HomeMy WebLinkAboutComprehensive Annual Financial Report - FY2012
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
YEAR ENDED
SEPTEMBER 30, 2012
Officials Issuing Report:
Roger C. Roecker
City Manager
Cindy S. Edge
Director of Administrative Services
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2012
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 23-56
Required Supplementary Information
Schedule of Funding Progress for Participation in
Texas Municipal Retirement System 57
Schedule of Funding Progress – Post Employment Benefits Plan Other
Than Pensions 58
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual – General Fund 59-65
Notes to Required Supplementary Information 66-68
Combining and Individual Fund Statements and Schedules
Non-major Governmental Funds 69
Combining Balance Sheet 70
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances 71
CITY OF FRIENDSWOOD, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2012
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 72
Debt Service Fund 73
STATISTICAL SECTION (Unaudited) Table Page(s)
Financial Trends
Net Assets by Component 1 74
Changes in Net Assets 2 75-76
Fund Balances, Governmental Funds 3 77
Changes in Fund Balances, Governmental Funds 4 78
Revenue Capacity
Assessed Value and Taxable Value of Property 5 79
Direct and Overlapping Property Tax Rates 6 80
Principal Property Tax Payers 7 81
Property Tax Levies and Collections 8 82
Debt Capacity
Ratios of Outstanding Debt by Type 9 83
Ratios of Net General Bonded Debt Outstanding 10 84
Direct and Overlapping Governmental Activities Debt 11 85
Legal Debt Margin Information 12 86
Pledged-Revenue Coverage 13 87
Demographic and Economic Information
Demographic and Economic Statistics 14 88
Principal Employers 15 89
Operating Information
Full-Time Equivalent City Government Employees
by Function/Program 16 90
Operating Indicators by Function/Program 17 91
Capital Asset Statistics by Function/Program 18 92
INTRODUCTORY SECTION
February 28, 2013
The Honorable Mayor, Members of the City Council, and the Citizens of Friendswood:
The Comprehensive Annual Financial Report (CAFR) of the City of Friendswood for the fiscal year
ended September 30, 2012, is hereby submitted. Responsibility for both the accuracy of the data, and
the completeness and fairness of the presentation, including all disclosures, rests with the City. To the
best of our knowledge and belief, the enclosed data are accurate in all material respects and are
reported in a manner designed to present fairly the financial position and results of operations of the
various funds and account groups of the City. All disclosures necessary to enable the reader to gain an
understanding of the City’s financial activities have been included.
The comprehensive annual financial report is presented in three sections: introductory, financial, and
statistical. The introductory section includes a list of principal officials, this transmittal letter, and the
City’s organizational chart. The financial section includes the auditor’s report on the financial
statements, a Management Discussion and Analysis (MD&A), the basic financial statements, required
supplementary information and combining and individual fund financial statements and schedules.
The MD&A, found immediately following the report of the independent auditor, is a narrative
introduction; overview and analysis required by generally accepted accounting principles (GAAP).
This letter of transmittal is designed to complement the MD&A and should be read in conjunction with
it. The statistical section includes selected financial and demographic information, generally presented
on a multi-year basis.
Management of the City is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that
adequate accounting data are compiled to allow for the preparation of financial statements in
conformity with generally accepted accounting principles. The internal control structure is designed to
provide reasonable, but not absolute, assurance that these objectives are met. The concept of
reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to
be derived; and (2) the valuation of costs and benefits requires estimates and judgments by
management.
The City Charter requires an annual audit of the financial statements of all of the various funds of the
City by independent certified public accountants. The accounting firm of Weaver and Tidwell, L.L.P.
has performed such an audit and their opinion has been included in this report.
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PROFILE OF THE CITY
Established in 1895 as a Quaker colony, the City of Friendswood is rich in heritage. The City was
incorporated in 1960 and chartered a home-rule city under Texas law in 1971. The City operates under
a Council-Manager form of government. Policy-making and legislative authority are vested in a
governing council consisting of the Mayor and six (6) Council Members. The Mayor and Council are
responsible, among other things, for passing ordinances, adopting the budget, appointing board and
committee members and hiring the City Manager, City Attorney, Municipal Judge, and City Secretary.
The City Manager is responsible for carrying out the policies and ordinances of the City Council and
overseeing the day-to-day operations of the City government, and for appointing heads of various
departments. The Mayor and Council are elected on an at-large, non-partisan basis. The Mayor and
Council are elected to serve no more than four consecutive three-year terms.
The City provides a full range of municipal services including public safety (police, fire and
emergency medical), maintenance of streets and infrastructure, sanitation services, maintenance of the
treated waste distribution system and both sanitary and storm sewer collection transmission systems,
recreational activities and cultural events as well as general administrative services.
FACTORS AFFECTING FINANCIAL CONDITION
Location
Encompassing 21 square miles, Friendswood is located in southeast Texas near the Texas Gulf Coast,
between downtown Houston and Galveston, spanning across two counties – northern Galveston County
and southern Harris County. The current estimated population is 37,839. Residents and visitors can
access Friendswood through FM 2351, FM 518, and FM 528 (NASA Parkway). Hobby Airport and
Ellington Airport are located within a 15 minute drive from Friendswood, and Bush Intercontinental
Airport is just 45 minutes away. Major sectors of the area’s economic base include aerospace, specialty
chemicals, health care, retail, and tourism.
Community
Friendswood has been nationally recognized as one of the best places to live in the country. With low tax
rates, outstanding public education, and the lowest crime rate in the region, Friendswood is the perfect
place to live, work, and play. The city features beautiful parks and lush landscaping, along with a
championship golf course. Children academically excel via two superior public school systems –
Friendswood ISD and Clear Creek ISD. These attributes perfectly match Friendswood’s affluent
resident base of well-educated, high-income families. More than 50% of residents work in executive,
professional, and managerial positions and generate an average household income of over $100,000 –
one of the highest in the Houston area.
Business
Friendswood is the perfect choice for many types of commercial enterprises. Target markets include
professional offices, retail, commercial, and light industrial developments. A key City focus is to
encourage redevelopment of the downtown area and development of the City’s panhandle area. City
leaders have approved special tools and incentives to revitalize downtown to promote mixed-use, multi-
story developments with pedestrian streetscapes and other amenities. Additionally, the City recently
completed, through an Economic Development Administration grant, the extension of utilities to serve an
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area of town ripe for commercial growth (panhandle). The City offers competitive business incentives,
including a municipal grant program, tax abatement that includes “green” development, freeport tax
exemption, and downtown development fee waivers.
Quality Lifestyle
As with any city, the goal is planning for continued quality growth to create a well-balanced community.
Friendswood offers single-family residential housing in pleasant park-like settings, tucked-away from the
busy stream of vehicular traffic. Friendswood is committed to attracting more local enterprises that will
complement and enhance the unique community environment that has been carefully built over the past
100 years; one that has come to be cherished by residents and business owners alike.
LONG TERM PLANNING
Budgeting Controls
The objective of the City’s budgetary controls is to ensure compliance with legal provisions embodied
in the annual appropriated budget approved by Council. The charter requires the City Manager to
submit a proposed budget and an accompanying message to the City Council on or before August 1.
The council shall review and revise as deemed appropriate prior to general circulation for the public
hearing. The Public Notice and Hearing must be posted in the city hall and published in the official
newspaper. The budget must be adopted by the 15th of September or as soon thereafter as practical.
The City legally adopts annual budgets for the General, Special Revenue and Debt Service Funds.
Annual and project budgets are also adopted for the Proprietary and Capital Projects Funds,
respectively.
The level of budgetary control; that is, the level at which expenditures cannot legally exceed the
appropriated amount, is established by department within a fund. The City also maintains an
encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances
lapse at fiscal year end, but can be re-appropriated through a budget amendment the following fiscal
year. The City Manager is authorized to transfer budgeted amounts between departments within any
fund, but revisions that increase the total expenditures of any fund must be approved by Council.
Multi-Year Financial Planning
A Multi-Year financial plan (MYFP) was developed in 2006. Originally staff was directed to develop
a plan to forecast the City’s financial condition through 2020, the projected build-out date. The first
version of this plan was drafted and later reduced in scope to project out five years.
The MYFP is based on the City’s strategic planning efforts, including the Comprehensive Land Use
Plan, Vision 2020 and the Capital Improvements Plan. Departmental operational plans funding
requirements to provide programs and services are included in the MYFP as well. Funding needs and
available resources, both current and alternative revenue enhancements, are identified. Expenditures
are projected based on departmental needs assessments and are organized based on “one-time” and
“on-going” expenditures. In collaboration with Council, the plan is updated at least annually and
serves as the basis of budget development.
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Relevant Financial Policies
As part of the annual budget process, the City adopts Financial Management Policy Statements that
establish a framework for fiscal decision making and that ensure that financial resources are available
to meet the present and future needs of its citizens. These statements provide guidelines for financial
planning and management, addressing every major financial function and process.
Most importantly, the Financial Management Policy requires that the City maintain the General Fund
unassigned fund balance at a minimum of 90 days of prior year audited operating expenditures. Any
unassigned funds after the fiscal year-end audit will be allowed to accumulate to build this 90-day
reserve. After the General Fund has gathered sufficient resources, additional unassigned funds will be
allowed to accumulate for future General Fund capital improvements.
The Financial Management Policy also requires the minimum working capital in the Water and Sewer
Fund be 90 days of prior year audited operating expenditures. Any unrestricted funds after the fiscal
year-end audit will be allowed to accumulate to build this 90-day reserve. After these funds have
gathered sufficient resources, additional unrestricted funds will be allowed to accumulate in working
capital for future utility /operating fund capital improvements.
Awards
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for
Excellence in Financial Reporting to the City of Friendswood for its comprehensive annual financial
report for the fiscal year ended September 30, 2011. This was the twenty-fourth consecutive year that
the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the
City published an easily readable and efficiently organized comprehensive annual financial report.
This report satisfied both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement program’s
requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
Acknowledgements
The preparation of the comprehensive annual financial report was made possible by the dedicated
service of Rhonda Bloskas and the entire staff of the Administrative Services Department. Each
member of the department has my sincere appreciation for the contributions made in the preparation of
this report.
In closing, I also express my thanks to the Mayor, members of the City Council and the City Manager
for their leadership, interest and support in conducting the financial operations of the City in a
responsible and progressive manner.
Sincerely,
Cindy S. Edge
Director of Administrative Services
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CITY OF FRIENDSWOOD, TEXAS
PRINCIPAL OFFICIALS AS OF
SEPTEMBER 30, 2012
Elected Officials Position Term Expires
Kevin M. Holland Mayor May-15
Steve Rockey Council Member - Position No. 1 May-15
Billy J. Enochs Council Member - Position No. 2 May-14
Jim Hill Council Member - Position No. 3 May-15
Patrick J. McGinnis, MD Council Member - Position No. 4 May-13
John H. Scott Council Member - Position No. 5 May-14
Deirdre Carey Brown Council Member - Position No. 6 May-13
Key Staff Position
Roger C. Roecker City Manager
Morad Kabiri Assistant City Manager
Cindy S. Edge Director of Administrative Services
Terry Byrd Fire Marshal
Kazem Hamidian Public Works Director
Melinda Welsh City Secretary
James Toney Community Services Director
Robert B. Weiners Police Chief
Ross, Banks, May, Cron & Cavin, P.C. City Attorney
James W. Woltz Judge - Municipal Court
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CITY OF FRIENDSWOOD
ORGANIZATIONAL CHART
FINANCIAL SECTION
AN INDEPENDENT
MEMBER OF BAKER TILLY
INTERNATIONAL
WEAVER AND TIDWELL LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
WWW.WEAVERLLP.COM
HOUSTON
24 GREENWAY PLAZA, SUITE 1800, HOUSTON, TX 77046
P: (713) 850 8787 F: (713) 850 1673
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, 2012, 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 and the report of the other
auditors provide a reasonable basis for our opinions.
In our opinion, based on our audit and the report of the other auditors, the financial statements
referred to above present fairly, in all material respects, the respective financial position of the
governmental activities, the business-type activities, the discretely presented component unit,
each major fund, and the aggregate remaining fund information of the City as of September 30,
2012, and the respective changes in financial position, and, where applicable, cash flows
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
February 28, 2013, 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.
To the Honorable Mayor,
City Council and City Manager
City of Friendswood, Texas
Page 2
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Accounting principles generally accepted in the United States of America require that 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 57), the Schedule of
Funding Progress – Post Employment Benefits Other Than Pensions (on page 58), and the
Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual –
General Fund (on pages 59 through 65) be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements, is required
by the Governmental Accounting Standards Board, who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the
United States of America, which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any
assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
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 are the
responsibility of management and were derived from and relate directly to the underlying
accounting and other records used to prepare the financial statements. The information has
been subjected to the auditing procedures applied in the audit of the financial statements and
certain additional procedures, including comparing and reconciling such information directly to
the underlying accounting and other records used to prepare the financial statements or to the
financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the information is
fairly stated in all material respects in relation to the financial statements 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 an opinion or
provide any assurance on them.
WEAVER AND TIDWELL, L.L.P.
Houston, Texas
February 28, 2013
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Management’s Discussion and Analysis
(Unaudited)
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, 2012. 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 $114,722,005 (net assets). This number must be viewed in the
context that the vast majority of the City’s net assets of $91,201,606 (80%) are capital
assets net of related debt and that most capital assets in government do not directly
generate revenue nor can they be sold to generate liquid capital. Those net assets
restricted for specific purposes totaled $1,659,469 (1%). The remaining amount
$21,860,930 (19%) are unrestricted net assets and may be used to meet the
government’s ongoing obligations to citizens and creditors in accordance with the
City’s fund designation and fiscal policies.
Governmental activities realized a decrease in total net assets of $446,393 and
business-type activities realized an increase in total net assets of $1,082,154
bringing the net increase in total assets to for the City to $635,761.
At the close of the current fiscal year, the City of Friendswood’s governmental funds
reported combined ending fund balances of $11,303,101. Of the ending fund
balance, $2,357,870 is restricted under laws external to the City for specific purposes
(e.g., capital projects, debt service); $434,931 is assigned by the City for specific
purposes; $130,901 is nonspendable and $8,379,399 is unassigned and available to
meet the government’s ongoing obligations in accordance with the City’s fund
designation and fiscal policies.
The City’s total capital assets (net of accumulated depreciation) increased by
$995,460 which is primarily attributed the construction of facilities and the acquisition
of equipment.
