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Home My WebLink About3 - Combined Financial Stmts CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS AS OF DECEMBER 31, 2002 AND 2001 Page 1 of 4 ASSETS AND OTHER DEBITS: CURRENT ASSETS: CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - NON-EXPENDABLE TRUST DEPOSITS WITH FISCAL AGENT INVESTMENTS (NOTE 3) RECEIVABLES: TAXES CUSTOMER ACCOUNTS SPECIAL ASSESSMENTS DELINQUENT DEFERRED ACCRUED INTEREST OTHER RECEIVABLES INTERFUND RECEIVABLE (NOTE 5) DUE FROM OTHER GOVERNMENTAL UNITS (NOTE 6) INVENTORIES RESTRICTED ASSETS: CASH LONG-TERM CONTRACTS AND NOTES RECEIVABLE INVESTMENT IN JOINT VENTURE (NOTES 7,14) FIXED ASSETS, NET OF DEPRECIATION (NOTE 7) LONG-TERM INVESTMENTS (NOTE 3) DEFERRED CHARGES AMTS AVAIL FOR DEBT SERVICE FUND AMT TO BE PROVIDED FOR FUTURE YEAR See accompanying notes to the financial statements. Page 26 $ 12,497,920 $ 6,339,144 $ 1 ,843,957 $ 15,182,189 25,000 2,017,500 2,018,640 368,161 938 7 10,945 114,245 575,434 110,179 914,769 1,751,019 1,089,314 99,096 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS Page 2 of 4 $ 18,283,272 $ 6,595,044 $1,314,745 $ $ $ 62,056,271 $ 58,386,519 274,117 274,117 1,185,832 25,000 45,000 4,036,140 369,106 359,992 5,848,825 74 5,859,844 5,263,987 114,245 153,375 575,434 725,265 110,179 111,835 914,769 1,183,890 161,056 51,270 8,841 2,999,540 3,901,748 126,359 49,269 175,628 175,578 4,463,856 4,463,856 10,527,412 2,000,142 47,689,505 49,689,647 2,157,642 3,787,975 3,787,975 3,787,975 117,959,003 3,392,314 121,351,317 156,482,230 3,585,262 3,585,262 1,071,430 158,837 158,837 180,209 1,843,957 1,843,957 1,923,800 "continued" Page 27 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS AS OF DECEMBER 31, 2002 AND 2001 Page 3 of 4 LIABILITIES, EQUITIES & OTHER CREDITS: LIABILITIES: CURRENT LIABILITIES: CURRENT PAY ABLES $ 1,126,079 $ 1,727,037 $ $ 348,637 CUSTOMER DEPOSITS 223,874 MATURED BONDS PAYABLE 25,000 INTERFUND PAYABLE (NOTE 5) DUE TO OTHER GOVERNMENTAL UNITS 2,500 OTHER LIABILITIES PAYABLE PAYABLE FROM RESTRICTED ASSETS: GENERAL OBLIGATION BONDS (NOTE 10) REVENUE BONDS (NOTE 10) ACCRUED INTEREST DEPOSITS LONG-TERM BONDS PAYABLE: GENERAL OBLIGATION (NOTE 10) SPECIAL ASSESSMENTS (NOTE 10) REVENUE BONDS (NOTE 10) DEFERRED REVENUE 533,687 7,644 799,865 EMPLOYEE LEAVE BENEFITS (NOTE 10) OTHER LONG TERM LIABILITIES DEFERRED CREDITS FUND EQUITIES AND OTHER CREDITS: INVESTMENTS IN GENERAL FIXED ASSET (NOTE 7) INVESTMENTS IN JOINT VENTURE (NOTES 7,14) CONTRIBUTED CAPITAL RETAINED EARNINGS: RESERVED FOR DEBT SERVICE (NOTE 12) RESERVED FOR CONSTRUCTION (NOTE 12) RESERVED FOR GAIN/(LOSS) INVEST. UNRESERVED FUND BALANCE: RESERVED FOR PETTY CASH (NOTE 12) 6,025 RESERVED FOR CONTRIBUTIONS (NOTE 12) RESERVED FOR DEBT SERVICE (NOTE 12) 42,118 RESERVED FOR ENDOWMENT (NOTE 12) RESERVED FOR PENSION FUND (NOTE 12) RESERVED FOR LID GUARANTEE (NOTE 12) 1,801,839 UNRESERVED: DESIGNATED FOR RETIREMENTS 587,600 DESIGNATED FOR MITIGATION 984,659 UNDESIGNATED 15,082,927 6,726,196 14,932,648 See accompanying notes to the financial statements. Page 28 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS Page 4 of 4 $ 1,223,686 $ 70,084 $ 337,321 $ $ $ 4,832,844 $ 4,090,428 51,003 274,877 250,931 25,000 45,000 161,056 2,327,000 2,329,500 14 20,771 30,000 30,000 960,000 960,000 920,000 651,723 651,723 663,142 102,364 102,364 147,244 1,575,000 3,470,000 5,045,000 5,245,000 548,904 548,904 738,904 9,230,000 9,230,000 10,190,000 26,742 38,890 1,406,828 1,635,033 216,353 60,058 2,675,669 2,952,080 3,398,138 7,826,039 1,367,108 9,193,147 9,822,157 47,689,505 47,689,505 40,886,468 3,787,975 3,787,975 3,787,975 101,040,651 5,435,653 106,476,304 101,416,737 1,403,819 1,403,819 1,388,124 631,008 631,008 903,834 3,123 3,123 2,222 23,820,870 4,470,832 28,291,702 25,884,161 6,025 6,025 12,718 42,118 142,564 1,020,569 1,020,569 981,544 3,552,973 3,552,973 3,668,268 1,801,839 1,781,236 587,600 574,315 984,659 994,803 233,286 36,975,057 35,765,331 Page 29 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUND FOR THE FISCAL YEARS ENDED DECEMBER 31, 2002 AND 2001 Page 1 of 2 REVENUE: TAXES $ 31,295,717 $ 103,781 $ - $ 2,340,706 LICENSES AND PERMITS 973,410 INTERGOVERNMENTAL 2,046,809 7,175,003 110,149 CHARGES FOR SERVICES 1,409,783 580,220 20,765 FINES AND FORFEITS 763,839 SPECIAL ASSESSMENTS 144,148 MISCELLANEOUS 682,470 193,186 91 ,497 298,462 TOTAL REVENUES 37,172,028 8,052,190 235,645 2,770,082 EXPENDITURES: CURRENT: GENERAL GOVERNMENT 5,342,269 SECURITY OF PERSONS & PROPERTY 21,438,580 104,428 PHYSICAL ENVIRONMENT 2,368,407 TRANSPORTATION 1,716,086 7,522,137 ECONOMICS ENVIRONMENT 1,191,555 490,084 MENTAL & PHYSICAL HEALTH 490,999 CULTURE AND RECREATION 3,668,703 2,366 CAPITAL OUTLAY 1,683,120 DEBT SERVICE: PRINCIPAL RETIREMENT 335,000 702,065 INTEREST & FISCAL CHARGES 215,488 2,069,173 TOTAL EXPENDITURES 36,216,599 8,119,015 550,488 4,454,358 EXCESS REVENUE OVER EXPENDITURES 955,429 (66,825) (314,843) (1,684,276) OTHER FINANCING SOURCES (USES): SALE OF GENERAL FIXED ASSETS 3,570 PROCEEDS OF LONG-TERM DEBT 2,069,173 OPERATING TRANSFERS IN 848,941 1,074,762 245,000 3,050,000 OPERATING TRANSFER (OUT) (3,400,715) (1,217,502) (10,000) (451,406) TOTAL OTHER FINANCING SOURCES/USES (2,548,204) (142,740) 235,000 4,667,767 EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES (1,592,775) (209,565) (79,843) 2,983,491 FUND BALANCE AT BEGINNING OF YEAR 17,279,327 7,920,420 1,923,800 11,949,157 PRIOR PERIOD ADJUSTMENT BEGINNING FUND BALANCE RESTATED 17,279,327 7,920,420 1,923,800 11,949,157 RESIDUAL EQUITY TRANSFER-IN RESIDUAL EQUITY TRANSFER-(OUT) (10,000) FUND BALANCE AT END OF YEAR $ 15,676,552 $ 7,710,855 $ 1,843,957 $ 14,932,648 See accompanying notes to the financial statements. Page 30 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS Page 2 of 2 $ $ 33,740,204 $ 34,343,324 973,410 1,120,433 9,331,961 17,243,334 2,010,768 2,313,490 763,839 623,427 144,148 302,290 66,684 1,332,299 2,180,146 66,684 48,296,629 58,126,444 5,342,269 4,480,244 21,543,008 20,459,407 2,368,407 2,386,732 9,238,223 18,019,216 1,681,639 1,514,486 490,999 420,440 74,254 3,745,323 3,583,816 1,683,120 2,612,769 1,037,065 415,000 2,284,661 227,297 74,254 49,414,714 54,119,407 (7,570) (1,118,085) 4,007,037 3,570 2,069,173 5,218,703 6,270,037 (5,079,623) (6,118,037) 2,211,823 152,000 (7,570) 1,093,738 4,159,037 39,072,704 35,132,562 56,063 56,063 (62,449) 56,063 39,128,767 35,070,113 92,954 (10,000) (249,400) $ 48,493 $ 40,212,505 $ 39,072,704 Page 31 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL AND SPECIAL REVENUE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31,2002 Page 1 of2 REVENUES: TAXES: GENERAL PROPERTY TAXES $11,198,840 $ 11,673,805 $ 474,965 $ $ 134 $ 134 SALES AND USE TAXES 12,725,000 13,568,518 843,518 INTERFUND TAXES 1,013,200 1,078,845 65,645 BUSINESS TAXES 4,153,600 4,193,983 40,383 EXCISE TAXES 841,500 780,566 (60,934) BUSINESS IMPROVEMENT AREA TAXES 53,000 52,839 (161) HOTEL/MOTEL EXCISE TAX 45,000 48,971 3,971 PENAL TIES AND INTEREST-TAXES 100 1,837 1,737 LICENSES AND PERMITS 940,700 973,410 32,710 INTERGOVERNMENTAL 1 ,828,925 2,046,809 217,884 10,182,129 7,175,003 (3,007,126) CHARGES FOR SERVICES 1,457,500 1,409,783 (47,717) 732,000 580,220 (151,780) FINES AND FORFEITS 590,300 763,839 173,539 MISCELLANEOUS 737,650 682,470 (55,180) 222,354 193,186 (29,168) EXPENDITURES: GENERAL GOVERNMENT: MAYOR AND COUNCIL 405,000 355,111 49,889 PERSONNEL 2,140,900 1,766,631 374,269 FINANCE 2,376,500 1 ,943,182 433,318 CITY ATTORNEY 1,581,025 1,277,345 303,680 SECURITY OF PERSONS AND PROPERTY: POLICE 13,067,250 12,222,556 844,694 132,149 104,428 27,721 FIRE 8,338,200 7,863,376 474,824 PUBLIC WORKS 1,645,770 1,352,648 293,122 PHYSICAL ENVIRONMENT: PUBLIC WORKS 2,791,320 2,368,407 422,913 TRANSPORTATION: STREET 1,867,300 1,716,086 151,214 13,144,500 7,522,137 5,622,363 See accompanying notes to the financial statements Page 32 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL AND SPECIAL REVENUE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31,2002 Page 2 of 2 ECONOMIC ENVIRONMENT: PLANNING & COMMUNITY DEVELOPMENT 1,942,000 1,191,555 750,445 596,984 490,084 106,900 PLANNING & COMMUNITY DEVELOP 503,800 490,999 12,801 CULTURE AND RECREATION: PARKS AND RECREATION 4,446,145 3,668,703 777,442 55,200 2,366 52,834 EXCESS REVENUE OVER EXPENDITURES (5,617,995) 955,429 6,573,424 (2,694,250) (66,825) 2,627,425 OTHER FINANCING SOURCES (USES): SALE OF GENERAL FIXED ASSETS 3,570 3,570 OPERATING TRANSFERS-IN 833,080 848,941 15,861 1,604,715 1,074,762 (529,953) OPERATING TRANSFERS-(OUT) (3,461,915) (3,400,715) 61,200 (1,392,000) (1,217,502) 174,498 EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES (8,246,830) (1,592,775) 6,654,055 (2,481,535) (209,565) 2,271,970 FUND BALANCES AT BEGINNING OF YEAR 17,279,327 17,279,327 7,920,325 7,920,420 95 PRIOR PERIOD ADJUSTMENTS BEGINNING FUND BALANCE RESTATED 17,279,327 17,279,327 7,920,325 7,920,420 95 RESIDUAL EQUITY TRANSFERS (OUT) (10,000) (10,000) Page 33 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND EQUITY ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS FOR THE FISCAL YEARS ENDED DECEMBER 31,2002 AND 2001 OPERATING REVENUES: CHARGES FOR SERVICE $ 29,709,399 $ 1 ,445,049 $ 39,025 $ 31,193,473 $ 30,237,757 INTEREST 3,648 3,648 3,531 OTHER OPERATING REVENUE 5,307 5,307 25,604 TOTAL OPERATING REVENUES 29,718,354 1,445,049 39,025 31,202,428 30,266,892 OPERATING EXPENSES: OPERATIONS & MAINTENANCE 18,735,791 706,458 19,442,249 18,815,683 ADMINISTRATION 2,958,395 534,032 3,492,427 3,546,467 TAXES 1,915,528 1,915,528 1 ,862,830 DEPRECIA TION/AMORTIZA TION 3,076,410 656,415 3,732,825 3,521,075 OTHER OPERATING EXPENSES 705 TOTAL OPERATING EXPENSES 26,686,124 1,896,905 28,583,029 27,746,760 OPERATING INCOME (LOSS) 3,032,230 (451,856) 39,025 2,619,399 2,520,132 NON-OPERATING REVENUES (EXPENSES): INTEREST REVENUE 419,979 126,556 75,694 622,229 1,365,656 OTHER NON-OPERATING REVENUE 220,490 3,823 224,313 162,355 GAIN(LOSS) SALE OF FIXED ASSETS 2,007 (2,200) (193) (26,579) INTEREST EXPENSE (722,098) (722,098) (1,005,963) OTHER NON-OPERATING EXPENSES (328,797) (328,797) (1,313) TOTAL NON-REVENUE/EXPENSE (408,419) 128,179 75,694 (204,546) 494,156 OPERATING TRANSFERS OPERATING TRANSFERS-IN 51,697 51,697 OPERATING TRANSFERS-(OUT) (179,080) (5,000) (46,696) (230,776) (152,000) TOTAL OPERATING TRANSFERS (127,383) (5,000) (46,696) (179,079) (152,000) NET INCOME (LOSS) BEFORE CONTRIBUTIONS 2,496,428 (328,677) 68,023 2,235,774 2,862,288 CAPITAL CONTRIBUTIONS 4,868,866 190,703 5,059,569 NET INCOME (LOSS) 7,365,294 (137,974) 68,023 7,295,343 2,862,288 EQUITIES: RETAINED EARNINGS/FUND BALANCE AT BEGINNING OF YEAR 23,378,832 4,799,509 1,185,832 29,364,173 31,628,162 CONTRIBUTED CAPITAL AT AT BEGINNING OF YEAR 96,171,787 5,244,950 101,416,737 101,416,736 PRIOR PERIOD ADJUSTMENTS (16,442) (16,442) (4,982,827) BEGINNING RETAINED EARNINGS/ FUND BALANCE RESTATED 119,534,177 1 0,044,459 1,185,832 130,764,468 128,062,071 RESIDUAL EQUITY TRANSFER-IN 3,947 RESIDUAL EQUITY TRANSFER-(OUT) (147,396) FUND EQUITY AT END OF YEAR $ 126,899,471 $ 9,906,485 $ 1,253,855 $ 138,059,811 $ 130,780,910 See accompanying notes to the financial statements. Page 34 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS FOR THE FISCAL YEARS ENDED DECEMBER 31,2002 AND 2001 Page 1 of2 CASH FLOWS FROM OPERATING ACTIVITES: CASH RECEIVED FROM USERS $29,187,737 $ 1,445,049 $ 39,025 $ 30,671,811 $ 30,074,608 CASH RECEIVED FROM DEFERRED REV 83,722 83,722 CASH PAID TO SUPPLIERS (17,256,735) (763,323) (18,020,058) (17,195,910) CASH PAID FOR TAXES (1,853,874) (1,853,874) (1,919,549) CASH PAID FOR INVENTORY (55,841) (221,994) (277,835) (285,667) CASH PAID TO EMPLOYEES (4,907,651) (477,166) (5,384,817) (4,933,433) OTHER CASH RECEIVED 119,788 119,788 33,659 CASH FLOW FROM NONCAPITAL FINANCING ACTIVITIES: INTERFUND LOAN RECEIVABLE 7,056 7,056 7,056 INTEREST ON LOAN RECEIVABLE 917 OPERATING GRANTS RECEIVED 41,496 41,496 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PROCEEDS FROM SALE OF FIXED ASSETS 90,111 90,111 33,177 PURCHASE OF FIXED ASSETS (5,424,599) (643,774) (6,068,373) (7,464,202) CONTRIBUTED CAPITAL 495,904 190,703 686,607 (380,457) CAPITAL GRANT 3,062 3,062 137,493 PROCEEDS FROM OTHER GOVERNMENTS 641,250 641,250 PRINCIPAL PAYMENT ON BONDS (948,487) (948,487) (1,054,833) INTEREST PAID ON BONDS (712,095) (712,095) (771,150) OPERATING TRANSFER -IN 51,697 51,697 3,947 RESIDUAL & OPERATING TRANSFER-(OUT) (179,080) (5,000) (46,696) (230,776) (99,000) DEBT PROCEEDS (LOAN) 6,972,025 OTHER CASH RECEIVED 3,823 3,823 CASH FLOW FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF INVESTMENTS 2,000,000 2,000,000 4,000,000 6,703,440 PURCHASE OF INVESTMENTS (2,000,000) (2,000,000) (4,000,000) INTEREST RECEIVED 384,472 126,556 75,694 586,722 1,257,315 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (322,178) (255,015) 68,023 (509,170) 11,119,436 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 23,069,306 6,850,059 1,185,832 31,105,197 19,985,761 CASH AT END OF YEAR CONSIST OF: CASH AND CASH EQUIVALENTS 18,283,272 6,595,044 1,253,855 26,132,171 20,577,016 RESTRICTED CASH "continued" Page 35 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2002 AND 2001 Page 2 of 2 RECONCILIATION OF NET OPERATING TO NET CASH PROVIDED BY OPERATING ACTIVITIES: ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION 3,076,410 656,415 3,732,825 3,521,075 CHANGES IN ASSETS (INCREASES) DECREASES: ACCOUNTS RECEIVABLE (405,583) (405,583) (178,878) MISCELLANEOUS A/R - REVENUE (100) (100) (2,692) MISCELLANEOUS A/R - GL INVENTORY (58,571) (220,405) (278,976) (293,443) PREPAID EXPENSE CHANGES IN LIABILITIES INCREASES (DECREASES): ACCOUNTS PAYABLE (119,170) (274) (119,444) (187,924) VOUCHERS PAYABLE 108,650 22,661 131,311 419,852 DEPOSITS PAYABLE (47,273) (47,273) 5,963 COMPENSATED ABSENCES PAYABLE (182,034) (23,976) (206,010) 36,168 A/P RELATED TO CAPITAL (87,413) (87,413) 616,067 PRIOR PERIOD ADJUSTMENTS (682,609) INVENTORY RELATED TO CAPITAL DEFERRED CREDITS SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES: CONTRIBUTED CAPITAL $ 4,868,866 $ 190,703 $ $ 5,059,569 $ 4,428,372 See accompanying notes to the financial statements. Page 36 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF CHANGES IN NET PLAN ASSETS FIREMAN'S PENSION FUND FOR THE FISCAL YEARS ENDED DECEMBER 31, 2002 AND 2001 ADDITIONS EMPLOYER CONTRIBUTIONS $ $ OTHER CONTRIBUTIONS: FIRE INSURANCE PREMIUMS 40,868 37,281 INVESTMENT INCOME: Net appreciation (depreciation) in fair value of investments 32,532 41 ,831 Interest 85,824 187,452 118,356 229,283 Less investment expense (78) NET INVESTMENT INCOME 118,278 229,283 TOTAL ADDITIONS 159,146 266,564 DEDUCTIONS BENEFIT PAYMENTS 222,305 178,598 LONG TERM CARE PREMIUMS 36,530 38,341 ADMINISTRATIVE EXPENSES 15,606 13,227 TOTAL DEDUCTIONS 274,441 230,166 NET INCREASE (115,295) 36,398 FUND BALANCE RESERVED FOR EMPLOYEES' PENSION BENEFITS: BEGINNING OF YEAR 3,668,268 3,631,870 END OF YEAR $ 3,552,973 $ 3,668,268 See accompanying notes to the financial statements. Page 37 CITY OF AUBURN: 2002 CAFR GENERAL PURPOSE FINANCIAL STATEMENTS Page 38 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS City of Auburn NOTES TO THE FINANCIAL STATEMENTS December 31, 2002 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICiES............................................... 40 A. REPORTING ENTITY......................................................................................................... 40 B. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND BASIS OF PRESENTATION ..............................................................................................40 C. BASIS OF ACCOUNTING ..................................................................................................42 D. BUDGET AND BUDGETARY ACCOUNTING.................................................................... 43 E. ASSETS, LIABILITIES, AND FUND EQUITY..................................................................... 44 1. DEPOSITS AND INVESTMENTS ............................................................................... 44 2. RECEiVABLES............................................................................................................ 45 3. INTERFUND RECEIVABLES AND PAYABLES .........................................................45 4. AMOUNTS DUE FROM OTHER GOVERNMENTAL UNITS...................................... 45 5. INVENTORIES............................................................................................................ 45 6. RESTRICTED ASSETS............................................................................................... 45 7. INTERFUND ..TRANSACTIONS................................................................................. 45 8. FIXED ASSETS........................................................................................................... 46 9. DEFERRED CREDITS/CHARGES ............................................................................. 46 10. COMPENSATED ABSENCES ....................................................................................46 11. DEFERRED REVENUES ............................................................................................47 12. RESERVATIONS AND DESIGNATIONS OF FUND EQUITY .................................... 47 F. REVENUES, EXPENDITURES AND EXPENSES ............................................................. 47 G. MEMORANDUM ONLY - TOTAL COLUMNS .................................................................. 48 H. FUTURE CHANGES IN ACCOUNTING STANDARDS .....................................................48 NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY.............................................. 48 NOTE 3 - DEPOSITS AND INVESTMENTS......................................................................................48 NOTE 4 - PROPERTY TAXES........................................................................................................... 50 NOTE 5 - INTERFUND ACTIVITY ..................................................................................................... 51 NOTE 6 - DUE FROM OTHER GOVERNMENTAL UNITS ............................................................... 53 NOTE 7 - FIXED ASSETS AND DEPRECiATION............................................................................. 53 NOTE 8 - RECORDED VACATION, SICK LEAVE, AND POST-EMPLOYMENT BENEFITS .......... 54 NOTE 9 - PENSION PLANS .............................................................................................................. 54 NOTE 10 - LONG-TERM DEBT......................................................................................................... 60 NOTE 11 - CONTRIBUTED CAPITAL ...............................................................................................63 NOTE 12 - FUND EQUiTy................................................................................................................. 63 NOTE 13 - ENTERPRISE FUND SEGMENT INFORMATION .......................................................... 64 NOTE 14 - JOINT VENTURE / RELATED PARTY............................................................................ 65 NOTE 15 - CONTINGENCIES AND LITIGATION ............................................................................. 67 NOTE 16 - RISK MANAGEMENT/INSURANCE................................................................................ 67 NOTE 17 - RESTATEMENTS AND PRIOR PERIOD ADJUSTMENTS ............................................ 68 Page 39 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Auburn, King County, Washington, was incorporated in 1891. It operates under the laws of the State of Washington applicable to a Non-Charter Code City under a Mayor/Council form of government. A full-time mayor and seven part-time council members administer Auburn, all elected at-large to four-year terms. The City provides a range of municipal services authorized by state law, including water services, sanitary sewer collection, solid waste collection, storm drainage, a general aviation airport, a municipal cemetery and municipal golf course. The accounting and reporting policies of the City of Auburn, which conform to Generally Accepted Accounting Principles (GAAP) for governments, are regulated by the Washington State Auditor's Office. The City's significant accounting policies are described in the following notes. A. REPORTING ENTITY The City's Comprehensive Annual Financial Report (CAFR) includes all funds and two separate account groups, known as General Fixed Asset and General Long-Term Debt. Based on the criteria of Governmental Accounting Standards Board (GAS B) Statement No. 14, the Valley Communications Center is included in the accompanying financial statements as a joint venture under the General Fixed Asset Account Group. (Please refer to Note 14). B. