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HomeMy WebLinkAboutFinancialSection2007CAFR CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS The City of Auburn's (the "City") discussion and analysis is designed to: . Assist the reader in focusing on significant financial issues . Provide an overview of the City's financial activity . Identify changes in the City's financial position (its ability to meet future years' challenges) . Identify any material deviations from the approved budget . Identify individual fund issues or concerns Management's Discussion and Analysis is designed to focus on the current year's activities, resulting changes and currently known facts. Therefore, it should be read in conjunction with the Transmittal Letter and the City's financial statements. Financial Highlights . Total government-wide net assets, the amount by which total assets exceed total liabilities, equal $436.3 million. A total of $343.1 million, or 79% of total net assets, is invested in capital assets, net of debt related to the capital assets, and includes assets such as utility systems, streets, buildings, land, vehicles and equipment. An additional $2.2 million of net assets is restricted for purposes of endowment and debt service. Of the remaining $91.0 million of net assets, the majority is legally restricted, reserved by City policy for specific purposes, or is restricted for use by the City's utilities. . The net increase in government-wide net assets during 2007 was $26.6 million. Of this amount, $22.8 million was directly related to the increase in City-owned capital assets and infrastructure. . On a government-wide basis, government net assets increased by $12.1 million during 2007. Of this amount $11.8 million is related to the capitalization of construction projects, and the balance of the increase is due to lower than anticipated expenditures. . Business-type net assets increased by $14.5 million during 2007. Of this amount, $10.8 million is related to infrastructure assets donated by developers, $1.7 million is related to utility system development charges, and the rest is related to increases in the sanitary sewer and storm drainage funds. . Government fund balances at year-end totaled $39.1 million. Of this amount, $37.6 million, or 96%, is unreserved and available to fund ongoing activities. However, the majority of the unreserved fund balance relates to special revenue funds and, as such, is legally restricted for specific purposes. Included in unreserved fund balance is $6.0 million in the cumulative reserve fund that is intended to provide resources in the event of significant downturns in certain City funds or provide for capital needs as designated by the City Council. Compared to 2006, total government fund balances decreased by $2.3 million. This decrease is a result of planned use of fund balance in the capital projects fund. . The general fund's unreserved fund balance of $14.4 million at year-end is relatively unchanged from 2006. The slight increase of $14,392 for 2007 is the result of budgeted use of accurately forecasted general fund revenue, offset by planned net transfers out of the general fund. . Total City debt payments during the year, net of compensated absences, was $2.3 million. Total outstanding debt, including bonds and loans, totaled $27.8 million at December 31st. This ending debt balance is a decrease of $2.5 million and is the result of scheduled debt 15 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS repayment and removal of the compensated absence liability for firefighters and EMS, partially offset by additional new Public Works Trust Fund loans. See note 11 for further information on debt activity during the year and note 15 for information related to incorporation of what was the City's fire department into a new regional fire protection district. Other City Highlights: . The newly created, and first regional fire authority in the state, Valley Regional Fire Authority (VRFA) began operations. This moved the City fire department to a new taxing authority which operates similar to a fire district. The City acted as fiscal agent for 2007 for this entity. . Adopted the Environmental Park (EP) District and associated rezone to encourage compatible development in the proximity of the Auburn Environmental Park. . Developed a fiber communications infrastructure plan. . Police reduced crime through community programs educating citizens on reducing crimes. . Citizens in two King County Planned Annexation Areas (PAA's) voted to annex into the City effective January 1, 2008. Total population increased by approximately 15,500. . The Save our Streets program completed over $2.2 million in local street projects. . Worked with other regional governments on future regional water supplies, climate change, water demand, source exchange and small systems management. . Began discussions with King County Metro to extend sewer treatment services agreement to 2056 via a new service agreement. . Continued support of the Regional Transportation Improvement District (RTID) package in preparation for the fall 2007 ballot and voter approval. . Completed construction of a new golf course club house and restaurant. . Expanded recreation programs and completed and/or redesigned several parks. . Expanded the use of Photosafe Red Light Photo Enforcement and Speed Enforcement within the City to enhance the public safety of our pedestrian and vehicular traffic. Expansion included one new intersection and two school zones. . Worked with Valley Cities to develop regional truck route mapping and evaluation of freight impacts on the City arterial street system. Overview of the Financial Statements The City's basic financial statements are presented in three parts: 1) Government-wide financial statements 2) Fund financial statements 3) Notes to the financial statements Other supplementary information, in addition to the basic financial statements, is also contained in this report. This section of the management's discussion and analysis is intended to introduce and explain the basic financial statements. 16 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Government-wide Financial Statements The government-wide financial statements are designed to be corporate-like in that all governmental and business-type activities are consolidated into columns which add to a total for the City. The focus of the Statement of Net Assets is designed to be similar to bottom-line results for the City and its governmental and business-type activities. This statement combines and consolidates governmental funds' current financial resources (short-term spendable resources) with capital assets and long-term obligations. Over time, increases or decreases in net assets may be one indicator of improvement or deterioration in the City's overall financial health. 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, 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 operating a golf course, airport, cemetery and commercial retail space. Governmental activities are primarily supported by taxes, charges for services, and grants while business-type activities are self-supporting through user fees and charges. Fund Financial Statements The Fund Financial Statements are the traditional reporting format for governments. A fund is a fiscal and accounting entity with a self-balancing set of accounts used to account for specific activities or meet certain objectives. While the government-wide statements present the City's finances based on the type of activity (general government vs. business type), the Fund Financial Statements are presented by fund type, such as the general fund, special revenue funds and proprietary funds, with the focus on major funds. Government Funds are used to account for essentially the same functions that are reported as governmental activities in the government-wide financial statements. The government major fund presentation is used, utilizing the "sources and uses of liquid resources" basis. This is the manner in which the budget is typically developed. The basis of accounting is different between the government fund statements and the government-wide financial statements. The government fund statements focus on the near-term revenues/financial resources and expenditures while the government-wide financial statements include both near-term and long-term revenues/financial resources and expenditures. The information in the governmental fund statements can be used to evaluate the City's near-term financing requirements and immediate fiscal health. Comparing the governmental fund statements with the government-wide statements can help the reader better understand the long-term impact of the City's current-year financing decisions. Because the basis of accounting is different between the government fund statements and the government-wide financial statements, reconciliations are provided. The reconciliation between the government fund Balance Sheets and the government-wide Statement of Net Assets is found on the bottom of the government funds' Balance Sheet, while the reconciliation between the government fund Statement of Revenues, Expenditures and Changes in Fund Balance and the government-wide 17 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Statement of Activities is found directly following the government funds' Statement of Revenues, Expenses, and Changes in Fund Balance. The City maintains nineteen 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 required supplemental information. Other budgetary comparison schedules are included following the other government funds' combining statements in this report. Proprietary funds are used by governments to account for their business-type activities and use the same basis of accounting as utilized in private industry. Business-type activities provide specific goods or services to a group of customers that are paid for by fees charged to those customers. There is a direct relationship between the fees paid and the services rendered. The City has two types of proprietary funds: enterprise funds and internal service funds. Enterprise funds are used to account for goods and services provided to citizens, while internal service funds are used to account for goods and services provided internally to various City departments. Enterprise funds report the same functions presented as business-type activities in the government- wide statements, but in greater detail. The City's enterprise fund statements provide information on the City's four utilities (water, sanitary sewer, storm water, and solid waste) as well as the City- owned airport, cemetery, and golf course and the City-leased retail space. Internal service funds are an essential accounting tool used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its fleet of vehicles, the City-wide provision of computer hardware and software services, and its insurance premiums. Internal service funds benefit both governmental and business-type activities, and are allocated accordingly in the government-wide statement of activities. Fiduciary funds account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments or other funds. Fiduciary funds are not included in the government-wide financial statements because their assets are not available to support the City's activities. The City has two fiduciary funds: a pension fund and an agency fund, and are accounted for on the accrual basis. As agency funds are custodial in nature, they do not include revenues and expenses. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found at the end of the Basic Financial Statements section. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the budget vs. actual reports of the City's general fund and major special revenue funds. The budget vs. actual required supplementary 18 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS information can be found in the tab labeled "Required Supplemental Information" and the pension benefit required supplementary information is found in note 10. The combining statements referred to earlier in connection with nonmajor government funds, non major enterprise funds, and internal service funds are presented in the section titled "Fund Financial Statements and Schedules". Government-wide Financial Analysis The statement of net assets can serve as a useful indicator of the City's financial position. The City of Auburn's net assets (assets in excess of liabilities) at December 31, 2007 totaled $436.3 million. Following is a condensed version of the government-wide statement of net assets with a comparison to 2006: City of Auburn Net Assets Governmental Activities Business-type Activities Total As of 12/31/07 As of 12/31/06 As of 12/31/07 As of 12/31/06 As of 12/31/07 As of 12/31/06 Current and other assets $ 58,618,809 $ 60,119,600 $ 46,338,621 $ 48,538,753 $ 104,957,430 $ 108,658,353 Capital assets, net of accumulated depreciation 217.146.886 204.552.704 151.684.341 136.106.696 368.831.227 340.659.400 Total assets 275,765,695 264,672,304 198,022,962 184,645.449 473,788,657 449,317,753 Long-term liabilities 7.461,126 9,040.438 22.422,501 23,549,299 29,883,627 32,589,737 Other liabilities 4.400,206 3,830,304 3,202,642 3,149,996 7,602,848 6,980,300 Total liabilities 11,861,332 12,870,742 25,625,143 26,699,295 37.486.475 39,570,037 Net assets Invested in capital assets, net of related debt 212,611,232 200,814,063 130,515,163 125,265,152 343,126,395 326,079,215 Restricted 24,519,024 26,839,342 1,227,395 6,987,485 25,746,419 33,826,827 Unrestricted 26,774,107 24,148,157 40,655,261 25,693,517 67.429,368 49,841,674 Total net assets $ 263,904,363 $ 251,801,562 $ 172,397,819 $ 157,946,154 $ 436,302,182 $ 409,747,716 The largest component of the City's net assets, $343.1 million, or 79%, is its investment in capital assets, less debt related to the acquisition or construction of those assets. These capital assets, such as streets, parks, trails, and vehicles and equipment related to police and public works, are used to provide services to the citizens. As a result, these assets are not for sale, and are therefore not available to fund current and future City obligations. The City elected the GASB 34 reporting option to include all general infrastructure of the City acquired or substantially renovated since 1980. The largest component of unrestricted net assets, $40.7 million, represents the unrestricted net assets of the City's business-type activities and may only be spent on activities related to one of the four City utilities (water, sanitary sewer, storm water and solid waste) or to the City-owned ventures (airport, golf course, cemetery, and commercial retail property). Examples of utility activities include maintenance of water/sewer mains, pump and lift stations, storm drain flushing, water meter reading, and garbage collection. Activities related to the other City-owned ventures include maintenance of hangars and runways at the airport, and grooming and landscaping at the golf course and cemetery. Restricted governmental fund net assets are $24.5 million and are restricted for purposes such as capital project construction, debt service, mitigation, and endowment. The remaining net assets of the City may be used for functions such as public safety employee salaries and supplies, park and road maintenance, and other general government services. 19 CITY OF AUBURN: 2007 CAFR Changes in Net Assets MANAGEMENT'S DISCUSSION AND ANALYSIS The change in net assets represents the increase or decrease in City net assets resulting from its various activities. Following is a condensed version of the City's changes in net assets. The table shows the revenues, expenses and related changes in net assets for both governmental-type and business-type activities: City of Auburn's Changes in Net Assets Revenues: Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues Property taxes Sales taxes Interfund utility taxes Admission & utility taxes Excise taxes Other taxes Investment earnings Miscellaneous revenue Total revenues Expenses: General government Public safety Transportation Physical environment Culture and recreation Economic environment Health and human services Interest on long-term debt Water Sanitary sewer Storm drainage Solid waste Golf course Other business-type activities Total expenses Increase in net assets before transfers Transfers Change in net assets Net assets-beginning of period Net assets-end of period Governmental Activities 2007 2006 $ 10,049,930 $ 2,923,968 9,213,115 16,164,073 18,958,484 2,095,901 6,073,429 3,862,692 2,005,836 2,993,174 (406,847) 73,933,755 7,196,492 33,396,630 8,077,154 3,269,334 6,539,281 2,400,031 416,456 163,916 61,459,294 12,474,461 (371,660) Business-type Activities 2007 2006 7,875,376 2.714,324 5,174,350 $ 38,784,127 43,263 12,479,500 $ 36,226,324 47,961 3,988,202 1,574,444 1,602,274 43,439,205 7,647,935 11,878,252 3,852,335 9,936,222 1,020,070 1,618,285 35,953,099 7,486,106 570,588 Total 2007 2006 $ 48,834,057 2,967,231 21,692,615 16,164,073 18,958,484 2,095,901 6,073,429 3,862,692 2,005,836 5,091,591 20,675 127,766,584 7,196,492 33,396,630 8,077,154 3,269,334 6,539,281 2,400,031 416,456 163,916 7,873,191 13,974,607 4,224,881 10,368,901 1,576,126 1.735,118 101,212,118 26,554,466 $ 44,101,700 2.762,285 9,162,552 15,186,456 17,784,374 1,983,652 5,893,041 4,568,549 1,859,428 4,029,138 1,671,311 109,002,486 6,462,578 29,804,864 7,619,268 2,418,543 5,729,431 1,848,988 763,156 203,180 7,647,935 11,878,252 3,852,335 9,936,222 1,020,070 1,618,285 90,803,107 18,199,379 12,102,801 10,142,685 14,451,665 8,056,694 26,554,466 18,199,379 15,186,456 17,784,374 1,983,652 5,893,041 4,568,549 1,859,428 2,454,694 69,037 65,563,281 2,098,417 427,522 53,832,829 251,801,562 241,658,877 157,946,154 149,889,460 409,747,716 391,548,337 6,462,578 29,804,864 7,619,268 2,418,543 5,729,431 1,848,988 763,156 203,180 54,850,008 7,873,191 13,974,607 4,224,881 10,368,901 1,576,126 1.735,118 39,752,824 $ 263,904,363 $ 251,801,562 $ 172.397,819 $ 157,946,154 $ 436,302,182 $ 409,747,716 10,713,273 14,080,005 Governmental activities contributed $12.1 million to the total increase in City net assets. Revenues to fund capital assets are recorded as program or general revenues in the statement of activities. However, asset purchases are not recorded as expenses in the year purchased and construction costs are not recorded as expenses in the year incurred. Instead, the costs are recorded as long- term assets and are depreciated over their useful life. This amount equaled $11.4 million, which was offset by an overall increase in the cost and variety of governmental services provided. (570,588) 371,660 20 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS General tax revenue rose during 2007: . Property tax revenue rose by $977,617, or 6.4%. This increase is higher than the statutory maximum of 1 %, and is due to the Save Our Streets levy lid lift passed by the voters in 2004, as well as taxes collected on construction completed during 2007. . Sales tax collections had a healthy increase of $1,174,110, or 6.6%. . Utility and admission tax revenue rose by $180,388 or 3.1 %. . Real Estate Excise Tax (REET) revenue decreased by $705,857, or 15.5%. . Investment revenue rose by $538,480, or 21.9%. This was due to rising interest rates during the first half of 2007. Governmental activity expenses rose $6.6 million, or 12.0%. Public safety and general government expenditures increased by $4.3 million and most other governmental program expenditures increased from 2006. The next chart summarizes the government activity revenue by source, while the second one reflects the specific programs' revenues and related expenses for the various activities of the City. Gaps between specific programs' revenues and their related expenditures are funded through general tax revenues. Revenues by Source - Government Activities Other revenue 3% Other taxes 8% Utility & admission taxes 8% Interfund utility taxes 3% Cha rges for services 14% Capital grants & contributions 4% Operating grants & contributions 12% Property taxes 22% 21 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Program Revenues and Expenses - Governmental Activities $35,000,000 $5,000,000 o Program revenues . Expenses $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $0 ~ ~0 ~<::' ,.0 ~ ~ ~ 0<::' o '{,.,~ ,,,,'If ~v ~ ~ &.0<::- 0~ t::-'lf '!::-~ ~O .~O '!::-g ,;." ,,,,'If ~ 0 .v'lf cd' ~-0 &.0<::- 0'lf 6 ,0 ,!::-O 'If ~0 ~v C;V ~ "" ~0 ~.ff' .~O<::' ",,0 ,;. 'If .v0 .~ ~ ,<::-V ,!::-O ,!::-O /,& ~'lf v f/} ~0 Business-type net assets increased by $14.5 million. Key components of this increase include: . $12.5 million of the increase relates to utility capital contributions. Of this amount, $10.8 million is related to utility infrastructure contributed to the City by developers, and $1.7 million is related to new customer connections . Income (loss) before capital contributions and transfers amounted to: o Water fund: o Sanitary sewer fund: o Storm fund: o Solid waste fund: o Golf course: o Non-major funds: $ 724,525 605,714 388,580 254,029 (39,102) (34.522) $ 1,899,224 . Net transfers-in totaled $371,660. 22 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Below is a chart that shows the relative net asset balances for each business-type fund: Business-type Net Assets - By Fund Golf course 3% Solid waste 2% Water 32% Commercial retail 1% Storm drainage 22% Sanitary sewer 35% The majority of net assets in the City's enterprise funds relate to capital asset infrastructure, such as water and sewer mains, the airport runway, and the golf course land. As such, most of the net assets are not available to support the ongoing expenses of the funds. Following are two charts that contrast the total net assets to the spendable portion of net assets for each enterprise fund: Comparison of Total Net Assets to Spendable Net Assets Utility Funds $0 Sanitary sewer $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 Water Storm drainage Solid waste 23 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Comparison of Total Net Assets to Spendable Net Assets Other Enterprise Funds $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 o Spendable net assets . Total net assets The first chart following depicts the revenues and expenses for business-type funds, while the second shows the various sources of business-type revenue: $15,000,000 $13,500,000 $12,000,000 $10,500,000 $9,000,000 $7,500,000 $6,000,000 $4,500,000 $3,000,000 $1,500,000 Airport Cemetery Golf course Commercial retail Business-type Activity Revenues and Expenses Before Capital Contributions and Transfers $0 Water Sanitary sewer Storm drainage Solid waste Golf course Minor business-type activities 24 o Revenues . Expenses CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Business-type Activity Revenues - By Source Investment earnings 4% Capital contributions 23% Financial Analysis of Governmental Funds Business-type miscellaneous income 1% Charges for services 72% The purpose of the City's government funds is to report on near-term revenues/financial resources and expenditures. This information helps determine the City's financial requirements in the near future. Specifically, fund balance is a good indicator of the City's financial resources. As of December 31, 2007, the City's governmental funds had combined fund balances of $39,132,728 a decrease of $2,346,776 or 5.7%. This decrease is related to: . General fund . Arterial street fund . Capital improvement projects fund . Other governmental funds $14,392 $17,131 ($3,827,447) $1,449,148 Of the government funds' total fund balances, $37,621,570 is unreserved. Of this unreserved total, $9,873,331 is earmarked for capital projects and $13,124,661 is in special revenue funds and is earmarked for specific purposes. Of the $1,511,158 of fund balances that are reserved, $1,319,367 is reserved for endowment. The general fund is the primary operating fund of the City. All receipts and payments of ordinary City operations are processed through it unless they are required to be accounted for in another fund. At the end of 2007, the general fund had a fund balance of $14,462,720, of which substantially all is unreserved. Other funds that had significant fund balances include: . $9,685,352 in the capital improvement projects fund; used for various governmental capital asset projects. . $5,962,968 in the cumulative reserve fund; used for revenue stabilization or capital projects. 