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HomeMy WebLinkAbout2018 CAFR2018 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 CITY OF AUBURN WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year January 1, 2018 through December 31, 2018 ` Prepared by City of Auburn Finance Department Shelley Coleman, Finance Director City of Auburn: 2018 CAFR Table of Contents i COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended December 31, 2018 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 Schedule of Changes in Total Pension Liability and Related Ratios ........................................................106 Schedule of Changes in Total OPEB Liability and Related Ratios ............................................................ 107 City of Auburn: 2018 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: 2018 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: 2018 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 Steve Gross Human Resources / Risk & Property Mgmt. Director Candis Martinson Innovation & Technology Director David Travis Parks, Arts and Recreation Director Daryl Faber Community Development Director Jeff Tate Public Works Director Ingrid Gaub Police Chief William Pierson Administration Director Dana Hinman 2 Citizens City Council Mayor Nancy Backus Director of Human Resources & Risk/Property Management Candis Martinson City Attorney Steve Gross Police Chief William Pierson Director of Innovation and Technology David Travis Director of Administration Dana Hinman Community Development Director Jeff Tate Parks /Art and Recreation Director Daryl Faber Finance Director Shelley Coleman Public Works Director Ingrid Gaub 3 June 20, 2019 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, 2018. 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, 2018. This transmittal letter 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 generally 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 designed 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: 2018 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 2017 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 80,615 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 organizations provide services to other owner/member governments and other non-owner/member governments as well through interlocal agreements. City of Auburn: 2018 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 2018, Auburn was providing 52,300 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 1,700 people, and is currently investing over $25 million 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 315 commercial building permits representing about $72 million in construction investments, including projects such as The Villas and Reserve (597 unit mixed use development), the Auburn Town Center (6-story, 226 unit mixed use building), Legacy Plaza (7-story, 167 unit mixed use development), North Auburn Logistics (245,000 square foot industrial building), Hudson Distribution Center (288,000 square foot industrial building), Dick Scobee Elementary School replacement, Boeing Workforce Readiness Center, Olympic Middle School reconstruction, and several new area hotels as well as an investment of approximately $25 million by MultiCare in power and utilities infrastructure to support the current and future hospital campuses. 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 2018. 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 $18.2 million in 2018. 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, although this declined to $1.7 million in 2018 as it was reduced dollar-for-dollar by voluntary payments for internet sales taxes. 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 $489,000 (2.8%) from 2017. The portion allocated to the General Fund, $15.9 million, constitutes about 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: 2018 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 has – in recent years – utilized 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 2018 and established rates to fund operating and capital needs through 2022. This includes the possible issuance of new revenue bonds in 2019 to support significant new utility construction projects. Utility rates will continue to be reviewed as part of the comprehensive planning process. 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 and street improvements that include 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 1990s. 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: 2018 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 economies 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: 2018 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 2018 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 2018. 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, 2017. This was the thirtieth consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificate 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. Also, in 2017, the City received the Government Finance Officers Association Distinguished Budget Presentation award for its 2017-2018 biennial budget. 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, 2017 P �.' " . ·... . ·· ·· .... ' · .. · .· .. · 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 20, 2019 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, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements 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, 2018, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General and Arterial Street funds 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 2018, the City adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. 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 combining and individual fund financial statements and schedules are presented for the purposes of additional analysis and are 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. Our audit was conducted for the sole purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements as a whole. The Introductory and Statistical Sections are presented for purposes of additional analysis and are 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 20, 2019, 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 reportin g 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: 2018 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 liabilities plus deferred inflows – equals $706.7 million, an increase of $11.5 million or 1.6%. Of this, a total of $583.3 million, or 82.5% 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 $3.3 million of net position is restricted for purposes of endowment and debt service. Of the remaining $120.1 million of net position, $28.6 million is legally restricted, restricted by City policy for specific purposes, or is restricted for use by the City’s utilities, and $91.5 million is unrestricted. • The net increase in government-wide net position during 2018 was $11.5 million. Of this amount, $4.3 million was directly related to the increase in City-owned net investment in capital assets, restricted net position increased by $0.2 million, and unrestricted net position increased by $7.1 million. • Business-type net position increased by $9.9 million to $259.1 million during 2018 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 $70.0 million. Of this amount, $24.6 million, or 35.2%, is unassigned and available to fund ongoing activities. Compared to 2017, total governmental fund balances increased by $0.9 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 $10.4 million. Total long-term liabilities, including bonds and loans, totaled $119.5 million at December 31, 2018. The ending long-term liabilities is a decrease of $3.2 million from 2017 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: 2018 CAFR Management’s Discussion and Analysis 16 Other City Highlights: Parks, Arts and Recreation • Completed a major capital improvement project at Les Gove Park, including a new restroom, large event plaza, trail lighting, and emergency phones with security cameras for enhanced safety. • Added a new synthetic mini soccer pitch at Brannan Park • Installed a new playground at Lakeland Hills Park. The playground was named in memory of Avery Huffman, a little girl with courage, grit, fight, strength and toughness who lost her battle with cancer in 2016. • Received a $500,000 Aquatic Lands Enhancement Account water access grant from the Washington State Recreation Conservation Office to support construction of the 14.74 acre park at 104th Ave along the Green River. • Added two additional pickleball courts to Game Farm Park as well as improvements to the existing sports courts. • Performed a restoration of the windows at the Auburn Arts & Culture Center to historical standards as required by the Landmark designation of the building. Also, began Phase I of the building restoration. Community Development Services • Transitioned from a permit processing system that required paper submittals to a system that accommodated electronic submittal and review. • Processed more than 2,600 permits, representing nearly $100,000,000 in construction investments, and processed approximately 1,000 business licenses, completed 4,000 building inspections, completed more than 1,300 code enforcement cases, and participated in more than 52,000 customer service interactions. • Through the City’s façade improvement program, contributed $120,800 in financial assistant to owners of downtown buildings seeking to make cosmetic improvements to their buildings and/or businesses. • Notable, active projects in review and/or under construction during the year: o The Villas and Reserve (597 unit mixed use complex) o Auburn Town Center (6 story 226 unit mixed use building) o Legacy Plaza (7 story 167 units mixed use building) o North Auburn Logistics (245,000 square foot industrial building) o Hudson Distribution (288,000 square foot industrial building) o Dick Scobee Elementary School replacement o Wyndham Hotel (63 rooms) o Olympic Middle School reconstruction o Boeing Workforce Readiness Center o Tru by Hilton Hotel (90 rooms) o Big Foot Java mixed use building (30 rooms) o Holiday Inn Express Hotel (120 rooms) Engineering Services • Managed street preservation programs that resulted in average pavement condition index (PCI) for City local streets to increase from 77 at the end of 2017 to 78 at the end of 2018 and for City collectors and arterials, the average PCI of 63 was held steady between 2017 and 2018. • Coordinated and provided oversight of WSDOT’s paving of Auburn Way South from SR-18 to M Street SE. • Re-paved 15th St NE/NW and S 277th Street from SR-167 to Auburn Way North. Also re-paved Harvey Road and other roads throughout the City. • Completed construction of the City’s first roundabout in the valley at 21st St NE and I St NE. City of Auburn: 2018 CAFR Management’s Discussion and Analysis 17 • Completed construction of a new traffic signal at the intersection of 37th Street SE and A Street SE and replaced an existing traffic signal at the intersection of Main Street and C Street SW. • Constructed 25 capital projects including 30 lane miles of replaced pavement, 7,000 feet of new water main, 11,500 feet of new storm drain pipe, 400 feet of new sewer main, and 14,000 feet of new or replaced sidewalks. • Completed the required annual reporting for the United States Environmental Protection Agency National Pollutant Discharge Elimination System (NPDES) Phase II permit requirements. Maintenance & Operations Services • Refreshed all striping on public roads and continued to refresh thermoplastic pavement markings and legends as needed (overseen by Engineering and completed through contracting with Pierce and King Counties). • Continued with cross training maintenance staff, enabling a more continuous use of equipment such as closed- circuit television equipment and the jet/vactor truck. • Completed rehabilitation work at the A ST ditch, including installation of 300 feet of drainage pipe. • Completed the final phase of the AMI meter project, giving us the ability to notify customers of potential leaks in their water service well before the next billing cycle. Airport Services • Completed the runway length justification for the Airport Runway Enhancement project and began the design process. • Completed the transition from contract management services to in-house management of the Airport, including the fueling services. • Completed the Competitive Market Assessment and Long Term Rate Study for the Airport. 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 section of the management’s discussion and analysis is intended to introduce and explain the basic financial statements. Government-wide Financial Statements The government-wide financial statements are designed to be corporate-like in that all governmental and business-type activities are consolidated into columns which add to a total for the City. The focus of the Statement of Net 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 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. City of Auburn: 2018 CAFR Management’s Discussion and Analysis 18 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 each function either supports itself or relies on taxes and other general funding sources for support. All activity on this statement is reported on the accrual basis of accounting, requiring that revenues are reported when they are earned and expenses are reported when they are incurred, regardless of when cash is received or disbursed. Governmental activities of the City include general government (executive, finance, legal, human resources, 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 statements later in this report. The City maintains budgetary control over its operating funds through the adoption of a biennial budget. Budgets are adopted at the fund level according to state law. Budgetary comparison statements are presented for the general and arterial street funds as part of the basic financial statements. Other budgetary comparison statements are included following the other government funds’ combining statements. City of Auburn: 2018 CAFR Management’s Discussion and Analysis 19 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 account for goods and services provided to citizens, while internal service funds are used to account for goods and services provided internally to various City departments. Enterprise funds report the same functions presented as business-type activities in the government-wide statements, but in greater detail. The City’s enterprise fund statements provide information on the City’s four utilities (water, sanitary sewer, storm water, and solid waste) as well as the City-owned airport and cemetery. Internal service funds are an essential accounting tool used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its fleet of vehicles, 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”. 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 2017 to 2018 show an increase in total net position of $11.5 million or 1.7%. Following is a condensed version of the government-wide statement of net position with a comparison to 2017: City of Auburn: 2018 CAFR Management’s Discussion and Analysis 20 The largest component of the City’s net position, $583.3 million, or 82.5% 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 current and future City obligations. The City elected the GASB 34 reporting option to include all general infrastructure of the City acquired or substantially renovated since 1980. The largest component of unrestricted net position, $49.1 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. The second largest component of unrestricted net position, $42.4 million, may be used for functions such as public safety employee salaries and supplies, parks and road maintenance, and other general governmental services. Restricted governmental fund net position is $30.0 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 $4.3 million. Changes in Net Position The change in net position represents the increase or decrease in City net position resulting from its various activities. Following is a condensed version of the City’s changes in net position. The table shows the revenues, expenses and related changes in net position for both governmental-type and business-type activities: As of 12/31/18 As of 12/31/17 As of 12/31/18 As of 12/31/17 As of 12/31/18 As of 12/31/17 Current and other assets 136,134,446$ 130,119,043$ 64,189,589$ 58,080,763$ 200,324,035$ 188,199,806$ Capital assets, net of accumulated depreciation 405,025,365 404,922,880 237,685,694 237,873,905 642,711,059 642,796,785 Total assets 541,159,811 535,041,923 301,875,283 295,954,668 843,035,094 830,996,591 Deferred Outflows of Resources 2,221,501 2,241,938 805,391 928,489 3,026,892 3,170,427 Long-term liabilities 78,232,970 76,954,091 34,019,802 38,315,101 112,252,772 115,269,192 Other liabilities 10,854,971 10,713,381 7,957,619 8,478,481 18,812,590 19,191,862 Total liabilities 89,087,941 87,667,472 41,977,421 46,793,582 131,065,362 134,461,054 Deferred Inflows of Resources 6,705,141 3,589,485 1,553,327 927,497 8,258,468 4,516,982 Net position Net investment in capital assets 375,208,981 373,368,906 208,136,620 205,677,614 583,345,601 579,046,520 Restricted for: Capital Projects 27,418,887 27,407,299 - - 27,418,887 27,407,299 Nonexpendable Permanent Endowment 1,775,453 1,717,134 - - 1,775,453 1,717,134 Debt Service 5,386 9,686 1,497,309 1,437,567 1,502,695 1,447,253 Tourist Promotion 197,675 200,371 - - 197,675 200,371 Drug Investigation & Enforce 448,351 381,136 - - 448,351 381,136 Comm Dev Block Grant 42,904 44,904 - - 42,904 44,904 Central Business Distr Dev 113,295 93,710 - - 113,295 93,710 Rate Stabilization - - 427,257 419,403 427,257 419,403 Unrestricted 42,377,297 42,803,759 49,088,740 41,627,494 91,466,037 84,431,253 Total net position 447,588,228$ 446,026,905 259,149,926$ 249,162,078$ 706,738,154$ 695,188,983$ Governmental Activities Business-type Activities Total STATEMENT OF NET POSITION Comparative Analysis of 2018 and 2017 City of Auburn: 2018 CAFR Management’s Discussion and Analysis 21 Governmental activities contributed $11.0 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. General tax revenues decreased by 0.1% to $67.5 million between 2017 and 2018, compared to an increase of 6.8% between 2016 and 2017: • Property tax revenue increased $0.6 million or 2.8%. • Sales tax collections decreased $0.3 million or 1.5%, reflecting a slowing in the economy. • Utility and admission tax revenue decreased by $0.5 million or 5.3%. 2018 2017 2018 2017 2018 2017 Revenues: Program revenues Charges for services 11,050,781$ 11,790,334$ 69,723,671$ 68,220,200$ 80,774,452$ 80,010,534$ Operating grants and contributions 2,831,794 2,257,646 106,286 106,286 2,938,080 2,363,932 Capital grants and contributions 9,065,857 13,229,502 4,566,838 4,363,568 13,632,695 17,593,071 General revenues Property taxes 21,546,734 20,967,953 - - 21,546,734 20,967,953 Sales taxes 21,996,115 22,333,454 - - 21,996,115 22,333,454 Interfund utility taxes 4,552,505 4,540,265 - - 4,552,505 4,540,265 Admission & utility taxes 9,841,620 10,391,462 - - 9,841,620 10,391,462 Excise taxes 4,393,134 4,141,146 - - 4,393,134 4,141,146 Other taxes 5,213,217 5,253,964 - - 5,213,217 5,253,964 Investment earnings 1,657,481 787,786 989,564 479,132 2,647,045 1,266,918 Miscellaneous revenue 428,582 204,306 602,528 444,110 1,031,110 648,415 Total revenues 92,577,820 95,897,818 75,988,887 73,613,296 168,566,707 169,511,114 Expenses: General government 10,191,329 10,384,647 - - 10,191,329 10,384,647 Public safety 30,337,791 32,746,406 - - 30,337,791 32,746,406 Transportation 17,620,176 17,904,352 - - 17,620,176 17,904,352 Physical environment 3,794,576 3,217,885 - - 3,794,576 3,217,885 Culture and recreation 13,665,612 13,539,098 - - 13,665,612 13,539,098 Economic environment 4,140,104 3,859,863 - - 4,140,104 3,859,863 Health and human services 787,535 674,270 - - 787,535 674,270 Interest on long-term debt 1,502,236 1,555,803 - - 1,502,236 1,555,803 Water - - 12,499,974 12,408,008 12,499,974 12,408,008 Sanitary sewer - - 26,213,221 25,360,718 26,213,221 25,360,718 Storm drainage - - 9,374,373 8,979,969 9,374,373 8,979,969 Solid waste - - 15,311,654 14,539,703 15,311,654 14,539,703 Other business-type activities - - 2,186,842 2,106,557 2,186,842 2,106,557 Total expenses 82,039,359 83,882,324 65,586,064 63,394,955 147,625,423 147,277,279 Increase in net position before transfers 10,538,461 12,015,495 10,402,823 10,218,341 20,941,284 22,233,836 Transfers 414,973 454,436 (414,975) (454,436) (2) - Change in net position 10,953,434 12,469,931 9,987,848 9,763,905 20,941,282 22,233,836 Net Position, January 1, as Previously Reported 446,024,169 446,026,905 249,162,078 249,162,078 695,186,247 695,188,983 Change in Accounting Principle (9,389,375) (3,218,004) - - (9,389,375) (3,218,004) Net Position, January 1, as Restated 436,634,794 424,005,769 249,162,078 225,343,784 685,796,872 649,349,553 Net position, December 31 447,588,227$ 455,278,831$ 259,149,926$ 258,925,983$ 706,738,153$ 714,204,814$ CHANGES IN NET POSITION Comparative Analysis of 2018 and 2017 Governmental Activities Business-type Activities Total City of Auburn: 2018 CAFR Management’s Discussion and Analysis 22 • Excise tax revenue increased by $0.3 million or 6.1%. • Investment earnings increased by $0.9 million in governmental activities and $0.5 million in business-type activities for a government-wide increase of $1.4 million. Government-wide miscellaneous revenue increased by $0.4 million to $1.0 million. Government-wide expenses increased by approximately $0.3 million or 0.2% 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 10% Operating Grants & Contributions 3% Property Taxes 23% Sales Taxes 24% Interfund Utility Taxes 5% Utility & Admission Taxes 11% Other Taxes10% Other Revenue 2% City of Auburn: 2018 CAFR Management’s Discussion and Analysis 23 Program Expenses and Revenues – Governmental Activities Business-type net position totaled $259.1 million, an increase of 4.0%. Key components of this increase include: • Business-type revenues increased $2.4 million to $76.0 million due to increases in charges for services, capital grants and contributions, interest earnings, and miscellaneous revenues. • Income (loss) before capital contributions and transfers amounted to: Water fund: $ 3,296,610 Sanitary sewer fund: 793,981 Storm fund: 928,487 Solid waste fund: 578,897 Non-major funds: 241,344 $ 5,839,319 • Net transfers totaled ($414,975). $0 $5 $10 $15 $20 $25 $30 MillionsProgram Revenues Expenses City of Auburn: 2018 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 Water32.5% Sanitary Sewer34.4% Storm Drainage26.6% Solid Waste 2.1% Airport3.8%Cemetery 0.7% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Water Sanitary Sewer Storm Drainage Solid WasteMillionsSpendable Net Position Total Net Position City of Auburn: 2018 CAFR Management’s Discussion and Analysis 25 Comparison of Total Net Position to Spendable Net Position 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 $2 $4 $6 $8 $10 $12 Airport CemeteryMillionsSpendable Net Position Total Net Position $0 $2 $3 $5 $6 $8 $9 $11 $12 $14 $15 $17 $18 $20 $21 $23 $24 $26 $27 $29 Water Sanitary Sewer Storm Drainage Solid Waste Minor Business- Type ActivitiesMillions Revenues Expenses City of Auburn: 2018 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, 2018, the City’s governmental funds had combined fund balances of $70.0 million, an increase of $0.9 million or 1.3% over the previous year. This change is primarily due to an increase in fund balance in the capital improvement fund net of reductions in fund balance for the City’s General Fund and the Arterial Street Fund. The following table shows the changes in fund balance between 2017 and 2018. Changes in Fund Balance - By Fund Charges for Services 90.6% Capital Contributions 6.0% Investment Earnings 1.3% Business-type Miscellaneous Income 2.1% Fund 2018 2017 Difference General fund 34,041,633$ 34,760,782$ (719,149)$ Arterial street fund 2,062,371 2,584,136 (521,765) Capital improvement fund 13,325,664 11,271,845 2,053,819 Mitigation fund 11,881,782 11,451,755 430,027 Cemetery endowment fund 1,896,829 1,811,509 85,320 All other government funds 6,742,006 7,179,614 (437,608) Total 69,950,285$ 69,059,641$ 890,644$ City of Auburn: 2018 CAFR Management’s Discussion and Analysis 27 Of the government funds’ total fund balances, $24.6 million is unassigned. Nonspendable, restricted, committed and assigned fund balances total $45.3 million. Of this $45.3 million, $15.4 million is earmarked for capital projects, $18.7 million is in special revenue funds that are earmarked for specific purposes and $1.8 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 2018, the general fund had a fund balance of $34.0 million, $9.4 million of which is assigned, and $24.6 million is unassigned. Other funds that had significant fund balances include: • $13.3 million in the capital improvement projects fund; used for various governmental capital asset projects. • $20.5 million in all other government funds; used primarily for local street improvements, local revitalization funding and maintenance of cemetery. The general fund balance of $34.0 million decreased by $0.7 million from the prior year. Revenues increased due to growth in property taxes, charges for services, intergovernmental revenues, and miscellaneous revenues. At the same time, expenses increased over 2017 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 General Fund49% Arterial Street Fund 3% CapitalImprovement Fund19% Mitigation Fund17% CemeteryEndowment Fund3%All OtherGovernment Funds9% City of Auburn: 2018 CAFR Management’s Discussion and Analysis 28 General fund revenue increased by $1.4 million, sources of which are shown in the chart below. Property taxes increased by $0.6 million while sales taxes were essentially unchanged from 2017. Utility and other taxes decreased by a net of $0.4 million. Licenses and Permits decreased slightly due to reductions in building permit fees and plumbing permits. Charges for Services increased by $0.4 million, Fines & Forfeitures essentially remained unchanged, Intergovernmental Revenues increased by $0.3 million and Miscellaneous Revenues increased by $0.5 million largely due to interest earnings. 