HomeMy WebLinkAbout2017 Financial Federal Single Audit FINAL
Financial Statements and Federal Single Audit
Report
City of Port Townsend
JeffersonCounty
For theperiodJanuary 1, 2017through December 31, 2017
Published August 6, 2018
Report No. 1021831
Office of the Washington State Auditor
Pat McCarthy
August 6, 2018
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report ontheCity of Port Townsend’sfinancial statementsandcompliance
with federal laws and regulations.
We are issuing this report in order to provide information ontheCity’s financial condition.
Sincerely,
Pat McCarthy
State Auditor
Olympia, WA
Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370Pat.McCarthy@sao.wa.gov
TABLE OF CONTENTS
Schedule of Findings and Questioned Costs .................................................................................. 4
Independent Auditor's 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.................................................................................................... 6
Independent Auditor's Report on Compliance for Each Major Federal Program and Report on
Internal Control Over Compliance in Accordance With the Uniform Guidance .......................... 9
Independent Auditor's Report on Financial Statements ............................................................... 12
Financial Section.......................................................................................................................... 15
About the State Auditor's Office .................................................................................................. 47
Washington State Auditor's OfficePage 3
SCHEDULE OF FINDINGSAND QUESTIONED COSTS
City of Port Townsend
JeffersonCounty
January 1, 2017through December 31, 2017
SECTION I – SUMMARY OF AUDITOR’S RESULTS
The results of our audit of the City of Port Townsendare summarized below in accordance with
Title 2 U.S. Code of Federal Regulations(CFR) Part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Financial Statements
We issued an unmodifiedopinion on the fair presentation of the City’s financial statements in
accordance with its regulatory basis of accounting. Separately, we issued an adverse opinion on
the fair presentation of all funds with regard to accounting principles generally accepted in the
United States of America (GAAP) because the financial statements are prepared using a basis of
accounting other than GAAP.
Internal Control over Financial Reporting:
Significant Deficiencies: Wereported no deficiencies in the design or operation of internal
control over financial reporting that we consider to be significant deficiencies.
Material Weaknesses:We identified nodeficiencies that we consider to be material
weaknesses.
We noted noinstances of noncompliance that were material to the financial statementsof the City.
Federal Awards
Internal Control over Major Programs:
Significant Deficiencies:We reported nodeficiencies in the design or operation of internal
control over major federal programs that we consider to be significant deficiencies.
Material Weaknesses:We identified no deficiencies that we consider to be material
weaknesses.
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We issued an unmodified opinion on the City’s compliance with requirements applicable to its
major federal program.
We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a).
Identification of Major Federal Programs:
The following programwas selectedasa major programin our audit of compliance in accordance
with the Uniform Guidance.
CFDA No.Program or Cluster Title
20.205HighwayPlanning and Construction
The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by
the Uniform Guidance, was $750,000.
The City did not qualify as a low-risk auditee under the Uniform Guidance.
SECTION II – FINANCIAL STATEMENT FINDINGS
None reported.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED
COSTS
None reported.
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INDEPENDENT AUDITOR’S REPORT ON INTERNALCONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMEDIN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
City of Port Townsend
JeffersonCounty
January 1, 2017 throughDecember 31, 2017
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standardsapplicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States, the financial statements of the
City of Port Townsend,JeffersonCounty, Washington, as of and for the yearended December 31,
2017, and the related notes to the financial statements, which collectively comprise the City’s
financial statements, and have issued our report thereon dated July 27, 2018.
We issued an unmodifiedopinion on the fair presentation of the City’s financial statements in
accordance with its regulatory basis of accounting. We issued an adverse opinion on the fair
presentation with regard to accounting principles generally accepted in the United States of
America (GAAP) because thefinancial statements are prepared by the Cityusing accounting
practices prescribed by Washington State statutes and the State Auditor’s Budgeting, Accounting
and Reporting System(BARS) manualdescribed in Note 1, which is a basis of accounting other
than GAAP. The effects on the financial statements of the variances between the basis of
accounting described in Note 1and accounting principles generally accepted in the United States
of America, although not reasonably determinable, are presumed to be material.
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 thatare
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
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internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s
internal control.
Adeficiency in internal controlexists 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 deficiencyis 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.
COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City’s financial statements are free
from material misstatement, we performed tests of the City’scompliance 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 Standardsin considering the City’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose. However,
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this report is a matter of public record and its distribution is not limited. It also serves to
disseminate information to the public as a reporting tool to help citizens assess government
operations.
Pat McCarthy
State Auditor
Olympia, WA
July 27, 2018
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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR
EACH MAJOR FEDERAL PROGRAM AND REPORT ON
INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE
WITH THE UNIFORM GUIDANCE
City of Port Townsend
JeffersonCounty
January 1, 2017through December 31, 2017
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM
We have audited the compliance of the City of Port Townsend,JeffersonCounty, Washington,
with the types of compliance requirements described in the U.S. Office of Management and Budget
(OMB) Compliance Supplementthat could have a direct and material effect on each of the City’s
major federal programs for the year ended December 31, 2017. The City’s major federal programs
are identified in the accompanying Schedule of Findings and Questioned Costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and
conditions of its federal awards 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 bythe Comptroller General of the United States; and the audit
requirements of Title 2 U.S. Code of Federal RegulationsPart 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance).
Those standards and the Uniform Guidance require that we plan and perform the audit to obtain
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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 theCity’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. Our audit does not provide a legal determination on the City’s compliance.
Opinion on Each Major Federal Program
In our opinion, the Citycomplied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended December 31, 2017.
REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Management of the Cityis responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and
performing our audit of compliance, we considered the City’s internal control over compliance
with the types of requirements that could have a direct and material effect on each major federal
program in order to determine the auditing procedures that are appropriate in the circumstances
for the purpose of expressing an opinion on compliance for each major federal program and to test
and report on internal control over compliance in accordance with the Uniform Guidance, 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.
Adeficiency in internal control over complianceexists 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 ofa 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 complianceis 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.
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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.
