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R-2014-028 2014-03-17
RESOLUTION NO. R2014-28 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, ACCEPTING THE CITY'S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR 2013 AS PREPARED BY THE ACCOUNTING FIRM OF GRANT THORNTON. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That certain comprehensive annual financial report as prepared by Grant Thornton, 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 comprehensive annual financial report. PASSED, APPROVED and ADOPTED this the 17th day of March, A.D., 2014. ATTEST: APPROVED AS TO FORM: t( • DARRIN M. COKER CITY ATTORNEY TOM REID MAYOR Clay Pearson City Manager Exhibit "A" Resolution No. R2014-28 CITY OF PEARLAND, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended September 30, 2013 Officials Issuing Report Jon Branson Mickiel Hodge Assistant City Assistant City Manager Manager FILE COPY CITY SECRETARY'S OFFICE DO NOT REMOVE Claire Bogard Director of Finance Rick Overgaard Assistant Director of Finance s G rantThornton March 10,2014 Management and City Council City of Pearland,TX Grant Thornton LLP Address 1 Address 2 Address 3 Address 4 T XXX.XXX.XXXX F XXX.XXX.XXXX www.GrantThornton.com Ladies and Gentlemen: - In connection with our audit of the City of Pearland (the "City") financial statements as of September 30, 2013 and for the year then ended, auditing standards generally accepted in the United States of America ("US GAAS") require that we advise management and the City Council (hereinafter referred to as "those charged with governance") of the following internal control matters identified during our audit. Our responsibilities Our responsibility, as prescribed by US GAAS, is to plan and perform our audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error.An audit includes consideration of internal control over financial reporting (hereinafter referred to as "internal control") as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion on internal control effectiveness. Identified deficiencies in internal control We identified the following internal control matters that are of sufficient importance to merit your attention. Significant deficiencies Our consideration of internal control was not designed to identify all deficiencies in internal control that, individually or in combination, might be material weaknesses or significant deficiencies; therefore, material weaknesses or significant deficiencies may exist that were not identified. A deficiency in internal control ("control deficiency") exists when the design or operation:of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A Grant Thornton LLP U.S.member firm of Grant Thornton International Ltd r• GrantThornton 2 material weakness is a deficiency, or a combination of deficiencies,in internal control,such that there is a reasonable possibility that a material misstatement of the City's financial statements., will not be prevented, or detected and corrected, on a timely basis. A signifi cant deficiency is a deficiency, or a combination of deficiencies,in internal control that is less severe than a material weakness,yet important enough to merit attention by those charged with governance. We consider the following identified control deficiencies to be significant deficiencies. • Misapplication of GAAP Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in PreNovember30, 1989 FASB establishes guidance on capitalizing interest cost as part of the historical costs of acquiring certain assets. The historical costs.of acquiring an asset includes the costs necessarily incurred to_bring it to the condition. and location necessary for its intended use. Interest shall be capitalized for assets that are constructed or otherwise produced for an entity's own use, including assets constructed or produced for the entity by others for which deposits or progress payments have been made. It was noted that the City did not compute and properly record the capitalized interest associated with the Water and Sewer Revenue Bonds issued for the use in capital related projects. We recommend the City formulate a process to compute and record the capitalized interest in accordance with the standards. Management Response The City appropriates funding (cash or bonds or a combination thereof) for Water/Sewer Capital Projects on an annual basis, however the project itself may be a multi-year project; as such capitalized interest is required to be calculated until the project is complete: The City will create a form and document a process and the procedure for the computation and recordation of capitalized interest. . Segregation of Duties It was noted that the duties of the senior financial reporting personnel, which include the Director of Finance included the ability to make journal entries. To the extent possible, duties should be segregated to serve as a check and balance and to maintain the best control system possible. Management Response The Finance Director currently will write up journal entries and give to the Assistant Director or Accounting Supervisor for review and approval and entry and posting to the General Ledger. For the most part, these entries are for year-end debt entries and annexation entries;' not the normal monthly journal entries. .Except for year-end debt entries and for any future annexation entries, the Director of Finance will not write-up any other journal entries to ensure to segregation of duties, proper internal controls, and accuracy and reliability of financial data. This internal department policy will.be documented in writing. The Director of Finance will also train others to make these entries. Grant Thornton LLP - U.S.member firm of Grant Thornton International Ltd .. 09 GrantThornton 3 Administration and Management of User Access During our review of access to critical systems or applications,we noted the following - New User Access. In accordance with the City's policy, a "System Access Request Form'.' is to be completed for each new hire. GT noted that a formal "System Access Request Form"was not completed for five newly hired employees.- Removal of Access.. Through inspection of the sample (23) of users terminated during the FY2013 audit period, GT noted that for six terminated employees the notification emails to IT were not processed in a timely manner. Additionally, GT noted that four terminated employees'access to the Sungard RUE application was active at the time of testing(9/28/2013). - Review of Access. GT was unable to obtain evidence that a formal user access review of the Active Directory (AD) accounts and Sungard".HE'F application have taken place during the audit period since City's management does not have a formal process in. place to monitor/review employee access rights on a periodic basis. We recommend the following: ' - A formal "User Access Provisioning Policy" should be in place to ensure that City of Pearland's IT Department obtains required approvals from the designated approvers before granting users'access to systems and applications. - The IT department disable/ delete terminated employee user access immediately upon notification of termination. Additionally, the HR / Business departments should communicate all employee terminations to the IT department immediately to ensure critical system access is removed timely. In the event that the employee's manager requires the terminated account to remain active for specific transactional issues, the - request should be formally documented and approved. - - A formal user access reviews should be conducted on Sungard H1'h and Active Directory by management on a periodic basis to confirm that current user access rights- are not excessive and commensurate with their job functions and to confirm the removal or disablement of terminated user accounts. Additionally,these access reviews should be documented in a verifiable manner. Management Response New User Access: IT will make sure it receives "System Access Request Form" for new employees with proper approvals and save forms in secure network drive folders. A policy will - be, put in place to ensure that the IT department obtains required approvals from the designated approvers before granting users access to systems and applications. IT will work with management to make sure all request forms for access to city systems are approved before access is granted including directors, supervisor and managers. Removal of access - IT will work with Human Resource and other departments about receiving notification on employee termination within a timely matter. IT will then disable / delete terminated employee user access at the time notification received, but in no case longer than Grant Thornton LLP - - U.S.member firm of Grant Thornton Internafional Ltd (1 .GrantThornton three business days from notification. Any employees,not terminated due to manager:request will be formally documented and approved. Review of access - IT will review..employee access rights on a periodic basis to comply with recommendations.The Network Administrator will perform quarterly audits of users on Active Directory and Sungard H.T.E. applications. A form will be created and prepared after each quarterly review, supporting that the audit was completed, including findings and signed by the IT Manager. Control deficiencies A deficiency in internal control ("control deficiency") exists when the design or operation of a control does not allow management or employees, in the normal course of performing their. assigned functions,to prevent,or detect and correct misstatements on a timely basis. We identified the following control deficiencies. Incorrect calculation of OBEB obligation In accordance with Governmental Accounting Standards Board (GASB) No . 45, when an employer has a net OPEB obligation,annual OPEB cost should be equal to the annual required contribution (ARC), one year's interest on the net OPEB obligation, and an adjustment to the ARC. The adjustment should be deducted from the ARC if the beginning balance of the net OPEB obligation is positive (cumulative annual OPEB cost is greater than cumulative employer contributions), or added to the ARC if the net OPEB obligation is negative. It was noted through testing that the City did not include the adjustment to the ARC in the determination of the Net OPEB obligation. We recommend the adjustment to ARC be properly included in the determination of the Net OPEB obligation. Management's Response Pursuant to GASB, the City's contract's its OPEB actuarial update and report every two years for the City's total OPEB obligation and annual OPEB contribution calculations. 'We have contacted our consultant, G. P. Monnin Consulting Inc. regarding the ARC adjustment. They will be able to calculate this for the City each'year as long as we provide them the amount of claims paid for retirees,which the City wouldobtain from our provider. This will be included in the future. Journal Entry Access It was noted during the audit that the listing of those with journal entry capabilities is not : reviewed periodically to ensure proper access is being provided to the appropriate individuals. We noted twelve people with access to make journal entries within the Sunguard HI'i system - GrantThomton LLP - - - U.S.member firm of Grant Thornton International Ltd - 61! GrantThornton that were not found on the current employee roster. We recommend that the listing of those with journal entry abilities be reviewed periodically and revised if necessary. Management's Response • Out of the twelve people identified, nine of those were former Finance employees who had:. been terminated from the system and could not log-on. Access was also designated for the previous auditor and the H T E Programmer. However,as stated above,review of people with journal entry access to enter and post to the City financials have not been done to ensure only those with proper authority have granted access rights. Finance does not have access to user rights, therefore, Finance will coordinate with IT in generating a report twice a year for our review. A form showing the review was complete and findings will be prepared and signed by the Director of Finance. Segregation of duties with Security Administration GT noted that. four individuals possess the ability to perform security administrative responsibilities (Sungard HIE) as well as financial reporting responsibilities which constitute a segregation of duties issue. The noted individuals can edit / modify and.delete user access within the application and possesses financial reporting responsibilities as a.part of his:/ her primary job function. GT determined that only the IT Manager and Network Administrator, can create user accounts within Sunguard H.U.E. We recommend the responsibility of administering security within financially critical systems should.be transferred to IT" system administrators who do not perform financial reporting processes or controls.. All security. administration rights within financially critical systems granted to personnel performing financial reporting processes and controls should be revoked. Alternatively, management should implement a formal / documented monitoring process designed.to'detect misuse of administrative functionality by personnel responsible for performing financial reporting processes or controls. Management's Response The four individuals identified had access to edit, modify, and delete user access with-in financial applications as well as give account access:.. We do feel that certain employees within Finance should have the capabilities to give access to account numbers,but not modify,edit or delete.user menus and functions. IT will work with the Finance Department to change individual's security administrative responsibilities per audit recommendations.'. Also, IT will work with management on setting employee access tailored to safe business practice. We will check with our current system provider to see if there is an audit trail summary/report that will show system changes by person,to see if misuse has occurred. Inadequate IT Policies and procedures GT noted through review of policies and procedures relevant to the security administration-and program maintenance IT processes, that the City's IT department does not have documented policies and procedures in place to address critical areas within the control environment. We recommend that the City's current IT policies and procedures should be expanded to cover Grant Thornton LLP U.S.member firm of Grant Thornton International Ltd - - - - 6 GrantThornton 6 highly critical areas such as user access provisioning, user application access reviews, program change management and emergency program .change procedures to reflect the current. :. processes followed within the IT department. Management's response IT currently has policies and procedures in place for passwords, internet and e-mail acceptable use, firewall, third-party access, storage media destruction,patch management. The IT Strategic Plan, completed in 2013, also reviewed the city's IT policies and found the list to be incomplete or addressing an incomplete audience as well as recommended .implementation of the Information Infrastructure Library that supports customer services:` Configuration Management, Capacity Management,Continuity Management and Release Management. The IT Strategic Plan recommendation planned for implementation in FY2015 and :IT will be submitting a supplemental budget request. In the meantime, IT will work on policies and procedures that will cover us er access provision, as noted above for review and approval. This policy will be completed in the third quarter of the City's fiscal year 2014. City response The.City's written.response to the internal control matters identified herein has not been subjected to our audit procedures and,accordingly,we express no opinion on it. The purpose of this communication is solely to describe the scope of our testing of internal control and the result of that testing, and not to provide an opinion on the effectiveness of the City's internal control. This communication is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control. Accordingly,this communication is not suitable for any other purpose., Very truly yours, Grant Thornton LLl U.S.member firm of Grant Thornton Internafional Ltd. - Schedule of Expenditures of Federal Awards and Report of Independent Certified Public Accountants City of Pearland, Texas Year Ended September 30, 2013 ' 4 Contents Page Part I.—Financial: Report of Independent Certified Public Accountants on the Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 .4 Schedule of Expenditures of Federal Awards 5 Notes to Schedule of Expenditures of Federal Awards 6 Part II—Internal Control and Compliance Reports: Report of Independent Certified Public Accountants on Internal Control Over Financial Reporting and on Compliance and Other Matters Required by Government Auditing Standards 8 Report of Independent Certified Public Accountants on Compliance , for each Major Federal Program on Internal Control over Compliance by OMB Circular A-133 10 Part.III—Schedule of Findings and Questioned Costs: Section I—Summary of Auditor's Results 13 Section II—Financial Statement Findings 14 Section III—Federal Award Findings and Questioned Costs 17 Part IV—Summary of Prior Findings . . 18 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A-133 The Honorable Mayor and City Council City of Pearland,Texas We have audited,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,the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Pearland,Texas (the "City") as of and for the.year ended September 30, 2013, and the related notes to the financial statements,which collectively comprise the City's basic financial statements, and our report thereon dated March 12, 2014 expressed unmodified opinions on those financial statements. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits.of States, Local Governments; and Non-Profit Organisations, and is not a required part of the basic financial statements. Such supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used • to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures. These additional procedures included comparing and reconciling the information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Houston,Texas March 12,2014 4 City of Pearland,Texas SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended September 30,2013 Federal grantor/ CFDA Pass-Through Federal Grant Pass-through grantor/Program title , Number. Grantor Number . . Expenditures U.S.HOUSING AND URBAN DEVELOPMENT: Community Development Block Grant_2010 14.218 N/A $ - •1,202 Community Development Block Grant 2011 14.218 N/A 169,033 Community Development Block Grant 2012 14.218 N/A. 93,313 Total U.S. Housing and Urban Development 263,548 U.S.DEPARTMENT OF JUSTICE: • Direct Program Bulletproof Vest Partnership Program 16.607 N/A 6,038 Passed through Texas Office of the Governor: • Crime Victim Assistance 16.575 2362303 59,963 Total U.S.Department of Justice 66,001 U.S.DEPARTMENT OF TRANSPORTATION: Passed.through Texas Department of Transportation Highway Planning and Construction 20.205 CSJ::0912=31-273 282,883 Highway Planning and Construction ' 20.205 CSJ:0912-31-274 1,259,760 Total Highway Planning and Construction Cluster 1,542,643 National Priority Safety Program 20.616 CSJ:0912-31 4,125 Total U.S.Department of Transportation 1,546,768 U.S.DEPARTMENT OF HOMELAND SECURITY: -Passed through FhMA: . . Staffing Adequate Fire Emergency Response (SAFER) " 97.083 1111 - 372,079 Staffing Adequate Fire Emergency Response (SAFER) 97.083 618 13,293 Total Passed through FEMA-SAFER 385,372 Passed through Texas Department of Public Safety:. - Emergency Management Performance Grants 97.042 13TX-EMPG-0328" _ 33,965 Total Passed through Texas Department of Public Safety 33,965 Total U.S.Department of Homeland Security 419,337 TOTAL FEDERAL EXPENDITURES $ 2,295,654 The•accompanying notes are an integral part of this schedule. 5 • • City of Pearlarid,Texas • • NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended September 30,2013 NOTE A—BASIS OF PRESENTATION - The accompanying schedule of expenditures of federal awards (the "Schedule") includes.the federal grant activity of the City under programs of the federal government for the year ended September 30,2013. The information in this schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133,Audits of States, Local Governments, and Non-Profit Organisations. -Because the schedule presents only a selected portion of the operations of the City,it is not intended to and does not present the financial position,changes in net position or cash flows of the City. • NOTE B—BASIS OF ACCOUNTING ' • The City accounts for awards under federal programs in the General and Special Revenue governmental funds. In the Governmental funds, these programs are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e. revenues and other financing sources) and decreases (i.e. expenditures and other financing uses)in net current assets. The modified accrual basis of accounting is used for these funds. This basis of accounting recognizes revenues in the accounting period in which they become susceptible to accrual, i.e., both measurable and available, and expenditures in the accounting period in which the liability is incurred,if measurable,except for certain compensated absences and claims and judgments, which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, wherein certain types of expenditures are not allowable or are limited to reimbursement. Pass-through entity identifying numbers are presented where available. Federal grants are considered to be earned to the extent of expenditures made under the provisions of the • grant, and, accordingly,when such funds are received, they are recorded as deferred revenues until earned. Generally,unused balances are returned to the grantor at the close of specified project periods. 6 Part II-Internal Control and Compliance Reports;, • REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS REQUIRED BY GOVERNMENT AUDITING STANDARDS The Honorable Mayor and City Council The City of Pearland,Texas We have audited,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,the financial statements of the • governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Pearland, Texas (the "City") as of and for the year ended September 30, 2013, and the related notes to the financial statements,which collectively comprise the City's basic financial statements, and have issued our report thereon dated March 12,2014. Internal control over financial reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting("internal control") to design audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of internal control. Accordingly,-we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies,in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, • or detected and corrected,on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses. Given these limitations,during our audit we did not identify any deficiencies in the City's internal control that we consider to be material weaknesses. However,material weaknesses may exist that have not been identified. 8 Our consideration of internal control was also not designed to identify all deficiencies in internal control that might be significant deficiencies. A significant deficiency is a deficiency,or a combination of deficiencies;in internal control that is less severe than a material weakness,yet important enough to merit attention by those charged with governance. We identified certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items 2013-01 —2013-03 that we consider to be significant deficiencies in the City's internal control. Compliance and other matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed:.no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. City's response to findings The City's response to our findings, which is described in the accompanying schedule:.of findings and questioned costs,was not subjected to the auditing procedures applied in the audit of the financial statements and accordingly,we express noo opinion on the Cit p p ty's response. Intended purpose The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing,and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an, integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance.Accordingly,this report is not suitable for any other purpose. ...1 . Houston,Texas March 12,2014 9 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 The Honorable Mayor and City Council City of Pearland,Texas Report on compliance for each major federal program We have audited the compliance of the City of Pearland, Texas (the "City") with the types of • compliance requirements described in the U.S. Office of Management and Budget's OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended September 30, 2013. The City's major federal programs are-identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's responsibility • Management is responsible for compliance with the requirements of laws, regulations, contracts,and grants applicable to the City's federal programs. Auditor's responsibility Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States;and OMB Circular A-133,Audits of States,Local Governments,and Non-Profit Organijations. The above-mentioned standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However,our audit does not provide a legal determination of the City's • compliance. 10 • Opinion on each major federal program In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major ,federal programs for the year ended September 30,2013. Report on internal control over compliance Management of the City is responsible for designing, implementing, and maintaining effective internal control over compliance with the types of compliance requirements referred to above., _ In planning and performing our audit of compliance,we considered the City's internal control over compliance with the types of compliance requirements that could have a direct and material effect on each major federal program to design audit procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major. federal program-and to test and report on internal control over compliance in accordance with OMB Circular A-133,but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. " Accordingly,-we do not -express an opinion on the effectiveness of the City's internal control over compliance: A deficiency in internal control over compliance exists..when the design or operation of a _. _ control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is'a deficiency, or a combination of deficiencies, in internal: control over compliance, such that there is a reasonable possibthty that material noncompliance with a type of compliance requirement of a federal program will not be prevented,or detected and corrected,on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in the City's internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this Report on Internal Control.Over Compliance is solely to describe the, scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133.Accordingly,this report is not suitable for any other purpose. Houston,Texas March 12,2014 11 • City of Pearland,Texas SCHEDULE OF FINDINGS AND QUESTIONED COSTS. Year ended September 30,2013 SECTION I—SUMMARY OF AUDITOR'S RESULTS. Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting: • Material weakness(es)identified? No • Significant deficiency(ies)identified that are not considered to be material weaknesses? Yes Noncompliance material to financial statements noted? No Federal Awards Internal controls over major program: • Material weakness(es)identified? No • Significant deficiency(ies)identified that are not considered to be material weaknesses? None reported Type of auditor's report issued on compliance for major program: Unmodified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? No Identification of major program: Name of Federal Program or Cluster CFDA Number Highway Planning and Construction 20.205 Staffing Adequate Fire Emergency Response(SAFER) 97.083 Dollar threshold considered between Type A and Type B programs: $300,000 Auditee qualified as a low-risk auditee? Yes 13 ' City of Pearland,Texas SCHEDULE OF FINDINGS AND QUESTIONED COSTS-CONTINUED Year ended September 30,2013 SECTION II—FINANCIAL STATEMENT FINDINGS Finding#: 2013-01 Misapplication of GAAP Type of Finding—Significant Deficiency Criteria: Governmental Accounting Standards Board (GASB) Statement No. 62,Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB establishes guidance on capitalizing interest costs as part of the historical costs of acquiring certain assets. The historical costs of acquiring an asset includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use. Interest shall be capitalized for assets that are constructed or otherwise produced for an entity's own use, including- assets constructed or produced for the entity by others for which deposits or progress payments have been made. Condition and Context: It was noted that the City did not compute and properly record the capitalized interest associated with the Water and Sewer Revenue Bonds issued for the use in capital related projects. Cause: The City failed to put procedures in place to evaluate the implications of all applicable accounting standards. Effect: The City had to calculate the capitalized interest from the inception of the Water and Sewer bonds related to capital projects which was $502,287. Recommendation: We recommend the City formulate a process to compute and record the capitalized interest in accordance with the standards. Views of Responsible Officials: The City appropriates funding (cash or bonds or a combination thereof) for Water/Sewer Capital Projects on an annual basis, however the project itself may be a multi-year project; as such capitalized interest is required to be calculated until the project is complete. The City will create a form and document a process and the procedure for the computation and recordation of capitalized interest. 14 • City of Pearland,Texas SCHEDULE OF.FINDINGS AND QUESTIONED COSTS-CONTINUED Year ended September.30,2013 - Finding 2013-02 Segregation of Duties Type.of Finding—Significant Deficiency Criteria: • In accordance with the internal control integrated framework, an entity is required.to maintain an effective framework for the internal controls. The five components:that provide for this effective framework include an effective control environment, good risk assessment,.control activities, information.and communication and monitoring. Specifically,characteristics of good control activities include proper segregation of duties. Condition and Context: It was noted that the Director of Finance has the.ability to make journal entries. Currently this entails the recording of year end:journal•entries related to debt transactions: Cause: Due to the complexity and infrequency of the journal entries,the Director of Finance performs the entries. Effect: Proper segregation of duties may not exist which may lead to fraudulent activity. Recommendation: To the extent possible, duties should be segregated to serve as a check and balance and to maintain the best control system possible. Views of Responsible.Officials: The Finance Director currently will write up journal entries and give to the Assistant Director or Accounting Supervisor for review and approval and entry and posting to the General.Ledger.For the most part, these entries are for year-end debt entries and annexation entries;not the normal monthly journal entries. Except for year-end debt entries and for any future annexation entries, the Director of Finance will not write-up any other journal.. entries to ensure segregation of duties,proper internal controls,and accuracy and reliability of financial data. This internal department policy will be documented in writing. The Director of Finance,will also train others:to.make . these entries. 15 City of Pearland,Texas SCHEDULE OF FINDINGS AND QUESTIONED COSTS- CONTINUED Year ended September 30,2013 Finding 2013-03 Administration and Management of User Access Type of finding-Significant Deficiency Criteria: In accordance with the City's policy, a"System Access Request Form"is to be completed for each new hire. The IT department is required to receive notification emails regarding terminated employees' access removal from the system. Condition and Context: During review of access to critical systems or applications,it was noted the following: - New User Access. It was noted that a formal "System Access Request Form" was not completed for five newly hired employees.- Removal of Access: Through inspection of the"sample (23) of users terminated during the FY2013 audit period, it was noted that for six terminated employees the notification emails to IT were not processed in a timely manner. Additionally, it was noted that four terminated employees' access to the Sungard-HTE application was active at the time of testing(9/28/2013). - Review of Access. We were unable to obtain evidence that a formal user access review of the Active Directory (AD) accounts and Sungard HTE application have taken place during the audit period since City's management does not have a formal process'in place to monitor/review employee access rights on a periodic basis. Cause: Appropriate IT controls were not in place to ensure new user access, removal of access and review of access was - performed timely and in accordance with policies and procedures. Effect: Inappropriate personnel could obtain or maintain access to the system. Recommendation: . We recommend the following: - A formal "User Access Provisioning Policy" should be in place to ensure that City of Pearland's IT Department obtains required approvals from the designated approvers before granting users' access to systems and applications. - - 16 City of Pearland,Texas SCHEDULE OF FINDINGS AND.QUESTIONED COSTS-CONTINUED Year ended September 30,2013 - The IT department disable / delete terminated employee user access immediately upon notification of •- termination. Additionally, the HR/ Business departments should communicate all employee terminations to the IT.department immediately to ensure critical system access is removed .timely'. In the event that the employee's manager requires the terminated account to remain active for specific transactional.issues, the request should be formally documented and approved. - A formal user access review should be conducted on Sungard HIE and Active Directory by management on a periodic basis to review that current user access rights are not excessive and commensurate with their job functions and to review the removal or disablement of terminated user accounts."Additionally, these access ' ' reviews should be documented in a verifiable manner.. Views of Responsible Officials: - New User Access: IT.will make sure it receives "System"Access Request Form" for new employees with proper approvals and save forms in secure network drive folders. A policy will be put in place to ensure that the IT department obtains required approvals from the designated approvers before granting users access to systems and applications. IT will work with management to make sure all request forms for access to city systems are approved before access is granted including directors,supervisor and managers. - Removal of access: IT will work with Human Resource and other departments about receiving notification'on employee termination within a timely matter. IT will then disable/delete terminated employee user access at the time notification received, but in no case longer than three business days from notification. Any - employees not terminated due to manager request will be formally documented and approved. - Review.of access: IT will review employee access rights on a periodic basis to comply with recommendations. The Network Administrator will perform quarterly audits of users on Active Directory and Sungard H.T.E. applications. A form will be created and prepared after each quarterly review, supporting that the audit was completed,including findings and signed by the IT Manager. SECTION III-FEDERAL AWARD FINDINGS AND.QUESTIONED COSTS The audit disclosed no findings to be reported. 17 1 ' City of Pearland,Texas SUMMARY OF PRIOR FINDINGS Year ended September 30,2013 There were no prior year findings. 18 11. 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I................... ................. ........ ... .... ..... .:.:.:.:.. ................ 111 r.. ............r.r.i..............I.I...r......I..i....i..r .r..r.........r.....rr.....................r.............I...I r...r...............r.......r. ..................... ...... .......... .. ........... ........ .. rrr rr r �r. I L: :.>.0 ulll . ..L ` 4 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 gill RI 14111 111 III 411 III Ill III III III IIII IV IN NI II 0111 illi ill 141 !III '!41 IIII Rai IN NI III 411 q RI II RI Responsibilities Audit scope and results Quality of accounting practices Significant risks — OMB A-133 The following provides an overview of the areas of significant audit focus based on our risk assessments. Federal :.i .,.,.,...., ..:J,, -:. ,i.-:.:::�...,:.i.:...,.....;. :. �fL ..,:....:::........... :....:::..:::.Ii:..lLi. ..�IF! _.. 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I'l:.'!':'.,'I....:.,-Ii'''t...:1'1..:''Ii'.i'i.,•:'il.:...',,'Ii':11...''I''.;'1:''....i'',,'1:'''.•.11'1:'•:::I''!'1:'....':I''I'l''.:':I:'',.'!'1...':i:''!'''I''...11..:'::l'''....'I':!!:.1'':ll:1..::'.l'i...''I:';::*l:::...':.1':''!''i'''...''1::i''i...''.i'''E:'i''..''i'::''!''.:.1:,:':i''...:',!''.::'.'i''.:':1i'i:'i.:1i:'i'...::.i''.,•'I'''....ji'.;'i''.....:i'1;•''t'''.:'.,i'1.,,•'I'l....'!'1.:'':':,I.:.'lli:','1:...1,':l',.:',i'.....''',.'::':,':,'!,,1:::.,,1;',,j:...:,''','''::!..:'',1','.:','I..!,,!iI..'..,''I'!';•',',.:',.i..•.:,:'.,''.,.'..':.,'.,!,::::•',,:';''',,,I..•:l,:',,,1:•:',,I,'':,,1:..1,:',,l.::.!'::.':,'.::.:E':..':,'....::!::':,i...':,':..j:,'!.:1,i':,I.!!!,:'':':..,:'!',:'',''.:','!i,.:'..!1.!!-.:!:',,''..:,',:',I.',':',1.''::',1.'!:E,I..',',,i..',',':':'!,'::':':,„':'',''':„':',:'!!....',!,:'::':',',','....,',''':.,'!':.,'':'.,'.',',',''.,'':','.',':'.,'..,:..:'!.:,':.',''..::','..:,'..:!.,:,'..:,'...',',..,'....,'....::'....:'...',''..:,'..:'::..:,'..l...'...,':','.','..,::' y L.i�li 11 l II !i,li ` 5 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 r] fi r] ` 1 P1 ' A ' 1 ' 1 `1 17 Fl ` 1 l) ll Fi F-1 ' 1 ` 1 Al `-1 ` 1 ` l Fi F1 11 F1 A Audit scope and results Quality of accounting practices Technical updates Results of the audit • Unqualified "clean" opinions - City's financial statement audit • Unqualified opinion on compliance — A-133 audit • No scope limitations • No unresolved audit issues • Internal control comments • Open and effective communication with management 6 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 17 '1 ri r1 r j 'i I 1 F-1 " 1 I i ' I El Li '1 I-j 11 '1 r i El Audit scope and results Quality of accounting practices Technical updates • Summary of adjustments Increase (Decrease)to: Description Assets Liabilities Equity Net Income Recorded adjustments Dr. Uncollectible Expense (3,201) Cr. Water and Sewer allowance for doubtful accounts 3,201 to reverse original unbilled uncollectible. JE 12275 Dr. Water and Sewer allowance for doubtful accounts (47,716) Cr. Uncollectible expense 47,716 to remove solid waste allowance from water and sewer allowance Dr. Solid Waste allowance for doubtful accounts (19,704) Cr. Uncollectible/bad debt expense 19,704 Management believes the unrecorded to adjust garbage uncollectible adjustments are immaterial to the financial Net impact $ (64,219) $ - $ - $ 64,219 statements. Unrecorded misstatements could be potentially material to future financial statements. As such,we request that these unrecorded adjustments be corrected. 