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2006 Comprehensive Annual Financial Report CITY OF Spo ane 0 Comprehensive Annual Financial Report For the Fiscal Year Ended December 31 , 2006 Page 1 of I Ken Thompson From: Ken Thompson Sent: Tuesday, December 18, 2007 9:29 AM To: 'christina.h.lopez @oig.dot.gov' Subject: City of Spokane Valley, WA request for an extension to file year ended 12-31-06 audit report Dear Christina: Please consider this as a request to extend our filing date for our 12-31-06 audit report to February 28, 2008. As I mentioned in earlier correspondence, we had three key accounting positions turn over this year which left us shorthanded. We are nearing the end of our audit but expect the State Auditors Office will need time to review their worksheets before finishing their report. The additional 60 days will allow the State adequate time to complete their work and adequate time for the City to review same. I understand there may be other federal agencies that need to take appropriate action to grant this extension. During 2006 the City received federal funding from only the U.S. Department of Transportation (CFDA Number 20.205). Please let me know what I need to do to have this request approved. Thank you for your assistance. Ken Thompson Finance and Administrative Services Director 509 688 0027 • • • Page 1 of 1 Ken Thompson From: Lopez, Christina H. [Christina.H.Lopez @oig.dot.govj Sent: Tuesday, January 15, 2008 9:49 AM To: Ken Thompson Cc: Sysak, John R.; Thornton, Cynthia <FHWA>; Tax, Stephanie; Bell, Holly <FHWA> Subject: Granted due date extension request for City of Spokane Valley, WA Dear Mr. Thompson: Your December 18, 2007 request to file your fiscal year ended December 31, 2006 Office of Management and Budget (OMB) Circular A-133 audit report on February 28, 2008 is granted. Please forward a copy of this letter and your request to each Federal agency that provided funding to your organization and to the Federal Audit Clearinghouse. In addition, please attach this letter to the audit reporting package that is submitted to the Federal Audit Clearinghouse. If you have any questions, please contact me at (410) 962-2630. Sincerely, C. a John R. Sysak DOT National Single Audit Coordinator cc: FHWA Audit Liaison • CITY OF SPOKANE VALLEY Comprehensive Annual Financial Report December 31, 2006 • City of Spokane Valley • Contents • Page FINANCIAL SECTION: Independent Auditor's report 2 Management's discussion and analysis 3-12 . BASIC FINANCIAL STATEMENTS: Government-Wide Financial Statements: Statement of net assets 13 Statement of activities 14-15 Fund Financial Statements: Balance sheet—governmental funds' 16-17 Reconciliation of the governmental funds balance sheet to the statement of net assets 18 Statement of revenues, expenditures and changes in fund balances-governmental funds 19-20 Reconciliation of the combined statement of revenues, expenditures, and changes in fund balances of governmental funds to the statement of activities 21 Statement of net assets—proprietary funds 22 Statement of revenues, expenses, and changes in fund net assets —proprietary funds 23 Statement of cash flows—proprietary funds 24 Notes to the financial statements 25-46 REQUIRED SUPPLEMENTAL INFORMATION: Schedule of revenues, expenditures, and changes in fund balance— budget and actual—General Fund ' 47 Schedule of revenues, expenditures, and changes in fund balance— budget and actual—Street Fund 48 • Schedule of revenues, expenditures, and changes in fund balance— budget and actual—Service Level Stabilization Fund 49 Schedule of revenues, expenditures, and changes in fund balance— budget and actual—Capital Projects Fund 50 Schedule of revenues, expenditures, and changes in fund balance— budget and actual—Special Capital Projects Fund 51 City of Spokane Valley Contents REQUIRED SUPPLEMENTAL INFORMATION(continued): Schedule of revenues, expenditures, and changes in fund balance— budget and actual—Street Capital Projects Fund 52 Schedule of revenues, expenditures, and changes in fund balance— budget and actual—Capital Grants Fund 53 COMBINING STATEMENTS—NON-MAJOR FUNDS: Combining balance sheet—nonmajor governmental funds 54 Combining statement of revenues, expenditures, and changes in fund balance—nonmajor governmental funds 55 Combining balance sheet—special revenue funds 56 Combining statement of revenues, expenditures, and changes in fund balance—special revenue funds 57 Combining balance sheet—capital projects funds 58 Combining statement of revenues, expenditures, and changes in fund balance—capital projects funds 59 Schedule of revenues, expenditures, and changes in fund balance— budget and actual—nonmajor special revenue funds 60-64 Schedule of revenues, expenditures;and changes in fund balance— budget and actual—nonmajor debt service funds 65 Schedule of revenues, expenditures, and changes in fund balance— budget and actual—nonmajor capital projects funds 66-71 • Combining statement of net assets—internal service funds 72 Combining statement of revenues, expenses, and changes in net assets- internal service funds 73 Combining statement of cashflows—internal service funds 74 STATISTICAL SECTION: Net assets by component 75 Changes in net assets 76 Governmental activities tax revenues by source 77 Fund balances of governmental funds 78 Changes in fund balances of governmental finds 79 Assessed and estimated actual value of taxable property 80 Property tax rates 81 Principal property taxpayers 82 City of Spokane Valley Contents STATISTICAL SECTION(continued): Property tax levies and collections 83 Ratio of outstanding debt by type 84 Ratio of general bonded debt outstanding 85 Computation of direct and overlapping debt 86 Legal debt margin information 87 Computation of limitation of indebtedness 88 Demographic statistics 89 Principal employers 90 Full-time equivalent city government employees by function 91 Capital assets statistics by function 92 OTHER SUPPLEMENTARY SCHEDULES Schedule of expenditures offederal awards 93 • Independent Auditor's Report on Financial Statements • City of Spokane Valley . Spokane County January 1, 2006 through December 31, 2006 Council City of Spokane Valley Spokane Valley, Washington We have audited the accompanying financial statements of the governmental activities, the business-type . . activities, each major fund and the aggregate remaining fund information of the City of Spokane Valley, Spokane County, Washington, as of and for the year ended December 31, 2006, which collectively comprise the City's basic financial statements as listed on page 11. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained ih Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial. statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund _ and the aggregate remaining fund information of the City of Spokane Valley, as of December 31; 2006, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report 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 pad of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. • The management's discussion and analysis on pages 12 through 19 and budgetary comparison information on pages 47 through 49 are not a required part of the basic financial statements but are 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. . Our audit was performed for the purpose of forming an opinion on the financial statements that collectively comprise the City's basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Washington State Auditors Office 9 Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. This schedule is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. BRIAN SONNTAG, CGFM STATE AUDITOR February 20, 2008 Washington State Auditor's Office 10 INTERNET REPORT ID:248173 VERSION:1 I N 2119/2008 -OMB No.0348-0057 I-ForF!SF-SAC U.S.DEPT.OF COMM.—Ecoa am,Cat A*,la-U.S.CENSUS BUREAU\- ACE.'AS OGI1NG AGENT FOR • (5-20 . O�-FCE OF MAN DLL AND BUDGET Data Collection Form for Reporting on AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS ' for Fiscal Year Ending Dates in 2004, 2005, or 2006 Complete this form, as required by OMB Circular A-133, 'Audits Federal Audit Clearinghouse P y Jeffersonville,E. 10th Street • of States, Local Governments,and Non-Profit Organizations.° Jeffersonville, IN 47132 's-es: ;'i. : GENERAL INFORMATION (To be completed by auditee, except for Items 4 and 7) 1. Fiscal period ending date for this submission 2. Type of Circular A-133 audit • Month Day Year / Fiscal Period End Dates Must 1®Single audit 2❑Program-specific audit 12 31 2006 Be In 2004. 2005,or 2006 • 3. Audit period covered 4. FEDERAL Date received by GOVERNMENT Federal clearinghouse 1 IN Annual 2❑ Biennial 3❑ Other - Months USE ONLY 5. Auditee Identification Numbers a. Primary Employer Identification Number(E IN) b. Are multiple EiNs covered in this report? 1 ❑Yes -2 NI No 7 1 - 0 9 1 4 1 7 0 c. If Part I, Item 5b='Yes,"complete Part I. Item 5c on the continuation sheet on Page 4. d. Data Universal Numbering System (DUNS) Number e. Are multiple DUNS covered in this report? I ❑Yes 2®No l I. If Part I, Item 5e='Yes" complete Part I, Item 5t 1 6 - 8 2 4 - 0 6 117 on The continuation sheet on Page 4. 6. AUDITEE INFORMATION 7. AUDITOR INFORMATION (To be completed by auditor) a. Auditee name a. Auditor name • CITY OF SPOKANE VALLEY WASHINGTON STATE AUDITOR'S OFFICE b. Auditee address (Number and saver) b. Auditor address (Number and stree)) 11707 E.SPRAGUE AVENUE,STE. 106 OLD CITY HALL STE.324,221 N.WALL ST. City City SPOKANE VALLEY SPOKANE State ZIP+4 Code 1 State ZIP+4 Code _ • WA 9 9 2 01 6 WA 9 9 2 0 1 c.Auditee contact c. Auditor contact Name Name KEN THOMPSON • DEBBIE PENNICK The Title FINANCE DIRECTOR AUDIT MANAGER d. Auditee contact telephone d.Auditor contact telephone ( 509 ) 688 — 0027 (509 ) 456 — 3052 e.Auditee contact FAX e. Auditor contact FAX r t 509 ) 688 —0236 509 ) 456 — 4476 f. Auditee contact E-mail I. Auditor contact E-mail KTHOMPSON @SPOKANEVALLEY.ORG PENNICKD @SAO.WA.GOV g.AUDITEE CERTIFICATION STATEMENT-This is to g. AUDITOR STATEMENT-The data elements and certify that,to the best of my knowledge and belief,the auditee information included in this form are limited to those prescribed has:(1)engaged an auditor to perform an audit in accordance by OMB Circular A-133.The information included in Parts II and with the provisions of OMB Circular A-133 for the period III of the form,except for Part III, Items 7,8,and 9a-9l,was described in Part I,Items 1 and 3;(2)the auditor has completed transferred from the auditor's report(s)for the period described such audit and presented a signed audit report which states that in Part I. Items 1 and 3,and is not a substitute for such the audit was conducted in accordance with the provisions of the reports.The auditor has not performed any auditing procedures Circular;and,(3)the information included in Parts I,II,and III since the date of the auditor's report(s).A copy of the reporting . of this data collection form is accurate and complete.I declare package required by OMB Circular.A-133,which includes the that the foregoing is true and correct complete auditor's report(s),is available in its entirety from the Signature of certi g official Date auditee at the address provided in Part I of this form.As /f�/� Month Day Year required by OMB Circular A-133,the information in Parts II 020 / O SF' and III of this form was entered in this form by the auditor based on information included in the reporting package.The Printed Name of certifying official auditor has not performed any additional auditing procedures in connection with the completion of this form. Printed Title of certifying official Signature of,auditor Date . {�, _ -try ! - Month Day Year INTERNET REPORT ID:248173 VERSION:1 I N 2119)2008 Primary EIN: 7 1 0I 9I 1 4 11 17 0 a r `; FINANCIAL STATEMENTS To be completed by auditor) 1 . Type of audit report Mark either: 1 El Unqualified opinion OR any combination of: 2 ❑ Qualified opinion 3❑ Adverse opinion 4❑Disclaimer of opinion • 2. Is a'going concern' explanatory paragraph included in the audit report? i ❑Yes 2 t]No 3. Is a reportable condition disclosed? 1 0 Yes 2❑No—SKIP to Item 5 4. Is any reportable condition reported as a material weakness? I ©Yes 2❑No 5. Is a material noncompliance disclosed? 1 ❑Yes 2 X No j FEDERAL PROGRAMS (To be completed by auditor) 1. Does the auditor's report include a statement that the auditee's financial statements include departments:agencies,or other organizational units • emending$500.000 or more in Federal awards that have separate A-133 audits which are not included in this audit? (AICPA Audit Guide. Chapter 12) t ❑Yes 2©No 2. What is the dollar threshold to distinguish Type A and Type B programs? $ 300,000 (OMB Circular A-133§_ .520(b)) 3. Did the auditee qualify as a low-risk auditee? (§_ .530) 1 ❑Yes 2©No 4. Is a reportable condition disclosed for any major program? (§__ .510(a)(1)) 1 ❑Yes 2®No—SKIP to Item 6 5. Is any reportable condition reported as a material weakness? (§_ .510(a)(1)) 1 ❑Yes 2❑No 6. Are any known questioned costs reported? (§ .510(a)(3) or(4)) 1 ❑Yes 2 El No 7. Were Prior Audit Findings related to direct funding shown in the Summary Schedule of Prior Audit Findings? (§ .315(b)) 1 ❑Yes 2®No 8. Indicate which Federal aoency(ies)have current year audit findings related to direct funding or prior audit findings shown in the Summary Schedule of Prior Audit Findings related to direct funding. (Marc(X)all that apply or None) ss❑ U.S.Agency for Inter- 83❑ Federal Emergency 43❑ National Aeronautics and 96❑ Social Security national Development Management Agency Space Administration Administration 10❑ Agriculture 39❑ General Services Administration as❑ National Archives and is❑ U.S. Department 23❑ Appalachian Regional 1)3❑ Health and Human Services Records Administration of State Commission 97❑ Homeland Security 05❑ National Endowment for 20❑ Transportation ❑ the Arts 21 ❑ Treasu ry 11 Commerce 14❑ Housing and Urban 94❑ Corporation for National Development 06❑ National Endowment for 82❑ United States and Community Service 03❑ Institute of Museum and the Humanities Information Agency 12❑ Defense Library Services 47❑ National Science 64❑ Veterans Affairs Foundation 84❑ Education 15❑ Interior ao Li None is❑ Justice o ❑ Office of National Drug ❑ Other—S e°i a1 ❑ Energy Control Policy P a ': 66❑ Environmental 17❑ Labor 5?❑ Small Business Protection Agency os❑ Legal Services Corporation Administration Each agency identified is required to receive a copy of the reporting package. In addition, one copy each of the reporting package is required for. •the Federal Audit Clearinghouse archives XI •and, if not marked above. the Federal cognizant agency ❑ Count total number of boxes marked above and submit this number of reporting packages . . . . 1 . \ J Page 2 _ FORM sr-SAC ts.2e441 INTERNET REPORT ID:248173 VERSION:1 j N 2/19/2008 (Page 3-#1 of 1) Primary EIN: 7 1 0 9 1 4 1 7 0 MEM 9. FEDERAL AWARDS FEDERAL PROGRAMS-Continued EXPENDED DURING FISCAL YEAR 10. AUDIT FINDINGS CFDA Number Research and develop- menl (c) Name of Federal program (d) Amount expended (a) Direct award (0 Major p ogram ype(s) of mpliance men 4 requcoirets) a) Audit finding references number(s)5 (b) Federal I Agency I Extension 2 Profixr I I (b Major program (g) II o es,and I e f report 3 (h) 2 I 0 I ,205 1 ❑Yes 21X NO FEDERAL HIGHWAY PLANNING AND CONSTRUCTION $ 1,750,066 ,00 1❑Yes 2 Cl No 1 K4 Yes 2 A No U 0 -- N/A , 10 Yes z • No $ .00 /Nos 2 20 No ID z • No � i , • Nes 2• No -■,_ $ 00 • Yes 2� No •Nes 2 � No ■ I 10 Yes 2 • No I' .$ .00 $ .00 1 • Yes 2E3 No 1 ❑Yes 2❑No 1 • Yes 20 No 1 • Yes 2 • No . 1 ❑Yes 2❑No . 10 Yes 2 • NO -$ .00 1 • Yes 20 No 1 • Yes 2 • No - I I • 10 Yes 2❑No $ .00 ,❑Yes 20 No i • Yes 2• No 1 III Yes 2 • No ID Yes 2 • No ■ ■ . 1 • Yes 2• No $ 00 I I 2❑Yes 2DNo _■_ $ 00 2 • Yes 20 NO • 1 Os N 2 ■ . 1 ■ Yes 20 No , $ 00 10 yes 2■ No ID Yes 2■ No TOTAL FEDERAL AWARDS $ 1,750,066 .00 IF ADD TIONAL LINES ARE NEEDED, PLEASE PHOTOCOPY THIS PAGE,ATTACH ADDITIONAL PAGES TO THE FORM, AND SEE INSTRUCTIONS EXPENDED t (See Appendix 1 of instructions for valid Federal Agency two-digit prelixes. 20r other idenlitying number when the Catalog of Federal Domestic Assistance(CFDA)number is not available. (See Inseucllons) 3 If major program is marked"Yes,"enter only one letter(U= Unqualified opinion.Q=Qualified opinion,A=Adverse opinion,O=Disclaimor of opinion)corresponding to the type of audit report in the adjacent box. If major program is marked"No,"leave the type of audit report box blank. 4 Enter the letter(s)of all tyrx3(s)of compliance requlrement(s)that apply to audit findings(i.e.,noncompliance,reportable conditions(including materiel weaknesses),questioned costs,fraud,and other items repotted under§_.