HomeMy WebLinkAboutComprehensive Annual Financial Report - FY2007CITY OF
FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2007
CITY OF
FRIENDSWOOD, TEXAS
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
Fiscal Year Ended
September 30, 2007
Officials Issuing Report:
Robert T. McDaniel
City Manager
Roger C. Roecker
Director of Administrative Services
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CITY OF FRIENDSWOOD, TEXAS
TABLE OF CONTENTS
SEPTEMBER 30, 2007
Page
Exhibit Number
INTRODUCTORY SECTION
Letter of Transmittal..................................................................................................... 1 – 4
Organization Chart........................................................................................................ 5
Certificate of Achievement for Excellence in Financial Reporting.............................. 6
Principal Officials......................................................................................................... 7
FINANCIAL SECTION
Independent Auditors’ Report....................................................................................... 8 – 9
Management’s Discussion and Analysis ...................................................................... 10 – 17
Basic Financial Statements
Government-wide Financial Statements
Statement of Net Assets.......................................................................................... 18
Statement of Activities............................................................................................ 19 – 20
Fund Financial Statements
Balance Sheet – Governmental Funds.................................................................... 21
Statement of Revenues, Expenditures and Changes in
Fund Balances – Governmental Funds................................................................ 22
(continued)
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
(Continued)
SEPTEMBER 30, 2007
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
Statement of 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
Schedule 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, 2007
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
Donation Fund ..................................................................................................... 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, 2007
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
Taxable Property......................................................................................... 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
Principal Employers....................................................................................... 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
(continued)
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
(Continued)
SEPTEMBER 30, 2007
Page
Number
COMPLIANCE SECTION
Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance With
Government Auditing Standards................................................................................ 88 – 89
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INTRODUCTORY SECTION
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March 14, 2008
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, 2007, 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 and account groups 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 auditor’s report on the financial
statement, 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 auditor, 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.
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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 34,759. 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 15th 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
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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.
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 is based on the City’s strategic planning efforts, including the Comprehensive Land Use
Plan, Vision 2020 and the Capital Improvements Plan. Departmental operational plans’ funding
requirements to provide programs and services are included in the MYFP as well. Funding needs and
available resources, both current and alternative revenue enhancements, are identified. Alternative
revenue resources that have been identified include a referendum to utilize the balance of the sales tax
rate (1/2 cent); new fees for alarm permits and/or emergency medical services; and a new drainage
utility fee.
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 5.10%. 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 worker’s
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, 2006. This was the nineteenth 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, Rhonda Bloskas 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.
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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.
CITY OF FRIENDSWOOD
ORGANIZATIONAL CHART
BOARDS, COMMITTEES
COMMISSIONS
CITY
SECRETARY
CITY
ATTORNEY
ADMINISTRATIVE
SERVICES
POLICE FIRE MARSHAL
EMERGENCY MGMT
COMMUNITY
DEVELOPMENT
PUBLIC
WORKS
COMMUNITY
SERVICES
ECOMONIC
DEVELOPMENT
CITY
MANAGER
MUNICIPAL
JUDGE
MAYOR AND
COUNCIL
CITIZENS
OF FRIENDSWOOD
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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, 2006
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.
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CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL OFFICIALS
SEPTEMBER 30, 2007
Term
Elected Officials Position Expires
David J. H. Smith Mayor May 2009
Laura Ewing Council Member - Position No. 1 May 2009
John R. LeCour Council Member - Position No. 2 May 2008
Jim Hill Council Member - Position No. 3 May 2009
Leslie Reid Council Member - Position No. 4 May 2010
W. Chris Peden Council Member - Position No. 5 May 2008
Andy Rivera Council Member - Position No. 6 May 2010
Key Staff Position
Robert T. McDaniel City Manager
Olson & Olson City Attorney
Deloris McKenzie City Secretary
Roger C. Roecker Director of Administrative Services
James Toney Director of Community Services
Leslie E. McMahen Director of Community Development
Terry Byrd Fire Marshal/Emergency Management
Coordinator
James W. Woltz Judge - Municipal Court
Robert Wieners Police Chief
Kaz Hamidian Director of Public Works
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FINANCIAL SECTION
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INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and
Members 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, 2007, 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, 2007, 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 March
14, 2008, 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.
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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.
March 14, 2008
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, 2007. 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 $109,476,811 (net assets). Of this amount, $10,785,998 is unrestricted net
assets for governmental activities and $7,475,597 for business-type activities.
• The City’s net assets increased by $40,770,978. This resulted in an increase in invested
in capital assets net of related debt of $38,996,940, unrestricted net assets increased in the
amount of $478,486 and the remaining $1,295,552 increased restricted net assets.
• As of the close of the current fiscal year, the City of Friendswood’s governmental funds
reported combined ending fund balances of $16,648,387. Of the ending fund balance,
$4,357,990 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;
$2,363,918 reserved for encumbrances and prepaid items; and $9,660,236 is unreserved
and available to meet the government’s ongoing obligations in accordance with the City’s
fund designation and fiscal policies.
• The City retroactively reported infrastructure in the current year in accordance with
GASB 34. Net capital assets added was $39,039,298.
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.
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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.
• Component Unit activities include activities of The West Ranch Management
District.
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
funds 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 six 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.
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• 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 $109.5 million as of September 30, 2007. The largest portion
of the City’s net assets (80.99%) reflects its investments in capital assets (e.g., land, buildings,
equipment, improvements, construction in progress and infrastructure); less any related debt used to
acquire those assets that are still outstanding. The City uses these capital assets to provide services to
citizens; therefore, these assets are not available for future spending. It should be noted that the
resources needed to repay this debt must be provided from other sources, since the capital assets
themselves cannot be used to liquidate these liabilities.
CITY OF FRIENDSWOOD’S NET ASSETS
2007 2006 2007 2006 2007 2006
Current and other assets 19,905,791$ 21,033,794$ 25,808,598$ 24,807,232$ 45,714,389$ 45,841,026$
Capital assets 84,771,769 44,894,364 39,457,544 33,543,702 124,229,313 78,438,066
Total assets 104,677,560 65,928,158 65,266,142 58,350,934 169,943,702 124,279,092
Long-term liabilities 16,733,514 17,445,404 32,215,978 33,129,838 48,949,492 50,575,242
Other liabilities 2,989,426 3,208,028 8,527,973 1,789,889 11,517,399 4,997,917
Total liabilities 19,722,940 20,653,432 40,743,951 34,919,727 60,466,891 55,573,159
Net assets:
Invested in capital assets,
net of related debt 71,777,140 32,849,446 16,884,376 16,815,130 88,661,516 49,664,576
Restricted 2,391,482 2,034,157 162,218 41,057 2,553,700 2,075,214
Unrestricted 10,785,998 10,391,123 7,475,597 6,574,920 18,261,595 16,966,043
Total net assets 84,954,620$ 45,274,726$ 24,522,191$ 23,431,107$ 109,476,811$ 68,705,833$
Governmental Activities Business-type Activities Totals
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Governmental and business-type activities increased the City’s net assets by $1.7 million in 2007. The
following table provides a summary of the City’s operations for the year ended September 30, 2007.
The Governmental activities increased the City of Friendswood’s net assets by $640,596, accounting for
37% 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 expenditures. Business-type
activities increased the City’s net assets by $1,091,084, accounting for 63% of the total increase in net
fixed assets. This increase is due to revenue collections for future capital projects and debt reduction.
CITY OF FRIENDSWOOD’S CHANGES IN NET ASSETS
2007 2006 2007 2006 2007 2006
Revenues:
Program revenues:
Charges for services 2,594,996$ 2,211,675$ 8,021,040$ 8,392,277$ 10,616,036$ 10,603,952$
Operating grants
and contributions 489,707 771,477 - - 489,707 771,477
Capital grants
and contributions - - - - - -
General revenues:
Property taxes 11,876,246 11,304,684 - - 11,876,246 11,304,684
Sales taxes 3,904,436 3,658,699 - - 3,904,436 3,658,699
Franchise taxes 1,239,167 1,220,581 - - 1,239,167 1,220,581
Other taxes 16,186 11,940 - - 16,186 11,940
Investment earnings 1,063,715 915,710 1,236,092 262,761 2,299,807 1,178,471
Miscellaneous 350,128 21,556 4,182 1,375 354,310 22,931
Total revenues 21,534,581 20,116,322 9,261,314 8,656,413 30,795,895 28,772,735
Expenses:
General government 4,472,602 3,330,439 - - 4,472,602 3,330,439
Public safety 7,565,797 7,060,800 - - 7,565,797 7,060,800
Community development
and public works 5,475,447 2,813,857 - - 5,475,447 2,813,857
Community services 3,420,244 3,098,013 - - 3,420,244 3,098,013
Water and sewer - - 5,711,063 6,078,881 5,711,063 6,078,881
Interest on long-term
debt 835,511 857,602 1,583,551 962,989 2,419,062 1,820,591
Total expenses 21,769,601 17,160,711 7,294,614 7,041,870 29,064,215 24,202,581
Increases in net assets
before transfers 235,020)( 2,955,611 1,966,700 1,614,543 1,731,680 4,570,154
Transfers 875,616 680,850 875,616)( 680,850)( - -
Change in net assets 640,596 3,636,461 1,091,084 933,693 1,731,680 4,570,154
Net assets, beginning 45,274,726 41,638,265 23,431,107 22,497,414 68,705,833 64,135,679
Prior period adjustment 39,039,298 - - - 39,039,298 64,135,679
Net assets, ending 84,954,620$ 45,274,726$ 24,522,191$ 23,431,107$ 109,476,811$ 68,705,833$
Governmental Activities Business-type Activities Totals
14
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 $16,648,387. Approximately 58% of this amount ($9,660,236) is unreserved, undesignated
fund balance; however, $4.8 million is set aside for the 90-day operating reserve, as set forth in the
City’s financial policies. $6,988,151 is reserved or designated as follows:
Reserves (60%)
• Encumbrances $ $2,286,706
• Prepaid expense 77,212
• Debt service 1,813,320
Designations (4%)
• Projects $ $266,243
Legally restricted (36%)
• Capital projects $ $1,957,116
• Special revenue funds 558,653
• Permanent Funds 28,901
In the General Fund, fund balance increased by $240,650. The increase is due to increased revenues in
property taxes ($77,911), sales tax ($550,522), fines and forfeitures ($312,337), and interest on
investments ($454,408). The City issued a property tax refund ($1,050,323) that reduced the net
increase to fund balance. The refund was based on 10% of taxes paid for tax year 2005.
Proprietary Fund
Unrestricted net assets of the respective proprietary funds are Enterprise, (water and sewer), $7,475,597
and Internal Service Fund (vehicle replacement fund), $359,610. The net assets of the water and sewer
fund increased by $1,091,084. The net assets of the internal service fund increased by $115,053.
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 $3,331,348 or 18.75%. The
majority of this increase was the appropriation of encumbrances ($1,188,348) from the prior year, the
property tax refund ($1,050,323), General Fund supported capital improvements ($287,700) and
Friendswood Volunteer Fire Department equipment ($121,506).
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, 2007, is $124,229,313. The investment
in capital assets include land, buildings and improvements, equipment, infrastructure, water rights and
construction in progress.
15
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
$2.5. Prior year costs were $3.9 and the proposed project costs are $6.4 million.
• Continued site preparation and pre-construction of new Fire Station #4 for $12,289.
Prior year costs were $80,900. The proposed project costs are $1.9 million.
• Completed Phase II improvements at Centennial Park for a total of $3.4 million.
• Continued design phase of Glenshannon Drainage with current year costs of $182,700
and prior year costs of $94,685.
• Continued design phase of Clover Acres Drainage with current year costs of $42,400
and prior cost of $298,900.
• Bay Area Waterline was completed with a cost of $210,700.
• Design phases continued for the following water and sewer projects: Deepwood Force
Main ($277,144), Deepwood Lift Station Expansion ($132,914), South Friendswood
Force Main Diversion ($75,400), Sunmeadow Lift Station $82,800 and 16” waterline
from Sunset to water well #4 ($244,200).
• City of Houston Southeast Water Purification Plant Expansion. The City’s current
year share of the project was $6.7 million.
• The City retroactively added general government infrastructure (streets, drainage and
sidewalks) in the amount of $66,803,025 with accumulated depreciation of $27,763,727.
