R2005-0051 03-28-05 RESOLUTION NO. R2005-51
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, SUPPORTING THE HYBIRD SOUTH ALTERNATIVE IDENTIFIED
IN THE JULY 2004 BRAZORIA COUNTY TOLL ROAD ROUTE AND
FEASIBILITY REPORT.
WHEREAS, the Harris County Toll Road Authority has prepared a Brazoria County
Toll Road Route and Feasibility Report, (the "Report"), dated July 2004, on behalf of the
Brazoria County Toll Road Authority;
WHEREAS, the Report evaluated four alternative alignments and recommended the
Hybrid North alignment as the preferred route for additional analysis;
WHEREAS, the City Council of the City of Pearland is concerned about the impacts
to the community from the Hybrid North alignment and is aware of several new
developments that have occurred within the Hybrid North alignment corridor that have
occurred since the inception of the study;
WHEREAS, the Hybrid South alignment as described in the Report provides similar
connectivity between SH 35 and SH 288 that would be provided by the Hybrid North
alignment, but is proposed in a less developed corridor than is the Hybrid North alignment;
WHEREAS, the State Highway 288 Major Corridor Feasibility Study recommended
toll/managed lanes in the median of SH 288 as the best alternative for addressing future
mobility needs in the northern Brazoria County area;
WHEREAS, the City Council of the City of Pearland desires to enhance mobility
options for northern Brazoria County;
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. The City Council of the City of Pearland does not support the Hybrid
North alternative as recommended in the July 2004 Brazoria County Toll Road Route and
Feasibility Report.
Section 2. The City Council of the City of Pearland supports the Hybrid South
RESOLUTION NO. 2005-51
alternative as recommended in the July 2004 Brazoria County Toll Road Route and
Feasibility Report.
PASSED, APPROVED and ADOPTED this the 21st
A.D., 2005.
ATTEST:
DEPUTY CITY SECRETARY
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
day of March
TOM REID
MAYOR
2
3/28/05
Resolution R2005-61
CITY OF
PEARLAND, TEXAS
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
SEPTEMBER 30, 2004
CITY OF PEARLAND, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2004
Prepared by:
Finance Department
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
YEAR ENDED SEPTEMBER 30, 2004
INTRODUCTORY SECTION
Page
Number
Letter of Transmittal i — viii
GFOA Certificate of Achievement for
Excellence in Financial Reporting ix
Organizational Chart x
List of Principal Officials xi — xii
FINANCIAL SECTION
Independent Auditors' Report
Management's Discussion and Analysis
Basic Financial Statements
Government -wide Financial Statements
Statement of Net Assets
Statement of Activities
Fund Financial Statements
Balance Sheet — Governmental Funds
1-2
3 — 1 0
11
12 — 13
14
Statement of Revenues, Expenditures and Changes in
Fund Balances — Governmental Funds 15
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30, 2004
FINANCIAL SECTION (Continued)
Fund Financial Statements (Continued)
Reconciliation of the Statement of Revenues, Expenditures
and Changes in Fund Balances of Governmental Funds to the
Statement of Activities
Page
Number
16
Statement of Revenues, Expenditures and Changes in
Fund Balances — Budget and Actual — General Fund 17
Statement of Net Assets — Proprietary Fund 18
Statement of Revenues, Expenses and Changes in
Fund Net Assets — Proprietary Fund 19
Statement of Cash Flows — Proprietary Fund 20
Notes to Financial Statements 21 — 44
Combining Statements and Schedules
General Fund
Schedule of Expenditures — Budget and Actual 45
Nonmaj or Governmental Funds
Combining Balance Sheet 46 — 48
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 49 — 51
Debt Service Fund
Schedule of Revenues Expenditures and
Changes in Fund Balances — Budget and Actual 52
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30, 2004
Table
UNAUDITED STATISTICAL SECTION
Government -wide Expenses by Function 1
Government -wide Revenues 2
General Governmental Expenditures by Function — Last Ten
Fiscal Years 3
Page
Number
53
54
55
General Governmental Revenue by Source — Last Ten
Fiscal Years 4 56
Property Tax Levies and Collections — Last Ten Fiscal Years 5 57
Assessed Value of Taxable Property — Last Ten Fiscal Years 6 58
Property Tax Rates — Direct and Overlapping Governments —
Last Ten Fiscal Years 7 59
Principal Taxpayers 8 60
Property Values, Construction and Bank Deposits 9 61
Ratio of Net General Long-term Debt to Assessed Value and
Net Long-tetin Debt Per Capita — Last Ten Fiscal Years 10 62
Ratio of Annual Debt Service Expenditures for General
Long-term Debt to Total General Governmental
Expenditures and legal Debt Limits — Last Ten Fiscal Years 11
Computation of Direct and Overlapping Debt 12
Demographic Statistics 13
Miscellaneous Statistical Data 14
63
64
65
66 — 67
INTRODUCTORY SECTION
To the Honorable Mayor, Members
of City Council, and Citizens of
the City of Pearland, Texas:
We are pleased to submit to you the Comprehensive Annual Financial Report of the City of Pearland,
Texas (the "City") for the fiscal year ended September 30, 2004. This report is published in order to
provide the City Council, City employees our Citizens, and other interested parties with detailed
information concerning the financial condition and significant activities of the City. Responsibility for
the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures,
rests with the City. We believe that the enclosed data, as presented is accurate in all material respects,
and is reported in a manner designed to present fairly the financial position and results of operations of
the City, as measured by the financial activity of its various funds and account groups; and that all
disclosures necessary to enable the reader to gain an understanding of the City's financial affairs have
been included.
THE REPORT
The Comprehensive Annual Financial Report is presented in three sections• Introductory, Financial, and
Statistical. The Introductory Section, which is unaudited, includes this transmittal letter, the City's
organizational chart a list of principal City officials, and a copy of the 2003 Certificate of Achievement
for Excellence in Financial Reporting. The Financial Section includes a Management's Discussion and
Analysis (MD&A), basic financial statements and the combining statements and schedules. The
Financial Section also includes our independent auditors' report on the governmental activities, the
business -type activities, the aggregate discretely presented component units, each major fund, and the
aggregate remaining fund information. The Statistical Section which is unaudited, includes selected
financial and demographic infoiination, generally presented on a multi -year basis to allow for certain
trend analyses relative to the City.
This report includes all the funds of the primary government (i.e., the City of Pearland as legally
defined), as well as all of its Component Units Component Units are legally separate entities for which
the primary government is financially accountable. The City provides a full range of municipal services
contemplated by statute or charter. These services include police and fire protection, health and social
services, public improvements, planning and zoning, and general administrative services. The City also
provides water sewer, and sanitation services. Additionally, the City has an Economic Development
Corporation, which was established to attract and retain jobs within the City and to more fully develop
the local ad valorem tax base
i
There are two types of Component Units which are reported herein — one being the Pearland Economic
Development Corporation (as previously described) and the other being Tax Increment Investment
Zones ("TIRZ"). A TIRZ is an area within the City's jurisdiction that is created in order to foster
investment and development that will ultimately benefit the City. These Component Units are presented
herein discretely. Further the Component Units are reported in a separate column in the government -
wide financial statements to emphasize that they are legally separate from the primary government and
to differentiate their financial position and results of operations from those of the primary government.
The MD&A is intended to be a narrative introduction, overview and analysis of the financial and
operating affairs of the City, written to supplement the basic financial statements The letter of
transmittal is designed to compliment MD&A and should be read in conjunction with it. The City of
Pearland's MD&A can be found immediately following the independent auditors' report.
CITY PROFILE
Form of Government
The City of Pearland is governed by the Council/Manager form of government in accordance with the
Home Rule Charter adopted by the voters in February 1971.
The City Council is the legislative and policy -making body of the City. It consists of five members
elected at -large for a three-year, staggered terms Elections are held annually the first Saturday in May.
The Mayor and Council provide community leadership, develop policies to guide the City in delivering
services and achieving community goals, and encourage citizen awareness and involvement.
Location
The City of Pearland is located in the upper Gulf Coast region of Texas and is situated primarily in the
northeast corner of Brazoria County, approximately 15 miles southeast of the City of Houston's central
business district. The City currently encompasses approximately 44 square miles within the City limits
and includes approximately 29 additional square miles within its Extra Territorial Jurisdiction (ETJ).
The City of Pearland's transportation needs are served via access to several interstate and state
highways. State Highway 288 traverses the City's west side providing access to the port of Freeport to
the south and to the Houston Medical Center on into downtown Houston to the north. The Sam Houston
Tollway (Beltway 8) is a freeway "loop" that encircles the City of Houston. This freeway artery runs
near and parallel to the City's northern boundaries in an east -west direction Interstate Highway 45 lies
just east of the City of Pearland, providing access to the Johnson Space Center and Port of Galveston to
the south, and travels northward, through the heart of downtown Houston Additionally, State Highway
35 bisects the City of Pearland in a north -south direction, providing easy access to Houston's Hobby
airport approximately 6 miles to the north
ii
Population
Currently, the City's estimated population is approximately 54,000 people (not including the ETJ
population). Recent trends forecast the City's population growth to double within the city limits by the
year 2012. Estimates for Brazoria County for this same time period reflect a population increase of
approximately 40%, from approximately 255,000 today, up to approximately 356,000 in 2012.
However, nearly 50% of the overall county population growth is expected to occur within Pearland's
city limits, which is estimated to account for 27% of the county population by 2012 (as compared to
approximately 18% today).
MAJOR INITIATIVES
Dramatic growth and opportunity - tempered with visionary guidance - continue to be the prevailing
forces steering Pearland City Council, staff, and community direction The community continues to
embrace the challenge of preserving Pearland's small-town feel, even as it blossoms into one of
Houston's largest suburbs. This concept is captured by the slogan "Where town and country meet," and
is embodied in numerous major initiatives and on -going programs.
The Old Town Site
The Old Town Site is the historic center of Pearland, and the City Council has established a vision to
reinvent the area as a hub of mixed -use residential, business, and civic activity. Over the past three
years, the majority of the area's half -century old sewer system has been rehabilitated. For five years
$150,000 per year has been spent to add sidewalks, and increase the ` walk ability' of the neighborhood
In 2003, the City re -acquired ownership of Zychlinski Old Town Park, and added walking trails
playground equipment, a basketball court, and landscaping. Redevelopment efforts will continue next
year with implementation of a mixed use "Village District" zoning concept for the area. The Council
has expressed a willingness to utilize tax increment reinvestment zones and other creative financing
tools to continue the revitalization effort.
Sense of Community
Maintaining a small town environment means ensuring that opportunities exist for all citizens- `old-
timers' and newcomers - to come together and form new bonds The Parks and Recreation Department
plays a leading role in this function by sponsoring community -wide events that attract residents of all
ages. City and citizen support for such events as the summer concert series, bi-monthly teen and senior
citizen dances, the annual Winterfest event the Christmas tree lighting ceremony and Christmas parade
continue to grow steadily each year In 2003, the City took over operation and programming for the
senior citizen center; daily programs and periodic field trips are now offered, and attendance has grown
significantly. The department is also focused on reaching out to the community and offering classes and
events in the newly developed Western portion of our City. The City of Pearland has many natural
assets. The Ecotourism Department is working on a plan to incorporate nature and heritage tourism
while preserving and enhancing greenspace.
iii
Community Appearance
The original small town of Pearland traditionally prided itself on a clean appearance, and the larger City
of Pearland expects nothing less. A close relationship with the local Keep America Beautiful affiliate
has spawned several initiatives. Adding to the curbside recycling collection program that has been in
place since 1995., green waste recycling has also been added. Partnering with the Houston -Galveston
Area Council, the City operates a state-of-the-art recycling center that serves Pearland and Brazoria
County. The center was completed in April 2004 and will be one of the anchors of the new Southwest
Environmental Center. Beginning in early 2005, the City began accepting Household Hazardous waste
at the center
Volunteers staff an innovative program known as the "Eyes of Pearland," patterned after the familiar
song "The Eyes of Texas are Upon You. ' High weeds, structures and fences in ill repair, and "bandit"
signs are the primary targets of this motivated group, which began operation in 2003. Supplementing
City code enforcement staff, these volunteers clean up these problems in a timely manner, while
allowing City staff to focus on other pressing issues. Another volunteer program utilizes graduates from
the citizen's police academy to enforce handicapped -parking violations. Now in its third year, this
program has been tremendously successful and additional resources continue to be allocated to the
program.
Public Safety
Personal safety and low crime rate are often cited as reasons families have chosen to relocate to
Pearland. Public safety continues to be a major emphasis for the City Council, continuing a program to
add a minimum of six new police officers per year to maintain a ratio of 1.8 officers per 1,000
population In 2004, a new police department Geographic Information System interface was added that
will improve response times ensure dispatch to the proper locations, and add significant crime tracking
and analysis capabilities. Explorer Post 411 (affiliated with Boy Scouts of America), sponsored by the
Pearland Police Department, continues to gain members compete well at competitions, and create
another vital linkage between the City and its citizens.
Community Enrichment Initiatives
Under the leadership of the Mayor, several new community -oriented initiatives are setting the stage for
future opportunities A joint venture grant application with the YMCA was submitted to the Texas Park
and Wildlife Department to build a skateboard park on City -owned land will benefit the YMCA by
reducing costs, and benefit the community by providing a safe location for kids to practice this popular
sport. This joint venture has created an opportunity to apply for a Texas Park and Wildlife grant to build
additional recreational trails near the facility. The Pearland Arts League was also formed in 2003 and
will be hosting its first event on Grand Avenue in the Old Town Site in 2004. This community event
serves multiple purposes: providing a venue for artisans of all varieties, bringing diverse segments of
the community together, and placing a focal point on the Old Town Site. Finally, the higher education
initiative has resulted in a partnership between the Alvin Community College-Pearland Campus and the
University of Houston to offer upper -level (junior -senior) classes in Pearland. This pilot initiative will
likely lead to a full-time presence for a future University of Houston — Pearland campus.
iv
Growth Management
An update of the 1999 Comprehensive Plan was completed in July of 2004. This document refreshes
the vision of the community to maintain a strong balance of residential, retail, and primary employers.
The Pearland Economic Development Corporation and City are funding a nearly $9 million extension of
Kirby Drive along with associated drainage and utilities that will serve as the focal point for the
Spectrum Business Park, a development that may ultimately include 1,000 acres of biomedical research
and manufacturing, offices, regional retail, and related uses. The City and EDC executed a development
agreement with the first tenant, a 700,000 square foot lifestyle retail center in December 2004. Two
major hospital corporations have purchased property in Pearland for new facilities, and the University of
Texas has acquired 50 acres for a potential annex to the world- renowned Texas Medical Center.
Following completion of the Comprehensive Plan Update in mid-2005 will be revisions to several City
codes. The zoning and subdivision codes will be combined into one updated unified development code
that will assist both applicants and City staff in effective and efficient plan review. All of the City's
building, fire, and life -safety codes have also been updated to the most recent national standards.
Transportation Improvements and Strategic Planning
Enhancing transportation to meet growth demands also continues to be a major priority. Several major
components of the $92.5 million transportation bond program (passed in Fall 2001) are construction,
including Yost Road, Barry Rose Road, and Cullen Boulevard extension. The first phases of the $36
million Magnolia Road project are now in design All of these projects will provide new transportation
linkages, and provide traffic relief for FM 518. By early 2006, the first phase of the $46 million Dixie
Farm Road project will be under construction resulting in a. vastly improved primary connection to IH 45.
In addition to transportation construction projects, the City is actively involved in long-range
transportation planning activities. City staff members are on the steering committees of the TX DOT -
sponsored major corridor feasibility studies for improvements to SH 288 and SH 35. The SH 288 study
was completed 2004, and the SH 35 study will be completed by mid-2005. The City also participated
with the Houston -Galveston Area Council and the cities of Friendswood and League City in a mobility
study for FM 518. Implementation of the recommendations of this study will begin in 2005. This study
resulted in specific projects that can improve mobility and reduce travel delay on FM 518 without the
need to add additional lane capacity; significant improvements have already been implemented and a
raised medium plan is in design. Finally, the City actively participated in the Brazoria County Mobility
Bond Steering Committee, which developed a street bond program, which was submitted to and
approved in November 2004. The County Bond referendum was approved in November 2004 and the
project is now in progress.
