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HomeMy WebLinkAboutComprehensive Annual Financial Report - FY2014 CITY OF FRIENDSWOOD, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED SEPTEMBER 30, 2014 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, 2014 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 1-3 Management’s Discussion and Analysis (Unaudited) 4-16 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 17 Statement of Activities 18 Fund Financial Statements Governmental Funds Balance Sheet 19 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 20 Statement of Revenues, Expenditures and Changes in Fund Balances 21 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 22 Proprietary Funds Statement of Net Position 23-24 Statement of Revenues, Expenses and Changes in Fund Net Position 25 Statement of Cash Flows 26-27 Notes to Basic Financial Statements 28-61 Required Supplementary Information Schedule of Funding Progress for Participation in Texas Municipal Retirement System 62 Schedule of Funding Progress – Post Employment Benefits Plan Other Than Pensions 63 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – General Fund 64-70 Notes to Required Supplementary Information 71-73 Combining and Individual Fund Statements and Schedules Non-major Governmental Funds 74 Combining Balance Sheet 75 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 76 CITY OF FRIENDSWOOD, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED SEPTEMBER 30, 2014 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 77 Debt Service Fund 78 STATISTICAL SECTION (Unaudited) Table Page(s) Financial Trends Net Position by Component 1 79 Changes in Net Position 2 80-81 Fund Balances, Governmental Funds 3 82 Changes in Fund Balances, Governmental Funds 4 83 Revenue Capacity Assessed Value and Taxable Value of Property 5 84 Direct and Overlapping Property Tax Rates 6 85 Principal Property Tax Payers 7 86 Property Tax Levies and Collections 8 87 Debt Capacity Ratios of Outstanding Debt by Type 9 88 Ratios of Net General Bonded Debt Outstanding 10 89 Direct and Overlapping Governmental Activities Debt 11 90 Legal Debt Margin Information 12 91 Pledged-Revenue Coverage 13 92 Demographic and Economic Information Demographic and Economic Statistics 14 93 Principal Employers 15 94 Operating Information Full-Time Equivalent City Government Employees by Function/Program 16 95 Operating Indicators by Function/Program 17 96 Capital Asset Statistics by Function/Program 18 97 INTRODUCTORY SECTION ii iii iv v CITY OF FRIENDSWOOD, TEXAS PRINCIPAL OFFICIALS AS OF SEPTEMBER 30, 2014 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-17 Jim Hill Council Member - Position No. 3 May-15 Patrick J. McGinnis, MD Council Member - Position No. 4 May-16 John H. Scott Council Member - Position No. 5 May-17 Carl W. Gustafson Council Member - Position No. 6 May-16 Key Staff Position Roger C. Roecker City Manager Morad Kabiri Assistant City Manager Cindy S. Edge Director of Administrative Services Terry Byrd Fire Marshal Patrick Donart 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 vi vii CITY OF FRIENDSWOOD ORGANIZATIONAL CHART FINANCIAL SECTION AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL WEAVER AND TIDWELL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS 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 Report on the Financial Statements 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, 2014, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements The City’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the West Ranch Management District, a discretely presented component unit of the City, which represents 100% of the assets, net position and revenues of the discretely presented component units. 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 solely 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 from material misstatement. The financial statements of the West Ranch Management District were not audited in accordance with Governmental Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of To the Honorable Mayor, City Council and City Manager City of Friendswood, Texas 2 significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 1 to the basic financial statements, the City has adopted the provisions of Governmental Accounting Standards Board Statement No. 65, Items Previously Reported as Assets and Liabilities. Beginning net position on the government-wide Statement of Net Position and the proprietary fund Statement of Net Position has been restated to reflect the effect of implementation of this statement. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, Schedule of Funding Progress for Participation in Texas Municipal Retirement System, Schedule of Funding Progress – Post Employment Benefits Other Than Pensions, and Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund 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. To the Honorable Mayor, City Council and City Manager City of Friendswood, Texas 3 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2015, 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 in considering the City’s internal control over financial reporting and compliance. WEAVER AND TIDWELL, L.L.P. Houston, Texas March 16, 2015 4 Management’s Discussion and Analysis (Unaudited) As management of the City of Friendswood (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City of Friendswood for the fiscal year ended September 30, 2014. Please read this information in conjunction with the basic financial statements that follow this section. The discussion and analysis includes comparative data for 2013. FINANCIAL HIGHLIGHTS Some of the City’s financial highlights for the fiscal year ending September 30, 2014 include:  The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $116,261,509.  The City’s total net position increased during the year by $1,638,637.  Unrestricted net position is $25,617,011.  Program revenues of $15,530,271 reduced the net cost of the City’s functions to be financed from the City’s general revenues to $19,894,741. OVERVIEW OF THE FINANCIAL STATEMENTS Components of the Financial Section Basic Financial  Statements Notes to the  Financial  Statements Fund Financial  Statements Government‐ Wide Financial  Statements Independent  Auditors' Report Managment's  Discussion and  Analysis Required  Supplementary  Information Summary Detail  5 This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements report information for the City as a whole. These statements included transactions and balances relating to all assets, including infrastructure capital assets. These statements are designed to provide information about cost of services, operating results, and financial position of the City as an economic entity. The Statement of Net Position and the Statement of Activities, which appear first in the City’s financial statements, report information on the City’s activities that enable the reader to understand the financial condition of the City. These statements are prepared using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account even if cash has not yet changed hands. The Statement of Net Position presents information on all of the City’s assets and liabilities with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Other non-financial factors, such as the City’s property tax base and the condition of the City’s infrastructure, need to be considered in order to assess the overall health of the City. The Statement of Activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows – the accrual method rather than modified accrual that is used in the fund level statements. 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 – Most of the City’s basic services are reported here including general government (mayor and council, city secretary, city manager, and administrative services); public safety (police, volunteer fire department and fire marshal); public works (streets and drainage); community development (engineering, building inspection and planning and zoning); community services (parks, facility operations and community activities) and library. Interest payments on the City’s debt are also reported here. Property tax, sales tax, franchise taxes, municipal court fines and permit fees finance most of the activities.  Business-type activities – Services involving a fee for those services, which include the City’s water and sewer system are reported here.  Component Unit activities include activities of The West Ranch Management District. 6 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 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 the City’s near-term financing requirements. 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. Both the governmental fund balance sheet and the governmental statement of revenues, 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 which is considered to be a major fund. Management has elected to present the debt service fund as a major fund with singular presentation rather than aggregated with the other non-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. Proprietary funds The City maintains two types of proprietary funds: enterprise and internal service funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses an enterprise fund to account for its operation in water distribution and wastewater collection/treatment along with its water and wastewater impact fees, and water construction projects. Management would note that trash collection services are provided by a third party contract. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses an internal service fund to account for fleet management services. Because these services predominantly benefit governmental rather than business-type functions, they have been included within the governmental activities in the government-wide financial statements. 7 Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes are the last section of the basic financial statements. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain Required Supplementary Information (RSI). The RSI includes schedules of funding progress for the Texas Municipal Retirement System and the City’s other post-employment healthcare benefits. The City adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided in RSI to demonstrate compliance with this budget. RSI can be found after the basic financial statements. 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. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. For the City of Friendswood, assets exceeded liabilities by $116.3 million as of September 30, 2014 in the primary government, which is an increase in the City’s overall financial position compared to the prior year. The largest portion of the City’s net position (77.3 percent) reflects its investments in capital assets (e.g., land, buildings and improvements, machinery and equipment, infrastructure, water and sewer system, construction in progress and water rights); less any debt outstanding used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the assets themselves cannot be used to liquidate these liabilities. The following table reflects the condensed Statement of Net Position. 8 CONDENSED STATEMENT OF NET POSITION 2014 2013 2014 2013 2014 2013 Current and other assets 15,885,919$ 14,263,045$ 16,465,206$ 20,158,255$ 32,351,125$ 34,421,300$ Capital assets 85,049,272 86,127,831 56,244,200 55,861,351 141,293,472 141,989,182 Total assets 100,935,191 100,390,876 72,709,406 76,019,606 173,644,597 176,410,482 Deferred outflows of resources 470,752 - 292,040 - 762,792 - Total assets and deferred outflows of resources 101,405,943 100,390,876 73,001,446 76,019,606 174,407,389 176,410,482 Long-term liabilities 20,375,437 21,614,799 30,913,294 31,838,747 51,288,731 53,453,546 Other liabilities 4,173,312 3,436,216 2,683,837 4,252,247 6,857,149 7,688,463 Total liabilities 24,548,749 25,051,015 33,597,131 36,090,994 58,145,880 61,142,009 Net Position: Net investment in capital assets 65,404,791 65,056,180 24,495,816 22,961,547 89,900,607 88,017,727 Restricted 653,496 718,275 90,395 176,882 743,891 895,157 Unrestricted 10,798,907 9,565,406 14,818,104 16,790,183 25,617,011 26,355,589 Total net position 76,857,194$ 75,339,861$ 39,404,315$ 39,928,612$ 116,261,509$ 115,268,473$ Governmental Activities Business-type Activities Totals A portion of the primary government’s net position, $743,891 or 0.64 percent, represents resources that are subject to external restriction on how they may be used. These restrictions include monies accounted for in special revenue funds for which the use is legally restricted, monies restricted for debt service, and capital project funds that represent unspent bond proceeds at the fund level. The remaining balance of unrestricted net position, $25,617,011 or 22.03 percent, may be used to meet the City’s ongoing obligations to citizens and creditors. Change in Net Position The following table provides a summary of the City’s changes in net position. 