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HomeMy WebLinkAboutComprehensive Annual Financial Report September 30, 2022ol M I U : 0 FOR THE FISCAL YEAR ENDED SEPTEMBEP 30,2022 oie 41 I City of pnd6wood -Texas CITY OF FRIENDSWOOD, TEXAS ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED Fiscal Year Ended September 30, 2022 Officials Issuing Report: Morad Kabiri City Manager Katina Hampton Director of Administrative Services City of pnd6wood -Texas CITY OF FRIENDSWOOD, TEXAS TABLE OF CONTENTS Page Introductory Section Letter of Transmittal i Principal Officials v GFOA Certificate of Achievement vi Organizational Chart vii Financial Section Independent Auditor's Report 3 Management's Discussion and Analysis 7 Basic Financial Statements: Government -Wide Financial Statements: Statement of Net Position 21 Statement of Activities 22 Fund Financial Statements: Balance Sheet - Governmental Funds 24 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 25 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 26 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 27 Statement of Net Position - Proprietary Funds 28 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 31 Statement of Cash Flows - Proprietary Funds 32 Notes to the Financial Statements 35 Required Supplementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund 72 Notes to Budgetary Schedule 80 Schedule of Changes in the Net Pension Liability and Related Ratios - Texas Municipal Retirement System 82 Schedule of City Contributions -Texas Municipal Retirement System 84 Notes to Schedule of Contributions 85 Schedule of Changes in the Total OPEB Liability and Related Ratios - Texas Municipal Retirement System Supplemental Death Benefits Fund 86 Schedule of Changes in the Total OPEB Liability and Related Ratios - City of Friendswood Retiree Health Care Plan 87 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS TABLE OF CONTENTS (continued) Page Financial Section (continued) Other Supplementary Information: Combining and Individual Fund Financial Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds 92 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 95 Schedule of Revenue, Expenditures and Changes in Fund Balances - Budget and Actual: Police Investigation 98 Fire/EMS Donation 99 Municipal Court 100 CDBG — DR Harris County 101 Hazard Mitigation 102 CDBG — DR Galveston County 103 1776 Park 104 Sidewalk Installation 105 Park Land Dedication 106 Street Improvement 107 Debt Service 108 Bond Construction 109 Page Table Statistical Section (Unaudited) Net Position by Component 114 1 Changes in Net Position 116 2 Fund Balances of Governmental Funds 120 3 Changes in Fund Balances of Governmental Funds 122 4 Assessed Value and Taxable Value of Property 124 5 Direct and Overlapping Property Tax Rates 126 6 Principal Property Taxpayers 127 7 Property Tax Levies and Collections 128 8 Ratios of Outstanding Debt by Type 129 9 Ratio of Net General Bonded Debt Outstanding 130 10 Direct and Overlapping Governmental Activities Debt 131 11 Legal Debt Margin Information 132 12 Pledged Revenue Coverage 133 13 Demographic and Economic Statistics 134 14 Principal Employers 135 15 Full -Time Equivalent City Government Employees by Function/Program 136 16 Operating Indicators by Function/Program 138 17 Capital Asset Statistics by Function/Program 140 18 City of Friendswood, Texas 2022 ACFR INTRODUCTORY SECTION City of Friendswood, Texas 2022 ACFR City of ripnoodd�w Texas City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD March 22, 2023 The Honorable Mayor, Members of the City Council, and the Citizens of Friendswood: The Annual Comprehensive Financial Report (ACFR) of the City of Friendswood for the fiscal year ended September 30, 2022, is hereby submitted. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. This report consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the City's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City Charter requires an annual audit of the financial statements of all of the various funds of the City by independent certified public accountants. The accounting firm of Whitley Penn LLP has performed such an audit. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended September 30, 2022 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City's financial statements for the fiscal year ended September 30, 2022, are fairly presented in conformity with GAAP. The independent auditors' report is presented as the first component of the financial section of this report City of Friendswood, Texas 2022 ACFR GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City's MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE CITY Established in 1895 as a Quaker colony, the City of Friendswood is rich in heritage. The City was incorporated in 1960 and chartered a home -rule city under Texas law in 1971. The City operates under a Council -Manager form of government. Policy - making and legislative authority are vested in a governing council consisting of the Mayor and six (6) Council Members. The Mayor and Council are responsible, among other things, for passing ordinances, adopting the budget, appointing board and committee members and hiring the City Manager, City Attorney, Municipal Judge, and City Secretary. The City Manager is responsible for carrying out the policies and ordinances of the City Council and overseeing the day-to-day operations of the City government, and for appointing heads of various departments. The Mayor and Council are elected on an at -large, non- partisan basis. The Mayor and Council are elected to serve no more than four consecutive three-year terms. The City provides a full range of municipal services including public safety (police, fire and emergency medical), maintenance of streets and infrastructure, sanitation services, maintenance of the treated waste distribution system and both sanitary and storm sewer collection transmission systems, recreational activities and cultural events as well as general administrative services. FACTORS AFFECTING FINANCIAL CONDITION Location Encompassing 21 square miles, Friendswood is located in southeast Texas near the Texas Gulf Coast, between downtown Houston and Galveston, spanning across two counties — northern Galveston County and southern Harris County. The current estimated population is 42,222. Residents and visitors can access Friendswood through FM 2351, FM 518, and FM 528 (NASA Parkway). Hobby Airport and Ellington Airport are located within a 15 minute drive from Friendswood, and Bush Intercontinental Airport is just 45 minutes away. Major sectors of the area's economic base include aerospace, specialty chemicals, healthcare, retail, and tourism. Community Friendswood has been nationally recognized as one of the best places to live in the country. With low tax rates, outstanding public education, and the lowest crime rate in the region, Friendswood is the perfect place to live, work, and play. The city features beautiful parks and lush landscaping, along with a championship golf course. Children academically excel via two superior public school systems— Friendswood ISD and Clear Creek ISD. These attributes perfectly match Friendswood's affluent resident base of well-educated, high -income families. More than 50% of residents work in executive, professional, and managerial positions and generate an average household income of over $145,000, one of the highest in the Houston area. Business Friendswood is the perfect choice for many types of commercial enterprises. Target markets include professional offices, retail, commercial, and light industrial developments. A key City focus is to encourage redevelopment of the downtown area and development of the City's panhandle area. City leaders have approved special tools and incentives to revitalize downtown to promote mixed -use, multi -story developments with pedestrian streetscapes and other amenities. The City offers competitive business incentives, including a municipal grant program, tax abatement that includes "green" development, freeport tax exemption, and downtown development fee waivers. Quality Lifestyle As with any city, the goal is planning for continued quality growth to create a well-balanced community. Friendswood offers single-family residential housing in pleasant park -like settings, tucked -away from the busy stream of vehicular traffic. Friendswood is committed to attracting more local enterprises that will complement and enhance the unique community environment that has been carefully built over the past 100 years; one that has come to be cherished by residents and business owners alike. City of Friendswood, Texas 2022 ACFR LONG TERM PLANNING Budgeting Controls The objective of the City's budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by Council. The charter requires the City Manager to submit a proposed budget and an accompanying message to the City Council on or before August 1. The council shall review and revise as deemed appropriate prior to general circulation for the public hearing. The Public Notice and Hearing must be posted in the city hall and published in the official newspaper. The budget must be adopted by the 151h of September or as soon thereafter as practical. The City legally adopts annual budgets for the General, Special Revenue and Debt Service Funds. Annual and project budgets are also adopted for the Proprietary and Capital Projects Funds, respectively. The level of budgetary control; that is, the level at which expenditures cannot legally exceed the appropriated amount, is established by department within a fund. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances lapse at fiscal year end, but can be re -appropriated through a budget amendment the following fiscal year. The City Manager is authorized to transfer budgeted amounts within departments in any fund, but revisions that increase the total expenditures of any fund or transfers between departments must be approved by Council. Multi -Year Financial Planning A Multi -Year financial plan (MYFP) was developed in 2006. Originally, staff was directed to develop a plan to forecast the City's financial condition through 2020, the projected build -out date. The first version of this plan was drafted and later reduced in scope to a five year projection. The MYFP is based on the City's strategic planning efforts, including the Comprehensive Land Use Plan, Vision 2020 and the Capital Improvements Plan. Departmental operational plans funding requirements to provide programs and services are included in the MYFP as well. Funding needs and available resources, both current and alternative revenue enhancements, are identified. Expenditures are projected based on departmental needs assessments and are organized based on "one-time" and "on -going" expenditures. In collaboration with Council, the plan is updated at least annually and serves as the basis of budget development. Relevant Financial Policies As part of the annual budget process, the City adopts Financial Management Policy Statements that establish a framework for fiscal decision making and that ensure that financial resources are available to meet the present and future needs of its citizens. These statements provide guidelines for financial planning and management, addressing every major financial function and process. iii City of Friendswood, Texas 2022 ACFR Most importantly, the Financial Management Policy requires that the City maintain the General Fund unassigned fund balance at a minimum of 90 days of prior year audited operating expenditures. Any unassigned funds after the fiscal year-end audit will be allowed to accumulate to build this 90-day reserve. After the General Fund has gathered sufficient resources, additional unassigned funds will be allowed to accumulate for future General Fund capital improvements. The Financial Management Policy also requires the minimum working capital in the Water and Sewer Fund be 90 days of prior year audited operating expenditures. Any unrestricted funds after the fiscal year-end audit will be allowed to accumulate to build this 90-day reserve. After these funds have gathered sufficient resources, additional unrestricted funds will be allowed to accumulate in working capital for future utility /operating fund capital improvements. Awards The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Friendswood for its annual comprehensive financial report for the fiscal year ended September 30, 2021. This was the thirty-fourth consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized annual comprehensive financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current annual comprehensive financial report continues to meet the Certificate of Achievement program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements The preparation of the annual comprehensive financial report was made possible by the dedicated service of the entire staff of the Administrative Services Department. Each member of the department has my sincere appreciation for the contributions made in the preparation of this report. In closing, I also express my thanks to the Mayor, members of the City Council and the City Manager for their leadership, interest and support in conducting the financial operations of the City in a responsible and progressive manner. Sincerely, Katina Hampton Director of Administrative Services iv City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS PRINCIPAL OFFICIALS September 30, 2022 Elected Officials Position Mike Foreman Mayor Steve Rockey Council Member - Position No. 1 Sally Branson Council Member - Position No. 2 Trish Hanks Council Member - Position No. 3 Robert J. Griffon Council Member - Position No. 4 John H. Scott Council Member - Position No. 5 Brent Erenwert Council Member - Position No. 6 Key Staff Position Morad Kabiri City Manager Steven Rhea Assistant City Manager Katina Hampton Director of Administrative Services Aubrey Harbin Director of Community Development Jildardo Arias Director of Engineering Matt Riley Library Director Brian Mansfield Fire Marshal/Emergency Management Coordinator Haley Brown Director of Human Resources James O'Brien Director of Information Technology Rene Ibarra Director of Public Works James Toney Director of Parks and Recreation Leticia Brysch City Secretary Robert B. Wieners Police Chief Karen Horner City Attorney James W. Woltz Judge - Municipal Court Term Expires May 2024 May 2024 May 2023 May 2024 May 2025 May 2023 May 2025 v City of Friendswood, Texas 2022 ACFR Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Friendswood Texas For its Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2021 Executive Director/CEO vi City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS ORGANIZATIONAL CHART Citizens of Friendswood City Attorney Mayor and City Council Prosecutors Municipal Judge Boards, Committees, Commissions City Manager ■ .4dmrnrstration Administrative Services . Finance ■ Ufirityf3r7lirtg ■ municipa? Count City Secretary AdmanisbaSon + Records Management . Erecfions Human Resources Human Resources . Insurance . Rrsk Management Information Technology . Cybersacurity . Wrastructur-e Services & Ops Fire Marshal . Lldrrrinis�at6orr . Irr vest5g a So rrsllrrsp a cti a rrs ■ Emergency Managerrrent ■ FVFD Corrfra+cf Police Department . A�{mrnisfra?rorr + Patrol + Criminallnvestrgations • Animal Carrtrof o Cammuni4abons Assistant City Manager Economic Deveiapmenf CommunicatrorrvPubiic tnformagon Community Development . Adrrrrnislra�avr Pranning and Zoning . lnspecdorrs/Code Enforcement Parks & Recreation w Adrnrrrrsbm6-,n r fiecreatron Programs + Park Operations + Facrtrty Operations Public Works Admrnis�a�an # Streets ! Sidewalks • Drainage Operations • W31er Operations * Sewer Operations Engineering e Engineering + Pro}ects Library Services ■ Friendswood Public Library vii City of Friendswood, Texas 2022 ACFR City of 3wood -Texas viii City of Friendswood, Texas 2022 ACFR FINANCIAL SECTION City of Friendswood, Texas 2022 ACFR City of City xas City of Friendswood, Texas 2022 ACFR in whit Ieypenn' INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of City Council City of Friendswood, Texas Report on the Audit of the Financial Statements Opinions Houston Office 3737 Buffalo Speedway Suite 1600 Houston, Texas 77098 713.621.1515 Main whitleypenn.com We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of City of Friendswood, Texas (the "City"), as of and for the year ended September 30, 2022, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. In our opinion, based on our report and the report of other auditors, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business - type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City, as of September 30, 2022, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of West Ranch Management District, a discretely presented component unit of the City, which represents 81%, 100%, and 76%, respectively, of the assets, liabilities, and revenues of the aggregate discretely presented component units. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it related to the amounts included for West Ranch Management District, is based solely on the report of the other auditors. The financial statements of West Ranch Management District were not audited in accordance with Government Auditing Standards. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities underthose standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. OHLB ,..u�E',-.,E,.,_, THEE GLOBAL ADVI=SORY 3 City of Friendswood, Texas 2022 ACFR AND ACCOUNTING NETWORK The Honorable Mayor and Members of the City Council City of Friendswood, Texas Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis, general fund budgetary comparison schedule, pension information, and other -post employment benefit information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 4 City of Friendswood, Texas 2022 ACFR The Honorable Mayor and Members of the City Council City of Friendswood, Texas Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual fund financial statements and schedules, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory section and statistical section but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Houston, Texas March 22, 2023 City of Friendswood, Texas 2022 ACFR City of ripnd5wood Texas City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Friendswood, Texas ("the City"), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2022. Please read this information in conjunction with the basic financial statements that follow this section. Financial Highlights Some of the City's financial highlights for the fiscal year ending September 30, 2022 include: • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $138,408,783. • The City's total net position increased during the year by $10,173,322. The City's net pension and total OPEB liabilities were $5.2 million and $1.9 million, respectively. The net pension liability and total OPEB liability decreased by $4.6 million and $11.8 thousand, respectively, compared to the prior year. • As of the close of the current fiscal year, the City reported unrestricted net position of $20,445,699. • Program revenues of $26,019,424 reduced the net cost of the City's functions to be financed from the City's general revenues to $24,836,928 . Overview of the Financial Statements Coinponeut= of the FinaucialSection Managem afs Base Fiaanria] Fequred Discu anion and SupplerMo:ar� Aaa sin .s:ZtPT]mta JsfOmma136R Isdependn-. Au -hors R:ypca Gove-.3—at-Ride Foan€i2iState¢Ms : and . manna! StatanwIM Now to the %ancial St3:euaests rjumun 71Z"<===> I.12 t71l This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The basic financial statements are comprised of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Government -wide Financial Statements The government -wide financial statements report information for the City as a whole. These statements include transactions and balances relating to all assets, including infrastructure capital assets. These statements are designed to provide information about cost of services, operating results, and financial position of the City as an economic entity. The Statement of Net Position and the Statement of Activities, which appear first in the City's financial statements, report information on the City's activities that enable the reader to understand the financial condition of the City. These statements are prepared using the accrual basis of accounting, which is similar to the accounting used by most private -sector companies. All of the current year's revenues and expenses are taken into account even if cash has not yet changed hands. The Statement of Net Position presents information on all of the City's assets and deferred outflows of resources and liabilities and deferred inflows of resources with the difference reported as net position. Overtime, increases or decreases in the net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Other non- financial factors, such as the City's property tax base and the condition of the City's infrastructure, need to be considered in order to assess the overall health of the City. The Statement of Activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows —the accrual method rather than modified accrual that is used in the fund level statements. Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from functions that are intended to recover all or significant portion of their costs through user fees (business -type activities). Governmental activities— Most of the City's basic services are reported here including general government (mayor and council, city secretary, city manager, administrative services, human resources, and information technology); public safety (police and fire marshal); engineering (capital projects administration); public works (streets and drainage); community development (building inspection and planning and zoning); parks and recreation (parks, facility operations and community activities) and library. Interest payments on the City's debt and internal lease payments are also reported here. Property tax, sales tax, franchise taxes, municipal court fines and permit fees finance most of the activities. Business -type activities — Services involving a fee for those services, which include the City's water and sewer system are reported here. Component Units — Activities of the West Ranch Management District and Friendswood Downtown Economic Development Corporation. Fund Financial Statements A fund is a self -balancing set of accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. The City uses two fund types — governmental and proprietary. 8 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements with the exclusion of internal service fund activity. However, unlike the government - wide financial statements, governmental funds focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City's near -term financing requirements. Because the focus of the governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, the reader may better understand the long-term impact of the government's near -term financial decisions. Both the governmental fund balance sheet and the governmental statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains fourteen governmental funds. Information is presented separately in the governmental funds balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund, Coronavirus State and Local Fiscal Recovery Fund, Bond Construction Fund, and Debt Service Fund, which are considered to be major funds. The other ten funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in the form of combining statements found in this report. Proprietary Funds The City maintains two types of proprietary funds: enterprise and internal service funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses an enterprise fund to account for its operation in water distribution and wastewater collection/treatment along with its water and wastewater impact fees, and water construction projects. Management would note that trash collection services are provided by a franchise agreement. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses an internal service fund to account for fleet management services. Because these services predominately benefit governmental rather than business -type functions, they have been included within the governmental activities in the government -wide financial statements. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government -wide fund financial statements. The notes are the last section of the basic financial statements. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain Required Supplementary Information ("RSI"). The City adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule has been provided as RSI to demonstrate compliance with this budget. RSI can be found after the notes to the financial statements. The RSI also includes schedules related to the City's progress in funding its obligation to provide pension and other post -employment benefits to its employees. The combining and individual fund financial statements and schedules that further support the information in the financial statements are presented immediately following the required supplementary information. 9 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) GOVERNMENT -WIDE FINANCIAL ANALYSIS Statement of Net Position As noted earlier, net position may serve over time as a useful indicator of a government's financial position. For the City, assets and deferred outflows of resources exceed liabilities and deferred inflows of resources by $138,408,783 as of September 30, 2022 in the primary government, which is an increase in the City's overall financial position compared to the prior year. The largest portion of the City's net position (79.5%) reflects its investments in capital assets (e.g., land, buildings and improvements, machinery and equipment, infrastructure, water and sewer system, construction in progress and water rights); less any debt outstanding used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the assets themselves cannot be used to liquidate these liabilities. The following table reflects the condensed Statement of Net Position. Governmental Activities Business -Type Activities Totals 2022 2021 2022 2021 2022 2021 Current and other assets $ 48,901,051 $ 44,538,331 $ 42,738,547 $ 48,888,658 $ 91,639,598 $ 93,426,989 Capital assets 115,612,347 108,518,265 71,551,212 62,808,555 187,163,559 171,326,820 Total Assets 164,513,398 153,056,596 114,289,759 111,697,213 278,803,157 264,753,809 Deferred Outflows of Resources 3,221,061 2,969,271 1,002,527 1,023,421 4,223,588 3,992,692 Total Assets and Deferred Outflows of Resources 167,734,459 156,025,867 115,292,286 112,720,634 283,026,745 268,746,501 Long-term liabilities 57,337,086 62,989,424 60,296,656 64,349,995 117,633,742 127,339,419 Other Liabilities 16,380,206 8,080,805 3,611,658 2,429,773 19,991,864 10,510,578 Total Liabilities 73,717,292 71,070,229 63,908,314 66,779,768 137,625,606 137,849,997 Deferred Inflows of Resources 6,282,137 2,336,852 710,219 324,191 6,992,356 2,661,043 Net Position: Net investment in capital assets 74,006,329 72,240,727 35,999,342 32,910,959 110,005,671 105,151,686 Restricted 5,059,835 3,491,974 2,897,578 2,721,465 7,957,413 6,213,439 Unrestricted 8,668,866 6,886,085 11,776,833 9,984,251 20,445,699 16,870,336 Total Net Position $ 87,735,030 $ 82,618,786 $ 50,673,753 $ 45,616,675 $138,408,783 $128,235,461 A portion of the primary government's net position, $7,957,413 or 5.7%, represents resources that are subject to external restrictions on how they may be used. These restrictions include monies accounted for in special revenue funds for which the use is legally restricted and capital project funds. The remaining balance of unrestricted net position, $20,445,699 or 14.8%, may be used to meet the City's ongoing obligations to citizens and creditors. 