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND BASIS OF PRESENTATION The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. Each fund is accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenue, and expenditures or expenses, as appropriate. The City resources are allocated to, and accounted for, in individual funds according to the purpose for which they are spent and how they are controlled. The three broad fund categories, seven generic fund types, and two account groups presented in this report are described below: 1. GOVERNMENTAL FUND TYPES All governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities generally are included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available spendable resources". Governmental fund operating statements focus on measuring cash flows rather than net income; they present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. a. General fund - This fund is used to account for all financial resources and transactions of the City, not accounted for in another fund, as required. 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. c. Debt Service funds - These funds account for the accumulation of resources for, and the payment of, general long-term and special assessment debt principal, interest, and related costs. These funds also include the LID Guarantee fund, which provides financial security for outstanding LID Bonds. Page 40 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS 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. 2. PROPRIETARY FUND TYPES Proprietary funds are accounted for on the "flow of economic resources" measurement focus. This means that all assets and all liabilities (whether current or non-current) associated with their activity are included on their balance sheets. Their reported fund equity is segregated into contributed capital and retained earnings components. Proprietary fund operating statements present increases (revenues and gains) and decreases (expenses and losses) in net total fund equities. The Proprietary fund measurement focus is upon determination of financial position, net income, and cash flow. Pursuant to Statement 20 of the Governmental Accounting Standards Board (GASB), Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the City has chosen to apply all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: FASB Statements and Interpretations, APB Opinion, and ARBs. a. Enterprise funds - These funds are used to account for services to the general public where all or most of the costs, including depreciation, are to be financed or recovered from users of such services. b. Internal Service funds - These funds are used to account for the financing of goods and services provided to other funds, departments, or governments on a cost reimbursement basis. 3. FIDUCIARY FUND TYPES Trust Agency funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These include an expendable trust, a non-expendable trust, a pension trust, and one agency fund. Each trust fund is classified for accounting measurement purposes either as a Governmental fund or a Proprietary fund. Non-expendable trust and pension trust funds are accounted for on the accrual basis in essentially the same manner as Proprietary funds since capital management is critical. The City's Cemetery Endowed Care fund and the Fire Relief and Pension fund are included in this group, although based on actuarial recommendations, there are no employee or employer contributions to the Fire Relief and Pension Plan. Pension benefits are recognized when due; plan administration costs are also recognized when incurred in this fund. The Expendable Special Parks Trust fund is accounted for on the modified accrual basis in essentially the same manner as Governmental funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Page 41 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS 4. ACCOUNT GROUPS Account groups are used to establish accounting control over the City's general fixed assets and general long-term debt. The City uses the following account groups: a. General Fixed Assets Account Group - This account group accounts for all fixed assets of the City other than those accounted for in Proprietary funds. b. General Long-Term Debt - This account group accounts for all long-term debt of the City, other than debt accounted for in Proprietary funds, including special assessment debt. The City's financial statements include the financial position and results of operations of all funds over which the City exercises budgetary control and all internal service and enterprise operations, which the City manages. The financial statements also include the assets and liabilities of all funds for which the City has a custodial or trust responsibility. C. BASIS OF ACCOUNTING Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. The modified accrual basis of accounting is followed in all Governmental, Agency funds, and the Expendable Trust fund of the City. Under the modified accrual basis of accounting, revenues are recognized when measurable and available. Revenues are generally considered available if they are collected within the current period or soon enough thereafter (30 days) to pay current liabilities. For derived tax revenues, such as sales tax and utility business and occupation taxes, revenues are recognized in the period when the underlying exchange has occurred. For imposed non-exchange taxes, such as property taxes, revenues are recognized when the use of resources is permitted, or when resources are available. Grant revenue is recognized in the period in which the expenditure occurs and the eligibility requirements have been met. Non-exchange transactions such as contributions are recognized when the donation eligibility requirements have been satisfied. Those specific major revenue sources accrued are: Property Taxes - King County and Pierce County collect property taxes and remit to the City daily or monthly. December collections by each County, remitted in January, are recognized as revenues in current year even though received in the subsequent year since they are considered to be measurable and available. Property taxes remaining uncollected at year-end are reported as "deferred revenue", since they are not considered to be available. Sales Tax Revenues - The State of Washington collects all sales taxes. Auburn's portion is remitted to the City by the State monthly. The sales tax received in January is recognized as revenue in current year even though received in the subsequent year, because of when the underlying transaction occurred and the resources are considered to be measurable and available. Grant Revenues - On cost reimbursement, grant revenue is recognized when the expenditure is incurred. Under the modified accrual basis, expenditures are recorded when the fund liability is incurred, except for the un-matured interest and principal on general long-term debt, which Page 42 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS is recognized when due, and for compensated absences which are recorded as expenditures when liquidated from expendable available fund resources. Purchase of fixed assets from Governmental funds, is reported as expenditures during the year incurred and the asset is capitalized in the General Fixed Assets Account Group. Long-term liabilities, including compensated absences pay not currently due and payable, are accounted for in the General Long-Term Debt Account Group, except those long-term liabilities accounted for in the Proprietary funds. The accrual basis of accounting is followed in all Proprietary, Pension Trust and Non- Expendable Trust funds. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when incurred. D. BUDGET AND BUDGETARY ACCOUNTING The City of Auburn budgets in accordance with the Revised Code of Washington (RCW) 35A.33 for the General and Special Revenue Funds. For governmental funds, there are no substantial differences between the budgetary basis and generally accepted accounting principles. Budgetary accounts are integrated in fund ledgers for all budgeted funds, but the financial statements include budgetary comparisons for annually budgeted governmental funds only. Budgets established for Proprietary and Trust funds are "management budgets", are not legally required to be reported and, as such, are not reported in the CAFR. The annual budget is proposed by the Mayor and adopted by the City Council with legal budgetary control at the fund level; i.e., expenditures and other financing sources may not exceed budgeted appropriations at the fund level. The Mayor may authorize transfers within funds; however, the City Council must approve by ordinance any amendments that increase the total for the fund. Any unexpended appropriation balances lapse at the end of the fiscal year. The City prepares annual budgets on the modified accrual basis, which conforms to Generally Accepted Accounting Principles (GAAP). The CAFR included budgetary comparisons for those governmental funds with legally adopted budgets. Budget amounts include the adopted annual current year budget appropriations and any revisions made during the year. State law establishes the budget process and the time limits under which a budget must be developed. The City follows the procedures outlined below to establish its annual budget: 1. Sixty days prior to the ensuing fiscal year, the Mayor submits to the City Council a preliminary budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and funding sources. 