9 CHANGES IN NET POSITION 2014 2013 2014 2013 2014 2013 Revenues: Program revenues: Charges for services 2,366,509$ 2,388,737$ 11,117,391$ 11,462,779$ 13,483,900$ 13,851,516$ Operating grants and contributions 843,995 644,458 - - 843,995 644,458 Capital grants and contributions 1,202,376 543,763 - - 1,202,376 543,763 General revenues: Property taxes 14,864,284 14,630,961 - - 14,864,284 14,630,961 Sales taxes 4,693,484 4,293,794 - - 4,693,484 4,293,794 Franchise taxes 1,673,615 1,583,258 - - 1,673,615 1,583,258 Other taxes 32,799 24,974 - - 32,799 24,974 Investment earnings 109,849 88,510 40,713 37,565 150,562 126,075 Miscellaneous 118,634 122,470 - 35,790 118,634 158,260 Total revenues 25,905,545 24,320,925 11,158,104 11,536,134 37,063,649 35,857,059 Expenses: General government 4,589,795 4,679,339 - - 4,589,795 4,679,339 Public safety 11,236,402 10,800,130 - - 11,236,402 10,800,130 Public Works 3,921,658 4,385,090 - - 3,921,658 4,385,090 Community development 1,097,075 1,207,264 - - 1,097,075 1,207,264 Community services 3,356,587 3,260,931 - - 3,356,587 3,260,931 Library 1,083,043 1,002,801 - - 1,083,043 1,002,801 Water and sewer - - 7,995,106 7,681,366 7,995,106 7,681,366 Interest on long-term debt 630,542 703,275 1,514,804 1,590,395 2,145,346 2,293,670 Total expenses 25,915,102 26,038,830 9,509,910 9,271,761 35,425,012 35,310,591 Increases/(Decrease) in net position before transfers (9,557) (1,717,905) 1,648,194 2,264,373 1,638,637 546,468 Transfers 1,799,344 1,773,982 (1,799,344) (1,773,982) - - Change in net position 1,789,787 56,077 151,150)( 490,391 1,638,637 546,468 Net position - beginning, as originally reported 75,339,861 75,283,784 39,928,612 39,438,221 115,268,473 114,722,005 Implementation of change in accounting principle 272,454)( - 373,147)( - 645,601)( - Net position - beginning, as restated 75,067,407 75,283,784 39,555,465 39,438,221 114,622,872 114,722,005 Net position, ending 76,857,194$ 75,339,861$ 39,404,315$ 39,928,612$ 116,261,509$ 115,268,473$ Governmental Activities Business-type Activities Totals 10 Governmental Activities Governmental activities increased the City of Friendswood’s net position by $1,789,787. Key elements of this change are as follows:  Property and sales taxes continue to be the City’s largest revenue sources. Property tax revenue increased by $233,323 due to new property added to the roll in the current fiscal year.  Sales tax revenue remained strong during fiscal year 2014, providing a 9.3 percent increase for the year, from $4.3 million to $4.7 million.  Capital Grants and contributions increased $658,613 from prior year, primarily due to the commencement of the Friendswood Link/Whispering Pines Street project. This project is being funded by the Community Development Block Grant.  Total expenses decreased $123,728 from prior year. The largest increase was in Public Safety ($436,272) offset by decreases in Public Works ($463,432) and Community Development ($110,189). Governmental Activities – Revenues Governmental Activities – Expenses Charges for  Services 9.14% Operating  Grants &  Contributions 3.26% Capital  Grants &  Contributions 4.64%Property  Taxes 57.38% Sales Taxes 18.12% Franchise  Taxes 6.46% Miscellaneous  1.01% General  Government  18% Public Safety  43% Public Works   15% Community  Development  4% Community  Services 13% Library 4% Interest on  Long‐Term  Debt 3% 11 Business Type Activities Business type activities decreased the City of Friendswood’s net position by $151,150. Key elements of this change are as follows:  Operating revenue decreased by $345,388 or 3.3 percent. Water and sewer revenue decreased approximately 3.85% while impact fees increased slightly, 2.47 percent, due to new home development. Administrative fees related to disconnect/reconnection and tampering fees increased approximately 4.70%.  Operating expenses increased $309,299 or 4.0 percent. Expenses related to water operations decreased 3.62 percent and expenses related to sewer operations increased 12.01 percent. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance-related legal requirements. Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the City’s net resources available for spending at the end of the year. At the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $12,978,060. Approximately 79.5 percent of this amount ($10,315,105) 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.  ‐  2,000,000  4,000,000  6,000,000  8,000,000  10,000,000  12,000,000 2014 2013 Operating Revenues Operating Expenses 12 The remaining $2,662,955 is nonspendable, restricted or assigned as follows: Nonspendable (1.3 percent)  Prepaid items $143,201  Permanent fund 31,241 Restricted (8.2 percent)  State and/or federal statutes $327,946  Fire/EMS Donations 83,037  City ordinances 125,187  Debt Service 130,147  Public education and government channels 400,411 Assigned (11.0 percent)  Encumbrances $1,421,785 The general fund is the chief operating fund of the City of Friendswood. At the end of the current fiscal year, unassigned fund balance of the general fund was $10.6 million, while the total fund balance reached $12.5 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned and total fund balance to total fund expenditures. Unassigned fund balance represents 47.9 percent of total general fund expenditures, while total fund balance represents 56.8 percent of that same amount. At year end, the City’s operating reserve was $5.3 million, representing 24 percent of total general fund expenditures. Key differences between last year’s general fund activity and this year’s include:  $1,066,277 increase in total revenues – new homes added to the property tax roll increased property taxes, sales tax remained strong and increased from the prior year 9.0 percent and additional federal grants received increased intergovernmental revenues.  $359,238 increase in total expenditures – completed capital projects in current year resulted in increase in capital outlay.  $147,318 decrease in capital lease proceeds – purchase of new public works equipment in prior year. Fund balance in the Debt Service Fund decreased $49,681. This decrease was planned during the budget process as debt service payments would exceed property tax collections. Proprietary Funds The City’s proprietary funds financial statements provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the year, unrestricted net position was $14,818,104 for the Water and Sewer fund. The total decrease in the net position of the water and sewer fund was $151,150. Other factors concerning the finances of this fund have already been addressed in the discussion of the City of Friendswood’s business-type activities. 13 Unrestricted net position of the Internal Service Fund was $315,723. The net position of the internal service fund decreased by $19,006 primarily as a result of an increase in depreciation expense. GENERAL FUND BUDGETARY HIGHLIGHTS The City made revisions to the original appropriations approved by the City Council. Budgeted revenues increased by $155,712 or 1 percent and expenditures were increased by $1,610,919 or 7.0 percent. Total revenues were above budget by $1,048,693. The more significant variances are detailed below:  $80,057 above budget in property taxes as a result of more new construction and higher tax values than anticipated.  $572,732 above budget in sales taxes due to improved economic conditions.  $92,769 under budget in fines and forfeitures due to fewer class C misdemeanor violations.  $140,012 above budget in permits and fees due to greater than anticipated housing development.  $164,353 above budget in intergovernmental revenues due to more received in federal funds than anticipated. Total expenditures of the General Fund were $2,735,689 below the final expenditure budget. The more significant variances are detailed below:  $539,616 below budget in total general government expenditures primarily a result of decrease in other services and charges (legal, appraisal services, consulting, etc.) and personnel vacancies.  $381,012 below budget in total public safety expenditures due to vacancies in personnel and capital projects that were not complete at the end of the fiscal year (parking lot repairs at Fire Station #3).  $1,188,641 below budget in public works primarily due to current year capital projects that were not complete at the end of the fiscal year, a decrease in streets repairs and maintenance and vacancies in personnel.  $424,376 below budget in community services expenditures due to capital projects that were not complete at the end of the fiscal year. 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, 2014 is $141,293,472. The investment in capital assets includes land, buildings and improvements, machinery and equipment, infrastructure, water and sewer system, water rights and construction in progress. 14 Major capital events during the year included the following:  Completion of the traffic light at Blackhawk and FM 2351. The total cost of the project was approximately $197,000.  Completion of the Centennial Park lighting project which was approximately $235,000.  Completion of Water Plant #5 Rehabilitation. Total project cost was $3.3 million.  Completion of Lift Station #6 Replacement. Total cost of the project was approximately $470,000.  The following water and sewer projects are in construction in progress at the end of fiscal year 2014: Blackhawk Water Plant Rehabilitation ($2.1 million) Water Plant #2 Replacement ($470,000), Water Plant #7 Rehabilitation ($944,00), and Lift Station #3 ($80,000). CITY OF FRIENDSWOOD’S CAPITAL ASSETS AT YEAR-END 2014 2013 2014 2013 2014 2013 Land 24,007,398$ 24,007,398$ 716,818$ 716,818$ 24,724,216$ 24,724,216$ Buildings and improvements 22,778,832 24,055,022 - - 22,778,832 24,055,022 Equipment 8,080,185 7,995,263 547,711 403,053 8,627,896 8,398,316 Infrastructure 27,560,683 29,043,415 31,628,645 29,389,193 59,189,328 58,432,608 Water rights - - 19,716,695 19,716,695 19,716,695 19,716,695 Construction in progress 2,622,174 1,026,733 3,634,331 5,635,592 6,256,505 6,662,325 Total capital assets 85,049,272$ 86,127,831$ 56,244,200$ 55,861,351$ 141,293,472$ 141,989,182$ Governmental Activities Business-type Activities Totals More detailed information on the City’s capital assets is presented in Note 4 to the financial statements. DEBT ADMINISTRATION At the end of the current fiscal year, the City of Friendswood had a total bonded debt and capital lease obligation of $51,268,407. CITY OF FRIENDSWOOD’S OUTSTANDING DEBT AT YEAR-END 2014 2013 2014 2013 2014 2013 General obligations 18,815,000$ 20,230,000$ -$ -$ 18,815,000$ 20,230,000$ Revenue bonds payable - - 31,830,000 32,995,000 31,830,000 32,995,000 Certificates of obligation - - - - - - Capital leases 623,407 876,981 - - 623,407 876,981 19,438,407$ 21,106,981$ 31,830,000$ 32,995,000$ 51,268,407$ 54,101,981$ Governmental Activities Business-type Activities Totals 15 The City’s General Obligation and Revenue Bonds bond ratings are listed below: Standard & Poor's General Obligation Bonds AA+ Revenue Bonds AA- More detailed information about the City’s outstanding debt can be found in Note 6 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES Friendswood continues to experience moderate growth. The City’s current population is estimated to be 38,911. 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 adopted budget for fiscal year 2015 maintains the tax rate of $0.5914 per $100 of taxable value. This rate consists of a maintenance and operations (M&0) tax rate of $.5303 and an interest and sinking (debt service) tax rate of $.0611. The rate was set based on a net assessed value of $2,608,035,340. This is an increase of $105,478,062 from certified taxable values for tax year 2013 in taxable value. This increase is mainly a result of new construction in the City. This additional value results in a total levy increase of $720,925. 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 an increase in this revenue stream from the prior year and has adjusted the budget from $4,127,080 to $4,553,543. The franchise fees budget has been increased from $1,543,900 to $1,552,315 and the budget for municipal court fines has been decreased from $921,406 to $763,594. 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 $5.2 million at September 30, 2015. Water revenues are budgeted at $5,907,695 which is an increase of $600,145 in revenues, or 11.31 percent. Sewer revenues are budgeted at $3,866,520. Water and sewer retained earnings net of the 90 operating requirement ($2.4 million) is expected to be $5.8 million at the end of fiscal year 2015. Pursuant to the City’s financial management policy, funds in excess of the 90-day operating reserve are designated for future capital improvements. 