Purpose of this Report
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 the Uniform Guidance. Accordingly, this report is not suitable for any other
purpose. However, this report is a matter of public record and its distribution is not limited. It
also serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
Pat McCarthy
State Auditor
Olympia, WA
July 27, 2018
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INDEPENDENT AUDITOR’S REPORT ON
FINANCIAL STATEMENTS
City of Port Townsend
JeffersonCounty
January 1, 2017 throughDecember 31, 2017
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statementsof the City of Port Townsend,Jefferson
County, Washington, for the yearended December 31, 2017, and the related notes to the financial
statements, which collectively comprise the City’s financial statements, as listed on page 15.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the financial reporting provisions of Washington State statutes and the
Budgeting, Accounting and Reporting System(BARS) manual prescribedby the State Auditor
described in Note 1. This includes determining thatthe basis of accounting is acceptable for the
presentation of the financial statements in the circumstances. Management is also responsible for
the design, implementation andmaintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
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due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the City’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 City’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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
Unmodified Opinion on Regulatory Basis of Accounting (BARS Manual)
As described in Note 1, the City of Port Townsendhas prepared these financial statements to meet
the financial reporting requirements of Washington State statutes using accounting practices
prescribed by the State Auditor’s Budgeting, Accounting and Reporting System(BARS) manual.
Those accounting practices differ fromaccounting principles generally accepted in the United
States of America (GAAP). The differences in these accounting practices are also described in
Note 1.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position and results of operations of the City of Port Townsend, for the year ended
December 31, 2017, on the basis of accounting described in Note 1.
Basis for Adverse Opinion on U.S. GAAP
Auditing standards issued by the American Institute of Certified Public Accountants (AICPA)
require auditors to formally acknowledge when governments do not prepare their financial
statements, intended for general use, in accordance with GAAP. The effects on the financial
statements of the variances between GAAP and the accounting practices the Cityused, as
described in Note 1, although not reasonably determinable, are presumed to be material. As a
result, we are required to issue an adverse opinion on whether the financial statements are
presented fairly, in all material respects, in accordance with GAAP.
Adverse Opinion on U.S. GAAP
The financial statements referred to above were not intended to, and in our opinion they do not,
present fairly, in accordance with accounting principles generally accepted in the United States of
America, the financial position of the City of Port Townsend, as of December 31, 2017, or the
changes in financial position or cash flows for the yearthen ended, due to the significance of the
matter discussed in the above “Basis for Adverse Opinion on U.S. GAAP” paragraph.
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Other Matters
Supplementary and Other Information
Our audit was performed for the purpose of forming opinions on the financial statements taken as
a whole. The Schedule of Expenditures of Federal Awards is presented for purposes of additional
analysis as required byTitle 2 U.S. Code of Federal Regulations(CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
(Uniform Guidance).The Schedule of Liabilities is presented for purposes of additional analysis,
as required by the prescribed BARS manual.These schedules arenot a required part of the
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 financial
statements. The information has been subjected to the auditing procedures applied in the audit of
the financial statements and certain additional procedures, including comparing and reconciling
such information directly to the underlying accounting and other records used to prepare the
financial statements or to the financial statements themselves, and otheradditional procedures in
accordance with auditing standards generally accepted in the United States of America. In our
opinion, the information is fairly stated, in all material respects, in relation to the financial
statements taken as a whole.
OTHERREPORTING REQUIRED BY GOVERNMENT AUDITING
STANDARDS
In accordance with Government Auditing Standards,we have also issued our report dated July 27,
2018on 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 Standardsin considering the
City’s internal control over financial reporting and compliance.
Pat McCarthy
State Auditor
Olympia, WA
July 27, 2018
Washington State Auditor's OfficePage 14
FINANCIAL SECTION
City of Port Townsend
JeffersonCounty
January 1, 2017through December 31, 2017
FINANCIAL STATEMENTS
Fund Resources and Uses Arising from Cash Transactions – 2017
Fiduciary Fund Resources and Uses Arising from Cash Transactions – 2017
Notes to the Financial Statements – 2017
SUPPLEMENTARY AND OTHER INFORMATION
Schedule of Liabilities – 2017
Schedule of Expenditures of Federal Awards – 2017
Notes to the Schedule of Expenditures of Federal Awards – 2017
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City of Port Townsend
Notes to the Financial Statements
For the Year Ended December 31, 2017
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Port Townsend was incorporated on January 16, 1860 and operates under the laws of the
State of Washington applicable to a non-charter code city. The city is a general purpose local
government and provides police and fire protection, water, sewer, storm drainage, waste management,
as well as maintaining parks, streets, and a library for use by its citizens.
The City of Port Townsend reports financial activity in accordance with the Cash Basis Budgeting,
Accounting and Reporting System (BARS) Manual prescribed by the State Auditors Office under the
authority of Washington State law, Chapter 43.09 RCW. This manual prescribes a financial reporting
framework that differs from generally accepted accounting principles (GAAP) in the following manner:
Financial transactions are recognized on a cash basis of accounting as described below.
Component units are required to be disclosed, but are not included in the financial statements.
Government-wide statements, as defined in GAAP, are not presented.
All funds are presented, rather than a focus on major funds.
The Schedule of Liabilities is required to be presented with the financial statements as
supplementary information.
Supplementary information required by GAAP is not presented.
Ending balances are not presented using the classifications defined in GAAP.
A.Fund Accounting
Financial transactions of the government are reported in individual funds. Each fund uses a
separate set of self-balancing accounts that comprises its cash and investments, revenues and
expendit
depending on their intended purpose. Each fund is reported as a separate column in the financial
statements.
The following fund types are used:
GOVERNMENTAL FUND TYPES:
General Fund (Fund 010):
This fund is the primary operating fund of the city. It accounts for all financial resources except
those required or elected to be accounted for in another fund.
Special Revenue Funds (Funds in the 100 series):
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These funds account for specific revenue sources derived from specific taxes, grants or other
sources, which are restricted or committed to expenditures for specified purposes of the city.
(Note: Prior to 2014, the City reported its System Development Charge Fund in the 100 series. This
fund was reassigned as a proprietary fund (400 series) because it was created to fund water and
wastewater capital improvements and replacements.)