Storm Water Management
Responding to the devastation inflicted by Tropical Storm Allison in 2001, the City has stepped up efforts
to enhance flood control measures. A revised Drainage Design Criteria Manual enacted in February 2004
will result in approximately 12% larger detention ponds for private development. The City has also
completed a Hazard Mitigation Plan that incorporates compliance with state and federal agency
requirements to ensure continued eligibility for grant programs In late 2003, the City submitted an
application to FEMA for inclusion in the Community Rating System The City and Drainage District will
begin joint construction of a second stormwater detention facility on Mary's Creek in 2005, and are
designing a third detention facility on Mary's Creek. A final rating is expected in 2005
v
Water and Sewer Strategic Planning
Assurance of adequate water and sewer capacity is a primary goal toward providing quality -of -life
amenities for current residents, and ensuring a desirable future -growth rate. The City's first major
source of surface water (purchased from the City of Houston) was activated in 2003, and will provide up
to three million gallons per day (MGD) of drmldng water in 2005. The City intends to increase that
intake to 6 MGD by 2007, and will also be buying into a regional surface water treatment plant in 2005
at a cost of over $16 million for an additional capacity of 10 MGD to be available by 2009. This
initiative to convert the majority of water supplies to surface water not only provides the City with
adequate water supplies through 2022, but also will assist in the regional battle against subsidence by
reducing the City s reliance on pumping groundwater. The City's four wastewater treatment plants are
all operating well within governmental compliance requirements, and a more formal method of
monitoring and predicting wastewater volume growth is now in place. The next major plant expansion
is expected to enter the planning stage in 2005.
In addition to these planning activities, over $40 million in in -line extension and plant improvement
projects are currently in progress These projects include major trunk facilities to network properties
annexed in the late 1990's, as well as local distribution and collection lines to replace substandard well
and septic tank service in several recently -annexed areas. A major initiative to correct sewer inflow and
infiltration in the older sections of the City is nearing the end of a six -year program, in which more than
$4 million has been spent in rehabilitation By reducing unnecessary rainwater flow to the wastewater
treatment plants, plant operational costs have decreased, thus deferring the need for plant expansion
City Facilities
Accompanying the aspects of long-range utility and transportation planning is an initiative to compile a
cohesive water, sewer, drainage, transportation, and facility capital improvement programs, which were
presented to City Council in February 2005. A comprehensive street inventory to be used for
compliance with GASB 34 and budget planning was completed in January 2005. A building facility -
needs analysis has been completed and will provide a blueprint for additional public safety, public
works, and administrative facility needs to match the City's growth trends.
ECONOMIC OUTLOOK
Brazoria County's current population is approximately 250,000. It is estimated that this will increase to
over 356,000 by 2012. According to the Economic Development Alliance for Brazoria County, job
growth will be focused in four primary areas: 1) aerospace/high technology 2) transportation and
distribution, 3) petrochemical and downstream petrochemical companies and 4) tourism
In late 1998, the City of Pearland created a Tax Increment Reinvestment Zone (TIRZ #2). This involved
the annexation of over 3,000 acres west of the State Highway 288 (SH 288) corridor. The city limit now
extends to portions of Fort Bend County. The proposed development, Shadow Creek Ranch, has the
potential to develop the acreage over a 15 to 20 year time frame and has already developed more than
3,000 lots. It is estimated that 7,000 new single-family homes, 1,800 assisted living units and 3 900
multi -family units could be developed. More than two billion dollars worth of value would be added
over the next 20 years New valuation of property in Shadow Creek Ranch exceeded $330 million in
2003-2004. Retail continues to grow in Pearland Within the City and EMJ, an estimated 400,000 sq.
feet of new retail opened in 2004. This served to boost our sales tax revenue by more than 17% in 2003.
vi
Shadow Creek Ranch will not only improve roads in the area, but will also bring in sewer and drainage,
water, and major landscaping to the area. The added population poises SH 288 for major retail and
commercial development that could eventually include major office buildings a hospital, and hotels.
With respect to economic development projects in Pearland, 2004 proved to be a very active year.
Many commercial enterprises have expanded ore relocated their businesses to the City during the course
of the year. The following list summarizes some of the major projects in 2004:
• The Spectrum at Clear Creek — a master -planned, mixed -used business park development
to be located on a 1,000-acre site at the crossroads of SH 288 and Beltway 8 in Pearland.
The Spectrum will be the convergence of science, technology, training, and lifestyle.
Design of the extension by Kirby Drive, which will provide access to the Spectrum, is
nearing completion
West Pearland Professional Center — a 20,000 square foot professional office building
and an adjacent strip center that includes approximately 11,500 square feet. Construction
is currently underway for an additional 11,500 square foot professional office building.
• HCA announced plans to begin construction of Phase 1 of a hospital project in early
2005.
•
• In addition are numerous retail projects that have either opened for business or are in the
process of building.
ACCOUNTING AND BUDGETARY CONTROLS
Management of the City is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the City are protected from loss, theft or misuse, and to ensure that
adequate accounting data are compiled to allow for the preparation of financial statements in conformity
with generally accepted accounting principles. The internal control structure is designed to provide
reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable
assurance recognizes that (1) the cost of controls should not exceed the benefits expected to be derived
and (2) the evaluation of costs and benefits requires estimates and judgments by management.
Accounting Controls. We believe that the City's accounting controls provide reasonable assurance that
errors or irregularities that could be material to the financial statements are prevented or would be detected
within a timely period by employees in the norrual course of performing their assigned function.
Budgeting Controls. In addition, the City maintains budgetary controls. The objective of these budgetary
controls is to ensure compliance with legal provisions embodied in the annual appropriated budget
approved by the City's governing body. Activities of the General, Debt Service, and Enterprise Funds are
included in the annual appropriated budget. The level of budgetary control (the level at which expenditures
cannot legally exceed the appropriated amount) is the total approved budget for each department.
vii
OTHER INFORMATION
Independent Audit
The City Charter requires an annual audit of the books of account, financial records, and transactions of
all administrative departments of the City by an independent certified public accountant. The
accounting firm of Pattillo, Brown and Hill L L P was selected by the City Council. This requirement
has been complied with, and the auditors opinion has been included with this report.
Awards
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to the City of Pearland for its
Comprehensive Annual Financial Report for the fiscal year ended September 30, 2003. This was the
27th consecutive year that the City has received this prestigious award.
In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily
readable and efficiently organized comprehensive annual financial report, whose contents conform to
program standards. Such reports 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 our current report
continues to confoiui to Certificate of Achievement Program requirements and we are submitting it to
GFOA to determine its eligibility for another certificate.
In addition, the government also received the GFOA' s Award for Distinguished Budget Presentation,
the 17 h consecutive year for its annual appropriated budget dated September 8, 2003 In order to qualify
for the Distinguished Budget Presentation Award, the government's budget document was judged to be
proficient in several categories including policy documentation, financial planning, and organization
Acknowledgments
We would like to express our appreciation to all members of the Finance and Administration
Departments who assisted and contributed to its preparation. We would also like to thank the Mayor,
members of the City Council, and City Manager for their interest and support in planning and
conducting the financial operations of the City in a responsible and progressive manner.
Respectfully submitted,
Andrea M. Jason
Director of Finance
January 7, 2005
CITY OF PEARLAND, TEXAS
ORGANIZATIONAL CHART
SEPTEMBER 30, 2004
CITIZENS OF
PEARLAND
MAYOR AND
CITY COUNCIL
MUNICIPAL JUDGES
CITY ATTORNEY
DEPUTY CITY
MANAGER
BOARDS &
COMMISSIONS
CITY MANAGER
PUBLIC WORKS
ENGINEERING
PROJECT
MANAGEMENT
POLICE
FIRE MARSHAL
EMERGENCY
MANAGEMENT
FIRE
DIRECTOR OF
FINANCE
FINANCE
GRANTS
PURCHASING
INFORMATION
TECHNOLOGY
UTILITY BILLING
EMERGENCY
MEDICAL SERVICES
CITY SECRETARY
HUMAN
RESOURCES
PARKS &
RECREATION
x
EXECUTIVE
DIRECTOR OF
COMMUNITY
SERVICES
COMMUNITY
DEVELOPMENT
MUNICIPAL
COURT
PLANNING
ANIMAL
CONTROL
PUBLIC AFFAIRS
CITY OF PEARLAND, TEXAS
LIST OF PRINCIPAL OFFICIALS
AS OF SEPTEMBER 30, 2004
ELECTED OFFICIALS
Tom Reid Mayor
Richard Tetens (Position 1) Council Member
Woody Owens (Position 2) Council Member
H. Charles Viktorin (Position 3) Council Member, Mayor Pro-Tem
Larry Marcott (Position 4) Council Member
Kevin Cole (Position 5) Council Member
APPOINTED OFFICIALS
Bill Eisen City Manager
Young Lorfing City Secretary
Darrin Coker City Attorney
(continued)
xi
Alan Mueller
Fredrick Howard Welch
Andrea. Gardner
Chris Doyle
Steve Chapman
Nicholas Finan
Rhonda Cyrus
Jerry Burns
Joseph Wertz
Kola D. Olayiwola
Doug Kneupper
Glenn Chaney
Edward Sillas
Floyd Myers
Jeff Sundeth
Paul Jamison
Mary Hickling
Lata Krishnarao
CITY OF PEARLAND, TEXAS
LIST OF PRINCIPAL OFFICIALS
(Continued)
YEAR ENDED SEPTEMBER 30, 2004
EXECUTIVE MANAGERS
Deputy City Manager
Executive Director of P.E.D.C.
Director of Finance
Police Chief
Fire Marshal/Emergency
Management Director
Executive Director of Community Services
Director of Parks and Recreation
Director of Public Works
Director of Projects
Director of Inspection Services
City Engineering
Municipal Court Judge
Municipal Court Judge
Municipal Court Judge
Director of EMS
Fire Chief
Director of Human Resources
Director of Planning
xii
FINANCIAL SECTION
flfI
PATTILLO, BROWN & HILL,L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and
Member of the City of Council
City of Pearland, Texas
We have audited the accompanying financial statements of the governmental activities, the
business -type activities, the aggregate discretely presented component units, each major fund, and the
aggregate remaining fund information of the City of Pearland, Texas, as of and for the year ended
September 30, 2004, which collectively comprise the City's basic financial statements as listed in the
table of contents. These financial statements are the responsibility of the City of Pearland, Texas'
management Our responsibility is to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States Those standards require that we plan
and perfoiin the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement An audit includes examining, on a test basis evidence supporting the amounts
and disclosures in the financial statements An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business -type activities, the
aggregate discretely presented component units, each major fund, and the aggregate remaining fund
information of the City of Pearland, Texas, as of September 30, 2004, and the respective changes in
financial position and cash flows, where applicable, thereof and the respective budgetary comparison for
the General Fund for the year then ended in confonnity with accounting principles generally accepted in
the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated January
7, 2005 on our consideration of the City of Pearland, Texas' internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements
and other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing and not to provide an opinion on the
internal control over financial reporting or on compliance That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in assessing the
results of our audit.
1
401 WEST HIGHWAY 6 ■ P. O. BOX 20725 ■ WACO, TX 76702-0725 ■ (254) 772-4901 ■ FAX: (254) 772-4920 ■ www.pbhcpa.com
AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544-7778 ■ HILLSBORO, TX (254) 582-2583
TEMPLE, TX (254) 791-3460 ■ ALBUQUERQUE, NM (505) 266-5904 ■ RIO RANCHO, NM (505) 898-3516
The management's discussion and analysis on pages 3 through 11 is not a required part of the
basic financial statements but is supplementary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures, which consisted
principally of inquiries of management regarding the methods of measurement and presentation of the
required supplementary information However, we did not audit the information and express no opinion
on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City of Pearland, Texas' basic financial statements. The introductory section,
combining and individual fund financial statements and schedules and statistical tables are presented for
purposes of additional analysis and are not a required part of the basic financial statements. The
combining and individual fund financial statements and schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in
all material respects in relation to the basic financial statements taken as a whole. The introductory
section and statistical tables have not been subjected to the auditing procedures applied in the audit of
the basic financial statements and, accordingly we express no opinion on them.
fRuklekiloinn
January 7, 2005
2
MANAGEMENT' S
DISCUSSION AND ANALYSIS
Management's Discussion and Analysis
As management of the City of Pearland, we offer readers of the City's financial statements this narrative
overview and analysis of the financial activities of the City for the fiscal year ended September 30,
2004. We encourage readers to consider the information presented here in conjunction with additional
information that we have furnished in our letter of transmittal, which can be found on pages i — viii of
this report.
FINANCIAL HIGHLIGHTS
•
•
The assets of the City of Pearland exceeded its liabilities as of September 30, 2004, by
$56 628,532 (net assets). Of this amount, $25,731,225 (unrestricted net assets) may be
used to meet the City's ongoing obligations to citizens and creditors in accordance with the
City's fund designation and fiscal policies.
The City's total net assets increased by $11,515,589.
• At the close of the current fiscal year, the City of Pearland's governmental funds reported
combined ending fund balances of $60,721,741. Of this amount $57,643,923 is
unreserved fund balance available for use within the City s fund designation and fiscal
policies.
• As of September 30 2004, the unreserved, undesignated fund balance for the General Fund
was $8,215,524. Approximately $1.2 million of this ending balance can be attributed to
work in progress for capital projects, which is expected to decrease the fund balance in the
following fiscal year.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City's basic financial
statements. The City's basic financial statements are comprised of three components: (1) government -
wide financial statements, (2) fund financial statements and (3) notes to the financial statements. This
report also contains other supplementary information in addition to the basic financial statements
themselves.
Government -wide Financial Statements — The government -wide financial statements, which begin on
page 11 of this report, are designed to provide readers with a broad overview of the City's finances, in a
manner similar to a private -sector business.
The Statement of Net Assets presents information on all of the City's assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may
serve as a useful indicator of whether the financial position of the City is improving or deteriorating.
3
The Statement of Activities presents information showing how the City's net assets changed during the
fiscal year. All changes in net assets are reported when the underlying event giving rise to the change
occurs, regardless of the timing of related cash flows Thus, revenues and expenses are reported in this
statement for some items that will only result in cash flows in the future fiscal periods (e.g , uncollected
taxes and earned but unused compensated absences)
Both of the government -wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from functions that are
intended to recover all or a significant portion of their costs through user fees and charges (business -type
activities). The governmental activities of the City include General Government, Public Safety, Public
Works and Community Services. The business -type activities of the City include Water and Sewer.
The government -wide financial statements include not only the City of Pearland itself (known as the
primary government), but also a legally separate Economic Development Corporation and Tax
Increment Investment Zone (TIRZ) Developments for which the City of Pearland is financially
accountable. Financial information for these component units is reported separately from the financial
information presented for the primary government, itself.
Fund Financial Statements — A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. The City, like other state
and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related
legal requirements. All funds of the City can be divided into two categories — governmental funds and
proprietary funds.
Governmental Funds — Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government -wide financial statements However, unlike the
government -wide financial statements, governmental fund financial statements focus on current sources
and uses of spendable resources, as well as on balances of spendable resources available at the end of
the fiscal year. Such information may be useful in evaluating a government's near -term financing
requirements.
Because the focus of governmental funds is narrower than that of the government -wide financial
statements, it is useful to compare the infoiniation presented for governmental funds with similar
information presented for governmental activities in the government -wide financial statements. By
doing so, readers may better understand the long-term impact of the government's near-teini financing
decisions. Both the governmental funds balance sheet and the governmental fund statements of
revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
Beginning on page 14 of this report, information is presented separately in the Governmental Fund
Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures, and Changes in
Fund Balances for the General, Debt Service and Capital Projects Funds, which are considered to be
major funds. Data from the other governmental funds are combined into a single, aggregated
presentation Individual fund data for each of these non -major governmental funds is provided in the
form of combining statements elsewhere in this report.
