HomeMy WebLinkAboutComprehensive Annual Financial Report - FY2008CITY OF
FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2008
CITY OF
FRIENDSWOOD, TEXAS
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
Fiscal Year Ended
September 30, 2008
Officials Issuing Report:
Roger C. Roecker
Interim City Manager
Cindy Edge
Interim Director of Administrative Services
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
SEPTEMBER 30, 2008
Page
Exhibit Number
INTRODUCTORY SECTION
Letter of Transmittal..................................................................................................... 1 – 4
Organizational 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, 2008
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 – 55
Combining and Individual Fund Statements and Schedules
General Fund
Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual................................................. 56 – 63
(continued)
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
(Continued)
SEPTEMBER 30, 2008
Page
Number
FINANCIAL SECTION (Continued)
Combining and Individual Fund Statements and Schedules (Continued)
Nonmajor Governmental Funds
Combining Balance Sheet....................................................................................... 64 – 65
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances................................................................................... 66 – 67
Nonmajor Special Revenue Funds
Schedule of Revenues, Expenditures and Changes in
Fund Balances – Budget and Actual – Fire/EMS
Donation Fund ..................................................................................................... 68
Nonmajor Debt Service Funds
Schedule of Revenues, Expenditures and Changes in
Fund Balances – Budget and Actual.................................................................... 69
STATISTICAL SECTION (Unaudited)
Page
Table Number
Net Assets by Component.............................................................................. 1 70
Changes in Net Assets ................................................................................... 2 71 – 72
(continued)
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
(Continued)
SEPTEMBER 30, 2008
Page
Table Number
STATISTICAL SECTION (Unaudited)
Fund Balances – Governmental Funds.......................................................... 3 73
Changes in Fund Balances – Governmental Funds....................................... 4 74 – 75
Assessed Value and Estimated Actual Value of
Taxable Property......................................................................................... 5 76
Direct and Overlapping Property Tax Rates.................................................. 6 77
Principal Property Taxpayers......................................................................... 7 78
Property Tax Levies and Collections............................................................. 8 79
Ratios of Outstanding Debt by Type ............................................................. 9 80
Ratios of Net General Bonded Debt Outstanding.......................................... 10 81
Direct and Overlapping Governmental Activities Debt................................. 11 82
Legal Debt Margin Information..................................................................... 12 83
Pledged Revenue Coverage........................................................................... 13 84
Demographic and Economic Statistics.......................................................... 14 85
Principal Employers....................................................................................... 15 86
Fulltime Equivalent City Government Employees
by Function/Program .................................................................................. 16 87
Operating Indicators by Function/Program ................................................... 17 88
Capital Asset Statistics by Function/Program................................................ 18 89
INTRODUCTORY SECTION
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March 6, 2009
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, 2008, 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 35,500. 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. Expenditures are
projected based on departmental needs assessments and are organized based on “one-time” and
“ongoing” expenditures. In collaboration with Council, the plan continues to evolve.
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 3.83%. All deposits are either
insured by federal depository insurance or collateralized with securities held by the pledging financial
institution’s trust department.
Risk Management
The City’s risk management division continually evaluates risk in terms of severity, frequency of
probability and loss exposure. A proactive safety training and awareness program is provided for all
City employees. The City purchases insurance coverage for property, liability, and workers’
compensation through Texas Municipal League Intergovernmental Risk Pool.
Awards
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for
Excellence in Financial Reporting to the City of Friendswood for its comprehensive annual financial
report for the fiscal year ended September 30, 2007. This was the 20th 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, 2007
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, 2008
Term
Elected Officials Position Expires
David J. H. Smith Mayor May 2009
Michael Barker Council Member - Position No. 1 May 2009
Jim Barr Council Member - Position No. 2 May 2011
Jim Hill Council Member - Position No. 3 May 2009
Leslie Reid Council Member - Position No. 4 May 2010
Bill Holbert Council Member - Position No. 5 May 2011
Andy Rivera Council Member - Position No. 6 May 2010
Key Staff Position
Roger Roecker Interim City Manager
Olson & Olson City Attorney
Deloris McKenzie City Secretary
Cindy Edge Interim Director of Administrative Services
James Toney Director of Community Services
Morad Kabiri Interim 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
FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and
Members of City Council
City of Friendswood, Texas
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, the 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, 2008, 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, 2008, 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 6,
2009, 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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9
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 6, 2009
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, 2008. 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 $108,543,394 (net assets). Of this amount, $10,548,129 is
unrestricted net assets for governmental activities and $4,227,253 for business-type
activities.
• The City’s net assets decreased by $933,417. This resulted in a decrease of $3,486,213
in unrestricted net assets offset by an increase of $2,305,340 in net assets invested in
capital assets net of related debt and an increase of $247,456 in 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 $13,522,040. Of the ending fund
balance, $3,101,266 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; $1,243,384 reserved for encumbrances and prepaid items; and $8,911,147
is unreserved and available to meet the government’s ongoing obligations in
accordance with the City’s fund designation and fiscal policies.
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 eight 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, Capital
Projects Fund and the Debt Service Fund; these funds are considered to be major
funds. The other five 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 $108.5 million as of September 30, 2008. The largest portion
of the City’s net assets (83.81%) reflects its investments in capital assets (e.g., land, buildings,
equipment, improvements, construction in progress and infrastructure); less any related debt used to
acquire those assets that are still outstanding. The City uses these capital assets to provide services to
citizens; therefore, these assets are not available for future spending. It should be noted that the
resources needed to repay this debt must be provided from other sources, since the capital assets
themselves cannot be used to liquidate these liabilities.
CITY OF FRIENDSWOOD’S NET ASSETS
2008 2007 2008 2007 2008 2007
Current and other assets 19,980,784$ 19,905,791$ 9,481,699$ 25,808,598$ 29,462,483$ 45,714,389$
Capital assets 86,102,752 84,771,769 48,303,304 39,457,544 134,406,056 124,229,313
Total assets 106,083,536 104,677,560 57,785,003 65,266,142 163,868,539 169,943,702
Long-term liabilities 16,117,119 16,733,514 31,176,917 32,215,978 47,294,036 48,949,492
Other liabilities 6,053,142 2,989,426 1,977,967 8,527,973 8,031,109 11,517,399
Total liabilities 22,170,261 19,722,940 33,154,884 40,743,951 55,325,145 60,466,891
Net assets:
Invested in capital assets,
net of related debt 70,591,236 71,777,140 20,375,620 16,884,376 90,966,856 88,661,516
Restricted 2,773,910 2,391,482 27,246 162,218 2,801,156 2,553,700
Unrestricted 10,548,129 10,785,998 4,227,253 7,475,597 14,775,382 18,261,595
Total net assets 83,913,275$ 84,954,620$ 24,630,119$ 24,522,191$ 108,543,394$ 109,476,811$
Governmental Activities Business-type Activities Totals
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Combined governmental and business-type activities decreased the City’s net assets by $933,417 in
2008. The following table provides a summary of the City’s operations for the year ended September
30, 2008. The governmental activities decreased the City of Friendswood’s net assets by $1,041,345.
This decrease is due to a decline in revenues for charges for services, sales tax, and interest earnings.
Business-type activities increased the City’s net assets by $107,928. This increase is due to revenue
collections for future capital projects and debt reduction.
CITY OF FRIENDSWOOD’S CHANGES IN NET ASSETS
2008 2007 2008 2007 2008 2007
Revenues:
Program revenues:
Charges for services 2,170,183$ 2,594,996$ 8,624,546$ 8,021,040$ 10,794,729$ 10,616,036$
Operating grants
and contributions 4,021,908 489,707 - - 4,021,908 489,707
Capital grants
and contributions - - - - - -
General revenues:
Property taxes 12,512,950 11,876,246 - - 12,512,950 11,876,246
Sales taxes 3,767,526 3,904,436 - - 3,767,526 3,904,436
Franchise taxes 1,317,166 1,239,167 - - 1,317,166 1,239,167
Other taxes 25,429 16,186 - - 25,429 16,186
Investment earnings 648,301 1,063,715 531,758 1,236,092 1,180,059 2,299,807
Miscellaneous 73,026 350,128 - 4,182 73,026 354,310
Total revenues 24,536,489 21,534,581 9,156,304 9,261,314 33,692,793 30,795,895
Expenses:
General government 4,339,620 4,472,602 - - 4,339,620 4,472,602
Public safety 12,652,812 7,565,797 - - 12,652,812 7,565,797
Community development
and public works 4,921,298 5,475,447 - - 4,921,298 5,475,447
Community services 3,841,387 3,420,244 - - 3,841,387 3,420,244
Water and sewer - - 6,523,501 5,711,063 6,523,501 5,711,063
Interest on long-term
debt 803,733 835,511 1,543,859 1,583,551 2,347,592 2,419,062
Total expenses 26,558,850 21,769,601 8,067,360 7,294,614 34,626,210 29,064,215
Increase (decrease) in net
assets before transfers 2,022,361)( 235,020)( 1,088,944 1,966,700 933,417)( 1,731,680
Transfers 981,016 875,616 981,016)( 875,616)( - -
Change in net assets 1,041,345)( 640,596 107,928 1,091,084 933,417)( 1,731,680
Net assets, beginning 84,954,620 45,274,726 24,522,191 23,431,107 109,476,811 68,705,833
Prior period adjustment - 39,039,298 - - - 39,039,298
Net assets, ending 83,913,275$ 84,954,620$ 24,630,119$ 24,522,191$ 108,543,394$ 109,476,811$
Governmental Activities Business-type Activities Totals
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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 $13,522,040. Approximately 66% of this amount ($8,911,147) is unreserved, undesignated
fund balance; however, $5.9 million is set aside for the 90-day operating reserve, as set forth in the
City’s financial policies. $4,610,893 is reserved or designated as follows:
Reserves (72%)
• Encumbrances $1,169,061
• Prepaid expense 74,323
• Debt service 2,104,376
Designations (6%)
• Projects $266,243
Legally restricted (22%)
• Capital projects $323,597
• Special revenue funds 643,223
• Permanent Funds 30,070
In the General Fund, fund balance decreased by $313,456. This decrease is due to a decline in revenues
in sales tax ($127,667), fines and forfeitures ($126,891) and investment earnings ($587,071). Also, in
September 2008, Hurricane Ike hit the Texas Gulf Coast and as a result the City incurred expenditures
that are not 100% reimbursable by FEMA. In the Capital Projects Fund, fund balance decreased by
$3,189,686 as a result of capital outlay of $3,259,523. In the Debt Service Fund, fund balance increased
by $291,056. This increase is due to an increase in property tax revenues ($187,755).
Proprietary Fund
Unrestricted net assets of the respective proprietary funds are Enterprise, (water and sewer), $4,227,253
and Internal Service Fund (vehicle replacement fund), $469,460. The net assets of the water and sewer
fund increased by $107,928. The net assets of the internal service fund increased by $91,933.
General Fund Budgetary Highlights
The City made revisions to the original appropriations approved by the City Council. These changes
resulted in an increase in budgeted expenditures from the original budget of $1,653,891 or 8.59%. The
majority of this increase was the appropriation of encumbrances ($524,434) from the prior year, the
property tax refund ($56,335) and General Fund supported capital improvements ($794,815).
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, 2008, is $134,406,056. The investment
in capital assets includes 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:
• Completed construction of the Public Safety Building for a total of $5.9 million.