(10(a))reported for each Federal program. A. Activities allowed or unallowed E. Eligibility I. Procurement and suspension L. Reporting B. Allowable costs/cost principles F. Equipment and real property management and debarment M. Subrecipient monitoring C. Cash management G. Matching, level of effort, earmarking J, Program income N, Special tests and provisions D. Davis— Bacon Act H. Period of availabilit of Federal funds K. Real property acquisition and 0. None City of Spokane Valley Management's Discussion and Analysis This section of the City of Spokane Valley's (the City) annual financial report provides a narrative overview of the City's financial activities for the fiscal year ended December 31, 2006,and financial position as of December 31, 2006. This information should be read in conjunction with the preceding letter of transmittal, the financial statements, and notes to the financial statements that follow. FINANCIAL IIIGHLIGHTS • Net assets, the amount by which total assets exceed total liabilities,equal $89.2 million. A total of 60% or $53.9 million,of total net assets is invested in capital assets, such as streets, land, and buildings. Of the remaining net assets, $35.3 million is available to meet the government's ongoing activities and obligations. • The government's net assets increased by$7.8 million in 2006. This increase was a result of higher than anticipated revenues and lower than appropriated expenditures and prior period adjustments. • Governmental fund balances at year end were$31.5 million. • Unreserved fund balance in the general fund was $8.7 million in 2006. This represents an increase of$1.7 million over the December 31, 2005,unreserved fund balance. • Total City debt increased by$1.3 million to $10.5 million during the current fiscal year. The City entered into a capital lease agreement for the police precinct building. OVERVIEW OF THE FINANCIAL STATEMENTS The City's basic financial statements are presented in three parts: 1)government-wide financial statements, 2) fund financial statements, and 3)notes to the financial statements. This section of the management's discussion and analysis is intended to introduce and explain the basic financial statements.The City's financial position improved during the year as revenues exceeded estimates and expenses were less than budget. Government-wide financial statements The government-wide financial statements are designed to give the reader a picture of the financial condition and activities of the City as a whole. This broad overview is similar to the financial reporting of the private sector businesses. The government-wide financial statements have separate columns for governmental activities and business-type activities. Governmental activities of the City include general government(finance,executive, human resources),public safety(police),physical environment, economic environment, transportation, mental and physical health,and culture and recreation. The City's business-type activities consist of the stormwater utility. The statement of net assets presents information on all of the City's assets and liabilities, with the difference reported as net assets. This statement is similar to the balance sheet of a private sector business. Over time, increases or decreases in net assets may serve as a useful indicator of improvement or deterioration in the City's 'overall financial position. 3 City of Spokane Valley Management's Discussion and Analysis (continued) The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. This statement distinguishes revenue generated by specific functions from revenue provided by taxes and other sources not related to a specific function. The revenue generated by the specific functions(charges for services, grants,and contributions) is compared to the expenses for those functions to show how much each function either supports itself or relies on taxes and other general funding sources for support. All activity on the statement is reported on the accrual basis of accounting, requiring that revenues are reported when they are earned and expenses are reported when they are incurred,regardless of when cash is received or disbursed. Items such as uncollected taxes, unpaid vendor invoices for goods or services received during the year, and earned but unused • vacation leave are included in the statement of activities as revenue and expenses even though no cash has changed hands. The government-wide financial statements can be found immediately following this Management Discussion and Analysis (MD&A). Fund financial statements The annual financial report includes fund financial statements in addition to the government-wide financial statements. While the government-wide statements present the City's finances based on the type of activity, general government versus business-type, the fund financial statements are presented by fund type such as the general fund, special revenue funds, and proprietary funds. A fund is a fiscal and accounting entity with a self- balancing set of accounts used to account for specific activities or meet certain objectives. Funds are often set up in accordance with special regulations, restrictions, or limitations. The City of Spokane Valley, like other state and local governments, use fund accounting to ensure and show compliance with finance-related legal requirements. The City's funds are divided into two categories, governmental and proprietary. Governmental funds are used to account for essentially the same functions as are reported as governmental activities in the government-wide financial statements. The basis of accounting is different between the governmental fund statements and the government-wide financial statements. The governmental fund statements focus on near-term revenues/financial resources and expenditures while the government-wide financial statements include both near-term and long-term revenues/financial resources and expenses. The information in the governmental fund statements can be used to evaluate the City's near-term financing requirements and immediate fiscal health. Comparing the governmental fund statements with the government-wide statements help the reader better understand the long-term impact of the City's current year financing decisions. To assist in this comparison, reconciliations between the governmental fund statements and the government-wide financial statements are included with the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances. • The City of Spokane Valley maintains nineteen individual governmental funds. The City's seven major governmental funds,the general fund, street fund, service level stabilization reserve fund, capital projects fund, special capital projects fund, street capital projects fund, and capital grants fund are presented separately in the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances. The remaining governmental funds are combined into a single column labeled other governmental funds. Individual fund data for each of the other governmental funds can be found in the combining statements later on in this report. 4 City of Spokane Valley Management's Discussion and Analysis (continued) The City maintains budgetary control over its operating funds through the adoption of an annual budget. Budgets are adopted at the fund level according to state law. A budgetary comparison statement is presented for the major funds as a basic financial statement. Other budgetary comparison schedules are included following the other governmental funds' combining statements in this report. Proprietary fluids are used by governments to account for their business-type activities. Business-type activities provide specific goods or services to a group of customers that are paid for by fees charged to those customers. There is a direct relationship between the fees paid and services received. The City of Spokane Valley has two types of proprietary funds, enterprise funds,and internal service funds. Enterprise funds are used to account for goods and services provided to citizens. Internal service funds are used to account for goods and services provided internally to various City departments. Enterprise funds of the City are used to report the same functions presented as business-type activities in the government-wide statements with the fund statements providing more detail then is reported in the government- wide statements. The enterprise fund statements provide information for the City's stormwater utility—a major fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its fleet of vehicles, computer equipment, and insurance claims. Internal service fund assets and liabilities are predominantly governmental and have been included in the governmental activities column of the government-wide statement of net assets. Notes to the financial statements The notes to the financial statements provide additional information that is important to a full understanding of the data in the government-wide and fund financial statements. The notes are located immediately following the basic financial statements. Other information The combining statements for other governmental funds and internal service funds are presented immediately following the required supplementary information. 5 City of Spokane Valley Management's Discussion and Analysis (continued) GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of net assets The statement of net assets can serve as a useful indicator of the City's financial position. The City's financial position improved during the year ended December 31, 2006, as net assets increased by$7.8 million(see also prior period adjustments). The City of Spokane Valley's net assets at December 31, 2006 total $91,129,396. Following is a condensed version of the government-wide statement of net assets. Table 1 City of Spokane Valley's Net Assets (in thousands) Governmental Business-Type Total Primary Activities Activities Government 2006 2005 2006 2005 2006 2005 Current and other assets $ 38,629 $ 28,168 $ 1,756 $ 1,397 $ 40,385 $ 29,565 Capital assets(net of depreciation) 64,201 65,326 328 - 64,529 65,326 Total assets $102,830 $ 93,494 $ 2,084 $ 1,397 $104,419 $ 94,891 Long-term liabilities $ 10,502 $ 9,298 $ - $ - $10,502 $ 9,298 Other liabilities 3,140 2,207 143 119 3,283 2,326 Total liabilities $ 13,642 $ 11,505 $ 143 $ 119 $ 13,785 $ 11,624 Net assets: Invested in capital assets, net of related debt $ 53,865 $ 56,029 $ 327 $ - $ 54,192 $ 56,029 Restricted 13,358 7,248 - - 13,358 7,248 Unrestricted 21,965 18,712 1614 1,277 23,579 19,989 Total net assets $ 89,188 $ 81,989 $ 1,941 $ 1,278 $ 91,129 $ 83,266 The largest component of the City's net assets, 59% or$53.8 million, is its investment in capital assets net of any related outstanding debt issued to acquire those assets. These capital assets such as streets,bridges, parks, and buildings and equipment, are used to provide services to the citizens. Consequently, these assets are not available to sell and convert to cash for future spending. The majority of these assets were donated by Spokane County at the time of incorporation. Other functions of the City may access the remaining net assets of$35.3 million to meet ongoing obligations to citizens and creditors. Examples of other City obligations which these net assets may be used for are public safety, employee salaries, park maintenance, and ongoing street maintenance(street sweeping, lane striping, resurfacing). At the end of the fiscal year, the City of Spokane Valley reported positive balances in all three categories of net assets, for the government as a whole, as well as for the separate governmental and business-type activities. 6 City of Spokane Valley Management's Discussion and Analysis (continued) Changes in net assets • The changes in net assets table illustrates the increases or decreases in net assets of the City resulting from its •operating activities. The City of Spokane Valley's net assets increased approximately$7.8 million in 2006 (see also prior period adjustments). Following is a condensed version of the City's changes in net assets. The table shows the revenues, expenses, and related changes in net assets in tabular form for the governmental activities separate from the business-type activities. Table 2 Change in City of Spokane Valley's Net Assets (in thousands) Governmental Business-Type Total Primary Activities Activities Government 2006 2005 2006 2005 2006 2005 Revenues: Program Revenues: Charges for services $ 4,360 $ 4,803 $ 1,558 $ 1,252 $ 5,918 $ 6,055 Operating grants and contributions - 84 - - - 84 Capital grants and contributions 8,039 1,393 - - 8,039 1,393 General Revenues: Property taxes 8,727 9,549 - - 8,727 9,549 Sales taxes 18,842 18,648 - - 18,842 18,648 Excise taxes 3,106 5,741 - - 3,106 5,741 Other taxes 911 1,534 - - 911 1,534 Extraordinary gain(loss) 7 (62) - - 7 (62) Capital Contributions 87 87 Investment interest 1,253 562 58 36 1 311 598 Total revenues 45,332 42,252 1,616 1,288 46,948 43,540 Expenses: General government 4,903 3,471 - - 4,903 3,471 Public safety 15,742 15,934 - - 15,742 15,934 Physical environment 1,485 986 - - 1,485 986 Transportation 13,260 14,944 - - 13,260 14,944 Economic environment 1,867 2,020 - - 1,867 2,020 Mental and physical health - 44 - - - 44 Culture and recreation 1,884 3,785 - - 1,884 3,785 Interest on long-term debt 409 450 - - 409 450 Stormwater management - - 1,102 1,022 1,102 1,022 Total expenses 39.550 41,634 1,102 1,022 40,652 42,656 7 City of Spokane Valley Management's Discussion and Analysis (continued) Governmental Business-Type Total Primary Activities Activities Government 2006 2005 2006 2005 2006 2005 Increase in net assets before transfers $ 5,783 $ 618 $ 514 $ 266 $ 6,297 $ 884 Transfers 30 258 (30) (258) - - Increase in net assets 5,813 876 484 8 6,297 884 Net assets,beginning 83,375 81,113 1,457 1,270 84,832 82,383 Total net assets $ 89,188 $ 81,989 $ 1,941 $ 1,278 $ 91,129 $ 83,267 Governmental activities contributed $5.8 million of the total change in net assets of$6.3 million. Key elements of the increase are as follows: • Sales taxes accounted for approximately$18.8 million in revenues in year 2006. The City received $8.7 million in property taxes. Other taxes received were real estate excise taxes($2.5 million), motor vehicle fuel taxes($1.98 million), and hotel/motel room taxes ($417 thousand). • This being the fourth year of incorporation the City aggressively monitored contract service costs and staffing levels. The net result was a fourth year unreserved balance of$23.2 million for governmental activities. Business-type activities of the City's stormwater utility increased the City of Spokane Valley's net assets by$484 thousand, accounting for .08% of the total growth in the government's net assets. Key element of this increase is as follows: • The Stormwater Management fund accounted for the entire increase of$484 thousand. The primary revenue source is a stormwater management fee imposed upon real property. FINANCIAL ANALYSIS OF THE CITY'S FUNDS As discussed earlier, the City of Spokane Valley uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds The purpose of the City's governmental funds is to report on near-term revenues/financial resources and expenditures. This information helps determine the City's financial requirements in the near future. In particular, unreserved fund balance is a good indicator of the City's resources available for spending at the end of the year. At the end of the current year, the City's combined ending governmental fund balance was$31.5 million. Of the total ending fund balance, $9.3 million resides with special revenue funds,and the General fund has an unreserved fund balance of$8.7 million. 