CITY OF FRIENDSWOOD’S CAPITAL ASSETS AT YEAR-END
2007 2006 2007 2006 2007 2006
Land 23,950,721$ 24,390,687$ 718,493$ 718,493$ 24,669,214$ 25,109,180$
Buildings and
improvements 12,866,845 10,871,758 - - 12,866,845 10,871,758
Equipment 1,738,311 1,598,491 580,256 575,782 2,318,567 2,174,273
Infrastructure 38,209,424 - 27,120,313 28,264,928 65,329,737 28,264,928
Water rights - - 3,465,469 3,465,469 3,465,469 3,465,469
Construction in progress 8,006,468 8,033,428 7,573,013 519,030 15,579,481 8,552,458
Total capital assets 84,771,769$ 44,894,364$ 39,457,544$ 33,543,702$ 124,229,313$ 78,438,066$
Governmental Activities Business-type Activities Totals
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 $49,696,380.
16
CITY OF FRIENDSWOOD’S OUTSTANDING DEBT AT YEAR-END
2007 2006 2007 2006 2007 2006
General obligations 16,660,000$ 17,150,000$ 2,375,000$ 2,845,000$ 19,035,000$ 19,995,000$
Revenue bonds payable - - 30,515,000 30,665,000 30,515,000 30,665,000
Certificates of obligation - - 50,000 280,000 50,000 280,000
Capital leases 96,380 168,957 - - 96,380 168,957
16,756,380$ 17,318,957$ 32,940,000$ 33,790,000$ 49,696,380$ 51,108,957$
Governmental Activities Business-type Activities Totals
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 A1 A+
Revenue Bonds Aaa A
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 34,759. 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 a new large residential and
commercial development called West Ranch. The West Ranch residential development is currently
under way, with commercial construction scheduled to follow as the area’s residential population
grows.
The City’s largest single source of revenue in the General Fund continues to be ad valorem taxes. The
tax rate was reduced by .57 cents from $.5821 to $.5764. This rate consists of a maintenance and
operations (M&0) tax rate of $.5016 and an Interest and Sinking (debt service) tax rate of $.0748. The
rate was set based on a net assessed value of $2,134,576,240. This is an increase of $122,945,420 in
taxable value with $59,113,000 or 48% resulting from new construction in the City. This additional
value results in an M&O levy increase of $407,484. The City’s financial management policies, sets the
guideline to maintain the fund balance and retained earnings of the various operating funds at levels
sufficient to protect the City’s creditworthiness as well as its financial position from unforeseeable
emergencies.
17
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 $3,370,100 to $3,750,000, the 2008 estimate is 0.4% less than
the collections of the previous fiscal year. Other significant general fund revenues are franchise fees,
$1,211,000 and municipal court fines, $1,118,700. If all estimates are realized, the total General Fund
unreserved fund balance is projected to be $5.4 million at September 30, 2008.
Water revenues are budgeted at $4,238,169, which is an additional $1,074,470 in revenues, or 34%.
Sewer revenues are budgeted at $3,461,956. This represents an increase of $805,865. Water and sewer
working capital is expected to be $8.96 million at the end of fiscal year 2008. 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 $3.5 million that will be used to acquire additional capacity
in the Southeast Water Purification Plant in lieu of issuing additional debt.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, customers, investors, and creditors with a
general overview of the City’s finances and to show the City’s accountability for the money it receives.
If you have questions about this report or need additional information, contact Administrative Services,
P. O. Box 1288, Friendswood, Texas 77549-1288, or call Roger C. Roecker 281-996-3211, or email
rroecker@ci.friendswood.tx.us.
BASIC
FINANCIAL STATEMENTS
THIS PAGE LEFT BLANK INTENTIONALLY
Governmental Business-type Component
Activities Activities Total Unit
ASSETS
Cash and investments 17,543,696$ 6,630,414$ 24,174,110$ 33,451$
Receivables:
Taxes 1,374,823 - 1,374,823 -
Customer accounts 128,980 1,206,227 1,335,207 -
Other 315,911 113,178 429,089 -
Due from other governments 278,746 - 278,746 -
Prepaid expenses 77,212 23,667 100,879 -
Deferred charges 186,423 431,127 617,550 -
Restricted cash and investments - 17,122,179 17,122,179 -
Net investment in joint venture - 281,806 281,806 -
Deferred contributions - - - 1,633,322
Capital assets:
Land 23,950,721 718,493 24,669,214 -
Buildings and improvements 20,716,826 - 20,716,826 -
Machinery and equipment 6,965,542 3,063,036 10,028,578 -
Infrastructure 67,671,399 - 67,671,399 -
Water and wastewater system - 45,799,462 45,799,462 -
Construction in progress 8,006,468 7,573,013 15,579,481 -
Water rights - 3,465,469 3,465,469 -
Accumulated depreciation 42,539,187)( 21,161,929)( 63,701,116)( -
Total capital assets, net of
accumulated depreciation 84,771,769 39,457,544 124,229,313 -
Total assets 104,677,560 65,266,142 169,943,702 1,666,773
LIABILITIES
Accounts payable 1,517,856 7,176,724 8,694,580 3,554
Accrued liabilities 573,171 20,323 593,494 -
Unearned revenue 31,664 - 31,664 -
Accrued interest 59,324 128,379 187,703 -
Customer deposits - 273,659 273,659 -
Noncurrent liabilities:
Due within one year 807,411 928,888 1,736,299 -
Due in more than one year 16,733,514 32,215,978 48,949,492 1,902,350
Total liabilities 19,722,940 40,743,951 60,466,891 1,905,904
NET ASSETS
Invested in capital assets, net of related debt 71,777,140 16,884,376 88,661,516 -
Restricted for:
Debt service 1,803,928 - 1,803,928 -
Public safety 275,941 - 275,941 -
Community development 311,613 - 311,613 -
Capital improvements - 162,218 162,218 -
Unrestricted 10,785,998 7,475,597 18,261,595 239,131)(
Total net assets 84,954,620$ 24,522,191$ 109,476,811$ 239,131)$(
The accompanying notes are an integral part of these financial statements.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2007
Primary Government
18
Functions/Programs Expenses
Charges for
Services
Operating Grants
and Contributions
Capital Grants
and
Contributions
Primary government
Governmental activities:
General government 4,472,602$ 1,353,160$ -$ -$
Public safety 7,565,797 23,267 448,676 -
Community development and public works 5,475,447 998,625 28,691 -
Community services 3,420,341 219,944 12,340 -
Interest on long-term debt 835,511 - - -
Total governmental activities 21,769,698 2,594,996 489,707 -
Business-type activities:
Water and sewer 7,294,614 8,021,040 - -
Total business-type activities 7,294,614 8,021,040 - -
Total primary government 29,064,312$ 10,616,036$ 489,707$ -$
Component unit
West Ranch Management District 207,836$ -$ -$ -$
Total component unit 207,836$ -$ -$ -$
General revenues:
Taxes:
Property, levied for general purposes
Property, levied for debt service
Sales
Franchise
Other
Investment earnings
Gain on sale of capital assets
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning
Prior period adjustment
Net assets - ending
The accompanying notes are an integral part of these financial statements.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2007
Program Revenues
19
Governmental
Activities
Business-type
Activities Total Component Unit
3,119,442)$( -$ 3,119,442)$( -$
7,093,854)( - 7,093,854)( -
4,448,131)( - 4,448,131)( -
3,188,057)( - 3,188,057)( -
835,511)( - 835,511)( -
18,684,995)( - 18,684,995)( -
- 726,426 726,426 -
- 726,426 726,426 -
18,684,995)( 726,426 17,958,569)( -
- - - 207,836)(
- - - 207,836)(
10,443,487 - 10,443,487 -
1,432,759 - 1,432,759 40,676
3,904,436 - 3,904,436 -
1,239,167 - 1,239,167 -
16,186 - 16,186 -
1,063,715 1,236,092 2,299,807 104
345,976 - 345,976 -
4,152 4,182 8,334 -
875,616 875,616)( - -
19,325,494 364,658 19,690,152 40,780
640,499 1,091,084 1,731,583 167,056)(
45,274,726 23,431,107 68,705,833 72,075)(
39,039,298 - 39,039,298 -
84,954,523$ 24,522,191$ 109,476,714$ 239,131)$(
Net (Expense) Revenue and Changes in Net Assets
Primary Government
20
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General Fund
2003 and 2005
Bond
Construction Other Funds
Total Governmental
Funds
ASSETS
Cash and investments 10,599,693$ 4,132,846$ 2,446,225$ 17,178,764$
Receivable, net of allowances for uncollectibles:
Taxes 1,324,891 - 49,932 1,374,823
Customer accounts 94,913 - 34,067 128,980
Other 298,665 1,194 14,601 314,460
Receivable from other governments 278,746 - - 278,746
Prepaid expenditures 77,212 - - 77,212
Total assets 12,674,120$ 4,134,040$ 2,544,825$ 19,352,985$
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable 1,008,857 414,652 87,574 1,511,083
Accrued liabilities 573,107 - 64 573,171
Deferred revenue 564,031 - 56,313 620,344
Total liabilities 2,145,995 414,652 143,951 2,704,598
Fund balances:
Reserved for:
Encumbrances 524,434 1,762,272 - 2,286,706
Prepaid expenditures 77,212 - - 77,212
Debt service - - 1,813,320 1,813,320
Unreserved, reported in:
General fund:
Designated for:
Projects 266,243 - - 266,243
Undesignated 9,660,236 - - 9,660,236
Capital projects fund - 1,957,116 - 1,957,116
Special revenue funds - - 558,653 558,653
Permanent fund - - 28,901 28,901
Total fund balances 10,528,125 3,719,388 2,400,874 16,648,387
Total liabilities and fund balances 12,674,120$ 4,134,040$ 2,544,825$
Amounts reported for governmental activities in the statement of net assets are different because:
84,313,278
588,680
818,101
17,413,826)(
Net assets of governmental activities 84,954,620$
The accompanying notes are an integral part of these financial statements.
CITY OF FRIENDSWOOD, TEXAS
BALANCE SHEET
GOVERNMENTAL FUNDS
Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds.
SEPTEMBER 30, 2007
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.
Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds.
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.
21
General Fund
2003 and 2005
Bond
Construction Other Funds
Total
Governmental
Funds
REVENUES
Property taxes 10,376,849$ -$ 1,425,180$ 11,802,029$
Sales taxes 3,920,622 - - 3,920,622
Franchise taxes 1,239,167 - - 1,239,167
Fines and forfeitures 1,205,307 - 83,487 1,288,794
Permits and fees 903,353 - 114,149 1,017,502
Intergovernmental 248,702 - - 248,702
Investment earnings 684,258 246,140 124,300 1,054,698
Donations - - 229,939 229,939
Other 272,245 2,543 5,000 279,788
Total revenues 18,850,503 248,683 1,982,055 21,081,241
EXPENDITURES
Current:
General government 4,500,350 57,959 46,936 4,605,245
Public safety 7,299,128 - 183,475 7,482,603
Community development and public works 3,600,798 - - 3,600,798
Community services 2,866,485 - - 2,866,485
Capital outlay 1,653,962 2,051,470 6,040 3,711,472
Debt service:
Principal - - 658,073 658,073
Interest and other charges - - 739,487 739,487
Total expenditures 19,920,723 2,109,429 1,634,011 23,664,163
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 1,070,220)( 1,860,746)( 348,044 2,582,922)(
OTHER FINANCING SOURCES (USES)
Proceeds on sale of capital assets 785,942 - - 785,942
Transfers in 875,616 350,688 - 1,226,304
Transfers out 350,688)( - - 350,688)(
Total other financing sources and uses 1,310,870 350,688 - 1,661,558
NET CHANGE IN FUND BALANCES 240,650 1,510,058)( 348,044 921,364)(
FUND BALANCES, BEGINNING 10,287,475 5,229,446 2,052,830 17,569,751
FUND BALANCES, ENDING 10,528,125$ 3,719,388$ 2,400,874$ 16,648,387$
The accompanying notes are an integral part of these financial statements.
FOR THE YEAR ENDED SEPTEMBER 30, 2007
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
22
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) 921,364)$(
Governmental funds report capital outlays as expenditures. However,in the statement of
activities the cost of those assets is allocated over their estimated useful lives and reported as
depreciation expense. This is the amount by which capital outlays exceeded depreciation in
the current period.775,864
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds.98,347
The issuance of long-term debt (e.g., bonds, leases)provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt consumes the
current financial resources of governmental funds. Neither transaction, however, has any
effecton net assets. This amount is the net affect of these differences in the treatment of long-
term debt and related items.570,159
Some expenses reported in the statement of activities do not require the use of current
financial resources and, therefore, are not reported as expenditures in governmental funds. 2,537
Internal Service Funds are used by management to charge the costs of certain capital assets to
individual funds. The net revenue of certain activities of internal service funds is reported
with governmental activities.115,053
Change in net assets of governmental activities (pages 19 - 20)640,596$
The notes to the financial statements are an integral part of this statement.