4
Proprietary Funds — The City maintains one type of proprietary fund. Enterprise Funds are used to
report the same functions presented as business -type activities in the government -wide financial
statements. The City uses an Enterprise Fund to account for the Water and Sewer Fund.
Proprietary funds provide the same type of information as the government -wide financial statements,
only in more detail. The basic proprietary fund financial statements, which begin on page 18 of this
report, provide separate infonuiation for the Water and Sewer Enterprise Fund since it is considered to be
a major fund of the City.
Notes to the Financial Statements — The notes provide additional infoumation 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 on pages 21 — 44 of this report.
Other Information — In addition to the basic financial statements and accompanying notes, this report
also presents combining fund statements and schedules that further support the information in the
financial statements. The combining fund statements and schedules for nonmajor funds are presented
immediately following the notes to the financial statements beginning on page 45 of this report.
GOVERNMENT -WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of government's financial position.
In the case of the City of Pearland, net assets exceeded liabilities by $56,628,532 as of September 30,
2004.
The largest portion of the City's net assets $24,506,803 reflects its investments in capital assets (e.g.,
land building, equipment, improvements, construction in progress and infrastructure), less any
outstanding debt used to acquire those assets. The City uses these capital assets to provide service to
citizens; consequently these assets are not available for future spending. Although the City's
investment in its capital assets is reported net of related debt, it should be noted that the resources
needed to repay this debt must be provided from other sources since the capital assets themselves
cannot be used to liquidate these liabilities.
5
Current and other assets
Capital assets
Total assets
CITY OF PEARLAND'S NET ASSETS
Governmental Activities
2004
2003
$ 64,371,013 $
67,143,104
131,514,117
Other liabilities 2,750,146
Long-term liabilities 118,165,340
Total liabilities 120,915,486
Net assets:
Invested in capital assets,
net of related debt
Restricted
Unrestricted
2,537,520)
6,390,504
6,745,647
Business -type Activities
2004 2003
58,831,697 $
51,822,512
110,654,209
7,921,467
100,148,774
108,070,241
4,777,139)
4,151,464
3,209,643
Total net assets $ 10,598,631 $
23,448,781 $
76,429,323
99,878,104
3,207,343
50,640,860
53,848,203
2,583,968 $
Totals
2004
31,053,620 $
67,239,915
98,293,535
4,449,789
51,314,771
55,764,560
2003
87,819,794 $
143,572,427
231,392,221
5,957,489
168,806,200
174,763,689
27,044,323 16,779,525
18,985,578 25,749,450
46,029,901 $ 42,528,975 $
24,506,803
6,390,504
25,731,225
89,885,317
119,062,427
208,947,744
12,371,256
151,463,545
163,834,801
12,002,386
4,151,464
28,959,093
56,628,532 $ 45,112,943
A portion of the City's net assets ($6,390,504) represents resources that are subject to external
restriction on how they may be used. The remaining balance ($25,731,225) of unrestricted net assets
may be used to meet the City's ongoing obligations to citizens and creditors.
Analysis of the City's Operations — The following table provides a summary of the City's operations
for the year ended September 30, 2004. Governmental activities increased the City of Pearland's net
assets by $8,014,663, accounting for approximately 70% of the total growth in net assets. Business -type
activities increased the City's net assets by $3,500,926, accounting for approximately 30% of the total
growth in net assets.
Governmental Activities — The major increase in revenues comes from the tax category. The property
tax base increased by approximately $413 million, due to construction of new residences, businesses,
and revaluation of property. The current year tax collection rate was approximately 98% of the levy.
Additionally, there was an increase in both license and permit revenues and engineering and inspection
revenues due to an increase in both residential and commercial building permits. Sales tax revenues
increased due to the addition of new retail outlets and an increased residential base to frequent the new
and existing retail outlets. Fines and forfeitures were up due to increased citations issued, and
investment earnings are down due to the continued low interest rates.
Business -type Activities — The City has one enterprise operation, the Water and Sewer Fund. Total
operating revenues of the Water and Sewer fund were $11,892,876 for the fiscal year. Water sales
increased primarily due to an increasing customer base due to growth in residential and commercial
development, and due to a lack of rainfall during portions of the year. Similarly, service charges for
wastewater increased primarily due to new residential and commercial construction. The increase in the
Water and Sewer Fund's expenditures was primarily due to various capital infrastructure improvements
and increase in service to customers.
6
CITY OF PEARLAND'S CHANGES IN NET ASSETS
Governmental Activities
2004
Revenues:
Program revenues:
Charges for services $
Operating grants
and contributions
Capital grants
and contributions
General revenues:
Ad valorem taxes
Sales taxes
Franchise taxes
Other taxes
Investment earnings
Miscellaneous
Total revenues
Expenses:
General government
Public safety
Public works
Community services
Interest on Tong -tern
debt
Water and sewer
Total expenses
Increases in net assets
before transfers
Transfers
Change in net assets
Net assets, beginning
Prior period adjustment
Net assets, ending
2003
11,040,246 $
855,917
2,074,506
17,907,163
6,739,484
2,883,188
193,464
1,115,100
782,165
43,591,233
7,314,239
10,524,915
9,912,937
2,700,356
5,549,292
36,001,739
7,589,494
524,110
8,113,604
2,583,968
( 98,941)
Business -type Activities
2004 2003
8,571,764 $
711,671
2,217,293
15,120,150
5,859,053
2,533,475
149,335
170,594
741,313
36,074,648
6,274,853
9,645,369
9,728,975
2,873,903
4,558,650
33,081,750
2,992,898
728,000
3,720,898
( 1,136,930)
11,892,876 $
47,293
6,932,959
417,258
19,290,386
aiMi
gim
NIEL
15,265,350
15,265,350
4,025,036
Totals
2004
8,809,189 $ 22,933,122
903,210
9,881,756 9,007,465
196,094
18,887,039
9,643,086
9,643,086
9,243,953
( 524,110) ( 728,000)
3,500,926
42,528,975
$ 10,598,631 $ 2,583,968 $ 46,029,901 $
17,907,163
6,739,484
2,883,188
193,464
1,532,358
782,165
62,881,619
7,314,239
10,524,915
9,912,937
2,700,356
5,549,292
15,265,350
51,267,089
11,614,530
2003
$ 17,380,953
711,671
12,099,049
15,120,150
5,859,053
2,533,475
149,335
366,688
741,313
54,961,687
6,274,853
9,645,369
9,728,975
2,873,903
4,558,650
• 9,643,086
42,724,836
12,236,851
8,515,953 11,614,530
32,047,168 45,112,943
1,965,854 ( 98,941)
42,528,975 $ 56,628,532 $
12,236,851
30,910,238
1,965,854
45,112,943
7
FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS
Governmental Funds — The focus of the City of Pearland's governmental funds is to provide
information on near -term inflows, outflows, and balances of spendable resources. Such information is
useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve
as a useful measure of a government's net resources available for spending at the end of the fiscal year.
At the end of the current fiscal year, the City of Pearland's governmental funds reported combined
ending fund balances of $60,721,741. Approximately 95% of this total amount $57,643,923 constitutes
an unreserved fund balance The remainder of the fund balance $3,077 818 is reserved to indicate that is
not available for new spending because it has already been committed to pay for encumbrances or debt
service or to provide for other items. Refer to page 14 of this report for a more detailed presentation of
governmental fund balances.
In the General Fund, the City originally budgeted for no change in fund balance. The actual increase to
fund balance for the General Fund was $2,923,858 for fiscal year 2004.
Proprietary Funds — The City's proprietary fund statements, beginning on page 18 of this report,
provide the same type of information found in the government -wide financial statements, but in more
detail.
Unrestricted net assets of the only proprietary fund are $18,985,578. This fund experienced increases in
total net assets during 2004 of $3,500,926. This increase was primarily due to an increase in customer
base. See discussion for business -type activities for further explanation
General Fund Budgetary Highlights — During the year, revenues exceeded budgetary estimates and
expenditures were less than budgetary estimates, thus eliminating any need to draw upon existing fund
balance.
Refer to the General Fund Statement of Revenue, Expenditures and Changes in Fund Balances — Budget
and Actual on page 17 of this report for a detailed presentation of the actual General Fund operations
compared to both the original and final budget for fiscal year 2004.
CAPITAL ASSETS
The City of Pearland's investment in capital assets for its governmental and business -type activities as
of September 30, 2004, amounts to $143,572,427 (net of accumulated depreciation). This investment in
capital assets includes land, building equipment, improvements other than buildings infrastructure and
construction work in progress. Major capital asset events occurring during the current fiscal year related
primarily to three basic categories: water and sewer infrastructure projects, streets and mobility projects
and drainage improvement projects.
8
Land
Buildings and
improvements
Equipment
Infrastructure/
water distribution
Construction in
progress
Less: accumulated
depreciation
Total capital assets
CITY OF PEARLAND'S CAPITAL ASSETS AT YEAR-END
Governmental Activities
2004 2003
2,509,691 $
12,575,655
8,619,886
42,674,657
12,946,218
Business -type Activities
Totals
2004 2003 2004
2,509,691 $
2003
367,962 $ 367,962 $ 2,877,653 $ 2,877,653
12,575,655 21,518,110
10,880,210 7,895,580
18,195,829
19,367,162
12,183,003) ( 11,706,035)
60,791,814
21,518,110
7,512,707
34,093,765 34,093,765
16,515,466 18,392,917
32,641,748 103,466,471
2,166,494 19,321,872
50,837,577
15,112,712 38,689,034
16,310,637) ( 14,122,484) ( 28,493,640) ( 25,828,519)
$ 67,143,104 $ 51,822,512 $ 76,429,323 $
67,239,915 $ 143,572,427 $ 119,062,427
Additional information on the City's capital assets can be found in Note 4, pages 34 — 35 of this report.
DEBT ADMINISTRATION
At the end of the current fiscal year, the City of Pearland had total bonded debt of $165,770,000. Of this
amount, $132 265,000 represents bonded debt backed by the full faith and credit of the government and
$33,505,000 represents bonds secured solely by water and sewer revenues.
General obligation
Revenue bonds
payable
Certificates of
obligation
CITY OF PEARLAND'S
OUTSTANDING DEBT AT YEAR-END
Governmental Activities
2004 2003
Business -type Activities Totals
2004 2003
2004
2003
$ 25,345,000 $ 26,880,000 $ $ $ 25,345,000 $ 26,880,000
33,505,000 34,485,000 33,505,000 34,485,000
90,185,000 70,650,000 16,735,000 16,835,000 106,920,000 87,485,000
$ 115,530,000 $ 97,530,000 $ 50,240,000 $ 51,320,000 $ 165,770,000 $ 148,850,000
During the fiscal year, the City issued $21,000,000 in Certificates of Obligation.
The City's General Obligation, Certificates of Obligation, and Revenue Bond ratings are listed below.
Tax Bonds
Revenue Bonds
Moody's
AAA
AAA
Standard
and Poor s
AAA
AAA
9
Most of the City's Bonds are insured, thus holding a Triple A credit rating from Moody's and Standard
& Poor's Additional information on the City of Pearland's long term -debt can be found on pages 36 —
40 of this report.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The General Fund budget (including transfers in) for fiscal year 2005 is based on a projected revenue
growth of 10% compared to the fiscal year 2004 budget due to anticipated continued growth Licenses
and Permits account for the majority of the increase. Approximately 21% of General Fund revenues are
sales taxes. Substantial anticipated increases in property taxes, due to growth, are budgeted for in fiscal
year 2005. However, those funds have been allocated to the Debt Service Fund and will have no
material impact on the General Fund.
The 2005 budget includes for the General Fund additional personnel and various system improvements.
There are also budgeted increases for various depaitiuents related to the purchases of additional vehicles
and equipment
There is no rate increase in the 2005 budget for the Water and Sewer Fund Included in the Water and
Sewer Fund are additions to personnel and generous repairs, replacements, and maintenance related
capital infrastructure. There are also budgeted increases for various departments related to the purchase
of additional vehicles and equipment. The Pearland Economic Development Fund fiscal year 2005
budget includes bond proceeds from the sale of Sales Tax Bonds totaling $6,500,000 for the Kirby Road
Extension and related water, sewer and drainage in February 2005.
REQUEST FOR INFORMATION
The financial report is designed to provide our citizens, customers, investors and creditors with a general
overview of the City's finances. If you have questions about this report or need any additional
information contact Andrea Jason, Director of Finance, at 3519 Liberty Drive, Pearland, Texas 77581
or call (281) 652-1600.
10
BASIC
FINANCIAL STATEMENTS
ASSETS
Cash and investments
Receivables, net of allowances
for uncollectibles
Accounts
Property taxes
Sales taxes
Other taxes
Intergovernmental
Accrued interest
Inventories
Deferred charges
Restricted cash and investments
Capital assets:
Land
Buildings and improvements
Machinery and equipment
Infrastructure
Construction work in progress
Less: accumulated depreciation
Total capital assets
Total assets
LIABILITIES
Accounts payable
Accrued liabilities
Unearned revenue
Accrued interest
Customer deposits
Noncurrent liabilities:
Due within one year
Due in more than one year
Total liabilities
NET ASSETS
Invested in capital assets,
net of related debt
Restricted for:
Debt service
Street improvements
Other purposes
Unrestricted
Total net assets
CITY OF PEARLAND, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2004
Primary Government
Governmental
Activities
$ 61,238,802
977,462
738,970
1,190,945
10,967
27,430
1,103
70,066
115,268
2,509,691
12,575,655
8,619,886
42,674,657
12,946,218
( 12,183,003)
67,143,104
131,514,117
2,205,231
111,856
21,843
411,216
4,010,021
114,155,319
120,915,486
2,537,520)
2,841,682
654,145
2,894,677
6,745,647
Business -type
Activities
Total
18,221,235 $
3,745,559
6,553
669,993
805,441
367,962
21,518,110
7,895,580
60,791,814
2,166,494
( 16,310,637)
76,429,323
99,878,104
1,864,960
27,420
230,437
1,084,526
1,685,172
48,955,688
53,848,203
$ 10,598,631 $
27,044,323
18,985,578
46,029,901
79,460,037
4,723,021
738,970
1,190,945
10,967
27,430
7,656
70,066
785,261
805,441
2,877,653
34,093,765
16,515,466
103,466,471
15,112,712
28,493,640)
143,572,427
231,392,221
4,070,191
139,276
21,843
641,653
1,084,526
5,695,193
163,111,007
174,763,689
24,506,803
2,841,682
654,145
2,894,677
25,731,225
56,628,532
Component Units
Economic
Development
Corporation
$ 3,423,253
142
589,774
13,623
19,501
124,959
( 144,460)
4,026,792
72,879
6,204
212,908
3,966,632
4,258,623
( 231,831)
TIRZ
Developments
$ 547,263
55,436
Imp
602,699
30,736
30,736
$( 231,831) $
The notes to the financial statements are an integral part of this statement.
571,963
571,963
11
CITY OF PEARLAND, TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Functions/Programs
Primary Government:
Governmental activities:
General government
Public safety
Public works
Community services
Interest on long-term debt
Total governmental activities
Business -type activities:
Water and sewer
Total business -type activities
Total primary government
Component Units:
Economic Development Corporation
TIRZ Developments
Total component units
Expenses
Program Revenues
Charges for
Services
$ 7,314,239 $
10,524,915
9,912,937
2,700,356
5,549,292
36,001,739
15,265,350
15,265,350
$ 51,267,089
Operating
Grants and
Contributions
506,081 $
2,974,714
6,863,769
695,682
11,040,246
11,892,876
11,892,876
$ 22,933,122
$ 1,977,848 $
294,617
$ 2,272,465 $
General revenues:
Taxes:
Property, levied for general purposes
Property, levied for debt service
Sales
Franchise
Other
Investment earnings
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets, beginning
Prior period adjustment
Net assets, beginning, as restated
Net assets, ending
838,918
16,999
855,917
47,293
47,293
$ 903,210
The notes to the financial statements are an integral part of this statement.
