HomeMy WebLinkAboutR2006-071 05-22-06RESOLUTION NO. R2006-71
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, ACCEPTING THE CITY'S ANNUAL AUDIT MANAGEMENT
LETTER AS PREPARED BY THE ACCOUNTING FIRM OF PATTILLO,
BROWN AND HILL, L. L. P.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain financial audit management letter as prepared by Patillio,
Brown and Hill, L. L. P., a copy of which is attached hereto as Exhibit "A" and made a part
hereof for all purposes, is hereby authorized and approved.
Section 2. That the City Council accepts the City's annual financial audit
management letter.
PASSED, APPROVED and ADOPTED this the 22nd day of May , A.D., 2006.
TOM REID
MAYOR
if.(iN,OF
G, RMC
ITY SECRETARY
APPROVED AS TO FORM:
- /tad._
DARRIN M. COKER
CITY ATTORNEY
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PATTILLO, BROWN & HILL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
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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, 2005, 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 opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free 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, 2005, 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 conformity with accounting principles generally accepted in
the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated March
10, 2006, 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 conjunction
with this report in considering the results of our audit.
1
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AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544-7778 ■ HILLSBORO, TX (254) 582-2583
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The management's discussion and analysis on pages 3 through 10 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.
Pc4,41-dio,S1,0,ry, Wal, ) L.. . L3.
March 10, 2006
2
PEARLAND
For the year ended
September 30, 2005
CITY OF
PEARLAND, TEXAS
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
SEPTEMBER 30, 2005
CITY OF PEARLAND, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2005
Prepared by:
Finance Department
THIS PAGE LEFT BLANK INTENTIONALLY
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
YEAR ENDED SEPTEMBER 30, 2005
INTRODUCTORY SECTION
Letter of Transmittal
GFOA Certificate of Achievement for
Excellence in Financial Reporting
Organizational Chart
List of Principal Officials
Page
Number
i — vii
FINANCIAL SECTION
Independent Auditors' Report 1 — 2
Management's Discussion and Analysis 3 — 11
Basic Financial Statements
Government -wide Financial Statements
Statement of Net Assets 12
Statement of Activities 13 — 14
Fund Financial Statements
Balance Sheet — Governmental Funds 15
Statement of Revenues, Expenditures and Changes in
Fund Balances — Governmental Funds 16
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30, 2005
Page
Number
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 17
Statement of Revenues, Expenditures and Changes in
Fund Balances — Budget and Actual — General Fund 18
Statement of Net Assets — Proprietary Fund 19
Statement of Revenues, Expenses and Changes in
Fund Net Assets — Proprietary Fund 20
Statement of Cash Flows — Proprietary Fund 21
Notes to Financial Statements 22 — 46
Combining Statements and Schedules
General Fund
Schedule of Expenditures — Budget and Actual 47
Nonmajor Governmental Funds
Combining Balance Sheet 48 — 50
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 51 — 53
Debt Service Fund
Schedule of Revenues, Expenditures and
Changes in Fund Balances — Budget and Actual 54
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30, 2005
Page
Number
FINANCIAL SECTION (Continued)
Combining Statements and Schedules (Continued)
Water and Sewer Fund
Comparative Statements of Net Assets 55
Comparative Statements of Revenues, Expenses and
Changes in Fund Net Assets 56
Comparative Statements of Cash Flows 57
Component Units
Balance Sheet — Economic Development Corporation 58
Schedule of Revenues, Expenditures and Changes in
Fund Balance — Economic Development Corporation 59
Balance Sheet — TIRZ Developments 60
Schedule of Revenues, Expenditures and Changes in
Fund Balance — TIRZ Developments 61
Balance Sheet — Development Authority of Pearland 62
Schedule of Revenues, Expenditures and Changes in
Fund Balance — Development Authority of Pearland 63
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30, 2005
Table
Page
Number
UNAUDITED STATISTICAL SECTION
Government -wide Expenses by Function 1 64
Government -wide Revenues 2 65
General Governmental Expenditures by Function — Last Ten
Fiscal Years 3 66
General Governmental Revenue by Source — Last Ten
Fiscal Years 4 67
Property Tax Levies and Collections — Last Ten Fiscal Years 5 68
Assessed Value of Taxable Property — Last Ten Fiscal Years 6 69
Property Tax Rates — Direct and Overlapping Governments —
Last Ten Fiscal Years 7 70
Principal Taxpayers 8 71
Property Values, Construction and Bank Deposits 9 72
Ratio of Net General Long-term Debt to Assessed Value and
Net Long-term Debt Per Capita — Last Ten Fiscal Years 10 73
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 74
Computation of Direct and Overlapping Debt 12 75
Demographic Statistics 13 76
Miscellaneous Statistical Data 14 77 — 78
INTRODUCTORY SECTION
To the Honorable Mayor, Members
of City Council, and Citizens of the
City of Pearland, Texas
State law requires that the City shall have its records and accounts audited annually and shall have an
audited financial statement prepared based on the audit. We are pleased to submit to you the
Comprehensive Annual Financial Report for the City of Pearland, Texas (the "City") for the fiscal year
ended September 30, 2005. This report is published in order to provide the City Council, our Citizens,
and other interested parties with detailed information concerning the financial conditions and activities
of the City.
Management assumes full responsibility for the completeness and reliability of the information
contained in this report, based upon a comprehensive framework of internal control that it has
established for this purpose. Because the cost of internal control should not exceed anticipated benefits,
the objective is to provide reasonable, rather than absolute, assurance that the financial statements are
free of any material misstatements.
Pattillo, Brown & Hill, L.L.P., Certified Public Accountants, have issued an unqualified ("clean")
opinion on the City of Pearland's financial statements for the year ended September 30, 2005. The
independent auditors' report is located at the front of the financial section of this report.
Management's discussion and analysis (MD&A) immediately follows the independent auditors' report
and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A
complements this letter of transmittal and should be read in conjunction with it.
PROFILE OF THE GOVERNMENT
The City of Pearland, incorporated in 1959, is located across the northern end of Brazoria County and
shares a common border with Houston, Texas to the north. The City of Pearland, encompassing
approximately 50 square miles, is the fastest growing city in Brazoria County, increasing from
approximately 18,000 residents in 1990 to 70,000 residents estimated as of December 2005.
i
The City of Pearland is a home -rule City operating under a Council -Manager form of government.
Policy -making and legislative authority are vested in a governing council (Council) consisting of the
mayor and five other members. The Mayor and all Council members are elected at large. The Mayor is
allowed to vote only in case of a tie vote. The Mayor and each Council member hold office for a period
of three years and until his/her successor is elected and qualified. Council members shall be limited to
two full consecutive terms of office and there is no limitation on the office of Mayor. The City Manager
is appointed by Council and is responsible for implementation of Council policy, execution of the laws,
and all day-to-day operations of the City.
A full range of municipal services is provided by the City of Pearland including public safety (police,
fire, and emergency medical services); solid waste; water and wastewater utilities; public improvements;
repair and maintenance of infrastructure; recreational and community activities; and general
administrative services.
As an independent political subdivision of the State of Texas, the City is considered a primary
government. Pursuant to standards established by the Governmental Accounting Standards Board
(GASB), the City also reports for all funds for which the City, as the primary government, is financially
accountable. As such, this report includes financial activities of three component units as follows: The
Pearland Economic Development Corporation was created by the City in 1995 under the Texas
Development Corporation Act of 1979 for the purpose of promoting, assisting, and enhancing economic
and related development activities on behalf of the City. The Tax Increment Reinvestment Zone (TIRZ
#2) was created in 1998 for the purposes of development and redevelopment in the Zone Area, better
known as Shadow Creek Ranch. The City participates in the Zone by contributing tax increments
produced in the Zone to the Tax Increment Fund. The Development Authority of Pearland was created
in 2004 to provide financing for the development of the Zone.
LOCAL ECONOMY
Located minutes away from Downtown Houston, Texas, the nation's second largest seaport, the world-
renowned Texas Medical Center, and NASA -Johnson Space Center, Pearland is the premier location for
residential and commercial growth. With abundant land, business facilities, a sound infrastructure, and a
diverse workforce supported by educational programs, Pearland's growth has been consistent and will
continue to be sustained over time with continued residential and commercial development.
The total construction value of all building permits issued during fiscal year 2004-2005 totaled over
$550 million, the majority of which can be attributable to residential construction. New single-family
housing permits totaled 2,610. Residential permitting activity is anticipated to remain at this level for
several years as the development of a 3,300-acre master planned community, Shadow Creek Ranch,
continues. Homes are priced from $140,000 to $1 million and ultimate development will consist of as
many as 7,000 single-family homes, 1,800 assisted living units, and 3,900 multi -family units and offer
700 acres of greenbelts and parks, 300 acres of recreational lakes, and commercial and retail centers.
Commercial development tends to follow residential development. As such, the City of Pearland is
experiencing and will continue to experience retail and office development.
11
The Promenade Shops at Shadow Creek, an 800,000 square foot lifestyle center, is tentatively scheduled to
open in the fall of 2007. Bass Pro Shops has committed to anchor the center. The Promenade Shops is part
of The Spectrum at Clear Creek, a new 1,000-acre mixed -use business and technology park, which will
target emerging companies working in advanced sciences. The development will blend components of
industrial flex, office and corporate campus uses with retail, leisure, and other lifestyle components.
Nashville based HCA, Inc. is building an 81,500 square foot medical complex, which will include a
medical office building, outpatient diagnostics and an emergency center. HCA, Inc. will also begin
construction of a hospital at the same site in the summer of 2006. Memorial Hermann Hospital will
begin construction of a three-story medical office building on SH 288, north of Broadway in early 2006.
The City currently is in negotiations with a developer that will bring to the City a new 700,000 square
foot open-air pedestrian regional shopping center. The center, which could open in the fall of 2008,
would be located on a 110-acre tract adjacent to the Shadow Creek subdivision.
Because of Pearland's proximity to Houston Hobby Airport and land availability, Pearland is quickly
becoming home to a growing aviation industry. Two aviation companies located near Houston Hobby
have relocated to Pearland, comprising a total of 9,500 square feet.
MAJOR INITIATIVES
The City of Pearland continues to experience dramatic growth and new opportunities. The City Council,
staff, and community share a vision that combines progress and innovation with prudent controls to
shape Pearland's future even as it becomes one of the largest suburbs in the Houston area. Our slogan
"Where town and country meet" reinforces the message that Pearland will maintain its small-town feel
despite becoming a mid -sized city.
The Old Town Site
The historic center of Pearland, the Old Town Site, has received special attention over the last several
years, with a focus on careful planning that will result in a substantially revitalized neighborhood. The
City rehabilitated the sewer system, added over a half -million dollars worth of sidewalks, and completed
a makeover of Zychlinski Old Town Park, complete with walking trails, playground equipment,
landscaping, and a basketball court. The City now looks forward to implementation of a "Village
District" zoning concept intended to allow for mixed -use properties in the area.
Sense of Community
The City preserves its small-town feel by providing opportunities for all citizens, new and old, to
participate in community activities and. events. Each year, a greater number of citizens gather at a wide
variety of city -sponsored events, including Winter fest, teen and senior dances, the summer concert
series, and the Christmas tree lighting ceremony and parade. Participation at the Knapp Senior Center
also continues to grow, sparked by new daily programs, field trips, and transportation. Improvements to
the building and parking lot will be completed in the near future. Subsequent to the annexation of
Brazoria County Municipal Utility District (MUD) #5, the City has taken control of the Westside Event
Center, opening up new possibilities for providing services to citizens on that side of town.
iii
Community Appearance
The City of Pearland continues to pride itself on a clean, attractive appearance in the midst of
unprecedented growth. Maintaining close collaboration with the Keep America Beautiful affiliate has
resulted in a growing number of successful programs to reduce littering, encourage recycling, and
educate citizens on a variety of environmental issues. Participation at the Recycling Center continues to
grow, strengthened by the highly popular Household Hazardous Waste Collection program. City staff is
now working with other communities to expand recycling and hazardous waste collection opportunities
on a regional scale.
City staff and volunteers have worked together to improve the effectiveness of the volunteer -driven
"Eyes of Pearland" community appearance program. Volunteers supplement the efforts of City code
enforcement staff to address structures or fences in ill repair, high weeds, "bandit" signs, and other
violations of local ordinances. Citizen Police Academy graduates continue to assist with handicapped -
parking violations, while also supporting code enforcement efforts in the removal of "bandit" signs.
Combined, these efforts provide a community -driven response to code violations, while allowing City
staff to concentrate on other pressing issues.
Public Safety
Among numerous other reasons, families move to Pearland for a high degree of personal safety and a
low crime rate. The City Council continues to emphasize public safety, adding a minimum of six new
police officers each year to keep pace with growth. The Police Department has expanded traffic and
commercial vehicle enforcement with added motorcycle and DOT -certified officers, while capitalizing
on improved computer equipment to improve crime tracking and analysis. Community policing remains
a focus, with crime prevention, victim assistance, and youth intervention programs further reinforcing
the City's small-town feel.
The City and the Volunteer Fire Department requested a re-evaluation of our fire insurance rating by the
Insurance Service Organization (ISO). As a result of this re-evaluation, the City's ISO rating was
reduced from a score of 5 to one of 3. This will result in reduced property insurance premiums for
property owners in the City.
The City has also formed a committee of the public safety leadership in the City to begin planning for
the addition of paid firefighting personnel. This committee, which includes the leadership of the
Volunteer Fire Department, is developing a plan to begin combined volunteer -paid personnel operations
in October 2007.