10 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The following table provides a summary of the City's changes in net position. Governmental Activities Business Type Activities Totals 2022 2021 2022 2021 2022 2021 Revenues Program Revenues: Charges for services $ 2,848,589 $ 2,853,702 $ 19,419,622 $ 17,919,751 $ 22,268,211 $ 20,773,453 Operating grants and contributions 841,537 3,874,866 289,181 - 1,130,718 3,874,866 Capital grants and contributions 2,620,495 3,864,589 - 2,620,495 3,864,589 General Revenues: Property taxes 20,845,938 19,163,858 20,845,938 19,163,858 Sales and alcohol taxes 11,176,190 9,915,046 11,176,190 9,915,046 Franchise taxes 2,170,152 2,090,001 - 2,170,152 2,090,001 Investment earnings 49,151 50,805 130,401 43,099 179,552 93,904 Miscellaneous 638,418 390,533 - - 638,418 390,533 Total Revenues 41,190,470 42,203,400 19,839,204 17,962,850 61,029,674 60,166,250 Expenses General government 6,210,336 5,867,654 6,210,336 5,867,654 Public safety 15,655,859 15,645,527 15,655,859 15,645,527 Public works 6,994,042 7,160,229 6,994,042 7,160,229 Engi neeri ng 570,098 506,959 570,098 506,959 Community development 1,017,509 1,035,202 1,017,509 1,035,202 Parks and recreation 4,870,623 4,604,943 4,870,623 4,604,943 Library services 1,283,007 1,221,740 1,283,007 1,221,740 Water and sewer - - 11,124,562 11,864,245 11,124,562 11,864,245 Interest on long-term debt 1,268,435 1,244,881 1,861,881 1,808,120 3,130,316 3,053,001 Total Expenses 37,869,909 37,287,135 12,986,443 13,672,365 50,856,352 50,959,500 Increase (decrease) in net position before transfers 3,320,561 4,916,265 6,852,761 4,290,485 10,173,322 9,206,750 Transfers 1,795,683 1,541,853 (1,795,683) (1,541,853) - - Changeinnetposition 5,116,244 6,458,118 5,057,078 2,748,632 10,173,322 9,206,750 Net Position - Beginning 82,618,786 76,160,668 45,616,675 42,868,043 128,235,461 119,028,711 Net Position - Ending $ 87,735,030 $ 82,618,786 $ 50,673,753 $ 45,616,675 $138,408,783 $128,235,461 11 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Governmental Activities Governmental activities increased the City's net position by $5,116,244. Key elements of this change are as follows: • Property taxes continue to be the City's largest revenue source. Property tax revenue increased by $1,682,080 primarily due to new construction within the City to cover operating expenses, deferred facilities maintenance, deferred equipment purchases and debt service obligations. • Sales and alcohol tax revenue remained strong during fiscal year 2022, providing a 12.72% increase for the year, from $9.9 million to $11.2 million. This increase is primarily a result of commercial growth and inflation. • Operating grants and contributions decreased $3,033,329 from the prior year. This decrease is primarily a result of the City being awarded $2.5 million in public assistance grant funds related to Hurricane Harvey in the prior year. • Capital grants and contributions decreased $1,244,094 from the prior year. In the prior year, Flood Mitigation Assistance funds of $1.9 million were received for the acquisition and demolition of flood -prone properties. • Overall, total expenses increased $0.6 million from the prior year. The largest increase of $342,682 was in General Government which was primarily a result of software support service expenses in the current fiscal year. Parks and Recreation had the next largest increase of $265,680 as a result of facility maintenance items previously deferred. Governmental Activities - Revenues Sa I es and alcohol to xE 27`, Prop.-, --- -- 51% Fra nchise taxes Miscellaneous �r Operating grants and contri butions 2% al grants and itri butions 6% 12 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Governmental Activities - Expenses Library services Intereston long - Pa rks a nd 3%term debt � 3% recreation 13% General Community government development °� � 16 Engi neeri 2% Publicworks 19% Business -Type Activities Publicsafety 41% Business -type activities increased the City's net position by $5,057,078. Key elements of this change are as follows: • Revenues increased by $1.9 million or 10.4% resulting from an increase in utility rates and consumption due to drought like conditions. Expenses decreased $686 thousand which was primarily a result of a decrease in the CIP billings for the Southeast Water Purification Plant offset by engineering costs for the upgrade of Blackhawk WWTP Aeration project. 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 2022 2021 ■ Operating Revenues ■ Operating Expenses 13 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance -related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near -term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of the City's net resources available for spending at the end of the year. At the end of the current fiscal year, the City's governmental funds reported combined ending fund balance of $29,958,067. Approximately 39.45% of this amount or $11,817,954 is unassigned fund balance; however, $7.9 million is set aside for the 90-day operating reserve, as set forth in the City's financial policies. The remaining $18,140,113 is nonspendable, restricted, or assigned as follows: 0.91% - Nonspendable Prepaid items $ 260,457 Permanent fund 11,093 Total Nonspendable $ 271,550 44.07% - Restricted Public education and government channels $ 460,154 Debt servi ce 46,375 Municipal courtoperations 282,910 Public safety operations 674,536 Capital projects 11,737,088 Total Restricted $ 13,201,063 15.58% - Assigned Subsequent year's budget appropriation of fund balance $ 3,396,348 Capital projects 1,271,152 Total Assigned $ 4,667,500 The General Fund is the chief operating fund of the City. At the end of the current fiscal year, total fund balance reached $17.4 million of which unassigned fund balance of the General Fund was $12.0 million. As a measure of the General Fund's liquidity, it may be useful to compare both unassigned and total fund balance to total fund expenditures. Unassigned fund balance represents 35.0% of total General Fund expenditures, while total fund balance represents 50.6% of that same amount. At year end, the City's operating reserve was $7.9 million, representing 25% of total General Fund expenditures, excluding capital expenditures. 14 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Key differences between last year's General Fund activity and this year's include: $0.4 million decrease in total revenues -This decrease is primarily related to a decrease in intergovernmental revenue as a result of the City receiving $2.5 million in public assistance grants in the prior year. This decrease is offset by an increase in property taxes of $1.2 million due to new construction to fund operating expenditures. In addition, sales tax revenue increased $1.0 million as a result of commercial growth and inflation. $1.0 million increase in total expenditures - This increase can be attributed to $587 thousand in Parks and Recreation resulting from maintenance cost previously deferred, $532 thousand in Public Safety as a result of increased personnel costs, $444 thousand in Public Works due to repairs and maintenance in the streets division and $444 thousand in general government resulting from increased personnel costs and other services and charges. These increases were offset by a decrease of $1.2 million in capital improvements due to in the purchase of a building in the prior year to house the Public Works, Engineering and the Operations Division of Parks and Recreation. The Coronavirus State and Local Fiscal Recovery Fund received an additional $5.0 million in funding in fiscal year 2022. This amount is unearned revenue and will be expended in fiscal year 2023. The fund balance of the Bond Construction Fund was $8,152,712, a decrease of $7,059,803 compared to the prior year. This decrease is related to cost incurred for the renovation of the Public Safety building, the construction of new Fire Station #2 and drainage related projects. The Debt Service Fund had a total fund balance of $46,375 at the end of the fiscal year, all of which is restricted for the payment of debt service. The net increase in the Debt Service fund balance during the year was $35,767. Other non -major governmental funds fund balance increased by $1,647,379. This increase is primarily a result of a sales tax collections for the Street Improvement fund exceeding improvement cost by $1.9 million. Proprietary Funds The City's proprietary funds financial statements provide the same type of information found in the government -wide financial statements, but in more detail. At the end of the year, unrestricted net position was $11.8 million for the Water and Sewer Fund. The total increase in the net position of the Water and Sewer Fund was $5,057,078. Other factors concerning the finances of this fund have already been addressed in the discussion of the City's business -type activities. Unrestricted net position of the Internal Service Fund was $910,808. The net position of the Internal Service Fund increased by $569,274 resulting from lease revenue from the City's participating funds. General Fund Budgetary Highlights The City made revisions to the original appropriations approved by the City Council. Budgeted revenues increased by $61,717 or 0.21% and budgeted expenditures were increased by $7,114,700 or 21.48%. 15 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Total revenues were above budget by $1,252,321. The more significant variances are detailed below: • $818,456 over budget in sales and mixed beverage taxes as a result of commercial growth and inflation. • $244,324 over budget in franchise taxes as a result of increased gas and electric franchise fees and the receipt of unbudgeted Public Education and Government (PEG)/In-Kind fees. • $120,083 below budget in fines and forfeitures due to a decrease in number of tickets written for traffic violations. • $124,363 over budget in permits due to an increase in commercial and residential growth. Total expenditures of the General Fund were $6.0 million below the final expenditure budget. The more significant variances are detailed below: $761,530 below budget in general government expenditures as a result of an decrease in other services and charges (legal, contract, consulting, etc.). $980,287 below budget in public safety expenditures as a result of personnel vacancies in the patrol division. Also, the implementation of new public safety software included in the budget was not complete at the end of the fiscal year. $3,875,714 below budget in capital improvements due to projects either not being started or completed in the current fiscal year. These projects are primarily related to facility and streets improvements. Capital Assets The City's investment in capital assets (net of accumulated depreciation) for its governmental and business -type activities as of September 30, 2022 is $187.2 million. The investment in capital assets include land, buildings and improvements, machinery and equipment, infrastructure, water and sewer system, water rights and construction in progress. Major capital events during the year included the following: • Business -type improvements include the completion of 42" Southeast Transmission Phases 1-III which is a cost share project with the City of Houston and several other government entities for $3,609,532. The Sanitary Sewer Assessment Phases V-VI were also completed in FY22 for $203,726. • To accommodate future flood mitigation projects, the City purchased ten properties for a total cost of $2,660,075. Grant funds covered a majority of the acquisition costs. • Heavy equipment purchases included two backhoes, an excavator, and a Freightliner M2106 Truck with loader for a total cost of $672,548. • The City accepted completion of four sidewalk infrastructure projects at Leisure Lane, a portion of FM 518 along with TXDOT, a sidewalk at Cline Elementary, and a portion of sidewalk at Friendswood Parkway. The total cost of the sidewalk projects was $160,894. • As part of the Public Safety Building expansion project, computer and server equipment for the Police Department as well as furniture and fixtures for the Emergency Operations Center upgrade totaled $330,972. • Several improvements were made to City parks including the completion of a new walking trail at Stevenson Park for $445,931, a perimeter fence at Renwick Park for $38,000, and playground equipment at Stevenson Park and Old City Park for $80,435. Bay Area Park had a new security light installed for a cost of $8,886. • The library received conference room audio and video equipment for a cost of $177,486 purchased with PEG fees. 16 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) • The City purchased 15 new vehicles and the equipment to upfit an additional seven vehicles. Public Safety received 8 of the new vehicles, upfit for one vehicle purchased in FY21, and the upfit equipment for an additional 6 vehicles for a total cost of $588,290. EMS purchased a new ambulance for a total cost of $163,000. The Fire Marshal's office purchased a new vehicle with a cost of $52,981. Engineering purchased a new vehicle with a cost of $47,348. Public Works purchased three new vehicles for a total cost of $177,921. The Parks & Recreation department purchased one new vehicle with a cost of $42,589. • The following major projects are in Construction in Progress at the end of fiscal year 2022: Blackhawk Building Renovation, Fire Station #2, Public Safety Building, Centennial Park Wall, Utility Relocation at Clear Creek Utility Bridge, Forest Bend Detention Pond, Water System Improvement Study & Engineering, Lift Station Mitigation Program, and Automated Water Meter installation. Governmental Activities Business -type Activities Totals 2022 2021 2022 2021 2022 2021 Land $ 32,355,840 $ 29,695,765 $ 319,473 $ 319,473 $ 32,675,313 $ 30,015,238 Buildings and improvements 22,938,656 23,862,519 318,849 338,606 23,257,503 24,201,125 Machinery and equipment 7,845,397 7,014,572 2,596,552 2,658,943 10,441,949 9,673,515 Infrastructure 43,675,282 46,509,824 38,970,139 36,904,531 82,645,423 83,414,355 Water rights - - 19,716,695 19,716,695 19,716,695 19,716,695 Construction in progress 8,797,172 1,435,585 9,629,504 2,870,307 18,426,676 4,305,892 $ 115,612,347 $ 108,518,265 $ 71,551,212 $ 62,808,555 $ 187,163,559 $ 171,326,820 More detailed information on the City's capital assets is presented in Note 4 to the financial statements. Debt Administration At the end of the current fiscal year, the City had a total bonded debt, premiums and notes payable obligation of $109.3 million. Governmental Activities 2022 2021 Business -type Activities 2022 2021 Totals 2022 2021 General obligation bonds $ 43,950,000 $ 46,265,000 $ 18,635,000 $ 20,300,000 $ 62,585,000 $ 66,565,000 Revenue bonds - - 35,630,000 37,080,000 35,630,000 37,080,000 Premium on bond issuance 3,193,902 3,544,358 5,264,036 5,666,291 8,457,938 9,210,648 Notes payable 2,613,729 1,681,809 - 2,613,729 1,681,809 $ 49,757,631 $ 51,491,167 $ 59,529,036 $ 63,046,291 $ 109,286,667 $ 114,537,457 The City's General Obligation and Revenue Bonds bond ratings are listed below: General Obligation Bonds Revenues Bonds Standard & Poor's AA+ AA - More detailed information about the City's outstanding debt can be found in Note 5 to the financial statements. 17 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Economic Factors and Next Year's Budgets and Rates Friendswood continues to experience moderate growth. The City's current population is estimated to be 42,222. Friendswood is expected to reach build out with an estimated population of 58,012. The City is continuing to focus on economic development initiatives, including the revitalization of downtown and commercial development. These commercial development projects include a medical office building and another building that will include 30 hotel rooms, retail and office space as well as 30 multifamily units. In addition, to commercial growth the City is also experiencing residential growth with several large master -planned communities in progress or in the planning stages. The City's largest single source of revenue in the General Fund continues to be ad valorem taxes. The adopted budget for fiscal year 2023 has a tax rate of $0.487314 per $100 taxable value. This rate consists of a maintenance and operation (M&O) tax rate of $0.388560 and an interest and sinking (debt service) tax rate of $0.098754. The rate was set based on a net assessed value of $4,614,143,928. This is an increase of $187,212,608 above certified values including supplemental rolls for tax year 2021. The City's financial management policy sets the guideline to maintain the fund balance and net position of the various operating funds at levels sufficient to protect the City's creditworthiness as well as its financial position from unforeseeable emergencies. The City second largest source of revenue in the General Fund is sales tax. The City anticipates an increase in this revenue stream from the prior year and has adjusted the budget from $8,095,816 to $8,621,519. The franchise fees budget increased from $1,925,828 to $2,044,100 and the budget for licenses and permits has been increased from $823,839 to $873,730. If all projections are accurate, the total General Fund unassigned fund balance net of the 90 day operating requirement ($7.9 million) is estimated to be approximately $3.6 million at September 30, 2023. Water revenues are budgeted at $8,548,086 which is an increase of $347,583 in revenues, or 4.23 percent. Sewer revenues are budgeted at $9,037,580 which is an increase of $160,112 or 1.8 percent. Water and Sewer Fund unrestricted net position, net of the 90 day operating requirement ($2.3 million) is projected to be $7.4 million at the end of fiscal year 2023. Pursuant to the City's financial management policy, funds in excess of the 90 day operating reserve are designated for future capital improvements. Requests for Information The financial report is designed to provide our citizens, customers, investors, and creditors with a general overview of the City's finance and to show the City's accountability for the money it receives. If you have questions about this report or need additional information, contact Administrative Services, P.O. Box 1288, Friendswood, Texas 77549-1288, or call Katina Hampton at 281-996-3221, or email khampton@friendswood.com. Separately issued financial statements for the West Ranch Management District can be obtained by writing to: West Ranch Management District, a Component Unity of the City of Friendswood, c/o Allen Boone Humphries LLP, 3200 Southwest Freeway, Suite 2600, Houston, Texas 77027. 18 City of Friendswood, Texas 2022 ACFR BASIC FINANCIAL STATEMENTS 19 City of Friendswood, Texas 2022 ACFR rjCity of rpnd,5wood -Texas 20 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION September 30, 2022 Primary Government Component Units West Ranch Governmental Business -type Management Friendswood Activities Activities Total District Downtown EDC Assets Cash and cash equivalents $ 10,434,204 $ 4,313,653 $ 14,747,857 $ 240,532 $ 818,732 Investments 31,130,049 10,374,899 41,504,948 4,250,759 1,969,545 Receivables, net of allowances Taxes 3,055,805 - 3,055,805 10,674 142,602 Leases 1,021,537 - 1,021,537 - - Customer accounts 451,998 3,989,589 4,441,587 Other 734,354 - 734,354 - - Accrued interest 17,409 8,258 25,667 32 1,496 Due from other governments 1,795,238 - 1,795,238 - - Prepaid items 260,457 63,224 323,681 Working capital deposit - 571,884 571,884 Restricted investments - 23,417,040 23,417,040 - Capital Assets: Non -depreciable 41,153,012 29,665,672 70,818,684 7,762,414 Depreciable, net 74,459,335 41,885,540 116,344,875 356,185 Total Capital Assets 115,612,347 71,551,212 187,163,559 8,118,599 - Total Assets 164,513,398 114,289,759 278,803,157 12,620,596 2,932,375 Deferred Outflows of Resources Deferred loss on issuance of refunding bonds 54,715 587,418 642,133 287,109 - Deferred outflow of resources for pensions 2,849,672 368,093 3,217,765 - Deferred outflow of resources for OPEB 316,674 47,016 363,690 - Total Deferred Outflows of Resources 3,221,061 1,002,527 4,223,588 287,109 - Total Assets and Deferred Outflows of Resources 167,734,459 115,292,286 283,026,745 12,907,705 2,932,375 Liabilities Accounts payable 4,850,034 2,694,826 7,544,860 101,485 753 Accrued liabilities 811,325 161,042 972,367 - - Retainagepayable 442,341 5,797 448,138 - Accrued interest 118,802 179,563 298,365 239,053 Unearned revenue 10,003,026 - 10,003,026 - Customer deposits 8,080 570,430 578,510 Due to other governments 146,598 - 146,598 - Noncurrent liabilities: Duewithinoneyear 3,331,788 3,246,882 6,578,670 865,000 Duein morethan oneyear 47,570,186 56,391,564 103,961,750 18,448,638 Netpension liability 4,747,707 410,084 5,157,791 - TotalOPEBliability 1,687,405 248,126 1,935,531 Total Liabilities 73,717,292 63,908,314 137,625,606 19,654,176 753 Deferred Inflows of Resources Deferred gain on issuance of refunding bonds 55,814 27,292 83,106 - - Deferred Inflows of resources for leases 1,011,689 - 1,011,689 Deferred Inflows of resources for pensions 4,884,186 630,892 5,515,078 Deferred Inflows of resources for OPEB 330,448 52,035 382,483 Total Deferred Inflows of Resources 6,282,137 710,219 6,992,356 Net Position Net investment in capital assets 74,006,329 35,999,342 110,005,671 5,331,558 Restricted for: Public education and government channels 460,154 - 460,154 - Debt service 46,375 2,521,137 2,567,512 1,991,706 Municipal court operations 283,301 - 283,301 - - Economic development - - 2,931,622 Public safety 674,536 674,536 - Communitydevelopment- nonexpendable 11,093 - 11,093 Capital projects 3,584,376 376,441 3,960,817 54,638 Unrestricted 8,668,866 11,776,833 20,445,699 (14,124,373) - Total Net Position $ 87,735,030 $ 50,673,753 $ 138,408,783 $ (6,746,471) $ 2,931,622 See notes to the financial statements. 21 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF ACTIVITIES For the Year Ended September 30, 2022 Program Revenues Operating Grants Capital Grants Charges for and and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental Activities: General government $ 6,210,336 $ 974,029 $ 16,000 $ Public safety 15,655,859 1,197,570 789,849 Public works 6,994,042 234,103 - 2,620,495 Engineering 570,098 - - Community development 1,017,509 1,238 - Parks and recreation 4,870,623 441,649 35,688 Library services 1,283,007 - - Interest on long-term debt 1,268,435 - - - Total Governmental Activities 37,869,909 2,848,589 841,537 2,620,495 Business -type Activities: Water and sewer 12,986,443 19,419,622 289,181 - Total Business -type Activities 12,986,443 19,419,622 289,181 - Total Primary Government 50,856,352 22,268,211 1,130,718 2,620,495 Component Units West Ranch Management District 1,036,725 - - - Friendswood Downtown EDC 36,449 Total Component Units $ 1,073,174 $ $ $ Page 1 of 2 See notes to the financial statements. 22 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OFACTIVITIES For the Year Ended September 30, 2022 Functions/Programs Primary government Governmental Activities: General government Public safety Public works Engi neeri ng Community development Parks and recreation Library services Interest on long-term debt Total Governmental Activities Business -type Activities: Water and sewer Total Business -type Activities Total Primary Government Component Units West Ranch Management District Friendswood Downtown EDC Total Component Units General revenues: Taxes: Property taxes Franchise and other taxes Sales taxes Interest Miscellaneous Transfers Total General Revenues and Transfers Change in net position Net Position - Beginning Net Position - Ending Net (Expense) Revenue and Changes in Net Position Primary Government Component Units Governmental Business -type Activities Activities Total $ (5,220,307) $ (13,668,440) (4,139,444) (570,098) (1,016,271) (4,393,286) (31,559,288) $ (5,220,307) $ (13,668,440) (4,139,444) (570,098) (1,016,271) (4,393,286) 6,722,360 6,722,360 (31,559,288) 6,722,360 (24,836,928) 20,845,938 20,845,938 2,170,152 2,170,152 11,176,190 11,176,190 49,151 130,401 179,552 638,418 - 638,418 Page 2 of 2 West Ranch Management Friendswood District Downtown EDC (1,036,725) 1— AAnX 2,314,093 - 736,129 13,385 (855) $ 87,735,030 $ 50,673,753 $ 138,408,783 $ (6,746,471) $ 2,931,622 See notes to the financial statements. 23 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2022 Coronavirus State Total Nonmajor Total Fiscal Recovery Bond Debt Service Governmental Governmental General Fund Fund Construction Fund Funds Funds Assets Cash and cash equivalents $ 5,650,255 $ 2,935,831 $ 9,982 $ 43,584 $ 1,513,649 $ 10,153,301 Investments 10,075,984 7,062,450 9,572,206 104,845 3,638,822 30,454,307 Receivables, net of allowance: Taxes 2,573,880 - - 54,119 427,806 3,055,805 Leases 1,021,537 - - - - 1,021,537 Customer accounts 449,301 - - - 2,697 451,998 Other receivables 730,696 - - - 3,658 734,354 Accrued interest 10,945 3,079 - 681 2,135 16,840 Duefrom other funds 1,157,730 - 996,000 - - 2,153,730 Duefrom other governments 44,063 - - - 1,751,175 1,795,238 Prepaid items 260,066 391 260,457 Total Assets $ 21,974,457 $ 10,001,360 $ 10,578,188 $ 203,229 $ 7,340,333 $ 50,097,567 Liabilities, Deferred Inflows and Fund Balances Liabilities: Accounts payable $ 1,879,444 $ - $ 2,051,195 $ 104,181 $ 768,808 $ 4,803,628 Accrued liabilities 811,325 - - - - 811,325 Due to other governments 146,598 - - - - 146,598 Customer deposits 8,080 - - 8,080 Retainage payable 29,580 - 374,281 - 38,480 442,341 Due to other funds - - - - 2,153,730 2,153,730 Unearned revenue 10,003,026 10,003,026 Total Liabilities 2,875,027 10,003,026 2,425,476 104,181 2,961,018 18,368,728 Deferred Inflows of Resources: Unavailable revenue 702,654 - - 52,673 3,756 759,083 Lea s es 1,011,689 1,011,689 Total Deferred Inflows of resources 1,714,343 52,673 3,756 1,770,772 Fund Balances: Nonspendable: Prepaid items 260,066 - - - 391 260,457 Perma nent fund - - - - 11,093 11,093 Restricted: Public education and government channels 460,154 - - - - 460,154 Municipal court operations - - - - 282,910 282,910 Debt service - - - 46,375 - 46,375 Publicsafety - - - - 674,536 674,536 Capital projects - - 8,152,712 - 3,584,376 11,737,088 Assigned: Subsequent year's budget appropriation of fund balance 3,396,348 - - - - 3,396,348 Capital projects 1,271,152 - - - - 1,271,152 Unassigned 11,997,367 (1,666) - (177,747) 11,817,954 Total Fund Balances 17,385,087 (1,666) 8,152,712 46,375 4,375,559 29,958,067 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 21,974,457 $ 10,001,360 $ 10,578,188 $ 203,229 $ 7,340,333 $ 50,097,567 See notes to the financial statements. 24 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION September 30, 2022 Total fund balance, governmental funds $ 29,958,067 Amounts reported for governmental activities i n the Statement of Net Position are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the fund financial statement, but are reported in the governmental activities of the Statement of Net Position. 113,247,160 The assets and liabilities of certain internal service funds are not included in the fund financial statement, but are included in the governmental activities of the Statement of Net Position. 3,275,995 Some liabilities are not due and payable in the current period and are not included in the fund financial statement, but are included in the governmental activities of the Statement of Net Position. Bonds and certificates of obligation payable (43,950,000) Notes payable (2,613,729) Compensated absences (1,144,343) Accrued interest payable (118,802) Unamortized premium on bonds (3,193,902) Unavailable revenues in the governmental fund statements is recognized as revenue in the government- widefinancial statements. 759,083 Deferred gain on refunding (55,814) Deferred loss on refunding 54,715 Certain other long-termassets and liabilities are not available to pay current period expenditures and therefore are not reported in this fund financial statement, but are reported in the governmental activities of the Statement of Net Position. Net pension liability (4,747,707) Total OPEB liabilty (1,687,405) Deferred outflows and inflows of resources related to the net pension liability (2,034,514) Deferred outflows and inflows of resources related to the total OPEB liability (13,774) Net Position of Governmental Activities in the Statement of Net Position $ 87,735,030 See notes to the financial statements. 