The City’s bonds payable decreased by $2,370,000, due to the scheduled repayment
of principal on outstanding bonded debt combined with refunding bonds issued for
the defeasance of certain issues of general obligation bonds.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City’s basic
financial statements. The City’s basic financial statements comprise three components:
1) government-wide financial statements, 2) fund financial statements, and 3) notes to the
financial statements. This report also contains other supplementary information in addition to
the basic financial statements themselves.
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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. Other non-financial factors should also be taken into consideration, such as
changes in the City’s property tax base and the condition of the City’s infrastructure (i.e. roads,
drainage improvements, storm sewer, 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 changes in net assets are reported as soon as the underlying event giving rise
to the change occurs, regardless of the timing of related cash flows. 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 of the government-wide financial statements distinguish functions of the City that are
principally supported by taxes and intergovernmental revenues (governmental activities) from
functions that are intended to recover all or a significant portion of their costs through user fees
(business-type activities).
Governmental activities include most of the City’s basic services, (general
government, public safety, community development and public works and
community services). Property taxes, sales taxes, and franchise fees primarily
finance these activities.
Business-type activities include the City’s water and sewer system. Charges for
services covers all or most of the cost for these services.
Component Unit activities include activities of The West Ranch Management
District.
The government-wide financial statements can be found on pages 12-13 of this report.
Fund Financial Statements
A fund is a self-balancing set of accounts that is used to maintain control over resources that
have been segregated for specific activities or objectives. The City, like other state and local
governments, uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements. The City uses two fund types – governmental and proprietary.
Governmental funds – Governmental funds are used to account for essentially
the same functions reported as governmental activities in the government-wide
financial statements with the exclusion of internal service fund activity. However,
unlike the government-wide financial statements, governmental funds focus on
near-term inflows and outflows of spendable resources, as well as on balances of
spendable resources available at the end of the fiscal year. Such information may
be useful in evaluating a government’s near-term financing requirements.
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Because the focus of governmental funds is narrower than that of the
government-wide financial statements, it is useful to compare the information
presented for governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so,
the reader may better understand the long-term impact of the government’s
near-term financing decisions. The governmental funds balance sheet, statement
of revenue and expenditures, and changes in fund balances provide a
reconciliation to facilitate this comparison between governmental funds and
governmental activities.
The City maintains eleven 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 nine 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.
The basic governmental fund financial statements can be found on pages 14-17.
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.
The basic proprietary fund financial statements can be found on pages 18-22.
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. The notes to the financial
statements can be found on pages 23-56.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents
certain required supplementary information concerning the City’s progress in funding its obligation
to provide pension benefits to its employees. Additionally, schedules comparing budgetary figures
and actual results of the General Fund are also located in this section of the report. Required
supplementary information can be found on pages 57-68.
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The combining and individual fund statements and schedules that further support the information
in the financial statements are presented immediately following the notes to the required
supplementary information. Combining and individual fund statements and schedules can be
found on pages 69-73.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net assets and especially net assets by category may serve over time as a
useful indicator of a government’s financial position. The City’s net assets exceed liabilities by
$114.7 million as of September 30, 2012. The largest portion of the City’s net assets (80%)
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;
consequently these assets are not available for future spending and with exception of
business-type assets, do not generate direct revenue for the City. They do represent, however,
an obligation on the part of the City to maintain these assets into the future.
Although the City’s investment in its capital assets is reported net of related debt, 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.
An additional portion of the City’s net assets (1%) represents resources that are subject to
external restrictions on how they may be used. The remaining balance of unrestricted net
assets $21,860,930 (19%) may be used to meet the City’s ongoing obligations to citizens,
creditors and employees.
CITY OF FRIENDSWOOD’S NET ASSETS
2012 2011 2012 2011 2012 2011
Current and other assets 14,265,582$ 16,625,116$ 20,066,228$ 21,479,959$ 34,331,810$ 38,105,075$
Capital assets 87,670,295 87,380,310 54,989,386 54,283,911 142,659,681 141,664,221
Total assets 101,935,877 104,005,426 75,055,614 75,763,870 176,991,491 179,769,296
Long-term liabilities 23,181,645 24,450,283 32,993,350 34,093,976 56,174,995 58,544,259
Other liabilities 3,470,448 3,824,966 2,624,043 3,313,827 6,094,491 7,138,793
Total liabilities 26,652,093 28,275,249 35,617,393 37,407,803 62,269,486 65,683,052
Net assets:
Invested in capital assets,
net of related debt 65,582,783 66,580,049 25,618,823 26,251,346 91,201,606 92,831,395
Restricted 872,869 922,874 786,600 731,410 1,659,469 1,654,284
Unrestricted 8,828,132 8,227,254 13,032,798 11,373,311 21,860,930 19,600,565
Total net assets 75,283,784$ 75,730,177$ 39,438,221$ 38,356,067$ 114,722,005$ 114,086,244$
Governmental Activities Business-type Activities Totals
Combined governmental and business-type activities increased the City’s net assets by
$635,761 in 2012. The following table provides a summary of the City’s operations for the year
ended September 30, 2012. The Governmental activities decreased the City of Friendswood’s
net assets by ($446,393). Revenues decreased $1.7 million from prior year while expenses
increased $585,456. The decrease in revenues can be attributed primarily to the decrease in
grants. The two percent increase in expenditures is primarily a result of increased depreciation
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expense ($294,403) due to the completion of major projects in the current fiscal year (Beamer
Road water/sewer project, installation of generators at critical infrastructure and the completion
of the new animal control facility). The remaining increase in expenditures was the anticipated
increase in operating expenses to maintain services at the same level as in the past.
Business-type activities increased the City’s net assets by $1,082,154. This increase is related
primarily to the following: charges for services exceeded operating expenses ($4,355,937) as a
result of water consumption exceeding expectations due to drought conditions while expenses
remained fairly constant.
CITY OF FRIENDSWOOD’S CHANGES IN NET ASSETS
2012 2011 2012 2011 2012 2011
Revenues:
Program revenues:
Charges for services 2,419,836$ 2,311,298$ 11,258,216$ 12,726,936$ 13,678,052$ 15,038,234$
Operating grants
and contributions 648,058 3,150,808 - - 648,058 3,150,808
Capital grants
and contributions 527,288 - - - 527,288 -
General revenues:
Property taxes 14,165,599 13,944,725 - - 14,165,599 13,944,725
Sales taxes 3,907,577 4,002,740 - - 3,907,577 4,002,740
Franchise taxes 1,556,556 1,598,407 - - 1,556,556 1,598,407
Other taxes 23,356 28,883 - - 23,356 28,883
Investment earnings 137,202 110,863 82,853 55,163 220,055 166,026
Miscellaneous 165,058 150,059 7,000 - 172,058 150,059
Total revenues 23,550,530 25,297,783 11,348,069 12,782,099 34,898,599 38,079,882
Expenses:
General government 4,737,702 4,876,064 - - 4,737,702 4,876,064
Public safety 10,736,805 10,548,568 - - 10,736,805 10,548,568
Public Works 3,738,111 3,517,707 - - 3,738,111 3,517,707
Community development 1,520,401 1,284,188 - - 1,520,401 1,284,188
Community services 3,227,731 3,058,313 - - 3,227,731 3,058,313
Library 1,004,303 979,978 - - 1,004,303 979,978
Water and sewer - - 6,902,279 6,955,505 6,902,279 6,955,505
Interest on long-term
debt 757,011 871,790 1,638,495 1,644,074 2,395,506 2,515,864
Total expenses 25,722,064 25,136,608 8,540,774 8,599,579 34,262,838 33,736,187
Increases/(Decrease) in net assets
before transfers 2,171,534)( 161,175 2,807,295 4,182,520 635,761 4,343,695
Transfers 1,725,141 5,336,312)( 1,725,141)( 5,336,312 - -
Change in net assets 446,393)( 5,175,137)( 1,082,154 9,518,832 635,761 4,343,695
Net assets, beginning 75,730,177 80,905,314 38,356,067 28,837,235 114,086,244 109,742,549
Net assets, ending 75,283,784$ 75,730,177$ 39,438,221$ 38,356,067$ 114,722,005$ 114,086,244$
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 $11,303,101. Approximately 74% of this amount ($8,379,399) is unassigned
fund balance; however, $5.3 million is set aside for the 90-day operating reserve, as set forth in
the City’s financial policies. $2,922,702 is nonspendable, restricted or assigned as follows:
Nonspendable (1%)
Prepaid items $98,874
Permanent fund 31,027
Restricted (21%)
Authorized construction $1,290,975
State and/or federal statutes 382,948
Fire/EMS Donations 67,203
City ordinances 197,977
Debt Service 245,752
Public education and
government channels 173,015
Assigned (4%)
Encumbrances $434,931
In the General Fund, the City plans for a balanced budget. Due to a positive variance in overall
expenditures, the General Fund ended the year with an increase to fund balance of $171,815.
This increase is a result of positive budget variance ($733,649) in overall expenditures resulting
primarily from staffs’ ongoing efforts to search out ways to reduce operating costs while still
maintaining service levels as well as postponing capital improvements. In the Debt Service
Fund, fund balance decreased by $62,479. This decrease is primarily related to bond issuance
costs associated with the issuance of the 2012 refunding bonds which will ultimately save the
City over $1 million over the life of the bonds.
Proprietary Fund
Unrestricted net assets of the respective proprietary funds are Enterprise, (water and sewer),
$13,032,798 and Internal Service Fund (vehicle replacement fund), $427,591. The net assets
of the water and sewer fund increased $1,082,154. This is primarily a result of water revenue
exceeding expectations due to drought conditions while expenditures remained fairly constant
allowing for operating income of $4,355,937. The net assets of the internal service fund
increased by $39,125 primarily as a result of operating income of $29,005 and gains recognized
on sales of capital assets.
9
General Fund Budgetary Highlights
The City made revisions to the original appropriations approved by the City Council. Budgeted
revenues increased by $388,780 or 1.9% and expenditures were increased by $1,647,175 or
7.7%. In addition to the appropriation for prior year encumbrances totaling $1.0 million, the
expenditure budget increased by $.6 million primarily as a result of fund balance uses for capital
improvement projects.
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, 2012, is $142,659,681. 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:
In fiscal year 2011, the City began construction of a new animal control facility.
This project was completed in fiscal year 2012 and the total cost of the project
was approximately $1.1 million.
The Beamer Road Water and Sewer Project was completed in fiscal year 2012.
The total cost of the project was approximately $1.3 million. This project was
funded by a grant received from the Department of Commerce’s Economic
Development Administration (EDA).
In fiscal year 2010, the City was awarded a $2.3 million Community Development
Block Grant to purchase and install emergency generators to critical
infrastructure. Construction began on this project in fiscal year 2011 and was
completed in fiscal year 2012. The total project cost was approximately is
$1.7 million.
The following water and sewer projects are in construction in progress at the end
of fiscal year 2012: Water Plant # 2 Rehabilitation ($1.3 million), Water Plant #7
Rehabilitation ($81,500), and Water Plant #5 Rehabilitation ($3.3 million).
Construction was complete on Water Plant #6 Rehabilitation in fiscal year 2012.
The total project cost was approximately $1.1 million.
10
CITY OF FRIENDSWOOD’S CAPITAL ASSETS AT YEAR-END
2012 2011 2012 2011 2012 2011
Land 24,007,398$ 24,007,398$ 716,818$ 716,818$ 24,724,216$ 24,724,216$
Buildings and
improvements 21,684,276 22,953,911 - - 21,684,276 22,953,911
Equipment 8,160,545 3,461,722 426,569 356,220 8,587,114 3,817,942
Infrastructure 30,540,783 32,066,832 29,386,863 29,816,407 59,927,646 61,883,239
Water rights - - 19,716,695 19,716,695 19,716,695 19,716,695
Construction in progress 3,277,293 4,890,447 4,742,441 3,677,771 8,019,734 8,568,218
Total capital assets 87,670,295$ 87,380,310$ 54,989,386$ 54,283,911$ 142,659,681$ 141,664,221$
Governmental Activities Business-type Activities Totals
Additional information on the City’s capital assets can be found in the notes on pages 38 and 39
of this report.
DEBT ADMINISTRATION
At the end of the current fiscal year, the City of Friendswood had a total bonded debt and capital
lease obligation of $56,695,726.
CITY OF FRIENDSWOOD’S OUTSTANDING DEBT AT YEAR-END
2012 2011 2012 2011 2012 2011
General obligations 21,605,000$ 22,885,000$ -$ -$ 21,605,000$ 22,885,000$
Revenue bonds payable - - 34,115,000 35,205,000 34,115,000 35,205,000
Capital leases 975,726 710,023 - - 975,726 710,023
22,580,726$ 23,595,023$ 34,115,000$ 35,205,000$ 56,695,726$ 58,800,023$
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 41 through 46 of
this report.
11
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
Friendswood continues to experience moderate growth. The City’s current population is
estimated to be 37,839. 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 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 .0068 cents from $.5902 to $.5970. This rate consists of a
maintenance and operations (M&0) tax rate of $.5307 and an Interest and Sinking (debt service)
tax rate of $.0663. The rate was set based on a net assessed value of $2,392,531,721. This is
an increase of $29,602,291 in taxable value. This increase is a result of new construction in the
City. This additional value results in a total levy increase of $336,199. 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.
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 $3,965,020 to $3,908,684. The franchise fees budget has been decreased from
$1,511,334 to $1,496,561 and the budget for municipal court fines has been increased from
$952,020 to $1,013,532. If all projections are accurate, the total General Fund unassigned fund
balance net of the 90 day operating requirement ($5.3 million) is estimated to be approximately
$1.8 million at September 30, 2013.
Water revenues are budgeted at $5,270,000 which is an increase of $150,000 in revenues, or
2.9%. Sewer revenues are budgeted at $3,840,000. Water and sewer retained earnings net of
the 90 operating requirement ($2.4 million) is expected to be $9.6 million at the end of fiscal
year 2013.
Pursuant to the City’s financial management policy, funds in excess of the 90-day operating
reserve are designated for future capital improvements.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, customers, investors, and creditors with
a general overview of the City’s finances and to show the City’s accountability for the money it
receives. If you have questions about this report or need additional information, contact
Administrative Services, P. O. Box 1288, Friendswood, Texas 77549-1288, or call Cindy S.
Edge 281-996-3224, or email cedge@friendswood.com.
BASIC FINANCIAL STATEMENTS
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2012
The Notes to the Basic Financial Statements
are an integral part of these statements.
