HomeMy WebLinkAbout2007 Financial Statements & Federal Single Audit ReportWashington State Auditor's Office
Financial Statements Audit Report
City of Port Townsend
Jefferson County
Audit Period
January 1, 2007 through December 31, 2007
Report No. 1000548
Issue Date
February 2, 2009
Washington State Auditor
Brian Sonntag
February 2, 2009
Council
City of Port Townsend
Port Townsend, Washington
Report on Financial Statements
Please find attached our report on the City of Port Townsend's financial statements.
We are issuing this report in order to provide information on the City's financial condition.
In addition to this work, we look at other areas of our audit client's operations for compliance with state
laws and regulations. The results of that audit will be included in a separately issued accountability
report.
Sincerely,
BRIAN SONNTAG, CGFM
STATE AUDITOR
Insurance Building, P.O. Box 40021 • Olympia, Washington 98504-0021 • (360) 902-0370 • TDD Relay (800) 833-6388
FAX (360) 753-0646 • http://www.sao.wa.gov
Table of Contents
City of Port Townsend
Jefferson County
January 1, 2007 through December 31, 2007
Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance
and Other Matters in Accordance with Government Auditing Standards .......................
Independent Auditor's Report on Financial Statements
Financial Section
Independent Auditor's Report on Internal
Control over Financial Reporting and on
Compliance and Other Matters in Accordance
with Government Auditing Standards
City of Port Townsend
Jefferson County
January 1, 2007 through December 31, 2007
Council
City of Port Townsend
Port Townsend, Washington
We have audited the financial statements of each major fund and the remaining funds of the City of Port
Townsend, Jefferson County, Washington, as of and for the year ended December 31, 2007, which
collectively comprise the City's basic financial statements, and have issued our report thereon dated
October 14, 2008.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to the financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit, we considered the City's internal control over financial reporting as
a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal
control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the
City's internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the City's ability to initiate, authorize, record, process or report
financial data reliably in accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the City's financial statements that is more than
inconsequential will not be prevented or detected by the City's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in
more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the entity's internal control.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all deficiencies in internal control that
might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal
control over financial reporting that we consider to be material weaknesses, as defined above.
Washington State Auditor's Office
1
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 the City's 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.
This report is intended for the information and use of management and the Council. 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.
BRIAN SONNTAG, CGFM
STATE AUDITOR
October 14, 2008
Washington State Auditor's Office
2
Independent Auditor's Report on Financial
Statements
City of Port Townsend
Jefferson County
January 1, 2007 through December 31, 2007
Council
City of Port Townsend
Port Townsend, Washington
We have audited the accompanying financial statements of each major fund and the remaining funds of
the City of Port Townsend, Jefferson County, Washington, as of and for the year ended December 31,
2007, as listed on page 5. These financial statements are the responsibility of the City's management.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the City prepares the financial statements for certain
proprietary funds in conformity with accounting principles generally accepted in the United States of
America applicable to proprietary funds of local governments.
As described in Note 1 to the financial statements, the City prepares its financial statements for the
remaining funds on the basis of accounting that demonstrates compliance with Washington State statutes
and the Budgeting, Accounting and Reporting System (BARS) manual prescribed by the State Auditor,
which is a comprehensive basis of accounting other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of each major fund of the City of Port Townsend, as of December 31, 2007, and the
changes in financial position and, where applicable, cash flows thereof for the Water/Sewer and
Stormwater funds for the year then ended in accordance with accounting principles generally accepted in
the United States of America. For the remaining funds, in our opinion, the financial statements present
fairly the financial position and results of operations of the funds of the City of Port Townsend, for the year
ended December 31, 2007, on the basis of accounting prescribed by the BARS manual.
In accordance with Government Auditing Standards, we have also issued our report on our consideration
of the City's internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the internal control over financial reporting
or on compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards and should be considered in assessing the results of our audit.
Washington State Auditor's Office
3
The management's discussion and analysis on pages 6 through 9 is not a required part of the basic
financial statements but is supplementary information required by the Governmental Accounting
Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required supplementary
information. However, we did not audit the information and express no opinion on it.
BRIAN SONNTAG, CGFM
STATE AUDITOR
October 14, 2008
Washington State Auditor's Office
4
Financial Section
City of Port Townsend
Jefferson County
January 1, 2007 through December 31, 2007
REQUIRED SUPPLEMENTAL INFORMATION
Management Discussion and Analysis — 2007
BASIC FINANCIAL STATEMENTS
Fund Resources and Uses Arising from Cash Transactions — 2007
Statement of Net Assets — Proprietary Funds — 2007
Statement of Revenues, Expenses and Changes in Net Assets — Proprietary Funds — 2007
Statement of Cash Flows — Proprietary Funds - 2007
Notes to the Financial Statements — 2007
Washington State Auditor's Office
5
MANAGEMENT DISCUSSION & ANALYSIS
This discussion and analysis is designed to provide an overview of the City of Port Townsend's
utility financial activities for the year ended December 31, 2007. Please read this
supplementary information in conjunction with the City's financial statements.
Overview of the Financial Statements
The basic financial statements include the Statement of Net Assets, the Statement of
Revenues, Expenses and Changes in Net Assets, and the Statement of Cash Flows.
The Statement of Net Assets presents the City's Water/Sewer Utility and Stormwater Utility
assets and liabilities with the difference between them reported as net assets. This statement
provides information about the amount of investments in resources (assets) and the obligations
to creditors (liabilities). The net assets increase when revenues exceed expenses. This
statement provides the basis for evaluating the capital structure, and assessing liquidity and
financial flexibility of the City.
The Statement of Revenue, Expenses and Changes in Net Assets reports revenues, expenses,
and the change in net assets for the years indicated. This statement measures the success of
the City's Water/Sewer Utility and Stormwater Utility operations and can be used to evaluate the
level of cost recovery from charges for products and services.
The Statement of Cash Flows provides information concerning cash receipts and disbursements
resulting from operational, financing, and investing activities. This statement provides insight
into the City's Water/Sewer and Stormwater Utility ability to generate cash flow and to meet
obligations and is an important indicator of the utility's liquidity and financial strength.
The Notes to the Financial Statements provide additional information that is essential to a full
understanding of the information contained in the basic financial statements.
Financial Highlights
No rate increases were implemented for 2007 for water and sewer services , as the utility rate
study was not completed until 2008. The new water/sewer rates adopted in October 2007 do
not take affect until January 1, 2008 and include a cost of service componet that changes how
the customer classes are derived and billed.
Effective April 1, 2007 an additional 10% utility tax was implemented on all utilities.
This additional tax was embedded in the utility rates charged to customers. When the new
customer classes take affect in 2008 these taxes will not be embedded in the rates.
Stormwater rates increased effective April 1, 2007 from $6.00 to $7.25 for single family
dwellings that do not exceed 3,000 square feet of impervious surface.
Water customers increased by 69, or 1.6%. Sewer customers increased by 60, or 1.6%, in
2007. Water/Sewer revenues increased by 6.3% due to the additional taxes embedded in the
rates. Water consumption billed decreased 4%.
Washington State Auditor's Office
6
The City Water/Sewer Utility ended 2007 with $8,081,231 unrestricted cash. The City
Stormwater Utility ended 2007 with $443,119 unrestricted cash. These levels of cash are
enough to provide adequate insurance for meeting continuing cash flow needs. The City
Water/Sewer Utility is maintaining debt service coverage levels of 2.67, well above the minimum
required level of 1.25. The Stormwater Utility has no outstanding debt.
