HomeMy WebLinkAbout1995 09 30 Other - City of Friendswood I
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CITY OF FRIENDS WOOD, TEXAS
IGENERAL PURPOSE FINANCIAL STATEMENTS
Year Ended September 30, 1995
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CITY OF FRIENDS WOOD, TEXAS
IGENERAL PURPOSE FINANCIAL STATEMENTS
Year Ended September 30, 1995
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TABLE OF CONTENTS
IExhibit Pa e
IIndependent Auditors' Report 1
GENERAL PURPOSE FINANCIAL STATEMENTS
ICombined Balance Sheet— All Fund Types and
Account Groups A-1 2
Combined Statement of Revenues,Expenditures and Changes
I in Fund Balances—All Governmental Fund Types A-2 4
Combined Statement of Revenues,Expenditures and Changes
in Fund Balances— Budget and Actual(GAAP Basis)— General,
I Special Revenue and Debt Service Funds A-3 6
Combined Statement of Revenues,Expenses and Changes in
Retained Earnings/Fund Balance— Proprietary Fund Type
and Non—Expendable Trust Fund A-4 8
I Combined Statement of Cash Flows — Proprietary Fund Type
and Non—Expendable Trust Fund A-5 10
Notes to Financial Statements A-6 12
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Null&Associates Houston Fort Bend County
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Professional Corporation 11 Greenway Plaza,Suite 1515 One Sugar Creek Center Blvd.,Suite 1150
„�. 7 1, Houston,Texas 77046 Sugar Land,Texas 77478
Ce WLLGU llC ACcoUn tams (713)621-1515••FAX:621-1570 (713)242-8600•FAX:242-7333
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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, 1995, as listed in the table of
contents. 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 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 above present fairly, in all
material respects, the financial position of the City of Friendswood, Texas, as of September 30,
1995, and the results of its operations and the cash flows of its proprietary fund type and
nonexpendable trust fund for the year then ended in conformity with generally accepted
accounting principles.
I ifoc �
/ r�S /C77J/ L
Houston,Texas
January 16, 1996
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IGENERAL PURPOSE FINANCIAL STATEMENTS
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CITY OF FRIENDSWOOD, TEXAS I
COMBINED BALANCE SHEET -
ALL FUND TYPES AND ACCOUNT GROUPSI
September 30, 1995
with comparative totals for September 30, 1994 I
Governmental Fund Types
Special Debt Capital
General Revenue Service Projects
Assets and Other Debits I
Assets
Cash and temporary investments $ 2,461,306 $ 131,126 $ 27,065 $ 1,347,302
Receivables
Taxes 195,088 68,444
Customer accounts 156,397
Interest
Other 46,113 15,000 I
Investments with fiscal agent
Fixed assets,net of accumulated
depreciation,where applicable
Investment in Blackhawk joint venture 111
Other assets 71,240 10,109 5,087
Due from other funds 19,794
Other Debits
Amount available for debt service I
Amount to be provided for retirement
of general long-term debt
Total Assets and Other Debits S 2.930.144 S 146,126 S 125,412 $ 1352,389
Liabilities, Equity, and Other Credits I
Liabilities
Accounts payable and accrued liabilities $ 462,577 $ 21,968 $ $ 244,467 I
Compensated absences 718,890
Customer deposits
Deferred revenue 303,288 68,444
Deferred compensation benefits payable I
Bonds payable
Certificates of obligation payable
Notes payable
Obligations under capital leases I
Due to other funds 19,794
Acreted interest on premium compound
interest bonds
Total Liabilities 1,484,755 21,968 68,444 264,261 I
Equity and Other Credits
Investment in general fixed assets
Contributed capital
Retained Earnings
Fund Balances
Reserved 91,780 56,968
Unreserved:
Designated 900,000 124,158 1,088,128
Undesignated 453,609
Total Equity and Other Credits 1,445,389 124,158 56,968 1,088,128
Total Liabilities,Equity, and
Other Credits S 2.930,144 S 146.126 S 125.412 $ 1,352,389
See Notes to Financial Statements.