Community Enrichment Initiatives
The Mayor, City Council, and City staff continue to promote a variety of community -oriented
recreational, cultural, and educational activities designed to enhance the quality of life in Pearland. The
Parks and Recreation Department constantly seeks new funding avenues for planned improvements
including recreational trails and a possible skateboard park. Meanwhile, City funds are being used to
build additional soccer fields, a spray park, and added parking capacity.
iv
To enrich our cultural landscape, the Pearland Arts League, with coordination and support from City
Council and staff, has established itself as an effective community organization with a history of
successful events. The League is supported by strong, community -backed board leadership, and now
looks forward to partnering with the Convention and Visitors Bureau to collaborate on bigger and better
events in the future.
Lastly, to add to the ever-increasing menu of educational opportunities, the Mayor and staff members
have helped cultivate a partnership between Alvin Community College and the University of Houston to
offer upper -level classes in Pearland. Furthermore, plans for a University of Houston campus and a San
Jacinto Community College campus in Pearland continue to take shape.
Growth Management
Over the past several years, the City has adopted and updated a number of codes to enhance the value
and attractiveness of new development. In order to combine these various codes for easier use by staff
and developers, the City Council adopted a Unified Development Code, which officially goes into effect
May 1, 2006. City staff is conducting presentations to realtors, developers, and other groups in the
business community to provide outreach and education on the new regulations. The City also directly
facilitates a variety of development projects that will help shape the future of our community.
Through Strategic Partnership Agreements, the City has a responsible and financially sound plan for the
annexation of municipal utility districts (MUD) in our extra -territorial jurisdiction. In December of
2005, the City welcomed approximately 5,000 new residents to the City with the annexation of Brazoria
County MUD #5. In December of 2006, the City will welcome another 5,000 new residents with the
annexation of Brazoria County MUD #1.
With continued residential and commercial growth, the need to build new infrastructure and maintain
existing infrastructure will be a priority and implemented through an aggressive capital improvement
program. The City has $29.8 million voted but, un-issued bond authorization remaining from its 2001
bond referendum, which is expected to be issued over the next year. The City, through master plans,
developer agreements, and studies is working toward a 2007 bond referendum to ensure that the City
maintains a quality of life that the citizens have come to expect.
Transportation Improvements and Strategic Planning
Charged with planning, establishing, and maintaining an effective transportation system in the midst of
such dramatic growth, the City of Pearland is involved in numerous activities to face this challenge.
Major components of our $92.5 million transportation bond program (passed in 2001) are now complete,
with others either in progress or ready to start. The Barry Rose Road and Cullen Boulevard extension
projects are finished, and the Yost Road project is nearing completion. The first phase of the $46
million Dixie Farm Road project will start construction this year, resulting in a vastly improved primary
connection to IH 45. Projects completed also include the extension of Kirby Drive from Shadow Creek
Ranch to Beltway 8 and the construction of McHard Road from SH 35 to Pearland Parkway.
v
The City is also involved in regional efforts for long-range transportation planning. City staff
participates on TxDOT-sponsored study steering committees for improvements to SH 288 and SH 35.
The City has also participated with the Houston -Galveston Area Council and the cities of Friendswood
and League City in a mobility study for FM 518. The City of Pearland also played a key role in the
development and passage of the November 2004 Brazoria County Mobility Bond project.
Storm Water Management
The City has responded to disasters over the last five years with planning and mitigation efforts that will
ensure the best possible management of our floodplain. Over the past two years, the City has adopted
revised Drainage Design Criteria as well as a Hazard Mitigation Plan, providing additional mitigation
measures while also maintaining compliance with state and federal requirements. Moreover, in 2005,
the City of Pearland was approved by FEMA for inclusion in the Community Rating System as a Class 8
community, earning flood insurance premium discounts of up to 10% for our citizens. The City is
working to improve this rating and increase discounts available to our residents.
Water and Sewer Strategic Planning
The City continues to make strides in providing adequate water and sewer capacity for the future.
Building upon major surface water purchases since 2003, the City has increased both intake and
treatment capacity that will result in an additional 10 million gallons per day (MGD) over the next three
years. This surface water initiative not only ensures an adequate water supply through 2022, but also
alleviates subsidence by reducing our dependence on groundwater. Furthermore, the City has maintained
its five wastewater treatment plants within governmental compliance, and is currently planning another
major plant expansion.
While planning for the future and maintaining our treatment plants, the City is also expanding its water
and sewer service area while maintaining the existing infrastructure. Several in -line extension projects
are in progress, working to network annexed areas and replace substandard well and septic tank service.
Moreover, the City is wrapping up a six -year program to correct sewer inflow and infiltration in older
sections of the City.
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for the Excellence in Financial Reporting to the City of Pearland, Texas, for
its Comprehensive Annual Financial Report for the year ended September 30, 2004. This was the 28th
consecutive year that the government 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. This report must satisfy both
generally accepted principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program's
requirements, and we are submitting it to GFOA to determine its eligibility for another certificate.
vi
In addition, the government also received the GFOA's Distinguished Budget Presentation Award for its
annual budget document for fiscal year 2004-2005. In order to qualify for the Distinguished Budget
Presentation Award, the government's budget document had to be judged proficient as a policy
document, a financial plan, an operations guide, and a communications device.
The preparation of this report was accomplished with the dedicated service of the entire staff of the
Finance Department. We express our appreciation to all members of the Department who assisted and
contributed to the preparation of this report. We also thank the Mayor and members of the City Council
for their support in planning and conducting the financial operations of the City in a responsible manner.
Respectfully submitted,
William Eisen, City Manager Claire Manthei, Director of Finance
vii
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Pearland,
Texas
For its Comprehensive Annual
Financial Report.
,for the Fiscal YearEnded
September 30, 2004
A Certificate .CorAOliiev,eivientfoeExcellence. in Financial
Reporting is presented. by"thefaovernment.FihanceOfficers
Association.oftlie 'United States and Canada to
govemment.Amits and publicemployee.retirement
systems whose cotriprehensive:-annualfmancial
reports (CAFRa) aphieVe‘,theliigheSt.
standards governtneOt accounting
and financial reporting.
ORITIOSTATES
ARO
CANADA
CORPORATION
SEW,
ancua
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President
FxectitiveDirector
viii
Organizational Chart
CITIZENS OF
PEARLAND
MAYOR AND
CITY COUNCIL
MUNICIPAL JUDGES
CITY ATTORNEY
ASSISTANT
CITY MANAGER
BOARDS &
COMMISSIONS
CITY MANAGER
PUBLIC WORKS
ENGINEERING
PROJECT
MANAGEMENT
POLICE
FIRE MARSHAL
EMERGENCY
MANAGEMENT
FIRE
EMERGENCY
MEDICAL SERVICES
ASSISTANT
CITY MANAGER
COMMUNITY
DEVELOPMENT
MUNICIPAL COURT
ANIMAL CONTROL
PLANNING
PUBLIC AFFAIRS
PARKS &
RECREATION
CITY SECRETARY
HUMAN
RESOURCES
DIRECTOR OF
FINANCE
PURCHASING I --
INFORMATION
TECHNOLOGY
FINANCE
W & S
BILLING &
COLLECTIONS
GRANTS
ix
CITY OF PEARLAND, TEXAS
LIST OF PRINCIPAL OFFICIALS
YEAR ENDED SEPTEMBER 30, 2005
ELECTED OFFICIALS.
Tom Reid Mayor
Richard Tetens (Position 1) Council Member
Woody Owens (Position 2) Council Member
Steve Saboe (Position 3) Council Member
Larry Marcott (Position 4) Council Member
Kevin Cole (Position 5) Council Member, Mayor Pro-Tem
APPOINTED OFFICIALS
Bill Eisen City Manager
Young Lorfing City Secretary
Darrin Coker City Attorney
(continued)
x
CITY OF PEARLAND, TEXAS
LIST OF PRINCIPAL OFFICIALS
(Continued)
YEAR ENDED SEPTEMBER 30, 2005
EXECUTIVE MANAGERS
Nicholas Finan Assistant City Manager
Michel Hodge Assistant City Manager
Fredrick Howard Welch Executive Director of P.E.D.C.
Claire Manthei Director of Finance
Chris Doyle Police Chief
Steve Chapman Fire Marshal/Emergency
Management Director
Rhonda Cyrus Director of Parks and Recreation
Daniel Cameron Director of Public Works
Joseph Wertz Director of Projects
Kola D. Olayiwola Director of Inspection Services
Doug Kneupper City Engineer
Glenn Chaney Municipal Court Judge
• Letitia Farnie Municipal Court Judge
•
411 Roy Simmons Municipal Court Judge
Jeff Sundseth Director of EMS
4) Paul Jamison Fire Chief
• Mary Hickling Director of Human Resources
41 Lata Krishnarao Director of Planning
411
4/
3
xi
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FINANCIAL SECTION
THIS PAGE LEFT BLANK INTENTIONALLY
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, 2005, 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 opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free 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, 2005, 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 conformity with accounting principles generally accepted in
the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated March
10, 2006, 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 conjunction
with this report in considering 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
ANMLIATE OFFICES: BROWNSVILLE, TX (956) 544-7778 • HILLSBORO, TX (254) 582-2583
TEMPLE, TX (254) 791-3460 • ALBUQUERQUE, NM (505) 266-5904
The management's discussion and analysis on pages 3 through 10 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.
Pa,40‘), ) L. L.L.
March 10, 2006
2
MANAGEMENT'S
DISCUSSION AND ANALYSIS
THIS PAGE LEFT BLANK INTENTIONALLY
r �
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, 2005.
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 — vii of this report.
FINANCIAL HIGHLIGHTS
• The assets of the primary government of the City of Pearland exceeded its liabilities as
of September 30, 2005, by $68,951,906 (net assets). Of this amount, $6,337,483
(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 $12,323,374.
• At the close of the current fiscal year, the City of Pearland's governmental funds
reported combined ending fund balances of $58,857,765, an increase of $79,932 in
comparison with the prior year. Approximately $44 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.
• As of September 30, 2005, the unreserved, undesignated fund balance for the General
Fund was $8,201,447 or 25.9% of total General Fund expenditures.
• The City of Pearland's General Obligation and Certificates of Obligation debt increased
to $148,445,000, an increase of $32,915,000, net of debt retirement, over the previous
year. The key factor was the sale of $37,015,000 in Permanent Improvement and
Refunding Bonds. The City of Pearland Economic Development Corporation issued
$11,005,000 of Sales Tax Revenue and Refunding Bonds and the Development
Authority of Pearland issued $13,995,000 in Tax Increment Contract Revenue bonds.
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 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 of Pearland 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, Tax Increment
Reinvestment Zone (TIRZ) and the Development Authority of Pearland 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. The government -wide financial
statements can be found on pages 12 — 14 of this report.
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 information 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 -term 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 15 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, Capital Projects and other 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
The City of Pearland adopts an annual appropriated budget for its General Fund. A budgetary
comparison statement has been provided for the General Fund to demonstrate compliance with the
budget.
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 its 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 19 of this
report, provide separate information 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 information that is essential to a full
understanding of the data provided in the government -wide and fund financial statements. The notes to
the financial statements can be found on pages 22 — 46 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 47 of this report.
GOVERNMENT -WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of a government's financial
position. In the case of the City of Pearland, assets exceeded liabilities by $68,951,906 as of September
30, 2005.
The largest portion of the City's net assets, 71 percent, 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. Since the City does not capitalize all infrastructure assets at
this time, the financial statements do not fully reflect the City's total assets but does reflect its total
liabilities for the corresponding debt.
5
COMPARATIVE SCHEDULE OF NET ASSETS
SEPTEMBER 30, 2005 AND 2004
Governmental Activities
Business -type Activities Totals
2005 2004 2005 2004 2005 2004
Current and other asset $ 65,342,583 $ 64,371,013 $ 17,834,831 $ 23,448,781 $ 83,177,414 $ 87,819,794
Capital assets 92,505,150 67,143,104 88,846,250 76,429,323 181,351,400 143,572,427
Total assets 157,847,733 131,514,117 106,681,081 99,878,104 264,528,814 231,392,221
Other liabilities 8,853,968 2,750,146 6,662,540 3,207,343 15,516,508 5,957,489
Long-term liabilities 133,262,658 118,165,340 46,797,742 50,640,860 180,060,400 168,806,200
Total liabilities 142,116,626 120,915,486 53,460,282 53,848,203 195,576,908 174,763,689
Net assets:
Invested in capital assets,
net of related debt 3,084,208 ( 2,537,520) 45,641,648 36,022,558 48,725,856 33,485,038
Restricted 6,861,792 6,390,504 7,026,775 5,979,068 13,888,567 12,369,572
Unrestricted 5,785,107 6,745,647 552,376 4,028,275 6,337,483 10,773,922
Total net assets $ 15,731,107 $ 10,598,631 $ 53,220,799 $ 46,029,901 $ 68,951,906 $ 56,628,532
A portion of the City's net assets ($13,888,567) represents resources that are subject to external
restriction on how they may be used. The remaining balance ($6,337,483) 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 tables provide a summary of the City's operations
for the year ended September 30, 2005. Governmental activities increased the City of Pearland's net
assets by $5,132,476, accounting for approximately 42% of thetotal growth in net assets. Business -type
activities increased the City's net assets by $7,190,898, accounting for approximately 58% of the total
growth in net assets.
