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R-2016-043 2016-03-14RESOLUTION NO. R2016-43 A Resolution of the City Council of the City of Pearland, Texas, accepting the City's comprehensive annual financial report for fiscal year 2015 as prepared by the accounting firm of Whitley Penn, LLP. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That certain comprehensive annual financial report as prepared by Whitley Penn. LLP. a copy of which is attached hereto as Exhibit "B" 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 14thday of March. A.D., 2016. ATTEST: NG L?j; ANG, SEC TARY APPROVED AS TO FORM: / 64----- DARRIN M. COKER CITY ATTORNEY TOM REID MAYOR Resolution No. R2016-043 Results of September 30, 2015 Financial Statement Audit City of Pearland Audit Committee 4 .■ whitleypenn - CPAs and Professional Consultants Audit Team • Tom Pedersen, CPA — Engagement Partner • Christopher Breaux, CPA — Concurring Partner • Lupe Garcia, CPA — Senior Manager • Ailene Comple, CPA, CFE — Senior • Patrick Simmons, CPA — Senior • Lauren Nelson — Senior • Jordan Henneman — Staff ■■ whitleypenn 1 CPAs and Professional Consultants Audit Approach • Team — Active participation from all levels • Approach —Risk Based Methodology • Communications — Frequent, Formal and Informal 6 ■■ whitleypenn CPAs and Professional Consultants 7 Audit Approach • Auditor's responsibility under U.S. Generally Accepted Auditing Standards Plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatements Consider internal controls for the purpose of determining audit procedures Express an opinion on the financial statements • Financial statements are the responsibility of the City's management 7 ■■ whitleypenn CPAs and Professional Consultants Audit Approach • Analytical procedures and tests of controls are performed on all significant account balances and transaction classes • Detailed substantive testing performed on activities based on level of risk and materiality • Detailed substantive testing includes observations, vouching to source documents, and confirming with third parties ■■ whitleypenn' CPAs and Professional Consultants Audit Areas Walkthroughs performed: • Cash • Investments • Capital assets • Grants • Budget • Purchasing Compliance with State law and City policies • Accounts payable • Human resources Segregation of duties Review and approval process • Payroll • Information technology 9 • Information technology Management and organization Acquisition and maintenance of applications Security policies and procedures Data security and segregation of duties Physical security of hardware • Revenue: Property taxes • Sales taxes • Franchise taxes • Fines and fees • Licenses and permits Utilities • Miscellaneous revenues ■■ whitleypenn CPAs and Professional Consultants 7 Audit Testing • Internal Control and Compliance Testing Performed: Expenditures Payroll Non -payroll Purchasing — compliance with State law and City policies Procurement cards Licenses and permits Public Funds Investment Act 10 .■ whitleypenn' CPAs and Professional Consultants H 7 Required Communications • Significant Accounting Policies The City's accounting policies and methods are appropriate and in accordance with industry standards. Implemented GASB Statements No. 68 and 71 • Judgments and Accounting Estimates The preparation of the financial statements requires that certain estimates and judgments be made by management. These judgments and estimates include: Allowances for doubtful accounts Estimated lives of capital assets Net pension liability, deferred inflows of resources, and pension expense ■■ whitleypenn 11 CPAs and Professional Consultants 7 Required Communications • Misstatements No misstatements were identified in our audit. • Disagreements with Management We had no disagreements with management over the application of accounting principles or management's judgments about accounting estimates. • Consultation with Other Accountants We are not aware of any situations in which management consulted with other accountants on accounting or financial reporting matters. • Major Issues Discussed with Management Prior to Retention We discussed the application of accounting principles and auditing standards, however, our responses were not a condition to our ■■ retention. whitleypenn 12 CPAs and Professional Consultants Required Communications • Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing our audit. • Significant Written Communications Between Auditor and Management Engagement letter Management representation letter • Independence We confirm that we are independent accountants with respect to the City of Pearland. 13 .■ whitleypenn CPAs and Professional Consultants Auditors' Opinion on Financial Statements (p. 1) • Audit conducted in accordance with GAAP and Governmental Auditing Standards • Unmodified or "clean" opinion • Highest level of assurance that can be given on financial statements • Indicates that amounts presented are materially correct and can be relied upon 14 ■■ whitleypenn CPAs and Professional Consultants Statement of Net Position (p. 19) Total Primary Government (Governmental and Business -type) As of September 30, 2015 As of September 30, 2014 Cash and Investments Receivables/Other Capital Assets, Net Total Assets Total Deferred Outflows of Resources Current Liabilities Long-term Debt Total Liabilities Net Position S117,924,907 36, 267, 388 1,085,118,212 1,239,310,507 17,934,518 24, 509,126 538,174,381 562,683,507 $694,561,518 108, 776, 602 30,643,943 1,047,908,325 1,187,328,870 12,026,137 19,581,869 511,621,258 531,203,127 $668,151,880 15 ■■ whitleypenn CPAs and Professional Consultants Long-term Debt (p. 19) Total Primary Government (Governmental and Business -type) September 30, 2015 September 30, 2014 Certificates of obligation Revenue bonds General obligation bonds Tax increment revenue bonds rermancnt improvement bonds $50,030,000 15,265,000 245,865,000 61,695,000 $56,505,000 22,690,000 236,730,000 57,435,000 1 1,JJJ,VVV 1L,at ,vvv Water and sewer revenue bonds 107,410,000 101,925,000 Net pension liability* 16,616,527 Premiums (discounts) 16,844,088 10,714,420 Other 13,1 1 3,766 12,756,838 Total $538,174,381 $511,621,258 *As a result of the City implementing GASB Statements No. 68 and 71; NPL at 9/30/2014 was $15,653,252. 16 ■• whitleypenn CPAs and Professional Consultants Statement of Revenues, Expenditures, and Changes in Fund Balance - General Fund (p. 26) Year Ended September 30, 2015 Total Revenues Total Expenditures Deficiency of Revenues Over Expenditures Other Financing Uses Net Change in Fund Balance Fund Balance — Beginning Fund Balance — Ending $61,909,692 62,708,081 (798,389) 2,698,125 1,899,736 19,454, 501 $21,354,237 17 .■ whitleypenn CPAs and Professional Consultants General Fund Revenue (p. 26) Charges for services 2 3% Fines and forfeitures 5% Licenses and permits 7% Sales and use taxes Franchise fees 31% 11% all j whitleypenn CPAs and Professional Consultants Other 2% Property taxes 21% 18 Statement of Revenues, Expenses, and Changes in Net Position - Water and Sewer Fund (p. 30) Year Ended September 30, 2015 Total Operating Revenues Total Operating Expenses Non-operating Income Non-operating Expense Capital Contributions Transfers, net Change in Net Position Net Position — Beginning Prior period adjustment GASB 68 Net Position — Ending $30,200,793 28,843,751 3,054,612 (5,422, 374) 13,176,793 (2,488,255) 9,677,818 204,638,492 (1,437,119) $212,879,191 19 Single Audit • Major Programs — Bulletproof Vest Community Development Block Grant Victims of Crime Act • No deficiencies in internal control over financial reporting or compliance • Unmodified opinion on compliance with major program requirements • No questioned costs or noncompliance noted 20 ■■ whitleypenn 1 CPAs and Professional Consultants Next Steps • March 15, 2016 — City Council Meeting City Council will consider approving a resolution accepting the City's CAFR • By March 31, 2016 City submits application and CAFR to the Government Finance Officers Association's Excellence in Financial Reporting Program • By April 14, 2016 — City submits data collection form to Federal Audit Clearinghouse reporting the results of the Single Audit; City and auditor both certify the submission 21 ■■ whitleypenn' CPAs and Professional Consultants Questions? FINAL DRAFT CITY OF PEARLAND, TEXAS Clay Pearson City Manager COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended September 30, 2015 Officials Issuing Report Jon Branson Trent Epperson Rick Overgaard Deputy City Assistant City Assistant Director Manager Manager of Finance FINAL DRAFT CITY OF PEARLAND,TEXAS • COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS Page Introductory Section • Letter of Transmittal Principal Officials xi Organizational Chart xii GFOA Certificate of Achievement xiii Financial Section Report of Independent Auditors 1 Management's Discussion and Analysis 7 Basic Financial Statements: Government-Wide Financial.Statements: Statement of Net Position 19 Statement of Activities 20 • Fund Financial Statements: Balance Sheet-Governmental Funds 22 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 25 Statement of Revenues,Expenditures,and Changes in Fund Balances- - Governmental Funds 26 Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund . Balance of Governmental Funds to the Statement of Activities 28 Statement of Net Position-Proprietary Funds 29 Statement of Revenues,Expenses and Changes in Fund Net Position-Proprietary - Funds 30 Statement of Cash Flows-Proprietary Funds 31 Notes to the Financial Statements 33 Required Supplementary Information: . General Fund-Schedule of Revenues,Expenditures,and Changes in Fund Balances- - Budget and Actual - 74 Notes To Required Supplementary Budget Information. 75 Required Pension System and Other Post Retirement Benefit Supplementary Information 76 • • 25 FINAL DRAFT CITY OF PEARLAND,TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS(Continued) Financial Section(Continued) Page Other Supplementary Information: Combining and Individual Fund Statements and Schedules Combining Balance Sheet-Non-Major Governmental Funds 84 Combining Statement of Revenues,Expenditures,and Changes in Fund Balances- Non-Major Governmental Funds 88 Schedules of Revenues,Expenditures,and Changes in Fund Balance-Budget and Actual: Debt Service Fund 92 Hotel/Motel Tax Fund 93 Court Security Fund 94 City-Wide Donations Fund 95 Court Technology Fund 96 Street Assessments 97 Park Donations Fund 98 Police:Seizure Fund 99 Parks and Recreation Development Fund 100 Sidewalk Fund 101: Grant Fund 102 Traffic Impact Improvements 103 Juvenile Management Fund 104 Capital Projects Fund 105 Educational TV Fund: 106 U of H Fund 107: Long-Term Debt Amortization Schedules: Combining Schedule of Governmental Activity Long-Term Debt 110 Combining Schedule of Enterprise Fund Long-Term Debt 118 26 FINAL DRAFT CITY OF PEARLAND,TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS(Continued) Statistical Section(Unaudited) Page Net Position by Component 124 Changes in Net Position 126 Fund Balances of Governmental Funds 130 Changes in Fund Balances of Governmental Funds 132 Spending and Growth Analysis 134 Assessed Value and Estimated Actual Value of Taxable Property 136 Per Capita,Household, Square Mile for Benchmark Cities of Taxable_Property 139 Direct and Overlapping Property Tax Rates 140 Property Tax Levies and Collections 142 Principal Property Taxpayers 143 Taxable Sales by Category 144 Outstanding Debt by Type 146 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capita 148. Direct and Overlapping Governmental Activities Debt 149. Pledged Revenue Coverage 150 . . Demographic and Economic Statistics 151 Principal Employers 153 Full-time Equivalent City Government Employees by Function/Program 154 Operating Indicators by Function/Program 156 Capital Asset Statistics by Function/Program • 160 • • 27 FINAL, DRAFT 28 FINAL DRAFT Introductory Section 29 FINAL DRAFT (This page intentionally left blank). 30 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE a .: Pp d'Ail City of Pearland v 9a 3519 Liberty Drive FPE'ARJ..AND Pearland, Texas 77581 hi=e_z w s-- Tel:281.652.1600 d pearlandtx.gov E3T. 18g March 14, 2016 Honorable Mayor,Members of City Council, and Citizens of the City of Pearland, Texas USA The Comprehensive Annual Financial Report(CAFR) of the City of Pearland,Texas (the"City") for the fiscal year ending September 30, 2015, 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 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. Whitley Penn,LLP, Certified Public Accountants, have issued an unmodified(or"clean") opinion on the City of Pearland's financial statements for the year ending September 30, 2015. The independent auditor's report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the 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 in conjunction with it. PROFILE OF THE GOVERNMENT The City of Pearland, incorporated in 1959, is located across the northern end of Brazoria County and shares a common border with Houston, Texas to the north. The City 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 112,300 residents estimated as of September 2015. The City of Pearland is a home-rule City operating under a Council-Manager form of government. Policy-making and legislative authority are vested in a governing council (Council) consisting of the mayor and five other members. The Mayor and all Council members are elected at large. The Mayor is allowed to vote only in case of a tie vote.The Mayor and each Council member hold office for a period of three years and until his/her successor is elected and qualified. Council members 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. i 31 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE 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 visitor services; 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 in the Governmental Fund Financial Statements. ECONOMIC CONDITIONS Local Economy Located 25 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 a premier location for residential and commercial growth. With abundant land, business facilities, a sound infrastructure, and a diverse workforce supported by educational programs, Pearland's growth has been consistent and will' continue to be sustained over time with continued residential and commercial development. The total of all new construction permitted during the 2015 calendar year was over$430 million, an 11% increase in value from 2014. New single-family housing permits totaled 1,394 with a construction value of $312 million. Multi-family permits totaled 284 with a value of $19 million. Pearland's economy continues to grow. During the final quarter of 2015 building permit revenues are up for December 2015 over December 2014, from $399,261 to $456,464, a 14.3% increase. Revenues associated with development, including electrical, plumbing & gas, and mechanical permits combined, increased by $66,483, from $177,066 through December 2014 to $243,549 December 2015, a 37.6% increase. The building plan check fee revenues increased by $162,135, from $234,748 to $396,883, a 69.1% increase. The value of commercial building permits through December 2015 is $19.8M compared to $12.0M through last December. The number of single family permits, however dropped from 316 through last December to 253 this December. The average value for single family permits is $219,153 compared to $226,028 last year for this same period,a 3.0%decrease. ii 32 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE Sales of homes throughout the greater Houston area remained strong in 2015,but less than 2014 because of plunging:oil prices and the resulting layoffs. The Houston Association of Realtors reported 73,724 single family home sales for 2015, down 2.4% from the 75,535 sales in 2014. The average price of a single family home rose 3.7% from $270,182 in 2014 to $280,290 in 2015. 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 metro in an enviable position compared to other markets around the country. Houston is the world's energy capital, however the oil and gas industry has contracted because of the continued decrease in the price of oil, resulting in a significant reduction in oil and gas exploration. Over the course of the year, drilling permits fell 41.6 percent, the North American rig count fell:61.4 percent, and the price of crude fell 29.6 percent. These declines are on top of the declines the industry already suffered in 2014. The impact outside the oil and gas industry in the Houston area has been mixed so far in 2016. Office leasing is down,but retail construction is up. Houston sales tax collections have slipped,but vehicle sales set a new record. Home closings have fallen,while airport and port traffic continues to grow. : Employers continue to add jobs, just enough to offset losses in oil and gas. With the decrease in exploration,Houston will look to other sectors for growth. Pearland's unemployment rate was 3.3%in September 2015,down from 4.3%in September 2014.This is • compared to the national unemployment rate of 5.1% and the State of Texas unemployment rate of 4.7% as of September 2015. Pearland's unemployment is less than the national and state rates with a:growing economy. Houston added 23,200 jobs in 2015 and the Greater.Houston Partnership is forecasting 21,900 new jobs for 2016. Although this is much lower than the past couple of years, the Houston economy is still strong. 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,: = Energy, healthcare and life sciences, and manufacturing have been key areas of interest for Pearland for over ten years; Combined with a mix of reinforcing land uses, urban planning, key entertainment and cultural attractions, public spaces, and walkability and connectivity will provide for livable.sustainable developments. As noted later in the Economic Development section,PEDC and the City announced projects in all three key areas in 2015,including Lonza Houston,FloWorks and Mitsubishi Industries Compressor Corp. In November 2015, Costco opened 150,000-square-foot store on Business Center-.Drive, just south of Pearland Town Center.The new store employs approximately 150 individuals. In late 2014, Hospital Corporation of America (HCA) completed construction on its Pearland Medical Center, the community's first acute-care hospital. The 144,000 square-foot, 32-bed hospital contains surgical suites, medical/surgical beds, intensive care beds and a 24-hour emergency department.: The hospital, which opened to the public in February 2015, is located on a 48-acre site that also is home to a full-service freestanding emergency department, imaging center and three-story, 80-000 square-foot : medical office building. Memorial Hermann is expected to open a new 64-bed acute care hospital in March 2016. Memorial Hermann Pearland sits on a 40 acre comprehensive medical campus that also includes.a Convenient Care Center, a 100,000 square-foot physicians' office building and a Memorial Hermann Life Flight®helipad. The hospital will offer many of the high quality services already offered by Memorial Hermann at their other campuses, including cardiac catheterization labs, comprehensive radiology and laboratory services; women's and children's services and sports medicine and rehabilitation. Memorial Hermann Pearland is expected to add approximately 350 jobs to the local economy. Sales tax for fiscal year 2015 totaled$28.2 million, an increase of$2.6 million or 10.0% over fiscal year 111 33 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE 2014. Of the$28.2 million, $18.8 million went to the City's:General Fund for operations and$9.4 million went to the City's Economic Development Corporation for specific economic development programs and activities. The City's General Fund is 29% funded by 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 20.12,which continued through 2015. As such, the.City projected an 8.8% growth in sales tax for fiscal year 2016. Retail sales nationally is expected to be decent in:2016,but at a slower pace than last year because of a mixed economy. Long-Term Financial Planning The City adopts a one-year operating budget, including a five-year capital improvement program (CIP). Even though a one-year budget is adopted, the budget implements strategies, both financial and operational,to meet existing challenges and to plan for the future. The City's Five-Year CIP for fiscal year 2016 through fiscal year 2020 totals $481 million and:continues to implement the $162 million bond program approved by the voters in May 2007. .Projects include drainage ($14M), streets ($152M), facilities ($25M), parks ($28M), water and wastewater ($262M). 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. In order to fund obligations and implement the fiscal year CIP, the Debt Service tax rate will need'to increase by $0.0172 from the fiscal year 2016 tax rate of$0.4828 to $0.5000 in fiscal year 2018. From fiscal year 2016 to fiscal year 2018,total revenues are anticipated to increase 7.4%to 10.1%per year. The City completes a Water/Sewer Cost 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 taken for fiscal year 2011,2012 or 2013; however, the model produced a rate increase for 2015, and anticipates another for 2017 and 2018. The City's utility system continues to be self-supporting:and financially sound. Relevant Financial Policies/Guidelines 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. • Leverage City dollars by seeking outside funding sources. • Maintain stable property tax rates. . . iv 34 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE Majorinitaatives 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. Pearland City Council continues to :emphasize public safety and the City delivers services in the areas of law enforcement, emergency management,emergency medical services,and fire protection. The Pearland Police Department has focused attention on the strategic priority of Safe Community.. Several new programs were implemented throughout the fiscal year in order to increase efficiency, work with the public to deter crime, build stronger community relationships and catch violators. The Police Department implemented a Lobby Officer Detail, this position has reduced Wait times for citizens filing rion-emergency reports. The position has also allowed for patrol: officers to stay on the streets and permitted a more professional and welcoming service to those visiting the public safety building. Community policing efforts have included a Teen Citizen Police Academy which hosted over 20 local students. This class is helping bridge the gap,between the police and the public we serve. Pearland : officers have also attended "Coffee with a Cop" programs sponsored by private local businesses. The police.department is also working with other city departments to host CRASE (Citizen Response:to Active Shooter Encounters)training. Numerous classes were completed to educate the City of Pearland's employees on actions to take in case of this serious threat. Technological_ advances are helping the police department work more efficiently and increase the connection with the public to catch violators. Programs such as Text to 911 and civilian camera registrations are permitting the police to communicate with the public in new forms. In addition, the department implemented an Online Reporting system. This new technology allows victims to be able to report certain property crimes online. This has reduced greatly the time needed by patrol to respond:to what are most often citizen calls for service with no viable leads. It has also helped create a convenient way.for the public:to contact the department,without requiring an officer to go to their homes or places of business: The: City of Pearland Police Department communications division provided dispatch services for the City's Police and Fire 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. By utilizing contracted 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 dispatching, this arrangement has contributed to increased safety,for emergency responders as well as better deployment and utilization of resources. Fire:Station 2, located at the northeast corner of Harkey Road and Fite Road, is under construction. This : station will be approximately 10,726 sq. ft. and house an operation crew, one fire engine, and one ambulance. This facility construction started in October 2014 and will be:ready:for starting occupancy by February 2016: Fire Station 1, currently located at the corner of Orange Street and Old Alvin Road,will relocate in 2017 to provide quicker response times. The new station will be located on Old Alvin Road at McHard. At approximately 8,500 sq. ft., the station will house a 24-hour operation crew, one fire engine,-and one v 35 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE ambulance. Fire Station 3 began construction in June 2014 on a new 10,726 square foot station which is located on the corner of Yost and Broadway adjacent to the existing EMS station. The new Fire Station #3 will accommodate up to 10 full-time fire fighters and became operational in August 2015. Economic Development The Pearland Economic Development Corporation(PEDC) is a non-profit Type B Corporation under the Texas Development Corporation Act and is primarily funded by a half-cent sales tax in the City of Pearland. PEDC is committed to enhancing the community's economic vitality through the attraction, retention and expansion of primary employers. PEDC works to ensure Pearland's business climate and built environment strongly support these efforts by focusing on aesthetics, infrastructure, quality of life, image,workforce and quality development and redevelopment of key Pearland_districts and corridors. PEDC works with the City to generally promote the City and 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 PEDC's Fiscal Year 2015 attraction and retention projects. Lonza Houston, one of the world's leading and most-trusted suppliers to the pharma & biotech and specialty ingredient markets, announced the construction of a 100,000 square-foot biotech facility on an 1:1-acre site in Pearland's Lower Kirby District. FloWorks International, a leading specialty supplier of pipe, valves, fittings and:related products, broke ground on a 225,000-square-foot facility, located on a 41-acre site northwest of the Bailey Road and State Highway 35 intersection. Scheduled for completion in 2016, the facility will be home to approximately 80 employees, including executive management, sales, operations, administrative, accounting and warehouse personnel. In April 2015,Mitsubishi Heavy Industries Compressor International Corporation,(MCO-I)celebrated the grand opening of Pearland Works, its new office,manufacturing and service facility in Pearland's Lower Kirby District. It is the first U.S.-based manufacturing and service location for the Japanese-owned company. The 180,000-square-foot facility, located at 14888 Kirby Drive, houses packaging and assembly, vertical and horizontal rotor storage, repair and maintenance services, administrative offices and a training center. In addition, MCO-I also constructed a 49,500-square-foot warehouse facility, which opened in late 2015. PEDC continued to work with the Highway 288 Management District (PMMD#2), created in 2013, on 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 $400,000 annually. The Board has also approved a master plan for the District and cleanup efforts have begun in the corridor. PEDC, along with local partners in government, education,healthcare and business, continue to work on implementation of the Pearland 20/20 community strategic plan. The long-term strategic community and economic development plan that was created in 2012 incorporates nine strategies to ensure a shared vision for the community's future growth and an action plan to achieve it. The plan's steering committee completed a mid-course update to the plan in 2015 to get a big-picture sense of key successes and challenges. The nine strategies are 1. Economic Development Marketing, 2. Mobility, 3. Corridors and Character Districts,4. Recreation and Culture, 5. Aesthetics, 6. Lower Kirby District,7. Multi-Use Event Center, 8.Education and Workforce,and 9.Internal Marketing. vi 36 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE One of the City's prime areas for development, the Lower Kirby District, a 1,200 acre mixed-use development located 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 and the City on the development of regional detention, reconstruction:of Hooper Road and the installation of underground electricity that will serve developable sites on Kirby Drive. PEDC 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 was 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. Annual hotel occupancy taxes total$1.5 million dollars and the funds ending balance is$3.7 million as of September 30,2015. 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. 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. 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 strategy that identifies the major regional drainage and roadway improvements needed to bring the plan together. This master plan and implementation strategy for Lower Kirby ensure that the vision for-the mixed use regional destination is feasible,but flexible to address changing market 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 Management District Boards to create:a coordinated action plan that identifies the responsibilities and roles of each of the entities. 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 Avenue as a focal point for the Old Town Site while also responding to existing growth patterns in the city. A primary vii 37 RESPONSIVE RESULTS-ORIENTED TRUST BUILDERS ACCOUNTABLE 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 recommends adopting form based codes that would'be used to ensure buildings and streets are coordinated in a manner that is attractive to pedestrians:and encourages - outdoor activities. Using form based codes allows for more flexibility and a mix of uses as compared 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 2016-2020 totals.