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Home My WebLink About1993 09 30 Other - City of Friendswood 1 1 1 1 ' CITY OF FRIENDSWOOD, TEXAS tGENERAL PURPOSE FINANCIAL STATEMENTS Year Ended September 30, 1993 1 1 ' CITY OF FRIENDSWOOD, TEXAS ' GENERAL PURPOSE FINANCIAL STATEMENTS Year Ended September 30, 1993 TABLE OF CONTENTS 1 Exhibit Page Independent Auditors' Report 1 ' Combined Balance Sheet - All Fund Types and Account Groups A-1 2-3 ' Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types A-2 4-5 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General, Special ' Revenue and Debt Service Funds A-3 6-7 Combined Statement of Revenues, Expenses and Changes in Retained Earnings/Fund Balance - Proprietary Fund Type ' and Non-Expendable Trust Fund A-4 8-9 Combined Statement of Cash Flows - Proprietary Fund Type and Non-Expendable Trust Fund A-5 10-11 Notes to Financial Statements A-6 12-35 1 1 Null &Associates Houston Fort Bend County Professional Corporation 11 Houston ay Plaza,Suite 1515 One Sugar Creek Center Blvd.,Suite 975 Certified Public Houston,Texas 77046 Sugar Land,Texas 77478 Certified 1 ublc Accountants (713)621-1515•FAX:621-1570 (713)242-8600•FAX:242-7333 Independent Auditors' Report To the Honorable Mayor and Members of the City Council City of Friendswood, Texas We have audited the accompanying general purpose financial statements of the City of Friendswood, Texas, as of and for the year ended September 30, 1993. These general purpose financial statements are the responsibility of the City of Friendswood, Texas, management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable ' assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and t significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. ' In our opinion, the general purpose financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the ' City of Friendswood, Texas, as of September 30, 1993, and the results of its operations and the cash flows of its proprietary fund type and non-expendable trust fund for the year then ended in conformity with generally accepted accounting principles. P. 6 . 1 Houston, Texas December 23, 1993 • MEMBERS:AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS,TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS, CPA ASSOCIATES INTERNATIONAL,INC.WITH ASSOCIATED 1)FFICES IN PRINCIPAL U.S.AND INTERNATIONAL CITIES. ' GENERAL PURPOSE FINANCIAL STATEMENTS 1 CITY OF FRIENDSWOOD, TEXAS COMBINED BALANCE SHEET — ALL FUND TYPES AND ACCOUNT GROUPS September 30, 1993 with comparative totals for September 30, 1992 Governmental Fund Types Special Debt Capital General Revenue Service Projects • Assets and Other Debits Assets Cash and temporary investments $ 2,156,410 $ 8,409 $ 49,528 $ 2,789,378 ' Receivables: Taxes 229,868 83,210 Accounts 195,004 Interest Land, buildings, and equipment (at cost), net of accumulated depreciation in the Enterprise Fund Investment in Blackhawk joint venture Other assets 93,534 14,390 II Other Debits Amount available for debt service Amount to be provided for retirement of general long-term debt Total Assets and Other Debits $ 2.674.816 $ 8,409 $ 132.738 $ 2,803,768 Liabilities, Equity, and Other Credits Liabilities Accounts payable and accrued liabilities $ 534,406 62 $ 4,027 $ 114,644 Compensated absences 625,610 Customer deposits Deferred revenue 302,165 83,210 Deferred compensation benefits payable Bonds payable Certificates of obligation Total Liabilities 1,462,181 62 87,237 114,644 Equity and Other Credits Contributed capital Investment in general fixed assets Retained Earnings: Reserved Unreserved Fund Balances: Reserved for encumbrances 68,415 425,908 I Reserved for endowments Reserved for debt service 45,501 Unreserved: Designated 800,000 8,347 2,263,216 Undesignated 344,220 Total Equity and Other Credits 1,212,635 8,347 45,501 2,689,124 Total Liabilities, Equity, and Other Credits $ 2,674,816 $ 8,409 $ 132,738 $ 2,803,768 See Notes to Financial Statements. 2 II II IIExhibit A-1 II I Proprietary Fiduciary Totals Fund Type Fund Type Account Groups (Memorandum Only) Trust and General General Long- September 30, September 30, Enterprise Agency Fixed Assets Term Debt 1993 1992 II $ 2,528,339 $ 407,431 $ $ $ 7,939,495 $ 4,802,984 11 313,078 306,419 656,821 851,825 752,146 28,588 28,588 ' 22,702,539 57,200 22,094,506 44,854,245 41,207,454 140,927 140,927 129,191 ' 73,380 181,304 90,422 45,501 45,501 78,244 II 9,016,148 9,016,148 6,587,533 $ 26.130,594 $ 464,631 $ 22,094,506 $ 9,061,649 $ 63,371,111 $ 53,954,393 II ' $ 595,156 64,696 $ $ $ $ 1,248,295 $ 750,333 690,306 587,925 147,535 147,535 121,865 385,375 353,292 I 378,444 336,444 305,671 3,480,000 6,856,649 10,36,649 7,155,777 3,660,000 2,205,000 5,865,000 4,120,000 7,947,387 378,444 9,061,649 19,051,604 13,394,863 II14,812,068 14,812,068 14,459,049 22,094,506 22,094,506 19,623,096 I1,229,135 1,229,135 1,046,385 2,142,004 2,142,004 3,184,426 II 494,323 357,699 67,200 67,200 67,200 45,501 78,244 II 3,071,563 1,282,075 18,987 363,207 461,356 18,183,207 86,187 22,094,506 44,319,507 40,559,530 II $ 26,130,594 $ 464,631 $ 22,094,506 $ 9,061,649 $ 63,371,111 $ 53,954,393 II 3 I CITY OF FRIENDSWOOD, TEXAS I COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — ALL GOVERNMENTAL FUND TYPES Year Ended September 30, 1993 I with comparative totals for Year Ended September 30, 1992 Governmental Fund Types II Special Debt Capital General Revenue Service Projects ' Revenues Property taxes $ 3,968,813 $ $ 1,280,704 $ Sales taxes 979,890 Franchise fees 530,059 ' Sanitation 838,542 Fines and forfeitures 174,487 Permits and fees 319,384 Donations 8,609 73,000 611,919 II Intergovernmental 32,273 Interest on investments 128,002 620 25,573 62,072 Other 138,006 25 Total Revenues 7,118,065 73,620 1,306,277 674,016 I Expenditures Current: General government 1,149,344 II Public safety 2,737,505 77,153 Public works 1,621,896 Community development 386,976 IICommunity services 1,319,689 Capital outlay 2,318,794 Debt Service: Principal retirement 945,000 Interest and fiscal charges 489,052 Total Expenditures 7,215,410 77,153 1,434,052 2,318,794 II Revenues Over (Under) IIExpenditures (97,345) (3,533) (127,775) (1,644,778) Other Financing Sources (Uses) Operating transfers in 248,145 1,399 95,032 1,467,829 II Operating transfers (out) (304,802) Proceeds from the sale of bonds (---_____--"� 6,471,674 Proceeds from the sale of certificates of obligation 2,160,000 il Payment to refunding bond escrow agent �— (6,471,674) Total Other Financing Sources (Uses) (56,657) 1,399 95,032 3,627,829 II Revenues and Other Financing Sources Over (Under) Expenditures and IIOther Financing (Uses) (154,002) (2,134) (32,743) 1,983,051 Fund balances - Beginning 1,366,637 10,481 78,244 706,073 Fund Balances - Ending ' $ 1,212,635 $ 8,347 $ 45,501 $ 2,689,124 II See Notes to Financial Statements. 