Capital
Grants and
Contributions
$ 1,318,518
755,988
2,074,506
6,932,959
6,932,959
$ 9,007,465
12
Net (Expenses) Revenues and
Changes in Net Assets
Primary Government
Governmental
Activities
Business -type
Activities
5,489,640) $
5,955,295)
3,049,168)
1,987,675)
5,549,292)
22,031,070)
$( 22,031,070)
3,607,778
3,607,778
$ 3,607,778
$ 8,760,346 $
9,146,817
6,739,484
2,883,188
193,464
1,115,100
782,165
524,110
30,144,674
8,113,604
2,583,968
( 98,941)
2,485,027
$ 10,598,631
417,258
( 524,110)
( 106,852)
3,500,926
42,528,975
42,528,975
$ 46,029,901
Total
5,489,640)
5,955,295)
3,049,168)
1,987,675)
5,549,292)
22,031,070)
3,607,778
3,607,778
$( 18,423,292)
$ 8,760,346
9,146,817
6,739,484
2,883,188
193,464
1,532,358
782,165
30,037,822
11,614,530
45,112,943
( 98,941)
45,014,002
$ 56,628,532
Component Units
Economic
Development
Corporation
$( 1,977,848)
$( 1,977,848)
3,369,173
99,776
10,000
3,478,949
1,501,101
( 1,732,932)
( 1,732,932)
$( 231,831)
TIRZ
Developments
294,617)
294,617)
$ 765,066
10,019
3,103
778,188
483,571
88,392
88,392
$ 571,963
13
ASSETS
Cash and investments
Receivables, net of allowances for uncollectibles
Accounts
Property taxes
Sales taxes
Other taxes
Intergovernmental
Accrued interest
Inventories
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Accrued liabilities
Deferred revenue
Total liabilities
Fund balances:
Reserved for:
Inventories
Debt service
Unreserved, reported in:
General fund
Special revenue funds
Capital projects fund
Total fund balances
CITY OF PEARLAND, TEXAS
BALANCE SHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30, 2004
General
7,544,837
865,381
482,424
1,190,945
10,967
70,066
$ 10,164,620
982,692
73,857
822,481
1,879,030
70,066
8,215,524
8,285,590
Debt
Service
Capital
Projects
$ 3,015,151 $ 47,162,110
72,870
256,546
$ 3,271,697 $
18,799
245,146
263,945
3,007,752
47,234,980
1,222,429
1,222,429
46,012,551
3,007,752 46,012,551
Total liabilities and fund balances $ 10,164,620 $ 3,271,697 $ 47,234,980
Other
Funds
$ 3,516,704
39,211
27,430
1,103
$ 3,584,448
110
19,200
149,290
168,600
2,848,603
567,245
3,415,848
$ 3,584,448
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, are not reported in the funds.
Other long-term assets are not available to pay for current -period expenditures and, therefore, are deferred in the funds.
Long -tern liabilities are not due and payable in the current period and therefore are not reported in the funds.
Net assets of governmental activities
The notes to the financial statements are an integral part of this statement.
Total
Governmental
Funds
$ 61,238,802
977,462
738,970
1,190,945
10,967
27,430
1,103
70,066
$ 64,255,745
2,205,231
111,856
1,216,917
3,534,004
70,066
3,007,752
8,215,524
2,848,603
46,579,796
60,721,741
67,143,104
1,195,074
( 118,461,288)
$ 10,598,631
14
CITY OF PEARLAND, TEXAS
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
REVENUES
Taxes:
Property
Sales
Mixed beverage
Hotel/motel
Franchise
Permits, licenses and fees
Fines
Charges for services
Intergovernmental
Other income
Investment earnings
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Community services
Capital outlay
Debt service:
Principal
Interest and fiscal charges
Total expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Proceeds from capital lease
Capital -related debt issued
Premium from capital -related debt issued
Total other financing sources and (uses)
NET CHANGE IN FUND BALANCES
FUND BALANCES, BEGINNING AS
PREVIOUSLY STATED
PRIOR PERIOD ADJUSTMENT
FUND BALANCES, BEGINNING AS RESTATED
FUND BALANCES, ENDING
General
8,752,162
6,739,484
39,315
2,883,188
3,427,957
1,561,850
5,259,748
716,136
621,396
194,917
30,196,153
6,059,595
10,142,115
8,709,151
2,792,376
27,703,237
2,492,916
858,942
428,000)
430,942
2,923,858
5,361,732
5,361,732
Debt
Service
$ 9,138,523
15,669
9,154,192
3,000,000
5,549,292
8,549,292
Capital
Pro. ects
1,637,110
224,673
790,123
2,651,906
18,044,504
115,268
18,159,772
604,900 ( 15,507,866)
272,531
272,531
250,000
( 469,000)
184,000
21,000,000
94,443
21,059,443
877,431 5,551,577
2,130,321 40,460,974
2,130,321
40,460,974
Other
Funds
153,908
12,891
46,466
686,478
230,235
114,391
1,244,369
161,771
101
111,923
13,380
287,175
957,194
Total
Governmental
Funds
$ 17,890,685
6,739,484
39,315
153,908
2,883,188
3,440,848
1,608,316
5,259,748
3,039,724
1,076,304
1,115,100
43,246,620
6,221,366
10,142,216
8,709,151
2,904,299
18,057,884
3,000,000
5,664,560
54,699,476
( 11,452,856)
50,000 1,431,473
( 10,363) ( 907,363)
184,000
21,000,000
94,443
39,637 21,802,553
996,831
2,517,958
10,349,697
50,470,985
( 98,941) ( 98,941)
2,419,017
50,372,044
8,285,590 $ 3,007,752 $ 46,012,551 $ 3,415,848 $
The notes to the financial statements are an integral part of this statement.
60,721,741
15
CITY OF PEARLAND, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Amounts reported for governmental activities in the Statement of Activities (pages 12 - 13)
are different because:
Net change in fund balances - total governmental funds (page 15) $ 10,349,697
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 outlays exceeded depreciation in
the current period. 15,320,592
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds.
The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to
governmental funds while the repayment of the principal of long-term debt consumes the
current financial resources of governmental funds. Neither transaction, however, has any
effect on net assets. This amount is the net effect of these differences in the treatment of long-
term debt and related items.
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.
344,613
( 18,163,175)
261,877
Change in net assets of governmental activities (pages 12 - 13) $ 8,113,604
The notes to the financial statements are an integral part of this statement.
16
CITY OF PEARLAND, TEXAS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
REVENUES
Property taxes and penalties
Other taxes
Franchise fees
Licenses and permits
Fines and forfeitures
Charges for services
Intergovernmental
Other income
Investment earnings
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Community services
Total expenditures
FOR THE YEAR ENDED SEPTEMBER 30, 2004
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total other financing sources (uses)
NET CHANGE IN FUND BALANCES
FUND BALANCES, BEGINNING
FUND BALANCES, ENDING
Budgeted Amounts
Original Final
$ 9,085,112
6,182,500
2,820,000
3,023,095
1,361,500
5,100,086
281,019
495,282
153,000
28,501,594
6,198,755
9,836,484
10,275,678
2,816,985
29,127,902
$ 9,085,112
6,182,500
2,820,000
3,023,095
1,362,500
5,100,086
281,019
495,282
153,000
28,502,594
6,184,661
10,137,962
9,772,180
2,874,003
28,968,806
( 626,308) ( 466,212)
1,100,363
( 428,000)
672,363
46,055
5,017,946
$ 5,064,001
Actual
Amounts
$ 8,752,162
6,778,799
2,883,188
3,427,957
1,561,850
5,259,748
716,136
621,396
194,917
30,196,153
6,059,595
10,142,115
8,709,151
2,792,376
27,703,237
2,492,916
1,100,363 858,942
( 428,000) ( 428,000)
672,363 430,942
206,151
5,017,946
2,923,858
5,017,946
Variance with
Final Budget -
Positive
(Negative)
$( 332,950)
596,299
63,188
404,862
199,350
159,662
435,117
126,114
41,917
1,693,559
125,066
( 4,153)
1,063,029
81,627
1,265,569
2,959,128
( 241,421)
( 241,421)
2,717,707
$ 5,224,097 $ 7,941,804 $ 2,717,707
The notes to the financial statements are an integral part of this statement.
17
CITY OF PEARLAND, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUND
SEPTEMBER 30, 2004
ASSETS
Current assets:
Cash and investments
Accounts receivable, net of allowances
Accrued interest
Restricted cash and investments
Total current assets
Noncurrent assets:
Deferred charges
Capital assets:
Land
Buildings and improvements
Machinery and equipment
Infrastructure
Construction work in progress
Less: accumulated depreciation
Total capital assets
Total noncurrent assets
Total assets
LIABILITIES
Current liabilities:
Accounts payable
Accrued liabilities
Accrued interest
Customer deposits
Compensated absences
Certificates of obligation
Revenue bonds
Total current liabilities
Noncurrent liabilities:
Compensated absences
Certificates of obligation
Revenue bonds
Total noncurrent liabilities
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Unrestncted
Total net assets
The notes to the financial statements are an integral part of this statement.
18
Business -type
Activities
Enterprise Fund
Water and Sewer
$ 18,221,235
3,745,559
6,553
805,441
22,778,788
669,993
367,962
21,518,110
7,895,580
60,791,814
2,166,494
( 16,310,637)
76,429,323
77,099,316
99,878,104
1,864,960
27,420
230,437
1,084,526
80,172
855,000
750,000
4,892,515
320,688
15,880,000
32,755,000
48,955,688
53,848,203
27,044,323
18,985,578
46,029,901
CITY OF PEARLAND, TEXAS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2004
OPERATING REVENUES
Charges for services
Other
Total operating revenues
OPERATING EXPENSES
Production and wastewater
Distribution and collection
Accounting and collections
Other requirements
Construction and engineering
Depreciation
Total operating expenses
OPERATING INCOME
NONOPERATING REVENUES (EXPENSES)
Earnings on investments
Intergovernmental
Interest and fiscal charges
Total nonoperating revenues (expenses)
LOSS BEFORE CONTRIBUTIONS
AND TRANSFERS
CAPITAL CONTRIBUTIONS
TRANSFERS IN
TRANSFERS OUT
CHANGE IN NET ASSETS
TOTAL NET ASSETS, BEGINNING
TOTAL NET ASSETS, ENDING
Business -type
Activities
Enterprise Fund
Water and Sewer
$ 11,840,005
52,871
11,892,876
4,887,517
1,455,607
1,053,388
638,004
2,842,867
2,192,353
13,069,736
( 1,176,860)
417,258
47,293
( 2,195,614)
( 1,731,063)
( 2,907,923)
6,932,959
128,000
( 652,110)
3,500,926
42,528,975
$ 46,029,901
The notes to the financial statements are an integral part of this statement.
19
CITY OF PEARLAND, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customer
Cash paid to suppliers for goods and service
Cash paid to employees for services
Net cash used for operating activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers from other fund:
Transfers to other funds
Net cash used for noncapital for financing activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Principal repayments on bond
Cash received from capital contribution
Interest and fiscal charges on deb
Acquisition and construction of capital asset
Disposal of capital assets
Net cash used for capital and related financing activities
CASH FLOWS FROM INVESTING ACTIVITIES
Earnings on investments
Net cash provided by investing activities
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING
CASH AND CASH EQUIVALENTS, ENDING
Cash and investment;
Restricted cash and investments
Cash and cash equivalents, ending
Reconciliation of operating loss to net cas
used for operating activities
Operating loss
Adjustments to reconcile operating los
to net cash used for operating activities
Depreciation
Changes in assets and liabilities
Decrease (increase) in assets
Accounts rcceivabh
Increase (decrease) in liabilities
Accounts payable
Accrued liabilitie;
Customer deposit:
Compensated absences payable
Net cash used for operating activities
The notes to the financial statements are an integral part of this statement.
Business -type
Activities
Enterprise Fund
Water and Sewer
9,796,621
2,481,493)
9,477,664)
2,162,536)
128,000
( 652,110)
(
524,110)
1,080,000)
6,980,252
2,153,417)
11,391,761)
10,000
7,634,926)
454,245
454,245
(
9,867,327)
28,894,003
19,026,676
18,221,235
805,441
19,026,676
$( 1,176,860)
2,192,353
( 2,313,407)
(
(
974,752)
92,721)
217,152
( 14,301)
$( 2,162,536)
20
CITY OF PEARLAND, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The City of Pearland, Texas was incorporated in December 1959, and adopted the "Home
Rule Charter" February 6, 1971, pursuant to the laws of the State of Texas. The City
operates under a "Council -Manager" form of government and provides services authorized
by its charter. Presently, these services include police and fire protection, water and sewer
services, drainage, sanitation, building and code inspection planning, zoning engineering,
street repair and maintenance, park maintenance, recreational activities for citizens, and
general administrative services. The City is an independent political subdivision of the State
of Texas, governed by an elected mayor and five -member Council, and is considered a
primary government.
The accompanying financial statements present the government and its component units,
entities for which the government is considered to be financially accountable. Each
discretely presented component unit is reported in a separate column in the government -wide
financial statements (see note below for description) to emphasize that it is legally separate
from the government.
Discretely Presented Component Units — The component units' column in the government -
wide financial statements includes the financial data of the City's component units.
1. The Pearland Economic Development Corporation (PEDC) is responsible for
economic development within the City's jurisdiction The PEDC is fiscally
dependent upon the government because, besides appointing the Board, the
City Council also must approve the PEDC's budget and any debt issuances.
2. The Tax Increment Reinvestment Zone (TIRZ #2) provides tax assisted
property development and/or redevelopment in specific geographic areas in
accordance with applicable state laws. Besides appointing Board members,
the City Council must also approve the TIRZ's budgets and any debt
issuances done on behalf of the TIRZs.
(continued)
21
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A. Reporting Entity (Continued)
Complete financial statements for each of the individual component units may be obtained
from their respective administrative offices at the following address:
Pearland Economic Development Corporation
or
Tax Increment Reinvestment Zones
3519 Liberty Drive
Pearland, Texas 77581 5416
B. Government -wide and Fund Financial Statements
The government -wide financial statements (i.e., the statement of net assets and the statement
of activities) report information on all of the nonfiduciary activities of the primary
government and its component units. For the most part, the effect of interfund activity has
been removed from these statements. Governmental activities which normally are supported
by taxes and intergovernmental revenue, are reported separately from business -like activities
which rely to a significant extent on fees and charges for support. Likewise, the primary
government is reported separately from certain legally separate component units for which
the primary government is financially accountable.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment are offset by program revenue. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenue includes 1) charges to
customers or applicants who purchase, use, or directly benefit from goods, services, or
privileges provided by a given function or segment, and 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or
segment. Taxes and other items not properly included among program revenue are reported
instead as general revenue.
Separate financial statements are provided for governmental funds and proprietary funds.
Major individual governmental funds and major individual Enterprise Funds are reported as
separate columns in the fund financial statements.
(continued)
22
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government -wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund financial
statements. Revenue is recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows. Property taxes are recognized as
revenue in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenue is recognized as
soon as it is both measurable and available. Revenue is considered to be available when it is
collectible within the current period or soon enough thereafter to pay liabilities of the current
period. For this purpose, the government considers revenue to be available if collected
within 60 days of the end of the current fiscal period. Expenditures generally are recorded
when a liability is incurred, as under accrual accounting. However debt service
expenditures, as well as expenditures related to compensated absences and claims and
judgments, are recorded only when payment is due.
Property taxes, franchise taxes, sales taxes, and interest associated with the current fiscal
period are all considered to be susceptible to accrual and so have been recognized as revenue
of the current fiscal period. All other revenue items are considered to be measurable and
available only when cash is received by the City.
The City reports the following major governmental funds:
The General Fund is the City's primary operating fund It accounts for all
financial resources of the general government, except those required to be
accounted for in another fund.
The Debt Se! vice Fund is used to account for the resources accumulated and
payments made for principal and interest on long-term general obligation debt of
the governmental funds.