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2007
CITY OF FRIENDSWOOD, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
23
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Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES
Property taxes 10,298,938$ 10,298,938$ 10,376,849$ 77,911$
Sales taxes 3,370,100 3,370,100 3,920,622 550,522
Franchise taxes 1,158,800 1,158,800 1,239,167 80,367
Fines and forfeitures 892,970 892,970 1,205,307 312,337
Permits and fees 664,333 664,333 903,353 239,020
Intergovernmental 231,576 241,263 248,702 7,439
Interest on investments 229,850 229,850 684,258 454,408
Other 137,137 192,853 272,245 79,392
Total revenues 16,983,704 17,049,107 18,850,503 1,801,396
EXPENDITURES
Current:
General government 3,676,605 4,860,273 4,599,270 261,003
Public safety 7,264,086 7,466,329 7,299,128 167,201
Community development and public works 3,325,808 4,478,070 4,057,452 420,618
Community services 3,496,789 4,289,964 3,964,873 325,091
Total expenditures 17,763,288 21,094,636 19,920,723 1,173,913
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 779,584)( 4,045,529)( 1,070,220)( 2,975,309
OTHER FINANCING SOURCES
Proceeds on sale of capital assets - - 785,942 785,942
Transfers in 867,616 875,616 875,616 -
Transfers out - - 350,688)( 350,688)(
Total other financing sources 867,616 875,616 1,310,870 435,254
NET CHANGE IN FUND BALANCES 88,032 3,169,913)( 240,650 3,410,563
FUND BALANCES, BEGINNING 10,287,475 10,287,475 10,287,475 -
FUND BALANCES, ENDING 10,375,507$ 7,117,562$ 10,528,125$ 3,410,563$
The notes to the financial statements are an integral part of this statement.
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30, 2007
GENERAL FUND
24
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Business-type
Activities Governmental
Enterprise Fund Activities
Water and Sewer
Internal Service
Fund
ASSETS
Current assets:
Cash and investments 6,630,414$ 364,932$
Accounts receivable, net of allowance
Customer accounts 1,206,227 -
Other 113,178 1,451
Prepaid expenses 23,667 -
Restricted cash and investments 17,122,179 -
Total current assets 25,095,665 366,383
Non-current assets
Net investment in joint venture 281,806 -
Deferred charges 431,127 -
Capital assets:
Land 718,493 -
Machinery and equipmen 3,063,036 1,189,762
Water and wastewater system 45,799,462 -
Construction in progress 7,573,013 -
Water rights 3,465,469 -
Accumulated depreciation 21,161,929)( 731,271)(
Total capital assets 39,457,544 458,491
Total noncurrent assets 40,170,477 458,491
Total assets 65,266,142$ 824,874$
LIABILITIES
Current liabilities:
Accounts payable 7,176,724$ 6,773$
Accrued liabilities 20,323 -
Accrued interest 128,379 -
Customer deposits 273,659 -
Compensated absences 15,028 -
Bonds payable 913,860 -
Total current liabilities 8,527,973 6,773
Non-current liabilities
Compensated absences 60,111 -
Bonds, notes and loans payable 32,155,867 -
Total non-current liabilities 32,215,978 -
Total liabilities 40,743,951 6,773
NET ASSETS
Invested in capital assets, net of related deb 16,884,376 458,491
Restricted for capital improvement 162,218 -
Unrestricted 7,475,597 359,610
Total net assets 24,522,191$ 818,101$
The accompanying notes are an integral part of these financial statements.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
SEPTEMBER 30, 2007
25
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Business-type
Activities Governmental
Enterprise Fund Activities
Water and Sewer
Internal
Service Fund
OPERATING REVENUES
Charges for services 8,021,040$ 309,861$
Total operating revenues 8,021,040 309,861
OPERATING EXPENSES
Personnel services 1,315,559 -
Wastewater operations 1,202,439 -
Water purchases 659,391 -
Repairs and maintenance 398,139 -
Supplies 156,295 42,264
Other services and charges 606,996 -
Depreciation 1,372,244 137,689
Total operating expenses 5,711,063 179,953
OPERATING INCOME 2,309,977 129,908
NON-OPERATING REVENUES (EXPENSES)
Investment earnings 1,236,092 9,017
Gain (loss) on sale of capital assets 4,182 23,872)(
Interest expense and fiscal charges 1,583,551)( -
Total non-operating revenues (expenses)343,277)( 14,855)(
INCOME BEFORE TRANSFERS 1,966,700 115,053
TRANSFERS OUT 875,616)( -
CHANGE IN NET ASSETS 1,091,084 115,053
TOTAL NET ASSETS, BEGINNING 23,431,107 703,048
TOTAL NET ASSETS, ENDING 24,522,191$ 818,101$
The accompanying notes are an integral part of these financial statements.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2007
26
Business-type Governmental
Activities Activities -
Enterprise Fund Internal
Service
Water and Sewer Fund
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users 8,127,747$ 309,861$
Cash paid to suppliers for goods and services 1,324,537)( -
Cash paid to employees for services 3,038,992)( 43,185)(
Net cash provided by operating activities 3,764,218 266,676
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers to other funds 875,616)( -
Net cash used for noncapital financing activities 875,616)( -
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from sale of capital assets 4,182 23,872)(
Acquisition of capital assets 587,210)( 199,932)(
Principal paid on bonds 860,000)( -
Interest and fiscal charges paid on debt 1,568,699)( -
Net cash used for capital and related financing activities 3,011,727)( 223,804)(
CASH FLOWS FROM INVESTING ACTIVITIES
Investment earnings 1,236,092 9,017
Net cash provided by investing activities 1,236,092 9,017
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,112,967 51,889
CASH AND CASH EQUIVALENTS, BEGINNING 22,639,626 313,043
CASH AND CASH EQUIVALENTS, ENDING 23,752,593$ 364,932$
(Including $17,122,179 for water and sewer reported as restricted assets)
(continued)
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2007
27
Business-type Governmental
Activities Activities -
Enterprise Fund Internal
Service
Water and Sewer Fund
Reconciliation of operating income to net cash
provided by operating activities:
Operating income 2,309,977$ 129,908$
Adjustments to reconcile operating income
to net cash provided by operating activities:
Depreciation 1,372,244 137,689
Changes in assets and liabilities:
Decrease (increase) in assets:
Customer receivable 190,229 -
Other receivable 86,276)( 44)(
Prepaid and other assets 19,638)( -
Increase (decrease) in liabilities:
Accounts payable 3,906 877)(
Accrued liabilities 8,978)( -
Customer deposits 2,754 -
Net cash provided by operating activities 3,764,218$ 266,676$
The notes to the financial statements are an integral part of this statement.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2007
28
29
CITY OF FRIENDSWOOD, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2007
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 (the 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)
30
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 79th
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)
31
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. Property 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)
32
1. 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)
33
1. 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 interfund 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)
34
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, 2007.
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 $0.5821 per $100
of assessed valuation that were prorated between operations and debt service in the amounts
of $0.5120 and $0.0701, respectively. The resulting tax levies were approximately $9.2 and
$2.6 million for operations and debt service, respectively, based on a total taxable valuation
of approximately $2.016 billion for the 2006 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.
Deferred Contributions
Deferred contributions include the costs of land and infrastructure within the West Ranch
Management District that will be contributed upon completion to the primary government.
Upon completion of the project, these assets will be transferred to the primary government
and expensed in the Statement of Activities.
(continued)
35
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities, and Net Assets or Equity (Continued)
Deferred Contributions (Continued)
The District approved a contract with the City effective August 15, 2005. Under the terms of
the contract, the District is to pay for construction of water distribution, sanitary sewer,
drainage, transportation, education and recreation facilities to serve the District.
The District shall be the owner of the system until the system is completed, approved by the
City and conveyed to it, at which time ownership will vest in the City. The District will own
and operate detention facilities to serve the District. Pursuant to the contract, the District
shall have a security interest therein until all bonds issued by the District are retired.
Capital Assets
Capital assets, which include property, plant, equipment, infrastructure, and water rights, are
reported in the applicable governmental or business-type activities columns in the government-
wide financial statements. The City defines capital assets as assets with an initial, individual cost
of more than $5,000 and an estimated 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
Streets, sidewalks and drainage 40-50
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.
(continued)
36
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities, and Net Assets or Equity (Continued)
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.
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.
37
2. RECONCILIATION 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 $17,413,826 difference are as follows:
Premium on bonds 144,060$
General obligation bonds 16,660,000
Deferred charges for issuance costs (to be amortized 186,423)(
over life of debt)
Capitalized lease obligations 96,380
Accrued interest payable 59,324
Compensated absences 640,485
Net adjustment to reduce fund balance - total
governmental funds to arrive at net assets -
governmental activities 17,413,826$
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 $775,864 difference are as follows:
Capital outlay 3,873,508$
Depreciation expense 2,657,678)(
Cost of land sold 439,966)(
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities 775,864$
(continued)
38
2. RECONCILIATION 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
$98,347 difference are as follows:
Property taxes 74,217$
Court fines 24,245
Other 115)(
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities 98,347$
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 $570,159 difference are
as follows:
Principal repayments:
General obligation debt 490,000$
Capital lease 72,577
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 of governmental activities 570,159$
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 $2,537 difference are as follows:
Compensated absences 10,647$
Accrued interest 1,702
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 of governmental activities 2,537$
39
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 15th day of September or as
soon thereafter as practical. Adoption of the budget shall require an affirmative vote of at least a
majority of all members of the Council. Adoption of the budget shall constitute appropriations
of the amounts specified therein as expenditures from the funds indicated. If, during the fiscal
year, the City Manager certifies that there are 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)
40
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 2007 fiscal year, expenditures exceeded appropriations in the following departments
(the legal level of compliance):
General Fund:
Public Safety - Communications 2,325$
Public Safety - Animal Control 12,610
Community Development and Public Works - Administration 14,179
Community Development and Public Works - Sanitation 3,394
4. DETAILED NOTES ON ALL FUNDS
Deposits and Investments
As of September 30, 2007, the City had the following investments:
Weighted Average
Investment Type Fair Value Maturity (Days)
MBIA Class 24,505,137$ 41
Lone Star 2,894,871 23
Tex Pool 3,978,469 34
U. S. Agency Securities:
Freddie Mac 692,110 340
Federal Home Loan Bank 4,606,670 509
Fannie Mae 2,103,300 456
Total U. S. Agency Securities 7,402,080
Total portfolio 38,780,557$
Portfolio weighted average maturity (days)122
(continued)
41
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
The City’s investment pools are 2a7-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, 2007, 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, 2007, $2,536,512 of the
City’s $2,636,512 deposit balance was collateralized with securities held by the pledging financial
institution in the City’s name. The remaining balance, $100,000 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, 2007, were rated as follows:
Investment Type Rating Rating Agency
MBIA Class AAA Fitch
Lone Star AAAm 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 $100,000;
3. No-load money market mutual funds; and
4. TexPool, Lone Star Investment Pool and MBIA Class.
(continued)
42
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
The City Council has adopted a written investment policy regarding the investments of its funds
as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas Government
Code). The investments of the City are in compliance with the Council’s investment policies.
The City did not have any derivative investment products during the current year. All significant
legal and contractual provisions for investments were complied with during the year.
Investments at year-end are representative of the types of investments maintained by the City
during the year.
