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HomeMy WebLinkAbout2017 CAFR2017 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2017 CITY OF AUBURN WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year January 1, 2017 through December 31, 2017 ` Prepared by City of Auburn Finance Department Shelley Coleman, Finance Director City of Auburn: 2017 CAFR Table of Contents i COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended December 31, 2017 TABLE OF CONTENTS I. INTRODUCTORY SECTION Page Title Page Table of Contents ....................................................................................................................................................... i City Officials ................................................................................................................................................................ 1 Organizational Chart ................................................................................................................................................. 2 Letter of Transmittal ................................................................................................................................................. 3 Certificate of Achievement ....................................................................................................................................... 9 II. FINANCIAL SECTION Auditor’s Report ....................................................................................................................................................... 11 Management’s Discussion and Analysis .................................................................................................................. 15 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position............................................................................................................................. 35 Statement of Activities .................................................................................................................................. 36 Fund Financial Statements: Governmental Funds Balance Sheet ............................................................................................................................................. 40 Reconciliation of Balance Sheet of Government Funds to the Statement of Net Position .................... 41 Statement of Revenues, Expenses and Changes in Fund Balances ........................................................ 42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Government Funds to the Statement of Activities .................................................. 43 Statement of Revenues, Expenses and Changes in Fund Balances – Budget and Actual: General Fund ........................................................................................................................................... 44 Arterial Street Fund ................................................................................................................................ 45 Proprietary Funds: Statement of Net Position ......................................................................................................................... 48 Statement of Revenues, Expenses, and Changes in Fund Net Position .................................................. 49 Statement of Cash Flows ........................................................................................................................... 50 Fiduciary Funds: Statement of Fiduciary Net Position ......................................................................................................... 54 Notes to the Financial Statements ................................................................................................................... 55 Required Supplemental Information Schedule of Proportionate Share of the Net Pension Liability PERS 1 .................................................... 103 Schedule of Proportionate Share of the Net Pension Liability PERS 2/3 ................................................. 103 Schedule of Proportionate Share of the Net Pension Liability LEOFF 1 .................................................. 103 Schedule of Proportionate Share of the Net Pension Liability LEOFF 2 .................................................. 103 Schedule of Employer Contributions PERS 1............................................................................................. 105 Schedule of Employer Contributions PERS 2/3 ......................................................................................... 105 Schedule of Employer Contributions LEOFF 2 .......................................................................................... 105 Firefighter’s Pension Fund-Schedule of Changes in Total Pension Liability & Related Ratio’s ..............106 Retiree Medical & Long-Term Care Benefits LEOFF 1-Schedule of Funding Progress ............................ 107 Retiree Medical & Long-Term Care Benefits LEOFF 1-Schedule of Employer Contributions .................. 107 City of Auburn: 2017 CAFR Table of Contents ii Page Combining and Individual Fund Financial Statements and Schedules Non-Major Government Funds: Combining Balance Sheet .......................................................................................................................... 110 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .............................. 111 Non-Major Special Revenue Funds: Combining Balance Sheet .......................................................................................................................... 114 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .............................. 116 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: Local Street Special Revenue Fund ....................................................................................................... 118 Hotel/Motel Tax Special Revenue Fund ................................................................................................ 119 Arterial Street Preservation Special Revenue Fund .............................................................................. 120 Drug Forfeiture Special Revenue Fund ................................................................................................. 121 Housing & Community Development Special Revenue Fund .............................................................. 122 Recreation Trails Special Revenue Fund ............................................................................................... 123 Business Improvement Area Special Revenue Fund ............................................................................ 124 Cumulative Reserve Special Revenue Fund .......................................................................................... 125 Mitigation Special Revenue Fund .......................................................................................................... 126 Non-Major Debt Service Funds: Combining Balance Sheet .......................................................................................................................... 128 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .............................. 129 Capital Project Funds: Combining Balance Sheet .......................................................................................................................... 132 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance ................................ 133 Permanent Fund: Balance Sheet ............................................................................................................................................. 136 Statement of Revenues, Expenditures and Changes in Fund Balance .................................................... 137 Non-Major Enterprise Funds: Combining Statement of Net Position ...................................................................................................... 140 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................................ 141 Combining Statement of Cash Flows ........................................................................................................ 142 Internal Service Funds: Combining Statement of Net Position ...................................................................................................... 146 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................................ 147 Combining Statement of Cash Flows ........................................................................................................ 148 Agency Fund: Statement of Changes in Assets and Liabilities ........................................................................................ 152 City of Auburn: 2017 CAFR Table of Contents iii III. STATISTICAL SECTION Schedule Page Net Position by Components .................................................................................................................. 1............... 154 Changes in Net Positions ......................................................................................................................... 2............... 155 Fund Balances, Government Funds ........................................................................................................ 3............... 156 Changes in Fund Balances, Government Funds .................................................................................... 4............... 157 Tax Revenues by Source, Government Funds ....................................................................................... 5............... 158 Assessed Value by Type.......................................................................................................................... 6............... 159 Property Tax Data.................................................................................................................................... 7...............160 Property Tax Levies and Collections ...................................................................................................... 8............... 162 Principal Taxpayers – Property Taxes .................................................................................................... 9............... 163 Retail Tax Collections by Sector............................................................................................................ 10...............164 Ratios of Outstanding Debt by Type ..................................................................................................... 11............... 165 Computation of Legal Debt Margin ...................................................................................................... 12...............166 Legal Debt Margin Ratios ...................................................................................................................... 13...............166 Computation of Net Direct and Estimated Overlapping Debt ............................................................ 14............... 167 Ratios of Net General Bonded Debt to Assessed Value ...................................................................... 15...............168 Pledged Revenue Bond Coverages ...................................................................................................... 16...............169 Population, Income and Housing Trends ............................................................................................. 17............... 170 Major Employers.................................................................................................................................... 18............... 171 Staffing Levels by Department ............................................................................................................. 19............... 172 Operating Indicators by Department ...................................................................................................20............... 173 Capital Asset Indicators by Department .............................................................................................. 21............... 174 Utility Customers by Customer Class .................................................................................................... 22............... 174 City of Auburn: 2017 CAFR Table of Contents iv 1 CITY COUNCIL CITY OFFICIALS MAYOR Nancy Backus Claude DaCorsi John Holman Bob Baggett Bill Peloza Yolanda Trout-Manuel Larry Brown Largo Wales DEPARTMENT DIRECTORS Finance Director Shelley Coleman City Attorney Dan Heid Human Resources / Risk & Property Mgmt. Director Rob Roscoe Innovation & Technology Director Paul Haugan Parks, Arts and Recreation Director Daryl Faber Community Development & Public Works Director Vacant Police Chief Bob Lee Administration Director Dana Hinman 2 Citizens Mayor Nancy Backus City Council Director of HR & Risk/Property Mgmt. Rob Roscoe City Attorney Dan Heid Police Chief Bob Lee Director of Innovation and Technology Paul Haugan Director of Administration Dana Hinman Community Dev. & Public Works Director Vacant Parks, Art and Recreation Director Daryl Faber Finance Director Shelley Coleman 3 June 21, 2018 Honorable Nancy Backus, Mayor Members of the Auburn City Council Citizens of the City of Auburn 25 W Main Street Auburn, WA 98001 We are pleased to present the City’s Comprehensive Annual Financial Report for the year ended December 31, 2017. We publish this financial statement in conformity with generally accepted accounting principles (GAAP). It has been audited in accordance with generally accepted auditing standards by the Washington State Auditor’s Office. Therefore, we issue and transmit to you the City of Auburn’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2017. This transmittal let ter provides an overview of the report and the financial condition of the City. It also provides insight into the history of the City and the economic conditions affecting it, and describes the systems and controls employed by the Finance department. The Comprehensive Annual Financial Report has several significant uses. First, it provides a general overview of the City’s finances to the general public and taxpayers. Second, it is referenced by bond buyers and rating agencies to evaluate the City’s fiscal stability and creditworthiness. Finally, the CAFR is a series of financial statements that have been audited by the State Auditor’s Office and provides assurances that assets are safeguarded and funds are expended as they were legally appropriated in the biennial budget. I. INTRODUCTION A. Management Representation The Auburn Finance Department prepared the report and accepts complete responsibility for the accuracy, completeness, and fairness of presentation of the information included. The data is believed to be accurate in all material respects, and it is believed that all significant information necessary for an understanding of the affairs and financial condition of the City has been disclosed. The report has been prepared in conformance with g enerally accepted accounting principles and in conformance with financial reporting standards issued by the Governmental Accounting Standards Board (GASB). City management has developed and evaluated a comprehensive internal control structure that is desi gned to protect the City’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with generally accepted accounting principles. Because the cost of internal controls should not outweigh the benefits, the City’s internal control structure is designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. As management, we attest that, to the best of our knowledge and belief, this financial report is complete and reliable in all material aspects. City of Auburn: 2017 CAFR Letter of Transmittal 4 GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Auburn’s MD&A can be found immediately following the independent auditor’s report. B. Organization of the Report The report is divided into three sections: the Introductory Section, the Financial Section, and the Statistical Section. The Introductory Section contains the table of contents, a list of the City’s principal officials, an organizational chart, this letter of transmittal, and the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers’ Association of the United States and Canada for the 2016 CAFR. The Financial Section contains the Washington State Auditor’s Report, completed by the Washington State Auditor, Management’s Discussion and Analysis, Government-Wide Financial Statements, the Fund Financial Statements, Notes to the Financial Statements and Other Required Combining and Supplemental Information. The Statistical Section, which is unaudited, contains a range of statistical tables and charts that present various financial, economic, social, and demographic data about the City. This information depicts various trends that have affected the fiscal condition of the City over the last ten years. The data presented in this section complies with the requirements of GASB Statement No. 44, Economic Condition Reporting: The Statistical Section. C. Reporting Entity The City of Auburn was incorporated in 1891 and currently operates as a non-charter Code City under the laws of the State of Washington. Code City status in Washington provides “home rule” authority to cities. Auburn has a Mayor/Council form of government; the Mayor is elected and is the full-time Chief Administrator. The seven-member City Council is elected at large, rather than by district. Members of the City Council are responsible for establishing the general direction and policies for the City and for providing the resources necessary to carry out those policies. As the City’s chief administrator, the Mayor is responsible for carrying out the policy and direction set by the City Council. This includes the enforcement of laws and ordinances, the execution of contracts and agreements, and maintenance of peace and order in the city. The City is located primarily in southern King County (county seat, Seattle) and a small northeastern portion of Pierce County. These are the two most populous counties in the State of Washington, comprising over 41% of the state-wide population. The City is strategically located in relation to the labor and consumer markets of the two largest cities in the area: Seattle in King County and Tacoma in Pierce County. Auburn currently serves approximately 78,960 people within its incorporated limits. The City provides a wide range of services, both beneficial and necessary, to its residents as well as to the adjacent area. These services include police protection; parks and recreational facilities that include a senior center, gymnasium, community and teen center, golf course and museum; land use management and development regulation; infrastructure construction and maintenance; water, sanitary sewage collection, storm drainage, and solid waste services; a general aviation airport; and a municipal cemetery. The City is a member/owner of Valley Communications providing emergency 911 services and South Correctional Entity (SCORE) providing jail facilities. Both these organiza tions provide services to other owner/member governments and other non-owner/member governments as well through interlocal agreements. City of Auburn: 2017 CAFR Letter of Transmittal 5 II. ECONOMIC CONDITION A. Summary of Local Economy Auburn began as a small rural community founded on agriculture and the railroad, which maintained a significant switching and repair facility. The City has grown significantly since World War II, both as a residential community and as a commercial and industrial location. Auburn has become a significant area for automobile sales and has also developed a substantial manufacturing and distribution base with the largest employer being The Boeing Co., which employs approximately 6,000 people at its Auburn facility. Boeing is a worldwide supplier of aircraft and related products. As of year-end 2017, Auburn was providing 60,118 jobs with a unemployment rate of 4.1%, which is below both the national and state figures. Auburn has enjoyed steady residential and industrial growth over the years as development has moved outward from the major cities. Auburn is currently home to about 4,000 businesses and is the center of the largest industrial complex in the Pacific Northwest. The City has a growing array of manufacturing facilities, as well as distribution, wholesale, and retail operations. Auburn’s transit-oriented district is home to the MultiCare Auburn Medical Center, with a Trauma Level III emergency facility. This location serves the local geographic area, employs approximately 1,613 people, and is currently investing over 120 million dollars in expansion and upgrades. The City’s recent efforts to promote economic development and champion its designation as an Innovation Partnership Zone helps to solidify Auburn’s economic standing in the region and spur new business and development activity. A number of commercial and service industry projects , currently in progress or in the planning stages, contribute to an economic picture of future growth. Significant developments in the City include the issuance of 178 building permits for single family homes as well as about $120 million in commercial construction, which includes projects such as the Promenade (298 unit mixed use development), The Reserve and Villas (597 unit mixed use development), The Estates at Hillside Garden (126 unit senior housing project), Multicare Emergency Room upgrades, Boeing job training center, three mini storage complexes, and several new commercial strip buildings and tenant improvements at the Outlet Collection These projects have positive impacts on available revenue and, as they take hold, will serve to strengthen the City’s economic future. The City’s total assessed property valuation has risen from $6.5 billion in 2008 to $10.6 billion in 2017. The recession, coupled with the impact of the Streamlined Sales Tax (SST) legislation enacted by the State of Washington that went into effect July 1, 2008, reduced general sales tax revenues from their high in 2007 of $17.5 million to a low of $11.8 million in 2009, then increasing slowly to $17.7 million in 2017. The SST impact is estimated to have eliminated approximately $200,000 per month of sales tax revenue to the City. To lessen the financial impact on cities severely impacted by this legislation, the State of Washington implemented a mitigation plan under which the City of Auburn has been receiving approximately $1.9 million in mitigation payments each year since 2012. Mitigation payments are scheduled to end in the third quarter of 2019. This loss may ultimately be offset by Marketplace Fairness Act (internet sales tax) revenues. Sales tax revenue, net of criminal justice and annexation sales tax credits, increased $731,000 (5%) from 2016. The portion allocated to the General Fund, $15 million, constitutes a bout 23% of its revenue. Nonetheless, while the local economy is favorable, the City remains vigilant in its management of expenses to ensure it lives within its means. City of Auburn: 2017 CAFR Letter of Transmittal 6 Despite economic cycles, the City has continually focused on enhancing the quality of life in the community and focusing on maintaining and redeveloping its aging infrastructure. For example, the City’s Arterial Street program is partially funded by dedicating 1.0% of utility taxes toward arterial roadway improvements. In addition, the City utilizes sales taxes collected from new construction for the local street program, commonly referred to as the Save Our Streets (SOS) program. The City’s budgeting process is based on financial policies directed at conserving fiscal resources while supporting programmatic strategies. Budget recommendations reflect a long -range analysis of fiscal trends. These policies and practices have not only averted serious funding problems in the past, but have enabled the General Fund to remain on a firm financial footing during the most recent recession. The City maintains a stable financial condition by managing expenditure budgets to available revenue streams. All funds contain adequate balances, and the City’s debt is manageable. The General fund contains a satisfactory balance along with a reserve fund for stabilization, a significant Insurance fund has been set aside for contingencies, and the Equipment Rental fund is adequate for vehicle replacement. The Proprietary and Fiduciary funds are in satisfactory condition. The City completed a review of the City’s water, sewer and stormwater utility rates in 2012 and established rates to fund operating and capital needs through 2017 which included the issuance of new revenue bonds in 2013 to support significant new utility construction projects. An interim review of utility rates, in conjunction with the comprehensive planning process, is underway. B. Future Economic Outlook Auburn is in a continuous process of both short-term and long-term financial planning. Short-term financial planning is inherent in the development of the City’s biennial budget. Concurrent with the biennial budget is the review of the City’s long-term capital needs. Funding sources are assessed with the development of the six-year Capital Facilities Plan. The capital facility plan is a component of the Comprehensive Master Plan, which outlines how the City should look and function in twenty years and creates a vision that can be realistically implemented. An integral part of this vision is determining how to allocate the City’s financial resources to achieve the desired goals. The City has several long-term municipal planning and capital projects underway. These include reconstruction of aged utility infrastructure; street improvements including rehabilitation of local neighborhood streets. These projects will improve mobility, will contribute to the restoration of a North/South arterial corridor, and provide for greater recreational opportunities for the community. These municipal projects, coupled with the new private sector developments described earlier, will help ensure local economic growth continues, albeit not at the rate experienced in the late 1990’s. The challenge is to control costs that grow at a faster rate than revenue. Areas of concern are health care costs , pension costs, other post-employment benefits (OPEB), and public safety costs related to incarceration and labor contracts. Continuing to maintain service level in these sectors will draw valuable resources from other areas such as infrastructure replacement and capital programs. As Auburn moves forward, economic conditions will be continually monitored and adjustments to city spending and services made to maintain the City’s financial health. Long-term plans will be focused on ensuring the City continues to be an economically strong and viable city. City of Auburn: 2017 CAFR Letter of Transmittal 7 III. FINANCIAL INFORMATION A. Cash Management The City invests in U.S. Treasury and Agency Issues, Prime Bankers Acceptances, Time Deposits, and Repurchase Agreements. Investment policies and procedures, established by the Mayor and adopted by the City Council, require the City to establish a trustee to take delivery of all investment transactions at time of payment. The City has contracted with the Bank of New York to provide delivery versus payment trustee services on all government agency investments. The State of Washington maintains an investment pool to provide econom ies of scale in investing to smaller- and medium-sized cities in the State. The City uses this service for all funds not invested in longer -term securities. The pool operates under the same legal restrictions that apply to all municipalities in the State and, consequently, uses the same instruments as listed above. The State also takes delivery of all investment transactions. The City has adopted a comprehensive investment policy statement to guide City investment practices. These policies are closely patterned after the recommendations in Investing Public Funds published by the Government Finance Officers Association (GFOA). Investments are restricted to less than three years in order to maintain liquidity on all investments in all funds, yet enable the City to take advantage of the yield curve. Fiduciary funds, which involve long- term reserves and require minimal liquidity, are invested for longer time periods. The City undertakes repurchase agreements only with financial institutions that offer the City full protection in the event of default, by providing the delivery of the underlying security to the City. B. Risk Management The City participates in the Washington Cities’ Insurance Authority (an insurance pool of over 160 members) and the City actively pursues risk reduction in the operation of its programs. The Washington Cities’ Insurance Authority not only provides a sharing of risk by pooling of losses, it also provides an extensive array of professional services in risk management. The pool monitors the City’s management practices and damage claims. The City follows the guidelines provided by the pool in an effort to minimize risk exposure in the day - to-day operations of the City’s programs. The City also maintains an extensive employee safety program managed by the Human Resources department. The City purchases, with employee participation, most of its health insurance for its employees through commercial policies administered by Brown and Brown. Employees represented by the outside Teamsters Union have insurance through the Teamsters organization and employees represented by the inside Teamsters Union have insurance policies administered by the Association of Washington Cities. Beginning in 2014, the City created its own worker’s compensation program and pool. Prior, the City participated in the Washington State Workers’ Compensation program. In order to keep its long-term options open and to provide for any uninsured losses that might occur, the City has elected to build an insurance reserve (the Insurance fund). The Insurance fund supplements various insurance coverage’s maintained by the City. This fund is also used to self-insure some limited exposures, the most significant of which is accidental loss to City-owned vehicles. City of Auburn: 2017 CAFR Letter of Transmittal 8 IV. OTHER RELEVANT INFORMATION A. Independent Audit State law requires an annual audit of all City books of accounts and financial records by the Office of the State Auditor, which is headed by an independently elected State official, the State Auditor. The Auditor has broad legal authority to inquire into all financial and legal compliance matters and such audits are considered equal to audits by certified public accounting firms. The 2017 financial audit of the City is complete and was conducted in conformance with Generally Accepted Auditing Standards. The financial statements of all City funds have been included in this audit. The City has been given an unqualified opinion for 2017. Please see the Auditor’s Report. The State Auditor’s Office also audits the City’s administration of its federal grants under the single audit concept. B. Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Auburn for its Comprehensive Annual Financial Report for the fiscal year ended December 31, 2016. This was the twenty-ninth consecutive year that the City has achieved this prestigious award. In order to be awarded a Certif icate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. In 2017, the City has also received the Government Finance Officers Association Distinguished Budget Presentation award for its 2017-2018 biennial budget. The City was one of just twenty -one cities in the state to receive both the Certificate of Achievement for Excellence in Financial Reporting and the Distinguished Budget Presentation award for 2015. C. Acknowledgments Preparation of this report could not have been accomplished without the professional, efficient, and dedicated staff of the Finance department and various other City employees who assisted in its production. Further appreciation is extended to the Mayor and City Council for their encouragement, interest, and support in conducting the financial affairs of the City in a sound and progressive manner. The assistance of the auditors from the Washington State Auditor’s Office is also greatly appreciated. Respectfully submitted, Shelley R. Coleman Finance Director Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Auburn Washington For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2016 /ID. ·rJI, _ p. •-�-."�.1�i ,,..� Executive Director/CEO 9 10 Insurance Building, P.O. Box 40021  Olympia, Washington 98504-0021  (360) 902-0370  Pat.McCarthy@sao.wa.gov Office of the Washington State Auditor Pat McCarthy INDEPENDENT AUDITOR’S REPORT ON FINANCIA L STATEMENTS June 21, 2018 Mayor and City Council City of Auburn Auburn, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund and the aggregate remaining fund information of the City of Auburn, King County, Washington, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Resp onsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s 11 preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Auburn, as of December 31, 2017, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General Fund and Arterial Street Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As discussed in Note 1 to the financial statements, in 2017, the City adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 12 Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying information listed as combining and individual fund financial statements and schedules are presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. This information has been subjected to auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The Introductory and Statistical Sections is presented for purposes of additional analysis and is not a required part of the basic financial statements of the City. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we will also issue our report dated June 21, 2018, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. That report will be issued under separate cover in the City’s Single Audit Report. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Sincerely, Pat McCarthy State Auditor Olympia, WA 13 14 City of Auburn: 2017 CAFR Management’s Discussion and Analysis 15 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 position – the difference between assets plus deferred outflows and l iabilities plus deferred inflows – equals $695.2 million, an increase of $19.0 million or 2.8%. Of this, a total of $578.7 million, or 83.2% of total net position, represents net investment in capital assets and includes assets such as utility systems, streets, buildings, land, vehicles and equipment. An additional $3.2 million of net position is restricted for purposes of endowment and debt service. Of the remaining $113.3 million of net position, $28.5 million is legally restricted, restricted by City policy for specific purposes, or is restricted for use by the City’s utilities , and $84.8 million is unrestricted.  The net increase in government-wide net position during 2017 was $19.0 million. Of this amount, $16.0 million was directly related to the increase in City-owned net investment in capital assets, restricted net position increased by $1.9 million, and unrestricted net position increased by $1.1 million.  Business-type net position increased by $9.8 million to $249.2 million during 2017 as a result of net capital investment and net earnings related to the City’s water, sewer and storm water utilities.  Governmental fund balances at year-end totaled $69.1 million. Of this amount, $25.4 million, or 36.8%, is unassigned and available to fund ongoing activities. Compared to 2016, total governmental fund balances increased by $3.5 million. This increase reflects the net effect of a general improvement in the regional economy and continued vigilance in monitoring general spending.  Total City debt payments during the year, net of compensated absences and other post-employment benefits, were $9.4 million. Total long-term liabilities, including bonds and loans, totaled $119.5 million at December 31, 2017. The ending long-term liabilities is a decrease of $9.2 million from 2016 and is largely attributable to the retirement of bond principal. See note 9 for further information on long-term liability activity during the year. City of Auburn: 2017 CAFR Management’s Discussion and Analysis 16 Other City Highlights: Parks and Community Development  Was awarded over $600,000 in grant funds for the Museum and the Arts and Culture Center for programming and improvements.  Increased marketing presence on social media as well as completed facility rental marketing brochures for the Auburn Community & Event Center and other facilities, leading to a large increase in rental revenues.  Completed construction of new Memory Heights area of Mountain View Cemetery, adding over 500 new burial sites.  Rebuilt the first green and surrounds at the Auburn Golf Course, increasing drainage and playability.  Replaced the playground at Roegner Park.  Completed Les Gove Park improvements along Auburn Way, adding irrigation and updating the pergola.  Processed more than 2,800 permits and 900 business licenses, completed 6,050 building inspections, conducted 7,680 permit reviews, and participated in more than 50,000 interactions with customers.  Launched electronic plan review capabilities that allow customers to submit electronically and that enable the customer and staff to transfer information electronically.  