12
Primary Government
Governmental Business-type Component
Activities Activities Total Unit
ASSETS
Cash and investments 12,398,024$ 11,640,112$ 24,038,136$ 1,676,055$
Receivables (net of allowances for uncollectibles)
Taxes 1,458,613 - 1,458,613 10,584
Customer accounts 199,034 1,975,408 2,174,442 -
Other 232,262 68,544 300,806 2,300
Internal balances (900,000) 900,000 - -
Due from other governments 482,683 - 482,683 -
Prepaid items 99,874 33,183 133,057 44,304
Working capital deposit - 288,862 288,862 -
Deferred charges 295,092 393,660 688,752 487,579
Restricted cash and investments - 4,766,459 4,766,459 -
Capital assets
Land 24,007,398 716,818 24,724,216 5,538,985
Buildings and improvements 34,784,890 - 34,784,890 -
Machinery and equipment 15,772,730 3,045,887 18,818,617 -
Infrastructure 67,671,399 - 67,671,399 462,138
Water and sewer system - 55,015,231 55,015,231 -
Construction in progress 3,277,293 4,742,441 8,019,734 -
Water rights - 19,716,695 19,716,695 -
Accumulated depreciation (57,843,415) (28,247,686) (86,091,101) -
Total capital assets, net 87,670,295 54,989,386 142,659,681 6,001,123
Total assets 101,935,877 75,055,614 176,991,491 8,221,945
LIABILITIES
Accounts payable 623,744 770,278 1,394,022 13,693
Accrued liabilities 1,078,546 272,642 1,351,188 -
Accrued interest 90,848 130,800 221,648 197,796
Customer deposits - 328,554 328,554 -
Noncurrent liabilities:
Due within one year 1,677,310 1,121,769 2,799,079 125,000
Due in more than one year 23,181,645 32,993,350 56,174,995 12,751,909
Total liabilities 26,652,093 35,617,393 62,269,486 13,088,398
NET ASSETS (DEFICIT)
Invested in capital assets, net of related debt 65,582,783 25,618,823 91,201,606 -
Restricted for:
Debt service 193,714 - 193,714 243,602
Public safety 450,151 - 450,151 -
Community development 229,004 - 229,004 -
Capital improvements - 786,600 786,600 4,448
Unrestricted 8,828,132 13,032,798 21,860,930 (5,114,503)
Total net assets (deficit) 75,283,784$ 39,438,221$ 114,722,005$ (4,866,453)$
CITY OF FRIENDSWOOD, TEXAS STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2012 The Notes to the Basic Financial Statements are an integral part of these statements. 13 Program RevenuesOperating Capital Primary GovernmentCharges for Grants and Grants and Governmental Business - Type ComponentProgram Activities Expenses Services Contributions Contributions Activities Activities Total UnitPrimary governmentGovernmental activitiesGeneral government 4,737,702$ 1,167,619$ - $ - $ (3,570,083)$ - $ (3,570,083)$ - $ Public safety 10,736,805 39,661 522,110 527,288 (9,647,746) - (9,647,746) - Public works 3,738,111 171,890 - - (3,566,221) - (3,566,221) - Community development 1,520,401 730,211 - - (790,190) - (790,190) - Community services 3,227,731 271,912 125,948 - (2,829,871) - (2,829,871) - Library 1,004,303 38,543 - - (965,760) - (965,760) - Interest on long-term debt 757,011 - - - (757,011) - (757,011) - Total governmental activities 25,722,064 2,419,836 648,058 527,288 (22,126,882) - (22,126,882) - Business-type activitiesWater and sewer 8,540,774 11,258,216 - - - 2,717,442 2,717,442 - Total business-type activities 8,540,774 11,258,216 - - - 2,717,442 2,717,442 - Total primary government 34,262,838$ 13,678,052$ 648,058$ 527,288$ (22,126,882) 2,717,442 (19,409,440) - Component unitWest Ranch Management District 2,152,865 - - - - - - (2,152,865) 2,152,865$ - $ - $ - $ - - - (2,152,865) GENERAL REVENUESTaxes:Property taxes, levied for general purposes 12,529,305 - 12,529,305 756,403 Property taxes, levied for debt service 1,636,294 - 1,636,294 - Sales taxes3,907,577 - 3,907,577 - Franchise taxes 1,556,556 - 1,556,556 - Other taxes23,356 - 23,356 - Penalties and interest - - - 6,942 Interest on investments 137,202 82,853 220,055 5,624 Gain on sale of capital assets 17,601 7,000 24,601 - Miscellaneous147,457 - 147,457 - TRANSFERS1,725,141 (1,725,141) - - Total general revenues and transfers 21,680,489 (1,635,288) 20,045,201 768,969 Change in net assets (446,393) 1,082,154 635,761 (1,383,896) NET ASSETS, beginning of year75,730,177 38,356,067 114,086,244 (3,482,557) NET ASSETS, end of year75,283,784$ 39,438,221$ 114,722,005$ (4,866,453)$ Changes in Net AssetsNet (Expense) Revenue and
CITY OF FRIENDSWOOD, TEXAS
BALANCE SHEET – GOVERNMENTAL FUNDS
SEPTEMBER 30, 2012
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 7,453,024$ 245,455$ 4,272,382$ 11,970,861$
Receivables, net of allowance
Taxes 1,419,793 38,820 - 1,458,613
Customer accounts 168,798 - 30,236 199,034
Other 225,991 297 5,546 231,834
Due from other funds 1,495,557 - - 1,495,557
Receivable from other governments 62,497 - 420,186 482,683
Prepaids and other assets 99,874 - - 99,874
Total assets 10,925,534$ 284,572$ 4,728,350$ 15,938,456$
Liabilities
Accounts payable 379,290$ -$ 244,454$ 623,744$
Accrued liabilities 964,962 - 113,584 1,078,546
Due to other funds - - 2,395,557 2,395,557
Deferred revenue 494,063 38,820 4,625 537,508
Total liabilities 1,838,315 38,820 2,758,220 4,635,355
Fund Balances
Nonspendable
Prepaid items 99,874 - - 99,874
Permanent fund - - 31,027 31,027
Restricted for
Public education and
government channels 173,015 - - 173,015
Debt service - 245,752 - 245,752
Authorized construction - - 1,290,975 1,290,975
State and/or federal statute - - 382,948 382,948
Fire/EMS donations - - 67,203 67,203
City ordinances - - 197,977 197,977
Assigned 434,931 - - 434,931
Unassigned 8,379,399 - - 8,379,399
Total fund balances 9,087,219 245,752 1,970,130 11,303,101
Total liabilities and fund balances 10,925,534$ 284,572$ 4,728,350$ 15,938,456$
ASSETS
LIABILITIES AND FUND BALANCES
CITY OF FRIENDSWOOD, TEXAS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2012
The Notes to the Basic Financial Statements
are an integral part of these statements.
15
Total fund balances - governmental funds 11,303,101$
86,838,571
295,092
(1,249,305)
(90,848)
1,259,315
537,508
Bonds payable (21,605,000)$
Deferred loss on refunding 549,210
Premiums on issuance (797,761)
Capital leases payable (975,726)
Compensated absences (780,373) (23,609,650)
Net assets of governmental activities 75,283,784$
Revenues earned but not available within sixty days of the year end are
not recognized as revenue on the fund financial statements.
governmental funds balance sheet.
resources; therefore, interest payable is not reported as a liability in the
Interest payable on long term debt does not require current financial
governmental activities in the statement of net assets.
assets and liabilities of the internal service fund are included in the
certain activities, such as fleet management, to individual funds. The
An internal service fund is used by management to charge the cost of
amortized over the life of the debt in the government-wide financial
expensed when incurred in the fund statements and capitalized and
Costs associated with the issuance of governmental long term debt are
therefore not recorded in the governmental fund financial statements.
obligation do not require the use of current financial resources and are
The accruals for net other post employment benefits and net pension
These long-term liabilities at year end consists of:
period and therefore are not reported in the fund financial statements.
and compensated absences are not due and payable in the current
Long-term liabilities, including bonds payable, capital leases payable,
assets are different because:
Amounts reported for governmental activities in the statement of net
balance sheet.
resources and therefore are not reported in the governmental funds
Capital assets used in governmental activities are not current financial
statements.
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES – GOVERNMENTAL FUNDS
YEAR ENDED SEPTEMBER 30, 2012
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 12,508,638$ 1,634,045$ - $ 14,142,683$
Sales and alcohol taxes 3,930,933 - - 3,930,933
Franchise taxes 1,556,556 - - 1,556,556
Fines and forfeitures 998,219 - 39,661 1,037,880
Permits and fees 1,106,913 - 67,100 1,174,013
Intergovernmental 424,654 - 653,236 1,077,890
Investment earnings 121,676 3,714 10,093 135,483
Donations 58,323 - 247,796 306,119
Miscellaneous 41,410 - - 41,410
Total revenues 20,747,322 1,637,759 1,017,886 23,402,967
Expenditures
Current
General government 4,258,974 - 63,657 4,322,631
Public safety 10,030,452 - 170,558 10,201,010
Public works 1,702,119 - - 1,702,119
Community development 1,520,401 - - 1,520,401
Community services 2,622,970 - - 2,622,970
Library 1,004,303 - - 1,004,303
Capital outlay 1,236,327 - 2,469,295 3,705,622
Debt service
Principal - 1,450,897 111,191 1,562,088
Interest and fiscal charges - 754,565 13,764 768,329
Bond issuance costs and fees - 131,380 - 131,380
Total expenditures 22,375,546 2,336,842 2,828,465 27,540,853
Excess (deficiency) of
revenues over expenditures (1,628,224) (699,083) (1,810,579) (4,137,886)
Other financing sources (uses)
Issuance of refunding bonds - 8,890,000 - 8,890,000
Premium on issuance of bonds - 563,666 - 563,666
Proceeds from capital lease 464,270 - - 464,270
Proceeds from sale of capital assets 9,250 - - 9,250
Insurance recoveries 105,502 - - 105,502
Transfers in 1,291,680 608,476 70,663 1,970,819
Transfers out (70,663) - (175,015) (245,678)
Payment to bond refunding
escrow agent - (9,425,538) - (9,425,538)
Total other financing
sources (uses) 1,800,039 636,604 (104,352) 2,332,291
Net change in fund balances 171,815 (62,479) (1,914,931) (1,805,595)
Fund balances, beginning of year 8,915,404 308,231 3,885,061 13,108,696
Fund balances, end of year 9,087,219$ 245,752$ 1,970,130$ 11,303,101$
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, 2012
The Notes to the Basic Financial Statements
are an integral part of these statements.
17
Net change in fund balances - total governmental funds (1,805,595)$
Amounts reported for governmental activities in the statement of activities are
different because:
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. 3,690,737
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. (3,446,459)
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. The effect of these differences in the treatment of long
term debt and related items was:
Proceeds from issuance of long term debt (9,917,936)$
Payment to escrow agent for advance refunding 9,425,538
Long term debt issuance costs 131,380
Amortization of bond issuance costs (22,638)
Amortization of premium on bonds payable 60,470
Amortization of deferred loss on refunding bonds (39,229)
Repayment of long term debt 1,463,567 1,101,152
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.(15,096)
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.13,085
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.22,741
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.(46,083)
An internal service fund is used by management to charge the cost of fleet
management to individual funds. The change in net assets of the internal service
fund is included in the governmental activities in the statement of net assets.39,125
Change in net assets of governmental activities (446,393)$
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS – PROPRIETARY FUNDS
SEPTEMBER 30, 2012
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 11,640,112$ 427,163$
Accounts receivable, net of allowance
Customer accounts 1,975,408 -
Other 68,544 428
Due from other funds 900,000 -
Prepaids and other assets 33,183 -
Restricted cash and investments 4,766,459 -
Total current assets 19,383,706 427,591
Noncurrent assets
Working capital deposit 288,862 -
Deferred charges 393,660 -
Capital assets
Land 716,818 -
Machinery and equipment 3,045,887 2,173,280
Water and sewer system 55,015,231 -
Construction in progress 4,742,441 -
Water rights 19,716,695 -
Accumulated depreciation (28,247,686) (1,341,556)
Net capital assets 54,989,386 831,724
Total noncurrent assets 55,671,908 831,724
Total assets 75,055,614 1,259,315
ASSETS
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF NET ASSETS – PROPRIETARY FUNDS
SEPTEMBER 30, 2012
(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 770,278 -
Accrued liabilities 272,642 -
Accrued interest 130,800 -
Deposits 328,554 -
Compensated absences 15,350 -
Bonds and other long-term debt payable 1,106,419 -
Total current liabilities 2,624,043 -
Noncurrent liabilities
Compensated absences 93,546 -
Bonds and other long-term debt payable 32,899,804 -
Total noncurrent liabilities 32,993,350 -
Total liabilities 35,617,393 -
Invested in capital assets, net of related debt 25,618,823 831,724
Restricted for capital improvements 786,600 -
Unrestricted 13,032,798 427,591
Total net assets 39,438,221$ 1,259,315$
LIABILITIES
NET ASSETS
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
YEAR ENDED SEPTEMBER 30, 2012
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 11,258,216$ 318,767$
Total operating revenues 11,258,216 318,767
Operating expenses
Personnel services 1,547,765 -
Sewer operations 1,353,187 -
Water purchases 1,104,860 -
Repairs and maintenance 421,460 -
Supplies 155,534 -
Other services and charges 778,761 -
Depreciation 1,540,712 289,712
Total operating expenses 6,902,279 289,712
Operating income 4,355,937 29,055
Nonoperating revenues (expenses)
Investment income 82,853 1,719
Gain (loss) on sale of capital assets 7,000 8,351
Interest expense and fiscal charges (1,638,495) -
Total nonoperating revenues (expenses) (1,548,642) 10,070
Income before transfers 2,807,295 39,125
Transfers out (1,725,141) -
Change in net assets 1,082,154 39,125
Net assets, beginning of year 38,356,067 1,220,190
Net assets, end of year 39,438,221$ 1,259,315$
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS
YEAR ENDED SEPTEMBER 30, 2012
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 11,735,052$ 318,613$
Cash payments to suppliers for goods
and services (4,554,931) -
Cash payments to employees for services (1,541,665) -
Net cash provided by operating activities 5,638,456 318,613
NONCAPITAL FINANCING ACTIVITIES
Transfer out (1,725,141) -
Net cash used in
noncapital financing activities (1,725,141) -
CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from the sale of capital assets 7,000 13,410
Acquisition and construction of capital assets (2,246,187) (340,478)
Repayment of debt (1,090,000) -
Interest paid on debt (1,607,728) -
Net cash used in capital and related
financing activities (4,936,915) (327,068)
INVESTING ACTIVITIES
Investment income 75,920 1,719
Net cash provided by investing activities 75,920 1,719
Net change in cash and cash equivalents (947,680) (6,736)
CASH AND CASH EQUIVALENTS, beginning of year 17,354,251 433,899
CASH AND CASH EQUIVALENTS, end of year 16,406,571$ 427,163$
CITY OF FRIENDSWOOD, TEXAS
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS
YEAR ENDED SEPTEMBER 30, 2012
(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 4,355,937$ 29,055$
Adjustments to reconcile operating income
to net cash provided by operating activities
Depreciation and amortization 1,540,712 289,712
Change in assets and liabilities
Accounts receivable 446,629 (154)
Prepaids and other assets 4,549 -
Working capital deposits 1,292 -
Accounts payable (794,494) -
Accrued liabilities 53,624 -
Deposits 30,207 -
Net cash provided by operating activities 5,638,456$ 318,613$
Reconciliation of cash to statement of net assets
Cash and investments 11,640,112$ 427,163$
Restricted cash and investments 4,766,459 -
CASH AND CASH EQUIVALENTS 16,406,571$ 427,163$
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 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
Chapters 3837, Texas Special District Local Laws Code, Chapters 49 and 54 of the
Texas Water Code and Chapter 375 of the Texas Local Government 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 (GASB).