Receivables
Receivables as of year-end for the City’s individual major funds, nonmajor funds in the
aggregate and the Internal Service Fund including the applicable allowances for uncollectible
accounts, are as follows:
2003 and
2005 Bond Water and Internal
General Construction Nonmajor Sewer Service Total
Receivables:
Property taxes 345,935$ -$ 55,480$ -$ -$ 401,415$
Sales taxes 706,429 - - - - 706,429
Franchise taxes 307,120 - - - - 307,120
Customer accounts 96,913 - 34,067 1,216,227 - 1,347,207
Accrued interest 45,920 1,194 8,220 25,442 1,451 82,227
Court fines 541,979 - - - - 541,979
Other 25,627 - 6,381 87,736 - 119,744
Gross receivables 2,069,923 1,194 104,148 1,329,405 1,451 3,506,121
Less: allowance for
uncollectibles 351,454 - 5,548 10,000 - 367,002
Net total receivables 1,718,469$ 1,194$ 98,600$ 1,319,405$ 1,451$ 3,139,119$
Governmental Funds Proprietary Funds
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)
43
4. DETAILED NOTES ON ALL FUNDS (Continued)
Receivables (Continued)
Unavailable Unearned
General Fund
Delinquent property taxes 311,342$ -$
Court fines 209,907 -
Miscellaneous 11,118 31,664
Total General Fund 532,367 31,664
Court Security and Technology Fund
Miscellaneous 6,381 -
Total Court Security and Technology Fund 6,381 -
Debt Service Fund
Delinquent property taxes 49,932 -
Total Debt Service Fund 49,932 -
Total Governmental Funds 588,680$ 31,664$
Capital Assets
Capital asset activity for the year ended September 30, 2007, was as follows:
Primary Government
Beginning Reclassifications/ Ending
Balance Increases Decreases Adjustments* Balance
Governmental activities:
Capital assets, not being depreciated:
Land 24,390,687$ -$ 439,966$ -$ 23,950,721$
Construction in progress 8,033,428 3,555,597 3,582,557 - 8,006,468
Total assets not being depreciated 32,424,115 3,555,597 4,022,523 - 31,957,189
Capital assets, being depreciated:
Buildings and improvements 17,989,872 3,430,870 703,916 - 20,716,826
Machinery and equipment 6,522,777 538,609 95,844 - 6,965,542
Infrastructure - 164,458 703,916)( 66,803,025 67,671,399
Total capital assets being depreciated 24,512,649 4,133,937 95,844 66,803,025 95,353,767
Less accumulated depreciation:
Buildings and improvements 7,118,114 852,867 121,000 - 7,849,981
Machinery and equipment 4,924,286 365,252 62,307 - 5,227,231
Infrastructure - 1,577,248 121,000)( 27,763,727 29,461,975
Total accumulated depreciation 12,042,400 2,795,367 62,307 27,763,727 42,539,187
Total capital assets being
depreciated, net 12,470,249 1,338,570 33,537 39,039,298 52,814,580
Governmental activities capital
assets, net 44,894,364$ 4,894,167$ 4,056,060$ 39,039,298$ 84,771,769$
* The City retroactively reported infrastructure in the current year in accordance with GASB
34.
(continued)
44
4. DETAILED NOTES ON ALL FUNDS (Continued)
Capital Assets (Continued)
Beginning Reclassifications/Ending
Balance Increases Decreases Balance
Business-type activities
Capital assets, not being depreciated:
Land 718,493$ -$ -$ 718,493$
Construction in progress 519,030 7,264,686 210,703 7,573,013
Water rights 3,465,469 - - 3,465,469
Total assets not being depreciated 4,702,992 7,264,686 210,703 11,756,975
Capital assets, being depreciated:
Machinery and equipment 3,041,636 21,400 - 3,063,036
Water and wastewater system 45,588,759 210,703 - 45,799,462
Total capital assets being depreciated 48,630,395 232,103 - 48,862,498
Less accumulated depreciation:
Machinery and equipment 2,465,854 16,926 - 2,482,780
Water and wastewater system 17,323,831 1,355,318 - 18,679,149
Total accumulated depreciation 19,789,685 1,372,244 - 21,161,929
Total capital assets being
depreciated, net 28,840,710 1,140,141)( - 27,700,569
Business-type activities capital
assets, net 33,543,702$ 6,124,545$ 210,703$ 39,457,544$
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government 137,993$
Public safety 85,856
Community development and public works 1,877,311
Community services 556,518
Capital assets held by the City's internal service fund are
charged to the various functions based on their usage 137,689
Total depreciation expense - governmental activities 2,795,367$
Business-type activities:
Water and sewer 1,372,244$
Total depreciation expense - business-type activities 1,372,244$
Commitments for construction projects in progress were $452,332 at September 30, 2007.
(continued)
45
4. DETAILED NOTES ON ALL FUNDS (Continued)
Interfund Transfers
The following schedule briefly summarizes the City’s transfer activity:
Transfers In Transfers Out Amount Purpose
2003 and 2005 Bond General 350,688$ Fund portion of capital
Construction improvements
General Water and sewer 875,616 Fund indirect cost for
administrative expenditures
Long-term Debt
The City issues a variety of long-term debt instruments in order to acquire and/or construct major
capital facilities and equipment for governmental and business-type activities. These instruments
include general obligation bonds, certificates of obligation, revenue bonds, and 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, 2007, follows:
(continued)
46
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Bonds Payable and Certificates of Obligation (Continued)
Final Interest Governmental Business-type
Maturity Rate Activities Activities
General Obligation Bonds
2002 Refunding 3,785,000$ 2008 3.950% 345,000$ 460,000$
2003 Permanent
Improvement 8,700,000 2026 3.65%-5.50% 8,500,000 -
2005 Permanent
Improvement and Refunding 9,800,000 2020 2.85%-4.375%
7,815,000 1,915,000
16,660,000 2,375,000
Revenue Bonds
1999 Waterworks and Sewer
System Revenue 4,945,000 2019 4.2%-5.55% - 100,000
2000 Waterworks and Sewer
System Revenue 3,515,000 2019 4.2%-6.5% - 180,000
2001 Waterworks and Sewer
System Revenue 6,100,000 2021 4.7%-6.5% - 5,950,000
2006 Waterworks and Sewer
System Revenue and
Refunding Bond 24,285,000 2031 4.0%-5.0%
- 24,285,000
- 30,515,000
Combination Tax and Revenue
Certificates of Obligation
1995 Series 3,200,000 2010 5.375%-7.375%
- 50,000
- 50,000
Total Bonds and Certificates of Obligation 16,660,000$ 32,940,000$
Series and Original
Issue Amount
Annual debt service requirements for bonds and certificates of obligation are as follows:
Year Ending
September 30, Principal Interest Principal Interest
2008 595,000$ 698,761$ 905,000$ 1,519,535$
2009 620,000 670,243 1,030,000 1,474,136
2010 645,000 639,084 1,080,000 1,425,012
2011 675,000 606,806 1,135,000 1,372,424
2012 705,000 576,319 1,190,000 1,319,047
2013-2017 3,935,000 2,427,332 6,770,000 5,760,524
2018-2022 4,810,000 1,524,360 7,910,000 4,056,085
2023-2027 4,675,000 413,049 7,485,000 2,180,770
2028-2032 - - 5,435,000 378,510
Total 16,660,000$ 7,555,954$ 32,940,000$ 19,486,043$
Governmental Activities Business-type Activities
(continued)
47
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
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, 2007, $10,220,000 of bonds considered defeased is still
outstanding.
Federal Arbitrage
General obligation bonds, combination tax and revenue bonds and certificates of obligation are
subject to the provisions of the Internal Revenue Code of 1986 related to arbitrage and interest
income tax regulations under those provisions.
Obligations Under Capital Leases
In prior years, the City entered into capital lease agreements in order to purchase machinery and
equipment for public works, police and fire departments. The assets acquired through these lease
agreements are as follows:
Governmental
Activities
Asset:
Machinery and equipment 634,701$
Less: accumulated depreciation 482,068
Total 152,633$
The following is a summary of future lease payments due on this machinery and equipment:
Year Ending Lease
September 30, Obligation
2008 80,574$
2009 20,071
Total 100,645
Less interest portion 4,265)(
Obligations under capital leases 96,380$
(continued)
48
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Changes in Long-term Liabilities
Long-term liability activity of the primary government for the year ended September 30, 2007, was
as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental activities
General obligation bonds 17,150,000$ -$ 490,000$ 16,660,000$ 595,000$
Premium on bond issuance 151,642 - 7,582 144,060 7,582
Capital lease obligations 168,957 - 72,577 96,380 76,732
Compensated absences 651,132 456,824 467,471 640,485 128,097
Governmental activities
long-term liabilities 18,121,731$ 456,824$ 1,037,630$ 17,540,925$ 807,411$
Business-type activities
General obligation bonds 2,855,000$ -$ 480,000$ 2,375,000$ 695,000$
Revenue bonds 30,665,000 - 150,000 30,515,000 160,000
Certificates of obligation 280,000 - 230,000 50,000 50,000
Premium on bond issuance 422,729 - 23,509 399,220 24,213
Loss on refunding 284,846)( - 15,353)( 269,493)( 15,353)(
Compensated absences 75,139 46,720 46,720 75,139 15,028
Business-type activities
long-term liabilities 34,013,022$ 46,720$ 914,876$ 33,144,866$ 928,888$
The compensated absence liability attributable to the governmental activities will be liquidated
primarily by the General Fund.
Long-term liability activity of the West Ranch Management District for the year ended July 31,
2007, was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Component unit
Developer advances 95,000$ 25,000$ -$ 120,000$ -$
Due to developer
construction - 1,782,350 - 1,782,350 -
Component unit
long-term liabilities 95,000$ 1,807,350$ -$ 1,902,350$ -$
A developer of the West Ranch Management District has advanced $120,000 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.
Developers of the West Ranch Management District have constructed underground utilities and
have made land improvements on behalf of the District. The District is maintaining and
operating the land improvements and has conveyed the underground facilities to the City and has
agreed to reimburse the developers for these construction costs and interest. The District
estimates reimbursable costs for completed projects are $1,782,350.
(continued)
49
4. DETAILED NOTES ON ALL FUNDS (Continued)
Restricted Assets
The balances of the restricted asset accounts in the Enterprise Fund are as follows:
Cash and investments:
Customer deposits 273,659$
Construction 32,579
Construction - 2006 bonds 16,815,941
Total restricted assets 17,122,179$
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 821 municipalities having the benefit plan administered by TMRS, an
agent multiple employer public employee retirement system. Each of the 821 municipalities has an
annual individual actuarial valuation performed. All assumptions for the December 31, 2006,
valuations are contained the 2006 TMRS 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)
50
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, 2006, valuation is effective for rates
beginning in January 2008).
Schedule of Actuarial Liabilities and Funding Progress
Actual Valuation Date 12/031/04 12/031/05 12/031/06
Actuarial value of assets 17,143,239$ 18,436,890$ 18,730,279$
Actuarial accrued liability 21,881,143 23,496,143 24,313,786
Percent funded 78.3% 78.5% 77.0%
Unfunded (overfunded) actuarial accrued liability (UAAL)4,737,904 5,059,253 5,583,507
Annual covered payroll 7,479,620 7,639,184 7,998,107
UAAL as a percentage of covered payroll 63.3% 66.2% 69.8%
Net pension obligation (NPO at the beginning of period - - -
Annual Pension Cost:
Annual required contribution (ARC)1,084,657 1,055,993 1,036,959
Interest on NPO - - -
Adjustment to the ARC 1,084,657 1,055,993 1,036,959
Contributions made 1,084,657 1,055,993 1,036,959
Increase in NPO - - -
NPO at the end of the period -$ -$ -$
Actuarial Assumptions
Actuarial Cost Method - Unit Credit
Amortization Method - Level Percent of Payroll
Remaining Amortization Period - 25 Years - Open Period
Asset Valuation Method - Amortized Cost (to accurately reflect the
requirements of GASB Statement No. 25,
paragraphs 36e and 138)
Amortzation Period - Open
Investment Rate of Return -7%
Projected Salary Increases - None
Includes Inflation at -3.5%
Cost-of-living Adjustments - None
(continued)
51
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deferred Compensation Plan
The City offers its employees a tax-deferred compensation plan meeting the requirements of
Internal Revenue Code Section 457. The plan was established by City ordinance 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.
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, 2007, 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).
(continued)
52
4. DETAILED NOTES ON ALL FUNDS (Continued)
Blackhawk Regional Waste Treatment Plant (Continued)
Separate financial statements for the joint venture were available in the December 31, 2006,
audited financial statements of the Gulf Coast Waste Disposal Authority and are summarized
below:
Blackhawk Blackhawk
Regional Contingency
Facility Reserve
Total assets 665,750$ 279,579$
Total liabilities 665,750 -
Total fund equity -$ 279,579$
Total revenue 1,994,670$ 29,705$
Total expenditures 1,994,670 -
Net change in fund balance - 29,705
Fund balances, beginning - 249,874
Fund balances, ending -$ 279,579$
Joint Venture
Complete financial statements may be obtained at the Gulf Coast Waste Disposal Authority, 910
Bay Area Boulevard, Houston, Texas 77058.
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, 2007, 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, 2007, the
City believed the amounts paid on workers’ compensation would not change significantly from the
amounts recorded.
(continued)
53
4. DETAILED NOTES ON ALL FUNDS (Continued)
Risk Management (Continued)
During the year ended September 30, 2007, 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 $2,139,000. 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 can not be determined at
this time although the City expects such amounts, if any, to be immaterial.
