HomeMy WebLinkAboutComprehensive Annual Financial Report - FY2010
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
YEAR ENDED
SEPTEMBER 30, 2010
Officials Issuing Report:
Roger C. Roecker
City Manager
Cindy Edge
Director of Administrative Services
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2010
C O N T E N T S
Page(s)
INTRODUCTORY SECTION
Letter of Transmittal i-iv
Principal Officials v
GFOA Certificate of Achievement vi
Organizational Chart vii
FINANCIAL SECTION
Independent Auditor's Report 1-2
Management’s Discussion and Analysis (Unaudited) 3-11
Basic Financial Statements
Government-wide Financial Statements
Statement of Net Assets 12
Statement of Activities 13
Fund Financial Statements
Governmental Funds
Balance Sheet 14
Reconciliation of the Governmental Funds Balance Sheet to
the Statement of Net Assets 15
Statement of Revenues, Expenditures and Changes in Fund Balances 16
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the Statement
of Activities 17
Proprietary Funds
Statement of Net Assets 18-19
Statement of Revenues, Expenses and Changes in Fund Net Assets 20
Statement of Cash Flows 21-22
Notes to Basic Financial Statements 23-52
Required Supplementary Information
Schedule of Funding Progress for Participation in
Texas Municipal Retirement System 53
Schedule of Funding Progress – Post Employment Benefits Plan Other
Than Pensions 54
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual – General Fund 55-61
Notes to Required Supplementary Information 62-64
Combining and Individual Fund Statements and Schedules
Non-major Governmental Funds 65
Combining Balance Sheet 66-67
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances 68-69
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2010
C O N T E N T S – CONTINUED
Page(s)
Combining and Individual Fund Statements and Schedules – Continued
Schedule of Revenues, Expenditures and Changes in Fund Balance –
Budget and Actual
Fire/EMS Donation Fund 70
Debt Service Fund 71
STATISTICAL SECTION (Unaudited) Table Page(s)
Financial Trends
Net Assets by Component 1 73
Changes in Net Assets 2 74-75
Fund Balances, Governmental Funds 3 76
Changes in Fund Balances, Governmental Funds 4 77
Revenue Capacity
Assessed Value and Actual Value of Taxable Property 5 78
Direct and Overlapping Property Tax Rates 6 79
Principal Property Tax Payers 7 80
Property Tax Levies and Collections 8 81
Debt Capacity
Ratios of Outstanding Debt by Type 9 82
Ratios of Net General Bonded Debt Outstanding 10 83
Direct and Overlapping Governmental Activities Debt 11 84
Legal Debt Margin Information 12 85
Pledged-Revenue Coverage 13 86
Demographic and Economic Information
Demographic and Economic Statistics 14 87
Principal Employers 15 88
Operating Information
Full-Time Equivalent City Government Employees
by Function/Program 16 89
Operating Indicators by Function/Program 17 90
Capital Asset Statistics by Function/Program 18 91
INTRODUCTORY SECTION
i
ii
iii
iv
v
CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL OFFICIALS AS OF
SEPTEMBER 30, 2010
Elected Officials Position Term Expires
David J.H. Smith Mayor May-12
Michael E. Barker Council Member - Position No. 1 May-12
Jim Barr Council Member - Position No. 2 May-11
Jim Hill Council Member - Position No. 3 May-12
Patrick J. McGinnis, MD Council Member - Position No. 4 May-13
Bill Holbert Council Member - Position No. 5 May-11
Deirdre Carey Brown Council Member - Position No. 6 May-13
Key Staff Position
Roger C. Roecker City Manager
Olson & Olson City Attorney
Melinda Welsh City Secretary
Cindy S. Edge Director of Administrative Services
James Toney Community Services Director
Morad Kabiri Community Development Director
Terry Byrd Fire Marshal/Emergency Management Coordinator
James W. Woltz Judge - Municipal Court
Robert B. Weiners Police Chief
Kazem Hamidian Public Works Director
vi
Executive Director
vii
CITY OF FRIENDSWOOD
ORGANIZATIONAL CHART
FINANCIAL SECTION
1
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor,
City Council and City Manager
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 (the City) as of and for
the year ended September 30, 2010, 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’s 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, which represents 100 percent of the assets, net assets and revenues of the 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. The financial statements of the West
Ranch Management District were not audited in accordance with Governmental Auditing
Standards. 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, 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
discretely presented component unit, each major fund, and the aggregate remaining fund
information of the City as of September 30, 2010, and the respective changes in financial
position and cash flows, where applicable, thereof 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 16, 2011, on our consideration of the City’s internal control over financial reporting and
on 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 over financial reporting and compliance and the results of that testing, and not
to provide an opinion on internal control over financial reporting or on compliance. 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.
2
To the Honorable Mayor,
City Council and City Manager
City of Friendswood, Texas
Page 2
The management’s discussion and analysis (on pages 3 through 11), the Schedule of Funding
Progress for Participation in Texas Municipal Retirement System (on page 53), the Schedule of
Funding Progress – Post Employment Benefits Plan Other Than Pensions (on page 54), and
the Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual –
General Fund (on pages 55 through 61) are not a required part of the basic financial statements
but are supplementary information required by accounting principles generally accepted in the
United States of America. We 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’s financial statements as a whole. The introductory section,
combining and individual nonmajor fund financial statements 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 nonmajor fund financial statements have been
subjected to the auditing procedures applied in the audit of the basic financial statements, and,
in our opinion, 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 in the audit of the basic financial statements and,
accordingly, we do not express no opinion on them.
WEAVER AND TIDWELL, L.L.P.
Houston, Texas
March 16, 2011
3
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, 2010. This information is not intended to be a complete statement of the City’s
financial condition. We recommend and encourage readers to consider the information
presented here in conjunction with the accompanying transmittal letter and basic financial
statements.
FINANCIAL HIGHLIGHTS
The assets of the City of Friendswood exceeded its liabilities at the close of the
most recent fiscal year by $109,742,549 (net assets). Of this amount, $8,447,179
is unrestricted net assets for governmental activities and $8,677,882 for business-
type activities.
The City’s net assets increased by $128,632. This resulted in an increase of
$502,172 in unrestricted net assets and an increase of $16,362 in restricted
assets offset by a decrease of $389,902 in net assets invested in capital assets
net of related debt.
As of the close of the current fiscal year, the City of Friendswood’s governmental
funds reported combined ending fund balances of $11,156,820. Of the ending
fund balance, $1,953,287 is restricted under laws external to the City for specific
purposes (e.g., capital projects, debt service); $268,075 is designated by the City
for specific purposes; $1,804,316 reserved for encumbrances and prepaid items;
and $7,131,142 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
4
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, water distribution and sewer collection lines, etc.), to assess the overall financial
condition of the City.
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, public works, community development, community
services, and library). 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 cover 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 and statement of revenues, expenditures, and changes in
fund balances include a reconciliation to provide such comparison.
5
The City maintains ten governmental funds. Information is presented
separately in the governmental funds balance sheet and the governmental
fund statement of revenues, expenditures, and changes in fund balances for
the General Fund and the Debt Service Fund; these funds are considered to
be major funds. The other eight 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.
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.
6
GOVERNMENT-WIDE FINANCIAL ANALYSIS
The City’s net assets exceed liabilities by $109.7 million as of September 30, 2010. The largest
portion of the City’s net assets (82%) reflects its investments in capital assets (e.g., land,
buildings, equipment, improvements, construction in progress and infrastructure); less any
related debt used to acquire those assets that are still outstanding. The City uses these capital
assets to provide services to citizens; therefore, these assets are not available for future
spending. It should be noted that the resources needed to repay this debt must be provided
from other sources, since the capital assets themselves cannot be used to liquidate these
liabilities.
CITY OF FRIENDSWOOD’S NET ASSETS
2010 2009 2010 2009 2010 2009
Current and other assets 14,377,943$ 15,174,508$ 19,981,212$ 21,713,510$ 34,359,155$ 36,888,018$
Capital assets 86,241,576 85,543,163 52,501,312 52,697,045 138,742,888 138,240,208
Total assets 100,619,519 100,717,671 72,482,524 74,410,555 173,102,043 175,128,226
Long-term liabilities 16,644,650 16,437,012 40,724,281 42,162,606 57,368,931 58,599,618
Other liabilities 3,069,555 2,613,724 2,921,008 4,300,967 5,990,563 6,914,691
Total liabilities 19,714,205 19,050,736 43,645,289 46,463,573 63,359,494 65,514,309
Net assets:
Invested in capital assets,
net of related debt 70,480,334 69,313,348 19,565,756 21,122,644 90,046,090 90,435,992
Restricted 1,977,801 2,461,510 593,597 93,526 2,571,398 2,555,036
Unrestricted 8,447,179 9,892,077 8,677,882 6,730,812 17,125,061 16,622,889
Total net assets 80,905,314$ 81,666,935$ 28,837,235$ 27,946,982$ 109,742,549$ 109,613,917$
Governmental Activities Business-type Activities Totals
Combined governmental and business-type activities increased the City’s net assets by
$128,632 in 2010. The following table provides a summary of the City’s operat ions for the year
ended September 30, 2010. The Governmental activities decreased the City of Friendswood’s
net assets by ($761,621). This decrease is related to the increase in the City’s net pension
obligation of ($305,024) and Other Post-Employment Benefit (OPEB) obligation of ($267,642).
Also, interest expense increased by $110,947 in the current year as a result of an arbitrage
rebate payment ($105,104) on the 2005 General Obligation Bonds. Business-type activities
increased the City’s net assets by $890,253. Although water and sewer rates were decreased
in the current year, operating expenditures remained fairly constant allowing for a planned
increase in net assets.
7
CITY OF FRIENDSWOOD’S CHANGES IN NET ASSETS
2010 2009 2010 2009 2010 2009
Revenues:
Program revenues:
Charges for services 2,115,519$ 2,387,729$ 9,854,083$ 12,028,895$ 11,969,602$ 14,416,624$
Operating grants
and contributions 2,819,418 5,755,038 - - 2,819,418 5,755,038
Capital grants
and contributions - - - - - -
General revenues:
Property taxes 13,664,765 13,481,500 - - 13,664,765 13,481,500
Sales taxes 3,853,161 3,871,995 - - 3,853,161 3,871,995
Franchise taxes 1,510,794 1,363,221 - - 1,510,794 1,363,221
Other taxes 28,859 28,859 - - 28,859 28,859
Investment earnings 93,018 166,492 87,056 128,338 180,074 294,830
Miscellaneous 165,192 218,804 182,198)( 48,678)( 17,006)( 170,126
Total revenues 24,250,726 27,273,638 9,758,941 12,108,555 34,009,667 39,382,193
Expenses:
General government 5,145,447 5,164,623 - - 5,145,447 5,164,623
Public safety 10,175,028 14,929,941 - - 10,175,028 14,929,941
Community development
public works - 5,292,000 - - - 5,292,000
Public Works 3,853,685 - - - 3,853,685 -
Community development 1,203,204 - - - 1,203,204 -
Community services 3,034,523 4,002,165 - - 3,034,523 4,002,165
Library 979,084 - - - 979,084 -
Water and sewer - - 6,663,308 6,640,062 6,663,308 6,640,062
Interest on long-term
debt 789,652 678,705 2,037,104 1,604,174 2,826,756 2,282,879
Total expenses 25,180,623 30,067,434 8,700,412 8,244,236 33,881,035 38,311,670
Increases/(Decrease) in
net assets before transfers 929,897)( 2,793,796)( 1,058,529 3,864,319 128,632 1,070,523
Transfers 168,276 547,456 168,276)( 547,456)( - -
Change in net assets 761,621)( 2,246,340)( 890,253 3,316,863 128,632 1,070,523
Net assets, beginning 81,666,935 83,913,275 27,946,982 24,630,119 109,613,917 108,543,394
Net assets, ending 80,905,314$ 81,666,935$ 28,837,235$ 27,946,982$ 109,742,549$ 109,613,917$
Note: In FY 2009, Community Development and Public Works were reported as one department.
Also in FY 2009, the Library was included with Community Services.
Governmental Activities Business-type Activities Totals
8
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 $11,156,820. Approximately 64% of this amount ($7,131,142) is unreserved,
undesignated fund balance; however, approximately $5.1 million is set aside for the 90-day
operating reserve, as set forth in the City’s financial policies. $4,025,678 is reserved or
designated as follows:
Reserves (22%)
Encumbrances $1,743,087
Prepaid expense 61,229
Debt service 594,422
Designations (2%)
Projects $268,075
Legally restricted (12%)
Special revenue funds $1,328,145
Permanent Funds 30,720
In the General Fund, fund balance decreased by $741,721. This decrease is a result of
increased in capital expenditures due the Downtown Drainage project. In the Debt Service
Fund, fund balance decreased by $388,134. This decrease is a result of a transfer to the water
sewer debt service fund to cover the principal and interest payments on the 2005 refunding
bonds which are budgeted in the tax debt service fund ($883,922) offset by property taxes
collected exceeding debt service payments by $495,788.
Proprietary Fund
Unrestricted net assets of the respective proprietary funds are Enterprise, (water and sewer),
$8,677,882 and Internal Service Fund (vehicle replacement fund), $474,116. The net assets of
the water and sewer fund increased by $890,253. Although Water and Sewer rates were
decreased in the current year, operating expenditures remained fairly constant allowing for
operating income of $3,190,775. The net assets of the internal service fund increased by
$82,238.
General Fund Budgetary Highlights
The City made revisions to the original appropriations approved by the City Council. Budgeted
revenues increased by $2,334,944 or 11.6% and expenditures were increased by $5,191,842 or
25.4%. The revenue increased primarily as a result of the receipt of the City’s portion of the
bond proceeds totaling $1.5 million from Galveston County for the Downtown Drainage project.
In addition to the appropriation for prior year encumbrances totaling $606,338, the expenditure
budget increased by $4.5 million as a result of fund balance uses for capital improvement
projects.
9
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, 2010, is $138,742,888. The
investment in capital assets includes land, buildings and improvements, equipment,
infrastructure, water rights and construction in progress.
This year’s major capital events during the current fiscal year included the following:
The Glenshannon Drainage project was completed. The total cost of the
project as of September 30, 2010 was approximately $930,000.
Completed the Friendswood Link Road project with a current cost of $3,822
and a total cost of approximately $704,000.
The Design Phase of the Beamer Road Water and Sewer Project began in
fiscal year 2010. The total cost to date is approximately $330,000.
Engineering phase began on the following water and sewer projects: Water
Plant # 2 Rehabilitation ($50,550), Water Plant Rehabilitation #6 ($123,280),
and Water Plant #5 Rehabilitation ($217,577).
The following water and sewer projects were completed during the year:
Deepwood Force Main ($2,773,880), Deepwood Lift Station ($2,377,164) and
the 16” waterline from Sunset to Water Well #4 ($1,942,367).