6
1
Revenues by Source - Governmental Activities
Ad valorem taxes
41%
Capital grants and
contributions
2%
Operating grants and
contributions
2%
Charges for services
26%
Investment earnings
6%
Miscellaneous
2%
Franchise taxes
6%
Other taxes
1%
Investment earnings
4%
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
Expenses and Program Revenues - Governmental
Activities
General Public safety Public works Community Interest on
government
services long-term debt
0 Expenses
■ Revenues
COMPARATIVE SCHEDULE OF CHANGES IN NET ASSESTS
SEPTEMBER 30, 2005 AND 2004
Governmental Activities
Business -type Activities Totals
2005 2004 2005 2004 2005 2004
Revenues:
Program revenues:
Charges for services $ 12,309,406 $ 11,040,246 $ 11,219,499 $ 11,892,876 $ 23,528,905 $ 22,933,122
Operating grants
and contributions 1,154,531 855,917 47,293 1,154,531 903,210
Capital grants
and contributions 1,117,712 2,074,506 8,365,452 6,932,959 9,483,164 9,007,465
General revenues:
Ad valorem taxes 19,804,541 17,907,163 19,804,541 17,907,163
Sales taxes 7,785,161 6,739,484 7,785,161 6,739,484
Franchise taxes 3,097,163 2,883,188 3,097,163 2,883,188
Other taxes 241,046 193,464 241,046 193,464
Investment earnings 1,863,323 1,115,100 399,275 417,258 2,262,598 1,532,358
Miscellaneous 827,589 782,165 827,589 782,165
Total revenues 48,200,472 43,591,233 19,984,226 19,290,386 68,184,698 62,881,619
Expenses:
General government 8,714,401 7,314,239 8,714,401 7,314,239
Public safety 11,856,643 10,524,915 11,856,643 10,524,915
Public works 12,858,259 9,912,937 12,858,259 9,912,937
Community services 2,939,228 2,700,356 2,939,228 2,700,356
Interest on long-term
debt 5,115,039 5,549,292 5,115,039 5,549,292
Water and sewer 13,624,497 15,265,350 13,624,497 15,265,350
Total expenses 41,483,570 36,001,739 13,624,497 15,265,350 55,108,067 51,267,089
Increases in net assets
before transfers 6,716,902 7,589,494 6,359,729 4,025,036 13,076,631 11,614,530
Transfers 359,482 524,110 ( 359,482) ( 524,110)
Change in net assets 7,076,384 8,113,604 6,000,247 3,500,926 13,076,631 11,614,530
Net assets, beginning 10,598,631 2,583,968 46,029,901 42,528,975 56,628,532 45,112,943
Prior period adjustment ( 1,943,908) ( 98,941) 1,190,651 ( 753,257) ( 98,941)
Net assets, ending $ 15,731,107 $ 10,598,631 $ 53,220,799 $ 462029,901 $ 68,951,906 $ 56,628,532
7
Governmental Activities — The major increase in revenues comes from the tax category. The property
tax base increased by approximately $412 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. Fines and forfeitures
were up due to increased citations issued, and investment earnings are down due to the continued low
interest rates. Charges for services increased due to population growth.
Business -type Activities — The City has one enterprise operation, the Water and Sewer Fund. Total
charges for services of the Water and Sewer Fund were $11,219,499 for the fiscal year. This is slightly
lower than the previous year, however, expenses are significantly lower by $1.6 million due to
construction activities.
FINANCIAL ANALYSIS OF THE CITY'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 $58,857,765. Of this total amount, $55 million constitutes an unreserved fund
balance and can be used to fund day-to-day operations and capital projects. The remainder of the fund
balance, $3.9 million, is reserved to indicate that it 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 15 of this report for a more detailed presentation of governmental fund balances.
In the General Fund, the City originally budgeted for a decrease in fund balance. The actual fund
balance for the General Fund was $4,059,350 over the final budgeted fund balance.
Proprietary Funds — The City's proprietary fund statements, beginning on page 19 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 $552,376. This fund experienced increases in
total net assets during 2005 of $6,000,247. This increase was primarily due to increased contributions
from impact fees.
General Fund Budgetary Highlights — During the year, revenues exceeded budgetary estimates by
$3.4 million and expenditures were less than budgetary estimates by $1.3 million, 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 18 of this report for a detailed presentation of the actual General Fund operations
compared to both the original and final budget for fiscal year 2005.
9
CAPITAL ASSETS
The City of Pearland's investment in capital assets for its governmental and business -type activities as
of September 30, 2005, amounts to $181,351,400 (net of accumulated depreciation) as reflected in the
following schedule. This investment in capital assets includes land, building, equipment, improvements
other than buildings, infrastructure and construction work in progress. This represents a net increase of
$37.8 million or 26% over last year. 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.
CITY OF PEARLAND'S CAPITAL ASSETS AT YEAR-END
Governmental Activities
Business -type Activities Totals
2005 2004 2005 2004 2005 2004
Land $ 2,717,453 $ 2,509,691 $ 367,962 $ 367,962 $ 3,085,415 $ 2,877,653
Buildings and
improvements 12,834,943 12,575,655 22,610,028 21,518,110 35,444,971 34,093,765
Equipment 9,282,167 8,619,886 8,347,893 7,895,580 17,630,060 16,515,466
Infrastructure/
water distribution 61,799,139 42,674,657 57,228,510 60,791,814 119,027,649 103,466,471
Construction in
progress 20,698,167 12,946,218 19,424,558 2,166,494 40,122,725 15,112,712
Less: accumulated
depreciation ( 14,826,719) ( 12,183,003) ( 19,132,701) ( 16,310,637) ( 33,959,420) ( 28,493,640)
Total capital assets $ 92,505,150 $ 67,143,104 $ 88,846.250 $ 76,429,323 $ 181.351.400 $ 143,572,427
Additional information on the City's capital assets can be found in Note 4, pages 35 — 36 of this report.
LONG-TERM DEBT
At the end of the current fiscal year, the City of Pearland had debt totaling $180,925,000, excluding
capital leases. Of this amount, $148,445,000 represents debt backed by the full faith and credit of the
government and $32,480,000 represents bonds secured solely by water and sewer revenues.
CITY OF PEARLAND'S
OUTSTANDING DEBT AT YEAR-END
Governmental Activities
Business -type Activities Totals
2005 2004 2005 2004 2005 2004
General obligation $ 60,175,000 $ 25,345,000 $ $ $ 60,175,000 $ 25,345,000
Revenue bonds
payable 32,480,000 33,505,000 32,480,000 33,505,000
Certificates of
obligation 72,390,000 90,185,000 15,880,000 16,735,000 88,270,000 106,920,000
$ 132,565,000 $ 115,530,000 $ 48,360,000 $ 50,240,000 $ 180.925,000 $ 165.770,000
10
During the fiscal year, the City issued $37,015,000 in Permanent Improvement and Refunding Bonds.
The City's General Obligation, Certificates of Obligation, and Revenue Bond underlying ratings are
listed below.
Tax Bonds
W/S Revenue Bonds
Moody's
Standard
and Poor's
Al A+
Baal A
All of the City's bond issues have been successful in qualifying for bond insurance resulting in ratings of
"Aaa" and "AAA" from Moody's and Standard & Poor's, respectively. Additional information on the
City of Pearland's long-term debt can be found on pages 37 — 42 of this report.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
One of the primary factors considered in the 2006 budget development is the overall economy and how
it affects Pearland's growth. Pearland continues to be one of the fastest growing cities in the Houston
area with such developments as Shadow Creek Ranch, the Lakes at Highland Glen and Southern Trails.
New single-family housing starts totaled 2,610 for 2005 and total construction value of all permits for
2005 was $550 million. The continued growth creates the need to expand services and provide
infrastructure.
The Pearland City Council approved a $38.0 million General Fund budget for the 2005-2006 fiscal year.
This is a 16% increase over the adopted 2004-2005 fiscal year budget. This includes approximately $1.0
million to serve the newly annexed area formerly known as Brazoria County MUD 5, which has an
estimated population of 5,000. Twenty-five new personnel were added to the General Fund budget.
The growth in the budget is driven by increased costs of doing business, as well as, funding for growth
and development. The budget incorporates a tax rate reduction of 2.9% to $0.6744 per $100 of
valuation. The budget also includes the third installment of the 2001 voter approved bond referendum
for mobility projects. After the issuance, there will be a $29 8 million voted, but unissued bonds.
The Pearland Economic Development Corporation fiscal year 2006 budget includes bond proceeds from
the sale of Sales Tax Bonds totaling $11,005,000 for the Kirby Road Extension and related water, sewer
and drainage.
REQUESTS 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 financial
information, contact Claire Manthei, Director of Finance, at 3519 Liberty Drive, Pearland, Texas 77581,
or call (281) 652-1600. For general information, visit the City's website at www.cityofpearland.com.
11
BASIC
FINANCIAL STATEMENTS
ASSETS
Cash and investments
Receivables, net of allowances
for uncollectibles
Accounts
Property taxes
Sales taxes
Other taxes
Intergovernmental
Accrued interest
Prepaid items
Inventories
Restricted cash and investments
Deferred charges
Capital assets:
Land
Buildings and improvements
Machinery and equipment
Infrastructure
Construction 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
Capital improvements
Public safety
Parks and recreation
Economic development
Community services
Unrestricted
Total net assets
CITY OF PEARLAND, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2005
Primary Government
Governmental
Activities
$ 60,503,560 $
913,860
797,744
1,456,049
664,345
270,306
2,387
1,324
69,549
663,459
2,717,453
12,834,943
9,282,167
24,631,483
57,865,823
( 14,826,719)
92,505,150
157,847,733
3,987,205
494,613
167,061
523,316
3,681,773
133,262,658
142,116,626
3,084,208
3,607,258
904,397
449,775
992,941
669,937
237,484
5,785,107
$ 15,731,107 $
Business -type
Activities
Total
Component Units
Economic
Development
Corporation
TIRZ
Developments
10,413,796 $ 70,917,356 $ 1,198,360 $ 1,168,096 $
2,245,558
20,079
4,527,602
627,796
367,962
22,610,028
8,347,893
57,228,510
19,424,558
( 19,132,701)
88,846,250
3,159,418
797,744
1,456,049
664,345
270,306
22,466
1,324
69,549
4,527,602
1,291,255
142
724,601
20,097
3,450
10,035,804
256,439
3,085,415
35,444,971 19,501
17,630,060 124,959
81,859,993
77,290,381
33,959,420) ( 144,460)
181,351,400
106,681,081 264,528, 814
3,094,901 7,082,106
157,955 652,568
167,061
117,851 641,167
1,253,770 1,253,770
2,038,063 5,719,836
46,797,742 180,060,400
53,460,282 195,576,908
45,641,648 48,725,856
275,502
6,751,273
552,376
3,882,760
7,655,670
449,775
992,941
669,937
237,484
6,337,483
12,238,893
21,076
11,498
351,088
10,219,274
10,602,936
1,635,957
234,287
1,402,383
179,285
179,285
Development
Authority
of Pearland
65,344
1,630,157
927,778
2,623,279
815,000
13,180,000
13,995,000
1,223,098 ( 11,371,721)
53,220,799 $ 68,951,906 $ 1,635,957 $ 1,223,098 $ ( 11,371,721)
The notes to the financial statements are an integral part of this statement.
12
CITY OF PEARLAND, TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2005
Program Revenues
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions
Primary Government:
Governmental activities:
General government $ 8,714,401 $ 185,235 $ 2,380 $ 799,999
Public safety 11,856,643 3,639,966 673,276 311,921
Public works 12,858,259 7,221,015 5,792
Community services 2,939,228 1,263,190 478,875
Interest on long-term debt 5,115,039
Total governmental activities 41,483,570 12,309,406 1,154,531 1,117,712
Business -type activities:
Water and sewer
Total business -type activities
13,624,497 11,219,499 8,365,452
13,624,497 11,219,499 8,365,452
Total primary government $ 55,108,067 $ 23,528,905 $ 1,154,531 $ 9,483,164
Component Units:
Economic Development Corporation $ 2,312,729 $ $ $
TIRZ Developments 1,888,506
Development Authority of Pearland 13,225,937 1,824,418
Total component units
$ 17,427,172 $
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
The notes to the financial statements are an integral part of this statement.
$ 1,824,418
13
Net (Expenses) Revenues and
Changes in Net Assets
Primary Government Component Units
Governmental Business -type
Activities Activities
$ ( 7,726,787) $
( 7,231,480)
( 5,631,452)
( 1,197,163)
( 5,115,039)
( 26,901,921)
Economic Development
Development TIRZ Authority
Total Corporation Developments of Pearland
$ ( 7,726,787) $ $ $
( 7,231,480)
( 5,631,452)
( 1,197,163)
( 5,115,039)
( 26,901,921)
5,960,454 5,960,454
5,960,454 5,960,454
( 26,901,921) 5,960,454 ( 20,941,467)
9,678,307
10,126,234
7,785,161
3,097,163
241,046
1,863,323 399,275
827,589
359,482 ( 359,482)
9,678,307
10,126,234
7,785,161
3,097,163
241,046
2,262,598
827,589
( 2,312,729)
( 2,312,729)
3,891,870
( 1,888,506)
( 11,401,519)
1,888,506) ( 11,401,519)
2,531,251
303,129 8,390 29,798
12,000
33,978,305 39,793 34,018,098 4,206,999 2,539,641 29,798
7,076,384
10,598,631
( 1,943,908)
6,000,247 13,076,631
46,029,901 56,628,532
1,190,651 ( 753,257)
8,654,723 47,220,552 55,875,275
$. 15,731,107 $ 53,220,799 $ 68,951,906
1,894,270
231,831)
26,482)
258,313)
651,135 ( 11,371,721)
571,963
571,963
1,635,957 $ 1,223,098 $ ( 11,371,721)
14
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CITY OF PEARLAND, TEXAS
BALANCE SHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30, 2005
General
Total
Debt Capital Other Governmental
Service Projects Funds Funds
ASSETS
Cash and investments $ 6,945,697 $ 3,843,924 $ 46,538,692 $ 3,175,247 $ 60,503,560
Receivables, net of allowances for uncollectibles
Accounts 802,568 46,605 64,687 913,860
Property taxes 511,094 286,650 797,744
Sales taxes 1,456,049 1,456,049
Other taxes 664,345 664,345
Intergovernmental 216,443 53,863 270,306
Accrued interest 1,393 994 2,387
Prepaid items 1,324 1,324
Inventories 69,549 69,549
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Accrued liabilities
Deferred revenue
Total liabilities
$ 10,668,462 $ 4,130,574 $ 46,585,297 $ 3,294,791 $ 64,679,124
940,728 3,009,966 36,511 3,987,205
464,613 30,000 494,613
1,060,350 275,445 3,746 1,339,541
2,465,691 275,445 3,039,966 40,257 5,821,359
Fund balances:
Reserved for:
Inventories 69,549 69,549
Prepaid items 1,324 1,324
Debt service 3,855,129 3,855,129
Unreserved, reported in: -
General fund 8,201,447 8,201,447
Special revenue funds 2,462,352 2,462,352
Capital projects fund 43,545,331 792,182 44,337,513
Total fund balances 8,202,771 3,855,129 43,545,331 3,254,534 58,857,765
Total liabilities and fund balances $ 10,668,462 $ 4,130,574 $ 46,585,297 $ 3,294,791
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.