Became the first jurisdiction in the State of Washington to allow final subdivisions to be approved administratively rather than legislatively.  Managed 1,244 code enforcement cases and achieved resolution on 1,193 cases (95.9% success rate). Engineering Services  Completed 25 capital projects totaling approximately $31M that included: 30 lane miles of new pavement, 6,500 feet of new water mains, three new pressure reducing valve stations for water, two new water well pumps, 10,300 feet of new storm drainage piping, 5,700 feet of new sanitary sewer piping, six new/replaced traffic signal systems, and 20,000 feet of new/replaced sidewalks.  Completed several water projects bringing the City’s water sources back on line and reducing the need to purchase water from Tacoma, saving the water system approximately $1M per year.  Completed design of the 22nd and I Street NE roundabout and began construction.  Completed the installation of two dynamic message signs on Auburn Way South and S 277th Street to provide drivers with information to improve driver behavior and traffic flow.  Completed the reconstruction of B Street NW using full-depth pavement reclamation methods, saving approximately $1M in costs.  Completed the installation of a high friction surface treatment on Lake Tapps Parkway as a pilot project to address safety concerns.  Completed the purchase of equipment and began implementation of scanner-generated field survey data.  Completed the installation of a pedestrian actuated crosswalk at R St SE and 21 st St SE, installation of radar speed feedback signs on 118th Ave SE, SE 316th Street, and 55th Ave S, and over 40 speed studies.  Issued 49 right-of-way use permits, completed two franchise agreements, and completed seven street cleanup activities through the Adopt-A-Street Program.  Completed the Airport obstruction survey/advanced ground information system (AGIS) survey.  Completed 433 inspections on private storm systems and 303 inspections on public storm systems for compliance with our NPDES Phase 2 permit. City of Auburn: 2017 CAFR Management’s Discussion and Analysis 17  Issued 380 construction permits for work in the public right-of-way, completed inspections related to 1,190 other development permits (building, plumbing, water, sewer, storm and backflow), managed 76 active public facility extension agreements with developers and 26 active grading permits.  Refreshed all striping on public roads and continued to refresh thermoplastic pavement markings and legends a s needed. Maintenance & Operations Services  Completed rehabilitation in ten storm drainage ponds. This work returned the ponds to original design specifications thereby enhancing the function and longevity of these facilities.  Engaged in regular preventative maintenance activities of the sewer system to include video inspection, high velocity cleaning, repair of collection system assets and operation of 24 sewer/storm pump stations.  Completed a three year project of installing the Sensus Automated Metering Infrastructure (AMI) system. This project included replacing over 15,000 meters and installing four radio base stations throughout the city to collect meter reads.  Completed ongoing citywide repairs or replacement of damaged and worn street sign s identified through staff inspections.  Equipment Rental replaced 32 new vehicles and equipment to replace aging units in the fleet , minimizing repair costs and maximizing vehicle up-time and utilization. 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 These statements report the City’s net position and changes during the reporting year. The net position is the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources. Other supplementary information, in addition to the basic financial statements, is also contained in this report. This secti on of the management’s discussion and analysis is intended to introduce and explain the basic financial statements. Government-wide Financial Statements The Financial Statements are presented in conformity with the Governmental Accounting Standards Board (GASB ), which establishes Generally Accepted Accounting Principles (GAAP) for governmental entities. The City adopted the provisions of Statement No. 73 – Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68; GASB Statement No. 82 – Pension Issues, an amendment of GASB Statement No. 67, No. 68, and No. 73. There is no material impact to the City of implementing these standards. 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 Position 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 City of Auburn: 2017 CAFR Management’s Discussion and Analysis 18 assets, deferred outflows of resources, long-term obligations and deferred inflows of resources. Over time, increases or decreases in net position may be one indicator of improvement or deterioration in the City’s overall financial health. 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. 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 ea ch 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, and contracted court), security (police), 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 the operations of an airport and cemetery. 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. Governmental 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 is presented 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 governmental fund statements and the government -wide financial statements. The governmental 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 expenses. 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 governmental fund statements and the government-wide financial statements, reconciliations are provided. The reconciliation between the governmental fund Balance Sheets and the government-wide Statement of Net Position is found directly following the governmental funds’ Balance Sheet; the reconciliation between the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balance and the government-wide Statement of Activities is found directly following the governmental funds’ Statement of Revenues, Expenses, and Changes in Fund Balances. The City maintains twenty - one 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 statemen ts later in this report. The City maintains budgetary control over its operating funds through the adoption of a biennial budget. Budgets are adopted at City of Auburn: 2017 CAFR Management’s Discussion and Analysis 19 the fund level according to state law. Budgetary comparison statements are presented for the genera l and arterial street funds as part of the basic financial statements. Other budgetary comparison statements are included following the other government funds’ combining statements. Proprietary funds are used by governments to account for their business-type activities and use the same basis of accounting 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 accou nt 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 sta tements provide information on the City’s four utilities (water, sanitary sewer, storm water, and solid waste) as well as the City-owned airport and cemetery. Internal service funds are an essential accounting tool used to accumulate and allocate costs in ternally among the City’s various functions. The City uses internal service funds to account for its fleet of vehicles, maintenance and operation of facilities, computer hardware and software services, employee costs related to occupational injury or illness, and 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 one fiduciary fund: An agency fund, which is 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. The budget vs. actual required supplementary information can be found on pages 44 and 45, and the pension benefit and other postemployment benefit required supplementary information is found in the required supplemental information section. The combining statements referred to earlier in connection with nonmajor governmental funds, nonmajor enterprise funds, and internal service funds are presented in the section titled “Fund Financial Statements and Schedules”. City of Auburn: 2017 CAFR Management’s Discussion and Analysis 20 Government-wide Financial Analysis The statement of net position may serve as a useful indicator of the City’s financial position. The overall financial position has improved for the City of Auburn over the prior year. Changes in Net Position from 2016 to 2017 show an increase in total net position of $19.0 million or 2.8%. Following is a condensed version of the government-wide statement of net position with a comparison to 2016: The largest component of the City’s net position, $579.0 million, or 83.2% is its net investment in capital assets. These capital assets, such as streets, parks, trails, and vehicles and equipment related to police 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 curren t 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 position, $42.8 million, may be used for functions such as public safety employee salaries and supplies, parks and road maintenance, and other general governmental services. The second largest component of unrestricted net position, $42.0 million, represents the unrestricted net position 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 and cemetery). 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, and grooming and landscaping at the cemetery. Restricted governmental fund net position is $29.9 million and is restricted for purposes such as capital project construction, debt service, drug investigation and enforcement, and endowment. Total net investment in capital assets increased by $16.4 million. As of 12/31/17 As of 12/31/16 As of 12/31/17 As of 12/31/16 As of 12/31/17 As of 12/31/16 Current and other assets 130,119,043$ 121,141,782$ 58,080,763$ 57,286,223$ 188,199,806$ 178,428,005$ Capital assets, net of accumulated depreciation 404,922,880 400,377,892 237,873,905 231,598,816 642,796,785 631,976,708 Total assets 535,041,923 521,519,674 295,954,668 288,885,039 830,996,591 810,404,713 Deferred Outflows of Resources 2,241,938 4,034,077 928,489 1,359,639 3,170,427 5,393,716 Long-term liabilities 76,954,091 78,915,572 38,315,101 42,564,080 115,269,192 121,479,652 Other liabilities 10,713,381 9,533,214 8,478,481 8,130,257 19,191,862 17,663,471 Total liabilities 87,667,472 88,448,786 46,793,582 50,694,337 134,461,054 139,143,123 Deferred Inflows of Resources 3,589,485 329,987 927,497 152,168 4,516,982 482,155 Net position Net investment in capital assets 373,368,906 367,128,894 205,677,614 195,490,061 579,046,520 562,618,955 Restricted for: Capital Projects 27,407,299 24,332,465 - 800 27,407,299 24,333,265 Nonexpendable Permanent Endowment 1,717,134 1,666,043 - - 1,717,134 1,666,043 Debt Service 9,686 11,945 1,437,567 2,694,103 1,447,253 2,706,048 Tourist Promotion 200,371 180,146 - - 200,371 180,146 Drug Investigation & Enforce 381,136 451,507 - - 381,136 451,507 Comm Dev Block Grant 44,904 44,904 - - 44,904 44,904 Central Business Distr Dev 93,710 58,260 - - 93,710 58,260 Rate Stabilization - - 419,403 415,511 419,403 415,511 Unrestricted 42,803,759 42,900,814 41,627,494 40,797,698 84,431,253 83,698,512 Total net position 446,026,905$ 436,774,978 249,162,078$ 239,398,173$ 695,188,983$ 676,173,151$ Governmental Activities Business-type Activities Total STATEMENT OF NET POSITION Comparative Analysis of 2017 and 2016 City of Auburn: 2017 CAFR Management’s Discussion and Analysis 21 Changes in Net Position The change in net position represents the increase or decrease in City net position resulting from its various activities. Following is a condensed version of the City’s changes in net position. The table shows the revenues, expenses and related changes in net position for both governmental-type and business-type activities: Governmental activities contributed $12.5 million to the total increase in City net position. Revenues to fund capital assets are recorded as program or general revenues in the statement of activities. However, asset purchases are not recorded as expenses in the year purchased and construction costs are not recorded as expenses in the year incurred. Instead, the costs are recorded as long-term assets and are depreciated over their useful lives. 2017 2016 2017 2016 2017 2016 Revenues: Program revenues Charges for services 11,790,334$ 12,338,041$ 68,220,200$ 65,733,943$ 80,010,534$ 78,071,984$ Operating grants and contributions 2,257,646 2,767,931 106,286 106,286 2,363,932 2,874,217 Capital grants and contributions 13,229,502 13,275,208 4,363,568 10,574,852 17,593,070 23,850,061 General revenues Property taxes 20,967,953 18,102,286 - - 20,967,953 18,102,286 Sales taxes 22,333,454 21,475,335 - - 22,333,454 21,475,335 Interfund utility taxes 4,540,265 4,624,951 - - 4,540,265 4,624,951 Admission & utility taxes 10,391,462 8,917,401 - - 10,391,462 8,917,401 Excise taxes 4,141,146 5,057,013 - - 4,141,146 5,057,013 Other taxes 5,253,964 5,160,215 - - 5,253,964 5,160,215 Investment earnings 787,786 332,520 479,132 196,595 1,266,918 529,115 Miscellaneous revenue 204,306 157,874 444,110 1,085,275 648,416 1,243,148 Total revenues 95,897,818 92,208,775 73,613,296 77,696,951 169,511,114 169,905,726 Expenses: General government 10,384,647 9,557,602 - - 10,384,647 9,557,602 Public safety 32,746,406 32,117,837 - - 32,746,406 32,117,837 Transportation 17,904,352 16,602,993 - - 17,904,352 16,602,993 Physical environment 3,217,885 3,266,375 - - 3,217,885 3,266,375 Culture and recreation 13,539,098 12,811,186 - - 13,539,098 12,811,186 Economic environment 3,859,863 3,224,984 - - 3,859,863 3,224,984 Health and human services 674,270 573,115 - - 674,270 573,115 Interest on long-term debt 1,555,803 1,709,647 - - 1,555,803 1,709,647 Water - - 12,408,008 13,107,629 12,408,008 13,107,629 Sanitary sewer - - 25,360,718 25,685,370 25,360,718 25,685,370 Storm drainage - - 8,979,969 8,814,542 8,979,969 8,814,542 Solid waste - - 14,539,703 13,460,155 14,539,703 13,460,155 Other business-type activities - - 2,106,557 2,150,693 2,106,557 2,150,693 Total expenses 83,882,324 79,863,739 63,394,955 63,218,389 147,277,279 143,082,128 Increase in net position before transfers 12,015,495 12,345,036 10,218,341 14,478,562 22,233,836 26,823,598 Transfers 454,436 424,173 (454,436) (424,173) - - Change in net position 12,469,931 12,769,209 9,763,905 14,054,389 22,233,836 26,823,598 Net Position, January 1, as Previously Reported 436,774,978 421,493,212 239,398,173 225,343,784 676,173,151 646,836,996 Change in Accounting Principle (3,218,004) 2,512,557 - - (3,218,004) 2,512,557 Net Position, January 1, as Restated 433,556,974 424,005,769 239,398,173 225,343,784 672,955,147 649,349,553 Net position, December 31 446,026,905$ 436,774,978$ 249,162,078$ 239,398,173$ 695,188,983$ 676,173,151$ Governmental Activities Business-type Activities Total CHANGES IN NET POSITION Comparative Analysis of 2017 and 2016 City of Auburn: 2017 CAFR Management’s Discussion and Analysis 22 General tax revenues increased by 6.8% to $67.6 million between 2016 and 2017, compared to an increase of 3.3% between 2015 and 2016:  Property tax revenue increased $2.9 million or 15.8%.  Sales tax collections increased $0.9 million or 4.0%, reflecting improvement in the economy.  Utility and admission tax revenue increased by $1.4 million or 10.3%.  Excise tax revenue decreased by $0.9 million or 18.1%.  Investment earnings increased by $0.4 million in governmental activities and $0.3 million in business-type activities for a government-wide increase of $0.7 million. Government-wide miscellaneous revenue decreased by $0.6 million to $0.6 million. Government-wide expenses increased by approximately $4.2 million or 2.9% and were largely attributable to general increases in operating expenses such as salaries and wages. The chart below summarizes the government activity revenue by source, while the chart on the next page 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 12% Capital Grants & Contributions 14% Operating Grants & Contributions 2% Property Taxes 22%Sales Taxes 23% Interfund Utility Taxes 5% Utility & Admission Taxes 11% Other Taxes 10% Other Revenue 1% City of Auburn: 2017 CAFR Management’s Discussion and Analysis 23 Program Expenses and Revenues – Governmental Activities Business-type net position totaled $249.2 million, an increase of 4.1%. Key components of this increase include:  Business-type revenues decreased $4.1 million to $73.6 million due to a reduction in capital grants and contributions as well as miscellaneous revenues, which were partly offset by increases in charges for services and investment earnings.  Income (loss) before capital contributions and transfers amounted to: Water fund: $ 2,747,130 Sanitary sewer fund: 623,178 Storm fund: 1,028,263 Solid waste fund: 677,037 Non-major funds: 155,260 $ 5,230,868  Net transfers totaled ($454,436). $0 $5 $10 $15 $20 $25 $30 MillionsProgram Revenues Expenses City of Auburn: 2017 CAFR Management’s Discussion and Analysis 24 The following chart shows the relative net position balances for each business-type fund: Business Type Net Position – By Fund The majority of net position in the City’s enterprise funds relate to capital asset infrastructure, such as water and sewer mains and the airport runway. As such, most of the net position is not available to support the ongoing expenses of the funds. Following are two charts that contrast the total net position to the spendable portion of net position for each enterprise fund: Comparison of Total Net Position to Spendable Net Position Utility Funds 26.9 2.0 Water 32.0% Sanitary Sewer 34.6% Storm Drainage 26.9% Solid Waste 2.0% Airport 3.9% Cemetery 0.6% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 Water Sanitary Sewer Storm Drainage Solid Waste Spendable Net Position Total Net Position City of Auburn: 2017 CAFR Management’s Discussion and Analysis 25 Comparison of Total Net Position to Spendable Net Position Other Enterprise Funds 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 $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 Airport CemeteryMillionsSpendable Net Position Total Net Position $0 $2 $3 $5 $6 $8 $9 $11 $12 $14 $15 $17 $18 $20 $21 $23 Water Sanitary Sewer Storm Drainage Solid Waste Minor Business-Type ActivitiesMillionsRevenues Expenses City of Auburn: 2017 CAFR Management’s Discussion and Analysis 26 Business Type Activity Revenues By Source Financial Analysis of Governmental Funds The purpose of the City’s governmental 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, 2017, the City’s governmental funds had combined fund balances of $69.1 million, an increase of $3.5 million or 5.4% over the previous year. This change is primarily due to increases in fund balances for the General fund and capital improvement fund net of a reduction in fund balance for the City’s Arterial Street and other governmental funds. The following table shows the changes in fund balance between 2016 and 2017. Changes in Fund Balance - By Fund 100.0Charges for Services 91.6% Capital Contributions 5.9% Investment Earnings 0.7% Business-type Miscellaneous Income 1.8% Fund 2017 2016 Difference General fund 34,760,782$ 32,151,179$ 2,609,603$ Arterial street fund 2,584,136 2,655,913 (71,777) Capital improvement fund 11,271,845 10,032,509 1,239,336 All other government funds 20,442,878 20,704,803 (261,925) Total 69,059,641$ 65,544,404$ 3,515,237$ City of Auburn: 2017 CAFR Management’s Discussion and Analysis 27 Of the government funds’ total fund balances, $25.4 million is unassigned. Nonspendable, restricted, committed and assigned fund balances total $43.6 million. Of this $43.6 million, $13.9 million is earmarked for capital projects, $18.7 million is in special revenue funds that are earmarked for specific purposes and $1.7 million is 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 2017, the general fund had a fund balance of $34.8 million, $9.3 million of which is assigned, and $25.5 million is unassigned. Other funds that had significant fund balances include:  $11.3 million in the capital improvement projects fund; used for various governmental capital asset projects.  $20.4 million in all other government funds; used primarily for local street improvements, local revitalization funding and maintenance of cemetery. The general fund balance of $34.8 million increased by $2.6 million from the prior year. Revenues increased with the continued gradual improvement in the local and regional economic conditions . At the same time, expenses increased over 2016 due to inflation and programmatic changes. Meanwhile, the City continues its vigilance in monitoring general expenditure activity. The following chart shows the relative fund balances for governmental funds: Governmental Funds – Fund Balances City of Auburn: 2017 CAFR Management’s Discussion and Analysis 28 General fund revenue increased by $3.3 million, sources of which are shown in the chart below. Property taxes increased by $2.9 million and sales taxes increased $0.5 million. Utility and other taxes increased by a net of $0.3 million. Licenses and Permits decreased by $1.1 million due primarily to reductions in building permit fees ($0.8 million) and plumbing permits ($0.2 million). Charges for Services increased by $0.2 million, Fines & Forfeitures essentially remained unchanged, Intergovernmental Revenues increased by $0.4 million and Miscellaneous Revenues increased by $0.2 million. 2017 General Fund Revenue Changes – By Source 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. Property Taxes $$733,412 Sales Taxes $369,290 Interfund Utility Taxes $312,103 Utility & Admission Taxes $34,771 Licenses & Permits $909,993 Charges for Services ($144,266) Fines & Forfeitures ($32,854) Intergovernmental $386,833 Miscellaneous $401,928 ($200,000) $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 Property Taxes $2.9 Sales Taxes $0.5 Interfund Utility Taxes ($0.1) Utility & Admission Taxes $0.4 Licenses & Permits ($1.1) Charges for Services $0.2 Fines & Forfeitures ($0.0) Intergovernmental $0.4 Miscellaneous $0.1 ($1.6) ($1.2) ($0.8) ($0.4) $0.0 $0.4 $0.8 $1.2 $1.6 $2.0 $2.4 $2.8 $3.2 $3.6 $4.0 Millions City of Auburn: 2017 CAFR Management’s Discussion and Analysis 29 General Fund Budgetary Highlights The City budgets biennially by adopting two single-year budgets at the end of each even-numbered year and then making adjustments as necessary via budget amendments throughout the next two years. Major amendments to the 2017 budget included:  Budgeted General Fund expenditures and transfers out increased from $69.5 million to $73.2 million. Significant changes include increased property tax revenues to reflect the use of banked capacity, funding of emergency repairs at the Auburn Municipal Airport, and transfers to the insurance and cumulative reserve fund. Reasons for the variances in the general fund between the final budget and actual results include:  Actual General Fund revenues totaled $68.6 million, exceeding budget by $1.3 million. Significant areas of favorable variance include sales and property taxes, which exceeded budget by $320,000 and $186,000, respectively, as described above; rents and leases, which exceeded budget by $164,000; electric and gas utility taxes, which exceeded budget by $307,000; leasehold excise taxes, which exceeded budget by $163,000; and investment in come, which exceeded budget by $169,000. Areas of unfavorable variance include building permits, which were $383,000 below budget; brokered natural gas taxes, which were $176,000 under budget; and development services fees, which were $101,000 below budget.  Actual General Fund expenditures totaled $67.0 million and were under budget by $6.2 million. Departments experienced savings due to continued vigilance in monitoring city-wide expenditures. Significant areas of under- expenditure include reduced personnel costs largely due to Police Department vacancies, and reduced professional services contracts and other miscellaneous expenses. 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, 2017 totaled $642.8 million (net of accumulated depreciation), an increase of $10.8 million from 2016. 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:  Developer contributions resulted in an increase of $2.5 million in utility infrastructure assets and $2.4 million in governmental infrastructure assets.  $11.3 million was spent by proprietary funds on construction projects during the year.  Purchases of government land resulted in an increase of $0.1 million.  $18.5 million was spent by governmental funds on construction projects during the year. Some of the larger projects in the governmental funds include: $3.9 million on South 277th (Auburn Way North to Green River Bridge) project $2.6 million on Auburn Way South Corridor Improvements $2.0 million on B Street Northwest Reconstruction project $1.7 million on Auburn Way North Street Preservation project $1.3 million on West Main St. Multimodal Corridor and ITS Improvements City of Auburn: 2017 CAFR Management’s Discussion and Analysis 30 A summary of the City’s capital assets follows: 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 net bonded debt outstanding of $77.7 million. Of this amount, $22.9 million is due to other governments, $27.8 million is general obligation bonds, and $27.0 million is revenue bonds for the water, sewer and storm utilities. The City currently maintains a rating of Aa3 with Moody’s and a rating of AA+ with Standard & Poor’s for its general obligation debt. The following schedule summarizes the City’s bonded debt: Below is a summary of additional, non-bonded long-term debt of the City: Washington State law limits the amount of general obligation debt a governmental entity may issue to 7.5% of its total assessed value. Of the 7.5% limit, 2.5% is for general purposes, 2.5% is for open spaces/parks, and 2.5% is for utilities. Non- voted (limited tax) general obligation indebtedness is limited to 1.5% of assessed valuation. The combination of unlimited tax and limited tax general obligation debt for all purposes cannot exceed 7.5% of asse ssed valuation. Summary of Capital Assets (net of depreciation) As of 12/31/17 As of 12/31/2016 As of 12/31/17 As of 12/31/2016 As of 12/31/17 As of 12/31/2016 Land 108,890,255$ 108,793,702$ 12,526,187$ 12,526,187$ 121,416,442$ 121,319,889$ Building 53,614,550 55,101,628 2,025,151 2,106,829 55,639,701 57,208,457 Site improvements 7,490,415 7,813,341 207,306,228 203,881,093 214,796,643 211,694,434 Equipment 8,652,792 8,436,499 293,545 265,028 8,946,337 8,701,527 Intangibles 37,967 192,530 5,449,186 5,196,600 5,487,153 5,389,130 Infrastructure 216,159,542 209,040,706 - - 216,159,542 209,040,706 Construction in progress 10,077,359 10,999,486 10,273,608 7,623,079 20,350,967 18,622,565 404,922,880$ 400,377,892$ 237,873,905$ 231,598,816$ 642,796,785$ 631,976,708$ Governmental Activities Business-type Activities Total Summary of Bonded Debt Governmental Activities Business-type Activities Total General obligation bonds 27,411,611$ 362,822$ 27,774,433$ Revenue bonds - 27,035,000 27,035,000 Due to other governments 22,918,300$ - 22,918,300 50,329,911$ 27,397,822$ 77,727,733$ Other Long-Term Debt Public Works Trust Fund loans 10,394,433$ Capital Lease 382,914$ 10,777,347$ City of Auburn: 2017 CAFR Management’s Discussion and Analysis 31 Additional information can be found in note 9 and in the statistical section of this report. Economic Factors Over the past year, economic conditions continued to improve locally. Real property values , which had finally recovered to pre-recession levels by 2016, grew an additional 8.4% in 2017. Property tax receipts grew by 16.2% due in part to this increase in assessed valuation and in part to the used of banked taxing capacity. Retail sales continued to increase, by 2.7% over 2016 levels, and the rate of unemployment in the County and City remained low. However, building permit revenues decreased by over 24% reflecting reduced construction activity relative to 2016. While general economic conditions in the region have improved, and the economic outlook for the City is generally positive, significant challenges to the City’s overall financial condition remain. In particular, several areas at the Federal and State levels of government continue to cast a shadow. These negative factors include the ongoing disagreements within the United States Congress on finding a long-term solution to fund governmental services as well as – at the State level – long- term fiscal challenges for addressing holes left by one -time budget fixes in the current budget and the need to fund basic education mandates. Additionally, the State and City continue to grapple with the financial impacts of the phase-out of streamlined sales tax revenue distributions to cities and the uncertainty of sales tax receipts on out-of-state sales under the new Marketplace Fairness Act. Therefore, although the City has seen significant private investments in the community, including development within several blocks in downtown that will serve as a catalyst for future redevelopment, the City remains cautious and continues to vigilantly monitor and control its expenses in order to live within the City’s means. 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. City of Auburn: 2017 CAFR Management’s Discussion and Analysis 32 City of Auburn: 2017 CAFR Basic Financial Statements 33 GOVERNMENT-WIDE FINANCIAL STATEMENTS The City presents two government-wide financial statements. The Statement of Net Position This statement provides information all on city assets and liabilities, with the difference between the two reported as net position. The Statement of Activities This statement 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. City of Auburn: 2017 CAFR Basic Financial Statements 34 City of Auburn: 2017 CAFR Basic Financial Statements 35 Governmental Business-Type Activities Activities Total ASSETS: Cash and Cash Equivalents (Note 3)60,013,183$ 43,189,343$ 103,202,526$ Cash with Outside Agencies (391) - (391) Investments (Note 3)992,430 - 992,430 Receivables Taxes 306,809 - 306,809 Customer Accounts 486,179 6,884,100 7,370,279 Other Receivables 2,624,305 - 2,624,305 Special Assessments 7,283 - 7,283 Due From Other Governmental Units (Note 6)2,775,623 171,616 2,947,239 Internal Balances (440,475) 440,475 - Materials and Supplies Inventory 272,670 160,443 433,113 Restricted Assets: Temporarily Restricted: Cash and Cash Equivalents (Note 3)20,559,911 6,588,886 27,148,797 Due From Other Governmental Units (Note 6)2,185,905 - 2,185,905 Permanently Restricted: Cash and Cash Equivalents (Note 3)1,717,134 - 1,717,134 Prepaids 546,773 - 546,773 Long-Term Contracts and Notes 13,473 645,900 659,373 Net Pension Asset (Note 10)6,702,047 - 6,702,047 Investment in Joint Ventures (Note 15)31,356,184 - 31,356,184 Depreciable Capital Assets (Net of Accumulated Depreciation) (Note 7)285,955,266 209,624,924 495,580,190 Non-Depreciable Capital Assets (Note 7)118,967,614 28,248,981 147,216,595 Total Assets 535,041,923 295,954,668 830,996,591 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflows from Bond Refunding 5,588 21,837 27,425 Deferred Outflows related to Pensions 2,236,350 906,652 3,143,002 Total Deferred Outflow of Resources 2,241,938 928,489 3,170,427 LIABILITIES: Accounts Payable 5,607,399 3,673,088 9,280,487 Other Liabilities Payable 785,730 1,382 787,112 Payable From Restricted Assets: Accrued Interest - 1,485,333 1,485,333 Deposits - 215,194 215,194 Unearned Revenue 13,473 - 13,473 Bonds and Other Debt Payable: Due Within One Year (Note 9)3,590,679 3,103,484 6,694,163 Due in More Than One Year (Note 9)30,414,688 32,702,154 63,116,842 Due to Other Governmental Units: Due Within One Year (Note 9)716,100 - 716,100 Due in More Than One Year (Note 9)22,202,200 - 22,202,200 Net Penion Liability (Note 10)11,986,783 5,612,947 17,599,730 Firemen's Pension Liability (Note 10)3,212,435 - 3,212,435 Net OPEB Obligation (Note 11)9,137,985 - 9,137,985 Total Liabilities 87,667,472 46,793,582 134,461,054 DEFERRED INFLOWS OF RESOURCES: Deferred Inflows related to Pensions 3,589,485 927,497 4,516,982 Total Deferred Inflows of Resources 3,589,485 927,497 4,516,982 NET POSITION Net Investment in Capital Assets 373,368,906 205,677,614 579,046,520 Restricted: Capital Projects 27,407,299 - 27,407,299 Nonexpendable Permanent Endowment 1,717,134 - 1,717,134 Debt Service 9,686 1,437,567 1,447,253 Tourist Promotion 200,371 - 200,371 Drug Investigation and Enforcement 381,136 - 381,136 Community Development Block Grant Program 44,904 - 44,904 Central Business District Development 93,710 - 93,710 Rate Stabilization - 419,403 419,403 Unrestricted 42,803,759 41,627,494 84,431,253 Total Net Position 446,026,905$ 249,162,078$ 695,188,983$ The notes to the basic financial statements are an integral part of this statement. Primary Government City of Auburn, Washington STATEMENT OF NET POSITION December 31, 2017 City of Auburn: 2017 CAFR Basic Financial Statements 36 Charges Operating Capital for Services Grants and Grants and Expenses and Fines Contributions Contributions FUNCTIONS / PROGRAMS: Primary Government Governmental Activities: General Government 10,384,647$ 1,241,905$ 163,698$ 366,582$ Public Safety 32,746,406 2,523,667 1,936,498 13,227 Transportation 17,904,352 2,118,980 - 11,232,469 Physical Environment 3,217,885 431,580 5,125 220,987 Culture and Recreation 13,539,098 3,073,262 145,325 794,962 Economic Environment 3,859,863 2,400,940 2,000 23,005 Health and Human Resources 674,270 - 5,000 578,270 Interest on Long-Term Debt 1,555,803 - - - 83,882,324 11,790,334 2,257,646 13,229,502 Business-Type Activities Water 12,408,008 14,781,310 - 1,176,756 Sanitary Sewer 25,360,718 26,369,496 - 873,779 Storm Drainage 8,979,969 9,778,102 - 2,313,033 Solid Waste 14,539,703 15,079,932 106,286 - Nonmajor Business-Type Activities 2,106,557 2,211,360 - - 63,394,955 68,220,200 106,286 4,363,568 Total Primary Government 147,277,279$ 80,010,534$ 2,363,932$ 17,593,070$ General Revenues: Taxes: Property Retail Sales and Use Interfund Utility Utility Excise Other Investment Earnings Other Revenues Gain on Sale of Capital Assets Contributions to Endowment Funds Transfers (Note 5) Total General Revenues Change in Net Position Net Position, January 1 Change In Accounting Principle Net Position, January 1 restated Net Position, December 31 The notes to the basic financial statements are an integral part of this statement. Program Revenues City of Auburn, Washington STATEMENT OF ACTIVITIES For the Year Ended December 31, 2017 Page 1 of 2 City of Auburn: 2017 CAFR Basic Financial Statements 37 Governmental Business-Type Activities Activity Total (8,612,462)$ -$ (8,612,462)$ (28,273,013) - (28,273,013) (4,552,903) - (4,552,903) (2,560,193) - (2,560,193) (9,525,549) - (9,525,549) (1,433,918) - (1,433,918) (91,000) - (91,000) (1,555,803) - (1,555,803) (56,604,841) - (56,604,841) - 3,550,058 3,550,058 - 1,882,557 1,882,557 - 3,111,166 3,111,166 - 646,515 646,515 - 104,803 104,803 - 9,295,099 9,295,099 (56,604,841)$ 9,295,099$ (47,309,742)$ 20,967,953$ -$ 20,967,953$ 22,333,454 - 22,333,454 4,540,265 - 4,540,265 10,391,462 - 10,391,462 4,141,146 - 4,141,146 5,253,964 - 5,253,964 787,786 479,132 1,266,918 134,003 444,110 578,113 19,212 - 19,212 51,091 - 51,091 454,436 (454,436) - 69,074,772 468,806 69,543,578 12,469,931 9,763,905 22,233,836 436,774,978 239,398,173 676,173,151 (3,218,004) - (3,218,004) 433,556,974 239,398,173 672,955,147 446,026,905$ 249,162,078$ 695,188,983$ Changes in Net Position Net (Expense) Revenue and Page 2 of 2 City of Auburn: 2017 CAFR Basic Financial Statements 38 City of Auburn: 2017 CAFR Basic Financial Statements 39 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. Biennial budgets are adopted with appropriations lapsing at the end of each year of the biennium. Arterial Street Fund This fund is supported by the State of Washington’s motor vehicle fuel tax and by various grants and is used for major street construction. Capital Improvement Projects Fund This fund accounts for major capital acquisitions, and streets and parks construction projects. City of Auburn: 2017 CAFR Basic Financial Statements 40 Other Total General Arterial Capital Governmental Governmental Fund Street Improvement Funds Funds ASSETS: Cash and Cash Equivalents 32,874,422$ 1,087,394$ 11,229,743$ 20,960,950$ 66,152,509$ Investments (Note 3)992,430 - - - 992,430 Deposits with Fiscal Agent (391) - - - (391) Receivables: Taxes 306,809 - - - 306,809 Customer Accounts 125,862 339,839 - 3,793 469,494 Other Receivables 2,274,352 - - 345,829 2,620,181 Special Assessments - - - 7,283 7,283 Interfund Receivable (Note 5)50,000 - 93,782 - 143,782 Inventories 30,453 - - - 30,453 Long-Term Notes and Contracts - - 13,473 - 13,473 Due From Other Governmental Units (Note 6)2,769,412 1,961,355 44,050 180,500 4,955,317 Total Assets 39,423,349 3,388,588 11,381,048 21,498,355 75,691,340 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES: Liabilities: Current Payables 2,974,017 804,452 95,730 961,240 4,835,439 Customer Deposits 427,872 - - - 427,872 Interfund Payable (Note 5)- - - 50,000 50,000 Other Liabilities Payable 188,207 - - 36,954 225,161 Unearned Revenue - - 13,473 - 13,473 Total Liabilities 3,590,096 804,452 109,203 1,048,194 5,551,945 Deferred Inflow of Resources: Unavailable Revenue-Special Assessments - - - 7,283 7,283 Unavailable Revenue-Other 1,072,471 - - - 1,072,471 Total Deferred Inflow of Resources 1,072,471 - - 7,283 1,079,754 Fund Balances: (Note 1) Nonspendable 30,453 - - - 30,453 Nonspendable Permanent Endowment - - - 1,717,134 1,717,134 Restricted - 2,584,136 10,794,522 14,758,448 28,137,106 Committed - - - 3,223,108 3,223,108 Assigned 9,315,528 - 477,323 744,188 10,537,039 Unassigned 25,414,801 - - - 25,414,801 Total Fund Balances:34,760,782 2,584,136 11,271,845 20,442,878 69,059,641 Total Liabilities, Deferred Inflows and Fund Balances 39,423,349$ 3,388,588$ 11,381,048$ 21,498,355$ 75,691,340$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, Washington BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2017 City of Auburn: 2017 CAFR Basic Financial Statements 41 Total governmental fund balances as reported on this statement 69,059,641$ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore 396,609,025 not reported in the governmental funds. Other non-current assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Investment in Joint Ventures 8,437,884 Prepaids 546,773 Interest receivable on investments 4,124 Net pension asset 3,489,612 12,478,393 Other long-term assets are not available to pay for current-period expenditures and therefore are reported as unavailable revenue in the governmental funds. Unearned revenue beyond the city's 30-day measurable and available period 1,072,471 Unavailabe revenue reported for special assessments 7,283 1,079,754 Internal service funds are used by management to charge the cost of certain activities, such as insurance, fleet maintenance and information technology, to individual funds. The assets and liabilities of these internal service 21,111,117 funds are included in governmental activities in the statement of net position. Some liabilities are not due and payable in the current period and therefore are not reported in the governmental funds. Bonds and loans payable (31,376,165) Premium on Bonds Payable (73,929) Deferred amount on bond refunding 5,588 Deferred amounts related to pensions (1,326,570) Interest payable (132,397) Net pension liability (10,096,427) Net other postemployment obligations (9,137,985) Compensated absences payable (2,173,140) (54,311,024) Net position of government activities as reported on the statement of net position 446,026,905$ The notes to the basic financial statements are an integral part of this statement. RECONCILIATION OF BALANCE SHEET OF GOVERNMENT FUNDS TO THE STATEMENT OF NET POSITION December 31, 2017 City of Auburn, Washington City of Auburn: 2017 CAFR Basic Financial Statements 42 Other Total General Arterial Capital Governmental Governmental Fund Street Improvement Funds Funds REVENUES: Taxes: Property 20,837,874$ -$ -$ 138,510$ 20,976,384$ Retail Sales & Use 19,441,488 - - 2,891,966 22,333,454 Interfund Utility 3,891,656 - - 648,609 4,540,265 Utility 8,932,920 - - 1,458,542 10,391,462 Excise 519,630 - 3,497,030 124,486 4,141,146 Other - - - 42,535 42,535 Licenses and Permits 1,906,796 - - - 1,906,796 Intergovernmental 6,322,043 7,043,677 30,847 2,790,993 16,187,560 Charges for Services 4,416,518 - - 2,701,256 7,117,774 Fines and Forfeitures 882,254 - - - 882,254 Special Assessments - - - 3,835 3,835 Investment Earnings 349,018 11,173 102,542 209,980 672,713 Miscellaneous 1,096,866 709,222 6,259 153,986 1,966,333 Total Revenues 68,597,063 7,764,072 3,636,678 11,164,698 91,162,511 EXPENDITURES: Current: General Government 9,755,757 - - - 9,755,757 Security of Persons and Property 31,464,290 - - 620,086 32,084,376 Physical Environment 3,359,548 - - - 3,359,548 Transportation 3,679,967 9,618,924 - 7,353,647 20,652,538 Economic Environment 3,117,886 - - 762,139 3,880,025 Health and Human Services 674,270 - - - 674,270 Culture and Recreation 11,943,070 - - - 11,943,070 Debt Service: Principal 57,642 197,376 - 1,380,108 1,635,126 Interest and Other Costs 20,526 12,135 - 1,557,864 1,590,525 Capital Outlay 29,905 - 849,072 1,217,304 2,096,281 Total Expenditures 64,102,861 9,828,435 849,072 12,891,148 87,671,516 Excess (Deficiency) of Revenues Over (Under) Expenditures 4,494,202 (2,064,363) 2,787,606 (1,726,450) 3,490,995 OTHER FINANCING SOURCES (USES): Sales of Capital Assets 2,700 - - - 2,700 Insurance Recoveries 134,003 - - - 134,003 Transfers In (Note 5)1,079,000 1,999,610 475,583 3,496,624 7,050,817 Transfers Out (Note 5)(3,100,302) (7,024) (2,023,853) (2,032,099) (7,163,278) Total Other Financing Sources and Uses (1,884,599) 1,992,586 (1,548,270) 1,464,525 24,242 Net Change in Fund Balances 2,609,603 (71,777) 1,239,336 (261,925) 3,515,237 Fund Balances - January 1, as Previously Reported 32,151,179 2,655,913 10,032,509 20,704,803 65,544,404 Fund Balances - Ending 34,760,782$ 2,584,136$ 11,271,845$ 20,442,878$ 69,059,641$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For the Year Ended December 31, 2017 City of Auburn: 2017 CAFR Basic Financial Statements 43 Net change in fund balances per the Statement of Revenues, Expenditures and Changes in Fund Balance 3,515,237$ Amount reported as change in net position 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 ($18,432,909) exceeded depreciation ($16,509,513) in the current period.1,923,396 Certain Capital and Joint Venture activities do not use or provide current financial resources but increase net position.817,723 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds: Property taxes (8,431) Special assessments (4,114) Other unavailable revenue (90,700) Amortization of bond premium 29,141 Investment interest receivable (8,837) (82,940) Developer contributions and annexation of infrastructure assets are reported as revenue in the statement of activities, but do not provide current financial resources and are not reported as fund revenue.2,451,623 Repayment of the principal of long-term debt consumes the current financial resources of governmental funds but has no effect on the net position. 