• Continued construction of new Fire Station #4 for $1.7 million. Prior year costs were
$93,222. The proposed project costs are $2.2 million.
• Continued design phase of Glenshannon Drainage with current year costs of $651,593
and prior year costs of $277,385.
• Continued design phase of Clover Acres Drainage with current year costs of $691,651
and prior cost of $341,300.
• Design phases continued for the following water and sewer projects: Deepwood Force
Main ($316,446), Deepwood Lift Station Expansion ($132,914) South Friendswood
Force Main Diversion ($78,000), Sunmeadow Lift Station $322,000, 16” waterline
from Sunset to water well #4 ($328,080) and Blackhawk Blvd Waterline Replacement
($235,000).
• City of Houston Southeast Water Purification Plant Expansion. The City’s current
year share of the project was $9.6 million.
CITY OF FRIENDSWOOD’S CAPITAL ASSETS AT YEAR-END
2008 2007 2008 2007 2008 2007
Land 23,950,721$ 23,950,721$ 718,493$ 718,493$ 24,669,214$ 24,669,214$
Buildings and
improvements 17,733,705 12,866,845 - - 17,733,705 12,866,845
Equipment 2,166,274 1,738,311 506,460 580,256 2,672,734 2,318,567
Infrastructure 36,636,913 38,209,424 25,814,124 27,120,313 62,451,037 65,329,737
Water rights - - 19,717,545 3,465,469 19,717,545 3,465,469
Construction in progress 5,615,139 8,006,468 1,546,682 7,573,013 7,161,821 15,579,481
Total capital assets 86,102,752$ 84,771,769$ 48,303,304$ 39,457,544$ 134,406,056$ 124,229,313$
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 $48,116,351.
16
CITY OF FRIENDSWOOD’S OUTSTANDING DEBT AT YEAR-END
2008 2007 2008 2007 2008 2007
General obligations 16,065,000$ 16,660,000$ 1,680,000$ 2,375,000$ 17,745,000$ 19,035,000$
Revenue bonds payable - - 30,355,000 30,515,000 30,355,000 30,515,000
Certificates of obligation - - - 50,000 - 50,000
Capital leases 16,351 96,380 - - 16,351 96,380
16,081,351$ 16,756,380$ 32,035,000$ 32,940,000$ 48,116,351$ 49,696,380$
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 A2 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 35,500. 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 increased .0033 cents from $.5764 to $.5797. This rate consists of a maintenance and
operations (M&0) tax rate of $.5097 and an Interest and Sinking (debt service) tax rate of $.0700. The
rate was set based on a net assessed value of $2,242,178,295. This is an increase of $107,602,055 in
taxable value with $82,052,532 or 76% resulting from new construction in the City. This additional
value results in an M&O levy increase of $694,211. 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. The City does not
anticipate a change in this revenue stream from the prior year budget of $3,750,000. Other significant
general fund revenues are franchise fees, $1,345,700 and municipal court fines, $1,080,000. If all
estimates are realized, the total General Fund unreserved fund balance is projected to be $5.1 million at
September 30, 2009.
Water revenues are budgeted at $4,711,712, which is an additional $473,543 in revenues, or 11%.
Sewer revenues are budgeted at $3,832,042. This represents an increase of $370,086, or 10%. Water
and sewer working capital is expected to be $4.04 million at the end of fiscal year 2009.
Pursuant to the City’s financial management policy, funds in excess of the 90-day operating reserve are
designated for future capital improvements.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, customers, investors, and creditors with a
general overview of the City’s finances and to show the City’s accountability for the money it receives.
If you have questions about this report or need additional information, contact Administrative Services,
P. O. Box 1288, Friendswood, Texas 77549-1288, or call Cindy S. Edge, 281-996-3224, or email
cedge@ci.friendswood.tx.us.
BASIC
FINANCIAL STATEMENTS
Governmental Business-type Component
Activities Activities Total Unit
ASSETS
Cash and investments 14,214,362$ 3,456,088$ 17,670,450$ 47,793$
Receivables:
Taxes 1,390,034 - 1,390,034 741
Customer accounts 171,971 1,608,906 1,780,877 -
Other 319,850 28,103 347,953 -
Due from other governments 3,633,633 - 3,633,633 -
Prepaid items 74,323 1,706 76,029 4,313
Deferred charges 176,611 403,842 580,453 -
Restricted cash and investments - 3,698,115 3,698,115 -
Net investment in joint venture - 284,939 284,939 -
Deferred contributions - - - 2,356,939
Capital assets:
Land 23,950,721 718,493 24,669,214 -
Buildings and improvements 26,180,629 - 26,180,629 -
Machinery and equipment 7,750,474 3,063,036 10,813,510 -
Infrastructure 67,671,399 - 67,671,399 -
Water and wastewater system - 45,799,462 45,799,462 -
Construction in progress 5,615,139 1,546,682 7,161,821 -
Water rights - 19,717,545 19,717,545 -
Accumulated depreciation 45,065,610)( 22,541,914)( 67,607,524)( -
Total capital assets, net of
accumulated depreciation 86,102,752 48,303,304 134,406,056 -
Total assets 106,083,536 57,785,003 163,868,539 2,409,786
LIABILITIES
Accounts payable 4,122,898 470,618 4,593,516 4,616
Accrued liabilities 1,093,369 51,160 1,144,529 -
Accrued interest 57,136 124,877 182,013 -
Customer deposits - 277,324 277,324 -
Noncurrent liabilities:
Due within one year 779,739 1,053,988 1,833,727 -
Due in more than one year 16,117,119 31,176,917 47,294,036 3,721,560
Total liabilities 22,170,261 33,154,884 55,325,145 3,726,176
NET ASSETS
Invested in capital assets, net of related debt 70,591,236 20,375,620 90,966,856 -
Restricted for:
Debt service 2,100,617 - 2,100,617 -
Public safety 299,035 - 299,035 -
Community development 374,258 - 374,258 -
Capital improvements - 27,246 27,246 -
Unrestricted 10,548,129 4,227,253 14,775,382 1,316,390)(
Total net assets 83,913,275$ 24,630,119$ 108,543,394$ 1,316,390)$(
The accompanying notes are an integral part of these financial statements.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2008
Primary Government
18
Functions/Programs Expenses
Charges for
Services
Operating Grants
and Contributions
Capital Grants
and
Contributions
Primary government
Governmental activities:
General government 4,339,620$ 1,178,523$ -$ -$
Public safety 12,652,812 21,356 4,002,342 -
Community development and public works 4,921,298 838,060 6,061 -
Community services 3,841,387 132,244 13,505 -
Interest on long-term debt 803,733 - - -
Total governmental activities 26,558,850 2,170,183 4,021,908 -
Business-type activities:
Water and sewer 8,067,360 8,624,546 - -
Total business-type activities 8,067,360 8,624,546 - -
Total primary government 34,626,210$ 10,794,729$ 4,021,908$ -$
Component unit
West Ranch Management District 1,152,568$ -$ -$ -$
Total component unit 1,152,568$ -$ -$ -$
General revenues:
Taxes:
Property, levied for general purposes
Property, levied for debt service
Sales
Franchise
Other
Investment earnings
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning
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, 2008
Program Revenues
19
Governmental
Activities
Business-type
Activities Total Component Unit
3,161,097)$( -$ 3,161,097)$( -$
8,629,114)( - 8,629,114)( -
4,077,177)( - 4,077,177)( -
3,695,638)( - 3,695,638)( -
803,733)( - 803,733)( -
20,366,759)( - 20,366,759)( -
- 557,186 557,186 -
- 557,186 557,186 -
20,366,759)( 557,186 19,809,573)( -
- - - 1,152,568)(
- - - 1,152,568)(
10,897,831 - 10,897,831 -
1,615,119 - 1,615,119 75,216
3,767,526 - 3,767,526 -
1,317,166 - 1,317,166 -
25,429 - 25,429 -
648,301 531,758 1,180,059 93
73,026 - 73,026 -
981,016 981,016)( - -
19,325,414 449,258)( 18,876,156 75,309
1,041,345)( 107,928 933,417)( 1,077,259)(
84,954,620 24,522,191 109,476,811 239,131)(
83,913,275$ 24,630,119$ 108,543,394$ 1,316,390)$(
Net (Expense) Revenue and Changes in Net Assets
Primary Government
20
General Fund
2003 and 2005
Bond
Construction Debt Service Other Funds
Total
Governmental
Funds
ASSETS
Cash and investments 10,455,267$ 511,173$ 2,094,651$ 686,012$ 13,747,103$
Receivable, net of allowances for uncollectibles:
Taxes 1,336,656 - 53,378 - 1,390,034
Customer accounts 140,607 - - 31,364 171,971
Other 301,393 9 9,724 6,145 317,271
Due from other funds - 675,469 - - 675,469
Receivable from other governments 3,633,633 - - - 3,633,633
Prepaid items 74,323 - - - 74,323
Total assets 15,941,879$ 1,186,651$ 2,157,753$ 723,521$ 20,009,804$
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable 3,640,789 435,255 - 46,476 4,122,520
Due to other funds 675,469 - - - 675,469
Accrued liabilities 871,598 221,694 - 77 1,093,369
Deferred revenue 539,354 - 53,377 3,675 596,406
Total liabilities 5,727,210 656,949 53,377 50,228 6,487,764
Fund balances:
Reserved for:
Encumbrances 962,956 206,105 - - 1,169,061
Prepaid items 74,323 - - - 74,323
Debt service - - 2,104,376 - 2,104,376
Unreserved, reported in:
General fund:
Designated for:
Projects 266,243 - - - 266,243
Undesignated 8,911,147 - - - 8,911,147
Capital projects fund - 323,597 - - 323,597
Special revenue funds - - - 643,223 643,223
Permanent fund - - - 30,070 30,070
Total fund balances 10,214,669 529,702 2,104,376 673,293 13,522,040
Total liabilities and fund balances 15,941,879$ 1,186,651$ 2,157,753$ 723,521$
Amounts reported for governmental activities in the statement of net assets are different because:
85,662,178
596,406
910,034
16,777,383)(
Net assets of governmental activities 83,913,275$
The accompanying notes are an integral part of these financial statements.
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.
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, 2008
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.
21
General Fund
2003 and 2005
Bond
Construction Debt Service Other Funds
Total
Governmental
Funds
REVENUES
Property taxes 10,883,217$ -$ 1,612,935$ -$ 12,496,152$
Sales taxes 3,792,955 - - - 3,792,955
Franchise taxes 1,317,166 - - - 1,317,166
Fines and forfeitures 1,108,598 - - 53,305 1,161,903
Permits and fees 889,208 - - 55,548 944,756
Intergovernmental 3,787,293 - - 13,720 3,801,013
Investment earnings 467,627 79,835 76,268 15,672 639,402
Donations 30,920 - - 234,615 265,535
Other 37,876 - - - 37,876
Total revenues 22,314,860 79,835 1,689,203 372,860 24,456,758
EXPENDITURES
Current:
General government 4,074,610 9,998 - 30,054 4,114,662
Public safety 12,234,821 - - 169,924 12,404,745
Community development and public 3,045,904 - - - 3,045,904
Community services 3,266,250 - - - 3,266,250
Capital outlay 1,080,023 3,259,523 - - 4,339,546
Debt service:
Principal - - 694,555 80,029 774,584
Interest and other charges - - 703,592 544 704,136
Total expenditures 23,701,608 3,269,521 1,398,147 280,551 28,649,827
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 1,386,748)( 3,189,686)( 291,056 92,309 4,193,069)(
OTHER FINANCING SOURCES (USES)
Proceeds on sale of capital assets 22,600 - - - 22,600
Insurance recoveries 63,106 - - - 63,106
Transfers in 992,586 - - - 992,586
Transfers out 5,000)( - - 6,570)( 11,570)(
Total other financing sources and uses 1,073,292 - - 6,570)( 1,066,722
NET CHANGE IN FUND BALANCES 313,456)( 3,189,686)( 291,056 85,739 3,126,347)(
FUND BALANCES, BEGINNING 10,528,125 3,719,388 1,813,320 587,554 16,648,387
FUND BALANCES, ENDING 10,214,669$ 529,702$ 2,104,376$ 673,293$ 13,522,040$
The accompanying notes are an integral part of these financial statements.