92,505,150
1,172,480
Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds. ( 136,804,288)
Net assets of governmental activities
$ 15,731,107
The notes to the financial statements are an integral part of this statement.
15
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CITY OF PEARLAND, TEXAS
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2005
General
Total
Debt Capital Other Governmental
Service Projects Funds Funds
REVENUES
Taxes:
Property $ 9,649,452 $ 10,095,935 $ $ $ 19,745,387
Sales 7,785,161 7,785,161
Mixed beverage 55,181 55,181
Hotel/motel 469 185,396 185,865
Franchise 3,097,163 3,097,163
Permits, licenses and fees 3,863,592 3,863,592
Fines 1,883,381 51,586 1,934,967
Charges for services 6,138,610 6,138,610
Intergovernmental 871,196 1,111,920 398,388 2,381,504
Other revenue 595,369 8,846 568,098 1,172,313
Investment earnings 415,296 57,687 1,335,250 55,090 1,863,323
Total revenues 34,354,870 10,153,622 2,456,016 1,258,558 48,223,066
EXPENDITURES
Current:
General government 6,664,735 84,839 6,749,574
Public safety 10,816,906 264,555 11,081,461
Public works 10,449,814 10,449,814
Community services 2,692,450 54,729 2,747,179
Capital outlay 1,019,976 27,531,520 109,355 28,660,851
Debt service:
Principal 3,534,534 3,534,534
Interest and fiscal charges 5,027,376 527,689 5,555,065
Intergovernmental 1,083,896 1,083,896
Total expenditures 31,643,881 9,645,806 28,059,209 513,478 69,862,374
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 2,710,989 507,816 ( 25,603,193) 745,080 ( 21,639,308)
OTHER FINANCING SOURCES (USES)
Transfers in 2,063,264 339,561 2,384,774 82,000 4,869,599
Transfers out ( 3,003,294) ( 608,559) ( 898,264) ( 4,510,117)
Issuance of capital lease 271,193 271,193
Capital -related debt issued 37,015,000 37,015,000
Premium from capital -related debt issued 1,368,186 1,368,186
Payment to escrow agent ( 17,294,621) ( 17,294,621)
Total other financing sources and (uses) ( 940,030) 339,561 23,135,973 ( 816,264) 21,719,240
NET CHANGE IN FUND BALANCES 1,770,959 847,377 ( 2,467,220) ( 71,184) 79,932
FUND BALANCES, BEGINNING AS
PREVIOUSLY STATED
8,285,590 3,007,752 46,012,551 3,415,848 60,721,741
PRIOR PERIOD ADJUSTMENT ( 1,853,778) - ( 90,130) ( 1,943,908)
FUND BALANCES, BEGINNING AS RESTATED 6,431,812 3,007,752 46,012,551 3,325,718 58,777,833
FUND BALANCES, ENDING $ 8,202,771 $ 3,855,129 $ 43,545,331 $ 3,254,534 $ 58,857,765
The notes to the financial statements are an integral part of this statement.
16
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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, 2005
Amounts reported for governmental activities in the Statement of Activities (pages 13 - 14)
are different because:
Net change in fund balances - total governmental funds (page 16)
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.
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.
$ 79,932
(
25,362,046
22,594)
( 17,273,098)
( 1,069,902)
Change in net assets of governmental activities (pages 13 - 14) $ 7,076,384
The notes to the financial statements are an integral part of this statement.
17
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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
Capital outlay
Total expenditures
FOR THE YEAR ENDED SEPTEMBER 30, 2005
Budgeted Amounts
Original Final
$ 9,767,610
6,931,000
3,015,000
3,180,335
1,590,200
5,269,949
879,300
282,100
1,000
30,916,494
$ 9,767,610
6,931,000
3,015,000
3,180,335
1,590,200
5,269,949
879,300
288,100
1,000
Actual
Amounts
Variance with
Final Budget -
Positive
(Negative)
$ 9,649,452 $ ( 118,158)
7,840,811 909,811
3,097,163 82,163
3,863,592 683,257
1,883,381 293,181
6,138,610 868,661
871,196 ( 8,104)
595,369 307,269
415,296 414,296
30,922,494 34,354,870 3,432,376
6,380,991 6,720,970 6,664,735
10, 706, 646 11, 031, 997 10, 816, 906
9,926,159 10,916,013 10,449,814
3,801,935 3,123,164 2,692,450
1,762,877 1,138,759 1,019,976
32,578,608 32,930,903 31,643,881
56,235
215,091
466,199
430,714
118,783
1,287,022
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES ( 1,662,114) ( 2,008,409) 2,710,989 4,719,398
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total other financing sources (uses)
1,765,806
( 459,000)
1,306,806
1,765,806
( 2,045,788)
( 279,982)
NET CHANGE IN FUND BALANCES ( 355,308) ( 2,288,391)
FUND BALANCES, BEGINNING AS
PREVIOUSLY STATED
PRIOR PERIOD ADJUSTMENT
FUND BALANCES, BEGINNING
AS RESTATED 6,431,812 6,431,812 6,431,812
2,063,264 297,458
( 3,003,294) ( 957,506)
( 940,030) ( 660,048)
1,770,959 4,059,350
8,285,590 8,285,590 8,285,590
( 1,853,778) ( 1,853,778) ( 1,853,778)
FUND BALANCES, ENDING $ 6,076,504 $ 4,143,421 $ 8,202,771 $ 4,059,350
The notes to the financial statements are an integral part of this statement.
18
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CITY OF PEARLAND, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUND
SEPTEMBER 30, 2005
Business -type
Activities
Enterprise Fund
Water and Sewer
ASSETS
Current assets:
Cash and investments $ 10,413,796
Accounts receivable, net of allowances 2,245,558
Accrued interest 20,079
Restricted cash and investments 4,527,602
Total current assets 17,207,035
Noncurrent assets:
Deferred charges 627,796
Capital assets:
Land 367,962
Buildings and improvements 22,610,028
Machinery and equipment 8,347,893
Infrastructure 57,228,510
Construction work in progress 19,424,558
Less: accumulated depreciation ( 19,132,701)
Total capital assets 88,846,250
Total noncurrent assets 89,474,046
Total assets 106,681,081
LIABILITIES
Current liabilities:
Accounts payable 3,094,901
Accrued liabilities 157,955
Accrued interest 117,851
Customer deposits 1,253,770
Compensated absences 83,063
Certificates of obligation 880,000
Revenue bonds 1,075,000
Total current liabilities 6,662,540
Noncurrent liabilities:
Compensated absences 392,742
Certificates of obligation 15,000,000
Revenue bonds 31,405,000
Total noncurrent liabilities 46,797,742
Total liabilities 53,460,282
NET ASSETS
Invested in capital assets, net of related debt 45,641,648
Restricted for:
Debt service 275,502
Capital improvements 6,751,273
Unrestricted 552,376
Total net assets $ 53,220,799
The notes to the financial statements are an integral part of this statement.
19
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CITY OF PEARLAND, TEXAS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2005
Business -type
Activities
Enterprise Fund
Water and Sewer
OPERATING REVENUES
Charges for services $ 10,947,737
Other 271,762
Total operating revenues 11,219,499
OPERATING EXPENSES
Production and wastewater 4,507,571
Distribution and collection 1,415,078
Accounting and collections 1,124,626
Other requirements 792,301
Construction and engineering 767,233
Depreciation 2,864,261
Total operating expenses 11,471,070
OPERATING LOSS ( 251,571)
NONOPERATING REVENUES (EXPENSES)
Earnings on investments 399,275
Interest and fiscal charges ( 2,153,427)
Total nonoperating revenues (expenses) ( 1,754,152)
LOSS BEFORE CONTRIBUTIONS
AND TRANSFERS ( 2,005,723)
CAPITAL CONTRIBUTIONS 8,365,452
TRANSFERS IN 536,520
TRANSFERS OUT ( 896,002)
CHANGE IN NET ASSETS 6,000,247
TOTAL NET ASSETS, BEGINNING 46,029,901
PRIOR PERIOD ADJUSTMENT 1,190,651
TOTAL NET ASSETS, ENDING $ 53,220,799
The notes to the financial statements are an integral part of this statement.
20
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CITY OF PEARLAND, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2005
Business -type
Activities
Enterprise Fund
Water and Sewer
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 12,888,744
Cash paid to suppliers for goods and services ( 2,710,758)
Cash paid to employees for services ( 4,460,630)
Net cash provided by operating activities 5,717,356
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Cash paid to other funds 1,190,651
Transfers from other funds 536,520
Transfers to other funds ( 896,002)
Net cash used for noncapital for financing activities 831,169
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Principal repayments on bonds ( 1,880,000)
Cash received from capital contributions 8,365,452
Interest and fiscal charges on debt ( 2,111,230)
Acquisition and construction of capital assets ( 15,281,188)
Net cash used for capital and related financing activities ( 10,906,966)
CASH FLOWS FROM INVESTING ACTIVITIES
Earnings on investments 273,163
Net cash provided by investing activities 273,163
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING
4,085,278)
19,026,676
CASH AND CASH EQUIVALENTS, ENDING $ 14,941,398
Cash and investments $ 10,413,796
Restricted cash and investments 4,527,602
Cash and cash equivalents, ending $ 14,941,398
Reconciliation of operating loss to net cash
provided by operating activities:
Operating loss $ ( 251,571)
Adjustments to reconcile operating loss
to net cash provided by operating activities:
Depreciation 2,864,261
Changes in assets and liabilities:
Decrease (increase) in assets:
Accounts receivable . 1,500,001
Increase (decrease) in liabilities:
Accounts payable 1,229,941
Accrued liabilities 130,535
Customer deposits 169,244
Compensated absences payable 74,945
Net cash provided by operating activities $ 5,717,356
The notes to the financial statements are an integral part of this statement.
21
CITY OF PEARLAND, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
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 was created
in 1995 and is fiscally dependent upon the primary 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. TIRZ #2 was created in 1998. Besides
appointing Board members, the City Council must also approve the TIRZ's
budgets and any debt issuances done on behalf of the TIRZ.
3. The Development Authority of Pearland was created by the City in 2004 by
Resolution No. 2004-107 to aid, assist and account on behalf of the City to
provide financing for the Reinvestment Zone Number Two. Proceeds from
bond sales are to be used to reimburse developers and fund a debt service
reserve.
(continued)
22
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 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 -type 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)
23
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 Service 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)
24
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 -type 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 program 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)
25
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, 2005. 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 October 1 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 lien 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% or 20% is added in July for attorney costs.
There are no discounts allowed in taxes.
(continued)
26
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 2004 tax year were $.3389
and $.3559, respectively, per $100 of assessed valuation. The 2004 assessed value and total
tax levy as adjusted through September 30, 2005, were $3,019,449,422 and $20,979,391,
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 and Economic Development Corporation 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 applicable bond covenants. Certain
resources are also set aside for repayment of Development Authority bonds and are reported
as restricted assets.
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)
27
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 Statement No. 34
related to infrastructure (roads, sidewalks, etc.) assets acquired prior to October 1, 2002. The
City has implemented the general provisions of GASB Statement No. 34 and will complete
the implementation of the retroactive provisions for infrastructure no later than September
30, 2007.
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 hired after October 1, 2005, earn vacation at a rate of 10 days per year
from 1 — 6 years of service, 15 days per year for 7 — 15 years of service, and 20 days for over
16 years of service. 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)
28
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. As of September 30,
2005, the City has elected to delay implementation of the requirements of GASB 34 related
to infrastructure assets acquired prior to October 1, 2002. As a result, net assets invested in
capital assets, net of related debt does not consist of infrastructure acquired prior to October
1, 2002, but does consist of the infrastructures related debt. 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.
29
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 $136,804,288 difference are as follows:
Certificates and General Obligation Bonds $ 132,565,000
Deferred charge for issuance cost ( 663,459)
Deferred amount for issuance premium 1,458,694
Deferred loss on refunding bonds ( 789,621)
Accrued interest payable 523,316
Compensated absences 3,314,699
Capital lease obligation 395,659
Net adjustment to reduce fund balance - total
governmental funds to arrive at net assets -
governmental activities
$ 136,804,288
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 $25,362,046 difference are as follows:
Capital outlay $ 28,005,762
Depreciation expense ( 2,643,716)
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities
(continued)
$ 25,362,046
30
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
$(22,594) difference are as follows:
Property taxes $ 59,154
Court fines ( 81,748)
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities
$ ( 22,594)
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 $(17,273,098) difference
are as follows:
Debt issued or incurred:
Issuance of general obligation bonds $ ( 37,015,000)
Bond issuance cost 548,191
Premium on issuance of bonds ( 1,368,186)
Capital lease financing ( 271,193)
Amortization of bond issue costs 3,935
Payment to escrow agent 17,294,621
Principal repayments:
General obligation debt 3,534,534
Net adjustment to reduce net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities $ ( 17,273,098)
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 $(1,069,902) difference are as follows:
Compensated absences
Interest expense
Net adjustment to increase net changes in fund balances -
total governmental funds to arrive at changes in net
assets of governmental activities
$ (
957,802)
112,100)
$ ( 1,069,902)
31
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.