$481 million. Projects include drainage ($14M), streets ($152M), facilities ($25M), parks ($28M), water and wastewater($262M). Major thoroughfare projects include the widening of Bailey Road between FM1128 and Veterans, reconstruction of one mile of Old Alvin Road from Plum Street to McHard Road, McHard Road extension from Mykawa Road.to Cullen Boulevard, expansion of Smith Ranch Road from two lanes asphalt to four lanes concrete, curb arid 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 field sports 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 a 7,900 square feet expansion and renovation to the Tom Reid Library, reconstruction of Fire Station#2, relocation of Fire Station#1, and City Hall and Orange Street Service Center facility improvements. Water projects include the preliminary design of a 10 million gallon per day (MGD) surface water plant, which is phase I of an ultimate capacity of 20 MGD. Associated:with the water plant construction are multiple water transmission and distribution lines. Major wastewater:plant projects include expansion 4.0 MGD:expansion of the Reflection Bay plant, an . approximate 2.0 MGD of the Barry Rose plant, and an approximate 2.0 MGD of the JHEC plant. In addition, the program includes an extension of the 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 the Secretary for H-GAC's Transportation Policy Council(TPC),with the Deputy City Manager serving as an alternate. The Assistant City Manager is the 2nd Vice-Chair of the:Technical Advisory Committee (TAC), a sub-committee of the TPC, a member of the Transportation Improvement Program (TIP) Subcommittee,and Chair of the Regional Transportation Plan(RTP) 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..2015- 2018 and five:of the City's projects were selected for funding. The projects are Mykawa Road (FM518 to Beltway), viii 38 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE Hughes Ranch Road (Smith Ranch to Cullen Parkway), SH288 Northbound Frontage Road:(CR59 to FM518), Clear Creek Trail (Hughes Road to University of Houston Clear Lake, Pearland Campus) and Safe-Routes to School (including Carleston Elementary, Cockrell Elementary and Jr High South) These projects will also receive State and federal funding in the amount:of:80% totaling $60,367,000 with the City providing 20%matching funds. These project are scheduled for completion between 2018 and 2022. These projects are in addition to the five projects selected in 2013 totaling $63,251,113 and the:four projects that received funding in 2011 totaling$20,180,901 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. Harris County is preparing to begin construction this year on four new toll lanes on Texas 288 north of the Brazoria-Harris County line to the Texas Medical Center. Brazoria County will follow with managed toll lanes from the county line south to County Road . 58. In addition, the County has secured TIP funds to reconstruct the.SH288 overpass.at FM518,FM518 under SH288 and the associated frontage road approaches to the intersection, which addresses the main congestion issues at our busiest intersection. The TIP funds will provide 80% of the funds and the Texas Department of Transportation (TxDOT) is providing the 20% matching funds. This project will be constructed in conjunction with the toll lane project. 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 to see how the spending decisions made today affect the future as well as to identify any issues/concerns that are forthcoming arid to put strategies in place today to address those issues/concerns for the future. Since fiscal year 2013 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 2016 budget.The strong local economy will most likely result in continued growth in revenues in the current fiscal year,2016,most noticeably in sales tax and property tax.Through the first quarter,sales tax revenue for fiscal year 2016 is up 8.3%over the prior year.The fiscal year 2016 Adopted Budget includes an increase of 8.8% over fiscal year 2015. Property Tax revenue is also projected to maintain the strong levels that have developed during fiscal year 2015. The Adopted Budget-for fiscal year 2016 projects an increase of 7.4%over last year's budget mainly due to increased valuations and new property added to the roll. The Adopted Budget includes a .007 cent decrease in the:property tax rate from$0.7121 to $0.7053 per $100 valuation. Of the total adopted tax rate of 70.53 cents per hundred dollars valuation, the operating tax rate increased to 22.25 cents per hundred dollars and the debt service tax rate decreased from$0.4900 to$0.4828. While about half-way into the 2016 fiscal year, the City is already beginning to prepare for the 2017 budget process and up-coming forecast with the same goal of being fiscally responsible to our citizens. ix 39 RESPONSIVE RESULTS-ORIENTED TRUST-BUILDERS ACCOUNTABLE AWARDS AND ACKNOWLEDGEMENTS • The Texas State Comptroller awarded the City of Pearland a Platinum Leadership Circle Award, which spotlights entities that go above and beyond providing financial transparency online through clear, consistent pictures of spending and sharing information in a user-friendly format that lets viewers easily drill down for more information. 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, 2014. This was the 38th consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report. 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. City staff believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to GFOA to determine its eligibility for another certificate. 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, \ , „1„..c„,„:„......„,..\ Clay J.:Pearson, City Manager Jon Branson,Deputy City Manager x 40 FINAL DRAFT CITY OF PEARLAND,TEXAS PRINCIPAL OFFICIALS Term Expires Elected Officials Position May Tom Reid Mayor 2017 Tony Carbone Council Member at Large-Position One,Mayor Pro Tem 2016 Derrick Reed Council Member at Large-Position Two 2018 Gary Moore Council Member at Large-Position Three 2017 Keith Ordeneaux Council Member at Large-Position Four 2018 Greg Hill Council Member at Large-Position Five 2016 Appointed Officials Position Clay Pearson City Manager Darrin Coker City Attorney Letitia Farnie Municipal Court Judge City Management Position Jon Branson Deputy City Manager and Interim Director of Finance Trent Epperson Assistant City Manager Matt Buchanan Executive Manager of Development Services and. PEDC President Young Lorfmg City Secretary Eric Wilson Director of Public Works Michelle Graham Director of Human Resources Daniel McGhinnis Director of Information Officer Chris Doyle Police Chief Chris Orlea Director of Parks and Recreation Vance Riley Fire Chief Andrew Fearn Head Librarian Lata Krishnarao Director of Community Development Kim Sinistore Executive Director,CVB Sparkle Anderson Communications Manager Jennifer Huhn Municipal Court Administrator Susan Polka City Engineer xi 41 FINAL DRAFT • • If ,i iPEMLM.PI• -•• •• _. . .. ......_ .., _. .. .... • Office of the • •City Manager City of'Pea rland, Texas .. Organization .Chart Deputy City . Strategic.Priorities • Manager ' •. • . • Sustainable Infrastructure Parks&, Finance& • Fiscally Responsible Government Recreation . Purchasing • Healthy Local Economy . . .. . • • • Engaged.Comrnunity HR/Organizationa City Secretary .7- I Development :. • Safe Community . . • '• Quality parks,recreation and events r. Communications,....; Convention Visitor's Bureau, I ' ' Municipal Court — . , ., .nst•r,w..PTaleifsPva,,V1.s10.r.lo,+vv•v . Asststant City • Manager C , Executive Mane er of ' • Development Services . Fire &PEDC President • • E Police- Chief Information Officer • •. - - -,. rt , . , . . e 1 Fire Marshal ,•=•••• Animal Services •-,•• IT/GIS Engineering , Public Works ' PEDC Community Development 1...., . . . , . . . , : Code&Healt.h•-• Projects. Operations - , .Water&Sewer : . , Enforcement — Planning ' • • Traffic r--- • Engineering • -- Facilities • . Operations. • ' ' • Permits& ..... Inspections . . .. , . 'Right of Way ,,' .. ' • X1.1 42 FINAL DRAFT(D Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to s City of Pearland Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2014oteo$40, l Executive Director/CE0 xiii 43 FINAL DRAFT (This page intentionally left blank.) 44 FINAL DRAFT Financial Section 45 FINAL DRAFT (This page intentionally left blank) 46 FINAL DRAFT REPORT OF INDEPENDENT AUDITORS To the Honorable Mayor and Members of the City Council City of Pearland,Texas 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 30,2015,and the related notes to the financial statements, which collectively comprise the City':s basic financial statements as listed m 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 fmancial 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 fmancial 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 circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting:estimates made by management,as well as evaluating the overall presentation of the financial statements. 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, as of September 30, 2015, 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. 1. 47 FINAL DRAFT To the Honorable Mayor and.Members of the City Council Emphasis of Matter As discussed in Note 1 and Note 16 to the financial statements, the City adopted the provisions of GASB Statement No. 68,Accounting and Financial Reporting for Pensions, an Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date-An Amendment of GASB Statement No. 68 for the year ending September 30, 2015. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the.United States of America require that the management's discussion and analysis on pages 7 through 17, budgetary comparison information on pages 74 through 75, and pension system supplementary information and other post-employment benefit supplementary information on page 76 through 78 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board,who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which 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. Other 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 introductory section, combining and individual fund statements and schedules, other supplementary information, budgetary comparison. schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and budgetary comparison schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such 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 combining and individual fund statements and schedules, other supplementary information, and budgetary comparison schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have 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 them. 2 48 FINAL DRAFT To the Honorable Mayor and Members of the City Council Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 14, 2016, 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 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 City's internal control over financial 'reporting and compliance. Houston,Texas March 14,2016 3 49 FINAL DRAFT (This page intentionally left blank.) 4 50 FINAL DRAFT Management's Discussion and Analysis 5 51 FINAL DRAFT • (This page intentionally left blank.) 6 52 FINAL DRAFT- CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Pearland (the "City"), 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 30,2015. FINANCIAL HIGHLIGHTS •: The assets and deferred outflows of resources of the primary government of the City exceeded its liabilities as of September 30, 2015,by $694.6 million (net position). Of this amount, $648.3 million is invested in capital assets,net of related capital debt and$61.5 million restricted for capital improvements, debt-service, community development projects,public safety, and economic development. • At the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of$79.3 million, an increase of$7.9 million in comparison with the prior year. Increases are seen in the General Fund of$1.9 million and$4.9 million in Capital Projects Fund. Approximately$57.8 million of the $79.3 million is considered restricted and primarily consists of$24.1 million for economic development and$22.5 million attributable to unspent bond proceeds for capital projects. • As of September 30, 2015, the unassigned fund balance for the General Fund was $19.7 million or 31% of total General Fund expenditures. The total fund balance for the General Fund is $21.4 million or 34% of General Fund expenditures. • The City's long-term liabilities increased by $26.6 million due to the issuance of new debt and the recognition of a$16.6 million net pension liability. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: (1) government-wide financial statements, (2) fund financial statements and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements - The government-wide financial statements are designed to provide readers with a broad overview of the City's finances,in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the City's assets,deferred outflows of resources,arid liabilities,with the difference between the three 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. The Statement of Activities presents information showing how the City's net position changed during the 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 include general government,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 21 through 23 of this report. The government- wide financial statements include not only the City, itself(known as the primary government), but also a legally separate Economic Development Corporation, Tax Increment Reinvestment Zone (TIRZ #2) and the Development Authority of Pearland for which the City is financially accountable. Financial information for these = blended component units is reported _together with the financial information presented for the primary government,itself. 7 53 FINAL DRAFT CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) 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 statement 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 24 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, Tax Increment Reinvestment Zone #2, and Development Authority of Pearland, which are considered to be.major funds. Data from-the non-major 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. The City 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 funds. 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. Additionally, the City maintains an Internal Service.Fund 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. The Internal Service Fund is included in governmental activities for government-wide reporting purposes. Proprietary funds provide the same type of information as the government-wide financial statements,only in more detail. The basic proprietary fund financial statements, which begin on page 31 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. The basic proprietary fund financial statements can be found on pages 31 through 34 of this report. 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 35 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 74 of this report. 8 54 FINAL DRAFT CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) 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 and deferred outflows of resources exceeded liabilities by$694.6 million at the close of the most recent fiscal year. By far the largest portion of the City's net position (93%) reflects its investment in capital assets (e.g., land, infrastructure, buildings, machinery, and equipment), less any 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 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. COMPARATIVE SCHEDULE OF NET POSITION September 30,2015 and 2014 Amounts in(000's) • Governmental Activities Business-type Activities Totals 2015 2014 2015 2014 2015 2014 Assets - Current and other assets $ 109,894 $ 99;425 $ 44,298 $ 39,996 $ 154,192 $ 139,421 Capital assets 784,493 759,236 300,625 288,672 1,085,118 1,047,908 Total Assets 894,387 858,661 344,923 328,668 1,239,311 1,187,329 Total Deferred Outflows of Resources 16,962 11,517 972 509 17,935 12,026 Liabilities Other liabilities 14,264 11,846 10,245 7,735 24,509 19,581 Long-term liabilities outstanding 415,696 395,230 122,479 116,392 538,175. 511,622 Total Liabilities 429,961 407,076 132,723 124,127 562,685 531,203 Net position Net investment in capital assets 461,484 430,286 186,819 174,955 648,303 605,241 Restricted 47,927 45,826 13,538 14,483 61,465 60,309. Unrestricted (28,022) (13,010) 12,815 15,612 (15,207) 2,602 Total Net Position $ 481,389 $ 463,102. $ 213,172 $ 205,050 $ 694,561 $ 668,152 Due to the implementation of GASB Statement No. 61, The Financial Reporting Entity: Omnibus-an Amendment of GASB Statements No. 14 and No. 34, 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 column.This implementation occurred in fiscal year 2013. As a result of the GASBS No. 61 implementation,unrestricted net position for governmental activities is negative$28.0 million for fiscal year 2015. Governmental 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. 9 55 u FINAL DRAFT CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) COMPARATIVE SCHEDULE OF CHANGES IN NET POSITION For the Years Ended September 30,2015 and 2014 Amounts in(000's) Governmental Activities Business-type Activities Totals 2015 2014 2015 2014 2015 2014 Revenues Program revenues: Charges for services $ 23,464 $ 19,848 $ 36,837 $ 35;937 $ 60,301 $ 55,785 Operating grants and. contributions 7,432 9,297 2,512 9,944 9,297 Capital grants and contributions 36,440 29,269 13,177 17,677 49,617 46,946 Property taxes 62,974 57,378 62,974 57,378 Sales and use taxes 29,970 27,295 29,970 27,295 Franchise taxes 6,971 6,484 6,971 6,484. Investment earnings 491 254 325 139 816 393 Other 4,149 .2,399 219 275 4,368 2,674 Total Revenues 171,891 152,224 53,070 54,028 224,961 206,252 Expenses General Government 17,189 12,240 17,189 12,240 Public Safety 33,179 32,130 33,179 32,130 Public Works 45,894 38,579 45,894 38,579 Community Services 3,641 4,687 3,641 . 4,687 .. Parks and Recreation 3,731 6,896 • 3,731 6,896 Economic Development 26,159 26,498 26,159: 26,498 Interest on long-term debt 15,569 16,225 15,569: 16,225 Water and Sewer 34,266 32,444 34,266 32,444 Solid Waste 6,417 6,664 6,417 6,664 Total Expenses 145,362 137,255 40,683 39,108 186,045 176,363 Increase(decrease)in net position before special item and transfers 26,529 14,969 12,387 14,920 38,916 29,889 Special item-loss on disposal of asset (3,039) (3,039) Transfers 2,828 2,031 _ . . (2,828) (2,031) Increase in net position 29,357 13,961 9,559 12,889 38,916 26,850 Net position-beginning 463,102 449,141 205,050 192,161 668,152 641,302 Prior period adjustment (11,070) (1,437) (12,507) Net position-ending $ 481,389 $ 463,102: $ . 213,172 $ 205,050 . $ 694,561 $ 668,152: The increase in Total Net Position from the prior year is $26.4 million(after applying a prior period adjustment of$12.5 million related to the implementation of new accounting standards), which is primarily attributable to capital contributions from developers. 10 56 FINAL DRAFT CITY OF PEARLAND, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Governmental activities - Governmental activities increased the City's net position by $29.4 million, thereby accounting for 75%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 $63.0 million, $30.0 million, and $7.0 million, respectively. These revenues increased by $8.8 million from prior year primarily as a result of an increase in taxable assessed values and increased consumer spending. • Capital contributions totaled$36.4 million as a result of infrastructure contributed by developers. • The revenues were offset by expenses for general government, public safety, public works, and economic development of$17.2 million, $33.2 million, $45.9 million, and$26.2 million respectively: Expenses and Program Revenues-Governmental Activities $50,000 OExpenses $45,000 $40,000 ■Program Revenues $35,000 $30 000 o $25,000 — o $20,000 Id —; ° '_ ` �� o lie ��~o co , ,�� 1G�� ,� SAS, e°c' \0'4 ` Vo �`o� N3 •titi9 4� tie' ��ti 4 quo Samoa: 1•G� do°� CSe'' OP 4� ot+o e,5�'o) 4Y" tizt ti� Revenues by Source - Governmental Activities Charges for services 14% Grants and Other contributions 3% 25% h Sales and use taxes Property taxes 17% 37% . Franchise taxes 4% 11 57 FINAL DRAFT CITY OF"PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) Business-type activities - Business-type activities increased the City's net position by $9.6 million, thereby accounting for 25%percent of the total increase in the net position of the City. Key elements of this increase are as follows: • Charges for services of $36.8 million increased approximately $0.9 million overr the prior year primarily due to rate increases. • Capital grants and contributions of$13.2 million decreased$4.5 million from the prior year mainly due to a decrease in contributions from developers for impact fees. • The revenues listed above were offset by expenses of$34.3 million and $6.4 million, respectively, for Water and Sewer and Solid Waste. Expenses increased from prior year by$1.6 million. . Expenses and Program Revenues-Business-type Activities $50,000 $45,000 $40,000 $35,000 ©Expenses $30 000 ■Program Revenues g $25,000 $20,000 $15,000 $10,000 $5,000 Water and Sewer Solid Waste Revenues by Source - Business-type Activities Other 1% Charges for services 69% Grants and contributions 30% 12 58 FINAL DRAFT CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) FINANCIAL ANALYSIS OF THE 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 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$79.3 million. A portion of the combined fund balance,or$19.7 million,is unassigned and available for day-to-day operations of the City;$22.5 million is restricted for capital projects; $24.1 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$7.9 million from the prior year. The increase in fund balance includes increases of approximately $1.9 million in the General Fund and$4.9 million in the Capital Projects Fund.The General Fund's fund balance totaled$21.4 million at year end. The Pearland Economic Development Corporation, TIRZ #2, and Development Authority, the City's component units blended with the primary government,had expenditures totaling$40.1.million,leaving an ending fund balance of$18.2 million,$4.9 million,and$2.0 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.Total net position in the Internal Service Fund was$0.8 million at year end, a$0.2 million decrease from the prior year. GENERAL FUND BUDGETARY HIGHLIGHTS During the year, there was a $2.0 million increase in appropriations between the original and final amended budget. The increase in appropriations is attributable to carryover funding from prior-year encumbrances and projects and to reflect projections during the 2014-2015 budget process. Budget estimates for revenues and other sources combined increased by approximately $0.7 million for the year; also to reflect carryovers and revised projections. Actual revenues of$61.9 million were$1.7 million over the final budget mainly in licenses and permits and charges for services. Actual expenditures of$62.7 million were under budget by$4.9 million,resulting in the year-end fund balance of$21.4 million over budget by$5.8 million. At year-end, equipment purchases and several projects were still in progress and part of the $5.8 million will be carried over and reappropriated in the 2015-2016 budget year. 13 59 FINAL DRAFT CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets-At the end of fiscal year 2015,the City's governmental activities and business-type activities had invested$784.5 million and $300.6 million,respectively,in a variety of capital assets and infrastructure,as reflected in the following schedule. This represents a net increase of$25.3 million, or 3.3 percent over the end of last fiscal year for the governmental activities and a net increase of$12.0 million or 4.1 percent over the end of last fiscal year for business-type activities. Governmental Activities Business-Type Activities Totals 2015 2014 2015 2014 2015 2014 Land $ 31,150 $ 31,264 $ 3,796 $ 3,796 $ 34,947 $ : 35,060 .: Construction in progress 23,548 19,975 8,736 9;509 32,284 29,484 Infrastructure 638,690 617,866 236,699 221,763 875,389 839,629 Buildings and improvements 80,274 79,233 25,693 26,438 105,968 105,671 Machinery and equipment 8,034 8,110 1,206 1,289 9,240 9,399 Furniture and fixtures 2,797 2,789 29 30 2,826, 2,819 Contractual water rights 24,466 25,847 24,466 25,847 Total Capital Assets $784,493 $ 759,237 $ 300,625 $ 288,672 $1,085,118 $1,047,909 Construction in progress at year-end represents numerous ongoing projects, the largest of which relate to street, parks, 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, net pension liability, capital leases, and post-employment liabilities outstanding of$538.2:million. Of this amount, $257.2 million is composed of general obligation bonds; $50.0 million is composed of certificates of obligation and $184.4 million represents revenue bonds secured solely by specified revenue sources. Governmental Activities Business-Type Activities Totals 2015 2014 2015 2014 2015 2014 General obligation bonds $ 245,865 $ 236,730 $ 11,305 $ 12,865 $ 257,170 $ 249,595 Certificates of obligation 50,030 56,505 50,030 56,505 Revenue bonds 76,960 80,125 107,440 101,925 184,400 182,050 Unamortized amount for issuance premium/(discount) 16,186 10,123 659 592 16,845 10,715 Net pension liability 14,707 1,909 16,617 . - Capital leases payable 3,629 4,344 82 169 3,711 4,513 Compensated absences 5,804 5,682 627 525 6,431 6,207 :. Post employment benefit liability 2,516 1,721 456 315 2,972 2,036 $ 415,697 $ 395,230 $ 122,478 $ 116,391 $ 538,175 . $ 511,621 The City's general obligation bonds and certificates of obligation debt for governmental activities increased to $295.9 million.The increase is due to new debt issued offset by scheduled principal payments.The City's debt for business activities increased to $118.7 million, a net increase of$4.0 million from the previous year,which was a result of new debt issued offset by scheduled principal payments. 14 60 FINAL DRAFT CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS:(continued) Current ratings on debt issues are as follows: Mo o dys Standard Investor and Poor's Fitch Services General obligation bonds AA AA Aa2 Revenue bonds AA- AA- Aa3 Both the Pearland Economic Development Corporation (PEDC) and the Development Authority of Pearland (DAP), 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 Poor's. 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 The City of Pearland continues with its forward momentum in FY 2016. The trend lines stoke upwards on sales tax revenue and property valuation. Strategically,we have people in the right places within our City organization. The City, however, is significantly leveraged, which was necessary to give us the opportunity to grow successfully. As of September 30, 2015 the City had $295.9 million in General Obligation and Certificates of Obligation outstanding being paid back primarily by property taxes. Our financial obligations will continue to be met, and the City will continue to grow, but knowing that the heavy investments both past and future may limit our resources for ongoing operations and innovations. Second is the challenge to maintain strong property:values on limited land resources. The property values derived from the City's growth have not been of extremely high value relative to the land that has been developed compared to some other large suburban communities. Despite these valuation concerns, the overall tax base reflects a strong 11.4% increase for FY 2016, compared to 8.5% in FY 2015,7.1%in FY 2014,and 1.0%,0.6%,and 2.6% in fiscal years 2011,2012,and2013,respectively. With the strong Houston area economy and the continued growth in population served by the City General Fund revenues and other sources are projected to increase from$65,341,507 in FY 2015 to$69,791,421 in FY 2016,an increase of$4,449,914, or 6.8%,mainly due to an increase in Property Tax, Sales Tax and TIRZ Administration Fees. General Fund current property taxes are expected to increase from a projected $12,817,498 in FY 2015 to $13,809,808 in FY 2016,an increase of$992,310 or 7.7%due to new development,revaluation and an increase in the operating property tax rate of$0.0004, from $0.2221 to $0.2225. Other taxes, primarily composed of sales taxes,are estimated to increase from a projected$18,929,697 in FY 2015 to $20,594,329 in FY 2016,. an increase of$1,664,632, or 8.8%. The sales tax increase is the result of the improvement in the local economy, increased consumer confidence, and continued new development. Employment in the Houston MSA grew 2% for the 12 months ending September 2015,adding 48,631 new jobs. General Fund expenditures are anticipated to increase from a projected$69,236,374 in FY 2015 to$73,272,942 in FY 2016, an increase of$4,036,568 or 5.8%. The increase is mainly due to an increase in the cost of employee medical coverage, employee compensation, as well as new positions added in fiscal year 2016. New positions added in FY 2016 result in a net increase of 24.52 full-time equivalent positions. Of the new positions, 22 are in Public Safety, 1 Human Resources Generalist for six months, 1 Small Business Coordinator for six months, 1 Plans Examiner for nine months, 1 Municipal Court Bailiff going from part-time to full time (.5 FTE), and 1 Parks Recreation Specialist position was eliminated.The FY 2016 budget includes funding for the opening of Fire Station#2 and two new parks, Hickory Slough Sportsplex and Shadow Creek Ranch Park, as well as funding for improvements at Independence Park. Pursuant to the Pearland 20/20 Strategic Plan,community beautification has been enhanced with increased service levels for landscaping/median maintenance, and the contracting of new medians. 