Financial Analysis
The following information
provides analysis of
the 2007 and
2006 comparative
financial
information provided in the following table.
Water/Sewer Utility Fund
Condensed Financial Information for December 31, 2007, and 2006
Statement of Net Assets
2007
2006
Change % Change
Restated
Current Assets
8,532,846
8,802,681
-269,835
-3.1
Noncurrent Assets
25,735,320
25,487,901
247,419
.9
Total Assets
34,268,166
34,290,582
-22,416
.06
Current Liabilities
912,148
902,546
9,602
1.1
Noncurrent Liabilities
4,918,920
5,679,912
-760,992
-13.4
Total Liabilities
5,831,067
6,582,458
-751,390
-11.4
Net Assets
28,437,099
27,708,124
728,975
2.6
Statement of Revenue. Expenses and Chanaes in Net Assets
2007
2006
Change
% Change
Operating Revenues
4,627,886
4,355,066
272,820
6.3
Operating Expenses
5,350,327
4,783,488
566,839
11.8
Net Operating Income
-722,441
-428,422
-294,019
-68.6
NonOperating Revenues
718,505
538,918
179,587
33.3
NonOperating Expenses
-160,496
-181,129
20,633
-11.4
NonOperating Revenue/
558,009
357,789
200,220
56.0
(Expenses)
Contributed Capital
893,406
692,787
200,619 29.0
Change in Net Assets
728,974
622,154
106,820 17.2
Net Assets — beginning of year
27,708,124
27,085,970
622,154 2.3
Net Assets — end of year
28,437,098
27,708,124
728,974 2.6
Washington State Auditor's Office
7
Stormwater Utility Fund
Condensed Financial Information for December 31, 2007, and 2006
Statement of Net Assets
2007
2006
Change
% Change
Current Assets
505,153
501,531
3,622
.7
Noncurrent Assets
2,683,959
2,641,847
42,112
1.6
Total Assets
3,189,112
3,143,378
45,734
1.5
Current Liabilities
0
3,164
-3164
-100.0
Noncurrent Liabilities
0
0
0
0
Total Liabilities
0
3,164
0
0
Net Assets
3,189,112
3,140,214
48,898
1.6
Statement of Revenue. Expenses and Chanaes in Net Assets
2007
2006
Change
% Change
Operating Revenues
574,048
457,296
116,752
25.5
Operating Expenses
607,151
448,509
158,642
35.4
Net Operating Income
-33,103
8,787
-41,890
-476.7
NonOperating Revenues
64,580
102,318
-37,738
-36.8
NonOperating Expenses
0
0
0
0
NonOperating Revenue/
64,580
102,318
-37,738
-36.8
(Expenses)
Contributed Capital
17,420
140,936
-123,516 -87.6
Change in Net Assets
48,897
252,041
-203,144 -80.6
Net Assets — beginning of year
3,140,214
2,888,173
252,041 8.7
Net Assets — end of year
3,189,111
3,140,214
48,897 1.5
Assets
Water/Sewer Utility current assets in 2007 decreased $269,835 from 2006, or 3.1%.
Noncurrent assets increased in 2007 in the amount of $247,419 or .9%. A prior year
correcting entry to depreciation in the amount of $497,968 accounts for a
portion of this change.
Stormwater Utility current assets in 2007 increased $3,622 from 2006, or .7%. Noncurrent
assets increased in 2007 in the amount of $42,112 or 1.6%. A prior correcting entry for over
depreciation accounts for $26,973 of this increase.
Liabilities
Water/Sewer Utility current liabilities increased 1.1 % in 2007 from 2006. Noncurrent liabilities
decreased $760,992 mostly in debt outstanding.
Washington State Auditor's Office
8
Stormwater Utility current liabilities were reduced $3,164 in 2007, resulting in the Stormwater
utility now having no liabilities.
Net Assets
Water/Sewer Utility net assets increased by $728,975 or 2.6%. The increase in total net assets
was mostly due to a decrease in liabilities due to debt repayment.
Stormwater Utility net assets increased $48,898 or 1.6%, from 2006. The increase in
total net assets was mostly due to an increase in capital assets.
Operating Revenues
Water/Sewer Utility operating revenues increased by 6.3% over 2006. This is an increase of
$272,820. This increase is due to the additional 10% tax levied by the city on all utilities
effective April 1, 2007. This new tax is embedded in the utility rates, in the same manner as the
original 10% utility tax.
The City Water and Sewer Utility customers increased by 69 in 2007.
Stormwater Utility operating revenues increased by 25.5% over 2006. This is an increase of
$116,752. This increase is mostly due to rate increase of 20.8% effective April 1, 2007. There
was also an additional 10% utility tax imposed by the city on all utility rates.
Operating Expenses
Water/Sewer Utility operating expenses increased by $566,839 or 11.8%, in 2007. This was
mostly due to an increase in utility tax paid to the city.
Stormwater Utility operating expenses increased by $158,642 or 35.4%, in 2007. This was due
to a increase in the taxes due to city and payroll expense increases.
Nonoperating Revenues and Expenses
Water/Sewer Utility total nonoperating revenues and expenses increased by $200,220 or 56%,
in 2007 due to grant revenue and money received from the Port of Port Townsend as
reimbursements for improvements. Stormwater nonoperating revenues and expenses
decreased by $37,738 or 36% in 2007.
Capital Assets and Long Term Debt Activity
Water/Sewer Utility Net Plant Assets increased by $728,974 in 2007. The main capital projects
included work on Jackson Street utilities.
The Stormwater Utility net assets increased by $48,897, the purchase of Quimper Jefferson
Land Trust Land accounted for the bulk of the increase.
No new debt was issued in 2007. The debt service coverage ratio for 2007 is 2.67 for the
Water/Sewer utility. The Stormwater Utility has no debt.