The City Manager, between 60 and 90 days prior to the beginning of each fiscal year, submits 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 no later than 15 days prior to the beginning of the fiscal 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.
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)
32
4. 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 obligations, 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 firm and having received a rating of not less than A or
its equivalent.
The deposit and investment policies for the Pearland Economic Development Corporation, TIRZ
Developments, and Development Authority of Pearland are substantially the same as the City.
Deposits and Investments
As of September 30, 2005, the City had the following investments:
Investment Type
Primary government:
Fannie Mae Discount Note
Freddie Mac Discount Note
Weighted Average
Fair Value Maturity (Days)
$ 1,152,974
1,851,659
Total portfolio $ 3,004,633
17
91
Portfolio weighted average maturity (days) 63
Interest Rate Risk In accordance with its investment policy, the City manages its exposure to
declines in fair market values by limiting the weighted average maturity of its investment
portfolios to a maximum of 365 days.
(continued)
33
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
Custodial Credit Risk. In the case of deposits, this is the risk that in the event of a bank failure, the
City's deposits may not be returned to it. State statutes require that all deposits in financial
institutions be fully collateralized by U. S. Government obligations or its agencies and
instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a fair
value of not less than the principal amount of deposits. As of September 30, 2005, $64,957,376 of
the City's $65,257,376 deposit balance was collateralized with securities held by the pledging
financial institution. The remaining balance, $300,000 was covered by FDIC insurance. As of the
same date, $13,808,363 of the component units' deposit balance was collateralized with securities
held by the pledging financial institution and by FDIC.
Credit Risk. It is the City's policy to limit its investments to investment types with an investment
quality rating not less than A or its equivalent by a nationally recognized statistical rating
organization. The City's investments as of September 30, 2005, were rated as follows:
Investment Type
Rating Rating Agency
U. S. Agency Securities:
Fannie Mae Discount Note AAA
Freddie Mac Discount Note Aaa
Receivables
Moody's Investor Service
Moody's Investor Service
Receivables as of year-end for the City's individual major funds, nonmajor funds in the
aggregate, and discretely presented component units in the aggregate including the applicable
allowances for uncollectible accounts, are as follows:
General
Debt Capital Nonmajor Water Component
Service Proiects Governmental and Sewer Units
Total
Receivables:
Accounts $ 868,158 $ $ 46,605 $ 64,687 $ 2,714,763 $ 142 $ 3,694,355
Property taxes 511,094 286,650 234,287 1,032,031
Sales taxes 1,456,049 724,601 2,180,650
Other taxes 664,345 664,345
Intergovernmental 216,443 53,863 270,306
Accrued interest 1,393 994 20,079 20,097 42,563
Gross receivables 3,717,482 286,650 46,605 119,544 2,734,842 979,127 7,884,250
Less: allowance for
uncollectibles 65,590 469,205 534,795
Net total
receivables $ 3,651,892 $_ 286,650 $ 46,605 $ 119,544 $ 2,265,637 $ 979,127 $ 7,349,455
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:
(continued)
34
4. DETAILED NOTES ON ALL FUNDS (Continued)
Receivables (Continued)
Unavailable Unearned
General fund:
Delinquent property taxes receivable $ 500,028 $
Municipal court 393,261
Other
Debt service fund:
Delinquent property taxes receivable 275,445
Nonmajor governmental:
Municipal court 3,746
Governmental Funds
167,061
$ 1,172,480 $ 167,061
Capital Assets
Capital asset activity for the year ended September 30, 2005, was as follows:
Primary Government
Decreases
Beginning and Ending
Balance Increases Reclassifications Balance
Governmental activities:
Capital assets, not being depreciated:
Land $ 2,509,691 $ 207,762 $ $ 2,717,453
Construction in progress 12,946,218 26,335,777 ( 18,583,828) 20,698,167
Total capital assets not being depreciated 15,455,909 26,543,539 ( 18,583,828) 23,415,620
Capital assets, being depreciated:
Buildings 10,357,504 104,827
Improvements other than buildings 2,;18,151 154,461
Machinery and equipment 8,619,886 662,281
Infrastructure 42,674,657 540,654
Total capital assets being depreciated 63,870,198 1,462,223
Less accumulated depreciation:
Buildings 3,589,225 227,342
Improvements other than buildings 1,357,101 90,268
Machinery and equipment 5,714,914 1,259,239
Infrastructure 1,521,763 1,066,867
Total accumulated depreciation 12,183,003 2,643,716
Total capital assets, being depreciated, net
18,583,828
10,462,331
2,372,612
9,282,167
61,799,139
18,583,828 83,916,249
3,816,567
1,447,369
6,974,153
2,588,630
14,826,719
51,687,195 ( 1,181,493) 18,583,828 69,089,530
Governmental activities capital assets, net $ 67,143,104 $ 25,362,046 $ $ 92,505,150
(continued)
35
4. DETAILED NOTES ON ALL FUNDS (Continued)
Capital Assets (Continued)
Decreases
Beginning and Ending
Balance Increases Reclassifications Balance
Business -type activities:
Capital assets, not being depreciated:
Land $ 367,962 $ $ $ 367,962
Construction in progress 2,166,494 17,258,064 19,424,558
Total assets not being depreciated 2,534,456 17,258,064 19,792,520
Capital assets, being depreciated:
Buildings and improvements 21,518,110 1,091,918 22,610,028
Machinery and equipment 7,895,580 452,313 8,347,893
Water and sewer system 60,791,814 3,063,383 6,626,687 57,228,510
Total capital assets, being depreciated 90,205,504 4,607,614 6,626,687 88,186,431
Less accumulated depreciation:
Buildings and improvements 8,198,116 695,693 8,893,809
Machinery and equipment 4,083,651 695,658 4,779,309
Water and sewer system 4,028,870 1,430,713 5,459,583
Total accumulated depreciation 16,310,637 2,822,064 19,132,701
Total capital assets being depreciated, net 73,894,867 1,785,550 6,626,687 69,053,730
Business -type activities capital assets, net $ 76,429,323 $ 19,043,614 $ 6,626,687 $ 88,846,250
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government $ 581,618
Public safety 475,869
Public works 1,454,043
Community services 132,186
Total depreciation expense - governmental activities $ 2,643,716
Business -type activities:
Water and sewer $ 2,822,064
Total depreciation expense - business -type activities $ 2,822,064
Interfund Transfers
Transfers In
General
Debt Capital Nonmajor Water
Service Projects Governmental and Sewer
Total
Transfers Out:
General $ - $ - $ 2,384,774 $ 82,000 $ 536,520 $ 3,003,294
Capital projects 404,000 204,559 - 608,559
Nonmajor governmental 898,264 - - 898,264
Water and sewer 761,000 135,002 896,002
Total Transfers $ 2,063,264 $ 339,561 $ 2,384,774 $ 82,000 $ 536,520 $ 5,406,119
(continued)
36
4. DETAILED NOTES ON ALL FUNDS (Continued)
Interfund Transfers (Continued)
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.
Long-term Debt
General Obligation Bonds and Certificates of Obligation
The City issues general obligation bonds and certificates of obligation to provide funds for the
acquisition and construction of major capital facilities. General obligation bonds and certificates
of obligation have been issued for both governmental and business -type activities. The original
amount of general obligation bonds and certificates of obligation issued in prior years was
$153,795,000. During the year, general obligation bonds and certificates of obligation totaling
$37,015,000 were issued to fund general obligation projects and refund certain debt issues.
General obligation bonds and certificates of obligation 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 and certificates of
obligation currently outstanding are as follows:
Purpose
Governmental activities
Governmental activities - refunding
Business -type activities
Interest Rates Amount
3.00 - 7.25%
3.25 - 5.5%
2.6 - 6.5%
$ 107,550,000
25,015,000
15,880,000
$ 148,445,000
Annual debt service requirements to maturity for general obligation bonds
obligation are as follows:
Year Ending
September 30,
2006
2007
2008
2009
2010
2011-2015
2016-2020
2021-2025
2026-2030
Total
Governmental Activities
Principal Interest
$ 2,850,000
2,525,000
2,650,000
4,340,000
4,885,000
27,045,000
29,330,000
32,735,000
26,205,000
$ 6,279,799
5,936,666
5,822,694
5,663,043
5,445,556
23,764,608
17,396,188
10,351,167
2,268,629
$ _ 132,565,000 $ 82,928,350
(continued)
and certificates of
Business -type Activities
Principal Interest
$ 880,000
915,000
945,000
980,000
1,015,000
5,645,000
5,500,000
$ 548,674
521,072
492,006
461,197
428,271
1,570,214
347,768
$ 15,880,000 $ 4,369,202
37
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% $ 32,480,000
Revenue bond debt service requirements to maturity are as follows:
Year Ending Business -type Activities
September 30, Principal Interest
2006 $ 1,075,000 $ 1,459,365
2007 1,125,000 1,411,888
2008 1,180,000 1,361,558
2009 1,235,000 1,308,250
2010 1,295,000 1,251,918
2011-2015 7,485,000 5,254,083
2016-2020 9,380,000 3,431,769
2021-2025 9,705,000 1,222,249
Total $ 32,480,000 $ 16,701,080
Obligations Under Capital Leases
During the current year, the City entered into a capital lease agreement in order to purchase
equipment and vehicles for various departments. The assets acquired through these lease
agreements are as follows:
Governmental
Activities
Asset:
Equipment and vehicles $ 455,193
Less: accumulated depreciation 26,284
Total $ 428,909
(continued)
38
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Obligations Under Capital Leases (Continued)
Year Ending
September 30,
2006
2007
2008
Total
Less interest portion
Obligations under capital leases
Lease
Obligation
$ 159,629
159,629
95,069
414,327
( 18,668)
$ 395,659
The primary government's long-term liability activity for the year ended September 30, 2005,
was as follows:
Beginning
Balance
Additions
Reductions
Governmental activities
Bonds payable:
General obligation $ 25,345,000 $ 37,015,000 $ 2,185,000 $
Certificates of obligation 90,185,000 17,795,000
Deferred amount for
issuance premium 94,443 1,368,186 3,935
Deferred loss on refunding ( 789,621)
Total bonds payable
Capital lease
Compensated absences
Governmental activity
long-term liabilities
Business -type activities
Bonds payable:
Certificates of obligation
Revenue
Total bonds payable
115,624,443 37,593,565 19,983,935
184,000 271,193 59,534
2,356,897 1,234,722 276,920
118,165,340 39,099,480 20,320,389
16,735,000
33,505,000
50,240,000
Compensated absences 400,860
Business -type activity
long-term liabilities $ 50,640,860 $
82,447
Ending
Balance
Due Within
One Year
60,175,000 $ 2,295,000
72,390,000 555,000
1,458,694
( 789,621)
133,234,073
395,659
3,314,699
136,944,431
855,000 15,880,000
1,025,000 32,480,000
1,880,000 48,360,000
67,991 415,316
82,447 $ 1,947,991 $
60,943
( 39,481)
2,871,462
147,371
662,940
3,681,773
880,000
1,075,000
1,955,000
83,063
48,775,316 $ 2,038,063
The governmental activities compensated absences are generally liquidated by the General Fund.
(continued)
39
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Advance Refunding
The City issued $16,510,000 of general obligation refunding bonds to provide resources to
purchase U. S. Government State and Local Government Series securities that were placed in an
irrevocable trust for the purpose of generating resources for all future debt service payments of
$17,294,621 of general obligation bonds. As a result, the refunded bonds are considered to be
defeased and the liability has been removed from the governmental activities column of the
statement of net assets. The reacquisition price exceeded the net carrying amount of the old debt
by $789,621. This amount is being netted against the new debt and amortized over the
remaining life of the refunded debt, which is shorter than the life of the new debt issued. This
advance refunding was undertaken to increase total debt service payments over the next 12 years
by $1,031,367 and resulted in an economic gain of $871,970.
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(t) 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 a liability in the amount of $53,317 was reported
in the Water and Sewer Fund.
(continued)
40
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
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
projects.
Component Units
The terms of Sales Tax and Tax Increment Revenue Bonds are as follows:
Purpose
Sales Tax Revenue - Economic Development
Tax Increment Revenue - Development Authority
Interest Rates Amount
2.5% - 5% $ 10,590,000
3.25% - 5.5% 13,995,000
The Pearland Economic Development Corporation issued $4,365,000 of sales tax revenue
refunding bonds to provide resources to purchase U. S. Government State and Local Government
Series securities that were placed in an irrevocable trust for the purpose of generating resources
for all future debt service payments of $4,349,474 of sales tax revenue bonds. As a result, the
refunded bonds are considered to be defeased and the liability has been removed from the
statement of net assets. The reacquisition price exceeded the net carrying amount of the old debt
by $189,626. This amount is being netted against the new debt and amortized over the
remaining life of the refunded debt, which is shorter than the life of the new debt issued. This
advance refunding was undertaken to increase total debt service payments over the next 10 years
by $1,135,935 and resulted in an economic gain of $790,921.