4 11 I I IExhibit A-2 I 11 Totals (Memorandum Only) 1 September 30, 1993 September 30, 1992 $ 5,249,517 $ 4,958,963 979,890 804,453 11 530,059 545,793 838,542 780,604 174,487 171,154 319,384 337,539 II 693,528 76,299 32,273 34,006 216,267 170,145 138,031 151,543 II 9,171,978 8,030,399 II 1,149,344 1,112,882 2,814,658 3,061,016 1,621,896 1,537,447 386,976 326,854 1 1,319,689 1,087,039 2,318,794 371,954 945,000 830,000 1 489,052 485,242 11,045,409 8,812,434 II (1,873,431) (782,035) II 1,812,405 1664,354 (304,802) 633,319) 6,471,674 , 1 2,160,000 (6,471,674) II 3,667,603 1,031,035 II 1,794,172 249,000 2,161,435 1,912,435 1 $ 3.955,607 $ 2.161,435 1 5 I CITY OF FRIENDSWOOD, TEXAS ' COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 11 GENERAL. SPECIAL REVENUE, AND DEBT SERVICE FUNDS Year Ended September 30, 1993 I with comparative totals for Year Ended September 30, 1992 II General Fund Variance IIFavorable Budget Actual (Unfavorable) Revenues Property taxes $ 3,883,478 $ 3,968,813 $ 85,335 II Sales taxes 977,465 979,890 2,425 Franchise fees 533,390 530,059 (3,331) Sanitation 760,179 838,542 78,363 Fines and forfeitures 165,860 174,487 8,627 II Permits and fees 299,638 319,384 19,746 Donations 8,407 8,609 202 Intergovernmental l . Wnn 34,985 32,273 (2,712) Interest on investments c Mot it )>106,670 128,002 21,332 II KA,/ Other 41114t 84,495 138,006 53,511 Total Revenues V ` 6,854,567 7,118,065 263,498 ExpendituresII Current: General government 1,331,445 1,149,344 182,101 Public safety 2,726,870 2,737,505 (10,635) , Public works 1,553,524 1,621,896 (68,372) Community development 391,571 386,976 4,595 Community services 1,386,414 1,319,689 66,725 Debt Service: IIPrincipal retirement Interest and fiscal charges Total Expenditures 7,389,824 7,215,410 174,414 Revenues Over (Under) I Expenditures (535,257) (97,345) 437,912 Other Financing Sources (Uses) Operating transfers in 24 248,145 II Operating transfers (out) 384,006 (304,802) 79,204 Proceeds from the sale of bonds IIPayment to refunding bond escrow agent Total Other Financing Sources (Uses) (135,861) (56,657) 79,204 Revenues and Other Financing II Sources Over (Under) Expenditures and Other Financing (Uses) (671,118) (154,002) 517,116 ' Fund balances - Beginning 1,366,637 1,366,637 Fund Balances - Ending $ 695,519 $ 1,212,635 $ 517,116 II See Notes to Financial Statements. ' 6 I I Exhibit A-3 II IISpecial Revenue Fund Debt Service Fund Variance Variance I Favorable Favorable (Un favorable) Actual (Unfavorable) Budget Actual $ $ $ $ 1,251,586 $ 1,280,704 $ 29,118 II II76,163 73,000 (3,163) 1,230 620 (610) 24,897 25,573 676 77,393 73,620 (3,773) 1,276,483 1,306,277 29,794 II 83,197 77,153 6,044 11 II 937,500 945,000 (7,500) 488,030 489,052 (1,022) 83,197 77,153 6,044 1,425,530 1,434,052 (8,522) II (5,804) (3,533) 2,271 (149,047) (127,775) 21,272 ' 1,399 1,399 95,032 95,032 6,471,674 6,471,674 I (6,471,674) (6,471,674) 1,399 1,399 95,032 95,032 II II (5,804) (2,134) 3,670 (54,015) (32,743) 21,272 10,481 10,481 78,244 78,244 II $ 4,677 $ 8,347 S 3,670 $ 24,229 $ 45,501 $ 21,272 7 I CITY OF FRIENDSWOOD, TEXAS 1 COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS/FUND BALANCE — PROPRIETARY FUND TYPE AND NON—EXPENDABLE TRUST FUND Year Ended September 30, 1993 with comparative totals for Year Ended September 30, 1992 Proprietary Fiduciary II Fund Type Fund Type Non-Expendable II Enterprise Trust Operating Revenues Water charges $ 2,612,847 $ Sewer charges 1,070,081 IIFees and penalties 85,820 Other 39,818 Total Operating Revenues 3,808,566 II Operating Expenses IIWater operations 824,110 Sewer operations 1,063,052 Operation administration 88,353 Finance administration 163,132 IIComputer services 4,294 Insurance 26,259 Engineering 77,769 Depreciation 695,616 1 Total Operating Expenses 2,942,585 Operating Income 865,981 II Nonoperating Revenues (Expenses) IIInterest revenue 172,257 1,048 Interest expense (390,307) Total Nonoperating Revenues (Expenses) (218,050) 1,048 , Income Before Operating Transfers 647,931 1,048 Operating Transfers In (Out) II Operating transfers (out) (1,507,603) Net Income (Loss) (859,672) 1,048 , Retained earnings/Fund balance - Beginning 4,230,811 85,139 II Retained Earnings/Fund Balance - Ending $ 3,371,139 $ 86,187 ' See Notes to Financial Statements. 8 11 I I IExhibit A-4 I I Totals I Septe r 30,(Memorandum1993 Only) mbe September 30, 1992 $ 2,612,847 $ 2,428,937 II 1,070,081 1,031,407 85,820 78,697 39,818 28,338 I 3,808,566 3,567,379 I 824,110 770,128 1,063,052 990,540 88,353 83,949 ' 163,132 4,294 151,319 5,299 26,259 17,998 77,769 44,461 II695,616 648,639 2,942,585 2,712,333 1 865,981 855,046 II 173,305 71,754 (390,307) (337,952) I (217,002) (266,198) 648,979 588,848 1 (1,507,603) (1,031,035) II (858,624) (442,187) I 4,315,950 4,758,137 $ 3,457.326 $ 4,315.950 11 9 CITY OF FRIENDSWOOD, TEXAS COMBINED STATEMENT OF CASH FLOWS — PROPRIETARY FUND TYPE AND NON—EXPENDABLE TRUST FUND Year Ended September 30, 1993 with comparative totals for Year Ended September 30, 1992 Proprietary Fiduciary Fund Type Fund Type Non-Expendable Enterprise Trust Cash Flows from Operating Activities Operating income $ 865,981 $ Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activites: Depreciation 695,616 Changes in Assets and Liabilities: (Increase) Decrease in accounts receivable (95,086) (Increase) Decrease in other assets (47,433) Increase (Decrease) in accounts payable and accrued liabilities 305,485 Increase (Decrease) in customer deposits 25,670 Increase (Decrease) in compensated absences 15,669 Net Cash Provided by Operating Activities 1,765,902 Cash Flows from Noncapital Financing Activities Operating transfers (out) (1,507,603) Net Cash (Used) by Noncapital Financing Activities (1,507,603) Cash Flows from Capital and Related Financing Activities Contributed capital 353,020 Capital expenditures for property, plant, and equipment (1,868,716) Issuance of revenue bonds and certificates of obligation 2,840,000 Principal payments on revenue bonds and certificates of obligation (310,000) Interest payments on revenue bonds and certificates of obligation (390,307) Net Cash Provided (Used) by Capital and Related Financing Activities 623,997 Cash Flows from Investing Activities Interest on investments 172,257 1,048 Net Cash Provided by Investing Activities 172,257 1,048 Net Increase (Decrease) in Cash and Cash Equivalents 1,054,553 1,048 , Cash and cash equivalents, beginning of year 1,473,786 27,939 Cash and Cash Equivalents, End of Year $ 2,528,339 $ 28,987 II See Notes to Financial Statements. 