HomeMy WebLinkAboutComprehensive Annual Financial Report - FY2006CITY OF
FRIENDSWOOD, TEXAS
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
Fiscal Year Ended
September 30, 2006
Officials Issuing Report:
Ronald E. Cox
City Manager
Roger C. Roecker
Director of Administrative Services
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CITY OF FRIENDSWOOD, TEXAS
TABLE OF CONTENTS
SEPTEMBER 30, 2006
Page
Exhibit Number
INTRODUCTORY SECTION
Letter of Transmittal.........................................................................................
OrganizationChart ............................................................................................
Certificate of Achievement for Excellence in Financial Reporting ..................
PrincipalOfficials.............................................................................................
FINANCIAL SECTION
Independent Auditors' Report .......................................................................................
Management's Discussion and Analysis......................................................................
Basic Financial Statements
Government -wide Financial Statements
Statement of Net Assets..........................................................................................
Statementof Activities............................................................................................
Fund Financial Statements
Balance Sheet — Governmental Funds....................................................................
Statement of Revenues, Expenditures and Changes in
Fund Balances — Governmental Funds................................................................
(continued)
1-4
5
6
7
8-9
10 —17
l;'�
21
22
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
(Continued)
SEPTEMBER 30, 2006
Page
Number
FINANCIAL SECTION (Continued)
Fund Financial Statements (Continued)
Reconciliation of the Statement of Revenues, Expenditures
and Changes in Fund Balances of Governmental Funds to the
Statementof Activities......................................................................................... 23
Statement of Revenues, Expenditures and Changes in
Fund Balances — Budget and Actual — General Fund .......................................... 24
Statement of Net Assets — Proprietary Funds......................................................... 25
Statement of Revenues, Expenses and Changes in
Fund Net Assets — Proprietary Funds.................................................................. 26
Statement of Cash Flows — Proprietary Funds ........................................................ 27 — 28
Notes to Financial Statements.................................................................................... 29 — 53
Combining and Individual Fund Statements and Schedules
General Fund
Comparative Statements of Revenues, Expenditures and
Changes in Fund Balances — Budget and Actual ................................................. 54 — 61
(continued)
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
(Continued)
SEPTEMBER 30, 2006
Page
Number
FINANCIAL SECTION (Continued)
Combining and Individual Fund Statements and Schedules (Continued)
Nonmajor Governmental Funds
Combining Balance Sheet....................................................................................... 62 — 63
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances................................................................................... 64 — 65
Nonmajor Special Revenue Funds
Schedule of Revenues, Expenditures and Changes in
Fund Balances — Budget and Actual — Fire/EMS
DonationFund..................................................................................................... 66
Nonmajor Debt Service Funds
Schedule of Revenues, Expenditures and Changes in
Fund Balances — Budget and Actual.................................................................... 67
STATISTICAL SECTION (Unaudited)
Page
Table Number
Net Assets by Component.............................................................................. 1 68
Changes in Net Assets................................................................................... 2 69 — 70
(continued)
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
(Continued)
SEPTEMBER 30, 2006
Page
Table Number
STATISTICAL SECTION (Unaudited)
Fund Balances — Governmental Funds..........................................................
3
71
Changes in Fund Balances — Governmental Funds .......................................
4
72 — 73
Assessed Value and Estimated Actual Value of
TaxableProperty .........................................................................................
5
74
Direct and Overlapping Property Tax Rates ..................................................
6
75
Principal Property Taxpayers.........................................................................
7
76
Property Tax Levies and Collections.............................................................
8
77
Ratios of Outstanding Debt by Type.............................................................
9
78
Ratios of Net General Bonded Debt Outstanding ..........................................
10
79
Direct and Overlapping Governmental Activities Debt .................................
11
80
Legal Debt Margin Information.....................................................................
12
81
Pledged Revenue Coverage...........................................................................
13
82
Demographic and Economic Statistics..........................................................
14
83
PrincipalEmployers.......................................................................................
15
84
Fulltime Equivalent City Government Employees
by Function/Program..................................................................................
16
85
Operating Indicators by Function/Program...................................................
17
86
Capital Asset Statistics by Function/Program...................................................
18
87
INTRODUCTORY SECTION
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January 19, 2007
The Honorable Mayor, Members of the City Council, and the Citizens of Friendswood:
The Comprehensive Annual Financial Report (CAFR) of the City of Friendswood for the fiscal year
ended September 30, 2006, is hereby submitted. Responsibility for both the accuracy of the data, and
the completeness and fairness of the presentation, including all disclosures, rests with the City. To the
best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported
in a manner designed to present fairly the financial position and results of operations of the various
funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City's
financial activities have been included.
The comprehensive annual financial report is presented in three sections: introductory, financial, and
statistical. The introductory section includes a list of principal officials, this transmittal letter, and the
City's organizational chart. The financial section includes the auditors' report, a Management Discussion
and Analysis (MD&A), the basic financial statements and combining and individual fund financial
statements and schedules. The MD&A, found immediately following the report of the independent
auditors, is a narrative introduction; overview and analysis required by generally accepted accounting
principles (GAAP). This letter of transmittal is designed to complement the MD&A and should be read in
conjunction with it. The statistical section includes selected financial and demographic information,
generally presented on a multi -year basis.
Management of the City is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that
adequate accounting data are compiled to allow for the preparation of financial statements in conformity
with generally accepted accounting principles. The internal control structure is designed to provide
reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable
assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived;
and (2) the valuation of costs and benefits requires estimates and judgments by management.
The City Charter requires an annual audit of the financial statements of all of the various funds of the
City by independent certified public accountants. The accounting firm of Pattillo, Brown & Hill, L.L.P.
has performed such an audit and their opinion has been included in this report.
1
Administrative Services • 910 South Friendswood Drive • Friendswood, Texas 77546-4856 • Fax (281) 482-6491
Computer Services Finance Human Resources Municipal Court Utility Billing
(281) 996-3217 (281) 996-3200 (281) 996-3225 (281) 996-3252 (281) 996-3232
PROFILE OF THE CITY
Established in 1895 as a Quaker colony, the City of Friendswood is rich in heritage. The City was
incorporated in 1960 and chartered a home -rule city under Texas law in 1971. The City operates under
a Council -Manager form of government. Policy -making and legislative authority are vested in a
governing Council consisting of the Mayor and six (6) Council Members. The Mayor and Council are
responsible, among other things, for passing ordinances, adopting the budget, appointing board and
committee members and hiring the City Manager, City Attorney, Municipal Judge, and City Secretary.
The City Manager is responsible for carrying out the policies and ordinances of the City Council and
overseeing the day-to-day operations of the City government, and for appointing heads of various
departments. The Mayor and Council are elected on an at -large, non -partisan basis. The Mayor and
Council are elected to serve no more than three consecutive three-year terms.
The City provides a full range of municipal services including public safety (police, fire and emergency
medical), maintenance of streets and infrastructure, sanitation services, maintenance of the treated waste
distribution system and both sanitary and storm sewer collection transmission systems, recreational
activities and cultural events as well as general administrative services.
FACTORS AFFECTING FINANCIAL CONDITION
The City of Friendswood, Texas, is located 20 miles southeast of downtown Houston in southern Harris
and northern Galveston Counties. Friendswood's population has more than doubled in every census
count since 1960. The current population is estimated at 34,306. The economy is linked closely to that
of Houston and the Clear Lake area.
The Friendswood/Clear Lake regional economy has become more diverse, featuring aerospace,
petrochemical, tourism, boating, and recreation industries. Biotechnology, biomedical, software services,
electronics and communication equipment sub -sectors are increasing and show solid signs of growth and
sustainability. The NASA/Johnson Space Center, the Bayport petrochemical complex, Ellington Field and
the University of Houston -Clear Lake are key players in the area's economy. According to BAHEP
estimates, "over three-quarters of a million people work within a 45 minute drive time of the Clear Lake area.
Budgeting Controls
The objective of the City's budgetary controls is to ensure compliance with legal provisions embodied in
the annual appropriated budget approved by Council. The charter requires the City Manager to submit a
proposed budget and an accompanying message to the City Council on or before August 1. The Council
shall review and revise as deemed appropriate prior to general circulation for the public hearing. The
Public Notice and Hearing must be Posted in the City hall and published in the official newspaper. The
budget must be adopted by the 15' of September or as soon thereafter as practical. The City legally
adopts annual budgets for the General, Special Revenue and Debt Service Funds. Annual and project
budgets are also adopted for the Proprietary and Capital Projects Funds, respectively.
The level of budgetary control; that is, the level at which expenditures cannot legally exceed the
appropriated amount, is established by department within a fund. The City also maintains an
encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances
lapse at fiscal year end, but can be re -appropriated through a budget Amendment the following fiscal
year. The City Manager is authorized to transfer budgeted amounts between departments within any
fund, but revisions that increase the total expenditures of any fund must be approved by Council.
2
Multi -Year Financial Planning
We have been working on a multi -year financial plan (MYFP) for some time. Originally, staff was
directed to develop a plan to forecast the City's financial condition through 2020, the projected build -out
date. The first version of this plan was drafted and later reduced in scope to project out five years.
The MYFP project will be based on the City's Comprehensive Land Use Plan and other strategic plans,
such as Vision 2020. The City's Capital Improvements Plan and departmental operational plans for
providing programs and services will be aligned with the strategic plans to translate these into dollars.
Funding needs and available resources, both current and alternative revenue enhancements, will be
identified. These alternative revenues could include a referendum to utilize the balance of the sales tax
rate (1/2 cent); create fees for alarm permits and/or emergency medical services; and the creation of a
drainage utility fee. These alternatives to meet the gaps between expenditures and revenue will be
discussed with Council in a series of work sessions during 2007.
Cash Management
The City's investment policy authorizes the City to invest in Obligations of the U. S. Government,
certificates of deposits, money market mutual funds, and local government investment pools. The
primary objectives of the investment policy, in priority order, are safety (preservation of capital),
liquidity (availability of funds) and yield (rate of return commensurate with investment risk and cash
flow needs). The average yield on maturing investments for the year was 4.43%. All deposits are either
insured by federal depository insurance or collateralized with securities held by the pledging financial
institution's trust department.
Risk Management
The City's risk management division continually evaluates risk in terms of severity, frequency of
probability and loss exposure. A proactive safety training and awareness program is provided for all
City employees. The City purchases insurance coverage for property, liability, and workers'
compensation through Texas Municipal League Intergovernmental Risk Pool.
Awards
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for
Excellence in Financial Reporting to the City of Friendswood for its comprehensive annual financial
report for the fiscal year ended September 30, 2005. This was the 18th consecutive year that the City has
received this prestigious award. In order to be awarded a Certificate of Achievement, the City published
an easily readable and efficiently organized comprehensive annual financial report. This report satisfied
both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement program's
requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
Acknowledgements
The preparation of the comprehensive annual financial report was made possible by the dedicated
service of Cindy Edge, Ted Beason and the entire staff of the Administrative Services Department.
Each member of the department has my sincere appreciation for the contributions made in the
preparation of this report.
3
In closing, I also express my thanks to the Mayor, members of the City Council and the City Manager
for their leadership, interest and support in conducting the financial operations of the City in a
responsible and progressive manner.
Sincerely,
Roger C. Roecker
Director of Administrative Services
4
CITY
SECRETARY
ADMINISTRATIVE I I POLICE
SERVICES
CITIZENS
OF FRIENDSWOOD
MAYOR AND
COUNCIL
CITY
ATTORNEY
I
FIRE MARSHAL
EMERGENCY M9
BOARDS, COMMITTEES
COMMISSIONS
CITY
MANAGER
COMMUNITY
DEVELOPMENT
CITY OF FRIENDSWOOD
ORGANIZATIONAL CHART
MUNICIPAL
JUDGE
PUBLIC I I COMMUNITY
WORKS SERVICES
ECOMONIC
DEVELOPMENT
5
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Friendswood
Texas
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
September 30, 2005
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
Uf'STA
01 �v,
TES
COMMCAM � President
IMCRO
Executive Director
6
CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL OFFICIALS
SEPTEMBER 30, 2006
Elected Officials Position
David J. H. Smith
Laura Ewing
John R. LeCour
Jim Hill
Jay Horecky
W. Chris Peden
Mel P. Measeles
Appointed Officials
Roger Roecker
Deloris McKenzie
Jon Branson
Cathy Bernacki
Dan Johnson
Kaz Hamidian
Olson & Olson
Terry Byrd
Cindy Edge
Robert Wieners
James W. Woltz
Mayor
Council Member - Position No. 1
Council Member - Position No. 2
Council Member - Position No. 3
Council Member - Position No. 4
Council Member - Position No. 5
Council Member - Position No. 6
Position
City Manager (acting)
City Secretary
Director of Community Services
Tax Assessor -Collector
Community Development Director
Public Works Director
City Attorney
Fire Marshal/Emergency Management
Coordinator
Director of Administrative Services (acting)
Police Chief
Judge - Municipal Court
Term
Expires
May 2009
May 2009
May 2008
May 2009
May 2007
May 2008
May 2007
7
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FINANCIAL SECTION
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mQql
PATTILLO, BROWN & HILL,L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and
Member of the City of Council
City of Friendswood, Texas
We have audited the accompanying financial statements of the governmental activities, the
business -type activities, the aggregate discretely presented component unit, each major fund, and the
aggregate remaining fund information of the City of Friendswood, Texas, as of and for the year ended
September 30, 2006, which collectively comprise the City's basic financial statements as listed in the
table of contents. These financial statements are the responsibility of the City of Friendswood, Texas'
management. Our responsibility is to express opinions on these financial statements based on our audit.
We did not audit the financial statements of the West Ranch Management District, a discretely presented
component unit. Those financial statements were audited by other auditors whose report thereon has
been furnished to us, and our opinion, insofar as it relates to the amounts included for the West Ranch
Management District, is based on the report of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the respective financial position of the
governmental activities, the business -type activities, the aggregate discretely presented component unit,
each major fund, and the aggregate remaining fund information of the City of Friendswood, Texas, as of
September 30, 2006, and the respective changes in financial position and cash flows, thereof and the
respective budgetary comparison for the General Fund for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated January
19, 2007, on our consideration of the City of Friendswood, Texas' internal control over financial reporting
and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements
and other matters. The purpose of that report is to describe the scope of our testing of internal control of
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. The financial statements of the discretely
presented component unit were not audited in accordance with Government Auditing Standards. That
report is an integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.
8
401 WEST HIGHWAY 6 ■ P. O. BOX 20725 ■ WACO, TX 76702-0725 ■ (254) 772-4901 ■ FAX: (254) 7724920 ■ www.pbhcpa.com
AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544-7778 ■ HILLSBORO, TX (254) 582-2583
TEMPLE, TX (254) 791-3460 ■ ALBUQUERQUE, NM (505) 266-5904
The management's discussion and analysis on pages 10 through 17 is not a required part of the
basic financial statements but is supplementary information required by accounting principles generally
accepted in the United States of America. We and the other auditors, have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of
measurement and presentation of the required supplementary information. However, we did not audit
the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City of Friendswood, Texas' basic financial statements. The introductory
section, combining and individual fund financial statements and schedules, and statistical section are
presented for purposes of additional analysis and are not a required part of the basic financial statements.