8 City of Spokane Valley Management's Discussion and Analysis (continued) Major governmental funds The General fund is the primary operating fund of the City through which all receipts and payments of ordinary City operations are processed, unless they are required to be accounted for in another fund. Sales taxes are the major revenue source. At the end of 2006,the fund balance of the General fund was$8.7 million. The General fund increased fund balance by$1.7 million for the year ended December 31, 2006. Revenues exceeded projections by $1.7 million primarily from increased sales tax revenues. Expenditures were$6.1 million less than budget primarily in the area of general government functions. • The Street fund has a fund balance of$4.7 million, an increase of$786 thousand for the year. The primary source of revenue for the Street fund is motor fuel tax. Road maintenance costs were $769 thousand under the original budget projection. The Capital Projects fund has a fund balance of$3.5 million, an increase of$1.2 million for the year. The primary source of revenue for the capital projects fund is a real estate excise tax, which was approximately$200 thousand over the original budget projection. The Special Capital Projects fund has a fund balance of$3.7 million, an increase of$1.3 million for the year. The primary source of revenue for this fund is the real estate excise tax, which was approximately$200 thousand over the original budget projection. The Street Capital Projects fund has an ending negative fund balance of($171)thousand. Construction costs were approximately$1.3 million for the year. Grant revenue*as approximately$5.7 million less than budgeted. These projects were mostly funded with grant funds and transfers from other City Funds. The Street Capital Grant Projects fund has a zero fund balance. Construction costs were approximately$3.6 million for the year. Grant revenue was approximately$3.0 million. These projects were mostly funded with grant funds and transfers from other City Funds. The Service Level Stabilization fund has a fund balance of$4.6 million. The primary source of funding for the service level stabilization fund is transfers from the General Fund which was approximately$2.1 million this year. The Stormwater fund has a Net Asset balance of$1.9 million,an increase of$664 thousand for the year. The primary source of revenue for the Stormwater fund are stormwater fees. Operating expenses were$456 thousand under the budget projection. Proprietary funds The City of Spokane Valley's Proprietary fund statements provide the same type of information found in the government-wide financial statements,but in more detail. Factors concerning the finances of the City's proprietary funds have already been addressed in the discussion of the City's business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS The City Council amended the revenue and expenditure budgets during 2006. The amendments recognized additional unrestricted fund balance carried over from 2005, a service fee from building permits/planning fees, grant proceeds, and additional sales tax receipts. Expenditure appropriations increased for street projects, 9 City of Spokane Valley Management's Discussion and Analysis (continued) CenterPlace construction, and for the creation of reserves for CenterPlace operations,parks capital improvements, civic facilities, extraordinary winter weather operations, and a service level stabilization fund. Jo City of Spokane Valley • Management's Discussion and Analysis (continued) Actual revenues were $1.7 million higher than the final 2006 revenue budget. The largest portion of this positive variance was licenses and permits of$1.57 million more than the final budget. Actual expenditures were $6.1 million less than the final 2006 expenditure budget. General government expenditures of$3.1 million less than the budgeted amount account for the largest portion of this positive variance. Overall, there was a positive variance of $7.8 million (see also prior period adjustments)over the final 2006 budget. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets The City of Spokane Valley's investment in capital assets, including construction in progress, for its governmental type activities as of December 31, 2006, amounts to$64.2 million, net of accumulated depreciation. This investment in capital assets includes land, buildings, improvements, machinery and equipment, construction in progress,and infrastructure. The year-end balance represents a net decrease (additions less retirements and depreciation) of$1.1 million from the end of last year. Additional information can be found in note 5 of this report. Major additions to capital assets during the fiscal year included the following: • Police Precinct Building$2,403,337 • Infrastructure $1,648,906 • Construction in Progress$5,331,210 The following table provides a listing of the capital assets (net of accumulated depreciation) at December 31,2006. • Governmental Activities Land $ 2,978,847 Buildings 11,643,239 Other improvements 836,296 Infrastructure 36,781,595 Machinery and equipment 466,272 Construction in progress 11,494.406 Total $ 64,200,656 Long-Term Debt At the end of the current fiscal year, the City of Spokane Valley has total bonded debt outstanding of$8,945,000. This amount is backed by the full faith and credit of the City(general obligation bonds)with debt service funded by general government revenues and contributions from Public Facilities District. City of Spokane Valley Management's Discussion and Analysis (continued) Under State of Washington statutes general obligation indebtedness for general purposes pursuant to a vote of the electorate is limited to 2.5% of actual value of taxable property located within the City. Non-voted general purpose indebtedness is limited to 1.5% of assessed valuation and the combination of voted and non-voted general purpose indebtedness cannot exceed 2.5% of assessed valuation. The assessed valuation of the City for the year 2006, for purposes of determining the legal debt margin, is $5,056,991,058. Remaining debt capacities for the City for general voted and non-voted purposes(2.5%) is limited to $117,317,938. The City of Spokane Valley maintains an A3 rating from Moody's for its non-voted general obligation debt. Additional information regarding the debt limitations and capacities can be found in note 10. ECONOMIC FACTORS AND NEXT YEARS' BUDGETS AND RATES Several factors that affect the economic climate in the City of Spokane Valley were considered when preparing the City's 2007 budget. The outlook for the regional economy was weighed in relation to its expected impact on the City of Spokane Valley. The character of the City, including its current and future business activity and its attraction as a place to live, was evaluated. Based on the budget analysis, the City's future is promising. Healthy economic numbers emerged in 2006, including 7,100 new jobs in Spokane County, with the unemployment rate dropping to 5.0%. Single family dwelling permits in the Spokane area dropped to 2,192 while the number of single family dwelling sales topped 7,792. The City of Spokane Valley's assessed value climbed 12%to $5.06 billion in 2006. An increase of another 10% is expected during 2007. The City of Spokane Valley's 2007 property tax rate is expected to remain very close to the 2006 level of$1.60/thousand dollars of assessed value. A county wide real estate excise tax generated$2.5 million in receipts for city capital projects during 2006. Sales tax receipts are expected to grow at a 2%rate in 2007. The City received $18.8 million in sales tax in 2006. The City contracts with Spokane County for a majority of city services including public safety and sheet maintenance. Parks maintenance is provided by a private landscape maintenance firm. This has allowed the City, with a population of 85,010, to hold the number of full-time employees at 64. A moderate cost increase is expected in service contracts in 2007: These factors were considered when the City adopted the 2007 budget. No general fund tax increases were made in 2006,nor were any anticipated in the 2007 budget. Expenditures were budgeted at levels to maintain services at the 2006 level. REQUESTS FOR FINANCIAL INFORMATION This financial report is designed to provide a general overview of the City of Spokane Valley's finances and to demonstrate the City's accountability. If you have questions about this report or would like to request additional information, contact the City's Finance Department, 11707 E. Sprague Ave., Suite 106, Spokane Valley, Washington 99206. 12 City of Spokane Valley Statement of Net Assets December 31, 2006 Primary Government Governmental Business-Type Activities Activities Totals Assets Cash $ 1,389,939 $ 339,460 $ 1,729,399 Deposits and investments 30,560,771 1,251,426 31,812,197 Receivables,net: Taxes 4,972,245 44,825 5,017,070 Accounts 667,222 - 667,222 Due from other governments 314,707 7,049 321,756 Internal balances 724,622 113,816 838,438 Capital assets(not being depreciated): Land 2,978,847 - 2,978,847 Construction in progress 11,643,239 - 11,643,239 Capital assets, net of accumulated depreciation: Building and system 11,494,406 - 11,494,406 Improvements other than buildings 836,296 - 836,296 Machinery and equipment 466,272 13,384 479,656 Infrastructure 36,781,595 314,151 37,095,746 Total assets $102,830,161 $ 2,084,111 $104,914,272 Liabilities Accounts payable $ 1,251,710 $ 31,995 $ 1,283,705 Taxes payable 838 - 838 Internal balances 816,110 22,328 838,438 Accrued liabilities 242,168 10,861 253,029 Bonds and deposits payable 89,800 - 89,800 Other liabilities 739,199 77,619 816,818 Special assessment debt with governmental commitment: Due within one year 284,416 - 284,416 Due in more than one year 10,217,832 - 10,217,832 Total liabilities $ 13,642,073. $ 142,803 $ 13,784,876 Net Assets Invested in capital assets,net of related debt 53,865,089 327,535 54,192,624 Restricted for: Capital Projects 8,003,901 - 8,003,901 Center Place operating 321,297 - 321,297 Other 5,032,503 5,032,503 Unrestricted 21,965,298 1,613,773 23,579,071 Total net assets $ 89,188,088 $ 1,941,308 $ 91,129,396 See accountants'compilation report and notes to financial statements. 13 City of Spokane Valley Statement of Activities Year Ended December 31,2006 Net Revenues(Expenses)and Changes in Net Assets Program Revenues _ Primary Government Operating Capital • Charges for Grants and Grants and Governmental Business-type Function/Programs Expenses Services Contributions Contributions Activities Activities Total Primary Government: • Government activities: General government $ 4,903,530 $ 947,190 S - $ - $ (3,956,340) $ - $ (3,956,340) Public safety 15,741,625 582,872 - - (15,158,753) - (15,158,753) Physical environment 1,484,594 - - - (1,484,594) - (1,484,594) Transportation 13,259,749 - - 8,039,238 (5,220,511) - (5,220,511) Economic environment 1,867,096 2,253,318 - - 386,222 - 386,222 Culture and recreation 1,884,302 576,401 - - (1,307,901) - (1,307,901) Interest on long-term debt 408,999 - - - (408,999) - (408,999) Total governmental activities 39,549,895 4,359,781 - 8,039,238 (27,150,876) - (27,150,876) Business-type activities: Stormwater management 1,102,346 1,557,916 - - - 455,570 455,570 Total primary government $40,652,241 $ 5,917,697 $ - $ 8,039,238 (27,150,876) 455,570 (26,695,306) General revenues: Taxes Property taxes 8,727,251 - 8,727,251 Sales and use tax 18,841,917 - 18,841,917 Excise taxes 3,105 637 - 3,105,637 Other taxes 911,464 - 911,464 Extraordinary gain,-proceeds 7,698 - 7,698 Capital contributions 87,128 87,128 Investment earnings 1,253,467 58,02! 1,311,488 Transfers 29,393 (29,393) - Total general revenues,special items,and transfers 32,963,955 28,628 32,992,583 CHANGE IN NET ASSETS 5,813,079 484,198 6,297,277 NET ASSETS,beginning of year,as restated 83,375,007 1,457,110 84,832,117 • NET ASSETS.end of year $ 89,188,086 $ 1,941,308 $ 91,129,394 See accountants'compilation report and notes to financial statements. • • City of Spokane Valley Balance Sheet-Governmental Funds Year Ended December 31, 2006 Service Level Special Street Stabilization Capital Capital Capital Capital Other General Street Reserve Projects Projects Projects Grants Governmental Governmental and Fund Fund and Fund Fund Fund Funds Fun is Assets Cash $ 134,575 $ 486,676 $ - $ 24,951 $ 179,782 $ 289,856 $ 226,717 $ 9,663 $ 1,352,220 Deposits and investments 7,274,700 4,446,012 4,620,022 3,435,466 3,453,860 - - 6,520,132 29,750,192 Receivables,net: Taxes 2,358,857 168,283 - - 29,147 2,556,287 Accounts 23,997 - - - - 70,073 386,162 180,741 660,973 Due from other funds 444,715 - - - 134,983 68,652 30,845 679,195 Due from other governments 153,387 34 80,643 80,643 - - - 314,707 Total assets $ 10,390,231 $ 5101,005 $ 4,620,022 $ 3,541,060 $ 3,714,285 $ 494,912 $ 681,531 $ 6,770,528 $ 35,313,574 Liabilities and Fund Balances LIABILITIES: Accounts payable $ 240,245 $ 361,441 $ - $ - $ - $ 329,415 $ 174,117 $ 145,424 $ 1,250,642 Accrued wages and benefits 211,255 11,977 - - - 953 1,040 171 225,396 Due to other funds 77,821 31,325 - 52,609 - - 476,974 177,381 816,110 Due to other governments 729,531 1,994 - - - 4,314 - - 735,839 Bonds and deposits payable 89,800 - - - - - - 89,800 Taxes payable- 838 - - - - 838 Deferred revenues 334,129 - - 331,867 29,400 695,396 Total liabilities 1,683,619 406,737 - 52,609 - 666,549 681,531 322,976 3,814,021 Special assessment debt with governmental commitment: Fund balances: Reserved for: Capital projects - 3,488,451 3,714,285 • - • 801,165 8,003,90! CenterPlace operating - - - - - 321,297 321,297 Unreserved 8,706,612 4,694,268 4,620,022 (171,637) 5,325,090 23,174,355 Total liabilities and fund balances $ 10,390,231 $ 5,101,005 $ 4,620,022 $ 3,541,060 $ 3,714,285 $ 494,912 $ 681,531 $ 6,770,528 $ 35,313,574 See accountants'compilation report and notes to financial statements. /6 City of Spokane Valley Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets December 31, 2006 Total fund balances as shown on the governmental funds balance sheet. $31,499,553 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and,therefore are not reported in the governmental funds balance sheet. 63,943,093 These assets consist of: Land $ 2,978,847 Construction in progress 11,643,239 Buildings 12,339,003 Improvements other than buildings. 2,123,571 Machinery and equipment,general government 372,789 Infrastructure 209,517,754 Less accumulated depreciation (175,032,110) Certain taxes will be collected after year-end and will not be available after year-end to pay for current year expenditures and are reported as deferred revenue. 2,422,207 These revenues consist of: Sales and use tax $ 1,989,213 Excise tax 228,896 Other taxes 197,849 Charges for services - Investment earnings 6;249 Long-term liabilities,including bonds payable are not due and payable in the current period and therefore are not reported in the funds. (9,823,625) These long-term liabilities consist of: Bonds payable $ (8,945,000) Note Payable $ (1,222,540) Premium on bond issuance $ (172,870) Accrued interest (16,772) Compensated absences (161,838) Deferred revenue 695,395 Internal service funds are used by management to charge costs of various support services such as equipment rental,self-insurance,information technology and facility services to individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the statement of net assets. 1,146,860 Current assets 893,725 Capital assets 257,563 Total liabilities (4,428) Total net assets of governmental activities as shown on the statement of net assets,as restated $89,188,088 See accountants'compilation report and notes to financial statements. 18 City of Spokane Valley Statement of Revenue,Expenditures,and Changes in Fund Balances-Governmental Funds Service Level Special Street Stabilization Capital ' Capital Capital Capital Other Total General Street Reserve Projects Projects Projects Grants Governmental Governmental Fund Fund Fund Fund Fund Fund Fund Funds Funds REVENUE: Taxes $ 27,578,547 $ 115,589 $ $ 1,237,018 $ 1,224,268 $ $ - $ 1,105,013 $ 31,260,435 Licenses and permits 2,253,318 - - - 2,253,318 Intergovernmental revenues 1,889,556 1,999,312 - - - 365,532 2,989,969 794,869 8,039,238 Charges for services 682,465 - - - - - 682,465 Fines and forfeitures 582,872 - - - - - - - 582,872 Investment income 312,722 210,918 179,316 128,989 135,514 4,710 - 242,116 1,214,285 Miscellaneous revenues 459,198 38,484 - - - 8,209 29290 41,220 - 576,401 Total revenue ' 33,758,678 2,364,303 179 316 1,366 007 1 359 782 378,451 3,019,259 2 183,218 44,609,014 EXPENDITURES: Current: General government 4,211,163 - - - - - 4,211,163 Public safety 15,733,006 - - - - - 15,733,006 Physical environment 1,423,904 - - - - - _ 48,839 1,472,743 Transportation - 2,957,753 - - - - 2,170 2,959,923 Economic environment 1,556,178 - - - - - 296,912 1,853,090 Culture and recreation 1,755,015 - - - - - 1,755,015 Total current expenditures 24,679,266 2,957,753 - - - - 347,921 27,984,940 Capital outlay 64,867 508,639 - - - 1,345,883 3,605,064 2,841,116 8,365,569 Debt service: Principal retirement - - 213,370 213,370 Interest - 414 535 • 414,535 Total expenditures 24,744,133 3,466,392 1 345 883 3 605,064 3,816,942 36,978,414 EXCESS OF REVENUE OVER (UNDER)EXPENDITURES 9014,545 (1,102,089) 179 316 1,366,007 1359782 (967,432) (585,805) (1,633,724) 7,630,600 OTHER FINANCING SOURCES(USES): Debt proceeds . - _ - - 1,260,910 1,260,910 Extraordinary gain,fire proceeds 109,317 - - - - 109,317 Transfers in 74,300 2,000,000 2,105,000 - 790,782 • 585,805 3,534,765 9,090,652 Transfers out ' (7,539,050) (111,645) - (144,254) (91,645) - (1,184,752) (9,071,346) Total other financing sources and(uses) (7,355,433) 1,888,355 2,105,000 (144,254) (91 645) 790,782 585,805 3 610 923 1,389,533 NET CHANGE IN FUND BALANCES 1,659,112 . 