15 61 FINAL DRAFT CITY OF PEARLAND,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS(continued) The General Fund meets reserve requirements; however, cannot fund current services and anticipated operating expenditures in 2016 mainly due to completion of CIP and projects and phased funding of increasing street maintenance funds for investment in our assets. The fund is structurally imbalanced, whereby recurring expenditures exceed recurring revenues. By 2017, the General Fund is projected to be in balance. The policy reserve requirement of 2 months recurring operating expenditures increases by 10.6% from$11.2 million in fiscal year 2016 to .$12.4 million by fiscal year 2018. In order to fund services and meet fund balance policy requirements, the O&M tax rate will increase from $0.2225 in 2016 to $0.2425 by 2018, a $0.0200 increase, though limited by truth-in-taxation laws. 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.pearlandtx.gov. 16 62 FINAL DRAFT Basic Financial Statements 17 63 - FINAL DRAFT • • (This page intentionally left blank) 18 64 FINAL DRAFT CITY OF PEARLAND,TEXAS STATEMENT OF NET POSITION • September 30,2015 Primary Government Governmental Business-type Activities Activities Total Assets Cash and:equivalents $ 46,839,112 $ 2,971,968 $ 49,811,080 3nvestments 30,668,775 10,347,757 41,016,532 Receivables,net of allowance for uncollectibles 23,143,169 4,403,75.6 27,546,925 Due from other governmental agencies 7,808,339. 7,808,339 Inventories 210,352 210,352 Prepaid items 255,891 445,881 701,772 Restricted cash and cash equivalents 968,397 18,925,047 19,893,444 Restricted investments 7,203,851 7,203,851 Capital assets: • Capital assets not subject to depreciation 54,698,420 12,532,224 67,230,644 Capital assets,net of accumulated depreciation 729,795,016 288,092,552 .1,017,887,568 Total Capital Assets • 784,493,436 300,624,776 1,085,118,212 Total Assets 894,387,471 344,923,036 1,239,310,507 • Deferred Outflows of Resources Deferred charge on refunding 13,015,994 459,826 13,475,820 Deferred outflows related to pension activities 3,946,376 512,322 4,458,698 Total Deferred Outflows of Resources 16,962,370 972,148 17,934,518 Liabilities Accounts payable and accrued liabilities 9,491,930 6,473,699 15,965,629 Accrued interest 1,189,501 406,589 1,596,090 Unearned revenues 3,453,694 3,453,694 Customer deposits 129,308 3,364,406 3,493,714 Long-term liabilities: Due within one year 18,968,405 5,649,518 24,617,923 Due in more than one year 396,727,795 116,828,663 513,556,458 Total Liabilities 429,960,632 132,722,875 562,683,507 Net Position Net investment in capital assets 461,484,097 186,818,695 648,302,792 Restricted for: Capital improvements 11,187,594 11,014,792 22,202,386 Debt service 5,644,262 2,523,836 8,168,098 Community development programs 4,938,387 4,938,387 Public safety 393,582 393,582 Economic development 25,762,947 25,762,947 Unrestricted (28,021,660) 12,814,986 (15,206,674) Total Net Position $ 481,389,209 $ 213,172,309 $ 694,561,518 See Notes to Financial Statements. 19 65 FINAL DRAFT CITY OF PEARLAND,TEXAS STATEMENT OF ACTIVITIES For the Year Ended September 30,2015 Program Revenue Charges for Operating Grants Capital Grants and Functions/Programs Expenses Services and Contributions Contributions Primary Government Governmental Activities: General Government $ 17,188,599 $ 7,623,794 . $ 747,873 $: Public Safety 33,178,755 4,110,380 293,976 Public Works 45,894,395 338,303 4,588,807 .36,440,186. Community:Services 3,641,398 7,770,827 215,550 Parks and Recreation 3,731,293 2,412,069 1,586,263 Economic Development 26,158,600 1,208,669 Interest on long-term debt 15,569,309 Total Governmental Activities 145,362,349 23,464,042 7,432,469 36,440,186 Business-type activities: Water and Sewer 34,266,125 30,200,793 2,511,774 13,176,793 Solid Waste 6,417,159 6,637,144 Total Business-Type Activities 40,683,284 36,837,937 2,511.,774 .13,.176,793 Total Primary Government $ 186,045,633. $ 60,301,979 :$: 9,944243 $: 49,616,979 General Revenues: Taxes: Property taxes Sales and use taxes Franchise taxes Unrestricted investment earnings Miscellaneous Transfers • Total General Revenues and Transfers Change in net position Net position-beginning Prior period adjustment Net position-ending See Notes to Financial Statements. 20 66 FINAL DRAFT Net(Expense)Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total $. (8,816,932) $ $ (8,816,932) (28,774,399) (28,774,399) (4,527,099) (4,527,099) 4,344,979 4,344,979 267,039 267,039 (24,949,931) (24,949,931) (15,569,309) (15,569,309) (78,025,652) (78,025,652) 11,623,235 11,623,235 219,985 219,985 11,843,220 11,843,220 (78,025,652) 11,843,220 (66,182,432) 62,973,916 62,973,916 29,969,711 29,969,711 6,971,005 6,971,005 491,026 324,797 815,823 4,149,345 219,422 4,368,767 2,828,255 (2,828,255) 107,383,258 (2,284,036) 105,099,222 29,357,606 9,559,184 38,916,790 463,101,636 205,050,244 668,151,880 (11,070,033) (1,437,119) (12,507,152) $. 481 389,209 $ _213,172,309 $ 694,561,518 21 67 • FINAL DRAFT CITY OF PEARLAND,TEXAS BALANCE SHEET GOVERNMENTAL FUNDS September 30,2015 Tax Increment Capital Reinvestment General Fund Debt Service Projects_ Zone#2 Assets Cash and cash equivalents $ 10,530,938 $ 1,698,576 $.17,314,441 $ 4,952,937 Investments 9,466,449 3,225,894 4,483,470 Receivables,net of allowance for uncollectbles 6,272,108 8,416,110 2,546,390 Due from other governments 518,592 7,140,395 Due from other funds 44,456 Inventories 210,352 Prepaid items 83,097 166,894 Restricted cash and cash equivalents Total Assets $27,125,992 $13,507,474 $:31,484,696 $ 4,952,937 Liabilities Accounts payable $ 3,135,170 $ 166,894 $ 1,349,141 $ 4,191 Accrued expenditures 1,604,808 2,474,981 Deposits 90,975 Due to other funds Unearned revenue 460,480 1,562,194 1,431,020 Total Liabilities 5,291,433 1,729,088 5,255,142 4,191 Deferred Inflows of Resources Unavailable revenue 480,322 6,744,771 5,709,375 Total Deferred Inflows of Resources 480,322 6,744,771 5,709,375 Fund Balances Non-spendable Inventories 210,352 Prepaid items 83,097 166,894 Restricted Debt service 4,866,721 Capital improvements 20,520,179 Community development programs Public safety Economic development 4,948,746 Assigned 1,406,453 Unassigned 19,654,335 Total Fund Balances 21,354,237 5,033,615 20,520,179 4,948,746 Total Liabilities,Deferred Inflows of Resources, and Fund Balances $27,125,992 $13,507,474 $31,484,696 $ 4,952,937 See Notes to Financial Statements. • 22 68 FINAL DRAFT Development Non-major Total Authority of Governmental Governmental Pearland Funds Funds $ 988,693 $ 10,194,946 $ 45,680,531 13,492,962 30,668,775 5,847,896 23,082,504 149,352 7,808,339 44,456 210,352 5,900 255,891 968,397 968,397 $ 1,957,090 $ 29,691,056 $ 108,719,245 $ 556 $ 310,681 $ 4,966,633 34,697 4,114,486 38,333 129,308 44,456 44,456 3,453,694 556 428,167 12,708,577 3,781,478 16,715,946 3,781,478 16,715,946 210,352 5,900 255,891 968,397 5,835,118 1,963,607 22,483,786 4,938,387 4,938,387 393,582 393,582 988,137 18,179,935 24,116,818 1,406,453 19,654,335 1,956,534 25,481,411 79,294,722 $ . 1,957,090 $ 29,691,056 $ 108,719,245 • 23 69 FINAL DRAFT (This page intentionally left blank) 24 70 FINAL DRAFT CITY OF PEARLAND,TEXAS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION September 30,2015 Total fund balance,governmental funds $ 79,294,722 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and,therefore, are not reported in the funds. 784,493,436 Deferred outflows represent a consumption of net position that applies to future periods and therefore will not be recognized as an outflow of resources until then. Deferred charge on refunding 13,015,994 Deferred outflows relating to pension activities 3,946,376 Other long-term assets(property taxes receivable and adjudicated court fines receivable)are not available to pay current period expenditures and,therefore, are reported as unavailable revenue in the funds. 16,715,946 Long-term liabilities, including bonds payable, are not due and payable in the current period, therefore, are not reported in the funds. Bonds and capital leases payable (392,668,781) Compensated absences (5,804,207) Accrued interest governmental activity debt (1,189,501) Estimated post employment benefit liability (2,515,987):. Net pension liability (14,707,225) Internal:service funds are used by management to charge the cost of property insurance and employee benefits to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position. 808,436 Net Position of Governmental Activities in the Statement of Net Position $ 481,389„209 See Notes to Financial Statements. 25 71 FINAL DRAFT CITY OF PEARLAND,TEXAS STATEMENT OF REVENUES,EXPENDITURES AND CHANGES INFUND BALANCES GOVERNMENTAL FUNDS For the Year Ended September 30,2015 • Tax Increment Capital Reinvestment General Fund Debt Service Projects Zone#2 Revenues Property taxes $13,261,422 $28,757,970 $ $ 20,902,201 Sales and use taxes 19,073,940 Franchise fees 6,663,788 Licenses and permits 4,544,396. Fines and forfeitures 2,968,636 Charges for services 14,228,228 Investment earnings 123,308 47,779 75,913 11,699 Intergovernmental 11,229 653,322 1,097,268 Other 1,034,745 115,393 4,482,428 Total Revenues 61,909,692 29,574,464 5,655,609 20,913,900 Expenditures Current:: General government 8,828,201 Public safety. 31,999,650 Public works 9,024,549 924,517 Community services 3,114,754 Parks and recreation 5,678,666 • Economic development 7,644,683 Debt Service: Principal 174,935 12,389,612 Interest and other charges 27,022 12,978,019 357,492 Capital outlay 3,860,304 20,464,495 Intergovernmental 4,792,379 Total Expenditures 62,708,081 _. 30,160,010 21,746,504 7,644,683 Excess(deficiency)of revenues over:expenditures (798,389) (585,546) (16,090,895) 13,269,217 Other Financing Sources(Uses) Revenue bonds issued Certificates of obligation issued 9,485,000 Permanent improvement bonds issued 8,495,000 Refunding bonds issued 47,165,000 Payments to refunded bond escrow agent • (54,303,290). Premium on debt issued 7,608,103 445,228 Capital leases 574,049 Sale of capital assets . - 3,157,291 Transfers in 3,456,210 613,411 298,415 Transfers out (1,332,134) (884,669) (12,666,896) Total Other Financing Sources(Uses) 2,698,125 1,083,224 20,996,265 (12,666,896) Net change in fund balances 1,899,736 497,678 4,905,370 602,321 Fund balances-beginning 19,454,501 4,535,937 15,614,809 4,346,425 Fund balances-ending $21,354,237 $ 5,033,615_ $20,520,179 $ 4,948,746 See Notes to Financial Statements. • 26 72 FINAL DRAFT Development Non-major Total Authority of Governmental Governmental Pearland Funds Funds $ $ $ 62,921,593 10,895,771 29,969,711 307,217 6,971,005 4,544,396 139,598 3,108,234 433,165 14,661,393 1,906 172,261 432,866 1,434,955 3,196,774 1,443,341 7,075,907 1,906 14,826,308 132,881,879 15,043 1,626,685 10,469,929 229,037 32,228,687 349,064 10,298,130 293,481 3,408,235 144,260 5,822,926 14,730,000 3,250,595 25,625,278 3,800,000 7,425,000 23,789,547 2,159,421 1,073,288 16,595,242 145,716 24,470,515 4,792,379 20,704,464 14,537,126 157,500,868 (20,702,558) 289,182 (24,618,989) 8,060,000 8,060,000 9,485,000 8,495,000 47,165,000 (54,303,290) 8,053,331 574,049 3,157,291 12,666,896 8,041 17,042,973 (349,731) (15,233,430) 20,726,896 (341,690) 32,495,924 24,338 (52,508) 7,876,935 1,932,196 25,533,919 71,417,787 $ 1,956,534 $ 25,481,411 $ 79,294,722 27 73 FINAL DRAFT CITY OF PEARLAND,TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30,2015 Net change in fund balances-total governmental funds: $ 7,876,935 Amounts reported for Governmental Activities in the Statement of Activities are different because: Governmental funds report outlays for capital assets as expenditures.However,in the Statement of Activities,the cost of these assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation of$32,600,024 exceeded capital outlays of$22,293,711 in the current period. (10,306,313) 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. (193,906). Capital assets net of related debt acquired as a result of in City development. 35,757,272 Governmental funds do not present revenues that are not available to"pay current obligations. In contrast,such revenues are reported in the Statement of Activities when earned. 288,549 Pension contributions made after the net pension liability date are reported as expenditures in the governmental funds and are reported as deferred outflows on the face of the statement of net position 4,071,813 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. 3,503,534 Some expenses reported in the Statement of Activities do not require the use of current financial resources and,therefore,are not reported as expenditures in governmental funds: Accrued interest 51,605 Deferred charge on refunding (1,499,271) Bond premiums/discounts (6,062,710) Compensated absences (122,150). Capital lease activity 715,500 Post employment benefit liability (794,737) Pension expense for the pension plan measurement year(governmental activities portion) (3,762,629) • The internal service funds are used by management to charge the costs of property insurance and employee benefits to individual funds.The net revenue(expense)of certain activities of internal service funds is reported with governmental activities. with governmental activities. (165,886) Change in net position of governmental activities $ 29,357,606 See Notes to Financial Statements. 28 74 FINAL DRAFT CITY OF PEARLAND,TEXAS STATEMENT OF NET POSITION • PROPRIETARY FUNDS • September 30,2015 Governmental Business-type•Activities-Enterprise Funds Activities- Water and Sewer Solid Waste Internal Fund Fund Total Service Fund Assets •Current assets: .Cash and cash equivalents $ 1,739,096 $ '1,232,872 $ 2,97.1,968 $ 1,158,582 Investments 10,100,749 247,008 19,347,757 Accounts receivable,net of allowance for doubtful accounts .3,851,613 552,143.. 4,403,756 . 60,666. Prepaid items 445,881 445,881 . Restricted cash and cash equivalents 18,925,047 18,92'5,047. . Restricted investments 7,203,851 7,203,851: Total current assets •42,266,237 2,032,023 44,298,260 1,219,248 Non-current assets:- Capital assets: • . Land_and improvements 3,796,382 3,796,382 Construction in progress 8,735,842 8,735,842 Contractual rights to water supply 34,511,428 .34,511,428 Infrastructure .339,663,435 339,663,435 • Buidings 31,239,872 31,239,872 • Machinery and equipment 4,223,730 4,223,730 Less Accumulated depreciation (121,545,913) (121,545,913) Total non-current assets 300,624,776 300,624,776 Total Assets. 342,891,013 2,032,023 344,923,036 1;219,248_ Deferred Outflows of Resources Deferred charge on refunding 459,826 459,826 • Deferred outflows relating to pension activities 512;322 • 512,322 Total Deferred Outflows of Resources 972,148 972,148 Liabilities • Current liabilities: Accounts payable and accrued expenses 4,734,794 1,738,905 6,473,699 410,811 Accrued interest payable 406,589 406,589 •Customer deposits 3,364,406 3,364,406 •Coniperisated absences-current portion 122,857 122;857 Bonds and-permanent improvement payable-current portion •5,480,000 5,480,000 Capital lease-current portion 46,661 46,661 Total current liabilities 14,155,307 1,738,905 15,894,212 410,811 Non-current liabilities: Compensated absences 504,305 504,305 Capital lease obligation 35,519 35,519 Other post-employment benefits 455,515 455,515 Net pension liability 1,909,302 . ' 1,909,302 • Bonds and permanent improvement payable 113,924,022 113,924,022 Total non-current liabilities 116,828,663 116,828,663 Total Liabilities 130,983,970 1,738,905 • 132,722,875 . 410,811 • Net Position • Net investment in capital assets 186,818,695 186,818;695 Restricted for debt service: 2,523,836 2,523,836 Restricted for capital projects 11,014,792 11,014,792 Unrestricted 12,521,868 293,118 12,814,986 808,437 Total Net:Position $ 212,879,191 • '$ 293,118 $213,172,309 .$ 808,437 See Notes to Financial Statements. • 29 75 • FINAL DRAFT CITY OF PEARLAND,TEXAS • STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For the Year Ended September 30,2015 Governmental • . Business type Activities-Enterprise Funds Activities Water and Sewer Solid Waste. Internal Service Fund Fund Total . • Fund Revenues Charges for services $ 30,200,793. $.. 6,637,144 $ 36,837;937 $ 6,181,517: Total operating revenues 30,200,793 6,637,144 . 36,837,937 . 6,181,517 Operating Expenses Personnel:services 5,770,596 5,770,596 Supplies and materials 2,205,759 2,205,759 Contractual services 8,237,296 6,387,945 14,625,241 . 7,289,070 Repairs and-maintenance 1,926,178 1,926,178 Otherexpenses 626,866 29,214 656,080 77,666 Depreciation and amortization 10,077,056' 10,077,056 Total Operating Expenses • 28,843,751 6,417,159 35,260,910. 7,366,736 Operating income(loss) 1;357,042 219,985 1,577,027 • (1,185,219) Non-Operating Revenues(Expenses) Earnings on investments 323,416 1,381 324,797 622 Miscellaneous revenue(expense) 2.19,422 219,422 Operating.grants and contributions 2,511,774 . 2,511,774 Interest expense (5,422,374) : (5;422,374) • Total Non-Operating Revenues(Expenses) (2,367,762) • 1,381 •(2,366,381) • • 622 .. Income(loss)before contributions and transfers (1,0:10,720) 221,366 (789,354) (1;184,597) • Capital contributions 13,176,793 . 13,176,793 Transfers in 235,491 235,491 1,018,712 Transfers out (2,723,746) (340,0001 (3,063,746) Change in net position 9,677,818 (118,634)• 9,559,184 • (165,885) Total-net position-beginning 204,638,492 411,752 205,050,244 974,322 Prior period adjustment - (1,437,119) (1,437,119) Total net position ending $ . 212,879,191 $ 293,118 $213,172,309 $: . ::808,437 See Notes to Financial Statements. 30 76 FINAL DRAFT CITY OF PEARLAND,TEXAS Pagel of 2 STATEMENT OF CASHFLOWS PROPRIETARY FUNDS For the Year Ended September 30,2015 Governmental Business-type Activities-Enterprise Funds Activities- Water and Sewer Solid Waste Internal Service Fund Fund Total Fund • Cash flows from Operating Activities Receipts from customers and users $ 29,297,857 $ 6,694,803 $ 35,992,660 $ Receipts from interfund charges for insurance activities 6,260,675 Disbursed for personnel services (5,775,579) (5,775,579) Disbursed:for goods and services (11,556,019): . (5,994,936) (17,550,955) (7,259,781). Net cash provided.(used)by operating activities 11,966,259 699,867 12,666,126 (999,106) Cash Flows from Noncapital Financing Activities Transfers in 235,491 .235,491 1,018,712 Transfers out (2,723,746) (340,000) (3,063,746) Cash received from non-operating revenues 219,422 219,422 Net cash provided by(used by)noncapital financing activities (2,268,833) (340,000) (2,608,833) 1,018,712 Cash Flows from Capital and Related Financing Activities Proceeds from the sale of equipment Capital grants and contributions 7,457,829 7,457,829 Operating grants and contributions 2,511,774 2,511,774 Proceeds from the issuance of debt 9,315,751 9,315,751 - Principal payments on debt (5,255,000) (5,255,000) Principal payments on leases (82,180) (82,180) Interest paid (5,411,204) (5,411,204) Acquisition and construction of capital assets (16,097,576) (16,097,576) Net cash used by capital and related financing activities (7,560,606) (7,560,606) Cash Flows from Investing Activities Sale of investments 868,835 627 869,462 Interest received 323,416 1,381 324,797 622 Net cash:provided by(used by)investing activities 1,192,251 .: 2,008 1,194,259 622 Net increase(decrease)in cash and equivalents 3,329,071 361,875 3,690,946 20,228 Cash and:equivalents,beginning 17,335,072 870,997 18,206,069 1,138,353 Cash and equivalents,end $ 20,664,143 . $ . . 1,232,872 $ 21,897,015 $ 1,158,581 Unrestricted cash and equivalents $ 1,739,096 $ 1,232,872 $ 2,971,968 :$ . 1,158,582 Restricted cash and equivalents 18,925,047 18,925,047 $ 20,664,143 $ 1,232,872 $ 21,897;015 $ 1,158,582 See Notes to Financial Statements. 31 77 FINAL DRAFT CITY OF PEARLAND,TEXAS Page 2 of 2 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended September 30,2015 Governmental Business-type Activities-Enterprise Funds Activities- Water and Sewer Solid Waste Internal Service Fund Fund Total Funds Reconciliation of operating income to net cash provided by operating activities Operating:income(loss) $ 1,357,042 $ 219,985 $ 1,577,027 $ (1,185,219) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 10,077,056 10,077,056 (Increase)decrease in accounts receivable (1,105,845) 57,659 (1,048,186) 79,158 (Increase)decrease in prepaid expenses (432,935) (432,935) (Increase)decrease in deferred outflows relating to pension activities (150,823) Increase(decrease)in accounts payable 1,873,015 422,223 2,295,238 106,955 Increase(decrease)in salaries payable 35,156 35,156 Increase(decrease)in customer deposits 202,909 202,909 Increase(decrease)in net pension liability 110,684 . . . Net cash provided by(used by)operating activities $ 11,966,259 $ 699,867 $ 12,666,126 : $ _ (999,106) Summary of non-cash transactions Contributed capital assets $ 5,718,964 $ $ 5,718,964 $ . See Notes.to Financial Statements. • 32 78 FINAL DRAFT 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. Presently, 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 part-time/volunteer department. The City is governed by an elected mayor and five-member Council.In May 2014,the citizens voted to amend the City Charter to increase the size of City Council from five councilmembers to seven councihnembers over a period of three years. 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 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 id the funds are:integral parts of the primary government.. 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 financial relationships with the City.The component units do not issue separate financial statements. 33 79 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1-Summary of Significant Accounting Policies.(continued) 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 issuances. 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 specific geographic areas 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 sits on the Board of Directors for the TIRZ#2. Development Authority of Pearland In 2004,the City created the Development Authority of Pearland to provide financing for the development oftlie: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. B. Government-wide and Fund Financial Statements The government-wide fmancial statements (i.e., the Statement of Net Position and the Statement of.Changes in Net Position) report information about the City as a whole. These statements include all activities :of the primary government and its 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. 34 80 FINAL DRAFT 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 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 statements of net position. Proprietary fund-type operating statements present increases(i.e.,revenues)and decreases(i.e.,expenses) in net total assets.Furniture and equipment capitalized in the Proprietary Fund Types are valued at cost. The governmental fund fmancial 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 column, a reconciliation is presented:which briefly explains the adjustments necessary to reconcile fund-based financial statements with the governmental 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, administrative services,public works, parks and recreation,community 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 arid the sale of bonds and related interest earnings for capital improvement projects. The Capital Projects Fund is considered.a major fund for reporting purposes. 35 81 FINAL DRAFT 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 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: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 an Internal Service Fund 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 Fund include property and liability insurance coverage and employee health benefits. The Internal Service Fund is included in governmental activities for government-wide reporting purposes. All assets, deferred outflows of resources, liabilities, equities, revenues, expenses and transfers relating to the government's business 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 Fund 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 expense. 36 82 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued). Note 1 -Summary of Significant Accounting Policies(continued) D. Fund Balance Working Capital Policies As of these financial statements, the City has adopted GASB Statement No. 54,-which redefined how fund balances of the governmental funds are presented in the financial statements. 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 than 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 a 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—Amounts that are available for any purpose. Positive amounts are reported only, in the General Fund. 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. 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. 37 83 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1 -Summary of Significant Accounting Policies(continued) D. Fund Balance Working Capital Policies(continued) Internal Service Fund Unrestricted Net Position The Internal Service 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. The Internal Service Fund is funded through City and employee contributions. Estimated costs shall be determined during each budget year and the contributions adjusted accordingly. There is no minimum balance for this fund as it relates to employee benefits. 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. 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. 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 the date of acquisition. The City reports all investments at fair value based on quoted market prices at year-end date. 38 84 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1 -Summary of Significant Accounting Policies(continued) 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 when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. 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 balance sheet 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 extend assets' lives are not capitalized. Property,plant,and equipment 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 39 85 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1 -Summary of Significant Accounting Policies(continued) 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 15 years of service; 20 days per year for service of 16 to 19 years, and 25 days per year for service of 20 years or more. Employees,: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.Effective October 1, 2005, employees are no longer able to carry over unused vacation from one year to the next with the exception of police department personnel in classified positions. Certified police and firefighter personnel earn 15 days of vacation-after 1 year and 20 days of vacation after 16 years. 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 staffing 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 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 overtime:is 120 hours,including employees involved in public safety. All sick leave benefits are accumulated and paid to employees 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 arid the reported amounts of revenues and expenditures during the reporting period.Actual results could differ from those estimates. N. Comparative Data and Reclassifications 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. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with current year's presentation. 40 86 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1 -Summary of Significant Accounting Policies(continued) O.Deferred Outflows/Inflows of Resources In addition to assets, the statement of fmancial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and thus, will not be recognized as an outflow of resources(expense/expenditure)until then. The City has only two items that qualifies for reporting in this category. •: Deferred outflows of resources for refunding - Reported in the government-wide statement of net position, this deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding.debt. • Deferred outflows of resources for pension activities - Reported in the government wide financial statement of net position,.this deferred outflow results from pension plan contributions made after the measurement date of the net pension liability and the results of differences between expected and actual actuarial experiences. The deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the next fiscal year. The other pension related deferred outflows will be amortized over the expected remaining service lives of all employees (active and inactive employees) that are provided with pensions through the pension plan. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows:of resources. This separate fmancial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources(revenue)until that time.The City has only one type of item that qualifies for reporting in this category. • Deferred inflows of resources for unavailable revenues-Reported only in the governmental funds balance sheet, unavailable revenues arise under the modified accrual basis of accounting. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. P.Pensions For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources, and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from the City's Fiduciary Net Position have been determined:on the same basis as they are reported by TMRS. For this purpose, plan contributions,are recognized in the period that compensation is reported for the employee,which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms.Investments are reported at fair value. Information regarding the City's Total Pension Liability is obtained from TMRS through a report prepared for the City by TMRS consulting actuary, Gabriel Roeder Smith &Company,in compliance with Governmental Accounting Standards Board (GASB) Statement No. 68,Accounting and Financial Reporting for Pensions. 