Washington State Auditor's Office
9
MCAG NO 0364
STATEMENT C4
City of Port Townsend
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
For the Year Ended 2007
BARS CODE
Beginning Net Cash Investment
Revenue and Other Sources
310
320
330
340
350
360
370
390
Total Revenue and Other Sources
Total Resources
Operating Expenditure
Taxes
Licenses and Permits
Intergovernmental
Charges for Goods and Services
Fines and Penalties
Miscellaneous
Capital Contributions
Other Financing Sources
Fund Number and Name
Fund Number and Name
010 General Fund
110 Street
Budget Actual
Budget Actual
$ 297,084 $
258,409
$ 101,423 $
44,660
$ 5,547,391 $
5,575,847
$ 437,492 $
411,539
336,199
339,879
-
387
146,829
160,167
213,653
213,713
1,179,589
1,134,596
26,000
8,836
108,000
106,062
-
-
25,383
30,898
5,697
172
(2,750)
7,343,390 7,347,622 677,145 637,422
$ 7,640,474 $ 7,606,031 $ 778,568 $ 682,082
510
General Goverment
1,440,005
1,481,929
520
Public Safety
2,554,076
2,565,173
530
Physical Environment
3,600
-
-
-
540
Transportation
-
-
499,296
485,717
550
Economic Environment
863,344
879,486
-
-
560
Mental and Physical Health
-
-
570
Culture and Recreational
60,599
39,985
-
-
Total Operating Expenditures
$ 4,921,624
$ 4,966,573
$
499,296
$ 485,717
591-593
Debt Service
-
3,697
-
-
594-595
Capital Outlay
28,293
22,552
322,781
50,522
Total Expenditures
$ 4,949,917
$ 4,992,822
$
822,077
$ 536,240
597-599
Other Financing Uses
$ 2,363,935
$ 2,320,971
$
-
$ -
Total Expenditures and Other Uses
$ 7,313,853
$ 7,313,793
$
822,077
$ 536,240
Excess (Deficit) of Resources Over
Uses
$ 326,622
$ 292,239
$
(43,509)
$ 145,842
380
Nonrevenues (Except 384 and 388.80)
400
1,087
9,110
580
Nonexpenditures (Except 584 and 588.80)
-
(60)
(8,281)
(8,281)
Ending Net Cash and Investments
$ 327,022
$ 293,265
$
(51,790)
$ 146,671
The Accompanying Notes are an Integral part of This Statement
Washington State Auditor's Office
10
MCAG NO 0364
STATEMENT C4
City of Port Townsend
FUND RESOURCES AND USES ARISING FROM
CASH TRANSACTIONS
For the Year Ended 2007
BARS CODE
Fund Number and Name
Fund Number and Name
120 Library Fund
140 PW
Admin & Engineer
Budget
Actual
Budget
Actual
Beginning Net Cash Invenstment
$
3,000
$
$
$
Revenue and Other Sources
310
Taxes
$
-
$
$
$
320
Licenses and Permits
330
Intergovernmental
22,648
340
Charges for Goods and Sery
-
-
1,001,493
938,359
350
Fines and Penalties
10,000
12,592
-
-
360
Miscellaneous
-
8,311
1,027
370
Capital Contributions
-
-
-
390
Other Financing Sources
712,547
693,996
-
-
Total Revenue and Other Sources
722,547
737,547
1,001,493
939,386
Total Resources
$
725,547
$
737,547
$
1,001,493
$
939,386
Operating Expenditure
510
General Goverment
-
-
-
-
520
Public Safety
-
-
530
Physical Environment
981,493
938,971
540
Transportation
-
-
550
Economic Environment
560
Mental and Physical Health
-
-
570
Culture and Recreational
675,547
663,774
-
-
Total Operating Expenditures
$
675,547
$
663,774
$
981,493
$
938,971
591-593
Debt Service
-
-
-
-
594-595
Capital Outlay
62,000
73,773
20,000
415
Total Expenditures
$
737,547
$
737,547
$
1,001,493
$
939,386
597-599
Other Financing Uses
0.00
0.00
0.00
0.00
Total Expenditures and Other Uses
$
737,547
$
737,547
$
1,001,493
$
939,386
Excess (Deficit) of Resources Over Uses
$
(12,000)
$
-
$
-
$
-
380
Nonrevenues (Except 384 ar
580
Nonexpenditures (Except 58,
Ending Net Cash and Investments
$
(12,000)
$
$
$
The Accompanying Notes are an Integral part of This Statement
Washington State Auditor's Office
11
MCAG NO 0364
STATEMENT C4
City of Port Townsend
FUND RESOURCES AND USES ARISING
FROM CASH TRANSACTIONS
For the Year Ended 2007
BARS CODE
Fund Number
and
Name
Fund Number
and Name
150 Lodging Tax
171 Fire
and EMS
Budget
Actual
Budget
Actual
Beginning Net Cash Invenstment
$
158,753
$
213,385
$
-
$
13,652
Revenue and Other Sources
310
Taxes
$
343,322
$
351,119
$
382,500
$
376,827
320
Licenses and Permits
-
-
-
-
330
Intergovernmental
2,274
340
Charges for Goods and Sery
77
350
Fines and Penalties
-
-
-
360
Miscellaneous
6,350
9,169
370
Capital Contributions
-
-
-
-
390
Other Financing Sources
-
-
829,248
826,262
Total Revenue and Other Sources
349,672
360,289
1,211,748
1,205,440
Total Resources
$
508,425
$
573,674
$
1,211,748
$
1,219,092
Operating Expenditure
510
General Goverment
26,000
26,000
-
-
520
Public Safety
-
-
1,218,779
1,219,092
530
Physical Environment
-
-
540
Transportation
-
-
550
Economic Environment
305,850
288,331
560
Mental and Physical Health
-
-
570
Culture and Recreational
-
-
-
-
Total Operating Expenditures
$
331,850
$
314,331
$
1,218,779
$
1,219,092
591-593
Debt Service
-
-
-
-
594-595
Capital Outlay
-
-
-
-
Total Expenditures
$
331,850
$
314,331
$
1,218,779
$
1,219,092
597-599
Other Financing Uses
28,000
28,000
-
-
Total Expenditures and Other Uses
$
359,850
$
342,331
$
1,218,779
$
1,219,092
Excess (Deficit) of Resources Over Uses
$
148,575
$
231,342
$
(7,031) $
380
Nonrevenues (Except 384 ar
-
-
580
Nonexpenditures (Except 58,
-
-
Ending Net Cash and Investments
$
148,575
$
231,342
$
(7,031)
$
The Accompanying Notes are an Integral part of This Statement
Washington State Auditor's Office
12
MCAG NO 0364
STATEMENT C4
City of Port Townsend
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
For the Year Ended 2007
BARS CODE
Fund Number and
Name
Fund Number and
Name
195 System Dev Charges
199 Community Services
Budget
Actual
Budget
Actual
Beginning Net Cash Invenstment
$
377,306
$
578,390
$
$
Revenue and Other Sources
310
Taxes
$
-
$
-
$
$
320
Licenses and Permits
330
Intergovernmental
340
Charges for Goods and Services
75,000
76,383
350
Fines and Penalties
-
-
-
-
360
Miscellaneous
25,092
28,500
14,207
11,837
370
Capital Contributions
-
-
-
-
390
Other Financing Sources
-
-
659,089
689,137
Total Revenue and Other Sources
25,092
28,500
748,296
777,356
Total Resources
$
402,398
$
606,890
$
748,296
$
777,356
Operating Expenditure
510
General Goverment
-
-
11,050
7,216
520
Public Safety
-
-
530
Physical Environment
540
Transportation
-
-
550
Economic Environment
75,805
69,080
560
Mental and Physical Health
-
-
570
Culture and Recreational
697,941
701,606
Total Operating Expenditures
$
$
$
784,796
$
777,901
591-593
Debt Service
-
-
594-595
Capital Outlay
500
-
Total Expenditures
$
$
$
785,296
$
777,901
597-599
Other Financing Uses
715,000
351,368
-
-
Total Expenditures and Other Uses
$
715,000
$
351,368
$
785,296
$
777,901
Excess (Deficit) of Resources Over Uses
$
(312,602)
$
255,522
$
(37,000)
$
(545)
380
Nonrevenues (Except 384 and 388.80)
335,584
357,496
545
580
Nonexpenditures (Except 584 and 588.
