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HomeMy WebLinkAboutFINANCIAL SECTION CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS The City of Auburn’s (the “City”) discussion and analysis is designed to: Assist the reader in focusing on significant financial issues Provide an overview of the City’s financial activity Identify changes in the City’s financial position (its ability to meet future years’ challenges) Identify any material deviations from the approved budget Identify individual fund issues or concerns Management’s Discussion and Analysis is designed to focus on the current year’s activities, resulting changes and currently known facts. Therefore, it should be read in conjunction with the Transmittal Letter and the City’s financial statements. Financial Highlights Total government-wide net assets, the amount by which total assets exceed total liabilities, equal $409.7 million. A total of $326.1 million, or 80% of total net assets, is invested in capital assets, net of debt related to the capital assets, and includes assets such as utility systems, streets, buildings, land, vehicles and equipment. An additional $2.3 million of net assets is restricted for purposes of endowment and debt service. Of the remaining $81.3 million of net assets, the majority is legally restricted, reserved by city policy for specific purposes, or is restricted for use by the city’s utilities. The net increase in government-wide net assets during 2006 was $18.2 million. Of this amount, $11.4 million was directly related to the increase in City-owned capital assets and infrastructure. On a government-wide basis, government net assets increased by $10.1 million during 2006. Of this amount $7.7 million is related to the capitalization of construction projects, and the balance of the increase is due to lower than anticipated expenditures. Business-type net assets increased by $8.1 million during 2006. Of this amount, $1.9 million is related to infrastructure assets donated by developers, $2.1 million is related to utility system development charges, and the rest is related to increases in the sanitary sewer and storm drainage funds. Government fund balances at year-end totaled $41.5 million. Of this amount, $40.0 million, or 96%, is unreserved and available to fund ongoing activities. However, the majority of the unreserved fund balance relates to special revenue funds and, as such, is legally restricted for specific purposes. Included in unreserved fund balance is $5.6 million in the cumulative reserve fund that is intended to provide resources in the event of significant downturns in certain city funds or provide for capital needs as designated by the City Council. Compared to 2005, total government fund balances increased by $1.8 million. This increase is a result of a combination of revenues that were higher than anticipated, particularly with retail sales tax, and expenditures less than budgeted in certain departments. The general fund’s unreserved fund balance of $14.4 million at year-end is a decrease of $1.5 million from 2005. This decrease is the result of transferring $3.5 million to the capital improvement projects fund, $0.9 million to the cumulative reserve fund and other fund transfers, offset by the increase in retail sales tax and other taxes and fees. Total City debt payments during the year, net of compensated absences, totaled $2.1 million. Total outstanding debt, including bonds and loans, totaled $30.4 million at 15 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS st December 31. This ending debt balance is an increase of $3.9 million and is the result of debt issuance for the Auburn Golf Course and Mountain View Cemetery proprietary funds and new Public Works Trust Fund loans, offset by debt service payments made during 2006. See note 10 for further information on debt activity during the year. Other City Highlights: Created, and approved by a vote of the citizenry, the Valley Regional Fire Authority (VRFA) with two neighboring jurisdictions. This moved the City fire department to a new taxing authority which operates similar to a fire district. Adopted the Environmental Park (EP) District and associated rezone to encourage compatible development in the proximity of the Auburn Environmental Park. Developed a fiber communications infrastructure plan. Police reduced crime through community programs educating citizens on reducing crimes. Entered into an interlocal agreement with King County regarding Planned Annexation Areas (PAA's) in order to move forward for a vote on annexation of the PAA's in 2007. The Save our Streets program completed over $1.5 million in local street projects. Completed Phase I of the Intelligent Transportation System (ITS). Completed the Auburn Way South safety improvements. Continued support of the Regional Transportation Improvement District (RTID) package in preparation for the fall 2007 ballot and voter approval. Began construction of a new golf course club house and restaurant. Expanded recreation programs and completed and or redesigned several parks. Work was completed on fire station construction preliminary design and cost estimation. Implemented Photo Safe Red Light Enforcement and Speed Enforcements to enhance the public safety of pedestrians and vehicular traffic. Worked with Valley Cities to develop regional standards for technologies such as wireless communications. Overview of the Financial Statements The City’s basic financial statements are presented in three parts: 1) Government-wide financial statements 2) Fund financial statements 3) Notes to the financial statements Other supplementary information, in addition to the basic financial statements, is also contained in this report. This section of the management’s discussion and analysis is intended to introduce and explain the basic financial statements. 16 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Government-wide Financial Statements The government-wide financial statements are designed to be corporate-like in that all governmental and business-type activities are consolidated into columns which add to a total for the City. The focus of the Statement of Net Assets is designed to be similar to bottom-line results for the City and its governmental and business-type activities. This statement combines and consolidates governmental funds’ current financial resources (short-term spendable resources) with capital assets and long-term obligations. Over time, increases or decreases in net assets may be one indicator of improvement or deterioration in the City’s overall financial health. TheStatement of Activities is focused on both the gross and net cost of various functions, including both governmental and business-type activities, which are supported by the City’s general tax and other revenues. This is intended to summarize and simplify the user’s analysis of cost of various governmental services and/or subsidy to various business-type activities. The revenue generated by the specific functions (charges for services, grants, and contributions) is compared to the expenses for those functions to show how much each function either supports itself or relies on taxes and other general funding sources for support. All activity on this statement is reported on the accrual basis of accounting, requiring that revenues are reported when they are earned and expenses are reported when they are incurred, regardless of when cash is received or disbursed. Governmental activities of the City include general government (executive, finance, legal, human resources, court), security (police, fire), physical environment, economic environment, transportation, health and human services, and culture and recreation. The City’s business-type activities include water, sanitary sewer, storm water and solid waste utilities, as well as operating a golf course, airport, cemetery and commercial retail space. Governmental activities are primarily supported by taxes, charges for services, and grants while business-type activities are self-supporting through user fees and charges. Fund Financial Statements The Fund Financial Statements are the traditional reporting format for governments. A fund is a fiscal and accounting entity with a self-balancing set of accounts used to account for specific activities or meet certain objectives. While the government-wide statements present the City’s finances based on the type of activity (general government vs. business type), the Fund Financial Statements are presented by fund type, such as the general fund, special revenue funds and proprietary funds, with the focus on major funds. Government Funds are used to account for essentially the same functions that are reported as governmental activities in the government-wide financial statements. The government major fund presentation is used, utilizing the “sources and uses of liquid resources” basis. This is the manner in which the budget is typically developed. The basis of accounting is different between the government fund statements and the government-wide financial statements. The government fund statements focus on the near-term revenues/financial resources and expenditures while the government-wide financial statements include both near-term and long-term revenues/financial resources and expenditures. The information in the governmental fund statements can be used to evaluate the City’s near-term financing requirements and immediate fiscal health. Comparing the governmental fund statements with the government-wide statements can help the reader better understand the long-term impact of the City’s current-year financing decisions. Because the basis of accounting is different between the government fund statements and the government-wide financial statements, reconciliations are provided. The reconciliation between the government fund Balance Sheets and the government-wide Statement of Net Assets is found on the bottom of the government funds’ Balance Sheet, while the reconciliation between the government fund Statement of Revenues, Expenditures and Changes in Fund Balance and the government-wide 17 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Statement of Activities is found directly following the government funds’ Statement of Revenues, Expenses, and Changes in Fund Balance. The City maintains 19 individual governmental funds. Of these, three are considered major (the general fund, the arterial street fund, and the capital improvement projects fund) and are presented separately in the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balances. The remaining governmental funds are combined into a single column labeled “Other Governmental Funds”. Individual fund data for each of the other governmental funds can be found in the combining statements later in this report. The City maintains budgetary control over its operating funds through the adoption of an annual budget. Budgets are adopted at the fund level according to state law. Budgetary comparison statements are presented for the general and arterial street funds as required supplemental information. Other budgetary comparison schedules are included following the other government funds’ combining statements in this report. Proprietary funds are used by governments to account for their business-type activities and use the same basis of accounting as utilized in private industry. Business-type activities provide specific goods or services to a group of customers that are paid for by fees charged to those customers. There is a direct relationship between the fees paid and the services rendered. The City has two types of proprietary funds: enterprise funds and internal service funds. Enterprise funds are used to account for goods and services provided to citizens, while internal service funds are used to account for goods and services provided internally to various city departments. Enterprise funds report the same functions presented as business-type activities in the government- wide statements, but in greater detail. The City’s enterprise fund statements provide information on the City’s four utilities (water, sanitary sewer, storm water, and solid waste) as well as the city-owned airport, cemetery, and golf course and the city-leased retail space. Internal service funds are an essential accounting tool used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its fleet of vehicles, the city-wide provision of computer hardware and software services, and its insurance premiums. Internal service funds benefit both governmental and business-type activities, and are allocated accordingly in the government-wide statement of activities. Fiduciary funds account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments or other funds. Fiduciary funds are not included in the government-wide financial statements because their assets are not available to support the City’s activities. The City has two fiduciary funds: a pension fund and an agency fund, and are accounted for on the accrual basis. As agency funds are custodial in nature, they do not include revenues and expenses. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found at the end of the Basic Financial Statements section. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the budget vs. actual reports of the City’s general fund and major special revenue funds, and the City’s progress in funding its obligation to 18 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS provide pension benefits to certain retired firefighters. The budget vs. actual required supplementary information can be found in the tab labeled “Required Supplemental Information” and the pension benefit required supplementary information is found in note 9. The combining statements referred to earlier in connection with nonmajor government funds, nonmajor enterprise funds, and internal service funds are presented in the section titled “Fund Financial Statements and Schedules”. Government-wide Financial Analysis The statement of net assets can serve as a useful indicator of the City’s financial position. The City of Auburn’s net assets (assets in excess of liabilities) at December 31, 2006 totaled $391.5 million. Following is a condensed version of the government-wide statement of net assets with a comparison to 2005: City of Auburn Net Assets Governmental ActivitiesBusiness-type ActivitiesTotal As of 12/31/06As of 12/31/05As of 12/31/06As of 12/31/05As of 12/31/06As of 12/31/05 Current and other assets60,119,600$ 56,901,363$ 48,538,753$ 38,515,313$ 108,658,353$ 95,416,676$ Capital assets, net of accumulated depreciation204,552,704 197,950,363 136,106,696 132,273,719 340,659,400 330,224,082 Total assets264,672,304 254,851,726 184,645,449 170,789,032 449,317,753 425,640,758 Long-term liabilities9,040,438 9,319,445 23,549,299 18,490,019 32,589,737 27,809,464 Other liabilities3,830,304 3,873,404 3,149,996 2,409,553 6,980,300 6,282,957 Total liabilities12,870,742 13,192,849 26,699,295 20,899,572 39,570,037 34,092,421 Net assets Invested in capital assets, net of related debt200,814,063 194,121,232 125,265,152 115,137,273 326,079,215 309,258,505 Restricted26,839,342 23,442,309 6,987,485 2,238,611 33,826,827 25,680,920 Unrestricted24,148,157 24,095,336 25,693,517 32,513,576 49,841,674 56,608,912 Total net assets251,801,562$ 241,658,877$ 157,946,154$ 149,889,460$ 409,747,716$ 391,548,337$ The largest component of the City’s net assets, $326.1 million, or 80%, is its investment in capital assets, less debt related to the acquisition or construction of those assets. These capital assets, such as streets, parks, trails, and vehicles and equipment related to police, fire and public works, are used to provide services to the citizens. As a result, these assets are not for sale, and are therefore not available to fund current and future City obligations. The City elected the GASB 34 reporting option to include all general infrastructure of the City acquired or substantially renovated since 1980. The largest component of unrestricted net assets, $25.7 million, represents the unrestricted net assets of the City’s business-type activities and may only be spent on activities related to one of the four City utilities (water, sanitary sewer, storm water and solid waste) or to the City-owned ventures (airport, golf course, cemetery, and commercial retail property). Examples of utility activities include maintenance of water/sewer mains, pump and lift stations, storm drain flushing, water meter reading, and garbage collection. Activities related to the other city-owned ventures include maintenance of hangars and runways at the airport, grooming and landscaping at the golf course and cemetery, and developing tenant space at the Sound Transit parking garage. $26.8 million of net assets are restricted to purposes such as capital project construction, debt service, mitigation, and endowment. The remaining net assets of the City may be used for functions such as public safety employee salaries and supplies, park and road maintenance, and other general government services. 19 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Changes in Net Assets The change in net assets represents the increase or decrease in City net assets resulting from its various activities. Following is a condensed version of the City’s changes in net assets. The table shows the revenues, expenses and related changes in net assets for both governmental-type and business-type activities: City of Auburn's Changes in Net Assets Governmental ActivitiesBusiness-type ActivitiesTotal 200620052006200520062005 Revenues: Program revenues Charges for services7,875,376$ 7,965,484$ 36,226,324$ 32,658,440$ 44,101,700$ 40,623,924$ Operating grants and contributions2,714,324 2,445,913 47,961 54,999 2,762,285 2,500,912 Capital grants and contributions5,174,350 11,162,241 3,988,202 7,857,856 9,162,552 19,020,097 General revenues Property taxes15,186,456 13,464,390 - - 15,186,456 13,464,390 Sales taxes17,784,374 16,333,169 - - 17,784,374 16,333,169 Interfund utility taxes1,983,652 1,792,136 - - 1,983,652 1,792,136 Admission & utility taxes5,893,041 5,349,713 - - 5,893,041 5,349,713 Excise taxes4,568,549 4,633,037 - - 4,568,549 4,633,037 Other taxes1,859,428 1,796,224 - - 1,859,428 1,796,224 Investment earnings2,454,694 1,465,102 1,574,444 895,870 4,029,138 2,360,972 Miscellaneous revenue69,037 564,416 1,602,274 2,124,658 1,671,311 2,689,074 Total revenues65,563,281 66,971,825 43,439,205 43,591,823 109,002,486 110,563,648 Expenses: General government6,462,578 5,284,440 - - 6,462,578 5,284,440 Public safety29,804,864 28,048,087 - - 29,804,864 28,048,087 Transportation7,619,268 7,956,286 - - 7,619,268 7,956,286 Physical environment2,418,543 2,209,652 - - 2,418,543 2,209,652 Culture and recreation5,729,431 5,324,543 - - 5,729,431 5,324,543 Economic environment1,848,988 1,919,780 - - 1,848,988 1,919,780 Health and human services763,156 602,726 - - 763,156 602,726 Interest on long-term debt203,180 188,945 - - 203,180 188,945 Water- - 7,647,935 6,962,997 7,647,935 6,962,997 Sanitary sewer- - 11,878,252 12,044,330 11,878,252 12,044,330 Storm drainage- - 3,852,335 3,354,899 3,852,335 3,354,899 Solid waste- - 9,936,222 9,121,727 9,936,222 9,121,727 Golf course- - 1,020,070 1,032,733 1,020,070 1,032,733 Other business-type activities- - 1,618,285 1,593,944 1,618,285 1,593,944 Total expenses54,850,008 51,534,459 35,953,099 34,110,630 90,803,107 85,645,089 Increase in net assets before transfers10,713,273 15,437,366 7,486,106 9,481,193 18,199,379 24,918,559 Transfers(570,588) 194,286 570,588 (194,286) - - Change in net assets10,142,685 15,631,652 8,056,694 9,286,907 18,199,379 24,918,559 Net assets-beginning of period241,658,877 226,027,225 149,889,460 140,602,553 391,548,337 366,629,778 Net assets-end of period251,801,562$ 241,658,877$ 157,946,154$ 149,889,460$ 409,747,716$ 391,548,337$ Governmental activities contributed $10.1 million to the total increase in city net assets. Revenues to fund capital assets are recorded as program or general revenues in the statement of activities. However, asset purchases are not recorded as expenses in the year purchased and construction costs are not recorded as expenses in the year incurred. Instead, the costs are recorded as long- term assets and are depreciated over their useful life. This amount equaled $11.3 million, which was offset by an overall increase in the cost and variety of governmental services provided. 20 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS General tax revenue rose during 2006: Property tax revenue rose by $1,722,066, or 12.6%. This increase is higher than the statutory maximum of 1%, and is due to the Save Our Streets lid lift passed by the voters in 2004, as well as taxes collected on construction completed during 2006. Sales tax collections had a healthy increase of $1,451,205, or 8.9%. Utility and admission tax revenue rose $379,718 or 7.1%. Real Estate Excise Tax (REET) revenue decreased by $64,488, or 1.4%. Investment revenue rose by $989,592, or 67.5%. This was due to rising interest rates. Governmental activity expenses rose $3.3 million, or 6.4%. Increases in public safety and general government expenditures of $2.9 million were offset by decreased expenditures in economic environment and transportation. The next chart summarizes the government activity revenue by source, while the second one reflects the specific programs’ revenues and related expenses for the various activities of the city. Gaps between specific programs’ revenues and their related expenditures are funded through general tax revenues. Revenues by Source - Government Activities Charges for services Other revenue 12% 4% Other taxes Capital grants & 10% contributions 4% Utility & admission taxes 9% Operating grants & contributions Interfund utility taxes8% 3% Property taxes 23% Sales taxes 27% 21 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Program Expenses and Revenues - Governmental Activities $30,000,000 $25,000,000 $20,000,000 Program revenues $15,000,000 Expenses $10,000,000 $5,000,000 $0 Business-type net assets increased by $8.1 million. Key components of this increase include: $4.0 million, or 49.4%, is related to utility capital contributions. Of this amount, $1.9 million is related to utility infrastructure contributed to the City by developers, and $2.1 million is related to new customer connections. Income (loss) before capital contributions and transfers amounted to: Water fund: $ 911,900 o Sanitary sewer fund: 1,982,651 o Storm fund: 400,975 o Solid waste fund: (181,559) o Golf course: 15,854 o Non-major funds: (45,220) o $ 3,084,601 Transfers-in totaled $570,588. 