2018 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. City of Auburn: 2018 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 2018 budget included: • Budgeted General Fund expenditures and transfers out increased from $73.2 million to $77.7 million. Significant changes include expenditures associated with new grants, homeless sheltering, new staff additions, salary and benefit adjustments, and a one-time transfer to the cumulative reserve fund. Reasons for the variances in the general fund between the final budget and actual results include: • Actual General Fund revenues totaled $69.9 million, or 3.3% above budget. Significant areas of favorable variance include sales and use taxes, which exceeded budget by $953,000; revenues for law enforcement services, which exceeded budget by $379,000; criminal justice sales taxes, which exceeded budget by $382,000; investment income, which exceeded budget by $367,000; marijuana sales taxes, which exceeded budget by $172,000; and payments for emergency services to the Muckleshoot casino, which were $427,000 above budget. Areas of unfavorable variance include building permits, which were $733,000 below budget; Streamlined Sales Tax mitigation payments, which were $189,000 below budget; telephone B&O taxes, which were $203,000 under budget; and plan check fees, which were $320,000 below budget. • Actual General Fund expenditures totaled $72.4 million and were under budget by $6.8 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 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, 2018 totaled $642.7 million (net of accumulated depreciation), a decrease of $0.1 million from 2017. 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 $3.7 million in utility infrastructure assets and $2.9 million in governmental infrastructure assets. • $6.4 million was spent by proprietary funds on construction projects during the year. • $13.0 million was spent by governmental funds on construction projects during the year. Some of the larger projects in the governmental funds include: $2.5 million on 15th St NE/NW Preservation ( SR-167 to 8th St SE) project $2.1 million on Local Street Pavement Reconstruction project $1.0 million on 22nd St NE & I St NE Intersection project $0.9 million on S 277th Street Preservation project $0.7 million on Les Gove Park Improvements $0.7 million on AWS Corridor Safety Improvements - Muckleshoot Plaza City of Auburn: 2018 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 $73.9 million. Of this amount, $22.2 million is due to other governments, $26.2 million is general obligation bonds, and $25.5 million is revenue bonds for the water, sewer and storm utilities. The City currently maintains a rating of Aa3 with Moody’s and a rating of AA+ with Standard & Poor’s for its general obligation debt. The following schedule summarizes the City’s bonded debt: Below is a summary of additional, non-bonded long-term debt of the City: Washington State law limits the amount of general obligation debt a governmental entity may issue to 7.5% of its total assessed value. Of the 7.5% limit, 2.5% is for general purposes, 2.5% is for open spaces/parks, and 2.5% is for utilities. Non- voted (limited tax) general obligation indebtedness is limited to 1.5% of assessed valuation. The combination of unlimited tax and limited tax general obligation debt for all purposes cannot exceed 7.5% of assessed valuation. Additional information can be found in note 9 and in the statistical section of this report. Summary of Capital Assets (net of depreciation) As of 12/31/18 As of 12/31/2017 As of 12/31/18 As of 12/31/2017 As of 12/31/18 As of 12/31/2017 Land 108,890,255$ 108,890,255$ 12,533,022$ 12,526,187$ 121,423,277$ 121,416,442$ Building 52,263,935 53,614,550 1,913,127 2,025,151 54,177,062 55,639,701 Site improvements 7,598,552 7,490,415 214,830,090 207,306,225 222,428,642 214,796,640 Equipment 8,909,038 8,652,792 282,411 293,545 9,191,449 8,946,337 Intangibles (116,596) 37,967 5,701,772 5,449,186 5,585,176 5,487,153 Infrastructure 218,495,563 216,159,542 - - 218,495,563 216,159,542 Construction in progress 8,984,615 10,077,359 2,425,272 10,273,608 11,409,887 20,350,967 405,025,362$ 404,922,880$ 237,685,694$ 237,873,902$ 642,711,056$ 642,796,782$ Governmental Activities Business-type Activities Total Summary of Bonded Debt Governmental Activities Business-type Activities Total General obligation bonds 26,000,051$ 186,420$ 26,186,471$ Revenue bonds - 25,475,000 25,475,000 Due to other governments 22,202,200$ - 22,202,200 48,202,251$ 25,661,420$ 73,863,671$ Other Long-Term Debt Public Works Trust Fund loans 9,360,698$ Capital Leases 282,461 9,643,159$ City of Auburn: 2018 CAFR Management’s Discussion and Analysis 31 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 8.6% in 2018, and property tax receipts grew by 2.8%. Retail sales remained flat at 2017 levels ($19.4 million), and the rate of unemployment in the County and City remained low. However, building permit revenues decreased by nearly 23% reflecting reduced construction activity relative to 2017. 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: 2018 CAFR Management’s Discussion and Analysis 32 City of Auburn: 2018 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: 2018 CAFR Basic Financial Statements 34 City of Auburn: 2018 CAFR Basic Financial Statements 35 Governmental Business-Type Activities Activities Total ASSETS: Cash and Cash Equivalents (Note 3)45,309,574$ 41,001,089$ 86,310,663$ Investments (Note 3)16,023,693 6,785,884 22,809,577 Receivables Taxes 294,319 - 294,319 Customer Accounts 264,293 8,237,476 8,501,769 Other Receivables 2,641,450 33,957 2,675,407 Special Assessments 4,950 - 4,950 Due From Other Governmental Units (Note 6)2,926,058 218,760 3,144,818 Internal Balances (477,713) 477,713 - Materials and Supplies Inventory 275,385 204,066 479,451 Restricted Assets: Temporarily Restricted: Cash and Cash Equivalents (Note 3)22,827,138 6,607,244 29,434,382 Due From Other Governmental Units (Note 6)1,446,227 - 1,446,227 Permanently Restricted: Cash and Cash Equivalents (Note 3)1,775,453 - 1,775,453 Prepaids 437,418 - 437,418 Long-Term Contracts and Notes 6,901 623,400 630,301 Net Pension Asset (Note 10)10,038,834 - 10,038,834 Investment in Joint Ventures (Note 15)32,340,466 - 32,340,466 Depreciable Capital Assets (Net of Accumulated Depreciation) (Note 7)287,150,492 217,025,628 504,176,120 Non-Depreciable Capital Assets (Note 7)117,874,870 20,660,066 138,534,936 Total Assets 541,159,808 301,875,283 843,035,091 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflows from Bond Refunding - 10,918 10,918 Deferred Outflows related to Pensions 2,221,501 794,473 3,015,974 Total Deferred Outflow of Resources 2,221,501 805,391 3,026,892 LIABILITIES: Accounts Payable 6,338,251 3,136,870 9,475,121 Other Liabilities Payable 402,079 - 402,079 Payable From Restricted Assets: Accrued Interest - 1,425,591 1,425,591 Deposits - 230,599 230,599 Unearned Revenue 6,901 - 6,901 Bonds and Other Debt Payable: Due Within One Year (Note 9)3,368,390 3,164,559 6,532,949 Due in More Than One Year (Note 9)29,026,320 29,986,716 59,013,036 Due to Other Governmental Units: Due Within One Year (Note 9)739,350 - 739,350 Due in More Than One Year (Note 9)21,462,850 - 21,462,850 Net Penion Liability (Note 10)8,541,631 4,033,086 12,574,717 Firemen's Pension Liability (Note 10)2,973,304 - 2,973,304 Net OPEB Liability (Note 11)16,228,865 - 16,228,865 Total Liabilities 89,087,941 41,977,421 131,065,362 DEFERRED INFLOWS OF RESOURCES: Deferred Inflows related to Pensions 6,705,141 1,553,327 8,258,468 Total Deferred Inflows of Resources 6,705,141 1,553,327 8,258,468 NET POSITION Net Investment in Capital Assets 375,208,981 208,136,620 583,345,601 Restricted: Capital Projects 27,418,887 - 27,418,887 Nonexpendable Permanent Endowment 1,775,453 - 1,775,453 Debt Service 5,386 1,497,309 1,502,695 Tourist Promotion 197,675 - 197,675 Drug Investigation and Enforcement 448,351 - 448,351 Community Development Block Grant Program 42,904 - 42,904 Central Business District Development 113,295 - 113,295 Rate Stabilization - 427,257 427,257 Unrestricted 42,377,297 49,088,740 91,466,037 Total Net Position 447,588,227$ 259,149,926$ 706,738,153$ 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, 2018 City of Auburn: 2018 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 10,191,329$ 1,462,867$ 248,595$ 360,399$ Public Safety 30,337,791 2,821,516 2,257,741 10,760 Transportation 17,620,176 886,760 467 6,894,288 Physical Environment 3,794,576 611,342 9,645 258,405 Culture and Recreation 13,665,612 3,355,206 260,586 953,816 Economic Environment 4,140,104 1,913,090 51,742 50,250 Health and Human Resources 787,535 - 3,018 537,939 Interest on Long-Term Debt 1,502,236 - - - 82,039,359 11,050,781 2,831,794 9,065,857 Business-Type Activities Water 12,499,974 15,294,085 - 1,271,234 Sanitary Sewer 26,213,221 26,582,233 - 2,299,751 Storm Drainage 9,374,373 9,809,840 - 995,853 Solid Waste 15,311,654 15,729,897 106,286 - Nonmajor Business-Type Activities 2,186,842 2,307,616 - - 65,586,064 69,723,671 106,286 4,566,838 Total Primary Government 147,625,423$ 80,774,452$ 2,938,080$ 13,632,695$ 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, 2018 Page 1 of 2 City of Auburn: 2018 CAFR Basic Financial Statements 37 Governmental Business-Type Activities Activity Total (8,119,468)$ -$ (8,119,468)$ (25,247,774) - (25,247,774) (9,838,661) - (9,838,661) (2,915,184) - (2,915,184) (9,096,004) - (9,096,004) (2,125,022) - (2,125,022) (246,578) - (246,578) (1,502,236) - (1,502,236) (59,090,927) - (59,090,927) - 4,065,345 4,065,345 - 2,668,763 2,668,763 - 1,431,320 1,431,320 - 524,529 524,529 - 120,774 120,774 - 8,810,731 8,810,731 (59,090,927)$ 8,810,731$ (50,280,196)$ 21,546,734$ -$ 21,546,734$ 21,996,115 - 21,996,115 4,552,505 - 4,552,505 9,841,620 - 9,841,620 4,393,134 - 4,393,134 5,213,217 - 5,213,217 1,657,481 989,564 2,647,045 288,518 599,428 887,946 81,743 3,100 84,843 58,319 - 58,319 414,975 (414,975) - 70,044,361 1,177,117 71,221,478 10,953,434 9,987,848 20,941,282 446,024,169 249,162,078 695,186,247 (9,389,375) - (9,389,375) 436,634,794 249,162,078 685,796,872 447,588,227$ 259,149,926$ 706,738,153$ Changes in Net Position Net (Expense) Revenue and Page 2 of 2 City of Auburn: 2018 CAFR Basic Financial Statements 38 City of Auburn: 2018 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: 2018 CAFR Basic Financial Statements 40 Other Total General Arterial Capital Governmental Governmental Fund Street Improvement Funds Funds ASSETS: Cash and Cash Equivalents 16,402,329$ 1,579,289$ 13,552,771$ 20,472,340$ 52,006,729$ Investments (Note 3)16,023,693 - - - 16,023,693 Receivables: Taxes 294,319 - - - 294,319 Customer Accounts 179,593 15,991 - - 195,584 Other Receivables 2,248,000 - - 337,152 2,585,152 Special Assessments - - - 4,950 4,950 Interfund Receivable (Note 5)- - 53,210 - 53,210 Inventories 38,179 - - - 38,179 Long-Term Notes and Contracts - - 6,901 - 6,901 Due From Other Governmental Units (Note 6)2,805,564 574,215 31,759 840,253 4,251,791 Total Assets 37,991,677 2,169,495 13,644,641 21,654,695 75,460,508 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES: Liabilities: Current Payables 2,637,034 107,124 312,076 1,129,128 4,185,362 Customer Deposits 274,712 - - - 274,712 Other Liabilities Payable 426 - - - 426 Unearned Revenue - - 6,901 - 6,901 Total Liabilities 2,912,172 107,124 318,977 1,129,128 4,467,401 Deferred Inflow of Resources: Unavailable Revenue-Special Assessments - - - 4,950 4,950 Unavailable Revenue-Other 1,037,872 - - - 1,037,872 Total Deferred Inflow of Resources 1,037,872 - - 4,950 1,042,822 Fund Balances: (Note 1) Nonspendable 38,179 - - - 38,179 Nonspendable Permanent Endowment - - - 1,775,453 1,775,453 Restricted - 2,062,371 11,350,312 14,813,815 28,226,498 Committed - - - 3,079,656 3,079,656 Assigned 9,375,470 - 1,975,352 851,693 12,202,515 Unassigned 24,627,984 - - - 24,627,984 Total Fund Balances:34,041,633 2,062,371 13,325,664 20,520,617 69,950,285 Total Liabilities, Deferred Inflows and Fund Balances 37,991,677$ 2,169,495$ 13,644,641$ 21,654,695$ 75,460,508$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, Washington BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2018 City of Auburn: 2018 CAFR Basic Financial Statements 41 Total governmental fund balances as reported on this statement 69,950,285$ 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 396,435,639 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 10,138,266 Prepaids 437,418 Interest receivable on investments 56,298 Net pension asset 7,065,530 17,697,512 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 1,037,872 Unavailabe revenue reported for special assessments 4,950 1,042,822 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 22,228,723 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 (29,708,698) Premium on Bonds Payable (39,202) Deferred amount on bond refunding 0 Deferred amounts related to pensions (4,178,983) Interest payable (126,941) Net pension liability (7,246,339) Net other postemployment obligations (16,228,865) Compensated absences payable (2,237,724) (59,766,752) Net position of government activities as reported on the statement of net position 447,588,227$ 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, 2018 City of Auburn, Washington City of Auburn: 2018 CAFR Basic Financial Statements 42 Other Total General Arterial Capital Governmental Governmental Fund Street Improvement Funds Funds REVENUES: Taxes: Property 21,422,752$ -$ -$ 139,172$ 21,561,924$ Retail Sales & Use 19,435,888 - - 2,560,227 21,996,115 Interfund Utility 3,902,147 - - 650,358 4,552,505 Utility 8,459,526 - - 1,382,094 9,841,620 Excise 628,432 - 3,636,894 127,808 4,393,134 Other - - - 85,048 85,048 Licenses and Permits 1,853,554 - - - 1,853,554 Intergovernmental 6,625,685 2,481,864 119,365 3,007,315 12,234,229 Charges for Services 4,797,036 545,707 - 1,128,760 6,471,503 Fines and Forfeitures 920,187 - - - 920,187 Special Assessments - - - 2,210 2,210 Investment Earnings 635,693 32,750 251,126 389,319 1,308,888 Miscellaneous 1,267,712 - 19,442 313,125 1,600,279 Total Revenues 69,948,612 3,060,321 4,026,827 9,785,436 86,821,196 EXPENDITURES: Current: General Government 9,804,631 - - - 9,804,631 Security of Persons and Property 33,963,331 - - 263,251 34,226,582 Physical Environment 4,128,266 - - - 4,128,266 Transportation 3,768,932 4,031,737 - 7,712,037 15,512,706 Economic Environment 3,213,183 - - 1,101,465 4,314,648 Health and Human Services 787,535 - - - 787,535 Culture and Recreation 12,450,884 - - - 12,450,884 Debt Service: Principal 61,269 197,376 - 1,418,132 1,676,777 Interest and Other Costs 18,070 11,441 - 1,507,993 1,537,504 Capital Outlay 48,216 - 853,079 1,244,699 2,145,994 Total Expenditures 68,244,317 4,240,554 853,079 13,247,577 86,585,527 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,704,295 (1,180,233) 3,173,748 (3,462,141) 235,669 OTHER FINANCING SOURCES (USES): Insurance Recoveries 165,210 - 25,873 97,435 288,518 Transfers In (Note 5)1,609,896 684,494 1,539,189 4,371,738 8,205,317 Transfers Out (Note 5)(4,198,550) (26,026) (2,684,991) (929,293) (7,838,860) Total Other Financing Sources and Uses (2,423,444) 658,468 (1,119,929) 3,539,880 654,975 Net Change in Fund Balances (719,149) (521,765) 2,053,819 77,739 890,644 Fund Balances - January 1, as Previously Reported 34,760,782 2,584,136 11,271,845 20,442,878 69,059,641 Fund Balances - Ending 34,041,633$ 2,062,371$ 13,325,664$ 20,520,617$ 69,950,285$ 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, 2018 City of Auburn: 2018 CAFR Basic Financial Statements 43 Net change in fund balances per the Statement of Revenues, Expenditures and Changes in Fund Balance 890,644$ 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 ($13,236,340) exceeded depreciation ($16,296,067) in the current period.(3,059,727) Certain Capital and Joint Venture activities do not use or provide current financial resources but increase net position.1,700,382 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds: Property taxes (15,190) Special assessments (2,333) Other unavailable revenue (19,410) Amortization of bond premium 29,138 Investment interest receivable 52,174 44,379 Developer contributions and annexation of infrastructure assets are reported as revenue in the statement of activities, but do not provide current financial resources and are not reported as fund revenue.2,886,340 Repayment of the principal of long-term debt consumes the current financial resources of governmental funds but has no effect on the net position. 1,670,205 Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet maintenance, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities.2,172,606 Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Amortization of prepaids (109,355) Change in accrued interest payable 5,456 Change in net pension obligation or asset 3,573,593 Change in net other postemployment benefits 1,243,495 Change in compensated absences payable (64,584) 4,648,605 Change in net position on the Statement of Activities 10,953,434$ 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, 2018 City of Auburn: 2018 CAFR Basic Financial Statements 44 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Property 20,781,000$ 21,281,000$ 21,422,752$ 141,752$ Retail Sales & Use 18,482,650 18,482,650 19,435,888 953,238 Interfund Utility 3,820,100 3,991,000 3,902,147 (88,853) Utility 8,362,500 8,362,500 8,459,526 97,026 Excise 343,180 343,180 628,432 285,252 Licenses and Permits 2,419,950 2,419,950 1,853,554 (566,396) Intergovernmental 5,859,350 6,269,050 6,545,887 276,837 Charges for Services 4,056,680 4,307,180 4,797,036 489,856 Fines and Forfeitures 885,300 885,300 920,187 34,887 Investment Earnings 68,000 68,000 434,605 366,605 Miscellaneous 903,800 1,042,000 1,267,712 225,712 Total Revenues 65,982,510 67,451,810 69,667,726 2,215,916 EXPENDITURES: Current: General Government 12,046,874 11,705,212 9,804,631 1,900,581 Security of Persons and Property 33,743,226 35,360,976 33,756,696 1,604,280 Physical Environment 4,279,049 4,526,549 4,128,266 398,283 Transportation 3,863,742 4,039,204 3,768,932 270,272 Economic Environment 3,594,282 4,208,332 3,213,183 995,149 Health and Human Services 641,648 1,008,348 787,535 220,813 Culture and Recreation 12,508,702 12,756,002 12,450,884 305,118 Debt Service 77,699 77,699 79,339 (1,640) Capital Outlay 319,618 38,918 48,216 (9,298) Total Expenditures 71,074,840 73,721,240 68,037,682 5,683,558 Excess (Deficiency) of Revenues Over (Under) Expenditures (5,092,330) (6,269,430) 1,630,044 7,899,474 OTHER FINANCING SOURCES (USES): Insurance Recoveries 25,000 105,000 165,210 60,210 Transfers In (Note 5)84,300 144,300 109,896 (34,404) Transfers Out (Note 5)(1,785,204) (3,976,504) (2,898,550) 1,077,954 Total Other Financing Sources and Uses (1,675,904) (3,727,204) (2,623,444) 1,103,760 Net Change in Fund Balances (6,768,234) (9,996,634) (993,400) 9,003,234 Fund Balances - Beginning 12,623,309 22,643,676 22,643,676 - Fund Balances - Ending 5,855,075$ 12,647,042$ 21,650,276$ 9,003,234$ 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 10,158,066 The Fire, Relief & Pension Fund is combined with the General Fund for purposes of GASB Statement 73 2,233,291 Fund Balance - Ending (GAAP)34,041,633$ The notes to the basic financial statements are an integral part of this statement. Budget Amounts For the Year Ended December 31, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND City of Auburn: 2018 CAFR Basic Financial Statements 45 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Intergovernmental $4,995,000 $3,009,100 $2,481,864 ($527,236) Charges for Services - 466,200 545,707 79,507 Investment Earnings 2,600 2,600 32,750 30,150 Miscellaneous 178,000 - - - Total Revenues 5,175,600 3,477,900 3,060,321 (417,579) EXPENDITURES: Current: Transportation 6,430,859 6,443,359 4,031,737 2,411,622 Debt Service Principal 197,376 197,376 197,376 - Interest and Other Costs 11,442 11,442 11,441 1 Total Expenditures 6,639,677 6,652,177 4,240,554 2,411,623 Excess (Deficiency) of Revenues Over (Under Expenditures (1,464,077) (3,174,277) (1,180,233) 1,994,044 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)1,039,817 1,833,417 684,494 (1,148,923) Transfers Out (Note 5)(3,615) (95,615) (26,026) 69,589 Total Other Financing Sources and Uses 1,036,202 1,737,802 658,468 (1,079,334) Net Change in Fund Balances (427,875) (1,436,475) (521,765) 914,710 Fund Balances - Beginning 1,376,814 2,584,136 2,584,136 - Fund Balances - Ending 948,939$ 1,147,661$ 2,062,371$ 914,710$ The notes to the basic financial statements are an integral part of this statement. Budget Amounts For the Year Ended December 31, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL ARTERIAL STREET FUND City of Auburn: 2018 CAFR Basic Financial Statements 46 City of Auburn: 2018 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: 2018 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 7,294,288$ 15,768,440$ 10,644,121$ 5,308,275$ 1,985,965$ 41,001,089$ 17,905,436$ Investments - 2,004,660 4,781,224 - - 6,785,884 - Restricted Cash: Bond Payments 1,687,994 535,243 803,251 - - 3,026,488 - Customer Deposits 31,541 95,300 3,422 - 100,336 230,599 - Other 1,630,314 516,173 1,203,670 - - 3,350,157 - Customer Accounts 1,837,533 3,516,161 1,105,972 1,777,380 430 8,237,476 68,709 Other Receivables - 19,200 14,757 - - 33,957 - Due From Other Governmental Units 14,338 - 103,343 49,317 51,762 218,760 120,494 Inventories 183,252 8,316 4,795 - 7,703 204,066 237,206 Total Current Assets 12,679,260 22,463,493 18,664,555 7,134,972 2,146,196 63,088,476 18,331,845 Noncurrent Assets Long-Term Contracts and Notes - 623,400 - - - 623,400 - Capital Assets: Land 897,971 1,695,023 5,937,014 - 4,003,014 12,533,022 - Intangible - Water Rights 5,701,772 - - - - 5,701,772 - Buildings and Equipment 2,509,599 1,274,801 290,575 496,618 4,076,062 8,647,655 25,685,338 Improvements Other Than Buildings 142,480,531 103,581,870 81,449,103 - 11,138,268 338,649,772 431,375 Construction in Progress 620,533 1,270,093 153,082 - 381,564 2,425,272 34,727 Less: Accumulated Depreciation (57,946,751) (33,844,064) (28,392,426) (468,389) (9,620,169) (130,271,799) (17,561,714) Total Capital Assets (Net of A/D)94,263,655 73,977,723 59,437,348 28,229 9,978,739 237,685,694 8,589,726 Total Noncurrent Assets 94,263,655 74,601,123 59,437,348 28,229 9,978,739 238,309,094 8,589,726 Total Assets 106,942,915 97,064,616 78,101,903 7,163,201 12,124,935 301,397,570 26,921,571 DEFERRED OUTFLOW OF RESOURCES: Deferred Outflow from Bond Refunding - - - - 10,918 10,918 - Deferred Outflow related to Pensions 274,590 174,689 254,676 46,358 44,160 794,473 268,180 274,590 174,689 254,676 46,358 55,078 805,391 268,180 LIABILITIES: Current Liabilities: Current Payables 831,153 409,231 308,381 1,487,189 100,916 3,136,870 1,143,889 Claims Payable (Incurred but not Reported)- - - - - - 1,009,000 Interfund Payables (Note 5)- - - - 53,210 53,210 - Loans Payable - Current 652,107 288,262 - - - 940,369 - Employee Leave Benefits - Current 122,115 105,009 156,429 23,202 16,015 422,770 250,119 Revenue Bonds Payable - Current 902,092 274,960 437,948 - - 1,615,000 - General Obligation Bonds Payable - Current - - - - 186,420 186,420 - Payable From Restricted Assets: Accrued Interest 794,779 265,509 365,303 - - 1,425,591 - Deposits 31,541 95,300 3,422 - 100,336 230,599 - Other Liabilities Payable - - - - - - 42,874 Total Current Liabilities 3,333,787 1,438,271 1,271,483 1,510,391 456,897 8,010,829 2,445,882 Noncurrent Liabilities Employee Leave Benefits 44,177 37,988 56,590 8,394 5,794 152,943 90,484 Other LT Liabilities Payable - - - - - - 25,610 Loans Payable 3,123,514 1,802,146 - - - 4,925,660 - Revenue Bonds Payable 13,952,693 3,924,924 7,030,496 - - 24,908,113 - Net Pension Liability 2,245,967 771,584 805,573 129,482 80,480 4,033,086 1,295,292 Total Noncurrent Liabilities 19,366,351 6,536,642 7,892,659 137,876 86,274 34,019,802 1,411,386 Total Liabilities 22,700,138 7,974,913 9,164,142 1,648,267 543,171 42,030,631 3,857,268 DEFERRED INFLOW OF RESOURCES: Deferred Inflow related to Pensions 581,946 340,609 495,860 59,663 75,249 1,553,327 572,837 NET POSITION: Net Investment in Capital Assets:77,321,243 68,222,674 52,772,155 28,229 9,792,319 208,136,620 8,521,242 Restricted for: Debt Service 835,535 250,664 411,110 - - 1,497,309 - Rate Stabilization - - 427,257 - - 427,257 - Unrestricted 5,778,643 20,450,445 15,086,055 5,473,400 1,769,274 48,557,817 