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HomeMy WebLinkAbout1 - Introduction ~ ~ ~ ~ CITY OF AUBURN ~ WASHINGTON ' COMPREHENSIVE ANNUAL ~ FINANCIAL REPORT Fiscal Year January 1, 2001 Through, December 31, 2001 ~ A ~ ' Prepared by ' . Department of Finance , Shelley Coleman, Finance Director ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Af- , e . , „ . . . . ~ - . ~ . . . ,.v = . b 90 . ~ ~ ~ ~ ~ CITY_ OF AUBURN: 2001 CAFR TABLE OF CONTENTS ~ COMPREHENSIVE ANNUAL FINANCIAL REPORT ,i For the Year Ended December 31, 2001 TABLE OF CONTENTS ~ Statement . Reference Page ~ I. INTRODUCTORY SECTION Title Page Table of Contents i ~ City Officials 1 Organizational Chart (City and Council Committees) 2 Letter of Transmittal 3 Certificate of Achievement 21 ~ II. FINANCIAL SECTION ~ Auditor's Report 23 COMBINED FINANCIAL STATEMENTS - OVERVIEW (General Purpose Financial Statements) , Combined Balance Sheet: All Fund Types and Account Groups 1 26 Combined Stafement of Revenues, Ezpendifures, and Changes in Fund Balances: All Governmental Fund Types and Expendable Trust Fund 2 30 Combined Statement of Revenues, Expenditures, and Changes in ~ Fund Balances - Budget and Actual Gene[al and Special Revenue Funds 3 32 Combined 8tatement of Revenues, Expenses, and Changes in Fund Equity ~ All Proprietary Fund Types and Similar Trust Fund 4 34 Combined Statement of Net Plan Assets Combined Statement of Cash Elows ~ All Proprietary Fund Types and Similar Trust Funds 5 35 Statement of Changes in Net Plan Assets 6 37 Notes to the Financial Statements 7 39 ~ SUPPLEMENTARY DATA (Financial Statements and Schedules of Individual Funds and Account Groups): General Fund: ~ Comparative Balance Sheet 67 Comparative Statement of Revenues, Expenditures, and Changes in Fund Balances 68 ~ Comparative Statements ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual 69 Special Revenue Funds: Combining Balance Sheet 72 ~ Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 74 Combining Statement of Revenues, Expenditures, ~ and Ghanges in Fund Balances - Budget and Actual 76 Debt Service Funds: Combining Balance Sheet 83 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 84 , Page i ' ~S CITY OF AUBURN: 2001 CAFR TABLE.OF CONTENTS ~ ~ Capital Projects Funds: Gombining Balance Sheet 85 Combining Stafement of Revenaes, Expenditures, and Changes in Fund Balances 86 Enterprise Funds: ~ Combining Balance Sheet 88 Combining Statement ofRevenues, Expenses, and Changes in Fund Equity 90 Combining Statement of Cash Flows 92 Internal Service Funds: Comb.ining Balance Sheet 97 Combining Statement of Revenues, Expenses, and Changes in Fund Equity 98 ~ Combining Statement of Cash Flows 99 Fiduciary Funds: Combining Balance Sheet 102 ~ Nonexpendable Trust Fund - Combining Statement of Cash Flows 104 Combining Statement of Changes in Assets and Liabilities - All Agency Funds 105 Comparative Statement of Net Plan Assets 106 ~ Comparative Statement of Changes in Net Plan Assets 107 General Fixed Assets Account Group: Comparative Schedule of General Fixed Assets by Sources 109 Schedule of General Fixed Assets by Function 110 ~ Schedule of Changes in General Fixed Assets by Function and Activity 111 III. STATISTICAL SECTION ~ General Govemmental Revenues and Expenditures 1 114 Ten Years' PropertyTax Data 2 118 Ratio of Net General Bonded Debt 3 120 ~ Computation of Legal Debt Margin 4a 121 Computation of Net Direct and Estimated Overlapping Debt 4b 121 Ten Years' Debt Service to General Expenditures Ratios 5 122 ~ Ten Years' Utility Revenue Bond Coverages 6 123 Ten Years' Special Assessment Gollections 7 124 Ten Years' Population and Housing Trends 8 125 Employment in Auburn g 126 ~ Taxable Retail Sales by Sector 10 1_27 Principal' Taxpayers 11 128 Ten Years' Building Permits and Construction Values 12 129 ~ Ten Years' Stafring Levels by Department 13 130 Police Department Statistics 14 131 Fire Department Statistics 15 132 Parks and Recreation Statistics 16 133 ~ Proprietary Funds-Working Capital 17 134 Assessed Value by Type 18 135 Miscellaneous Statistics 19 136 ~ ~ a Page ii ~ ~ ~ r ~ CITY OFFICIALS MAYOR Pete Lewis q ~ ~ ~ CITY COUNCIL ~ ~ ~ ~ Jeanne Barber Trish Borden Stacey Brothers ~ ~ ,fY d i' S 1 Gene Cerino Fred Pce Sue Singer Rich Wagner ~ DEPARTMENT HEADS Finance Director Shelley Coleman ~ City Attorney Dan Heid Parks Director Daryl Faber Fire Chief Bob Johnson Police Chief Jim Kelly ~ Public Works Director Christine Engler Planning Director Paul Krauss Director of Human Resources 8 Risk Management Brenda Heineman ~ ~ CITY OF AUBURN:2001 CAFR ORGANIZATION ~ ~ CITIZENS ~ - ~ F JUDGE MAYOR CITY COUNCIL ~ Patrick Pete Lewis Burns ~ ADMINISTRATIVE PUBLIC PUBLIC PUBLIC WORKS SERVICES SERVICES SAFETY . Christine Engler ~ PARKS & pLqNNING POLICE FIRE RECREATION . Daryl Faber Paul Krauss Jim Kelly Bob Johnson FINAN E HUMAN LEGAL ~ C RESOURCES Shelley Coleman Dan Heid Brenda Heineman ~ COUNCIL COMMITTEES ~ FINANCE COMMITTEE MUNICIPAL SERVICES , Fted Poe, Chairperson Sue Singer. Chairperson Trish Borden `Rich Wagner ~ Gene Cerino Stacey Brothecs PLANN/NG 8 COMMUNITY DEVELOPMENT PUBUC WORKS ~ Trish Borden, Chairperson Rich Wagner, Chairperson Sue Singer Fred Poe Stacey Brothers Gene Cerino ~ ~ ~ ~ Page 2 ~ 1 , I ~ Q~ ~(nG~4l~lGL Telephone: 253.931.3000 ~ 25 W MAIN ST • AUBURN WA • 98001-4998 FAX:253.288.3132 June 14, 2002 ~ Peter B. Lewis Mayor Mayor, City Council, and Citizens of the City of Aubum: ~ Jeanne Barber This correspondence transmits to you the City of Auburn's Comprehensive Annual Mayor Pro-Tem Financial Report (CAFR) for the fiscal year ended December 31, 2001. This ~'IYish Borden transmittal letter provides an overview of the report and the fnancial condition of the City. It also provides insights into the history of the City and the economic conditions Council Member affecting it, and describes the systems and controls employed by the Finance Department. The report is prepared in accordance with the Revised Code of ~ Stacey Brothers Washington (RCW) 43.09.230. Council Member The Comprehensive Annual Financial Report has several significant uses. First, it ~ Gene Cerino provides a general overview of the City's finances to the general public and taxpayer. Gouncil Member Second, it is referenced by bond buyers and rating agencies to evaluate the City's fiscal stability and creditworthiness. Finally, the CAFR is sets of financial statements Fred Poe that have been audited by the State Auditor's Office and provide assurances that ~ Council Member assets are safeguarded and funds are expended as they were legally appropriated in the annual budget. Sue Singer ~ CouncilMember 1• INTRODUCTION Rich Wagner A. MANAGEMENT REPRESENTATION ~ Council Member The Auburn Finance Department prepared the report and accepts complete responsibility for the accuracy, completeness and fairness of presentation of the information included. The data is believed to be accurate in all material respects, ~ Mayor's Office and it is believed that all significant information necessary for an understanding of 253.931.3041 the affairs and financial condition of the City has been disclosed. The report has Finance been prepared in conformance with Generally Accepted Accounting Principles 253.931.3033 (GAAP) and in conformance with financial reporting standards issued by the ~ Governmental Accounting Standards Board (GASB). Pazks & Recreation 253.931.3043 g QRGANIZATION OF THE REPORT ~ Public Works The report is divided into three sections: the Introductory Section, the Financial 253.9313010 Section, and the Statistical Section. The Introductory Section contains the table of contents, a list of the City's principal officials, an organizational chart, this letter of ~ City Attomey transmittal, and the Certificate of Achievement for Excellence in Financial Reporting 253.931.3030 from the Goyernment Finance Officers Association of the United States and Canada for the 2000 CAFR. ~ City Clerk 253.931.3039 The Financial Section contains the Washington State Auditor's Report, the General Purpose Financial Statements (GPFS), significant notes and schedules, and the Human Resources combining and individual fund comparative statements and schedules. The GPFS, ~ 253.931.3040 together with the notes, provide an overview of the City's financial position, operations and cash flow results. The combining and comparative statements and Planning & Community schedules are more detailed and present financial information reported by individual Development funds as required by law and sound financial management. ~ 253.931.3090 The Statistical Section contains a range of statistical tables and charts that present Police various financial, economic, social, and demographic data about the City. This ~ 253.931.3080 information depicts various trends that have affected the fiscal condition of the City Fire over the last 10 years. 