FOR THE YEAR ENDED SEPTEMBER 30, 2008
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) 3,126,347)$(
Governmental funds report capital outlays as expenditures. However,in the statement of
activities the cost of those assets is allocated over their estimated useful lives and reported as
depreciation expense. This is the amount by which capital outlays exceeded depreciation in
the current period.1,348,900
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds.7,726
The issuance of long-term debt (e.g., bonds, leases)provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt consumes the
current financial resources of governmental funds. Neither transaction, however, has any
effecton net assets. This amount is the net affect of these differences in the treatment of long-
term debt and related items.682,611
Some expenses reported in the statement of activities do not require the use of current
financial resources and, therefore, are not reported as expenditures in governmental funds. 46,168)(
Internal Service Funds are used by management to charge the costs of certain capital assets to
individual funds. The net revenue of certain activities of internal service funds is reported
with governmental activities.91,933
Change in net assets of governmental activities (pages 19 - 20)1,041,345)$(
The notes to the financial statements are an integral part of this statement.
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2008
CITY OF FRIENDSWOOD, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
23
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES
Property taxes 10,705,967$ 10,705,967$ 10,883,217$ 177,250$
Sales taxes 3,763,000 3,763,000 3,792,955 29,955
Franchise taxes 1,211,000 1,211,000 1,317,166 106,166
Fines and forfeitures 1,118,699 1,118,699 1,108,598 10,101)(
Permits and fees 787,709 796,829 889,208 92,379
Intergovernmental 209,286 381,585 3,787,293 3,405,708
Interest on investments 462,481 462,481 467,627 5,146
Donations - 12,138 30,920 18,782
Other 8,300 17,314 37,876 20,562
Total revenues 18,266,442 18,469,013 22,314,860 3,845,847
EXPENDITURES
Current:
General government 4,544,678 4,355,552 4,100,892 254,660
Public safety 7,970,290 8,608,576 12,240,685 3,632,109)(
Community development and public works 3,621,332 4,236,467 3,801,510 434,957
Community services 3,115,878 3,705,474 3,558,521 146,953
Total expenditures 19,252,178 20,906,069 23,701,608 2,795,539)(
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 985,736)( 2,437,056)( 1,386,748)( 1,050,308
OTHER FINANCING SOURCES
Proceeds on sale of capital assets - - 22,600 22,600
Insurance recoveries - 28,484 63,106 34,622
Transfers in 986,016 992,586 992,586 -
Transfers out - 5,000)( 5,000)( -
Total other financing sources 986,016 1,016,070 1,073,292 57,222
NET CHANGE IN FUND BALANCES 280 1,420,986)( 313,456)( 1,107,530
FUND BALANCES, BEGINNING 10,528,125 10,528,125 10,528,125 -
FUND BALANCES, ENDING 10,528,405$ 9,107,139$ 10,214,669$ 1,107,530$
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, 2008
GENERAL FUND
24
Business-type
Activities Governmental
Enterprise Fund Activities
Water and Sewer Internal Service
ASSETS
Current assets:
Cash and investments 3,456,088$ 467,259$
Accounts receivable, net of allowance
Customer accounts 1,608,906 -
Other 28,103 2,579
Prepaid expenses 1,706 -
Restricted cash and investments 3,698,115 -
Total current assets 8,792,918 469,838
Non-current assets
Net investment in joint venture 284,939 -
Deferred charges 403,842 -
Capital assets:
Land 718,493 -
Machinery and equipmen 3,063,036 1,262,995
Water and wastewater system 45,799,462 -
Construction in progress 1,546,682 -
Water rights 19,717,545 -
Accumulated depreciation 22,541,914)( 822,421)(
Total capital assets 48,303,304 440,574
Total noncurrent assets 48,992,085 440,574
Total assets 57,785,003 910,412
LIABILITIES
Current liabilities:
Accounts payable 470,618 378
Accrued liabilities 51,160 -
Accrued interest 124,877 -
Customer deposits 277,324 -
Compensated absences 15,028 -
Bonds payable 1,038,960 -
Total current liabilities 1,977,967 378
Non-current liabilities
Compensated absences 60,111 -
Bonds payable 31,116,806 -
Total non-current liabilities 31,176,917 -
Total liabilities 33,154,884 378
NET ASSETS
Invested in capital assets, net of related deb 20,375,620 440,574
Restricted for capital improvement 27,246 -
Unrestricted 4,227,253 469,460
Total net assets 24,630,119$ 910,034$
The accompanying notes are an integral part of these financial statements.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
SEPTEMBER 30, 2008
25
Business-type
Activities Governmental
Enterprise Fund Activities
Water and Sewer Internal Service
OPERATING REVENUES
Charges for services 8,624,546$ 316,651$
Total operating revenues 8,624,546 316,651
OPERATING EXPENSES
Personnel services 1,388,835 -
Wastewater operations 1,343,348 -
Water purchases 837,339 -
Repairs and maintenance 775,136 -
Supplies 175,089 87,005
Other services and charges 623,769 -
Depreciation 1,379,985 163,448
Total operating expenses 6,523,501 250,453
OPERATING INCOME 2,101,045 66,198
NON-OPERATING REVENUES (EXPENSES)
Investment earnings 531,758 8,899
Gain on sale of capital assets - 16,836
Interest expense and fiscal charges 1,543,859)( -
Total non-operating revenues (expenses)1,012,101)( 25,735
INCOME BEFORE TRANSFERS 1,088,944 91,933
TRANSFERS IN 5,000 -
TRANSFERS OUT 986,016)( -
CHANGE IN NET ASSETS 107,928 91,933
TOTAL NET ASSETS, BEGINNING 24,522,191 818,101
TOTAL NET ASSETS, ENDING 24,630,119$ 910,034$
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, 2008
26
Business-type Governmental
Activities Activities -
Enterprise Fund Internal
Water and Sewer Service
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users 8,310,607$ 316,651$
Cash paid to suppliers for goods and services 1,357,998)( -
Cash paid to employees for services 10,441,959)( 94,528)(
Net cash provided (used) by operating activities 3,489,350)( 222,123
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers to other funds 986,016)( -
Net cash used for noncapital financing activities 981,016)( -
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from sale of capital assets - 18,233
Acquisition of capital assets 10,225,745)( 146,928)(
Principal paid on bonds 905,000)( -
Interest and fiscal charges paid on debt 1,529,037)( -
Net cash used for capital and related financing activities 12,659,782)( 128,695)(
CASH FLOWS FROM INVESTING ACTIVITIES
Investment earnings 531,758 8,899
Net cash provided by investing activities 531,758 8,899
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,598,390)( 102,327
CASH AND CASH EQUIVALENTS, BEGINNING 23,752,593 364,932
CASH AND CASH EQUIVALENTS, ENDING 7,154,203$ 467,259$
(Including $3,698,115 for water and sewer reported as restricted assets)
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2008
(continued)
27
Business-type Governmental
Activities Activities -
Enterprise Fund Internal
Water and Sewer Service
Reconciliation of operating income to net cash
provided (used) by operating activities:
Operating income 2,101,045$ 66,198$
Adjustments to reconcile operating income
to net cash provided by operating activities:
Depreciation 1,379,985 163,448
Changes in assets and liabilities:
Decrease (increase) in assets:
Customer receivable 402,679)( -
Other receivable 85,075 1,128)(
Prepaid and other assets 21,961 -
Investment in joint venture 3,133)( -
Increase (decrease) in liabilities:
Accounts payable 6,706,106)( 6,395)(
Accrued liabilities 30,837 -
Customer deposits 3,665 -
Net cash provided (used) by operating activities 3,489,350)$( 222,123$
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, 2008
28
29
CITY OF FRIENDSWOOD, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
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,
2007, 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 Debt Service Fund is used to account for the property taxes levied for payment
of principal and interest on all governmental debt of the City.
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, 2008.
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 $0.5764 per $100
of assessed valuation that were prorated between operations and debt service in the amounts
of $0.5016 and $0.0748, respectively. The resulting tax levies were approximately $10.8 and
$1.6 million for operations and debt service, respectively, based on a total taxable valuation
of approximately $2.8 billion for the 2007 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 for the 2007 tax
year. 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 $16,777,383 difference are as follows:
Premium on bonds 136,478$
General obligation bonds 16,065,000
Deferred charges for issuance costs (to be amortized 176,611)(
over life of debt)
Capitalized lease obligations 16,351
Accrued interest payable 57,136
Compensated absences 679,029
Net adjustment to reduce fund balance - total
governmental funds to arrive at net assets -
governmental activities 16,777,383$
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 $1,348,900 difference are as follows:
Capital outlay 4,413,054$
Depreciation expense 2,944,356)(
Loss on sale of assets 119,798)(
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities 1,348,900$
(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
$7,726 difference are as follows:
Property taxes 16,798$
Court fines 9,072)(
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities 7,726$
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 $682,611 difference are
as follows:
Principal repayments:
General obligation debt 595,000$
Capital lease 80,029
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 682,611$
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 $(46,168) difference are as follows:
Compensated absences 38,544)$(
Accrued interest 2,188
Amortization of issuance costs 9,812)(
Net adjustment to decrease net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities 46,168)$(
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 2008 fiscal year, expenditures exceeded appropriations in the following departments
(the legal level of compliance):
General Fund:
General government - Mayor and Council 94,617$
General government - City Manager 12,049
General government - tax 62,335
Public safety - police services 196,381
Public safety - communications 44,146
Public safety - fire and EMS 3,424,449
Community development and public works - sanitation 809
Community services - administration 8,172
Community services - swimming pool 11,326
4. DETAILED NOTES ON ALL FUNDS
Deposits and Investments
As of September 30, 2008, the City had the following investments:
Weighted Average
Investment Type Fair Value Maturity (Days)
MBIA Class 6,939,815$ 40
Lone Star 2,491,544 28
Tex Pool 2,745,234 44
U. S. Agency Securities:
Freddie Mac 999,945 372
Federal Home Loan Bank 4,980,355 680
Fannie Mae 1,493,785 825
Federal Farm Credit Bank 495,479 328
Total U. S. Agency Securities 7,969,564
Total portfolio 20,146,157$
(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, 2008, 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, 2008, $1,171,870 of the
City’s $1,271,870 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, 2008, 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
Federal Farm Credit Bank 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 $100,000;
3. No-load money market mutual funds; and
4. TexPool, Lone Star Investment Pool and MBIA Class.
(continued)
42
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
The City Council has adopted a written investment policy regarding the investments of its funds
as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas Government
Code). The investments of the City are in compliance with the Council’s investment policies.
The City did not have any derivative investment products during the current year. All significant
legal and contractual provisions for investments were complied with during the year.