2. Public hearings are conducted at the Auburn City Council Meetings to obtain taxpayer comments. 3. Prior to December 31, the budget is legally enacted through passage of an ordinance. 4. The final operating budget as adopted is published and distributed after adoption. Copies of the budget are made available to the public. Amounts shown in the accompanying financial statements represent the original budgeted amounts and all supplemental appropriations. Page 43 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Governmental Funds General Fund Special Revenue Fund: Street Arterial Street Hotel/Motel Fund Drug Forfeiture Fund Local Law Enforcement Block Grant Housing and Community Development Recreation Trails Business Improvement Area Cumulative Reserve 1986 Parks & Street Improvement Mitigation Fees 639,000 9,612,100 55,000 31,500 59,149 478,784 4,800 156,400 4,340,200 3,645,345 (7,479) 64,100 8,697 4,435 7,451 7,998 26,151 59,176 (714,484) 2,281,300 E. ASSETS, LIABILITIES, AND FUND EQUITY 1. DEPOSITS AND INVESTMENTS 639,000 13,257,445 47,521 95,600 67,846 483,219 12,251 164,398 4,366,351 59,176 1,566,816 It is the City's policy to invest all temporary cash surplus. At December 31, 2002, the Local Government Investment Pool (LGIP) was holding $64,457,080 in short-term investments. This amount is classified on the balance sheet as cash and cash equivalents. The interest on these investments is prorated to the various funds based upon ownership of investments. For purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on deposit with financial institutions in both demand and time deposit accounts, and amounts invested in the Local Government Investment Pool, administered by the State Treasurer's Office. The City, by State law, is authorized to purchase certificates of deposit issued by Washington State depositories that participate in the State Investment Pool, U.S. Treasury and Agency securities, Banker's Acceptances, and Repurchase Agreements. The City purchases repurchase agreements only from institutions that use authorized securities for collateral. The City of Auburn also has signed a "Master Repurchase Agreement" with its primary bank (Key Bank). For purposes of the Statement of Cash Flows, all proprietary fund types and similar trust funds consider all highly liquid investments (including restricted assets) with maturity of three months or less when purchased, to be cash equivalents. Investments are recorded at market value. Adjustments are made to cost for investments amortized over the period to maturity in accordance with GASB 31. Page 44 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS 2. RECEIVABLES Taxes receivable consist of property taxes (please refer to Note 4). Accrued interest receivable consists of amounts earned on notes, and contracts at the end of the year. Customer accounts receivable consists of amounts owed by private individuals or organizations for goods and services provided. Uncollectible amounts are considered immaterial and the direct write-off method is used. Special assessments are levied against certain property owners and become liens against the property benefited by the improvement. Special assessments receivable consist of current assessments, which are due within one year, delinquent assessments remaining unpaid after the due date, and deferred, uncollected assessments, which have been levied, but are not due within one year. Other receivables include utility taxes due from private organizations, and customer accounts receivable consists 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 consists 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. 5. INVENTORIES Inventories in the Enterprise and Internal Service funds are valued at cost using the weighted average costing method. Governmental fund types recognize the cost of inventory items as expenditures when purchased. In Governmental funds, materials and supplies remaining at year-end are immaterial and not included in inventory on the balance sheet. 6. RESTRICTED ASSETS The customer deposits and proceeds of revenue bonds issued by City utilities are restricted by applicable bond ordinances to pay bond and construction costs. 7. INTERFUND TRANSACTIONS During the course of normal operations, the City has numerous transactions between City funds. Quasi-external transactions, such as buying goods and services, are recorded as revenues and expenditures. Internal Service fund billings are recorded as revenues in the Equipment Rental fund and as expenditures in the paying fund. Operating transfers between funds are included as "other financing sources or uses" and residual equity transfers are reported as direct additions to or deductions from fund balance/fund equity. Page 45 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS 8. FIXED ASSETS Fixed assets are recorded in the General Fixed Asset Account Group (GFAAG) and accounted for at historical cost when known. When historical cost is not known, assets are recorded at estimated historical cost. Infrastructure, such as roads, bridges and curbs, is considered public property and is not accounted for in the GFAAG. Donated fixed assets are stated at their market value on the date donated. Fixed assets of Enterprise and Internal Service funds are recorded at cost. The fixed assets of the Airport are carried at cost and include those acquired with capital contributed by the Federal Government. Capital improvements financed by special assessments that provide capital assets to a government's Proprietary funds are capitalized on the fund's balance sheet and are offset by contributed capital. Fixed assets of Proprietary funds are depreciated, whereas general fixed assets are not, nor has interest been capitalized. Depreciation is calculated on the straight-line method utilizing estimated lives as follows: Building $ 2,500 Straight-line 10 - 50 years Improvement $ 2,500 Straight-line 10 - 50 years Equipment $ 2,500 Straight-line 3 - 20 years 9. DEFERRED CREDITS/CHARGES Deferred charges and credits include the premium, discount and issuance costs of revenue bonds that are amortized over the life of the bond issue. Deferred credits and charges also include undistributed court receipts. 1 o. COMPENSATED ABSENCES City employees accrue vacation leave at a variable rate based on years of service. In general, employees are allowed to accumulate vacation leave up to what would be earned in two years. Unaffiliated employees accrue sick leave at the rate of one day per month up to 960 hours. Sick leave accumulations over 960 hours at year-end are paid at 25%. Sick leave is not paid upon termination except in some instances upon separation in good standing, where employees hired before 12/31/1984 can be reimbursed at their current rate for unused sick leave up to a maximum of 960 hours, at a rate based on years of service. The City's union contracts have varied sick leave accruals and payout options. In general, non-exempt employees can accrue up to 80 hours of compensatory time. The City reports compensated absences as liabilities in Proprietary funds and in the General Long Term Debt Account Group. Vacation and compensatory time is reported at 100%, sick leave is reported at an average of 25%. Page 46 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Governmental funds recognize expenditures for vacation, sick, and compensatory time when paid. Proprietary and Trust funds recognize the expense and accrue a liability for vacation and sick leave pay as the leave is earned. 11. DEFERRED REVENUES This account reflects the amounts of taxes and other long-term receivables for which the revenue recognition criteria have not been met. It also reflects prepayments on accounts and grants received in advance. 12. RESERVATIONS AND DESIGNATIONS OF FUND EQUITY In Governmental funds, reserves are used to indicate a portion of fund balance that is not appropriable for expenditure or is legally segregated, and designations are used to indicate tentative managerial plans for financial resource utilization in a future period. In Proprietary funds, retained earnings are generally reserved in connection with restricted assets or for legal segregation. These reserves are identified on the balance sheet of each fund type and in Note 12. F. REVENUES, EXPENDITURES AND EXPENSES Under the modified accrual basis of accounting: Charges for services, interest on investments, and rents generally are considered measurable and available when earned in Governmental funds. Taxes and federal or state entitlements or shared revenues that have been collected but not remitted by an intermediary collection agency to the City are considered measurable and available. Special assessments are considered measurable and available when they become due. Grants are considered measurable and available to the extent that expenditures have been made. Other intergovernmental revenues are considered measurable and available when earned. Interfund revenues for goods and services are considered measurable and available when earned. Proceeds from sale or loss of fixed assets are recognized as other financing sources. Revenues from taxpayer-assessed taxes (i.e., sales tax), net of estimated refunds, are recognized when measurable and available to finance expenditures of the current period. All other revenues are either not measurable or considered not available until collected. Expenditures are generally recognized when incurred, except for principal and interest on General Long-Term Debt, which are reported as expenditures when paid and compensated absences, which are reported as expenditures when liquidated from expendable available financial resources. Page 47 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Under the accrual basis of accounting: Revenues are recognized when earned and expenses are recognized when incurred. G. MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the General Purpose Financial Statements are captioned as "memorandum only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position, results of operations or cash flows in accordance with generally accepted accounting principles. Interfund eliminations have not been made in the aggregation of this data. H. FUTURE CHANGES IN ACCOUNTING STANDARDS The Governmental Accounting Standards Board (GAS B) has issued Statement No. 34 Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, Statement No. 37 Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments: Omnibus - an amendment of GASB Statements No. 21 and No. 34, and Statement No. 38 Certain Financial Statement Note Disclosures. These new accounting and reporting standards will impact the City's revenue and expenditure recognition and assets, liabilities, and fund equity reporting. The new standards will also require reformatting of the financial statements and the restating of beginning balances. These new GASB standards will be implemented in fiscal year 2003. 