CITY OF FRIENDSWOOD’S CAPITAL ASSETS AT YEAR-END
2010 2009 2010 2009 2010 2009
Land 24,007,398$ 24,007,398$ 716,818$ 716,818$ 24,724,216$ 24,724,216$
Buildings and
improvements 20,708,083 20,250,990 - - 20,708,083 20,250,990
Equipment 3,653,914 3,220,055 385,840 430,143 4,039,754 3,650,198
Infrastructure 33,618,179 35,178,077 31,263,014 25,754,439 64,881,193 60,932,516
Water rights - - 19,716,695 19,716,695 19,716,695 19,716,695
Construction in progress 4,254,002 2,886,643 418,945 6,078,950 4,672,947 8,965,593
Total capital assets 86,241,576$ 85,543,163$ 52,501,312$ 52,697,045$ 138,742,888$ 138,240,208$
Governmental Activities Business-type Activities Totals
Additional information on the City’s capital assets can be found in the notes on pages 36 and 37
of this report.
10
DEBT ADMINISTRATION
At the end of the current fiscal year, the City of Friendswood had a total bonded debt and capital
lease obligation of $57,684,928.
CITY OF FRIENDSWOOD’S OUTSTANDING DEBT AT YEAR-END
2010 2009 2010 2009 2010 2009
General obligations 14,800,000$ 15,445,000$ -$ 865,000$ 14,800,000$ 16,310,000$
Revenue bonds payable - - 42,045,000 42,260,000 42,045,000 42,260,000
Certificates of obligation - - - - - -
Capital leases 839,928 982,518 - - 839,928 982,518
15,639,928$ 16,427,518$ 42,045,000$ 43,125,000$ 57,684,928$ 59,552,518$
Governmental Activities Business-type Activities Totals
The City’s General Obligation, Revenue Bonds, and Certificates of Obligation bond ratings are
listed below:
Standard
& Poor's
General Obligation Bonds AA-
Revenue Bonds AA-
Additional information on the City’s outstanding debt can be found on pages 38 through 42 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 38,057. Friendswood is expected to reach build-out
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 .0054 cents from $.5797 to $.5851. This rate consists of a
maintenance and operations (M&0) tax rate of $.5198 and an Interest and Sinking (debt service)
tax rate of $.0653. The rate was set based on a net assessed value of $2,336,118,472. This is
an increase of $93,940,177 in taxable value. This increase is a result of new construction in the
City. This additional value results in a total levy increase of $500,981. The City’s financial
management policy 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.
11
The City’s second largest source of revenue in the General Fund is Sales Tax. The City
anticipates a decrease in this revenue stream from the prior year and has adjusted the budget
from $3,923,944 to $3,748,428. Franchise fees budget has been increased from $1,350,440 to
$1,404,742 and the budget for municipal court fines has been adjusted from $1,125,051 to
1,047,212. If all projections are accurate, the total General Fund undesignated fund balance is
estimated to be approximately $1.76 million at September 30, 2011.
Water revenues are budgeted at $5,015,000, which is a decrease of $350,040 in revenues, or
6.5%. Sewer revenues are budgeted at $3,815,000. This represents a decrease of $122,341
or 3.1%. Water and sewer working capital is expected to be $6.2 million at the end of fiscal year
2011.
Pursuant to the City’s financial management policy, funds in excess of the 90-day operating
reserve are designated for future capital improvements.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, customers, investors, and creditors with
a general overview of the City’s finances and to show the City’s accountability for the money it
receives. If you have questions about this report or need additional information, contact
Administrative Services, P. O. Box 1288, Friendswood, Texas 77549-1288, or call Cindy S.
Edge 281-996-3224, or email cedge@friendswood.com.
BASIC FINANCIAL STATEMENTS
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
12
Primary Government
Governmental Business-type Component
Activities Activities Total Unit
ASSETS
Cash and investments 11,194,286$ 7,994,680$ 19,188,966$ 621,365$
Receivables (net of allowances for uncollectibles)
Taxes 1,445,451 - 1,445,451 3,364
Customer accounts 176,280 1,867,835 2,044,115 -
Other 270,797 17,310 288,107 645
Due from other governments 1,038,449 - 1,038,449 -
Prepaid items 61,229 33,090 94,319 -
Working capital deposit - 288,862 288,862 -
Deferred charges 191,451 466,595 658,046 -
Restricted cash and investments - 9,312,840 9,312,840 -
Deferred contributions - - - 2,443,341
Capital assets
Land 24,007,398 716,818 24,724,216 -
Buildings and improvements 31,374,231 - 31,374,231 -
Machinery and equipment 10,078,459 2,923,388 13,001,847 -
Infrastructure 67,671,399 - 67,671,399 -
Water and sewer system - 53,934,135 53,934,135 -
Construction in progress 4,254,002 418,945 4,672,947 -
Water rights - 19,716,695 19,716,695 -
Accumulated depreciation (51,143,913) (25,208,669) (76,352,582) -
Total capital assets, net 86,241,576 52,501,312 138,742,888 -
Total assets 100,619,519 72,482,524 173,102,043 3,068,715
LIABILITIES
Accounts payable 914,111 930,896 1,845,007 20,820
Accrued liabilities 1,105,807 71,807 1,177,614 -
Accrued interest 90,115 161,299 251,414 40,290
Customer deposits - 294,604 294,604 -
Noncurrent liabilities:
Due within one year 959,522 1,462,402 2,421,924 -
Due in more than one year 16,644,650 40,724,281 57,368,931 3,410,175
Total liabilities 19,714,205 43,645,289 63,359,494 3,471,285
NET ASSETS (DEFICIT)
Invested in capital assets, net of related debt 70,480,334 19,565,756 90,046,090 -
Restricted for:
Debt service 545,676 - 545,676 -
Public safety 316,175 - 316,175 -
Public works 324,172 - 324,172 -
Community development 791,778 - 791,778 -
Capital improvements - 593,597 593,597 -
Unrestricted 8,447,179 8,677,882 17,125,061 (402,570)
Total net assets (deficit)80,905,314$ 28,837,235 109,742,549$ (402,570)$
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF ACTIVITIES
YEAR ENDED SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
13
Program Revenues
Operating Capital Primary Government
Charges for Grants and Grants and Governmental Business - Type Component
Program Activities Expenses Services Contributions Contributions Activities Activities Total Unit
Primary government
Governmental activities
General government 5,145,447$ 1,072,289$ - $ - $ (4,073,158)$ - $ (4,073,158)$ - $
Public safety 10,175,028 38,438 2,726,072 - (7,410,518) - (7,410,518) -
Public works 3,853,685 152,163 - - (3,701,522) - (3,701,522) -
Community development 1,203,204 550,286 - - (652,918) - (652,918) -
Community services 3,034,523 258,030 93,346 - (2,683,147) - (2,683,147) -
Library 979,084 44,313 - - (934,771) - (934,771) -
Interest on long-term debt 789,652 - - - (789,652) - (789,652) -
Total governmental activities 25,180,623 2,115,519 2,819,418 - (20,245,686) - (20,245,686) -
Business-type activities
Water and sewer 8,700,412 9,854,083 - - - 1,153,671 1,153,671 -
Total business-type activities 8,700,412 9,854,083 - - - 1,153,671 1,153,671 -
Total primary government 33,881,035$ 11,969,602$ 2,819,418$ - $ (20,245,686) 1,153,671 (19,092,015) -
Component unit
West Ranch Management District 335,385 - - - - - - (335,385)
335,385$ - $ - $ - $ - - - (335,385)
GENERAL REVENUES
Taxes:
Property taxes, levied for general purposes 11,788,183 - 11,788,183 482,708
Property taxes, levied for debt service 1,876,582 - 1,876,582 -
Sales taxes 3,853,161 - 3,853,161 -
Franchise taxes 1,510,794 - 1,510,794 -
Other 28,859 - 28,859 -
Penalties and interest - - - 5,845
Interest on investments 93,018 87,056 180,074 3,598
Gain (loss) on sale of capital assets 33,647 (182,198) (148,551) -
Miscellaneous 131,545 - 131,545 50
Transfers 168,276 (168,276) - -
Total general revenues and transfers 19,484,065 (263,418) 19,220,647 492,201
Change in net assets (761,621) 890,253 128,632 156,816
NET ASSETS, beginning of year 81,666,935 27,946,982 109,613,917 (559,386)
NET ASSETS, end of year 80,905,314$ 28,837,235$ 109,742,549$ (402,570)$
Changes in Net Assets
Net (Expense) Revenue and
CITY OF FRIENDSWOOD, TEXAS
BALANCE SHEET – GOVERNMENTAL FUNDS
SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
14
Other Total
General Debt Governmental Governmental
Fund Service Funds Funds
Cash and investments 8,677,522$ 593,571$ 1,446,194$ 10,717,287$
Receivables, net of allowance
Taxes 1,404,082 41,369 - 1,445,451
Customer accounts 145,313 - 30,967 176,280
Other 253,175 851 16,304 270,330
Receivable from other governments 1,038,449 - - 1,038,449
Prepaids and other assets 61,229 - - 61,229
Total assets 11,579,770$ 635,791$ 1,493,465$ 13,709,026$
Liabilities
Accounts payable 854,920$ - $ 55,841$ 910,761$
Accrued liabilities 1,105,666 - 141 1,105,807
Deferred revenue 488,911 41,369 5,358 535,638
Total liabilities 2,449,497 41,369 61,340 2,552,206
Fund Balances
Reserved for
Encumbrances 1,669,827 - 73,260 1,743,087
Prepaid items 61,229 - - 61,229
Debt service - 594,422 - 594,422
Unreserved, reported in
General fund
Designated for projects 268,075 - - 268,075
Undesignated 7,131,142 - - 7,131,142
Capital projects fund - - - -
Special revenue funds - - 1,328,145 1,328,145
Permanent fund - - 30,720 30,720
Total fund balances 9,130,273 594,422 1,432,125 11,156,820
Total liabilities and fund balances 11,579,770$ 635,791$ 1,493,465$ 13,709,026$
ASSETS
LIABILITIES AND FUND BALANCES
CITY OF FRIENDSWOOD, TEXAS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
15
Total fund balances - governmental funds 11,156,820$
Capital assets used in governmental activities are not current financial
resources and therefore are not reported in the governmental funds
balance sheet.85,516,467
Costs associated with the issuance of governmental long term debt
are expensed when incurred in the fund statements and capitalized
and amortized over the life of the debt in the government-wide
financial statements.191,451
The accruals for net other post employment benefits and net pension
obligation do not require the use of current financial resources and
are therefore not recorded in the governmental fund financial
statements.(1,070,145)
Interest payable on long term debt does not require current financial
resources;therefore,interest payable is not reported as a liability in
the governmental funds balance sheet.(90,115)
An internal service fund is used by management to charge the cost of
certain activities,such as fleet management,to individual funds.The
assets and liabilities of the internal service fund are included in the
governmental activities in the statement of net assets.1,199,225
Revenues earned but not available within sixty days of the year end
are not recognized as revenue on the fund financial statements.535,638
Long-term liabilities,including bonds payable,capital leases payable,
bond premiums and compensated absences are not due and payable
in the current period and therefore are not reported in the fund
financial statements.(16,534,027)
Net assets of governmental activities 80,905,314$
Amounts reported for governmental activities in the statement of net
assets are different because:
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES – GOVERNMENTAL FUNDS
YEAR ENDED SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
16
Other Total
General Debt Governmental Governmental
Fund Service Funds Funds
Revenues
Property taxes 11,829,725$ 1,882,086$ - $ 13,711,811$
Sales and alcohol taxes 3,882,020 - - 3,882,020
Franchise taxes 1,510,794 - - 1,510,794
Fines and forfeitures 1,004,688 - 38,438 1,043,126
Permits and fees 921,779 - 38,700 960,479
Intergovernmental 2,126,432 - 525,605 2,652,037
Investment earnings 78,588 8,031 3,718 90,337
Donations 40,585 - 239,638 280,223
Miscellaneous 31,366 - 50,000 81,366
Total revenues 21,425,977 1,890,117 896,099 24,212,193
Expenditures
Current
General government 4,147,319 - 77,065 4,224,384
Public safety 9,591,762 - 207,610 9,799,372
Public works 1,956,479 - - 1,956,479
Community development 1,208,899 - - 1,208,899
Community services 2,458,422 - - 2,458,422
Library 979,084 - - 979,084
Capital outlay 3,300,166 - 499,137 3,799,303
Debt service
Principal - 736,468 51,122 787,590
Interest and fiscal charges 105,104 657,861 10,779 773,744
Total expenditures 23,747,235 1,394,329 845,713 25,987,277
Excess (deficiency) of
revenues over expenditures (2,321,258) 495,788 50,386 (1,775,084)
Other financing sources (uses)
Proceeds from sale of capital assets 23,340 - - 23,340
Insurance recoveries 43,210 - 7,369 50,579
Capital lease proceeds - - - -
Transfers in 1,512,987 - - 1,512,987
Transfers out - (883,922) (460,789) (1,344,711)
Total other financing
sources (uses)1,579,537 (883,922) (453,420) 242,195
Net change in fund balances (741,721) (388,134) (403,034) (1,532,889)
Fund balances, beginning of year 9,871,994 982,556 1,835,159 12,689,709
Fund balances, end of year 9,130,273$ 594,422$ 1,432,125$ 11,156,820$
CITY OF FRIENDSWOOD, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
YEAR ENDED SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
17
Net change in fund balances - total governmental funds (1,532,889)$
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 of capital assets recorded in the current period.3,737,386
Depreciation expense on capital assets is reported in the statement of
activities but does not require the use of current financial resources.
Therefore,depreciation expense is not reported as expenditures in the
governmental funds.(3,157,695)
The issuance of long term debt (e.g.bonds,capital 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,
premiums,discounts,and similar items when debt is first issued,whereas
the amounts are deferred and amortized in the statement of activities.
This amount is the net effect of these differences in the treatment of long-
term debt and related items.
785,319
Current year changes in long term liability for compensated absences do
not require the use of current financial resources;therefore,are not
reported as expenditures in governmental funds.(41,303)
Current year changes in accrued interest payable do not require the use
of current financial resources;therefore,it is not reported as an
expenditure in the governmental funds.(13,637)
Certain unearned revenues in the government-wide statement of activities
that do not provide current financial resources are not reported as
revenue in the governmental funds.(48,374)
The accruals for net other post employment benefits and net pension
obligation do not require the use of current financial resources and are
therefore not recorded in the governmental fund financial statements.(572,666)
An internal service fund is used by management to charge the cost of
fleet management to individual funds.The net revenue of the internal
service fund is included in the governmental activities in the statement of
net assets.82,238
Change in net assets of governmental activities 761,621)($
Amounts reported for governmental activities in the statement of activities
are different because:
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS – PROPRIETARY FUNDS
SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
18
Business Type
Activities Governmental
Enterprise Fund Activities
Water and Sewer Internal Service
Current assets
Cash and investments 7,994,680$ 476,999$
Accounts receivable, net of allowance
Customer accounts 1,867,835 -
Other 17,310 467
Prepaids and other assets 33,090 -
Restricted cash and investments 9,312,840 -
Total current assets 19,225,755 477,466
Noncurrent assets
Working capital deposit 288,862 -
Deferred charges 466,595 -
Capital assets
Land 716,818 -
Machinery and equipment 2,923,388 1,779,003
Water and sewer system 53,934,135 -
Construction in progress 418,945 -
Water rights 19,716,695 -
Accumulated depreciation (25,208,669) (1,053,894)
Net capital assets 52,501,312 725,109
Total noncurrent assets 53,256,769 725,109
Total assets 72,482,524 1,202,575
ASSETS
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS – PROPRIETARY FUNDS
SEPTEMBER 30, 2010
(CONTINUED)
The Notes to the Basic Financial Statements
are an integral part of these statements.