25 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS . $5,120,045 in the mitigation fund; used to collect fees from new development to mitigate the cost of new roads and other infrastructure. . $1,490,350 in the cemetery endowed care fund; used for maintenance of the cemetery. The following chart shows the relative fund balances for governmental funds: Governmental Funds - Fund Balances Cemetery endowment fund 4% All other government funds 4% Mitigation fund 13% General fund 37% Cumulative reserve fund 15% Arteria I street fund 2% Capital improvement fund 25% The increase in the general fund balance of $14,392 can be attributed to transferring $600,000 to the golf course fund, $300,000 to the capital projects fund and other fund transfers, offset by the increase in retail sales tax and other taxes and fees. General fund operating expenditures increased by $7.3 million from 2006. The increase relates to overall salary and benefit cost increases including a $3.0 million increase in expenditures for the police department for general salary and staffing increases, in addition to new staffing added in anticipation of increased services levels for annexation areas effective January 1, 2008, as described in note 18. The general fund revenue increase of $4.3 million came from the following sources: 26 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS General Fund Revenue Increases I (Decreases) - By Source $1,500,000 $1,250,000 Property taxes $1,219,693 Sales taxes $1,174,110 $1,000,000 Fines & forfeitures $876,188 $750,000 $500,000 $0 Miscellaneous $274,669 $250,000 Charges for services $42,846 ($250,000) Licenses & penn its ($76,370) Intergovemmental ($194,398) The increase of $17,131 in the arterial street fund is due to transfers in from the capital improvement projects fund and mitigation fees fund, as well as increased investment income for 2007. The decrease of $3,827,447 in the capital improvement projects fund is due to transfers out of $2,821,296 for major capital projects primarily in the local street and arterial street funds. Capital outlays within the capital improvement projects fund increased by $2,068,019 from prior year, which was partially offset by transfers in of $914,800 as well as investment income of $739,227. Other significant changes in fund balances include: . The mitigation fund increased by $1,778,133 due to an increase in revenue from prior year of $1 ,321 ,072 and expenditures less than what was anticipated and budgeted for. . The local streets fund increased by $219,283 due to transfers in from the capital improvement projects and mitigation funds, as well as lower than anticipated expenditures. . The cumulative reserve fund increased by $320,781 due to investment income earned during 2007. Financial Analysis of Proprietary Funds The City's proprietary funds provide the same type of information as found in the government-wide financial statements, but in greater detail. Factors affecting the finances of the City's proprietary funds have already been addressed in the discussion of the City's business-type activities. General Fund Budgetary Highlights The City budgets biannually by adopting a budget at the end of the preceding fiscal year, and then making adjustments as necessary via budget amendments throughout the next two years. Following is a summary of such budget amendments: 27 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Budgeted general fund revenue changed for the following reasons: Beginning Fund Balance higher than anticipated Grants & Intergovernmental Revenue Engineering Fees Culture & Recreation Traffic Photo Enforcement Contributions Mukleshoot Tribe Fee for Signal Poles Operating Transfer In $ 3,736,203 873,600 340,000 48,800 760,000 163,200 25,000 31,220 $ 5.978.023 Budgeted general fund expenditures changed for the following reasons: Program Improvement - Council Assistant Program Improvement - Property Manager Program Improvement - Development Services staffing Program Improvement - Ass!. Police Chief, patrol positions Program Improvement - Construction Inspectors Program Improvement - Traffic Operations Technician Program Improvement - Small tools & equipment Early start for annexation related salaries & benefits Increase operating expenses for annexation positions Decrease Public Safety (Fire/EMS) expenditures related to VRFA Probation Assistant position reclassification Public Defender contract Increased Planning department professional services Development peer review services Police Investigations Unit promotions Police uniforms Police vehicles Traffic photo enforcement costs Grant funded operating expenditures Additional street and traffic signal expenditures Parks department operating expenditures Increased cash receipting software & hardware costs Public art map & brochure Clean Sweep project Utility cost increases Street Maintenance Workers (3) & Field Supervisor Supplies & equipment for additional Streets division staff Increase retiree medical payments & insurance Multiservice center & gateway projects Mill Creek restoration project Transfer out to Mitigation Fund Transfer out to Fire Relief & Pension Fund Transfer out to Information Services Fund Transfer out to Equipment Rental Fund Transfer out to Golf Course Fund Transfer out to Capital Projects Fund $ 17,900 55,500 141,300 587,000 83,600 67,900 22,000 50,400 20,500 (348,200) 1,900 60,000 398,600 125,000 19,100 52,500 209,500 180,000 80,200 177,000 244,900 32,400 15,000 35,000 185,000 68,700 15,000 329,000 159,100 20,000 53,300 5,200 27,600 800 600,000 414,800 $ 4,207,500 Reasons for the significant variances in the general fund between the final budget and actual results include: . Property taxes increased by $1,219,693 due to an increase in assessed values along with voter approved additional levies for the Save-Our-Streets program. . Fines and forfeitures increased by $876,188 from prior year due to an increase in photo enforcement efforts at intersections and within school zones. 28 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS . Sales tax revenue was much stronger than anticipated, resulting in a positive variance to budget of $1 ,174,110. . Investment income was $498,061 greater than budgeted due to the rising interest rates in the first ha If of 2007. . Professional services expenditures were $1,183,628 million less than budgeted. 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, 2007 totaled $368.8 million (net of accumulated depreciation), an increase of $28.2 million from 2006. This investment in capital assets includes land, buildings, improvements, machinery and equipment, construction in progress, utility transmission/distribution systems, roads, bridges, and other infrastructure. Major capital asset changes during the year include: . Land, building and right-of-way costs were incurred during the year, resulting in an increase in governmental infrastructure of $2.3 million. The City also finalized during 2007 the donation process for property valued at $2.2 million received from the federal government. . Developer contributions resulted in an increase of $1 0.8 million in utility infrastructure assets. . $10.0 million was spent by proprietary funds on construction projects during the year. Some of the larger ones include: o $1.7 million on Auburn Way South sanitary sewer project o $0.5 million on Lea Hill sanitary sewer pump station costs o $0.6 million on M St SE storm system improvements o $4.5 million on golf course clubhouse and restaurant o $0.4 million on completion of a columbarium at the cemetery . Equipment with a net book value of $1,037,163 was transferred to the newly created Valley Regional Fire Authority (VRFA) upon incorporation of the authority. See note 15 for more information on the VRFA. As a separate municipal corporation of the state, the transfer was accounted for as a disposal by the City. A summary of the City's net assets follows: 29 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Summary of Capital Assets (net of depreciation) Land Building Joint venture Site improvements Equipment Intangibles Infrastructure Construction in progress Governmental Activities As of 12/31/07 As of 12/31/06 $ 48,969,057 $ 44,536,400 16,789,533 14,930,016 2,885,788 2,737,913 4,077,270 2,578,111 6,109,008 7,072,672 649,137 134,140,672 3,526,421 $ 217,146,886 129,431,581 3,266,011 $ 204,552,704 Business-type Activities As of 12/31/07 As of 12/31/06 $ 14,158,803 $ 14,158,803 8,666,798 4,053,247 Total As of 12/31/07 As of 12/31/06 $ 63,127,860 $ 58,695,203 25,456,331 18,983,263 2,885,788 2,737,913 125,914,668 114,985,149 7,151,076 8,112,917 649,137 134,140,672 9,505,695 $ 368,831,227 121,837,398 112,407,038 1,042,068 1,040,245 5,979,274 4,447,367 $ 151,684,341 $ 136,106,700 129,431,581 7,713,378 $ 340,659,404 Long-term Debt More detailed information on capital assets is provided in note 7. At the end of the current fiscal year, the City had total bonded debt outstanding of $15,416,827. Of this amount, $10,650,000 is general obligation bonds, $4,730,000 is revenue bonds for the water and storm utilities, and $36,827 is special assessment debt with government commitment. The City currently maintains a rating of A 1 with Moody's for its general obligation debt. The following schedule summarizes the City's bonded debt: Summary of bonded debt General obligation bonds Special assessment bonds Revenue bonds Governmental Activities $ 4,230,000 36,827 $ 4,266,827 Busi ness-type Activities $ 6,420,000 $ Total 10,650,000 36,827 4,730,000 15,416,827 4,730,000 $ 11,150,000 $ Below is a summary of additional, non-bonded long-term debt of the City: Other Long-term Debt Public Works Trust Fund loans Employee leave benefits $ 10,149,419 1,629,872 $ 11,779,291 Washington State law limits the amount of general obligation debt a governmental entity may issue to 7.5% of its total assessed value. Of the 7.5% limit, 2.5% is for general purposes, 2.5% is for open spaces/parks, and 2.5% is for utilities. Non-voted (limited tax) general obligation indebtedness is limited to 1.5% of assessed valuation. The combination of unlimited tax and limited tax general obligation debt for all purposes cannot exceed 7.5% of assessed valuation. Following is a summary of the City's legal debt limitations and capacity: 30 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS Summary of legal debt limits and capacity With a Vote General Open spaces/parks Utilities Totals Legal Limitation $ 163,157,375 163,157,375 163,157,375 $ 489,472,125 Auburn Capacity $ 152,436,451 163,157,375 163,157,375 $ 478,751,200 Without a Vote General Totals $ 97,894,425 $ 87,173,501 $ 97,894,425 $ 87,173,501 Additional information can be found in note 11 and in the statistical section of this report. Economic Factors The outlook for 2008 and beyond is positive. The economy in the county and the City has been robust. Many existing businesses are planning to expand their facilities & employ more people. According to the Washington State Employment Security Department, the Auburn economy added 1,450 new jobs between January 2006 and January 2008. Some of the most recent and significant projects are: . Auburn Regional Medical Center is planning an 11 ,OOO-square foot cancer treatment center adjacent to the hospital, along with a public/private mix 300-stall parking garage. . A new three story building that will house a floor of City offices (City Hall Annex) will break ground next to City Hall in 2008. The building will feature Key Bank as its anchor, along with medical/professional offices and a restaurant.. . Downtown redevelopment is planned on several blocks (4+) near the Transit Station. A developer has been selected and the project value is estimated to be $240 million. . Plans are moving forward to develop a large retail/office project in the City's north end that had been a drive-in movie complex. Up to 65 acres may be involved. Significant new retail sales tax revenues would be generated from this project. . A new Super Wal-Mart is about to begin its 2 year construction cycle adjacent to the Super Mall that will also provide the City with new jobs and new tax revenues. . The City issued 293 residential permits in 2007 for new construction, remodels, and rehabs. In addition, 214 commercial and industrial permits were issued for new projects and renovations. Requests for Information This financial report is designed to provide a general overview of the City of Auburn's finances for readers with an interest in the City's finances. Questions concerning this report, or requests for additional information, may be addressed to the Finance Director, City of Auburn, 25 West Main Street, Auburn WA 98001-4998. 31 CITY OF AUBURN: 2007 CAFR MANAGEMENT'S DISCUSSION AND ANALYSIS * * * * * MORE THAN YOU IMAGINED 32 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS The City presents two government-wide financial statements: The Statement of Net Assets provides information all on city assets and liabilities, with the difference between the two reported as net assets. The Statement of Activities is focused on both the gross and net cost of various functions, including both governmental and business-type activities, which are supported by the City's general tax and other revenues. 33 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS * * * * * MORE THAN YOU IMAGINED 34 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF NET ASSETS DECEMBER 31, 2007 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS: CASH AND CASH EQUIVALENTS (Note 3) $ 41,577,938 $ 23,922,681 $ 65,500,619 INVESTMENTS (Note 3) 8,298,435 12,511,727 20,810,162 RECEIVABLES: TAXES 1,578,248 1,578,248 CUSTOMER ACCOUNTS 210,127 4,080,825 4,290,952 OTHER RECEIVABLES 1,419,273 128,108 1,547,381 SPECIAL ASSESSMENTS 703,809 703,809 DUE FROM OTHER GOVERNMENTAL UNITS (Note 6) 3,059,817 43,263 3,103,080 INTERNAL BALANCES (67,437) 67,437 MA TERIALS AND SUPPLIES INVENTORY 135,275 243,935 379,210 LONG-TERM CONTRACTS AND NOTES 7,182 1,236,816 1,243,998 DEFERRED CHARGES 1,696,142 1,696,142 RESTRICTED ASSETS: TEMPORARILY RESTRICTED: CASH AND CASH EQUIVALENTS (Note 3) 4,103,829 4,103,829 DEPRECIABLE CAPITAL ASSETS (NET OF ACCUMULATED DEPRECIA TION): (Note 7) 164,715,613 131,546,343 296,261,956 NON-DEPRECIABLE CAPITAL ASSETS 52,431,273 20,137,998 72,569,271 TOTAL ASSETS 275,765,695 198,022,962 ~ 473,788,6571 LIABILITIES: ACCOUNTS PAYABLE 4,131,939 2,782,537 6,914,476 OTHER LIABILITIES PAYABLE 268,267 139,501 407,768 PAYABLE FROM RESTRICTED ASSETS: ACCRUED INTEREST 280,604 280,604 UNEARNED REVENUE 1,132,203 916,385 2,048,588 BONDS AND OTHER DEBT PAYABLE: DUE WITHIN ONE YEAR (Note 11) 1,589,305 2,451,334 4,040,639 DUE IN MORE THAN ONE YEAR (Note 11) 4,702,791 19,054,782 23,757,573 SPEC ASSESSMENT DEBT WITH GOV'T COMMITMENT (Note 11) 36,827 36,827 TOTAL LIABILITIES 11,861,332 25,625,143 37,486,4751 NET ASSETS: INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT 212,611,232 130,515,163 343,126,395 RESTRICTED NET ASSETS: CAPITAL PROJECTS 9,908,034 9,908,034 SPECIAL REVENUE FUND PROJECTS 13,129,957 13,129,957 DEBT SERVICE 148,938 706,976 855,914 NON EXPENDABLE PERPETUAL CARE 1,332,095 1,332,095 CONSTRUCTION 520,419 520,419 UNRESTRICTED NET ASSETS 26,774,107 40,655,261 67,429,368 TOTAL NET ASSETS $ 263,904,363 $ 172,397,819 $ 436,302,1821 The notes to the financial statements are an integral part of this statement. 35 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31,2007 Page 1 of 2 EXPENSES CHARGES FOR SERVICES PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPIT AL GRANTS AND CONTRIBUTIONS FUNCTIONS I PROGRAMS: PRIMARY GOVERNMENT GOVERNMENTAL ACTIVITIES GENERAL GOVERNMENT PUBLIC SAFETY TRANSPORTATION PHYSICAL ENVIRONMENT CULTURE AND RECREATION ECONOMIC ENVIRONMENT HEALTH AND HUMAN SERVICES INTEREST ON LONG-TERM DEBT $ 7,196,492 $ 1,126,258 $ 316,788 $ 2,241,373 33,396,630 3,100,973 1,407,219 4,727 8,077,154 1,930,504 14,153 6,711,776 3,269,334 576,539 582,631 74,076 6,539,281 1,245,122 377,876 181,163 2,400,031 2,070,534 107,504 416,456 117,797 163,916 61,459,294 10,049,930 2,923,968 9,213,1151 7,873,191 7,934,141 5,578,567 13,974,607 13,352,474 4,700,246 4,224,881 4,196,732 2,200,687 10,368,901 10,442,391 43,263 1,576,126 1,401,757 1,735,118 1,456,632 39,752,824 38,784,127 43,263 12,479,500 I 101,212,118 $ 48,834,057 $ 2,967,231 $ 21,692,6151 BUSINESS-TYPE ACTIVITIES: WATER SANITARY SEWER STORM DRAINAGE SOLID WASTE GOLF COURSE NON MAJOR BUSINESS-TYPE ACTIVITIES !TOTAL PRIMARY GOVERNMENT $ GENERAL REVENUES TAXES PROPERTY RETAIL SALES AND USE INTERFUND UTILITY UTILITY EXCISE OTHER INVESTMENT EARNINGS MISCELLANEOUS GAIN (LOSS) ON SALE OF CAPITAL ASSETS CONTRIBUTIONS TO ENDOWMENT FUNDS TRANSFERS (Note 5) I TOTAL GENERAL REVENUES I CHANGE IN NET ASSETS NET ASSETS - BEGINNING I NET ASSETS - ENDING The notes to the financial statements are an integral part of this statement. 36 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS Page 2 of 2 NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITY TOTAL $ (3,512,073) $ $ (3,512,073) (28,883,711) (28,883,711) 579,279 579,279 (2,036,088) (2,036,088) (4,735,120) (4,735,120) (221,993) (221,993) (298,659) (298,659) (163,916) (163,916) (39,272,281) ~ (39,272,281 )1 5,639,517 5,639,517 4,078,113 4,078,113 2,172,538 2,172,538 116,753 116,753 (174,369) (174,369) (278,486) (278,486) I 11,554,066 11,554,0661 1$ (39,272.281) . $ 11,554,066 $ (27,718,215)1 $ 16,164,073 $ $ 16,164,073 18,958,484 18,958,484 2,095,901 2,095,901 6,073,429 6,073,429 3,862,692 3,862,692 2,005,836 2,005,836 2,993,174 2,098,417 5,091,591 429,472 429,472 (457,499) (1,950) (459,449) 50,652 50,652 (371,660) 371,660 51 ,~,082 2,~,599 54,~~ 12,102801 14,451,665 26,5544661 251,801,562 157,946,154 409,747,716 1$ 263,904,363 $ 172.397,819 $ 436,302,1821 37 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS MAJOR GOVERNMENTAL FUNDS General Fund The general fund accounts for all of the City's financial resources except those required by statute or generally accepted accounting principles to be accounted for in another fund. As is the case with most municipalities, the general fund is the largest and most important accounting entity of the City. As noted in the statements that follow, the general fund receives the bulk of its revenues from ~ocal 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's one-half cent gas tax and is used for major street construction. Capital Improvement Projects Fund This fund accounts for major capital acquisitions, and streets and parks construction projects. 38 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2007 OTHER TOTAL GENERAL ARTERIAL CAPITAL GOVERNMENTAL GOVERNMENTAL FUND STREET IMPROVEMENT FUNDS FUNDS ASSETS: CASH AND CASH EQUIVALENTS $ 10,830,782 $ 759,779 $ 7,540,469 $ 12,214,976 $ 31,346,006 INVESTMENTS 2,997,813 2,013,111 2,286,261 7,297,185 RECEIVABLES TAXES 1,578,248 1,578,248 CUSTOMER ACCOUNTS 69,144 91,182 160,326 OTHER RECEIVABLES 1,343,298 24,595 1,367,893 SPECIAL ASSESSMENTS 703,809 703,809 INTERFUND RECEIVABLE (Note 5) 229,000 134,375 363,375 LONG-TERM NOTES AND CONTRACTS 610,951 610,951 DUE FROM OTHER GOVERNMENTAL UNITS 1,857,841 760,670 441,306 3,059,817 DEFERRED CHARGES 6,868 6,868 TOTAL ASSETS $ 18,906,126 $ 1,520,449 $ 10,414,683 $ 15,653,220 $ 46,494,478 I LIABILITIES AND FUND BALANCES: CURRENT PAYABLES $ 2,613,365 $ 250,594 $ 93,784 $ 577,217 $ 3,534,960 CUSTOMER DEPOSITS 235,470 235,470 INTERFUND PAYABLE (note 5) 229,000 229,000 OTHER LIABILITIES PAYABLE 69 69 DEFERRED REVENUE 1,594,502 428,393 635,547 703,809 3,362,251 TOTAL LIABILITIES 4,~,406 678,987 729,331 1,~,026 7,~,ZQQJ FUND BALANCES RESERVED FOR PETTY CASH 10,125 10,125 DEBT SERVICE 181,666 181,666 ENDOWMENT 1,319,367 1,319,367 UNRESERVED, REPORTED IN GENERAL FUND 14,452,595 14,452,595 SPECIAL REVENUE FUNDS 841,462 12,283,199 13,124,661 CAPITAL PROJECT FUNDS 9,685,352 187,979 9,873,331 PERMANENT FUND 170,983 170,983 TOTALFiJ'No-BALANCES 14,462,720 841,462 9,685,352 14,143,194 39,132,728 I TOTAL LIABILITIES AND FUND BALANCES $ 18,906,126 $ 1,520,449 $ 10,414,683 $ 15,653,220 $ 46,494,478 I Other long-term assets are not available to pay for current-period expenditures and therefore are deferred in the funds. Prepaid expenses Net pension asset Interest receivable on investments Unearned revenue beyond the city's 30-day measurable and available period Deferred charges for bond issue costs $ 39,132,728 212,008,540 1,640,321 48,953 81,751 1,594,502 1,126 3,366,653 15,665,633 (4,373,561 ) (32,728) (1,199,348) (663,554) (6,269,191) $ 263,904,363 I Total governmental fund balances as reported on this statement Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore not reported in the funds. Internal service funds are used by management to charge the cost of certain activities, such as insurance and fleet maintenance, to individual funds. The assets and liabilities of these internal service funds are included in governmental activities in the statement of net assets. Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Bonds and loans payable Interest payable Compensated absences payable Capital lease payable INet assets of government activities as re[!Qrted on the statement of net assets The notes to the financial statements are an integral part of this statement. 