25 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended September 30, 2022 Revenues Property taxes Sales taxes Franchise fees and other Fines and forfeitures Permits and fees Intergovernmental Investment income (loss) Donations Miscellaneous Total Revenues Expenditures Current: General government Public safety Public works Engi neeri ng Community development Parks and recreation Library services Debt service: Principal Interest and other charges Capital outlay Total Expenditures Excess (deficiency) of revenues over (under) expenditures Other Financing Sources (Uses) Notes payable issued Insurance recoveries Transfers in Transfers out Saleofcapital assets Total Other Financing Sources (Uses) Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Coronavirus Total Nonmajor Total State Fiscal Bond Debt Service Governmental Governmental General Fund Recovery Fund Construction Fund Funds Funds $ 16,475,894 $ $ $ 4,370,044 $ - $ 20,845,938 8,967,803 - 2,208,387 11,176,190 2,170,152 - 2,170,152 969,344 83,596 1,052,940 1,789,147 58,838 1,847,985 594,774 2,620,495 3,215,269 (15,254) (1,666) 68,133 (1,498) (135) 49,580 61,211 - 194,427 255,638 336,367 8,997 345,364 31,349,438 (1,666) 68,133 4,368,546 5,174,605 40,959,056 5,988,239 - - 52,593 6,040,832 15,330,928 - 39,333 15,370,261 3,047,460 163,330 2,554,523 5,765,313 571,010 - - 571,010 1,187,413 - 1,187,413 4,302,309 10,547 - 4,312,856 1,333,456 - - 2,729 1,336,185 - 2,721,206 119,514 2,840,720 - 1,611,573 13,318 1,624,891 2,563,859 6,954,059 759,216 10,277,134 34,324,674 7,127,936 4,332,779 3,541,226 49,326,615 (2,975,236) (1,666) (7,059,803) 35,767 1,633,379 (8,367,559) 1,457,640 1,457,640 74,126 74,126 1,708,331 1,708,331 (124,948) - (124,948) 18,029 14,000 32,029 3,133,178 14,000 3,147,178 157,942 (1,666) (7,059,803) 35,767 1,647,379 (5,220,381) 17,227,145 15,212,515 10,608 2,728,180 35,178,448 $ 17,385,087 $ (1,666) $ 8,152,712 $ 46,375 $ 4,375,559 $ 29,958,067 See notes to the financial statements. 26 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2022 Net Change in Fund Balances - Total Governmental Funds $ (5,220,381) Amounts reported for Governmental Activities in the Statement of Activities are different because: Governmental funds report outlays for capital assets as expenditures because such outlays use current financial resources. In contrast, the Statement of Activities reports only portion of the outlay as expense. The outlay is allocated over the assets' estimated useful lives as depreciation expense for the period. Capital outlay 12,365,688 Depreciation expense (5,637,471) Governmental funds do not present revenues that are not available to pay current obligations. In contrast, such revenues are reported in the Statement of Activities when earned. Unavailable property tax revenue and other revenues 62,599 Governmental funds report proceeds from long-term debt as current financial resources. In contrast, the Statement of Activities treats such issuance of debt as a liability. Governmental funds report repayment of long-term debt principal as an expenditure, In contrast, the Statement of Activities treats such repayments as a reduction in long-term liabilities. Debt service principal 2,840 720 Proceeds from notes payable (1,457,640) Contributions aretreated as expenditures in the fund based financial statements, but aretreated as reductions in the City's net pension/OBEB liability in the statement of net position. This amount is the difference between contributions and net pension/OPEB expense (revenue) for the currentfiscal year. Pension 11454,988 OPEB (67,626) Some expenses reported in the statement of activities do not require the use of current financial resources and these are not reported as expenditures in governmental funds: (Increase) decrease in accrued interest 6,003 (Increase) decrease in compensated absences (148,153) Amortization of deferred loss on refunding (6,506) Amortization of deferred gain on refunding 4,293 Amortization of premium on bonds 350,456 Internal servicefund is used by managementto charge the cost of fleet managementto individual funds. The change in net position of the internal servicefund is included in the governmental activities in the statement of activities. 569,274 Change in Net Position of Governmental Activities $ 5,116,244 See notes to the financial statements. 27 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION PROPRIETARY FUNDS September 30, 2022 Page 1 of 2 Business -Type Activities Governmental Activities Enterprise Fund Water and Sewer Internal Service Assets Current Assets Cash and cash equivalents $ 4,313,653 $ 280,903 Investments 10,374,899 675,742 Accounts receivable, net of allowance: Customer accounts 3,989,589 - Accrued interest 8,258 569 Prepaids and other assets 63,224 - Restricted investments 23,417,040 - Total Current Assets 42,166,663 957,214 Non -current Assets Working capital deposit 571,884 - Capital Assets: La nd 319,473 Construction in progress 9,629,504 Water rights 19,716,695 Buildings and improvements 683,906 - Machinery and equipment 7,878,937 5,216,063 Water and sewer systems 78,013,079 - Accumulated depreciation (44,690,382) (2,850,876) Total Capital Assets 71,551,212 2,365,187 Total Non -current Assets 72,123,096 2,365,187 Total Assets 114,289,759 3,322,401 Deferred Outflows of Resources Deferred loss on bond refunding 587,418 - Deferred outflows - pension related 368,093 Deferred outflows - OPEB related 47,016 Total Deferred Outflows of Resources 1,002,527 - Total Assets and Deferred Outflows of Resources 115,292,286 3,322,401 See notes to the financial statements. 28 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION PROPRIETARY FUNDS September 30, 2022 Liabilities Current Liabilities Accounts payable Accrued liabilities Accrued interest Unearned revenue Customer deposits Retainage payable Compensated absences Bonds and other long-term debt payable Total Current Liabilities Non -current Liabilities Compensated absences Net Pension liability Total OPEB liability Bonds and other long-term debt payable Total Non -current Liabilities Total Liabilities Deferred Inflows of Resources Deferred gain on issuance of refunding bonds Deferred inflows - pension related Deferred inflows of resources for OPEB Total Deferred Inflows of Resources Total Liabilities and Deferred Inflows of Resources Net Position Net investment in capital assets Restricted for capital projects Restricted for debt service Unrestricted Total Net Position Business -Type Activities Enterprise Fund Water and Sewer $ 2,694,826 161,042 179,563 570,430 5,797 21,882 3,225,000 6,858,540 87,528 410,084 248,126 56,304,036 57,049,774 63,908,314 27,292 630,892 52,035 710,219 Page 2 of 2 Governmental Activities Internal Service $ 46,406 46,406 46,406 64,618,533 46,406 35,999,342 376,441 2,521,137 11,776,833 $ 50,673,753 2,365,187 910,808 $ 3,275,995 See notes to the financial statements. 29 City of Friendswood, Texas 2022 ACFR City of ripnoodd�w Texas 30 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS For the Year Ended September 30, 2022 Business -Type Activities Enterprise Governmental Fund Activities Water and Sewer Internal Service Operating Revenues Charges for services $ 19,223,542 $ 813,530 Miscellaneous 184,788 - Total Operating Revenues 19,408,330 813,530 Operating Expenses Personnel services 2,626,093 - Sewer operations 2,588,636 - Water purchases 1,836,874 - Repairs and maintenance 819,562 3,568 Supplies 217,565 - Other services and charges 1,041,844 - Depreciation 1,993,988 515,648 Total Operating Expenses 11,124,562 519,216 Operating income 8,283,768 294,314 Non -Operating Revenues (Expenses) Intergovernmental 289,181 - Investment income 130,401 (429) Gain on disposal of capital assets - 63,089 Insurance proceeds 11,292 - Interest expense (1,861,881) - Total Non -Operating Revenues (Expenses) (1,431,007) 62,660 Income before transfers 6,852,761 356,974 Transfers in 47,648 212,300 Transfers out (1,843,331) - Change in net position 5,057,078 569,274 Net position - Beginning 45,616,675 2,706,721 Total Net Position - Ending $ 50,673,753 $ 3,275,995 See notes to the financial statements. 31 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended September 30, 2022 Cash flows from operating activities Cash received from customers Receipts from interfund charges for fleet management Cash payments to suppliers for goods and services Cash payments to employees for services Net cash provided by operating activities Cash flows from noncapital financing activities Transfer in from other funds Transfers outto other funds Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities Acquisition and construction of property, plant and equipment Disposal of capital assets Repayment of debt Interest paid on debt Net cash provided (used) by capital and related financing activities Cash flows from investing activities Purchase of investments Investment i ncome Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and Cash Equivalents, Beginning Cash and Cash Equivalents, Ending Reconciliation of Total Cash and Cash Equivalents Currentassets -cash and cash equivalents Restricted assets - cash and cash equivalents Page 1 of 2 Business -Type Activities Enterprise Governmental Fund Activities Water and Sewer Internal Service $ 18,888,531 $ - - 813,530 (4,876,811) 41,100 (2,816,162) - 11,195,558 854,630 47,648 212,300 (1,843,331) - (1,795,683) 212,300 (10,558,139) (881,513) - 63,089 (3,456,348) - (2,209,143) - (16,223,630) (818,424) (2,190,209) (204,211) 126,588 (744) (2,063,621) (204,955) (8,887,376) 43,551 36,618,069 237,352 $ 27,730,693 $ 280,903 $ 4,313,653 23,417,040 $ 27,730,693 $ 280,903 $ 280,903 See notes to the financial statements. 32 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended September 30, 2022 Business -type Activities - Enterprise Funds Water and Sewer Reconciliation of operating income to net cash provided (used) by operating activities: Operating income $ 8,283,768 $ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,993,988 Change in assets, deferred inflows and outflows, and liabilities: Decrease (increase) in customer receivable (534,410) Decrease (increase) in prepaids and other assets (354) pensions (47,141) Decrease (increase) in deferred outflow for OPEB 4,096 Increase (decrease) in accounts payable 1,561,167 Increase (decrease) in accrued liabilities 66,857 Increase (decrease) in customer deposits 14,611 pensions 381,164 Increase (decrease) in deferred inflows for OPEB 7,896 Increase (decrease) in total OPEB liability (3,466) Increase (decrease) in net pension liability (524,249) Increase (decrease) in compensated absences (8,369) Total Adjustments 2,911,790 Net cash provided by operating activities Page 2 of 2 Governmental Activities Internal Service 294,314 515,648 44,668 560,316 $ 11,195,558 $ 854,630 See notes to the financial statements. 33 City of Friendswood, Texas 2022 ACFR City of ripnoodd�w Texas 34 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies The City of Friendswood, Texas ("the City') was incorporated on October 15, 1960. The City charter provides for a City Council -City Manager form of government. The Mayor and six Council members are elected from the City at large serving three-year terms. The City Council is the principal legislative body of the City. The City Manager is appointed by a majority vote of the City Council and is responsible to the Council for the administration of all the affairs of the City. The City Manager is responsible for law enforcement, appointment and removal of department directors and employees, supervision and control of all City departments, and preparation of the annual budget. The Mayor resides at meetings of the City Council and can vote. The City provides the following services: public safety, streets, parks and recreation, library, water and sewer, sanitation, planning and zoning, building inspection, code enforcement, and general administrative services. A. Reporting Entity The City is an independent political subdivision of the State of Texas governed by an elected six- member Council and Mayor and is considered a primary government. As required by generally accepted accounting principles, these financial statements have been prepared based on considerations regarding the potential for inclusion of other entities, organizations, or functions as part of the City's financial reporting entity. Based on these considerations, the West Ranch Management District and Friendswood Downtown Economic Development Corporation have been included in the City's reporting entity as discretely presented component units. Additionally, as the City is considered a primary government for financial reporting purposes, its activities are not considered a part of any other governmental or other type of reporting entity. Consideration regarding the potential for inclusion of other entities, organizations, or functions in the City's financial reporting entity is based on criteria prescribed by general accepted accounting principles. These same criteria are evaluated in considering whether the City is a part of any other governmental or other type of reporting entity. The overriding elements associated with prescribed criteria considered in determining that the City's financial reporting entity status is that of a primary government are that it has a separately elected governing body; it is legally separate; and it is financial independent of other state and local governments. Additional prescribed criteria under generally accepted accounting principles include considerations pertaining to organizations for which the primary government is financially accountable; and considerations pertaining to other organizations for which the nature and significance of the relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The West Ranch Management District ("the District"), a discretely presented component unit, was created under Section 59, Article XVI of the Texas Constitution added by an Act of the 791h Legislature of the State of Texas, effective June 17, 2005, in accordance with the Texas Water Code, Chapter 54. The District operates in accordance with Chapters 3837, Texas Special District Local Laws Code, Chapters 49 and 54 of the Texas Water Code and Chapter 375 of the Texas Local Government Code, and is subject to the continuing supervision of the Texas Commission on Environmental Quality. The District was created to promote and encourage employment and the public welfare within the District. The affairs of the District are managed by a Board of Directors composed of persons appointed by the City Council. The City is financially accountable for the District because City Council must approve any debt issuances. Complete financial statements from the component may be obtained at the District's administrative office. The Friendswood Downtown Economic Development Corporation ("FDEDC") was incorporated August 1, 2016 as a nonprofit economic development corporation under the Development Corporation Act. The citizens of Friendswood voted to pass a one- half cent sales tax dedicated to support and enhance the welfare and prosperity of the citizens of the City and of this State by promotion of economic development and growth by encouraging the development of new business enterprises and the retention or expansion of existing business enterprises. 35 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) A. Reporting Entity (continued) To serve this purpose, the Corporation shall have the authority and power of a Type B corporation to undertake projects as described in Subchapter C of Chapter 501 of the Local Government Code and Chapter 505 of the Local Government Code, including undertaking projects as authorized by law, including but not limited to projects to promote new or expanded business enterprises in the downtown area as defined by the City of Friendswood Downtown District Map, including but not limited to streets, targeted infrastructure, paved sidewalks, pedestrian amenities including lighting, benches, signage, and other related public improvements, and the maintenance and operations expenses for any of the above -described projects. A separate governing board oversees FDEDC, which is appointed by Friendswood City Council, and consists of members of City Council, City's management, and individuals from the community. The City can remove appointed board members and approves the FDEDC's budget. The FDEDC is reported as a discretely presented component unit because the governing body is not identical to the governing body of the City, the FDEDC does not solely serve the City, and the City has the ability to impose its will on FDEDC. Complete financial statements of the FDEDC may be obtained by contacting FDEDC's administration office. B. Government -Wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net position and the statement of activities) report information on all activities of the primary government and its component unit. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenue, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financial accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenue includes 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operations or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenue are reported instead as general revenue. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. 36 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considered revenue to be available if collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgements, are recorded only when payment is due. Property taxes, franchise taxes, sales taxes, and interest associated with the current fiscal period are all considered to be susceptible to accrual and, accordingly, have been recognized as revenue of the current fiscal period. All of revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Coronavirus State and Local Fiscal Recovery Fund is used to account for federal funds related to the fiscal recovery of Coronavirus. Funds will be used for water and sewer infrastructure projects. The Bond Construction Fund is used to account for the construction of public facilities, and park, street and drainage improvements that are funded by the proceeds from Permanent Improvement Bonds. The Debt Service Fund is used to account for the accumulation of resources for the payment of general long-term debt principal, interest, and related costs. Other governmental funds is a summarization of all the non -major governmental funds. The City reports the following major enterprise fund: The Water and Sewer Fund is used to account for the activities of the City's water and wastewater operations. Additionally, the City reports the following fund type: The Internal Service Fund is used to account for fleet management services provided to other departments of the City on a cost reimbursement basis. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are charges between the City's water and sewer function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenue reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Water and Sewer enterprise fund and of the City's internal service fund are charges to customers for sales and services. Operating expenses for the enterprise fund and internal service fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. 37 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Outflows/Inflows and Net Position/Fund Balance Cash and Investments Cash and investments include cash on hand, deposits with financial institutions, short-term investments in a state -managed public funds investment pool account (TexPool), and a privately managed public funds investment pool (Texas Class). Other investments consist mainly of U.S. government treasury bills, treasury notes and other U.S. government obligations. Restricted cash and investments are assets restricted for specific use. Restricted includes cash deposits with financial institutions and investment pools. The City maintains a pooled cash and investments account for all funds of the City. Each fund's positive equity in the pooled cash account is presented as "cash and investments" in the financial statements. Negative equity balances are reclassified and are reflected as interfund accounts payable. Interest income and interest expense are allocated monthly to each respective individual fund based on their representative fund balances. The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Investments for the City are reported at fair value, except for the position in investment pools. The City's investment in pools are reported at the net asset value per share (which approximates fair value) even though it is calculated using the amortized cost method. TexPool and Texas Class have a redemption notice period of one day and may redeem daily. The investment pool's authority may only impose restrictions on redemptions in the event of a general suspension of trading on major securities markets, general banking moratorium or national state of emergency that affects the pool's liquidity. Property Taxes All trade and property tax receivables are shown net of an allowance for uncollectible accounts. Management estimates an allowance for trade accounts receivable based on past experience, historical losses, and other pertinent factors. The City's property taxes are levied annually in October on the basis of the Appraisal District's assessed values as of January 1 of that calendar year. Appraised values are established by the Appraisal District at market value and assessed at 100% of appraised value less exemptions. The City's property taxes are billed and collected by Galveston County. Such taxes are applicable to the fiscal year in which they are levied and become delinquent with an enforceable lien on property on February 1 of the subsequent calendar year. Property taxes are prorated between operations and debt service based on rates adopted for the year of the levy. For the current year, the City levied property taxes of $0.487314 per $100 of assessed valuation that were prorated between operations and debt service in the amounts of $0.385147 and $0.102167, respectively. The resulting tax levies were approximately $16.4 and $4.4 million for operations and debt service, respectively, based on a total taxable valuation of approximately $4.2 billion for the 2021 tax year. West Ranch Management District bond resolutions require that the District levy and collect an ad valorem debt service tax sufficient to pay interest and principal on bonds when due. During the year ended July 31, 2022, the District levied an ad valorem tax at the rate of $0.1750 per $100 of assessed valuation, which resulted in tax levy of $1.2 million on the taxable valuation of approximately $697.1 million for the 2021 tax year. 38 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Outflows/Inflows and Net Position/Fund Balance (continued) Interfund Receivables/Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans"). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. The City applies the consumption method in accounting for prepaid items in the governmental funds. Restricted Assets Certain proceeds of the City's enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Contract with West Ranch Management District The District approved a contract with the City effective August 15, 2005, as amended. Under the terms of the contract, the District is to pay for construction of water distribution, sanitary sewer, drainage, transportation, education and recreation facilities to serve the District. The District shall be the owner of the system until the system is completed, approved by the City and conveyed to it, at which time ownership will vest in the City. The District will own and operate these facilities to serve the District. Pursuant to the contract, the District shall have a security interest therein until all bonds issued by the District are retired. Capital Assets Capital assets, which include property, plant, equipment, infrastructure, and water rights, are reported in the applicable governmental or business -type activities columns in the government- wide financial statements. The City defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at acquisition cost, which is the price that would be paid to acquire an asset with equivalent service potential at the acquisition date. The City's water rights have an indefinite life. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. 39 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Outflows/Inflows and Net Position/Fund Balance (continued) Capital Assets The City's property, plant and equipment are depreciated using the straight-line method over the following useful lives: Buildings and improvements 20-50 years Machinery and equipment 5 - 10 years Infrastructure 40-50 years Water and sewer system 40-50 years The West Ranch Management District's capital assets are depreciated using the straight-line method over estimated useful lives of 10 to 45 years. Compensated Absences The City's employees earn vacation leave, which may either be taken or accumulated, up to certain amounts, until paid upon resignation or retirement. All vacation leave pay is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Long-term Debt In the government -wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance cost are expenses in the period incurred. Leases The City is a lessor for noncancellable lease agreements. The City recognizes a lease receivable and a deferred inflow of resources in the government -wide and governmental fund financial statements. At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts. • The City uses its estimated incremental borrowing rate as the discount rate for leases. The lease term includes the noncancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee. 40 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Outflows/Inflows and Net Position/Fund Balance (continued) Leases (continued) The City monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has the following items that qualify for reporting in this category: • Deferred loss on refunding debt - A deferred loss on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. • Deferred outflows of resources for pension - Reported in the government -wide financial statement of net position, this deferred outflow results from pension plan contributions made after the measurement date of the net pension liability and the results of 1) differences between projected and actual earnings on pension plan investments; 2) changes in actuarial assumptions; 3) differences between expected and actual actuarial experiences; and 4) changes in the City's proportional share of pension liabilities. The deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the next fiscal year. The deferred outflows resulting from differences between projected and actual earnings on pension plan investments will be amortized over a closed five year period. The remaining pension related deferred outflows will be amortized over the expected remaining service lives of all employees five year period. • Deferred outflows of resources for other post -employment benefits (OPEB) - Reported in the government wide financial statement of net position, these deferred outflows result from OPEB plan contributions made after the measurement date of the total OPEB liability and the results of changes in assumptions and other inputs. The deferred outflows of resources resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the next fiscal year. The other OPEB related outflow will be amortized over the expected remaining service lives of all employees (active and inactive employees) who are provided with OPEB benefits. In addition to liabilities, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has the following items that qualify for reporting in this category: • Deferred inflows of resources for unavailable revenues - Reported only in the governmental funds balance sheet, unavailable revenues arise under the modified accrual basis of accounting. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. • Deferred inflows of resources for leases - This deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. 41 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Outflows/Inflows and Net Position/Fund Balance (continued) Deferred Outflows/Inflows of Resources (continued) Deferred inflows of resources for pension - Reported in the government wide financial statement of net position, these deferred inflows result primarily from changes in actuarial assumptions. These pension related deferred inflows will be amortized over the expected remaining service lives of all employees (active and inactive employees) that are provided with pensions through the pension plan. Deferred inflows of resources for gain on issuance of refunding bonds - Reported in the government wide financial statement of net position, these deferred inflows result primarily from differences from the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. • Deferred inflows of resources for OPEB - Reported in the government wide financial statement of net position, this deferred inflow results primarily from 1) changes in actuarial assumptions; and 2) differences between expected and actual actuarial experiences. These OPEB related deferred inflows will be amortized over the expected remaining service lives of all employees (active and inactive employees) that are provided with OPEB through the OPEB plans. Pension For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources, and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Other Post -Employment Benefits (OPEB) The City provides its retirees the opportunity to maintain health insurance coverage by participating in the City's insurance plan. The City reports the total liability for this plan on the government -wide and proprietary fund financial statements. The actual cost recorded in the governmental fund financial statements is the cost of the health benefits incurred on behalf of the retirees less the premiums collected from the retirees. Information regarding the City's total liability for this plan is obtained through a report prepared by Gabriel Roeder Smith & Company, the City's third -party actuary, in compliance with GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Additionally, the City participates in a defined -benefit group -term life insurance plan, both forcurrent and retired employees, administered by the Texas Municipal Retirement System (TMRS). The City reports the total liability for this plan on the government -wide and proprietary fund financial statements. Information regarding the City's total OPEB liability is obtained from TMRS through a report prepared for the City by TMRS' consulting actuary, Gabriel Roeder Smith & Company, in compliance with GASB Statement No. 75. 42 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Outflows/Inflows and Net Position/Fund Balance (continued) Fund Balance The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows: Non -spendable — includes amounts that cannot be spent because they are either not in spendable form, or, for legal or contractual reasons, must be kept intact. This classification includes prepaid items and the fund balance of the City's permanent fund. Restricted— includes fund balance amounts that are constrained for specific purposes which are imposed by providers, such as creditors or amounts restricted due to constitutional provision or enabling legislation. This classification includes retirement of long-term debt, construction programs, City ordinances, and other federal and state grants. Committed— includes fund balance amounts that are constrained for specific purposes that are internally imposed by the City through formal action in an open meeting of the highest level of decision making authority. Committed fund balance is reported pursuant to resolution passes by the City Council. Assigned — includes fund balance amounts that are self-imposed by the City to be used for particular purpose. Fund balance can be assigned by the City Council or the City Manager, pursuant to the City's fund balance policy. At September 30, 2022, the City's assigned fund balance included amounts assigned for encumbrances and capital projects. Unassigned— includes residual positive fund balance within the general fund which has not been classified within the other above mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. When both restricted and unrestricted fund balances are available for use, it is the City's policy to use restricted fund balance first, then unrestricted fund balance. Furthermore, committed fund balances are reduced first, followed by assigned amounts and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications are available. The City has established a minimum fund balance policy whereby the City's unassigned general fund balance will be maintained at levels sufficient to protect the City's creditworthiness, as well as its financial position, from unforeseeable emergencies. The City will strive to maintain the unassigned general fund balance at a minimum of 90 days of prior year audited operating expenditures. 43 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1. Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Outflows/Inflows and Net Position/Fund Balance (continued) Net Position Government -Wide Financial Statements: The Statement of Net Position includes the following categories of net position: Net investment in capital assets —the component unit of net position that reports the difference between capital assets less both the accumulated depreciation and the outstanding balance of debt, net of premiums and discounts, that is directly attributable to the acquisition, construction or improvement of these capital assets. Restricted — Net position is reported as restricted when there are limitations imposed on its use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. Unrestricted —the difference between assets, deferred outflows and inflows, and liabilities that are not reported in any of the classifications above. Use of Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ materially from those estimates. E. Implementation of New Accounting Standards The following GASB pronouncements were effective during fiscal year 2022. GASB Statement No. 87 Leases was issued in June 2017 and was effective for periods beginning after June 15, 2021. This Statement established a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right -to -use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. The financial statements have been updated to reflect this new standard. 44 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 2. Cash and Investments Under provisions of state and local statutes, the City's investment policies, and provisions of the City's depository contract with an area financial institution, the City is authorized to place available deposits and investments in the following: 1. Obligations of the U.S., it's agencies and instrumentalities; 2. Certificates of Deposit issued by state and national banks or savings or loan associations domiciled in this state that are guaranteed or incurred by the Federal Deposit Insurance Corporation or collateralized in accordance with Section 2256.010, the Texas Government Code, in face amounts not to exceed $100,000; 3. No-load money market mutual funds; and 4. TexPool, Lone State Investment Pool and Texas CLASS. The City Council has adopted a written investment policy regarding the investments of its funds as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas Government Code). The investments of the City are in compliance with the Council's investment policies. The City did not have any derivative investment products during the current year. All significant legal and contractual provisions for investments were complied with during the year. At September 30, 2022, the carrying amount of the City and Friendswood Downtown Economic Development Corporation's deposits was $15,561,580 and the bank balance of $16,804,877. As of September 30, 2022, the City and Friendswood Downtown Economic Development Corporation held the following investments. Reported Weighted Value of Average Investments Maturity (Days) Investment pools: TexPool $ 6,875,033 24 Texas CLASS 51,226,788 34 Total investment pools 58,101,821 Debt Securities: Federal Farm Credit Bonds 4,377,299 340 Federal Home Loan Bank Bonds 3,449,160 222 Federal Home Loan Mortgage Corporation 494,649 262 Federal National Mortgage Association 468,604 574 Total debt securities 8,789,712 Total investments $ 66,891,533 The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The valuation techniques used in the fair value measurement are based on quoted market closing prices for Level 2 inputs. 45 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 2. Cash and Investments (continued) The City has the following recurring fair value measurements as of September 30, 2022: Fair Value / Amortized Cost Level 1 Inputs Level 2 Inputs Level 3 Inputs Investment Securities: Federal Farm Credit Bank $ 4,377,299 $ $ 4,377,299 $ Federal Home Loan Bank 3,449,160 3,449,160 Federal Home Loan Mortgage Corp. 494,649 494,649 Federal National Mortgage Assoc. 468,604 468,604 Total Investment Securities $ 8,789,712 $ $ 8,789,712 $ The City invests in Texas Local Government Investment Pool (TexPool), which was created under the Interlocal Cooperation Act, Texas Government Code Ann. Chapter 791 and the Texas Public Funds Investment Act. The Texas Treasury Safekeeping Trust Company ("the Trust") is trustee of TexPool and is a limited purpose trust company authorized pursuant to Texas Government Code Ann. Section 404.103 for which the Texas State Comptroller is sole officer, director and shareholder. The advisory board of TexPool is composed of members appointed pursuant to the requirements of the Texas Public Funds Investment Act. The City invests in Texas CLASS Investment Pool which was established in 1996 pursuant to the Texas Public Funds Investment Act. The pool is governed by a 7-member board of trustees, who are elected by pool participants. The Cutwater Investor Services Corp. serves as the pools program administrator and Wells Fargo Bank Texas, NA, serves as custodian. Interest Rate Risk. In accordance with its investment policy, the City manages its exposure to declines in fair values by structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations and invest operating funds primarily in short-term securities. Custodial Credit Risk. In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be returned. State statutes require that all deposits in financial institutions be fully collateralized by U.S. Government obligations or its agencies and instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a fair value of not less than the principal amount of deposits. As of September 30, 2022, all of the City's cash deposits with financial institutions were collateralized with securities held by the pledging financial institution in the City's name. Credit Risk Credit Risk. It is the City's policy to limit its investments to investment types with an investment quality rating not less than A or its equivalent by a nationally recognized statistical rating organization. The City's investments as of September 30, 2022, were rated as follows: Credit Quality Investment Type: Rating Rating Agency Investment Pools: Texas CLASS AAAm Standard & Poor's TexPool AAAm Standard & Poor's Debt Securities: Federal Home Loan Mortgage Corp. Aaa Moody's Investor Service Federal Home Loan Bank Aaa Moody's Investor Service Federal Farm Credit Bank Aaa Moody's Investor Service Federal National Mortgage Association Aaa Moody's Investor Service 46 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 3. Receivables and Deferred Inflows of Resources Receivables as of September 30, 2022 for the City's individual major funds and nonmajor funds in the aggregate including the applicable allowances for uncollectible accounts, are as follows: receivables Governmental Funds Proprietary Fund Debt Service Water and General Fund Nonmajor Sewer Total Receivables: Property taxes $ 247,529 $ 53,104 $ $ $ 300,633 Penalties and interest 138,675 24,376 163,051 Sales tax 1,731,350 - 427,806 2,159,156 Franchise taxes 572,740 - 572,740 Customer accounts 321,776 2,697 4,268,748 4,593,221 Court fines 873,513 - - 873,513 Leases 1,021,537 - 1,021,537 Other 730,696 3,658 - 734,354 Gross receivables 5,637,816 77,480 434,161 4,268,748 10,418,205 Less: allowancefor uncollectibles (862,402) (23,361) - (279,159) (1,164,922) Net total $ 4 775 414 $ 54 119 $ 434 161 $ 3 989 589 $ 9 253 283 Governmental funds reported deferred inflows of resources in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of deferred inflows of resources for unavailable revenues reported in the governmental funds were as follows: General Fund: Delinquent property taxes Property tax penalties and interest Court fines Grants Miscellaneous Total General Fund Debt Service Fund: Delinquent property taxes Property tax penalties and interest Nonmajor funds: Court fi nes Total Nonmajor Funds Total governmental funds Deferred Inflows of Resources $ 173,870 100,990 174,703 244,925 8,166 702,654 37,042 15,631 52,673 3,756 3,756 $ 759,083 47 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 4. Capital Assets Capital assets activity for the primary government for the fiscal year ended September 30, 2022, is as follows: Governmental activities Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings and improvements Machinery and equipment Infrastructure Total capital assets, being depreciated Less accumulated depreciation for: Buildings & improvements Machinery and equipment Infrastructure Total accumulated depreciation Total capital assets - being depreciated Governmental capital assets, net Business -type activities Capital assets, not being depreciated: Land Water rights Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings and improvements Machinery and equipment Water and sewer system Total capital assets, being depreciated Less accumulated depreciation for: Buildings and improvements Machinery and equipment Water and sewer system Total accumulated depreciation Total capital assets - being depreciated Business -type capital assets, net Reclassification/ Beginning Balance Increases Decreases Ending Balance $ 29,695,765 $ 2,660,075 $ $ 32,355,840 1,435,585 7,361,587 8,797,172 31,131,350 10,021,662 41,153,012 45,778,777 573,252 46,352,029 19,043,530 2,497,550 (321,697) 21,219,383 105,053,888 160,894 105,214,782 169,876,195 3,231,696 (321,697) 172,786,194 (21,916,258) (1,497,115) - (23,413,373) (12,028,958) (1,660,569) 315,541 (13,373,986) (58,544,064) (2,995,436) - (61,539,500) (92,489,280) (6,153,120) 315,541 (98,326,859) 77,386,915 (2,921,424) (6,156) 74,459,335 $ 108,518,265 $ 7,100,238 $ (6,156) $ 115,612,347 Reclassification/ Beginning Balance Increases Decreases Ending Balance $ 319,473 $ $ $ 319,473 19,716,695 19,716,695 2,870,307 10,572,454 (3,813,257) 9,629,504 22,906,475 10,572,454 (3,813,257) 29,665,672 683,906 - 683,906 7,725,245 164,191 (10,499) 7,878,937 74,199,822 - 3,813,257 78,013,079 82,608,973 164,191 3,802,758 86,575,922 (345,300) (19,757) - (365,057) (5,066,302) (226,582) 10,499 (5,282,385) (37,295,291) (1,747,649) - (39,042,940) (42,706,893) (1,993,988) 10,499 (44,690,382) 39,902,080 (1,829,797) 3,813,257 41,885,540 $ 62,808,555 $ 8,742,657 $ - $ 71,551,212 48 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 4. Capital Assets (continued) Capital assets activity for the discretely presented component units for the fiscal year ended September 30, 2022, is as follows: Component Unit Capital assets, not being depreciated: La nd Total capital assets, not being depreciated Capital assets, being depreciated: Water production and distribution facilities Total capital assets, being depreciated Less accumulated depreciation for: Water production and distribution facilities Total accumulated depreciation Total capital assets - being depreciated Component Unit capital assets, net Depreciation Reclassification/ Beginning Balance Increases Decreases Ending Balance $ 7,762,414 $ $ $ 7,762,414 7,762,414 7,762,414 483,467 483,467 483,467 483,467 (116,537) (10,745) (127,282) (116,537) (10,745) (127,282) 366,930 (10,745) 356,185 $ 8,129,344 $ (10,745) $ $ 8,118,599 Depreciation expense was charged to functions/programs of the City as follows: Depreciation Expense Primary Government Governmental activities: General government $ 416,913 Public safety 11197,021 Public works 31338,400 Community development 5,902 Parks and recreation 679,236 Capital assets held bytheCity's internal service fund are charged tothevarious functions based on their usage 515,648 Total Governmental activities 61153,120 Business -type activities: Water and sewer 1,993,988 Total Business -type activities: 1,993,988 Total Primary Government $ 8,147,108 49 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 4. Capital Assets (continued) Construction commitments The City has active construction projects as of September 30, 2022. At year end, the City's commitments with contractors were as follows: Projects Governmental funds: Parks Master Plan Blackhawk Emergency Shelter Blackhawk Building Renovation Fi re Stati on #2 Public Safety Building Centennial Wall Utility Relocation at Clear Creek Utility Bridge Forest Bend Detention Pond Deepwood Flood Control IT Network Refresh Enterprise funds: Lift Station Mitigation Program Automated Water Meters Water Systems Improvements Lift Station SCADA Server Upgrade Fire Station #2 Total Commitments Construction Construction in Remaining Commitment Progress Commitment $ 146,200 $ 95,400 $ 50,800 36,475 27,550 8,925 260,000 213,825 46,175 4,627,683 2,334,587 2,293,096 6,077,700 4,700,280 1,377,420 435,589 291,864 143,725 219,200 202,550 16,650 4,070,225 835,634 3,234,591 236,369 63,924 172,445 239,882 31,558 208,324 16,349,323 8,797,172 7,552,151 $ 507,784 $ 428,256 $ 79,528 8,725,441 8,406,911 318,530 937,316 746,221 191,095 3,744 3,744 - 44,372 44,372 - 10,218,657 9,629,504 589,153 $ 26,567,980 $ 18,426,676 $ 8,141,304 The remaining commitment amounts were encumbered at year end. The encumbrances and related appropriation lapse at the end of the fiscal year, but they are re -appropriated and become a part of the subsequent year's budget because performance under the executory contract is expected in the next year. At year end, the amount of significant encumbrances expected to be honored upon performance by the vendors in the next year were $3,396,348 for General Fund. Note 5. Long-term Debt The City issues a variety of long-term debt instruments in order to acquire and/or construct major capital facilities and equipment for governmental and business -type activities. These instruments include general obligation bonds, certificates of obligation, revenue bonds, and notes payable. These debt obligations are secured by either future tax revenue, water and sewer system revenue, or liens on property and equipment. Debt obligations that are intended to be repaid from water and sewer system revenue have been recorded as business -type activities. All other long-term obligations of the City are considered to be governmental type activities. 50 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note S. Long-term Debt (continued) Federal Arbitrage The Tax Reform Act of 1986 instituted certain arbitrage restrictions consisting of complex regulations with respect to issuance of tax-exempt bonds after August 31, 1986. Arbitrage regulations deal with the investment of tax-exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service (IRS) at least every five years for applicable bond issues. Accordingly, there is the risk that if such calculations are not performed, or are not performed correctly, a substantial liability to the City could result. The City periodically engages an arbitrage consultant to perform the calculations in accordance with the rules and regulations of the IRS. There was no liability for arbitrage recorded as of year-end. Bonds Payable and Certificates of Obligation The following schedule summarizes the terms of the City's general obligation bonds, combination tax and revenue bonds, and certificates of obligation outstanding and their corresponding allocations to the governmental and business -type activities at September 30, 2022: Original Issue Final Interest Governmental Business -Type General Obligation Bonds: Amount Maturity Rates Activities Activities 2014 General Obligation Refunding 2015 General Obligation Refunding 2016 General Obligation Permanent Improvement and Refunding 2016AGeneral Obligation Refunding 2017 General Obligation Bonds 2020 General Obligation and Refunding Bonds 2021 General Obligation and Refunding Bonds Total general obligation bonds Revenue Bonds: 2016 Waterworks and Sewer System 2018 Waterworks and Sewer System 2021 Waterworks and Sewer System Total revenue bonds Total $ 8,805,000 9,595,000 19,095,000 9,765,000 5,605,000 10,465,000 16,235,000 5,735,000 20,170,000 13,690,000 2028 2.0%-4.0% $ 1,910,000 $ 4,910,000 2030 2.0%-3.0% 6,450,000 - 2031 2.0%-5.0% 6,635,000 6,515,000 2034 2.0%-4.0% - 7,210,000 2031 2.0%-4.0% 4,295,000 - 2050 2.0%-4.0% 2051 2.375% - 4.0% 2036 2038 2041 2.0% - 4.0% 4.0% - 5.0% 3.0% - 4.0% 9,435,000 15,225,000 18,635,000 4,350,000 18,060,000 13,220,000 $ 43,950,000 $ 54,265,000 51 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note S. Long-term Debt (continued) Bonds Payable and Certificates of Obligation (continued) Annual debt service requirements for the City's bonds and revenue bonds are as follows: Governmental Activities Business -type Activities Fiscal Year Principal Interest Principal Interest Total 2023 $ 2,400,000 $ 1,508,906 $ 3,225,000 $ 2,096,600 $ 9,230,506 2024 2,485,000 1,424,206 3,345,000 1,973,275 9,227,481 2025 2,575,000 1,333,469 3,485,000 1,837,125 9,230,594 2026 2,670,000 1,239,669 3,685,000 1,687,950 9,282,619 2027 2,815,000 1,136,803 3,760,000 1,528,000 9,239,803 2028-2032 13,510,000 3,886,238 18,260,000 5,072,025 40,728,263 2033-2037 5,505,000 2,083,075 13,485,000 1,994,150 23,067,225 2038-2042 4,835,000 1,248,600 5,020,000 244,450 11,348,050 2043-2047 3,950,000 670,797 - - 4,620,797 2048-2052 3,205,000 151,878 - - 3,356,878 $ 43,950,000 $ 14,683,641 $ 54,265,000 $ 16,433,575 $ 129,332,216 Changes in the City's long-term liability activity for the year ended September 30, 2022, are as follows: Beginning Additions Reductions Ending Balance Due Within One Balance Year Primary Government Governmental activities: General obligation bonds $ 46,265,000 $ $ (2,315,000) $ 43,950,000 $ 2,400,000 Premium on bond issuance 3,544,358 (350,456) 3,193,902 - Notes payable 1,681,809 1,457,640 (525,720) 2,613,729 702,919 Compensated absences 996,190 1,180,525 (1,032,372) 1,144,343 228,869 Governmental activity Long-term liabilities $ 52,487,357 $ 2,638,165 $ (4,223,548) $ 50,901,974 $ 3,331,788 Beginning Additions Reductions Ending Balance Due Within One Balance Year Business -type activities: Revenue bonds 37,080,000 $ $ (1,450,000) $ 35,630,000 $ 1,510,000 General obligation bonds 20,300,000 (1,665,000) 18,635,000 1,715,000 Premium on bond issuance 5,666,291 (402,255) 5,264,036 - Compensated absences 117,779 118,399 (126,768) 109,410 21,882 Business -type activity Long-term liabilities $ 63,164,070 $ 118,399 $ (3,644,023) $ 59,638,446 $ 3,246,882 Total Primary government $ 115,651,427 $ 2,756,564 $ (7,867,571) $ 110,540,420 $ 6,578,670 52 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note S. Long-term Debt (continued) Bonds Payable and Certificates of Obligation (continued) The compensated absences, net pension liability and total OPEB liabilities attributable to the governmental activities will be liquidated primarily by the General Fund. West Ranch Management District The following schedule summarizes the terms of the West Ranch Management District's general obligation bonds at July 31, 2022: Amounts Interest Range of General Obligation Bonds: Outstanding Rates Maturities Road Series 2010A $ 45,000 4.35% 2021-2022 Road Series2014 1,845,000 2.00%-3.75% 2022-2040 Series 2015 3,905,000 2.950% - 4.125% 2022-2030 Series 2016 2,080,000 3.00% - 4.00% 2031-2040 Refunding Series 2016 665,000 2.00%-4.00% 2022-2026 Series 2020 8,975,000 2.00% - 4.00% 2022-2040 Refunding Series 2016 1,535,000 2.00%-4.00% 2022-2040 Total general obligation bonds $ 19,050,000 * Or any date thereafter, callable at par plus accrued interest to the date of redemption. Annual debt service requirements for the District's bonds are as follows: Fiscal Year 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2041 Principal $ 865,000 900,000 930,000 970,000 1,005,000 5,370,000 4,740,000 4,270,000 $ 19,050,000 Interest $ 559,587 530,329 497,763 461,806 426,238 1,638,010 947,879 255,216 $ 5,316,828 Total $ 1,424,587 1,430,329 1,427,763 1,431,806 1,431,238 7,008,010 5,687,879 4,525,216 $ 24,366,828 Callable Date * September 1, 2020 September 1, 2022 September 1, 2023 September 1, 2024 September 1, 2024 September 1, 2025 September 1, 2025 The District's bonds are payable from the proceeds of an ad valorem tax levied upon all property within the District subject to taxation, without limitation as to rate or amount. 53 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note S. Long-term Debt (continued) Bonds Payable and Certificates of Obligation (continued) West Ranch Management District (continued) Changes in the discretely presented component units' long-term liabilities for the year end July 31, 2022, are as follows: Beginning West Ranch Management District Balance Component Unit General obligation bonds $ 21,750,000 Discount on bonds (277,729) Premium on bonds 76,630 Developer advances 40,000 Due to developer 369,600 Due Within One Increase Decrease Ending Balance Year $ $ (2,700,000) 64,319 (9,182) $ 19,050,000 $ 865,000 (213,410) - 67,448 40,000 369,600 Total $ 21,958,501 $ - $ (2,644,863) $ 19,313,638 $ 865,000 At July 31, 2022, the District had $3,775,000 of unlimited tax bonds and recreational facilities' bonds authorized, but unissued, for the purposes of acquiring, constructing and improving recreational facilities, transportation, education, and the water, sanitary sewer and drainage systems within the District. A developer of the District has advanced $40,000 to the District for operating expenses. The District has agreed to pay these amounts, plus interest, to the extent approved by the Commission from the proceeds of future bond sales. These amounts have been recorded in the financial statements as long-term liabilities. The District is currently unable to estimate when bonds will be issued to pay this liability. The developer of the District has constructed underground utilities on behalf of the District. The District's engineer estimates reimbursable costs for completed projects are $369,600. The District has agreed to reimburse the developers for these amounts, plus interest, to the extent approved by the Texas Commission on Environmental Quality from the proceeds of future bond sales. These amounts have been recorded in the financial statements as long-term liabilities. Defeasance of Bonds The City defeased certain bonds by placing the proceeds of new bonds in an irrevocable trust to provide future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City's financial statements. On September 30, 2022, the City has no bonds considered defeased that were outstanding. Notes Payable During the current fiscal year, the City entered into a five-year agreement for the acquisition and use of vehicles and equipment. An initial liability was recorded in the amount of $1,457,640 during the current fiscal year. The City is required to make annual principal and interest payments of $318,555. The agreement has an interest rate of 3.03%. 