22 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Below is a chart that shows the relative net asset balances for each business-type fund: Business-type Net Assets - By Fund Golf course 3% Commercial retail Cemetery 1% 1% Airport Solid waste 4% 2% Water 32% Storm drainage 23% Sanitary sewer 34% The majority of net assets in the City’s enterprise funds relate to capital asset infrastructure, such as water and sewer mains, the airport runway, and the golf course land. As such, most of the net assets are not available to support the ongoing expenses of the funds. Following are two charts that contrast the total net assets to the spendable portion of net assets for each enterprise fund: Comparison of Total Net Assets to Spendable Net Assets Utility Funds Spendable net assets $60,000,000 Total net assets $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 Water Sanitary sewer Storm drainage Solid waste 23 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Comparison of Total Net Assets to Spendable Net Assets Other Enterprise Funds Spendable net assets $7,000,000 Total net assets $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Airport Cemetery Golf course Commercial retail The first chart following depicts the revenues and expenses for business-type funds, while the second shows the various sources of business-type revenue: Business-type Activity Revenues and Expenses Before Capital Contributions and Transfers $15,000,000 $13,500,000 $12,000,000 $10,500,000 $9,000,000 $7,500,000 Revenues Expenses $6,000,000 $4,500,000 $3,000,000 $1,500,000 $0 Water Sanitary Storm Solid waste Golf course Minor sewerdrainagebusiness-type activities 24 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Business-type Activity Revenues - By Source Investment earnings Business-type 4% miscellaneous income 4% Capital contributions 9% Charges for services 83% The following two charts show the percentage of revenues and expenses that relate to both governmental and business-type activities: Comparison of Revenues and Expenses - 2006 100% 90% 80% 70% 60% Business-type activities 50% Governmental 40% 30% 20% 10% 0% RevenuesExpenses 25 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Financial Analysis of Governmental Funds The purpose of the City’s government funds is to report on near-term revenues/financial resources and expenditures. This information helps determine the City’s financial requirements in the near future. Specifically, fund balance is a good indicator of the City’s financial resources. As of December 31, 2006, the City’s governmental funds had combined fund balances of $41,479,504, an increase of $1,853,944 or 4.7%. This increase is related to: General fund ($1,490,497) Arterial street fund $31,984 Capital improvement projects fund $1,297,897 Other governmental funds $2,014,560 Of the government funds’ total fund balances, $40,092,581 is unreserved. Of this unreserved total, $14,727,423 is earmarked for capital projects and $10,738,431 is in special revenue funds and is earmarked for specific purposes. Of the $1,386,923 of fund balances that are reserved, $1,232,349 is reserved for endowment. The general fund is the primary operating fund of the City. All receipts and payments of ordinary city operations are processed through it unless they are required to be accounted for in another fund. At the end of 2006, the general fund had a fund balance of $14,448,328, of which substantially all is unreserved. Other funds that had significant fund balances include: $13,512,799 in the capital improvement projects fund; used for various governmental capital asset projects. $5,642,187 in the cumulative reserve fund; used for revenue stabilization or capital projects. $3,341,912 in the mitigation fund; used to collect fees from new development to mitigate the cost of new roads and fire service. $1,420,873 in the cemetery endowed care fund; used for maintenance of the cemetery. The following chart shows the relative fund balances for governmental funds: 26 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Governmental Funds - Fund Balances All other government funds 6% Cemetery endowment fund 3% Mitigation fund 8% General fund 34% Cumulative reserve fund 14% Arterial street fund 2% Capital improvement fund 33% The decrease in the general fund balance of $1,490,497 can be attributed to result of transferring $3,500,000 to the capital improvement projects fund, $900,000 to the cumulative reserve fund and other fund transfers, offset by the increase in retail sales tax and other taxes and fees. The major increase in general fund operating expenditures was due to salary and benefit costs that increased $1,822,654 or 6.3%. The revenue increase of $4.3 million came from the following sources: 27 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS The increase of $31,984 in the arterial street fund is due to transfers in from the capital improvement projects fund and mitigation fees fund, offset by the expenditure of funds that were received by the City prior to 2006. The arterial street fund also received $142,313 of Public Works Trust Fund loan proceeds in 2006. The increase of $1,297,897 in the capital improvement projects fund is due to the receipt of funds for projects that will not begin until 2007, as well as an increase in investment income for 2006. Other significant changes in fund balances include: The cumulative reserve fund increased by $1,134,304 due to a transfer in from the general fund of $900,000 and investment income of $234,304. The mitigation fees fund rose by $513,617 due to increased development activity. The municipal park construction fund increased by $318,253 due to a $240,000 transfer from the capital improvement projects fund, as well as intergovernmental revenue received during the year. Financial Analysis of Proprietary Funds The City’s proprietary funds provide the same type of information as found in the government-wide financial statements, but in greater detail. Factors affecting the finances of the City’s proprietary funds have already been addressed in the discussion of the City’s business-type activities. General Fund Budgetary Highlights The City budgets annually by adopting a budget at the end of the preceding fiscal year, and then making adjustments as necessary via budget amendments throughout the year. Following is a summary of such budget amendments: Budgeted general fund balances increased for the following reasons: Beginning fund balance higher than anticipated4,369,025$ Grants317,600 Rental income12,000 Recreational classes70,000 Contributions - WalMart100,000 $4,868,625 28 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Budgeted general fund balances decreased for the following reasons: Archiving project - Legal department14,400$ Neighborhood grant program17,600 Environmental park enhancements30,000 Tobacco prevention fair2,000 Parks two additional half-time positions38,100 Fire department equipment29,000 Environmental park project matching funds45,800 Sidewalk improvement project100,000 Shoreline master plan150,000 Additional police patrol officer position64,500 Police department CALEA accreditation overtime29,600 Jail study project65,400 Contracted jail services490,000 Lake Winter Citizens project15,700 Various professional services related to VFRA formation108,300 King County apparatus maintenance contract75,900 Street light repairs85,000 Additional Parks staffing22,000 Digital video security system upgrades48,400 Flashing beacons at elementary schools15,800 Additional recreation staffing and operations70,000 Multi service center and gateway projects100,000 Various professional expenditures16,700 Transfer to capital projects fund3,000,000 Transfer to cumulative reserve fund900,000 Transfer to golf course fund for admission taxes51,000 Transfer to hotel/motel tax fund for ASO contract25,000 $ 5,610,200 Reasons for the significant variances in the general fund between the final budget and actual results include: Sales tax revenue was much stronger than anticipated, resulting in a positive variance to budget of $1.6 million. Admission and utility tax collections were more than $768,000 higher than budgeted due to the rising cost of utility charges and greater than anticipated admission tax receipts. Charges for services were $474,000 higher than budgeted mainly due to plan check fee and recreational class revenue. This variance is also due to the strong building market. Interest revenue was $203,000 greater than budgeted due to the environment of rising interest rates. Salary and benefit expenses were $1.4 million less than budgeted due to positions that were left unfilled for significant periods of time and budgeted retirement contributions that were not required. Professional services expenditures were $1.5 million less than budgeted. Machinery and equipment expenditures were $518,000 less than budgeted. 29 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Capital Asset and Debt Administration Capital Assets The City’s investment in capital assets for both its governmental and business-type activities as of December 31, 2006 totaled $340.7 million (net of accumulated depreciation), an increase of $10.4 million from 2005. This investment in capital assets includes land, buildings, improvements, machinery and equipment, construction in progress, utility transmission/distribution systems, roads, bridges, and other infrastructure. Major capital asset changes during the year include: Land purchase and right-of-way costs were incurred during the year, resulting in an increase in governmental infrastructure of $2.6 million. Developer contributions resulted in an increase of $1.9 million in utility infrastructure assets. $9.3 million was spent on construction projects during the year. Some of the larger ones include: $3.1 million on Auburn Way South sanitary sewer project o $1.6 million on local street patching and overlay project o rd $1.3 million on 3 & Cross Street improvement project o $1.1 million on Auburn Golf Course improvement projects o $2.6 million was spent for the acquisition for several parcels of land and for various rights-of- way. A summary of the City’s net assets follows: Summary of Capital Assets (net of depreciation) Governmental ActivitiesBusiness-type ActivitiesTotal As of 12/31/06As of 12/31/05As of 12/31/06As of 12/31/05As of 12/31/06As of 12/31/05 Land44,526,400$ 39,341,442$ 14,158,803$ 14,158,803$ 58,685,203$ 53,500,245$ Building14,930,016 15,510,071 4,053,247 4,257,185 18,983,263 19,767,256 Joint venture2,737,913 2,732,875 - - 2,737,913 2,732,875 Site improvements2,578,111 2,851,640 112,568,671 107,249,726 115,146,782 110,101,366 Equipment7,072,673 6,841,203 878,690 939,540 7,951,363 7,780,743 Infrastructure129,431,581 123,551,003 - - 129,431,581 123,551,003 Construction in progress3,266,012 7,122,129 4,447,289 5,668,464 7,713,301 12,790,593 $ 197,950,363204,542,706$ 136,106,700$ 132,273,718$ 340,649,406$ 330,224,081$ More detailed information on capital assets is provided in note 7. Long-term Debt At the end of the current fiscal year, the City had total bonded debt outstanding of $17,151,827. Of this amount, $11,210,000 is general obligation bonds, $5,905,000 is revenue bonds for the water and storm utilities, and $36,827 is special assessment debt with government commitment. The City currently maintains a rating of A1 with Moody’s for its general obligation debt. 30 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS On August 22, 2006, the City issued $3,275,000 of Limited General Obligation Bonds with a premium of $108,030 and an interest rate of 4.25% to 5.00%. The bonds were issued to fund improvements at the Auburn Golf Course including a pro shop, clubhouse and related facilities, as well as construction of a columbarium at the Mountain View Cemetery. The net proceeds of $3,359,175 (after payment of $44,336 in underwriting fees, insurance, and other issuance costs), were held for disbursement on construction related expenditures. Any excess funds were invested in the Local Government Investment Pool (LGIP). Although the debt is a general obligation of the City, the expectation is that the golf course and cemetery will fund debt service from operations. For this reason, the debt is reflected in the Proprietary Funds Statement of Net Assets. Also on August 22, 2006, the City issued $1,885,000 of taxable Limited General Obligation Bonds with an interest rate of 5.40% to 5.52%. The bonds were issued to construct and equip restaurant, banquet and related facilities for a restaurant facility to be located at the golf course clubhouse. The net proceeds of $1,859,817 (after payment of $25,183 in underwriting fees, insurance, and other issuance costs), were held for disbursement on construction related expenditures. Any excess funds were invested in the Local Government Investment Pool (LGIP). The following schedule summarizes the City’s bonded debt: Summary of bonded debt GovernmentalBusiness-type ActivitiesActivitiesTotal General obligation bonds4,575,000$ 6,635,000$ 11,210,000$ Special assessment bonds36,827 - 36,827 Revenue bonds- 5,905,000 5,905,000 $ 12,540,0004,611,827$ 17,151,827$ Below is a summary of additional, non-bonded long-term debt of the City: Other Long-term Debt Public Works Trust Fund loans9,853,410$ Employee leave benefits3,385,277 $ 13,238,687 Washington State law limits the amount of general obligation debt a governmental entity may issue to 7.5% of its total assessed value. Of the 7.5% limit, 2.5% is for general purposes, 2.5% is for open spaces/parks, and 2.5% is for utilities. Non-voted (limited tax) general obligation indebtedness is limited to 1.5% of assessed valuation. The combination of unlimited tax and limited tax general obligation debt for all purposes cannot exceed 7.5% of assessed valuation. Following is a summary of the City’s legal debt limitations and capacity: 31 CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS Summary of legal debt limits and capacity Auburn With a Vote Legal LimitationCapacity General144,125,693$ 132,533,910$ Open spaces/parks144,125,693144,125,693 Utilities144,125,693144,125,693 Totals432,377,078$ 420,785,296$ Without a Vote General86,475,416$ 74,883,633$ Totals86,475,416$ 74,883,633$ Additional information can be found in note 10 and in the statistical section of this report. Economic Factors The outlook for 2007 and beyond is positive. The economy in the county and the City has been robust. Many existing businesses are planning to expand their facilities & employ more people. Some of the most recent and significant projects are: Auburn Regional Medical Center is planning an 11,000-square foot cancer treatment center adjacent to the hospital, along with a public/private mix 300-stall parking garage. Downtown redevelopment is planned on several blocks (4+) near the Transit Station. Additionally, a bid to develop a full block for a Transit Orientated Development (residential & parking) will be issued in 2007. Plans are moving forward to develop a large retail/office project in the city’s north end that had been a drive-in movie complex. Up to 65 acres may be involved. Significant new retail sales tax revenues would be generated from this project. A new Super Wal-Mart is under construction at the Super Mall that will also provide the City with new jobs and new tax revenues. The City issued 465 residential permits in 2006 for new construction, remodels, and rehabs. In addition, 176 commercial and industrial permits were issued for new projects and renovations. Requests for Information This financial report is designed to provide a general overview of the City of Auburn’s finances for readers with an interest in the City’s finances. Questions concerning this report, or requests for additional information, may be addressed to the Finance Director, City of Auburn, 25 West Main Street, Auburn WA 98001-4998. 32 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS The City presents two government-wide financial statements: TheStatement of Net Assets provides information all on city assets and liabilities, with the difference between the two reported as net assets. The Statement of Activities is focused on both the gross and net cost of various functions, including both governmental and business-type activities, . which are supported by the City’s general tax and other revenues 33 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS 34 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF NET ASSETS DECEMBER 31, 2006 PRIMARY GOVERNMENT GOVERNMENTALBUSINESS-TYPE ACTIVITIESACTIVITIESTOTAL ASSETS: CASH AND CASH EQUIVALENTS (Note 3)33,706,097$ 20,008,238$ 53,714,335$ INVESTMENTS (Note 3)18,094,130 10,427,767 28,521,897 RECEIVABLES: TAXES -1,080,196 1,080,196 CUSTOMER ACCOUNTS123,164 5,301,927 5,425,091 OTHER RECEIVABLES1,515,718 86,459 1,602,177 SPECIAL ASSESSMENTS946,725 - 946,725 DUE FROM OTHER GOVERNMENTAL UNITS (Note 6)3,294,245 30,382 3,324,627 INTERNAL BALANCES(500,531) 500,531 - MATERIALS AND SUPPLIES INVENTORY100,655 181,879 282,534 LONG-TERM CONTRACTS AND NOTES9,525 1,546,807 1,556,332 DEFERRED CHARGES1,749,676 - 1,749,676 RESTRICTED ASSETS: TEMPORARILY RESTRICTED: CASH AND CASH EQUIVALENTS (Note 3)- 10,454,763 10,454,763 DEPRECIABLE CAPITAL ASSETS (NET OF ACCUMULATED DEPRECIATION): (Note 7)156,764,455 117,500,606 274,265,061 NON-DEPRECIABLE CAPITAL ASSETS47,788,249 18,606,090 66,394,339 TOTAL ASSETS264,672,304 184,645,449 449,317,753 LIABILITIES: ACCOUNTS PAYABLE3,559,130 2,688,732 6,247,862 DUE TO OTHER GOVERNMENTAL UNITS24,283 - 24,283 OTHER LIABILITIES PAYABLE246,891 49,188 296,079 PAYABLE FROM RESTRICTED ASSETS: ACCRUED INTEREST 346,149- 346,149 DEPOSITS 65,927- 65,927 UNEARNED REVENUE1,375,122 870,015 2,245,137 DEFERRED CREDITS16,652 - 16,652 BONDS AND OTHER DEBT PAYABLE: DUE WITHIN ONE YEAR (Note 10)2,024,923 2,211,388 4,236,311 DUE IN MORE THAN ONE YEAR (Note 10)5,586,914 20,467,896 26,054,810 SPEC ASSESSMENT DEBT WITH GOV'T COMMITMENT (Note 10)36,827 - 36,827 TOTAL LIABILITIES12,870,742 26,699,295 39,570,037 NET ASSETS: INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT200,814,063 125,265,152 326,079,215 RESTRICTED NET ASSETS: CAPITAL PROJECTS14,727,423 4,744,823 19,472,246 SPECIAL REVENUE FUND PROJECTS10,769,997 - 10,769,997 DEBT SERVICE 885,611109,573 995,184 NON EXPENDABLE PERPETUAL CARE1,232,349 - 1,232,349 CONSTRUCTION 1,357,051- 1,357,051 UNRESTRICTED NET ASSETS24,148,157 25,693,517 49,841,674 TOTAL NET ASSETS251,801,562$ 157,946,154$ 409,747,716$ The notes to the financial statements are an integral part of this statement. 35 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2006 Page 1 of 2 PROGRAM REVENUES OPERATINGCAPITAL CHARGES GRANTS ANDGRANTS AND EXPENSESFOR SERVICESCONTRIBUTIONSCONTRIBUTIONS FUNCTIONS / PROGRAMS: PRIMARY GOVERNMENT GOVERNMENTAL ACTIVITIES: GENERAL GOVERNMENT6,462,578$ 820,585$ 262,359$ -$ PUBLIC SAFETY29,804,864 2,514,867 1,763,656 2,385 TRANSPORTATION7,619,268 631,340 - 4,853,791 PHYSICAL ENVIRONMENT2,418,543 436,503 181,832 73,725 CULTURE AND RECREATION5,729,431 881,318 37,173 244,449 ECONOMIC ENVIRONMENT1,848,988 2,590,763 240,862 - HEALTH AND HUMAN SERVICES763,156 - 228,442 - INTEREST ON LONG-TERM DEBT203,180 - - - 7,875,37654,850,008 2,714,324 5,174,350 BUSINESS-TYPE ACTIVITIES: WATER7,647,935 8,043,417 - 1,683,786 SANITARY SEWER11,878,252 12,186,548 - 1,542,419 STORM DRAINAGE3,852,335 3,936,837 - 761,997 SOLID WASTE9,936,222 9,601,135 47,961 - GOLF COURSE1,020,070 975,233 - - NONMAJOR BUSINESS-TYPE ACTIVITIES1,618,285 1,483,154 - - 36,226,32435,953,099 47,961 3,988,202 TOTAL PRIMARY GOVERNMENT90,803,107$ 44,101,700$ 2,762,285$ 9,162,552$ GENERAL REVENUES: TAXES: PROPERTY RETAIL SALES AND USE INTERFUND UTILITY UTILITY EXCISE OTHER INVESTMENT EARNINGS MISCELLANEOUS GAIN ON SALE OF CAPITAL ASSETS CONTRIBUTIONS TO ENDOWMENT FUNDS TRANSFERS (Note 5) TOTAL GENERAL REVENUES CHANGE IN NET ASSETS NET ASSETS - BEGINNING NET ASSETS - ENDING The notes to the financial statements are an integral part of this statement. 36 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS Page 2 of 2 NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS GOVERNMENTALBUSINESS-TYPE ACTIVITIESACTIVITYTOTAL $ -(5,379,634)$ (5,379,634)$ -(25,523,956) (25,523,956) -(2,134,137) (2,134,137) -(1,726,483) (1,726,483) -(4,566,491) (4,566,491) -982,637 982,637 -(534,714) (534,714) -(203,180) (203,180) -(39,085,958) (39,085,958) 2,079,268- 2,079,268 1,850,715- 1,850,715 846,499- 846,499 (287,126)- (287,126) (44,837)- (44,837) (135,131)- (135,131) 4,309,388- 4,309,388 $ 4,309,388(39,085,958)$ (34,776,570)$ $ -15,186,456$ 15,186,456$ -17,784,374 17,784,374 -1,983,652 1,983,652 -5,893,041 5,893,041 -4,568,549 4,568,549 -1,859,428 1,859,428 1,574,4442,454,694 4,029,138 1,602,933- 1,602,933 (659)17,621 16,962 -51,416 51,416 570,588(570,588) - 3,747,30649,228,643 52,975,949 8,056,69410,142,685 18,199,379 149,889,460241,658,877 391,548,337 $ 157,946,154251,801,562$ 409,747,716$ 37 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS MAJOR GOVERNMENTAL FUNDS General Fund The general fund accounts for all of the City's financial resources except those required by statute or generally accepted accounting principles to be accounted for in another fund. As is the case with most municipalities, the general fund is the largest and most important accounting entity of the City. As noted in the statements that follow, the general fund receives the bulk of its revenues from local taxes, followed by State shared revenues, service charges, and other income. The general fund is accounted for on a modified accrual basis. Annual budgets are adopted with appropriations lapsing at year-end. Arterial Street Fund This fund is supported by the State's one-half cent gas tax and is used for major street construction. Capital Improvement Projects Fund This fund accounts for major capital acquisitions, and streets and parks construction projects. 38 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2006 OTHERTOTAL GENERAL ARTERIAL CAPITALGOVERNMENTALGOVERNMENTAL FUNDSTREETIMPROVEMENTFUNDSFUNDS ASSETS: CASH AND CASH EQUIVALENTS9,098,126$ 547,681$ 7,584,422$ 8,612,652$ 25,842,881$ INVESTMENTS4,457,770 - 5,945,316 4,236,375 14,639,461 RECEIVABLES: TAXES1,080,192 - - 4 1,080,196 CUSTOMER ACCOUNTS57,613 - 57,551 - 115,164 OTHER RECEIVABLES1,470,712 - 23,424 - 1,494,136 SPECIAL ASSESSMENTS- - - 946,725 946,725 INTERFUND RECEIVABLE (Note 5)134,000 - - - 134,000 LONG-TERM NOTES AND CONTRACTS- - 635,546 - 635,546 DUE FROM OTHER GOVERNMENTAL UNITS2,024,318 1,033,653 - 222,904 3,280,875 TOTAL ASSETS18,322,731$ 1,581,334$ 14,246,259$ 14,018,660$ 48,168,984$ LIABILITIES AND FUND BALANCES: CURRENT PAYABLES2,575,616$ 328,184$ 74,490$ 219,602$ 3,197,892$ CUSTOMER DEPOSITS211,345 - - - 211,345 INTERFUND PAYABLE (note 5)- - - 134,000 134,000 DUE TO OTHER GOVERNMENTAL UNITS- - - 24,283 24,283 OTHER LIABILITIES PAYABLE244 426 - - 670 DEFERRED REVENUE1,087,198 428,393 658,970 946,729 3,121,290 TOTAL LIABILITIES3,874,403 757,003 733,460 1,324,614 6,689,480 FUND BALANCES: RESERVED FOR: PETTY CASH10,125 - - - 10,125 DEBT SERVICE- - - 144,449 144,449 ENDOWMENT- - - 1,232,349 1,232,349 UNRESERVED, REPORTED IN: GENERAL FUND14,438,203 - - - 14,438,203 SPECIAL REVENUE FUNDS- 824,331 - 9,914,100 10,738,431 CAPITAL PROJECT FUNDS- - 13,512,799 1,214,624 14,727,423 PERMANENT FUND- - - 188,524 188,524 TOTAL FUND BALANCES14,448,328 824,331 13,512,799 12,694,046 41,479,504 TOTAL LIABILITIES AND FUND BALANCES18,322,731$ 1,581,334$ 14,246,259$ 14,018,660$ 48,168,984$ Total governmental fund balances as reported on this statement$ 41,479,504 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore not reported in the funds.199,830,746 Other long-term assets are not available to pay for current-period expenditures and therefore are deferred in the funds. Prepaid expenses1,749,676 Interest receivable on investments47,946 Unearned revenue beyond the city's 30-day measurable and available period1,087,198 Deferred charges for bond issue costs1,228 2,886,048 Internal service funds are used by management to charge the cost of certain activities, such as insurance and fleet maintenance, to individual funds. The assets and liabilities of these internal service funds are included in governmental15,179,327 activities in the statement of net assets. Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Bonds and loans payable (4,754,140) Interest payable(34,876) Net pension obligation(16,652) Compensated absences payable(2,768,395) (7,574,063) Net assets of government activities as reported on the statement of net assets$ 251,801,562 The notes to the financial statements are an integral part of this statement. 