Debt Service Funds (Funds in the 200 series):
These funds account for the financial resources that are restricted, committed, or assigned to
expenditures for principal, interest and related costs on general long-term debt.
Capital Projects Funds (Funds in the 300 series):
These funds account for financial resources which are restricted, committed, or assigned for the
acquisition or construction of capital facilities or other capital assets.
Permanent Funds
These funds account for financial resources that are legally restricted to the extent that only
earnings, and not principal, may be used for purposes that support programs for the benefit of the
government or its citizenry.
PROPRIETARY FUND TYPES:
Enterprise Funds (Funds in the 400 series):
These funds account for operations that provide goods or services to the general public and are
supported primarily through user charges.
Notes:
Prior to 2014, the City reported its System Development Charge Fund in the 100 series. This fund
was reassigned as a proprietary fund (400 series) because it was created to fund water and
wastewater capital improvements and replacements.
Prior to 2016, the City reported its Golf Course Fund as a Fiduciary Fund. The activities of this fund
are supported by user charges to support capital improvements, maintenance and repairs, and
other operating expenditures of the Golf Course and was reassigned as an Enterprise Fund.
Internal Service Funds (Funds in the 500 series):
These funds account for operations that provide goods or services to other departments or funds
of the city or other governmental unitson a cost reimbursement basis.
FIDUCIARY FUND TYPES:
Fiduciary funds account for assets held by the government in a trustee capacity or as an agent on
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behalf of others.
Pension (and Other Employee Benefit) Trust Funds (Fund 610):
This fund is used to account for financial resources to pay retiree benefits related to the Fire
).
Private Purpose Trust (Fund 621):
The Memorial Fund was established to account for assets donated to the city. Funds coming into
the memorial fund may be a shall be accepted and managed in accord with any conditions and
terms imposed by the donor making the gift.
Agency Funds (Funds 613 699):
These funds are used to account for assets that the city holds on behalf of others in a custodial
capacity.
B.Basis of Accounting and Measurement Focus
Financial statements are prepared using the cash basis of accounting and measurement focus.
Revenues are recognized when cash is received and expenditures are recognized when paid,
including those properly chargeable against the prior year(s) budget appropriations as required by
state law.
In accordance with state law the city also recognizes expenditures paid during twenty days after
the close of the fiscal year for claims incurred during the previous period.
Purchases of capital assets are expensed during the year of acquisition. There is no capitalization
of capital assets, nor allocation of depreciation expense. Inventory is expensed when purchased.
C.Budgets
The city adopts annual appropriated budgets for all funds. These budgets are appropriated at the
fund level. The budget constitutes the legal authority for expenditures at that level. Annual
appropriations for these funds lapse at the fiscal year end.
Annual appropriated budgets are adopted on the same basis of accounting as used for financial
reporting.
The appropriated and actual expenditures for the legally adopted budgets were as follow:
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FISCAL YEAR 2017
Final AppropriatedActual
AmountsExpendituresVariance
General$ 8,560,864$ 8,362,152$ 198,712
Street$ 865,941$ 808,415$ 57,526
Library$ 1,036,496$ 1,013,963$ 22,533
Real Estate Excise Tax Fund$ 606,000$ 606,000$ -
Lodging Tax$ 480,000$ 433,614$ 46,386
Fire & EMS Service$ 2,317,194$ 2,307,427$ 9,767
Affordable Housing Fund$ 40,000$ 40,000$ -
Community Development Block Grants$ 15,245$ -$ 15,245
Community Services$ 1,925,969$ 1,913,599$ 12,370
GO Debt Service$ 4,987,702$ 4,987,597$ 105
Capital Improvement$ 5,442,057$ 4,196,893$ 1,245,164
Water/Sewer Utility Operations$ 5,753,353$ 5,365,310$ 388,044
System Development Charges$ 687,000$ 687,000$ -
Utility Construction Fund$ 5,901,617$ 4,775,142$ 1,126,475
Trans line Replacement$ 589,764$ 589,764$ -
1978 Water Sewer Rev Bond$ 22,000$ 22,000$ -
Water Capital Debt Reserve$ 795,369$ 651,857$ 143,512
Storm water Operations$ 478,005$ 467,419$ 10,586
Storm water Capital Fund$ 640,000$ 311,786$ 328,214
Equipment Rental$ 982,600$ 953,982$ 28,618
Public Work & Admin$ 530,119$ 504,554$ 25,565
Engineering Service Fund$ 1,003,088$ 969,311$ 33,777
Unemployment Self Insurance$ 30,640$ 30,637$ 3
Firemen's Pension$ 31,487$ 30,559$ 928
Court Agency Funds$ -$ 111,806$ (111,806)
Golf Course Fund$ 9,698$ 4,884$ 4,814
TOTAL$ 43,732,208$ 40,145,673$ 3,586,536
Budgeted amounts are authorized to be transferred within any fund/object classes within
departments; however, any revisions that alter the total expenditures of a fund, or impact the
number of authorized employee positions, salary ranges, hours, or other conditions of employment
must be approved by the city council.
D.Cash and Investments
investments is
prorated to the various funds based on fund balance.
All deposits are covered by the Federal Deposit Insurance Corporation and/or by collateral held in
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a multiple financial institution pool administered by the Washington Public Deposit Protection
Commission.
the Washington State Treasurer
savings and loan institutions.
Investments are reported at fair value. Investment activity for the year ending December 31, 2017
is listed below:
City of Port Townsend
State of Washington
Local Government Investment Pool
1/1/2017Beginning Balance$ 6,485,230
Gross Investment Earnings
$ 63,168
Administrative Fees(486)
Net Investment Earnings
62,681
Deposits
$ -
Withdrawals
-
-
12/31/2017Ending Balance (Market Value)6,547,911$
E.Capital Assets
The city is responsible for stewardship of public resources and as such, has policies and procedures
in place to track, demonstrate accountability, and insure security of all assets.