39 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31,2007 OTHER TOTAL GENERAL ARTERIAL CAPITAL GOVERNMENTAL GOVERNMENTAL FUND STREET IMPROVEMENT FUNDS FUNDS REVENUES: TAXES PROPERTY $ 15,166,016 $ $ $ 500,000 $ 15,666,016 RETAIL SALES & USE 18,958,484 18,958,484 INTERFUND UTILITY 2,095,901 2,095,901 UTILITY 6,073,429 6,073,429 EXCISE 1,008,066 2,769,221 85,405 3,862,692 OTHER 65,129 65,129 LICENSES AND PERMITS 1,606,950 1,606,950 INTERGOVERNMENTAL 3,451,594 1,635,666 30,000 649,224 5,766,484 CHARGES FOR SERVICES 2,663,788 2,353,436 5,017,224 FINES AND FORFEITURES 1,930,389 224,731 2,155,120 SPECIAL ASSESSMENTS 52,291 52,291 INVESTMENT EARNINGS 848,061 63,434 739,227 805,569 2,456,291 MISCELLANEOUS 786,146 14,153 25,905 51.269 877,473 I TOTAL REVENUES 54,~,824 1,~,253 3,~,353 4,~054 64,~,;!.iliJ EXPENDITURES: CURRENT GENERAL GOVERNMENT 6,834,084 6,834,084 SECURITY OF PERSONS AND PROPERTY 32,798,206 57,641 712,906 33,568,753 PHYSICAL ENVIRONMENT 3,352,466 3,352,466 TRANSPORTATION 2,096,049 3,396,595 1,893,285 7,385,929 ECONOMIC ENVIRONMENT 1,872,312 269,970 2,142,282 HEALTH AND HUMAN SERVICES 416,456 416,456 CULTURE AND RECREATION 6,541,980 29,295 6,571,275 DEBT SERVICE PRINCIPAL 191,091 35,578 208,424 435,093 INTEREST AND OTHER COSTS 34,050 297 168,919 203,266 CAPITAL OUTLAY 5,427,063 1,919,253 7,346,316 I TOTAL EXPENDITURES 54,136,694 3,432,470 5,484,704 5,202,052 68,255,920 I EXCESS (DEFICIENCY) OF REVENUES rO\!ER"(ONDERtEXPENDITORES '152~130 (1~lg~2'17) (1~920~351) ('1~4'998) (3~602:-436)1 OTHER FINANCING SOURCES (USES): PROCEEDS FROM CAPITAL LEASE 695,504 695,504 TRANSFERS IN (Note 5) 1,047,733 1,736,348 914,800 2,404,263 6,103,144 TRANSFERS OUT (Note 5) (2,180,975) (2,821,896) (540,117) (5,542,988) TOTAL OTHER FINANCING SOURCES AND USES (ill,738) 1,736,.348 (1,907 096) 1864,146 1255,~ NET CHANGE IN FUND BALANCES 14,392 17,131 (3,827,447) 1,449,148 (2,346,776) FUND BALANCES - BEGINNING 14,448,328 824,331 13,512,799 12,694,046 41,479,504 IFUND BALANCES - ENDING $ 14,462,720 $ 841 ,462 $ 9,685,352 $ 14,143,194 $ 39,132,7281 The notes to the financial statements are an integral part of this statement. 40 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENT FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2007 Net change in fund balances per the Statement of Revenues, Expenditures and Changes in Fund Balance Amount reported as change in net assets in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay ($11 ,394,900) exceeded depreciation and amortization ($7,230,093) in the current period. Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds: Deferred revenue Donation of property Amortization of bond premium Investment interest receivable 507,304 2,241,373 3,138 34,666 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. Repayment of the principal of long-term debt consumes the current financial resources of governmental funds but has no effect on the net assets. 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. Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Amortization of debt issue costs Amortization of prepaid expenses Change in accrued interest payable Change in net pension obligation Change in compensated absences payable (3,240) (109,355) 2,148 65,605 1,569,046 $ (2,346,776) 4,164,807 2,786,481 5,076,110 411,669 486,306 1,524,204 $ 12,102,8011 IChange in net assets on the Statement of Activities The notes to the financial statements are an integral part of this statement. 41 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS * * * * * MORE THAN YOU IMAGINED 42 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS MAJOR PROPRIETARY FUNDS ENTERPRISE FUNDS The City's enterprise funds are used to account for operations that are financed and operated in a manner similar to private business operations. The goods and services these funds provide to the general public are primarily financed by service charges. Enterprise funds are self-supporting and use the accrual method of accounting. Auburn has five major enterprise funds. The Water Fund This fund accounts for all maintenance, construction, and debt service requirements associated with the water system. The Sanitary Sewer Fund This fund accounts for maintenance, construction, and debt requirements for Auburn's sanitary sewer system. The Storm Drainage Fund This fund accounts for the maintenance, construction and debt service requirements of Auburn's storm drainage system. The Solid Waste Fund Garbage collection services for the City are accounted for in this fund, supported almost entirely by garbage collection fees. Expenses include payment to the City's garbage contractor and other service charges. The Golf Course Fund Accounts for services, maintenance, and operations associated with the Auburn Municipal Golf Course. 43 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS TOTAL ASSETS CITY OF AUBURN, WASHINGTON STATEMENT OF NET ASSETS PROPRIETARY FUNDS DECEMBER 31, 2007 GOVERNMENTAL NON-MAJOR TOTAL ACTIVITIES SANITARY STORM SOLID GOLF PROPRIETARY PROPRIETARY INTERNAL WATER SEWER DRAINAGE WASTE COURSE FUNDS FUNDS SERVICE FUNDS 5.860.893 9.958.790 3.534.480 1.613.651 349.176 2.605.691 23.922.681 10.231.932 4.003,125 4.000,918 3.507,344 1.000,340 12,511.727 1,001.250 1,028.885 449,902 272.207 1,750,994 43.665 18.471 77.366 139.502 502.043 989,826 504.933 216,531 2.213.333 749.529 1.620.525 489.623 1.217.238 3.910 4.080.825 49.801 33.439 29.439 45.369 19.861 128,108 1.406 43.263 43.263 223,040 4.330 7,597 8.968 243,935 135.275 12,:L4.4l6,j9.-16,622,2g9 8,539 248 3,8g~,,353_83?19,1.1-2,695,g35-15,03....,;4,368 1,1,;lJ9,66tJ 1.163.400 73.416 1,236.816 897.971 1.654.958 5.686.254 2.229.636 3.689.984 14.158.803 2.902.031 1,120,740 192,076 496.618 6.381,833 5.237.684 16,330.982 11.455,280 78.679,611 53.232,004 37.356.499 3,023,052 6,628.275 178,919.441 46,591 981.228 4,589,591 266,636 141,740 5,979,195 64,206 (30.047,965) (13.917.417) (11.645.026) (256.803) (1.761,529) (6.075.340) (63.704.080) (6.427.731) 53.412.876 46.679,876 31,856.439 239,815 9,872,992 9.622,343 151,684.341 5.138.346 53.412.876 47.843.276 31 856.439 239.815 9.872,992 9.695.759 152,921.157 5.138.3461 65.857.495 64.465,575 40.395.687 4.134.168 10,710.906 12.391,694 197,955.525 16,558,Q1Q.I 375.436 1.158.317 189.865 859.169 140.789 58.961 2.782.537 596.979 43,665 18.471 77,365 139,501 134.375 134.375 435.568 243,955 679,523 101,807 59.756 66.260 13,046 42.129 18.813 301.811 83.829 855,100 379,900 1.235.000 175.000 60.000 235,000 198.109 12.493 70.002 280,604 2,o.og,685 1.492,@2 706,Q27 872,215 492,293 2).5,139 fi,W,35:1 680,~ 42.201 162.203 597.204 41.361 73.416 916.385 11,849 6.955 7,712 1.518 4.903 2.190 35,127 9.757 5.323.768 4.039,393 9.363,161 2.551.701 979,049 3,530,750 4.313.362 1.812.382 6.125,744 7,929,519 4,2il1l,551 1.583,965 1,518 4,~,~2.2-1,~988 19,971,167 9,M 9,939,20.4_5,7,01,543 2,289 992 873,733_4,851,919_2,103,127_25,759,518 690,565J 44.246.739 42.396.528 30.497.490 239.815 5,384.630 7.749.961 130.515,163 5,138.346 502,043 204,933 706,976 304,152 216,267 520.419 11.169.509 16.063.352 7.403.272 3.020.620 258.090 2.538.606 40.453.449 10.729.099 55.918.291 58.764.032 38.105.695 3.260.435 5.858.987 10.288.567 172.196.007 15.867.4451 Adjustment to reflect the consolidation of internal service funds related to enterprise funds 201,812 Net assets of business-type activities h 172.397.8191 ASSETS: CURRENT ASSETS: CASH AND CASH EOUIVALENTS INVESTMENTS RESTRICTED CASH: BONDS PAYMENTS CUSTOMER DEPOSITS OTHER CUSTOMER ACCOUNTS OTHER RECEIVABLES DUE FROM OTHER GOVERNMENTAL UNITS INVENTORIES L...._.1.oJ.&L.CU .1313 EtJ)~.&SS E:!;;S NONCURRENT ASSETS: LONG-TERM CONTRACTS AND NOTES CAPITAL ASSETS: LAND BUILDINGS AND EQUIPMENT IMPROVEMENTS OTHER THAN BUILDINGS CONSTRUCTION IN PROGRESS LESS: ACCUMULATED DEPRECIATION TOTAL CAPITAL ASSETS (NET OF AID) TOTAL NONCURRENT ASSETS LIABILITIES: CURRENT LIABILITIES: CURRENT PAYABLES CUSTOMER DEPOSITS INTERFUND PAYABLES LOANS PAYABLE-CURRENT EMPLOYEE LEAVE BENEFITS-CURRENT REVENUE BONDS PAYABLE-CURRENT GENERAL OBLIGATION BONDS PAYABLE-CURRENT ACCRUED INTEREST T:QThL CURREtfl..L~B.lLillES NONCURRENT LIABILITIES: DEFERRED REVENUE EMPLOYEE LEAVE BENEFITS LOANS PAYABLE REVENUE BONDS PA YABLE GENERAL OBLIGATION BONDS PAYABLE IOTAL OTHER NONCURREtfl..L~B.lLillES L.....-TOTilL LIABILITIES NET ASS ETS: INVESTED IN CAPITAL ASSETS. NET OF RELATED DEBT RESTRICTED FOR: DEBT SERVICE CONSTRUCTION UNRESTRICTED TOTAL NET ASSETS The note5 to the financial 5tatement5 are an integral part of thi5 5tatement. 44 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31,2007 WATER SANITARY SEWER STORM DRAINAGE SOLID WASTE GOLF COURSE NON MAJOR ENTERPRISE FUNDS TOTAL PROPRIETARY FUNDS GOVERNMENTAL I ACTIVITI ES INTERNAL SERVICE FUNDS OPERATING REVENUES: CHARGES FOR SERVICES 7,933,931 13,352,474 4,196,564 10,442,161 1,395,839 1,400,070 38,721,039 7,091,830 INTEREST 2,471 2,471 OTHER OPERATING REVENUE 210 168 230 5,918 54,091 60,617 164,171 r--TOT AI:"OPERA TI NG""REVEN U ES 7,934,141 13,352,474 4,196,732 10,442,391 1,401,757 1,456,632 38,784,127 7,256,0011 OPERATING EXPENSES: OPERATIONS & MAl NTENANCE 3,019,557 10,180,017 1,397,273 8,767,982 1,217,974 633,366 25,216,169 4,745,296 ADMINISTRATION 1,627,322 1,351,278 1,394,071 637,940 55,685 553,378 5,619,674 870,164 DEPR EC IA TION/AMORTIZA TION 2,008,907 986,668 951,898 38,107 142,634 444,006 4,572,220 1,097,840 OTHER OPERATING EXPENSES 844,938 1,034,275 388,563 924,872 60,806 9,875 3.263,329 TOTiiC"QPERATi'NG'EXPENSES 7.500,724 13.552.238 4,131,805 10,368,901 1,477,099 1,640,625 38.671,392 6,713,3001 OPERATING INCOME (LOSS 433,417 (199,764) 64,927 73,490 (75.342) (183,993) 112,735 542.7011 NON-OPERATING REVENUE (EXPENSE): INTEREST REVENUE 599,673 706,993 416,141 137,276 136,167 102,167 2,098,417 536,645 OTHER NON-OPERATING REVENUES 63,902 222,135 588 43,263 142,847 472,735 7,848 GAIN (LOSS) ON SALE OF CAPITAL ASSETS (900) (1,050) (1,950) (457,499) INTEREST EXPENSE (214,721) (20,434) (67,420) (99,027) (91.799) (493,401) OTHER NON-OPERATING EXPENSES (157,746) (103,216) (25,656) (2,694) (289,312) TOTAL"NON~OPERATING'RE\7ENUE'(EXPENSE)- 291,108 805,478 323.653 180,539 36,240 149,471 1,786,489 86,9941 INCOME (LOSS) BEFORE CONTRIBUTIONS & TRANSFERS 724,525 605,714 388,580 254,029 (39,102) (34,522) 1,899,224 629,6951 CAPITAL CONTRIBUTIONS 5,578,567 4,700,246 2,200,687 12,479,500 549,892 TRANSFERS IN (Note 5) 451,160 70,500 521,660 15,000 TRANSFERS OUT (Note 5) (50,000) (50,000) (50,000) (150,000) (1,007,000) I CHANGE IN NET ASSETS 6,253,092 5,255,960 2,539,267 254,029 412,058 35,978 14,750,384 187,5871 TOTAL NET ASSETS BEGINNING OF YEAR 49.665.199 53.508.072 35.566,428 3.006,406 5,446.929 10.252.589 157,445.623 15.679.858 ITOT AL NET ASSETS END OF YEAR 55,918,291 58,764,032 38,105,695 3,260,435 5.858,987 10,288,567 172,196.007 15,867,4451 Change in net assets from this statement 14,750,384 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds (298,719) Change in net assets of business-type activities 1$ 14,451,6651 The notes to the financial statements are an integral part of this statement. 45 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31,2007 Page 1 of 2 GOVERNMENTI NON-MAJOR ACTIVITIES ENTERPRISE INTERNAL FUND TOTAL SERVICE FUNDS 1.464.804 40.034,163 7.098.588 (730,643) (24.143,346) (2.665.833) (9.875) (3.263.329) (37.804) 2.552 (62,057) (611,956) (517.843) (6,775.506) (2,099,664) 31.191 100.000 208,995 5,821,116 1,783,331 134.375 (19.615) 67.807 518.966 15.000 (150.000) (1.007.000) 67.807 483.726 (992,0001~ 640,844 649.011 38.406 (547,182) (10,292,731) (1,072,757) (380,001 ) SANITARY STORM SOLID WATER SEWER DRAINAGE WASTE 8.418.450 13,664.123 4.373.102 10.707,150 (2.683.859) (9.888,113) (1.202,949) (8,937,223) (844.938) (1.034.275) (388.563) (924.872) (62,171) (2,104) (334) (2,187.347) (1.435.232) (1.527,544) (455,186) 22,362 8.599 230 2,640,135 1,326,761 1,262,311 390,099 (19,615) GOLF COURSE CASH FLOWS FROM OPERATING ACTIVITIES: CASH RECEIVED FROM USERS CASH PAID TO SUPPLIERS CASH PAID FOR TAXES CASH PAID FOR INVENTORY CASH PAID TO EMPLOYEES OTHER CASH RECEIVED (PAID) NET.CASH PROVIDED~(USED) BY OPERATING ACTIVITIES 1,406.534 (700,559) (60.806) (652,354) (7,185) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: INTERFUND LOAN PAYABLE OPERATING GRANT RECEIVED TRANSFERS IN TRANSFERS OUT NETCASHP'RSVIOED (USED) BY NON- CAPITAL FINANCING ACTIVITIES 134.375 451.159 (50.000) (50.000) (50.000) (50.QQQ)_(~)_(~1_(J.2,~) 585 534 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PROCEEDS FROM SALE OF EOUIPMENT PURCHASE OF CAPITAL ASSETS SALE OF FIXED ASSETS CONTRIBUTED CAPITAL CAPITAL GRANTS PROCEEDS FROM OTHER GOVERNMENTS PROCEEDS FROM INSURANCE SETTLEMENT PREMIUM & BOND ISSUANCE COSTS PRINCIPAL PAYMENT ON DEBT INTEREST PAYMENT ON DEBT DEBT PROCEEDS OTHER CASH RECEIVED (PAID) reJET CASH PROVIIfED(iJSEDiFORCAPITA[ UN D--3E L4JE D--5.It-J~~CII)! G.&CJ!.VJII ES 8,167 (1,283.400) (2,781,166) (1,091,797) (5.145) (4.584,041) 1,733,971 588 689.653 15.737 (759) 4.835 24.182 (330.000) (45.062) (2,093.475) (98,387) (92.271) (551.255) 165.000 1,040,000 41.361 33.592 74.953 . (2,J6J ,635)_(1,:U2,896)_I7.!;o,J38)_38.1.:!8_~,806,826)-1oi,0.l.1-(8..l.o9,366)_11 ,:!.!3,98ZJ. 537,135 43,263 109.255 591,339 378,237 764.395 588 15.737 14.170 (1.249.269) (258.379) 365 (107,844) (14.258) 875,000 5.936 (361,300) (87.960) CASH FLOW FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF INVESTMENTS 5,494.087 3.755,855 1.750,000 10.999.942 3.454,669 PURCHASE OF INVESTMENTS (4.999.400) (3.758.780) (4.249.800) (13.007.980) (1.000.000) INTEREST RECEIVED 585.537 671.124 362.906 118.169 136.167 102.168 1.976.071 536.703 ffiET"CASHp'R"oVIDED"{OsEDjIN INVESTING ACTIVITIES 1 080,224 668,199 (2,136,894) 118,169 136,167 102,168 (31,967) 2,991,372.} NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,508.724 832.064 (1.694,721 ) 526,771 (4.092.310) 482.981 (2.436.491) 2.368,716 CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR 5.926.762 10.135.023 6.184.036 1.086.880 4.930.224 2.200.076 30.463.001 7.863.216 (CASi1AN D.CASi1"EQU 1\1 ALENTS~EN D.O F'1EAR 7.435.486 10.967.087 4.489.315 1.613.651 837.914 2.683.057 28.026.510 10.231.932~ CASH AT END OF YEAR CONSISTS OF: CASH AND CASH EQUIVALENTS 5.860.893 9,958.790 3.534.480 1,613.651 349.176 2.605.691 23,922,681 10,231,932 RESTRICTED CASH-BOND PA YMENTS 1,530.928 989,826 954.835 272,207 3,747.796 RESTRICTED CASH-CUSTOMER DEPOSITS 43.665 18.471 216.531 77.366 356.032 I"'""'TOTAL"CASH 7.435.486 10.967.087 4.489.315 1.613.651 837.914 2.683.057 28.026.510 10.231.932~ The notes to the financial statements are an integral part of this statement. 46 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31,2007 WATER SANITARY SEWER STORM DRAINAGE SOLID WASTE GOLF COURSE NON-MAJOR ENTERPRISE FUND Page 2 of 2 GOVERNMENTI ACTIVITIES INTERNAL SERVICE FUNDS TOTAL RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES !:QE..ERATli'J'GTNc'OME (LOSS) ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: 433,417-$~7~$ 64,927-~7~$-C75Y41J'$ (183,~ $ 112,7re-$-542':zQl] DEPRECIATION 2.008.907 986,668 951 .898 38,107 142.634 444.006 4.572.220 1,097.841 ASSET (INCREASES) DECREASES: ACCOUNTS RECEIVABLE 476,104 303,640 176,370 264.989 4,777 6.734 1,232,614 (24,561) INVENTORY (62,171) (2,104) (334) 2.552 (62.057) (34,619) LIABILITY (INCREASES) DECREASES: ACCOUNTS & VOUCHERS PAYABLE (126.680) 221,570 75,794 13,139 (101.185) (80,720) 1.918 214.249 DEPOSITS PAYABLE 8.205 30,372 8,172 46.749 WAGES & BENEFITS PAYABLE 26,363 19,411 10.918 (1,789) 9.988 4.634 69.525 21,491 COMPENSATED ABSENCES PAYABLE (124.010) (33.032) (17.262) 2.163 11.942 7.610 (152.589) (33.771 ) r-TbTAL-ADJUST!:1ENTS- -- 2,206,718 1,526,525 1,197,384 316,609 68,156 392,988 5,708,380 1,240,62Q.} [Bp"cA'sii"PRbli ID EDlIT SEDTB'fOPE RA TI~G-ACTI\iITI ES 2.640.135 1.326,761 1.262.311 390.099 (7.185) 208.995 5.821.116 1.783.331 ~ SCHEDULE OF NONCASH INVESTING. CAPITAL AND FINANCING ACTIVITIES CAPITAL ASSETS ACQUIRED BY CONTRIBUTED CAPITAL 5,027.226 4,322,009 1,436.292 10,785.527 549,892 INCREASE (DECREASE) IN FAIR VALUE OF INVESTMENT 20.625 41.875 10.981 2,440 75.921 1.250 TOTAL NON CASH INVESTING, CAPITAL AND 551.1421 FINANCING ACTIVITIES 5.047.851 4.363.884 1,447.273 2,440 10.861,448 The notes to the financial statements are an integral part of this statement. 47 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS FIDUCIARY FUNDS Fiduciary funds are used to account for assets held by the City of Auburn as a trustee or agent for various individuals, private organizations, and other governmental units. The Fire Relief and Pension Fund is accounted for on an accrual basis. The agency fund is custodial in nature; therefore, no annual budget is adopted. TRUST FUNDS The Fire Relief and Pension Fund This fund accounts for the payment of administrative costs and benefits for retired firefighters (and beneficiaries) who were employed prior to March 1, 1970. Primary revenue sources are general property tax allocations, fire insurance premium tax, and investment interest, in accordance with actuarial recommendations. AGENCY FUNDS The Agency Fund This fund accounts for the funds over which the City is strictly a short-term custo- dian. 48 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS DECEMBER 31, 2007 LIABILITIES: CURRENT PAYABLES TOTAL LIABILITIES FIRE RELIEF PENSION AGENCY TRUST FUND FUND $ 2,818,630 $ 2,203,513 86,078 3,984 655 394,508 $ 2,905,363 : $ 2,602,005 I $ 6,395 $ 2,602,005 6,395 2,602,005 I ASSETS: CASH AND CASH EQUIVALENTS INVESTMENTS RECEIVABLES: CUSTOMER ACCOUNTS INTEREST DUE FROM OTHER GOVERNMENTAL UNITS ~TOTAC"A'SSETS NET ASSETS: HELD IN TRUST FOR PENSION BENEFITS AND OTHER PURPOSES $ 2,898,968 $ - I The notes to the financial statements are an integral part of this statement. 49 CITY OF AUBURN: 2007 CAFR BASIC FINANCIAL STATEMENTS CITY OF AUBURN, WASHINGTON STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED DECEMBER 31,2007 FIRE RELIEF PENSION TRUST FUND $ 60,185 161,705 221,890 I 107,364 308 41,957 149,6281 72,2611 2,826,706 $ 2,898,9681 ADDITIONS: FIRE INSURANCE PREMIUMS-TRANSFERRED FROM GENERAL FUND INVESTMENT EARNINGS I TOTAL ADDITIONS DEDUCTIONS: BENEFIT PAYMENTS PROFESSIONAL SERVICES ADMINISTRATIVE EXPENSES I TOTAL DEDUCTIONS r-CRANGE~ETASSETS NET ASSETS - BEGINNING INET ASSETS - ENDING The notes to the financial statements are an integral part of this statement. 50 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS City of Auburn NOTES TO THE FINANCIAL STATEMENTS December 31,2007 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICiES............................................... .52 A. REPORTING ENTITY ......................................................................................................... 52 B. BASIC FINANCIAL STATEMENTS ...................................................................................52 C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND BASIS OF PRESENTATION .............................................................................................. 53 D. BUDGET AND BUDGETARY ACCOUNTING.................................................................... 56 E. ASSETS, LIABILITIES, AND FUND EQUiTy..................................................................... 57 1. DEPOSITS AND INVESTMENTS ............................................................................... 57 2. RECEiVABLES............................................................................................................ 57 3. INTERFUND RECEIVABLES AND PAYABLES .........................................................58 4. AMOUNTS DUE FROM OTHER GOVERNMENTAL UNITS...................................... 58 5. INVENTORIES ............................................................................................................ 58 6. RESTRICTED ASSETS............................................................................................... 58 7. INTERFUND TRANSACTIONS................................................................................... 58 8. CAPITAL ASSETS....................................................................................................... 58 9. DEFERRED CREDITS/CHARGES .............................................................................59 10. COMPENSATED ABSENCES.................................................................................... 59 11. DEFERRED REVENUES ............................................................................................ 60 12. RESERVATIONS AND DESIGNATIONS OF FUND EQUITY .................................... 60 F. REVENUES, EXPENDITURES AND EXPENSES ............................................................. 60 G. ESTIMATES........................................................................................................................ 61 H. CHANGES IN ACCOUNTING STANDARDS ..................................................................... 61 NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITy.............................................. 61 NOTE 3 - DEPOSITS AND INVESTMENTS...................................................................................... 62 NOTE 4 - PROPERTY TAXES........................................................................................................... 64 NOTE 5 - INTERFUND ACTIVITY ..................................................................................................... 65 NOTE 6 - DUE FROM OTHER GOVERNMENTAL UNITS ...............................................................67 NOTE 7 - CAPITAL ASSETS AND DEPRECIATION ........................................................................ 68 NOTE 8 - CAPITAL LEASE OBLIGATION......................................................................................... 69 NOTE 9 - RECORDED VACATION, SICK LEAVE, AND POST-EMPLOYMENT BENEFITS .......... 70 NOTE 10 - PENSION PLANS ............................................................................................................ 70 NOTE 11 - LONG-TERM DEBT ......................................................................................................... 79 NOTE 12 - CONSTRUCTION COMMITMENTS................................................................................ 82 NOTE 13 - CEMETERY ENDOWED CARE FUND ...........................................................................82 NOTE 14 - JOINT VENTURE / RELATED PARTY............................................................................ 83 NOTE 15 - JOINTLY GOVERNED ORGANIZATION / RELATED PARTy....................................... 84 NOTE 16 - CONTINGENCIES AND LITIGATION .............................................................................85 NOTE 17 - RISK MANAGEMENT & INSURANCE ............................................................................ 85 NOTE 18 - SUBSEQUENT EVENT ................................................................................................... 