39 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 OTHERTOTAL GENERAL ARTERIAL CAPITALGOVERNMENTALGOVERNMENTAL FUNDSTREETIMPROVEMENTFUNDSFUNDS REVENUES: TAXES: PROPERTY13,946,323$ -$ -$ 636,506$ 14,582,829$ RETAIL SALES & USE17,784,374 - - - 17,784,374 INTERFUND UTILITY1,983,652 - - - 1,983,652 UTILITY5,893,041 - - - 5,893,041 EXCISE 1,060,275 - 3,434,644 73,630 4,568,549 OTHER- - - 54,716 54,716 LICENSES AND PERMITS1,683,320 - - - 1,683,320 INTERGOVERNMENTAL3,645,992 2,630,879 - 554,369 6,831,240 CHARGES FOR SERVICES2,620,942 - - 1,038,831 3,659,773 FINES AND FORFEITURES1,054,201 - - - 1,054,201 SPECIAL ASSESSMENTS- - - 75,574 75,574 INVESTMENT EARNINGS753,930 41,803 34,064 647,571 1,477,368 MISCELLANEOUS553,399 300,000 636,641 375,039 1,865,079 TOTAL REVENUES50,979,449 2,972,682 4,105,349 3,456,236 61,513,716 EXPENDITURES: CURRENT: GENERAL GOVERNMENT6,062,037 - - - 6,062,037 SECURITY OF PERSONS AND PROPERTY28,884,978 - - 263,300 29,148,278 PHYSICAL ENVIRONMENT2,370,300 - 64,901 - 2,435,201 TRANSPORTATION2,041,035 5,496,306 136,303 1,729,503 9,403,147 ECONOMIC ENVIRONMENT1,605,676 - - 323,302 1,928,978 HEALTH AND HUMAN SERVICES538,783 - - 224,373 763,156 CULTURE AND RECREATION4,990,128 - - 26,426 5,016,554 DEBT SERVICE: PRINCIPAL127,796 - - 292,835 420,631 INTEREST AND OTHER COSTS71,885 - - 175,666 247,551 CAPITAL OUTLAY124,719 72,005 3,359,044 267,127 3,822,895 TOTAL EXPENDITURES46,817,337 5,568,311 3,560,248 3,302,532 59,248,428 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES4,162,112 (2,595,629) 545,101 153,704 2,265,288 OTHER FINANCING SOURCES (USES): SALES OF CAPITAL ASSETS4,163 - 123,796 - 127,959 PROCEEDS OF LONG-TERM DEBT- 142,313 - - 142,313 TRANSFERS IN (Note 5)60,000 2,485,300 3,730,000 2,597,900 8,873,200 TRANSFERS OUT (Note 5)(5,716,772) - (3,101,000) (737,044) (9,554,816) TOTAL OTHER FINANCING SOURCES AND USES(5,652,609) 2,627,613 752,796 1,860,856 (411,344) NET CHANGE IN FUND BALANCES(1,490,497) 31,984 1,297,897 2,014,560 1,853,944 FUND BALANCES - BEGINNING15,938,825 792,347 12,214,902 10,679,486 39,625,560 FUND BALANCES - ENDING14,448,328$ 824,331$ 13,512,799$ 12,694,046$ 41,479,504$ The notes to the financial statements are an integral part of this statement. 40 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENT FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2006 Net change in fund balances per the Statement of Revenues, Expenditures and Changes in Fund Balance1,853,944$ Amount reported as change in net assets 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 by which capital outlay ($11,335,910) exceeded depreciation ($6,969,422) in the current period.4,366,488 Debt proceeds are reported as financing sources in governmental fund and thus contribute to the change in fund balances. In the government-wide statements, however, issuing debt increases long-term liabilities in the statement of net assets and does not affect the statement of activities.(142,313) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds: Deferred revenue603,483 Amortization of bond premium3,138 Investment interest receivable(36,092) 570,529 Developer contributions and annexation of infrastructure assets are reported as revenue in the statement of activities, but do not provide current financial resources and are not reported as fund revenue.1,922,416 Repayment of the principal of long-term debt consumes the current financial resources of governmental funds but has no effect on the net assets.423,527 Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet maintenance, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities.1,542,871 Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Amortization of debt issue costs(3,240) Amortization of prepaid expenses(109,355) Change in accrued interest payable7,169 Change in net pension obligation(270,299) Change in compensated absences payable(19,052) (394,777) Change in net assets on the Statement of Activities$ 10,142,685 The notes to the financial statements are an integral part of this statement. 41 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS 42 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS MAJOR PROPRIETARY FUNDS ENTERPRISE FUNDS The City's enterprise funds are used to account for operations that are financed and operated in a manner similar to private business operations. The goods and services these funds provide to the general public are primarily financed by service charges. Enterprise funds are self-supporting and use the accrual method of accounting. Auburn has five major enterprise funds. The Water Fund This fund accounts for all maintenance, construction, and debt service requirements associated with the water system. The Sanitary Sewer Fund This fund accounts for maintenance, construction, and debt requirements for Auburn's sanitary sewer system. The Storm Drainage Fund This fund accounts for the maintenance, construction and debt service requirements of Auburn's storm drainage system. The Solid Waste Fund Garbage collection services for the City are accounted for in this fund, supported almost entirely by garbage collection fees. Expenses include payment to the City's garbage contractor and other service charges. The Golf Course Fund Accounts for services, maintenance, and operations associated with the Auburn Municipal Golf Course. 43 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF NET ASSETS PROPRIETARY FUNDS DECEMBER 31, 2006 GOVERNMENTAL NON-MAJORTOTALACTIVITIES SANITARYSTORMSOLIDGOLFPROPRIETARYPROPRIETARYINTERNAL WATERSEWERDRAINAGEWASTECOURSEFUNDSFUNDSSERVICE FUNDS ASSETS: CURRENT ASSETS: CASH AND CASH EQUIVALENTS4,222,303$ 7,382,663$ 5,174,580$ 1,086,880$ 422,146$ 1,719,666$ 20,008,238$ 7,863,216$ INVESTMENTS4,477,187 3,956,117 996,563 997,900 - - 10,427,767 3,454,669 RESTRICTED CASH: BONDS PAYMENTS1,040,103 - 452,740 - 4,333,606 411,217 6,237,666 - CUSTOMER DEPOSITS35,460 15,670 - - - 69,194 120,324 - OTHER628,896 2,736,690 556,715 174,472 - 4,096,773 - CUSTOMER ACCOUNTS1,225,633 1,924,165 665,993 1,482,227 - 3,909 5,301,927 8,000 OTHER RECEIVABLES39,928 35,445 3,115 3,194 4,777 - 86,459 6,585 DUE FROM OTHER GOVERNMENTAL UNITS- - - 23,648 - 6,734 30,382 13,370 INVENTORIES160,869 2,227 7,263 - - 11,520 181,879 100,655 TOTAL CURRENT ASSETS1 16,052,9771,830,379 7,856,969 3,593,849 4,935,001 2,222,240 46,491,415 11,446,495 NONCURRENT ASSETS: LONG-TERM CONTRACTS AND NOTES- 1,478,400 - - - 68,407 1,546,807 - CAPITAL ASSETS: LAND897,971 1,654,958 5,686,254 - 2,229,636 3,689,984 14,158,803 - BUILDINGS AND EQUIPMENT2,864,439 1,073,964 160,173 491,472 1,459,313 4,655,372 10,704,733 11,267,535 IMPROVEMENTS OTHER THAN BUILDINGS73,196,435 48,759,304 34,491,359 - 2,256,357 6,607,413 165,310,868 46,591 CONSTRUCTION IN PROGRESS349,116 2,109,108 660,226 - 1,106,593 222,244 4,447,287 4,163 LESS: ACCUMULATED DEPRECIATION(28,039,058) (12,930,749) (10,693,127) (218,696) (1,619,415) (5,013,950) (58,514,995) (6,596,331) TOTAL CAPITAL ASSETS (NET OF A/D)49,268,903 40,666,585 30,304,885 272,776 5,432,484 10,161,063 136,106,696 4,721,958 TOTAL NONCURRENT ASSETS49,268,903 42,144,985 30,304,885 272,776 5,432,484 10,229,470 137,653,503 4,721,958 TOTAL ASSETS61,099,282 58,197,962 38,161,854 3,866,625 10,367,485 12,451,710 184,144,918 16,168,453 LIABILITIES: CURRENT LIABILITIES: CURRENT PAYABLES475,753 894,974 103,153 847,818 231,986 135,048 2,688,732 361,238 CUSTOMER DEPOSITS35,460 10,461 - - - 3,267 49,188 - LOANS PAYABLE-CURRENT435,568 107,844 - - - - 543,412 - EMPLOYEE LEAVE BENEFITS-CURRENT134,958 56,638 51,807 7,042 19,926 7,605 277,976 72,320 REVENUE BONDS PAYABLE-CURRENT813,700 - 361,300 - - - 1,175,000 - GENERAL OBLIGATION BONDS PAYABLE-CURRENT- - - - 165,000 50,000 215,000 - ACCRUED INTEREST248,390 6,318 91,441 - - - 346,149 - DEPOSITS- - - - - 65,927 65,927 - TOTAL CURRENT LIABILITIES2,143,829 1,076,235 607,701 854,860 416,912 261,847 5,361,384 433,558 NONCURRENT LIABILITIES: DEFERRED REVENUE42,201 162,203 597,204 - - 68,407 870,015 - EMPLOYEE LEAVE BENEFITS102,708 43,104 39,427 5,359 15,164 5,787 211,549 55,037 LOANS PAYABLE5,759,336 3,408,348 - - - - 9,167,684 - REVENUE BONDS PAYABLE3 -,386,009 1,351,094 - - - 4,737,103 - GENERAL OBLIGATION BONDS PAYABLE- - - - 4,488,480 1,863,080 6,351,560 - TOTAL OTHER NONCURRENT LIABILITIES9,290,254 3,613,655 1,987,725 5,359 4,503,644 1,937,274 21,337,911 55,037 TOTAL LIABILITIES11,434,083 4,689,890 2,595,426 860,219 4,920,556 2,199,121 26,699,295 488,595 NET ASSETS: INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT45,069,193 37,150,393 28,592,491 272,776 5,432,484 8,747,815 125,265,152 4,721,959 RESTRICTED FOR: DEBT SERVICE628,896 - 256,715 - - - 885,611 - CAPITAL PROJECTS- - - - 4,333,606 411,217 4,744,823 - CONSTRUCTION- 1,182,579 - - 174,472 - 1,357,051 - UNRESTRICTED3,967,110 15,175,100 6,717,222 2,733,630 (4,493,633) 1,093,557 25,192,986 10,957,899 TOTAL NET ASSETS49,665,199$ 53,508,072$ 35,566,428$ 3,006,406$ 5,446,929$ 10,252,589$ 157,445,623$ 15,679,858$ Adjustment to reflect the consolidation of internal service funds related to enterprise funds500,531 Net assets of business-type activities157,946,154$ The notes to the financial statements are an integral part of this statement. 44 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 GOVERNMENTAL NONMAJORTOTALACTIVITIES SANITARYSTORMSOLIDGOLFENTERPRISEPROPRIETARYINTERNAL WATERSEWERDRAINAGEWASTECOURSEFUNDSFUNDSSERVICE FUNDS OPERATING REVENUES: CHARGES FOR SERVICES8,043,417$ 12,186,548$ 3,936,275$ 9,601,135$ 969,146$ 1,415,084$ 36,151,605$ 6,768,505$ INTEREST- - 91 - - 5,936 6,027 - OTHER OPERATING REVENUE- - 471 - 6,087 62,134 68,692 - TOTAL OPERATING REVENUES8,043,417 12,186,548 3,936,837 9,601,135 975,233 1,483,154 36,226,324 6,768,505 OPERATING EXPENSES: OPERATIONS & MAINTENANCE2,786,780 9,229,476 1,182,889 8,462,460 743,716 555,996 22,961,317 3,723,680 ADMINISTRATION1,793,289 1,269,221 1,268,878 594,255 47,323 507,345 5,480,311 595,691 DEPRECIATION/AMORTIZATION1,958,596 883,686 953,750 40,373 145,452 459,086 4,440,943 1,061,241 OTHER OPERATING EXPENSES850,338 889,549 344,895 839,134 53,476 10,117 2,987,509 - TOTAL OPERATING EXPENSES7,389,003 12,271,932 3,750,412 9,936,222 989,967 1,532,544 35,870,080 5,380,612 OPERATING INCOME (LOSS)654,414 (85,384) 186,425 (335,087) (14,734) (49,390) 356,244 1,387,893 NON-OPERATING REVENUE (EXPENSE): INTEREST REVENUE461,431 555,394 316,473 95,258 60,691 85,197 1,574,444 458,523 OTHER NON-OPERATING REVENUES54,987 1,532,264 - 58,270 - 5,373 1,650,894 1,375 GAIN (LOSS) ON SALE OF CAPITAL ASSETS- - - - - (659) (659) (110,338) INTEREST EXPENSE(257,342) (11,447) (86,173) - (30,103) (85,741) (470,806) - OTHER NON-OPERATING EXPENSES(1,590) (8,176) (15,750) - - - (25,516) - TOTAL NON-OPERATING REVENUE ( EXPENSE)257,486 2,068,035 214,550 153,528 30,588 4,170 2,728,357 349,560 INCOME (LOSS) BEFORE CONTRIBUTIONS & TRANSFERS911,900 1,982,651 400,975 (181,559) 15,854 (45,220) 3,084,601 1,737,453 CAPITAL CONTRIBUTIONS1,683,786 1,542,419 761,997 - - - 3,988,202 164,021 TRANSFERS IN (Note 5)6,200 77,044 2,100 800 749,644 90,800 926,588 54,700 TRANSFERS OUT (Note 5)(143,000) (50,000) (163,000) - - - (356,000) - CHANGE IN NET ASSETS 3,552,1142,458,886 1,002,072 (180,759) 765,498 45,580 7,643,391 1,956,174 TOTAL NET ASSETS BEGINNING OF YEAR47,206,313 49,955,958 34,564,356 3,187,165 4,681,431 10,207,009 149,802,232 13,723,684 TOTAL NET ASSETS END OF YEAR49,665,199$ 53,508,072$ 35,566,428$ 3,006,406$ 5,446,929$ 10,252,589$ 157,445,623$ 15,679,858$ Change in net assets from this statement7,643,391 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds413,303 Change in net assets of business-type activities8,056,694$ The notes to the financial statements are an integral part of this statement. 45 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Page 1 of 2 GOVERNMENT NON-MAJORACTIVITIES SANITARYSTORMSOLIDGOLFENTERPRISEINTERNAL WATERSEWERDRAINAGEWASTECOURSEFUNDTOTALSERVICE FUNDS CASH FLOWS FROM OPERATING ACTIVITIES: CASH RECEIVED FROM USERS7,776,964$ 12,062,438$ 3,841,828$ 9,564,916$ 970,456$ 1,500,476$ 35,717,078$ 6,760,505$ CASH PAID TO SUPPLIERS(2,511,267) (8,994,494) (1,150,318) (8,546,402) (115,038) (575,341) (21,892,860) (2,128,496) CASH PAID FOR TAXES(850,648) (889,549) (344,895) (839,134) (53,476) (10,117) (2,987,819) (54,871) CASH PAID FOR INVENTORY(59,227) (308) (2,063) - - (4,864) (66,462) (491,604) CASH PAID TO EMPLOYEES(1,963,209) (1,170,109) (1,316,065) (413,569) (472,441) (443,277) (5,778,670) (1,657,959) OTHER CASH RECEIVED (PAID)- - 3,900 - - - 3,900 - NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES2,392,613 1,007,978 1,032,387 (234,189) 329,501 466,877 4,995,167 2,427,575 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: OPERATING TRANSFERS IN6,200 77,044 2,100 800 749,644 90,800 926,588 54,700 OPERATING GRANT RECEIVED- - - (8,712) - - (8,712) - OPERATING TRANSFERS OUT(143,000) (50,000) (163,000) - - - (356,000) - NET CASH PROVIDED (USED) BY NON- CAPITAL FINANCING ACTIVITIES(136,800) 27,044 (160,900) (7,912) 749,644 90,800 561,876 54,700 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PROCEEDS FROM SALE OF EQUIPMENT6,060 - - - - - 6,060 60,526 PURCHASE OF CAPITAL ASSETS(1,042,874) (3,447,973) (590,283) (3,262) (1,135,180) (198,203) (6,417,775) (1,381,071) CONTRIBUTED CAPITAL771,456 2,208,819 691,355 - - - 3,671,630 - PROCEEDS FROM OTHER GOVERNMENTS- 142,295 - 47,960 - 128 190,383 - PROCEEDS FROM INSURANCE SETTLEMENT2,465 553 - 10,309 - - 13,327 925 PREMIUM & BOND ISSUANCE COSTS14,169 - 5,936 - 28,999 14,348 63,452 - PRINCIPAL PAYMENT ON DEBT(1,207,568) (107,844) (343,000) - (45,000) (50,062) (1,753,474) - INTEREST PAYMENT ON DEBT(298,981) (7,151) (104,767) - (30,158) (85,885) (526,942) - DEBT PROCEEDS- 1,575,000 - - 4,669,536 490,464 6,735,000 - OTHER CASH RECEIVED (PAID)- - - - - 5,245 5,245 - NET CASH PROVIDED (USED) FOR CAPITAL AND RELATED FINANCING ACTIVITIES(1,755,273) 363,699 (340,759) 55,007 3,488,197 176,035 1,986,906 (1,319,620) CASH FLOW FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF INVESTMENTS2,987,500 1,488,281 1,980,950 992,890 - - 7,449,621 991,250 PURCHASE OF INVESTMENTS(1,986,948) (2,962,887) (998,747) (999,050) - - (6,947,632) (2,955,383) INTEREST RECEIVED455,727 538,108 321,452 96,754 60,691 85,197 1,557,929 458,793 NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES1,456,279 (936,498) 1,303,655 90,594 60,691 85,197 2,059,918 (1,505,340) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS1,956,819 462,223 1,834,383 (96,500) 4,628,033 818,909 9,603,867 (342,685) CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR3,969,943 9,672,800 4,349,652 1,183,380 302,191 1,381,168 20,859,134 8,205,901 CASH AND CASH EQUIVALENTS-END OF YEAR5,926,762$ 10,135,023$ 6,184,035$ 1,086,880$ 4,930,224$ 2,200,077$ 30,463,001$ 7,863,216$ CASH AT END OF YEAR CONSISTS OF: CASH AND CASH EQUIVALENTS4,222,303$ 7,382,663$ 5,174,580$ 1,086,880$ 422,146$ 1,719,666$ 20,008,238$ 7,863,216$ RESTRICTED CASH-BOND PAYMENTS1,704,459 2,752,360 1,009,455 - 4,333,606 477,144 10,277,024 - RESTRICTED CASH-CUSTOMER DEPOITS- - - - 174,472 3,267 177,739 - TOTAL CASH5,926,762$ 10,135,023$ 6,184,035$ 1,086,880$ 4,930,224$ 2,200,077$ 30,463,001$ 7,863,216$ The notes to the financial statements are an integral part of this statement. 46 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Page 2 of 2 GOVERNMENT NON-MAJORACTIVITIES SANITARYSTORMSOLIDGOLFENTERPRISEINTERNAL WATERSEWERDRAINAGEWASTECOURSEFUNDTOTALSERVICE FUNDS RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES OPERATING INCOME (LOSS)654,414$ (85,384)$ 186,425$ (335,087)$ (14,734)$ (49,390)$ 356,244$ 1,387,893$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION1,958,596 883,686 953,750 40,373 145,452 459,085 4,440,942 1,061,241 WRITE-OFF ASSETS LESS THAN $5,000- - 5,127 - - - 5,127 - ASSET (INCREASES) DECREASES : ACCOUNTS RECEIVABLE(278,133) (133,210) (94,917) (36,219) (4,777) 2,524 (544,732) (24,724) INVENTORY(59,227) (308) (2,063) - - (4,864) (66,462) (833) LIABILITY (INCREASES) DECREASES : ACCOUNTS & VOUCHERS PAYABLE97,547 331,704 (14,571) 85,049 194,329 57,429 751,487 (67,859) DEPOSITS PAYABLE11,680 9,100 - - - 8,064 28,844 - WAGES & BENEFITS PAYABLE13,540 (817) (760) 8,684 375 3,568 24,590 26,962 COMPENSATED ABSENCES PAYABLE(5,804) 3,207 (604) 3,011 8,856 (9,539) (873) 44,895 TOTAL ADJUSTMENTS1,738,199 1,093,362 845,962 100,898 344,235 516,267 4,638,923 1,039,682 -- - - NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES2,392,613$ 1,007,978$ 1,032,387$ (234,189)$ 329,501$ 466,877$ 4,995,167$ 2,427,575$ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES CAPITAL ASSETS ACQUIRED BY CONTRIBUTED CAPITAL958,791$ 858,016$ 70,642$ -$ -$ -$ 1,887,449$ 164,021$ INCREASE (DECREASE) IN FAIR VALUE OF INVESTMENT24,145 1,980 (2,184) (1,150) - - 22,791 4,131 TOTAL NON CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES982,936$ 859,996$ 68,458$ (1,150)$ -$ -$ 1,910,240$ 168,152$ The notes to the financial statements are an integral part of this statement. 47 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS FIDUCIARY FUNDS Fiduciary funds are used to account for assets held by the City of Auburn as a trustee or agent for various individuals, private organizations, and other governmental units. The Fire Relief and Pension Fund is accounted for on an accrual basis. The agency fund is custodial in nature; therefore, no annual budget is adopted. TRUST FUNDS The Fire Relief and Pension Fund This fund accounts for the payment of administrative costs and benefits for retired firefighters (and beneficiaries) who were employed prior to March 1, 1970. Primary revenue sources are general property tax allocations, fire insurance premium tax, and investment interest, in accordance with actuarial recommendations. AGENCY FUNDS The Agency Fund This fundaccounts for the funds over which the City is strictly a short-term custo- dian. 48 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS DECEMBER 31, 2006 FIRE RELIEF PENSIONAGENCY TRUST FUNDFUND ASSETS: CASH AND CASH EQUIVALENTS1,255,455$ 825,631$ INVESTMENTS1,577,116 - RECEIVABLES: CUSTOMER ACCOUNTS- 3,618 DUE FROM OTHER GOVERNMENTAL UNITS- 399 TOTAL ASSETS2,832,571$ 829,648$ LIABILITIES: CURRENT PAYABLES5,865$ 829,648$ TOTAL LIABILITIES5,865 829,648 NET ASSETS: HELD IN TRUST FOR PENSION BENEFITS AND OTHER PURPOSES2,826,706$ -$ The notes to the financial statements are an integral part of this statement. 49 CITY OF AUBURN: 2006 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIRE RELIEF PENSION TRUST FUND FOR THE YEAR ENDED DECEMBER 31, 2006 20062005 ADDITIONS: FIRE INSURANCE PREMIUMS TAX TRANSFERRED FROM GENERAL FUND56,328$ 52,596$ INVESTMENT EARNINGS 92,225128,993 TOTAL ADDITIONS 144,821185,321 DEDUCTIONS: BENEFIT PAYMENTS 247,094272,484 INSURANCE EXPENSE 42,75829,219 ADMINISTRATIVE EXPENSES 37,66734,176 TOTAL DEDUCTIONS 327,519335,879 CHANGE IN NET ASSETS (182,698)(150,558) NET ASSETS - BEGINNING 3,159,9622,977,264 NET ASSETS - ENDING$ 2,977,2642,826,706$ The notes to the financial statements are an integral part of this statement. 50 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS City of Auburn NOTES TO THE FINANCIAL STATEMENTS December 31, 2006 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES................................................52 A. REPORTING ENTITY.........................................................................................................52 B. BASIC FINANCIAL STATEMENTS...................................................................................52 C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND BASIS OF PRESENTATION..............................................................................................53 D. BUDGET AND BUDGETARY ACCOUNTING....................................................................55 E. ASSETS, LIABILITIES, AND FUND EQUITY.....................................................................57 1. DEPOSITS AND INVESTMENTS...............................................................................57 2. RECEIVABLES............................................................................................................57 3. INTERFUND RECEIVABLES AND PAYABLES.........................................................57 4. AMOUNTS DUE FROM OTHER GOVERNMENTAL UNITS......................................57 5. INVENTORIES............................................................................................................58 6. RESTRICTED ASSETS...............................................................................................58 7. INTERFUND TRANSACTIONS...................................................................................58 8. CAPITAL ASSETS.......................................................................................................58 9. DEFERRED CREDITS/CHARGES.............................................................................59 10. COMPENSATED ABSENCES....................................................................................59 11. DEFERRED REVENUES............................................................................................59 12. RESERVATIONS AND DESIGNATIONS OF FUND EQUITY....................................59 F. REVENUES, EXPENDITURES AND EXPENSES.............................................................60 G. ESTIMATES........................................................................................................................61 H. CHANGES IN ACCOUNTING STANDARDS.....................................................................61 NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY..............................................61 NOTE 3 – DEPOSITS AND INVESTMENTS......................................................................................61 NOTE 4 – PROPERTY TAXES...........................................................................................................64 NOTE 5 – INTERFUND ACTIVITY.....................................................................................................65 NOTE 6 – DUE FROM OTHER GOVERNMENTAL UNITS...............................................................66 NOTE 7 – CAPITAL ASSETS AND DEPRECIATION........................................................................67 NOTE 8 – RECORDED VACATION, SICK LEAVE, AND POST-EMPLOYMENT BENEFITS..........68 NOTE 9 – PENSION PLANS..............................................................................................................68 NOTE 10 – LONG-TERM DEBT.........................................................................................................74 NOTE 11 – CONSTRUCTION COMMITMENTS................................................................................78 NOTE 12 – CEMETERY ENDOWED CARE FUND...........................................................................78 NOTE 13 – JOINT VENTURE / RELATED PARTY............................................................................78 NOTE 14 – CONTINGENCIES AND LITIGATION.............................................................................80 NOTE 15 – RISK MANAGEMENT & INSURANCE............................................................................81 NOTE 16 – SUBSEQUENT EVENTS.................................................................................................82 51 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Auburn, King County, Washington, was incorporated in 1891. It operates under the laws of the State of Washington applicable to a Non-Charter Code City under a Mayor/Council form of government. A full-time mayor and seven part-time council members administer Auburn, all elected at-large to four-year terms. The City provides a range of municipal services authorized by state law, including water services, sanitary sewer collection, solid waste collection, storm drainage, a general aviation airport, a municipal cemetery and a municipal golf course. The accounting and reporting policies of the City of Auburn, which conform to Generally Accepted Accounting Principles (GAAP) for governments, are regulated by the Washington State Auditor’s Office. The City’s significant accounting policies are described in the following notes. A. REPORTING ENTITY The City’s Comprehensive Annual Financial Report (CAFR) includes all funds controlled by the City. Based on the criteria of Governmental Accounting Standards Board (GASB) Statement No. 14 as modified by GASB Statement No. 34, the Valley Communications Center is included in the accompanying government-wide statement of net assets as a joint venture. (Please refer to Notes 7 and 13). The government-wide financial statements consist of the government-wide statement of net assets and the government-wide statement of activities. B. BASIC FINANCIAL STATEMENTS The City’s basic financial statements consist of government-wide financial statements and fund financial statements. The government-wide financial statements, which include the statement of net assets and the statement of activities, summarize the entire operation of the City. The fund financial statements, which include balance sheets, statements of revenues, expenditures and changes in fund balances, budget and actual statements, and statements of cash flows, provide a more detailed level of reporting. The government-wide financial statements report information on all of the non-fiduciary activities of the City. For the most part, the effect of interfund activity has been eliminated from these statements. Because governmental activities are normally supported by taxes and intergovernmental revenue, while business-type activities are generally supported through user fees and charges, governmental activities are reported separately from business-type activities on all government-wide financial statements. The statement of activities demonstrates the degree to which the direct expenses of various functions and activities of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or activity. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a function or activity, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or activity. Taxes and other items that are not properly included among function or activity revenues are instead reported as general revenues. The City does not allocate indirect expenses to functions in the statement of activities. Separate financial statements are included for government funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide 52 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS financial statements. Major individual governmental funds and major individual enterprise funds are reported in separate columns in the fund financial statements. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND BASIS OF PRESENTATION The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. Each fund is accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenue, and expenditures or expenses, as appropriate. The City resources are allocated to, and accounted for, in individual funds according to the purpose for which they are spent and how they are controlled. Thebasis of accounting refers to the timing of when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary and pension trust fund financial statements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Themodified accrual basis of accounting is followed in all governmental and permanent funds of the City. Under the modified accrual basis of accounting, revenues are recognized when measurable and available. Revenues are generally considered available if they are collected within the current period or soon enough thereafter (30 days) to pay current liabilities. For derived tax revenues, such as sales tax and utility business and occupation taxes, revenues are recognized in the period when the underlying exchange has occurred. For imposed non-exchange taxes, such as property taxes, revenues are recognized when the use of resources is permitted, or when resources are available. Grant revenue is recognized in the period in which the expenditure occurs and the eligibility requirements have been met. Non-exchange transactions, such as contributions, are recognized when the donation eligibility requirements have been satisfied. Those specific major revenue sources accrued are: Property Taxes – King County and Pierce County collect property taxes and remit to the City daily or monthly. December collections by each County, remitted in January, are recognized as revenues in current year even though received in the subsequent year since they are considered to be measurable and available. Property taxes remaining uncollected at year-end are reported as “deferred revenue”, since they are not considered to be available. Sales Tax Revenues – The State of Washington collects all sales taxes. Auburn’s portion is remitted to the City by the State monthly. The sales tax received in January is recognized as revenue in current year even though received in the subsequent year because of when the underlying transaction occurred and the resources are considered to be measurable and available. Grant Revenues – On cost reimbursement, grant revenue is recognized when the expenditure is incurred. Under the modified accrual basis, expenditures are recorded when the fund liability is incurred, except for the un-matured interest and principal on general long-term debt, which is recognized when due, and for compensated absences which are recorded as expenditures when liquidated from expendable available fund resources. Purchases of capital assets from governmental funds are reported as expenditures during the year incurred and the asset is capitalized and reported on the government-wide statement of net 53 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS assets. Long-term liabilities, including compensated absence pay not currently due and payable, are also reported on the government-wide statement of net assets. Theaccrual basis of accounting is followed in all proprietary, agency, and pension trust funds. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when incurred. The three broad fund categories and nine generic fund types presented in this report are described below: 1. GOVERNMENTAL FUND TYPES All governmental funds are accounted for on a spending or “financial flow” measurement focus. This means that only current assets and current liabilities generally are included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of “available spendable resources”. Governmental fund operating statements focus on measuring cash flows rather than net income; they present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. a. General fund – This fund is used to account for all financial resources and transactions of the City not accounted for in another fund, as required. The general fund is always considered a major fund. b. Special Revenue funds – These funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. One special revenue fund is considered major: the arterial street fund. This fund is supported by the State of Washington’s one-half cent gas tax and is used for major street construction. c. Debt Service funds – These funds account for the accumulation of resources for, and the payment of, general long-term and special assessment debt principal, interest, and related costs. These funds also include the LID guarantee fund which provides financial security for outstanding LID bonds. d. Capital Projects funds – These funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds. One capital project fund is considered major: the capital improvement projects fund. This fund accounts for major capital acquisitions, and street and parks construction projects. e. Permanent funds – These funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes of supporting a specific City program. 2. PROPRIETARY FUND TYPES Proprietary funds are accounted for on the “flow of economic resources” measurement focus. This means that all assets and all liabilities (whether current or non-current) associated with their activity are included on their balance sheets. Their reported fund equity is segregated into contributed capital and net asset components. Proprietary fund operating statements present increases (revenues and gains) and decreases (expenses and losses) in net total fund equities. The proprietary fund measurement focus is upon determination of financial position, net income, and cash flow. 54 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Proprietary funds distinguish operating revenues and expenses from non-operating 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 revenue of the City’s utility funds, other enterprise funds, and internal service funds are charges to customers for sales and services, vehicle and computer replacement, and insurance. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, taxes, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses, or as capital contributions. Pursuant to Statement No. 20 of the Governmental Accounting Standards Board (GASB),Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the City has chosen to apply all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: FASB Statements and Interpretations, APB Opinion, and ARBs. a.Enterprise funds – These funds are used to account for services to the general public where all or most of the costs, including depreciation, are to be financed or recovered from users of such services. b.Internal Service funds – These funds are used to account for the financing of goods and services provided to other funds, departments, or governments on a cost reimbursement basis. 3. FIDUCIARY FUND TYPES Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These include a pension trust and an agency fund. Each fiduciary fund is classified for accounting measurement purposes either as a governmental fund or a proprietary fund. Pension trust funds are accounted for on the accrual basis in essentially the same manner as proprietary funds since capital management is critical. The City’s Fire Relief and Pension fund is included in this group, although based on actuarial recommendations, there are no employee or employer contributions to the Fire Relief and Pension Plan. Pension benefits are recognized when due; plan administration costs are also recognized when incurred in this fund. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. D. BUDGET AND BUDGETARY ACCOUNTING The City of Auburn budgets in accordance with the Revised Code of Washington (RCW) 35A.33 for the general and special revenue funds. For governmental funds, there are no substantial differences between the budgetary basis and generally accepted accounting principles. Budgetary accounts are integrated in fund ledgers for all budgeted funds, but the financial statements include budgetary comparisons for annually budgeted governmental funds only. Budgets established for proprietary and trust funds are “management budgets”, and are not legally required to be reported and, as such, are not reported in the CAFR. 55 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS The annual budget is proposed by the Mayor and adopted by the City Council with legal budgetary control at the fund level; i.e., expenditures and other financing sources may not exceed budgeted appropriations at the fund level. The Mayor may authorize transfers within funds; however, the City Council must approve by ordinance any amendments that increase the total for the fund. Any unexpended appropriation balances lapse at the end of the fiscal year. The City prepares annual budgets on the modified accrual basis, which conforms to Generally Accepted Accounting Principles (GAAP). The CAFR includes budgetary comparisons for those governmental funds with legally adopted budgets. Budget amounts include the adopted annual current year budget appropriations and any revisions made during the year. State law establishes the budget process and the time limits under which a budget must be developed. The City follows the procedures outlined below to establish its annual budget: 1. Sixty days prior to the ensuing fiscal year, the Mayor submits to the City Council a preliminary budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and funding sources. 2. Public hearings are conducted at the Auburn City Council Meetings to obtain taxpayer comments. 3. Prior to December 31, the budget is legally enacted through passage of an ordinance. 4. The final operating budget as adopted is published and distributed after adoption. Copies of the budget are made available to the public. Amounts shown in the accompanying financial statements represent the original budgeted amounts and all supplemental appropriations. ORIGINAL AND SUPPLEMENTAL APPROPRIATIONS OriginalFinal BudgetRevisionsBudget Governmental funds General fund51,742,500$ 5,608,800$ 57,351,300$ Total governmental funds51,742,500 5,608,800 57,351,300 Special revenue funds: Local street1,200,000 567,120 1,767,120 Arterial street7,599,000 2,723,000 10,322,000 Hotel/motel tax50,500 25,000 75,500 Drug forfeiture fund162,900 85,000 247,900 Local Law Enforcement Block Grant45,400 (19,092) 26,308 Housing and Community Development454,000 75,000 529,000 Business Improvement Area36,000 28,000 64,000 Mitigation fees492,000 100,000 592,000 Parks & recreation special projects25,000 - 25,000 Total special revenue funds10,064,800 3,584,028 13,648,828 Total budgeted funds61,807,300$ 9,192,828$ 71,000,128$ 56 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS E. ASSETS, LIABILITIES, AND FUND EQUITY 1. DEPOSITS AND INVESTMENTS It is the City’s policy to invest all temporary cash surplus. At December 31, 2006, the Local Government Investment Pool (LGIP) was holding $60,966,110 in short-term investments. This amount is classified on the balance sheet as cash and cash equivalents. The interest on these investments is prorated to the various funds based upon ownership of investments. For purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on deposit with financial institutions in both demand and time deposit accounts, and amounts invested in the Local Government Investment Pool, administered by the State Treasurer’s Office. The City, by state law, is authorized to purchase certificates of deposit issued by Washington State depositories that participate in the state investment pool, U.S. Treasury and Agency securities, banker’s acceptances, and repurchase agreements. The City purchases repurchase agreements only from institutions that use authorized securities for collateral. The City of Auburn also has signed a “master repurchase agreement” with its primary bank (Key Bank). For purposes of the statement of cash flows, all proprietary fund types and similar trust funds consider all highly liquid investments (including restricted assets) with maturity of three months or less when purchased to be cash equivalents. Investments are recorded at fair value. Adjustments are made to cost for investments amortized over the period to maturity in accordance with GASB Statement No. 31. 2. RECEIVABLES Taxes receivable consist of property taxes (see Note 4). Accrued interest receivable consists of amounts earned on notes and contracts at the end of the year. Customer accounts receivable consist of amounts owed by private individuals or organizations for goods and services provided. Uncollectible amounts are considered immaterial and the direct write-off method is used. Special assessments are levied against certain property owners and become liens against the property benefited by the improvement. Special assessments receivable consist of current assessments, which are due within one year, delinquent assessments remaining unpaid after the due date, and deferred, uncollected assessments, which have been levied, but are not due within one year. Other receivables include utility taxes due from private organizations and customer accounts receivable, which consist of amounts owed from private individuals or organizations for goods and services, including amounts owed for which billings have not been prepared. Notes and contracts receivable consist of amounts owed on open accounts from private individuals or organizations for goods and services rendered. 3. INTERFUND RECEIVABLES AND PAYABLES These accounts include all interfund receivables and payables. A separate schedule of interfund activity is furnished in Note 5. 57 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS 4. AMOUNTS DUE FROM OTHER GOVERNMENTAL UNITS This account includes amounts due from other governments for grants, entitlements and charges for services. 5. INVENTORIES Inventories in the enterprise and internal service funds are valued at cost using the weighted average costing method. Governmental fund types recognize the cost of inventory items as expenditures when purchased. In governmental funds, materials and supplies remaining at year-end are immaterial and not included in inventory. 6. RESTRICTED ASSETS There are three types of restricted assets: customer deposits, proceeds of revenue bonds issued by City utilities that are restricted by applicable bond ordinances to pay bond and construction costs, and funds contributed by the Muckleshoot Indian Tribe that have been restricted for use in certain construction projects. 7. INTERFUND TRANSACTIONS During the course of normal operations, the City has numerous transactions between City funds. Interfund services provided and used, such as buying goods and services, are recorded as revenues and expenditures. Internal service fund billings are recorded as revenues in the equipment rental fund and as expenditures in the paying fund. Transfers between funds are included as “other financing sources or uses”. 8. CAPITAL ASSETS Capital assets are recorded at historical cost when known, or at estimated historical cost when actual costs are not known. Infrastructure, such as roads, bridges and water mains, is reported in the applicable government or business-type activities columns in the government-wide statement of net assets. All infrastructure costs have been calculated and are reported. Government-donated capital assets are stated at their market value on the date donated. Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. In accordance with FASB Statement No. 62, the City capitalized net construction period interest during 2006 for enterprise funds with projects funded by tax-exempt bonds. Because construction period interest revenue exceeded interest expense, the net effect of capitalization was to reduce overall project costs. Net construction period interest revenue was $2,693 for the columbarium construction project at the Mountain View Cemetery, and $14,821 for the clubhouse construction project at the Auburn Golf Course. Capital assets of enterprise and internal service funds are recorded at cost. The capital assets of the airport are carried at cost and include those acquired with capital contributed by the Federal Government. Capital improvements financed by special assessments that provide capital assets to a government’s proprietary funds are capitalized on the fund’s balance sheet and are offset by equity. 58 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Capital assets of all funds are depreciated, and are calculated on the straight-line method utilizing estimated lives as follows: Capitalization Depreciation Estimated Asset Threshold MethodUseful Life Building $5,000 Straight-line 10 - 50 years Improvement $5,000 Straight-line 10 - 50 years Equipment $5,000 Straight-line 3 - 20 years Infrastructure $5,000 Straight-line 25 - 50 years At the inception of capital leases at the government fund reporting level, expenditures and an “other financing source” of an equal amount are reported as the net present value of future minimum lease payments. 9. DEFERRED CREDITS/CHARGES Deferred charges and credits include the premium, discount and issuance costs of revenue bonds that are amortized over the life of the bond issue. Deferred credits and charges also include undistributed court receipts. 10. COMPENSATED ABSENCES City employees accrue vacation leave at a variable rate based on years of service. In general, employees are allowed to accumulate vacation leave up to what would be earned in two years. Unaffiliated employees accrue sick leave at the rate of one day per month up to 960 hours. Sick leave accumulations over 960 hours at year-end are paid at 25%. Sick leave is not paid upon termination except in some instances upon separation in good standing, where employees hired before 12/31/1984 can be reimbursed at their current rate for unused sick leave up to a maximum of 960 hours, at a rate based on years of service. The City’s union contracts have varied sick leave accruals and payout options. In general, non-exempt employees can accrue up to 80 hours of compensatory time. The City reports compensated absences as liabilities in the government-wide statement of net assets and in proprietary funds. Vacation, compensatory time, and sick leave are calculated separately for each employee using the rules described above. Governmental funds recognize expenditures for vacation, sick, and compensatory time when paid. Proprietary and pension trust funds recognize the expense and accrue a liability for vacation and sick leave pay as the leave is earned. All compensated absence liabilities include salary-related payments, where applicable. 11. DEFERRED REVENUES This account reflects the amounts of taxes and other long-term receivables for which the revenue recognition criteria have not been met. It also reflects prepayments on accounts and grants received in advance. 12. RESERVATIONS AND DESIGNATIONS OF FUND EQUITY In governmental funds, reserves are used to indicate a portion of fund balance that is not appropriable for expenditure or is legally segregated, and designations are used to 59 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS indicate tentative managerial plans for financial resource utilization in a future period. In proprietary funds, net assets are generally reserved in connection with restricted assets or for legal segregation. These reserves are identified on the balance sheet of each fund type. F. REVENUES, EXPENDITURES AND EXPENSES Under the modified accrual basis of accounting: Charges for services, interest on investments, and rents generally are considered measurable and available when earned in governmental funds. Taxes and federal or state entitlements or shared revenues that have been collected but not remitted by an intermediary collection agency to the City are considered measurable and available. Special assessments are considered measurable and available when they become due. Grants are considered measurable and available to the extent that expenditures have been made. Other intergovernmental revenues are considered measurable and available when earned. Interfund revenues for goods and services are considered measurable and available when earned. Proceeds from sale or loss of capital assets are recognized as other financing sources. Revenues from taxpayer-assessed taxes (i.e., sales tax), net of estimated refunds, are recognized when measurable and available to finance expenditures of the current period. All other revenues are either not measurable or considered not available until collected. Expenditures are generally recognized when incurred, except for principal and interest on general long-term debt, which are reported as expenditures when paid, and compensated absences, which are reported as expenditures when liquidated from expendable available financial resources. Under the accrual basis of accounting: Revenues are recognized when earned and expenses are recognized when incurred. Contributions of capital in proprietary fund financial statements arise from internal and external contributions of capital assets or from grants or outside contributions of resources restricted to capital acquisition and construction. Transfers between government and business-type activities on the government-wide statement of activities are reported as general revenues. Transfers between funds reported in the governmental activities column are eliminated, as are transfers between funds reported in the business-type activities column. 