The combining and individual fund financial statements and schedules have been subjected to the
auditing procedures applied by us and the other auditors in the audit of the basic financial statements
and, in our opinion, based on our audit and the report of other auditors, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole. The introductory and statistical
sections have not been subjected to the auditing procedures applied by us and the other auditors in the
audit of the basic financial statements and, accordingly, we express no opinion on them.
`
Rao-k,6pwa , j � i L Lf
January 19, 2007
9
MANAGEMENT'S
DISCUSSION AND ANALYSIS
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Management's Discussion and Analysis
As Management of the City of Friendswood, we offer readers of the City's financial statements this
narrative overview and analysis of the financial activities of the City for the fiscal year ended September
30, 2006. This information is not intended to be a complete statement of the City's financial condition.
We recommend and encourage readers to consider the information presented here in conjunction with
the accompanying transmittal letter and basic financial statements.
FINANCIAL HIGHLIGHTS
The assets of the City of Friendswood exceeded its liabilities at the close of the most
recent fiscal year by $68,705,833 (net assets). Of this amount, $10,391,123 is unrestricted
net assets for governmental activities and $6,574,920 for business -type activities.
The City's net assets increased by $4,570,154. This resulted in an increase in invested in
capital assets net of related debt of $307,187, unrestricted net assets increased in the
amount of $4,209,668 and the remaining $53,299 increased restricted net assets.
As of the close of the current fiscal year, the City of Friendswood's governmental funds
reported combined ending fund balance of $17,569,751. Of the ending fund balance,
$5,971,277 is restricted under laws external to the City for specific purposes (e.g.,
capital projects, debt service); $266,243 is designated by the City for specific purposes;
$2,624,828 reserved for encumbrances and prepaid items; and $8,707,403 is unreserved
and available to meet the City's ongoing obligations in accordance with the City's fund
designation and fiscal policies.
• The City issued $24,285,000 in water and sewer revenue bonds and refunding bonds.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City's basic financial
statements. The City's basic financial statements comprise three components: 1) government -wide
financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report
also contains other supplementary information in addition to the basic financial statements themselves.
Government -wide Financial Statements
The government -wide financial statements are designed to provide readers with a broad overview of the
City's finances, in a manner similar to a private -sector business.
The Statement of Net Assets presents information on all of the City's assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may
serve as a useful indicator of whether the financial position of the City is improving or deteriorating. This
statement combines and consolidates governmental funds current financial resources (short-term
spendable resources) with capital assets and long-term obligations. Other non -financial factors should also
be taken into consideration, such as changes in the City's property tax base and the condition of the City's
infrastructure (i.e. roads, drainage improvements, storm sewer and water lines, etc.), to assess the overall
financial condition of the City.
10
The Statement of Activities presents information showing how the City's net assets changed during the
fiscal year. All of the current year's revenues and expenses are taken into account regardless of when cash
is received or paid. Thus, revenues and expenses are reported in this statement for some items that will only
result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but not used compensated
absences). Both the statement of net assets and the statement of activities are prepared utilizing the accrual
basis of accounting as opposed to the modified accrual basis used in prior reporting models.
Both of the government -wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from functions that are
intended to recover all or a significant portion of their costs through user fees (business -type activities).
• Governmental activities include most of the City's basic services, (general government,
public safety, community development and public works and community services).
Property taxes, sales taxes, and franchise fees primarily finance these activities.
• Business -type activities include the City's water and sewer system. Charges for
services covers all or most of the cost for these services.
The government -wide financial statements include not only the City itself (known as the primary
government), but also a legally separate management district for which the City is financially
accountable. Financial information for this component unit is reported separately from the financial
information presented for the primary government itself.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been
segregated for specific activities or objectives. Fund accounting is used by state and local governments
to control and manage money for particular purposes and to ensure finance -related legal requirements.
The City uses two fund types — governmental and proprietary.
• Governmental funds — Similar to the governmental activities in the government -wide
financial statements. However, unlike the government -wide financial statements,
governmental funds focus on current sources and uses of spendable resources. The
governmental fund statement provides a detailed short-term view of the City's general
government operations and helps you determine whether resources are available in the
near future to finance City programs. Comparing the information presented for
governmental funds with the information presented for governmental activities in the
government -wide financial statements will help the reader to better understand the
long-term impact of the government's near -term financing decisions. The governmental
Rinds balance sheet, statement of revenue and expenditures, and changes in fund
balances include a reconciliation to provide such comparison.
The City maintains nine governmental funds. Information is presented separately in the
governmental funds balance sheet and the governmental fund statement of revenues,
expenditures, and changes in fund balances for the General Fund and the Capital Projects
Fund, both are considered to be major funds. The other seven funds are combined into a
single, aggregated presentation. Individual fund data for each of these non -major
governmental funds is provided in the form of combining statements found in this report.
11
• Proprietary funds — The City maintains two types of proprietary funds. The City uses
the Enterprise Fund for water and sewer operations. The Enterprise Fund reports the
same functions presented as business -type activities in the government -wide financial
statement. The second proprietary fund is the Internal Service Fund. This fund is used
to account for fleet management services. The Internal Service Fund is included within
the governmental activities in the government -wide financial statements.
Proprietary fund financial statements provide the same type of information as the
government -wide financial statements, with more detail and include the Internal
Service Fund type activity.
Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in
the government -wide and fund financial statements.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents combining
and individual fund statements and schedules that further support the information in the financial
statements. These statements are presented immediately following the notes to the financial statements.
GOVERNMENT -WIDE FINANCIAL ANALYSIS
The City's net assets exceed liabilities by $68.7 million as of September 30, 2006. The largest portion
of the City's net assets (72.29%) reflects its investments in capital assets (e.g., land, buildings,
equipment, improvements, construction in progress and infrastructure), less any related debt used to
acquire those assets that is still outstanding. The City uses these capital assets to provide services to
citizens; therefore, these assets are not available for future spending. It should be noted that the
resources needed to repay this debt must be provided from other sources, since the capital assets
themselves cannot be used to liquidate these liabilities.
Current and other assets
Capital assets
Total assets
Long-term liabilities
Other liabilities
Total liabilities
Net assets:
Invested in capital assets,
net of related debt
Restricted
Unrestricted
Total net assets
CITY OF FRIENDSWOOD'S NET ASSETS
Governmental Activities
Business -type Activities
Totals
2006
2005
2006
2005
2006
2005
$ 21,033,794 $
20,612,279 $
24,807,232 $
6,842,347 $
45,841,026 $
27,454,626
44,894,364
41,729,856
33,543,702
34,508,884
78,438,066
76,238,740
65,928,158
62,342,135
58,350,934
41,351,231
124,279,092
103,693,366
17,445,404
17,997,649
33,129,838
17,058,651
50,575,242
35,056,300
3,208,028
2,706,221
1,789,889
1,795,166
4,997,917
4,501,387
20,653,432
20,703,870
34,919,727
18,853,817
55,573,159
39,557,687
32,849,446
32,533,863
16,815,130
16,823,526
49,664,576
49,357,389
2,034,157
1,576,829
41,057
445,086
2,075,214
2,021,915
10,391,123
7,527,573
6,574,920
5,228,802
16,966,043
12,756,375
$ 45,274,726 $
41,638,265 $
23,431,107 $
22,497,414 $
68,705,833 $
64,135,679
12
Governmental and business -type activities increased the City's net assets by $4.57 million in 2006. The
following table provides a summary of the City's operations for the year ended September 30, 2005. The
Governmental activities increased the City of Friendswood's net assets by $3.6 million, accounting for
79.57% of the total increase in net assets. This increase is due to additional revenues received for sales
tax, fines and interest earnings. There was also significant savings in operating expenses. Business -type
activities increased the City's net assets by $933,693, accounting for 20.43% of the total increase in net
assets. This increase is due to revenue collections for future capital projects and debt reduction.
Revenues:
Program revenues:
Charges for services
Operating grants
and contributions
Capital grants
and contributions
General revenues:
Property taxes
Sales taxes
Franchise taxes
Other taxes
Investment earnings
Miscellaneous
Total revenues
Expenses:
General government
Public safety
Community development
and public works
Community services
Water and sewer
Interest on long-term
debt
Total expenses
Increases in net assets
before transfers
Transfers
Change in net assets
Net assets, beginning
Net assets, ending
CITY OF FRIENDSWOOD'S CHANGES IN NET ASSETS
Governmental Activities
Business -type Activities
Totals
2006
2005
2006
2005
2006
2005
$ 2,211,675 $
2,015,867
$ 8,392,277
$ 8,390,761 $
10,603,952 $
10,406,628
771,477
1,271,119
-
-
771,477
1,271,119
-
235,300
-
-
-
235,300
11,304,684
11,352,598
-
-
11,304,684
11,352,598
3,658,699
3,199,136
-
-
3,658,699
3,199,136
1,220,581
1,176,460
-
-
1,220,581
1,176,460
11,940
53,790
-
-
11,940
53,790
915,710
376,435
262,761
114,932
1,178,471
491,367
21,556
51,503
1,375
13,478
22,931
64,981
20,116,322
19,732,208
8,656,413
8,519,171
28,772,735
28,251,379
3,330,439
3,438,849
-
-
3,330,439
3,438,849
7,060,800
7,318,886
-
-
7,060,800
7,318,886
2,813,857
2,576,447
-
-
2,813,857
2,576,447
3,098,013
3,075,023
-
-
3,098,013
3,075,023
-
-
6,078,881
6,251,251
6,078,881
6,251,251
857,602
478,495
962,989
963,355
1,820,591
1,441,850
17,160,711
16,887,700
7,041,870
7,214,606
24,202,581
24,102,306
2,955,611
2,844,508
1,614,543
1,304,565
4,570,154
4,149,073
680,850
763,361
( 680,850)
( 763,361)
-
-
3,636,461
3,607,869
933,693
541,204
4,570,154
4,149,073
41,638,265
38,030,396
22,497,414
21,956,210
64,135,679
59,986,606
$ 45,274,726 $
41,638,265
$ 23,431,107
$ 22,497,414 $
68,705,833 $
64,135,679
13
FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS
Governmental Funds
At the end of the current fiscal year, the City's governmental funds reported combined ending fund
balances of $17,569,751. Approximately
49% of this amount ($8,707,403) is unreserved, undesignated
fund balance, however, $4.1 million is set aside for the 90-day operating reserve, as set forth in the
City's financial policies. $8,862,348 is reserved, designated or has legal restrictions as follows:
Reserves (48%)
• Encumbrances $
2,499,347
• Prepaid expense
125,481
• Debt service
1,595,397
Designations (3%)
• Projects $
266,243
Legally restricted (49%)
• Capital projects $
3,943,654
• Special revenue funds
404,749
• Permanent Funds
27,477
In the General Fund, fund balance increased by $2,743,435. The increase is due to increased revenues in
property taxes ($160,953), sales tax ($860,639), franchise taxes ($90,081), fines and forfeitures
($189,829), intergovernmental revenue ($132,961), and interest on investments ($320,751). In addition to
operating expenditure savings, there is unexpended capital that is included in the reserve for encumbrance
($594,770). The 2003 and 2005 Bond Construction Fund balance decreased by $3,355,335. This decrease
is due to construction of the public safety building.
Proprietary Fund
Unrestricted net assets of the respective proprietary funds are Enterprise, (water and sewer), $6,574,920
and Internal Service Fund (vehicle replacement fund), $306,800. The net assets of the Water and Sewer
Fund increased by $933,693. The net assets of the Internal Service Fund increased by $136,775.
General Fund Budgetary Highlights
The City made revisions to the original appropriations approved by the City Council. These changes
resulted in an increase in budgeted expenditures from the original budget of $1,207,084 or 7%. The
majority of this increase was the appropriation of encumbrances ($383,462) from the prior year and
appropriate additional funds for the Public Safety Building ($616,604).
CAPITAL ASSETS
The City of Friendswood's investment in capital assets (net of accumulated depreciation) for its
governmental and business -type activities as of September 30, 2006, is $78,438,066. The investment in
capital assets include land, buildings and improvements, equipment, infrastructure, water rights and
construction in progress.
14
This year's major capital events during the current fiscal year included the following:
• Continued construction phase of the Public Safety Building with current year costs of
$3.3 million. Prior year costs were $681,462 and the proposed project costs are $6.3
million.
• Continued site preparation and pre -construction of new Fire Station #4 for $52,532.
The proposed project costs are $1.5 million.
• Completion of the drainage improvements in Sun Meadow totaling $2.2 million.
• Continued Phase II improvements at Centennial Park with current year costs of
$290,000 and total projected costs of $3.5 million.
• Asphalt Street Improvements completed for a total of $138,540.
• Design phases of Prairie Wilde Drainage ($13,900), Clover Acres Drainage ($298,974)
and Glenshannon Drainage ($94,685).
• Design phases of the following water and sewer projects: Deepwood Force Main
($227,924), Deepwood Lift Station Expansion ($132,914), South Friendswood Force
Main Diversion ($71,728), Bay Area Boulevard waterline ($33,350) and the 16"
waterline from Sunset to water well #4 ($8,736).
CITY OF FRIENDSWOOD'S CAPITAL ASSETS AT YEAR-END
Land
Buildings and
improvements
Equipment
Infrastructure
Water rights
Construction in progress
Total capital assets
Governmental Activities
2006
2005
Business -type Activities
2006 2005
Totals
2006 2005
$ 24,390,687 $
24,564,265 $
718,493 $
718,493 $
25,109,180 $
25,282,758
10,871,758
9,196,060
-
-
10,871,758
9,196,060
1,598,491
1,625,743
575,782
618,525
2,174,273
2,244,268
-
-
28,264,928
29,373,029
28,264,928
29,373,029
-
-
3,465,469
3,465,469
3,465,469
3,465,469
8,033,428
6,343,788
519,030
333,368
8,552,458
6,677,156
$ 44,894,364 $
41,729,856 $
33,543,702 $
34,508,884 $
78,438,066 $
76,238,740
Additional information on the City's capital assets can be found in the notes on pages 43 and 44 of this
report.
DEBT ADMINISTRATION
At the end of the current fiscal year, the City of Friendswood had a total bonded debt and capital lease
obligation of $51,108,957.