-
-
-
Ending Net Cash and Investments
$
22,982
$
613,018
$
(37,000)
$
The Accompanying Notes are an Integral part of This Statement
Washington State Auditor's Office
13
MCAG NO 0364
STATEMENT C4
City of Port Townsend
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
For the Year Ended 2007
BARS CODE
Beginning Net Cash Investment
Revenue and Other Sources
310
Taxes
320
Licenses and Permits
330
Intergovernmental
340
Charges for Goods and Services
350
Fines and Penalties
360
Miscellaneous
370
Capital Contributions
390
Other Financing Sources
Total Revenue and Other Sources
Total Resources
Operating Expenditure
510
General Goverment
520
Public Safety
530
Physical Environment
540
Transportation
550
Economic Environment
560
Mental and Physical Health
570
Culture and Recreational
Total Operating Expenditures
591-593
Debt Service
594-595
Capital Outlay
Total Expenditures
597-599
Other Financing Uses
otal Expenditures and Other Uses
Excess (Deficit) of Resources Over Uses
380
Nonrevenues (Except 384 and 388.80)
580
Nonexpenditures (Except 584 and 588.80)
Ending Net Cash and Investments
The Accompanying Notes are an Integral part of This Statement
Fund Number and Name
Fund Number and Name
200 G.O. Debt Service
301 General CIP Projects
Budget
Actual
Budget
Actual
$
51,704
$
53,974
$
243,416
$ 279,006
$
-
$
-
$
473,972
$ 463,349
939,000
149,275
62,585
67,265
13,195
17,266
586,824
537,609
244,089
415,661
649,409
604,874
1,670,256
1,045,551
$
701,113
$
658,848
$
1,913,672
$ 1,324,557
1,000
1,212
-
500
$
1,000
$
1,212
$
$ 500
641,124
638,126
-
-
-
1,869,177
554,440
$
642,124
$
639,338
$
1,869,177
$ 554,940
-
-
512,824
786,504
$
642,124
$
639,338
$
2,382,001
$ 1,341,443
$
58,989
$
19,510
$
(468,328)
$ (16,886)
$
58,989
$
19,510
$
(468,328)
$ (16,886)
Washington State Auditor's Office
14
MCAG NO 0364
STATEMENT C4
City of Port Townsend
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
For the Year Ended 2007
BARS CODE
Beginning Net Cash Investment
Revenue and Other Sources
310
320
330
340
350
360
370
390
Total Revenue and Other Sources
Total Resources
Operating Expenditure
Taxes
Licenses and Permits
Intergovernmental
Charges for Goods and Services
Fines and Penalties
Miscellaneous
Capital Contributions
Other Financing Sources
Fund Number and Name Fund Number and Name
302 City Hall Annex/Renovation500 Equipment Rental
Budget Actual Budget Actual
391,264 42,410 854,115 912,022
7,500 - 8,492
- 104,208 105,387
73,116 73,321 768,353 746,822
19,000 18,959
73,116 80,821 891,561 879,660
464,380 123,231 1,745,676 1,791,682
510
General Goverment
125,143
113,425
520
Public Safety
-
-
530
Physical Environment
-
-
540
Transportation
553,519
542,060
550
Economic Environment
-
-
560
Mental and Physical Health
570
Culture and Recreational
-
-
Total Operating Expenditures
-
678,662
655,485
591-593
Debt Service
-
14,063
-
-
594-595
Capital Outlay
100,000
62,025
762,999
629,030
Total Expenditures
100,000
76,087
1,441,661
1,284,515
597-599
Other Financing Uses
-
23,913
-
-
Total Expenditures and Other Uses
100,000
100,000
1,441,661
1,284,515
Excess (Deficit) of Resources Over Uses
364,380
23,231
304,015
507,167
380
Nonrevenues (Except 384 and 388.
-
-
-
-
580
Nonexpenditures (Except 584 and °
-
-
-
-
Ending Net Cash and Investments
364,380
23,231
304,015
507,167
The Accompanying Notes are an Integral part of This Statement
Washington State Auditor's Office
15
MCAG NO. 0364 STATEMENT C-5
PAGE 1 OF 2
CITY OF PORT TOWNSEND
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION
For The Year Ended December 31, 2007
Fund Type:
Beginning Net Cash and Investments:
Revenues and Other Financing Sources
Total Resources
Expenditures And Other Financing Uses
Excess (Deficit) of Resources Over Uses
Nonrevenues (Except 384)
Nonexpenditures (Except 584)
Ending Net Cash and Investments
Fund Type:
Beginning Net Cash and Investments:
Revenues and Other Financing Sources
Total Resources
Expenditures And Other Financing Uses
Excess (Deficit) of Resources Over Uses
Nonrevenues (Except 384)
Nonexpenditures (Except 584)
Ending Net Cash and Investments
Fund Type:
Fund Number And Name Fund Number And Name
101 - DRUG ENFORCEMENT ED 102 - Continaencv
$ 66 $
-
659
-
$
154,495
6,180
$
160,876
7,725
$ 66 $
659
$
160,675
$
168,601
$ 66 $
659
$
160,675
$
168,601
]]$
66 $
659
$
160,675
$
168,601
Fund Number And Name Fund Number And Name
170 - Fire EauiD Joint Maint 1190 - COMM DEV BLOCK GRANT
$ 10,248 $
-
10,091
118
$
35,943
18,707
$
80,241
51,830
$ 10,248 $
10,248
10,209
10,209
$
54,650
40,000
$
132,071
-
$ - $
-
$
14,650
$
132,071
$ - $
-
$
14,650
$
132,071
Fund Number And Name Fund Number And Name
610 - Firemen's Pension & Relief 1 613 - Aaencv
Beginning Net Cash and Investments:
$
294,582
$
296,383
$
- $
51,012
Revenues and Other Financing Sources
90,194
91,578
-
-
$
- $
51,012
Total Resources $ 384,776 $ 387,961
Expenditures And Other Financing Uses
80,679
73,229
-
-
$
- $
51,012
Excess (Deficit) of Resources Over Uses $ 304,097 $ 314,733
Nonrevenues (Except 384)
-
-
-
88,570
Nonexpenditures (Except 584)
-
-
-
114,043
Ending Net Cash and Investments
$
304,097
$
314,733
$
- $
25,539
The Accompany Notes are an Integral Part of This Statement
Washington State Auditor's Office
16
MCAG NO. 0364
Fund Type:
STATEMENT C-5
PAGE 2OF2
CITY OF PORT TOWNSEND
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION
For The Year Ended December 31, 2007
Fund Number And Name Fund Number And Name
621 -Memorial 1 623 - Golf Course
Beginning Net Cash and Investments:
$
20,176
$
27,290
$
6,000
$
(834)
Revenues and Other Financing Sources
8,720
8,147
20,000
17,708
$
26,000
$
16,874
Total Resources $ 28,896 $ 35,437
Expenditures And Other Financing Uses
15,000
15,307
22,000
8,853
$
8,021
Excess (Deficit) of Resources Over Uses $ 13,896 $ 20,130
Nonrevenues (Except 384)
-
-
-
-
Nonexpenditures (Except 584)
-
-
-
-
$
-
$
8,021
Ending Net Cash and Investments $ 13,896 $ 20,130
Fund Type:
Beginning Net Cash and Investments:
Revenues and Other Financing Sources
Total Resources
Expenditures And Other Financing Uses
Excess (Deficit) of Resources Over Uses
Nonrevenues (Except 384)
Nonexpenditures (Except 584)
Ending Net Cash and Investments
Fund Number And Name
631 - Maritime Center Fund
$ - $ 2
- 1
$ - $ 3
$ - $ 3
17,505 72,401
- 72,401
$ 17,505 $ 3
The Accompany Notes are an Integral Part of This Statement
Washington State Auditor's Office
17
CITY OF PORT TOWNSEND
Statement of Net Assets
Proprietary Funds
December 31, 2007
ASSETS
Current Assets:
Cash and Cash Equivalent
Account Receivables (net)
Inventories
Total Current Assets
Noncurrent Assets:
Capital Assets, net of accumulated depreciation
Construction Work In Progress
Loan Receivable
Unamortized Sewer Com Plan
Unamortized Debt Discount
Unamortized Flood Control Plan
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities:
Refundable Deposits
Unclaimesd property
Compensated Absences
Accrued interest
Current portion long term debt