60 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS G. ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. During 2005, a change was made in the method for estimating unbilled revenue receivable in the utility funds as of the end of the year. H. CHANGES IN ACCOUNTING STANDARDS The Governmental Accounting Standards Board (GASB) has issued Statement No. 34 Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, Statement No. 37 Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments: Omnibus – an amendment of GASB Statements No. 21 and No. 34, and Statement No. 38 Certain Financial Statement Note Disclosures. These new accounting and reporting standards impacted the City’s revenue and expenditure recognition and assets, liabilities, and fund equity reporting. The new standards also required reformatting of the financial statements and restating beginning balances. These new GASB standards were implemented in 2003 except for the full reporting of infrastructure assets, which was implemented in 2004. NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY There have been no material violations of finance-related legal or contractual provisions, and there have been no expenditures exceeding legal appropriations in any of the funds of the City of Auburn. NOTE 3 – DEPOSITS AND INVESTMENTS At December 31, 2006, the carrying amount of the City’s cash demand deposits with Key Bank totaled $5,218,251 while the bank balance was $5,476,685. In addition, there was $10,000 in the Drug Forfeiture Fund to be used for enforcement purposes, and $5,525 in various petty cash and cashier change funds. The Federal Deposit Insurance Corporation (FDIC) insures the City’s deposits up to $100,000 and the Washington Public Deposit Protection Commission (WPDPC) insures amounts over $100,000. The WPDPC is a multiple financial institution collateral arrangement, which provides for additional assessments against members of the pool on a pro rata basis. As required by State law, all investments of the City’s funds are obligations of the U.S. Government, or deposits with Washington State banks. Pension and Non-expendable Trust funds are not subject to these limitations. All temporary investments are stated at cost. Other investments are shown on the balance sheet at fair value. Investments that were not at par value (cost) as of December 31, 2006 are reported at fair value. The City holds some deep discount federal securities that are reported this way. The fair value of the position in the state investment pool is the same as the value of shares held by the City in the pool. During 2006, the net decrease in the fair value of investments being held for more than one year is $122,880 at year-end. During 2004, the City early-implemented the requirements of GASB Statement No. 40: Deposit and Investment Risk Disclosures. These new disclosures were not mandated until 2005. 61 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS As of December 31, 2006, the City had the following investments and maturities: SCHEDULE OF INVESTMENTS BY MATURITIES AS OF DECEMBER 31, 2006 Investment maturities FairLess than1 to 22 to 3Greater than Investment TypeValue1 yearyearsyears3 years State investment pool60,966,110$ 60,966,110$ -$ -$ -$ US Treasuries83,210 - - - 83,210 US Agencies30,015,803 17,880,368 7,914,018 4,221,418 - $ 78,846,47791,065,122$ 7,914,018$ 4,221,418$ 83,210$ Reconciliation to government- wide statement of net assets: Total investments above91,065,122$ Plus: cash in checking and petty cash5,284,075 Less: cash investments in fiduciary funds(3,658,202) Total cash and investments, government- wide statement of net assets92,690,995$ Interest Rate Risk As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits the maximum maturity of an investment to not greater than three years, unless an investment is matched to an anticipated future cash flow. Credit Risk State law and the City’s investment policy limits the instruments in which the City may invest. These include: 1. United States bonds. 2. United States certificates of indebtedness. 3. Bonds or warrants of the State of Washington. 4. General obligation or utility revenue bonds or warrants of its own or of any other city or town in the State. 5. Its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund. 6. Savings or time accounts in designated public depositories. 7. Certificates, notes or bonds of United States agencies, or corporations wholly owned by the United States. 8. Repurchase agreements. 9. Banker’s acceptances. 10. Federal Home Loan Bank notes and bonds, Federal Land Bank bonds, Federal National Mortgage Association notes, debentures and guaranteed certificates of participation, or obligations of any other government sponsored corporation whose obligations are or may be eligible as collateral for advances to member banks as determined by the Board of Governors of the Federal Reserve System or any portion thereof in investment deposits as defined in RCW 39.8.010 secured by collateral in accordance with RCW 39.58. 11. Interim financing warrants of local improvement districts. 12. State Local Government Investment Pool. 62 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS As of December 31, 2006, the City had investments in a limited number of investment instruments as follows: Federal Home Loan Bank bonds Federal National Mortgage Association bonds Federal Farm Credit Bank bonds Federal Home Loan Mortgage Corporation bonds Federal Home Loan Mortgage Corporation Discount bonds State Local Government Investment Pool With the exception of the State Local Government Investment Pool, which is not rated, all of the investments above carried a rating of AAA by Standard & Poor’s rating service at December 31, 2006. Concentration of Credit Risk The City diversifies its investments by security type and institution. The investment policy states: “With the exception of US Treasury securities and the State Investment Pool, no more than 20% of the City’s total investment portfolio will be invested in a single security type or with a single financial institution”. Other information Effective 2002, the City has established arrangements with Bank of New York for safekeeping of all investments. Below is a schedule of investments by fund type: SCHEDULE OF INVESTMENTS BY FUND CATEGORY AND INVESTMENT TYPE AS OF DECEMBER 31, 2006 State InvestmentU.S. PoolSecuritiesTotal General Fund-$ 4,457,770$ 4,457,770$ Special Revenue Funds- 2,987,418 2,987,418 Capital Project Funds- 5,945,316 5,945,316 Permanent Funds- 1,248,957 1,248,957 Enterprise Funds- 10,427,768 10,427,768 Internal Service Funds- 3,454,669 3,454,669 Fiduciary Funds- 1,577,116 1,577,116 Treasurer's Residual Funds60,966,110 - 60,966,110 Total60,966,110$ 30,099,013$ 91,065,122$ 63 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 4 – PROPERTY TAXES For 2006, the City’s regular tax levy was $2.53 per $1,000 on a total 2005 assessed valuation of $5,765,027,710 for a total regular levy of $14,611,910. State law provides that debt cannot be incurred in excess of the following percentages of the taxable property of the City. 1.50% without a vote of the people 2.50% with a vote of the people The City has additional authority to incur the following debt as a percentage of total valuation. 2.50% with a vote of the people, indebtedness is for utilities 2.50% with a vote of the people, indebtedness is for parks, or open space development At December 31, 2006, the debt limits for the City were as follows: With a Vote For Parks or WithoutGeneralForOpen Space Itema VotePurposesUtilitiesDevelopmentTotal 1.50%1.00%2.50%2.50%Capacity Legal Limit$86,475,416$57,650,277$144,125,693$144,125,693432,377,079$ Outstanding indebtedness(15,897,269) - - - (15,897,269) Assets available4,305,486 - - - 4,305,486 Margin available74,883,633$ 57,650,277$ 144,125,693$ 144,125,693$ 420,785,296$ The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. Taxes are levied annually on January 1 on property values listed as of the prior August 31. The County assesses property at 100% of fair value. A revaluation of all property is required at least once every four years and a physical inspection is required at least once every six years. Property taxes levied by the County Assessor and collected by the County Treasurer become a lien on the first day of the levy year and may be paid in two installments if the total amount exceeds $10. The first half of real property taxes is due on April 30 and the balance is due October 31. Delinquent taxes bear interest at the rate of 12% and are subject to additional penalties if not paid as scheduled. At year-end, property taxes are recorded as a receivable with the portion not expected to be collected within 30 days offset by deferred revenue. In the statement of activities, this deferred revenue is referred to as “Unearned Revenue”. During the year, property tax revenues are recognized when cash is received. 1. The Washington State Constitution limits the total regular property taxes to 1% of assessed valuation or $10 per $1,000 of value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the 1% limit. 2. Washington State law in RCW 84.55.010 limits the annual growth of regular property taxes to the lesser of 1% or the rate of inflation. With a vote of the majority of the voters within a taxing district, the 1% levy limitation can be “lifted” and additional taxes may be levied. 3. The City may voluntarily levy taxes below the legal limit. Special levies approved by the voters are not subject to the above limitations. 64 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Property taxes are recorded as receivable and offset by a deferred revenue account when levied. Since state law allows for the sale of property for failure to pay taxes, no estimate of uncollectible taxes is made. NOTE 5 – INTERFUND ACTIVITY The next two tables summarize interfund activity during the past year. The first table details transfers while the second lists loan activity. Transfers are legally authorized transfers of resources from a fund receiving revenue to the fund through which resources are to be expended. Transfers FundsTransfer OutTransfer In Governmental funds: General fund5,716,772$ 60,000$ Special revenue funds: Local street fund- 1,120,000 Hotel / Motel tax- 25,000 Arterial street fund- 2,485,300 Local Law Enforce Block Grants- 2,600 Recreational trails- 5,100 Cumulative reserve- 900,000 Mitigation fees592,000 - Debt service funds: 1998 library GO- 305,200 LID guarantee55,044 - Capital projects fund: Park construction- 240,000 Capital improvement projects3,101,000 3,730,000 Proprietary funds: Water143,000 6,200 Sewer50,000 77,044 Storm drainage163,000 2,100 Solid waste- 800 Cemetery- 90,800 Golf course- 749,644 Internal service funds: Information services- 53,900 Equipment rental- 800 Fiduciary funds: Fire pension & relief fund- 56,328 Permanent funds: Cemetery endowed care90,000 - Total9,910,816$ 9,910,816$ All transfers are considered routine. 65 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Loans between funds are classified as interfund loans receivable and payable or advances to and from other funds on the balance sheet, depending on the time period for which the loan was made. Interfund loans do not affect total fund equity. Interfund LoansBalanceBalance Due FromDue ToPurpose1/1/2006New LoansRepayments12/31/2006 Arterial street fundGeneral fundShort-term cash loan500,000$ -$ 500,000$ -$ Comm Dev Blk GrantGeneral fundShort-term cash loan84,000 50,000 - 134,000 Local Law Blk GrantGeneral fundShort-term cash loan3,700 - 3,700 - Total interfund loans587,700$ 50,000$ 503,700$ 134,000$ NOTE 6 – DUE FROM OTHER GOVERNMENTAL UNITS As of December 31, 2006, the City had receivables due from other governmental units as follows: Due from Other Governmental Units General fund2,024,318$ Arterial street fund1,033,653 Local law enforcement block grant4,073 Housing & community development169,581 Municipal park construction49,250 Solid waste fund23,648 Cemetery6,734 Equipment rental13,370 Agency disbursement fund399 Total3,325,026$ 66 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 7 – CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the year ended December 31, 2006 is as follows: Schedule of Capital Asset Activity BalanceDecreases/Balance 1/1/06IncreasesAdjustments12/31/06 Governmental activities: Capital assets, not being depreciated: Land39,341,442$ 5,221,023$ (36,065)$ 44,526,400$ Construction in progress7,122,129 7,702,119 (11,558,236) 3,266,012 Total capital assets, not being depreciated46,463,571 12,923,142 (11,594,301) 47,792,412 Capital assets, being depreciated: Buildings21,726,647 - - 21,726,647 Improvements other than buildings10,534,982 43,966 - 10,578,948 Machinery and equipment16,680,744 2,020,282 (1,404,665) 17,296,361 Joint venture3,696,777 5,038 - 3,701,815 Infrastructure168,978,975 11,539,245 - 180,518,220 Total capital assets being depreciated221,618,125 13,608,531 (1,404,665) 233,821,991 Less: accumulated depreciation for: Buildings(6,216,576) (580,055) - (6,796,631) Improvements other than buildings(7,683,342) (317,495) - (8,000,837) Machinery and equipment(9,839,541) (1,498,121) 1,113,974 (10,223,688) Joint venture(963,902) - - (963,902) Infrastructure(45,427,972) (5,658,667) - (51,086,639) Total accumulated depreciation(70,131,333) (8,054,338) 1,113,974 (77,071,697) Total capital assets, being depreciated, net151,486,792 5,554,193 (290,691) 156,750,294 Governmental activities capital assets, net197,950,363$ 18,477,335$ (11,884,992)$204,542,706$ Business-type activities: Capital assets, not being depreciated: Land14,158,803$ -$ -$ 14,158,803$ Construction in progress5,668,464 6,240,153 (7,461,328) 4,447,289 Total capital assets, not being depreciated19,827,267 6,240,153 (7,461,328) 18,606,092 Capital assets, being depreciated: Buildings7,326,265 - - 7,326,265 Improvements other than buildings156,123,723 9,348,778 - 165,472,501 Machinery and equipment3,089,507 149,479 (22,150) 3,216,836 Total capital assets being depreciated166,539,495 9,498,257 (22,150) 176,015,602 Less: accumulated depreciation for: Buildings(3,069,080) (203,938) - (3,273,018) Improvements other than buildings(48,873,997) (4,029,833) - (52,903,830) Machinery and equipment(2,149,967) (207,170) 18,991 (2,338,146) Total accumulated depreciation(54,093,044) (4,440,941) 18,991 (58,514,994) Total capital assets, being depreciated, net112,446,451 5,057,316 (3,159) 117,500,608 Business-type activities capital assets, net132,273,718$ 11,297,469$ (7,464,487)$ 136,106,700$ 67 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Depreciation expense was charged to functions/programs of the City as follows: Government activities: General government$ 193,094 Public safety 613,589 Transportation 5,501,859 Physical environment 38,186 Culture and recreation 622,694 Capital assets held by the City's internal service funds are charged to the various functions based on their usage of the assets1,061,241 Total depreciation expense - governmental activities8,030,663$ Business-type activities Water$ 1,958,596 Sanitary sewer 883,686 Storm water 953,750 Solid waste 40,373 Golf course 145,452 Airport 250,845 Cemetery 88,508 Commercial retail 119,733 Total depreciation expense - business-type activities4,440,943$ NOTE 8 – RECORDED VACATION, SICK LEAVE, AND POST-EMPLOYMENT BENEFITS In accordance with GASB Statement No. 16, the City accrues vacation and sick leave pay. The accrual is shown on the government-wide statement of net assets for both governmental and proprietary funds. The accrual is also seen in the separate proprietary fund balance sheets, but is excluded from the separate governmental fund balance sheets since it is not currently due and payable at year-end (please refer to Note 10). In addition to pension benefits described in Note 9, the City provides post-retirement benefits, in accordance with state statutes, to all LEOFF 1 retirees. Currently, 65 retirees meet the eligibility requirements. The City provides long-term care, medical insurance, and reimburses all validated claims for medical, dental and hospitalization costs incurred by retirees. Expenditures for post- retirement health care benefits are recognized as retirees report claims. During the year, expenditures of $921,643 were recognized for post-retirement health care. This represents an increase of $98,450 from the previous year. NOTE 9 – PENSION PLANS Substantially all City full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, P.O. Box 48380, Olympia, WA 98504- 8380. The following disclosures are made pursuant to GASB Statement 27, Accounting for Pensions by State and Local Government Employers. 68 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Public Employees’ Retirement System (PERS) Plans 1, 2 and 3 Plan Description PERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a defined benefit plan with a defined contribution component. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not participating in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS participants who joined the system by September 30, 1977, are Plan 1 members. Those who joined on or after October 1, 1977 and by either, February 28, 2002 for state and higher education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after March 1, 2002 for state and higher education employees, or September 1, 2002 for local government employees have their revocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PERS retirement benefit provisions are established in state statute and may be amended only by the State Legislature. Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at the age of 60 with five years of service, or at the age of 55 with 25 years of service. The annual benefit is 2 percent of the average final compensation per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. If qualified, after reaching the age of 66 a cost-of-living allowance is granted based on years of service credit and is capped at 3 percent annually. Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at the age of 65 with five years of service, or at the age of 55 with 20 years of service, with an allowance of 2 percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Plan 2 retirements prior to the age of 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3 percent per year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3 percent annually. Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. The defined benefit portion provides a benefit calculated at 1 percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Effective June 7, 2006, Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after fiveyears if twelve months of that service are earned after age 44; or after five service credit years earned in PERS Plan 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. Vested Plan 3 members are eligible to retire with full benefits at age 65, or at age 55 with 10 years of service. Retirements prior to the age of 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3 percent per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service credit; and Plan 3 provides the same cost-of- 69 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS living allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option selected by the member, either as a lump sum or pursuant to other options authorized by the Employee Retirement Benefits Board. There are 1,181 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and beneficiaries receiving benefits 68,609 Terminated plan members entitled to but not yet receiving benefits 22,567 Active plan members vested 104,574 Active plan members non-vested 51,004 Total 246,754 Funding Policy Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6 percent for state agencies and local government unit employees, and 7.5 percent for state government elected officers. The employer and employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature. Under PERS Plan 3, employer contributions finance the defined benefit portion of the plan, and member contributions finance the defined contribution portion. The Employee Retirement Benefits Board sets Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options are graduated rates dependent on the employee’s age. The methods used to determine the contribution requirements are established under state statute in accordance with chapters 41.40 and 41.45 RCW. The required contribution rates expressed as a percentage of current-year covered payroll, as of December 31, 2006 were as follows: PERS Plan 1PERS Plan 2PERS Plan 3 Employer*3.69%**3.69%3.69%**** Employee6.00%***3.50%***** * The employer rates include the employer administrative expense fee currently set at 0.18%. ** The employer rate for state elected officials is 5.44%. *** The employee rate for state elected officials is 7.50%. **** Plan 3 defined benefit portion only. ***** Variable from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 member. Both the City of Auburn and the employees made the required contributions. The City’s required contributions for the years ended December 31 were: PERS Plan 1PERS Plan 2 PERS Plan 3 2006$37,733$386,786$65,820 2005$24,541$226,425$30,450 2004$17,192$150,805$20,221 70 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Law Enforcement Officers’ and Fire Fighters’ Retirement Systems (LEOFF) Plans 1 and 2 Plan Description LEOFF is a cost-sharing multiple-employer retirement system comprised of two separate defined benefit plans. LEOFF participants who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977 are Plan 2 members. Membership in the system includes all full-time, fully compensated, local law enforcement officers and firefighters. LEOFF membership is comprised primarily of non-state employees, with the Department of Fish and Wildlife enforcement officers, who were first included prospectively effective July 27, 2003 being an exception. In addition, effective July 24, 2005, current members of PERS who are emergency medical technicians can elect to become members of LEOFF Plan 2. Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established to provide governance of LEOFF Plan 2. The Board’s duties include adopting contribution rates and recommending policy changes to the Legislature for the LEOFF Plan 2 retirement plan. LEOFF defined benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays the remainder through state legislative appropriations. LEOFF retirement benefit provisions are established in state statute and may be amended by the State Legislature. Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for retirement with five years of service at the age of 50. The benefit per year of service calculated as a percent of final average salary is as follows: Term of ServicePercent of Final Average Salary 20 or more years2.0% 10 but less than 20 years1.5% 5 but less than 10 years1.0% The final average salary is the basic monthly salary received at the time of retirement, provided a member has held the same position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months’ salary within the last 10 years of service. If membership was established in LEOFF after February 18, 1974, the service retirement benefit is capped at 60 percent of final average salary. A cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index). Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at the age of 50 with 20 years of service, or at the age of 53 with five years of service, with an allowance of 2 percent of the final average salary per year of service. The final average salary is based on the highest consecutive 60 months. Plan 2 retirements prior to the age of 53 are reduced 3 percent for each year that the benefit commences prior to age 53 and to reflect the choice of a survivor option. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3 percent annually. There are 376 participating employers in LEOFF. Membership in LEOFF consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and beneficiaries receiving benefits 8,723 Terminated plan members entitled to but not yet receiving benefits 577 Active plan members vested 12,348 Active plan members non-vested 3,543 Total 25,191 71 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Funding Policy Starting on July 1, 2000, Plan 1 employers and employees will contribute zero percent as long as the plan remains fully funded. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plan. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board in accordance with Chapter 41.45 RCW. All employers are required to contribute at the level required by state law. The Legislature has the ability, by means of a special funding arrangement, to appropriate money from the state General Fund to supplement the current service liability and fund the prior service costs of Plans 1 and 2 in accordance with the requirements of the Pension Funding Council. However, this special funding situation is not mandated by the state constitution and this funding requirement could be returned to the employers by a change of statute. The required contribution rates expressed as a percentage of current year covered payroll, as of December 31, 2006 were: LEOFF Plan 1 LEOFF Plan 2 Employer*0.18%4.90%** Employee0.00%7.85% Staten/a3.13% * The employer rates include the employer administrative expense fee currently set at 0.18%. ** The employer rate for ports and universities is 8.03%. Both the City of Auburn and the employees made the required contributions. The City’s required contributions for the years ended December 31 were: LEOFF Plan 1 LEOFF Plan 2 2006$1,049$585,329 2005$1,236$463,000 2004$1,288$370,192 City of Auburn Fire Relief and Pension Plan The City is the administrator of the Firemen’s Pension Plan (Plan), which is a closed, single- employer defined benefit pension plan that was established in conformance with RCW Chapters 41.16 and 41.18. This plan provided retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Membership is limited to firefighters employed prior to March 1, 1970 when the LEOFF retirement system was established. The City’s obligation under the Firemen’s Pension Plan consists of paying all benefits, including payments to beneficiaries and healthcare, for firefighters who retired prior to March 1, 1970, and excess pension and healthcare benefits of LEOFF for covered firefighters who retired after March 1, 1970. The Plan does not issue a separate financial report. Under state law, the Firemen’s Pension Plan is provided an allocation of 25% of all monies received by the state from taxes on fire insurance premiums, interest earnings, member contributions made prior to the inception of LEOFF, and City contributions required to meet projected future pension obligations. The actuary determined as of January 1, 2007 that no 72 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS future City contributions would be required beyond future revenues from state fire insurance taxes and interest earnings. In 2006 $56,327 was received from the state from taxes on fire insurance premiums. Administrative costs, such as City staff time and actuarial valuation costs are funded from interest earnings or City contributions. Membership of the Firemen’s Pension Plan consisted of 15 eligible, of which 14 are receiving benefits. GASB STATEMENTS No. 25 and No. 27 SCHEDULE OF FUNDING PROGRESS (rounded to thousands) Unfunded Actuarial ActuarialUAAL as a Actuarial AccruedAccruedPercentage ActuarialValueLiabilities -LiabilitiesFundedCoveredof Covered Valuation Dateof AssetsEntry Age(UAAL)RatioPayrollPayroll January 1, 1999$2,096$2,157$6097.17%$11951% January 1, 2001$3,632$2,332($1,300)155.75%$58-2241% January 1, 2003$3,514$2,428($1,086)144.73%$61-1780% January 1, 2005$3,160$2,172($988)145.00%$64-1544% January 1, 2007$2,868$2,802($66)102.00%$0N/A This plan primarily covers inactive participants. There are no current member contributions. Prior to adoption of GASB Statement No. 25 in 1997, the Annual Required Contribution (ARC) was not determined pursuant to the parameters required by the statement. Therefore, no liability prior to 1997 has been shown. GASB STATEMENT No. 25 GASB STATEMENT No. 27 SCHEDULE OF EMPLOYER CONTRIBUTIONSTHREE YEAR TREND INFORMATION FiscalActualAnnual RequiredPercentageAnnual PercentageNet YearEmployerContributionof ARC Pension Costof APCPension EndingContributions(ARC)Contributed(APC)ContributedObligation December 31, 1997*$27,847$38,76372% December 31, 1998$24,822$38,76364% December 31, 1999$52,738$5,381980% December 31, 2000$31,721$5,381590%$5,520574.66%($48,808) December 31, 2001$37,281$0 N/A$34110932.84%($85,748) December 31, 2002$40,869$0 N/A$6845975.00%($125,933) December 31, 2003$45,664$0 N/A$1,1374016.18%($170,460) December 31, 2004($137,783)($91,881) N/A($90,143) N/A($122,820) December 31, 2005($144,746)($78,690) N/A($76,827) N/A($54,901) December 31, 2006($149,327)($78,690) N/A($77,774) N/A$16,652 * Information prepared by prior actuary. 73 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS GASB STATEMENT No. 27 Annual Development of Pension Cost FISCAL ARC atAmort.AnnualTotal YEAREnd ofInterest onARCFactorPension CostEmployer Change inNPO (2)(1)(3) Year NPO Balance ENDINGAdjustment**(APC)ContributionsNPO 12/31/1997$38,763$0$012.88%$38,763$27,847$10,916$10,916 12/31/1998$38,763$873$84812.88%$38,788$24,822$13,966$24,882 12/31/1999$5,381$1,742$1,87413.28%$5,249$52,738($47,489)($22,607) 12/31/2000$5,381($1,582)($1,721)13.14%$5,520$31,721($26,201)($48,808) 12/31/2001$0($3,417)($3,758)12.99%$341$37,281($36,940)($85,748) 12/31/2002$0($6,002)($6,686)12.83%$684$40,869($40,185)($125,933) 12/31/2003$0($8,815)($9,952)12.65%$1,137$45,664($44,527)($170,460) 12/31/2004($91,881)($11,932)($13,670)12.47%($90,143)($137,783)$47,640($122,820) 12/31/2005($78,690)($7,369)($9,232)13.30%($76,827)($144,746)$67,919($54,901) 12/31/2006($78,690)($3,294)($4,210)13.04%($77,774)($149,327)$71,553$16,652 (1) 8.00% interest rate was used for years prior to January 1, 1999: 7.00% thereafter. (2) A change in consulting actuaries resulted in a recommended change in the actuarial methods and assumptions. (3) The Net Pension Obligation (NPO) balance is reflected as part of Deferred Credits on the Government-wide Statement of Net Assets ** Based on 30-year level-dollar closed amortization as of January 1, 1999 (27 years as of January 1, 2003). The information presented in the preceding required schedules was determined as part of the actuarial valuations at the date indicated. Valuation dateJanuary 1, 2007 Entry age normal Actuarial cost method Amortization method30-year, closed as of January 1, 1999 Remaining amortization period22 years Asset valuation methodFair market value Actuarial Assumptions: Investment rate of return5% Projected salary increases4% Cost-of living adjustments3% NOTE 10 – LONG-TERM DEBT General Obligation Bonds are direct obligations of the City for which its full faith and credit are pledged. Debt service for voter-approved issues, of which the City has none, would be funded by special property tax levies. Debt service for City Council authorized bonds, also called councilmanic bonds, is funded from regular property taxes or general revenues, and is generally paid from debt service funds but can be paid from other designated funds. 74 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS General Obligation Bonds outstanding at year-end are as follows: 1998 Limited Tax General Obligation bonds were issued for construction of a library to be owned and operated by the King County Rural Library District. These 20-year bonds mature in 2018 and are paid from the Debt Service fund. 1999 Limited Tax General Obligation bonds were issued for construction of hangars at the Auburn Municipal Airport. These 20-year bonds mature in 2019 and are paid from the Airport fund. Valley Communication Center Development Authority issued General Obligation bonds in 2000 for a new dispatch facility. The City is contracted to pay 20% of the debt service of these 15-year bonds that mature in 2015. This debt is paid from the General fund. 2005 Limited Tax General Obligation refunding bonds were issued to partially advance refund the 1999 Limited Tax Obligation bonds. 2006 Limited Tax General Obligation bonds were issued to fund improvements at the Auburn Golf Course including a pro shop, clubhouse and related facilities, as well as construction of a columbarium at the Mountain View Cemetery. 2006 Limited Tax General Obligation (taxable) bonds were issued to construct and equip restaurant, banquet and related facilities for a restaurant facility to be located at the Auburn Golf Course clubhouse. Revenue Bonds are payable from water and storm drainage utility revenues generated by those enterprise funds. Special Assessment Bonds are not a direct responsibility of the City, but are funded from the collection of special assessment payments. Debt service principal and interest costs are paid from the individual LID funds. The City is obligated for special assessment debt to the extent that it is required to establish an LID Guarantee fund for the purpose of guaranteeing the payment of local improvement bonds in the event there are insufficient funds in the individual LID fund. As of December 31, 2006, a total of $101,340 of special assessments was delinquent, and there was $89,285 in delinquent interest and penalties. During 2006 the City acquired from King County the parcel subject to the outstanding assessments, interest and penalties. See Note 16 for subsequent events related to the outstanding assessments. State of Washington Public Works Trust Fund Loans are a direct responsibility of the City. Auburn currently has six outstanding loans with a remaining total balance of $9,853,410. Five of the loans are being repaid from water and sewer fund revenues over a 20-year period that begins upon each project completion. The other loan is being repaid from arterial street fund revenues over a 4-year period that begins upon project completion. Debt Issued during 2006 was used for various business-type activities. On August 22, 2006, the City issued $3,275,000 of Limited General Obligation Bonds with a premium of $108,030 and an interest rate of 4.25% to 5.00%. The bonds were issued to fund improvements at the Auburn Golf Course including a pro shop, clubhouse and related facilities, as well as construction of a columbarium at the Mountain View Cemetery. The net proceeds of $3,359,175 (after payment of $44,336 in underwriting fees, insurance, and other issuance costs), were held for disbursement on construction related expenditures. Any excess funds were invested in the Local Government Investment Pool (LGIP). Although the debt is a general obligation of the City, the expectation is that the golf course and cemetery will fund debt service from operations. For this reason, the debt is reflected in the Proprietary Funds Statement of Net Assets. 75 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Also on August 22, 2006, the City issued $1,885,000 of taxable Limited General Obligation Bonds with an interest rate of 5.40% to 5.52%. The bonds were issued to construct and equip restaurant, banquet and related facilities for a restaurant facility to be located at the golf course clubhouse. The net proceeds of $1,859,817 (after payment of $25,183 in underwriting fees, insurance, and other issuance costs), were held for disbursement on construction related expenditures. Any excess funds were invested in the Local Government Investment Pool (LGIP). Although the debt is a general obligation of the City, the expectation is that the golf course will fund debt service from operations. For this reason, the debt is reflected in the Proprietary Funds Statement of Net Assets. The following schedules summarize the long-term debt transactions of the City for the year ended December 31, 2006. The first table summarizes all debt transactions for Auburn, while the second provides detailed information on all long-term debt. Additional schedules reflect total annual debt service requirements to maturity and the reconciliation of debt by fund type. CHANGES IN LONG-TERM DEBT SUMMARY General Special Employee Leave ObligationAssessmentBenefitDeferred Charges UtilityTotal Long-term debt payable 12/31/056,478,000$ 15,699,509$ 132,354$ 3,322,203$ (139,397)$ 25,492,669$ Added5,160,000 1,717,313 - 2,113,899 38,511 9,029,723 Retired(428,000) (1,658,412) (95,527) (2,050,825) 38,323 (4,194,441) Long-term debt payable 12/31/0611,210,000$ 15,758,410$ 36,827$ 3,385,277$ (62,563)$ 30,327,951$ DEBT SERVICE REQUIREMENT TO MATURITY GeneralUtilitySpecialTotalEmployee Obligation BondsBonds/LoansAssessmentsLong-Term DebtLeave Benefits YEARPrincipalInterestPrincipalInterestPrincipalInterestPrincipalPrincipalInterest 2007560,000$ 527,964$ 1,753,991$ 340,603$ 6,138$ 2,523$ 1,922,321$ 4,242,449$ 871,089$ 2008597,000 499,944 1,901,492 276,690 6,138 2,102 146,296 2,650,925 778,736 2009625,000 469,878 1,961,491 213,115 6,138 1,682 146,296 2,738,924 684,675 2010669,000 439,857 941,491 145,611 6,138 1,261 146,296 1,762,924 586,728 2011718,000 408,540 920,912 130,236 6,138 841 146,296 1,791,346 539,616 2012752,000 374,718 935,912 114,439 6,138 420 146,296 1,840,346 489,577 2013795,000 339,292 940,912 98,042 - - 146,296 1,882,208 437,333 2014831,000 300,712 955,912 81,445 - - 146,296 1,933,208 382,156 2015873,000 259,514 970,912 61,810 - - 146,296 1,990,208 321,324 2016685,000 215,340 985,912 41,651 - - 146,296 1,817,208 256,991 2017725,000 183,730 630,912 20,966 - - 146,296 1,502,208 204,696 2018755,000 151,665 630,912 16,769 - - - 1,385,912 168,434 2019495,000 118,125 630,912 12,572 - - - 1,125,912 130,697 2020320,000 95,850 448,544 8,375 - - - 768,544 104,225 2021330,000 81,450 448,544 6,002 - - - 778,544 87,452 2022345,000 66,600 221,458 3,629 - - - 566,458 70,229 2023360,000 51,075 195,344 2,391 - - - 555,344 53,466 2024380,000 34,875 195,344 1,414 - - - 575,344 36,289 2025395,000 17,775 87,500 438 - - - 482,500 18,213 TOTALS11,210,000$ 4,636,901$ 15,758,410$ 1,576,198$ 36,827$ 8,829$ 3,385,277$ 30,390,514$ 6,221,928$ 76 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS CHANGES IN LONG-TERM DEBT InterestMaturityOriginalPrincipalBalanceBalanceDue Within Issue Name Rates Date Amount Installments 12/31/05 Additions Reductions 12/31/06 One Year Governmental debt: General obligation bonds: Limited G.O. library3.75-5.00%12/1/20184,000,000$ $110,000 - $290,0002,995,000$ -$ (175,000)$ 2,820,000$ 185,000$ Valley Communication G.O.4.30-5.75%12/1/20152,551,600 $96,600 - $233,0001,908,000 - (153,000) 1,755,000 160,000 Total general obligation bonds6,551,600 4,903,000 - (328,000) 4,575,000 345,000 Employee leave benefit: Compensated absences- 2,831,805 1,818,223 (1,754,276) 2,895,752 1,644,345 Public Works Trust Fund loans: PWTF 2006(a)0.50%7/1/2010142,313 $35,578- 142,313 - 142,313 35,578 Special assessment bonds: L.I.D. # 346 (1)5.85%3/31/2009206,077 Varies5,527 - (5,527) - - L.I.D. # 3476.85%5/1/2012587,827 Varies126,827 - (90,000) 36,827 6,138 Total special assessment bonds793,904 132,354 - (95,527) 36,827 6,138 Deferred charges related to debt -(1,330) 102 (1,228) - Total governmental7,487,817$ 7,865,829$ 1,960,536$ (2,177,701)$ 7,648,664$ 2,031,061$ Business-type debt: General obligation bonds GO bond 19995.00-5.10%11/1/20091,655,000$ $45,000 - $65,000220,000$ -$ (45,000)$ 175,000$ 50,000$ GO refunding bond 20054.00-5.00%12/1/20191,375,000 $10,000 - $190,0001,355,000 - (10,000) 1,345,000 - GO bond 20064.25-5.00%12/1/20253,275,000 $5,000 - $395,000- 3,275,000 - 3,275,000 - GO bond 2006 taxable5.40-5.52%12/1/20151,885,000 $45,000 - $245,000- 1,885,000 (45,000) 1,840,000 165,000 Total GO bonds8,190,000 1,575,000 5,160,000 (100,000) 6,635,000 215,000 Revenue bonds: Utility sys. revenue 1997 (1)5.50%11/1/20075,000,000 $230,000 - $245,000475,000 - (230,000) 245,000 245,000 Utility sys. revenue 1999 (1)5.00-5.10%11/1/20098,345,000 $670,000 - $1,030,0003,825,000 - (885,000) 2,940,000 930,000 Utility sys. refunding bonds 2005 (1)3.00-4.75%11/1/20162,765,000 $45,000 - $355,0002,720,000 - - 2,720,000 - Total revenue bonds16,110,000 7,020,000 - (1,115,000) 5,905,000 1,175,000 Employee leave benefit: Compensated absences- 490,398 295,676 (296,549) 489,525 277,976 Public Works Trust Fund loans: PWTF 19991.00%7/1/20193,850,000 $182,3682,553,158 - (182,369) 2,370,789 182,368 PWTF 20010.50%7/1/20214,290,405 $227,0863,633,369 - (227,085) 3,406,284 227,086 PWTF 20021.00%7/1/2022641,250 $26,114443,946 - (26,114) 417,832 26,114 PWTF 20040.50%7/1/20242,156,880 $107,8442,049,036 - (107,844) 1,941,192 107,844 PWTF 2006(b)0.50%7/1/20251,575,000 $87,500- 1,575,000 - 1,575,000 - Total Public Works Trust Fund loans12,513,535 8,679,509 1,575,000 (543,412) 9,711,097 543,412 Deferred charges related to debt 38,511(138,067) 38,221 (61,335) - Total proprietary36,813,535$ 17,626,840$ 7,069,187$ (2,016,740)$ 22,679,287$ 2,211,388$ Total all funds44,301,352$ 25,492,669$ 9,029,723$ (4,194,441)$ 30,327,951$ 4,242,449$ (1) Subject to federal arbitrage rules. LONG-TERM DEBT RECONCILIATION Long-Term EnterpriseDebt12/31/06 Liabilities payable from restricted assets: Revenue bonds885,610$ -$ 885,610$ Long-term bonds payable: General obligation bonds6,635,000 4,575,000 11,210,000 Revenue bonds5,019,390 - 5,019,390 Special assessments with- 36,827 36,827 government commitment Public Works Trust Fund loans9,711,097 142,313 9,853,410 Employee leave benefits489,525 2,895,752 3,385,277 Deferred charges(61,335) (1,228) (62,563) Total long-term debt22,679,287$ 7,648,664$ 30,327,951$ 77 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Revenue Bond Debt Service Coverage The required debt service coverage for the 1997 and 1999 utility revenue bonds and the 2005 utility revenue refunding bonds is 1.25. Debt service coverage for 2006 was 3.64. Please refer to Schedule 16 in the statistical section. The restricted rate stabilization fund for the utility revenue bonds was established to minimize the effect on rates of revenue fluctuations between years. By transferring cash into this stabilization fund, adjusted net revenue available for debt service, as defined, would be decreased by the amount of the transfer. Conversely, transfers out of the account would increase adjusted net revenue available for debt service. NOTE 11 – CONSTRUCTION COMMITMENTS At December 31, 2006 the City had the following contractual obligations on construction projects: Building projects13,697$ Street projects467,765 Utilities projects2,019,528 Total commitments2,500,990$ NOTE 12 – CEMETERY ENDOWMENT CARE FUND The City maintains one permanent fund known as the cemetery endowed care fund. Paid into this fund are 15% of all proceeds received from the sale of each grave, niche or crypt. This fund is irreducible in principal and no part of the income of this fund shall ever be used for purposes other than those specified upon the creation of the fund. RCW 68.44.020 restricts the use of endowment net appreciation to endowment care “stipulated in the instrument by which the fund was established”. For the City, the instrument that established the fund is Auburn City Code section 3.04.080, and section 3.040.120 governs the use of the fund. ACC 3.04.120 restricts net interest or income from investments to the care of the lots and in the improvement or embellishment of the cemetery or the erection or preservation of any buildings or structures, fences or walks, or for the repair, preservation, erection or renewal of any tomb, monument, grave, stone, fence, railing or other erection in or around the cemetery. The funds may also be used for planting and cultivating trees, shrubs, flowers or plants in or around the cemetery. All expenditures of income from the fund must first be authorized by the City Council. For 2006, of the $69,532 net appreciation on investments, $34,442 was available for expenditure, and the rest was related to an unrealized gain on a long-term investment that matures in 2009. Amounts that are available for expenditure are reflected as unrestricted net assets. NOTE 13 – JOINT VENTURE / RELATED PARTY The “Valley Communications Center” was established August 20, 1976, when an Interlocal Agreement was entered into by four participating municipal corporations: Renton, Kent, Auburn and Tukwila. The provisions and terms of the “Interlocal Cooperation Act”, pursuant to RCW 39.34, sanction the agreement. The initial duration of the agreement was five years and 78 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS thereafter is automatically extended for consecutive two-year periods, unless terminated by one or more of the participating cities. Any such termination must be in writing and served upon the other cities on or before July 1 in any one year and such termination shall then become effective on the last day of such year. On August 4, 1999 the Administration Board of Valley Communications Center voted to include the City of Federal Way as a full participating member city as of January 1, 2000. The five participating municipal corporations that include the cities of Renton, Kent, Auburn, Tukwila, and Federal Way on April 17, 2000 entered into a new interlocal Agreement, pursuant to RCW 39.34, et seq. This agreement reaffirmed Valley Communications Center as a governmental administration agency pursuant to RCW 39.34.030 (3) (b). The purpose of the joint operation, hereafter referred to as Valley Com, is to provide improved consolidated emergency communications (dispatch) services for police, fire and medical aid to the five participating cities and to the several subscribing agencies, which include King County Fire Districts #2, #20, #40, #43, #44, #47, Black Diamond Fire Department, Vashon Island Fire Department, City of Pacific Police and Fire Departments, City of Algona Police Department, City of Black Diamond Police Department, City of Des Moines Police Department, SeaTac Fire Department, North Highline Fire Department, and King County EMS Units. In 1988, King County Fire District #1 was annexed to the City of Tukwila. A separate agreement between Valley Com and the subscribing agencies has been executed, which set forth condition of services and rates charged. The participating cities provide the majority of revenues to Valley Com. The method of allocating revenue source was changed in 1990 to a basis of prior years calls with actual first and second quarter and estimated third and fourth quarter calls. The allocation of prorated financial participation among the five participating cities is the percentage of estimated dispatched calls attributed to each jurisdiction compared to the total actual and estimated dispatched calls, for the period for January 1, through December 31. The percentages are applied to the current approved budget, less revenue from subscribing agencies and all other sources. The 2006 cost distribution for the five participating cities is as follows: DispatchablePercent of CallsTotal * Renton66,41519.68% Kent92,80827.50% Auburn64,04818.98% Tukwila34,95610.36% Federal Way79,28623.49% Total337,513100.00% * Distribution of current year net income is based on these budgeted percentages. Valley Com is served by an Administration Board composed of the Mayors or designated representatives from the five participating cities of Renton, Kent, Auburn, Tukwila and Federal Way. The Administration Board is responsible for the following functions: 1) Budget review and recommendation to the legislative bodies of the participating cities, and budget adoption after each legislative body has approved the required financial participation for the ensuing year; 2) Approval of appointment and/or discharge of the Director; 3) Approval of personnel policy and final decisions on all major policy changes; 4) Review and approval of all contracts. 