15
CITY OF FRIENDSWOOD'S OUTSTANDING DEBT AT YEAR-END
Governmental Activities
2006 2005
Business -type Activities
2006 2005
Totals
2006 2005
General obligations $ 17,150,000 $ 17,590,000 $ 2,845,000 $ 3,310,000 $ 19,995,000 $ 20,900,000
Revenue bonds payable - - 30,665,000 14,020,000 30,665,000 14,020,000
Certificates of obligation - - 280,000 470,000 280,000 470,000
Capital leases 168,957 237,597 - - 168,957 237,597
$ 17,318,957 $ 17,827,597 $ 33,790,000 $ 17,800,000 $ 51,108,957 $ 35,627,597
The City's General Obligation, Revenue Bonds, and Certificates of Obligation bond ratings are listed
below:
Moody's Standard
Investors Service & Poor's
General Obligation Bonds Al A
Revenue Bonds Aaa AAA
Additional information on the City's outstanding debt can be found on pages 45 through 48 of this
report.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The entire area surrounding Friendswood continues to experience unprecedented growth. The City's
current population is estimated to be 34,306. Friendswood is expected to reach build out sometime
before 2020 with an estimated population of 57,000. The City is continuing to focus on Economic
Development initiatives, including the revitalization of downtown and two new large residential and
commercial developments, West Ranch and The Falls at Friendswood. The Falls at Friendswood, as
planned, will include 1.6 million feet of new development and is projected to add $230 million in new
taxable value and an estimated $1.5 million in sales tax revenue. The West Ranch residential
development is currently under way. The Falls at Friendswood is projected to break ground in the fall of
2007 with project completion estimated to be 5 — 7 years after construction begins.
The City's largest single source of revenue in the General Fund continues to be ad valorem taxes. The
tax rate was reduced by 2.19 cents from $.6040 to $.5821. This rate consists of a maintenance and
operations (M&O) tax rate of $.5120 and an I&S (debt service) tax rate of $.0701. The rate was set
based on a net assessed value of $2,011,630,820. This is an increase of $171,536,000 in taxable value
with $61,596,000 or 36% resulting from new construction in the City. This additional value results in an
M&O levy increase of $651,638. The City's financial management policies sets the guideline to
maintain the fund balance and net assets of the various operating funds at levels sufficient to protect the
City's creditworthiness as well as its financial position from unforeseeable emergencies.
16
The City's second largest source of revenue in the General Fund is sales tax. While the City projects an
increase from the prior year budget of $2,800,000 to $3,359,100, the 2007 estimate is only 3% more
than the collections of the previous fiscal year. Other significant General Fund revenues are building
permits, $506,200 and municipal court fines, $892,970. At the beginning of fiscal year 2006-07,
Council authorized a property tax refund. The City will refund 10% of City property taxes paid for tax
year 2005. The estimated amount of this refund is $1.1 million. If all estimates are realized and after
issuing the property tax refund, the total General Fund unreserved fund balance is projected to be $2.2
million at September 30, 2007.
Water revenues are budgeted at $4,586,000, which is an additional $113,810 in revenues, or 2.5%.
Sewer revenues are budgeted at $3,611,500. This represents an increase of $16,527. Water and sewer
working capital is expected to be $6.58 million at the end of fiscal year 2007. Pursuant to the financial
management policy, funds in excess of the 90-day operating reserve are designated for future capital
improvements. This balance also includes $3.5 million that will be used to acquire additional capacity
in the Southeast Water Purification Plant in lieu of issuing additional debt.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, customers, investors, and creditors with a
general overview of the City's finances and to show the City's accountability for the money it receives.
If you have questions about this report or need additional information, contact Administrative Services,
P. O. Box 1288, Friendswood, Texas 77549-1288, or call Roger C. Roecker 281-996-3211, or email
rroecker@ci.friendswood.tx.us.
17
FINANCIAL STATEMENTS
THIS PAGE LEFT BLANK INTENTIONALLY
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2006
Primary Government
Governmental
Business -type
Component
Activities
Activities
Total
Unit
ASSETS
Cash and investments
$ 18,887,595
$ 5,572,005
$ 24,459,600
$ 27,439
Receivables:
Taxes
1,295,298
-
1,295,298
-
Customer accounts
122240
1,396,456
1,518,696
-
Other
248:020
26,902
274,922
-
Due from other governments
158,923
-
158,923
-
Prepaid expenses
125,483
4,029
129,512
-
Deferred charges
196,235
458,413
654,648
-
Restricted assets:
Cash and investments
-
17,067,621
17,067,621
-
Net investment in joint venture
-
281,806
281,806
-
Capital assets:
Land
24,390,687
718,493
25,109,180
-
Buildings and improvements
17,989,872
-
17,989,872
-
Machinery and equipment
6,522,777
3,041,636
9,564,413
-
Water and wastewater system
-
45,588,759
45,588,759
-
Construction in progress
8,033,428
519,030
8,552,458
-
Water rights
-
3,465,469
3,465,469
-
Accumulated depreciation
( 12,042,400)
( 19,789,685)
( 31,832,085)
-
Total capital assets, net of
accumulated depreciation
44,894,364
33,543,702
78,438,066
-
Total assets
65,928,158
58,350,934
124,279,092
27,439
LIABILITIES
Accounts payable
1,823,421
473,942
2,297,363
4,514
Accrued liabilities
647,254
29,301
676,555
-
Accrued interest
615026
131,852
192,878
-
Customer deposits
-
270,905
270,905
-
Noncurrent liabilities:
Due within one year
676327
883,989
1,560,316
-
Due in more than one year
17,445:404
33,129,838
50,575,242
95,000
Total liabilities
20,653,432
34,919,827
55,573,259
99,514
NET ASSETS
Invested in capital assets, net of related debt
32,849,446
16,815,130
49,664,576
-
Restricted for:
Debt service
1,576,724
-
1,576,724
-
Public safety
272,223
-
272,223
-
Community development
185,210
-
185,210
-
Capital improvements
-
41,057
41,057
-
Unrestricted
10,391,123
6,574,920
16,966,043
( 72,075)
Total net assets
$ 45,274,726
$ 23,4315107
$ 68,705,833
$( 72,075)
The accompanying notes are an integral part of these fmancial statements.
18
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Functions/Programs
Expenses
Primary government
Governmental activities:
General government
$ 3,330,439
Public safety
7,060,800
Community development and public works
2,813,857
Community services
3,098,013
Interest on long-term debt
857,602
Total governmental activities
17,160,711
Business -type activities:
Water and sewer
7,041,870
Total business -type activities
7,041,870
Total primary government
$ 24,202,581
Component unit
Program Revenues
Capital Grants
Charges for Operating Grants and
Services and Contributions Contributions
$ 1,238,631 $ - $ -
54,653 502,122 -
805,710 262,923 -
112,681 6,432 -
2,211,675 771,477 -
8,392,277 - -
8,392,277 - -
$ 10,603,952 $ 771,477 $ -
West Ranch Management District $ 95,598 $ - $ - $ -
Total component unit $ 95,598 $ - $ - $ -
General revenues:
Taxes:
Property, levied for general purposes
Property, levied for debt service
Sales
Franchise
Other
Investment earnings
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets -be i i g
Net assets - ending
The accompanying notes are an integral part of these financial statements.
19
Net (Expense) Revenue and Changes in Net Assets
Primary Government
Governmental Business -type
Activities Activities Total Component Unit
$( 2,091,808)
$ -
$( 2,091,808)
$ -
( 6,504,025)
-
( 6,504,025)
-
( 1,745,224)
-
( 1,745,224)
-
( 2,978,900)
-
( 2,978,900)
-
( 857,602)
-
( 857,602)
-
( 14,177,559)
-
( 14,177,559)
-
-
1,350,407
1,350,407
-
-
1,350,407
1,350,407
-
( 12,827,152)
1,350,407
( 11,476,745)
-
-
-
-
( 95,598)
-
-
-
( 95,598)
9,813,226
-
9,813,226
-
1,491,458
-
1,491,458
23,523
3,658,699
-
3,658,699
-
1,220,581
-
1,220,581
-
11,940
-
11,940
-
915,710
262,761
1,178,471
-
21,556
1,375
22,931
-
680,850
( 680,850)
-
-
17,814,020
( 416,714)
17,397,306
23,523
3,636,461
933,693
4,570,154
( 72,075)
41,638,265
22,497,414
64,135,679
-
$ 45,274,726
$ 23,431,107
$ 68,705,833
$( 72,075)
20
THIS PAGE LEFT BLANK INTENTIONALLY
CITY OF FRIENDSWOOD, TEXAS
BALANCESHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30, 2006
2003 and 2005
Bond
Total Governmental
General Fund Construction Other Funds
Funds
ASSETS
Cash and investments $ 10,352,468 $ 6,134,546 $
2,087,538
$ 18,574,552
Receivable, net of allowances for uncollectibles:
Taxes 1,252,945 -
42,353
1,295,298
Customer accounts 93,041 -
29,199
122,240
Other 229,889 7,187
9,537
246,613
Receivable from other governments 158,923 -
-
158,923
Prepaid expenditures 125,483 -
-
125,483
Total assets $ 12,212,749 $ 6,141,733 $
2,168,627
$ 20,523,109
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable 830,054 9129287
73,430
1,815,771
Accrued liabilities 647,254 -
-
647,254
Deferred revenue 447,966
42,367
490,333
Total liabilities 1,925,274 912,287
115,797
2,953,358
Fund balances:
Reserved for:
Encumbrances 1,188,348 1,2859792
25,207
29499,347
Prepaid expenditures 125,481 -
-
1259481
Debt service -
1,595,397
1,595,397
Unreserved, reported in:
General fund:
Designated for:
Projects 266,243
266,243
Undesignated 8,707,403 -
8,707,403
Capital projects fund - 3,943,654
-
3,943,654
Special revenue funds - -
404,749
404,749
Permanent fund - -
27,477
27,477
Total fund balances 10,287,475 5,229,446
2,052,830
17,569,751
Total liabilities and fund balances $ 12,212,749 $ 6,141,733 $
2,168,627
Amounts reported for governmental activities in the statement of net assets are different because:
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.
44,498,116
Other long-term assets are not available to pay for current -period expenditures and, therefore, are deferred in the funds.
490,333
An Internal Service Fund is used by management to charge the costs of certain capital assets to individual funds. The assets and
liabilities of the Internal Service Fund are included in the governmental activities in the statement of net assets.
703,048
Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds.
( 17,986,522)
Net assets of governmental activities
$ 45,274,726
The accompanying notes are an integral part of these financial statements.
21
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
REVENUES
Property taxes
Sales taxes
Franchise taxes
Fines and forfeitures
Permits and fees
Intergovernmental
Interest on investments
Donations
Other
Total revenues
EXPENDITURES
Current:
General government
Public safety
Community development and public works
Community services
Capital outlay
Debt service:
Principal
Interest and other charges
Total expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Proceeds on sale of capital assets
Transfers in
Transfers out
Total other financing sources and uses
NET CHANGE IN FUND BALANCES
FUND BALANCES, BEGINNING
FUND BALANCES, ENDING
2003 and 2005
Total
Bond
Governmental
General Fund
Construction
Other Funds
Funds
$ 9,808,253
$ -
$ 1,491,283
$ 11,299,536
3,670,639
-
-
3,670,639
1,220,581
-
-
1,220,581
1,051,134
-
112,850
1,163,984
717,029
-
52,323
769,352
535,074
-
-
535,074
478,251
328,487
99,814
906,552
-
-
219,353
219,353
277,995
-
-
277,995
17,758,956
328,487
1,975,623
20,063,066
3,315,844
-
-
3,315,844
6,755,191
-
148,615
6,903,806
2,579,398
-
-
2,579,398
2,630,094
-
-
2,630,094
567,532
3,683,822
41,500
4,292,854
-
-
608,184
608,184
-
-
757,402
757,402
15,848,059
3,683,822
1,555,701
21,087,582
1,910,897
( 3,355,335)
419,922
( 1,024,516)
187,345
-
-
187,345
775,074
-
129,881
904,955
( 129,881)
-
( 94,224)
( 224,105)
832,538
-
35,657
868,195
2,743,435
( 3,355,335)
455,579
( 156,321)
7,544,040
8,584,781
1,597,251
17,726,072
$ 10,287,475
$ 5,229,446
$ 2,052,830
$ 17,569,751
The accompanying notes are an integral part of these financial statements.
22
CITY OF FRIENDSWOOD, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Amounts reported for governmental activities in the Statement of Activities (pages 19 - 20)
are different because:
Net change in fund balances - total governmental funds (page 22) $( 156,321)
Governmental funds report capital outlays as expenditures. However, in the statement of
activities the cost of those assets is allocated over their estimated useful lives and reported as
depreciation expense. This is the amount by which capital outlays exceeded depreciation in
the current period. 3,112,740
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds. 22,864
The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt consumes the
current financial resources of governmental funds. Neither transaction, however, has any
effect on net assets. This amount is the net affect of these differences in the treatment of long-
term debt and related items. 516,222
Some expenses reported in the statement of activities do not require the use of current
financial resources and, therefore, are not reported as expenditures in governmental funds. 4,181
Internal Service Funds are used by management to charge the costs of certain capital assets to
individual funds. The net revenue of certain activities of internal service funds is reported
with governmental activities. 136,775
Change in net assets of governmental activities (pages 19 - 20) $ 3,636,461
The notes to the financial statements are an integral part of this statement.
23
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CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Budgeted Amounts
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)
Property taxes
$ 9,647,300
$ 9,647,300
$ 9,808,253
$ 160,953
Sales taxes
2,810,000
2,810,000
3,670,639
860,639
Franchise taxes
1,130,500
1,130,500
1,220,581
90,081
Fines and forfeitures
861,305
861,305
1,051,134
189,829
Permits and fees
635,100
635,100
717,029
81,929
Intergovernmental
381,086
402,113
535,074
132,961
Interest on investments
157,500
157,500
478,251
320,751
Other
110,733
110,733
277,995
167,262
Total revenues
15,733,524
15,754,551
17,758,956
2,004,405
EXPENDITURES
Current:
General government
Public safety
Community development and public works
Community services
Total expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES
Proceeds on sale of capital assets
Transfers in
Transfers out
Total other financing sources
NET CHANGE IN FUND BALANCES
FUND BALANCES, BEGINNING
3,576,915
6,872,338
3,368,832
2,924,307
16,742,392
3,770,250
6,926,886
3,631,581
3,620,759
17,949,476
3,407,908
6,776,209
2,754,481
2,909,461
15,848,059
362,342
150,677
877,100
711,298
2,101,417
( 1,008,868)
( 2,194,925)
1,910,897
4,105,822
-
-
187,345
187,345
775,074
775,074
775,074
-
-
-
( 129,881)
( 129,881)
775,074
775,074
832,538
57,464
( 233,794)
( 1,419,851)
2,743,435
4,163,286
7,544,040
7,544,040
7,544,040
-
FUND BALANCES, ENDING $ 7,310,246 $ 6,124,189 $ 10,287,475 $ 4,163,286
The notes to the financial statements are an integral part of this statement.