10 ' II II IExhibit A-5 II IITotals (Memorandum Only) I September 30, 1993 September 30, 1992 $ 865,981 $ 855,046 II 695,616 650,921 I (95,086) (65,821) (47,433) (9,438) II 305,485 (34,467) 25,670 41,800 15,669 327 II 1,765,902 1,438,368 (1,507,603) (1,031,035) I (1,507,603) (1,031,035) ' 353,020 494,180 (1,868,716) (949,210) ' 2,840,000 II (310,000) (235,000) (390,307) (337,952) 623,997 (1,027,982) II 173,305 71,754 ' 173,305 71,754 II 1,055,601 (548,895) 1,501,725 2,050,620 I $ 2,557,326 $ 1,501,725 I 11 CITY OF FRIENDSWOOD. TEXAS , NOTES TO FINANCIAL STATEMENTS , NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES , The City of Friendswood, Texas (the City) , was incorporated on October 15, 1960 with the charter providing for a Mayor-Council form of city government. On October 16, 1971, the charter was amended to provide for a City Council-City Manager form of government. The charter was also amended on March 24, 1992, to provide for a term limitation of three terms. It also changed the term of Mayor and Council Members from two to three years and is being phased in over a three year period. The Mayor and six Council Members are elected from the City at large. 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 presides 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 combined financial statements of the City include all funds and operations which are controlled by or dependent upon the City. The criteria considered in determining governmental activities to be reported within the City's combined financial statements include the degree of oversight responsibility exercised by the City Council over an organization, activity, or function. Oversight responsibility is demonstrated by financial interdependency, selection of governing authority, designation of management, ability to significantly influence I operations, and accountability for fiscal matters. The City is the lowest level of government exercising oversight responsibility and control over all activities related to operations of the City within the boundaries of the City of Friendswood, Texas. The City is not included in any other governmental "reporting entity" as defined by the Governmental Accounting Standards Board, since the City Council is elected by the public and has decision making authority, the power to designate management, the ability to significantly influence operations, and primary accountability for fiscal matters. 12 ' ' CITY OF FRIENDSWOOD, TEXAS ' NOTES TO FINANCIAL STATEMENTS I NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) A. Reportine Entity (continued) ' The City participates in funding a contributory pension plan (see Note 6) . Under applicable sections of State of Texas ' statutes, the responsibility for the administration and operations of the Texas Municipal Retirement System has been vested with its pension board. The pension plan has not been included in the City's reporting entity because the City I Council is not able to exercise control over the operations of the plan, to select the plan's governing authority, designate management, or otherwise significantly influence operations. ' The City is also not responsible for financing deficits, if any, of the plan, is not entitled to surpluses, and does not guarantee debts of the plan. ' The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. Pursuant to Statement No. 2 of the Governmental Accounting ' Standards Board, the plan is included in the City's reporting entity as an agency fund because the City has title to the plan's assets under established regulations. ' As indicated in Note 8, the City participates in a joint venture (Blackhawk Regional Waste Treatment Plant) with three other entities, under the authority of the Gulf Coast Waste ' Disposal Authority. This venture is accounted for under the equity method. B. Basis of Presentation - Fund Accounting • The City's accounts are organized on the basis of funds or ' account groups, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for by providing a set of self-balancing accounts which consist of each fund's assets, liabilities, fund equity, revenues, and I expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based on the purposes for which they are intended and the ' means by which spending activities are controlled. The following paragraphs describe the fund types and account groups used by the City in its financial statements. 11 13 11 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS ' NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) , R. Basis of Presentation - Fund Accounting (continued) Governmental Fund Types Governmental Funds are those through which most governmental functions of the City are financed. The acquisition, use, and balances of the City's expendable financial resources and the related liabilities (except those accounted for in the Proprietary Funds) are accounted for through Governmental Funds. The measurement focus is based on determination of changes in financial position, rather than on net income determination. The following are the City's governmental fund types: I General Fund The General Fund accounts for the resources used to finance the fundamental operations of the City which are not accounted for in another fund. The principal sources of revenue of the General Fund are property taxes, sales and use taxes, franchise taxes, fines and forfeitures, and other programs and services. Expenditures are for general government, public safety, public works, community development, and community services. Debt Service Fund The Debt Service Fund is used to account for the accumulation of resources for the retirement of general long-term debt and related costs. The primary source of revenue of the Debt Service Fund is property taxes. Special Revenue Fund The Special Revenue Fund is used to account for the proceeds of specific revenue sources (other than expendable trusts and major capital projects) that are legally restricted or designated for specified activities. Capital Projects Fund The Capital Projects Fund is used to account for the financial resources to be used for the acquisition or construction of major capital facilities financed principally by proceeds of bond and certificate of obligation issues. 1 14 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS ' NOTE. I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B. Basis of Presentation -Fund Accounting (continued) ' Proprietary Fund Type Enterprise Fund The Enterprise Fund is used to account for the City's water, wastewater collection, and wastewater treatment operations. Such operations are operated in a manner similar to private business enterprises, where the intent of the City is that the costs (including depreciation) of providing goods or services to the ' general public on a continuing basis will be financed or recovered primarily through user charges. Fiduciary Fund Types Trust Fund The Non-Expendable Trust Fund (1776 Park) is used to ' account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments and/or other funds. This fund is accounted for in the same manner as proprietary funds. Agency Fund ' The Agency Fund (Deferred Compensation Fund) is used to account for assets held for employees in accordance with the provisions of Internal Revenue Code ' Section 457. The Agency Fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. ' Account Groups Account groups are used to establish accounting control and accountability for the City's