Total Current Liabilities
Noncurrent Liabilities:
Deferred Amount (refunding)
Bonds
Other Long Term Debt
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Investment in Capital Assets, net of debt
Restricted
Unrestricted
Total Net Assets
2007
2007
2007
Enterprise Funds
Water/Sewer
Storm
Fund
Fund
Total
$
8,081,231
$
443,119
$
8,524,351
451,615
62,034
513,648
8,532,846
505,153
9,037,999
25,267,938
2,522,003
$
27,789,942
350,000
350,000
64,509
64,509
52,873
52,873
161,956
161,956
25,735,320
2,683,959
28,419,280
34,268,166
$
3,189,112
$37,457,279
$
$
12,388
$
-
$
12,388
70,452
-
70,452
38,377
-
38,377
790,931
790,931
912,148
-
912,148
(258,069)
(258,069)
1,700,000
-
1,700,000
3,476,989
-
3,476,989
4,918,920
-
4,918,920
5,831,067
$
-
$
5,831,067
$
$
19,558,088
$
2,683,959
$
22,242,047
8,879,011
505,153
9,384,164
$
28,437,099
$
3,189,112
$31,626,211
The Accompanying notes are an Integral Part of This Statement
Washington State Auditor's Office
18
CITY OF PORT TOWNSEND
Statement of Revenues, Expenses and Changes in Net Assets
Proprietary Funds
Year Ended December 31, 2007
Operating Revenues
Charges for services
Total Operating Revenue
Operating Expenses
Operations and Maintenance
Administration
Amortization
Depreciation
Taxes
Total Operating Expenses
Operating Income (Loss)
Nonoperating Revenues (Expenses):
Interest Income
Interest Expense
Grant Revenue
Other Miscellaneous Income
Total Nonoperating Revenues (Expenses)
Income (Loss) Before Transfers and
Contributed Capital
Transfers (to) from Other Funds:
Total Transfers (to) from Other Funds
Contributed Capital
Change in Net Assets
Net Assets, January 1, as restated
Net Assets, December 31
2007
2007
2007
Water/Sewer
Storm
Utility
Fund
Total
$
4,627,886
$
574,048
$
5,201,934
$
4,627,886
$
574,048
$
5,201,934
$
1,909,255
$
339,173
$
2,248,428
1,512,589
121,175
$
1,633,764
58,694
17,970
$
76,665
751,534
22,175
$
773,708
1,118,255
106,658
$
1,224,913
$
5,350,327
$
607,151
$
5,957,478
$
(722,441)
$
(33,103)
$
(755,544)
$
414,509
21,723
$
436,232
$
(160,496)
-
$
(160,496)
$
71,590
38,241
$
109,832
$
232,406
4,616
$
237,022
$
558,010
$
64,580
$
622,590
$
(164,431)
$
31,477
$
(132,954)
$
893,406
$
17,420
$
910,826
$
728,975
$
48,897
$
777,872
$
27,708,124
$
3,140,214
$ 30,848,338
$ 28,437,099
$
3,189,111
$ 31,626,211
The Accompanying Notes are an Integral Part of This Statement
Washington State Auditor's Office
19
MCAG NO. 0364
CITY OF PORT TOWNSEND
Statement of Cash Flow
Proprietary Funds
For the year ended December 31, 2007
Enterprise Funds
Water/Sewer Fund
Storm Fund
Total
Cash flows from operating activities:
Receipts from customers
$ 4,565,864
$ 554,296
$ 5,120,160
Payments to suppliers for goods and services
(3,420,688)
(460,348)
(3,881,036)
Payments to employees for services
Payments for taxes
(1,118,255)
(106,658)
(1,224,913)
Net cash provided (used) by operating activities
26,921
(12,710)
14,211
Cash flows from noncapital financing activities:
Interfund Loans
Operating transfers -from (to) other funds
-
-
-
Receipts from other operating revenues
234,922
4,616
239,538
Net cash provided (used) by noncapital financing activities 234,922
4,616
239,538
Cash flows from capital & related financing activities:
Acquisition and construction of capital assets including Work In Progress
PWTF & SRF Loan proceeds
Payments for principal on revenue bonds and contracts
Payments for interest on revenue bonds and contracts
Operating Transfers from other funds
Cash contributed in aid of construction
Loss on retirement of assets
Net cash provided (used) by capital &related financing activities
Cash flows from investing activities:
Sale (Purchase) of investment securities
Proceeds from interest and dividends earned
Net cash provided (used) by investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash and cash equivalents consists of:
Unrestricted cash and cash equivalents
Restricted cash and cash equivalents
Total cash and cash equivalents
Reconciliation of operating income (loss) to net cash provided
by operating activities:
Net operating income (loss)
Adjustments to reconcile operating income to net cash
provided by operating activities:
(550,693)
(64,836)
(615,529)
(765,342)
(765,342)
(157,302)
(157,302)
483,849
38,241
522,090
(989,488)
(26,595)
(1,016,083)
414,513
21,723
436,236
414,513
21,723
436,236
(313,132)
(12,966)
(326,099)
8,394,364
456,085
8,850,449
$ 8,081,232 $
443,119
$ 8,524,350
$ 0
$ 8,081,232 $
443,119
$ 8,524,351
443,119
$ 8,524,351
$ 8,081,232 $
$ (722,441) $ (33,103) $ (755,544)
Depreciation
751,534
22,175
773,709
(Increase) decrease in Accounts Receivable
(45,816)
(16,588)
(62,404)
Increase (decrease) in Current Liabilities
(15,049)
(3,164)
(18,213)
(Increase) decrease in Deferred Debits
58,693
17,970
76,664
Prior year capital acquisition received grant funding this year
-
Total adjustments to reconcile operating income to
net cash provided by operating activities:
749,362
20,393
769,755
Net cash provided by operating activities:
$ 26,921 $
(12,710) $
14,211
The Accompanying Notes Are An Integral Part of This Statement
Washington State Auditor's Office
20
City of Port Townsend
Notes To The Financial Statements
For the Year Ended December 31, 2007
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the utility funds of the City of Port Townsend conform to generally
accepted accounting principles (GAAP) as applicable to utility funds of governments. The
Governmental Accounting Standards Board (GASB) is the accepted standard setting body for
establishing governmental accounting and financial reporting principles. In June 1999, GASB
approved Statement 34, Basic Financial Statements — and Management Discussion and Analysis —
for State and Local Governments. This and consecutive statements are reflected in the
accompanying financial statements (including notes to financial statements). The following is a
summary of the most significant policies (including identification of those policies which result in
material departures from generally accepted accounting principles):
A. Reporting Entity
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 government and provides police and fire protection, water, sewer, storm drainage,
as well as maintaining parks, streets, and a library for use by its citizens.
B. Basis of Accountina and Presentation
The city uses single entry, cash basis accounting for its governmental fund type funds,
which is a departure from generally accepted accounting principles (GAAP). The
proprietary funds use the accrual basis accounting. Proprietary funds are used to account
for activities that are operated in a manner similar to private enterprise business.
The City of Port Townsend uses the revenue and expenditure classifications contained in
the Budgeting, Accounting and Reporting System (BARS) manual. The manual is
prescribed by the State Auditor's Office under the authority of the Washington State law,
Chapter 43.09 RCW.