14,238,404 Total Net Position 83,935,421$ 88,923,783$ 68,696,577$ 5,501,629$ 11,561,593$ 258,619,003$ 22,759,646$ Adjustment to reflect the consolidation of internal service funds related to enterprise funds 530,923 Net position of business-type activities 259,149,926$ The notes to the basic financial statements are an integral part of this statement. City of Auburn, WashingtonSTATEMENT OF NET POSITIONPROPRIETARY FUNDS December 31, 2018 Enterprise Funds City of Auburn: 2018 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 15,293,485$ 26,582,233$ 9,809,840$ 15,729,897$ 1,445,741$ 68,861,196$ 14,476,455$ Other Operating Revenue 600 - - - 861,875 862,475 340,964 Total Operating Revenue 15,294,085 26,582,233 9,809,840 15,729,897 2,307,616 69,723,671 14,817,419 OPERATING EXPENSES: Operations & Maintenance 3,692,419 19,117,920 3,568,600 13,441,834 1,314,153 41,134,926 10,625,200 Administration 4,702,259 4,509,602 3,326,599 1,851,001 368,463 14,757,924 975,466 Depreciation / Amortization 3,407,933 2,234,136 2,067,030 18,819 469,060 8,196,978 1,635,347 Other Operating Expenses - 103,267 - - 16,906 120,173 - Total Operating Expenses 11,802,611 25,964,925 8,962,229 15,311,654 2,168,582 64,210,001 13,236,013 Operating Income (Loss)3,491,474 617,308 847,611 418,243 139,034 5,513,670 1,581,406 NON-OPERATING REVENUE (EXPENSE):` Interest Revenue 178,271 350,596 327,884 94,592 38,221 989,564 305,899 Other Non-Operating Revenue 324,228 71,039 165,136 66,062 79,249 705,714 154,439 Gain on Sale of Capital Assets - - - - 3,100 3,100 81,743 Interest Expense (697,363) (244,962) (310,816) - - (1,253,141) (2,733) Other Non-Operating Expenses - - (101,328) - (18,260) (119,588) - Total Non-Operating Revenue (Expense)(194,864) 176,673 80,876 160,654 102,310 325,649 539,348 Income (Loss) Before Contributions & Transfers 3,296,610 793,981 928,487 578,897 241,344 5,839,319 2,120,754 Capital Contribution 1,271,234 2,299,751 995,853 - - 4,566,838 - Transfers In (Note 5)2,686,332 - 125,000 - 7,558 2,818,890 935,536 Transfers Out (Note 5)(2,800,400) (95,244) (332,589) - (5,632) (3,233,865) (887,018) Change in Net Position 4,453,776 2,998,488 1,716,751 578,897 243,270 9,991,182 2,169,272 Net Position, January 1 79,481,645 85,925,295 66,979,826 4,922,732 11,318,323 248,627,821 21,645,374 Change in Accounting Principle - - - - - - (1,055,000) Net Position, January 1 restated 79,481,645 85,925,295 66,979,826 4,922,732 11,318,323 248,627,821 20,590,374 Net Position, December 31 83,935,421$ 88,923,783$ 68,696,577$ 5,501,629$ 11,561,593$ 258,619,003$ 22,759,646$ Change in net position from this statement 9,991,182 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds (3,334) Change in net position of business-type activities 9,987,848$ 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, 2018 Enterprise Funds City of Auburn: 2018 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 14,808,146$ 25,808,156$ 9,755,235$ 15,654,109$ 2,326,097$ 68,351,743$ 14,673,096$ Cash Paid to Suppliers for Goods & Services (5,345,753) (21,236,056) (3,440,266) (14,709,477) (1,054,703) (45,786,255) (6,901,822) Cash Paid for Taxes (599) (180) - - (16,935) (17,714) - Cash Paid to Employees (3,899,467) (2,661,065) (3,934,978) (494,874) (746,087) (11,736,471) (4,657,922) Other Cash Received 85,537 - - - - 85,537 81,998 Other Non-Operating Revenue - - - - 11,690 11,690 - Net Cash Provided (Used) by Operating Activities 5,647,864 1,910,855 2,379,991 449,758 520,062 10,908,530 3,195,350 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Interfund Loan Payable - - - - (40,572) (40,572) - Operating Grant 234,406 71,039 131,917 86,279 70,659 594,300 49,999 Transfers In 2,686,332 - 125,000 - 7,558 2,818,890 935,536 Transfers Out (2,800,400) (95,244) (332,589) - (5,632) (3,233,865) (887,018) Net Cash Provided (Used) by Noncapital Financing Activities 120,338 (24,205) (75,672) 86,279 32,013 138,753 98,517 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Sale of Equipment - - - - 1,400 1,400 177,345 Purchase of Capital Assets (2,529,586) (317,053) (1,339,899) - (146,505) (4,333,043) (2,088,562) Contributed Capital 285,082 233,805 370,826 - - 889,713 - Capital Grants - - - - (37,772) (37,772) - Proceeds from Other Governments - 22,500 - - - 22,500 - Proceeds from Insurance Settlement 7,915 - - - - 7,915 81,901 Bond Issuance Costs - - - - 10,919 10,919 - Principal Payment on Debt (1,506,166) (550,947) (425,578) - (176,402) (2,659,093) - Interest Payment on Debt (775,846) (264,926) (350,697) - (18,261) (1,409,730) (2,733) Debt Proceeds 86,332 - - - - 86,332 (2,733) Net Cash Provided (Used) for Capital and Related Financing Activities (4,432,269) (876,621) (1,745,348) - (366,621) (7,420,859) (1,834,782) CASH FLOW FROM INVESTING ACTIVITIES: Purchase of Investments - (1,999,360) (4,769,271) - - (6,768,631) - Interest Received 178,271 345,296 315,931 94,592 38,221 972,311 305,899 Net Cash Provided (Used) in Investing Activities 178,271 (1,654,064) (4,453,340) 94,592 38,221 (5,796,320) 305,899 Net Increase (Decrease) in Cash and Cash Equivalents 1,514,204 (644,035) (3,894,369) 630,629 223,675 (2,169,896) 1,767,717 Cash and Cash Equivalents - Beginning of Year 9,129,933 17,559,191 16,548,833 4,677,646 1,862,626 49,778,229 16,137,719 Cash and Cash Equivalents - End of Year 10,644,137$ 16,915,156$ 12,654,464$ 5,308,275$ 2,086,301$ 47,608,333$ 17,905,436$ CASH AT END OF YEAR CONSISTS OF: Cash and Cash Equivalents 7,294,288 15,768,440 10,644,121 5,308,275 1,985,965 41,001,089 17,905,436 Restricted Cash - Bond Payments 1,687,994 535,243 803,251 - - 3,026,488 - Restricted Cash - Customer Deposits 31,541 95,300 3,422 - 100,336 230,599 - Restricted Cash - Other 1,630,314 516,173 1,203,670 - - 3,350,157 - Total Cash 10,644,137$ 16,915,156$ 12,654,464$ 5,308,275$ 2,086,301$ 47,608,333$ 17,905,436$ 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, 2018 City of Auburn: 2018 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)3,491,474$ 617,308$ 847,611$ 418,243$ 139,034$ 5,513,670$ 1,581,406$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Depreciation 3,407,933 2,234,136 2,067,030 18,819 469,060 8,196,978 1,635,347 Other Non-Operating Revenue 85,294 - - - 11,691 96,985 83,033 Write-Off Assets Less Than $5,000 - - (101,328) - - (101,328) - Asset (Increases) Decreases: Accounts Receivable (469,958) (770,704) (39,848) (75,788) 6,552 (1,349,746) (145,058) Miscellaneous A/R Revenue - (19,200) (14,757) - - (33,957) - Inventory (47,802) 787 2,595 - 797 (43,623) 5,011 Liability Increases (Decreases): Accounts & Vouchers Payable (533,319) 14,472 (93,061) 121,389 (76,585) (567,104) 275,243 Deposits Payable - 15,827 - - 11,929 27,756 (300) Wages & Benefits Payable (288,928) (189,689) (274,907) (34,373) (40,185) (828,082) (307,271) Compensated Absences Payable 3,170 7,918 (13,344) 1,468 (2,231) (3,019) 67,939 Total Adjustments 2,156,390 1,293,547 1,532,380 31,515 381,028 5,394,860 1,613,944 Net Cash Provided (Used) by Operating Activities 5,647,864$ 1,910,855$ 2,379,991$ 449,758$ 520,062$ 10,908,530$ 3,195,350$ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Capital Assets Acquired by Contributed Capital 986,152 2,065,946 625,027 - - 3,677,125 - Increase (Decrease) in Fair Value of Investment - 5,300 11,953 - - 17,253 - Total Non Cash Investing, Capital and Financing Activities 986,152$ 2,071,246$ 636,980$ -$ -$ 3,694,378$ -$ 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, 2018 PROPRIETARY FUNDS City of Auburn: 2018 CAFR Basic Financial Statements 52 City of Auburn: 2018 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: 2018 CAFR Basic Financial Statements 54 Agency Fund ASSETS: Cash and Cash Equivalents 543,157$ Receivables: Customer Accounts 6,181 Total Assets 549,338 LIABILITIES: Current Payables 499,340 Due to Other Governmental Units 49,998 Total Liabilities 549,338 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, 2018 City of Auburn: 2018 CAFR Notes to the Financial Statements 55 City of Auburn NOTES TO THE FINANCIAL STATEMENTS December 31, 2018 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 ............................................................................................................. 59 E. Assets, Liabilities and Fund Balance ............................................................................................................ 60 1. Deposits and Investments .................................................................................................................... 60 2. Receivables ............................................................................................................................................ 61 3. Interfund Receivables and Payables .................................................................................................... 61 4. Amounts Due From Other Governmental Units .................................................................................. 61 5. Inventories and Prepaid Expenses ....................................................................................................... 61 6. Restricted Assets .................................................................................................................................. 61 7. Interfund Transactions ......................................................................................................................... 62 8. Capital Assets ........................................................................................................................................ 62 9. Pensions ................................................................................................................................................ 62 10. Deferred Outflows/Inflows of Resources ............................................................................................ 62 11. Compensated Absences ....................................................................................................................... 63 12. Unearned Revenues.............................................................................................................................. 63 13. Fund Balance Components – Proprietary Funds ................................................................................. 63 14. Fund Balance Components – Governmental Funds ............................................................................ 63 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 .................................................................................................................................................... 69 Note 5 – Interfund Activity ................................................................................................................................................. 71 Note 6 – Due From Other Governmental Units ................................................................................................................ 73 Note 7 – Capital Assets and Depreciation ......................................................................................................................... 74 Note 8 – Capital Lease Obligation ..................................................................................................................................... 75 Note 9 – Long-Term Liabilities ........................................................................................................................................... 76 Note 10 – Pension Plans ...................................................................................................................................................... 80 Note 11 – Other Post-Employment Benefits ...................................................................................................................... 91 Note 12 – Association of Washington Cities Employment Benefit Trust .......................................................................... 93 Note 13 – Construction Commitments ............................................................................................................................... 95 Note 14 – Cemetery Endowed Care Fund ........................................................................................................................... 95 Note 15 – Joint Ventures / Related Party ............................................................................................................................ 95 Note 16 – Jointly Governed Organization / Related Party ................................................................................................. 99 Note 17 – Contingencies and Litigations ............................................................................................................................ 99 Note 18 – Risk Management and Insurance ....................................................................................................................... 99 Note 19 – Tax Abatements ................................................................................................................................................. 101 Note 20 – Change in Accounting Principle ......................................................................................................................... 102 City of Auburn: 2018 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 2018 financial statements have been presented in accordance with the following new Governmental Accounting Standards Board (GASB) Statements: a. GASB Statement No. 75 – Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement addresses accounting and financial reporting for other post-employment benefits (OPEB) that is provided to the employees of state and local governmental employers. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. Note disclosure and required supplementary information requirements are also addressed within this GASB statement. b. GASB Statement No. 85 - Omnibus 2017. This statement establishes accounting and financial reporting requirements for blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). 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) the 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, 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. City of Auburn: 2018 CAFR Notes to the Financial Statements 57 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 with 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 particular function or activity. Taxes and other items that are not properly included among function or activity revenues are instead reported as general revenues. Separate financial statements are included for governmental 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 available if they are collected within the current period or soon enough thereafter (30 days) to pay current liabilities. For derived tax revenues, such as sales tax and utility business and occupation taxes, revenues are recognized in the period when the underlying exchange has occurred. For imposed non-exchange taxes, such as property taxes, revenues are recognized when the use of resources is permitted, or when resources are available. Grant revenue is recognized in the period in which the expenditure occurs and the eligibility requirements have been met. Non-exchange transactions, such as contributions, are recognized when the donation eligibility requirements have been satisfied. Those specific major revenue sources accrued are: City of Auburn: 2018 CAFR Notes to the Financial Statements 58 Property Taxes – King County and Pierce County collect property taxes and remit to the City daily or monthly. Sales Tax Revenues – The State of Washington collects all sales taxes. Auburn’s portion is remitted to the City by the State monthly. The sales tax received in January is recognized as revenue in current year even though received in the subsequent year because of when the underlying transaction occurred and the resources are considered to be measurable and available. Grant Revenues – On cost reimbursement grants, grant revenue is recognized when the eligible expenditure is incurred. Under the modified accrual basis, expenditures are recorded when the fund liability is incurred, except for the un-matured interest and principal on general long-term debt, which is recognized when due, and for compensated absences which are recorded as expenditures when liquidated from expendable available fund resources. Purchases of capital assets from governmental funds are reported as expenditures during the year incurred and the asset is capitalized and reported on the government-wide statement of net 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, general long- term and special assessment debt principal, interest, and related costs. These 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”. 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. City of Auburn: 2018 CAFR Notes to the Financial Statements 59 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 sewer 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. 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. City of Auburn: 2018 CAFR Notes to the Financial Statements 60 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 developed. 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. 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, 2018, the Washington State Local Government Investment Pool (LGIP) was holding $101,513,214 in short-term investments. This amount is classified on the Statement of Net Position as cash and cash equivalents. The interest on these investments is prorated to the various funds based upon ownership of investments. For purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on deposit with financial institutions in both demand and time deposit accounts, and amounts invested in the Local Government Investment Pool, administered by the State Treasurer’s Office because it is operated in a manner consistent with a Securities and Exchange Commission’s Rule 2a-7 of the Investment Company Act of 1940. The State Finance Committee is the administrator of the statute that created the pool and adopts appropriate rules. The State Treasurer’s Office is responsible for establishing the investment policy for the pool and reviews it annually. Any proposed changes are reviewed by the LGIP Original Final Budget Revisions Budget Governmental Funds General Fund 72,860,044$ 4,837,700$ 77,697,744$ Total Governmental Funds 72,860,044 4,837,700 77,697,744 Special Revenue Funds: Local Street 2,418,270$ 1,173,300$ 3,591,570$ Arterial Street 6,643,292 104,500 6,747,792 Hotel/Motel Tax 113,700 106,100 219,800 Arterial Street Preservation 2,880,440 4,123,500 7,003,940 Drug Forfeiture Fund 253,221 18,700 271,921 Housing and Community Development 468,446 741,200 1,209,646 Recreation Trails - - - Business Improvement Area 55,000 35,000 90,000 Cumulative Reserve 250,000 1,342,200 1,592,200 Mitigation Fees 1,219,817 1,826,100 3,045,917 Total Special Revenue Funds 14,302,186 9,470,600 23,772,786 Total Budgeted Funds 87,162,230$ 14,308,300$ 101,470,530$ ORIGINAL AND SUPPLEMENTAL APPROPRIATIONS City of Auburn: 2018 CAFR Notes to the Financial Statements 61 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 the 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. 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 City of Auburn: 2018 CAFR Notes to the Financial Statements 62 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 acquisition 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 the 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 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 City of Auburn: 2018 CAFR Notes to the Financial Statements 63 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. 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, withdraw 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 City of Auburn: 2018 CAFR Notes to the Financial Statements 64 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 categories 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: 2018 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, 2018: 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. Arterial Capital Other Total General Street Improvement Governmental Governmental Fund Fund Fund Funds Funds Nonspendable Inventory 38,179$ -$ -$ -$ 38,179$ Cemetery Endowment - - - 1,775,453 1,775,453 Total Nonspendable 38,179 - - 1,775,453 1,813,632 Restricted Major Street Construction - 2,062,371 - - 2,062,371 REET 1 Allowable Projects - - 5,325,988 - 5,325,988 REET 2 Allowable Projects - - 6,024,323 - 6,024,323 Arterial Street Presevation Fund - - - 1,510,377 1,510,377 Parks and Trails Construction Projects - - - 615,903 615,903 City Tourism Promotion - - - 197,675 197,675 Drug Investigation and Enforcement - - - 448,351 448,351 Community Development Block Grant Program - - - 42,904 42,904 Recreational Trail Development - - - 64,726 64,726 Downtown Business Area Improvements - - - 113,295 113,295 Street and Fire Service Mitigation Fees - - - 11,815,198 11,815,198 Debt Service - - - 5,386 5,386 Total Restricted - 2,062,371 11,350,312 14,813,815 28,226,498 Committed Local Street Improvements (Save our Streets)- - - 2,584,603 2,584,603 Arterial Street Preservation - - - 495,053 495,053 Total Committed - - - 3,079,656 3,079,656 Assigned Appropriations Over Estimated Revenue 9,375,470 - - - 9,375,470 Arterial Street Preservation Fund - - 1,975,352 39,029 2,014,381 Drug Investigation and Enforcement - - - 8,843 8,843 Recreation Trail Development - - - 1,150 1,150 Downtown Business Area Improvements - - - 2,518 2,518 Local Street Improvements - - - 215,354 215,354 School Administration Fees - - - 66,584 66,584 Cemetery Capital Enhancement and Maintenance - - - 121,376 121,376 Downtown Infrastructure Improvements - - - 381,988 381,988 Debt Service - - - 14,851 14,851 Total Assigned 9,375,470 - 1,975,352 851,693 12,202,515 Unassigned Unassigned 24,627,984 - - - 24,627,984 Total Unassigned 24,627,984 - - - 24,627,984 Total Fund Balances 34,041,633$ 2,062,371$ 13,325,664$ 20,520,617$ 69,950,285$ Governmental Fund Balances December 31, 2017 Major City of Auburn: 2018 CAFR Notes to the Financial Statements 66 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. 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, 2018, the carrying amount of the City’s cash demand deposits with Key Bank totaled $6,313,508 while the bank balance was $6,524,135. In addition, the balance of the City’s interest bearing checking account with Opus Bank totaled $10,218,137. 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, 2018. 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 2018, the net increase in the fair value of investments being held for more than one year is $49,335 at year-end. City of Auburn: 2018 CAFR Notes to the Financial Statements 67 As of December 31, 2018, the City had the following investments and maturities: The city measures and reports investments at fair value using the valuation input hierarchy established by generally accepted accounting principles, as follows: *Level 1 – Quoted prices in active markets for identical assets or liabilities; *Level 2 – These are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other quoted prices that are not observable; *Level 3 – Unobservable inputs for an asset or liability. Fair Less than 1 to 2 2 to 3 Greater than Investment Type Value 1 year years years 3 years US Agency 21,047,957$ 10,027,935$ $7,013,522 $2,004,660 2,001,840$ Municipal Bond 1,761,620 - 1,761,620 - - 22,809,577$ 10,027,935$ 8,775,142$ 2,004,660$ 2,001,840$ Reconciliation to government- wide statement of net position: Total investments above 22,809,577$ Plus: cash in checking 16,531,645 Plus: petty cash 18,800 Less: cash investments in fiduciary funds (543,157) Total cash and investments at fair value 38,816,860$ Amortized Investment Type Cost State investment pool (LGIP)101,513,214$ 101,513,214$ -$ -$ -$ 101,513,214$ 101,513,214$ -$ -$ -$ Total cash and investments, government- wide statement of net position 140,330,075$ Schedule of Investments by Maturities As of December 31, 2018 Investment maturities Governmental Business-Type Activities Activities Total Cash and Cash Equivalents 45,309,574$ 41,001,089$ 86,310,663$ Cash with Outside Agencies - - - Investments 16,023,693 6,785,884 22,809,577 Temporarily Restricted: Cash and Cash Equivalents 22,827,138 6,607,244 29,434,382 Permanently Restricted: Cash and Cash Equivalents 1,775,453 - 1,775,453 85,935,858$ 54,394,217$ 140,330,075$ Reconciliation of Cash and Investments Government-Wide Statement of Net Position As of December 31, 2018 City of Auburn: 2018 CAFR Notes to the Financial Statements 68 At December 31, 2018, 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 will not fulfill its obligations. State law and the City’s investment policy limits the instruments in which the City may invest. These include: 1. US Treasury obligations 2. US Government Agency obligations and US Government Sponsored Enterprises (GSE’s) which may include, but are not limited to Federal Farm Credit Bank (FFCB), Federal Home Loan Bank (FHLB), Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Student Loan Marketing Corporation (SLMA), and/or Tennessee Valley Authority (TVA) 3. Non-negotiable Certificates of Deposit of financial institutions which are qualified public depositories as defined by RCW 39.58.010(2) and in accordance with the restrictions therein 4. Bonds of the State of Washington and any local government in the State of Washington, General Obligation bonds outside the State of Washington; at the time of investment, the bonds must have a rating of AA- from S&P or Aa3 from Moody’s, or higher. In the case of a split rating, the lower rating of these two rating agencies will be used. 5. Washington Local Government Investment Pool (LGIP) managed by the Washington State Treasurer’s Office 6. Other investments authorized by law 7. Time deposits and savings account deposits with Washington State Public Deposit Protection Commission (PDPC) approved banks. The City’s municipal bond holding at time of purchase carried a AAA rating from S&P and a Aaa rating from Moody’s. 