54 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note S. Long-term Debt (continued) Notes Payable (continued) The following is a summary of future notes payments due on this machinery and equipment: Fiscal Year Principal Interest 2023 $ 702,919 $ 70,085 2024 721,122 51,882 2025 406,103 33,191 2026 386,312 22,032 2027 397,273 11,172 Total $ 2,613,729 $ 188,362 Pledged Revenues On February 1, 2016, the City issued $5,735,000 in Waterworks and Sewer System Revenue Bonds, Series 2016. On December 3, 2018, the City issued $20,170,000 in Waterworks and Sewer System Revenue Bonds, Series 2018. On February 4, 2021, the City issued $13,690,000 in Water and Sewer System Revenue Bonds, Series 2021. These bonds represent special obligations of the City and are payable solely from a first lien on and pledge of the net revenues of the City's waterworks and sanitary sewer system. The proceeds of the bonds were and are to be used to finance sanitary sewer and waterworks system extensions and improvements. The outstanding revenue bonds have a final maturity of March 1, 2036 for the 2016 bonds, March 1, 2038 for the 2018 bonds, and March 1, 2041 for the 2021 bonds. The City will commit revenues each year the bonds are outstanding. At September 30, 2022, the remaining principal on the series 2016, 2018 and 2021 bonds was $4,350,000, $18,060,000, and $13,220,000, respectively. Principal and interest payments for the fiscal year were $1,450,000 and $1,434,200, respectively. Net pledged revenue in 2022 produced 385 percent of the current debt service requirement. 55 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 6. Interfund Balances and Transfers Due to/from Other Funds The City had interfund receivable and payable balances at September 30, 2022 as follows: Due To Due From Amount Purpose Expenditures funded by General Fund General Fund HMGPAcquisition and Demolition $ 205,180 pending grant reimbursement. Expenditures funded by General Fund General Fund 2017 CDBG- DR Harvey- Harris County 680,090 pending grant reimbursement. Expenditures funded by General Fund General Fund 2017CDBG- DR Harvey- Galveston County 272,460 pending grant reimbursement. Expenditures funded by bond funds 2021 Bond Fund 2017 CDBG- DR Harvey -Galveston County 996,000 pendinggrantreimbursement $ 2,153,730 Governmental activities: General fund $ 1,157,730 $ $ 1,157,730 Bond construction fund - 996,000 996,000 Nonmajor governmental funds - (2,153,730) (2,153,730) Interfund Transfers The composition of interfund transfers for the year ended September 30, 2022, were as follows: Transfer In Transfers Out Amount Purpose Budgeted annual transfers for indirect watei General Fund Water and Sewer Fund $ 1,708,331 and sewer costs by the General Fund Internal Service Fund General Fund 77,300 To fund newvehiclefor Police Department Internal Service Fund Water and Sewer Fund 135,000 To fund 2 newvehicles for Public Works Capital lease proceeds to purchase Water and Sewer Fund General Fund 47,648 equipment in the sewer division $ 1,968,279 Note 6. Leases Lease Receivable The City leases real property to third parties for the placement of their telecommunication towers. The City recognized $37,563 in lease revenue and $27,178 in interest revenue during the current fiscal year related to these leases. As of September 30, 2022, the City's receivable for lease payments was $1,021,537. Also, the City has a deferred inflow of resources associated with this lease that will be recognized as revenue over the lease term. As of September 30, 2022, the balance of the deferred inflow of resources was $1,011,689. 56 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 7. Employee Retirement System Texas Municipal Retirement System Plan Description and Provisions The City participates as one of 901 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered bythe Texas Municipal Retirement System (TMRS). TMRS is an agency created bythe State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple -employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six -member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax -qualified plan under Section 401(a) of the Internal Revenue Code. TMRS a report (ACFR) that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the city -financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven actuarially equivalent payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest. The City has approved an annually repeating (automatic) basis monetary credit referred to as an updated service credit (USC) which is a theoretical amount which takes into account salary increases or plan improvements. If at any time during their career an employee earns a USC, this amount remains in their account earning interest at 5% until retirement. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer match plus employer -financed monetary credits, such as USC, with interest were used to purchase an annuity. Additionally, City provides on an annually repeating (automatic) basis cost of living adjustments (COLA) for retirees equal to a percentage of the change in the consumer price index (CPI). A summary of plan provisions for the City are as follows: Employee deposit rate: 7% Matching ratio (City to employee): 2 to 1 Years required for vesting: 5 Service retirement eligibility: Vested at age 60 or 20 years at any age Updated Service Credit: 100% Repeating Annuity increase to retirees 50% of CPI; Repeating Supplement death benefit — active Employees and retirees Yes 57 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 7. Employee Retirement System (continued) Texas Municipal Retirement System (continued) Employees covered by benefit terms At the December 31, 2021 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 152 Inactive employees entitled to but not yet receiving benefits 131 Active employees 216 Total 499 Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the City matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the City. Under the State law governing TMRS, the contribution rate for each City is determined annually by the consulting actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees forthe City were required to contribute 7.0%of their annual gross earnings during the fiscal year. The contribution rates for the City were 16.55% and 16.27% in calendar years 2021 and 2022, respectively. The City's contributions to TMRS for the year ended September 30, 2022, were $2,844,852 and were equal to the required contributions. Net Pension Liability The City's Net Pension Liability (NPL) was measured as of December 31, 2021, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. Actuarial Assumptions The Total Pension Liability in the December 31, 2021 actuarial valuation was determined using the following actuarial assumptions: Actuarial cost method: Amortization method: Remaining amortization period Asset valuation method: Inflation: Salary increases: Investment rate of return: Entry age normal Level percentage of payroll, closed 24 years 10 year smoothed market; 12% soft corridor 2.50% 3.50%to 11.50%including inflation 6.75% 58 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 7. Employee Retirement System (continued) Texas Municipal Retirement System (continued) Actuarial Assumptions (continued) Salary increases are based on a service -related table. Mortality rates for active members are based on the PUB (10) mortality tables with the Public Safety table used for males and the General Employee table used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender distinct 2019 Municipal Retirees of Texas mortality tables. The rates for actives, healthy retirees and beneficiaries are projected on a fully generational basis by Scale LIMP to account for future mortality improvements. For disabled annuitants, the same mortality tables for healthy retirees is used with a 4- year set -forward for males and a 3-year set -forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is applied, for males and females respectively, to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four- year period from December 31, 2014, to December 31, 2018. They were adopted in 2019 and first used in the December 31, 2019, actuarial valuation. The post -retirement mortality assumption for annuity purchase rates is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). The target allocation and best estimates of real rates of return for each major asset class in fiscal year 2020 are summarized in the table below: Global Equity Core Fixed Income Non -Core Fixed Income Other Public and Private Markets Real Estate Hedge Funds Private Equity Total Discount Rate Long -Term Expected Real Rate of Return Target Allocation (Arithmetic) 35.0% 7.55% 6.0% 2.00% 20.0% 5.68% 12.0% 7.22% 12.0% 6.85% 5.0% 5.35% 10.0% 10.00% 100.0% The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statue. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. 59 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 7. Employee Retirement System (continued) Texas Municipal Retirement System (continued) Changes in the Net Pension Liability Balance at 12/31/2020 Changes for the year: Service Cost Interest (on the Total Pension Liability) Difference between expected and actual experience Changes of assumptions Benefit payments, including refunds of employee contributions Contributions — employer Contributions — employee Net investment income Administrative Expense Other Balance at 12/31/2021 Increase (Decrease) Total Pension Plan Fiduciary Net Net Pension Liability Position Liability $ 91,096,245 $ 81,355,616 $ 9,740,629 3,032,100 - 3,032,100 6,110,807 - 6,110,807 788,166 - 788,166 (4,163,654) (4,163,654) - - 2,777,049 (2,777,049) - 1,174,582 (1,174,582) - 10,611,017 (10,611,017) - (49,073) 49,073 - 337 (337) $ 96,863,664 $ 91,705,874 $ 5,157,790 Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability (asset) of the City, calculated using the discount rate of 6.75%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1%Decrease in Current Single Rate 1%Increase in Discount Rate (5.75%) Discount Rate (6.75%) Discount Rate (7.75%) City's net pension liability $ 18,854,597 $ 5,157,790 $ (6,071,734) Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separately issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. 60 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 7. Employee Retirement System (continued) Texas Municipal Retirement System (continued) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2022, the City recognized a pension expense of $1,199,639. At September 30, 2022, the City reported deferred outflows and inflows of resources related to pensions from the following sources: Deferred Outflows of Deferred Inflows Resources of Resources Difference in expected and actual economic experience $ 1,016,277 $ (82,001) Changes in actuarial assumptions 130,195 - Difference between projected and actual investment earnings - (5,433,077) Contributions subsequent to the measurement date 2,071,293 - Tota I $ 3,217,765 $ (5,515,078) The $2,071,293 reported as deferred outflows of resources related to pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ending September 30, 2023. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expenses as follows: 2023 2024 2025 2026 Thereafter Tota I Net Deferred Outflows (Inflows) of Resources $ (486,639) (1,949,324) (991,613) (941,030) $ (4,368,606) 61 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 8. Post Employee Benefits Other Than Pensions TMRS Supplemental Death Benefits Fund Benefit Plan Description The City's single -employer defined benefit group -term life insurance plan is operated by the Texas Municipal Retirement System (TMRS) via the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group -term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump -sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death); retired employees are insured for $7,500; this coverage is another post -employment benefit (OPEB). As the SDBF covers both active and retiree participants, with no segregation of assets, the SDBF is considered to be an unfunded OPEB plan (i.e. no assets are accumulated). Membership in the plan as of the measurement date of December 31, 2021 was as follows: Inactive employees currently receiving benefits 104 Inactive employees entitled to but not yet receiving benefits 33 Active employees 216 Total 353 Contributions Contributions are made monthly based on the covered payroll of employee members of the participating member city. The contractually required contribution rate is determined annually for each city (currently 0.17% of covered payroll). The rate is based on the mortality and service experience of all employees covered by the SDBF and the demographics specific to the workforce of the city. There is a one-year delay between the actuarial valuation that serves as the basis for the employer contribution rate and the calendar year when the rate goes into effect. The funding policy of this plan is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to prefund retiree term life insurance during employees' entire careers. As such, contributions are utilized to fund active member deaths on a pay-as-you-go basis; any excess contributions and investment income over payments then become net position available for benefits. Discount Rate The TMRS SDBF program is treated as unfunded OPEB plan because the SDBF trust covers both active employees and retirees and the assets are not segregated for these groups. Under GASB Statement No. 75, the discount rate for an unfunded OPEB plan should be based on 20-year tax-exempt AA or higher Municipal Bonds. Therefore, a discount rate of 1.84% based on the Fidelity Index's "20-Year Municipal GO AA Index" rate as of December 31, 2021. 62 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 8. Post Employee Benefits Other Than Pensions (continued) TMRS Supplemental Death Benefits Fund (continued) Actuarial Assumptions The City's total OPEB liability was measured at December 31, 2021 and was determined by an actuarial valuation as of that date using the following actuarial assumptions: Valuation Date: December 31, 2021 Methods and Assumptions: Inflation: 2.50% Salary Increases: 3.50%to 11.50%, including inflation Discount rate *: 1.84% Retirees' share of benefit related costs: $0 Administrative expenses: All administrative expenses are paid through the Pension Trust and accounted for under reporting requirements under GASB Statement No. 68. Mortality rates — service retirees: 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a fully generational basis with scale UMP. Mortality rates — disabled retirees: 2019 Municipal Retirees of Texas Mortality Tables with a 4 year set -forward for males and a 3 year set -forward for females. In addition, a 3.5% and 3% minimum mortality rate will be applied to reflect the impairment for younger members who become disabled for males and females, respectively. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. *The discount rate was based on the Fidelity Index's "20-Year Municipal GO AA Index" rate as of December 31,2021. Note: The actuarial assumptions used in the December 31, 2021 valuation were based on the results of an actuarial experience study for the period December 31, 2014 to December 31, 2018. Changes in the Total OPEB Liability Service cost $ 45,305 Interest 17,025 Changes of benefit terms - Difference between expected and actual experience (9,842) Changes of assumptions 29,168 Benefit payments (15,102) Net change in total OPEB liability 66,554 Total OPEB liability- beginning 836,154 Total OPEB liability- ending $ 902,708 Ending total OPEB liability is $902,708 as of December 31, 2021. Changes of assumptions reflect a change in the discount rate from 2.00% as of December 31, 2020 to 1.84% as of December 31,2021. 63 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 8. Post Employee Benefits Other Than Pensions (continued) TMRS Supplemental Death Benefits Fund (continued) Sensitivity Analysis The following presents the total OPEB liability of the employer, calculated using the discount rate of 1.84%, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower (0.84%) or 1 percentage point higher (2.84%) than the current rate. Note that the healthcare cost trend rate does not affect the total OPEB liability, so sensitivity to the healthcare cost trend rate is not shown. Current Discount Rate Assumption 1% Increase to 1% Decrease to 0.84% 1.84% 2.84% $ 1,116,891 $ 902,708 $ 740,283 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB Activity For the year ended September 30, 2022, the City recognized OPEB expense of $85,258 related to the TMRS Supplemental Death Benefit Fund and OPEB expense of $63,783 related to the City's retiree healthcare plan for total OPEB expense of $149,041. As of September 30, 2022, the City reported deferred outflows of resources related to OPEB from the following sources: Deferred Outflows of Deferred Inflows of Resources Resources Differences between expected and actual experience $ - $ (75,182) Changes in assumptions and other inputs 159,032 - Contributions made subsequent to the measurement date 3,819 - Total $ 162,851 $ (75,182) The $3,819 reported as deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability for the year ending September 30, 2023. Other amounts reported as deferred outflows and inflows of resources related to OPEB, excluding contributions subsequent to the measurement date, will be recognized in OPEB expenses as follows: Net Deferred Outflows (Inflows) of Resources 2023 $ 22,928 2024 17,482 2025 20,637 2026 16,524 2027 5,355 Thereafter 924 Tota 1 $ 83,850 64 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 8. Post Employee Benefits Other Than Pensions (continued) Retiree Health Care Plan (RHCP) Plan Description The City's defined benefit OPEB plan, City of Friendswood Retiree Health Care Plan (RHCP), provides OPEB through an implicit healthcare premium for retirees for all permanent full-time employees of the City. RHCP is a single -employer defined benefit OPEB plan administered by the City. At this time, no assets are accumulated in a trust to fund the future requirements of the RHCP. Benefits Provided RHCP provides access to post retirement employees by offering a "blended premium" structure, that is, the overall health care premiums for active employees and non -Medicare retirees, are stated in terms of a single "blended premium". The difference between the underlying retiree claims and the blended overall health care premium is referred to as an "implicit" subsidy. Because the underlying claims costs for a non -Medicare retiree are on average higher than the blended premium, there is a positive implicit subsidy for the non -Medicare retirees. Employees covered by benefit terms. At December 31, 2020, the following employees were covered by the benefit terms: Retirees and beneficiaries 7 Inactive, nonretired members 0 Active members 204 Total 211 Total OPEB Liability The City's total OPEB liability of $1,032,823 was measured as of December 31, 2021, and was determined by an actuarial valuation as of December 31, 2020. 65 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 8. Post Employee Benefits Other Than Pensions (continued) Retiree Health Care Plan (RHCP) (continued) Actuarial Assumptions and Methods The actuarial valuation was performed as of December 31, 2020. Update procedures were used to roll forward the total OPEB liability to December 31, 2021. The total OPEB liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Valuation Date: December 31, 2020 Measurement Date: December 31, 2021 Methods and Assumptions: Actuarial Cost Method: Individual Entry -Age Normal Discount Rate: 1.84% as of December 31, 2021 Inflation: 2.50% Salary Increases: 3.50% to 11.50%, including inflation Demographic Assumptions: Based on the experience study covering the four year period ending December 31, 2018 as conducted for the Texas Municipal Retirement System (TMRS) Mortality: For healthy retirees, the gender -distinct 2019 Municipal Retirees of Texas mortality tables are used. The rate are projected on a fully generational basis using the ultimate mortality improvement rates in the MP tables published through 2019 to account for future mortality improvements. Health Care Trend Rates: Initial rate of 6.80% declining to an ultimate rate of 4.25% after 12 years. Participation Rates: It was assumed 20% of employees retiring at the age of 50 or over would choose to receive retiree health care coverage through the City. Employees retiring before the age of 50 were not assumed to elect coverage. Other Information: Notes: The discount rate changed from 2.00% as of December 31, 2020 to 1.84% as of December 31, 2021. Additionally, the period of service used for the allocation of service costs was changed to only reflect service with the City. Discount Rate For plans that do not have formal assets, the discount rate should equal the tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating as of the measurement date. For the purpose of this valuation, the municipal bond rate is 1.84% (based on the daily rate closest to but not later than the measurement date of the Fidelity "20-Year Municipal GO AA Index"). The discount rate was 2.00% as of the prior measurement date. Plan Assets There are no plan assets accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. 66 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 8. Post Employee Benefits Other Than Pensions (continued) Retiree Health Care Plan (RHCP) (continued) Changes in the Total OPEB Liability Service cost $ 60,759 Interest 22,218 Changes of benefit terms - Difference between expected and actual experience 11,967 Changes of assumptions (111,991) Benefit payments (61,339) Net change in total OPEB liability (78,386) Total OPEB liability- beginning 1,111,209 Total OPEB liability- ending $ 1,032,823 The ending Total OPEB Liability was $1,032,823 as of December 31, 2021. Sensitivity of the total OPEB liability to changes in the discount rate The following presents the plan's total OPEB liability, calculated using a discount rate of 1.84%, as well as what the plan's total OPEB liability would be if it were calculated using a discount rate that is one percent lower or one percent higher: 1% Decrease to 0.84% $ 1,128,772 Current Discount Rate Assumption 1% Increase to 1.84% 2.84% $ 1,032,823 $ 944,844 Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates The following presents the plan's total OPEB liability, calculated using the assumed trend rates as well as what the plan's total OPEB liability would be if it were calculated using a trend rate that is one percent lower or one percent higher: 1% Decrease $ 909,992 Current Healthcare Cost Trend Rate Assumption 1% Increase $ 1,032,823 $ 1,179,741 67 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 8. Post Employee Benefits Other Than Pensions (continued) Retiree Health Care Plan (RHCP) (continued) OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2022, the City recognized OPEB expense of $85,258 related to the TMRS Supplemental Death Benefit Fund and OPEB expense of $63,783 related to the City's retiree healthcare plan for total OPEB expense of $149,041. As of September 30, 2022, the City reported deferred outflows of resources related to OPEB from the following sources: Differences between expected and actual experience Changes assumptions Contributions subsequent to the measurement date Tota I Deferred Outflows of Resources $ 18,959 148,501 Deferred Inflows of Resources $ (206,886) (100,415) 33,379 - $ 200,839 $ (307,301) The $33,379 reported as deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability for the year ending September 30, 2023. Other amounts reported as deferred outflows and inflows of resources related to OPEB, excluding contributions subsequent to the measurement date, will be recognized in OPEB expenses as follows: Net Deferred Outflows Fiscal Year (Inflows) of Resources 2023 $ (19,194) 2024 (19,194) 2025 (19,194) 2026 (19,194) 2027 (20,836) Thereafter (42,229) Total $ (139,841) 68 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 9. Commitments and Contingencies Southeast Water Purification Plant The City has entered into a contract with the City of Houston for construction, operating and maintaining a water purification plant known as Southeast Water Purification Plant. The City's pro rata share of the actual pumping construction costs is 1.33 percent. The City began receiving water from the plant on October 15, 1990. The City is billed on a monthly basis for the actual gallons of water received times the City's pro rata share of actual costs. At the end of each quarter, the City of Houston computes the total operation and maintenance expenses for the quarter just ended, recalculates the cost per one thousand gallons, and adjusts previous billings on the next invoice. The relationship of the parties is of a fiduciary character, no partnership or joint venture is created by this contract. Blackhawk Regional Wastewater Treatment Facility On December 12, 1974, the City entered into an agreement with Gulf Coast Waste Disposal Authority to construct the Blackhawk Regional Wastewater Treatment Facility. The Blackhawk Wastewater Treatment Facility was constructed in the early 1980s and is a regional wastewater treatment plant serving MUD 55, Baybrook MUD 1, City of Houston and the City of Friendswood. The plant has a capacity of 9.25 million gallons per day (MGD) and is operated and maintained by Gulf Coast Waste Disposal Authority. Friendswood is the majority owner having 52.465% or 4.853 MGD of its capacity. As a part of the contract with Gulf Coast Waste Disposal Authority, the City and all participants pay their share of operational costs and expenses (direct and indirect) incurred monthly at the Blackhawk Wastewater Treatment Facility based upon actual flows. This includes the maintenance of the plant and the creation and maintenance of reasonable reserves for repairs and other contingencies. Capital expenditures on the other hand shall be the responsibility of all participants based upon their purchased capacity in the plant. For Friendswood, that equates to 52.465% for capital projects identified and approved at the plant. Federal and State Programs The City recognizes grant monies received as reimbursement for costs incurred in certain federal and state programs it administers as revenue. Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any, to be immaterial. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City's risk management program encompasses obtaining property and liability insurance through Texas Municipal League (TML), an Intergovernmental Risk Pool. The City has not had any significant reduction in insurance coverage and the amounts of insurance settlements have not exceeded insurance coverage for any of the last three years. The participation of the City in TML is limited to payment of premiums. During the year ended September 30, 2022, the City paid premiums to TML for provision of various liability, property and casualty insurance. The City has various deductible amounts ranging from $500 to $5,000 on various policies. 