1,628,867 Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet maintenance, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities.1,829,168 Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Amortization of prepaids (109,355) Change in accrued interest payable 4,595 Change in net pension obligation or asset 1,383,217 Change in net other postemployment benefits (690,154) Change in compensated absences payable (201,446) 386,857 Change in net position on the Statement of Activities 12,469,931$ The notes to the basic financial statements are an integral part of this statement. 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, 2017 City of Auburn: 2017 CAFR Basic Financial Statements 44 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Property 20,152,000$ 20,652,000$ 20,837,874$ 185,874$ Retail Sales & Use 19,094,300 19,094,300 19,441,488 347,188 Interfund Utility 3,671,300 3,936,300 3,891,656 (44,644) Utility 8,487,700 8,487,700 8,932,920 445,220 Excise 340,300 340,300 519,630 179,330 Licenses and Permits 2,338,700 2,338,700 1,906,796 (431,904) Intergovernmental 5,919,680 6,129,110 6,243,965 114,855 Charges for Services 3,981,980 4,361,980 4,416,518 54,538 Fines and Forfeitures 876,100 876,100 882,254 6,154 Investment Earnings 69,000 69,000 237,532 168,532 Miscellaneous 879,500 884,500 1,096,866 212,366 Total Revenues 65,810,560 67,169,990 68,407,499 1,237,509 EXPENDITURES: Current: General Government 11,182,750 11,285,933 9,755,757 1,530,176 Security of Persons and Property 32,577,455 33,668,898 31,269,319 2,399,579 Physical Environment 4,053,466 4,073,266 3,359,548 713,718 Transportation 3,760,044 3,817,220 3,679,967 137,253 Economic Environment 3,428,643 3,764,529 3,117,886 646,643 Health and Human Services 639,742 733,542 674,270 59,272 Culture and Recreation 12,083,188 12,152,688 11,943,070 209,618 Debt Service 77,699 77,699 78,168 (469) Capital Outlay 324,519 30,000 29,905 95 Total Expenditures 68,127,506 69,603,775 63,907,890 5,695,885 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,316,946) (2,433,785) 4,499,609 6,933,394 OTHER FINANCING SOURCES (USES): Sales of Capital Assets - - 2,700 2,700 Insurance Recoveries 25,000 25,000 134,003 109,003 Transfers In (Note 5)84,000 79,000 79,000 - Transfers Out (Note 5)(1,360,476) (3,578,551) (3,100,302) 478,249 Total Other Financing Sources and Uses (1,251,476) (3,474,551) (2,884,599) 589,952 Net Change in Fund Balances (3,568,422) (5,908,336) 1,615,010 7,523,346 Fund Balances - Beginning 16,191,731 21,028,666 21,028,666 - Fund Balances - Ending 12,623,309$ 15,120,330$ 22,643,676$ 7,523,346$ RECONCILIATION OF PERSPECTIVE DIFFERENCE BETWEEN BUDGETARY INFORMATION AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP): The Cumulative Reserve Fund is combined with the General Fund for purposes of GASB Statement 54 9,799,312 The Fire, Relief & Pension Fund is combined with the General Fund for purposes of GASB Statement 73 2,317,794 Fund Balance - Ending (GAAP)34,760,782$ The notes to the basic financial statements are an integral part of this statement. Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND City of Auburn: 2017 CAFR Basic Financial Statements 45 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Intergovernmental $1,717,965 $10,632,292 $7,043,677 ($3,588,615) Charges for Services - 466,191 - (466,191) Investment Earnings 2,600 2,600 11,173 8,573 Miscellaneous 100,000 809,221 709,222 (99,999) Total Revenues 1,820,565 11,910,304 7,764,072 (4,146,232) EXPENDITURES: Current: Transportation 2,580,646 16,304,793 9,618,924 6,685,869 Debt Service Principal 197,376 197,376 197,376 - Interest and Other Costs 12,135 12,135 12,135 - Total Expenditures 2,790,157 16,514,304 9,828,435 6,685,869 Excess (Deficiency) of Revenues Over (Under Expenditures (969,592) (4,604,000) (2,064,363) 2,539,637 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)718,511 3,420,622 1,999,610 (1,421,012) Transfers Out (Note 5)(4,661) (15,046) (7,024) 8,022 Total Other Financing Sources and Uses 713,850 3,405,576 1,992,586 (1,412,990) Net Change in Fund Balances (255,742) (1,198,424) (71,777) 1,126,647 Fund Balances - Beginning 1,632,556 2,655,913 2,655,913 - Fund Balances - Ending 1,376,814$ 1,457,489$ 2,584,136$ 1,126,647$ The notes to the basic financial statements are an integral part of this statement. Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL ARTERIAL STREET FUND City of Auburn: 2017 CAFR Basic Financial Statements 46 City of Auburn: 2017 CAFR Basic Financial Statements 47 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 four major enterprise funds. The Water Fund This fund accounts for all maintenance, construction, and debt service requirements associated with Auburn’s 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. City of Auburn: 2017 CAFR Basic Financial Statements 48 Governmental Activities Non-Major Total Sanitary Storm Solid Enterprise Enterprise Internal Water Sewer Drainage Waste Funds Funds Service Funds ASSETS: Current Assets Cash and Cash Equivalents 5,765,412$ 16,427,725$ 14,545,114$ 4,677,646$ 1,773,446$ 43,189,343$ 16,137,719$ Restricted Cash: Bond Payments 1,690,316 535,820 804,480 - - 3,030,616 - Customer Deposits 43,892 79,473 3,422 - 89,180 215,967 - Other 1,630,313 516,173 1,195,817 - - 3,342,303 - Customer Accounts 1,363,945 2,745,457 1,066,124 1,701,592 6,982 6,884,100 16,685 Due From Other Governmental Units 17,968 - 70,124 69,534 13,990 171,616 6,211 Inventories 135,450 9,103 7,390 - 8,500 160,443 242,217 Total Current Assets 10,647,296 20,313,751 17,692,471 6,448,772 1,892,098 56,994,388 16,402,832 Noncurrent Assets Long-Term Contracts and Notes - 645,900 - - - 645,900 - Capital Assets: Land 897,971 1,695,023 5,937,014 - 3,996,179 12,526,187 - Intangible - Water Rights 5,449,186 - - - - 5,449,186 - Buildings and Equipment 2,509,599 1,255,947 290,575 496,618 4,064,521 8,617,260 25,051,494 Improvements Other Than Buildings 131,463,582 101,366,336 79,177,949 - 11,082,929 323,090,796 117,158 Construction in Progress 8,374,328 1,121,482 459,310 - 318,488 10,273,608 109,048 Less: Accumulated Depreciation (54,538,817) (31,609,927) (26,325,396) (449,569) (9,159,423) (122,083,132) (16,963,844) Total Capital Assets (Net of A/D)94,155,849 73,828,861 59,539,452 47,049 10,302,694 237,873,905 8,313,856 Total Noncurrent Assets 94,155,849 74,474,761 59,539,452 47,049 10,302,694 238,519,805 8,313,856 Total Assets 104,803,145 94,788,512 77,231,923 6,495,821 12,194,792 295,514,193 24,716,688 DEFERRED OUTFLOW OF RESOURCES: Deferred Outflow from Bond Refunding - - - - 21,837 21,837 - Deferred Outflow related to Pensions 312,206 200,138 292,611 51,059 50,638 906,652 310,456 312,206 200,138 292,611 51,059 72,475 928,489 310,456 LIABILITIES: Current Liabilities: Current Payables 1,354,856 393,163 391,180 1,364,777 169,112 3,673,088 771,960 Customer Deposits - - - - - - 300 Interfund Payables (Note 5)- - - - 93,782 93,782 - Loans Payable - Current 634,328 288,262 - - - 922,590 - Employee Leave Benefits - Current 125,285 103,747 173,857 23,140 18,464 444,493 209,418 Revenue Bonds Payable - Current 871,737 262,685 425,578 - - 1,560,000 - General Obligation Bonds Payable - Current - - - - 176,401 176,401 - Accrued Interest 828,486 279,081 377,766 - - 1,485,333 - Deposits 43,892 79,473 3,422 - 88,407 215,194 - Other Liabilities Payable 600 172 469 141 - 1,382 41,608 Total Current Liabilities 3,859,184 1,406,583 1,372,272 1,388,058 546,166 8,572,263 1,023,286 Noncurrent Liabilities Employee Leave Benefits 37,836 31,332 52,506 6,988 5,576 134,238 63,246 Other LT Liabilities Payable - - - - - - 67,861 Loans Payable 3,689,390 2,090,408 - - - 5,779,798 - Revenue Bonds Payable 14,899,559 4,206,276 7,495,862 - - 26,601,697 - General Obligation Bonds Payable - - - - 186,421 186,421 - Net Pension Liability 2,775,633 1,130,142 1,339,843 195,660 171,669 5,612,947 1,890,356 Total Noncurrent Liabilities 21,402,418 7,458,158 8,888,211 202,648 363,666 38,315,101 2,021,463 Total Liabilities 25,261,602 8,864,741 10,260,483 1,590,706 909,832 46,887,364 3,044,749 DEFERRED INFLOW OF RESOURCES: Deferred Inflow related to Pensions 372,104 198,614 284,225 33,442 39,112 927,497 337,021 NET POSITION: Net Investment in Capital Assets:75,751,151 67,517,050 52,422,492 47,049 9,939,872 205,677,614 8,204,387 Restricted for: Debt Service 801,827 237,092 398,648 - - 1,437,567 - Rate Stabilization - - 419,403 - - 419,403 - Unrestricted 2,928,667 18,171,153 13,739,283 4,875,683 1,378,451 41,093,237 13,440,987 Total Net Position 79,481,645$ 85,925,295$ 66,979,826$ 4,922,732$ 11,318,323$ 248,627,821$ 21,645,374$ Adjustment to reflect the consolidation of internal service funds related to enterprise funds 534,257 Net position of business-type activities 249,162,078$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, Washington STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2017 Enterprise Funds City of Auburn: 2017 CAFR Basic Financial Statements 49 Governmental Activities Non-Major Total Sanitary Storm Solid Enterprise Enterprise Internal Water Sewer Drainage Waste Funds Funds Service Funds OPERATING REVENUES: Charges of Services 14,781,310$ 26,369,496$ 9,778,102$ 15,079,932$ 1,407,320$ 67,416,160$ 14,275,060$ Other Operating Revenue - - - - 804,040 804,040 202,861 Total Operating Revenue 14,781,310 26,369,496 9,778,102 15,079,932 2,211,360 68,220,200 14,477,921 OPERATING EXPENSES: Operations & Maintenance 3,753,573 19,055,093 3,379,046 12,749,847 1,201,009 40,138,568 10,158,005 Administration 4,672,569 4,464,901 3,372,935 1,770,178 358,309 14,638,892 861,891 Depreciation / Amortization 3,269,581 2,199,711 1,885,931 18,819 510,226 7,884,268 1,862,565 Other Operating Expenses 8,964 6,648 13,085 859 16,254 45,810 - Total Operating Expenses 11,704,687 25,726,353 8,650,997 14,539,703 2,085,798 62,707,538 12,882,461 Operating Income (Loss)3,076,623 643,143 1,127,105 540,229 125,562 5,512,662 1,595,460 NON-OPERATING REVENUE (EXPENSE):` Interest Revenue 104,564 164,566 151,733 41,713 16,556 479,132 135,747 Other Non-Operating Revenue 269,264 73,739 78,397 95,095 33,901 550,396 142,037 Gain on Sale of Capital Assets - - - - - - 16,512 Interest Expense (703,321) (258,270) (328,972) - - (1,290,563) (3,580) Other Non-Operating Expenses - - - - (20,759) (20,759) - Total Non-Operating Revenue (Expense)(329,493) (19,965) (98,842) 136,808 29,698 (281,794) 290,716 Income (Loss) Before Contributions & Transfers 2,747,130 623,178 1,028,263 677,037 155,260 5,230,868 1,886,176 Capital Contribution 1,176,756 873,779 2,313,033 - - 4,363,568 - Transfers In (Note 5)2,500,000 800,000 300,000 - 274,937 3,874,937 1,511,700 Transfers Out (Note 5)(2,693,946) (962,905) (672,122) - (400) (4,329,373) (944,803) Change in Net Position 3,729,940 1,334,052 2,969,174 677,037 429,797 9,140,000 2,453,073 Net Position, January 1 75,751,705 84,591,243 64,010,652 4,245,695 10,888,526 239,487,821 19,192,301 Net Position, December 31 79,481,645$ 85,925,295$ 66,979,826$ 4,922,732$ 11,318,323$ 248,627,821$ 21,645,374$ Change in net position from this statement 9,140,000 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 623,905 Change in net position of business-type activities 9,763,905$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, Washington STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS For the Year Ended December 31, 2017 Enterprise Funds City of Auburn: 2017 CAFR Basic Financial Statements 50 Page 1 of 2 Government Non Major Activities Sanitary Storm Solid Enterprise Internal Water Sewer Drainage Waste Funds Total Service Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Users 14,724,460$ 26,292,793$ 9,755,335$ 14,937,407$ 2,212,749$ 67,922,744$ 14,465,507$ Cash Paid to Suppliers for Goods & Services (4,017,089) (21,169,781) (3,548,224) (13,973,052) (812,879) (43,521,025) (6,486,879) Cash Paid for Taxes - (45) (817) (858) (16,302) (18,022) - Cash Paid to Employees (3,855,381) (2,512,575) (3,765,255) (478,771) (721,404) (11,333,386) (4,542,201) Other Cash Received 69,054 - - - - 69,054 (127) Other Non-Operating Revenue - 1,978 20,988 - 13,740 36,706 - Net Cash Provided (Used) by Operating Activities 6,921,044 2,612,370 2,462,027 484,726 675,904 13,156,071 3,436,300 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Interfund Loan Payable - - - - (39,900) (39,900) - Operating Grant 170,210 71,903 425,355 90,316 20,161 777,945 57,928 Transfers In 2,500,000 800,000 300,000 - 274,937 3,874,937 1,511,700 Transfers Out (2,693,946) (962,905) (672,122) - (400) (4,329,373) (944,803) Net Cash Provided (Used) by Noncapital Financing Activities (23,736) (91,002) 53,233 90,316 254,798 283,609 624,825 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Sale of Equipment - - - - - - 189,666 Purchase of Capital Assets (7,634,763) (1,586,105) (2,050,838) - (398,059) (11,669,765) (2,205,690) Contributed Capital 597,556 458,574 817,846 - - 1,873,976 - Capital Grants - - - - 20,887 20,887 - Proceeds from Other Governments - 22,500 - - - 22,500 - Proceeds from Insurance Settlement 19,970 - - - - 19,970 84,067 Bond Issuance Costs - - - - 10,918 10,918 - Principal Payment on Debt (1,468,079) (541,127) (413,162) - (171,023) (2,593,391) - Interest Payment on Debt (814,960) (276,483) (361,994) - (20,759) (1,474,196) (3,580) Debt Proceeds 91,990 - - - - 91,990 (3,580) Net Cash Provided (Used) for Capital and Related Financing Activities (9,208,286) (1,922,641) (2,008,148) - (558,036) (13,697,111) (1,939,117) CASH FLOW FROM INVESTING ACTIVITIES: Interest Received 104,564 164,566 144,461 41,713 16,556 471,860 135,747 Net Cash Provided (Used) in Investing Activities 104,564 164,566 144,461 41,713 16,556 471,860 135,747 Net Increase (Decrease) in Cash and Cash Equivalents (2,206,414) 763,293 651,573 616,755 389,222 214,429 2,261,335 Cash and Cash Equivalents - Beginning of Year 11,336,347 16,795,898 15,897,260 4,060,891 1,473,404 49,563,800 13,876,384 Cash and Cash Equivalents - End of Year 9,129,933$ 17,559,191$ 16,548,833$ 4,677,646$ 1,862,626$ 49,778,229$ 16,137,719$ CASH AT END OF YEAR CONSISTS OF: Cash and Cash Equivalents 5,765,412 16,427,725 14,545,114 4,677,646 1,773,446 43,189,343 16,137,719 Restricted Cash - Bond Payments 1,690,316 535,820 804,480 - - 3,030,616 - Restricted Cash - Customer Deposits 43,892 79,473 3,422 - 89,180 215,967 - Restricted Cash - Other 1,630,313 516,173 1,195,817 - - 3,342,303 - Total Cash 9,129,933$ 17,559,191$ 16,548,833$ 4,677,646$ 1,862,626$ 49,778,229$ 16,137,719$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, Washington STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Fiscal Year Ended December 31, 2017 City of Auburn: 2017 CAFR Basic Financial Statements 51 Page 2 of 2 Government Non Major Activities Sanitary Storm Solid Enterprise Internal Water Sewer Drainage Waste Funds Total Service Funds RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES Operating Income (Loss)3,076,623$ 643,143$ 1,127,105$ 540,229$ 125,562$ 5,512,662$ 1,595,460$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Depreciation 3,269,581 2,199,711 1,885,931 18,819 510,226 7,884,268 1,862,565 Other Non-Operating Revenue 69,054 1,978 20,988 - 13,740 105,760 42 Asset (Increases) Decreases: Accounts Receivable (64,903) (78,959) (22,767) (142,525) (6,982) (316,136) (12,583) Inventory 5,064 (1,022) (373) - (505) 3,164 (17,101) Liability Increases (Decreases): Accounts & Vouchers Payable 754,947 (74,038) (408,745) 98,676 54,295 425,135 154,337 Deposits Payable 8,053 2,256 - - 8,371 18,680 - Wages & Benefits Payable (135,737) (85,965) (141,900) (23,148) (23,209) (409,959) (157,847) Compensated Absences Payable (61,638) 5,266 1,788 (7,325) (5,594) (67,503) 11,427 Total Adjustments 3,844,421 1,969,227 1,334,922 (55,503) 550,342 7,643,409 1,840,840 Net Cash Provided (Used) by Operating Activities 6,921,044$ 2,612,370$ 2,462,027$ 484,726$ 675,904$ 13,156,071$ 3,436,300$ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Capital Assets Acquired by Contributed Capital 579,200 415,205 1,495,187 - - 2,489,592 - Total Non Cash Investing, Capital and Financing Activities 579,200$ 415,205$ 1,495,187$ -$ -$ 2,489,592$ -$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, Washington STATEMENT OF CASH FLOWS For the Fiscal Year Ended December 31, 2017 PROPRIETARY FUNDS City of Auburn: 2017 CAFR Basic Financial Statements 52 City of Auburn: 2017 CAFR Basic Financial Statements 53 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 agency fund is custodial in nature; therefore, no annual budget is adopted. AGENCY FUNDS The Agency Fund This fund accounts for the funds over which the City is strictly a short-term custodian. City of Auburn: 2017 CAFR Basic Financial Statements 54 Agency Fund ASSETS: Cash and Cash Equivalents 527,745$ Receivables: Customer Accounts 6,853 Total Assets 534,598 LIABILITIES: Current Payables 485,094 Due to Other Governmental Units 49,504 Total Liabilities 534,598 The notes to the financial statements are an integral part of this statement. City of Auburn, Washington STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS December 31, 2017 City of Auburn: 2017 CAFR Notes to the Financial Statements 55 City of Auburn NOTES TO THE FINANCIAL STATEMENTS December 31, 2017 Note 1 – Summary of Significant Accounting Policies ........................................................................................................ 56 A. Reporting Entity ........................................................................................................................................... 56 B. Basic Financial Statements .......................................................................................................................... 56 C. Measurement Focus, Basis of Accounting, and Basis of Presentation ..................................................... 57 D. Budget and Budgetary Accounting ............................................................................................................. 60 E. Assets, Liabilities and Fund Balance ............................................................................................................ 61 1. Deposits and Investments .................................................................................................................... 61 2. Receivables ............................................................................................................................................ 61 3. Interfund Receivables and Payables .................................................................................................... 61 4. Amounts Due From Other Governmental Units .................................................................................. 62 5. Inventories and Prepaid Expenses ....................................................................................................... 62 6. Restricted Assets .................................................................................................................................. 62 7. Interfund Transactions ......................................................................................................................... 62 8. Capital Assets ........................................................................................................................................ 62 9. Pensions ................................................................................................................................................ 63 10. Deferred Outflows/Inflows of Resources ............................................................................................ 63 11. Compensated Absences ....................................................................................................................... 63 12. Unearned Revenues.............................................................................................................................. 63 13. Fund Balance Components – Proprietary Funds ................................................................................. 64 14. Fund Balance Components – Governmental Funds ............................................................................ 64 F. Revenues, Expenditures and Expenses ...................................................................................................... 65 G. Estimates ...................................................................................................................................................... 66 Note 2 – Stewardship, Compliance and Accountability ................................................................................................... 66 Note 3 – Deposits and Investments .................................................................................................................................. 66 Note 4 – Property Taxes .................................................................................................................................................... 70 Note 5 – Interfund Activity ................................................................................................................................................ 72 Note 6 – Due From Other Governmental Units ................................................................................................................ 74 Note 7 – Capital Assets and Depreciation ......................................................................................................................... 75 Note 8 – Capital Lease Obligation ..................................................................................................................................... 76 Note 9 – Long-Term Liabilities ........................................................................................................................................... 77 Note 10 – Pension Plans ...................................................................................................................................................... 81 Note 11 – Other Post-Employment Benefits ...................................................................................................................... 92 Note 12 – Association of Washington Cities Employment Benefit Trust .......................................................................... 94 Note 13 – Construction Commitments ............................................................................................................................... 95 Note 14 – Cemetery Endowed Care Fund ........................................................................................................................... 95 Note 15 – Joint Ventures / Related Party ............................................................................................................................ 96 Note 16 – Jointly Governed Organization / Related Party ................................................................................................. 99 Note 17 – Contingencies and Litigations .......................................................................................................................... 100 Note 18 – Risk Management and Insurance ..................................................................................................................... 100 Note 19 – Tax Abatements ................................................................................................................................................. 101 Note 20 – Change in Accounting Principle ......................................................................................................................... 102 City of Auburn: 2017 CAFR Notes to the Financial Statements 56 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 2017 financial statements have been presented in accordance with the following new Governmental Accounting Standards Board (GASB) Statements: a. GASB Statement No. 73 – Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The objective of this statement is to improve the usefulness of information about pensions included in the general purpose external financial reports of state and local governments for making decisions and assessing accountability. This Statement features two effective dates. The requirements of Statement 73 that address accounting and financial reporting by employer and governmental non-employer contributing entities for pensions that are not within the scope of Statement 68 were incorporated into the City’s 2016 CAFR. The requirements of Statement 73 for pension plans that are within the scope of Statement 67 or for pensions that are within the scope of Statem ent 68 are implemented in the City’s 2017 CAFR. There is no material impact to the City in implementing this standard. b. GASB Statement No. 82 - Pension Issues. This statement addresses issues regarding (1) the presentation of payroll- related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. There is no material impact to the City in implementing this standard. The City’s significant accounting policies are described in the following notes. A. Reporting Entity In accordance with the criteria set forth in Statement No. 14 of the Governmental Accounting Standards Board (GASB) t he City’s Comprehensive Annual Financial Report (CAFR) includes all funds controlled by the City. Joint Ventures - Based on the criteria of Governmental Accounting Standards Board (GASB) Statement No. 14 as modified by GASB Statements No. 34 and 61, the Valley Communications Center and South Correctional Entity Facility (SCORE) are included in the accompanying government-wide statement of net position as a joint venture. (Refer to Notes 9 and 15). Jointly Governed Organizations - The cities of Auburn, Algona and Pacific formed the Valley Regional Fire Authority (VRFA) effective January 1, 2007. The VRFA is a separate municipal corporation of the State of Washington, organized as a regional fire protection service authority under RCW 52.26. The VRFA is not financially accountable to the member cities, none of the participating cities has an ongoing financial interest in the VRFA, and the VRFA is not financially dependent upon any member city. The VRFA imposes its own property tax levy and fire benefit charge. As such, the VRFA is not included in the City of Auburn’s financial reporting entity. The government-wide financial statements consist of the government-wide statement of net position 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 position and the statement of activities, summarize the entire operation of the City. The governmental fund financial statements, which include the balance sheet, City of Auburn: 2017 CAFR Notes to the Financial Statements 57 statement of revenues, expenditures and changes in fund balance, and statements of revenues, expenditures and changes in fund balance budget and actual, provide a more detailed level of reporting. The proprietary fund financial statements, which include statement of net position, statement of revenues, expenses, and changes in net position and statement 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 Net Position reports the assets, deferred outflows of resources, deferred inflows and liabilities of the primary government. The net position section of this statement represents the residual amount of assets and their associated liabilities, deferred outflow and deferred inflows of resources. The net position section is divided into three categories. The first category is Net Investment in Capital Assets, which includes all capital assets, net of accumulated depreciation, less the outstanding balances of any borrowing (bonds, loans) used for acquisition, construction, or improvement of those assets. Capital assets cannot readily be sold and converted into cash. The second category is Restricted Net Position, which includes those assets, net of their related debt that have a constraint placed on their use. The constraints are either: 1) externally imposed by creditors, such as through debt covenants, grantors, contributors, or laws and regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. The final section is Unrestricted Net Position, and this represents net position that generally can be used for any purpose. However, they are not necessarily in a spendable form, such as cash. 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 wit h a specific function or activity. The City’s policy is to allocate indirect costs to a specific function or segment. 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 particu lar function or activity. Taxes and other items that are not properly included among function or activi ty revenues are instead reported as general revenues. Separate financial statements are included for government al funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide 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 balance/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. The basis 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 fund financial statements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. The modified 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 City of Auburn: 2017 CAFR Notes to the Financial Statements 58 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 requiremen ts 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 “unavailable 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 ar e considered to be measurable and available. Grant Revenues – On cost reimbursement grants, grant revenue is recognized when the eligible expenditure is incurred. Under the modified accrual basis, expenditures are recorded when the fund liability is incu rred, 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 position. Long-term liabilities, including compensated absences not currently due and payable, are also reported on the government-wide statement of net position. The accrual basis of accounting is followed in all proprietary and agency 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 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 and deferred inflow of resources generally are included on these balance sheets. Reported fund balance is considered a measure of “available spendable resources”. Governmental fund operating statements focus on measuring cash flows rather than net income; and 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 motor vehicle fuel tax and by various grants is used for major street construction. c. Debt Service funds – These funds account for the accumulation of resources for, and the payment of, gen eral long-term and special assessment debt principal, interest, and related costs. Th ese funds also include the local improvement districts (LID) guarantee fund which provides financial security for outstanding LID bonds. No debt service funds are considered major funds and are reported within the “Other Governmental Funds”. City of Auburn: 2017 CAFR Notes to the Financial Statements 59 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. The city has one permanent fund, Cemetery Endowment. 2. Proprietary Fund Types Financial statements for proprietary funds use the economic resources measurement focus and the accrual basis of accounting. This means that all assets and all liabilities (whether current or non-current) associated with proprietary fund activity are included on the Statement of Net Position. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when incurred . The economic resources measurement focus is applied in the determination of financial position, net income, and cash flow. 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. Substantially all proprietary fund operating revenues are used as security for revenue bonds. GASB Statement No. 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, provides a codification of private-sector standards of accounting and financial reporting issued prior to December 1, 1989, to be followed in the financial statements of proprietary fund types. The City has adopted provisions of GASB Statement No. 62. 