general fixed assets and general long-term debt where such items do not directly affect net expendable available resources. The following are the City's account groups: General Fixed Assets The General Fixed Assets Account Group is used to account for the City's land, buildings, improvements, l and equipment except those recorded in the Proprietary Fund. ' 15 11 CITY OF FRIENDSWOOD, TEXAS , NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) , B. Basis of Presentation - Fund Accounting(continued) Account Groups (continued) ' General Lone-Term Debt This account group is used to account for the City's liability for general obligation bonds, certificates of obligation, and other long-term liabilities. The debt is offset by the amount available in the Debt ' Service Fund and the amount to be provided in future years. C. Basis of Accounting I The basis of accounting is the method by which revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All Governmental Fund Types are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e. , revenues and other financing sources) and decreases (i.e. , expenditures and other financing uses) in net current assets. The Proprietary Fund is accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and liabilities associated with the operation of this fund are included on the balance sheet. Fund equity (i.e. , net total assets) is segregated into contributed capital and retained earnings components. Proprietary Fund operating statements present increases (i.e. , revenues) and decreases (e.g. , expenses) in net total assets. The modified accrual basis of accounting is used by the Governmental and Fiduciary Fund Types. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual, i.e. , both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Most types of revenue (except investment earnings) are recorded as revenues when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned since they are measurable and available. ' 16 ' ' CITY OF FRIENDSWOOD. TEXAS NOTES TO FINANCIAL STATEMENTS ' NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) C. Basis o[Accounting (continued) ' Under the modified accrual basis of accounting, expenditures (including capital outlay) are recorded when the liability is ' incurred, except for general obligation bond principal and interest which are recorded when paid rather than when incurred. ' The Proprietary Fund is accounted for using the accrual basis of accounting, whereby revenues are recognized in the period in which they are earned and expenses are recognized in the period in which they are incurred. D. Budgets ' Procedures in establishing budgetary data reflected in the financial statements are as follow: ' 1. 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. The Council shall adopt the budget by ordinance on one reading on or before the 15th day of ' September or as soon thereafter as practical. 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. If, during the fiscal year, the City Manager certifies that there are ' available for appropriation, revenues in excess of those estimated in the budget, the Council may make supplemental appropriation for the year up to the amount of such excess. 2. 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 by ordinance transfer part or all of any unencumbered appropriation balance from one department, office, or agency to another. ' 17 1 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) I D. Budgets (continued) 3. Limitations: 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. 4. Lapse of Appropriations: Every appropriation, except an appropriation for a capital expenditure, shall lapse at the close of the fiscal year to the extent that it has not been expended or encumbered. An appropriation for a capital expenditure shall continue in force under the purpose for which it was made until it has been accomplished or abandoned. The purpose of any such appropriation shall be deemed abandoned if three years pass without disbursement from or encumbrance of the appropriation. S. Legally adopted budgets for the General, Special ' Revenue, and Debt Service Funds are prepared on a basis consistent with generally accepted accounting principles (GAAP) at the departmental level, the legal level of budgetary control. 6. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation - is utilized in the governmental funds. Encumbrances outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. Encumbrances that lapse are reappropriated in the ensuing years budget. , The City of Friendswood has complied with all budget requirements for the year ended September 30, 1993. E. Cash and Cash Equivalents Cash and cash equivalents for purposes of the cash flows ' statement for Proprietary Fund types includes cash and temporary investments as disclosed in Note 2. These cash and investments are generally available for the City's disbursement needs and have a maturity of three months or less from the date of acquisition. 18 ' CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS ' NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) F. Interfund Transactions ' Transactions Between Funds Transactions between funds that would be treated as revenues, expenditures, or expenses if they involved organizations ' external to the governmental unit are accounted for as revenues, expenditures, or expenses in the funds involved. Transactions which constitute reimbursements of a fund for ' expenditures or expenses initially made from that fund which are properly attributable to another fund are recorded as expenditures or expenses in the reimbursing fund and primarily as reductions of the expenditure or expense in the fund that is reimbursed. Non-recurring or non-routine transfers of equity between funds ' are reported as additions to or reductions of the fund balance of Governmental Funds. Transfers of equity to the Enterprise Fund are treated as contributed capital, and such transfers from the Enterprise Fund are reported as reductions of retained earnings or contributed capital, as is appropriate in the circumstances. All other legally authorized transfers are treated as operating transfers and are included in the results ' of operations of both the Governmental and Proprietary Fund Types. Fixed Assets General Fixed Assets General fixed assets have been acquired or constructed for ' general governmental purposes. Such fixed assets are recorded as expenditures in the Governmental Funds and capitalized at historical cost in the General Fixed Assets Account Group. ' Gifts or contributions of general fixed assets are recorded at estimated fair market value upon receipt. Public domain ("infrastructure") general fixed assets consisting of certain ' improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are capitalized as general fixed assets. No depreciation has been provided on general fixed assets. ' 19 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 1 G. Fixed Assets (continued) Enterprise Fund Fixed Assets The land, buildings, and equipment owned by the Enterprise Fund are recorded at historical cost, including those constructed in the Capital Projects Fund, or at estimated fair market value for contributed assets. Interest costs during construction are capitalized when the effects of capitalization materially impact the financial statements. Some of the assets on which such interest was capitalized are still under construction and are classified as construction in progress in the Enterprise Fund. Depreciation of buildings and equipment is provided using the straight-line method over the following estimated useful lives: Years, , Water and sewer system 40-50 Equipment 5-10 Additions to the water and sewer systems are financed principally from sources other than Enterprise Fund operating revenues. Such additions are reflected as contributed capital in the accompanying financial statements. Depreciation recognized on assets acquired or constructed by general obligation bond proceeds is recorded as an expense in the statement of operations. The costs of normal maintenance and repairs are charged to operations as incurred. Improvements and betterments which extend the useful lives of the assets are capitalized. H. Debt Service The ad valorem tax rate is allocated each year between the General Fund and the Debt Service Fund. The full amount estimated to be required for debt service on general obligation debt is provided by the tax along with interest earned in the Debt Service Fund. Enterprise Fund long-term requirements are provided by net revenues to the fund. 1 I 20 ' I ICITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS II NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) General Property Taxes II. All taxes due the City on real or personal property are payable at the Office of the City Assessor-Collector and may be paid at any time after the tax rolls for the year have been completed II and approved, which is no later than October 1. Taxes are levied on October 1 and are due by February 1, and all taxes not paid prior to this date are deemed delinquent and are I subject to penalty and interest. All property located within the City limits on the first day of January of each year is charged with a special lien in favor of the City from such date for taxes due thereon. IJ. Allowances I The allowance for doubtful accounts has been recorded at September 30, 1993 as follows: Fund Time of Account Amount I Enterprise Fund Water and Sewer Billings $ 10,000 General Fund Sanitation Billings 2,000 IIN. Total Columns on Combined Statements Total columns presented in the combined financial statements I are captioned (Memorandum Only) to indicate that they are presented only to facilitate financial analysis. Data in these columns do not represent financial position, results of I operations, or changes in financial position in conformity with generally accepted accounting principles. Interfund eliminations have not been made in the aggregation of this data. Certain reclassifications have been made to the data for I the prior year to conform with the current year presentation. INOTE 2 - DEPOSITS (CASH) AND TEMPORARY INVESTMENTS Deposits (Cash) I The City's funds are required to be deposited and invested under the terms of a depository contract pursuant to state statutes. The depository bank deposits, for safekeeping and trust with the City's IIagent bank, approved pledged securities in an amount sufficient to protect City funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit II Insurance Corporation ("FDIC") Insurance. I 21 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS ' NOTE 2 - DEPOSITS (CASH) AND TEMPORARY INVESTMENTS (continued) ' Deposits (Cash) (continued) The City's cash deposits, at September 30, 1993, were entirely covered by FDIC insurance or by pledged collateral held by the City's agent bank. The deposits were collateralized in accordance with state law and were properly secured throughout the year. The cash deposits held at financial institutions can be categorized according to three levels of risk. These three levels of risk are: Category 1 Deposits which are insured or collateralized with securities held by the entity or by its agent in the entity's name. Category 2 Deposits which are collateralized with securities held by the pledging financial institution's trust department or agent in the entity's name. Category 3 Deposits which are not collateralized. , Based on these three levels of risk, all of the City's cash deposits are classified as Category 1. , Temporary Investments Statutes authorize the City to invest in obligations of the U. S. Treasury or the State of Texas, certain U. S. agencies, certificates of deposit, money market savings accounts, certain municipal securities, repurchase agreements, common trust funds, and other investments specifically allowed by the Public Funds Investment Act of 1987 (Article 842a. -2 Vernon's Civil Statutes). Similar to cash deposits, investments held at a financial institution ' can be categorized according to three levels of risk. These three levels of risk are: Category 1 Investments that are insured, registered or held by the entity or by its agent in the entity's name. Category 2 Investments that are uninsured and unregistered held by the counterparty's trust department or agent in the entity's name. ' Category 3 Uninsured and unregistered investments held by the counterparty, its trust department or its agent, but not in the entity's name. ' 22 ' ' CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS NOTE 2 - DEPOSITS (CASH) AND TEMPORARY INVESTMENTS (continued) Temporary Investments (continued) Based on these three levels of risk, all of the City's investments other than amounts in Texpool are classified as Category 1. The ' Texpool investments are not evidenced by securities that exist in physical or book entry form and accordingly are not categorized. However, Texpool policies require that local government deposits be used to purchase investments authorized by the Public Funds Investment Act of 1987, as amended. Cash and Temporary Investments ' The City's cash and temporary investments, at September 30, 1993, are shown below. Carrying Market Amount Value Cash $ 667.988 $ 667.988 ' United States Government Securities 1,271,593 1,271,593 Texpool 5.999,914 5.999.914 ' Total Temporary Investments 7.271,507 7.271.507 Total Cash and Temporary Investments $ 7.939.495 $ 7.939.495 1 NOTE 3 - PROPERTY TAXES ' 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. The City's property taxes are billed and collected by the City's Tax Assessor/Collector. 