The City of Port Townsend applies GASB pronouncements and has not elected to apply
Financial Accounting Standard Board (FASB) statements and Accounting Principles Board
(APB) pronouncements issued after November 30, 1989.
The accounts of the city are organized on the basis of funds and account groups, each of
which is considered a separate accounting entity. Each fund is accounted for with a
separate set of single entry accounts that comprise its cash, investments, revenues and
expenditures or expenses, as appropriate.
The accounting records of the City of Port Townsend's utilities are maintained and reported
in accordance with the methods prescribed by the State Auditor under the authority of
Chapter 43.09 RCW.
Washington State Auditor's Office
21
The city's resources are allocated to and accounted for in individual funds depending on
what they are to be spent for and how they are controlled. The following are the fund types
used by the city:
Governmental Fund Types.- are used to finance most governmental functions and account
for and report expendable financial resources and related obligations.
General Fund (Fund 010) (Current Expense Fund)
This fund is the primary operating fund of the city. It accounts for all financial resources
except those required to be accounted for in another fund.
Special Revenue Funds (Funds in the 100 series)
These funds account for revenues derived from specific taxes, grants, or other sources
which are designed to finance particular activities of the city.
Debt Service Funds (Funds in the 200 series)
These funds are used to gather resources to pay general government debt.
Capital Projects Funds (Funds in the 300 series)
These funds account for financial resources which are designated for the acquisition or
construction of general government capital improvements.
Proprietary Fund Types - are used to account for activities similar to those in the private
sector and measure net income.
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.
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 units on a cost -reimbursement basis.
Fiduciary Fund Types - Fiduciary funds account for assets held by the city in a trustee
capacity or as an agent on behalf of others.
Pension (and Other Employee Benefit) Trust Funds (611-620)
Firemen's Pension
Private Purpose Trust Funds (621-630)
Funds used to report all trust arrangements under which principal and income
benefit individual, private organization and other government.
Agency Funds (Funds 631-699)
This fund accounts for assets whereby the city acts as a pass through agent for various
government entities.
Washington State Auditor's Office
22
C. Basis of Accounting
Basis of accounting refers to when revenues and expenditures are recognized in the
accounts and reported in the financial statements. Revenues are recognized only 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 for the
governmental fund types.
Purchases of capital assets are expensed during the year of acquisition. There is no
capitalization of capital assets, nor allocation of depreciation expense for the governmental
fund types. Inventory is expensed when purchased.
A different basis of accounting is used for the water, sewer, and storm drainage enterprise
functions as prescribed for. See Notes 8 through 16.
D. Budgets and Budgetary Accounting
Annual appropriated budgets are adopted for all funds. The financial statements include
budgetary comparisons for those funds.
Annual appropriated budgets are adopted at the fund level. The budgets constitute the legal
authority for expenditures at that level. Annual appropriations for all funds lapse at year
end.
The city manager is authorized to transfer budgeted amounts between (department within
and fund/object classes with departments); however, any revisions that alter the total
expenditures of a fund, or that affect the number of authorized employee positions, salary
ranges, hours, or other conditions of employment must be approved by the city council.
E. Assets, Liabilities and Equities
Cash and Equivalents
It is the city's policy to invest all temporary cash surpluses. The amounts are included in the
net cash and investments shown on the statements of fund resources and uses arising from
cash transactions. The interest on these investments is prorated to the various funds. The
average compensating balances maintained during 2007 were approximately $450,683.22.
The city's deposits are entirely covered by federal depository insurance (FDIC and FSLIC)
or by collateral held in a multiple financial institution collateral pool administered by the
Washington Public Deposit Protection Commission (PDPC).
Investments See Note 3.
Capital Assets
Capital assets are long-lived assets of the city and are recorded as expenditures when
purchased in the government fund types. The proprietary funds capitalization threshold is
$5,000 and utility capital assets are depreciated over their useful lives. See Notes 4, 8
and 9.
Compensated Absences
Vacation pay, which may be accumulated up to 6 weeks, is payable upon resignation,
retirement or death. Sick leave may be accumulated up to 1440 hours.
Washington State Auditor's Office
23
Lonq-Term Debt See Note 6.
Other Financing Sources Or Uses
The city's "Other Financing Sources or Uses" consist of Operating transfers -in, Operating
transfers -out, Special assessment bond proceeds, Proceeds from refunding bonds, and
Capital leases.
Risk Management See Note 8.
NOTE 2 - COMPLIANCE AND ACCOUNTABILITY
There have been no material violations of finance -related legal or contractual provisions.
NOTE 3 - INVESTMENTS
The city's investments are either insured, registered, or held by the city or its agent in the city's
name. As required by state law, all investments of the city's funds are obligations of the U S
Government, the State Treasurer's Investment Pool, or deposits with Washington State banks and
savings and loan institutions.
Investments by type at December 31, 2007 are as follows:
Investments
Carrying Amount
Market value
Washington State Treasurer's Investment Pool
$9,958,291.39
$9,958,291.39
US Bank Savings Account
US Bank Investment Account
Frontier Bank CD
$581.69
$18,706.13
$1,026,136.99
$581.69
$18,706.13
$1,026,136.99
2007 Total Investments
$11,003.716.20
$11,003,716.20
NOTE 4 — UTILITY CAPITAL ASSETS
Major expenses for capital assets, including capital leases and major repairs that increase useful
lives, are capitalized. Maintenance, repairs and minor renewals are accounted for as expenses
when incurred.
Capital assets are recorded at cost. Donations are recorded at fair market value at the time of
donations or the appraised value.
Washington State Auditor's Office
24
The Net Capital Assets includes a prior year adjustment for over depreciation from prior periods.
See note 18.
Utility Capital Asset activity for the year ended December 31, 2007 was as follows:
Beginning
Ending
Balance Increase
Decrease
Balance
Depreciation
Capital Assets not being depreciated:
Errors from
Previous Yrs
Land
$ 2,146,112 $ 84,297
$
2,230,409
Construction in Progress
$ - $ -
$ - $
-
Total Capital Assets not being
deprreciated:
$ 2,146,112 $ 84,297
$ - $
2,230,409
Capital Assets being depreciated:
Other Improvements $ 31,862,621 $ 880,688 $ $ 32,743,309
Machinery & Equipment $ 7,617,200 $ 149,111 $ $ 7,766,312
Total Capital Assets being depreciated: $ 39,479,821 $ 1,029,799 $ $ 40,509,621
Less accumulated depreciation for:
Other Improvements $ 8,740,331 $ 569,361 $(183,603) $ 9,126,088
Machinery & Equipment $ 5,960,992 $ 204,347 $(341,339) $ 5,824,000
Total accumulated depreciation $ 14,701,323 $ 773,708 $(524,942) $ 14,950,089
Total Capital Assets being depreciated,
net: $ 24,778,498 $ 256,091 $(524,942) $ 25,559,532
TOTAL CAPITAL ASSETS, NET $ 26,924,611 $ 340,389 $(524,942) $ 27,789,941
Washington State Auditor's Office
25
NOTE 5 - 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.
The city's regular levy for 2007 was $1.40629 per $1,000.00 on an assessed valuation of
$1,193,600,895 for a total regular levy of $1,678,549. In 2007 the city also had a special levy for
Emergency Medical Services (EMS). The EMS levy rate was $ .31659 per $1,000 for a total levy of
$377, 882.
NOTE 6 - LONG-TERM DEBT
The accompanying Schedule of Long-term Debt (09) provides a listing of the outstanding debt of
the city.