19
Business Type
Activities Governmental
Enterprise Fund Activities
Water and Sewer Internal Service
Current liabilities
Accounts payable 930,896$ 3,350$
Accrued liabilities 71,807 -
Accrued interest 161,299 -
Deposits 294,604 -
Compensated absences 15,940 -
Bonds and other long-term debt payable 1,446,462 -
Total current liabilities 2,921,008 3,350
Noncurrent liabilities
Compensated absences 83,646 -
Bonds and other long-term debt payable 40,640,635 -
Total noncurrent liabilities 40,724,281 -
Total liabilities 43,645,289 3,350
Invested in capital assets, net of related debt 19,565,756 725,109
Restricted for capital improvements 593,597 -
Unrestricted 8,677,882 474,116
Total net assets 28,837,235$ 1,199,225$
LIABILITIES
NET ASSETS
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
YEAR ENDED SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
20
Business Type
Activities Governmental
Enterprise Fund Activities
Water and Sewer Internal Service
Operating revenues
Charges for services 9,854,083$ 314,966$
Total operating revenues 9,854,083 314,966
Operating expenses
Personnel services 1,463,929 -
Sewer operations 1,514,824 -
Water purchases 880,968 -
Repairs and maintenance 459,751 -
Supplies 147,233 34,074
Other services and charges 717,625 -
Depreciation 1,478,978 211,707
Total operating expenses 6,663,308 245,781
Operating income 3,190,775 69,185
Nonoperating revenues (expenses)
Investment income 87,056 2,681
Gain (loss) on sale of capital assets (182,198) 10,372
Interest expense and fiscal charges (2,037,104) -
Total nonoperating revenues (expenses)(2,132,246) 13,053
Income before transfers 1,058,529 82,238
Transfers in 883,922 -
Transfers out (1,052,198) -
Change in net assets 890,253 82,238
Net assets, beginning of year 27,946,982 1,116,987
Net assets, end of year 28,837,235$ 1,199,225$
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS
YEAR ENDED SEPTEMBER 30, 2010
The Notes to the Basic Financial Statements
are an integral part of these statements.
21
Business Type
Activities Governmental
Enterprise Fund Activities
Water and Sewer Internal Service
OPERATING ACTIVITIES
Cash received from customers 9,869,156$ 314,860$
Cash payments to suppliers for goods
and services (5,417,460) (30,724)
Cash payments to employees for services (1,454,463) -
Net cash provided by operating activities 2,997,233 284,136
NONCAPITAL FINANCING ACTIVITIES
Transfer in 883,922 -
Transfer out (1,052,198) -
Net cash provided by (used in)
noncapital financing activities (168,276) -
CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from the sale of capital assets 4,000 16,040
Capital expenditures (1,469,442) (336,097)
Proceeds from the issuance of debt - -
Repayment of debt (1,080,000) -
Interest paid on debt (2,028,885) -
Net cash provided by (used in)
capital and related financing activities (4,574,327) (320,057)
INVESTING ACTIVITIES
Investment income 83,594 2,681
Net cash provided by investing activities 83,594 2,681
Net change in cash and cash equivalents (1,661,776) (33,240)
Cash and cash equivalents, beginning of year 18,969,296 510,239
Cash and cash equivalents, end of year 17,307,520$ 476,999$
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS
YEAR ENDED SEPTEMBER 30, 2010
(CONTINUED)
The Notes to the Basic Financial Statements
are an integral part of these statements.
22
Business Type
Activities Governmental
Enterprise Fund Activities
Water and Sewer Internal Service
Reconciliation of operating income
to net cash provided by operating activities
Operating income 3,190,775$ 69,185$
Adjustments to reconcile operating income
to net cash provided by operating activities
Depreciation and amortization 1,478,978 211,707
Change in assets and liabilities
Accounts receivable 9,818 (106)
Prepaids and other assets (682) -
Accounts payable (1,448,247) 3,350
Accrued liabilities (238,664) -
Deposits 5,255 -
Net cash provided by operating activities 2,997,233$ 284,136$
Reconciliation of cash to statement of net assets
Cash and investments 7,994,680$ 476,999$
Restricted cash and investments 9,312,840 -
Cash and cash equivalents 17,307,520$ 476,999$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
23
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Friendswood, Texas (the City) was incorporated on October 15, 1960. The City
charter provides for a City Council-City Manager form of government. The Mayor and six
Council members are elected from the City at large serving three-year terms. Currently, the
City charter provides for a Council term limitation of four 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.
Financial 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.
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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
24
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Financial Reporting Entity – Continued
The West Ranch Management District (the 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. Complete financial
statements from the component may be obtained at the District’s administrative office.
Basis of Presentation
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.
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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
25
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Measurement Focus/Basis of Accounting
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, accordingly, 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.
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.
Other governmental funds is a summarization of all the non-major governmental funds.
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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
26
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Measurement Focus/Basis of Accounting – Continued
Additionally, the City reports the following fund type:
The Internal Service Fund is used to account for fleet management services
provided to other departments of the City 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 fund are charges to customers for sales and services.
Operating expenses for the enterprise fund and internal service fund 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.
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 Texas Class).
Other investments consist mainly of U. S. government treasury bills, treasury notes and
other U. S. government obligations. Restricted cash and investments are assets
restricted for specific use. Restricted cash includes cash on deposit with financial
institutions and investment pools.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
27
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Cash and Investments – Continued
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 are 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. The City had no
interfund loans or internal balances at September 30, 2010.
All trade and property tax receivables are shown net of an allowance for uncollectible
accounts. Management estimates an allowance for trade accounts receivable based on
past experience, historical losses, and other pertinent factors. The property tax
receivable allowance is equal to 10 percent of outstanding property taxes at
September 30, 2010.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
28
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Receivables and Payables – Continued
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
Galveston County. 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
$0.5797 per $100 of assessed valuation that were prorated between operations and
debt service in the amounts of $0.4997 and $0.0800, respectively. The resulting tax
levies were approximately $11.7 and $1.9 million for operations and debt service,
respectively, based on a total taxable valuation of approximately $2.3 billion for the
2009 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, which resulted in a tax levy of $482,708 on the taxable valuation of
$74,262,774 for the 2009 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.
The City applies the consumption method in accounting for prepaid items in the
governmental funds.
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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
29
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Deferred Contributions – Continued
The District approved a contract with the City effective August 15, 2005, as amended.
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 actual
historical cost is not available. 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:
Buildings and improvements 20 - 50 years
Machinery and equipment 5 - 10 years
Infrastructure 40 - 50 years
Water and sewer system 40 - 50 years
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 is 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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
30
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – 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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
31
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
New Accounting Pronouncements
In June 2007, the GASB issued statement No. 51, Accounting and Financial Reporting
for Intangible Assets (GASB 51). This statement requires that all intangible assets not
specifically excluded by its scope provisions be classified as capital assets. The
requirements of this statement are effective for periods beginning after June 15, 2009.
The City implemented GASB 51, as of October 1, 2009, and the adoption of this
standard did not have a material impact on the City’s financial statements.
In March 2009, the GASB issued statement No. 54, Fund Balance and Governmental
Fund Type Definitions (GASB 54). This statement is to enhance the usefulness of fund
balance information by providing clearer fund balance classifications that can be more
consistently applied and by clarifying the existing governmental fund type definitions.
The requirements of this statement are effective for financial statements for periods
beginning after June 15, 2010. The City will adopt GASB 54 in the fiscal year ending
September 30, 2011 and is currently evaluating the impact of this standard on its
financial statements.
In June 2010, the GASB issued Statement No. 59, Financial Instrument Omnibus (GASB
59). This statement is to update and improve existing standards regarding financial
reporting and disclosure requirements of certain financial instruments and external
investment pools for which significant issues have been identified in practice. The
requirements of this statement are effective for financial statements for periods
beginning after June 15, 2010. The City will adopt GASB 59 in the fiscal year ending
September 30, 2011 and is currently evaluating the impact of this standard on its
financial statements.
In November 2010, the GASB issued Statement No. 61, The Financial Reporting Entity:
Omnibus an Amendment of GASB Statement No. 14 and No. 34 (GASB 61). This
statement modifies certain requirements for inclusion of component units in the financial
reporting entity, amends criteria for reporting component units as if they were part of the
primary government and clarifies the reporting of equity interests in legally separate
organizations. The requirements of this statement are effective for financial statements
for periods beginning after June 15, 2012. The City will adopt GASB 61 in the fiscal year
ending September 30, 2013 and is currently evaluating the impact of this standard on its
financial statements.
In December 2010, the GASB issued Statement No. 62, “Codification of Accounting and
Financial Reporting Guidance Contained in Pre-November 30, 1989 Financial
Accounting Standards Board (FASB) and American Institute of Certified Public
Accountants (AICPA) Pronouncements (GASB 62). This statement incorporates into
GASB authoritative literature, certain accounting and financial reporting guidance issued
by the FASB and AICPA on or before November 30, 1989, which does not conflict or
contradict GASB pronouncements. The requirements of this statement are effective for
financial statements for periods beginning after December 15, 2011. The City will adopt
GASB 62 in the fiscal year ending September 30, 2013 and is currently evaluating the
impact of this standard on its financial statements.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
32
NOTE 2. DEPOSITS AND INVESTMENTS
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 $100,000;
3. No-load money market mutual funds; and
4. TexPool, Lone Star Investment Pool and Texas Class.
The City Council has adopted a written investment policy regarding the investments of its
funds as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas
Government Code). The investments of the City are in compliance with the Council’s
investment policies. The City did not have any derivative investment products during the
current year. All significant legal and contractual provisions for investments were complied
with during the year.
Deposits and investments as of September 30, 2010 are classified in the accompanying
financial statements as follows:
Governmental Activities 11,194,286$
Business-type Activities 17,307,520
28,501,806$
Deposits and investments as of September 30, 2010 consist of the following:
Deposits with financial institutions 2,757,429$
Investments 25,744,377
28,501,806$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
33
NOTE 2. DEPOSITS AND INVESTMENTS – CONTINUED
As of September 30, 2010, the City had the following investments:
Fair Value
Texas Class 11,874,712$ 40
Lone Star Corporate Overnight Fund 2,928,216 33
Tex Pool 2,928,349 34
U.S. Agency Securities:
Federal Farm Credit Bank 3,007,261 793
Federal Home Loan Bank 2,502,503 635
Federal National Mortgage Association 2,003,052 780
Federal Home Loan Mortgage Corporation 500,284 1,060
Total U.S. Agency Securities 8,013,100
Total portfolio 25,744,377$
Investment Type
Weighted Average
Maturity (Days)
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. The City’s investments in these
pools are the same as the value of the pool shares, which are valued based on quoted
market rates.
The City invests in Texas Local Government Investment Pool (TexPool), which was created
under the Interlocal Cooperation Act, Texas Government Code Ann. Chapter 791 and the
Texas Public Funds Investment Act. The Texas Treasury Safekeeping Trust Company (the
Trust) is trustee of TexPool and is a limited purpose trust company authorized pursuant to
Texas Government Code Ann. Section 404.103 for which the Texas State Comptroller is
sole officer, director and shareholder. The advisory board of TexPool is composed of
members appointed pursuant to the requirements of the Texas Public Funds Investment
Act.
The City invests in Texas Class Investment Pool which was established in 1996 pursuant to
the Texas Public Funds Investment Act. The pool is governed by a 7 member board of
trustees, who are elected by pool participants. The Cutwater Investor Services Corp. serves
as the pools program administrator and Wells Fargo Bank Texas, NA, serves as custodian.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
34
NOTE 2. DEPOSITS AND INVESTMENTS – CONTINUED
The City invests in Lone Star Investment Pool pursuant to the Texas Public Funds
Investment Act. This pool is governed by an 11 member board of trustees all of which are
pool participants. The Bank of New York Mellon acts as custodian and provides valuation
services.
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, 2010, 21% of the City’s investments were
invested for a period of more 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. 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,
2010, all of the City’s $2,757,429 balance on deposit with financial institutions was
collateralized with securities held by the pledging financial institution in the City’s name.