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 $.663 per $100 of assessed valuation which were prorated between operations and debt service in the amounts of $.5016 and $.1614, respectively. The resulting adjusted tax levies were $3,918,438 and $1,260,837 for operations and debt service, respectively, on the total adjusted taxable valuation of $781,187,783 ' for the 1993 tax year. ' 23 I CITY OF FRIENDSWOOD, TEXAS I NOTES TO FINANCIAL STATEMENTS I NOTE 3 - PROPERTY TAXES (continued) I Property taxes receivable, at September 30, 1993, consists of the 1 following: Tax General Debt Service Year Fund Fund I 1993 $ 74,291 $ 23,900 1992 29,928 10,937 1991 17,824 6,525 I 1990 16,070 4,873 1989 14,672 5,421 1988 and prior 77.083 31.554 $ 229.868 S 83.210 I NOTE 4- LAND. BUILDINGS AND EQUIPMENT I A summary of changes in land, buildings, and equipment included in the General Fixed Assets Account Group, for the year ended September 30, I 1993, follows: Balance Balance October 1, September 30, 1992 Additions Retirements 1993 Land S 1,424,893 S 503,219 S $ 1,928,112 Buildings 2,452,811 476,827 2,929,638 Improvements other ' than buildings 12,170,845 491,956 12,662,801 Furniture and equipment 3,465,437 368,223 (118,871) 3,714,789 Construction in progress 109,110 1.718.657 (968.601) 859.166 Total General Fixed Assets $ 19_�623, S 3,5� 58.882 $(1,087,472) $ 2 506 IIm onmmlimmonis A summary of changes in Enterprise Fund land, buildings, and equipment, for the year ended September 30, 1993, follows: I Transfers Balance In (Out) Balance• IIOctober 1, and September 30, 1992 Additions Retirements 1993 Land $ 249,417 $ $ S 249,417 Plant and equipment 9,275,624 98,018 240,598 9,614,240 Plant and equipment - IIBlackhawk 9,749,543 9,749,543 Water and sewer line 8,312,024 8,312,024 Construction in progress 235.357 1.770.698 (273,598) 1.732.457 $ 27,821,965 S 186.716 S (33.000) 29,657,681 IILess accumulated depreciation (6,955.142) Net Land, Buildings, and Equipment S 2 ,539 • 24 II I ICITY OF FRIENDSWOOD. TEXAS IINOTES TO FINANCIAL STATEMENTS I NOTE 5 - LONG-TERM DEBT General Obligation Bonds IIThe City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities payable from I the proceeds of an annual ad valorem tax. General obligation bonds have been issued to refund both general obligation and revenue bonds. These bonds therefore are reported in the proprietary fund if they are expected to be repaid from proprietary revenues. II II General obligation bonds are direct obligations and pledge the full faith and credit of the City. General obligation bonds currently I outstanding are as follow: Purpose Interest Rates Amount General government - Refunding 2.25% - 7.9% $ 6,535,777 I Proprietary - Refunding 2.25% - 4.625% 3,015,000 I Annual debt service requirements to maturity for general obligation bonds, including interest of $2,782,882, are as follow: Enterprise General Long- ' Fiscal Year Fund Term Debt Total 1994 $ 146,466 $ 1,211,895 $ 1,358,361 1995 145,791 1,114,718 1,260,509 II 1996 194,141 1,183,970 1,378,111 1997 638,194 727,909 1,366,103 1998 652,504 744,290 1,396,794 I Thereafter 2.000.674 3.573.107 5.573.781 $ 3,777,770 $ 8.555.889 $ 12.333.659 11 Combination Tax and Revenue Certificates of Obligation The City also issues combination tax and revenue certificates of I obligation (C.O. 's) to provide funds for the acquisition and construction of major capital facilities payable from the proceeds of annual ad valorem tax and further payable from a junior and Ian subordinate pledge of the net revenues of the City's water and sewer system. C.O. 's have been issued for both general government and proprietary activities. These bonds therefore are reported in the II proprietary fund if they are expected to be repaid from proprietary revenues. C.O. 's currently outstanding are as follow: Purpose Interest Rates Amount IIGeneral government 5.3% - 8.375% $ 2,205,000 Proprietary 5.3% - 8.375% 3,660,000 II 25 I CITY OF FRIENDSWOOD, TEXAS I NOTES TO FINANCIAL STATEMENTS I NOTE 5 - LONG-TERM DEBT (continued) 1 Combination Tax and Revenue Certificates of Obligation (continued) I Annual debt service requirements to maturity for C.O. 's, including interest of $3,212,095, are as follow: Enterprise General Long- I Fiscal Year Fund Term Debt Total 1994 $ 375,755 $ 171,729 $ 547,484 II1995 421,370 153,833 575,203 1996 519,855 151,808 671,663 1997 527,291 149,783 677,074 1998 230,109 196,070 426,179 II Thereafter 3.480.017 2.699.475 6.179.492 $ 5.554.397 $ 3.522.698 $ 9.077.095 II Revenue Bonds The City also issues bonds where the City pledges income derived from II the acquired or constructed assets to pay debt service. Revenue bonds outstanding are as follow: Purpose Interest Rates Amount I Proprietary 5.5% - 6.125% $ 465,000 Annual debt service requirements maturity uirements to for revenue bonds II including interest of $62,831, are as follow: Enterprise II Fiscal Year Fund 1994 $ 158,378 II1995 155,581 1996 55,244 1997 52,503 II1998 54,594 Thereafter 51.531 $ 527.831 II II II 26 I I ICITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS II I NOTE 5 - LONG-TERM DEBT (continued) Advance Refunding IOne April 14, 1993, the City advance refunded a portion of general obligation refunding bonds and unlimited tax and revenue certificates of obligation with general obligation refunding bonds. The City issued I $6,555,000 of general obligation refunding bonds to provide resources to purchase government securities that were placed in an irrevocable trust for the purpose of generating resources for all future debt I service payments on the refunded debt. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the General Long-Term Debt Account Group and the Proprietary Fund. ' This advance refunding was undertaken to reduce total debt service payments over the next 11 years by $229,919 and to obtain an economic gain (difference between the present value of the debt service payments of the refunded and refunding bonds) of $205,550. IIChanges in Lone Term Liabilities I During the year ended September 30, 1993, the following changes occurred in liabilities reported in the general long-term debt account group: I Balance Balance October 1, September 30, 1992 Additions Reductions 1993 Accreted interest on premium I compound interest bonds S $ 320,872 S $ 320,872 General obligation debt 6,575,777 3,480,000 3,520,000 6,535,777 Certificates of obligation 90,000 2,160,000 45,000 2,205,000 Total $ 6.665.777 S 5�i72 $ 3.56 S 9.061.649 II NOTE 6 - RETIREMENT PLANS IA. Texas Municipal Retirement System IIPlan Description The City provides pension benefits for all of its full-time employees through a non-traditional, joint contributory, defined contribution plan in the state-wide Texas Municipal IIRetirement System ("TMRS"), one of over 570 administered by TMRS, an agent multiple-employer public employee retirement system. It is the opinion of TMRS management that the plans in I TMRS are substantially defined contribution plans, but they have elected to provide additional voluntary disclosure to help foster a better understanding of some of the non-traditional IIcharacteristics of the plan. I 27 1 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS NOTE 6 - RETIREMENT PIANS (continued) ' A. Texas