7 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 r j r j 1] r l i j r] rj A A r- r] rA rj r j A r j rj r 1 r i r `� r j �� r] r1 rj r� r j nj rj 71 Audit scope and results Quality of accounting practices Technical updates Summary of adjustments Increase (Decrease)to: Description Assets Liabilities Equity Net Income Unrecorded adjustments Non-Major Governmental Funds Parks and Recreation 38,121 Parks and Recreation Revenue (38,121) Deferred Revenue To properly adjust the Park Deferred Revenue balance to the Class Report Balance Water and Sewer Capital Assets 502,287 Net Assets (484,100) Management believes the unrecorded Interest Expense (18,187) adjustments are immaterial to the financial to record capitalizaed interest statements. Unrecorded misstatements Government Wide could be potentially material to future financial statements. As such,we request Capital Outlay 908,029 that these unrecorded adjustments be Net Assets (908,029) corrected. to record CIP that should have been recorded in the prior year. Net impact $ 502,287 $ 38,121 $ (1,392,129) $ 851,721 , Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 Audit scope and results Quality of accounting practices Technical updates Internal control matters Our responsibility Definitions • Obtain reasonable assurance about whether the financial • A deficiency in internal control ("control deficiency") statements are free of material misstatement exists when the design or operation of a control does not • Our audit included consideration of internal control over allow management or employees,in the normal course of financial reporting as a basis for designing audit procedures performing their assigned functions, to prevent, or detect that are appropriate in the circumstances for the purpose of and correct,misstatements on a timely basis. expressing our opinion on the financial statements,but not • A material weakness is a deficiency, or a combination of for the purpose of expressing an opinion on the deficiencies,in internal control, such that there is a effectiveness of the City's internal control reasonable possibility that a material misstatement of the • We express no opinion on the effectiveness of internal city's financial statements will not be prevented, or control detected and corrected, on a timely basis. • Control deficiencies that are of a lesser magnitude than a • A significant deficiency is a deficiency,or a combination significant deficiency were communicated to management of deficiencies,in internal control that is less severe than a and are included in this presentation. material weakness,yet important enough to merit attention by those charged with governance. 9 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 Ril ‘111 II II ill IIII till III ill IN 111 IV 41 Ill ill mil II Ili 411 Audit scope and results Quality of accounting practices Technical updates Internal control matters Significant deficiencies were communicated to you in our letter Significant deficiencies dated March 10, 2014.. !111:11V.ERMIsapplfeattomdf.GAAR regarding the recording and; computing of capitalized interest Control deficiencies that are of a lesser magnitude than a 2 Se re ation of duties in relation to journal entries significant deficiency were communicated to management and included in our letter dated (date). 3 /Administration and Management of user access Control deficiencies IilitigtilA11400(nallileAtry:AogessTporIgoioArovievval:1:111:1111:11-11;111111gliglol:1111.ii:lirigiungli Security Administration segregation of duties 3. 'Inadequate,IT Poli ies,and,Procedures " 4 Incorrect calculation of OPEB Obli ation ` 10 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 Audit scope and results Quality of accounting practices Technical updates Other required communications Disagreements with management II'. ,: � eements:w�th rnana�ement!:whether or not.sa#isfac#o ;II resole d ab u#matters# at_t d�v�duall or in..:. We;h.ad no..d sa r.:.....:....:...:.............: ..... ...................... ,.............. .................. Y,.::.:.:.::.:.::...:.::.:.::: .:.r .......:.....:::.:.:......::.::.:..:.:.:.:.......:.:.::.:.::....:..,::::.:. .: :.:.::.:.. theta re a#e could:.be.:s� n���,cant to,: he Cit ,�.f�nancral statements r#h audit r, a rt , .., ...................: .::.:........ ..::.:.:.::.:.:::::...:.,.:... : ::.::...,... ............. Management's consultations with other accountants .�.,:. � !.!I I lu.� 1. ul..l..a......�.!.. :...n... . ...�.�...!..........t....l..l..�....L..I�.....�.�..................a.. �...!... . .. ............... ......... ;.i'.�...�!...:.:�<:..!.rl�'ail:i'.:..:_�.::Ir. .....:....�... ,..........ICI I..I� ...... ................................. ..................�..... ..................�.. .�....!.....!......... ................. I.I.� ��........, ...�...... � ... ... ..�.....�.......�..........,................. ..:. ......:.::..:..:::::.:.. Significant issues discussed with management ti ronouncements: ccaun n e entatron � ,!`,GASB'-Statement No: 61, "The Financial:Reporting Entity :Omnibus an amendment of GASB Statements No.:94 and `:`. is enf:No' ;62' . Codification ofAccountrn .and Financial;Re ort►n Guidance Contained in Pre'=November GASBI Statement d .. ::.. ....... . ::30 :9:9:89:°FASB.an. AICPA.Proriuncertents` _ - ::'�';>':!. ... : _ : .: .,:: ., . ::.;.... .r....:.. !rl;..:::.:...; . .: GASB Statement No:63,::"Financial Reporting of Deferred.Outflows:of Resources,•deferred lnflo►tisof Resources and,:. . 11 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 "1111 '11 "I '1 -11 1 1 1 1 1 I 1 1 1 1 1 1 i Audit scope and results Quality of accounting practices Technical updates • \/ • Other required communications (continued) Significant difficulties encountered during the audit , 11111 1.11111 AT% provide1111.1114 l'1.11111111:111.11111111:111; 1:11.1.1.11 1 1.111111111,..,1111111111 .t:111111111 .1....1,11111:111,11111... 11111 1.:'..1111.1! : . , • • •!! .• ••:•,•• .; audit , • .•.•... •••:. •• • . • • ••::.' ' • • Unavailability of expected otion9r.efty:ppropn91,. • Management imposed resfrictiohs, including those related to the.6te:pf'external:'confirmations,the ihebility-t0'0. erfo'rrn.:•' procedures on required supplementary information, or restrictions related to..:0grpOp audit • EktehtiVe.'unexpetted effort to...obtain:evidence- . . . . . . -• . Related parties and related party transactions We noted no significantfindings or issues related to related parties and the nature of related party relationshIps, 1601.0000: 7 . • i.ii,o.:.:(ivi-iotheririferItipppl'pt.pOl) by 0 teci•,:pwosipr significant related party transactions • Identification of significant related party transactions that have not been appropriately authorized and approved • isagreennt with management regading the accounting for, and disclosure of, igtkifido-h.:(.1.•...elatocuparty transactions entity• Noncompliance with applicable laws and regulations prohibiting or restricting specific types of transactions • Diffiultis in içlentifying tlie party that ultimately controls the .:, Other information in documents containing audited financial statements •-• :.•• • • . . We aiie not awarf any other documents containing audited financial statments •• ••••.,-,., • • •• - •••• •• •• < 1 2 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 ' 1 " II ' A ' 1 ' 1 1 1 ' 1 ' 1 ' 1 ' I 1 _j 1 1 1 ! 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Audit scope and results Quality of accounting practices Technical updates Quality of accounting practices \ 13 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 Audit scope and results Quality of accounting practices Technical updates Quality of accounting practices Accounting policies :•:r:�:,r.:..,:�:..:.:.:.:.:......:....:...:i,...;...::.i l:;.,:.:.�1.��::...::1.:.�.;. ,...e:.:.:::i.l.i::i.::l:i.i.:l::..:�:.:.:.:.,..,:..;.:.;.;:.,.;.:.;::::•.:i.::.:. ::.i:i.i:.:�... Gen:.:.ra ly, accou:nting;policies;are'consistent with prior year and deemed appropriate with the':'exce 'tion of '' :' r I . .. .. : :.... ..:....... 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I L r ::: .: ....... ..... ..: ..,I.i s�'�::..... ...:.......... ::. ...1....:...:...T.I. 1111111I.......:..:...........:.:I.... ........r.:................................................. ...:..... .............,.................. : : , I: : .1 I : . II:.I..LLI I .I 11...1. . LI LI. : L....... ... .......... ......�:..:.:.:,..: �.i� .................. .... :i a I I I_ la ILLII ...I lal.L..TIT LI.LLLIIL..I L IILI.I,.. I .u..:. :I: I. :,III I�.IIII i� L.. .I ` 14 / Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 Audit scope and results Quality of accounting practices Technical updates • Technical updates r .. ��i ` 15 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 I AAAAAAAAAr 7 ril r] rj rj ri r j r II `i r] 1l r] n l] Audit scope and results Quality of accounting practices Technical updates Technical updates GASB Statement No. 65,"Items Previously Reported as Assets and Liabilities." This statement establishes accounting and financial reporting standards that reclassify,as deferred outflows of resources or deferred inflows of resources,certain items that were previously reported as assets and liabilities and recognizes,as outflow of resources or inflows of resources,certain items that were previously reported as assets and liabilities. This statement also provides other financial reporting guidance related to the impact of the financial statement elements deferred outflows of resources and deferred inflows of resources,such as changes in the determination of the major fund calculations and limiting the use of the term"deferred"in financial statement presentations. Effective Date of GASB: Fiscal years beginning after December 15,2012 Effective for the City: Fiscal year ending September 30,2014 GASB issued Statement No. 66, "Technical Corrections—2012—an amendment of GASB Statements No. 10 and No.62." The objective of this statement is to improve accounting and financial reporting for a government financial reporting entity by resolving conflicting guidance that resulted from issuance of two pronouncements, Statements No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions"and No. 62, "Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements." Effective Date of GASB: Fiscal years beginning after December 15,2012 Effective for the City: Fiscal year ending September 30,2014 GASB Statement No. 68, "Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27" This statement replaces requirements of GASB Statements No.27 and No. 50, related to pension plans administered through trusts or similar arrangements.Requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability, and to more comprehensively and comparably measure the annual costs of pension benefits. Adds revised and new note disclosures and required supplementary information. Effective Date of GASB: Fiscal years beginning after June 15,2014 Effective for the City: Fiscal year ending September 30,2015 \ 16 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 1 ' A El El El l 1 i 11 El El El El r ■ El El El I , P 1 El nl 1 1 f 1 111 i1 F] 1] r] ' l Audit scope and results Quality of accounting practices Technical updates Technical updates Federal Grant Regulations In December,OMB issued guidance on Administrative Requirements,Cost Principles,and Audit Requirements for Federal Financial Assistance.Under this new guidance: Federal agencies have six months to issue regulations implementing the new guidance to be effective December 26,2014. The cost principles found in various documents(OMB Circular A-21,A-87 and A-122)will be combined into one consistent cost standard,so allowable costs under Federal grants will change from previous guidance. The administrative requirements found in OMB Circulars A-102 and A-110 are being consolidated into one standard that mostly follows the more restrictive requirements in A-102. (A-110 is applicable to higher education institutions.) The new guidance will impact allowable costs,procurement, indirect costs rates, internal controls,safeguarding protected personally identifiable information,major program determination and other areas. 17 Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 r_1 r 1 , * ,ri !i `i '-11 I r1 ri r l i] r j 1 'A r I l 11 ri 11 11 I I ri ni ri This communication is intended solely for the information and use of management and the Audit Committee of the City of Pearland,Texas and is not intended to be and should not be used by anyone other than these specified parties. GrantThornton www.g ra ntthornton.corn ©Grant Thornton LLP All rights reserved Grant Thornton LLP is a member firm within Grant Thornton International Ltd.Grant Thornton International Ltd and the member firms are not a worldwide partnership.Services are delivered independently by the member firms. \ > Presentation to the Audit Committee of the City of Pearland,Texas March 10,2014 R CITY.OF PEARLAND,,TEXAS 1101 fool T EX 61 no COMPREHENSIVE ANNUAL FINANCIAL REPORT FILE COPY CITY SECRETARY'S OFFICE DO NOT REMOVE Fiscal Year Ended September 30, 2013 Officials.Issuing Report Clay Pearson. Jon Branson Mickiel Hodge Claire.Bogard _ Rick.Overgaard City Manager Assistant City Assistant City Director of Finance : Assistant Director Manager Manager of Finance CITY OF PEARLAND,TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS Page Introductory Section Letter of Transmittal Principal Officials xiii Organization Chart xiv GFOA Certificate of Achievement xv Financial Section Independent Auditors' Report 1 Management's Discussion and Analysis 6 —Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position 20 Statement of Activities 21 Fund Financial Statements: Balance Sheet-Governmental Funds 23 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position - 24 Statement of Revenues,Expenditures,and Changes in Fund Balances- Governmental Funds " 25 Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund Balance of Governmental Funds to the Statement of Activities. 26 Statement of Net Position-Proprietary Funds 27 Statement of Revenues,Expenses and Changes in Fund Net Position-Proprietary Funds 28 Statement of Cash Flows-Proprietary Funds 29 Notes to the Financial Statements 31 Required Supplementary Information: . General Fund-.Schedule of Revenues,Expenditures,and Changes in Fund Balances- Budget and Actual 67 Notes To Required Supplementary Budget Information 68 Required Pension System and Other Post Retirement Benefit Supplementary Information 69 RE CITY OF PEARLAND,TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS(Continued) r*t i Financial Section(Continued) Page !"4 : Other Supplementary Information: Combining and Individual Fund Statements and Schedules Combining Balance Sheet-Non-Major Governmental Funds 75 Combining.Statement of Revenues,Expenditures,and.Changes in Fund Balances- L _ Non-Major Governmental Funds 79 Schedules of Revenues,Expenditures,and Changes in Fund Balance Budget and Actual: Debt Service Fund. 83 Hotel/Motel Tax Fund 84 +e Court Security Fund 85 City-Wide Donations Fund; 86 " -_ Court Technology Fund 87 Regional Detention Fund 88 Park Donations Fund 89. ..i Police Seizure Fund 90 Parks and Recreation Development Fund 91. Sidewalk Fund 92 wq Grant Fund 93 Traffic Impact Improvements 94 Juvenile,Management Fund 95 Educational TV Fund 96 U of H Fund 97 gee Long-Term Debt Amortization Schedules: Combining Schedule of Governmental Activity Long-Term Debt 99 Combining Schedule of Enterprise Fund Long-Term Debt 111 vis• CITY OF PEARLAND,TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS(Continued) Statistical Section(Unaudited) Page Net Position by Component 117 Changes in Net Position 119 Fund Balances of Governmental Funds 123 Changes in Fund Balances of Governmental Funds 125 Assessed Value and Estimated Actual Value of Taxable Property 127 Direct and Overlapping Property Tax Rates 129 Property Tax Levies and Collections 131 Principal Property Taxpayers 132 Taxable Sales by Category 133 Outstanding Debt by Type 135 Ratios of General Bonded Debt to Assessed Value and Net Bonded Debt per Capita 137 Direct and Overlapping Governmental Activities Debt 138 Pledged Revenue Coverage 139 Demographic and Economic Statistics 140 Principal Employers 141. Full-time Equivalent City Government Employees by Function/Program 142 Operating Indicators by Function/Program 143 Capital Asset Statistics by Function/Program 147 r Introductory Section (This page intentionally left blank.) RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE City of Pearland • - 0 3519 Liberty Drive . LPE fA Pearland,Texas 77581 < x s Tel<281:652.1600, :': - eSr. ,s cityofpearland,com ., March 10,:2014. Honorable Mayor,Members Of City Council,and Citizens of the.. City of Pearland, Texas - The Comprehensive Annual Financial Report (CAFR) of the City of Pearland, Texas (the "City")for the fiscal year ending September 30,2013, is hereby submitted as mandated by both local and state statutes. These ordinances and:statutes require that the City issue an .:annual report on its financial position and activity and that an independent firm of certified. public accountants audit this report.::. Management assumes -.full responsibility .for the completeness and reliability. of the. information contained in this report, based upon'a comprehensive framework of internal e 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. Grant Thornton, LLP, Certified Public Accountants,have issued an Unqualified(or"clean") opinion on the City of Pearland's financial statements for the year ending September 30,: 2013.The independent auditor's report is located at the front of the financial section of this`. report: Managenient's 'discussion. and analysis (MD&A) :immediately follows the2 independent auditor's 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 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 also extends into 'Fort .Bend and Harris Counties .The City of Pearland, encompassing approximately 48 square miles, is the fastest growing city in Brazoria County,:increasing from approximately 18,000 residents ':in 1990 to °1.04,100 residents estimated as of September-2013. The City of Pearland is a home-rule::City operating under. a .Council-Manager form of government. .. i 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 are 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; convention and visitors bureau; and general administrative services. In addition, the City provides planning for future land use, traffic control, building codes, and health inspections, and plans for new infrastructure and rehabilitation of infrastructure to meet the needs of the citizens today, as well as tomorrow: The City is authorized to issue debt, subject to certain limitations, for the purpose of financing its capital projects and the City is empowered to levy a property tax on real property within its boundaries. Activities of the general, debt service, water and sewer, solid waste, capital project funds, and special revenue funds such as hotel/motel tax are included in the City's annual appropriated budget. Capital project funds are budgeted for project length. The legal level of control for each budget is at the fund level, which is to say that total expenditures for each fund should not exceed total budgeted expenditures for that fund.The City Manager is authorized,to transfer budgeted amounts within and among departments. The City Council must approve any budget amendment that increases appropriations by fund. The City amends the budget at the end of each fiscal year to reflect current year projections for revenues and expenditures/expenses. 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 to promote, assist, and enhance 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 a portion of 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 TRIZ #2. All these component units are considered blended component units and have been included as major funds in the Governmental Funds. ECONOMIC CONDITIONS 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 ii r•e - 7.4 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 of all new construction permitted during the 2013 calendar year totaled over $284.5 million, a 12.0% increase in value from,2012, New single-family housing permits totaled 954 with a construction value of$214 Million. While this is only 3 permits higher- "' than last year, permitted value is up $22.0 million or 11-.6%. Pearland's economy continues to maintain strong levels. ,Residential permitting activity for the 2014 fiscal year is expected to remain at 2013 levels, budgeted at 1,000 perniits. For calendar year 2013, the ni City had 184 commercial permits with a value of$74 million, compared to 77 permits with a value of$62 million in 2012.The commercial real estate market also remains strong. Sales of homes throughout the greater Houston area remained robust in 2013, driven by a combination of good local job numbers and historically low, interest rates. The Houston Association of Realtors reported 73,232 single family home sales for 2013, up 17:7% from the 62;226 sales in 2012. Indications are that the Houston area will continue to have a , healthy market with a balanced supply of housing inventory and strong pricing—conditions •- that put Houston in an enviable position compared to other markets around the Country. While new residential construction and home sales,remain strong; the average value of existing homes has slightly declined since fiscal year 2909. The average residential home value in fiscal year 2013 was $172,331, down half a percent, from the average value in fiscal year 2009 of$173,308. Fiscal year 2014 average value has stayed flat, thereby having to rely on new added value to fund operations and debt service. Houston is the world's energy capital. Growth in the oil and gas industry, spurred- by technological advances such as the Use of hydraulic fracturing, continued in p2013 reaching levels unseen in 30 years. Texas is now producing more than twice the'oil it did three years ago, and more than one-third of all U.S. production, .according to federal data. Oil production in Texas has surpassed 1.8 million barrels per day and is on track to reach 3 million barrels per day in 2017 and potentially 4 million barrels per day by 2020. This trend will continue keeping the Houston oil industry busy for many years. Pearland's unemployment rate was 5.0%in September 2013, down from 5.3% in.September. 2012. This is compared to the national unemployment rate of 7.6% and the State Of Texas unemployment rate of 6.5% as of September 2013. Pearland's unemployment is less than the national and state rates with the economy turning around. Texas has been named the ' top state for doing business by Area Development Magazine stating"With its proven,model. of success, the Lone Star State continues to dominate the national conversation-on job creation and economic prosperity." Earlier in 2013, the state was also named.beat business climate-by Business Facilities Magazine and the most competitive state by Site Selection Magazine. Chief Executive Magazine has also ranked Texas as the best state for business for nine years in a row through their annual survey of Chief Executive Officer's. Houston added 82,000 jobs in 2013 and the Greater Houston Partnership is-forecasting 69,800 new jobs for 2014. The Houston area, and the State of Texas, is built on businesses, on jobs, and on economic opportunities-. Pearland is poised to take advantage of those opportunities. Pearland has two prime areas for commercial, mixed use, and livable developments along the Highway 288 corridor. A strategic and target market study shows that energy,. _ healthcare, life sciences, and manufacturing are key areas of interest for -.Pearland. Combined with a mix of reinforcing land uses, urban planning, key entertainment and. culturalattractions, public spaces, and:walkability and connectivity, all will provide for • 7 livable sustainable developments:. , _ Kelse -Se bold.a major healthcare organization of 370 physicians, completed construction y y of a new 170,000 square foot, four story corporate headquarters on an 18 acre `site in: Shadow Creek Ranch in the summer of 2013, which is home to 'approximately 800 employees The facility is next to.the Shadow Creek Business Center, an 80,000 square foot office building built in 2009, and'Hospital Corporation of-America's (HCA) 78,000 square foot medical office building. ' Merit::Medical Systems, a global medical device company, completed of 120,000 square foot facility for research and development and manufacturing in early March 2014: Merit Medical is expected to:employ 220 employees at the Pearland facility. HCA Gulf Coast Division,broke,ground September 17, 2013, for the new $71,`million �- • Pearland Medical Center. As an HCA affiliated hospital,Pearland Medical`-Center joins the `continuum of nine other Houston-area medical centers, ambulatory ,surgery=centers, diagnostic imaging facilities, and off'campus emergency centers. The 144,000 square-foot, -- : .30 bed acute-care"hospital will open in the fall of -2014 and feature-surgical suites, :Medical/surgical beds; intensive care beds and a 24-hour emergency._department. Imaging services:_will 'include magnetic resonance imaging, computerized . tomography, a catheterization lab, echocardiogram testing, and~nuclear medicine modalities::The:Center's., new women''s:-services will provide digital mammography, labor and delivery suites, - cesarean=section operating rooms and a newborn nursery. The new hospital will be.located s - the Southwest intersection of Highway 288 and.Shadow Creek Parkway on a 48-acre site at . currently hone to a full=service,freestanding emergency department,imaging center and 3-- • story,`;80,000 square foot medical office building. ` Memorial Hermann Health Systems will also establish a medical campus in Pearland. The ; centerpiece will.be a 64 bed acute care hospital which will open'in 2015 It-will feature an intensive:care-unit,'operating rooms, cardiac catheterization labs, surgical units, women's and neonatology services.The campus will be built on a 40 acre site.Currently home to an' outpatient imaging center, diagnostic lab services, and-°miedical office.building. The new facility will include a one-of-a-kind convenient _carer center'that will .provide one stop coordinated access to adult '.and pediatric primary care, specialty physicians, .sports medicine and a 24 hour emergency room. Sales tax for fiscal year 2013 totaled $23.6 million, an increase of$16 million or 7.3% over fiscal year;2012 -Of the $23.6.'million,.$15.7 Million went.to the City's General'.Fun&for operations and $7 9:_Million"went. to the -City's•"Economic .Development Corporation:for • - economic development:programs and:activities..The City's General Fund is 29°%..funded by r sales.tax•, an elastic revenue stream that will:fluctuate with the economy. _As such, the City closely-monitors sales tax and the economy. Pearland is a regional shopping destination and the economy has turned around since the recession of_2010 and 2011:; The City-saw a resurgence of spending in 2012, which continued in`2013.. AS such, the City projected a 7:8% growth in sales tax,for fiscal year 2014. .The nation's largest retail group, National Retail Federation, expects retail;sales.to _ A increase at a slightly faster pace this year than last.year as continued improvements in jobs and housing should help shoppers feel more confident about spending: , r Long-Term.Financial Planning The City adopt§ a one-year operating budget, including a five-year capital improvement program: (CIP). .:Even though a one-year budget :is, adopted, the-_budget implements El strategies, both financial and:o erational to:meet existingchallenges and to plan for the. ape g future. `" The City's Five-Year:CIP for fiscal year-2014 through fiscal year 2018.totals $354 milhon and continues:to implement the $162 million bond program approved,by`the voters in May '2007. As of September 30, 2013 there was$95.2:million in unissued bonds approved by the: voters and based on the 2014=2018.CIP, there would be $12:5 million in unissued bonds approved by the voters at the end of fiscal year.:2018.:Projects include drainage ($23M),_ streets ($160M); facilities ($21M), parks($36M), water and wastewater:($114M). Projects in the.CIP have identified.-funding sources or potential funding:sources. Funding for these projects comes from the issuance of debt,through Certificates of Obligation, General Obligation Bonds, and Revenue Bonds, as well as impact fees, cash,and contributions from the State,: County, and other sources Those'projects that:are unfunded, currently totaling - • $53 l million will be identifying projects for the City's next bond referendum, potentially as'. early as 201G: The Debt Service Fund forecast shows a need to increase the Debt Service component of the -' tax rate to$0.5325 by fiscal year 2017 to implement the Five-Year CIP,excluding unfunded projects, which is consistent with the financial modeling that the City undertook-when : - `! analyzing_ the Debt :Service tax implications of'implementing the $162 :million:bond referendum. The debt service component of the tax rate for.fiscal year 2014:.remains'the. same as in fiscal year 2013 at$0.4900. The City completes a Water/SewerCost.of Service,Rate.Study annually for the forecast.The study-is built around the Five-Year CIP, operating-budget,and future needs. Due to funds ,�. . on hand for pay-as-you go capital improvements, no rate increase'was necessary for fiscal year 2011, 2012 or 2013; however, the model-anticipates rate increases:for 2015, 2017 and: — 2018. The City's utility system continues to be self-supporting and financially sound: Relevant Financial PolicieslGuidelines Financial Policies guide the development and implementation of the-budget and are a framework for-fiscal-decision making.and that ensure financial resources are available to meet the current and future:needs of the:City. The policy statements address;areas."of reporting and.auditing, budgeting, revenues, capital improvements;`debt, and grants to, ••• name a few..Some of the most relevant policies are:' , • - Recurring revenues fund recurring expenditures/expenses • -Non-recurring funds fund.non-recurring expenditures/expenses.: • General Fund .Operating Reserves should be a minimum of two months of operations.. • Water and Wastewater Operating Reserves shall strive to be maintained at .: 25%_of operations. -` • Budget revenues on a conservative basis. • Fund existing services at current service levels. . • Enterprise Funds must be self-supporting. " _I •. Leverage City dollars by seeking outside funding:sources. • Maintain stable property tax rates: Major Initiatives The City Council, staff, and community share a vision that combines progress and innovation with prudent controls to shape Pearland's future, as it becomes one of the largest suburbs in the Houston area. Some of the major initiatives are as follows: Public Safety . Among numerous other reasons, families move to Pearland for a high degree of personal safety and a low crime rate. Pearland was recently rated as one of the safest Cities in the United States ranking number 48 out of the top 50 Cities.Pearland was one of two Cities in the Houston area in the top 50. The City Council continues to emphasize public safety and the City delivers programs in the areas of law enforcement, emergency management, emergency medical services, and fire protection. For more than a decade, the City of Pearland public safety departments have been subscribers to an 800 MHZ trunked radio system provided by Harris County. This system was originally designed for mobile radios in vehicles and at a time when the western half of Pearland was sparsely populated. Pearland public safety departments have experienced - r significant radio reception difficulties creating safety issues for the City. Harris County is not able to improve radio coverage in west Pearland, and to switch to the digital version of the Harris County system is costly and would not guarantee improved radio coverage. The City of Houston has recently established a $130 million dollar 700 MHz trunked radio system designed for in-building coverage using portable radios. After radio testing and research,-the City of Pearland will be switching to the City of Houston's radio system which will result in improvements in coverage, improving public safety for employees and citizens of Pearland, and at a lesser cost than creating a new radio system or staying as a subscriber to the current radio system. The City of Pearland Police Department communications division provided dispatch services for the City's Police, Fire, and EMS departments. Due to the rapid population. growth and increased demands for service in the City, it became apparent that the Police communications division workload was unsustainable. As an alternative to hiring more - dispatchers, the City has contracted with Harris County Emergency Corps for the provision .of Fire Department and EMS dispatch services. In addition to the cost savings.of not. having to hire additional employees, the contracted dispatch center brings added capabilities to the Fire and EMS departments. By utilizing personnel specifically trained and certified for. the Fire and EMS dispatch role, as well as employing a Computer Aided- Dispatch system specifically configured for Fire and EMS dispatching, this arrangement has contributed to increased safety for emergency responders as well as better deployment and utilization of resources. - Brazoria County MUD's 21 and 22 in cooperation with Friendswood Development have constructed Fire Station 6 in the City's ETJ, which opened in 2012. This station is staffed and operated by Pearland Volunteer Firefighters with the MUD's bearing the cost of operations, pursuant to a Strategic Partnership Agreement. This has greatly enhanced response times out in the City's southwestern ETJ, where development continues. The City is also nearing completion of design for the reconstruction of Fire Station#3, anticipated to . open fall 2014, on the eastern edge of the City to accommodate a 24/7 crew, and will be beginning design for reconstruction of Fire Station#2, to improve response times to these service areas of the City. - vi Another initiative of.the City, is the approved merger of the Fire and EMS;.departments effective October1, 2014. In 2010, the City engaged the firm of McGrath Consulting Group to evaluate the City's Fire and EMS departments. One of the recommendations was to -consolidate the.Departments, the.purpose being to-improve-the efficiency and effectiveness of Current and- future delivery of services at the highest possible level of quality while considering costs The consolidation,is"'multi-year, multiphase plan; with cross-training -occurring in:fiscal year 2014 and:full-implementation•in fiscal year 2015 Economic Development. :. The Pearland. Economic -Development: Corporation (PEDC) is a Type 4B non-profit corporation under the Texas Development Corporation Act that utilizes:a half cent;sales-tax collected: in the•City -to carry out economic development activities for the City. The Corporation is committed to enhancing the City's economic:vitality:'through attraction, retention,.and expansion of primary,employ'.ers. .The Corporation works with the City.to • - • utilize various tools such,as tax abatement and .the:authority`.granted the City. under Chapter 380 of the Local Government Code:to encourage,new jobs and investment in..the community.The following highlights a few of the most recent Corporation attraction efforts: Dover';Energy.kicked off construction' in June 2013 for;-the:,global Manufacturer's new facility-in Pearland..Dover Energy, which provides:highlyy-engineered:solutions for the.safe - • and efficient extraction and handling of critical fluids worldwide in the drilling, production and downstream markets, selected .Pearland during a multi-city site search The new facility, which will consolidate Dover's multiple Texas locations.-into one regional facility,is. expected to be :completed in .February 2014. Dover , Energy's -new ::consolidated manufacturing and operations center will be located in the Lower Kirby Urban District On a, - 14=acre: site at the :northeast corner.of Spectrum'-Boulevard;:and Hooper Road, directly_. behind Merit Medicare new.facility.The facility will be 150,000 square feet With space fora staff of approximately 200.employees to PpP y Amerlux, .a -manufacturer: of energy efficient lighting for retail, supermarket, and commercial markets, just announced plans to build a 100,000:square foot manufacturing facility in Pearland on 11 acres.on Kirby Drive It is anticipated.that_the facility Will open in the fourth quarter of 2014 :The facility will include a.wide array of new materials an equipment to.help produce and service the-extensive line of interior and exterior products Mitsubishi Heavy`Industries has.chosen Pearland;for-its-first;U.S.plant The,$100 million new compressor facility will sit on a 26=acre site and include;a 1.00,000 square foot space for assembly, packaging,shipping-and storage of compressors-that:serve the petrochemical facilities. A 40,000 square foot office facility will also be built. The first.phase estimated to cost $40 million should be complete November,2014.;By2016,,�the full..scale.manufacturing facility will be:complete with 100 new employees on-site The Corporation also:spearheaded legislation;that passed the State Legislature in 2013,Ito create a- Highway 288 ,Management: District ;for, corridor beautification. The 'corridor currently is non-landscaped and does not reflect City standards.. The goal is to create a -' vibrant visually appealing corridor that will attract investment in the City. District board members. have been appointed and the District:has levied a- 10 cent tax rate, which is anticipated to generate .approximately;.