86 51 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Auburn, King County, Washington, was incorporated in 1891. It operates under the laws of the State of Washington applicable to a Non-Charter Code City under a Mayor/Council form of government. A full-time mayor and seven part-time council members administer Auburn, all elected at-large to four-year terms. The City provides a range of municipal services authorized by state law, including water services, sanitary sewer collection, solid waste collection, storm drainage, a general aviation airport, a municipal cemetery and a municipal golf course. The accounting and reporting policies of the City of Auburn, which conform to Generally Accepted Accounting Principles (GAAP) for governments, are regulated by the Washington State Auditor's Office. The City's significant accounting policies are described in the following notes. A. REPORTING ENTITY The City's Comprehensive Annual Financial Report (CAFR) includes all funds controlled by the City. Joint Venture - Based on the criteria of Governmental Accounting Standards Board (GAS B) Statement No. 14 as modified by GASB Statement No. 34, the Valley Communications Center is included in the accompanying government-wide statement of net assets as a joint venture. (Please refer to Notes 7 and 14). Jointly Governed Organization - 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. The City of Auburn is fiscal agent for the VRFA, and as such activity for the VRFA is accounted for in the City's agency fund. The government-wide financial statements consist of the government-wide statement of net assets and the government-wide statement of activities. B. BASIC FINANCIAL STATEMENTS The City's basic financial statements consist of government-wide financial statements and fund financial statements. The government-wide financial statements, which include the statement of net assets and the statement of activities, summarize the entire operation of the City. The fund financial statements, which include balance sheets, statements of revenues, expenditures and changes in fund balances, budget and actual statements, and statements of cash flows, provide a more detailed level of reporting. The government-wide financial statements report information on all of the non-fiduciary activities of the City. For the most part, the effect of interfund activity has been eliminated from these statements. Because governmental activities are normally supported by taxes and intergovernmental revenue, while business-type activities are generally supported through user fees and charges, governmental activities are reported separately from business-type activities on all government-wide financial statements. The statement of activities demonstrates the degree to which the direct expenses of various functions and activities of the City are offset by program revenues. Direct 52 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS expenses are those that are clearly identifiable with a specific function or activity. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a function or activity, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or activity. Taxes and other items that are not properly included among function or activity revenues are instead reported as general revenues. The City does not allocate indirect expenses to functions in the statement of activities. Separate financial statements are included for government funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported in separate columns in the fund financial statements. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND BASIS OF PRESENTATION The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. Each fund is accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenue, and expenditures or expenses, as appropriate. The City resources are allocated to, and accounted for in, individual funds according to the purpose for which they are spent and how they are controlled. 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 and pension trust fund financial statements. Interfund services provided and used are not eliminated in the process of consolidation. 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: 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. 53 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Sales Tax Revenues - The State of Washington collects all sales taxes. Auburn's portion is remitted to the City by the State monthly. The sales tax received in January is recognized as revenue in current year even though received in the subsequent year because of when the underlying transaction occurred and the resources are considered to be measurable and available. Grant Revenues - On cost reimbursement, grant revenue is recognized when the expenditure is incurred. Under the modified accrual basis, expenditures are recorded when the fund liability is incurred, except for the un-matured interest and principal on general long-term debt, which is recognized when due, and for compensated absences which are recorded as expenditures when liquidated from expendable available fund resources. Purchases of capital assets from governmental funds are reported as expenditures during the year incurred and the asset is capitalized and reported on the government-wide statement of net assets. Long-term liabilities, including compensated absences not currently due and payable, are also reported on the government-wide statement of net assets. The accrual basis of accounting is followed in all proprietary, agency, and pension trust funds. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when incurred. The three broad fund categories and nine fund types presented in this report are described below: 1. GOVERNMENTAL FUND TYPES All governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities generally are included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available spendable resources". Governmental fund operating statements focus on measuring cash flows rather than net income; they present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. a. General fund - This fund is used to account for all financial resources and transactions of the City not accounted for in another fund, as required. The general fund is always considered a major fund. b. Special Revenue funds - These funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. One special revenue fund is considered major: the arterial street fund. This fund is supported by the State of Washington's one-half cent gas tax and is used for major street construction. c. Debt Service funds - These funds account for the accumulation of resources for, and the payment of, general long-term and special assessment debt principal, interest, and related costs. These funds also include the LID guarantee fund which provides financial security for outstanding LID bonds. d. Capital Projects funds - These funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds. One capital project fund is considered major: the capital improvement projects fund. This fund 54 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS accounts for major capital acquisitions, and street and parks construction projects. e. Permanent funds - These funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes of supporting a specific City program. 2. PROPRIETARY FUND TYPES Proprietary funds are accounted for on the "flow of economic resources" measurement focus. This means that all assets and all liabilities (whether current or non-current) associated with their activity are included on their balance sheets. Their reported fund equity is segregated into contributed capital and net asset components. Proprietary fund operating statements present increases (revenues and gains) and decreases (expenses and losses) in net total fund equities. The proprietary fund measurement focus is upon determination of financial position, net income, and cash flow. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the City's utility funds, other enterprise funds, and internal service funds are charges to customers for sales and services, vehicle and computer replacement, and insurance. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, taxes, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses, or as capital contributions. Pursuant to Statement No. 20 of the Governmental Accounting Standards Board (GASB), Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the City has chosen to apply all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: FASB Statements and Interpretations, APB Opinion, and ARBs. a. Enterprise funds - These funds are used to account for services to the general public where all or most of the costs, including depreciation, are to be financed or recovered from users of such services. Five 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. The golf course fund is used to account for business operations at the City's municipal golf course. b. Internal Service funds - These funds are used to account for the financing of goods and services provided to other funds, departments, or governments on a cost reimbursement basis. 3. FIDUCIARY FUND TYPES Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These include a Fire Relief and Pension Trust Fund and Agency Fund. Each fiduciary fund is classified for accounting measurement purposes as either a governmental fund or a proprietary fund. 55 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS The Fire Relief and Pension Trust Fund is accounted for on the accrual basis in essentially the same manner as proprietary funds since capital management is critical. 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 Agency Fund is custodial in nature (assets equal liabilities) 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 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 biannually budgeted governmental funds only. Budgets established for proprietary and trust funds are "management budgets", and are not legally required to be reported and, as such, are not reported in the CAFR. The biennial budget is proposed by the Mayor and adopted by the City Council with legal budgetary control at the fund level; i.e., expenditures and other financing sources may not exceed budgeted appropriations at the fund level. The Mayor may authorize transfers within funds; however, the City Council must approve by ordinance any amendments that increase the total for the fund. Any unexpended appropriation balances lapse at the end of the fiscal year. The City prepares the biennial budget on the modified accrual basis, which conforms to Generally Accepted Accounting Principles (GAAP). The CAFR includes budgetary comparisons for those governmental funds with legally adopted budgets. Budget amounts include the adopted current year budget appropriations and any revisions made during the year. State law establishes the budget process and the time limits under which a budget must be developed. The City follows the procedures outlined below to establish its biennial budget: 1. 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 1 st. 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 st, 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. 56 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS ORIGINAL AND SUPPLEMENTAL APPROPRIATIONS Original Final Budget Revisions Budget Governmental funds General fund $ 54,987,600 $ 4,207,500 $ 59,195,100 ~governmental funds 54,987,600 4,207,500 59,195,100 I Special revenue funds: Local street 1,200,000 911 ,100 2,111 ,100 Arterial street 7,599,000 2,723,000 10,322,000 Hotel/motel tax 70,000 30,300 100,300 Drug forfeiture fund 259,500 83,500 343,000 Local Law Enforcement Block Grant 29,000 29,000 Housing and Community Development 520,737 520,737 Business Improvement Area 53,500 53,500 Cumulative reserve 1,151,900 (1,141,900) 10,000 Mitigation fees 895,000 1 ,373,400 2,268,400 Parks & recreation special projects 41,154 19,358 60,512 Total special revenue funds 11,819,791 3,998,758 15,818,5491 Total budgeted funds $ 66,807,391 $ 8,206,258 $ 75,013,649 I E. ASSETS, LIABILITIES, AND FUND EQUITY 1. DEPOSITS AND INVESTMENTS It is the City's policy to invest all temporary cash surplus. At December 31,2007, the Local Government Investment Pool (LGIP) was holding $71,383,914 in short-term investments. This amount is classified on the balance sheet as cash and cash equivalents. The interest on these investments is prorated to the various funds based upon ownership of investments. For purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on deposit with financial institutions in both demand and time deposit accounts, and amounts invested in the Local Government Investment Pool, administered by the State Treasurer's Office. The City, by state law, is authorized to purchase certificates of deposit issued by Washington State depositories that participate in the state investment pool, U.S. Treasury and Agency securities, banker's acceptances, and repurchase agreements. The City purchases repurchase agreements only from institutions that use authorized securities for collateral. The City of Auburn also has signed a "master repurchase agreement" with its primary bank (Key Bank). For purposes of the statement of cash flows, all proprietary fund types and similar trust funds consider all highly liquid investments (including restricted assets) with maturity of three months or less when purchased to be cash equivalents. Investments are recorded at fair value. Adjustments are made to cost for investments amortized over the period to maturity in accordance with GASB Statement No. 31. 2. RECEIVABLES Taxes receivable consist of property taxes (see Note 4). Accrued interest receivable consists of amounts earned on notes and contracts at the end of the year. 57 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Customer accounts receivable consist of amounts owed by private individuals or organizations for goods and services provided. Uncollectible amounts are considered immaterial and the direct write-off method is used. Special assessments are levied against certain property owners and become liens against the property benefited by the improvement. Special assessments receivable consist of current assessments, which are due within one year, delinquent assessments remaining unpaid after the due date, and deferred, uncollected assessments, which have been levied, but are not due within one year. Other receivables include utility taxes due from private organizations and customer accounts receivable, which consist of amounts owed from private individuals or organizations for goods and services, including amounts owed for which billings have not been prepared. Notes and contracts receivable consist of amounts owed on open accounts from private individuals or organizations for goods and services rendered. 3. INTERFUND RECEIVABLES AND PAYABLES These accounts include all interfund receivables and payables. A separate schedule of interfund activity is furnished in Note 5. 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 Inventories in the enterprise and internal service funds are valued at cost using the weighted average costing method. Governmental fund types recognize the cost of inventory items as expenditures when purchased. In governmental funds, materials and supplies remaining at year-end are immaterial and not included in inventory. 6. RESTRICTED ASSETS There are three types of restricted assets: customer deposits, proceeds of revenue bonds issued by City utilities that are restricted by applicable bond ordinances to pay bond and construction costs, and funds contributed by the Muckleshoot Indian Tribe that have been restricted for use in certain construction projects. 7. INTERFUND TRANSACTIONS During the course of normal operations, the City has numerous transactions between City funds. Interfund services provided and used, such as buying goods and services, are recorded as revenues and expenditures. Internal service fund billings are recorded as revenues in the equipment rental fund and as expenditures in the paying fund. Transfers between funds are included as "other financing sources or uses". 8. CAPITAL ASSETS Capital assets are recorded at historical cost when known, or at estimated historical cost when actual costs are not known. Infrastructure, such as roads, bridges and 58 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS water mains, is reported in the applicable government or business-type activities columns in the government-wide statement of net assets. All infrastructure costs have been calculated and are reported. Government-donated capital assets are stated at their market value on the date donated. Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. In accordance with FASB Statement No. 62, the City capitalized net construction period interest during 2007 for enterprise funds with projects funded by tax-exempt bonds. Because construction period interest expense exceeded interest revenue, the net effect of capitalization was to increase overall project costs. Net construction period interest expense was $6,466 for the columbarium construction project at the Mountain View Cemetery, and $30,865 for the clubhouse construction project at the Auburn Golf Course. In accordance with FASB Statement No. 34, the City capitalized construction period interest related to taxable bonds for the restaurant portion of the golf course clubhouse project. Interest expense capitalized related to the taxable bonds was $98,898. Capital assets of enterprise and internal service funds are recorded at cost. The capital assets of the airport are carried at cost and include those acquired with capital contributed by the Federal Government. Capital improvements financed by special assessments that provide capital assets to a government's proprietary funds are capitalized on the fund's balance sheet and are offset by equity. Capital assets of all funds are depreciated, and are calculated on the straight-line method utilizing estimated lives as follows: Asset Building Improvement Equipment Infrastructure Capitalization Threshold $5,000 $5,000 $5,000 $5,000 Depreciation Method Straight-line Straight-line Straight-line Straight-line Estimated Useful Life 10 - 50 years 10 - 50 years 3 - 20 years 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. DEFERRED CREDITS/CHARGES Deferred charges and credits include the premium, discount and issuance costs of revenue bonds that are amortized over the life of the bond issue. Deferred credits and charges also include undistributed court receipts. 10. COMPENSATED ABSENCES City employees accrue vacation leave at a variable rate based on years of service. In general, employees are allowed to accumulate vacation leave up to what would be earned in two years. Unaffiliated employees accrue sick leave at the rate of 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 59 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS good standing, where employees hired before 12/31/1984 can be reimbursed at their current rate for unused sick leave up to a maximum of 960 hours, at a rate based on years of service. The City's union contracts have varied sick leave accruals and payout options. In general, non-exempt employees can accrue up to 80 hours of compensatory time. The City reports compensated absences as liabilities in the government-wide statement of net assets and in proprietary funds. Vacation, compensatory time, and sick leave are calculated separately for each employee using the rules described above. Governmental funds recognize expenditures for vacation, sick, and compensatory time when paid. Proprietary and pension trust funds recognize the expense and accrue a liability for vacation and sick leave pay as the leave is earned. All compensated absence liabilities include salary-related payments, where applicable. 11. DEFERRED REVENUES This account reflects the amounts of taxes and other long-term receivables for which the revenue recognition criteria have not been met. It also reflects prepayments on accounts and grants received in advance. 12. RESERVATIONS AND DESIGNATIONS OF FUND EQUITY In governmental funds, reserves are used to indicate a portion of fund balance that is not appropriable for expenditure or is legally segregated, and designations are used to indicate tentative managerial plans for financial resource utilization in a future period. In proprietary funds, net assets are generally reserved in connection with restricted assets or for legal segregation. These reserves are identified on the balance sheet of each fund type. F. REVENUES, EXPENDITURES AND EXPENSES Under the modified accrual basis of accounting: Charges for services, interest on investments, and rents generally are considered measurable and available when earned in governmental funds. Taxes and federal or state entitlements or shared revenues that have been collected but not remitted by an intermediary collection agency to the City are considered measurable and available. Special assessments are considered measurable and available when they become due. Grants are considered measurable and available to the extent that expenditures have been made. Other intergovernmental revenues are considered measurable and available when earned. Interfund revenues for goods and services are considered measurable and available when earned. 60 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Proceeds from sale or loss of capital assets are recognized as other financing sources. Revenues from taxpayer-assessed taxes (i.e., sales tax), net of estimated refunds, are recognized when measurable and available to finance expenditures of the current period. All other revenues are either not measurable or considered not available until collected. Expenditures are generally recognized when incurred, except for principal and interest on general long-term debt, which are reported as expenditures when paid, and compensated absences, which are reported as expenditures when liquidated from expendable available financial resources. Under the accrual basis of accounting: Revenues are recognized when earned and expenses are recognized when incurred. Contributions of capital in proprietary fund financial statements arise from internal and external contributions of capital assets or from grants or outside contributions of resources restricted to capital acquisition and construction. Transfers between government and business-type activities on the government-wide statement of activities are reported as general revenues. Transfers between funds reported in the governmental activities column are eliminated, as are transfers between funds reported in the business-type activities column. 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 H. 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 impacted the City's revenue and expenditure recognition and assets, liabilities, and fund equity reporting. The new standards also required reformatting of the financial statements and restating beginning balances. These new GASB standards were implemented in 2003 except for the full reporting of infrastructure assets, which was implemented in 2004. NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 61 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS 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, 2007, the carrying amount of the City's cash demand deposits with Key Bank totaled $3,170,172 while the bank balance was $3,420,147. In addition, there was $10,000 in the Drug Forfeiture Fund to be used for enforcement purposes, and $6,325 in various petty cash and cashier change funds. The Federal Deposit Insurance Corporation (FDIC) insures the City's deposits up to $100,000 and the Washington Public Deposit Protection Commission (WPDPC) insures amounts over $100,000. The WPDPC is a multiple financial institution collateral arrangement, which provides for additional assessments against members of the pool on a pro rata basis. As required by State law, all investments of the City's funds are obligations of the U.S. Government, or deposits with Washington State banks. Pension and non-expendable trust funds are not subject to these limitations. All temporary investments are stated at cost. Other investments are shown on the balance sheet at fair value. Investments that were not at par value (cost) as of December 31, 2007 are reported at fair value. 