Economic Dependency
The West Ranch Management District’s developers own the majority of the taxable property in the
District. The District’s ability to meet its obligations is dependent on the developers’ ability to pay
property taxes.
Since inception, the developers have advanced $120,000 to the District for operations. The District
does not have sufficient funds nor anticipated revenues sufficient to liquidate these advances
during the forthcoming fiscal year. These advances have been recorded as liabilities in the
District’s financial statements.
Prior Period Adjustment
In the current year, the City completed implementation of the retroactive infrastructure reporting in
accordance with GASB 34. An adjustment to retroactively report infrastructure in governmental
activities statement of net assets was made during the current year in the amount of $39,039,298.
COMBINING AND INDIVIDUAL FUND
STATEMENTS AND SCHEDULES
THIS PAGE LEFT BLANK INTENTIONALLY
GENERAL FUND
The General Fund accounts for the resources used to finance the fundamental operations of the City. It
is the basic fund of the City and covers all activities for which a separate fund has not been established.
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES
Property taxes 10,298,938$ 10,298,938$ 10,376,849$ 77,911$
Sales taxes 3,370,100 3,370,100 3,920,622 550,522
Franchise taxes 1,158,800 1,158,800 1,239,167 80,367
Fines and forfeitures 892,970 892,970 1,205,307 312,337
Permits and fees 664,333 664,333 903,353 239,020
Intergovernmental 231,576 241,263 248,702 7,439
Interest on investments 229,850 229,850 684,258 454,408
Other 137,137 192,853 272,245 79,392
Total revenues 16,983,704 17,049,107 18,850,503 1,801,396
EXPENDITURES
GENERAL GOVERNMENT
Mayor and council:
Personnel services 299 299 - 299
Supplies 5,293 5,293 4,064 1,229
Other services and charges 166,527 166,654 166,213 441
Total mayor and council 172,119 172,246 170,277 1,969
City manager:
Personnel services 365,015 385,015 378,466 6,549
Supplies 5,630 8,130 8,526 396)(
Other services and charges 65,060 69,851 63,968 5,883
Capital outlay 2,500 2,500 - 2,500
Total city manager 438,205 465,496 450,960 14,536
City secretary:
Personnel services 301,435 308,188 304,212 3,976
Supplies 18,302 40,180 21,447 18,733
Other services and charges 58,953 47,017 24,041 22,976
Capital outlay 4,000 11,000 10,954 46
Total city secretary 382,690 406,385 360,654 45,731
(continued)
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30, 2007
GENERAL FUND
Budgeted Amounts
54
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
GENERAL GOVERNMENT (Continued)
Administrative services:
Personnel services 552,639$ 552,639$ 526,598$ 26,041$
Supplies 5,500 6,158 5,041 1,117
Repairs and maintenance 125 125 430 305)(
Other services and charges 49,295 203,788 166,706 37,082
Total administrative services 607,559 762,710 698,775 63,935
Human resources:
Personnel services 227,154 227,154 221,464 5,690
Supplies 13,300 18,718 16,066 2,652
Other services and charges 73,995 91,077 77,053 14,024
Total human resources 314,449 336,949 314,583 22,366
Tax:
Other services and charges 177,750 1,232,979 1,215,128 17,851
Total tax 177,750 1,232,979 1,215,128 17,851
Economic development:
Personnel services 103,489 103,489 106,207 2,718)(
Supplies 127,776 150,276 91,198 59,078
Other services and charges - - 288 288)(
Total economic development 231,265 253,765 197,693 56,072
Municipal court:
Personnel services 402,614 402,614 392,049 10,565
Supplies 15,120 15,120 16,869 1,749)(
Repairs and maintenance 500 500 1,107 607)(
Other services and charges 24,361 24,361 31,335 6,974)(
Total municipal court 442,595 442,595 441,360 1,235
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
GENERAL FUND
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES
(continued)
Budgeted Amounts
FOR THE YEAR ENDED SEPTEMBER 30, 2007
55
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
GENERAL GOVERNMENT (Continued)
Computer services:
Personnel services 244,527$ 244,527$ 259,374$ 14,847)$(
Supplies 22,335 26,685 26,506 179
Repairs and maintenance 76,700 76,700 77,436 736)(
Other services and charges 249,630 262,256 224,824 37,432
Capital outlay 97,400 102,470 87,966 14,504
Total computer services 690,592 712,638 676,106 36,532
Risk management:
Personnel services 62,835 62,835 61,391 1,444
Supplies 9,125 9,125 11,141 2,016)(
Other services and charges 147,421 2,550 1,202 1,348
Total risk management 219,381 74,510 73,734 776
Total general government 3,676,605 4,860,273 4,599,270 261,003
PUBLIC SAFETY
Police services:
Personnel services 4,185,089 4,227,717 4,140,229 87,488
Supplies 236,800 242,336 299,937 57,601)(
Repairs and maintenance 98,749 98,749 83,348 15,401
Other services and charges 324,268 326,714 347,591 20,877)(
Capital outlay 40,240 40,240 - 40,240
Total police services 4,885,146 4,935,756 4,871,105 64,651
(continued)
CITY OF FRIENDSWOOD, TEXAS
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
SCHEDULE OF REVENUES, EXPENDITURES
Budgeted Amounts
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2007
(Continued)
56
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
PUBLIC SAFETY (Continued)
Communications:
Personnel services 748,901$ 748,901$ 749,514$ 613)$(
Supplies 8,563 8,563 13,481 4,918)(
Repairs and maintenance 3,793 3,793 3,540 253
Other services and charges 10,517 10,517 7,564 2,953
Total communications 771,774 771,774 774,099 2,325)(
Animal control:
Personnel services 146,002 146,002 161,962 15,960)(
Supplies 13,849 13,849 12,614 1,235
Repairs and maintenance 2,239 2,239 1,465 774
Other services and charges 13,502 13,502 12,161 1,341
Total animal control 175,592 175,592 188,202 12,610)(
Fire and EMS:
Personnel services 383,354 378,354 364,033 14,321
Supplies 41,112 165,454 82,030 83,424
Repairs and maintenance 8,625 9,025 6,416 2,609
Other services and charges 998,483 1,030,374 1,013,243 17,131
Total fire and EMS 1,431,574 1,583,207 1,465,722 117,485
Total public safety 7,264,086 7,466,329 7,299,128 167,201
COMMUNITY DEVELOPMENT AND PUBLIC WORKS
Administration:
Personnel services 446,896 446,896 470,970 24,074)(
Supplies 7,539 7,539 3,258 4,281
Repairs and maintenance 600 600 139 461
Other services and charges 10,752 59,002 53,849 5,153
Total administration 465,787 514,037 528,216 14,179)(
FOR THE YEAR ENDED SEPTEMBER 30, 2007
Budgeted Amounts
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
CITY OF FRIENDSWOOD, TEXAS
(continued)
57
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
COMMUNITY DEVELOPMENT AND PUBLIC WORKS (Continued)
Planning and zoning:
Personnel services 125,079$ 125,079$ 101,245$ 23,834$
Supplies 2,800 2,800 2,422 378
Other services and charges 9,698 9,698 7,255 2,443
Total planning and zoning 137,577 137,577 110,922 26,655
Engineering:
Personnel services 59,100 59,100 56,834 2,266
Supplies 2,300 2,300 1,786 514
Repairs and maintenance 500 500 - 500
Other services and charges 9,403 9,403 6,027 3,376
Total engineering 71,303 71,303 64,647 6,656
Inspection:
Personnel services 374,824 326,574 322,730 3,844
Supplies 9,952 9,952 12,175 2,223)(
Repairs and maintenance 1,100 1,100 380 720
Other services and charges 56,056 68,109 43,112 24,997
Total inspection 441,932 405,735 378,397 27,338
Streets:
Personnel services 387,991 387,991 374,368 13,623
Supplies 59,622 59,222 65,273 6,051)(
Repairs and maintenance 632,957 1,008,732 1,213,055 204,323)(
Other services and charges 394,088 394,488 435,297 40,809)(
Capital outlay 300,000 698,488 376,372 322,116
Total streets 1,774,658 2,548,921 2,464,365 84,556
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2007
Budgeted Amounts
(continued)
CITY OF FRIENDSWOOD, TEXAS
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
58
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
COMMUNITY DEVELOPMENT AND PUBLIC WORKS (Continued)
Drainage:
Personnel services 292,436$ 292,436$ 260,444$ 31,992$
Supplies 3,829 3,829 4,206 377)(
Repairs and maintenance 41,811 35,211 32,646 2,565
Other services and charges 6,475 164,540 129,933 34,607
Capital outlay 90,000 304,481 80,282 224,199
Total drainage 434,551 800,497 507,511 292,986
Sanitation:
Other services and charges - - 3,394 3,394)(
Total sanitation - - 3,394 3,394)(
Total community development
and public works 3,325,808 4,478,070 4,057,452 420,618
COMMUNITY SERVICES
Administration:
Personnel services 167,454 167,454 140,064 27,390
Supplies 3,575 3,575 2,704 871
Other services and charges 20,837 25,837 28,970 3,133)(
Total administration 191,866 196,866 171,738 25,128
Library:
Personnel services 676,788 676,788 640,435 36,353
Supplies 148,317 155,552 144,473 11,079
Repairs and maintenance 2,500 2,500 202 2,298
Other services and charges 24,392 24,392 20,133 4,259
Capital outlay 15,000 15,000 11,374 3,626
Total library 866,997 874,232 816,617 57,615
Budgeted Amounts
(continued)
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, 2007
59
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
COMMUNITY SERVICES (Continued)
Parks and recreation:
Personnel services 546,003$ 546,003$ 487,738$ 58,265$
Supplies 92,075 111,285 123,493 12,208)(
Repairs and maintenance 87,490 83,590 76,985 6,605
Other services and charges 485,342 483,842 481,186 2,656
Capital outlay 148,578 162,608 95,195 67,413
Total parks and recreation 1,359,488 1,387,328 1,264,597 122,731
Swimming pool:
Personnel services 44,481 44,481 42,750 1,731
Supplies 14,335 14,335 6,114 8,221
Repairs and maintenance 11,293 11,293 10,718 575
Other services and charges 23,232 23,232 13,298 9,934
Total swimming pool 93,341 93,341 72,880 20,461
Building operations:
Personnel services - - 11,787 11,787)(
Supplies 18,851 18,851 12,736 6,115
Repairs and maintenance 102,650 125,750 87,864 37,886
Other services and charges 468,296 448,296 534,835 86,539)(
Capital outlay 395,300 1,145,300 991,819 153,481
Total building operations 985,097 1,738,197 1,639,041 99,156
Total community services 3,496,789 4,289,964 3,964,873 325,091
Total expenditures 17,763,288 21,094,636 19,920,723 1,173,913
FOR THE YEAR ENDED SEPTEMBER 30, 2007
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
GENERAL FUND
CITY OF FRIENDSWOOD, TEXAS
(continued)
Budgeted Amounts
60
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 779,584)$( 4,045,529)$( 1,070,220)$( 2,975,309$
OTHER FINANCING SOURCES (USES)
Proceeds on sale of capital assets - - 785,942 785,942
Transfers in 867,616 875,616 875,616 -
Transfers out - - 350,688)( 350,688)(
Total other financing sources (uses)867,616 875,616 1,310,870 435,254
NET CHANGE IN FUND BALANCES 88,032 3,169,913)( 240,650 3,410,563
FUND BALANCES, BEGINNING 10,287,475 10,287,475 10,287,475 -
FUND BALANCES, ENDING 10,375,507$ 7,117,562$ 10,528,125$ 3,410,563$
FOR THE YEAR ENDED SEPTEMBER 30, 2007
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
GENERAL FUND
Budgeted Amounts
61
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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.