A. BONDS
The City of Port Townsend issues general obligation and revenue bonds to finance the
construction and remodel of capital assets. Bonded indebtedness has also been entered into 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.
Washington State Auditor's Office
26
General obligation bonds currently outstanding is as follows:
Issue
Date
Purpose
Original
Issue
Interest
Rate
Maturi
y
Date
Debt
Outstanding
Limited GO Bonds for reconstruction
1991
of the Balloon Hanger at Ft.Worden
$535,000
6.4 — 5.45%
2011
$72,790
for performing arts.
Limited GO Bonds for Fire & Library
1999
repairs from interfund loans;city
$645,000
5.0 — 6.0%
2016
$455,000
facilities, Marine Science Ctr and
Police Station.
2002
Limited GO Bonds for construction of
$3,465,000
1.95—
2022
$3,130,000
City Hall Annex and old City Hall.
4.70%
2003
Limited GO Bonds for Skateboard
Park, the Wave Viewing Gallery, City
$2,390,000
1.85-4.60%
2023
$2,195,000
Hall, Fire Station, Pool & Pink House
Lease settlement.
2005
Limited GO Bonds for construction
funds for City Hall Annex and Old City
$1,545,000
3.05- 4.35%
2025
$1,495,000
Hall
TOTAL
$ 7,347,790
Washington State Auditor's Office
27
The annual debt service requirements to maturity for general obligation debt is as follows:
Govermental Activities
Year ending
December 31
Principal
Interest
2008
$351,336
$311,396
2009
$351,800
$300,145
2010
$367,920
$288,046
2011
$383,401
$274,646
2012
$393,000
$260,635
2013-2017
$2,130,000
$1,059,646
2018-2022
$2,640,000
$556,950
2023-2025
$820,000
$63,369
Total
$7,437,457
$3,114,830
As of December 31, 2007 the long term debt payable from proprietary fund resources consisted of
the following:
Issue
Date
Purpose
Original Issue
Interest
Rate
Maturiy
Date
Debt
Outstanding
1978
Water/Sewer Revenue Bonds
5%
2018
$ 190,000
Water and Sewer Improvements
$395,000
Water/Sewer Revenue Bonds
Refunding 1992 issue Sewer
1998
Treatment Plant, refunded
1978 Series B Bonds
$5,950,000
4.10-4.65%
2011
$2,040,000
TOTAL
$2,230,000
Washington State Auditor's Office
28
Debt service requirements to maturity for proprietary funds:
Business Type Activities
Year ending
December 31
Principal
Interest
2008
$790,931
$133,467
2009
$811,527
$108,537
2010
$842,133
$82,208
2011
$722,748
$53,150
2012
$283,372
$29,663
2013-2017
$1,446,559
$101,071
2018-2022
$975,703
$28,391
2023-2024
$99,947
$1,881
Total
$5,972,920
$538,367
B. Public Works Trust Fund Loans and State Revolving Fund Loans
State of Washington Public Works Trust Fund (PWTF) Loans are an intergovernmental loan 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 five 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 currently has
one SRF loan.
Washington State Auditor's Office
29
As of December 31, 2007 the long-term debt payable for PWTF and SRF loans consisted of the
following:
Issue
Date
Purpose
Original Issue
Interest
Rate
Maturiy
Date
Debt
Outstanding
1998
PWTF Loan
$2,172,055
1 %
2018
$491,898
CT Pipeline
Tri-Area Water Storage
Tri-Area Well upgrades
(payoff of $1,186,718 with sale of
Tri-Area assets)
1999
PWTF Loan
$1,434,365
1 %
2019
$715,137
Gaines St Lift Station
San Juan Sewer Trunk Line
2001
PWTF Loan
$1,153,350
.5%
2021
$773,870
Wastewater Treatment
Outfall Expansion
Trunk Sewer Line replacement
2002
PWTF Loan
$1,242,742
.5%
2022
$1,000,529
Morgan Hill Water System
Improvements
2002
SRF Loan
$856,803
1.5%
2024
$761,486
Wastewater Conveyance
Storm and sewer separation
Gaines St Lift Station
Phase 2 Trunk Sewer Replace
2003
PWTF Loan
$90,000
0%
2009
$90,000
Transportation Plannng
TOTAL
$3,832,920
C. ADVANCED REFUNDING AND DEFEASED BONDS
In 1998 the City of Port Townsend refunded two prior revenue bond issues while issuing an
additional $1,000,000 of debt. This 1998 Revenue Bond issue was partially defeased in 2002 due to
the sale of some associated asset improvements in the Tri-Area.
The 1978 "series B" revenue bonds were refunded in the amount of $115,000 and the 1992
Revenue Bonds were refunded in the amount of $4,835,000 in the 1998 Bond issue.
As part of the Tri-Area well and reservoir assets sold in 2002, $1,490,000 in bonds were defeased.
Washington State Auditor's Office
30
NOTE 7 - PENSION PLANS
Substantially all city full-time and qualifying part-time employees participated in Public Employees'
Retirement System (PERS), Law Enforcement Officers' and Fire Fighters' Retirement System
(LEOFF) Volunteer Firemen Relief and Pension Fund, Firemen's Pension and Relief Fund
administered by the Department of Retirement Systems, under cost -sharing multi -employer define
benefit public employee retirement systems. Actuarial information in on a system -wide basis and is
not considered pertinent to the city's financial statements. Contributions to the systems by both
employee and employer are based upon gross wages covered by the plan.
Historical trends or other information regarding each plan is presented in the state Department of
Retirement Systems 2006 annual financial report. A copy of this report may be obtained at:
Department of Retirement Systems
PO Box 48380
Olympia, WA 98504-8380
NOTE 8 - 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 for the
purpose of providing a pooling mechanism for jointly purchasing insurance, jointly self -insuring,
and/or jointly contracting for management services. WCIA has a total of 126 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 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, public officials' errors and omissions, stop gap, and employee benefits
liability. Limits are $3 million per occurrence self insured layer, $12 million per occurrence in the re-
insured excess layer. The excess layer is insured by the purchase of reinsurance and insurance
ans is subject to aggregate limits. Total limits are $15 million per occurrence subject to aggregate
sublimits in the excess layers. The Board of directors determines the limits and terms of coverage
annually.
Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and
machinery are purchased on a group basis. Various deductibles apply by type of coverage. Auto
physical damage coverage and property insurance are self funded up to $500,000, for all perils other
than flood and earthquake, and insured above that amount by the purchase of reinsurance.
In-house services include risk management consultation, loss control field services, claims and
litigation administration, and loss analysis. WCIA contracts for the claims investigation consultants
for personal issues and land use problems, insurance brokerage, 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
Washington State Auditor's Office
31
adjustment, and administrative expenses. As outlined in the interlocal, WCIA retains the right to
additionally assess the membership for any finding shortfall.
An investment committee, using investment brokers, produces additional revenue by investment of
WCIA's assets in financial instruments that comply with all State guidelines. These revenues
directly offset portions of the membership's annual assessment.
WCIA is governed by a Board of Directors 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 9 - UTILITY ACCOUNTING AND PRESENTATION
The Budgeting, Accounting, and Reporting System (BARS) chart of accounts is used for the Water -
sewer Utility and the Storm Drainage Utility as prescribed by the State Auditor under the authority of
Chapter 43.09 RCW.
A full -accrual basis is in use where revenues are recognized when earned and expenses are
recognized when incurred. Capital asset purchases are capitalized and long-term liabilities are
accounted for in the appropriate funds.