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Exhibit A-1
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IProprietary Fiduciary Totals
Fund Type Fund Type Account Groups (Memorandum Only)
Trust and General General Long- September 30, September 30,
1 Enterprise Agency Fixed Assets Term Debt 1995 1994
$ 2,089,689 $ 31,339 $ $ $ 6,087,827 $ 6,028,010
1 263,532 276,097
757,705 914,102 810,783
5,531
1 61,113 53,780
586,995 586,995 446,805
25,452,519 57,200 27,967,545 53,477,264 48,471,226
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179,637 179,637
176,962 172,831
90,526 129,149
19,794
1 56,968 56,968 47,281
5,326,980 5,326,980 8,878,642
1 $ 28.570,076 S 675,534 S 27,967,545 S 5383,948_ S 67.151,174 $ 65320,135
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$ 310,425 $ $ $ $ 1,039,437 $
802,211 993,134
83,321 750,451
184,523 184,523 164,850
371,732 369,432
586,995 2,402,077586,995
446,805
5,493,701 7,895,778 8,940,777
6,500,000.1 2,130,000 8,630,000 5,670,000
384,642 384,642 598,567
1 223,043 223,043 166,461
19,794
199,789 244,186_ 443,975 380,118
12,771,759 586,995 5,383,948 20,582,130 18,480,595
27,967,545 27,967,545 25,069,423
1 13,140,148 13,140,148 15,511,200
2,658,169 2,658,169 2,965,516
67,200 215,948 279,344
1 21,339 2,133,625 2,696,512
453,609 317,545
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15,798„317 88,539 27,967,545 46,569,044 46,839,540
$ 28,570.076 $ 675,534 S 27.967.545 $ 5383.948 $ 67.151,174 $ 65,320.135_
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CITY OF FRIENDSWOOD, TEXAS 1
COMBINED STATEMENT OF REVENUES,EXPENDITURES, AND I
CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES
Year Ended September 30, 1995
with comparative totals for Year Ended September 30, 1994
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Governmental Fund Types
Special Debt Capital
General Revenue Service Projects
Revenues
Property taxes $ 4,544,589 $ $ 1„321,266 $ I
Sales taxes 1,028,528
Franchise fees 863,183
Sanitation 1,085,149
Fines and forfeitures 266,2,87 I
Permits and fees 234,518
Donations 10,083 135,095 6,233
Intergovernmental 46,060 279,339 1
Interest on investments 173,781 6,536 13,271 75,867
Other 152,543 56,906 59,235
Total Revenues 8,404,721 198,537 1,334,537 420,674
Expenditures I
Current
General government 1,481,710
Public safety 3,176,914 29,308
Public works 1,792,014
Community development 463,813
Community services 1,605,052 51,094 I
Capital outlay 2,400,940
Debt Service
Principal retirement 1,184,592 I
Interest and fiscal charges 394,898
Total Expenditures 8,519,503 80,402 1,579,490 2,400,940
Revenues Over (Under)
Expenditures (114,782) 118,135 (244,953) (1,980,266)
Other Financing Sources (Uses)
Operating transfers in 509,844 i 11,024 254,640 1,285,435
Operating transfers (out) (399,257) (48,700)
Proceeds from sale of equipment
Proceeds from issuance of debt 117,176 / 1
Total Other Financing
Sources (Uses) 227,763 (37,676) 254,640 1,285,435
Revenues and Other Financing Sources
Over (Under) Expenditures
and Other Financing(Uses) 112,981 80,459 9,687 (694,831)
Fund balances- Beginning 1,332,408 43,699 47,281 1,782,959
Fund Balances - Ending S 1.445389 $ 124.158 $ 56.968 $ 1,088.128
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See Notes to Financial Statements.
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Exhibit A-2
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Totals
I (Memorandum Only)
September 30, September 30,
1995 1994
Is 5,865,855 $ 5,553,218
1,028,528 1,001,832
863,183 570,031
1,085,149 966,066
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266,287 217,411
234,518 296,003
151,411 235,640
I 325,399 77,331
269,455 188,222
268,684 360,636
10,358,469 9,466,390
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I 1,481,710 1,478,817
3,206,222 2,846,169
1,792,014 1,783,738
463,813 413,489
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1,656,146 1,426,792
2,400,940 2,695,500
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1,184,592 989,463
394,898 437,897
12,580,335 12,071,865
I (2,221,866) (2,605,475)
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2,060,943 1,189,731
(447,957) (132,957)
4,950
117,176 794,491
1,730,162 1,856,215
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(491,704) (749,260)
I3,206,347 3,955,607
$ 2.714.643 S 3.206347
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CITY OF FRIENDSWOOD, TEXAS 1
COMBINED STATEMENT OF REVENUES,EXPENDITURES,AND I
CHANGES IN FUND BALANCES - BUDGET(GAAP BASIS)AND ACTUAL
GENERAL, SPECIAL REVENUE,AND DEBT SERVICE FUNDS
Year Ended September 30, 1995 I
General Fund I
Variance
Favorable
Budget Actual (Unfavorable) I
Revenues
Property taxes $ 4,575,812 $ 4,544,589 $ (31,223)
Sales taxes 1,013,810 1,028,528 14,718 I
Franchise fees 658,381 863,183 204,802
Sanitation 1,055,654 1,085,149 29,495
Fines and forfeitures 237,150 266,287 29,137
Permits and fees 356,456 234,518 (121,938) I
Donations 7,990 10,083 2,093
Intergovernmental 47,318 46,060 (1,258)
Interest on investments 92,800 173,781 80,981
Other 132,173 152,543 20,370 111
Total Revenues 8,177,544 8,404,721 227,177
Expenditures
Current I
General government 1,709,381 1,481,710 227,671
Public safety 3,137,531 3,176,914 (39,383)
Public works 1,799,935 1,792,014 7,921 1
Community development 497,729 463,813 33,916
Community services 1,652,417 1,605,052 47,365