79 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS In addition, an Operations Board provides direction and consists of two members of each participating City’s public safety departments, including the heads of such departments or their designees. The Operations Board performs the following functions: 1) Oversees the operation of Valley Com, advises and makes recommendations to the Administration Board; 2) Makes recommendations on Director selection; 3) Presents proposed policies and budget to the Administration Board; 4) Approves disbursement of funds by the Director. The Director presents a proposed budget to the Operations Board on or before August 15 of each year. Said budget is then presented to the Administration Board by September 1 of each year. The Administration Board can make changes to the proposed Valley Com budget as it finds necessary, but final approval falls to the legislative body of each participating city in accordance with the provisions of the Interlocal Agreement. In August 1993, Valley Com entered into an Interlocal Cooperation Agreement, pursuant to Chapter 39.34 RCW, with the sub-regions of King County, Seattle and Eastside Public Safety Communications Agency (EPSCA). This agreement governs the development, acquisition and installation of the 800 MHz emergency radio communications system (system) funded by the $57 million King County levy. This agreement provides that upon voluntary termination of any sub-region participation in the system, it surrenders its radio frequencies, relinquishes its equipment and transfers any unexpended levy proceeds and association equipment replacement reserves to another sub- region or consortium of sub-regions. The share of equity belonging to the five participating cities is as follows: ItemRentonKentAuburnTukwilaFederal WaTotal y Equity Dec. 31, 20053,974,434$ 5,550,126$ 3,696,777$ $2,398,8482,030,087$ 17,650,273$ Current year change7,11630,2895,038(20,505)18,41740,355 Equity Dec 31, 20063,981,550$ 5,580,415$ 3,701,815$ 2,378,343$ 2,048,504$ 17,690,628$ % of equity22.51%31.54%20.93%13.44%11.58% % of 2006 distribution17.63%75.06%12.48%-50.81%45.64% Liabilities are the responsibility of the five participating cities in direct proportion to their equity position. Complete audited financial statements for Valley Communications Center can be obtained from Valley Communications Center, 27519 108th Ave SE, Kent, WA 98030, or telephone 253-372- 1300. NOTE 14 – CONTINGENCIES AND LITIGATION As of December 31, 2006, a number of claims were pending against the City for damages and legal actions. While the outcome of these actions is uncertain, no losses are clearly anticipated at this time due to these pending claims. In the event of a liability finding against the City, it is anticipated that any potential adverse judgment against the City also would be subject to coverage under the City’s comprehensive liability insurance, including public officials’ errors and omission insurance and general liability insurance. 80 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 15 – RISK MANAGEMENT & INSURANCE Risk Management The City of Auburn is a member of the Washington Cities Insurance Authority (WCIA). Utilizing Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly purchasing insurance, jointly self- insuring, and / or jointly contracting for risk management services. WCIA has a total of 121 Members. New members initially contract for a three-year term, and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its unresolved loss history incurred during membership. Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general, automobile, police, public officials’ errors or omissions, stop gap, and employee benefits liability. Limits are $3 million per occurrence self insured layer, and $12 million per occurrence in the re-insured excess layer. The excess layer is insured by the purchase of reinsurance and insurance and is subject to aggregate limits. Total limits are $15 million per occurrence subject to aggregate sublimits in the excess layers. The Board of Directors determines the limits and terms of coverage annually. Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members’ deductible to $500,000, for all perils other than flood and earthquake, and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage, and lobbyist services. WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the interlocal, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA's assets in financial instruments which comply with all State guidelines. These revenues directly offset portions of the membership's annual assessment. A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WCIA. No settlement has exceeded insurance coverage over the past three years. 81 CITY OF AUBURN: 2006 CAFR NOTES TO THE FINANCIAL STATEMENTS Workers’ Compensation Title 51 RCW requires the City to ensure payment of benefits for job-related injuries and diseases through the Workers’ Compensation fund or through self-insurance. The City participates in the State of Washington’s Workers’ Compensation program. Premiums are based on individual employer’s reported payroll hours and insurance rates based on each employer’s risk classification and past experience. The premium is paid by employer and employee contributions. NOTE 16 – SUBSEQUENT EVENTS Fire Authority Residents of the cities of Auburn, Algona and Pacific approved in the November 7, 2006 general election the creation of a regional fire authority pursuant to RCW 52.26. The new regional fire protection service authority, called the Valley Regional Fire Authority (VRFA), will provide first responder fire and emergency medical services to residents of Auburn, Algona and Pacific. The VRFA is new municipal corporation, with its own Governing Board, and is legally separate from the three cities it services. The Governing Board of the VRFA consists of the Mayors of the three cities within the VRFA service area, as well as two Councilmembers from each city. Effective January 1, 2007, all personnel, assets, equipment and contractual obligations of the former Auburn Fire Department were transferred to the VRFA. Similar transfers were made by the cities of Algona and Pacific. The effect to the City of Auburn of the creation of the VRFA is to reduce the City’s operating budget for 2007 by the amount previously budgeted for the Auburn Fire Department. The budget originally adopted for the Auburn Fire Department for 2007 was $10,716,700. It is expected that for 2007 the three cities serviced by the VRFA will dedicate a portion of their property tax revenue to fund operations of the VRFA, as well as other miscellaneous revenue sources. Beginning in 2008 the VRFA will levy its own property tax amount as well as a fire benefit charge based on the square footage of a structure, its occupancy type and the fire protection infrastructure present, if any. Delinquent Special Assessments As described in Note 10, as of December 31, 2006, a total of $101,340 of special assessments was delinquent, and there was $89,285 in delinquent interest and penalties. During 2006 the City acquired from King County the parcel subject to the delinquent assessments, interest and penalties. At the City Council’s Finance Committee meeting on February 20, 2007, the Committee approved the write-off of the delinquent special assessments, penalties and interest as the City owned the subject property since acquiring it in September 2006. 82 CITY OF AUBURN: 2006 CAFR REQUIRED SUPPLEMENTAL INFORMATION CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: TAXES: PROPERTY13,700,000$ 13,700,000$ 13,946,323$ 246,323$ RETAIL SALES & USE16,150,000 16,150,000 17,784,374 1,634,374 INTERFUND UTILITY1,790,500 1,790,500 1,983,652 193,152 UTILITY5,125,000 5,125,000 5,893,041 768,041 EXCISE 1, 1,116,500116,500 1,060,275 (56,225) LICENSES AND PERMITS1, 1,612,000612,000 1,683,320 71,320 INTERGOVERNMENTAL3,157,500 3,443,700 3,645,992 202,292 CHARGES FOR SERVICES2,076,000 2,146,000 2,620,942 474,942 FINES AND FORFEITURES852,500 852,500 1,054,201 201,701 INVESTMENT EARNINGS 550,000550,000 753,930 203,930 MISCELLANEOUS388,300 530,300 553,399 23,099 TOTAL REVENUES46,518,300 47,016,500 50,979,449 3,962,949 EXPENDITURES: CURRENT: GENERAL GOVERNMENT7,847,400 7,327,800 6,062,037 1,265,763 SECURITY OF PERSONS AND PROPERTY29,837,200 31,067,900 28,884,978 2,182,922 PHYSICAL ENVIRONMENT2,767,100 2,803,000 2,370,300 432,700 TRANSPORTATION2,038,000 2,150,300 2,041,035 109,265 ECONOMIC ENVIRONMENT1,847,300 2,207,900 1,605,676 602,224 HEALTH AND HUMAN SERVICES595,000 625,600 538,783 86,817 CULTURE AND RECREATION5,139,900 5,342,200 4,990,128 352,072 DEBT SERVICE- - 199,681 (199,681) CAPITAL OUTLAY- 10,000 124,719 (114,719) TOTAL EXPENDITURES50,071,900 51,534,700 46,817,337 4,717,363 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES(3,553,600) (4,518,200) 4,162,112 8,680,312 OTHER FINANCING SOURCES (USES): SALES OF CAPITAL ASSETS- - 4,163 4,163 TRANSFERS IN (Note 5)60,000 60,000 60,000 - TRANSFERS OUT (Note 5)(1,670,600) (5,816,600) (5,716,772) 99,828 TOTAL OTHER FINANCING SOURCES AND USES(1,610,600) (5,756,600) (5,652,609) 103,991 NET CHANGE IN FUND BALANCES(5,164,200) (10,274,800) (1,490,497) 8,784,303 FUND BALANCES - BEGINNING11,569,800 15,938,825 15,938,825 - FUND BALANCES - ENDING6,405,600$ 5,664,025$ 14,448,328$ 8,784,303$ 83 CITY OF AUBURN: 2006 CAFR REQUIRED SUPPLEMENTAL INFORMATION CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL ARTERIAL STREET FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: TAXES: INTERGOVERNMENTAL4,516,000$ 6,065,000$ 2,630,879$ (3,434,121)$ INVESTMENT EARNINGS50,000 50,000 41,803 (8,197) MISCELLANEOUS800,000 800,000 300,000 (500,000) TOTAL REVENUES5,366,000 6,915,000 2,972,682 (3,942,318) EXPENDITURES: CURRENT: TRANSPORTATION7,599,000 10,322,000 5,496,306 4,825,694 TOTAL EXPENDITURES7,599,000 10,322,000 5,496,306 4,825,694 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES(2,233,000) (3,407,000) (2,523,624) 883,376 OTHER FINANCING SOURCES (USES): PROCEEDS OF LONG-TERM DEBT- - 142,313 142,313 TRANSFERS IN (Note 5)1,689,300 2,810,300 2,485,300 (325,000) TOTAL OTHER FINANCING SOURCES AND USES1,689,300 2,810,300 2,627,613 (182,687) NET CHANGE IN FUND BALANCES(543,700) (596,700) 103,989 700,689 FUND BALANCES - BEGINNING702,331 792,347 792,347 - FUND BALANCES - ENDING158,631$ 195,647$ 896,336$ 700,689$ 84 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS THE CITY HAS FOUR TYPES OF NON-MAJOR GOVERNMENTAL FUNDS: Special Revenue Funds Special revenue funds account for the proceeds of specific revenue sources and are segregated into individual funds to ensure that expenditures are made exclusively for qualified purposes. Special revenue funds are accounted for on a modified accrual basis. Annual budgets are adopted with appropriations lapsing at year-end. Debt Service Funds Debt service funds account for payments of principal and interest on general obligation and special assessment long-term debt. Capital Project Funds Capital project funds account for the City of Auburn's financial resources used for the acquisition or construction of major non-proprietary capital facilities. Permanent Funds Permanent funds are used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support City programs that are for the benefit of the City or its citizens. 85 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING BALANCE SHEET NON-MAJOR GOVERNMENT FUNDS DECEMBER 31, 2006 TOTALTOTAL TOTALTOTALTOTAL NONMAJORNONMAJORNONMAJORNONMAJORNONMAJOR SPECIAL REVENUEDEBT SERVICECAPITAL PROJPERMANENTGOVERNMENTAL FUNDSFUNDSFUNDSFUNDSFUNDS ASSETS: CASH AND CASH EQUIVALENTS7,075,875$ 144,449$ 1,220,412$ 171,916$ 8,612,652$ INVESTMENTS2,987,418 - - 1,248,957 4,236,375 RECEIVABLES: TAXES 4- - - 4 SPECIAL ASSESSMENTS- 946,725 - - 946,725 DUE FROM OTHER GOVERNMENTAL UNITS173,654 - 49,250 - 222,904 TOTAL ASSETS10,236,947$ 1,091,178$ 1,269,662$ 1,420,873$ 14,018,660$ LIABILITIES AND FUND BALANCES: CURRENT PAYABLES164,564$ -$ 55,038$ -$ 219,602$ INTERFUND PAYABLE (Note 5)134,000 - - - 134,000 DUE TO OTHER GOVERNMENTAL UNITS24,283 - - - 24,283 DEFERRED REVENUE- 946,729 - - 946,729 TOTAL LIABILITIES322,847 946,729 55,038 - 1,324,614 FUND BALANCES: RESERVED FOR: DEBT SERVICE- 144,449 - - 144,449 ENDOWMENT- - - 1,232,349 1,232,349 UNRESERVED DESIGNATED FOR MITIGATION2,884,017 - - - 2,884,017 UNDESIGNATED7,030,083 - 1,214,624 188,524 8,433,231 TOTAL FUND BALANCES9,914,100 144,449 1,214,624 1,420,873 12,694,046 TOTAL LIABILITIES AND FUND BALANCES10,236,947$ 1,091,178$ 1,269,662$ 1,420,873$ 14,018,660$ 86 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENT FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 TOTAL TOTAL TOTAL TOTAL TOTAL NONMAJOR NONMAJOR NONMAJOR NONMAJOR NONMAJOR SPECIAL REVENUEDEBT SERVICECAPITAL PROJECTSPERMANENTGOVERNMENTAL REVENUES: TAXES: PROPERTY 636,506$ -$ -$ -$ 636,506$ EXCISE73,630 - - - 73,630 OTHER54,716 - - - 54,716 INTERGOVERNMENTAL455,119 - 99,250 - 554,369 CHARGES FOR SERVICES958,638 - 28,777 51,416 1,038,831 SPECIAL ASSESSMENTS- 75,574 - - 75,574 INVESTMENT EARNINGS464,289 68,722 45,028 69,532 647,571 MISCELLANEOUS201,248 - 173,791 - 375,039 TOTAL REVENUES2,844,146 144,296 346,846 120,948 3,456,236 EXPENDITURES: CURRENT: SECURITY OF PERSONS & PROPERTY263,300 - - - 263,300 TRANSPORTATION1,729,503 - - - 1,729,503 ECONOMIC ENVIRONMENT323,302 - - - 323,302 CULTURAL AND RECREATION24,960 - 1,466 - 26,426 HEALTH & HUMAN SERVICES224,373 - - - 224,373 DEBT SERVICE PRINCIPAL- 292,835 - - 292,835 INTEREST- 175,666 - - 175,666 CAPITAL OUTLAY- - 267,127 - 267,127 TOTAL EXPENDITURES2,565,438 468,501 268,593 - 3,302,532 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES278,708 (324,205) 78,253 120,948 153,704 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)2,052,700 305,200 240,000 - 2,597,900 TRANSFERS OUT (Note 5)(592,000) (55,044) - (90,000) (737,044) TOTAL OTHER FINANCING SOURCES (USES)1,460,700 250,156 240,000 (90,000) 1,860,856 NET CHANGE IN FUND BALANCES1,739,408 (74,049) 318,253 30,948 2,014,560 FUND BALANCES - BEGINNING8,174,692 218,498 896,371 1,389,925 10,679,486 FUND BALANCES - ENDING9,914,100$ 144,449$ 1,214,624$ 1,420,873$ 12,694,046$ 87 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES 88 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special revenue funds account for the proceeds of specific revenue sources and are segregated into individual funds to ensure that expenditures are made exclusively for qualified purposes. Special revenue funds are accounted for on a modified accrual basis. Annual budgets are adopted with appropriations lapsing at year-end. The City has ten non-major special revenue funds. The Local Street Fund - This fund was created when Auburn voters approved the Save Our Streets lid lift in 2004 and is used to account for all revenues and expenditures related to this initiative. Hotel/Motel Tax Fund - This fund was created to account for the hotel/motel taxes levied to support City tourist promotion. Drug Forfeiture Fund – Money seized and forfeited from drug activity is deposited in this fund to be used exclusively for drug investigation and enforcement. Local Law Enforcement Block Grant – Accounts for police overtime relating to community oriented policing. The Housing and Community Development Fund - Accounts for projects associated with the Community Development Block Grant program. The Recreational Trails Fund - Created for the purpose of trail development. This is a tax-supported fund. The Business Improvement Area Fund - Accounts for special assessments on downtown merchants for ongoing services and for improvements made to the downtown area. The Cumulative Reserve Fund - Created for the purpose of revenue stabilization for future operations. Mitigation Fees – Accounts for the receipt of contracted mitigation fees for streets and fire service. Special Parks and Recreation -- Accounts for funds that are donated to the City for specific parks and recreation uses. 89 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING BALANCE SHEET NON-MAJOR SPECIAL REVENUE FUNDS DECEMBER 31, 2006 Page 1 of 2 HOTEL/LOCALHOUSING LOCALMOTELDRUGLAWCOMMUNITY STREEETSTAXFORFEITUREENFORCEMENTDEVELOPMENT ASSETS: CASH AND CASH EQUIVALENTS251,424$ 81,122$ 575,102$ 5,081$ 12,481$ INVESTMENTS- - - - - DUE FROM OTHER GOVERNMENTAL UNITS- - - 4,073 169,581 TOTAL ASSETS251,424$ 81,122$ 575,102$ 9,154$ 182,062$ LIABILITIES AND FUND BALANCES: CURRENT PAYABLES29,266$ 19,000$ 8,187$ -$ 36,915$ INTERFUND PAYABLE (Note 5)- - - - 134,000 DUE TO OTHER GOVERNMENTAL UNITS- - 24,283 - - TOTAL LIABILITIES29,266 19,000 32,470 - 170,915 FUND BALANCES: UNRESERVED DESIGNATED FOR MITIGATION- - - - - UNDESIGNATED222,158 62,122 542,632 9,154 11,147 TOTAL FUND BALANCES222,158 62,122 542,632 9,154 11,147 TOTAL LIABILITIES AND FUND BALANCES251,424$ 81,122$ 575,102$ 9,154$ 182,062$ 90 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES Page 2 of 2 TOTAL BUSINESSSPECIALNONMAJOR RECREATIONIMPROVEMENTCUMULATIVEMITIGATIONPARKS ANDSPECIAL REVENUE TRAILSAREARESERVEFEESRECREATIONFUNDS $ 19,03124,997$ 3,645,082$ 2,416,112$ 45,443$ 7,075,875$ -- 1,997,105 990,313 - 2,987,418 -- - - - 173,654 $ 19,03124,997$ 5,642,187$ 3,406,425$ 45,443$ 10,236,947$ $ 6,652-$ -$ 64,513$ 31$ 164,564$ -- - - - 134,000 -- - - - 24,283 6,652- - 64,513 31 322,847 -- - 2,884,017 - 2,884,017 12,37924,997 5,642,187 457,895 45,412 7,030,083 12,37924,997 5,642,187 3,341,912 45,412 9,914,100 $ 19,03124,997$ 5,642,187$ 3,406,425$ 45,443$ 10,236,947$ 91 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 Page 1 of 2 HOTEL/LOCAL LAWHOUSING LOCALMOTELDRUGENFORCEMENTCOMMUNITY TAXFORFEITUREGRANTDEVELOPMENT STREETS REVENUES: TAXES: PROPERTY636,506$ -$ -$ -$ -$ EXCISE- 73,630 - - - OTHER- - - - - INTERGOVERNMENTAL- 18,007 26,308 410,804 CHARGES FOR SERVICES- - - - - INVESTMENT EARNINGS51,019 2,699 28,010 259 - MISCELLANEOUS496 - 175,462 - - TOTAL REVENUES688,021 76,329 221,479 26,567 410,804 EXPENDITURES: CURRENT: SECURITY OF PERSONS & PROPERTY- - 236,992 26,308 - TRANSPORTATION1,729,503 - - - - ECONOMIC ENVIRONMENT- 80,624 - - 186,221 CULTURAL AND RECREATION- - - - - HEALTH & HUMAN SERVICES- - - - 224,373 TOTAL EXPENDITURES1,729,503 80,624 236,992 26,308 410,594 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES(1,041,482) (4,295) (15,513) 259 210 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)1,120,000 25,000 - 2,600 - TRANSFERS OUT (Note 5)- - - - - TOTAL OTHER FINANCING SOURCES (USES)1,120,000 25,000 - 2,600 - NET CHANGE IN FUND BALANCES78,518 20,705 (15,513) 2,859 210 FUND BALANCES - BEGINNING143,640 41,417 558,145 6,295 10,937 FUND BALANCES - ENDING222,158$ 62,122$ 542,632$ 9,154$ 11,147$ 92 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES Page 2 of 2 TOTAL BUSINESSSPECIALNONMAJOR RECREATIONIMPROVEMENTCUMULATIVEMITIGATIONPARKS ANDSPECIAL REVENUE RESERVEFEESRECREATION TRAILSAREAFUNDS $ --$ -$ -$ -$ 636,506$ -- - - - 73,630 54,716- - - - 54,716 -- - - - 455,119 -- - 958,638 - 958,638 1,019- 234,304 146,979 - 464,289 -1,072 - - 24,218 201,248 55,7351,072 234,304 1,105,617 24,218 2,844,146 -- - - - 263,300 -- - - - 1,729,503 56,457- - - - 323,302 -- - - 24,960 24,960 -- - - - 224,373 56,457- - - 24,960 2,565,438 (722)1,072 234,304 1,105,617 (742) 278,708 -5,100 900,000 - - 2,052,700 -- - (592,000) - (592,000) -5,100 900,000 (592,000) - 1,460,700 (722)6,172 1,134,304 513,617 (742) 1,739,408 13,10118,825 4,507,883 2,828,295 46,154 8,174,692 $ 12,37924,997$ 5,642,187$ 3,341,912$ 45,412$ 9,914,100$ 93 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL LOCAL STREETS SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: TAXES: PROPERTY500,000$ 500,000$ 636,506$ 136,506$ INVESTMENT EARNINGS10,000 50,000 51,019 1,019 MISCELLANEOUS -- 496 496 TOTAL REVENUES510,000 550,000 688,021 138,021 EXPENDITURES: CURRENT: TRANSPORTATION1,200,000 1,767,120 1,729,503 37,617 TOTAL EXPENDITURES1,200,000 1,767,120 1,729,503 37,617 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES(690,000) (1,217,120) (1,041,482) 175,638 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)1,120,000 1,120,000 1,120,000 - TOTAL OTHER FINANCING SOURCES (USES)1,120,000 1,120,000 1,120,000 - NET CHANGE IN FUND BALANCES430,000 (97,120) 78,518 175,638 FUND BALANCES - BEGINNING- 143,640 143,640 - FUND BALANCES - ENDING430,000$ 46,520$ 222,158$ 175,638$ 94 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HOTEL/MOTEL TAX SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: TAXES: EXCISE$ 50,00050,000$ 73,630$ 23,630$ INVESTMENT EARNINGS500 500 2,699 2,199 TOTAL REVENUES50,500 50,500 76,329 25,829 EXPENDITURES: CURRENT: ECONOMIC ENVIRONMENT50,500 75,500 80,624 (5,124) TOTAL EXPENDITURES50,500 75,500 80,624 (5,124) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES- (25,000) (4,295) 20,705 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)- 25,000 25,000 - TOTAL OTHER FINANCING SOURCES (USES)- 25,000 25,000 - NET CHANGE IN FUND BALANCES- - 20,705 20,705 FUND BALANCES - BEGINNING14,077 41,417 41,417 - FUND BALANCES - ENDING14,077$ 41,417$ 62,122$ 20,705$ 95 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL DRUG FORFEITURE SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: INTERGOVERNMENTAL-$ 15,000$ 18,007$ 3,007$ INVESTMENT EARNINGS5,000 5,000 28,010 23,010 MISCELLANEOUS200,000 200,000 175,462 (24,538) TOTAL REVENUES205,000 220,000 221,479 1,479 EXPENDITURES: CURRENT: SECURITY OF PERSONS & PROPERTY162,900 247,900 236,992 10,908 TOTAL EXPENDITURES162,900 247,900 236,992 10,908 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES42,100 (27,900) (15,513) 12,387 NET CHANGE IN FUND BALANCES42,100 (27,900) (15,513) 12,387 FUND BALANCES - BEGINNING366,832 558,145 558,145 - FUND BALANCES - ENDING408,932$ 530,245$ 542,632$ 12,387$ 96 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL LOCAL LAW ENFORCEMENT GRANT SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: INTERGOVERNMENTAL40,400$ 26,300$ 26,308$ 8$ INVESTMENT EARNINGS100 100 259 159 TOTAL REVENUES40,500 26,400 26,567 167 EXPENDITURES: CURRENT: SECURITY OF PERSONS & PROPERTY45,400 29,000 26,308 