Investments at year-end are representative of the types of investments maintained by the City
during the year.
Receivables
Receivables as of year-end for the City’s individual major funds, nonmajor funds in the
aggregate and the Internal Service Fund including the applicable allowances for uncollectible
accounts, are as follows:
2003 and 2005
Bond Debt Water and Internal
General Construction Service Nonmajor Sewer Service Total
Receivables:
Property taxes 360,772$ -$ 59,308$ -$ -$ -$ 420,080$
Sales taxes 680,945 - - - - - 680,945
Franchise taxes 331,017 - - - - - 331,017
Customer accounts 142,607 - - 31,364 1,618,906 - 1,792,877
Accrued interest 56,154 - 9,724 2,463 22,135 2,579 93,055
Court fines 475,084 - - - - - 475,084
Other 53,716 9 - 3,682 5,968 - 63,375
Gross receivables 2,100,295 9 69,032 37,509 1,647,009 2,579 3,856,433
Less: allowance for
uncollectibles 321,639 - 5,930 - 10,000 - 337,569
Net total receivables 1,778,656$ 9$ 63,102$ 37,509$ 1,637,009$ 2,579$ 3,518,864$
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
reported in the governmental funds were as follows:
(continued)
43
4. DETAILED NOTES ON ALL FUNDS (Continued)
Receivables (Continued)
Unavailable
General Fund
Delinquent property taxes 324,695$
Court fines 203,541
Miscellaneous 11,118
Total General Fund 539,354
Court Security and Technology Fund
Miscellaneous 3,675
Total Court Security and Technology Fund 3,675
Debt Service Fund
Delinquent property taxes 53,377
Total Debt Service Fund 53,377
Total Governmental Funds 596,406$
Capital Assets
Capital asset activity for the year ended September 30, 2008, was as follows:
Primary Government
Beginning Reclassifications/ Ending
Balance Increases Decreases Balance
Governmental activities:
Capital assets, not being depreciated:
Land 23,950,721$ -$ -$ 23,950,721$
Construction in progress 8,006,468 4,191,404 6,582,733 5,615,139
Total assets not being depreciated 31,957,189 4,191,404 6,582,733 29,565,860
Capital assets, being depreciated:
Buildings and improvements 20,716,826 5,951,323 487,520 26,180,629
Machinery and equipment 6,965,542 926,293 141,361 7,750,474
Infrastructure 67,671,399 - - 67,671,399
Total capital assets being depreciated 95,353,767 6,877,616 628,881 101,602,502
Less accumulated depreciation:
Buildings and improvements 7,849,981 1,039,271 442,328 8,446,924
Machinery and equipment 5,227,231 496,022 139,053 5,584,200
Infrastructure 29,461,975 1,572,511 - 31,034,486
Total accumulated depreciation 42,539,187 3,107,804 581,381 45,065,610
Total capital assets being
depreciated, net 52,814,580 3,769,812 47,500 56,536,892
Governmental activities capital
assets, net 84,771,769$ 7,961,216$ 6,630,233$ 86,102,752$
(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$
Water rights 3,465,469 16,252,076 - 19,717,545
Construction in progress 7,573,013 672,545 6,698,876 1,546,682
Total assets not being depreciated 11,756,975 16,924,621 6,698,876 21,982,720
Capital assets, being depreciated:
Machinery and equipment 3,063,036 - - 3,063,036
Water and wastewater system 45,799,462 - - 45,799,462
Total capital assets being depreciated 48,862,498 - - 48,862,498
Less accumulated depreciation:
Machinery and equipment 2,482,780 73,796 - 2,556,576
Water and wastewater system 18,679,149 1,306,189 - 19,985,338
Total accumulated depreciation 21,161,929 1,379,985 - 22,541,914
Total capital assets being
depreciated, net 27,700,569 1,379,985)( - 26,320,584
Business-type activities capital
assets, net 39,457,544$ 15,544,636$ 6,698,876$ 48,303,304$
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government 172,250$
Public safety 321,575
Community development and public works 1,875,394
Community services 575,137
Capital assets held by the City's internal service fund are
charged to the various functions based on their usage 163,448
Total depreciation expense - governmental activities 3,107,804$
Business-type activities:
Water and sewer 1,379,985$
Total depreciation expense - business-type activities 1,379,985$
Commitments for construction projects in progress were $387,293 at September 30, 2008.
(continued)
45
4. DETAILED NOTES ON ALL FUNDS (Continued)
Interfund Receivables, Payables and Transfers
The composition of interfund balances as of September 30, 2008, is as follows:
Due to/from Other Funds:
Receivable Fund Payable Fund Amount
2003 and 2005 Bond Construction General 675,469$
Balances resulted from the time lag between the dates that 1) interfund goods and services are
provided on reimbursable expenditures occur, and 2) transactions are recorded in the accounting
system, and 3) payments between funds are made.
The following schedule briefly summarizes the City’s transfer activity:
Interfund Transfers:
Transfers In Transfers Out Amount Purpose
General Water and sewer 986,016$ Fund indirect cost for
administrative expenditures
Water and sewer General 5,000 To fund miscellaenous projects
General Parkland dedication 6,570 To fund miscellaenous projects
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, 2008, 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
2003 Permanent
Improvement 8,700,000$ 2026 3.65%-5.50% 8,350,000$ -$
2005 Permanent
Improvement and Refunding 9,800,000 2020 2.85%-4.375%
7,715,000 1,680,000
16,065,000 1,680,000
Revenue Bonds
1999 Waterworks and Sewer
System Revenue 4,945,000 2019 4.2%-5.55% - 50,000
2000 Waterworks and Sewer
System Revenue 3,515,000 2019 4.2%-6.5% - 120,000
2001 Waterworks and Sewer
System Revenue 6,100,000 2021 4.7%-6.5% - 5,900,000
2006 Waterworks and Sewer
System Revenue and
Refunding Bond 24,285,000 2031 4.0%-5.0%
- 24,285,000
- 30,355,000
Total Bonds and Certificates of Obligation 16,065,000$ 32,035,000$
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
2009 620,000$ 670,243$ 1,030,000$ 1,474,137$
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 730,000 547,881 1,240,000 1,266,689
2014-2018 4,090,000 2,262,737 7,075,000 5,459,330
2019-2023 5,025,000 1,318,372 7,720,000 3,676,339
2024-2028 3,575,000 235,751 7,860,000 1,804,895
2029-2032 - - 3,705,000 168,636
Total 16,065,000$ 6,857,193$ 32,035,000$ 17,966,509$
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, 2008, $9,165,000 of bonds considered defeased is still outstanding.
Federal Arbitrage
General obligation bonds, combination tax and revenue bonds and certificates of obligation are
subject to the provisions of the Internal Revenue Code of 1986 related to arbitrage and interest
income tax regulations under those provisions.
Obligations Under Capital Leases
In prior years, the City entered into capital lease agreements in order to purchase machinery and
equipment for public works, police and fire departments. The assets acquired through these lease
agreements are as follows:
Governmental
Activities
Asset:
Machinery and equipment 634,701$
Less: accumulated depreciation 634,701
Total -$
The following is a summary of future lease payments due on this machinery and equipment:
Year Ending Lease
September 30, Obligation
2009 16,553$
Total 16,553
Less interest portion 202
Obligations under capital leases 16,351$
(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, 2008, was
as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental activities
General obligation bonds 16,660,000$ -$ 595,000$ 16,065,000$ 620,000$
Premium on bond issuance 144,060 - 7,582 136,478 7,582
Capital lease obligations 96,380 - 80,029 16,351 16,351
Compensated absences 640,485 605,398 566,854 679,029 135,806
Governmental activities
long-term liabilities 17,540,925$ 605,398$ 1,249,465$ 16,896,858$ 779,739$
Business-type activities
General obligation bonds 2,375,000$ -$ 695,000$ 1,680,000$ 815,000$
Revenue bonds 30,515,000 - 160,000 30,355,000 215,000
Certificates of obligation 50,000 - 50,000 - -
Premium on bond issuance 399,220 - 24,314 374,906 24,313
Loss on refunding 269,493)( - 15,353)( 254,140)( 15,353)(
Compensated absences 75,139 50,706 50,706 75,139 15,028
Business-type activities
long-term liabilities 33,144,866$ 50,706$ 964,667$ 32,230,905$ 1,053,988$
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,
2008, was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Component unit
Developer advances 120,000$ 25,000$ -$ 145,000$ -$
Due to developer
construction 1,782,350 1,794,210 - 3,576,560 -
Component unit
long-term liabilities 1,902,350$ 1,819,210$ -$ 3,721,560$ -$
A developer of the West Ranch Management District has advanced $145,000 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 $3,576,560.
(continued)
49
4. DETAILED NOTES ON ALL FUNDS (Continued)
Restricted Assets
The balances of the restricted asset accounts in the Enterprise Fund are as follows:
Cash and investments:
Customer deposits 277,324$
Construction 63,976
Construction - 2006 bonds 3,356,815
Total restricted assets 3,698,115$
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), one of 827 administered by TMRS, an agent multiple-employer public
employee retirement system. All assumptions for the December 31, 2007, valuations are
contained in the 2007 TMRS Comprehensive Annual Financial Report, a copy of which may be
obtained by writing to 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%) 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 City
matching percent had always been in existence and if the employee’s salary had always been the
average of his salary in the last three years that are one year before the effective date. At
retirement, the benefit is calculated as if the sum of the employee’s accumulated contributions
with interest and the employer-financed monetary credits with interest were used to purchase an
annuity.
Members can retire at ages 60 and above with 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 employees 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 to budget
for it, 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, 2007, valuation is effective
for rates beginning January 2009).
Assumptions and Schedule of Actuarial Liabilities and Funding Progress
Actuarial Cost Method Projected Unit Credit
Amortization Method Level Percent of Payroll
Remaining Amortization 30 Years - Closed Period
Asset Valuation Method Amortized Cost
Investment Rate of Return 7%
Projected Salary Increases Varies by age and service
Includes Inflation at 3.0%
Cost of Living Adjustments 2.1% (3.0% CPI)
Payroll growth assumption 3.0%
Withdrawal rates for Male/Female Mid-Low/Mid
(continued)
51
4. DETAILED NOTES ON ALL FUNDS (Continued)
Employee Retirement System (Continued)
Contributions (Continued)
Actuarial Valuation Date 12/31/07 12/31/06 12/31/05
Actuarial Value of Assets 20,112,856$ 18,730,279$ 18,436,890$
Actuarial Accrued Liabilities 30,397,880 24,313,786 23,496,143
Percentage Funded 66.2% 77.0% 78.5%
Unfunded (Overfunded) Actuarial
Accrued Liability (UAAL) 10,285,024 5,583,507 5,059,253
Annual Covered Payroll 8,429,619 7,998,107 7,639,184
UAAL as a Percentage of Covered Payroll 122.0% 69.8% 66.2%
Net Pension Obligation (NPO)
at the Beginning of Period - - -
Annual Pension Cost:
Annual Required Contribution (ARC) 1,085,937 1,036,959 1,055,993
Interest on NPO - - -
Adjustment to the ARC - - -
1,085,937 1,036,959 1,066,293
Contributions Made (100%) 1,085,937 1,036,959 1,066,293
Increase in NPO - - -
NPO at the End of Period -$ -$ -$
At its December 8, 2007 meeting, the TMRS Board of Trustees adopted actuarial assumptions to
be used in the actuarial valuation for the year ended December 31, 2007. A summary of
actuarial assumptions and definitions can be found in the December 31, 2007 TMRS
Comprehensive Annual Financial Report (CAFR).