Debt Service
Principal retirement
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Interest and fiscal charges
Total Expenditures 8,796,993 8,519,503 277,490
Revenues (Under) Expenditures (619,449) (114,782) 504,667 I
Other Financing Sources (Uses)
Operating transfers in 509,844 509,844
Operating transfers (out) (399,257) (399,257)
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Proceeds from issuance of long-term debt 117,176 117,176
Total Other Financing
Sources (Uses) 227,763 227,763
Revenues and Other Financing
Sources Over
Expenditures and Other
Financing (Uses) (391,686) 112,981 504,667 1
Fund balances- Beginning 1,332,408 1,332,408
Fund Balances - Ending $ 940.722 $ 1.445 389 $ 504.667
See Notes to Financial Statements. I
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Exhibit A-3
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ISpecial Revenue Fund Debt Service Fund
Variance Variance
Favorable Favorable
IBudget Actual (Unfavorable) Budget Actual (Unfavorable)
$ $ $ $ 1,311,607 $ 1,321,266 $ 9,659
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I123,590 135,095 11,505
3,180 6,536 3,356 8,850 13,271 4,421
I 25,902 56,906 31,004
152,672 198,537 45,865 1,320,457 1,334,537 14,080
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32,362 29,308 3,054
I35,111 51,094 (15,983)
I 1,214,592 1,184,592 30,000
399,905 394,898 5,007
67,473 80,402 (12,929) 1,614,497 1,579,490 35,007
I85,199 118,135 32,936 (294,040) (244,953) 49,087
11,024 11,024 308,933 254,640 (54,293)
I (48,700) (48,700)
I (37,676) (37,676) 308,933 254,640 (54,293)
I47,523 80,459 32,936 14,893 9,687 (5,206)
43,699 43,699 47,281 47,281
I $ 91.222 $ 124.158 S 32.936 S 62.174 $ 56.968 $ (5.206)
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CITY OF FRIENDS WOOD, 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, 1995 I
with comparative totals for Year Ended September 30, 1994
Proprietary Fiduciary I
Fund Type Fund Type
Non—Expendable I
Enterprise Trust
Operating Revenues
Water charges $ 2,690,353 $ I
Sewer charges 1,574,347
Fees and penalties 107,204
Other 22,385
Total Operating Revenues 4„394,289 I
Operatin&Expenses
Water operations 766,975 I
Sewer operations 990,890
Operation administration 97,627
Finance administration 191,740
Computer services 6,047 I
Insurance 25,980
Engineering 55,968
Depreciation 744,370
Total Operating Expenses 2,879,597 1
Operating Income 1,514,692
Nonoperating Revenues(Expenses) I
Interest revenue 152,306 1,485
Interest expense (361,359)
Total Nonoperating I
Revenues (Expenses) (209,053) 1,485
Income Before IIOperating Transfers 1,305,639 1,485
Operating Transfers In (Out)
Operating transfers(out) (1,612,986) 1
Net Income (Loss) (307,347) 1,485
Retained earnings/Fund balance— I
Beginning of Year 2,965,516 87,054
Retained Earnings/Fund Balance —
End of Year $ 2,658.169_ $ 88,539
See Notes to Financial Statements.
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Exhibit A-4
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Totals
(Memorandum Only)
I September 30, September 30,
1995 1994
$ 2,690,353 S 2,569,083
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1,574,347 1,226,495
107,204 91,565
22,385 32,869
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4,394,289 3,920,012
766,975 860,714
I 990,890 1,094,056
97,627 94,868
191,740 169,829
I 6,047 3,623
25,980 25,867
55,968 56,996
744,370 692,954
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2,879,597 2,998,907
1,514,692 921,105
I153,791 102,687
(361,359) (371,774)
I (207,568) (269,087)
III 1,307,124 652,018
(1,612,986) (1,056,774)
(305,862) (404,756)
I3,052,570 3,457,326
IS 2.746.708 S 3.052570
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CITY OF FRIENDSWOOD, TEXAS I
COMBINED STATEMENT OF CASH FLOWS —
PROPRIETARY FUND TYPE AND NON—EXPENDABLE TRUST FUND
Year Ended September 30, 1995 I
with comparative totals for Year Ended September 30, 1994
Proprietary Fiduciary I
Fund Type Fund Type
Non—Expendable
Enterprise Trust
Cash Flows from Operating Activities
Operating Income $ 1,514,692 $
Adjustments to Reconcile Operating
Income to Net Cash
Provided by Operating Activities:
Depredation and amortization 744,370
(Increase)Decrease in accounts receivable (96,661) I
(Increase)Decrease in other assets (37,052)
(Decrease)in accounts
payable and accrued liabilities (94,845)
Increase in customer deposits 19,673
Increase in compensated absences 11,265
Net Cash Provided by Operating Activities 2,061,442
Cash Flows from Noncapital Financing Activities
Operating transfers(out) (1,612,986)
Net Cash (Used) by Financing Activities (1,612,986)
Cash Flows from Capital and Related I
Financing Activities
Contributed capital 167,438
Capital expenditures for property,plant, I
and equipment (2,852,286)
Proceeds from the sale of equipment
Issuance of long—term debt 3,200,000
Principal payments on long—term debt (375,000) 111
Interest payments on long—term debt (361,3591
Net Cash(Used) by Capital
and Related Financing Activities (221,207)
Cash Flows from Investing Activities
Interest on investments 152,306 1,485
Net Cash Provided by Investing Activities 152,306 1,485
Net Increase (Decrease)in Cash
and Cash Equivalents 379,555 1,485
Cash and cash equivalents,beginning of year 1,710,134 29,854
Cash and Cash Equivalents, End of Year $ 2.089.689 $ 31,339
See Notes to Financial Statements.