$300,000>annually. The next step is to plan the aesthetic'improvements and.build a phased.landscaping program for implementation. vii J In 2012, the PEDC, along with local partners in government, education, healthcare and business, embarked upon a long-term strategic community and economic development planning process in order to create a shared vision for the community's future growth and an action plan to achieve it. The planning process resulted in a Pearland 20/20:Strategic Plan incorporating nine strategies to improve Pearland's product The nine strategies are 1. Marketing,:2. Mobility, 3. Corridors, 4. Recreation and Culture, 5. Beautification, 6. Lower Kirby Mixed Use District, 7. Multi-Use Event Center,8. Workforce Pipeline, and 9. Image Campaign. More than ever before, companies are considering education, workforce, entertainment, parks, etc. into their decisions to locate or remain in the City. It will take a myriad of partners to develop and maintain a'successful community product. One of the City's prime areas for development, the Lower Kirby Mixed Use District at Hwy. 288 and Beltway 8, has infrastructure needs that make it more difficult to develop. The PEDC is working with two area Municipal Management Districts to coordinate a multi- phase plan for the construction and funding of some of the major infrastructure that is needed: The Pearland Economic Development Corporation continues to promote Pearland and is working with a myriad of companies on future relocations and site visits as well as working with existing businesses on future expansions.. The City's Convention and Visitor's Bureau (CVB), funded by hotel occupancy taxes, also focuses on economic development through tourism and putting heads in beds. In late 2012, the City Council authorized the creation of a city department for the Convention and Visitor's Bureau, service that had been previously contracted out In fiscal year 2013, an Executive Director and staff were hired. The location of Pearland, as previously mentioned, makes Pearland a perfect hub.and spoke for visitors and "A Perfect Pick...to play, stay, meet, and getaway", the tag line for the CVB. The time has come for Pearland to complement and support its development with cultural and lifestyle amenities to include a multi-use events center. This need has been noted in multiple Pearland planning processes as an enhancement to make the city more competitive for employers and residents. Annul hotel occupancy taxes total slightly over $1 million dollars and the funds ending balance is $2.3 million as of September 30, 2013. Land Use Plan/Annexation ,. Land use planning seeks to order and regulate the use of land in an efficient and ethical way, thus preventing land use conflicts. Land use planning is the systematic assessment of land, alternatives for land use, and social and economic conditions in order to select and adopt the best land use options. Its purpose is to select and put into practice those land uses that will best meet the'needs of the people while safeguarding resources and ensuring sustainability. r- PEDC and the City of Pearland, in partnership with Gateway Planning, finalized a market based master plan and implementation strategy for the area formerly known as the Spectrum District, and currently known as the Lower Kirby Mixed Use District, that leverages the area's unique location (on Beltway 8 and 288) and creates a de facto"master development" context. The area is planned to be a regional employment center with destination mixed use urban living, and concentrated retail/entertainment areas. The key issues addressed by the plan include drainage,transportation access, linkages, and transit; revision of'the existing zoning and development standards; incorporating new development with existing uses; involving the existing municipal management districts; and incorporating public parks and open spaces. viii The master plan and associated regulatory recommendation of a form based code envisions • - a:market based approach_and:identifies different "character zones" of development, each implementing_a unique _neighborhood-within the Lower Kirby Mixed :Use,:District This form-based code is combined with the overall infrastructure:strategythat.-identifies the �. major regional drainage 'arid°roadway] m g y;,improvements needed to bring the :.plan,together. This=master.plan and implementation strategy for•Lower Kirby;ensure that;the vision for mg the mixed use regional,;destination .is feasible, but flexible to address changing market L : conditions. In order to'implement this vibrant vision, for the Lower Kirby Mixed, Use District, PEDC is working with the' `City of. Pearland' and the. .two area Municipal 7Management.:District Boards to create a :coordinated action plan that- identifies the responsibilities and.roles of each;:of the entities: . . . , ._ . , The City's annexation of Brazoria County MUD#4, occurred December 31, 2012; pursuant L, : _ to a Strategic"Partnership Agreement between the City and MUD Brazoria County MUD #4 encompassed approximately,600-acres and had an estimated population of 3,100. Upon annexation,all assets and obligations of the MUDtransferred to the City In January 2013, City Council voted to incorporate the Grand Avenue Master Plan.into the City's Comprehensive Plan:The'plan is.;designed to facilitate:future development of Grand 7 Avenue:as a focal point for the;;Old Town,Site while also responding to existing growth L. patterns in the city:A primary initiative for this plan is to reinvent the Old Town Site as a modern village with:a compatible mix of residential and non-residential uses.. The.Plan 7 recommends adopting esbuildingsand form based cod that would:be used to ensure: 'Streets 4, are-coordinated in a manner that is.attractive.to pedestrians and;,encourages outdoor . '.activities Using forth based'codes allows for more flexibility.and a mix of uses as compared im' , to traditional zoning:used throughout the City. - •Capital Improvement Projects and.Planning With continued residential and commercial growth; and to plan for the future, the need to build new:infrastructure, and -maintain:existing infrastructure is a priority and_will be. implemented through' an aggressive capital improvement.:program: The City's Five Year CIP 2014 ,. 2018::;totals $354;million: Projecta include-drainage=-($23M) streets ($160M), -' - -`.facilities.($21M), parks:($36M); water and wastewater($114M). : Major thoroughfare projects include the widening of Bailey Road between:FM1128 and • Veterans, reconstruction of;one.mile..of Old Alvin:Road from Plum Street -McHard Road;:; - McHard Road'extension from;Mykawa to Cullen, expansion of Smith Ranch:Road from two '.1' • lanes:asphalt. to four lanes concrete,. curb-and gutter, from.Hughes Ranch', to:North of Broadway, the widening..of Max Road between:Broadway and Hughes.Ranch Road,and the - extension of. Fite .between. McLean::and.Veterans. :..;Major .'drainage projects _include expansion of:the D.L Smith detention.pond-,by approximately 150 acre feet and `future storm water regional.detention at FM518 and Cullen: Major.:park projects include a soccer complex,"improvements to.Independence and Centennial;Parks;Phase I development of the Shadow Creek.Ranch Park,and a 7,000 square foot Nature Center Facility projects include an 11,500 square feet expansion and renovation to the Torn Reid:Library, reconstruction-.of -- Fire Station#3 and Fire Station #2 to accommodate a 24/7 manned station, relocation of Fire Station.#1,-and City Hall and Hill House Road facility improvements..Water projects '� include the preliminary design of a 20 million gallon,per.day_surface water plant along with . 'various waterline'extensions. Wastewater projects include;:..the..expansion of,the- Far ix Northwest, Barry Rose and JHEC wastewater treatment plants, extension of trunk sewer on McHard, and various lift station projects. Transportation Improvements and Strategic Planning Charged with planning, establishing,:and maintaining an effective transportation system, the City of Pearland is involved in numerous activities to face this challenge. The $84 million transportation bond program :(passed in 2007) will construct major projects mentioned previously. The City is also involved in regional efforts for "long-range transportation planning and funding. The Mayor is a member of H-GAC's Transportation Policy Council (TPC), and an Assistant City Manager is a member of the Technical Advisory Committee (TAC), a sub- committee of the TPC and the Transportation Improvement Program(TIP) Subcommittee. The City submitted several proposed roadway projects from its Capital Improvement Program for possible funding in the.region's Transportation Improvement Program (TIP) for 2013-2016 and five of the City's projects were selected for funding. The projects are McHard Road Extension (Mykawa to Cullen), Bailey Road (Veterans to FM1128), Smith Ranch Road Extension and Green Tee Terrace and Shadow Creek Ranch Trails. These projects will receive 80%funding from state or federal sources totaling$63,251,113 with the City.providing 20% matching funds. These projects are in addition to the four projects that received funding in 2011 totaling $20,180,901 in state or federal funding from the TIP. These projects are -slated to be completed within the City's current Five-Year Capital. Improvement Program. With the growth in population along the Highway 288 corridor and the number of Pearland residents that rely on Hwy 288 to commute to Houston and the Texas Medical Center, the City along with Brazoria County have been meeting and working with the Texas Department of Transportation to provide traffic relief on the corridor through managed toll lanes."Brazoria County is preparing to begin design work, anticipated to be awarded on March 25, 2014,'on four new toll lanes on Texas 288 from the Brazoria-Harris County line to County Road 58. Design will take approximately nine months with bids to be advertised around January 2015. Construction is likely to begin March 2015 with a three-year construction schedule. In 2007, State legislation was passed giving authority for the Brazoria County Toll Road Authority to construct their own toll roads. The Gulf Coast Center operates a transportation program known as Connect Transit. Connect Transit provides "curb cab" service to Pearland. Services are shared ride services with pick-up and delivery from curb to curb by reservation. The City funds approximately $20,000 for this service annually to its citizens meeting the eligibility requirements; seniors, person with disabilities, or low-income. This is a way to provide those needing transportation to grocery stores, doctor visits, etc. Fiscal Responsibility and Sustainability Fiscal sustainability can be defined as "the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes." City Council takes-a proactive stance in ensuring.the fiscal health and sustainability of the City. Council adopted a set of Financial Management Policy Statements and receives quarterly Finance "Snapshot" presentations, which includes economic indicators. The City also prepares a Five-Year Forecast for the City's major funds x 7 to see how the:spending decisions made today affect the future:as well as to identify any• issues/concerns''that-are forthcoming and to put_strategies in place today to address those issues/concerns for the future. Over the past three years because of the sluggish economy the'City has seen base:budget - • :reductions to the General Fund totaling$4 9 million.During fiscal year'2013 however, we have:seen a turnaround in the economy:and;'growth; The improving Houston area economy and the City's increasing population played major roles in the development,of the fiscal - year 2014,budget. Theimproving economy will most likely-result in improved revenues in • the current fiscal year, 2014, most noticeably in sales tax;and building:permits Sales tax revenue for.fiscal year 2013 is up 7:3%0,over the-prior year. The fiscal year 2014 Adopted Budget.includes an increase of 7.8%0 over fiscal year 2013. Building Permit'revenue is also projected to maintain'the;-strong levels that,have developed: during fiscal year 2013. The Adopted Budget for fiscal year 2014 :anticipates 1,000 single family permits. Another _': significant factor that impacts'the Adopted Budget is a.3% increase in population. This increase°in population results 'in a need for increased::services to' meet needs of new residents. This projected increase in population is .the result" of both newly constructed homes and multifamily dwellings. The Adopted Budget includes no increase in either the _ '.._property"tax rate or water:-and sewer rates. Of the total adopted'tax rate of:70.51 cents per hundred dollars valuation, the operating tax rate:remains at 21.51 cents per hundred dollars and the debt service tax rate remains unchanged at 49 cents.. While only a few Months into the 2014 fiscal year,the City is already beginning to prepare' IP for the ,2015..budget:process and up.coming forecast with the:same goal of being fiscally. '- ' responsible to our citizens. <AWARDS AND ACKNOWLEDGEMENTS Parks. and. Recreation earned national . accreditation through the 'Commission for Accreditation of.Park and:Recreation Agencies and the National Recreation and Park Association.The accreditation is a measure of the overall quality of operation, management and:service to the community and has meet rigorous standards related to the management • and administration of lands, facilities, resources,:programs, safety and:services: g • The. Cityof Pearland. received;Crystal Awards in two. categories recognizing marketing excellence: Online Social Media-Non Profit for the City's campaign promoting:its three social media pages, and Maverick Marketing for the promotion of its CATFAX cat adoption event The Texas Fire Marshal's Association awarded the City. with the 2013 Achievement-of Excellence :Gold: Level :Award.: The award recognizes organizations for performing excellence in fire prevention: 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, 2012. >This was the 36th consecutive year that the City has received this mus must ward In easily readable awarded a Certificate of Achievement, a governmental- • -prestigious - " p 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 . • Xi . Certificate of Achievement Program's requirements, and we are submitting it to G?OA`to determine its eligibility for another certificate. - The City has also received the GFOA''s.Distinguished Budget Presentation Award for its annual budget document.. 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 - Accounting:staff of-the Finance Department: We express our:sincere appreciation to these individuals who have continually demonstrated the core beliefs of the City and 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; . C J . 7s0n, City Manager' Claire Bogard,Director of Finance CITY OF PEARI,AND,_TEXAS PRINCIPAL OFFICIALS Term Expires Elected Officials Position May 7 Tom Reid Mayor. . :2014 Tony Carbone Council Member at Large Position One 2016 Scott Sherman Council Member at Large-Position Two 2015 r.■ Susan Sherrouse Council Member at Large-Position Three 2014. Keith Ordeneaux Council Member at Large-Position Four 2015 — ` Greg Hill Council Member at Large-Position Five,Mayor Pro Tern 2016 Appointed Officials Position Clay Pearson City Manager Darrin'Coker City Attorney Letitia Farnie Municipal Court Judge City Management Position Mickiel Hodge Assistant City Manager Jon Branson Assistant City Manager Claire Bogard Director.of Finance Matt Buchanan President,PEDC Daniel Baum . Emergency Medical Services Chief Young Lorfmg City Secretary Eric Wilson Director of Public Works Bonita Hall ` Director of Human Resource s Chris Doyle . Police Chief "1 Michelle Smith Director of Parks and Recreation Vance;Riley Fire Chief Andrew Fearn Head Librarian Lata Krishnarao Director of Community Development Trent Epperson. Director of Engineering and Capital Projects Kim Sinistore Executive Director,CVB xiii A.. - ..- ' • ,ORGANIZATION CHART - • - - ' CITY OF PEARLAND,TEXAS ' - • i ;CITIZENS OF RF.ARLANI? MAYOR AND CITY COUriCIL.:i , I • MUJJICIP.4LJUDGES . r CITY ArroRNEY: 1 - ~"' saoARDS AfJI3Cflr,trllsiorts I' . i . . IT CYht;it1AGER . j .. - . ECOiJOi41C DEVVELOPinfENT 1 - • .,SSlSTA1JT CITYI�L".11.iGER . .SSISTANT CITY MANAGER 11 i �r � I' - ' Convention& . Engineering& . Fire City Secretary y'"j 9;apital Projects. - ' ` �i { C 'Visitors'Bureau '� y b Administration= �+ Fire idarshai ,,- r{ .� >=inance •--, Animal Control Capital Projects Emergency 1 `-== f Management . • Engineering — • c--t Human Re sources . - Accounting • — budget TraffiicOper:& Emergency �'!I _ Information .. Maintenance -. N7ed cal j! Technology: Communications •.,.Services , Geographic 4. ,;.,'_.. Purchasing Information i� a- -." Systems - _,_ Utility Billing i-r Municipal Court -•',,i - - _ &Collections I f tf Ponce E r ` f J L PublicWorks_, f Parks&RecreaUo . i Epmmunity ��Ml Administration = Development • — Administration — Administration- =t - . `. Patrol — --.Fleet Resource .. Planning Investigations — . Development . . --- Litt Stations . Permits& Community - -. Inspections Services — — Service Center. Aquatics . p Streets& . Athletics" Support Drainage. Custodial Svcs Health&Code Services Enforcement iOlstribuflon:& Facilities Mtce:Jat i' Collection -- Parks Mice.East Commercial Vehicle Enforcement Production. Parks h1tce;West - School Resource , - _ Recreation Ctr./- ; wastewater Officers — Natatorium. , -Treatment . TraffiicEnfcmt./ = Recycling Center : : Motorcycles . Nater/Sewer - Construction — Senior • Spedal• ".� . Public Works Special Events Investigations Geographic, Information Wes • iside Events .• 7 Training `-' Center Systems- Youth • a . Development - "as of 9-30.2013 . _. • xiv [10) - Government Finance Officers Association Certificate -of • Achievement for Excellence in Financial • Reporting Presented to City of Pearland Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2012 "7:040e-0, r. t Executive Director/CEO XV -a, Financial Section (This page-intentionally left blank), • • • • • GrantThornton • • • • • • • Grant Thornton LLP 700 Milam Street,Suite-300 Houston,TX 77002-2848 T 832.476.3600 F 713.655.8741 GrantThomton.com REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Iinkd.in/GrantlhomtonUS • twitter.com/GrantThornton U S • The.Honorable Mayor and Members of the City Council City of Pearland,Texas Report on the financial statements - We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City .- of Pearland, Texas (the "City") as of and for the year ended September 30, 2013, and the related notes'to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America;this includes the design,implementation,and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material - . misstatement,whether due to fraud or error. . Auditor's responsibility 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 from material misstatement. • • An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether.due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Entity's preparation and fair,presentation of the financial statements in order to design audit procedures that are appropriate in the fj 1 GrantThornton LLP U.S.member firm of Grant Thornton International Ltd. 1 • "i1 Grant Thornton circumstances,;but not for the purpose of expressing_an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating appropriatenessaccounting the of .policies used and the reasonableness of significant ' ... . _ 'accounting estimates made by management,as-well as,evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, each major fund, and the aggregate remaining fund information of the City of Pearland,Texas as of September 30, 2013, and the respective changes in financial position.and, where. applicable, cash flows thereof for the year then,ended in accordance with accounting principles generally accepted in the United States of America. Other matters Required supplementary information Accounting principles generally accepted in the United States of America require that the wif management's discussion and analysis on pages'6 16,the Schedule of Revenues,Expenditures. and Changes in.Fund Balances— Budget and Actual on pages 67 68 schedules of funding progress for Texas.Municipal Retirement System and City of Pearland Other Post-Employment Benefit Obligation on page 69 be presented to supplement the basic financial statements.Such information, although not a required part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial rmi-. - reporting for placing the basic financial statements in an appropriate operational, economic, or historical context This required supplementary information is the .responsibility of management. We have applied certain limited procedures to the required supplementary. =„ information in accordance with auditing standards generally accepted in'the United States of : ' America. These limited procedures consisted of inquiries of management about the methods of preparing the information and comparing .the information for consistency with. management's responses to our inquiries,the basic financial statements, and other knowledge we obtained during our audit of the basic financial-statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us. with sufficient evidence to express an opinion or provide any assurance: Supplementary information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual fund - ' statements and schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such supplementary information is the 2. Grant Thornton LLP - - U.S.member firm of Grant Thornton International Ltd. - GrantThornton . s responsibility of management and was .derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has-been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures. These additional procedures included comparing and reconciling the information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion,the supplementary information is fairly stated,in all material respects,in relation to the basic financial statements as a whole. Other information The introductory section and the statistical section on pages i-xv and 117-147,-respectively are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other reporting required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report, dated March 12, 2014, on our consideration of the City's 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 effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. wP �- Houston,Texas March 12,2014 J t 3 J Grant Thornton LLP - U.S.member firm of Grant Thornton International Ltd. (This page intentionally left blank) 111, 4 Management's Discussion and Analysis 5 CITY OF PEARLAND,TEXAS ,. 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 30,2013.. FINANCIAL HIGHLIGHTS • The assets of the primary government of the City of Pearland exceeded its liabilities as of September 30, 2013, by $645.2 million (net position). Of this amount, $609.6 million is for investments..in capital assets, net of related capital debt and .$44.2 million is restricted for economic development, capital projects, debt service,public safety, and community development ,� projects. . • The City's total primary government net position increased by$58.3 million primarily due to the annexation of Brazoria MUD No.4 and capital contributions froth developers for infrastructure. • At :the close of the ,current fiscal year, the City of Pearland's governmental funds reported combined ending fund balances of$64:8 million,an increase`of$4.3 million in comparison with the prior year. Increases are seen in the Pearland Economic Development Corporation of $1.9 million, $1.1 million is in the. General Fund, $800,000 in Capital Project Fund, and the remaining in the. City other Governmental Funds. Approximately. $48.8 million of the. $64.8 million is considered restricted or assigned; $20.8 million for economic development, and $14.5 million can be attributed to unspent bond proceeds for capital projects. • ' As of September 30,,2013, the unassigned:fund;balance for the General Fund was $16.9 million or 31% of total General Fund expenditures. This-exceeds the City's reserve policy of 16.6%. . The -total fund balance for the General Fund is $18.6 million or 34% of General Fund expenditures: . , . • The City of Pearland's outstanding General Obligation and Certificates of Obligation debt for governmental activities totaled $294.7 million, a net increase of$5.1 million over the previous - year. .The increase is attributable to new money being issued.of$12.1 million Offset by principal payments. Revenue Bonds for the City's. component units total $75.1 million, down. to - - $3,6 million from last year due to payment of principal: "The City's debt for business activities totaled $119.7 million; a net decrease of,approximately $4.7 million from the previous year. principal outstanding. 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 '41, provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The Statement of Net Position presents'information on all of the City's assets"and liabilities, with the difference between the two reported as net position. Over time,increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. = 6 CITY OF PEARLAND,TEXAS. MANAGEMENT'S DISCUSSION AND ANALYSIS The Statement of Activities presents information showing how the City's net position changed during the n fiscal year. All changes in net position 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, economic development, public safety, public works, community services and parks and recreation. The business- type activities of the City include water, sewer,and solid waste. The government-wide financial statements can be found'on pages 20.through 22 of this report. 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 blended component units is reported together with the financial information presented for the primary government,itself. ' Fund Financial Statements - A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All funds of the City can be divided into two categories - governmental funds and proprietary funds. Governmental Funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on current sources and uses of spendable resources, as well as on balances of spendable resources available at the end of the. fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the 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 balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Beginning on page 23 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, Pearland Economic Development Corporation, Tax Increment Reinvestment Zone#2, and Development Authority of Pearland, 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. 7 n 1,41 CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS L . 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 two types 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 and Solid Waste Fund. The City rn't also .maintains two internal service funds to account for its property insurance andhealth insurance. These funds.are part of the governmental activities in the government-wide financial statements and are reported separately beginning on page 27 of the Statement of Net Position. 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 can be found on pages 27 through' 30 of this report,provide separate information for the Water and Sewer and Solid Waste Enterprise Funds 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 beginning on page 31 of this report. Other Information In addition to the basic financial statements and accompanying notes this report also presents other required supplementary, information as well as combining and::individual fund - statements and schedules that further support the information in the'financial statements. This information is presented.immediately following the notes to the financial statements beginning on page 67 of this report.. Government-wide Financial Analysis , As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of,the City, assets exceeded liabilities by $645.2 million at the close,of the most recent fiscal year. By far the largest portion of the:City's net position (94 percent) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any capital related debt used to acquire those, assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of capital 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. -11 8 • CITY OF PEARLAND,TEXAS r! MANAGEMENT'S DISCUSSION AND ANALYSIS COMPARATIVE SCHEDULE OF NET POSITION r' September 30,2013 and 2012 Amounts in (000's) • Governmental Activities Business-Type Activities Totals 2013 2012* 2013 2012 2013 2012* • Assets `^ Current and other assets $ 95,694 $ 87,941 $ 42,133 $ 48,163 $ 137,827 $ 136,104 Capital assets 749,038 706,242 281,213 266,288 1,030,251 972,530 Total Assets 844,732 794,183 323,346 314,451 1,168,078 1,108,634 r" Liabilities Other liabilities 17,170 9,778 9,147 6,996 26,317 16,774 Long-term liabilities outstanding 375,604 378,471 120,961 126,479 496,565 504,950 r, Total Liabilities 392,774 388,249 130,108 133,475 522,882 521,724 Net position Net investment in capital assets 442,581 396,009 . 166,992 158,716 609,573 554,725 r^ Restricted 34,666 36,548 9,542 9,821 44,208 46,369 Unrestricted (25,289) (26,623) 16,704 12,439 (8,585) (14,184) Total Net Position $ 451,958 $ 405,934 $ 193,238 $ 180,976 -$ 645,196 $ 586,910 *As restated for comparison purposes. Due to the implementation of GASB 61, The Financial Reporting Entity: Omnibus An Amendment of GASB Statements No. 14 and No. 34 (GASB 61), Pearland Economic Development Corporation, Pearland TIRZ#2 and the Development Authority of Pearland have been presented as blended component units and therefore are included in the Governmental Activities numbers in this year's annual report. Fiscal year 2012 numbers have been restated for comparative purposes. As a result of this implementation, Unrestricted Net Position for Governmental Activities is negative $25,289 for fiscal year 2013, where historically this has been a positive number. Governmental r, Accounting Standards require that the Development Authority of Pearland outstanding debt be deducted from the unrestricted component of the government's net position as the Development • Authority has acquired no capital assets,therefore the debt is considered non-capital related. If one where to adjust for this, Governmental Activities Unrestricted Net Position would have been a positive $20,628 compared to $21,618 in fiscal year 2012, a reduction of$990 thousand in unrestricted net position. -, The increase in Total Net Position from the prior year is $58.3 million, which is primarily attributed to an increase in capital assets from developer contributions. fl 9 rig runt CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSIONAND ANALYSIS COMPARATIVE SCHEDULE OF CHANGES IN NET POSITION September 30,2013 and 2012 Amounts in (000's) Governmental Activities Business-Type Activities Totals 2013 2012* 2013 2012 2013 2012 Revenues Program revenues: Charges for services $ 22,719. $ 12,597 $ 37,183 $ 35,189. $ 59,902 $ "47,786 Operating grants and contributions . 2,325 7,662 - 205 2,325 7,867 Capital grants and contributions 53,101 18,843 16,273 8,118 .'69,374 26,961 fw!. Property"taxes " • 54,433 .. 52,230 ., - - 54,433 52,230 -Sales and use taxes 24,942 22,969 - - 24,942 22,969 Franchise taxes 5,999 5,670 - 5,999 5,670 Investment earnings 155 ' 134 95 ' 68 250 202 " Other 1,701 1,554 ,- 682 •, 443 2,383 1,997 Total Revenues 165,375 121;659 54,233 . 44,023 219,608 165,682 -41 Expenses General Government 13,358 13,334 13;358 13,334 Public Safety 28,944 27,403 - 28,944 27,403 Public Works - 31,690- 28,510 ' " " - 31,690 28,510 r1, Community Services - 3,807 4,267 : . - - _ 3,807 ' 4,267 ' ' Parks and Recreation .. 9,524 9,264 - . - 9,524: 9,264 Economic Development 17,411 26,311 - _ 17,41.1. 26,311 Interest on-long-term debt 16,224 ..11,572 ' - ' - 16,224 11,572 Water and Sewer - - 32,040 29,392 32,040 29,392 Solid Waste - - 8,324 7,528 . - 8,324 7,528 Total Expenses 120,958 120,661 . 40,364 36,920. '161,322 157,581 �+ Increase(decrease)in net. position before transfers 44,417 ' 998 " . 13,869 7,103 58,286 8,101 Transfers. .. 1,607 2,269 (1,607) (2,269) - Increase in net position 46,024 3,267 12,262 4,834 58,286. 8,101 Net position-beginning, as restated ' ' 405,934 402,667 180,976 176,142 586,910:. 578,809 Net position-ending $ 451,958 $ 405,934 $ 193,238 $ 180,976 $ 645,196 $ 586,910 *As restated for comparison purposes.° At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business- type activities. 10' CITY OF PEARLAND,TEXAS '`'I MANAGEMENT'S DISCUSSION AND ANALYSIS Governmental activities - Governmental activities increased the City's net position by $46.0 million, thereby accounting for 79%percent of the total increase in the net position of the City. Key elements of this increase are as follows: • Property taxes, sales and use taxes, and franchise taxes totaled$54.4 million, $24:9 million,and $6.0 million, respectively. These revenues increased.by $4.5 million from prior year primarily _ as a result of the-annexation of Brazoria MUD No. 4 and collection of their property taxes, increase in property taxes due to a 2 cent increase in the property tax rate, and increased' consumer spending. • :Charges for services increased to $22.7 million. This is $10.1 million over the prior year of which $5.4 million is TIRZ administrative fees previously classified as Operating Grants and ,. Contributions. • Capital -Contributions totaled $53.1 million as a result of infrastructure contributed-.by . - - developers, the annexation of Brazoria MUD No.4, and grants and contributions for capital projects. This is an increase of$34.3 million over last year: • The revenues were offset by expenses for general government,public safety, public works, and _ economic 'development of $13.4 million, $28.9 million, $31.7 million, and $17.4 million, respectively. _In total,these expenses were relatively consistent with the prior year. Expenses and Program Revenues-Governmental Activities - - S55,000 ■S50.000 Eapenses. S45,000 o` , .000 - - - a Program Revenues' S30,0011 - - - - { szs000 $20,000 s15,000 S5 0051. • .. F „pc' `C� *ocBO. Vcca� � Qac� ��t` `includes Brazoria County MUD capital contribution for infrastructure Revenues by Source-Governmental Activities Charges for Services, 14% Other,1% Grants and \` contributions,34% NN Property taxes,33% . - - Sales and use taxes, - 15% Franchise taxes,4% 11 MB CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS Business-type activities-.Business-type activities increased the'City's net position by $12.3 million. Key elements of this increase are as follows: l _ • Charges for services of$37.2 million increased approximately $2.0 million over the prior year '- primarily due to an increase in water and sewer consumption due to the annexation of Brazoria MUD No.4.. • Capital grants and contributions of$16.3 million increased $8.2 million from the prior year mainly due to the annexation of Brazoria MUD No. 4 and recordation of assets. • The revenues listed above were offset by expenses' of $32.0 million and $8.3 million, 7 respectively for Water and Sewer and Solid Waste.' Expenses increased from prior year by $2.6 million mainly due to an increase in solid waste of $800,000 due to increase in rates pursuant to the contract, and annexation of Brazoria County MUD No: 4; increase in rot depreciation and amortization of assets of $770,000, and increase in system repairs of $643,000. ^�+ Expenses and Program Revenues- Business-type Activities $5o,000 545 000 . wl 540,000 •menses $35,000 . ■Program Revenues' S30,000 ^is4 525,000 520,000 515,000 'i • � 5I0,000. $5,000 5 Water and Sewer Solid Waste *includes Brazoria County MUD4 capital contribution for infrastructure Revenues by Source-Business-type Activities 111, Other,1% � l i Charges for Services, - Grants and. 69% contributions,30% gik 12 CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSIONAND ANALYSIS FINANCIAL ANALYSIS OF IHE CITY'S FUNDS As noted earlier, fund accounting is used to demonstrate and ensure,compliance with finance-related legal requirements. .— Governmental Funds - The focus of the City's governmental funds is to provide information of near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of 7 the City's net resources available for spending at the end of the fiscal year. The City's governmental funds reflect a combined fund balance of$64.8 million.A portion of the combined fund balance, or $16.9 million, is unassigned and available for day-to-day operations of the City; $14.5 million is restricted for capital projects; $20.8 million for economic development and the remaining balance is restricted for debt service and other programs. There was an increase in the combined fund balance of$4.3 million from the prior year. The increase in fund balance includes an increase in the capital projects fund balance of approximately$800,000 due to bond proceeds, a decrease of $300,000 in the debt service fund balance, offset by a combined increase of approximately $973,000 in the special revenue funds. $1.1 million increase in the General Fund is seen mainly in Charges for Services for TIRZ Administration fees and Recreation Center/Natatorium fees; the General Fund's fund balance totaled$18.6 million at year end. ,. In the Capital Projects Fund, the City spent $17.5 million on various improvement projects; leaving an ending fund balance of$14.5 million,which will be spent on various capital projects. The Pearland Economic Development Corporation, TIRZ#2, and Development Authority; the City's component units, but blended with the primary government,had expenditures totaling$23.9 million, leaving an ending fund balance of $15.4 million, $4.3 million, and $1.8 million, respectively, all considered restricted. Proprietary Funds - The City's business-type activities contain two activities (water and sewer, and solid waste). The City's proprietary funds provide the same type of information found in the government-wide financial statements. GENERAL FUND BUDGETARY HIGHLIGHTS r During the year, there was a $2.2 million-increase in appropriations between the original and final amended budget, from $57.6 million to $59.8 million. The increase in appropriations is attributable to carryover funding from prior-year encumbrances and projects and to reflect projections during the 2012-2013 budget process. Budget estimates for revenues and other sources combined increased by approximately$2.8 million for the year; also to reflect carryovers and revised projections. Actual revenues and other sources of$59.4 million were$1.7 million under the final budget mainly due to capital lease financing occurring in FY 2014 versus FY 2013 for FY 2013 purchases. Actual expenditures of$55.3 million were under budget by$4.6 million, resulting in the year-end fund balance of$18.6 million over budget by$2.8 million. At year-end, equipment purchases and several projects were still in progress and $976,713 of the $2.8 million was carried over and re-appropriated in the 2013-2014 budget year. 13 r-, CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS 17 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets - At the end of fiscal year 2013, the City's governmental activities and business-type activities had invested $749.0 million and $281.2 million, respectively, in a variety of capital assets and infrastructure, as reflected in the following schedule. This represents a net increase of$14.9 million, or 5.6 percent over the end of last fiscal year for the business-type:activities capital assets and a net increase of $43.7 million or 6.2 percent over the end of last fiscal year for the governmental activities capital assets. The "" increase is mainly due to the recordation of Brazoria County MUD No.4 assets upon annexation. Governmental Activities Business-Type Activities Totals 2013 . . 2012 - 2013 .= 2012 .2013 2012 Land $ 31,264 $ 31,260 $ 3,796 $ 3,610 $ 35,060 $ 34,870 Construction in progress 23,306. 23,489 8,918 5,419 32,224 28,908 Infrastructure. 607,940" 573,752 212,666 : 199,511 820,606 773,263 Buildings and improvements 77,899 70,762' . - 27,168 27,898 ' 105,067 : 98,660 Machinery and equipment. 6,165 5,200 . 1,401- 1,199 7,566 6,399 Furniture and fixtures 2,464 873 .37 : 44 2,501. 917.' Contractual water rights • - ' 27,227 28,607 27,227 28,607 Total Capital Assets $ 749,038 $ 705,336 $ 281,213. $ 266,288 $.1,030,251 $ 971,624. Construction in progress at year-end represents numerous ongoing projects,the largest of which relate to street,drainage and water/sewer projects. Additional information on the City's capital assets can be found in Note 4 to the financial statements. Long-Term Debt At the end of the current fiscal year, the`City had total bonds, certificates of obligation, notes, capital leases, and post employment liabilities outstanding of$496.6 million. Of this amount, $230.0 million is composed of general obligation bonds, $78.7 million is composed.of certificates of obligation and$180.8 million represents revenue bonds secured solelyby specified revenue sources. Governmental Activities Business-Type Activities Totals 2013 2012 : 2013 . 