41 87 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 1-Summary of Significant Accounting Policies(continued) R.New Accounting Standards In the current fiscal year,the City implemented the following new standards: • GASB Statement 68, Accounting and Financial Reporting for Pensions ("GASB •68") establishes accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts or similar arrangements that meet certain criteria. The Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. Implementation is reflected in the financial statements, notes to the financial statements and required supplementary information. • GASB Statement 71,:Pension Transition for Contributions Made Subsequent to the Measurement Date ("GASB 71") amends the transition provisions of GASB 68. GASB 71 requires that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions made subsequent to the measurement date of the beginning net pension liability. Implementation is reflected in the financial statements and the notes to the financial statements. 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. Government or U.S. Government Agencies, obligations of states, counties, and cities, fully collateralized certificates of deposit, bankers' acceptances, 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. 42 88 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 2-Deposits(Cash)and Investments(continued) Deposit and Investment Amounts The City's cash and:investments are classified as: cash and cash equivalents, investments, and restricted cash and investments: The cash and cash equivalents include cash on hand, deposits with financial institutions; and: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 specific use. The restricted cash and investments include cash on deposit with financial institutions. For 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 in U.S. Government Securities. 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 and investments at year-end: Total Fair Value Cash deposits $ 69,704,524 Temporary Investments FAMC discount note 2,026,364 FFCB discount note 3,826,563 FHLB discount note 5,044,342 FHLMC discount note 4,012,984 FNMA discount note 5,024,197 :Certificates of deposit 28,285,933 $ 117,924,907 At September 30, 2015, the City reported cash deposits in the amount of$69,704,524 and the bank balance was $71,057,309:Of the bank balance,the entire amount was covered by$250,000 in federal depository insurance and by$80,378,989 in pledged collateral held by the City's agent in the City's name as of September 30,2015. 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 income as follows: Total Fair Value Interest income $ 644,681 Unrealized gain(loss)on temporary investments 171,148 Investment earnings $ 815,829 43 89 -FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued): Note 2-Deposits(Cash)and Investments(continued) Interest_Rate Risk At year-end, the City had the following investments subject to interest rate risk disclosure, under U.S. generally accepted accounting principles: Weighted Ave rage Maturity Total Fair Value (days) Temporary Investments FAMC discount note $ 2,026,364 878 FFCB discount note 3,826,563 924 FHLB discount note 5,044,342 983 FHLMC discount note 4,012,984 826 FNMA discount note 5,024,197 1,100 Certificates of deposit 28,285,933 . 701 . $ 48,220,383 Portfolio weighted average maturity 808 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 331 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. 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, 2015, the City had investments in U.S. Agency securities that exceeded five percent of the total investment portfolio at year-end. Percentage of Total Investment Investment Type Total Fair.Value .Portfolio FAMC discount.note $ 2,026,364 4% FFCB discount note 3,826,563 8% .. FHLB:discount note 5,044,342 11% FHLMC discount note 4,012,984 8% FNMA discount note 5,024,197 10% Certificates of deposit 28,285,933 59% Total $ 48,220,383 100% 44 90 • FINAL DRAFT CITY OF PEARLAND,TEXAS NOTESTO FINANCIAL STATEMENTS(continued) • • Note 2-Deposits(Cash) and Investments(continued) Credit Risk Federal National Mortgage Association, 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. 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 $ 2,930,425 Customer deposits 3,364,406 Capital improvements 19,834,067 Total $ 26,128,898 . Note 3-Receivables Receivables at September 30,2015,consisted of:the following: Primary Government: Governmental Funds: Non-major Debt Service Capital Governmental General Fund Fund Projects Fund Funds Total Receivables Property takes,including • penalties and interest $ 520,508 $ 875,960 $ $ $ 1,396,468 Lease receivable 7,551,037 7,551,037 Sales-and other taxes 4,773,229 2,025,435 6,798,655 Interest 29,050 5,533 7,146 28,391 70,120 Other 958,968 2,539,244 3,794,070 7,292,282 Allowance for _ uncollectibles (9,638) (16,420) (26,058) $ 6,272,108 $ 8,416,110 $ 2,546,390 $ 5,847,896 $ 23,082,504 45 91 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 3-Receivables(continued) Proprietary Funds: Water and Solid Waste Internal • Sewer Fund Fund Service Fund Total Receivables Customer accounts $ 2,983,187 $ 602,256 $ $ 3,585,443 Interest 49,263 8 49,271 : Other 870,950 60,666 931,616 Allowance for uncollectibles (51,787) (50,121) (101,908) $ 3,851,613 $ 552,143 $ 60,666 $ 4,464,422 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 and unearned revenue reported in the governmental funds were as follows: Unavailable Une arne d Delinquent property taxes receivable-general fund $ 480,322 $ Delinquent property taxes receivable- debt service fund 788,339 Lease revenues-principal 5,956,432 Street assessments •. 1,859,583 Other 7,631,270 1,431,020 . Lease interest revenues 1,562,194 Grants and revenues prior to meeting all eligibility requirements 460,480 Total $ 16,715,946 $ 3,453,694 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,penalties,'and interest ultimately imposed. The Central Appraisal District ("CAD") of Brazoria County, Harris 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 collection of tax levies with the Brazoria County Tax Assessor-Collector. 46 92 FINAL DRAFT- CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) . Note 4- Capital Assets - A summary of changes in the primary government's capital assets for the year ended September 30,2015,follows: Balance (Decreases) Balance September 30, and September 30, 2014. Increases Reclassifications. . 2015 Governmental Activities Capital assets not being depreciated: Land • • . $ 31,264,285 $ 2,614,141 $ (2,728,127) $ 31,150,299 Construction in progress 19,974,598 17,917,329 (14,343,806) 23,548,121 Total:capital assets not being depreciated 51,238,883 20,531,470 (17,071,933) 54,698,420 -- Other capital assets: Infrastructure - 898,338,073 47,777,869 946,115,942 Buildings and improvements 102,673,275 4,595,849 107,269,124 Machinery and equipment 117,411,800 1,617,659 (415,689) 18,613,770 Furniture and fixtures 5,512,859 486,074 (235,185) 5,763,748 Total other capital assets 1,023,936,007 54,477,451 . . (650,874) 1;077,762,584 Less accumulated depreciation for: Infrastructure (280,472,199) (26,953,673) (307,425,872) Buildings and improvements (23,420,526) (3,554,946) (26,975,472) Machinery and equipment (9,321,594) (1,613,624) 335,960 (10,599,258) Furniture and fixtures (2,724,178) (477,781) 234,993 (2,966,966) Total:accumulated depreciation. .(315,938,497) (32,600,024) 570,953' (347,967,568) Other capital assets,net 707,997,510 21,877,427 (79,921) 729,795,016 Totals $ 759,236,393. $ . 42,408,897 $. (17,151,854) $ .784,493,436 Balance (Decreases) Balance September 30, and September 30, 2014 Increases Reclassifications . 2015: :: Business-type Activities Capital assets not being depreciated: Land $ 3,796,382 $ $ $ 3,796,382 • . Construction in progress 9,508,864 15,782,496 (16,555,518) 8,735,842 Total capital assets not being depreciated 13,305;246 15,782,496 (16,555,518) . :12,532,224 Other.capital assets: Water and sewer system 317,072,555 22,574,280 16,600 339,663,435 Buildings and improvements 31,256,472 (16,600) 31,239,872 Machinery and equipment 3,796,059 306,749 4,102;808 Furniture and fixtures 113,401 7,521 120,9.22 Coitractual water rights 34,511,428 34,511,428. Total other capital assets 386,749,915 22,888,550 409,638,465 Less accumulated depreciation for: - Water and sewer system (95,310,012) (7,655,791) (102,965,803) Buildings and improvements (4,818,037) (728,460) (5,546,497) Machinery and equipment (2,507,254) (389,417) (2,896,671) Furniture and fixtures (83,053) (8,558) . (91,611) Contractual water rights • (8,664,874) (1,380,457) (10,045,331) Total accumulated depreciation . (111,383,230) (10,162,683) (121,545,913) • Other capital assets,net _ 275,366,685 12,725,867 288,092,552 Totals $ 288,671,931 $ 28,508,363 $ (16,555,518) $ 300,624,776 47 93 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 4-Capital Assets (continued) Depreciation was charged to programs as follows: General government $ 842,111 Public safety 2,440,616 Public works 26,750,969 Community services 156,138 Parks and recreation 2,410,190 Total Governmental Activity $ : 32,600,024 Water and sewer $ 10,162,683 Total Business-Type Activity $ 10,162,683 The :City had active construction projects as of September 30, 2015. 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: Total In Remaining Project Description Contract Progress Commitment Drainage Improvement $ 13,429,996 $ 1,954,959 $ 11,475,037.. Building Improvements 24,341,380 3,301,536 21,039,844 Street Improvement 124,542,810 11,149,186 113,393,624 Park Improvements 13,386,593 7,142,440 6,244,153 .. Total Governmental Activities 175,700;779 23,548,121 152,152,658. Water and.Sewer Improvements 29,690,916 8,735,842 20,955,074 Total Primary Government $ .. 205,391,695 $ 32,283,963 $ 173,107,732 I Note 5.Long-Term Debt A. Governmental Activity Debt 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 of Pearland from property tax increment. 48 94 FINAL DRAFT CITY OF PEARLAND, TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. Governmental Activity Debt(continued) The City issued$4,860,000 of Certificates of Obligation, Series 2015 dated September 1,2015. Proceeds from the sale of the certificates will be used for certain street improvements within the City including improvements to Industrial Drive, certain:improvements to existing City facilities including Fire Station 2, and to pay the costs of : issuance of the certificates. The City issued $8,495,000 of Permanent.Improvement Bonds, Series 2015 dated September 1, 2015. Proceeds from the sale of the bonds will be used for construction and improvement to City facilities and to pay for the cost of issuance of the bonds. The City issued $47,165,000.of Permanent Improvement Refunding Bonds, Series 2015 dated April 1, 2015. Proceeds from the sale of the bonds will be used for the refunding of certain outstanding obligations of the .City and to pay for the cost of issuance of the bonds. The City issued$8,060,000 of Tax Increment Contract Revenue Bonds Proceeds, Series 2014 dated December 9, 2014 Proceeds from the sale of the bonds were used to reimburse the developer $7,890,000 for infrastructure within the TIRZ boundaries. The City issued $4,625,000 of Certificates of Obligation, Series 2014 dated October 1,2014. Proceeds from the sale of the certificates will be used for improvements, renovations and additions to the existing public works ' service center located at East Orange Street and Old.Alvin. Road, acquisition of land for and the design and construction of two new fire stations located at Yost Road and FM 518 and at Harkey Road and Fite:Road,project management for parks, street and facility capital projects within the City, renovations to the existing City Hall _ Complex,and to pay the costs of issuance of the Certificates. The following is a summary of changes in the City's total governmental long-term liabilities for the year:ended September 30, 2015. 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 Balance Amounts September 30, September 30, Due Within 2014 : Additions (Reductions) 2015 One Year. Governmental Activities Bonds payable: General obligation bonds.: $ 236,730,000 $ 55,660,000 $ (46,525,000) $ 245,865,000 $ 9,775,000 Certificates of obligation 56,505,000 9,485,000 (15,960,000) 50,030,000 2,600,000 Sales tax revenue bonds 22,690,000 (7,425,000) 15,265,000 720,000 Tax increment revenue bonds 57,435,000 8,060,000 (3,800,000) 61,695,000 3,855,000 Unamortized premium/(discount) 10,122;356 8,053,331 (1,990,621) 16,185,066 Total bonds payable 383,482,356 81,258,331 (75,700,621) 389,040,066 16,950,000 Other liabilities: Net pension liability 10,013,507 4,693,718 14,707,225 Obligations under capital leases 4,344,215 574,049 (1,289,549) 3,628,715 1,050,017 Compensated absences 5,682,057 2,856,633 (2,734,483) 5,804,207 968,388 Other post-employment benefits 1,721,250 794,737 2,515,987 , Total Governmental Activities $ 405,243,385 $ 89,382,731 $ (78,929,916) $ 415,696,200 $ 18,968,405 - 49 95 FINAL, DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. Governmental Activity Debt(continued) 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. A summary of the terms of general obligation bonds and certificates of obligation,as of September 30,2015,follows: Original Interest Debt Series Issue Matures Rate (%) Outstanding General Obligation Bonds Permanent Improvement and Refunding Bonds,Series 2005 37,015,000 2029 3.25-5.00 $ 940,000 Permanent Improvement and Refunding Bonds,Series 2006 32,165,000 2029 4.00-5.00 8,525,000 Permanent Improvement and Refunding Bonds,Series 2007 69,640,000 2032 4.00-5.00 40,135,000 Permanent Improvement,Series 2008 22,835,000 2032 4.50-5.50 16,180,000 - Permanent Improvement and Refunding Bonds,Series 2009 16,735,000 2034 2.00-5.00 14,580,000 Permanent Improvement,Series 2010A 12,415,000 2035 3.00-4.00 10,625,000 Permanent Improvement Refunding,Series 2010B 1,630,000 2018 2.00-4.00 555,000 Permanent Improvement,Series 2011 5,400,000 2036 2.125-4.125 4,905,000 Permanent Improvement and Refunding Bonds,Series 2012 43,575,000 2029 3.00-5.00 42,890,000 Permanent Improvement Bonds,Series 2013 9,315,000 2038 3.00-5.00 8,745,000 Permanent Improvement and Refunding Bonds,Series 2014 40,410,000 2034 2.00-5.00 39,875,000 Permanent Improvement Refunding Bonds,Series 2015 47,165,000 2032 2.00-5.00 47,165,000 . Permanent Improvement Bonds,Series 2015 8,495,000 2035 2.00-4.00 8,495,000 Annexed Municipal Utility District Bonds BC MUD 4 Series 2011 2,640,000. 2032 2.50-5.00 2,250,000 Total General Obligation Bonds $ 245,865,000 Certificates of Obligation • Certificates of Obligation,Series 2006 9,700,000 2029 3.65-4.68 $ 800,000 Certificates of Obligation,Series 2007 23,250,000 2032 3.25-5.25 11,640,000 Certificates of Obligation,Series 2008 9,000,000 2032 3.75-5.00 8,180,000 Certificates of Obligation,Series 2009 8,520,000 2034 2.25-5.00 7,370,000 Certificates of Obligation,Series 2009A 12,145,000 2029 2.00-4.50 8,945,000 Certificates of Obligation,Series 2011 2,095,000 2021 2.09 1,255,000 Certificates of Obligation,Series 2013 2,745,000 2038 3.00-4.625 2,585,000 Certificates of Obligation,Series 2014 4,625,000 2034 2.00-4.00 4,395,000 Certificates of Obligation,Series 2015 4,860,000 2035 2.00-4.00 4,860,000 Total Certificates of Obligation $ 50,030,000 50 96 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) • Note 5-Long-Term Debt(continued) • A. Governmental Activity Debt(continued) 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 as of September 30,2015,is as follows: Original Interest Debt Series Issue Matures Rate (%) Outstanding Pearland Economic Development Corporation Sales Tax Revenue Bonds,Series 2005 $ 10,590,000 2026 2.30-4.42 $ 6,635,0.00 Sales Tax Revenue Bonds,Series 2006 10,235,000 2030 3.66-4.75 8,630,000 Development Authority of Pearland : - Tax Increment Revenue Bonds,Series 2012 56,915,000 . 2029 3.07* 45,830,000 . Tax Increment Revenue Bonds,Series 2013 9,150,000 2029 3.77 8,355,000 Tax Increment Revenue Bonds,Series 2014 8,060,000 2029 3.00 7,510,000 Total Component Unit Long-Term Debt $ 76,960,000 *Fixed for 10 years,then rate changes to be 65%of LIBOR,not to exceed 6.0% Current Year Refunding The Permanent Improvement Refunding Bonds, Series 2015 were issued on April 1, 2015 in the amount of $47,165,000: to refund certain outstanding obligations of the City in the aggregate principal amount of $51,210,000. The new bonds bear interest from 2.00% - 5.00% and are due in annual installments ranging from $320,000 to $4,975,000.through March 1, 2032. The refunding will.save $7.227 million,over 17 years, or annual savings of about$425,000 with a present value savings percent of 11.17%. 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 30,2015,approximately$79 million of previously refunded bonds outstanding were considered defeased. General Obligation •PIB Series 2006 $21,495,000 CO Series 2006 7,300,000 CO Series 2007 10,160,000 PIB Series 2007 21,295,000 PIB Series 2008 4,870,000 $65,120;000 Development Authority Of Pearland Series 2006 $ 6,970,000 Series 2009 6,880,000 $ 13,850,000 Total: $78,970,000 51 97 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. Governmental Activity Debt(continued) 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$7.4 million. Following is a summary of future lease payments due on this equipment: Fiscal Year Obligations 2016 $ 1,131,597 2017 964,703 2018 701,836 2019 567,386 2020 370,915 2021 87,471 Total 3,823,908 Less:.Interest (195,193) Obligations under capital leases $ 3,628,715 52 98 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. Governmental Activity Debt(continued) The annual requirements to amortize governmental activity general obligation bonds and certificates of obligation outstanding at September 30,2015,were as follows: Governmental Activities General Obligation Certificates of Obligation Fiscal Year Principal Interest Principal Interest 2016 $ 9,775,000 $ 10,112,043 $ 2,600,000 $ 1,897,756 2017 9,315,000 9,743,262 2,665,000 1,810,606 2018 9,585,000 9,374,662 2,835,000 1,706,235 2019 13,205,000 8,928,808 1,920,000 1,623,935 2020 13,740,000 8,391,409 1,935,000 1,565,147 2021 14,315,000. 7,810,545 1,965,000 1,504,531 2022 15,075,000. 7,209,229 1,775,000 1,442,540 2023 15,695,000 6,569,365 1,805,000 1,378,611 2024 16,275,000 5,858,635 1,840,000 1,309,384 2025 17,045,000 5,129,624 1,870,000 1,234,445 2026 17,595,000 4,394,684 1,935,000 1,155,446 2027 16,755,000 3,649,276 3,555,000 1,048,271 2028 17,410,000 2,941,161 3,670,000 913,254 2029 18,075,000. 2,223,386 3,800,000 772,621 2030 10,125,000 1,620,753 3,880,000 621,375 2031. 10,295,000 1,170,939 4,275,000 446,419 2032 10,540,000 707,874 4,660,000 246,216 2033 3,610,000 395,931 1,105,000 118,044 2034 3,725,000 238,588 1,135,000 71,297 2035 1,945,000 118,950 375,000 26,947 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 $. 245,865,000. $ .: 96,696,341 $ 50,030,000 $ 20,923,374 53 99 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) A. Governmental Activity Debt(continued) The annual requirements to amortize blended component unit revenue bonds outstanding at September 30, 2015, were as follows: Governmental Activities Pearland Economic. Development Authority of Development Corporation Pearland Fiscal Year Principal Interest Principal Interest 2016 $ 720,000 $ 698,956 $ 3,855,000 $ 1,926,237 2017 - 760,000 664,756 3,975,000 1,806,996 2018 795,000 628,669 4,100,000 1,684,088 2019 835,000 590,575 4,225,000 1,557,256 2020 875,000 556,125 4,040,000 1,426,533 2021 910,000 519,625 4,170,000 1,301,053 2022 950,000 481,075 4,270,000 1,171,494 2023 995,000 439,200 4,210,000 1,037,027 2024 1,040,000 395,138 4,370,000 905,680 2025 1,090,000 348,538 4,535,000 769,071 2026 1,140,000 299,325 4,710,000 627,064 2027 1,190,000 247,838 4,890,000 479,352 2028 1,255,000 188,338 5,075,000 325,747 2029 1,320,000 128,725 5,270,000 166,059 2030 1,390,000 66,025. $ 15,265,000 $ 6,252,906 $ 61,695,000 $ 15,183,654 54 100 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 5-Long-Term Debt(continued) B. Business-type Activity Debt The City issued $9,210,000 of Water and Sewer System Revenue Bonds, Series 2,014 dated October 1, 2014. Proceeds from the sale of the bonds will be used for waterworks and sanitary sewer system improvements, and to pay the costs of issuance of the bonds. The new bonds bear interest from 2.00% - 4.00% and are due in annual installments ranging from$150,000 to$1,245,000 through September 1,2039. The following is a summary of changes in the City's total business-type long-term liabilities for the year ended September 30,2015. Balance Balance Amounts . September 30, September:30, Due Within 2014 Additions (Reductions) 2015 One Year Business-type Activities Bonds payable: Permanent Improvement Bonds $ 12,865,000 $ $ (1,530,000) $ 11,335,000 $ 1,560,000 Water and sewer revenue bonds 101,925,000 9,210,000 (3,725,000) 107,410,000 3,920,000 Unamortized premium/(discount) 592,064 202,173 (135,215) 659,022 . Total bonds payable 115,382,064 9,412,173 (5,390,215) 119,404,022 5,480,000 • Other liabilities: • Net pension liability 1,299,960 609,342 1,909,302 Obligations under capital leases 169,140 (86,960) 82,180 46,661 Compensated absences 524,909 381,892 (279,639) 627,162 122,857 Other post-employment benefits 315,267 140,248 455,515 Total Business-type Activities $ 117,691,340 $ 10,403,407 $ (5,616,566) $ 122,478,181 $ 5,649,518 A summary of the terms of revenue bonds and permanent improvement bonds-recorded in the Enterprise Funds as of September 30,2015,is as follows: Original Interest Debt Series . . Issue Matures Rate(%) Outstanding Water and Wastewater Fund Water and Sewer System Adjustable Rate Revenue Bonds, Series 1999 $ 8,000,000 2020 4.41-4.60 $ 2,445,000 Water andSewer System Revenue.and Refunding Bonds, Series 2006 13,845,000 2031 3.74-4.82 9,460,000 Water and Sewer System Revenue and Refunding Bonds, Series 2007 40,135,000 2031 3.50-5.50 34,740,000 Water and Sewer System Revenue Bonds,Series 2008 14,950,000 2034 4.125-5.00 13,415,000 Water and Sewer System Revenue Bonds,Series 2009 13,130,000 2034 3.00-5.50 10,955,000 Permanent Improvement and Refunding Bonds,Series 2009 11,660,000 2018 2.00-5.00 5,440,000 Water.and Sewer System Revenue Bonds,Series 2010A 14,040,000 2035 1.75-4.50 12,100,000 Water and Sewer System Refunding Bonds,Series 2010B 8,970,000 2023 1.75-4.00 7,520,000 Permanent Improvement and Refunding Bonds,Series 2012 6,230,000 2025 3.00-5.00 5,895,000 Water and Sewer System Revenue Bonds,Series 2012 8,670,000 2037 2.00-3.625 7,715,000 Water and Sewer System Revenue Bonds,Series 2014 9,210,000. 2039 2.00-4.00 9,060,000 Total Utility System Fund $ 118,745,000 55 101 • FINAL DRAFT • CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS.(continued) • Note 5-Long-Term Debt(continued) B. Business-type Activity Debt(continued) The annual requirements to amortize Enterprise Fund revenue bonds and permanent improvement bonds outstanding at September 30,:2015,were as follows: Business-Type Activities Revenue Bonds Permanent Improvement Bonds Fiscal Year . Principal Interest Principal Interest 2016 $ 3,920,000 $ 4,622,182 $ 1,560,000 $ 427,900 2017 . 4,090,000 4,466,263 2,415,000 344,000 2018 4,250,000. 4,310,086 2,515,000 232,188 2019 • 4,425,000 4,145,038 365,000 171,700 2020 . 4,610,000 • 3,972,427 370,000 157,000 2021 4,870,000. 3,784,576 370,000 • 142,200 2022 5,080,000 3,576,639 385,000 127,100 2023. 5,305,000 3,360,039 395,000 111,5.00 2024 4,485,000 3,132,788 1,480,000 74,000 2025 4,750,000 2,926,093 1,480,000 22,200 2026 6,485,000 2,702,368 2027 0,795,000 2,392,905 2028 7,130,000 2,068,194 2029 7,465,000 1 1,742,731 2030 7,780,000 1,435,194 ' 2031 8,105,000 1,112,813 2032 4,155,000 776,163 2033 4,365,000 580,469 2034 4,570,000 384,331 2035 1,700,000 178,431 2036 895,000 110,063 2037 935,000 78,306 2038 605,000 45,131 • 2039 640,000• 23,200 • $ 1.07,410,000 $ 51,926,428 $ 11,335,000 $ 1,809,788. C. Legal Compliance Long-term debt assumed by the City upon dissolution of annexed municipal utility district 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. • 56 102 • FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 6-Interfund Transactions • A.summary of interfund transfers, the purpose of which is to cover operational expenses/expenditures, for the year ended September 30,2015,is as follows: Transfers In Transfers Out Amounts Purpose. Overhead allocation for city manager,legal, General Fund Water Sewer.Fund $ 1,599,592 human resources;fmance,etc. General Fund Water Sewer Fund 481,949 Project management • General Fund Capital Projects Fund 50,372 Project management General Fund • Capital Projects Fund 834,297 Project management General:F.und Sidewalk Fund 150,000 Gap sidewalk program Overhead allocation for city manager,legal, General Fund Solid Waste Fund 340,000 human resources,fmance,etc. Total General Fund • 3,456,210 Debt Service Fund General Fund 156,844. City's share of UofH facility debt Debt Service Fund Water Sewer Fund • 456,567 W/S debt in debt service fund Total Debt Service Fund 613,411 Development Authority of Pearland Tax Increment Reinvestment TIRZ tax increment to DAP for debt service& Zone#2 12,666,896 developer reimbursement U of H Fund • General Fund 8,041 City's share of UofH capital renewal fund Capital Projects Fund , General Fund 100,000 Fire Station#3 for FFE • Parks and Recreation Capital Projects Fund ." Development Fund 100,000 Centennial Park development Capital Projects Fund Park Donation Fund 31,100 Trees at Shadow Creek Ranch Park Capital Projects:Fund • . Traffic Improvement Fund 91 County Road 94 Bailey Road Extension from Vterans to Capital projects Fund Sidewalk Fund 67;224 FM1128 Total Capital.Projects Fund 298,415 Internal Service Fund Hotel/Motel Tax Fund 1,316 CVB insurance on property Internal Service Fund General Fund 831,758 Share of insurance premiums Internal Service Fund Water Sewer Fund : 185,638 Share of insurance premiums Total Internal Service Fund 1,018,712 Water Sewer Fund General Fund 235,491 Operating-costs Total $ 18,297,176• A summary-of interfund receivables and payables at September 30,2015,follows: Receivable Fund Payable Fund Amount Purpose General Fund Grant Fund $ 44,456 Short term loan • • • 57 103 • FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 7-Fund Balance/Net Position. Encumbrances Encumbrance accounting is employed as an extension of formal budgetary integration for the General Fund, special revenue funds, and capital projects funds. Certain amounts which were classified as restricted, committed, 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 $ 1,406,453 Capital Projects Fund-restricted 16,502,886 Non-major Funds restricted 672,561 $ 18,581,900 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 Texas Municipal Retirement System Plan Description and Provisions The City participates as one of 860 plans in the nontraditional,joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System(TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act,Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the.general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax-qualified plan under Section 401 (a) of the.Internal.Revenue Code. TMRS issues a publicly available comprehensive annual financial report(CAFR)that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. 58 104 FINAL DRAFT' CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued): Note 9-Employee Retirement System (continued) Benefits Provided TMRS provides retirement, disability,and death benefits. Benefit provisions are adopted by the governing body of the City,within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the city- financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven actuarially equivalent payments.options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12,24,or 36 monthly payments, which cannot exceed 75%of the member's deposits and 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 200% of the employee's accumulated.contributions. A summary of plan provisions for the City are as follows: Employee deposit rate: 7% Matching ratio(city to employee): 2 to 1 Years required for:vesting: 5 Service retirement eligibility: 20 years at any age,5 years at age 60 and above Updated service credit: 75%repeating Annuity increase to retirees: 50%of CPI repeating Supplemental death benefit—employees and retirees: Yes The City does not participate in Social Security. At the December 31,2014 valuation and measurement date,the following employees were covered by the benefit terms: Retirees or beneficiaries currently receiving benefits: 146 Inactive employees entitled to but notyet receiving benefits: 226 Active employees: 561 Total: . 933 Contributions The contribution rates for employees in TMRS'are either 5%, 6%,or 7% of employee gross earnings,and the city matching percentages are either 100%, 150%, or 200%,both as adopted by the governing body of the city.Under the state law governing TMRS, the contribution rate for each city is determined annually by the consulting actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. For fiscal year 2015, the City made contributions of 13.08% for the months in 2014 and 13.51% for the months in 2015. 