253.931.3060 ~ Page 3 CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ C. REPORTING ENTITY ~ The City of Auburn was incorporated in 1891 and currently operates as a noncharter Code City ~ under the laws of the State of Washington. Code City status in Washington provides "home rule" . authority to cities. The City has a Mayor/Council form of government, and the Mayor is the administrative head of the city government. The City Council is the legislative body for the City. ~ The City administration is composed of eight departments that report to the Mayor. The City is located primarily in southern King County (county seat, Seattle) and a small northeastern portion of Pierce County. They are the two most populous counties in the State of Washington, comprising over 40% of the population. The City is strategically located in relation to the labor and consumer markets of the two largest cities in the area: Seattle in King county and - Tacoma in Pierce county. Auburn currently serves approximately 45,000 people within its incorporated limits as well as over 37,000 people in adjacent unincorporated areas. ~ The City began as a small rural community based on agriculture and the railroad, which maintained a significant switching and repair facility in Auburn. The City has grown significantly ~ since World War II, both as a residential community and as a commercial and induStrial area. The City has become a significant area for automobile sales and has also developed a significant r manufacturing and distribution base with the largest employer being The Boeing Co., which employs over 7,900 people in its Auburn facility. Boeing is a worldwide supplier of aircraft and ~ related products. The City's assessed valuation for 2001 property tax collection was $3,725,634,388. The City provides a wide range of services to its residents as well as to the adjacent area. These ' services include police and fire protection, parks, land use management, development regulation, street construction and maintenance, water services, sanitary sewage collection, storm drainage management, solid waste collection, a general aviation airport, a. municipal cemetery and a golf ~ course. The City currently employs approximately 430 people. The City continues to implement the Growth Management Act that was enacted by the Washington State Legislature in 1990 to strengthen local governments' ability to manage growth. The comprehensive plan, adopted by ~ Auburn in 1986, has been amended and updated annually since 1994. The comprehensive plan 9uides the phYsical development of the communitY. Other governmental agencies also provide services to the City of Auburn and the surrounding ~ area. They include The Aubum School District, Green River Community College, King County Metro (a county agency which provides transportation), King County Wastewater Treatment (sewage treatment services), the King County Housing Authority, and the King County Library System. Recently, a new government agency was formed, Sound Transit. Sound Transit is responsible for providing light rail transit service in the Puget Sound area from Everett to Olympia. Auburn has been designated as one of the four "First Start" projecfs for the commuter rail component of the transit plan. The Auburn rail station was completed and began serving the ~ citizens in September 2000. A multi level parking garage was completed late 2001 and further _ enhancements such as a sky bridge and commons area are scheduled for completion in 2003. II. ECONOMIC CONDITION ~ A. SUMMARY OF LOCAL ECONOMY The economy of the City of Auburn is diversified and has significant strength. Although the ~ economy 'is reflective of the region in which it is located and subject to regional and national economic cycles, Auburn's diversity and steady growth has protected it substantially from severe cycles. Note the 10-year summaries of general government revenues and assessed valuation , set forth as follows - ~ Page 4 ~ ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL GENERAL GOVERMdENiREVENUES i $60.000.000 $50.000,000 , $40,000,000 $30.000,000 $20.000.000 ~ $,o,006,~ ~ 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 i ~ ~ TOTAL ASSESSED VALUE (In Thousands) $4,000,000 ~ $3,000,000 $2,000,000 ~ $1,000,000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 ~ ~ Auburn has enjoyed steady residential and industrial growth over the years as development has moved outward from the major cities. The City currently has a growing array of manufacturing facilities, as well as distribution, wholesaling, and retailing operations. Aubum Regional Medical Genter, also located in Auburn, serves the local geographic area and is a major trauma center of ~ the northwest. Several of Boeing's manufacturing and other facilities are located in the Green River Valley in the cities of Renton, Kent, and Auburn,. all of which are within easy commuting distance for city ~ residents. The plant in Auburn is the company's fabrication plant that supplies the commercial air fleet with spare parts. As such, the Auburn plant is less subject to the production variability that has characterized the employment levels in many of the company's plants over the years. Many ~ of the city's manufacturing jobs (Figure 9: Statistical Section) are at this plant, and the plant fumished 18.45% of the assessed value of the city (Figure 11: Statistical Section). Boeing recently announced that 105 acres of the Auburn plant would be sold as they downsize their presence in the Puget Sound Area. ~ Auburn also has a significant retailing base, and in addition to maintaining its downtown core businesses, has attracted significant retailers such as Fred Meyer, Office Max, Men's ~ Wearhouse, Wal-Mart, Sam's Club and Lowes who have constructed major new facilities in Auburn in recent years. The SuperMall of the Great Northwest, a major destination mall, was completed in 1995. Ancillary mall development is planned, as several prime sites are available for building. Development that has taken place over past years includes a 17-screen movie ~ Page 5 ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ theater and a restaurant. Currently, other businesses are studying the viability of building near ~ the SuperMall. Auburn has aiso been a center for automobile sales for a number of years, drawing customers from a wide area. In 2001, close to 42% of the retail sales in the City were from automobiles and related products,and services. In 2001, the City received $13,264,607 in ~ sales taxes, less than a half of a percent increase over 2000. The following graph depicts annual collections over the past ten years. ~ TOTAL ANNUAL SALES TAX $15,000,000 ~ $10,000,000 $5,000,000 R -N°'41b N°'06 2 2 The overall increase the Past Year has been dismal when comPared to the Previous four Years ~ that had significant increases ranging from 5.3% to 12.3%. During the past ten years, Auburn has enjoyed sales tax revenue growth annually ranging from 2.1 % to 12.3%. Four of the years ~ during this time #he City experienced sales tax growth in the double digits. The City is now feeling the effects of a recession coupled with the effects of State law changes on what can ,be taxed. During the 1996 legislature; the sales tax law was changed to exempt from sales taxes all ~ activities and goods used in the manufacturing process. It has been difficult to determine the exact impact due to some accounting changes negotiated with the Department of Revenue that were phased in through the year 2001. This law change was significant and it is now obvious and reflected in tax revenues. Estimates of up to a 20% annual drop in sales tax revenues are not ~ unrealistic. These changes, combined with the increases in the local and national economy, have enabled ' the City to continue with the existing level of service. However, due to the recession, the City has had to limit new programs and the expansion of existing ones. The City has recently expanded senrices in Code Compliance and jail services to offset costs in other areas. The expansion of`jail services has been fueled by lengthier incarceration periods required by law and increased jail ~ costs. _ Losses in sales tax revenue have negatively impacted City revenue. The overall upward trend of ~ the Aubum economy has stalled and it is uncertain when growth is expected to resume. Like most economies, it has been cyclical to some extent, following the general cycles that affect the entire area from Boeing in particular, which has by far the biggest influence on the overall region. The growth cycle