16 CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, customers, investors, and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional information, contact Administrative Services, P. O. Box 1288, Friendswood, Texas 77549-1288, or call Cindy S. Edge at 281-996-3224, or email cedge@friendswood.com. Separately issued financial statements for the West Ranch Management District can be obtained by writing to: West Ranch Management District, a Component Unit of the City of Friendswood, c/o Allen Boone Humphries Robinson LLP, 3200 Southwest Freeway, Suite 2600, Houston, Texas 77027. BASIC FINANCIAL STATEMENTS CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 17 Primary Government Governmental Business-type Component Activities Activities Total Unit ASSETS Cash and investments 13,372,650$ 10,057,820$ 23,430,470$ 1,832,256$ Receivables (net of allowances for uncollectibles) Taxes 1,479,524 - 1,479,524 15,026 Customer accounts 219,030 2,122,431 2,341,461 - Other 159,403 9,815 169,218 4,813 Internal balances (900,000) 900,000 - - Due from other governments 1,412,111 - 1,412,111 - Prepaid items 143,201 40,370 183,571 2,787 Working capital deposit - 303,196 303,196 - Restricted cash and investments - 3,031,574 3,031,574 - Capital assets Land 24,007,398 716,818 24,724,216 5,848,357 Buildings and improvements 38,518,112 - 38,518,112 - Machinery and equipment 16,992,645 3,244,767 20,237,412 - Infrastructure 67,671,399 - 67,671,399 483,467 Water and sewer system - 60,361,450 60,361,450 - Construction in progress 2,622,174 3,634,331 6,256,505 - Water rights - 19,716,695 19,716,695 - Accumulated depreciation (64,762,456) (31,429,861) (96,192,317) (41,320) Total capital assets, net 85,049,272 56,244,200 141,293,472 6,290,504 Total assets 100,935,191 72,709,406 173,644,597 8,145,386 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on issuance of refunding bonds 470,752 292,040 762,792 - Total deferred outflows of resources 470,752 292,040 762,792 - Total assets and deferred outflows of resources 101,405,943 73,001,446 174,407,389 8,145,386 LIABILITIES Accounts payable 1,097,445 839,903 1,937,348 27,335 Accrued liabilities 1,069,729 108,225 1,177,954 - Accrued interest 68,964 123,417 192,381 282,308 Customer deposits - 375,382 375,382 - Noncurrent liabilities: Due within one year 1,937,174 1,236,910 3,174,084 330,000 Due in more than one year 20,375,437 30,913,294 51,288,731 16,165,993 Total liabilities 24,548,749 33,597,131 58,145,880 16,805,636 NET POSITION Net investment in capital assets 65,404,791 24,495,816 89,900,607 - Restricted for: Debt service 86,085 - 86,085 772,072 Public safety 410,983 - 410,983 - Community development Expendable 125,187 - 125,187 - Nonexpendable 31,241 - 31,241 - Capital improvements - 90,395 90,395 6,450 Unrestricted 10,798,907 14,818,104 25,617,011 (9,438,772) Total net position 76,857,194$ 39,404,315$ 116,261,509$ (8,660,250)$ CITY OF FRIENDSWOOD, TEXAS STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 18 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 4,589,795$ 912,910$ - $ - $ (3,676,885)$ - $ (3,676,885)$ - $ Public safety 11,236,402 31,620 796,398 1,202,376 (9,206,008) - (9,206,008) - Public works 3,921,658 193,064 - - (3,728,594) - (3,728,594) - Community development 1,097,075 877,132 - - (219,943) - (219,943) - Community services 3,356,587 315,702 40,813 - (3,000,072) - (3,000,072) - Library 1,083,043 36,081 6,784 - (1,040,178) - (1,040,178) - Interest on long-term debt 630,542 - - - (630,542) - (630,542) - Total governmental activities 25,915,102 2,366,509 843,995 1,202,376 (21,502,222) - (21,502,222) - Business-type activitiesWater and sewer 9,509,910 11,117,391 - - - 1,607,481 1,607,481 - Total business-type activities 9,509,910 11,117,391 - - - 1,607,481 1,607,481 - Total primary government 35,425,012$ 13,483,900$ 843,995$ 1,202,376$ (21,502,222) 1,607,481 (19,894,741) - Component unitWest Ranch Management District 3,888,850 - - - - - - (3,888,850) 3,888,850$ - $ - $ - $ - - - (3,888,850) GENERAL REVENUESTaxes:Property taxes, levied for general purposes 13,334,122 - 13,334,122 1,322,005 Property taxes, levied for debt service 1,530,162 - 1,530,162 - Sales taxes4,693,484 - 4,693,484 - Franchise taxes 1,673,615 - 1,673,615 - Other taxes32,799 - 32,799 - Penalties and interest - - - 2,735 Interest on investments 109,849 40,713 150,562 3,104 Gain on sale of capital assets 34,359 - 34,359 - Miscellaneous84,275 - 84,275 - TRANSFERS1,799,344 (1,799,344) - - Total general revenues and transfers 23,292,009 (1,758,631) 21,533,378 1,327,844 Change in net position 1,789,787 (151,150) 1,638,637 (2,561,006) NET POSITION, beginning of year - as originally reported75,339,861 39,928,612 115,268,473 (5,168,030) Implementation of change in accounting principle (Note 1)(272,454) (373,147) (645,601) (931,214) NET POSITION, beginning of year - as restated75,067,407 39,555,465 114,622,872 (6,099,244) NET POSITION, end of year76,857,194$ 39,404,315$ 116,261,509$ (8,660,250)$ Changes in Net PositionNet (Expense) Revenue and CITY OF FRIENDSWOOD, TEXAS BALANCE SHEET – GOVERNMENTAL FUNDS SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 19 Other Total General Debt Governmental Governmental Fund Service Funds Funds Cash and investments 11,619,995$ 129,990$ 1,307,157$ 13,057,142$ Receivables, net of allowance Taxes 1,454,623 24,901 - 1,479,524 Customer accounts 188,032 - 30,998 219,030 Other 154,626 158 4,404 159,188 Due from other funds 939,536 - - 939,536 Receivable from other governments 190,036 - 1,222,075 1,412,111 Prepaids and other assets 143,201 - - 143,201 Total assets 14,690,049$ 155,049$ 2,564,634$ 17,409,732$ Liabilities Accounts payable 756,992$ -$ 340,453$ 1,097,445$ Accrued liabilities 1,017,329 - 52,400 1,069,729 Due to other funds - - 1,839,536 1,839,536 Total liabilities 1,774,321 - 2,232,389 4,006,710 Deferred Inflows of Resources Deferred property taxes 191,074 24,902 - 215,976 Court fines 188,585 - 3,912 192,497 Other deferred revenues 16,489 - - 16,489 Total deferred inflows of resources 396,148 24,902 3,912 424,962 Fund Balances Nonspendable Prepaid items 143,201 - - 143,201 Permanent fund - - 31,241 31,241 Restricted for Public education and government channels 400,411 - - 400,411 Debt service - 130,147 - 130,147 State and/or federal statute - - 327,946 327,946 Fire/EMS donations - - 83,037 83,037 City ordinances - - 125,187 125,187 Assigned Encumbrances 1,421,785 - - 1,421,785 Unassigned 10,554,183 - (239,078) 10,315,105 Total fund balances 12,519,580 130,147 328,333 12,978,060 Total liabilities, deferred inflows of resources, and fund balances 14,690,049$ 155,049$ 2,564,634$ 17,409,732$ ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES CITY OF FRIENDSWOOD, TEXAS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 20 Total fund balances - governmental funds 12,978,060$ 84,109,526 (1,399,627) (68,964) 1,255,469 424,962 Bonds payable (18,815,000)$ Premiums on issuance (676,826) Capital leases payable (623,407) Compensated absences (797,751) (20,912,984) Deferred losses on issuances of refunding bonds are recorded as deferred outflows of resources in the statement of net position. This is the difference between the reacquisition price and the net carrying amount of refunded bonds, net of amortization.470,752 Net position of governmental activities 76,857,194$ funds balance sheet. resources; therefore, it is not reported as a liability in the governmental Interest payable on long term debt does not require current financial 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, An internal service fund is used by management to charge the cost of Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. governmental activities in the statement of net position. assets and liabilities of the internal service fund are included in the certain activities, such as fleet management, to individual funds. The 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 therefore not recorded in the governmental fund financial statements. position are different because: obligation do not require the use of current financial resources and are The accruals for net other post employment benefits and net pension CITY OF FRIENDSWOOD, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 21 Other Total General Debt Governmental Governmental Fund Service Funds Funds Revenues Property taxes 13,395,956$ 1,539,673$ - $ 14,935,629$ Sales and alcohol taxes 4,726,283 - - 4,726,283 Franchise taxes 1,673,615 - - 1,673,615 Fines and forfeitures 828,637 - 31,620 860,257 Permits and fees 1,327,464 - 58,434 1,385,898 Intergovernmental 548,262 - 1,243,189 1,791,451 Investment earnings 106,134 949 2,034 109,117 Donations 72,940 - 276,226 349,166 Miscellaneous 54,989 - - 54,989 Total revenues 22,734,280 1,540,622 1,611,503 25,886,405 Expenditures Current General government 4,194,272 - 111,871 4,306,143 Public safety 10,442,051 - 157,524 10,599,575 Public works 1,689,987 - - 1,689,987 Community development 1,092,982 - - 1,092,982 Community services 2,772,072 - - 2,772,072 Library 1,083,043 - - 1,083,043 Capital outlay 758,533 - 1,741,721 2,500,254 Debt service Principal - 1,560,379 108,313 1,668,692 Interest and fiscal charges - 646,074 16,644 662,718 Total expenditures 22,032,940 2,206,453 2,136,073 26,375,466 Excess (deficiency) of revenues over expenditures 701,340 (665,831) (524,570) (489,061) Other financing sources (uses) Proceeds from sale of capital assets - - 6,325 6,325 Insurance recoveries 28,886 - - 28,886 Transfers in 1,183,194 616,150 - 1,799,344 Total other financing sources (uses) 1,212,080 616,150 6,325 1,834,555 Net change in fund balances 1,913,420 (49,681) (518,245) 1,345,494 Fund balances, beginning of year 10,606,160 179,828 846,578 11,632,566 Fund balances, end of year 12,519,580$ 130,147$ 328,333$ 12,978,060$ 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, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 22 Net change in fund balances - total governmental funds 1,345,494$ 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. 2,530,810 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. (3,614,206) 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 position. Also, governmental funds report the effect of 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: Amortization of premium on bonds payable 60,467$ Amortization of deferred loss on refunding bonds (39,229) Repayment of long term debt 1,668,574 1,689,812 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. (3,471) 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. 10,938 Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. (75,391) 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. (75,193) An internal service fund is used by management to charge the cost of fleet management to individual funds. The change in net position of the internal service fund is included in the governmental activities in the statement of net position. (19,006) Change in net position of governmental activities 1,789,787$ CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION – PROPRIETARY FUNDS SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 23 Business Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service Current assets Cash and investments 10,057,820$ 315,508$ Accounts receivable, net of allowance Customer accounts 2,122,431 - Other 9,815 215 Due from other funds 900,000 - Prepaids and other assets 40,370 - Restricted cash and investments 3,031,574 - Total current assets 16,162,010 315,723 Noncurrent assets Working capital deposit 303,196 - Deferred charges - - Capital assets Land 716,818 - Machinery and equipment 3,244,767 2,539,771 Water and sewer system 60,361,450 - Construction in progress 3,634,331 - Water rights 19,716,695 - Accumulated depreciation (31,429,861) (1,600,025) Net capital assets 56,244,200 939,746 Total noncurrent assets 56,547,396 939,746 Total assets 72,709,406 1,255,469 Deferred loss on issuance of refunding bonds 292,040 - Total deferred outflows of resources 292,040 - Total assets and deferred outflows of resources 73,001,446 1,255,469 ASSETS DEFERRED OUTFLOWS OF RESOURCES CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION – PROPRIETARY FUNDS SEPTEMBER 30, 2014 (CONTINUED) The Notes to the Basic Financial Statements are an integral part of this statement. 24 Business Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service Current liabilities Accounts payable 839,903$ - $ Accrued liabilities 108,225 - Accrued interest 123,417 - Deposits 375,382 - Compensated absences 18,134 - Bonds and other long-term debt payable 1,218,776 - Total current liabilities 2,683,837 - Noncurrent liabilities Compensated absences 91,646 - Bonds and other long-term debt payable 30,821,648 - Total noncurrent liabilities 30,913,294 - Total liabilities 33,597,131 - Net investment in capital assets 24,495,816 939,746 Restricted for capital improvements 90,395 - Unrestricted 14,818,104 315,723 Total net position 39,404,315$ 1,255,469$ LIABILITIES NET POSITION CITY OF FRIENDSWOOD, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 25 Business Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service Operating revenues Charges for services 11,117,391$ 321,725$ Total operating revenues 11,117,391 321,725 Operating expenses Personnel services 1,603,813 - Sewer operations 1,970,403 - Water purchases 1,220,696 - Repairs and maintenance 563,463 - Supplies 194,641 610 Other services and charges 823,494 - Depreciation 1,614,085 368,887 Total operating expenses 7,990,595 369,497 Operating income (loss) 3,126,796 (47,772) Nonoperating revenues (expenses) Investment income 40,713 732 Gain (loss) on sale of capital assets - 28,034 Interest expense and fiscal charges (1,514,804) - Miscellaneous (4,511) - Total nonoperating revenues (expenses) (1,478,602) 28,766 Income before transfers 1,648,194 (19,006) Transfers out (1,799,344) - Change in net position (151,150) (19,006) Net position, beginning of year - as originally reported 39,928,612 1,274,475 Implementation of change in accounting principle (Note 1)(373,147) - Net position, beginning of year - as restated 39,555,465 1,274,475 Net position, end of year 39,404,315$ 1,255,469$ CITY OF FRIENDSWOOD, TEXAS STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2014 The Notes to the Basic Financial Statements are an integral part of this statement. 26 Business Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service OPERATING ACTIVITIES Cash received from customers 10,996,376$ 321,761$ Cash payments to suppliers for goods and services (6,453,418) (610) Cash payments to employees for services (1,600,382) - Net cash provided by operating activities 2,942,576 321,151 NONCAPITAL FINANCING ACTIVITIES Transfer out (1,799,344) - Net cash used in noncapital financing activities (1,799,344) - CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from the sale of capital assets - 34,389 Acquisition and construction of capital assets (1,996,934) (380,079) Repayment of debt (1,165,000) - Interest paid on debt (1,505,057) - Net cash used in capital and related financing activities (4,666,991) (345,690) INVESTING ACTIVITIES Investment income 90,953 732 Net cash provided by investing activities 90,953 732 Net change in cash and cash equivalents (3,432,806) (23,807) CASH AND CASH EQUIVALENTS, beginning of year 16,522,200 339,315 CASH AND CASH EQUIVALENTS, end of year 13,089,394$ 315,508$ CITY OF FRIENDSWOOD, TEXAS STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2014 (CONTINUED) The Notes to the Basic Financial Statements are an integral part of this statement. 