Credit Risk. It is the City’s policy to limit its investments to investment types with an
investment quality rating not less than A or its equivalent by a nationally recognized
statistical rating organization. The City’s investments as of September 30, 2010, were rated
as follows:
Rating Rating Agency
Texas Class AAAm Standard & Poor's
Lone Star Corporate Overnight Fund AAAf Standard & Poor's
TexPool AAAm Standard & Poor's
U.S. Agency Securities:
Federal Farm Credit Bank Aaa Moody's Investor Service
Federal Home Loan Bank Aaa Moody's Investor Service
Federal National Mortgage Association Aaa Moody's Investor Service
Federal Home Loan Mortgage Corporation Aaa Moody's Investor Service
Investment Type
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
35
NOTE 3. ACCOUNTS RECEIVABLE AND DEFERRED REVENUE
Receivables as of September 30, 2010 for the City’s individual major funds, nonmajor funds
in the aggregate and the Internal Service Fund including the applicable allowances for
uncollectible accounts, are as follows:
Debt Water and Internal
General Service Nonmajor Sewer Service Total
Receivables:
Property taxes 301,372$ 45,966$ -$ -$ -$ 347,338$
Sales taxes 741,063 - - - - 741,063
Franchise taxes 391,784 - - - - 391,784
Customer accounts 147,313 - 30,967 1,877,835 - 2,056,115
Accrued interest 11,060 851 439 9,468 467 22,285
Court fines 507,382 - - - - 507,382
Intergovernmental 1,038,449 - - - - 1,038,449
Other 18,294 - 15,865 7,842 - 42,001
Gross receivables 3,156,717 46,817 47,271 1,895,145 467 5,146,417
Less: allowance for
uncollectibles 315,698 4,597 - 10,000 - 330,295
Net total receivables 2,841,019$ 42,220$ 47,271$ 1,885,145$ 467$ 4,816,122$
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:
Deferred revenue
General Fund
Delinquent property taxes 271,234$
Court fines 204,784
Miscellaneous 12,893
Total General Fund 488,911
Court Security and Technology Fund
Court fines 5,358
Total Court Security and Technology Fund 5,358
Debt Service Fund
Delinquent property taxes 41,369
Total Debt Service Fund 41,369
Total Governmental Funds 535,638$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
36
NOTE 4. CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2010, was as follows:
Beginning Reclassifications/Ending
Balance Increases Decreases Balance
Governmental activities
Capital assets not being depreciated
Land 24,007,398$ -$ -$ 24,007,398$
Construction in progress 2,886,643 3,257,576 (1,890,217) 4,254,002
Total capital assets not
being depreciated 26,894,041 3,257,576 (1,890,217) 28,261,400
Capital assets being depreciated
Buildings and improvements 29,740,200 1,634,031 - 31,374,231
Machinery and equipment 9,303,063 1,072,093 (296,697) 10,078,459
Infrastructure 67,671,399 - - 67,671,399
Total capital assets
being depreciated 106,714,662 2,706,124 (296,697) 109,124,089
Less accumulated depreciation
Buildings and improvements 9,489,210 1,176,938 - 10,666,148
Machinery and equipment 6,083,008 632,501 (290,964) 6,424,545
Infrastructure 32,493,322 1,559,898 - 34,053,220
Total accumulated
depreciation 48,065,540 3,369,337 (290,964) 51,143,913
Total capital assets
being depreciated, net 58,649,122 (663,213) (5,733) 57,980,176
Governmental activities
capital assets, net 85,543,163$ 2,594,363$ (1,895,950)$ 86,241,576$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
37
NOTE 4. CAPITAL ASSETS – CONTINUED
Beginning Reclassifications/Ending
Balance Increases Decreases Balance
Business Type Activities
Capital assets not being depreciated
Land 716,818$ -$ -$ 716,818
Water rights 19,716,695 - - 19,716,695
Construction in progress 6,078,950 1,469,443 (7,129,448) 418,945
Total capital assets not
being depreciated 26,512,463 1,469,443 (7,129,448) 20,852,458
Capital assets being depreciated
Machinery and equipment 2,957,043 - (33,655) 2,923,388
Water and sewer system 47,084,957 7,129,448 (280,270) 53,934,135
Total capital assets
being depreciated 50,042,000 7,129,448 (313,925) 56,857,523
Less accumulated depreciation:
Machinery and equipment 2,526,900 44,303 (33,655) 2,537,548
Water and sewer system 21,330,518 1,434,675 (94,072) 22,671,121
Total accumulated
depreciation 23,857,418 1,478,978 (127,727) 25,208,669
Total capital assets
being depreciated, net 26,184,582 5,650,470 (186,198) 31,648,854
Business-type activities
capital assets, net 52,697,045$ 7,119,913$ (7,315,646)$ 52,501,312$
Depreciation expense was charged to functions/programs of the primary government as
follows:
Governmental activities
General government 245,177$
Public safety 436,210
Public works 1,897,206
Community services 579,037
Capital assets held by the City's internal service fund are
charged to the various functions based on their usage 211,707
Total depreciation expense - Governmental Activities 3,369,337$
Business-Type activities
Water and sewer 1,478,978$
Total depreciation expense - Business-Type Activities 1,478,978$
Commitments for construction projects in progress were $2,557,327 at September 30, 2010.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
38
NOTE 5. INTERFUND TRANSFERS
The following schedule summarizes the City’s transfer activity:
Transfers In Transfers Out Amount
General Park land dedication 50,000$ Fund miscellaneous projects
General Capital projects 377,548 Reimbursement for capital
expenditure
General Police investigation 33,241 Reimbursement for expenditures
General Water and sewer 1,052,198 To fund indirect costs for
administrative expenditures
Water and sewer Debt service 883,922 2005 refunding bonds funded
by debt service
2,396,909$
Purpose
NOTE 6. 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.
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.
Bonds Payable and Certificates of Obligation
The following schedule summarizes 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, 2010:
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
39
NOTE 6. LONG-TERM DEBT – CONTINUED
Bonds Payable and Certificates of Obligation – Continued
Final Governmental Business-Type
Maturity Interest Rate Activities Activities
General Obligation Bonds
2003 Permanent Improvement $ 8,700,000 2026 3.65% - 5.5%7,730,000$ -$
2005 Permanent Improvement
and Refunding 9,800,000 2020 2.85% - 4.375%7,070,000 -
14,800,000 -
Revenue Bonds
2001 Waterworks and Sewer System 6,100,000 2021 4.7% - 6.5%- 5,800,000
2006 Waterworks and Sewer System
Revenue and Refunding 24,285,000 2031 4.0% - 5.0%- 24,125,000
2009 Waterworks and Sewer System 12,120,000 2028 2.0% - 4.8%- 12,120,000
- 42,045,000
Total Bonds and Certificates of Obligation 14,800,000$ 42,045,000$
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 Total
2011 675,000$ 606,806$ 1,440,000$ 1,904,689$ 4,626,495$
2012 705,000 576,318 1,500,000 1,844,388 4,625,706
2013 730,000 547,881 1,560,000 1,783,355 4,621,236
2014 755,000 518,229 1,625,000 1,717,793 4,616,022
2015 785,000 487,068 1,695,000 1,648,874 4,615,942
2016 - 2020 4,430,000 1,909,941 9,650,000 7,058,386 23,048,327
2021 - 2025 5,480,000 874,785 9,790,000 4,724,154 20,868,939
2026 - 2030 1,240,000 26,836 11,765,000 2,197,016 15,228,852
2031 - 2035 - - 3,020,000 311,250 3,331,250
14,800,000$ 5,547,864$ 42,045,000$ 23,189,905$ 85,582,769$
Governmental Activities Business -Type Activities
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, 2010, $7,430,000 of
bonds considered defeased are still outstanding.
Obligations Under Capital Leases
The City has entered into capital lease agreements in order to purchase machinery and
equipment for public works, police and fire departments. The assets acquired through
these lease agreements are as follows:
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
40
NOTE 6. LONG-TERM DEBT – CONTINUED
Obligations Under Capital Leases – Continued
Governmental
Asset:Activities
Machinery and equipment 1,133,460$
Less: accumulated depreciation (120,401)
Total 1,013,059$
The following is a summary of future lease payments due on this machinery and
equipment:
Year Ending Lease
September 30,Obligation
2011 171,547$
2012 171,547
2013 171,547
2014 171,547
2015 171,547
2016 128,812
Total 986,547
Less: interest portion (146,619)
Obligations under capital leases 839,928$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
41
NOTE 6. LONG-TERM DEBT – CONTINUED
Changes in Long-term Liabilities
Long-term liability activity of the primary government for the year ended September 30,
2010, was as follows:
Balance Balance Due
Beginning End of Within One
of Year Increase Decrease Year Year
Governmental Type Activities
General obligation bonds 15,445,000$ -$ (645,000)$ 14,800,000$ 675,000$
Premium on bond issuance 128,896 - (7,582) 121,314 7,582
Capital lease obligations 982,518 - (142,590) 839,928 142,590
Net pension obligation 224,845 305,024 - 529,869 -
Net OPEB obligation 272,634 267,642 - 540,276 -
Compensated absences 731,482 613,250 (571,947) 772,785 134,350
Total governmental
type activities 17,785,375 1,185,916 (1,367,119) 17,604,172 959,522
Business Type Activities
General obligation bonds 865,000 - (865,000) - -
Revenue bonds 42,260,000 - (215,000) 42,045,000 1,440,000
Discount on bond issuance (62,443) - 2,498 (59,945) (2,498)
Premium on bond issuance 350,592 - (24,313) 326,279 24,313
Deferred loss on refunding bonds (238,787) - 14,550 (224,237) (15,353)
Compensated absences 90,120 58,700 (49,234) 99,586 15,940
Total business type activities 43,264,482 58,700 (1,136,499) 42,186,683 1,462,402
Total primary government
activities 61,049,857$ 1,244,616$ (2,503,618)$ 59,790,855$ 2,421,924$ 2,489,232$
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, 2010, was as follows:
Balance Balance Due
Beginning End of Within One
of Year Increase Decrease Year Year
Component Unit
Bond anticipation note -$ 2,405,000$ -$ 2,405,000$ -$
Developer advances 160,000 - - 160,000 -
Due to developer 2,994,670 - (2,149,495) 845,175 -
Total component unit 3,154,670$ 2,405,000$ (2,149,495)$ 3,410,175$ -$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
42
NOTE 6. LONG-TERM DEBT – CONTINUED
Changes in Long-term Liabilities - Continued
A developer of the West Ranch Management District has advanced $160,000 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 on behalf of the District. The District has agreed to reimburse the developers for
these construction costs and interest to the extent approved by the Texas Commission
on Environmental Quality. The District estimates reimbursable costs for completed
projects are $845,175. These amounts have been recorded in the financial statements
as long-term liabilities.
NOTE 7. RESTRICTED ASSETS
The balances of the restricted asset accounts in the enterprise fund are as follows:
Cash and investments:
Customer deposits 294,604$
Construction 593,048
Construction - 2006 bonds 1,892,764
Construction - 2009 bonds 6,363,987
Debt service reserve 168,437
Total restricted assets 9,312,840$
NOTE 8. EMPLOYEE RETIREMENT SYSTEM
Plan Description
The City provides pension benefits for all of its full-time employees through a
non-traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas
Municipal Retirement System (TMRS), an agent multiple-employer public employee
retirement system. The plan provisions that have been adopted by the City are within
the options available in the governing statutes of TMRS.
TMRS issues a publicly available comprehensive annual financial report that includes
financial statements and required supplementary information (RSI) for TMRS; the report
also provides detailed explanations of the contributions, benefits and actuarial methods
and assumptions used by the System. This report may be obtained by writing to TMRS,
P.O. Box 149153, Austin, TX 78714-9153 or by calling 800-924-8677; in addition, the
report is available on TMRS’ website at www.TMRS.com.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
43
NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED
Benefits
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 at least 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 the City matching
percent had always been in existence and if the employee’s salary had always been the
average of his salary in the last three years that are one year before the effective date.
At retirement, the benefit is calculated as if the sum of the employee's accumulated
contributions with interest and the employer-financed monetary credits with interest were
used to purchase an annuity.
Members can retire at ages 60 and above with 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.
Plan provisions for the City were as follows:
Plan Year Plan Year
2009 2010
Employee deposit rate 7.00%7.00%
Matching ratio (city to employee) 2 to 1 2 to 1
Years required for vesting 5 5
Service retirement eligibility
(expressed as age / years of 60/5,0/20 60/5,0/20
service)
100% Repeating, 100% Repeating,
Updated Service Credit Transfers Transfers
70% of 70% of
Annuity Increase (to retirees) CPI Repeating CPI Repeating
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
44
NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED
Contributions
Under the state law governing TMRS, the contribution rate for each city is determined
annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate
consists of the normal cost contribution rate and the prior service cost contribution rate,
which is calculated to be a level percent of payroll from year to year. The normal cost
contribution rate finances the portion of an active member’s projected benefit allocated
annually; the prior service contribution rate amortizes the unfunded (overfunded)
actuarial liability (asset) over the applicable period for that city. Both the normal cost and
prior service contribution rates include recognition of the projected impact of annually
repeating benefits, such as Updated Service Credits and Annuity Increases.
The City contributes to the TMRS Plan at an actuarially determined rate. Both the
employees and the City make contributions monthly. Since the City needs to know its
contribution rate in advance for budgetary purposes, there is a one-year delay between
the actuarial valuation that serves as the basis for the rate and the calendar year when
the rate goes into effect. The annual pension cost and net pension obligation/(asset) are
as follows:
Annual Required Contribution (ARC) 1,947,293$
Interest on Net Pension Obligation 16,582
Adjustment to the ARC (13,533)
Annual Pension Cost (APC) 1,950,342
Contributions Made (1,645,318)
Increase in net pension obligation 305,024
Net Pension Obligation, beginning of year 224,845
Net Pension Obligation, end of year 529,869$
City historical data is as follows:
Annual Percentage of Net Pension Obligation
Fiscal Year Pension Cost (APC) APC Contributed at September 30
2008 1,085,937$ 100%-$
2009 1,690,675 87%224,845
2010 1,950,342 73%529,869
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
45
NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED
Contributions – Continued
The required contribution rates for fiscal year 2010 were determined as part of the
December 31, 2007 and 2008 actuarial valuations. Additional information as of the latest
actuarial valuation, December 31, 2009, also follows:
Valuation date 12/31/2007 12/31/2008 12/31/2009
Actuarial cost method Projected Unit
Credit
Projected Unit
Credit
Projected Unit
Credit
Actuarial assumptions:
Investment rate of return 7.00%7.50%7.50%
Included inflation rate 3.00%3.00%3.00%
Cost-of-living adjustments 2.10%2.10%2.10%
Level Percent of
Payroll
Level Percent of
Payroll
Amortized Cost 10-year Smoothed
Market
Varies by age and
service
Varies by age and
service
Varies by age and
service
30 years:
closed period
29 years:
closed period
28 years:
closed period
Amortization method
Remaining amortization period
Projected salary increases
Asset valuation method Amortized Cost
Level Percent of
Payroll
The funded status as of December 31, 2009, the most recent actuarial valuation date, is
as follows:
Actuarial UAAL as a
Actuarial Actuarial Accrued Unfunded Percentage
Valuation Value of Liability Funded AAL Covered of Covered
Date Assets (AAL) Ratio (UAAL) Payroll Payroll
(1) (2) (3) (4) (5) (6)
(1) / (2) (2) - (1) (4) / (5)
12/31/2009 $24,941,996 $38,954,566 64.00%$14,012,570 $11,194,824 125.17%
The schedule of funding progress, presented as Required Supplementary Information
following the notes to the financial statements, presents multi-year trend information
about whether the actuarial value of plan assets is increasing or decreasing over time
relative to the actuarial accrued liability of benefits.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
46
NOTE 9. POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS
Retiree Insurance Coverage
The City Council has established a single-employer medical, dental, and vision insurance
defined benefit plan for retirees. Eligible retirees are provided insurance benefits at a set
premium rate equal to the City’s employees’ rate. Eligible retirees may also cover their
dependents. Retirees are responsible for paying the premium cost associated with their
coverage. A retiree is defined as a person who is receiving lifetime monthly TMRS pension
benefit payments and retired directly from active employment at the City. T he City will stop
insurance coverage on the retiree and all dependents on the last day of the month the
retiree fails to submit the required premium payment or upon death of the employee. The
retiree health plan does not issue a publicly available financial report.
Retirement Benefit Eligibility
The retiring employee must be 60 years of age with 5 years of service or have 20 years
of service at any age. Employees terminating before normal retirement conditions are
met are not eligible for retiree health plans. Retirees are not required to enroll in
Medicare Parts A and B once eligible.
Plan Participants
Permanent full-time employees and any dependents covered on the employee’s last
date of employment are eligible for coverage. Dependents are not eligible for coverage
unless the retired employee is covered. Should the retiring employee reject any of the
plans he/she is never eligible to re-enroll in the rejected plans. At the time of coverage
election, the retiring employee has the option of cancelling coverage on any dependent
with the understanding that that dependent can never be re-enrolled; new dependents
cannot be added to the plan.
Medical HMO and/or POS Plan
The retiring employee is eligible to retain whichever medical plan the employee had on
the last day of employment. Any dependents covered at that time may remain on the
retired employee’s plan as long as the retired employee remains active on the plan. The
only time the retiree’s plan choice can be changed is at open enrollment. All terms and
conditions of the plan are the same as active employees.
Dental DMO and/or PPO Plan
The retiring employee is eligible to retain whichever dental plan the employee had on the
last day of employment. Any dependents covered at that time may remain on the retired
employee’s plan as long as the retired employee remains active on the plan. The only
time the retiree’s plan choice can be changed is at open enrollment. All terms and
conditions of the plan are the same as active employees.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
47
NOTE 9. POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS – CONTINUED
Retiree Insurance Coverage – Continued
Vision Plan
The retiring employee is eligible to retain the vision plan the employee had on the last
day of employment. Any dependents covered at that time may remain on the retired
employee’s plan as long as the retired employee remains active on the plan. All terms
and conditions of the plan are the same as active employees.