started in the mid-1970's as Boeing recovered from a devastating downward ~ trend when an employment reduction of up to 75% was necessary. Economic growth was dramatic through the early 1980's when it slowed putting a serious strain on city operations, which had been expanded considerably during that period. Once again, after the September 11 ~ terrorists' attacks, Boeing announced staff reductions company wide. In the worst case scenario, up to 20,000 jobs could be lost in the Puget Sound area. Locally, in Auburn, over 1500 - fabrication operation jobs were cut by the end of the year. There will be more jobs lost in 2002. Construction was completed on Emerald Downs in the summer of 1996, a major thoroughbred ~ horse racing facility in Auburn, to replace Longacres - the area's former racing facility located in Renton; Washington. The addition of the Thoroughbred Breeders Association headquarters was ~ Page 6 ~ ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ completed in 1998. Emerald Downs also provides facilities for meetings, banquets and seminars. Another major gambling facility on the Muckleshoot Indian Reservation, which abuts Auburn, ~ opened in 1995. In 1999, and again in 2001, the facility was expanded for additional gambling and entertainment. The most recent expansion included a 24-hour family restaurant. The tribe also plans to open the White River Amphitheater, a 25,000 seat outdoor facility. The project has currently undergone an environmental impact review. The total impact of this facility on the City ~ is not known at this time but it is anticipated there will be an increased demand for public safety and the transportation impact will be large as the main arterial accessing this site goes directly through the City. ~ The economy has generally been strong since the late 1980's although recessionary conditions did prevail in 1991, 1992 and again, now, in 2001 and 2002. The City has been operated consenratively and has been able to maintain high levels of service without tax increases or ~ significant erosion of surplus. Since the mid-1980's the area's economy has enjoyed considerable diversification, reducing past dependence on Boeing. At one time, Boeing had accounted for close to 50% of the assessment base. , Despite the economic cycles, the City has continually focused on enhancement of the quality of life in the community. In recent years, through strategically placed bond issues and conservative operations, parks have been expanded, streets improved, commercial and residential sidewalks ~ have been improved or upgraded, a building advantageously acquired for new police facilities and a municipal court established. In 1997, #he voters elected to annex to the King County Library System. The System completed construction of a new library in the City early in 2000. The City has contributed $4 million towards the project with general obligation bonds. In 2001, the City j completed construction of a new Senior Center at the Les Gove park campus. The campus hosts the Library, White River Museum, and Senior Center. ~ B. MAJOR INDUSTRIES Figure 11 of the Statistical Section lists the ten largest taxpayers in the city. As noted above, Boeing is the largest by a very substantial margin. The other nine listed represent a diversified ~ range of moderate-sized economic activities, illustrating the diversified character of the economy. These firms include health, retail services, utilities, transportation and development. In addition to the largest companies, firms located in the community include several recently developed ~ transportation and distribution firms, a boat manufacturing company, several food processing plants, and machine shops. ~ C. FUTURE ECONOMIC OUTLOOK The outlook for 2002 and beyond is guarded. The general economy in the country and the region has been slow. Boeing had been steadily increasing employment in Auburn over the past ~ several years, however, over the past two years the company has had to streamline costs and employment levels have decreased as a result. The long-term future of the aircraft business is expeeted to remain healthy because management does not hesitate to implement cost saving and control measures when needed. However, the long-term presence of Boeing in the Puget ~ Sound area is unknown. Boeing moved the corporate headquarters last fall from their long time Seattle location to Chicago. The company is further dissatisfied with the inability of the State to solve transportation issues in the area. Auburn has encountered unprecedented development ~ that will make fhe local economy less dependent on Boeing. Significant projects are listed below: • At its completion, the SuperMall of the Great Northwest is expected to encompass 1.6 million square feet of shopping, employ 4,200 people and generate $350 million in sales. ~ Phase one, the mall itself, was completed in 1995. Phase II, the planned western portion of the mall has not yet begun and there are no immediate plans to proceed. Phase III, the ancillary development, is 25% complete with the construction of a restaurant and the ~ 17-screen cinema. ~ Page 7 CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ ~ • During the spring of 1998, the City annexed property in the abutting County. The annexation is a 240-acre development with 3400 residential units and commercial sites ~ planned. A 450-acre annexation with 2,500 residents on Lea Hill occurred in February of 2000. o The City issued 204 new single-family home permits and 12 multi-family permits in 2001. ~ In addition, 21 new commercial and industrial permits were issued. A new retail site known as the "Auburn Market Place" began construction late 1999 and is a prime retail. location. New retailers at this site are Lowe's Hardware, Kids Country, a new bank, a ~ medical facility, and sites for other retailers. The local tax base is expected to continue growing each year, but it is uncertain whether growth will increase enough to cover existing labor contracts and the cost of living. In November 2001 the citizens of the State voted in initiative 747 which limits the increase in property taxes to the lesser of 1% or the rate of inflation. With declines in sales tax growth and a slowing of new ~ housing starts, Auburn may have to limit programs unless reserve funds are available. It is anticipated reserves will be used first to support existing programs. Presently, the City will budget cautiously until the amount and timing of revenues becomes evident. The extension of the jurisdiction of the Corps of Engineers in the late 1980's to wetlands within , the City has constrained the development of some of the City vacant industrial sites. This situation affects Auburn because much of the City is on relatively flat terrain adjacent to the ~ Green River. The City's Planning Department had conducted a program to identify these wetlands and to work out a mitigation program to balance their protection with the City's economic development objectives. Nonetheless, while many vacant industrial sites may be limited by the presence of these wetlands, there are also many major developing industrial parks ~ that are not substantially affected by this constraint. III. MAJOR INITIATIVES ' The Comprehensive Annual Financial Report has many purposes. It represents clearly the financial health of the City. An independent reviewer also audits it, so it also speaks to the City's financial management. The CAFR should also illustrate where the expenditures were made and ~ how they accomplished the significant priorities as established annually by the City Council. Each year, during the budget process, the Mayor and City Council, with the support of the City staff, hold extensive goal-setting sessions to review and refine City goals for the coming year. As ~ a first step in this process, the City's Vision and Mission Statements are reviewed and discussed. During the second phase, these statements are used as an overall framework to establish specific goals and objectives for the coming year. The goals and objectives are designed to be specific, measurable and realistic. Individual department heads are responsible for the ~ development of detailed work plans and the accomplishment of the goals. These work plans thus become the basis for the departmental budgets for the coming year. Throughout the year, Department Heads report regularly to the Mayor concerning the status of their assigned goals. At mid-year, Department Heads prepare formal reports on the progress towards completion of their ~ assigned goals. Any changes in strategy to accomplish these goals are addressed at this time. At year-end, Department Heads make another full report to the Mayor and Council concerning