24
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CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
SEPTEMBER 30, 2006
Business -type
Activities
Governmental
Enterprise Fund
Activities
Internal Service
Water and Sewer
Fund
ASSETS
Current assets:
Cash and investments
$ 5,572,005
$ 313,043
Accounts receivable, net of allowance:
Customer accounts
1,396,456
-
Other
26,902
1,407
Prepaid expenses
4,029
-
Restricted cash and investments
17,067,621
-
Total current assets
24,067,013
314,450
Non -current assets:
Restricted net investment in joint venture
281,806
-
Deferred charges
458,413
Capital assets:
Land
718,493
-
Machinery and equipment
3,041,636
1,040,137
Water and wastewater system
45,588,759
-
Construction in progress
519,030
Water rights
3,465,469
-
Accumulated depreciation
( 19,789,685)
( 643,889)
Total capital assets
339543,702
396,248
Total noncurrent assets
34,283,921
396,248
Total assets
$ 58,350,934
$ 710,698
LIABILITIES
Current liabilities:
Accounts payable
$ 473,942
$ 7,650
Accrued liabilities
29,301
-
Accrued interest
131,852
Customer deposits
270,905
Compensated absences
15,028
Bonds payable
868,961
-
Total current liabilities
1,789,989
7,650
Non -current liabilities:
Compensated absences
60,111
-
Bonds, notes and loans payable
33,069,727
-
Total non -current liabilities
33,129,838
-
Total liabilities
34,919,827
7,650
NET ASSETS
Invested in capital assets, net of related debt
16,815,130
396,248
Restricted for capital improvements
41,057
-
Unrestricted
6,574,920
306,800
Total net assets
$ 23,431,107
$ 703,048
The accompanying notes are an integral part of these financial statements.
25
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CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Business -type
Activities
Governmental
Enterprise Fund
Activities
Internal
Water and Sewer
Service Fund
OPERATING REVENUES
Charges for services
$ 8,392,277
$ 291,127
Total operating revenues
8,392,277
291,127
OPERATING EXPENSES
Personnel services
1,246,179
-
Wastewater operations
1,190,644
-
Water purchases
866,197
-
Repairs and maintenance
537,873
-
Supplies
201,434
30,639
Other services and charges
633,274
-
Depreciation
1,403,280
145,364
Total operating expenses
6,078,881
176,003
OPERATING INCOME
2,313,396
115,124
NON -OPERATING REVENUES (EXPENSES)
Investment earnings
262,761
9,796
Gain on sale of capital assets
1,375
11,855
Interest expense and fiscal charges
( 962,989)
-
Total non -operating revenues (expenses)
( 698,853)
21,651
INCOME BEFORE TRANSFERS
1,614,543
136,775
TRANSFERS IN
94,224
-
TRANSFERS OUT
( 775,074)
-
CHANGE IN NET ASSETS
933,693
136,775
TOTAL NET ASSETS, BEGINNING
22,497,414
566,273
TOTAL NET ASSETS, ENDING
$ 23,431,107
$ 703,048
The accompanying notes are an integral part of these fmancial statements.
26
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Business -type
Governmental
Activities
Activities
Enterprise Fund
Internal
Service
Water and Sewer
Fund
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users
$ 8,487,626
$ 291,127
Cash paid to suppliers for goods and services
( 1,227,031)
-
Cash paid to employees for services
( 3,559,445)
( 23,760)
Net cash provided by operating activities
3,701,150
267,367
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers from other funds 94,224 -
Transfers to other funds ( 775,074) Net cash used for noncapital financing activities ( 680,850) -
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from issuance of bonds 16,927,450 -
Proceeds from sale of capital assets - 11,855
Acquisition of capital assets ( 436,721) ( 197,132)
Principal paid on bonds ( 795,000) -
Interest and fiscal charges paid on debt ( 1,263,586) -
Net cash provided (used) by capital and related financing activities 14,432,143 ( 185,277)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment earnings 262,761 9,796
Net cash provided by investing activities 262,761 9,796
NET INCREASE IN CASH AND CASH EQUIVALENTS 17,715,204 91,886
CASH AND CASH EQUIVALENTS, BEGINNING 4,924,422 221,157
CASH AND CASH EQUIVALENTS, ENDING $ 22,639,626 $ 313,043
(Including $17,067,621 for water and sewer reported as restricted assets)
(continued)
27
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Reconciliation of operating income to net cash
provided by operating activities:
Operating income
Adjustments to reconcile operating income
to net cash provided by operating activities:
Depreciation
Changes in assets and liabilities:
Decrease (increase) in assets:
Customer receivable
Other receivable
Prepaid and other assets
Investment in joint venture
Increase (decrease) in liabilities:
Accounts payable
Accrued liabilities
Compensated absences payable
Customer deposits
Net cash provided by operating activities
Business -type
Governmental
Activities
Activities -
Enterprise Fund
Internal
Service
Water and Sewer
Fund
$ 2,313,396
$ 115,124
1,403,280
145,364
93,414
-
( 6,310)
( 771)
( 2,165)
-
( 10,141)
-
( 117,717)
7,650
3,804
-
15,344
-
8,245
-
$ 3,701,150
$ 267,367
NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES
The City issued $7,940,000 of revenue refunding bonds to generate resources for future debt service
payments. Proceeds were deposited into an irrevocable trust for the defeasance of $7,480,000 of
outstanding revenue bonds.
The notes to the financial statements are an integral part of this statement.
28
CITY OF FRIENDSWOOD, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Friendswood, Texas (the City) was incorporated on October 15, 1960. The City
charter provides for a City Council -City Manager form of government. The Mayor and six
Council Members are elected from the City at large serving three-year terms. 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 City is an independent political subdivision of the State of Texas governed by an elected
six -member Council and Mayor and is considered a primary government. As required by
generally accepted accounting principles, these financial statements have been prepared
based on considerations regarding the potential for inclusion of other entities, organizations,
or functions as part of the City's financial reporting entity. Based on these considerations,
the West Ranch Management District has been included in the City's reporting entity as a
discretely presented component unit. Additionally, as the City is considered a primary
government for financial reporting purposes, its activities are not considered a part of any
other governmental or other type of reporting entity.
(continued)
29
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A. Reporting Entity (Continued)
Consideration regarding the potential for inclusion of other entities, organizations, or
functions in the City's financial reporting entity is based on criteria prescribed by generally
accepted accounting principles. These same criteria are evaluated in considering whether the
City is a part of any other governmental or other type of reporting entity. The overriding
elements associated with prescribed criteria considered in determining that the City's
financial reporting entity status is that of a primary government are that it has a separately
elected governing body; it is legally separate; and it is financially independent of other state
and local governments. Additional prescribed criteria under generally accepted accounting
principles include considerations pertaining to organizations for which the primary
government is financially accountable; and considerations pertaining to other organizations
for which the nature and significance of their relationship with the primary government are
such that exclusion would cause the reporting entity's financial statements to be misleading
or incomplete.
The West Ranch Management District, a discretely presented component unit, was created
under Section 59, Article XVI of the Texas Constitution added by an Act of the 79tn
Legislature of the State of Texas, effective June 17, 2005, in accordance with the Texas
Water Code, Chapter 54. The District operates in accordance with Chapter 49 and 54 of the
Texas Water Code and is subject to the continuing supervision of the Texas Commission on
Environmental Quality. The District was created to promote and encourage employment and
the public welfare within the District. The affairs of the District are managed by a Board of
Directors composed of three directors from a list of persons nominated by the Board and
appointed by the City Council and two directors appointed by the City Council. The City is
financially accountable for the District because City Council must approve any debt
issuances. An audit of the District's financial statements for the fiscal year ended July 31,
2006, was conducted by another auditor. Complete financial statements from the component
may be obtained at the District's administrative office.
As indicated in Note 4, 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. Government -wide Fund Financial Statements
The government -wide financial statements (i.e., the statement of net assets and the statement
of activities) report information on all activities of the primary government and its
component unit. For the most part, the effect of interfund activity has been removed from
these statements. Governmental activities, which normally are supported by taxes and
intergovernmental revenue, are reported separately from business -type activities, which rely
to a significant extent on fees and charges for support. Likewise, the primary government is
reported separately from certain legally separate component units for which the primary
government is financially accountable.
(continued)
30
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. Government -wide Fund Financial Statements (Continued)
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment are offset by program revenue. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenue includes 1) charges to
customers or applicants who purchase, use, or directly benefit from goods, services, or
privileges provided by a given function or segment, and 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or
segment. Taxes and other items not properly included among program revenue are reported
instead as general revenue.
Separate financial statements are provided for governmental funds and proprietary funds.
Major individual governmental funds and major individual Enterprise Funds are reported as
separate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government -wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund financial
statements. Revenues are recorded when earned and expenses are recorded when a liability
is incurred, regardless of the timing of related cash flows. Properly taxes are recognized as
revenue in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized
as soon as they are both measurable and available. Revenues are considered to be available
when they are collectible within the current period or soon enough thereafter to pay liabilities
of the current period. For this purpose, the government considers revenue to be available if
collected within 60 days of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and
judgments, are recorded only when payment is due.
Property taxes, franchise taxes, sales taxes, and interest associated with the current fiscal
period are all considered to be susceptible to accrual and so have been recognized as revenue
of the current fiscal period. All other revenue items are considered to be measurable and
available only when cash is received by the City.
The City reports the following major governmental funds:
The General Fund is the City's primary operating fund. It accounts for all
financial resources of the general government, except those required to be
accounted for in another fund.
(continued)
31
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation
(Continued)
The 2003 and 2005 Bond Construction Fund is used to account for the construction
of public safety facilities, and park, streets and drainage improvements that are
funded by the Permanent Improvement Bonds, Series 2003 and 2005.
The City reports the following major Enterprise Fund:
The Water and Sewer Fund is used to account for the activities of the City's
water and wastewater operations.
Additionally, the City reports the following fund type:
The Internal Service Fund is used to account for vehicle management services
provided to other departments or agencies of the City, or to other governments, on
a cost reimbursement basis.
Private -sector standards of accounting and financial reporting issued prior to December 1,
1989, generally are followed in both the government -wide and enterprise fund financial
statements to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. Governments also have the option of following
subsequent private -sector guidance for their business -type activities and Enterprise Funds,
subject to this same limitation. The City has elected not to follow subsequent private -sector
guidance.
As a general rule, the effect of interfund activity has been eliminated from the government -
wide financial statements. Exceptions to this general rule are charges between the City's
water and sewer function and various other functions of the government. Elimination of
these charges would distort the direct costs and program revenue reported for the various
functions concerned.
Proprietary funds distinguish operating revenues and expenses from nonoperating items.
Operating revenues and expenses generally result from providing services and producing and
delivering goods in connection with a proprietary fund's principal ongoing operations. The
principal operating revenues of the Water and Sewer Enterprise Fund, and of the City's
Internal Service Funds are charges to customers for sales and services. Operating expenses
for the Enterprise Fund and Internal Service Funds include the cost of sales and services,
administrative expenses, and depreciation on capital assets. All revenue and expenses not
meeting this definition are reported as nonoperating revenue and expenses.
When both restricted and unrestricted resources are available for use, it is the City's policy to
use restricted resources first, then unrestricted resources as they are needed.
(continued)
32
L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities, and Net Assets or Equity
Cash and Investments
Cash and investments include cash on hand, deposits with financial institutions, short-term
investments in a state -managed public funds investment pool account (TexPool), and two
privately managed public funds investment pools (Lone Star and MBIA). Other investments
consist mainly of U. S. government treasury bills, treasury notes and other U. S. government
obligations. The restricted cash and investments are the assets restricted for specific use.
The restricted cash includes cash on deposit with financial institutions and TexPool.
In accordance with GASB Statement No. 31, the City's general policy is to report money
market investments and short-term participating interest -earning investment contracts at
amortized cost and to report nonparticipating interest -earning investment contracts using a
cost -based measure. However, if the fair value of an investment is significantly affected by
the impairment of the credit standing of the issuer or by other factors, it is reported at fair
value. All other investments are reported at fair value unless a legal contract exists which
guarantees a higher value. The term "short-term" refers to investments, which have a
remaining term of one year or less at time of purchase. The term "nonparticipating" means
that the investment's value does not vary with market interest rate changes.
The City maintains a pooled cash and investments account for all funds of the City. Each
fund's positive equity in the pooled cash account is presented as "cash and investments" in
the financial statements. Negative equity balances have been reclassified and are reflected as
interfund accounts payable. Interest income and interest expense are allocated to each
respective individual fund monthly based on their representative fund balances.
The City's cash and cash equivalents are considered to be cash on hand, demand deposits,
and short-term investments with original maturities of three months or less from the date of
acquisition.
Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements
outstanding at the end of the fiscal year are referred to as either "due to/from other funds"
(i.e., the current portion of interfimd loans) or "advances to/from other funds" (i.e., the
noncurrent portion of interfund loans). All other outstanding balances between funds are
reported as "due to/from other funds." Any residual balances outstanding between the
governmental activities and business -type activities are reported in the government -wide
financial statements as "internal balances."
Advances between funds, as reported in the fund financial statements, are offset by a fund
balance reserve account in applicable governmental funds to indicate that they are not
available for appropriation and are not expendable available financial resources.
(continued)
33
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities, and Net Assets or Equity (Continued)
Receivables and Payables (Continued)
All trade and property tax receivables are shown net of an allowance for uncollectibles.
Trade accounts receivable in excess of 180 days comprise the trade accounts receivable
allowance for uncollectibles. The property tax receivable allowance is equal to 10 percent of
outstanding property taxes at September 30, 2006.
The City's property taxes are levied annually in October on the basis of the Appraisal District's
assessed values as of January 1 of that calendar year. Appraised values are established by the
Appraisal District at market value and assessed at 100% of appraised value less exemptions.
The City's property taxes are billed and collected by 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 $0.604 per $100
of assessed valuation that were prorated between operations and debt service in the amounts
of $0.5243 and $0.0797, respectively. The resulting adjusted tax levies were approximately
$9.7 and $1.4 million for operations and debt service, respectively, based on a total adjusted
taxable valuation of approximately $1.842 billion for the 2005 tax year.
At an election held November 8, 2005, voters of the West Ranch Management District, a
discretely presented component unit, authorized a maintenance tax not to exceed $0.65 per
$100 valuation on all property within the District subject to taxation. The District levied an
ad valorem maintenance tax at the rate of $0.6500 per $100 of assessed valuation. The
maintenance tax is being used by the District to pay operating expenditures.
Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are
recorded as prepaid items in both government -wide and fund financial statements.
Restricted Assets
Certain proceeds of the City's Enterprise Fund revenue bonds, as well as certain resources set
aside for their repayment, are classified as restricted assets on the balance sheet because their
use is limited by applicable bond covenants.
(continued)
34
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities, and Net Assets or Equity (Continued)
Capital Assets
Capital assets, which include property, plant, equipment, infrastructure, and water rights, are
reported in the applicable governmental or business -type activities columns in the government -
wide financial statements. The City defines capital assets as assets with an initial, individual cost
of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded
at historical cost or estimated historical cost if purchased or constructed. Donated capital assets
are recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend assets' lives are not capitalized.
Property, plant and equipment is depreciated using the straight-line method over the
following useful lives:
Assets Years
Buildings
20-50
Improvements
5-50
Equipment
5-10
Water and sewer system
40-50
The City has elected to delay implementation of the requirements of GASB 34 related to
infrastructure (roads, sidewalks, etc.) assets acquired prior to October 1, 2002. GASB 34
permits an optional four-year transition period for governmental infrastructure reporting.