27 Business Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) 3,126,796$ (47,772)$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities Depreciation and amortization 1,614,085 368,887 Change in assets and liabilities Accounts receivable (145,660) 36 Prepaids and other assets (7,661) - Working capital deposits (14,334) - Accounts payable (1,566,445) - Accrued liabilities (88,850) - Deposits 24,645 - Net cash provided by operating activities 2,942,576$ 321,151$ Reconciliation of cash to statement of net position Cash and investments 10,057,820$ 315,508$ Restricted cash and investments 3,031,574 - CASH AND CASH EQUIVALENTS 13,089,394$ 315,508$ CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 28 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 29 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 persons 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 position 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 30 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 31 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). 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 a privately managed public funds investment pool (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 32 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, 2014. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 33 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 $0.5914 per $100 of assessed valuation that were prorated between operations and debt service in the amounts of $0.5303 and $0.0611, respectively. The resulting tax levies were approximately $13.3 and $1.5 million for operations and debt service, respectively, based on a total taxable valuation of approximately $2.5 billion for the 2013 tax year. West Ranch Management District bond resolutions require that the District levy and collect an ad valorem debt service tax sufficient to pay interest and principal on bonds when due. During the year ended July 31, 2014, the District levied an ad valorem debt service tax at the rate of $0.3800 per $100 of assessed valuation, which resulted in a tax levy of $769,931 on the taxable valuation of approximately $202.4 million for the 2013 tax year. During the year ended July 31, 2014, the District levied an ad valorem maintenance tax at the rate of $0.1500 per $100 of assessed valuation and an ad valorem road tax at the rate of $0.1200 per $100 of assessed valuation, which resulted in a tax levy of $303,920 and $243,136, respectively, on the taxable valuation of approximately $202.4 million for the 2013 tax year. 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 34 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. The City’s 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 The West Ranch Management District’s capital assets are depreciated using the straight-line method over estimated useful lives of 10 to 45 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 35 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 position. Bond premiums and discounts 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 expensed in the period incurred. 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 Position Government-Wide Financial Statements: In accordance with GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, net position on the Statement of Net Position includes the following categories: Net investment in capital assets – the component of net position that reports the difference between capital assets less both the accumulated depreciation and the outstanding balance of debt, net of premiums and discounts, that is directly attributable to the acquisition, construction or improvement of these capital assets. Restricted – Net position is reported as restricted when there are limitations imposed on its 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 36 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Fund Balances and Net Position – Continued Governmental Fund Financial Statements: In accordance with GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, 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, 2014, the City had no committed fund balance amounts. 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 or the City Manager, pursuant to the City’s fund balance policy. At September 30, 2014, 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. At September 30, 2014, the City’s bond construction fund reported a deficit fund balance of $239,078. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 37 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Fund Balances and Net Position – Continued Governmental Fund Financial Statements – Continued: 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. Deferred Inflows and Deferred Outflows of Resources During the year ending September 30, 2014, the City adopted GASB Statement No. 65, Items Previously Reported as Assets and Liabilities (GASB 65), which establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources and deferred inflows of resources, certain items that were previously reported as assets and liabilities. The effects of implementation of GASB 65 are reflected in the accompanying financial statements. Pursuant to GASB 65, bond issuance costs which previously had been capitalized and amortized over the term of the bonds in the government-wide financial statements are now accounted for as expense in the period incurred. Therefore, the beginning net position on the Statement of Activities has been adjusted to reflect the portion of deferred charges that were incurred in prior years. In accordance with GASB 65, deferred inflows of resources represent an acquisition of resources that applies to a future period and therefore will not be recognized as an inflow of resources (revenue) until that time. Deferred outflows of resources represent a consumption of resources that applies to a future period and therefore will not be recognized as an outflow of resources (expense/expenditure) until that time. 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 materially from those estimates. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 38 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 $100,000; 3. No-load money market mutual funds; and 4. TexPool, Lone Star Investment Pool and Texas Class. The City Council has adopted a written investment policy regarding the investments of its funds as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas Government Code). The investments of the City are in compliance with the Council’s investment policies. The City did not have any derivative investment products during the current year. All significant legal and contractual provisions for investments were complied with during the year. Deposits and investments as of September 30, 2014 are classified in the accompanying financial statements as follows: Governmental activities 13,372,650$ Business-type activities 13,089,394 26,462,044$ Deposits and investments as of September 30, 2014 consist of the following: Deposits with financial institutions 1,870,169$ Investments 24,591,875 26,462,044$ CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 39 NOTE 2. DEPOSITS AND INVESTMENTS – CONTINUED As of September 30, 2014, the City had the following investments: Fair Value Texas Class 7,274,551$ TexPool 2,837,644 U.S. Agency Securities: Federal Home Loan Mortgage Corporation 5,493,116 714 Federal Home Loan Bank 4,493,909 739 Federal Farm Credit Bank 3,493,723 777 Federal National Mortgage Association 998,932 492 Total U.S. Agency Securities 14,479,680 Total portfolio 24,591,875$ Investment Type Weighted Average Maturity (Days) The City’s investment pools are 2a7-like pools. A 2a7-like pool is one which is not registered with the Securities and Exchange Commission (SEC) as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940. The City’s investments in these pools are the same as the value of the pool shares, which are valued based on quoted market rates. The City invests in Texas Local Government Investment Pool (TexPool), which was created under the Interlocal Cooperation Act, Texas Government Code Ann. Chapter 791 and the Texas Public Funds Investment Act. The Texas Treasury Safekeeping Trust Company (the Trust) is trustee of TexPool and is a limited purpose trust company authorized pursuant to Texas Government Code Ann. Section 404.103 for which the Texas State Comptroller is sole officer, director and shareholder. The advisory board of TexPool is composed of members appointed pursuant to the requirements of the Texas Public Funds Investment Act. The City invests in Texas Class Investment Pool which was established in 1996 pursuant to the Texas Public Funds Investment Act. The pool is governed by a 7-member board of trustees, who are elected by pool participants. The Cutwater Investor Services Corp. serves as the pools program administrator and Wells Fargo Bank Texas, NA, serves as custodian. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 40 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, 2014, all of the City’s $1,870,169 balance on deposit with financial institutions was collateralized with securities held by the pledging financial institution in the City’s name. Credit Risk. It is the City’s policy to limit its investments to investment types with an investment quality rating not less than A or its equivalent by a nationally recognized statistical rating organization. The City’s investments as of September 30, 2014, were rated as follows: Rating Rating Agency Texas Class AAAm Standard & Poor's TexPool AAAm Standard & Poor's U.S. Agency Securities: Federal Home Loan Mortgage Corporation Aaa Moody's Investor Service Federal Home Loan Bank Aaa Moody's Investor Service Federal Farm Credit Bank Aaa Moody's Investor Service Federal National Mortgage Association Aaa Moody's Investor Service Investment Type CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 41 NOTE 3. ACCOUNTS RECEIVABLE AND DEFERRED INFLOWS OF RESOURCES Receivables as of September 30, 2014 for the City’s individual major funds, nonmajor funds in the aggregate and the Internal Service Fund including the applicable allowances for uncollectible accounts, are as follows: Debt Water and Internal General Service Nonmajor Sewer Service Total Receivables: Property taxes 212,305$ 27,668$ -$ -$ -$ 239,973$ Sales taxes 866,784 - - - - 866,784 Franchise taxes 396,764 - - - - 396,764 Customer accounts 190,032 - 30,998 2,173,260 - 2,394,290 Accrued interest 12,046 158 471 9,815 215 22,705 Court fines 415,157 - 3,933 - - 419,090 Intergovernmental 190,036 - 1,222,075 - - 1,412,111 Other 10,984 - - - - 10,984 Gross receivables 2,294,108 27,826 1,257,477 2,183,075 215 5,762,701 Less: allowance for uncollectibles 306,791 2,767 - 50,829 - 360,387 Net total receivables 1,987,317$ 25,059$ 1,257,477$ 2,132,246$ 215$ 5,402,314$ Governmental Funds Proprietary Funds Governmental funds report deferred inflows of resources in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: Deferred Inflows of Resources General Fund Delinquent property taxes 191,074$ Court fines 188,585 Miscellaneous 16,489 Total General Fund 396,148 Nonmajor funds Court fines 3,912 Total nonmajor funds 3,912 Debt Service Fund Delinquent property taxes 24,902 Total Debt Service Fund 24,902 Total Governmental Funds 424,962$ CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 42 NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2014 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 1,026,733 2,385,331 (789,890) 2,622,174 Total capital assets not being depreciated 25,034,131 2,385,331 (789,890) 26,629,572 Capital assets being depreciated Buildings and improvements 38,447,558 - 70,554 38,518,112 Machinery and equipment 16,247,829 1,244,893 (500,077) 16,992,645 Infrastructure 67,671,399 - - 67,671,399 Total capital assets being depreciated 122,366,786 1,244,893 (429,523) 123,182,156 Less accumulated depreciation Buildings and improvements 14,392,536 1,346,744 - 15,739,280 Machinery and equipment 8,252,566 1,153,617 (493,723) 8,912,460 Infrastructure 38,627,984 1,482,732 - 40,110,716 Total accumulated depreciation 61,273,086 3,983,093 (493,723) 64,762,456 Total capital assets being depreciated, net 61,093,700 (2,738,200) 64,200 58,419,700 Governmental activities capital assets, net 86,127,831$ (352,869)$ (725,690)$ 85,049,272$ CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 43 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 5,635,592 1,803,619 (3,804,880) 3,634,331 Total capital assets not being depreciated 26,069,105 1,803,619 (3,804,880) 24,067,844 Capital assets being depreciated Machinery and equipment 3,051,452 193,315 - 3,244,767 Water and sewer system 56,556,570 - 3,804,880 60,361,450 Total capital assets being depreciated 59,608,022 193,315 3,804,880 63,606,217 Less accumulated depreciation: Machinery and equipment 2,648,399 48,657 - 2,697,056 Water and sewer system 27,167,377 1,565,428 - 28,732,805 Total accumulated depreciation 29,815,776 1,614,085 - 31,429,861 Total capital assets being depreciated, net 29,792,246 (1,420,770) 3,804,880 32,176,356 Business-type activities capital assets, net 55,861,351$ 382,849$ -$ 56,244,200$ Component unit Capital assets not being depreciated Land 5,848,357$ -$ -$ 5,848,357$ Capital assets being depreciated Water production and distribution facilities 483,467 - - 483,467 Less accumulated depreciation: Water production and distribution facilities 30,575 10,745 - 41,320 Total capital assets being depreciated, net 452,892 (10,745) - 442,147 Component unit capital assets, net 6,301,249$ (10,745)$ -$ 6,290,504$ CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 44 NOTE 4. CAPITAL ASSETS – CONTINUED Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities General government 203,800$ Public safety 597,318 Public works 2,231,671 Community services 581,417 Capital assets held by the City's internal service fund are charged to the various functions based on their usage 368,887 Total depreciation expense - governmental activities 3,983,093$ Business-type activities Water and sewer 1,614,085$ Total depreciation expense - business-type activities 1,614,085$ Unexpended commitments for construction projects in progress were $8,784,779 at September 30, 2014. NOTE 5. INTERFUND BALANCES AND ACTIVITIES Interfund balances (net) at September 30, 2014 consisted of the following individual fund balances: Due to Fund Due from Fund Amount General Nonmajor 939,536$ Balance of fund expenditures governmental funded by the general fund, pending reimbursements Water and sewer Nonmajor 900,000 Return of excess amount previously governmental transferred, upon decrease in City's obligation under grant award 1,839,536$ Purpose All amounts due are scheduled to be repaid within one year. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 45 NOTE 5. INTERFUND BALANCES AND ACTIVITIES – CONTINUED During the year ended September 30, 2014, transfers between funds occurred as described below: Transfers In Transfers Out Amount Debt service Water and sewer 616,150$ To fund Series 2010B debt service payments General Water and sewer 1,183,194 To fund indirect costs for administrative expenses 1,799,344$ Purpose NOTE 6. LONG-TERM DEBT The City issues a variety of long-term debt instruments in order to acquire and/or construct major capital facilities and equipment for governmental and business-type activities. These instruments include general obligation bonds, certificates of obligation, revenue bonds, and capital leases. These debt obligations are secured by either future tax revenue, water and sewer system revenue, or liens on property and equipment. Debt obligations that are intended to be repaid from water and sewer system revenue have been recorded as business-type activities. All other long-term obligations of the City are considered to be governmental type activities. Federal Arbitrage General obligation bonds, combination tax and revenue bonds, and certificates of obligation are subject to the provisions of the Internal Revenue Code of 1986 related to arbitrage and interest income tax regulations under those provisions. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 46 NOTE 6. LONG-TERM DEBT – CONTINUED 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, 2014: Final Governmental Business-Type Maturity Interest Rate Activities Activities General Obligation Bonds 2005 Permanent Improvement and Refunding $ 9,800,000 2020 2.85% - 4.375% 3,395,000$ -$ 2010A Permanent Improvement 3,460,000 2035 1.0% - 4.75% 3,080,000 - 2010B Permanent Improvement and Refunding 5,460,000 2021 1.0% - 4.0% 3,940,000 - 2012 General Obligation Refunding 8,890,000 2026 2.0% - 3.5% 8,400,000 - 18,815,000 - Revenue Bonds 2006 Waterworks and Sewer System Revenue and Refunding 24,285,000 2031 4.0% - 5.0% - 20,975,000 2009 Waterworks and Sewer System 12,120,000 2028 2.0% - 4.8% - 10,855,000 - 31,830,000 Total Bonds and Certificates of Obligation 18,815,000$ 31,830,000$ Series and Original Issue Amount 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 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 1,550,000 513,382 1,295,000 1,358,571 4,716,953 2018 1,595,000 473,248 1,345,000 1,304,706 4,717,954 2019 - 2023 7,400,000 1,664,430 7,985,000 5,526,591 22,576,021 2024 - 2028 4,145,000 532,577 10,695,000 3,271,296 18,643,873 2029 - 2033 795,000 180,615 7,255,000 829,388 9,060,003 2034 - 2035 370,000 17,806 810,000 20,250 1,218,056 18,815,000$ 4,527,202$ 31,830,000$ 15,178,307$ 70,350,509$ Governmental Activities Business -Type Activities Prior Year Defeasance of Bonds In prior years, the City defeased certain bonds by placing the proceeds of new bonds in an irrevocable trust to provide future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City’s financial statements. On September 30, 2014, $17,220,000 of bonds considered defeased are still outstanding. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 47 NOTE 6. LONG-TERM DEBT – CONTINUED Obligations Under Capital Leases The City has entered into capital lease agreements in order to purchase machinery and equipment for public works, police and fire departments. The assets acquired through these lease agreements are as follows: Governmental Asset: Activities Machinery and equipment 1,745,048$ Less: accumulated depreciation (481,067) Total 1,263,981$ The following is a summary of future lease payments due on this machinery and equipment: Year Ending Lease September 30, Obligation 2015 284,322$ 2016 191,868 2017 63,056 2018 63,056 2019 63,034 Total 665,336 Less: interest portion (41,929) Obligations under capital leases 623,407$ CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 48 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, 2014, was as follows: Balance Balance Due Beginning End of Within One of Year Increase Decrease Year Year Governmental activities General obligation bonds 20,230,000$-$ (1,415,000)$ 18,815,000$ 1,455,000$ Premium on bond issuance 737,293 - (60,467) 676,826 60,468 Capital lease obligations 876,981 - (253,574) 623,407 262,856 Net pension obligation 638,703 1,852,116 (1,847,375) 643,444 - Net OPEB obligation 685,731 88,587 (18,135) 756,183 - Compensated absences 794,280 711,608 (708,137) 797,751 158,850 Total governmental activities 23,962,988 2,652,311 (4,302,688) 22,312,611 1,937,174 Business type activities Revenue bonds 32,995,000 - (1,165,000) 31,830,000 1,205,000 Discount on bond issuance (52,452) - 2,497 (49,955) (2,498) Premium on bond issuance 276,653 - (16,274) 260,379 16,274 Compensated absences 106,349 66,807 (63,376) 109,780 18,134 Total business type activities 33,325,550 66,807 (1,242,153) 32,150,204 1,236,910 Total primary government 57,288,538$2,719,118$ (5,544,841)$ 54,462,815$ 3,174,084$ 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, 2014: Amounts Outstanding Interest Range of Callable Series July 31, 2014 Rates Maturities Dates * Series 2010 $6,535,000 3.25% to 5.25% 2014 - 2040 September 1, 2020 Road Series 2010A $1,760,000 3.50% to 5.00% 2014 - 2040 September 1, 2020 Series 2012A $3,110,000 3.50% to 4.10% 2027 - 2040 September 1, 2020 Series 2012B $1,590,000 3.00% to 4.75% 2014 - 2026 September 1, 2016 Road Series 2013 $1,390,000 2.00% to 3.00% 2014 - 2028 September 1, 2021 Series 2013 $1,270,000 3.00% to 5.00% 2015 - 2040 September 1, 2021 *Or any date thereafter; callable at par plus accrued interest to the date of redemption. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 49 NOTE 6. LONG-TERM DEBT – CONTINUED West Ranch Management District – Continued Annual debt service requirements for the District’s bonds are as follows: Year Ending July 31, Principal Interest Total 2015 330,000$ 672,602$ 1,002,602$ 2016 365,000 662,445 1,027,445 2017 375,000 651,738 1,026,738 2018 390,000 640,485 1,030,485 2019 405,000 628,282 1,033,282 2020 - 202 2,275,000 2,904,845 5,179,845 2025 - 2029 2,820,000 2,379,077 5,199,077 2030 - 2034 3,020,000 1,733,228 4,753,228 2035 - 2039 3,850,000 922,476 4,772,476 2040 - 2041 1,825,000 89,512 1,914,512 15,655,000$ 11,284,690$ 26,939,690$ 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, 2014, was as follows: Balance Balance Due Beginning End of Within One of Year Increase Decrease Year Year Component unit General obligation bonds 14,610,000$ 1,270,000$ (225,000)$ 15,655,000$ 330,000$ Discount on bond issuance (279,352) (38,100) 6,703 (310,749) - Developer advances 40,000 - - 40,000 - Due to developer - 1,111,742 - 1,111,742 - Total component unit 14,370,648$2,343,642$ (218,297)$ 16,495,993$ 330,000$ Developers of the District have constructed underground utilities on behalf of the District. The District's engineer estimates reimbursable costs for completed projects are $1,111,742. Additionally, a developer of the District has advanced $40,000 to the District for operating expenses. The District has agreed to reimburse the developers for these amounts, plus interest, to the extent approved by the Texas Commission on Environmental Quality from the proceeds of future bond sales. These amounts have been recorded in the financial statements as long-term liabilities. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 50 NOTE 7. RESTRICTED ASSETS The balances of the restricted asset accounts in the enterprise fund are as follows: Cash and investments: Customer deposits 375,382$ Construction 90,267 Construction - 2006 bonds 1,242,669 Construction - 2009 bonds 451,791 Debt service reserve 871,465 Total restricted assets 3,031,574$ 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. 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. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 51 NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED Benefits – Continued 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. Plan provisions for the City were as follows: Plan Year Plan Year 2013 2014 Employee deposit rate 7.00% 7.00% Matching ratio (city to employee) 2 to 1 2 to 1 Years required for vesting 5 5 100% Repeating, 100% Repeating, Transfers Transfers 50% of 50% of CPI Repeating CPI Repeating 60/5,0/20 Updated Service Credit Annuity Increase (to retirees) Service retirement eligibility (expressed as age / years of service) 60/5,0/20 Contributions Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) cost method (EAN was first used in the December 31, 2013 valuation; previously, the Projected Unit Credit actuarial cost method had been used). 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 for an employee is the contribution rate which, if applied to a member’s compensation throughout their period of anticipated covered service with the municipality, would be sufficient to meet all benefits payable on their behalf. The salary-weighted average of the individual rates is the total normal cost rate. 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. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 52 NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED Contributions – Continued The annual pension cost and net pension obligation are as follows: Annual required contribution (ARC) 1,847,375$ Interest on net pension obligation 44,709 Adjustment to the ARC (39,968) Annual pension cost (APC) 1,852,116 Contributions made (1,847,375) Increase in net pension obligation 4,741 Net pension obligation, beginning of year 638,703 Net pension obligation, end of year 643,444$ 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 2012 1,780,547$ 1,773,895$ 99.6% 633,108$ 2013 1,796,817 1,791,222 99.7% 638,703 2014 1,852,116 1,847,375 99.7% 643,444 CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 53 NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED Contributions – Continued The required contribution rates for fiscal year 2014 were determined as part of the December 31, 2011 and 2012 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2013, also follows: Valuation date 12/31/2011 12/31/2012 12/31/2013 Actuarial cost method Projected Unit Credit Projected Unit Credit Entry Age Normal Actuarial assumptions: Investment rate of return * 7.00% 7.00% 7.00% * Includes inflation at 3.00% 3.00% 3.00% Cost-of-living adjustments 1.50% 1.50% 1.50% Level Percent of Payroll 27.0 years: closed period 30 years 10-year Smoothed Market Varies by age and service Amortization method GASB 25 Equivalent Single Amortization Period Level Percent of Payroll Level Percent of Payroll Projected salary increases * Varies by age and service Varies by age and service Asset valuation method 10-year Smoothed Market Amortization period for new gains/losses 27.0 years: closed period 25.9 years: closed period 30 years 30 years 10-year Smoothed Market CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 54 NOTE 8. EMPLOYEE RETIREMENT SYSTEM – CONTINUED Funded Status and Funding Progress In October 2013, the TMRS Board approved actuarial changes in (a) the funding method from Projected Unit Credit to Entry Age Normal, (b) the post-retirement mortality assumptions used in calculating liabilities and contribution rates and in the development of the Annuity Purchase Rate factors, and (c) the amortization policy. These actuarial changes were effective with the December 31, 2013 actuarial valuation. For a complete description of the new actuarial cost method and assumptions, please see the December 31, 2013 TMRS Comprehensive Annual Financial Report (CAFR). The funded status as of December 31, 2013, 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) 12/31/2013 $47,336,543 $58,341,940 81.1% $11,005,397 $11,615,396 94.7% 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 55 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 Plan The retiring employee is eligible to retain the 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. All terms and conditions of the plan are the same as active employees. Dental Plan The retiring employee is eligible to retain the 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. All terms and conditions of the plan are the same as active employees. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 56 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 accrual that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize the unfunded actuarial liabilities (or funding excesses) over a period not to exceed thirty years. The City’s annual OPEB cost for the fiscal year ending September 30, 2014 is as follows: Annual required contribution 86,319$ Interest on OPEB obligation 30,858 Adjustment to ARC (28,590) Annual O PEB cost (expense) end of year 88,587 Net estimated employer contributions 18,135 Increase in net OPEB obligation 70,452 Net OPEB obligation – as of beginning of the year 685,731 Net OPEB obligation – as of end of year 756,183$ 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 2012 83,150$ 43,719$ 53% 616,197$ 2013 85,843 16,309 19% 685,731 2014 88,587 18,135 20% 756,183 CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 57 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, 2012, 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) 12/31/2012 $0 $676,248 0.00% $676,248 $11,513,756 5.87% Under the reporting parameters, the City’s retiree health care plan is 0% funded with an estimated actuarial accrued liability exceeding actuarial assets by $676,248 at December 31, 2012. As of the most recent valuation, the ratio of the unfunded actuarial accrued liability to annual covered payroll is 5.87%. 