the year-end status.of their department's assigned goals. ~ ~ ~ Page 8 ~ ~ CITY OF AUBURN• 2001 CAFR LETTER OF TRANSMITTAL The City's Vision Statement along with the Mission Statement reflecting Auburn's current economic development conditions are set forth below: ~ AUBURN'S VISION FOR THE FUTURE: As a city of regional significance, proud of its small town heritage as well as the diversity of its ~ peop/e and neighborhoods, Auburn offers an opportunity for people of all ages to enjoy life. CITY OF AUBURN MISSION STATEMENT: ~ To provide a service-oriented govemment that meets the needs of our citizens and business community through efficient and professional management with responsive and accessi6le ~ leadership. These statements are a guiding force in the accomplishment of citywide goals and objectives as described in this section. Major 2001 initiatives, whether ongoing or completed, are organized ~ below, under the structure used for development of the 2001 citywide goals. A. ASSURE PUBLIC SAFETY FOR CITIZENS OF AUBURN. ~ During 2001, the Police Department maintained National Accreditation. To maintain this accredifation, the police department had to comply with a set of standards established for police agencies by a national committee. The department will continue to comply with these standards , and be monitored for such compliance. The department continued the Community Policing Program using training and education. Police ~ visibility was increased via bike patrol officers in the downtown area. The department continued eommunity education by providing special training to landlords and tenants on evictions for narcotic activity. Other projects, to list a few, included: completion of the laptop reporting system, that facilitated timely processing of police reports; completed renovation of the jail including the ~ installation of a new video surveillance system; installed video recording systems in each patrol vehicle; prepared a staffing contingency plan for 2002 in anticipation of increases in population demands; continuation of police services to Muckleshoot Tribal members within the City limits; ~ and fraineci personnel and placed a Heartstart defibrillator in each first responder vehicle. Police personnel received additional training in Community Policing, especially in the aspects of team building within the Police Department and within the community. Police personnel ~ participated in the Aubum Citizen's Police Academy, Block Watch, and Bicycle Patrol Unit. A school violence training and awareness program was developed and implemented with the Aubum School District. Installation of block watch signs continued throughout Auburn ~ neighborhoods. As a result of these. programs, there was an increase in the Volunteer Program and the implementation of the Citizens on Patrol Program. The Fire Department provides services designed to protect the lives and property of the ~ inhabitants of the City from the adverse effects of fires, sudden medical emergencies or exposure to dangerous conditions created by either man or nature. The fire department is responsible for . that part of the fire prevention and investigation, emergency medical services, hazardous material response, disaster senrices and public fire prevention activities. 1 buring 2001, the Fire Department accepted delivery ofi one replacement fire engine, submitted fire station location recommendations for.Council consideration, prepared to take over fire service ~ to the annexed area of Lea Hill, upgraded fire engines to 5 inch supply hoses, upgraded all heavy rescue equipment and rewrote and updated 100 pages of the 150 page emergency management plan. ~ ~ Page 9 CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ B. CONTINUE TO PROVIDE BASIC GOVERNMENT SERVICES ~ General government functions are provided and administered in the General, Special Revenue, Debt Service, and Capital Projects Funds. ~ These funds share general revenue sources and include basic government services: publie safety, parks and recreation, planning and zoning, municipal court, street maintenance and ~ construction, and associated administrative and support services. Accomplishments in 2001 included: initiated implementation efforts on the downtown ~ revitalization plan; revised the Zoning Ordinance to support downtown redevelopment; completed the Sensitive Areas Plan; implemented a joint housing repair program with the City of Kent to improve response time, decrease costs, and serve Auburn households; completed a 600 car pa.rking garage and retail space with Sound Transit; assisted by a citizen task force, developed ~ recommendations for a proposed community center; and completed phase II Pierce County annexation. Parks and recreation programs focused on providing a variety of facilities and programs for ~ residents of all ages and interests. The department works closely with the Auburn School District; Green River Community College and other cultural and youth serving agencies in Auburn to provide facilities and services to citizens. Programs, in coordination with the school district, such ~ as the "Teens in Leadership Training" and the "Reaching out Fair" are two programs provided in 2001. The school district and the City have also joined together, along with the YMCA, to - develop the late night and after school programs. These programs are highly popular and well attended by the youth of the City. ~ Other services provided for citizens include the continuation of essential human service programs; began automated bill paying systems for utility customers; and explored options for ~ online services to City of Auburn citizens. C. ENCOURAGE APPROPRIATE AND ECONOMICALLY SOUND DEVELOPMENT AND ~ ASSURE THE INFRASTRUCTURE NECESSARY FOR ITS SUPPORT. The City implemented an interlocal agreement with King County establishing potential annexation ~ area boundaries. Other interlocal coordination resulted in water and sewer franchises with the City of Pacific and Pierce County. The City continued negotiations with the Muckleshoot Indian Tribe to resolve issues for sewer service to City trust properties and provided a comprehensive sanitary sewer update to King County for the Lea Hill service area. ~ Several major utility improvements are currently under construction that will upgrade and e.xtend existing facilities. Improvements include, but are not limited to: beginning construction of the ~ Corrosion control Treatment Facilities; Finalized the 2001 water comprehensive plan; completed design of the East Valley Highway pipe line; converted all large vault meters to be read remotely; completed design and construction of sewer extension into developed, but unsewered resiciential areas; and rehabilitation of the Brannan Park bio swale. ~ The City's Comprehensive Transportation Plan continued to be a priority of the Public Works Department and the six-year street plan was updated for 2001. In addition, the City began collecting transportation impact fees mid 2001 on projects that impact existing infrastructure. , Fees will be used on projects that will mitigate the impact of growth on the transportation system. Coordination, design and right-of way acquisition of a major arterial grade separation, 277th Street, continued. The construction on another major grade separation, 3`d street, is well ~ underway with completion scheduled mid 2002. The estimated total cost of these two projects alone is approximately $72 million. Federal, State, and other local governments in the area are providing a large portion of the funding. ~ Page 10 ~ ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ The six-year capital facility plan was developed in 1998. Generally, the plan reflects the ~ proposed new capacity, replacement, and rehabilitation of capital facilities and financing for six years (1998 - 2003). This plan takes into account the general planning goals and policies, as well as land use infrastructure requirements, identified in longer range planning documents. The plan was updated in the 1999 and 2000 budgeting process with no significant changes noted in ~ the 2001 budget process. The plan was in the process of being updated in late 2001. D. IMPROVE QUALITY OF LIFE FOR AUBURN CITIZENS ~ The City continues to plan and develop park and recreation facilities. The new Senior Center was completed and opened in 2001. Other projects include completion of a linear park in Lakeland; completed design and construction of a 15-acre community park in Lakeland; completed Brannan ~ park field #1 lighting improvements; and completed Phase II improvements at the White River Valley Historical Museum. The cemetery completed development of Section #9 Phase II creating additional ground burial and upright marker sections. Cemetery also completed a master site plan for a niche mausoleum. The Auburn golf course rebuilt the 6'h green and installed a cart ~ path on the entire length of the 6th hole. Trees were planted and a plan developed to finance construction of a new clubhouse and parking facilities. 