The Capital Projects Fund is used to account for the proceeds from the sale of
general obligation bonds and certificates of obligation and expenditures of these
proceeds for the acquisition of capital assets as designated in each bond issue
(continued)
23
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation
(Continued)
The City reports the following major Enterprise Fund:
The Water and Sewer Fund accounts for the activities necessary for the provision
of water and wastewater services.
Private -sector standards of accounting and financial reporting issued prior to December 1,
1989, generally are followed in both the government -wide and proprietary fund financial
statements to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. The City also has the option of following
subsequent private -sector guidance for their business -like activities and Enterprise Funds,
subject to this same limitation. The City has elected not to follow subsequent private -sector
guidance.
As a general rule, the effect of interfund activity has been eliminated from the government -
wide financial statements. Exceptions to this general rule are charges between the City's
water and sewer function and various other functions of the government. Elimination of
these charges would distort the direct costs and program revenue reported for the various
functions concerned.
Amounts reported as pi ogram revenues include. 1) charges to customers or applicants for
goods, services or privileges provided, 2) operating grants and contributions, and 3) capital
grants and contributions, including special assessments. Internally dedicated resources are
reported as general revenues rather than as program revenue. Likewise, general revenue
includes all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating 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 revenues of the City's Enterprise Funds and Internal Service Funds are
charges to customers for sales and services. Operating expenses for Enterprise Funds and
Internal Service Funds include the cost of sales and services, administrative expenses, and
depreciation on capital assets. All revenue and expenses not meeting this definition are
reported as nonoperating revenue and expenses.
When both restricted and unrestricted resources are available for use, it is the City's policy to
use restricted resources first, then unrestricted resources as needed.
(continued)
24
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities and Net Assets or Equity
Cash and Investments
Cash and investments consist of amounts in an interest -bearing time deposit account, petty
cash funds, and U. S. Government Securities Investments are stated at fair value based on
quoted market prices at September 30, 2004. The net increase or decrease in the fair value of
investments is recorded as investment earnings. Investments are generally held to maturity.
The City pools cash resources of its various funds to facilitate the management of cash. Cash
applicable to a particular fund is readily identifiable. The balance in the pooled cash
accounts is available to meet current operating requirements. Cash in excess of current
requirements is invested in various interest -bearing securities and disclosed as part of the
City's investments. The City pools excess cash of the various individual funds to purchase
investments. These pooled investments are reported in the combined balance sheet as
investments in each fund based on each fund's share of the pooled investments. Interest
income is allocated to each respective individual fund monthly based on its respective share
of pooled investments.
Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements
outstanding at the end of the fiscal year are referred to as "due to/from other funds" (i.e., the
current portion of interfund loans). Any residual balances outstanding between the
governmental activities and business -type activities are reported in the government -wide
financial statements as "internal balances "
All trade receivables are shown net of an allowance for uncollectibles. Trade accounts
receivable in excess of 180 days comprise the trade accounts receivable allowance for
uncollectibles.
Property taxes for each year are required to be levied by September 15 and are due upon
receipt of the City's tax bill and become delinquent on February 1 of the following year. On
January 1 of each year, a tax hen is attached to the property to secure the payment of all
taxes, penalties and interest. The lien exists in the favor of the State and each taxing unit
Appraised values are established by the Central Appraisal District (CAD) of Brazoria
County, Texas, through procedures established by the Texas Legislature. The Brazoria
County Tax office bills and collects the City's property taxes.
A penalty of 7% is added to delinquent taxes on February 1 and increases 2% each month
through September. An additional penalty of 15% is added in July for attorney costs. There
are no discounts allowed in taxes.
(continued)
25
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities and Net Assets or Equity (Continued)
Receivables and Payables
The City is permitted by Article XI, Section 5 of the State of Texas Constitution and the
City Charter to levy property taxes up to $2.50 per $100 of assessed valuation for general
governmental services. Within the $2.50 maximum levy, there is no legal limit upon the
amount of property taxes, which can be levied for debt service. The property tax rates to
finance general governmental services and debt service for the 2003-2004 tax year were
$.3457 and $.3502, respectively, per $100 of assessed valuation The 2004 assessed value
and total tax levy as adjusted through September 30, 2004, were $2,355,280,316 and
$2,583,049,183, respectively.
The City has enacted an ordinance providing for the exemption of $25 000 of the assessed
value of residential homesteads of persons 65 years of age or older from property taxes This
is provided by Section 1-b(a) of Article 8 of the Constitution of Texas. Additionally, the
market value of agricultural land is reduced to agricultural value for purposes of the City's
tax levy calculation.
Inventories
Inventory, which consists of gasoline and auto parts for use in the City's vehicles, is stated at
cost (first -in first -out method) Expenditures are recognized as the fuel and auto parts are
consumed rather when purchased.
Restricted Assets
Certain proceeds of the Enterprise Fund revenue bonds and certain resources set aside for
their repayment, are classified as restricted assets on the balance sheet because their use is
limited by apphcable bond covenants.
Capital Assets
Capital assets, which include property, plant, equipment and infrastructure, are reported in
the applicable governmental or business -type activities columns in the government -wide
financial statements. The City defines capital assets as assets with an initial, individual cost
of more than $1,000 and an estimated useful life in excess of one year. Such assets are
recorded at historical cost or estimated historical cost if purchased or constructed Donated
capital assets are recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend assets' lives are not capitalized.
(continued)
26
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities and Net Assets or Equity (Continued)
Capital Assets (Continued)
The City has elected to delay implementation of the requirements of GASB 34 related to
infrastructure (roads, sidewalks, etc.) assets acquired prior to October 1, 2002. GASB 34
permits an optional four-year transition period for governmental infrastructure reporting.
Property, plant, and equipment is depreciated using the straight-line method over the
following useful lives:
Assets Years
Buildings and improvements 20-45
Machinery and equipment 5-15
Infrastructure 40-50
Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused vacation, sick
and holiday pay benefits.
Employees earn vacation leave at the rate of 15 days per year from 1 to 15 years of service,
20 days per year for service of 16 to 19 years, and 25 days per year for service of 20 years or
more. Employees are required to take their earned vacation Employees who are unable to
use their vacation, for various reasons, may, with the City Manager's approval, carry over 50
percent of the unused portion of the vacation, or receive compensation for a maximum of 40
hours.
City employees receive 11 paid holidays per year. Employees may be paid or may elect to
receive compensatory time off for the holiday. Overtime is earned at one and one-half times
the regular rate of pay. Employees may be paid or receive compensatory time The
maximum accrual for overtime is 160 hours, except for employees involved in public safety,
who can accrue up to 320 hours
All sick leave benefits are accumulated and paid to employees upon separation from the City.
Vacation, sick and holiday pay benefits are accrued when incurred in the government -wide
and proprietary fund financial statements. A liability for these amounts is reported in
governmental funds only if they have matured, for example, as a result of employee
resignations and retirements.
(continued)
27
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities and Net Assets or Equity (Continued)
Long-term Obligations
In the government -wide financial statements and proprietary fund types in the fund financial
statements, long-term debt and other long-term obligations are reported as liabilities in the
applicable governmental . activities, business -type activities, or proprietary fund type
statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred
and amortized over the life of the bonds using the straight-line method which approximates
the effective interest method. Bonds payable are reported net of the applicable bond
premium or discount. Bond issuance costs are reported as deferred charges and amortized
over the term of the related debt.
In the fund financial statements, governmental fund types recognize bond premiums and
discounts, as well as bond issuance costs, during the current period. The face amount of debt
issued is reported as other financing sources. Premiums received on debt issuances are
reported as other financing sources while discounts on debt issuances are reported as other
financing uses. Issuance costs, whether or not withheld from the actual debt proceeds
received, are reported as debt service expenditures.
Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for
amounts that are not available for appropriation or are legally restricted by outside parties for
use for a specific purpose Designations of fund balance represent tentative management
plans that are subject to change.
Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in
capital assets, net of related debt consists of capital assets, net of accumulated depreciation,
reduced by the outstanding balances of any borrowing used for the acquisition, construction
or improvements of those assets, and adding back unspent proceeds. Net assets are reported
as restricted when there are limitations imposed on their use either through the enabling
legislations adopted by the City or through external restrictions imposed by creditors,
grantors or laws or regulations of other governments.
Estimates
The preparation of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual amounts could differ from those estimates.
28
2. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS
Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the
Government -wide Statement of Net Assets
The governmental fund balance sheet includes a reconciliation between fund balance — total
governmental funds and net assets — governmental activities as reported in the government -wide
statement of net assets. One element of that reconciliation explains, ` long-term liabilities,
including bonds payable, are not due and payable in the current period and therefore are not
reported in the funds.' The details of this $118,461,288 difference are as follows:
Certificates and General Obligation Bonds
Deferred charge for issuance cost
Deferred amount for issuance premium
Accrued interest payable
Compensated absences
Capital lease obligation
Net adjustment to reduce fund balance - total
governmental funds to arrive at net assets -
governmental activities
115,530,000
115,268)
94,443
411,216
2,356,897
184,000
$ 118,461,288
Explanation of Certain Differences Between the Governmental Fund Statement of
Revenue, Expenditures and Changes in Fund Balances and the Government -wide
Statement of Activities
The governmental fund statement of revenue, expenditures and changes in fund balances
includes a reconciliation between net changes in fund balances — total governmental fund and
changes in net assets of governmental activities as reported in the government -wide statement of
activities. One element of that reconciliation explains, "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 " The details of
this $15,320,592 difference are as follows:
Capital outlay $ 17,947,059
Depreciation expense ( 2,626,467)
Net adjustment to increase net changes in fund balances -
total governmental fiends to arrive at changes in net
assets of governmental activities
(continued)
$ 15,320,592
29
2. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS
(Continued)
Explanation of Certain Differences Between the Governmental Fund Statement of
Revenue, Expenditures and Changes in Fund Balances and the Government -wide
Statement of Activities (Continued)
Another element of that reconciliation states, "Revenues in the statement of activities that do not
provide current financial resources are not reported as revenues in the funds." The details of this
$344,613 difference are as follows:
Property taxes $ 16,478
Court fines 328,135
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities
$ 344,613
Another element of that reconciliation states, "The issuance of long-term debt (e.g. bonds, leases)
provides current financial resources to governmental funds, while the repayment of the principal of
long-term debt consumes the current financial resources of governmental funds. Neither
transaction, however, has any effect on net assets. Also, governmental funds report the effect of
issuance costs, premiums, and similar items when debt is first issued, whereas these amounts are
deferred and amortized in the statement of activities. The details of this $18,163,175 difference are
as follows:
Debt issued or incurred:
Issuance of general obligation bonds
Bond issuance cost
Premium on issuance
Capital lease financing
Principal repayments:
General obligation debt
Net adjustment to reduce net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities
$( 21,000,000)
115,268
94,443)
184,000)
(
(
3,000,000
$( 18,163,175)
Another element of that reconciliation states, "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." The details of this $261,877 difference are as follows:
Compensated absences $ 261,877
Net adjustment to increase net changes in fiend balances -
total governmental funds to arrive at changes in net
assets of governmental activities $ 261,877
30
3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information
Annual appropriated budgets are adopted on a basis consistent with generally accepted
accounting principles for the General Fund and Debt Service Fund The City adopts project -
length budgets for the Capital Projects and Special Revenue Funds. All annual appropriations
lapse at fiscal year-end.
On or before the 10th day of July of each year, the City Manager shall submit to Council a
proposed budget. The Council shall review the proposed budget and revise as deemed
appropriate prior to circulation for public hearing
After the public hearing, the Council may adopt the budget with or without amendment. In
amending the budget, Council may add or increase programs or amounts and may delete or
decrease any amount, except expenditures required by law or for debt or for estimated cash
deficits, provided no amendments to the budget shall increase the authorized expenditures to an
amount greater than the total of estimated income plus funds available from prior years.
The Council shall adopt the budget by the 15th of September of each year. Adoption of the
budget shall constitute appropriation of the amounts specified therein as expenditures and shall
constitute a levy of the property tax therein proposed.
Every appropriation lapses at the close of the fiscal year to the extent it has not been expended.
Any encumbered .appropriation lapses at year-end, but is generally reappropriated as part of the
subsequent year's budget. Expenditures may not legally exceed appropriations at the fund level.
At any time during the fiscal year, the City Manager may request Council to transfer by
ordinance any unencumbered appropriation balance between funds.
No significant supplemental appropriations were necessary during the year.
Deficit Equity Balance
At September 30, 2004, the Pearland Economic Development Corporation had a deficit equity
balance in the amount of $231,830. The City anticipates future revenues to fund this negative
balance.
4. DETAILED NOTES ON ALL FUNDS
Cash and Investments
The City's cash and investments are classified as cash and cash equivalents, investments, and
restricted cash and investments. The cash and cash equivalents include cash on hand, deposits
with financial institutions and other investments which have maturities at purchase date of less
than three months. The restricted cash includes cash on deposit with financial institutions.
(continued)
31
DETAILED NOTES ON ALL FUNDS (Continued)
Cash and Investments (Continued)
The Council has adopted a written investment policy regarding the investment of its funds as
defined by the Public Funds Investment Act (Chapter 2256 Texas Government Code). The
investments of the City are in compliance with the Council's investment policies. It is the City's
policy to restrict its investments to direct obligations of the U. S. Government commercial
paper, fully collateralized certificates of deposit and other interest -bearing time and demand
deposits, and other instruments and investments in public funds investment pools. State law
provides that collateral pledged as security for bank deposits must have a market value of not
less than the uninsured amount of the deposits and must consist of 1) obligations of the United
States of its agencies and instrumentalities; 2) direct obligations of the State of Texas or its
agencies; 3) other obhgations, the principal and interest on which are unconditionally
guaranteed or insured by the State of Texas; and/or 4) obligations of states, agencies, counties,
cities, and other political subdivisions of any state having been rated as to investment quality by
a nationally recognized investment rating fiun and having received a rating of not less than A or
its equivalent.
At year-end, the primary government's carrying amount of deposits was $74,030,682 and the
carrying amount of deposits for the Economic Development Corporation and TIRZ
Developments, discretely presented component units, were $3,423 253 and $547 263,
respectively. Amounts are maintained in consolidated cash accounts, with a bank balance of
$80,372,562. Of the bank balance, $300,000 was fully covered by federal depository insurance
or collateral, $80,072,562, held by the pledging financial institution's trust department or agent
in the City's name.
The primary government's investments are categorized into these three categories of credit risk:
1. Insured or registered, or securities held by the City or its agent in the government's
name.
2. Uninsured and unregistered with securities held by the counterparty's trust
department or agent in the City's name.
3. Uninsured and unregistered, with securities held by the counterparty, or by its
trust department or agent, but not in the City's name.
U. S. Government securities
Total investments
1
Category
2
3
Fair
Value
$ 5,429,355 $ - $ $ 5,429,355
$ 5,429,355 $ $ - $ 5,429,355
(continued)
32
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
Fair value of investments are based on quoted market prices in accordance with GASB Statement
No. 31, Accounting and Financial Repoi ting foi Certain Investments and for External
Investment Pools.