786,266 2,284,316 1,221,753 1,268,137 (176,650) 1,977,199 9,020,133 FUND BALANCES,BEGINNING OF YEAR 7,047,500 3,908 002 2,335 706 2,266,698 2,446,148 5,013 - 4 470 353 22,479,420 FUND BALANCES,END OF YEAR $ 8,706,612 $4,694,268 $ 4,620,022 $3,488,451 $ 3,714,285 $ (171,637) $ - $ 6,447552 $ 31,499,553 See accountants'compilation report and notes to financial statements. City of Spokane Valley Reconciliation of the Combined Statement of Revenues, Expenditures, and Changes in Fund Balances of Year Ended Governmental Funds to the Statement of Activities December 31, 2006 Net change in fund balances-total governmental funds. $ 9,020,133 - Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. The entity wide statement of activities reports capital outlay as depreciation expense over the life of the asset. This is amount by which depreciation exceeded capital outlays in the current period. (2,444,225) Depreciation (10,773,877) Capital outlay 8,365,569 Transfer of governmental capital assets to Stormwater (123,045) Donated capital assets 87,128 The book basis of assets destroyed in fire,gross proceeds from insurance settlement $109,317,which resulted in a gain of$7,698 (101,619) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 431,150 • This is comprised of: Property taxes $ (120,138) Sales and use tax 210,408 Excise tax 217,896 Other taxes 17,668 Charges for services _ 103,203 Investment earnings 2,113 Bond proceeds provide current financial resources to governmental funds,but issuing debt increases non-current Iiaiblities in the statement of net assets. Repayment of non-current debt is an expenditure in the governmental funds but on the statement of net assets it reduces the liability. (1,042,004) Principal repayment $ 213,370 Debt borrowings (1,260,910) Amortization of premium 5,536 Some expenses reported in the statement of activities do not require the use of current financial resources and,therefore,are not reported as expenditures in governmental funds: Compensated absences (38,662) Internal service funds are used by management to charge the cost of certain activities,such as equipment rental,self-insurance,information technology and facility services to the individual hinds. The net revenue(expense)of these internal service funds is reported with governmental activities. (11,694) • Changes in net assets of governmental activities $ 5,813,079 21 City of Spokane Valley Statement of Net Assets - Proprietary Funds December 31, 2006 Governmental Activities Internal Stormwater Service Management Funds Assets Current assets: Cash $ 339,460 $ 37,719 Deposits and investments 1,251,426 810,579 Assessment receivables(net) 44,825 - Due from other funds 113,816 45,427 Due from other governments 7,049 - Total current assets 1,756,576 893,725 Capital assets: Machinery and equipment 13,511 786,004 Infrastructure 323,199 Less accumulated depreciation (9,175) (528,441) Total capital assets(net of depreciation) 327,535 257,563 • Total assets $ 2,084,111 • $ 1,151,288 Liabilities Current liabilities: Accounts payable $ 31,995 . $ 1,068 Accrued wages and benefits payable 10,861 - Due to other funds 22,328 - Due to other governments - 3,153 Deposits and other payables 32,100 207 Deferred revenue 45,519 Total liabilities 142,803 4,428 Net Assets Invested in capital assets, net of related debt 327,535 257,563 Unrestricted • 1,613,773 889,297 Total net assets 1,941,308 1,146,860 Total liabilities and net assets $ 2,084,111 $ 1,151,288 The notes to the fmancial statements are an integral part of this statement 22 City of Spokane Valley Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds Year Ended December 31, 2006 Governmental Activities Internal Stormwater Service Management Funds _ OPERATING REVENUE: . Charges for goods and services(net of returns and allowances) $ 1,557,916 $ 161,522 OPERATING EXPENSES: Operations 1,093,171 169,033 Depreciation 9,175 174,384 Total operating expenses 1,102,346 343,417 INCOME (LOSS) FROM OPERATIONS 455,570 (181,895) NONOPERATING REVENUE: Investment income 57,460 37,069 Other miscellaneous revenue 561 - Loss on disposal of assets - - Total nonoperating revenues 58,021 37,069 Income(loss)before contributions and operating transfers 513,591 (144,826) CONTRIBUTIONS AND TRANSFERS: Transfers in 123,045 133,132 Transfers out (152,438) - Capital contributions - - Total contributions and transfers (29,393) 133,132 INCREASE (DECREASE) IN NET ASSETS 484,198 (11,694) NET ASSETS, BEGINNING OF YEAR 1,277,396 661,615 PRIOR PERIOD ADJUSTMENT 179,714 496,939 NET ASSETS, BEGINNING OF YEAR 1,457,110 1,158,554 NET ASSETS, END OF YEAR $ 1,941,308 $ 1,146,860 The notes to the financial statements are an integral part of this statement 23 City of Spokane Valley Statement of Cash Flows - Proprietary Funds Year Ended December 31, 2006 Governmental Activities Internal Stormwater Service Management Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers and users $ 1,576,522 $ 22,442 Receipts from interfund services provided - 161,523 Payments to suppliers and for services (1,069,555) (169,898) Net cash provided by operating activities 506,967 14,067 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from sale of capital assets - 45,428 Operating transfers net (29,393) - Purchases of capital assets (156,997) - Net cash(used in)provided by operating activities (186,390) 45,428 • CASH FLOWS FROM INVESTING ACTIVITIES: Interest received 58,021 37,069 NET INCREASE IN CASH AND CASH EQUIVALENTS 378,598 96,564 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,212,287 751,734 CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,590,885 $ 848,298 Reconciliation of Operating Income (Loss) from Operations to Net Cash Provided by Operating Activities: Operating income(loss) $ 455,570 $ (181,895) Adjustments to reconcile operating income(loss)from operations to net cash provided by operating activities: Depreciation 9,175 174,384 Decrease(increase) in assets: Assessment receivable 25,655 - Due from other funds - 22,442 Due from other governments (7,049) - Increase(decrease) in liabilities: Accounts payable 31,995 1,068 Accrued wages and benefits payable 2,956 - Due to other funds 22,328 - Due to other government (15,668) (2,139) Deposits and other payables - 207 Deferred revenue (17,995) - Total adjustments 51,397 195,962 Net cash provided by operating activities $ 506,967 $ 14,067 The notes to the financial statements are an integral part of this statement 24 City of Spokane Valley • Notes to Financial Statements NOTE I—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The City of Spokane Valley(the City) was incorporated on March 31, 2003. The City operates under a Council– Manager form of government. The City's major operations, as authorized under the laws of the State of Washington applicable to a non-charter city code,include planning and zoning, public safety,public works, and recreation and culture. On May 10, 2005 an election was held that annexed library services to the Spokane County Library District. The district assumed responsibility for all city library services on January 1, 2006. The accounting and reporting policies of the City relate to the funds included in the accompanying financial statements which conform to generally accepted accounting principles(GAAP) applicable to state and local governments. GAAP for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB),the Financial Accounting Standards Board(FASB), when applicable, and the American Institute of Certified Public Accountants (AICPA)pronouncements that have been made applicable by GASB Statements or Interpretation. A. Reporting entity As required by GAAP the City's financial statements present the City of Spokane Valley–the primary government. There are no component units(either blended or discretely presented) included in these statements. B. Government-wide and fund financial statements The City's basic financial statements include both government-wide (reporting the City as a whole)and fund financial statements(reporting the City's major funds). Both the government-wide and fund financial statements categorize primary activities as either government or business-type. The government-wide financial statements (i.e., the statement of net assets and the statement of activities)report information on all of the non-fiduciary activities of the primary government. For the most part,the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues,,are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase,use, or directly benefit from goods, services,or privileges provided by a given function or segment and 2)grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues. Separate financial statements are provided for governmental funds,proprietary funds, and fiduciary funds. The City has no fiduciary funds. Major individual funds are reported as separate columns while the remaining funds are combined for presentation purposes in the governmental funds statements and the proprietary funds statements. 25 • City of Spokane Valley Notes to Financial Statements NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): C. Measurement focus, basis of accounting, and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting,as are proprietary funds. Under this approach, revenues are recorded when earned and expenses are recorded when a liability is incurred,regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all the eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectable within the current period or soon thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 30 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, claims,and judgments are recorded only when the payment is due. Property taxes, franchise fees, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The city reports the following major governmental funds: The General Fund is the City's primary operating fiord. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Street Fund is responsible for the maintenance of all city streets and bridges. The Service Level Stabilization Reserve Fund provides emergency revenue source to maintain service levels in the event of a downturn in the local economy. The Capital Projects Fund and the Special Capital Projects Fund are used as matching funs for construction projects. These funds account for the collection and expenditure of the real estate excise tax levied on all sales of real estate. The first quarter of real estate excise tax must be spent on capital improvements identified in a capital improvements plan and is monitored through the Capital Projects Fund. The second quarter percent of the real estate excise tax is levied by the City for planning under the Growth Management Act and are used for capital projects monitored through the Special Capital Projects Fund. The Street Capital Projects Fund and Capital Grants Fund accounts for monies used to finance the six year • transportation improvement plan. Revenues are transfers from the Arterial Street Fund, Capital Projects Fund, Special Capital Projects Fund and Street Bond Fund. • 26 City of Spokane Valley Notes to Financial Statements NOTE I —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): The city reports the following major governmental funds(continued): The Capital Grants Fund accounts for capital improvement projects funded partially by grant proceeds from other governmental agencies, such as TIB, SRTC, and BRAC. Revenues are from grant proceeds and transfers from other special revenue funds. The city reports the following major proprietary fund: The Stormwater Management Fund accounts for the receipt and expenditure of the stormwater management fee. The expenditures are used for stormwater control construction and management. Additionally, the government reports the following fund types: Special revenue funds account for arterial street construction and maintenance, hotel/motel tax revenues and expenditures, CenterPlace operating reserve, winter weather reserve, and revenues and expenditures for the Paths and Trails Fund. Debt service funds account for the resources accumulated and payments made for principal and interest on general government debt except those to be accounted for in another fund. Capital project funds account for the acquisition or development of capital facilities for governmental activities. Their major sources of revenues are from proceeds of general obligation bonds, grants from other agencies, and contributions from other funds. Internal service funds account for computer hardware/software, equipment, vehicle replacement, and risk management services provided to other departments on a cost reimbursement basis. Private-standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule interfund activity has been eliminated from the government-wide financial statements. Exceptions are payments in lieu of taxes,external type transactions within internal service funds (revenues and expenses for interest or services to other governmental organizations), and other charges for stormwater services. Elimination of these charges would distort the direct cost and program revenues reported for these functions. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2)operating grants and contributions, and 3) capital grants and contributions,including special assessments. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. 27 City of Spokane Valley • • Notes to Financial Statements NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principle operating revenues of the stormwater enterprise fund is a stormwater assessment fee. Operating expenses of enterprise funds and internal service funds include the cost of sales and services,administrative expenses,and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, and then unrestricted resources as they are needed. D. Assets, liabilities,and fund equity 1. Cash and cash equivalents The City considers all highly liquid assets including demand deposits,money market accounts, CD's, investment in the State Treasurer's Investment Pool, and short-term investments with a maturity of three months or less from the date of acquisition as cash and cash equivalents. These amounts are classified on the balance sheet or in the statement of net assets within cash and cash equivalents in the various funds. The interest on these investments is prorated to the applicable funds. 2. Investments—Refer to Note 3 3.Receivables and payables Taxes receivable consists of property taxes and related interest and penalties. Accrued interest receivable consists of amounts earned on investments,notes,and contracts. Accrued interest payable consists of amounts owed on notes, loans, and contracts. Customer accounts receivable/payable consist of amounts owed from/to private individuals or organizations for goods and services including amounts owed. If the transactions are with another governmental unit, it is accounted for within "due from/to other governments." Receivables have been reported net of estimated uncollectible accounts. Because property taxes and special assessments are considered liens on property,no estimated uncollectible amounts are established. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to either"due to/from other funds"(i.e.,the current portion of interfund loans)or"interfund loans receivable/payable"(i.e., the non-current portion of interfund loans). All other outstanding balances between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances.". (Refer to Note 8.) Advances, between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. • 28 City of Spokane Valley Notes to Financial Statements NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): In the government-wide financial statements,and proprietary fund types in the fund financial statements, long-term liabilities are reported in applicable governmental activities,business-type activities, or proprietary fund type statement of net assets. Wages and benefits payable represent wages earned at the end of the current fiscal year but not paid until the next fiscal year. 4. Inventories and prepaid items Reported inventories in governmental funds consist of expendable supplies held for consumption. The cost thereof has been recorded as an expenditure at the time individual inventory items were purchased(purchase method). Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund statements. 5. Capital assets and deprecation–Refer to Note 5 6. Long-term debt Liabilities for long-term debt are recorded in the government-wide statement of net assets and in the governmental funds balance sheet. The liabilities include bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Issuance costs are reported as deferred charges. Long-term debt outstanding at year end is outlined in Note 10. For governmental funds financial statements,bond issuance costs are expended at the time of issuance. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bond proceeds are reported as an other financing source net of the applicable premium or discount. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. The nature of debt in the governmental activity is specific to a program and,therefore; debt service costs are not an allocated expense. 