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.
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 monthly to each respective individual fund 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.”
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, 2012.
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
$0.5902 per $100 of assessed valuation that were prorated between operations and
debt service in the amounts of $0.5218 and $0.0684, respectively. The resulting tax
levies were approximately $12.3 and $1.6 million for operations and debt service,
respectively, based on a total taxable valuation of approximately $2.4 billion for the 2011
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. During the year
ended July 31, 2012, the District levied an ad valorem maintenance tax at the rate of
$0.1700 per $100 of assessed valuation and an ad valorem debt service tax at the rate
of $0.3800 per $100 of assessed valuation, which resulted in a maintenance tax levy of
$197,858 and a debt service tax levy of $442,271 on the taxable valuation of
$116,386,954 for the 2011 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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
29
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Contract with West Ranch Management District
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 Balances and Net Assets
Government-Wide Financial Statements:
Net assets on the Statement of Net Assets includes the following categories:
Invested in capital assets, net of related debt – the component of net assets that
reports the difference between capital assets less both the accumulated depreciation
and the outstanding balance of debt, net of premiums and discounts, excluding
unspent proceeds, that is directly attributable to the acquisition, construction or
improvement of these capital assets.
Restricted – Net assets are reported as restricted when there are limitations imposed
on their use either through the enabling legislation adopted by the City or through
external restrictions imposed by creditors, grantors, or laws or regulations of other
governments.
Unrestricted – the difference between the assets and liabilities that is not reported in
any of the classifications above.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
31
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Fund Balances and Net Assets – Continued
Governmental Fund Financial Statements:
The City has adopted the provisions of GASB Statement No. 54, Fund Balance
Reporting and Governmental Fund Type Definitions (GASB 54). GASB 54 establishes
fund balance classifications that comprise a hierarchy based primarily on the extent to
which a government is bound to observe constraints imposed upon the use of the
resources reported in governmental funds. Fund balance classifications, under GASB
54 are non-spendable, restricted, committed, assigned, and unassigned. These
classifications reflect not only the nature of funds, but also provide clarity to the level of
restriction placed upon fund balance. Fund balance can have different levels of
constraint, such as external versus internal compliance requirements. Unassigned fund
balance is a residual classification within the general fund. The general fund should be
the only fund that reports a positive unassigned balance. In all other funds, unassigned
is limited to negative residual fund balance.
In accordance with GASB 54, the City classifies governmental fund balances as follows:
Non-spendable – includes amounts that cannot be spent because they are either not
in spendable form, or, for legal or contractual reasons, must be kept intact. This
classification includes prepaid items and the fund balance of the City’s permanent
fund.
Restricted – includes fund balance amounts that are constrained for specific
purposes which are imposed by providers, such as creditors or amounts restricted
due to constitutional provisions or enabling legislation. This classification includes
retirement of long term debt, construction programs, City ordinances, and other
federal and state grants.
Committed – includes fund balance amounts that are constrained for specific
purposes that are internally imposed by the City through formal action in an open
meeting of the highest level of decision making authority. Committed fund balance is
reported pursuant to resolution passed by the City Council. At September 30, 2012,
the City had no committed fund balance amounts.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
32
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Fund Balances and Net Assets – Continued
Governmental Fund Financial Statements – Continued:
Assigned – includes fund balance amounts that are self-imposed by the City to be
used for a particular purpose. Fund balance can be assigned by the City Council,
the City Manager, or the City Manager’s designee pursuant to the City’s fund
balance policy. At September 30, 2012, the City’s assigned fund balance included
amounts assigned for encumbrances.
Unassigned – includes residual positive fund balance within the general fund which
has not been classified within the other above mentioned categories. Unassigned
fund balance may also include negative balances for any governmental fund if
expenditures exceed amounts restricted, committed, or assigned for those specific
purposes.
When both restricted and unrestricted fund balances are available for use, it is the City’s
policy to use restricted fund balance first, then unrestricted fund balance. Furthermore,
committed fund balances are reduced first, followed by assigned amounts and then
unassigned amounts when expenditures are incurred for purposes for which amounts in
any of those unrestricted fund balance classifications are available.
The City has established a minimum fund balance policy whereby the City’s unassigned
general fund balance will be maintained at levels sufficient to protect the City’s
creditworthiness, as well as its financial position, from unforeseeable emergencies. The
City will strive to maintain the unassigned general fund balance at a minimum of 90 days
of prior year audited operating expenditures.
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
33
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
New Accounting Pronouncements
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.
In June 2011, the GASB issued Statement No. 63, Financial Reporting of Deferred
Outflows of Resources, Deferred Inflows of Resources, and Net Position (GASB 63).
This statement amends Statement No. 34 relating to net asset reporting requirements.
The requirements of this statement are effective for financial statements for periods
beginning after December 15, 2011. The City will adopt GASB 63 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
34
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 amounts not to exceed
$100,000;
3. No-load money market mutual funds; and
4. TexPool, Lone Star Investment Pool and Texas Class.
The City Council has adopted a written investment policy regarding the investments of its
funds as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas
Government Code). The investments of the City are in compliance with the Council’s
investment policies. The City did not have any derivative investment products during the
current year. All significant legal and contractual provisions for investments were complied
with during the year.
Deposits and investments as of September 30, 2012 are classified in the accompanying
financial statements as follows:
Governmental Activities 12,398,024$
Business-type Activities 16,406,571
28,804,595$
Deposits and investments as of September 30, 2012 consist of the following:
Deposits with financial institutions 3,165,160$
Investments 25,639,435
28,804,595$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
35
NOTE 2. DEPOSITS AND INVESTMENTS – CONTINUED
As of September 30, 2012, the City had the following investments:
Fair Value
Texas Class 7,453,741$
Lone Star Corporate Overnight Fund 2,087,471
Tex Pool 2,084,315
U.S. Agency Securities:
Federal Farm Credit Bank 7,502,166 865
Federal Home Loan Mortgage Corporation 3,506,527 815
Federal National Mortgage Association 2,005,087 725
Federal Home Loan Bank 1,000,128 965
Total U.S. Agency Securities 14,013,908
Total portfolio 25,639,435$
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.
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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
36
NOTE 2. DEPOSITS AND INVESTMENTS – CONTINUED
Interest Rate Risk. In accordance with its investment policy, the City manages its exposure
to declines in fair values by structuring the investment portfolio so that securities mature to
meet cash requirements for ongoing operations and invest operating funds primarily in
short-term securities.
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,
2012, all of the City’s $3,165,160 balance on deposit with financial institutions was
collateralized with securities held by the pledging financial institution in the City’s name.
Credit Risk. It is the City’s policy to limit its investments to investment types with an
investment quality rating not less than A or its equivalent by a nationally recognized
statistical rating organization. The City’s investments as of September 30, 2012, were rated
as follows:
Rating Rating Agency
Texas Class AAAm Standard & Poor's
Lone Star Government Overnight Fund AAAf Standard & Poor's
TexPool AAAm Standard & Poor's
U.S. Agency Securities:
Federal Farm Credit Bank Aaa Moody's Investor Service
Federal Home Loan Mortgage Corporation Aaa Moody's Investor Service
Federal National Mortgage Association Aaa Moody's Investor Service
Federal Home Loan Bank Aaa Moody's Investor Service
Investment Type
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
37
NOTE 3. ACCOUNTS RECEIVABLE AND DEFERRED REVENUE
Receivables as of September 30, 2012 for the City’s individual major funds, nonmajor funds
in the aggregate and the Internal Service Fund including the applicable allowances for
uncollectible accounts, are as follows:
Debt Water and Internal
General Service Nonmajor Sewer Service Total
Receivables:
Property taxes 310,402$ 43,133$ -$ -$ -$ 353,535$
Sales taxes 758,120 - - - - 758,120
Franchise taxes 382,311 - - - - 382,311
Customer accounts 170,798 - 30,236 1,985,408 - 2,186,442
Accrued interest 8,420 297 900 14,371 428 24,416
Court fines 482,054 - 4,646 - - 486,700
Intergovernmental 62,497 - 420,186 - - 482,683
Other 19,078 - - 54,173 - 73,251
Gross receivables 2,193,680 43,430 455,968 2,053,952 428 4,747,458
Less: allowance for
uncollectibles 316,601 4,313 - 10,000 - 330,914
Net total receivables 1,877,079$ 39,117$ 455,968$ 2,043,952$ 428$ 4,416,544$
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 279,362$
Court fines 198,612
Miscellaneous 16,089
Total General Fund 494,063
Court Security and Technology Fund
Court fines 4,625
Total Court Security and Technology Fund 4,625
Debt Service Fund
Delinquent property taxes 38,820
Total Debt Service Fund 38,820
Total Governmental Funds 537,508$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
38
NOTE 4. CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2012, 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 4,890,447 2,909,455 (4,522,609) 3,277,293
Total capital assets not
being depreciated 28,897,845 2,909,455 (4,522,609) 27,284,691
Capital assets being depreciated
Buildings and improvements 34,779,590 5,300 - 34,784,890
Machinery and equipment 10,357,862 1,131,343 4,283,525 15,772,730
Infrastructure 67,671,399 - - 67,671,399
Total capital assets
being depreciated 112,808,851 1,136,643 4,283,525 118,229,019
Less accumulated depreciation
Buildings and improvements 11,825,679 1,274,935 - 13,100,614
Machinery and equipment 6,896,140 935,187 (219,142) 7,612,185
Infrastructure 35,604,567 1,526,049 - 37,130,616
Total accumulated
depreciation 54,326,386 3,736,171 (219,142) 57,843,415
Total capital assets
being depreciated, net 58,482,465 (2,599,528) 4,502,667 60,385,604
Governmental activities
capital assets, net 87,380,310$ 309,927$ (19,942)$ 87,670,295$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
39
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 3,677,771 2,145,764 (1,081,094) 4,742,441
Total capital assets not
being depreciated 24,111,284 2,145,764 (1,081,094) 25,175,954
Capital assets being depreciated
Machinery and equipment 2,978,193 100,423 (32,729) 3,045,887
Water and sewer system 53,934,137 - 1,081,094 55,015,231
Total capital assets
being depreciated 56,912,330 100,423 1,048,365 58,061,118
Less accumulated depreciation:
Machinery and equipment 2,621,973 30,074 (32,729) 2,619,318
Water and sewer system 24,117,730 1,510,638 - 25,628,368
Total accumulated
depreciation 26,739,703 1,540,712 (32,729) 28,247,686
Total capital assets
being depreciated, net 30,172,627 (1,440,289) 1,081,094 29,813,432
Business-type activities
capital assets, net 54,283,911$ 705,475$ -$ 54,989,386$
Depreciation expense was charged to functions/programs of the primary government as
follows:
Governmental activities
General government 255,741$
Public safety 547,264
Public works 2,038,049
Community services 605,405
Capital assets held by the City's internal service fund are
charged to the various functions based on their usage 289,712
Total depreciation expense - governmental activities 3,736,171$
Business-Type activities
Water and sewer 1,540,712$
Total depreciation expense - business-type activities 1,540,712$
Unexpended commitments for construction projects in progress were $1,778,182 at
September 30, 2012.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
40
NOTE 5. INTERFUND BALANCES AND ACTIVITIES
Interfund balances (net) at September 30, 2012 consisted of the following individual fund
balances:
Due to Fund Due from Fund Amount
General TDRA 1,495,557$ Balance of TDRA fund expenditures
funded by the general fund, pending
grant reimbursements
Water and sewer EDA 900,000 Return of excess amount previously
transferred, upon decrease in City's
obligation under grant award
2,395,557$
Purpose
All amounts due are scheduled to be repaid within one year.