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, US Agency Securities and the Washington State Local Government Investment Pool which may comprise 100% of the total investment portfolio. Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Investments by Fair Value Level 12/31/2018 (Level 1)(Level 2)(Level 3) US Agency 21,047,957$ 21,047,957$ -$ -$ Municipal Bond 1,761,620 1,761,620 - - Total Investments by Fair Value Level 22,809,577$ 22,809,577$ -$ -$ Investments and Derivative Instruments Measured at Fair Value As of December 31, 2018 Fair Value Measurements Using City of Auburn: 2018 CAFR Notes to the Financial Statements 69 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: NOTE 4 – PROPERTY TAXES Property taxes received during tax year 2018 were $21,561,924 including collection of prior year delinquent assessments. Property taxes assessed for collection in tax year 2018 were based on a regular tax levy of $2.20 per $1,000 on a total 2017 assessed value of $10,559,150,607. For levy year 2018, to be received in 2019, the City’s regular tax levy is $2.03 per $1,000 on a 2018 assessed valuation of $11,393,504,898, as of December 31, 2018, for a total regular levy of $22,007,247. State law provides that debt cannot be incurred in excess of the following percentages of the taxable property of the City. 1.50% of assessed value without a vote of the people 2.50% of assessed value with a vote of the people The City has additional authority to incur the following debt as a percentage of total valuation. 2.50% of assessed value with a vote of the people, indebtedness is for utilities 2.50% of assessed value with a vote of the people, indebtedness is for parks, or open space development At December 31, 2018, the debt limits for the City were as follows: State Investment U.S.Municipal Pool Agency Bond Total General Fund -$ 16,023,693$ -$ 16,023,693$ Permanent Fund - - - Enterprise Funds - 5,024,264 1,761,620 6,785,884 Internal Service Funds - - - - Fiduciary Funds - - - - Treasurer's Residual Funds 101,513,214 - - 101,513,214 Total 101,513,214$ 21,047,957$ 1,761,620$ 124,322,791$ Schedule of Investments by Fund Category and Investment Type As of December 31, 2018 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 170,902,573$ 113,935,049$ 284,837,622$ 284,837,622$ 854,512,866$ Outstanding indebtedness (52,097,318) - - - (52,097,318) Margin available 118,805,255$ 113,935,049$ 284,837,622$ 284,837,622$ 802,415,548$ With a Vote City of Auburn: 2018 CAFR Notes to the Financial Statements 70 The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. Taxes are levied annually on January 1 on property values listed as of the prior August 31. The County assesses property at 100% of fair 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 penalties 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. During the year, property tax revenues are recognized when cash is received. 1.The Washington State Constitution limits the total regular property taxes to 1% of assessed valuation or $10 per $1,000 of value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the 1% limit. 2.Washington State law in RCW 84.55.010 limits the annual growth of regular property taxes to the lesser of 1% or the rate of inflation. With a vote of the majority of the voters within a taxing district, the 1% levy limitation can be “lifted” and additional taxes may be levied 3.The City may voluntarily levy taxes below the legal limit. Special levies approved by the voters are not subject to the above limitations. Property taxes are recorded as receivable and offset by an unearned revenue account when levied. Since state law allows for the sale of property for failure to pay taxes, no estimate of uncollectible taxes is made. City of Auburn: 2018 CAFR Notes to the Financial Statements 71 NOTE 5 – INTERFUND ACTIVITY Transfers are legally authorized transfers of resources from a fund receiving revenue to the fund through which resources are to be expended. The principal purposes for interfund transfers include interfund subsidies and transfers into capital project and debt service funds. Interfund transfers for the year ended December 31, 2018 were as follows: Funds Transfer In Transfer Out Governmental funds: General 109,896$ 2,898,550$ Cumulative Reserve 1,500,000 1,300,000 Total general fund 1,609,896 4,198,550 Other Governmental funds Special revenue funds: Arterial Streets 684,494 26,026 Local Streets 150,000 317 Hotel / Motel tax - 7,000 Arterial Street Preservation 1,466,120 - Mitigation Fees 133,800 914,418 Total special revenue funds 2,434,414 947,761 Debt service funds: 1998 Library GO 282,150 - 2010 A&B Annex 1,314,721 - 2010 C&D Local Revitalization 226,109 - LID 250 372,014 - Total debt service funds 2,194,994 - Capital projects funds: Municipal Park Construction 426,824 - Capital Improvements 1,539,189 2,684,991 Total capital projects funds 1,966,013 2,684,991 Total all governmental funds 8,205,317 7,831,302 Proprietary funds: Water 2,686,332 2,800,400 Sewer - 95,244 Storm Drainage 125,000 332,589 Non-major Enterprise funds Airport - 5,000 Cemetery 7,558 632 Total proprietary funds 2,818,890 3,233,865 Internal service funds: Facilities 242,411 857,624 Innovation & Technology 276,575 29,394 Equipment Rental 416,550 - Total internal service funds 935,536 887,018 Permanent funds: Cemetery Endowed Care - 7,558 Total 11,959,743$ 11,959,743$ All transfers are considered routine. Transfers City of Auburn: 2018 CAFR Notes to the Financial Statements 72 Loans between funds are classified as interfund receivable and payable. Interfund Loans do not affect total fund equity. Balance Balance Due From Due To 1/1/2018 New Loans Repayments 12/31/2018 Housing & Comm. Dev.General fund 50,000$ -$ 50,000$ -$ Airport Fund Capital Improvement 93,782 - 40,573 53,210 Total interfund loans 143,782$ -$ 90,573$ 53,210$ All interfund loans are considered short-term cash loans. *The purpose of the interfund loan to Housing & Community Development was to cover authorized expenditures while the City waited 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. Interfund Loans City of Auburn: 2018 CAFR Notes to the Financial Statements 73 NOTE 6 – DUE FROM OTHER GOVERNMENTAL UNITS As of December 31, 2018 the City had receivables due from other governmental units as follows: General Fund: Auburn School District 25,069 City of Kent -Utilities 103 King County Arts Commission 17,000 King County District Court 487,494 King County Library Systems 11,830 King County -Real Estate Excise Taxes 197,437 King County Sheriff's - Registered Sex Offender Grant 9,677 King County VSHS Levy grant 49,845 Pierce County - Real Estate Excise Taxes 11,316 Muckleshoot Indian Tribe 310,770 Department of Commerce -VNET 2,560 US Department of Justice -Bulletproof Vest Program 3,324 US Department of Justice -COPS Hiring Program 72,974 US Department of Justice -SCAAP Grant 467 WA Association of Sheriffs & Police Chiefs 2,000 WA Auto Theft Prevention Authority - Auto Theft Prevention Grant 104,173 WA State Criminal Justice Training 37,245 WA State Department of Ecology - Shoreline Master Program 9,645 WA State Military Department -EMPG Grant 15,468 WA State Treasurer - Sales Taxes 1,437,166 Total General Fund 2,805,564 Arterial Street Fund: City of Kent 10,000 KCWTD 14,469 WA State Transportation Improvement Board - Arterial Street Imp.196,699 WA Dept. of Transportation - Arterial Street Improvements 353,046 Total Arterial Street Fund 574,215 Arterial Street Preservation Fund: WA Dept. of Transportation - Arterial Street Preservation 618,926 Drug Forfeiture Fund: Pierce County Sheriff's Department -TNET 5,979 Total Drug Forfeiture Fund 5,979 Housing & Community Development: City of Bellevue 1,783 City of Federal Way 1,783 City of Kent 1,783 U.S. Dept. of Housing - Community Development Block Grant 100,442 Total Housing & Community Development Fund 105,791 Municipal Park Construction Fund: WA State Recreation & Conservation 9,250 WA State Historical Society 100,307 Total Municipal Park Construction Fund 109,557 Capital Improvements General Government: 4Culture -Grant 7,147 Pierce County - Real Estate Excise Taxes 18,492 WA State Transportation Improvement Board - Grant 922 WA State Utilities & Transportation-Grant 5,198 Total Capital Improvements Fund 31,759 Water Fund: Valley Communications -Lease 1,000 WA State Military Department -Grant (Capital Fund)13,338 Total Water Fund 14,338 Storm Fund: City of Algona -Decant Admin Fee 90 City of Pacific -Decant Admin Fee 300 King County -Grant (Capital Fund)3,219 WA State Department of Ecology 99,734 Total Storm Drainage Fund 103,343 Solid Waste Fund: King County - Local hazardous waste management grant 8,674 King County - Waste reduction and recycling grant 20,824 WA State Department of Ecology 19,819 Total Solid Waste fund 49,317 Airport Fund Federal Aviation Administration -Grant 49,384 WA State Department of Transportation 2,378 Total Airport l fund 51,762 Facilities Fund: VRFA 15 City of Federal Way 42,000 King County -Senior Center Grant 49,999 Total Facilities fund 92,014 Information Services Fund: City of Pacific 3,667 VRFA 4,813 Total Information Services fund 8,480 Equipment Rental Capital Fund: WCIA 20,000 Total 4,591,045 Reconciliation to government-wide statement of net assets: Total above due from other governmental units 4,591,045 Amount due to fiduciary fund - Total due from other governmental units, 4,591,045 Due from Other Governmental Units government-wide statement of net assets City of Auburn: 2018 CAFR Notes to the Financial Statements 74 NOTE 7 – CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the year ended December 31, 2018 is as follows: Balance Decreases/Balance 1/1/18 Increases Adjustments 12/31/18 Governmental activities: Capital assets, not being depreciated: Land 108,890,255$ -$ -$ 108,890,255$ Construction in progress 10,077,359 9,111,220 (10,203,964) 8,984,615 Total capital assets, not being depreciated 118,967,614 9,111,220 (10,203,964) 117,874,870 Capital assets, being depreciated: Buildings 73,616,279 200,783 - 73,817,062 Improvements other than buildings 23,005,439 823,326 - 23,828,765 Machinery and equipment 29,563,721 2,138,321 (1,214,822) 30,487,220 Intangibles 1,095,684 - - 1,095,684 Infrastructure 386,862,467 16,156,736 (15,180) 403,004,023 Total capital assets being depreciated 514,143,590 19,319,166 (1,230,002) 532,232,754 Less: accumulated depreciation for: Buildings (20,001,729) (1,551,398) - (21,553,127) Improvements other than buildings (15,515,024) (715,189) - (16,230,213) Machinery and equipment (20,910,929) (1,704,730) 1,037,477 (21,578,182) Intangibles (1,057,717) (154,563) - (1,212,280) Infrastructure (170,702,925) (13,805,535) - (184,508,460) Total accumulated depreciation (228,188,324) (17,931,415) 1,037,477 (245,082,262) Total capital assets, being depreciated, net 285,955,266 1,387,751 (192,525) 287,150,492 Governmental activities capital assets, net 404,922,880$ 10,498,971$ (10,396,489)$ 405,025,362$ Business-type activities: Capital assets, not being depreciated: Land 12,526,187$ 6,835$ -$ 12,533,022$ Water Rights 5,449,186 252,586 - 5,701,772 Construction in progress 10,273,608 4,256,481 (12,104,817) 2,425,272 Total capital assets, not being depreciated 28,248,981 4,515,902 (12,104,817) 20,660,066 Capital assets, being depreciated: Buildings 6,076,886 8,548 - 6,085,434 Improvements other than buildings 323,090,795 15,558,972 - 338,649,767 Machinery and equipment 2,540,372 31,563 (9,713) 2,562,222 Total capital assets being depreciated 331,708,053 15,599,083 (9,713) 347,297,423 Less: accumulated depreciation for: Buildings (4,051,735) (120,572) - (4,172,307) Improvements other than buildings (115,784,570) (8,035,107) - (123,819,677) Machinery and equipment (2,246,827) (41,297) 8,313 (2,279,811) Total accumulated depreciation (122,083,132) (8,196,976) 8,313 (130,271,795) Total capital assets, being depreciated, net 209,624,921 7,402,107 (1,400) 217,025,628 Business-type activities capital assets, net 237,873,902$ 11,918,009$ (12,106,217)$ 237,685,694$ Schedule of Capital Asset Activity City of Auburn: 2018 CAFR Notes to the Financial Statements 75 Capital asset activity for the year ended December 31, 2018 is as follows: Depreciation/amortization expense was charged to functions/programs of the City as follows: The 2018 total interest cost incurred for business-type activities was $1,253,141 of which $1,253,141 was charged to expense. NOTE 8 – CAPITAL LEASE OBLIGATION The City has the following capital leases: On January 1, 2007 the City entered into a capital lease agreement for the Auburn Avenue Theater facility for a 15 year term. The intent is for the City’s Parks, Arts and Recreation department to offer performances to the public, as well as make the facility available for short-term rentals. On July 15, 2015 the City entered into a 5 year term capital lease agreement to finance the purchase of a John Deere Excavator. The lease agreement qualifies as a capital lease for accounting purposes. The assets acquired through capital leases are as follows: Governmental activities: General government 1,046,748$ Public safety 538,701 Transportation 13,288,938 Physical environment - Culture and recreation 1,421,680 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 1,635,348 Total depreciation/amortization expense - governmental activities 17,931,415$ Business-type activities: Water 3,407,933$ Sanitary sewer 2,234,136 Storm water 2,067,030 Solid waste 18,819 Golf course - Airport 435,848 Cemetery 33,212 Total depreciation expense - business-type activities 8,196,978$ Governmental Asset Activities Auburn Avenue Theater 749,110$ John Deere Excavator 205,334 Less: Accumulated Depreciation (734,111) Total Assets Acquired Through Capital Leases 220,333$ Assets Acquired Through Capital Leases City of Auburn: 2018 CAFR Notes to the Financial Statements 76 The future minimum lease obligation and the net present value of these minimum lease payments as of December 31, 2018, were as follows: 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: • 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 deposited 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 has been removed from the City’s financial statements. The remaining balance of outstanding defeased debt as of December 31, 2018 is $2,631,471. 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 $9,360,697. Seven of the loans are for water and sewer construction projects. The loans are being repaid from water and sewer fund revenues over a 20-year period that begins upon each project completion (PWTF 1999, PWTF 2001, PWTF 2002, PWTF 2004, PWTF 2006, PWTF 2013, & DWSRF 2016). The other two loans are for arterial street improvements and are being repaid from arterial street fund revenues over a 20-year period that began in 2009 upon project completion (PWTF 2008) and over a 29-year period that began in 2013 upon project completion (PWTF 2012). Lease Payable Theater Excavator Total 2019 79,339 44,342 123,681 2020 79,339 25,867 105,206 2021 80,333 - 80,333 Total minimum lease payments 239,011 70,209 309,220 Less: Amounts representing interest (25,034) (1,725) (26,759) Present value of future minimum lease payments 213,977$ 68,484$ 282,461$ Schedule of Future Minimum Lease Payments City of Auburn: 2018 CAFR Notes to the Financial Statements 77 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, 2018. 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 12/31/17 31,851,816$ 33,737,388$ 3,024,535$ 9,137,985$ 17,599,730$ 3,212,435$ 1,200,626$ 22,918,300$ 122,682,815$ Added - 86,332 2,273,713 8,932,099 - 108,873 - - 11,401,017 Retired (1,888,215) (2,482,691) (2,144,208) (1,841,219) (5,025,013) (348,004) (113,311) (716,100) (14,558,761) Long-term liabilities payable 12/31/18 29,963,601$ 31,341,029$ 3,154,040$ 16,228,865$ 12,574,717$ 2,973,304$ 1,087,315$ 22,202,200$ 119,525,071$ (1) Includes capital leases CHANGES IN LONG-TERM LIABILITES SUMMARY Year Principal Interest Principal Interest Principal Interest Principal (1)Interest 2019 2,094,636 2,843,041 108,768 14,912 2,752,745 1,344,491 4,956,149 4,202,445 2020 1,969,766 2,755,227 96,480 8,727 2,630,376 1,273,406 4,696,622 4,037,360 2021 2,039,702 2,665,409 77,213 3,120 2,690,376 1,207,458 4,807,291 3,875,987 2022 2,109,908 2,564,978 - - 2,523,291 1,118,520 4,633,199 3,683,498 2023 2,174,533 2,459,271 - - 2,567,176 1,022,420 4,741,709 3,481,691 2024-2028 10,957,726 10,488,255 - - 13,061,669 3,520,436 24,019,395 14,008,691 2029-2033 12,477,150 6,947,455 - - 7,674,119 648,556 20,151,269 7,596,012 2034-2038 13,325,250 2,733,809 - - 584,966 8,774 13,910,216 2,742,583 2039-2043 1,240,000 77,413 - - 350,979 1,755 1,590,979 79,168 2043-2047 - - - - - - - - Totals 48,388,671$ 33,534,858$ 282,461$ 26,759$ 34,835,698$ 10,145,817$ 83,506,830$ 43,707,434$ (1)83,506,830$ Principal debt service requirements to maturity 3,154,040 Employee Leave Benefits 16,228,865 Other Post Employment Benefits 12,574,717 Net Pension Liability 2,973,304 Firemen's Pension Liability 1,087,315 Premium 119,525,071$ Long Term Liabilities 12/31/2018 Obligation Bonds Obligation Bonds/Loans Long-Term Debt DEBT SERVICE REQUIREMENT TO MATURITY General Capital Lease Utility Total City of Auburn: 2018 CAFR Notes to the Financial Statements 78 Interest Maturity Original Principal Balance Balance Due Within Issue Name Rates Date Amount(2) Installments 12/31/17 Additions Reductions 12/31/18 One Year GOVERNMENTAL DEBT General Obligation Bonds: LTGO 2010A (1)2.00-4.50%12/1/2018 4,385,000 $235,000 - $720,000 270,000$ -$ (270,000)$ -$ -$ LTGO 2010B (1)3.27-6.24%12/1/2039 20,365,000 $535,000 - $1,240,000 18,725,000 - (575,000) 18,150,000 590,000 LTGO 2010D (1)3.27-6.19%12/1/2034 6,320,000 $220,000 - $445,000 5,645,000 - (240,000) 5,405,000 245,000 LTGO Refunding 2016 - Golf/Cemetery 1.64 -1.64%12/1/2025 3,166,930 $71,470 - $366,159 2,771,611 - (326,560) 2,445,051 333,866 Total General Obligation Bonds 34,236,930 27,411,611 - (1,411,560) 26,000,051 1,168,866 Capital Leases: Auburn Avenue Theater 6.58%12/31/2021 695,504 $4,114 - $6,612 275,246 - (61,269) 213,977 65,895 John Deere Financial Excavator Lease 3.00%7/15/2020 205,334 $3,695 110,092 - (41,608) 68,484 42,874 Total Capital Leases 900,838 385,338 - (102,877) 282,461 108,769 Employee Leave Benefits: Compensated absences 2,445,803 1,858,688 (1,726,164) 2,578,327 1,893,379 Other Post Employment Benefits: LEOFF 1 9,137,985 8,932,099 (1,841,219) 16,228,865 - Pensions: Net Pension Liability 11,986,783 - (3,445,152) 8,541,631 - Firemen's Pension Liability 3,212,435 108,873 (348,004) 2,973,304 - Public Works Trust Fund Loans: PWTF 2008 0.50%7/1/2028 1,527,273 $80,383 884,210 - (80,383) 803,827 80,383 PWTF 2012 0.50%6/1/2041 3,284,857 $116,993 2,807,835 - (116,993) 2,690,842 116,993 Total Public Works Trust Fund Loans 4,812,130 3,692,045 - (197,376) 3,494,669 197,376 Premium Related to Debt 73,928 - (34,726) 39,202 - Total Governmental 39,949,898$ 58,345,928$ 10,899,660$ (9,107,078)$ 60,138,510$ 3,368,390$ BUSINESS-TYPE DEBT General Obligation Bonds LTGO Refunding 2016 - Airport 1.64 -1.64%12/1/2019 700,284 $166,439 - $186,420 362,822 - (176,402) 186,420 186,420 Total General Obligation Bonds 700,284 362,822 - (176,402) 186,420 186,420 Revenue Bonds: Utility sys bonds 2010 (1)3.00-6.40%12/1/2030 21,295,000 $575,000 - $1,720,000 17,865,000 - (1,070,000) 16,795,000 1,120,000 Utility sys bonds 2013 (1)0.38-4.00%12/1/2032 11,415,000 $335,000 - $785,000 9,170,000 - (490,000) 8,680,000 495,000 Total Revenue Bonds 32,710,000 27,035,000 - (1,560,000) 25,475,000 1,615,000 Employee Leave Benefits: Compensated absences 578,732 415,025 (418,044) 575,713 422,770 Net Pension Liability 5,612,947 - (1,579,861) 4,033,086 - Public Works Trust Fund & Drinking Water Loans: PWTF 1999 1.00%7/1/2019 3,465,000 $182,368 364,736 - (182,368) 182,368 182,368 PWTF 2001 0.50%7/1/2021 4,290,405 $227,086 908,343 - (227,086) 681,257 227,086 PWTF 2002 1.00%7/1/2022 641,250 $26,114 130,572 - (26,114) 104,458 26,114 PWTF 2004 0.50%7/1/2024 2,049,036 $107,844 754,908 - (107,844) 647,064 107,844 PWTF 2006 0.50%7/1/2026 3,325,000 $180,418 1,623,763 - (180,418) 1,443,345 180,418 PWTF 2013 2.00%6/1/2032 3,325,000 $188,538 2,828,076 - (188,538) 2,639,538 188,538 DWSRF 2016 1.50%10/1/2024 1,353,400 $28,000 91,990 86,332 (10,323) 167,999 28,000 Total Public Works Trust Fund & Drinking Water Loans 18,449,091 6,702,388 86,332 (922,691) 5,866,029 940,369 Premium Related to Debt 1,126,698 - (78,585) 1,048,113 - Total Proprietary 51,859,375$ 41,418,587$ 501,357$ (4,735,583)$ 37,184,361$ 3,164,559$ Total All Funds 91,809,273$ 99,764,515$ 11,401,017$ (13,842,661)$ 97,322,871$ 6,532,949$ (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: 2018 CAFR Notes to the Financial Statements 79 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 2018 was 1.65. 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 revenue fluctuations between years. By transferring cash into this stabilization fund, adjusted net revenue available for debt service, as defined, would be decreased by the amount of the transfer. Conversely, transfers out of the account would increase adjusted net revenue available for debt service. 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, 2018 is $0 for its tax-exempt bond issues. Interest Maturity Original Principal Balance Balance Due Within Issue Name Rates Date Amount Installments 12/31/17 Additions Reductions 12/31/18 One Year GOVERNMENTAL DEBT: General Obligation Bonds: SCORE Public Development Authority 3.00-6.62%1/1/2039 26,732,850 $593,650 - $1,601,150 22,918,300 - (716,100) 22,202,200 739,350 Total General Obligation Bonds Due Other Governments 26,732,850$ 22,918,300$ -$ (716,100)$ 22,202,200$ 739,350$ CHANGES IN LONG-TERM LIABILITIES DUE TO OTHER GOVERNMENTS Enterprise Governmental Funds Funds 12/31/18 Liabilities payable from restricted assets: Revenue bonds 2,922,900$ -$ 2,922,900$ Long-term bonds payable: General obligation bonds 186,420 26,000,051 26,186,471 Capital lease - 282,461 282,461 Revenue bonds 22,552,100 - 22,552,100 Public Works Trust Fund loans 5,866,029 3,494,669 9,360,698 Due to Other Governments - 22,202,200 22,202,200 Employee leave benefits 575,713 2,578,327 3,154,040 Other Post Employment Benefits - 16,228,865 16,228,865 Net Pension Liability 4,033,086 8,541,631 12,574,717 Firemen's Pension Liability - 2,973,304 2,973,304 Premium 1,048,113 39,202 1,087,315 Total long-term debt 37,184,361$ 82,340,710$ 119,525,071$ LONG-TERM LIABILITIES RECONCILIATION City of Auburn: 2018 CAFR Notes to the Financial Statements 80 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 2018 Aggregate Pension Amounts - All Plans Pension liabilities $ (12,574,716) Pension assets $ 10,038,834 Deferred outflows of resources $ 3,015,973 Deferred inflows of resources $ (8,258,468) Pension expense/expenditures $ (55,827) *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 percent 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 retiring from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially reduced 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: 2018 CAFR Notes to the Financial Statements 81 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 2018 were as follows: PERS Plan 1 Actual Contribution Rates: Employer Employee* January – August 2018: PERS Plan 1 7.49% 6.00% PERS Plan 1 UAAL 5.03% Administrative Fee 0.18% Total 12.70% 6.00% September – December 2018: PERS Plan 1 7.52% 6.00% PERS Plan 1 UAAL 5.13% Administrative Fee 0.18% Total 12.83% 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 years 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 the 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 the defined contribution benefits. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan. City of Auburn: 2018 CAFR Notes to the Financial Statements 82 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 2018 were as follows: PERS Plan 2/3 Actual Contribution Rates: Employer 2/3 Employee 2* January – August 2018: 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% September – December 2018: PERS Plan 2/3 7.52% 7.41% PERS Plan 1 UAAL 5.13% Administrative Fee 0.18% Employee PERS Plan 3 Varies Total 12.83% 7.41% * For employees participating in JBM, the contribution rate was 18.45% to 18.53%. The City’s actual PERS plan contributions were $1,296,482 to PERS Plan 1 and $1,941,592 to PERS Plan 2/3 for the year ended December 31, 2018. 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 plans. 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 highest 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. Other 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: 2018 CAFR Notes to the Financial Statements 83 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 2018. 