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 2007, the net decrease in the fair value of investments being held for more than one year is $198,587 at year-end. As of December 31,2007, the City had the following investments and maturities: SCHEDULE OF INVESTMENTS BY MATURITIES AS OF DECEMBER 31, 2007 Investment Type Investment maturities I Fair Less than 1 to 2 2to 3 Greater than I Value 1 year years years 3 years $ 71 ,383,914 $ 71,383,914 $ - $ - $ 86,078 86,078 20,810,160 7,990,633 5,300,309 7,519,219 $ 92,280,152 $ 79,374,546 $ 5.300.309 $ 7.519.219 $ 86.078 I State investment pool US Treasuries US Agencies rTOtal Reconciliation to government- wide statement of net assets: Total investments above Plus: cash in checking and petty cash Less: cash investments in fiduciary funds Total cash and investments, government- wide statement of net assets $ 92,280,152 3,242,679 (5,108,221 ) $ 90,414,610 I 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 three years, unless an investment is matched to an anticipated future cash flow. 62 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS 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. United States bonds. 2. United States certificates of indebtedness. 3. Bonds or warrants of the State of Washington. 4. General obligation or utility revenue bonds or warrants of its own or of any other city or town in the State. 5. Its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund. 6. Savings or time accounts in designated public depositories. 7. Certificates, notes or bonds of United States agencies, or corporations wholly owned by the United States. 8. Repurchase agreements. 9. Banker's acceptances. 10. Federal Home Loan Bank notes and bonds, Federal Land Bank bonds, Federal National Mortgage Association notes, debentures and guaranteed certificates of participation, or obligations of any other government sponsored corporation whose obligations are or may be eligible as collateral for advances to member banks as determined by the Board of Governors of the Federal Reserve System or any portion thereof in investment deposits as defined in RCW 39.8.010 secured by collateral in accordance with RCW 39.58. 11. Interim financing warrants of local improvement districts. 12. State Local Government Investment Pool. As of December 31, 2007, the City had investments in a limited number of investment instruments as follows: . Federal Home Loan Bank bonds . Federal National Mortgage Association bonds . Federal Farm Credit Bank bonds . Federal Home Loan Mortgage Corporation bonds . State Local Government Investment Pool With the exception of the State Local Government Investment Pool, which is not rated, all of the investments above carried a rating of AAA by Standard & Poor's rating service at December 31, 2007. 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. The investment policy states: "With the exception of US Treasury securities and the State Investment Pool, no more than 20% of the City's total investment portfolio will be invested in a single security type or with a single financial institution". Other information Effective 2002, the City has established arrangements with Bank of New York for safekeeping of all investments. Below is a schedule of investments by fund type: 63 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS SCHEDULE OF INVESTMENTS BY FUND CATEGORY AND INVESTMENT TYPE AS OF DECEMBER 31, 2007 State Investment U.S. Pool Securities Total General Fund $ $ 2,997,813 $ 2,997,813 Special Revenue Funds 1,000,938 1,000,938 Capital Project Funds 2,013,111 2,013,111 Permanent Funds 1,285,323 1,285,323 Enterprise Funds 12,511,726 12,511,726 Internal Service Funds 1,001,250 1,001,250 Fiduciary Funds 86,078 86,078 Treasurer's Residual Funds 71 ,383,914 71,383,914 I Total $ 71 ,383,914 $ 20,896,238 $ 92,280,1521 NOTE 4 - PROPERTY TAXES Property taxes received during tax year 2007 were $15,666,016, including collection of prior year delinquent assessments. Property taxes assessed for collection in tax year 2007 were based on a regular tax levy of $2.73 per $1 ,000 on a total 2006 assessed value of $5,759,446,291. For levy year 2007, to be received in 2008, the City's regular tax levy is $1.48 per $1,000 on a 2007 assessed valuation of $6,526,294,998, as of December 31, 2007, for a total regular levy of $9,684,042. The decrease in levy rate from $2.73 to $1.48 is a result of incorporation of the new Valley Regional Fire Authority, as discussed in Note 15, which will assess its own property tax levy and fire benefit charge for 2008. 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 2.50% of assessed value 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% of assessed value 2.50% of assessed value 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 , 2007, the debt limits for the City were as follows: With a Vote For Parks or Without General For Open Space Item a Vote Purposes Utilities Development Total 1.50% 1.00% 2.50% 2.50% Ca pacity Legal Limit $ 97,894,425 $ 65,262,950 $ 163,157,375 $ 163,157,375 $ 489,472,125 Outstanding indebtedness (11,126,484) (11,126,484) Assets available 3,040,560 3,040,560 Margin available $ 89,808,501 $ 65,262,950 $ 163,157,375 $ 163,157,375 $ 481,386,2011 64 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. Taxes are levied annually on January 1 on property values listed as of the prior August 31. The County assesses property at 100% of fair value. A revaluation of all property is required at least once every four years and a physical inspection is required at least once every six years. Property taxes levied by the County Assessor and collected by the County Treasurer become a lien on the first day of the levy year and may be paid in two installments if the total amount exceeds $10. The first half of real property taxes is due on April 30 and the balance is due October 31. Delinquent taxes bear interest at the rate of 12% and are subject to additional penalties if not paid as scheduled. At year-end, property taxes are recorded as a receivable with the portion not expected to be collected within 30 days offset by deferred revenue. In the statement of activities, this deferred revenue is referred to as "Unearned Revenue". During the year, property tax revenues are recognized when cash is received. 1. The Washington State Constitution limits the total regular property taxes to 1 % of assessed valuation or $10 per $1,000 of value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the 1 % limit. 2. Washington State law in RCW 84.55.010 limits the annual growth of regular property taxes to the lesser of 1 % or the rate of inflation. With a vote of the majority of the voters within a taxing district, the 1 % levy limitation can be "lifted" and additional taxes may be levied. 3. The City may voluntarily levy taxes below the legal limit. Special levies approved by the voters are not subject to the above limitations. Property taxes are recorded as receivable and offset by a deferred revenue account when levied. Since state law allows for the sale of property for failure to pay taxes, no estimate of uncollectible taxes is made. NOTE 5 - INTERFUND ACTIVITY The next two tables summarize interfund activity during 2007. The first table details transfers while the second lists loan activity. Transfers are legally authorized transfers of resources from a fund receiving revenue to the fund through which resources are to be expended. 65 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Funds Transfers Transfer Out Transfer In Governmental funds: General fund $ 2,180,975 $ 1,047,733 Special revenue funds: Local street fund Arterial street fund Local Law Enforce Block Grants Recreational trails Mitigation fees Special parks and recreation Total special revenue funds 358,374 30,733 389,107 1 ,586,100 1,736,348 2,600 5,100 66,297 3,396,445 Debt service funds: 1998 library GO LID guarantee Special assessments Total debt service funds 10,000 70,510 80,510 306,500 70,511 377,011 Capital projects funds: Park construction Capital improvement projects Total capital projects funds 2,821,896 2,821,896 367,155 914,800 1,281,955 Proprietary funds: Water Sewer Storm drainage Cemetery Golf course Total proprietary funds 50,000 50,000 50,000 150,000 70,500 451,160 521,660 Internal service funds: Information services Equipment rental Total internal service funds 15,000 1,007,000 1,007,000 15,000 Fiduciary funds: Fire pension & relief fund 60,185 Permanent funds: Cemetery endowed care ITotal $ 70,500 6,699,988 $ 6,699,988 I All transfers are considered routine. Loans between funds are classified as interfund loans receivable and payable or advances to and from other funds on the balance sheet, depending on the time period for which the loan was made. Interfund loans do not affect total fund equity. 66 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Interfund Loans Balance Balance Due From Due To 1/1/2007 New Loans Repayments 12/31/2007 Golf course fund Capital projects fund $ $ 150,000 $ 15,625 $ 134,375 Park construction fund General fund 150,000 150,000 Comm Dev Blk Grant General fund 134,000 75,000 59,000 Local Law Blk Grant General fund 20,000 20,000 iTotal interfund loans $ 134,000 $ 320,000 $ 90,625 $ 363,375 I All interfund loans are considered short-term cash loans. NOTE 6 - DUE FROM OTHER GOVERNMENTAL UNITS As of December 31,2007, the City had receivables due from other governmental units as follows: IDue from Other Governmental Units General fund: WA State Treasurer - Sales taxes WA Dept. of Ecology - Shoreline upgrade grant WA Dept. of Transportation - Wayfinding grant King County - Olympic Leadership Academy grant King County - Real estate excise taxes Pierce County - Real estate excise taxes Muckleshoot Indian Tribe - Public safety Total general fund Arterial street fund: WA Dept. of Transportation - Arterial street improvements Local law enforcement block grant: U.S. Dept. of Justice - Justice assistance grant Housing & community development: U.S. Dept. of Housing - Community development block grant Municipal park construction: WA Recreation and Conservation Office - Park imp. grants Solid waste fund: WA Dept. of Ecology - Coordinated prevention grant King County - Local hazardous waste management grant King County - Waste reduction and recycling grant Total solid waste fund Agency disbursement fund: King County - Basic life support City of Algona - Court administration Total agency disbursement fund iTotal Reconciliation to government-wide statement of net assets: Total above due from other governmental units Amount due to fiduciary fund Total due from other governmental units, government-wide statement of net assets $ 1,348,934 3,039 13,418 12,500 117,445 54,686 307,819 1,857,841 760,670 29,000 63,106 349,200 5,023 13,420 24,820 43,263 374,206 20,302 394,508 $ 3,497,5881 $ 3,497,588 (394,508) $ 3,103,080 I 67 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 7 - CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the year ended December 31,2007 is as follows: Schedule of Capital Asset Activity Balance Decreasesl Balance 1/1/07 Increases Adjustments 12/31/07 Governmental activities: Capital assets, not being depreciated: Land $ 44,536,400 $ 4,432,657 $ $ 48,969,057 Construction in progress 3,266,011 3,522,259 (3,261,849) 3,526,421 Total capital assets, not being depreciated 47,802,411 7,954,916 (3,261,849) 52,495,478 Capital assets, being depreciated: Buildings 21,726,647 2,477,701 24,204,348 Improvements other than buildings 10,578,948 1,749,261 (5,235) 12,322,974 Machinery and equipment 17,296,361 2,107,208 (4,455,281) 14,948,288 Joint venture 3,701,815 147,875 3,849,690 Intangibles 695,504 695,504 Infrastructure 180,518,220 10,668,410 191,186,630 Total capital assets being depreciated 233,821,991 17,845,959 (4,460,516) 247,207,434 Less: accumulated depreciation for: Buildings (6,796,631 ) (618,184) (7,414,815) Improvements other than buildings (8,000,837) (244,867) (8,245,704) Machinery and equipment (10,223,689) (1,459,195) 2,843,604 (8,839,280) Joint venture (963,902) (963,902) Intangibles ( 46,367) (46,367) Infrastructure (51,086,639) (5,959,319) (57,045,958) Total accumulated depreciation (77,071,698) (8,327,932) 2,843,604 (82,556,026) Total capital assets, being depreciated, net 156,750,293 9,518,027 (1,616,912) 164,651,408 rGovernmentalacHvities capital assets, net $ 204,552, 704 ~ $ 17,472,943 ~ $ (4,878,761( $ 217,146,8861 Business-type activities: Capital assets, not being depreciated: Land $ 14,158,803 $ $ $ 14,158,803 Construction in progress 4,447,367 10,088,672 (8,556,765) 5,979,274 Total capital assets, not being depreciated 18,606,170 10,088,672 (8,556,765) 20,138,077 Capital assets, being depreciated: Buildings 7,326,265 5,458,467 12,784,732 Improvements other than buildings 165,310,868 13,608,574 178,919,442 Machinery and equipment 3,378,391 212,214 ( 44,432) 3,546,173 Total capital assets being depreciated 176,015,524 19,279,255 ( 44,432) 195,250,347 Less: accumulated depreciation for: Buildings (3,273,018) (204,072) (640,844) (4,117,934) Improvements other than buildings (52,903,830) (4,178,214) (57,082,044) Machinery and equipment (2,338,146) (189,934) 23,975 (2,504,105) Total accumulated depreciation (58,514,994) ( 4,572,220) (616,869) (63,704,083) Total capital assets, being depreciated, net 117,500,530 14,707,035 (661 ,301) 131,546,264 rSusiness-tYJ:>e activities caJ:>ital assets, net $ 136,106,700 ~ $ 24,795,707 ~ $ (9,218,066) ~ $ 151,684,341 1 68 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Depreciation/amortization expense was charged to functions/programs of the City as follows: Government activities: General government Public safety Transportation Physical environment Culture and recreation Capital assets held by the City's internal service funds are charged to the various functions based on their usage of the assets rTotal aef)reciation/amortization eXf)ense - governmental activities $ 198,037 518,613 5,836,292 61,988 615,162 1,097,840 $ 8,327,932 I Business-type activities: Water Sanitary sewer Storm water Solid waste Golf course Airport Cemetery Commercial retail rTO'ialaepreciation expense - bUSiness-type activHies $ 2,008,907 986,668 951 ,898 38,1 07 142,634 246,349 78,330 119,327 $ 4,572,220 I NOTE 8 - CAPITAL LEASE OBLIGATION During 2007 the City entered into a capital lease agreement for the Auburn Avenue Theater facility. 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. SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS 2008 2009 2010 2011 2012 2013-2017 2018-2021 Total minimum lease payments Less: Amounts representing interest Ipresent value of future minimum lease payments Lease Payable $ 66,000 66,000 66,000 66,000 66,000 330,000 264,000 924,000 (260,446) $ 663,5541 As of December 31, 2007, the value of capital assets acquired under the capital lease is $649,137. Monthly lease payments of $5,500 are payable through the end of the lease period on December 1, 2021. Interest on the lease was imputed at five percent. 69 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS NOTE 9 - RECORDED VACATION, SICK LEAVE, AND POST-EMPLOYMENT BENEFITS In accordance with GASB Statement No. 16, the City accrues vacation and sick leave pay. The accrual is shown on the government-wide statement of net assets for both governmental and proprietary funds. The accrual is also seen in the separate proprietary fund balance sheets, but is excluded from the separate governmental fund balance sheets since it is not currently due and payable at year-end (please refer to Note 11). In addition to pension benefits described in Note 10, the City provides post-employment benefits, in accordance with state statutes, to all LEOFF 1 retirees. Currently, 65 retirees meet the eligibility requirements. The City provides long-term care, medical insurance, and reimburses all validated claims for medical, dental and hospitalization costs incurred by retirees. Expenditures for post-retirement health care benefits are recognized as retirees report claims. During the year, expenditures of $1,020,293 were recognized for post-employment health care. This represents an increase of $98,650 from the previous year. NOTE 10 - 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 System (PERS) Plans 1, 2, and 3 Plan Description PERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a defined benefit plan with a defined contribution component. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not participating in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS participants who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977 and by either, February 28, 2002 for state and higher education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after March 1, 2002 for state and higher education employees, or September 1, 2002 for local government employees have the irrevocable 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. 70 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PERS retirement benefit provisions are established in state statute and may be amended only by the State Legislature. Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at the age of 60 with five years of service, or at the age of 55 with 25 years of service. The annual benefit is two percent of the average final compensation per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. Plan 1 retirements from inactive status prior to the age of 65 may receive actuarially reduced benefits. The benefit is actuarially reduced to reflect the choice of a survivor option. A cost-of living allowance (COLA) is granted at age 66 based upon years of service times the COLA amount, increased by three percent annually. Plan 1 members may also elect to receive an additional COLA amount (indexed to the Seattle Consumer Price Index), capped at three percent annually. To offset the cost of this annual adjustment, the benefit is reduced. Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members may retire at the age of 65 with five years of service, or at the age of 55 with 20 years of service, with an allowance of two percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Plan 2 retirements prior to the age of 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a three percent per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at three percent annually. Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. The defined benefit portion provides a benefit calculated at one percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Effective June 7, 2006, Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service, if twelve months of that service are earned after age 44; or after five service credit years earned in PERS Plan 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. Vested Plan 3 members are eligible to retire with full benefits at age 65, or at age 55 with 10 years of service. Retirements prior to the age of 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a three percent per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service credit, and Plan 3 provides the same cost-of-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. Judicial Benefit Multiplier Beginning January 1, 2007 through December 31, 2007, judicial members of PERS may choose to participate in the Judicial Benefit Multiplier Program (JBM). Current justices or judges in PERS Plan 1 and 2 may make a one-time irrevocable election to pay increased contributions that would fund a retirement benefit with a 3.5 percent multiplier. The benefit would be capped at 75 percent of average financial compensation. Judges in PERS Plan 3 can elect a 1.6 percent of pay per year of service benefit, capped at 37.5 percent of average compensation. Members who choose to participate in JBM will accrue service credit at the higher multiplier beginning with the date of their election, pay higher contributions, stop contributing to the Judicial 71 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Retirement Account (JRA), and be given the option to increase the multiplier on past judicial service. Members who do not choose to participate will: continue to accrue service credit at the regular multiplier; continue to participate in JRA, if applicable; never be a participant in the JBM Program; and continue to pay contributions at the regular PERS rate. Justices and judges who are newly elected or appointed to judicial service and choose to become PERS members on or after January 1, 2007, or who have not previously opted into PERS membership, are required to participated in the JBM Program. Justices and judges who are newly elected or appointed to judicial service will: return to prior PERS Plan if membership had previously been established; be mandated into Plan 2 and not have a Plan 3 transfer choice, if a new PERS member; accrue the higher multiplier for all judicial service; not contribute to JRA; and not have the option to increase the multiplier for past judicial service. There are 1,188 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of September 30,2006: Retirees and Beneficiaries Receiving Benefits Terminated Plan Members Entitled to but not yet Receiving Benefits Active Plan Members Vested Active Plan Members Non-vested Total 70,201 25,610 105,215 49.812 250,838 Fundinq Policy Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6 percent for state agencies and local government unit employees, and at 7.5 percent for state government elected officials. The employer and employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature. Under PERS Plan 3, employer contributions finance the defined benefit portion of the plan, and member contributions finance the defined contribution portion. The Employee Retirement Benefits Board sets Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options are graduated rates dependent on the employee's age. As a result of the implementation of the Judicial Benefit Multiplier Program in January 2007, a second tier of employer and employee rates was developed to fund, along with investment earnings, the increased retirement benefits of those justices and judges that participate in the program. The methods used to determine the contribution requirements are established under state statute in accordance with chapters 41.40 and 41.45 RCW. The required contribution rates expressed as a percentage of current year covered payroll, as of December 31,2007, were as follows: Members not participating in JBM: PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer* Employee 6.13%** 6.13%** 6.13%*** 6.00%**** 4.15%**** * The employer rates include the employer administrative expense fee currently set at 0.16%. 