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. Four enterprise funds are considered major funds. Utilities provided to residents are accounted for in the water fund, sanitary sew er fund, storm drainage fund, and the solid waste fund. 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. The City uses internal service funds to account for its fleet of vehicles, its maintenance and operation of facilities, the City -wide provision of computer hardware and software services, the cost of employees affected by an occupational injury or illness, and its insurance premiums. 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. Fiduciary funds are classified for accounting measurement purposes as either a governmental fund or a proprietary fund. The city has one fiduciary fund, an Agency Fund. The Agency fund is custodial in nature on behalf of another individual, entity, or government and does not involve a measurement of results of operations. City of Auburn: 2017 CAFR Notes to the Financial Statements 60 D. Budget and Budgetary Accounting The City of Auburn budgets in accordance with the Revised Code of Washington (RCW) 35A.33 for the general fund 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 the biennial 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. The biennial 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 the biennial budget 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 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 devel oped. The City follows the procedures outlined below to establish its biennial budget: a. Sixty days prior to each odd numbered fiscal year, the Mayor submits to the City Council a preliminary budget for the biennium commencing the following January 1st. The operating budget includes proposed expenditures and funding sources. b. Public hearings are conducted at the Auburn City Council Meetings to obtain taxpayer comments. c. Prior to December 31st, the budget is legally enacted through passage of an ordinance. d. The final operating budget as adopted is published and distributed after adoption. Copies of the budget are made available to the public. Original Final Budget Revisions Budget Governmental Funds General Fund 64,735,515$ 3,742,398$ 68,477,913$ Total Governmental Funds 64,735,515 3,742,398 68,477,913 Special Revenue Funds: Local Street 1,600,000$ 1,264,398$ 2,864,398$ Arterial Street 12,320,712 6,484,926 18,805,638 Hotel/Motel Tax 86,000 141,500 227,500 Arterial Street Preservation 2,884,378 2,112,193 4,996,571 Drug Forfeiture Fund 273,027 - 273,027 Housing and Community Development 440,000 715,398 1,155,398 Business Improvement Area 55,000 - 55,000 Cumulative Reserve 1,917,084 36,214 1,953,298 Mitigation Fees 1,221,827 2,719,018 3,940,845 Total Special Revenue Funds 20,798,028 13,473,647 34,271,675 Total Budgeted Funds 85,533,543$ 17,216,045$ 102,749,588$ ORIGINAL AND SUPPLEMENTAL APPROPRIATIONS City of Auburn: 2017 CAFR Notes to the Financial Statements 61 E. Assets, Liabilities, and Fund Balance 1. Deposits and Investments It is the City’s policy to invest all temporary cash surplus. At December 31, 2017, the Washington State Local Government Investment Pool (LGIP) was holding $116,427,623 in short-term investments. This amount is classified on the Statement of Net Position 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 because it is operated in a manner consistent with a Securities and Exchange Commission’s Rule 2a-7 of the Investment Company Act of 1940. The State Finance Committee is the administrator of the statute that created the pool and adopts appropriate rules. The State Treasurer’s Office is responsible for establishing the investment policy for the pool and reviews it annually. Any proposed changes are reviewed by the LGIP Advisory Committee. The terms of the policy are designed to ensure the safety and liquidity of the funds deposited in the LGIP. The City, by state law, is authorized to purchase certificates of deposit issued by Washington State depositories that participate in Washington Public Deposit Protection Commission (WPDPC), 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 or amortized cost. Adjustments are made to cost for investments amortized over the period to maturity in accordance with GASB Statement No. 31. The investment in the state investment pool is valued at amortized cost. 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 t he improvement. Special assessments receivable consist of current assessments, which are due within one year, delinquent assessments remaining unpaid after the due date, and unearned, 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. City of Auburn: 2017 CAFR Notes to the Financial Statements 62 4. Amounts Due From Other Governmental Units This account includes amounts due from other governments for grants, entitlements and charges for services. A schedule by fund of amounts due from other governmental units is presented in Note 6. 5. Inventories and Prepaid Expenses Government fund types recognize the cost of inventory items and prepaid expenses (expenses that benefit future periods) as expenditures in the year of purchase. In governmental funds, materials and supplies remaining at year-end are immaterial and not included in inventory. In enterprise and internal service funds, inventories are valued at cost using the weighted average costing method. 6. Restricted Assets In accordance with the utility bond ordinances, state law, or other agreements, separate restricted assets have been established. These assets are restricted for specific purposes including the establishment of bond reserve funds, utility rate stabilization funds, financing the ongoing capital improvement programs of the various utilities, customer deposits, nonexpendable permanent cemetery endowment and other purposes. 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 in the internal service funds and expenditures in the paying fund. Transfers between funds are included as “other financing sources or uses” in governmental fund types and as other items in proprietary fund types. 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 position. 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. For proprietary funds, interest costs incurred to bring certain assets to the condition and location necessary for their intended use are capitalized as part of the historical cost of acquiring the assets. Additionally, in situations involving t he acquisition of certain assets financed with the proceeds of tax-exempt borrowing, any interest earned on related interest-bearing investment from such proceeds are offset against the related interest costs in determining either capitalization rates or limitations on the amount of interest costs to be capitalized. 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 assets of all funds are depreciated, and are calculated on the straight -line method using estimated lives as follows: Asset Capitalization Threshold Depreciation Method Estimated Useful Life Building $5,000 Straight-line 20 - 50 years Other Improvements $5,000 Straight-line 10 - 50 years Equipment/Machinery $5,000 Straight-line 2 - 20 years Infrastructure $5,000 Straight-line 25 - 50 years Utility Plant $5,000 Straight-Line 25 - 50 years City of Auburn: 2017 CAFR Notes to the Financial Statements 63 At the inception of capital leases at the government fund reporting level, the net present value of future minimum lease payments allocable to the capital asset is reflected as expenditures and an “other financing source” of an equal amount. 9. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all state sponsored pension plans and additions to/deductions from those plans’ fiduciary net position have been determined on the same basis as they are reported by the Washington State Department of Retirement Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 10. Deferred Outflows/Inflows of Resources Deferred outflow of resources is the consumption of net position by the government that is applicable to a future reporting period. The deferred amount on special assessments consist of special assessments not due within one year is reported as deferred outflows of resources in the governmental funds. Deferred inflow of resources is acquisition of net position by the government that is applicable to a future reporting period. The difference between the carrying amount of redeemed and/or defeased debt and its reacquisition price is the deferred amount on refunding and is amortized over the remaining life of the debt, or the life of the new debt, whichever is shorter. Deferred outflows and deferred inflows of resources related to pensions are reported for differences between expected and actual experience, changes of assumptions, and differences between projected and actual returns on pension plan investments. 11. 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 eight hours 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 position and in proprietary funds. Vacation, compensatory time, and sick leave are calculated separately for each employee using the rules described above. The reporting format is in compliance with GASB statement No. 16. Governmental funds recognize expenditures for vacation, sick, and compensatory time when paid. Proprietary 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. 12. Unearned 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. City of Auburn: 2017 CAFR Notes to the Financial Statements 64 13.Fund Balance Components – Proprietary Funds In proprietary funds, net position is generally restricted in connection with restricted assets or for legal segregation. These restrictions are identified on the statement of net position of each fund type. The City holds and administers a Utility System Rate Stabilization Fund. The City may, by ordinance, wi thdraw from the Rate Stabilization Fund for inclusion in the net revenue of the Utility System at any time for any current fiscal year of the Utility System, except that the total amount withdrawn from the Rate Stabilization Fund in any fiscal year may not exceed the total debt service of the Utility System in that year. 14.Fund Balance Components – Governmental Funds Fund balance is presented in the governmental fund financial statements and represents the difference between assets and liabilities reported within the governmental fund. Beginning with the most restrictive constraints, fund balance amounts are reported in the following categories: a.Nonspendable fund balance includes items that cannot be spent. This includes activity that is not in a spendable form (investments, prepaid amounts, long-term portion of loans/notes receivable, or property held for resale unless the proceeds are restricted, committed or assigned) and activity that is legally or contractually required to remain intact. b.Restricted fund balance is externally (outside the City) enforceable limitations imposed by creditors, grantors, contributors, laws and regulations of other governments, or laws through constitutional provisions or enabling legislation. c.Committed fund balance is self-imposed limitations imposed at the highest level of decision making authority, namely, Mayor and City Council. Mayor and City Council approval by ordinance is required to commit, modify or rescind resources. d.Assigned fund balance includes amounts that are constrained by the City’s intent to be used for a specific purpose, but are neither restricted nor committed. It is the City’s policy that the Finance Director shall have the authority to assign amounts of fund balance to a specific purpose; however, before expenditure, amounts must be appropriated by the City Council which is often adopted by City Council in the biennial budget ordinance. For governmental funds, other than the General Fund, this is the residual amount within the fund that is not restricted or committed. e.Unassigned fund balance is the residual amount of the General Fund not included in the four cate gories described above. Also, any deficit fund balances within the other governmental fund types are reported as unassigned. When expenditure is incurred for purposes for which both restricted and unrestricted resources are available, it is the City’s policy to use restricted resources first. When expenditures are incurred for purposes, for which unrestricted (committed, assigned, and unassigned) resources are available, and amounts in any of these unrestricted classifications could be used, it is the City’s policy to spend committed resources first, then assigned and unassigned, in that order. City of Auburn: 2017 CAFR Notes to the Financial Statements 65 The following shows the composition of the fund balance of the governmental funds for the fiscal year ended December 31, 2017: F. Revenues, Expenditures and Expenses Operating revenues and expenses for the proprietary fund are those that result from providing services and producing and delivering goods and/or services in connection with a proprietary fund’s principal ongoing operations. For the city, operating expenses for proprietary funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation of capital assets. All revenues and expenses not meeting this definition are reported as non - operating revenues and expenses. 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. Arterial Capital Other Total General Street Improvement Governmental Governmental Fund Fund Fund Funds Funds Nonspendable Inventory 30,453$ -$ -$ -$ 30,453$ Cemetery Endowment -$ -$ -$ 1,717,134$ 1,717,134$ Total Nonspendable 30,453 - - 1,717,134 1,747,587 Restricted Major Street Construction - 2,584,136 - - 2,584,136 REET 1 Allowable Projects - - 4,824,406 - 4,824,406 REET 2 Allowable Projects - - 5,970,116 - 5,970,116 Arterial Street Presevation Fund - - - 1,557,947 1,557,947 Parks and Trails Construction Projects - - - 1,018,032 1,018,032 City Tourism Promotion - - - 200,371 200,371 Drug Investigation and Enforcement - - - 381,136 381,136 Community Development Block Grant Program - - - 44,904 44,904 Recreational Trail Development - - - 57,022 57,022 Downtown Business Area Improvements - - - 93,710 93,710 Street and Fire Service Mitigation Fees - - - 11,395,640 11,395,640 Debt Service - - - 9,686 9,686 Total Restricted - 2,584,136 10,794,522 14,758,448 28,137,106 Committed Local Street Improvements (Save our Streets)- - - 2,766,701 2,766,701 Arterial Street Preservation - - - 456,407 456,407 Total Committed - - - 3,223,108 3,223,108 Assigned Appropriations Over Estimated Revenue 9,315,528 - - - 9,315,528 Arterial Street Preservation Fund - - 477,323 25,483 502,806 Drug Investigation and Enforcement - - - 3,918 3,918 Recreation Trail Development - - - 504 504 Downtown Business Area Improvements - - - 763 763 Local Street Improvements - - - 176,649 176,649 School Administration Fees - - - 56,115 56,115 Cemetery Capital Enhancement and Maintenance - - - 94,375 94,375 Downtown Infrastructure Improvements - - - 374,966 374,966 Debt Service - - - 11,415 11,415 Total Assigned 9,315,528 - 477,323 744,188 10,537,039 Unassigned Unassigned 25,414,801 - - - 25,414,801 Total Unassigned 25,414,801 - - - 25,414,801 Total Fund Balances 34,760,782$ 2,584,136$ 11,271,845$ 20,442,878$ 69,059,641$ Governmental Fund Balances December 31, 2017 Major City of Auburn: 2017 CAFR Notes to the Financial Statements 66 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. 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, 2017, the carrying amount of the City’s cash demand deposits with Key Bank totaled $6,129,754 while the bank balance was $6,341,880. In addition, the balance of the City’s interest bearing checking account with Opus Bank totaled $10,020,030. Furthermore, there was $18,800 in petty cash ($10,000 in the Drug Forfeiture Fund to be used for enforcements purposes, $8,800 in various petty cash and cashier change funds). Custodial Credit Risk. Custodial credit risk is the risk associated with the failure of a depository financial institution. In the event of a depository financial institution’s failure, it is the risk that the City would not be able to recover its deposits or collateralized securities that are in the possession of the outside parties. The City minimizes custodial credit risk by following the restrictions set forth in state law. The Federal Deposit Insurance Corporation (FDIC) insures the City’s deposits up to $250,000. The Washington Public Deposit Protection Commission (WPDPC) (established under Chapter 39.58 of the Revised Code of Washington) constitutes a multiple financial institution collateral pool. Pledged securities under the WPDPC collateral pool are held by the WPDPC’s agent in the name of the collateral pool. 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 that participate in the WPDPC. Pension and permanent funds are not subject to these limitations. All temporary investments such as the State Investment Pool are stated at amortized cost. Other investments are shown on the statement of net position at fair value as of December 31, 2017. In accordance with GASB Statement 79, the state investment pool (LGIP) is reported at amortized cost, and is operated in a manner consistent with the Securities and Exchange Commission’s Rule 2a-7 of the Investment Company Act of 1940. The LGIP meets the maturity, quality, diversification and liquidity requirements as set forth in GASB Statement 79. The LGIP is an unrated external investment pool, and was authorized by Chapter 294, Laws of 1986, and is managed and operated by the Washington State Treasurer. The LGIP does not have any legally binding guarantees of share values. The LGIP does not impose liquidity fees or redemption gates on participant withdrawals. The Office of the State Treasurer prepares a stand -alone LGIP financial report. A copy of the report is available from the Office of the State Treasurer, PO Box 40200, Olympia, Washington 98504-0200, online at http://www.tre.wa.gov. During 2017, the net decrease in the fair value of investments being held for more than one year is $4,740 at year-end. City of Auburn: 2017 CAFR Notes to the Financial Statements 67 As of December 31, 2017, the City had the following investments and maturities: The city measures and reports investments at fair value using the valuation input hierarchy established by generally accepted accounting principles, as follows: *Level 1 – Quoted prices in active markets for identical assets or liabilities; *Level 2 – These are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other quoted prices that are not observable; *Level 3 – Unobservable inputs for an asset or liability. Fair Less than 1 to 2 2 to 3 Greater than Investment Type Value 1 year years years 3 years US Treasuries 992,430$ -$ 992,430$ -$ -$ 992,430$ -$ 992,430$ -$ -$ Reconciliation to government- wide statement of net position: Total investments above 992,430$ Plus: cash in checking 16,149,783 Plus: petty cash 18,800 Plus: cash with outside agency (391) Less: cash investments in fiduciary funds (527,745) Total cash and investments at fair value 16,632,873$ Amortized Investment Type Cost State investment pool (LGIP)116,427,623 116,427,623$ -$ -$ -$ 116,427,623$ 116,427,623$ -$ -$ -$ Total cash and investments, government- wide statement of net position 133,060,496$ Schedule of Investments by Maturities As of December 31, 2017 Investment maturities Governmental Business-Type Activities Activities Total Cash and Cash Equivalents 60,013,183$ 43,189,343$ 103,202,526$ Cash with Outside Agencies (391) - (391) Investments 992,430 - 992,430 Temporarily Restricted: Cash and Cash Equivalents 20,559,911 6,588,886 27,148,797 Permanently Restricted: Cash and Cash Equivalents 1,717,134 - 1,717,134 83,282,267$ 49,778,229$ 133,060,496$ Reconciliation of Cash and Investments Government-Wide Statement of Net Position As of December 31, 2017 City of Auburn: 2017 CAFR Notes to the Financial Statements 68 At December 31, 2017, the city had the following investments measured at fair value: Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. 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 five years, unless an investment is matched to an anticipated future cash flow. The segmented time distribution presented in the schedule of investments by maturity above indicates how the City has managed its interest rate risk. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment wil l not fulfill its obligations. 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, Fede ral 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 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Investments by Fair Value Level 12/31/2017 (Level 1)(Level 2)(Level 3) US Treasuries - Federal National Mortgage Assoc.992,430$ 992,430$ -$ -$ Total Investments by Fair Value Level 992,430$ 992,430$ -$ -$ Investments and Derivative Instruments Measured at Fair Value As of December 31, 2017 Fair Value Measurements Using City of Auburn: 2017 CAFR Notes to the Financial Statements 69 As of December 31, 2017, the City had investments in a limited number of investment instruments as follows:  U.S. Treasuries  State Local Government Investment Pool With the exception of the State Local Government Investment Pool which is not rated, all other investments above carried a rating of Aaa by Moody’s rating service at December 31, 2017. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of an investment in a single issuer. The City diversifies its investments by security type and institution. City investment policy restricts security holdings to 25 - 40% of the City’s total investment portfolio in a single security type. This restriction excludes US Treasury obligations and the Washington State Local Government Investment Pool both of which may comprise 100% of the total investment portfolio. Other information Effective 2002, the City has established arrangements with Bank of New York for safekeeping of all investments. The following is a schedule of investments by fund type: State Investment U.S. Pool Securities Total General Fund -$ 992,430$ 992,430$ Permanent Fund - - Enterprise Funds - - - Internal Service Funds - - - Fiduciary Funds - - - Treasurer's Residual Funds 116,427,623 - 116,427,623 Total 116,427,623 992,430$ 117,420,053$ As of December 31, 2017 Schedule of Investments by Fund Category and Investment Type City of Auburn: 2017 CAFR Notes to the Financial Statements 70 NOTE 4 – PROPERTY TAXES Property taxes received during tax year 2017 were $20,976,384 including collection of prior year delinquent assessments. Property taxes assessed for collection in tax year 2017 were based on a regular tax levy of $2.05 per $1,000 on a total 2016 assessed value of $9,555,039,113. For levy year 2017, to be received in 2018, the City’s regular tax levy is $2.20 per $1,000 on a 2017 assessed valuation of $10,559,150,607, as of December 31, 2017, for a total regular levy of $21,548,429. State law provides that debt cannot be incurred in excess of the following percentages of the taxable property of the City. 1.50% of assessed value without a vote of the people 2.50% of assessed value with a vote of the people The City has additional authority to incur the following debt as a percentage of total valuation. 2.50% of assessed value with a vote of the people, indebtedness is for utilities 2.50% of assessed value with a vote of the people, indebtedness is for parks, or open space development At December 31, 2017, the debt limits for the City were as follows: The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. Taxes are l evied annually on January 1 on property values listed as of the prior August 31. The County assesses property at 100% of fair market value. A revaluation of all property is required every year 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 $50. 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 pe nalties if not paid as scheduled. No allowance for uncollectable taxes is established because delinquent taxes are considered fully collectable. At year-end, property taxes are recorded as a receivable with the portion not expected to be collected within 60 days after the current period are reported as other unavailable revenue in the deferred inflow of resources section of the governmental funds financial statements. 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 $1,000 of value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below t he 1% limit. For Parks or Without General For Open Space a Vote Purposes Utilities Development Total Item 1.50%1.00%2.50%2.50%Capacity Legal Limit 158,387,259$ 105,591,506$ 263,978,765$ 263,978,765$ 791,936,295$ Outstanding indebtedness (54,208,225) - - - (54,208,225) Margin available 104,179,034$ 105,591,506$ 263,978,765$ 263,978,765$ 737,728,070$ With a Vote City of Auburn: 2017 CAFR Notes to the Financial Statements 71 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. Property taxes are recorded as receivable and offset by an unearned 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. City of Auburn: 2017 CAFR Notes to the Financial Statements 72 NOTE 5 – INTERFUND ACTIVITY Transfers are legally authorized transfers of resources from a fund receiving revenue to the fund through which resources are to be expended. The principal purposes for interfund transfers include interfund subsidies and transfers into capital project and debt service funds. Interfund transfers for the year ended December 31, 2017 were as follows: Funds Transfer In Transfer Out Governmental funds: General 79,000$ 3,100,302$ Cumulative Reserve 1,000,000 - Total general fund 1,079,000 3,100,302 Special revenue funds: Arterial Streets 1,999,610 7,024 Local Streets (other governmental)150,000 5,826 Hotel / Motel tax (other governmental)- 5,000 Arterial Street Preservation (other gov't)194,915 51,776 Mitigation Fees (other governmental)- 1,969,497 Total special revenue funds 2,344,525 2,039,123 Debt service funds: 1998 Library GO (other governmental)283,850 - 2010 A&B Annex (other governmental)1,316,610 - 2010 C&D Local Revitalization (other gov't)222,510 - LID 250 (other governmental)374,615 - Total debt service funds 2,197,585 - Capital projects funds: Municipal Park Construction (other gov't)954,124 - Capital Improvements 475,583 2,023,853 Total capital projects funds 1,429,707 2,023,853 Proprietary funds: Water 2,500,000 2,693,946 Sewer 800,000 962,905 Storm Drainage 300,000 672,122 Airport (non-major enterprise)274,937 - Cemetery (non-major enterprise)- 400 Total proprietary funds 3,874,937 4,329,374 Internal service funds: Insurance 670,715 - Facilities - 888,503 Innovation & Technology 368,953 56,300 Equipment Rental 472,032 - Total internal service funds 1,511,700 944,803 Total 12,437,454$ 12,437,454$ All transfers are considered routine. Transfers City of Auburn: 2017 CAFR Notes to the Financial Statements 73 Loans between funds are classified as interfund receivable and payable. Interfund Loans do not affect total fund equity. Balance Balance Due From Due To 1/1/2017 New Loans Repayments 12/31/2017 Housing & Comm. Dev.General fund 50,000$ 50,000$ 50,000$ 50,000$ Airport Fund Capital Improvement 133,682 - 39,900 93,782 Parks Construction General fund 400,000 - 400,000 - Total interfund loans 583,682$ 50,000$ 489,900$ 143,782$ All interfund loans are considered short-term cash loans. *The purpose of the interfund loan to Housing & Community Development is to cover authorized expenditures while the City waits for reimbursement of federal Community Development Block Grant monies. *The purpose of the interfund loan to The Airport Fund is to cover the cost of The Auburn Municipal T Hanger Enclosure Project. *The purpose of the interfund loan to the Municipal Parks Construction Fund (a Grant Sustained Fund) was to cover authorized expenditures while the City waited for reimbursement of federal, state, and local grant monies. Interfund Loans City of Auburn: 2017 CAFR Notes to the Financial Statements 74 NOTE 6 – DUE FROM OTHER GOVERNMENTAL UNITS As of December 31, 2017 the City had receivables due from other governmental units as follows: General Fund: WSDOT -Excavation Permits 300$ King Conservation District -Farmer's Market 10,094 King County District Court 510,117 King County Library Systems 7,620 King County -Real Estate Excise Taxes 299,559 King County Sheriff's - Registered Sex Offender Grant 370 Pierce County - Real Estate Excise Taxes 12,864 Muckleshoot Indian Tribe 266,528 Department of Commerce -VNET 1,588 Seattle Police Dept -US Department of Justice JAG Grant 23,961 US Department of Justice -Bulletproof Vest Program 4,985 US Department of Justice -COPS Hiring Program 55,389 WA Auto Theft Prevention Authority - Auto Theft Prevention Grant 74,981 WA State Criminal Justice Training 11,586 WA State Military Department -EMPG Grant 12,459 WA State Traffic Safety Commission - Grants 8,427 WA State Treasurer - Sales Taxes 1,468,586 Total General Fund 2,769,412 Arterial Street Fund: WA State Transportation Improvement Board - Arterial Street Imp.1,292,367 WA Dept. of Transportation - Arterial street imp.668,988 Total Arterial Street Fund 1,961,355 Arterial Street Preservation Fund: WA Dept. of Transportation - Arterial street imp.7,939 Drug Forfeiture Fund: Pierce County Sheriff's Department -TNET 7,074 Pierce County Sheriff's Department -OCDET 3,530 Total Drug Forfeiture Fund 10,605 Housing & Community Development: U.S. Dept. of Housing - Community Development Block Grant 161,956 General Government Capital Improvements: 4Culture -Grant 9,903 Pierce County - Real Estate Excise Taxes 32,325 WA State Transportation Improvement Board -Grant 1,821 44,050 Water Fund: Valley Communications -Lease 1,000 Storm Fund: City of Algona -Decant Admin Fee 90 City of Pacific -Decant Admin Fee 300 King Conservation District 20,000 WA State Department of Ecology 49,734 Total Storm Drainage Fund 70,124 Solid Waste Fund: King County - Local hazardous waste management grant 14,659 King County - Waste reduction and recycling grant 54,874 Total Solid Waste fund 69,534 Water Capital Fund: WA State Military Department -Grant 16,968 Airport Capital Fund Federal Aviation Administration 13,990 Facilities Fund: VRFA 15 Information Services Fund: City of Algona 500 City of Pacific 3,620 VRFA 2,077 Total Information Services fund 6,196 Total 5,133,144$ Reconciliation to government-wide statement of net assets: Total above due from other governmental units 5,133,144 Amount due to fiduciary fund - Total due from other governmental units, 5,133,144$ Due from Other Governmental Units government-wide statement of net assets City of Auburn: 2017 CAFR Notes to the Financial Statements 75 NOTE 7 – CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the year ended December 31, 2017 is as follows: Balance Decreases/Balance 1/1/17 Increases Adjustments 12/31/17 Governmental activities: Capital assets, not being depreciated: Land 108,793,702$ 96,553$ -$ 108,890,255$ Construction in progress 10,999,486 10,042,632 (10,964,759) 10,077,359 Total capital assets, not being depreciated 119,793,188 10,139,185 (10,964,759) 118,967,614 Capital assets, being depreciated: Buildings 73,554,732 61,547 - 73,616,279 Improvements other than buildings 22,557,659 447,780 - 23,005,439 Machinery and equipment 28,288,914 2,309,293 (1,034,486) 29,563,721 Intangibles 1,095,684 - - 1,095,684 Infrastructure 365,765,293 21,097,174 - 386,862,467 Total capital assets being depreciated 491,262,282 23,915,794 (1,034,486) 514,143,590 Less: accumulated depreciation for: Buildings (18,453,104) (1,548,625) - (20,001,729) Improvements other than buildings (14,744,318) (770,706) - (15,515,024) Machinery and equipment (19,852,415) (1,919,846) 861,332 (20,910,929) Intangibles (903,154) (154,563) - (1,057,717) Infrastructure (156,724,587) (13,978,338) - (170,702,925) Total accumulated depreciation (210,677,578) (18,372,078) 861,332 (228,188,324) Total capital assets, being depreciated, net 280,584,704 5,543,716 (173,154) 285,955,266 Governmental activities capital assets, net 400,377,892$ 15,682,901$ (11,137,913)$ 404,922,880$ Business-type activities: Capital assets, not being depreciated: Land 12,526,187$ -$ -$12,526,187$ Water Rights 5,196,600 252,586 - 5,449,186 Construction in progress 7,623,079 11,310,392 (8,659,863) 10,273,608 Total capital assets, not being depreciated 25,345,866 11,562,978 (8,659,863) 28,248,981 Capital assets, being depreciated: Buildings 6,039,603 37,283 - 6,076,886 Improvements other than buildings 311,931,706 11,159,092 - 323,090,798 Machinery and equipment 2,480,505 59,867 - 2,540,372 Total capital assets being depreciated 320,451,814 11,256,242 - 331,708,056 Less: accumulated depreciation for: Buildings (3,932,774) (118,961) - (4,051,735) Improvements other than buildings (108,050,613) (7,733,957) - (115,784,570) Machinery and equipment (2,215,477) (31,350) - (2,246,827) Total accumulated depreciation (114,198,864) (7,884,268) - (122,083,132) Total capital assets, being depreciated, net 206,252,950 3,371,974 - 209,624,924 Business-type activities capital assets, net 231,598,816$ 14,934,952$ (8,659,863)$ 237,873,905$ Schedule of Capital Asset Activity City of Auburn: 2017 CAFR Notes to the Financial Statements 76 Capital asset activity for the year ended December 31, 2017 is as follows: Depreciation/amortization expense was charged to functions/programs of the City as follows : The 2017 total interest cost incurred for business-type activities was $1,331,752 of which $1,290,563 was charged to expense and $41,189 capitalized. NOTE 8 – CAPITAL LEASE OBLIGATION The City has the following capital leases: On January 1, 2007 the City entered into a capital lease agreement for the Auburn Avenue Theater facility for a 15 year term. The intent is for the City’s Parks, Arts and Recreation department to offer performances to the public, as well as make the facility available for short-term rentals. On July 15, 2015 the City entered into a 5 year term capital lease agreement to finance the purchase of a John Deere Excavator. The lease agreement qualifies as a capital lease for accounting purposes. The assets acquired through capital leases are as follows: Assets Acquired Through Capital Leases Governmental Asset Activities Auburn Avenue Theater $ 749,110 John Deere Excavator 204,710 Less: Accumulated Depreciation (638,739) Total Assets Acquired Through Capital Leases $ 315,081 Governmental activities: General government 1,017,296$ Public safety 440,566 Transportation 13,565,902 Physical environment - Culture and recreation 1,485,749 Economic environment - Capital assets held by the City's internal service funds are charged to the various functions based on their usage of the assets 1,862,565 Total depreciation/amortization expense - governmental activities 18,372,078$ Business-type activities: Water 3,269,581$ Sanitary sewer 2,199,711 Storm water 1,885,931 Solid waste 18,819 Golf course - Airport 462,843 Cemetery 47,383 Total depreciation expense - business-type activities 7,884,268$ City of Auburn: 2017 CAFR Notes to the Financial Statements 77 The future minimum lease obligation and the net present value of these minimum lease payments as of December 31, 201 7, were as follows: Schedule of Future Minimum Lease Payments Lease Payable Theater Excavator Total 2018 79,339 44,342 123,681 2019 79,339 44,342 123,681 2020 79,339 22,582 101,921 2021 80,334 - 80,334 Total minimum lease payments 318,351 111,266 429,617 Less: Amounts representing interest (43,104) (4,593) (47,697) Present value of future minimum lease payments $ 275,247 $ 106,673 $ 381,920 NOTE 9 – LONG-TERM LIABILITIES 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. General Obligation Bonds outstanding at year-end are as follows:  2010A Limited Tax General Obligation Improvement and Refunding bonds were issued to provide funds with which to (i) pay a portion of the costs of acquisition of certain condominium units to provide city office space near City Hall (City Hall Annex) in lieu of the City Hall Annex lease and (ii) to partially advance refund the 1998 Limited Tax General Obligation bonds. The 1998 Limited General Obligation bonds were issued for construction of a library to be owned and operated by the King County Rural Library District. The City advance refunded the 1998 Limited Tax General Obligation bonds in 2010. The debt is considered extinguished in an in-substance defeasance and, accordingly is not reflected in the accompanying financial statements. The remaining balance of outstanding defeased debt as of December 31, 2017 is $270,000.  2010B Limited Tax General Obligation Bonds (Taxable Build America Bonds – Direct Payment) bonds were issued to provide funds with which to pay a portion of the costs of acquisition of certain condominium units to provide city office space near City Hall (City Hall Annex) in lieu of the City Hall Annex lease.  