During the year ended September 30, 2012, transfers between funds occurred as described
below:
Transfers In Transfers Out Amount
Debt service Water and sewer 608,476$ To fund Series 2010B debt service
payments
Fire/EMS donation General 9,250 Funds received from sale of a
Fire/EMS vehicle
Park land dedication General 14,009 Reimbursement of unexpended funds
TDRA General 47,404 To fund the City's portion of project
expenditures
General Sidewalk installation 15 Transfer of fund balance to close
fund
General Park land dedication 175,000 To fund miscellaneous projects
General Water and sewer 1,116,665 To fund indirect costs for
administrative expenses
1,970,819$
Purpose
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
41
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 the City’s 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, 2012:
Final Governmental Business-Type
Maturity Interest Rate Activities Activities
General Obligation Bonds
2003 Permanent Improvement $ 8,700,000 2026 3.65% - 5.5% 345,000$ -$
2005 Permanent Improvement
and Refunding 9,800,000 2020 2.85% - 4.375% 4,170,000 -
2010A Permanent Improvement 3,460,000 2035 1.0% - 4.75% 3,290,000 -
2010B Permanent Improvement
and Refunding 5,460,000 2021 1.0% - 4.0% 4,910,000 -
2012 General Obligation Refunding 8,890,000 2026 2.0% - 3.5% 8,890,000 -
21,605,000 -
Revenue Bonds
2006 Waterworks and Sewer System
Revenue and Refunding 24,285,000 2031 4.0% - 5.0% - 22,610,000
2009 Waterworks and Sewer System 12,120,000 2028 2.0% - 4.8% - 11,505,000
- 34,115,000
Total Bonds and Certificates of Obligation 21,605,000$ 34,115,000$
Series and Original Issue Amount
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
42
NOTE 6. LONG-TERM DEBT – CONTINUED
Bonds Payable and Certificates of Obligation – Continued
Annual debt service requirements for the City’s bonds and certificates of obligation are
as follows:
Year Ending
September 30, Principal Interest Principal Interest Total
2013 1,375,000$ 669,923$ 1,120,000$ 1,548,303$ 4,713,226$
2014 1,415,000 630,233 1,165,000 1,504,006 4,714,239
2015 1,455,000 592,152 1,205,000 1,457,771 4,709,923
2016 1,505,000 552,992 1,240,000 1,409,734 4,707,726
2017 - 2021 8,200,000 2,135,677 7,020,000 6,208,957 23,564,634
2022 - 2026 6,215,000 933,010 9,715,000 4,253,229 21,116,239
2027 - 2031 730,000 244,027 10,330,000 1,670,865 12,974,892
2032 - 2036 710,000 69,344 2,320,000 177,750 3,277,094
21,605,000$ 5,827,358$ 34,115,000$ 18,230,615$ 79,777,973$
Governmental Activities Business -Type Activities
Defeasance of Bonds
On May 1, 2012, the City issued $8.890 million in Series 2012 General Obligation
Refunding Bonds with an average interest rate of 2.919 percent to advance refund
$6.745 million of outstanding Series 2003 Permanent Improvement Bonds and
$2.160 million of outstanding Series 2005 Permanent Improvement and Refunding
Bonds (the Refunded Bonds) with average interest rates of 4.254 percent and
4.138 percent, respectively. The net proceeds of $9.310 million (after payment of
$143,898 in underwriting fees, insurance, and other issuance costs) plus an additional
$118,000 of Refunded Bonds sinking fund monies were used to purchase U.S.
government securities. Those securities were deposited in an irrevocable trust with an
escrow agent to provide for all future debt service payments on the Refunded Bonds. As
a result, the Refunded Bonds are considered to be defeased and the liability for those
bonds has been removed from the government-wide Statement of Net Assets.
The advance refunding resulted in a difference between the reacquisition price and the
net carrying amount of the old debt of $588,439. This difference, reported in the
accompanying financial statements as a deduction from bonds payable, is being
charged to operations through the year 2026 using the effective-interest method. The
City completed the advance refunding to reduce its total debt service payments over the
next 14 years by $1,026,111 and to obtain an economic gain (difference between the
present values of the old and new debt service payments) of $896,521.
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, 2012, $19,990,000 of
bonds considered defeased are still outstanding.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
43
NOTE 6. LONG-TERM DEBT – CONTINUED
Obligations Under Capital Leases
The City has entered into capital lease agreements in order to purchase machinery and
equipment for public works, police and fire departments. The assets acquired through
these lease agreements are as follows:
Governmental
Asset: Activities
Machinery and equipment 1,597,730$
Less: accumulated depreciation (211,326)
Total 1,386,404$
The following is a summary of future lease payments due on this machinery and
equipment:
Year Ending Lease
September 30, Obligation
2013 234,603$
2014 234,603
2015 234,603
2016 191,868
2017 - 2019 189,167
Total 1,084,844
Less: interest portion (109,118)
Obligations under capital leases 975,726$
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
44
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,
2012, was as follows:
Balance Balance Due
Beginning End of Within One
of Year Increase Decrease Year Year
Governmental type activities
General obligation bonds 22,885,000$ 8,890,000$ (10,170,000)$ 21,605,000$ 1,375,000$
Premium on bond issuance 408,294 563,666 (174,199) 797,761 60,468
Deferred loss on refunding bonds - (588,439) 39,229 (549,210) (39,229)
Capital lease obligations 710,023 464,270 (198,567) 975,726 189,791
Net pension obligation 626,456 1,780,547 (1,773,895) 633,108 -
Net OPEB obligation 576,766 83,150 (43,719) 616,197 -
Compensated absences 765,277 717,872 (702,776) 780,373 91,280
Total governmental
type activities 25,971,816 11,911,066 (13,023,927) 24,858,955 1,677,310
Business type activities
Revenue bonds 35,205,000 - (1,090,000) 34,115,000 1,120,000
Discount on bond issuance (57,447) - 2,498 (54,949) (2,498)
Premium on bond issuance 310,001 - (17,073) 292,928 16,274
Deferred loss on refunding bonds (374,911) - 28,155 (346,756) (27,357)
Compensated absences 102,796 61,801 (55,701) 108,896 15,350
Total business type activities 35,185,439 61,801 (1,132,121) 34,115,119 1,121,769
Total primary government
activities 61,157,255$ 11,972,867$ (14,156,048)$ 58,974,074$ 2,799,079$
The compensated absences liability attributable to the governmental activities will be
liquidated primarily by the General Fund. The General Fund has typically been used in prior
years to liquidate the net pension obligation and net OPEB obligation.
West Ranch Management District
The following schedule summarizes the terms of the West Ranch Management District’s
general obligation bonds at July 31, 2012:
Road
Series 2010 Series 2010A
Amounts outstanding, July 31, 2012 $6,740,000 $1,815,000
Interest rates 3.25% to 5.25% 3.50% to 5.00%
Maturity dates, serially beginning/ending September 1, 2012/2040 September 1, 2012/2040
Interest payment dates September 1/March 1 September 1/March 1
Callable dates* September 1, 2020 September 1, 2020
*Or any date thereafter; callable at par plus accrued interest to the date of redemption.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
45
NOTE 6. LONG-TERM DEBT – CONTINUED
West Ranch Management District – Continued
Annual debt service requirements for the District’s bonds are as follows:
Year Ending
July 31, Principal Interest Total
2013 125,000$ 408,491$ 533,491$
2014 135,000 403,785 538,785
2015 140,000 398,792 538,792
2016 145,000 393,860 538,860
2017 - 2021 875,000 1,883,939 2,758,939
2022 - 2026 1,145,000 1,677,001 2,822,001
2027 - 2031 1,490,000 1,363,402 2,853,402
2032 - 2036 1,950,000 926,381 2,876,381
2037 - 2041 2,550,000 345,850 2,895,850
8,555,000$ 7,801,501$ 16,356,501$
The District’s bonds are payable from the proceeds of an ad valorem tax levied upon all
property within the District subject to taxation, without limitation as to rate or amount.
Long-term liability activity of the West Ranch Management District for the year ended
July 31, 2012, was as follows:
Balance Balance Due
Beginning End of Within One
of Year Increase Decrease Year Year
Component Unit
General obligation bonds 8,555,000$ -$ -$ 8,555,000$ 125,000$
Discount on bond issuance (212,305) - 3,182 (209,123) -
Bond anticipation note - 2,665,000 - 2,665,000 -
Developer advances 40,000 - - 40,000 -
Due to developer 3,266,960 184,048 (1,624,976) 1,826,032 -
Total component unit 11,649,655$ 2,849,048$ (1,621,794)$ 12,876,909$ 125,000$
A developer of the West Ranch Management District has advanced $40,000 to the
District for operating expenses. The District has agreed to repay these amounts plus
interest to the extent approved by the Texas Commission on Environmental Quality from
the proceeds of future bond sales. These amounts have been recorded in the financial
statements as long-term liabilities. The District is currently unable to estimate when
bonds will be issued to pay this liability.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
46
NOTE 6. LONG-TERM DEBT – CONTINUED
West Ranch Management District – Continued
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 $1,826,032. These amounts have been recorded in the financial statements
as long-term liabilities.
NOTE 7. RESTRICTED ASSETS
The balances of the restricted asset accounts in the enterprise fund are as follows:
Cash and investments:
Customer deposits 328,554$
Construction 785,709
Construction - 2006 bonds 1,848,581
Construction - 2009 bonds 1,269,893
Debt service reserve 533,722
Total restricted assets 4,766,459$
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 state 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 from TMRS’ website
at www.TMRS.com.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
47
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
2011 2012
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
30% of 50% of
Annuity Increase (to retirees) CPI Repeating CPI Repeating
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
48
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 are as follows:
Annual Required Contribution (ARC) 1,773,895$
Interest on Net Pension Obligation 44,635
Adjustment to the ARC (37,983)
Annual Pension Cost (APC) 1,780,547
Contributions made (1,773,895)
Increase in net pension obligation 6,652
Net Pension Obligation, beginning of year 626,456
Net Pension Obligation, end of year 633,108$
City historical data is as follows:
Annual Actual Percentage Net Pension
Fiscal Pension Cost Contribution of APC Obligation
Year (APC) Made Contributed at September 30
2010 1,950,342$ 1,645,318$ 84.4% 529,869$
2011 1,858,285 1,761,698 94.8% 626,456
2012 1,780,547 1,773,895 99.6% 633,108
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
49
NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED
Contributions – Continued
The required contribution rates for fiscal year 2012 were determined as part of the
December 31, 2009 and 2010 actuarial valuations. Additional information as of the
latest actuarial valuation, December 31, 2011, also follows:
Valuation date 12/31/2009 12/31/2010 12/31/2011
Actuarial cost method Projected Unit
Credit
Projected Unit
Credit
Projected Unit
Credit
Actuarial assumptions:
Investment rate of return * 7.50% 7.00% 7.00%
* Includes inflation at 3.00% 3.00% 3.00%
Cost-of-living adjustments 2.10% 0.90% 1.50%
Amortization method
GASB 25 Equivalent Single
Amortization Period
Level Percent of
Payroll
Level Percent
of Payroll
Projected salary increases *
Asset valuation method 10-year Smoothed
Market
Level Percent
of Payroll
10-year Smoothed
Market
10-year Smoothed
Market
Amortization Period for new
Gains/Losses 30 years
Varies by age and
service
Varies by age
and service
Varies by age
and service
28.1 years:
closed period
27.8 years:
closed period
27.0 years:
closed period
30 years 30 years
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
50
NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED
Funded Status and Funding Progress
The funded status as of December 31, 2011, the most recent actuarial valuation date, is
presented 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)
12/31/2011 $39,062,666 $49,224,949 79.4% $10,162,283 $11,521,562 88.2%
Actuarial valuations involve estimates of the value of reported amounts and assumptions
about the probability of events far into the future. Actuarially determined amounts are
subject to continual revision as actual results are compared to past expectations and
new estimates are made about the future.
Actuarial calculations are based on the benefits provided under the terms of the
substantive plan in effect at the time of each valuation, and reflect a long-term
perspective. Consistent with that perspective, actuarial methods and assumptions used
include techniques that are designed to reduce short-term volatility in actuarial accrued
liabilities and the actuarial value of assets.
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
51
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. The 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
52
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’s annual OPEB cost for
the current year is as follows:
Annual required contribution 72,428$
Interest on OPEB obligation 25,955
Adjustment to ARC (15,233)
Annual OPEB cost (expense) end of year 83,150
Net estimated employer contributions 43,719
Increase in net OPEB obligation 39,431
Net OPEB obligation – as of beginning of the year 576,766
Net OPEB obligation – as of end of year 616,197$
City historical data is as follows:
Annual Actual Percentage Net OPEB
Fiscal OPEB Contribution of OPEB Obligation
Year Cost Made Cost Contributed at September 30
2010 305,150$ 37,508$ 12% 540,276$
2011 83,000 46,510 56% 576,766
2012 83,150 43,719 53% 616,197
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
53
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, 2010, 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)
12/31/2010 $0 $610,795 0.00% $610,795 $11,160,286 5.47%
Under the reporting parameters, the City’s retiree health care plan is 0% funded with
an estimated actuarial accrued liability exceeding actuarial assets by $610,795 at
December 31, 2010.
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.
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.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
54
NOTE 9. POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS – CONTINUED
Retiree Insurance Coverage – Continued
Actuarial Methods and Assumptions – Continued
Significant methods and assumptions were as follows:
Investment rate of return 4.5%, net of expenses
Inflation rate 1.50%
Healthcare cost trend rates 4.5% to 9.0%
Actuarial cost method Projected Unit Credit Cost Method
Amortization method Level Percent of Payroll over an
open period of 30 years
Payroll Growth Rate 3.00%
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.
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 “other postemployment benefit,” or OPEB.
CITY OF FRIENDSWOOD, TEXAS
NOTES TO BASIC FINANCIAL STATEMENTS
55
NOTE 9. POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS – CONTINUED
Supplemental Death Benefits Fund – Continued
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,
2012, 2011 and 2010 were $21,455, $25,107, and $22,282, respectively, which
equaled the required contributions each year.
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, 2011, 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, 2012, the City believed the amounts paid on workers’ compensation would
not change significantly from the amounts recorded.
During the year ended September 30, 2012, employees of the City were covered by a health
and dental insurance plan. Employees have the option to select either an 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
56
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, 2012, the City has purchased water capacity with an indefinite life of
$19,716,695.
The relationship of the parties is of a fiduciary character. No partnership or joint venture
is created by this contract.
Federal and State Programs
The City recognizes grant monies received as reimbursement for costs incurred in
certain federal and state programs it administers as revenue. Amounts received or
receivable from grantor agencies are subject to audit and adjustment by grantor
agencies. Any disallowed claims, including amounts already collected, may constitute a
liability of the applicable funds. The amount, if any, of expenditures which may be
disallowed by the grantor cannot be determined at this time although the City expects
such amounts, if any, to be immaterial.
Litigation
The City is a defendant in various lawsuits. The outcome and the impact of these
lawsuits is not presently determinable.
REQUIRED SUPPLEMENTARY
INFORMATION
(Unaudited)
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF FUNDING PROGRESS FOR PARTICIPATION
IN TEXAS MUNICIPAL RETIREMENT SYSTEM
SEPTEMBER 30, 2012
57
Actuarial Actuarial UAAL as a
Actuarial Value of Accrued Unfunded AAL Covered Percentage of
Valuation Date Assets Liability (AAL) Funded Ratio (UAAL) Payroll Covered Payroll
(1) (2) (3) (4) (5) (6)
(1) / (2) (2) - (1) (4) / (5)
12/31/2009 24,941,996$ 34,979,418$ 71.3% 10,037,422$ 11,194,824$ 89.7%
12/31/2010 35,257,370 46,008,288 76.6 10,750,918 11,160,286 96.3
12/31/2011 39,062,666 49,224,949 79.4 10,162,283 11,521,562 88.2
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF FUNDING PROGRESS
POST EMPLOYMENT BENEFITS PLAN OTHER THAN PENSIONS
SEPTEMBER 30, 2012
58
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)
12/31/2009 -$ 2,426,788$ 0.0% 2,426,788$ 10,885,990$ 22.3%
12/31/2010 - 610,795 0.0 610,795 11,160,286 5.5
12/31/2011 * - 610,795 0.0 610,795 11,160,286 5.5
* In accordance with GASB Statement No. 45, the City has an actuarial valuation performed every 2 years,
which was performed as of 12/31/10. Therefore data for 2011 is the same as 2010.