7. Deferred revenues The deferred revenues account is used to offset receivables established in the governmental fund financial statements for certain revenues that are measurable but not considered available to finance payment of current obligations, and, therefore,not susceptible to accrual on the modified accrual basis. When the receivable amounts are collected in future periods, this liability account is reduced and corresponding revenue is recorded. Deferred revenues represented in this manner on the accompanying financial statements are uncollected property taxes levied and uncollected road taxes levied. 29 City of Spokane Valley Notes to Financial Statements 8. Compensated absences Compensated absences are absences for which employees will be paid, such as vacation and sick leave. Vacation pay, which may be accumulated up to 360 hours, is payable upon resignation,retirement, or death. All vacation pay is accrued when incurred in the government-wide,proprietary and fund financial statements. An additional amount has been accrued for the city's share of Medicare taxes related to the vacation accrual. A liability for these amounts is reported in the government fund statements only if they have matured, for example, as a result of employee resignations and retirements NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): 9. Fund balance designations and reservations In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. E. Revenues, expenditures,and expenses 1. Program revenues Program revenues include charges for services to customers for goods or services provided, operating grants and contributions,and nonoperating grants and contributions within the Government-wide statement of activities. charges for services include business licenses,construction permits, and recreation program fees. 2. General revenues Property taxes,retail taxes,business taxes, excise taxes, and associated penalties and interest, and interest and investment earnings are classified as general revenues within the Government-wide statement of activities. 3. Interfund transfers Permanent reallocations of resources between funds of the reporting entity are classified as interfund transfers. For the purposes of the Government-wide Statement of Activities,all interfund transfers between individual governmental funds have been eliminated. 4. Expenses/expenditures Expenses in the Government-wide statement of activities are reported by function as a governmental activity (general government, security of persons and property,physical environment, transportation,economic environment, culture and recreation, or interest on long-term debt),or business-type activity(wastewater,or stormwater). Certain indirect costs are included in program expenses by function. In the fund financial statements, expenditures of governmental funds are classified current by function, debt service principle and interest payments, or purchases of capital items. Proprietary expenditures are classified as operating or non-operating 30 City of Spokane Valley Notes to Financial Statements 5. Operating and nonoperating revenues and expenses Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services in connection to the proprietary fund's principal ongoing operations. It also includes all revenue and expenses not related to capital and related financing, non-capital financing, or investing activities. All revenue and expenses not meeting this definition are nonoperating revenues and expense. NOTE 2—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY: A. Scope of budget Annual appropriated budgets are adopted for all funds on a basis consistent with generally accepted accounting principals. Legal budgetary control is established at the fund level. Subsidiary revenue and expenditure ledgers are used to compare the budgeted amounts with actual revenues and expenditures. As a management control device, the subsidiary ledgers are used to monitor expenditures for individual functions and activities by object class. B. Procedures for adopting the original budget The City's budget procedures are mandated by the Revised Code of Washington 35A.33. The following are key procedural steps in the City's budget development process. Note that the process and dates are for the 2007 budget process and may be changed for future processes: • In April,the official"budget call" required by State law is made to all department directors or fund managers. Budget development instructions and other materials are provided to the departments at this time. • In June departments submit revenue and expenditure estimates to the Finance department. The City Council and City management staff discuss City goals and priorities and reaffirm overall City priorities, vision, and mission at a mid-year retreat. Additional policy guidance is provided throughout the year. • In July the Finance department submits the preliminary budget to the City Manager. • In August the City Manager submits estimates on the current year's revenue and expenditures for the upcoming year to the council. • During September,preliminary budget documents were prepared, printed and filed with City Clerk. This proposed budget is presented to the City Clerk and copies are made available to the public. The Council set the dates of the preliminary and final budget hearings. • Before December 3151 the City Council,by a majority vote, will adopt the budget by ordinance, establishing the budget appropriation for the year. • The approved budget is published and distributed during the first quarter of the following year. Copies are made available to the public. • Quarterly budget monitoring reports are published by the Finance Department to report on actual performance compared to budget estimates and to identify any remedial actions that may be needed. 31 • • City of Spokane Valley Notes to Financial Statements NOTE 2—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY(continued): C. Amending the budget The budget, as adopted,constitutes the legal authority for expenditures. The City's budget is adopted at the fund level, so that expenditures may not legally exceed appropriations at that level of detail. The City Manager is authorized to transfer budgeted amounts within a fund;however, any revisions that alter the total expenditures of a fund, or that effect the number of authorized employee positions, salary ranges, or other conditions of employment must be approved by the City Council. When the City Council determines that it is in the best interest of the City to increase or decrease the appropriation for a particular fund, it may do so by ordinance approved by one more than the majority after holding a public hearing. The City's budget was amended two times during the fiscal year. The financial statements contain the original and final budget information. The original budget is the first complete appropriated budget. The final budget is the original budget adjusted by all reserves, transfers, allocations, supplemental appropriations, and other legally authorized changes. All appropriations lapse at year end. Unexpended resources must be re-appropriated in the subsequent period. D. Compliance There have been no material violations of finance-related legal or contractual provisions, and there have been no expenditures exceeding legal appropriations in any of the funds with the exception of the Civics Building Capital Projects Fund and Debt Service LTGO fund by$1,352,176 and$27,905 respectively. E. Deficit fund equity At December 31, 2006,the Street Capital Projects Fund had a deficit of($171,637)in their fund balance., The deficit will be eliminated by the appropriation of future revenue from the general fund and other resources. NOTE 3—DEPOSITS AND INVESTMENTS: A. Deposits The City's deposits and certificates of deposit are entirely covered by the federal depository insurance(FDIC)or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission(PDPC). The PDPC is a statutory authority established under Chapter 39.58 of the Revised Code of Washington. B.Investments As required by state law, all investments of the City's funds are obligations of the U.S. Government, U.S. agency issues, obligations of the State of Washington, general obligation of Washington State municipalities(the State Treasurer's Local Government Investment Pool (LGIP), or certificate of deposit with Washington State banks and savings and loan institutions. 32 City of Spokane Valley Notes to Financial Statements NOTE 3—DEPOSITS AND INVESTMENTS(continued): The Washington Local Government Investment Pool operates in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The fair value of the portfolio is calculated by the master custodian or by an, independent pricing service under contract with the State Treasurer's Office. The fair value of the City's position in the State of Washington Local Government Investment Pool is the same as the value of the pool shares Investments are shown on entity-wide Statement of Net Assets at fair market value or 2a7-like-pools at amortized cost. Investments are reported within cash and investments of governmental activities and within cash and cash equivalents of business-type activities. The City's investments are categorized to give an indication of risk assumed at year-end. The following summary shows the City's investments at year-end categorized by risk. • Category 1 includes investments that are insured,registered, or held by the City or its agent in the City's name. • Category 2 includes uninsured and unregistered investments, which are held by the counterparty's trust department or agent in the City's name. • Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty's trust department or agent, but not in the City's name. The City had no Category 1, 2, or 3 type investments in their investment portfolio as of December 31, 2006. C. Deposit and investment reconciliation Amounts reported in the fund statements are as follows: Fair Value Carrying Cash Amount Investments Equivalents State investment pool $ 30,240,643 $ - $ 30,240,643 Money market account 1,571.554 - 1,571,554 Total investments not subject to credit risk $ 31,812,197 $ - $ 31,812,197 NOTE 4—PROPERTY TAXES: The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. The County Assessor is responsible for determining what the individual property taxes are, based upon the monies requested by the taxing districts and the assessed valuation within these districts. Taxes are levied annually on January l'on property values listed as of the prior May 31'. Assessed values are established by the County Assessor at 100%of fair market value. A revaluation of all property is required every four years. Taxes are due in two equal installments on April 30`h and October 31'. Tax liens are automatic at the point the taxes are levied. 33 City of Spokane Valley Notes to Financial Statements NOTE 4—PROPERTY TAXES(continued): • Property taxes levied for the current year are recorded as a receivable when levied, offset by deferred revenue. During the year,property tax revenues are recognized when cash is collected. At year-end,property tax revenues are recognized for collections to be distributed by the County Treasurer in January. No allowance for uncollectible taxes is established because delinquent taxes are considered fully collectible. The tax rate for general City operations is limited by State law(RCW 84.52.043) to $3.60 per$1,000 of assessed valuation, deducting from there the levy of$1.50 by the Spokane County Fire Districts#1 and#8, and$.50 for Library Districts which leaves the City with the authority to levy$1.60 for its own purposes. This amount may be reduced for any of the following reasons: (1) The Washington State Constitution limits the total regular property taxes to one percent of assessed valuation or $10 per$1,000 of value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the one-percent limit. (2) Initiative 747 passed by the voters in November of 2001 limits the amount by which a taxing jurisdiction can increase the amount of its regular property tax levy to the lesser of the Implicit Price Deflator(IPD) or one percent,plus adjustments for new construction and annexations. Tax increases higher than one percent must be approved by the voters at an election held according to RCW 84.55.050. A simple majority vote is required. (3) The City may voluntarily levy taxes below the legal limit. For 2006, the City levied$8,084,062 on an assessed valuation of$5,056,991,058. NOTE 5—CAPITAL ASSETS AND DEPRECIATION: Capital assets, which include property,plant,equipment, and infrastructure assets (e.g. roads,bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type columns in the government-wide financial statements. The City defines capital assets as assets with an initial,individual cost of more than$5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Other donated assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. 34 • • City of Spokane Valley • • Notes to Financial Statements • • NOTE S—CAPITAL ASSETS AND DEPRECIATION(continued): A summary of changes in governmental capital assets follows: Donated capital assets received from Spokane County at the time of incorporation were recorded at cost and the �1 accumulated depreciation at the time of transfer. These assets are shown as capital contributions on the statement �� of activities. The following schedule details the assets transferred during the year ended December 31, 2003. � • Capital Assets Donated From Spokane County • Historical Accumulated Depreciation • Cost Depreciation Cost • Infrastructure: • Roadways $ 187,732,531 $ 127,418,027 $ 60,314,504 • Signs, signals, beacons 9,056,000 4,528,000 4,528,000 • Crosswalks 130,084 13,008 117,076 Bridges 5,633,979 2,808,112 2,825,867 • Total infrastructure 202,552,594 134,767,147 67,785,447 • Parks: • Land 1,548,655 1,548,655 • Buildings 898,729 609,824 288,905 Improvements other buildings 2,123,571 1,059,298 1,064,273 • Machinery and equipment 3,337 3,003 334 • Total parks 4,574,292 1,672,125 2,902,167 • Total County assets donated $207,126,886 $ 136,439,272 $ 70,687,614 • • Capital asset activity for the year ended December 31, 2006,is summarized as follows: • Beginning Ending S Balance Increase Decrease Balance • Governmental Activities: Land(not being depreciated) $ 2,567,247 $ 411,600 $ - $ 2,978,847 • Construction in progress 7,468,646 5,331,210 (1,156,617) 11,643,239 • Buildings and leasehold improvements 10,580,288 2,077,866 (319,151) 12,339,003 • Improvements other buildings 2,123,571 - - 2,123,571 Infrastructure 207,991,893. 1,525,861 - 209,517,754 • Machinery and equipment 931,356 227,437 - 1,158,793 • Total capital assets 231,663,001 9,573,974 (1,475,768) 239,761,207 • • • • i 35 • City of Spokane Valley Notes to Financial Statements NOTE 5—CAPITAL ASSETS AND DEPRECIATION(continued): Beginning Ending Balance Increase Decrease Balance Less accumulated depreciation for: Buildings and leasehold improvements$ 737,871 $ 324,257 $ (217,531) $ 844,597 Improvements other buildings 1,215,759 71,516 - 1,287,275 Infrastructure 162,419,303 10,316,855 - 172,736,158 Machinery and equipment 456,889 235,632 - 692,521 Total accumulated depreciation 164,829,822 10,948,260 (217,531) 175,560,551 Capital assets,net of accumulated depreciation $ 66,833,179 $ (1,374,286) $ (1,258,237) $ 64,200,656 Beginning Ending Balance Increase • Decrease Balance Business-type Activities: Infrastructure $ 179,713 $ 143,486 $ - $ 323,199 Machinery and equipment - 13,511 - 13,511 Total capital assets 179,713 156,997 - 336,710 Less accumulated depreciation for: Infrastructure - 9,049 - 9,049 Machinery and equipment - 127 - 127 Total accumulated depreciation - 9,176 - 9,176 Capital assets,net of accumulated depreciation $ 179,713 $ 147,821 $ - $ 327,534 Depreciation Property,plant, and equipment of the primary government is depreciated using the straight line method over the estimated service life as follows: Buildings and improvements 10-60 years Infrastructure 5-40 years Light/Heavy Transportation Equipment 5-10 years Other Equipment 2-20 years Office Equipment 3-5 years Computer Equipment 3-5 years 36 City of Spokane Valley Notes to Financial Statements NOTE 5—CAPITAL ASSETS AND DEPRECIATION(continued): Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Business Type General government services $ 310,288 $ Public safety 8,619 Physical environment 11,851 9,175 Transportation 10,299,826 Economic environment 14,006 Culture and recreation 129,287 Capital assets held by the government's internal service funds are charged to the various functions based on their usage of the assets 174,384 9,175 Total depreciation—governmental activities $10,948,261 $ 9,175 Construction commitments The City of Spokane Valley has active construction projects as of December 31, 2006. The projects include various street construction projects. At year end the City's commitments with contractors are as follows: Remaining Spent-to-Date Commitments Various street construction projects $ 4,946,782 $ 1,537,381 The various street construction projects are being funded by state and local grants, as well as, existing resources in various City Funds. NOTE 6—PENSION PLANS: Substantially all City of Spokane Valley full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems(DRS), a department with the primary government of the State of Washington, issues a publicly available comprehensive annual financial report(CAFR)than includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, P.O. Box 48380, Olympia, WA 98504-8380. The following disclosures are made pursuant to GASB Statement 27,Accounting for Pensions by State and Local Government Employers. 