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 service 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 benefit. 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. Effective July 1, 2017, when a LEOFF employer charges a fee or recovers costs for services rendered by a LEOFF 2 member to a non-LEOFF employer, the LEOFF employer must cover both the employer and state contributions on the LEOFF 2 basic salary earned for those services. The LEOFF Plan 2 required contribution rates (expressed as a percentage of covered payroll) for 2018 were as follows: LEOFF Plan 2 Actual Contribution Rates: Employer Employee 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 $746,370 for the year ended December 31, 2018. 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, 2018, the state contributed $68,152,127 to LEOFF Plan 2. The amount recognized by the City as its proportionate share of this amount is $453,015. Actuarial Assumptions The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial valuation completed in 2018 with a valuation date of June 30, 2017. 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 2017 Economic Experience Study. Additional assumptions for subsequent events and law changes are current as of the 2017 actuarial valuation report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, 2018. Plan liabilities were rolled forward from June 30, 2017, to June 30, 2018, reflecting each plan’s normal cost (using the entry-age cost method), assumed interest and actual benefit payments. City of Auburn: 2018 CAFR Notes to the Financial Statements 84 • Inflation: 2.75% total economic inflation; 3.50% salary inflation • Salary increases: In addition to the base 3.50% salary inflation assumption, salaries are also expected to grow by promotions and longevity. • Investment rate of return: 7.4% 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 recognized 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. • Lowered the valuation interest rate from 7.70% to 7.50% for all systems except LEOFF 2. For LEOFF 2 the valuation interest rate was lowered from 7.50% to 7.40%. • Lowered the assumed general salary growth from 3.75% to 3.50% for all systems. • Lowered assumed inflation from 3.00% to 2.75% for all systems. • Modified how the valuation software calculates benefits paid to remarried duty-related death survivors of LEOFF 2 members. • Updated the trend that the valuation software uses to project medical inflation for LEOFF 2 survivors of a duty-related death, and for certain LEOFF 2 medical-related duty disability benefits. Discount Rate The discount rate used to measure the total pension liability for all DRS plans was 7.4 percent. To determine that rate, an asset sufficiency test included an assumed 7.5 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. (All plans use 7.5 percent except LEOFF 2, which has assumed 7.4 percent). Consistent with the long-term expected rate of return, a 7.4 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 rates (including PERS 2/3, PSERS 2, 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 7.4 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 7.4 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: 2018 CAFR Notes to the Financial Statements 85 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, 2018, 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 7% 4.90% Real Estate 18% 5.80% Global Equity 32% 6.30% Private Equity 23% 9.30% 100% Sensitivity of Net Pension Liability/(Asset) The table below presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.4 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 (6.4 percent) or 1-percentage point higher (8.4 percent) than the current rate. 1% Decrease (6.40%) Current Discount Rate (7.40%) 1% Increase (8.40%) PERS 1 $ 10,433,375 $ 8,489,752 $ 6,806,182 PERS 2/3 18,684,720 4,084,964 (7,885,207) LEOFF 1 (1,469,701) (1,847,473) (2,172,713) LEOFF 2 $ (1,089,298 $ (8,191,361) $ (13,983,920) 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, 2018, the City reported a total pension liability of $2,535,882 for its proportionate share of the net pension liabilities as follows: Liability (Asset) PERS 1 $ 8,489,752 PERS 2/3 4,084,964 LEOFF 1 (1,847,473) LEOFF 2 $ (8,191,361) 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: City of Auburn: 2018 CAFR Notes to the Financial Statements 86 LEOFF 1 Asset LEOFF 2 Asset Employer’s proportionate share $ (1,847,473) $ (8,191,361) State’s proportionate share of the net pension asset associated with the employer (12,496,261) (5,303,752) TOTAL $ (14,343,734) $(13,495,113) At June 30, the City’s proportionate share of the collective net pension liabilities was as follows: Proportionate Share 6/30/17 Proportionate Share 6/30/18 Change in Proportion PERS 1 0.192614% 0.190096% (0.002518)% PERS 2/3 0.243488% 0.239249% (0.004239)% LEOFF 1 0.102451% 0.101761% (0.000690)% LEOFF 2 0.370954% 0.403472% 0.032518 % 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 2018. Historical data was obtained from a 2011 study by the Office of the State Actuary (OSA). In fiscal year 2018, 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 2018, the state of Washington contributed 39.30 percent of LEOFF 2 employer contributions pursuant to RCW 41.26.725 and all other employers contributed the remaining 60.70 percent of employer contributions. The collective net pension liability (asset) was measured as of June 30, 2018, and the actuarial valuation date on which the total pension liability (asset) is based was as of June 30, 2017, with update procedures used to roll forward the total pension liability to the measurement date. Pension Expense For the year ended December 31, 2018, the City recognized pension expense as follows: Pension Expense PERS 1 $ 621,647 PERS 2/3 (61,852) LEOFF 1 (287,519) LEOFF 2 (328,104) TOTAL $ (55,827) City of Auburn: 2018 CAFR Notes to the Financial Statements 87 Deferred Outflows of Resources and Deferred Inflows of Resources At December 31, 2018, 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 337,378 Changes of assumptions Changes in proportion and differences between contributions and proportionate share of contributions Contributions subsequent to the measurement date 646,669 TOTAL $ 646,669 $ 337,378 PERS 2/3 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 500,710 $ 715,202 Net difference between projected and actual investment earnings on pension plan investments 2,506,723 Changes of assumptions 47,787 1,162,548 Changes in proportion and differences between contributions and proportionate share of contributions 34,317 153,753 Contributions subsequent to the measurement date 970,038 TOTAL $ 1,552,851 $ 4,538,225 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 149,988 Changes of assumptions Changes in proportion and differences between contributions and proportionate share of contributions Contributions subsequent to the measurement date TOTAL $ $ 149,988 LEOFF 2 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 438,795 $ 190,204 Net difference between projected and actual investment earnings on pension plan investments 1,433,598 Changes of assumptions 4,637 1,175,608 Changes in proportion and differences between contributions and proportionate share of contributions 433,466 Contributions subsequent to the measurement date 373,020 TOTAL $ 816,452 $ 3,232,877 City of Auburn: 2018 CAFR Notes to the Financial Statements 88 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, 2019. 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 2019 $ 14,760 $ (413,907) $ 143 $ (227,253) 2020 (73,753) (847,423) (33,836) (444,308) 2021 (221,311) (1,548,094) (92,156) (899,225) 2022 (57,074) (581,928) (24,140) (363,810) 2023 - (224,052) - (160,567) Thereafter $ - $ (340,008) $ - $ (694,282) City of Auburn Fire Relief and Pension Plan The City is the administrator of the Firemen’s Pension Plan (Plan), which is a closed, single-employer defined benefit pension plan that was established in conformance with RCW Chapters 41.16 and 41.18. This plan 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 firefighters who retired prior to March 1, 1970, and excess pension and healthcare benefits of LEOFF for covered firefighters who retired after March 1, 1970. 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 2018, $79,798 was received from the state from taxes on fire insurance premiums, and $42,334 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: 2018 CAFR Notes to the Financial Statements 89 The following table represents the plan aggregate pension amounts for 2018: Aggregate Pension Amounts – Fire Relief and Pension Plan Pension liabilities $ (2,973,304) Deferred outflows of resources $ 0 Deferred inflows of resources $ 0 Pension expense/expenditures $ (113,644) 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 benefit 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, 2017 and the December 31, 2018 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, 2018 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, 2017 December 31,2018 Discount Rate – municipal bond rate (average rating AA/Aa or higher) 3.50% 4.00% Valuation Date January 1, 2017 January 1, 2017 Measurement Date December 31, 2017 December 31, 2018 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: 2018 CAFR Notes to the Financial Statements 90 Total Pension Liability The following table represents the changes in the total pension liability for 2018: Fire Relief and Pension Plan Increase (Decrease) Total Pension Liability Balances as of December 31, 2017 $ 3,212,435 Changes for the year: Service cost 0 Interest on total pension liability 108,873 Effect of plan changes 0 Effect of economic/demographic gains or losses 0 Effect of assumptions, changes or inputs (142,719) Benefit payments * (205,285) Balances as of December 31, 2018 $ 2,973,304 * 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 4.00%, 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 (3.00%) or 1 percentage point higher (5.00%) than the current rate. 1% Decrease (3.00%) Current Discount Rate (4.00%) 1% Increase (5.00%) $ 3,270,383 $ 2,973,304 $ 2,718,536 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, 2017 to December 31, 2017 January 1, 2018 to December 31, 2018 Service Cost $ 0 $ 0 Interest on Total Pension Liability 116,957 108,873 Effect of Plan Changes 0 0 Contributions From State Fire Insurance Premium Tax (78,078) (79,798) Recognition of Deferred Inflows/Outflows of Resources: Recognition of Economic/Demographic Gains/Losses 0 0 Recognition of Assumption Changes or Inputs 77,612 (142,719) Pension Expense $ 116,491 $ (113,644) City of Auburn: 2018 CAFR Notes to the Financial Statements 91 Deferred Outflows/Inflows of Resources As of December 31, 2018, 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: 2019 $0 2020 0 2021 0 2022 0 2023 0 Thereafter 0 NOTE 11 – OTHER POST-EMPLOYMENT BENEFITS The following table represents the aggregate OPEB amounts for all plans subject to the requirements of GASB Statement 75 for the year 2018: Aggregate OPEB Amounts OPEB Liabilities $ 16,228,865 OPEB Assets $ 0 Deferred outflows of resources $ 0 Deferred inflows of resources $ 0 OPEB expense/expenditures $ (447,545) Plan Description The city is the administrator of the Law Enforcement Officer and Fire Fighter(LEOFF) 1 employees plan providing lifetime medical care. The plan is a single employer, defined benefit, other post-employment benefit plan (OPEB). The plan does not issue a separate standalone financial report. Benefits Provided Effective March 1, 1970, the LEOFF plan was established by the Legislature under Revised Code of Washington (RCW) Chapter 41.26. LEOFF members who joined the system by September 30, 1977 are Plan 1 members. In addition, the City is required to pay post-employment benefits in accordance with 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 long 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. City of Auburn: 2018 CAFR Notes to the Financial Statements 92 The City OPEB plan provides medical, prescription drug, dental, Medicare Part B premiums, long-term care, and vision expenses for retirees. The plan does not cover dependent spouses and children. The City’s cost is reduced by any amounts retirees receive from Medicare or other health plans. Funding Policy The plan is funded on a pay-as-you-go basis from the General Fund and there are no assets accumulated in a qualifying trust. Membership As of December 31, 2018, there are 46 retirees and 0 active employees meeting the eligibility requirements of a LEOFF 1 member. This is considered a closed group with no new members. Retirees currently receiving benefits 46 Retirees entitled to but not yet receiving benefits 0 Active employees 0 Total 46 OPEB Liability The Valuation Date is January 1, 2017. This is the date as of which the actuarial valuation was performed. The Measurement Date is December 31, 2018. This is the date as of which the total OPEB liability under GASB 75 is determined. The Reporting Date is the Plan’s and City’s fiscal year ending date. Update procedures were used to roll forward the total OPEB liability to the measurement date. Assumptions and Other Inputs A number of assumptions are used in development of the OPEB plan actuarial valuation as discussed below. GASB 75 requires the discount rate used to measure the Total OPEB Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method) to be a yield or index rate for 20-year, tax exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The Bond Buyer General Obligation 20-bond municipal bond index for bonds that mature in 20 years is 4.10% as of December 27, 2018. Rounding this to the nearest ¼% results in a discount rate of 4.00% as of the December 31, 2018 measurement date. A medical (healthcare) trend rate of 6.1% for pre-65 retirees and 5.7% for post 65 retirees is assumed and the inflation rate includes a dental inflation rate of 5% and long-term care inflation rate of 4.5%. Mortality assumptions are based on the RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB. For service retired members, ages are set back one year for males and set forward one year for females. For disabled members, ages are set forward two years. Sensitivity Analysis The following presents the total OPEB liability of the City calculated using the current healthcare cost trend rates as well as what the City’s total OPEB liability would be if it were calculated using trend rates that are one percentage point lower or one percentage point higher than the current trend rates. 1% Decrease (4.70% - 5.10%) Current Trend Rate (5.70% - 6.10%) 1% Increase (6.70% - 7.10% Total December 31, 2018 OPEB Liability $ 14,325,796 $ 16,228,865 $ 18,477,507 City of Auburn: 2018 CAFR Notes to the Financial Statements 93 The following presents the total OPEB liability of the City calculated using the discount rate of 4.00%, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is one percentage point lower (3.00%) or one percentage point higher (5.00%) than the current rate. 1% Decrease (3.00%) Current Discount Rate (4.00%) 1% Increase (5.00%) Total December 31, 2018 OPEB Liability $ 18,245,081 $ 16,228,865 $ 14,410,220 The following table represents the changes in total OPEB liability for 2018: OPEB LEOFF Plan 1 Increase (Decrease) Total OPEB Liability Balance as of December 31, 2017 $ 17,472,360 Changes for the Year: Service Cost 0 Interest on Total OPEB Liability 597,724 Effect of Plan Changes 0 Effect of Economic/Demographic Gains or Losses 0 Effect of Assumptions, Changes or Inputs (1,045,269) Expected Benefit Payments (795,950) Balance as of December 31, 2018 $ 16,228,865 For the year ended December 31, 2018, the City recognized an OPEB expense of $ -447,545. Changes in assumptions that affected measurement of the total OPEB liability since the prior measurement date include changes in premiums and claims, mortality, and trends. The City reported no deferred outflows of resources and no deferred inflows of resources related to OPEB. NOTE 12 – ASSOCIATION OF WASHINGTON CITIES EMPLOYEE BENEFIT TRUST (“Trust”) Trust Description The City of Auburn 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 City of Auburn: 2018 CAFR Notes to the Financial Statements 94 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, 2018, 257 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 payment of all covered claims. In 2018, 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. 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”). In 2018, the retiree medical plan subsidy was eliminated, and is noted as such in this report. 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. City of Auburn: 2018 CAFR Notes to the Financial Statements 95 NOTE 13 – CONSTRUCTION COMMITMENTS At December 31, 2018, the City had the following contractual obligations on construction projects: 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 planting and cultivating trees, shrubs, flowers or plants in or around the cemetery. All expenditures of income from the fund must first be authorized by the City Council. For 2018, of the $34,559 net appreciation on investments, all was available for expenditures. Amounts that are available for expenditure are reflected as assigned fund balance. NOTE 15 – JOINT VENTURES / RELATED PARTY Valley Communications Center The “Valley Communications Center” was established August 20, 1976, when an Interlocal Agreement was entered into by four participating municipal corporations: Renton, Kent, Auburn and Tukwila. The provisions and terms of the “Interlocal Cooperation Act”, pursuant to RCW 39.34, sanction the agreement. The initial duration of the agreement was five years and thereafter is automatically extended for consecutive two-year periods, unless terminated by one or more of the participating cities. Any such termination must be in writing and served upon the other cities on or before July 1 in any one year and such termination shall then become effective on the last day of such year. On August 4, 1999 the Administration Board of Valley Communications Center voted to include the City of Federal Way as a full participating member city as of January 1, 2000. The five participating municipal corporations that include the cities of Renton, Kent, Auburn, Tukwila, and Federal Way on April 17, 2000 entered into a new Interlocal Agreement, pursuant to RCW 39.34, et seq. This agreement reaffirmed Valley Communications Center as a governmental administration agency pursuant to RCW 39.34.030 (3) (b). SCHEDULE OF OUTSTANDING CONSTRUCTION OBLIGATIONS As of December 31, 2018 Amount Outstanding Traffic projects 157,574$ Street projects 2,483,830 Utilities projects 398,928 Other projects 198,770 Total commitments 3,239,102$ City of Auburn: 2018 CAFR Notes to the Financial Statements 96 The purpose of the joint operation, hereafter referred to as Valley Com, is to provide improved consolidated emergency communications (dispatch) services for police, fire and medical aid to the five participating cities and to the several subscribing agencies, which include King County Fire Districts #2, #20, #40, #43, #44, #47, Black Diamond Fire Department, Vashon Island Fire Department, City of Pacific Police and Fire Departments, City of Algona Police Department, City of Black Diamond Police Department, City of Des Moines Police Department, SeaTac Fire Department, North Highline Fire Department, and King County EMS Units. In 1988, King County Fire District #1 was annexed to the City of Tukwila. A separate agreement between Valley Com and the subscribing agencies has been executed, which set forth condition of services and rates charged. The participating cities provide the majority of revenues to Valley Com. The method of allocating revenue source was changed in 1990 to a basis of prior 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 budget, less revenue from subscribing agencies and all other sources. The 2018 cost distribution for the five participating cities is as follows: Dispatchable Percent of Calls Total * Kent 117,948 26.92% Renton 90,329 20.62% Auburn 101,199 23.10% Tukwila 36,799 8.40% Federal Way 91,883 20.97% Total 438,157 100.00% * Distribution of current year net income is based on these budgeted percentages. Valley Com is served by an Administration Board composed of the Mayors or designated representatives from the five participating cities of Renton, Kent, Auburn, Tukwila and Federal Way. The Administration Board is responsible for the following functions: 1) Budget review and recommendation to the legislative bodies of the participating cities, and budget adoption after each legislative body has approved the required financial participation for the ensuing year; 2) Approval of appointment and/or discharge of the Director; 3) Approval of personnel policy and final decisions on all major policy changes; 4) Review and approval of all contracts. In addition, an Operations Board provides direction and consists of two members of each participating City’s public safety departments, including the heads of such departments or their designees. The Operations Board performs the following functions: 1) Oversees the operation of Valley Com, advises and makes recommendations to the Administration Board; 2) Makes recommendations on Director selection; 3) Presents proposed policies and budget to the Administration Board; 4) Approves disbursement of funds by the Director. The Director presents a proposed budget to the Operations Board on or before August 15 of each year. Said budget is then presented to the Administration Board by September 1 of each year. The Administration Board can make changes to the proposed Valley Com budget as it finds necessary, but final approval falls to the legislative body of each participating city in accordance with the provisions of the Interlocal Agreement. City of Auburn: 2018 CAFR Notes to the Financial Statements 97 In August 1993, Valley Com entered into an Interlocal Cooperation Agreement, pursuant to Chapter 39.34 RCW, with the sub- regions of King County, Seattle and Eastside Public Safety Communications Agency (EPSCA). This agreement governs the development, acquisition and installation of the 800 MHz emergency radio communications system (system) funded by the $57 million King County levy. This agreement provides that upon voluntary termination of any sub-region participation in the system, it surrenders its radio frequencies, relinquishes its equipment and transfers any unexpended levy proceeds and association equipment replacement reserves to another sub-region or consortium of sub-regions. The share of equity belonging to the five participating cities is as follows: Item Kent Renton Auburn Tukwila Federal Way Total Equity Dec 31, 2017 $ 7,215,101 $ 5,212,721 $ 5,290,137 $2,677,982 $ 4,222,772 $ 24,618,713 Current year change 874,974 670,091 750,724 272,987 681,619 3,250,395 Equity Dec 31, 2018 $ 8,090,075 $ 5,882,812 $ 6,040,861 $ 2,950,969 $ 4,904,391 $ 27,869,108 % of equity 29.03% 21.11% 21.68% 10.59% 17.60% % of 2018 distribution 26.92% 20.62% 23.10% 8.40% 20.97% 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, under 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 interlocal 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 and 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. 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 Formation 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 development authority City of Auburn: 2018 CAFR Notes to the Financial Statements 98 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 within 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: 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, 2018 related to 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: City of Auburn: 2018 CAFR Notes to the Financial Statements 99 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. 