Operating under a cash basis, capital assets and inventory are recorded as capital expenditures
when purchased; because the entire expenditure is recognized in the period when the cash outflow
occurs, the reporting of depreciation accounts is not appropriate.
Capital Improvements are defined as projects to create, expand, or modify a capital facility. The
project may include design permitting, environmental analysis, land acquisition, construction,
landscaping, site improvements, initial furnishings, and equipment. The project cost must exceed
$5,000 and have a useful life of one year or more.
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F.Compensated Absences
Vacation leave may be accumulated up to 240 hours for regular employees and 360 hours for
department heads. Vacation leave is payable upon separation or retirement. Sick leave may be
accumulated up to 1,440 hours. Upon separation or retirement employees do not receive payment
for unused sick leave. Expenditures related to leave are recognized when paid.
The compensated absence balances increased by $55,855 from 2016 to 2017, ending at $511,399
for the year.
G.Long-Term Debt
See Note 4.
H.Other Financing Sources or Uses
The Other Financing Sources or Uses consist of operating transfers-in, operating transfers-
out, special assessment bond proceeds, and proceeds from refunding bonds.
I.Risk Management
See Note 6.
J.Reserved Portion of Ending Cash and Investments
Beginning and Ending Cash and Investments is reported as reserved when it is subject to
restrictions on use imposed by external parties or due to internal commitments established by the
City Council through a formal action (e.g. ordinance or resolution). When expenditures that meet
these restrictions are incurred, the city intends to use reserved resources first before using
unreserved amounts.
Reservations of Ending Cash and Investments consist as of December 31, 2017 are $1,786,451.
These funds were reserved by Trust in 1956 for system replacement or improvements related to
the Olympic Gravity Water System Pipeline (Ordinance 1321).
NOTE 2 PROPERTY TAXES
The Jefferson County Treasurer acts as agent to collect property taxes levied in the county for all taxing
authorities. Collections are distributed after the total collected surpasses $10,000; with any balance
left over distributed at month-end.
Property tax revenues are recognized when cash is collected. Delinquent taxes are considered fully
collectible because a lien affixes to the property when taxes are levied.
2017 was $1.55334 per $1,000 on assessed valuation of $1,441,602,061 for
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a total regular levy of $2,239,304.
A Library LID lift was approved by voters in 2008 to be phased in over 2009-2011. For 2017 the library
levy was $0.72217 per $1,000 for a total of $1,041,085.
Voters approved a Fire LID lift in 2012. For 2017 the Fire LID lift was $0.47694 per $1,000 for a tax
amount of $687,562.
The city also has a special levy for Emergency Medical Services (EMS). The EMS levy rate was voter
approved in 2010 to $0 .50 per $1,000 for a total levy of $720,801 in 2017.
In 2015, voters approved a tax levy for improvements to the Mountain View Commons. The tax levy
pays for the debt service on the bonds issued to make these improvements. The levy rate for 2017
was $0.10607 per $1,000 of assessed property value for a total levy of $149,999.
NOTE 3 LONG TERM DEBT
The accompanying schedule of Long Term Liabilities (Schedule 09) provides a listing of the outstanding
nsactions for Calendar Year 2017.
The debt service payments for the year being reported and future payment requirements, including
interest, are listed in the table below. Schedule 9 also includes liabilities for compensated absences
(see Note 1) and pension liabilities (see note 5).
DEBT SERVICE SCHEDULE
Revenue
G.O. Bond Bond
Anticipation Anticipation Revenue Total Debt
YearG.O. BondsLine of CreditLine of CreditBondsOther DebtService
2017$1,578,619$0$30,753$22,000$989,732$2,621,105
2018$1,642,655$0$1,719,409$21,000$978,128$4,361,192
2019$1,643,405$0$0$0$1,529,990$3,173,395
2020$1,642,893$0$0$0$1,317,532$2,960,425
2021$1,639,243$0$0$0$1,308,591$2,947,834
2022-2026$8,124,768$0$0$0$5,768,585$13,893,353
2027-2031$8,095,800$0$0$0$5,340,527$13,436,327
2032-2036$5,278,400$0$0$0$3,112,968$8,391,368
2037-2039$0$0$0$0$775,610$775,610
Total$29,645,783$0$1,750,162$43,000$21,121,662$52,560,607
Washington State Auditor's OfficePage 29
A.Bonds
The City of Port Townsend issues general obligation and revenue bonds to finance the construction and
improvement of capital assets. Bonded indebtedness has also been used to advance refund revenue
bonds. General obligation bonds have been issued for both general government and business-type
activities and are being repaid from the applicable resources. The revenue bonds are being repaid by
proprietary fund revenues.
In 2008 the City issued $7,500,000 in Limited General Obligation Bonds to finance road and sidewalk
improvements, as well as tourism, infrastructure, and waterfront access improvements. In 2017, the
City issued $9,155,000 Of Limited Tax General Obligation and Refunding Bonds (Series 2017A Bank
Qualified/Tax Exempt) and $1,105,000 Limited Tax General Obligation Bonds (Series 2017B Taxable).
The proceeds of the Bonds refunded approximately $7,800,000 of the 2008 General Obligation Bonds
at a significantly lower interest rate, producing a net present value savings of $980,000 or 13.1%. The
City took advantage of the savings and low interest rate environment to obtain an additional $3,200,000
in proceeds. These proceeds fund sidewalk improvements, Water Street repaving project, capital
improvements at the Carnegie Library and other capital items. The All-in Total Interest Cost of the
bonds was 3.29%. The Bonds were authorized pursuant to Ordinance 3165, passed on February 6,
2017. Two series of bonds were structured where the taxable (higher interest rate) series (2017B)
matures first callable on or after June 1, 2022, followed by the lower cost tax-exempt bonds (2017A),
callable on or after June 1, 2026. As a cash basis entity, the city only recorded the net cash proceeds.
This caused a variance between cash proceeds on the GL vs. the Debt Principal totals recorded on
Schedule 09. The City applied to S&P Global Ratings (S&P) for a rating on the bonds. The City Manager
and Finance Director participated in a rating call with S&P analysts covering the local economy, city
policies and practices, management and finances. Based on the overall strength of the City, S&P
-.