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Exhibit A-5
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I Totals
(Memorandum Only)
September 30, September 30,
I1995 1994
S 1,514,692 $ 921,105
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744,370 692,954
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(96,661) 24,365
(37,052) 13,100
(94,845) (189,886)
I 19,673 17,315
11,265 7,360
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2,061,442 1,486,313
I (1,612,9(36) (1,056,774)
(1,612,986) (1,056,774)
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167,438 290,217
I (2,852,286) (97, 74)9,667
1 3,200,000
(375,000) (310,000)
(361,359) (371,774)
(221,207) (1,349,564)
I153,791 102,687
153,791 102,687
I381,040 (817,338)
1,739,988 2,557,326
I $ 2,121.028 $ 1,739,988
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' CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
1 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 sewing three year terms.Currently,the City charter provides for a Council
term limitation of three 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 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 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.
As indicated in Note 11, 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 in the City's Enterprise Fund.
B.Fund Accounting
The accounts of the City 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 expenditures or expenses, as appropriate. The following paragraphs describe the
various fund types and account groups.
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CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
B. Fund Accounting(continued)
Governmental Fund Types(Budgeted) 1
General Fund
The General Fund accounts for the resources used to finance all the operations of the City not
properly includable in other funds. The principal sources of revenue of the General Fund include
property taxes, sales and use taxes, franchise taxes, fines and forfeitures, permits and fees, and
charges for sanitation services. Expenditures include general government, public safety, public
works,community development,and community services.
Special Revenue Funds
The Special Revenue Funds are used to account for the proceeds of specific revenue sources that
are legally restricted or designated for specified activities.
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.
Capital Projects Funds 1
The Capital Projects Funds are used to account for the financial resources to be used for the
acquisition or construction of major capital facilities financed principally by proceeds of long—term
debt. Capital project funds are budgeted on a project rather than an annual basis. I
Proprietary Fund Type(Unbudgeted)
Enterprise Fund
The Enterprise Fund is used to account for the operations that provide water and wastewater
utility services to the public. These services are financed and operated in a manner similar to
private business enterprises where the intent of the Council is that costs (expenses, including
depreciation) of providing goods or services to the general public on a continuing basis will be
financed or recovered primarily through user charges. Proprietary fund types follow generally
accepted accounting principles prescribed by the Governmental Accounting Standards Board
(the GASB),and all Financial Accounting Standards Board's standards issued prior to November
30, 1989. Subsequent to this date, the City accounts for its proprietary funds as presented by the
GASB.
Fiduciary Fund Types(Unbudgeted)
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 on the same basis 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.
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CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
' NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
B.Fund Accounting(continued)
' Account Groups
General Fired Assets
' The General Fixed Assets Account Group is used to account for the City's land, buildings,
improvements,and equipment,except those recorded in proprietary and fiduciary fund types.
' General Long—Term Debt
This account group is used to account for the City's liability for general obligation bonds,
certificates of obligation, notes payable, and capital leases which are payable from governmental
fund resources. 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
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 Type and the Non—expendable Trust Fund are 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. Operating
statements for these funds 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 Fund Types and Agency Fund.
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 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.
' Under the modified accrual basis of accounting, expenditures (including capital outlay) are recorded
when the liability is incurred, except for general obligation debt principal and interest which are
recorded when paid rather than when incurred.
' The Proprietary Fund Type and Non—expendable Trust Fund are 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.
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CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
D. Budgets
Procedures in establishing budgetary data reflected in the financial statements are as follow 1
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.
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.
5. Annual appropriations budgets are adopted 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. An annual non—appropriated budget
is adopted for the City's Water and Sewer Enterprise Fund on a non—GAAP basis for managerial
control. Project length budgets are adopted for Capital Projects Funds and amended on an annual
basis to reflect the uncompleted portion of the projects.
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.
During the 1995 fiscal year,expenditures exceeded appropriations at the departmental level(the legal
level of compliance)in the General Fund and the Centennial Special Revenue Fund.
15 1
I
I CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
1 NOTES TO FINANCIAL STATEMENTS
I
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
E. Cash and Cash Equivalents
1 For the purpose of the statement of cash flows, the Proprietary Fund Type considers temporary
investments with original maturities of three months or less to be cash equivalents.
IF.Interfund Transactions
I Interfund transactions 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
I 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
I 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
I 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.
IG.Fund Equity
Contributed capital is recorded in the Enterprise Fund which has received capital grants,
I contributions from developers and customers,and/or other funds of the City. Reserved fund balances
represent those portions of fund balance not appropriable for expenditure or legally segregated for a
specific future use. Designated fund balances represent management's tentative plans for future use
of financial resources.
I
H. Compensated Employee Absences
IThe City's employees earn vacation and sick leave which may either be taken or accumulated, up to
certain amounts,until paid upon termination or retirement.