1 This past year, the Auburn Airport installed a new pilot guidance and safety instrument approach system, Super Unicom. Ground leases were negotiated for private section development and security fencing was installed on the western boundary. ~ E. PROVIDE SOUND ADMINISTRATION OF ALL CITY PROGRAMS AND AFFAIRS In 2000 the City's Finance Department again worked to receive the Certificate of Achievement for ~ Excellence in Financial Reporting from the Government Finance Officer's Association (this award has been received every year since 1987). All funds have been undergoing monitoring by the - Finance DepartmenY for problems and inconsistencies. The record of excellent bond ratings, audits, and reports continued to be a priority in 2001. ~ IV. FINANCIAL INFORMATION ~ A. FINANCIAL STRUCTURE AND CONTROLS Financial and budget controls in the City of Auburn are derived from and are an integral part of ~ the accounting system, which is based on the fund structure. A fund is a fiscal and accounting entity with a self-balancing set of accounts segregated within the City's accounting system for the purpose of budgeting and accounting for a specific function. In 2001, the City had 31 separate ~ funds. In addition, Account Groups are used to establish control over and account for the City's general fixed assets and debt. The City uses the same system of funds and accounts for budgeting, financial control and reporting. ~ Tlie Gity's funds are divided into three broad categories: Govemmental, Proprietary, and Fiduciary. ~ Governmental Funds include General, Special Revenue, Debt Service, and Capital Projects Funds. These funds support general governmental functions of the City, and are supported mainly by tax revenues. The financial statements for General Governmental Funds are prepared on a modified accrual basis. Revenues are recognized when measurable and available to ~ finance current expenditures. Expenditures are recognized when goods and services are received and liabilities are due and payable. ~ Page 11 ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ Proprietary Funds are used to account for activities that are expected to be self-supporting. ~ Enterprise Funds, a type of Proprietary Fund, are used to account for the financial transactions of the City's utilities and for the operation of the Municipal Airport, Golf Course, and Cemetery. Internal Service Funds, another type of Proprietary Fund, are used to account for the financiaJ ~ transactions of the Equipment Rental Fund and the Insurance Fund. Proprietary Funds are self-supporting from revenue derived specifically to support _those services, ~ and no tax revenues are used to subsidize their operations. The financial statements for these funds are prepared on an accrual basis. Revenues are recognized when eamed and expenses are recognized when incurred. All funds are accounted for in accordance with GAAP. Fiduciary Funds account for various trust obligations of the City. These funds include an ~ Expendable Trust, a Non-Expendable Trust, a Pension Trust, and one agency fund. Non- Expendable Trust and Pension Funds are accounted for in essentially the same manner as ~ Proprietary Funds. The Expendable Trust Fund is accounted for in essentially the same manner as Governmental Funds. Agency Funds are custodial in nature and do not measure the results of operations. In addition to forming the basis for the accounting system, _ funds also provide legal budgetary ~ control over City expenditures. The City Council approves appropriations for all budgeted funds priorto January 1 of each year. The various department and division directors are responsible for , monitoring individual budgets on a departmenfal or project basis. The Mayor may reallocate resources within a fund. The accounting system of the City involves numerous financial and administrative controls that ~ ensure the safeguarding of assets and the reliability of financial reports. This system is designed to provide assurance that transactions are executed in accordance with management authorization and recorded in accordance with GAAP, and that there exists accountability.of and ~ control over the assets and obligations of the City. In addition to budgetary control at the fund level, revenue and expenditure data are maintained by project, organization, program, and object code. This accounting and reporting is in compliance ~ with the Budgeting, Accounting and Reporting System (BARS) prescribed by the Office of the State Auditor and is in accordance with Washington State law. State law also provides for annual independent audits by the State Auditor and requires timely submission of annual financial ~ reports. B. GENERAL GOVERNMENTAL FUNCTIONS (General Fund) As discussed earlier, continuing economic growth which began in 1987 and which has continued ~ through 1998, with the exception of 1991 and 1992, has generated sufficient revenues for the City's General Fund to keep pace with increasing service demands, and also to accumulate a ~ surplus. During 1991 and 1992, the city was operated very conservatively and was able to maintain a high level of service without significant erosion of reserves. During 2001, the economy has stalled as the nation and the region slipped into recession. The City is cautiously monitoring the situation and limiting new program growth. 2002 revenues may have to be revised as they ~ fail to meet original estimates. The 2001 ending General Fund balance of $17,279,327 was up over 13% from $15,288,352 at ~ the end of 2000. The increase was the residual effect of departments under spending budgets, significant increases in energy utility taxes, and building permit activity. In addition, $3,158,850 was added to the Capital Improvement Project Fund in 2001 for fire and aid vehicles, downtown revitalization, and capital projects. ~ ~ Page 12 ~ ~ ('ITY OF AUBURN• 2001 CAFR LETTER OF TRANSMITTAL ~ = GENERAL FUND SUMMARY ~ - . ~ . ~2001 4 2Q01 r~.FAVOAABLE~2000 ACTUAL. ACTUAI (UNFAifORABL~)~ AGTUAL }t CIi;4NGE ' REVENUES: PROPERTY TAXES $ 10,676,000 $11,016,171 28.1% $ 340,171 $ 10,209,181 $ 806,990 SALES TAXES 12,689,500 13,467,184 34.3% 777,684 13,376,907 90,277 OTHER TAXES 6,412,800 8,329,322 21.2% 7,916,522 6,527,052 1,802,270 ~ INTERGOVERNMENTAL 1,716,892 2.059,441 5.3% 342,549 1,743,071 316,370 LICENSES, PERMITS 8 OTHERS 3,443,800 4,348,012 11.1% 904,212 4,627,040 (279.028) ~ T.OTAI fiEYENUES ,~:34,838',892 39;220 130 ' 100 d96 4 281 138 38 483 251 2 Z36 879,; ~~...~«..~...a...~., ~ _...__.....,~,.~,.s.~~~...__,.~~ ,~~,.w..,.w,,,e._...~.._..._...~.~....._.... EXPENDITURES: ~ CURRENT BY TYPE OF SERVICE: SECURITY OF PERSONS & PROPERTY 21,909,476 20,388,855 60.6% 1,520,621 19,076,690 1,312,165 CULTURE AND RECREATION 3.912,100 3,574,639 10.6% 337,461 3,360,753 213,886 ~ GENERAL GOVERNMENT 5.854,243 4,480,244 13.3% 1,373.999 4,403,884 76,360 ENGINEERING AND PLANNING 4,256,100 3,291,268 9.8% 964,832 3,032,070 259,198 TRANSPORTATION 1,646,100 1,501,268 4.5% 144,832 1,538,177 (36,909) MENTAL 8 PHYSICAL HEALTH 482,100 420,440 1.2% 61,660 395,458 24,982 ~ DEBT SERVICE - 0 0% " , 'TOTlIL~'XPENDIT{! z~~,;,~~ 98,060,~k '33.656714"~~10U:09o ~„~g~.4~103;4U5... `31,807;0$2' , 1;84~ 9.682~ ~ OTHER FINANCING SOURCES (USES): SALE OF FIXED ASSETS 2,777 TRANSFERS IN 822.000 797,783 (24,217) 1,246,763 (448.980) TRANSFERS OUT (4,267,254) (4,267,254) - (2,711,200) (2,156,054) ~ FUND BALANCES AT BEGINNING OF YEAR 15,288,352 15,288,352 11,602,793 3,685,559 RESIDUAL EQUITY TRANSFER IN(OUT) (152,500) (102,970) 49,530 (129.000) 26,030 , UND BACANCES At~ffVD.OF;YEAA , ~ ~~,585 4?,;.1 . , $'T7,279y327 _ : . ~ . . „„F. : 8 7U9;856_.$: 15;288,3b2 ' $ 1:;99~7.52 € ~ ~ Tax revenues rose in 2001, increasin9 7.9% overall from 2000. Sales tax increased less than 1% over 2000 and property tax revenues increased 7.9%. The property tax increase is attributed to ~ the substantial growth in new construction. The largest increase in tax was a one-time increase in utility taxes from the high-energy costs in 2001. Utility tax increased 27.6% over 2000. 2002 revenues will be watched closely. Sales taxes are flat and in a decline mode, new construction ~ numbers are anticipated to decrease and the utility tax "windfall" in 2001 was a one-time occurrence. Preliminary estimates are indicating that utility and sales tax revenue will be adjusted downward from original 2002 estimates. 