Since its inception, TMRS has used the Unit Credit actuarial funding method. This method
accounts for liability accrued as of the valuation date, but does not project the potential future
liability of provisions adopted by a city. Two-thirds of the cities participating in TMRS have
adopted the Updated Service Credit and Annuity increases provisions on an annually repeating
basis. For the December 31, 2007 valuation, the TMRS Board determined that the Projected Unit
Credit (PUC) funding method should be used, which facilitates advance funding for future updated
service credits and annuity increases that are adopted on an annually repeating basis. In addition,
the Board also adopted a change in the amortization period from a 25-year “open” to a 25-year
“closed” period. TMRS Board of Trustees rules provide that, whenever a change in actuarial
assumptions or methods results in a contribution rate increase in an amount greater than 0.5%, the
amortization period will be increased to 30 years, unless a city requests that the period remain at 25
years. For cities with repeating features, these changes would likely result initially in higher
required contributions and lower funded ratios; however, the funded ratio should show steady
improvement over time. To assist in this transition to higher rates, the Board also approved an
eight-year phase-in period, which will allow cities the opportunity to increase their contributions
gradually (approx. 12.5% each year) to their full rate (or their required contribution rate).
(continued)
52
4. DETAILED NOTES ON ALL FUNDS (Continued)
Employee Retirement System (Continued)
Contributions (Continued)
If the changes in actuarial funding method and assumptions had not been adopted for the 2007
valuation, the City’s unfunded actuarial accrued liability would have been $6,050,291 and the
funded ratio would have been 76.9%.
In addition, TMRS is currently working on its legislative package for 2009. There is a
possibility that the investment rate of return (IRR) assumption of 7% would need to be lowered if
desired legislation for the 2009 session is unsuccessful. Maintaining a 7% IRR assumption is
contingent in part on the continued diversification of the TMRS portfolio, from an almost
exclusive bond portfolio to a portfolio that includes equities as well. If state legislation needed
to facilitate the continued diversification is not enacted, TMRS may have to revisit the continued
diversification of the portfolio and consider reducing the assumed IRR. A reduction in the IRR
would result in increased actuarial accrued liabilities, thus causing further increases in City
contribution rates, following the December 31, 2009 actuarial valuation.
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.
Postemployment Health Care
In addition to the pension benefits described above, the City Council established a medical,
dental and vision insurance benefit plan for retirees. Eligible retirees will be provided insurance
benefits at a set premium rate equal to the City employees’ rate. Eligible retirees may also cover
their eligible dependents. Retirees are responsible for paying the premiums. A retiree is defined
as someone who is receiving lifetime monthly Texas Municipal Retirement System pension
benefit payments and retired directly from active employment with the City of Friendswood.
The City will stop insurance coverage on the retiree and dependent on the last day of the month
until the retiree fails to submit the required set premium rate or death.
Currently, 13 retirees meet those eligibility requirements. Expenses for post-employment health
care benefits are recognized on a pay-as-you-go basis. During the year, premiums paid by the
retirees were $22,543.
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.
(continued)
53
4. DETAILED NOTES ON ALL FUNDS (Continued)
Southeast Water Purification Plant (Continued)
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. As of September 30, 2008, the City has
purchased water capacity with an indefinite life of $19,717,545.
The relationship of the parties is of a fiduciary character. No partnership or joint venture is
created by this contract.
Blackhawk Regional Waste Treatment Plant
The City has entered into an arrangement with the Gulf Coast Waste Disposal Authority for the
operation and maintenance of a joint treatment plant known as Blackhawk Regional Waste
Treatment Plant. The City of Friendswood, the City of Houston, Harris County MUD No. 55,
and the Baybrook MUD 1, (the “participants”) share in the expense of operation and
maintenance based on their respective usage on a monthly basis. The percentages of equity in
the joint venture based on their respective capacity rights at September 30, 2008, are as follows:
City of Friendswood 52.47%
City of Houston 16.18%
Harris County MUD No. 55 20.27%
Baybrook MUD No. 1 11.08%
100.00%
An annual budget for operations is submitted to the Gulf Coast Waste Disposal Authority each
year. The Gulf Coast Waste Disposal Authority is the governing authority and consists of 9
members (3 appointed by the governor, 3 appointed by Harris County, Galveston County, and
Chambers County, and 3 appointed by the participants).
Separate financial statements for the joint venture were available in the December 31, 2007,
audited financial statements of the Gulf Coast Waste Disposal Authority and are summarized
below:
(continued)
54
4. DETAILED NOTES ON ALL FUNDS (Continued)
Joint Venture
Blackhawk
Regional
Facility
Total assets 5,559,091$
Total liabilities 727,841)(
Total net assets 4,831,250$
Total operating revenue 2,057,054$
Total operating expenses 2,517,716)(
Total nonperating revenue 37,598
Total nonoperating expenses 354)(
Net change in net assets 423,418)(
Net assets, beginning 5,254,668
Net assets, ending 4,831,250$
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, 2008, 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, 2008, the
City believed the amounts paid on workers’ compensation would not change significantly from the
amounts recorded.
During the year ended September 30, 2008, 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.
(continued)
55
4. DETAILED NOTES ON ALL FUNDS (Continued)
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. As of July 31, 2008, the
District’s engineer has stated that current construction contract amounts are approximately $533,000.
This amount has not been recorded in the financial statements since the facilities are neither 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 $145,000 to the District for operations. The District
does not have sufficient funds nor anticipated revenues sufficient to liquidate these advances
during the forthcoming fiscal year. These advances have been recorded as liabilities in the
District’s financial statements.
New Pronouncements
In July 2004, the GASB Issued Statement No. 45, Accounting and Financial Reporting by
Employers for Postretirement Benefits Other than Pensions. This statement establishes
standards for the measurement, recognition and display of other postretirement benefits
expenses/expenditures and related liabilities (assets), note disclosures and required
supplementary information in the financial reports of state and local governmental employers.
The provisions of this Statement are effective for the fiscal year ending September 30, 2009.
The City has not yet determined the effect this statement will have on its financial statements.
COMBINING AND INDIVIDUAL FUND
STATEMENTS AND SCHEDULES
GENERAL FUND
The General Fund accounts for the resources used to finance the fundamental operations of the City. It
is the basic fund of the City and covers all activities for which a separate fund has not been established.
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES
Property taxes 10,705,967$ 10,705,967$ 10,883,217$ 177,250$
Sales taxes 3,763,000 3,763,000 3,792,955 29,955
Franchise taxes 1,211,000 1,211,000 1,317,166 106,166
Fines and forfeitures 1,118,699 1,118,699 1,108,598 10,101)(
Permits and fees 787,709 796,829 889,208 92,379
Intergovernmental 209,286 381,585 3,787,293 3,405,708
Investment earnings 462,481 462,481 467,627 5,146
Donations - 12,138 30,920 18,782
Other 8,300 17,314 37,876 20,562
Total revenues 18,266,442 18,469,013 22,314,860 3,845,847
EXPENDITURES
GENERAL GOVERNMENT
Mayor and council:
Personnel services 299 299 - 299
Supplies 5,448 5,448 3,848 1,600
Other services and charges 171,377 200,050 296,566 96,516)(
Total mayor and council 177,124 205,797 300,414 94,617)(
City manager:
Personnel services 396,455 552,907 570,045 17,138)(
Supplies 7,395 7,395 7,810 415)(
Other services and charges 71,552 91,737 87,451 4,286
Capital outlay 25,000 27,500 26,282 1,218
Total city manager 500,402 679,539 691,588 12,049)(
City secretary:
Personnel services 317,211 333,563 336,969 3,406)(
Supplies 17,857 18,877 19,781 904)(
Other services and charges 74,535 76,755 66,634 10,121
Total city secretary 409,603 429,195 423,384 5,811
(continued)
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30, 2008
GENERAL FUND
56
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
GENERAL GOVERNMENT (Continued)
Administrative services:
Personnel services 602,412$ 657,005$ 589,067$ 67,938$
Supplies 5,663 5,663 5,359 304
Repairs and maintenance 129 129 - 129
Other services and charges 209,697 216,390 147,295 69,095
Total administrative services 817,901 879,187 741,721 137,466
Human resources:
Personnel services 882,286 264,394 257,379 7,015
Supplies 14,723 14,723 13,471 1,252
Other services and charges 85,033 85,033 44,593 40,440
Total human resources 982,042 364,150 315,443 48,707
Tax:
Other services and charges 153,009 168,009 230,344 62,335)(
Total tax 153,009 168,009 230,344 62,335)(
Economic development:
Personnel services 107,731 119,421 120,136 715)(
Supplies 117,517 150,017 91,008 59,009
Total economic development 225,248 269,438 211,144 58,294
Municipal court:
Personnel services 484,302 528,071 475,237 52,834
Supplies 26,889 26,889 19,823 7,066
Repairs and maintenance 1,437 1,437 104 1,333
Other services and charges 38,093 38,093 29,701 8,392
Capital outlay 1,500 1,500 - 1,500
Total municipal court 552,221 595,990 524,865 71,125
GENERAL FUND
Budgeted Amounts
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES
FOR THE YEAR ENDED SEPTEMBER 30, 2008
(Continued)
(continued)
57
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
GENERAL GOVERNMENT (Continued)
Computer services:
Personnel services 249,460$ 263,102$ 277,353$ 14,251)$(
Supplies 50,195 50,195 31,258 18,937
Repairs and maintenance 78,970 78,970 59,810 19,160
Other services and charges 257,017 273,044 209,786 63,258
Total computer services 635,642 665,311 578,207 87,104
Risk management:
Personnel services 66,943 74,393 73,437 956
Supplies 15,690 15,690 7,754 7,936
Other services and charges 8,853 8,853 2,591 6,262
Total risk management 91,486 98,936 83,782 15,154
Total general government 4,544,678 4,355,552 4,100,892 254,660
PUBLIC SAFETY
Police services:
Personnel services 4,528,336 4,843,215 5,009,096 165,881)(
Supplies 291,933 337,560 431,711 94,151)(
Repairs and maintenance 116,936 106,736 109,940 3,204)(
Other services and charges 353,040 385,181 398,049 12,868)(
Capital outlay 85,587 85,587 5,864 79,723
Total police services 5,375,832 5,758,279 5,954,660 196,381)(
FOR THE YEAR ENDED SEPTEMBER 30, 2008
SCHEDULE OF REVENUES, EXPENDITURES
(continued)
GENERAL FUND
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
58
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
PUBLIC SAFETY (Continued)
Communications:
Personnel services 754,718$ 792,939$ 837,489$ 44,550)$(
Supplies 8,813 11,813 13,269 1,456)(
Repairs and maintenance 3,903 3,903 3,840 63
Other services and charges 11,932 9,697 7,900 1,797
Total communications 779,366 818,352 862,498 44,146)(
Animal control:
Personnel services 192,178 201,919 167,279 34,640
Supplies 19,540 20,641 20,233 408
Repairs and maintenance 2,304 2,304 5,013 2,709)(
Other services and charges 14,464 14,464 13,936 528
Total animal control 228,486 239,328 206,461 32,867
Fire and EMS:
Personnel services 401,001 451,617 854,856 403,239)(
Supplies 20,102 122,228 192,560 70,332)(
Repairs and maintenance 8,865 8,865 8,184 681
Other services and charges 1,156,638 1,167,623 4,161,466 2,993,843)(
Capital outlay - 42,284 - 42,284
Total fire and EMS 1,586,606 1,792,617 5,217,066 3,424,449)(
Total public safety 7,970,290 8,608,576 12,240,685 3,632,109)(
COMMUNITY DEVELOPMENT AND PUBLIC WORKS
Administration:
Personnel services 608,440 604,291 574,860 29,431
Supplies 7,761 8,011 3,394 4,617
Repairs and maintenance 618 618 100 518
Other services and charges 15,942 46,035 43,409 2,626
Total administration 632,761 658,955 621,763 37,192
(continued)
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2008
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
CITY OF FRIENDSWOOD, TEXAS
Budgeted Amounts
59
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
COMMUNITY DEVELOPMENT AND PUBLIC WORKS (Continued)
Planning and zoning:
Personnel services 109,260$ 118,936$ 118,262$ 674$
Supplies 2,880 2,880 1,669 1,211
Other services and charges 9,981 26,451 9,365 17,086
Total planning and zoning 122,121 148,267 129,296 18,971
Engineering:
Personnel services 59,833 59,107 55,362 3,745
Supplies 2,369 2,369 1,254 1,115
Repairs and maintenance 515 515 314 201
Other services and charges 9,634 35,834 31,424 4,410
Total engineering 72,351 97,825 88,354 9,471
Inspection:
Personnel services 324,251 339,892 317,953 21,939
Supplies 12,996 12,996 12,797 199
Repairs and maintenance 1,133 1,133 837 296
Other services and charges 57,518 67,142 15,870 51,272
Total inspection 395,898 421,163 347,457 73,706
Streets:
Personnel services 407,589 414,059 422,257 8,198)(
Supplies 61,678 61,678 69,022 7,344)(
Repairs and maintenance 636,857 626,810 599,240 27,570
Other services and charges 427,295 427,295 443,044 15,749)(
Capital outlay 515,000 887,467 755,606 131,861
Total streets 2,048,419 2,417,309 2,289,169 128,140
(continued)
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
CITY OF FRIENDSWOOD, TEXAS
Budgeted Amounts
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2008
60
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
COMMUNITY DEVELOPMENT AND PUBLIC WORKS (Continued)
Drainage:
Personnel services 291,781$ 298,668$ 271,755$ 26,913$
Supplies 6,529 6,529 3,776 2,753
Repairs and maintenance 45,281 45,281 13,370 31,911
Other services and charges 6,191 25,163 32,011 6,848)(
Capital outlay - 113,557 - 113,557
Total drainage 349,782 489,198 320,912 168,286
Sanitation:
Other services and charges - 3,750 4,559 809)(
Total sanitation - 3,750 4,559 809)(
Total community development
and public works 3,621,332 4,236,467 3,801,510 434,957
COMMUNITY SERVICES
Administration:
Personnel services 158,700 166,025 169,651 3,626)(
Supplies 3,679 3,679 3,403 276
Other services and charges 21,475 26,475 31,297 4,822)(
Total administration 183,854 196,179 204,351 8,172)(
Library:
Personnel services 683,607 718,038 713,835 4,203
Supplies 152,635 168,440 159,539 8,901
Repairs and maintenance 2,575 2,575 - 2,575
Other services and charges 25,212 24,712 24,412 300
Total library 864,029 913,765 897,786 15,979
GENERAL FUND
Budgeted Amounts
FOR THE YEAR ENDED SEPTEMBER 30, 2008
(continued)
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
(Continued)
SCHEDULE OF REVENUES, EXPENDITURES
CITY OF FRIENDSWOOD, TEXAS
61
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXPENDITURES (Continued)
COMMUNITY SERVICES (Continued)
Parks and recreation:
Personnel services 581,923$ 580,388$ 593,106$ 12,718)$(
Supplies 102,984 88,409 97,319 8,910)(
Repairs and maintenance 89,857 98,492 108,955 10,463)(
Other services and charges 524,990 538,845 498,771 40,074
Capital outlay 60,000 138,456 85,949 52,507
Total parks and recreation 1,359,754 1,444,590 1,384,100 60,490
Swimming pool:
Personnel services 44,275 49,339 45,414 3,925
Supplies 34,256 36,037 29,167 6,870
Repairs and maintenance 11,623 11,623 11,150 473
Other services and charges 23,909 23,909 46,503 22,594)(
Total swimming pool 114,063 120,908 132,234 11,326)(
Building operations:
Personnel services - - 4 4)(
Supplies 19,401 20,151 19,345 806
Repairs and maintenance 84,485 97,135 99,796 2,661)(
Other services and charges 456,292 496,157 614,583 118,426)(
Capital outlay 34,000 416,589 206,322 210,267
Total building operations 594,178 1,030,032 940,050 89,982
Total community services 3,115,878 3,705,474 3,558,521 146,953
Total expenditures 19,252,178 20,906,069 23,701,608 2,795,539)(
FOR THE YEAR ENDED SEPTEMBER 30, 2008
CITY OF FRIENDSWOOD, TEXAS
(continued)
(Continued)
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
Budgeted Amounts
GENERAL FUND
62
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 985,736)$( 2,437,056)$( 1,386,748)$( 1,050,308$
OTHER FINANCING SOURCES (USES)
Proceeds on sale of capital assets - - 22,600 22,600
Insurance recoveries - 28,484 63,106 34,622
Transfers in 986,016 992,586 992,586 -
Transfers out - 5,000)( 5,000)( -
Total other financing sources (uses)986,016 1,016,070 1,073,292 57,222
NET CHANGE IN FUND BALANCES 280 1,420,986)( 313,456)( 1,107,530
FUND BALANCES, BEGINNING 10,528,125 10,528,125 10,528,125 -
FUND BALANCES, ENDING 10,528,405$ 9,107,139$ 10,214,669$ 1,107,530$
(Continued)
GENERAL FUND
CITY OF FRIENDSWOOD, TEXAS
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
SCHEDULE OF REVENUES, EXPENDITURES
Budgeted Amounts
FOR THE YEAR ENDED SEPTEMBER 30, 2008
63
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.
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 14,136$ 53,661$ 346,162$ 242,147$
Receivable, net of allowances for uncollectibles:
Customer accounts - 31,364 - -
Other 72 301 1,926 3,682
Total assets 14,208$ 85,326$ 348,088$ 245,829$
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable 1,559$ 41,017$ 3,900$ -$
Deferred revenue - - - 3,675
Other accrued expenses - - - 77
Total liabilities 1,559 41,017 3,900 3,752
Fund balances:
Unreserved 12,649 44,309 344,188 242,077
Total fund balances 12,649 44,309 344,188 242,077
Total liabilities and fund balances 14,208$ 85,326$ 348,088$ 245,829$
Special Revenue
CITY OF FRIENDSWOOD, TEXAS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
SEPTEMBER 30, 2008
64
Permanent
1776 Park
Total
Nonmajor
Governmental
Funds
29,906$ 686,012$
- 31,364
164 6,145
30,070$ 723,521$
-$ 46,476$
- 3,675
- 77
- 50,228
30,070 673,293
30,070 673,293
30,070$ 723,521$
65
Police
Investigation
Fire/EMS
Donation
Park Land
Dedication
Court
Security and
Technology
REVENUES
Fines and forfeitures -$ -$ -$ 53,305$
Permits and fees - - 55,548 -
Intergovernmental 13,720 - - -
Investment earnings 764 1,241 12,498 -
Donations - 234,615 - -
Total revenues 14,484 235,856 68,046 53,305
EXPENDITURES
Current:
General government - - - 30,054
Public safety 15,551 154,373 - -
Debt service:
Principal - 80,029 - -
Interest and other charges - 544 - -
Total expenditures 15,551 234,946 - 30,054
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 1,067)( 910 68,046 23,251
OTHER FINANCING SOURCES (USES)
Transfers out - - 6,570)( -
Total other financing sources and uses - - 6,570)( -
NET CHANGE IN FUND BALANCES 1,067)( 910 61,476 23,251
FUND BALANCES, BEGINNING 13,716 43,399 282,712 218,826
FUND BALANCES, ENDING 12,649$ 44,309$ 344,188$ 242,077$
FOR THE YEAR ENDED SEPTEMBER 30, 2008
Special Revenue
CITY OF FRIENDSWOOD, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
66
Permanent
1776 Park
Total Nonmajor
Governmental
Funds
-$ 53,305$
- 55,548
- 13,720
1,169 15,672
- 234,615
1,169 372,860
- 30,054
- 169,924
- 80,029
- 544
- 280,551
1,169 92,309
- 6,570)(
- 6,570)(
1,169 85,739
28,901 587,554
30,070$ 673,293$
67
Variance with
Final Budget
Final Actual Positive
Budget Amounts (Negative)
REVENUES
Investment earnings 1,200$ 1,241$ 41$
Donations 141,052 234,615 93,563
Total revenues 142,252 235,856 93,604
EXPENDITURES
Current:
Public safety - 154,373 154,373)(
Debt service:
Principal 134,257 80,029 54,228
Interest and fiscal charges 7,995 544 7,451
Total expenditures 142,252 234,946 92,694)(
NET CHANGE IN FUND BALANCES - 910 910
FUND BALANCES, BEGINNING 43,399 43,399 -
FUND BALANCES, ENDING 43,399$ 44,309$ 910$
FOR THE YEAR ENDED SEPTEMBER 30, 2008
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FIRE/EMS DONATION FUND
68
Variance with
Final Budget
Final Actual Positive
Budget Amounts (Negative)
REVENUES
Property taxes 1,597,730$ 1,612,935$ 15,205$
Interest on investments 50,000 76,268 26,268
Total revenues 1,647,730 1,689,203 41,473
EXPENDITURES
Debt service:
Principal 972,269 694,555 277,714
Interest and fiscal charges 801,697 703,592 98,105
Total expenditures 1,773,966 1,398,147 375,819
NET CHANGE IN FUND BALANCES 126,236)( 291,056 417,292
FUND BALANCES, BEGINNING 1,813,320 1,813,320 -
FUND BALANCES, ENDING 1,687,084$ 2,104,376$ 417,292$
DEBT SERVICE FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2008
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
69
STATISTICAL SECTION
STATISTICAL SECTION
(Unaudited)
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 70
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 76
These schedules contain information to help the reader assess the City’s
most significant local revenue sources, the property tax.
Debt Capacity 80
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 85
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 87
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.