(continued)
41
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt (Continued)
Component Units (Continued)
Long-term activity for the year ended September 30, 2005, was as follows:
Beginning
Balance Additions Reductions
Economic Development Corporation:
Sales Tax Revenue Bonds $ 4,165,000 $ 11,005,000 $
Deferred amount for
issuance premium 155,448
Deferred loss on refunding ( 189,626)
Compensated absences 14,540 28,191
Total long-term
liabilities $ 4,179,540 $ 10,999,013 $
Development Authority of Pearland:
Tax Increment Revenue Bonds $
Total long-term
liabilities $
$ 13,995,000 $
$ 13,995,000 $
4,580,000 $
28,191
4,608,191 $
Ending
Balance
Due Within
One Year
10,590,000 $ 345,000
155,448
189,626)
14,540
7,772
9,481)
7,797
10,570,362 $ 351,088
$ 13,995,000 $ 815,000
$ 13,995,000 $ 815,000
Annual debt service requirements to maturity for sales tax revenue bonds are as follows:
Year Ending
September 30, Principal Interest _
2006
2007
2008
2009
2010
2011-2015
2016-2020
2021-2025
2026
$ 345,000
350,000
360,000
375,000
385,000
2,140,000
2,645,000
3,255,000
735,000
Total $ 10,590,000
$ 420,900
412,275
402,650
391,850
380,600
1,693,590
1,190,740
575,689
31,238
$ 5,499,532
Annual debt service requirements to maturity for tax increment revenue bonds are as follows:
Year Ending
September 30, Principal Interest
2006
2007
2008
2009
2010
2011-2015
2016-2020
2021-2025
2026-2028
Total
(continued)
$ 815,000
840,000
360,000
375,000
390,000
2,215,000
2,790,000
3,570,000
2,640,000
$ 13,995,000
$ 668,858
642,370
614,020
601,060
586,435
2,663,241
2,085,615
1,307,981
292,489
9,462,069
42
4. DETAILED NOTES ON ALL FUNDS (Continued)
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.
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 801 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)
43
4. 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 to satisfy
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, 2004, valuation is effective
for rates beginning January 2006).
Schedule of Actuarial Liabilities and Funding Progress
For the Years Ended September 30, 2002, 2003 and 2004
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
12/31/02
$ 16,390,251
19,963,606
82.1%
3,573,355
11,151,256
32.0%
NPO at the end of the period $
12/31/03 12/31/04
$ 18,772,272
23,190,084
80.9%
4,417,812
12,731,012
34.7%
1,228,907 1,371,452
1,228,907 1,371,452
(continued)
$ 21,971,144
26,517,882
82.9%
4,546,738
13,703,115
33.2%
1,480,301
1,480,301
44
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
Investment Rate of Return
Projected Salary Increases
Includes Inflation at
Cost -of -living Adjustments
Actuarial Assumptions
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)
7%
None
None
None
The City is one of 801 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, 2004, valuations are contained in the 2004 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)
45
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
As of September 30, 2004, the City (overstated) understated certain assets between funds.
Beginning fund equity was restated in each of the following funds to correct this error in the
prior year.
Fund
Amount of
Restatement
General $ ( 1,853,778)
Nonmajor governmental ( 90,130)
Water and sewer 1,190,651
Economic Development Corporation ( 26,482)
Subsequent Events
Debt Issuance
On October 1, 2005, the Development Authority of Pearland, a discretely presented component
unit, issued Tax Increment Revenue Bonds, Series 2005, in the amount of $9,775,000. These
bonds were used to reimburse developers for certain project costs including infrastructure and
related improvements made by such developers within Reinvestment Zone Number Two.
Annexation
On December 31, 2005, the City annexed approximately 582 acres of land consisting of all of
Brazoria County Municipal Utility District No. 5 and adjacent portions of County Road 403 and
FM 865, Brazoria County into the City. Upon the dissolution of the District, the City assumes all
property and assets owned by the District, as well as all debts, liabilities and obligations of the
District, and must provide all City services to the annexed areas. Capital assets and long-term
debt acquired were approximately $11.7 million and $8.3 million, respectively.
46
COMBINING AND INDIVIDUAL FUND
STATEMENTS AND SCHEDULES
CITY OF PEARLAND, TEXAS
GENERAL FUND
SCHEDULE OF EXPENDITURES - BUDGET AND ACTUAL
YEAR ENDED SEPTEMBER 30, 2005
GENERAL GOVERNMENT
City council
City manager
Human resources
City secretary
Finance
Legal
Municipal court
Custodial services
Engineering
Public affairs/grants
Project management
Information technology
Emergency management
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 and aquatics
Parks and recreation - special events
Parks and recreation - senior programs
Total community services
CAPITAL OUTLAY
Final
Budget
$ 86,600
626,356
569,104
222,800
923,825
425,424
434,665
659,605
1,318,902
340,505
591,918
510,300
10,966
6,720,970
7,908,587
376,518
389,530
403,437
1,797,810
156,115
11,031,997
10,916,013
129,313
1,679,760
452,069
305,992
387,360
168,670
3,123,164
1,138,759
Actual
$ 70,422
632,472
555,469
214,584
1,004,003
433,010
433,882
683,263
1,245,697
280,321
589,044
510,,1,/1
12,124
6,664,735
7,738,616
346,051
374,270
387,034
1,826,769
144,166
10,816,906
10,449, 814
116,346
1,407,405
399,288
285,839
336,958
146,614
2,692,450
1,019,976
Variance
Positive
(Negative)
$ 16,178
( 6,116)
13,635
8,216
( 80,178)
( 7,586)
783
( 23,658)
73,205
60,184
2,874
( 144)
( 1,158)
56,235
169,971
30,467
15,260
16,403
( 28,959)
11,949
215,091
466,199
12,967
272,355
52,781
20,153
50,402
22,056
430,714
118,783
Total expenditures $ 32,930,903 $ 31,643,881 $ 1,287,022
47
THIS PAGE LEFT BLANK INTENTIONALLY
NONMAJOR 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/Motel 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 Department.
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, 2005
Special Revenue
Municipal Soccer Regional Hotel/ Park
Court Donation Detention Motel Tax Donation
ASSETS
Cash and investments $ 93,430 $ 6,275 $ 102,129 $ 631,484 $ 53,241
Accounts receivable 1,688 60,523
Intergovernmental receivable
Accrued interest
Total assets
$ 95,118 $ 6,275 $ 102,129 $ 692,007 $ 53,241
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 999 $ $ $ 22,070 $
Deferred revenue 1,688
Total liabilities 2,687 22,070
Fund balances:
Unreserved, reported in:
Special revenue funds 92,431 6,275 102,129 669,937 53,241
Capital projects fund
Total fund balances 92,431 6,275 102,129 669,937 53,241
Total liabilities
and fund balances $ 95,118 $ 6,275 $ 102,129 $ 692,007 $ 53,241
48
Special Revenue
Park and
Recreation Tree Tree Federal Community
Development Donations Trust Sidewalk Police Police Services
$ 743,093 $ 1,448 $ 188,884 $ 112,215 $ 89,081 $ 26,548 $ 73,628
$ 743,093 $ 1,448 $ 188,884 $ 112,215 $ 89,081 $ 26,548 $ 73,628
$ $ $ $ $ 10,970
10,970
743,093 1,448 188,884 112,215 89,081 26,548 62,658
743,093 1,448 188,884 112,215 89,081 26,548 62,658
$ 743,093 $ 1,448 $ 188,884 $ 112,215 $ 89,081 $ 26,548 $ 73,628
(continued)
49
THIS PAGE LEFT BLANK INTENTIONALLY
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, 2005
Special Revenue
Grants
$ 123,345 $
53,863
Capital
Projects
FEMA Court Street
Buyout Technology Assessments Total
$ 139,586 $ 790,860 $ 3,175,247
2,058 418 64,687
53,863
994 994
$ 177,208 $ $ 141,644 $ 792,272 $ 3,294,791
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 2,382 $ $ $ 90 $ 36,511
Deferred revenue 2,058 3,746
Total liabilities 2,382 2,058 90 40,257
Fund balances:
Unreserved, reported in:
Special revenue funds
Capital projects fund
Total fund balances
174,826 139,586 2,462,352
792,182 792,182
174,826 139,586 792,182 3,254,534
Total liabilities
and fund balances $ 177,208 $ $ 141,644 $ 792,272 $ 3,294,791
50
CITY OF PEARLAND, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2005
Special Revenue
Municipal Soccer Regional Hotel/ Park
Court Donation Detention Motel Tax Donation
REVENUES
Hotel/motel $ $ $ $ 185,396 $
Fines
Intergovernmental
Other income 39,988 12,610 49,258 14,018
Investment earnings 1,137 245 1,211 7,759 696
Total revenues 41,125 12,855 50,469 193,155 14,714
EXPENDITURES
Current:
General government 3,266 80,313
Public safety
Community services 8,968 16,971
Capital outlay
Total expenditures 3,266 8,968 80,313 16,971
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 AS
PREVIOUSLY STATED
PRIOR PERIOD ADJUSTMENT
FUND BALANCES, BEGINNING
AS RESTATED
37,859 3,887 50,469 112,842 ( 2,257)
( 10,363)
( 10,363)
27,496 3,887 50,469 112,842 ( 2,257)
64,935 2,388 51,660 557,095 55,498
64,935 2,388 51,660 557,095 55,498
FUND BALANCES, ENDING $ 92,431 $ 6,275 $ 102,129 $ 669,937 $ 53,241
51
$
Special Revenue
Park and
Recreation Tree Tree Federal Community
Development Donations Trust Sidewalk Police Police Services
185,998 1,000 36,950 25,542 3,806
8,346 20 2,439 1,924 1,307 344 797
194,344 20 3,439 38,874 26,849 344 4,603
17,661
28,790
17,661 28,790
194,344 20 3,439 38,874 9,188 344 ( 24,187)
( 180,000)
32,000
( 180,000) 32,000
194,344 20 3,439 (141,126) 9,188 344 7,813
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
$ 743,093 $ 1,448 $ 188,884 $ 112,215 $ 89,081 $ 26,548 $ 62,658
(continued)
52
THIS PAGE LEFT BLANK INTENTIONALLY
CITY OF PEARLAND, TEXAS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
(Continued)
FOR THE YEAR ENDED SEPTEMBER 30, 2005
Special Revenue
Grants
Capital
Proiects
FEMA Court Street
Buyout Technology Assessments Totals
REVENUES
Hotel/motel $ $ $ $ $ 185,396
Fines 51,586 51,586
Intergovernmental 398,388 398,388
Other income 198,928 568,098
Investment earnings 866 56 1,934 26,009 55,090
Total revenues 399,254 56 53,520 224,937 1,258,558
EXPENDITURES
Current:
General government 1,260 84,839
Public safety 261,551 3,004 264,555
Community services 54,729
Capital outlay 91,694 109,355
Total expenditures 354,505 3,004 513,478
REVENUES OVER (UNDER)
EXPENDITURES 44,749 56 50,516 224,937 745,080
OTHER FINANCING
SOURCES (USES)
Transfers in
Transfers out
Total other financing
sources (uses)
NET CHANGE IN
FUND BALANCES
FUND BALANCES, BEGINNING AS
PREVIOUSLY STATED
PRIOR PERIOD ADJUSTMENT
FUND BALANCES, BEGINNING
AS RESTATED
50,000
( 707,901)
82,000
( 898,264)
50,000 (707,901) ( 816,264)
94,749 ( 707,845) 50,516 224,937 ( 71,184)
80,077 774,389 112,656 567,245 3,415,848
( 66,544) ( 23,586) ( 90,130)
80,077 707,845 89,070 567,245 3,325,718
FUND BALANCES, ENDING $ 174,826 $ $ 139,586 $ 792,182 $ 3,254,534
53
CITY OF PEARLAND, TEXAS
DEBT SERVICE FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30, 2005
REVENUES
Property taxes and penalties
Investment earnings
Total revenues
EXPENDITURES
Debt service:
Principal
Interest and fiscal charges
Intergovernmental
Total expenditures
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
$ 9,813,190 $
211,440
10,024,630
3,475,000
5,696,456
1,178,058
10,349,514
Variance with
Final Budget -
Actual Positive
Amounts (Negative)
9,813,190 $ 10,095,935 $ 282,745
211,440 57,687 ( 153,753)
10,024,630 10,153,622 128,992
3,475,000
5,568,925
1,178,058
3,534,534
5,027,376
1,083,896
10,221,983 9,645,806
( 324,884) ( 197,353)
339,561 339,561
339,561 339,561
14,677 142,208
3,007,752 3,007,752
507,816
339,561
339,561
847,377
3,007,752
( 59,534)
541,549
94,162
576,177
705,169
705,169
3,022,429 $ 3,149,960 $ 3,855,129 $ 705,169
54
WATER AND SEWER
COMPARATIVE STATEMENTS
THIS PAGE LEFT BLANK INTENTIONALLY
CITY OF PEARLAND, TEXAS
COMPARATIVE STATEMENTS OF NET ASSETS
WATER AND SEWER FUND
SEPTEMBER 30, 2005 AND 2004
2005 2004
ASSETS
Current assets:
Cash and investments $ 10,413,796 $ 9,193,441
Accounts receivable, net of allowances 2,245,558 3,745,559
Accrued interest 20,079 6,553
Restricted cash and investments 4,527,602 9,833,235
Total current assets 17,207,035 22,778,788
Noncurrent assets:
Deferred charges 627,796 669,993
Capital assets:
Land 367,962 367,962
Buildings and improvements 22,610,028 21,518,110
Machinery and equipment 8,347,893 7,895,580
Infrastructure 57,228,510 60,791,814
Construction work in progress 19,424,558 2,166,494