Receivables
Receivables as of year-end for the government's individual major funds and nonmajor funds in
the aggregate, including the applicable allowances for uncollectible accounts, are as follows:
Receivables:
Accounts
Gross receivables
Less: allowance for
uncollectibles
Net total receivables
General
Capital
Projects
Nonmajor
Governmental
$ 930,971 $ 72,870 $ 39,211
930,971 72,870 39,211
( 65,590)
$ 865,381 $ 72,870 $ 39,211
Water
and Sewer
Total
$ 3,861,442 $ 4,904,494
3,861,442 4,904,494
115,883)
(
181,473)
$ 3,745,559 $ 4,723,021
Governmental funds report deferred revenue in connection with receivables for revenue that is
not considered to be available to liquidate liabilities of the current period. Governmental funds
also defer revenue recognition in connection with resources that have been received, but not yet
earned. At the end of the current fiscal year, the various components of deferred revenue and
unearned revenue reported in the governmental funds were as follows:
Unavailable Unearned
General fund:
Delinquent property taxes receivable $ 471,173 $
Municipal court 329,465
Other
Debt service fund:
Delinquent property taxes receivable 245,146
Capital projects:
Other
86,900
Nonmajor governmental:
Other 62,390
Governmental Funds
(continued)
21,843
$ 1,195,074 $ 21,843
33
4. DETAILED NOTES ON ALL FUNDS (Continued)
Capital Assets
Capital asset activity for the year ended September 30, 2004, was as follows:
Primary Government
Beginning
Balance
Governmental activities:
Capital assets, not being depreciated:
Land $
Construction work in progress
Total capital assets not being depreciated
Capital assets, being depreciated:
Buildings
Improvements other than buildings
Machinery and equipment
Infrastructure
Total capital assets being depreciated
Less accumulated depreciation:
Buildings
Improvements other than buildings
Machinery and equipment
Infrastructure
Total accumulated depreciation
Total capital assets, being depreciated, net
Governmental activities capital assets, net $
Increases
2,509,691 $
19,367,162
21,876,853
10,357,504
2,218,151
10,880,210
18,195,829
41,651,694
Business -type activities:
Capital assets, not being depreciated:
Land
Construction work in progress
Total assets not being depreciated
Capital assets, being depreciated:
Buildings and improvements
Machinery and equipment
Infrastructure
Total capital assets being depreciated
Less accumulated depreciation:
Buildings and improvements
Machinery and equipment
Infrastructure
Total accumulated depreciation
Total capital assets being depreciated, net
Business -type activities capital assets, net
3,361,883
1,284,082
6,605,174
454,896
11,706,035
29,945,659
51,822,512 $
18,057,884
18,057,884
Decreases
and
Reclassifications
Ending
Balance
$ $
( 24,478,828)
( 24,478,828)
1,238,420 ( 3,498,744)
24,478,828
1,238,420 20,980,084
367,962 $
19,321,872
19,689,834
21,518,110
7,512,707
32,641,748
61,672,565
7,577,881
3,542,196
3,002,407
14,122,484
47,550,081
$ 67,239,915
(continued)
227,342
73,019
1,259,239
1,066,867
2,626,467 (
1,388,047)
16,669,837 $(
2,509,691
12,946,218
15,455,909
10,357,504
2,218,151
8,619,886
42,674,657
63,870,198
3,589,225
1,357,101
2,149,499) 5,714,914
1,521,763
10,994,688
10,994,688
2,149,499) 12,183,003
23,129,583 51,687,195
1,349,245) $ 67,143,104
$ $
( 28,150,066)
( 28,150,066)
392,873 ( 10,000)
28,150,066
392,873 28,140,066
620,235
545,655 ( 4,200)
1,026,463 -
2,192,353 (
( 1,799,480)
$ 9,195,208 $(
367,962
2,166,494
2,534,456
21,518,110
7,895,580
60,791,814
90,205,504
8,198,116
4,083,651
4,028,870
4,200) 16,310,637
28,144,266 73,894,867
5,800) $ 76,429,323
34
4. DETAILED NOTES ON ALL FUNDS (Continued)
Capital Assets (Continued)
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government
Public safety
Public works
Community services
Total depreciation expense - governmental activities $
Business -type activities:
Water and sewer
Total depreciation expense - business -type activities
Interfund transfers:
Transfers Out:
General
Capital projects
Nonmajor governmental
Water and sewer
Total Transfers
Transfers In
577,823
472,764
1,444,557
131,323
2,626,467
$ 2,192,353
$ 2,192,353
General
$
Debt
Service
Capital
Projects
Nonmajor
Governmental
$ $ 250,000 $
329,000 140,000
10,363
519,579 132,531
Water
and Sewer
Total
50,000 $ 128,000 $ 428,000
469,000
10,363
652,110
$ 858,942 $ 272,531 $ 250,000 $ 50,000 $ 128,000
$ 1,559,473
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect
them to the fund that statute or budget requires to expend them, (2) move receipts restricted to
debt service from the funds collecting the receipts to the Debt Service Fund as debt service
payments become due, and (3) use unrestricted revenues collected in the General Fund to finance
various programs accounted for in other funds in accordance with budgetary authorizations.
(continued)
35
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt
General Obligation Bonds
The government issues general obligation bonds to provide funds for the acquisition and
construction of major capital facilities. General obligation bonds have been issued for both
governmental and business -type activities. The original amount of general obligation bonds
issued in prior years was $117,880,000. During the year, general obligation bonds totaling
$21,000,000 were issued to fund general obhgation projects.
General obligation bonds are direct obligations and pledge the full faith and credit of the
government. These bonds generally are issued as 20-year serial bonds with equal amounts of
principal maturing each year. General obligation bonds currently outstanding are as follows:
Purpose
Governmental activities
Governmental activities - refunding
Interest Rates Amount
3.00 - 7.80 $ 105,185,000
3.90 - 7.35 10,345,000
$ 115,530,000
Annual debt service requirements to maturity for general obligation bonds are as follows:
Year Ending
September 30,
2005
2006
2007
2008
2009
2010-2014
2015-2019
2020-2024
2025-2028
Total
Governmental Activities
Principal
$ 3,475,000
3,770,000
3,980,000
4,190,000
4,405,000
24,465,000
27,760,000
26,855,000
16,630,000
Interest
$ 5,575,335
5,484,571
5,285,298
5,080,515
5,053,681
22,381,681
18,403,222
13,833,756
8,409,020
$ 115,530,000 $ 89,507,079
(continued)
Business -type Activities
Principal
855,000
880,000
915,000
945,000
980,000
5,450,000
6,710,000
Interest
574,705
548,674
521,072
492,006
461,197
1,767,723
578,526
$ 16,735,000 $ 4,943,903
36
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
The various bond obligations contain certain financial limitations and restrictions. The
ordinances authorizing the issuance of general obligation bonds created an interest and sinking
fund (general debt service fund). The ordinances require the City to ascertain a rate and amount
of tax which will be sufficient to pay interest as it comes due and provide a reserve fund which is
adequate to meet principal as it matures. The City is in compliance with all such significant
financial restrictions.
Revenue Bonds
The City also issues bonds where the City pledges income derived from the acquired or
constructed assets to pay debt service The original amount of revenue bonds issued in prior
years was $36,370,000. Revenue bonds outstanding at year-end are as follows:
Purpose
Water and sewer improvements
Interest Rates Amount
4.00 - 6.00 $ 33,505,000
Revenue bond debt service requirements to maturity are as follows:
Year Ending
September 30,
2005
2006
2007
2008
2009
2010-2014
2015-2019
2020-2024
2025
Total
Business -type Activities
Principal
$ 1,025,000
1,075,000
1,125,000
1,180,000
1,235,000
7,140,000
8,980,000
10,245,000
1,500,000
$ 33,505,000
Interest
$ 1,504,240
1,459,365
1,411,887
1,361,557
1,308,250
5,595,858
3,809,139
1,691,271
63,750
18,205,317
Obligations Under Capital Leases
During the current year, the City entered into a capital lease agreement in order to purchase
equipment for the police department. The assets acquired through these lease agreements are as
follows:
Asset:
Dispatch equipment
Less: accumulated depreciation
Total
(continued)
Governmental
Activities
$ 184,000
13,142
$ 170,858
37
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Obligations Under Capital Leases (Continued)
Year Ending
September 30,
2005
2006
2007
Total
Less interest portion
Lease
Obligation
$ 64,560
64,560
64,560
193,680
9,680)
Obligations under capital leases $ 184,000
Primary Government
Long-term liability activity for the year ended September 30, 2004, was as follows:
Beginning
Balance
Governmental activities
Bonds payable:
General obligation $ 26,880,000
Certificates of obligation 70,650,000
Deferred amount for
issuance premium
Total bonds payable 97,530,000
Capital lease
Compensated absences
Governmental activity
long-term liabilities
Business -Type activities
Bonds payable:
Certificates of obligation
Revenue
Total bonds payable
Compensated absences
Business -type activity
long-term liabilities
2,618,774
Additions
Reductions
$ 1,535,000
21,000,000 1,465,000
94,443
21,094,443
184,000
523,755
3,000,000
785,632
$ 100,148,774 $ 21,802,198 $ 3,785,632
$ 16,835,000 $
34,485,000
51,320,000
415,161
$ 51,735,161
68,731
Ending
Balance
Due Within
One Year
$ 25,345,000 $
90,185,000
94,443
115,624,443
184,000
2,356,897
$ 118,165,340
1,960,000
1,515,000
4,106
3,479,106
59,535
471,380
$ 4,010,021
100,000 $ 16,735,000 $
980,000 33,505,000
50,240,000
1,080,000
83,032
68,731 $ 1,163,032
400,860
855,000
750,000
50,640,860 $
1,605,000
80,172
1,685,172
The governmental activities compensated absences are generally liquidated by the General Fund.
(continued)
38
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Federal Tax Compliance (Arbitrage) for Long-term Debt
In accordance with provisions of Section 148 of the Internal Revenue Code of.1986, as amended,
(the "Code") the City's long-term debt obligations must meet certain minimum criteria to be
considered and continue to be considered "tax-exempt." This "tax-exempt" status means that
interest income earned by purchasers of the City's long-term debt instruments is not subject to
federal income taxes. Related Treasury Regulations promulgated under Section 148 of the Code
generally provide that the determination of whether these obligations are tax-exempt is made as
of the date such obligations are issued based on a reasonable expectation regarding the use of the
proceeds of the bonds issued Long-term debt that does not meet and continue to meet the
minimum criteria of Section 148 of the Code and the related Treasury Regulations described
above are considered "arbitrage bonds and are not considered "tax-exempt" as described above.
Rebate
Obligations will become arbitrage bonds (as described above) if certain arbitrage profits are not
paid to the federal government as rebate under Section 148(f) of the Code. The City's
obligations to calculate and make rebate payments (if any) will continue as long as there are
gross proceeds allocable to outstanding debt issues. The City has performed calculations
required under Section 148(f) of the Code and has no present liability nor has the City ever been
required to make rebate payments for issued debt in past years.
Unexpended Debt Issuance Proceeds (Yield Restriction Requirements)
Section 148 of the Code also provides that in order for debt not to be considered arbitrage bonds
(as described above), proceeds of such debt must be invested at a yield that is not materially higher
than the yield on the debt issued starting on the third anniversary of the issue date of such debt.
Accordingly, any unexpended proceeds of debt issued by the City that remain unexpended more
than three years after such debt was issued should be yield restricted The yield restriction may be
accomplished by making yield reduction payments pursuant to Treasury Regulation Section 1.148
5(c). The City is currently pursuing compliance with these yield restriction requirements and does
not anticipate associated significant noncompliance issues. The City is continuing to proceed with
reasonable diligence to expend any remaining unexpended debt issuance proceeds on qualifying
prof ects.
Component Unit
The terms of Sales Tax Revenue Bonds are as follows:
Purpose
Sales Tax Revenue - Economic Development
Interest Rates Amount
5.20 - 7.00 $ 4,165,000
(continued)
39
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Component Unit (Continued)
Long-term activity for the year ended September 30, 2004, was as follows:
Sales Tax Revenue Bonds,
Series 1997
Compensated absences
Total Long-term
Liabilities
Beginning
Balance
$ 4,365,000
14,540
$ 4,379,540
Additions
$
Reductions
Ending
Balance
$ 200,000 $ 4,165,000
3,123 3,123 14,540
$ 3,123
Due Within
One Year
$ 210,000
2,908
$ 203,123 $ 4,179,540 $ 212,908
Annual debt service requirements to maturity for sales tax revenue bonds are as follows:
Year Ending
September 30,
2005
2006
2007
2008
2009
2010-2014
2015-2016
Total
Restricted Assets
The balances of the restricted asset accounts in the Enterprise Funds are as follows:
Principal
$ 210,000
220,000
235,000
300,000
320,000
1,930,000
950,000
$ 4,165,000
Interest
$ 232,650
217,530
201,690
187,590
171,990
577,950
74,880
1,664,280
Revenue bond debt service account
Total Restricted Assets
$ 805,441
$ 805,441
Contingent Liabilities
Amounts received or receivable from grant agencies are subject to audit and adjustment by
grantor agencies, principally the federal government. Any disallowed claims, including amounts
already collected, may constitute a liability of the applicable funds. The amount, if any, of
expenditures that may be disallowed by the grantor cannot be determined at this time, although
the government expects such amounts if any, to be immaterial.
The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not
presently determinable, in the opinion of the City s counsel, the resolution of these matters will
not have a material adverse effect on the financial condition of the City.
(continued)
40
4. DETAILED NOTES ON ALL FUNDS (Continued)
Pension Plans — Primary Government
Plan Description
The City provides pension benefits for all of its full-time employees through a non-traditional,
joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement
System (TMRS), one of 794 administered by TMRS, an agent multiple -employer public
employee retirement system.
Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the
City -financed monetary credits, with interest. At the date the plan began the City granted
monetary credits for service rendered before the plan began of a theoretical amount equal to two
times what would have been contributed by the employee, with interest prior to establishment of
the plan. Monetary credits for service since the plan began are a percent (100%, 150%, or 200%)
of the employee's accumulated contributions. In addition, the City can grant, as often as
annually, another type of monetary credit referred to as an updated service credit which is a
theoretical amount which, when added to the employee s accumulated contributions and the
monetary credits for service since the plan began, would be the total monetary credits and
employee contributions accumulated with interest, if the current employee contribution rate and
City matching percent had always been in existence and if the employee's salary had always
been the average of his salary in the last three years that are one year before the effective date.
At retirement, the benefit is calculated as if the sum of the employee's accumulated
contributions, with interest, and the employer -financed monetary credits, with interest, were used
to purchase an annuity.
Members can retire at age 60 and above with 5 or more years of service or with 20 years of
service regardless of age. A member is vested after 5 years. The plan provisions are adopted by
the governing body of the City, within the options available in the state statutes governing TMRS
and within the actuarial constraints also in the statutes.
(continued)
41
DETAILED NOTES ON ALL FUNDS (Continued)
Pension Plans — Primary Government (Continued)
Contributions
The contribution rate for the employees is 7% and the City matching ratio is currently 2 to 1,
both as adopted by the governing body of the City. Under the state law governing TMRS, the
actuary annually determines the City contribution rate. This rate consists of the normal cost
contribution rate and the prior service contribution rate, both of which are calculated to be a level
percent of payroll from year to year. The normal cost contribution rate finances the currently
accruing monetary credits due to the City matching percent, which the obligation of the City as
of an employee's retirement date not at the time the employee's contributions are made. The
normal cost contribution rate is the actuarially determined percent of payroll necessary tosatisfy
the obligation of the City to each employee at the time his/her retirement becomes effective. The
prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over
the remainder of the plan's 25-year amortization period. When the City periodically adopts
updated service credits and increases its annuities in effect, the increased unfunded actuarial
liability is to be amortized over a new 25-year period. The unit credit actuarial cost method is
used for determining the City contribution rate. Both the employees and the City make
contributions monthly. Since the City needs to know its contribution rate in advance to budget
for it, there is a one-year delay between the actuarial valuation that is the basis for the rate and
the calendar year when the rate goes into effect (i.e. December 31, 2003, valuation is effective
for rates beginning January 2005).