2012 2013 . 2012 General obligation bonds $ 230,040 $ 224,170 $ $ - $ 230,040 $ 224,170 Certificates of obligation 64,690 65,425 14,020 15,130 78,710 80,555 Revenue bonds 75,125 78,725 105,690 - 109,305 180,815 188,030 .�. Unamortized amount for issuance premium/(discount) 6,159 6,479• 730 . . 882 6,889 7 361 Deferred loss on.refunding -. (11,053) (12,351) (560), (610) . - :(11,613): . (12,961) Capital leases payable' 3,681 3,407 261 342 3,942 3,749 Compensated absences 5,007 4,724 463. , . 539 5,470 5,263 Post employment benefit liability ' . 1,955 ,° '' 1,535 , 357' • 282' 2,312 '. .1,817 $ 375,604 $ 372,114 $ 120,961 . $ 125,870 $ 496,565 $'497,984 The City of Pearland's General Obligation and Certificates of Obligation debt for governmental activities increased to $294.7 million. The$5.1 million increase is due to new monies issued. The City's debt for business activities decreased.to $119.7 million, a net decrease of,$4.7 million from the previous year, which was the result of the principal payments. 14 CITY OF PEARLAND,TEXAS fl MANAGEMENT'S DISCUSSION AND ANALYSIS Current ratings on debt issues are as follows: Standard and Poors Fitch r1 General obligation bonds AA- AA Revenue bonds AA- AA- Both the Pearland Economic Development Corporation (PEDC) and the Development Authority of Pearland (DAP), blended component units of the City, have issued debt. The PEDC bonds are rated Al from Moody's. The DAP bonds are rated A-by Standard and Poors. Additional information on the City's long-term debt can be found in Note 5 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES Two primary factors in the 2014 budget are the improving Houston area economy and the continued growth in population served by the City. The improving regional economy will result in substantially improved revenues in the coming fiscal year. Improved economic conditions will be most noticeable in two major revenue sources—sales tax and building permits. Sales tax revenue for FY 2013 was up 7.3% over FY2012. The adopted budget for FY 2014 includes a total increase in sales tax of 7.8% over FY 2013 revenues. The nation's largest retail group, National Retail Federation, expects retail sales to increase at a slightly faster pace this year than last year as continued improvements in jobs and housing should help shoppers feel more confident about spending. Building Permit revenue is also projected to maintain the strong levels that have developed during FY 2013. The FY 2013 Adopted Budget was based on an estimated 1,000 single-family permits. Due to the strengthening regional economy during FY 2013,housing starts were 941. The FY 2014 Adopted Budget anticipates 1,000 single-family permits. Another economic factor that will impact revenues is an increase in property values of$504 million or 7.7%, due to new construction and the addition of MUD No. 4, which was annexed on December 31, 2012. Values of existing residential properties have declined slightly over the past few years, from an average value in FY 2009 of$173,308 to an average value in FY 2013 of$172,331, and indications are that residential property values have stayed flat for the FY 2014 budget year. The impact of new residential and commercial construction will more than offset home values for existing properties for 2014. The budget incorporates no increase in the property tax rate. Of the total adopted tax rate of 70.51 cents per hundred dollars valuation, the operating tax rate remains at 21.51 cents per hundred dollars and the debt service tax rate is 49 cents. Another significant factor that impacts the adopted budget is a 3% increase in population. This increase in population results in increased services to meet the needs of the new residents. This projected increase in population is a combination of two factors— newly constructed homes and multifamily dwellings and the annexation of Brazoria MUD No.4. The Pearland City Council approved a $63.3 million General Fund budget for FY 2014. This is an 8% increase from the FY 2013 adopted budget. The increase is. mainly due to compensation adjustments recommended from a Class and Compensation Study and new positions added in FY 2014 for a new 5th ambulance, opening of Max Road Sportsplex, and manned staffing at Fire Station #3. In addition, $400,000 is budgeted in FY 2014 for bunker gear and cross-training of emergency medical personnel in anticipation of the approved Fire-EMS merger effective October 1, 2014. The FY 2014 budget also includes year one implementation of a Five-Year Information Technology Strategic Plan that recommends the replacement of the City's integrated Financial and Community Development systems in 15 pm CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS L year two,FY 2015. The Five-Year Plan totals$7.1 million. Caring for the City's existing infrastructure to ensure the long-term economic well being and financial health of the City is a priority.,.As such, the City budgeted$300,000.in FY 2014 for an in-depth street and sidewalk assessment that will provide for a r„, rehabilitation,replacement, and maintenance program and dollars required. The Water and Sewer fund is able to fund operations, debt service, and bond coverage requirements with no increase in rates.. This-:is mainly attributable to efficient operations and transfers in from water and sewer impact fee funds used towards annual debt service payments. REQUESTS FOR INFORMATION The financial•report is designed to provide our citizens, customers, investors and creditors'with a general overview.of City's`finances. If you have questions about this report or need any additional financial information,contact Claire Bogard,Director of Finance,at 3519 Liberty Drive,Pearland,Texas 77581, or call (281) 652-1600. . The report and general information can be found on „the City's website at www.cityofpearland.com. t . time 16. REV (This page intentionally left blank.) 17 ■ Basic Financial Statements111 1 . 1 i 1 _ - (This page intentionally left blank.) PIM 19 CITY.OF PEARLAND,TEXAS STATEMENT OF NET POSITION September 30, 2013 Primary Government Governmental: Business-Type "'' Activities Activities Total Assets 7 Cash and cash equivalents $ -.49,965,161 $ 4,769,402 $ 54,734,563. Investments 19,960,608 5,760,545 ' 25,721,153 m Receivables,net of allowance for uncollectibles 21,130,475 3,833,506 24,963,981 tea. Due from other governmental agencies 753,725 - 753,725' Inventories 105,230 105,230 , Prepaid items 245,906 12,562 258,468 _ Restricted cash and investments 716,315 26,679,900 27,396,215 Unamortized issuance costs ; 2,816,829 . 1,076,799. 3,893,628 �+ Capital assets:" Nondepreciable capital assets 54,570,742 `12,714,417 67,285,159 Capital assets,net of accumulated depreciation 694,467,679 268,498,649 962,966,328 Total Capital Assets 749,038,421 281,213,066 1,030,251,487 Total Assets' 844,732,670 323,345,780 1,168,078,450 Liabilities Accounts payable and accrued liabilities 12,205,785 5,711,756 17,917,541 Accrued interest 1,246,881 411,650 1,658,531. Unearned revenues 3,633,280 - 3,633,280 Customer deposits 84,808: 3,023,012 3,107,820.11 Long-term liabilities: Due within one year 15,918,732 5,082,862 21,001,594 Due in more than one.year 359,684,992. 115,878,489 . 475,563,481 Total Liabilities 392,774,478. 130,107,769 522,882,247 Net Position Net investment in capital assets 442,581,308 : 166,991,827 609,573,135 Restricted for: - Capital improvements 3,568,609. 7,681,267 11,249,876 Debt service 4,161,020 1,860,731 6,021,751 Community development -- .programs .4,756,143 . - , 4;756,143 Economic development 20,527,040 ' - 20,527,040 Public safety 1,652,989 •. • - 1,652,989 Unrestricted (25,288,917) 16,704,186 (8,584,731) Total Net Position $ 451,958,192 $ 193,238,011, $ 645,196,203 The accompanying notes are an integral part of these basic financial statements: 20 CITY OF PEARLAND,TEXAS STATEMENT OF ACTIVITIES For the Year Ended September 30, 2013 Program Revenue Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government Governmental Activities: General Government $ 13,358,412 $ 6,326,156 $ 43,847 $ 180,000 '1 Public Safety 28,944,507 7,410,197 602,850 - Public Works 31,689,576 3,095,679 1;388,392 52,921,691 Community Services 3,807,513 3,263,783 107,519 - Parks and Recreation 9,523,793 2,209,118 182,496 - Economic Development 17,410,535 414,000 - - • Interest on long-term debt 16,223,583 - - - Total Governmental Activities 120,957,919 22,718,933 2,325,104 53,101,691 Business-Type Activities: Water and Sewer 32,040,246 29,007,476 - 16,273,170 Solid Waste 8,323,786 8,175,198 - - Total Business-Type Activities 40,364,032 37,182,674 - 16,273,170 Total Primary Government 161,321,951 59,901,607 2,325,104 69,374,861 General Revenues Taxes: Property taxes Sales and use taxes Franchise taxes Unrestricted investment earnings - Gain on sale of assets Miscellaneous Transfers • Total General Revenues and Transfers Change in net assets Net position-beginning,as restated Net position-ending The accompanying notes are an integral part of these basic financial statements. r 21 Net(Expense)Revenue and Changes in Net Position Primary Government Governmental Business-Type Activities Activities Total $ (6,808,409) $ _ $ (6,808,409) L: - ,_ (20,931,460) .. _ '(20,931,460) 25,716;186 - 25,716,186 !" (436,211) _ (436,211) (7,132,179) (7,132,179) (16,996,535) (16,996,535) (16,223,583) (16,223,583) (42,812,191) (42,812,191) 13,240,400. 13,240,400 (148,588) ' (148,588) - :13,091,812 13,091,812: - (42,812,191) 13,091,812 (29,720,379) 7 54,433,047 54,433,047 24,941,540. • . - 24,941,540 5,999,154 5.,999,154 154,723 94,889 249,612 8,487 - 8,487 1,692,870 681,892 2,374,762 1,606,753 (1,606,753) t 88,836,574 (829,972) 88,006,602 46,024,383 12,261,840 58,286,223 405,933,809 180,976,171 586,909,980 $ 451,958,192 $ 193,238,011 $ 645,196,20314, 22 • CITY OF PEARLAND,TEXAS • BALANCE SHEET • . Governmental Funds September 30, 2013 • • Pearland Tax - Economic Increment Development Other - Total General Capital Development Reinvestment Authority of Governmental Governmental Fund Debt Service Projects Fund Corporation - Zone#2 Pearland - Funds • Funds Assets ' Cash and cash equivalents $ 8,887,567 $ 3,073,485 $ 14,824,931 $• 4,685,369 • $ 4,200,431 $ 8,148,177 $ 5,290,853 $ 49,110,813 ' Investments 8,742,291 1,496,355 744,000 8,729,962 - 248,000 - 19,960,608 Receivables,net of allowance ' foruncollectibles 6,094,897 9,692,829 868,241 . 1,425,984 130,541 12 2,854,234 21,066,738 Due from other governments. . 581,579 - - - - - 172,146 753,725 Due from other funds 118,097 - - - - - - 118,097 Inventories 105,230 - - - - - - 105,230 Prepaid items 53,217 166,894 - 11,547 - - 4,162 235,820 Restricted cash ' - - - 665,254 r - 51,061 - 716,315 Total Assets $ 24,582,878 $ 14,429,563 '$ 16,437,172 $ 15,518.116 $ 4,330,972 $ 8,447,250 $ 8,321,395 $ 92,067,346 r..." Liabilities and Fund Balances' Liabilities. - _ Accounts payable- $ 1,707,531 ' $ 166,894 $ 1,475,090 $ 43,493 $ 485 $ 6,639,030 $ 155,137 $ 10,187,660 - Accrued expenditures 1,197,097 38,870 426,495 - - - 80,946 1,743,408 Deposits - 46,475 - - 38,333 - - - 84,808 r• . Due to other funds - - - - - - 118,097 118,097 - Unavailable/uneamed revenue 3,008,658 9,580,978 - 69,785 - - 2,491,869 15,151,290 Total Liabilities , ' 5,959,761 9,786,742 1,901,585 151,611 .485 6,639,030 2,846,049 27,285263 Fund balances: - r Non-spendable: Inventories . 105,230 - - - - - - 105,230 Prepaid items - • 53,217 166,894 - 11,547 -. - - 4,162 235,820 ' - Restricted for: Debt service - 4,475,927 - 665,254 51,061 - 5,192,242 , Capital improvements - -- 14,535,587 - - - - 14,535,587 r' Community development • programs - - - - 4,756,143 4,756,143. Public safety - - - - - - 715,041 715,041 Economic development - - - 14,689,704 4,330,487 1,757,159 - . 20,777,350 Assigned for: - r" Encumbrances 1,553,390 1,553,390 Unassigned: S General fund 161911,280 - - - - - 16,911 280 • Total Fund Balances 18,623,117 4,642,821 14,535,587 15,366,505 4,330,487 1,808,220 5,475,346 64,782,083 . Total Liabilities and _ Fund Balances $ 24,582,878 $ 14,429,563 $ 16,437,172 $ 15:518,116 $ 4,330,972 $- 8,447,250 ' $ 8,321,395 $ 92,067,346 r r • • r The accompanying-notes are an integral part of these basic financial statements. . 23 . CITY OF PEARLAND,TEXAS �- RECONCILIATION OF THE BALANCE SHEET OF.GOVERNMENTAL FUNDS TO THE STATEMENT O FN ET POSITION September 30, 2013 Total fund balance,governmental funds � $ 64,782,083 L Amounts reported for governmental activities in the Statement of Net Position are different because Capital assets used in governmental activities are not current financial resources and therefore are not reported in the fund financial statements, but are reported in the governmental activities of the Statement of Net Position. 749,038,421 Certain other long-term assets(property taxes receivable,adjudicated court i i . g- J fines receivable and unamortized bond issuance costs)are not available to pay current period expenditures and therefore are not reported in;the fund financial statements,but are reported in the governmental activities of the Statement of Position Net ` . 14,334,839 , . . . Some liabilities are not due and payable in the current period and are not included ::in the fund'financial statement,but are included in the governmental activities of. : the Statement of Net Position: Bonds payable (369,855,000) Unamortized premium/discount (6,158,967) Deferred loss on refunding 11,053,492 Capital lease payable _ - (3,681,366) Compensated absences Accrued interest payable (1,246,881) Other post employment benefit liability (1,955,154) The assets and liabilities of certain internal service funds are not included in the fund fmancial statement,but are included in the governmental activities of the Statement of Net Positron:: 653,454 Net Position of Governmental Activities in the Statement of Net Position $ 451,958,192 The accompanying notes are an integral part of these basic financial statements, 24 l� • CITY OF PEARLAND,TEXAS STATEMENT OF REVENUES,EXPENDITURES AND . • CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS • For the Year Ended September 30, 2013 , • Pearland Tax ' Economic Increment Development Other Total J - General Capital Development Reinvestment Authority of Governmental " Governmental Fund Debt Service - Projects Fund Corporation Zone#2 . Pearland Funds Funds • -, Revenues ' . Property taxes ' $ 11,178,950 $ 25,898,494 $ - $ - $ 17,397,567 $ ' - $ $ 54,475,011 • Sales and use taxes 15,919,784 - .- , 7,871,396 - - 1,150,360 24,941,540 • .Franchise fees 5,758,776 - - - - - 240,378 - 5,999,154 Licenses and permits 2,988,859 - - - - - . - 2,988,859 • Fines and forfeitures 3,333,675 - - - - - 199,988 '3,533,663 Charges for services ' 12,567,693 - - 414,000 - - 12,981,693 • Investment earnings 54,063 19,296 18,070 40,811 12,238 2,182 7,485 154,145 Intergovernmental 3,593,783. - - - 1,001,515 _ • 4,595,298 - • Other - 814,956. - 1,946,973 4,116,743 24,326 - . - . 1,070,549 •7,973,547 Total Revenues 52,616,756 27,864,763 . 7,728,596 8,350,533 17,409,805 2,182 _ 3,670,275 117.642,910 t•••• Expenditures - . Current: .- . General government 7,098,242 - - - - 9,806 849,916 7,957,964 Public safety 26,082,178 - - - - - 122,479 26,204,657 Public works - 7,502,356 - .309,833 -. - - - . 7,812,189 Community services 3,263,146 _ - - - - - 259,741 _ 3,522,887 • . - Parks and recreation 7,111,012 - - - - - . - 133,064 7,244,076 Economic development - -. - 4,400,139 6,375,434 6,638,430 - 17,414,003 , . Debt Service: - Principal . 86,254 11,950,504 - 880,000 - 2,720,000 - - 15,636,758 Interest and other charges 28,232" 12,667,961 - 1,165,585 - 1,671,965 - 15,533,743 r Bond issuance costs - - 324,993 - - - - 324,993 ' Capital outlay 4,088,048 - 17,487,825 - - . - 525,218 22,101,091 Intergovernmental - 4,057,682 - - - -' - 4,057,682 ' Total Expenditures 55,259,468 28,676,147 18,122,651 6,445,724 _ 6,375,434 11,040,201 1,890,418 127,810,043 Excess(deficiency)of revenues over(under)expenditures ' (2,642,712) . (811,384) (10,394,055) 1,904,809 11,034,371 (11,038,019) 1,779,857 - (10,167,133) Other Financing Sources(Uses) Issuance of debt - - 12,060,000 - - - - 12,060,000 Bond premium - . - 331,309 - - - - 331,309 r. Capital leases 1,179,413 - - - - - - 1,179,413 Transfers in 3,613,122 461,726 421,615 - - 10,997,930 20,748 15,515,141 Transfers out (1,098,667) - (1,659,245) - (10,997,930) - (827,546) (14,583388) • Total Other Financing Sources(Uses) 3,693,868 461,726 11,153,679 - (10,997,930) 10,997,930- (806,798) 14,502,475 Net change in fund balances . . 1,051,156 (349,658) 759,624 1,904,809 . 36,441 (40,089) 973,059 4,335,342 r Fundbalances-beginning 17,571,961 4,992,479 13.775,963 13,461,696 4,294,046 1,848,309 ' 4,502,287 60,446.741 Fund balances-ending .$ 18,623,117 $ 4,642,821 $ 14,535,587 $ 15,366,505 $ 4,330,487 $ 1,808,220 $ 5,475,346 $ 64,782,083 . • . r r' . r • The accompanying notes are an integral part of these basic financial statements. r 25 • r CITY OF PEARLAND,TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES EXPENDITURES AND CHANGES I N FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES . For the Year Ended September 30, 2013 Net change in fund balances-total governmental funds: $ 4,335,342 Amounts reported for governmental activities in the Statement of Activities are different because:. . _ Governmental funds report outlays for capital assets as expenditures because such outlays use current financial resources. In contrast,the Statement of -111 Activities reports only a portion of the outlay as.expense. The outlay is allocated over the assets'estimated useful lives as depreciation expense for - period. This is the amount by which depreciation of$29,360,934 exceeded capital outlays of$22,427,041 in the current period. (6,933,893)`. i - Governmental funds report only the proceeds from the disposal of capital . - assets and not the difference between the carrying value and the accumulated depreciation of the asset This is the amount by which the carrying value exceeded the;accumulated depreciation. (44,911) Capital assets contributed by developers that do not represent current assets and are not reflected in the governmental fund financial statements 18,503,918 119 Capital assets net of related debt acquired as a result of Municipal Utility Annexation 27,098,685 Governmental funds do not present revenues that are not available to pay . 't current obligation& In contrast,such revenues are reported in the Statement of Activities when earned. 2,174,369 Governmental funds report bond proceeds as current financial resources. In contrast,the Statement of Activities treats such issuance of debt as a liability.:Governmental funds report repayment of bond principal as an expenditure. In contrast,the Statement of Activities treats such repayments as a reduction in long-term liabilities. This is the amount by which proceeds exceeded repayments. 2,333,691 Governmental funds report bond issuance costs as expenditures. In contrast the government-wide financial statements amortizes such a cost over the life of the bonds 324;993 Some expenses reported in the statement of activities do not require the use of current financial resources and these are not reported as expenditures in governmental funds: Accrued interest (14,977) Amortization of bond related costs (940,048) ,�. Compensated absences (282,486) Capital lease activity (274,607) Post employment benefit liability (419,768) Internal service funds are used by management to charge the costs of certain activities,such as property and liability insurance coverage and employee health benefits,to individual funds. The net revenue(expense)of certain internal service funds is reported with governmental activities. 164,075 Change in net position of governmental activities $ 46,024,383 The accompanying notes are an integral part of these basic financial statements. 26 CITY OF PEARL,TEXAS 1 STATEMENT OF NET POSITION PROPRIETARY FUNDSrwl September 30,2013 Governmental Business-Type Activities-Enterprise'Funds Activities- Water and Solid Waste Internal Sewer Fund Fund Total Service Fund _ Assets Current assets: Cash and cash equivalents $ 3,670,426 $ 1,098,976 $ 4,769,402 $ 854,348 7 Investments 5,760,545 - 5,760,545 - Accounts receivable,net of allowance for doubtful accounts 3,011,164 822,342 -3,833,506 63,737 Prepaid items. 12,562 - 12,562 10,086 "l Restricted cash and cash equivalents 18,680,551 - 18,680,551 - Restricted investments 7,999,349 7,999,349 - Total current assets - 39,134,597 1,921,318 41,055,915 , 928,171 Non-current assets: . Unamortized issuance.costs 1,076,799 1,076,799- - Capital assets: Land and improvements 3,796,382 -. 3,796,382 - r--1 Construction in progress 8,918,035 - 8,918,035 - Contractual rights to water supply 34,511,428 34,511,428 Infrastructure ' 300,748,324 . - 300,748,324 - Buildings and improvement 31,256,473 - 3.1,256,473 - n Machinery and equipment 3,706,656 - •- 3,706,656 - Furniture and fixtures 106,127 - " 106,127 - J Less: Accumulated depreciation (101,830,359) (101,830,359) - Total non-current assets 282,289,865 - 282,289,865 - ri Total Assets 322,501,261 1,921,318 324,422,579 928,171 Liabilities - Current liabilities: .--, Accounts payable and accrued expenses $ 4,002,839 $ , 1,708,917 $ 5,711,756 $ 274,717 Accrued interest payable 411,650 - . 411,650 - Customer deposits 3,023,012 - 3,023,012 - Compensated absences- current portion 78,740 - 78,740 - Bonds payable-current portion 4,920,000 - 4,920,000 - Capital lease-current portion 84,122 - 84,122 - Total current liabilities` . 12,520,363 1,708,917 14,229,280 274,717 Non-current liabilities: Compensated absences 384,742 - 384,742 - Capital lease obligation 176,862 - 176,862 - • r- Other post-employment benefits 356,544 - 356,544 - Bonds payable,net 114,960,341 - 114,960,341 - _ Total non-current liabilities 115,878,489 115,878,489 - r- Total Liabilities 128,398,852 1,708,917 130,107,769 274,717 Net Position Net Investment in capital assets 166,991,827 - 166,991,827 - Restricted for debt service 1,860,731 - 1,860,731 - Restricted for capital projects 7,681,267 - 7,681,267 - Unrestricted 16,491,785 212,401 16,704,186 653,454 Total Net Position $ 193,025,610 $ 212,401 $ 193,238,011 $ 653,454 The accompanying notes are an integral part of these basic financial statements. 27 • CITY OF PEARLAND,TEXAS STATEMENT OF REVENUES, EXPENSES.AND CHANGES IN FUND NET POSITION,: PROPRIETARY FUNDS For the Year Ended September 30, 2013 Governmental Business-Type Activities-Enterprise Funds Activities Water and Solid Waste Internal - Sewer Fund Fund ` Total. Service Fund Revenues - Charges for services $ .29,007,476 .$ . 8,175,198 $. 37,182,674. $ 6,532,572 Operating Expenses Personnel services 5,042,612 - 5,042,612' _ - Supplies and materials 2,752203 2,752,203 - Contractual services 7,369,515. 8,317,836 .15,687,351. 6,881,016 Repairs and maintenance . . 1,669,554 . • - 1,669,554 . 4,774 other expenses - 589,398 5,950 595,348 . '- 158,285 Depreciation and amortization 9,335,337 9,335,337 - - . Total Operating Expenses 26,758,619 8,323,786 35,082,405 ." 7,044,075 Operating income(loss) 2,248,857 (148,588) 2,100,269 (511;503). . Non-Operating Revenues(Expenses) Earnings.on investments 94,277 612 94,889; 578 Miscellaneous revenue(expense) 664,418 . 17,474 681,892' - Interest expense (5,281,627) . - ' . - . :(5,281,627) - I Total Non-Operating Revenues(Expenses). (4,522,932) 18,086 ' (4,504,846) 578 Loss before contributions and transfers (2,274,075) (130,502) . (2,404,577) (510,925) Capital contributions 16,273,170 - 16,273,170 - Transfers in 218,961 . - . 218,961 - 675,000. Transfers out -. (1,825,714) - , (1,825,714) ' - Change'in net positioa .- 12,392,342 (130,502) 12,261,840 '..164,075 . Total net position-beginning 180,633,268 342,903 180,976,171 ' 489,379 Total net position-ending $ 193,025,610 $ 212,401 $ 193,238,011- $' 653,454 The accompanying notes are an integral part of these basic financial statements. • 28 n CITY OF PEARLAND,TEXAS Page 1 of 2 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended September 30, 2013 • Governmental 7 Business-Type Activities-Enterprise Funds Activities- j Water and Solid Waste Internal Sewer Fund Fund Total Service Fund - Cash Flows from Operating Activities Receipts from customers and users $ 28,990,245 $ 8,083,250 $ 37,073,495 $ 5,345,005 Receipts from interfund transactions - - - 1,135,102 Disbursed for personnel services (5,019,856) - (5,019,856) - Disbursed for goods and services • (10,716,040) (7,926,751) (18,642,791) (7,084,133) Net cash provided by(used in) operating activities 13,254,349 156,499 13,410,848 (1,739,128) . ,-1 i Cash Flows From Noncapital Financing Activities Transfers from funds 218,961 - 218,961 675,000 Transfers to other funds (1,825,714) - (1,825,714) Cash received from non-operating revenues 644,316 - 644,316 - Net cash provided by(used in) - noncapital financing activities (962,437) - (962,437) 675,000 r-, Cash Flows from Capital and Related Financing Activities • Proceeds from the sale of equipment 20,102 - 20;102 - Capital grants and contributions 5,942,763 - 5,942,763 - Principal payments on debt (4,725,000) - (4,725,000) - Principal payments on leases (81,380) - (81,380) Acquisition and construction of - capital assets - (13,866,825) - (13,866,825) - F Net cash used in capital and related financing activities (12,710,340) - (12,710,340) - Cash Flow from Investing Activities Purchase of investments (10,776,720) - (10,776,720) - Sales of investments 13,713,512 - 13,713,512 - Interest received 108,075 612 108,687 578 Interest paid (5,305,812) - (5,305,812) - Net cash provided by(used in) investing activities (2,260,945) 612 (2,260,333) 578 Net increase(decrease)in cash and equivalents (2,679,373) 157,111 (2,522,262) (1,063,550) ,--- Cash and equivalents,beginning 25,030,350 941,865 25,972,215 782,836 Cash and equivalents,end .$ 22,350,977 $ 1,098,976 $ 23,449,953 $ (280,714) Unrestricted cash and equivalents $ • 3,670,426 $ 1,098,976 $ 4,769,402 $ 854,348 Restricted cash and equivalents . 18,680,551 - 18,680,551 - $ 22,350,977 $ 1,098,976 $ 23,449,953 $ 854,348 The accompanying notes are an integral part of these basic financial statements. E- 29 n.i CITY OF PEARLAND,TEXAS Page 2 of 2 STATEMENT OF CASH FLOWS PROPRIETARYFUNDS For the Year Ended September 30, 2013 Governmental Business-Type Activities-Enterprise Funds Activities- -- Water and ; Solid Waste •' Internal Sewer Fund" - Fund Total -. Service Fund Reconciliation of operating income(loss)to net cash provided by(used in)operating activities Operating income(loss) .' $ 2,248,857,' " $ (148,588) $ 2,100,269 $ .(511,503) Adjustments to reconcile operating income to _ net cash provided by(used in)operating activities: -'I- Depreciation and amortization - .9,335,337...- _ .: - 9,335,337 - - .Recovery of allowance - 17,474 17,474 - (Increase)decrease in accounts receivable (249,131) : (109,422) (358,553) (52,505) (Increase)decrease in prepaid expenses 50,559 -. 50,559 ' (10,086) '.. - Increase(decrease)in accounts payable 1,638,146 397,035 2,035,181 (29,972) Increase(decrease)in compensated absences (75,396) - (75,396) . +� Increase(decrease)in customer deposits 231,900 -. 231,900, - . Increase(decrease)in other post - ., . employment benefits 74,077 - 74,077 Net cash provided by(used in) - 111 operating activities $. 13,254,349 $ ' " 156,499" '$ 13,410,848 $ (604,066) — Summary of non-cash transactions Contributed capital assets, . $ 10,330,407 $ $ 10,330,407. $ - inj Change in value of investments $. 9,791 $ - $ 9,791 $ - - i The accompanying notes are an integral part of these basic financial statements.. 30 0-1 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS Note 1 -Summary of Significant Accounting Policies The City of Pearland, Texas (the "City") was incorporated in December 1959 and adopted a "Home Rule Charter" February 6, 1971. The Charter, as amended, provides for a Council-Manager form of government and provides services authorized by its charter. These services include police, fire and emergency medical, 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. Fire protection is provided through a combination full-time/volunteer and part-time/volunteer department. The City is governed by an elected mayor and five-member Council. '- The Mayor and all 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 p.9 and qualified. Council members shall be limited to two full consecutive terms of office and there is no limitation on the office of the 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. Financial Reporting Entity The City is an independent political subdivision of the State of Texas governed by an elected council and a mayor and is considered a primary government. As required by accounting principles generally accepted in the United States of America, these financial statements have been prepared based on considerations regarding the potential for inclusion of component units, which are other entities or organizations that are financially accountable to the City. Blended component units are component units that are Considered so closely related to the legal entity that the blended component unit funds appear as if the funds are integral parts of the primary government. Based upon GASB 61 criteria, the City's financial statements include the following blended component units: the Pearland Economic Development.Corporation (PEDC); the Tax Increment Reinvestment Zone (TIRZ#2); and the Development Authority of Pearland (DAP). No other entities have been included in the City's reporting entity. Additionally, as the City is considered a primary government for financial reporting purposes, its activities are not considered,a part of any other governmental or other type of reporting entity. Considerations regarding the potential for inclusion of other entities, organizations, or functions in the City's financial reporting entity are based on criteria prescribed by generally accepted accounting principles. These same criteria are evaluated in considering whether the City is a part of any other governmental or other type of reporting entity. The overriding elements associated with prescribed criteria considered in determining that the City's financial reporting entity status is that of a primary government are that it has a separately elected Governing body; it is legally separate; and it is fiscally independent of other state and local governments. Additionally prescribed criteria under generally accepted accounting principles include: considerations pertaining to organizations for which the primary government is financially accountable; and considerations pertaining to other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The component units discussed below are included in the City's reporting entity because of the significance of their operational or fmancial relationships with the City. The component units do not issue separate financial statements. 31 L CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1-Summary of Significant Accounting Policies(continued) L ' A. Financial Reporting Entity(continued) Blended Component Units: . Pearland Economic Development Corporation(PEDC) In 1995,the citizens of Pearland established the Pearland Economic Development Corporation(PEDC) to help the citizens and public officials of Pearland attract new businesses and to help existing businesses to expand. The mechanism to fund the operations of the corporation is through a sales tax levy at a rate of one- half of one percent(1/2%)..The PEDC 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 Tax Increment.Reinvestment Zone(TIRZ#2) In 1998,the Tax Increment Reinvestment Zone(TIRZ#2)was established for a period of 30 years or until dissolved by the City:'.The TIRZ#2 provides tax-assisted property development and/or redevelopment in a specific geographic area known as Shadow Creek Ranch,in accordance with applicable state laws. Besides appointing Board members,the City Council must also approve any debt issuances done on behalf of the TIRZ. .A major land owner within the City of Pearland sits on;the Board of Directors for the TIRZ#2. Development Authority of Pearland ' • hi 2004,the City created the Development Authority of Pearland to provide financing for the development of the TIRZ-#2. Proceeds from bond sales are to be used to reimburse developers and fund'a debt service reserve. Besides appointing Board members, the City Council must also approve any debt issuances done on behalf of the Development Authority: Related Organizations The City Council'of Pearland appoints the voting majority of members to the board of directors for the Pearland Municipal Management District No:1, Pearland Municipal Management District No:2 and Lower Kirby District. However, the City's accountability for these entities does not extend beyond making. appointments. There is no financial benefit/burden relationship or the ability to impose its will on these entities. B. Government-wide and Fund Financial.Statements The government-wide financial statements (i.e., the Statement of Net.Position and the Statement of Activities) report information about the.City as a whole. These statements include all activities of the primary government and its blended component units: For the most part,the effect of interfund activity has been eliminated from the government-wide statements. Exceptions to this general rule are charges between the City's business-type and governmental funds. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Governmental activities, which normally are supported by taxes and intergovernmental revenues,are reported separately from business-type _ activities,which rely to a significant extent on fees and charges for support, The statement of'activities demonstrates the degree to which the direct expenses of a"given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with.a specific function or segment. Program revenues include(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 revenues are reported instead as general revenues. 32 CITY OF PEARLAND,TEXAS 'l NOTES TO FINANCIAL STATEMENTS(continued) Note 1 -Summary of Significant Accounting Policies(continued) C. Measurement Focus,Basis of Accounting and Financial Statement Presentation The government-wide financial statements and all proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting.. Revenues-are recognized when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. With this measurement focus, all assets and all liabilities associated with the operations of these activities are included on the statement of net position. Proprietary fund-type operating statements present increases(i.e.,revenues)and decreases(i.e.,expenses)in net position. The governmental fund financial statements are presented on a current financial resources measurement focus and modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. Revenues are recognized as soon as they are both measurable and available. Measurable means that the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Revenues susceptible to accrual include property taxes, sales and use taxes, franchise fees, charges for services and interest on temporary investments. Other receipts become measurable and available when cash is received by the government and are recognized as revenue at that time. Under modified accrual accounting, expenditures are recognized in the accounting period in which the liability is incurred, if measurable, except for interest on general long-term debt, which is recognized when due. Since the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements' governmental activities column, a reconciliation is presented which briefly explains the adjustments necessary to reconcile fund-based financial statements with the governmental activities column of the government-wide presentation. In the fund financial statements,the accounts of the City are organized on the basis of funds,each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses,as appropriate.Following is a description of the various funds: Governmental funds are those funds through which most governmental functions are typically financed. The City reports the following major governmental funds: The General Fund is used to account for all financial transactions not properly includable in other funds. The principal sources of revenues include local property taxes, sales and franchise taxes, licenses and permits,fines and forfeitures,and charges for services. Expenditures include general government,community services,public works,parks and recreation,economic development,and public safety. The Debt Service Fund is used to account for the payment of interest and principal on all general obligation bonds and other governmental long-term debt of the City. The primary source of revenue for debt service -is local property taxes. The Debt Service Fund is considered a major fund for reporting purposes. The Capital Projects Fund is used to account for the expenditures of resources accumulated on a pay-as-you go basis and the sale of bonds and related interest earnings for capital improvement projects. The Capital Projects Fund is considered a major fund for reporting purposes. 33 M. CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) • Note 1-Summary of Significant Accounting Policies(continued) C. 'Measurement Focus,Basis of Accounting and Financial Statement Presentation.(continued) The Pearland Economic Development Corporation fund is used to account for the•revenues and expenditures associated with the half-cent sales tax for economic development approved by the voters in 1995. Use of= funds are governed by State Law. The Pearland Economic Development Corporation is considered a major tam fund for reporting purposes.. The Tax Increment Reinvestment.Zone#2 fund is,used to account for the incremental property tax revenues in the specific geographical area and use thereof from the participating taxing entities in the Zone. The Tax Increment Re-investment Zone#2 is considered a major fund for reporting purposes." .. The Development Authority of Pearland fund is used to account for the financing of the development of the FIR TIRZ#2. The Development Authority of Pearland is considered a major fund for reporting purposes. The.City's.Business-type activities:consist of the following funds: . The Enterprise Funds are used to account for the operations that provide water and sewer utility services as well as solid waste collection services to the public. The services are financed and operated.in'a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses including depreciation) of providing goods or services to the general public on a continuing basis will be financed or recovered primarily through user charges. Additionally, the City maintains Internal Service Funds used to account for the financing of goods or _ services provided by one department or agency to other departments or agencies of the City on a"cost- reimbursement basis. Services provided by the. Internal Service Funds include property and liability insurance coverage and employee health benefits.. The Internal Service Funds are included in governmental activities for government-wide reporting purposes: All assets,liabilities, equities,revenues, expenses and transfers relating to the government's business-type activities are accounted for through proprietary funds. The measurement focus is on determination of net income,financial position and cash flows. 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 are charges to customers for sales and services.:Operating expenses for Enterprise 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. . 