Premiums Paid
All premiums are 100% paid monthly by the retiree. The City does not contribute to any
of the plans once an employee retires.
Funding Policy and Annual OPEB Cost
The City’s annual other post employment benefits (OPEB) cost is calculated based on
the annual required contribution of the employer (ARC), an amount actuarially
determined in accordance with the parameters of GASB Statement No. 45. The ARC
represents a level of expense that, if recognized on an ongoing basis, is projected to
cover normal cost each year and to amortize the unfunded actuarial liabilities over a
period not to exceed thirty years. The City had its first OPEB actuarial valuation
performed for the fiscal year beginning October 1, 2008 as required by GASB. The City’s
annual OPEB cost for the current year is as follows:
Annual required contribution 299,567$
Interest on OPEB obligation 12,269
Adjustment to ARC (6,686)
Annual OPEB cost (expense) end of year 305,150
Net estimated employer contributions 37,508
Increase in net OPEB obligation 267,642
Net OPEB obligation – as of beginning of the year 272,634
Net OPEB obligation – as of end of year 540,276$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
48
NOTE 9. POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS – CONTINUED
Retiree Insurance Coverage – Continued
Funding Status and Funding Progress
The funded status of the City’s retiree health care plan, under GASB Statement No. 45
as of December 31, 2008, the most recent valuation date, is as follows:
Actuarial UAAL as a
Actuarial Actuarial Accrued Unfunded Percentage
Valuation Value of Liability Funded AAL Covered of Covered
Date Assets (AAL) Ratio (UAAL) Payroll Payroll
(1) (2) (3) (4) (5) (6)
(1) / (2) (2) - (1) (4) / (5)
12/31/2008 $0 $2,426,788 0.00%$2,426,788 $10,885,990 22.29%
Under the reporting parameters, the City’s retiree health care plan is 0% funded with an
estimated actuarial accrued liability exceeding actuarial assets by $2,426,788 at
December 31, 2008.
Actuarial Methods and Assumptions
The Projected Unit Credit actuarial cost method is used to calculate the GASB ARC for
the City’s retiree health care plan. Using the plan benefits, the present health premiums
and a set of actuarial assumptions, the anticipated future payments are projected. The
projected unit credit method then provides for a systematic funding for these anticipated
payments. The yearly ARC is computed to cover the cost of benefits being earned by
covered members as well as to amortize a portion of the unfunded accrued liability.
Projections of health benefits are based on the plan as understood by the City and
include the types of benefits in force at the valuation date and the pattern of sharing
benefit costs between the City and the City’s employees to that point. Actuarial
calculations reflect a long-term perspective and employ methods and assumptions that
are designed to reduce short-term volatility in actuarial accrued liabilities and the
actuarial value of assets. Significant methods and assumptions were as follows:
Investment rate of return 4.5%, net of expenses
Actuarial cost method Projected Unit Credit Cost Method
Amortization method Level Percentage of Payroll
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
49
NOTE 9. POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS – CONTINUED
Retiree Insurance Coverage – Continued
Actuarial Methods and Sssumptions – Continued
Actuarial valuations involve estimates of the value of reported amounts and assumptions
about the probability of events in the future. Amounts determined regarding the funded
status and the annual required contributions of the City’s retiree health care plan are
subject to continual revision as actual results are compared to past expectations and
new estimates are made about the future. The required schedule of funding progress
presented as required supplementary information provides multiyear trend information
that shows whether the actuarial value of plan assets is increasing or decreasing over
time relative to the actuarial accrued liability for benefits.
Supplemental Death Benefits Fund
Plan Description
The City also participates in the cost sharing multiple-employer defined benefit group-
term life insurance plan operated by the Texas Municipal Retirement System (TMRS)
known as the Supplemental Death Benefits Fund (SDBF). The City elected, by
ordinance, to provide group-term life insurance coverage to both current and retired
employees. The City may terminate coverage under and discontinue participation in the
SDBF by adopting an ordinance before November 1 of any year to be effective the
following January 1.
The death benefit for active employees provides a lump-sum payment approximately
equal to the employee’s annual salary (calculated based on the employee’s actual
earnings, for the 12-month period preceding the month of death); retired employees are
insured for $7,500; this coverage is an OPEB.
Contributions
The City contributes to the SDBF at a contractually required rate as determined by an
annual actuarial valuation. The rate is equal to the cost of providing one-year term life
insurance. The funding policy for the SDBF program is to assure that adequate
resources are available to meet all death benefit payments for the upcoming year; the
intent is not to pre-fund retiree term life insurance during employees’ entire careers.
The City’s contributions to the TMRS SDBF for the years ended September 30, 2010,
2009 and 2008 were $22,282, $24,533, and $19,388, respectively, which equaled the
required contributions each year.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
50
NOTE 10. 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, 2010, 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 open
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, 2010, the City believed the amounts paid on workers’ compensation would
not change significantly from the amounts recorded.
During the year ended September 30, 2010, 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 through an
HMO plan, the City pays 90% of the monthly premium. If an individual employee chooses to
cover themselves and their dependents through an HMO plan, the City pays 70% of the
monthly premium. If an employee chooses insurance coverage through the POS plan for
themselves or for themselves and their dependents then the City pays up to 90% or 70%,
respectively, of the HMO plan monthly premium.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
51
NOTE 11. COMMITMENTS AND CONTINGENCIES
Southeast Water Purification Plant
The City has entered into a contract with the City of Houston for constructing, operating
and maintaining a water purification plan known as Southeast Water Purification Plant.
The City’s pro rata share of the actual pumping construction costs is 1.33 percent.
The City began receiving water from the plant on October 15, 1990. The City is billed on
a monthly basis for the actual gallons of water received times the City’s pro rata share of
actual costs. At the end of each quarter, the City of Houston computes the total
operation and maintenance expense for the quarter just ended, recalculates the cost per
one thousand gallons, and adjusts previous billings on the next invoice. As of
September 30, 2010, the City has purchased water capacity with an indefinite life of
$19,716,695.
The relationship of the parties is of a fiduciary character. No partnership or joint venture
is created by this contract.
West Ranch Management District
The 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 or make advances to the District. Since inception, a developer has
advanced $160,000 to the District for operations. The District does not have sufficient
funds or anticipated revenues sufficient to liquidate these advances during the
forthcoming fiscal year. Due to the uncertain reimbursement date and in accordance
with standards adopted by the Governmental Accounting Standards Board, these
advances are considered long-term and have been recorded as liabilities in the
government-wide financial statements.
Developers of the District are constructing water, sewer, drainage, and paving facilities
within the boundaries of the District. The District has agreed to reimburse the
developers 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 Commission. The District's engineer has stated that current construction contract
amounts are approximately $2,800,000. This amount has not been recorded in the
financial statements since the facilities are neither complete nor operational.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
52
NOTE 11. COMMITMENTS AND CONTINGENCIES - CONTINUED
Federal and State Programs
The City recognizes as revenue grant monies received as reimbursement for costs
incurred in certain federal and state programs it administers. Amounts received or
receivable from grantor agencies are subject to audit and adjustment by grantor
agencies. Any disallowed claims, including amounts already collected, may constitute a
liability of the applicable funds. The amount, if any, of expenditures which may be
disallowed by the grantor cannot be determined at this time although the City expects
such amounts, if any, to be immaterial.
Litigation
The City is a defendant in various lawsuits. The outcome and the impact of these
lawsuits is not presently determinable.
NOTE 12. SUBSEQUENT EVENTS
In November 2010, the City sold $3,460,000 in Permanent Improvement Bonds, Series
2010A (the Series 2010A Bonds) and $5,460,000 in Permanent Improvement Refunding
Bonds, Series 2010B (the Series 2010B Bonds). The bonds mature in varying amounts
from 2016 through 2035 with coupons ranging from 2% to 4.75%. Proceeds of the sale of
the Series 2010A Bonds will be used for street and thoroughfare improvements in the City
and to pay the costs of issuance of the Series 2010A Bonds. Proceeds of the sale of the
Series 2010B Bonds will be used to refund $5,400,000 of Waterworks and Sewer System
Revenue Bonds, Series 2001, and to pay the costs of issuance of the Series 2010B Bonds.
On October 21, 2010, the West Ranch Management District awarded the sale of its Series
2010 unlimited tax revenue bonds in the amount of $6,740,000 at a net effective interest
rate of 5.180247 percent. The bonds were sold to repay developers for construction of
utilities within the District. In addition, on October 21, 2010, the District awarded the sale of
its Series 2010A unlimited tax road bonds in the amount of $1,815,000 at a net effective
interest rate of 5.034522 percent. The bonds were sold to repay developers for construction
of road facilities within the District.
REQUIRED SUPPLEMENTARY
INFORMATION
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF FUNDING PROGRESS FOR PARTICIPATION
IN TEXAS MUNICIPAL RETIREMENT SYSTEM
SEPTEMBER 30, 2010
53
Actuarial Actuarial UAAL as a
Actuarial Value of Accrued Unfunded AAL Covered Percentage of
Valuation Date Assets Liability (AAL) Funded Ratio (UAAL)Payroll Covered Payroll
(1)(2)(3)(4)(5)(6)
(1) / (2) (2) - (1) (4) / (5)
12/31/2007 20,112,856$ 30,397,880$ 66.2%10,285,024$ 8,429,619$ 122.0%
12/31/2008 22,413,171 35,257,980 63.6 12,844,809 10,885,990 118.0
12/31/2009 24,941,996 38,954,566 64.0 14,012,570 11,194,824 125.2
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF FUNDING PROGRESS
POST EMPLOYMENT BENEFITS PLAN OTHER THAN PENSIONS
SEPTEMBER 30, 2010
54
Actuarial Actuarial UAAL as a
Actuarial Value of Accrued Unfunded AAL Covered Percentage of
Valuation Date Assets Liability (AAL) Funded Ratio (UAAL)Payroll Covered Payroll
(1)(2)(3)(4)(5)(6)
(1) / (2) (2) - (1) (4) / (5)
12/31/2007 N/A N/A N/A N/A N/A N/A
12/31/2008 -$ 2,426,788$ 0.0%2,426,788$ 10,885,990$ 22.3%
12/31/2009 *- 2,426,788 0.0 2,426,788 10,885,990 22.3
*In accordance with GASB Statement No. 45, the City has an actuarial valuation performed every 2 years,
which was last performed as of 12/31/08. Therefore data for 2009 is the same as 2008.
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2010
55
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Property taxes 11,599,912$ 11,599,912$ 11,829,725$ 229,813$
Sales taxes 3,948,694 3,948,694 3,882,020 (66,674)
Franchise taxes 1,350,440 1,354,340 1,510,794 156,454
Fines and forfeitures 1,125,051 1,125,051 1,004,688 (120,363)
Permits and fees 633,334 636,334 921,779 285,445
Intergovernmental 162,133 2,077,229 2,126,432 49,203
Investment earnings 119,150 119,150 78,588 (40,562)
Donations 20,000 47,920 40,585 (7,335)
Miscellaneous 9,300 12,200 31,366 19,166
Total revenues 18,968,014 20,920,830 21,425,977 505,147
Expenditures
General government
Mayor and council
Personnel services 299 299 - 299
Supplies 5,611 3,421 3,293 128
Other services and charges 259,018 316,632 302,716 13,916
Total mayor and council 264,928 320,352 306,009 14,343
City manager
Personnel services 441,654 441,654 469,469 (27,815)
Supplies 5,969 10,243 7,150 3,093
Other services and charges 109,693 121,947 75,584 46,363
Capital outlay - - - -
Total city manager 557,316 573,844 552,203 21,641
City secretary
Personnel services 379,613 379,613 355,037 24,576
Supplies 11,826 27,507 25,840 1,667
Repairs and maintenance 140 140 0 140
Other services and charges 51,273 48,801 32,860 15,941
Total city secretary 442,852 456,061 413,737 42,324
Administrative services
Personnel services 724,652 724,652 641,133 83,519
Supplies 6,592 5,577 4,812 765
Other services and charges 218,469 224,060 195,222 28,838
Total administrative services 949,713 954,289 841,167 113,122
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND – CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2010
56
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Human resources
Personnel services 289,769 308,530 297,055 11,475
Supplies 15,065 14,565 7,630 6,935
Other services and charges 87,585 69,324 57,472 11,852
Total human resources 392,419 392,419 362,157 30,262
Tax
Other services and charges 214,478 214,478 170,591 43,887
Total tax 214,478 214,478 170,591 43,887
Economic development
Personnel services 127,885 127,885 134,904 (7,019)
Supplies 19,453 19,959 7,436 12,523
Other services and charges 101,590 110,776 82,277 28,499
Total economic development 248,928 258,620 224,617 34,003
Municipal court
Personnel services 484,832 487,332 517,971 (30,639)
Supplies 27,639 21,929 12,568 9,361
Repairs and maintenance 1,480 1,480 - 1,480
Other services and charges 39,250 44,005 30,279 13,726
Capital outlay 1,545 - - -
Total municipal court 554,746 554,746 560,818 (6,072)
Computer services
Personnel services 280,027 280,027 291,002 (10,975)
Supplies 23,070 23,070 15,963 7,107
Repairs and maintenance 71,724 71,724 63,456 8,268
Other services and charges 329,548 326,854 251,575 75,279
Capital outlay 21,000 21,000 13,495 7,505
Total computer services 725,369 722,675 635,491 87,184
Risk management
Personnel services 84,735 84,735 81,342 3,393
Supplies 9,438 12,634 4,572 8,062
Other services and charges 16,541 16,541 8,110 8,431
Total risk management 110,714 113,910 94,024 19,886
Total general government 4,461,463 4,561,394 4,160,814 400,580
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND – CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2010
57
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Public safety
Police services
Personnel services 5,396,654 5,398,304 5,723,562 (325,258)
Supplies 315,776 312,482 319,438 (6,956)
Repairs and maintenance 120,443 145,620 139,794 5,826
Other services and charges 381,752 402,512 386,685 15,827
Capital outlay 41,412 206,506 174,792 31,714
Total police services 6,256,037 6,465,424 6,744,271 (278,847)
Communications
Personnel services 850,595 850,595 908,490 (57,895)
Supplies 6,149 6,477 4,246 2,231
Repairs and maintenance 17,764 17,764 13,554 4,210
Other services and charges 17,300 17,300 15,070 2,230
Total communications 891,808 892,136 941,360 (49,224)
Animal control
Personnel services 226,431 226,431 166,046 60,385
Supplies 16,383 17,056 14,024 3,032
Repairs and maintenance 2,373 2,373 788 1,585
Other services and charges 17,904 18,108 15,720 2,388
Total animal control 263,091 263,968 196,578 67,390
Fire and EMS