2010D Limited Tax General Obligation Bonds (Taxable Build America Bonds – Direct Payment) bonds were issued to provide funds with which to pay portion of the downtown infrastructure improvements in the City’s revitalization area.  2016 Limited Tax General Obligation Refunding Bonds were issued for the primary purposes of (a) refunding on a current basis the 2005 Limited Tax General Obligation Refunding Bonds and (b) refunding on an advance basis the 2006A Limited Tax General Obligation Bonds. The net proceeds were used to purchase United States government securities. Those securities were depos ited into an irrevocable trust with an escrow agent to (a) pay the full outstanding principal and interest on the 2005 Bonds on the redemption date and to (b) provide for all future debt service payments on the 2006A bonds which were refunded. As a result of these transactions, the 2005 and 2006A bonds are considered to be defeased and the liability for those bonds City of Auburn: 2017 CAFR Notes to the Financial Statements 78 has been removed from the City’s financial statements. The remaining balance of outstanding defeased debt as of December 31, 2017 is $3,134,433. Revenue Bonds are payable from water, sewer and storm drainage utility revenues generated by those enterprise funds. State of Washington Public Works Trust Fund and Drinking Water State Revolving Fund Loans are a direct responsibility of the City. Auburn currently has nine outstanding loans with a remaining total balance of $10,394,433. Seven of the loans are for water and sewer construction projects. The loans are being repaid from water and sewer fund revenues over a 20 -year period that begins upon each project completion (PWTF 1999, PWTF 2001, PWTF 2002, PWTF 2004, PWTF 2006, PWTF 2013, & DWSRF 2016). The other two loans are for arterial street improvements and are being repaid from arterial street fund revenues over a 20-year period that began in 2009 upon project completion (PWTF 2008) and over a 29-year period that began in 2013 upon project completion (PWTF 2012). Compensated Absences are paid by those funds that have employees. These are mostly payable by the General fund and enterprise funds. The following schedules summarize the long-term debt transactions of the City for the year ended December 31, 2017. The first table summarizes all debt transactions for Auburn, while the second provides detailed information on all long-term debt. Additional schedules reflect total annual debt service requirements to maturity and the reconciliation of debt by fund type. General Obligation (1)Utility Employee Leave Benefit Other Post Employment Benefits Net Pension Liability Firemen's Pension Liability Premium Due To Other Governments Total Long-term liabilities payable 12/31/16 33,685,361$ 36,067,767$ 2,879,166$ 8,447,831$ 22,652,229$ -$ 1,313,939$ 23,612,700$ 128,658,993$ Added 937 91,990 2,307,540 1,268,760 - 3,212,435 - - 6,881,662 Retired (1,836,905) (2,422,368) (2,162,171) (578,606) (5,052,499) - (113,312) (694,400) (12,860,261) Long-term liabilities payable 12/31/17 31,849,393$ 33,737,389$ 3,024,535$ 9,137,985$ 17,599,730$ 3,212,435$ 1,200,627$ 22,918,300$ 122,680,394$ (1) Includes capital leases CHANGES IN LONG-TERM LIABILITES SUMMARY Year Principal Interest Principal Interest Principal Interest Principal (1)Interest 2018 2,304,062 2,939,960 103,252 19,258 2,679,966 1,402,903 5,087,280 4,362,121 2019 2,094,636 2,843,041 108,796 13,713 2,734,966 1,343,198 4,938,398 4,199,952 2020 1,969,766 2,755,227 95,486 7,926 2,612,597 1,272,380 4,677,849 4,035,533 2021 2,039,702 2,665,409 75,381 2,776 2,672,597 1,206,698 4,787,680 3,874,883 2022 2,109,908 2,564,978 - - 2,505,512 1,118,027 4,615,420 3,683,004 2023-2027 10,919,809 11,108,478 - - 12,967,816 4,073,754 23,887,625 15,182,232 2028-2032 11,987,250 7,719,511 - - 10,203,041 1,115,299 22,190,291 8,834,810 2033-2037 13,236,450 3,596,130 - - 584,966 10,237 13,821,416 3,606,367 2038-2042 4,031,150 282,084 - - 467,972 2,925 4,499,122 285,009 Totals 50,692,733$ 36,474,818$ 382,915$ 43,673$ 37,429,434$ 11,545,420$ 88,505,082$ 48,063,912$ (1)88,505,082$ Principal debt service requirements to maturity 3,024,535 Employee Leave Benefits 9,137,985 Other Post Employment Benefits 17,599,730 Net Pension Liability 3,212,435 Firemen's Pension Liability 1,200,627 Premium 122,680,394$ Long Term Liabilities 12/31/2017 Obligation Bonds Obligation Bonds/Loans Long-Term Debt DEBT SERVICE REQUIREMENT TO MATURITY General Capital Lease Utility Total City of Auburn: 2017 CAFR Notes to the Financial Statements 79 Interest Maturity Original Principal Balance Balance Due Within Issue Name Rates Date Amount(2) Installments 12/31/16 Additions Reductions 12/31/17 One Year GOVERNMENTAL DEBT General Obligation Bonds: LTGO 2010A (1)2.00-4.50%12/1/2018 4,385,000 $235,000 - $720,000 530,000$ -$ (260,000)$ 270,000$ 270,000$ LTGO 2010B (1)3.27-6.24%12/1/2039 20,365,000 $535,000 - $1,240,000 19,285,000 - (560,000) 18,725,000 575,000 LTGO 2010D (1)3.27-6.19%12/1/2034 6,320,000 $220,000 - $445,000 5,875,000 - (230,000) 5,645,000 240,000 LTGO Refunding 2016 - Golf/Cemetery 1.64 -1.64%12/1/2025 3,166,930 $71,470 - $366,159 3,095,460 - (323,849) 2,771,611 326,560 Total General Obligation Bonds 34,236,930 28,785,460 - (1,373,849) 27,411,611 1,411,560 Capital Leases: Auburn Avenue Theater 6.58%12/31/2021 695,504 $4,114 - $6,514 330,151 937 (57,642) 273,446 61,644 John Deere Financial Excavator Lease 3.00%7/15/2020 204,710 $3,695 146,484 - (37,015) 109,468 41,608 Total Capital Leases 900,214 476,635 937 (94,657) 382,914 103,252 Employee Leave Benefits: Compensated absences 2,232,931 1,866,002 (1,653,130) 2,445,803 1,878,492 Other Post Employment Benefits: LEOFF 1 8,447,831 1,268,760 (578,606) 9,137,985 - Pensions: Net Pension Liability 15,449,080 - (3,462,297) 11,986,783 - Firemen's Pension Liability - 3,212,435 - 3,212,435 - Public Works Trust Fund Loans: PWTF 2008 0.50%7/1/2028 1,527,273 $80,383 964,593 - (80,383) 884,210 80,383 PWTF 2012 0.50%6/1/2041 3,284,857 $116,993 2,924,828 - (116,993) 2,807,835 116,993 Total Public Works Trust Fund Loans 4,812,130 3,889,421 - (197,376) 3,692,045 197,376 Premium Related to Debt 108,655 - (34,727) 73,928 - Total Governmental 39,949,274$ 59,390,013$ 6,348,134$ (7,394,642)$ 58,343,504$ 3,590,680$ BUSINESS-TYPE DEBT General Obligation Bonds LTGO Refunding 2016 - Airport 1.64 -1.64%12/1/2019 700,284 $166,439 - $186,420 533,845 - (171,023) 362,822 176,402 Total General Obligation Bonds 700,284 533,845 - (171,023) 362,822 176,402 Revenue Bonds: Utility sys bonds 2010 (1)3.00-6.40%12/1/2030 21,295,000 $575,000 - $1,720,000 18,895,000 - (1,030,000) 17,865,000 1,070,000 Utility sys bonds 2013 (1)0.38-4.00%12/1/2032 11,415,000 $335,000 - $785,000 9,650,000 - (480,000) 9,170,000 490,000 Total Revenue Bonds 32,710,000 28,545,000 - (1,510,000) 27,035,000 1,560,000 Employee Leave Benefits: Compensated absences 646,235 441,538 (509,041) 578,732 444,493 Net Pension Liability 7,203,149 - (1,590,202) 5,612,947 - Public Works Trust Fund & Drinking Water Loans: PWTF 1999 1.00%7/1/2019 3,465,000 $182,368 547,105 - (182,368) 364,736 182,368 PWTF 2001 0.50%7/1/2021 4,290,405 $227,086 1,135,428 - (227,086) 908,343 227,086 PWTF 2002 1.00%7/1/2022 641,250 $26,114 156,687 - (26,114) 130,572 26,114 PWTF 2004 0.50%7/1/2024 2,049,036 $107,844 862,752 - (107,844) 754,908 107,844 PWTF 2006 0.50%7/1/2026 3,325,000 $180,418 1,804,180 - (180,418) 1,623,763 180,418 PWTF 2013 2.00%6/1/2032 3,325,000 $188,538 3,016,615 - (188,538) 2,828,076 188,538 DWSRF 2016 1.50%10/1/2026 1,353,400 $10,221 - 91,990 - 91,990 10,221 Total Public Works Trust Fund & Drinking Water Loans 18,449,091 7,522,767 91,990 (912,368) 6,702,388 922,589 Premium Related to Debt 1,205,284 - (78,585) 1,126,699 - Total Proprietary 51,859,375$ 45,656,280$ 533,528$ (4,771,219)$ 41,418,588$ 3,103,487$ Total All Funds 91,808,649$ 105,046,293$ 6,881,662$ (12,165,861)$ 99,762,092$ 6,694,167$ (1) Subject to federal arbitrage compliance rules. (2) The original amount is the amount authorized and issued with exception of the Utility System Bonds 2013 in which the authorized amount was $13,000,000 and the issued amount was $11,415,000. CHANGES IN LONG-TERM LIABILITIES City of Auburn: 2017 CAFR Notes to the Financial Statements 80 Due to Other Governments  SCORE Public Development Authority issued General Obligation bonds in 2009 to acquire, construct, improve, and equip a consolidated correctional facility located in Des Moines, Washington. The city is contracted to pay 31% of the debt service of these 30 year bonds that mature in 2039. This debt is paid from the General fund. Revenue Bond Debt Service Coverage The required debt service coverage for the 2013 utility revenue bonds, 2010 utility revenue bonds and the 2005 utility revenue refunding bonds is 1.25. Debt service coverage for 2017 was 3.33. The ratio indicates the direction and degree to which the revenue stream exists to meet the current debt burden. The ratio is calculated by dividing the net revenue available by debt service requirements. The restricted rate stabilization fund for the utility revenue bonds was established to minimize the effect on rates of reven ue 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. Estimated Arbitrage Rebate The Federal Tax Reform Act of 1986 requires issuers of tax -exempt debt of over $5 million to make payments to the United States Treasury of investment interest received at yields that exceed the issuer’s tax -exempt borrowing rates. Payments of arbitrage rebate amounts due under these regulations must be made to the U.S. Treasury every five years. The City’s estimated arbitrage rebate as of December 31, 2017 is $0 for its tax-exempt bond issues. Interest Maturity Original Principal Balance Balance Due Within Issue Name Rates Date Amount Installments 12/31/16 Additions Reductions 12/31/17 One Year GOVERNMENTAL DEBT: General Obligation Bonds: SCORE Public Development Authority 3.00-6.62%1/1/2039 26,732,850 $593,650 - $1,601,150 23,612,700 - (694,400) 22,918,300 716,100 Total General Obligation Bonds Due Other Governments 26,732,850$ 23,612,700$ -$ (694,400)$ 22,918,300$ 716,100$ CHANGES IN LONG-TERM LIABILITIES DUE TO OTHER GOVERNMENTS Enterprise Governmental Funds Funds 12/31/17 Liabilities payable from restricted assets: Revenue bonds 2,922,900$ -$ 2,922,900$ Long-term bonds payable: General obligation bonds 362,822 27,411,611 27,774,433 Capital lease - 382,914 382,914 Revenue bonds 24,112,100 - 24,112,100 Public Works Trust Fund loans 6,702,388 3,692,045 10,394,433 Due to Other Governments - 22,918,300 22,918,300 Employee leave benefits 578,732 2,445,803 3,024,535 Other Post Employment Benefits - 9,137,985 9,137,985 Net Pension Liability 5,612,947 11,986,783 17,599,730 Firemen's Pension Liability - 3,212,435 3,212,435 Premium 1,126,699 73,928 1,200,627 Total long-term debt 41,418,588$ 81,261,804$ 122,680,394$ LONG-TERM LIABILITIES RECONCILIATION City of Auburn: 2017 CAFR Notes to the Financial Statements 81 Note 10 – Pension Plans The following table represents the aggregate pension amounts for all plans subject to the requirements of GASB Statement 68, Accounting and Financial Reporting for Pensions for the year 2017 Aggregate Pension Amounts - All Plans Pension liabilities $ (17,599,730) Pension assets $ 6,702,047 Deferred outflows of resources $ 3,143,002 Deferred inflows of resources $ (4,516,982) Pension expense/expenditures $ 1,592,900 *Pension Assets GASB 68 equals total Net Position Statement State Sponsored 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 state Legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. 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 98540-8380 Or the DRS CAFR may be downloaded from the DRS website at www.drs.wa.gov. Public Employees’ Retirement System (PERS) PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher education employees not participating in higher education retirement programs. PERS is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component. PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two perc ent of the member’s average final compensation (AFC) times the member’s years of service. The AFC is the average of the member’s 24 highest consecutive service months. Members are eligible for retirement from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. Members retiri ng from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially redu ced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of- living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. City of Auburn: 2017 CAFR Notes to the Financial Statements 82 Contributions The PERS Plan 1 member contribution rate is established by State statute at 6 percent. The employer contribution rate is developed by the Office of the State Actuary and includes an administrative expense component that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage of covered payroll) for 2017 were as follows: PERS Plan 1 Actual Contribution Rates: Employer Employee* January – June 2017: PERS Plan 1 6.23% 6.00% PERS Plan 1 UAAL 4.77% Administrative Fee 0.18% Total 11.18% 6.00% July – December 2017: PERS Plan 1 7.49% 6.00% PERS Plan 1 UAAL 5.03% Administrative Fee 0.18% Total 12.70% 6.00% * For employees participating in JBM, the contribution rate was 12.26%. PERS Plan 2/3 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s year s of service for Plan 2 and 1 percent of AFC for Plan 3. The AFC is the average of the member’s 60 highest-paid consecutive service months. There is no cap on years of service credit. Members are eligible for retirement with a full benefit at 65 with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan 2/3 members who have at least 20 years of service credit and are 55 years of age or older, are eligible for early retirement with a benefit that is reduced by a factor that varies according to age for each year before age 65. PERS Plan 2/3 members who have 30 or more years of service credit and are at least 55 years old can retire under one of two provisions:  With a benefit that is reduced by three percent for each year before age 65; or  With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return -to-work rules. PERS Plan 2/3 members hired on or after May 1, 2013 have the option to retire early by accepting a reduction of five percent for each year of retirement before age 65. This option is available only to those who are age 55 or older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced to reflect th e choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one -time duty related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44. PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined contribution rates are set at a minimum of 5 percent and escalate to 15 percent with a choice of six options. Employers do not contribute to th e defined contribution benefits. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan. City of Auburn: 2017 CAFR Notes to the Financial Statements 83 Contributions The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. The Plan 2/3 employer rates include a component to address the PERS Plan 1 UAAL and an administrative expense that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates and Plan 3 contribution rates. The PERS Plan 2/3 required contribution rates (expressed as a percentage of covered payroll) for 2017 were as follows: PERS Plan 2/3 Actual Contribution Rates: Employer 2/3 Employee 2* January – June 2017: PERS Plan 2/3 6.23% 6.12% PERS Plan 1 UAAL 4.77% Administrative Fee 0.18% Employee PERS Plan 3 varies Total 11.18% 6.12% July – December 2017: PERS Plan 2/3 7.49% 7.38% PERS Plan 1 UAAL 5.03% Administrative Fee 0.18% Employee PERS Plan 3 varies Total 12.70% 7.38% * For employees participating in JBM, the contribution rate was 15.30% for January – June 2017 and 18.45% for July – December 2017. The City’s actual PERS plan contributions were $1,216,069 to PERS Plan 1 and $1,714,887 to PERS Plan 2/3 for the year ended December 31, 2017. Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) LEOFF membership includes all full-time, fully compensated, local law enforcement commissioned officers, firefighters, and as of July 24, 2005, emergency medical technicians. LEOFF is comprised of two separate defined benefit pl ans. LEOFF Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined per year of service calculated as a percent of final average salary (FAS) as follows:  20+ years of service – 2.0% of FAS  10-19 years of service – 1.5% of FAS  5-9 years of service – 1% of FAS The FAS 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 hi ghest consecutive 24 months’ salary within the last ten years of service. Members are eligible for retirement with five years of service at the age of 50. Othe r benefits include duty and non-duty disability payments, a cost-of living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. City of Auburn: 2017 CAFR Notes to the Financial Statements 84 Contributions Starting on July 1, 2000, LEOFF Plan 1 employers and employees contribute zero percent, as long as the plan remains fully funded. The LEOFF Plan I had no required employer or employee contributions for fiscal year 201 7. Employers paid only the administrative expense of 0.18 percent of covered payroll. LEOFF Plan 2 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the final average salary (FAS) per year of service (the FAS is based on the highest consecutive 60 months). Members are eligible for retirement with a full benefit at 53 with at least five years of service credit. Members who retire prior to the age of 53 receive reduced benefits. If the member has at least 20 years of serv ice and is age 50, the reduction is three percent for each year prior to age 53. Otherwise, the benefits are actuarially reduced for each year prior to age 53. LEOFF 2 retirement benefits are also actuarially reduced to reflect the choice of a survivor b enefit. Other benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one -time duty- related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 2 members are vested after the completion of five years of eligible service. Contributions The LEOFF Plan 2 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2. The employer rate included an administrative expense component set at 0.18 percent. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. The LEOFF Plan 2 required contribution rates (expressed as a percentage of covered payroll) for 201 7 were as follows: LEOFF Plan 2 Actual Contribution Rates: Employer Employee January – June 2017: State and local governments 5.05% 8.41% Administrative Fee 0.18% Total 5.23% 8.41% Ports and Universities 8.41% 8.41% Administrative Fee 0.18% Total 8.59% 8.41% July – December 2017 State and local governments 5.25% 8.75% Administrative Fee 0.18% Total 5.43% 8.75% Ports and Universities 8.75% 8.75% Administrative Fee 0.18% Total 8.93% 8.75% The City’s actual contributions to the plan were $656,346 for the year ended December 31, 2017. The Legislature, by means of a special funding arrangement, appropriates money from the state General Fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. For the state fiscal year ending June 30, 201 7, the state contributed $62,155,262 to LEOFF Plan 2. The amount recognized by the City as its proportionate share of this amount is $380,132. Actuarial Assumptions The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial valuation completed in 2017 with a valuation date of June 30, 2016. The actuarial assumptions used in the valuation were based on the results of the Office of the State Actuary’s (OSA) 2007-2012 Experience Study and the 2015 Economic Experience Study. City of Auburn: 2017 CAFR Notes to the Financial Statements 85 Additional assumptions for subsequent events and law changes are current as of the 201 6 actuarial valuation report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, 201 7. Plan liabilities were rolled forward from June 30, 2016, to June 30, 2017 , reflecting each plan’s normal cost (using the entry-age cost method), assumed interest and actual benefit payments.  Inflation: 3.0% total economic inflation; 3.75% salary inflation  Salary increases: In addition to the base 3.75% salary inflation assumption, salaries are also expected to grow by promotions and longevity.  Investment rate of return: 7.5% Mortality rates were based on the RP-2000 report’s Combined Healthy Table and Combined Disabled Table, published by the Society of Actuaries. The OSA applied offsets to the base table and reco gnized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis; meaning, each member is assumed to receive additional mortality improvements in each future year throughout his or her lifetime. There were changes in methods and assumptions since the last valuation.  For all plans except LEOFF Plan 1, how terminated and vested member benefits are valued was corrected .  How the basic minimum COLA in PERS Plan 1 is valued for legal order payees was improved.  For all plans, the average expected remaining service lives calculation was revised. Discount Rate The discount rate used to measure the total pension liability for all DRS plans was 7.5 percent. To determine that rate, an asset sufficiency test included an assumed 7.7 percent long -term discount rate to determine funding liabilities for calculating future contribution rate requirements. (All plans use 7.7 percent except LEOFF 2, which has assumed 7.5 percent). Consistent with the long-term expected rate of return, a 7.5 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue being made at contractually required rat es (including PERS 2/3, SERS 2/3, and TRS 2/3 employers, whose rates include a component for the PERS 1, and TRS 1 plan liabilities). Based on these assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long- term expected rate of return of 7.5 percent was used to determine the total liability. Long-Term Expected Rate of Return The long-term expected rate of return on the DRS pension plan investments of 7.5 percent was determined using a building- block-method. In selecting this assumption, the Office of the State Actuary (OSA) reviewed the historical experience data, considered the historical conditions that produced past annual investment returns, and considered capital market assumptions and simulated expected investment returns provided by the Washington State Investment Board (WSIB). The WSIB uses the capital market assumptions and their target asset allocation to simulate future investment returns over various time horizons. City of Auburn: 2017 CAFR Notes to the Financial Statements 86 Estimated Rates of Return by Asset Class Best estimates of arithmetic real rates of return for each major asset class included in the pension plan ’s target asset allocation as of June 30, 2017, are summarized in the table below. The inflation component used to create the table is 2.2 percent and represents the WSIB’s most recent long-term estimate of broad economic inflation. Asset Class Target Allocation % Long-Term Expected Real Rate of Return Arithmetic Fixed Income 20% 1.70% Tangible Assets 5% 4.90% Real Estate 15% 5.80% Global Equity 37% 6.30% Private Equity 23% 9.30% 100% Sensitivity of NPL The table below presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.5 percent, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.5 percent) or 1-percentage point higher (8.5 percent) than the current rate. 1% Decrease (6.5%) Current Discount Rate (7.5%) 1% Increase (8.5%) PERS 1 $ 11,133,883 $ 9,139,685 $ 7,412,282 PERS 2/3 22,792,245 8,460,044 (3,283,068) LEOFF 1 (1,153,005) (1,554,407) (1,899,120) LEOFF 2 $ 1,113,941 $ (5,147,640) $ (10,249,314) Pension Plan Fiduciary Net Position Detailed information about the State’s pension plans’ fiduciary net position is available in the separately issued DRS financial report. Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the City reported a total pension liability of $10,897,682 for its proportionate share of the net pension liabilities as follows: Liability (Asset) PERS 1 $ 9,139,685 PERS 2/3 8,460,044 LEOFF 1 (1,554,407) LEOFF 2 $ (5,147,640) City of Auburn: 2017 CAFR Notes to the Financial Statements 87 The amount of the asset reported above for LEOFF Plans 1 and 2 reflects a reduction for State pension support provided to the City. The amount recognized by the City as its proportionate share of the net pension asset, the related State support, and the total portion of the net pension asset that was associated with the City were as follows: LEOFF 1 Asset LEOFF 2 Asset Employer’s proportionate share $ (1,554,407) $ (5,147,640) State’s proportionate share of the net pension asset associated with the employer (10,513,971) (3,339,178) TOTAL $ (12,068,378) $(8,486,817) At June 30, the City’s proportionate share of the collective net pension liabilities was as follows: Proportionate Share 6/30/16 Proportionate Share 6/30/17 Change in Proportion PERS 1 0.194185% 0.192614% (0.001571)% PERS 2/3 0.242776% 0.243488% 0.000712 % LEOFF 1 0.101574% 0.102451% 0.000877% LEOFF 2 0.359661% 0.370954% 0.011293 % Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30 are used as the basis for determining each employer’s proportionate share of the collective pension amounts reported by the DRS in the Schedules of Employer and Nonemployer Allocations for all plans except LEOFF 1. LEOFF Plan 1 allocation percentages are based on the total historical employer contributions to LEOFF 1 from 1971 through 2000 and the retirement benefit payments in fiscal year 201 7. Historical data was obtained from a 2011 study by the Office of the State Actuary (OSA). In fiscal year 2017, the state of Washington contributed 87.12 percent of LEOFF 1 employer contributions and all other employers contributed the remaining 12.88 percent of employer contributions. LEOFF 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. The allocation method the plan chose reflects the projected long-term contribution effort based on historical data. In fiscal year 2017, the state of Washington contributed 39.35 percent of LEOFF 2 employer contributions pursuant to RCW 41.26.725 and all other employers contributed the remaining 60.65 percent of employer contributions. The collective net pension liability (asset) was measured as of June 30, 201 7, and the actuarial valuation date on which the total pension liability (asset) is based was as of June 30, 2016, with update procedures used to roll forward the total pension liability to the measurement date. Pension Expense For the year ended December 31, 2017, the City recognized pension expense as follows: Pension Expense PERS 1 $ 475,481 PERS 2/3 1,201,215 LEOFF 1 (257,088) LEOFF 2 173,292 TOTAL $ 1,592,900 City of Auburn: 2017 CAFR Notes to the Financial Statements 88 Deferred Outflows of Resources and Deferred Inflows of Resources At December 31, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PERS 1 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ $ Net difference between projected and actual investment earnings on pension plan investments 341,067 Changes of assumptions Changes in proportion and differences between contributions and proportionate share of contributions Contributions subsequent to the measurement date 625,456 TOTAL $ 625,456 $ 341,067 PERS 2/3 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 857,202 $ 278,236 Net difference between projected and actual investment earnings on pension plan investments 2,255,244 Changes of assumptions 89,862 Changes in proportion and differences between contributions and proportionate share of contributions 48,701 10,996 Contributions subsequent to the measurement date 934,975 TOTAL $ 1,930,740 $ 2,544,476 LEOFF 1 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ $ Net difference between projected and actual investment earnings on pension plan investments 144,441 Changes of assumptions Changes in proportion and differences between contributions and proportionate share of contributions Contributions subsequent to the measurement date TOTAL $ $ 144,441 LEOFF 2 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 226,249 $ 195,207 Net difference between projected and actual investment earnings on pension plan investments 1,155,681 Changes of assumptions 6,199 Changes in proportion and differences between contributions and proportionate share of contributions 136,110 Contributions subsequent to the measurement date 354,359 TOTAL $ 586,806 $ 1,486,999 City of Auburn: 2017 CAFR Notes to the Financial Statements 89 Deferred outflows of resources related to pensions resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended PERS 1 PERS 2/3 LEOFF 1 LEOFF 2 December 31 2018 $ (230,540) $ (892,068) $ (90,649) $ (556,277) 2019 72,785 251,250 24,448 94,881 2020 (16,900) (189,859) (9,763) (104,678) 2021 (166,413) (902,906) (68,477) (522,542) 2022 - 80,379 - (29,631) Thereafter $ - $ 104,493 $ - $ (136,304) 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 41.1 6 and 41.18. This plan provides 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 firefight ers who retired prior to March 1, 1970, and excess pension and healthcare benefits of LEOFF for covered firefighters who retired after March 1, 1970. Benefits and refunds of the defined benefit pension plan are recognized when due and payable in accordance with the Plan. The Plan does not issue a separate financial report. Membership of the Firemen’s Pension Plan consisted of 13 eligible inactive employees or their beneficiaries, of which 11 received city paid benefits. There are no active employees in this plan. 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 (which is not considered a special funding situation), interest earnings, member contributions made prior to the inception of LEOFF, and City contributions required to meet projected future pension obligations. In 2017, $78,078 was received from the state from taxes on fire insurance premiums, and $22,111 was received from interest earnings. On-behalf payments of fringe benefits and salaries for the City’s employees were recognized as revenues and expenditures/expenses during the period. Administrative costs, such as City staff time and actuarial valuation costs are funded from interest earnings or City contributions. The City has determined that GASB Statement No. 67 – Financial Reporting for Pension Plans; an amendment of GASB Statement No. 25 does not apply to the City’s single-employer Fire Relief and Pension Fund as there are no assets accumulated in a qualifying trust and it does not meet the criteria applicability set by the statement as the contributions to that fund are not irrevocable. Plan assets may be used to cover medical expenses which are outside of the scope of the pension plan benefits. Therefore, the Fire Relief and Pension Fund has been presented in conformance with GASB Statement No. 73 – Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. City of Auburn: 2017 CAFR Notes to the Financial Statements 90 The following table represents the plan aggregate pension amounts for 2017: Aggregate Pension Amounts – Fire Relief and Pension Plan Pension liabilities $ (3,212,435) Deferred outflows of resources $ 0 Deferred inflows of resources $ 0 Pension expense/expenditures $ 116,491 Service Retirement Benefit The amount of a members benefit is based upon the rank of the firefighter at the time of retirement and amounts to 50% of salary plus an additional 2% for each year of service in excess of 25 years, to a maximum be nefit of 60% of salary. An annual post-retirement increase is determined based upon 2 factors:  escalation by salary in proportion to the current salary of rank from which the firefighter retired (RCW 41.18.040), and  increase proportionate to the annual increase in the Seattle-area CPI and regardless of the increase (or decrease) in the CPI, the benefits are increased at least 2% each year. (RCW 41.18.104) Assumptions and Other Inputs to the Total Pension Liability GASB Statement 73 requires a schedule of changes in Total Pension Liability from year to year. Both the December 31, 2016 and the December 31, 2017 amounts are based on the January 1, 2017 actuarial valuation (the valuation date) and then projected forward to the measurement date. The measurement date is December 31, 2017 which is the date as of which the total pension liability is determined. The discount rate and other key actuarial assumptions utilized are noted below: Fire Relief and Pension Plan December 31, 2016 December 31, 2017 Discount Rate – municipal bond rate (average rating AA/Aa or higher) 3.75% 3.50% Valuation Date January 1, 2017 January 1, 2017 Measurement Date December 31, 2016 December 31, 2017 Inflation 2.25% 2.25% Salary Increases Including Inflation 3.25% 3.25% Mortality RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB Actuarial Cost Method Entry Age Normal Entry Age Normal City of Auburn: 2017 CAFR Notes to the Financial Statements 91 Total Pension Liability The following table represents the changes in the total pension liability for 2017: Fire Relief and Pension Plan Increase (Decrease) Total Pension Liability Balances as of December 31, 2016 $ 3,218,004 Changes for the year: Service cost 0 Interest on total pension liability 116,957 Effect of plan changes 0 Effect of economic/demographic gains or losses 0 Effect of assumptions, changes or inputs 77,612 Benefit payments * (200,138) Balances as of December 31, 2017 $ 3,212,435 * Benefit payments are estimated based on expected payouts. Sensitivity Analysis The following table presents the total pension liability of the City, calculated using the discount rate of 3.50%, as well as what the City’s total pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (2.50%) or 1 percentage point higher (4.50%) than the current rate. 1% Decrease 2.50% Current Discount Rate 3.50% 1% Increase 4.50% $3,556,531 $3,212,435 $2,919,603 Pension Expense The amount of pension expense recognized by the City for the reporting period is as follows: Fire Relief and Pension Plan January 1, 2016 to December 31, 2016 January 1, 2017 to December 31, 2017 Service Cost N/A $ 0 Interest on Total Pension Liability N/A 116,957 Effect of Plan Changes N/A 0 Contributions From State Fire Insurance Premium Tax N/A (78,078) Recognition of Deferred Inflows/Outflows of Resources: Recognition of Economic/Demographic Gains/Losses N/A 0 Recognition of Assumption Changes or Inputs N/A 77,612 Pension Expense N/A $ 116,491 City of Auburn: 2017 CAFR Notes to the Financial Statements 92 Deferred Outflows/Inflows of Resources As of December 31, 2017, the deferred outflows and inflows of resources are as follows: Fire Relief and Pension Plan Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 0 $ 0 Changes of assumptions 0 0 Contributions subsequent to the measurement date 0 0 TOTAL $ 0 $ 0 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31: 2018 $0 2019 0 2020 0 2021 0 2022 0 Thereafter 0 NOTE 11 – OTHER POST-EMPLOYMENT BENEFITS In 2008, the city implemented GASB Statement 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. Plan Description The city is the administrator of the LEOFF 1 employees plan covering lifetime medical care. This plan is a defined benefit healthcare plan, other post-employment benefit plan (OPEB). The city is required to pay post-employment benefits in accordance with Revised Code of Washington (RCW) Chapter 41.16, all medical and long term care as long as a disability exists are covered for any active firefighter hired prior to March 1, 1970. For any retired firefighter hired prior to March 1, 1970, medical and lon g term care are covered at the discretion of the Retirement Board. Members retired prior to 1961 for reasons other than duty disability are not eligible for medical benefits during retirement. In 1970, LEOFF was established by the Legislature under RCW Chapter 41.26. LEOFF members who joined the system by September 30, 1977 are Plan 1 members. For Plan 1 members, the city is required to pay all healthcare expenses incurred by LEOFF 1 retirees. The City’s cost is reduced by any amounts retirees receive from Medicare or other health plans. Funding Policy The funding policy is based upon the pay-as-you-go financing requirements paid out of the General fund. Membership As of December 31, 2017, there was 1 active member and 51 retirees meeting the eligibility requirements of a LEOFF 1 member. This is considered a closed group with no new members. The one active member is employed by the Valley Regional Fire Authority (VRFA) which is a separate governmental entity and the City is billed annually for their medical costs. City of Auburn: 2017 CAFR Notes to the Financial Statements 93 Annual OPEB Cost and Net OPEB Obligation The City’s annual other post-employment benefit (OPEB) cost is calculated based upon the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities over a period of 21 years as of January 1, 2008. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan and changes in the City’s net OPEB for LEOFF. The net OPEB obligation of $9,137,985 is included as a non-current liability on the Statement of Net Position. The City’s annual OPEB cost, the percentage of OPEB costs contributed to the plan, and the net OPEB obligation for 2017, 2016 and 2015 are as follows: Funded Status and Funding Progress As of January 1, 2017, the most recent actuarial valuation date, the plan was 0% funded. The accrued liability for benefits was $17.6 million, and the actuarial value of assets was $0, resulting in a UAAL of $17.6 million. The required schedule of funding progress immediately following the notes to the financial statements presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation. The actuarial Fiscal Year Ending Annual Required Contribution (ARC)12/31/2015 12/31/2016 12/31/2017 1. Annual Normal Costs at beginning of year 45,656$ 45,656$ -$ 2. Amortization of UAAL at beginning of year 2,168,028 2,168,028 1,756,269 3. Interest to end of year 71,945 71,945 61,469 4. ARC at end of year 2,285,629$ 2,285,629$ 1,817,738$ 5. Interest on Net OPEB Obligation 201,873 235,548 295,674 6. Adjustment to ARC 541,686 670,637 844,652 7. Annual OPEB Cost 1,945,816$ 1,850,540$ 1,268,760$ 8. Employer Contributions 909,657 650,332 578,606 9. Change in Net OPEB Obligation 1,036,159 1,200,208 690,154 10. Net OPEB Obligation at beginning of year 6,211,464 7,247,623 8,447,831 11. Net OPEB Obligation at end of year 7,247,623$ 8,447,831$ 9,137,985$ Contributions as a Annual Percentage of Net OPEB Fiscal Year Ending OPEB Cost Annual OPEB Cost Obligation December 31, 2017 1,268,760$ 46%9,137,985$ December 31, 2016 1,850,540 35%8,447,831 December 31, 2015 1,945,816 47%7,247,623 City of Auburn: 2017 CAFR Notes to the Financial Statements 94 methods and assumptions used include techniques that are designed to reduce the effects of short -term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. In the January 1, 2017 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions used included a 3.5% discount rate, which is based upon the long-term investment yield on the investments that are expected to be used to finance the payment of benefits. The medical (healthcare) trend rate of 7.9% for pre-65 retirees and 7.4% for post-65 retirees is assumed and the inflation rate includes the dental inflation rate of 5.0% and long term care inflation rate of 4.5%. The UAAL is being amortized on a closed basis at the assumed discount rate using the level dollar amortization method. The remaining amortization period at January 1, 2017 was 12 years. NOTE 12 – ASSOCIATION OF WASHINGTON CITIES EMPLOYEE BENEFIT TRUST (“Trust”) Trust Description The City is a member of the Association of Washington Cities Employee Benefit Trust Health Care Program (AWC Trust HCP). Chapter 48.62 RCW provides that two or more local government entities may, by Interlocal agreement under Chapter 39.34 RCW, form together or join a pool or organization for the joint purchasing of insurance, and/or joint self- insurance, to the same extent that they may individually purchase insurance, or self-insure. An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter 39.34 RCW, the Interlocal Cooperation Act. The AWC Trust HCP was formed on January 1, 2014 when participating cities, towns, and non -city entities of the AWC Employee Benefit Trust in the State of Washington joined together by signing an Interlocal Governmental Agreement to jointly self-insure certain health benefit plans and programs for participating employees, their covered dependents and other beneficiaries through a designated account within the Trust. As of December 31, 2017, 261 cities/towns/non-city entities participate in the AWC Trust HCP. The AWC Trust HCP allows members to establish a program of joint insurance and provides health and welfare services to all participating members. The AWC Trust HCP pools claims without regard to individual member experience. The pool is actuarially rated each year with the assumption of projected claims run-out for all current members. The AWC Trust HCP includes medical, dental and vision insurance through the following carriers: Kaiser Foundation Health Plan of Washington, Kaiser Foundation Health Plan of Washington Options, Inc., Regence BlueShield, Asuris Northwest Health, Delta Dental of Washington, and Vision Service Plan. Eligible members are cities and towns within the state of Washington. Non-City Entities (public agency, public corporation, intergovernmental agency, or political subdivision within the state of Washington) are eligible to apply for coverage into the AWC Trust HCP, submitting application to the Board of Trustees for review as required in the Trust Agreement. Participating employers pay monthly premiums to the AWC Trust HCP. The AWC Trust HCP is responsible for paymen t of all covered claims. In 2017, the AWC Trust HCP purchased stop loss insurance for Regence/Asuris plans at an Individual Stop Loss (ISL) of $1.5 million through Life Map, and Kaiser ISL at $1 million with Companion Life through ASG Risk Management . The aggregate policy is for 200% of expected medical claims. Participating employers contract to remain in the AWC HCP for a minimum of three years. Participating employers with over 250 employees must provide written notice of termination of all coverage a minimum of 12 months in advance of the termination date, and participating employers with under 250 employees must provide written notice of termination of all coverage a minimum of 6 months in advance of termination date. When all coverage is being terminated, termination will only occur on December 31. Participating employers terminating a group or line of coverage must notify the HCP a minimum of 60 days prior to termination. A participating employer’s termination will not obligate that member to past debts, or further contributions to the HCP. Similarly, the terminating member forfeits all rights and interest to the HCP Account. City of Auburn: 2017 CAFR Notes to the Financial Statements 95 The operations of the Health Care Program are managed by the Board of Trustees or its delegates. The Board of Trustees is comprised of four regionally elected officials from Trust member cities or towns, the Employee Benefit Advisory Committee Chair and Vice Chair, and two appointed individuals from the AWC Board of Directors, who are from Trust member cities or towns. The Trustees or its appointed delegates review and analyze Health Care Program related matters and make operational decisions regarding premium contributions, reserves, plan options and benefits in compliance with Chapter 48.62 RCW. The Board of Trustees has decision authority consistent with the Trust Agreement, Health Care Program policies, Chapter 48.62 RCW and Chapter 200-110-WAC. The accounting records of the Trust HCP are maintained in accordance with methods prescribed by the State Auditor’s office under the authority of Chapter 43.09 RCW. The Trust HCP also follows applicable accounting standards established by the Governmental Accounting Standards Board (“GASB”). Year-end financial reporting is done on an accrual basis and submitted to the Office of the State Auditor as required by Chapter 200 -110 WAC. The audit report for the AWC Trust HCP is available from the Washington State Auditor’s office. NOTE 13 – CONSTRUCTION COMMITMENTS At December 31, 2017, the City had the following contractual obligations on construction projects: SCHEDULE OF OUTSTANDING CONSTRUCTION OBLIGATIONS As of December 31, 2017 Amount Outstanding Traffic projects 1,104,773$ Street projects 2,914,429 Utilities projects 814,876 Other projects 69,953 Total commitments 4,904,030$ NOTE 14 – CEMETERY ENDOWED CARE FUND The City maintains one permanent fund known as the cemetery endowed care fund. Paid into this fund is 10% of the base, pre-tax sales price 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 plant ing 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 2017, of the $16,609 net appreciation on investments, all was available for expenditures. Amounts that are available for expenditure are reflected as assigned fund balance. City of Auburn: 2017 CAFR Notes to the Financial Statements 96 NOTE 15 – JOINT VENTURES / RELATED PARTY Valley Communications Center 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 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 Co unty 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 year’s 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 budge t, less revenue from subscribing agencies and all other sources. The 2017 cost distribution for the five participating cities is as follows: * 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 Dispatchable Percent of Calls Total * Kent 115,303 26.55% Renton 87,220 20.09% Auburn 100,554 23.16% Tukwila 36,635 8.44% Federal Way 94,522 21.76% Total 434,233 100.00% City of Auburn: 2017 CAFR Notes to the Financial Statements 97 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. 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 participati ng 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 Comm unications 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: 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. South Correctional Entity (SCORE) The South Correctional Entity (SCORE) consolidated correctional facility was established February 25, 2009, when an Interlocal Agreement (the “Original Interlocal Agreement”) was entered into by seven participating municipal governments, the “Member Cities” of Auburn, Burien, Des Moines, Federal Way, Renton, SeaTac and Tukwila, und er the authority of the “Interlocal Cooperation Act” (RCW 39.34). This “Original Interlocal Agreement” was amended and restated October 1, 2009 and named the City of Des Moines as the “Host City” and the remaining Member Cities as “Owner Cities”. This in terlocal agreement is known as the “Formation Interlocal Agreement”. Pursuant to a separate “Host City Agreement” dated October 1, 2009, the Host City will not enjoy the same equity position as the Owner Cities until all debts issued are paid an d the Host City fulfills all of its obligations as outlined in the Host City Agreement. Pursuant to SCORE financial policies, all unexpected funds or reserve funds shall be distributed based on the percentage of the Member City’s average daily population at the SCORE Facility for the last three (3) years regardless of its Owner City or Host City status. Item Kent Renton Auburn Tukwila Federal Way Total Equity Dec 31, 2016 6,314,604$ 4,531,544$ 4,504,828$ $2,391,872 3,484,567$ 21,227,415$ Current year change 900,497 681,177 785,309 286,110 738,205 3,391,298 Equity Dec 31, 2017 7,215,101$ 5,212,721$ 5,290,137$ 2,677,982$ 4,222,772$ 24,618,713$ % of equity 29.31%21.17%21.49%10.88%17.15% % of 2017 distribution 26.55%20.09%23.16%8.44%21.77% City of Auburn: 2017 CAFR Notes to the Financial Statements 98 SCORE, a governmental administrative agency pursuant to RCW 39.34.030(3), has the power to acquire, construct, own, operate, maintain, equip, and improve a correctional facility known as the “SCORE Facility” and to provide correctional services and functions incidental thereto, for the purpose of detaining arrestees and sentenced offenders in the furtherance of public safety and emergencies within the jurisdiction of the Member Cities. The SCORE Facility may serve the Member Cities and Subscribing Agencies which are in need of correctional facilities. Any agreement with a Subscribing Agency shall be in writing and approved by SCORE as provided within the SCORE Forma tion Interlocal Agreement. Financing for the acquisition, construction, equipping, and improvement of the SCORE Facility was provided by bonds issued by the South Correctional Entity Facility Public Development Authority (the “SCORE PDA”), a public develo pment authority chartered by the City of Renton pursuant to RCW 35.21.730 through 35.21.755. The SCORE PDA issued $86 million in special obligation bonds in 2009 (the “Bonds”) to construct, develop, acquire and equip the SCORE Facility. Pursuant to the Formation Interlocal Agreement and the ordinances of each city, each Owner City (which includes the Cities of Auburn, Burien, Federal Way, Renton, SeaTac, and Tukwila) is obligated to budget for and pay its share, and only its share, of the principal of and interest on the Bonds as the same become due and payable. Each Owner City’s obligation to pay its portion is an irrevocable, unconditional full faith and credit obligation of such Owner City, payable from property taxes levied with in the constitutional and statutory authority provided without a vote of the electors of the Owner City on all of the taxable property within the Owner City and other sources of revenues available therefor. The following is a summary of the debt service requirements for the Bonds: BABs Auburn Burien Federal Way Renton SeaTac Tukwila Year Principal Interest Subsidy Total 31%4%18%36%3%8% 2018 2,240,000$ 4,715,979$ (1,512,496)$ 5,443,483$ 1,687,480$ 217,739$ 979,827$ 1,959,654$ 163,304$ 435,479$ 2019 2,310,000 4,602,229 (1,478,317) 5,433,912 1,684,513 217,356 978,104 1,956,208 163,017 434,713 2020 2,385,000 4,484,854 (1,440,560) 5,429,294 1,683,081 217,172 977,273 1,954,546 162,879 434,344 2021 2,465,000 4,363,604 (1,401,577) 5,427,027 1,682,378 217,081 976,865 1,953,730 162,811 434,162 2022 2,590,000 4,233,250 (1,500,618) 5,322,632 1,650,016 212,905 958,074 1,916,148 159,679 425,811 2023-2027 14,485,000 18,727,798 (6,710,481) 26,502,317 8,215,718 1,060,093 4,770,417 9,540,834 795,070 2,120,185 2028-2032 17,725,000 13,590,870 (4,959,695) 26,356,175 8,170,414 1,054,247 4,744,112 9,488,223 790,685 2,108,494 2033-2037 21,855,000 7,082,263 (2,731,829) 26,205,434 8,123,685 1,048,217 4,716,978 9,433,956 786,163 2,096,435 2038-2039 10,115,000 676,321 (353,824) 10,437,497 3,235,624 417,500 1,878,749 3,757,499 313,125 835,000 Totals 76,170,000$ 62,477,168$ (22,089,397)$ 116,557,771$ 36,132,909$ 4,662,310$ 20,980,399$ 41,960,798$ 3,496,733$ 9,324,623$ Summary of Debt Service Requirements Debt Service Schedule Debt Service Allocation to Owner Cities City of Auburn: 2017 CAFR Notes to the Financial Statements 99 The City of Auburn reports its share of equity interest in the Governmental Activities column within the Government -wide financial statements under non-current assets. The following is condensed (unaudited) financial information as of December 31, 2017 related to SCORE: Member City Percent of Equity 2016 Equity Balance 2017 Apportionment 2017 Equity Balance Auburn 31.00%3,115,334$ 32,413$ 3,147,747$ Burien 3.00%324,602 22,263 346,865$ Des Moines 2.00%166,583 (3,248) 163,335$ Federal Way 23.00%2,292,265 61,482 2,353,747$ Renton 30.00%2,941,503 74,665 3,016,168$ SeaTac 4.00%434,029 22,947 456,976$ Tukwila 7.00%703,323 16,099 719,422$ Grand Totals 100.00%9,977,639$ 226,621$ 10,204,260$ South Correctional Entity (SCORE) Completed financial statements for SCORE and SCORE PDA can be obtained at SCORE, 20817 17th Avenue South, Des Moines, WA 98198. Since the obligation to fund future joint venture-related debt is separately reported as due to other governments, the investment in joint ventures is reported as a combination of this debt with the current reported equity in joint ventures as follows: NOTE 16 – JOINTLY GOVERNED ORGANIZATION / RELATED PARTY 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), provides first responder fire and emergency medical services to residents of Auburn, Algona and Pacific. The VRFA is a new municipal corporation, with its own Governing Board, and is legally separate from the three cities it serves. 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. Membership on the Governing Board is made by appointment from the city council of the respective member cities. 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. Balance Additions Reductions Balance 12/31/2016 12/31/2017 Valley Communication Public Dev Auth -$ -$ -$ -$ SCORE Public Development Authority 23,612,700 - (694,400) 22,918,300 Due to Other Governments 23,612,700 - (694,400) 22,918,300 Valley Communications Center 4,504,827 785,310 - 5,290,137 South Correctional Entity (SCORE)3,115,334 32,413 - 3,147,747 Equity Share 7,620,161 817,723 - 8,437,884 Total Investment in Joint Ventures 31,356,184$ Investment in Joint Ventures City of Auburn: 2017 CAFR Notes to the Financial Statements 100 In accordance with the interlocal agreement at time of formation, each member city retained its obligation for LEOFF 1 firefighter and Fire Relief and Pension Plan obligations. During 2017 Auburn paid $1,808, for the employer’s share of active LEOFF 1 firefighter medical premiums and benefit payments. Premium and benefit payments for retired LEOFF 1 firefighters for 2017 were $123,889. Medical premiums and benefit payments made under the Fire Relief and Pension Plan for 2017 were $67,052. NOTE 17 – CONTINGENCIES AND LITIGATIONS As of December 31, 2017, a number of claims were pending against the City for damages and legal actions. While the outcome of these actions is uncertain, no uncovered losses are anticipated at this time with 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 general liability insurance. The City participates in a number of federal and state assisted programs. These grants are subject to audit by the grantors or their representatives. Such audits could result in requests for reimbursement to grantor agencies for expenditures disallowed under the terms of the grants. The City’s management believes that such disallowances, if any, will be immaterial . NOTE 18 – RISK MANAGEMENT & INSURANCE Risk Management The City is exposed to various risks of loss such as: theft and damage and destruction of assets, errors and omissions, injur ies or property damage to others, employees’ health, and natural disasters. All risk financing activities are accounted for in the Insurance internal service fund. To insure against risks of loss 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 A ct), 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 s ervices. WCIA has a total of 161 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, errors or omissions, stop gap, employment practices and employee benefits liability. Limits are $4 million per occurrence in the self-insured layer, and $21 million in limits above the self-insured layer is provided by reinsurance. Total limits are $25 million per occurrence subject to aggregate sublimits. 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 coverage are purchased on a group basis. Various deductibles apply by type of coverage. Property coverage is self-funded from the members’ deductible to $750,000, for all perils other than flood and earthquake, and insured above that to $300 million per occurrence subject to aggregates and sublimits. Automobile physical damage cov erage is self-funded from the members’ deductible to $250,000 and insured above that to $100 million per occurrence subject to aggregates and sublimits. In-house services include risk management consultation, loss control field services, and claims and litigation administration. WCIA contracts for certain claims investigations, consultants for personnel and land use issues, insurance brokerage, actuarial, and lobbyist services. City of Auburn: 2017 CAFR Notes to the Financial Statements 101 WCIA is fully funded by its members, who make annual assessments on a prospe ctively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, reinsurance 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. 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. 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 become self-insured for worker’s compensation in 2014. Contributions are made from the operating funds. At December 31, 2017 fund equity was $1,595,592. NOTE 19 – TAX ABATEMENTS The city offers a multifamily property tax exemption within the downtown core to encourage construction of new multifamily housing, and that the provisions of additional housing opportunities in the downtown core will assist in achieving the goals of the city’s comprehensive plan. Under Chapter 84.14 RCW, the city provides the opportunity for a limited, eight - year exemptions from ad valorem property taxation for a qualified new multifamily and rehabilitated multifamily housing constructed in the downtown core and 12-year exemptions from ad valorem property taxation for qualified new affordable multifamily and rehabilitated multifamily housing contracted in the downtown core. Abatements are obtained through application by the property owner, including proof of improvements that have been made, and equal 100 percent of the additional property tax resulting from the increase in assessed value as a result of t he improvements. If application is approved and all requirements meet, exemption begins January 1st, of the year immediately following the calendar year of issuance of the final certificate of tax emption. If at any time it is determined the property no longer complies with the terms of the contract or the requirements, or the use of the property for any reason no longer qualifies for the tax exemption, the tax exemption shall be cancelled and additional taxes, interest and penalties imposed. The city has the following tax abatement agreement(s) in place as of December 31, 2017. 1) Plan A Development LLC, project name Trek Apartments; a four story building of 126 apartment units with outdoor plaza and ground parking and retail space. The final certificate of tax exemption was issued December 3, 2015, with the eight-year ad valorem property tax exemption to start with tax year 2016. The amount of the property tax abated during the fiscal year 2017 was $39,995. 2) Merrill Gardens at Auburn LLC, project name Merrill Gardens; a senior living community with 129 apartment units (114 assisted living units and 15 memory care units). The building is four stories above grade with one level of below grade park ing. The final certificate of tax exemption was issued September 14, 2017, with the eight-year ad valorem property tax exemption to start with tax year 2018. City of Auburn: 2017 CAFR Notes to the Financial Statements 102 NOTE 20 – CHANGE IN ACCOUNTING PRINCIPLE The City of Auburn implemented the second year requirement of Governmental Accounting Standards Board (GASB) Statement 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB 68, and Amendments to Certain Provisions of GASB 67 and 68 . The Fire Relief and Pension Fund is reported under GASB 73 for financial reporting (recognize a pension liability), note disclosure and supplementary information. City of Auburn: 2017 CAFR Required Supplemental Information 103 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of the Net Pension Liability As of June 30, 2017 Last 10 Fiscal Years* PERS 1 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.192614%0.194185%0.192878% Employer's proportionate share of the net pension liability (asset)9,139,685$ 10,428,649$ 10,089,313$ Covered payroll 181,521$ 212,906$ 328,015$ Employer's proportionate share of the net pension liability as a percentage of its covered payroll 5035.06%4898.24%3075.87% Plan fiduciary net position as a percentage of the total pension liability 61.24%57.03%59.10% PERS 2/3 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.243488%0.247760%0.241739% Employer's proportionate share of the net pension liability (asset)8,460,044$ 12,223,580$ 8,637,472$ Covered payroll 23,904,107$ 22,734,107$ 21,460,504$ Employer's proportionate share of the net pension liability as a percentage of its covered payroll 35.39%53.77%40.25% Plan fiduciary net position as a percentage of the total pension liability 90.97%85.82%89.20% LEOFF 1 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.102451%0.101574%0.103718% Employer's proportionate share of the net pension liability (asset)(1,554,407)$ (1,046,503)$ (1,250,031)$ Covered payroll -$ -$ -$ Employer's proportionate share of the net pension liability as a percentage of its covered payroll 0.00%0.00%0.00% Plan fiduciary net position as a percentage of the total pension liability 136.00%123.74%127.36% LEOFF 2 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.370954%0.359661%0.354511% Employer's proportionate share of the net pension liability (asset)(5,147,640)$ (2,091,896)$ (2,193,486)$ State's proportionate share of the net pension liability (asset) associated with the employer (3,339,178)$ (1,363,764)$ (1,450,178)$ Total (8,486,818)$ (3,455,660)$ (3,643,664)$ Covered payroll 11,623,292$ 10,953,667$ 10,336,409$ Employer's proportionate share of the net pension liability as a percentage of its covered payroll -44.29%-19.10%-21.22% Plan fiduciary net position as a percentage of the total pension liability 113.40%106.04%111.67% City of Auburn: 2017 CAFR Required Supplemental Information 104 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of the Net Pension Liability As of June 30, 2017 Last 10 Fiscal Years* * The City implemented GASB Statement No. 68 in fiscal year 2015. Information is not available for prior years. The schedule will be built prospectively until it contains ten years of data. Notes to Schedule: Significant methods and assumptions used in calculating the actuarial determined contribution are presented in Note 10. Contribution and covered payroll on this schedule is based on the plan fiscal year – July 1 – June 30. The LEOFF 1 plan is closed and has no further covered payroll. City of Auburn: 2017 CAFR Required Supplemental Information 105 Schedule of Employer Contributions As of December 31 2017 Last 10 Fiscal Years* * The City implemented GASB Statement No. 68 in fiscal year 2015. Information is not available for prior years. The schedule will be built prospectively until it contains ten years of data. Note to Schedule: Significant methods and assumptions used in calculating the actuarial determined contribution are presented in Note 10. PERS 1 2017 2016 2015 Statutorily or contractually required contributions 22,545$ 20,088$ 30,642$ Contributions in relation to the statutorily or contractually required contributions (22,545)$ (20,088)$ (30,642)$ Contribution deficiency (excess)-$ -$ -$ Covered payroll 188,486$ 179,680$ 306,408$ Contributions as a percentage of covered payroll 11.96%11.18%10.00% PERS 2/3 2017 2016 2015 Statutorily or contractually required contributions 2,908,411$ 2,608,360$ 2,258,109$ Contributions in relation to the statutorily or contractually required contributions (2,908,411)$ (2,608,360)$ (2,258,109)$ Contribution deficiency (excess)-$ -$ -$ Covered payroll 24,350,435$ 23,330,702$ 22,130,501$ Contributions as a percentage of covered payroll 11.94%11.18%10.20% LEOFF 2 2017 2016 2015 Statutorily or contractually required contributions 639,662$ 594,665$ 551,812$ Contributions in relation to the statutorily or contractually required contributions (639,662)$ (594,665)$ (551,812)$ Contribution deficiency (excess)-$ -$ -$ Covered payroll 11,992,821$ 11,370,216$ 10,553,437$ Contributions as a percentage of covered payroll 5.33%5.23%5.23% City of Auburn: 2017 CAFR Required Supplemental Information 106 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Total Pension Liability & Related Ratio’s Fire Relief and Pension Plan Last 10 Fiscal Years * * The City implemented GASB Statement No. 73 in fiscal year 2017. Information is not available for prior years. The schedule will be built prospectively until it contains ten years of data. Notes to Schedule: No assets have been accumulated in a trust that meets the criteria of a qualified plan. The effect of assumption changes or inputs is the result of a change in the discount rate from 3.75% as of December 31, 2016 to 3.50% as of December 31, 2017. Significant methods and assumptions used in calculating the actuarial determined contribution are presented in Note 10. 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Total Pension Liability - Beginning 3,218,004$ N/A N/A N/A N/A N/A N/A N/A N/A N/A Service Cost - N/A N/A N/A N/A N/A N/A N/A N/A N/A Interest on Total Pension Liability 116,957 N/A N/A N/A N/A N/A N/A N/A N/A N/A Effect of Plan Changes - N/A N/A N/A N/A N/A N/A N/A N/A N/A Effect of Economic/Demographic Gains (Losses)- N/A N/A N/A N/A N/A N/A N/A N/A N/A Effect of Assumption Changes or Inputs 77,612 N/A N/A N/A N/A N/A N/A N/A N/A N/A Benefit Payments (200,138) N/A N/A N/A N/A N/A N/A N/A N/A N/A Net Change in Total Pension Liability (5,569) N/A N/A N/A N/A N/A N/A N/A N/A N/A Total Pension Liability - Ending 3,212,435$ N/A N/A N/A N/A N/A N/A N/A N/A N/A Covered Payroll - N/A N/A N/A N/A N/A N/A N/A N/A N/A Total Pension Liability as a % of Covered Payroll N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Fiscal Year Ending December 31 City of Auburn: 2017 CAFR Required Supplemental Information 107 REQUIRED SUPPLEMENTARY INFORMATION Retiree Medical and Long-Term Care Benefits for Firemen’s Relief and Pension Plan and LEOFF 1 Employees January 1, 2017 Annual Required Year Ending Employer Contribution Percentage of 12/31 Contributions (ARC) ARC Contributed 2012 1,104,259 2,197,396 50% 2013 1,24,809 2,197,396 51% 2014 793,286 2,285,629 35% 2015 909,657 2,285,629 40% 2016 350,332 2,285,629 28% 2017 578,606 1,817,738 32% GASB STATEMENT No. 43 SCHEDULE OF EMPLOYER CONTRIBUTIONS Unfunded Actuarial UAAL as a Actuarial Actuarial Accrued Percentage Actuarial Value Accrued Liabilities Funded Covered of Covered Valuation Date of Assets Liabilities (UAAL) Ratio Payroll Payroll January 1, 2008 - 20,738 20,738 0% N/A N/A January 1, 2011 - 26,482 26,482 0% N/A N/A January 1, 2014 - 26,246 26,246 0% N/A N/A January 1, 2017 - 17,565 17,565 0% N/A N/A GASB STATEMENTS No. 43 and No. 45 (rounded to thousands) SCHEDULE OF FUNDING PROGRESS City of Auburn: 2017 CAFR Required Supplemental Information 108 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 109 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. Biennial 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. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 110 Total Total Total Total Total Nonmajor Nonmajor Nonmajor Nonmajor Nonmajor Special Revenue Debt Service Capital Projects Permanent Governmental Funds Funds Funds Funds Funds ASSETS: Cash and Cash Equivalents 17,676,790$ 21,101$ 1,451,550$ 1,811,509$ 20,960,950$ Receivables: Customer Accounts - - 3,793 - 3,793 Other Receivables 345,829 - - - 345,829 Special Assessments - 7,283 - - 7,283 Due From Other Governmental Units 180,500 - - - 180,500 Total Assets 18,203,119 28,384 1,455,343 1,811,509 21,498,355 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES: Liabilities: Current Payables 898,895 - 62,345 - 961,240 Interfund Payable (Note 5)50,000 - - - 50,000 Other Liabilities Payable 36,954 - - - 36,954 Total Liabilities 985,849 - 62,345 - 1,048,194 Deferred Inflow of Resources: Unavailable Revenue-Special Assessments - 7,283 - - 7,283 Total Deferred Inflow of Resources - 7,283 - - 7,283 Fund Balances: Nonspendable - - - 1,717,134 1,717,134 Restricted 13,730,730 9,686 1,018,032 - 14,758,448 Committed 3,223,108 - - - 3,223,108 Assigned 263,432 11,415 374,966 94,375 744,188 Total Fund Balances 17,217,270 21,101 1,392,998 1,811,509 20,442,878 Total Liabilities, Deferred Inflows and Fund Balances 18,203,119$ 28,384$ 1,455,343$ 1,811,509$ 21,498,355$ December 31, 2017 City of Auburn, Washington COMBINING BALANCE SHEET NON-MAJOR GOVERNMENT FUNDS City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 111 Total Total Total Total Total Nonmajor Nonmajor Nonmajor Nonmajor Nonmajor Special Revenue Debt Service Capital Projects Permanent Governmental REVENUES: Taxes: Property -$ -$ 138,510$ -$ 138,510$ Retail Sales & Use 2,632,107 259,859 - - 2,891,966 Interfund Utility 648,609 - - - 648,609 Utility 1,458,542 - - - 1,458,542 Excise 124,486 - - - 124,486 Other 42,535 - - - 42,535 Intergovernmental 2,232,220 483,773 75,000 - 2,790,993 Charges for Services 2,640,770 - 9,395 51,091 2,701,256 Special Assessments - 3,835 - - 3,835 Investment Earnings 177,486 1,032 14,853 16,609 209,980 Miscellaneous 107,912 1,044 45,030 - 153,986 Total Revenues 10,064,667 749,543 282,788 67,700 11,164,698 EXPENDITURES: Current: Security of Persons & Property 620,086 - - - 620,086 Transportation 7,353,647 - - - 7,353,647 Economic Environment 762,139 - - - 762,139 Debt Service: Principal - 1,380,108 - - 1,380,108 Interest - 1,557,864 - - 1,557,864 Capital Outlay - - 1,217,304 - 1,217,304 Total Expenditures 8,735,872 2,937,972 1,217,304 - 12,891,148 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,328,795 (2,188,429) (934,516) 67,700 (1,726,450) OTHER FINANCING SOURCES (USES): Transfers In (Note 5)344,915 2,197,585 954,124 - 3,496,624 Transfers Out (Note 5)(2,032,099) - - - (2,032,099) Total Other Financing Sources (Uses)(1,687,184) 2,197,585 954,124 - 1,464,525 Net Change in Fund Balances (358,389) 9,156 19,608 67,700 (261,925) Fund Balances - Beginning 17,575,659 11,945 1,373,390 1,743,809 20,704,803 Fund Balances - Ending 17,217,270$ 21,101$ 1,392,998$ 1,811,509$ 20,442,878$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENT FUNDS For the Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 112 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 113 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 each year of the biennium. The City has eight 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. Arterial Street Preservation Fund This fund was created to repair classified arterial streets and is funded from a one percent utility tax increase that was adopted by Council in 2008. Drug Forfeiture Fund Money seized and forfeited from drug activity is deposited in this fund to be used exclusively for drug investigation and enforcement. 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. Mitigation Fees Accounts for the receipt of contracted mitigation fees for streets and fire service. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 114 Page 1 of 2 Hotel/Arterial Housing Local Motel Street Drug Community Streets Tax Preservation Forfeiture Development ASSETS: Cash and Cash Equivalents 3,487,565$ 203,003$ 1,895,118$ 390,381$ 65,575$ Other Receivables - - 345,829 - - Due From Other Governmental Units - - 7,939 10,605 161,956 Total Assets 3,487,565 203,003 2,248,886 400,986 227,531 LIABILITIES AND FUND BALANCES: Liabilities: Current Payables 544,215 2,632 209,049 9,137 132,594 Interfund Payable (Note 5)- - - - 50,000 Other Liabilities Payable - - - 6,795 33 Total Liabilities 544,215 2,632 209,049 15,932 182,627 Fund Balances: Restricted - 200,371 1,557,947 381,136 44,904 Committed 2,766,701 - 456,407 - - Assigned 176,649 - 25,483 3,918 - Total Fund Balances 2,943,350 200,371 2,039,837 385,054 44,904 Total Liabilities and Fund Balances 3,487,565$ 203,003$ 2,248,886$ 400,986$ 227,531$ City of Auburn, Washington COMBINING BALANCE SHEET NON-MAJOR SPECIAL REVENUE FUNDS December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 115 Page 2 of 2 Total Business Nonmajor Recreational Improvement Mitigation Special Revenue Trails Area Fees Funds 57,526$ 95,741$ 11,481,881$ 17,676,790$ - - - 345,829 - - - 180,500 57,526 95,741 11,481,881 18,203,119 - 1,268 - 898,895 - - - 50,000 - - - 6,795 - - 30,126 30,159 - 1,268 30,126 985,849 57,022 93,710 11,395,640 13,730,730 - - - 3,223,108 504 763 56,115 263,432 57,526 94,473 11,451,755 17,217,270 57,526$ 95,741$ 11,481,881$ 18,203,119$ City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 116 Page 1 of 2 Hotel/Arterial Housing Local Motel Street Drug Community Streets Tax Preservation Forfeiture Development REVENUES: Taxes: Retail Sales & Use 2,632,107$ -$ -$ -$ -$ Interfund Utility - - 648,609 - - Utility - - 1,458,542 - - Excise - 124,486 - - - Other - - - - - Intergovernmental - - 1,557,947 13,230 653,843 Charges for Services - - - 26,628 - Investment Earnings 32,475 1,738 25,483 3,918 - Miscellaneous - - - 107,912 - Total Revenues 2,664,582 126,224 3,690,581 151,688 653,843 EXPENDITURES: Current: Security of Persons and Property - - - 220,086 - Transportation 2,290,133 - 5,063,514 - - Economic Environment - 100,999 - - 653,843 Total Expenditures 2,290,133 100,999 5,063,514 220,086 653,843 Excess (Deficiency) of Revenues Over (Under) Expenditures 374,449 25,225 (1,372,933) (68,398) - OTHER FINANCING SOURCES (USES): Transfers In (Note 5)150,000 - 194,915 - - Transfers Out (Note 5)(5,826) (5,000) (51,776) - - Total Other Financing Sources (Uses)144,174 (5,000) 143,139 - - Net Change in Fund Balances 518,623 20,225 (1,229,794) (68,398) - Fund Balances - Beginning 2,424,727 180,146 3,269,631 453,452 44,904 Fund Balances - Ending 2,943,350$ 200,371$ 2,039,837$ 385,054$ 44,904$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON-MAJOR SPECIAL REVENUE FUNDS For the Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 117 Page 2 of 2 Total Business Nonmajor Recreational Improvement Mitigation Special Revenue Trails Area Fees Funds -$ -$ -$ 2,632,107$ - - - 648,609 - - - 1,458,542 - - - 124,486 - 42,535 - 42,535 7,200 - - 2,232,220 - - 2,614,142 2,640,770 504 763 112,605 177,486 - - - 107,912 7,704 43,298 2,726,747 10,064,667 - - 400,000 620,086 - - - 7,353,647 - 7,297 - 762,139 - 7,297 400,000 8,735,872 7,704 36,001 2,326,747 1,328,795 - - - 344,915 - - (1,969,497) (2,032,099) - - (1,969,497) (1,687,184) 7,704 36,001 357,250 (358,389) 49,822 58,472 11,094,505 17,575,659 57,526$ 94,473$ 11,451,755$ 17,217,270$ City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 118 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Property 1,750,000$ 1,750,000$ 2,632,107$ 882,107$ Investment Earnings 9,100 9,100 32,475 23,375 Total Revenues 1,759,100 1,759,100 2,664,582 905,482 EXPENDITURES: Current: Transportation 2,417,173 3,120,142 2,290,133 830,009 Total Expenditures 2,417,173 3,120,142 2,290,133 830,009 Excess (Deficiency) of Revenues Over (Under) Expenditures (658,073) (1,361,042) 374,449 1,735,491 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)150,000 150,000 150,000 - Transfers Out (Note 5)(666) (11,051) (5,826) 5,225 Total Other Financing Sources (Uses)149,334 138,949 144,174 5,225 Net Change in Fund Balances (508,739) (1,222,093) 518,623 1,740,716 Fund Balances - Beginning 1,401,882 2,424,727 2,424,727 - Fund Balances - Ending 893,143$ 1,202,634$ 2,943,350$ 1,740,716$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL LOCAL STREETS SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 119 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Excise 110,000$ 110,000$ 124,486$ 14,486$ Investment Earnings 400 400 1,738 1,338 Total Revenues 110,400 110,400 126,224 15,824 EXPENDITURES: Current: Economic Environment 100,400 141,000 100,999 40,001 Total Expenditures 100,400 141,000 100,999 40,001 Excess (Deficiency) of Revenues Over (Under) Expenditures 10,000 (30,600) 25,225 55,825 OTHER FINANCING SOURCES (USES): Transfers Out (Note 5)(10,000) (5,000) (5,000) - Total Other Financing sources and Uses (10,000) (5,000) (5,000) - Net Change in fund Balances - (35,600) 20,225 55,825 Fund Balances - Beginning 84,044 180,146 180,146 - Fund Balances - Ending 84,044$ 144,546$ 200,371$ 55,825$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HOTEL/MOTEL TAX SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 120 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Interfund Utility 632,300$ 632,300$ 648,609$ 16,309$ Utility 1,416,300 1,416,300 1,458,542 42,242 Intergovernmental 1,402,100 2,354,398 1,557,947 (796,451) Investment Earnings 4,900 4,900 25,483 20,583 Total Revenues 3,455,600 4,407,898 3,690,581 (717,317) EXPENDITURES: Current: Transportation 4,768,470 7,439,019 5,063,514 2,375,505 Total Expenditures 4,768,470 7,439,019 5,063,514 2,375,505 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,312,870) (3,031,121) (1,372,933) 1,658,188 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)300,000 431,750 194,915 (236,835) Transfers Out (Note 5)- (56,535) (51,776) 4,759 Total Other Financing Sources (Uses)300,000 375,215 143,139 (232,076) Net Change in Fund Balances (1,012,870) (2,655,906) (1,229,794) 1,426,112 Fund Balances - Beginning 1,378,878 3,269,631 3,269,631 - Fund Balances - Ending 366,008$ 613,725$ 2,039,837$ 1,426,112$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL ARTERIAL STREET PRESERVATION SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 121 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Intergovernmental 17,000$ 17,000$ 13,230$ (3,770)$ Charges for Services 14,000 14,000 26,628 12,628 Investment Earnings 1,100 1,100 3,918 2,818 Miscellaneous 55,000 55,000 107,912 52,912 Total Revenues 87,100 87,100 151,688 64,588 EXPENDITURES: Current: Security of Persons & Property 251,016 251,016 220,086 30,930 Total Expenditures 251,016 251,016 220,086 30,930 Excess (Deficiency of Revenues Over (Under) Expenditures (163,916) (163,916) (68,398) 95,518 Net Change in Fund Balances (163,916) (163,916) (68,398) 95,518 Fund Balances - Beginning 357,897 453,452 453,452 - Fund Balances - Ending 193,981$ 289,536$ 385,054$ 95,518$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL DRUG FORFEITURE SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 122 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Intergovernmental 710,000$ 850,000$ 653,843$ (196,157)$ Total Revenues 710,000 850,000 653,843 (196,157) EXPENDITURES: Current: Economic Environment 712,450 852,450 653,843 198,607 Total Expenditures 712,450 852,450 653,843 198,607 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,450) (2,450) - 2,450 Net Change in Fund Balances (2,450) (2,450) - 2,450 Fund Balances - Beginning 54,905 44,904 44,904 - Fund Balances - Ending 52,455$ 42,454$ 44,904$ 2,450$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HOUSING & COMMUNITY DEVELOPMENT SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 123 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Intergovernmental 7,200$ 7,200$ 7,200$ -$ Investment Earnings 140 140 504 364 Total Revenues 7,340 7,340 7,704 364 Excess (Deficiency) of Revenues Over (Under) Expenditures 7,340 7,340 7,704 364 Net Change in Fund Balances 7,340 7,340 7,704 364 Fund Balances - Beginning 49,658 49,822 49,822 - Fund Balances - Ending 56,998$ 57,162$ 57,526$ 364$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL RECREATION TRAILS SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 124 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Other 55,000$ 55,000$ 42,535$ (12,465)$ Investment Earnings 200 200 763 563 Total Revenues 55,200 55,200 43,298 (11,902) EXPENDITURES: Current: Economic Environment 55,000 55,000 7,297 47,703 Total Expenditures 55,000 55,000 7,297 47,703 Excess (Deficiency) of Revenues Over (Under) Expenditures 200 200 36,001 35,801 Net Change in Fund Balances 200 200 36,001 35,801 Fund Balances - Beginning 48,516 58,472 58,472 - Fund Balances - Ending 48,716$ 58,672$ 94,473$ 35,801$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL BUSINESS IMPROVEMENT AREA SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 125 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Investment Earnings 20,500$ 20,500$ 89,375$ 68,875$ Total Revenues 20,500 20,500 89,375 68,875 Excess (Deficiency) of Revenues Over (Under) Expenditures 20,500 20,500 89,375 68,875 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)- 1,000,000 1,000,000 - Transfers Out (Note 5)(200,000) (242,138) - 242,138 Total Other Financing Sources (Uses)(200,000) 757,862 1,000,000 242,138 Net Change in Fund Balances (179,500) 778,362 1,089,375 311,013 Fund Balances - Beginning 7,546,199 8,709,937 8,709,937 - Fund Balances - Ending 7,366,699$ 9,488,299$ 9,799,312$ 311,013$ RECONCILIATION OF PERSPECTIVE DIFFERENCE BETWEEN BUDGETARY INFORMATION AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP): The Cumulative Reserve Fund is combined with the General Fund for purposes of GASB Statement 54 (9,799,312) Fund Balance - Ending (GAAP)-$ The notes to the financial statements are an integral part of this statement. Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL CUMULATIVE RESERVE SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 126 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Charges for Services 1,512,000$ 1,582,000$ 2,614,142$ 1,032,142$ Investment Earnings 8,200 8,200 112,605 104,405 Total Revenues 1,520,200 1,590,200 2,726,747 1,136,547 EXPENDITURES: Current: Security of Person & Property 50,000 400,000 400,000 - Total Expenditures 50,000 400,000 400,000 - Excess (Deficiency) of Revenues Over (Under) Expenditures 1,470,200 1,190,200 2,326,747 1,136,547 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)- 400,000 - (400,000) Transfers Out (Note 5)(1,315,081) (3,938,042) (1,969,497) 1,968,545 Total Other Financing Sources (Uses)(1,315,081) (3,538,042) (1,969,497) 1,568,545 Net Change in Fund Balances 155,119 (2,347,842) 357,250 2,705,092 Fund Balances - Beginning 4,274,362 11,094,505 11,094,505 - Fund Balances - Ending 4,429,481$ 8,746,663$ 11,451,755$ 2,705,092$ Budget Amounts For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL MITIGATION SPECIAL REVENUE FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 127 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 two outstanding general obligation issues, and two special assessment funds. The 2010 A Series General Obligation Bonds (refunding portion) Accounts for debt service on a Council-approved bond issue to partially advance refund the 1998 General Obligation Library Bonds. The 2010 A Series (non-refunding portion) and B Series General Obligation Bonds Accounts for debt service on a Council-approved bond issue to finance acquisition costs of certain condominium units in the City Hall Annex. The 2010 C Series and 2010 D Series General Obligation Bonds Accounts for the debt service on a Council-approved bond issue to finance a portion of the downtown infrastructure improvements in the City’s revitalization area. The 2016 General Obligation Bonds Accounts for the debt service on a Council-approved bond issue to refund on a current basis the 2005 General Obligation Refunding Airport Bonds and refunding on an advance basis the 2006A General Obligation Bonds for Golf and Cemetery. The L.I.D. Guarantee Fund This fund provides financial security for outstanding 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. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 128 Total GO Library 2010 2010 2016 Nonmajor Refunding A & B C & D Local Combined Refunding LID Special Debt Service Bond Debt Annex Revitalization Golf/Cemetery Guarantee Assessments Funds ASSETS: Cash and Cash Equivalents -$ -$ 11,396$ 19$ 1,603$ 8,083$ 21,101$ Receivables: Special Assessments - - - - - 7,283 7,283 Total Assets - - 11,396 19 1,603 15,366 28,384 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES: Deferred Inflows of Resources: Unavailable Revenue - Special Assessments - - - - - 7,283 7,283 Total Deferred Inflows of Resources - - - - - 7,283 7,283 Fund Balances: Restricted - - - - 1,603 8,083 9,686 Assigned - - 11,396 19 - - 11,415 Total Fund Balances - - 11,396 19 1,603 8,083 21,101 Total Liabilities, Deferred Inflows and Fund Balances -$ -$ 11,396$ 19$ 1,603$ 15,366$ 28,384$ City of Auburn, WashingtonCOMBINING BALANCE SHEET NON-MAJOR DEBT SERVICE FUNDS December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 129 Total GO Library 2010 2010 2016 Nonmajor Refunding A & B C & D Local Combined Refunding L I D Special Debt Service Bond Debt Annex Revitalization Golf/Cemetery Guarantee Assessments Funds REVENUES: Taxes: Retail Sales & Use -$ -$ 259,859$ -$ -$ -$ 259,859$ Special Assessments - - - - - 3,835 3,835 Intergovernmental - 366,581 117,192 - - - 483,773 Investment Earnings - - 906 19 15 92 1,032 Miscellanous - - - - - 1,044 1,044 Total Revenues - 366,581 377,957 19 15 4,971 749,543 EXPENDITURES: Debt Service: Principal 260,000 560,000 230,000 323,849 - 6,259 1,380,108 Interest 23,850 1,123,191 359,071 50,766 - 986 1,557,864 Total Expenditures 283,850 1,683,191 589,071 374,615 - 7,245 2,937,972 Excess (Deficiency) of Revenues Over (Under) Expenditures (283,850) (1,316,610) (211,114) (374,596) 15 (2,274) (2,188,429) OTHER FINANCING SOURCES (USES): Transfers In (Note 5)283,850 1,316,610 222,510 374,615 - - 2,197,585 Total Other Financing Sources (Uses)283,850 1,316,610 222,510 374,615 - - 2,197,585 Net Change in Fund Balances - - 11,396 19 15 (2,274) 9,156 Fund Balances - Beginning - - - - 1,588 10,357 11,945 Fund Balances - Ending -$ -$ 11,396$ 19$ 1,603$ 8,083$ 21,101$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NON-MAJOR DEBT SERVICE FUNDS For the Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 130 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 131 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 two non-major capital project funds. 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. The Local Revitalization Fund Accounts for the City Hall Plaza and the Downtown Promenade project. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 132 Municipal Nonmajor Park Local Capital Project Construction Revitalization Funds ASSETS: Cash and Cash Equivalents 1,076,584$ 374,966$ 1,451,550$ Receivables: Customer Accounts 3,793 - 3,793 Total Assets 1,080,377 374,966 1,455,343 LIABILITIES AND FUND BALANCES: Liabilities: Current Payables 62,345 - 62,345 Total Liabilities 62,345 - 62,345 Fund Balances: Restricted 1,018,032 - 1,018,032 Assigned - 374,966 374,966 Total Fund Balances 1,018,032 374,966 1,392,998 Total Liabilities and Fund Balances 1,080,377$ 374,966$ 1,455,343$ City of Auburn, Washington COMBINING BALANCE SHEET CAPITAL PROJECT FUNDS December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 133 Municipal Nonmajor Park Local Capital Project Construction Revitalization Funds REVENUES: Taxes: Property 138,510$ -$ 138,510$ Intergovernmental 75,000 - 75,000 Charges for Services 9,395 - 9,395 Investment Earnings 11,350 3,503 14,853 Miscellaneous 45,030 - 45,030 Total Revenues 279,285 3,503 282,788 EXPENDITURES: Capital Outlay 1,198,277 19,027 1,217,304 Total Expenditures 1,198,277 19,027 1,217,304 Excess (Deficiency) of Revenues Over (Under) Expenditures (918,992) (15,524) (934,516) OTHER FINANCING SOURCES (USES): Transfers In (Note 5)954,124 - 954,124 Total Other Financing Sources (Uses)954,124 - 954,124 Net Change in Fund Balances 35,132 (15,524) 19,608 Fund Balances - Beginning 982,900 390,490 1,373,390 Fund Balances - Ending 1,018,032$ 374,966$ 1,392,998$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES CAPITAL PROJECT FUNDS For the Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 134 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 135 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 for 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. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 136 Cemetery Endowed Care ASSETS: Cash and Cash Equivalents Non-Expendable Trust 1,811,509$ Total Assets 1,811,509 LIABILITIES AND FUND BALANCES: FUND BALANCES: Nonspendable 1,717,134 Assigned 94,375 Total Fund Balances 1,811,509 Total Liabilities and Fund Balances 1,811,509$ City of Auburn, Washington BALANCE SHEET PERMANENT FUND December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 137 Cemetery Endowed Care REVENUES: Increase to Endowment from Lot Sales 51,091$ Investment Earnings 16,609 Total Revenues 67,700 EXPENDITURES: Excess (Deficiency) of Revenues Over (Under) Expenditures 67,700 Net Change in Fund Balance 67,700 Fund Balance - Beginning 1,743,809 Fund Balance - Ending 1,811,509$ For the Year Ended December 31, 2017 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE PERMANENT FUND City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 138 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 139 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 two 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. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 140 Total Nonmajor Enterprise Airport Cemetery Funds ASSETS: Current Assets: Cash and Cash Equivalents 957,861$ 815,585$ 1,773,446$ Restricted Cash: Customer Deposits 89,180 - 89,180 Customer Accounts 6,982 - 6,982 Due From Other Governmental Units 13,990 - 13,990 Inventories - 8,500 8,500 Total Current Assets 1,068,013 824,085 1,892,098 Noncurrent Assets: Capital Assets: Land 3,653,343 342,836 3,996,179 Buildings and Equipments 3,042,254 1,022,267 4,064,521 Improvements Other Than Buildings 9,907,670 1,175,259 11,082,929 Construction in Progress 318,488 - 318,488 Less: Accumulated Depreciation (7,594,183) (1,565,240) (9,159,423) Total Capital Assets (Net of A/D)9,327,572 975,122 10,302,694 Total Noncurrent Assets 9,327,572 975,122 10,302,694 Total Assets 10,395,585 1,799,207 12,194,792 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflow from Bond Refunding 21,837 - 21,837 Deferred Outflow Related to Pensions 4,454 46,184 50,638 26,291 46,184 72,475 LIABILITIES: Current Liabilities: Current Payables 118,852 50,260 169,112 Interfund Payables 93,782 - 93,782 Employee Leave Benefits - Current - 18,464 18,464 General Obligation Bonds Payable - Current 176,401 - 176,401 Customer Deposits 88,407 - 88,407 Total Current Liabilities 477,442 68,724 546,166 Noncurrent Liabilities: Employee Leave Benefits - 5,576 5,576 General Obligation Bonds Payable 186,421 - 186,421 Net Pension Liability 14,493 157,176 171,669 Total Noncurrent Liabilities 200,914 162,752 363,666 Total Liabilities 678,356 231,476 909,832 DEFERRED INFLOWS OF RESOURCES: Deferred Inflow Related to Pensions (82) 39,194 39,112 NET POSITION: Net Investment in Capital Assets 8,964,750 975,122 9,939,872 Unrestricted 778,852 599,599 1,378,451 Total Net Position 9,743,602$ 1,574,721$ 11,318,323$ City of Auburn, Washington COMBINING STATEMENT OF NET POSITION NON-MAJOR ENTERPRISE FUNDS December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 141 Total Nonmajor Enterprise Airport Cemetery Funds OPERATING REVENUES: Charges for Services 70,750$ 1,336,570$ 1,407,320$ Other Operating Revenue 804,040 - 804,040 Total Operating Revenues 874,790 1,336,570 2,211,360 OPERATING EXPENSES: Operations & Maintenance 412,580 788,429 1,201,009 Administration 67,284 291,025 358,309 Depreciation/Amortization 462,843 47,383 510,226 Other Operating Expenses 505 15,749 16,254 Total Operating Expenses 943,212 1,142,586 2,085,798 Operating Income (Loss)(68,422) 193,984 125,562 NON-OPERATING REVENUE (EXPENSE): Interest Revenue 9,829 6,727 16,556 Other Non-Operating Revenues 33,901 - 33,901 Other Non-Operating Expenses (20,759) - (20,759) Total Non-Operating Revenue (Expense)22,971 6,727 29,698 Income (Loss) Before Contributions & Transfers (45,451) 200,711 155,260 Transfers In (Note 5)274,937 - 274,937 Transfers Out (Note 5)- (400) (400) Change in Net Position 229,486 200,311 429,797 Net Position, January 1 9,514,116 1,374,410 10,888,526 Net Position, December 31 9,743,602$ 1,574,721$ 11,318,323$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION NON-MAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 142 Page 1 of 2 Total Non Major Enterprise Airport Cemetery Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received From Users 876,179$ 1,336,570$ 2,212,749$ Cash Paid to Suppliers for Goods & Services (411,559) (401,320) (812,879) Cash Paid for Taxes (552) (15,750) (16,302) Cash Paid to Employees (1,378) (720,026) (721,404) Other Non-Operating Revenue 13,740 - 13,740 Net Cash Provided (Used) By Operating Activities 476,430 199,474 675,904 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Interfund Loan Payable (39,900) - (39,900) Operating Grant Received 20,161 - 20,161 Transfers from Other Funds 274,937 - 274,937 Operating Transfers Out - (400) (400) Net Cash Provided (Used) by Non-Capital Financing Activities 255,198 (400) 254,798 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchase of Capital Assets (398,059) - (398,059) Capital Grant 20,887 - 20,887 Premium & Bond Issuance Costs 10,918 - 10,918 Principal Payment on Debt (171,023) - (171,023) Interest Payment on Debt (20,759) - (20,759) Net Cash Provided (Used) for Capital and Related Financing Activities (558,036) - (558,036) CASH FLOW FROM INVESTING ACTIVITIES: Interest Received 9,829 6,727 16,556 Net Cash Provided (Used) in Investing Activities 9,829 6,727 16,556 Net Increase (Decrease) in Cash and Cash Equivalents 183,421 205,801 389,222 Cash and Cash Equivalents - Beginning of Year 863,620 609,784 1,473,404 Cash and Cash Equivalents - End of Year 1,047,041$ 815,585$ 1,862,626$ CASH AT END OF YEAR CONSISTS OF: Cash and Cash Equivalents 957,861 815,585 1,773,446 Restricted Cash - Customer Deposits 89,180 - 89,180 Total Cash 1,047,041$ 815,585$ 1,862,626$ City of Auburn, Washington COMBINING STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS For the Fiscal Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 143 Page 2 of 2 Total Non Major Enterprise Airport Cemetery Funds RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES Operating Income (Loss)(68,422)$ 193,984$ 125,562$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Depreciation 462,843 47,383 510,226 Other Non-Operating Revenue 13,740 - 13,740 Asset (Increases) Decreases: Accounts Receivable (6,982) - (6,982) Inventory - (505) (505) Liability Increases (Decreases): Accounts & Vouchers Payable 71,777 (17,482) 54,295 Deposits Payable 8,371 - 8,371 Wages & Benefits Payable (1,378) (21,831) (23,209) Compensated Absences Payable (3,519) (2,075) (5,594) Total Adjustments 544,852 5,490 550,342 Net Cash Provided (Used) by Operating Activities 476,430$ 199,474$ 675,904$ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Total Non Cash Investing, Capital and Financing Activities -$ -$ -$ City of Auburn, Washington COMBINING STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS For the Fiscal Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 144 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 145 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 five 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 Workers Comp Self Insurance Fund Provides a source of funds to pay time loss and medical benefits for employees who are affected by an occupational injury or illness. The Facilities Funds Accounts for the costs of maintaining various City facilities. 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. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 146 Workers Comp Information Equipment Insurance Self Insurance Facilities Services Rental Total ASSETS: Current Assets: Cash and Cash Equivalents 2,015,648$ 1,631,041$ 1,965,515$ 3,866,232$ 6,659,283$ 16,137,719$ Customer Accounts - - 16,685 - - 16,685 Due From Other Governmental Units - - 15 6,196 - 6,211 Inventories - - - - 242,217 242,217 Total Current Assets 2,015,648 1,631,041 1,982,215 3,872,428 6,901,500 16,402,832 Capital Assets: Buildings and Equipment - - - 8,279,035 16,772,459 25,051,494 Improvements Other than Buildings - - - 7,497 109,661 117,158 Construction in Progress - - - 64,421 44,627 109,048 Less: Accumulated Depreciation - - - (6,895,423) (10,068,421) (16,963,844) Total Capital Assets (Net of A/D)- - - 1,455,530 6,858,326 8,313,856 Total Noncurrent Assets - - - 1,455,530 6,858,326 8,313,856 Total Assets 2,015,648 1,631,041 1,982,215 5,327,958 13,759,826 24,716,688 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflow Related to Pensions - 7,829 73,518 163,464 65,645 310,456 LIABILITIES: Current Liabilities: Current Payables 148 5,922 240,290 230,327 295,273 771,960 Customer Deposits - - 300 - - 300 Employee Leave Benefits - Current - 5,087 69,193 111,724 23,414 209,418 Other Liabilities Payable - - - - 41,608 41,608 Total Current Liabilities 148 11,009 309,783 342,051 360,295 1,023,286 Noncurrent Liabilities Employee Leave Benefits - 1,536 20,897 33,742 7,071 63,246 Other LT Liabilities Payable - - - - 67,861 67,861 Net Pension Liability - 23,599 217,525 471,592 1,177,640 1,890,356 Total Noncurrent Liabilities - 25,135 238,422 505,334 1,252,572 2,021,463 Total Liabilities 148 36,144 548,205 847,385 1,612,867 3,044,749 DEFERRED INFLOWS OF RESOURCES: Deferred Inflow Related to Pensions - 7,134 55,233 162,796 111,858 337,021 NET POSITION: Net Investment in Capital Assets - - - 1,455,530 6,748,857 8,204,387 Unrestricted 2,015,500 1,595,592 1,452,295 3,025,711 5,351,889 13,440,987 Total Net Position 2,015,500$ 1,595,592$ 1,452,295$ 4,481,241$ 12,100,746$ 21,645,374$ City of Auburn, Washington COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 147 Workers Comp Information Equipment Insurance Self Insurance Facilities Services Rental Total OPERATING REVENUES: Charges for Services -$ 941,648$ 3,374,196$ 5,973,721$ 3,985,495$ 14,275,060$ Other Operating Revenue - - 110,838 92,023 - 202,861 Total Operating Revenues - 941,648 3,485,034 6,065,744 3,985,495 14,477,921 OPERATING EXPENSES: Operations & Maintenance - 423,759 2,752,306 5,541,241 1,440,699 10,158,005 Administration 52,546 - - - 809,345 861,891 Depreciation/Amortization - - - 680,431 1,182,134 1,862,565 Total Operating Expenses 52,546 423,759 2,752,306 6,221,672 3,432,178 12,882,461 Operating Income (Loss)(52,546) 517,889 732,728 (155,928) 553,317 1,595,460 NON-OPERATING REVENUE (EXPENSE): Interest Revenue 11,646 13,175 19,817 33,166 57,943 135,747 Other Non-Operating Revenues - - 57,928 - 84,109 142,037 Gain (Loss) on Sale of Capital Assets - - - - 16,512 16,512 Interest Expense - - - - (3,580) (3,580) Total Non-Operating Revenue (Expense)11,646 13,175 77,745 33,166 154,984 290,716 Income (Loss) Before Contributions (40,900) 531,064 810,473 (122,762) 708,301 1,886,176 Transfers In (Note 5)670,715 - - 368,953 472,032 1,511,700 Transfers Out (Note 5)- - (888,503) (56,300) - (944,803) Change in Net Position 629,815 531,064 (78,030) 189,891 1,180,333 2,453,073 Net Position, January 1 1,385,685 1,064,528 1,530,324 4,291,350 10,920,413 19,192,301 Total Net Position - Ending 2,015,500$ 1,595,592$ 1,452,295$ 4,481,241$ 12,100,746$ 21,645,374$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS For the Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 148 Page 1 of 2 Insurance Workers Comp Self Insurance Facilities Information Services Equipment Rental Total CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received From Users -$ 941,648$ 3,472,445$ 6,065,744$ 3,985,670$ 14,465,507$ Cash Paid to Suppliers for Goods & Services (52,398) (332,757) (1,777,182) (3,055,378) (1,269,164) (6,486,879) Cash Paid to Employees - (104,518) (965,495) (2,596,884) (875,304) (4,542,201) Other Cash Received - - - (169) 42 (127) Net Cash Provided (Used) By Operating Activities (52,398) 504,373 729,768 413,313 1,841,244 3,436,300 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating Grant Received - - 57,928 - - 57,928 Transfers In 670,715 - - 368,953 472,032 1,511,700 Transfers Out - - (888,503) (56,300) - (944,803) Net Cash Provided (Used) by Non-Capital Financing Activities 670,715 - (830,575) 312,653 472,032 624,825 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Sale of Equipment - - - - 189,666 189,666 Purchase of Capital Assets - - - (533,694) (1,671,996) (2,205,690) Proceeds from Insurance Settlement - - - - 84,067 84,067 Interest Payment on Debt - - - - (3,580) (3,580) Net Cash Provided (Used) for Capital and Related Financing Activities - - - (533,694) (1,401,843) (1,935,537) CASH FLOW FROM INVESTING ACTIVITIES: Interest Received 11,646 13,175 19,817 33,166 57,943 135,747 Net Cash Provided (Used) in Investing Activities 11,646 13,175 19,817 33,166 57,943 135,747 Net Increase (Decrease) in Cash and Cash Equivalents 629,963 517,548 (80,990) 225,438 969,376 2,261,335 Cash and Cash Equivalents - Beginning of Year 1,385,685 1,113,493 2,046,505 3,640,794 5,689,907 13,876,384 Cash and Cash Equivalents - End of Year 2,015,648$ 1,631,041$ 1,965,515$ 3,866,232$ 6,659,283$ 16,137,719$ CASH AT END OF YEAR CONSISTS OF: Cash and Cash Equivalents 2,015,648 1,631,041 1,965,515 3,866,232 6,659,283 16,137,719 Total Cash 2,015,648$ 1,631,041$ 1,965,515$ 3,866,232$ 6,659,283$ 16,137,719$ City of Auburn, Washington COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Fiscal Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 149 Page 2 of 2 Insurance Workers Comp Self Insurance Facilities Information Services Equipment Rental Total RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES Operating Income (Loss)(52,546)$ 517,889$ 732,728$ (155,928)$ 553,317$ 1,595,460$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Depreciation - - - 680,431 1,182,134 1,862,565 Other Non-Operating Revenues 42 42 Asset (Increases) Decreases: Accounts Receivable - - (12,589) (169) 175 (12,583) Inventory - - - - (17,101) (17,101) Liability Increases (Decreases): Accounts & Vouchers Payable 148 (10,370) 45,776 (33,024) 151,807 154,337 Wages & Benefits Payable - (3,438) (34,983) (90,883) (28,543) (157,847) Compensated Absences Payable - 292 (1,164) 12,886 (587) 11,427 Total Adjustments 148 (13,516) (2,960) 569,241 1,287,927 1,840,840 Net Cash Provided (Used) by Operating Activities (52,398)$ 504,373$ 729,768$ 413,313$ 1,841,244$ 3,436,300$ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Total Non Cash Investing, Capital and Financing Activities -$ -$ -$ -$ -$ -$ City of Auburn, Washington COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Fiscal Year Ended December 31, 2017 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 150 City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 151 AGENCY FUNDS The agency fund accounts 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. City of Auburn: 2017 CAFR Fund Financial Statements and Schedules 152 Balance Balance 1/1/2017 Additions Deductions 12/31/2017 ASSETS: Cash and Cash Equivalents 241,446$ 6,929,371$ 6,643,071$ 527,746$ Other Current Assets 3,713 274,954 271,814 6,853 Total Assets 245,159$ 7,204,325$ 6,914,885$ 534,599$ LIABILITIES: Due to Other Government Units 245,159 13,507,224 13,796,664 534,599 Total Liabilities 245,159$ 13,507,224$ 13,796,664$ 534,599$ City of Auburn, Washington STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND For the Fiscal Year Ended December 31, 2017 City of Auburn: 2017 CAFR Statistical Section 153 City of Auburn STATISTICAL SECTION December 31, 2017 Financial Trends Information Financial trends schedules are intended to provide users with information to assist them in understanding and assessing how the City’s financial position has changed over time. Schedule 1 Net position by components .............................................................................................................. 154 Schedule 2 Changes in net position ....................................................................................................................... 155 Schedule 3 Fund balances, government funds..................................................................................................... 156 Schedule 4 Changes in fund balances, government funds ................................................................................... 157 Schedule 5 Tax revenues by source, government funds ..................................................................................... 158 Revenue Capacity Information The objective of providing revenue capacity information is to help users understand and assess the factors affecting the City’s ability to generate its most significant local source revenues. Schedule 6 Assessed value by type ....................................................................................................................... 159 Schedule 7 Property tax data ................................................................................................................................ 160 Schedule 8 Property tax levies and collections .....................................................................................................162 Schedule 9 Principal taxpayers-property taxes-sales taxes ................................................................................. 163 Schedule 10 Retail tax collections by sector .......................................................................................................... 164 Debt Capacity Information Debt capacity information is intended to assist users to understand and assess the City’s current levels of outstanding debt and ability to issue additional debt in the future. Schedule 11 Ratios of outstanding debt by type ................................................................................................... 165 Schedule 12 Computation of legal debt margin ..................................................................................................... 166 Schedule 13 Legal debt margin ratios ..................................................................................................................... 166 Schedule 14 Computation of net direct and estimated overlapping debt............................................................ 167 Schedule 15 Ratios of net general bonded debt to assessed value ...................................................................... 168 Schedule 16 Pledged revenue bond coverages ..................................................................................................... 169 Demographic and Economic Information These schedules offer demographic and economic information to assist users in understanding certain aspects of the environment within which the City operates and to provide information that facilitates comparisons of financial statement information over time and across governmental units. Schedule 17 Population, income and housing trends .............................................................................................170 Schedule 18 Major employers .................................................................................................................................. 171 Operating Information These schedules contain service and infrastructure data to help users understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. Schedule 19 Staffing levels by department ............................................................................................................. 172 Schedule 20 Operating indicators by department .................................................................................................. 173 Schedule 21 Capital indicators by department ........................................................................................................ 174 Schedule 22 Utility customers by customer class ................................................................................................... 174 City of Auburn: 2017 CAFR Statistical Section 154 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Governmental activities: Net Investment in Capital Assets 303,564,348$ 314,691,982$ 320,506,701$ 340,941,112$ 354,899,294$ 346,195,793$ 348,080,505$ 361,094,242$ 367,128,894$ 373,368,558$ Restricted 28,965,599 12,741,566 15,180,467 14,230,963 13,164,116 15,019,909 16,404,328 19,470,880 26,745,270 29,854,240 Unrestricted 25,955,501 43,754,879 46,734,364 45,250,090 43,245,050 47,426,352 51,898,566 40,928,090 42,900,814 42,804,107 Total governmental activities net position 358,485,448 371,188,427 382,421,532 400,422,165 411,308,460 408,642,054 416,383,399 421,493,212 436,774,978 446,026,906 Business-type activities: Net Investment in Capital Assets 144,626,496 150,621,492 152,343,987 166,289,542 173,709,864 165,619,867 169,098,916 187,604,782 195,490,061 205,317,614 Restricted 933,914 2,071,219 4,107,128 4,153,982 4,719,058 16,839,589 14,115,610 4,764,340 3,110,414 1,856,970 Unrestricted 35,859,489 29,546,169 28,642,334 30,523,974 30,439,381 32,880,216 37,724,080 32,974,662 40,797,698 41,987,494 Total business-type activities net position 181,419,899 182,238,880 185,093,449 200,967,498 208,868,303 215,339,672 220,938,606 225,343,784 239,398,173 249,162,078 Primary government: Net Investment in Capital Assets 448,190,844 465,313,474 472,850,688 507,230,654 528,609,158 511,815,660 517,179,421 548,699,024 562,618,955 578,686,172 Restricted 29,899,513 14,812,785 19,287,595 18,384,945 17,883,174 31,859,498 30,519,938 24,235,220 29,855,684 31,711,210 Unrestricted 61,814,990 73,301,048 75,376,698 75,774,064 73,684,431 80,306,568 89,622,646 73,902,752 83,698,512 84,791,601 Total primary government net position 539,905,347$ 553,427,307$ 567,514,981$ 601,389,663$ 620,176,763$ 623,981,726$ 637,322,005$ 646,836,996$ 676,173,151$ 695,188,984$ Source: City of Auburn, Finance Department City of Auburn, Washington SCHEDULE 1 NET POSITION BY COMPONENTS Last Ten Fiscal Years (Accrual Basis of Accounting) City of Auburn: 2017 CAFR Statistical Section 155 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Expenses Governmental activities: General government 8,000,715$ 7,567,085$ 7,934,948$ 8,581,829$ 9,441,887$ 7,508,112$ 8,363,427$ 9,187,539$ 9,557,602$ 10,384,647$ Public safety 28,217,844 25,675,063 25,890,627 27,320,805 27,339,301 27,423,015 27,144,153 29,883,217 32,117,837 32,746,406 Transportation 12,974,861 11,471,167 11,989,752 12,123,615 15,736,610 14,861,834 16,150,877 17,324,036 16,602,993 17,904,352 Physical environment 3,096,696 3,327,836 2,498,539 2,327,911 2,535,877 2,699,301 2,976,461 2,924,046 3,266,375 3,217,885 Culture and recreation 6,271,924 7,561,569 7,307,270 7,606,584 8,310,210 9,184,289 11,094,524 12,096,651 12,811,186 13,539,098 Economic environment 2,608,980 3,000,257 2,499,631 3,135,984 2,914,335 2,346,025 2,751,869 3,044,354 3,224,984 3,859,863 Health and human services 776,224 527,029 578,247 619,172 633,175 510,285 622,374 925,299 573,115 674,270 Interest on long-term debt 226,651 408,471 1,809,322 1,685,055 2,336,960 3,795,024 3,615,211 1,986,853 1,709,647 1,555,803 Total governmental activities expenses 62,173,895 59,538,478 60,508,335 63,400,955 69,248,355 68,327,885 72,718,896 77,371,995 79,863,739 83,882,324 Business-type activities: Water 8,565,231 8,970,215 10,042,879 8,961,736 9,655,724 11,893,094 11,992,944 13,691,529 13,107,629 12,408,008 Sewer 14,479,299 16,569,297 17,794,958 18,852,402 19,680,724 21,584,215 23,026,216 23,992,161 25,685,370 25,360,718 Storm drainage 5,226,823 7,275,072 6,994,381 6,752,021 8,025,729 7,726,467 7,668,072 8,308,559 8,814,542 8,979,969 Solid waste 10,781,426 11,019,606 9,894,429 9,957,943 11,305,322 12,535,078 12,760,313 12,907,832 13,460,155 14,539,703 Golf course 1,958,703 1,909,758 1,844,108 1,903,836 1,912,174 1,933,597 - - - - Non-major business-type activities 1,720,603 1,666,754 1,781,204 2,010,776 1,954,104 1,857,252 1,924,874 2,062,695 2,150,693 2,106,557 Total business-type activities expenses 42,732,085 47,410,702 48,351,960 48,438,714 52,533,777 57,529,703 57,372,419 60,962,776 63,218,389 63,394,955 Total primary government expenses 104,905,980$ 106,949,180$ 108,860,294$ 111,839,669$ 121,782,132$ 125,857,588$ 130,091,315$ 138,334,771$ 143,082,128$ 147,277,279$ Program revenues Governmental activities: Charges for services General Government 2,316,125$ 814,095$ 1,168,574$ 1,010,911$ 897,521$ 893,326$ 1,160,198$ 1,243,263$ 939,184$ 1,241,905$ Public Safety 2,674,777 2,854,530 2,938,942 3,867,013 1,016,191 2,103,823 2,273,903 1,993,117 1,468,536 2,523,667 Transportation 1,272,751 1,587,850 960,532 1,042,147 1,819,851 1,967,778 1,660,270 1,446,026 3,265,147 2,118,980 Physical Environment 257,780 147,996 86,306 103,590 36,766 398,564 276,632 384,485 260,555 431,580 Culture and Recreation 917,544 1,048,390 962,558 1,182,688 880,380 873,970 2,876,185 3,052,599 2,508,166 3,073,262 Economic Environment 1,638,579 1,654,692 1,732,397 2,294,916 3,266,188 3,586,844 3,087,853 2,989,579 3,896,453 2,400,940 Health and human services - 989 449 7,528 - - - - - - Total charges for services 9,077,556 8,108,542 7,849,758 9,508,793 7,916,897 9,824,305 11,335,041 11,109,069 12,338,041 11,790,334 Operating grants and contributions 2,567,788 3,001,401 3,022,835 1,724,711 3,560,707 1,967,252 1,333,652 4,234,309 2,767,931 2,257,646 Capital grants and contributions 94,905,563 12,806,049 10,702,132 19,730,140 17,835,784 5,955,062 6,001,230 19,526,548 13,275,208 13,229,502 Total governmental activities program revenues 106,550,907 23,915,992 21,574,725 30,963,644 29,313,388 17,746,619 18,669,923 34,869,926 28,381,180 27,277,482 Business-type activities: Charges for services 39,883,386 42,338,079 43,461,742 45,045,488 50,710,688 57,533,735 60,332,817 63,391,139 65,733,943 68,220,200 Operating grants and contributions 55,024 87,454 70,841 116,735 97,052 90,361 111,025 106,286 106,286 106,286 Capital grants and contributions 10,670,660 1,992,259 7,391,111 15,981,735 7,248,835 5,483,344 5,070,810 5,821,857 10,574,852 4,363,568 Total business-type activities program revenue 50,609,070 44,417,792 50,923,694 61,143,958 58,056,575 63,107,440 65,514,652 69,319,282 76,415,081 72,690,054 Total primary government program revenues 157,159,977 68,333,784 72,498,419 92,107,602 87,369,963 80,854,059 84,184,575 104,189,208 104,796,261 99,967,536 Net (expense)/revenue Governmental activities 44,377,012 (35,622,486) (38,933,610) (32,437,311) (39,934,967) (50,581,266) (54,048,973) (42,502,069) (51,482,559) (56,604,841) Business-type activities 7,876,985 (2,992,910) 2,571,734 12,705,244 5,522,798 5,577,737 8,142,233 8,356,506 13,196,692 9,295,099 Total primary government net expense 