I The City accrues vacations and sick leave based on criteria established by the Governmental
Accounting Standards Board. For all funds, this liability reflects amounts attributable to cumulative
employee services previously rendered, where the payment is probable and can be reasonably
estimated. The liability for accumulated vacation and sick leave,as of September 30, 1995, has been
I
recorded in the General and Enterprise Funds since the liability is to be liquidated with expendable
available resources.
I
I
I16
3
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
L 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.
Enterprise Fund Fixed Assets
The land,buildings,and equipment owned by the Enterprise Fund are recorded at historical cost or at I
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 I
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 I
Fund operating revenues such as long—term debt and contributed capital. 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
J. Total Columns on Combined Statements I
Total columns presented in the combined financial statements 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 operations, or changes in financial position on a consolidated
basis 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 prior year totals
to conform with the current year presentation.
I
I
17 1
1
ICITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
INOTES TO FINANCIAL STATEMENTS
I
NOTE 2 — DEPOSITS (CASH) AND TEMPORARY INVESTMENTS
The City's cash and temporary investments,at September 30, 1995,are shown below.
ICarrying Market
Amount Value
I
Cash S 19,067 S 19,067
United States Government Securities 2,610,000 2,610,000
I
Texpool 1,837,533 1,837,533
Lone Star Investment Pool 1,621,227 1,621,227
Total Temporary Investments 6,068,760 6,068,760
I
Total Cash and Temporary Investments S 6,087.827 S 6,087.827
I
Deposits(Cash)
The City's funds are required to be deposited and invested under the terms of a depository contract
I
pursuant to state statutes. The depository bank deposits, for safekeeping and trust with the City's agent
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 Insurance Corporation("FDIC")Insurance.
I
Credit Risk Categorization
The City's cash deposits, at September 30, 1995, were entirely covered by FDIC insurance or by
' pledged collateral held by the City's agent bank in the City's name. The City's deposits were
undercollateralized at the time of the largest tax deposits during the year. Management has addressed
this situation with the depository bank and procedures have been implemented by the bank to correct
undercollateralization problems in the future.
ITemporary Investments
I 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,as amended. Temporary investments are recorded at cost.
ICredit Risk Categorization
Temporary investments,with the exception of balances in two public funds investment pools (Texpool
I
and Lone Star Investment Pool),are held by the City's agent in the City's name.
Balances in Texpool and Lone Star Investment Pool are not evidenced by securities that exist in
physical or book entry form and accordingly are not subject to credit risk categorization. However,
' the investment pools'policies require that local government deposits be used to purchase investments
authorized by the Public Funds Investment Act of 1987,as amended.
I
I
18
3
CITY OF FRIENDSWOOD, TEXAS I
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS I
NOTE 3 — PROPERTY TAXES I
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. I
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 S.663 per S 100 of assessed valuation which I
were prorated between operations and debt service in the amounts of $5140 and $.1490, respectively.
The resulting adjusted tax levies were approximately$4.4 and S13 million for operations and debt service,
respectively, based on a total adjusted taxable valuation of approximately $869 million for the 1994 tax
year. I
Property taxes receivable,at September 30, 1995,consists of the following.
Debt I
General Service
Tax Year Fund Fund Total
1994 $ 48,261 $ 13,990 $ 62,251 1
1993 22,313 7,127 29,440
1992 16,161 5,200 21,361
1991 15,635 5,713 21,348 I
1990 7,947 2,909 10,856
1989 and prior 84,771 33,505 118.276
$ 195.088 $ 68.444 $ 263.532 I
NOTE 4 — LAND, BUILDINGS AND EQUIPMENT I
A summary of changes in the General Fixed Assets Account Group, for the year ended September 30,
1995,follows: I
Balance, Balance,
October 1, Retirements September 30,
1994 Additions and Transfers 1995
Land $ 2,951,139 $ $ $ 2,951,139
Buildings 3,482,953 3,482,953
Improvements other
than buildings 13,857,275 451,694 14,308,969
Furniture and equipment 4,063,924 418,233 (2,000) 4,480,157
Construction in progress 714,132 2,481,889 (451,694) 2L744,327
Totals $ 25.069.423 $ 2 900,122 $ (1000) $ 27.967.545
I
19 I
I
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
INOTES TO FINANCIAL STATEMENTS
INOTE 4 - LAND, BUILDINGS AND EQUIPMENT(continued)
Construction in progress and remaining commitments under related construction contracts for general
Igovernment construction projects at September 30, 1995 follow:
Authorized Total in Remaining
Project Description Contract Progress Commitment
ICity hall building S 1,646,904 S 1,595,971 S 50,933
City hall- other 366,187 366,187
I Melody Lane Street 230,967 139,667 91,300
Willowick Street 80,698 65,535 15,163
Heritage - Woodlawn 236,240 190,704 45,536
Clover Acres Improvements 14,272 14,272
I Stevenson Park 244,964 194,253 50,711
Stevenson Park Pavilion 59,949 59,949
Oak Drive 13,570 6,666 6,904
Miscellaneous 111,123 111,123
IS 3,004.874 S 2.744 327 S 260,547
IA summary of Enterprise Fund fixed assets at September 30, 1995,follows:
I Land S 252,528
Plant and equipment 9,833,157
Plant and equipment-Blackhawk 9,749,543
I Water and sewer lines 11,286,105
Construction in progress 2,718,040
33,839,373
ILess accumulated depreciation (8,386,854)
Total S 25.452.519
IConstruction in progress and remaining commitments under related construction contracts for water and
sewer construction projects at September 30,1995 follow:
I Authorized Total in Remaining
Project Description Contract Progress Commitment
Wilderness Trails Water S 1,400 S 1,400 S
I I&I Analysis 83,069 83,061 8
South Friendswood Water Line 2,270,137 331,440 1,938,697
Elevated Storage Tank 508,256 502,006 6,250
I Waste Water Diverson 187,480 56,276
1,728,607131,204
Blackhawk WWTP Improvements 1,728,607
Forest Bend Lift Station 88,975 15,250 73,725
IS 4,867.924 S 2.718,040 S 2.149.884
I20
3
CITY OF FRIENDSWOOD, TEXAS I
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS I
NOTE 5 — LONG—TERM DEBT I
The City issues a variety of long—term debt instruments in order to acquire and/or construct major
capital facilities and equipment for general government and enterprise fund activities. These instruments I
include general obligation bonds, certificates of obligation, revenue bonds, notes payable, and capital
leases. These debt obligations are secured by either future tax revenues, water and sewer system
revenues, or liens on property and equipment. Debt obligations which are intended to be repaid from
water and sewer system revenues have been recorded in the City's Enterprise Fund. All other long—term I
obligations of the City have been recorded in the General Long—Term Debt Account Group.