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 2018 Auburn paid $9,939, 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 2018 were $129,205. Medical premiums and benefit payments made under the Fire Relief and Pension Plan for 2018 were $62,303. NOTE 17 – CONTINGENCIES AND LITIGATIONS As of December 31, 2018, a number of claims were pending against the City for damages and legal actions. While the outcome of these actions is uncertain, no uncovered losses are anticipated at this time with these pending claims. In the event of a liability finding against the City, it is anticipated that any potential adverse judgment against the City also would be subject to coverage under the City’s general liability insurance. The City participates in a number of federal and state assisted programs. These grants are subject to audit by the grantors or their representatives. Such audits could result in requests for reimbursement to grantor agencies for expenditures disallowed under the terms of the grants. The City’s management believes that such disallowances, if any, will be immaterial. NOTE 18 – RISK MANAGEMENT & INSURANCE Risk Management The City is exposed to various risks of loss such as: theft and damage and destruction of assets, errors and omissions, injuries or property damage to others, employees’ health, and natural disasters. All risk financing activities are accounted for in the Insurance internal service fund. To insure against risks of loss the City of Auburn is a member of the Washington Cities Insurance Authority (WCIA). Balance Additions Reductions Balance 12/31/2017 12/31/2018 Valley Communication Public Dev Auth -$ -$ -$ -$ SCORE Public Development Authority 22,918,300 - (716,100) 22,202,200 Due to Other Governments 22,918,300 - (716,100) 22,202,200 Valley Communications Center 5,290,137 750,724 - 6,040,861 South Correctional Entity (SCORE)3,147,747 949,658 - 4,097,405 Equity Share 8,437,884 1,700,382 - 10,138,266 Total Investment in Joint Ventures 32,340,466$ Investment in Joint Ventures City of Auburn: 2018 CAFR Notes to the Financial Statements 100 Utilizing Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly purchasing insurance, jointly self-insuring, and / or jointly contracting for risk management services. WCIA has a total of 160 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 $16 million in limits above the self-insured layer is provided by reinsurance. Total limits are $20 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 coverage 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. WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, 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. The funding and allocations for the worker’s compensation program are reviewed by an actuary on an annual basis. The actuarial study made by Bickmore as of December 31, 2018 projected ultimate loss during 2019 and 2020 program years to be $602,000 and $627,000, respectively. At December 31, 2018, incurred but not reported and claims payable were estimated at $1,009,000. At December 31, 2018 fund equity was $1,144,318. The City carriers excess works’ compensation insurance coverage with a private carrier for losses exceeding $500,00 per occurrence to a maximum indemnity in occurrence with statutory limits. Claims handling is currently contracted to an independent, qualified third party administrator (TPA). City of Auburn: 2018 CAFR Notes to the Financial Statements 101 The Workers Compensation claims liability includes an estimated amount for claims that have been incurred but not reported (IBNR). Reported claims liabilities are based on the requirements of GABS 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonable estimated. Changes in the Workers Compensation self-insurance fund claims liabilities in 2017 and 2018 were: CHANGES OF ESTIMATED CLAIMS LIABILITIES FOR 2018 AND 2017 Workers Compensation 2018 2017 Beg. of Year Claims Liabilities $1,055,000 $0 Less: Claim Payments (134,255) (90,786) Plus: Claims and Changes in Estimates 88,255 1,145,786 End of Year Claims Liabilities $1,009,000 $1,055,000 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 twelve-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 the 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, 2018. 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 city’s portion of the property tax abated during the fiscal year 2018 was $37,502. 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 parking. 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. The city’s portion of the property tax abated during the fiscal year 2018 was $42,95 City of Auburn: 2018 CAFR Notes to the Financial Statements 102 NOTE 20 – CHANGE IN ACCOUNTING PRINCIPLE The City of Auburn implemented Governmental Accounting Standards Board (GASB) Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The City previously reported its OPEB obligation under the provisions of GASB Statement 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. This change in accounting principle results in a $8,334,375 reduction in governmental activities net position. In addition, the City has implemented GASB Statement 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues for its Workers Compensation Self Insurance Fund. This change in accounting principle results in a $1,055,000 reduction in governmental activities net position. City of Auburn: 2018 CAFR Required Supplemental Information 103 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of the Net Pension Liability As of June 30, 2018 Last 10 Fiscal Years* PERS 1 2018 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.190096%0.192614%0.194185%0.192878% Employer's proportionate share of the net pension liability (asset)8,489,752$ 9,139,685$ 10,428,649$ 10,089,313$ Covered payroll 192,351$ 181,521$ 212,906$ 328,015$ Employer's proportionate share of the net pension liability as a percentage of its covered payroll 4413.68%5035.06%4898.24%3075.87% Plan fiduciary net position as a percentage of the total pension liability 63.22%61.24%57.03%59.10% PERS 2/3 2018 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.239249%0.243488%0.247760%0.241739% Employer's proportionate share of the net pension liability (asset)4,084,964$ 8,460,044$ 12,223,580$ 8,637,472$ Covered payroll 24,674,226$ 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 16.56%35.39%53.77%40.25% Plan fiduciary net position as a percentage of the total pension liability 95.77%90.97%85.82%89.20% LEOFF 1 2018 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.101761%0.102451%0.101574%0.103718% Employer's proportionate share of the net pension liability (asset)(1,847,473)$ (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%0.00% Plan fiduciary net position as a percentage of the total pension liability 144.42%136.00%123.74%127.36% LEOFF 2 2018 2017 2016 2015 Employer's proportion of the net pension liability (asset)0.403472%0.370954%0.359661%0.354511% Employer's proportionate share of the net pension liability (asset)(8,191,361)$ (5,147,640)$ (2,091,896)$ (2,193,486)$ State's proportionate share of the net pension liability (asset) associated with the employer (5,303,752)$ (3,339,178)$ (1,363,764)$ (1,450,178)$ Total (13,495,113)$ (8,486,818)$ (3,455,660)$ (3,643,664)$ Covered payroll 12,697,917$ 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 -64.51%-44.29%-19.10%-21.22% Plan fiduciary net position as a percentage of the total pension liability 118.50%113.40%106.04%111.67% City of Auburn: 2018 CAFR Required Supplemental Information 104 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of the Net Pension Liability As of June 30, 2018 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: 2018 CAFR Required Supplemental Information 105 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Employer Contributions As of December 31 2018 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 2018 2017 2016 2015 Statutorily or contractually required contributions 15,868$ 22,545$ 20,088$ 30,642$ Contributions in relation to the statutorily or contractually required contributions (15,868)$ (22,545)$ (20,088)$ (30,642)$ Contribution deficiency (excess)-$ -$ -$ -$ Covered payroll 124,947$ 188,486$ 179,680$ 306,408$ Contributions as a percentage of covered payroll 12.70%11.96%11.18%10.00% PERS 2/3 2018 2017 2016 2015 Statutorily or contractually required contributions 3,222,237$ 2,908,411$ 2,608,360$ 2,258,109$ Contributions in relation to the statutorily or contractually required contributions (3,222,237)$ (2,908,411)$ (2,608,360)$ (2,258,109)$ Contribution deficiency (excess)-$ -$ -$ -$ Covered payroll 25,087,758$ 24,350,435$ 23,330,702$ 22,130,501$ Contributions as a percentage of covered payroll 12.84%11.94%11.18%10.20% LEOFF 2 2018 2017 2016 2015 Statutorily or contractually required contributions 708,333$ 639,662$ 594,665$ 551,812$ Contributions in relation to the statutorily or contractually required contributions (708,333)$ (639,662)$ (594,665)$ (551,812)$ Contribution deficiency (excess)-$ -$ -$ -$ Covered payroll 13,044,797$ 11,992,821$ 11,370,216$ 10,553,437$ Contributions as a percentage of covered payroll 5.43%5.33%5.23%5.23% City of Auburn: 2018 CAFR Required Supplemental Information 106 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Total Pension Liability & Related Ratios 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 3.50% as of December 31, 2017 to 4.00% as of December 31, 2018. Significant methods and assumptions used in calculating the actuarial determined contribution are presented in Note 10. 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Total Pension Liability - Beginning 3,212,435$ 3,218,004$ 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 Interest on Total Pension Liability 108,873 116,957 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 Effect of Economic/Demographic Gains (Losses)- - N/A N/A N/A N/A N/A N/A N/A N/A Effect of Assumption Changes or Inputs (142,719) 77,612 N/A N/A N/A N/A N/A N/A N/A N/A Benefit Payments (205,285) (200,138) N/A N/A N/A N/A N/A N/A N/A N/A Net Change in Total Pension Liability (239,131) (5,569) N/A N/A N/A N/A N/A N/A N/A N/A Total Pension Liability - Ending 2,973,304$ 3,212,435$ 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 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: 2018 CAFR Required Supplemental Information 107 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Total OPEB Liability and Related Ratios Firemen’s Relief and Pension Plan and LEOFF 1 Employees For the Year Ended December 31 Last 10 Fiscal Years* *The City implemented GASB Statement No. 75 in fiscal year 2018. 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 in paragraph 4 of GASB 75 to pay related benefits. The effect of assumption changes or inputs is the result of a change in the discount rate from 3.50% as of December 31, 2017 to 4.00% as of December 31, 2018. Significant methods and assumptions used in calculating the actuarial determined contribution are presented in Note 10. 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Total OPEB Liability - Beginning 17,472,360$ 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 OPEB Liability 597,724 N/A N/A N/A N/A N/A N/A N/A N/A N/A Changes of Benefit Terms - 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 (1,045,269) N/A N/A N/A N/A N/A N/A N/A N/A N/A Expected Benefit Payments (795,950) N/A N/A N/A N/A N/A N/A N/A N/A N/A Total Pension Liability - Ending 16,228,865$ 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: 2018 CAFR Required Supplemental Information 108 City of Auburn: 2018 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: 2018 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 17,621,091$ 20,237$ 934,183$ 1,896,829$ 20,472,340$ Receivables: Other Receivables 337,152 - - - 337,152 Special Assessments - 4,950 - - 4,950 Due From Other Governmental Units 730,696 - 109,557 - 840,253 Total Assets 18,688,939 25,187 1,043,740 1,896,829 21,654,695 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES: Liabilities: Current Payables 1,083,279 - 45,849 - 1,129,128 Total Liabilities 1,083,279 - 45,849 - 1,129,128 Deferred Inflow of Resources: Unavailable Revenue-Special Assessments - 4,950 - - 4,950 Total Deferred Inflow of Resources - 4,950 - - 4,950 Fund Balances: Nonspendable - - - 1,775,453 1,775,453 Restricted 14,192,526 5,386 615,903 - 14,813,815 Committed 3,079,656 - - - 3,079,656 Assigned 333,478 14,851 381,988 121,376 851,693 Total Fund Balances 17,605,660 20,237 997,891 1,896,829 20,520,617 Total Liabilities, Deferred Inflows and Fund Balances 18,688,939$ 25,187$ 1,043,740$ 1,896,829$ 21,654,695$ December 31, 2018 City of Auburn, Washington COMBINING BALANCE SHEET NON-MAJOR GOVERNMENT FUNDS City of Auburn: 2018 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 -$ -$ 139,172$ -$ 139,172$ Retail Sales & Use 2,309,617 250,610 - - 2,560,227 Interfund Utility 650,358 - - - 650,358 Utility 1,382,094 - - - 1,382,094 Excise 127,808 - - - 127,808 Other 85,048 - - - 85,048 Intergovernmental 2,422,832 474,926 109,557 - 3,007,315 Charges for Services 1,064,578 - 5,863 58,319 1,128,760 Special Assessments - 2,210 - - 2,210 Investment Earnings 332,723 1,923 20,114 34,559 389,319 Miscellaneous 261,900 598 50,627 - 313,125 Total Revenues 8,636,958 730,267 325,333 92,878 9,785,436 EXPENDITURES: Current: Security of Persons & Property 263,251 - - - 263,251 Transportation 7,712,037 - - - 7,712,037 Economic Environment 1,101,465 - - - 1,101,465 Debt Service: Principal - 1,418,132 - - 1,418,132 Interest - 1,507,993 - - 1,507,993 Capital Outlay - - 1,244,699 - 1,244,699 Total Expenditures 9,076,753 2,926,125 1,244,699 - 13,247,577 Excess (Deficiency) of Revenues Over (Under) Expenditures (439,795) (2,195,858) (919,366) 92,878 (3,462,141) OTHER FINANCING SOURCES (USES): Insurance Recoveries - - 97,435 - 97,435 Transfers In (Note 5)1,749,920 2,194,994 426,824 - 4,371,738 Transfers Out (Note 5)(921,735) - - (7,558) (929,293) Total Other Financing Sources (Uses)828,185 2,194,994 524,259 (7,558) 3,539,880 Net Change in Fund Balances 388,390 (864) (395,107) 85,320 77,739 Fund Balances - Beginning 17,217,270 21,101 1,392,998 1,811,509 20,442,878 Fund Balances - Ending 17,605,660$ 20,237$ 997,891$ 1,896,829$ 20,520,617$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENT FUNDS For the Year Ended December 31, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 112 City of Auburn: 2018 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: 2018 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 2,879,778$ 226,418$ 1,454,436$ 481,381$ 29,610$ Receivables: Other Receivables - - 337,152 - - Due From Other Governmental Units - - 618,926 5,979 105,791 Total Assets 2,879,778 226,418 2,410,514 487,360 135,401 LIABILITIES AND FUND BALANCES: Liabilities: Current Payables 79,821 28,743 366,055 30,166 92,497 Total Liabilities 79,821 28,743 366,055 30,166 92,497 Fund Balances: Restricted - 197,675 1,510,377 448,351 42,904 Committed 2,584,603 - 495,053 - - Assigned 215,354 - 39,029 8,843 - Total Fund Balances 2,799,957 197,675 2,044,459 457,194 42,904 Total Liabilities and Fund Balances 2,879,778$ 226,418$ 2,410,514$ 487,360$ 135,401$ City of Auburn, Washington COMBINING BALANCE SHEET NON-MAJOR SPECIAL REVENUE FUNDS December 31, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 115 Page 2 of 2 Total Business Nonmajor Recreational Improvement Mitigation Special Revenue Trails Area Fees Funds 65,876$ 121,310$ 12,362,282$ 17,621,091$ - - - 337,152 - - - 730,696 65,876 121,310 12,362,282 18,688,939 - 5,497 480,500 1,083,279 - 5,497 480,500 1,083,279 64,726 113,295 11,815,198 14,192,526 - - - 3,079,656 1,150 2,518 66,584 333,478 65,876 115,813 11,881,782 17,605,660 65,876$ 121,310$ 12,362,282$ 18,688,939$ City of Auburn: 2018 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 2,309,617$ -$ -$ -$ -$ Interfund Utility - - 650,358 - - Utility - - 1,382,094 - - Excise - 127,808 - - - Other - - - - - Intergovernmental - - 1,510,377 - 905,255 Charges for Services - 345 - 14,648 - Investment Earnings 65,988 4,135 39,029 8,843 - Miscellaneous - - - 261,900 - Total Revenues 2,375,605 132,288 3,581,858 285,391 905,255 EXPENDITURES: Current: Security of Persons and Property - - - 213,251 - Transportation 2,668,681 - 5,043,356 - - Economic Environment - 127,984 - - 907,255 Total Expenditures 2,668,681 127,984 5,043,356 213,251 907,255 Excess (Deficiency) of Revenues Over (Under) Expenditures (293,076) 4,304 (1,461,498) 72,140 (2,000) OTHER FINANCING SOURCES (USES): Transfers In (Note 5)150,000 - 1,466,120 - - Transfers Out (Note 5)(317) (7,000) - - - Total Other Financing Sources (Uses)149,683 (7,000) 1,466,120 - - Net Change in Fund Balances (143,393) (2,696) 4,622 72,140 (2,000) Fund Balances - Beginning 2,943,350 200,371 2,039,837 385,054 44,904 Fund Balances - Ending 2,799,957$ 197,675$ 2,044,459$ 457,194$ 42,904$ 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, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 117 Page 2 of 2 Total Business Nonmajor Recreational Improvement Mitigation Special Revenue Trails Area Fees Funds -$ -$ -$ 2,309,617$ - - - 650,358 - - - 1,382,094 - - - 127,808 - 85,048 - 85,048 7,200 - - 2,422,832 - - 1,049,585 1,064,578 1,150 2,518 211,060 332,723 - - - 261,900 8,350 87,566 1,260,645 8,636,958 - - 50,000 263,251 - - - 7,712,037 - 66,226 - 1,101,465 - 66,226 50,000 9,076,753 8,350 21,340 1,210,645 (439,795) - - 133,800 1,749,920 - - (914,418) (921,735) - - (780,618) 828,185 8,350 21,340 430,027 388,390 57,526 94,473 11,451,755 17,217,270 65,876$ 115,813$ 11,881,782$ 17,605,660$ City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 118 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Retail Sales and Use Tax 1,750,000$ 1,750,000$ 2,309,617$ 559,617$ Investment Earnings 9,100 9,100 65,988 56,888 Total Revenues 1,759,100 1,759,100 2,375,605 616,505 EXPENDITURES: Current: Transportation 2,417,754 3,591,054 2,668,681 922,373 Total Expenditures 2,417,754 3,591,054 2,668,681 922,373 Excess (Deficiency) of Revenues Over (Under) Expenditures (658,654) (1,831,954) (293,076) 1,538,878 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)150,000 150,000 150,000 - Transfers Out (Note 5)(516) (516) (317) 199 Total Other Financing Sources (Uses)149,484 149,484 149,683 199 Net Change in Fund Balances (509,170) (1,682,470) (143,393) 1,539,077 Fund Balances - Beginning 893,143 2,943,350 2,943,350 - Fund Balances - Ending 383,973$ 1,260,880$ 2,799,957$ 1,539,077$ Budget Amounts For the Year Ended December 31, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL LOCAL STREETS SPECIAL REVENUE FUND City of Auburn: 2018 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 113,300$ 113,300$ 127,808$ 14,508$ Charges for Services - - 345 345 Investment Earnings 400 400 4,135 3,735 Total Revenues 113,700 113,700 132,288 18,588 EXPENDITURES: Current: Economic Environment 103,400 209,500 127,984 81,516 Total Expenditures 103,400 209,500 127,984 81,516 Excess (Deficiency) of Revenues Over (Under) Expenditures 10,300 (95,800) 4,304 100,104 OTHER FINANCING SOURCES (USES): Transfers Out (Note 5)(10,300) (10,300) (7,000) 3,300 Total Other Financing sources and Uses (10,300) (10,300) (7,000) 3,300 Net Change in fund Balances -(106,100) (2,696) 103,404 Fund Balances - Beginning 84,044 200,371 200,371 - Fund Balances - Ending 84,044$ 94,271$ 197,675$ 103,404$ Budget Amounts For the Year Ended December 31, 2018 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: 2018 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 665,900$ 700,000$ 650,358$ (49,642)$ Utility 1,395,600 1,395,600 1,382,094 (13,506) Intergovernmental 1,000,940 1,511,840 1,510,377 (1,463) Investment Earnings 4,900 4,900 39,029 34,129 Total Revenues 3,067,340 3,612,340 3,581,858 (30,482) EXPENDITURES: Current: Transportation 2,880,440 6,957,840 5,043,356 1,914,484 Total Expenditures 2,880,440 6,957,840 5,043,356 1,914,484 Excess (Deficiency) of Revenues Over (Under) Expenditures 186,900 (3,345,500) (1,461,498) 1,884,002 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)-2,212,400 1,466,120 (746,280) Transfers Out (Note 5)-(46,100) -46,100 Total Other Financing Sources (Uses)-2,166,300 1,466,120 (700,180) Net Change in Fund Balances 186,900 (1,179,200) 4,622 1,183,822 Fund Balances - Beginning 366,008 2,039,837 2,039,837 - Fund Balances - Ending 552,908$ 860,637$ 2,044,459$ 1,183,822$ Budget Amounts For the Year Ended December 31, 2018 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: 2018 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$ -$ (17,000)$ Charges for Services 14,000 14,000 14,648 648 Investment Earnings 1,100 1,100 8,843 7,743 Miscellaneous 55,000 55,000 261,900 206,900 Total Revenues 87,100 87,100 285,391 198,291 EXPENDITURES: Current: Security of Persons & Property 253,221 271,921 213,251 58,670 Total Expenditures 253,221 271,921 213,251 58,670 Excess (Deficiency of Revenues Over (Under) Expenditures (166,121) (184,821) 72,140 256,961 Net Change in Fund Balances (166,121) (184,821) 72,140 256,961 Fund Balances - Beginning 193,981 385,054 385,054 - Fund Balances - Ending 27,860$ 200,233$ 457,194$ 256,961$ Budget Amounts For the Year Ended December 31, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL DRUG FORFEITURE SPECIAL REVENUE FUND City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 122 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis) (GAAP Basis)Results (Negative) REVENUES: Intergovernmental 460,000$ 1,201,200$ 905,255$ (295,945)$ Total Revenues 460,000 1,201,200 905,255 (295,945) EXPENDITURES: Current: Economic Environment 468,446 1,209,646 907,255 302,391 Total Expenditures 468,446 1,209,646 907,255 302,391 Excess (Deficiency) of Revenues Over (Under) Expenditures (8,446) (8,446) (2,000) 6,446 Net Change in Fund Balances (8,446) (8,446) (2,000) 6,446 Fund Balances - Beginning 52,455 44,904 44,904 - Fund Balances - Ending 44,009$ 36,458$ 42,904$ 6,446$ Budget Amounts For the Year Ended December 31, 2018 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: 2018 CAFR Fund Financial Statements and Schedules 123 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: TAXES: Intergovernmental 7,200$ 7,200$ 7,200$ -$ Investment Earnings 140 140 1,150 1,010 Total Revenues 7,340 7,340 8,350 1,010 Excess (Deficiency) of Revenues Over (Under) Expenditures 7,340 7,340 8,350 1,010 Net Change in Fund Balances 7,340 7,340 8,350 1,010 Fund Balances - Beginning 56,998 57,526 57,526 - Fund Balances - Ending 64,338$ 64,866$ 65,876$ 1,010$ Budget Amounts For the Year Ended December 31, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL RECREATION TRAILS SPECIAL REVENUE FUND City of Auburn: 2018 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$ 85,048$ 30,048$ Investment Earnings 200 200 2,518 2,318 Total Revenues 55,200 55,200 87,566 32,366 EXPENDITURES: Current: Economic Environment 55,000 90,000 66,226 23,774 Total Expenditures 55,000 90,000 66,226 23,774 Excess (Deficiency) of Revenues Over (Under) Expenditures 200 (34,800) 21,340 56,140 Net Change in Fund Balances 200 (34,800) 21,340 56,140 Fund Balances - Beginning 48,716 94,473 94,473 - Fund Balances - Ending 48,916$ 59,673$ 115,813$ 56,140$ Budget Amounts For the Year Ended December 31, 2018 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: 2018 CAFR Fund Financial Statements and Schedules 125 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis)(GAAP Basis)Results (Negative) REVENUES: Taxes: Investment Earnings 20,500$ 20,500$ 158,754$ 138,254$ Total Revenues 20,500 20,500 158,754 138,254 Excess (Deficiency) of Revenues Over (Under) Expenditures 20,500 20,500 158,754 138,254 OTHER FINANCING SOURCES (USES): Transfers In (Note 5)- 1,500,000 1,500,000 - Transfers Out (Note 5)(250,000) (1,592,200) (1,300,000) 292,200 Total Other Financing Sources (Uses)(250,000) (92,200) 200,000 292,200 Net Change in Fund Balances (229,500) (71,700) 358,754 430,454 Fund Balances - Beginning 7,366,699 9,799,312 9,799,312 - Fund Balances - Ending 7,137,199$ 9,727,612$ 10,158,066$ 430,454$ 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 (10,158,066) 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, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL CUMULATIVE RESERVE SPECIAL REVENUE FUND City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 126 Variance with Final Final Budget Original Adopted Actual Positive (GAAP Basis) (GAAP Basis)Results (Negative) REVENUES: TAXES: Charges for Services 1,512,000$ 1,512,000$ 1,049,585$ (462,415)$ Investment Earnings 8,200 8,200 211,060 202,860 Total Revenues 1,520,200 1,520,200 1,260,645 (259,555) EXPENDITURES: Current: Security of Person & Property 50,000 50,000 50,000 - Total Expenditures 50,000 50,000 50,000 - Excess (Deficiency) of Revenues Over (Under) Expenditures 1,470,200 1,470,200 1,210,645 (259,555) OTHER FINANCING SOURCES (USES): Transfers In (Note 5)-400,000 133,800 (266,200) Transfers Out (Note 5)(1,169,817) (2,995,917) (914,418) 2,081,499 Total Other Financing Sources (Uses)(1,169,817) (2,595,917) (780,618) 1,815,299 Net Change in Fund Balances 300,383 (1,125,717) 430,027 1,555,744 Fund Balances - Beginning 4,429,481 11,451,755 11,451,755 - Fund Balances - Ending 4,729,864$ 10,326,038$ 11,881,782$ 1,555,744$ Budget Amounts For the Year Ended December 31, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL MITIGATION SPECIAL REVENUE FUND City of Auburn: 2018 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: 2018 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 -$ -$ 14,832$ 19$ 1,633$ 3,753$ 20,237$ Special Assessments - - - - - 4,950 4,950 Total Assets - - 14,832 19 1,633 8,703 25,187 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES: Deferred Inflows of Resources: Unavailable Revenue - Special Assessments - - - - - 4,950 4,950 Total Deferred Inflows of Resources - - - - - 4,950 4,950 Fund Balances: Restricted - - - - 1,633 3,753 5,386 Assigned - - 14,832 19 - - 14,851 Total Fund Balances - - 14,832 19 1,633 3,753 20,237 Total Liabilities, Deferred Inflows and Fund Balances -$ -$ 14,832$ 19$ 1,633$ 8,703$ 25,187$ City of Auburn, WashingtonCOMBINING BALANCE SHEET NON-MAJOR DEBT SERVICE FUNDS December 31, 2018 City of Auburn: 2018 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 -$ -$ 250,610$ -$ -$ -$ 250,610$ Special Assessments - - - - - 2,210 2,210 Intergovernmental - 360,399 114,527 - - - 474,926 Investment Earnings - - 1,785 - 30 108 1,923 Miscellanous - - - - - 598 598 Total Revenues - 360,399 366,922 - 30 2,916 730,267 EXPENDITURES: Debt Service: Principal 270,000 575,000 240,000 326,560 - 6,572 1,418,132 Interest 12,150 1,100,120 349,595 45,454 - 674 1,507,993 Total Expenditures 282,150 1,675,120 589,595 372,014 - 7,246 2,926,125 Excess (Deficiency) of Revenues Over (Under) Expenditures (282,150) (1,314,721) (222,673) (372,014) 30 (4,330) (2,195,858) OTHER FINANCING SOURCES (USES): Transfers In (Note 5)282,150 1,314,721 226,109 372,014 - - 2,194,994 Total Other Financing Sources (Uses)282,150 1,314,721 226,109 372,014 - - 2,194,994 Net Change in Fund Balances - - 3,436 - 30 (4,330) (864) Fund Balances - Beginning - - 11,396 19 1,603 