Compensated Absences
The City's employees earn vacation and sick leave, which may either be taken or
accumulated, up to certain amounts, until paid upon resignation or retirement. All vacation
and sick leave pay are accrued when incurred in the government -wide and proprietary fund
financial statements. A liability for these amounts is reported in governmental funds only if
they have matured, for example, as a result of employee resignations and retirements.
Long-term Obligations
In the government -wide financial statements and proprietary fund types in the fund financial
statements, long-term debt and other long-term obligations are reported as liabilities in the
applicable governmental activities, business -type activities, or proprietary fund type
statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred
and amortized over the life of the bonds using the straight-line method, which approximates
the effective interest method. Bonds payable are reported net of the applicable bond
premium or discount. Bond issuance costs are reported as deferred charges and amortized
over the term of the related debt.
(continued)
35
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities, and Net Assets or Equity (Continued)
Long-term Obligations (Continued)
In the fund financial statements, governmental fund types recognize bond premiums and
discounts, as well as bond issuance costs during the current period. The face amount of debt
issued is reported as other financing sources. Premiums received on debt issuances are
reported as other financing sources while discounts on debt issuances are reported as other
financing uses. Issuance costs, whether or not withheld from the actual debt proceeds
received, are reported as debt service expenditures.
Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for
amounts that are not available for appropriation or are legally restricted by outside parties for
use for a specific purpose. Designations of fund balance represent tentative management
plans that are subject to change.
Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in
capital assets, net of related debt consists of capital assets, net of accumulated depreciation,
reduced by the outstanding balances of any borrowing used for the acquisition, construction
or improvements of those assets, and adding back unspent proceeds. Net assets are reported
as restricted when there are limitations imposed on their use either through the enabling
legislations adopted by the City or through external restrictions imposed by creditors,
grantors or laws or regulations of other governments.
Estimates
The preparation of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual amounts could differ from those estimates.
36
2. RECONCH IATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS
Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the
Government -wide Statement of Net Assets
The governmental fund balance sheet includes a reconciliation between fund balance — total
governmental funds and net assets — governmental activities as reported in the government -wide
statement of net assets. One element of that reconciliation explains, "Long-term liabilities,
including bonds payable, are not due and payable in the current period and therefore are not
reported in the funds." The details of this $17,986,522 difference are as follows:
Premium on bonds
$ 151,642
General obligation bonds
17,150,000
Deferred charges for issuance costs (to be amortized
( 196,235)
over life of debt)
Capitalized lease obligations
168,957
Accrued interest payable
61,026
Compensated absences
651,132
Net adjustment to reducefund balance - total
governmental funds to arrive at net assets -
governmental activities $ 17,986,522
Explanation of Certain Differences Between the Governmental Fund Statement of Revenue,
Expenditures and Changes in Fund Balances and the Government -wide Statement of
Activities
The governmental fund statement of revenue, expenditures and changes in fund balances
includes a reconciliation between net changes in fund balances — total governmental fund and
changes in net assets of governmental activities as reported in the government -wide statement of
activities. One element of that reconciliation explains, "Governmental funds report capital
outlays as expenditures. However, in the statement of activities, the cost of those assets is
allocated over their estimated useful lives and reported as depreciation expense." Another
element is in the statement of activities, only the gain on the sale of capital assets is reported.
However, in the governmental funds, the proceeds from the sale increase financial resources.
Thus, the change in net assets differs from the change in fund balance by the cost of capital
assets sold. The details of this $3,112,740 difference are as follows:
Capital outlay $ 4,298,953
Depreciation expense ( 1,007,609)
Cost of land sold ( 178,604)
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities $ 3,112,740
(continued)
37
2. RECONCH IATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS
(Continued)
Explanation of Certain Differences Between the Governmental Fund Statement of Revenue,
Expenditures and Changes in Fund Balances and the Government -wide Statement of
Activities (Continued)
Another element of that reconciliation states, "Revenues in the statement of activities that do not
provide current financial resources are not reported as revenues in the funds." The details of this
$22,864 difference are as follows:
Property taxes $ 5,148
Court fines 17,716
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets ofgovernmental activities $ 22,864
Another element of that reconciliation states, "The issuance of long-term debt (e.g., bonds,
leases) provides current financial resources to governmental funds, while the repayment of the
principal of long-term debt consumes the current financial resources of governmental funds.
Neither transaction, however, has any effect on net assets. Also, governmental funds report the
effect of issuance costs, and similar items when debt is first issued, whereas these amounts are
deferred and amortized in the statement of activities." The details of this $516,222 difference are
as follows:
Principal repayments:
General obligation debt $ 440,000
Capital lease 68,640
Amortization of premium on bonds 7,582
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets ofgovernmental activities $ 516,222
Another element of that reconciliation states, "Some expenses reported in the statement of
activities do not require the use of current financial resources and therefore are not reported as
expenditures in governmental funds." The details of this $4,181 difference are as follows:
Compensated absences $ 12,419
Accrued interest 1,574
Amortization of issuance costs ( 9,812)
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets ofgovernmental activities $ 4,181
38
3. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
Budgetary Information
Annual appropriated budgets are adopted for the General, Fire/EMS Donations Special Revenue,
and Debt Service Funds and 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.
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 15`l' 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 funds available for appropriation, revenue in
excess of those estimated in the budget, the Council may make supplemental appropriation for
the year up to the amount of such excess.
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.
No appropriation for debt service may be reduced or transferred and no appropriation may be
reduced below any amount required by law to be appropriated or by more than the amount of the
unencumbered balance thereof. The City Council made supplemental budgetary appropriation
changes during the fiscal year. The reported budgetary data has been revised for these
amendments legally authorized during the year.
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.
(continued)
39
3. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued)
Budgetary Information (Continued)
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 serve 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 lapse at year-end and
are reappropriated in the ensuing year's budget.
Excess of Expenditures Over Appropriations
During the 2006 fiscal year, expenditures exceeded appropriations in the following departments
(the legal level of compliance):
General Fund:
General Government - City Manager
General Government - City Secretary
Public Safety - Communications
Public Safety - Animal Control
Community Services - Administration
Community Services - Swimming Pool
4. DETAILED NOTES ON ALL FUNDS
Deposits and Investments
As of September 30, 2006, the City had the following investments:
$ 18,949
11,799
250
4,196
2,284
6,680
Weighted Average
Investment Type Fair Value Maturity (Days)
MBIA Class $ 27,928,782 35
Lone Star 3,761,654 31
Tex Pool 3,634,035 34
U. S. Agency Securities:
Freddie Mac 197,580 606
Federal Home Loan Bank 4,076,080 193
Fannie Mae 598,260 99
Total U. S. Agency Securities 4,871,920
Total portfolio $ 40,196,391
Portfolio weighted average maturity (days) 54
(continued)
40
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
The City's investment pools are 20-like pools. A 2a7-like pool is one which is not registered
with the Securities and Exchange Commission ("SEC') as an investment company, but
nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC's
Rule 2a7 of the Investment Company Act of 1940.
Interest Rate Risk In accordance with its investment policy, the City manages its exposure to
declines in fair market values by limiting 30% of its portfolio to be invested for a period of more
than two years. As of September 30, 2006, all of the City's investments were invested for a
period less than two years.
Custodial Credit Risk. In the case of deposits, this is the risk that in the event of a bank failure, the
City's deposits may not be returned to it. State statutes require that all deposits in financial
institutions be fully collateralized by U. S. Government obligations or its agencies and
instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a fair
value of not less than the principal amount of deposits. As of September 30, 2006, $1,319,344 of
the City's $1,519,344 deposit balance was collateralized with securities held by the pledging
financial institution. The remaining balance, $200,000 was covered by FDIC insurance.
Credit Risk It is the City's policy to limit its investments to investment types with an investment
quality rating not less than A or its equivalent by a nationally recognized statistical rating
organization. The City's investments as of September 30, 2006, were rated as follows:
Investment Tvne Rating Rating Aden
MBIA Class
AAA Fitch
Lone Star
AAm Standard & Poor's
TexPool
AAAm Standard & Poor's
U. S. Agency Securities:
Freddie Mac
AAa Moody's Investor Service
Federal Home Loan Bank
Aaa Moody's Investor Service
Fannie Mae
Aaa Moody's Investor Service
Under provisions of state and local statutes, the City's investment policies, and provisions of the
City's depository contracts with an area financial institution, the City is authorized to place
available deposits and investments in the following:
1. Obligations of the U. S., its agencies and instrumentalities;
2. Certificates of Deposit issued by state and national banks or savings or loan
associations domiciled in this state that are guaranteed or insured by the Federal
Deposit Insurance Corporation or collateralized in accordance with Section
2256.010, the Texas Government Code, in face amount not to exceed $100,000;
3. No-load money market mutual funds; and
4. TexPool, Lone Star Investment Pool and MBIA Class.
(continued)
41
4. DETAII.,ED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
The City Council has adopted a written investment policy regarding the investments of its funds
as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas Government
Code). The investments of the City are in compliance with the Council's investment policies.
The City did not have any derivative investment products during the current year. All significant
legal and contractual provisions for investments were complied with during the year.
Investments at year-end are representative of the types of investments maintained by the City
during the year.
Receivables
Receivables as of year-end for the City's individual major funds, nonmajor funds in the
aggregate and the Internal Service Fund including the applicable allowances for uncollectible
accounts, are as follows:
Governmental Funds
Proprietary Funds
2003 and
2005 Bond
Water and
Internal
General
Construction
Nonmajor
Sewer
Service
Total
Receivables:
Property taxes
$ 271,893
$ -
$ 47,059
$ -
$ - $
318,952
Sales taxes
698,533
-
-
-
-
698,533
Franchise taxes
309,708
-
-
-
-
309,708
Customer accounts
95,041
-
29,199
1,406,456
-
1,530,696
Accrued interest
50,105
7,187
9,524
26,454
1,407
94,677
Court fines
454,381
-
-
-
-
454,381
Other
13,446
-
13
448
-
13,907
Gross receivables
1,893,107
7,187
85,795
1,433,358
1,407
3,420,854
Less: allowance for
uncollectibles
317,232
-
4,706
10,000
-
331,938
Net total receivables
$ 1,575,875
$ 7,187
$ 81,089
$ 1,423,358
$ 1,407 $
3,088,916
Governmental funds report deferred revenue in connection with receivables for revenue that is
not considered to be available to liquidate liabilities of the current period. Governmental funds
also defer revenue recognition in connection with resources that have been received, but not yet
earned. At the end of the current fiscal year, the various components of deferred revenue and
unearned revenue reported in the governmental funds were as follows:
(continued)
42
4. DETAILED NOTES ON ALL FUNDS (Continued)
Receivables (Continued)
Unavailable
General Fund
Delinquent property taxes $ 244,704
Court fines 192,029
Miscellaneous 11,233
Total General Fund 447,966
Court Security and Technology Fund
Miscellaneous 14
Total Court Security and Technology Fund 14
Debt Service Fund
Delinquent property taxes 42,353
Total Debt Service Fund 42,353
Total Governmental Funds $ 490,333
Capital Assets
Capital asset activity for the year ended September 30, 2006, was as follows:
Primary Government
Governmental activities:
Capital assets, not being depreciated:
Land
Construction in progress
Total assets not being depreciated
Capital assets, being depreciated:
Buildings and improvements
Machinery and equipment
Total capital assets being depreciated
Less accumulated depreciation:
Buildings and improvements
Machinery and equipment
Total accumulated depreciation
Total capital assets being
depreciated, net
Governmental activities capital
assets, net
Beginning Ending
Balance Increases Decreases Balance
$ 24,564,265 $ 4,092 $ 177,670 $ 24,390,687
6,343,788 4,088,523 2,398,883 8,033,428
30,908,053 4,092,615 2,576,553 32,424,115
15,614,543 2,375,329 - 17,989,872
6,116,169 427,024 20,416 6,522,777
21,730,712 2,802,353 20,416 24,512,649
6,418,483 699,631 - 7,118,114
4,490,426 454,276 20,416 4,924,286
10,908,909 1,153,907 20,416 12,042,400
10,821,803 1,648,446 - 12,470,249
$ 41,729,856 $ 5,741,061 $ 2,576,553 $ 44,894,364
(continued)
4. DETAILED NOTES ON ALL FUNDS (Continued)
Capital Assets (Continued)
Business -type activities
Capital assets, not being depreciated:
Land
Construction in progress
Water rights
Total assets not being depreciated
Capital assets, being depreciated:
Machinery and equipment
Water and wastewater system
Total capital assets being depreciated
Less accumulated depreciation:
Machinery and equipment
Water and wastewater system
Total accumulated depreciation
Total capital assets being
depreciated, net
Business -type activities capital
assets, net
Beginning
Ending
Balance
Increases
Decreases
Balance
$ 718,493
$ -
$ -
$ 718,493
333,368
426,946
241,284
519,030
3,465,469
-
-
3,465,469
4,517,330
426,946
241,284
4,702,992
3,041,636
-
-
3,041,636
45,336,323
252,436
-
45,588,759
48,377,959
252,436
-
48,630,395
2,423,111
42,743
-
2,465,854
15,963,294
1,360,537
-
17,323,831
18,386,405
1,403,280
-
19,789,685
29,991,554
( 1,150,844)
-
28,840,710
$ 34,508,884
$( 723,898)
$ 241,284
$ 33,543,702
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government $ 139,856
Public safety 160,099
Community development and public works 237,564
Community services 471,024
Capital assets held by the City's internal service fund are
charged to the various functions based on their usage 145,364
Total depreciation expense - governmental activities $ 1,153,907
Business -type activities:
Water and sewer $ 1,403,280
Total depreciation expense - business -type activities $ 1,403,280
Commitments for construction projects in progress were $2,563,400 at September 30, 2006.
(continued)
44
4. DETAILED NOTES ON ALL FUNDS (Continued)
Interfund Transfers
The following schedule briefly summarizes the City's transfer activity:
Transfers In
Nonmajor governmental
General
Water and sewer
Long-term Debt
Transfers Out
Amount
Purpose
General
$ 129,881
Transfer amounts restricted for
Court Security and Technology
Water and sewer
775,074
Subsidy for administrative
expenditures
Debt service
94,224
Transfer amount for water and
sewer debt service payment
The City issues a variety of long-term debt instruments in order to acquire and/or construct major
capital facilities and equipment for governmental and business -type activities. These instruments
include general obligation bonds, certificates of obligation, revenue bonds, and capital leases.
These debt obligations are secured by either future tax revenue, water and sewer system revenue,
or liens on property and equipment. Debt obligations that are intended to be repaid from water
and sewer system revenue have been recorded as business -type activities. All other long-term
obligations of the City are considered to be governmental type activities.