59 105 • FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 9-Employee Retirement System (continued) •Net Pension Liability The City's Net Pension Liability:(NPL) was measured as of December 31, 2014, and the Total Pension Liability (TPL)used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. • Actuarial Assumptions The Total Pension Liability in the December 31,2014 actuarial valuation was determined using the following actuarial assumptions: Inflation • 3.0%per•year Overall payroll growth: 3.0%per year . Investment Rate of Return 7.0%,net of pension plan investment expense,including inflation Salary increases were based on a service-related table. Mortality rates for active members,. retirees, and beneficiaries were based on the gender-distinct RP2000 Combined Healthy Mortality Table, with male rates . multiplied by 109% and female rates multiplied by 103%. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Disabled Retiree Mortality Table is used,with slight adjustments. Actuarial assumptions'used in:the December 31,2.014,valuation were based on the results'of actuarial experience studies. This experience study was for the period January 1,.2006 through December 31, 2009, first used.in the December'31', 20.10 valuation. Healthy post-retirement mortality rates and annuity purchase rates-were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31,2013.. . These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the 2014 valuation. The long-term expected rate of return on pension plan investments is 7.0%. The pension plan':s policy in regard to the allocation of invested assets is established and may be amended by the TMRS Board of Trustees. Plan,assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of .income;in order to satisfy the short-term and long-term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined using a building-block.method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.These ranges are combined to produce the long term expected rate Of.return by weighting the expected future real rates of return by the target asset allocation.percentage and by adding expected inflation. • • 60 106 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) • Note 9-Employee Retirement System (continued) Actuarial Assumptions(continued) The target allocation and best estimates of arithmetic real 'rates of return for each_ major asset class are summarized in the following table: Long-term Expected Real Rate of Return Asset Class Target Allocation : (Arithmetic) Domestic Equity 17.5% 4.80% International Equity 17.5% 6.05% Core Fixed Income 30.0% 1.50% Non-core Fixed Income 10.0% 3.50% Real Return 5.0% 1.75% Real Estate 10.0% 5.25% • Absolute Return 5.0% 4.25% Private Equity 5.0% 8.50% Total 100.0% Discount Rate The discount rate used to measure the Total Pension Liability was 7.0%. The projection of cash flows used-to determine the discount rate assumed that employee contributions will remain at the current 7% and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. Changes in the Net Pension Liability Increase(Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a)-(b) • Balance at 12/31/2013 $ 98,960,025 $ 83,306,773 $15,653,252 Changes for the year: Service.cost 5,118,873 5,118,873 Interest 7,010,813 7,010,813 Change in benefit terms Difference between expected and actual experience 241,450 241,450 Changes in assumptions Contributions-employer 4,339,785 (4,339,785) Contributions-employee 2,355,095 (2,355,095) Net investment income 4,766,828 (4,766,828) Benefit payments, including refunds, of employee. contributions (2,729,973) (2,729,973) Administrative expense (49,756) 49,756 Other charges (4,091) 4,091 Net changes 9,641,163 8,677,888 963,275 Balance at 12/31/2014 $108,601,188 $ 91,984,661 $16,616,527 61 107 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued): Note 9-Employee Retirement System (continued) Changes in the Net Pension Liability(continued) The following presents the net pension liability of the City,calculated using the discount rate of 7.0%o,.as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower(6.0%)or 1-percentage-point higher(8.0%)than the current.rate: Current 1% Single Rate 1% Decrease to Assumption Increase to 6.00% 7.00% 8.00% City's net pension liability $35,448,844 $16,616,527 $ 1,514,331 Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separately-issued TIVIRS financial report.That report may be obtained on the Internet at www.tmrs.com. Pension Expense and Deferred Outflows of Resources Related to Pensions For the year ended September 30,2015,the City recognized pension expense of$4,251,096. At September 30, 2015, the City reported deferred outflows of resources related to pensions from the following sources: Deferred Outflows of Resources Differences between acturial assumptions and actual experience $ 200,247 Differences between projected and actual investment earnings 851,717 Contributions subsequent to the measurement date _ 3,406,734 Total $ 4,458,698 62 108 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 9-Employee Retirement System(continued) Deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date of$3,406,734 will be recognized as a reduction of the net pension liability for the measurement year ending December 31, 2015 (i.e. recognized in the city's fmancial statements September 30, 2016). Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Net deferred ouflows (inflows)of resources 2015 $ 254,132 2016 254,132 2017 254,132 2018 254,132 2019 35,436 Thereafter . Total $ 1,051,964 Subsequent Event Pursuant to TMRS policy of conducting experience:studies every four years, the TMRS Board at their July 31, 2015 meeting determined that they would be changing certain actuarial assumptions including reducing the long term expected rate of return from the current 7% to 6.75% and changing the inflation assumption from 3% to 2.5%.Reduction of expected investment return and related discount rate will increase projected pension liabilities. Reducing the inflation,assumption reduces liabilities as future annuity levels and future cost of living adjustments are not projected to be a large as originally projected. While the actual impact on the City's valuation for December 31, 2015 is not known the City does expect some downward pressure on its funded status and upward pressure on its 2017 actuarially determined contribution(ADC)due to this change. Supplemental Death Benefits Fund The City also participates in the cost sharing multiple-employer defined benefit group-term life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund (SDBF). The City, elected,by ordinance,to provide group-term life insurance coverage to both current and retired employees. The city may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump-sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of_death);retired employees are insured for$7,500;this coverage is an"other postemployment benefit,"or OPEB. Plan Year 2014 Plan Year 2015 The City offers supplemental death to: Active employees Yes Yes Retirees Yes Yes The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre-fund retiree term life insurance during employees' entire careers. 63 109 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 9-Employee Retirement System.(continued) Thecity's contributions to the TMRS SDBF for the fiscal years ended 2015, 2014, and 2013 were $41,740, $41,299,and$34,793,respectively,which equaled the required contributions each year. Schedule of Contribution Rate s (Retiree-only portion of the rate,for OPEB) Annual.Re quire d Actual. Percentage of Plan/Calendar Contribution Contribution ARC Year (Rate) Made (Rate) Contributed 2013 0.0.1% 0.01% 100% • 2014 0.01% 0.01% 100% 2015 0.01% 0.01% 100% 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 at 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: Emp/Dep. Number Total City's Coverage of Retired Cost Cost Cost Employees $ 47,999 $ $ 47,999 12 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. 64 110 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) • Note 10-Other Post-Employment Benefits(continued) The Governmental Accounting Standards Board published a guideline regarding accounting and financial reporting by employers for post-employment benefits other than pensions. This document gives guidance regarding the methods and timing for reporting. The effect of the Guideline 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 (UAAL)as Actuarial a Actuarial Actuarial Actuarial Accrued Annual Percentage Valuation Date Value of Accrued Percentage Liability Covered of Covered October 1, Assets Liabilities Funded (UAAL) ' Payroll Payroll 2014 $ $ 10,328,201 0% ' $ 10,328,201 $ 33,615,923 31% Net OPEB obligations at year-end for the last three fiscal years are as follows: 2013 . • 2014 . 2015 Normal cost $ 243,253 $ 234,852 $ 387,019 Amortization of UAAL 177,878 177,878 622,015: Annual required contribution(ARC) 421,131 412,730 1,009,034 Interest on prior-year net OPEB obligation 72,715 81,115 96,677 Amortization of prior-year net OPEB obligation (ARC adjustment) (109,364) (142,285) (152,421) Annual OPEB cost(expense) 384,482 351,560 953,290 • Employer contributions (174,458) (342,919) (18,305) Increase in net OPEB obligation 210,024 8,641 934,985 Net OPEB obligation-beginning of year 1,817,852 2,027,876 2,036,517 Net OPEB obligation-end of year $ 2,027,876 $ 2,036,517 $ 2,971,502 The annual cost recorded to the general ledger for fiscal year 2015 is $1,105,711, which includes the estimated normal cost of$387,019 to provide for the benefits earned by active employees. The total liability, which is not recorded to the general ledger,is$10,328,281,and represents the actuarial present value of benefits. Actuarial valuations for OPEB plans involve estimates of the value of reported amounts and assumptions 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, 2014 include using the unit credit actuarial method, allocation of the total liability into accrued and future liabilities was based upon a straight years of service ratio, the accrued liability was assumed to be amortized on a closed basis using a level dollar approach with an amortization period of 24 years,an inflation rate assumption of 2.5%, a discount rate of 4%,and medical inflation is taken at 9% for pre-Medicare_grading down to 5% in the ultimate. Rates of disability were derived from a Society of Actuaries study.The RP-2014 table(sex distinct)was used for mortality. Separate, audited GAAP-basis postemployment benefit plan reports are not applicable for the other post- retirement benefit plan for the City as there are no separately issued plan financial statements. • 65 111 FINAL DRAFT 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, 2015. 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 Economic Development Corporation offers incentives to attract and retain businesses to Pearland.The following are the current incentives. Current Incentives . Amount Prior Years FY 2015 Balance Amerlux $ 185,000 $ $ $ 185,000 - Base Pair Bio-Technologies 38,500 9,625 9,625 19,250 Brask Neela 70,000 70,000 Buc-ee's 72,000 72,000 Costco 246,827 246,827 - Keystone Engineering 189,000 189,000 KS Management 2,663,000 295,890 2,367,110 M&S Logistics 60,000 60,000 Merit Medical Systems 888,000 758,000 130,000 Shale-Inland. 490,000 490,000 Zapp Precision Wire 60,000 60,000 . $4,962,327 $ 767,625 $ 305,515 $3,889,187 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.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. 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 66 112 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) :: Note 11-Commitments and Contingencies (continued) Shadow Creek Town Center(continued) 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 arid the amount of TIRZ improvements to be funded from sales tax is $2,001,93.1. 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 the subsequent two years. The developer reimbursements funded from sales tax was complete in fiscal year 2016. Lower Kirby Urban Center Master Plan On June 10, 2013 Pearland adopted a 20/20 Strategic Plan to create a vision for the community's future growth. One of the strategies was to implement plans to develop the Lower Kirby Urban Center as Pearland's most intensive mixed-use employment, residential, and entertainment district. The Lower Kirby Master Plan identified $48 million in priority construction projects that include drainage, water, sewer,streets, traffic, sidewalks, and streetscape necessary to facilitate development of the area. On March 10, 2014, the City entered into a Master Financing Agreement with Lower Kirby Pearland Management District and Pearland Municipal Management : District which outlines the process for the City to advance funds to the District(s) in order to. facilitate the ' development The'City will be reimbursed from the Districts) from bond sales as the area is development and value on the ground. Each project is taken on a case by case basis and is approved via a Letter of Financing Agreement(LFA). As of September 30,2015 the following LFA's have been approved by and between the City and the LKMD and the PMMD#1: • Lower Kirby Pe arland Pe arland Municipal Management Management 3/10/2014 Cost District District#1 Dentention Pond $1,900,000 72.3% . $ 1,373,700 27.7% $ 526,300 Master Drainage Plan 127,410 72.3% 92,117 27.7% 35,293 Regional Drainage Plan 183,031 72.3% 132,331 27.7% 50,700 Subtotal 1,598,148 - 612,293 9/29/2014 Hooper Road Reconstruction $1,500,000 100.0% 1,500,000 0.0% 8/10/2015 Kirby Ditch Improvements $1,784,796 100.0% 1,784,796 0.0% 8/24/2015 South Spectrum $ 214,137 55.8% 119,462 44.2% 94,676 Total $ 5,002,406 $ 706,969 67 113 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) • Note 11 -Commitments and Contingencies (continued) Lower Kirby Urban Center Master Plan(continued) City funding for these LFA's is via Reimbursement Agreements with the Pearland Economic Development Corporation,whereby the City gets reimbursed for the cost of these projects by the Corporation; so that the City is not actually out any dollars. Chapter 380 Economic Development Agreements Costco Wholesale Corporation is a membership warehouse club that provides a wide selection of merchandise. As of 2014, it is the second largest retailer in the United States and the third largest in the world and the largest membership warehouse club chain in the United States. The City of Pearland has agreed to provide Costco incentives to build a 150;000 square-foot retail warehouse with an attached tire center and free- standing fuel facility. Total investment is estimated at $33.7M and the project will create approximately 75 full- time and 75 part-time jobs. The agreement with Costco and the City of Pearland, through a Chapter 380 agreement, is to refund Costco 50% of the 1,0% of sales tax collected by the City at the business location for a period not to exceed 10 years and an amount not to exceed$750,000. Costco opened in November 2015,with the first payment expected in fiscal year 2016. Kelsey-Seybold is a large multi-specialty clinic system located in the Greater Houston area and is Houston's largest and most renowned private multi-specialty physician group. The Kelsey System is a major provider of healthcare for NASA and a center for healthcare research. The City of Pearland and Pearland Economic Development Corporation made certain agreements with Kelsey to relocate its administrative headquarters to Shadow Creek Ranch in Pearland. The headquarters is located in a four story, 170,000-square-foot building at the intersection of Shadow Creek Parkway and Kirby Drive. The headquarters had a cost of $36 million, including the costs for equipment, construction, and fees. Construction began in May 2012 and Kelsey begin operations at the site in October 2013. The City of Pearland and the Pearland Economic Development Corporation has a 10-year Chapter 380 agreement with Kelsey that allows Kelsey to receive a rebate of 60% of the sales tax remitted by Kelsey and its vendors. The agreement with the City requires a minimum of 600 jobs to be in place as an eligibility factor. To date the City and Corporation have paid$144,470 in sales tax rebates. 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, 2015, the City believed the amounts paid on Workers' Compensation would not change significantly from the amounts recorded. 68 114 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) 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. Because this lease is recorded in a governmental fund, the receivable is deferred and the distinction between a sales and direct financing lease is not relevant at the fund level. UHCL has an option to purchase.the facility upon the commencement date of July 2010 until the 615t day preceding the 20th anniversary of the commencement date. 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 30,2015,the future minimum debt service lease payments to be received under the lease are as follows: Fiscal year ending . September 30, Payment 2016 $ : 643,059 2017 627,598 2018 610,030 2019 594,808 2020 577,349 2021-2025 2,675,108 2026-2029 1,842,859 Total $ 7,570,811 • Note 14-Operating Lease The City has a five-year agreement to lease a portion of the UHCL facility to the Pearland Economic 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, 2015, the future minimum debt service lease payments to be received under the lease are as follows: Fiscal year ending September 30, Payment 2016 $ 108,268 2017 105,665 2018 102,707 2019 100,144 2020 97,205 2021-2025 450,391 • 2026-2029 310,271 Total $ . 1,274,651 69 115 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 15-Subsequent Events Lease Purchase of Fire:Truck and Enterprise Resource Planning(ERP) Software On September 21, 2015, City Council approved a lease purchase agreement with U.S. Bancorp Government Leasing and Finance Inc. for a fire truck and ERP Software in the amount of$1,223,293 at a 1.703 percent interest rate with a five-year maturity schedule. The first semi-annual payment is due January 2016 in the amount of$123,068.46. The annual payment for fiscal year 2016 is $241,196. The financing was closed in October 2016. Development Authority Increment Contract Revenue and Refunding Bonds, Series 2015$66,030,000 On October 12,2015, the Development Authority of Pearland and the City approved the issuance of$66,030,000 in Increment Contract.Revenue and Refunding Bonds, Series 2015. A portion of the proceeds, $45,830,000,was used to refunding the remaining outstanding bonds of Series 2012.The refunding provided a gross savings of$1.8 million and a net.present value savings of $1.5 million to the Authority. New monies in the amount of $19,575,000 was used to reimburse the developer for infrastructure in the City's Tax Increment Reinvestment Zone#2,better known as Shadow Creek Ranch with remaining funds used for issuance costs. Permanent Improvement Refunding Bonds,Series 2015-A,$10,210,000 On October 12,2015, City.Council approved a bond parameter order to refund a maximum principal amount not to exceed $15,000,000. Pricing occurred on November 18, 2015 and the City refunded $10,095,000 in existing debt comprised of three bond issues. The refunding generated a gross savings of$1.4 million and a net present value savings of$1:2 million.Annual savings of approximately$110,267 is seen over thirteen years. Texas Water Development Board(TWDB)Financing On October 12; 2015, City Council approved an amended application for Texas Water Development Board funding:for the constructions costs related to the Reflection Bay Water Reclamation Facility Expansion and the design and build costs for the temporary wastewater treatment package plant in the amount of$61.2 million. The Texas Water Development Board approved the financing in January 2016 and it is anticipated that City Council will approve the bond order March 2016 with proceeds received April 2016. The actual amount of the loan will be finalized after the construction bids are received in March 2016,but not to exceed the$61.2 million.The bonds will be structured with a 30-year maturity level principal for the expansion of the plant and a 10-year maturity level principal for the temporary package plant. TWDB interest that was quoted in January 2015 was 1:44%, 1.2% below the bond market. The interest rate will be finalized a week prior to City Council authorizing the bond. Water/Sewer Rate Increase On September 21, 2015, City Council approved increases in the city's water/sewer rates, pursuant to the City's water/sewer rate model and fiscal year 2016 adopted budget. The rate increases were necessary to support the operations of the water/sewer fund, a self-supporting fund,in order to cover all costs of the system including debt, capital,.bond coverage and cash reserves. The rate increases are anticipated to generate a 16% increase in revenues of$4.7 million; The rate increases were effective with October 2015 consumption. 70 116 FINAL DRAFT CITY OF:PEARLAND,TEXAS NOTES TO FINANCIAL STATEMENTS(continued) Note 15-Subsequent Events(continued) Recycling Center Operation On October 12, 2015, the City.Council approved an agreement with Keep Pearland Beautiful (KPB) for the operations of the Stella Roberts Recycling Center. KPB will be responsible for minor maintenance and upkeep of the facility and will be responsible for staffing and operating the facility. The agreement will pay $200,000. to KPB to:accommodate'for offices and storage requirements and remodeling of the recycling center as well as two operational payments of$25,000:each. After the second full year of operations the City is anticipated to realize an operational net savings of approximately$190,000 a year. Letter of Financing Agreements—Lower Kirby Management District On November 11, 2015, City Council approved two Letter of Financing Agreements with the Lower Kirby :Management District Resolution 2015-203; amends a previous agreement approved by City Council on August 10, 2015, increasing the amount of the agreement from $1.785 million to $1.919 million for Kirby Ditch Improvements. Resolution 2015-204 approves a letter of financing agreement for the design and construction of the North Spectrum Traffic signal in the amount of$250,000. Simultaneously, reimbursement agreements were entered into by and between the City and the Pearland Economic Development Corporation to fund these Letter of Financing Agreements. Note 16.-Prior Period Adjustment The implementation of GASB Statements No. 68 and No. 71 resulted in the restatement of beginning net position for the elimination. of the previously reported net pension asset, the recording of the beginning net pension liability:and the beginning deferred outflow for contributions made after the measurement date. Prospectively applying this change results in the adjustment below: Fund Level Statement of Revenues, Expenses;and Government-wide Changes in Net Statement of Activities Position Governmental Business-type Water and Sewer Activities Activities Fund Net position at September.30,2014, :as previously reported $ 463,101,636 $ 205,050,244 $ 204,638,492 Recording of net pension liability as of September 30,2014 (13,854,634) (1,798,618) (1,798,618) Deferral for pension conrtibutions made after the measurement date • 2,784,601 361,499 361,499 Net position at Septemeber 30,2014, as restated $ 452,031,603 $ 203,613,125 $ 203,201,373 71 117 FINAL DRAFT (This page intentionally left blank.) 72 118 FINAL DRAFT Required Supplementary Information 73 119 FINAL DRAFT CITY OF PEARLAND,TEXAS GENERAL FUND • SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN • FUND BALANCES-BUDGET AND ACTUAL For the year ended September 30,2015 Variance with Final Budget- Budgeted Amounts Positive Original Final Actual (Negative) Revenues - Property taxes $ 13,197,208 $ 13,195,853 $ 13,261,422 $ 65,569 .. Sales and use taxes 18,063,535 18,929,697 19,073,940 144,243 Franchise:fees 6,646,438 6,635,878 6,663,788 27,910 Licenses and permits 3,922,331 3,928,395 4,544,396 616,001 Fees and forfeitures 3,105,239 2,917,038 2,968,636 51,598 Charges for services • 13,984,727 13,674,891 14,228,228 553,337 Investment earnings 84,000 103,000 123,308 20,308 Intergovernmental 11,229 11,229 Other . 527,309 859,362 1,034,745 175,383 Total Revenues 59,530,787 60,255,343 61,909,692 1,654,349 Expenditures • Current: General government 8,605,010 10,005,794 8,828,201. 1,177,593 Public safety 34,003,555 33,388,215 31,999,650 1,388,565 . Public works 9,971,411 10,127,928 9,024,549 1,103,379 Community services 2,834,699 3,110,499 3,114,754 (4,255) Parks and recreation 6,728,273 6,360,569 5,678,666 681,903 Debt Service: -- .. Principal 175,806 175,919 174,935 984 Interest and other charges 40,681 26,038' 27,022 (984) Capital outlay 3,315,287 4,435,374 3,860,304 575,070 Total Expenditures 65,674,722 67,630,336 62,708,081 4,922,255 Excess(deficiency)of revenues over expenditures (6,143,935) : (7,374,993) (798,389) 6,576,604 Other Financing Sources (Uses) Proceeds from capital leases 1,187,000 1,356,049 574,049 (782,000) Transfers in 2,676,200 3,456,210 3,456,210 Transfers out (1,546,744) (1,332,134) (1,332,134). Total Other Financing Sources (Uses) 2,316,456 3,480,125 2,698,125 (782,000) Net change in fund balances (3,827,479) (3,894,868) 1,899,736 5,794,604 Fund balances,beginning 19,454,501 19,454,501. 19,454,501 Fund balances,ending $ 15,627,022 $ 15,559,633 $ 21,354,237 $ 5,794,604 . 74 120 FINAL DRAFT CITY OF PEARLAND,TEXAS NOTES TO REQUIRED SUPPLEMENTARY BUDGET INFORMATION Budgetary Compliance The City has complied with all material budget requirements for the year ended September 30,2015. 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. 75 121 FINAL DRAFT CITY OF PEARLAND,TEXAS REQUIRED PENSION SYSTEM SUPPLEMENTARY INFORMATION • _ September 30,2015 TEXAS MUNICIPAL RETIREMENT SYSTEM(UNAUDITED) Schedule of Changes in Net Pension Liability and Related Ratios Measurement Year 2014 Total pension liability Service cost $ 5,118,873 Interest 7,010,813 Changes of benefit.terms Difference between expected and actual experience 241,450 Change in assumptions Benefit payments,including refunds of employee contributions (2,729,973) Net change in total pension liability 9,641,163 Total pension liability L beginning 98,960,025 Total pension liability-ending(a) $108,601,188 : Plan fiduciary net position: Contributions.employer $ 4,339,785 Contributions-employee 2,355,095 Net investment income 4,766,828 Benefit payments,including refunds of employee contributions (2,729,973) Administrative:expense (49,756) Other (4,091) Net change in plan fiduciary net position 8,677,888 Plan fiduciary net position-beginning 83,306,773 Plan fiduciary net position-ending(b) 91,984,661 • Net pension liability-ending(a)-(b) $ 16,616,527: Plan fiduciary net position as a percentage of total pension liability 84.70% Covered employee payroll $ 33,615,923 Net pension liability as a percentage of covered employee payroll 49.43% Amounts presented are for each measurement year,which end the preceding December 31 of the City's fiscal year end. Net pension liability is calculated using a new methodology and will be presented prospectively in accordance with GASB 68. Ten years of data should be presented in this schedule but data was unavailable prior to 2014. 76 122 FINAL DRAFT CITY OF PEARLAND,TEXAS REQUIRED PENSION SYSTEM SUPPLEMENTARY INFORMATION September 30,2015 • • TEXAS MUNICIPAL RETIREMENT SYSTEM(UNAUDITED) Schedule of Contributions Last Ten Fiscal Years • 2015 2014 2013. 2012 2011 Actuarially determined contribution $ 4,600,419 $ 4,311,811 $ 3,780,847 $ 3,518,289 $ 3,302,952 Contribution in.relation of the actuarially determined contribution $ 4,600,419 $ 4,311,811 $ 3,780,847 $ 3,518,289 $ 3,302,952 Contribution deficiency(excess) - - - - - Covered employee payroll $ 33,615,923 $ 30,586,987 $ 28,876,260 $ 27,756,555 $ 26,871,670 Contributions as a percentage of covered employee payroll 13.7% 14.1% 13.1% 12.7% 12.3% • 2010 2009 .2008. 2007 2006 Actuarially determined contribution $ 2,995,119 $ 2,550,976 $ 2,331,353 $ 1,907,419 $ 1,730,700 Contribution in relation of the actuarially determined contribution $ 2,995,119 $ 2,550,976 $ 2,331,353 $ 1,907,419 $. 1,730,700 Contribution deficiency(excess) - - - - - Covered employee payroll $ 25,519,548 $ 25,135,418 $ 19,967,051 $ 16,985,950 $ 15,233,614 Contributions as a percentage of covered employee payroll 11.7% 10.1% 11.7% 11.2% 11.4% • NOTES TO REQUIRED PENSION SYSTEM SUPPLEMENTARY INFORMATION • Valuation Date: Actuarial determined contribution rates are calculated as of December 31st each year and'become effective in January,.12 months and a day later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method: Entry Age Normal Amortization Method: Level Percentage of Payroll,Closed Remaining Amortization Period: 15 years Asset Valuation Method: 10 Year smoothed market; 15%soft corridor Inflation: 3.0% Salary Increases: 3.50%to 12.00%including inflation Investment Rate of Return: 7.00% Retirement Age: Experience-based table of rates that are specific to the City's plan of benefits.Last updated for the-2010 valuation pursuant to an experience study of the period 2005—2009. Mortality: RP2000 Combined Mortality Table with Blue Collar Adjustment • with male rates multiplied by 109%and female rates multiplied by 103% and projected on a fully generational basis with scale BB. Other Information: There were no benefit changes during the year. 77 123 FINAL DRAFT CITY OF PEARLAND,TEXAS REQUIRED SUPPLEMENTARY INFORMATION September 30,2015 CITY OF PEARLAND OTHER POST-EMPLOYMENT BENEFIT OBLIGATION Schedule of Funding Progress Unfunded Actuarial Actuarial. (UAAL)as a Valuation Actuarial Actuarial Accrued Percentage Date October Value of Accrued Percentage Liability Annual of Covered 1, Assets Liabilities Funded (UAAL) Covered Payroll Payroll 2014 $ $ 10,328,201 0% $ 10,328,201 $ 33,615,923 31% 2012 8,339,937 0% 8,339,937 28,876,260 29%.: . 2010 6,994,465 0% 6,994,465 26,871,670 26% NOTES TO REQUIRED SUPPLEMENTARY INFORMATION: 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 and there is an implicit subsidy due to the blended rate paid by the retirees. Thus, there is no direct liability due from the City as it does not pay any portion of the retiree's costs.Actuarial valuations are conducted every two years. Trend information is designed to provide information about the progress made in accumulating sufficient assets to pay benefits when due. 78 124 FINAL DRAFT Other Supplementary Information 79 125 FINAL DRAFT (This page intentionally left blank.) 