Personnel services 505,880 515,553 537,173 (21,620)
Supplies 20,404 75,714 83,222 (7,508)
Repairs and maintenance 7,457 4,504 2,524 1,980
Other services and charges 1,299,615 1,290,652 1,261,426 29,226
Capital outlay - 204,016 178,176 25,840
Total fire and EMS 1,833,356 2,090,439 2,062,521 27,918
Total public safety 9,244,292 9,711,967 9,944,730 (232,763)
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND – CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2010
58
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Public works
Administration
Personnel services 203,499 203,499 210,935 (7,436)
Supplies 1,801 1,620 1,008 612
Other services and charges 1,545 1,930 2,130 (200)
Total administration 206,845 207,049 214,073 (7,024)
Streets
Personnel services 509,701 509,701 489,501 20,200
Supplies 63,404 66,059 67,276 (1,217)
Repairs and maintenance 240,963 139,350 347,988 (208,638)
Other services and charges 440,113 440,469 491,968 (51,499)
Capital outlay 100,000 601,513 71,624 529,889
Total streets 1,354,181 1,757,092 1,468,357 288,735
Drainage
Personnel services 282,613 282,613 285,881 (3,268)
Supplies 6,725 6,725 5,044 1,681
Repairs and maintenance 46,639 48,253 39,017 9,236
Other services and charges 6,377 6,855 4,481 2,374
Capital outlay 35,000 2,851,436 2,581,572 269,864
Total drainage 377,354 3,195,882 2,915,995 279,887
Sanitation
Other services and charges 11,300 11,300 11,250 50
Total sanitation 11,300 11,300 11,250 50
Total public works 1,949,680 5,171,323 4,609,675 561,648
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND – CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2010
59
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Community development
Administration
Personnel services 464,864 464,864 564,641 (99,777)
Supplies 13,021 12,696 4,894 7,802
Repairs and maintenance 637 637 244 393
Other services and charges 14,875 14,159 6,307 7,852
Total administration 493,397 492,356 576,086 (83,730)
Planning and zoning
Personnel services 129,068 129,068 133,426 (4,358)
Supplies 1,589 1,589 691 898
Other services and charges 10,280 28,821 7,191 21,630
Total planning and zoning 140,937 159,478 141,308 18,170
Engineering
Personnel services 61,637 61,637 46,482 15,155
Supplies 1,167 1,809 1,468 341
Repairs and maintenance 530 530 40 490
Other services and charges 9,922 9,922 6,075 3,847
Total engineering 73,256 73,898 54,065 19,833
Inspection
Personnel services 411,890 411,890 404,179 7,711
Supplies 9,857 10,115 10,588 (473)
Repairs and maintenance 1,167 1,167 737 430
Other services and charges 59,242 44,710 21,936 22,774
Total inspection 482,156 467,882 437,440 30,442
Total community development 1,189,746 1,193,614 1,208,899 (15,285)
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND – CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2010
60
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Community services
Administration
Personnel services 228,776 228,776 227,238 1,538
Supplies 3,789 3,489 3,388 101
Other services and charges 20,021 23,434 24,784 (1,350)
Total administration 252,586 255,699 255,410 289
Parks and recreation
Personnel services 644,402 637,202 649,509 (12,307)
Supplies 103,726 114,104 101,362 12,742
Repairs and maintenance 114,152 92,735 72,625 20,110
Other services and charges 576,445 584,442 533,867 50,575
Capital outlay 49,000 55,148 49,311 5,837
Total parks and recreation 1,487,725 1,483,631 1,406,674 76,957
Swimming pool
Personnel services 75,859 67,664 53,893 13,771
Supplies 15,199 12,199 10,038 2,161
Repairs and maintenance 11,972 4,499 3,675 824
Other services and charges 24,627 45,345 45,091 254
Total swimming pool 127,657 129,707 112,697 17,010
Building operations
Supplies 19,983 43,119 31,509 11,610
Repairs and maintenance 95,209 149,086 175,851 (26,765)
Other services and charges 578,695 553,690 525,592 28,098
Capital outlay 99,000 1,410,602 231,196 1,179,406
Total building operations 792,887 2,156,497 964,148 1,192,349
Total community services 2,660,855 4,025,534 2,738,929 1,286,605
Library
Personnel services 747,443 747,443 793,385 (45,942)
Supplies 156,760 180,652 167,372 13,280
Repairs and maintenance 2,575 3,374 1,089 2,285
Other services and charges 25,357 34,712 17,238 17,474
Total library 932,135 966,181 979,084 (12,903)
Interest and fiscal charges - - 105,104 (105,104)
Total expenditures 20,438,171 25,630,013 23,747,235 1,882,778
Deficiency of
revenues over expenditures (1,470,157) (4,709,183) (2,321,258) 2,387,925
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND – CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2010
61
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Other financing sources
Proceeds from sale of capital assets - - 23,340 23,340
Insurance recoveries - 5,128 43,210 38,082
Transfers in 1,102,198 1,479,198 1,512,987 33,789
Total other financing sources 1,102,198 1,484,326 1,579,537 95,211
Net change in fund balances (367,959) (3,224,857) (741,721) 2,483,136
Fund balance, beginning of year 9,871,994 9,871,994 9,871,994 -
Fund balance, end of year 9,504,035$ 6,647,137$ 9,130,273$ 2,483,136$
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
62
NOTE 1. BUDGETARY CONTROL
The City’s Code of Ordinances establishes the following framework for the preparation and
format of the City’s annual budget:
Content
The budget shall provide a complete financial plan of all City funds and activities and,
except as required by law or this Charter, shall be in such form as the City Manager
deems desirable or the Council may require. The budget shall begin with a clear general
summary of its contents; shall show in detail all estimated income, the proposed property
tax levy, and all proposed expenditures for the ensuing fiscal year, including debt service
and an itemized estimate of the expense of conducting each Department of the City.
The proposed budget expenditures shall not exceed the total of estimated income. It
shall also include, in separate sections:
(1) Tax levies, rates, and collections for the preceding five years.
(2) The amount required for interest on the City's debts, for sinking fund and for
maturing serial bonds.
(3) The total amount of outstanding City debts, with a schedule of maturities on
bond issues.
(4) Anticipated net surplus or deficit for the ensuing fiscal year of each utility
owned or operated by the City and the proposed method of its disposition,
subsidiary budgets for each such utility giving detailed income and expenditure
information shall be attached as appendices to the budget.
(5) A capital program, which may be revised and extended each year to indicate
capital improvements pending or in process of construction or acquisition, and
shall include the following items which shall be attached as appendices to the
budget:
(a) A summary of proposed programs;
(b) A list of all capital improvements which are proposed to be
undertaken during the five fiscal years next ensuing, with appropriate
supporting information as to the necessity for such improvements;
(c) Cost estimates, method of financing and recommended time
schedules for each such improvement; and
(d) The estimated annual cost of operating and maintaining the facilities
to bid constructed or acquired.
(6) Such other information as may be required by the Council.
Submission
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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
63
NOTE 1. BUDGETARY CONTROL – CONTINUED
Public Notice and Hearing
The Council shall post in the City Hall and publish in the official newspaper a general
summary of their [its] proposed budget and a notice stating:
(1) The times and places where copies of the message and budget are
available for inspection by the public; and
(2) The time and place, not less than ten nor more than 30 days after
such publication, for a public hearing on the budget.
Amendment Before Adoption
After the public hearing, the Council may adopt the budget with or without amendment.
In amending the budget, it may add or increase programs or amounts and may delete or
decrease any programs or amounts, except expenditures required by law or for debt
service or for estimated cash deficit, provided that no amendment to the budget shall
increase the authorized expenditures to an amount greater than the total of estimated
income plus funds available from prior years.
Adoption
The Council shall adopt its annual budget inclusive of all governmental and proprietary
funds by ordinance, on one reading, by the 15th day of September or as soon thereafter
as practical. The City legally adopts annual budgets for the general, special revenue
and debt service funds. The budgets are adopted on a basis consistent with
generally accepted accounting principles.
If the Council fails to adopt an annual budget before the start of the fiscal year to which it
applies, appropriations of the last budget adopted shall be considered as adopted for the
current fiscal year on a month to month, pro rata basis, until the annual budget is
adopted. 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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
64
NOTE 1. BUDGETARY CONTROL – CONTINUED
Amendments After Adoption
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.
COMBINING AND INDIVIDUAL
FUND STATEMENTS AND SCHEDULES
65
NON MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
Special revenue funds are used to account for specific revenues that are legally restricted to
expenditures 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 capital expenditures.
EDA Grant Fund – This fund is used to account for receipts and expenditures related to
the Economic Development Administration grant awarded to the City.
TDRA Grant Fund – This fund is used to account for receipts and expenditures related
to the Texas Community Development Block Grant awarded to the City.
Park Land Dedication Fund – This fund is used to account for receipts from developers
to build or enhance neighborhood and community 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.
CAPITAL PROJECT FUNDS
Capital project funds are used to account for the acquisition and construction of major
capital facilities other than those financed by proprietary funds and trust funds.
2003 and 2005 Bond Construction Fund – This 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.
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 this City Park.
CITY OF FRIENDSWOOD, TEXAS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
SEPTEMBER 30, 2010
66
Court
Police Fire/EMS EDA TDRA Park Land Security and
Investigation Donation Grant Grant Dedication Technology
Cash and investments 37,717$ 63,122$ 790,796$ - $ 293,133$ 230,739$
Receivables, net of allowance
Customer accounts - 30,967 - - - -
Other 49 38 10,493 - 319 5,372
Total assets 37,766$ 94,127$ 801,289$ - $ 293,452$ 236,111$
LIABILITIES
Accounts payable 5,004$ 41,326$ 9,511$ - $ - $ - $
Accrued liabilities - - - - - 141
Deferred revenue - - - - - 5,358
Total liabilities 5,004 41,326 9,511 - - 5,499
FUND BALANCES
Reserved for encumbrances - - 65,825 - 7,435 -
Unreserved, undesignated 32,762 52,801 725,953 - 286,017 230,612
Total fund balances 32,762 52,801 791,778 - 293,452 230,612
Total liabilities and fund balances 37,766$ 94,127$ 801,289$ - $ 293,452$ 236,111$
ASSETS
LIABILITIES AND FUND BALANCES
Special Revenue Funds
67
Capital Projects Permanent
2003 and 2005 Total Nonmajor
Bond Governmental
Construction 1776 Park Funds
- $ 30,687$ 1,446,194$
- - 30,967
- 33 16,304
- $ 30,720$ 1,493,465$
- $ - $ 55,841$
- - 141
- - 5,358
- - 61,340
- - 73,260
- 30,720 1,358,865
- 30,720 1,432,125
- $ 30,720$ 1,493,465$
CITY OF FRIENDSWOOD, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
YEAR ENDED SEPTEMBER 30, 2010
68
Court
Police Fire/EMS EDA TDRA Park Land Security and
Investigation Donation Grant Grant Dedication Technology
Revenues
Fines and forfeitures - $ - $ - $ - $ - $ 38,438$
Permits and fees - - - - 38,700 -
Intergovernmental 93,346 - 221,464 210,795 - -
Investment earnings 267 168 - - 2,122 -
Donations - 239,638 - - - -
Miscellaneous - - - - - -
Total revenues 93,613 239,806 221,464 210,795 40,822 38,438
Expenditures
Current:
General government - - - 49,500 - 27,565
Public safety 38,640 168,970 - - - -
Community services - - - - - -
Capital outlay 18,806 - 284,636 161,295 - 34,400
Debt service:
Principal - 51,122 - - - -
Interest and fiscal charges - 10,779 - - - -
Total expenditures 57,446 230,871 284,636 210,795 - 61,965
Other financing sources (uses)
Insurance recoveries 7,369 - - - - -
Transfers out (33,241) - - - (50,000) -
Total other
financing sources (uses)(25,872) - - - (50,000) -
Net change in fund balances 10,295 8,935 (63,172) - (9,178) (23,527)
Fund balances, beginning of year 22,467 43,866 854,950 - 302,630 254,139
Fund balances, end of year 32,762$ 52,801$ 791,778$ - $ 293,452$ 230,612$
Special Revenue Funds
69
Capital Projects Funds Permanent
2003 and 2005 Total Nonmajor
Bond Governmental
Construction 1776 Park Funds
- $ - $ 38,438$
- - 38,700
- - 525,605
948 213 3,718
- - 239,638
50,000 - 50,000
50,948 213 896,099
- - 77,065
- - 207,610
- - -
- - 499,137
- - 51,122
- - 10,779
- - 845,713
- - 7,369
(377,548) - (460,789)
(377,548) - (453,420)
(326,600) 213 (403,034)
326,600 30,507 1,835,159
- $ 30,720$ 1,432,125$
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCE – BUDGET AND ACTUAL
FIRE/EMS DONATION FUND
YEAR ENDED SEPTEMBER 30, 2010
70
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Interest income 600$ 600$ 168$ (432)$
Donations 242,000 242,000 239,638 (2,362)
Total revenues 242,600 242,600 239,806 (2,794)
Expenditures
Current:
Public safety 180,100 180,100 168,970 11,130
Debt service:
Principal 54,265 54,265 51,122 3,143
Interest and fiscal charges 7,635 7,635 10,779 (3,144)
Total expenditures 242,000 242,000 230,871 11,129
Net change in fund balance 600 600 8,935 8,335
Fund balance, beginning of year 43,866 43,866 43,866 -
Fund balance, end of year 44,466$ 44,466$ 52,801$ 8,335$
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCE – BUDGET AND ACTUAL
DEBT SERVICE FUND
YEAR ENDED SEPTEMBER 30, 2010
71
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Property taxes 1,867,167$ 1,867,167$ 1,882,086$ 14,919$
Interest income 35,000 35,000 8,031 (26,969)
Total revenues 1,902,167 1,902,167 1,890,117 (12,050)
Expenditures
Debt service
Principal 1,631,455 1,631,455 736,468 894,987
Interest and fiscal charges 919,962 919,962 657,861 262,101
Total expenditures 2,551,417 2,551,417 1,394,329 1,157,088
Excess (deficiency) of revenues
over expenditures (649,250) (649,250) 495,788 1,145,038
Other financing uses
Transfers out - - (883,922) (883,922)
Net change in fund balance (649,250) (649,250) (388,134) 261,116
Fund balance, beginning of year 982,556 982,556 982,556 -
Fund balance, end of year 333,306$ 333,306$ 594,422$ 261,116$
Budgeted Amounts
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.
FINANCIAL TRENDS INFORMATION - information to help the reader understand how the City's
financial performance and well-being have changed over time.
1 Net assets by component
2 Changes in net assets
3 Fund balances, governmental funds
4 Changes in fund balances, governmental funds
REVENUE CAPACITY INFORMATION - information to help the reader assess the City's most
significant local revenue source, the property tax.
5 Assessed value and actual value of taxable property
6 Direct and overlapping property tax rates
7 Principal property tax payers
8 Property tax levies and collections
DEBT CAPACITY INFORMATION - 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.
9 Ratios of outstanding debt by type
10 Ratios of general bonded debt outstanding
11 Direct and overlapping governmental activities debt
12 Legal debt margin information
13 Pledged-revenue coverage
DEMOGRAPHIC AND ECONOMIC INFORMATION - information to help the reader understand the
environment within which the City's financial activities take place, and to help make comparisons over
time and with other governments.
14 Demographic and economic statistics
15 Principal employers
OPERATING INFORMATION - 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.