2001 intergovemmental revenue increased 18% due to a large receipt for the universal police hiring grant and increased collections on the , Muckleshoot gaming compact. Building permit revenue in 2001 was $100,000 less than 2000, which accounts for the 6% decrease in Licenses, Permits and Other Revenue categories. ~ ~ ~ Page 13 CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ ~ General Fund expenditures increased approximately 6.3% in 2001 over 2000 with the largest dollar increases being in security of persons and property. The increase is attributed to increases in labor contracts, retirements, increases in long-term care insurance premiums and escalating ~ jail service costs. Culture and Recreation remained fairly constant in 2001, with increases in salaries, part time help, utilities (water) and insurance. General Government increased 1.7%. The increases were due GIS mapping, costs associated with the Endangered Species Act and ~ technological improvements. Engineering and planning costs increased 8.5% as vacant positions in engineering were filled for the entire year and insurance costs rose based on past experience. Human services costs increased 6% as spending follows increases/decreases in General Fund expenses. ~ As will be noted when reviewing the combining balance sheets, activity in the Special Revenue Funds varies widely between funds and between years due to their unique fiscal roles. The City ~ Street Fund is an accounting tool to account for state-shared gas tax revenues for City street maintenance and development in a manner required by state law. All receipts in this fund are transferred to the General Fund for use, leaving no fund balance. The Housing and Community ~ Development Fund accounts for grant funds and since all expenditures are reimbursed by grant funds, no balance normally exists in this fund. Fund balances in Special Revenue Funds increased by $349,768 from 2000 to 2001. The fund ~ balance in the Arterial Street Fund. decreased $633,873. However, the Mitigation/Impact Fee Fund increased $736,098 and interest income in the Cumulative Reserve Fund increased $226,076 and more than offset the decreases. Operating transfers from the General Fund and ~ the Capital Projects Fund infused $1,842,000 of capital in the fund to assist in the construction of the 3`d Street Southwest project. Activity in the Debt Service Funds was minimal in 2001 and involved approximately $642,274 of ~ scheduled principal and interest payments on existing debt. Debt Service Funds include the LID Guarantee Fund, a reserve fund established to provide additional security for LIDs. It had a fund balance of $1,781,236 at the end of 2001, up from $1,718,670 at the beginning of the year. The increase was due to interest earnings in the fund during the year. The City is reviewing. the ~ balances in this fund and will reduce the balance to an adequate level in 2002. Some LID delinquencies do exist, and the Guarantee Fund has adequate reserves at this time to cover any. short falls. ~ Revenue to the Capital Project Funds included interest, real estate excise tax, revenue from intergovernmental funding for capital projects, and services. The ending fund balance of $11,949,157 consists primarily of the Capital Improvements Projects Fund balance of ~ $11,722,080. The Capital Improvement Projects Fund contains the funding for various park projects, fire vehicles, computer equipment, downtown revitalization, retaiL space at the transit center and other capital projects not yet determined. The work and funding on these projects ~ occurs over a number of years. C. PROPRIETARY AND FIDUCIARY OPERATIONS The fiscal condition of the City's Proprietary Funds continues to be generally sound. Working ~ capital and fund equities increased in most funds during 2001, and all funds retained sufficient fund balances or working capital to meet their needs. Water and Sewer service rates increased ~ on January 1, 2001 based upon a cost of service study updated in 1999. The pass through rate to the county (King County Metro) increased January 1, 2001 18.5%; for regional sewage treatment. ~ ~ Page 14 ~ ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ Enterprise Funds As with the City's Proprietary Funds as a whole, the overall fiscal condition of the City's ~ Enterprise Funds is generally sound. The fiscal position of the City's utilities generally improved. Note the summary on the following page. ~ The Water Fund accounts for the City's water distribution system. The fund's working capital decreased during 2001 due to the issuance of revenue bonds late in 1999 and the subsequent spend down on those bonds in 2000 and 2001. The 1999 revenue bond proceeds were used for the water resource program, pressure zone service area adjustments, corrosion control facilities ~ and new pump stations. At the end of 2001, the 1999 revenue bond proceeds had been spent on various capital projects. The retained earnings balance decreased significantly as the City changed accounting policy on the treatment of expenses made for the water resource program. ~ Over a period of six or more years, $4,000,000 has been spent to study aquifers in efforts to obtain more water rights from the State. These costs had been accounted for as a work in process for several years. As of this date, it is uncertain whether the City will be successful in obtaining more water rights and the large balance in work in process skewed the financial ~ statements. The Sewer Fund accounts for the City's Sanitary Sewerage Utility. The bulk of this fund's ~ revenue and expense consists of pass through to King County Metro, the local regional treatment facility. During 1997, the Sewer Fund sold a pump station and some collection and distribution facilities to Metro and recognized a net gain on the transaction of $1,060,688. During 1999, the City updated a cost of service study and increased rates January 1, 2000 and 2001 ensuring ~ revenues remain adequate to cover the cost of operations and scheduled improvements. Working capital increased 6.8% over 2001. There are several capital improvement projects planned in 2002 including line renewal and replacements to correct inflow and infiltration and ~ removal of the D Street pump station which will impact ending working capitaL 2001 ENTERPRISE FUND SUMMARY ~TOflM ~+~"~~"~SL7L{0' 07A z, QOIF ~'s ~"w R E ET,EB {1~SE' ~'~T'OTAL~~~ S PRI$E< c.'~SfWEF~~„~DAAWA A~ WYVASTEZgMAIPO.RT-CM,N "CO,,.aENTEA OPERATING REVENUES $5,834,858 $9,237,301 $ 2.669,804 $ 8.488,049 $746.996 $ 606,664 $ 991,946 $28,575,618 ~ OPERATING EXPENSES 4,579,536 8,498,655 2,102,787 8,344,240 842,917 721,379 886,500 25,976,014 OPERATING INCOME (LOSS) 1,255,322 738,646 567,017 143,809 (95,921) (114,715) 105,446 2,599,604 NONOPERATINCa REVENUES (EXPENSES) (351,675) 252,607 (73,920) 709,713 (57.920) 19,414 (24,436) (126,217) ~ NET INCOME (LOSS) 903.647 991.253 493.097 253.522 (153.841) (95,301) 81,010 2,473.387 %OFFiEVENUE 15.49% 10.73% 18.47% 2.99% -20.59°k -15.71% 8.17% 8.66% ~ RETAINED EARNINGS 12/31/00 3,793,104 5,363,954 10,580204 3.269,260 39,597 562,886 1,922,224 25,531,229 RETAINED EARNINGS 12/31/01 16,793 6,014,257 11,135,457 3,731,352 20,146 462,270 1,998.557 23,378,832 % INCREASE -99.56% 12.12% 5.25% 14.13% -49.12% -17.88% 3.97% -8.43% WORKING CAPITAL 12/31/00 3,425,896 7,295,015 4,740,436 3,497,723 357,869 340,948 166,064 19,823.951 ~ WORKING CAPITAL 12/31/01 2.538.015 8,127.087 4,173,961 3,410.539 260,890 329,041 199,754 19,039.287 % INCREASE -25.92% 11.41% -11.95% -2.49% -27.10% -3.49% 2029 % 3.96M FUND EQUITY 12/31/00 39,593,067 33,595,757 28,222,967 3,499,260 6,520,335 1,305,055 4,200,916 116,937,357 ~ FUND EQUITY 12/31/01 38,425,837 35,906,938 29,506,920 3,731,352 6,500,884 1,201,439 4,277.249 119,550,619 % INCREASE -2.95% 6.88% 4.55°/, 6.63% •0.30% -7.94% 1.82% 2.23% The Storm Drainage Fund accounts for the City's storm water management program. The ~ objective of this fund is to implement improvements in accordance with the Storm Water Drainage Plan as expeditiously as possible. In 2001, this fund continued to increase its retained earnings and equity. Working capital inereased 4.55% from 2000. Net Income as a percentage of ~ revenues is high due to scheduled capital improvements to be funded from rates. Page 15 ~ , CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ Durin9 2001, the Water, Sewer and Storm Draina9e funds received develoPer contributions in the ~ form of facility extensions and improvements in the amounts of $2,733,245, $1,077,903, and $425,571 respectively. New connections contributions for Water, Sewer; and Storm Drainage ~ were $336,907, $715,975 and $300,128 respectively. The Solid Waste Fund accounts for the activity of the City's solid waste collection system. In ~ 