80 126 FINAL DRAFT Combining and Individual Fund Statements and Schedules 81 127 FINAL DRAFT (This page intentionally left blank.) 82 128 • FINAL DRAFT • CITY OF PEARLAND,TEXAS NON-MAJOR GOVERNMENTAL FUNDS To account for the proceeds of specific revenue sources that, are legally restricted to expenditures for specific purposes. Hotel/1LIotel Tax Fund-A fund created to account for hotel/motel occupancy tax revenue. • 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. • Court Technology Fund This fund is used to account for the receipt and expenditure of revenues.from court • fines for court technology. Street Assessments Fund-A fund created to account for the revenue and expenditure of street assessments:as approved by City.Council for a designated street(s). • Park.Donation Fund - A fund used 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. • 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 resources and expenditures from traffic impact analysis. Juvenile Management Fund-A fund created to account for receipt and expenditure of revenues from m court fines for juvenile case manager. • Pearland Economic Development Corporation Fund-A fund 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. -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). 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. - 83 129 FINAL DRAFT CITY OF PEARLAND, TEXAS COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS September 30,2015 Hotel/Motel Court City-Wide Court Tax Security Donation Technology Assets Cash and cash equivalents $ 1,409,752 $ 71,976 $ 60,124 $ 31,894 Investments 1,990,456 Receivables (net of allowance for uncollectibles) 367,621 34 Due from.other governments Prepaid items 5,900 Total Assets $ 3,773,729 $ 72,010 $ 60,124 $ . 31,894 Liabilities Accounts payable $ 72,719 $ 3,061 $ $ 38 Accrued expenditures 10,132 Deposits Due to other funds Total.Liabilities 82,851 3,061 38 Deferred Inflows of Resources Unavailable revenue Total Deferred Inflows of Resources Fund Balance Non-spendable 5,900 Restricted for: Community development programs 3,684,978 68,949 3,518 Public safety 56,606 31,856 Capital improvements Economic development Total Fund Balances 3,690,878 68,949 60,124 31,856 Total Liabilities,Deferred Inflows:of Resources, and Fund Balances $ 3,773,729 $ 72,010 $ 60,124 $ 31,894 84 130 FINAL DRAFT Page l of 2 Park and Street Park Recreation Assessments Donation Police Seizure Development $ $ 104,884 $ 266,148 $ 739,417 496,161 1,859,583 62 $ 1,859,583 $ 104,884 $ 266,148 $ 1,235,640 $ $ $ 675 $ 675 • 1,859,583 1,859,583 104,884 265,473 1,235,640 104,884 265,473 1,235,640 $ 1,859,583 $ 104,884 $ 266,148 $ 1,235,640 85 131 • FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS September 30,2015 Traffic Impact Juvenile Sidewalk Grant Improvement Management Assets Cash and cash.equivalents $ . 17,491 $ $ 461,448 $ 41,399 _ Investments 248,907 Receivables(net of allowance for uncollectibles) 121 5 Due from other governments 128,159 Prepaid items Total Assets $ 17,491 $ 128,159 $ 710,476 $ 41,404 Liabilities Accounts payable $ $ 14,449 $ $ 1,757 Accrued expenditures Deposits Due to other funds - 44,456 Total Liabilities 58,905 1,757 Deferred Inflows of Resources Unavailable revenue Total Deferred Inflows of Resources Fund Balance Non-spendable Restricted for: Community development programs 69,254 Public safety. 39,647 Capital improvements 17,491 710,476 Economic development Total Fund Balances 17,491 69,254 .710,476 39,647 Total Liabilities,Deferred Inflows.of Resources, and Fund Balances.: $ 17,491_ . $ 128,159 $ 710,476 $ _ .41,404 86 132 FINAL DRAFT Page2of2 Pearland Economic Total Non-major Development Educational Governmental Corporation TV U of 11 Funds $ 5,984,437 $ 711,773 $ 294,203 $ 10,194,946 10,757,438 13,492,962 3,572,242 48,228 5,847,896 21,193 149,352 5,900 $:20,314,117 $ 760,001 $ 315,396 $ 29,691,056 $ .151,124 $ 1,646 $ 65,212 $ . 310,681 22,830 1,735 34,697 38,333 38,333 44,456 212,287 1,646 66,947 428,167 1,921,895 3,781,478 1,921,895 3,781,478 5,900 758,355 248,449 4,938,387 393,582 1,963,607 18,179,935 18,179,935 18,179,935 758,355 248,449 25,481,411 $20,314,117 $ 760,001 $ 315,396 $ 29,691,056 87 133 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS For the Year Ended September 30,2015 Hotel/Motel Court City-Wide Court Tax Security Donation Technology Revenues Sales and use taxes $ 1,492,169 $ $ $ Franchise fees Fines and forfeitures 53,104 56,174 Charges:for services Investment earnings 11,348 110 58 26 Intergovernmental Other 7,506 30,796 Total Revenues 1,511,023 53,214 30,854 56200 Expenditures Current: General government 817,297 49,656 Public safety 19,897 Public works Community services 101,724 23,121 Parks and recreation Economic development Debt Service: Principal Interest and other charges Capital outlay 500 Total Expenditures 817,297 101,724 20,397 72,777 Excess(deficiency)of revenues over expenditures 693,726 (48,510) 10,457 (16,577) Other Financing Sources(Uses) Issuance:of debt Bond premium Transfers in Transfers out (1,316) Total Other Financing Sources(Uses) (1,316) Net change in fund balances 692,410 (48,510) 10,457 (16,577) Fund balances-beginning 2,998,468 117,459 49,667 48,433 Fund balances-ending $ 3,690,878 $ 68,949: $ 60,124 $ 31,856 88 134 FINAL DRAFT Page l of 2 Park and Street - Park Recreation Assessments Donation Police Seizure Development 170 287 3,216 759,732 131,755 39,868 344,274 759,732 131,925 40,155 347,490 759,732 16,424 133,188 31,092 759,732 164,280 16,424 (32,355) 23,731 347,490 (31,100) (100,000) (31,100) (100,000) (63,455) 23,731 247,490 168,339 241,742 988,150. $ $ 104,884 $ 265,473 $ 1,235,640 • . 89 135 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS For the Year Ended September 30,2015 Traffic Impact Juvenile Sidewalk Grant Improvement Management Revenues Sales and use taxes $ $ $ $ Franchise fees Fines and forfeitures 30,320 Charges for services Investment earnings 236 37 3,770 55 Intergovernmental 405,083 Other 34,188 •Total Revenues 236 405,120 37,958 30,375 Expenditures Current: General government Public safety 192,716 Public works 8,520 Community services 94,302 44,240 Parks and recreation 11,072 Economic development Debt Service: Principal Interest and other charges Capital outlay 107,278 Total Expenditures 8,520 405,368 44,240 Excess(deficiency)of revenues over ex enditures (8,284) 248 P ( ) 37,958 (13,865) Other Financing Sources(Uses) Issuance of debt Bond premium Transfers in Transfers out (217,224) (91) • Total Other Financing Sources(Uses) (217,224) (91) Net change in fund balances (225,508) (248) 37,867 (13,865) Fund balances-beginning 242,999 69,502 672,609 53,512 Fund balances-ending $ 17,491 $ 69,254 $ 710,476 $ 39,647 90 136 FINAL DRAFT Page 2 of 2 Pearland Economic Total Non-major Development Educational Governmental Corporation TV U of H Funds $ 9,403,602 $ $ $ 10,895,771 307,217 307,217 139,598 433,165 4133165 151,991 654 303 172,261 775,504 254,368 1,434,955 9,069 86,153 1,443,341 10,773,331 307,871 340,824 14,826,308 1,626,685 229,037 340,544 349,064 30,094 293,481 144,260 3,250,595 3,250,595 7,425,000 • • 7,425,000 1,073,288 1,073,288 6,846 145,716 11,748,883 36,940 340,544 14,537,126 (975,552) 270,93.1 280 289,182 8,041 8,041 (349,731) . 8,041 (34.1,690) (975,552) 270,931 8,321 (52,508) 19,155,487 • 487,424 240,128 25,533,919 $ 18,179,935 $ 758,355 $ 248,449 $ 25,481,411 91 137 FINAL DRAFT CITY OFPEARLAND,TEXAS MAJOR GOVERNMENTAL FUND-DEBT SERVICE FUND SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,-2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget Actual (Negative) 2014 Revenues Property taxes $ 28,597,935 $ 28,757,970 • $ 160,035 $ 27,131,534 Investment earnings 36,561 47,779 11,218 37,272 Intergovernmental 653,322 653,322 663,540 Miscellaneous 110,153 115,393 5,240 : 111,856 Total Revenues 29,397,971 29,574,464 176,493 27,944,202 Expenditures Debt Service: Principal 12,389,634 12,389,612 22 11,575,162 Interest and other charges 12,846,130 12,978,019 (131,889) 13,102,430 Intergovernmental 4,792,373 4,792,379: (6) 4,307,496 Total Expenditures 30,028,137 30,160,010 (131,873) 28,985,088 Excess (deficiency)of revenues over:expenditures (630,166) (585,546) 44,620 . (1,040,886) Other Financing Sources (Uses) Proceeds from long-term debt 47,165,000 47,165,000 29,720,000 Premium on general obligation debt 7,608,103 7,608,103 3,778,000 Payments to refunding escrow agent (54,303,290) (54,303,290) (33,182,437) Transfers in 613,411 613,411 _ 618,439 Total Other Financing.Sources (Use 1,083,224 1,083,224 934,002 Net change in fund balance 453,058 497,678 • 44,620 (106,884) Fund Balances -Beginning 4,535,937 4,535,937 4,642,821 Fund Balances Ending $ 4,988,995 $ 5,033,615 $ 44,620 $ . 4,535,937 92 138 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-HOTEL/MOTEL TAX SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-B UDGETAND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive./ Final Budget Actual (Negative) 2014 Revenues Sales and use taxes $ 1,507,942 $ 1,492,169 $ (15,773) $ 1,404,306 Investment earnings 10,092 11,348 1,256 4,079 Other 3,066 7,506 4,440 80,990 Total Revenues 1,521,100 1,511,023 (10,077) 1,489,375 Expenditures Current: General government 916,631 817,297 99,334 708,755 Capital outlay 53,304 Total Expenditures 916,631 817,297. 99,334 762,059 , Excess(deficiency)of revenues over expenditures 604,469 693,726 89,257 727,316 Other Financing Sources (Uses) Transfers out (1,316) (1,316) Net change in fund balance 603,153 692,410 89,257 727,316 Fund Balances -B e ginning 2,998,468 2,998,468 2,271,152 Fund Balances -Ending $ 3,601,621 $ 3,690,878 $ 89,257 $ 2,998,468 93 139 FINAL DRAFT 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 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget Actual (Negative) 2014 Revenues Fines and forfeitures $ 52,802 $ 53,104 $ 302 $ 53,213 Investment earnings 130 110 (20) 180 Total Revenues 52,932 53,214 282 53,393 Expenditures Current: - Community services 104,337 101,724 2,613 65,542 Total Expenditures 104,337 101,724 2,613 65542 Net change in fund balance (51,405) (48,510) 2,895 (12,149) Fund Balances -Beginning 117,459 117,459 129,608 Fund Balances -Ending $ 66,054 $ 68,949 $. 2,895 $ 117,459 94 140 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-CITY-WIDE DONATION SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive/ Final Budget Actual (Negative) 2014 Revenues Investment earnings $ 53 $ 58 $ 5 $ 104 Other income 27,856 30,796 2,940 40,7.75 Total Revenues 27,909 30,854 2,945 40,879 Expenditures Current: Public safety 19,895 19,897 (2) 17,433 Capital outlay 500 .500 44,116 Total Expenditures 20,395 20,397 (2) 61,549 Excess(deficiency) of revenues over expenditures 7,514 10,457_ 2,943 (20,670) Other Financing Sources(Uses) Transfers out (21,000) Net change in fund balance 7,514 10,457 2,943 (41,670) Fund Balances-Beginning 49,667 49,667 91,337 Fund Balances-Ending $ 57,181 $ 60,124 $ 2,943 $ 49,667 95 141 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-COURT TECHNOLOGY SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget Actual (Negative) 2014 Revenues Fines and forfeitures $ 60,000 $ 56,174 $ (3,826) $ 60,846 Investment earnings 25 26 1 202 Total Revenues 60,025 56,200 (3,825) 61,048 Expenditure s Current: General government 46,691 49,656 (2,965) Community services 23,215 23,121 94 37,945 Capital Outlay 15,951 15,951 . .258,105 Total Expenditures 85,857 72,777 13,080 296,050 Net change in fund balance (25,832) (16,577) 9,255 (235,002) Fund Balances -Beginning 48,433 48,433 283,435 Fund Balances -Ending $ 22,601 $ 31,856 $ 9,255 $. 48,433 96 142 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND STREET ASSESSMENTS SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES INFUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive Final Budget Actual (Negative) 2014 Revenues Investment earnings $ $ $ $ Other 756,643 759,732 3,089 62,588 Total Revenues 756,643 759,732 3,089 62,588 Expenditures Current:: General government 756,643 759,732 (3,089): 62,588 Total Expenditures 756,643 759,732 (3,089) 62,588 Net change in fund balance Fund Balances -Beginning Fund Balances Ending $ $ $ $ 97 143 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND PARK DONATION SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 . Variance Positive I Final Budget Actual (Negative) 2014 Revenues Investment_earnings $ 165 $ 170 $ 5 $ 258 Other 101,000 131,755 30,755 111,529 Total Revenues 101,165 131,925 30,760 11.1,787 Expenditures Current: Parks and recreation 186,431 133,188 53,243 133,052 Capital outlay 31,616 31,092 524 Total Expenditures 218,047 164,280 53,767 1.33;052 Excess (deficiency) of revenues over expenditures (116,882) (32,355) 84,527 (21,265) Other Financing Sources (Uses) Transfers out (31,100) (31,100) Net change in fund balance (147,982) (63,455) 84,527 (21,265) Fund Balances -Beginning 168,339 168,339 189,604 .: Fund Balances -Ending $ 20,357 $ 104,884 $ 84,527 $ 168,339 • 98 144 FINAL DRAFT 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 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget Actual (Negative) 2014 Revenues Investment earnings $ 260 $ 287 $ : 27 $ 352 Other 32,528 39,868 7,340 118,233 Total Revenues 32,788 40,155 7,367 : 118,585 Expenditures Current: Public safety 18,150 16,424 1,726 72,342 Capital outlay 46,000 Total Expenditures 18,150 16,424 1,726 118,342 Net change in fund balance 14,638 23,731 9,093 243 Fund Balances Beginning 241,742 241,742 241,499 Fund Balances -Ending $ 256,380 $ 265,473 $ 9,093 $ 241,742 99 145 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-PARK AND RECREATION DEVELOPMENT SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget. Actual (Negative): 2014 Revenues Investment;earnings $ 2,150 $ 3,216 $ 1,066 $ 1,942 Other 292,308 344,274. 51,966 292,379 Total Revenues 294,458 347,490 53,032 294,321 Expenditures Current:: Parks and recreation 38,250 38,250. Capital outlay 93,967 93,967 35,590 I Total:Expenditure s 132,217 132,217 35,590 Excess(deficiency) of revenues over expenditures 162,241 347,490 185,249. 258,731 Other Financing Sources (Uses) Transfers out (105,000) (100,000) 5,000. (66,500) Total Other Financing Sources (Uses) (105,000) (100,000) 5,000 (66,500) Net change in fund balance 57,241 247,490 190,249 192,231 Fund Balances -Beginning 988,150 988,150 795,919 Fund Balances -Ending $ 1,045,391 $ 1,235,640 $ 190,249 $ 988,150 100 146 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-SIDEWALK SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Valiance Positive / Final Budget Actual (Negative) 2014 Revenues Investment earnings $ 240 $ 236 $ (4) $ 351 Other 33,390 Total Revenues 240 236 (4) 33,741 Expenditures Current: Public works 8,520 8,520 1,890 Total Expenditures 8,520 _ 8,520 1,890 Excess(deficiency) of revenues over expenditures (8,280) (8,284) (4) 31,851 Other Financing Sources (Uses) Transfers out (217,224) (217,224) (14,652) Total Other Financing Sources.(Uses) (217,224) (217,224) (14,652) Net change in fund balance (225,504) (225,508) (4) 17,199 Fund Balances -Beginning 242,999 242,999 225,800 Fund Balances -Ending $ 17,495 $ 17,491 $ (4) $ 242,999 101 147 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-GRANT SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget Actual (Negative) 2014 Revenues Investment earnings $ 14 $ 37 $ 23 $ Intergovernmental 1,507,228 405,083 (1,102,145) 848,339 Total Revenues 1,507,242 405,120. (1,102,122) 848,339 Expenditures Current: General government 3,100 3,100 11,993 Public safety 224,377 192,716 31,661 284,075 Community service 328,875 94,302 234,573 417,012 Parks and recreation 11,072 (11,072) Capital outlay 292,889 107,278 185,611 112,061 Total Expenditures 849,241 405,368. 443,873 825,141 Excess(deficiency)of revenues over expenditures 658,001 (248) (658,249) 23,198 Other Financing Sources:(Uses) Transfers in Transfers out (663,350) 663,350. Total other financing sources (uses) (663,350) 663,350 Net change in fund balance (5,349) (248) 5,101 23,198 Fund Balances -Beginning 69,502 69,502 46,304 Fund Balances -Ending $ 64,153 $ 69,254 $ 5,101 $ . 69,502 102 148 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-TRAFFIC IMPACT IMPROVEMENT SCHEDULE OF REVENUES,EXPENDITURES,AND • CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive_/ Final Budget Actual (Negative) 2014 Revenues Investment earnings $ 2,911 $ _ _ 3,770 $ .• 859 $ 2,488 Other 8,781 34,188 25,407 40,850 Total Revenues 11,692 37,958 26,266 43,338 Expenditures Current: Public works 93,548 93,548 Total Expenditures 93,548 :• 93,548 Excess (deficiency) of revenues over expenditures (81,856) 37,958 . 119,814 43,338 Other Financing Sources/(Uses) Transfers out (91) (91) (10,625) Net change in fund balance (81,947) 37,867 119,814 32,713 Fund Balances -Beginning 672,609 672,609 639,896 Fund Balances -Ending $ 590,662 $ 710,476. $ 119,814 $ 672,609 103 149 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-JUVENILE MANAGEMENT SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget Actual (Negative) 2014 Revenues Fines and Forfeitures $ 37,000 $ 30,320 $ (6,680) $ 36,066 Investment earnings 65 55 (10) 86 Total Revenues 37,065 30,375 (6,690) 36,152. Expenditure s Current: Community services 44,572 44,240 332 43,139 Total Expenditures 44,572 44,240. 332 43,139 Net change in fund balance (7,507) (13,865) (6,358) (6,987). Fund Balances -Beginning 53,512 53,512 60,499 Fund B alance s -Ending $ 46,005 $ 39,647 $ (6,358) $ 53,512 104 150 FINAL DRAFT CITY OF PEARLAND,TEXAS MAJOR GOVERNMENTAL FUND-CAPITAL PROJECTS FUND SCHEDULE OF REVENUES,EXPENDITURES,AM) CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive./ Final Budget Actual (Negative) 2014 Revenues Investment eamings $ 47,067 $ 75,913 $ 28,846 $ 24,804. Intergovernmental 16,591,670 1,097,268 (15,494,402) 712,409 Other income 5,751,527 4,482,428 .(1,269,099) 990,299 Total Revenues. 22,390,264 5,655,609 (16,734,655). 1,727,512 Expenditures Current: Public works 835,995 924,517 (88,522) 172,618 Debt Service Interest and other charges 333,983 357,492 (23,509) 111,564 Capital outlay 26,905,151 . 20,464,495 6,440,656.. 10,747,763.. Total Expenditures 28,075,129. 21,746,504 6,328,625 11,031,945 Excess(deficiency) of revenues over expenditures (5,684,865) . (16,090,895) (10,406,030) (9,304,433) Other Financing Sources(Uses) Issuance of debt 18,361,089 17,980,000 (381,089) 10,690,000 Premium on debt issued 445,228 445,228 1,005,606 Sale of capital assets 518,321 3,157,291 2,638,970 Transfers in 990,751 298,415 (692,336) 630,874 Transfers out (884,669) (884,669) (1,942,825) Total Other Financing Sources (Use! 18,985,492 20,996,265 2,010,773 10,383,655 Net change in fund balance 13,300,627 4,905,370 (8,395,257) . 1,079,222 Fund Balances -Beginning 15,614,809 15,614,809 14,535,587 Fund Balances -Ending $.28,915,436 $ 20,520,179 $ (8,395,257) $ 15,614,809 105 151 FINAL DRAFT CITY OF PEARLAND,TEXAS SPECIAL REVENUE FUND-EDUCATIONAL TV SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September 30,2014 2015 Variance Positive / Final Budget Actual (Negative) 2014 Revenues Investment earnings $ 660 $ 654 $ (6) $ 473 Franchise taxes 300,000 307,217 7,217- 269,915 Total Revenues 300,660 . 307,871 7,211 270,388 Expenditures Current: Community services 35,063 30,094 4,969 37,877 Capital.outlay 6,846 6,846. 5;601 Total Expenditures 41,909 36,940 4,969 43,478 Net change in fund balance 258,751 270,931 12,180 226,910 Fund Balances -Beginning 487,424 487,424 260,514 Fund Balances -Ending $ 746,175 $ 758,355 $ 12,180 $ 487,424 106 152 FINAL DRAFT CITY OF PEARL AND,TEXAS SPECIAL REVENUE FUND-UOF H SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Year Ended September 30,2015 with comparative actual totals for the year ended September.30,2014 2015 Variance Positive/ Final Budget Actual (Negative) 2014 Revenues Investment:earnings $ 300 $ 303 $ 3 $ 370 Intergovernmental 254,427 254,368 (59) 237,528 Other 85,489.. 86,153 664 81,786 Total Revenues 340,216 340,824 608 319,684 Expenditure s Current: Public works 339,916 340,544 (628) 325,052 Total Expenditures 339,916 340,544 (628) 325,052 Excess(deficiency)of revenues over expenditures 300 280 (20) (5,368) Other Financing Sources (Uses) Transfers in 8,041 8,041 5,717 Transfers out Total Other Financing Sources (Uses) 8,041 8,041 5,717 Net change in fund balance 8,341 8,321 (20) 349 Fund Balances -Beginning 240,128 240,128 239,779 Fund Balances -Ending $ 248,469 $ 248,449 $ (20) $ 240,128 107 153 FINAL DRAFT (This page intentionally left blank.) 108 154 FINAL DRAFT Long-Term Debt Amortization Schedules 109 155 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF GOVERNMENTAL ACTIVITY LONG-TERM DEBT BY MATURITY DATE September 30,2015 Permanent Improvement&Refunding Bonds, Permanent Improvement&Refunding Bonds, Series 2005 Series 2006 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 940,000 $ 23,500 $ 963,500 $ 445,000. $ 395,978 $ 840,978 2017 460,000 377,025 837,025 2018 480,000 357,050 837,050 2019 335,000 339,313 674,313 2020 370,000 322,525 692,525 2021 395,000. 303,400 698,400 2022 420,000 283,025 703,025 2023 535,000 259,150 794,150 2024 535,000 232,400 767,400 2025 565,000 204,900 769,900 2026 595,000 175,900 770,900 2027 630,000 146,063 776,063 2028 920,000 109,250 1,029,250 2029 1,840,000 43,700 1,883,700 2030 2031 2032 2033 2034 2035 2036 2037 2038 $ 940,000 $ 23,500 $ 963,500 $ 8,525,000 $ 3,549,678 $ 12,074,678 Certificates of Obligation,Series 2006 Permanent Improvement&Refunding Bonds, Series 2007 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 395,000 $ 27,075 $ 422,075 $ 2,345,000 $ 1,819,981 $ 4,164,981 2017 405,000 8,353 413,353 2,460,000 1,699,856 4,159,856 2018 2,220,000 1,582,856 3,802,856 2019. 3,830,000. 1,431,606 5,261,606 2020 3,005,000 1,268,244 4,273,244 2021 3,125,000 1,130,319 4,255,319 2022 3,250,000 986,881 4,236,881 2023 2,900,000 848,506 3,748,506 2024 3,030,000 715,081 3,745,081 2025 2,220,000 598,344 2,818,344 .. 2026 2,225,000 501,109 2,726,109 2027 2,320,000 397,338 2,717,338 2028 1,325,000 310,769 1,635,769 2029 1,370,000 246,763 1,616,763 2030 1,500,000 178,600 2031 1,515,000 106,994 2032 1,495,000 35,506 2033. 2034 2035 2036 2037 2038 $ 800,000 $ 35,428 $ 835,428 $ 40,135,000 $ 13,858,753 $ 49,162,653 110 156 FINAL DRAFT Page I of 4 Certificates of Obligation,Series 2007 Permanent Improve me nt Bonds,Series 2008 Fiscal Year: - Principal Interest Total Principal Interest Total 2016 $ 400,000 $ 437,500 $ 837,500 $ 325,000 $ 744,650 $ 1,069,650 2017 450,000. 415,188 865,188 340,000 725,025 1,065,025 2018 1,005,000 376,994 1,381,994 360,000 710,525 1,070,525 2019 350,613 350,613 405,000 691,400 1,096,400 2020 350,613 350,613 681,275 681,275 2021 350,613 350,613 681,275 681,275. 2022. 350,613 350,613 681,275 681,275 2023 350,613 350,613 681,275 681,275 2024 350,613 350,613 681,275 681,275 2025 350,613 350,613 681275 681,275 2026 350,613 350,613 681,275 681,275 2027 2027 1,580,000 324,938 1,904,938 .681,275 .681,275 2028 1,660,000 272,288 1,932,288 681,275 681,275 2029 1,745,000 216,956 1,961,956 730,000 664,850 1,394,850 2030 1,540,000 163,575 1,703,575 4,530,000 543,669 5,073,669 2031 1,600,000 104,550 1,704,550 4,705,000 330,109 5,035,109 2032 1,660,000 35,275 1,695,275 4,785,000 110,653 4,895,653 2033 2034 2035 2036 2037 2038 $ 11,640,000 $ 5,152,163 $ 16,792,163 $ 16,180,000 $ 10,652,356. .$ :: 26,832,356 Certificates of Obligation,Series 2008 Permanent Improvement and Refunding Bonds, Series 2009 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 150,000 $ 388,019 $ 538,019 $ 420,000 $ 615,918 $ 1,035,918 2017 160,000 381,819 541,819 435,000 599,267 1,034,267 2018 165,000 375,319 540,319 455,000 578,154 1,033,154 2019 185,000 368,319 553,319 590,000 557,888 1,147,888 2020 195,000 360,719 555,719 615,000 537,864 1,152,864 2021 205,000 352,591 557,591 635,000 517,075 1,152,075 2022 215,000 343,794 558,794 655,000 494,490 . 1,149,490 2023 225,000 334,388 559,388 680,000 470,120 1,150,120 2024 240,000 324,300 564,300 705,000 444,321 1,149,321 2025_ 250,000 313,550 563,550 735,000 416,954 1,151,954 2026 290,000 301,525 591,525 765,000 387,505 1,152,505 2027 305,000 287,375 592,375 795,000 356,305 1,151,305 2028 320,000 271,750 591,750 825,000 323,492 1,148,492 2029. 335,000 255,375 590,375 865,000 288,415 1,153,415 2030. 1,335,000 213,625 1,548,625 835,000 249,375 1,084,375 2031 1,675,000 138,375 1,813,375 945,000 204,875 1,149,875 2032 1,930,000 48,250 1,978,250 1,090,000 154,000 1,244,000 2033 1,235,000 95,875 1,330,875 2034 1,300,000 32,500 1,332,500 2035 2036 2037 2038 $ 8,180,000 $ 5,059,091 $ 13,239,091 $ 14,580,000 $ 7,324,393 $ 21,904,393 111 157 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF GOVERNMENTAL ACTIVITY LONG-TERM DEBT BY MATURITY DATE September 30,2015 Certificates of Obligation,Series 2009 Certificates of Obligation,Series 2009A Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 240,000 $ 332,903 $ 572,903 $ 640,000 $ 324,965 $ 964,965 2017 245,000 325,703 570,703 640,000 301,765 941,765 2018 255,000 317,128 572,128 640,000 275,403 915,403 2019 320,000 307,565 627,565 640,000 252,560 892,560 2020 325,000 294,765 619,765 635,000 231,361 866,361 2021 340,000 281,765 621,765 640,000 210,163 850,163 2022 350,000 268,165 618,165 640,000 187,763 827,763 2023 365,000 253,815 618,815 640,000 164,403 804,403 2024 385,000 238,303 623,303 640,000 140,563 780,563 2025 400,000 221,363 621,363 635,000 116,339 751,339 2026 420,000 203,363 623,363 640,000 91,315 731,315 2027 440,000 183,938 623,938 640,000 65,715 705,715 2028 465,000 163,038 628,038 635,000 39,898 674,898 2029 485,000 139,788 624,788 640,000 13,440 653,440 2030 415,000 116,750 531,750 2031 410,000 96,000 506,000 2032 475,000 75,500 550,500 2033 505,000 51,750 556,750 2034 530,000 26,500 556,500 2035 2036 2037 2038 $ 7,370,000 $ 3,898,098 $ 11,268,098 $ 8,945,000 $ 2,415,650 .5 11,360,650 Permanent Improvement Bonds,Series 2010A Permanent Improvement Bonds,Series 2010B Fiscal Year Principal Interest Total Principal .. Interest Total 2016 $ 380,000 $ 388,353 $ 768,353 $ 225,000 $ 14,400 $ 239,400 2017 390,000 378,703 768,703 240,000 6,300 246,300 2018 400,000 366,853 766,853 90,000 1,350 91,350 2019 415,000 354,628 769,628 2020 425,000 342,028 767,028 2021 440,000 329,053 769,053 2022 455,000 315,059 770,059 2023 465,000 300,109 765,109 2024 485,000 284,065 769,065 2025 500,000 265,578 765,578 2026 520,000 246,153 766,153 2027 540,000 226,603 766,603 2028 560,000 205,558 765,558 2029 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 2033 690,000 77,138 767,138 2034 720,000 47,175 767,175 2035 750,000 15,938 765,938 2036 2037 2038 $ 10,625,000 $ 4,724,131 $ 15,349,131 $ 555,000 $ 22,050 $ 577,050 112 158 FINAL DRAFT Page 2 oj4 BC MUD#4 Permanent Improvement Bonds,Series 2011 Unlimited Tax Bonds,Series 2011 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 130,000 $ 90,888 $ 220,888 $ 155,000 $ 184,031 $ 339,031 2017 130,000 87,313 217,313 165,000 177,631 342,631 2018 130,000 83,575 213,575 170,000 170,931 340,931 2019 130,000 79,350 209,350 175,000 164,031 339,031 2020 130,000 74,800 204,800 185,000 156,831 341,831 2021 130,000 69,925 199,925 190,000. 149,331 339,331 2022 130,000 64,725 194,725 200,000 141,531 341,531 2023 130,000 59,444 189,444 205,000 134,456 339,456 2024 130,000 54,081 184,081 210,000 128,231 338,231 2025 130,000 48,475 178,475 220,000 121,506 341,506 2026 130,000 42,625 172,625 225,000 114,275 339,275 2027 130,000 36,645 166,645 235,000 106,506 341,506 2028 130,000 30,535 160,535 245,000 98,106 343,106 2029 130,000 24,360 154,360 250,000 88,819 338,819 2030 130,000 18,120 148,120 260,000 78,619 338,619 2031 130,000 11,750 141,750 275,000 67,919 342,919 2032 170,000 4,250 174,250 285,000 56,719 341,719 2033 295,000 45,119 340,119 2034 305,000 33,119 338,119 2035 320,000 20,419 340,419 2036 335,000 6,909 341,909 2037 2038 $ 2,250,000 $ 880,860 $ 3,130,860 .$ . 4,905,000 $ 2,245,041 $ 7,150,041 Certificates of Obligation,Series 2011 Permanent Improvement Refunding Bonds, Series 2012 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 210,000 $ 24,035 $ 234,035 $ 1,955,000 $ I,489,975 $ 3,444,975 2017 205,000 19,698 224,698 2,625,000 1,388,600 4,013,600 2018 210,000 15,362 225,362 2,690,000 1,282,300 3,972,300 2019 210,000 10,973 220,973 3,210,000 1,164,300 4,374,300 2020 210,000 6,584 216,584 2,200,000 1,056,100 3,256,100 2021 210,000 2,195 212,195 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 2030 2031 2032 2033 2034 2035 2036 2037 2038 $ 1,255,000 $ 78,845 $ 1,333,845 $ 42,890,000 $ 10,965,575 $ 53,855,575 113 159 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF GOVERNMENTAL ACTIVITY LONG-TERM DEBT BY MATURITY DATE September 30,2015 Permanent Improvement Bonds,Series 2013 Certificates of Obligation,Series 2013 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 295,000 $ 362,093 $ 657,093 $ 85,000 $ 110,063 $ 195,063 2017 305,000 351,568 656,568 85,000 107,513 192,513 2018 305,000 339,368 644,368 85,000 104,963 189,963 2019 320,000 326,868 646,868 90,000 102,338 192,338 2020 320,000 314,068 634,068 100,000 98,988 198,988 2021. 330,000 301,068 631,068 100,000 94,488 194,488 2022 330,000 287,868 617,868 100,000 89,488 189,488 2023 340,000 274,468 614,468 100,000 84,488 184,488 2024 350,000 260,668 610,668 100,000 79,488 179,488 2025 360,000 246,468 606,468 110,000 74,238 184,238 2026 370,000 231,868 601,868 110,000 69,288 179,288. 