34 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1-Summary of Significant Accounting Policies(continued) D. Fund Balance Working Capital Policies Fund balances are classified as follows: Nonspendable — Amounts that cannot be spent either because they are not in a spendable form or because they are legally or contractually required to be maintained intact. Restricted—Amounts that can be spent only for specific purposes because of the City Charter, City Code, State or Federal laws, or externally imposed conditions by grantors or creditors. Committed—Amounts that can be used only for specific purposes determined by ordinances passed" by City Council, the City's highest level of decision making authority. Commitments may be modified or rescinded only through ordinances approved by City Council. Assigned—Amounts that are intended to be used for specific purposes,but do not meet the definition of restricted or committed fund balance. Under the City's policy, amounts can be assigned by the City's Director of Finance. Unassigned—All amounts not included in other spendable classifications. When multiple categories of fund balance are available for an expenditure, the City would typically use Restricted fund balances first, followed by Committed, and then Assigned, but reserves the right to selectively spend from any of"the categories, including Unassigned based upon the individual circumstances. The City Council has authorized the Director of Finance as the official authorized to assign fund balance to. a specific purpose. The City shall maintain the fund balance and working capital of the various operating funds at the following levels: General Fund Unassigned Fund Balance The City shall maintain the General Fund unassigned fund balance equivalent to 2 months of recurring operating expenditures,based on current year expenditures. If the fund balance exceeds this amount, funding non-recurring expenditures in the following fiscal year may be used to draw down the balance. Water/Sewer Unreserved Working Capital The City shall.maintain a working capital sufficient to provide for reserves for emergencies and revenue shortfalls. A cash equivalent operating reserve will be established and maintained at 25% of the current year's budget appropriation for recurring operating expenses. The cash operating reserve is derived by dividing the total cash equivalents balance by recurring operating expenses. Use of Fund Balance/Working Capital • - Fund balance/Working Capital shall only be used for emergencies, non-recurring expenditures/expenses or major capital purchases that cannot be accommodated through current year savings. Should such use reduce balances below the level established as the objective for that fund, restoration recommendations will accompany the request/decision to utilize said balances. 35. imp CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) ^° Note 1-Summary of Significant Accounting Policies(continued) D. Fund Balance Working Capital Policies(continued) Debt Service Fund.Total Fund Balance - The City shall maintain the debt'.service fund balance at 10%of annual debt service requirements or a fund balance reserve as required by bond ordinances,whichever is greater.. Property Insurance Fund Unrestricted Net Position The Property Insurance Fund accounts for uninsured and deductible claims for the City's property and liability insurance. Claims cannot be reasonably predicted and budgeted for; therefore the fund will maintain a balance that approximates the prior average annual expense for the last three years, excluding extra-ordinary expenses in the fund. Employee Benefits Fund Unrestricted Net Position - The Employee,Benefits Fund is funded through City and employee contributions.: .Estimated costs shall be determined(luring each budget year and the contributions adjusted accordingly. There is no minimum balance for this fund. Economic Development Corporation As sales tax revenue fluctuates due to changes in economic conditions, the PEDC shall maintain a fund balance of no less than 10%of budgeted sales tax revenues. Water/Sewer Revenue Debt Coverage Reserves. Revenues shall be maintained at 1.15.times coverage in a fiscal year where the water/sewer fund is not issuing additional debt and 1.4 times coverage in a year where debt is anticipated to be issued. •a Bond Issuance Reserves. Debt service reserves should be maintained for each bond issue as required by.bond covenants. Contingency Fund Pursuant to the City Charter, a provision shall be made within the annual budget for a contingency _ fund in an amount not more than seven percent of the total budget(General Fund) to be used in case of unforeseen items of expenditure. E. Cash and Cash Equivalents The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. For the purpose of the statement of cash flows, the Proprietary Fund Types consider temporary investments with maturity of three months or less when purchased to be cash equivalents. _ 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 accounts and securities and disclosed as part of the City's investments. 36 0-1 CITY OF PEARLAND,TEXAS ^, NOTES TO FINANCIAL STATEMENTS(continued) Note 1-Summary of Significant Accounting Policies(continued) E. Cash and Cash Equivalents(continued) The City pools excess cash of the various individual funds to purchase these 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 their respective share of investments in the pooled investments. F. Investments Investments consist of United States (U.S.) Government Agency securities and Certificates of Deposit with original maturities greater than three months from date of acquisition. The City reports all investments at fair value based on quoted market prices at year-end date. G. Receivables All receivables are reported at their gross value,and where appropriate,are reduced by the estimated portion that is expected to be uncollectible. Trade accounts receivable in excess of 120 days comprise the trade accounts receivable allowance for uncollectibles. • H. Due to and Due from Other Funds • Interfund receivables and payables arise from interfund transactions and are recorded by all funds affected in the•period in which the transactions are executed. These receivables and payables are classified as "due from other funds" or"due to other funds". Interfund receivables and payables which are not expected to be paid within 12 months are classified as loans from/loans to other funds. I. Inventories and Prepaid Items Inventory,which consists of fuel 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 than when purchased. J. Restricted Assets Certain proceeds of the Water and Sewer Enterprise Fund revenue bonds and certain resources set aside for their repayment are classified as restricted assets on the statement of net position because their use is limited by applicable bond covenants. Certain resources are.also set aside for repayment of Pearland Economic Development Corporation Bonds and are reported as restricted assets. K. 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$5,000 and an estimated useful life of three years or more. 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 37 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) :_ Note 1 -Summary of Significant Accounting Policies(continued) K. Capital Assets(continued) extend assets'.lives are not capitalized..Additionally, at September 30, 2013 .the:City reports intangible assets under business-type activities, which include $34.5"million in surface water rights with a life of 25 years. L Property, plant, equipment and intangible assets are depreciated using the straight-line method over the following useful lives: Asset . Years , . Buildings and improvements. . 10-45 Machinery and equipment 3-15.. Infrastructure. 10-50 Intangible Assets-Water Rights 25. L. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation, sick and holiday pay benefits. Employees hired prior to October 1, 2005, earn vacation leave at the rate of 15 days per year from 1 to 15years of service,20 days per for service of 16 to 19 years,and 25 days peryear for service of 20 years Yyear Y , _ - : or more. Employees, who are not classified and are 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 16 and over years of service. Employees cannot carry over unused vacation from one year to the.next with the exception of police department personnel in classified positions. Employees are required to use their vacation in the year it is earned.' Employees who are unable to use their vacation due to departmental scheduling or staffmg problems, may, with the City Manager's approval, receive compensation for half of the remaining balance up to a maximum of forty(40)hours.: City employees receive 12 paid holidays per year. Employees required to work on a City-observed-holiday '14 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 for non-exempt employees.• Employees may be paid.or receive. compensatory.time. The maximum accrual for compensatory time is.120 hours, including employees involved in public.safety. All sick leave benefits are accumulated and paid to employees, in good standing,upon separation from the City not to exceed 720 hours for employees hired prior to July 24,2006, and 360 hours for employees hired after. 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: M. 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 - disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. 38. CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1-Summary of Significant Accounting Policies(continued) N. Comparative Data Comparative data for the prior year have been presented in certain sections of the accompanying financial statements in order to provide an understanding of changes in the City's financial position and operations. O. Current Accounting Pronouncements In December 2010, the GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus —an amendment of GASB Statements No. 14 and No. 34. This Statement is intended to improve financial reporting for a governmental financial reporting entity. The requirements" of this Statement result in, financial reporting entity financial statements being more relevant by improving guidance for including,. presenting, and disclosing information about component units and equity interest transactions of a ,.- financial reporting entity. This. Statement provides amendments to GASB No. 14, "The Financial Reporting Entity," and GASB No.34, "Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments." The requirements of this Statement are effective for fiscal periods beginning after June 15,2012. The City implemented this statement in fiscal year 2013. `-- As a result of implementation, the City determined that the three previously identified discretely presented component units met the'criteria for inclusion as blended component units. These blended component units have been reflected as major governmental funds and are included in governmental activities in the government-wide statements. This implementation resulted in a retroactive adjustment to reduce beginning net position by $43,231,585. Additionally, as reflected in Notes 4 and 5, beginning (2012) capital assets and long-term debt have been restated to include the blending of the component units. In. December 2010, the GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This Statement is intended to improve financial reporting by contributing to the GASB's efforts to codify all sources of generally accepted accounting principles for state and local governments so that they derive from a single source. This requirement will bring the authoritative accounting and financial reporting literature together in one place. This Statement will eliminate the need for financial statement preparers and auditors to determine which FASB and AICPA pronouncement provisions apply to state and local governments, resulting in more consistent application of applicable guidance. The requirements of this Statement are effective for fiscal periods beginning after December 15,2011.. The City implemented this statement in fiscal year 2013;this had no effect on the financial statements. A- In June 2011, the GASB issued Statement No. 63, Financial Reporting of Deferred Outflows.of Resources, Deferred Inflows of Resources, and Net Position. This statement is intended to improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred ' inflows of resources'and their effects on a government's net position which required the City to change references to net assets to net position. It alleviates uncertainty about reporting those financial statement elements by providing guidance where none previously existed. The requirements of this Statement are effective for fiscal periods beginning after December 15, 2011. The City implemented this statement in fiscal year 2013,which required the City to change references to net assets to net position. 39 17111 CITY OF PEARLAND,TEXAS. NOTES TO FINANCIAL STATEMENTS(continued) rwt Note 1-Summary of Significant Accounting Policies(continued) O. Current Accounting Pronouncements(continued) rmo Future Accounting Pronouncements •InMarch 2012, the.GASB issued Statement No. 65;Items Previously Reported as Assets and Liabilities.-41 This statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows Of resources, certain items that were`previously reported as assets and liabilities and recognizes, as outflow of resources or inflows'of-resources; certain items that were previously;reported as assets arid.liabilities. This statement also provides other financial reporting: guidance related to the impact of the financial:statement elements deferred outflows of resources and deferred inflows of resources, such as changes in the..determination of the major fund calculations and ,�. limiting the use of the term"deferred"in financial statement presentations. This statement is effective for periods beginning after December 15, 2012. . The City anticipates implementation of this statement in - fiscal year 2014. Also in March of 2012, the GASB issued Statement No.' 66; Technical Corrections 2012 - an amendment.of GASB Statements No. 10 and No. 62.:The objective of this statement is to improve accounting and-financial reporting for a government financial reporting entity by resolving conflicting -41 guidance that resulted from issuance of two pronouncements, Statements No 54, "Fund Balance Reporting and Governmental Fund Type Definitions" and No. 62, "Codification:of Accounting and Financial Reporting :.Guidance 'Contained'. ..in Pre-November 30, 1989 FASB and `.AICPA Pronouncements." The City anticipates implementation of this statement in fiscal year 2014. In June of 2012, the GASB issued Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25. This statement is intended to improve financial reporting by state and local governmental pension plans and replaces the requirements of Statements No.25, "Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans"-and No. 50, "Pension Disclosures." This statement is effective for financial statements for fiscal years , beginning after June 15,2013. The City anticipates implementation of:this statement in fiscal year 2014. Also in June of 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for, Pensions 7 an amendment of,GASB Statement No. 27. The primary objective of this statement is to improve accounting and financial reporting by state and local governments for pensions. It replaces the requirements of Statement No.27, "Accounting for Pensions by State and Local Governmental Employers" as well as the requirements of Statement No:50, "Pension Disclosures." This statement is effective for financial statements for-fiscal years beginning after June:15, 2014. The•City anticipates implementation of this statement in fiscal year 2015. GASB issued Statement No. 69, Government Combinations and,Disposals-of Government Operations: This statement establishes accounting and financial reporting standards 'related to government combinations and disposals of government operations. The term, "government:combinations," includes a • variety of transactions referred to as mergers, acquisitions, and transfers of operations. 'This statement is.. effective for government combinations and disposals of government operations occurring in financial reporting 'periods beginning after December 15, 2013.. The City anticipates implementation of this statement in fiscal year 2015. ' 40 CITY OF PEARLAND,TEXAS ' NOTES TO FINANCIAL STATEMENTS(continued) Note 1-Summary of Significant Accounting Policies(continued) P. Current Accounting Pronouncements(continued)Future Accounting Pronouncements(continued) GASB issued Statement No.70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This Statement requires a government that extends a nonexchange financial guarantee to, recognize a liability when qualitative factors and historical data, if any, indicate that it is more likely than not that the government will be required to make a payment on the guarantee.. This Statement also requires a government that has issued an obligation guaranteed in a nonexchange transaction to report the obligation until legally released as an obligor, and requires a government that is required to repay a guarantor for making a payment on a guaranteed obligation or legally assuming the guaranteed obligation to continue to recognize a liability until legally released as an.obligor. This statement is effective for reporting periods beginning after June 15, 2013. The City anticipates implementation of this statement,if applicable in fiscal year 2014. GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date (an amendment of GASB Statement No. 68). This Statement amends Statement No. 68 related to transition provisions for certain pension contributions made to defined benefit pension plans prior to implementation of Statement No: 68 by employers and nonemployer contributing entities. This statement is effective for fiscal years beginning after June 15, 2014. . The provisions of this Statement should be applied simultaneously with the provisions of'Statement No.68. The City anticipates implementation of this statement in fiscal year 2015. ' . r- Note 2 Deposits(Cash)and Investments Authorization for Deposits and Investments The.Texas Public Funds Investment Act(PFIA), as prescribed in Chapter 2256 of the Texas Government Code,regulates deposits and investment transactions of the City. In accordance with applicable statutes, the City has a depository contract with an area bank (depository) providing for interest rates to be earned on deposited funds and for banking charges the City incurs for banking services received. The City may place funds with the depository in interest and non-interest bearing accounts. State law provides that collateral pledged as security for bank deposits must have a market value of not less than the amount of the deposits and must consist of: (1)obligations of the United ,- States or 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. City policy requires the collateralization level to be at least 102%of market value of principal and accrued interest. The Council has adopted a written investment policy regarding the investment of City funds as required- by the Public Funds Investment Act (Chapter 2256,Texas Government Code). The investments of the City are in compliance with the City's investment policy. The City's investment policy is more restrictive than the PFIA requires. It is the City's policy to restrict its direct investments to obligations of the U.S. 41 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 2-Deposits(Cash)and Investments(continued) Authorization for Deposits and Investments(continued) Government or U.S. Government Agencies, of the State:of Texas, obligationscounties, cities, and other political subdivisions rated not less than A, fully collateralized.certificates of deposit, mutual funds, repurchase agreements and local government investment pools :The maximum maturity allowed is five years,from date of purchase. The City's investment policy does not allow investments in collateralized �� mortgage obligations. L; Deposit and Investment Amounts 7 The City's cash and investments are.:classified as cash and cash equivalents, investments, and restricted i cash and investments. The cash and cash equivalents include cash on hand, deposits with financial institutions and short-term investments, which have maturities at purchase of less than three months, consisting mainly of certificates of deposit The restricted cash and investments are assets restricted for 1,71 specific use. The restricted cash and investments include cash on deposit with'financial`institutions. For L- better management of cash, the City pools the cash, based on the City's needs, into either bank/sweep accounts, or in longer-term investments as allowed by the City's 'investment policy. However, each ". fund's balance of cash and investments is maintained in the books of the City. The deposit and investment policies for the Pearland Economic Development Corporation, TIRZ No.2 and Development Authority of Pearland are substantially the same as the City. The following schedule shows the City's recorded cash deposits and investments at year-end: Total Fair Value Cash deposits $ .73,177,112 . .. Investments: FFCB discount.note 7,513,881 FHLB discount note 3,012,122 FHLMC discount note 5,018,755 FNMA discount note 2,521,657 Certificates of deposit 16,608,404 107,851,931 , . Quoted market prices are the basis of the fair value for U.S.Treasury and Agency securities. The amount of increase or decrease in the fair value of investments during the current year is included in the City's investment earnings as.follows: . Interest.income $ 245,070 Unrealized gain on temporary investments 4,542 1 - • Investment earnings $ 249,612 t ' 42 CITY-OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 2-,Deposits(Cash)and Investments(continued) Custodial Credit Risk For deposits,custodial credit risk is the risk that in the event of a bank failure,the City's deposits may not be returned to it. The City's investment policy follows state statutes, which require that'all deposits in financial institutions be fully collateralized or insured. For investments, custodial credit risk is the risk that in the event of the failure of a counterparty, the City will not be able to recover the value of its T investments or collateral securities that are in the possession of an outside party. To control custody and safekeeping risk,the City shall have pledged collateral held at an independent third-party institution and evidenced by a written receipt. The value of the pledged collateral should be marked to market monthly and shall be at least 102 percent of par or market value of the investments, whichever is greater. Substitutions of collateral shall meet the requirements of the collateral agreement. r, Collateral shall not be released until the replacement collateral has been received, if the release of the collateral should result in the value being under 102 percent of par value. The pledge of collateral shall comply with the City's investment policy. The City was not exposed to any custodial credit risk during the year. Interest Rate Risk At year-end, the City had the following investments subject to interest rate risk, under U.S. generally accepted accounting principles: Weighted Average Total Maturity Fair Value ' (Days) Temporary investments: FFCB discount note $ 7,513,881 332 FHLB discount note . 3,012,122 361 FHLMC discount note 5,018,755 996 FNMA discount note 2,521,657 314 $ 18,066,415 Portfolio weighted average maturity 519 • The City's investment policy specifies a maximum weighted average maturity for the portfolio of 900 days or 30 months based on the stated maturity date of the investments. When including cash investments,the weighted average maturity for the City is 165 days. To the extent possible, the City attempts to match investments with anticipated cash flow requirements. The City does not directly invest in securities with a stated maturity date more than five years or 1,825 days from date of purchase. The settlement date is considered the date of purchase. 43 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 2-Deposits(Cash)and Investments(continued) L Concentration of Credit Risk With the exception of U.S. Treasury securities and interest-bearing checking accounts that are fully collateralized,no more than 75 percent of the.City's total investment portfolio will be invested in a single. security type. As of September 30, 2013, the City had investments in U.S. Agency securities that 0,4I exceeded five percent of the total investment portfolio at year-end. Percentage of Total. Total Investment Investment Type Fair Value Portfolio FFCB discount note $ 7,513,881 41% FHLB discount note 3,012,122 17% FHLMC discount note 5,018,755 28% FNMA discount note 2,521,657 14% Total $ 18,066,415 ..100% Credit Risk Federal Home Loan Bank,Federal Home Loan Mortgage Corporation,Federal Farm Credit Bank and the Federal National Mortgage Association Discount Notes were rated AA+by Standard&Poor's,AAA by Fitch Ratings,and Aaa by Moody's Investors Service.' All credit ratings meet acceptable levels required by guidelines prescribed by both the PFIA and the City's investment policy. A public fund investment pool must be continuously rated no lower than AAA or AAAm or no lower than investment grade by at least one nationally-recognized rating service and_ have a weighted average maturity no greater than 90 days. Investments with minimum required ratings do not qualify as authorized investments during the period the investment does not have the minimum rating., .44 The city had no investments in an investment pool. Restricted Assets The Enterprise Funds have restricted certain cash and investments for customer deposits, reserve and emergency expenditures, capital improvements, cash restricted for others, and revenue bond debt service. Because of certain bond covenants, the Enterprise Fund is required to maintain prescribed amounts of. resources that can be used only to service outstanding debt Some of the proceeds from debt or from funds received from acquisition of Municipal Utility Districts are restricted for use on capital projects Revenue bond debt service $ 2,988,697 Customer deposits 3,023,012 Capital improvements 21,384,506 Total $ 27,396,215 44, i CITY OF PEARLAND,TEXAS 7 NOTES TO FINANCIAL STATEMENTS(continued) • ri Note 3-Receivables • i Receivables at September 30,2013,. consisted of the following: 7 Governmental Funds: _ - _ _ Pearland Tax Increment - Capital Economic Reinvestment Development Other P'-1 _ .General . Debt Service Projects Development Zone Authority of Non-Major Fund Fund Fund Corporation Developments Pearland Funds Total Receivables: Property taxes,including - penalties and interest $ 536,148 $ 873,642 . $ ' - $ - $ 130,541 $ - $ - $ 1,540,331 Lease receivable - 8,835,487 - - - - 8,835,487 Sales and other taxes 3,938,047 - - 1,344,827 - - 32,981 5,315,855 Fines and forfeitures • 930,995 - - - - - 6,953 937,948 Interest 7,801 771 123 8,010 - 12 71 16,788 Other 693,515 - 868,118 73,147 • - - 2,822,079 4,456,859 i Allowance for uncollectibles (11,609) (17,071) - - - - - (7,850) (36,530) 1 $ 6,094,897 $ 9,692,829 $ ' 868,241 $ 1,425,984 $ 130,541 $ 12 $ 2,854,234 $ 21,066,738 F"l Enterprise Funds: Water and Solid Waste Internal'Service Sewer Fund - Fund Fund Total Receivables: • - F-7 . Customer accounts $ 3,020,156 - $ 867,157 $ - $ 3,887,313 - Interest 25,938 - - 25,938 . Other 19,088 - 63,737 82,825 Allowance for uncollectibles (54,018) (44,815) - (98,833) r--,, $ 3,011,164 $ 822,342 $ 63,737 $ 3,897,243 - Governmental funds report receivables for revenues that are not considered to be available to liquidate - liabilities of the current period. At the end of the current fiscal year, the various components of unavailable/unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Delinquent property taxes receivable-general fund $ 470,445 $ . - Delinquent property taxes receivable-debt service fund 745,491_ _ - - Lease revenues-principal 6,809,424 - Municipal fines and forfeitures 937,948 - Street assessments 2,484,917 - Other 69,785 - "Lease interest revenues - - 2,026,064 Grants and revenues prior to meeting all eligibility requirements - 1,607,216 Total Unavailabe/Unearned for Governmental Funds $ 11,518,010 $ 3,633,280 .--- 45 114 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) ; Note 3 Receivables(continued) Property Taxes ! ! Property taxes are levied by October_1 in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. On January 1 of each year,a tax lien attaches to property to secure the payment of all taxes, 17 penalties, and interest ultimatelyimposed. The Central Appraisal District ("CAD") of_ Brazoria County, .ip ' Hams County, and Fort Bend County, Texas, establishes appraised values. Taxes are levied by the City Council based on the appraised values and operating needs of the City. The City contracts billing and nol -collection of tax levies with the Brazoria County Tax Assessor-Collector. Note 4 Capital Assets - A.summary of changes,in the primary government's capital assets for the year ended September 30, 2013, follows:.,. Balance September 30, Balance 2012 September 30, (Restated) ,. Increases Decreases 2013 Governmental Activities Non depreciable Capital Assets Land $ 31,260,913 $ 3,372 $ $ 31,264,285 Construction in progress 23,488,810 18,394,519 (18,576,872) 23,306,457 Total Non-depreciable capital assets: 54,749,723 18,397,891 (18,576,872) 54,570,742 Depreciable Capital Assets -19 Infrastructure 804,204,296 58,680,475 862,884,771 Buildings and improvements 87,473,376 10,457,147 97,930,523 Machinery and equipment 13,519,791 2,111,961 (600,435). 15031,317 Furniture and fixtures 2,662,298 2,037,431. - 4,699,729 Total depreciable capital assets 907,859,761 73,287,014 (600,435) 980,546,340 Less accumulated depreciation.for: Infrastructure (230,452,471) (24,492,719) - (254,945,190) Buildings and improvements (16,711,196) (3,320,164) (20,031,360) - Machinery and equipment (8,319,855) (1,101,666) 555,524. (8,865,997) Furniture and fixtures (1,789,729) (446,385). - (2,236,114) Total accumulated depreciation (257,273,251) (29,360,934) 555,524 (286,078,661) Depreciable capital assets,net 650,586,510 43,926,080 (44,9111 694,467,679 -11 Totals $705,336,233. $:62,323,971 $ (18,621,783) $'749,038,421 46 CITY OF PEARLAND,TEXAS �! NOTES TO FINANCIAL STATEMENTS(continued) Note 4-Capital Assets (continued) Balance Balance September 30, September 30, 2012 Increases Decreases 2013 Business-Type Activities Capital assets: Land $ 3,609,542 $ 186,840 $ - $ 3,796,382 Construction in progress 5,418,810 3,499,225 8,918,035 Total nondepreciaable capital assets 9,028,352 3,686,065 - 12,714,417 Other capital assets: Water and sewer system 280,739,923 20,008,401 300,748,324 Buildings and improvements 31,256,473 _ 31,256,473 Machinery and equipment 3,368,901 492,765 (155,010)- 3,706,656 Furniture and fixtures 96,127 10,000 106,127 Contractual water rights 34,511,428 34,511,428 Total depreciable capital assets 349,972,852 20,511,166 (155,010) 370,329,008 Less accumulated depreciation for: r Water and sewer system (81,229,112) (6,853,177) (88,082,289) Buildings and improvements (3,358,082) (729,978) (4,088,060) Machinery and equipment (2,169,842) (314,380) 178,146 (2,306,076) Furniture and fixtures (51,767) (17,750) (69,517) Contractual water rights (5,903,960) (1,380,457) (7,284,417) Total accumulated depreciation (92,712,763) (9,295,742) 178,146 (101,830,359) Depreciable capital assets,net 257,260,089 11,215,424 23,136 268,498,649 Totals - $ 266,288,441 $ 14,901,489 $ 23,136 $281,213,066 Depreciation was charged to programs as follows: _ General government $ 758,797 Public safety 1,918,725 Public works 24,241,247 Community services 227,991 Parks and recreation 2,214,174 Total Government Activity $ .29,360,934, Water and sewer - $ 9,295,742 Total Business-Type Activity $ 9,295,742 fl 47 Pul CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 4-Capital Assets (continued) The City had active construction projects as.of September 30, 2013. The projects included various ,..! improvements to streets, drainage and facilities as well as and water and sewer improvements:. At. year-end,the City's contractual commitments on projects were as follows: Project Description Progress Commitment li Drainage improvement $ ,5,099,765 $ 1,997,611 Building improvements 2,770,425" 2,534,291 r", Street improvement 12,383,037 4,212,683 Park improvements 2,745,652 1,617,073 Water and sewer improvements 9,225,613 6,678,510 Totals $ 32,224,492 $ 17,040,168 Note 5-Long-Term Debt A. General Obligation Bonds,Certificates of Obligation and Revenue Bonds The City issues general obligation bonds and certificates of obligation,and upon annexation and dissolution of Municipal Utility Districts, assumes unlimited tax and.revenue obligations. The assumed obligations were used to acquire and construct major capital facilities.General obligation bonds,certificates of obligation,and assumed obligations from dissolved and annexed areas are for both governmental and business-type activities." The bonds are reported in the Proprietary Funds only if they are expected to be repaid from proprietary revenues. The general long-term bonds, certificates of obligation and assumed obligations are paid through the Debt Service Fund from tax revenues. The City's component units,which are considered blended components units, have revenue bonds used to acquire and construct or to reimburse developers for major capital improvements. Revenue bonds are paid. through the Pearland Economic Development Corporation from sales tax and through the Development Authority ofPearland from property tax increment. 48' CITY OF PEARLAND,TEXAS 7 NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. General Obligation Bonds,Certificates of Obligation and Revenue Bonds(continued) The following is a summary of changes in the City's total governmental long-term liabilities for the year ended September 30, 2013. In general, the City uses the General and Debt Service funds as well as the Economic Development Corporation and Development Authority to liquidate governmental long-term liabilities. Balance September 30, Balance Amounts 2012 September 30, Due Within (Restated) Additions Reductions 2013 One Year Governmental Activities: Bonds payable: General obligation bonds $ ,224,170,000 $ 13,515,000 $ (7,645,000) $ 230,040,000 $ , 6,765,000 Certificates of obligation 65,425,000 2,745,000 (3,480,000) 64,690,000 3,710,000 Sales tax revenue bonds 24,490,000 - (880,000) 23,610,000 920,000 Tax increment revenue bonds '54,235,000 - '(2,720,000) .51,515,000 2,800,000 Deferred loss on refunding (12,351,438) - 1,297,946 (11,053,492) - Unamortized premium/(discount) 6,479,066 - 303,003 . (623,102) 6,158,967 - Total bonds payable 362,447,628 16,563,003 (14,050,156) 364,960,475 14,195,000 Other liabilities: Obligations under capital leases 3,406,759 1,186,346 (911,739) 3,681,366 929,000 Compensated absences 4,724,243 2,678,203 (2,395,717) 5,006,729 794,732 Other post-employment benefits 1,535,386 ' 419,768 - 1,955,154 Total Governmental Activities $ 372,114,016 $ 20,847,320 $ (17,357,612) $ 375,603,724 $ 15,918,732 Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period, and accordingly, are not reported as fund liabilities in the governmental funds. Interest on long-term debt is not accrued in governmental funds,but rather is recognized as an expenditure when due. The full amount estimated to be required for debt service on general obligation debt is provided by(1)the debt service portion of the tax levy;(2)interest earned in the Debt Service Fund;and(3)transfers from the Water and Sewer Enterprise Fund. Transfers from the Enterprise Funds are approved at the discretion of City - Council and are not intended to service a specific bond series. r— o fl r-, 49 • L..._ rm. CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued)A. General Obligation Bonds,Certificates of Obligation and Revenue Bonds(continued) wif A summary of the terms of general obligation bonds and certificates of obligation,as of September 30,2013, - follows: . . 7 , Interest Debt Series Original Issue Matures Rate(%) Outstanding ' -- General Obligation Bonds Permanent Improvement and Refunding Bonds,Series 2005 37,015,000 ''• 2029 4.00-5.00 $ 20,725,000 Permanent Improvement and Refunding Bonds,Series 2006 32,165,000 2029 4.00-5.00 30,860,000 Permanent Improvement and Refunding Bonds,Series 2007 69,640,000 2032 4.00-5.00 66,625,000 Permanent Improvement;Series 2008 22,835,000. 2032 4.50-5.50 • 21,695,000 ' Permanent Improvement Refunding Bonds,Series 2009 16,735,000 2034 2.50-5.00, 15,375,000 Permanent Improvement,Series 2010A 12,415,000 2035 2.00-4.25 11,350,000 L 1. Permanent Improvement Refunding,Series 2010B 1,630,000 2018 , 2.00-4.00- 1,000,000 Permanent Improvement,Series 2011 " ' 5,400,000 '2036 3.00-4.125 5,200,000 Permanent Improvement Refunding Bonds,Series 2012 ' 43,575,000 2029 3.00-5.00 43,575,000 fuliv Permanent Improvement Bond Series 2013 9,315,000 2038 3.00-4.625 9,315,000 Annexed Municipal Utility District Bonds ._ . BC MUD 1 Series 2007 1,940,000 2030 3.8-4:35 1,810,000 BC MUD 4 Series 2011 2,640,000 2032 2.50-5.00 2,510,000 rm. Total General Obligation Bonds $ 230,040,000 • Certificates of Obligations Certificates of Obligation,Series 2003 25,000,000 2014 3.60-3.75 1,035,000 Certificates of Obligation,Series 2004 21,000,000 2015 4.00 . 1,420,000 Certificates of Obligation,Series 2006 9,700,000 , 2029 4.125-6.125 8,825,000 Certificates of Obligation,Series 2007 23,250,000 2032 3.25-5.25. 22,450,000 Certificates of Obligation,Series 2008 _ 9,000,000 2032 3.875-5.00 8,480,000 Certificates of Obligation,Series 2009 8,520,000. 2034 2.50-5.00 7,835,000 Certificates of Obligation,Series 2009A 12,145,000 2029 2.25-4.50 10,225,000 711 Certificates of Obligation,Series 2011 2,095,000 2021 2.09 1,675,000 — Certificates of Obligation,Series 2013 2,745,000 2038 3.00-4.625 - 2,745,000 Total Certificates of Obligation $ 64,690,000 pm 1 . A summary of the terms of the revenue bonds recorded as long-term liabilities in the Pearland Economic • Development Corporation and Development Authority of Pearland funds as of September 30, 2013, is as PM follows: Interest Debt l'. Series Original Issue Matures Rate(%) Outstanding Pearland Economic Development Corporation._, Sales Tax Revenue and Refunding Bonds,Series 2005 $ 11,050,000 2026 4.0-5.0 $ 7,540,000 Sales Tax Revenue Bonds,Series 2006 10,235,000 2030 4.25-5.0 - 9,075,000 , rill Sales Tax Revenue Bonds,Series 2010 3 7 685 000 2030 Variable-resets 6,995,000 " every 6 months Development Authority of Pearland Tax Increment Contract Revenue and f-4 RefundingBonds,Series 2012 56,915,000 2028 3.07* 51,515,000 Total Revenue Bonds , $ 75,125,000 rl *Fixed for 10 years,then rate changes to be 65%of LIBOR,not to exceed 6.0%. .._ F-14, • 50 ''''' fl CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. General Obligation Bonds,Certificates of Obligation and Revenue Bonds(continued) r, Prior Year Refunding In prior years, the City defeased certain general obligation and other bonds by placing the proceeds of the new bonds in an irrevocable trust to provide for all future debt service payments on the refunded bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. At September 30, 2013, approximately $26.4 million of previously refunded bonds outstanding were considered defeased. Capital Lease Obligations The City has entered into certain capital lease agreements in order to purchase public safety and management information systems, equipment and other construction-related equipment. The capital.lease obligations are paid out of the General, Debt Service and Water and Sewer Funds. The historical purchase price of the capital assets under lease is approximately$6.8 million. Following is a summary of future lease payments due on this equipment: Fiscal Year Obligations 2014 $ 1,118,848 2015 1,118,848 2016 809,406 2017 629,950 '1 2018-2019 527,391 Total 4,204,443 Less: Interest 262,093 Obligations under capital leases $ 3,942,350 f 51 r . CITY OF PEARLAND,TEXAS NOTES TO FINANCL4L STATEMENTS(continued) 71 Note 5-Long-Term Debt(continued) A. General Obligation Bonds,Certificates of Obligation and Revenue Bonds(continued).: The.annual requirements to amortize governmental activity general obligation bonds and certificates of obligation outstanding at September 30,2013,were as follows: Governmental Activities. . General Obligation Certificates of Obligation Fiscal Year ... Principal Interest Principal Interest 2014 $ . 