69 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 9. Commitments and Contingencies (continued) The City also provides workers' compensation insurance on its employees through TML. Workers' compensation is subject to change when audited by TML. At year-end, September 30, 2022, the City believed the amounts paid on workers' compensation would not change significantly from the amounts recorded. During the year ended September 30, 2022, employees of the City were covered by a health and dental insurance plan. The City pays 90% of the monthly premium of employees choosing individual coverage only. The City pays 70% of the monthly premium for employees choosing to cover themselves and their dependents. Note 10— Deficit Fund Balance As of September 30, 2022, the Coronavirus State and Local Fiscal Recovery fund had a fund balance deficit of $1,666 and the CDBG-DR Harris County with a deficit of $204,422. The City plans to record revenue in the future to cover the deficits for the fund. 70 City of Friendswood, Texas 2022 ACFR REQUIRED SUPPLEMENTARY INFORMATION 71 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 1 of 8 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Variance with Final budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Property taxes $ 16,443,981 $ 16,443,981 $ 16,475,894 $ 31,913 Sales and alcohol taxes 8,149,347 8,149,347 8,967,803 818,456 Franchise taxes 1,925,828 1,925,828 2,170,152 244,324 Fines and forfeitures 1,089,427 1,089,427 969,344 (120,083) Permits and fees 1,658,218 1,664,784 1,789,147 124,363 Intergovernmental 642,396 642,396 S94,774 (47,622) Investment earnings 34,000 34,000 (1S,254) (49,254) Donations 7,750 38,510 61,211 22,701 Miscellaneous 84,453 108,844 336,367 227,523 Total Revenues 30,035,400 30,097,117 31,349,438 1,252,321 Expenditures General Government: Mayor and Council - Governing Body: Supplies and maintenance 11,700 S,364 4,869 49S Other services and charges 84,850 79,937 7S,077 4,860 Total Governing Body 96,S50 85,301 79,946 5,355 Mayor and Council - City Attorney: Personnel services 259,523 340,701 338,969 1,732 Supplies 450 32,565 14,341 18,224 Other services and charges 21,270 17,735 12,059 5,676 Total City Attorney 281,243 391,001 365,369 25,632 City Manager - Administration: Personnel services 747,737 747,737 747,646 91 Supplies 21,780 30,S45 29,725 820 Other services and charges 39,100 35,289 25,566 9,723 Total Administration 808,617 813,571 802,937 10,634 City Manager - Economic Development: Personnel services - - - - Supplies 5,000 5,000 1,000 4,000 Other services and charges 59,820 60,390 31,209 29,181 Total Economic Development 64,820 65,390 32,209 33,181 City Secretary - Municipal Clerk: Personnel services 389,936 389,936 376,1S4 13,782 Supplies 5,740 25,832 25,779 53 Other services and charges 16,725 19,800 19,901 (101) Total Municipal Clerk 412,401 435,568 421,834 13,734 72 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Expenditures (continued) General Government (continued): City Secretary - Election Services: Supplies Other services and charges Total Election Services City Secretary - Records Management: Personnel services Supplies Other services and charges Total Records Management Administrative Services - Finance: Personnel services Supplies Other services and charges Total Finance Administrative Services - Other Admin: Other services and charges Total Other Admin Administrative Services - Municipal Court: Personnel services Supplies Other services and charges Total Municipal Court Human Resources - Administration: Personnel services Supplies Other services and charges Total Administration Human Resources - Insurance: Other services and charges Total Insurance Budgeted Amounts Original Final Page 2 of 8 Variance with Final budget - Actual Positive Amounts (Negative) $ 1,100 $ 200 $ 195 $ 5 124,980 113,520 54,764 58,756 126,080 113,720 54,959 58,761 159,090 77,912 75,015 2,897 970 - - - 21,870 14,970 13,343 1,627 181,930 92,882 88,358 4,524 1,032,087 1,015,087 1,023,020 (7,933) 7,450 15,850 11,220 4,630 110,788 131,410 122,915 8,495 1,150,325 1,162,347 1,157,155 5,192 175,307 176,232 176,118 114 175,307 176,232 176,118 114 400,136 433,056 434,045 (989) 5,780 5,780 5,609 171 28,815 26,815 26,000 815 434,731 465,651 465,654 (3) 378,178 368,680 367,535 1,145 11,700 11,700 5,974 5,726 120,512 120,720 50,788 69,932 510,390 501,100 424,297 76,803 259,297 252,667 250,395 2,272 259,297 252,667 250,395 2,272 73 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 3 of 8 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Variance with Final budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued) General Government (continued): Human resources - Risk Management: Personnel services $ 148,422 $ 148,422 $ 149,599 $ (1,177) Supplies 10,960 12,806 7,138 5,668 Other services and charges 61,105 55,037 21,130 33,907 Total Risk Management 220,487 216,265 177,867 38,398 Information Technology - Administration: Personnel services 755,143 755,143 715,258 39,885 Supplies 82,290 60,056 43,073 16,983 Repairs and maintenance 65,630 65,630 30,049 35,581 Other services and charges 729,495 1,097,245 702,761 394,484 Total Administration 1,632,558 1,978,074 1,491,141 486,933 Total General Government 6,354,736 6,749,769 5,988,239 761,530 Public Safety: Police Department - Administration: Personnel services 915,716 915,716 929,797 (14,081) Supplies 28,750 29,753 21,933 7,820 Repairs and maintenance 42,500 62,104 38,258 23,846 Other services and charges 81,998 541,310 294,109 247,201 Total Administration 1,068,964 1,548,883 1,284,097 264,786 Police Department - Communications Personnel services 1,196,762 1,196,762 1,186,699 10,063 Supplies 9,700 9,988 6,010 3,978 Repairs and maintenance 36,250 43,250 23,877 19,373 Other services and charges 21,480 21,480 12,270 9,210 Total Communications 1,264,192 1,271,480 1,228,856 42,624 Police Department - Patrol: Personnel services 6,534,227 6,453,057 6,027,227 425,830 Supplies 305,040 330,355 308,772 21,583 Repairs and maintenance 225,100 252,184 204,305 47,879 Other services and charges 539,294 544,424 507,863 36,561 Total Patrol 7,603,661 7,580,020 7,048,167 531,853 Police Department - Patrol - DOT Program: Personnel services 102,922 102,922 115,829 (12,907) Supplies 4,480 4,480 5,784 (1,304) Repairs and maintenance 1,250 8,750 7,720 1,030 Other services and charges 11,899 11,899 8,654 3,245 Total Patrol - DOT Program 120,551 128,051 137,987 (9,936) 74 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 4 of 8 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Variance with Final budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued) Public Safety (continued): Police Department - Criminal Investigation: Personnel services $ 1,941,851 $ 1,915,351 $ 1,935,860 $ (20,509) Supplies 52,950 61,387 60,397 990 Repairs and maintenance 52,800 50,421 27,265 23,156 Other services and charges 163,528 216,028 195,197 20,831 Total Criminal Investigation 2,211,129 2,243,187 2,218,719 24,468 Police Department - Animal Control: Personnel services 346,601 345,218 370,119 (24,901) Supplies 32,500 42,500 41,980 520 Repairs and maintenance 12,000 12,000 4,433 7,567 Other services and charges 67,914 70,914 57,720 13,194 Total Animal Services 459,015 470,632 474,252 (3,620) Fire Marshal - Administration: Personnel services 901,027 911,227 929,053 (17,826) Supplies 28,075 34,850 33,225 1,625 Repairs and maintenance 5,500 6,219 5,753 466 Other services and charges 105,947 104,447 98,448 5,999 Total Administration 1,040,549 1,056,743 1,066,479 (9,736) Fire Marshal - Emergency Management: Personnel services 101,044 101,044 103,516 (2,472) Supplies 25,350 19,274 12,668 6,606 Repairs and maintenance 3,000 1,700 1,587 113 Other services and charges 48,630 70,301 30,724 39,577 Total Emergency Management 178,024 192,319 148,495 43,824 Fire Marshal - Fire/EMS Administration: Other services and charges 1,819,900 1,819,900 1,718,833 101,067 Total Fire/EMS Administration 1,819,900 1,819,900 1,718,833 101,067 Fire Marshal - Storm: Personnel services - - - - Supplies Repairs and maintenance - Other services and charges 5,043 (5,043) Total Storm 5,043 (5,043) Fire Marshal - Public Safety Health: Personnel services - Supplies Other services and charges Total Public Safety Health - - - - Total Public Safety 15,765,985 16,311,215 15,330,928 980,287 75 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 5 of 8 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Variance with Final budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued) Public Works: Administration: Personnel services $ 254,074 $ 254,074 $ 253,084 $ 990 Supplies 4,050 4,050 3,454 596 Other services and charges 13,275 17,379 5,211 12,168 Total Administration 271,399 275,503 261,749 13,754 Streets: Personnel services 816,S35 816,535 882,554 (66,019) Supplies 103,220 111,419 141,378 (29,959) Repairs and maintenance 143,830 1,023,317 966,247 57,070 Other services and charges 429,898 435,000 447,218 (12,218) Total Streets 1,493,483 2,386,271 2,437,397 (51,126) Drainage: Personnel services 338,413 338,413 271,787 66,626 Supplies 13,090 13,155 13,791 (636) Repairs and maintenance 56,800 106,336 49,986 56,350 Other services and charges 15,971 15,971 12,750 3,221 Total Drainage 424,274 473,875 348,314 125,561 Total Public Works 2,189,156 3,135,649 3,047,460 88,189 Engineering: Capital Projects Administration: Personnel services 482,905 482,905 492,762 (9,857) Supplies 13,965 17,207 16,661 546 Repairs and maintenance 2,000 2,000 716 1,284 Other services and charges 79,628 73,813 60,871 12,942 Total Capital Projects Administration: 578,498 575,925 571,010 4,915 Total Engineering 578,498 575,925 571,010 4,915 Community Development: Administration: Personnel services 367,866 367,866 366,766 1,100 Supplies 9,180 9,180 5,694 3,486 Other services and charges 20,510 20,510 7,081 13,429 Total Administration 397,556 397,556 379,541 18,015 76 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Variance with Final budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued) Community Development (continued): Planning and Zoning: Personnel services $ 316,297 $ 323,097 $ 326,979 $ (3,882) Supplies 3,900 1,900 1,272 628 Other services and charges 54,075 47,275 22,175 25,100 Total Planning and Zoning 374,272 372,272 350,426 21,846 Inspection and Code Enforcement: Personnel services 431,959 431,959 411,682 20,277 Supplies 10,380 10,380 10,215 165 Repairs and maintenance 3,650 3,650 1,011 2,639 Other services and charges 56,782 49,882 34,538 15,344 Total Inspection and Code Enforcement 502,771 495,871 457,446 38,425 Total Community Development 1,274,599 1,265,699 1,187,413 78,286 Parks and recreation: Administration: Personnel services 291,934 291,934 293,999 (2,065) Supplies 3,950 3,850 3,754 96 Repairs and maintenance 32,930 33,030 30,536 2,494 Total Administration 328,814 328,814 328,289 525 Recreation Programs Personnel services 324,187 324,187 345,855 (21,668) Supplies 19,025 19,716 19,407 309 Other services and charges 127,370 123,500 120,687 2,813 Total Recreation programs 470,582 467,403 485,949 (18,546) July 4th Program: Personnel services 31,233 31,233 34,926 (3,693) Supplies 4,000 5,039 5,038 1 Other services and charges 88,400 103,938 99,744 4,194 Total July 4th Program 123,633 140,210 139,708 502 Summer Day Camp Program: Personnel services 117,374 117,374 101,031 16,343 Supplies 12,500 13,635 13,631 4 Other services and charges 42,650 44,267 44,370 (103) Total Summer Day Camp Program 172,524 175,276 159,032 16,244 Page 6 of 8 77 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 7 of 8 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Variance with Final budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued) Parks and recreation (continued): Keep Friendswood Beautiful committee: Supplies $ 14,200 $ 14,634 $ 14,581 $ 53 Repairs and maintenance 2,500 4,426 3,925 501 Other services and charges 37,225 37,233 33,415 3,818 Total Keep Friendswood Beautiful committee 53,925 56,293 51,921 4,372 Stevenson Park pool Personnel services 76,834 76,834 59,674 17,160 Supplies 24,800 23,515 18,582 4,933 Repairs and maintenance 45,518 43,978 38,053 5,925 Other services and charges 25,770 25,810 15,743 10,067 Total Stevenson park pool 172,922 170,137 132,052 38,08S Senior Activity Center Personnel services 183,204 183,204 181,675 1,529 Supplies 10,500 9,633 9,315 318 Repairs and maintenance 2,000 5,029 4,997 32 Other services and charges 17,956 18,715 18,851 (136) Total Senior Activity Center 213,660 216,581 214,838 1,743 Park Operations: Personnel services 820,904 820,904 843,968 (23,064) Supplies 77,500 80,675 88,335 (7,660) Repairs and maintenance 226,258 239,526 235,549 3,977 Other services and charges 514,009 505,181 549,787 (44,606) Total Park Operations 1,638,671 1,646,286 1,717,639 (71,353) Facility Operations: Supplies 29,000 36,373 34,206 2,167 Repairs and maintenance 212,000 538,499 422,100 116,399 Other services and charges 546,000 600,103 616,575 (16,472) Total Facility Operations 787,000 1,174,975 1,072,881 102,094 Total parks and recreation 3,961,731 4,375,975 4,302,309 73,666 Library: Administration: Personnel services 1,164,843 1,164,843 1,144,622 20,221 Supplies 157,185 181,300 159,547 21,753 Repairs and maintenance 440 582 582 - Other services and charges 18,955 30,098 28,705 1,393 Total Administration 1,341,423 1,376,823 1,333,456 43,367 Total library 1,341,423 1,376,823 1,333,456 43,367 78 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES — BUDGET AND ACTUAL (WITH VARIANCES) GENERAL FUND For the Year Ended September 30, 2022 Expenditures (continued) Capital improvements: Repairs and Maintenace Other services and charges Capital outlay Total capital improvements Total Expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) Insurance recoveries Sale of capital assets Notes payable issued Transfers in Transfers out Total Other Financing Sources (Uses) Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Budgeted Amounts Original Final Actual Amounts Variance with Final budget - Positive (Negative) Page 8 of 8 $ $ 1,595 $ 1,595 $ - 32,298 30,034 2,264 1,649,800 6,405,680 2,532,230 3,873,450 1,649,800 6,439,573 2,563,859 3,875,714 33,115,928 40,230,628 34,324,674 5,905,954 (3,080,528) (10,133,511) (2,975,236) 7,158,275 31,308 74,126 42,818 - 18,029 18,029 - 752,663 1,457,640 704,977 1,563,531 1,708,331 1,708,331 - - (124,948) (124,948) - 1,563,531 2,367,354 3,133,178 765,824 (1,516,997) (7,766,157) 157,942 7,924,099 17,227,145 17,227,145 17,227,145 - $ 15,710,148 $ 9,460,988 $ 17,385,087 $ 7,924,099 79 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 1 of 2 NOTES TO BUDGETARY SCHEDULE For the Year Ended September 30, 2022 Budgetary Basis of Accounting Annual budgets are adopted on a basis consistent with generally accepted accounting principles. Budgetary Information The City's Code of Ordinances establishes the following frameworkfor the preparation and format of the City's annual budget: Content The budget shall provide a complete financial plan of all City funds and activities and, except as required by law or this Charter, shall be in such form as the City Manager deems desirable or the Council may require. The budget shall begin with a clear general summary of its contents; shall show in details all estimated income, the proposed property tax levy, and all proposed expenditures for the ensuing fiscal years, including debt service and an itemized estimate of the expense of conducting each Department of the City. The proposed budget expenditures shall not exceed the total of estimated income. It shall also include, in separate sections: 1) Tax levies, rates and collections for the preceding five years. 2) The amount required for interest on the City's debts, for sinking fund and for maturing serial bonds. 3) The total amount of outstanding City debts, with a schedule of maturities on bond issues. 4) Anticipated net surplus of deficit for the ensuing fiscal year of each utility owned or operated by the City and the proposed method of its disposition, subsidiary budgets for each such utility giving detailed income and expenditure information shall be attached as appendices to the budget. 5) A capital program, which may be revised and extended each year to indicate capital improvements pending or in process of construction or acquisition, and shall include the following items which shall be attached as appendices to the budget: a) A summary of proposed programs; b) A list of all capital improvements which are proposed to be undertaken during the five fiscal years next ensuing, with appropriate supporting information as to the necessity for such improvements; c) Cost estimates, method of financing and recommended time schedules from each such improvement; and d) The estimated annual cost of operating and maintaining the facilities to bid constructed or acquired. 6) Such other information as may be required by the Council. Submission On or before the first day of August of each year, the City Manager shall submit to the Council a proposed budget and an accompanying message. The Council shall review the proposed budget and revise as deemed appropriate prior to general circulation for public hearing. 80 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO BUDGETARY SCHEDULE For the Year Ended September 30, 2022 Public Notice and Hearing Page 2 of 2 The Council shall post in the City Hall and publish in the official newspaper a general summary of their proposed budget and a notice stating: 1) The times and places where copies of the message and budget are available for inspection by the public; and 2) The time and place, not less than ten nor more than 30 days after such publication, for a public hearing on the budget. Amendment Before Adoption After the public hearing, the Council may adopt the budget with or without amendment. In amending the budget, it may add or increase programs or amounts and may delete or decrease any programs or amounts, except expenditures required by law or for debt service or for estimated cash deficit, provided that no amendment to the budget shall increase the authorized expenditures to an amount greater than the total of estimated income plus funds available from prior years. If the Council fails to adopt an annual budget before the start of the fiscal year to which it applies, appropriations of the last budget adopted shall be considered as adopted for the current fiscal year on a month to month, pro rata basis, until the annual budget is adopted. Adoption of the budget shall require an affirmative vote of at least a majority of all members of the Council. Adoption of the budget shall constitute appropriations of the amounts specified therein as expenditures from the funds indicated. Amendments After Adoption At any time during the fiscal year, the City Manager may transfer part or all of any unencumbered appropriation balance among programs within a department, division, or office, and, upon written request by the City Manager, the Council may be by ordinance transfer part or all of any unencumbered appropriation balance from one department, office, or agency to another. No appropriation for debt service may be reduced or transferred and no appropriation may be reduced below any amount required by law to be appropriated or by more than the amount of the unencumbered balance thereof. The City Council made supplemental budgetary appropriation changes during the fiscal year. The reported budgetary data has been revised for these amendments legally authorized during the year. 81 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 1 of 2 SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM Last Eight Measurement Years 2021 2020 2019 2018 A. Total pension liability 1. Service Cost $ 3,032,100 $ 2,979,569 $ 2,738,906 $ 2,626,099 2. Interest (on the Total Pension Liability) 6,110,807 5,780,980 5,345,140 5,044,613 3. Difference between expected and actual experience 788,166 (146,825) 1,150,459 59,617 4. Changes of assumptions - 378,973 - 5. Benefit payments, including refunds of employee contributions 6. Net change in total pension liability 7. Total pension liability— beginning 8. Total pension liability — ending B. Plan fiduciary net position 1. Contributions —employer 2. Contributions —employee 3. Net investment income 4. Benefit payments, including refunds of employee contributions 5. Administrative Expense 6. Other 7. Net change in plan fiduciary net position 8. Plan fiduciary net position — beginning 9. Plan fiduciary net position — ending (4,163,654) (3,343,679) (3,210,157) (3,458,824) 5,767,419 5,270,045 6,403,321 4,271,505 91,096,245 85,826,200 79,422,879 75,151,374 96,863,664 91,096,245 85,826,200 79,422,879 2,777,049 2,620,564 2,395,398 2,305,344 1,174,582 1,158,078 1,068,692 1,025,248 10,611,017 5,713,369 10,053,454 (2,013,270) (4,163,654) (3,343,679) (3,210,157) (3,458,824) (49,073) (36,958) (56,778) (38,892) 337 (1,442) (1,704) (2,032) 10,350,258 6,109,932 10,248,905 (2,182,426) 81,355,616 75,245,684 64,996,779 67,179,205 91,705,874 81,355,616 75,245,684 64,996,779 C. Net pension liability (A.9 — B.9) $ 5,157,790 $ 9,740,629 $ 10,580,516 $ 14,426,100 D. Plan fiduciary net position as a percentage of the total pension liability 94.68% 89.31% 87.67% 81.84% E. Covered payroll $ 16,779,748 $ 16,543,970 $ 15,267,034 $ 14,646,398 F. Net position liability as a percentage of covered payroll 30.74% 58.88% 69.30% 98.50% Note: Ten years of data should be presented in this schedule but data was unavailable prior to 2014 82 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 2 of 2 SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM Last Eight Measurement Years 2017 2016 2015 2014 A. Total pension liability 1. Service Cost $ 2,505,392 $ 2,334,817 $ 2,204,299 $ 2,018,353 2. Interest (on the Total Pension Liability) 4,755,782 4,435,987 4,317,394 4,084,392 3. Difference between expected and actual experience (60,180) 366,687 (1,032,789) (736,093) 4. Changes of assumptions - 847,469 5. Benefit payments, including refunds of employee contributions 6. Net change in total pension liability 7. Total pension liability — beginning 8. Total pension liability — ending B. Plan fiduciary net position 1. Contributions —employer 2. Contributions —employee 3. Net investment income 4. Benefit payments, including refunds of employee contributions 5. Administrative Expense 6. Other 7. Net change in plan fiduciary net position 8. Plan fiduciary net position — beginning 9. Plan fiduciary net position — ending C. Net pension liability (A.9 — B.9) D. Plan fiduciary net position as a percentage of the total pension liability E. Covered payroll F. Net position liability as a percentage of covered payroll (2,505,921) (2,464,107) (2,256,734) (2,005,311) 4,695,073 4,673,384 4,079,639 3,361,341 70,456,304 65,782,920 61,703,281 58,341,940 75,151,377 70,456,304 65,782,920 61,703,281 2,182,093 2,037,849 1,998,038 1,867,782 987,399 923,896 886,669 829,598 8,104,390 3,672,583 79,202 2,868,842 (2,505,921) (2,464,107) (2,256,734) (2,005,311) (41,987) (41,467) (48,239) (29,949) (2,127) (2,234) (2,383) (2,462) 8,723,847 4,126,520 656,553 3,528,500 58,455,358 54,328,838 53,672,285 50,143,785 67,179,205 58,455,358 54,328,838 53,672,285 $ 7,972,172 $ 12,000,946 $ 11,454,082 $ 8,030,996 89.39% 82.97% 82.59% 86.98% $ 14,098,997 $ 13,198,512 $ 12,653,842 $ 11,851,396 56.54% 90.93% 90.52% 67.76% Note: Ten years of data should be presented in this schedule but data was unavailable prior to 2014. 83 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF CITY CONTRIBUTIONS TEXAS MUNICIPAL RETIREMENT SYSTEM Last Nine Fiscal Years Actuarially required contributions Contributions in relation to the actuarially required contributions Contribution deficiency (excess) City's covered payroll Contributions as a percentage of covered payroll Actuarially required contributions Contributions in relation to the actuarially required contributions Contribution deficiency (excess) City's covered payroll Contributions as a percentage of covered payroll 2022 2021 2020 2019 2018 $ 2,844,852 $ 2,721,688 $ 2,485,117 $ 2,376,185 $ 2,255,270 2,844,852 2,721,688 2,485,117 2,376,185 2,255,270 $ 17,404,825 $ 16,639,755 $ 15,724,041 $ 15,133,171 $ 14,385,208 16.35% 16.36% 15.80% 15.70% 15.68% 2017 2016 2015 2014 $ 2,161,617 $ 2,100,698 $ 1,960,652 $ 1,847,375 2,161,617 2,100,698 1,960,652 1,847,375 $ 13,986,135 $ 13,525,613 $ 12,423,310 $ 11,781,281 15.46% 15.53% 15.78% 15.68% Note: Ten years of data should be presented in this schedule but data was unavailable prior to 2014. 84 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NOTES TO SCHEDULE OF CONTRIBUTIONS For the Year Ended September 30, 2022 Valuation Date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January 13 months later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method Inflation Salary Increases Investment Rate of Return Entry Age Normal Level Percentage of Payroll, Closed 24 years 10 Year smoothed market; 12% soft corridor 2.50% 3.50% to 11.50% including inflation 6.75% Retirement Age Experience -based table of rates that are specific to the City's plan of benefits. Last updated for the 2019 valuation pursuant to an experience study of the period 2014 — 2018 Mortality Post -retirement: 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a fully generational basis with scale LIMP. Pre - retirement: PUB (10) mortality tables, with the Public Safety table used for males and the General Employee table used for females. The rates are projected on a fully generational basis with scale LIMP. Other Information: There were no benefit changes during the year. 85 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF CHANGES IN THE TOTAL OPEB LIABILITYAND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM SUPPLEMENTAL DEATH BENEFITS FUND Last Five Measurement Years Service cost Interest Difference between expected and actual experience Changes of assumptions Benefit payments ** Net change in total OPEB liability Total OPEB liability - beginning Total OPEB liability - ending Covered -employee payroll Total OPEB liability as a percentage of covered -employee payroll Service cost Interest Difference between expected and actual experience Changes of assumptions Benefit payments ** Net change in total OPEB liability Total OPEB liability - beginning Total OPEB liability - ending Covered -employee payroll Total OPEB liability as a percentage of covered -employee payroll 2021 2020 2019 2018 $ 45,305 $ 36,397 $ 27,481 $ 30,757 17,025 20,150 23,199 20,933 (9,842) (48,181) (60,356) (7,425) 29,168 115,737 118,183 (43,775) (15,102) (4,963) (6,107) (5,859) 66,554 119,140 102,400 (5,369) 836,154 717,014 614,614 619,983 $ 902,708 $ 836,154 $ 717,014 $ 614,614 $ 16,779,748 $ 16,543,970 $ 15,267,034 $ 14,646,398 5.38% 5.05% 4.70% 4.20% 2017 $ 26,788 20,384 49,777 (5,640) 91,309 528,674 $ 619,983 $ 14,098,997 4.40 % Note: Ten years of data should be presented in this schedule but data was unavailable prior to 2017. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB 75 to pay related benefit. ** Due to the SDBF being considered an unfunded OPEB plan under GASB 75, benefit payments are treated as being equal to the employer's yearly contributions for retirees. Notes to Required Supplementary Information: Changes of assumptions: Changes of assumptions reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: 2021 1.84% 2020 2.00% 2019 2.75% 2018 3.71% 2017 3.31% 86 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF CHANGES IN THE TOTAL OPEB LIABILITYAND RELATED RATIOS CITY OF FRIENDS WOOD RETIREE HEALTH CARE PLAN Last Five Measurement Years Service cost Interest Difference between expected and actual experience Changes of assumptions Benefit payments Net change in total OPEB liability Total OPEB liability - beginning Total OPEB liability - ending Covered -employee payroll Total OPEB liability as a percentage of covered -employee payroll Service cost Interest Difference between expected and actual experience Changes of assumptions Benefit payments Net change in total OPEB liability Total OPEB liability - beginning Total OPEB liability - ending Covered -employee payroll Total OPEB liability as a percentage of covered -employee payroll 2021 2020 2019 2018 $ 60,759 $ 60,972 $ 46,995 $ 53,919 22,218 30,484 36,314 37,843 11,967 (104,038) 8,768 (214,124) (111,991) 75,401 86,718 7,071 (61,339) (59,267) (52,896) (38,566) (78,386) 3,552 125,899 (153,857) 1,111,209 1,107,657 981,758 1,135,615 $ 1,032,823 $ 1,111,209 $ 1,107,657 $ 981,758 $ 16,779,752 $ 16,543,973 $ 15,267,037 $ 14,646,402 6.16% 6.72% 2017 $ 44,637 39,497 4,573 51,765 (38,414) 102,058 1,033,557 $ 1,135,615 $ 12,035,859 9.44% Note: Ten years of data should be presented in this schedule but data was unavailable prior to 2017. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB 75 to pay related benefit. Notes to Required Supplementary Information: Methods and Assumptions Used to Determine Contribution Rates: 7.26% 6.70% The demographic assumptions are based on the assumptions that were developed for the defined benefit plan in which the City participates (TMRS). The assumptions are based on the experience study covering the four year period ending December 31, 2018 as conducted for the Texas Municipal Retirement System (TMRS). Changes of assumptions: 2021- The period of service used for allocation of service costs was changed to only reflect service with the City. 2019 - The demographic study and salary increase assumptions were updated to reflect the 2019 TMRS Experience Study. 