72 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS ** The employer rate for state elected officials is 9.12% for Plan 1 and 6.13% for Plan 2 and Plan 3. *** Plan 3 defined benefit portion only. **** The employee rate for state elected officials is 7.50% for Plan 1 and 4.15% for Plan 2. ***** Variable from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 member. Members participating in JBM: PERS Plan 1 PERS Plan 2 PERS Plan 3 I Employer* Employee 6.13% 12.26% 6.13% 10.38% 6.13%** 7.50%*** * The employer rates include the employer administrative expense fee currently set at 0.16%. ** Plan 3 defined benefit portion only. *** Minimum rate. Both City and the employees made the required contributions. The City's required contributions for the years ended December 31 were as follows: PERS Plan 1 PERS Plan 2 PERS Plan 3 I 2007 $49,744 $765,172 $144,898 2006 $37,733 $386,786 $65,820 2005 $24,541 $226,425 $30,450 The increase in contributions each year is primarily due to an increase in the employer contribution rate. The employer contribution rate for the City was 2.44% in 2005, 3.69% in 2006, and 6.13% in 2007. Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) Plans 1 and 2 Plan Description LEOFF is a cost-sharing multiple-employer retirement system comprised of two separate defined benefit plans. LEOFF participants who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977 are Plan 2 members. Membership in the system includes all full-time, fully compensated, local law enforcement officers and firefighters. LEOFF membership is comprised primarily of non-state employees, with Department of Fish and Wildlife enforcement officers, who were first included prospectively effective July 27, 2003, being an exception. In addition, effective July 24, 2005, current members of PERS who are emergency medical technicians can elect to become members of LEOFF Plan 2. Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established to provide governance of LEOFF Plan 2. The Board's duties include adopting contribution rates and recommending policy changes to the Legislature for the LEOFF Plan 2 retirement plan. LEOFF defined benefit retirement benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state 73 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS pays through state legislative appropriations. LEOFF retirement benefit provisions are established in state statute and may be amended by the State Legislature. Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement with five years of service at the age of 50. The benefit per year of service calculated as a percent of final average salary is as follows: Term of Service 20 or more years 10 but less than 20 years 5 but less than 10 years Percent of Final Average Salary 2.0% 1.5% 1.0% The final average salary is the basic monthly salary received at the time of retirement, provided a member has held the same position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months' salary within the last ten years of service. If membership was established in LEOFF after February 18, 1974, the service retirement benefit is capped at 60 percent of final average salary. A cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index). Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members may retire at the age of 50 with 20 years of service, or at the age of 53 with five years of service, with an allowance of two percent of the final average salary per year of service. The final average salary is based on the highest consecutive 60 months. Plan 2 retirements prior to the age of 53 are actuarially reduced for each year that the benefit commences prior to age 53 and to reflect the choice of a survivor option. 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. 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 three percent annually. There are 383 participating employers in LEOFF. Membership in LEOFF consisted of the following as of the latest actuarial valuation date for the plans of September 30,2006: Retirees and Beneficiaries Receiving Benefits Terminated Plan Members Entitled to but not yet Receiving Benefits Active Plan Members Vested Active Plan Members Non-vested Total 8,951 602 12,711 3.603 25,867 Fundinq Policy Starting on July 1, 2000, Plan 1 employers and employees contribute zero percent as long as the plan remains fully funded. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plan. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. 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 2 in accordance with the requirements of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. However, this special funding situation is not mandated by the state constitution and this funding requirement could be returned to the employers by a change of statute. The required contribution rates expressed as a percentage of current year covered payroll, as of December 31,2007, were as follows: 74 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS LEOFF Plan 1 LEOFF Plan 21 Employer* Employee 0.16% 0.00% 5.35%** 8.64% * The employer rates include the employer administrative expense fee currently set at 0.16%. ** The employer rate for ports and universities is 8.80%. Both the City of Auburn and the employees made the required contributions. The City's required contributions for the years ended December 31 were: LEOFF Plan 1 LEOFF Plan 21 2007 $216 $382,356 2006 $1,049 $585,329 2005 $1,236 $463,000 Public Safety Employees' Retirement System (PSERS) Plan 2 Plan Description PSERS was created by the 2004 legislature and became effective July 1, 2006. PSERS is a cost-sharing multiple-employer retirement system comprised of a single defined benefit plan, PSERS Plan 2. PSERS Plan 2 membership includes full-time employees of a covered employer on or before July 1, 2006, who met at least one of the PSERS eligibility criteria, and elected membership during the election period of July 1, 2006 to September 30, 2006; and those full-time employees, hired on or after July 1,2006 by a covered employer, that meet at least one of the PSERS eligibility criteria. A "covered employer" is one that participates in PSERS. Covered employers include: State of Washington agencies: Department of Corrections, Department of Natural Resources, Parks and Recreation Commission, Gambling Commission, Washington State Patrol, Liquor Control Board; Washington state counties; and Washington state cities except for Seattle, Tacoma and Spokane. To be eligible for PSERS, an employee must work on a full-time basis and: . have completed a certified criminal justice training course with authority to arrest, conduct criminal investigations, enforce the criminal laws of Washington, and carry a firearm as part of the job: or . have primary responsibility to ensure the custody and security of incarcerated or probationary individuals; or . function as a limited authority Washington peace officer, as defined in RCW 10.93.020; or . have primary responsibility to supervise eligible members who meet the above criteria. PSERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PSERS retirement benefit provisions are established in state statute and may be amended only by the State Legislature. Plan 2 members are vested after the completion of five years of eligible service. PSERS Plan 2 members may retire at the age of 65 with five years of service, or at the age of 60 with at least 10 years of PSERS service credit, with an allowance of two percent of the average final compensation per year of service. The average final compensation is the monthly average of the 75 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS member's 60 consecutive highest-paid service credit months, excluding any severance pay such as lump-sum payments for deferred sick leave, vacation or annual leave. Plan 2 retirees prior to the age of 60 receive reduced benefits. If retirement is at age 53 or older with at least 20 years of service, a three percent per year reduction for each year between the age at retirement and age 60 applies. 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 three percent annually. There are 69 participating employers in PSERS. Membership in PSERS consisted of the following as of the latest actuarial valuation date for the plan of September 30, 2006: Retirees and Beneficiaries Receiving Benefits Terminated Plan Members Entitled to but not yet Receiving Benefits Active Plan Members Vested Active Plan Members Non-vested Total 2.073 2,073 Fundinq Policy Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates. The employer and employee contribution rates for Plan 2 are developed by the Office of the State Actuary to fully fund Plan 2. All employers are required to contribute at the level established by the Legislature. The methods used to determine the contribution requirements are established under state statute in accordance with chapters 41.37 and 41.45 RCW. The required contribution rates expressed as a percentage of current year covered payroll, as of December 31,2007, were as follows: PSERS Plan 2 Employer* Employee 8.55% 6.57% *The employer rate includes and employer administrative expense fee of 0.16%. Both City and the employees made the required contributions. The City's required contributions for the years ended December 31 were as follows: PSERS I Plan 2 2007 $ 48,549 2006 $ 7,225 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 76 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS 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. Under state law, the Firemen's Pension Plan is provided an allocation of 25% of all monies received by the state from taxes on fire insurance premiums, interest earnings, member contributions made prior to the inception of LEOFF, and City contributions required to meet projected future pension obligations. The actuary determined as of January 1, 2007 that no future City contributions would be required beyond future revenues from state fire insurance taxes and interest earnings. In 2007 $60,185 was received from the state from taxes on fire insurance premiums. 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. Membership of the Firemen's Pension Plan consisted of 15 eligible, of which 14 are receiving benefits. GASB STATEMENTS No. 25 and No. 27 SCHEDULE OF FUNDING PROGRESS (rounded to thousands) Unfunded Actuarial Actuarial UAAL as a Actuarial Accrued Accrued Percentage Actuarial Value Liabilities - Liabilities Funded Covered of Covered Valuation Date of Assets Entry Age (UAAL) Ratio Payroll Payroll January 1, 1999 $2,096 $2,157 $60 97.17% $119 51% January 1, 2001 $3,632 $2,332 ($1,300) 155.75% $58 -2241 % January 1, 2003 $3,514 $2,428 ($1,086) 144.73% $61 -1780% January 1, 2005 $3,160 $2,172 ($988) 145.00% $64 -1544% January 1, 2007 $2,868 $2,802 ($66) 102.00% $0 N/A This plan primarily covers inactive participants. There are no current member contributions. Prior to adoption of GASB Statement No. 25 in 1997, the Annual Required Contribution (ARC) was not determined pursuant to the parameters required by the statement. Therefore, no liability prior to 1997 has been shown. 77 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS GASB STATEMENT No. 25 GASB STATEMENT No. 27 SCHEDULE OF EMPLOYER CONTRIBUTIONS THREE YEAR TREND INFORMATION fiscal Actual Annual Required Percentage Annual Percentage Net Year Employer Contribution of ARC Pension Cost of APC Pension Ending Contributions (ARC) Contributed (APC) Contributed Obligation December 31, 1998 $24,822 $38,763 64% December 31, 1999 $52,738 $5,381 980% December 31, 2000 $31,721 $5,381 590% $5,520 574.66% ($48,808) December 31, 2001 $37,281 $0 N/A $341 10932.84% ($85,748) December 31, 2002 $40,869 $0 N/A $684 5975.00% ($125,933) December 31, 2003 $45,664 $0 N/A $1,137 4016.18% ($170,460) December 31, 2004 ($137,783) ($91,881) N/A ($90,143) NiA ($122,820) December 31, 2005 ($144,746) ($78,690) N/A ($76,827) NiA ($54,901) December 31, 2006 ($149,327) ($78,690) N/A ($77,774) NiA $16,652 December 31, 2007 $60,185 ($5,048) NiA ($5,420) N/A ($48,953) GASB STATEMENT No. 27 Annual Development of Pension Cost Fiscal ARC at Amort. Annual Total Year End of Interest on ARC Factor Pension Cost Employer Change in NPO Ending Year (1) NPO(2) Adjustment (APC) Contributions NPO Balance (3) 12/31/1998 $38,763 $873 $848 12.88% $38,788 $24,822 $13,966 $24,822 12/31/1999 $5,381 $1,742 $1,874 13.28% $5,249 $52,738 ($47,489) ($22,667) 12/31/2000 $5,381 ($1,582) ($1,721) 13.14% $5,520 $31,721 ($26,201 ) ($48,808) 12/31/2001 $0 ($3,417) ($3,758) 12.99% $341 $37,281 ($36,940) ($85,748) 12/31/2002 $0 ($6,002) ($6,686) 12.83% $684 $40,869 ($40,185) ($125,933) 12/31/2003 $0 ($8,815) ($9,952) 12.65% $1,137 $45,664 ($44,527) ($170,460) 12/31/2004 ($91,881 ) ($11,932) ($13,670) 12.47% ($90,143) ($137,783) $47,640 ($122,820) 12/31/2005 ($78,690) ($7,369) ($9,232) 13.30% ($76,827) ($144,746) $67,919 ($54,901) 12/31/2006 ($78,690) ($3,294) ($4,210) 13.04% ($77,774) ($149,327) $71,553 $16,652 12/31/2007 ($5,048) $833 $1,205 13.82% ($5,420) $60,185 ($65,605) ($48,953) (1) A change in consulting actuaries resulted in a recommended change in the actuarial methods and assumptions. (2) 8.00% interest rate was used for years prior to January 1, 1999: 7.00% thereafter. (3) The Net Pension Obligation (NPO) balance is reflected as part of Deferred Credits on the Government-wide Statement of Net Assets * Based on 30-year level-dollar closed amortization as of January 1, 1999 (27 years as of January 1,2003). The information presented in the preceding required schedules was determined as part of the actuarial valuations at the date indicated. 78 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS IValuation date Actuarial cost method IAmortization method Remaining amortization period IAsset valuation method JanuarY. 1, 2007 Entry age normal 30-year, closed as of JanuarY. 1, 1999 22 years Fair market value Actuarial Assumptions Ilnvestment rate of return Projected salary increases !COst-of living~justments 5% 4% 3% NOTE 11 - 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, 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: . 1998 Limited Tax General Obligation bonds were issued for construction of a library to be owned and operated by the King County Rural Library District. These 20-year bonds mature in 2018 and are paid from the Debt Service fund. . 1999 Limited Tax General Obligation bonds were issued for construction of hangars at the Auburn Municipal Airport. These 20-year bonds mature in 2019 and are paid from the Airport fund. . Valley Communication Center Development Authority issued General Obligation bonds in 2000 for a new dispatch facility. The City is contracted to pay 20% of the debt service of these 15-year bonds that mature in 2015. This debt is paid from the General fund. . 2005 Limited Tax General Obligation refunding bonds were issued to partially advance refund the 1999 Limited Tax Obligation bonds. . 2006 Limited Tax General Obligation bonds were issued to fund improvements at the Auburn Golf Course including a pro shop, clubhouse and related facilities, as well as construction of a columbarium at the Mountain View Cemetery. . 2006 Limited Tax General Obligation (taxable) bonds were issued to construct and equip restaurant, banquet and related facilities for a restaurant facility to be located at the Auburn Golf Course clubhouse. Revenue Bonds are payable from water and storm drainage utility revenues generated by those enterprise funds. Special Assessment Bonds are not a direct responsibility of the City, but are funded from the collection of special assessment payments. Debt service principal and interest costs are paid from the individual LID funds. The City is obligated for special assessment debt to the extent that 79 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS 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 six outstanding loans with a remaining total balance of $10,149,419. Five of the loans are being repaid from water and sewer fund revenues over a 20-year period that begins upon each project completion. The other loan is being repaid from arterial street fund revenues over a 4-year period that begins upon project completion. The following schedules summarize the long-term debt transactions of the City for the year ended December 31,2007. The first table summarizes all debt transactions for Auburn, while the second provides detailed information on all long-term debt. Additional schedules reflect total annual debt service requirements to maturity and the reconciliation of debt by fund type. CHANGES IN LONG-TERM DEBT SUMMARY General Special Employee Leave Obligation Utility Assessment Benefit Deferred Charges Total Long-term debt payable 12/31/06 $ 11,210,000 $ 15,758,410 $ 36,827 $ 3,385,277 $ (62,563) $ 30,327,951 Added 695,504 875,000 1,580,035 3,150,539 Retired (591,951) (1,753,991) (3,335,440) 37,931 (5,643,451 ) ~g-term debt [layable 12/31/07 $ 11,313,553 $ 14,879,419 $ 36,827 $ 1,629,872 $ (24,632) $ 27,835,0391 DEBT SERVICE REQUIREMENT TO MATURITY General Capital Lease Utility Special Employee Total Obligation Bonds Obligation Bonds/Loans Assessments Leave Benefits Long-Term Debt YEAR Principal Interest Principal Interest Principal Interest Principal Interest Principal Principal Interest 2008 597.000 $ 499.944 33.585 $ 32.415 $ 1.950.103 $ 281.065 2.102 $ 1.459.953 $ 4.040.639 $ 815.526 2009 625.000 469.878 35.303 30.697 2.010.102 217.247 1.682 16.992 2.687.396 719.504 2010 669,000 439.857 37,109 28.891 990,102 149,499 1,261 16.992 1,713.202 619,508 2011 718,000 408.540 39.009 26.991 969.524 133.882 841 16.992 1,743.524 570.253 2012 752,000 374.718 41,003 24.997 984.524 117.841 36.827 420 16.992 1,831,345 517,976 2013 795.000 339.292 43.102 22,898 989.524 101,201 16.992 1,844.617 463.391 2014 831,000 300.712 45,307 20.693 1.004.524 84.361 16.992 1,897,822 405,766 2015 873.000 259.514 47.625 18,375 1.019.524 64,484 16.992 1,957,140 342.373 2016 685.000 215.340 50,061 15.939 1.034.524 44.081 16,992 1,786.576 275.360 2017 725,000 183.730 52,623 13,377 679.524 23,154 16.992 1.474,138 220,261 2018 755,000 151.665 55.315 10,685 679.524 18,714 16.994 1,506,832 181,064 2019 495,000 118,125 58.145 7,855 679.524 14,274 1,232,669 140,254 2020 320.000 95.850 61,119 4.881 497,155 9.834 878.274 110,565 2021 330.000 81.450 64.247 1,753 497,155 7.217 891,402 90.420 2022 345.000 66.600 270.070 4.601 615.070 71.201 2023 360.000 51,075 243.955 3.120 603.955 54.195 2024 380.000 34.875 243.955 1.900 623,955 36,775 2025 395,000 17.775 136,110 681 531,112 18,456 I TOTALS $ 10.650,000 $ 4.108.937 663.553 $ 260.447 $ 14.879.419 $ 1.277.158 36.827 $ 6,307 $ 1.629.872 $ 27,859.671 $ 5.652.8481 80 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS CHANGES IN LONG-TERM DEBT I Issue Name Interest Maturity Original Principal Balance Balance Due Within Rates Date Amount Installments 12/31/06 Additions Reductions 12/31/07 One Year Governmental debt: General obliaation bonds: Limited G.O. library 3.75-5.00% 12/1/2018 4.000.000 $110.000 - $290.000 2.820.000 (185.000) 2.635.000 195.000 Valley Communication G.O. 4.30-5.75% 12/1/2015 2,551,600 $96.600 - $233,000 1.755.000 (160.000) 1,595.000 167,000 ~general obligation bonds 6,551,600 4,575,000 (345.000) 4.230,000 362,000 I Caoitallease: IAuburn Avenue Theater (.1) 5.00% 12/31/2021 695,504 $5,500 695.504 (31,951) 663.553 33,5851 Emolovee leave benefit: ~!2ensated absences 2.895,752 1.253.442 (2.856,260) 1.292,934 1,158,1421 Public Works Trust Fund loans: r~wrE 2~(a) 0.50% 7/1/2010 142,313 _$~,578 142.313 (35.578) 106.735 355i'81 Soecial assessment bonds: [U.D. # 347 6.85% 5/1/2012 587~7 varies 36,827 36.827 -I I Deferred charges related to debt (1.228) 102 (1,126) -. I Total governmental 7,281,740 7.648.664 1.948.946 (3.268.687) 6.328.923 1,589,3051 Business-type debt: General obliaation bonds GO bond 1999 5.00-5.10% 11/1/2009 1.655,000 $45.000 - $65,000 175.000 (50.000) 125.000 60,000 GO refunding bond 2005 4.00-5.00% 12/1/2019 1.375.000 $10.000 - $190.000 1.345.000 1.345.000 GO bond 2006 4.25-5.00% 12/1/2025 3,275.000 $5.000 - $395.000 3.275.000 3.275,000 GO bond 2006 taxable 5.40-5.52% 12/1/2015 1,885,000 $45,000 - $245,000 1,840,000 (165,000) 1.675,000 175,000 ITotal GO bonds 8,190,000 6,635,000 (215,000) 6,420,000 235.000 1 Revenue bonds: Utility sys. revenue 1997 (2) 5.50% 11/1/2007 5.000,000 $230.000 - $245.000 245.000 (245.000) Utility sys. revenue 1999 (2) 5.00-5.10% 11/1/2009 8,345,000 $670,000 - $1,030,000 2.940,000 (930,000) 2,010,000 980,000 Utility sys. refunding bonds 2005 (2) 3.00-4.75% 11/1/2016 2.765,000 $45,000 - $355,000 2.720.000 2.720.000 255,000 ITotal revenue bonds 16,110,000 5.905.000 (1,175,000) 4.730.000 1.235,.QQQj Emolovee leave benefit: ~p'ensated absences 489.525 326.593 (479.1801 336.938 301.811 ~ Public Works Trust Fund loans: PwrF 1999 1.00% 7/1/2019 3.850.000 $182.368 2.370.789 (182.368) 2.188.421 182.368 PwrF 2001 0.50% 7/1/2021 4.290.405 $227,086 3.406.284 (227,086) 3.179,198 227.086 PwrF 2002 1.00% 7/1/2022 641.250 $26,114 417.832 (26,115) 391,717 26,114 PwrF 2004 0.50% 7/1/2024 2.156.880 $107.844 1.941,192 (107.844) 1.833.348 107,844 PwrF 2006(b) 0.50% 7/1/2025 1.575.000 $87,500 1.575.000 875.000 2.450.000 136.111 ITotal Public Works Trust Fund loans 12.513.535 9.711.097 875.000 (543.413) 10.042.684 679,5231 [Deferred charges related to debt (61,335) 37,829 (23,506) -I Total proprietary 36,813,535 22.679,287 1.201.593 (2,374,764) 21.506.116 2.451.3341 Total all funds 44.095.275 30.327.951 3.150.539 (5.643.451) 27.835.039 4.040.639 ~ (1) Imputed interest rate of 5.00%. (2) Subject to federal arbitrage rules. LONG-TERM DEBT RECONCILIATION Enterprise Governmental Funds Funds 12/31/07 Liabilities payable from restricted assets: Revenue bonds $ 885,610 $ $ 885,610 Long-term bonds payable: General obligation bonds 6,420,000 4,230,000 10,650,000 Capital lease 663,553 663,553 Revenue bonds 3,844,390 3,844,390 Special assessments with 143,562 143,562 government commitment Public Works Trust Fund loans 10,042,684 10,042,684 Employee leave benefits 336,938 1,292,934 1,629,872 Deferred charges (23,506) (1,126) (24,632) ITotallong-term debt $ 21,506,116 $ 6,328,923 $ 27,835,039 I 81 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Revenue Bond Debt Service Coveraqe The required debt service coverage for the 1999 utility revenue bonds and the 2005 utility revenue refunding bonds is 1.25. Debt service coverage for 2007 was 2.85. Please refer to Schedule 16 in the statistical section. The restricted rate stabilization fund for the utility revenue bonds was established to minimize the effect on rates of revenue fluctuations between years. By transferring cash into this stabilization fund, adjusted net revenue available for debt service, as defined, would be decreased by the amount of the transfer. Conversely, transfers out of the account would increase adjusted net revenue available for debt service. NOTE 12 - CONSTRUCTION COMMITMENTS At December 31, 2007 the City had the following contractual obligations on construction projects: SCHEDULE OF OUTSTANDING CONSTRUCTION OBLIGATIONS AS OF DECEMBER 31, 2007 Amount Outstanding Traffic projects Street projects Utilities projects rTotal commitments $ 211,471 596,062 655,407 1,462,940 I $ NOTE 13-CEMETERYENDOWEDCAREFUND The City maintains one permanent fund known as the cemetery endowed care fund. Paid into this fund are 15% of all proceeds received from the sale of each grave, niche or crypt. This fund is irreducible in principal and no part of the income of this fund shall ever be used for purposes other than those specified upon the creation of the fund. RCW 68.44.020 restricts the use of endowment net appreciation to endowment care "stipulated in the instrument by which the fund was established". For the City, the instrument that established the fund is Auburn City Code section 3.04.080, and section 3.040.120 governs the use of the fund. ACC 3.04.120 restricts net interest or income from investments to the care of the lots and in the improvement or embellishment of the cemetery or the erection or preservation of any buildings or structures, fences or walks, or for the repair, preservation, erection or renewal of any tomb, monument, grave, stone, fence, railing or other erection in or around the cemetery. The funds may also be used for planting and cultivating trees, shrubs, flowers or plants in or around the cemetery. All expenditures of income from the fund must first be authorized by the City Council. For 2007, of the $89,327 net appreciation on investments, $52,959 was available for expenditure, and the rest was related to an unrealized gain on a long-term investment that matures in 2009. Amounts that are available for expenditure are reflected as unrestricted net assets. 