Police
Investigation
Fire/EMS
Donation
Park Land
Dedication
Court
Security and
Technology
ASSETS
Cash and investments 13,459$ 52,519$ 282,655$ 262,486$
Receivable, net of allowances for uncollectibles:
Taxes - - - -
Customer accounts 4,555 29,512 - -
Other 30 118 957 6,381
Total assets 18,044$ 82,149$ 283,612$ 268,867$
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable 4,328$ 38,750$ 900$ 43,596$
Deferred revenue - - - 6,381
Other accrued expenses - - - 64
Other payables - - - -
Total liabilities 4,328 38,750 900 50,041
Fund balances:
Reserved for:
Debt service - - - -
Unreserved 13,716 43,399 282,712 218,826
Total fund balances 13,716 43,399 282,712 218,826
Total liabilities and fund balances 18,044$ 82,149$ 283,612$ 268,867$
Special Revenue
CITY OF FRIENDSWOOD, TEXAS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
SEPTEMBER 30, 2007
62
Permanent
Debt Service 1776 Park
Total
Nonmajor
Governmental
Funds
1,806,308$ 28,798$ 2,446,225$
49,932 - 49,932
- - 34,067
7,012 103 14,601
1,863,252$ 28,901$ 2,544,825$
-$ -$ 87,574$
49,932 - 56,313
- - 64
- - -
49,932 - 143,951
1,813,320 - 1,813,320
- 28,901 587,554
1,813,320 28,901 2,400,874
1,863,252$ 28,901$ 2,544,825$
63
Police
Investigation
Fire/EMS
Donation
Park Land
Dedication
Court
Security and
Technology
REVENUES
Property taxes -$ -$ -$ -$
Fines and forfeitures 13,924 - - 69,563
Permits and fees - - 114,149 -
Interest on investments 776 1,539 10,830 -
Donations - 229,939 - -
Other 5,000 - - -
Total revenues 19,700 231,478 124,979 69,563
EXPENDITURES
Current:
General government - - - 46,936
Public safety 36,051 147,424 - -
Capital outlay 6,040 - - -
Debt service:
Principal - 72,577 - -
Interest and other charges - 7,995 - -
Total expenditures 42,091 227,996 - 46,936
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 22,391)( 3,482 124,979 22,627
NET CHANGE IN FUND BALANCES 22,391)( 3,482 124,979 22,627
FUND BALANCES, BEGINNING 36,107 39,917 157,733 196,199
FUND BALANCES, ENDING 13,716$ 43,399$ 282,712$ 218,826$
FOR THE YEAR ENDED SEPTEMBER 30, 2007
Special Revenue
CITY OF FRIENDSWOOD, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
64
Permanent
Debt Service 1776 Park
Total Nonmajor
Governmental
Funds
1,425,180$ -$ 1,425,180$
- - 83,487
- - 114,149
109,731 1,424 124,300
- - 229,939
- - 5,000
1,534,911 1,424 1,982,055
- - 46,936
- - 183,475
- - 6,040
585,496 - 658,073
731,492 - 739,487
1,316,988 - 1,634,011
217,923 1,424 348,044
217,923 1,424 348,044
1,595,397 27,477 2,052,830
1,813,320$ 28,901$ 2,400,874$
65
Variance with
Final Budget
Final Actual Positive
Budget Amounts (Negative)
REVENUES
Interest on investments 650$ 1,539$ 889$
Donations 80,572 229,939 149,367
Total revenues 81,222 231,478 150,256
EXPENDITURES
Current:
Public safety 28,148 147,424 119,276)(
Debt service:
Principal 72,577 72,577 -
Interest and fiscal charges 7,995 7,995 -
Total expenditures 108,720 227,996 119,276)(
NET CHANGE IN FUND BALANCES 27,498)( 3,482 30,980
FUND BALANCES, BEGINNING 39,917 39,917 -
FUND BALANCES, ENDING 12,419$ 43,399$ 30,980$
FOR THE YEAR ENDED SEPTEMBER 30, 2007
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FIRE/EMS DONATION FUND
66
Variance with
Final Budget
Final Actual Positive
Budget Amounts (Negative)
REVENUES
Property taxes 1,409,819$ 1,425,180$ 15,361$
Interest on investments 53,700 109,731 56,031
Total revenues 1,463,519 1,534,911 71,392
EXPENDITURES
Debt service:
Principal 595,496 585,496 10,000
Interest and fiscal charges 807,034 731,492 75,542
Total expenditures 1,402,530 1,316,988 85,542
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 60,989 217,923 156,934
OTHER FINANCING USES
Transfers out 94,224)( - 94,224
Total other financing uses 94,224)( - 94,224
NET CHANGE IN FUND BALANCES 33,235)( 217,923 251,158
FUND BALANCES, BEGINNING 1,595,397 1,595,397 -
FUND BALANCES, ENDING 1,562,162$ 1,813,320$ 251,158$
DEBT SERVICE FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2007
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
67
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STATISTICAL SECTION
This part of the City of Friendswood, Texas’ comprehensive annual financial report
presents detailed information as a context for understanding what the information in the
financial statements, note disclosures, and required supplementary information says about
the government’s overall financial health.
Contents
Page
Financial Trends 68
These schedules contain trend information to help the reader
understand how the City’s financial performance and well-being have
changed over time.
Revenue Capacity 74
These schedules contain information to help the reader assess the City’s
most significant local revenue sources, the property tax.
Debt Capacity 78
These schedules present information to help the reader assess the
affordability of the City’s current levels of outstanding debt and the
City’s ability to issue additional debt in the future.
Demographic and Economic Information 83
These schedules offer demographic and economic indicators to help
the reader understand the environment within which the City’s
financial activities take place.
Operating Information 85
These schedules contain service and infrastructure data to help the reader
understand how the information in the City’s financial report relates to
the services the City provides and the activities it performs.
Sources: Unless otherwise noted, the information in these schedules is derived from the
comprehensive annual financial reports for the relevant year.
THIS PAGE LEFT BLANK INTENTIONALLY
TABLE 1
2003 2004 2005 2006 2007
Governmental activities:
Invested in capital assets, net of related debt 49,742,075$ 29,632,831$ 32,533,863$ 32,849,446$ 71,777,140$
Restricted 585,080 1,271,568 1,576,829 2,034,157 2,391,482
Unrestricted 5,468,870 7,125,997 7,527,573 10,391,123 10,785,998
Total governmental activities net assets 55,796,025$ 38,030,396$ 41,638,265$ 45,274,726$ 84,954,620$
Business-type activities:
Invested in capital assets, net of related debt 17,656,296$ 17,174,525$ 16,823,526$ 16,815,130$ 16,884,376$
Restricted 305,660 444,548 445,086 41,057 162,218
Unrestricted 4,058,223 4,337,137 5,228,802 6,574,920 7,475,597
Total business-type activities net assets 22,020,179$ 21,956,210$ 22,497,414$ 23,431,107$ 24,522,191$
Primary government:
Invested in capital assets, net of related debt 67,398,371$ 46,807,356$ 49,357,389$ 49,664,576$ 88,661,516$
Restricted 890,740 1,716,116 2,021,915 2,075,214 2,553,700
Unrestricted 9,527,093 11,463,134 12,756,375 16,966,043 18,261,595
Total primary government net assets 77,816,204$ 59,986,606$ 64,135,679$ 68,705,833$ 109,476,811$
Note:
The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003.
Fiscal Year
CITY OF FRIENDSWOOD, TEXAS
NET ASSETS BY COMPONENT
LAST FIVE FISCAL YEARS
(Accrual Basis of Accounting)
68
TABLE 2
2003 2004 2005 2006 2007
EXPENSES
Governmental activities:
General government 2,923,552$ 3,375,283$ 3,438,849$ 3,330,439$ 4,472,602$
Public safety 5,760,097 6,026,272 7,318,886 7,060,800 7,565,797
Community development and public works 3,383,229 2,569,356 2,576,447 2,813,857 5,475,447
Community services 2,747,438 3,081,717 3,075,023 3,098,013 3,420,244
Interest on long-term debt 128,192 465,770 478,495 857,602 835,511
Total governmental activities expenses 14,942,508 15,518,398 16,887,700 17,160,711 21,769,601
Business-type activities:
Water 5,457,496 5,614,077 6,251,251 6,078,881 5,711,063
Interest on long-term debt 1,063,940 999,219 963,355 962,989 1,583,551
Total business-type activities expenses 6,521,436 6,613,296 7,214,606 7,041,870 7,294,614
Total primary government expenses 21,463,944$ 22,131,694$ 24,102,306$ 24,202,581$ 29,064,215$
PROGRAM REVENUES
Governmental activities:
Charges for services:
General government 647,958$ 958,665$ 1,176,086$ 1,238,631$ 1,353,160$
Public safety 9,433 9,141 15,013 54,653 23,267
Community development and public works 1,865,086 822,927 758,487 805,710 998,625
Community services 66,862 65,850 66,281 112,681 219,944
Operating grants and contributions 661,568 778,261 1,271,119 771,477 489,707
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 3,084,703
Business-type activities:
Charges for services:
Water and wastewater 7,275,746 7,203,736 8,390,761 8,392,277 8,021,040
Total business-type activities program revenues 7,275,746 7,203,736 8,390,761 8,392,277 8,021,040
Total primary government program revenues 11,276,425$ 10,077,780$ 11,913,047$ 11,375,429$ 11,105,743$
CITY OF FRIENDSWOOD, TEXAS
CHANGES IN NET ASSETS
LAST FIVE FISCAL YEARS
(Accrual Basis of Accounting)
Fiscal Year
(continued)
69
TABLE 2
2003 2004 2005 2006 2007
NET (EXPENSE) REVENUES
Governmental activities 10,941,829)$( 12,644,354)$( 13,365,414)$( 14,177,559)$( 18,684,898)$(
Business-type activities 754,310 590,440 1,176,155 1,350,407 726,426
Total primary government net expense 10,187,519)( 12,053,914)( 12,189,259)( 12,827,152)( 17,958,472)(
GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS
Governmental activities:
Taxes
Property 9,706,202 10,931,393 11,352,598 11,304,684 11,876,246
Sales 2,875,071 1,119,328 3,199,136 3,658,699 3,904,436
Franchise 1,058,726 2,833,290 1,176,460 1,220,581 1,239,167
Other 79,691 71,028 53,790 11,940 16,186
Investment earnings 154,558 219,085 376,435 915,710 1,063,715
Gain on sale of capital assets - - - - 345,976
Miscellaneous 30,826 - 51,503 21,556 4,152
Transfers 664,102 714,278 763,361 680,850 875,616
Total governmental activities 14,569,176 15,888,402 16,973,283 17,814,020 19,325,494
Business-type activities:
Investment earnings 160,629 59,869 114,932 262,761 1,236,092
Miscellaneous 12,777 - 13,478 1,375 4,182
Extraordinary item 100,000 - - - -
Transfers 664,102)( 714,278)( 763,361)( 680,850)( 875,616)(
Total business-type activities 390,696)( 654,409)( 634,951)( 416,714)( 364,658
Total primary government 14,178,480 15,233,993 16,338,332 17,397,306 19,690,152
CHANGE IN NET ASSETS
Governmental activities 3,627,347 3,244,048 3,607,869 3,636,461 640,596
Business-type activities 363,614 63,969)( 541,204 933,693 1,091,084
Total primary government 3,990,961$ 3,180,079$ 4,149,073$ 4,570,154$ 1,731,680$
Note:
The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003.