1992, the utility began a major change in its operation with focus on reducing the waste stream by increasing recycling of waste material. Initially, this shift caused the utility to experience a significant drop in retained earnings and equity. As the new rates associated with the system stabilized, retained earnings has also stabilized. Since the utility has very little City capital ~ investment, equity is almost entirely in current assets, cash and customer accounts receivable. In 2001, the utility successfully renegotiated the refuse service contract to include curbside recycling, which will begin on January 1, 2002. ~ The Airport Fund continued to operate in a deficit. The airport completed an update to the master plan and installed a new global positioning system for pilot guidance and safety. Working capital and net income decreased because the master plan was updated, bond interest, and final ~ payment to the contractor on the hangar building was settled late December 2001. The interest on the debt was $74,767 in 2001. The Golf Course experienced an increase in revenue during 2001. Many of the improvements ~ over the past several years make the course more playable during the wet season. Working capital increased in 2001. The Cemetery Fund posted an operating loss again in 2001. Several large improvements to the ~ cemetery were finalized in 1999. Increased depreciation, supply costs and salaries contributed to the net loss. The recent improvements increased the inventory of niches and sites that will ~ provide revenue in the coming years. However, a new Veteran's cemetery opened in 2000 and municipal cemeteries in the area, including Auburn, have seen a decline in lot and niche sales. ENTERPRISE FUND EQUITV ~ 1892 - 2001 45.000,000 £.1 3' 3 ..u ~ " rrc ~ fE. 40 000 000 01992 ■199D 35,000,000 01994 Ot895 30 000 000 ~ ' ~ : ~ : ,r s, • 1996 z Y ~ ; n ' ° ' .+«r zt 01ee7 „ , e K ~ 4ti. 25000000 01e99 xW e s - ~ ..F ~ a ,v 3 + ■2000 20,000.000 02001 15.000.000 10.000.000 s + ~ f ks + e.aoo.ooo 0 r. Water Sewer Storm Drainege Solid Waste Alrport Cemetery Golf Couree ~ Inferna/ Service Funds The Equipment Rental Fund accounts for the purchase, maintenance and replacement of most of ~ the City's vehicular equipment. During 1997, the City decided to add fire engines to the inventory as new ones are acquired. The fund posted a net loss of $94,475 in 2001 but is in sound ~ Page 16 ~ ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL , condition. An analysis of the fund and the available reserves for replacement will be conducted in 2002. Working capital increased by $493,610 during the year to $3,863,699 and rental rates ~ were held constant with prior years for the 2001 budget. The Insurance Fund is managed as a part of the City's long_term risk management program (see below). The fund balance was $2,914,506 at the end of 2001, and the City's goal is to maintain ~ this Fund in excess of $2,000,000. No contributions were made to the fund during the year. Fiduciary Funds ~ Fund equity increased in the Non-Expendable and Expendable Fiduciary Funds as a whole during 2001, from $4,775,498 to $4,854,100. The increase is primarily from interest income on long-term investments. The Cemetery Endowed Care Fund reserves funds for capital ~ development purposes and to maintain the cemetery after it can no longer generate revenue to maintain itself by selling new graves and related services. The Fire Relief and Pension Fund is a remnant of an independent Fire Pension Fund previously operated by the City. Fire pensions are now part of a state system, and this fund provides supplementary benefits to firefighters who ~ wece enrolled (before 1970) in the prior City system. See Note 9c. D. DEBT ADMINISTRATION ~ Debt typically incurred by the City consists of the following types: general obligation, revenue bonds, special assessments, and employee leave benefits. During 2001, the City had General Obligation debt of $7,700,000; Utility Bonds and Public Works Trust Fund loans totaled ~ $18,477,157; Special Assessments (LIDs) totaled $738,904; and Employee Leave Benefits totaled $3,398,138. Note 10 summarizes the City's long-term debt. ~ In 2001, the City received $6,990,169 in Public Works' Trust Fund Loans to be used for the construction of corrosion control facilities. The loans are due in equal annual installments over 20 years at interest rates of .5% and 1%. ~ Washington State law provides a maximum debt limit for general obligations. A City may incur debts equal to 1.5% of the City's assessed valuation without a vote of the people; and debts for general govemment equal to 2.5% of the assessed value with a vote of the people. An additional ~ 2.5% may be incurred to finance water, sewer, and parks projects, also with a vote of the people. As of December 31, 2001 the City had $7,700,000 of general obligation debt. Figures 3 through 6 in the Statistical Section present additional data relating to the City's debt capacity. The City retains an independent financial advisor, who does no underwriting, for all significant debt issues. ~ E. CASH MANAGEMENT ~ The City invests in U.S. Treasury and Agency Issues, Prime Bankers Acceptances, Time Deposits, and Repurchase Agreements. Investment policies and procedures established by the Mayor require the City to establish a trustee to take delivery of all investment transactions at time of payment. The City has contracted with the Bank of New York to provide delivery versus ~ payment trustee services on all investments. The State of Washington maintains an investment pool to provide economies of scale in investing to smaller- and medium-sized cities in the state. The City uses this senrice very extensively whenever interest rates in the pool are better than ~ coultl be otherwise realized with independent investments. Conversely, City investments are not made through the pool whenever earnings in the pool are less than what may be earned independently. Comparative earnings are evaluated daily by the City investment staff in accordance with the City investment policies. The pool operates under the same legal ~ restrictions thaf apply to all municipalities in the state and, consequently, uses the same instruments as listed above. The state also takes delivery of all investment transactions. ~ ~ Page 17 CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ' The City has adopted a comprehensive investment policy statement to guide City investment ~ practices. These policies are closely pattemed after the recommendations in Investing Public Funds published by the Govemment Finance Officers Association (GFOA). Investments are restricted to less than three years in order to maintain liquidity on all investments in all funds, yet ~ _ enable the City to take advantage of the yield curve. Fiduciary funds, which involve long-term reserves and require minimal liquidity, are invested for longer time periods. The City undertakes repurchase agreements only with financial institutions that offer the City full protecfion in the ~ event of default by providing the delivery of the underlying security to the City. During 1997, the City received the Certification of Excellence Award from the Municipal Treasurer's Association of the United States and Canada on this policy. The City's investments at December 2001 totaled $70 million. The City earned an average yield ~ of 4.19%, earning $2,965,019 in investment income during 2001. F. RISK MANAGEMENT ~ 1. Types and Level of Risk Assumed The City participates in the Washington Cities Insurance Authority (an insurance pool of over 80 ~ cities). The City actively pursues risk reduction in the operation of its programs. The City purchases (employees paying part of the costs) most of its health insurance for its ' employees through commercial policies administered by the Association of Washington Cities. Employees represented by the Teamsters Union have insurance through the Teamsters organization. Washington is a monopolistic state for worker's compensation, and the City ~ participates in the state program. In order to keep its long-term options open and to provide for any uninsured losses that might ~ occur, the City has elected to build an insurance reserve (The Insurance Fund). The Insurance Fund supplements various insurance coverages maintained by the City. This Fund is also used to self-insure some limited exposures; the most significant of which is accidental loss to City owned vehicles. , 2. Risk Control Policies The Washington Cities Insurance Authority not only provides a sharing of risk by pooling of ~ l o s s e s, i t a l s o p r o v i d e s a n e x t e n s i v e a r r a y o f p r o f e s s i o n a l s e n r i c e s i n r i s k m a n a g e m e n