82 CITY OF AUBURN: 2007 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 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 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 #2, #20, #40, #43, #44, #47, Black Diamond Fire Department, Vashon Island Fire Department, City of Pacific Police and Fire Departments, City of Algona Police Department, City of Black Diamond Police Department, City of Des Moines Police Department, SeaTac Fire Department, North Highline Fire Department, and King County EMS Units. In 1988, King County Fire District #1 was annexed to the City of Tukwila. A separate agreement between Valley Com and the subscribing agencies has been executed, which set forth condition of services and rates charged. The participating cities provide the majority of revenues to Valley Com. The method of allocating revenue source was changed in 1990 to a basis of prior years calls with actual first and second quarter and estimated third and fourth quarter calls. The allocation of prorated financial participation among the five participating cities is the percentage of estimated dispatched calls attributed to each jurisdiction compared to the total actual and estimated dispatched calls, for the period for January 1, through December 31. The percentages are applied to the current approved budget, less revenue from subscribing agencies and all other sources. The 2007 cost distribution for the five participating cities is as follows: Dispatchable Calls Percent ofl Total * Renton Kent Auburn Tukwila Federal Way ITotal 68,312 99,059 64,342 38,220 84,624 354,557 19.27% 27.94% 18.15% 10.78% 23.87% 100.00%1 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 83 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS 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. 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 Renton Kent Auburn Tukwila Federal Way Total Equity Dec. 31, 2006 $ 3,981 ,550 $ 5,580,415 $3,701,815 $2,378,343 $ 2,048,504 $ 17,690,627 Current year change 162,657 277,142 147.875 50,612 223,394 861,680 Equity Dec 31, 2007 $ 4,144,207 $ 5,857,557 $ 3,849,690 $ 2,428,955 $ 2,271,898 $ 18,552,307 % of equity 22.34% 31.57% 20.75% 13.09% 12.25% % of 2007 distribution 18.88% 32.16% 17.16% 5.87% 25.93% Liabilities are the responsibility of the five participating cities in direct proportion to their equity position. Complete audited financial statements for Valley Communications Center can be obtained from Valley Communications Center, 27519 108th Ave SE, Kent, WA 98030, or telephone 253-372- 1300. NOTE 15 - 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 84 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS 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. The City of Auburn designated a portion of its 2007 tax revenue to support the VRFA for 2007 only. The amount of tax revenue paid to the VRFA was $10,546,600 and is reflected in the general fund as an operating expenditure for security of persons and property. 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 2007 Auburn paid $99,493 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 2007 was $126,745. Medical premiums and benefit payments made under the Fire Relief and Pension Plan for 2007 were $144,356. The City of Auburn acted as fiscal agent for the VRFA during 2007. Revenue and expenses of the VRFA were accounted for in the City's agency fund. NOTE 16 - CONTINGENCIES AND LITIGATION As of December 31, 2007, a number of claims were pending against the City for damages and legal actions. While the outcome of these actions is uncertain, no losses are clearly anticipated at this time due to these pending claims. In the event of a liability finding against the City, it is anticipated that any potential adverse judgment against the City also would be subject to coverage under the City's comprehensive liability insurance, including public officials' errors and omission insurance and general liability insurance. NOTE 17 - RISK MANAGEMENT & INSURANCE Risk Management The City of Auburn is a member of the Washington Cities Insurance Authority (WCIA). Utilizing Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly purchasing insurance, jointly self- insuring, and / or jointly contracting for risk management services. WCIA has a total of 126 Members. New members initially contract for a three-year term, and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its unresolved loss history incurred during membership. Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general, automobile, police, public officials' errors or omissions, stop gap, and employee benefits liability. Limits are $3 million per occurrence self insured layer, and $12 million per occurrence in the re-insured excess layer. The excess layer is insured by the purchase of reinsurance and insurance and is subject to aggregate limits. Total limits are $15 million per occurrence subject to aggregate sublimits in the excess layers. The Board of Directors determines the limits and terms of coverage annually. 85 CITY OF AUBURN: 2007 CAFR NOTES TO THE FINANCIAL STATEMENTS Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members' deductible to $500,000, for all perils other than flood and earthquake, and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage, and lobbyist services. WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the interlocal, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA's assets in financial instruments which comply with all State guidelines. These revenues directly offset portions of the membership's annual assessment. A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WCIA. No settlement has exceeded insurance coverage over the past three years. Workers' Compensation Title 51 RCW requires the City to ensure payment of benefits for job-related injuries and diseases through the Workers' Compensation fund or through self-insurance. The City participates in the State of Washington's Workers' Compensation program. Premiums are based on individual employer's reported payroll hours and insurance rates based on each employer's risk classification and past experience. The premium is paid by employer and employee contributions. NOTE 18 - SUBSEQUENT EVENTS Annexation At its January 16, 2007 meeting, the Auburn City Council passed resolutions initiating an annexation election process for Auburn's Potential Annexation Areas (PAAs). The City Council action included a 4.6 square mile area commonly referred to as Lea Hill, and a 1.8 square mile area commonly referred to as West Hill, which were identified as PAAs in Auburn's Comprehensive Plan more than a decade ago. On August 21,2007, the voters in the Lea Hill and West Hill areas approved the resolutions to become annexed into the city limits of Auburn. With certification of census data in December 2007 by the State of Washington, Office of Financial Management, annexation of Lea Hill and West Hill became effective January 1, 2008. As a result of annexation and an increase in the population of approximately 15,500 additional residents, the City increased staffing to meet additional citizen needs. During 2008, as a result of annexation, the City added sixteen commissioned police officers and forty other staff positions for a total of fifty-six new positions. The impact on the City's budget due to the increase in personnel costs and benefits, along with non-salary operating costs, resulted in an increase of $5,974,400 in the general fund budget for 2008. The City is also planning for an increase in operating and capital costs related to infrastructure maintenance, investment and replacement. 86 CITY OF AUBURN: 2007 CAFR REQUIRED SUPPLEMENTAL INFORMATION CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31,2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: TAXES: PROPERTY $ 14,700,000 $ 14,700,000 $ 15,166,016 $ 466,016 RETAIL SALES & USE 17,162,600 17,162,600 18,958,484 1,795,884 INTERFUND UTILITY 1,868,800 1,868,800 2,095,901 227,101 UTILITY 5,416,600 5,416,600 6,073,429 656,829 EXCISE 1,006,500 1,006,500 1,008,066 1,566 LICENSES AND PERMITS 1,721,000 1,721,000 1,606,950 (114,050) INTERGOVERNMENTAL 2,862,500 3,736,100 3,451 ,594 (284,506) CHARGES FOR SERVICES 1 ,758,500 2,138,500 2,663,788 525,288 FINES AND FORFEITURES 746,000 1,506,000 1,930,389 424,389 INVESTMENT EARNINGS 350,000 350,000 848,061 498,061 MISCELLANEOUS 351,100 548,100 786,146 238,046 ITOTAL REVENUES 47,943,600 50 154,200 54,588,824 4,434,~ EXPENDITURES: CURRENT: GENERAL GOVERNMENT 8,203,000 8,031,000 6,834,084 1,196,916 SECURITY OF PERSONS AND PROPERTY 32,573,800 33,854,300 32,798,206 1,056,094 PHYSICAL ENVIRONMENT 2,803,300 3,393,500 3,352,466 41,034 TRANSPORTATION 2,139,800 2,280,600 2,096,049 184,551 ECONOMIC ENVIRONMENT 1,807,800 2,556,900 1,872,312 684,588 HEALTH AND HUMAN SERVICES 592,200 599,700 416,456 183,244 CULTURE AND RECREATION 5,442,200 6,081,900 6,541 ,980 (460,080) DEBT SERVICE 225,141 (225,141) I TOTAL EXPENDITURES 53,562,100 56,797,900 54,136,694 2,661,2061 EXCESS (DEFICIENCY) OF REVENUES ~ER~(O~DERTEXPEN~TORES (5,618,500) . (6,643, 700) ~ 452,130 7]95,8301 OTHER FINANCING SOURCES (USES): PROCEEDS FROM CAPITAL LEASE 695,504 695,504 TRANSFERS IN (Note 5) 1,017,000 1,048,220 1,047,733 (487) TRANSFERS OUT (Note 5) (1,425,500) (2,397,200) (2,180,975) 216,225 I TOTAL OTHER FINANCING SOURCES AND USES (~500) (1,~~) (437,738) 911,~ NET CHANGE IN FUND BALANCES (6,027,000) (7,992,680) 14,392 8,007,072 FUND BALANCES - BEGINNING 10,712,125 14,448,328 14,448,328 IFUND BALANCES - ENDING $ 4,685,125 $ 6,455,648 $ 14,462,720 $ 8,007,0721 87 CITY OF AUBURN: 2007 CAFR REQUIRED SUPPLEMENTAL INFORMATION CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL ARTE~ALSTREETFUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: INTERGOVERNMENTAL $ 4,516,000 $ 6,065,000 $ 1,635,666 $ (4,429,334) INVESTMENT EARNINGS 50,000 50,000 63,434 13,434 MISCELLANEOUS 800,000 800,000 14,153 (785,847) I TOTAL REVENUES 5~,000 6~,000 1,713,253 (5,201..H...7)J EXPENDITURES: CURRENT: TRANSPORTA TION 7,599,000 10,322,000 3,396,595 6,925,405 DEBT SERVICE: PRINCIPAL 35,578 (35,578) INTEREST AND OTHER COSTS 297 (297) I TOTAL EXPENDITURES 7,599,000 10,322,000 3,432,470 6,889,530 I EXCESS (DEFICIENCY) OF REVENUES I OVER (UNDER) EXPENDITURES (2,233,000) . (3,407,000) . (1,719,217) . 1,687,7831 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) 1,689,300 2,810,300 1,736,348 (1,073,952) TOTAL OTHER FINANCING SOURCES AND USES 1,689,300 2,810,300 1,736,348 (1,073,952)J NET CHANGE IN FUND BALANCES (543,700) (596,700) 17,131 613,831 FUND BALANCES - BEGINNING 702,331 792,347 824,331 31,984 IFUND BALANCES - ENDING $ 158,631 $ 195,647 $ 841 ,462 $ 645,8151 88 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS THE CITY HAS FOUR TYPES OF NON-MAJOR GOVERNMENTAL FUNDS: Special Revenue Funds Special revenue funds account for the proceeds of specific revenue sources and are segregated into individual funds to ensure that expenditures are made exclusively for qualified purposes. Special revenue funds are accounted for on a modified accrual basis. 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. 89 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING BALANCE SHEET NON-MAJOR GOVERNMENT FUNDS DECEMBER 31, 2007 TOTAL TOT AL TOTAL TOTAL TOTAL NONMAJOR NON MAJOR NON MAJOR NON MAJOR NONMAJOR SPECIAL REVENUE DEBT SERVICE CAPITAL PROJ PERMANENT GOVERNMENT AL FUNDS FUNDS FUNDS FUNDS FUNDS ASSETS: CASH AND CASH EQUIVALENTS 11,704,782 181,666 123,501 205,027 12,214,976 INVESTMENTS 1,000,938 1,285,323 2,286,261 RECEIVABLES: SPECIAL ASSESSMENTS 703,809 703,809 DUE FROM OTHER GOVERNMENT AL UNITS 92,106 349,200 441,306 DEFERRED CHARGES 6,868 6,868 r---'TOTALAS'SETS 12,804,694 : $ 885,475 : $ 472,701 : $ 1,490,350 15,653,2201 LIABILITIES AND FUND BALANCES: CURRENT PAY ABLES 442,495 134,722 577,217 INTERFUND PAYABLE (Note 5) 79,000 150,000 229,000 DEFERRED REVENUE 703,809 703,809 TOTAL LIABILITIES 521,495 703,809 284,722 1,510,0261 FUND BALANCES: RESERVED FOR: DEBT SERVICE 181,666 181,666 ENDOWMENT 1,319,367 1,319,367 UNRESERVED: DESIGNATED FOR MITIGATION 4,960,078 4,960,078 UNDESIGNATED 7,323,121 187,979 170,983 7,682,083 TOT AL FUND BALANCES 12,283,199 181,666 187,979 1 ,490,350 14,143,1941 TOTAL LIABILITIES AND FUND BALANCES 12,804,694 885,475 472,701 1 ,490,350 15,653,220 I 90 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES. EXPENDITURES. AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENT FUNDS FOR THE YEAR ENDED DECEMBER 31, 2007 TOTAL TOTAL TOTAL TOTAL TOTAL NON MAJOR NONMAJOR NONMAJOR NON MAJOR NONMAJOR SPECIAL REVENUE DEBT SERVICE CAPITAL PROJECTS PERMANENT GOVERNMENTAL REVENUES: TAXES PROPERTY $ 500,000 $ $ $ $ 500,000 EXCISE 85,405 85,405 OTHER 65,129 65,129 INTERGOVERNMENTAL 217,724 431,500 649,224 CHARGES FOR SERVICES 2,279,710 23,074 50,652 2,353,436 FINES AND FORFEITURES 224,731 224,731 SPECIAL ASSESSMENTS 52,291 52,291 INVESTMENT EARNINGS 616,250 65,768 34,226 89,325 805,569 MISCELLANEOUS 14,616 36,653 51,269 I TOTAL REVENUES 4 003 565 118059 525 453 139 977 4,787,~ EXPENDITURES: CURRENT SECURITY OF PERSONS & PROPERTY 712,906 712,906 TRANSPORTATION 1,893,285 1,893,285 ECONOMIC ENVIRONMENT 269,970 269,970 CULTURAL AND RECREATION 29,295 29,295 DEBT SERVICE PRINCIPAL 208,424 208,424 INTEREST 168,919 168,919 CAPITAL OUTLAY 1,919,253 1,919,253 l _TOT ~1.. EXP~r::!D!Itg,S _ 2,905,456 377.343 1,919,253 5,202,0521 EXCESS (DEFICIENCY) OF REVENUES ~(~) EXPENDITURES 1,098,109 (259,284) .. (1,393,800) . 139,977 (414,998)1 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) 1,660,097 377,011 367,155 2,404,263 TRANSFERS OUT (Note 5) (389,107) (80,510) (70,500) (540,117) rTOTAL OT~ER~FINANCING SOURCES ANDUSES 1,270,990 296,501 367,155 (70 500) 1,864,1461 NET CHANGE IN FUND BALANCES 2,369,099 37,217 (1,026,645) 69,477 1,449,148 FUND BALANCES - BEGINNING 9,914,100 144,449 1,214,624 1,420,873 12,694,046 ~FUND BALANCES - ENDING $ 12,283,199 $ 181,666 $ 187,979 $ 1,490,350 $ 14,143,1941 91 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES * * * * * MORE THAN YOU IMAGINED 92 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special revenue funds account for the proceeds of specific revenue sources and are segregated into individual funds to ensure that expenditures are made exclusively for qualified purposes. Special revenue funds are accounted for on a modified accrual basis. Annual budgets are adopted with appropriations lapsing each year of the biennium. The City has ten non-major special revenue funds. The Local Street Fund - This fund was created when Auburn voters approved the Save Our Streets lid lift in 2004 and is used to account for all revenues and expenditures related to this initiative. Hotel/Motel Tax Fund - This fund was created to account for the hotel/motel taxes levied to support City tourist promotion. Drug Forleiture Fund - Money seized and forfeited from drug activity is deposited in this fund to be used exclusively for drug investigation and enforcement. Local Law Enforcement Block Grant - Accounts for police overtime relating to community oriented policing. The Housing and Community Development Fund - Accounts for projects associated with the Community Development Block Grant program. The Recreational Trails Fund - Created for the purpose of trail development. This is a tax-supported fund. The Business Improvement Area Fund - Accounts for special assessments on downtown merchants for ongoing services and for improvements made to the downtown area. The Cumulative Reserve Fund - Created for the purpose of revenue stabilization for future operations. Mitigation Fees - Accounts for the receipt of contracted mitigation fees for streets and fire service. Special Parks and Recreation -- Accounts for funds that are donated to the City for specific parks and recreation uses. This fund was closed at the end of 2007 with remaining amounts transferred to the general fund to be used for related projects in 2008. 93 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES 94 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES Page 2 of 2 TOTAL HOUSING BUSINESS NON MAJOR COMMUNITY RECREATION IMPROVEMENT CUMULATIVE MITIGATION SPECIAL REVENUE DEVELOPMENT TRAILS AREA RESERVE FEES FUNDS $ 92,222 $ 31,594 $ 46,558 $ 4,962,030 $ 5,439,108 $ 11,704,782 1,000,938 1,000,938 63,106 92,106 6,868 1$ 155,328 $ 31,594 $ 46,558 $ 5,962,968 $ 5,439,108 $ 12,804,6941 $ 86,097 $ $ $ $ 319,063 $ 442,495 59,000 79,000 145,097 319,063 521,495 I 4,960,078 4,960,078 10,231 31,594 46,558 5,962,968 159,967 7,323,121 10,231 31,594 46,558 5,962,968 5,120,045 12,283,199 h 155,328 $ 31,594 $ 46,558 $ 5,962,968 $ 5,439,108 $ 12,804,6941 95 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED DECEMBER 31,2007 Page 1 of 2 HOTEL! LOCAL LAW HOUSING LOCAL MOTEL DRUG ENFORCEMENT COMMUNITY STREETS TAX FORFEITURE GRANT DEVELOPMENTI REVENUES: TAXES PROPERTY $ 500,000 $ $ $ $ EXCISE 85,405 OTHER INTERGOVERNMENTAL 15,573 29,000 173,151 CHARGES FOR SERVICES FINES AND FORFEITURES 224,731 INVESTMENT EARNINGS 26,468 3,495 28,044 507 MISCELLANEOUS 1 TOTAL REVENUES 526,468 88,900 268,348 29,507 173,J21.J EXPENDITURES: CURRENT SECURITY OF PERSONS & PROPERTY 240,273 29,000 TRANSPORTATION 1,893,285 ECONOMIC ENVIRONMENT 63,628 174,067 CULTURAL AND RECREATION 1 TOTAL EXPENDITURES 1,893,285 63,628 240,273 29,000 174,0671 EXCESS (DEFICIENCY) OF REVENUES ~(UNDER) EXPENDITURES (1,366,817) ~ 25,272 28,075 507 (916)' OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) 1,586,100 2,600 TRANSFERS OUT (Note 5) rT'6TAL5T~ER~FINANCING SOURCES'ANDUSES-- 1,586,100 2,600 -. NET CHANGE IN FUND BALANCES 219,283 25,272 28,075 3,107 (916) FUND BALANCES - BEGINNING 222,158 62,122 542,632 9,154 11,147 :FUND BALANCES - ENDING $ 441,441 $ 87,394 $ 570.707 $ 12,261 $ 10,2311 96 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES Page 2 of 2 TOTAL BUSINESS SPECIAL NON MAJOR RECREA TION IMPROVEMENT CUMULATIVE MITIGATION PARKS AND SPECIAL REVENUE TRAILS AREA RESERVE FEES RECREATION FUNDS $ $ $ $ $ $ 500,000 85,405 65,129 65,129 217,724 2,279,710 2,279,710 224,731 1,497 1,325 320,781 234,133 616,250 14,616 14,616 1,497 66,454 320,781 2,lli843 14,616 4,003,5651 443,633 712,906 1,893,285 32,275 269,970 29,295 29,295 32,275 443,633 29,295 2,905,4561 1,497 34,179 320,781 2,070,210 (14,679) _ 1,098,1091 5,100 66,297 1,660,097 (358,374) (30,733) (389,107) 5,100 (292 077) : (30733) : 1,270,990 . 6,597 34,179 320,781 1,778,133 (45,412) 2,369,099 24,997 12,379 5,642,187 3,341,912 45,412 9,914,100 h 31,594 $ 46,558 $ 5,962,968 $ 5,120,045 $ $ 12,283,1991 97 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL LOCAL STREETS SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: TAXES: PROPERTY $ 500,000 $ 500,000 $ 500,000 $ INVESTMENT EARNINGS 20,000 20,000 26,468 6,468 I TOTAL REVENUES 520,000 520,000 526,468 6,468 I EXPENDITURES: CURRENT: TRANSPORTATION 1,200,000 2,111,100 1,893,285 217,815 I TOTAL EXPENDITURES 1,200,000 2,111,100 1,893,285 217,8151 EXCESS (DEFICIENCY) OF REVENUES I OVER (~) EXPENDITURES (680,000) ~ (1,591, 100) ~ (1 ,366,817) ~ 224,283 1 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) 675,000 1,586,100 1,586,100 I TOTAL OTHER FINANCING SOURCES AND USES 675,000 1,586,100 1,586,100 -I NET CHANGE IN FUND BALANCES (5,000) (5,000) 219,283 224,283 FUND BALANCES - BEGINNING 46,520 222,158 222,158 :F~D.BALANCE~ENDING $ 41,520 : $ 217,158 : $ 441,441 : $ 224,283 I 98 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HOTEL/MOTEL TAX SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 ORIGINAL FINAL BUDGET BUDGET (GAAP BASIS) (GAAP BASIS) ACTUAL RESULTS VARIANCE WITH FINAL BUDGET POSITIVE (NEGATIVE) REVENUES: TAXES: EXCISE INVESTMENT EARNINGS I TOTAL REVENUES $ 60,000 $ 1,000 61,000 70,000 $ 2,500 72,500 85,405 $ 3,495 88,900 15,405 995 16,400 I EXPENDITURES: CURRENT: ECONOMIC ENVIRONMENT I TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES lOVER (UNDER) EXPENDITURES 70,000 100,300 63,628 36,672 70,000 100,300 63,628 36,672 I (9,000) ~ (27,800) ~ 25,272 53,072 I (9,000) (27,800) 25,272 53,072 40,717 62,122 62,122 $ 31,717 $ 34,322 $ 87,394 $ 53,072 I NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING .FUND BALANCES - ENDING 99 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL DRUG FORFEITURE SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) $ $ 15,000 $ 15,573 $ 573 200,000 250,000 224,731 (25,269) 15,000 15,000 28,044 13,044 215,000 280,000 268,348 (11,652)J REVENUES: INTERGOVERNMENTAL FINES AND FORFEITURES INVESTMENT EARNINGS I TOTAL REVENUES EXPENDITURES: CURRENT: SECURITY OF PERSONS & PROPERTY I TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES lOVER (UNDER) EXPENDITURES 259,500 343,000 240,273 102,727 259,500 343,000 240,273 102,7271 (44,500) . (63,000) . 28,075 91,0751 (44,500) (63,000) 28,075 91,075 542,245 542,632 542,632 $ 497,745 $ 479,632 $ 570,707 $ 91,0751 NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING .FUND BALANCES - ENDING 100 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL LOCAL LAW ENFORCEMENT GRANT SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: INTERGOVERNMENTAL $ 26,300 $ 26,300 $ 29,000 $ 2,700 INVESTMENT EARNINGS 100 100 507 407 I TOTAL REVENUES 26,400 26,400 29,507 3,1071 EXPENDITURES: CURRENT: SECURITY OF PERSONS & PROPERTY 29,000 29,000 29,000 I TOTAL EXPENDITURES 29,000 29,000 29,000 -I EXCESS (DEFICIENCY) OF REVENUES I OVER (UNDER) EXPENDITURES (2,600) _ (2,600) _ 507 3,1071 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) 2,600 2,600 2,600 I TOTAL OTHER FINANCING SOURCES AND USES 2,600 2,600 2,600 -I NET CHANGE IN FUND BALANCES 3,107 3,107 FUND BALANCES - BEGINNING 6,295 9,154 9,154 .FUND BALANCES - ENDING $ 6,295 $ 9,154 $ 12,261 $ 3,1071 101 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL HOUSING & COMMUNITY DEVELOPMENT SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 ORIGINAL FINAL BUDGET BUDGET (GAAP BASIS) (GAAP BASIS) ACTUAL RESULTS VARIANCE WITH FINAL BUDGET POSITIVE (NEGATIVE) REVENUES: INTERGOVERNMENTAL I TOTAL REVENUES $ 509,800 $ 509,800 509,800 $ 509,800 173,151 $ 173,151 (336,649) (336,649)J EXPENDITURES: CURRENT: ECONOMIC ENVIRONMENT I TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES lOVER (UNDER) EXPENDITURES 520,737 520,737 174,067 346,670 520,737 520,737 174,067 346,670 I (10,937) _ (10,937) _ (916) . 