8,083 21,101 Fund Balances - Ending -$ -$ 14,832$ 19$ 1,633$ 3,753$ 20,237$ 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, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 130 City of Auburn: 2018 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: 2018 CAFR Fund Financial Statements and Schedules 132 Municipal Nonmajor Park Loc al Capital Project Construction Revitalization Funds ASSETS: Cash and Cash Equivalents 552,195$ 381,988$ 934,183$ Due From Other Governmental Units 109,557 - 109,557 Total Assets 661,752 381,988 1,043,740 LIABILITIES AND FUND BALANCES: Liabilities: Current Payables 45,849 - 45,849 Total Liabilities 45,849 - 45,849 Fund Balances: Restricted 615,903 - 615,903 Assigned - 381,988 381,988 Total Fund Balances 615,903 381,988 997,891 Total Liabilities and Fund Balances 661,752$ 381,988$ 1,043,740$ City of Auburn, Washington COMBINING BALANCE SHEET CAPITAL PROJECT FUNDS December 31, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 133 Municipal Nonmajor Park Local Capital Project Construction Revitalization Funds REVENUES: Taxes: Property 139,172$ -$ 139,172$ Intergovernmental 109,557 - 109,557 Charges for Services 5,863 - 5,863 Investment Earnings 13,092 7,022 20,114 Miscellaneous 50,627 - 50,627 Total Revenues 318,311 7,022 325,333 EXPENDITURES: Capital Outlay 1,244,699 - 1,244,699 Total Expenditures 1,244,699 - 1,244,699 Excess (Deficiency) of Revenues Over (Under) Expenditures (926,388) 7,022 (919,366) OTHER FINANCING SOURCES (USES): Insurance Recoveries - Capital Assets 97,435 - 97,435 Transfers In (Note 5)426,824 - 426,824 Total Other Financing Sources (Uses)524,259 - 524,259 Net Change in Fund Balances (402,129) 7,022 (395,107) Fund Balances - Beginning 1,018,032 374,966 1,392,998 Fund Balances - Ending 615,903$ 381,988$ 997,891$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES CAPITAL PROJECT FUNDS For the Year Ended December 31, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 134 City of Auburn: 2018 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: 2018 CAFR Fund Financial Statements and Schedules 136 Cemetery Endowed Care ASSETS: Cash and Cash Equivalents Non-Expendable Trust 1,896,829$ Total Assets 1,896,829 LIABILITIES AND FUND BALANCES: FUND BALANCES: Nonspendable 1,775,453 Assigned 121,376 Total Fund Balances 1,896,829 Total Liabilities and Fund Balances 1,896,829$ City of Auburn, Washington BALANCE SHEET PERMANENT FUND December 31, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 137 Cemetery Endowed Care REVENUES: Increase to Endowment from Lot Sales 58,319$ Investment Earnings 34,559 Total Revenues 92,878 EXPENDITURES: Excess (Deficiency) of Revenues Over (Under) Expenditures 92,878 OTHER FINANCING SOURCES (USES): Transfers Out (Note 5)(7,558) Total Other Financing Sources (Uses)(7,558) Net Change in Fund Balance 85,320 Fund Balance - Beginning 1,811,509 Fund Balance - Ending 1,896,829$ For the Year Ended December 31, 2018 City of Auburn, Washington STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE PERMANENT FUND City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 138 City of Auburn: 2018 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: 2018 CAFR Fund Financial Statements and Schedules 140 Total Nonmajor Enterprise Airport Cemetery Funds ASSETS: Current Assets: Cash and Cash Equivalents 995,558$ 990,407$ 1,985,965$ Restricted Cash: Customer Deposits 100,336 - 100,336 Customer Accounts 430 - 430 Due From Other Governmental Units 51,762 - 51,762 Inventories - 7,703 7,703 Total Current Assets 1,148,086 998,110 2,146,196 Noncurrent Assets: Capital Assets: Land 3,660,178 342,836 4,003,014 Buildings and Equipments 3,050,802 1,025,260 4,076,062 Improvements Other Than Buildings 9,963,009 1,175,259 11,138,268 Construction in Progress 371,756 9,808 381,564 Less: Accumulated Depreciation (8,030,031) (1,590,138) (9,620,169) Total Capital Assets (Net of A/D)9,015,714 963,025 9,978,739 Total Noncurrent Assets 9,015,714 963,025 9,978,739 Total Assets 10,163,800 1,961,135 12,124,935 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflow from Bond Refunding 10,918 - 10,918 Deferred Outflow Related to Pensions 4,374 39,786 44,160 15,292 39,786 55,078 LIABILITIES: Current Liabilities: Current Payables 58,844 42,072 100,916 Interfund Payables 53,210 - 53,210 Employee Leave Benefits - Current - 16,015 16,015 General Obligation Bonds Payable - Current 186,420 - 186,420 Customer Deposits 100,336 - 100,336 Total Current Liabilities 398,810 58,087 456,897 Noncurrent Liabilities: Employee Leave Benefits - 5,794 5,794 Net Pension Liability 13,361 67,119 80,480 Total Noncurrent Liabilities 13,361 72,913 86,274 Total Liabilities 412,171 131,000 543,171 DEFERRED INFLOWS OF RESOURCES: Deferred Inflow Related to Pensions 367 74,882 75,249 NET POSITION: Net Investment in Capital Assets 8,829,294 963,025 9,792,319 Unrestricted 937,260 832,014 1,769,274 Total Net Position 9,766,554$ 1,795,039$ 11,561,593$ City of Auburn, Washington COMBINING STATEMENT OF NET POSITION NON-MAJOR ENTERPRISE FUNDS December 31, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 141 Total Nonmajor Enterprise Airport Cemetery Funds OPERATING REVENUES: Charges for Services 77,866$ 1,367,875$ 1,445,741$ Other Operating Revenue 861,875 - 861,875 Total Operating Revenues 939,741 1,367,875 2,307,616 OPERATING EXPENSES: Operations & Maintenance 480,807 833,346 1,314,153 Administration 75,951 292,512 368,463 Depreciation/Amortization 435,848 33,212 469,060 Other Operating Expenses 571 16,335 16,906 Total Operating Expenses 993,177 1,175,405 2,168,582 Operating Income (Loss)(53,436) 192,470 139,034 NON-OPERATING REVENUE (EXPENSE): Interest Revenue 20,399 17,822 38,221 Other Non-Operating Revenues 79,249 - 79,249 Gain (Loss) on Sale of Capital Assets - 3,100 3,100 Other Non-Operating Expenses (18,260) - (18,260) Total Non-Operating Revenue (Expense)81,388 20,922 102,310 Income (Loss) Before Contributions & Transfers 27,952 213,392 241,344 Transfers In (Note 5)- 7,558 7,558 Transfers Out (Note 5)(5,000) (632) (5,632) Change in Net Position 22,952 220,318 243,270 Net Position, January 1 9,743,602 1,574,721 11,318,323 Net Position, December 31 9,766,554$ 1,795,039$ 11,561,593$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION NON-MAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2018 City of Auburn: 2018 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 958,222$ 1,367,875$ 2,326,097$ Cash Paid to Suppliers for Goods & Services (617,221) (437,482) (1,054,703) Cash Paid for Taxes (600) (16,335) (16,935) Cash Paid to Employees (118) (745,969) (746,087) Other Non-Operating Revenue 8,590 3,100 11,690 Net Cash Provided (Used) By Operating Activities 348,873 171,189 520,062 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Interfund Loan Payable (40,572) - (40,572) Operating Grant Received 70,659 - 70,659 Transfers from Other Funds - 7,558 7,558 Operating Transfers Out (5,000) (632) (5,632) Net Cash Provided (Used) by Non-Capital Financing Activities 25,087 6,926 32,013 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Sale of Equipment - 1,400 1,400 Purchase of Capital Assets (123,990) (22,515) (146,505) Capital Grant (37,772) - (37,772) Premium & Bond Issuance Costs 10,919 - 10,919 Principal Payment on Debt (176,402) - (176,402) Interest Payment on Debt (18,261) - (18,261) Net Cash Provided (Used) for Capital and Related Financing Activities (345,506) (21,115) (366,621) CASH FLOW FROM INVESTING ACTIVITIES: Interest Received 20,399 17,822 38,221 Net Cash Provided (Used) in Investing Activities 20,399 17,822 38,221 Net Increase (Decrease) in Cash and Cash Equivalents 48,853 174,822 223,675 Cash and Cash Equivalents - Beginning of Year 1,047,041 815,585 1,862,626 Cash and Cash Equivalents - End of Year 1,095,894$ 990,407$ 2,086,301$ CASH AT END OF YEAR CONSISTS OF: Cash and Cash Equivalents 995,558 990,407 1,985,965 Restricted Cash - Customer Deposits 100,336 - 100,336 Total Cash 1,095,894$ 990,407$ 2,086,301$ City of Auburn, Washington COMBINING STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS For the Fiscal Year Ended December 31, 2018 City of Auburn: 2018 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)(53,436)$ 192,470$ 139,034$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Depreciation 435,848 33,212 469,060 Other Non-Operating Revenue 8,591 3,100 11,691 Asset (Increases) Decreases: Accounts Receivable 6,552 - 6,552 Inventory - 797 797 Liability Increases (Decreases): Accounts & Vouchers Payable (67,421) (9,164) (76,585) Deposits Payable 11,929 - 11,929 Wages & Benefits Payable 6,810 (46,995) (40,185) Compensated Absences Payable - (2,231) (2,231) Total Adjustments 402,309 (21,281) 381,028 Net Cash Provided (Used) by Operating Activities 348,873$ 171,189$ 520,062$ 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, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 144 City of Auburn: 2018 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: 2018 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 1,932,767$ 2,180,137$ 1,896,137$ 4,458,020$ 7,438,375$ 17,905,436$ Customer Accounts - - 68,709 - - 68,709 Due From Other Governmental Units - - 92,014 8,480 20,000 120,494 Inventories - - - - 237,206 237,206 Total Current Assets 1,932,767 2,180,137 2,056,860 4,466,500 7,695,581 18,331,845 Noncurrent Assets: Capital Assets: Buildings and Equipment - - - 8,452,600 17,232,738 25,685,338 Improvements Other than Buildings - - - 243,150 188,225 431,375 Construction in Progress - - - - 34,727 34,727 Less: Accumulated Depreciation - - - (7,357,963) (10,203,751) (17,561,714) Total Capital Assets (Net of A/D)- - - 1,337,787 7,251,939 8,589,726 Total Noncurrent Assets - - - 1,337,787 7,251,939 8,589,726 Total Assets 1,932,767 2,180,137 2,056,860 5,804,287 14,947,520 26,921,571 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflow Related to Pensions - 6,784 64,585 139,402 57,409 268,180 LIABILITIES: Current Liabilities: Current Payables 241 6,029 289,843 326,301 521,475 1,143,889 Claims Payable (Incurred but not reported)- 1,009,000 - - - 1,009,000 Employee Leave Benefits - Current - 4,200 109,309 105,525 31,085 250,119 Other Liabilities Payable - - - - 42,874 42,874 Total Current Liabilities 241 1,019,229 399,152 431,826 595,434 2,445,882 Noncurrent Liabilities Employee Leave Benefits - 1,520 39,543 38,175 11,246 90,484 Other LT Liabilities Payable - - - - 25,610 25,610 Net Pension Liability - 8,892 91,782 132,905 1,061,713 1,295,292 Total Noncurrent Liabilities - 10,412 131,325 171,080 1,098,569 1,411,386 Total Liabilities 241 1,029,641 530,477 602,906 1,694,003 3,857,268 DEFERRED INFLOWS OF RESOURCES: Deferred Inflow Related to Pensions - 12,962 105,063 297,013 157,799 572,837 NET POSITION: Net Investment in Capital Assets - - - 1,337,787 7,183,455 8,521,242 Unrestricted 1,932,526 1,144,318 1,485,905 3,705,983 5,969,672 14,238,404 Total Net Position 1,932,526$ 1,144,318$ 1,485,905$ 5,043,770$ 13,153,127$ 22,759,646$ City of Auburn, Washington COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS December 31, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 147 Workers Comp Information Equipment Insurance Self Insurance Facilities Services Rental Total OPERATING REVENUES: Charges for Services -$ 1,030,060$ 3,342,600$ 6,133,909$ 3,969,886$ 14,476,455$ Other Operating Revenue - - 244,830 96,134 - 340,964 Total Operating Revenues - 1,030,060 3,587,430 6,230,043 3,969,886 14,817,419 OPERATING EXPENSES: Operations & Maintenance - 461,957 3,028,037 5,525,088 1,610,118 10,625,200 Administration 110,197 - - - 865,269 975,466 Depreciation/Amortization - - - 462,540 1,172,807 1,635,347 Total Operating Expenses 110,197 461,957 3,028,037 5,987,628 3,648,194 13,236,013 Operating Income (Loss)(110,197) 568,103 559,393 242,415 321,692 1,581,406 NON-OPERATING REVENUE (EXPENSE): Interest Revenue 27,223 35,623 39,431 71,684 131,938 305,899 Other Non-Operating Revenues - - 49,999 1,249 103,191 154,439 Gain (Loss) on Sale of Capital Assets - - - - 81,743 81,743 Interest Expense - - - - (2,733) (2,733) Total Non-Operating Revenue (Expense)27,223 35,623 89,430 72,933 314,139 539,348 Income (Loss) Before Contributions (82,974) 603,726 648,823 315,348 635,831 2,120,754 Transfers In (Note 5)- - 242,411 276,575 416,550 935,536 Transfers Out (Note 5)- - (857,624) (29,394) - (887,018) Change in Net Position (82,974) 603,726 33,610 562,529 1,052,381 2,169,272 Net Position, January 1 2,015,500 1,595,592 1,452,295 4,481,241 12,100,746 21,645,374 Change in Accounting Principle - (1,055,000) - - - (1,055,000) Net Position, January 1 restated 2,015,500 540,592 1,452,295 4,481,241 12,100,746 20,590,374 Total Net Position - Ending 1,932,526$ 1,144,318$ 1,485,905$ 5,043,770$ 13,153,127$ 22,759,646$ City of Auburn, Washington COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS For the Year Ended December 31, 2018 City of Auburn: 2018 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 -$ 1,030,060$ 3,443,107$ 6,230,043$ 3,969,886$ 14,673,096$ Cash Paid to Suppliers for Goods & Services (110,104) (402,413) (2,003,358) (2,965,934) (1,420,013) (6,901,822) Cash Paid to Employees - (114,174) (983,344) (2,645,354) (915,050) (4,657,922) Other Cash Received - - - (1,035) 83,033 81,998 Net Cash Provided (Used) By Operating Activities (110,104) 513,473 456,405 617,720 1,717,856 3,195,350 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating Grant Received - - 49,999 - - 49,999 Transfers In - - 242,411 276,575 416,550 935,536 Transfers Out - - (857,624) (29,394) - (887,018) Net Cash Provided (Used) by Non-Capital Financing Activities - - (565,214) 247,181 416,550 98,517 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Sale of Equipment - - - - 177,345 177,345 Purchase of Capital Assets - - - (344,797) (1,743,765) (2,088,562) Proceeds from Insurance Settlement - - - - 81,901 81,901 Interest Payment on Debt - - - - (2,733) (2,733) Net Cash Provided (Used) for Capital and Related Financing Activities - - - (344,797) (1,487,252) (1,832,049) CASH FLOW FROM INVESTING ACTIVITIES: Interest Received 27,223 35,623 39,431 71,684 131,938 305,899 Net Cash Provided (Used) in Investing Activities 27,223 35,623 39,431 71,684 131,938 305,899 Net Increase (Decrease) in Cash and Cash Equivalents (82,881) 549,096 (69,378) 591,788 779,092 1,767,717 Cash and Cash Equivalents - Beginning of Year 2,015,648 1,631,041 1,965,515 3,866,232 6,659,283 16,137,719 Cash and Cash Equivalents - End of Year 1,932,767$ 2,180,137$ 1,896,137$ 4,458,020$ 7,438,375$ 17,905,436$ CASH AT END OF YEAR CONSISTS OF: Cash and Cash Equivalents 1,932,767 2,180,137 1,896,137 4,458,020 7,438,375 17,905,436 Total Cash 1,932,767$ 2,180,137$ 1,896,137$ 4,458,020$ 7,438,375$ 17,905,436$ City of Auburn, Washington COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Fiscal Year Ended December 31, 2018 City of Auburn: 2018 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)(110,197)$ 568,103$ 559,393$ 242,415$ 321,692$ 1,581,406$ ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Depreciation - - - 462,540 1,172,807 1,635,347 Other Non-Operating Revenues - - - - 83,033 83,033 Asset (Increases) Decreases: Accounts Receivable - - (144,023) (1,035) - (145,058) Inventory - - - - 5,011 5,011 Liability Increases (Decreases): Accounts & Vouchers Payable 93 (45,925) 48,031 89,905 183,139 275,243 Deposits Payable - - (300) - - (300) Wages & Benefits Payable - (7,802) (65,458) (174,339) (59,672) (307,271) Compensated Absences Payable - (903) 58,762 (1,766) 11,846 67,939 Total Adjustments 93 (54,630) (102,988) 375,305 1,396,164 1,613,944 Net Cash Provided (Used) by Operating Activities (110,104)$ 513,473$ 456,405$ 617,720$ 1,717,856$ 3,195,350$ 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, 2018 City of Auburn: 2018 CAFR Fund Financial Statements and Schedules 150 City of Auburn: 2018 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: 2018 CAFR Fund Financial Statements and Schedules 152 Balance Balance 1/1/2018 Additions Deductions 12/31/2018 ASSETS: Cash and Cash Equivalents 527,746$ 7,392,536$ 7,377,125$ 543,157$ Other Current Assets 6,853 249,978 250,650 6,181 Total Assets 534,599$ 7,642,514$ 7,627,775$ 549,338$ LIABILITIES: Current Payables 485,095 13,623,818 13,608,585 500,328 Due to Other Government Units 49,504 892,340 892,834 49,010 Total Liabilities 534,599$ 14,516,158$ 14,501,419$ 549,338$ City of Auburn, Washington STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND For the Fiscal Year Ended December 31, 2018 City of Auburn: 2018 CAFR Statistical Section 153 City of Auburn STATISTICAL SECTION December 31, 2018 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: 2018 CAFR Statistical Section 154 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Governmental activities: Net Investment in Capital Assets 314,691,982$ 320,506,701$ 340,941,112$ 354,899,294$ 346,195,793$ 348,080,505$ 361,094,242$ 367,128,894$ 373,368,906$ 375,208,981$ Restricted 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 30,001,950 Unrestricted 43,754,879 46,734,364 45,250,090 43,245,050 47,426,352 51,898,566 40,928,090 42,900,814 42,803,759 42,377,297 Total governmental activities net position 371,188,427 382,421,532 400,422,165 411,308,460 408,642,054 416,383,399 421,493,212 436,774,978 446,026,906 447,588,227 Business-type activities: Net Investment in Capital Assets 150,621,492 152,343,987 166,289,542 173,709,864 165,619,867 169,098,916 187,604,782 195,490,061 205,677,614 208,136,620 Restricted 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 1,924,566 Unrestricted 29,546,169 28,642,334 30,523,974 30,439,381 32,880,216 37,724,080 32,974,662 40,797,698 41,627,494 49,088,740 Total business-type activities net position 182,238,880 185,093,449 200,967,498 208,868,303 215,339,672 220,938,606 225,343,784 239,398,173 249,162,078 259,149,926 Primary government: Net Investment in Capital Assets 465,313,474 472,850,688 507,230,654 528,609,158 511,815,660 517,179,421 548,699,024 562,618,955 579,046,520 583,345,601 Restricted 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 31,926,516 Unrestricted 73,301,048 75,376,698 75,774,064 73,684,431 80,306,568 89,622,646 73,902,752 83,698,512 84,431,253 91,466,037 Total primary government net position 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$ 706,738,153$ 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: 2018 CAFR Statistical Section 155 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Expenses Governmental activities: General government 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$ 10,191,329$ Public safety 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 30,337,791 Transportation 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 17,620,176 Physical environment 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 3,794,576 Culture and recreation 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 13,665,612 Economic environment 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 4,140,104 Health and human services 527,029 578,247 619,172 633,175 510,285 622,374 925,299 573,115 674,270 787,535 Interest on long-term debt 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 1,502,236 Total governmental activities expenses 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 82,039,359 Business-type activities: Water 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 12,499,974 Sewer 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 26,213,221 Storm drainage 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 9,374,373 Solid waste 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 15,311,654 Golf course 1,909,758 1,844,108 1,903,836 1,912,174 1,933,597 - - - - - Non-major business-type activities 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 2,186,842 Total business-type activities expenses 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 65,586,064 Total primary government expenses 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$ 147,625,423$ Program revenues Governmental activities: Charges for services General Government 814,095$ 1,168,574$ 1,010,911$ 897,521$ 893,326$ 1,160,198$ 1,243,263$ 939,184$ 1,241,905$ 1,462,867$ Public Safety 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 2,821,516 Transportation 1,587,850 960,532 1,042,147 1,819,851 1,967,778 1,660,270 1,446,026 3,265,147 2,118,980 886,760 Physical Environment 147,996 86,306 103,590 36,766 398,564 276,632 384,485 260,555 431,580 611,342 Culture and Recreation 1,048,390 962,558 1,182,688 880,380 873,970 2,876,185 3,052,599 2,508,166 3,073,262 3,355,206 Economic Environment 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 1,913,090 Health and human services 989 449 7,528 - - - - - - - Total charges for services 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 11,050,781 Operating grants and contributions 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 2,831,794 Capital grants and contributions 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 9,065,857 Total governmental activities program revenues 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 22,948,432 Business-type activities: Charges for services 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 69,723,671 Operating grants and contributions 87,454 70,841 116,735 97,052 90,361 111,025 106,286 106,286 106,286 106,286 Capital grants and contributions 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 4,566,838 Total business-type activities program revenue 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 74,396,795 Total primary government program revenues 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 97,345,227 Net (expense)/revenue Governmental activities (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) (59,090,927) Business-type activities (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 8,810,731 Total primary government net expense (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)$ (50,280,196)$ General revenues and other changes in net position Governmental activities: Taxes: Property taxes 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$ 21,546,734$ Retail sales and use tax 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 21,996,115 Interfund utility taxes 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 4,552,505 Utility taxes 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 9,841,620 Excise taxes 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 4,393,134 Other taxes 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 5,213,217 Investment earnings 570,798 379,316 224,593 178,618 121,687 105,117 118,399 332,520 787,786 1,657,481 Miscellaneous 67,223 214,190 775,969 547,391 (4,625,627) 178,482 194,600 157,874 204,306 428,580 Transfers 170,605 1,463,444 (483,107) (513,428) (218,230) 5,294,793 (462,955) 424,173 454,436 414,975 Total governmental activities 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 70,044,361 Business-type activities: Investment earnings 312,618 158,211 101,694 82,903 68,400 51,261 70,560 196,595 479,132 989,564 Miscellaneous 3,669,878 1,588,068 2,584,004 1,781,676 763,717 2,700,233 1,881,835 1,085,275 444,110 602,528 Transfers (170,605) (1,463,444) 483,107 513,428 218,230 (5,294,793) 462,955 (424,173) (454,436) (414,975) Total business-type activities:3,811,891 282,835 3,168,805 2,378,007 1,050,347 (2,543,299) 2,415,350 857,697 468,806 1,177,117 Total primary government 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$ 71,221,478$ Change in net position Before Change in Accounting Principle Governmental activities 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 10,953,434 Business-type activities 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 9,987,848 Total primary government 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$ 20,941,282$ Change in Accounting Principle Governmental activities - - - - (222,743) - (13,456,606) 2,512,557 (3,218,004) (9,389,375) Business-type activities - - - - (156,715) - (6,366,678) - - - Total primary government -$ -$ -$ -$ (379,458)$ -$ (19,823,284)$ 2,512,557$ (3,218,004)$ (9,389,375)$ Change in net position After Change in Accounting Principle Governmental activities 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 1,564,059 Business-type activities 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 9,987,848 Total primary government 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$ 11,551,907$ 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: 2018 CAFR Statistical Section 156 2009 2010 2011 (1)2012 2013 2014 2015 2016 2017 2018 General Fund Unreserved 13,237,851$ 15,382,354$ -$ -$ -$ -$ -$ -$ -$ -$ Nonspendable - - - 370,400 127 127 127 - 30,453 38,179 Restricted - - - - - - - - - - Committed - - - - - - - - - - Assigned - - 7,082,130 5,935,567 5,892,611 4,045,598 7,284,159 7,160,098 9,315,528 9,375,470 Unassigned - - 14,193,365 17,395,933 17,751,778 20,914,093 20,267,776 24,991,081 25,414,801 24,627,984 Total General Fund 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 34,041,633 All other governmental funds Reserved 1,538,038 1,592,378 - - - - - - - - Unreserved, Reported In:- - - Special Revenue Funds 15,184,058 15,486,918 - - - - - - - - Capital Projects Funds 10,422,360 12,589,604 - - - - - - - - Permanent Funds 153,503 132,717 - - - - - - - - Total Unreserved 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 1,775,453 Restricted 12,781,743 11,688,536 13,483,593 14,830,180 17,885,173 25,079,227 28,137,106 28,226,498 Committed 3,134,449 3,258,257 3,242,662 