52,253,997$ (38,615,396)$ (36,361,876)$ (19,732,067)$ (34,412,169)$ (45,003,529)$ (45,906,740)$ (34,145,563)$ (38,285,867)$ (47,309,742)$ General revenues and other changes in net position Governmental activities: Taxes: Property taxes 10,804,825$ 13,362,672$ 14,766,470$ 15,204,611$ 14,970,136$ 14,490,790$ 15,867,838$ 17,271,705$ 18,102,286$ 20,967,953$ Retail sales and use tax 17,620,661 14,727,496 15,657,081 16,213,244 16,679,278 18,335,157 19,744,684 21,125,730 21,475,335 22,333,454 Interfund utility taxes 2,507,213 3,437,526 2,788,083 2,948,297 3,281,816 3,892,250 4,068,667 4,260,831 4,624,951 4,540,265 Utility taxes 8,075,355 9,071,485 8,886,964 9,049,689 8,856,498 9,156,636 9,040,015 8,838,179 8,917,401 10,391,462 Excise taxes 3,477,517 2,310,076 1,389,030 1,859,738 2,141,620 2,555,850 2,888,797 4,999,517 5,057,013 4,141,146 Other taxes 2,949,430 4,607,584 4,622,138 4,644,909 4,679,333 4,429,090 4,601,925 4,722,482 5,160,215 5,253,964 Investment earnings 1,589,837 570,798 379,316 224,593 178,618 121,687 105,117 118,399 332,520 787,786 Miscellaneous 2,751,495 67,223 214,190 775,969 547,391 (4,625,627) 178,482 194,600 157,874 204,306 Transfers 427,740 170,605 1,463,444 (483,107) (513,428) (218,230) 5,294,793 (462,955) 424,173 454,436 Total governmental activities 50,204,073 48,325,465 50,166,715 50,437,943 50,821,262 48,137,603 61,790,318 61,068,488 64,251,768 69,074,772 Business-type activities: Investment earnings 1,242,363 312,618 158,211 101,694 82,903 68,400 51,261 70,560 196,595 479,132 Miscellaneous 330,472 3,669,878 1,588,068 2,584,004 1,781,676 763,717 2,700,233 1,881,835 1,085,275 444,110 Transfers (427,740) (170,605) (1,463,444) 483,107 513,428 218,230 (5,294,793) 462,955 (424,173) (454,436) Total business-type activities:1,145,095 3,811,891 282,835 3,168,805 2,378,007 1,050,347 (2,543,299) 2,415,350 857,697 468,806 Total primary government 51,349,168$ 52,137,356$ 50,449,550$ 53,606,748$ 53,199,269$ 49,187,950$ 59,247,019$ 63,483,838$ 65,109,465$ 69,543,578$ Change in net position Before Change in Accounting Principle Governmental activities 94,581,085 12,702,979 11,233,105 18,000,632 10,886,295 (2,443,663) 7,741,345 18,566,419 12,769,209 12,469,931 Business-type activities 9,022,080 818,981 2,854,569 15,874,049 7,900,805 6,628,084 5,598,934 10,771,856 14,054,389 9,763,905 Total primary government 103,603,165$ 13,521,960$ 14,087,674$ 33,874,681$ 18,787,100$ 4,184,421$ 13,340,279$ 29,338,275$ 26,823,598$ 22,233,836$ Change in Accounting Principle Governmental activities - - - - - (222,743) - (13,456,606) 2,512,557 (3,218,004) Business-type activities - - - - - (156,715) - (6,366,678) - - Total primary government -$ -$ -$ -$ -$ (379,458)$ -$ (19,823,284)$ 2,512,557$ (3,218,004)$ Change in net position After Change in Accounting Principle Governmental activities 94,581,085 12,702,979 11,233,105 18,000,632 10,886,295 (2,666,406) 7,741,345 5,109,813 15,281,766 9,251,927 Business-type activities 9,022,080 818,981 2,854,569 15,874,049 7,900,805 6,471,369 5,598,934 4,405,178 14,054,389 9,763,905 Total primary government 103,603,165$ 13,521,960$ 14,087,674$ 33,874,681$ 18,787,100$ 3,804,963$ 13,340,279$ 9,514,991$ 29,336,155$ 19,015,832$ Source: City of Auburn, Finance Department City of Auburn, Washington SCHEDULE 2 CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting) City of Auburn: 2017 CAFR Statistical Section 156 2008 2009 2010 2011 (1)2012 2013 2014 2015 2016 2017 General Fund Unreserved 13,071,091$ 13,237,851$ 15,382,354$ -$ -$ -$ -$ -$ -$ -$ Nonspendable - - - - 370,400 127 127 127 - 30,453 Assigned - - - 7,082,130 5,935,567 5,892,611 4,045,598 7,284,159 7,160,098 9,315,528 Unassigned - - - 14,193,365 17,395,933 17,751,778 20,914,093 20,267,776 24,991,081 25,414,801 Total General Fund 13,071,091 13,237,851 15,382,354 21,275,495 23,701,900 23,644,516 24,959,818 27,552,062 32,151,179 34,760,782 All other governmental funds Reserved 1,507,565 1,538,038 1,592,378 - - - - - - - Unreserved, Reported In:- - Special Revenue Funds 14,463,370 15,184,058 15,486,918 - - - - - - - Capital Projects Funds 12,990,032 10,422,360 12,589,604 - - - - - - - Permanent Funds 144,396 153,503 132,717 - - - - - - - Total Unreserved 27,597,798 25,759,921 28,209,239 - - - Nonspendable 1,453,540 1,475,580 1,536,316 1,574,148 1,585,707 1,666,043 1,717,134 Restricted 12,781,743 11,688,536 13,483,593 14,830,180 17,885,173 25,079,227 28,137,106 Committed 3,134,449 3,258,257 3,242,662 5,066,181 3,658,719 5,421,640 3,223,108 Assigned 3,120,372 2,388,684 4,976,833 4,725,119 4,755,182 1,226,315 1,221,511 Total All Other Governmental Funds 29,105,363$ 27,297,959$ 29,801,617$ 20,490,104$ 18,811,057$ 23,239,404$ 26,195,628$ 27,884,781$ 33,393,225$ 34,298,859$ (1)GASB Statement No. 54 was implemented in FY 2011. See Note 1E of the Notes to the Basic Financial Statements. Source: City of Auburn, Finance Department City of Auburn, Washington SCHEDULE 3 FUND BALANCES, GOVERNMENT FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) City of Auburn: 2017 CAFR Statistical Section 157 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenues Taxes 43,781,530$ 42,514,006$ 43,069,695$ 44,812,975$ 46,003,582$ 48,545,041$ 51,718,489$ 56,632,337$ 58,279,984$ 62,425,246$ Licenses and permits 1,110,722 1,326,875 1,311,916 1,769,516 2,344,643 3,041,948 2,400,662 2,074,432 3,005,125 1,906,796 Intergovernmental 8,369,888 9,616,067 9,656,529 16,174,149 20,045,299 11,854,984 9,379,699 13,620,446 12,714,010 16,187,560 Charges for services 3,784,544 3,473,199 3,073,168 2,938,815 4,006,762 3,891,776 5,717,712 7,321,295 11,563,678 7,117,774 Fines and forfeits 2,059,771 1,911,034 2,472,411 1,940,326 1,592,957 1,441,603 1,258,408 938,775 905,921 882,254 Special assessments 57,402 107,597 43,502 32,972 39,115 40,772 472,800 7,494 4,111 3,835 Investment earnings 1,363,375 484,696 386,890 237,056 200,826 144,151 135,709 117,942 279,058 672,713 Miscellaneous 1,296,349 1,142,428 3,023,589 2,322,580 871,191 621,673 1,691,274 1,890,419 1,854,450 1,966,333 Total revenues 61,823,581 60,575,902 63,037,699 70,228,389 75,104,375 69,581,948 72,774,753 82,603,140 88,606,337 91,162,511 Expenditures General government 7,719,205 7,864,410 7,770,957 8,310,037 8,761,452 7,300,667 7,712,018 8,661,592 8,936,366 9,755,757 Public safety 26,023,912 25,762,116 24,597,986 27,399,406 24,039,435 27,146,590 27,264,294 29,164,772 30,809,069 32,084,376 Transportation 8,910,967 9,850,579 10,054,434 16,059,156 20,766,134 15,119,530 8,979,583 16,323,425 12,607,616 20,652,538 Physical environment 3,490,636 3,192,089 2,480,641 2,290,328 2,526,526 2,855,908 3,086,738 2,991,145 3,309,993 3,359,548 Economic environment 2,530,827 3,028,684 2,597,849 3,138,590 2,876,558 2,692,389 2,783,898 3,066,674 3,324,309 3,880,025 Health and human services 776,224 527,029 568,911 616,717 616,583 631,997 626,681 925,299 573,115 674,270 Culture and recreation 6,296,743 6,622,546 6,663,881 6,918,623 7,228,345 7,925,325 9,759,110 10,700,680 11,480,488 11,943,070 Capital outlay (1)4,778,334 30,338,508 8,486,382 8,597,944 4,007,018 2,746,599 3,394,886 3,580,304 6,784,343 2,096,281 Debt service: Principal 456,655 479,661 26,683,671 1,208,512 1,219,137 2,238,181 2,704,468 1,713,940 1,737,569 1,635,126 Interest / other 264,997 296,241 1,775,746 1,761,334 2,245,858 2,709,768 2,892,281 1,801,109 1,632,786 1,590,525 Total expenditures 61,248,500 87,961,863 91,680,457 76,300,647 74,287,046 71,366,954 69,203,957 78,928,940 81,195,654 87,671,516 Excess of revenues over (under) expenditures 575,081 (27,385,961) (28,642,758) (6,072,258) 817,329 (1,785,006) 3,570,796 3,674,200 7,410,683 3,490,995 Other financing sources (uses) Transfers in 7,386,082 6,994,306 9,442,727 7,410,926 6,643,116 4,776,100 5,309,769 7,100,830 11,121,265 7,050,817 Transfers out (7,993,842) (6,997,801) (7,745,568) (6,242,333) (7,005,097) (4,450,925) (5,003,448) (6,668,626) (11,182,611) (7,163,278) Capital leases 17,728 24,549,186 - - - - - - - - Insurance recoveries - 114,607 200,642 154,200 291,210 192,898 136,585 153,041 83,737 134,003 Issuance of debt 360,000 957,278 31,172,273 - - 3,044,491 240,366 - 3,128,732 - Issuance of refunding bond - - 2,150,000 - - - - - 38,198 - Debt Premium - - 305,844 - - - - - - - Payment to escrow agent - refunded bon - - (2,235,000) - - - - - (3,005,000) - Sales of capital assets 2,698,677 127,741 - 1,331,092 800 2,593,405 17,458 21,952 - 2,700 Total other financing sources (uses)2,468,645 25,745,317 33,290,918 2,653,885 (69,971) 6,155,969 700,730 607,197 184,321 24,242 Net change in fund balances 3,043,726$ (1,640,644)$ 4,648,159$ (3,418,373)$ 747,358$ 4,370,963$ 4,271,526$ 4,281,397$ 7,595,004$ 3,515,237$ Debt service as a percentage of noncapital 1.42%1.54%37.50%5.44%6.64%8.71%10.68%5.50%5.14%4.66% expenditures (1)Capital outlay reported in governmental funds for 2017 are $2,096,281 plus $16,336,628 which is reported for each functional activity with the other funds results in total capital outlay of $18,432,909 as reported on the Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Government Funds to the Statement of Activities. Source: City of Auburn, Finance Department City of Auburn, Washington SCHEDULE 4 CHANGES IN FUND BALANCES, GOVERNMENT FUNDS Last Ten Fiscal Years (Modified Accrual Basisi of Accouting) City of Auburn: 2017 CAFR Statistical Section 158 Fiscal Sales Interfund Year Property & Use Utility Utility Excise Other Total 2008 12,040,124 17,620,661 2,507,213 8,075,355 3,477,517 60,660 43,781,530 2009 12,914,943 14,727,496 3,437,526 9,071,485 2,310,076 52,480 42,514,006 2010 14,283,303 15,657,081 2,788,083 8,886,964 1,389,030 65,234 43,069,695 2011 14,683,329 16,213,244 2,948,297 9,049,689 1,859,738 58,678 44,812,975 2012 14,987,636 16,679,278 3,281,816 8,856,498 2,141,620 56,734 46,003,582 2013 14,535,673 18,335,157 3,892,250 9,156,636 2,555,850 69,475 48,545,041 2014 15,933,338 19,744,684 4,068,667 9,040,015 2,888,797 42,988 51,718,489 2015 17,337,108 21,125,730 4,260,831 8,838,179 4,999,517 70,972 56,632,337 2016 18,067,324 21,475,335 4,624,951 8,917,401 5,057,013 137,960 58,279,984 2017 20,976,384 22,333,454 4,540,265 10,391,462 4,141,146 42,535 62,425,246 Change 2008-2017 74.2%26.7%81.1%28.7%19.1%-29.9%42.6% Source: City of Auburn, Finance Department TAX REVENUES BY SOURCE, GOVERNMENT FUNDS Last Ten Fiscal Years SCHEDULE 5 City of Auburn, Washington City of Auburn: 2017 CAFR Statistical Section 159 State Total Total Fiscal Property Personal Land and Assessed Direct Year and Other Property Building Value Rate 2008 112,101 640,004 5,804,585 6,556,690 1.49 2009 121,918 764,857 7,837,089 8,723,864 (*)1.49 2010 114,661 715,534 6,935,683 7,765,878 1.82 2011 126,415 726,944 6,711,148 7,564,507 1.93 2012 124,204 709,024 6,392,321 7,225,550 2.08 2013 124,230 745,891 6,098,598 6,968,719 2.10 2014 132,854 880,015 6,409,300 7,422,169 2.17 2015 146,941 911,493 7,308,219 8,366,653 2.08 2016 156,673 958,859 7,851,588 8,967,119 2.05 2017 171,829 957,161 8,592,887 9,721,877 2.20 Source: King County Dept of Assessments & Pierce County Assessor-Treasurer (*) In 2009, Total Assessed Value increased significantly due to annexations of Lea Hill and West Hill areas (Amounts Expressed in Thousands) City of Auburn, Washington SCHEDULE 6 ASSESSED VALUE BY TYPE Last Ten Fiscal Years $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Figure 6: Assessed Value by Type 2008 -2017 State property Personal property Land and building City of Auburn: 2017 CAFR Statistical Section 160 Page 1 of 2 Item 2008 (2)2009 2010 2011 Assessed and estimated actual values (1) Estimated and actual value (in thousands)6,556,690$ 8,723,864$ 7,765,878$ 7,564,507$ Assessed value (in thousands)6,556,690 8,723,864 7,765,878 7,564,507 Ratio of assessed to actual 100%100%100%100% Property tax rates (1) Direct regular and special General fund 1.48385$ 1.48678$ 1.82336$ 1.93458$ Debt service funds - - - - Subtotal 1.48385 1.48678 1.82336 1.93458 Overlapping regular and special (1) Auburn School District 4.40970$ 4.37709$ 5.09382$ 5.99562$ King County 1.20770 1.09772 1.28499 1.33816 State of Washington 2.13233 1.96268 2.22253 2.27990 Port of Seattle 0.22359 0.19700 0.21597 0.22366 Sound Transit - - - - Emergency Medical Services 0.30000 0.27404 0.30000 0.30000 Hospital District 0.50854 0.47141 0.53290 0.55753 King County Library District 0.45336 0.41736 0.48526 0.56621 Valley Regional Fire Authority 1.00000 1.10995 1.17910 1.17977 King County Flood Zone 0.10000 0.91230 0.10514 0.10976 King County Ferry District 0.05500 0.05018 0.00348 0.00360 Subtotal 10.39022 10.86973 11.42319 12.55421 Total direct and overlapping 11.87407$ 12.35651$ 13.24655$ 14.48879$ Sources: (1) King County and Pierce County Departments of Assessments; real and personal property has been assessed at 100% of the estimated actual value. (2) The 2008 decrease in property tax levy to $1.48 is due to the incorporation of the Valley Regional Fire Authority (VRFA) effective 1/1/2007. The VRFA will assess its own property tax levy in 2008, partially offsetting what was previously levied by the City. City of Auburn, Washington SCHEDULE 7 PROPERTY TAX DATA Last Ten Fiscal Years $1.00 $1.50 $2.00 $2.50 $3.00 2008 (2) 2009 2010 2011 2012 2013 2014 2015 2016 2017 Per $1,000 of Assessed ValuationFigure 7a: Ten Years City Property Tax Rates 2008 -2017 City of Auburn: 2017 CAFR Statistical Section 161 Page 2 of 2 2012 2013 2014 2015 2016 2017 7,225,550$ 6,968,719$ 7,422,169$ 8,366,653$ 8,967,119$ 9,721,877$ 7,225,550 6,968,719 7,422,169 8,366,653 8,967,119 9,721,877 100%100%100%100%100%100% 2.07527$ 2.10000$ 2.16739$ 2.08085$ 2.04719$ 2.19668$ - - - - - - 2.07527 2.10000 2.16739 2.08085 2.04719 2.19668 6.14004$ 6.62190$ 6.50262$ 6.14079$ 5.82831$ 6.74299$ 1.41588 1.54051 1.51605 1.34522 1.48027 1.38294 2.42266 2.56720 2.47044 2.28514 2.16898 2.03205 0.22982 0.23324 0.21533 0.18885 0.16954 0.15334 - - - - - 0.25000 0.30000 0.30000 0.33500 0.30217 0.28235 0.26305 0.50000 0.50000 0.50000 0.50000 0.50000 0.50089 0.56992 0.56743 0.56175 0.50276 0.47714 0.45118 1.18925 1.20479 1.20294 1.18043 1.13495 1.06821 0.11616 0.13210 0.15369 0.13860 0.12980 0.11740 0.00372 0.00378 0.00349 - - - 12.88745 13.67095 13.46131 12.58396 12.17134 12.96205 14.96272$ 15.77095$ 15.62870$ 14.66481$ 14.21853$ 15.15873$ $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 2008 (2)2009 2010 2011 2012 2013 2014 2015 2016 2017Dollars (Rate Per Thousand)Figure 7b: Property Tax Rates Last Ten Fiscal Years Sound Transit Hospital District King County Ferry District King County Flood Zone Valley Regional Fire Authority King County Library District Emergency Medical Services Port of Seattle State of Washington King County Auburn School District City of Auburn: 2017 CAFR Statistical Section 162 Total Tax Collections Fiscal Levy for in Subsequent Current Year Year Fiscal Year Amount % of Levy Years Amount % of Levy Levy Balance King County: 2008 9,550,684 9,406,398$ 98.5%144,084 9,550,482$ 100.0%202$ 2009 11,671,904 11,390,684 97.6%281,064 11,671,748 100.0%156 2010 12,712,801 12,459,564 98.0%253,566 12,713,130 100.0%(329) 2011 13,080,879 12,846,996 98.2%226,333 13,073,328 99.9%7,550 2012 13,391,835 13,167,731 98.3%222,514 13,390,245 100.0%1,591 2013 12,889,371 12,673,712 98.3%219,215 12,892,926 100.0%(3,556) 2014 14,166,167 13,970,560 98.6%182,124 14,152,683 99.9%13,483 2015 15,389,766 15,226,048 98.9%146,395 15,372,443 99.9%17,323 2016 16,038,165 15,897,626 99.1%124,841 16,022,467 99.9%15,698 2017 18,662,509 18,418,844 98.7%- 18,418,844 98.7%243,665 295,783$ Pierce County: 2008 1,226,764 1,177,691$ 96.0%49,073 1,226,764$ 100.0%1$ 2009 1,264,380 1,223,693 96.8%40,688 1,264,381 100.0%(0) 2010 1,489,729 1,451,377 97.4%38,352 1,489,729 100.0%1 2011 1,425,381 1,401,543 98.3%23,838 1,425,381 100.0%(0) 2012 1,495,390 1,478,230 98.9%17,038 1,495,269 100.0%121 2013 1,484,398 1,471,458 99.1%12,801 1,484,260 100.0%138 2014 1,595,567 1,587,010 99.5%8,557 1,595,567 100.0%0 2015 1,746,059 1,739,735 99.6%5,689 1,745,424 100.0%635 2016 1,867,819 1,866,161 99.9%- 1,866,161 99.9%1,658 2017 2,238,260 2,229,137 99.6%- 2,229,137 99.6%9,124 11,676$ Total current levy balance 307,459$ Source: King County Finance and Business Operations Division Pierce County Budget and Finance Department Fiscal Year of the Levy Total Collections to Date City of Auburn, Washington SCHEDULE 8 PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Collected Within the 95.0% 95.5% 96.0% 96.5% 97.0% 97.5% 98.0% 98.5% 99.0% 99.5% 100.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 FIGURE 8: TEN YEARS COLLECTION OF LEVIED PROPERTY TAXES Last Ten Fiscal Years Collection percentage within the fiscal year of the levy Total collection percentage City of Auburn: 2017 CAFR Statistical Section 163 Percentage Percentage of Total City of Total City Assessed Taxable Assessed Taxable Taxpayer Value Rank Assessed Value Value Rank Assessed Value Boeing 280,936,249$ 1 2.89%457,846,367$ 1 6.98% Glimcher Supermall Venture 119,511,411 2 1.23%124,696,902 2 1.90% EProperty Tax Inc.96,597,800 3 0.99%74,665,100 4 1.14% Puget Sound Energy 83,356,440 4 0.99%58,958,636 5 0.90% Safeway 79,488,034 5 0.82%121,011,972 3 1.85% Principal Life Insurance Co.71,175,200 6 0.73%- 0.00% PPF Industrial 69,997,800 7 0.72%- 0.00% KW Lakeland LLC 59,467,900 8 0.61%- 0.00% AMB Institutional Alliance 47,643,100 9 0.49%- 0.00% TIAA CREF 41,940,100 10 0.43%- 0.00% Muckleshoot Indian Tribe - 57,234,500 6 0.87% Invesco Realty Advisors - 53,946,000 7 0.82% Universal Health - 47,220,355 8 0.72% Qwest Corporation - 24,144,890 9 0.37% Roundup Co. (Fred Meyer)- 19,217,762 10 0.29% TOTALS 950,114,034$ 9.91%1,038,942,484$ 15.85% Source: King County and Pierce County Departments of Assessments Total assessed value for 2017:9,721,877,401$ Total assessed value for 2008:6,556,690,000$ 2017 2008 City of Auburn, Washington SCHEDULE 9a PRINCIPAL TAXPAYERS-PROPERTY TAXES Current Year and Nine Years Ago 0% 5% 10% 15% 20% 25% 2008 2017 FIGURE 9a-1: TOP TAXPAYER ASSESSED VALUE AS A PERCENTAGE OF TOTAL ASSESSED VALUE Current Year and Nine Years Ago 0% 5% 10% 15% 20% 25% 2008 2017 FIGURE 9a-2: TOP 10 TAXPAYERS ASSESSED VALUE AS A PERCENTAGE OF TOTAL ASSESSED VALUE Current Year and Nine Years Ago Percentage Percentage Sales of Total City Sales of Total City Tax Sales Taxes Tax Sales Taxes Received Sector (1)Rank Received Received Sector (1)Rank Received 554,111$ Automotive 1 3.2%401,376$ Automotive 1 3.1% 451,249 General Retail 2 2.6%388,323 Distribution 2 2.4% 419,874 Construction 3 2.4%340,904 Automotive 3 2.2% 376,034 Automotive 4 2.1%332,807 General Retail 4 2.1% 362,387 Manufacturing 5 2.1%296,036 General Retail 5 2.0% 355,149 Automotive 6 2.0%281,174 General Retail 6 1.9% 317,615 Automotive 7 1.8%269,511 Automotive 7 1.5% 303,791 General Retail 8 1.7%253,829 Manufacturing 8 1.4% 287,314 Automotive 9 1.6%236,397 General Retail 9 1.4% 284,913 Automotive 10 1.6%207,144 General Retail 10 1.4% 3,712,437$ 21.1%3,007,501$ 19.4% Source: Washington State Department of Revenue (1) It is illegal to disclose specific taxpayer sales tax information, so the above information is being provided without identification. 2017 2008 City of Auburn, Washington SCHEDULE 9b PRINCIPAL TAXPAYERS-SALES TAXES Current Year and Ten Years Ago City of Auburn: 2017 CAFR Statistical Section 164 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 RETAIL TRADE SECTOR Automotive/gas 3,255$ 2,559$ 2,553$ 2,785$ 3,019$ 3,136$ 3,309$ 3,707$ 3,659$ 3,972$ Furniture 241 220 194 218 226 235 254 254 185 197 Electronics & appliances 242 132 121 127 145 174 237 295 221 211 Building materials 521 358 389 383 425 447 502 590 579 580 Food stores 360 352 354 331 341 335 353 368 397 369 Health & personal care 152 150 144 148 149 174 188 221 284 369 Apparel 873 781 752 754 772 889 1,009 1,080 1,136 1,119 General merchandise 872 833 801 968 967 974 955 988 1,018 993 Misc. retail trade 1,234 755 834 851 897 990 1,182 1,193 1,032 1,033 Subtotal - Retail Trade 7,750 6,140 6,142 6,566 6,943 7,354 7,989 8,695 8,512 8,843 SERVICE SECTOR Information 489$ 457$ 979$ 481$ 396$ 446$ 487$ 526$ 630$ 662$ Finance & insurance 85 83 68 66 53 91 88 95 111 122 Real estate, rental, leasing 394 304 288 304 326 279 315 334 359 368 Professional, scientific, technical 146 200 191 175 173 184 216 195 238 239 Administrative, supply & remediation services 261 261 239 295 334 336 350 383 329 276 Educational 91 42 56 53 54 50 49 60 50 56 Healthcare & social services 98 61 37 41 115 33 66 82 92 75 Arts & entertainment 171 147 154 149 153 149 158 208 156 110 Accommodation & food service 915 827 806 839 921 979 1,067 1,159 1,218 1,276 Other services 457 485 493 482 530 507 526 603 788 728 Subtotal - Services 3,107 2,867 3,310 2,882 3,056 3,054 3,322 3,646 3,970 3,912 OTHER SECTORS Construction 1,647$ 1,368$ 1,322$ 1,296$ 1,221$ 1,943$ 1,754$ 2,297$ 2,292$ 2,632$ Manufacturing 643 383 411 583 405 624 1,163 862 761 678 Transportation 76 31 29 77 55 46 71 66 99 89 Wholesaling 2,306 1,073 1,180 1,260 1,297 1,279 1,205 1,229 1,265 1,363 Other business 72 47 128 224 61 64 120 72 67 65 Subtotal - Other 4,744 2,902 3,071 3,439 3,038 3,956 4,312 4,525 4,485 4,827 GRAND TOTAL 15,601$ 11,909$ 12,523$ 12,887$ 13,037$ 14,364$ 15,623$ 16,866$ 16,967$ 17,582$ OVERLAPPING SALES TAX RATES Basic sales tax rates City of Auburn 0.85%0.85%0.85%0.85%0.85%0.85%0.85%0.85%0.85%0.85% Washington State 6.50%6.50%6.50%6.50%6.50%6.50%6.50%6.50%6.50%6.50% King County 0.25%0.25%0.25%0.25%0.25%0.25%0.25%0.25%0.25%0.25% Regional Transit Authority 0.40%0.90%0.90%0.90%0.90%0.90%0.90%0.90%0.90%1.40% Metro 0.90%0.90%0.90%0.90%0.90%0.90%0.90%0.90%0.90%0.90% Criminal Justice 0.10%0.10%0.10%0.10%0.10%0.10%0.10%0.10%0.10%0.10% Total basic sales tax rate 9.00%9.50%9.50%9.50%9.50%9.50%9.50%9.50%9.50%10.00% Special sales tax rates Restaurants-for stadium funding (1)0.50%0.50%0.50%0.50%0.00%0.00%0.00%0.00%0.00%0.00% Motor vehicles 0.30%0.30%0.30%0.30%0.30%0.30%0.30%0.30%0.30%0.30% (1) This tax expired on October 1, 2011 Source: City of Auburn Finance Department and State of Washington (Amounts Expressed in Thousands) City of Auburn, Washington SCHEDULE 10 RETAIL TAX COLLECTIONS BY SECTOR Last Ten Fiscal Years City of Auburn: 2017 CAFR Statistical Section 165 General Special Public Works Total Percentage Fiscal Obligation Assessment Capital Revenue Trust Fund Primary of Personal Per Year Bonds Bonds Leases Bonds Loans Government Income (1)Capita 2008 10,053,000$ 36,827$ 646,799$ 3,495,000$ 9,730,324$ 23,961,950$ 1.82%357.61 2009 36,160,850 36,827 25,193,600 2,200,000 10,014,943 73,606,220 4.11%1,090.70 2010 64,816,850 - 604,685 23,220,000 10,296,024 98,937,559 5.35%1,449.21 2011 63,430,850 - 566,212 22,930,000 9,491,810 96,418,872 5.07%1,363.68 2012 61,900,771 - 524,498 23,057,333 8,687,599 94,170,201 5.05%1,321.87 2013 59,568,505 - 480,771 34,292,569 12,442,903 106,784,748 5.57%1,458.11 2014 57,367,766 - 435,068 32,813,473 11,808,711 102,425,018 5.12%1,372.44 2015 55,094,519 - 569,773 31,304,378 11,650,644 98,619,314 4.85%1,305.44 2016 54,245,944 - 476,635 28,545,000 11,412,188 94,679,767 4.48%1,228.65 2017 50,766,661 - 382,914 28,161,699 10,394,433 89,705,707 4.07%1,136.09 Source: City of Auburn, Finance Department (1) Personal income data provided by US Census Bureau estimate for 2013, 2012, 2011; Hebert Research for 2004, 2005 and 2010 only; other years are city estimates City of Auburn, Washington Last Ten Fiscal Years Governmental Activities Business-type Activities RATIOS OF OUTSTANDING DEBT BY TYPE SCHEDULE 11 City of Auburn: 2017 CAFR Statistical Section 166 Parks and Utility Total Councilmanic Excess Levy Open Spaces Purpose Capacity December 31, 2017 - Total Assessed Value: 10,559,150,607$ 2.5% of Assessed Value -$ 263,978,765$ 263,978,765$ 263,978,765$ 791,936,295$ 1.5% of Assessed Value 158,387,259 (158,387,259) - - - Statutory Debt Limit 158,387,259 105,591,506 263,978,765 263,978,765 791,936,295 Debt Outstanding 54,208,225 - - - 54,208,225 Net Debt Outstanding 54,208,225 - - - 54,208,225 Remaining Debt Capacity 104,179,034$ 105,591,506$ 263,978,765$ 263,978,765$ 737,728,070$ General Capacity Special Purpose Capacity City of Auburn, Washington SCHEDULE 12 COMPUTATION OF LEGAL DEBT MARGIN As of December 31, 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Debt Limit 653,979$ 577,669$ 565,822$ 539,989$ 518,188$ 546,602$ 617,872$ 661,996$ 716,628$ 791,936$ Total net debt applicable to limit 10,771 62,671 66,868 65,364 63,815 64,047 61,892 59,409 57,152 54,208 Legal debt margin 643,208$ 514,998$ 498,954$ 474,625$ 454,372$ 482,554$ 555,980$ 602,588$ 659,476$ 737,728$ Total net debt applicable to the limit as a percentage of debt limit 1.65%10.85%11.82%12.10%12.32%11.72%10.02%8.97%7.98%6.85% City of Auburn, Washington SCHEDULE 13 LEGAL DEBT MARGIN RATIOS Last Ten Fiscal Years (Expressed in Thousands) City of Auburn: 2017 CAFR Statistical Section 167 Net Debt Percent Bonded Amount Outstanding Applicable (3)Applicable Net direct debt: Net direct debt - City of Auburn (1)54,478,798$ Estimated net overlapping debt: (2) King County 736,346,000$ 1.82%13,401,497$ Port of Seattle 388,360,000 1.82%7,068,152 School District No. 210 189,527,698 2.79%5,287,823 School District No. 408 216,440,000 78.34%169,559,096 School District No. 415 102,559,482 1.27%1,302,505 Rural Library District 89,230,000 3.18%2,837,514 Valley Regional Fire Authority 12,570,000 90.21%11,339,397 Pierce County 124,025,000 1.00%1,240,250 Total estimated net overlapping debt 212,036,234 Total direct and overlapping debt 266,515,032$ Sources: (1) Includes both bonded and non bonded debt related to government activities. From Sch. 9 Changes in LT Liabilities (2) Overlapping governments (3) King County Assessors office and Pierce County Assessors office. Calculation of overlapping debt: applicable percentage is determined by the ratio of assessed valuation of taxable property in overlapping unit to valuation of property subject to taxation in the City of Auburn. COMPUTATION OF NET DIRECT AND ESTIMATED OVERLAPPING DEBT As of December 31, 2017 City of Auburn, Washington SCHEDULE 14 City of Auburn: 2017 CAFR Statistical Section 168 Ratio of Net Debt Net Bonded Net Assessed Net Service Bonded Debt to Bonded Fiscal Value (1)Bonded Amount (3)Debt Assessed Debt per Year Population (Thousands) Debt (2)Available (Thousands)Value Capita 2008 67,005 6,556,690$ 10,053,000$ 41,603$ 10,011$ 0.15%150$ 2009 67,485 8,723,864 36,160,850 37,746 36,123 0.41%536 2010 68,270 7,765,878 64,816,850 46,058 64,771 0.83%949 2011 70,705 7,564,507 63,430,850 45,754 63,385 0.84%897 2012 71,240 7,225,550 61,900,771 46,155 61,855 0.86%869 2013 73,235 6,968,719 59,568,505 - 59,569 0.85%813 2014 74,630 7,422,169 57,367,766 - 57,368 0.77%769 2015 75,545 8,366,653 55,094,519 - 55,095 0.66%729 2016 77,060 8,967,119 54,245,944 - 54,246 0.60%704 2017 78,960 9,721,877 50,766,661 - 50,767 0.52%643 Notes: (1) From Schedule 6 (2) General Obligation Debt related to government activities, from Schedule 11. (3) Fund balance from debt service fund. RATIOS OF NET GENERAL BONDED DEBT TO ASSESSED VALUE AND GROSS BONDED DEBT PER CAPITA Last Ten Fiscal Years City of Auburn, Washington SCHEDULE 15 City of Auburn: 2017 CAFR Statistical Section 169 Direct(2)Debt Service Requirements Gross (1)Operating Net Revenue Times Year Revenue Expense Available Principal Interest Total (3)Coverage 2008 27,665,498$ 23,149,802$ 4,515,696$ 1,942,938$ 279,765$ 2,222,703$ 2.03 2009 31,265,941 27,314,611 3,951,330 2,002,938 217,283 2,220,221 1.78 2010 33,115,398 28,749,877 4,365,520 1,056,094 150,675 1,206,769 3.62 2011 34,909,200 29,201,088 5,708,112 1,013,830 1,248,612 2,262,442 2.52 2012 38,119,472 30,974,506 7,144,966 1,028,830 1,277,285 2,306,115 3.10 2013 42,406,722 36,406,640 6,000,082 1,943,830 1,508,405 3,452,235 1.74 2014 46,900,016 35,502,812 11,397,204 2,197,667 1,599,347 3,797,014 3.00 2015 49,673,159 38,425,799 11,247,360 2,231,093 1,563,433 3,794,526 2.96 2016 50,385,548 38,614,719 11,770,829 2,326,117 1,523,830 3,849,947 3.06 2017 51,771,171 38,726,814 13,044,357 2,422,369 1,494,706 3,917,075 3.33 Source: City of Auburn, Finance Department (1) Includes water, sewer & storm drainage operating, interest and other revenues. (2) Includes water, sewer & storm drainage operating expenses less depreciation. (3) Includes both parity and non-parity debt. PLEDGED REVENUE BOND COVERAGES Last Ten Fiscal Years City of Auburn, Washington SCHEDULE 16 City of Auburn: 2017 CAFR Statistical Section 170 Item 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 School enrollment (1)14,703 14,589 14,482 14,363 14,596 14,971 15,277 15,663 15,945 16,344 Rate of unemployment (2)5.5%9.5%9.6%8.7%7.5%5.9%5.3%4.8%4.4%4.3% Population (3)67,005 67,485 70,180 70,705 71,240 73,235 74,630 75,545 77,060 78,960 Personal income (thousands of dollars) (4)2,024,087$ 1,989,660$ 1,900,474$ 1,901,540$ 1,871,973$ 1,917,219$ 2,000,606$ 2,033,520$ 2,111,829$ 2,206,142$ Per capita personal income (4)30,208$ 29,483$ 27,080$ 26,894$ 26,277$ 26,179$ 26,807$ 26,918$ 27,405$ 27,940$ Housing units (5) One unit 14,186 14,235 14,641 14,775 14,957 15,393 15,804 16,042 16,167 16,373 Two or more 10,375 10,391 10,560 10,592 10,631 10,841 10,841 10,847 10,854 11,110 Mobile home or special 2,761 2,782 2,633 2,635 2,618 2,630 2,631 2,637 2,630 2,675 Total housing units 27,322 27,408 27,834 28,002 28,206 28,864 29,276 29,526 29,651 30,158 Sources: (1) Auburn School District No. 408 (2) Bureau of Labor Statistics (BLS) (3) WA State Office of Financial Management (4) US Census Bureau (5) WA State Office of Financial Management City of Auburn, Washington SCHEDULE 17 POPULATION, INCOME AND HOUSING TRENDS Last Ten Fiscal Years City of Auburn: 2017 CAFR Statistical Section 171 Percentage Percentage of Total City of Total City Employer Product/service Employees Rank Employment Employees Rank Employment The Boeing Company Aerospace 5,750 1 27.2%5,000 1 32.8% Muckleshoot Tribal Enterprises Gaming 3,306 2 15.6%2,200 2 14.4% The Outlet Collection*Retail 3,150 3 14.9%1,700 4 11.1% Auburn School District Education 2,886 4 13.6%1,800 3 11.8% Multicare Auburn Medical Center**Hospital 1,638 5 7.7%805 7 5.3% Green River Community College Education 1,202 6 5.7%1,067 5 7.0% Emerald Downs Racetrack Horse racing 1,196 7 5.6%678 8 4.4% Safeway Distribution Center Distribution Center 847 8 4.0%900 6 5.9% Zones, Inc.Technology reseller 645 9 3.0%500 10 3.3% Skills, Inc Manufacturing 550 10 2.6%0.0% Social Security Administration Gov't / public offices 0.0%600 9 3.9% TOTALS 21,170 100.0%15,250 100.0% Sources: WA Employment Security Department 2017 - City of Auburn, Economic Development 2008 - City of Auburn * Previously The Super Mall **Previously Auburn Regional Medical Center. 2017 2008 City of Auburn, Washington SCHEDULE 18 MAJOR EMPLOYERS Current Year and Nine Years Ago 0% 20% 40% 60% 80% 100% 2008 2017 FIGURE 18b: AUBURN EMPLOYMENT BASE PERCENTAGE OF TOP 10 EMPLOYERS COMPARED TO ALL EMPLOYERS Last Ten Fiscal Years Top 10 employers All employers City of Auburn: 2017 CAFR Statistical Section 172 Department 2008 2009 2010(2)2011 2012 2013 2014 2015 2016 2017 Mayor 12 12 10 10 7 7 3 3 3 3 Administration (4)- - - - - - 8 8 10 11 Human Resources 18 9 7 7 8 8 8 8 9 8 Finance 25 25 21 22 22 23 23 22 22 22 Municipal Court (3)21 21 17 19 - - - - - - Legal 16 16 13 13 13 13 14 14 14 15 Community Development (5)34 34 24 24 28 29 25 26 26 26 Police 152 152 131 118 122 125 126 129 131 137 Public Works 63 63 43 43 43 48 49 50 53 54 Parks, Arts and Recreation (6)40 40 35 36 36 36 45 45 47 47 Street 14 14 12 19 19 19 19 19 19 20 Water 20 20 22 22 22 22 24 23 23 23 Sewer 11 11 11 12 11 10 10 10 10 10 Storm Drainage 16 17 16 10 10 10 10 10 10 10 Solid Waste 2 2 2 2 2 2 2 2 2 2 Cemetery 7 7 7 7 7 5 5 5 6 6 Golf Course (6)9 9 8 8 8 8 - - - - Facilities (1)- 10 10 10 9 9 9 10 10 10 Multi-Media (7)- - - - - - 4 4 4 4 Innovation & Technology 18 18 14 14 18 18 15 16 16 17 Equipment Rental 10 11 6 6 7 10 12 12 12 12 TOTAL 488 490 408 401 391 402 411 416 427 437 Source: City of Auburn Finance Department (1)Facilities Division was previously included in the Human Resources Department prior to the creation of a new Internal Service fund in 2009. (2)Due to the economic downturn, the City eliminated 82.5 of the total 490 positions in 2010. (3)In 2012, the City contracted out the Municipal Court to the King County District Court - resulting in a reduction of 19 positions. (4)In 2014 the Administration Department was created and consisted of 8 FTE's who were reorganized from several existing departments such as the Mayors Department, Public Works and Community Development. This department includes Emergency Management, Public Affairs, Economic Development, and Human Services and Community Programs. (5)In 2014 the Planning Department was renamed Community Development. (6)In 2014 the Golf Course fund was reclassified from an Enterprise Fund and included within the General Fund moving 8 of the Golf Course FTE's to the Parks, Arts and Recreation Department. (7)In 2014 the Multi-Media division was reorganized from the Innovation & Technology Fund into it's own Internal Service Fund. The 3.6 FTE's report to the Director of Administration. City of Auburn, Washington SCHEDULE 19 STAFFING LEVELS BY DEPARTMENT Last Ten Fiscal Years City of Auburn: 2017 CAFR Statistical Section 173 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Planning Commercial permits 95 112 18 38 24 32 64 52 79 37 Commercial construction value ($1,000's)22,887$ 58,896$ 8,386$ 10,904$ 13,219$ 28,357$ 35,786$ 36,289$ 74,887$ 48,157$ Residential permits 165 85 184 229 461 464 374 253 242 178 Residential construction value ($1,000's)27,048$ 15,739$ 36,602$ 43,574$ 98,212$ 96,248$ 83,007$ 62,043$ 68,997$ 54,132$ Police Crimes: Arson 24 19 23 29 27 14 32 - - 19 Aggravated Assault 154 163 137 148 110 145 156 186 179 198 Burglary 630 590 725 757 983 651 810 851 727 722 DUI 194 193 192 214 171 138 126 188 158 194 Homicide - 3 3 2 6 5 1 8 6 3 Narcotics 439 440 442 396 383 279 458 511 458 742 Rape 14 13 15 23 23 26 31 31 36 49 Robbery 102 92 79 107 110 109 104 91 98 117 Theft 2,343 2,362 2,533 2,435 2,415 2,583 3,192 2,728 2,235 2,169 Theft - motor vehicle 639 370 569 600 588 678 630 996 1,159 969 Traffic: Non-criminal 6,794 7,788 7,182 5,400 4,922 5,378 6,520 5,489 5,706 11,483 Parking 3,740 4,026 4,648 3,383 1,946 2,052 5,238 3,737 3,822 3,777 Parks and Recreation Athletic teams 416 428 439 429 388 382 358 321 328 306 Recreation activities 2,056 2,335 2,281 3,462 3,833 3,568 3,557 3,511 2,435 3,389 Golf course rounds 54,993 50,572 49,950 45,484 45,704 47,480 47,697 52,718 48,803 47,001 Senior center visits 36,805 41,032 41,350 41,802 40,704 36,991 40,715 38,485 36,636 35,454 Cultural activities 84 90 101 127 146 180 202 204 203 214 Museum audience served 11,921 11,835 12,570 14,119 15,397 14,163 13,968 13,535 14,380 13,570 Cemetery placements 289 232 228 273 259 226 250 237 281 264 Sources: Various city departments City of Auburn, Washington SCHEDULE 20 OPERATING INDICATORS BY DEPARTMENT Last Ten Fiscal Years City of Auburn: 2017 CAFR Statistical Section 174 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General City Total area (square miles)30.0 30.1 30.1 30.2 30.2 30.2 30.2 30.2 30.2 30.2 Public Works Miles of streets 272 276 283 285 249 245 244 254 238 238 Number of streetlights 5,074 5,392 5,523 5,581 6,101 6,110 6,211 6,362 6,552 6,581 Number of traffic signals 83 85 86 89 93 94 94 95 95 95 Utilities Number of services 13,050 13,076 13,372 13,334 13,863 14,106 14,573 14,787 14,872 14,746 Miles of water lines 283 293 297 304 314 315 316 320 321 323 Miles of sanitary sewer lines 205 207 213 213 219 220 220 223 224 225 Miles of storm lines 197 204 226 247 252 263 282 294 319 337 Number of fire hydrants 2,969 2,998 3,044 3,277 3,308 3,329 3,559 3,580 3,577 3,595 Public Safety Number of police stations 2 2 2 2 2 2 2 2 3 3 Parks and Recreation Total park acreage (1)598 602 602 602 630 635 972 977 988.7 986 Number of softball/baseball fields 19 18 18 18 17 17 18 18 18 18 Number of soccer/football fields 3 3 3 3 3 4 4 4 4 4 Number of playgrounds 32 33 35 35 35 36 28 31 31 30 Sources: Various city departments (1) The increase in total park acreage since 2013 is due to property inventory update in anticipation of the Parks Recreation & Open Space Plan update and additional park categories are now being reported. City of Auburn, Washington SCHEDULE 21 CAPITAL ASSET INDICATORS BY DEPARTMENT Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Water Customers by Class Single Family Residential 10,493 10,535 10,564 10,704 11,224 11,476 11,822 11,973 12,054 12,010 Multifamily 961 985 991 991 989 986 1,000 1,003 1,002 1,009 Commercial 1,098 1,083 1,100 1,095 1,098 1,094 1,146 1,190 1,186 1,158 Mfr./Industrial 39 38 38 38 37 37 38 38 37 2 Schools 39 37 37 37 36 37 37 37 38 37 City Accounts 30 27 29 28 26 28 30 30 31 31 Irrigation 383 363 401 434 446 441 493 509 517 492 Total Retail Water Customers 13,043 13,068 13,160 13,327 13,856 14,099 14,566 14,780 14,865 14,739 Wholesale Water Customers 7 8 8 7 7 7 7 7 7 7 Sewer Customers by Class Single Family Residential 10,698 10,711 10,918 11,183 11,522 11,982 12,631 12,890 13,091 13,124 Non-single Family Residential 2,604 2,605 2,612 2,616 2,653 2,659 2,713 2,728 2,725 2,724 Total Sewer Customers 13,302 13,316 13,530 13,799 14,175 14,641 15,344 15,618 15,816 15,848 Storm Customers by Class Single Family Residential 14,374 14,441 14,495 14,846 15,168 15,618 16,013 16,222 16,200 16,566 Non-single Family Residential 1,623 1,650 1,769 1,653 1,661 1,640 1,670 1,679 1,913 1,671 Total Storm Customers 15,997 16,091 16,264 16,499 16,829 17,258 17,683 17,901 18,113 18,237 Sources: City of Auburn - Utility Billing City of Auburn, Washington SCHEDULE 22 NUMBER OF UTILITY CUSTOMERS BY CUSTOMER CLASS Last Ten Fiscal Years