In 2010 the City issued an additional $3,740,000 in bonds for sidewalks, utilities and street
improvements, as well as funding for the Carnegie Library seismic retrofit. In 2012 the City refunded
the balance of the 1999 General Obligation Bonds and the 2005 General Obligation Bonds. As part of
the same financing, $1,505,000 of the 2003 Bonds were advance refunded as well as $2,500,000 of the
2002 Bonds.
In 2014, the City Council authorized a Limited General Obligation Bond Anticipation Note (BAN) for
$1,500,000. The BAN line of credit interest rate is a variable rate tied to the LIBOR (London Interbank
Offered Rate) and is calculated as 65% of the 3 month LIBOR rate plus 1.05%. The city did not initiate
any draws on this line of credit in 2017. The maturity date of the line of credit was December 1, 2017,
and was amended with Ordinance 3186 to extend the maturity to May 31, 2019. The interest rate and
other terms remain the same. The interest rate for this credit line was 2.01% as of December 31, 2017.
In 2015, the City issued $3,385,000 in voter approved Unlimited Tax General Obligation bonds to
finance energy retrofits, building improvements at city facilities located at Mountain View Commons,
which houses municipal services and social and public service organizations, and other general capital
project costs. The bond is being repaid by a voted property tax assessment and other City tax receipts.
In 2016, the city council approved authorized a line of credit providing for the issuance and sale of a
Water and Sewer Revenue Bond Anticipation Note with an aggregate principal amount not to exceed
$3,000,000. This line of credit was established
s prime rate minus 2.25% and cannot be
Washington State Auditor's OfficePage 30
less than 1.25%. As of the end of 2017, the city had an outstanding draw on the line of credit of
$1,7000,000, and the interest rate was 2.0%. The maturity date of the line of credit is March 1, 2018.
The line of credit will allow the City to pay construction invoices per contract terms while awaiting
reimbursement from state and federal programs.
Proprietary Long-Term Debt currently outstanding as of December 31, 2017is as follows:
PROPRIETARY LONG TERM DEBT
Issue Debt
YearPurposeOriginal IssueInterest RateMaturity DateOutstanding
Water/Sewer Revenue
Bonds for Water and Sewer
1978Improvements$395,0005.00%12/1/2018$20,000
Utility Capital Revenue Prime rate minus
Bond Anticipation Note Line 2.25% interest rate;
of Credit for Water/ Sewer cannot be less than
2016improvements$1,700,0001.25%3/1/2018$1,700,000
DOE - Wastewater Facility -
2017Outfall Project$2,1002.00%6/30/2018$2,100
Total$1,722,100
GeneralObligationDebtcurrently outstandingas of December 31,2017isas follows:
Washington State Auditor's OfficePage 31
G.O. LONG TERM OUTSTANDING DEBT
Issue Debt
YearPurposeOriginal IssueInterest RateMaturity DateOutstanding
Limited G.O. Bonds for
construction funds for civic
2008and street improvements$7,500,0004.15% - 5.00%12/1/2038$0
Limited G.O. Bonds for
street, sidewalk, utilities
2010and historic district$3,740,0002.30% - 5.00%12/1/2030$3,355,000
Limited G.O. Bonds for
refunding of 1999 Bonds, a
portion of the 2002 G.O.
Bonds, and a portion of the
20122005 G.O. Bonds$5,530,000.50% - 4.25%12/1/2025$3,165,000
Limited G.O. Bond
Anticipation Note (Line of Variable rate tied
Credit) for capital to Libor index (65%
improvments at the of 3 month Libor
Mountain View campus and plus 1.05%, rate as
other general capital of 12/31/2017 -
2014project costs$1,500,0001.267133% 12/1/2017$0
Voted Unlimited G.O. Bonds
for energy retrofits and
capital improvments at the
Mountain View campus and
other general capital
2015projects$3,385,0002.0% - 4.0%12/1/2031$3,205,000
Limited G.O. Taxable Bonds
for Library Renovations,
Streets & Visitor Center
Frontage & Other general
2017Capital Projects$1,150,0001.2% - 3.2%12/1/2025$1,060,000
Limited G.O. Bonds for
Library Retrofit, Streets &
Visitor Center Frontage &
other general capital
2017projects$9,155,0004.00%12/1/2035$9,155,000
Total$19,940,000
Washington State Auditor's OfficePage 32
B.Public Works Trust Fund Loans and State Revolving Fund Loans
State of Washington Public Works Trust Funds (PWTF) Loans are intergovernmental loans from the
Public Works Board to undertake local public works projects. These loans are a direct responsibility of
the City of Port Townsend. The City currently has eight such loans.
State Revolving Fund (SRF) Loans are State of Washington Department of Ecology low interest loans
for projects that protect and improve water quality. The City of Port Townsend has one SRF loan.
Drinking Water State Revolving Fund (DWSRF) Loans are low interest State of Washington loans for
infrastructure construction and improvements for drinking water systems that increase public health
and comply with drinking water regulations. In some cases, partial loan forgiveness is offered. The
City currently has three of these loans.