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2012
59
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Property taxes 12,432,608$ 12,432,608$ 12,508,638$ 76,030$
Sales and alcohol taxes 3,994,949 3,994,949 3,930,933 (64,016)
Franchise taxes 1,511,334 1,538,971 1,556,556 17,585
Fines and forfeitures 952,020 952,020 998,219 46,199
Permits and fees 1,007,774 1,039,344 1,106,913 67,569
Intergovernmental 220,430 487,691 424,654 (63,037)
Investment earnings 111,212 111,212 121,676 10,464
Donations 38,331 85,923 58,323 (27,600)
Miscellaneous 16,305 31,025 41,410 10,385
Total revenues 20,284,963 20,673,743 20,747,322 73,579
Expenditures
General government
Mayor and council
Personnel services 299 299 - 299
Supplies 3,421 3,505 2,438 1,067
Other services and charges 264,382 271,374 267,107 4,267
Total mayor and council 268,102 275,178 269,545 5,633
City manager
Personnel services 505,158 461,627 459,586 2,041
Supplies 6,169 6,444 3,820 2,624
Other services and charges 91,762 100,462 80,246 20,216
Total city manager 603,089 568,533 543,652 24,881
City secretary
Personnel services 366,704 366,704 362,135 4,569
Supplies 12,826 19,757 16,591 3,166
Repairs and maintenance 140 140 - 140
Other services and charges 48,273 47,713 21,567 26,146
Total city secretary 427,943 434,314 400,293 34,021
Administrative services
Personnel services 701,623 701,578 698,243 3,335
Supplies 6,592 6,890 4,720 2,170
Other services and charges 197,873 203,606 192,392 11,214
Total administrative services 906,088 912,074 895,355 16,719
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2012
(CONTINUED)
60
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Human resources
Personnel services 322,256 322,231 305,250 16,981
Supplies 13,555 8,468 5,422 3,046
Other services and charges 58,946 54,927 37,453 17,474
Total human resources 394,757 385,626 348,125 37,501
Tax
Other services and charges 214,478 214,478 199,810 14,668
Total tax 214,478 214,478 199,810 14,668
Economic development
Personnel services 138,753 138,748 142,060 (3,312)
Supplies 13,325 19,652 10,251 9,401
Other services and charges 101,259 102,649 88,967 13,682
Total economic development 253,337 261,049 241,278 19,771
Municipal court
Personnel services 556,203 544,104 537,865 6,239
Supplies 24,033 20,500 7,528 12,972
Repairs and maintenance 1,480 1,480 - 1,480
Other services and charges 42,916 42,986 25,040 17,946
Total municipal court 624,632 609,070 570,433 38,637
Computer services
Personnel services 306,678 309,938 312,627 (2,689)
Supplies 9,230 9,319 12,924 (3,605)
Repairs and maintenance 68,830 68,830 56,115 12,715
Other services and charges 309,928 320,714 300,733 19,981
Capital outlay 21,500 88,271 51,489 36,782
Total computer services 716,166 797,072 733,888 63,184
Risk management
Personnel services 91,291 101,770 98,063 3,707
Supplies 11,879 6,407 4,526 1,881
Other services and charges 14,100 6,600 5,495 1,105
Total risk management 117,270 114,777 108,084 6,693
Total general government 4,525,862 4,572,171 4,310,463 261,708
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2012
(CONTINUED)
61
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Public safety
Police services
Personnel services 5,948,341 5,977,726 5,896,038 81,688
Supplies 357,744 405,032 380,969 24,063
Repairs and maintenance 134,967 156,561 132,824 23,737
Other services and charges 410,154 409,989 403,095 6,894
Capital outlay 31,471 67,953 99,494 (31,541)
Total police services 6,882,677 7,017,261 6,912,420 104,841
Communications
Personnel services 907,133 907,063 933,485 (26,422)
Supplies 5,722 6,494 5,553 941
Repairs and maintenance 17,764 19,676 19,129 547
Other services and charges 17,995 15,588 14,198 1,390
Total communications 948,614 948,821 972,365 (23,544)
Animal control
Personnel services 232,762 232,762 249,523 (16,761)
Supplies 18,506 31,071 30,697 374
Repairs and maintenance 2,373 3,373 1,644 1,729
Other services and charges 18,546 47,610 36,598 11,012
Capital outlay - 8,330 9,573 (1,243)
Total animal control 272,187 323,146 328,035 (4,889)
Fire and EMS
Personnel services 562,375 567,720 554,649 13,071
Supplies 38,782 87,176 82,539 4,637
Repairs and maintenance 6,694 10,180 8,701 1,479
Other services and charges 1,303,280 1,288,292 1,280,810 7,482
Capital outlay - 26,787 491,562 (464,775)
Total fire and EMS 1,911,131 1,980,155 2,418,261 (438,106)
Total public safety 10,014,609 10,269,383 10,631,081 (361,698)
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2012
(CONTINUED)
62
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Public works
Administration
Personnel services 219,308 252,737 254,328 (1,591)
Supplies 1,621 1,621 841 780
Other services and charges 1,929 1,929 1,026 903
Total administration 222,858 256,287 256,195 92
Streets
Personnel services 487,567 487,567 506,398 (18,831)
Supplies 69,980 71,980 64,582 7,398
Repairs and maintenance 181,850 231,800 351,529 (119,729)
Other services and charges 452,406 452,456 412,043 40,413
Capital outlay 62,500 145,855 - 145,855
Total streets 1,254,303 1,389,658 1,334,552 55,106
Drainage
Personnel services 305,520 305,520 299,330 6,190
Supplies 9,435 9,735 11,314 (1,579)
Repairs and maintenance 41,029 38,129 12,565 25,564
Other services and charges 5,850 5,550 4,201 1,349
Capital outlay 35,000 107,428 24,385 83,043
Total drainage 396,834 466,362 351,795 114,567
Sanitation
Other services and charges 14,200 41,840 41,839 1
Total sanitation 14,200 41,840 41,839 1
Total public works 1,888,195 2,154,147 1,984,381 169,766
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2012
(CONTINUED)
63
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Community development
Administration
Personnel services 610,075 552,629 551,902 727
Supplies 8,621 9,321 9,558 (237)
Repairs and maintenance 637 637 220 417
Other services and charges 12,403 12,016 6,546 5,470
Total administration 631,736 574,603 568,226 6,377
Planning and zoning
Personnel services 148,901 184,796 178,592 6,204
Supplies 1,585 1,855 674 1,181
Other services and charges 11,274 11,661 8,856 2,805
Total planning and zoning 161,760 198,312 188,122 10,190
Engineering
Personnel services 63,730 61,513 48,531 12,982
Supplies 1,667 1,767 351 1,416
Repairs and maintenance 530 530 19 511
Other services and charges 7,476 7,376 4,902 2,474
Total engineering 73,403 71,186 53,803 17,383
Inspection
Personnel services 425,096 425,284 424,400 884
Supplies 13,126 14,720 11,840 2,880
Repairs and maintenance 1,167 3,980 2,848 1,132
Other services and charges 42,203 32,687 13,285 19,402
Total inspection 481,592 476,671 452,373 24,298
Total community development 1,348,491 1,320,772 1,262,524 58,248
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2012
(CONTINUED)
64
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Community services
Administration
Personnel services 243,237 282,372 281,901 471
Supplies 5,775 4,575 3,366 1,209
Other services and charges 26,105 29,155 26,985 2,170
Total administration 275,117 316,102 312,252 3,850
Parks and recreation
Personnel services 703,760 703,650 687,848 15,802
Supplies 110,617 125,980 117,091 8,889
Repairs and maintenance 106,935 140,892 134,718 6,174
Other services and charges 591,859 588,810 573,456 15,354
Capital outlay 35,000.00 439,749 162,386 277,363
Total parks and recreation 1,548,171 1,999,081 1,675,499 323,582
Swimming pool
Personnel services 65,764 65,399 53,319 12,080
Supplies 15,199 14,464 13,616 848
Repairs and maintenance 11,972 3,357 1,915 1,442
Other services and charges 31,153 32,153 29,439 2,714
Total swimming pool 124,088 115,373 98,289 17,084
Building operations
Supplies 24,409 29,562 25,598 3,964
Repairs and maintenance 118,542 123,662 103,830 19,832
Other services and charges 568,473 617,704 569,888 47,816
Capital outlay 0 542,372 397,438 144,934
Total building operations 711,424 1,313,300 1,096,754 216,546
Total community services 2,658,800 3,743,856 3,182,794 561,062
Library
Personnel services 841,370 841,370 809,881 31,489
Supplies 156,261 185,257 173,060 12,197
Repairs and maintenance 2,575 1,012 680 332
Other services and charges 25,857 21,227 20,682 545
Total library 1,026,063 1,048,866 1,004,303 44,563
Total expenditures 21,462,020 23,109,195 22,375,546 733,649
Deficiency of
revenues over expenditures (1,177,057) (2,435,452) (1,628,224) 807,228
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2012
(CONTINUED)
65
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Other financing sources
Proceeds from sale of capital assets - - 9,250 9,250
Proceeds from capital lease - - 464,270 464,270
Insurance recoveries 25,392 111,441 105,502 (5,939)
Transfers in 1,151,665 1,291,665 1,291,680 15
Transfers out - - (70,663) (70,663)
Total other financing sources 1,177,057 1,403,106 1,800,039 396,933
Net change in fund balances - (1,032,346) 171,815 1,204,161
Fund balance, beginning of year 8,915,404 8,915,404 8,915,404 -
Fund balance, end of year 8,915,404$ 7,883,058$ 9,087,219$ 1,204,161$
Budgeted Amounts
CITY OF FRIENDSWOOD, TEXAS
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
66
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
67
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
68
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
NON MAJOR GOVERNMENTAL FUNDS
69
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 outlays and debt repayments.
EDA Grant Fund – This fund is used to account for receipts and expenditures related to
the U.S. Department of Commerce Economic Development Administration grant
awarded to the City in fiscal year 2008-2009.
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 in fiscal year
2009-2010.
Sidewalk Installation Fund – This fund is used to account for receipts from developers
to install sidewalks in neighborhood developments.
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.
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
proceeds from Permanent Improvement Bonds.