TABLE 12003 2004 2005 2006 2007 2008Governmental activities: Invested in capital assets, net of related debt 49,742,075$ 29,632,831$ 32,533,863$ 32,849,446$ 71,777,140$ 70,591,236$ Restricted 585,080 1,271,568 1,576,829 2,034,157 2,391,482 2,773,910 Unrestricted5,468,870 7,125,997 7,527,573 10,391,123 10,785,998 10,548,129 Total governmental activities net assets55,796,025$ 38,030,396$ 41,638,265$ 45,274,726$ 84,954,620$ 83,913,275$ 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$ 20,375,620$ Restricted 305,660 444,548 445,086 41,057 162,218 27,246 Unrestricted4,058,223 4,337,137 5,228,802 6,574,920 7,475,597 4,227,253 Total business-type activities net assets22,020,179$ 21,956,210$ 22,497,414$ 23,431,107$ 24,522,191$ 24,630,119$ 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$ 90,966,856$ Restricted 890,740 1,716,116 2,021,915 2,075,214 2,553,700 2,801,156 Unrestricted9,527,093 11,463,134 12,756,375 16,966,043 18,261,595 14,775,382 Total primary government net assets77,816,204$ 59,986,606$ 64,135,679$ 68,705,833$ 109,476,811$ 108,543,394$ Note: The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003.Fiscal YearCITY OF FRIENDSWOOD, TEXASNET ASSETS BY COMPONENTLAST SIX FISCAL YEARS(Accrual Basis of Accounting)70
TABLE 2
2003 2004 2005 2006 2007 2008
EXPENSES
Governmental activities:
General government 2,923,552$ 3,375,283$ 3,438,849$ 3,330,439$ 4,472,602$ 4,339,620$
Public safety 5,760,097 6,026,272 7,318,886 7,060,800 7,565,797 12,652,812
Community development and public works 3,383,229 2,569,356 2,576,447 2,813,857 5,475,447 4,921,298
Community services 2,747,438 3,081,717 3,075,023 3,098,013 3,420,244 3,841,387
Interest on long-term debt 128,192 465,770 478,495 857,602 835,511 803,733
Total governmental activities expenses 14,942,508 15,518,398 16,887,700 17,160,711 21,769,601 26,558,850
Business-type activities:
Water 5,457,496 5,614,077 6,251,251 6,078,881 5,711,063 6,523,501
Interest on long-term debt 1,063,940 999,219 963,355 962,989 1,583,551 1,543,859
Total business-type activities expenses 6,521,436 6,613,296 7,214,606 7,041,870 7,294,614 8,067,360
Total primary government expenses 21,463,944$ 22,131,694$ 24,102,306$ 24,202,581$ 29,064,215$ 34,626,210$
PROGRAM REVENUES
Governmental activities:
Charges for services:
General government 647,958$ 958,665$ 1,176,086$ 1,238,631$ 1,353,160$ 1,178,523$
Public safety 9,433 9,141 15,013 54,653 23,267 21,356
Community development and public works 1,865,086 822,927 758,487 805,710 998,625 838,060
Community services 66,862 65,850 66,281 112,681 219,944 132,244
Operating grants and contributions 661,568 778,261 1,271,119 771,477 489,707 4,021,908
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 6,192,091
Business-type activities:
Charges for services:
Water and wastewater 7,275,746 7,203,736 8,390,761 8,392,277 8,021,040 8,624,546
Total business-type activities
program revenues 7,275,746 7,203,736 8,390,761 8,392,277 8,021,040 8,624,546
Total primary government
program revenues 11,276,425$ 10,077,780$ 11,913,047$ 11,375,429$ 11,105,743$ 14,816,637$
(continued)
Fiscal Year
CITY OF FRIENDSWOOD, TEXAS
CHANGES IN NET ASSETS
LAST SIX FISCAL YEARS
(Accrual Basis of Accounting)
71
TABLE 2
2003 2004 2005 2006 2007 2008
NET (EXPENSE) REVENUES
Governmental activities 10,941,829)$( 12,644,354)$( 13,365,414)$( 14,177,559)$( 18,684,898)$( 20,366,759)$(
Business-type activities 754,310 590,440 1,176,155 1,350,407 726,426 557,186
Total primary government net expense 10,187,519)( 12,053,914)( 12,189,259)( 12,827,152)( 17,958,472)( 19,809,573)(
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 12,512,950
Sales 2,875,071 1,119,328 3,199,136 3,658,699 3,904,436 3,767,526
Franchise 1,058,726 2,833,290 1,176,460 1,220,581 1,239,167 1,317,166
Other 79,691 71,028 53,790 11,940 16,186 25,429
Investment earnings 154,558 219,085 376,435 915,710 1,063,715 648,301
Gain on sale of capital assets - - - - 345,976 -
Miscellaneous 30,826 - 51,503 21,556 4,152 73,026
Transfers 664,102 714,278 763,361 680,850 875,616 981,016
Total governmental activities 14,569,176 15,888,402 16,973,283 17,814,020 19,325,494 19,325,414
Business-type activities:
Investment earnings 160,629 59,869 114,932 262,761 1,236,092 531,758
Miscellaneous 12,777 - 13,478 1,375 4,182 -
Extraordinary item 100,000 - - - - -
Transfers 664,102)( 714,278)( 763,361)( 680,850)( 875,616)( 981,016)(
Total business-type activities 390,696)( 654,409)( 634,951)( 416,714)( 364,658 449,258)(
Total primary government 14,178,480 15,233,993 16,338,332 17,397,306 19,690,152 18,876,156
CHANGE IN NET ASSETS
Governmental activities 3,627,347 3,244,048 3,607,869 3,636,461 640,596 1,041,345)(
Business-type activities 363,614 63,969)( 541,204 933,693 1,091,084 107,928
Total primary government 3,990,961$ 3,180,079$ 4,149,073$ 4,570,154$ 1,731,680$ 933,417)$(
Note:
The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003.
Fiscal Year
(Accrual Basis of Accounting)
CITY OF FRIENDSWOOD, TEXAS
CHANGES IN NET ASSETS
LAST SIX FISCAL YEARS
(Continued)
72
TABLE 31999 2000 2001 2002 2003 2004 2005 2006 2007 2008General fund Reserved 650,599$ 849,908$ 451,293$ 1,196,255$ 683,459$ 635,182$ 511,197$ 1,313,829$ 601,646$ 1,037,279$ Unreserved2,687,005 2,838,042 5,989,106 2,766,577 5,055,679 5,971,319 7,032,843 8,973,646 9,926,479 9,177,390 Total general fund3,337,604$ 3,687,950$ 6,440,399$ 3,962,832$ 5,739,138$ 6,606,501$ 7,544,040$ 10,287,475$ 10,528,125$ 10,214,669$ All other governmental funds Reserved 73,344$ 68,627$ 77,175$ 109,799$ 254,568$ 829,701$ 1,395,767$ 4,220,225$ 3,575,592$ 2,310,481$ Unreserved, reported in: Special revenue funds 11,694 77,039 268,247 177,390 263,242 411,229 175,192 404,749 558,653 643,223 Capital projects funds - - - - 7,342,304 5,171,662 8,584,781 3,943,654 1,957,116 323,597 Permanent fund21,358 22,549 23,892 24,707 25,232 25,587 26,292 27,477 28,901 30,070 Total all other governmental funds106,396$ 168,215$ 369,314$ 311,896$ 7,885,346$ 6,438,179$ 10,182,032$ 8,596,105$ 6,120,262$ 3,307,371$ Fiscal YearCITY OF FRIENDSWOOD, TEXASFUND BALANCESGOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(Modified Accrual Basis of Accounting)73
TABLE 41999 2000 2001 2002 2003 2004 2005 2006 2007 2008REVENUES Taxes 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$ 17,606,273$ Fines and penalties 332,659 416,722 550,854 631,066 639,678 879,369 1,112,916 1,163,984 1,288,794 1,161,903 Licenses, fees and permits 634,905 970,868 1,192,899 922,808 856,721 807,041 717,607 769,352 1,017,502 944,756 Intergovernmental 553,352 607,963 580,561 16,294,283 526,316 795,325 985,339 535,074 248,702 3,801,013 Investment earnings 292,886 399,712 424,412 269,109 153,848 218,419 375,123 906,552 1,054,698 639,402 Donations - - - - 235,749 215,535 213,381 219,353 229,939 265,535 Other revenues386,084 482,054 483,063 509,560 794,228 152,616 414,923 277,995 279,788 37,876 Total revenues11,187,869 13,023,231 14,646,374 31,142,743 16,895,277 17,912,160 19,598,415 20,063,066 21,081,241 24,456,758 EXPENDITURES General government 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 4,114,662 Public safety 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 12,404,745 Community development and public works - - - - 4,987,392 2,511,125 2,436,359 2,579,398 3,600,798 3,045,904 Public works 1,601,048 2,640,988 1,201,584 2,092,488 - - - - - - Community development 522,128 535,084 641,047 19,464,924 - - - - - - Community services 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 3,266,250 Capital outlay - 652,206 98,987 195,385 1,442,339 4,033,197 7,040,173 4,292,854 3,711,569 4,339,546 Debt service Principal 512,594 525,897 616,470 548,205 468,987 469,930 459,422 608,184 658,073 774,584 Interest185,952 450,762 511,175 188,958 213,741 476,207 594,076 757,402 739,487 704,136 Total expenditures11,233,274 13,731,789 13,119,979 34,599,590 18,437,946 19,206,242 23,704,608 21,087,582 23,664,163 28,649,827 (continued)Fiscal YearCITY OF FRIENDSWOOD, TEXASCHANGES IN FUND BALANCESGOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(Modified Accrual Basis of Accounting)74
TABLE 41999 2000 2001 2002 2003 2004 2005 2006 2007 2008EXCESS OF REVENUES OVER (UNDER) EXPENDITURES45,405)$( 708,558)$( 1,526,395$ 3,456,847)$( 1,542,669)$( 1,294,082)$( 4,106,193)$( 1,024,516)$( 2,582,922)$( 4,193,069)$( OTHER FINANCING SOURCES (USES) Sale of capital assets - - - - 15,826 - - 187,345 785,942 22,600 Insurance recoveries - - - - - - - - - 63,106 Bonds issued - - - - 8,701,495 - 8,024,224 - - - Refunding bonds issued - - - 1,629,707 - - - - - - Payments to escrow account - - - 1,611,304)( - - - - - - Proceeds from issuance of debt 149,780 574,856 47,393 229,460 - - - - - - Transfers in 792,169 546,113 555,713 17,225,350 1,955,635 853,073 923,361 904,955 1,226,304 992,586 Transfers out304,988)( - - 16,621,918)( 1,382,860)( 138,795)( 160,000)( 224,105)( 350,688)( 11,570)( Total other financing sources (uses)636,961 1,120,969 603,106 851,295 9,290,096 714,278 8,787,585 868,195 1,661,558 1,066,722 NET CHANGE IN FUND BALANCES591,556$ 412,411$ 2,129,501$ 2,605,552)$( 7,747,427$ 579,804)$( 4,681,392$ 156,321)$( 921,364)$( 3,126,347)$( DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES6.2% 7.5% 8.7% 2.1% 4.0% 6.2% 6.3% 8.1% 7.0% 6.1% Note:CITY OF FRIENDSWOOD, TEXASCHANGES IN FUND BALANCESGOVERNMENTAL FUNDSFrom 1997 to 2002, Public Works and communityDevelopment were two separate departments. From 2003 to 2008, the departments were combined. In 2001 and2002,the City participated in the FEMA Hazard Mitigation Grant Buyout Program. The City's participation costs resulted in a reduction of fund balance. In 2002, the Cityadopted a Financial Policy. Based on this policy, undesignated fund balance shall be allowed to accumulate to establish a 90-day operating reserve. After the reserve isestablished, additional undesignated funds are allowed to accumulate for future capital projects.LAST TEN FISCAL YEARSFiscal Year(Continued)(Modified Accrual Basis of Accounting)75
TABLE 5EstimatedCommercial Less: Total Taxable Total ActualFiscal Residential and Industrial Other Tax-exempt Assessed Direct TaxableYear Property Property Property Property Value Tax Rate Value1999 1,014,445,395$ 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 2008 2,289,027,422 154,237,707 202,571,688 149,658,030 2,795,494,847 0.5764 2,645,836,817 Source: Galveston County Tax Assessor/Collector and City of Friendswood records.Note:Tax rates per $100 of assessed valueResidential property includes both single-family and multi-family properties.CITY OF FRIENDSWOOD, TEXASASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARSProperty in the City of Friendswood is reassessed once every two years on average. (Source: Galveston Central Appraisal District)76