5,066,181 3,658,719 5,421,640 3,223,108 3,079,656 Assigned 3,120,372 2,388,684 4,976,833 4,725,119 4,755,182 1,226,315 1,221,511 2,827,045 Unassigned 0 - - - - Total All Other Governmental Funds 27,297,959$ 29,801,617$ -$ 18,811,057$ 23,239,404$ 26,195,628$ 27,884,781$ 33,393,225$ 34,298,859$ 35,908,652$ (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: 2018 CAFR Statistical Section 157 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Revenues Taxes 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$ 62,430,346$ Licenses and permits 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 1,853,554 Intergovernmental 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 12,234,229 Charges for services 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 6,471,503 Fines and forfeits 1,911,034 2,472,411 1,940,326 1,592,957 1,441,603 1,258,408 938,775 905,921 882,254 920,187 Special assessments 107,597 43,502 32,972 39,115 40,772 472,800 7,494 4,111 3,835 2,210 Investment earnings 484,696 386,890 237,056 200,826 144,151 135,709 117,942 279,058 672,713 1,308,888 Miscellaneous 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 1,600,279 Total revenues 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 86,821,196 Expenditures General government 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 9,804,631 Public safety 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 34,226,582 Transportation 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 15,512,706 Physical environment 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 4,128,266 Economic environment 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 4,314,648 Health and human services 527,029 568,911 616,717 616,583 631,997 626,681 925,299 573,115 674,270 787,535 Culture and recreation 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 12,450,884 Capital outlay (1)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 2,145,994 Debt service: Principal 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 1,676,777 Interest / other 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 1,537,504 Total expenditures 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 86,585,527 Excess of revenues over (under) expenditures (27,385,961) (28,642,758) (6,072,258) 817,329 (1,785,006) 3,570,796 3,674,200 7,410,683 3,490,995 235,669 Other financing sources (uses) Transfers in 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 8,205,317 Transfers out (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) (7,838,860) Capital leases 24,549,186 - - - - - - - - - Insurance recoveries 114,607 200,642 154,200 291,210 192,898 136,585 153,041 83,737 134,003 288,518 Issuance of debt 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 127,741 - 1,331,092 800 2,593,405 17,458 21,952 - 2,700 - Total other financing sources (uses)25,745,317 33,290,918 2,653,885 (69,971) 6,155,969 700,730 607,197 184,321 24,242 654,975 Net change in fund balances (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$ 890,644$ Debt service as a percentage of noncapital 1.54%37.50%5.44%6.64%8.71%10.68%5.50%5.14%4.66%4.38% expenditures (1)Capital outlay reported in governmental funds for 2018 are $2,145,994 plus $11,090,346 which is reported for each functional activity with the other funds results in total capital outlay of $13,236,340 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: 2018 CAFR Statistical Section 158 Fiscal Sales Interfund Year Property & Use Utility Utility Excise Other Total 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 2018 21,561,924 21,996,115 4,552,505 9,841,620 4,393,134 85,048 62,430,346 Change 2009-2018 67.0%49.4%32.4%8.5%90.2%62.1%46.8% Source: City of Auburn, Finance Department TAX REVENUES BY SOURCE, GOVERNMENT FUNDS Last Ten Fiscal Years SCHEDULE 5 City of Auburn, Washington $0 $10 $20 $30 $40 $50 $60 $70 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018MillionsFigure 5: Tax Revenues by Source 2009-2018 Excise & Other Utility Interfund Utility Sales & Use Property City of Auburn: 2018 CAFR Statistical Section 159 State Total Total Fiscal Property Personal Land and Assessed Direct Year and Other Property Building Value Rate 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 2018 169,543 918,637 9,611,541 10,699,721 2.03 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 $2 $3 $4 $5 $6 $7 $8 $9 $10 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018MillionsFigure 6: Assessed Value by Type 2009 -2018 State Property Personal Property Land and Buildings City of Auburn: 2018 CAFR Statistical Section 160 Page 1 of 2 Item 2009 2010 2011 2012 Assessed and estimated actual values (1) Estimated and actual value (in thousands)8,723,864$ 7,765,878$ 7,564,507$ 7,225,550$ Assessed value (in thousands)8,723,864 7,765,878 7,564,507 7,225,550 Ratio of assessed to actual 100%100%100%100% Property tax rates (1) Direct regular and special General fund 1.48678$ 1.82336$ 1.93458$ 2.07527$ Debt service funds - - - - Subtotal 1.48678 1.82336 1.93458 2.07527 Overlapping regular and special (1) Auburn School District 4.37709$ 5.09382$ 5.99562$ 6.14004$ King County 1.09772 1.28499 1.33816 1.41588 State of Washington 1.96268 2.22253 2.27990 2.42266 Port of Seattle 0.19700 0.21597 0.22366 0.22982 Sound Transit - - - - Emergency Medical Services 0.27404 0.30000 0.30000 0.30000 Hospital District 0.47141 0.53290 0.55753 0.50000 King County Library District 0.41736 0.48526 0.56621 0.56992 Valley Regional Fire Authority 1.10995 1.17910 1.17977 1.18925 King County Flood Zone 0.91230 0.10514 0.10976 0.11616 King County Ferry District 0.05018 0.00348 0.00360 0.00372 Subtotal 10.86973 11.42319 12.55421 12.88745 Total direct and overlapping 12.35651$ 13.24655$ 14.48879$ 14.96272$ Sources: (1) King County and Pierce County Departments of Assessments; real and personal property has been assessed at 100% of the estimated actual value. City of Auburn, Washington SCHEDULE 7 PROPERTY TAX DATA Last Ten Fiscal Years $1.00 $1.50 $2.00 $2.50 $3.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Per $1,000 of Assessed ValuationFigure 7a: Ten Years City Property Tax Rates 2009 -2018 City of Auburn: 2018 CAFR Statistical Section 161 Page 2 of 2 2013 2014 2015 2016 2017 2018 6,968,719$ 7,422,169$ 8,366,653$ 8,967,119$ 9,721,877$ 10,699,721$ 6,968,719 7,422,169 8,366,653 8,967,119 9,721,877 10,699,721 100% 100% 100% 100% 100% 100% 2.10000$ 2.16739$ 2.08085$ 2.04719$ 2.19668$ 2.03239$ - - - - - - 2.10000 2.16739 2.08085 2.04719 2.19668 2.03239 6.62190$ 6.50262$ 6.14079$ 5.82831$ 6.74299$ 6.29971$ 1.54051 1.51605 1.34522 1.48027 1.38294 1.32735 2.56720 2.47044 2.28514 2.16898 2.03205 2.91820 0.23324 0.21533 0.18885 0.16954 0.15334 0.13518 - - - - 0.25000 0.22745 0.30000 0.33500 0.30217 0.28235 0.26305 0.23940 0.50000 0.50000 0.50000 0.50000 0.50089 0.45689 0.56743 0.56175 0.50276 0.47714 0.45118 0.41190 1.20479 1.20294 1.18043 1.13495 1.06821 0.98189 0.13210 0.15369 0.13860 0.12980 0.11740 0.10708 0.00378 0.00349 - - - - 13.67095 13.46131 12.58396 12.17134 12.96205 13.10505 15.77095$ 15.62870$ 14.66481$ 14.21853$ 15.15873$ 15.13744$ $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Dollars (Rate Per Thousand)Figure 7b: Property Tax Rates Last Ten Fiscal Years Sound Transit Hospital District King County Ferry District King County Flood Zone Valley Regional Fire Authority King County Library District Emergency Medical Services Port of Seattle State of Washington King County Auburn School District City of Auburn: 2018 CAFR Statistical Section 162 Total Tax Collections Fiscal Levy for in Subsequent Current Year Year Fiscal Year Amount % of Levy Years Amount % of Levy Levy Balance King County: 2009 11,671,904 11,390,684$ 97.6%281,064 11,671,748$ 100.0%156$ 2010 12,712,653 12,459,564 98.0%253,580 12,713,144 100.0%(491) 2011 13,069,514 12,846,996 98.3%226,366 13,073,362 100.0%(3,847) 2012 13,403,022 13,167,731 98.2%226,177 13,393,908 99.9%9,113 2013 12,889,446 12,673,712 98.3%220,635 12,894,347 100.0%(4,901) 2014 14,166,992 13,970,560 98.6%186,115 14,156,675 99.9%10,318 2015 15,389,137 15,226,048 98.9%170,558 15,396,606 100.0%(7,469) 2016 16,037,093 15,897,626 99.1%160,506 16,058,132 100.1%(21,039) 2017 18,651,149 18,418,844 98.8%160,622 18,579,465 99.6%71,684 2018 19,100,533 18,872,111 98.8%- 18,872,111 98.8%228,422 281,946$ Pierce County: 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%17,159 1,495,390 100.0%0 2013 1,484,398 1,471,458 99.1%12,801 1,484,260 100.0%138 2014 1,595,675 1,587,010 99.5%8,501 1,595,511 100.0%164 2015 1,746,163 1,739,735 99.6%6,324 1,746,059 100.0%104 2016 1,867,878 1,866,161 99.9%1,289 1,867,450 100.0%429 2017 2,238,227 2,229,137 99.6%6,701 2,235,837 99.9%2,390 2018 2,321,975 2,312,378 99.6%- 2,312,378 99.6%9,596 12,822$ Total current levy balance 294,768$ 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% 96.0% 97.0% 98.0% 99.0% 100.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 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: 2018 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 586,934,541$ 1 5.49%491,218,466$ 1 5.63% EProperty Tax Inc.139,108,400 2 1.30%73,718,900 4 0.85% Safeway 124,197,569 3 1.16%106,729,941 3 1.22% Glimcher Supermall Venture 121,884,218 4 1.14%119,546,742 2 1.37% Principal Life Insurance Co.109,741,800 5 1.03%- 0.00% PPF Industrial 98,337,700 6 0.92%- 0.00% Puget Sound Energy 87,149,356 7 1.30%59,115,114 6 0.68% Prologis (formerly AMB Institutional Alliance)86,877,500 8 0.81%- 0.00% KW Lakeland LLC 68,388,100 9 0.64%- 0.00% TIAA CREF 63,721,100 10 0.60%- 0.00% Universal Health 59,912,292 5 0.69% Belara Communities LLC 51,114,300 7 0.59% Muckleshoot Indian Tribe 50,197,600 8 0.58% UPS Supply Chain Solutions 36,083,797 9 0.41% Wal-Mart Store 25,257,711 10 0.29% TOTALS 1,486,340,284$ 14.38%1,072,894,863$ 12.30% Source: King County and Pierce County Departments of Assessments Total assessed value for 2018:10,699,721,499$ Total assessed value for 2009:8,723,864,000$ 2018 2009 City of Auburn, Washington SCHEDULE 9a PRINCIPAL TAXPAYERS-PROPERTY TAXES Current Year and Nine Years Ago 0% 5% 10% 15% 20% 25% 2009 2018 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% 2009 2018 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 552,026$ Automotive 1 3.0%313,722$ Automotive 1 2.6% 485,717 Automotive 2 2.7%309,568 Distribution 2 2.6% 465,018 Manufacturing 3 2.6%243,202 Automotive 3 2.0% 462,923 Retail Trade 4 2.5%229,605 Retail Trade 4 1.9% 388,752 Automotive 5 2.1%224,637 Automotive 5 1.9% 373,145 Automotive 6 2.1%220,993 Retail Trade 6 1.9% 306,252 Retail Trade 7 1.7%189,806 Retail Trade 7 1.6% 287,418 Automotive 8 1.6%180,350 Automotive 8 1.5% 268,587 Wholesale Trade 9 1.5%179,370 Retail Trade 9 1.5% 263,949 Retail Trade 10 1.5%174,129 Automotive 10 1.5% 3,853,787$ 21.2%2,265,382$ 19.0% Source: Washington State Department of Revenue 2018 2009 City of Auburn, Washington SCHEDULE 9b PRINCIPAL TAXPAYERS-SALES TAXES Current Year and Ten Years Ago City of Auburn: 2018 CAFR Statistical Section 164 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 RETAIL TRADE SECTOR Automotive/gas 2,559$ 2,553$ 2,785$ 3,019$ 3,136$ 3,309$ 3,707$ 3,659$ 3,972$ 4,122$ Furniture 220 194 218 226 235 254 254 185 197 210 Electronics & appliances 132 121 127 145 174 237 295 221 211 229 Building materials 358 389 383 425 447 502 590 579 580 576 Food stores 352 354 331 341 335 353 368 397 369 388 Health & personal care 150 144 148 149 174 188 221 284 369 420 Apparel 781 752 754 772 889 1,009 1,080 1,136 1,119 1,170 General merchandise 833 801 968 967 974 955 988 1,018 993 221 Misc. retail trade 755 834 851 897 990 1,182 1,193 1,032 1,033 1,827 Subtotal - Retail Trade 6,140 6,142 6,566 6,943 7,354 7,989 8,695 8,512 8,843 9,163 SERVICE SECTOR Information 457$ 979$ 481$ 396$ 446$ 487$ 526$ 630$ 662$ 638$ Finance & insurance 83 68 66 53 91 88 95 111 122 140 Real estate, rental, leasing 304 288 304 326 279 315 334 359 368 368 Professional, scientific, technical 200 191 175 173 184 216 195 238 239 254 Administrative, supply & remediation services 261 239 295 334 336 350 383 329 276 424 Educational 42 56 53 54 50 49 60 50 56 47 Healthcare & social services 61 37 41 115 33 66 82 92 75 93 Arts & entertainment 147 154 149 153 149 158 208 156 110 119 Accommodation & food service 827 806 839 921 979 1,067 1,159 1,218 1,276 1,435 Other services 485 493 482 530 507 526 603 788 728 711 Subtotal - Services 2,867 3,310 2,882 3,056 3,054 3,322 3,646 3,970 3,912 4,229 OTHER SECTORS Construction 1,368$ 1,322$ 1,296$ 1,221$ 1,943$ 1,754$ 2,297$ 2,292$ 2,632$ 2,310$ Manufacturing 383 411 583 405 624 1,163 862 761 678 754 Transportation 31 29 77 55 46 71 66 99 89 120 Wholesaling 1,073 1,180 1,260 1,297 1,279 1,205 1,229 1,265 1,363 1,469 Other business 47 128 224 61 64 120 72 67 65 154 Subtotal - Other 2,902 3,071 3,439 3,038 3,956 4,312 4,525 4,485 4,827 4,807 GRAND TOTAL 11,909$ 12,523$ 12,887$ 13,037$ 14,364$ 15,623$ 16,866$ 16,967$ 17,582$ 18,198$ 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% 1.40% 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% 10.00% 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 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018MillionsFIGURE 10: RETAIL TAX COLLECTIONS City of Auburn: 2009 -2018 Other Wholesaling Manufacturing Construction Services Other Retail Automotive City of Auburn: 2018 CAFR Statistical Section 165 General Special Public Works Total Percentage Fiscal Obligation Assessment Capital Revenue Trust Fund Primary of Personal Per Year Bonds Bonds Leases Bonds Loans Government Income (1)Capita 2009 36,160,850$ 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 2018 48,427,873 - 282,461 26,523,113 9,360,698 84,594,145 3.58%1,049.36 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 - 300 600 900 1,200 1,500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 FIGURE 11: PER CAPITA DEBT Last Ten Fiscal Years City of Auburn: 2018 CAFR Statistical Section 166 Parks and Utility Total Councilmanic Excess Levy Open Spaces Purpose Capacity December 31, 2018 - Total Assessed Value: 11,393,504,898$ 2.5% of Assessed Value -$ 284,837,622$ 284,837,622$ 284,837,622$ 854,512,866$ 1.5% of Assessed Value 170,902,573 (170,902,573) - - - Statutory Debt Limit 170,902,573 113,935,049 284,837,622 284,837,622 854,512,866 Debt Outstanding 52,097,318 - - - 52,097,318 Net Debt Outstanding 52,097,318 - - - 52,097,318 Remaining Debt Capacity 118,805,255$ 113,935,049$ 284,837,622$ 284,837,622$ 802,415,548$ General Capacity Special Purpose Capacity City of Auburn, Washington SCHEDULE 12 COMPUTATION OF LEGAL DEBT MARGIN As of December 31, 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Debt Limit 577,669$ 565,822$ 539,989$ 518,188$ 546,602$ 617,872$ 661,996$ 716,628$ 791,936$ 854,513$ Total net debt applicable to limit 62,671 66,868 65,364 63,815 64,047 61,892 59,409 57,152 54,208 52,097 Legal debt margin 514,998$ 498,954$ 474,625$ 454,372$ 482,554$ 555,980$ 602,588$ 659,476$ 737,728$ 802,416$ Total net debt applicable to the limit as a percentage of debt limit 10.85%11.82%12.10%12.32%11.72%10.02%8.97%7.98%6.85%6.10% City of Auburn, Washington SCHEDULE 13 LEGAL DEBT MARGIN RATIOS Last Ten Fiscal Years (Expressed in Thousands) City of Auburn: 2018 CAFR Statistical Section 167 Net Debt Percent Bonded Amount Outstanding Applicable (3)Applicable Net direct debt: Net direct debt - City of Auburn (1)52,018,583$ Estimated net overlapping debt: (2) King County 652,024,000$ 1.77%11,540,825$ Port of Seattle 362,389,998 1.77%6,414,303 School District No. 210 309,929,548 2.83%8,771,006 School District No. 408 335,825,000 77.98%261,876,335 School District No. 415 229,341,000 1.28%2,935,565 Rural Library District 79,175,000 3.12%2,470,260 Valley Regional Fire Authority 11,520,000 89.85%10,350,720 Pierce County 111,615,000 1.00%1,117,609 Total estimated net overlapping debt 305,476,623 Total direct and overlapping debt 357,495,206$ 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, 2018 City of Auburn, Washington SCHEDULE 14 City of Auburn: 2018 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 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 2018 80,615 10,699,721 48,427,873 - 48,428 0.45% 601 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 $0 $200 $400 $600 $800 $1,000 - 0.0020 0.0040 0.0060 0.0080 0.0100 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Debt/Assessed ValueYear FIGURE 15: BONDED DEBT RATIOS Last Ten Fiscal Years Debt/AV Debt/Pop City of Auburn: 2018 CAFR Statistical Section 169 Direct(2)Debt Service Requirements Gross (1)Operating Net Revenue Times Year Revenue Expense Available Principal Interest Total (3)Coverage 2009 31,265,941$ 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 2018 53,103,312 46,729,765 6,373,547 2,482,692 1,391,468 3,874,160 1.65 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 $0 $2 $4 $6 $8 $10 $12 $14 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Millions YEAR FIGURE 16: UTILITY BOND COVERAGES Last Ten Fiscal Years Net revenue available Debt service requirements City of Auburn: 2018 CAFR Statistical Section 170 Item 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 School enrollment (1)14,589 14,482 14,363 14,596 14,971 15,277 15,663 15,945 16,525 16,705 Rate of unemployment (2)8.8%9.7%8.7%7.5%6.0%5.4%4.9%4.4%4.5%4.2% Population (3)67,485 70,180 70,705 71,240 73,235 74,630 75,545 77,060 78,960 80,615 Personal income (thousands of dollars) (4)1,989,660$ 1,900,474$ 1,901,540$ 1,871,973$ 1,917,219$ 2,000,606$ 2,033,520$ 2,111,829$ 2,206,142$ 2,365,567$ Per capita personal income (4)29,483$ 27,080$ 26,894$ 26,277$ 26,179$ 26,807$ 26,918$ 27,405$ 27,940$ 29,344$ Housing units (5) One unit 14,235 14,641 14,775 14,957 15,393 15,804 16,042 16,167 16,373 16,616 Two or more 10,391 10,560 10,592 10,631 10,841 10,841 10,847 10,854 11,110 11,417 Mobile home or special 2,782 2,633 2,635 2,618 2,630 2,631 2,637 2,630 2,675 2,659 Total housing units 27,408 27,834 28,002 28,206 28,864 29,276 29,526 29,651 30,158 30,692 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 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 FIGURE 17: POPULATION AND HOUSING TRENDS Last Ten Fiscal Years Population Total housing units City of Auburn: 2018 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 5,700 1 14.5%5,179 1 17.4% Muckleshoot Tribal Enterprises Gaming 3,494 2 8.9%2,500 2 8.4% The Outlet Collection*Retail 3,150 3 8.0%1,700 4 5.7% Auburn School District Education 2,513 4 6.4%1,800 3 6.0% Multicare Auburn Medical Center**Hospital 1,638 5 4.2%805 6 2.7% Green River College Education 1,202 6 3.1%1,067 5 3.6% Emerald Downs Racetrack Gaming 1,150 7 2.9%678 7 2.3% Safeway Distribution Center Distribution 825 8 2.1%650 8 2.2% Zones, Inc.Technology Reseller 551 9 1.4%500 10 1.7% Skills, Inc Manufacturing 610 10 1.5%0.0% Federal Aviation Administration Federal Government - -0.0%500 10 1.7% General Services Administration Federal Government - -0.0%500 10 1.7% Social Security Administration Gov't / Public Offices 0.0%600 9 2.0% Totals 20,833 52.9%16,479 55.3% 2018 - City of Auburn, Economic Development 2009 - City of Auburn CAFR * Previously the Supermall. **Previously Auburn Regional Medical Center. 2018 2009 City of Auburn, Washington SCHEDULE 18 MAJOR EMPLOYERS Current Year and Nine Years Ago 0% 20% 40% 60% 80% 100% 2009 2018 FIGURE 18a: AUBURN EMPLOYMENT BASE PERCENTAGE OF TOP EMPLOYER COMPARED TO ALL EMPLOYERS Last Ten Fiscal Years Top employer All employers 0% 20% 40% 60% 80% 100% 2009 2018 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: 2018 CAFR Statistical Section 172 Department 2009 2010(2)2011 2012 2013 2014 2015 2016 2017 2018 Mayor 12 10 10 7 7 3 3 3 3 3 Administration (4)- - - - - 8 8 10 11 12 Human Resources 9 7 7 8 8 8 8 9 8 8 Finance 25 21 22 22 23 23 22 22 22 22 Municipal Court (3)21 17 19 - - - - - - - Legal 16 13 13 13 13 14 14 14 15 15 Community Development (5)34 24 24 28 29 25 26 26 26 25 Police 152 131 118 122 125 126 129 131 138 140 Public Works 63 43 43 43 48 49 50 53 54 55 Parks, Arts and Recreation (6)40 35 36 36 36 45 45 47 47 47 Street 14 12 19 19 19 19 19 19 20 20 Water 20 22 22 22 22 24 23 23 23 23 Sewer 11 11 12 11 10 10 10 10 10 10 Storm Drainage 17 16 10 10 10 10 10 10 10 12 Solid Waste 2 2 2 2 2 2 2 2 2 2 Airport (8)- - - - - - - - - 3 Cemetery 7 7 7 7 5 5 5 6 6 6 Golf Course (6)9 8 8 8 8 - - - - - Facilities (1)10 10 10 9 9 9 10 10 10 10 Multi-Media (7)- - - - - 4 4 4 4 4 Innovation & Technology 18 14 14 18 18 15 16 16 17 17 Equipment Rental 11 6 6 7 10 12 12 12 12 12 TOTAL 490 408 401 391 402 411 416 427 438 446 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. (8)In 2018, 3.0 FTEs were added to the Airport now that the Airport is to be managed in-house. This was approved via Budget Amendment #6, Ordinance No. 6684. City of Auburn, Washington SCHEDULE 19 STAFFING LEVELS BY DEPARTMENT Last Ten Fiscal Years - 20 40 60 80 100 120 140 160 Police Public Works/Streets Parks, Arts & Recreation Utilities Administration Community Development OtherNumber of EmployeesFIGURE 19: STAFFING LEVELS BY TYPE OF SERVICE Last Ten Fiscal Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 City of Auburn: 2018 CAFR Statistical Section 173 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Planning* Commercial permits 112 18 38 24 32 64 52 79 37 31 Commercial construction value ($1,000's)58,896$ 8,386$ 10,904$ 13,219$ 28,357$ 35,786$ 36,289$ 74,887$ 48,157$ 49,295$ Residential permits 85 184 229 461 464 374 253 242 178 108 Residential construction value ($1,000's)15,739$ 36,602$ 43,574$ 98,212$ 96,248$ 83,007$ 62,043$ 68,997$ 54,132$ 21,969$ Police Crimes: Arson 19 23 29 27 14 32 - - 19 20 Aggravated Assault 163 137 148 110 145 156 186 179 198 158 Burglary 590 725 757 983 651 810 851 727 722 615 DUI 193 192 214 171 138 126 188 158 194 223 Homicide 3 3 2 6 5 1 8 6 3 1 Narcotics 440 442 396 383 279 458 511 458 742 912 Rape 13 15 23 23 26 31 31 36 49 42 Robbery 92 79 107 110 109 104 91 98 117 115 Theft 2,362 2,533 2,435 2,415 2,583 3,192 2,728 2,235 2,169 2,945 Theft - motor vehicle 370 569 600 588 678 630 996 1,159 969 973 Traffic: Non-criminal 7,788 7,182 5,400 4,922 5,378 6,520 5,489 5,706 11,483 10,946 Parking 4,026 4,648 3,383 1,946 2,052 5,238 3,737 3,822 3,777 3,477 Parks and Recreation Athletic teams 428 439 429 388 382 358 321 328 306 312 Recreation activities 2,335 2,281 3,462 3,833 3,568 3,557 3,511 2,435 3,389 3,498 Golf course rounds 50,572 49,950 45,484 45,704 47,480 47,697 52,718 48,803 47,001 50,720 Senior center visits 41,032 41,350 41,802 40,704 36,991 40,715 38,485 36,636 35,454 32,464 Cultural activities 90 101 127 146 180 202 204 203 214 211 Museum audience served 11,835 12,570 14,119 15,397 14,163 13,968 13,535 14,380 13,570 15,153 Cemetery placements 232 228 273 259 226 250 237 281 264 263 Sources: Various city departments * Includes new construction only. City of Auburn, Washington SCHEDULE 20 OPERATING INDICATORS BY DEPARTMENT Last Ten Fiscal Years City of Auburn: 2018 CAFR Statistical Section 174 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 General City Total area (square miles)30.1 30.1 30.2 30.2 30.2 30.2 30.2 30.2 30.2 30.2 Public Works Miles of streets 276 283 285 249 245 244 254 238 238 247 Number of streetlights 5,392 5,523 5,581 6,101 6,110 6,211 6,362 6,552 6,581 6,738 Number of traffic signals 85 86 89 93 94 94 95 95 95 95 Utilities Number of services 13,076 13,372 13,334 13,863 14,106 14,573 14,787 14,872 14,746 14,769 Miles of water lines 293 297 304 314 315 316 320 321 323 347 Miles of sanitary sewer lines 207 213 213 219 220 220 223 224 225 227 Miles of storm lines 204 226 247 252 263 282 294 319 337 362 Number of fire hydrants 2,998 3,044 3,277 3,308 3,329 3,559 3,580 3,577 3,595 3,664 Public Safety Number of police stations 2 2 2 2 2 2 2 3 3 3 Parks and Recreation Total park acreage (1)602 602 602 630 635 972 977 989 986 986 Number of softball/baseball fields 18 18 18 17 17 18 18 18 18 18 Number of soccer/football fields 3 3 3 3 4 4 4 4 4 4 Number of playgrounds 33 35 35 35 36 28 31 31 30 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 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Water Customers by Class Single Family Residential 10,535 10,564 10,704 11,224 11,476 11,822 11,973 12,054 12,010 12,010 Multifamily 985 991 991 989 986 1,000 1,003 1,002 1,009 1,012 Commercial 1,083 1,100 1,095 1,098 1,094 1,146 1,190 1,186 1,158 1,159 Mfr./Industrial 38 38 38 37 37 38 38 37 2 2 Schools 37 37 37 36 37 37 37 38 37 37 City Accounts 27 29 28 26 28 30 30 31 31 30 Irrigation 363 401 434 446 441 493 509 517 492 512 Total Retail Water Customers 13,068 13,160 13,327 13,856 14,099 14,566 14,780 14,865 14,739 14,762 Wholesale Water Customers 7 8 8 7 7 7 7 7 7 7 Sewer Customers by Class Single Family Residential 10,711 10,918 11,183 11,522 11,982 12,631 12,890 13,091 13,124 13,176 Non-single Family Residential 2,605 2,612 2,616 2,653 2,659 2,713 2,728 2,725 2,724 2,728 Total Sewer Customers 13,316 13,530 13,799 14,175 14,641 15,344 15,618 15,816 15,848 15,904 Storm Customers by Class Single Family Residential 14,441 14,495 14,846 15,168 15,618 16,013 16,222 16,200 16,566 16,610 Non-single Family Residential 1,650 1,769 1,653 1,661 1,640 1,670 1,679 1,913 1,671 1,691 Total Storm Customers 16,091 16,264 16,499 16,829 17,258 17,683 17,901 18,113 18,237 18,301 Sources: City of Auburn - Utility Billing City of Auburn, Washington SCHEDULE 22 NUMBER OF UTILITY CUSTOMERS BY CUSTOMER CLASS Last Ten Fiscal Years City of Auburn: 2018 CAFR Statistical Section 175