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. In 2002 the City closed one Capital Projects fund, the 1998 Library Construction fund. NOTE 3 - DEPOSITS AND INVESTMENTS The Federal Deposit Insurance Commission (FDIC) insures the City's deposits up to $100,000 and the Washington Public Deposit Protection Commission (WPDPC) insures amounts over $100,000. The WPDPC is a multiple financial institution collateral arrangement, which provides for additional assessments against members of the pool on a pro rata basis. As required by State law, all investments of the City's funds are obligations of the U.S. Government, or deposits with Washington State banks. Pension and Non-expendable Trust funds are not subject to the preceding limitations. All temporary investments are stated at cost. Other investments are shown on the balance sheet at fair value. Investments that were not at par value (cost) as of December 31, 2002 are reported at fair value. The City holds several deep discount federal securities that are reported this way. The fair value of the position in the state investment pool is the same as the value of shares held by the City in the pool. During 2002, the net increase in the fair value of investments being held for more than one year is $112,805.59 at year-end. (PerGASB 31). Page 48 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS The City's investments are categorized to give an indication of the risk assumed at year-end. Category 1 includes investments that are insured, registered, or held by the City or its agent in the City's name. Effective 2002 the City has established arrangements with Bank of New York for safekeeping of all investments. u.s. Government Securities Total Investment with State Pool Total Investments $ 7,621,402 7,621,402 $ 7,621,402 7,621,402 SCHEDULE OF INVESTMENTS BY FUND CATEGORY AND INVESTMENT TYPE AS OF DECEMBER 31, 2002 Fiduciary Funds $ Treasurer's Residual Funds Total $ 7,621,402 $ 7,621,402 Page 49 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 4 - PROPERTY TAXES For 2002, the City's regular tax levy was $2.93 per $1,000 on a total 2001 assessed valuation of $3,928,917,828 for a total regular levy of $11,525,718. State law provides that debt cannot be incurred in excess of the following percentages of the taxable property of the city. 1.50% 2.50% Without a vote of the people With a vote of the people The City has additional authority to incur the following debt as a percentage of total valuation. 2.50% 2.50% With a vote of the people, indebtedness is for utilities With a vote of the people, indebtedness is for parks, or open space development At December 31, 2002, the debt limits for the City were as follows: Legal Limit $ $ 98,640,404 $ 196,445,891 Indebtedness The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. Taxes are levied annually on January 1 on property values listed as of the prior August 31. The County assesses property at 100% of fair value. A revaluation of all property is required at least once every four years and a physical inspection is required at least once every six years. Property taxes levied by the County Assessor and collected by the County Treasurer become a lien on the first day of the levy year and may be paid in two installments if the total amount exceeds $10. The first half of real property taxes is due on April 30 and the balance is due October 31. Delinquent taxes bear interest at the rate of 12% and are subject to additional penalties if not paid as scheduled. At year-end property taxes are recorded as a receivable with the portion not expected to be collected within 30 days, offset by deferred revenue. 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 growth of regular property taxes to the rate of inflation or, with the proof of substantial need and a supermajority vote of council, 6% per year, after adjustment for new construction. If the assessed valuation increases by more than 6% due to re-evaluation, the levy rate will be decreased. 3. The City may voluntarily levy taxes below the legal limit. Special levies approved by the voters are not subject to the above limitations. Page 50 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Property taxes are recorded as receivable and offset by a deferred revenue account when levied. Since State law allows for sale of property for failure to pay taxes, no estimate of uncollectible taxes is made. NOTE 5 - INTERFUND ACTIVITY The tables below summarize interfund activity during the past year. The first table lists operating transfers, the second table lists loan activity, and the third table lists residual equity transfers. Operating transfers are legally authorized transfers of resources from a fund receiving revenue to the fund through which resources are to be expended. Governmental Funds: General Fund $ 3,400,715 $ 848,941 Special Revenue Fund: Street Fund 654,861 Arterial Street Fund 45,000 1,069,047 Local Law Enforce Block Grants 5,715 Mitigation Fees 517,641 Debt Service Funds: 1998 Library GO 245,000 LID Guarantee 10,000 Capital Projects Fund: Park Construction 92,000 Capital Improvement Projects 401,406 2,958,000 Library Construction 50,000 Proprietary Funds: Water 10,000 Sewer 79,540 Storm Drainage 79,540 Solid Waste 10,000 Ai rport 5,000 Cemetery 46,697 Internal Service Funds: Insurance 5,000 Endowed Care Operating Transfers recorded as Contributed Capital Internal Service: Rental Page 51 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Loans between funds are classified as interfund loans receivable and payable or advances to and from other funds on the combined balance sheet, depending on the time period for which the loan was made. Interfund loans do not affect total fund equity. L.ID. #344 Comm Dev Bk Grant Totallnterfund Loans Water Fund General Fund $ 7,056 154,000 161,056 $ $ 7,056 341,000 348,056 $ $ $ 187,000 187,000 $ $ Residual equity and contribution transfers are classified as direct additions or subtractions to fund equity. Governmental Fund: General Fund Capital Projects Funds: Capital Improvement Projects 1998 Library Construction Proprietary Funds: Sub-Total $ 10,000 $ 43,267 43,267 53,267 43,267 Residual Equity Transfers Recorded as Contributed Capital Internal Service: Equipment Rental 10,000 Page 52 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 6 - DUE FROM OTHER GOVERNMENTAL UNITS As of December 31, 2002, the City had receivables due from other governmental units as follows: General Fund Arterial Street Fund Block Grant Fund Capital Improvement Projects Solid Waste Fund A ency Disbursement/Collection $ 1,751,019 1,086,314 3,000 99,096 51,270 8,841 NOTE 7 - FIXED ASSETS AND DEPRECIATION Two fixed asset schedules are presented below. The first presents a schedule of changes in general fixed assets and the second summarizes the fixed asset and depreciation data for Enterprise and Internal Service funds. Joint Venture $ 3,787,975 $ $ $ 3,787,975 Land 9,324,626 2,345,000 11,669,626 Building 7,619,926 2,069,173 9,689,099 Site Improvements 7,821,263 1,132,247 8,953,510 Streets 9,868,268 9,868,268 Equipment 6,252,385 657,862 10,902 6,899,345 Const In Departments: Water $ 750,078 $ 1,519,576 $ 64,349,631 $ 1,189,874 $ 711,964 $ 68,521,123 $ (19,677,809) $ 48,843,314 Sewer 1,654,958 360,095 33,772,838 643,605 858,136 37,289,632 (9,545,936) 27,743,696 Storm Drainage 4,160,690 6,484 31,147,839 110,064 46,129 35,471,206 (7,140,349) 28,330,857 Solid Waste 418,555 15,000 433,555 (104,320) 329,235 Airport 3,629,496 2,334,718 4,312,998 78,623 2,752 10,358,587 (2,647,973) 7,710,614 Cemetery 36,641 168,490 912,148 429,895 9,713 1 ,556,887 (682,671) 874,216 Golf Course 2,229,636 621,917 1,807,452 557,973 5,216,978 (1,089,908) 4,127,070 Equipment Rental 268,720 27,262 6,786,951 7,082,933 (3,690,619) 3,392,314 Page 53 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 8 - RECORDED VACATION, SICK LEAVE, AND POST-EMPLOYMENT BENEFITS In accordance with GASB Statement No. 16, the City accrues vacation and sick leave pay. The accrual is made in each Proprietary fund. For Governmental funds, the accrual is recorded in the General Long-Term Debt Account Group, since it is not currently due and payable at year-end (please refer to Note 10). In addition to pension benefits described in Note 9, the City provides post-retirement benefits in accordance with State statues, to all LEOFF 1 retirees. Currently, 65 retirees meet the eligibility requirements. The City provides Long Term Care, medical insurance and reimburses all validated claims for medical, dental and hospitalization costs incurred by retirees. Expenditures for post- retirement health care benefits are recognized as retirees report claims. During the year, expenditures of $619,253 were recognized for post-retirement health care. This represents a $93,866 increase from the previous year. NOTE 9 - PENSION PLANS Substantially all City full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, P.O. Box 48380, Olympia, WA 98504-8380. The following disclosures are made pursuant to GASB Statement 27, Accounting for Pensions by State and Local Government Employers. Public Employees' Retirement Systems (PERS) Plans 1, 2, and 3 Plan Description PERS is a cost-sharing multiple-employer retirement system comprised of 3 separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefiUdefined contribution plan. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than judges in a judicial retirement system); employees of legislative committees; college and university employees (not in national higher education retirement programs); judges of district and municipal courts; and employees of local governments. PERS participants who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977 and by either, February 28, 2002 for state and higher education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after March 1, 2002 for state and higher education employees, or September 1, 2002 for local government employees have the option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employee and employer contributions. PERS retirement benefit provisions are established in state statute and may be amended only by the state legislature. Page 54 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Retirement benefits in both Plan 1 and Plan 2 are vested after completion of 5 years of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at age 60 with 5 years of service, or at the age of 55 with 25 years of service. The annual pension is 2% of the average final compensation per year of service, capped at 60%. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. If qualified, after reaching age 66, a cost-of-living allowance is granted based on years of service credit and is capped at 3%. Plan 2 members may retire at the age of 65 with 5 years of service, or at age 55 with 20 years of service, with an allowance of 2% per year of service of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Plan 2 retirements prior to age 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3% per year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit, and a cost-of- living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3% annually. Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. The defined benefit portion provides a benefit calculated at 1 % of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Plan 3 members become eligible for retirement if they have: at least 10 years of service; or 5 years including 12 months that were earned after age 54; or 5 service credit years earned in PERS Plan 2 prior to June 1, 2003. Plan 3 retirements prior to the age of 65 received reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3% per year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit, and Plan 3 provides the same cost-of-living allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option selected by the member, either as a lump sum or pursuant to other options authorized by the Employee Retirement Benefits Board. There are 1,155 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2001 : Retirees and Beneficiaries Receiving Benefits Terminated Plan Members Entitled to But Not Yet Receiving Benefits Active Plan Members Vested Active Plan Members Nonvested Total 62,189 18,412 97,777 55,1 59 233,537 Fundinq Policv Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6% and do not vary from year to year. The employer and employee contribution rates for Plan 2 and the employer rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature. PERS Plan 3 defined contribution is a non-contributing plan for employers. Employees who participate in the defined contribution portion of PERS Plan 3 do not contribute to the defined benefit portion of PERS Plan 3. The Employee Retirement Benefits Board sets Plan 3 employee contribution rates. 6 rate options are available ranging from 5 to 15 percent; 2 of the options are graduated rates dependent on the employee's age. The methods used to determine the contribution requirements are established under State statute in accordance with RCW chapters 41.40 and 41.45. Page 55 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS The required contribution rates expressed as a percentage of current year covered payroll as of December 31, 2002 were: Employer* Employee 1.32% 6.00% 1.32% 0.65% 1.32%** *The employer rates include the employer administrative expense fee currently set at 0.22%. **Plan 3 defined benefit portions only. ***Variable from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 members. Both Auburn and the employees made the required contributions. The City's required contributions for the years ended December 31 were: 2002 2001 2000 $ 21,847 47,556 69,709 $ 164,228 336,037 410,286 $ 436 Law Enforcement Officers' and Fire Fighters' Retirement Systems (LEOFF) Plans 1 and 2 Plan Description LEOFF is a cost-sharing multiple-employer retirement system comprised of 2 separate defined benefit plans. Membership in the system includes all full-time, fully-compensated, local law enforcement officers and fire fighters. LEOFF is comprised primarily of non-state employees. Participants who joined the system by September 30, 1977 are Plan 1 members. Those joining thereafter are enrolled in Plan 2. LEOFF retirement benefits are financed from a combination of investment earnings, employee and employer contributions, and a special funding situation in which the State pays the remainder through State legislative appropriations. LEOFF retirement benefit provisions are established in State statute and may be amended only by the State Legislature. Plan 1 retirement benefits are vested after an employee completes 5 years of eligible service. Plan 1 members are eligible to retire with 5 years of service at age 50. The benefits per year of service calculated as a percent of final average salary is as follows: 20 or more years 10 but less than 20 years 5 but less than 10 years The final average salary is the basic monthly salary received at the time of retirement, provided a member has held the same position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months salary within the last 10 years of service. If membership was established in LEOFF after February 18, 1974, the service retirement benefit is capped at 60 percent of final average salary. A cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index). Page 56 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Plan 2 retirement benefits are vested after an employee completes 5 years of eligible service. Plan 2 members are eligible to retire at age 50 with 20 years of service, or at age 53 with 5 years of service, with an allowance of 2% of the final average salary per year of service. The final average salary is based on the highest consecutive 60 months. Plan 2 retirements prior to age 53 are actuarially reduced 3% for each year that the benefit commences prior to age 53. There is no cap on years of service credit, and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3% annually. There are 359 participating employers in LEOFF. Membership in LEOFF consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2001 : Retirees and Beneficiaries Receiving Benefits Terminated Plan Members Entitled to But Not Yet Receiving Benefits Active Plan Members Vested Active Plan Members Nonvested Total 8,078 332 10,894 4,006 23,310 Starting on July 1, 2000, Plan 1 employers and employees will contribute 0%, as long as the plan remains fully funded. Employer and employee rates are developed by the Office of the State Actuary to fully fund the plan. Plan 2 employers and employees are required to pay at the level adopted by the Department of Retirement Systems in accordance with RCW chapter 41.45. All employers are required to contribute at the level required by State law. The Legislature, by means of a special funding arrangement, appropriated money from the State general fund to supplement the current service liability and fund the prior service costs of Plan 1 in accordance with the requirements of the Pension Funding Council. The State Constitution does not mandate this special funding situation however, and this fund requirement could be returned to the employers by a change of statute. The methods used to determine the contribution rates are established under State statute in accordance with RCW chapters 41.26 and 41.45. The required contribution rates expressed as a percentage of current year covered payroll, as of December 31, 2002 were: Employer* Employee State 0.22% 0.00% n/a 2.86% 4.39% 1.75% *The employer rates include the employer administrative expense fee currently set at 0.23%. Both Auburn and the employees made the required contributions. The City's required contributions for the years ended December 31 were: Page 57 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS 2002 2001 2000 $ 1,587 1,626 22,876 $ 297,215 341,562 337,434 City of Auburn Fire Relief and Pension Plan The City is the administrator of the Firemen's Pension Plan (Plan), which is a closed, single- employer defined benefit pension plan that was established in conformance with RCW Chapters 41.16 and 41.18. This plan provided retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Membership is limited to firefighters employed prior to March 1, 1970 when the LEOFF retirement system was established. The City's obligation under the Firemen's Pension Plan consists of paying all benefits, including payments to beneficiaries and healthcare, for fire fighters who retired prior to March 1, 1970, and excess pension and healthcare benefits of LEOFF for covered firefighters who retired after March 1, 1970. The Plan does not issue a separate financial report. Under State law, the Firemen's Pension Plan is provided an allocation of 25% of all monies received by the State from taxes on fire insurance premiums; interest earnings; member contributions made prior to the inception of LEOFF; and City contributions required to meet projected future pension obligations. The actuary determined as of January 1, 2003, that no future City contributions would be required beyond future revenues from State fire insurance taxes and interest earnings. Administrative costs, such as City staff time and actuarial valuation costs are funded from interest earnings or City contributions. Membership of the Firemen's Pension Plan consisted of 19 