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 58 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 3.00% Healthcare cost trend rates 4.5% to 7.5% 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 59 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, 2014, 2013 and 2012 were $20,884, $19,708, and $21,455, 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, 2014, 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, 2014, the City believed the amounts paid on workers’ compensation would not change significantly from the amounts recorded. During the year ended September 30, 2014, employees of the City were covered by a health and dental insurance plan. The City pays 90% of the monthly premium for employees choosing individual coverage only. The City pays 70% of the monthly premium for employees choosing to cover themselves and their dependents. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 60 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 plant 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, 2014, 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. NOTE 12. SUBSEQUENT EVENTS In December 2014, the City sold $8,805,000 in General Obligation Refunding Bonds, Series 2014 (the Series 2014 Bonds). The bonds mature in varying amounts from 2015 through 2028 with coupons ranging from 2% to 4%. Proceeds from the sale of the bonds will be used to refund $2,995,000 of Permanent Improvement and Refunding Bonds, Series 2005 and $6,085,000 of Waterworks and Sewer System Revenue and Refunding Bonds, Series 2006, and to pay the costs of issuance of the Series 2014 Bonds. CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 61 NOTE 12. SUBSEQUENT EVENTS – CONTINUED In January 2015, the City sold $9,595,000 in General Obligation Bonds, Series 2015 (the Series 2015 Bonds). The bonds mature in varying amounts from 2016 through 2030 with coupons ranging from 2% to 3%. Proceeds from the sale of the bonds will be used for construction and improvements to City parks and the purchase of land for parks, construction and improvements to City fire stations and library, construction and improvements to City streets, and to pay the costs of issuance of the Series 2015 Bonds. On September 24, 2014, the West Ranch Management District issued its Series 2014 unlimited tax road bonds in the amount of $2,235,000 at a net effective interest rate of 3.610479 percent. The bonds were sold to finance road construction projects within the District. In November 2014, the West Ranch Management District issued a $660,000 Bond Anticipation Note (BAN). The BAN will be retired with the issuance of Series 2015 bonds. REQUIRED SUPPLEMENTARY INFORMATION (Unaudited) CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF FUNDING PROGRESS FOR PARTICIPATION IN TEXAS MUNICIPAL RETIREMENT SYSTEM SEPTEMBER 30, 2014 62 Actuarial Actuarial UAAL as a Actuarial Value of Accrued Unfunded AAL Covered Percentage of Valuation Date Assets Liability (AAL) Funded Ratio (UAAL) Payroll Covered Payroll (1) (2) (3) (4) (5) (6) (1) / (2) (2) - (1) (4) / (5) 12/31/2011 39,062,666$ 49,224,949$ 79.4% 10,162,283$ 11,521,562$ 88.2% 12/31/2012 43,044,755 52,372,967 82.2 9,328,212 11,513,756 81.0 12/31/2013 47,336,543 58,341,940 81.1 11,005,397 11,615,396 94.7 CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF FUNDING PROGRESS POST EMPLOYMENT BENEFITS PLAN OTHER THAN PENSIONS SEPTEMBER 30, 2014 63 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) 12/31/2011 -$ 610,795$ 0.0% 610,795$ 11,160,286$ 5.5% 12/31/2012 - 676,248 0.0 676,248 11,513,756 5.9 12/31/2013 * - 676,248 0.0 676,248 11,513,756 5.9 * In accordance with GASB Statement No. 45, the City has an actuarial valuation performed every 2 years, which was performed as of 12/31/12. Therefore data for 2013 is the same as 2012. CITY OF FRIENDSWOOD, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2014 64 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Revenues Property taxes 13,315,899$ 13,315,899$ 13,395,956$ 80,057$ Sales and alcohol taxes 4,153,547 4,153,547 4,726,283 572,736 Franchise taxes 1,529,086 1,543,900 1,673,615 129,715 Fines and forfeitures 921,406 921,406 828,637 (92,769) Permits and fees 1,169,327 1,187,452 1,327,464 140,012 Intergovernmental 340,279 383,909 548,262 164,353 Investment earnings 71,690 71,690 106,134 34,444 Donations 17,000 68,125 72,940 4,815 Miscellaneous 11,641 39,659 54,989 15,330 Total revenues 21,529,875 21,685,587 22,734,280 1,048,693 Expenditures General government Mayor and council Supplies 3,497 3,497 3,229 268 Other services and charges 264,605 264,605 215,572 49,033 Total mayor and council 268,102 268,102 218,801 49,301 City manager Personnel services 426,407 426,407 412,696 13,711 Supplies 15,244 29,104 28,411 693 Other services and charges 76,786 73,640 46,156 27,484 Total city manager 518,437 529,151 487,263 41,888 City secretary Personnel services 379,699 379,699 361,387 18,312 Supplies 12,826 12,208 5,806 6,402 Repairs and maintenance 140 140 - 140 Other services and charges 68,773 69,641 53,614 16,027 Total city secretary 461,438 461,688 420,807 40,881 Administrative services Personnel services 788,816 788,816 712,968 75,848 Supplies 9,822 10,139 5,744 4,395 Other services and charges 207,268 210,869 203,585 7,284 Total administrative services 1,005,906 1,009,824 922,297 87,527 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, 2014 (CONTINUED) 65 Variance With Final Budget Actual Positive Original Final Amounts (Negative) General government - continued Human resources Personnel services 341,870 341,870 317,722 24,148 Supplies 15,655 14,779 10,942 3,837 Other services and charges 58,346 61,620 58,003 3,617 Total human resources 415,871 418,269 386,667 31,602 Tax Other services and charges 214,478 218,643 215,989 2,654 Total tax 214,478 218,643 215,989 2,654 Economic development Personnel services 153,654 153,727 150,110 3,617 Supplies 13,325 13,325 4,382 8,943 Other services and charges 101,259 105,686 72,349 33,337 Total economic development 268,238 272,738 226,841 45,897 Municipal court Personnel services 536,338 536,338 411,228 125,110 Supplies 16,206 15,307 8,610 6,697 Other services and charges 40,530 41,630 26,910 14,720 Total municipal court 593,074 593,275 446,748 146,527 Computer services Personnel services 392,211 394,911 390,948 3,963 Supplies 9,230 21,524 16,208 5,316 Repairs and maintenance 68,830 73,002 64,214 8,788 Other services and charges 327,215 322,442 286,424 36,018 Capital outlay 16,000 34,000 11,738 22,262 Total computer services 813,486 845,879 769,532 76,347 Risk management Personnel services 106,464 106,464 101,169 5,295 Supplies 11,879 9,496 2,346 7,150 Other services and charges 14,100 12,097 7,550 4,547 Total risk management 132,443 128,057 111,065 16,992 Total general government 4,691,473 4,745,626 4,206,010 539,616 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, 2014 (CONTINUED) 66 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Public safety Police services Personnel services 6,209,324 6,213,849 6,150,138 63,711 Supplies 449,092 431,690 370,553 61,137 Repairs and maintenance 152,407 127,580 107,868 19,712 Other services and charges 388,447 450,569 424,865 25,704 Capital outlay 84,421 72,651 64,422 8,229 Total police services 7,283,691 7,296,339 7,117,846 178,493 Communications Personnel services 971,556 996,101 991,756 4,345 Supplies 5,722 5,304 4,045 1,259 Repairs and maintenance 27,784 31,373 21,119 10,254 Other services and charges 17,798 21,192 15,444 5,748 Capital outlay 274,900 274,900 274,900 - Total communications 1,297,760 1,328,870 1,307,264 21,606 Animal control Personnel services 250,898 263,598 262,760 838 Supplies 28,922 31,471 30,880 591 Repairs and maintenance 2,477 1,887 1,882 5 Other services and charges 79,447 83,127 79,672 3,455 Capital outlay - 8,900 8,838 62 Total animal control 361,744 388,983 384,032 4,951 Fire and EMS Personnel services 594,222 596,999 561,963 35,036 Supplies 38,482 75,931 72,245 3,686 Repairs and maintenance 6,694 7,244 6,430 814 Other services and charges 1,361,457 1,349,150 1,340,431 8,719 Capital outlay - 278,631 150,924 127,707 Total fire and EMS 2,000,855 2,307,955 2,131,993 175,962 Total public safety 10,944,050 11,322,147 10,941,135 381,012 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, 2014 (CONTINUED) 67 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Public works Administration Personnel services 289,341 316,875 268,435 48,440 Supplies 1,621 1,621 1,471 150 Other services and charges 1,929 4,614 3,260 1,354 Total administration 292,891 323,110 273,166 49,944 Streets Personnel services 542,326 583,857 528,074 55,783 Supplies 77,131 84,664 75,889 8,775 Repairs and maintenance 619,300 461,506 72,464 389,042 Other services and charges 413,251 418,838 415,854 2,984 Capital outlay - 860,250 192,156 668,094 Total streets 1,652,008 2,409,115 1,284,437 1,124,678 Drainage Personnel services 302,144 267,884 262,351 5,533 Supplies 17,493 15,832 10,470 5,362 Repairs and maintenance 37,316 45,481 43,299 2,182 Other services and charges 5,866 9,362 8,420 942 Total drainage 362,819 338,559 324,540 14,019 Total public works 2,307,718 3,070,784 1,882,143 1,188,641 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, 2014 (CONTINUED) 68 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Community development Administration Personnel services 537,534 422,343 405,546 16,797 Supplies 9,410 8,357 5,237 3,120 Repairs and maintenance 637 637 154 483 Other services and charges 12,218 12,363 8,573 3,790 Total administration 559,799 443,700 419,510 24,190 Planning and zoning Personnel services 222,244 312,622 279,581 33,041 Supplies 1,585 1,345 714 631 Other services and charges 11,804 12,194 10,083 2,111 Total planning and zoning 235,633 326,161 290,378 35,783 Engineering Personnel services 11,991 11,091 - 11,091 Supplies 2,222 2,072 1,585 487 Repairs and maintenance 530 530 41 489 Other services and charges 56,921 78,050 33,139 44,911 Capital outlay - 5,695 5,694 1 Total engineering 71,664 97,438 40,459 56,979 Inspection Personnel services 383,863 339,644 326,976 12,668 Supplies 13,644 15,164 8,486 6,678 Repairs and maintenance 1,930 1,930 336 1,594 Other services and charges 36,523 32,099 12,531 19,568 Total inspection 435,960 388,837 348,329 40,508 Total community development 1,303,056 1,256,136 1,098,676 157,460 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, 2014 (CONTINUED) 69 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Community services Administration Personnel services 268,265 268,158 267,453 705 Supplies 5,116 2,941 2,740 201 Other services and charges 27,764 25,353 25,241 112 Total administration 301,145 296,452 295,434 1,018 Parks and recreation Personnel services 874,215 884,829 862,422 22,407 Supplies 124,028 167,419 145,298 22,121 Repairs and maintenance 139,563 163,139 156,458 6,681 Other services and charges 609,210 660,043 637,259 22,784 Capital outlay - 278,726 49,861 228,865 Total parks and recreation 1,747,016 2,154,156 1,851,298 302,858 Swimming pool Personnel services 54,007 49,339 45,301 4,038 Supplies 13,613 14,163 13,267 896 Repairs and maintenance 7,472 4,915 3,088 1,827 Other services and charges 31,673 34,960 30,476 4,484 Total swimming pool 106,765 103,377 92,132 11,245 Building operations Supplies 29,585 31,023 26,912 4,111 Repairs and maintenance 139,217 117,495 94,979 22,516 Other services and charges 531,651 513,086 461,178 51,908 Capital outlay - 30,720 - 30,720 Total building operations 700,453 692,324 583,069 109,255 Total community services 2,855,379 3,246,309 2,821,933 424,376 Library Personnel services 876,341 876,341 856,330 20,011 Supplies 156,213 217,644 196,149 21,495 Repairs and maintenance 1,100 1,140 804 336 Other services and charges 22,380 32,502 29,760 2,742 Total library 1,056,034 1,127,627 1,083,043 44,584 Total expenditures 23,157,710 24,768,629 22,032,940 2,735,689 Excess (deficiency) of revenues over expenditures (1,627,835) (3,083,042) 701,340 3,784,382 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, 2014 (CONTINUED) 70 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Other financing sources Insurance recoveries 25,342 41,794 28,886 (12,908) Transfers in 1,335,094 1,335,094 1,183,194 (151,900) Total other financing sources 1,360,436 1,376,888 1,212,080 (164,808) Net change in fund balances (267,399) (1,706,154) 1,913,420 3,619,574 Fund balance, beginning of year 10,606,160 10,606,160 10,606,160 - Fund balance, end of year 10,338,761$ 8,900,006$ 12,519,580$ 3,619,574$ Budgeted Amounts CITY OF FRIENDSWOOD, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION 71 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 72 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 73 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 74 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, 2014 75 Capital Projects PermanentCourt Total NonmajorPolice Fire/EMS EDA TDRA Sidewalk Park Land Security and Bond GovernmentalInvestigation Donation Grant Grant Installation Dedication Technology Construction 1776 Park FundsCash and investments 63,363$ 87,915$ 456,873$ - $ 3,241$ 131,825$ 269,822$ 262,904$ 31,214$ 1,307,157$ Receivables, net of allowanceCustomer accounts - 30,998 - - - - - - - 30,998 Other 47 46 - - 4 117 4,163 - 27 4,404 Receivable from other governments - - 501,200 720,875 - - - - - 1,222,075 Total assets 63,410$ 118,959$ 958,073$ 720,875$ 3,245$ 131,942$ 273,985$ 262,904$ 31,241$ 2,564,634$ LIABILITIESAccounts payable 5,226$ 35,922$ 45,174$ - $ - $ 10,000$ - $ 244,131$ - $ 340,453$ Accrued liabilities - - 12,899 36,044 - - 311 3,146 - 52,400 Due to other funds - - 900,000 684,831 - - - 254,705 - 1,839,536 Total liabilities 5,226 35,922 958,073 720,875 - 10,000 311 501,982 - 2,232,389 Deferred Inflows of ResourcesCourt fines - - - - - - 3,912 - - 3,912 Total deferred inflows of resources - - - - - - 3,912 - - 3,912 FUND BALANCESNonspendablePermanent