Bonds Payable and Certificates of Obligation
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 governmental and
business -type activities at September 30, 2006, follows:
(continued)
45
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Bonds Payable and Certificates of Obligation (Continued)
Series and Original
Issue Amount
General Obligation Bonds
2002 Refunding $ 3,785,000
2003 Permanent
Improvement 8,700,000
2005 Permanent
Improvement and Refunding 9,800,000
Revenue Bonds
1999 Waterworks and Sewer
System Revenue
2000 Waterworks and Sewer
System Revenue
2001 Waterworks and Sewer
System Revenue
2006 Waterworks and Sewer
System Revenue and
Refunding Bond
Combination Tax and Revenue
Certificates of Obligation
1995 Series
Final
Interest
Governmental
Business -type
Maturity
Rate
Activities
Activities
2008
3.950%
$ 685,000
$ 920,000
2026
3.65% -5.50%
8,600,000
-
2020
2.850/&4.375%
7,865,000
1,925,000
17,150,000
2,845,000
4,945,000
2019
4.2% - 5.55%
- 150,000
3,515,000
2019
4.2%- 6.5%
- 240,000
6,100,000
2021
4.7%- 6.5%
- 6,000,000
24,285,000
2031
4.0°/r5.0%
- 24,285,000
3,200,000 2010 5.375%- 7.375%
Total Bonds and Certificates of Obligation
30,675,000
280,000
280,000
$ 17,150,000 $ 33,800,000
Annual debt service requirements for bonds and certificates of obligation are as follows:
Year Ending
Governmental Activities
Business -type
Activities
September 30,
Principal
Interest
Principal
Interest
2007
$ 490,000
$ 722,102
$ 860,000
$ 1,561,380
2008
595,000
698,761
905,000
1,519,535
2009
620,000
670,243
1,030,000
1,474,136
2010
645,000
639,094
1,080,000
1,425,012
2011
675,000
606,806
1,135,000
1,372,424
2012-2016
3,790,000
2,583,843
6,485,000
6,047,236
2017-2021
4,615,000
1,721,423
8,100,000
4,436,671
2022-2026
5,720,000
635,794
7,125,000
2,538,170
2027-2031
-
-
7,080,000
672,859
Total
$ 17,150,000
$ 8,278,056
$ 33,800,000
$ 21,047,423
(continued)
46
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Advance Refunding
The City issued $7,940,000 of revenue refunding bonds to provide resources to purchase U. S.
Government State and Local Government Series securities that were placed in an irrevocable
trust for the purpose of generating resources for all future debt service payments of $7,480,000
of revenue bonds. As a result, the refunded bonds are considered to be defeased and the liability
has been removed from the Water and Sewer Fund and business -type activities column of the
applicable statement of net assets. The reacquisition price exceeded the net carrying amount of
the old debt by $268,121. This amount is being netted against the new debt and amortized over
the remaining life of the refunded debt, which is shorter than the life of the new debt issued.
This advance refunding was undertaken to decrease total debt service payments over the next 12
years by $409,031 and resulted in an economic gain of $328,494.
Prior Year Defeasance of Bonds
In prior years, the City defeased certain bonds by placing the proceeds of new bonds in an
irrevocable trust to provide future debt service payments on the old bonds. Accordingly, the
trust account assets and liabilities for the defeased bonds are not included in the City's financial
statements. On September 30, 2006, $11,030,000 of bonds considered defeased is still
outstanding.
Federal Arbitrage
General obligation bonds, combination tax and revenue bonds and certificates of obligation are
subject to the provisions of the Internal Revenue Code of 1986 related to arbitrage and interest
income tax regulations under those provisions.
Obligations Under Capital Leases
In prior years, the City entered into capital lease agreements in order to purchase machinery and
equipment for public works, police and fire departments. The assets acquired through these lease
agreements are as follows:
Governmental
Activities
Asset:
Machinery and equipment $ 634,701
Less: accumulated depreciation 418,599
Total $ 216,102
(continued)
47
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
The following is a summary of future lease payments due on this machinery and equipment:
Year Ending Lease
September 30, Obligation
2007 $ 80,572
2008 80,574
2009 20,071
Total 181,217
Less interest portion ( 12,260)
Obligations under capital leases $ 168,957
Changes in Long-term Liabilities
Long-term liability activity of the primary government for the year ended September 30, 2006, was
as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental activities
General obligation bonds $ 17,590,000 $ - $ 440,000 $ 17,150,000 $ 490,000
Premium on bond issuance 159,224 - 7,582 151,642 7,582
Capital lease obligations 237,597 - 68,640 168,957 72,577
Compensated absences 663,551 464,485 476,904 651,132 106,168
Governmental activities
long-term liabilities $ 18,650,372 $ 464,485 $ 993,126 $ 18,121,731 $ 676,327
Business -type activities
General obligation bonds $ 3,310,000 $ - $ 455,000 $ 2,855,000 $ 470,000
Revenue bonds 14,020,000 24,285,000 7,640,000 30,665,000 160,000
Certificates of obligation 470,000 - 190,000 280,000 230,000
Premium on bond issuance 40,198 390,571 8,040 422,729 24,314
Loss on refunding ( 20,906) ( 268,121) ( 4,181) ( 284,846) ( 15,353)
Compensated absences 59,795 41,856 26,512 75,139 15,028
Business -type activities
long-term liabilities $ 17,879,087 $ 24,449,306 $ 8,315,371 $ 34,013,022 $ 883,989
Long-term liability activity of the West Ranch Management District for the year ended July 31,
2006, was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Component unit
Developer advances $ - $ 95,000 $ - $ 95,000 $ -
Component unit
long-term liabilities $ - $ 95,000 $ - $ 95,000 $ -
A developer of the West Ranch Management District has advanced $95,000 to the District for
operating expenses. The District has agreed to repay this amount plus interest. The District is
currently unable to estimate when bonds will be issued to pay this liability.
The compensated absence liability attributable to the governmental activities will be liquidated
primarily by the General Fund.
(continued)
48
4. DETAILED NOTES ON ALL FUNDS (Continued)
Restricted Assets
The balances of the restricted asset accounts in the Enterprise Fund are as follows:
Cash and investments:
Customer deposits $ 270,905
Construction 45,013
Construction - 2006 bonds 16,751,703
Net investment in joint venture 281,806
Total restricted assets $ 17,349,427
Employee Retirement System
Plan Description
The City provides pension benefits for all of its fulltime employees through a nontraditional, joint
contributory, hybrid defined benefit plan in the statewide Texas Municipal Retirement System
(TMRS). The City is one of 811 municipalities having the benefit plan administered by TMRS, an
agent multiple employer public employee retirement system. Each of the 811 municipalities has an
annual individual actuarial valuation performed. All assumptions for the December 31, 2005,
valuations are contained the 2005 T IRS Comprehensive Annual Financial Report, a copy of
which may be obtained by writing P. O. Box 149153, Austin, Texas 78714-9153.
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 date the plan began, 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 the plan began 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 age 60 and above with 5 or more years of service or with 20 years of
service regardless of age. A member is vested after 5 years. 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.
(continued)
49
4. DETAILED NOTES ON ALL FUNDS (Continued)
Employee Retirement System (Continued)
Contributions
The contribution rate for the employee is 7%, and the City matching ratio is currently 2 to 1, both
as adopted by the governing body of the City. Under the state law governing TMRS, the actuary
annually determines the City contribution rate. 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 the 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/her retirement becomes effective. The
prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over
the remainder of the plan's 25-year amortization period. The unit credit actuarial cost method is
used for determining the City contribution rate. Both the employees and the City make
contributions monthly. Since the City needs to know its contribution rate in advance for
budgetary purposes, there is a one-year delay between the actuarial valuation that is the basis for
the rate and the calendar year when the rate goes into effect (i.e. December 31, 2005, valuation is
effective for rates beginning in January 2007).
Schedule of Actuarial Liabilities and Funding Progress
Actual valuation Date
12/031/03
12/031/04
12/031/05
Actuarial value of assets
$ 14,949,967
$ 17,143,239
$ 18,436,890
Actuarial accrued liability
19,935,673
21,881,143
23,496,143
Percent funded
75.0%
78.3%
78.5%
Unfunded (overfunded) actuarial accrued liability (UAAL)
4,985,706
4,737,904
5,059,253
Annual covered payroll
6,866,859
7,479,620
7,639,184
UAAL as a percentage of covered payroll
72.6%
63.3%
66.2%
Net pension obligation (NPO at the beginning of period
-
-
-
Annual Pension Cost:
Annual required contribution (ARC)
957,310
1,084,657
1,055,993
Interest on NPO
-
-
-
Adjustment to the ARC
957,310
1,084,657
1,055,993
Contributions made
957,310
1,084,657
1,055,993
Increase in NPO
-
-
-
NPO at the end of the period
(continued)
50
4. DETAILED NOTES ON ALL FUNDS (Continued)
Employee Retirement System (Continued)
Contributions (Continued)
Actuarial Cost Method
Amortization Method
Remaining Amortization Period
Asset Valuation Method
Amortzation Period
Investment Rate of Return
Projected Salary Increases
Includes Inflation at
Cost -of -living Adjustments
Deferred Compensation Plan
Actuarial Assumptions
- Unit Credit
- Level Percent of Payroll
- 25 Years - Open Period
- Amortized Cost (to accurately reflect the
requirements of GASB Statement No. 25,
paragraphs 36e and 138)
- Open
- 7%
- None
- 3.5%
- None
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 that 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.
Southeast Water Purification Plant
The City has entered into a contract with the City of Houston for constructing, operating and
maintaining a water purification plan known as Southeast Water Purification Plant. The City's
pro rata share of the actual pumping construction costs is 1.33 percent.
The City began receiving water from the plant on October 15, 1990. The City is billed on a
monthly basis for the actual gallons of water received times the City's pro rata share of actual
costs. At the end of each quarter, the City of Houston computes the total operation and
maintenance 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.
(continued)
51
4. DETAILED NOTES ON ALL FUNDS (Continued)
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 treatment plant known as Blackhawk Regional Waste
Treatment Plant. The City of Friendswood, the City of Houston, Harris County MUD No. 55,
and the Baybrook MUD 1, (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, 2006, 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 9
members (3 appointed by the governor, 3 appointed by Harris County, Galveston County, and
Chambers County, and 3 appointed by the participants).
Separate financial statements for the joint venture were available in the December 31, 2005,
audited financial statements of the Gulf Coast Waste Disposal Authority and are summarized
below:
Total assets
Total liabilities
Total fund equity
Total revenue
Total expenditures
Net change in fund balance
Fund balances, beginning
Fund balances, ending
Joint Venture
Blackhawk
Regional
Facility
$ 662,496
662,496
Blackhawk
Contingency
Reserve
$ 249,874
$ - $ 249,874
$ 2,011,478 $ 23,889
2,011,478 -
23,889
225,985
$ - $ 249,874
Complete financial statements may be obtained at the Gulf Coast Waste Disposal Authority, 910
Bay Area Boulevard, Houston, Texas 77058.
(continued)
52
4. DETAILED NOTES ON ALL FUNDS (Continued)
Risk Management
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. The City's risk
management program encompasses obtaining property and liability insurance through Texas
Municipal League (TML), an Intergovernmental Risk -Pool. The City has not had any significant
reduction in insurance coverage and the amounts of insurance settlements have not exceeded
insurance coverage for any of the last three years. The participation of the City in TML is limited
to payment of premiums. During the year ended September 30, 2006, the City paid premiums to
TML for provisions of various liability, property and casualty insurance. The City has various
deductible amounts ranging from $500 to $5,000 on various policies. At year-end, the City did not
have any significant claims.
The City also provides workers' compensation insurance on its employees through TML. Workers'
compensation is subject to change when audited by TML. At year-end, September 30, 2006, the
City believed the amounts paid on workers' compensation would not change significantly from the
amounts recorded.
During the year ended September 30, 2006, employees of the City were covered by a health and
dental insurance plan. Employees have the option to select either a HMO or a Point of Service
(POS) plan. If an individual employee chooses to cover only themselves, the City pays 90% of the
monthly premium. If an individual employee desires to cover themselves and their dependents, the
City pays 70% of the monthly premium.
Contingent Liabilities
West Ranch Management District — Developer Reimbursements
A developer of the West Ranch Management District is constructing water, sewer and drainage
facilities within the boundaries of the District. The District has agreed to reimburse the developer for
a portion of these costs plus interest from the proceeds of future bond sales. These amounts are to be
reimbursed from bond proceeds to the extent approved by the District. The District's engineer has
stated that current construction contract amounts are approximately $3,715,000. This amount has not
been recorded in the financial statements since the facilities are not complete nor operational.
Litigation
The City is a defendant in various lawsuits. The outcome and the impact of these lawsuits is not
presently determinable.
Federal and State Programs
The City recognizes as revenue grant monies received as reimbursement for costs incurred in
certain federal and state programs it administers. Amounts received or receivable from grantor
agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims,
including amounts already collected, may constitute a liability of the applicable funds. The
amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at
this time although the City expects such amounts, if any, to be immaterial.
53
COMBINING AND INDIVIDUAL FUND
STATEMENTS AND SCHEDULES
THIS PAGE LEFT BLANK INTENTIONALLY
GENERAL FUND
The General Fund accounts for the resources used to finance the fundamental operations of the City. It
is the basic fund of the City and covers all activities for which a separate fund has not been established.