eligible, of which 18 are receiving benefits. GASB STATEMENTS No. 25 and No. 27 SCHEDULE OF FUNDING PROGRESS (rounded to thousands) December 31, 1997* January 1, 1999 January 1 , 2001 January 1 , 2003 $1,984 2,096 3,632 3,514 $2,278 2,157 2,332 2,428 $294 60 (1,300) (1,086) 87.10% $ 97.17% 155.75% 144.73% 119 58 61 N/A 51% -2241 % -1780% This plan primarily covers inactive participants. There are no current member contributions. Prior to adoption of GASB Statement No. 25 in 1997, the ARC was not determined pursuant to the parameters required by the statement. Therefore, no liability prior to 1997 has been shown. Information prepared by prior actuary. Page 58 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS GASB STATEMENT No. 25 SCHEDULE OF EMPLOYER CONTRIBUTIONS (rounded to thousands) GASB STATEMENT No. 27 THREE YEAR TREND INFORMATION (rounded to thousands) December 31, 1997 * $ December 31, 1998 December 31, 1999 December 31 , 2000 December 31, 2001 December 31, 2002 27,847 $ 24,822 52,738 31 ,721 37,281 40,869 38,763 38,763 5,381 5,381 72% 64% 980% 590% N/A N/A $ 5,520 341 684 574.66% 10932.84% 5975.00% (48,808) (85,748) (125,933) * Information prepared by prior actuary. GASB STATEMENT No. 27 Annual Development of Pension Cost (rounded to thousands) 12/31/1997 $ 38,763 $ - $ - 12.88% $ 38,763 $ 27,847 $ 10,916 $ 10,916 12/31/1998 38,763 873 848 12.88% 38,788 24,822 13,966 24,882 12/31/1999 5,381 1,742 1,874 13.28% 5,249 52,738 (47,489) (22,607) 12/31/2000 5,381 (1,582) (1,721) 13.14% 5,520 31,721 (26,201 ) (48,808) 12/31/2001 (3,417) (3,758) 12.99% 341 37,281 (36,940) (85,748) 12/31/2002 (6,002) (6,686) 12.83% 684 40,869 (40,185) (125,933) (1) 8.00% interest rate was used for years prior to January 1, 1999: 7.00% thereafter. (2) A change in consulting actuaries resulted in a recommended change in the actuarial methods and assumptions. ** Based on 30-year level-dollar closed amortization as of January 1, 1999 (27 years as of January 1,2002). The information presented in the preceding required schedules was determined as part of the actuarial valuations at the date indicated. Valuation date January 1, 2003 Actuarial cost method Entry Age Normal Actuarial Cost Method Amortization method Level percent closed Remaining amortization period 27 years Asset valuation method Market Value Actuarial Assumptions: Investment rate of return 7% Projected salary increases 5% Cost-of living adjustments 4% Page 59 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 10 - LONG-TERM DEBT General Obliqation Bonds are direct obligations of the City for which its full faith and credit are pledged. Debt service for voter-approved issues, for which the City has none, would be funded by special property tax levies. Debt service for City Council authorized or councilmanic issues 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: · 1998 Limited Tax General Obligation bonds were issued for construction of a library to be owned and operated by the King County Rural Library District. These 20-year bonds mature in 2018 and are paid from the Debt Service fund. · 1999 Limited Tax General Obligation bonds were issued for construction of hangars at the Auburn Municipal Airport. These 20-year bonds mature in 2019 and are paid from the Airport fund. · Valley Communication Center Development Authority issued 2000 General Obligation bonds for a new dispatch facility. The City is contracted to pay 20% of the debt service of these 15- year bonds that mature in 2015. The current balance of this debt is $2,327,000 and is paid from the General fund. Revenue Bonds are payable from water and storm drainage utility revenues generated by these Enterprise funds. Special Assessment Bonds are not a direct responsibility of the City, but are funded from the collection of special assessment payments. Debt service principal and interest costs are paid from the individual LID funds. The City is obligated for special assessment debt to the extent that it is required to establish an LID Guarantee fund for the purpose of guaranteeing the payment of local improvement bonds in the event there are insufficient funds in the individual LID fund. State of Washinqton Public Works Trust Fund Loans are a direct responsibility of the City. Auburn currently has three outstanding loans with a remaining total balance of $7,826,039. The loans are being repaid from Water fund revenues over a 20-year period that begins upon each project completion. Capital Leases represent acquisitions where the related assets and liabilities are recorded in the City's financial records. In 2002 the City entered into a 99-year lease with the Central Puget Sound Regional Transit Authority (Sound Transit) for use of 180 parking stalls and the right to sublease the Commercial Tenant area. The total lease obligation is $2,106,195 to be paid in 3 annual installments of $702,065 beginning 7/26/2002. The lease was recorded at a value of $2,069,173, which represents the present value of the future minimum lease payments at inception. As of 12/31/02, the present value of the 2 remaining lease payments is $1,367,108. The following schedules summarize the long-term debt transactions of the City for the year ended December 31, 2002. The first table summarizes all debt transactions for Auburn, while the second provides detailed information on all long-term debt. Additional schedules reflect total annual debt service requirements to maturity and the reconciliation of debt by fund type. CHANGES IN LONG-TERM DEBT SUMMARY Long-Term Debt Payable 1/1/02 Added Retired $ 7,700,000 $ 2,069,173 18,477,157 $ 641,250 738,904 $ 3,398,138 $ 30,314,199 2,710,423 Page 60 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS CHANGES IN LONG-TERM DEBT General: General ObliQation Bonds: Limited G.O. Library 3.75-5.00% 12/01/18 $ 4,000,000 $ 3,615,000 $ $ (145,000) $ 3,470,000 Valley Communication G.O. 4.3-5.75 12/01/15 2,551,600 2,455,000 (128,000) 2,327,000 Capital Lease: 1.80 02/26/04 $ $ 2,069,173 $ (702,065) $ 1,367,108 Special Assessment Bonds: Ll.D. #341/348 4.40/5.70 10/01/07 $ 817,332 $ 175,000 $ $ (45,000) $ 130,000 LI. D. #345 3.25/5.20 11/01/05 151,020 10,000 (10,000) Ll.D. # 346 5.85 03/31/09 206,077 66,077 (17,000) 49,077 Ll.D. # 347 6.85 05/01/12 587,827 487,827 (118,000) 369,827 Employee Leave Benefit: $ 2,962,721 $ $ (287,053) $ 2,675,668 Proprietary: General ObliQation Bonds G.O. Bond 1999 4.5/5.6 11/01/19 $ 1,655,000 $ 1,630,000 $ $ (25,000) $ 1,605,000 Revenue Bonds: Utility Sys. Revenue 1997 5.45/6.0 11/01/16 $ 5,000,000 $ 4,135,000 $ $ (185,000) $ 3,950,000 Wtr/Storm Revenue 1999 4/5.1 11/01/09 8,345,000 6,975,000 (735,000) 6,240,000 Employee Leave Benefit: $ 434,469 $ $ (158,059) $ 276,410 Public Works Trust Fund Loans: PWTF 1999 1.0 07/01/19 $ 3,282,632 $ $ (182,368) $ 3,100,264 PWTF 2001 0.5 07/01/21 4,084,525 4,084,525 PWTF 2002 1.0 07/01/22 641,250 641,250 Fiduciary: Employee Leave Benefit: $ 948 $ $ (948) $ Page 61 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS DEBT SERVICE REQUIREMENT TO MATURITY 2003 $ 991 ,457 $ 358,643 $ 1,357,343 $ 585,366 $ 92,436 $ 42,979 $ 2,952,078 $ 5,393,314 $ 986,988 2004 1,023,651 343,897 1,441,093 533,745 122,436 37,249 2,587,180 914,891 2005 311,000 327,997 1,496,093 478,740 42,436 29,758 1,849,529 836,495 2006 328,000 310,812 1,546,093 420,910 42,436 26,828 1,916,529 758,550 2007 480,000 292,774 1,606,093 360,529 42,436 23,898 2,128,529 677,201 2008 422,000 273,664 1,666,093 297,074 42,436 20,967 2,130,529 591,705 2009 445,000 253,065 1,731,093 232,099 42,436 18,037 2,218,529 503,201 2010 469,000 232,800 711,093 162,588 42,436 15,107 1,222,529 410,495 2011 498,000 211,000 731,093 144,688 42,436 12,176 1,271 ,529 367,864 2012 527,000 187,570 751 ,093 125,458 36,980 9,247 1,315,073 322,275 2013 560,000 162,720 761 ,093 105,018 1,321,093 267,738 2014 586,000 135,145 781,093 84,047 1,367,093 219,192 2015 618,000 105,428 796,093 61,492 1,414,093 166,920 2016 415,000 73,785 816,093 38,120 1,231,093 111,905 2017 440,000 54,055 431,093 13,656 871 ,093 67,711 2018 465,000 33,055 431,093 10,176 896,093 43,231 2019 190,000 10,640 431,093 6,696 621,093 17,336 2020 248,725 3,215 248,725 3,215 2021 248,725 1,785 248,725 1,785 2022 33,758 355 33,758 355 LONG-TERM DEBT RECONCILIATION Liabilities Payable from Restricted Assets: Revenue Bonds Long-Term Bonds Payable: General Obligation Bonds Capital Lease Revenue Bonds Special Assessments with government commitment Public Works Trust Fund Loans Leave Benefits $ 960,000 $ 1,605,000 9,230,000 - $ - $ - $ 960,000 5,797,000 7,402,000 1,367,108 1,367,108 9,230,000 548,904 548,904 7,826,039 Revenue Bond Debt Service Coveraqe The required debt service coverage for the 1997 and 1999 utility revenue bonds is 1.25. Debt service coverage for 2002 was 3.73. Please refer to Figure 6 in the statistical section. The restricted rate stabilization fund for the utility revenue bonds was established to minimize the effect on rates of revenue fluctuations between years. By transferring cash into this rate stabilization fund, adjusted net revenue available for debt service, as defined, would be decreased by the amount Page 62 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS of the transfer. Conversely, transfers out of the account would increase adjusted net revenue available for debt service. NOTE 11 - CONTRIBUTED CAPITAL During the year, contributed capital increased by the following amounts: New Connections $ - $ - $ - $ Developers-New Systems Government-Other Units Government-Other Funds 50,000 Total Additions 50,000 Contributed Capital at Beginning of Year 38,409,044 29,892,681 728,699 3,211,463 Due to the implementation of GASB 33, capital contributions from external sources are reported as income and are now shown on the combined Statement of Revenues, Expenses and Changes in Fund Equity. NOTE 12 -FUND EQUITY Reservations and Desiqnations The following is an analysis of fund equity reservations and designations by type for each of the City's fund groups. RESERVES AND DESIGNATIONS Retained Earnings: Debt Service-Future $ $ $ $ 1,403,819 Construction 631,008 Fund Balance: Petty Cash 6,025 