2027 370,000 217,068 587,068 110,000 64,888 174,888 2028 380,000 202,068 582,068 110,000 60,488 170,488 2029 390,000 186,424 576,424 120,000 55,738 175,738 2030 400,000 169,880 569,880 120,000 50,563 170,563 2031 410,000 152,411 562,411 120,000 45,313 165,313 2032 420,000 134,203 554,203 120,000 40,063 160,063 2033 430,000 115,288 545,288 130,000 34,513 164,513 2034 440,000 95,713 535,713 130,000 28,663 158,663 2035 450,000 75,688 525,688 130,000 22,813 152,813 2036 460,000 55,213 515,213 140,000 16,650 156,650 2037 480,000 33,763 513,763 140,000 10,175 150,175 2038 490,000 11,331 501,331 150,000 3,469 153,469 $ 8,745,000 $ 4,745,414 $ 13,490,414 $ 2,585,000 $ 1,448,669 $ 4,033,669 Permanent Improvement&Refunding Bonds, Certificates of Obligation,Series 2014 Series 2014 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 1,735,000 $ 1,662,831 $ 3,397,831 $ 235,000 $ 124,944 $ 359,944 2017 1,020,000 1,630,181 2,650,181 230,000 119,119 349,119 2018 1,085,000 1,603,231 2,688,231 230,000 114,519 344,519 2019 1,240,000 1,573,031 2,813,031 230,000 109,919 339,919 2020 2,310,000 1,508,281 3,818,281 230,000 105,319 335,319 2021 2,415,000 1,401,706 3,816,706 230,000 100,719 330,719 2022 2,510,000 1,284,831 3,794,831 230,000 96,119 326,119 2023 3,165,000 1,149,206 4,314,206 230,000 90,369 320,369 2024 2,710,000 1,002,331 3,712,331 230,000 82,319 312,319 2025 2,830,000 863,831 3,693,831 235,000 73,019 308,019 2026 3,055,000 716,706 3,771,706 230,000 63,719 293,719 2027 4,120,000 537,331 4,657,331 235,000 55,594 290,594 2028 3,145,000 385,191 3,530,191 235,000 48,544 283,544 2029 5,860,000 218,850 6,078,850 230,000 41,425 271,425 2030 535,000 90,950 625,950 230,000. 34,238 264,238 2031 535,000 69,550 604,550 230,000 26,906 256,906 2032 535,000 48,150 583,150 230,000 19,431 249,431 2033 535,000 28,088 563,088 230,000 11,813 241,813 2034 535,000 9,363 544,363 235,000 3,966 238,966 2035 2036 2037 2038 $ 39,875,000 $ 15,783,641 $ 55,658,641 $ 4,395,000 $ 1,321,997 $ 5,716,997 114 160 FINAL DRAFT Page 3 of 4 Permanent Improvement Refunding Bonds,Series Permanent Improvement Bonds,Series 2015 2015 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ $ 2,096,919 $ 2,096,919 $ 425,000 $ 222,527 $ 647,527 2017. 320,000 2,093,719 2,413,719 425,000 228,075 653,075 2018 775,000 2,078,894 2,853,894 425,000 219,575 644,575 2019 2,130,000 2,035,319 4,165,319 425,000 211,075 636,075 2020 3,755,000 1,926,819 5,681,819 425,000 202,575 627,575 2021 3,890,000 1,768,019 5,658,019 425,000 194,075 619,075.. 2022 4,020,000 1,619,069 5,639,069 425,000 185,575 610,575. 2023 4,010,000 1,462,119 5,472,119 425,000 176,013 601,013 2024 4,975,000 1,247,494 6,222,494 425,000 165,388 590,388 2025 4,540,000 1,009,619 5,549,619 425,000 151,575 576,575 2026 4,745,000 777,494 5,522,494 425,000 134,575 559,575 2027 4,155,000 554,994 4,709,994 425,000 117,575 542,575 2028 4,100,000 348,619 4,448,619 425,000 100,575 525,575 2029 3,450,000 159,869 3,609,869 425,000 85,700 510,700 2030 905,000 59,478 964,478 420,000 73,025 493,025 2031 720,000 33,638 753,638 425,000 60,350 485,350 2032 675,000 10,969 685,969 425,000 47,600 472,600 2033 425,000 34,425 459,425 2034 425,000 20,719 445,719 2035 425,000 6,906 431,906 2036 2037 2038 $ 47,165,000 $ 19,283,047 $ 66,448,047 $ 8,495,000 $ 2,637,902 $ 11,132,902 Certificates of Obligation,Series 2015 Sales Tax Revenue Bonds,Series 2005 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 245,000 $ 128,253 $ 373,253 $ 480,000 $ 287,538 $ 767,538 2017 245,000 131,450 376,450 505,000 263,538 768,538 2018 245,000 126,550 371,550 530,000 238,288 768,288 2019 245,000 121,650 366,650 555,000 211,788 766,788 2020 240,000 116,800 356,800 575,000 189,588 764,588 2021 240,000 112,000 352,000 600,000 166,588 766,588 2022 240,000 106,600 346,600 625,000 141,988 766,988 2023 245,000 100,538 345,538 650,000 116,363 766,363 2024 245,000 93,800 338,800 675,000 89,550 764,550 2025 240,000 85,325 325,325 705,000 61,200 766,200 2026 245,000 75,625 320,625 735,000 31,238 766,238 2027 245,000 65,825 310,825 2028 245,000 57,250 302,250 2029 245,000 49,900 294,900 2030 240,000 42,625 282,625 2031 240,000 35,275 275,275 2032 245,000 27,697 272,697 2033 240,000 19,969 259,969 2034 240,000 12,169 252,169 2035 245,000 4,134 249,134 2036 2037 2038 $ 4,860,000 $ 1,513,435 $ 6,373,435 $ 6,635,000 $ 1,797,663 $ 8,432,663 115 161 FINAL DRAFT (This page intentionally left blank) 116 162 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF GOVERNMENTAL ACTIVITY LONG-TERM DEBT Page 4 of 4 BY MATURITY DATE September 30,2014 Sales Tax Revenue Bonds,Series 2006 Development Authority of Pearland Tax Increment Contract Revenue and Refimdino Ronda_Seriec 2012 Fiscal Year Principal Interest _ Total Principal Interest Total 2016 $ 240,000 $ 411,419 $ 651,419 $ 2,970,000 $ 1,406,981 $ 4,376,981 2017 255,000 401,219 656,219 3,070,000 1,315,802 4,385,802 2018. 265,000 390,381 655,381 3,160,000 1,221,553 4,381,553 2019 280,000 378,788 658,788 3,255,000 1,124,541 4,379,541 2020 300,000 366,538 666,538 3,120,000 1,024,613 4,144,613 2021 310,000 353,038 663,038 3,215,000 928,829 4,143,829 2022 325,000 339,088 664,088 3,030,000 830,128 3,860,128 2023 345,000 322,838 667,838 3,130,000 737,107 3,867,107 2024 365,000 305,588 670,588 3,225,000 641,016 3,866,016 2025 385,000 287,338 672,338 3,320,000 542,009 3,862,009 2026 405,000 268,088 673,088 3,425,000 440,085 3,865,085 2027 1,190,000 247,838 1,437,838 3,530,000 334,937 3,864,937 2028 1,255,000 188,338 1,443,338 3,635,000 226,566 3,861,566 2029 1,320,000 128,725 1,448,725 3,745,000 114,972 3,859,972 2030 1,390,000 66,025 1,456,025 2031 2032 2033 2034 2035 2036 2037 2038 $ 8,630,000 $ 4,455,244 $ 13,085,244 $ 45,830,000 $ 10,889,137 $ 56,719,137 Development Authority of Pe arland Development Authority of Pe arland Tax Increment Contract Revenue Tax Increment Contract Revenue Rnndc.Serec 2011 Rnndc Seriec 21114 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 380,000 $ 314,984 $ 694,984 $ 505,000 $ 204,272 $ 709,272 2017 385,000 300,658 685,658 520,000 190,536 710,536 2018 405,000 286,143 691,143 535,000 176,392 711,392 2019 420,000 270,875 690,875 550,000 161,840 711,840 2020 445,000 255,041 700,041 475,000 146,880 621,880 2021 465,000 238,264 703,264 490,000 133,960 623,960 2022 735,000 220,734 955,734 505,000 120,632 625,632 2023 560,000 193,024 753,024 520,000 106,896 626,896 2024 615,000 171,912 786,912 530,000 92,752 622,752 2025 670,000 148,727 818,727 545,000 78,336 623,336 2026 725,000 123,468 848,468 560,000 63,512 623,512 2027 785,000 96,135 881,135 575,000 48,280 623,280 2028 850,000 66,541 916,541 590,000 32,640 622,640 2029 915,000 34,496 949,496 610,000 16,592 626,592 2030 2031 2032 2033 2034 2035 2036 2037 2038 $ 8,355,000 $ 2,720,998 $ 11,075,998 $ 7,510,000 $ 1,573,520. $ 9,083,520 117 163 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF ENTERPRISE FUND LONG-TERM DEBT BY MATURITY DATE September 30,2015 Water&Sewer Revenue Bonds, Water&Sewer Revenue Bonds, Series 1999 Series 2006 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 145,000 $ 107,825 $ 252,825 $ 745,000 $ 467,569 $ 1,212,569 2017 540,000 101,430 641,430 100,000 434,044 534,044 2018 565,000 77,616 642,616 100,000 429,744 529,744 2019 585,000 52,700 637,700 100,000 425,369 525,369 2020 610,000 26,901 636,901 100,000 420,869 520,869 2021 100,000 416,244 516,244 2022 100,000 411,619 511,619 2023 100,000 406,994 506,994 2024 100,000 402,369 502,369 2025 100,000 397,744 497,744 2026 1,150,000 393,119 1,543,119 2027 1,205,000 338,494 1,543,494 2028 1,265,000 278,244 1,543,244 2029 1,330,000 214,994 1,544,994 2030 1,395,000 146,831 1,541,831 2031 1,470,000 75,338 1,545,338 2032 2033 2034 2035 2036 2037 2038 2039 $ 2,445,000 $ 366,471 $ 2,811,471 $ 9,460,000 $ 5,659,581 $ 15,119,581 Water&Sewer Revenue Bonds, Water&Sewer Revenue Bonds, Series 2007 Series 2008 Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 1,010,000 $ 1,566,338 $ 2,576,338 $ 290,000 $ 628,840 $ 918,840 2017 950,000 1,510,788 2,460,788 315,000 615,790 930,790 2018 995,000 1,458,538 2,453,538 340,000 601,615 941,615 2019 1,045,000 1,403,813 2,448,813 370,000 586,315 956,315 2020 1,095,000 1,348,950 2,443,950 395,000 569,665 964,665 2021 1,155,000 1,294,200 2,449,200 420,000 551,890 971,890 2022 1,210,000 1,236,450 2,446,450 440,000 532,990 972,990 2023 1,275,000 1,175,950 2,450,950 460,000 514,840 974,840 2024 2,295,000 1,112,200 3,407,200 490,000 495,520 985,520 2025 2,480,000 997,450 3,477,450 510,000 474,450 984,450 2026 3,120,000 873,450 3,993,450 540,000 448,950 988,950 2027 3,280,000 717,450 3,997,450 560,000 421,950 981,950 2028 3,440,000 553,450 3,993,450 595,000 393,950 988,950 2029 3,615,000 398,650 4,013,650 600,000 364,200 964,200 2030 3,795,000 272,125 4,067,125 580,000 334,200 914,200 2031 3,980,000 139,300 4,119,300 560,000 305,200 865,200 2032 1,890,000 277,200 2,167,200 2033 1,980,000 182,700 2,162,700 2034 2,080,000 93,600 2,173,600 2035 2036 2037 2038 2039 $ 34,740,000 $ 16,059,100 $ 50,799,100 $ 13,415,000 $ 8,393,865 $ 21,808,865 118 164 FINAL DRAFT Page 1 of 2 Water&Sewer Revenue Bonds, Permanent Improvement and Refunding Bonds, Series 2009 Series 2009(water/sewer portion) Fiscal Year Principal Interest Total Principal Interest Total 2016 $ 400,000 $ 535,813 $ 935,813 $ 1,220,000 $ 212,000 $ 1,432,000 2017 410,000 522,813 932,813 2,065,000 143,600 2,208,600 2018 420,000 508,975 928,975 2,155,000 45,988 2,200,988 2019 435,000 493,750 928,750 2020 450,000 476,350 926,350 2021. 465,000 458,350 923,350 2022 485,000 438,588 923,588 2023 505,000 416,763 921,763 2024 520,000 393,406 913,406 2025 545,000 368,056 913,056 2026 570,000 340,806 910,806 2027 600,000 311,594 911,594 2028 630,000 280,844 910,844 2029 665,000 247,769 912,769 2030 700,000 212,025 912,025 2031 730,000 173,525 903,525 2032 765,000 133,375 898,375 2033 815,000 91,300 906,300 2034 845,000 46,475 891,475 2035 2036 2037 2038 2039 $ 10,955,000 $ 6,450,575 $ 17,405,575 $ 5,440,000 $ 401,588 $ 5,841,588 Water&Seiler Revenue Bonds, Water&Sewer Revenue Bonds, Series 2010A Series 2010B Fiscal Year Principal Interest Total Principal Interest Total 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 2020 475,000 438,944 913,944 445,000 235,175 680,175 2021 495,000 422,319 917,319 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 2024 555,000 360,519 915,519 2025 580,000 338,319 918,319 2026 600,000 315,119 915,119 2027 625,000 291,119 916,119 2028 650,000 265,338 915,338 2029 680,000 237,713 917,713 2030 710,000 208,813 918,813 2031 740,000 177,750 917,750 2032 755,000 144,450 899,450 2033 785,000 110,475 895,475 2034 825,000 75,150 900,150 2035 845,000 38,025 883,025 2036 2037 2038 2039 $ 12,100,000 $ 6,100,413 $ 18,200,413 $ 7,520,000 $ 1,747,044 $ 9,267,044 119 165 FINAL DRAFT CITY OF PEARLAND,TEXAS COMBINING SCHEDULE OF ENTERPRISE FUND LONG-TERM DEBT Page 2 of 2 BY MATURITY DATE September 30,2015 Permanent Improvement and Refunding Bonds, Water&Sewer Revenue Bonds, Series 2012(water/sewer portion) Series 2012 Principal Interest Total Principal Interest Total 2016 $ 340,000 $ 215,900 $ 555,900 $ 355,000 $ 218,255 $ 573,255 2017 350,000 200,400 550,400 755,000 211,155 966,155 2018 360,000 186,200 546,200 765,000 196,055 961,055 2019 365,000 171,700 536,700 780,000 180,755 960,755 2020 370,000 157,000 527,000 800,000 165,155 965,155 2021 370,000 142,200 512,200 230,000 141,155 371,155 2022 385,000 127,100 512,100 230,000 134,255 364,255 2023 395,000 111,500 506,500 240,000 127,355 .367,355 2024 1,480,000 74,000 1,554,000 230,000 120,155 350,155 2025 1,480,000 22,200 1,502,200 225,000 113,255 338,255 2026 175,000 106,505 281,505 2027 180,000 101,080 281,080 2028 185,000 95,500 280,500 2029 190,000 89,488 279,488 2030 195,000 83,313 278,313 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 2038 2039 $ 5,895,000 $ 1,408,200 $ 7,303,200 $ 72715,000 $ 2,416,116 $ 10,131,116 Water&Sewer Revenue Bonds, Series 2014 Fiscal Year Principal Interest Total 2016 $ 195,000 $ 324,619 $ 519,619 2017 210,000 316,819 526,819 2018 220,000 308,419 528,419 2019 230,000 299,619 529,619 2020 240,000 290,419 530,419 2021 255,000 280,819 535,819 2022 270,000 270,619 540,619 2023 280,000 259,819 539,819 2024 295,000 248,619 543,619 2025 310,000 236,819 546,819 2026 330,000 224,419 554,419 2027 345,000 211,219 556,219 2028 365,000 200,869 565,869 2029 385,000 189,919 574,919 2030 405,000 177,888 582,888 2031 425,000 164,725 589,725 2032 445,000 150,913 595,913 2033 470,000 135,894 605,894 2034 495,000 120,031 615,031 2035 520,000 102,706 622,706 2036 550,000 84,506 634,506 2037 575,000 65,256 640,256 2038 605,000 45,131 650,131 2039 640,000 23,200 663,200 $ 9,060,000 $ 4,733,263 $ 13,793,263 120 166 FESTAL DRAFT Statistical Section (Unaudited) 121 167 FINAL DRAFT (This page intentionally left blank.) 122 168 FINAL DRAFT Unaudited Statistical Section This part of the City's comprehensive annual financial report presents detailed information as a context for understanding what the information in the fmancial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Page Financial Trends 124 These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. Revenue Capacity 136 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 146 These schedules present information to help the reader assess the affordability of the. government's current levels of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information 151 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. Operating Information 154 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 provides and the activities it performs. Sources:Unless otherwise noted,the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 123 169 FINAL DRAFT CITY OF PEARLAND,TEXAS NET POSITION BY COMPONENT Last Ten Fiscal Years Amounts in(000's) (Accrual Basis of Accounting) 2006 2007 2008 2009 2010 Governmental Activities Net investment in capital assets $402,103 $400,522 $410,002 $429,054 $422,643 Restricted 8,085 10,130 10,864 10,615 18,020 Unrestricted 8,917 11,809 10,903 13,330 13,692 Total governmental activities net position $419,105 $422,461 $431,769 . $452,999 $454,355 Business-type activities Net investment in capital assets $130,648 $126,779 $138,679 $146,150 $144,244 Restricted 10,129 24,258 16,094 11,965 17,587 Unrestricted 700 1,638 3,406 9,256 11,942 Total business-type activities net position $141,477 $152,675 $158,179 $167,371 $173,773 Primary government Investment in capital assets $532,751 $527,301 $548,681 $575,204 $566,887 Restricted 18,214 34,388 26,958 22,580 35,607 Unrestricted 9,617 13,447 14,309 22,586 25,634 Total primary government net position $560,582 $575,136 $589,948 $620,370 $628,128 (1)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. (2)Restated due to implementation of GASB 65 in fiscal year 2014. Fiscal years 2012 and 2013 have been restated for comparison purposes. 124 170 FINAL DRAFT 2011 2012(2) 2013 (1)(2) 2014 2015 $413,439 $367,747 $420,009 $430,286 $461,484 16,462 36,548 34,666 45,826 47,927 14,543 (6,868) (5,534) (13,010) (28,022) $444,444 $397,427 $449,141 $463,102 $481,389.. $156,629 $156,888 $165,915 $174,955 $186,819 5,603 9,821 9,542 14,484 13,539 13,910 12,439 16,704 15,612 12,815 $176,142 $179,148 $192,161 $205,051 $213,172 $570,068 $524,635 $585,924 $605,241 $648,303 22,065 46,369 44,208 60,310 61,465 28,453 5,571 11,170 2,602 (15,207) $620,586 $576,575 $641,302 $668,153 $694,562 125 171 FINAL DRAFT CITY OF PEARLAND,TEXAS CHANGES IN NET POSITION Last Ten Fiscal Years Amounts in(000's) (Accrual Basis of Accounting) 2006 2007 2008 2009 Expenses Governmental activities General Government $ 8,574 $ 8,660 $ 11,161 $ 12,355 Public Safety 12,564 14,655 17,684 22,438 Public Works 26,914 24,041 24,532 26,893 Community Services 2,903 3,113 3,336 3,290 Parks and Recreation 4,131 4,882 7,157 7,240 Economic Development Interest on long-term debt 6,559 9,070 12,266 11,647 Total government activities expenses 61,645 64,421 76,136 83,863 Business-type activities: Water and Sewer 20,531 21,076 22,570 25,439 Solid.Waste 5,218 6,024 7,106 Total business-type activities: 20,531 26,294 28,594 32,545 Total primary government expenses $ 82,176 $ 90,715 $104,730 $116,408 Program Revenue Governmental activities Charges for services: General Government $ $ $ $ 6,637 Public Safety 2,627 2,788 2,959 3,524 Public Works 4,331 195 103 35 Community Services 6,312 5,822 5,130 4,755 Parks and Recreation 825 818 936 672 Economic Development Operating grants and contributions General Government 1,239 1,659 3,951 4,913 Public Safety 111 154 230 420 Public Works 456 551 375 Community Services 55 34 129 202 Parks and Recreation 21 11 115 450 Capital grants and contributions General Government Public Safety 503 279 Public Works 15,743 8,690 15,263 26,092 Parks and Recreation 6 261 4,653 Total governmental activities program revenues 31,270 20,627 30,131 53,007 Business-type activities: Charges for services Water and Sewer 13,849. 17,754 21,524 26,617 Solid Waste 5,218 6,038 6,766 Operating grants and contributions Water and Sewer 474 385 315 2,464 Capital grants and contributions Water and Sewer 13,434 12,621 5,869 6,125 Total business-type activities program revenues 27,757 35,978 33,746 41,972 Total primary government program revenues $ 59,027 $ 56,605 $ 63,877 $ 94,979 (1)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. (2)Restated due to implementation of GASB 65 in fiscal year 2014. Fiscal years 2012 and 2013 have been restated for comparison purposes. 126 172 FINAL DRAFT Page I of 2 2010 . 2011 2012(2) 2013(1)(2) 2014 2015 $ 13,439 $ 15,945 $ 13,334 $ 13,358 $ 12,241 $ 17,189 24,268 23,042 27,403 28,944 32,130 33,179 35,679 31,130 28,510 31,690 38;579 45,894 3,323 3,254 4,267 3,807 4,687 3,641 7,699 8,062 9,264 9,524 6,896 3,731 26,311 17,411 26,498 26,159 13,738 13,142 11,572 10,534 16,225 15,569 98;146 94,575 120,661 115,268 137;256 145,362 27,157 29,192 29,392 31,289 32,444 34,266 7,089 7,285 7,528 8,324 • 6,664 6,417 34,246 36,477 36,920 39,613 39,108 40,683 $132,392 $131,052 $157,581 $154,881 $176,364 $186,045 $ 6,637 $ $ 7,624 $ 6,326 $ 6,637 $ 7,624 3,296 3,679 4,206 7,410 2,793 4,110 10 18 43 3,096 322 338 4,312 4,632 5,855 3,264 7,375 7,771 906 2,027 2,080 2,209 2;290 2,412 413 414 430 1,209 5,215 5,488 6,045 44 440 747 641 407 711 603 434 294 207 675 53 1,388 7,612 4,589 159 366 311 108 337 216 424 462 542 182 474 1,586 180 98 29,800 10,330 18,743 52,921 29,269 36,440 100 51,705' 28,084 46,726 78,145 58,413 67,336 24,961 28,664 27,535 29,008 28,929 30,201 7,313 7,258 7,654 8,175 7,008 6,637 70 61 205 2,512 8,611 4,215 8,118 16,273 17,677 13,177 40,955 40,198 43,512 53,456 53,614 52,527 $ 92,660 $ 68,282 $ 90,238 $131,601 $112,027 $119,863 127 173 FINAL DRAFT CITY OF PEARLAND,TEXAS CHANGES IN NET POSITION Last Nine Fiscal Years* Amounts in(000's) (Accrual Basis of Accounting) 2006 2007 2008 2009 Net(Expense)/Revenue Governmental activities $(30,375) $(43,794) $(46,005) $(30,856) Business-type activities 7,226 9,684 5,152 9,427 Total primary government net expense $(23,149) $(34,110) $(40,853) $(21,429) General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes $ 19,805 $ 21,845 $ 24,823 $ 29,492 Sales and use taxes 8,026 9,980 11,025 12,581 Franchise taxes 3,097 3,426 3,760 4,427 Investment earnings 1,863 2,991 4,943 4,572 Miscellaneous 828 740 1,539 2,911 Special item Transfers 359 1,230 1,060 1,330 Total governmental activities $ 33,978 $ 40,212 $ 47,150 $ 55,313 Business-type activities: Investment earnings $ 399 $ 758 $ 2,574 $ 1,669 Miscellaneous 12 Transfers (359) (1,230) (1,060) (1,330) Total business-type activities 40 (472) 1,514 351 Total primary government $ 34,018 $ 39,740 $ 48,664 $ 55,664 Change in Net Position Governmental activities $ 3,603 $ (3,582) $ 1,145 $ 24,457 Business-type activities 7,266 9,212 6,666 9,778 Total primary government $ 10,869 $ 5,630 $ 7,811 $ 34,235 (1)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. (2)Restated due to implementation of GASB 65 in fiscal year 2014. Fiscal years 2012 and 2013 have been restated for comparison purposes. 128 174 FINAL DRAFT Page 2of2 2010 2011 2012 (2) 2013 (1)(2) 2014 2015 $(46,441) $(66,491) $(73,935) $(37,123) $(78,843) $(78,027) 6,709 3,721 6,592 13,843 14,506 11,844 $(39,732) $(62,770) $(67,343) $(23,280) $(64,337) $(66,183) $ 31,140 $ 32,963 $ 33,451 $ 52,230 $ 54,433 $ 62,974 14,218 13,578 13,983 22,969 24,942 29,970 5,075 5,426 5,605 5,670 5,999 6,971 1,376 253 157 134 155 491 6,294 1,028 1,854 1,554 1,701 4,149 621 1,186 1,475 2,269 1,607 2,828 $ 58,724 $ 54,434 $ 56,525 $ 84,826 $ 88,837 $107,383 $ 363 $ 100 $ 116 $ 68 $ 95 $ 325 23 779 9 444 682 219 (621) (1,186) (1,475) (2,269) (1,607) (2,828) (235) (307) (1,350) (1,757) (830) (2,284) $ 58,489 $ 54,127 $ 55,175 $ 83,069 $ 88,007 _$105,099 $ 12,283 $(12,057) $(17,410) $ 47,703 $ 9,994 $ 29,356 6,474 3,414 5,242 12,086 13,676 9,560 $ 18,757 $ (8,643) $(12,168) $ 59,789 $ 23,670 $ 38,916 129 175 FINAL DRAFT CITY OF PEARLAND,TEXAS FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years Amounts in(000's) (Modified Accrual Basis of Accounting) 2006 2007 2008 2009 General fund Non-spendable $ 84 $ 123 $ 181 $ 119 Restricted Assigned 552 58.1 4,698 699 Unassigned 9,961 12,932 8,647 11,401 Total General Fund $ 10,597 $ 13,636 $ 13,526 $ 12,219 All other governmental funds Non-spendable $ $ $ $ Restricted Debt service 4,658 6,552 6,835 7,246 Capital improvements 52,957 96,542 110,715 62,46.7 Public safety 453 591 583 699 Economic Development Community development programs Tourism 864 1,051 1,247 1,344 Parks and recreation 1,393 1,652 1,183 1,094 Capital projects - other 1,064 1,138 1,346 1,146 Other 247 114 629 85 Total other Governmental Funds $ 61,636 $ 107,640 $ 122,538 $ 74,081 (1)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. 130 176 FINAL DRAFT 2010 2011 2012 2013 (1) 2014 2015 $ 146 $ 130 $ 182 $ 158 $ 202 $ 293 126 117 160 167 1,554 1,394 1,406 12,599 14,108 17,222 16,911 17,859 19,655 $ 12,862 $ 14,524 $ 17,571 $ 18,623 $ 19,455 $ 21,354 $ $ $ $ 183 $ 209 $ 173 6,705 5,160 4,992 5,192 5,951 5,835 30,893 23,461 13,776 14,536 17,519 22,484. 612 541 702 715 390 394 20,777 23,814 24,117 1,394 1,452 1,821 2,267 2,994 3,685 1,214 1,143 968 985 168 105 962 810 797 866 79 87 215 638 918 1,149 $ 41,859 $ 32,654 $ 23,271 $ 46,159 $ 51,963 $ 57,940 131 177 FINAL DRAFT AFT CITY OF PEARLAND,TEXAS CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years Amounts in(000's) (Modified Accrual Basis of Accounting) r 2006 2007 2008 2009 Revenues Property taxes $ 22,150 $ 24,525 $ 29,200 ..$ . 31,349 Sales and use taxes 9,980 11,025 12,581 14,218 Franchise fees 3,426 3,760 4,427 5,075 Licenses and permits 4,067 4,030 2,992 2,079 Fines and forfeitures 2,038 2,048 2,086 2,325 Charges for services 8,734 5,250 7,512 8,885 Investment earnings 2,991 4,938 4,568 1,375. Intergovernmental 7,852 14,463 3,731 7,589 Other. 1,744 1,815 5,638 8,980 Total Revenues 62,982 71,854 72,735 81,875 Expenditures General government 6,381 6,293 7,388 8,412 Public safety 12,870 14,598 19,604 22,310 Public works: 9,728. 6,278 .7,536 12,051 Community services 3,787 3,102 3,426 3,386 Parks and recreation 3,358 4,908 6,605 5,789 Economic development Debt service: Principal 3,429 3,228 3,160 5,482. Interest and other charges 6,771 10,197 12,382 12,080 Capital outlay 36,706 28,530 27,777 68,615 Intergovernmental 1,684 2,169 3,434 3,250 Total Expenditures 84,714 79,303 91,312 141,375 Excess of revenues over(under)expenditures (21,732) (7,449) (18,577) (59,500) Other Financing Sources(Uses) Transfers in 5,852 4,596 4,912 3,246 Transfers out (4,698) (3,536) (3,582) (2,625) Debt issued. 41,959 94,559 31,835 8,520 Payment to Escrow Agent Capital leases 1,568 649 Other (8,005) (40,695) 200 (54) Total other Financing Sources(uses) 35,108 56,492 33,365 9,736 Net change in fund balances $ 13,376 -$ 49,043 $ 14,788 $ (49,764) Debt service as a percentage of noncapital expenditures 21.2% 26.4% 24.5% 24.1% 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. 132 178 69 69 NJ W IV i-. G1 w Cr, N -3 U., O N.) N IV 00 NJ U., W VA U.) .-. W Q, Cr, W V 1 W Oo O 0.) 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'J tj FINAL DRAFT CITY OF PEARLAND,TEXAS SPENDING AND GROWTH ANALYSIS Last Ten Fiscal Years Amounts in(000's) (Modified Accrual Basis of Accounting) Amounts in(000's) Expenditures 2006 2007 2008 2009 General Gov't $ 6,430 $ 6,363 $ 7,406 $ 8,423 Public Safety 12,870 14,598 19,604 22,310 Public Works 9,728 6,278 7,536 12,051 Coummunity Servies 3,787 3,102 3,426 3,386 Parks&:recreation 3,358 4,908 6,605 5,789 Economic Development 10,670 14,391 16,899 18,730 Debt Service-principal 5,309 5,183 4,265 7,517 Debt service-interest 9,141 13,483 15,688 15,704 Capital outlay 36,706 28,530 27,777 75,490 Intergovernmental 8,896 14,699 3,434 7,630 Total $ 106,895 $ 111,535 $ 112,640 $ 177,030 Distribution.of Spending General Gov't 6.0% 5.7% 6.6% 4.8% Public Safety 12.0% 13.1% 17.4% 12.6% Public Works 9.1% 5.6% 6.7% 6.8% Coummunity Servies 3.5% 2.8% 3.0% 1.9% Parks&recreation 3.1% 4.4% 5.9% 3.3% Economic Development 10.0% 12.9% 15.0% 10.6% Debt Service-principal 5.0% 4.6% 3.8% 4.2% Debt service-interest 8.6% 12.1% 13.9% 8.9% Capital outlay 34.3% 25.6% 24.7% 42.6% Intergovernmental 8.3% 13.2% 3.0% 4.3% Total 100.0% 100.0% 100.0% 100.0% Per Capita Expenditures Adjusted for CPI POPULATION 79,322 84,500 89,000 92,600 PER CAPITA $ 1,348 $ 1,320 $ 1,266 $ 1,912 CPI INDEX(NATIONAL) 201.59 207.34 215.30 214.54 PER CAPITA ADJ TO 2015 $ 1,582 $ 1,507 $ 1,391 $ 2,109 PER CAPITA ADJ TO 2006 $ 1,348 $ 1,283 $ 1,185 $ 1,796 134 180 FINAL DRAFT Average Compounded 2010 2011 2012 2013 2014 2015 %CHG Growth Rate $ 19,561 $ 10,877 $ 7,797 $ 7,958 $ 8,027 $. 10,470 62.8% 5.57% 23,784 23,926 25,372 26,204 29,171 32,229 150.4% 10.74% 7,108 6,505 5,533 7,812 8,121 10,298 5.9% 0.63% 3,839 3,376 4,246 3,523 3,960 3,408 -10.0% -1.16% 6,305 7,539 7,499 7,244 7,816 5,823 73.4% 6.31% 15,426 17,391 20,397 17,414 25,248 25,625 140.2% 10.22% 8,525 10,847 12,893 15,637 15,815 23,790 348.1% 18.13% 17,096 17,154 15,534 15,859 16,373 16,595 81.5% 6.85% 64,563 25,768 9,201 22,101 15,536 24,471 -33.3% -4.41% 4,234 . 4,127 4,158 4,058 4,307 4,792 -46.1% -6.64% $ 170,441 $ 127,510 $ 112,630 $ 127,810 $ 134,374 $ 157,501. 47.3% 4.40% 11.5% 8.5% 6.9% 6.2% 6.0% 6.6% 14.0% 18.8% 22.5% 20.5% 21.7% 20.5% 4.2% 5.1% 4.9% 6.1% 6.0% 6.5% 2.3% 2.6% 3.8% 2.8% 2.9% 2.2% 3.7% 5.9% 6.7% 5.7% 5.8% 3.7% 9.1% 13.6% 18.1% 13.6% 18.8% 16.3% 5.0% 8.5% 11.4% 12.2% 11.8% 15.1% 10.0% 13.5% 13.8% 12.4% 12.2% 10.5% 37.9% 20.2% 8.2% 17.3% 11.6% 15.5% 2.5% 3.2% 3.7% 3.2% 3.2% 3.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Average Compounded Growth Rate 94,100 97,200 99,800 104,100 106,900 112,300 3.94% $ 1,811 $ 1,312 $ 1,129 $ 1,228 $ 1,257 $ 1,403 0.44% 218.06 224.94 229.59 232.96 234.75 236.70 1.80% $ 1,966 $ 1,380 $ 1,163 $ 1,247 $ 1,267 $ 1,403 -1.33% $ 1,675 $ 1,176 $ 991 $ 1,062 $ 1,079 $ 1,194 -1.33% 135 181 FINAL DRAFT CITY OF PEARLAND, TEXAS ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Real Property Fiscal Tax Personal Less Tax Exempt Year Year Residential Commercial Property Real Property 2006 2005 $ 2,689,041,440 $ 1,072,417,312 $ 309,552,190 $ 270,175,010 2007 (1) 2006 3,398,952,580 1,234,444,431 378,160,330. 307,538,080 2008 2007 4,136,844,130 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 (2) 2012 5,042,965,503 1,954,587,058 612,564,952 617,274,555 2014 2013 5,530,854,515 1,966,675,342 614,461,500 627,308,465 2015 2014 6,000,588,340 2,035,398,664 670,832,220. 673,524,095: Notes: Assessed valuation for fiscal year 2007 does not include Brazoria County Mud#1 valuation of (1) $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 (2) $241,712,166 that was annexed into the City on December 31, 2012. Assessed value based on adjusted tax roll at year end. 136 182 FINAL DRAFT Assessed Value Less Other Total as a Percent of Exemptions and Total Taxable Direct Tax Estimated Actual Actual Taxable Abatements Assessed Value 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 6,331,723,029 100% 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% 487,709,374 6,996,973,518 0.7051 6,996,973,518 100% 452,738,140 7,580,556,989 0.7121 7,580,556,989 100% 137 183 FINAL DRAFT (This page intentionally left blank.) 138 184 FINAL DRAFT CITY OF PEARLAND,TEXAS PER CAPITA,HOUSEHOLD,SQUARE MILE FOR BENCHMARK CITIES OF TAXABLE PROPERTY Fiscal Year 2014* Total Taxable Value per Capita Cary,NC I I $157,118 Fris.co;TX �..,f .. —1 $146,514 Sugar Land,TX I $127,067 i Rancho Cucamonga,CA / I;$116;361 j Plano,TX zz 1 $96,110 i McKinney,.TX 1 $86,040 G i Pearland,TX ;$74,587 I _ League City,TX I $64,956 C j Franklin,TN t .oi rifi $49,894' Olathe,KS ® $11,206, , $0 $40;000 $80,000 $120,000 $160,000 Total Taxable Value per Household Frisco,TX P•iiii.. ..p,. 4 $439,576 i Cary,NC i $433,665. Sugar Land,TX I - I!