16 Full-time equivalent city government employees by function/program
17 Operating indicators by function/program
18 Capital asset statistics by function/program
Sources: Unless otherwise noted, the information in these schedules is derived from the
comprehensive annual financial reports for the relevant year.
STATISTICAL SECTION
(Unaudited)
73
Table 1
City of Friendswood
Net Assets by Component
Last Eight Fiscal Years
(accrual basis of accounting)
(unaudited)
2003 2004 2005 2006 2007 2008 2009 2010
Governmental activities
Invested in capital assets,
net of related debt 49,742,075$ 29,632,831$ 32,533,863$ 32,849,446$ 71,777,140$ 70,591,236$ 69,313,348$ 70,480,334$
Restricted 585,080 1,271,568 1,576,829 2,034,157 2,391,482 2,773,910 2,461,510 1,977,801
Unrestricted 5,468,870 7,125,997 7,527,573 10,391,123 10,785,998 10,548,129 9,892,077 8,447,179
Total governmental activities net assets 55,796,025$ 38,030,396$ 41,638,265$ 45,274,726$ 84,954,620$ 83,913,275$ 81,666,935$ 80,905,314$
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$ 21,122,644$ 19,565,756$
Restricted 305,660 444,548 445,086 41,057 162,218 27,246 93,526 593,597
Unrestricted 4,058,223 4,337,137 5,228,802 6,574,920 7,475,597 4,227,253 6,730,812 8,677,882
Total business-type activities net assets 22,020,179$ 21,956,210$ 22,497,414$ 23,431,107$ 24,522,191$ 24,630,119$ 27,946,982$ 28,837,235$
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$ 90,435,992$ 90,046,090$
Restricted 890,740 1,716,116 2,021,915 2,075,214 2,553,700 2,801,156 2,555,036 2,571,398
Unrestricted 9,527,093 11,463,134 12,756,375 16,966,043 18,261,595 14,775,382 16,622,889 17,125,061
Total primary government net assets 77,816,204$ 59,986,606$ 64,135,679$ 68,705,833$ 109,476,811$ 108,543,394$ 109,613,917$ 109,742,549$
Note:Accrual-basis financial information for the city as a whole is only available back to fiscal year 2003,
the year GASB Statement 34 was implemented.
Fiscal Year
74
Table 2
City of Friendswood
Changes in Net Assets
Last Eight Fiscal Years
(accrual basis of accounting)
(unaudited)
2003 2004 2005 2006 2007 2008 2009 2010
Expenses
Governmental activities:
General government 2,923,552$ 3,375,283$ 3,438,849$ 3,330,439$ 4,472,602$ 4,339,620$ 5,164,623$ 5,145,447$
Public safety 5,760,097 6,026,272 7,318,886 7,060,800 7,565,797 12,652,812 14,929,941 10,175,028
Community development and public works 3,383,229 2,569,356 2,576,447 2,813,857 5,475,447 4,921,298 5,292,000 -
Public works - - - - - - - 3,853,685
Community development - - - - - - - 1,203,204
Community services 2,747,438 3,081,717 3,075,023 3,098,013 3,420,244 3,841,387 4,002,165 3,034,523
Library - - - - - - - 979,084
Interest and fiscal charges 128,192 465,770 478,495 857,602 835,511 803,733 678,705 789,652
Total governmental activities expenses 14,942,508 15,518,398 16,887,700 17,160,711 21,769,601 26,558,850 30,067,434 25,180,623
Business-type activities:
Water and sewer 5,457,496 5,614,077 6,251,251 6,078,881 5,711,063 6,523,501 6,640,062 6,663,308
Interest and fiscal charges 1,063,940 999,219 963,355 962,989 1,583,551 1,543,859 1,604,174 2,037,104
Total business-type activities expenses 6,521,436 6,613,296 7,214,606 7,041,870 7,294,614 8,067,360 8,244,236 8,700,412
Total primary government expenses 21,463,944 22,131,694 24,102,306 24,202,581 29,064,215 34,626,210 38,311,670 33,881,035
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 1,327,484 1,072,289
Public safety 9,433 9,141 15,013 54,653 23,267 21,356 46,773 38,438
Community development and public works 1,865,086 822,927 758,487 805,710 998,625 838,060 602,265 -
Public works - - - - - - - 152,163
Community development - - - - - - - 550,286
Community services 66,862 65,850 66,281 112,681 219,944 132,244 411,207 258,030
Library - - - - - - - 44,313
Operating grants and contributions 661,568 778,261 1,271,119 771,477 489,707 4,021,908 5,755,038 2,819,418
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 8,142,767 4,934,937
Business-type activities:
Charges for services
Water and sewer 7,275,746 7,203,736 8,390,761 8,392,277 8,021,040 8,624,546 12,028,895 9,854,083
Total business-type activities program revenues 7,275,746 7,203,736 8,390,761 8,392,277 8,021,040 8,624,546 12,028,895 9,854,083
Total primary government program revenues 11,276,425 10,077,780 11,913,047 11,375,429 11,105,743 14,816,637 20,171,662 14,789,020
Net (Expense)/Revenues
Governmental activities (10,941,829) (12,644,354) (13,365,414) (14,177,559) (18,684,898) (20,366,759) (21,924,667) (20,245,686)
Business-type activities 754,310 590,440 1,176,155 1,350,407 726,426 557,186 3,784,659 1,153,671
Total primary government net expense (10,187,519)$ (12,053,914)$ (12,189,259)$ (12,827,152)$ (17,958,472)$ (19,809,573)$ (18,140,008)$ (19,092,015)$
(Continued)
Fiscal Year
75
2003 2004 2005 2006 2007 2008 2009 2010
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$ 13,481,500$ 13,664,765$
Sales 2,875,071 1,119,328 3,199,136 3,658,699 3,904,436 3,767,526 3,871,995 3,853,161
Franchise 1,058,726 2,833,290 1,176,460 1,220,581 1,239,167 1,317,166 1,363,221 1,510,794
Other 79,691 71,028 53,790 11,940 16,186 25,429 28,859 28,859
Investment earnings 154,558 219,085 376,435 915,710 1,063,715 648,301 166,492 93,018
Gain (loss) on sale of capital assets - - - - 345,976 - 4,320 33,647
Miscellaneous 30,826 - 51,503 21,556 4,152 73,026 214,484 131,545
Transfers 664,102 714,278 763,361 680,850 875,616 981,016 547,456 168,276
Total governmental activities 14,569,176 15,888,402 16,973,283 17,814,020 19,325,494 19,325,414 19,678,327 19,484,065
Business-type activities:
Investment earnings 160,629 59,869 114,932 262,761 1,236,092 531,758 128,338 87,056
Gain (loss) on sale of capital assets - - - - - - (48,678) (182,198)
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) (547,456) (168,276)
Total business-type activities (390,696) (654,409) (634,951) (416,714) 364,658 (449,258) (467,796) (263,418)
Total primary government 14,178,480 15,233,993 16,338,332 17,397,306 19,690,152 18,876,156 19,210,531 19,225,647
Change in Net Assets
Governmental activities 3,627,347 3,244,048 3,607,869 3,636,461 640,596 (1,041,345) (2,246,340) (761,621)
Business-type activities 363,614 (63,969) 541,204 933,693 1,091,084 107,928 3,316,863 890,253
Total primary government 3,990,961$ 3,180,079$ 4,149,073$ 4,570,154$ 1,731,680$ (933,417)$ 1,070,523$ 128,632$
(Concluded)
Note:Accrual-basis financial information for the city as a whole is only available back to fiscal year 2003,
the year GASB Statement 34 was implemented. Community Development and Publics Works were shown
as one department from 2003 to 2009. From 2003 to 2009, the Library was included with Community Services.
Fiscal Year
76
Table 3
City of Friendswood
Fund Balances, Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
(unaudited)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
General Fund
Reserved 451,293$ 1,196,255$ 683,459$ 635,182$ 511,197$ 1,313,829$ 601,646$ 1,037,279$ 686,404$ 1,731,056$
Unreserved 5,989,106 2,766,577 5,055,679 5,971,319 7,032,843 8,973,646 9,926,479 9,177,390 9,185,590 7,399,217
Total general fund 6,440,399$ 3,962,832$ 5,739,138$ 6,606,501$ 7,544,040$ 10,287,475$ 10,528,125$ 10,214,669$ 9,871,994$ 9,130,273$
All Other Governmental Funds
Reserved 77,175$ 109,799$ 254,568$ 829,701$ 1,395,767$ 4,220,225$ 3,575,592$ 2,310,481$ 1,385,265$ 667,682$
Unreserved, reported in:- - - - - - - - - -
Special revenue funds 268,247 177,390 263,242 411,229 175,192 404,749 558,653 643,223 1,075,343 1,328,145
Capital projects funds - - 7,342,304 5,171,662 8,584,781 3,943,654 1,957,116 323,597 326,600 -
Permanent fund 23,892 24,707 25,232 25,587 26,292 27,477 28,901 30,070 30,507 30,720
Total all other governmental funds 369,314$ 311,896$ 7,885,346$ 6,438,179$ 10,182,032$ 8,596,105$ 6,120,262$ 3,307,371$ 2,817,715$ 2,026,547$
Fiscal Year
77
Table 4
City of Friendswood
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
(unaudited)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Revenues
Taxes 11,414,585$ 12,515,917$ 13,688,737$ 14,843,855$ 15,779,126$ 16,190,756$ 16,961,818$ 17,606,273$ 18,763,998$ 19,104,625$
Fines and penalties 550,854 631,066 639,678 879,369 1,112,916 1,163,984 1,288,794 1,161,903 1,143,102 1,043,126
Licenses and permits 1,192,899 922,808 856,721 807,041 717,607 769,352 1,017,502 944,756 966,797 960,479
Intergovernmental 580,561 16,294,283 526,316 795,325 985,339 535,074 248,702 3,801,013 5,794,303 2,652,037
Investment earnings 424,412 269,109 153,848 218,419 375,123 906,552 1,054,698 639,402 161,106 90,337
Donations - - 235,749 215,535 213,381 219,353 229,939 265,535 272,911 280,223
Other revenues 483,063 509,560 794,228 152,616 414,923 277,995 279,788 37,876 34,448 81,366
Total revenues 14,646,374 31,142,743 16,895,277 17,912,160 19,598,415 20,063,066 21,081,241 24,456,758 27,136,665 24,212,193
Expenditures
General government 2,196,226 2,897,613 3,042,541 3,249,965 3,420,274 3,315,844 4,605,245 4,114,662 4,178,062 4,224,384
Public safety 5,115,933 4,961,812 5,530,953 5,810,503 7,127,975 6,903,806 7,482,603 12,404,745 14,717,404 9,799,372
Community development and public works - - 4,987,392 2,511,125 2,436,359 2,579,398 3,600,798 3,045,904 3,406,881 -
Public works 1,201,584 2,092,488 - - - - - - - 1,956,479
Community development 641,047 19,464,924 - - - - - - - 1,208,899
Community services 2,738,557 4,250,205 2,751,993 2,655,315 2,626,329 2,630,094 2,866,388 3,266,250 3,439,475 2,458,422
Library - - - - - - - - - 979,084
Capital outlay 98,987 195,385 1,442,339 4,033,197 7,040,173 4,292,854 3,711,569 4,339,546 2,489,845 3,799,303
Debt principal payment 616,470 548,205 468,987 469,930 459,422 608,184 658,073 774,584 787,293 787,590
Interest and fiscal agent charges 511,175 188,958 213,741 476,207 594,076 757,402 739,487 704,136 691,638 773,744
Total expenditures 13,119,979 34,599,590 18,437,946 19,206,242 23,704,608 21,087,582 23,664,163 28,649,827 29,710,598 25,987,277
Excess of revenues
Over (under) expenditures 1,526,395 (3,456,847) (1,542,669) (1,294,082) (4,106,193) (1,024,516) (2,582,922) (4,193,069) (2,573,933) (1,775,084)
Other Financing Sources (Uses)
Sale of capital assets - - 15,826 - - 187,345 785,942 22,600 - 23,340
Insurance recoveries - - - - - - - 63,106 123,707 50,579
Issuance of debt 47,393 229,460 8,701,495 - 8,024,224 - - - - -
Capital lease proceeds - - - - - - - - 1,133,460 -
Refunding bonds issued - 1,629,707 - - - - - - - -
Payment to refunding bond escrow agent - (1,611,304) - - - - - - - -
Premium on issuance of debt - - - - - - - - - -
Transfer in 555,713 17,225,350 1,955,635 853,073 923,361 904,955 1,226,304 992,586 2,098,405 1,512,987
Transfer out - (16,621,918) (1,382,860) (138,795) (160,000) (224,105) (350,688) (11,570) (1,613,970) (1,344,711)
Total other financing sources (uses)603,106 851,295 9,290,096 714,278 8,787,585 868,195 1,661,558 1,066,722 1,741,602 242,195
Net change in fund balance 2,129,501$ (2,605,552)$ 7,747,427$ (579,804)$ 4,681,392$ (156,321)$ (921,364)$ (3,126,347)$ (832,331)$ (1,532,889)$
Debt service as a percentage of
noncapital expenditures 8.7%2.1%4.0%6.2%6.3%8.1%7.0%6.1%5.4%7.0%
Note:From 1997 to 2002, Public Works and Community Development were two separate departments. From 2003 to 2009, the departments were combined. In 2010,
they are shown as separate departments.
In 2001 and 2002, the City participated in the FEMA Hazard Mitigation Grant Buyout Program. The City's participation costs resulted in a reduction of fund balance.
In 2002, the City adopted 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 is established, additional undesignated funds are allowed to accumulate for future capital projects.
Fiscal Year
78
Table 5
City of Friendswood
Assessed Value and Actual Value of Taxable Property
Last Ten Fiscal Years
(Unaudited)
Fiscal Total Estimated
Year Commercial Total Taxable Direct Actual
Ended Residential and Industrial Other Tax Exempt Assessed Tax Taxable
September 30,Property Property Property Property Value Rate Value
2001 1,235,737,251$ 88,524,370$ 185,220,540$ 88,005,650$ 1,597,487,811$ 0.63850 1,509,482,161$
2002 1,418,354,411 101,081,380 170,988,340 90,631,200 1,781,055,331 0.63850 1,690,424,131
2003 1,549,261,881 109,659,080 176,329,200 96,366,250 1,931,616,411 0.63850 1,835,250,161
2004 1,770,911,545 116,739,133 186,106,639 105,017,040 2,178,774,357 0.63850 2,073,757,317
2005 1,868,119,395 119,696,390 173,923,130 121,988,410 2,283,727,325 0.63850 2,161,738,915
2006 1,984,426,335 122,337,518 167,808,785 125,184,070 2,399,756,708 0.60400 2,274,572,638
2007 2,147,192,985 151,086,039 193,971,876 147,461,610 2,639,712,510 0.58210 2,492,250,900
2008 2,289,027,422 154,237,707 202,571,688 149,658,030 2,795,494,847 0.57640 2,645,836,817
2009 1,923,530,682 135,428,527 169,686,128 108,171,840 2,336,817,177 0.57970 2,228,645,337
2010 1,971,335,722 136,962,495 172,946,410 111,507,506 2,392,752,133 0.57970 2,281,244,627
Source: Galveston County Tax Assessor/Collector and City of Friendswood records.