37 City of Spokane Valley Notes to Financial Statements NOTE 6—PENSION PLANS(continued): Public Employees' Retirement System (PERS)Plans 1,2,and 3 Plan Description PERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership purposes; Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution plan. Membership in the system includes; elected officials, state employees, employees of the Supreme, Appeals, and Superior Courts(other than judges in a judicial retirement system), employees of legislative committees, community and technical colleges, college and university employees (not in national higher education retirement programs),judges of district and municipal courts, and employees of local governments. PERS participants who joined the system by September 30, 1977 are Plan 1 members. Those joined on or after August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after September 1, 2002 for local government employees have the option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Retirement benefit provisions are established in state statute and may be amended by the State Legislature. Plan 1 retirement benefits are vested after an employee completes five year of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at age 60 with five years of service or at the age of 55 with 25 years of service. The annual pension is 2% of the average final compensation per year of service, capped at 60%. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. If qualified, after reaching the age of 66 a cost-of-living allowance is granted based on years of service and is capped at 3% annually. Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at the age of 65 with five years of service,or at the age of 55 with 20 years of service, with an allowance of 2%of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-months period. Plan 2 retirements prior to the age of 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3%per year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit; and a cost-of-living allowance is granted(indexed to the Seattle Consumer Price Index), capped at 3% annually. Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component,and member contributions finance a defined contributions component. The defined benefit portion provides a benefit calculated at 1% of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Effective June 7, 2006,Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or five if twelve months that were earned after age 44; or after five service credit years earned in PERS Plan 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. Vested Plan 3 members are eligible to retire with full benefits at age 65, or at age 55 with 10 years of service. Retirements prior to age 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3%per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service credit; and Plan 3 provides the same cost-of-living allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option selected by the - member, either as a lump sum or pursuant to other options authorized by the Employee Retirement Benefits Board. 38 City of Spokane Valley Notes to Financial Statements NOTE 6-PENSION PLANS(continued): There are 1,181 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and beneficiaries receiving benefits 68,609 Terminated plan members entitled to but not yet receiving benefits 22,567 Active plan members vested 104,574 Active plan members nonvested 51,004 Total 246,754 Funding Policy Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6% for state agencies and local government unit employees, and 7.5%for state government elected officers. The employer and employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature. PERS Plan 3 defined contribution is a non-contributing plan for employers. Employees who participate in the defined contribution portion of PERS Plan 3 do not contribute to the defined benefit portion of PERS Plan 3. The Employee Retirement Benefits Board set Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options have graduated rates dependant on the employee's age. The methods used to determine the contribution requirements are established under state statute in accordance with chapters 41.40 and 41.45 RCW. PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer* 3.69% 3.69% 3.69%** Employee 6.00% 3.50% *** * The employer rates include the employer administrative expense fee currently set at 0.19%. ** Plan 3 defined benefit portion only. ***Variable form 5.0%minimum to 15.0%maximum based on rate selected by PERS 3 member. Both the City of Spokane Valley and the employees made the required contributions. The City of Spokane Valley - required contributions for the years ending December 31 were as follows. PERS Plan 1 PERS Plan 2 PERS Plan 3 2006 Employer Contributions $3,238 $63,233 $24,919 2005 Employer Contributions 1,765 33,018 10,185 2004 Employer Contributions 1,284 18,910 7,315 2003 Employer Contributions 276 10,567 3,448 39 City of Spokane Valley Notes to Financial Statements NOTE 7—RISK MANAGEMENT: The City of Spokane Valley is exposed to financial loss resulting from City-caused damage to property or persons, bodily injuries or illness of employees,and unemployment compensation. The City is insured by the Washington Cities Insurance Authority(WCIA) for general liability and property damage coverage.The City uses the Washington State Department of Labor and Industries Insurance Services for coverage to pay for medical care for job-related injuries and illnesses, and wage replacement when the injury or illness is serious enough to miss work. The City is self-insured for unemployment compensation benefits. The Risk Management Fund is used to account for, and finance the liability and unemployment insurance costs. All departments of the City make payments through interfund assessments to the fund on estimates of the amounts needed to pay prior and current year claims. The Washington Cities Insurance Authority(WCIA)was originally formed on January 1, 1981,utilizing Chapter 48.62 RCW(self-insurance regulation) and Chapter 39.34 RCW(Interlocal Cooperation Act) for the purpose of providing a pooling mechanism for jointly purchasing insurance,jointly self-insuring, and/or jointly contracting for risk management services. WCIA has a total of 108 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 professional, public officials' errors and omissions, stopgap, and employee benefits liability. Limits are $3 million per occurrence self insured layer, and$11 million per occurrence in the re-insured excess layer with no annual aggregate except$10 million per member for public officials errors and omissions. The excess layer is insured by the purchase of reinsurance and insurance. Total limits are$14 million per occurrence. 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 may apply by type of coverage.Property insurance and auto physical damage are self-funded from the members' deductible to $250,000 and$500,000 effective July 1, 2004 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 analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage and lobbyist services. WCIA is fully funded by its members,who make annual assessments on prospectively rate basis, as determined by an outside independent actuary. The assessments cover 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 WCIA's assets in financial instruments which comply with State guidelines. These revenues directly offset portions of the membership's annual assessment. 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 the WCIA. 40 City of Spokane Valley Notes to Financial Statements NOTE 7—RISK MANAGEMENT(continued): The City is self-insured on a reimbursement basis for unemployment compensation. The City incurred$3,153 in claims for unemployment compensation in 2006. NOTE 8—INTERFUND BALANCES AND TRANSFERS: Interfund Balances Due to other funds and due from other funds result from goods issued, work performed or services rendered to or for the benefit of another fund of the same government. The amount of interfund loans payable within one year is also included in due to and due from other funds. Due to other fund and due from other fund balances at December 31, 2006 were: Due From Due To Other Funds Other Funds General Fund $ 444,715 $ 77,821 Street Fund - 31,325 Capital Projects Fund - 52,609 Street Capital Projects Fund 134,983 - Capital Grants Fund 68,652 476,974 Nonmajor governmental funds 30,845 177,381 Proprietary funds 113,816 22,328 Internal service funds 45,427 - Total government wide $ 838,438 $ 838,438 Interfund transfers are the flow of assets with a reciprocal return of assets, goods,or services in return.The City uses transfers to (1)move revenues from the fund that stature or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3)use unrestricted revenues collected in the general and street funds to finance various programs accounted for in other funds in accordance with budgetary authorizations. • 41 City of Spokane Valley Notes to Financial Statements NOTE 8—INTERFUND BALANCES AND TRANSFERS(continued): Interfund transfer activity for the year is as follows: Transfers In Transfers Out General Fund $ 74,300 $7,539,050 Street Fund 2,000,000 111,645 Arterial Street Fund - 126,422 Service Level Stabilization Fund 2,105,000 - Debt Service Fund 183,290 - Capital Projects Fund - 144,254 Special Capital Projects Fund - 91,645 Street Capital Projects Fund 790,782 - Street Bond Fund - 1,058,330 CD Block Grant Fund 1,475 - Capital Grant Fund 585,805 - Park Capital Project Fund 750,000 - Civic Building Fund 2,600,000 • - Stormwater Fund 123,045 152,438 Transfer of capital assets from 123,045 governmental funds Internal service Funds 133,132 - Total government wide $9.346,822 346 82 NOTE 9—SHORT-TERM DEBT: As of December 31, 2006,the City had no short-term debt. NOTE 10—LONG-TERM DEBT AND LEASES: General Obligation Bonds The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for governmental-type activities. General obligation bonds are direct obligations and pledge the full faith and credit of the government. General obligation bonds are either created by 315th majority vote of the people and, therefore, financed by a special tax levy; or created by ordinance, adopted by the City Council,and normally financed from general revenues(councilmanic bonds). General obligation bonds currently outstanding are as follows: In 2003, the City issued$9,430,000 in councilmanic bonds to finance the construction of the CenterPlace Community Center and for various street construction projects. The City does expect to receive intergovernmental payments from the Spokane Public Facilities District pursuant to an interlocal agreement dated as of July 2003, which if and when received by the City will be available for debt service associated with the Center for up to$7 million of bonds. 42 City of Spokane Valley Notes to Financial Statements NOTE 10-LONG-TERM DEBT AND LEASES(continued): General obligation bonds currently outstanding are as follows: Debt Name of Issuance Purpose Interest Rate Outstanding 2003 LTGO Bonds Governmental Activities 2.00% - 5.00% $8,945,000 The annual debt service requirements to maturity for general obligation bonds are as follows: Governmental Activities Total Principal Interest Requirements 2007 $ 185,000 $ 411,035 $ 596,035 2008 190,000 406,872 596,872 2009 205,000 401,173 606,173 2010 210,000 395,022 605,022 2011 225,000 386,622 611,622 2012-2016 1,350,000 1,786,113 3,136,113 . 2017-2021 1,995,000 1,458,423 3,453,423 2022-2026 2,580,000 884,750 3,464,750 2027-2031 1,585,000 320,750 1,905,750 2032-2033 420,000 32,500 452,500 $ 8,945,000 $ 6,483,260 $15,428,260 Long-term debt on the Statement of Net Assets is presented net of any premium/discount incurred at the time of issuance. The 2003 LTGO Bonds were sold at a premium of$189,974 and were reported at the net amount of $9,619,974. The premium will be amortized over the life of the bonds. Changes in Long-Term Liabilities During the year ended December 31, 2006,the following changes occurred in long-term liabilities: Governmental Balance Balance Due Within Activities Jan. 1, 2006 Additions Reductions Dec. 31, 2006 One Year General obligation bonds $ 9,120,000 $ - $ 175,000 $ 8,945,000 $ 185,000 Premium 175,343 - 7,316 168,027 7,316 Note payable - 1,260,910 38,370 1,222,540 92,100 Compensated absences 123,176 38,662 - 161,838 - Governmental activity Long-term liabilities $ 9,418,519 $ 1,299,572 $ 220,686 $10,497,405 $ 284,416 43 City of Spokane Valley Notes to Financial Statements NOTE 10—LONG-TERM DEBT AND LEASES(continued): Legal Debt Margin RCW 39.36.020 provides cities with three segments of debt capacity, each equal to two and one-half percent of the city's assessed valuation, for a total debt capacity of seven and one-half percent. The assessed valuation of the City for the year 2006 for purposes of determining the legal debt margin is $5,056,991,058. Under State of Washington statutes general obligation indebtedness pursuant to a vote of the electorate is limited to 2.5%of actual value of taxable property located within the City. Indebtedness without a vote of the people is limited to 1.5% of actual value subject to the limitation that total general purpose indebtedness may not exceed 2.5% of total valuation. There is a 2.5% limitation each for utility purposes and open space and park facilities purposes. The remaining debt capacities of the City are as follows: Amount General Purposes Voted and Non-voted Debt—2.5% (1) $ 117,317,938 Utility Voted Debt—2.5% 126,424,776 Open Space and Park Facilities Voted Debt-2.5% 126,424,776 Total Remaining Debt Capacity $370,167,490 (1) Includes $66,748,028 debt capacity for non-voted debt. Note Payable—The City entered into a purchase agreement with Spokane County for purchase of the Spokane Valley Precinct Building. The balance of$1,260,910 as of June 1, 2006, will be paid as a credit by the City to the County in the form of tenant use of Premises by the County. A monthly payment of$7,675 of principal and interest is due monthly for 2006. The payment is adjusted on a yearly basis. The purchase agreement is to be paid in full by December 31, 2017, however, either party may terminate the agreement for any reason whatsoever upon six months written notice to the other Party. Leases Operating Leases—The City entered into a six year operating lease agreement with Northwest Christian Schools for the rental of office space. The lease commenced on February 1, 2003. Rental rates vary between$15.15 and $16.75 per square foot per annum. Lease payments for the year ended December 31, 2006 amounted to$296,412. Schedule of Minimum Future Rental Payments Year Ended Dec. 31 Amount 2007 $ 352,821 2008 365,116 2009 376,708 2010 98,079 Total minimum future rental payments $1,192,724 44 City of Spokane Valley Notes to Financial Statements NOTE 11 —SUBSEQUENT EVENT: In January 2007,the City hired an architectural firm to begin renovation on the three City of Spokane Valley pools. Renovations were started in fall of 2007 and are expected to be completed in Spring 2008. The estimated costs for construction of the project are between $1.6 to $1.9 million. On September 1, 2007,the City of Spokane Valley paid off the balance owing on the Precinct Building. NOTE 12— CONTINGENCIES AND LITIGATION: In the normal course of governmental operations the City has claims filed against it for various losses related to tort actions for such things as wrongful acts, injuries, or damages for which a civil action can be brought, and other routine legal proceedings. At any given point in time, there is a recurring volume of tort and other claims for compensation and damages against the City, which could impact expenditures. The City's Risk Management fund provides for these claims, and insurance is available to pay a portion of damages for certain types of claims. The collective impact of these claims is not likely to have a material impact on the City's financial position. The City participates in a number of federal-and-state assisted programs. These grants are subject to audit by the grantors or their representatives. Such audits could result in requests for reimbursement to grantor agencies for expenditures disallowed under the terms of the grants. City management does not believe that such disallowances, if any, will be material. NOTE 13—PRIOR PERIOD ADJUSTMENT: The City discovered that revenue was inadvertently recorded as deferred revenue in the Equipment Rental and Replacement Fund instead as revenue for the year ending December 31,2005. Income was understated in the applicable fund by$496,939. The effect of the adjustment gives the City a net prior period adjustment of $496,939, for the year ended December 31,2005. During 2006 the City performed reconciliations of the capital assets accounts and noted that capital assets of $4,814,140 were omitted from the government-wide financial statements for the year ended December 31,2005. The impact on the prior year statement of activities has not been determined. A prior period correction was made in 2006 on the books for$496,939, however the 2005 financial statement were overstated by an additional $496,939 so the net effect in 2006 on net assets was zero. The result on the above adjustments to net assets is as follows: Governmental Business-Type Net assets as reported at December 31, 2005 $ 81,988,710 $ 1,277,396 Correction of Premium on Bonds (120,711) Correction of capital assets 4,814,140 179,714 Correction of Accumulated Depreciation (3,307,132) -0- Total prior period adjustment 1,386,297 179,714 Net assets at December 31, 2005, as restated '1,M,311±_)07 $ 1,457,110 46 City of Spokane Valley Notes to Financial Statements NOTE 13—PRIOR PERIOD ADJUSTMENT: - Continued The effect upon operating income in prior years due to the above adjustments has not been determined. NOTE 14—PRIOR PERIOD ADJUSTMENT: In February of 2006 a fire broke out burning approximately half of the stables and causing water damage to another structure. After consulting with an engineering firm management decided not to rebuild or repair the structures that were damaged. 