TABLE 6Friendswood Clear Creek GalvestonTotal Independent Independent CountyFiscal Debt Direct School School Drainage Galveston HarrisYear General Service Rate District District District County County1999 0.5610$ 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 2008 0.5016 0.0748 0.5764 1.1770 1.3200 0.1425 0.5686 0.62998 Source: Galveston County 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 YEARS77
TABLE 7
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Value Value Value Value
Friendswood Estates, LTD 14,901,010$ 0.53% -$ - %
Texas-New Mexico Power Co. 13,627,600 0.49% 11,353,480 1.11%
Reserve at Autumn Creek, LTD 12,600,000 0.45% - - %
Southwestern Bell Telephone Co. 9,246,010 0.33% 13,058,690 1.27%
Kroger Texas, LP 9,176,030 0.33% - - %
H. E. Butt Grocery Company 8,631,640 0.31% - - %
Southwest Properties, LP 7,350,000 0.26% 7,539,980 0.73%
Texas HCP Holding, LP 6,995,240 0.25% - - %
Autumn Creek Dev., LTD 6,627,210 0.24% 7,842,820 0.76%
MB Friendswood Parkwood 5,833,550 0.21% - - %
Friendswood Retirement 5,361,943 0.19% 8,346,695 0.81%
Exxon Corp. 4,337,707 0.16% 24,477,740 2.38%
Comcast of Houston, LLC 4,018,820 0.14% - - %
Timber Creek Holdings, LP 3,881,660 0.14% - - %
Centerpoint Energy, Inc. 3,670,920 0.13% - - %
Friendswood Huntington Woods 3,599,460 0.13% - - %
Maxi-Ban, LTD 3,597,530 0.13% 4,930,620 0.48%
Howard, Jack A. 3,524,260 0.13% - - %
Mystic, LTD 3,408,495 0.12% 3,933,640 0.38%
River Oaks @ Friendswood 3,342,020 0.12% - - %
Blackhawk Apartments - - % 8,766,020 0.85%
Albertson's Inc.- -% 5,592,330 0.54%
Total 133,731,105$ 4.78% 95,842,015$ 9.31%
All other taxpayers 2,661,763,742$ 95.22%
2,795,494,847$
Source: Galveston County Appraisal District
2008 1999
CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL PROPERTY TAXPAYERS
CURRENT YEAR AND NINE YEARS AGO
78
TABLE 8
Taxes Levied Collections
Fiscal for the Percentage in Subsequent Percentage
Year Ended Fiscal Year Amount of Levy Years Amount of Levy
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% 135,201 11,668,083 99.38%
2008 12,351,183 12,193,715 98.73% - 12,193,715 98.73%
Sources: Galveston County 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
79
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 Capita1999 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 0.39% 1,040 2006 17,150,000 - - 168,957 2,855,000 280,000 30,665,000 51,118,957 0.50% 1,490 2007 16,660,000 - - 96,380 2,375,000 50,000 30,515,000 49,696,380 N/A 1,430 2008 16,065,000 - - 16,351 1,680,000 - 30,355,000 48,116,351 N/A 1,340 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 YEARS80
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
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
2008 35,500 2,795,494,847 16,065,000 2,104,376 13,960,624 0.50% 393
Note: 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
81
TABLE 11
Estimated
Share of
Estimated Direct and
Debt Percentage Overlapping
Outstanding Applicable Debt
Debt repaid with property taxes:
Friendswood Independent School District 120,885,554$ 100.000% 120,885,554$
Clear Creek Independent School District 619,078,774 2.866% 17,742,798
Galveston County 203,838,000 7.945% 16,194,929
Harris County 3,122,164,000 0.595% 18,576,876
Subtotal overlapping debt 173,400,157
City direct debt 16,081,351
Total direct and overlapping debt 189,481,508$
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, 2008
82
TABLE 12
CITY OF FRIENDSWOOD, TEXAS
LEGAL DEBT MARGIN INFORMATION
AS OF SEPTEMBER 30, 2008
The tax rate for fiscal year ending September 30, 2008, is $.5764 per $100 of assessed valuation with assessed valuation
being 100% of market value.
As a City Council-City Manager form of government, the City of Friendswood is not limited by law in the amount of debt
it may issue. The City's charter states:
"In keeping with the Constitution of the State of Texas and not contrary thereto, the City of Friendswood shall have
the power to borrow money on the credit of the City for any public purpose not now or hereafter prohibited by the
Constitution and laws of the State of Texas, and shall have the right to issue all tax bonds, revenue bonds, funding
and refunding bonds, time warrants and other evidence of indebtedness as now authorized or as may hereafter be
authorized to be issued by cities and towns by the laws of the State of Texas."
Article 11, Section 5 of the State of Texas Constitution States in part:
"but no tax for any pose shall ever be lawful for any one year, which shall exceed two and one-half percent of the
taxable property of such city"
83
TABLE 13
Utility Less: Net
Fiscal Service Operating Available
Year Charges Expenses Revenue Principal Interest Coverage
1999 5,482,707$ 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 3,682,221 150,000 1,441,234 2.31
2008 8,624,546 5,143,516 3,481,030 160,000 1,416,465 2.21
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
84
TABLE 14
Per Capita
Calendar Personal Personal Unemployment
Year Population Income Income Rate
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 10,144,967,000 36,284 3.0%
2007 34,759 - - 3.4%
2008 35,500 - - 4.9%
Sources:
Note: Personal Incomeand Per Capita Personal Incomenumbers are for Galveston County; 2007 and 2008
numbers were not available.
CITY OF FRIENDSWOOD, TEXAS
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN CALENDAR YEARS
Population informationwas provided from past financial reports. Unemploymentrates were obtained
from the U. S. Department of Labor Bureau of Labor Statistics website or the Texas Workforce
Commissionwebsite. Personal Incomeand Per Capita Personal Incomewere obtained from the U. S.
Bureau of Economic Analysis website.
85
TABLE 15
Percentage Percentage
of Total City of Total City
Employer Employees Employment Employees Employment
Friendswood ISD 711 31.54% 628 51.06%
HEB 280 12.42% 80 6.50%
City of Friendswood 228 10.12% 132 10.73%
Kroger 225 9.98% 52 4.23%
Friendship Haven Nursing Home 150 6.65% 100 8.13%
UTMB 97 4.30% - - %
Summerville (Park Place) 86 3.82% 40 3.25%
McDonalds 80 3.55% - - %
Friendswood Healthcare Center (Autumn Hills) 70 3.11% 85 6.91%
U. S. Post Office 70 3.11% 70 5.69%
Timber Creek Golf Club 65 2.88% - - %
Sonic 64 2.84% - - %
Gary Greene Realtors 48 2.13% - - %
Luna's 40 1.77% - - %
Village on the Park 40 1.77% 43 3.50%
Total 2,254 100.00% 1,230 100.00%
Source: City Economic Development Division
CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL EMPLOYERS
CURRENT AND NINE YEARS AGO
2008 1999
86
TABLE 16Function/Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008General government City manager 3.50 4.50 4.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 City secretary 3.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 5.00 5.00 Administrative services 17.12 18.64 19.64 20.64 21.70 22.72 24.44 25.81 26.19 27.20 Public safety Police 55.94 56.94 59.94 62.94 65.06 67.40 70.07 72.06 81.41 83.90 Fire marshal and fire 11.50 12.50 12.50 12.50 12.58 12.85 12.85 4.50 6.11 6.10 Public works 17.00 17.00 17.00 17.00 - - - - - - Community development 11.00 14.00 14.00 15.00 - - - - - - Community development and public works - - - - 34.00 34.00 34.00 35.00 36.00 36.00 Community services 28.86 29.86 29.92 30.42 30.43 30.43 30.43 31.01 32.18 32.20 Water 6.00 6.00 6.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 Wastewater5.00 5.00 5.00 6.00 6.00 7.00 7.00 8.00 8.00 8.00 Total158.92 168.44 172.50 183.00 188.27 192.90 197.29 194.88 209.39 212.90 Source: City of Friendswood Budget DocumentsNotes:From 1998 to 2002, public works and community development were two separate departments. From 2003 to 2008, 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 YEARS87
TABLE 17Function/Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008General government Building permits issued 840 1,125 1,252 1,266 1,048 851 1,129 882 975 872 Building inspections conducted 8,654 11,121 15,576 12,554 10,841 10,051 12,641 12,264 11,135 11,472 Police Physical arrests 491 463 556 625 752 1,189 1,041 1,804 1,923 1,868 Parking violations 118 30 31 34 74 45 22 30 34 46 Traffic violations 3,915 4,436 6,117 6,387 9,754 11,196 12,053 12,623 11,374 7,897 Fire marshal Inspections 623 671 451 383 1,065 812 731 668 1,300 1,312 Fire Emergency responses 1,925 2,051 2,283 2,264 2,285 2,395 2,453 2,497 2,723 2,794 Fires extinguished 118 110 105 84 79 82 93 75 74 118 Parks and recreation Recreation participants NA NA NA NA NA NA NA NA NA 7,547 Facility reservations NA NA NA NA NA NA NA NA 1,115 1,065 Library Volumes in collection 86,933 87,357 87,181 87,639 88,185 88,737 90,163 92,633 93,028 96,100 Total volumes borrowed 254,917 263,374 274,204 279,850 290,044 280,520 281,060 300,241 308,718 323,323 Water New connections 770 300 665 242 270 388 208 209 289 202 Water main breaks - - - - 10 54 76 105 44 73 Average daily consumption 3,990 5,257 3,803 4,008 4,172 3,957 4,094 3,886 3,472 4,217 (thousands of gallons) Peak daily consumption 12,336 11,479 8,649 10,081 11,491 10,718 9,935 7,030 6,358 11,004 (thousands of gallons)Wastewater Average daily sewage treatment 2,305 2,107 3,050 3,050 3,332 3,258 3,081 3,064 3,425 3,120 (thousands of gallons) Maximum daily flow 8,750 6,117 13,913 13,913 10,180 8,563 10,587 10,484 10,484 7,520 (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 YEARS88
TABLE 18Function/Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol units 12 14 14 14 15 15 16 18 28 27 Fire Stations 3 3 3 3 3 3 3 3 3 3 Public works Streets -paved (miles) 98 98 105 105 105 157 157 179 150 159 Streets - unpaved (miles) 2 2 1 1 1 4 4 1 - 2 Traffic signals - - - - - 3 3 3 3 3 Parks and recreation Acreage 111 189 189 189 189 189 189 189 189 18 Parks 6 8 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) 120 151 155 157 160 160 165 179 180 180 Fire hydrants 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,275 1,275 Connections 9,123 9,423 10,088 10,330 10,600 10,988 11,196 11,405 11,748 11,982 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) 120 151 155 155 160 160 165 153 155 155 Connections 8,679 8,979 9,414 9,658 10,240 10,331 10,537 10,682 10,902 11,115 Storm sewers (miles) 85 85 85 85 86 92 92 - 95 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 CAFRsFiscal YearCITY OF FRIENDSWOOD, TEXASCAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMLAST TEN FISCAL YEARS89