Retirements 587,600 Street & Fire Mitigation 984,659 Debt Service 42,118 Endowment Pension Fund LI D Guarantee $ 1,020,569 3,552,973 $ 1,403,819 631,008 6,025 587,600 984,659 42,118 1,020,569 3,552,973 1 Page 63 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Deficits The Airport Enterprise fund has a deficit retained earnings at December 31 , 2002. This resulted from lower revenues after airport closures in late 2001 and early 2002 due to national security issues. There has also been additional maintenance on the aging facilities. NOTE 13 - ENTERPRISE FUND SEGMENT INFORMATION The City of Auburn operates seven enterprises whose revenues primarily are derived from user fees. Summary of the financial activity during 2002 for these funds is as follows: ENTERPRISE FUNDS SEGMENT DATA UTILITIES OPERATING EXPENSES Operation & Maintenance 1,974,926 7,764,173 624,113 6,827,882 393,318 443,217 708,162 18,735,791 Administration 767,074 652,592 790,917 342,494 207,516 134,384 63,418 2,958,395 Taxes 579,696 578,216 186,209 504,661 1,209 7,513 58,024 1,915,528 Depreciation/Amortization 1,537,658 389,817 648,973 18,804 287,269 71,481 122,408 3,076,410 Operating Transfers-(ln) 5,000 46,697 51,697 Operating Transfers-(Out) (10,000) (79,540) (79,540) (10,000) (179,080) CURRENT CAPITAL CONTRIBUTIONS 1,295,538 2,784,260 789,068 4,868,866 PROPERTY /PLANT/EQUI PMENT Deletions (750) (2,799) (24,288) (63,142) (90,979) Additions 10,504,423 3,934,133 2,697,434 143,019 51,673 141,347 17,472,029 BONDS AND OTHER LIABILITIES PAYABLE FROM OPERATING REVENUES 15,921,013 160,475 3,336,197 642,982 1,801,446 58,539 71,441 21,992,093 Page 64 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 14 - JOINT VENTURE / RELATED PARTY The "Valley Communications Center" was established August 20, 1976, when an Interlocal Agreement was entered into by 4 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 5 years and thereafter is automatically extended for consecutive 2-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 anyone year and such termination shall then become effective on the last day of such year. On August 4, 1999 the Administration Board of Valley Communications Center voted to include the City of Federal Way as a full participating Member City as of January 1, 2000. The five participating municipal corporations that include the cities of Renton, Kent, Auburn, Tukwila, and Federal Way on April 17, 2000 entered into a new interlocal Agreement, pursuant to RCW 39.34, et seq. This agreement reaffirmed Valley Communications Center as a governmental administration agency pursuant to RCW 39.34.030 (3) (b). The purpose of the joint operation, hereafter referred to as Valley Com, is to provide improved consolidated emergency communications (dispatch) services for police, fire and medical aid to the five participating cities and to the several subscribing agencies, which include King County Fire Districts #17, #20, #40, #43, #44, #46, #47, City of Pacific Police and Fire Departments, City of Algona Police Department, City of Des Moines Police Department, City of Newcastle, City of Federal Way 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 the revenue source was changed in 1990 to a basis of prior years calls with actual first and second quarter and estimated third and fourth quarter calls. The allocation of prorated financial participation among the five participating cities is the percentage of estimated dispatched calls attributed to each jurisdiction compared to the total actual and estimated dispatched calls, for the period for January 1, through December 31. The percentages are applied to the current approved budget, less revenue from subscribing agencies and all other sources. The 2002 cost distribution for the 5 participating cities are as follows: Renton Kent Auburn Tukwila Federal Way 63,378 91,625 66,908 37,980 71,629 19.12% 27.64% 20.18% 11 .46% 21.60% * Distribution of current year net income is based on these budgeted percentages. Information stated in Equity chart. Valley Com is served by an Administration Board composed of the Mayors or designated representatives from the 5 participating cities of Renton, Kent, Auburn, Tukwila and Federal Way. Page 65 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS 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) Approves appointment and/or discharge of the Director; 3) Approves personnel policy and makes final decisions on all major policy changes; 4) Reviews and approves all contracts. In addition, an Operations Board provides direction and consists of 2 members of each participating City's Public Safety Departments, including the heads of such departments or their designees. The Operations Board performs the following functions: 1) Oversees the operation of Valley Com, advises and makes recommendations to the Administration Board; 2) Makes recommendations on Director selection; 3) Presents proposed policies and budget to the Administration Board; 4) Approves disbursement of funds by the Director. The Director presents a proposed budget to the Operations Board on or before August 15 of each year. Said budget is then presented to the Administration Board by September 1 of each year. The Administration Board can make changes to the proposed Valley Com budget as it finds necessary, but final approval falls to the legislative body of each participating City in accordance with the provisions of the Interlocal Agreement. In August 1993, Valley Com entered into an Interlocal Cooperation Agreement, pursuant to Chapter 39.34 RCW, with the sub-regions of King County, Seattle and Eastside Public Safety Communications Agency (EPSCA). This agreement governs the development, acquisition and installation of the 800 MHz emergency radio communications system (system) funded by the $57 million King County Levy. This agreement provides that upon voluntary termination of any sub-region participation in the system, it surrenders its radio frequencies, relinquishes its equipment and transfers any unexpended levy proceeds and association equipment replacement reserves to another sub-region or consortium of sub-regions. The share of equity belonging to the five participating cities is as follows: Equity Jan. 1, 2002 $4,087,259 $ 5,464,384 $ 3,787,975 $2,692,643 $ 1,971,762 $ 18,004,023 Current Year Increase 501,185 724,517 528,971 300,397 566,193 2,621,263 Equity Dec 31,2002 $ 4,588,444 $ 6,188,901 $4,316,946 $2,993,040 $ 2,537,955 $ 20,625,286 % of Equity 22.25% 30.01% 20.93% 14.51% 12.31% % of 2002 Distribution 19.12% 27.64% 20.18% 11 .46% 21.60% Liabilities are the responsibility of the 5 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. Page 66 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 15 - CONTINGENCIES AND LITIGATION As of December 31, 2002, a number of claims were pending against the City for damages and legal actions. While the outcome of these actions is uncertain, no losses are clearly anticipated at this time due to these pending claims. Any potential adverse judgment against the City also would be subject to coverage under the City's comprehensive liability insurance, including public officials' errors and omission insurance. NOTE 16 - RISK MANAGEMENT/INSURANCE Risk Manaqement The City of Auburn is a member of the Washington Cities Insurance Authority (WCIA). Utilizing Chapter 48.62 RCW (Self-Insurance Regulation) and Chapter 39.34 RCW (lnterlocal Cooperation Act), 9 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 105 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 professional, public officials' errors or omissions, stopgap, and employee benefits liability. Limits are $1 million per occurrence in the primary layer, $2 million per occurrence, subject to a $12 million annual aggregate, in the excess layer, and $11 million per occurrence in the second excess layer with no annual aggregate except $10 million per member for public officials' errors and omissions. The second excess layer is insured by the purchase of reinsurance. Total limits are $14 million per occurrence. The Board of Directors determines the limits and terms of coverage annually. Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members' deductible to $250,000. For all perils other than flood and earthquake, and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage and lobbyist services. WCIA is fully funded by its members, who make annual assessments on a prospective rates basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the interlocal, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA's assets in financial instruments, which comply with all State guidelines. These revenues directly offset portions of the membership's annual assessment. A Board of Directors governs WCIA, which is comprised of 1 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. Page 67 CITY OF AUBURN: 2002 CAFR NOTES TO THE FINANCIAL STATEMENTS Workers' Compensation Title 51 RCW requires the City to ensure payment of benefits for job-related injuries and diseases through the Workers' Compensation fund or through self insurance. The City participates in the State of Washington's Workers' Compensation program. Premiums are based on individual employers' reported payroll hours and insurance rates based on each employer's risk classification and past experience. The premium is paid by employer and employee contributions. NOTE 17 - RESTATEMENTS AND PRIOR PERIOD ADJUSTMENTS Certain reclassifications have been made with respect to prior years' balances to provide presentation consistent with the current year. For the year ended December 31, 2002, the following prior period adjustments have resulted in fund equity restatement. 2002 PRIOR PERIOD ADJUSTMENTS Water (1) Storm Drainage (2) Special Parks Expendable Trust (3) Total Prior Period Adjustments $ 38,836 (55,278) 56,063 (1) Prior year error - omission of recognition of revenue. (2) Decrease $38,836 due to incorrect prior year recognition of revenue; increase $16,442 correction of an error omitting an entry to reverse an accrual. (3) Prior year error in classifying deferred revenue instead of revenue. Page 68