46 • REQUIRED SUPPLEMENTAL INFORMATION • City of Spokane Valley Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Year Ended December 31, 2006 Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ 24,491,000 $ 26,713,000 $ 27,578,547 $ 865,547 Licenses and permits 681,750 681,750 2,253,318 1,571,568 Intergovernmental revenues 1,121,000 1,121,000 1,889,556 768,556 Charges for services 1,600,000 1,685,000 682,465 (1,002,535) Fines and forfeitures 1,350,000 1,250,000 582,872 (667,128) Investment income 131,300 231,300 312,722 81,422 Miscellaneous 348,016 348,016 459,198 111,182 Total revenue 29,723,066 32,030,066 33,758,678 1,728,612 EXPENDITURES: Current: General government 7,266,170 7,286,170 4,211,163 (3,075,007) Public safety 17,647,913 18,347,913 15,733,006 (2,614,907) Physical environment 980,192 980,192 1,423,904 443,712 Transportation - - - - Economic environment 2,136,700 2,286,700 1,556,178 (730,522) Culture and recreation ' 1,854,666 1,924,666 1,755,015 (169,651) Total current expenditures 29,885,641 30,825,641 24,679,266 (6,146,375) Capital outlay - - 64,867 64,867 Debt service: Principal payments - - - - Interest expense - - - - Total expenditures 29,885,641 30,825,641 24,744,133 (6,081,508) EXCESS OF EXPENDITURES OVER REVENUES (162,575) 1,204,425 9,014,545 7,810,120 OTHER FINANCING SOURCES(USES): Debt proceeds - - Extraordinary gain, fire proceeds - - 109,317 109,317 Operating transfers in 80,000 80,000 74,300 (5,700) Operating transfers out - (3,607,000) (7,539,050) (3,932,050) Total operating financing sources(uses) 80,000 (3,527,000) (7,355,433) (3,828,433) NET CHANGE IN FUND BALANCES (82,575) (2,322,575) 1,659,112 3,981,687 FUND BALANCE, BEGINNING OF YEAR 4,784,250 7,024,250 7,047,500 23,250 FUND BALANCE, END OF YEAR $ 4,701,675 $ 4,701,675 $ 8,706,612 $ 4,004,937 See accompanying accountants'compilation report. 47 City of Spokane Valley Sechedul of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Street Fund Year Ended December 31, 2006 Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ 115,589 $ 115,589 Licenses and permits - - - Intergovernmental revenues 1,753,000 1,812,600 1,999,312 186,712 Charges for services - - - - Fines and forfeitures - - - - Investment income 60,000 105,000 210,918 105,918 Miscellaneous - - 38,484 38,484 Total revenue 1,813,000 1,917,600 2,364,303 446,703 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation 4,131,256 4,211,856 2,957,753 (1,254,103) Economic environment - - - - Culture and recreation - - - - Total current expenditures 4,131,256 4,211,856 2,957,753 (1,254,103) Capital outlay - 24,000 508,639 484,639 Debt service: Principal payments - - - - Interest expense - - - - Total expenditures 4,131,256 4,235,856 3,466,392 (769,464) EXCESS OF EXPENDITURES OVER REVENUES (2,318,256) (2,318,256) (1,102,089) 1,216,167 OTHER FINANCING SOURCES(USES): Debt proceeds - - - Operating transfers in 2,000,000 2,000,000 2,000,000 - Operating transfers out - - (111,645) (111,645) Total operating financing sources(uses) 2,000,000 2,000,000 1,888,355 (111,645) NET CHANGE IN FUND BALANCES (318,256) (318,256) 786,266 1,104,522 FUND BALANCE, BEGINNING OF YEAR 3,100,000 3,100,000 3,908,002 808,002 FUND BALANCE, END OF YEAR $ 2,781,744 $ 2,781,744 $ 4,694,268 $ 1,912,524 See accompanying accountants'compilation report. 48 City of Spokane Valley Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Service Level Stabilization Fund Year Ended December 31, 2006 Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures _ - _ - Investment income - - 179,316 179,316 Miscellaneous - - - - Total revenue - - 179,316 179,316 EXPENDITURES: Current: General government - - - - Public safety - - _ - Physical environment - - - - Transportation 1,000,000 1,000,000 - (1,000,000) Economic environment - - - - Culture and recreation - - - - Total current expenditures 1,000,000 1,000,000 - (1,000,000) Capital outlay - - - - Debt service: Principal payments - - - - Interest expense - - _ - Total expenditures 1,000,000 1,000,000 - (1,000,000) EXCESS OF EXPENDITURES OVER REVENUES (1,000,000) (1,000,000) 179,316 1,179,316 OTHER FINANCING SOURCES(USES): Debt proceeds - - - Operating transfers in - - 2,105,000 2,105,000 Operating transfers out - - Total operating financing sources(uses) - - 2,105,000 2,105,000 NET CIL4NGE IN FUND BALANCES (1,000,000) (1,000,000) 2,284,316 3,284,316 FUND BALANCE, BEGINNING OF YEAR 1,000,000 1,000,000 2,335,706 1,335,706 FUND BALANCE, END OF YEAR $ - $ - $ 4,620,022 $ 4,620,022 See accompanying accountants'compilation report. 49 City of Spokane Valley Schedule of Revenue, Expenditures, and Changes in Fund Balance - Budget and Actual - Capital Projects Fund Year Ended December 31, 2006 Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ 1,000,000 $ 1,000,000 $ 1,237,018 $ 237,018 Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures - - - - Investment income - - 128,989 128,989 Miscellaneous 20,000 20,000 - (20,000) Total revenue 1,020,000 1,020,000 1,366,007 346,007 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - - Capital outlay - - - - Debt service: Principal payments - - - - Interest expense - - - Total expenditures - - - - EXCESS OF EXPENDITURES OVER REVENUES 1,020,000 1,020,000 1,366,007 346,007 OTHER FINANCING SOURCES(USES): Debt proceeds - - - Operating transfers in - - - Operating transfers out (1,210,000) (1,210,000) (144,254) 1,065,746 Total operating financing sources(uses) (1,210,000) (1,210,000) (144,254) 1,065,746 NET CHANGE IN FUND BALANCES (190,000) (190,000) 1,221,753 1,411,753 FUND BALANCE, BEGINNING OF YEAR 190,000 190,000 2,266,698 2,076,698 FUND BALANCE, END OF YEAR $ - $ - $ 3,488,451 $ 3,488,451 See accompanying accountants'compilation report. 50 City of Spokane Valley Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Special Capital Projects Fund t Year Ended December 31, 2006 Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ 1,000,000 $ 1,000,000 $ 1,224,268 $ 224,268 Licenses and permits - - _ Intergovemmental revenues - _ _ - Charges for services - - - - Fines and forfeitures - - - - Investment income - 135,514 135,514 Miscellaneous 20,000 20,000 - (20,000) Total revenue 1,020,000 1,020,000 1,359,782 339,782 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - - Capital outlay - - - - Debt service: Principal payments - - - - Interest expense - - - - Total expenditures - - - - EXCESS OF EXPENDITURES OVER REVENUES 1,020,000 1,020,000 1,359,782 339,782 OTHER FINANCING SOURCES(USES): Debt proceeds - - - Operating transfers in - - - Operating transfers out (1,070,713) (1,070,713) (91,645) 979,068 Total operating financing sources(uses) (1,070,713) (1,070,713) (91,645) 979,068 NET CHANGE IN FUND BALANCES (50,713) (50,713) 1,268,137 1,318,850 FUND BALANCE, BEGINNING OF YEAR 50,713 50,713 2,446,148 2,395,435 FUND BALANCE,•END OF YEAR $ - $ - $ 3,714,285 $ 3,714,285 See accompanying accountants'compilation report. 5/ City of Spokane Valley Schedule of Revenue, Expenditures, and Changes in Fund Balance - Budget and Actual - Street Capital Projects Fund Year Ended December 31, 2006 Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues 6,023,400 6,023,400 365,532 (5,657,868) Charges for services - - - - Fines and forfeitures - - - - Investment income - - 4,710 4,710 Miscellaneous - - 8,209 8,209 Total revenue 6,023,400 6,023,400 378,451 (5,644,949) EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - - Capital outlay 8,385,843 8,385,843 1,345,883 (7,039,960) Debt service: Principal payments - - - Interest expense - - - - Total expenditures 8,385,843 8,385,843 1,345,883 (7,039,960) EXCESS OF EXPENDITURES OVER REVENUES (2,362,443) (2,362,443) (967,432) 1,395,011 OTHER FINANCING SOURCES(USES): Debt proceeds - - - Operating transfers in 2,362,443 2,362,443 790,782 (1,571,661) Operating transfers out - - - Total operating financing sources(uses) 2,362,443 2,362,443 790,782 (1,571,661) NET CHANGE IN FUND BALANCES - - (176,650) (176,650) FUND BALANCE, BEGINNING OF YEAR - - 5,013 5,013 FUND BALANCE, END OF YEAR $ - $ - $ (171,637) $ (171,637) See accompanying accountants'compilation report. 52 City of Spokane Valley Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Capital Grants Fund Year Ended December 31, 2006 Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues 6,857,615 6,857,615 2,989,969 (3,867,646) Charges for services - - - - Fines and forfeitures - - - - Investment income - - - - Miscellaneous - - 29,290 29,290 Total revenue 6,857,615 6,857,615 3,019,259 (3,838,356) EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - - Capital outlay 8,211,000 8,211,000 3,605,064 (4,605,936) Debt service: Principal payments - - - - Interest expense - - - - Total expenditures 8,211,000 8,211,000 3,605,064 (4,605,936) EXCESS OF EXPENDITURES OVER REVENUES (1,353,385) (1,353,385) (585,805) $ 767,580 OTHER FINANCING SOURCES(USES): . Debt proceeds - - - Operating transfers in 1,353,385 1,353,385 585,805 (767,580) Operating transfers out - - - - Total operating financing sources(uses) 1,353,385 1,353,385 585,805 (767,580) NET CHANGE IN FUND BALANCES - - - - FUND BALANCE, BEGINNING OF YEAR - - - - FUND BALANCE, END OF YEAR $ - $ - $ - $ - See accompanying accountants'compilation report. 53 COMBINING STATEMENTS NON-MAJOR FUNDS City of Spokane Valley Combining Balance Sheet - Nonmajor Governmental Funds December 31, 2006 Special Debt Capital Revenue Service Projects Total Assets Cash, cash equivalents, and pooled investments $ 8,882 $ - $ 781 $ 9,663 Deposits and investments 2,159,024 - 4,361,108 6,520,132 Taxes receivable 29,147 - - 29,147 Due from other funds 2,198 - 28,647 30,845 Due from other governments - - - - Accounts receivable - - 180,741 180,741 Total assets $2,199,251 $ - $4,571,277 $6,770,528 Liabilities and Fund Balance(Deficit) LIABILITIES: Accounts payable $ 41,895 $ - $ 103,529 $ 145,424 Accrued wages and benefits payable - - 171 171 Due to governmental agencies - - - - Due to other funds 113,866 - 63,515 177,381 Total liabilities 155,761 - 167,215 322,976 FUND BALANCE: Reserved for: Capital projects 801,165 - - 801,165 CenterPlace operating 321,297 - - 321,297 Unreserved 921,028 - 4,404,062 5,325,090 Total fund balance 2,043,490 - 4,404,062 6,447,552 Total liabilities and fund balance $2,199,251 $ - $4,571,277 $6,770,528 See accompanying accountants'compilation report. 54 City of Spokane Valley Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Year Ended December 31, 2006 Special Debt Capital Revenue Service Projects Total REVENUE: Taxes $ 417,084 $ - $ 687,929 $1,105,013 Licenses and permits - - - - Intergovernmental revenues 8,309 406,245 380,315 794,869 Charges for services - - - - Fines and forfeitures - - - - Interest income 101,413 - 140,703 242,116 Miscellaneous revenues - 38,370 2,850 41,220 Total revenue 526,806 444,615 1,211,797 2,183,218 EXPENDITURES: Current General government - - - - Public safety - - - - Physical environment - - 48,839 48,839 Transportation - - 2,170 2,170 Economic environment 296,912 - - 296,912 Culture and recreation - - - - Total current expenditures 296,912 - 51,009 347,921 Capital outlay - - 2,841,116 2,841,116 Debt service Principal retirement - 213,370 - 213,370 Interest - 414,535 - 414,535 Total expenditures 296,912 627,905 2,892,125 3,816,942 EXCESS OF REVENUE OVER (UNDER) EXPENDITURES 229,894 (183,290) (1,680,328) (1,633,724) OTHER FINANCING SOURCES(USES): Debt proceeds - - 1,260,910 1,260,910 Operating transfers in - 183,290 3,351,475 3,534,765 Operating transfers out (126,422) - (1,058,330) (1,184,752) Total other financing sources(uses) (126,422) 183,290 3,554,055 3,610,923 EXCESS OF REVENUE OVER EXPENDITURES AND OTHER FINANCING SOURCES 103,472 - 1,873,727 1,977,199 FUND BALANCE, BEGINNING OF YEAR 1,940,018 - 2,530,335 4,470,353 FUND BALANCE, END OF YEAR $2,043,490 $ - $4,404,062 $6,447,552 See accompanying accountants'compilation report. 55 City of Spokane Valley Combining Balance Sheet - Special Revenue Funds December 31, 2006 Arterial Trails& Hotel/ Center Weather Street Paths Motel Place Reserve Fund Fund Fund Fund Fund 102 103 105 120 122 Total Assets Cash $ 923 $ 6,111 $ 1,848 $ - $ - $ 8,882 Deposits and investments 881,503 16,253 407,178 321,297 532,793 2,159,024 Taxes receivable - 29,147 29,147 Due from other funds 2,198 - 2,198 Due from other governments Accounts receivable Total assets $ 882,426 $ 24,562 $ 438,173 $ 321,297 $ 532,793 $2,199,251 Liabilities and Fund Balance LL4BILITIES: Accounts payable $ $ $ 41,895 $ $ $ 41,895 Accrued wages and benefits payable Due to governmental agencies -Due to other funds 105,823 8,043 113,866 Total liabilities 105,823 - 49,938 155,761 FUND BALANCE: Reserved for: Capital projects 776,603 24,562 - 801,165 Center Place operating 321,297 - 321,297 Unreserved 388,235 - 532,793 921,028 Total fund balance 776,603 24,562 388,235 321,297 532,793 2,043,490 Total liabilities and fund balance $ 882,426 $ 24,562 $ 438,173 $ 321,297 $ 532,793 $2,199,251 See accompanying accountants'compilation report. 56 City of Spokane Valley Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Special Revenue Funds Year Ended December 31, 2006 • Winter Arterial Trails& Hotel/ Center Weather Street Paths Motel Place Reserve Fund Fund Fund Fund Fund Total 102 103 105 120 122 REVENUE: Taxes • $ - $ - $ 417,084 $ - $ - $ 417,084 Licenses and permits - - - - - - Intergovernmental revenues - 8,309 - - - 8,309 Charges for services - - - - - - Fines and forfeitures - - - - - - Investment income 45,136 595 15,792 15,006 24,884 101,413 Miscellaneous revenues - - - - - - Total revenue 45,136 8,904 432,876 15,006 24,884 526,806 EXPENDITURES: • Current • General government - - - - - - . Public safety - - - - - - • •Physical environment - - - - - - Transportation - - - - - - Economic environment - - 296,912 - - 296,912 Culture and recreation - - - - - - Total current expenditures - - 296,912 - - 296,912 Capital outlay - - - - - Debt service Principal retirement - - - - - - Interest - - - - - - Total expenditures - - 296,912 - - 296,912 EXCESS OF REVENUE OVER (UNDER)EXPENDITURES 45,136 8,904 135,964 15,006 24,884 229,894 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - - - Operating transfers in - - - - Operating transfers out (126,422) - - - - (126,422) Total other financing sources(uses) (126,422) - - - - (126,422) EXCESS OF REVENUE OVER (UNDER)EXPENDITURES AND OTHER FINANCING SOURCES(USES) (81,286) 8,904 135,964 15,006 24,884 103,472 FUND BALANCE,BEGINNING OF YEAR 857,889 15,658 252,271 306,291 507,909 1,940,018 FUND BALANCE, END OF YEAR $ 776,603 $ 24,562 $ 388,235 $ 321,297 $ 532,793 $2,043,490 See accompanying accountants'compilation report. 57 City of Spokane Valley Combining Balance Sheet - Capital Projects Funds December 31, 2006 Mirabeau Pt. Street Bond CD Parks Civic Capital Capital Block Barker Capital Building Projects Projects Grant Bridge Projects Capital Projects Fund Fund Fund Fund Fund Fund 304 305 306 308 309 310 Assets Total Cash $ 781 $ $ $ $ - $ - $ 781 Deposits and investments 371,393 1,346,866 2,642,849 4,361,108 Taxes receivable - Due from other funds 28,647 - 28,647 Due from other governments - - - Accounts receivable 13,526 167,215 180,741 Total assets $ 414,347 $ $ $ 167,215 $1,346,866 $2,642,849 $4,571,277 Liabilities and Fund Balance LIABILITIES: Accounts payable Accrued wages and benefits payable Due to governmental agencies Due to other funds Deposits payable Deferred revenue Total liabilities FUND BALANCE: Unreserved $ $ $ 103,529 $ 171 $ 103,529 171 63,515 63,515 167,215 167,215 414,347 1,346,866 2,642,849 4,404,062 Total liabilities and fund balance $ 414,347 $ $ $ 167,215 $1,346,866 $2,642,849 $4,571,277 See accompanying accountants'compilation report. 