t. T h e p o o l monitors the City's management practices and damage claims. The City follows the guidelines provided by the pool in an effort to minimize risk exposure in the day-to-day operations of the ~ City's programs. The City also maintains an extensive employee safety program managed by the Human Resources Department. G. FUTURE FISCAL ISSUES AND CONSIDERATIONS ' As a part of the City's approach to managing its future, the City integrates its budget process with its comprehensive planning process, which is intended to reduce the adverse fiscal impact of ~ inappropriately designed and located development. In 1990, the legislature passed a Growth Management Act that requires cities to integrate their financial planning of public facilities with their land use management programs. Many of these requirements are similar to current City ~ practice, and the City is in the process of implementing these requirements. In that respect, the City's budgeting proeess is based on financial policies directed at conserving fiscal resources while supporting programmatic strategies. Budget recommendations reflect a ~ long-range analysis of fiscal trends. These policies and practices have not only averted serious funding problems in the past, particularly in the recent recession years of 1991 and 1992, but ~ Page 18 ~ ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ have maintained the General Fund on a firm financial basis and allowed carefully planned enhancements in services. ~ The City is currently in stable financial condition. All funds contain adequate balances, and the City's debt is.manageable. The General and Cumulative Reserve Fund contain satisfactory balances, a significant Insurance Fund has been set aside for contingencies, and the Equipment ~ Rental Fund is adequate for vehicle replacement. The Proprietary and Fiduciary Funds are generally in satisfactory condition and have adequate balances for their purposes. The Water Fund is under some economic pressure due to an aggressive capital program to meet federal and state requirements. Rates were increased during 1996, 1998, 2000 and again in 2001. All rate ~ increases were applied as a result of a cost of service study. A cost of service study was updated for the Sewer Utility and rates increased in January 2000 and 2001 to ensure the ongoing operational health of the fund. The City completed a cost of service study for the Storm Drainage ~ Utility in 1999 and new rates went into effect late 2000 and again in 2001. Conservative budgeting and fiscal practices are still very much in order for the future. Although Auburn is experiencing significant growth at the present time, perhaps unprecedented, the need ~ for accompanying services and facilities will be considerable. The SuperMall generates annually approximately $1.5 million, with a possibility of as much as $3 million, of additional General Fund revenues. Other development will generate relatively less and projected needs for services and ~ infrastructare including police, fire and emergency response are considerable. SuperMall sales tax revenues have offset sales tax revenue decreases from enacted sales tax exemptions designed to encourage manufacturing in Washington State. Impacts from this legislation are under continued monitoring by the Finance Department at this time. Washington State legislators ~ enacted additional sales tax exemptions for machinery and equipment used in research and development in 1997 and repairing or retooling of machinery used in manufacturing in 1996. ~ An initiative was put before Washington State voters in the fall of 2001 to limit property taxes to the lesser of 1% or inflation. The impact of this initiative is exponential with the impact in 2002 being $100,000 and reaching an annual amount of $1.2 million in seven years. This initiative will impact the City if economic growth does not continue at the same pace as previous years. The ~ cost of doing business and labor contracts are anticipated to continue growing annually in excess of 1%. It is anticipated that the General Fund operating budget will not be fiscally constrained in 2002. The region remains in recession and the City will need to balance current budgets. ~ In March of 1999, the National Marine Fisheries Service listed Puget Sound salmon runs as threatened. The City is obligated to respond to the Environmental Protection Agency (EPA) regarding salmon habitat and how to best mitigate the effects of development and other factors ~ impacting the salmon runs. At this time, the cost to the City for mitigation, if any, is unknown. It is anticipated that development will take longer and will be more costly. Also, compliance with EPA is absolute for the City to receive state and federal grants. ~ To summarize, revenue increases from development and an expanding. economy must be monitored carefully in relation to the economic trends in the region as well as the country as a whole. Services must be increased carefully as the need develops and balanced carefully ~ against available resources. Adequate reserves have been maintained to date and it is likely to be utilized to some extent in the near future to offset recent downturns in economic circumstances. Additional tax capacity is available to the City, however, it must be used very ~ cautiously and only for significant expansions in levels of service which bring value to the City and justify generation of sufficient revenue for repayment. ~ ~ Page 19 ~ CITY OF AUBURN: 2001 CAFR LETTER OF TRANSMITTAL ~ V. OTHER RELEVANT INFORMATION ~ A. INDEPENDENT AUDIT State law requires an annual audit of all City books of accounts and financial records by the ~ Office of the State Auditor, which is headed by an independent elected State official, the State Auditor. The Auditor has a broad legal authority to inquire into all financial and legal compliance matters and such audits are considered equal to audits by certified public accounting firms, The ~ 2001 financial audit of the City now has been completed and was conducted in conformance with Generally Accepted Auditing Standards. The financial statements of all City funds and account groups have been included in this audit. The City has been given an unqualified opinion for2001. ~ Please see the Auditor's Report. The State Auditor's Office also audits the City's administration of its federal grants under tfie single audit concept. B. AWARDS ~ The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement of Excellence in Financial Reporting to the City of Auburn for its ~ comprehensive annual financial ceport for the fiscal year ended December 31, 2000. This was the twelfth consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificafe of Achievement, a govemment must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both ~ generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current ' comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirement and we are submitting it to the GFOA to determine its eligibility for another certificate. The 1988 Budget was submitted for the first time for consideration for the award for Distinguished ~ Budget Presentation under GFOA programs, and the City has received the award consistently though 2000. In addition to the regular award, the 1991, 1994 and 1995 Budgets were ~ recognized as °Especially Notable" as Policy Documents by GFOA. C. ACKNOWLEDGMENTS Preparation of this report could not have been accomplished without the professional, efficient, ~ and dedicated staff of the Finance Department and various other City employees who assisted in its production. Further appreciation is extended to the Mayor and City Council for their ~ encouragement, interest, and support in conducting the financial affairs of the City in a sound ancl progressive manner. The assistance of the auditors from the Office of the State Auditor is also greatly appreciated. Respec Ily submitted ~ Shelley R. Coleman ~ Finance Director ~ ~ ~ Page 20 ~ ` CITY OF AUBURN: 2001 CAFR CERTIFICATE OF ACHIEVEMENT ~ ~ e • Certificate of Achievement ~ . for Excellence ~ e e 1n Fin" anclal ~ Reporting Presented to , City of Auburn, Washington ~ For its Comprehensive Annual ~ Financial Report for the Fiscal Year Ended December 31, 2000 , A Certificate of Aehievement for Fxcellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to ~ government units and public employee retirement systems whose, comprehensive annual financial xeports (CAFRs) achieve the highest , standards in govemment accounting and. financial reporting. ~ ~ = MRFU STA _ yN ,u NiD ~ ~"'"DA ° Pr sident ~ coRroAamx' s WNEAEO. ~e ~ %f Executive Director ~ ~ Page 21 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ..Y\ 9 r ~ ~ ~ i ~ ~ ~ Page 22 ~