As of December 31, 2017, the long-term debt payable for PWTF and SRF loans consisted of the
following:
Washington State Auditor's OfficePage 33
PUBLIC WORKS AND STATE REVOLVING FUND LOAN SCHEDULE
Issue Maturity Debt
YearPurposeOriginal IssueInterest RateDateOutstanding
PWTF Loan: CT Pipeline Tri-Area
Water Storage, Tri-Area Well
1998Upgrades$2,172,0551.00%7/1/2018$44,718
PWTF Loan: Gaines Street Lift
1999Station; San Juan Street Trunk Line$1,434,3651.00%7/1/2019$119,190
PWTF Loan: Wastewater
Treatment Outfall Expansion;
2001Trunk Sewer Line Replacement$1,153,3500.50%7/1/2021$221,106
PWTF Loan: Morgan Hill Water
2002System Improvements$1,263,4530.50%7/1/2022$333,509
SRF Loan: Dept of Ecology Loan:
Wastewater Conveyance Storm
and Sewer Separation; Gains
Street Lift Station Phase II; Trunk
2005Sewer Line Replacement$856,8031.50%10/31/2023$337,127
2012PWTF Loan: City Lake Repair$1,000,0000.50%6/1/2031$736,842
PWTF Loan: Mandated LT2 Water
2012Treatment Facility$1,896,0000.50%6/1/2031$1,566,899
DWSRF Loan: LT2 Federally
Mandated Water Treatment
2012Facility$3,071,5211.50%10/1/2036$2,917,945
PWTF Loan: 5 MG Reservoir
2013Replacement$1,236,4420.50%6/1/2032$1,103,985
2013PWTF Loan: UV Disinfection$3,688,2780.50%6/1/2032$3,442,963
DWSRF Loan: Replacement for
Primary 5MG Reservoir with
2014Booste$5,588,8901.00%10/1/2038$5,588,890
DWSRF Loan: Mandated LT2 Water
2015Treatment Facility$5,053,2501.00%10/1/2038$4,240,773
Total$20,653,946
Washington State Auditor's OfficePage 34
NOTE 4 PENSION PLANS
A.State Sponsored Plans
Substantially all city full-time and qualifying part-
ion and Relief Fund administered by
Washington State Department of Retirement Systems (DRS), under cost-sharing multiple-employer
public employee defined benefit and defined contribution employee retirement plans. Contributions
to the systems by both employee and employer are based upon gross wages covered by the plan.
The State Legislature establishes, and amends, laws pertaining to the creation and administration of
all public retirement systems.
The Department of Retirement Systems, a department within the primary government of the State of
Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes
financial statements and required supplementary information for each plan. The DRS CAFR may be
obtained by writing to:
Department of Retirement Systems
Communication Unit
PO Box 48380
Olympia, WA 98504-8380
Also, the DRS CAFR may be downloaded from the DRS website at www.drs.wa.gov.
At June 30, 2017 rtionate share of the collective
net pension liabilities, as reported on Schedule 09,
net pension assets was as follows:
Allocation % Liability (Asset)
PERS 1 0.000000% $0.00
PERS 1 UAAL 0.039986% $2,147,436.53
PERS 2 / 3 0.051237% $2,579,742.47
Total Net Pension Liability (Sch 09) $4,727,179.01
Washington State Auditor's OfficePage 35
Allocation %Liability (Asset)
PERS 10.000000%$0.00
PERS 1 UAAL0.039926%$1,894,519.84
PERS 2 / 30.051355%$1,784,340.77
Total Net Pension Liability (Sch 09)$3,678,860.62
LEOFF 10.011893%-$180,442.97
LEOFF 20.040411%-$560,773.75
Net pension Assets-$741,216.72
LEOFF Plan 1
The city also participates in LEOFF Plan 1. The LEOFF Plan 1 is fully funded and no further employer
contributions have been required since June 2000. If the plan becomes underfunded, funding of the
remaining liability will require new legislation. Starting on July 1, 2000, employers and employees
contribute zero percent.
LEOFF Plan 2
The city also participates in the LEOFF Plan 2. The Legislature, by means of a special funding
arrangement, appropriates money from the state general fund to supplement the current service
liability and fund the prior service costs of Plan 2 in accordance with the recommendation of the
Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not
mandated by the state constitution and could be changed by statute.
B.Local Government Pension Plans
The City of Port Town
Pension. The system is shown as a trust fund in the financial statements of the City of Port Townsend.
As of December 31, 2017, there were a total of three individuals covered and drawing benefits under
this system. None of these individuals were employed by the City in 2017.
As of December 31, 2017, the fund balance of this trust fund was $231,925.
NOTE 5 RISK MANAGEMENT
The City of Port Townsend is a member of the Washington Cities Insurance Authority (WCIA). Utilizing
Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act),
nine cities originally formed WCIA on January 1, 1981. WCIA was created to providing a pooling
mechanism for jointly purchasing insurance, jointly self-insuring, and / or jointly contracting for risk
management services. WCIA has a total of 168 Members.
New members initially contract for a three-year term, and thereafter automatically renew on an annual
basis. A one-year withdrawal notice is required before membership can be terminated. Termination
Washington State Auditor's OfficePage 36
does not relieve a former member from its unresolved loss history incurred during membership.
Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general,
automobile, police, errors or omissions, stop gap, employment practices and employee benefits
liability. Limits are $4 million per occurrence in the self-insured layer, and $21 million in limits above
the self-insured layer is provided by reinsurance. Total limits are $25 million per occurrence subject to
aggregates and sub-limits. The Board of Directors determines the limits and terms of coverage
annually.
Insurance for property, automobile physical damage, fidelity, inland marine, and boiler and machinery
coverage are purchased on a group basis. Various deductibles apply by type of coverage. Property
coverage is self-flood and
earthquake, and insured above that to $300 million per occurrence subject to aggregates and sub-
limits. Automobile physical damage coverage is self-
and insured above that to $100 million per occurrence subject to aggregates and sub-limits.
In-house services include risk management consultation, loss control field services, and claims and
litigation administration. WCIA contracts for certain claims investigations, consultants for personnel
and land use issues, insurance brokerage, actuarial, and lobbyist services.
WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as
determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and
administrative expenses. As outlined in the interlocal, WCIA retains the right to additionally assess the
membership for any funding shortfall.
An investment committee, using investment brokers, produces additional revenue by investment of
WCI
A Board of Directors governs WCIA, which is comprised of one designated representative from each
member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy
direction for the organization. The WCIA Executive Director reports to the Executive Committee and is
responsible for conducting the day to day operations of WCIA.
NOTE 6 CONTINGENCIES AND LITIGATION
In the opinion of management, the City(see Note 6) and self-insurance fund (see
Note 11) are adequate to pay all known or pending claims.