Schedule of Actuarial Liabilities and Funding Progress
For the Years Ended September 30, 2001, 2002 and 2003
Actual Valuation Date
Actuarial value of assets
Actuarial accrued liability
Percent funded
Unfunded (overfunded) actuarial accrued liability (UAAL)
Annual covered payroll
UAAL as a percentage of covered payroll
Net pension obligation (NPO at the beginning of period
Annual Pension Cost:
Annual required contribution (ARC)
Contributions made
Increase in NPO
12/31/01
$ 14,000,841
17,152,477
81.6%
3,151,636
9,161,949
34.4%
983,172
983,172
NPO at the end of the period $
(continued)
12/031/02
$ 16,390,251
19,963,606
82.1%
3,573,355
11,151,256
32.0%
1,228,907
1,228,907
12/031/03
$ 18,772,272
23,190,084
80.9%
4,417,812
12,731,012
34.7%
1,371,452
1,371,452
42
4. DETAILED NOTES ON ALL FUNDS (Continued)
Pension Plans — Primary Government (Continued)
Contributions (Continued)
Actuarial Cost Method
Amortization Method
Remaining Amortization Period
Asset Valuation Method
Amortzation Period
Investment Rate of Return
Projected Salary Increases
Includes Inflation at
Cost -of -living Adjustments
Actuarial Assumptions
imp
NMI
Unit Credit
Level Percent of Payroll
25 Years - Open Period
Amortized Cost (to accurately reflect the
requirements of GASB Statement No. 25,
paragraphs 36e and 138)
Open
7%
None
None
None
The City is one of 794 municipalities having its benefit plan administered by TMRS Each of the
794 municipalities has an annual, individual actuarial valuation performed. All assumptions for
the December 31, 2003, valuations are contained in the 2003 TMRS Comprehensive Annual
Financial Report, a copy of which may be obtained by writing to P. O. Box 149153, Austin
Texas 78714-9153.
Risk Management
The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction
of assets; errors and omissions; injuries to employees; and natural disasters. The City's risk
management program mainly encompasses obtaining property and liability insurance through
Texas Municipal League (TML-IRP) an Intergovernmental Risk -Pool and through commercial
insurance carriers. The City purchases commercial general insurance through the Texas
Municipal League, an unincorporated association of political subdivisions of the State of Texas.
This policy encompasses general liability, incidental, medical malpractice, automobile liability,
law enforcement liability, errors and omissions liability, property automobile vehicle liability,
and damages with limits of liability for each occurrence. The City has not had any significant
reduction in insurance coverage, and the amounts of insurance settlements have not exceeded
insurance coverage for any of the last three years. The participation of the City in the TML-IRP
is limited to payment of premiums. At year-end, the City did not have any significant claims
pending.
(continued)
43
4. DETAILED NOTES ON ALL FUNDS (Continued)
Risk Management (Continued)
Workers' Compensation
The City is a member of the Texas Municipal League (TML) Workers' Compensation
Intergovernmental Risk Pool, an unincorporated association of political subdivisions of the State
of Texas. The fund contracts with a third -party administrator for administration, investigation,
and adjustment services in the handling of claims. Premiums are based on the estimated City
payroll by risk factor and rates. The premiums are adjusted by the City's experience modifier.
All loss contingencies, including claims incurred, but not reported, if any, are recorded and
accounted for by the TML Pool. The City's liability is limited to the payment of premiums as
assessed by TML.
Prior Period Adjustment
During the current year, the City discovered that deferred revenue and accounts receivable were
overstated in nonmajor governmental funds as of September 30, 2003. An adjustment has been
made to beginning fund balance in nonmajor governmental funds. The net effect of this
transaction was a decrease in the amount of $98,941.
Subsequent Event
On February 14, 2005, the Economic Development Corporation, a discretely presented
component unit issued Sales Tax Revenue and Refunding Bonds, Series 2005, in the amount of
$11 005,000. These bonds are being used to provide funds to acquire and construct streets
roads, drainage and related improvements within the City and refund the Economic Development
Corporation's Sales Tax Revenue Bonds, Series 1997.
44
COMBINING STATEMENTS
AND SCHEDULES
CITY OF PEARLAND, TEXAS
GENERAL FUND
SCHEDULE OF EXPENDITURES - BUDGET AND ACTUAL
YEAR ENDED SEPTEMBER 30, 2004
GENERAL GOVERNMENT
City council
City manager
Human resources
City secretary
Finance
Tax
Legal
Municipal court
Custodial services
Engineering
Public affairs/grants
Project management
Information technology
Total general government
PUBLIC SAFETY
Police
Fire
Fire marshal
Animal shelter
Emergency medical services
Service center
Total public safety
PUBLIC WORKS
COMMUNITY SERVICES
Library
Parks and recreation - administration
Parks and recreation - recreation
Parks and recreation - athletics
Parks and recreation - aquatics and
special events
Parks and recreation - senior programs
Total community services
Total expenditures
Budget
$ 80,850
618,488
510,242
194,915
712,520
389,287
384,556
604,908
1,303,883
393,526
484,702
506,784
6,184,661
7,549,646
280,544
388,887
319,073
1,448,303
151,509
10,137,962
9,772,180
81,844
1,485,407
481,557
318,049
359,357
147,789
2,874,003
Actual
67,198 $
544,114
469,936
193,315
697,699
31,925
414,821
437,743
527,884
1,387,455
326,224
473,366
487,915
6,059,595
7,349,304
286,899
363,489
294,053
1,656,828
191,542
10,142,115
8,709,151
$ 28,968,806 $
122,793
1,447,955
395,099
302,216
302,904
221,409
2,792,376
Variance
Positive
(Negative)
13,652
74,374
40,306
1,600
14,821
31,925)
25,534)
53,187)
77,024
83,572)
67,302
11,336
18,869
125,066
200,342
( 6,355)
25,398
25,020
208,525)
40,033)
4,153)
(
(
(
1,063,029
40,949)
37,452
86,458
15,833
56,453
73,620)
81,627
27,703,237 $
1,265,569
45
NONMALR GOVERNMENTAL FUNDS
Special Revenue Funds are used to account for specific revenues that are legally restricted for
particular purposes. A description of the individual Special Revenue Funds follows:
Municipal Court — A fund created to account for municipal court fees collected.
Soccer Donation — A fund created to account for soccer field donations.
Regional Detention Fund — A fund created to account for the regional detention
development.
Hotel/Mote Tax — A fund created to account for hotel/motel occupancy tax revenue.
Park Donation — A fund created to account for the development of parks.
Park and Recreation Development — A fund created to account for the development
of parks
Tree Donations — A fund created to account for tree donations
Tree Trust — A fund created to account for tree trust donations.
Sidewalk Fund — A fund created to account for resources designated for sidewalks.
Police Fund — To account for financial resources to be used for the Police Department
drug program.
Federal Police Fund — To account for expenditures related to special federal
programs for the Police Depaitnient.
Community Services — To account for expenditures related to community services.
Grants Fund — To account for certain grant revenues and expenditures.
FEMA Buyout — A fund created to account for the flood related FEMA projects.
Court Technology — This fund is used to account for the receipt and expenditure of
revenues from court fines for court security.
Capital Projects Funds are used to account for financial resources to be used for the acquisition or
construction of major capital facilities.
Street Assessments — A fund created to account for resources for street assessments.
CITY OF PEARLAND, TEXAS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
SEPTEMBER 30, 2004
Special Revenue
Municipal Soccer Regional Hotel/ Park
Court Donation Detention Motel Tax Donation
ASSETS
Cash and investments $ 64,935 $ 2,388 $ 96,400 $ 520,828 $ 55,498
Accounts receivable 1,334 36,267
Intergovernmental receivable
Accrued interest
Total assets $ 66,269 $ 2,388 $ 96,400 $ 557,095 $ 55,498
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ $ $ $ $
Accrued liabilities
Deferred revenue 1,334 44,740
Total liabilities 1,334 44,740 -
Fund balances:
Unreserved, reported in:
Special revenue funds 64,935 2,388 51,660 557,095 55,498
Capital projects fund
Total fund balances 64,935 2,388 51,660 557,095 55,498
Total liabilities
and fund balances
$ 66,269 $ 2,388 $ 96,400 $ 557,095 $ 55,498
Special Revenue
Park and
Recreation Tree Tree
Development Donations Trust
Federal Community
Sidewalk Police Police Services
$ 548,749 $ 1,428 $ 185,445 $ 253,341 $ 79,893 $ 26,204 $ 54,865
$ 548,749 $ 1,428 $ 185,445 $ 253,341 $ 79,893 $ 26,204 $ 54,865
$ $ $ 20
20
548,749 1,428 185,445 253,341 79,893 26,204 54,845
548,749 1,428 185,445 253,341 79,893 26,204 54,845
$ 548,749 $ 1,428 $ 185,445 $ 253,341 $ 79,893 $ 26,204 $ 54,865
(continued)
47
ASSETS
Cash and investments
Accounts receivable
Intergovernmental receivable
Accrued interest
Total assets
CITY OF PEARLAND, TEXAS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
(Continued)
SEPTEMBER 30, 2004
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Accrued liabilities
Deferred revenue
Total liabilities
Fund balances:
Unreserved, reported in:
Special revenue funds
Capital projects fund
Total fund balances
Total liabilities
and fund balances
Special Revenue
Grants
$ 67,353
27,430
FEMA
Buyout
$ 774,389
Court
Technology
$ 112,656
1,610
$ 94,783 $ 774,389 $ 114,266
$ $ $
14,706 1,610
14,706 1,610
80,077 774,389 112,656
80,077 774,389 112,656
$ 94,783 $ 774,389 $ 114,266
Capital
Projects
Street
Assessments
$ 672,332
1,103
$ 673,435
$ 90
19,200
86,900
106,190
567,245
567,245
673,435
Total
$ 3,516,704
39,211
27,430
1,103
$ 3,584,448
$ 110
19,200
149,290
168,600
2,848,603
567,245
3,415,848
$ 3,584,448
48
CITY OF PEARLAND, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Municipal
Court
Soccer
Donation
REVENUES
Hotel/motel $ $
Permits, licenses and fees
Fines
Intergovernmental
Other income 31,118
Investment earnings 3,066
Total revenues 34,184
EXPENDITURES
Current:
General government
Public safety
Community services
Capital outlay
Total expenditures
982
982
533
16
549
REVENUES OVER (UNDER)
EXPENDITURES 33,202 549
OTHER FINANCING
SOURCES (USES)
Transfers in
Transfers out
Total other financing
sources (uses)
( 10,363)
( 10,363)
NET CHANGE IN
FUND BALANCES 22,839
FUND BALANCES. BEGINNING AS
PREVIOUSLY STATED 42,096
PRIOR PERIOD ADJUSTMENT
Special Revenue
Regional
Detention
$
12,891
2,704
2,027
17,622
17,622
549 17,622
1,839 34,038
FUND BALANCES, BEGINNING
AS RESTATED 42,096 1,839
FUND BALANCES, ENDING $ 64,935 $ 2,388
34,038
$ 51,660
Hotel/
Motel Tax
Park
Donation
$ 153,908 $
20,164
174,072
9,129
9,129
164,943
164,943
392,152
392,152
$ 557,095
20,106
33,366
53,472
2,176
2,176
51,296
51,296
4,202
4,202
$ 55,498
Park and
Recreation
Development
142,480
18,926
161,406
20,381
20,381
141,025
141,025
318,824
88,900
407,724
$ 548,749
Tree
Donations
85
85
Tree
Trust
9,992
9,992
68,457
68,457
85 ( 58,465)
85 ( 58,465)
1,343
243,910
Special Revenue
Sidewalk
25,827
11,980
37,807
37,807
37,807
215,534
1,343 243,910 215,534
$ 1,428 $ 185,445 $ 253,341
(continued)
Police
23,788
155
3,757
27,700
101
5,190
5,291
22,409
22,409
57,484
57,484
$ 79,893
Federal
Police
1,208
1,208
1,208
1,208
24,996
Community
Services
7,312
4,864
12,176
20,909
20,909
(
8,733)
(
8,733)
63,578
24,996 63,578
$ 26,204 $ 54,845
50
CITY OF PEARLAND, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN I'UND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Special Revenue
Grants
FEMA
Buyout
REVENUES
Hotel/motel $ $
Permits, licenses and fees
Fines
Intergovernmental 225,294 437,396
Other income
Investment earnings
Total revenues 225,294 437,396
EXPENDITURES
Current:
General government
Public safety
Community services
Capital outlay
Total expenditures
103,591
6,200
109,791
REVENUES OVER (UNDER)
EXPENDITURES 115,503
OTHER FINANCING
SOURCES (USES)
Transfers in
Transfers out
Total other financing
sources (uses)
50,000
50,000
NET CHANGE IN
FUND BALANCES 165,503
FUND BALANCES, BEGINNING AS
PREVIOUSLY STATED ( 85,426)
PRIOR PERIOD ADJUSTMENT
FUND BALANCES, BEGINNING
AS RESTATED
FUND BALANCES, ENDING
6,618
6,618
430,778
430,778
343,611
( 85,426) 343,611
$ 80,077 $ 774,389
Court
Technology
46,466
2,094
48,560
1,990
1,990
46,570
46,570
66,086
66,086
$ 112,656
Capital
Projects
Street
Assessments
2,846
2,846
41,451
41,451
( 38,605)
( 38,605)
Totals
$ 153,908
12,891
46,466
686,478
230,235
114,391
1,244,369
161,771
101
111,923
13,380
287,175
957,194
50,000
( 10,363)
39,637
996,831
793,691 2,517,958
( 187,841) ( 98,941)
605,850
$ 567,245
2,419,017
$ 3,415,848
51
CITY OF PEARLAND, TEXAS
DEBT SERVICE FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
REVENUES
Property taxes and penalties
Investment earnings
Total revenues
EXPENDITURES
Debt service:
Principal
Interest and fiscal charges
Total expenditures
FOR THE YEAR ENDED SEPTEMBER 30, 2004
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES
Transfers in
Total other financing sources
NET CHANGE IN FUND BALANCES
FUND BALANCES, BEGINNING
FUND BALANCES, ENDING
Budgeted Amounts
Original Final
Actual
Amounts
$ 8,721,689 $ 8,721,689 $ 9,138,523
41,000 41,000 15,669
8,762,689 8,762,689 9,154,192
3,000,000
5,890,451
8,890,451
(
3,000,000
5,890,451
8,890,451
127,762) ( 127,762)
272,531
272,531
144,769
2,019,623
272,531
272,531
144,769
3,000,000
5,549,292
8,549,292
604,900
272,531
272,531
877,431
2,019,623 2,019,623
$ 2,164,392 $ 2,164,392 $ 2,897,054
Variance with
Final Budget -
Positive
(Negative)
$ 416,834
( 25,331)
391,503
341,159
341,159
732,662
732,662
$ 732,662
STATISTICAL SECTION
CITY OF PEARLAND, TEXAS
GOVERNMENT -WIDE EXPENSES BY FUNCTION
Fiscal General Public
Year Government Safety
2003 $ 6,274,853
2004 7,314,239
LAST TWO FISCAL YEARS
(UNAUDITED)
Public
Works
$ 9,645,369 $ 9,728,975
10,524,915 9,912,937
Community
Services
$ 2,873,903
2,700,356
Interest on
Long-term
Debt
$ 4,558,650
5,549,292
TABLE 1
Water and
Wastewater Total
$ 42,724,836
$ 9,643,086
15,265,350 51,267,089
* The City implemented GASB 34 in fiscal year 2003, thus only two years of data are available.
53
Charges
Fiscal for
Year Services
Operating
Grants and
Contributions
2003 $ 17,380,953 $ 711,671
2004 22,933,122
903,210
CITY OF PEARLAND, TEXAS
GOVERNMENT -WIDE REVENUES
LAST TWO FISCAL YEARS
(UNAUDITED)
Capital
Grants and
Contributions
$ 12,099,049
9,007,465
Taxes
$ 23,662,013
27,723,299
Investment
Earnings Miscellaneous
$ 366,688
1,532,358
TABLE 2
Total
Revenues*
$ 741,313 $ 54,961,687
782,165 62,881,619
* The City implemented GASB 34 in fiscal year 2003, thus only two years of data are available.