Less: accumulated depreciation ( 19,132,701) ( 16,310,637)
Total capital assets 88,846,250 76,429,323
Total noncurrent assets
Total assets
89,474,046 77,099,316
106,681,081 99,878,104
LIABILITIES
Current liabilities:
Accounts payable 3,094,901 1,864,960
Accrued liabilities 157,955 76,906
Accrued interest 117,851 180,951
Customer deposits 1,253,770 1,084,526
Compensated absences 83,063 80,172
Certificates of obligation 880,000 855,000
Revenue bonds 1,075,000 750,000
Total current liabilities
6,662,540 4,892,515
Noncurrent liabilities:
Compensated absences 392,742 320,688
Certificates of obligation 15,000,000 15,880,000
Revenue bonds 31,405,000 32,755,000
Total noncurrent liabilities
Total liabilities
46,797,742 48,955,688
53,460,282 53,848,203
NET ASSETS
Invested in capital assets, net of related debt 45,641,648 36,022,558
Restricted for:
Debt service 275,502 296,667
Construction 6,751,273 5,682,401
Unrestricted 552,376 4,028,275
Total net assets
$ 53,220,799 $ 46,029,901
55
CITY OF PEARLAND, TEXAS
COMPARATIVE STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
WATER AND SEWER FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2005 AND 2004
2005 2004
OPERATING REVENUES
Charges for services $ 10,947,737 $ 11,840,005
Other 271,762 52,871
Total operating revenues
11,219,499 11,892,876
OPERATING EXPENSES
Production and wastewater 4,507,571 4,887,517
Distribution and collection 1,415,078 1,455,607
Accounting and collections 1,124,626 1,053,388
Other requirements 792,301 638,004
Construction and engineering 767,233 2,842,867
Depreciation 2,864,261 2,192,353
Total operating expenses 11,471,070 13,069,736
OPERATING LOSS
NONOPERATING REVENUES (EXPENSES)
Earnings on investments
Intergovernmental
Interest and fiscal charges
Total nonoperating revenues (expenses)
( 251,571) ( 1,176,860)
399,275
( 2,153,427)
417,258
47,293
( 2,195,614)
( 1,754,152) ( 1,731,063)
LOSS BEFORE CONTRIBUTIONS
AND TRANSFERS ( 2,005,723)
CAPITAL CONTRIBUTIONS 8,365,452
TRANSFERS IN 536,520
TRANSFERS OUT ( 896,002)
CHANGE IN NET ASSETS 6,000,247
TOTAL NET ASSETS, BEGINNING 46,029,901
PRIOR PERIOD ADJUSTMENT 1,190,651
TOTAL NET ASSETS, ENDING
2,907,923)
6,932,959
128,000
652,110)
3,500,926
42,528,975
$ 53,220,799 $ 46,029,901
56
CITY OF PEARLAND, TEXAS
COMPARATIVE STATEMENTS OF CASH FLOWS
WATER AND SEWER FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2005 AND 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers
Cash paid to suppliers for goods and services
Cash paid to employees for services
Net cash provided (used) by operating activities
2005 2004
(
12,888,744
2,710,758)
4,460,630)
5,717,356
(
9,796,621
2,481,493)
9,477,664)
2,162,536)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Cash paid to other funds 1,190,651
Transfers from other funds 536,520 128,000
Transfers to other funds ( 896,002) ( 652,110)
Net cash used for noncapital for financing activities 831,169 ( 524,110)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Principal repayments on bonds
Cash received from capital contributions
Interest and fiscal charges on debt
Acquisition and construction of capital assets
Disposal of capital assets
1,880,000)
8,365,452
2,111,230)
15,281,188)
Net cash used for capital and related financing activities ( 10,906,966)
(
(
(
1,080,000)
6,980,252
2,153,417)
11,391,761)
10,000
(
7,634,926)
CASH FLOWS FROM INVESTING ACTIVITIES
Eamings on investments 273,163 454,245
Net cash provided by investing activities 273,163 454,245
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 4,085,278) ( 9,867,327)
CASH AND CASH EQUIVALENTS, BEGINNING 19,026,676 28,894,003
CASH AND CASH EQUIVALENTS, ENDING $ 14,941,398 $ 19,026,676
Cash and investments $ 10,413,796 $ 9,193,441
Restricted cash and investments 4,527,602 9,833,235
Cash and cash equivalents, ending $ _ 14,941,398 $ 19,026,676
Reconciliation of operating loss to net cash
provided (used) by operating activities:
Operating loss
Adjustments to reconcile operating loss
to net cash provided by operating activities:
Depreciation
Changes in assets and liabilities:
Decrease (increase) in assets:
Accounts receivable
Increase (decrease) in liabilities:
Accounts payable
Accrued liabilities
Customer deposits
Compensated absences payable
$ ( 251,571) $ ( 1,176,860)
2,864,261 2,192,353
1,500,001 ( 2,313,407)
1,229,941 ( 974,752)
130,535 ( 92,721)
169,244 217,152
74,945 ( 14,301)
Net cash provided (used) by operating activities $ 5,717,356 $ ( 2,162,536)
57
THIS PAGE LEFT BLANK INTENTIONALLY
COMPONENT UNITS
THIS PAGE LEFT BLANK INTENTIONALLY
CITY OF PEARLAND, TEXAS
ECONOMIC DEVELOPMENT CORPORATION
BALANCE SHEET
SEPTEMBER 30, 2005
ASSETS
Cash and investments $ 4,438,285
Restricted cash and investments for:
Construction 6,795,879
Sales taxes receivable 724,743
Accrued interest 20,097
Prepaid items 3,451
Total assets 11,982,455
LIABILITIES AND FUND BALANCE
Liabilities:
Accounts payable
Accrued liabilities
Total liabilities
21,077
11,498
32,575
Fund balance:
Reserved for:
Prepaid items 3,451
Construction 6,795,879
Unreserved, undesignated 5,150,550
Total fund balance 11,949,880
Total liabilities and fund balance $ 11,982,455
RECONCILIATION OF FUND BALANCE TO NET ASSETS
Fund balance of component unit - Economic Development Corporation
Other long-term assets are not available to pay for current -period expenditures and,
therefore, are deferred in the funds.
Long-term liabilities are not due and payable in the current period and therefore are not
reported in the funds.
$ 11,949,880
256,439
( 10,570,362)
Net assets of component unit - Economic Development Corporation $ 1,635,957
58
CITY OF PEARLAND, TEXAS
ECONOMIC DEVELOPMENT CORPORATION
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED SEPTEMBER 30, 2005
REVENUES
Sales taxes $ 3,891,870
Other income 12,000
Investment earnings 303,129
Total revenues 4,206,999
EXPENDITURES
Current:
Economic development 1,960,469
Debt service:
Principal 415,000
Interest and fiscal charges 608,698
Total expenditures 2,984,167
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 1,222,832
OTHER FINANCING SOURCES (USES)
Capital -related debt issued
Premium from capital -related debt issued
Payment to escrow agent
Total other financing sources (uses)
11,005,000
155,448
( 4,354,626)
6,805,822
NET CHANGE IN FUND BALANCE 8,028,654
FUND BALANCE, BEGINNING AS
PREVIOUSLY STATED 3,947,708
PRIOR PERIOD ADJUSTMENT ( 26,482)
FUND BALANCE, BEGINNING AS RESTATED 3,921,226
FUND BALANCE, ENDING $ 11,949,880
RECONCILIATION FROM NET CHANGE IN FUND BALANCE TO
CHANGE IN NET ASSETS
Net change in fund balance - Economic Development Corporation $ 8,028,654
The issuance of long-term debt (e.g., bonds) 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.
( 6,134,383)
Change in net assets of component unit - Economic Development Corporation $ 1,894,271
59
CITY OF PEARLAND, TEXAS
TIRZ DEVELOPMENTS
BALANCE SHEET
SEPTEMBER 30, 2005
ASSETS
Cash and investments
Property taxes receivable
Total assets
LIABILITIES AND FUND BALANCE
Liabilities:
Deferred revenue
Total liabilities
Fund balance:
Unreserved, undesignated
Total fund balance
$ 1,168,096
234,287
1,402,383
179,285
179,285
1,223,098
1,223,098
Total liabilities and fund balance $ 1,402,383
60
CITY OF PEARLAND, TEXAS
TIRZ DEVELOPMENTS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED SEPTEMBER 30, 2005
REVENUES
Property taxes
Investment earnings
Total revenues
EXPENDITURES
Current:
Economic development
Total expenditures
NET CHANGE IN FUND BALANCE
FUND BALANCE, BEGINNING
FUND BALANCE, ENDING
61
$ 2,531,251
8,390
2,539,641
1,888,506
1,888,506
651,135
571,963
1,223,098
CITY OF PEARLAND, TEXAS
DEVELOPMENT AUTHORITY OF PEARLAND
COMBINING BALANCE SHEET
SEPTEMBER 30, 2005
General
Debt
Service
Total
ASSETS
Cash and investments $ 65,344 $ $ 65,344
Restricted cash and investments for debt service 1,630,157 1,630,157
Total assets 65,344 1,630,157 1,695,501
LIABILITIES AND FUND BALANCE
Liabilities
Fund balance:
Reserved for debt service
Unreserved, undesignated
Total fund balance
Total liabilities and fund balance
RECONCILIATION OF FUND BALANCE TO NET ASSETS
65,344
65,344
1,630,157
1,630,157
65,344
1,630,157 1,695,501
$ 65,344 $ 1,630,157 $ 1,695,501
Fund balance of component unit - Development Authority of Pearland
Other long-term assets are not available to pay for current -period expenditures and,
therefore, are deferred in the funds.
Long-term liabilities are not due and payable in the current period and therefore are not
reported in the funds.
$ 1,695,501
927,778
(13, 995,000)
Net assets of component unit - Development Authority of Pearland $ (11,371,721)
62
CITY OF PEARLAND, TEXAS
DEVELOPMENT AUTHORITY OF PEARLAND
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED SEPTEMBER 30, 2005
General
Debt
Service
Total
REVENUES
Intergovernmental $ 843,666 $ 980,752 $ 1,824,418
Investment earnings 29,798 29,798
Total revenues 843,666 1,010,550 1,854,216
EXPENDITURES
Current:
General government 32,108 32,108
Economic development 740,000 11,939,395 12,679,395
Debt service:
Interest and fiscal charges 6,214 1,359,349 1,365,563
Total expenditures 778,322 13,298,744 14,077,066
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 65,344 (12,288,194) (12,222,850)
OTHER FINANCING SOURCES (USES)
Capital -related debt issued
Discount from capital -related debt issued
Total other financing sources (uses)
13,995,000 13,995,000
( 76,649) ( 76,649)
13,918,351 13,918,351
NET CHANGE IN FUND BALANCE 65,344 1,630,157 1,695,501
FUND BALANCE, BEGINNING
FUND BALANCE, ENDING $ 65,344 $ 1,630,157 $ 1,695,501
RECONCILIATION FROM NET CHANGE IN FUND BALANCE TO
CHANGE IN NET ASSETS
Net change in fund balance - Development Authority of Pearland $ 1,695,501
The issuance of long-term debt (e.g., bonds) 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.
(13,067,222)
Change in net assets of component unit - Development Authority of Pearland $ (11,371,721)
63
STATISTICAL SECTION
THIS PAGE LEFT BLANK INTENTIONALLY
Fiscal General
Year Government
2003 $ 6,274,853 $
2004 7,314,239
2005 8,714,401
CITY OF PEARLAND, TEXAS
GOVERNMENT -WIDE EXPENSES BY FUNCTION
Public
Safety
LAST THREE FISCAL YEARS
(UNAUDITED)
Public
Works
Community
Services
Interest on
Long-term
Debt
Water and
Wastewater
TABLE 1
Total
9,645,369 $ 9,728,975 $ 2,873,903 $ 4,558,650 $ 9,643,086 $ 42,724,836
10,524,915 9,912,937 2,700,356 5,549,292 15,265,350 51,267,089
11,856,643 12,858,259 2,939,228 5,115,039 13,624,497 55,108,067
* The City implemented GASB 34 in fiscal year 2003, thus only three years of data are available.
64
TABLE 2
CITY OF PEARLAND, TEXAS
GOVERNMENT -WIDE REVENUES
LAST THREE FISCAL YEARS
(UNAUDITED)
Charges Operating Capital
Fiscal for Grants and Grants and Investment Total
Year Services Contributions Contributions Taxes Earnings Miscellaneous Revenues*
2003 $ 17,380,953 $ 711,671 $ 12,099,049 $ 23,662,013 $ 366,688 $ 741,313 $ 54,961,687
2004 22,933,122 903,210 9,007,465 27,723,299 1,532,358 782,165 62,881,619
2005 23,528,905 1,154,531 9,483,164 30,927,911 2,262,598 827,589 68,184,698
* The City implemented GASB 34 in fiscal year 2003, thus only three years of data are available.
65
TABLE 3
CITY OF PEARLAND, TEXAS
GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION (1)
LAST TEN FISCAL YEARS
(UNAUDITED)
Fiscal General Public Public Community Debt
Year Government Safety Works Services Service Total
1996 $ 2,316,013 $ 3,865,449 $ 4,112,939 $ 1,185,426 $ 2,430,097 $ 13,909,924
1997 2,357,621 4,238,647 4,334,123 1,137,045 2,451,033 14,518,469
1998 2,834,021 5,026,554 4,925,693 1,543,440 3,273,010 17,602,718
1999 3,685,523 5,695,956 5,137,708 1,580,624 3,209,693 19,309,504
2000 3,580,693 5,944,516 5,635,397 1,762,770 3,064,038 19,987,414
2001 4,217,744 6,692,138 5,974,667 2,043,620 3,275,682 22,203,851
2002 5,052,056 7,411,992 7,603,804 2,271,052 4,112,491 26,451,395
2003 5,678,275 9,637,676 8,769,722 2,729,859 6,339,385 33,154,917
2004 6,059,595 10,142,115 8,709,151 2,792,376 8,549,292 36,252,529
2005 6,785,322 11,303,466 10,816,109 2,738,983 9,645,806 41,289,686
(1) Includes general governmental expenditures of the General Fund and Debt Service Fund.