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, 2012 70 Capital Projects PermanentCourt Total NonmajorPolice Fire/EMS EDA TDRA Sidewalk Park Land Security and Bond GovernmentalInvestigation Donation Grant Grant InstallationDedication Technology Construction 1776 Park FundsCash and investments 129,130$ 76,568$ 519,265$ 1,476,483$ - $ 197,628$ 274,977$ 1,567,339$ 30,992$ 4,272,382$ Receivables, net of allowanceCustomer accounts - 30,236 - - - - - - - 30,236 Other 151 68 - - - 349 4,943 - 35 5,546 Receivable from other governments - - 380,735 39,451 - - - - - 420,186 Total assets 129,281$ 106,872$ 900,000$ 1,515,934$ - $ 197,977$ 279,920$ 1,567,339$ 31,027$ 4,728,350$ LIABILITIESAccounts payable 21,282$ 39,669$ - $ - $ - $ - $ - $ 183,503$ - $ 244,454$ Accrued liabilities - - - 20,377 - - 346 92,861 - 113,584 Due to other funds - - 900,000 1,495,557 - - - - - 2,395,557 Deferred revenue - - - - - - 4,625 - - 4,625 Total liabilities 21,282 39,669 900,000 1,515,934 - - 4,971 276,364 - 2,758,220 FUND BALANCESNonspendablePermanent fund - - - - - - - - 31,027 31,027 RestrictedAuthorized construction - - - - - - - 1,290,975 - 1,290,975 State and/or federal statute 107,999 - - - - - 274,949 - - 382,948 Fire/EMS donations - 67,203 - - - - - - - 67,203 City ordinances - - - - - 197,977 - - - 197,977 Total fund balances 107,999 67,203 - - - 197,977 274,949 1,290,975 31,027 1,970,130 Total liabilities and fund balances 129,281$ 106,872$ 900,000$ 1,515,934$ - $ 197,977$ 279,920$ 1,567,339$ 31,027$ 4,728,350$ ASSETSLIABILITIES AND FUND BALANCESSpecial Revenue Funds
CITY OF FRIENDSWOOD, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2012 71 Capital Projects Funds PermanentTotalCourt NonmajorPolice Fire/EMS EDA TDRA Sidewalk Park Land Security and Bond GovernmentalInvestigation Donation Grant Grant Installation Dedication Technology Construction 1776 Park FundsRevenuesFines and forfeitures - $ - $ - $ - $ - $ - $ 39,661$ - $ - $ 39,661$ Permits and fees - - - - - 67,100 - - - 67,100 Intergovernmental 125,948 - 52,671 474,617 - - - - - 653,236 Investment earnings 563 138 - - - 1,659 1,253 6,322 158 10,093Donations - 247,796 - - - - - - - 247,796 Total revenues 126,511 247,934 52,671 474,617 - 68,759 40,914 6,322 158 1,017,886 ExpendituresCurrent:General government - - - 33,800 - - 29,857 - - 63,657 Public safety 45,294 125,264 - - - - - - - 170,558 Capital outlay 10,000 - 52,671 488,221 - - - 1,918,403 - 2,469,295 Debt service:Principal - 111,191 - - - - - - - 111,191 Interest and fiscal charges - 13,764 - - - - - - - 13,764 Total expenditures 55,294 250,219 52,671 522,021 - - 29,857 1,918,403 - 2,828,465 Other financing sources (uses)Proceeds from bond issuance - - - - - - - - - Premium on issuance of bonds - - - - - - - - - Transfers in - 9,250 - 47,404 - 14,009 - - - 70,663 Transfers out - - - - (15) (175,000) - - - (175,015) Total other financing sources (uses) - 9,250 - 47,404 (15) (160,991) - - - (104,352) Net change in fund balances 71,217 6,965 - - (15) (92,232) 11,057 (1,912,081) 158 (1,914,931) Fund balances, beginning of year 36,782 60,238 - - 15 290,209 263,892 3,203,056 30,869 3,885,061 Fund balances, end of year 107,999$ 67,203$ - $ - $ - $ 197,977$ 274,949$ 1,290,975$ 31,027$ 1,970,130$ Special Revenue Funds
CITY OF FRIENDSWOOD, TEXAS
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCE – BUDGET AND ACTUAL
FIRE/EMS DONATION FUND
YEAR ENDED SEPTEMBER 30, 2012
72
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Interest income - $ - $ 138$ 138$
Donations 241,000 241,000 247,796 6,796
Total revenues 241,000 241,000 247,934 6,934
Expenditures
Current
Public safety 112,187 112,187 125,264 (13,077)
Debt service
Principal 111,192 111,192 111,191 1
Interest and fiscal charges 17,621 17,621 13,764 3,857
Total expenditures 241,000 241,000 250,219 (9,219)
Excess (deficiency) of revenues
over expenditures - - (2,285) (2,285)
Other financing sources (uses)
Transfers in - - 9,250 9,250
Net change in fund balance - - 6,965 6,965
Fund balance, beginning of year 60,238 60,238 60,238 -
Fund balance, end of year 60,238$ 60,238$ 67,203$ 6,965$
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, 2012
73
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Property taxes 1,639,607$ 1,639,607$ 1,634,045$ (5,562)$
Interest income 7,000 7,000 3,714 (3,286)
Total revenues 1,646,607 1,646,607 1,637,759 (8,848)
Expenditures
Debt service
Principal 1,452,667 1,452,667 1,450,897 1,770
Interest and fiscal charges 893,111 896,361 754,565 141,796
Bond issuance costs - 131,381 131,380 1
Total expenditures 2,345,778 2,480,409 2,336,842 143,567
Excess (deficiency) of revenues
over expenditures (699,171) (833,802) (699,083) 134,719
Other financing sources (uses)
Issuance of refunding bonds - 134,631 8,890,000 8,755,369
Premium on issuance of bonds - - 563,666 563,666
Payments to escrow agent - - (9,425,538) (9,425,538)
Transfers in 608,475 608,475 608,476 1
Total other financing sources 608,475 743,106 636,604 (106,502)
Net change in fund balance (90,696) (90,696) (62,479) 28,217
Fund balance, beginning of year 308,231 308,231 308,231 -
Fund balance, end of year 217,535$ 217,535$ 245,752$ 28,217$
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)
74 Table 1City of FriendswoodNet Assets by ComponentLast Ten Fiscal Years(accrual basis of accounting)(unaudited)2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Governmental activitiesInvested 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$ 66,580,049$ 65,582,783$ Restricted 585,080 1,271,568 1,576,829 2,034,157 2,391,482 2,773,910 2,461,510 1,977,801 922,874 872,869 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 8,227,254 8,828,132 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$ 75,730,177$ 75,283,784$ Business-type activitiesInvested 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$ 26,251,346$ 25,618,823$ Restricted 305,660 444,548 445,086 41,057 162,218 27,246 93,526 593,597 731,410 786,600 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 11,373,311 13,032,798 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$ 38,356,067$ 39,438,221$ Primary governmentInvested 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$ 92,831,395$ 91,201,606$ Restricted 890,740 1,716,116 2,021,915 2,075,214 2,553,700 2,801,156 2,555,036 2,571,398 1,654,284 1,659,469 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 19,600,565 21,860,930 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$ 114,086,244$ 114,722,005$ Fiscal Year
75 Table 2City of FriendswoodChanges in Net AssetsLast Ten Fiscal Years(accrual basis of accounting)(unaudited)2003 2004 2005 2006 2007 2008 2009 2010 2011 2012ExpensesGovernmental 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$ 4,876,064$ 4,737,702$ 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 10,548,568 10,736,805 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 3,517,707 3,738,111 Community development - - - - - - - 1,203,204 1,284,188 1,520,401 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 3,058,313 3,227,731 Library - - - - - - - 979,084 979,978 1,004,303 Interest and fiscal charges 128,192 465,770 478,495 857,602 835,511 803,733 678,705 789,652 871,790 757,011 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 25,136,608 25,722,064 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 6,955,505 6,902,279 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 1,644,074 1,638,495 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 8,599,579 8,540,774 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 33,736,187 34,262,838 Program RevenuesGovernmental 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 1,158,392 1,167,619 Public safety 9,433 9,141 15,013 54,653 23,267 21,356 46,773 38,438 39,914 39,661 Community development and public works 1,865,086 822,927 758,487 805,710 998,625 838,060 602,265 - - - Public works - - - - - - - 152,163 158,858 171,890 Community development - - - - - - - 550,286 643,150 730,211 Community services 66,862 65,850 66,281 112,681 219,944 132,244 411,207 258,030 267,837 271,912 Library - - - - - - - 44,313 43,147 38,543 Operating grants and contributions 661,568 778,261 1,271,119 771,477 489,707 4,021,908 5,755,038 2,819,418 3,150,808 648,058 Capital grants and contributions 749,772 239,200 235,300 - - - - - - 527,288 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 5,462,106 3,595,182 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 12,726,936 11,258,216 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 12,726,936 11,258,216 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 18,189,042 14,853,398 Net (Expense)/RevenuesGovernmental 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) (19,674,502) (22,126,882) Business-type activities 754,310 590,440 1,176,155 1,350,407 726,426 557,186 3,784,659 1,153,671 4,127,357 2,717,442 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)$ (15,547,145)$ (19,409,440)$(Continued)Fiscal Year
76 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012General Revenues and Other Changes in Net AssetsGovernmental activities:Taxes Property 9,706,202$ 10,931,393$ 11,352,598$ 11,304,684$ 11,876,246$ 12,512,950$ 13,481,500$ 13,664,765$ 13,944,725$ 14,165,599$ 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 4,002,740 3,907,577 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 1,598,407 1,556,556 Other 79,691 71,028 53,790 11,940 16,186 25,429 28,859 28,859 28,883 23,356 Investment earnings 154,558 219,085 376,435 915,710 1,063,715 648,301 166,492 93,018 110,863 137,202 Gain (loss) on sale of capital assets - - - - 345,976 - 4,320 33,647 23,831 17,601 Miscellaneous 30,826 - 51,503 21,556 4,152 73,026 214,484 131,545 126,228 147,457 Transfers 664,102 714,278 763,361 680,850 875,616 981,016 547,456 168,276 (5,336,312) 1,725,141 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 14,499,365 21,680,489 Business-type activities:Investment earnings 160,629 59,869 114,932 262,761 1,236,092 531,758 128,338 87,056 55,163 82,853 Gain (loss) on sale of capital assets - - - - - - (48,678) (182,198) - 7,000 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) 5,336,312 (1,725,141) Total business-type activities (390,696) (654,409) (634,951) (416,714) 364,658 (449,258) (467,796) (263,418) 5,391,475 (1,635,288) Total primary government 14,178,480 15,233,993 16,338,332 17,397,306 19,690,152 18,876,156 19,210,531 19,220,647 19,890,840 20,045,201 Change in Net AssetsGovernmental activities 3,627,347 3,244,048 3,607,869 3,636,461 640,596 (1,041,345) (2,246,340) (761,621) (5,175,137) (446,393) Business-type activities 363,614 (63,969) 541,204 933,693 1,091,084 107,928 3,316,863 890,253 9,518,832 1,082,154 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$ 4,343,695$ 635,761$ (Concluded)Note: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
77 Table 3City of FriendswoodFund Balances, Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting)(unaudited)2003 2004 2005 2006 2007 2008 2009 2010 2011 2012General FundReserved 683,459$ 635,182$ 511,197$ 1,313,829$ 601,646$ 1,037,279$ 686,404$ 1,731,056$ -$ -$ Unreserved 5,055,679 5,971,319 7,032,843 8,973,646 9,926,479 9,177,390 9,185,590 7,399,217 - - Nonspendable - - - - - - - - 220,151 99,874 Restricted - - - - - - - - 97,728 173,015 Assigned - - - - - - - - 1,085,527 434,931 Unassigned - - - - - - - - 7,511,998 8,379,399 Total general fund 5,739,138 6,606,501 7,544,040 10,287,475 10,528,125 10,214,669 9,871,994 9,130,273 8,915,404 9,087,219$ All Other Governmental FundsReserved 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 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 25,232 25,587 26,292 27,477 28,901 30,070 30,507 30,720 - - Nonspendable - - - - - - - - 30,869 31,027 Restricted - - - - - - - - 4,162,423 2,184,855 Total all other governmental funds 7,885,346$ 6,438,179$ 10,182,032$ 8,596,105$ 6,120,262$ 3,307,371$ 2,817,715$ 2,026,547$ 4,193,292$ 2,215,882$ Note: In fiscal year 2011, the City implemented GASB 54 which changed the fund balance classifications to nonspendable, restricted, committed, assigned and unassigned. See Note 1 to the Basic Financial Statements. Fiscal Year
78 Table 4City of FriendswoodChanges in Fund Balances, Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting)(unaudited)2003 2004 2005 2006 2007 2008 2009 2010 2011 2012RevenuesTaxes 13,688,737$ 14,843,855$ 15,779,126$ 16,190,756$ 16,961,818$ 17,606,273$ 18,763,998$ 19,104,625$ 19,592,092$ 19,630,172$ Fines and penalties 639,678 879,369 1,112,916 1,163,984 1,288,794 1,161,903 1,143,102 1,043,126 1,012,592 1,037,880 Licenses and permits 856,721 807,041 717,607 769,352 1,017,502 944,756 966,797 960,479 1,069,845 1,174,013 Intergovernmental 526,316 795,325 985,339 535,074 248,702 3,801,013 5,794,303 2,652,037 3,109,645 1,077,890 Investment earnings 153,848 218,419 375,123 906,552 1,054,698 639,402 161,106 90,337 109,272 135,483 Donations 235,749 215,535 213,381 219,353 229,939 265,535 272,911 280,223 276,209 306,119 Other revenues 794,228 152,616 414,923 277,995 279,788 37,876 34,448 81,366 78,243 41,410 Total revenues 16,895,277 17,912,160 19,598,415 20,063,066 21,081,241 24,456,758 27,136,665 24,212,193 25,247,898 23,402,967 ExpendituresGeneral government 3,042,541 3,249,965 3,420,274 3,315,844 4,605,245 4,114,662 4,178,062 4,224,384 4,397,858 4,322,631 Public safety 5,530,953 5,810,503 7,127,975 6,903,806 7,482,603 12,404,745 14,717,404 9,799,372 10,093,964 10,201,010 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 - - - - - - - 1,956,479 1,637,237 1,702,119 Community development - - - - - - - 1,208,899 1,284,188 1,520,401 Community services 2,751,993 2,655,315 2,626,329 2,630,094 2,866,388 3,266,250 3,439,475 2,458,422 2,472,015 2,622,970 Library - - - - - - - 979,084 979,978 1,004,303 Capital outlay 1,442,339 4,033,197 7,040,173 4,292,854 3,711,569 4,339,546 2,489,845 3,799,303 4,254,582 3,705,622 Debt principal payment 468,987 469,930 459,422 608,184 658,073 774,584 787,293 787,590 1,065,865 1,562,088 Interest and fiscal agent charges 213,741 476,207 594,076 757,402 739,487 704,136 691,638 773,744 864,746 768,329 Bond issuance costs and fees - - - - - - - - 200,227 131,380 Total expenditures 18,437,946 19,206,242 23,704,608 21,087,582 23,664,163 28,649,827 29,710,598 25,987,277 27,250,660 27,540,853 Excess of revenuesunder expenditures(1,542,669) (1,294,082) (4,106,193) (1,024,516) (2,582,922) (4,193,069) (2,573,933) (1,775,084) (2,002,762) (4,137,886) Other Financing Sources (Uses)Sale of capital assets 15,826 - - 187,345 785,942 22,600 - 23,340 8,992 9,250 Insurance recoveries - - - - - 63,106 123,707 50,579 45,334 105,502 Issuance of debt 8,701,495 - 8,024,224 - - - - - 3,460,000 8,890,000 Capital lease proceeds - - - - - - 1,133,460 - - 464,270 Refunding bonds issued - - - - - - - - 5,460,000 - Payment to refunding bond escrow agent - - - - - - - - - (9,425,538) Premium on issuance of debt - - - - - - - - 317,452 563,666 Transfer in 1,955,635 853,073 923,361 904,955 1,226,304 992,586 2,098,405 1,512,987 1,235,892 1,970,819 Transfer out (1,382,860) (138,795) (160,000) (224,105) (350,688) (11,570) (1,613,970) (1,344,711) (6,573,032) (245,678) Total other financing sources (uses) 9,290,096 714,278 8,787,585 868,195 1,661,558 1,066,722 1,741,602 242,195 3,954,638 2,332,291 Net change in fund balance7,747,427$ (579,804)$ 4,681,392$ (156,321)$ (921,364)$ (3,126,347)$ (832,331)$ (1,532,889)$ 1,951,876$ (1,805,595)$ Debt service as a percentage of noncapital expenditures 4.0% 6.2% 6.3% 8.1% 7.0% 6.1% 5.4% 7.0% 8.4% 9.8%Note:From 2003 to 2009, Public Works and Community Development were combined as one department. Beginning in 2010, they are shown as separate departments.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
79 Table 5City of FriendswoodAssessed Value and Taxable Value of PropertyLast Ten Fiscal Years(Unaudited)Less: TotalCommercial Total Exemptions and Total DirectFiscal Tax Residential and Industrial Other Assessed Tax Exempt Taxable TaxYearYear Property Property PropertyValue PropertyValue Rate2003 2002 1,552,152,869$ 187,715,742$ 191,747,800$ 1,931,616,411$ 425,222,769$ 1,506,393,642$ 0.63850 2004 2003 1,773,557,635 202,586,683 202,516,869 2,178,661,187 496,157,461 1,682,503,726 0.63850 2005 2004 1,882,823,995 211,269,120 189,513,770 2,283,606,885 532,056,903 1,751,549,982 0.63850 2006 2005 1,998,747,285 217,285,258 183,010,440 2,399,042,983 557,521,388 1,841,521,595 0.60400 2007 2006 2,163,006,305 260,809,119 215,897,086 2,639,712,510 622,333,722 2,017,378,788 0.58210 2008 2007 2,305,398,212 266,240,487 223,856,148 2,795,494,847 642,347,609 2,153,147,238 0.57640 2009 2008 2,443,040,835 271,618,942 254,262,180 2,968,921,957 672,410,955 2,296,511,002 0.57970 2010 2009 2,509,894,027 277,693,532 248,910,248 3,036,497,807 695,681,434 2,340,816,373 0.57970 2011 2010 2,547,883,315 276,080,104 235,256,040 3,059,219,459 703,419,784 2,355,799,675 0.58510 2012 2011 2,584,070,993 280,043,373 230,531,859 3,094,646,225 706,059,683 2,388,586,542 0.59020 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.