Municipal Retirement System (continued) Plan Description (continued) Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City-financed monetary credits, with interest. At the inception of the plan, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since initiation of the plan are a percent (100%, 150%, or 200%) of the employee's accumulated contributions. In addition, the 1 City can grant as often as annually another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated, with interest if the current employee contribution rate and the City matching percent had always been in existence and if the employee's salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer-financed monetary credits with interest were used to ' purchase an annuity. Members can retire at ages 60 and above with ten or more years of service or with 25 years of service regardless of age. The 1 plan also provides for death and disability benefits. A member is vested after ten years, but he must leave his accumulated contributions in the plan. If a member withdraws his own money, he is not entitled to the employer-financed monetary credits, even if he was vested. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. 1 1 1 28 1 I ICITY OF FRIENDSWOOD. TEXAS NOTES TO FINANCIAL STATEMENTS INOTE 6 - RETIREMENT PLANS (continued) A. Texas Municipal Retirement System (continued) IContributions The contribution rate for the employees is 6%, and the City's matching percent is currently 150% of that contribution, both I as adopted by the governing body of the City. Under the state law governing TMRS, the City contribution rate is annually determined by the actuary. This rate consists of the normal I cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances II the currently accruing monetary credits due to City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is I the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his retirement becomes effective. The prior service I contribution rate amortizes the unfunded actuarial liability over the remainder of the plan's 25-year amortization period. When the City periodically adopts updated service credits and increases in annuities, the increased unfunded actuarial IIliability is to be amortized over a new 25-year period. Currently, the unfunded actuarial liability is being amortized over the 25-year period which began January 1991. The unit II credit actuarial cost method is used for determining the City contribution rate. Contributions are made monthly by both the employees and the City. Since the City needs to know its I contribution rate in advance to budget for it, there is a one- year lag between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect. II The City's total payroll in fiscal year 1993 was $3,699,490, and the City's contributions were based on a payroll of $3,339,878. Both the City and the covered employees made the I required contributions, amounting to $208,440 (6.98% of covered payroll for the months in calendar year 1992 consisting of 5.38% normal cost plus 1.60% to amortize the unfunded actuarial liability, and 5.97% for the months in calendar year 1993 I . comprised of 5.40% normal cost plus 2.57% to amortize the unfunded actuarial liability) for the City and $200,363 (6%) for the employees. The City adopted changes in the plan II subsequent to the previous actuarial valuation, which had the effect of increasing the City's contribution rate for 1993 by 0.50% of payroll. There were no related-party transactions. II . II 29 CITY OF FRIENDSWOOD, TEXAS ' NOTES TO FINANCIAL STATEMENTS NOTE 6- RETIREMENT PLANS (continued) ' A. Texas Municipal Retirement System (continued) Fundine Status and Proeress Even though the substance of the City's plan is not to provide a defined benefit in some form, some additional voluntary disclosure is appropriate due to the non-traditional nature of the defined contribution plan which had an initial unfunded pension benefit obligation due to the monetary credits granted by the City for services rendered before the plan began and which can have additions to the unfunded pension benefit obligation through the periodic adoption of increases in benefit credits and benefits. Statement No. 5 of the Governmental Accounting Standards Board (GASB 5) defines pension benefit obligation as a standardized disclosure measure of the actuarial present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of public employee pension plans, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among public employee pension plans. The pension benefit obligation shown below is similar in nature to the standardized disclosure measure required by GASB 5 for defined benefit plans except that there is no need to project salary increases since the benefit credits earned for service to date are not dependent upon future salaries. The calculations were made as part of the annual actuarial valuation as of September 30, 1992. Because of the money- purchase nature of the plan, the interest rate assumption, currently 8.5% per year, does not have as much impact on the results as it does for a defined benefit plan. Market value of assets is not determined for each City's plan, but the market value of assets for TMRS as a whole was 112.3% of book value as of September 30, 1992. Pension Benefit Obligation Annuitants currently receiving benefits $ 135,734 Terminated employees 577,998 Current Employees Accumulated employee contributions, including allocated invested earnings 1,600,115 Employer-financed vested 1,584,453 Employer-financed nonvested 347.673 Total Pension Benefit Obligation 4,245,973 Net assets available for benefits, at book value 3.954.115 • Unfunded Pension Benefit Obligation ,$ 291.85811 30 ' I ICITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS INOTE 6 - RETIREMENT PLANS (continued) A. Texas Municipal Retirement System (continued) Unfunded Pension Benefit Obligation The book value of assets is amortized cost for bonds and I original cost for short-term securities and stocks. The assumptions used to compute the actuarially determined City contribution rate are the same as those used to compute the pension benefit obligation. The numbers above reflect the I adoption of changes in the plan since the previous actuarial valuation, which had the effect of increasing the pension benefit obligation by $26,527. I Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. For the years ended September 30, 1991, 1992, and 1993, I respectively, net assets available for benefits were sufficient to fund 75%, 92%, and 93% of the PBO. The unfunded PBO represented 26%, 9%, and 9% of the annual payroll for employees covered by TMRS for 1991, 1992, and 1993, respectively. In I addition, the City's contributions to TMRS were 5.8%, 6.9%, and 6.2%, respectively, of annual covered payroll for the years ending September 30, 1991, 1992, and 1993. IB. Deferred Compensation Plan The City offers its employees a tax-deferred compensation plan I