6,765,000 $ 9,913,967 $ : 3,710,000 $ 2,722,249 20.15 7,765,000 9,572,070 • 2,745,000 2,592,723 2016 8,865,000 9,190,377 2,120,000 2,500,538 2017 8,490,000 8,805,299 2,190,000 2,416,016 2018 8,375,000 8,443,772 . 2,765,000 2,312,640 vg 2019 . 10,745,000 8,026,805 3,010,000 2,192,779 2020 11,580,000 .7,541,328 3,050,000 2,065,511 . 2021 11,845,000 7,033,931 3,165,000 . .1,933,459 2022 12,840,000 6,496,949 3,060,000 1,796,233 2023 . . 13,160,000 ; :5,929,679 . 3,180,000 .1,654,141. 2024 13,925,000 :5,332,766 3,310,000 ' 1,504,781 2025. '14,350,000 4,731,384 3,430,000 1,347,751 2026 14,615,000 4,133,095 3,580,000 1,180,803 2027 15,720,000 3,498,79.1 . 3,950,000 1,018,540 2028 16,255,000. . • . . 2,835,511 3,995,000 863,823 2029 16,680,000 . 2,128,625- 4,175,000 700,421 2030 9,650,000 1,534,628 3,410,000 544,513 2031 9,590,000 1,085,420 . 3,805,000 384,238 2032 . . •• . 10,125,000 627,044 4,185,000 •• .199,088 2033 2,650,000 333,419 635,000 86,263 2034 2,765,000 208,507 660,000 • 55,163 -44 2035 1,520,000 112,044 130,000 22,813 2036 795,000 62,122 140,000 16,650 2037 480,000 •. 33,763 140,000 , 10,175_ 2038 490,000 11,331. 150,000 3,469 $ 230,040,000 $ 107,622,627 $ 64,690,000 $ .30,124,780 52 • CITY OF PEARLAND,TEXAS NOTES TO FINANCL4L STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. General Obligation Bonds,Certificates of Obligation and Revenue Bonds(continued) The annual requirements to amortize blended component unit revenue bonds outstanding at September 30, 2013,were as follows: Governmental Activities Pearland Economic Development Development Authority of Corporation Pearland Fiscal Year Principal Interest Principal Interest 2014 $ 920,000 $ 1,110,514 $ 2,800,000 $ 1,581,511 2015 965,000 1,068,839 2,885,000 1,495,550 . 2016 1,010,000. 1,025,057 2,970,000 1,406,981 2017 1,060,000 976,218 3,070,000 1,315,802 2018 1,115,000 924,986 3,160,000 1,221,553 2019 1,175,000 870,739 3,255,000 1,124,541 2020 1,230,000 819,126 3,120,000 1,024,613 2021 1,285,000 • 764,705 3,215,000 928,828 2022 1,350,000 707,225 3,030,000 830,128 2023 1,415,000 645,158 3,130,000 737,107 2024 • 1,480,000 579,894 3,225,000 641,016 • 2025 • • 1,555,000 511,083 3,320,000 • 542,008 2026 1,635,000 438,397 3,425,000 440,085 • 2027 - 1,715,000 361,922 3,530,000 334,937 2028 1,805,000 275,920 3,635,000 226,566 2029 1,895,000 188,544 3,745,000 114,972 2030 2,000,000 96,818 - = $ 23,610,000 $ 11,365,145 $ 51,515,000 $ 13,966,198 r ' r r 53 rip " CITY OF PEARLAND,TEXAS . NOTES TO FINANCIAL STATEMENTS(continued)„ !#1 Note 5 Long-Term Debt(continued) B. Enterprise Fund Debt The following is a.summary of changes_in the City's total business-type long-term liabilities for the year ` ended September 30 2013: i, Balance Balance Amounts September 30, September 30, Due Within 2012 Additions Reductions 2013 • One Year _ Business-Type Activities:. . I Bonds payable: . Permanent Improvement bonds $ ;15,130,000 ': $ $ (1,110,000) $ 14,020,000 $ 1,155,000 Water and sewer revenue bonds 109,305,000 - (3,615,000) 105,690,000 3,765,000 Deferred loss on refunding (610,450). - 50,481 (559,969) - Unamortized premium/(discount) 881,600 - (151,290) •. 730,310 Total bonds payable - •. 124706,150 - (4 825 809) 119,880,341 . 4,920,000 Other liabilities: Obligations under capital leases • 342,364 - (81,380) 260,984 84,122 Compensated absences 538,878 276,771 (352167) 463,482 78,740 111 Other post-employment benefits 282,467 74,077 - 356,544 - Total Business-Type Activities , $ 125,869,859 , $ 350,848 $ (5,259,356) $ 120,961,351 $ 5,082,862 A summary of the terms of permanent improvement bonds and revenue bonds recorded in the Enterprise Funds as of September 30,2013,is as follows: Interest Debt Series • .,Original Issue Matures Rate(%) Outstanding Water and•Wastewater Fund • aq Water and Sewer System Adjustable Rate Revenue Bonds, Series 1999 $ '. 8,000,000 .2020 4.60 $ 2,710,000 - __' Water and Sewer.System Revenue Bonds,Series 2003. 9,500,000 2014 • 4.00 340,000 Water and Sewer System Revenue and Refunding Bonds,. Water-and Sewer S stem Revenue Bonds,Serie 13,845,000 2031 4 50 5 55 10,850;000 Series 2006 y s 2007 40,135,000 2031 3.50-5;50 • 36,625,000 Water and Sewer System Revenue Bonds,Series 2008 14,950:000 2034° 4125-5.00 - 13;945,000 Water and Sewer System Revenue Bonds,Series 2009 13,130,000 2034 - 3.00-5.50 11,720,000 Permanent Improvement and Refunding Bonds,Series 2009 11,660,000 2018 2.50-5.00 ' 7,790,000 Water and Sewer System Revenue Bonds,Series 2010A 14,040,000 2035 2.00-4.50 12,900,000 ' Water and Sewer System Revenue and Refunding Bonds, Series 2010B • 8,970,000 . . 2023 2.00-4.00 8,225,000 Permanent Improvement and Refunding Bonds,Series 2012 6,230,000 2025 - 3.00-5.00 6,230,000 Water:and Sewer System Revenue and Refunding Bonds, Series 2012 8,670,000 2037 2.00-3.625 8,375,000 .. , - Total Utility System Fund $ 119,710,000 54 CITY OF PEARLAND,TEXAS n NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) r B. Enterprise Fund Debt(continued) The annual requirements to amortize business-type activity revenue bonds and permanent improvement bonds outstanding at September 30,2013,were as follows: Business Type Activities Revenue Bonds Permanent Improvement Bonds Fiscal Year Principal Interest Principal Interest 2014 $ 3,765,000 $ 4,584,324 $ 1,155,000 $ 525,325 2015 3,575,000 4,439,468 1,530,000 474,812 2016 3,725,000 4,302,208 . 1,560,000 427,900 2017. 3,880,000 4,153,814 2,415,000 344,001 2018. 4,030,000 4,005,011 2,515,000 232,188 2019 4,195,000 3,847,690 365,000 171,700 2020 _ 4,370,000 3,683,168 370,000 157,000 2021 4,615,000 3,503,757 370,000 142,200 2022 4,810,000 3,306,021 385,000. 127,100 2023 5,025,000 3,100,221 : 395,000 111,500 2024 4,190,000 2,884,169 1,480,000 74,000 2025 4,440,000 2,689,273 1,480,000 22,200 2026 6,155,000 2,477,948 - - 2027 6,450,000 2,181,686 - - 2028 6,765,000 1,867,325 - - 2029 7,080,000 1,552,814 - - 2030 7,375,000 1,257,306 - = 2031 7,680,000 948,088 - - 2032 3,710,000 625,250 - - r- 2033 3,895,000 444,575 - - 2034 4,075,000 264,360 - - 2035 1,180,000 75,725 - - 2036 345,000 25,556 - - 2037 360,000 13,050" - $ 105,690,000 $ 56,232,807 $ 14,020,000 $ 2,809,926 C. Legal Compliance Long-term debt assumed by the City upon dissolution of annexed municipal utility districts in fiscal years 2006,2007,and 2013 has been recorded as part of the City's long-term debt. A portion of the assumed debt is related to assets recorded in the Water and Sewer Fund.Even though the debt is related to assets recorded in the Water and Sewer Fund,the debt is considered general obligation debt based on Texas law. • 55 mil : CITY OF PEARLAND;-TEXAS NOTES TO FINANCIAL STATEMENTS(continued) ri Note 6 Interfund Transactions A summary of interfund transfers,the purpose of which is to cover,operational expenses/expenditures, for:the r",- year ended September 30,2013,is-as follows: Summary'Table of Interfund Transfers : 2013 for the Year Ended September 30, • • Transfers From Transfers'To Other: Other Funds Funds General. • _ Debt Service Fund $" - $ 161,445 Capital Projects 1,654,245 • 137,263 Water&Sewer Fund . : - .1,426,126. - 218,961 Internal Service Fund = 560,250 - Nonmajor Aggregate-Remaining:Funds , ,532,751. 20,748 - Total General Fund 3,613,122 1,098,667 .. �! Debt Service Capital Projects 5000 - Water&Sewer Fund 284,838 - General Fund '161,445 Nomnajor Aggregate Remaining Funds 10 443 - Total Debt Service Fund 461;726 - Capital Projects General Fund 137,263' 1,654,245 I Debt Service - 5,000 Internal Service Fund 284,352 . Total Capital Projects 421,615. 1,65.9,245 . Water&Sewer Debt Service Fund 284,838. General Fund 218,961 1,426,126 Internal Service.Fund 114,750 Total Water and Sewer = 218,961` 1,825,7.14 Internal Service-COP Health Claims Fund a4 General.Fund. 560250. • Water&Sewer Fund 114,750 :. • - Total Internal Service Fund 675,000.; - Tax Increment Reinvestment Zone#2 Development Authority of Pearland - - 10,997930 • Development Authority'of Pearland - Tax Increment Reinvestment Zone#2 . 10,997,930 - Other Governmental Funds General Fund 20,748 :' - 532,751 Capital Projects - 284,352 Debt Service Fund Total Other Governmental Funds .20,748:. 827,546 ' - Total $ 16,409,102 . $ 16,409,102 • } 56 rwri CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 6-Interfund Transactions(continued) r' A summary of interfund receivables and payables at September 30,2013,follows: Receivable Fund Payable Fund Amount Purpose General Fund Non-Major Governmental Fund $ 118,097 Short-term loan to fund operations Note 7-Fund Balance Encumbrances Encumbrance accounting is employed as an extension of formal budgetary integration for the general fund,'special revenue funds, and capital projects funds. As of September 30,2013,certain amounts which were classified as restricted or assigned for specific purposes have been encumbered in the governmental funds. Significant encumbrances included in governmental fund balances are as follows: Encumbrances General Fund-assigned $ 1,553,390 Capital Projects-restricted 5,799,338 Debt service-restricted 7,405- Aggregate non-major funds-restricted 357,583 $ 7,717,716 Note 8-Deferred Compensation Plan The City maintains,for its employees,a tax-deferred compensation plan meeting the requirements of Internal Revenue Code Section 457. The plan was established in the 1995 fiscal year by City Ordinance,and ICMA Retirement Corporation is the plan administrator. The deferred compensation is not available to employees until termination,retirement, death,or unforeseen emergency. The plan's trust arrangements are established to protect deferred compensation amounts of employees under the plan from any other use other than intended under the plan (eventual payment to employees deferring the compensation) in accordance with federal tax laws. Amounts of compensation deferred by employees under plan provisions are disbursed bi-weekly by the City to a third-party administrator. The third-party administrator handles all funds in the plan and makes investment decisions and disburses funds to employees in accordance with plan provisions. Note 9-Employee Retirement System Plan Description and Provisions The City provides pension benefits- for all of its -full-time employees through a non-traditional, joint contributory, defined benefit plan in the state-wide Texas Municipal Retirement System ("TMRS"), one of, 849 currently administered by TMRS,an agent multiple-employer public employee retirement system. r.. 57 PRI F., CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) r"° Note 9-Employee Retirement System (continued) Plan Description and Provisions(continued) 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.The plan provisions are adopted by the City Council of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Plan provisions for the City were as follows: Plan.Year 2012 Plan Year 2013 _ Employee deposit rate 7.0% 7.0% Matching ratio(City to employee) 2 to 1 2 to 1 Years required for vesting 5 5 Service retirement eligibility (expressed as_a age/years of service) 60/5,0/20 `60/5,0/20 Updated service credit 100%Repeating,Transfers 100%Repeating,Transfers Annuity increase(to retirees) 70%of CPI Repeating 70%of CPI Repeating Members can retire at ages 60 and above with 5 or more years of service or with 20 years of service regardless of age. Contributions Under the.state law governing TMRS,the actuary annually determines the City's contribution rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are -.f 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 City matching percent,which are 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 retirement becomes effective. The prior service contribution rate amortizes the unfunded (over funded) actuarial liability (asset) over the remainder of the plan's 30-year amortization period. The projected unit credit actuarial cost method is used for determining the City contribution rate using a 28-year closed period: .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. 58 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 9-Employee Retirement System(continued) Contributions (continued) The City's total payroll in fiscal year 2013 was $31.2 million and the City's contributions were based on a payroll of$29.7 million. Contributions made by employees totaled $2.1 million, and the City made - contributions of$3.8 million during the fiscal year ended September 30,2013. Three-year trend information is presented below: 2013 2012 2011 Annual Pension Cost(APC) $ 3,780,847 $ 3,518,289 $ 3,302,952 Percentage of APC contributed 100% 100% 100% NPO at the end of the period $ $ $ Because the actuary determines contribution rates on an annual basis and the City pays the calculated rate each month,the City will always have a net pension obligation(NPO)of zero at the beginning and end of the period,and the annually required contributions(ARC)will always equal contributions made. All assumptions for the December 31, 2012, valuations are contained in the 2012 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O.Box 149153,Austin,Texas 78714-9153. The following is a summary of the actuarial assumptions: Actuarial Cost Method Projected unit credit Amortization Method Level percent of payroll Remaining Amortization Period 25.3 years-closed period Asset Valuation Method Amortized cost Actuarial Assumptions: Investment rate of return • 7.00% Projected salary increases Varies by age and service Includes inflation at 3.00% Cost-of-living adjustments 2.10% r In order to provide a reasonable retirement benefit at a reasonable cost to employers and to provide better long-range rate forecasts, TMRS' actual funding method is the Projected Unit Credit method using a 25-30 year"closed"period. For cities that have adopted annually repeating annuity increases (COLA's) this change in method results in-increased contribution rates, which will provide advanced funding and positive improvement in the pension funding rates. The TMRS Board adopted an eight-year phase-in period for new rates to enable cities to slowly increase contributions. These new rates were first reflected in 2009. 59 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) 74 Note 9-Employee Retirement System(continued) Contributions(continued)_ - A schedule of funding status and progress for TMRS for the most recent valuation date follows: Unfunded Actuarial Actuarial (UAAL)as a Valuation Actuarial Actuarial Accrued Annual. Percentage Date Value of Accrued Percentage Liability'. Covered of Covered December 31, Assets . Liabilities Funded (UAAL) Payroll Payroll 2012 $ 69,800,322 $ 85,022,771. 82% $ 15,222,449 $ 28,876,260 53% 'g A schedule.of funding progress for TMRS for the three most recent actuarial valuations may be found in the required supplementary information section of the City's Annual Financial Report Note 10-Other Post-Employment Benefits In addition to pension benefits,the City provides access to medical and dental coverage through its selected . . insurance carrier,'to retirees and/or retiree dependents: The City's other post employment benefit plan is a __ single-employer plan. To qualify for retiree's medical or dental insurance,the retiree must have a minimum of ten years of continuous'service with the,City and be least sixty years of age, or with 20 years of continuous service at any age. The City provides the coverage on a pay-as-you-go basis,similar to current employees, but the City does not pay any portion of the retiree premium Therefore, there is an implicit subsidy due to the blended rate paid by the retirees, but there is no direct liability due from the City as it does not pay any portion of the retiree's costs. _ The costs of providing these benefits and number of retired employees are as follows: Number of Total City's Emp/Dep Retired Cost Cost Coverage Cost Employees $ 77,684 $ - $ 77,684 9 Retirees who are entitled to receive retirement benefits'under the City's retirement plan may purchase ' continued health benefits coverage for the retiree and the retiree's dependents, but shall pay 100% of the. _ premium for coverage. The retiree,however,is able to receive a lower rate by participating in the City's plan as opposed to`individually-purchasing.health insurance. The City's coverage is secondary to Medicare when the person becomes eligible for these benefits. 60 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 10-Other Post-Employment Benefits(continued) The Governmental Accounting Standards Board published guidelines regarding accounting and financial reporting by employers for post-employment benefits other than pensions. This standard gives guidance regarding the methods and timing for reporting. The effect of the standard is to cause the cost of retiree benefits to be accrued for during the working lifetime of the employees. This requires pre-funding or ' accruing of a liability. The City has elected to accrue the liability, and the unfunded liability will be funded over a period of 30 years. The results of the City's most recent actuarial valuation are as follows: Unfunded Actuarial (UAAL)as a .- Actuarial Actuarial Actuarial Accrued Annual Percentage Valuation Date Value Accrued Percentage Liability Covered of Covered October 1, of Assets Liabilities Funded (UAAL) Payroll Payroll 2012 $ - $ 8,339,937 0% $ 8,339,937 $ 28,876,260 29% Net OPEB obligations at year-end for the last three fiscal years are as follows: 2011 2012 2013 r-- • Normal cost $ 206,293 $ 190,706 $ 243,253 Amortization of UAAL 141,837 141,837 177,878 Annual required contribution(ARC) - 348,130 332,543 421,131 Interest on prior-year net OPEB obligation 41,540 57,127 72,715 C Estimated increase in net OPEB obligation 389,670 389,670 493,846 Net OPEB obligation-beginning of year 1,038,512 1,428,182 1,817,852 Net OPEB obligation-end of year $ 1,428,182 $ 1,817,852 $ 2,311,698 The annual cost recorded to the general ledger for fiscal year 2013 is$493,846,which includes the estimated normal cost of$243,253 to provide for the benefits earned by active employees. The total liability,which is not recorded to the general ledger,is$8,339,937,and represents the actuarial present value of benefits. Actuarial valuations for OPEB plans involve estimates of the value of reported amounts and assumptions r- about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. The methods and assumptions used as of the measurement date of October 1, 2012 include using the Projected Unit.Credit actuarial costs method, a closed amortization period of 26 years, a discount rate of 4%, medical inflation and ultimate pre-Medicare rate of 10% and 5%, respectively, with a straight years of service amortization method. 61 rill CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 11 -Commitments and Contingencies Litigation and Other Contingencies The City was involved in various lawsuits and arbitration proceedings at September 30,2013. The City and its legal counsel believe that any amounts which the City might ultimately be required to pay will not exceed underlying insurance coverage. Reimbursements due to Developers . " Pursuant to the Local Government Code, the City of Pearland offers incentives to athact businesses to Pearland. The following are the current incentives. Current Incentives Amount Prior Years FY 2013 Balance Altus Harbor $. .87,500 . . $. . 65,000 $ . 15,000 $. 7,500 Braska/Neela,Inc. : 150,000 - 150,000 r' Cardiovascular Systems,Inc. 5,100,000 4,100,000 1,000,000 Hatch Mott 100,000 - 100,000 - KS Management 2,600,000 - .- 2,600,000 7 KS Management Sales Tax Est. 600,000 - - 600,000 Merit Medical Systems,Inc. 888,000 - - 888,000 Ref-Chem 340,000 - 340,000 - SCR HH GP,LLC 300,000 180,000 - 120,000 Dover . 630,000 - 630,000. $ 10,795,500 $ 4,345,000 $ 605,000 .$ 5,845,500 Shadow Creek Town Center In 2004, the City, along with the Reinvestment Zone Number Two (the Zone) and the Development Authority of Pearland (the Authority), component units of the City, entered into an agreement with a 7 developer to reimburse the developer all or a portion of the project costs to implement the Shadow Creek Ranch Development TIRZ (TIRZ Plan). As projects implementing the TIRZ Plan are completed, the Zone Board may recommend to the City that the Authority reimburse developers on behalf of the Zone and the City. The Zone Board will forward to the City and the Authority all of the necessary and required documentation supporting the requested reimbursement and a .determination of the exact amount requested for reimbursement, including a calculation of the amount of interest to be reimbursed on funds advanced for the projects. In addition all monies available in,the Tax Increment Fund shall be transferred to the escrow agent no less than once per year and no later than the fifteenth day of each August, subject to the retention by the City of: (1)an amount equal to the City's administrative costs connected with the Zone and the TIRZ Plan, as provided in the TIRZ plan (36% of the City's Tax Increment, but not more than,$0.255, in years four through eight, and 64% of the City's Tax Increment,but not more than$0.44, in years nine through 30 shall be retained by the City;(2)amounts required to be maintained in the Alvin ISD Suspense Account; (3)an amount sufficient to pay reasonable current and anticipated administrative and operating costs of.the Zone,as determined by the Zone Board. ; 62 CITY OF PEARLAND,TEXAS �I NOTES TO FINANCIAL STATEMENTS(continued) Note 11-Commitments and Contingencies(continued) i Shadow Creek Town Center(continued) On November 13, 2006, the City of Pearland,Pearland Economic Development Corporation(PEDC) and Shadow Creek Retail,LP entered into an agreement whereby the developer would build and construct a mixed use commercial development located at the northwest corner of State Highway 288 and Broadway, also known as FM 518. The Developer provided for the construction of segments of Broadway Street, Business Center Drive, Memorial Hermann Drive, as well as landscaping, underground utilities, pipeline relocation and other associated costs. The source of funds for reimbursement of the public infrastructure is both the TIRZ#2 and City and PEDC sales tax revenue generated from the project. The total funded from TIRZ#2 is $11,749,618 and the amount of TIRZ improvements to be funded from sales tax is $2,001,93L Once completion and tenant occupancy of at least 318,000 square feet is achieved for a period of three consecutive months,the City and PEDC, shall remit,monthly,thirty-three percent of sales tax received by the City and PEDC to the Developer until paid in full plus interest at eight percent per annum for the first two years following completion of the widening of Broadway and interest at five percent per annum for P"-', the subsequent two years. The Developer met the targets set forth in the agreement in fiscal year 2008. Through September 30,2013,the City remitted sales tax to the developer pursuant to the agreement in the amount of$1,900,828, of which $444,060 was remitted in fiscal year 2013. To date, $1.5 million has been reimbursed towards principal and$448,585 for interest. The balance due as of September 30, 2013 is$555,820. Note 12-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's Intergovernmental Risk-Pool (TML-IRP), and through commercial insurance carriers. The participation of the City in TML-IRP is limited to payment of premiums. 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 City also provides Workers' Compensation insurance on its employees through TML-Workers' Compensation Fund. Workers' Compensation premiums are subject to change when audited by TML Workers' Compensation Fund. At fiscal year-end September 30, 2013, the City believed the amounts paid on Workers' Compensation would not change significantly from the amounts recorded. Note 13-Capital Lease The City has.a 20-year agreement to lease a facility to the University of Houston Clear Lake (UHCL), which commenced in July 2010. Rent or lease payments are broken into two parts, debt service and operating. For accounting purposes the City has classified the lease as a direct financing lease. UHCL has an option to purchase the facility upon the commencement date of July 2010 until the 615`day preceding the 20`h anniversary of the commencement date. 63 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 13-Capital Lease.(continued) The lease payments related to debt service to be received coincide with debt service payments the City is required to make on a bond that matures on March 1,2029. At September 30, 2013, the future minimum debt service lease payments to be received under the lease are as follows: Fiscal year ending . September 30, . Payment 2014 $ 664,384 2015 -. 654,255: 2016 643,059' 2017 627,598 2018 610,030 . . 2019-2023 2,826,396 2024-2029 2,863,729 Total $ 8,889,451 Note 14-Operating Lease The City has a five-year agreement to lease a portion of the UHCL.facility to the Pearland Economic 71, Development Corporation which commenced in July 2010. For accounting purposes the.City has classified the lease as an operating lease- The agreement calls for up to three additional five-year terms for a total of 20 years. The rent/lease payments are broken into two parts;debt service and operating. The debt service lease payments to be received coincide with debt service payments the.City is required to make on a bond that matures on March 1,- 2029. At September 30, 2013, the future minimum debt service lease payments to be received under the lease,are as follows: Fiscal year ending September 30, Payment 2014.. $: 111,858 . •. 2015 110,153 2016 ." 108,268 2017 105,665 2018 102,707 2019-2023 475,863. 2024-2029 • 482,148 " Total . $_.- 1,496,662 vis 64 CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 15=Subsequent Events • fl J Lease Purchase City Council approved a Notice of Intent to reimburse itself from future capital lease proceed on, October.22, 2012 in an amount not to exceed $2,100,000. On October 14, 2013, City Council awarded the bid to U.S. Bancorp Government Leasing and Finance, Inc. that provided an interest rate of 2.028%. The amount financed via lease/purchase is$1,852,938 as follows: Financing Equipment Description Amount Alcatel-Lucent data equipment: (11) 0S6850E-P48X switches, (5)OS685pE-P24X switches, (2)0S6450-P10 swithces,(20)wireless access points and appurtenances $ 121,159 Alcatel-Lucent OmniPCX Enterprise Voice Solution system 166,653 (1)Pierce Impel Pumper Truck and(1)Pierce 75'HAL Aerial,quint,alum.body, single axle Truck 1,277,195 (1)New Frazer Type 1 ambulance on F-350 diesel cab/chassis,and(1)refurbished Frazer Type 1 ambulance module onto new F-350 diesel cab/chassis 211,575 (1)Dybapac model CA134PD 54"pad roller 76,356 Total for financing $ 1,852,938 The first semi-annual payment is due in January, 2014 in the amount of $141,722 with the final semi-annual payment due in July, 2020 in the amount of$141,722. The total repayment amount for the seven-year lease term will be $1,948,110. There is no pre-payment penalty for early payoff, and the lender has waives its usual administrative and escrow fees. Development Authority of Pearland Bond Sale,Series 2013 On November 26, 2013, the Development Authority of Pearland issued $9,140,000 in tax increment contract revenue bonds. Proceeds from the bonds will be used to reimburse the developer approximately $8.9 million pursuant to the TIRZ financing plan. The remaining amount on the bonds are for issuance costs. The interest rate is 3.75% with an average annual debt service on the bonds of$779,202 and a maturity of 2029. Based on valuation in the Tax Increment Reinvestment Zone, the Zone is able to pay the debt and maintain a 1.25 coverage. 65 r _ F Required Supplementary Information 66 r CITY OF PEARLAND,TEXAS rl GENERAL FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL f--, For the year ended September 30, 2013 Variance "`1 with Final Budgeted Amounts Budget=Positive Original Final Actual (Negative) _' Revenues J Property taxes $ 10,992,437 $ 11,034,162 $ 11,178,950 $ 144,788 Sales and use taxes ' 15,125,235 16,172,355 15,919,784 (252,571). T Franchise fees 6,016,906 5,855,695 5,758,776 (96,919) ! Licenses and permits 2,620,219 2,726,978 2,988,859 261,881 Fines and forfeitures 3,107,512 3,390,068 3,333,675 (56,393) Charges for services 12,330,342 12,428,649 12,567,693 139,044 Investment earnings 56,729 60,285 54,063 (6,222) Other 475,329 693,904 814,956 . 121,052 Total Revenues 50,724,709 52,362,096 52,616,756 254,660 Expenditures Current: General government 7,709,175 7,801,411 7,572,787 228,624 Public safety 29,728,329 31,856,493 29,407,655 2,448,838 Public works 8,466,353 8,832,754 7,741,495 1,091,259 Community services 3,450,700 3,555,628 3,312,710 242,918 7 Parks and recreation 8,275,021 7,811,503 7,224,821 586,682 Total Expenditures 57,629,578 59,857,789 55,259,468 4,598,321 Excess(deficiency)of revenues over(under)expenditures (6,904,869) • (7,495,693) (2,642,712) 4,852,981 Other Financial Sources(Uses) Proceeds from capital leases 2,037,400 3,216,813 1,179,413 • (2,037,400) Transfers in 3,625,412 • 3,592,065 3,613,122 21,057 - Transfers out (945,606) (1,099,509) (1,098,667) 842 Total Other Financing ' Sources(Uses) • 4,717,206 5,709,369 3,693,868 (2,015,501) J Net change in fund balances (2,187,663) (1,786,324) 1,051,156 2,837,480 ,,, Fund balances,beginning 17,571,961 17,571,961 17,571,961 - Fund balances,ending $ 15,384,298 $ 15,785,637 $ 18,623,117 $ 2,837,480 r, I J `!1 67 J • CITY OF PEARLAND,TEXAS NOTES TO REQUIRED SUPPLEMENTARY BUDGET INFORMATIO1V Budgetary Compliance The City of Pearland has complied with all material budget requirements for the year ended September 30,2013. Annual appropriated budgets are adopted for the General,Special Revenue and Debt Service Funds,using the same basis of accounting as for financial reporting. All annual appropriations lapse at fiscal year end. _ Project length budgets are adopted for the Capital Project Funds. The City, for management control, approves a financial plan for the Enterprise Fund. City Council approves the annual budget for the Pearland Economic Development Corporation,which is included in the City's financial reporting entity. Expenditures may,not legally exceed budgeted appropriations at the fund level (i.e. General.Fund, Debt Service Fund,etc). Expenditure requests,which would require an increase in total budgeted appropriations, must be approved by City Council through a formal budget amendment At any time in the fiscal year,the Council may make emergency appropriations to meet a pressing need for public expenditure in order to protect the public health, safety,or welfare. The Council has the power to transfer any unencumbered funds allocated by the budget from one activity, function, or department, to another activity, function, or department,to re-estimate revenues and expenditures,and to amend the budget. ,,, Because City Council adopts the budget at the fund level,management has the authority to transfer available funds allocated by the budget from one function/department or activity to another function or activity within the same department In cooperation with the directors and department heads of the City, the Budget Officer, the Director of Finance and the City Manager prepare an annual budget for the General Fund, Special Revenue Funds and Debt Service Fund for the ensuing fiscal year, in a form and style as deemed desirable by the City Manager. 'The City Manager shall submit to the Council, for its review, consideration, and revision, both a letter describing the proposed new budget, as well as a balanced budget • for the forthcoming fiscal year,between 60 (sixty) and 90 (ninety) days prior to the beginning of the fiscal year. The budget, as adopted,must set forth the appropriations for services, functions, and activities of the various City departments and agencies, and shall meet all fund requirements provided by law and required • by bond covenants. Capital projects are budgeted on a project-length basis. Amounts reported in the accompanying financial statements represent the budgeted amount with all supplemental appropriations. No! 68 CITY OF PEARLAND,TEXAS REQUIRED PENSION SYSTEM SUPPLEMENTARY INFORMATION September 30, 2013 J TEXAS MUNICIPAL RETIREMENT SYSTEM(UNAUDITED) Schedule of Funding Progress Unfunded - Actuarial Actuarial (UAAL)as a Valuation Actuarial Actuarial Accrued Annual Percentage r 1 Date Value of Accrued _ Percentage Liability Covered of Covered December 31, Assets Liabilities Funded (UAAL) Payroll Payroll 2012 $ 69,800,322 $ 85,022,771 82% $ 15,222,449 $ 28,876,260 53% 2011 61,822,285 78,404,115 79% 16,581,830 27,756,555 60% 2010 54,358,401 72,195,923 75% 17,837,882 26,871,670 70% CITY OF PEARLAND OTHER POST-EMPLOYMENT BENEFIT OBLIGATION Schedule of Funding Progress Unfunded Actuarial Actuarial (UAAL)as a Valuation Actuarial Actuarial Accrued Annual Percentage Date Value of Accrued Percentage Liability Covered of Covered October 1, Assets Liabilities Funded (UAAL) Payroll Payroll 2012 $ - - $ 8,339,937 0% $ 8,339,937 $ 28,876,260 29% 2010 - 6,994,465 0% 6,994,465 26,871,670 25% While retirees get the benefit of an overall employee blended rate for the Other Post-Employment Benefit Obligation,benefits are funded on a pay-as-you go basis via premiums paid by the retirees and to be paid by future retirees. Therefore, the City does not pay for retiree health insurance directly; however there is an implicit subsidy due to the blended rate paid by the retirees. There is no direct liability due from the City as it does not pay any portion of the retiree's costs. Trend information is designed to provide information about the progress made in accumulating sufficient assets to pay benefits when due. r-1 J 69 I �y I I I IOther Supplementary Information I I _ I I -F I I I . 70 I _ F . Combining and Individual Fund Statements and Schedules OP 72 e CITY OF PEARLAND,TEXAS NON—MAJOR GOVERNMENTAL FUNDS „si SPECIAL REVENUE FUNDS To account for the proceeds of specific revenue sources that, are legally restricted to expenditures for 7 specific purposes. Hotel/Motel Tax Fund-A fund created to account for hotel/motel occupancy tax revenue. rim Court Security Fund- A fund created to account for the receipt and expenditure of revenues from court fines for court security. City-Wide Donation Fund - .A fund created to account for miscellaneous donations for all city departments except parks. . re Court Technology Fund— A fund created to account for the receipt and expenditure of revenues from court fines for court technology. Regional Detention Fund-A fund created to account for regional detention development. _ Park Donation Fund - A fund created to account for park donations,for park.special events and development of parks. This fund also includes funds from tree trust donations. Police Seizure Fund-A fund created to account for state and federal seizure funds which are used solely for law enforcement purposes. Park and Recreation Development Fund- A fund created to account for the receipt and expenditure of payment in lieu of parkland for the development of parks. r, Sidewalk Fund-A fund created to account for resources designated for sidewalks. Grant Fund-A fund created to account for revenues and expenditures associated with federal,state,and local grants. Traffic Impact Improvement Fund-A fund created to account for revenues and expenditures associated with the results of traffic impact analysis for new development. ram. Juvenile Management Fund- A fund created to account for receipt and expenditure of revenues from court fines for juvenile case manager. Educational TV Fund—A fund created to account for the revenues and expenditures associated with the " purchase of equipment for public-access television broadcasting under rules set forth.by the Federal Communications Commission(FCC). Rim Street Assessments-'A fund created to account for the revenue"and expenditure of street assessments as approved by City Council for a designated street(s). University of Houston (U of H) Fund- A fund created to account for lease revenues and the operating. expenditures related to the University of Houston Clear Lake-Pearland Campus built by the City and leased to the University of Houston Clear Lake and'the Pearland Economic Development Corporation. 71, 74 fl CITY OF PEARLAND,TEXAS COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS September 30, 2013 Hotel/Motel Court City-Wide Court Tax Security Donations Technology Assets Cash and cash equivalents $ 2,130,144 $ 131,364 $ 88,807 $ 283,435 Receivables(net of allowance for uncollectibles) 315,111 2,886 2,530 2,593 Due from other governments - - Prepaid items 4,162 - - - r- Total Assets $ 2,449,417 $ 134,250 $ 91,337 $ 286,028 Liabilities and Fund Balances Liabilities: Accounts payable and . accrued liabilities $ 178,265 $ 1,756 $ - $ . - Due to other funds Unavailable revenue - 2,886 - 2,593 Total Liabilities 178,265 4,642 - 2,593 n Fund Balances:- Non-spendable 4,162 - - - Restricted for: r1 Community development programs 2,266,990 - • 91,337 . - Public safety - 129,608 - 283,435 Total Fund Balances - 2,271,152 129,608 91,337 283,435 Total Liabilities and Fund Balances $ 2,449,417 $ 134,250 $ 91,337 $ 286,028 r-, 75 n L -• - - Page 1 of2, • - Parks and Regional Park Police Recreation •_• • . Detention ..Donations Seizure Development 11. • L $ - $ 189,986 $ 248,514' $ 807,708 . - 1,400 _ $. • - $ -189,986 $ - 249,914 $ 807,708 . • re, $ . • - $ - 382 $ 8,415 -S. ' 11,789 . - • , • 382 8,415 11,789 - 189,604 - . 795,919 - • . - - 241,499 _ • - 189,604 . • •241,499 795,919 . $ , - .$ 189,986 • $ - 249,914 $ 807,708 . • - 76. 7 rl CITY OF PEARLAND,.TEXAS j COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS r1 September 30, 2013 1 , Juvenile 7 Traffic Impact Management j Sidewalk Grant Fund Improvements Fund Assets Cash and cash equivalents $ 225,800 $ - $ 637,094 $ 61;822 ' Receivables(net of allowance rl for uncollectibles) - - 2,802 1,473 Due from other governments - - 172,146 - . - Prepaid items - - - - Total Assets $ 225,800 $ 172,146 $ 639,896 $ 63,295 Liabilities and Fund Balances Liabilities: `--1 Accounts payable $ - $ 7,745 $ - $ 1,323 Due to other funds - 118,097 - - Unavailable revenue - - - 1,473 n Total Liabilities - 125,842 2,796 Fund Balances: Non-spendable - - - - Restricted for: Community development programs 225,800 46,304 639,896 - 7 Public safety - - - 60,499 Total Fund Balances 225,800 46,304 639,896 60,499 Total Liabilities and Fund Balances $ 225,800 $ 172,146 $ 639,896 $ 63,295 J I I J 1 n 77 1 I J • n.e " Page 2 of 2 Li Educational Street - . - -_TV Assessments' U of If Fund. , - Total $ - 227,557 $ - $ 258,622'. $ 5,290,853 - " 32,98-1 2,484,917 7,541. • 2,854,234 • - - - •172,146 • - 4,162 $ 260,538 $' 2,484,9,1.7 • $ 266,163 • $. 