At September 30, 1995,the City reallocated certain debt issues,based on the original purpose of the debt, '
between the General Long—Term Debt Account Group and the Enterprise Fund to correctly reflect
enterprise net income. This reallocation resulted in a net increase in Enterprise Fund debt and a net
decrease to the General Long—Term Debt Account Group of S2,538,489.
Bonds Payable and Certificates of Obligation I
A summary of the terms of general obligation bonds,combination tax and revenue bonds,and certificates
of obligation outstanding and their corresponding allocations to the General Long—Term Debt Account I
Group and the Enterprise Fund at September 30,1995 follows:
General
Series and Original Final Interest Long—Term Enterprise I
Issue Amount Maturity _ Rate (%) Debt Fund
General Obligation Bonds
1986 Refunding Bonds
10,650,777 2004 4.25 — 7.90 S 756,677 $ 619,101 I
1993 Refunding Bonds
6,555,000 2004 2.25 — 4.625 1,582,500 4,747,500=
2,339,177 5,366,601
Combination Tax and Revenue
Certificates of Obligation
1988 Series
4,400,000 1997 7.0— 8375 545,000
1992 Series
5,000,000 2008 530— 6.75 2,130,000 2,755,000
1995 Series
3,200,000 2010 5375 —7375 3,200,000 1
2,130,000 6,500,000
Revenue Bonds
1969 Series 1
700,000 1999 5.5 — 6.125 62,900 122,100
1979 Series
1,750,000 1996 5.5 — 6.125 5,000
62,900 127,100
Total Bonds and Certificates of Obligation S 4.532.077 $ 11993.701
1
21
I
I CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
I
NOTES TO FINANCIAL STATEMENTS
INOTE 5 — LONG—TERM DEBT(continued)
Annual debt service requirements for bonds and certificates of obligation are as follows:
IGeneral
Long—Term Enterprise
Fiscal Year Debt Fund
I
1996 $ 803,970 S 1,569,686
1997 509,160 1,838,749
1998 563,831 1,565,987
1999 554,016 1,547,760
I 2000 807,211 1,296,477
Thereafter 3,140,715 9,055,221_
6,378,903 16,873,880
I less interest portion 1,846,826 4,880,179
Total requirements S 4.532.077 S 11.993.701
IAccreted Interest on Premium Compound Interest Bonds
A portion of the bonds sold in the Series 1986 refunding bond issue were premium compound interest
I bonds. These obligations have par values of$440,777 and maturity values of S1,305,000. The interest on
these obligations will be paid upon maturity in the fiscal years ending September 30,2000, through 2004.
The accreted values of these bonds at September 30, 1995, is approximately $884,752,of which $389,138
has been allocated to the Enterprise Fund and$486,614 has been allocated the the General Long—Term
I Debt Account Group. Accordingly, accreted interest on these bonds of$199,789 and S244,186 has been
recorded in the Enterprise Fund and the General Long—Term Debt Account Group,respectively.
INote Payable
During the year ended September 30, 1994, the City entered into an agreement to purchase a tract of
land for building a sports complex. As a result of this agreement, the City issued a note to the seller of
the property for approximately$598,567. The Note is secured by a first lien Deed of Trust against the
property and is payable in three annual installments bearing an interest rate of 6 percent. The
installments are due on or before September 15,each year. Anticipated future debt service requirements
I for this note are as follow:
Debt Service
Fiscal Year Requirements
I1996 $ 225,916
1997 192,713
Total 418,629
I
less interest portion 33,987
Note Payable $ 384,642
I
I
22
3
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 5 — LONG—TERM DEBT (continued)
Obligations Under Capital Leases
The City entered into capital lease agreements in order to purchase management information system
equipment for City hall and the police and fire department. Following is a summary of future lease
payments due on this equipment:
Lease
Fiscal Year Obligation
1996 $ 71,725
1997 71,725
1998 71,725
1999 37,731
2000 2,200
Total 255,106
less interest portion 32,063
Obligations under capital leases S 223.043 '
Prior Year Defeasance of Debt I
In prior years, the City defeased certain general obligation and revenue bonds by placing the proceeds of
the 1986 and 1993 refunding bonds in an irrevocable trust to provide for all future debt service payments
on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not
included in the City's financial statements. On September 30, 1995, approximately S7.9 million of bonds
outstanding are considered defeased.