Unbilled water, sewer and storm drainage utility service charges receivable are recorded at year end.
Operating income in utility funds includes gains and losses from the disposal of utility plant.
The Water -Sewer and Storm Drainage Utility's financial statements include the financial position
and results of operations of all enterprise operations which the water -sewer and storm drainage
utilities manage. The financial statements include also include the assets and liabilities of all funds
for which the water -sewer and storm drainage utilities have a custodial or trust responsibility.
NOTE 10 - UTILITY PLANT AND DEPRECIATION
Utility plant in service and other capital assets are recorded at cost where the historical cost is
known. Where the historical cost is not known, assets are recorded at estimated cost. Donations
by developers and customers are recorded at donor cost.
The original cost of operating property retired or otherwise disposed of and the cost of removal, less
salvage, is charged to accumulated depreciation. However, in the case of the sale of a significant
operating unit or system, the original cost is removed from the utility plant accounts, accumulated
depreciation is charged with the accumulated depreciation related to the property sold and the net
gain or loss on disposition is credited or charged to income.
Depreciation is computed on the straight-line method with useful lives of 10 to 70 years. Initial
depreciation on the utility plant is recorded subsequent to purchase.
Preliminary costs incurred for proposed projects are deferred pending construction of the facility.
Costs relating to projects ultimately constructed are transferred to the utility plant; charges that
relate to abandoned projects are expensed.
Washington State Auditor's Office
32
NOTE 11- FUND EQUITIES
A. Proprietary Fund Types
1. Capital Contributions — Capital contributions in internal service funds records the amounts
of working capital and capital assets received from other funds.
2 .Restricted Net Assets- Net Assets in proprietary fund types is generally restricted to
indicate that a portion of net assets has been externally restricted for specific purposes.
The amount restricted equals total restricted assets except for amounts intended for
payment of current payables and debt proceeds for construction purposes.
B. Designated Net Assets
This category is used to set aside fund equity when city management has plans or tentative
commitments to expend resources for certain purposes in future periods. Further legal
action will be required to authorize the actual expenses and expenditures.
NOTE 12 - RESTRICTED FUNDS
In accordance with bond ordinances and certain related agreements, separate restricted funds are
required to be established. The assets held in these funds are restricted for specific uses, including
construction, debt service, and other special reserve requirements. Assets and liabilities shown as
current on the accompanying balance sheets of the Water -Sewer Utility exclude current maturities
on revenue bonds and accrued interest thereon because debt service funds are provided for their
payment.
NOTE 13 - UTILITY RECEIVABLES
All delinquent accounts receivable must receive prior City Council approval before they are written
off.
NOTE 14 - UNAMORTIZED DEBT EXPENSE
Costs relating to the sale of bonds are deferred and amortized over the lives of the various bond
issues.
NOTE 15 - CONTINGENCIES AND LITIGATION
In the opinion of management the city's self-insurance reserves are adequate to pay all known or
pending claims. (See Note 8.)
NOTE 16 - UTILITY PLANT CONSTRUCTION MATERIALS AND SUPPLIES
It is the policy of management to charge all expenditures for enterprise utility plant construction
materials and supplies to plant in service or maintenance expenses. The inventory account is
immaterial to the total assets of the fund.
Washington State Auditor's Office
33
NOTE 17 — INTERFUND LOANS
During 2006 the council approved two interfund loans. The first interfund loan was in the amount of
$100,000 from the Equipment Rental Fund, which had an excess of cash, to the Fire and EMS
Fund. The second interfund loan was approved by council in order to close out the City Hall Project.
The lending fund , the Transmission Pipeline Fund, also was deemed to have an excess of funds
available for investment purposes, so was able to loan $350,000 to the City Hall Construction Fund.
Interest payment rates for both loans were based the current Local Government Investment Pool
rates. As of December 31, 2007 these loans were still outstanding.
NOTE 18 — PRIOR PERIOD ADJUSTMENTS
During the fiscal year the prior period adjustments below were made to Net Assets. These
adjustments were attributed to over depreciation in the amount of $497,968. in the Water and
Sewer utility and $26,974. in the Storm utility from prior years.
In the Water and Sewer Utility there was also a prior period adjustment for $60,683 to Long Term
Debt for debt that was refunded to the Public Works Trust Fund and issued by the The Public
Works Trust Fund in 2006 and not properly recorded.
Water and Sewer Utility -
Account Adjustment Amount
Accumulated Depreciation $ 497,968
Long Term Debt — Other 60,683
Water and Sewer Utility Total $ 558,651
Stormwater Utility —
Account Adjustment Amount
Accumulated Depreciation $ 26,974
Stormwater Utility Total $ 26,974
NOTE 19 — UNREIMBURSED CAPITAL PROJECT EXPENSE
The General Government Capital Improvement Fund ended the year with a $16,885.95 deficit in
Fund Balance. There is currently an outstanding reimbursable expense for the Joint Emergency
Operations Communications Tower that was built on top of the new Fire Hall. The unreimbursed
expense total is $79,338.01.
Washington State Auditor's Office
34
NOTE 20 - AMORTIZATION OF ENGINEERING STUDIES COSTS
Storm Flood Control Proiect
Year
Expenditures from 1994
Year
Amortization
to 1999 spent on Storm
over twenty
Flood Control Project
years
following
each year's
expenditures
1994
$64,444.02
1995
$3,222.24
1995
65,563.55
1996
6,500.42
1996
120,976.03
1997
12,549.23
1997
52,054.17
1998
15,151.94
1998
28,810.00
1999
16,592.44
1999
27,560.63
2000-2019
305,392.13
Total
$359,408.40
Total
$359,408.40
Washington State Auditor's Office
35
ABOUT THE STATE AUDITORS OFFICE
The State Auditor's Office is established in the state'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.
Our mission is to work in cooperation with our audit clients and citizens as an advocate for
government accountability. As an elected agency, the State Auditor's Office has the independence
necessary to objectively perform audits and investigations. Our audits are designed to comply with
professional standards as well as to satisfy the requirements of federal, state, and local laws.
The State Auditor's Office has 300 employees who are located around the state to deliver our
services effectively and efficiently. Approximately 65 percent of our staff are certified public
accountants or hold other certifications and advanced degrees.
Our regular audits look at financial information and compliance with state, federal and local laws on
the part of all local governments, including schools, and all state agencies, including institutions of
higher education. We also perform fraud and whistleblower investigations. In addition, we have the
authority to conduct performance audits of state agencies and local governments.
The results of our audits are widely distributed through a variety of reports, which are available on
our Web site. We continue to refine our reporting efforts to ensure the results of our audits are
useful and understandable.
We take our role as partners in accountability seriously. We provide training and technical
assistance to governments and have an extensive program to coordinate audit efficiency and to
ensure high -quality audits.
State Auditor
Chief of Staff
Chief Policy Advisor
Director of Administration
Director of State and Local Audits
Director of Performance Audit
Director of Special Investigations
Director for Legal Affairs
Local Government Liaison
Communications Director
Public Records Officer
Main number
Toll -free hotline for government efficiency
Web Site
Brian Sonntag, CGFM
Ted Rutt
Jerry Pugnetti
Doug Cochran
Chuck Pfeil, CPA
Linda Long, CPA, CGFM
Jim Brittain, CPA
Jan Jutte
Mike Murphy
Mindy Chambers
Mary Leider
(360) 902-0370
(866) 902-3900
www.sao.wa.gov
(SAO FACTS. DOC - Rev. 05/08)