8,321,395 • $ 24 . $ - . $ 26,384 $ 236,083 - - - — . - • ' - 1'18,097 - 2,484,917 2,491,869 - 24 2,484,917 26,384 - - 2,846,049 • rip - - • - 4,162 • 260,514 - 239,779 4,756,143 - - - • 715,041 260,514 - - - • 239;779- • 5,475,346 $ -260,538 $ 2,484,917 $ -266,163 " $ 8,321,395 • 78 CITY OF PEARLAND,TEXAS COMBINING STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS - r, For the Year Ended September 30, 2013 Hotel/Motel Court City-Wide Court Tax Security Donations Technology Revenues Sales and use taxes $ 1,150,360 $ - $ - $ - Franchise fees - - Fines and forfeitures 59,476 - 70,909 '9 Investment earnings 3,277 200 118 380 Intergovernmental - - - - Other - - 34,413 - ...1 Total Revenues - 1,153,637 59,676 34,531 71,289 , Expenditures r, Current: General government 533,088 - - Public safety - - 14,558 - Community services - 71,189 - 31,149 7 Parks and recreation - - - 1 Capital Outlay 173,226 - - - Total Expenditures 706,314 71,189 14,558 31,149 Excess(deficiency)of revenues over(under)expenditures 447,323 (11,513) 19,973 40,140 Other Financing Sources(Uses) 7 Transfers in - - - - Transfers out - - - • - Total Other Financing 1 Sources(Uses) - - - - - Net change in fund balances 447,323 (11,513) 19,973 40,140 Fund balances-beginning 1,823,829 141,121 71,364 243,295 Fund balances-ending $ 2,271,152 $ 129,608 $ 91,337 $ 283,435 ,--, 79 J Page 1 of 2 illParks and Regional Park Police Recreation Detention :Donations. Seizure Development • $ - . $ - $ - $ - voi 12 203 372 1,247 114 10,425 163,096 43,191 243,803 10,437 163,299 : `_ . . 43,563 245,050 50,639 _ - 76,882 - 52,441 - . 5,245 - 29,883 256,392 let .. '82,127 80,522 308,833 10,437 81,172 : (36,959) - (63,783) (10,443) - - - (10,443) - (6) 81,172 (36,959) , (63,783) 6 108,432 278,458 859,702 $ - - $ 189,604 $ 241,499 $ 795,919 wet ws 80 CITY OF PEARLAND,TEXAS COMBINING STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS r"1 For the Year Ended September 30, 2013 Juvenile Traffic Impact Management Sidewalk Grant Fund Improvements Fund Revenues Sales and use taxes $ - $ - $ - $• - - Franchise fees - - Fines and forfeitures - - - 69,603 `-- Investment earnings 308 27 1,006 70 _ Intergovernmental - 814,545 - - Other 20,129 12,292 204,689 . Total Revenues 20,437 826,864 205,695 69,673 Expenditures Current: General government - - -Public safety - 57,282 Community services - 93,441 - 44,081 Parks and recreation - 3,741 -Capital Outlay - 15,659 - - Total Expenditures - - 170,123 - 44,081 Excess(deficiency)of revenues over(under)expenditures 20,437 656,741 205,695 25,592 Other Financing Sources(Uses) Transfers in - 20,748 - - Transfers out - (659,196) (157,907) - Total Other Financing V Sources(Uses) - (638,448) (157,907) Net change in fund balances 20,437 18,293 47,788 25,592 . Fund balances-beginning 205,363 28,011 592,108 34,907 Fund balances-ending $ 225,800 $ 46,304 $ 639,896 $ 60,499 81 Page 2 of 2 _ •, • Educational • Street TV -Assessments" . U of H Fund • Total • • . ` $. • $ - - $ $ 1,150,360 • . 240,378 - - • 240,378 rig - - 199,988 204 - • 61 7,485 - • - 186,970 1,001,515 - �"'+ . - - . . - • -. .338;511 • ' 1,070;549 • - . 240,582 - 525;542 3,670,275 - • L, . • - • • - ••316;8.28' ' • -849,916 - - - • . 122,479 19;881 . - • - -. •• 259,741 .. - - - 133,064 . . 44,813 • . - • - :525,218 - ! . .64,694 - 3.16;828 1,890,418. .175,888 • - 208,714 .1,779,857. . • . - 20,748 . • . - • . (827,546) - (806,798) • 175,888 - 208,714'- - . -973,059 • - • -84,626 - :31,065 .• . • . •"4,502,287• r $ 260,514 $ • - . $ 239,779 . $ . 5,475,346 - • • rw • - • • 82'. .' • • • • • • • • CITY OF PEARLAND,TEXAS DEBT SERVICE FUND` • SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE—BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30;2012 • • • 2013 . • • Variance . 1-1 .Positive/ Final Budget Actual (Negative) 2012 Revenues • r! Property taxes $ 25,546,545 $ 25,898,494 $ 351,949 ' $ 23,500,454 Investment earnings 23,595 19,296 (4,299) 9,784 Miscellaneous 1,949,966 1,946,973 • (2,993) 796,087 'Total Revenues 27,520,106 27,864,763 344,657 24,306,325 Expenditures Debt Service: • Principal • 11,950,486 11,950,504 - (18) 9,373,377 Interest 12,630,564 12,630,436 128 12,400,810 Other 44,580 • 37,525 7,055 - Intergovernmental 4,057,682 4,057,682 3,992,293 Total Expenditures 28,683,312 28,676,147 7,165 25,766,480 Revenues over(under)expenditures (1,163,206) (811,384) 351,822 (1,460,155) Other Financing Sources(Uses) Proceeds from long-term debt - - - 49,805,000 Premium on general obligation debt - - - - ' 3,808,801 Payments to refunding escrow agent - - - (54,478,177) Transfers in 461,726 461,726 - 2,157,471 • Total Other Financing Sources(Uses) 461,726 461,726 - 1,293,095 r< Net change in fund balances (701,480) (349,658) 351,822 (167,060) Fund balances-beginning 4,992,479 4,992,479 • - 5,159,539 Fund balances-ending $ 4,290,999 $ 4,642,821 $ 351,822 $ 4,992,479 • • • • • • 83 CITY OF PEARLAND,TEXAS SPECIAL.REVENUE FUND-HOTEL/MOTEL TAX SCHEDULE OF REVENUES,EXPENDITURES AND 17 CHANGES IN FUND BALANCE—BUDGET AND ACTUAL L For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 2013 Variance Positive/ Final Budget Actual (Negative) 2012 rIm Revenues Hotel occupancy tax .$ 1,056,209 $ 1,150,360 $ 94,151 . $ 816,640 - Investment earnings 2,808 3,277 . 469 1,471 Misc 77,000 - (77,000) - Total Revenues 1,136,017 1,153,637 17,620 818,111 Expenditures Current: General government . 614,812 533,088 81,724 . 449,174 L Capital outlay 216,547 173,226 43,321. ` - Total Expenditures 831,359 706,314 125,045 449,174 rap Revenues over(under)expenditures - 304,658 . 447,323 142,665 368,937 Net change in fund balances 304,658 447,323 142,665 . 368,937. I', Fund balances-beginning 1,823,829 1,823,829 - 1,454,892 Fund balances-ending $ 2,128,487 •$ 2,271,152 $ 142,665 . $ 1,823,829 d_ rat 'al _ 84 CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND—COURT SECURITY SCHEDULE OF REVENUES,EXPENDITURES,AND ,-, CHANGES IN FUND BALANCE—BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 2013 Variance - n Positive/ Final Budget Actual (Negative) 2012 1 Revenues 9-9 Fines and forfeitures $ 62,950 $ 59,476 $ (3,474) $ 62,493 Investment earnings 205 200 (5) 113 Total Revenues 63,155 59,676 (3,479) 62,606 Expenditures Current: Community services 73,850 71,189 2,661 61,525 Total Expenditures 73,850 71,189 2,661 61,525 Revenues over(under)expenditures (10,695) (11,513) (818) 1,081 Net change in fund balances (10,695) (11,513) (818) 1,081 7 Fund balances-beginning 141,121 141,121 - 140,040 Fund balances-ending $ 130,426 $ 129,608 $ (818) $ 141,121 ,-, 7 n fl 85 n J CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-CITY-WIDE DONATIONS SCHEDULE OF REVENUES,EXPENDITURES,AND -. r"' CHANGES IN FUND BALANCE-BUDGET AND ACTUAL L For the Year.Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 Variance Positive/ __ Final Budget: Actual (Negative)" 2012 .. Revenues Investment earnings $ 106 $ 118 $ 12 $• 51 --- Other income 30,560 34,413 3,853 33,179 Nom Total Revenues 30,666. 34,531 3,865 33,230 Expenditures __ Current: Public safety : 17,098 . - 14,558 2,540 . 14,937 Community services 6,500 - 6,500 _ 7,697 Total Expenditures 23,598 14,558 9,040 ` 22,634 .411 Revenues over(under)expenditures 7,068 19,973 12,905 - . 10,596. Net change in fund balances 7,068 19,973 12,905 10,596 Fund balances-beginning : . 71,364 71,364 . - . - 60,768 Fund balances ending $ . 78,432 $ 91,337 $ . 12,905 $ .71,364. .e L ae NI!. 86 CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND—COURT TECHNOLOGY SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the'YearEnded September 30, 2013 withcomparative actual totals for the year ended September 30, 2012 2013 Variance Positive/ Final Budget' Actual (Negative) 2012 Revenues - —' Fines and forfeitures $ 74,600 $ 70,909 (3,691) $ 74,945 Investment earnings 352 380 28 180 Total Revenues 74,952 71,289 (3,663) 75,125 ,r Expenditures Current: Community services 50,456 31,149. 19,307 41,268 n Capital outlay 262,676 - 262,676 - Total Expenditures 313,132 31,149 281,983 41,268 Revenues over(under)expenditures (238,180) 40,140 - 278,320 33,857 Net change in fund balances (238,180) 40,140 278,320 33,857 Fund balances-beginning 243,295 243,295 - 209,438 Fund balances-ending $ 5,115 $ 283,435 $ 278,320 $ .243,295 sR 87 CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND REGIONAL DETENTION SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES INFUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 2013 Variance Positive/ Final Budget Actual (Negative) 2012 Revenues- Investment earnings $ 12 $ 12 : $ - $ 6 Other Income 10,425 10,425 - 24,750 IN Total Revenues 10,437 10,437 24,756 Other Financing Sources(Uses) Transfers out (10,443) (10,443) ' - (24,750) a Net change in fund balances (6) (6) - 6 Fund balances-beginning 6 6 Fund balances-ending $ - $ $ $ 6 +I • go • 88 • I CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-PARK DONATIONS SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 J Variance Positive/ Final Budget Actual (Negative) 2012 • J Revenues Investment.earnings $ 151 $ 203 $ 52 $ 74 Other 95,095 163,096 68,001 84,559 Total Revenues 95,246 163,299 68,053 84,633 Expenditures Current: , Parks and recreation 87,500 76,882 10,618 65,149 Capital outlay - 5,245 (5,245) Total Expenditures 87,500 82,127 5,373 65,149 Revenues over(under)expenditures 7,746 81,172 73,426 19,484 Net change in fund balances 7,746 81,172 73,426 19,484 Fund balances-beginning 108,432 108,432 - 88,948 Fund balances-ending $ 116,178 $ 189,604 $ 73,426 $ 108,432 89 CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-POLICE SEIZURE • SCHEDULE OF REVENUES,"EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended,September 30, 2013 with comparative actual totals for the year ended September 30, 2012 • re 2013 Variance Positive/ Final.Budget Actual. (Negative) 2012 Revenues Investment earnings $ 357 $ .372. $ . 15 $ 209 :. Other- : . 30,123 43,191 13,068. 178,773 Total Revenues 30,480 43,563 13,083 178,982 Expenditures . Current: Public safety 77,135 . : 50,639 26,496 59,789 'R Capital outlay 52;883 . 29,883 23,000 8,085 -- Total Expenditures 130,018 80,522 49,496 67,874 Revenues over(under)expenditures (99,538) . (36,959) 62,579• 111,108 Net change in fund balances (99,538) (36,959) 62,579 111,108 Fund balances-beginning . 278,458 - 278,458 - : 167,350 Fund balances-ending $ 178,920 - $ '' . 241,499 $ 62,579 $ .. 278,458 . 104 90 CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-PARKS AND RECREATION DEVELOPMENT SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES INFUND BALANCE—BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 2013 Variance Positive/ Final Budget Actual (Negative) 2012 Revenues Investment earnings $ 1,105 $ 1,247 $ 142 $ 1,054 Other 75,996 243,803 167,807 65,308 Total Revenues 77,101 245,050 167,949 66,362 Expenditures Current: Parks and recreation 136,365 52,441 83,924 - Capital outlay 261,677 256,392 5,285 232,935 Total Expenditures 398,042 308,833 89,209 232,935 Revenues over(under)expenditures (320,941) (63,783) 257,158 (166,573) Other Financing Sources(Uses) . Transfers out - - - (27,280) Net change in fund balances - (320,941) (63,783) 257,158 (193,853) Fund balances-beginning 859,702 859,702 - 1,053,555 . Fund balances-ending $ 538,761 $ 795,919 $ 257,158 $ 859,702 91 pP CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND SIDEWALK SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES INFUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual_ totals for the year ended September 30, 2012 2 13. Variance Positive/ _ . Final Budget Actual (Negative) 2012 Revenues Investment earnings $ 295 . $ . 308 -'$' 13 $ , 167 Li Other ' - .5,000 20,129 _ ....15,129; - - Total Revenues 5,295 20,437 15,142 167. Expenditures . . Current: Public works Total Expenditures - . - 1,980 Revenues over(under)expenditures 5,295 20,437 15,142: (1,813) Other Financing Sources(Uses) _; Transfers out - - - (12,072) Net change in fund balances 5,295 20,437'. ' 15,142 (13,885) Fund balances-beginning 205,363 ` 205,363 - 219,248 Fund balances-ending. $ 210,658 $ 225,800 $ 15,142 $ 205,363' a " I. CITY OF PEARL,AND,TEXAS SPECIAL REVENUE FUND- GRANT FUND SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 fl 2013 Variance Positive/ fl Final Budget Actual (Negative) 2012 Revenues Investment earnings $ 3 $ 27 $ 24 $ - Intergovernmental 1,475,001 814,545 (660,456) 1,236,626 . Other 4,000 12,292 8,292" 5,000 Total Revenues 1,479,004 826,864 (652,140) 1,241,626 Expenditures Current: General government - Public safety 100,786 57,282 43,504: 119,246 Public works 26,156 Community service 126,498 93,441 33,057 198,688 Parks and recreation 7,741 3,741 4,000 208,059 Capital outlay 200,341 15,659 184,682 131,191 Total Expenditures 435,366 170,123 265,243 683,340 r- Revenues over(under)expenditures 1,043,638 656,741 (386,897) 558,286 Other Financing Sources(Uses) Transfers in 14,710 20,748 6,038 - r- Transfers out (1,058,191) (659,196) 398,995 (557,940) Net change in fund balances 157 18,293 18,136 346 Fund balances-beginning 28,011 28,011 - 27,665 r- Fund balances-ending $ 28,168 $ 46,304 $ 18,136 • $ 28,011 rr 93 CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-TRAFFIC IMPACT IMPROVEMENTS SCHEDULE OF REVENUES,EXPENDITURES AND rig CHANGES IN FUND BALANCE-BUDGET AND ACTUAL. For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 2013 Variance y Positive/ Final Budget Actual. (Negative) 2012 Revenues Investment earnings $. .984 $ . 1,006 $ . 22 .$. 704 -- Other . 230,789 , 204,689 . (26,100): - �. Total Revenues 231,773 205,695 (26,078) 704 Other Financing Sources(Uses) Transfers out (157,907) (157,907) - - we Net change in fund balances 73,866 47,788 (26,078) 704 Fund balances-beginning 592,108 .592,108 , - 591,404 Fund balances-ending . $ 665,974 $: 639,896 $ (26,078) • $ 592,108we . am +e 111 .11 94 . CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND—JUVENILE MANAGEMENT FUND SCHEDULE OF REVENUES,EXPENDITURES;AND rr CHANGES IN FUND BALANCE—BUDGET AND ACTUAL For the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30, 2012 2013 Variance Positive/ Final Budget Actual (Negative) 2012 Revenues Fines and fees $ 74,600 $ 69,603 $ (4,997) $ 72,529 Investment earnings 64 70 6 25 Total Revenues. 74,664 69,673 . (4,991) 72,554. b Expenditures Current: Community services 46,693 44,081 2,612 57,048 ,.-, Total Expenditures 46,693 44,081 2,612 57,048 Revenues over(under)expenditures 27,971 25,592 . (2,379) 15,506 Net change in fund balances 27,971 25,592 (2,379) 15,506 Fund balances-beginning 34,907 34,907 - 19,401 Fund balances-ending $ 62,878 $ 60,499 $ (2,379) $ 34,907 r- r- r. - 95 + CITY OF PEARLAND,TEXAS ' - SPECIAL REVENUE FUND-EDUCATIONAL TV SCHEDULE OF REVENUES,EXPENDITURES,AND rul CHANGES IN FUND BALANCE-BUDGE TANDACTUAL For the Year Ended September.30, 2013 with comparative actual totals for the year ended September.30 2012 Variance Positive/ Final Budget . Actual (Negative) : 2012 Revenues Franchise taxes $ 243,996 $ 240,378 $ (3,618) $ 146,988 L: Investment earnings 150 204 54 20 Total Revenues 244 146 240582 (3,564) 147,008 Expenditures Current: Community services 24,858 19,881 4,977 18,036 l l i Ca ta outlay Y _ 47,151 ,.:44,813; , :2,338 .44;346 Total Expenditures . 72,009 64,694 7,315 62382 vs Revenues over(under)expenditures 172,137 175,888 3,751 84,626 Net change in fund balances 172,137 175,888 3,751 84,626 Fund balances-beginning 84,626 84,626 - - Fund balances-ending $ ; .256,763 $ 260,514 $ 3,751 $ 84,626 ffn CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND—U OFHFUND SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGESINFUND BALANCE—BUDGET AND ACTUAL For. the Year Ended September 30, 2013 with comparative actual totals for the year ended September 30,2012 2013 Variance Positive/ Final Budget Actual (Negative) 2012 Revenues Investment earnings $ 50 $ 61 $ 11 $ 57 Intergovernmental 187,211, .186,970 (241) 182,860 - Other: 344,195 338,511 (5,684) 64,231 Total Revenues 531,456 525,542 (5,914) 247,148.. Expenditures Current General government 322,771 316,828 5,943 217,346 Total Expenditures. 322,771 316,828 5,943 217,346 Revenues over(under)expenditures 208,685 208,714 29 29,802 Net change in fund balances 208,685 208,714 29 29,802 Fund balances-beginning 31,065 31,065 - 1,263 Fund balances-ending $ 239,750 . $' ' 239,779 $ 29. $ 31,065 . 97 . 1 � 1 f I Long-Term Debt Amortization Schedules f 1 1 1 _ 1 98 0.1 1 J CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF GOVERNMENT ACTIVITY LONG-TERM DEBT fl i BY MATURITY DATE - September 30, 2013 Certificates of Obligation, Certificates of Obligation, Series 2003 Series 2004 Fiscal Year Principal Interest Total Principal Interest Total '1 i 2014 $ 1,035,000 $ 18,630 $ 1,053,630 $ 710,000 $ 42,600 $ 752,600 2015 - - - 710,000 14,200 724,200 2016 - - - - - -. "' 2017 - - - - - - 2018 - - - , 2019 - - - - - 2020 - - - - 2021 - - - - 2022 - - - - - - 2023 - - - - - - 2024 - - - - - - ror7 2025 - - - - - - 2026 - - - - - - i 2027 - - - - - J 2028 - - - - - - 2029 - - - - - - 7 2030 - - - - - - 2031 - - - - - - _ 2032 - - - - - - 2033 - - - - - - 2034 - - - - 2035 - - - - - - 2036 - - - - - - $ 1,035,000 $ 18,630 $ 1,053,630 $ 1,420,000 $ 56,800 - $ 1,476,800 ri /-I n rr. P7 7 i 99 - Page l of 6 Permanent Improvement&Refunding Bonds, Certificates of Obligation, Series 2005 Series 2006 Fiscal Year Principal _ Interest Total " Principal Interest Total fli 2014 $ 1,930,000 $ 925,414 $ . 2,855,414 $ 355,000 $ ' 393,557 $ 748,557 2015 2,010,000. 836,564 2,846,564 , 370,000 .•- 371,354 .741,354 2016 " . - 2,115,000 733,439 2,848,439 „395,000 -349,654 744,654 2017 865,000 663,264 1,528,264 405,000 330,932` 735,932 ' 2018 995,000 626,064 1,621,064. 405,000- 314,074 719,074 I 2019 380,000 598,374 ; . 978,374 505,000 , 294,838 _ . 799,838 . 2020 385,000 582,643 967,643 470,000 274,001. 744,001, pm . 2021 . 395,000 566,408 961,408` •500,000 253,146 753,146 2022 405,000 549,506 954,506 525,000 230912 755,912 2023 . 875,000 = ..`522,088 1,397,088 . 555,000 .I 207,218 762,218 2024 1,185,000 473,650 1,658,650 585,000 181,991. 766,991 2025 1,245,000 412,900' 1,657,900 605,000 155,363 . 760,363 711 2026 1,310,000 349,025' 1,659,025 730,000 125,325 855,325 P r 2027 3,045,000 247,763 3,292,763 765,000 91,688 856,688 2028 1,810,000 134,000 1,944,000 805,000 56,363 861,363 2029 1,775,000 44,375 1,819,375 850,000 19,125 869,125 2030 - _ . > t. 2031 - 2032 . - - - -. - . _ 2033 _. 2034 $ '20,725,000 $ 8,265,477 '$, 28,990,477 ,.$ 8,825,000 $ 3,649,541, ` $ 12,474,541 71111 BCMUD#1 Bonds, 1 , - Series 2007 Fiscal Year Principal, Interest - • Total 2014 $- 65,000 $ 75,585 $ 140,585 2015 70,000 73,082 143,082 2016 75,000 70,353 145,353 2017 75,000 • 67,428 , 142,428 2018 80,000 64,428 144,428 1111! - 2019 85,000 61,228 - 146,228 2020 90,000 57,827 • 147,827 - 2021 95,000 54,228 149,228 2022 100,000 50,333 • 150,333 2023. - • 110,000 46,232. 156,232 2024 115,000 • 41,612 156,612 2025 120,000 36,782. 156,782•. 2026 130,000 31,622 161,622 - - 2027 135,000 26,033 161,033 IR 2028 _ -145,000 - 20,227 165,227 `, 2029 155,000 - 13,920 168,920 • 2030 . 165,000 7,178 172,178. 2031 - '111 2032 - - 2033 . . . - - .. 5 - - . -- . 2034 . . - - 2035 - 2036 - . -. . - $ .1,810,000 $ " 798,098- $ 2,608,098 11/ 100• CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF GOVERNMENT ACTIVITY LONG-TERM DEBT BY MATURITY DATE September 30, 2013 Permanent Improvement and Refunding Bonds, Certificates of Obligation, Series 2006 Series 2007 Fiscal Year Principal Interest Total Principal Interest Total '..' 2014 $ 410,000 • $ 1,474,794 $ 1,884,794 $ 300,000 $ 1,007,650 $ 1,307,650 2015 430,000 1,457,994 1,887,994 350,000 990,588 1,340,588 2016 445,000 1,440,216 1,885,216 400,000 970,900 1,370,900 . ' p- 2017 460,000 1,421,263 1,881,263 450,000 948,587 1,398,587 • 2018 480,000 1,401,288 1,881,288 1,005,000 910,394 1,915,394 2019 1,335,000 1,361,050 2,696,050 1,060,000 856,187 1,916,187 , 2020 1,485,000 1,293,888 2,778,888 1,115,000 799,094 1,914,094 ,-,. 2021 1,580,000 1,217,263 2,797,263 1,170,000 739,112 1,909,112 2022 - 1,675,000 1,135,888 2,810,888 1,230,000 676,113 1,906,113 2023 2,150,000 1,040,263 3,190,263 1,295,000 609,831 1,904,831 2024 2,150,000 932,763 3,082,763 1,360,000 540,137 1,900,137 2025. 2,270,000 822,263 3,092,263 1,430,000. 466,900 1,896,900 2026 2,395,000 705,638 3,100,638 1,500,000 389,988 1,889,988 2027 2,525,000 585,794 3,110,794 1,580,000 324,937 1,904,937 2028 3,690,000 438,188 4,128,188 1,660,000 272,288 1,932,288 2029 7,380,000 175,275 7,555,275 1,745,000 216,956 1,961,956 r 2030 - - - 1,540,000 163,575 1,703,575 2031 - - - 1,600,000 104,550 1,704,550 2032 - - - :1,660,000 35,275 _ 1,695,275 2033 - - - . - 2034 - - - - 2035 - - - - - - 2036 - - - - - - $ 30,860,000 $ 16,903,828 $ 47,763,828 $ 22,450,000 $ 11,023,062 $ 33,473,062 1--" 1 7 i 101 7 Page2of6 Permanent Improvement and Refunding Bonds, Certificates of Obligation, Series 2007 Series 2009 Fiscal Year Principal Interest Total Principal Interest Total 2014. $- 2,510,000 $ 3,048,062 $ ,5,558,062 $ 230,000 $ 345,703 : . $ 575,703 2015 - 2,685,000 2,924,025 5,609,025 235,000 339,953 574,953 IP 2016 -.2,345,000 2,791,562 5,136,562 240,000 332,903 -572,903 2017 - 2,460,000 2,671,438 5,131,438 245,000 325,703 570,703 2018 2,220,000 2,554,437 4,774,437 255,000: '' 317,128 . 572,128 2019 3,830,000 2,403,188 6,233,188 320,000 307,565 627,565 2020 5,190,000 2,190,662 7,380,662 325,000: 294,765 619,765 2021 5,395,000 1,952,500 7,347,500 .340,000 281,765 621,765 2022 5,610,000 1,704,887 7,314,887 350,000 268,165 618,165 2023- 5,005,000 1,466,050 6,471,050 365,000 253,815 618,815 2024 5,230,000 1,235,763 6,465,763 - 385,000 238,303 -• 623,303. 2025 3,835,000 1,034,197 4,869,197 400,000 - 221,363 621,363 - . 2026 3,845,000 866,197 4,711,197 420,000 203,363 . 623,363 2027. '- 4,010,000. 686,850 4,696,850 440,000 183,938 623,938 2028- 2,290,000 537,225 2,827,225 465,000 163,038 " 628,038 um 2029 2,370,000 426,550. 2,796,550 485,000 139,788 624,788 2030 2,590,000 308,750 2,898,750 415,000 116,750. 531,750 2031 2,620,000 185,012 : • 2,805,012 .410,000 96,000 506,000 2032 - 2,585,000 61,394 2,646,394 475,000 75,500 • , 550,500 - .2033 - • -505,000 51,750 556,750 2034 - - - 530,000 26,500 556,500 • - 2035 2036 $ 66,625,000 $ 29,048,749 $ 95,673,749 $ 7,835,000 $ 4,583,758 $ 12,418,758 . 1 111 NIP gik 102 7 7 CITY OF PEARLAND,TEXAS " COMBINING SCHEDULE OF GOVERNMENT ACTIVITYLONG-TERMDEBT 1. BY MATURITY DATE I September 30, 2013 Certificates of Obligation, Permanent Improvement'Bonds,' Series 2008 Series 2008 Fiscal Year Principal .Interest Total Principal Interest Total I-1 1 i 2014 $ 155,000 $ 399,641 $ 554,641 $ 335,000 $ 1,041,150 $ 1,376,150 - 2015 145,000 393,828 538,828 310,000 1,025,025 1,335,025 2016 150,000 388,019 538,019 325,000 1,009,150 1,334,150 7 2017 160,000 381,819 541,819 340,000 992,525 1,332,525 2018 165,000 375,319 540,319 360,000 975,025 1,335,025 2019 185,000 368,319 553,319 405,000 955,900 1,360,900 2020 195,000 360,710 555,710 425,000 934,619 1,359,619 2021 205,000 352,591 557,591 445,000 911,781 1,356,781 2022 215,000 343,794 558,794 470,000 887,763 1,357,763 2023 225,000 334,388 559,388 490,000 861,950 1,351,950 2024 240,000 324,300 564,300 515,000 834,313 1,349,313 2025 250,000 313,550 563,550 545,000 805,163 1,350,163 I 2026 290,000 301,525 591,525 625,000 772,988 1,397,988 2027 305,000 287,375 592,375 660,000 737,650 1,397,650 2028 - - 320,000 271,750 591,750 695,000 700,388 1,395,388 2029 335,000 255,375 590,375 730,000 664,850 1,394,850 7 2030 1,335,000 213,625 1,548,625 4,530,000 543,669 5,073,669 2031 1,675,000 138,375 1,813,375 4,705,000 330,109 5,035,109 2032 1,930,000 48,250 1,978,250 4,785,000 110,653 4,895,653 2033 - - - - - 2034 - - - - - - I 2035 - - - - - - J 2036 - - - - - - $ 8,480,000 $ 5,852,553 $ 14,332,553 $ 21,695,000 $ 15,094,671 $ 36,789,671 7 " R 1 r'i J n 103 . P Page 3 of 6 pi Certificates of Obligation, Permanent Improvement Bonds, Series 2009A Series 2010A Fiscal Year Principal Interest Total Principal Interest Total i 2014 $ 640,000 ` $ 356,965 $; 996,965 $ 355,000 $ 410,503 $ 765,503 2015 640,000 341,765 981,765 370,000 -399,553 769,553_ 2016 640,000 324,965' 964,965 380,000 388,353. ,768,353 .:. 2017 640,000 301,765 . 941,765 390,000 378,703 768,703 ` 2018 640,000 275,403 915,403 400,000 366,853 766,853 2019 640,000 252,560 892,560 415,000 354,628 769,628 IR - 2020 ' ' 635,000 231,361 866,361 ' 425,000 342,028 767,028 2021 640,000 .210,163 ' 850,163 440,000 329,053 ' 769,053 ,. 2022 . 640,000 : 187,763. ' . 827,763 455,000 _ 315,059 770,059, 2023 640,000 164,403 804,403 465,000 300,109 765,109 mei 2024 640,000 ` '140,562 780,562 485,000 284,065 769,065 r 2025 ' 635,000 116,338 751,338 500,000 265,578 765,578 2026 . - 640,000 91,315 731,315 520,000 246,153 , 766,153 . 2027 ' 640,000 65,715 705,715 540,000" 226,603 '766,603 2028 . 635,000 39,898 674,898 560,000 205,558 765,558 ge 2029" ' 640,000 ' 13,440 653,440 585,000 182,938 767,938 2030 - '. - . - 610,000 159,038 769,038 2031 - - - 635,000 133,344 768,344 2032 - - - 660,000 105,825 765,825 IR 2033. - - - - •690,000 77,138 767,138 2034 - - '720,000 , 47,175 ' 767,175 2035 _ - - 750,000` , 15,938 765,938 2036 vi! $ 10,225,000 $ 3,114381 $ . 13,339,381 $ :11,350,000 $ 5,534,195 $ 16,884,195 1.1 Permanent Improvement&Refund Bonds, Series 2009 - ' Fiscal Year Principal Interest Total - . 2014 . $ - - 390,000 $ 641,568 .$ 1,031,568 2015 ' .405,000 626,568_ 1,031,568 ' - 2016 420,000 615,918 1,035,918 2017 ' 435,000 599,267 1,034,267. AR 2018 . . 455,000 578,154 1,033,154 - 2019 590,000 557,888.. 1,147,888 2020 615,000 538,863 - 1,153,863 2021 635,000 517,075 1,152,075 2022. 655,000 494,490- 1,149,490 2023 680,000 -470,120 1,150,120 2024 705,000 444,321 1,149,321 2025 - 735,000 416,953 1,151,953 2026 765,000 387,505 1,152,505 . . 2027 795,000 356,305 1,151,305 2028 . 825,000 323,492 1,148,492 - - - 2029 865,000 288,415 '1,153,415 2030 835,000 249,375 1,084,375 v 2031 945,000 204,875 1,149,875 ' 2032 1,090,000 154,000 " 1,244,000 - 2033 135,000 95,875 230,875 2034 1,300,000 . 32,500 1,332,500 - II 2035 - - 2036 - - - - $ 14,275,000 S. 8,593,527 - $ 22,868,527 104 I 1 • . 1 CITY OF PEARLAND,TEXAS -- COMBINING SCHEDULE OF GOVERNMENT ACTIVITY LONG-TERM DEBT "I BYMATURITYDATE 1 September 30, 2013 ' • I . Permanent Improvement Refunding Bonds, Permanent Improvement Refunding Bonds, . Series 2010B Series 2012 Fiscal Year Principal Interest Total Principal Interest Total 7 2014 $ 220,000 $ 25,600 . $ 245,600 $ - $ 1,566,250 $ 1,566,250 • - i 2015 225,000 • 21,150 246,150 685,000 1,552,550 2,237,550 2016 225,000 • • 14,400 239,400 1,955,000 1,489,975 3,444,975 2017 240,000 6,300 246,300 • 2,625,000 1,388,600 4,013,600 • 2018 90,000 1,350 91,350 2,690,000 1,282,300 • • 3,972,300 2019 - - - 3,210,000 • 1,164,300 4,374,300 •2020 - - - 2,200,000 1,056,100 3,256,100 2021 • - - - 2,340,000 • 965,300 . 3,305,300 2022 _ _ - 2,680,000 • 864,900 3,544,900 • 2023 - . - - 2,840,000 754,500 3,594,500 2024 - - - 2,720,000 643,300 3,363,300 - • 2025 - - - 4,520,000 521,100 •5,041,100 2026 - - - 4,540,000 385,200 •4,925,200 2027 - - - 3,035,000 271,575 3,306,575 2028 - - 5,355,000 . 145,725 5,500,725 2029 - - • - 2,180,000 32,700 2,212,700 `F •2030 • - - - - - - 2031 - - - - - - • 2032 - - - - - .2033 - - - - - p-- 2034 - _ - _ 2035 - - - - - 2036 $ 1,000,000 $ 68,800 $ 1,068,800 $ 43,575,000 $."14,084,375 $ 57,659,375 '-• . r-- • • • • • 105 . Page 4"of6 Permanent Improvement Bonds, Certificates of Obligation, Series 2011 Series 2011 Fiscal Year Principal . Interest. . Total _ Principal Interest Total 2014 $ 145,000 $. 196,031 $ 341,031 $ 210,000 $ 32,813 $ 242,813 2015 150,000 190,131. 340,131 210,000 -; 28,424 238,424 2016. 155,000. 184,031 339,031 210,000 .24,035 - 234,035 2017 165,000 177,631.. 342,631 205,000 19,698. 224,698 2018 170,000 170,931 340,931 210,000 15,362, 225,362 2019 175,000 164,031 339,031 210,000 , • - 10,973 220,973 ■4 2020 185,000 156,831 341,831 210,000 6,584 216,584 2021 190,000 . 149,331 339,331 210,000 2,195 " 212,195 2022. 200,000 141,531 341,531 - 2023 205,000 134,456 339,456 - - - ■q. 2024 _ - - 210,000 . 128,231 338,231 2025 ' 220,000 121,506 341,506 - - ' - 2026 225,000- 114,275 339,275 2027 "235,000 106,506" 341,506 - - . - - - - 2028. _ - '245,000 .98,106 - 343,106 mit 2029 250,000, 88,819 . 338,819 2030 • - 260,000 78,619 33,8,619 2031 '275,000 67,919 342,919 2032 285,000 56,719 341,719 .. - - • - _ - IR 2033 295,000 45,119• 340,119 2034 305,000 33,119 338,119 - - - 2035' 320,000- - 20,419 ' ' 340,419 - 2036 335,000 ' ' 6,909 341,90905) $ ' 5,200,000 " . $ 2,631,201 $ , 7,831,201 $ - 1,675,000 '$. • 140,084 -$ 1,815,084 - 1 vim +A . 106 , 1 1 . CITY.OF PEARLAND,TEXAS • - COMBINING SCHEDULE OF GOVERNMENT ACTIVITY LONG-TERM DEBT _ 7 BYMATURITYDATE September 30, 2013 . • • 7 • J BCMUD#4 Bonds, Permanent Improvement Bonds, • . Series 2011 • Series 2013 . Fiscal Year• Principal Interest Total Principal Interest Total 7 2014 $. • 130,000 • 1 97,550 $ 227,550 $ . 275,000 $ 411,461 $ 686,461 2015 130,000 •94,300 224,300 295,000 370,943 665,943 • 2016 130,000 ' 90,887 220,887 295,000 362,093 657,093 2017 130,000 87,313 217,313 - 305,000 351,568 656;568 2018 130,000 _ 83,575 213,575 305,000 339,368 .644,368 2019 130,000 79,350 209,350 320,000. 326,868 646,868 2020 130,000 74,800 204,800 320,000 314,068 634,068 2021 130,000 69,925 199,925 . 330,006 301,068 631,068 2022 130,000 64,725, 194,725 330,000 287,868 617,868 i 2023 130,000 59,444 . 189,444 340,000 274,468 '614,468 2024 130,000 54,081 184,081 350,000 • 260,668 610,668 .. 2025 • 130,000 48,475 178,475 360,000 246,468 606,468 ' 2026 130,000 42,625 172,625 370,000 231,868 601,868.- 2027 130,000 36,645 166,645 370,000 . .217,068 587,068 2028 '130,000- 30,535 160,535 380,000 202,068 - 582,068 2029 130,000 24,360 154,360 390,000 186,424 576,424 `F 2030 130,000 18,120 148,120 400,000 169,880 569,880 2031 130,000 11,750 141,750 410,000 152,411 , 562,411 2032 170,000 4,250 ' 174,250 420,000 134,203 554,203 - . ' 2033 - - - 430,000 115,288 545,288 r 2034 . - - - 440,000 95,713 535,713 2035 - - - 450,000 75,688 525,688 2036 - - 460,000 - 55,213 515,213 2037 - - - 480,000 33,763 513,763 • 2038 - - - 490,000 11,331 - - 501,331 '- $ 2,510,000 $ 1,072,710 $ 3,582,710 $ 9,315,000 $ 5,527,827 $ -14,842,827 . r• . 107 p� Page S'of 6 I ' • Certificates of Obligation, Series.2013. .Fiscal Year `• Principal• Interest Total . M- _ - . 2014 -: $ 75,000 $ 124,691' r .$ :- .199,691 - - - : ` • 2615 . `•85,000 '•..•112,613 • 197,613 •.. L- • 2016 85,000.., •-- 110,063.. 195,063 • •• _ • - . •2017 85,000 107;513 . _ 192,513 2018 85,000 104,963` 189,963 r, - '` .2019 - • 90,000 102,338 192,338_ : ` ie. . ,2020 '•. 100,000 :. • 98,988 . 198,988 2021 - .100,900 • > • 94,488 • 194,488 : • - .2022 100,000. •. 89,488 . , 189,488 n, . : 2023 100,090 • 84,488 184,488 f f 2024 .109,000 . 79,488 ",179,488 • • 2025 -. • • 110,000 74,238, • 184,238 • ' .2026 • - 110,000 •• 69,288 '. • 179,288 . • . • - P -_ -2027 `1:10,000 " 64,888. 174,888 L • ..-2028 • 110,000 - 60,488 170,488. '2029" • ' - 120,000 '55,738 '. 175,738- - . 2030 •' 120,009 '50,563 • 170,563 • 2031" • , 1.20,000- - ` 45,313 " 165,313.. • " • 2032 . 120,090' " • 40,063 • •160,063 • -. ' _ .. . 1.-- - 2033 130,000 ' '. - 34,513 164,513 - • 2034,. • 130,000 ` 28,663 , 158,663 • - ',2035 130,000 •••;," 22,813' 152,813 • 36 140;000 16,650 ` 156,650" L_ • •• -220037 • ..'..140,000 • • 10,175 - .150,175 , ' 2038 . 150,000 3,469 153,469 • - . ,• • . . pm . ' - . $ 2,745,000 • $ 1,685,983 $ 4,430,983-• - .• • _ • s . • 108 wR . . 1 CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF GOVERNMENT ACTIVITY LONG-TERM DEBT BY MATURITY DATE September 30, 2013 Sales Tax Revenue and Refunding Bonds, - Sales Tax Revenue Bonds, Series 2005 Series 2006 Fiscal Year Principal Interest Total Principal Interest Total r 2014 $ 445,000 $ 323,738 $ 768,738 $ 215,000 $ 433,669 $ 648,669 2015 460,000 305,938 765,938 230,000 422,919 652,919 2016 480,000 287,538 767,538 240,000 411,419 651,419 F...- 2017 505,000 263,538 768,538 255,000 401,219 656,219 2018 530,000 238,288 768,288 265,000 390,381 655,381 2019 555,000 211,788 766,788 280,000 378,788 658,788 2020 575,000 189,588 764,588 300,000 366,538 666,538 2021 600,000 166,588 766,588 310,000 353,038 663,038 !r 2022 625,000 141,988 766,988 325,000 339,088 664,088 2023 650,000 116,363 766,363 345,000 322,838 667,838 2024 675,000 89,550 764,550 365,000 305,588 670,588 2025 705,000 61,200 766,200 385,000 287,338 672,338 I, 2026 735,000 31,238 766,238 - 405,000 268,088 673,088 2027 - - 1,190,000 247,838 1,437,838 2028 - - - 1,255,000 188,338 1,443,338 2029 - - 1,320,000 128,725 1,448,725 2030 - - - 1,390,000 66,025 1,456,025 r $ 7,540,000 $ 2,427,343 $ 9,967,343 $ 9,075,000 $ 5,311,837 $ 14,386,837 r Sales Tax Revenue Bonds, Series 2010 Fiscal Year Principal Interest Total r 2014 $ 260,000 $ 353,108 $ 613,108 2015 275,000 339,983 614,983 2016 290,000 326,101 616,101 2017 300,000 311,462 611,462 0- 2018 320,000 296,318 616,318 2019 340,000 280,164 - 620,164 2020 355,000 263,001 618,001 2021 375,000 245,080 620,080 r• 2022 400,000 226,150 626,150 2023 420,000 205,958 625,958. 2024 440,000 184,757 624,757 2025 465,000 162,546 627,546 2026 495,000 139,072 634,072 r 2027 525,000 114,085 639,085 2028 550,000 87,583 637,583 2029 575,000 59,819 634,819 2030 610,000 30,793 640,793 ,- $ 6,995,000 $ 3,625,980 $ 10,620,980 I- P i 109 r rm Page 6 of Tax Increment Contract Revenue and Refunding Bonds, Series 2012 Fiscal Year. Principal Interest Total 2014 $ 2,800,000 $ 1,581,511 $ 4,381,511 2015 2,885,000 1,495,550 4,380,550 2016 2,970,000 1,406,981 4,376,981. 2017, 3,070,000 1,315,802 . • • .4,385,802 2018 _ 3,160,000 1,221,553 - 4,381,553 2019. 3,255,000 1,124,541 • `•-4,379,541 'r 2020 3,120,000 1,024,613 4,144,613 2021 . 3,215,000 928,828 4,143,828 2022 3,030,000 830,128 3,860,128 2023 3,130,000 737,107 3,867,107 2024 3,225,000 641,016 3,866,016 2025 3,320,000 ' 542,008- . 3,862,008. . 2026 3,425,000 440,085 3,865,085 2027 3,530,000 334,937 3,864,937 gni 2028 - 3,635,000 226,566 3,861,566 2029 3,745,000 114,972 3,859,972 $ 51,515,000 $ . 13,966,198 $ . , 65,481,198 1 1 110 I 1 CITY OF PEARLAND,TEXAS J COMBINING SCHEDULE OF ENTERPRISE FUND LONG-TERM DEBT BY MATURITY DATE r- September 30, 2013 Water&Sewer System Revenue Bonds, Water&Sewer System Revenue Bonds, Series 1999 - Series 2003 fl Fiscal Year Principal Interest Total Principal Interest Total 2014 $ 130,000 $ 124,660 $ 254,660 $ 340,000 $ 13,600 $ 353,600 2015 135,000 118,680 253,680 - - - 7 2016 145,000 112,470 257,470 - - - 2017 540,000 105,800 645,800 - - - 2018 565,000 80,960 645,960 - - 2019 585,000 54,970 639,970 - - - 2020 610,000 28,060 638,060 - - - 71 2021 - - - 2022 _ - - 2023 - - - - - 2024 - - - - - - 2025 - 2026 - - - - - - 2027 - . - - - - - 2028 - - - -. - '� 2029 - - - - 2030 - 2031 - - - - - 2032 - - - i 2033 - - - - - - 2034 - - - - - _ 2035 - - - - - - 2036 - - - - 2037 - - - - - $ 2,710,000 $ 625,600 $ 3,335,600 $ 340,000 $ 13,600 - $ 353,600 Water&Sewer System Revenue and Refunding Bonds, Water&Sewer System Revenue and Refunding Bonds, Series 2006 Series 2007 Fiscal Year Principal Interest Total Principal Interest Total P 2014 $ 680,000 $ 530,119 $ 1,210,119 $ 920,000 $ 1,670,013 $ 2,590,013 2015 710,000 499,519 1,209,519 965,000 1,619,413 2,584,413 2016 745,000 467,569 1,212,569 1,010,000 1,566,338 2,576,338 2017 100,000 434,044 534,044 950,000 1,510,788. 2,460,788 r 2018 100,000 429,744 529,744 995,000 1,458,538 2,453,538 2019 100,000 425,369 525,369 1,045,000 1,403,813 2,448,813 2020 100,000 420,869 520,869 1,095,000 1,348,950 2,443,950 2021 100,000 416,244 516,244 1,155,000 1,294,200 2,449,200 2022 100,000 411,619 511,619 1,210,000 1,236,450 2,446,450 'r 2023 100,000 406,994 506,994 1,275,000 1,175,950 2,450,950 2024 100,000 402,369 502,369 2,295,000 1,112,200 3,407,200 2025 100,000 397,744 497,744 2,480,000 997,450 3,477,450 2026 1,150,000 393,119 1,543,119 3,120,000 873,450 3,993,450 2027 1,205,000. 338,494 1,543,494 3,280,000 717,450 3,997,450 2028 1,265,000 278,244 1,543,244 3,440,000 553,450 3,993,450 2029 1,330,000 214,994 1,544,994 3,615,000 398,650 4,013,650 2030 1,395,000 146,831 • 1,541,831 3,795,000 272,125 4,067,125 2031 1,470,000 75,338 1,545,338 3,980,000 139,300 4,119,300 '- 2032 - - - - -_ - 2033 - - - 2034 - - - - - 2035 - - - - - - 2036 2037 - - - - - - $ 10,850,000 $ 6,689,223 $ 17,539,223 $ 36,625,000 $ 19,348,528 $ 55,973,528 0-- 111 mg Page 1 of 2 Water&Sewer System Revenue Bonds, Water&Sewer System Revenue Bonds, Series 2008 Series 2009 rim .- . Fiscal Year Principal Interest Total Principal " ' Interest Total L 2014 $ -255,000 $ ' 652,690. $ 907,690 $ 380,000 $ 558,763 $ 938,763 2015 275,000 641,215 916,215 385,000 547,362 932,362 2016 - - - ,'290,000 628,840• 918,840 400,000 535,812 935,812 2017 315,000 615,790 930,790 410,000 522,813 932,813 L, 2018. 340,000 601,615 941,615 420,000. 508,975. 928,975 2019 370,000 586,315. 956,315 435,000 493,750 928,750 2020 - 395,000. _ 569,665 : .964,665 450,000 476,350 926,350 ri 2021 420,000 551,890 9.71,890 465,000 458,350 923,350 L.' 2022 : 440,000 . 532,990 972,990 . 485,000 438,588 923,588 2023.' - . 460,000 _ 514,840 974,840 • 505,000 416,763 921,763 2024 - 490,000 495,520 985,520 : 520,000 .393,406- . 913,406 - 2025 510,000 474,450 984,450 545,000 368,056 913,056 2026.. 540,000 „448,950 988,950 570,000, 340,806 910,806 Ell 2027 560,000 421,950 981,950 600,000 311,594 911,594 2028 595,000 393,950 _988,950 , 630,000 , 280,844 910,844 1,9 2029 600,000 364,200 - 964,200 665,000 247,769 -. 912,769 2030 580,000 334,200 914,200 700,000 212,025- . '- •912,025 2031 ' 560,000 305,200 865,200 730,000 . 173,525 . ;903,525 2032 1,890,000 277,200 2,167,200 • 765,000 - 133,375 . -898,375" 2033 1,980,000 182,700 2,162,700 815,000 91,300 906,300 1 2034" 2,080,000 93,600 2,173,600 845,000 46,475' " 891,475 2035 2037 $ 13,945,000 = ,$ - 9,687,770 $• 23,632,770- - $-•11,720,000. $ 7,556,701 $ 19,276,701 rig PIB Refunding Portion PIB Refunding Portion Series 2009 - Series 2012-W&S Portion Fiscal Year Principal Interest Total Principal Interest_ : Total". 7 2014 $ - 1,155,000 $ 287,525 $ 1,442,525 $ - $ 237,800 $ 237,800- 2015 1,195,000 243,712 1,438,712 335,000 231,100 566,100 2016 1,220,000 212,000 1,432,000 340,000 215,900 555,900 2017 . 2,065,000 - 143,601 2,208,601 350,000 ` .200,400 550,400 `il, 2018 2,155,000 45,988 2,200,988 ,. 360,000 - - _186,200" 546,200 2019 - 365,000:. 171,700 536,700 ` 2020 - 370,000 - 157,000. 527,000 2021 : - - - 370,000 • 142,200 512,200 "l 2022 - - - 385,000 127;100. 512,100 2023 - 395,000 111,500 506,500 , - 2024 - - - - - 1,480,000 74,000. 1,554,000 - 2025 .- . - - - 1,480,000 22,200 1,502,200 7 2026 _ 2027 - - - - - - - 2028 - - - - - 2030 2031 _ - - - - 2032 - - - - 2033 - - - - - - 2034 - - - - -111 2035 - - - - - 2036 - - 2037 - - , $ 7,790,000 $ " 932,826 ; $ 8,722,826 $ 6,230,000 $ 1,877,100 $ 8,107,100 ' • 112 1 i CITY OF PEARLAND,TEXAS Page 2 of 2 COMBINING SCHEDULE OF ENTERPRISE FUND LONG-TERM DEBT BYMATURITYDATE 7 September 30, 2013 I Water&Sewer System Revenue Bonds, Water&Sewer System Refunding Bonds, Series 2010A Series 2010B p.--,' Fiscal Year Principal Interest Total Principal Interest Total 2014 $ 395,000 $ - 506,481 $ 901,481 $ 350,000 $ 296,544 $ 646,544 2015 405,000 498,581 903,581 355,000 289,544 644,544 r 2016 410,000 490,481 900,481 370,000 282,444 652,444 2017 425,000 480,231 905,231 385,000 273,194 658,194 2018 440,000 467,481 907,481 405,000 261,644 666,644 2019 455,000 453,731 908,731 425,000 248,988 673,988 1-. 2020 475,000 438,944 913,944 445,000 235,175 680,175 2021 495,000 422,318 917,318 1,750,000 219,600 1,969,600 2022 515,000 402,519 917,519 1,830,000 149,600 1,979,600 2023 535,000 381,919 916,919 1,910,000 76,400 1,986,400 r 2024 555,000 360,519 915,519 - - - 2025 580,000 338,318 918,318 - - - 2026 600,000 315,118 915,118 - - - 2027 625,000 291,118 916,118 - - - , 2028 650,000 265,337 915,337 - - - .