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Variance with
Final Budget
Budgeted
Amounts
Actual
Positive
Original
Final
Amounts
(Negative)
REVENUES
Property taxes
$ 9,647,300
$ 9,647,300
$ 9,808,253
$ 160,953
Sales taxes
2,810,000
2,810,000
3,670,639
860,639
Franchise taxes
1,130,500
1,130,500
1,220,581
90,081
Fines and forfeitures
861,305
861,305
1,051,134
189,829
Permits and fees
635,100
635,100
717,029
81,929
Intergovernmental
381,086
402,113
535,074
132,961
Interest on investments
157,500
157,500
478,251
320,751
Other
110,733
110,733
277,995
167,262
Total revenues
15,733,524
15,754,551
17,758,956
2,004,405
EXPENDITURES
GENERAL GOVERNMENT
Mayor and council:
Personnel services
Supplies
Other services and charges
Total mayor and council
City manager:
256
256
5,293
5,293
60,827
51,789
66,376
57,338
- 256
2,286 3,007
48,132 3,657
50,418 6,920
Personnel services
367,973
369,973
403,384
( 33,411)
Supplies
6,756
6,756
5,478
1,278
Other services and charges
73,701
101,701
88,517
13,184
Total city manager
448,430
478,430
497,379
( 18,949)
City secretary:
Personnel services
242,543
251,605
258,928
( 7,323)
Supplies
6,205
6,205
4,567
1,638
Repairs and maintenance
1,010
1,010
-
1,010
Other services and charges
38,775
38,775
45,899
( 7,124)
Total city secretary
288,533
297,595
309,394
( 11,799)
(continued)
54
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Variance with
Final Budget
Budgeted Amounts
Actual
Positive
Original
Final
Amounts
(Negative)
EXPENDITURES (Continued)
GENERAL GOVERNMENT (Continued)
Administrative services:
Personnel services
$ 521,685 $
536,602
$ 482,091
$ 54,511
Supplies
12,766
12,766
4,180
8,586
Repairs and maintenance
287
287
214
73
Other services and charges
63,415
73,515
42,304
31,211
Total administrative services
598,153
623,170
528,789
94,381
Human resources:
Personnel services
267,817
267,817
250,041
17,776
Supplies
8,836
8,836
14,779
( 5,943)
Other services and charges
76,202
76,202
57,396
18,806
Total human resources
352,855
352,855
322,216
30,639
Tax:
Other services and charges
210,261
210,261
168,608
41,653
Total tax
210,261
210,261
168,608
41,653
Economic development:
Personnel services
96,156
96,156
96,628
( 472)
Supplies
109,451
109,451
100,119
9,332
Total economic development
205,607
205,607
196,747
8,860
Legal services:
Other services and charges
130,678
182,734
157,285
25,449
Total legal services
130,678
182,734
157,285
25,449
(continued)
55
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Variance with
Final Budget
Budgeted Amounts
Actual
Positive
Original
Final
Amounts
(Negative)
EXPENDITURES (Continued)
GENERAL GOVERNMENT (Continued)
Municipal court:
Personnel services
$ 371,864 $
371,864
$ 357,113
$ 14,751
Supplies
14,355
14,355
17,701
( 3,346)
Repairs and maintenance
560
560
70
490
Other services and charges
19,523
19,523
23,979
( 4,456)
Total municipal court
406,302
406,302
398,863
7,439
Computer services:
Personnel services
240,765
240,765
235,353
5,412
Supplies
34,545
34,665
30,701
3,964
Repairs and maintenance
51,509
51,509
45,276
6,233
Other services and charges
287,996
320,114
235,711
84,403
Capital outlay
100,000
154,000
92,064
61,936
Total computer services
714,815
801,053
639,105
161,948
Risk management:
Personnel services
28,556
28,556
29,489
( 933)
Supplies
8,610
8,610
9,524
( 914)
Other services and charges
117,739
117,739
100,091
17,648
Total risk management
154,905
154,905
139,104
15,801
Total general government
3,576,915
3,770,250
3,407,908
362,342
PUBLIC SAFETY
Police services:
Personnel services
3,960,378
3,968,264
3,859,122
109,142
Supplies
206,257
213,546
254,317
( 40,771)
Repairs and maintenance
101,952
105,137
121,390
( 16,253)
Other services and charges
296,817
296,817
288,535
8,282
Total police services
4,565,404
4,583,764
4,523,364
60,400
(continued)
56
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Variance with
Final Budget
Budgeted Amounts
Actual
Positive
Original
Final
Amounts
(Negative)
EXPENDITURES (Continued)
PUBLIC SAFETY (Continued)
Communications:
Personnel services
$ 675,236 $
675,236
$ 672,618
$ 2,618
Supplies
8,711
8,711
8,907
( 196)
Repairs and maintenance
3,793
3,793
3,851
( 58)
Other services and charges
10,335
10,335
12,949
( 2,614)
Total communications
698,075
698,075
698,325
( 250)
Animal control:
Personnel services
141,295
141,295
145,316
( 4,021)
Supplies
12,420
12,420
12,685
( 265)
Repairs and maintenance
3,065
3,065
3,810
( 745)
Other services and charges
12,328
12,328
11,493
835
Total animal control
169,108
169,108
173,304
( 4,196)
Fire and EMS:
Personnel services
297,655
297,655
293,273
4,382
Supplies
29,712
136,781
144,082
( 7,301)
Repairs and maintenance
8,175
8,385
7,755
630
Other services and charges
948,209
949,609
915,088
34,521
Capital outlay
156,000
83,509
21,018
62,491
Total fire and EMS
1,439,751
1,475,939
1,381,216
94,723
Total public safety
6,872,338
6,926,886
6,776,209
150,677
(continued)
57
CITY OF FRIENDSWOOD, TEXAS
,e��a �► �rw �n.n�
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Variance with
Final Budget
Budgeted Amounts
Actual
Positive
Original
Final
Amounts
(Negative)
EXPENDITURES (Continued)
COMMUNITY DEVELOPMENT AND PUBLIC WORKS
Administration:
Personnel services
$ 456,134 $
456,134
$ 382,035
$ 74,099
Supplies
6,486
6,486
2,944
3,542
Repairs and maintenance
991
991
107
884
Other services and charges
27,805
27,805
24,369
3,436
Total administration
491,416
491,416
409,455
81,961
Planning and zoning:
Personnel services
124,174
124,174
106,917
17,257
Supplies
2,405
2,405
1,889
516
Other services and charges
5,721
5,721
4,830
891
Total planning and zoning
132,300
132,300
113,636
18,664
Engineering:
Personnel services
55,766
55,766
56,152
( 386)
Supplies
2,421
2,421
1,822
599
Repairs and maintenance
527
527
155
372
Other services and charges
9,127
13,627
11,904
1,723
Total engineering
67,841
72,341
70,033
2,308
Inspection:
Personnel services
377,449
377,449
349,252
28,197
Supplies
9,151
9,151
11,055
( 1,904)
Repairs and maintenance
1,053
1,053
577
476
Other services and charges
60,504
60,504
28,905
31,599
Total inspection
448,157
448,157
389,789
58,368
(continued)
58
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Budgeted Amounts
Original Final
EXPENDITURES (Continued)
COMMUNITY DEVELOPMENT AND PUBLIC WORKS (Continued)
Streets:
Personnel services
$ 397,519
$ 397,519
Supplies
56,955
56,955
Repairs and maintenance
618,187
618,187
Other services and charges
414,722
414,722
Capital outlay
300,000
300,000
Total streets
1,787,383
1,787,383
Drainage:
Personnel services
216,889
216,889
Supplies
1,119
1,119
Repairs and maintenance
16,822
16,822
Other services and charges
203,605
203,605
Capital outlay
-
258,249
Total drainage
438,435
696,684
Sanitation:
Other services and charges
3,300
3,300
Total sanitation
3,300
3,300
Total community development
and public works
COMMUNITY SERVICES
Administration:
Personnel services
Supplies
Other services and charges
Total administration
3,368,832 3,631,581
162,332
162,332
3,641
3,641
20,956
20,956
186,929
186,929
(continued)
Actual
Amnnntc
$ 336,742
53,054
482,051
413,686
164,458
1,449,991
203,389
2,395
9,020
75,707
27,869
318,380
3,197
3,197
2,754,481
161,479
2,559
25,175
189,213
Variance with
Final Budget
Positive
(Negative)
$ 60,777
3,901
136,136
1036
135:542
337,392
13,500
1,276)
7,802
127,898
230,380
378,304
103
103
877,100
853
1,082
( 4,219)
( 2,284)
59
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Variance with
Final Budget
Budgeted Amounts
Actual
Positive
Original
Final
Amounts
(Negative)
EXPENDITURES (Continued)
COMMUNITY SERVICES (Continued)
Library:
Personnel services
$ 630,693 $
630,693
$ 610,588
$ 20,105
Supplies
145,901
148,837
126,521
22,316
Repairs and maintenance
2,704
2,704
691
2,013
Other services and charges
22,367
22,367
16,727
5,640
Capital outlay
-
-
5,079
( 5,079)
Total library
801,665
804,601
759,606
44,995
Parks and recreation:
Personnel services
469,682
469,682
479,730
( 10,048)
Supplies
85,181
95,181
94,637
544
Repairs and maintenance
94,072
94,072
92,800
1,272
Other services and charges
490,185
490,185
428,275
61,910
Total parks and recreation
1,139,120
1,149,120
1,095,442
53,678
Swimming pool:
Personnel services
44,462
44,462
41,430
3,032
Supplies
13,969
13,969
11,788
2,181
Repairs and maintenance
24,264
24,264
31,540
( 7,276)
Other services and charges
23,189
23,189
27,806
( 4,617)
Total swimming pool
105,884
105,884
112,564
( 6,680)
Building operations:
Personnel services
34,108
34,108
-
34,108
Supplies
17,063
17,063
18,758
( 1,695)
Repairs and maintenance
78,576
78,576
52,296
26,280
Other services and charges
410,962
410,962
407,294
3668
Capital outlay
150,000
833,516
274,288
559:228
Total building operations
690,709
1,374,225
752,636
621,589
Total community services
2,924,307
3,620,759
2,909,461
711,298
Total expenditures
16,742,392
17,949,476
15,848,059
2,101,417
(continued)
60
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2006
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Proceeds on sale of capital assets
Transfers in
Transfers out
Total other financing sources (uses)
NET CHANGE IN FUND BALANCES
FUND BALANCES, BEGINNING
FUND BALANCES, ENDING
Variance with
Final Budget
Budgeted
Amounts
Actual
Positive
Original
Final
Amounts
(Negative)
$( 1,008,868)
$( 2,194,925)
$ 1,910,897
$ 4,105,822
-
-
187,345
187,345
775,074
775,074
775,074
-
-
-
( 129,881)
( 129,881)
775,074
775,074
832,538
57,464
( 233,794)
( 1,419,851)
2,743,435
4,163,286
7,544,040
7,544,040
7,544,040
-
$ 7,310,246
$ 6,124,189
$ 10,287,475
$ 4,163,286
61
THIS PAGE LEFT BLANK INTENTIONALLY
NONMAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
Special Revenue Funds are used to account for specific revenues that are legally restricted to
expenditure for particular purposes.
Police Investigation Fund — This fund is used to account for revenues that are restricted to
police investigation expenditures.
Fire/EMS Donation Fund — This fund accounts for revenues that are restricted for Fire/EMS
expenditures.
Park Land Dedication Fund — This fund is used to account for receipts from developers to build
or enhance neighborhood parks.
Court Security and Technology Fund — This fund accounts for revenues that are restricted for
court technology and building security. In 1999, the state legislature authorized a court
technology and court security fee for municipal court fines. Those who pay citations at the
Friendswood Municipal Court contribute to these fees.
DEBT SERVICE FUND
The Debt Service Fund is used to account for property taxes levied for payment of principal and interest
on all governmental debt of the City.
PERMANENT FUND
The Permanent Fund is used to report resources that are legally restricted to the extent that only
earnings, not principal, may be used for purposes that support the City's programs.
1776 Park Fund — This fund is used to account for assets held by the City in a trustee capacity
and the earnings benefit the City's parks.
CITY OF FRIENDSWOOD, TEXAS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
SEPTEMBER 30, 2006
ASSETS
Cash and investments
Receivable, net of allowances for uncollectibles:
Taxes
Customer accounts
Other
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Deferred revenue
Total liabilities
Fund balances:
Reserved for:
Encumbrances
Debt service
Unreserved
Total fund balances
Total liabilities and fund balances
Special Revenue
Court
Police Fire/EMS Park Land Security and
Investigation Donation Dedication Technology
$ 75,566 $ 43,585 $ 157,585 $ 196,199
29,199 - -
$ 75,837 $ 73,017 $ 158,333 $ 196,213
$ 39,730 $ 33,100 $ 600 $ -
39,730 33,100 600 14
25,207 - - -
10,900 39,917 157,733 196,199
36,107 39,917 157,733 196,199
$ 75,837 $ 73,017 $ 158,333 $ 196,213
62
$ 1,587,252
42,353
8,145
$ 1,637,750
42,353
42,353
1,595,397
1,595,397
$ 1,637,750
Permanent
$ 27,351
126
$ 27,477
27,477
27,477
$ 27,477
Total
Nonmajor
Governmental
$ 2,087,538
42,353
29,199
9,537
$ 2,168,627
$ 73,430
42,367
115,797
25,207
1,595,397
432,226
2,052,830
$ 2,168,627
63
CITY OF FRIENDSWOOD, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Special Revenue
Court
Police
Fire/EMS
Park Land
Security and
Investigation
Donation
Dedication
Technology
REVENUES
Property taxes
$ -
$ -
$ -
$ -
Fines and forfeitures
46,532
-
-
66,318
Permits and fees
-
-
52,323
-
Interest on investments
2,554
1,115
7,375
-
Donations
-
219,353
-
-
Total revenues
49,086
220,468
59,698
66,318
EXPENDITURES
Current:
Public safety
10,759
137,856
-
-
Capital outlay
41,500
-
-
-
Debt service:
Principal
-
68,640
-
-
Interest and other charges
-
11,932
-
-
Total expenditures
52,259
218,428
-
-
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
3,173
2,040
59,698
66,318
OTHER FINANCING SOURCES (USES)
Transfers in
-
-
-
129,881
Transfers out
-
-
-
-
Total other financing sources and uses
-
-
-
129,881
NET CHANGE IN FUND BALANCES
( 3,173)
2,040
59,698
196,199
FUND BALANCES, BEGINNING
39,280
37,877
98,035
-
FUND BALANCES, ENDING
$ 36,107
$ 39,917
$ 157,733
$ 196,199
64
Total Nonmajor
Governmental
Debt Service 1776 Park Funds
$ 1,491,283 $ - $ 1,491,283
- - 112,850
- - 52,323
87,585 1,185 99,814
- - 219,353
1,578,868 1,185 1,975,623
- 148,615
- - 41,500
539,544 - 608,184
745,470 - 757,402
1,285,014 - 1,555,701
293,854
1,185
419,922
-
-
129,881
( 94,224)
-
( 94,224)
( 94,224)
-
35,657
199,630
1,185
455,579
1,395,767
26,292
1,597,251
$ 1,595,397
$ 27,477
$ 2,052,830
65
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FIRE/EMS DONATION FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2006
Variance with
Final Budget
Final Actual Positive
Budget Amounts (Negative)
REVENUES
Interest on investments
$ -
$ 1,115
$ 1,115
Donations
80,572
219,353
138,781
Total revenues
80,572
220,468
139,896
EXPENDITURES
Current:
Public safety
-
137,856
( 137,856)
Debt service:
Principal
68,640
68,640
-
Interest and fiscal charges
11,932
11,932
-
Total expenditures
80,572
218,428
( 137,856)
NET CHANGE IN FUND BALANCES
-
2,040
2,040
FUND BALANCES, BEGINNING
37,877
37,877
-
FUND BALANCES, ENDING
$ 37,877
$ 39,917
$ 2,040
66
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
DEBT SERVICE FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2006
REVENUES
Property taxes
Interest on investments
Total revenues
EXPENDITURES
Debt service:
Principal
Interest and fiscal charges
Total expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING USES
Transfers out
Total other financing uses
NET CHANGE IN FUND BALANCES
FUND BALANCES, BEGINNING
FUND BALANCES, ENDING
Final Actual
Budget Amounts
$ 1,466,870 $ 1,491,283
- 87,585
1,466, 870 1,578, 868
602,816
539,544
769,830
745,470
1,372,646
1,285, 014
94,224 293,854
94,224 94,224
1,395,767
$ 1,395,767
199,630
1,395,767
$ 1,595,397
Variance with
Final Budget
Positive
(Negative)
$ 24,413
87,585
111,998
63,272
24,360
87,632
24,366
199,630
$ 199,630
67
THIS PAGE LEFT BLANK INTENTIONALLY
STATISTICAL SECTION
THIS PAGE LEFT BLANK INTENTIONALLY
TABLE 1
CITY OF FRIENDSWOOD, TEXAS
NET ASSETS BY COMPONENT
LAST FOUR FISCAL YEARS
(Accrual Basis of Accounting)
Governmental activities:
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total governmental activities net assets
Business -type activities:
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total business -type activities net assets
Primary government:
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total primary government net assets
Fiscal Year
2003 2004 2005 2006
$ 49,742,075 $
29,632,831
$ 32,533,863
$ 32,849,446
585,080
1,271,568
1,576,829
2,034,157
5,468,870
7,125,997
7,527,573
10,391,123
$ 55,796,025 $
38,030,396
$ 41,638,265
$ 45,274,726
$ 17,656,296
$ 17,174,525
$ 16,823,526
$ 16,815,130
305,660
444,548
445,086
41,057
4,058,223
4,337,137
5,228,802
6,574,920
$ 22,020,179
$ 21,956,210
$ 22,497,414
$ 23,431,107
$ 67,398,371
$ 46,807,356
$ 49,357,389
$ 49,664,576
890,740
1,716,116
2,021,915
2,075,214
9,527,093
11,463,134
12,756,375
16,966,043
$ 77,816,204
$ 59,986,606
$ 64,135,679
$ 68,705,833
Note:
The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003.