fund - - - - - - - - 31,241 31,241 RestrictedState and/or federal statute 58,184 - - - - - 269,762 - - 327,946 Fire/EMS donations - 83,037 - - - - - - - 83,037 City ordinances - - - - 3,245 121,942 - - - 125,187 Unassigned - - - - - - - (239,078) - (239,078) Total fund balances 58,184 83,037 - - 3,245 121,942 269,762 (239,078) 31,241 328,333 Total liabilities, deferred inflows of resources, and fund balances 63,410$ 118,959$ 958,073$ 720,875$ 3,245$ 131,942$ 273,985$ 262,904$ 31,241$ 2,564,634$ ASSETSLIABILITIES, DEFERRED INFLOWS OF RESOURCES, 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, 2014 76 Capital Projects 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 - $ - $ - $ - $ - $ - $ 31,620$ - $ - $ 31,620$ Permits and fees - - - - 3,234 55,200 - - - 58,434 Intergovernmental 40,813 - 292,533 909,843 - - - - - 1,243,189 Investment earnings 182 114 - - 11 470 891 262 104 2,034Donations - 266,226 - - - 10,000 - - - 276,226 Total revenues 40,995 266,340 292,533 909,843 3,245 65,670 32,511 262 104 1,611,503 ExpendituresCurrent:General government - - - 74,610 - - 37,261 - - 111,871 Public safety 23,436 134,088 - - - - - - - 157,524 Capital outlay 28,441 - 292,533 835,233 - 72,028 11,504 501,982 - 1,741,721 Debt service:Principal - 108,313 - - - - - - - 108,313 Interest and fiscal charges - 16,644 - - - - - - - 16,644 Total expenditures 51,877 259,045 292,533 909,843 - 72,028 48,765 501,982 - 2,136,073 Other financing sources (uses)Proceeds from sale of capital assets 6,325 - - - - - - - - 6,325 Total other financing sources (uses) 6,325 - - - - - - - - 6,325 Net change in fund balances (4,557) 7,295 - - 3,245 (6,358) (16,254) (501,720) 104 (518,245) Fund balances, beginning of year 62,741 75,742 - - - 128,300 286,016 262,642 31,137 846,578 Fund balances, end of year 58,184$ 83,037$ - $ - $ 3,245$ 121,942$ 269,762$ (239,078)$ 31,241$ 328,333$ 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, 2014 77 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Revenues Interest income - $ - $ 114$ 114$ Donations 254,100 254,100 266,226 12,126 Total revenues 254,100 254,100 266,340 12,240 Expenditures Current Public safety 129,142 129,142 134,088 (4,946) Debt service Principal 109,570 108,314 108,313 1 Interest and fiscal charges 15,388 16,644 16,644 - Total expenditures 254,100 254,100 259,045 (4,945) Excess (deficiency) of revenues over expenditures - - 7,295 7,295 Net change in fund balance - - 7,295 7,295 Fund balance, beginning of year 75,742 75,742 75,742 - Fund balance, end of year 75,742$ 75,742$ 83,037$ 7,295$ 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, 2014 78 Variance With Final Budget Actual Positive Original Final Amounts (Negative) Revenues Property taxes 1,553,879$ 1,553,879$ 1,539,673$ (14,206)$ Interest income 1,294 1,294 949 (345) Total revenues 1,555,173 1,555,173 1,540,622 (14,551) Expenditures Debt service Principal 1,560,307 1,560,379 1,560,379 - Interest and fiscal charges 646,642 646,570 646,074 496 Total expenditures 2,206,949 2,206,949 2,206,453 496 Excess (deficiency) of revenues over expenditures (651,776) (651,776) (665,831) (14,055) Other financing sources (uses) Transfers in 616,150 616,150 616,150 - Total other financing sources 616,150 616,150 616,150 - Net change in fund balance (35,626) (35,626) (49,681) (14,055) Fund balance, beginning of year 179,828 179,828 179,828 - Fund balance, end of year 144,202$ 144,202$ 130,147$ (14,055)$ 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 position by component 2 Changes in net position 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 taxable value of 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 net 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) 79 Table 1City of FriendswoodNet Position by ComponentLast Ten Fiscal Years(accrual basis of accounting)(unaudited)2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Governmental activitiesNet investment in capital assets 32,533,863$ 32,849,446$ 71,777,140$ 70,591,236$ 69,313,348$ 70,480,334$ 66,580,049$ 65,582,783$ 65,056,180$ 65,404,791$ Restricted 1,576,829 2,034,157 2,391,482 2,773,910 2,461,510 1,977,801 922,874 872,869 718,275 653,496 Unrestricted 7,527,573 10,391,123 10,785,998 10,548,129 9,892,077 8,447,179 8,227,254 8,828,132 9,565,406 10,798,907 Total governmental activities net position 41,638,265$ 45,274,726$ 84,954,620$ 83,913,275$ 81,666,935$ 80,905,314$ 75,730,177$ 75,283,784$ 75,339,861$ 76,857,194$ Business-type activitiesNet investment in capital assets 16,823,526$ 16,815,130$ 16,884,376$ 20,375,620$ 21,122,644$ 19,565,756$ 26,251,346$ 25,618,823$ 22,961,547$ 24,495,816$ Restricted 445,086 41,057 162,218 27,246 93,526 593,597 731,410 786,600 176,882 90,395 Unrestricted 5,228,802 6,574,920 7,475,597 4,227,253 6,730,812 8,677,882 11,373,311 13,032,798 16,790,183 14,818,104 Total business-type activities net position22,497,414$ 23,431,107$ 24,522,191$ 24,630,119$ 27,946,982$ 28,837,235$ 38,356,067$ 39,438,221$ 39,928,612$ 39,404,315$ Primary governmentNet investment in capital assets 49,357,389$ 49,664,576$ 88,661,516$ 90,966,856$ 90,435,992$ 90,046,090$ 92,831,395$ 91,201,606$ 88,017,727$ 89,900,607$ Restricted 2,021,915 2,075,214 2,553,700 2,801,156 2,555,036 2,571,398 1,654,284 1,659,469 895,157 743,891 Unrestricted 12,756,375 16,966,043 18,261,595 14,775,382 16,622,889 17,125,061 19,600,565 21,860,930 26,355,589 25,617,011 Total primary government net position 64,135,679$ 68,705,833$ 109,476,811$ 108,543,394$ 109,613,917$ 109,742,549$ 114,086,244$ 114,722,005$ 115,268,473$ 116,261,509$ Fiscal Year 80 Table 2City of FriendswoodChanges in Net PositionLast Ten Fiscal Years(accrual basis of accounting)(unaudited)2005 2006 2007 2008 2009 2010 2011 2012 2013 2014ExpensesGovernmental activities:General government 3,438,849$ 3,330,439$ 4,472,602$ 4,339,620$ 5,164,623$ 5,145,447$ 4,876,064$ 4,737,702$ 4,679,339$ 4,589,795$ Public safety 7,318,886 7,060,800 7,565,797 12,652,812 14,929,941 10,175,028 10,548,568 10,736,805 10,800,130 11,236,402 Community development and public works 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 4,385,090 3,921,658 Community development - - - - - 1,203,204 1,284,188 1,520,401 1,207,264 1,097,075 Community services 3,075,023 3,098,013 3,420,244 3,841,387 4,002,165 3,034,523 3,058,313 3,227,731 3,260,931 3,356,587 Library - - - - - 979,084 979,978 1,004,303 1,002,801 1,083,043 Interest and fiscal charges 478,495 857,602 835,511 803,733 678,705 789,652 871,790 757,011 703,275 630,542 Total governmental activities expenses 16,887,700 17,160,711 21,769,601 26,558,850 30,067,434 25,180,623 25,136,608 25,722,064 26,038,830 25,915,102 Business-type activities:Water and sewer 6,251,251 6,078,881 5,711,063 6,523,501 6,640,062 6,663,308 6,955,505 6,902,279 7,681,366 7,995,106 Interest and fiscal charges 963,355 962,989 1,583,551 1,543,859 1,604,174 2,037,104 1,644,074 1,638,495 1,590,395 1,514,804 Total business-type activities expenses 7,214,606 7,041,870 7,294,614 8,067,360 8,244,236 8,700,412 8,599,579 8,540,774 9,271,761 9,509,910 Total primary government expenses 24,102,306 24,202,581 29,064,215 34,626,210 38,311,670 33,881,035 33,736,187 34,262,838 35,310,591 35,425,012 Program RevenuesGovernmental activities: Charges for services General government 1,176,086 1,238,631 1,353,160 1,178,523 1,327,484 1,072,289 1,158,392 1,167,619 989,190 912,910 Public safety 15,013 54,653 23,267 21,356 46,773 38,438 39,914 39,661 34,944 31,620 Community development and public works 758,487 805,710 998,625 838,060 602,265 - - - - - Public works - - - - - 152,163 158,858 171,890 186,504 193,064 Community development - - - - - 550,286 643,150 730,211 825,366 877,132 Community services 66,281 112,681 219,944 132,244 411,207 258,030 267,837 271,912 316,047 315,702 Library - - - - - 44,313 43,147 38,543 36,686 36,081 Operating grants and contributions 1,271,119 771,477 489,707 4,021,908 5,755,038 2,819,418 3,150,808 648,058 644,458 843,995 Capital grants and contributions 235,300 - - - - - - 527,288 543,763 1,202,376 Total governmental activities program revenues 3,522,286 2,983,152 3,084,703 6,192,091 8,142,767 4,934,937 5,462,106 3,595,182 3,576,958 4,412,880 Business-type activities:Charges for services Water and sewer 8,390,761 8,392,277 8,021,040 8,624,546 12,028,895 9,854,083 12,726,936 11,258,216 11,462,779 11,117,391 Total business-type activities program revenues 8,390,761 8,392,277 8,021,040 8,624,546 12,028,895 9,854,083 12,726,936 11,258,216 11,462,779 11,117,391 Total primary government program revenues 11,913,047 11,375,429 11,105,743 14,816,637 20,171,662 14,789,020 18,189,042 14,853,398 15,039,737 15,530,271 Net (Expense)/RevenuesGovernmental activities (13,365,414) (14,177,559) (18,684,898) (20,366,759) (21,924,667) (20,245,686) (19,674,502) (22,126,882) (22,461,872) (21,502,222) Business-type activities 1,176,155 1,350,407 726,426 557,186 3,784,659 1,153,671 4,127,357 2,717,442 2,191,018 1,607,481 Total primary government net expense (12,189,259)$ (12,827,152)$ (17,958,472)$ (19,809,573)$ (18,140,008)$ (19,092,015)$ (15,547,145)$ (19,409,440)$ (20,270,854)$ (19,894,741)$ (Continued)Fiscal Year 81 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014General Revenues and Other Changes in Net PositionGovernmental activities:Taxes Property 11,352,598$ 11,304,684$ 11,876,246$ 12,512,950$ 13,481,500$ 13,664,765$ 13,944,725$ 14,165,599$ 14,630,961$ 14,864,284$ Sales 3,199,136 3,658,699 3,904,436 3,767,526 3,871,995 3,853,161 4,002,740 3,907,577 4,293,794 4,693,484 Franchise 1,176,460 1,220,581 1,239,167 1,317,166 1,363,221 1,510,794 1,598,407 1,556,556 1,583,258 1,673,615 Other 53,790 11,940 16,186 25,429 28,859 28,859 28,883 23,356 24,974 32,799 Investment earnings 376,435 915,710 1,063,715 648,301 166,492 93,018 110,863 137,202 88,510 109,849 Gain (loss) on sale of capital assets - - 345,976 - 4,320 33,647 23,831 17,601 43,788 34,359 Miscellaneous 51,503 21,556 4,152 73,026 214,484 131,545 126,228 147,457 78,682 84,275 Transfers 763,361 680,850 875,616 981,016 547,456 168,276 (5,336,312) 1,725,141 1,773,982 1,799,344 Total governmental activities 16,973,283 17,814,020 19,325,494 19,325,414 19,678,327 19,484,065 14,499,365 21,680,489 22,517,949 23,292,009 Business-type activities:Investment earnings 114,932 262,761 1,236,092 531,758 128,338 87,056 55,163 82,853 37,565 40,713 Gain (loss) on sale of capital assets - - - - (48,678) (182,198) - 7,000 - - Miscellaneous 13,478 1,375 4,182 - - - - - 35,790 - Extraordinary item - - - - - - - - - - Transfers (763,361) (680,850) (875,616) (981,016) (547,456) (168,276) 5,336,312 (1,725,141) (1,773,982) (1,799,344) Total business-type activities (634,951) (416,714) 364,658 (449,258) (467,796) (263,418) 5,391,475 (1,635,288) (1,700,627) (1,758,631) Total primary government 16,338,332 17,397,306 19,690,152 18,876,156 19,210,531 19,220,647 19,890,840 20,045,201 20,817,322 21,533,378 Change in Net PositionGovernmental activities 3,607,869 3,636,461 640,596 (1,041,345) (2,246,340) (761,621) (5,175,137) (446,393) 56,077 1,789,787 Business-type activities 541,204 933,693 1,091,084 107,928 3,316,863 890,253 9,518,832 1,082,154 490,391 (151,150) Total primary government 4,149,073$ 4,570,154$ 1,731,680$ (933,417)$ 1,070,523$ 128,632$ 4,343,695$ 635,761$ 546,468$ 1,638,637$ (Concluded)Note:Community Development and Publics Works were shown as one department from 2005 to 2009. From 2005 to 2009, the Library was included with Community Services. Fiscal Year 82 Table 3City of FriendswoodFund Balances, Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting)(unaudited)2005 2006 2007 2008 2009 2010 2011 2012 2013 2014General FundReserved 511,197$ 1,313,829$ 601,646$ 1,037,279$ 686,404$ 1,731,056$ -$ -$ -$ -$ Unreserved 7,032,843 8,973,646 9,926,479 9,177,390 9,185,590 7,399,217 - - - - Nonspendable - - - - - - 220,151 99,874 122,927 143,201 Restricted - - - - - - 97,728 173,015 281,826 400,411 Assigned - - - - - - 1,085,527 434,931 487,201 1,421,785 Unassigned - - - - - - 7,511,998 8,379,399 9,714,206 10,554,183 Total general fund 7,544,040$ 10,287,475$ 10,528,125$ 10,214,669$ 9,871,994$ 9,130,273$ 8,915,404$ 9,087,219$ 10,606,160$ 12,519,580$ All Other Governmental FundsReserved 1,395,767$ 4,220,225$ 3,575,592$ 2,310,481$ 1,385,265$ 667,682$ -$ -$ -$ -$ Unreserved, reported in: - - - - - - - - - - Special revenue funds 175,192 404,749 558,653 643,223 1,075,343 1,328,145 - - - - Capital projects funds 8,584,781 3,943,654 1,957,116 323,597 326,600 - - - - - Permanent fund 26,292 27,477 28,901 30,070 30,507 30,720 - - - - Nonspendable - - - - - - 30,869 31,027 31,137 31,241 Restricted - - - - - - 4,162,423 2,184,855 995,269 666,317 Unassigned - - - - - - - - - (239,078) Total all other governmental funds 10,182,032$ 8,596,105$ 6,120,262$ 3,307,371$ 2,817,715$ 2,026,547$ 4,193,292$ 2,215,882$ 1,026,406$ 458,480$ Note: In fiscal year 2011, the City implemented GASB 54 which changed the fund balance classifications to nonspendable, restricted, committed, assigned and unassigned. Fiscal Year 83 Table 4City of FriendswoodChanges in Fund Balances, Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting)(unaudited)2005 2006 2007 2008 2009 2010 2011 2012 2013 2014RevenuesTaxes 15,779,126$ 16,190,756$ 16,961,818$ 17,606,273$ 18,763,998$ 19,104,625$ 19,592,092$ 19,630,172$ 20,563,848$ 21,335,527$ Fines and penalties 1,112,916 1,163,984 1,288,794 1,161,903 1,143,102 1,043,126 1,012,592 1,037,880 939,380 860,257 Licenses and permits 717,607 769,352 1,017,502 944,756 966,797 960,479 1,069,845 1,174,013 1,327,918 1,385,898 Intergovernmental 985,339 535,074 248,702 3,801,013 5,794,303 2,652,037 3,109,645 1,077,890 918,641 1,791,451 Investment earnings 375,123 906,552 1,054,698 639,402 161,106 90,337 109,272 135,483 87,330 109,117 Donations 213,381 219,353 229,939 265,535 272,911 280,223 276,209 306,119 363,413 349,166 Other revenues 414,923 277,995 279,788 37,876 34,448 81,366 78,243 41,410 84,673 54,989 Total