NOTE 7 INTERFUND LOANS
In November 2015, the City Council authorized an interfund loan from the Transmission Line
Replacement Fund to the Street Capital Fund to provide the matching funds necessary for grants from
the Transportation Improvement Board (TIB), Washington State Department of Transportation Surface
Transportation Program (WSDOT STP), and Community Economic Revitalization Board (CERB). Loan
financing of $320,000 was for grant matching funds for the Howard Street Extension Project and the
Washington State Auditor's OfficePage 37
construction of Landes Street & Sheridan Street sidewalk projects. In the same resolution, the City
Council authorized an inter fund loan in the amount of $180,000 from the Transmission Line
Replacement Fund to the General Capital Fund for financing energy savings improvements, equipment
and software for various city buildings. These loans were scheduled to be repaid by January 31, 2018
but were paid off on March 31, 2017 as part of the advance refunding/refinancing of the 2008 Limited
General Obligation Bonds (see Note 16 Subsequent Events).
In 2017, the City Council authorized, through Resolution 17-053 on November 13, 2017. an interfund
loan from the Transmission Line Replacement Fund to the General Fund regarding resolution 17-019
on April 24, 2017 authorizing a loan form the City to Homeward Bound, a Washington non-profit
corporation for an affordable housing project. This interfund loan will be repaid through a permanent
financing plan to be identified by the City in 2018 (see subsequent events note). This $250,000 loan
is the only outstanding interfund loan as of 12/31/2017.
2017Balance
Loan ReferenceBorrowing FundLending FundBalance 1/1/17RepaymentsNew Loans12/31/2017
Landes &
Sheridan Street Street Capital Transmission
Sidewalks(305) Line (417) $205,000$205,000$0$0
Howard Street Street Capital Transmission
Extension(305) Line (417) $115,000$115,000$0$0
Honeywell Energy General Capital Transmission
Project(301) Line (417) $180,000$180,000$0$0
Transmission
Homeward Bound General Fund Line (417) $0$0$250,000$250,000
TOTAL$500,000$500,000$250,000$250,000
NOTE 8 SELF INSURANCE
The City of Port Townsend self-
Employment Security Department. When a former employee files for and obtains unemployment
coverage with the State of Washington, the City of Port Townsend is direct-billed their portion of the
unemployment benefit costs.
In 2013, the City of Port Townsend established an Unemployment Self Insurance Fund. As of December
31, 2017, the fund had a balance of $24,832 as compared to the prior year ending Fund balance of
$24,732.
NOTE 9 MANAGEMENT FUNDS
for accounting purposes. The management fund activities are rolled into one fund for reporting
purposes.
The following funds include managerial fund activity that is reported in one fund:
Water and Sewer Utility Fund
Storm Utility Fund
General Government Capital Improvement Project Fund
Washington State Auditor's OfficePage 38
NOTE 10 POST EMPLOYMENT BENEFITS
The City of Port Townsend has a commitment to pay for post-employment benefits for employees that
belong to LEOFF1 retirement system. These benefits include medical insurance premiums, out-of-
pocket medical costs, and dental and vision care. Six police retirees and three Fire/EMS retirees and/or
spouses received these benefits during the year and $58,899 was paid out for those benefits.
NOTE 11 CONSTRUCTION COMMITMENT
The City of Port Townsend has four active construction projects as of December 31, 2017. Total
construction commitment as of the end of the year totaled $3,219,687. A summary table of those
commitments is below:
TABLE OF CONSTRUCTION COMMITMENTS - 2017
PROJECT CONTRACTOR PROJECT PHASE CONTRACT PAID TO DATE REMAINING
AMOUNT CONTRACT
Water HDR Engineering Design
Treatment2,870,656 2,830,767 39,889
Phase II
Rainier Regional AHBL Design
Storm 148,838 63,700 85,138
Big Quil HDR Engineering Design
Diversion 278,385 112,636 165,749
Wtr Trmt Facility Steller J Construction
& 5 MG 14,211,666 14,186,285 25,381
Reservoir
Golf Course Holt Services Construction
278,385 112,636 165,749
Water Street Shea Carr Jewell Design /
Overlay Construction 461,345 295,922 165,423
Water Street Interwest Construction
Overlay Construction 2,340,920 - 2,340,920
7th Street Shea Carr Jewell Design
14,889 2,517 12,372
SR 20 Pedestrian PND ENG Design
Walkway 120,000 31,024 88,976
Mountain View Rollunda Design
Architect 172,882 140,935 31,947
Library Rollunda Design
Architect 110,203 87,304 22,899
Mountain View Terrapin Construction
61,400 3,185 58,215
Library Terrapin Construction
20,400 3,373 17,027
TOTAL $21,089,969 $17,870,282 $3,219,687
Washington State Auditor's OfficePage 39
NOTE 12 HEALTH & WELFARE
The City of Port Townsend is a member of the Association of Washington Cities Employee Benefit Trust
Health Care Program (AWC Trust HCP). Chapter 48.62 RCW provides that two or more local government
entities may, by Interlocal agreement under Chapter 39.34 RCW, form together or join a pool or
organization for the joint purchasing of insurance, and/or joint self-insurance, to the same extent that
they may individually purchase insurance, or self-insure.
An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter 39.34
RCW, the Interlocal Cooperation Act. The AWC Trust HCP was formed on January 1, 2014 when
participating cities, towns, and non-city entities of the AWC Employee Benefit Trust in the State of
Washington joined together by signing an Interlocal Governmental Agreement to jointly self-insure
certain health benefit plans and programs for participating employees, their covered dependents and
other beneficiaries through a designated account within the Trust. As of December 31, 2017, 261
cities/towns/non-city entities participate in the AWC Trust HCP.
The AWC Trust HCP allows members to establish a program of joint insurance and provides health and
welfare services to all participating members. The AWC Trust HCP pools claims without regard to
individual member experience. The pool is actuarially rated each year with the assumption of projected
claims run-out for all current members. The AWC Trust HCP includes medical, dental and vision
insurance through the following carriers: Kaiser Foundation Health Plan of Washington, Kaiser
Foundation Health Plan of Washington Options, Inc., Regence BlueShield, Asuris Northwest Health, Delta
Dental of Washington, and Vision Service Plan. Eligible members are cities and towns within the state of
Washington. Non-City Entities (public agency, public corporation, intergovernmental agency, or political
subdivision within the state of Washington) are eligible to apply for coverage into the AWC Trust HCP,
submitting application to the Board of Trustees for review as required in the Trust Agreement.