Note: Property in the City of Friendswood is reassessed once every two years on average. (Source: Galveston Central Appraisal District)
Tax rates per $100 of assessed value.
Residential property includes both single-family and multi-family properties.
79
Table 6
City of Friendswood
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
(unaudited)
(rate per $100 of assessed value)
Fiscal
Year Friendswood Clear Creek Galveston County
Ended Debt Total Independent Independent Drainage Galveston Harris
September 30,General Service Direct School District School District District County County
2001 0.5547$ 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
2009 0.5097 0.0700 0.5797 1.3670 1.3600 0.1425 0.5586 0.62998
2010 0.4997 0.0800 0.5797 1.3670 1.3600 0.1425 0.6186 0.62998
Source: Galveston County Tax Assessor/Collector and City of Friendswood records.
Note:Overlapping rates are those of local and county governments that apply to property owners within the City of Friendswood. Not all overlapping rates apply
to all property owners. Overlapping rates for Friendswood Independent School District, Galveston County Consolidated Drainage District and Galveston
County apply only to residents whose property is in Galveston County. Overlapping rates for Clear Creek Independent School District and Harris County
apply only to residents whose property is in Harris County.
City Direct Rates Overlapping Rates
80
Table 7
City of Friendswood
Principal Property Tax Payers
Current Year and Nine Years Ago
(Unaudited)
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Value Value Value Value
Texas-New Mexico Power Co. 10,277,180$ 0.43%10,296,420$ 0.83%
H.E. Butt Grocery Company 8,574,000 0.36%- -
Friendswood Cypress LP 7,992,530 0.33%- -
Southwestern Bell Telephone Co. 7,202,910 0.30%13,003,400 1.05%
HCP Friendswood LLC 6,995,240 0.29%- -
Buzbee Family LTD Partnership 5,629,810 0.24%- -
Friendswood Retirement 5,348,882 0.22%8,369,445 0.68%
MB Friendswood Parkwood LP 4,990,350 0.22%- -
Comcast of Houston LLC 4,413,130 0.18%- -
Friendswood Huntington Woods 3,800,530 0.16%- -
Kroger Texas, LP 3,700,000 0.15%- -
Maxi-Ban LTD 3,570,620 0.15%- -
Howard, Jack A 3,524,260 0.15%- -
Autumn Creek Dev LTD 3,430,450 0.14%8,487,230 0.69%
Friendswood Realty LP 3,423,136 0.14%- -
HEB Pantry Foods 3,390,149 0.14%- -
Frontier Land V P L L 2,762,945 0.12%- -
Tiedje, Raymond G & Nancy T 2,639,910 0.11%- -
Buzbee Family Limited Partnership 2,573,280 0.11%- -
Raton Plaza Shop Cntr Investors LTD 2,500,000 0.10%- -
Exxon Corporation - - 27,842,580 2.25%
Blackhawk Apartments - - 8,212,470 0.66%
Southwest Properties - - 7,800,000 0.63%
Albertson's - - 5,509,370 0.44%
Mystic LTD - - 3,933,640 0.32%
Coastal Ben Property Developers - - 3,415,650 0.27%
Total 96,739,312 4.04%96,870,205 7.82%
All other taxpayers 2,296,012,821 95.96%1,141,467,483 92.18%
2,392,752,133$ 100.00%1,238,337,688$ 100.00%
Source: Galveston County Appraisal District
2010 2001
81
Table 8
City of Friendswood
Property Tax Levies and Collections
Last Ten Fiscal Years
(Unaudited)
Fiscal Collections
Year Taxes Levied (adjustments)
Ended for the Percentage in Subsequent Percentage
September 30,Fiscal Year Amount of Levy Years Amount of Levy
2001 7,906,786$ 7,809,643$ 98.77%92,546$ 7,902,189$ 99.94%
2002 8,863,904 8,721,196 98.39%133,968 8,855,164 99.90%
2003 9,642,413 9,496,887 98.49%132,158 9,629,045 99.86%
2004 10,785,308 10,630,820 98.57%141,265 10,772,085 99.88%
2005 11,221,282 11,078,265 98.73%128,756 11,207,021 99.87%
2006 11,151,572 11,019,314 98.81%111,006 11,130,320 99.81%
2007 11,740,541 11,532,882 98.23%163,214 11,696,096 99.62%
2008 12,351,183 12,193,715 98.73%169,814 12,363,529 100.10%
2009 13,230,005 13,113,928 99.12%101,526 13,215,454 99.89%
2010 13,482,173 13,395,543 99.36%- 13,395,543 99.36%
Source: Galveston County Tax Assessor/Collector and City of Friendswood records.
Collected within the
Fiscal Year of the Levy Total Collections to Date
82
Table 9
City of Friendswood
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
(Unaudited)
General Certificates General Certificates Water Total Percentage of
Fiscal Obligation of Revenue Capital Obligation of Revenue Primary Personal Per
Year Bonds Obligation Bonds Leases Bonds Obligation Bonds Government Income Capita
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 0.46%1,430
2008 16,065,000 - - 16,351 1,680,000 - 30,355,000 48,116,351 N/A 1,355
2009 15,445,000 - - 982,518 865,000 - 42,260,000 59,552,518 N/A 1,582
2010 14,800,000 - - 839,928 - - 42,045,000 57,684,928 N/A 1,516
Notes:Details regarding the City's outstanding debt can be found in the notes to the financial statements.
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 not
inclulded on this table.
N/A - Information is not available.
Governmental Activities Business-Type Activities
83
Table 10
City of Friendswood
Ratios of Net General Bonded Debt Outstanding
Last Ten Fiscal Years
(Unaudited)
Percentage of
General Less Debt Net Actual Taxable
Fiscal Assessed Obligation Service General Value of Per
Year Population Value Bonds Funds Bonded Debt Property Capita
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
2009 37,653 2,336,817,177 15,445,000 2,355,024 13,089,976 0.56%348
2010 38,057 2,392,752,133 14,800,000 594,422 14,205,578 0.59%373
Note:Details regarding the City's outstanding debt can be found in the notes to the financial statements.
General Bonded Debt Outstanding
84
Table 11
City of Friendswood
Direct and Overlapping Governmental Activities Debt
As of September 30, 2010
(Unaudited)
Estimated
Estimated Share of
Debt Percentage Overlapping
Governmental Unit Outstanding Applicable Debt
Debt repaid with property taxes
Friendswood Independent School District 116,114,978$ 100.00%116,114,978$
Clear Creek Independent School District 685,408,465 2.159%14,797,969
Galveston County 313,816,000 7.56%23,720,096
Harris County 3,335,232,000 0.610%20,344,915
Subtotal, overlapping debt 174,977,958
City direct debt 15,639,928
Total direct and overlapping debt 190,617,886$
Sources: Information was obtained from either the governmental unit's website or the finance department of the
governmental unit.
Notes: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City.
This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne
by the residents and businesses of the City of Friendswood. The City’s share of the debt of the overlapping
governments is based on the ratio of the assessed value of the City’s own property to that of each of the
other governments. 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.
85
Table 12
City of Friendswood
Legal Debt Margin Information
(Unaudited)
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 purpose shall ever be lawful for any one year, which shall exceed two and one-half percent
of the taxable property of such city"
The tax rate for fiscal year ended September 30, 2010, is $.5797 per $100 of assessed valuation with assessed
valuation being 100% of market value.
86
Table 13
City of Friendswood
Pledged-Revenue Coverage
Last Ten Fiscal Years
(Unaudited)
Utility Less:Net
Fiscal Service Operating Available Debt Service
Year Charges Expenses Revenue Principal Interest Coverage
2001 6,599,787$ 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
2009 12,028,895 5,249,388 6,779,507 215,000 1,986,015 3.08
2010 9,854,083 5,184,330 4,669,753 215,000 1,904,689 2.20
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.
Waterworks and Sewer Revenue Bonds
87
Table 14
City of Friendswood
Demographic and Economic Statistics
Last Ten Calendar Years
(Unaudited)
Per
Personal Capita
Calendar Estimated Income Personal Unemployment
Year Population (thousands)Income Rate
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 10,913,785,000 38,553 3.4%
2008 35,500 11,744,572,000 40,711 4.9%
2009 37,653 - - 6.2%
2010 38,057 - - 7.1%
Sources:Population information was provided from past financial reports. Unemployment rates
were obtained from the U. S. Department of Labor Bureau of Labor Statistics website
or the Texas Workforce Commission website. Personal Income and Per Capita
Personal Income were obtained from the U.S. Bureau of Economic Analysis website.
Note:Personal Income and Per Capita Personal Income numbers are for Galveston County;
2009 and 2010 numbers were not available.
88
Table 15
City of Friendswood
Principal Employers
Current Year and Four Years Ago
(Unaudited)
Percentage Percentage
Estimated of Total City Estimated of Total City
Employer Employees Workforce Employees Workforce
Friendswood ISD 698 27.86%675 34.84%
HEB 333 13.28%275 14.19%
Kroger 291 11.60%234 12.07%
City of Friendswood 231 9.21%222 11.46%
Clear Creek ISD 177 7.06%2 - 0.00%1
Friendship Haven Nursing Home 140 5.58%135 6.97%
McDonalds 83 3.31%33 1.70%
Friendswood Healthcare (Autumn Hills) 82 3.27%90 4.64%
Emeritus 70 2.79%- 0.00%
U.S. Post Office 61 2.43%70 3.61%
UTMB 56 2.23%- 0.00%1
Sonic 53 2.11%49 2.53%
Timber Creek Golf Club 45 1.79%41 2.12%
Gary Greene Realtors 40 1.59%40 2.06%
Luna's 40 1.59%40 2.06%
Melange 40 1.59%- 0.00%
Village on the Park 40 1.59%34 1.75%
Perry & Sons Market and Grille 28 1.12%- 0.00%1
Total 2,508 100.00%1,938 100.00%
Source: City Economic Development Division
Note: Principal Employer data was not available for fiscal year 2001 - 2005.
1 Data was not available for fiscal year 2006.
2 Includes Wedgewood Elementary and Brookside Intermediate.
2010 2006
89
Table 16
City of Friendswood
Full-time Equivalent City Government Employees by Function/Program
Last Ten Fiscal Years
(Unaudited)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Function/Program
General Government:
City Manager 4.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50
City Secretary 4.00 4.00 4.00 4.00 4.00 4.00 5.00 5.00 5.00 5.00
Administrative Services 19.64 20.64 21.70 22.72 24.44 25.81 26.19 27.20 27.20 27.20
Public Safety:
Police 59.94 62.94 65.06 67.40 70.07 72.06 81.41 83.90 79.40 79.40
Fire marshall and fire 12.50 12.50 12.58 12.85 12.85 4.50 6.11 6.10 6.10 6.10
Public Works:17.00 17.00 - - - - - - - 19.00
Community Development:14.00 15.00 - - - - - - - 17.70
Community Development and
Public Works:- - 34.00 34.00 34.00 35.00 36.00 36.00 36.70 -
Community Services:29.92 30.42 30.43 30.43 30.43 31.01 32.18 32.20 32.20 33.67
Water:6.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 10.30 10.30
Sewer:5.00 6.00 6.00 7.00 7.00 8.00 8.00 8.00 9.00 9.00
Total City Employees:172.50 183.00 188.27 192.90 197.29 194.88 209.39 212.90 211.40 212.87
Source: City of Friendswood Budget Documents
Notes: Beginning with fiscal year 2006, the fulltime equivalent for Fire Marshal and Fire include only the Fire Marshal Department. The City
has a contract with the Friendswood Volunteer Fire Department and there are no employees paid directly by the City.
From 1998 to 2002, public works and community development were two separate departments. From 2003 to 2009, the departments were
combined. In 2010, they are shown as two separate departments.
Full-time Equivalent Employees as of September 30
90
Table 17
City of Friendswood
Operating Indicators by Function/Program
Last Ten Fiscal Years
(Unaudited)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Function/Program
General Government:
Building permits issued 1,252 1,266 1,048 851 1,129 882 975 872 1,189 984
Building inspections conducted 15,576 12,554 10,841 10,051 12,641 12,264 11,135 11,472 6,673 8,744
Police:
Physical arrests 556 625 752 1,189 1,041 1,804 1,923 1,868 1,794 2,002
Parking violations 31 34 74 45 22 30 34 46 33 27
Traffic violations 6,117 6,387 9,754 11,196 12,053 12,623 11,374 7,897 7,821 7,000
Fire Marshall:
Inspections 451 383 1,065 812 731 668 1,300 1,312 1,653 1,509
Fire:
Emergency responses 2,283 2,264 2,285 2,395 2,453 2,497 2,723 2,794 2,950 2,737
Fires extinguished 105 84 79 82 93 75 74 118 102 110
Parks and Recreation:
Recreation participants NA NA NA NA NA NA NA 7,547 12,283 13,792
Facility reservations NA NA NA NA NA NA 1,115 1,065 1,727 1,451
Library:
Volumes in collection 87,181 87,639 88,185 88,737 90,163 92,633 93,028 96,100 94,512 99,880
Total volumes borrowed 274,204 279,850 290,044 280,520 281,060 300,241 308,718 323,323 350,892 356,787
Water:
New connections 665 242 270 388 208 209 289 202 46 160
Water main breaks - - 10 54 76 105 44 73 73 64
Average daily consumption 3,803 4,008 4,172 3,957 4,094 3,886 3,472 4,217 4,209 3,408
(thousands of gallons)
Peak daily consumption 8,649 10,081 11,491 10,718 9,935 7,030 6,358 11,004 7,187 7,606
Sewer:
Average daily sewage treatment 3,050 3,050 3,332 3,258 3,081 3,064 3,425 3,120 2,950 3,465
(thousands of gallons)
Maximum daily flow 13,913 13,913 10,180 8,563 10,587 10,484 10,484 7,520 9,537 11,393
(thousands of gallons)
Source: Various City departments and prior year CAFRs
NA - Information is not available.
Fiscal Year Fiscal Year
91
Table 18
City of Friendswood
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
(Unaudited)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Function/Program
Police
Stations 1 1 1 1 1 1 1 1 1 1
Patrol units 14 14 15 15 16 18 28 27 24 26
Fire
Stations 3 3 3 3 3 3 3 3 4 4
Public Works
Streets - paved (miles)105 105 105 157 157 179 150 159 160 161
Streets - unpaved (miles)1 1 1 4 4 1 0 2 2 2
Traffic signals 0 0 0 3 3 3 3 3 3 3
Parks and Recreation
Acreage 189 189 189 189 189 189 189 189 189 189
Public Safety:Parks 8 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)155 157 160 160 165 179 180 180 181 183
Fire hydrants 1,250 1,250 1,250 1,250 1,250 1,250 1,275 1,275 1,275 1,305
Connections 10,088 10,330 10,600 10,988 11,196 11,405 11,748 11,982 12,057 12,231
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)
Sewer
Sanitary sewers (miles)155 155 160 160 165 153 155 155 156 158
Connections 9,414 9,658 10,240 10,331 10,537 10,682 10,902 11,115 11,256 11,404
Storm sewers (miles)85 85 86 92 92 92 95 95 96 98
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 CAFRs
Fiscal Year