Fiscal Year
CITY OF FRIENDSWOOD, TEXAS
CHANGES IN NET ASSETS
LAST FIVE FISCAL YEARS
(Accrual Basis of Accounting)
70
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TABLE 31998 1999 2000 2001 2002 2003 2004 2005 2006 2007General fund Reserved 448,068$ 650,599$ 849,908$ 451,293$ 1,196,255$ 683,459$ 635,182$ 511,197$ 1,313,829$ 601,646$ Unreserved2,161,891 2,687,005 2,838,042 5,989,106 2,766,577 5,055,679 5,971,319 7,032,843 8,973,646 9,926,479 Total general fund2,609,959$ 3,337,604$ 3,687,950$ 6,440,399$ 3,962,832$ 5,739,138$ 6,606,501$ 7,544,040$ 10,287,475$ 10,528,125$ All other governmental funds Reserved 187,908$ 73,344$ 68,627$ 77,175$ 109,799$ 254,568$ 829,701$ 1,395,767$ 4,220,225$ 3,575,592$ Unreserved, reported in: Special revenue funds 515)( 11,694 77,039 268,247 177,390 263,242 411,229 175,192 404,749 558,653 Capital projects funds - - - - - 7,342,304 5,171,662 8,584,781 3,943,654 1,957,116 Permanent fund20,509 21,358 22,549 23,892 24,707 25,232 25,587 26,292 27,477 28,901 Total all other governmental funds207,902$ 106,396$ 168,215$ 369,314$ 311,896$ 7,885,346$ 6,438,179$ 10,182,032$ 8,596,105$ 6,120,262$ Fiscal YearCITY OF FRIENDSWOOD, TEXASFUND BALANCESGOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(Modified Accrual Basis of Accounting)71
TABLE 41998 1999 2000 2001 2002 2003 2004 2005 2006 2007REVENUES Taxes 8,564,986$ 8,987,983$ 10,145,912$ 11,414,585$ 12,515,917$ 13,688,737$ 14,843,855$ 15,779,126$ 16,190,756$ 16,961,818$ Fines and penalties 304,017 332,659 416,722 550,854 631,066 639,678 879,369 1,112,916 1,163,984 1,288,794 Licenses, fees and permits 699,432 634,905 970,868 1,192,899 922,808 856,721 807,041 717,607 769,352 1,017,502 Intergovernmental 346,879 553,352 607,963 580,561 16,294,283 526,316 795,325 985,339 535,074 248,702 Investment earnings 222,586 292,886 399,712 424,412 269,109 153,848 218,419 375,123 906,552 1,054,698 Donations - - - - - 235,749 215,535 213,381 219,353 229,939 Other revenues525,228 386,084 482,054 483,063 509,560 794,228 152,616 414,923 277,995 279,788 Total revenues10,663,128 11,187,869 13,023,231 14,646,374 31,142,743 16,895,277 17,912,160 19,598,415 20,063,066 21,081,241 EXPENDITURES General government 1,937,096 2,051,684 2,305,916 2,196,226 2,897,613 3,042,541 3,249,965 3,420,274 3,315,844 4,605,245 Public safety 4,043,792 4,166,008 4,265,750 5,115,933 4,961,812 5,530,953 5,810,503 7,127,975 6,903,806 7,482,603 Community development and public works - - - - - 4,987,392 2,511,125 2,436,359 2,579,398 3,600,798 Public works 1,946,903 1,601,048 2,640,988 1,201,584 2,092,488 - - - - - Community development 413,024 522,128 535,084 641,047 19,464,924 - - - - - Community services 1,904,926 2,193,860 2,355,186 2,738,557 4,250,205 2,751,993 2,655,315 2,626,329 2,630,094 2,866,388 Capital outlay - - 652,206 98,987 195,385 1,442,339 4,033,197 7,040,173 4,292,854 3,711,569 Debt service Principal 709,094 512,594 525,897 616,470 548,205 468,987 469,930 459,422 608,184 658,073 Interest200,275 185,952 450,762 511,175 188,958 213,741 476,207 594,076 757,402 739,487 Total expenditures11,155,110 11,233,274 13,731,789 13,119,979 34,599,590 18,437,946 19,206,242 23,704,608 21,087,582 23,664,163 (continued)Fiscal YearCITY OF FRIENDSWOOD, TEXASCHANGES IN FUND BALANCESGOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(Modified Accrual Basis of Accounting)72
TABLE 41998 1999 2000 2001 2002 2003 2004 2005 2006 2007EXCESS OF REVENUES OVER (UNDER) EXPENDITURES491,982)$( 45,405)$( 708,558)$( 1,526,395$ 3,456,847)$( 1,542,669)$( 1,294,082)$( 4,106,193)$( 1,024,516)$( 2,582,922)$( OTHER FINANCING SOURCES (USES) Sale of capital assets - - - - - 15,826 - - 187,345 785,942 Bonds issued - - - - - 8,701,495 - 8,024,224 - - Refunding bonds issued - - - - 1,629,707 - - - - - Payments to escrow account - - - - 1,611,304)( - - - - - Proceeds from issuance of debt 96,325 149,780 574,856 47,393 229,460 - - - - - Transfers in 557,983 792,169 546,113 555,713 17,225,350 1,955,635 853,073 923,361 904,955 1,226,304 Transfers out- 304,988)( - - 16,621,918)( 1,382,860)( 138,795)( 160,000)( 224,105)( 350,688)( Total other financing sources (uses)654,308 636,961 1,120,969 603,106 851,295 9,290,096 714,278 8,787,585 868,195 1,661,558 NET CHANGE IN FUND BALANCES162,326$ 591,556$ 412,411$ 2,129,501$ 2,605,552)$( 7,747,427$ 579,804)$( 4,681,392$ 156,321)$( 921,364)$( DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES8.2% 6.2% 7.5% 8.7% 2.1% 4.0% 6.2% 6.3% 8.1% 7.0% Note: From 1998 to 2002, Public Works and communityDevelopment were two separate departments. From 2003 to 2007, the departments were combined. In 2001 and 2002,the City participated in the FEMA Hazard Mitigation Grant Buyout Program. The City's participation costs resulted in a reduction of fund balance. In 2002, the Cityadopted a Financial Policy. Based on this policy, undesignated fund balance shall be allowed to accumulate to establish a 90-day operating reserve. After the reserve isestablished, additional undesignated funds are allowed to accumulate for future capital projects.LAST TEN FISCAL YEARSFiscal Year(Continued)(Modified Accrual Basis of Accounting)CITY OF FRIENDSWOOD, TEXASCHANGES IN FUND BALANCESGOVERNMENTAL FUNDS73
TABLE 5EstimatedCommercial Less: Total Taxable Total ActualFiscal Residential and Industrial Other Tax-exempt Assessed Direct TaxableYear Property Property Property Property Value Tax Rate Value1998 967,589,062$ 66,393,740$ 158,492,969$ 67,800$ 1,192,543,571$ 0.5961 1,192,475,771$ 1999 1,014,445,395 70,521,900 163,226,772 74,176,040 1,322,370,107 0.6125 1,248,194,067 2000 1,115,454,667 80,732,240 182,202,628 81,388,930 1,459,778,465 0.6385 1,378,389,535 2001 1,235,737,251 88,524,370 185,220,540 88,005,650 1,597,487,811 0.6385 1,509,482,161 2002 1,418,354,411 101,081,380 170,988,340 90,631,200 1,781,055,331 0.6385 1,690,424,131 2003 1,549,261,881 109,659,080 176,329,200 96,366,250 1,931,616,411 0.6385 1,835,250,161 2004 1,770,911,545 116,739,133 186,106,639 105,017,040 2,178,774,357 0.6385 2,073,757,317 2005 1,868,119,395 119,696,390 173,923,130 121,988,410 2,283,727,325 0.6385 2,161,738,915 2006 1,984,426,335 122,337,518 167,808,785 125,184,070 2,399,756,708 0.6040 2,274,572,638 2007 2,147,192,985 151,086,039 193,971,876 147,461,610 2,639,712,510 0.5821 2,492,250,900 Source: Friendswood Independent School District, Tax Assessor/Collector, and City of Friendswood Records.Note:Tax rates per $100 of assessed valueResidential property includes both single-family and multi-family properties.CITY OF FRIENDSWOOD, TEXASASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARSProperty in the City of Friendswood is reassessed once every two years on average. (Source: Galveston Central Appraisal District)74
TABLE 6Friendswood Clear Creek GalvestonTotal Independent Independent CountyFiscal Debt Direct School School Drainage Galveston HarrisYear General Service Rate District District District County County1998 0.5276$ 0.0685$ 0.5961$ 1.5750$ 1.5900$ 0.1425$ 0.5200$ 0.64173$ 1999 0.5610 0.0515 0.6125 1.6720 1.6415 0.1500 0.5200 0.64173 2000 0.5542 0.0843 0.6385 1.5350 1.5986 0.1500 0.5450 0.64173 2001 0.5547 0.0838 0.6385 1.5850 1.7008 0.1500 0.5400 0.64173 2002 0.5547 0.0838 0.6385 1.6170 1.7250 0.1500 0.5654 0.63998 2003 0.5547 0.0838 0.6385 1.6370 1.7400 0.1550 0.6063 0.63998 2004 0.5547 0.0838 0.6385 1.6370 1.7300 0.1500 0.6063 0.63998 2005 0.5547 0.0838 0.6385 1.6370 1.7450 0.1483 0.6388 0.63998 2006 0.5243 0.0797 0.6040 1.5070 1.7750 0.1450 0.5874 0.63998 2007 0.5120 0.0701 0.5821 1.5700 1.6300 0.1450 0.5874 0.63998 Source: Friendswood Independent School District, Tax Assessor/Collector and City of Friendswood Records.Notes: Overlapping rates are those of local and county governments that apply to property owners within the City of Friendswood. Not all overlapping rates applyto all property owners. Overlapping rates for Friendswood Independent School District, Galveston County Consolidated Drainage District and GalvestonCounty apply only to residents whose property is in Galveston County. Overlapping rates for Clear Creek Independent School District and Harris Countyapply only to residents whose property is in Harris County.City Direct Rates Overlapping RatesCITY OF FRIENDSWOOD, TEXASDIRECT AND OVERLAPPING PROPERTY TAX RATESLAST TEN FISCAL YEARS75
TABLE 7
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Value Value Value Value
Texas-New Mexico Power Co 12,679,210$ 0.48% 10,112,340$ 1.02%
Reserve at Autumn Creek, LTD 12,029,980 0.46% - - %
Southwestern Bell Telephone Co. 9,059,760 0.34% 14,354,920 1.45%
Kroger Texas, L.P. 8,680,990 0.33% - - %
H.E. Butt Grocery Company 8,431,640 0.32% - - %
Texas HCP Holding, L.P. 7,187,840 0.27% - - %
Southwest Properties, L.P. 6,967,100 0.26% - - %
MB Friendswood Parkwood 5,396,300 0.20% - - %
Friendswood Retirement 5,358,015 0.20% 7,778,890 0.79%
Exxon Mobil Pipeline Co. 5,213,590 0.20% 20,965,260 2.12%
Autumn Creek Dev., LTD 4,451,830 0.17% - - %
DR Horton - Texas, LTD - - % - - %
Maxi-Ban, LTD 3,600,000 0.14% - - %
Friendswood Huntington Woods 3,600,000 0.14% - - %
Texas & Kansas City Cable Partners 4,019,250 0.15% - - %
Centerpoint Energy, Inc. 3,888,910 0.15% - - %
Timber Creek Holdings, L.P. 3,881,660 0.15% - - %
Mystic, LTD 3,532,880 0.13% - - %
Howard, Jack A. 3,524,260 0.13% - - %
MdKinney Real Estate 3,418,990 0.13% - - %
Bay Meadows, LLP 3,215,300 0.12% - - %
South West Properties (Seahawk Apts.) - - % 6,650,000 0.67%
Hausman - Banfield Interests - - % 5,630,640 0.57%
Albertson's Inc. - - % 5,089,960 0.52%
Frontier Land VPLL (Salem Square) - - % 3,299,500 0.33%
Houston Lighting & Power - - % 3,181,970 0.32%
Forest Ben Limited - -% 2,620,350 0.27%
Total 118,137,505$ 4.48% 79,683,830$ 8.06%
All other taxpayers 2,521,575,005$ 95.52%
2,639,712,510$
Source: Friendswood Independent School District, Tax Assessor/Collector
2007 1998
CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL PROPERTY TAXPAYERS
CURRENT YEAR AND NINE YEARS AGO
76
TABLE 8
Taxes Levied Collections
Fiscal for the Percentage in Subsequent Percentage
Year Ended Fiscal Year Amount of Levy Years Amount of Levy
1998 5,886,162$ 5,844,583$ 99.29% 37,978$ 5,882,561$ 99.94%
1999 6,292,040 6,229,896 99.01% 59,064 6,288,960 99.95%
2000 7,239,468 7,125,877 98.43% 107,959 7,233,836 99.92%
2001 7,906,786 7,809,643 98.77% 90,410 7,900,053 99.91%
2002 8,863,904 8,721,196 98.39% 132,358 8,853,554 99.88%
2003 9,642,413 9,496,887 98.49% 128,742 9,625,629 99.83%
2004 10,785,308 10,630,820 98.57% 133,235 10,764,055 99.80%
2005 11,221,282 11,078,265 98.73% 115,318 11,193,583 99.75%
2006 11,151,572 11,019,314 98.81% 88,826 11,108,140 99.61%
2007 11,740,541 11,532,882 98.23% - 11,532,882 98.23%
Sources: Friendswood Independent School District, Tax Assessor/Collector and City of Friendswood Records.