Participating employers pay monthly premiums to the AWC Trust HCP. The AWC Trust HCP is
responsible for payment of all covered claims. In 2017, the AWC Trust HCP purchased stop loss
insurance for Regence/Asuris plans at an Individual Stop Loss (ISL) of $1.5 million through Life Map, and
Kaiser ISL at $1 million with Companion Life through ASG Risk Management. The aggregate policy is for
200% of expected medical claims.
Participating employers contract to remain in the AWC HCP for a minimum of three years. Participating
employers with over 250 employees must provide written notice of termination of all coverage a
minimum of 12 months in advance of the termination date, and participating employers with under 250
employees must provide written notice of termination of all coverage a minimum of 6 months in
advance of termination date. When all coverage is being terminated, termination will only occur on
December 31. Participating employers terminating a group or line of coverage must notify the HCP a
minimum of 60 days prior to terminati
member to past debts, or further contributions to the HCP. Similarly, the terminating member forfeits all
rights and interest to the HCP Account.
The operations of the Health Care Program are managed by the Board of Trustees or its delegates. The
Board of Trustees is comprised of four regionally elected officials from Trust member cities or towns, the
Employee Benefit Advisory Committee Chair and Vice Chair, and two appointed individuals from the
AWC Board of Directors, who are from Trust member cities or towns.
Washington State Auditor's OfficePage 40
The Trustees or its appointed delegates review and analyze Health Care Program related matters and
make operational decisions regarding premium contributions, reserves, plan options and benefits in
compliance with Chapter 48.62 RCW. The Board of Trustees has decision authority consistent with the
Trust Agreement, Health Care Program policies, Chapter 48.62 RCW and Chapter 200-110-WAC.
The accounting records of the Trust HCP are maintained in accordance with methods prescribed by the
-end
financial reporting is done on an accrual basis and submitted to the Office of the State Auditor as
required by Chapter 200-110 WAC. The audit report for the AWC Trust HCP is available from the
NOTE 13 SUBSEQUENT EVENTS
On April 20, 2017, the City Council authorized resolution 17-019 related to Affordable Housing at the
execute an agreement with Homeward Bound (doing business as Olympic Housing Trust) and further
authorized a loan to this non-profit organization. The resolution authorized a line of credit not to
exceed $250,000 to Homeward Bound to expedite the purchase, move and delivery of a four-plex
building that
and Homeward Bound will allow the organization to obtain the afore mentioned building while working
to secure permanent institutional and private funding for the project. The line of credit was scheduled
to mature on December 26, 2017 with a 2.5% interest rate, however the City Council authorized
resolution 17-053 to extend the maturity date of the loan. An interfund loan from the Transmission
Line Fund to the General Fund in the amount of $250,000 was authorized until Homeward Bound can
identify permanent financing. The loan is to be repaid no later than December 26, 2018.
In 2009, this Cherry Street property was identified by the City Council as one of several properties
suitable for use for affordable housing. The City held a public hearing on May 8, 2017 to declare the
property
and authorize the sale of this property to Homeward Bound. The organization will agree to rent the
property to very low or low income households for a period of not less than 40 years.
The City is working with Homeward Bound to identify permanent financing solutions for the completion
of the four plex and the addition of four additional units attached to the building. Costs associated
with this project include the repayment of the initial $250,000 loan, foundation and site work costs and
construction of the additional units. In May 2018, Ordinance 3201 was approved. This ordinance
provided for the issuance and sale of a twenty year Limited Tax General Obligation Bond with a principal
amount of $834,000 through Kitsap Bank. The sale of this bond occurred in late May 2018. The City
is working with Homeward Bound to execute a repayment agreement in the total amount of $925,000
over a period of forty years. The related agreements with Homeward Bound are targeted to be
completed in July 2018.
NOTE 14 OTHER FINANCIAL INFORMATION
The Fort Worden Public Development Authority (The Authority) was established by Ordinance 3108
it the power to manage, promote, develop, secure funding, and enhance the Fort Worden State Park
Washington State Auditor's OfficePage 41
including undertaking, assisting with, and otherwise facilitating the implementation of a Lifelong
Learning Center at the Park.
The Authority is a public corporation authorized under the provisions of RCW 35.21.735 35.21.759.
It is a separate legal entity that is independent from the City. RCW 35.21.750 provides that
from the assets and properties of such public corporation, commission, or authority and no creditor or
other person shall have any right of action against the city, town, or county creating such corporation,
commission or authority on account of any debts, obligations, or liabilities of such public corporation,
The Authority is governed by a Board of Directors. A nominating committee of the Authority solicits,
reviews and recommends Board Members. As the Chartering Agency, the City appoints Board
Members. The City Council also can remove Board members by resolution. The Authority maintains
independent financial reports. Financial reports are provided annually to the City Manager and City
Council and an independent audit is required annually.
In 2017, the City provided $30,000 of support to the Authority from the Lodging Tax Fund (approved
by the Lodging Tax Advisory Committee and the City Manager) to fund joint marketing of the Fort
Worden Lifelong Learning Center and the City of Port Townsend.
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ABOUT THE STATE AUDITOR’S OFFICE
The State Auditor's Office is established in thestate's Constitution and is part of the executive
branch of state government. The State Auditor is elected by the citizens of Washington and serves
four-year terms.
We work with our audit clients and citizens to achieve our vision of government that worksfor
citizens, by helping governments work better, cost less, deliver higher value, and earn greater
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In fulfilling our mission to hold state and local governments accountable for the use of public
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As an elected agency, the State Auditor's Office has the independence necessary to objectively
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Our audits look at financial information and compliance with state, federal and local laws on the
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The results of our work are widely distributed through a variety of reports, which are available on
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Contact information for the State Auditor’s Office
Public Records requestsPublicRecords@sao.wa.gov
Main telephone(360)902-0370
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Washington State Auditor's OfficePage 47