2018 - The health care trend assumption was modified. Changes of assumptions reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: 2021 1.84% 2020 2.00% 2019 2.75% 2018 3.71% 2017 3.31% 87 City of Friendswood, Texas 2022 ACFR City of 3wood -Texas 88 City of Friendswood, Texas 2022 ACFR COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES 89 City of Friendswood, Texas 2022 ACFR NONMAJOR GOVERNMENTAL FUNDS The Special Revenue Funds are used to account for specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Police Investigation Fund — This fund is used to account for revenues that are restricted to police investigation expenditures. Fire/EMS Donation Fund — This fund accounts for revenues that are restricted for Fire/EMS capital outlays and debt repayments. Municipal Court Fund —This fund accounts for revenues that are restricted for court technology and building security. In 1999, the state legislature authorized a court technology and court security fee for municipal court fines. In 2019, the state legislature authorized additional fees for truancy and jury services. Community Development Block Grant (CDBG) — Disaster Recovery (DR) Harris County — This fund is used to account for revenues that are restricted to the Community Development Block Grant — Disaster Recovery expenditures. Funds will be used for the Harris County side of the City. Hazard Mitigation Grant Program —This fund is used to account for federal grants that are restricted to the acquisition and demolition of flood -prone residential structures located within the City. Community Development Block Grant (CDBG) — Disaster Recovery (DR) Galveston County — This fund is used to account for revenues that are restricted to the Community Development Block Grant— Disaster Recovery expenditures. Funds will be used for the Galveston County side of the City. The Permanent Fund is used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the City's programs. 1776 Park Fund —This fund is used to account for assets held by the City in a trustee capacity and the earnings benefit this City Park. 90 City of Friendswood, Texas 2022 ACFR NONMAJOR GOVERNMENTAL FUNDS (continued) Capital Projects Funds are used to account for the acquisition and construction of major capital facilities. Sidewalk Installation Fund — This fund is used to account for receipts from developers to install sidewalks in neighborhood developments. Park Land Dedication Fund — This fund is used to account for receipts from developers to build or enhance neighborhood and community parks. Street Improvement Fund —This fund is used to record sales tax revenue collected for City's streets maintenance and improvements. MAJOR GOVERNMENTAL FUNDS The Special Revenue Funds are used to account for specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Coronavirus State and Local Fiscal Recovery Fund— This fund is used to account for federal funds related to the fiscal recovery of Coronavirus. Funds will be used for water and sewer infrastructure projects. Capital Projects Funds are used to account for the acquisition and construction of major capital facilities. Bond Construction Fund — is used to account for the construction of public facilities, and park, street and drainage improvements that are funded by the proceeds from Permanent Improvement Bonds. Debt Service Funds are used to account for the accumulation of resources that are restricted, committed, or assigned for the repayment of principal and interest on long-term obligations of the governmental funds. Debt Service Fund — This fund is used to account for the accumulation of resources for the payment of general long- term debt principal, interest and related costs. 91 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 1 of 3 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS September 30, 2022 Special Revenue Funds Police Fires/EMS CDBG - DR Investigation Donation Municipal Court Harris County Assets Cash and cash equivalents $ 55,910 $ 141,982 $ 84,687 $ 135,596 Investments 132,085 341,552 203,724 326,189 Receivables, net of allowance: Taxes - - - - Customer accounts - 2,697 - - Other receivables - - 3,573 - Accruedinterest 117 332 163 - Prepaid items - - 391 - Due from other governments - - - 444,527 Total Assets $ 188,112 $ 486,563 $ 292,538 $ 906,312 Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities: Accounts payable $ 139 $ - $ 5,208 $ 409,377 Retainage payable - - 273 21,267 Due to other funds - - - 680,090 Total Liabilities 139 - 5,481 1,110,734 Deferred Inflows of Resources: Unavailable revenue - - 3,756 - Total Deferred Inflows - - 3,756 - Fund Balances: Nonspendable: Prepaid items - - 391 Permanent fund - - Restricted: Municipal court operations - - 282,910 Public safety 187,973 486,563 - Capital projects - - - Unassigned - - - (204,422) Total Fund Balances 187,973 486,563 283,301 (204,422) Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 188,112 $ 486,563 $ 292,538 $ 906,312 92 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 2 of 3 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS September 30, 2022 Capital Projects Special Revenue Funds Permanent Funds HMGP Acquisition & CDBG - DR Demolition Galveston Sidewalk Install Project County 1776 Park Fund Fund Assets Cash and cash equivalents $ 2 $ 56,842 $ 3,255 $ 11,174 Investments - 136,738 7,831 26,881 Receivables, net of allowance: Taxes - - - - Customer accounts - - - - Other receivables - 85 - - Accrued interest - - 7 24 Prepaid items - - - - Due from other governments 205,178 1,101,470 - - Total Assets $ 205,180 $ 1,295,135 $ 11,093 $ 38,079 Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities: Accounts payable $ - $ - $ - $ 32,220 Retainage payable - - - - Due to other funds 205,180 1,268,460 - - Total Liabilities 205,180 1,268,460 - 32,220 Deferred Inflows of Resources: Unavailable revenue - - - - Total Deferred Inflows - - - Fund Balances: Nonspendable: Prepaid items - - - - Permanent fund - - 11,093 Restricted: Municipal court operations - - - - Public safety - - - - Capital projects - - - 5,859 Unassigned - 26,675 - - Total Fund Balances - 26,675 11,093 5,859 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 205,180 $ 1,295,135 $ 11,093 $ 38,079 93 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS September 30, 2022 Capital Projects Funds Park Land Street Total Nonmajor Dedication Improvements Governmental Funds Fund Funds Assets Cash and cash equivalents $ 10,167 $ 1,014,034 $ 1,513,649 Investments 24,458 2,439,364 3,638,822 Receivables, net of allowance: Taxes - 427,806 427,806 Customer accounts - - 2,697 Other receivables - - 3,658 Accrued interest 37 1,455 2,135 Prepaid items - - 391 Due from other governments - - 1,751,175 Total Assets $ 34,662 $ 3,882,659 $ 7,340,333 Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities: Accounts payable $ - $ 321,864 $ 768,808 Retainage payable - 16,940 38,480 Due to other funds - - 2,153,730 Total Liabilities - 338,804 2,961,018 Deferred Inflows of Resources: Unavailable revenue - - 3,756 Total Deferred Inflows - - 3,756 Fund Balances: Nonspendable: Prepaid items - - 391 Permanent fund - - 11,093 Restricted: Municipal court operations - - 282,910 Public safety - - 674,536 Capital projects 34,662 3,543,855 3,584,376 Unassigned - - (177,747) Total Fund Balances 34,662 3,543,855 4,375,559 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 34,662 $ 3,882,659 $ 7,340,333 Page 3 of 3 94 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended September 30, 2022 Special Revenue Funds Page 1 of 3 Police Fires/EMS CDBG - DR Investigation Donation Municipal Court Harris County Revenues Sales taxes $ - $ $ - $ - Fines and forfeitures 16,648 66,948 - Permits and fees - - - Intergovernmental - - 443,294 Miscellaneous - 297 - - Donations - 194,427 - - Investment income (loss) (73) (692) (140) - Total Revenues 16,575 194,032 66,808 443,294 Expenditures Current: General government - - 52,593 - Public safety 14,333 25,000 - - Public works - - 56,493 Library services - - - Debt Service: Principal - 119,514 - Interest and other charges - 13,318 - - Capital Outlay - 163,000 5,452 425,337 Total Expenditures 14,333 320,832 58,045 481,830 Excess (deficiency) of revenues over (under) expenditures 2,242 (126,800) 8,763 (38,536) Other Financing Sources (Uses) Sale of capital assets - 14,000 - Total Other Financing Sources (Uses) - 14,000 - Net change in fund balances 2,242 (112,800) 8,763 (38,536) Fund Balances - Beginning 185,731 599,363 274,538 (165,886) Fund Balances - Ending $ 187,973 $ 486,563 $ 283,301 $ (204,422) 95 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended September 30, 2022 Special Revenue Funds Permanent Page 2 of 3 Capital Projects Funds HMGP Acquisition & CDBG - DR Demolition Galveston Sidewalk Install Project County 1776 Park Fund Fund Revenues Sales taxes $ - $ - $ - - Fines and forfeitures - - - - Permits and fees - - - 1,238 Intergovernmental - 2,177,201 - - Miscellaneous - 8,700 - - Donations - - - - Investment income (loss) - - (8) (38) Total Revenues - 2,185,901 (8) 1,200 Expenditures Current: General government - - - - Public safety - - - - Public works - 2,159,226 - - Library services - - - - Debt Service: Principal - - - - Interest and other charges - - - - Capital Outlay - - - 39,061 Total Expenditures - 2,159,226 - 39,061 Excess (deficiency) of revenues over (under) expenditures - 26,675 (8) (37,861) Other Financing Sources (Uses) Sale of capital assets - - - - Total Other Financing Sources (Uses) - - - Net change in fund balances - 26,675 (8) (37,861) Fund Balances - Beginning - - 11,101 43,720 Fund Balances - Ending $ - $ 26,675 $ 11,093 $ 5,859 96 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Page 3 of 3 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended September 30, 2022 Capital Projects Funds Park Land Street Total Nonmajor Dedication Improvements Governmental Funds Fund Funds Revenues Sales taxes $ - $ 2,208,387 $ 2,208,387 Fines and forfeitures - - 83,596 Permits and fees 57,600 - 58,838 Intergovernmental - - 2,620,495 Miscellaneous - - 8,997 Donations - - 194,427 Investment income (loss) (166) 982 (135) Total Revenues 57,434 2,209,369 5,174,605 Expenditures Current: General government - - 52,593 Public safety - - 39,333 Public works - 338,804 2,554,523 Library services 2,729 - 21729 Debt Service: Principal - - 119,514 Interest and other charges - - 13,318 Capital Outlay 126,366 - 759,216 Total Expenditures 129,095 338,804 3,541,226 Excess (deficiency) of revenues over (under) expenditures (71,661) 1,870,565 1,633,379 Other Financing Sources (Uses) Sale of capital assets - - 14,000 Total Other Financing Sources (Uses) - - 14,000 Net change in fund balances (71,661) 1,870,565 1,647,379 Fund Balances - Beginning 106,323 1,673,290 2,728,180 Fund Balances - Ending $ 34,662 $ 3,543,855 $ 4,375,559 97 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL POLICE INVESTIGATION For the Year Ended September 30, 2022 Revenues Fines and forfeitures Investment earnings Total Revenues Expenditures Current: Public safety Total Expenditures Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) $ - $ - $ 16,648 $ 16,648 423 423 (73) (496) 423 423 16,575 16,152 15,294 14,333 961 - 15,294 14,333 961 423 (14,871) 2,242 17,113 185,731 185,731 185,731 - $ 186,154 $ 170,860 $ 187,973 $ 17,113 98 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FIRE/EMS DONATION For the Year Ended September 30, 2022 Revenues Donations Investment earnings Miscellaneous Total Revenues Expenditures Current: Public safety Debt service: Principal Interest and other charges Capital outlay Total Expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) Sale of capital assets Total Other Financing Sources (Uses) Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) $ 215,000 $ 215,000 $ 194,427 $ (20,573) 1,567 1,567 (692) (2,259) - - 297 297 216,567 216,567 194,032 (22,535) - 25,000 25,000 - 119,514 119,514 119,514 - 13,318 13,318 13,318 - 220,635 224,135 163,000 61,135 353,467 381,967 320,832 61,135 (136,900) (165,400) (126,800) 38,600 - 3,500 14,000 10,500 - 3,500 14,000 10,500 (136,900) (161,900) (112,800) 49,100 599,363 599,363 599,363 - $ 462,463 $ 437,463 $ 486,563 $ 49,100 99 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL MUNICIPAL COURT For the Year Ended September 30, 2022 Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) Revenues Fines and forfeitures $ 49,000 $ 49,000 $ 66,948 $ 17,948 Investment earnings 474 474 (140) (614) Total Revenues 49,474 49,474 66,808 17,334 Expenditures Current: General government 49,759 54,105 52,593 1,512 Capital outlay 120,000 98,233 5,452 92,781 Total Expenditures 169,759 152,338 58,045 94,293 Net change in fund balances (120,285) (102,864) 8,763 111,627 Fund Balances - Beginning 274,538 274,538 274,538 - Fund Balances - Ending $ 154,253 $ 171,674 $ 283,301 $ 111,627 100 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL CDBG — DR HARRIS COUNTY For the Year Ended September 30, 2022 Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) Revenues Intergovernmental $ - $ - $ 443,294 $ 443,294 Total Revenues - - 443,294 443,294 Expenditures Current: Public works - 85,592 56,493 29,099 Capital outlay - - 425,337 (425,337) Total Expenditures - 85,592 481,830 (396,238) Net change in fund balances - (85,592) (38,536) 47,056 Fund Balances - Beginning (165,886) (165,886) (165,886) - Fund Balances - Ending $ (165,886) $ (251,478) $ (204,422) $ 47,056 101 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL HAZARD MITIGATION GRANT PROGRAM For the Year Ended September 30, 2022 Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) Revenues Intergovernmental $ - Total Revenues - - Expenditures Current: Public works - - - Capital outlay - - - Total Expenditures - - Excess (deficiency) of revenues over expenditures - - - Other Financing Sources (Uses) Transfers in - - Total Other Financing Sources (Uses) - - - Net change in fund balances - - Fund Balances - Beginning - - - Fund Balances - Ending 102 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL CDBG - DR GALVESTON COUNTY For the Year Ended September 30, 2022 Revenues Intergovernmental Miscellaneous revenue Total Revenues Expenditures Current: Public works Total Expenditures Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) $ $ 1,075,731 $ 2,177,201 $ 1,101,470 - 8,700 8,700 1,075,731 2,185, 901 1,110,170 1,099,531 2,159,226 (1,059,695) 1,099,531 2,159,226 (1,059,695) (23,800) 26,675 50,475 $ $ (23,800) $ 26,675 $ 50,475 103 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL 1776 PARK For the Year Ended September 30, 2022 Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) Revenues Investment earnings $ 22 $ 22 $ (8) $ (30) Total Revenues 22 22 (8) (30) Expenditures Current - - - - Total Expenditures - - - - Net change in fund balances 22 22 (8) (30) Fund Balances - Beginning 11,101 11,101 11,101 - Fund Balances - Ending $ 11,123 $ 11,123 $ 11,093 $ (30) 104 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL SIDEWALK INSTALLATION For the Year Ended September 30, 2022 Revenues Permits and fees Investment earnings Total Revenues Expenditures Capital outlay Total Expenditures Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) $ - $ - $ 1,238 $ 1,238 88 88 (38) (126) 88 88 11200 1,112 - 45,030 39,061 5,969 - 45,030 39,061 5,969 88 (44,942) (37,861) 7,081 43,720 43,720 43,720 - $ 43,808 $ (1,222) $ 5,859 $ 7,081 105 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL PARK LAND DEDICATION For the Year Ended September 30, 2022 Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) Revenues Permit and fees $ 50,000 $ 50,000 $ 57,600 $ 7,600 Investment earnings 269 269 (166) (435) Total Revenues 50,269 50,269 57,434 7,165 Expenditures Current: Parks and recreation - 6,822 2,729 4,093 Capital outlay 149,308 126,366 22,942 Total Expenditures - 156,130 129,095 27,035 Net change in fund balances 50,269 (105,861) (71,661) 34,200 Fund Balances - Beginning 106,323 106,323 106,323 - Fund Balances - Ending $ 156,592 $ 462 $ 34,662 $ 34,200 106 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL STREET IMPROVEMENT For the Year Ended September 30, 2022 Revenues Sales taxes Investment earnings Total Revenues Expenditures Public works Capital outlay Total Expenditures Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) $ 2,023,954 $ 2,023,954 $ 2,208,387 $ 184,433 2,127 2,127 982 (1,145) 2,026,081 2,026,081 2,209,369 183,288 338,804 338,804 - 184,246 - 184,246 523,050 338,804 184,246 Net change in fund balances 2,026,081 1,503,031 1,870,565 367,534 Fund Balances - Beginning 1,673,290 1,673,290 1,673,290 - Fund Balances - Ending $ 3,699,371 $ 3,176,321 $ 3,543,855 $ 367,534 107 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL DEBT SERVICE FUND For the Year Ended September 30, 2022 Revenues Property taxes Investment earnings Total Revenues Expenditures Debt service: Principal Interest and other charges Total Expenditures Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Original Budget Final Budget Actual Amounts Variance with Final Budget - Positive (Negative) $ 4,355,517 $ 4,355,517 $ 4,370,044 $ 14,527 1,600 1,600 (1,498) (3,098) 4,357,117 4,357,117 4,368,546 11,429 2,722,150 2,722,150 2,721,206 944 1,613,367 1,613,367 1,611,573 1,794 4,335,517 4,335,517 4,332,779 2,738 21,600 21,600 35,767 14,167 10,608 10,608 10,608 - $ 32,208 $ 32,208 $ 46,375 $ 14,167 108 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL BOND CONSTRUCTION For the Year Ended September 30, 2022 Revenues Investment earnings Total Revenues Expenditures Current: Public works Parks and recreation Capital outlay Total Expenditures Net change in fund balances Fund Balances - Beginning Fund Balances - Ending Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) $ 18,258 $ 18,258 $ 68,133 $ 49,875 18,258 18,258 68,133 49,875 245,723 163,330 82,393 - 10,547 (10,547) 14,678,132 6,954,059 7,724,073 - 14,923,855 7,127,936 7,795,919 18,258 (14,905,597) (7,059,803) 7,845,794 15,212,515 15,212,515 15,212,515 - $ 15,230,773 $ 306,918 $ 8,152,712 $ 7,845,794 109 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL CORONAVIRUS STATE FISCAL RECOVERY FUND For the Year Ended September 30, 2022 Variance with Final Budget - Positive Original Budget Final Budget Actual Amounts (Negative) Revenues Intergovernmental $ $ 14,200 $ $ (14,200) Investment earnings - (1,666) (1,666) Total Revenues $ $ 14,200 $ (1,666) $ (15,866) Expenditures Current: - - Total Expenditures 14,200 14,200 Net change in fund balances - (1,666) (1,666) Fund Balances - Beginning Fund Balances - Ending $ $ $ (1,666) $ (1,666) 110 City of Friendswood, Texas 2022 ACFR STATISTICAL SECTION (Unaudited) 111 City of Friendswood, Texas 2022 ACFR City of ,i¢nd6wood TeXas 112 City of Friendswood, Texas 2022 ACFR STATISTICAL SECTION (Unaudited) This part of the City of Friendswood's annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Pages Financial Trends 114 These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. Revenue Capacity 124 These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. Debt Capacity 129 These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information 134 This schedule offers demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. Operating Information 138 These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year. 113 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (Accrual Basis of Accounting) Table 1 Page 1 of 2 2022 2021 2020 2019 2018 Governmental Activities Net investment in capital assets $ 74,006,329 $ 72,240,727 $ 68,990,597 $ 66,823,023 $ 68,320,682 Restricted 5,059,835 3,491,974 4,606,124 4,003,468 4,085,999 Unrestricted 8,668,866 6,886,085 2,563,947 5,402,312 6,248,751 Total Governmental Activities Net Position $ 87,735,030 $ 82,618,786 $ 76,160,668 $ 76,228,803 $ 78,655,432 Business -Type Activities Net investment in capital assets $ 35,999,342 $ 32,910,959 $ 32,242,803 $ 27,038,046 $ 27,088,280 Restricted 2,897,578 2,721,465 2,186,731 1,982,666 582,697 Unrestricted 11,776,833 9,984,251 8,438,509 12,077,564 13,620,211 Total Business -Type Activities Net Position $ 50,673,753 $ 45,616,675 $ 42,868,043 $ 41,098,276 $ 41,291,188 Primary Government Net investment in capital assets $ 110,005,671 $ 105,151,686 $ 101,233,400 $ 93,861,069 $ 95,408,962 Restricted 7,957,413 6,213,439 6,792,855 5,986,134 4,668,696 Unrestricted 20,445,699 16,870,336 11,002,456 17,479,876 19,868,962 Total Primary Government Net Positions $ 138,408,783 $ 128,235,461 $ 119,028,711 $ 117,327,079 $ 119,946,620 114 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 1 NET POSITION BY COMPONENT Page 2 of 2 LAST TEN FISCAL YEARS (Accrual Basis of Accounting) 2017 2016 2015 2014 2013 Governmental Activities Net investment in capital assets $ 72,631,192 $ 73,588,484 $ 73,611,490 $ 65,404,791 $ 65,056,180 Restricted 2,534,312 1,405,907 1,179,764 653,496 718,275 Unrestricted 5,532,198 5,579,677 5,901,505 10,798,907 9,565,406 Total Governmental Activities Net Position $ 80,697,702 $ 80,574,068 $ 80,692,759 $ 76,857,194 $ 75,339,861 Business -Type Activities Net investment in capital assets $ 29,305,429 $ 28,322,718 $ 26,628,714 $ 24,495,816 $ 22,961,547 Restricted 260,703 99,006 27,468 90,395 176,882 Unrestricted 10,584,764 10,238,993 12,040,181 14,818,104 16,790,183 Total Business -Type Activities Net Position $ 40,150,896 $ 38,660,717 $ 38,696,363 $ 39,404,315 $ 39,928,612 Primary Government Net investment in capital assets $ 101,936,621 $ 101,911,202 $ 100,240,204 $ 89,900,607 $ 88,017,727 Restricted 2,795,015 1,504,913 1,207,232 743,891 895,157 Unrestricted 16,116,962 15,818,670 17,941,686 25,617,011 26,355,589 Total Primary Government Net Positions $ 120,848,598 $ 119,234,785 $ 119,389,122 $ 116,261,509 $ 115,268,473 115 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 2 CHANGES IN NET POSITION Page 1 of 4 LAST TEN FISCAL YEARS (Accrual Basis of Accounting) Expenses Governmental Activities: General government Public safety Public works Engineering Community development Parks and recreation Library services Interest and fiscal charges Total Government Activities Expenses Business -Type Activities: Water and wastewater Interest and other Total Business -Type Activities Total Primary Government Expenses Program Revenues Governmental activities: Charges for services: General government Public safety Public works Community development Parks and recreation Library services Operating grants and contributions Capital grants and contributions Total Governmental Activities Program Revenues: 2022 2021 2020 2019 2018 $ 6,210,336 $ 5,867,654 $ 6,119,806 $ 5,912,467 $ 5,734,611 15, 655, 859 15, 645,527 15,501, 734 15,134,465 17, 538,040 6,994,042 7,160,229 8,840,113 7,897,373 6,267,824 570,098 506,959 434,976 - - 1,017,509 1,035,202 1,122,506 1,359,878 945,701 4,870,623 4,604,943 4,439,511 4,839,076 4,554,114 1,283,007 1,221,740 1,214,130 1,257,970 1,210,207 1,268,435 1,244,881 1,055,889 923,350 953,509 37,869,909 37,287,135 38,728,665 37,324,579 37,204,006 11,178,323 11,864,245 12,071,159 11,507,880 9,019,197 1,808,120 1,808,120 1,733,123 1,579,182 1,029,715 12,986,443 13, 672,365 13,804, 282 13,087,062 10,048,912 $ 50,856,352 $ 50,959,500 $ 52,532,947 $ 50,411,641 $ 47,252,918 $ 974,029 $ 871,362 $ 930,686 $ 751,112 $ 861,271 1,197,570 1,372,432 871,714 811,768 868,761 234,103 225,419 222,337 236,352 213,042 1,238 - 9,275 6,841 - 441,649 384,489 181,709 341,560 344,064 841,537 3,874,866 3,430,645 1,842,704 4,924,228 2,620,495 3,864,589 708,306 - - 6,310,621 10,593,157 6,354,672 3,990,337 7,211,366 Business -Type Activities: Charges for services: Water and wastewater 19,419,622 17,919,751 16,638,758 13,669,552 12,183,711 Operating grants and contributions 289,181 - 22,602 - - Total Business -Type activities Program Revenues 19,708,803 17,919,751 16,661,360 13,669,552 12,183,711 Total Primary Government Program Revenues $ 26,019,424 $ 28,512,908 $ 23,016,032 $ 17,659,889 $ 19,395,077 Net(Expense)Revenues Governmental activities (31,559,288) (26,693,978) (32,373,993) (33,334,242) (29,992,640) Business -type activities 6,722,360 4,247,386 2,857,078 582,490 2,134,799 Total Primary Government Net Expense $ (24,836,928) $ (22,446,592) $ (29,516,915) $ (32,751,752) $ (27,857,841) 116 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 2 CHANGES IN NET POSITION Page 2 of 4 LAST TEN FISCAL YEARS (Accrual Basis of Accounting) 2017 2016 2015 2014 2013 Expenses Governmental Activities: General government $ 5,128,399 $ 4,736,867 $ 5,410,643 $ 4,589,795 $ 4,679,339 Public safety 15,861,719 13,101,691 11,763,659 11,236,402 10,800,130 Public works 4,429,664 4,429,482 3,933,288 3,921,658 4,385,090 Engineering - - - - - Community development 1,495,001 1,577,813 1,406,288 1,097,075 1,207,264 Parks and recreation 3,459,053 3,080,453 2,869,345 3,356,587 3,260,931 Library services 1,215,683 1,134,859 1,026,967 1,093,043 1,002,801 Interest and fiscal charges 953,146 862,654 730,614 630,542 703,275 Total Government Activities Expenses 32,542,665 28,923,819 27,140,804 25,925,102 26,038,830 Business -Type Activities: Water and wastewater 8,502,218 7,975,920 7,629,711 7,995,106 7,681,366 Interest and other 1,086,278 1,642,723 1,524,276 1,514,804 1,590,395 Total Business -Type Activities 9,588,496 9,618,643 9,153,987 9,509,910 9,271,761 Total Primary Government Expenses $ 42,131,161 $ 38,542,462 $ 36,294,791 $ 35,435,012 $ 35,310,591 Program Revenues Governmental activities: Charges for services: General government $ 1,004,968 $ 1,002,022 $ 807,245 $ 912,910 $ 989,190 Public safety 35,007 28,760 30,275 31,620 34,944 Public works 242,184 174,568 190,099 193,064 186,504 Community development 1,036,741 949,011 843,648 877,132 825,366 Parks and recreation 387,915 286,727 280,046 315,702 316,047 Library services 30,600 27,532 33,699 36,081 36,686 Operating grants and contributions 2,591,025 800,151 660,633 843,995 644,458 Capital grants and contributions 219,808 318,657 3,225,672 1,202,376 543,763 Total Governmental Activities Program Revenues: 5,548,248 3,587,428 6,071,317 4,412,880 3,576,958 Business -Type Activities: Charges for services: Water and wastewater 12,295,441 11,319,801 11,020,029 11,117,391 11,462,779 Operating grants and contributions - - - - - Total Business -Type activities Program Revenues 12,295,441 11,319,801 11,020,029 11,117,391 11,462,779 Total Primary Government Program Revenues $ 17,843,689 $ 14,907,229 $ 17,091,346 $ 15,530,271 $ 15,039,737 Net(Expense)Revenues Governmental activities (26,994,417) (25,336,391) (21,069,487) (21,502,222) (22,461,872) Business -type activities 2,706,945 1,701,158 1,866,042 1,607,481 2,191,018 Total Primary Government Net Expense $ (24,287,472) $ (23,635,233) $ (19,203,445) $ (19,894,741) $ (20,270,854) 117 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 2 CHANGES IN NET POSITION Page 3 of 4 LAST TEN FISCAL YEARS (Accrual Basis of Accounting) General Revenues and Other Changes in Net Position Governmental activities: Taxes: Property taxes Sales taxes Franchise and other taxes Other Investment earnings Gain (loss) on disposal of capital assets Miscellaneous Transfers Total Governmental Activities Business -Type Activities: Investment earnings Gain (loss) on disposal of capital assets Miscellaneous Transfers Total Business -Type Activities Total Primary Government Change in Net Position Governmental activities Business -type activities Total Primary Government 2022 2021 2020 2019 2018 $ 20,845,938 $ 19,163,858 $ 18,731,549 $ 18,111,247 $ 17,608,094 11,176,190 9,915,046 8,846,359 8,407,249 7,965,662 2,170,152 2,090,001 2,142,660 2,054,395 1,617,121 49,151 50,805 880,606 526,867 321,468 638,418 390,533 269,855 351,165 263,245 1,795, 683 1,541,853 1,434, 829 1,456, 690 1, 554,849 36,675,532 33,152,096 32,305,858 30,907,613 29,330,439 130,401 43,099 