10,021 I (10,937) (10,937) (916) 10,021 10,937 11,147 11,147 $ $ 210 $ 10,231 $ 10,021 I NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING .FUND BALANCES - ENDING 102 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL RECREATION TRAILS SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: INVESTMENT EARNINGS $ 800 $ 800 $ 1,497 $ 697 I TOTAL REVENUES 800 800 1,497 6971 EXCESS (DEFICIENCY) OF REVENUES I OVER (UNDER) EXPENDITURES 800 800 1,497 6971 OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) 5,100 5,100 5,100 I TOTAL OTHER FINANCING SOURCES AND USES 5,100 5,100 5,100 -I NET CHANGE IN FUND BALANCES 5,900 5,900 6,597 697 FUND BALANCES - BEGINNING 24,724 24,997 24,997 .FUND BALANCES - ENDING $ 30,624 $ 30,897 $ 31,594 $ 6971 103 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL BUSINESS IMPROVEMENT AREA SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 ORIGINAL FINAL BUDGET BUDGET (GAAP BASIS) (GAAP BASIS) ACTUAL RESULTS VARIANCE WITH FINAL BUDGET POSITIVE (NEGATIVE) REVENUES: TAXES: OTHER INVESTMENT EARNINGS I TOTAL REVENUES $ 53,000 $ 500 53,500 53,000 $ 500 53,500 65,129 $ 1,325 66,454 12,129 825 12,9541 EXPENDITURES: CURRENT: ECONOMIC ENVIRONMENT I TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES lOVER (UNDER) EXPENDITURES 53,500 53,500 32,275 21,225 53,500 53,500 32,275 21,2251 34,179 34,1791 34,179 34,179 101 12,379 12,379 $ 101 $ 12,379 $ 46,558 $ 34,1791 NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING .FUND BALANCES - ENDING 104 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL CUMULATIVE RESERVE SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: INVESTMENT EARNINGS $ 180,000 $ 180,000 $ 320,781 $ 140,781 I TOTAL REVENUES 180,000 180,000 320,781 140,781 I EXCESS (DEFICIENCY) OF REVENUES I OVER (UNDER) EXPENDITURES 180,000 180,000 320,781 140,781 I OTHER FINANCING SOURCES (USES): TRANSFERS OUT (Note 5) (1,151,900) (10,000) 10,000 I TOTAL OTHER FINANCING SOURCES AND USES (1,151,900) ~ (10,000) ~ 10,000 I NET CHANGE IN FUND BALANCES (971,900) 170,000 320,781 150,781 FUND BALANCES - BEGINNING 5,567,883 5,642,187 5,642,187 .FUND BALANCES - ENDING $ 4,595,983 $ 5,812,187 $ 5,962,968 $ 150,781 I 105 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL MITIGATION SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: CHARGES FOR SERVICES $ 720,000 $ 1,320,000 $ 2,279,710 $ 959,710 INVESTMENT EARNINGS 50,000 50,000 234,133 184,133 I TOTAL REVENUES 770,000 1,370,000 2,513,843 1,143,8431 EXPENDITURES: CURRENT: SECURITY OF PERSONS & PROPERTY 443,633 (443,633) I TOTAL EXPENDITURES 443,633 (443,633~ EXCESS (DEFICIENCY) OF REVENUES I OVER (~) EXPENDITURES 770,000 ~ 1 ,370,000 ~ 2,070,210 700,210 I OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) 66,300 66,297 (3) TRANSFERS OUT (Note 5) (895,000) (2,268,400) (358,374) 1,910,026 I TOTAL OTHER FINANCING SOURCES AND USES (895,000) : (2,202,100< (292,077) : 1,910,023 I NET CHANGE IN FUND BALANCES (125,000) (832,100) 1,778,133 2,610,233 FUND BALANCES - BEGINNING 3,036,295 3,341,912 3,341,912 .FUND BALANCES - ENDING $ 2,911,295 $ 2,509,812 $ 5,120,045 $ 2,610,2331 106 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL SPECIAL PARKS AND RECREATION SPECIAL REVENUE FUND FOR THE YEAR ENDED DECEMBER 31, 2007 VARIANCE WITH ORIGINAL FINAL FINAL BUDGET BUDGET BUDGET ACTUAL POSITIVE (GAAP BASIS) (GAAP BASIS) RESULTS (NEGATIVE) REVENUES: MISCELLANEOUS $ $ 15,100 $ 14,616 $ (484) I TOTAL REVENUES 15,100 14,616 (484tl EXPENDITURES: CURRENT: CULTURAL AND RECREATION 41,154 29,292 29,295 (3) I TOTAL EXPENDITURES 41,154 29,292 29,295 (3)1 EXCESS (DEFICIENCY) OF REVENUES I OVER (~) EXPENDITURES (41,154) ~ (14,192) ~ (14,679) (487)1 OTHER FINANCING SOURCES (USES): TRANSFERS OUT (Note 5) (31,220) (30,733) 487 I TOTAL OTHER FINANCING SOURCES AND USES (31,220) (30,733) 4871 NET CHANGE IN FUND BALANCES (41,154) (45,412) (45,412) FUND BALANCES - BEGINNING 41,154 45,412 45,412 .FUND BALANCES - ENDING $ $ $ $ -I 107 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES * * * * * MORE THAN YOU IMAGINED 108 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Debt Service Funds Debt service funds account for payments of principal and interest on general obligation and special assessment long-term debt. The City of Auburn has one outstanding general obligation issue, and three special assessment funds. The 1998 General Obligation Library Bonds - Accounts for debt service on a Council-approved bond issue to finance, in conjunction with King County, the construction of a new library in the City. The L.I.D. Guarantee Fund - This fund provides financial security for out- standing L.I.D. bonds and special assessment debt. Special Assessment Debt Fund - Accounts for the special assessment collections and debt service payments for all local improvement districts located within the City. 109 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES ASSETS: CASH AND CASH EQUIVALENTS RECEIVABLES SPECIAL ASSESSMENTS ~TOT'Ai:"'i\sSETS CITY OF AUBURN, WASHINGTON COMBINING BALANCE SHEET DEBT SERVICE FUNDS DECEMBER 31, 2007 TOTAL 1998 GO NON MAJOR LIBRARY LID SPECIAL DEBT SERVICE BOND DEBT GUARANTEE ASSESSMENTS FUNDS $ 35,810 $ 115,023 $ 30,833 $ 181,666 703,809 703,809 $ 35,810 : $ 115,023 $ 734,642 : $ 885,4751 $ $ $ 703,809 $ 703,809 703,809 703,~ 35,810 30,833 66,643 115,023 115,023 35,810 115,023 30,833 181,2ffiJ $ 35,810 $ 115,023 $ 734,642 $ 885,4751 LIABILITIES AND FUND BALANCES: DEFERRED REVENUE TOTAL LIABILITIES FUND BALANCES RESERVED FOR DEBT SERVICE LID GUARANTEE TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES 110 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR DEBT SERVICE FUNDS FOR THE YEAR ENDED DECEMBER 31, 2007 TOTAL 1998 G.O. NON MAJOR LIBRARY LID SPECIAL DEBT SERVICE BOND DEBT GUARANTEE ASSESSMENTS FUNDS REVENUES: TAXES: SPECIAL ASSESSMENTS $ $ $ 52,291 $ 52,291 INVESTMENT EARNINGS 10,378 2,509 52,881 65,768 I TOTAL REVENUES 10,378 2,509 105,172 118,0591 EXPENDITURES: DEBT SERVICE PRINCIPAL 185,000 23,424 208,424 INTEREST 121,440 47,479 168,919 TOTAL EXPENDITURES 306,440 70,903 377,3431 EXCESS (DEFICIENCY) OF REVENUES I OVER (UNDER) EXPENDITURES (296,062) 2,509 34,269 (259,284)1 OTHER FINANCING SOURCES (USES): TRANSFERSIN(N~e~ 306,500 70,511 377,011 TRANSFERS OUT (Note 5) (10,000) (70,510) (80,510) I ~ 296,501 1 TOTAL OTHER FINANCING SOURCES AND USES 306,500 60,511 (70,510) ~ NET CHANGE IN FUND BALANCES 10,438 63,020 (36,241) 37,217 FUND BALANCES - BEGINNING 25,372 52,003 67,074 144,449 IFUND BALANCES - ENDING $ 35,810 $ 115,023 $ 30,833 $ 181,6661 111 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Capital Project Funds Capital projects funds account for the City of Auburn's financial resources used for the acquisition or construction of major non-proprietary capital facilities. Auburn has one non-major capital project fund. The Municipal Park Construction Fund - Accounts for park related construction activity and includes funding from a portion of field rental income and adult athletic team fees. 112 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON BALANCE SHEET CAPITAL PROJECT FUND DECEMBER 31,2007 MUNICIPAL PARK CONSTRUCTION ASSETS: CASH AND CASH EQUIVALENTS DUE FROM OTHER GOVERNMENTAL UNITS TOTAL ASSETS LIABILITIES AND FUND BALANCES: CURRENT PAYABLES INTERFUND PAYABLE (Note 5) TOTAL LIABILITIES FUND BALANCES: UNRESERVED UNDESIGNATED TOTAL FUND BALANCES $ 123,501 349,200 472,701 1 $ $ 134,722 150,000 284,7221 187,979 187,9791 TOTAL LIABILITIES AND FUND BALANCES 113 $ 472,701 I CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES CAPITAL PROJECT FUND FOR THE YEAR ENDED DECEMBER 31,2007 MUNICIPAL PARK CONSTRUCTION $ 431 ,500 23,074 34,226 36,653 525,4531 REVENUES: I NTERGOVERNMENT AL CHARGES FOR SERVICES INVESTMENT EARNINGS MISCELLANEOUS I TOTAL REVENUES EXPENDITURES: CAPITAL OUTLAY I TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES lOVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): TRANSFERS IN (Note 5) ,TOTAL OTHER FINANCING SOURCES AND USES NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING IFUND BALANCES - ENDING 114 1,919,253 1,919,2531 (1,393,800)1 367,155 367,1551 (1,026,645) $ 1,214,624 187,9791 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Permanent Funds Permanent funds are used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support City programs that are for the benefit of the City or its citizens. Auburn has one permanent fund. The Cemetery Endowed Care Fund - Accounts 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. 115 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON BALANCE SHEET PERMANENT FUND DECEMBER 31,2007 CEMETERY ENDOWED CARE ASSETS: CASH AND CASH EQUIVALENTS NON-EXPENDABLE TRUST $ 205,027 INVESTMENTS 1 ,285,323 TOTAL ASSETS $ 1,490,350 I FUND BALANCES: RESERVED FOR: ENDOWMENT $ 1,319,367 UNRESERVED UNDESIGNATED 170,983 TOTAL FUND BALANCES 1,490,350 I TOTAL LIABILITIES AND FUND BALANCES $ 1,490,350 I 116 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE PERMANENT FUND FOR THE YEAR ENDED DECEMBER 31,2007 CEMETERY ENDOWED CARE REVENUES: INCREASE TO ENDOWMENT FROM LOT SALES INVESTMENT EARNINGS I TOTAL REVENUES IEXCESS OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): TRANSFERS OUT (Note 5) I TOTAL OTHER FINANCING SOURCES AND USES NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING IFUND BALANCE - ENDING 117 $ 50,652 89,325 139,9771 139,9771 (70,500) (70,500)1 69,477 $ 1,420,873 1,490,350 I CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR PROPRIETARY FUNDS Enterprise Funds The City's enterprise funds are used to account for operations that are financed and operated in a manner similar to private business operations. The goods and services these funds provide to the general public are primarily financed by service charges. Enterprise funds are self-supporting and use the accrual method of accounting. Auburn has three non-major enterprise funds. The Airport Fund - Provides accounting of the activities of the Auburn Municipal Airport. Sources of income for the fund are leases, rentals, fuel charges, investment interest, and grant funding as available. The Cemetery Fund - Accounts for Mountain View Cemetery's operations. The Commercial Retail Fund - Accounts for revenues and expenses related to City-owned or leased property that is rented to commercial tenants. 118 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS DECEMBER 31,2007 TOT AL NON MAJOR COMMERCIAL ENTERPRISE CEMETERY RET AIL FUNDS 710,181 988,467 2,605,691 77,366 3,910 8,968 8,968 719",149 988,467 2,~,W 73,416 73,416 36,641 3,689,984 1,024,112 1,737,398 5,237,684 1,082,094 356,229 6,628,275 141,740 (1,020,635) (1,107,218) (6,075,340) 1,122,212 986,409 9,622,343 1 195,628 986,409 9,695,~ 1,914,777 1,974,876 12,391,693...l 42,085 7,310 58,961 77,365 16,540 18,813 60,000 58,625 7310 215,j1gJ 73,416 73,416 1,925 2,190 499,361 1,812,382 574,702 1,887,988 I 633,327 7,310 2,103,1ll...l 622,851 986,409 7,749,961 658,599 981,157 2,538,606 1,281,450 1,967,566 10,288,5671 AIRPORT ASSETS: CURRENT ASSETS: CASH AND CASH EQUIVALENTS RESTRICTED CASH: CUSTOMER DEPOSITS CUSTOMER ACCOUNTS INVENTORIES TOTAL CURRENT ASSETS 907,043 77,366 3,910 988,319 NONCURRENT ASSETS: LONG-TERM CONTRACTS AND NOTES CAPIT AL ASSETS: LAND BUILDINGS AND EQUIPMENT IMPROVEMENTS OTHER THAN BUILDINGS CONSTRUCTION IN PROGRESS LESS: ACCUMULATED DEPRECIATION TOT AL CAPITAL ASSETS (NET OF AID) 3,653,343 2,476,174 5,189,952 141,740 (3,947,487) 7,513,722 TOT AL NONCURRENT ASSETS 7,513,722 TOT AL ASSETS 8,502,041 LIABILITIES: CURRENT LIABILITIES: CURRENT PAY ABLES CUSTOMER DEPOSITS EMPLOYEE LEAVE BENEFITS-CURRENT GENERAL OBLIGATION BONDS PAY ABLE-CURRENT TOT AL CURRENT LIABILITIES 9,566 77,365 2,273 60,000 149,204 NONCURRENT LIABILITIES: DEFERRED REVENUE EMPLOYEE LEAVE BENEFITS GENERAL OBLIGATION BONDS PAYABLE TOTAL NONCURRENT LIABILITIES 265 1,313,021 1,313,286 TOTAL LIABILITIES 1,462,490 NET ASSETS: INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT UNRESTRICTED TOTAL NET ASSETS 6,140,701 898,850 7,039,551 119 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS NON MAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED DECEMBER 31,2007 TOTAL NONMAJOR COMMERCIAL ENTERPRISE AIRPORT CEMETERY RETAIL FUNDS OPERATING REVENUES: CHARGES FOR SERVICES $ 660,028 $ 740,042 $ $ 1,400,070 INTEREST 2,471 2,471 OTHER OPERATING REVENUE 54,091 54,091 ~TOTAL OPERATjj\jGRE~ENUES 660,028 742,513 : 54,091 : 1,456,632 I OPERATING EXPENSES: OPERATIONS & MAINTENANCE 3,754 599,347 30,265 633,366 ADMINISTRATION 353,821 197,082 2,475 553,378 DEPRECIA TIONiAMORTIZA TION 246,349 78,330 119,327 444,006 OTHER OPERATING EXPENSES 199 9,676 9,875 I TOTAL OPERATING EXPENSES 604,123 884,435 152,067 1,640,625 I .OPERATING INCOME (LOSS) 55,905 (141,922). (97,976) . (183,993)1 NON-OPERATING REVENUE (EXPENSE): INTEREST REVENUE 44,816 40,770 16,581 102,167 OTHER NON-OPERATING REVENUES 109,255 33,592 142,847 GAIN (LOSS) ON SALE OF CAPITAL ASSETS (1,050) (1,050) INTEREST EXPENSE (76,463) (15,336) (91,799) OTHER NON-OPERATING EXPENSES (2,694) (2,694) I TOTAL NON-OPERATING REVENUE (EXPENSE) 76,558 56,332 16,581 149,471 I INCOME (LOSS) BEFORE TRANSFERS 132,463 (85,590) _ (81,395) _ (34,522)1 TRANSFERS IN (Note 5) 70,500 70,500 I CHANGE IN NET ASSETS 132,463 (15,090) (81,395) 35,978 I TOTAL NET ASSETS BEGINNING OF YEAR 6,907,088 1 ,296,540 2,048,961 10,252,589 . 10,288,5671 ITOTAL NET ASSETS END OF YEAR $ 7,039,551 $ 1,281,450 $ 1,967,566 $ 120 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS NON MAJOR ENTERPRISE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31,2007 Page 1 of 2 TOTAL NON MAJOR COMMERCIAL ENTERPRISE AIRPORT CEMETERY RETAIL FUNDS CASH FLOWS FROM OPERATING ACTIVITIES: CASH RECEIVED FROM USERS $ 671,466 $ 742,513 $ 50,825 $ 1,464,804 CASH PAID TO SUPPLIERS (336,456) (357,210) (36,977) (730,643) CASH PAID FOR TAXES (199) (9,676) (9,875) CASH PAID FOR INVENTORY 2,552 2,552 CASH PAID TO EMPLOYEES (21,184) (496,659) (517,843) NET CASH PROVIDED (USED) 208,9951 BY OPERATING ACTIVITIES 313,627 (118,480) 13,848 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: TRANSFERS IN 67,807 67,807 NET CASH PROVIDED (USED) BY NON- CAPITAL FINANCING ACTIVITIES 67,807 67,807 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PROCEEDS FROM SALE OF EQUIPMENT 640,844 640,844 PURCHASE OF CAPITAL ASSETS (133,038) (414,144) (547,182) PROCEEDS FROM OTHER GOVERNMENTS 109,255 109,255 PREMIUM & BOND ISSUANCE COSTS 4,835 4,835 PRINCIPAL PAYMENT ON DEBT (45,062) (45,062) INTEREST PAYMENT ON DEBT (76,463) (15,808) (92,271) OTHER CASH RECEIVED (PAID) 33,592 33,592 NET CASH PROVIDED (USED) FOR CAPITAL 104,011 1 AND RELATED FINANCING ACTIVITIES (140,473)_(396,360) 640,844 CASH FLOW FROM INVESTING ACTIVITIES: INTEREST RECEIVED 44,817 40,770 16,581 102,168 I NET CASH PROVIDED (~) IN INVESTING ACTIVITIES 44,817 40,770 16,581 102,168 I NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 217,971 (406,263) 671,273 482,981 CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR 766,438 1,116,444 317,194 2,200,076 I CASH AND CASH EQUIVALENTS-END OF YEAR $ 984,409 $ 710,181 $ 988,467 $ 2,683,057 I CASH AT END OF YEAR CONSISTS OF: CASH AND CASH EQUIVALENTS $ 907,043 $ 710,181 $ 988,467 $ 2,605,691 RESTRICTED CASH-CUSTOMER DEPOSITS 77,366 77,366 TOTAL CASH $ 984,409 $ 710,181 $ 988,467 $ 2,683,057 I 121 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS NON MAJOR ENTERPRISE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31,2007 AIRPORT Page 2 of 2 TOTAL NONMAJOR COMMERCIAL ENTERPRISE CEMETERY RETAIL FUNDS RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES I OPERATING INCOME (LOSS) ~ 55,905 $ (141 ,922) ~ (97,976)J-(183,993)J ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION ASSET (INCREASES) DECREASES: ACCOUNTS RECEIVABLE INVENTORY LIABILITY (INCREASES) DECREASES: ACCOUNTS & VOUCHERS PAYABLE DEPOSITS PAYABLE WAGES & BENEFITS PAYABLE COMPENSATED ABSENCES PAYABLE TOTAL ADJUSTMENTS 246,349 78,330 119,327 444,006 6,734 6,734 2,552 2,552 (201) (76,282) (4,237) (80,720) 11 ,438 (3,266) 8,172 (64) 4,698 4,634 200 7,410 7,610 257,722 23,442 111,824 392,988 I 313,627 : $ (118,480): $ 13,848 $ 208,995 I ffiETC'"ASiiPRO\7itiE-D(CjSETDTBVQpYRATfNGA'CTi\7]TrES $ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES CAPITAL ASSETS ACQUIRED BY CONTRIBUTED CAPITAL $ INCREASE (DECREASE) IN FAIR VALUE OF INVESTMENT $ $ $ TOTAL NON CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES $ $ $ $ -I 122 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR PROPRIETARY FUNDS Internal Service Funds The City of Auburn's internal service funds are used to account for the financing of goods and services provided by one department of operation to other departments on a cost reimbursement basis. Internal service funds are self-supporting and use the accrual method of accounting. Auburn has three internal service funds. The Insurance Fund - Provides a source of funds to pay unemployment claims and property and casualty claims which fall below deductible levels. The Information Services Fund - Accounts for the costs of purchasing and maintaining the City's various computer and telecommunications systems. The Equipment Rental Fund - Accounts for the costs of purchasing, maintaining, and operating Auburn's fleet of vehicles and related equipment. 123 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES 124 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED DECEMBER 31,2007 INFORMATION EQUIPMENT INSURANCE SERVICES RENTAL TOTAL OPERATING REVENUES: CHARGES FOR SERVICES $ $ 4,155,900 $ 2,935,930 $ 7,091,830 OTHER OPERATING REVENUE 100,000 64,171 164,171 TOTAL OPERATING REVENUES 100,000 : 4,220,071 2,935,930 : 7,256,0011 OPERATING EXPENSES: OPERATIONS & MAINTENANCE 3,294,554 1,450,742 4,745,296 ADMINISTRATION 241,000 73,936 555,228 870,164 DE PRE CIA TIONiAMORTIZA TION 280,581 817,259 1,097,840 TOTAL OPERATING EXPENSES 241,000 3,649,071 2,823,229 6,713,300 . OPERATING INCOME (LOSS) (141,000) _ 571,000 112,701 542,7011 NON-OPERA TING REVENUE (EXPENSE): INTEREST REVENUE 113,901 163,297 259,447 536,645 OTHER NON-OPERATING REVENUES 7,848 7,848 GAIN (LOSS) ON SALE OF CAPITAL ASSETS (15,305) (442,194) (457,499) TOTAL NON-OPERATING REVENUE (EXPENSE) 113,901 147,992 (174,899) 86,994 . INCOME (~) BEFORE CONTRIBUTIONS & TRANSFERS (27,099) . 718,992 (62,198) _ 629,6951 CAPITAL CONTRIBUTIONS 549,892 549,892 TRANSFERS IN (Note 5) 15,000 15,000 TRANSFERS OUT (Note 5) (1,007,000) ~ (1,007,000) I CHANGE IN NET ASSETS (27,099) _ 733,992 (519,306) _ 187,5871 TOTAL NET ASSETS BEGINNING OF YEAR 2,742,617 3,028,076 9,909,165 15,679,858 lTOTAL NET ASSETS END OF YEAR $ 2,715,518 $ 3,762,068 $ 9,389,859 $ 15,867,4451 125 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 Page 1 of 2 INFORMA TION EQUIPMENT INSURANCE SERVICES RENTAL TOTAL CASH FLOWS FROM OPERATING ACTIVITIES: CASH RECEIVED FROM USERS $ (15,612) $ 4,178,270 $ 2,935,930 $ 7,098,588 CASH PAID TO SUPPLIERS (203,196) (1,655,592) (807,045) (2,665,833) CASH PAID FOR TAXES (37,804) (37,804) CASH PAID FOR INVENTORY (611,956) (611,956) CASH PAID TO EMPLOYEES (1,539,116) (560,548) (2,099,664) OTHER CASH RECEIVED (PAID) 100,000 100,000 NET CASH PROVIDED (USED) 1 ,783,331 1 BY OPERATING ACTIVITIES (lli!,612) 983,562 956,381 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: TRANSFERS IN 15,000 15,000 TRANSFERS OUT (1,007,000) (1,007,000) NET CASH PROVIDED (USED) BY NON- (992,000)J CAPITAL FINANCING ACTIVITIES 15,000 (1,007,000) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PROCEEDS FROM SALE OF EQUIPMENT (15,305) 53,711 38,406 PURCHASE OF CAPITAL ASSETS (418,401) (654,356) (1,072,757) SALE OF FIXED ASSETS (380,001) (380,001) PROCEEDS FROM INSURANCE SETTLEMENT 365 365 NET CASH PROVIDED (USED) FOR CAPITAL (600,280)~(1,413,987)J AND RELATED FINANCING ACTIVITIES (813,707) CASH FLOW FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF INVESTMENTS 1,497,344 993,125 964,200 3,454,669 PURCHASE OF INVESTMENTS (1,000,000) (1,000,000) INTEREST RECEIVED 113,901 166,011 256,791 536,703 I NET CASH PROVIDED (~) IN INVESTING ACTIVITIES 1,611,245 1,159,136 220,991 2,991,372 I NET INCREASE (DECREASE) IN CASH AND 2,368,7161 CASH EQUIVALENTS 1,454,633 1,343,991 (429,908) CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR 1,260,885 1,713,478 4,888,853 7,863,216 I CASH AND CASH EQUIVALENTS-END OF YEAR $ 2,715,518 $ 3,057,469 $ 4,458,945 $ 10,231,9321 CASH AT END OF YEAR CONSISTS OF: CASH AND CASH EQUIVALENTS $ 2,715,518 $ 3,057,469 $ 4,458,945 $ 10,231,932 ITotA[ CASR $ 2,715,518 $ 3,057,469 : $ 4,458,945 : $ 10,231,9321 126 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 Page 2 of 2 INSURANCE INFORMA TION SERVICES EQUIPMENT RENTAL TOTAL RECONCILIATION OF NET OPERATING INCOME TO NEW CASH PROVIDED BY OPERATING ACTIVITIES r6PERATING INCOME (~) $ (141,000) $-571,000 $ 112, io'1-$-542,"i011 ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION ASSET (INCREASES) DECREASES: ACCOUNTS RECEIVABLE INVENTORY 280,582 817,259 1,097,841 3,870 (41,801) 13,370 (24,561) (34,619) (34,619) (19,482) 152,983 80,748 214,249 21,634 (143) 21,491 (836) (32,935) (33,771) (15,612) 412,562 843,680 1,240,630 I (156,612) $ 983,562 ~ $ 956,381 ~ $ 1,783,331 1 $ $ 549,892 $ 549,892 1,250 1,250 $ $ 551,142 $ 551,1421 LIABILITY (INCREASES) DECREASES: ACCOUNTS & VOUCHERS PAYABLE WAGES & BENEFITS PAYABLE COMPENSATED ABSENCES PAYABLE ~T5TAL'ii'DJITSTiiiiENTS rNET"CASA"PROVIDED-(OSEDtByIOPERATING-f(CTIVITI ES- $ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES CAPITAL ASSETS ACQUIRED BY CONTRIBUTED CAPITAL $ INCREASE (DECREASE) IN FAIR VALUE OF INVESTMENT TOTAL NON CASH IN~ESTING, CAPITAL AND FINANCING ACTIVITIES $ 127 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES 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. 128 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES CITY OF AUBURN, WASHINGTON STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND FOR THE FISCAL YEAR ENDED DECEMBER 31,2007 BALANCE BALANCE I 1/1/2007 ADDITIONS DEDUCTIONS 12/31/2007 ASSETS: CASH AND CASH EQUIVALENTS $ 825,631 $ 4,235,022 $ 2,857,140 $ 2,203,513 OTHER CURRENT ASSETS 3,618 8,991 8,625 3,984 DUE FROM OTHER GOVERNMENTAL UNITS 399 394,508 399 394,508 TOTAL ASSETS $ 829,648 $ 4,638,521 $ 2,866,164 $ 2,602,005 1 LIABILITIES: DUE TO OTHER GOVERNMENTAL UNITS $ 829,648 $ 4,638,521 $ 2,866,164 $ 2,602,005 ITOTALCIABI elTl E'S $ 829,648 : $ 4,638,521 :$ 2,866,164 : $ 2,602,005 I 129 CITY OF AUBURN: 2007 CAFR FUND FINANCIAL STATEMENTS AND SCHEDULES * * * * * MORE THAN YOU IMAGINED 130