- 2029 680,000 237,713 917,713 - - - 2030 710,000 208,813 918,813 - - - 2031 - 177,750 177,750 - - - 2032 - 144,450 144,450 - - - 2033 - 110,475 110,475 - - - 2034 - 75,150 75,150 - - - 2035 3,950,000 38,025 3,988,025 - - - 2036 - - - - - 2037 - - - - - - $ 12,900,000 $ 7,105,472 $ 20,005,472 $ 8,225,000 $ 2,333,133 $ 10,558,133 r Water&Sewer System Revenue Bonds, Series 2012 Fiscal Year Principal Interest Total 2014 $ 315,000 $ 231,455 $ 546,455 2015 345,000 225,155 570,155 2016 355,000 218,255 573,255 2017 755,000 211,155 966,155 - 2018 765,000 196,055 961,055 2019 780,000 180,755 960,755 2020 _ 800,000 165,155 965,155 2021 230,000 141,155 371,155 2022 230,000 134,255 364,255 2023 240,000 127,355 367,355 2024 230,000 120,155 350,155 2025 225,000 113,255 338,255 2026 175,000 106,505 281,505 1- 2027 180,000 101,080 281,080 2028 185,000 95,500 280,500 2029 190,000 89,488 279,488 2030 195,000 83,312 278,312 2031 200,000 76,975 276,975 '- 2032 300,000 70,225 370,225 2033 315,000 60,100 375,100 2034 325,000 49,075 374,075 2035 335,000 37,700 372,700 2036 345,000 25,556 370,556 2037 360,000 13,050 373,050 $ 8,375,000 $ 2,872,726 $ 11,247,726 113 1 f Statistical Section (Unaudited), 1 i 1 1 1 114 PO OM • (This page intentionally left blank) - • • • 115 7 Unaudited Statistical Section 7 This part of the City of Pearland, Texas' comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financialfl .. health.` 1 Contents Page L Financial Trends 117 These schedules contain trend information, to help the reader understand how' thePoi ( I government's financial performance and well-being have changed over time. Revenue Capacity rill These schedules contain information to help the reader assess the :government's most significant local revenue sources, the property tax and sales tax: Debt Capacity 135 11. These schedules present information to.,help the reader assess the affordability of the L' government's current levels of outstanding debt and the government's-ability to issue additional debt in the future: Demographic:and Economic Information 140 These schedules offer demographic and economic indicators to help the reader understand. the environment within which the government's financial activities take place. 7 1 Operating Information 143 These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government iii provides and the activities it performs: rgu 1 I Sources:,Unless otherwise noted,the information in these schedules is derived from the comprehensive � annual financial reports for the relevant year. .744 1161 i 116 CITY OF PEARLAND,TEXAS NET POSITION BY COMPONENT Last Ten Fiscal Years Amounts in(000's) - (Accrual Basis of Accounting) 2004 2005 2006 2007 2008 Governmental Activities Net investment in capital assets $405,052 $396,619 $402,103 $400,522 $410,002 Restricted 6,391 6,862 8,085 10,130 10,864 Unrestricted 6,746 5,785 8,917 11,809 10,903 Total governmental activities. net position $418,189 . $409,266 $419,105 $422,461 $431,769 Business-type activities Net investment in capital assets $113,736 $127,144 $130,648 . $126,779 $138,679 Restricted . - . 7,027 10,129 ' 24,258 .16,094 Unrestricted 18,986 '552 700 1,638 3,406 Total business-type activities net position $132,722 $134,723 $141,477 $152,675 $158,179 Primary government Net investment in capital assets $518,788 $523,763 $532,751 $527,301. $548,681 Restricted 6,391 13,889 18,214 34,388 26,958 Unrestricted 25,732 6,337 9,617 13,447 ' 14,309 Total primary government net position $550,911 $543,989 $560,582 $575,136 $589,948 r In Fiscal Year 2007,the City implemented the retroactive reporting of infrastructure in accordance with GASB 34. Prior year presentations have been adjusted to reflect the retroactive reporting. a Due to implementation of GASB 61, the City's component units are now considered blended component units versus discretely presented as in years prior to fiscal year 2013. Fiscal Year 2012 has been restated for comparison purposes. 117 r rir L 2009 2010 • 2011 2012. 2013°. $429,054; $422,643 $413,439 $396,009 . $ 442,581 10,615 18,020 16,462 " , 36,548 s 34,666 13,330. ' 13,692 14,543 (26,623) (25,289)... $452,999 $454,355 $444,444 $405,934 $ 451,958 $146,150 ' . $.144,244 $156,629.` $158,716 $ 166,992 - 11,965 17,587 5,603, 9,821 9,542 9,256 . 11,942 13,910 , .12,439 16,704 _ $167,371 $173,773 $176,142 $180,976 $ 193,238 $575,204 $566,887 $570,068 $554,725 $ 609,573 22,580 35,607 22,065 46,369 . 44,208 . 22,586 . 25,634 28,453 (14,184) (8,585) $620,370 $628,128 $620,586. $"586,910 $ . 645,196 r.a 118 r. 6. CITY OF PEARL,AND,TEXAS CHANGES IN NET POSITION Last Ten Fiscal Years Amounts in (000's) (Accrual Basis of Accounting) 2004 2005 2006 2007 2008 P Expenses Governmental activities General Government $ 7,314 $ 8,714 $ ,8,574 $ 8,660 $ 11,161 Public Safety 10,525 11,857 12,564 14,655 17,684 P Public Works 25,913 28,858 26,914 24,041 24,532 Community Services 2,700 2,939 2,903 3,113 3,336 Parks and Recreation - - 4,131 ,4,882 7,157 , Economic Development - - - - - - Interest on long-term debt 5,549 5,115 6,559 9,070 12,266 Total government activities expenses 52,001 57,483 61,645 64,421 76,136 Business-type activities: . R Water and Sewer 19,265 17,624 20,531 21,076 22,570 Solid Waste - - .- 5,218 6,024 Total business-type activities: 19,265 17,624 20,531 26,294 28,594 Total primary government expenses $ 71,266 $ 75,107 $ 82,176 $ 90,715 $ 104,730 r Program Revenue . Governmental activities Charges for services: General Government $ 506 $. 185 $ - $ - $ - Public Safety 2,975 3,640 2,627 2,788 2,959 Public Works 6,864 7,221 4,331 195 103 Community Services 696 1,263 6,312 5,822 5,130 Parks and Recreation - - 825 818 936 Economic Development - - - - - Operating grants and contributions General Government - 2 1,239 1,659 3,951 ° Public Safety 839 673 111 154 230 Public Works - - 456 551 Community Services 17 479 55 34 129 Parks and Recreation - - 21 11 115 Capital grants and contributions General Government 1,319 800 - - - Public Safety 756 312 - - 503 Public Works - 6 15,743 8,690 15,263 Parks and Recreation - - 6 - 261 Total governmental activities program revenues 13,971 14,582 31,270 20,627 30,131 Business-type activities: ° Charges for services Water and Sewer 11,893 11,219 13,849 17,754 21,524 Solid Waste - - - 5,218 6,038. Operating grants and contributions Water and Sewer • 47 - 474 385 315 Capital grants and contributions Water and Sewer 6,933 8,365 13,434 12,621 5,869 Total business-type activities program revenues 18,873 19,585 27,757 35,978 33,746 1 Total primary government program revenues $ 32,844 $ 34,167 $ 59,027 $ 56,605 $ 63,877 a Due to implementation of GASB 61, the City's component units are now considered blended component units versus discretely presented as in years prior to fiscal year 2013. Fiscal year 2012 has been restated for comparison purposes. • 119 Page l of t 1._I - - - rim - . --.... ,._ 2009 2010 2011 2012 2013 ' $. .12,355 . $ •_13,439 $ 15;945. $ 13,334 $ 13,358 • • . r " 22,438 . : '24,268 ' 23,042 - . 27 403. . -28,944. L; -, " : • . 26;893 _ 35,679 - ; 31,130 •- 28,510 . 31;690 =:-. -3,290 - 3,323. . 3,254. - 4,267. 3,807 .. 7,240 . 7,699 8,062 9,264 .'9,524 ' . 7 - - - - - - 26,311 17,411 • 11,647 - 13,738 13,142 . 11,572 16,224 - : • 83,863`• 98,146 ' • 94,575 , .120,661 . 120,958 - • ' ,. 25;439 27,157 - • 29,192• 29,392 32,040 • _ _ ..7,106 . 7,089- 7,285 7,528 ' = 8,324 . -_ ' • • - 32,-545- 34,246 36,477 36,920 40,364 !ieg -$ 116,408 $ 132,392; $ 131,052. , . $ 157,581. ' • $ 161,322 . . : . . $ : - $ -- . $ - $ -- $ :6,326 • .3,524 3,296 3,679. 4,206 . 7,410 35 10 ' . 18 43 3,096 - . •4,755 4,312 ' _ 4,632 5,855':', 3,264- : • 672 , -•906 2,027:- ' ' 2,080'• 2,209 . - 413 414 4,913 5,215 5,488. 6,045 . 44 . -- • 420 641. ` 407 711 . 603 - • .. • 375 ". :. .207 675 53 : 1,388 IR . --• " ...202 '•• 159, ' 366.` • 311: 108 - - , ":.;. 450 424 .• ' 462 542 . • 182 . -• - 180 "y` 279 98 - 26,092` • = .- 29,800 • 10,330. . 18,743 ;52,921 ' 4,653 100 46,370- -' 45,068 . 28,084 39,102• - 78,145 • 26,617- , . 24,961 • 28,664 .. 27,535. .29,008 . - 6,766 - 7,313 _ 7,258 7,654 . 8,175 - 2,464. -70 61 205 • - - • m --- . "6,125 8,611 .4,215 . 8,118 16,273 . - 41,972 - -40,955 40,198 . 43,512 53;456. • ..$: 88,342: :$ -86,023 " $ 68,282 $ 82,614 $ 131,601- 120: . .. ' . ' • CITY OF PEARLAND,TEXAS . CHANGES IN NET POSITION Last Ten Fiscal Years .. Amounts in(000's) (Accrual Basis of Accounting) - - P 2004 2005 2006 2007 2008 Net(Expense)/Revenue Governmental activities $(38,030) $(42,901) $(30,375) $(43,794) $ (46,005) Business-type activities (392) 1,961 7,226 9,684 5,152 Total primary government net expense ' $(38,422). $(40,940) $(23,149) $(34,110) $ (40,853) General Revenues and Other Changes in Net Position Governmental activities: Taxes: Property taxes $ 17,907 $ 19,805 $ 21,845 $ 24,823 $ 29,492 Sales and use taxes 6,933 8,026 9,980 11,025 12,581 Franchise taxes 2,883 3,097 3,426 3,760 4,427 Investment earnings 1,115 1,863 2,991 4,943 4,572 Miscellaneous 783 828 740 1,539. 2,911 Transfers 524 359 1,230 • 1,060 1,330 Total governmental activities 30,145 33,978 40,212 47,150 55,313 Business-type activities: Investment earnings 417 399 758 2,574 1,669 Miscellaneous - - 12 Transfers - (524) (359) (1,230) (1,060) (1,330) Total business-type activities (107) 40 (472) . 1,514 351 Total primary government $ 30,038 $ 34,018 $ 39,740 . $ 48,664 $ 55,664 Change in Net Position Governmental activities $ (7,885) $ (8,923) $ 9,837 $ 3,356 $ 9,308 Business-type activities (499) 2,001 6,754 11,198 5,503 Total primary government $ (8,384) $ (6,922) $ 16,591 $ 14,554 $ 14,811 In Fiscal Year 2007,the City implemented the retroactive reporting of infrastructure in accordance with GASB 34. Prior year presentations have been adjusted to reflect the retroactive reporting of depreciation expenses. a Due to implementation of GASB 61, the City's component units are now considered blended component units versus discretely presented prior to fiscal year 2013. 121 Page 2 of 2 2009 2010 2011 2012 2013a $ (37,493) $ (53.,078) $ (66,491) $ (81,559). $ (42,813) 9,427 6,709 3,721 6,592' " 13,092 L. $ (28,066). $ . (46,369) $ (62,770)" $ (74,967) . $ .(29,721) I ' $ 31,140 $ 32,963 $ 33,451 $ 52,230 $ 54,433 14;218 13,578 .13983 ; • :229.69 '24,942 5,075 ' 5,426 5,605 5,670 5,999 1,376 253 157 134 155. 6,294 1,028 1,854 1,554 -1,701 62.1 . 1,186 1,475 2,269 . : :1,607 58,724 54,434 56,525 84,826 88,837 363 ' 100 116 68 95 23 779 9 444 682 (621) (1,186) : (1,475) (2,269) (1,607) (235) (307) (1,350) (1,757) (830) $ 58,489 . $ 54,127 $ 55,175 $ 83,069 $ 88,007. $ 21,231 $ 1,356 $ (9,966) $ 3,267 $ 46,024 • 9,192 ' 6,402 2,371 4,835 12,262 $:30,423. $ 7,758 $ (7,595) $ 8,102. _ $ 58,286 122r . CITY OF PEARLAND,TEXAS FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years Amounts in(000's) (Modified Accrual Basis of Accounting) P 2004 2005 2006 2007 2008 General fund Non-spendable $ 70 $ 71 $ 84 $ 123 $ 181 P Restricted Assigned - - 552 581 4,698 Unassigned 8,216 8,132 9,961 12,932 8,647 Total General Fund $ 8,286. $ 8,203 $ 10,597 $ 13,636 $ 13,526 All other governmental funds Nonspendable $ - $ - $ - $ $ - Debt service 3,008 3,855 4,658 6,552 6,835 P Capital improvements 46,014 43,545 52,957 96,542 110,715 Public safety 284 348 453 591 583 Economic development - - - - Community development projects Tourism 557 •670 864 1,051 1,247 Parks and recreation 793 992 1,393 • 1,652 . 1,183 Capital projects-other 872 • 1,007 1,064 1,138 1,346 Other 909 238 247 114 629 Total other Governmental Funds $ 52,437 $ 50,655 $ 61,636 $ 107,640 $ 122,538 123 sue . s� OOo oo .p �..wA. �•� ? r• N-� O • 69 EA _ _ _ . . . O .. . • .. ram-. r-. r-., O O\ N N O . .. NO . VD N •. 4 , ) 'Nwcn" , NUJ ) .O') . N O - . ,,W IN) -- ,,-,. N - . Os 00:-. -I). U . 1+ In . . _ _ _ Ui 00 . Ui - .P as ON N O as N W ' .. • .. N- - O . F+ ', . W -W .p �] J�" N "_ tJ - N.J 00 v J IJ r--• , . ..-. 01 r - O -1 1/4D -1 N 00 " • CA �] 00 N"O� N i- �- N �7 i N .• . .. .. .. N - - . O . .p N .. .-� �+ . .. N O . u,. 00 O\ .-� W. ' •. .. cn W..01 00 01 �l w 00 V1 'C.A . �, 00•O\.Ui �l �1 lh O1 N W W ,,--. .... 00 , CITY OF PEARLANI),TEXAS CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years Amounts in(000's) (Modified Accrual Basis of Accounting) 2004 2005 2006 2007 Revenues Property taxes $ 17,891 $ 19,745 $ 22,150 $ 24,525 Sales and use taxes 6,933 8,026 9,980 11,025 Franchise fees 2,883 3,097 3,426 3,760 Licenses and permits 3,441 3,864 4,067 4,030 Fines and forfeitures 1,608 1,935 2,038 2,048 Charges for services 5,260 6,139 8,734 5,250 Investment earnings 1,115 1,863 2,991 4,938 Intergovernmental 3,040 2,382 7,852 14,463 Other 1,076 1,172 1,744 1,815 Total Revenues 43,247 48,223 62,982 71,854 Expenditures General government 6,221 6,750 6,381 6,293 Public safety 10,142 ' 11,081 12,870 14,598. Public works 8,709 10,450 9,728 6,278 Community services 2,904 2,747 3,787 3,102 Parks and recreation - - 3,358 4,908 Economic development - - - - Debt service: Principal 3,000 3,535 3,429 •3,228 Interest and other charges 5,665 5,555 6,771 10,197 Capital outlay 18,058 28,661 36,706 - 28,530 Intergovernmental - 1,084 1,684 2,169 Total Expenditures 54,699 69,863 84,714 79,303 r Excess(deficiency)of revenues over (under)expenditures (11,452) (21,640) (21,732) (7,449) Other Financing Sources(Uses) Transfers in 1,431 4,870 5,852 4,596 Transfers out (907) (4,510) _ (4,698) (3,536) Bonds issued 184 37,015 41,959 94,559 Payment to Escrow Agent Capital leases 21,000 271 - 1,568 Other 94 (15,926) (8,005) (40,695) Total Other Financing Sources(Uses) 21,802 21,720 35,108 56,492 Net change in fund balances $ 10,350 $ 80 $ 13,376 $ 49,043 Debt service as a percentage of noncapital expenditures 23.6% 22.1% 21.2% 26.4% - r a Due to implementation of GASB 61, the City's component units are now considered blended component units versus discretely presented as in years prior to fiscal year 2013. 125 2008 2009 2010 2011 2012 20132 $ 29,200. $ 31,349 $ 32,856 $ 33,454. $ 34,362 $ 54,475 (" 12,581 14,218 13,578 13,983 15,632 24,942 4,427 5,075 5,426 5,605 5,817 5,999 2,992 2,079 1,807 1,721 . 2,320 2,989. pu 2,086 2,325 2,475 2,895 3,374 3,534 a ' 7,512 8,885 9,328 11,687 1.1,891 12,982 4,568 1,375 591 156. : 92 • 154 3,731 7,589 . 3,689 2,199 3,089 4,595 rn 5,638 8,980 982 1,560. 2,541 7,973 72,735 81,875 70,732 73,260, 79,118 117,643 71 7,388 8,412. 8,527 10,866 7,784 . 7,958 19,604 22,310 23,784 23,926 25,372 26,204 7,536 . 12,051 7,108 6,505 5,533 7,812 3,426 3,386 3,839 3,376 4,246 3,523 6,605 5,789 6,305 7,539 7,499 7,244 17,414 3,160 5,482 : 6,200 8,217 9,373 15,637- 12,3 82 12,080 13,635 13,543 12,401 15,859 27,777 68,615 61,317 25,703 9,201 22,101 3,434 3,250 3,794 3,954. , . 3,992 4,058 91,312 141,375 134,509 103,630 .' 85,401 127,810 (18,577) • (59,500) (63,777) (30,369) • (6,283) (10,167) 4,912 3,246 3,498 3,525 . 5,909 15,515 (3,582) (2,625) (2,312) (2,050) (5,096) (14,583) 31,835 8,520 28,962 21;637 49,805. 12,060 .' - - - (1,630) (54,478). , - 649 2,050 1,289 _ 1,179 200 (54) -. 56 3,809 331 • 33,365 9,736 . 32,198 22,826 (51) 14,502 $ 14,788 $ (49,764) $ (31,579) $ , .(7,543) $ (6,334) $ 4,335 24.5% 24.1% 27.1% 27.9% 28.3% 29.8% 126 .. 1 CITY OF PEARLAND,TEXAS ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Eight Fiscal Years 7 Real Property Fiscal Tax Less Tax Exempt Year Year - Residential Commercial Personal Property Real Property 2006 2005 . $ 2,689,041,440 $ 1,072,417,312 $ 309,552,190 $ 270,175,010 2007 2006 3,398,952,580 1,234,444,431 378,160,330 307,538,080 2008 2007 4136844,130 1,463,969,653 449,453,570 384,651,183 2009 2008 4,535,133,971 1,795,132,850 521,854,047 461,051,494 - 2010 2009 4,673,324,896 1,762,831,286 632,160,830 484,145,515 2011 2010 4,916,409,359 1,833,483,370 527,132,210 590,247,297 2012 2011 4,929,336,548 1,897,683,176 488,098,315 592,996,676 2013. 2012 5,042,965,503 1,954,587,058 612,564,952 617,274,555 Notes: Assessed valuation for fiscal year 2007 does not include Brazoria County MUD#1 valuation of $241,248,630 that was annexed into the City on December 31,2006. Assessed valuation for fiscal year 2013 does not include Brazoria County MUD#4 valuation of $242,712,166 that was annexed into the City on December 31,2012. ' 127 L Assessed Value as Less Other 'a Percent of Exemptions and Total Taxable Total Direct Estimated Actual Actual Taxable Abatements Assessed Value Tax Rate Taxable Value Value $ 224,396,803 $ 3,576,439,129 $ 0.6744 $ 3,576,439,129 - 100% 291,197,312 ' 4,412,821,949 0.6527 4,412,821,949 ` 100% 275,826,005 5,389,790,165 0.6526 5,389,790,165 . 100% 486,242,814 .5,904,826,560 0.6526 5,904,826,560 100% 315,123,559 6,269,047,937- 0.6526 • 6,269,047,937. 100% 355,054,613 6,331,723,029 0.6651 6,33.1,723,029 100% 352,494,382 6,369,626,981 0.6851 6,369,626,981 100%. 454,866,920 6,537,976,038 0.7051 6,537,976,038 100% not • 128 J CITY OF PEARLAND,TEXAS k " DIRECT AND.OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years (rate per$100 of assessed value) City Direct Rates Overlapping Rates Pearland Pasadena Alvin Harris Independent Independent Independent Alvin Fort Port of County 7 • Fiscal M&0 I&S Total = School School" School Comm Brazoria - Bend Harris Houston Flood - Year Rate Rate Direct District District District College County County County Authority Control 2004 $.0.346 $ 0.350 $ 0.696 $ 1.809 $ 0.255 $ 0.420 $ 0.499 $ 0.388 $ 0.020 $ 0.042 7 2005 ' 0.339 0.356 . 0.695 1.792 0.241 0.422 .0.500 0.400 0.017 0.033 , 2006 0.345 0.329 0.674 1.792 0.238 ' 0.408 0.517 0.400 0.015 0.033 2007 0.299 0.354 0.653 1.662 $ 1.350 $ 1.546 0.220 1 0.382 0.517 0.402 0.013 0.032 2008 0.250 0.402 0.653 . 1.427 1.350 1.328 0.210 0.311 0.517 0.392 .0.014 0.031 - 2009 0.220 0.433 0.653 1.419 1.350 1.328 0.200 0.330 0.500 0.391 0.018 0.031 2010 0.220 0.433 0.653 1.419 1:350 1.304 0.200 0.366 0.500 0.392 0.016 0.029 . 2011 0.215 0.450 0.665 1.419 1.350 1.304 0.200 ' 0.403 0.500 0.388 0.021 0.029 2012 0.215 0.470 0.685 1.419 1.350 1.344 0.199 0.413 0.500 0.391 0.019 0.028 2013 0.215 0.490 0.705 1.419 • 1.350 1.329 0.200 0.426 0.500 0.400 0.020 0.028PI . 1 Source: Brazoria County,Harris County,and Fort Bend County Appraisal District. �"R 1 J • . 1 • • • • • "1 • • i • 129 1 . 7 6 D n 00 0 VD 00 b VD VD b b b .n_• ' .. _ .. _ N N N N N N N N O.0 nr ,m..' 0 0 0.0.0 0 p p CO O CJ 0.0 0 0 0 0 0 O b o ~' o o.orn000000 .0 rPf :�• . - -4 J;,l CO 00 00 00 00 00 00 . 0 P.,`"C '� .. _ ^ .. 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Co 00 Co 00'00 Co 00 00 0o .tA Ur LA LA LA LA to LA•toCD CD CD CO CD CD Co CD ' b9 N N N N 0 LAW�, • CITY OF PEARLAND,TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years - (rate per$100 of assessed value) J Fiscal Collected within the Year Taxes Levied Fiscal Year of the Levy Collections Total Collections to Date j Ended for the Percentage in Subsequent • Percentage Sept 30, - Fiscal Year Amount of Levy Years Amount of Levy 2004 $ 18,030,473 $ 17,633,986 97.80% $ 363,348 $ 17,997,334 99.8% 2005 . 21,073,788 20,576,812 97.64% 475,920 21,052,732 99.9% 2006 24,284,597 23,690,031 97.55% 562,316 24,252,347 99.9% n 2007 28,819,229 28,235,276 97.97% 553,881 28,789,157 99.9% 2008 35,035,569 34,461,652 98.36% 559,681 35,021,333 100.0% 2009 38,368,354 37,820,603 98.57% 506,999 38,327,602 99.9% 2010 41,081,407 40,590,543 98.81% 392,167 40,982,709 99.8% 2011 41,968,046 41,594,389 99.11% 239,676 41,834,065 99.7% 2012 43,441,792 43,110,373 99.24% 186,945 43,297,318 99.7% 2013 45,850,625 45,509,522 99.26% - 45,509,522 99.3% • Source: Brazoria County Tax Office. 131 CITY OF PEARLAND,TEXAS I PRINCIPAL PROPERTY TAX PAYERS Current Year and Ten Years Ago 2013 . 2003 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed` Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Rim Pearland Town Center LP $ 68,763,470. 1 1.1.1% $ - Amreit SPF Shadow Creek,LP 43,671,670 2 . 0.71% Weatherford U.S.,Inc. . 37,689,240 .3 0:61% 34,843,830 1 . 1.26% Pearland Investments Ltd 35,554,380 4 0.58% . - Villas at Shadow Creek 29,597,540 5 0.48% Centerpoint Energy,Inc. 28,444,700 6 0.46% 18,062,650 2 0.65% Shadow Creek Parkway . 28,229,200 7 0.46% - - Discovery Shadow Creek 26,391,910 8 0.43% . . - Shadow Kirby LTD Partnership 25,000,000 9 0.40% - - " . Pearland Lifestyle Center 23,731,897 10 0.38% . -" - Walmart Real Estate BUS TR - . . 12,1.15,230 3 . 0.44% ' Landar Mary's Creek Apts 11,11.3,820." 4 0.40% iv! Southwestern Bell Telephone - 9,439,220- 5 ": 0.34% Lennar Homes of Texas • '. 8,997,250 6 . 0.32% - Westlake Residential Apts .- 8,835,990 7 0.32% Aggreko,Inc. - 8,560,750 8 _ • 0.31% " Whispering Winds Apartments - 7,705,580 9 0.28% Texas Windmill Apts. - 7,624,730 • 10. 0.28% Total • - • - - $ 347,074,007 - 5.61% $ 127,299,050 ,4.60% Source: Brazoria.County Appraisal District. • • 132 7 CITY OF PEARLAND,TEXAS TAXABLE SALES BY CATEGORY J Last Ten Calendar Years (in thousands of dollars) I . Calendar Year 2004 2005 2006 2007 J Agriculture,Forestry,Fishing $ 190 $ 283 $ 453 $ 473 Mining,Quarrying, Oil and Gas 3,738 2,985 11,186 9,280 Utilities - - 7 3 Manufacturing 29,200 41,057 46,241 50,134 Wholesale Trade 13,059 24,070 30,592 28,782 Retail Trade 305,156 370,665 464,850 536,352 Transportation/Warehousing 54 55 155 169 Information 3,365 7,203 8,553 10,086 7 Finance,Insurance 3,505 1,811 1,722 1,038 1 Real Estate/Rental/Leasing 10,722 18,629 33,329 44,560 Professional/Scientific/Technical 3,516 3,538 3,893 4,103 7 Management of Companies/Enterprises 2,399 2,278 - 1,161 j Admin/Support/Waste Mgmt/Remediation 17,880 13,688 8,060 9,209 Educational Services 95 204 110 110 Health Care/Social Assistance 9 72 56 63 Arts,Entertainment&Recreation 4,703 4,787 5,208 8,789 Accommodations&Food Services 65,708 80,185 95,154 107,850 Construction 13,288 13,234 18,348 16,232 7 Other Services(Except Public Admin) 15,108 16,921 20,390 20,794 j Other 547 13 2 - Total $ 492,242 $ 601,677 $ 748,310 $ 849,188 City direct sales tax rate b 1.00% 1.00% 1.00% 1.00% Source: State Comptroller's Office. a 2013 taxable sales thru 2nd quarter of 2013. `-1 b The City direct sales tax rate includes the City only and not the Pearland Economic Development Corp. (4B). c Categories changed in 2007.Re-categorized data. en "1 I 133 7 • • rem _ . . . . • • Calendar Year.._ : ' 2008 - -2009 2010 • • 2011'- '2012 • 2013 a . 1,4 $ 675 •$_ . 566 . $ . . ::.180 • , $' 306 .$ 468 $ • 272 . • • - : • 10,520 - 3;355 3,246 3,316 3,726 . • .6,971 6 6 • • 3 187 3 - . 47,447-- 31,243 39,582 49,474 • • • 48,213 . .17,908. • . • . - '"0 32;999 25,954 r • .30,730 . 33,163 :• • - 39,434 • 18;376 • • 667,47.0 699,338 • •,.673,714 697,359 758,145 -390,888 - 138 • • ' .161 282 .418_ 425 - - 161 me • 12,567 . 14,413 15,672 16,896 • 19,194 : . 11,077- . • 1,469:. •- 1,811 1,404 1,261 :1.,347.. . 601 • 52,276 • • • 38,924 46,811 48,062 ,. • • 61,695 ' , 27,017.- 5,218 . - • 5,923 6,277 7,069 9,028. • . . 5,891 -•,2,594 - - - ' 12,656 11,670 . 10,650 . 11,004 ' • 12,690 . • 6,832 212 - 144 - •207 • • .314 . • 429 . 177 • 37 52 184 .252 351 175 . -9,751 •,• . 9,909 11,3,15 " • 11,566 • 13,082' 6,971. 127,994 .146,598 . 155,345 . • , .172;131 198,450 . 107,619. 17,496 • 14,372 15,53,7. , 17,558 ."23,181., 11,054 - • 23,764 23,670 • . 25,114 29,768., • 3.1;713,:. '1.7,707 • : $ 1,025,289- • $• 1,028,107 ••$ • 1,036,253 • $ 1,100,104 $ 1,221;574 . $ .629,696 1.00% • 1.00% • 1.00% - 1.00%° 1.00% 1.00% • • • • 134 ' • • • • CITY OF PEARLAND,TEXAS j RATIOS OF OUTSTANDING DEBT BY TYPE • • Last Ten Calendar Years • • (dollars in thousands, except per capita) 1 Governmental Activities Business-Type Activities •-� 1 - General Certificates • Capital Permanent Capital i Fiscal Obligation of Obligation Revenue Lease Revenue Improvement Lease Year Bonds Bonds Bonds• Obligations Bonds Bonds Obligations • • 2004 $ 25,345 $ • 90,185 $ - $ 184 $ 33,505 $ 16,735 $ - 2005 60,175 72,390 - 396 32,480 15,880 2006 90,305 81,275 - 309 :40,170 15,000 - - 2007 164,810 66,220 - • 1,538 79,180 13,915 - 2008 184,985 - 74,980 - 1,187 92,900 13,140 - 2009 180,765 82,505 - 1,479 104,435 12,160 235 _ 2010 193,785 92,380' • - 3,237 116,440 • 10,540 345 2011 207,105 91,150 - 4,032 113,270 9,730 421 •r' • 2012 224,170 65,425 - 3,407 . 109,305 15,130. 342 • 2013* 230,040 64,690 • 75,125 • 3,681 105,690 14,020 253 • Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. • *_Due to implementation of GASB 61,the City's component units are now considered blended component units versus discretely as in years prior to fiscal year 2013. As such,the outstanding debt • for the components units have been added;however,the City,or primary government is not legally • responsible for the payment of its debt. Excluding this debt,debt per capita is$4,019. • • • • • • • • • • • • • 135 L Excluding . Total Percentage Total Component Primary " of Personal Per . _ Units" Government" Income Capita . Per Capita up $ 165,954 10.3% $ 3,073 •$- 181,321 9.3% . . 2,895. 227,059 11.1% 2,862 325,663 12.4% 3,854on - 367,192 12.4% 4,126 - 381,579 13.0% 416,727 - .13.5% 4,429' - 425,708 14.3% 4,380 o 417,779 13.0% . 4,186 493,499 14.0% 4,741 4,019., " 136 • • 1-1 CITY OF PEARLAND,TEXAS RATIOS OF NET GENERAL BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA • Last Ten Fiscal Years (dollars in thousands, except per capita) • General Less Debt Ratio of Net . Percentage Fiscal Tax Obligation Service Net Bonded Bonded Debt to of Personal .. Year Year Bonds Funds Debt Assessed Value Income' . Per Capita' 2004 2003 $ 132,265 $ 3,008 $ 129,257 6.3% 8.0% $ 2,394 2005 2004 , ' 148,445 3,855 144,590 6.2% 7.4% 2,308 2006 2005 186,580 . 4,658 181,922' 5.1% 8.9% 2,293 2007 2006 244,945 6,552 238,393 5.4% 9.1% 2,821 fl 2008 2007 273,105 6,552 266,553 4.9% 9.0% 2,995 2009 2008 275,430 , 7,247 268,183 • 4.5% 9.1%. . ` 2,896 2010 2009 296,705' 6,706 289,999 4.6% 9.4% 3,082 r,1 2011 2010 307,985 5,160 302,825 4.8% 10.2% ' 3,115 2012 2011 304,725 4,992 299,733 4.7% " 9.3% 3,003 2013 2012 308,750 4,643 304,107 4.7% 8.5% 2,921 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. a Population and personal income data can be found in demographic and economic statistics table. 137 CITY OF•PEARLAND,TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT ' . September 30,"2013 Debt as of September 30, Overlapping Taxing Jurisdiction 2013 Percent Amount Alvin Community College District $ 15,305,000 27.17% $ 4,158,369 f Alvin ISD 307,545,000 30.89%,• 95,000,65.1 Brazoria County 83,865,000 24.19% 20,286,944 Brazoria County MUD No. 17 28,085,000 100.00% 28,085,000 Brazoria County MUD No. 18 29,355,000.. 97.35% -28,577,093 L _ Brazoria County MUD No.19 36,150,000- 100.00% '. 36,150,000 ' Brazoria County MUD No.23. 17,035,000 100.00% 17,035,000 Brazoria County MUD No.26. 39,185,000 100.00% : 39,185,000 Brazoria County MUD No.28 16,570,000 100.00%. 16,570,000 Brazoria County MUD No.34 27,800,000 100.00%. 27,800,000riou Brazoria County MUD No.35 . ' ' 9,230,000 100.00% 9,230,000 Brazoria-Fort Bend County MUD No. 1 56,185,000 73.76% 41,442,056 Fort Bend County 468,360,000 0.23% 1,077,228 miq Harris County(a) 2,640,417,190 0.13% - 3,432,542 Harris County Dept.of Education , 7,6'05,000 0.13% ' 9,887 Harris County.Flood Control District 96,470,000 ' 0.13% : 1.25,411 Pasadena ISD 606,810,000 0.14% 849,534 Pearland ISD 300,627,047 71.72% 215,609,718 Port of Houston Authority 731,969,397 0:13% 951,560 TOTAL ESTIMATED OVERLAPPING ` 585,575,993 The City $ 308,750,000 100.00% 308,750,000 Total Direct and Estimated Overlapping Debt $ 894,325,993 �+. Population 104,100 : Per Capita Debt-Direct and Overlapping Debt $ 8,591 Source: Individual jurisdictions and/or Texas Municipal Reports. - *Debt amounts are as of September 30,2013: i - 138 • • • • CITY OF PEARLAND,TEXAS PLEDGED REVENUE COVERAGE . Amounts in(000's) Last Ten Fiscal Years Water&Sewer Revenue Bonds - 1 Net. Less: Revenue Debt Service Fiscal • Gross Operating Available for Year Revenues Expenses Debt Service Principal . Interest Total Coverage 2004 . $ 12,357 $ 10,877 $ 1,480 $ 1,025 $ 1,504 $ - 2,529 0.59 7 2005 11,619 8,607 3,012 1,075 1,459 2,534 1.19 2006 15,004 11,228 3,776 1,125 1,829 2,954 1:28 2007 20,713 12,151 8,562 1,125 2,915 .4,040 2.12 2008 . 23,507 14,827 8,680 1,230 4,011 • 5,241 1.66 2009 26,980 12,877 14,103 1,595 4,648 6,243 2.26 2010 25,061 13,585 11,476 2,575 4,848 7,423 1.55 • 2011 28,664 15,529 13,135 3,170 5,155 8,325 1.58 2012 27,969 15,946 12,023 3,305 5,016 •8,321 1.44 2013 29,607 17,423 12,184 3,615 , 4,724 8,339 1.46 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest, depreciation, or amortization expenses. Debt service excludes Permanent Improvement Bonds paid with system revenues,as those bonds do not require bond coverage. • • 139 . CITY OF PEARLAND,TEXAS DEMOGRATPIC AND ECONOMIC STATISTICS Last Ten Fiscal Years Education Per Capita level in School RIM Fiscal Population . Personal Income Personal Median Years of - Enrollment . . Unemployment Year (A) (in$000's) Income Age(B) Schooling (C) Rate(D) 2004 54,000 $ 1,609,362 $ 29,803. 35.1 14.3 13,600 4.5% 2005 62,634 1,951,801 31,162 35.5 14.3 15,023 4.6% 2006 79,322 2,050,394 .. 25,849 33.4 14.3 16,629 3.6% 2007 84,500 2,631,837 . " 31,146 34.9 14.3 17,733 3.6% 2008 89,000. 2,963,255 ' 33,295 35.8 14.3 18,439 3.8% 2009 92,600. 2,941,717 31,768. 34.5 14.2 20,056 6.5% 2010 94,100 3,076,788 . 32,697 33.4 14.2 21,269.. 6.9% 2011 97,200 2,974,785 30,605 33.3 . 14.2 20,931 6.9% 411. 2012 99,800 3,213,184 32,196 34.8 . 14.2 21,721 : .5.6% 2013 104,100 3,555,431 34,154 34.4 '14.2 23,771 5.0% _ (A) Estimated (B) Pearland Economic Development Corporation-CDS 0.4 _ (C) Texas Education Agency (D) Bureau of Labor Statistics , *Information not presented is not available. 14 4.1 140 . CITY OF PEARLAND,TEXAS 1 PRINCIPAL EMPLOYERS Current Year and Eight Years Ago i 2013 2005 Percentage Percentage 7 of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Pearland ISD 2,450 1 5.37% 1,820 1 7.26% ' Wal-Mart 1,185 2 2.60% 800 2 3.19% i Kelsey Seybold 800 3 1.75% - 0.00% City of Pearland 614 4 1.35% 420 3 1.67% HEB 350 5 0.77% - 0.00% Davis-Lynch 275 6 0.60% - 0.00% Home Depot 230 7 0.50% - 0.00% Super Target 205 8 0.45% - 0.00% Bass Pro Shop 200 9 0.44% - 0.00% Kemlon 200 10 0.44% 185 6 0.74% TurboCare - 0.00% 175 7 • 0.70% 'I Weatherford - 0.00% 250 4 1.00% Randall's - 0.00% 250 5 1.00% Super Target - 0.00% 150 8 0.60% Tele-flow - 0.00% 140 9 0.56% 7 Lowes - 0.00% 132 10 0.53% Total 6,509 14.27% 4,322 17.23% nI J Sources: Pearland Economic Development Corp. 7 3 Note: Information for the period nine years ago is not readily available. J 7 7 i "1 i 7 7 n 141 7 I CITY OF PEARLAND,TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Full-time Equivalent Employees as of September 30. rug 2004 .2005 2006. 2007 ' 2008 2009 2010 ,. 2011 - .2012 2013 ' . Function/Program Governrnental Activities General Government 41 42 49 51 55 55 57 57. 56 44 Public Safety 160 170 184 . 205 242 :253 264 276 286_ .295 Public Works 42 43 44 47 •45. 47 47 .45 31 . 57 rok Community Services 37 41 47 50 51 52 47 45 56 51 Parks and Recreation 55 58 52 59 68 72- 99 105 .109. . .101 - Business Type Activities Water&Sewer .62 . 62 76 78 77 82 . 82 87 90 ' 99 FIR Component Unit Economic Development 4 4 4 4 5 5 6 5 5 5 Total 401 . 420 456 .- 494 543 564 .601 619 633 652 142 CITY OF PEARLAND,TEXAS 1 OPERATING INDICATORS BY FUNCTION PROGRAM Last Ten Fiscal Years 7 1 2004 2005 2006 2007 2008 Function/Program f GENERAL GOVERNMENT J Finance. Number of purchase orders 3,667 3,183 . 3,085 3,475 3,552 '""j Number of budget transfers • 82 117 226 194 . 398 J Number of invoices,paid N/A 21,180 22,438 22,279 23,434 Average number of employees paid per month 848 930 984 1,026 1,185 Human Resources Number of hires 58 77 95 97 109 Number of HR interviews conducted 292 333 360 449 353 Number of applications received . 2,541 3,138 2,808 3,074 2,495 -i Legal Number of resolutions and ordinances prepared 268 234 295 269 293 .1 Information Technology Average monthly service requests 300 350 370 486 : 616 Number of PC's supported 185 205 220. 354 386 1 PUBLIC SAFETY Police Number of police calls resulting in dispatch 25,849 27,443 30,496 32,747 34,865 Total police arrests made 4,222 3,753 4,809 5,053 4,424 Dispatched calls per patrol officer 680 704 555 544 592 Commercial vehicles equipment violations _ 1,104 1,015 1,069 . 980 860 UCR Part I cases assigned(1) 398 418 366 371 349 Fire Total number of arson incidents 6 4 11 21 9 Fires investigated 71 70 120 .96 28 Total annual inspections 1,059 965 1,307 2,333 2,677 Total calls for service 889 1,168 1,188 1,202 2,215 p- EMS Total calls for service 3,297 3,941 4,290 5,372 6,029. Patients treated 3,124 3,848 4,048 4,983 5,529 PUBLIC WORKS Fleet Maintenance Fleet maintenance jobs completed 3,850 3,950 4,778 4,686 4,153 ,-- Preventative maintenance performed 1,501 2,251 1,815 1,889 1,756 Other Public Works _ Fuel issued(gallons) - 183,000 220,000 303,930 318,587 343,865 Street sweeping(miles) 790 790 790 583 2,324 Street signs maintained/replaced 758 1,170 1,725 1,404 1,288 Total work orders completed 16,888 19,327 21,181 19,961 18,723 143 • • 'N - •--� tn'N N � en N 'et M O N O\ O oo al 00 N N .-• VD kn � 1/40 N 1/40 N a> d' to' to h 1/40 co) -+ .-I - 00 t 00 O rM-1 'd' �kn., .• N 00 . N 00 -O 01 en 10 '.00 '.D .--. .--. 00 on N N :en" .-- [� N N N en N 1/40 M M Ct kr) On oo .-i N d- 10 O N o0 00 Vr to O \D N oo.tom '.D 00 t-- N O\ O.M cy N 10 o0 'n fn N Kl - N N O .en en N lD en 00 00 'n N Q1 O ry 'l 'dam •. Q� N . 00 M.V1 VD Q1 00 kn 00 VD � V'�lD l O O o0 O N O .-. � N \O .--. ".i•N �N VD' en .O1 N O o0 .--i en rn In - 10' I oo 1/4.f:) N O �t O\ 00 e- N N O en - en N 01 O .— M .-a . O In O N o0 N - -1n N •� d' ,. 10 O\ 00 N o0 �h .00 N \D'oo en .en 10 ' O •--� 'dam N 'ct N v) 00 .. '.. _ ; M MONO N•O - O\ d' On -1/40 '.D cn.N 'en In N N N 01 .-' - . N'0n 01 N' t` en N C M oo N 'M N - N.oo .-. t-- O N 'n'.--i N •-• a\ N en en d- Ni V'1 00 N t� d' \D 01 kn'1O O • t 1D , coll �t N O 10 O N •--i•-- - 'M �n. in N . N' . in N•-+ - N N o0 .. N N M �. a on d' VD 0, O O — N' ' .0 On 'ct O'.00''.D .-. a1 0o cn r N — - Cn o0 10 cn . . \D O.1,r) en O\ en M `� -d' a> 00 N N M t`-cn Cr) 0 •--- N N N 10 en Vim'.— .'n N VD en "I- d-.00 O O� �n 'n o0 N Ncn N'.-. en N In ' • N N 'vi M ' en N N 0 1 CITY OF PEARL-AND,TEXAS OPERATING INDICATORS BY FUNCTION PROGRAM Last Ten Fiscal Years • 7 Fiscal Year 2004 2005 2006 2007 2008 PARKS AND RECREATION All Parks and recreation - .. - ROW maintained-acres - N/A N/A 478 385 210 Trees maintained N/A 3,450 3,450 4,280 5,000 7 Acres of city property mowed N/A N/A 167 439 470 Total number of parkwork orders received N/A N/A 227 361 316 Parkland-acres(2) N/A N/A 175 175 180 Total number of special events held 23 24 20 25 25 Total number of tournaments held N/A N/A 19 25 9 Number of recreation classes offered(3) 632 1,170 1,189 1,222 1,083 Average monthly attendance(all locations)(4) 5,211 5,977 6,723 7,988 7,607 7 COMMUNITY SERVICES Animal Control Number of animals at shelter 1,834 2,228 2,898 3,068 2,947 Total number of calls for service 3,535 5,443 4,600 6,099 4,296 Inspection Services Total building inspections 44,973 53,924 36,724 31,004 34,773 Total code violation cases '3,687 2,792 2,739 3;962 3,629 Total permits issued ' 13,738 15,289 14,889 13,769 9,878 Number of plans reviewed 2,482 .' 3,026 2,682 3,055 1,309 Municipal Court Number of trials 2,195 2,800 1,952 2,305 1,616 Number of charges 20,964 18,275 22,185 20,481 19,666 Warrants cleared N/A N/A . N/A 3,596 6,402 WATER&SEWER Distribution and Collection Fire hydrant maintenance and inspections(5) 1,730 1,967 99* 537 740 '.` Backed up sewer repairs 261 278 251 330 393 Water mains repaired 37 . 71 ' 129 108 160 Water Production Water produced-wells (in millions of gallons) 1,850 1,925 2,044 1,597 2,128 Surface Water Purchased (in millions of gallons) - 280 683 967 1,121 1,147 r Billing&Collections Annual meter reads N/A 211,956 234,875 285,930 325,471 Number of bills N/A 192,014 248,848. 293,833 318,160 Wastewater Treatment , Wastewater treated (in millions of gallons) 1,386 , 1,398 1,668 2,305 2,096 - 145 r _ Page 1 of 2 • • w 2009 2010 2011 2012. - 2013 228 245 255 251 251 5,004 5,800 6,327. 6,157. 6,312 t ' 851 1,301. 1,331 1,380 1,380 275 252 249 - 230 140 138 139 139 138 138 . • 25 24 21 22 22 6 9 11" 2 1 855 307 459117 486 281 3,623. 11,823 16,1.16 18,378 18,980 rut 2,868. , 2,532 2,685. 2,220 2,355 3,529- 4,206. ' . 4,346 4,326 4,884. 24,834 . 21,753 19,244 22,416 26,274 L- 4,274 3,433 2,860 1,952 . 2,244 9,249 7,874 7,869 - 8,696 10,630. 925 969 917 1,050 . .939 1,391 402 688 1,116 885. 24,400 . 24,657 26,369 30,187 27,439 7,374 8,692 8,204 10,080 10,328 451 402 395 887 1,399 270 325 ' ' 310 275 286 168 82 410 283 . 380 2,574 3,065 • 3,869 2,916 2,859 1,146 634 968 1,321 1,816 • 340,281 344,618 364,424 370,755 403,220; 325,201 336,668 - 350,871 359,716 387,997 2,106 2,361 1,943 2,364 2,530 UCR method of reporting was terminated after 2009. Effective 2010,Incident Based Reporting(IBR)is used. 2 Prior to 2009,Pearland acres included medians and Wastewater Treatment Plants. After 2009,reported under total acres of city property maintained. 3.Prior to 2010,individual music classes were included in the total recreation classes held. Program was cancelled. 4 In FY 2010,a new facility,Recreation Center Natatorium,opened. 5 In Water&Sewer,Distribution and Collection fire hydrant maintenance and inspection is contracted out. During FY06,the contractor's services were disrupted by a storm. 146 • CITY OF PEARLAND,TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years 7 I Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Function/Program PUBLIC SAFETY . • Police Police stations 1 1 1 1 1 1 1 1 1 1 Police vehicles • 100 109 112 117 126 130 138 142 155- 157 . Fire Fire stations 4 4 4 4 ' 4 4 4 5 6 6 Fire vehicles 15 15 16 16 17 17 17 22 23 ' 26 EMS EMS stations. 3 3 3 3 3 3 3 3 4 5 EMS ambulances 5 5 5 5 6 8 8 8 8 - 9 PUBLIC WORKS Other public works 7 Streets(miles)* 232 248 578 758 773 807 807 806 806 839 Vehicle inventory** N/A N/A 342 405 360 333 355 363 385 374 Traffic signals 43 47 48 57 67 71 62 62 74 81 PARKS AND RECREATION • . •Parks and recreation fff Developed acreage*** 124 124 175 175 180 138 139 139 138 138 Pools 1 1 1 1 1 1 3 3 3 3 Outdoor basketball courts N/A N/A 10 10 10 10 10 10 6 6 7Soccer fields N/A N/A 12 12 12 12 12 12 12 12 Activity buildings 2 3 3 3 3 3 4 4 3 3 Baseball/Softball Fields 4 4 4 4 4 4 4 4 4 4 WATER AND SEWER • Water Production . Water wells 8 9 9 10 11 11 11 11. 11 10 Pumping stations 2 2 2 2 2 2 2 2 3 3 . Ground storage tanks 10 13 15 15 15 15 15 15 15 15 ..' Elevated towers 4 4 5 5 5 5 6 6 6 6 Wastewater j Treatment Plants 4 4 4 5 5 5 5 5 5 5 Lift Stations 74 78 74 78 76 78 78 80 80 75 Distribution and Collection Water mains(miles) 250 296 361 395 410 420 433 443 448 469 Sanitary sewers(miles) 240 279 321 353 360 370 378 380 382 400 ,I Sources: Various city departments. I • Note:No capital asset indicators are available for the general government and community services functions. pi Information not presented was not available at time of publications. *Inside city limits. Prior to FY07,street miles were measured visually. Beginning FY07,a GIS system was used to measure street miles. Although new streets were added in FY2011,an audit of the database resulted in the elimination of some street miles previously reported. **Decrease in inventory reflects surplus of vehicles auctioned off. Increases reflect new purchases,which may be offset with those sold. Vehicle inventory includes public safety vehicles. . ***Prior to 2009,Parkland acres included medians and Wastewater Treatment Plants. • . .1 7 147