347,518 681,288 200,449 (1,795,683) (1,541,853) (1,434,829) (1,456,690) (1,554,849) (1,665,282) (1,498,754) (1,087,311) (775,402) (1,354,400) 35,010,250 31,653,342 31,218,547 30,132,211 27,976,039 5,116,244 6,458,118 (68,135) (2,426,629) (662,201) 5,057,078 2,748,632 1,769,767 (192,912) 780,399 $ 10,173,322 $ 9,206,750 $ 1,701,632 $ (2,619,541) $ 118,198 118 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 2 CHANGES IN NET POSITION Page 4 of 4 LAST TEN FISCAL YEARS (Accrual Basis of Accounting) General Revenues and Other Changes in Net Position Governmental activities: Taxes: Property taxes Sales taxes Franchise and other taxes Other Investment earnings Gain (loss) on disposal of capital assets Miscellaneous Transfers Total Governmental Activities Business -Type Activities: Investment earnings Gain (loss) on disposal of capital assets Miscellaneous Transfers Total Business -Type Activities Total Primary Government Change in Net Position Governmental activities Business -type activities Total Primary Government 2017 2016 2015 2014 2013 $ 17,270,647 $ 16,350,101 $ 15,574,684 $ 14,864,284 $ 14,630,961 6,482,367 5,393,920 5,291,186 4,693,484 4,293,794 1,661, 654 1,779, 234 1,726, 557 1,673, 615 1, 583,258 - - - 32,799 24,974 187,001 149,003 79,071 109,849 88,510 25,999 19,564 - 34,359 43,788 131,639 128,813 108,306 84,275 78,682 1,358, 744 1,397,065 1,226,205 1,799, 344 1,773,982 27,118,051 25,217,700 24,006,009 23,292,009 22,517,949 141,978 95,825 49,138 40,713 37,565 - 7,569 - - - - 7,839 35,790 (1,358,744) (1,397,065) (1,226,205) (1,799,344) (1,773,982) (1,216,766) (1,293,671) (1,169,228) (1,758,631) (1,700,627) 25,901,285 23,924,029 22,836,781 21,533,378 20,817,322 123,634 (118,691) 2,936,522 1,789,787 56,077 1,490,179 407,487 696,814 (151,150) 490,391 $ 1,613,813 $ 288,796 $ 3,633,336 $ 1,638,637 $ 546,468 119 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) General fund Nonspendable Restricted Committed Assigned Unassigned Total General Fund All Other Governmental Funds Nonspendable Restricted Unassigned Total Other Governmental Funds Total Fund Balances of Governmental Funds 2022 2021 2020 2019 2018 Table 3 Page 1 of 2 $ 260,066 $ 355,011 $ 255,796 $ 378,736 $ 371,610 460,154 597,908 650,424 727,704 631,971 4,667,500 4,320,912 2,591,745 2,508,234 4,229,725 11,997,367 11,953,314 13,374,059 10,608,815 9,052,000 17,385,087 17,227,145 16,872,024 14,223,489 14,285,306 11,484 11,101 11,070 24,738 24,307 12,740,909 18,106,088 4,757,183 5,568,395 9,304,724 (179,413) (165,886) (1,826,743) - - 12,572,980 17,951,303 2,941,510 5,593,133 9,329,031 $ 29,958,067 $ 35,178,448 $ 19,813,534 $ 19,816,622 $ 23,614,337 120 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) Table 3 Page 2 of 2 2017 2016 2015 2014 2013 General fund Nonspendable $ 434,750 $ 646,778 $ 822,226 $ 143,201 $ 122,927 Restricted 667,271 626,229 518,119 400,411 281,826 Committed - 3,612 685,486 - - Assigned 2,893,697 2,706,897 2,773,419 1,421,875 487,201 Unassigned 9,547,039 9,776,031 8,760,424 10,554,183 9,714,206 Total General Fund 13,542,757 13,759,547 13,559,674 12,519,670 10,606,160 All Other Governmental Funds Nonspendable 31,869 31,721 31,378 31,241 31,137 Restricted 8,464,859 8,165,349 6,539,985 666,317 995,269 Unassigned - (193,750) - (239,078) - Total Other Governmental Funds 8,496,728 8,003,320 6,571,363 458,480 1,026,406 Total Fund Balances of Governmental Funds $ 22,039,485 $ 21,762,867 $ 20,131,037 $ 12,978,150 $ 11,632,566 121 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) Revenues Taxes Fines and forfeitures Permits and fees Intergovernmental Investment earnings Donations Miscellaneous Total Revenues Expenditures General government Public safety Public works Engineering Community development Parks and recreation Library services Capital outlay Debt principal payment Interest and other charges Total expenditures Excess of revenues over (under) expenditures Other Financing Sources (Uses) Sale of capital assets Insurance recoveries Issuance of capital related debt Issuance of notes payable Issuance of capital lease Refunding bonds issued Payment to refunding escrow agent Premium on issuance of debt Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Debt service as a percentage of noncapital expenditures Table 4 Page 1 of 2 2022 2021 2020 2019 2018 $ 34,192,280 $ 30,974,155 $ 29,712,771 $ 28,389,651 $ 27,247,421 1,052,940 1,219,096 780,717 866,812 957,671 1,847,985 1,669,033 1,504,555 1,483,554 1,566,656 3,215,269 7,495,971 3,828,898 1,576,838 4,398,836 49,580 48,609 274,405 518,221 313,793 255,638 264,938 274,945 290,069 396,010 345,364 124,627 719,721 18,777 181,017 40,959,056 41,796,429 37,096,012 33,143,922 35,061,404 6,040,832 5,591,248 5,690,428 5,336,269 5,440,888 15, 370,261 14,897,465 14,306,864 13,545,539 16,868, 931 5,765,313 4,612,796 6,021,313 4,127,539 2,157,277 571,010 507,933 434,976 - - 1,187,413 1,131,498 1,139,566 1,099,154 985,309 4,312,856 3,715,517 3,426,521 3,796,589 3,511,146 1,336,185 1,223,726 1,182, 289 1,204,415 1,200,512 10,277,134 7,037,490 12,865,475 6,219,243 2,615,538 2,840,720 2,556,282 2,221,257 2,168,876 2,137,284 1,624,891 1,567,472 1,285,807 1,112,127 1,145,400 49,326,615 42,841,427 48,574,496 38,609,751 36,062,285 (8,367,559) (1,044,998) (11,478,484) (5,465,829) (1,000,881) 32,029 21,270 72,568 6,614 9,135 74,126 175,351 8,548 235,443 725,304 - 1 457 640 13,185,000 7,795,000 - 485,305 306,329 1,791,015 3,050,000 2,065,000 (3,321,347) (2,372,262) 1,451,456 753,840 - - 1, 708,331 1,751,915 1,584,985 1,473,591 1,402,989 (124,948) (210,062) (223,298) (47,534) (47,000) 3,147,178 16,409,912 11,475,396 1,668,114 2,575,733 $ (5,220,381) $ 15,364,914 $ (3,088) $ (3,797,715) $ 1,574,852 12.1% 11.7% 9.9% 10.1% 9.8% 122 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) Revenues Taxes Fines and forfeitures Permits and fees Intergovernmental Investment earnings Donations Miscellaneous Total Revenues Expenditures General government Public safety Public works Engineering Community development Parks and recreation Library services Capital outlay Debt principal payment Interest and other charges Total expenditures Excess of revenues over (under) expenditures Other Financing Sources (Uses) Sale of capital assets Insurance recoveries Issuance of capital related debt Issuance of notes payable Issuance of capital lease Refunding bonds issued Payment to refunding escrow agent Premium on issuance of debt Transfersin Transfers out Total other financing sources (uses) Net change in fund balances Debt service as a percentage of noncapital expenditures Table 4 Page 2 of 2 2017 2016 2015 2014 2013 $ 25,509,760 $ 23,533,294 $ 22,513,317 $ 21,335,527 $ 20,563,848 1,023,556 873,872 907,557 860,257 939,380 1,708,357 1,450,939 1,349,264 1,385,898 1,327,918 1,763,974 664,427 3,536,980 1,791,451 918,641 184,127 147,403 77,947 109,117 87,330 434,164 257,724 349,325 349,166 363,413 165,619 79,435 72,837 54,989 84,673 30,789,557 27,007,094 28,807,227 25,886,405 24,285,203 4,975,926 4,385,321 5,343,160 4,306,143 4,250,320 14,751,381 12,135,956 11,348,346 10,599,575 10,234,811 2,160,152 2,118,572 2,066,349 1,689,987 2,204,176 893,663 954,103 925,947 1,092,982 1,207,264 3,339,864 3,032,979 2,917,857 2,772,072 2,675,813 1,172,245 1,096,614 1,036,843 1,083,043 1,002,801 8,429,200 9,332,400 7,255,229 2,500,254 1,942,746 1,813,130 1,570,176 1,272,823 1,668,692 1,721,983 1,170,958 921,982 776,340 662,718 712,822 38,706,519 35,548,103 32,942,894 26,375,466 25,952,736 (7,916,962) (8,541,009) (4,135,667) (489,061) (1,667,533) 12,757 2,743 99 6,325 27,566 25,999 19,564 39,257 28,886 48,132 5,605,000 7,345,000 9,595,000 - - 756,006 - 147,318 - 2,840,000 - - - (3,058,663) 435,074 1,484,593 646,746 - - 1,364,399 1,503,442 1,544,662 1,799,344 1,973,106 (5,655) (182,503) (318,457) - (199,124) 8,193,580 10,172,839 11,288,644 1,834,555 1,996,998 $ 276,618 $ 1,631,830 $ 7,152,977 $ 1,345,494 $ 329,465 9.9% 9.2% 7.5% 9.8% 10.0% 123 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS ASSESSED VALUE AND TAXABLE VALUE OF PROPERTY LAST TEN FISCAL YEARS (Unaudited) Fiscal Year Tax Year Residential Property Commercial and Industrial Property Other Property Total Assessed Value 2013 2012 $ 2,622,105,658 $ 286,288,277 $ 235,960,049 $ 3,144,353,984 2014 2013 2,695,532,057 294,316,218 238,127,209 3,227,975,484 2015 2014 2,850,404,776 300,533,643 237,028,723 3,387,967,142 2016 2015 3,156,205,930 335,006,408 206,365,157 3,697,577,495 2017 2016 3,546,622,242 320,646,912 230,805,066 4,098,074,220 2018 2017 3,795,456,220 222,328,923 376,053,145 4,393,838,288 2019 2018 3,749,539,307 227,659,302 352,044,261 4,329,242,870 2020 2019 4,078,991,715 241,927,251 414,739,865 4,735,658,831 2021 2020 4,526,853,385 290,599,941 451,358,776 5,268,812,102 2022 2021 5,112,738,325 337,329,366 528,637,507 5,978,705,198 Source: Galveston Central Appraisal District, Harris County Appraisal District, and City of Friendswood records. Table 5 Page 1 of 2 Note: Property in the City of Friendswood is reassessed once every two years on average. (Source: Galveston Central Appraisal District) Tax rates per $100 of assessed value. Residential property includes both single-family and multi -family properties. 124 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS ASSESSED VALUE AND TAXABLE VALUE OF PROPERTY LAST TEN FISCAL YEARS (Unaudited) Fiscal Year Tax Year Less: Exemptions and Tax Exempt Property Total Taxable Value Total Direct Tax Rate 2013 2012 $ 710,718,423 $ 2,433,635,561 $ 0.59700 2014 2013 724,153,848 2,503,821,636 0.59140 2015 2014 761,444,427 2,626,522,715 0.59140 2016 2015 776,779,458 2,920,798,037 0.56870 2017 2016 977,353,948 3,120,720,272 0.54600 2018 2017 894,716,055 3,499,122,233 0.52735 2019 2018 955,005,811 3,374,237,059 0.53240 2020 2019 1,066,920,381 3,668,738,450 0.52140 2021 2020 1,349,948,370 3,918,863,732 0.48740 2022 2021 1,735,137,851 4,243,567,347 0.48731 Table 5 Page 2 of 2 125 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years (Unaudited) (rate per $100 of assessed value) Table 6 Fiscal Year Ended September 30, General City Direct Rates Debt Service Total Direct Friendswood Independent School District Clear Creek Independent School District Overlapping Rates Galveston County Consolidate Drainage District Galveston County Harris County 2013 $ 0.5307 $ 0.0663 $ 0.5970 $ 1.3670 $ 1.3600 $ 0.1400 $ 0.5999 $ 0.62998 2014 0.5303 0.0611 0.5914 1.3670 1.4000 0.1400 0.5837 0.62998 2015 0.5303 0.0611 0.5914 1.3670 1.4000 0.1350 0.5788 0.62998 2016 0.4972 0.0715 0.5687 1.3670 1.4000 0.1150 0.5612 0.62998 2017 0.4620 0.0840 0.5460 1.3870 1.4000 0.1120 0.5462 0.62998 2018 0.4323 0.0950 0.5273 1.3670 1.4000 0.1080 0.5461 0.62998 2019 0.4372 0.0952 0.5324 1.3670 1.4000 0.1080 0.5298 0.62998 2020 0.4322 0.0893 0.5214 1.2594 1.3100 0.1122 0.5044 0.61170 2021 0.3922 0.0952 0.4874 1.3440 1.2659 0.1131 0.4651 0.59920 2022 0.3851 0.1022 0.4873 1.2394 1.1797 0.1320 0.4149 0.58135 Source: Galveston County Tax Assessor/Collector and City of Friendswood records Note: Overlapping rates are those of local and county governments that apply to property owners within the City of Friendswood. Not all overlapping rates apply to all property owners. Overlapping rates for Friendswood Independent School District, Galveston County Consolidated Drainage District and Galveston County apply only to residents whose property is in Galveston County. Overlapping rates for Clear Creek Independent School District and Harris County apply only to residents whose property is in Harris County. 126 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS PRINCIPAL PROPERTY TAX PAYERS CURRENT AND NINE YEARS AGO (Unaudited) Taxpayer Reserve at Autumn Creek LTD Texas -New Mexico Power Co. Bellevue at Clear Creek LP Tannos Land Holding III LLC Kroger Co. Bay Meadows LLP The Beldon Friendswood LLC A-S 108 Friendswood Crossing LP WCJV Friendswood LLC Frontier Land V P L L Autumn Creek Dev LTD G&I VI Sky Hawk LP H E Butt Grocery Company HCP Friendswood LLC HSRE Friendswood LLC Buzbee Family LTD Partnership Total All other taxpayers 2022 Taxable Value Rank $ 30,972,060 1 22,712,259 2 20,016,530 3 14,000,000 4 13,020,517 5 11,254,573 6 8,500,150 7 8,051,620 8 7,925,690 9 7,385,000 10 143,838,399 4,099,728,948 $4,243,567,347 2013 Percentage of Total City Taxable Assessed Taxable Value Value Ran 0.73% $17,486,069 1 0.54% 11,212,150 3 0.47% - 0.33% - 0.31% 13,606,816 2 0.27% - 0.20% - 0.19% 5,858,350 9 0.19% - 0.17% - - 9,396,550 4 8,856,988 5 8,149,920 6 6,995,240 7 - 5,995,130 8 - 5,367,560 10 3.39% 92,924,773 96.61% 2,340,710,788 100.00% $2,433,635,561 Source: Galveston Central Appraisal District and Harris County Appraisal District. Table 7 Percentage of Total City Taxable Assessed Value 0.72% 0.46% 0.56% 0.24% 0.39% 0.36% 0.33% 0.29% 0.25% 0.22% 3.82% 96.18% 127 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (Unaudited) Table 8 Collected within the Collections Fiscal Year Taxes Levied Fiscal Year of the Levy (adjustments) Total Collections to Date Ended forthe Percentage in Subsequent Percentage September 30, Fiscal Year Amount of Levy Years Amount of Levy 2013 $ 14,454,404 $ 14,361,379 99.63% $ 83,459 $ 14,444,838 99.93% 2014 14,747,526 14,656,257 99.38% 81,591 14,737,848 99.93% 2015 15,424,948 15,306,943 99.23% 105,530 15,412,473 99.92% 2016 16,431,153 16,264,080 98.98% 155,239 16,419,319 99.93% 2017 17,014,685 16,922,419 99.46% 80,143 17,002,562 99.93% 2018 17,633,192 17,554,220 99.55% 65,329 17,619,549 99.92% 2019 17,952,134 17,756,864 98.91% 177,496 17,934,360 99.90% 2020 18,682,563 18,605,868 99.59% 49,644 18,655,512 99.86% 2021 18,879,840 18,877,842 99.99% ( 37,764) 18,840,078 99.79% 2022 20,843,713 20,793,321 99.76% - 20,793,321 99.76% Source: Galveston County Tax Assessor/Collector and City of Friendswood records. 128 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS RATIOS OF OUTSTANDING DEBY BT TYPE LAST TEN FISCAL YEARS (Unaudited) Governmental Activities General Fiscal Obligation Notes Year Bonds Payable 2013 $ 20,230,000 $ 876,981 2014 18,815,000 623,407 2015 24,525,285 360,584 2016 31,768,805 180,408 2017 36,067,806 668,284 2018 34,065,657 791,305 2019 32,023,508 436,620 2020 38,058,822 1,861,762 2021 49,809,357 1,681,709 2022 47,143,902 2,613,729 Business -Type Activities General Water Obligation Revenue Bonds Bonds Total Primary Government Percentage of Personal Income Per Capita $ $ 32,995,000 $ 54,101,981 0.37% $ 1,410 31,830,000 51,268,407 0.35% 1,318 9,875,671 24,663,416 59,424,956 0.40% 1,510 33,238,357 6,109,871 71,297,441 0.46% 1,793 31,160,729 5,871,129 73,767,948 0.47% 1,818 29,028,108 5,627,385 69,512,455 0.42% 1,695 26,845,483 27,039,600 86,345,211 0.49% 2,093 24,587,858 26,037,385 90,545,827 0.49% 2,175 22,310,234 40,736,057 114,537,357 0.57% 2,733 20,447,609 39,081,427 109,286,667 0.51% 2,588 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See Table 14 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year. Table 9 129 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS RATIOS OF NET GENERAL BONDED DEBY OUTSTANDING LAST TEN FISCAL YEARS (Unaudited) General Bonded Debt Outstanding Table 10 General Less Debt Net Percentage of Fiscal Taxable Obligation Service General Taxable Value Per Year Population Value Bonds * Funds Bonded Debt Property Capita 2013 38,369 $ 2,433,635,561 $ 20,967,293 $ 134,339 $ 20,095,661 0.83% $ 524 2014 38,911 2,503,821,636 19,491,826 130,147 18,684,853 0.75% 480 2015 39,458 2,626,522,715 34,400,956 147,193 34,253,763 1.30% 868 2016 39,767 2,920,798,037 65,007,162 159,686 64,847,476 2.22% 1,631 2017 40,570 3,120,720,272 67,228,535 115,152 67,113,383 2.15% 1,654 2018 41,003 3,499,122,233 63,093,765 - 63,093,765 1.80% 1,539 2019 41,253 3,374,237,059 58,868,991 18,302 58,850,689 1.74% 1,427 2020 41,637 3,668,738,450 62,646,680 31,909 62,614,771 1.71% 1,504 2021 41,916 3,918,863,732 72,119,591 10,608 72,108,983 1.84% 1,720 2022 42,222 4,243,567,347 67,591,511 46,376 67,545,135 1.59% 1,600 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. * Includes both Governmental Activities and Business -type Activities 130 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 11 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF September 30, 2022 (Unaudited) Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable Debt Debt repaid with property taxes Friendswood Independent School District $196,190,000 100.00% $ 196,190,000 Clear Creek Independent School District 1,094,103,696 2.579% 28,216,934 Galveston County 224,931,000 7.672% 17,256,706 Harris County 2,697,314,000 0.149% 4,018,998 Subtotal, overlapping debt City Direct Debt Total Direct and Overlapping Debt 245,682,638 49,757,631 $ 295,440,269 Source: Information was obtained from either the governmental unit's website or the finance department of the governmental unit. Notes: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Friendswood. The City's share of the debt of the overlapping governments is based on the ratio of the assessed value of the City's own property to that of each of the other governments. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident --and therefore responsible for repaying the debt --of each overlapping government. 131 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS LEGAL DEBT MARGIN INFORMATION (UNAUDITED) Asa City Council -City Manager form of government, the City of Friends wood is not limited by law in the amount of debt it may issue. The City's charter states: "In keeping with the Constitution of the State of Texas and not contrary thereto, the City of Friendswood shall have the power to borrow money on the credit of the City for any public purpose not now or hereafter prohibited by the Constitution and laws of the State of Texas, and shall havethe right to issue all tax bonds, revenue bonds, funding and refunding bonds, time warrants and other evidence of indebtedness as now authorized or as may hereafter be authorized to be issued by cities and towns by the laws of the State of Texas." Article 11, Section 5 of the State of Texas Constitution states in part: "but no tax for any purpose shall ever be lawful for any one year, which shall exceed two and one -hall percent of the taxable property of such city" The tax rate for fiscal year ended September 30, 2022 is $0.4873 per $100 of assessed valuation with assessed valuation being 100% of ma rket va I ue. Table 12 132 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS (Unaudited) Table 13 Waterworks and Sewer Revenue Bonds Utility Less: Net Fiscal Service Operating Available Debt Service Year Charges Expenses Revenue Principal Interest Coverage 2013 $ 11,462,779 $ 6,113,276 $ 5,349,503 $ 1,120,000 $ 1,548,303 2.00 2014 11,117,391 6,376,510 4,740,881 1,165,000 1,504,006 1.78 2015 11,020,029 6,220,331 4,799,698 1,205,000 1,153,522 2.04 2016 11,319,801 6,361,229 4,958,572 - 481,140 10.31 2017 12,295,441 6,911,675 5,383,766 220,000 184,100 13.32 2018 12,183,711 7,205,293 4,978,418 225,000 179,250 12.32 2019 13,130,943 9,378,672 3,752,271 230,000 787,319 3.69 2020 16,638,758 10,050,967 6,587,791 905,000 952,470 3.55 2021 17,690,843 9,690,325 8,000,518 935,000 1,113,685 3.91 2022 19,408,330 9,130,574 10,277,756 1,450,000 1,221,488 3.85 Notes: Details regarding theCity's outstanding debt can be found in the notes to the financial statements. 133 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS (Unaudited) Per Capita Calendar Estimated Personal Personal Unemployment Year Population Income Income Rate 2013 38,369 $ 14,475,816,000 $ 47,186 4.5% 2014 38,911 14,741,197,000 46,917 3.4% 2015 39,358 14,774,880,000 47,011 3.7% 2016 39,767 15,463,890,000 47,991 4.9% 2017 40,570 15,682,608,000 47,605 4.7% 2018 41,003 16,443,373,000 49,079 4.3% 2019 41,253 17,497,755,000 51,785 3.2% 2020 41,637 18,561,154,000 54,250 5.9%il) 2021 41,916 19,994,969,000 57,941 3.9% 2022 42,222 21,328,914,000 60,071 3.4% Sources: Population information was provided from pastfinancial reports. Unemploym( rates, personal income and per capita personal income were obtained from the U.S. Department of Labor Bureau of Labor Statistics webs ite or the Texas Workforce Commission website. (1) Increase in unemployment rate is a resultof the COVID-19 pandemic. Table 14 134 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (Unaudited) Employer Friendswood ISD HEB City of Friendswood Kroger Clear Creek ISD Friendship Haven Nursing Home McDonalds U.S. Post Office Morada (formerly Atria ) UTMB Friendswood Healthcare (Autumn Hills) Emeritus Total Source: City Manager's Office Table 15 2022 2013 Percentage Estimated of Total Estimated Employees Employment Rank Employees Rank 817 4.10% 1 698 1 500 2.51% 2 370 3 248 1.25% 3 233 4 219 1.10% 4 413 2 190 0.95% 5 168 5 100 0.50% 6 140 6 102 0.51% 7 69 8 75 0.38% 8 58 9 72 0.36% 9 - 60 0.30% 10 - - - - - 85 7 - - - 69 10 2,383 11.97% 2,303 Note: Percentage of total employment is based on total City employment of 19,909 for 2022. Total City employment for 2013 is not available. 135 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 16 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Page 1 of 2 LAST TEN CALENDAR YEARS (Unaudited) Full-time Equivalent Employees as of September 30 2022 2021 2020 2019 2018 Function/Program General Government City Attorney 2.15 2.10 2.10 2.10 2.10 City Manager 4.00 6.00 6.00 5.00 5.40 City Secretary 4.00 4.00 4.00 5.00 5.00 Administrative Services 16.60 18.60 18.60 27.60 27.60 Human Resources 5.00 5.00 5.00 - - Information Technology 6.00 5.00 5.00 - - Public Safety: Police 90.38 90.38 90.38 90.38 87.72 Fire marshal and fire 7.38 7.20 7.20 7.20 6.60 Public Works 23.00 23.00 23.00 23.00 27.00 Community Development 11.18 10.70 10.70 10.70 10.70 Engi neeri ng 7.45 7.00 7.00 6.00 - Parks and Recreation 25.30 24.90 24.50 23.10 21.90 Li bra ry 15.62 14.97 14.97 14.97 14.97 Water 11.30 9.30 9.30 9.30 9.30 Sewer 11.00 11.00 11.00 11.00 10.00 Total City Employees: 240.36 239.15 238.75 235.35 228.29 Source: City of Friendswood Budget Documents Notes: In-house City Attorney added to staff in fiscal year 2015. In fiscal year 2019, Engineering became an independent department, separate from Public Works. In fiscal year 2020, Human Resources and Information Technology became independent departmen separate from Ad mini strative Services. 136 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 16 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Page 2 of 2 LAST TEN CALENDAR YEARS (Unaudited) Full-time Equivalent Employees as of September 30 2017 2016 2015 2014 2013 Function/Program General Government: City Attorney 1.00 1.00 1.00 - - City Manager 5.40 5.40 4.55 4.15 4.15 City Secretary 5.00 5.00 5.00 5.00 5.00 Administrative Services 27.70 27.70 28.70 28.70 28.20 Human Resources - - - - - Information Technology - - - - - Public Safety: Police 88.72 86.72 85.72 82.40 81.40 Fire marshal and fire 6.60 6.60 6.60 6.50 6.10 Public Works 26.00 29.00 25.33 26.33 20.33 Community Development 11.70 11.70 10.89 10.89 16.89 Engineering - - - - - Parks and Recreation 20.90 19.63 19.63 19.03 19.20 Library 14.97 14.62 14.62 14.37 14.37 Water 8.30 8.30 8.30 9.30 9.30 Sewer 11.00 8.00 8.00 9.00 9.00 Total City Employees: 227.29 223.67 218.34 215.67 213.94 Source: City of Friendswood Budget Documents Notes: In-house City Attorney added to staff in fiscal year 2015. In fiscal year 2019, Engineering became an independent department, separate from Public Work: In fiscal year 2020, Human Resources and Information Technology became independent departn separate from Admini strative Services. 137 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN CALENDAR YEARS (Unaudited) Fiscal Year 2022 2021 2020 2019 2018 Function/Program Community Development: Building permits issued 1,682 1,658 1,605 1,465 2,788 Building inspections conductec 9,325 9,998 9,124 9,251 14,157 Police: Physical arrests 1,051 1,368 847 1,190 1,145 Parking violations 11 36 17 26 15 Traffic violations 9,952 11,081 8,807 4,468 6,785 Fire Marshal: Inspections 1,315 1,730 1,146 1,448 1,139 Fire: Emergency responses 4,458 4,405 3,650 3,655 3,720 Fires extinguished 129 92 65 80 80 Parks and Recreation: Recreation participants 36,861 16,907 6,027 19,657 18,299 Facility reservations 5,356 1,033 3,166 3,293 2,123 Library: Volumes in collection 95,470 101,061 99,930 101,532 102,852 Total volumes borrowed 349,814 340,478 271,078 342,592 348,554 Water: Newconnections 136 92 185 169 125 Water main breaks 126 49 41 84 116 Average daily consumption 5,714 5,064 5,319 5,129 5,455 (thousands ofgallons) Peak daily consumption 11,166 14,041 9,927 9,390 9,475 Sewer: Average dailysewagetreatmer 2,840 3,255 3,113 3,345 3,117 (thousands of gallons) Maximum daily flow 8,369 11,006 10,520 12,491 10,370 (thousands of gallons) Source: Various Citydepartmentsand prioryearACFRs Table 17 Page 1 of 2 138 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN CALENDAR YEARS (Unaudited) Fiscal Year 2017 2016 2015 2014 2013 Function/Program Community Development: Building permits issued 2,177 1,865 1,377 1,395 1,469 Building inspections conductec 12,134 11,026 12,145 10,611 11,470 Police: Physical arrests 903 1,464 1,479 1,596 1,601 Parking violations 61 44 63 58 107 Traffic violations 3,669 5,001 4,540 5,815 5,718 Fire Marshal: Inspections 1,233 1,354 1,512 1,427 1,673 Fire: Emergency responses 3,599 3,303 3,258 3,261 2,993 Fires extinguished 75 76 78 116 86 Parks and Recreation: Recreation participants 20,556 21,369 16,153 15,178 18,607 Facility reservations 1,004 1,444 1,443 728 686 Library: Volumes in collection 100,678 147,726 133,165 141,383 133,865 Total volumes borrowed 341,048 301,158 350,145 367,452 367,948 Water: Newconnections 137 183 - 193 189 Water main breaks 44 46 57 149 193 Average daily consumption 5,282 4,963 4,970 5,171 5,577 (thousands ofgallons) Peak daily consumption 10,110 10,472 12,623 9,917 11,505 Sewer: Average dailysewagetreatmer 3,286 3,382 3,306 2,867 2,956 (thousands ofgallons) Maximum daily flow 12,766 12,188 11,237 10,770 10,401 (thousands ofgallons) Source: Various Citydepartmentsand prioryearACFRs Table 17 Page 2 of 2 139 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN CALENDAR YEARS (Unaudited) Function/Program Police Stations Patrol units Fire Stations Public Works Streets - paved (miles) Streets - unpaved (miles) Traffic signals Parks and Recreation Acreage Parks Swimming pool Tennis courts Li bra ry Water Water mains (miles) Fi re hydrants Connections Stora ge ca pa ci ty (thousands of gallons) Sewer Sanitary sewers (miles) Connections Storm sewers (miles) Treatment ca pa city (thousands of gallons) Fiscal Year Table 18 Page 1 of 2 2022 2021 2020 2019 2018 1 1 1 29 38 31 4 4 4 221 221 185 2 2 2 3 3 3 320 273 266 11 10 10 1 1 1 4 4 4 1 1 1 222 222 216 1,75S 1,747 1,713 14,328 14,192 14,098 7,850 7,850 7,850 182 182 202 13,241 13,132 13,029 117 117 112 9,250 9,250 9,250 Source: Various City departments and prior year ACFRs. 1 1 33 34 4 4 176 176 2 2 3 3 266 266 10 9 1 1 4 4 1 1 216 216 1,707 1,707 13,913 13,744 7,850 7,850 202 202 12,870 12,721 112 112 9,250 9,250 140 City of Friendswood, Texas 2022 ACFR CITY OF FRIENDSWOOD, TEXAS Table 18 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Page 2 of 2 LAST TEN CALENDAR YEARS (Unaudited) Fiscal Year 2017 2016 2015 2014 2013 Function/Program Police Stations 1 1 1 1 1 Patrol units 32 31 29 27 26 Fire Stations 4 4 4 4 4 Public Works Streets - paved (miles) 174 172 169 167 165 Streets - unpaved (miles) 2 2 2 2 2 Traffic signals 3 3 3 3 3 Parks and Recreation Acreage 266 266 232 189 189 Parks 9 9 8 8 8 Swimming pool 1 1 1 1 1 Tennis courts 4 4 4 4 4 Li bra ry 1 1 1 1 1 Water Water mains (miles) 214 212 209 207 187 Fi re hydra nts 1,690 1,672 1,631 1,610 1,608 Connections 13,619 13,482 13,289 13,093 12,929 Storage ca pacity 7,850 7,850 8,100 8,000 7,500 (thousands of gallons) Sewer San i ta ry sewers (miles) 200 198 195 194 163 Connections 12,588 12,378 12,407 12,236 12,072 Storms ewers (miles) 110 109 106 105 100 Treatment ca pa city 9,250 9,250 9,250 12,000 4,850 (thousands of gallons) Source: Various City departments and prior year ACFRs. 141 City of Friendswood, Texas 2022 ACFR City of ,i�nd,swood Tex a s 142 City of Friendswood, Texas 2022 ACFR