66
TABLE 4
CITY OF PEARLAND, TEXAS
GENERAL GOVERNMENTAL REVENUE BY SOURCE (1)
LAST TEN FISCAL YEARS
(UNAUDITED)
(2) (1)
Property
Fiscal Taxes and Other Licenses Fines and Charges Franchise Inter- Other
Year Penalties Taxes and Permits Forfeitures for Services Fees governmental Revenue Total
1996 $ 9,292,922 $ 3,314,615 $ 514,081 $ 459,884 $ 1,553,765 $ 1,016,069 $ 246,414 $ 523,188 $ 16,920,938
1997 10,472,362 4,088,706 524,197 529,152 1,648,617 1,498,788 197,764 722,189 19,681,775
1998 7,108,800 4,676,773 615,808 576,856 2,508,087 1,703,715 345,674 678,232 18,213,945
1999 8,192,927 5,370,121 955,819 675,691 2,960,214 1,943,545 489,860 692,481 21,280,658
2000 9,272,373 5,720,312 1,469,799 731,959 3,061,545 2,022,789 15,000 896,730 23,190,507
2001 10,833,292 7,113,828 1,896,728 856,641 3,202,767 2,303,730 939,532 27,146,518
2002 12,857,995 7,498,801 2,256,638 845,322 3,651,825 2,453,829 933,950 30,498,360
2003 15,120,150 8,428,211 2,682,456 1,377,552 3,982,070 615,436 304,214 32,510,089
2004 17,890,685 6,778,999 3,427,957 1,561,850 5,259,748 2,883,188 716,136 831,982 39,350,545
2005 19,745,387 7,840,811 3,863,592 1,883,381 6,138,610 3,097,163 871,196 1,068,352 44,508,492
(1) Includes general governmental revenue of the General Fund and Debt Service Fund
(2) Primarily City Sales taxes
67
TABLE 5
CITY OF PEARLAND, TEXAS
PROPERTY TAX LEVIES AND COLLECTIONS (1)
LAST TEN FISCAL YEARS
(UNAUDITED)
Percent Percent of
Percent of Total Tax Delinquent
Current of Current Delinquent Total Collections Cumulative Taxes
Tax Fiscal Total Tax Taxes Tax Tax to Total Delinquent to Total
Year Year Tax Levy (2) Collections Collected Collections Collections Tax Levy Taxes Tax Levy
1995 1996 $ 5,869,525 $ 5,790,544 98.65% $ 62,365 $ 5,852,909 99.72% $ 280,499 4.78%
1996 1997 6,343,113 6,235,954 98.31% 70,983 6,306,937 99.43% 258,104 4.07%
1997 1998 7,062,826 6,957,153 98.50% 74,969 7,032,122 99.57% 293,915 4.16%
1998 1999 8,147,473 7,992,304 98.10% 96,094 8,088,398 99.27% 389,445 4.78%
1999 2000 9,174,224 9,022,542 98.35% 119,461 9,142,003 99.65% 479,170 5.22%
2000 2001 10,864,049 10,609,654 97.66% 179,483 10,789,137 99.31% 285,091 2.62%
2001 2002 12,890,902 12,477,283 96.79% 199,030 12,676,313 98.34% 699,841 5.43%
2002 2003 14,869,170 14,575,297 98.02% 343,374 14,918,670 100.33% 693,785 4.67%
2003 2004 17,987,752 17,633,986 98.03% 358,048 17,992,034 100.02% 738,970 4.11%
2004 2005 20,979,391 20,576,812 98.08% 336,058 20,912,870 99.68% 797,744 3.80%
(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% to 20%
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.
68
TABLE 6
CITY OF PEARLAND, TEXAS
ASSESSED VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
(UNAUDITED)
Fiscal
Year Real Property Personal Property Total
1996 $ 722,600,850 $ 121,756,997 $ 844,357,847
1997 774,645,420 100,838,570 875,483,990
1998 857,952,469 154,096,941 1,012,049,410
1999 998,492,267 181,888,920 1,180,381,187
2000 1,145,678,437 174,353,848 1,320,032,285
2001 1,381,514,173 181,888,920 1,563,403,093
2002 1,760,551,863 114,457,797 1,875,009,660
*2003 1,811,953,131 237,293,120 2,049,246,251
*2004 2,092,303,036 251,600,130 2,343,903,166
*2005 2,515,954,084 239,603,060 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 2002
was $2,060,005,220. Total Taxable for Tax Year 2003 was $2,355,280,316. Total
Taxable for Tax Year 2004 was $2,768,431,914.
69
TABLE 7
CITY OF PEARLAND, TEXAS
PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS
(PER $100 OF ASSESSED VALUE)
LAST TEN YEARS
(UNAUDITED)
Pearland Harris Harris
Independent Port of County County Municipal Utility Districts
Tax Fiscal City of School Brazoria Harris Houston Flood Hospital
Year Year Pearland District County County Authority Control District No. 17 No. 18 No. 19 No. 26
1995 1996 0.695 1.705 0.358 0.407 0.016 0.076 0.124
1996 1997 0.695 1.769 0.358 0.419 0.016 0.080 0.124
1997 1998 0.695 1.777 0.358 0.417 0.021 0.080 0.124
1998 1999 0.695 1.862 0.358 0.370 0.020 0.031 0.147
1999 2000 0.695 1.650 0.400 0.350 0.018 0.062 0.203 0.75 0.65 0.80
2000 2001 0.695 1.820 0.400 0.384 0.018 0.048 0.190 0.75 0.65 0.80
2001 2002 0.686 1.837 0.420 0.360 0.020 0.050 0.190 0.75 0.65 0.80
2002 2003 0.686 1.837 0.420 0.360 0.020 0.050 0.190 0.75 0.65 0.80 0.85
2003 2004 0.696 1.809 0.420 0.388 0.020 0.042 0.190 0.75 0.65 0.80 0.85
2004 2005 0.695 1.792 0.362 0.400 0.017 0.033 0.190 0.75 0.65 0.80 0.85
Note: Property tax rates based on per $100 of assessed valuation
70
Taxpayer
TABLE 8
CITY OF PEARLAND, TEXAS
PRINCIPAL TAXPAYERS
FISCAL YEAR 2005
(UNAUDITED)
2004 Assessed Percentage
Type of Value of of Assessed
Business Property* Valuation
Lowe's Home Centers, Inc. Home improvement warehouse $ 13,731,150 0.50%
Wal-Mart Real Estate Bus. Tr. Retail company 12,428,460 0.45%
Home Depot Home improvement warehouse 9,756,700 0.35%
Wal-Mart Stores, Inc. Retail company 7,855,740 0.28%
CFPI LP Real estate development co. 6,488,200 0.23%
Home Depot USA, Inc. Home improvement warehouse 6,410,390 0.23%
HD Development Properties, LP Development construction 6,117,950 0.22%
Wal-Mart Stores, Inc. Retail company 5,920,880 0.21%
WC Properties, LTD Home construction 4,679,450 0.17%
Wal-Mart Stores, Inc. Retail company 4,099,890 0.15%
Total Principal Taxpayers 77,488,810 2.80%
Others 2,690,943,104 97.20%
Total $ 2,768,431,914 100.00%
* Source: Tax Department records of the Brazoria County
71
TABLE 9
CITY OF PEARLAND, TEXAS
PROPERTY VALUES AND CONSTRUCTION
LAST TEN FISCAL YEARS
(UNAUDITED)
Fiscal Property
Year Construction - A Values - B
1996 $ 47,357,024 $ 844,357,847
1997 126,940,074 912,663,450
1998 95,711,203 1,020,836,821
1999 106,475,930 1,310,608,180
2000 248,015,927 1,320,032,285
2001 236,902,344 1,563,403,093
2002 240,772,360 1,875,009,660
2003 191,669,109 2,049,246,251
2004 244,602,302 2,343,903,166
2005 249,273,385 2,755,557,149
Note A - Inspection Department records to the City
Note B - Brazoria County Appraisal District
72
TABLE 10
CITY OF PEARLAND, TEXAS
RATIO OF NET GENERAL LONG-TERM DEBT
TO ASSESSED VALUE AND NET LONG-TERM DEBT PER CAPITA
LAST TEN FISCAL YEARS
(UNAUDITED)
Ratio of
Debt Net Long- Net
Net Gross Service Net term Debt Long-term
Fiscal Estimated Assessed Value Long-term Monies Long-term to Assessed Debt Per
Year Population * (in thousands) Debt (1) Available Debt Value Capita
1996 $ 30,000 $ 1,563,037 $ 24,810,000 $ 2,435,712 $ 22,374,288 1.43% $ 746
1997 36,000 1,624,015 35,350,000 2,141,816 33,208,184 2.04% 922
1998 37,000 1,012,049 34,820,139 273,742 34,546,397 3.41% 934
1999 37,535 1,180,381 33,456,209 208,324 33,247,885 2.82% 886
2000 39,000 1,320,032 30,351,250 681,148 29,670,102 2.25% 761
2001 40,700 1,563,403 28,364,724 1,544,987 26,819,737 1.72% 659
2002 43,103 1,875,000 64,920,000 2,229,529 62,690,471 3.34% 1,454
2003 47,000 2,060,005 114,365,000 2,130,321 112,234,679 5.45% 2,388
2004 54,000 2,355,280 115,714,000 3,007,752 112,706,248 4.79% 2,087
2005 62,634 2,768,432 148,840,659 3,855,129 144,985,530 5.24% 2,315
(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%
73
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
LAST TEN FISCAL YEARS
(UNAUDITED)
Ratio of Debt
Interest Total Service
Fiscal and Fiscal Total Debt General to Total
Year Principal Agency Fees Service Expenditures (1) Expenditures
1996 $ 1,010,000 $ 1,420,097 $ 2,430,097 $ 13,909,924 17.47%
1997 1,200,000 1,251,033 2,451,033 14,518,469 16.88%
1998 1,280,000 1,993,010 3,273,010 17,586,532 18.61%
1999 1,440,000 1,769,693 3,209,693 19,309,504 16.62%
2000 1,605,000 1,468,461 3,073,461 19,987,414 15.38%
2001 1,680,000 1,558,652 3,238,652 22,203,851 14.59%
2002 1,920,000 2,192,490 4,112,490 26,421,394 15.57%
2003 2,040,000 4,299,385 6,339,385 33,154,917 19.12%
2004 3,000,000 5,549,292 8,549,292 36,252,529 23.58%
2005 3,534,534 6,111,272 9,645,806 41,289,687 23.36%
(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 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 2004 tax year were $.3389 and $.3559, respectively, per $100 of
assessed valuation.
74
TABLE 12
CITY OF PEARLAND, TEXAS
COMPUTATION OF DIRECT AND OVERLAPPING DEBT
Taxing Jurisdiction
SEPTEMBER 30, 2005
(UNAUDITED)
Gross Overlapping
Debt _ Percentage Amount
Alvin Community College District $ 19,610,000 5.22% $ 1,023,642
Brazoria County MUD No. 17 23,745,000 100.00% 23,745,000
Brazoria County MUD No. 18 30,925,000 99.86% 30,881,705
Brazoria County MUD No. 19 30,380,000 100.00% 30,380,000
Brazoria County MUD No. 26 40,830,000 100.00% 40,830,000
Harris County Department of Education 1,135,000 0.02% 227
Brazoria County 29,535,000 6.97% 2,058,590
Harris County 1,811,116,590 0.02% 362,223
Pearland Independent School District 285,000,000 72.20% 205,770,000
Port of Houston Authority 268,960,000 0.02% 53,792
Harris County Hood Control 38,859,985 0.02% 7,772
Total Overlapping Debt 335,112,951
City of Pearland 148,840,659 100.00% 148,840,659
Total Direct and Overlapping Debt $ 483,953,610
Population 62,634
Per Capita Debt -Direct and Overlapping $ 7,727
75
TABLE 13
CITY OF PEARLAND, TEXAS
DEMOGRAPHIC STATISTICS
LAST TEN FISCAL YEARS
(UNAUDITED)
Fiscal Estimated School Unemployment
Year Population (1) Enrollment (2) Percentage (3)
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%
2005 62,634 14,236 4.60%
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.
76
TABLE 14
CITY OF PEARLAND, TEXAS
MISCELLANEOUS STATISTICAL DATA
SEPTEMBER 30, 2005
(UNAUDITED)
Date of Incorporation December 1959
Form of Government Council/Manager
Area 45 City square miles
72.63 City and ETJ square miles
Fire Protection:
Number of stations 4
Number of certified personnel, not including reserve fire fighters 69
Number of fire vehicles 19
Police Protection:
Number of stations 1
Number of commissioned officers, not including P.S.O. or reserve officers 125
Number of patrol vehicles (home fleet program) 48
Recreation:
Number of parks 10
Acres 117
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 863
Number of students 14,236
Elementary schools 8
Middle school 3
Junior high 3
High school 1
1
City Employees:
Full-time employees 388
Part-time employees 67
Total 455
(continued)
77
TABLE 14
CITY OF PEARLAND, TEXAS
MISCELLANEOUS STATISTICAL DATA
(Continued)
SEPTEMBER 30, 2005
(UNAUDITED)
Water:
Number of wells 9
Average daily consumption 5,900,000 gallons
Maximum daily consumption 14,416,000 gallons
Water mains 296 miles
Number of connections 19,419
Sewer:
Number of plants 5
Lift stations 81
Average daily usage 9,600,000 gallons
Maximum daily capacity 36,400,000 gallons
Sanitary sewer mains 279 miles
Number of connections 13,878
Emergency Medical Services:
Number of volunteers 14
Number of paid paramedics 55
Number of stations 3
Number of vehicles 9
Library:
Number of buildings 1
Number of cardholders 40,000
Number of books in library 114,000
78
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