revenues 19,598,415 20,063,066 21,081,241 24,456,758 27,136,665 24,212,193 25,247,898 23,402,967 24,285,203 25,886,405 ExpendituresGeneral government 3,420,274 3,315,844 4,605,245 4,114,662 4,178,062 4,224,384 4,397,858 4,322,631 4,250,320 4,306,143 Public safety 7,127,975 6,903,806 7,482,603 12,404,745 14,717,404 9,799,372 10,093,964 10,201,010 10,234,811 10,599,575 Community development and public works 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 2,204,176 1,689,987 Community development - - - - - 1,208,899 1,284,188 1,520,401 1,207,264 1,092,982 Community services 2,626,329 2,630,094 2,866,388 3,266,250 3,439,475 2,458,422 2,472,015 2,622,970 2,675,813 2,772,072 Library - - - - - 979,084 979,978 1,004,303 1,002,801 1,083,043 Capital outlay 7,040,173 4,292,854 3,711,569 4,339,546 2,489,845 3,799,303 4,254,582 3,705,622 1,942,746 2,500,254 Debt principal payment 459,422 608,184 658,073 774,584 787,293 787,590 1,065,865 1,562,088 1,721,983 1,668,692 Interest and fiscal agent charges 594,076 757,402 739,487 704,136 691,638 773,744 864,746 768,329 712,822 662,718 Bond issuance costs and fees - - - - - - 200,227 131,380 - - Total expenditures 23,704,608 21,087,582 23,664,163 28,649,827 29,710,598 25,987,277 27,250,660 27,540,853 25,952,736 26,375,466 Excess of revenuesunder expenditures(4,106,193) (1,024,516) (2,582,922) (4,193,069) (2,573,933) (1,775,084) (2,002,762) (4,137,886) (1,667,533) (489,061) Other Financing Sources (Uses)Sale of capital assets - 187,345 785,942 22,600 - 23,340 8,992 9,250 27,566 6,325 Insurance recoveries - - - 63,106 123,707 50,579 45,334 105,502 48,132 28,886 Issuance of debt 8,024,224 - - - - - 3,460,000 8,890,000 - - Capital lease proceeds - - - - 1,133,460 - - 464,270 147,318 - 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 923,361 904,955 1,226,304 992,586 2,098,405 1,512,987 1,235,892 1,970,819 1,973,106 1,799,344 Transfer out (160,000) (224,105) (350,688) (11,570) (1,613,970) (1,344,711) (6,573,032) (245,678) (199,124) - Total other financing sources (uses) 8,787,585 868,195 1,661,558 1,066,722 1,741,602 242,195 3,954,638 2,332,291 1,996,998 1,834,555 Net change in fund balance4,681,392$ (156,321)$ (921,364)$ (3,126,347)$ (832,331)$ (1,532,889)$ 1,951,876$ (1,805,595)$ 329,465$ 1,345,494$ Debt service as a percentage of noncapital expenditures 6.3% 8.1% 7.0% 6.1% 5.4% 7.0% 8.4% 9.8% 10.1% 9.8%Note:From 2005 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 84 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 TaxYear Year Property Property Property Value Property Value Rate2005 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 2013 2012 2,622,105,658 286,288,277 235,960,049 3,144,353,984 710,718,423 2,433,635,561 0.59700 2014 2013 2,695,532,057 294,316,218 238,127,209 3,227,975,484 724,153,848 2,503,821,636 0.59140 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. 85 Table 6City of FriendswoodDirect and Overlapping Property Tax RatesLast Ten Fiscal Years(unaudited)(rate per $100 of assessed value)FiscalYear Friendswood Clear Creek Galveston CountyEnded Debt Total Independent Independent Drainage Galveston HarrisSeptember 30, General Service Direct School District School District District County County2005 0.5547$ 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 2013 0.5307 0.0663 0.5970 1.3670 1.3600 0.1400 0.5999 0.62998 2014 0.5303 0.0611 0.5914 1.3670 1.4000 0.1400 0.5837 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 86 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 18,864,491$ 1 0.75% 13,299,980$ 1 0.76% Kroger Co. 13,570,271 2 0.54% 7,713,640 4 0.44% Texas-New Mexico Power Co. 12,084,650 3 0.48% 12,573,930 2 0.72% Autumn Creek Dev LTD 9,046,190 4 0.36% - - G&I VI Sky Hawk LP 9,292,240 5 0.37% - - H.E. Butt Grocery Company 8,149,920 6 0.33% 5,770,930 8 0.33% HSRE Friendswood LLC 7,535,390 7 0.30% - - HCP Friendswood LLC 6,995,240 8 0.28% - - A-S 108 Friendswood Crossing LP 6,310,430 9 0.25% - - Timber Creek Holdings LP 5,646,290 10 0.23% - - Southwestern Bell Telephone Co. - - 9,207,860 3 0.53% Southwest Properties - - 7,500,090 5 0.43% Texas HCP Holding LP - - 6,457,140 6 0.37% Friendswood Retirement - - 6,023,505 7 0.34% D R Horton Texas, Ltd. - - 5,739,170 9 0.33% Exxon Mobil Pipeline - - 5,003,740 10 0.29% Total 97,495,112 3.89% 79,289,985 4.52% All other taxpayers 2,406,326,524 96.11% 1,673,508,835 95.48% 2,503,821,636$ 100.00% 1,752,798,820$ 100.00% Source: Galveston Central Appraisal District and Harris County Appraisal District 2014 2005 87 Table 8City of FriendswoodProperty Tax Levies and CollectionsLast Ten Fiscal Years(Unaudited)FiscalCollectionsYear Taxes Levied Total Taxes (adjustments)Ended for the Subsequent Levied for the Percentage in Subsequent PercentageSeptember 30, Fiscal Year Adjustments Fiscal Year Amount of Levy Years Amount of Levy2005 11,221,282$ 2,156$ 11,223,438$ 11,078,265$ 98.73% 136,030$ 11,214,295$ 99.92%2006 11,151,572 16,551 11,168,123 11,019,314 98.81% 137,899 11,157,213 99.90%2007 11,740,541 782 11,741,323 11,532,882 98.23% 199,408 11,732,290 99.92%2008 12,351,183 70,571 12,421,754 12,193,715 98.73% 219,575 12,413,290 99.93%2009 13,230,005 87,906 13,317,911 13,113,928 99.12% 191,651 13,305,579 99.91%2010 13,482,173 71,543 13,553,716 13,395,543 99.36% 141,384 13,536,927 99.88%2011 13,680,511 58,467 13,738,978 13,608,076 99.47% 114,382 13,722,458 99.88%2012 13,984,872 83,788 14,068,660 13,916,558 99.51% 130,224 14,046,782 99.84%2013 14,415,212 39,192 14,454,404 14,361,379 99.63% 58,164 14,419,543 99.76%2014 14,700,279 - 14,700,279 14,656,257 99.70% - 14,656,257 99.70%Source: Galveston County Tax Assessor/Collector and City of Friendswood records.Collected within theFiscal Year of the Levy Total Collections to Date 88 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 of Revenue Primary Personal PerYear Bonds Obligation Bonds Leases Bonds Obligation Bonds Government Income Capita 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 0.42% 1,498 2013 20,230,000 - - 876,981 - - 32,995,000 54,101,981 0.37% 1,410 2014 18,815,000 - - 623,407 - - 31,830,000 51,268,407 N/A 1,318 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 89 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 Debt Property Capita 2005 34,272 1,751,549,982$ 17,590,000$ 1,375,345$ 16,214,655$ 0.93% 473$ 2006 34,306 1,841,521,595 17,150,000 1,576,724 15,573,276 0.85% 454 2007 34,759 2,017,378,788 16,660,000 1,803,928 14,856,072 0.74% 427 2008 35,500 2,153,147,238 16,065,000 2,100,617 13,964,383 0.65% 393 2009 37,653 2,296,511,002 15,445,000 952,951 14,492,049 0.63% 385 2010 38,057 2,340,816,373 14,800,000 545,676 14,254,324 0.61% 375 2011 37,247 2,355,799,675 22,885,000 240,869 22,644,131 0.96% 608 2012 37,839 2,388,586,542 21,605,000 193,714 21,411,286 0.90% 566 2013 38,369 2,433,635,561 20,230,000 134,339 20,095,661 0.83% 524 2014 38,911 2,503,821,636 18,815,000 86,085 18,728,915 0.75% 481 Note:Details regarding the City's outstanding debt can be found in the notes to the financial statements.General Bonded Debt Outstanding 90 Table 11 City of Friendswood Direct and Overlapping Governmental Activities Debt As of September 30, 2014 (Unaudited) Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable Debt Debt repaid with property taxes Friendswood Independent School District 107,445,000$ 100.00% 107,445,000$ Clear Creek Independent School District 917,031,062 2.050% 18,799,137 Galveston County 248,523,000 7.93% 19,705,000 Harris County 3,205,021,000 0.504% 16,159,716 Subtotal, overlapping debt 162,108,853 City direct debt 19,438,407 Total direct and overlapping debt 181,547,260$ 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. 91 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, 2014, is $.5914 per $100 of assessed valuation with assessed valuation being 100% of market value. 92 Table 13 City of Friendswood Pledged-Revenue Coverage Last Ten Fiscal Years (Unaudited) Utility Less: Net Fiscal Service Operating Available Debt Service Year Charges Expenses Revenue Principal Interest Coverage 2005 8,390,761$ 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 2013 11,462,779 6,113,276 5,349,503 1,120,000 1,548,303 2.00 2014 11,117,391 6,376,510 4,740,881 1,165,000 1,504,006 1.78 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 93 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 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 13,651,835,000 45,433 5.0% 2013 38,369 14,475,816,000 47,186 4.5% 2014 38,911 - - 3.4% Sources:Population information was provided from past financial reports. Unemployment rates, personal income and per capita personal income 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; 2014 numbers were not available. 94 Table 15 City of Friendswood Principal Employers Current Year and Eight Years Ago (Unaudited) Percentage Percentage Estimated of Total City Estimated of Total City Employer Employees Workforce Employees Workforce Friendswood ISD 700 28.79% 675 34.83% HEB 317 13.04% 275 14.19% Kroger 292 12.01% 234 12.07% City of Friendswood 232 9.54% 222 11.46% Clear Creek ISD 155 6.38%2 - 0.00%1 Friendship Haven Nursing Home 140 5.76% 135 6.97% McDonalds 75 3.09% 33 1.70% Brookdale 69 2.84% - 0.00%1 Friendswood Healthcare (Autumn Hill 65 2.67% 90 4.64% U.S. Post Office 62 2.55% 70 3.61% UTMB 58 2.39% - 0.00%1 Sonic 49 2.02% 49 2.53% AAA Blastcote 45 1.85% - 0.00%1 Timber Creek Golf Club 45 1.85% 41 2.12% Perry & Sons Market and Grille 45 1.85% - 0.00%1 Luna's Mexican Restaurant 41 1.69% 40 2.06% 24 Hour Fitness 41 1.69% - 0.00%1 Village on the Park - 0.00%3 34 1.75% Gary Greene Realtors - 0.00%3 40 2.06% Total 2,431 100.00% 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 2014. 20062014 95 Table 16 City of Friendswood Full-time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years (Unaudited) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Function/Program General Government: City Manager 5.50 5.50 5.50 5.50 5.50 5.50 5.50 4.65 4.15 4.15 City Secretary 4.00 4.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Administrative Services 24.44 25.81 26.19 27.20 27.20 27.20 27.20 28.20 28.20 28.70 Public Safety: Police 70.07 72.06 81.41 83.90 79.40 79.40 80.40 80.40 81.40 82.40 Fire marshall and fire 12.85 4.50 6.11 6.10 6.10 6.10 6.10 6.10 6.10 6.50 Public Works: - - - - - 19.00 19.00 19.33 20.33 26.33 Community Development: - - - - - 17.70 17.70 16.89 16.89 10.89 Community Development and Public Works: 34.00 35.00 36.00 36.00 36.70 - - - - - Community Services: 30.43 31.01 32.18 32.20 32.20 18.95 18.95 19.28 19.20 19.03 Library - - - - - 14.72 14.72 14.72 14.37 14.37 Water: 9.00 9.00 9.00 9.00 10.30 10.30 10.30 10.30 9.30 9.30 Sewer: 7.00 8.00 8.00 8.00 9.00 9.00 9.00 9.00 9.00 9.00 Total City Employees: 197.29 194.88 209.39 212.90 211.40 212.87 213.87 213.87 213.94 215.67 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 2005 - 2009, public works and community development were combined. In 2010 - 2014, 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 96 Table 17City of FriendswoodOperating Indicators by Function/ProgramLast Ten Fiscal Years(Unaudited)2005200620072008200920102011201220132014Function/ProgramGeneral Government:Building permits issued 1,129 882 975 872 1,189 984 1,222 1,317 1,469 1,395 Building inspections conducted 12,641 12,264 11,135 11,472 6,673 8,744 9,514 10,486 11,470 10,611 Police:Physical arrests 1,041 1,804 1,923 1,868 1,794 2,002 1,962 1,885 1,601 1,596 Parking violations 22 30 34 46 33 27 82 61 107 58 Traffic violations 12,053 12,623 11,374 7,897 7,821 7,000 7,291 6,518 5,718 5,815 Fire Marshall:Inspections 731 668 1,300 1,312 1,653 1,509 1,444 1,616 1,673 1,427 Fire:Emergency responses 2,453 2,497 2,723 2,794 2,950 2,737 2,818 2,975 2,993 3,261 Fires extinguished 93 75 74 118 102 110 108 86 86 116 Parks and Recreation:Recreation participants NA NA NA 7,547 12,283 13,792 13,894 16,068 18,607 15,178 Facility reservations NA NA 1,115 1,065 1,727 1,451 503 493 686 728 Library:Volumes in collection 90,163 92,633 93,028 96,100 94,512 99,880 97,622 125,251 133,865 141,383 1 Total volumes borrowed 281,060 300,241 308,718 323,323 350,892 356,787 349,223 355,447 367,948 367,452 Water:New connections 208 209 289 202 46 160 173 185 189 193 Water main breaks 76 105 44 73 73 64 516 112 193 149 Average daily consumption 4,094 3,886 3,472 4,217 4,209 3,408 6,406 4,584 5,577 5,171 (thousands of gallons)Peak daily consumption 9,935 7,030 6,358 11,004 7,187 7,606 13,698 10,896 11,505 9,917 Sewer:Average daily sewage treatment 3,081 3,064 3,425 3,120 2,950 3,465 2,787 2,968 2,956 2,867 (thousands of gallons)Maximum daily flow 10,587 10,484 10,484 7,520 9,537 11,393 10,833 10,777 10,401 10,770 (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 97 Table 18City of FriendswoodCapital Asset Statistics by Function/ProgramLast Ten Fiscal Years(Unaudited)2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Function/ProgramPoliceStations 1111111111Patrol units 16 18 28 27 24 26 26 25 26 27FireStations 3333444444Public WorksStreets - paved (miles) 157 179 150 159 160 161 162 164 165 167Streets - unpaved (miles) 4 102222222Traffic signals 3 333333333Parks and RecreationAcreage 189 189 189 189 189 189 189 189 189 189Parks 8888888888Swimming pool 1 111111111Tennis courts 4 444444444Library 1111111111WaterWater mains (miles) 165 179 180 180 181 183 184 186 187 207Fire hydrants 1,250 1,250 1,275 1,275 1,275 1,305 1,324 1,588 1,608 1,610Connections 11,196 11,405 11,748 11,982 12,057 12,231 12,476 12,711 12,929 13,093Storage capacity 5,993 5,993 5,993 5,993 5,993 5,993 7,500 7,500 7,500 8,000(thousands of gallons)SewerSanitary sewers (miles) 165 153 155 155 156 158 159 162 163 194Connections 10,537 10,682 10,902 11,115 11,256 11,404 11,563 11,828 12,072 12,236Storm sewers (miles) 92 92 95 95 96 98 99 100 100 105Treatment capacity 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 12,000(thousands of gallons)Source: Various City departments and prior year CAFRsFiscal Year