Changes in Long—Term Debt I
The following are summaries of long—term debt transactions of the City for the year ended
September 30, 1995.
General Lone—Term Debt Account Group
Balance, Balance,
October 1, Retirements September 30,
1994 Additions do Transfers 1995
General obligation bonds S 5,620,777 S S (3,281,600) S 2,339,177
Revenue bonds 62,900 62,900 I
Certificates of obligation 2,160,000 (30,000) 2,130,000
Notes payable 598,567 (213,925) 384,642
Obligations under capital 166,461 117,176 (60,594) 223,043
leases
Accreted interest on premium
compound interest bonds 380,118 63,857 (199,789) 244,186
S 8,925,923 S 181.033 S (1723,0013) S 5,383.948
I
23
I
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
I
NOTES TO FINANCIAL STATEMENTS
INOTE 5 — LONG—TERM DEBT(continued)
Changes in Long—Term Debt(continued)
IEnterprise Fund Long—Term Debt
Balance, Balance,
I October 1, Additions September 30,
1994 do Transfers Retirements 1995
I Revenue bonds $ 330,000 $ S (202,900) $ 127,100
General obligation bonds 2,990,000 2,401,601 (25,000) 5,366,601
Certificates of obligation 3,510,000 3,200,000 (210,000) 6,500,000
Accreted interest on premium
Icompound interest bonds 199,789 199,789
S 6.830.000 $ 5.801390 S (437.900) S 12.193.490
Summary of Long—term Debt Requirements
The annual requirements to amortize all long—term debt outstanding at September 30, 1995, including
Iinterest payments are as follows:
General
Fiscal Long—Term Enterprise
IYear Debt Fund Total
1996 $ 1,101,611 S 1,569,686 $ 2,671,297
I
1997 773,598 1,838,749
1,565,987 2,612,347
1998 635,556 2,201,543
1999 591,747 1,547,760 2,139,507
2000 809,411 1,296,477 2,105,888
2001 408,361 977,951 1,386,312
2002 441,304 937,868 1,379,172
2003 442,039 941,121 1,383,160
2004 445,052 935,744 1,380,796
2005 346,320 873,494 1,219,814
2006 350,238 871,064 1,221,302
2007 352,913 867,935 1,220,848
I 2008 354,488 872,488 1,226,976
2009 884,175 884,175
2010 893,381 893,381
I
S 7.052.638 S 16.873.880 S 23,926,518
I
24
3
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 6 — FUND EQUITY ,
Retained Earnings
A portion of retained earnings in the Enterprise Fund is reserved for the following: ,
Water and sewer construction $ 387,539
Surface water construction 38,254
Central service area construction 791,407
Debt service 199,643
$ 1.416.843 '
Contributed Capital
The following is a schedule of changes in contributed capital for the Enterprise Fund for the year ended I
September 30,1995:
Contributed capital at beginning of year $ 15,511,200
Additions
Reallocation of long—term debt (2,538,490)
Impact fees 167,438
Contributed Capital at End of Year $ 13.140,148
Fund Balance
Fund Balances in the various Governmental Fund Types are reserved or designated as follows:
Special Capital
General Revenue Debt Service Projects
Reserved for: '
Encumbrances $ 91,780 $
Debt service 48,167
Total reserved fund
balance $ 91.780 $ 48.167
Designated for:
Emergency
operations $ 900,000 $ $
Police investigations 8,248
Centennial observance 29,973
Fire/EMS 85,937
Authorized
construction 1,088,128
Total designated fund
balance $ 900,000 $ 124.158 $ 1,088,128
In the Non—expendable Trust Fund,$67,200 of the fund balance is reserved for an endowment.
25 1
I
I CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
' NOTES TO FINANCIAL STATEMENTS
INOTE 7 — INTERFUND TRANSACTIONS
Operating transfers between funds during the 1995 year were as follow
IOperating Operating
Transfer From Transfer To Amounts
I General Fund Special Revenue Fund 11,024
General Fund Debt Service Fund 54,200
General Fund Capital Projects Fund 334,033
I Special Revenue Fund General Fund 35,000
Special Revenue Fund Capital Projects Fund 13,700
Enterprise Fund General Fund 474,844
Enterprise Fund Debt Service Fund 20,440
I Enterprise Fund Debt Service Fund 180,000
Enterprise Fund Capital Projects Fund 937,702
S 2.060.943
I
NOTE 8 —IMPACT FEES
IOn 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 nceded to serve new developments. An I
Impact Fee Structure to defray the costs of these improvements was also adopted.