68
TABLE 2
CITY OF FRIENDSWOOD, TEXAS
CHANGES IN NET ASSETS
LAST FOUR FISCAL YEARS
(Accrual Basis of Accounting)
Fiscal Year
2003
2004
2005
2006
EXPENSES
Governmental activities:
General government
$ 2,923,552
$ 3,375,283
$ 3,438,849
$ 3,330,439
Public safety
5,760,097
6,026,272
7,318,886
7,060,800
Community development and public works
3,383,229
2,569,356
2,576,447
2,813,857
Community services
2,747,438
3,081,717
3,075,023
3,098,013
Interest on long-term debt
128,192
465,770
478,495
857,602
Total governmental activities expenses
14,942,508
15,518,398
16,887,700
17,160,711
Business -type activities:
Water
5,457,496
5,614,077
6,251,251
6,078,881
Interest on long-term debt
1,063,940
999,219
963,355
962,989
Total business -type activities expenses
6,521,436
6,613,296
7,214,606
7,041,870
Total primary government expenses
$ 21,463,944
$ 22,131,694
$ 24,102,306
$ 24,202,581
PROGRAM REVENUES
Governmental activities:
Charges for services:
General government
$ 647,958
$ 958,665
$ 1,176,086
$ 1,238,631
Public safety
9,433
9,141
15,013
54,653
Community development and public works
1,865,086
822,927
758,487
805,710
Community services
66,862
65,850
66,281
112,681
Operating grants and contributions
661,568
778,261
1,271,119
771,477
Capital grants and contributions
749,772
239,200
235,300
-
Total governmental activities program revenues
4,000,679
2,874,044
3,522,286
2,983,152
Business -type activities:
Charges for services:
Water and wastewater
7,275,746
7,203,736
8,390,761
8,392,277
Total business -type activities program revenues
7,275,746
7,203,736
8,390,761
8,392,277
Total primary government program revenues $ 11,276,425 $ 10,077,780 $ 11,913,047 $ 11,375,429
(continued)
69
CITY OF FRIENDSWOOD, TEXAS
CHANGES IN NET ASSETS
LAST FOUR FISCAL YEARS
(Accrual Basis of Accounting)
NET (EXPENSE) REVENUES
Governmental activities
Business -type activities
Total primary government net expense
TABLE 2
Fiscal Year
2003 2004 2005 2006
$(10,941,829) $(12,644,354)
754,310 590,440
10,187,519 (12,053,914)
GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS
Governmental activities:
Taxes
Property
9,706,202
Sales
2,875,071
Franchise
1,058,726
Other
79,691
Investment earnings
154,558
Miscellaneous
30,826
Transfers
664,102
Total governmental activities
14,569,176
Business -type activities:
Investment earnings
Miscellaneous
Extraordinary item
Transfers
Total business -type activities
Total primary government
CHANGE IN NET ASSETS
Governmental activities
Business -type activities
Total primary government
Note:
10,931,393
1,119,328
2,833,290
71,028
219,085
714,278
15, 888,402
$(13,365,414)
1,176,155
12,189,259
11,352,598
3,199,136
1,176,460
53,790
376,435
51,503
763,361
16,973,283
160,629
59,869
114,932
12,777
-
13,478
100,000
-
-
664,102
( 714,278)
763,361
( 390,696)
654,409
634,951
14,178,480
15,233,993
16,338,332
$(14,177,559)
1,350,407
(12, 827,152)
11,304,684
3,658,699
1,220,581
11,940
915,710
21,556
680,850
17, 814,020
262,761
1,375
680,850
416,714
17,397,306
3,627,347
3,244,048
3,607,869
3,636,461
363,614
63,969
541,204
933,693
$ 3,990,961
$ 3,180,079
$ 4,149,073
$ 4,570,154
The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003.
70
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CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL PROPERTY TAXPAYERS
CURRENT YEAR AND NINE YEARS AGO
Taxroaver
Texas -New Mexico Power Co
Southwestern Bell Telephone Co
H E Butt Grocery Company
Texas HCP Holding, LP
Friendswood Retirement
Exxon Mobil Pipeline Co
D R Horton - Texas LTD
Maxi -Ban LTD
Friendswood Huntington Woods
Texas & Kansas City Cable Partners
Property Trust of America (Seahawk Apts.)
Hausman-Banfield Interests
Frontier Land VPLL (Salem Square)
Houston Lighting & Power
H.U.D. Multi -Family Homes
Bellaire Capital Partnership (Kroger 2351)
Total
All other taxpayers
TABLE 7
2006
1997
Percentage
Percentage
of Total City
of Total City
Taxable
Taxable
Taxable
Taxable
Assessed
Assessed
Assessed
Assessed
Value
Value
Value
Value
$ 12,092,450
0.53%
$ 8,541,300
0.91%
8,163,500
0.36%
13,224,420
1.40%
7,578,980
0.33%
-
- %
6,457,140
0.28%
-
- %
5,873,500
0.26%
7,204,830
0.77%
4,852,400
0.21%
15,467,470
1.64%
3,612,810
0.16%
-
- %
3,529,980
0.16%
-
- %
3,518,610
0.15%
-
- %
3,467,420
0.15%
-
- %
-
- %
6,880,940
0.73%
-
- %
5,630,640
0.60%
-
- %
3,299,500
0.35%
-
- %
3,151,810
0.33%
-
- %
2,910,450
0.31%
-
- %
2,884,580
0.31%
$ 59,146,790
2.60%
$ 69,195,940
7.35%
$ 2,215,425,848 97.40%
$ 2,274,572,638
Source: Friendswood Independent School District, Tax Assessor/Collector
76
CITY OF FRIENDSWOOD, TEXAS
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
Collected With the
Taxes Levied
Fiscal Year of the Levy
Fiscal
for the
Percentage
Year Ended
Fiscal Year
Amount
of Levy
1997
$ 5,692,451
$ 5,652,357
99.30%
1998
5,886,162
5,844,583
99.29%
1999
6,292,040
6,229,896
99.01%
2000
7,239,468
7,125,877
98.43%
2001
7,906,786
7,809,643
98.77%
2002
8,863,904
8,721,196
98.39%
2003
9,642,413
9,496,887
98.49%
2004
10,785,308
10,630,820
98.57%
2005
11,221,282
11,078,265
98.73%
2006
11,151,572
11,019,314
98.81%
TABLE 8
Collections
Total Collections to Date
in Subsequent
Percentage
Years
Amount
of Levy
$ 36,082
$ 5,688,439
99.93%
37,685
5,882,268
99.93%
58,763
6,288,659
99.95%
107,646
7,233,523
99.92%
89,699
7,899,342
99.91%
131,324
8,852,520
99.87%
122,589
9,619,476
99.76%
122,385
10,753,205
99.70%
85,745
11,164,010
99.49%
-
11,019,314
98.81%
Sources: Friendswood Independent School District, Tax Assessor/Collector and City of Friendswood Records.
77
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TABLE 10
CITY OF FRIENDSWOOD, TEXAS
RATIOS OF NET GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
Net General Bonded Debt Outstanding
Percentage of
General
Less Debt
Net
Actual Taxable
Fiscal
Assessed
Obligation
Service
Bonded
Value of
Per
Year
Population
Value
Bonds
Funds
Debt
Property
Capita
1997
285602
$ 941,679,232
$ 3,606,427
$ 392,220
$ 3,214,207
0.34%
$ 112
1998
30,787
1,192,543,571
3,206,927
187,908
3,019,019
0.25%
98
1999
31,192
1,322,370,107
2,798,677
73,344
2,725,333
0.21%
87
2000
31,761
1,459,778,465
2,430,219
68,627
2,361,592
0.16%
74
2001
32,720
1,597,487,811
2,205,725
77,175
2,128,550
0.13%
65
2002
33,500
1,781,055,331
1,915,518
109,799
1,805,719
0.10%
54
2003
33,800
1,931,616,411
10,375,891
254,568
10,121,323
0.52%
299
2004
34,152
2,178,774,357
10,059,865
829,701
9,230,164
0.42%
270
2005
34,272
2,283,727,325
17,590,000
1,395,767
16,194,233
0.71%
473
2006
34,306
2,399,756,708
17,150,000
1,731,974
15,418,026
0.64%
449
Notes:
Details regarding the City's outstanding debt can be found in the notes to the financial statements.
79
CITY OF FRIENDSWOOD, TEXAS
DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT
AS OF SEPTEMBER 30, 2006
Governmental Unit
Debt repaid with property taxes
Friendswood Independent School District
Clear Creek Independent School District
Galveston County
Harris County
Subtotal overlapping debt
City direct debt
Total direct and overlapping debt
TABLE 11
Estimated
Share of
Estimated
Direct and
Debt
Percentage
Overlapping
Outstanding
Applicable
Debt
$ 36,974,078
100.000%
$ 36,974,078
555,914,615
3.647%
20,274,762
1,006,500,000
2.123%
21,367,995
2,716,300,000
0.631%
17,131,704
95,748,539
17,318,957
$ 113,067,496
Sources: Information was obtained from either the governmental unit's website or the finance department of the
governmental unit.
Notes: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City.
This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by
the residents and businesses of the City of Friendswood. This process recognizes that, when considering the
City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses
should be taken into account. However, this does not imply that every taxpayer is a resident --and therefore
responsible for repaying the debt --of each overlapping government.
80
TABLE 12
CITY OF FRIENDSWOOD, TEXAS
LEGAL DEBT MARGIN INFORMATION
AS OF SEPTEMBER 30, 2006
As a City Council -City Manager form of government, the City of Friendswood is not limited by law in the amount of debt
it may issue. The City s charter states:
"In keeping with the Constitution of the State of Texas and not contrary thereto, the City of Friendswood shall have
the power to borrow money on the credit of the City for any public purpose not now or hereafter prohibited by the
Constitution and laws of the State of Texas, and shall have the right to issue all tax bonds, revenue bonds, funding
and refunding bonds, time warrants and other evidence of indebtedness as now authorized or as may hereafter be
authorized to be issued by cities and towns by the laws of the State of Texas."
Article 11, Section 5 of the State of Texas Constitution States in part:
"but no tax for any pose shall ever be lawful for any one year, which shall exceed two and one-half percent of the
taxable property of such city"
The tax rate for fiscal year ending September 30, 2006, is $.604 per $100 of assessed valuation with assessed valuation
being 100% of market value.
81
TABLE 13
CITY OF FRIENDSWOOD, TEXAS
PLEDGED REVENUE COVERAGE
LAST TEN FISCAL YEARS
Water Revenue Bonds
Utility
Less:
Net
Fiscal
Service
Operating
Available
Debt Service
Year
Charges
Expenses
Revenue
Principal
Interest
Coverage
1997
$ 4,744,557
$ 2,802,914
$ 1,941,643
$ 45,000
$ 7,503
$ 36.98
1998
5,815,425
2,679,707
3,135,718
33,000
3,032
87.03
1999
5,482,707
2,781,480
2,701,227
33,000
3,032
74.97
2000
7,211,716
3,310,375
3,901,341
-
441,600
8.83
2001
6,599,787
3,253,593
3,346,194
325,000
546,621
3.84
2002
7,506,333
3,797,453
3,708,880
25,000
850,874
4.23
2003
7,275,746
4,401,694
2,874,052
25,000
772,351
3.60
2004
7,203,736
4,238,810
2,964,926
25,000
769,936
3.73
2005
8,390,761
4,769,885
3,620,876
140,000
766,788
3.99
2006
8,392,277
4,660,868
3,731,409
160,000
445,351
6.16
Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements.
Operating expenses do not include interest, depreciation or amortization expenses.
82
TABLE 14
CITY OF FRIENDSWOOD, TEXAS
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN CALENDAR YEARS
Per Capita
Calendar
Personal
Personal
Unemployment
Year
Population
Income
Income
Rate
1997
28,902
$ 5,982,162,000
$ 24,647
3.8%
1998
30,787
6,480,422,000
26,381
3.1 %
1999
31,192
6,725,063,000
27,020
3.2%
2000
31,761
7,384,627,000
29,449
2.8%
2001
32,720
7,677,185,000
30,116
3.1 %
2002
33,500
7,964,860,000
30,537
3.9%
2003
33,800
8,356,254,000
31,313
4.3%
2004
34,152
8,719,688,000
32,055
4.0%
2005
34,272
-
-
4.3 %
2006
34,306
-
-
- %
Sources: Population information was provided from past financial reports. Unemployment rates were obtained
from the U. S. Department of Labor Bureau of Labor Statistics website. Personal Income and Per
Capita Personal Income were obtained from the U. S. Bureau of Economic Analysis website.
Note: Personal Income and Per Capita Personal Income numbers are for Galveston County; 2005 and 2006
number were not available. The 2006 Unemployment Rate was also unavailable.
83
CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL EMPLOYERS
CURRENT AND SEVEN YEARS AGO
Emnlover
Friendswood ISD
HEB
Kroger
City of Friendswood
Friendship Haven Nursing Home
Friendswood Healthcare Center (Autumn Hills)
U. S. Post Office
Summerville (Park Place)
Sonic
Timber Creek Golf Club
Luna's
Gary Greene Realtors
Village on the Park
McDonalds
Total
2006
Percentage
of Total City
Employees
Employment
675
33.70%
275
13.73%
234
11.68%
222
11.08%
135
6.74%
90
4.49%
70
3.49%
65
3.25%
49
2.45%
41
2.05%
40
2.00%
40
2.00%
34
1.70%
33
1.65%
2,003 100.00%
TABLE 15
1999
Percentage
of Total City
Employees
Employment
628
51.06%
80
6.50%
52
4.23%
132
10.73%
100
8.13%
85
6.91%
70
5.69%
40
3.25%
43
3.50%
1,230 100.00%
Source: City Economic Development Division
Note: Numbers prior to 1999 were unavailable from the employers; therefore, 1999 is presented for comparative purposes.
84
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