Fiscal Year of the Levy
Collected With the
Total Collections to Date
CITY OF FRIENDSWOOD, TEXAS
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
77
TABLE 9General Certificates General Certificates Water Total PercentageFiscal Obligation of Revenue Capital Obligation of Revenue Primary of Personal PerYear Bonds Obligation Bonds Leases Bonds Obligation Bonds Government Income Capita1998 1,199,927$ 1,990,000$ 17,000$ 153,252$ 3,070,851$ 5,585,000$ 33,000$ 12,049,030$ 0.19% 391$ 1999 888,677 1,910,000 - 198,688 2,091,213 5,425,000 - 10,513,578 0.16% 341 2000 600,219 1,830,000 - 775,443 1,603,691 5,255,000 8,388,842 18,453,195 0.25% 581 2001 445,725 1,760,000 - 713,430 1,246,827 5,080,000 14,074,887 23,320,869 0.30% 713 2002 1,915,518 - - 713,060 2,994,109 2,714,826 14,091,221 22,428,734 0.28% 670 2003 10,375,891 - - 510,858 2,468,558 2,635,000 14,185,000 30,175,307 0.36% 893 2004 10,059,865 - - 362,154 1,830,135 2,535,000 14,160,000 28,947,154 0.33% 848 2005 17,590,000 - - 237,597 3,310,000 470,000 14,020,000 35,627,597 N/A 1,040 2006 17,150,000 - - 168,957 2,855,000 280,000 30,665,000 51,118,957 N/A 1,490 2007 16,660,000 - - 96,380 2,375,000 50,000 30,515,000 49,696,380 N/A 1,430 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements.N/A - Information is not available.See Table 14 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year.Personal income data provided on Table 14 is for the County of Galveston. Data was not available specific to the City of Friendswood and therefore is notinclulded on this table.Governmental Activities Business-type ActivitiesCITY OF FRIENDSWOOD, TEXASRATIOS OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARS78
TABLE 10
Percentage of
General Less Debt Net Actual Taxable
Fiscal Assessed Obligation Service Bonded Value of Per
Year Population Value Bonds Funds Debt Property Capita
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 1,595,397 15,554,603 0.65% 453
2007 34,759 2,639,712,510 16,660,000 1,813,320 14,846,680 0.56% 427
Notes:
Details regarding the City's outstanding debt can be found in the notes to the financial statements.
Net General Bonded Debt Outstanding
CITY OF FRIENDSWOOD, TEXAS
RATIOS OF NET GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
79
TABLE 11
Estimated
Share of
Estimated Direct and
Debt Percentage Overlapping
Outstanding Applicable Debt
Debt repaid with property taxes:
Friendswood Independent School District 26,220,554$ 100.000% 26,220,554$
Clear Creek Independent School District 579,196,318 3.295% 19,084,519
Galveston County 197,669,000 8.193% 16,195,021
Harris County 3,170,789,000 0.571% 18,105,205
Subtotal overlapping debt 79,605,299
City direct debt 16,756,380
Total direct and overlapping debt 96,361,679$
Sources:
Notes:
Governmental Unit
Information was obtained from either the governmental unit's website or the finance department of the
governmental unit.
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.
CITY OF FRIENDSWOOD, TEXAS
DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT
AS OF SEPTEMBER 30, 2007
80
TABLE 12
CITY OF FRIENDSWOOD, TEXAS
LEGAL DEBT MARGIN INFORMATION
AS OF SEPTEMBER 30, 2007
The tax rate for fiscal year ending September 30, 2007, is $.5821 per $100 of assessed valuation with assessed valuation
being 100% of market value.
As a City Council-City Manager form of government, the City of Friendswood is not limited by law in the amount of debt
it may issue. The City's charter states:
"In keeping with the Constitution of the State of Texas and not contrary thereto, the City of Friendswood shall have
the power to borrow money on the credit of the City for any public purpose not now or hereafter prohibited by the
Constitution and laws of the State of Texas, and shall have the right to issue all tax bonds, revenue bonds, funding
and refunding bonds, time warrants and other evidence of indebtedness as now authorized or as may hereafter be
authorized to be issued by cities and towns by the laws of the State of Texas."
Article 11, Section 5 of the State of Texas Constitution States in part:
"but no tax for any pose shall ever be lawful for any one year, which shall exceed two and one-half percent of the
taxable property of such city"
81
TABLE 13
Utility Less: Net
Fiscal Service Operating Available
Year Charges Expenses Revenue Principal Interest Coverage
1998 5,815,425$ 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
2007 8,021,040 4,338,819 3,682,221 620,000 1,441,234 1.79
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.
CITY OF FRIENDSWOOD, TEXAS
PLEDGED REVENUE COVERAGE
LAST TEN FISCAL YEARS
Debt Service
Waterworks and Sewer Revenue Bonds
82
TABLE 14
Per Capita
Calendar Personal Personal Unemployment
Year Population Income Income Rate
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 3.4%
2003 33,800 8,356,254,000 31,313 3.8%
2004 34,152 8,719,688,000 32,055 3.5%
2005 34,272 9,192,246,000 33,146 3.9%
2006 34,306 - - 3.0%
2007 34,759 - - 3.4%
Sources:
Note: Personal Incomeand Per Capita Personal Incomenumbersare for GalvestonCounty; 2006 and 2007
numbers were not available.
CITY OF FRIENDSWOOD, TEXAS
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN CALENDAR YEARS
Population informationwas providedfrom past financialreports. Unemploymentrates wereobtained
from the U. S. Department of Labor Bureau of Labor Statistics website or the Texas Workforce
Commissionwebsite.Personal Incomeand Per Capita Personal Incomewereobtainedfrom the U. S.
Bureau of Economic Analysis website.
83
TABLE 15
Percentage Percentage
of Total City of Total City
Employer Employees Employment Employees Employment
Friendswood ISD 675 33.70% 628 51.06%
HEB 275 13.73% 80 6.50%
Kroger 234 11.68% 52 4.23%
City of Friendswood 222 11.08% 132 10.73%
Friendship Haven Nursing Home 135 6.74% 100 8.13%
Friendswood Healthcare Center (Autumn Hills) 90 4.49% 85 6.91%
U. S. Post Office 70 3.49% 70 5.69%
Summerville (Park Place) 65 3.25% 40 3.25%
Sonic 49 2.45% - - %
Timber Creek Golf Club 41 2.05% - - %
Luna's 40 2.00% - - %
Gary Greene Realtors 40 2.00% - - %
Village on the Park 34 1.70% 43 3.50%
McDonalds 33 1.65% - -%
Total 2,003 100.00% 1,230 100.00%
Source: City Economic Development Division
Note: Numbers prior to 1999 were unavailable from the employers.
CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL EMPLOYERS
CURRENT AND EIGHT YEARS AGO
2007 1999
84
TABLE 16Function/Program 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007General government City manager 3.50 3.50 4.50 4.50 5.50 5.50 5.50 5.50 5.50 5.50 City secretary 3.00 3.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 5.00 Administrative services 16.12 17.12 18.64 19.64 20.64 21.70 22.72 24.44 25.81 26.19 Public safety Police 55.94 55.94 56.94 59.94 62.94 65.06 67.40 70.07 72.06 81.41 Fire marshal and fire 9.00 11.50 12.50 12.50 12.50 12.58 12.85 12.85 4.50 6.11 Public works 17.00 17.00 17.00 17.00 17.00 - - - - - Community development 10.08 11.00 14.00 14.00 15.00 - - - - - Community development and public works - - - - - 34.00 34.00 34.00 35.00 36.00 Community services 27.17 28.86 29.86 29.92 30.42 30.43 30.43 30.43 31.01 32.18 Water 6.00 6.00 6.00 6.00 9.00 9.00 9.00 9.00 9.00 9.00 Wastewater5.00 5.00 5.00 5.00 6.00 6.00 7.00 7.00 8.00 8.00 Total152.81 158.92 168.44 172.50 183.00 188.27 192.90 197.29 194.88 209.39 Source: City of Friendswood Budget DocumentsNotes:From 1998 to 2002, public works and community development were two separate departments. From 2003 to 2007, the departments werecombined.Beginning with fiscal year 2006, the fulltime equivalent for Fire Marshal and Fire include only the Fire Marshal Department. The Cityhas a contract with the Friendswood Volunteer Fire Department and there are no employees paid directly by the City.Fulltime Equivalent Employees as of June 30,CITY OF FRIENDSWOOD, TEXASFULLTIME EQUIVALENT CITY GOVERNMENT EMPLOYEESBY FUNCTION/PROGRAMLAST TEN FISCAL YEARS85
TABLE 17Function/Program 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007General government Building permits issued 607 840 1,125 1,252 1,266 1,048 851 1,129 882 975 Building inspections conducted 3,577 8,654 11,121 15,576 12,554 10,841 10,051 12,641 12,264 11,135 Police Physical arrests 605 491 463 556 625 752 1,189 1,041 1,804 1,923 Parking violations 132 118 30 31 34 74 45 22 30 34 Traffic violations 2,215 3,915 4,436 6,117 6,387 9,754 11,196 12,053 12,623 11,374 Fire marshal Inspections 562 623 671 451 383 1,065 812 731 668 1,300 Fire Emergency responses 1,888 1,925 2,051 2,283 2,264 2,285 2,395 2,453 2,497 2,723 Fires extinguished 65 118 110 105 84 79 82 93 75 74 Parks and recreation Recreation participants NA NA NA NA NA NA NA NA NA 21,334 Facility reservations NA NA NA NA NA NA NA NA NA 1,115 Library Volumes in collection 87,587 86,933 87,357 87,181 87,639 88,185 88,737 90,163 92,633 93,028 Total volumes borrowed 240,486 254,917 263,374 274,204 279,850 290,044 280,520 281,060 300,241 308,718 Water New connections 511 770 300 665 242 270 388 208 209 289 Water main breaks - - - - - 10 54 76 105 44 Average daily consumption 4,127 3,990 5,257 3,803 4,008 4,172 3,957 4,094 3,886 3,472 (thousands of gallons) Peak daily consumption 10,215 12,336 11,479 8,649 10,081 11,491 10,718 9,935 7,030 6,358 (thousands of gallons)Wastewater Average daily sewage treatment 2,635 2,305 2,107 3,050 3,050 3,332 3,258 3,081 3,064 3,425 (thousands of gallons) Maximum daily flow 8,699 8,750 6,117 13,913 13,913 10,180 8,563 10,587 10,484 10,484 (thousands of gallons)Source: Various City departments and prior year CAFRsNA - Information is not available.Fiscal YearCITY OF FRIENDSWOOD, TEXASOPERATING INDICATORS BY FUNCTION/PROGRAMLAST TEN FISCAL YEARS86
TABLE 18Function/Program 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol units 12 12 14 14 14 15 15 16 18 28 Fire Stations 3 3 3 3 3 3 3 3 3 3 Public works Streets -paved (miles) 98 98 98 105 105 105 157 157 179 150 Streets - unpaved (miles) 2 2 2 1 1 1 4 4 1 - Traffic signals - - - - - - 3 3 3 3 Parks and recreation Acreage 111 111 189 189 189 189 189 189 189 189 Parks 6 6 8 8 8 8 8 8 8 8 Swimming pool 1 1 1 1 1 1 1 1 1 1 Tennis courts 4 4 4 4 4 4 4 4 4 4 Library 1 1 1 1 1 1 1 1 1 1 Water Water mains (miles) 120 120 151 155 157 160 160 165 179 180 Fire hydrants 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,275 Connections 8,893 9,123 9,423 10,088 10,330 10,600 10,988 11,196 11,405 11,748 Storage capacity 5,993 5,993 5,993 5,993 5,993 5,993 5,993 5,993 5,993 5,993 (thousands of gallons)Wastewater Sanitary sewers (miles) 120 120 151 155 155 160 160 165 153 155 Connections 8,377 8,679 8,979 9,414 9,658 10,240 10,331 10,537 10,682 10,902 Storm sewers (miles) 85 85 85 85 85 86 92 92 - 95 Treatment capacity 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 (thousands of gallons)Source: Various City departments and prior year CAFRsNote: No capital asset indicators are available for the general government.Fiscal YearCITY OF FRIENDSWOOD, TEXASCAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMLAST TEN FISCAL YEARS87
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COMPLIANCE SECTION
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REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and
Members of the City of Council
City of Friendswood, Texas
We have audited the financial statements of the governmental activities, the discretely presented
component unit, each major fund, and the aggregate remaining fund information of the City of
Friendswood, Texas (the “City”) as of and for the year ended September 30, 2007, which collectively
comprise the City’s basic financial statements and have issued our report thereon dated March 14, 2008.
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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the City’s internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on
the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
City’s internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the City’s internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the City’s ability to initiate, authorize, record, process, or
report financial data reliably in accordance with generally accepted accounting principles such that there
is more than a remote likelihood that a misstatement of the City’s financial statements that is more than
inconsequential will not be prevented or detected by the City’s internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the financial statements will not
be prevented or detected by the City’s internal control.
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Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and would not necessarily identify all deficiencies in
internal control that might be significant deficiencies or material weaknesses. We did not identify any
deficiencies in internal control over financial reporting that we consider to be material weaknesses, as
defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free
of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
However, we noted certain matters that were reported to management of the City, in a separate
letter dated March 14, 2008.
This report is intended solely for the information and use of the audit committee, management,
others within the City, and appropriate federal and state awarding agencies and pass-through entities and
is not intended to be and should not be used by anyone other than these specified parties.
March 14, 2008