In recent years the City has committed funds to the construction of surface water facilities and wastewater
I 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.
I 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
I 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,
I 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.
I 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.
I
I
I26
I
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 8 —IMPACT FEES (continued)
Fee Per Single
Equivalent
Service Unit
City Wide Impact Fees
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
Melody Lane service area $ 854
Bay Area Boulevard service area 294
South Friendswood service area 293
Wastewater Collection Impact Fees
Melody Lane service area $ 450
Mills,Murphy,Briarmeadow Avenue 2,532
South Friendswood Service Area
Area A 378 111
Area B-1 378
Area B-2 378
Area C 285
Area D 161
Area E-1 784
Area E-2 784
Area E-3 161
Area E-4 161
Area F 378
The impact fees are deposited into a separate, interest bearing bank account in compliance with the I
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 equity balance of each service area.
The portion of City Wide Impact Fees collected for Surface Water Facilities are used to meet the current
debt service obligations for the 1988 Certificates of Obligations issued to fund the surface water facilities 1
capital improvements. The remaining City Wide Impact Fees collected for Wastewater Treatment
Facilities and Impact fee study and 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.
I
I
27
' CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
' NOTE 9 — RETIREMENT PLANS
A_ Texas Municipal Retirement System
Plan Description and Provisions
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 Retirement 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 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 characteristics of the plan.
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 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 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.
' Contributions
The contribution rate for the employees is 6%,and the City's matching percent is currently 150% of
that contribution, both 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 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 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 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 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 liability 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 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 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.
1 28
3
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 9 — RETIREMENT PLANS (continued) 1
A. Texas Municipal Retirement System(continued)
Contributions (continued) '
The City's total payroll in fiscal year 1994 was$4,277,081,and the City's contributions were based on a
payroll of $3,892,013. Both the City and the covered employees made the required contributions, '
amounting to $248,569 (6.01% of covered payroll for the months in calendar year 1994 consisting of
5.46% normal cost plus 0.55% to amortize the unfunded actuarial liability, and 6.50% for the months
in calendar year 1995 comprised of 5.61% normal cost plus 0.89% to amortize the unfunded actuarial I
liability) for the City and $233,522 (6%) for the employees. The City adopted changes in the plan
subsequent to the previous actuarial valuation, which had the effect of increasing the City's
contribution rate for 1995 by 0.45%of payroll. There were no related—party transactions.
Funding Status and Progress '
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 1
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 December 31, 1994. I
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 I
was 98.6%of book value as of September 31, 1994.
Pension Benefit Obligation
Annuitants currently receiving benefits $ 432,551
Terminated employees 502,822
Current Employees:
Accumulated employee contributions,including allocated invested earnings 2,079,550
Employer—financed vested 2,386,481
Employer—financed nonvested 460,748
Total Pension Benefit Obligation 5,862,152
Net assets available for benefits,at book value 5,190,936
Unfunded Pension Benefit Obligation $ 671216
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I
CITY OF FRIENDSWOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
' NOTE 9 — RETIREMENT PLANS (continued)
A. Texas Municipal Retirement System(continued)
Unfunded Pension Benefit Obligation
The book value of assets is amortized cost for bonds and 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
adoption of changes in the plan since the previous actuarial valuation, which had the effect of
increasing the pension benefit obligation by$279,159.
Trend information gives an indication of the progress made in accumulating sufficient assets to pay
benefits when due. Ten—year trend information may be found in Table 14 of the Statistical Section of
' the City's comprehensive annual financial report. For the years ended September 30, 1993, 1994,and
1995, respectively, net assets available for benefits were sufficient to fund 93%, 84%, and 87% of the
PBO. The unfunded PBO represented 9%, 25%, and 17% of the annual payroll for employees
' covered by TMRS for 1993, 1994, and 1995, respectively. In addition, the City's contributions to
TMRS were 6.2%, 6.0%, and 6.0%, respectively, of annual covered payroll for the years ending
September 30, 1993, 1994,and 1995.
' B.Deferred Compensation Plan
' The City offers its employees a tax—deferred compensation plan 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 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. At September 30,
1995,the plan assets had a market value of$586,995.
All 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 (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 under 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 participant.
t
1
30
I
CITY OF FRIENDS WOOD, TEXAS
Exhibit A-6
NOTES TO FINANCIAL STATEMENTS
NOTE 10 — 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 133 percent.
The City began receiving water from the plant on October 15, 1990. The City is billed on a monthly I
basis for the actualgallons 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. 1
NOTE 11 — BLACKHAWK REGIONAL WASTE TREATMENT PLANT I
The City has entered into an arrangement with the Gulf Coast Waste Disposal Authority for the
operation and maintenance of a joint 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 31,1995 are as follows:
City of Friendswood 52.47 %
City of Houston 16.18
Harris County MUD No.55 20.27
Baybrook MUD No. 1 11.08
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 information on the joint venture was available in the December 31, 1994 audited financial
statements of the Gulf Coast Waste Disposal Authority:
Joint
Venture
Total assets S 361,124
Total liabilities — all current (361,124)
Total revenues 1,349,138
Total expenses (1,349,138)
S —0-
31 1