80 Table 6City of FriendswoodDirect and Overlapping Property Tax RatesLast Ten Fiscal Years(unaudited)(rate per $100 of assessed value)FiscalYear Friendswood Clear Creek Galveston CountyEnded Debt Total Independent Independent Drainage Galveston HarrisSeptember 30, General Service Direct School District School District District CountyCounty2003 0.5547$ 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 2011 0.5198 0.0653 0.5851 1.3670 1.3600 0.1425 0.6198 0.62998 2012 0.5218 0.0684 0.5902 1.3670 1.3600 0.1400 0.6129 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 applyto all property owners. Overlapping rates for Friendswood Independent School District, Galveston County Consolidated Drainage District and GalvestonCounty apply only to residents whose property is in Galveston County. Overlapping rates for Clear Creek Independent School District and Harris Countyapply only to residents whose property is in Harris County.City Direct Rates Overlapping Rates
81
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 Assessed Taxable Assessed
Taxpayer Value Rank Value Value Rank Value
Reserve at Autumn Crk Ltd 15,468,170$ 1 0.65% 10,326,050$ 3 0.69%
Kroger Co. 13,227,856 2 0.55% - -
Texas-New Mexico Power Co. 10,429,910 3 0.44% 9,086,300 4 0.60%
Autumn Creek Dev LTD 9,627,310 4 0.40% 6,166,950 8 0.41%
G&I VI Sky Hawk LP 8,807,817 5 0.37% - -
H.E. Butt Grocery Company 8,334,390 6 0.35% - -
HCP Friendswood LLC 6,995,240 7 0.29% - -
MB Friendswood Parkwood LP 5,861,410 8 0.25% - -
Friendswood Retirement 5,507,771 9 0.23% 8,169,425 6 0.54%
Buzbee Family LTD Partnership 5,288,460 10 0.22% - -
Southwestern Bell Telephone Co. - - 13,738,010 1 0.91%
Blackhawk Apartments - - 11,312,470 2 0.75%
Southwest Properties - - 8,849,980 5 0.59%
ACMC Friendswood Inc.6,205,770 7 0.41%
Albertson's - - 4,147,230 9 0.28%
Center Point Energy Company - - 4,020,390 10 0.27%
Total 89,548,334 3.75% 82,022,575 5.44%
All other taxpayers 2,299,038,208 96.25% 1,424,371,067 94.56%
2,388,586,542$ 100.00% 1,506,393,642$ 100.00%
Source: Galveston Central Appraisal District and Harris County Appraisal District
2012 2003
82
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
2003 9,642,413$ 9,496,887$ 98.49% 136,586$ 9,633,473$ 99.91%
2004 10,785,308 10,630,820 98.57% 146,501 10,777,321 99.93%
2005 11,221,282 11,078,265 98.73% 134,498 11,212,763 99.92%
2006 11,151,572 11,019,314 98.81% 135,435 11,154,749 100.03%
2007 11,740,541 11,532,882 98.23% 194,503 11,724,675 99.86%
2008 12,351,183 12,193,715 98.73% 207,217 12,400,932 100.40%
2009 13,230,005 13,113,928 99.12% 152,414 13,266,342 100.27%
2010 13,482,173 13,395,543 99.36% 100,393 13,495,936 100.10%
2011 13,680,511 13,608,076 99.47% 62,844 13,670,920 99.93%
2012 13,984,872 13,916,558 99.51% - 13,916,558 99.51%
Source: Galveston County Tax Assessor/Collector and City of Friendswood records.
Collected within the
Fiscal Year of the Levy Total Collections to Date
83 Table 9City of FriendswoodRatios of Outstanding Debt by TypeLast Ten Fiscal Years(Unaudited)General Certificates General Certificates Water Total Percentage ofFiscal Obligation of Revenue Capital Obligation ofRevenue Primary Personal PerYear Bonds Obligation Bonds Leases Bonds Obligation Bonds Government Income Capita 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 0.41% 1,355 2009 15,445,000 - - 982,518 865,000 - 42,260,000 59,552,518 0.50% 1,582 2010 14,800,000 - - 839,928 - - 42,045,000 57,684,928 0.47% 1,516 2011 22,885,000 - - 710,023 - - 35,205,000 58,800,023 0.46% 1,579 2012 21,605,000 - - 975,726 - - 34,115,000 56,695,726 N/A 1,498 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 notincluded on this table.N/A - Information is not available.Governmental Activities Business-Type Activities
84 Table 10City of FriendswoodRatios of Net General Bonded Debt OutstandingLast Ten Fiscal Years(Unaudited)General Less Debt Net Percentage ofFiscal Taxable Obligation Service General Taxable Value PerYear Population Value Bonds Funds Bonded DebtProperty Capita 2003 33,800 1,506,393,642$ 10,375,891$ 254,568$ 10,121,323$ 0.67% 299$ 2004 34,152 1,682,503,726 10,059,865 829,701 9,230,164 0.55% 270 2005 34,272 1,751,549,982 17,590,000 1,395,767 16,194,233 0.92% 473 2006 34,306 1,841,521,595 17,150,000 1,595,397 15,554,603 0.84% 453 2007 34,759 2,017,378,788 16,660,000 1,813,320 14,846,680 0.74% 427 2008 35,500 2,153,147,238 16,065,000 2,104,376 13,960,624 0.65% 393 2009 37,653 2,296,511,002 15,445,000 2,355,024 13,089,976 0.57% 348 2010 38,057 2,340,816,373 14,800,000 594,422 14,205,578 0.61% 373 2011 37,247 2,355,799,675 22,885,000 308,231 22,576,769 0.96% 606 2012 37,839 2,388,586,542 21,605,000 245,752 21,359,248 0.89% 564 Note:Details regarding the City's outstanding debt can be found in the notes to the financial statements.General Bonded Debt Outstanding
85
Table 11
City of Friendswood
Direct and Overlapping Governmental Activities Debt
As of September 30, 2012
(Unaudited)
Estimated
Estimated Share of
Debt Percentage Overlapping
Governmental Unit Outstanding Applicable Debt
Debt repaid with property taxes
Friendswood Independent School District 111,019,978$ 100.00% 111,019,978$
Clear Creek Independent School District 643,272,012 3.359% 21,604,934
Galveston County 265,054,000 5.30% 14,055,814
Harris County 3,639,971,000 0.481% 17,508,261
Subtotal, overlapping debt 164,188,987
City direct debt 22,580,726
Total direct and overlapping debt 186,769,713$
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.
86
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, 2012, is $.5902 per $100 of assessed valuation with assessed
valuation being 100% of market value.
87
Table 13
City of Friendswood
Pledged-Revenue Coverage
Last Ten Fiscal Years
(Unaudited)
Utility Less: Net
Fiscal Service Operating Available Debt Service
Year Charges Expenses Revenue Principal Interest Coverage
2003 7,275,746$ 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
2011 12,726,936 5,410,497 7,316,439 1,440,000 1,640,437 2.38
2012 11,258,216 5,361,567 5,896,649 1,090,000 1,589,565 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
88
Table 14
City of Friendswood
Demographic and Economic Statistics
Last Ten Calendar Years
(Unaudited)
Per
Capita
Calendar Estimated Personal Personal Unemployment
Year Population Income Income Rate
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 11,937,436,000 41,621 6.2%
2010 38,057 12,257,208,000 41,876 7.1%
2011 37,247 12,848,571,000 43,444 6.8%
2012 37,839 - - 5.0%
Sources:Population information was provided from past financial reports. Unemployment rates,
personal income and per capita personal inocme were obtained from the U.S.
Department of Labor Bureau of Labor Statistics website or the Texas Workforce
Commission website.
Note:Personal Income and Per Capita Personal Income numbers are for Galveston County;
2012 numbers were not available.
89
Table 15
City of Friendswood
Principal Employers
Current Year and Six Years Ago
(Unaudited)
Percentage Percentage
Estimated of Total City Estimated of Total City
Employer Employees Workforce Employees Workforce
Friendswood ISD 689 28.33% 675 34.84%
HEB 349 14.35% 275 14.19%
Kroger 287 11.80% 234 12.07%
City of Friendswood 239 9.83% 222 11.46%
Clear Creek ISD 177 7.28%2 - 0.00%1
Friendship Haven Nursing Home 125 5.14% 135 6.97%
Friendswood Healthcare (Autumn Hills) 80 3.29% 90 4.64%
McDonalds 74 3.04% 33 1.70%
U.S. Post Office 66 2.71% 70 3.61%
Emeritus 65 2.67% - 0.00%
UTMB 62 2.55% - 0.00%1
Luna's Mexican Restaurant 62 2.55% 40 2.06%
Timber Creek Golf Club 45 1.85% 41 2.12%
Sonic 40 1.64% 49 2.53%
Village on the Park 37 1.52% 34 1.75%
Perry & Sons Market and Grille 35 1.44% - 0.00%1
Gary Greene Realtors - 0.00%3 40 2.06%
Total 2,432 100.00% 1,938 100.00%
Source: City Economic Development Division
Note: Principal Employer data was not available for fiscal year 2003 - 2005.
1 Data was not available for fiscal year 2006.
2 Includes Wedgewood Elementary and Brookside Intermediate.
3 Data was not available for fiscal year 2012.
20062012
90
Table 16
City of Friendswood
Full-time Equivalent City Government Employees by Function/Program
Last Ten Fiscal Years
(Unaudited)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Function/Program
General Government:
City Manager 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 4.65
City Secretary 4.00 4.00 4.00 4.00 5.00 5.00 5.00 5.00 5.00 5.00
Administrative Services 21.70 22.72 24.44 25.81 26.19 27.20 27.20 27.20 27.20 28.20
Public Safety:
Police 65.06 67.40 70.07 72.06 81.41 83.90 79.40 79.40 80.40 80.40
Fire marshall and fire 12.58 12.85 12.85 4.50 6.11 6.10 6.10 6.10 6.10 6.10
Public Works: - - - - - - - 19.00 19.00 19.33
Community Development: - - - - - - - 17.70 17.70 16.89
Community Development and
Public Works: 34.00 34.00 34.00 35.00 36.00 36.00 36.70 - - -
Community Services: 30.43 30.43 30.43 31.01 32.18 32.20 32.20 18.95 18.95 19.28
Library - - - - - - - 14.72 14.72 14.72
Water: 9.00 9.00 9.00 9.00 9.00 9.00 10.30 10.30 10.30 10.30
Sewer: 6.00 7.00 7.00 8.00 8.00 8.00 9.00 9.00 9.00 9.00
Total City Employees: 188.27 192.90 197.29 194.88 209.39 212.90 211.40 212.87 213.87 213.87
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 2003 - 2009, public works and community development were combined.
In 2010 - 2012, they are shown as two separate departments.
Beginning in fiscal year 2010, the fulltime equivalent for Library is shown separate from Community Services. In previous years, the fulltime
equivalent is included with Community Services.
Full-time Equivalent Employees as of September 30
91 Table 17City of FriendswoodOperating Indicators by Function/ProgramLast Ten Fiscal Years(Unaudited)2003200420052006200720082009201020112012Function/ProgramGeneral Government:Building permits issued 1,048 851 1,129 882 975 872 1,189 984 1,222 1,317 Building inspections conducted 10,841 10,051 12,641 12,264 11,135 11,472 6,673 8,744 9,514 10,486 Police:Physical arrests 752 1,189 1,041 1,804 1,923 1,868 1,794 2,002 1,962 1,885 Parking violations 74 45 22 30 34 46 33 27 82 61 Traffic violations 9,754 11,196 12,053 12,623 11,374 7,897 7,821 7,000 7,291 6,518 Fire Marshall:Inspections 1,065 812 731 668 1,300 1,312 1,653 1,509 1,444 1,616 Fire:Emergency responses 2,285 2,395 2,453 2,497 2,723 2,794 2,950 2,737 2,818 2,975 Fires extinguished 79 82 93 75 74 118 102 110 108 86 Parks and Recreation:Recreation participants NA NA NA NA NA 7,547 12,283 13,792 13,894 16,068 Facility reservations NA NA NA NA 1,115 1,065 1,727 1,451 503 493 Library:Volumes in collection 88,185 88,737 90,163 92,633 93,028 96,100 94,512 99,880 97,622 125,251 1 Total volumes borrowed 290,044 280,520 281,060 300,241 308,718 323,323 350,892 356,787 349,223 355,447 Water:New connections 270 388 208 209 289 202 46 160 173 185 Water main breaks 10 54 76 105 44 73 73 64 516 112 Average daily consumption 4,172 3,957 4,094 3,886 3,472 4,217 4,209 3,408 6,406 4,584 (thousands of gallons)Peak daily consumption 11,491 10,718 9,935 7,030 6,358 11,004 7,187 7,606 13,698 10,896 Sewer:Average daily sewage treatment 3,332 3,258 3,081 3,064 3,425 3,120 2,950 3,465 2,787 2,968 (thousands of gallons)Maximum daily flow 10,180 8,563 10,587 10,484 10,484 7,520 9,537 11,393 10,833 10,777 (thousands of gallons)Source: Various City departments and prior year CAFRsNA - Information is not available.1Beginning in FY 2012, total volumes count also includes all electronic materials.Fiscal Year Fiscal Year
92 Table 18City of FriendswoodCapital Asset Statistics by Function/ProgramLast Ten Fiscal Years(Unaudited)2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Function/ProgramPoliceStations 1111111111Patrol units 15151618282724262625FireStations 3333334444Public WorksStreets - paved (miles) 105 157 157 179 150 159 160 161 162 164Streets - unpaved (miles)1441022222Traffic signals 0333333333Parks and RecreationAcreage 189 189 189 189 189 189 189 189 189 189Parks 8888888888Swimming pool 1111111111Tennis courts4444444444Library 1111111111WaterWater mains (miles) 160 160 165 179 180 180 181 183 184 186Fire hydrants 1,250 1,250 1,250 1,250 1,275 1,275 1,275 1,305 1,324 1,588Connections 10,600 10,988 11,196 11,405 11,748 11,982 12,057 12,231 12,476 12,711Storage capacity 5,993 5,993 5,993 5,993 5,993 5,993 5,993 5,993 7,500 7,500(thousands of gallons)SewerSanitary sewers (miles) 160 160 165 153 155 155 156 158 159 162Connections 10,240 10,331 10,537 10,682 10,902 11,115 11,256 11,404 11,563 11,828Storm sewers (miles) 86 92 92 92 95 95 96 98 99 100Treatment capacity 4,850 4,850 4,8504,850 4,850 4,850 4,850 4,850 4,850 4,850(thousands of gallons)Source: Various City departments and prior year CAFRsFiscal Year