54
Fiscal General
Year Government
1995 $ 1,998,228
1996 2,316,013
1997 2,357,621
1998 2,834,021
1999 3,685,523
2000 3,580,693
2001 4,217,744
2002 5,052,056
2003 5,678,275
2004 6,059,595
CITY OF PEARLAND, TEXAS
GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION (1)
Public
Safety
$ 3,445,100
3,865,449
4,238,647
5,026,554
5,695,956
5,944,516
6,692,138
7,411,992
9,637,676
10,142,115
LAST TEN FISCAL YEARS
(UNAUDITED)
Public
Works
$ 3,798,607
4,112,939
4,334,123
4,925,693
5,137,708
5,635,397
5,974,667
7,603,804
8,769,722
8,709,151
Community
Services
$ 881,211
1,185,426
1,137,045
1,543,440
1,580,624
1,762,770
2,043,620
2,271,052
2,729,859
2,792,376
Debt
Service
$ 2,044,453
2,430,097
2,451,033
3,273,010
3,209,693
3,064,038
3,275,682
4,112,491
6,339,385
8,549,292
TABLE 3
Total
$ 12,167,599
13,909,924
14,518,469
17,602,718
19,309,504
19,987,414
22,203,851
26,451,395
33,154,917
36,252,529
(1) Includes general governmental expenditures of the General Fund and Debt Service Fund.
55
Fiscal
Year
(I)
Property
Taxes and
Penalties
1995 $
1996
1997
1998
1999
2000
2001
2002
2003
2004
8,568,140
9,292,922
10,472,362
7,108,800
8,192,927
9,272,373
10,833,292
12,857,995
15,120,150
17,890,685
CITY OF PEARLAND, TEXAS
GENERAL GOVERNMENTAL REVENUE BY SOURCE (1)
(2)
Other
Taxes
3,192,226
3,314,615
4,088,706
4,676,773
5,370,121
5,720,312
7,113,828
7,498,801
8,428,211
9,661,987
LAST TEN FISCAL YEARS
(UNAUDITED)
Licenses
and Permits
Fines and
Forfeitures
$ 339,309 $
514,081
524,197
615,808
955,819
1,469,799
1,896,728
2,256,638
2,682,456
3,427,957
Charges
for Services
Inter-
governmental
415,378 $ 1,425,741 $ 78,882
459,884 1,553,765 246,414
529,152 1,648,617 197,764
576,856 2,508,087 345,674
675,691 2,960,214 489,860
731,959 3,061,545 15,000
856,641 3,202,767
845,322 3,651,825
1,377,552 3,982,070 615,436
1,561,850 5,259,748 716,136
Other
Revenue
$ 809,141
523,188
722,189
678,232
692,481
896,730
939,532
933,950
304,214
831,982
(1) Includes general governmental revenue of the General Fund and Debt Service Fund
(2) Primarily City Sales taxes
TABLE 4
Total
14,828,817
15,904,869
18,182,987
16,510,230
19,337,113
21,167,718
24,842,788
28,044,531
32,510,089
39,350,345
56
CITY OF PEARLAND, TEXAS
PROPERTY TAX LEVIES AND COLLECTIONS (1)
Current
Tax Fiscal Total Tax
Year Year Tax Levy (2) Collections
1994 1995 $ 5,316,625 $ 5,229,939
LAST TEN FISCAL YEARS
(UNAUDITED)
Percentage Delinquent
of Levy Tax
Collected Collections
Total
Tax
Collected
98.37% $ 63,318 $ 5,293,257
1995 1996 5,869,525 5,790,544 98.65%
1996 1997 6,343,113 6,235,954 98.31%
1997 1998 7,062,826 6,957,153 98.50%
1998 1999 8,147,473 7,992,304 98.10%
1999 2000 9,174,224 9,022,542 98.35%
2000 2001 10,864,049 10,609,654 97.66%
2001 2002 12,890,902 12,477,283 96.79%
2002 2003 14,869,170 14,575,297 98.02%
2003 2004 17,987,752 17,633,986 98.03%
62,365 5,852,909
70,983 6,306,937
74,969 7,032,122
96,094 8,088,398
119,461 9,142,003
179,483 10,789,137
199,030 12,676,313
343,374 14,918,670
358,048 17,992,034
Percentage
of Total Tax
Collections
to Total
Tax Levy
Outstanding
Delinquent
Taxes
99.56% $ 383,032
99.72%
99.43%
99.57%
99.27%
99.65%
99.31%
98.34%
100.33%
100.02%
280,499
258,104
293,915
389,445
479,170
285,091
699,841
693,785
738,970
TABLE 5
Percent of
Delinquent
to Total
Tax Levy
7.20%
4.78%
4.07%
4.16%
4.78%
5.22%
2.62%
5.43%
4.67%
4.11%
(1) A property tax system was initiated in the 1970-71 fiscal year. Taxes are levied in August (or as soon
thereafter as practicable) and become delinquent on February 1 of each year. The City, in accordance with
Section 33.07 of the Texas Property Tax Law Annotated 1982, imposes an additional penalty of 15%
beginning July 1 to defray cost of collection
(2) The total tax levy has been adjusted to reflect additions to and deletions from the tax roll for prior years.
57
Fiscal
Year
1995
1996
1997
1998
1999
2000
2001
2002
*2003
**2004
CITY OF PEARLAND, TEXAS
ASSESSED VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
(UNAUDITED)
Real Property
$ 646,643,658
722,600,850
774,645,420
857,952,469
998,492,267
1,145,678,437
1,381,514,173
1,760,551,863
2,092,303,036
2,515,954,084
Personal Property
$ 116,800,212
121,756,997
100,838,570
154,096,941
181,888,920
174,353,848
181,888,920
114,457,797
251,600,130
239,603,060
TABLE 6
Total
$ 763,443,870
844,357,847
875,483,990
1,012,049,410
1,180,381,187
1,320,032,285
1,563,403,093
1,875,009,660
2,343,903,166
2,755,557,144
Note: Assessment date is January 1st of the tax year. Assessed value is 100% of the estimated
actual value.
Source: Tax Department records of the City
* Does not include Manufactured Homes or Minerals. Total Taxable for Tax Year 2003
was $2,355,280,316.
** Does not include Manufactured Homes or Minerals. Total Taxable for Tax Year 2004
was $2,768,431,914.
58
Tax Fiscal
Year Year
1994 1995
1995 1996
1996 1997
1997 1998
1998 1999
1999 2000
2000 2001
2001 2002
2002 2003
2003 2004
CITY OF PEARLAND, TEXAS
PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS
(PER $100 OF ASSESSED VALUE)
City of
Pearland
0.697
0.695
0.695
0.695
0.695
0.695
0.686
0.686
0.686
0.695
Pearland
Independent
School
District
1.705
1.705
1.769
1.777
1.862
1.650
1.820
1.837
1.837
1.809
LAST TEN YEARS
(UNAUDITED)
Brazoria
County
0.358
0.358
0.358
0.358
0.358
0.400
0.400
0.420
0.420
0.420
Hams
County
0.363
0.407
0.419
0.417
0.370
0.350
0.384
0.360
0.360
0.388
Port of
Houston
Authority
0.013
0.016
0.016
0.021
0.020
0.018
0.018
0.020
0.020
0.020
Note: Note: Property tax rates based on per $100 of assessed valuation
Harris
County
Flood
Control
0.063
0.076
0.080
0.080
0.031
0.062
0.048
0.050
0.050
0.042
TABLE 7
Harris
County
Hospital
District
0.184
0.124
0.124
0.124
0.147
0.203
0.190
0.190
0.190.
0.190
59
CITY OF PEARLAND, TEXAS
Taxpayer
Weatherford U.S.A., Inc.
Centerpoint Energy, Inc.
Wal-Mart Realestate Bus. Tr.
Landar Mary's Creek, LP
Southwestern Bell Telephone Co.
Lennar Homes of Texas Land & Construction
Westlake Residential Apartments, LLC
Aggreko, Inc.
Whispering Winds Apartments
Texas Windmill Apartments
Total Principal Taxpayers
Others
Total
PRINCIPAL TAXPAYERS
FISCAL YEAR 2004
(UNAUDITED)
Type of
Business
Oil field service, rental
and fishing operation
Utility company
Retail store
Apartment
Utility company
Home construction
Apartment
Mobile termperature
Apartment
Apartment
* Source: Tax Department records of the Brazoria County
2003 Assessed
Value of
Property*
$ 34,843,830
18,062,650
12,115,230
11,113,820
9,439,220
8,997,250
8,835,990
8,560,750
7,705,580
7,624,730
127,299,050
2,641,132,864
$ 2,768,431,914
TABLE 8
Percentage
of Assessed
Valuation
1.26%
0.65%
0.44%
0.40%
0.34%
0.32%
0.32%
0.31%
0.28%
0.28%
4.60%
95.40%
100.00%
60
Fiscal
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
CITY OF PEARLAND, TEXAS
PROPERTY VALUES, CONSTRUCTION AND BANK DEPOSITS
LAST TEN FISCAL YEARS
(UNAUDITED)
Construction - A
$ 44,521,636
47,357,024
126,940,074
95,711,203
106,475,930
248,015,927
236,902,344
240,772,360
313,340,257
384,666,248
Note A - Inspection Department records to the City
Note B - Brazoria County Appraisal District
TABLE 9
Property
Values - B
$ 763,443,870
844,357,847
912,663,450
1,020,836,821
1,310,608,180
1,320,032,285
1,563,403,093
1,875,009,660
2,355,280,316
2,755,557,144
61
Fiscal Estimated
Year Population *
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
27,942
30,000
36,000
37,000
37,535
39,000
40,700
43,103
47,000
54,000
CITY OF PEARLAND, TEXAS
RATIO OF NET GENERAL LONG-TERM DEBT
TO ASSESSED VALUE AND NET LONG-TERM DEBT PER CAPITA
Net
Assessed Value
(in thousands)
$ 1,494,202
1,563,037
1,624,015
1,012,049
1,180,381
1,320,032
1,563,403
1,875,000
2,355,280
2,768,432
LAST TEN FISCAL YEARS
(UNAUDITED)
Gross
Long-term
Debt
Debt
Service
Monies
Available
$ 25,810,000 $ 2,173,995
24,810,000 2,435,712
35,350,000 2,141,816
34,820,139 273,742
33,456,209 208,324
30,351,250 681,148
28,364,724 1,544,987
64,920,000 2,229,529
97,530,000 2,130,321
132,449,000 3,007,752
Net
Long-term
Debt
$ 23,636,005
22,374,288
33,208,184
34,546,397
33,247,885
29,670,102
26,819,737
62,690,471
95,399,679
129,441,248
Ratio of
Net Long-
term Debt
to Assessed
Value
1.58%
1.43%
2.04%
3.41 %
2.82%
2.25%
1.72%
3.34%
4.05%
4.68%
TABLE 10
Net
Long-term
Debt Per
Capita
$ 846
746
922
934
886
761
659
1,454
2,030
2,397
(1) Includes all general obligation bonds, certificates of obligation, and obligations under capital
leases at fiscal year-end.
* Source:
1989 Reliant Energy
connections (City records) times 3.19 less vacancy rate of 6.3%
1990 Bureau of Statistics
1991-98 Bureau of Statistics plus Houston Lighting and Power connections times 3.19 less
vacancy rate of 6.3%
62
TABLE 11
CITY OF PEARLAND, TEXAS
RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL LONG-TERM
DEBT TO TOTAL GENERAL GOVERNMENTAL EXPENDITURES AND LEGAL DEBT LIMITS
Fiscal
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Principal
$ 955,000
1,010,000
1,200,000
1,280,000
1,440,000
1,605,000
1,680,000
1,920,000
2,040,000
3,000,000
LAST TEN FISCAL YEARS
(UNAUDITED)
Interest
and Fiscal
Agency Fees
$ 1,089,453
1,420,097
1,251,033
1,993,010
1,769,693
1,468,461
1,558,652
2,192,490
4,299,385
5,549,292
Total Debt
Service
$ 2,044,453
2,430,097
2,451,033
3,273,010
3,209,693
3,073,461
3,238,652
4,112,490
6,339,385
8,549,292
Total
General
Expenditures (1)
$ 12,167,599
13,909,924
14,518,469
17,586,532
19,309,504
19,987,414
22,203,851
26,421,394
33,154,917
36,252,529
Ratio of Debt
Service
to Total
Expenditures
16.80%
17.47%
16.88%
18.61%
16.62%
15.38%
14.59%
15.57%
19.12%
23.58%
(1) Includes general governmental expenditures of the General Fund and Debt Service Fund.
The City is permitted, by Article XI, Section 5 of the State of Texas Constitution and the City
Charter to levy property taxes up to $2.50 per $100 of assessed valuation for general governmental
services. Within the $2.50 maximumlevy there is no legal limit upon the amount of property taxes,
which can be levied for debt service. The property tax rates to finance general governmental
services and debt service for the 2002-2003 tax year were $.406 and $.280, respectively, per $100 of
assessed valuation.
63
TABLE 12
CITY OF PEARLAND, TEXAS
COMPUTATION OF DIRECT AND OVERLAPPING DEBT
SEPTEMBER 30, 2004
(UNAUDITED)
Gross Overlapping
Taxing Jurisdiction Debt Percentage Amount
Brazoria County $ 31,910,000 6.97% $ 2,224,127
Harris County 1,672,840,590 0.02% 334,568
Pearland Independent School District 193,976,130 77.62% 150,564,272
Port of Houston Authority 306,245,000 0.02% 61,249
Harris County Flood Control 408,554,985 0.02% 81,711
Total Overlapping Debt 153,265,927
City of Pearland 132,265,000 100.00% 132,265,000
Total Direct and Overlapping Debt $ 285,530,927
Population 54,000
Per Capita Debt -Direct and Overlapping $ 5,288
TABLE 13
CITY OF PEARLAND, TEXAS
DEMOGRAPHIC STATISTICS
LAST TEN FISCAL YEARS
(UNAUDITED)
Fiscal Estimated School Unemployment
Year Population (1) Enrollment (2) Percentage (3)
1995 27,942 8,600 7.10%
1996 30,000 8,900 7.40%
1997 35,000 9,000 7.20%
1998 37,000 9,200 4.50%
1999 37,535 9,500 4.60%
2000 39,000 9,700 3.60%
2001 40,500 10,224 4 20%
2002 43,103 11,700 4.60%
2003 47,000 12,103 4.20%
2004 54,000 13,401 3.60%
Sources:
(1) Estimated Population - The Pearland Economic Development Corporation
(2) School enrollment figures were obtained from Pearland Independent School District and
includes kindergarten through college students.
(3)
Unemployment statistics for the City were obtained from the Texas Workforce
Commission and calculated as a percentage of unemployed to employable.
65
TABLE 14
CITY OF PEARLAND, TEXAS
MISCELLANEOUS STATISTICAL DATA
SEPTEMBER 30, 2004
(UNAUDITED)
Date of Incorporation December 1959
Form of Government Council/Manager
Area 72.5 Total Area square miles
Fire Protection:
Number of stations 4
Number of certified personnel, not including reserve fire fighters 65
Number of fire vehicles 19
Police Protection:
Number of stations 1
Number of commissioned officers, not including P.S.O. or reserve officers 123
Number of patrol vehicles 48 (home fleet program)
Recreation:
Number of parks 10
Acres 115
Number of pools 1
Number of tennis courts 8
Softball fields 4
Pavilions 1 large and 4 small
Community Center 1
Activity Building 1
Education:
Pearland Independent School District
Number of teachers 747
Number of students 12,103
Elementary schools 8
Middle school 3
Junior high 3
High school 1
City Employees:
Full-time employees 352
Part-time employees 101
Total 453
(continued)
66
Water
Number of wells
Average daily consumption
Maximum daily consumption
Water mains
Number of connections
Sewer*
Number of plants
Lift stations
Average daily usage
Maximum daily capacity
Sanitary sewer mains
Number of connections
Emergency Medical Services:
Number of volunteers
Number of paid paramedics
Number of stations
Number of vehicles
Library:
Number of buildings
Number of cardholders
Number of books in library
CITY OF PEARLAND, TEXAS
MISCELLANEOUS STATISTICAL DATA
(Continued)
SEPTEMBER 30, 2003
(UNAUDITED)
TABLE 14
10
5,500,000 gallons
11,412,000 gallons
267 miles
14,227
4
77
9,600,000 gallons
36,400,000 gallons
209 miles
13,878
14
52
3
9
1
34,000
100,000
67