meeting the requirements of Internal Revenue Code Section 457. The plan was established by City Ordinance which appointed ICMA Retirement Corporation as plan administrator. The City's II fiduciary responsibility is to remit employee deferred compensation to the administrator on a regular basis. The deferred compensation is not available to employees until termination, retirement, death, or emergency. Employees' II compensation deferred and contributed during 1993 totalled $36,641 and, at September 30, 1993, the plan assets had a market value of $378,444. IAll amounts of compensation deferred under the plan, all. property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are I (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of the benefits IIunder the plan), subject only to the claims of the City's general creditors. Participants' rights under the plan are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each II • participant. I 31 11 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS NOTE 7 - INTERFUND TRANSACTIONS ' Operating transfers between funds during the 1993 year were as follow: Operating Transfer Operating Transfer From To Amounts General Fund Special Revenue Fund $ 1,399 General Fund Capital Projects Fund 303,403 Enterprise Fund General Fund 248,145 Enterprise Fund Debt Service Fund 95,032 Enterprise Fund Capital Projects Fund 1,164,426 NOTE 8 - BLACKHAWK REGIONAL WASTE TREATMENT PLANT , The City has entered into an arrangement with the Gulf Coast Waste Disposal Authority for the operation and maintenance of a joint waste treatment plant known as Blackhawk Regional Waste Treatment Plant. The City of Friendswood, the City of Houston, Harris County MUD No. 55, and CDC, Inc. (the "participants") share in the expense of operation and maintenance based on their respective usage on a monthly basis. The percentages of equity in the joint venture based on their respective capacity rights ,at September 30, 1993, follow: City of Friendswood 52.71% City of Houston 15.94 Harris County MUD No. 55 20.28 Baybrook MUD No. 1 11,07 100.00% An annual budget for operations is submitted to the Gulf Coast Waste Disposal Authority each year. The Gulf Coast Waste Disposal Authority is the governing authority and consists of nine members (three appointed by the governor, three appointed by Harris County, Galveston County, and Chambers County, and three appointed by the participants) . The following unaudited financial information of the joint venture was available from the operator for the nine months ended September 30, 1993: Joint Venture City Total assets $ 276,103 $ 145,534 Total liabilities 8.703 4.587 Total Participants' Equity $ 267.400 $ 140.947 ' Total revenues $ 964,180 Total expenses 964,180 32 , ' CITY OF FRIENDSWOOD, TEXAS 11 NOTES TO FINANCIAL STATEMENTS NOTE 9 - SOUTHEAST WATER PURIFICATION PLANT The City has entered into a contract with the City of Houston for ' constructing, operating, and maintaining a water purification plant known as Southeast Water Purification Plant. The City's pro rata share of the actual production construction costs of the project is 3.75 percent. 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 expense 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. ' NOTE 10 - CONTRIBUTED CAPITAL The following is a schedule of changes in contributed capital for the ' Enterprise Fund: 1993 1992 ' Contributed capital at beginning of year $ 14,459,049 $ 13,964,869 Additions 353.019 494.180 ' Contributed Capital at End of Year $ 14.812.068, $ 14,459.049, NOTE 11 - IMPACT FEES ' On April 27, 1990, the City, in conformance with the provisions of Senate Bill 336 and House Bill 1786, adopted a Capital Improvements Plan for Water Supply and Distribution Improvements and for Wastewater ' Treatment and Collection Improvements that were needed to serve new development. An Impact Fee Structure to defray the costs of these improvements was also adopted. ' 33 CITY OF FRIENDSWOOD, TEXAS NOTES TO FINANCIAL STATEMENTS NOTE 11 - IMPACT FEES (continued) In recent years the City has committed funds to the construction of surface water facilities and wastewater capacity necessary to provide service to current residents, as well as for projected development within the City. The cost of water and wastewater capacity that has been constructed to support new growth is reflected in the City Wide impact fees. Based on population growth projections, two areas (Melody Lane and Central Service Area) within the City were identified for the proposed ' extension of water distribution and wastewater collection systems and are included in the impact fee structure. An impact fee was also included to defray the costs of water distribution facilities extended to the Bay Area Boulevard Service Area under the terms of a contractual agreement with Bay Area Land Company, Ltd. The Capital Improvements Plan and Impact Fee structure was amended by City Council on January 7, 1991, to include an impact fee for sanitary sewer collection system costs serving the area known as Mills, Murphy, and Briarmeadow Avenue between Sunset Drive and Greenbriar. The following is a summary of the Impact Fees that apply on a City Wide Basis and for each of the designated service areas. The fees represent the charge for single equivalent service units as defined in the Capital Improvement Plan. City Wide Impact Fees I Surface water facilities $ 685 Wastewater treatment facilities 69 Impact fee study and Update study 36 Total City Wide Impact Fee $ 790 Water Distribution Impact Fees I Melody Lane service area $ 854 Bay Area Boulevard service area 294 South Friendswood service area 293 I 34 I ICITY OF FRIENDSWOOD. TEXAS NOTES TO FINANCIAL STATEMENTS 111 INOTE 11 - IMPACT FEES (continued) Wastewater Collection Impact Fees IIMelody Lane service area $ 450 Mills, Murphy, Briarmeadow Avenue 2,532 South Friendswood Service Area II Area A 378 Area B-1 378 Area B-2 378 I Area C 285 Area D 161 Area E-1 784 Area E-2 784 IArea E-3 161 Area E-4 161 Area F 378 I The impact fees are deposited into a separate, interest bearing bank I account in compliance with the referenced legislation and transferred to the Enterprise Fund cash account as needed. The impact fees and interest income for each service area are maintained in separate equity schedules. Interest is applied based on a percentage of the daily I equity balance of each service area. The portion of City Wide Impact Fees collected for Surface Water I Facilities are used to meet the current debt service obligations for the 1988 Certificates of Obligations issued to fund the surface water facilities capital improvements. The remaining City Wide Impact Fees collected for Wastewater Treatment Facilities and Impact fee study and II Update Study are used to fund other water and wastewater system improvements. All Impact Fees collected for specific service areas are used to fund new capital improvements for those designated areas. II II II I 35