$392,732 Rancho Cucamonga,CA I $358,464 McKinney,TX '. J $2,65,381 Plano,TX ( I $256,763 Pearland,TX $218,182 League City,TX ia1 $179,758 • Franklin,TN )—,,m+1 $127,281 , Olathe,KS ® $31,872 $0 $100,000 $200,000 $300,000 $400,000 $500,000 Taxable Value per Square Mile Rancho Cucamonga,CA , I $487,582,736. Cary,NC i 1 I $399,386,415 i Piano,TX i 1 $355,228,600 Sugar Land,TX I m i 1 $314,821,735 Frisco,TX ii.r. 41 $257,811,478 McKinney,TX !i ., _ / 1 $186,066,086 Pearland,TX $144,715,149 League City,TX 1 $101,690,909 Franklin,TN 1• 11gAi1 $78,482,619 Olathe,KS I J $23;561,100 $0 $200,000,000 $400,000,000 $600,000,000 Notes: Data from Community Development Strategies Survey *Information for FY2015 was unavailable 139 185 FINAL DRAFT CITY OF PEARLAND,TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years (rate per$l00 of assessed value) City Direct Rates Overlapping Rates a Pearland Pasadena Alvin Independent Independent Independent Alvin Fort Port of Fiscal M&0 I&S Total School School School Comm Brazoria Bend Harris Houston Year Rate Rate Direct District District District College County County County Authority 2006 $ 0.345 $ 0.329 $ 0.674 $ 1.792 $ 0.238 $ 0.408 $ 0.517 $ 0.400 $ 0.015 2007 0.299 0.354 0.653 1.662 $ 1.350 $ 1.546 0.220 0.382 0.517 0.402 0.013 2008 0.250 0.402 0.653 1.427 1.350 1.328 0.210 0.311 0.517 0.392 0.014 2009 0.220 0.433 0.653 1.419 1.350 1.328 0.200 0.330 0.500 0.391 0.018 2010 0.220 0.433 0.653 1.419 1.350 1.304 0.200 0.366 0.500 0.392 0.016 2011 0.215 0.450 0.665 1.419 1.350 1.304 0.200 0.403 0.500 0.388 0.021 2012 0.215 0.470 0.685 1.419 1.350 1.344 0.199 0.413 0.500 0.391 0.019 2013 0.215 0.490 0.705 1.419 1.350 1.329 0.200 0.426 0.500 0.400 0.020 2014 0.215 0.490 0.705 1.416 1.350 1.329 0.194 0.492 0.500 0.415 0.017 2015 0.222 0.490 0.712 1.416 1.350 1.417 0.204 0.499 0.495 0.417 0.015 Source:Brazoria County,Harris County,and Fort Bend County Appraisal Districts. a Overlapping rates are those of local and county governments that apply to property owners within the City of Pearland.Not all overlapping rates apply to all Pearland property ownerss;for example,although the county property tax rates apply to all. 140 186 L8 l• TPI OZO'I 058'0 OZ8'0 069'0 085'0 015'0 OLVO OZ5'0 058'0 900'0 OLl'0 L2O'0 OZO'I 058'0 OZ8'0 069'0 009'0 055'0 015'0 17175'0 058'0 900'0 OLIO 8Z0'0 OZO'l 058'0 0Z8'0 069'0 0I9'0 085'0 0£5'0 L175'0 058'0 L00'0 Z8I'0 8Z0'0 0Z0'I 058'0 0Z8'0 069'0 0£9'0 009'0 5175'0 05'0 058'0 L00'0 Z61'0 8Z0'0 OZO'I 058'0 OZ8'0 OIL'0 OLL'O OZ9'0 055'0 L175'0 058'0 L00'0 Z61'0 6Z0'0 OZO'l 058'0 0Z8'0 OIL'° 008'0 0£9'0 095'0 009'0 058'0 090'0 Z61'0 6Z0'0 068'0 058'0 0Z8'0 OIL'° OZ8'0 099'0 OL5'0 0£9'0 058'0 900'0 Z61'0 I£0'0 058'0 $ 058'0 0Z8'0 01L"0 058'0 089'0 065'0 0£L'0 058.0 900'0 Z61'0 1£0'0 058'0 OZ8'0 OLL'O 058'0 08L'0 019'0 NCO 058'0 900'0 Z61'0• Z£0'0 058'0 $ OZ8'0 $ 058'0 $ 058'0 $ 008'0$ 0179'0$ 0SL'0$ 058'0 $ 900'0 $ Z61'0$ ££0'0 $ S£'oN 6£'oN 8Z'°N 9Z'°N £Z'°N 6I'°N 8I'oN LI'oN I•oM uopu3npg PPSU loaluoD QI1NI am QUINT QIINI QRIAI QIMNI QIIIN QfM 10 Idaa Ielldsog pooh puag 1.4 Aunop Sluno3 ,Cluno3 /euozeig SWeg swell swag IAVIIU rNI3 FINAL DRAFT CITY OF PEARLAND,TEXAS PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Fiscal Collected within the Year Taxes Levied Fiscal Year of the Levy Collections Total Collections to Date Ended for the Percentage in Subsequent Percentage Sept 30, Fiscal Year Amount of Levy Years Amount of Levy 2006 $ 24,284,597 $ 23,690,031 97.55% $ 565,457 $ 24,255,488 99.9% 2007 28,819,229 28,235,276 97.97% 557,650 28,792,926 99.9% 2008 35,035,569 34,461,652 98.36% 565,917 35,027,569 100.0% 2009 38,368,354 37,820,603 98.57% 521,009 38,341,612 99.9% 2010 41,081,407 40,590,543 98.81% 435,582 41,026,124 99.9% 2011 41,968,046 41,594,389 99.11% 300,512 41,894,902 99.8% 2012 43,441,792 43,110,373 99.24% 279,535 43,389,908 99.9% 2013 45,850,625 45,509,522 99.26% 253,771 45,763,293 99.8% 2014 49,096,473 48,802,720 99.40% 148,090 48,950,810 99.7% 2015 53,463,919 53,175,174 99.46% 53,175,174 . 99.5% Source:Brazoria County Tax Office Taxes levied based on adjusted tax roll. 142 188 FINAL DRAFT CITY OF PEAR LAND,.AND,TEXAS PRINCIPAL PROPERTY TAX PAYERS Current Year and Nine Years Ago - 2015 2006 Percentage Percentage of Total City of Total Cit. Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed: Taxpayer Value Rank Value Value Rank Value Weatherford U.S.,Inc. $ 72,301,820 1 0.95% $ 33,721,540 2 0.94%. . Pearland Town Center LP 69,086,460 2 0.91% Amreit SPF Shadow Creek,LP 48,187,760 3 0.64% CenterpointEnergy,Inc. 32,581,900 4 0.43% 21,748,680 3 0.61% Shadow Creek Parkway 27,100,030 5 0.36% Discovery Shadow Creek 26,780,230 6 0.35% Forum US,Inc. 26,062,030 7 0.34% Shadow Kirby.LTD Partnership 25,000,000 8 0.33% Pearland Lifestyle Center LP 24,753,841 9 0.33% Pearland Multi Family Dist 24,205,950 10 0.32% Club Sun 83,037,360 1 2.32% Walmart Stores,Inc. 18,652,320 4 0.52% Pearland Investments LTD 18,529,310 5 0.52% MHI Partnership 12,008,030 6 0.34% Perry Homes- - 17,768,220 7 -0.50% Shadow Creek Ranch Dev Co 17,743,250 8 0.50%. Shadow Creek Ranch Development 12,754,930. 9 0.36% Lowe's Home Centers,Inc. 12,683,070 10 0.35% Total $ 376,060,021 4.96% $ 248,646,710 6.95% Source: Brazoria County Appraisal District 143 189 FINAL DRAFT CITY OF PEARLAND,TEXAS TAXABLE SALES BY CATEGORY Last Ten Calendar Years (in thousands of dollars) Calendar Year 2006 2007 2008 2009 Retail Trade $ 464,850 $ 536,352 $ 667,470 $ 699,338 Accommodations &Food Services 95,154 107,850 127,994 146,598 Real Estate/Rental/Leasing 33,329 44,560 52,276 38,924 Manufacturing 46,241 50,134 47,447 31,243 Wholesale Trade 30,592 28,782 32,999 25,954 Other Services(Except Public Admin) 20,390 20,794 23,764 23,670 Information 8,553 10,086 12,567 14,413 Construction 18,348 16,232 17,496 14,372 Arts,Entertainment&Recreation 5,208 8,789 9,751 9,909 Mining,Quarrying,Oil and Gas 11,186 9,280 10,520 3,355 Admin/Support/Waste Mgmt/Remediation 8,060 9,209 12,656 11,670 Professional/Scientific/Technical 3,893 4,103 5,218_ 5,923 Health Care/Social Assistance 56 63 37 52 Finance,Insurance 1,722 1,038 1,469 1,811 Agriculture,Forestry,Fishing 453 473 675 566 Transportation/Warehousing 155 169 138 161 Educational Services 110 110 212 144 Utilities 7 3 6 6 Management of Companies/Enterprises 1,161 2,594 Other 2 Total $ 748,310 $ 849,188 $1,025,289 $1,028,107 City direct sales tax rate b • 1.00% 1.00% 1.00% 1.00% Source: State Comptroller's Office. a 2015 taxable sales thru 2nd quarter of 2015. 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. 144 190 FINAL DRAFT Calendar Year 2010 2011 2012 2013 2014 2015a $ 673,714 $ 697,419 $ 764,460 $ 829,666 $ 871,959 $ 444,847 155,345 172,126 198,439 216,155 240,693 134,773 46,811 48,059 61,690 56,079 61,392 25,936 39,582 49,474 48,213 34,598 51,194 20,679 30,730 33,163 33,566 34,358 42,762 20,732 25,114 29,557 30,669 34,175 38,541 20,230 15,672 16,896 19,194 24,387 29,602 17,399 15,537 17,558 23,181 24,370 26,465 16,164 11,315 : 11,511 12,710 13,570 14,692 7,915 3,246 3,316 3,726 12,893 14,520 3,578 10;650 11;004 12,696 13,778 12,989 6,376 6,277 7,072 9,037 11,317 10,519 4,629 184 252 351 1,057 3,133 3,944 1,404 1,261 1,347 1,246 1,483 1,020 180 306 468 772 728 651. 282 418 425 318 406 137 207 314 429 374 350 144 3 187 3 7 7 - $1,036,253 $1,099,893 $1,220,603 $ 1,309,121 $ 1,421,435 $ 729,154 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 145 191 FINAL DRAFT . CITY OF PEARLAND,TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years (dollars in thousands,except per capita) Governmental Activities Business-Type Activities General Certificates Capital Permanent Capital Fiscal .Obligation of Obligation Revenue Lease Revenue Improvement Lease Year Bonds Bonds Bonds Obligations Bonds Bonds Obligations .. 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. . 2012 224,170 65,425 3,629 3,407 109,305 15,130 :342 2013 236,199 64,690 75,125 3,681 105,690 14,020 253 2014 246,791 56,505 80,186 4,344 102,517 12,865 169 2015 261,998 50,030 77,012 3,629 108,099 11,305 82 Note,: Details regarding the city's outstanding debt can be found in the notes to the financial statements: *Due to implementation of GASB 61 in fiscal year 2013,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. 146 192 FINAL DRAFT Excluding Total Percentage Total Component Primary of Personal Per Units Government Income Capita Per Capita $ 227,059 11.1% $ 2,862 325,663 12.4% 3,854 367,192 12.4% 4,126 381,579 13.0% 4,121 416,727 13.5% 4,429 425,708 14.3% 4,380 421,408 13.1% 4,223 499,658 14.1% 4,800 4,019 503,377 13.2% 4,709 3,859 512,155 12.6% 4,561 3,875 147 193 FINAL DRAFT CITY OF PEARLAND,TEXAS RATIO 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 Per Year Year Bonds Funds Debt Assessed Value Income a Capita a 2006 2005 $ 186,580 $ 4,658 $ 181,922 7.8% 8.9% $ 2,293 2007 2006 244,945 6,552 238,393 6.7% 9.1% 2,821 2008 2007 273,105 6,552 266,553 6.0% 9.0% 2,995 2009 2008 275,430 7,247 268,183 5.0% 9.1% 2,896 2010 2009 296,705 6,706 289,999 4.9% 9.4% 3,082 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 314,909 4,643 310,266 4.9% 8.7% 2,980 2014 2013 316,161 4,536 311,625 4.8% 8.2% 2,915 2015 2014 323,333 5,034 318,299 4.2% 7.8% 2,834 Note: Details regarding the city's outstanding debt can be found in the notes to the financial a Population and personal income data can be found in demographic and economic statistics table. 148 194 FINAL DRAFT CITY OF PEARLAND,TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT September 30,2015 Debt as of September 30, Overlapping Taxing Jurisdiction 2015 Percent Amount Alvin Community College District $13,350,000 27.15% $3,624,525 Alvin ISD 484,365,000 30.34% 146,956,341 • Brazoria County 84,880,000 25.15% 21,347,320 Brazoria County MUD No.6 20,195,000 0.27% 54,527 Brazoria County MUD No. 17 25,855,000 .100.00% 25,855,000 Brazoria County MUD No. 18 26,390,000 100.00% 26,390,000 Brazoria County MUD No. 19 32,455,000 100.00% 32,455,000 Brazoria County MUD No.23 15,245,000 100.00% 15,245,000 Brazoria County MUD No.26 37,955,000 100.00% 37,955,000 Brazoria County MUD No.28 22,405,000 100.00% 22,405,000 Brazoria County MUD No.34 32,055,000 100.00% 32,055,000 Brazoria County MUD No.35 9,715,000 100.00% 9,715,000 Brazoria-Fort Bend County MUD No. 1 61,665,000 60.32% 37,196,328 Fort Bend County 457,525,000 0.52% 2,379,130 Harris County(a) 2,678,076,350 0.15% 4,017,115 Hams County Dept.of Education 7,210,000 0.15% 10,815 Harris County Flood Control District 87,400,000 0.15% 131,100 Pasadena ISD 729,730,000 0.15% 1,094,595 Pearland ISD 309,349,059 75.74% 234,300,977 Port of Houston Authority 690,219,397 0.15% 1,035,329 Total estimated Overlapping 654,223,101 The City $392,668,781 100.00% 392,668,781 Total Direct and Estimated Overlapping Debt $ 1,046,891,882 Population 112,300 Per Capita Debt-Direct and Overlapping Debt $ 9,322 Source: Individual jurisdictions and/or Texas Municipal Reports. *Debt amounts are as of September 30,2015. (a) Harris County Toll Road Certificates are considered self-supporting and are not included in the amount shown for Harris County. 149 195 FINAL DRAFT CITY OF PEARLAND,TEXAS PLEDGED REVENUE COVERAGE Amounts in(000's) Last Ten Fiscal Years Water&Sewer Revenue Bonds Net Less: Revenue Debt Service Fiscal Gross Operating Available for Year Revenues Expenses Debt Service Principal Interest Total Coverage 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 2014 29,341 17,707 11,633 3,765 4,584 8,349 1.39 2015 30,744 18,767 11,977 3,920 4,622 8,542 1.40 Note:Details regarding the City's outstanding debt can be found in the notes to the fmancial 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. 150 196 FINAL DRAFT CITY OF PEARLAND,TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Education Per Capita leNel in School Fiscal Personal Income Personal Median Years of Enrollment Unemployment Year Population(A) (in$000's) Income(B) Age(B) Schooling (C) Rate(D) 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% 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% 2014 106,900 3,822,958 35,762 34.6 14.2 23,075 4.3% 2015 112,300 4,063,014 36,180 34.6 14.2 23,241 3.3% (A)Estimated (B) Pearland Economic Development Corporation (C)Texas Education Agency (D) Bureau of Labor Statistics *Information not presented is not avaialble. 151 197 FINAL DRAFT (This page intentionally left blank.) 152 198 FINAL DRAFT CITY OF PEARLAND,TEXAS PRINCIPAL EMPLOYERS Current Year and Nine Years Ago 2015 2006 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Pearland ISD 2,472 1 4.39% 1,978 1 7.89% Kelsey.Seybold 868 2 1.54% City of Pearland 696 3 1.24% 456 3 1.82% Alvin ISD 352 4 0.63% Kemlon 345 5 0.61% 225 4 0.90% Merit Meical 303 6 0.54% Davis-Lynch(Forum Energy Tech.) 300 7 0.53% 125 9 0.50% Pearland Medical Center 220 8 0.39% Dover Energy 205 9 0.36% TurboCare 175 10 0.31% 168 6 0.67% Wal-Mart 800 2 3.19% Weatherford 191 5 0.76% Super Target 150 7 0.60% Lowes 132 8 0.53% Packaging Service Co. 115 10 0.46% Total 5,936 10.54% 4,340 17.31% Sources: Pearland Economic Development Corp. - 153 199 FINAL DRAFT CITY OF PEARLAND,TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BYFUNCTION/PROGRAM Last Ten Fiscal Years 2006 2007 2008 2009 2010 2011 2012 Function/Program Governmental Activities: General Government 49 51 55 55 57 57 56 Public Safety 184 205 242 253 264 276 286 Public Works 44 47 45 47 47 45 31 Community Services 47 50 51 52 47 45 56 Parks and Recreation 52 59 68 72 99 105 109 Business Type Activities: Water&Sewer 76 78 77 82 82 87 90 Component Unit: Economic Development 4 4 5 5 6 5 5 Total 456 494 543 564 601 619 633 Source: City Budget 154 200 FINAL DRAFT 2013 2014 2015 44 45 52 295 313 339 57 60 67 51 53 40 101 99 88 99 101 105 5 9 5 652 680 696 155 201 FINAL DRAFT CITY OF PEARLAND,TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Fiscal Year 2006 2007 2008 2009 2010 2011 Function/Program GENERAL GOVERNMENT Finance Number of purchase orders 3,085 3,475 3,552 3,264 2,913. 2,679 Number of budget transfers 226 194 398 406 470 427 Number of invoices paid 22,438 22,279 23,434 23,259 21,632 21,000 Average number of employees paid per month 984 1,026 1,185 1,230 1,220 1,438 Human Resources Number of hires:. 95 97 109 90 91 131 Number of applications received 2,808 3,074 2,495 3,137 3,880 3,299 Legal Number of resolutions and ordinances prepared 295 269 293 266 229 205 Information Technology Average monthly service requests 370 486 616 649 734 815 Number of PC's supported 220 354 386 394 429 439 PUBLIC SAFETY Police Number of police calls resulting in dispatch 30,496 32,747 34,865 37,440 35,676 39,815 Total police arrests made 4,809 5,053 4,424 5,188 5,986 6,218 Dispatched calls per patrol officer 555 544 592 576 513 606 Commercial vehicles equipment violations 1,069 980 860 711 672 852 UCR Part I cases assigned(1) 366 371 349 629 2,003 3,304 Fire Total number of arson incidents 11 21 9 8 5 2 Fires investigated 120 96 28_ 33 22 25 Total annual inspections 1,307 2,333 2,677 2,374 1,752 1,380 Total calls for service 5,478 6,574 8,244 8,843 8,888 9,676 Patients treated 4,048 4,983 5,529 5,804 5,619 6,121 PUBLIC WORKS Fleet Maintenance Fleet maintenance jobs completed 4,778 4,686 4,153 3,063 2,394 3,410 Preventative maintenance performed 1,815 1,889 1,756 1,998 1,741 747 Other Public Works Fuel issued(gallons) 303,930 318,587 343,865 313,596 354,422 361,464 Street sweeping(miles) 790 583 2,324 2,561 2,239 1,299 Street signs maintained/replaced 1,725 1,404 1,288 2,864 2,049 1,588 Total work orders completed 21,181 19,961 18,723 20,213 18,632 16,834 156 202 FINAL DRAFT page 1 of 2 Fiscal Year 2012 2013 2014 2015 2,415 2,671 2,640 2,377 429 465 548 489 20,768 23,512 21,486 22,212 1,481 1,527 1,548. 1,523 112 94 98 131 4,936 7,642 8,507. 9,132 220 254 243 271 832 843 838 854 448: 454 575 649 42,3.18 47,200 45,500 49,750 6,525- 7,642 7,081 6,115 625 659 550 679 900 810 598 614 1,836 2,094 1,900 2,417 2 6 7 1 18 16. 25 20 1,537 1,958 1,644 1,640 10,494 10,789 15;048 17,407 6,537 6,537 6,936 7,180 3,581 3,817 3,860 3,887 682 611 610 437 377,754 350,186 353,890 332,745 1,079 1,155 871 648 1,090 884 993 1,477 17,803 18,346 21,212 25,873 157 203 FINAL DRAFT CITY OF PEARLAND,TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM Last Nine Fiscal Years Fiscal Year 2006 2007 2008 2009 2010 2011 Function/Program(continued) PARKS AND RECREATION All Parks and recreation ROW maintained-acres 478 385 210 228 245 255 Trees maintained 3,450 4,280 5,000 5,004 5;800 6,327 Acres of city property mowed 167 439 470 851 1,301 1,331 Total number of parkwork orders received 227 361 316 275 252 249 Parkland-acres(2) 175 175 180 138 139 139 Total number of special events held 20 25 25 25 24 21 Total number of-tournaments held 19 25 9 6 9 11 Number of recreation classes offered 1,189 1,222 1,083 855 307 459 Average monthly attendance(all locations)(4) 6,723 7,988 7,607 3,623 11,823 16,116 COMMUNITY SERVICES Animal Control Number of animals at shelter 2,898 3,068 2,947 2,868 2,532 2,685 Total number of calls for service 4,600 6,099 4,296 3,529 4,206 4,346 Inspection Services Total building inspections 36,724 31,004 34,773 24,834 21,753 19,244 Total code violation cases 2,739 3,962 3,629 4,274 3,433 2,860 Total permits issued 14,889 13,769 9,878 9,249 7,874 7,869- Number of plans reviewed 2,682 3,055 1,309 925 969 917 Municipal Court Number of trials 1,952 2,305 1,616 1,391 402 688 Number of charges 22,185 20,481 19,666 24,400 24,657 26,369 Warrants cleared N/A 3,596 6,402 7,374 8,692 8,204 WATER&SEWER Distribution and Collection Fire hydrant maintenance and inspections(5) 99* 537 740 451 402 395 Backed up sewer repairs 251 330 393 270 325 310 Water mains repaired 129 108 160 168 82 410 Water Production Water produced-wells (in millions of gallons) 2,044 1,597 2,128 2,574 3,065 3,869 Surface Water Purchased (in millions of gallons) 967 1,121 1,147 1,146 634 968 Billing&Collections Annual meter reads 234,875 285,930 325,471 340,281 344,618 364,424 Number of bills 248,848 293,833 318,160 325,201 336,668 350,871 Wastewater Treatment Wastewater treated (in millions of gallons) 1,668 2,305 2,096 2,106 2,361 1,943 Sources:Various city departments. Information not presented was not available at time of publication. 'UCR method of reporting was terminated after 2009. Effective 2010,Incident Based Reporting (IBR)is used. 2Prior to 2009,Parkland acres included medians and Wastewater Treatment Plants. After 2009, reported under total acres of city property maintained. 3Prior to 2010,individual music classes were included in the total recreation classes held. Program was cancelled. 4In FY 2010,a new facility,Recreation Center/Natatorium,opened. 5In Water&Sewer,Distribution and Collection fire hydrant maintenance and inspections is contracted out.During FY06,the contractor's services were disrupted by a storm. 158 204 FINAL DRAFT • page 2of2 Fiscal Year . 2012 2013 2014 2015 251 251 251 550 6,157 6,312 6,313 6,430 1,380. 1,035 1,035 1,116 230 140 180 147 138 138 138 138 • 22 22 20 19 2 1 3 - 486. 281 272 306 18,378: 18,980 • 21,366 14,371 • 2,220: 2,375 2,176 2,126 4,326 5,236 6,114 5,509 22,416 26,274•: 28,434 36,497 1,952 2,244 2,140 4,596 8,696. 10,630 13,972 18,186 1,050 939 1,185 1,584 1,116 885 839 856 30,187 27,439 23,182 19,223 • 10,080- 10,328 9,050 7,476 887 1,399 837 612 275 286 334 305 283 380 111 189 2,916 2,859 2,470 1,933 1,321 1,816 2,133 2,276 370,755 403,220 414,499 428,265 359,710. 387,997 388,338 400,662 2,364 2,530 2,493 3,067 • 159 205 FINAL DRAFT CITY OF PEARLAND,TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Function/Program PUBLIC SAFETY Police Police stations 1 1 1 1 1 1 1 1 1 1 Police vehicles 112 117 126 130 138 142 155 157 161 143 Fire Fire stations 4 4 4 4 4 5 6 6 6 6 Fire vehicles 16 16 17 17 17 22 23 26 26 26 EMS EMS Ambulances 5 5 6 8 8 8 8 9 9 7 PUBLIC WORKS Other public works Streets(miles)* 578 758 773 807 807 806 806 839 844 842 Vehicle Inventory** 342 405 360 333 355 363 385 374 375 372 Traffic signals 48 57 67 71 80 62 74 81 81 73 PARKS AND RECREATION Parks and recreation Developed acreage*** 175 175 180 138 139 139 138 138 138 168 Pools 1 1 1 1 3 3 3 3 3 3 Outdoor basketball courts 10 10 10 10 10 10 6 6 6 6 Soccer fields 12 12 12 12 12 12 12 12 12 12 Activity buildings 3 3 3 3 4 4 3 3 3 3 Baseball/SoftballFields 4 4 4 4 4 4 4 4 4 4 WATER AND SEWER Water Production Water wells 9 10 11 11 11 11 11 10 10 . 10 Pumping stations 2 2 2 2 2 2 3 3 3 3 .Ground storage tanks 15 15 15 15 15 15 15 15 . 15 15 Elevated towers 5 5 5 5 6 6 6 6 6 6 Wastewater Treatment Plants 4 5 5 5 5 5 5 5 5 5 Lift Stations 74 78 76 78 78 80 80 75 76 73 Distribution and Collection Water mains(miles) 361 395 410 420 433 443 448 469 488 509 Sanitary sewers(miles) 321 353 360 370 378 380 382 400 415 433 Sources:Various city departments. Note:No capital asset indicators are available for the general government and community services functions. Information not presented was not available at time of publication. *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 FY 2011,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 offset with those sold: those sold.Vehicle inventory includes public safety revenues. ***Prior to 2009,Parkland acres included medians and Wastewater Treatment Plants. • 160 206 FINAL DRAFT REPORT OF INDEPENDENT AUDITORS To the Honorable Mayor and Members of the City Council City of Pearland,Texas 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 30,2015,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 fmancial 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 circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluating the overall presentation of the financial statements. 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, as of September 30, 2015, 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. 1 207 FINAL DRAFT To the Honorable Mayor and Members of the City Council Emphasis of Matter As discussed in Note 1 and Note 16 to the financial statements, the City adopted the provisions of GASB Statement No. 68,Accounting.and Financial Reporting for Pensions, an Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date-An Amendment of GASB Statement No. 68 for the year ending September 30, 2015. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 7 through 17, budgetary comparison information on pages 74 through 75, and pension system supplementary information and other post-employment benefit supplementary information on page 76 through 78 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board,who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational,economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which 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. Other 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 introductory section, combining and individual fund statements and schedules, other supplementary information, budgetary comparison schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and budgetary comparison schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such 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 combining and individual fund statements and schedules, other supplementary information, and budgetary comparison schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have 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 them. 2 208 FINAL DRAFT To the Honorable Mayor and Members of the City Council Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 14, 2016, 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 fmancial reporting and compliance and the results of that testing, and not to provide an opinion on 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 City's internal control over financial reporting and compliance. Houston,Texas March 14,2016 3 209 FINAL DRAFT CITY OF PEARLAND,TEXAS FEDERAL.SINGLE AUDIT REPORT For the Year Ended September 30,2015 210 FINAL DRAFT 211 FINAL DRAFT:. CITY OF PEARLAND, TEXAS TABLE OF CONTENTS Page Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements.Performed in Accordance With Government Auditing Standards 1 Independent Auditors' Report on Compliance for each Major Program;Report on Internal Control over Compliance; and Report on Schedule of Expenditures:of Federal Awards OMB Circular A-133 3 Schedule of Findings and Questioned Costs 6 Schedule of Expenditures of Federal Awards 8 Notes to Schedule of Expenditures of Federal.Awards 9 212 FINAL DRAFT INDEPENDENT AUDITORS'REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of City Council City of Pearland,Texas We have audited, in accordance with the 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 City of Pearland, Texas (the "City"), as of and for the year ended September 30, 2015, 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 14,2016. 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 determine the 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 the City's 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. 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. 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 or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 1 214 FINAL DRAFT To the Honorable Mayor and Members of City Council City of Pearland,Texas Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of 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. Purpose of this Report 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 communication is not suitable for any other purposes. Houston,Texas March 14,2016 2 215 FINAL DRAFT INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM;REPORT ON INTERNAL CONTROL OVER COMPLIANCE;AND REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A-133 To the Honorable Mayor and Members of City Council City of Pearland,Texas Report on Compliance for Each Major Federal Program We have audited City of Pearland, Texas' (the "City") compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended September 30,2015. 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 its 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 Organizations. Those 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. 3 216 FINAL DRAFT To the Honorable Mayor and Members of City Council City of Pearland,Texas Opinion on Each Major Federal Program In our opinion, the City complied, in all material respects, with the 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 30,2015. Report on Internal Control over Compliance Management of the City:is responsible for establishing and maintaining effective internal;control over compliance with the types of compliance referred to above. In planning and performing our audit of compliance,we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance 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 combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility 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. A significant:deficiency in internal control over compliance is a deficiency,or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 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 that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in 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. 4 217 FINAL DRAFT To the Honorable Mayor and. Members of City Council City of Pearland,Texas Report on Schedule of Expenditures of Federal Awards We have audited the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements. We have issued our report thereon dated March 14, 2016, which contained unmodified opinions on those financial statements. Our audit was performed for the purpose of forming our opinions on the financial statements that collectively comprise the basic.financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such 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 financial statements and certain. other procedures, including comparing and reconciling such 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 taken as a whole. Houston,Texas March 14,2016 5 218 FINAL DRAFT CITY OF PEARLAND,TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS For The Year Ended September 30,2015 I. Summary of Auditors' Results Financial Statements Type of auditors' 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? None reported Noncompliance material to financial statements noted? No Federal Awards Internal control over major programs: Material weakness(es) identified? No Significant deficiency(ies)identified that are not None reported considered to be material weaknesses? Type of auditors' report issued on compliance with Unmodified major programs: Any audit findings disclosed that are required to be reported in accordance with section 510(a)OMB None Circular A-133? Identification of major programs: Name of Federal Program or Cluster CFDA Numbers Bulletproof Vest 16.607 Victims of Crime Act 16.575 Community Development Block Grant 14.218 Dollar Threshold Considered Between Type A and Type B: Federal $300,000 Auditee qualified as low risk auditee? Federal Yes 6 219 FINAL DRAFT CITY OF PEARLAND,TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS(continued) For The Year Ended September 30,2015 II. Financial Statement Findings There are no current year findings: III. Federal Award Findings and Questioned Costs There are no current year fmdings. IV. Status of Prior Year Findings and Questioned Costs No findings reported during the prior fiscal year. V. Views of Responsible Officials and Planned Corrective Action Not applicable. 7 220 FINAL DRAFT CITY OF PEARLAND,TEXAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30,2015 Federal Pass-Through CFDA Entity Identifying Federal Federal Grantor/Pass-Through Grantor/Program Title Number Number Expenditures U.S.Department of Housing:and Urban Development Direct: Community Development Block Grant 2012 14.218 B-12-MC-48-0400 $ 5,168 Community Development Block Grant 2013 14.218 B-13-MC-48-0400 . 72,392 Community Development Block Grant 2014 14.218 B-14-MC-48-0400 83,719 Total U.S.Department of Housing and Urban Development 161,279 U.S.Department of Justice Direct: Bulletproof Vest 16.607 . N/A 16,915 E.Byrne Memorial JAG 16.738 N/A 4,640 Passed-through the Texas Office of the Governor: . .. Victims of Crime Act 16.575 23623-05 60,111 Total U.S.Department of Justice 81,666 U.S.Department of Transportation Passed-through the Texas Department of Transportation: . . CMAQ Project-ITS Project 20.205 CSJ:0912-31-274 290,416 STP=Metro Mobility:Max Road 20.205 CSJ:0912-31-273 158,921 STP Metro Mobility:Fite Road 20.205 CSJ:0912-31-272 17,607 STP-Metro Mobility:McHard Road 20.205 CSJ:0912-31-290 129,103 Total Passed-through the Texas Department of Transportation 596,047 Passed-through the Houston-Galveston Area Council: H-GAC/DWI Task Force 20.604 . N/A 10,744 Total U.S.Department of Transportation 606,791 U.S.Department of Homeland Security Passed:through Texas Department of Public Safety: Emergency Management.Performance Grants 97.042 . 15TX-EMPG-0328 44,532: Total U.S.Department of Homeland Security 44,532 Total Expenditures of Federal Awards $ 894,268 8 221 FINAL DRAFT• CITY OF PEARLAND,TEXAS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Note 1 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 unearned revenues until earned. Generally,unused balances are returned to the grantor at the close of specified project periods. Note 2_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 30,2015. 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 Organizations. 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 assets or cash flows of the City. 9 222