2,692 TOTAL EXPENDITURES45,400 29,000 26,308 2,692 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES(4,900) (2,600) 259 2,859 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)4,000 2,600 2,600 - TOTAL OTHER FINANCING SOURCES (USES)4,000 2,600 2,600 - NET CHANGE IN FUND BALANCES(900) - 2,859 2,859 FUND BALANCES - BEGINNING7,128 6,295 6,295 - FUND BALANCES - ENDING6,228$ 6,295$ 9,154$ 2,859$ 97 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HOUSING & COMMUNITY DEVELOPMENT SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: INTERGOVERNMENTAL454,000$ 529,000$ 410,804$ (118,196)$ TOTAL REVENUES454,000 529,000 410,804 (118,196) EXPENDITURES: CURRENT: ECONOMIC ENVIRONMENT454,000 529,000 186,221 342,779 HEALTH & HUMAN SERVICES- - 224,373 (224,373) TOTAL EXPENDITURES454,000 529,000 410,594 118,406 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES- - 210 210 NET CHANGE IN FUND BALANCES- - 210 210 FUND BALANCES - BEGINNING14,130 10,937 10,937 - FUND BALANCES - ENDING14,130$ 10,937$ 11,147$ 210$ 98 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL RECREATION TRAILS SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: INVESTMENT EARNINGS400$ 400$ -$ (400)$ MISCELLANEOUS -- 1,072 1,072 TOTAL REVENUES400 400 1,072 672 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES400 400 1,072 672 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)5,100 5,100 5,100 - TOTAL OTHER FINANCING SOURCES (USES)5,100 5,100 5,100 - NET CHANGE IN FUND BALANCES5,500 5,500 6,172 672 FUND BALANCES - BEGINNING17,402 18,825 18,825 - FUND BALANCES - ENDING22,902$ 24,325$ 24,997$ 672$ 99 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL BUSINESS IMPROVEMENT AREA SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: TAXES: OTHER$ 50,00035,000$ 54,716$ 4,716$ INVESTMENT EARNINGS1,000 1,000 1,019 19 TOTAL REVENUES36,000 51,000 55,735 4,735 EXPENDITURES: CURRENT: ECONOMIC ENVIRONMENT36,000 64,000 56,457 7,543 TOTAL EXPENDITURES36,000 64,000 56,457 7,543 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES- (13,000) (722) 12,278 NET CHANGE IN FUND BALANCES- (13,000) (722) 12,278 FUND BALANCES - BEGINNING8,364 13,101 13,101 - FUND BALANCES - ENDING8,364$ 101$ 12,379$ 12,278$ 100 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL CUMULATIVE RESERVE SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: TAXES: INVESTMENT EARNINGS160,000$ 160,000$ 234,304$ 74,304$ TOTAL REVENUES160,000 160,000 234,304 74,304 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES160,000 160,000 234,304 74,304 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)- 900,000 900,000 - TOTAL OTHER FINANCING SOURCES (USES)- 900,000 900,000 - NET CHANGE IN FUND BALANCES160,000 1,060,000 1,134,304 74,304 FUND BALANCES - BEGINNING4,457,519 4,507,883 4,507,883 - FUND BALANCES - ENDING4,617,519$ 5,567,883$ 5,642,187$ 74,304$ 101 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL MITIGATION SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: CHARGES FOR SERVICES470,000$ 530,600$ 958,638$ 428,038$ INVESTMENT EARNINGS30,000 30,000 146,979 116,979 TOTAL REVENUES500,000 560,600 1,105,617 545,017 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES500,000 560,600 1,105,617 545,017 OTHER FINANCING SOURCES (USES): TRANSFERS OUT (Note 5)(492,000) (592,000) (592,000) - TOTAL OTHER FINANCING SOURCES (USES)(492,000) (592,000) (592,000) - NET CHANGE IN FUND BALANCES8,000 (31,400) 513,617 545,017 FUND BALANCES - BEGINNING2,052,732 2,828,295 2,828,295 - FUND BALANCES - ENDING2,060,732$ 2,796,895$ 3,341,912$ 545,017$ 102 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL SPECIAL PARKS AND RECREATION SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2006 VARIANCE WITH FINAL BUDGET ORIGINALFINALACTUALPOSITIVE BUDGETBUDGETRESULTS(NEGATIVE) REVENUES: MISCELLANEOUS20,000$ 20,000$ 24,218$ 4,218$ TOTAL REVENUES20,000 20,000 24,218 4,218 EXPENDITURES: CURRENT: CULTURAL AND RECREATION25,000 25,000 24,960 40 TOTAL EXPENDITURES25,000 25,000 24,960 40 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES(5,000) (5,000) (742) 4,258 NET CHANGE IN FUND BALANCES(5,000) (5,000) (742) 4,258 FUND BALANCES - BEGINNING40,181 46,154 46,154 - FUND BALANCES - ENDING35,181$ 41,154$ 45,412$ 4,258$ 103 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES 104 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Debt Service Funds Debt service funds account for payments of principal and interest on general obligation and special assessment long-term debt. The City of Auburn has one outstanding general obligation issue, and three special assessment funds. The 1998 General Obligation Library Bonds - Accounts for debt service on a Council-approved bond issue to finance, in conjunction with King County, the construction of a new library in the City. The L.I.D. Guarantee Fund - This fund provides financial security for out- standing L.I.D. bonds and special assessment debt. Special Assessment Debt Fund - Accounts for the special assessment collections and debt service payments for all local improvement districts located within the City. 105 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING BALANCE SHEET DEBT SERVICE FUNDS DECEMBER 31, 2006 TOTAL 1998 GONONMAJOR LIBRARYLIDSPECIALDEBT SERVICE BOND DEBTGUARANTEEASSESSMENTSFUNDS ASSETS: CASH AND CASH EQUIVALENTS25,372$ 52,003$ 67,074$ 144,449$ RECEIVABLES: TAXES 4- - 4 SPECIAL ASSESSMENTS- - 946,725 946,725 TOTAL ASSETS25,372$ 52,007$ 1,013,799$ 1,091,178$ LIABILITIES AND FUND BALANCES: DEFERRED REVENUE-$ 4$ 946,725$ 946,729$ TOTAL LIABILITIES- 4 946,725 946,729 FUND BALANCES: RESERVED FOR: DEBT SERVICE25,372 - 67,074 92,446 LID GUARANTEE- 52,003 - 52,003 TOTAL FUND BALANCES25,372 52,003 67,074 144,449 TOTAL LIABILITIES AND FUND BALANCES25,372$ 52,007$ 1,013,799$ 1,091,178$ 106 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR DEBT SERVICE FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 TOTAL 1998 G.O.NONMAJOR LIBRARYL I DSPECIALDEBT SERVICE BOND DEBTGUARANTEEASSESSMENTSFUNDS REVENUES: TAXES: SPECIAL ASSESSMENTS -$ -$ 75,574$ 75,574$ INVESTMENT EARNINGS11,106 3,960 53,656 68,722 TOTAL REVENUES11,106 3,960 129,230 144,296 EXPENDITURES: DEBT SERVICE PRINCIPAL175,000 - 117,835 292,835 INTEREST130,190 - 45,476 175,666 TOTAL EXPENDITURES305,190 - 163,311 468,501 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES(294,084) 3,960 (34,081) (324,205) OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)305,200 - - 305,200 TRANSFERS OUT (Note 5)- (55,044) - (55,044) TOTAL OTHER FINANCING SOURCES (USES) 305,200 (55,044) - 250,156 NET CHANGE IN FUND BALANCES11,116 (51,084) (34,081) (74,049) FUND BALANCES - BEGINNING 14,256 103,087 101,155 218,498 FUND BALANCES - ENDING25,372$ 52,003$ 67,074$ 144,449$ 107 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Capital Project Funds Capital projects funds account for the City of Auburn's financial resources used for the acquisition or construction of major non-proprietary capital facilities. Auburn has one non-major capital project fund. The Municipal Park Construction Fund - Accounts for park related construction activity and includes funding from a portion of field rental income and adult athletic team fees. 108 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON BALANCE SHEET CAPITAL PROJECT FUND DECEMBER 31, 2006 MUNICIPAL PARK CONSTRUCTION ASSETS: CASH AND CASH EQUIVALENTS1,220,412$ DUE FROM OTHER GOVERNMENTAL UNITS49,250 TOTAL ASSETS1,269,662$ LIABILITIES AND FUND BALANCES: CURRENT PAYABLES55,038$ TOTAL LIABILITIES55,038 FUND BALANCES: UNRESERVED UNDESIGNATED1,214,624$ TOTAL FUND BALANCES1,214,624 TOTAL LIABILITIES AND FUND BALANCES1,269,662$ 109 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES CAPITAL PROJECT FUND FOR THE YEAR ENDED DECEMBER 31, 2006 MUNICIPAL PARK CONSTRUCTION REVENUES: INTERGOVERNMENTAL99,250$ CHARGES FOR SERVICES28,777 INVESTMENT EARNINGS45,028 MISCELLANEOUS 173,791 TOTAL REVENUES 346,846 EXPENDITURES: CULTURAL AND RECREATION1,466 CAPITAL OUTLAY 267,127 TOTAL EXPENDITURES268,593 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES78,253 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5)240,000 TOTAL OTHER FINANCING SOURCES (USES) 240,000 NET CHANGE IN FUND BALANCES318,253 FUND BALANCES - BEGINNING 896,371 FUND BALANCES - ENDING1,214,624$ 110 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Permanent Funds Permanent funds are used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support City programs that are for the benefit of the City or its citizens. Auburn has one permanent fund. The Cemetery Endowed Care Fund - Accounts non-expendable investments held by the City's trustee. The interest income from investments is available for use by the cemetery fund for capital enhancement and maintenance. 111 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON BALANCE SHEET PERMANENT FUND DECEMBER 31, 2006 CEMETERY ENDOWED CARE ASSETS: CASH AND CASH EQUIVALENTS NON-EXPENDABLE TRUST171,916$ INVESTMENTS1,248,957 TOTAL ASSETS1,420,873$ FUND BALANCES: RESERVED FOR: ENDOWMENT1,232,349$ UNRESERVED UNDESIGNATED188,524 TOTAL FUND BALANCES1,420,873 TOTAL LIABILITIES AND FUND BALANCES1,420,873$ 112 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE PERMANENT FUND FOR THE YEAR ENDED DECEMBER 31, 2006 CEMETERY ENDOWED CARE REVENUES: INCREASE TO ENDOWMENT FROM LOT SALES51,416$ INVESTMENT EARNINGS69,532 TOTAL REVENUES120,948 EXCESS OF REVENUES OVER EXPENDITURES 120,948 OTHER FINANCING SOURCES (USES): TRANSFERS OUT (Note 5)(90,000) TOTAL OTHER FINANCING SOURCES (USES) (90,000) NET CHANGE IN FUND BALANCE30,948 FUND BALANCE - BEGINNING 1,389,925 FUND BALANCE - ENDING1,420,873$ 113 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR PROPRIETARY FUNDS Enterprise Funds The City's enterprise funds are used to account for operations that are financed and operated in a manner similar to private business operations. The goods and services these funds provide to the general public are primarily financed by service charges. Enterprise funds are self-supporting and use the accrual method of accounting. Auburn has three non-major enterprise funds. The Airport Fund - Provides accounting of the activities of the Auburn Municipal Airport. Sources of income for the fund are leases, rentals, fuel charges, investment interest, and grant funding as available. The Cemetery Fund - Accounts for Mountain View Cemetery's operations. The Commercial Retail Fund – Accounts for revenues and expenses related to City-owned or leased property that is rented to commercial tenants. 114 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS DECEMBER 31, 2006 TOTAL NONMAJOR COMMERCIALPROPRIETARY AIRPORTCEMETERYRETAILFUNDS ASSETS: CURRENT ASSETS: CASH AND CASH EQUIVALENTS700,511$ 705,227$ 313,928$ 1,719,666$ RESTRICTED CASH: BOND PAYMENTS- 411,217 - 411,217 CUSTOMER DEPOSITS65,927 - 3,267 69,194 CUSTOMER ACCOUNTS3,909 - - 3,909 DUE FROM OTHER GOVERNMENTAL UNITS- 6,734 - 6,734 INVENTORIES 11,520- - 11,520 TOTAL CURRENT ASSETS770,347 1,134,698 317,195 2,222,240 NONCURRENT ASSETS: LONG-TERM CONTRACTS AND NOTES- 68,407 - 68,407 CAPITAL ASSETS: LAND 36,6413,653,343 - 3,689,984 BUILDINGS AND EQUIPMENT2,500,686 417,288 1,737,398 4,655,372 IMPROVEMENTS OTHER THAN BUILDINGS5,169,090 1,082,094 356,229 6,607,413 CONSTRUCTION IN PROGRESS29,564 192,680 - 222,244 LESS: ACCUMULATED DEPRECIATION(3,724,599) (942,305) (347,046) (5,013,950) TOTAL CAPITAL ASSETS (NET OF A/D)7,628,084 786,398 1,746,581 10,161,063 TOTAL NONCURRENT ASSETS7,628,084 854,805 1,746,581 10,229,470 TOTAL ASSETS8,398,431 1,989,503 2,063,776 12,451,710 LIABILITIES: CURRENT LIABILITIES: CURRENT PAYABLES9,831 113,669 11,548 135,048 CUSTOMER DEPOSITS- - 3,267 3,267 EMPLOYEE LEAVE BENEFITS-CURRENT1,327 6,278 - 7,605 GENERAL OBLIGATION BONDS PAYABLE-CURRENT50,000 - - 50,000 DEPOSITS -65,927 - 65,927 TOTAL CURRENT LIABILITIES127,085 119,947 14,815 261,847 NONCURRENT LIABILITIES: DEFERRED REVENUE- 68,407 - 68,407 EMPLOYEE LEAVE BENEFITS1,010 4,777 - 5,787 GENERAL OBLIGATION BONDS PAYABLE1,363,248 499,832 - 1,863,080 TOTAL NONCURRENT LIABILITIES1,364,258 573,016 - 1,937,274 TOTAL LIABILITIES1,491,343 692,963 14,815 2,199,121 NET ASSETS: INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT6,214,835 786,398 1,746,582 8,747,815 RESTRICTED FOR: CAPITAL PROJECTS- 411,217 - 411,217 UNRESTRICTED692,253 98,925 302,379 1,093,557 TOTAL NET ASSETS6,907,088$ 1,296,540$ 2,048,961$ 10,252,589$ 115 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 TOTAL NONMAJOR COMMERCIALENTERPRISE AIRPORTCEMETERYRETAILFUNDS OPERATING REVENUES: CHARGES FOR SERVICES630,494$ 784,590$ -$ 1,415,084$ INTEREST 5,936- - 5,936 OTHER OPERATING REVENUE- - 62,134 62,134 TOTAL OPERATING REVENUES630,494 790,526 62,134 1,483,154 OPERATING EXPENSES: OPERATIONS & MAINTENANCE414 510,091 45,491 555,996 ADMINISTRATION354,637 150,046 2,662 507,345 DEPRECIATION/AMORTIZATION250,845 88,508 119,733 459,086 OTHER OPERATING EXPENSES156 9,961 - 10,117 TOTAL OPERATING EXPENSES606,052 758,606 167,886 1,532,544 OPERATING INCOME (LOSS)24,442 31,920 (105,752) (49,390) NON-OPERATING REVENUE (EXPENSE): INTEREST REVENUE34,241 36,574 14,382 85,197 OTHER NON-OPERATING REVENUES128 5,245 - 5,373 GAIN (LOSS) ON SALE OF CAPITAL ASSETS- (659) - (659) INTEREST EXPENSE(79,718) (6,023) - (85,741) TOTAL NON-OPERATING REVENUE ( EXPENSE)(45,349) 35,137 14,382 4,170 INCOME (LOSS) BEFORE CONTRIBUTIONS & TRANSFERS(20,907) 67,057 (91,370) (45,220) TRANSFERS IN (Note 5)- 90,800 - 90,800 CHANGE IN NET ASSETS 157,857(20,907) (91,370) 45,580 TOTAL NET ASSETS BEGINNING OF YEAR6,927,995 1,138,683 2,140,331 10,207,009 TOTAL NET ASSETS END OF YEAR6,907,088$ 1,296,540$ 2,048,961$ 10,252,589$ 116 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Page 1 of 2 COMMERCIAL AIRPORTCEMETERYRETAILTOTALS CASH FLOWS FROM OPERATING ACTIVITIES: CASH RECEIVED FROM USERS640,208$ 790,526$ 69,742$ 1,500,476$ CASH PAID TO SUPPLIERS(348,737) (181,878) (44,726) (575,341) CASH PAID FOR TAXES(156) (9,961) - (10,117) CASH PAID FOR INVENTORY- (4,864) - (4,864) CASH PAID TO EMPLOYEES(18,727) (424,550) - (443,277) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES272,588 169,273 25,016 466,877 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: OPERATING TRANSFERS IN- 90,800 - 90,800 NET CASH PROVIDED (USED) BY NON- CAPITAL FINANCING ACTIVITIES- 90,800 - 90,800 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PURCHASE OF CAPITAL ASSETS(8,702) (189,501) - (198,203) PROCEEDS FROM OTHER GOVERNMENTS128 - - 128 PREMIUM & BOND ISSUANCE COSTS4,836 9,512 - 14,348 PRINCIPAL PAYMENT ON DEBT(50,062) - - (50,062) INTEREST PAYMENT ON DEBT(79,718) (6,167) - (85,885) DEBT PROCEEDS- 490,464 - 490,464 OTHER CASH RECEIVED (PAID)- 5,245 5,245 NET CASH PROVIDED (USED) FOR CAPITAL AND RELATED FINANCING ACTIVITIES(133,518) 309,553 - 176,035 CASH FLOW FROM INVESTING ACTIVITIES: INTEREST RECEIVED34,241 36,574 14,382 85,197 NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES34,241 36,574 14,382 85,197 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS173,311 606,200 39,398 818,909 CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR593,127 510,244 277,797 1,381,168 CASH AND CASH EQUIVALENTS-END OF YEAR766,438$ 1,116,444$ 317,195$ 2,200,077$ CASH AT END OF YEAR CONSISTS OF: CASH AND CASH EQUIVALENTS700,511$ 705,227$ 313,928$ 1,719,666$ RESTRICTED CASH-BOND PAYMENTS65,927 411,217 - 477,144 RESTRICTED CASH-CUSTOMER DEPOITS- - 3,267 3,267 TOTAL CASH766,438$ 1,116,444$ 317,195$ 2,200,077$ 117 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Page 2 of 2 COMMERCIAL AIRPORTCEMETERYRETAILTOTALS RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES OPERATING INCOME (LOSS)24,442$ 31,920$ (105,752)$ (49,390)$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION250,845 88,507 119,733 459,085 ASSET (INCREASES) DECREASES : ACCOUNTS RECEIVABLE1,650 (6,734) 7,608 2,524 INVENTORY- (4,864) - (4,864) LIABILITY (INCREASES) DECREASES : ACCOUNTS & VOUCHERS PAYABLE(12,879) 66,881 3,427 57,429 DEPOSITS PAYABLE8,064 - - 8,064 WAGES & BENEFITS PAYABLE122 3,446 - 3,568 COMPENSATED ABSENCES PAYABLE344 (9,883) - (9,539) TOTAL ADJUSTMENTS248,146 137,353 130,768 516,267 -- - NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES272,588$ 169,273$ 25,016$ 466,877$ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES CAPITAL ASSETS ACQUIRED BY CONTRIBUTED CAPITAL-$ -$ -$ -$ INCREASE (DECREASE) IN FAIR VALUE OF INVESTMENT- - - - TOTAL NON CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES-$ -$ -$ -$ 118 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR PROPRIETARY FUNDS Internal Service Funds The City of Auburn's internal service funds are used to account for the financing of goods and services provided by one department of operation to other departments on a cost reimbursement basis. Internal service funds are self-supporting and use the accrual method of accounting. Auburn has three internal service funds. The Insurance Fund - Provides a source of funds to pay unemployment claims and property and casualty claims which fall below deductible levels. The Information Services Fund - Accounts for the costs of purchasing and maintaining the City’s various computer and telecommunications systems. The Equipment Rental Fund - Accounts for the costs of purchasing, maintaining, and operating Auburn's fleet of vehicles and related equipment. 119 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENTS OF NET ASSETS INTERNAL SERVICE FUNDS DECEMBER 31, 2006 INFORMATIONEQUIPMENT INSURANCESERVICESRENTALTOTAL ASSETS: CURRENT ASSETS: CASH AND CASH EQUIVALENTS1,260,885$ 1,713,478$ 4,888,853$ 7,863,216$ INVESTMENTS1,497,344 993,125 964,200 3,454,669 CUSTOMER ACCOUNTS- 8,000 - 8,000 OTHER RECEIVABLES3,870 2,715 - 6,585 DUE FROM OTHER GOVERNMENTAL UNITS- - 13,370 13,370 INVENTORIES- - 100,655 100,655 TOTAL CURRENT ASSETS2,762,099 2,717,318 5,967,078 11,446,495 NONCURRENT ASSETS: CAPITAL ASSETS: BUILDINGS AND EQUIPMENT- 2,255,483 9,012,052 11,267,535 IMPROVEMENTS OTHER THAN BUILDINGS- - 46,591 46,591 CONSTRUCTION IN PROGRESS- 4,163 - 4,163 LESS: ACCUMULATED DEPRECIATION- (1,640,807) (4,955,524) (6,596,331) TOTAL CAPITAL ASSETS (NET OF A/D)- 618,839 4,103,119 4,721,958 TOTAL NONCURRENT ASSETS- 618,839 4,103,119 4,721,958 TOTAL ASSETS2,762,099 3,336,157 10,070,197 16,168,453 LIABILITIES: CURRENT LIABILITIES: CURRENT PAYABLES19,482 237,742 104,014 361,238 EMPLOYEE LEAVE BENEFITS-CURRENT- 39,942 32,378 72,320 TOTAL CURRENT LIABILITIES19,482 277,684 136,392 433,558 NONCURRENT LIABILITIES: EMPLOYEE LEAVE BENEFITS- 30,397 24,640 55,037 TOTAL NONCURRENT LIABILITIES- 30,397 24,640 55,037 TOTAL LIABILITIES19,482 308,081 161,032 488,595 NET ASSETS: INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT- 618,840 4,103,119 4,721,959 UNRESTRICTED2,742,617 2,409,236 5,806,046 10,957,899 TOTAL NET ASSETS2,742,617$ 3,028,076$ 9,909,165$ 15,679,858$ 120 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED DECEMBER 31, 2006 INFORMATIONEQUIPMENT INSURANCESERVICESRENTALTOTAL OPERATING REVENUES: CHARGES FOR SERVICES-$ 3,752,892$ 3,015,613$ 6,768,505$ TOTAL OPERATING REVENUES- 3,752,892 3,015,613 6,768,505 OPERATING EXPENSES: OPERATIONS & MAINTENANCE- 2,601,068 1,122,612 3,723,680 ADMINISTRATION57,528 - 538,163 595,691 DEPRECIATION/AMORTIZATION- 229,084 832,157 1,061,241 TOTAL OPERATING EXPENSES57,528 2,830,152 2,492,932 5,380,612 OPERATING INCOME (LOSS)(57,528) 922,740 522,681 1,387,893 NON-OPERATING REVENUE (EXPENSE): INTEREST REVENUE106,346 91,632 260,545 458,523 OTHER NON-OPERATING REVENUES- - 1,375 1,375 GAIN (LOSS) ON SALE OF CAPITAL ASSETS- - (110,338) (110,338) TOTAL NON-OPERATING REVENUE (EXPENSE)106,346 91,632 151,582 349,560 INCOME (LOSS) BEFORE CONTRIBUTIONS48,818 1,014,372 674,263 1,737,453 CAPITAL CONTRIBUTIONS- - 164,021 164,021 TRANSFERS IN (Note 5)- 53,900 800 54,700 CHANGE IN NET ASSETS 1,068,27248,818 839,084 1,956,174 TOTAL NET ASSETS BEGINNING OF YEAR2,693,799 1,959,804 9,070,081 13,723,684 TOTAL NET ASSETS END OF YEAR2,742,617$ 3,028,076$ 9,909,165$ 15,679,858$ 121 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Page 1 of 2 INFORMATIONEQUIPMENT INSURANCESERVICESRENTALTOTAL CASH FLOWS FROM OPERATING ACTIVITIES: CASH RECEIVED FROM USERS-$ 3,744,892$ 3,015,613$ 6,760,505$ CASH PAID TO SUPPLIERS13,471 (1,384,817) (757,150) (2,128,496) CASH PAID FOR TAXES(54,871) - - (54,871) CASH PAID FOR INVENTORY- - (491,604) (491,604) CASH PAID TO EMPLOYEES- (1,121,917) (536,042) (1,657,959) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES(41,400) 1,238,158 1,230,817 2,427,575 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: OPERATING TRANSFERS IN- 53,900 800 54,700 NET CASH PROVIDED (USED) BY NON- CAPITAL FINANCING ACTIVITIES- 53,900 800 54,700 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PROCEEDS FROM SALE OF EQUIPMENT- - 60,526 60,526 PURCHASE OF CAPITAL ASSETS- (420,075) (960,996) (1,381,071) PROCEEDS FROM INSURANCE SETTLEMENT- - 925 925 NET CASH PROVIDED (USED) FOR CAPITAL AND RELATED FINANCING ACTIVITIES- (420,075) (899,545) (1,319,620) CASH FLOW FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF INVESTMENTS- - 991,250 991,250 PURCHASE OF INVESTMENTS(1,000,000) (994,039) (961,344) (2,955,383) INTEREST RECEIVED104,158 89,830 264,805 458,793 NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES(895,842) (904,209) 294,711 (1,505,340) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(937,242) (32,226) 626,783 (342,685) CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR2,198,127 1,745,704 4,262,070 8,205,901 CASH AND CASH EQUIVALENTS-END OF YEAR1,260,885$ 1,713,478$ 4,888,853$ 7,863,216$ CASH AT END OF YEAR CONSISTS OF: CASH AND CASH EQUIVALENTS1,260,885$ 1,713,478$ 4,888,853$ 7,863,216$ TOTAL CASH1,260,885$ 1,713,478$ 4,888,853$ 7,863,216$ 122 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Page 2 of 2 INFORMATIONEQUIPMENT INSURANCESERVICESRENTALTOTAL RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES OPERATING INCOME (LOSS)(57,528)$ 922,740$ 522,681$ 1,387,893$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION- 229,084 832,157 1,061,241 ASSET (INCREASES) DECREASES : ACCOUNTS RECEIVABLE(3,354) (8,000) (13,370) (24,724) INVENTORY- - (833) (833) LIABILITY (INCREASES) DECREASES : ACCOUNTS & VOUCHERS PAYABLE19,482 19,809 (107,150) (67,859) WAGES & BENEFITS PAYABLE- 26,684 278 26,962 COMPENSATED ABSENCES PAYABLE- 47,841 (2,946) 44,895 TOTAL ADJUSTMENTS16,128 315,418 708,136 1,039,682 - NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES(41,400)$ 1,238,158$ 1,230,817$ 2,427,575$ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES CAPITAL ASSETS ACQUIRED BY CONTRIBUTED CAPITAL-$ -$ 164,021$ 164,021$ INCREASE (DECREASE) IN FAIR VALUE OF INVESTMENT2,188 (913) 2,856 4,131 TOTAL NON CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES2,188$ (913)$ 166,877$ 168,152$ 123 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES AGENCY FUNDS The agency fundaccounts for monies over which the City is strictly a short- term custodian. Agency funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. 124 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON STATEMENT OF CHANGES IN ASSETS AND LIABILITIES GENCY FUND A FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 BALANCE BALANCE 1/1/2006ADDITIONSDEDUCTIONS12/31/2006 ASSETS: CASH AND CASH EQUIVALENTS915,382$ 2,557,143$ 2,646,894$ 825,631$ OTHER CURRENT ASSETS3,046 6,432 5,860 3,618 DUE FROM OTHER GOVERNMENTAL UNITS2,244 399 2,244 399 TOTAL ASSETS920,672$ 2,563,974$ 2,654,998$ 829,648$ LIABILITIES: DUE TO OTHER GOVERNMENTAL UNITS920,672$ 2,563,974$ 2,654,998$ 829,648$ TOTAL LIABILITIES920,672$ 2,563,974$ 2,654,998$ 829,648$ 125 CITY OF AUBURN: 2006 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES 126