58 City of Spokane Valley Combining Statement of Revenue, Expenditures, and Changes in Fund Balances - Capital Projects Funds Year Ended December 31, 2006 REVENUE: Taxes Licenses and permits Intergovernmental revenues Charges for services Fines and forfeitures Interest income Miscellaneous revenues Total revenue EXPENDITURES: Current General government Public Safety Physical environment Transportation Economic enviroment Culture and recreation Total current expenditures Capital outlay Debt service Principal retirement Interest Total expenditures EXCESS OF REVENUE OVER(UNDER)EXPENDITURES OTHER FINANCING SOURCES(USES): Debt proceeds Operating transfers in Operating transfers(out) Total other financing sources(uses) EXCESS OF REVENUE OVER(UNDER)EXPENDITURES AND OTHER FINANCING SOURCES(USES) FUND BALANCE(DEFICIT), BENINNING OF YEAR FUND BALANCE,END OF YEAR See accompanying accountants'compilation report. Mirabeau Pt. Capital Projects Fund 304 Street Bond CD Parks Civic Building Capital Block Barker Capital Capital Projects Projects Fund Grant Fund Bridge Fund Projects Fund Fund 305 306 08 309 310 19,525 2,850 41,572 22,375 41.572 695 380,315 41,329 Total $ 687,929 $ 687,929 380,315 38,277 140,703 2 850 1 211,797 380,315 41,329 726,206 1,475 48,839 48,839 2,170 695 57,516 1,475 380,263 48,839 51,009 2,403,337 2,841,116 57 516 695 1,475 380,263 2,452,176 2,892,125 (35,141) 40,877 (1,475 52 41,329 (1,725,970) (1,680,328) - 1,260,910 • 1,260,910 1,475 750,000 2,600,000 3,351,475 (1,058,330) - - - (1,058,330) (1,058,330) 1.475 750,000 3,860,910 3,554,055 (35,141) (1,017,453) 449 488 1,017 453 $ 414,347 $ - $ 52 791,329 2,134,940 1,873,727 (52) 555 537 507 909 2 530 335 $ - $ 1,346,866 $ 2,642,849 $ 4,404,062 59 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Arterial Street Fund Approved Approved Difference Original Revised (Uncollected), Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - . $ - $ - Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures - - - - Investment income - - 45,136 45,136 Miscellaneous revenues - - - - Total revenues - 45,136 45,136 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - Capital outlay - - - - Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures - - - - EXCESS OF EXPENDITURES OVER REVENUES - - 45,136 45,136 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - - - - Operating transfers out (568,655) (568,655) (126,422) 442,233 Total other financing sources (uses) (568,655) (568,655) (126,422) 442,233 NET CHANGE IN FUND BALANCES (568,655) (568,655) (81,286) 487,369 FUND BALANCE, BEGINNING OF YEAR 568,655 568,655 857,889 289,234 FUND BALANCE, END OF YEAR $ - $ - $ 776,603 $ 776,603 See accompanying accountants'compilation report. 60 I City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Trails &Paths Fund Approved Approved Difference Original Revised (Uncollected), Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits _ - _ - Intergovernmental revenues 5,053 5,053 8,309 3,256 Charges for services _ _ - - Fines and forfeitures _ - - - Investment income - - 595 595 Miscellaneous revenues - - _ Total revenues 5,053 5,053 8,904 3,851 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation 23,053 23,053 - 23,053 Total current expenditures 23,053 23,053 - (23,053) Capital outlay - - - Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - Total expenditures 23,053 23,053 - (23,053) EXCESS OF EXPENDITURES OVER REVENUES (18,000) (18,000) 8,904 26,904 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - - - - Operating transfers out - - - - Total other financing sources(uses) - - - - NET CHANGE IN FUND BALANCES (18,000) (18,000) 8,904 26,904 FUND BALANCE, BEGINNING OF YEAR 18,000 18,000 15,658 (2,342) FUND BALANCE, END OF YEAR $ - $ - $ 24,562 $ 24,562 See accompanying accountants'compilation report. 61 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 • Hotel/Motel Fund Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ 350,000 $ 350,000 $ 417,084 $ 67,084 Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures - - - - Investment income - - 15,792 15,792 Miscellaneous revenues 1,000 1,000 - (1,000) Total revenues 351,000 351,000 432,876 81,876 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment 400,667 400,667 296,912 (103,755) Culture and recreation - - - - Totalcurrentexpenditures 400,667 400,667 296,912 (103,755) Capital outlay - - - - Debt Service: - - - - Principal retirement - - - - • Interest and fiscal charges - - - - Total expenditures 400,667 400,667 296,912 (103,755) EXCESS OF EXPENDITURES OVER REVENUES (49,667) (49,667) 135,964 185,631 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - - - - Operating transfers out - - - - Total other financing sources(uses) - - - - NET CHANGE IN FUND BALANCES (49,667) (49,667) 135,964 185,631 FUND BALANCE, BEGINNING OF YEAR 49,667 49,667 252,271 202,604 FUND BALANCE, END OF YEAR $ - $ - $ 388,235 $ 388,235 See accompanying accountants'compilation report. 62 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Center Place Fund Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues - - - - - Charges for services - - - - Fines and forfeitures - - - - Investment income - - 15,006 15,006 Miscellaneous revenues - - -Total revenues - - 15,006 15,006 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation 300,000 300,000 - 300,000 Total current expenditures 300,000 300,000 - (300,000) Capital outlay - - - - Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 300,000 300,000 - (300,000) EXCESS OF EXPENDITURES OVER REVENUES (300,000) (300,000) 15,006 315,006 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - - - - Operating transfers out - - - - Total other financing sources(uses) - - - - NET CHANGE IN FUND BALANCES (300,000) (300,000) 15,006 315,006 FUND BALANCE, BEGINNING OF YEAR 300,000 300,000 306,291 6,291 FUND BALANCE, END OF YEAR $ - $ - $ 321,297 $ 321,297 See accompanying accountants'compilation report. 63 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Winter Weather Reserve Fund Approved Approved Difference Original Revised (Uncollected) Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures - - - - Investment income - - 24,884 24,884 Miscellaneous revenues - - - - Total revenues - - 24,884 24,884 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation 500,000 500,000 - 500,000 Economic environment - - - - Culture and recreation - - - - Total current expenditures 500,000 500,000 - (500,000) Capital outlay - - - - Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 500,000 .500,000 - (500,0001 EXCESS OF EXPENDITURES OVER REVENUES (500,000) (500,000) 24,884 524,884 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - - - - Operating transfers out - - - - Total other financing sources(uses) - - - - NET CHANGE IN FUND BALANCES (500,000) (500,000) 24,884 524,884 FUND BALANCE, BEGINNING OF YEAR 500,000 500,000 507,909 7,909 FUND BALANCE, END OF YEAR $ - $ - $532,793 $532,793 See accompanying accountants'compilation report. 64 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Debt Service _ Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues 414,000 414,000 406,245 (7,755) Charges for services - - - - Fines and forfeitures - - - - Miscellaneous revenues - 38 370 38,370 Total revenues 414,000 414,000 444,615 30,615 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - - Capital outlay - - - - Debt Service: - - - - Principal retirement 175,000 175,000 213,370 38,370 Interest and fiscal charges 425,000 425,000 414,535 (10,465) Total expenditures 600,000 600,000 627,905 27,905 EXCESS OF EXPENDITURES OVER REVENUES (186,000) (186,000) (183,290) 2,710 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in 186,000 186,000 183,290 (2,710) Operating transfers out - - - - Total other financing sources(uses) 186,000 186,000 183,290 (2,710) NET CHANGE IN FUND BALANCES - - - - FUND BALANCE, BEGINNING OF YEAR - - - - FUND BALANCE, END OF YEAR $ - $ - $ - $ - See accompanying accountants'compilation report. 65 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual • Nonmajor Special Revenue Funds Year Ended December 31, 2006 Mirabeau Point Capital Projects Fund Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures - - - - Investment income - - 19,525 19,525 Miscellaneous revenues - 2,850 2,850 Total revenues - - 22,375 22,375 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - - Capital outlay 783,205 783,205 57,516 (725,689) Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 783,205 783,205 57,516 (725,689) EXCESS OF EXPENDITURES OVER REVENUES (783,205) (783,205) (35,141) 748,064 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - - - - Operating transfers out - - - - Total other financing sources(uses) - - - - NET CHANGE IN FUND BALANCES (783,205) (783,205) (35,141) 748,064 • FUND BALANCE, BEGINNING OF YEAR 783,205 783,205 449,488 (333,717) FUND BALANCE, END OF YEAR $ - $ - $ 414,347 $ 414,347 • See accompanying accountants'compilation report. 66 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Street Bond Capital Projects Fund Approved Approved Difference Original Revised (Uncollected)/ • Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - _ Intergovernmental revenues _ - - - Charges for services - - - - Fines and forfeitures - - - - Investment income - - 41,572 41,572 Miscellaneous revenues - - - - Total revenues - - 41,572 41,572 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - 695 695 Economic environment - - - - Culture and recreation - - - - Total current expenditures - - 695 695 Capital outlay 902,460 1,202,460 - 1,202,460 Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 902,460 1,202,460 695 (1,201,765) EXCESS OF EXPENDITURES OVER REVENUES (902,460) (1,202,460) 40,877 1,243,337 OTHER FINANCING SOURCES(USES): Debt proceeds - - • - - Operating transfers in - - - - Operating transfers out - - (1,058,330) (1,058,330) Total other financing sources(uses) - - (1,058,330) - (1,058,330) NET CHANGE IN FUND BALANCES (902,460) (1,202,460) (1,017,453) 185,007 FUND BALANCE, BEGINNING OF YEAR 902,460 1,202,460 1,017,453 (185,007) FUND BALANCE, END OF YEAR $ - $ - $ - $ - See accompanying accountants'compilation report. 67 • City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 . CD Block Grant Fund Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services • - - - - Fines and forfeitures - - - - Miscellaneous revenues - - - - Total revenues - - - - EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - 1,475 1,475 Economic environment - - - - Culture and recreation - - - - Total current expenditures - - 1,475 1,475 Capital outlay - , - - - Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - 2,000 - (2,000) Total expenditures - 2,000 1,475 (525) EXCESS OF EXPENDITURES OVER REVENUES - (2,000) (1,475) 525 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - 2,000 1,475 (525) Operating transfers out - - - - Total other financing sources(uses) - 2,000 1,475 (525) NET CHANGE IN FUND BALANCES - - - - FUND BALANCE, BEGINNING OF YEAR - - - - FUND BALANCE, END OF YEAR $ - - $ - $ - See accompanying accountants'compilation report. 68 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 • Barker Bridge Fund Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues 558,000 890,400 380,315 (510,085) Charges for services - - - - Fines and forfeitures - - - - Miscellaneous revenues - - - - Total revenues 558,000 890,400 380,315 (510,085) EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - Capital outlay 558,000 890,400 380,263 (510,137) Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 558,000 890,400 380,263 (510,137) EXCESS OF EXPENDITURES OVER REVENUES - - 52 52 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in - - - - Operating transfers out - - - - Total other financing sources(uses) - - - - NET CHANGE IN FUND BALANCES - - 52 52 FUND BALANCE, BEGINNING OF YEAR - - (52) (52) FUND BALANCE, END OF YEAR $ - $ - $ - $ - • See accompanying accountants'compilation report. 69 II City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Parks Capital Projects Fund Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ - $ - Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures - - - - - Investment income - - 41,329 41,329 Miscellaneous revenues - - - - Total revenues - - 41,329 . 41,329 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - - - Transportation - - - - Economic environment - - - - Culture and recreation - - - - Total current expenditures - - - - Capital outlay 1,300,000 1,300,000 - - Debt Service: - - - - Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 1,300,000 1,300,000 - - EXCESS OF EXPENDITURES OVER REVENUES (1,300,000) (1,300,000) 41,329 1,341,329 OTHER FINANCING SOURCES(USES): Debt proceeds - - - - Operating transfers in 750,000 750,000 750,000 - Operating transfers out - - _ - - Total other financing sources(uses) 750,000 750,000 750,000 - NET CHANGE IN FUND BALANCES (550,000) (550,000) 791,329 1,341,329 FUND BALANCE, BEGINNING OF YEAR 550,000 550,000 555,537 5,537 FUND BALANCE, END OF YEAR $ - $ - $1,346,866 $ 1,346,866 See accompanying accountants'compilation report. 70 City of Spokane Valley Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Nonmajor Special Revenue Funds Year Ended December 31, 2006 Civic Building Capital Projects Fund Approved Approved Difference Original Revised (Uncollected)/ Budget Budget Actual (Unspent) REVENUE: Taxes $ - $ - $ 687,929 $ 687,929 Licenses and permits - - - - Intergovernmental revenues - - - - Charges for services - - - - Fines and forfeitures - - - - Miscellaneous revenues - - 38,277 38,277 Total revenues - - 726,206 726,206 EXPENDITURES: Current: General government - - - - Public safety - - - - Physical environment - - 48,839 48,839 Transportation - - - - Economic environment - - - - Culture and recreation - Total current expenditures - - 48,839 48,839 Capital outlay 1,100,000 1,100,000 2,403,337 1,303,337 Debt Service: Principal retirement - - _ - Interest and fiscal charges - - - - Total expenditures 1,100,000 1,100,000 2,452,176 1,352,176 EXCESS OF EXPENDITURES OVER REVENUES (1,100,000) (1,100,000) (1,725,970) (625,970) OTHER FINANCING SOURCES(USES): Debt proceeds - - 1,260,910 1,260,910 Operating transfers in 600,000 600,000 2,600,000 2,000,000 Operating transfers out - - - - Total other financing sources(uses) 600,000 600,000 3,860,910 3,260,910 NET CHANGE IN FUND BALANCES (500,000) (500,000) 2,134,940 2,634,940 FUND BALANCE, BEGINNING OF YEAR 500,000 500,000 507,909 7,909 FUND BALANCE, END OF YEAR $ - $ - $2,642,849 $ 2,642,849 See accompanying accountants'compilation report. 71 • City of Spokane Valley Combining Statement of Net Assets - Internal Service Funds December 31, 2006 Equipment Rental and Risk Replacement Management Total Assets Current assets: Cash $ 37,400 $ 319 $ 37,719 Deposits and investments • 788,799 21,780 810,579 Assessment receivables(net) - - - Due from other funds 45,427 - 45,427 Total current assets 871,626 22,099 893,725 Capital Assets Machinery& equipment 786,004 - 786,004 Less accumulated depreciation (528,441) - (528,441) Total capital assets (net of depreciation) 257,563 - 257,563 Total assets $ 1,129,189 $ 22,099 $ 1,151,288 Liabilities Current liabilities: Accounts payable $ 1,068 $ - $ 1,068 Due to other governments - 3,153 3,153 Deposits and other payables 207 - 207 Total liabilities 1,275 3,153 4,428 Net Assets Invested in capital assets, net of related debt 257,563 - 257,563 Unrestricted 870,351 18,946 889,297 Total net assets 1,127,914 18,946 1,146,860 Total liabilities and net assets $ 1,129,189 $ 22,099 $ 1,151,288 See accompanying accountants'compilation report. 72 City of Spokane Valley • Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets- Internal Service Funds Year Ended December 31, 2006 Equipment Rental and Risk Replacement Management Total OPERATING REVENUE: Charges for goods and services(net of returns and allowances) $ - $ 161,522 $ 161,522 OPERATING EXPENSES: Operation - 169,033 169,033 Depreciation 174,384 - 174,384 Total operating expenses 174,384 169,033 343,417 EXCESS OF REVENUE OVER (UNDER) EXPENDITURES 174,384 (7,511) (181,895) NONOPERATING REVENUE(EXPENSES) Investment income 36,070 999 37,069 Other miscellaneous revenue - - - Loss on disposal of assets - - - Total nonoperating revenues (expenses) 36,070 999 37,069 Income before contributions and operating transfers (138,314) (6,512) (144,826) CONTRIBUTIONS AND TRANSFERS: Transfers in 133,132 - 133,132 Transfers out - - - Capital contributions - - - Total contributions and transfers 133,132 - 133,132 INCREASE IN NET ASSETS (5,182) (6,512) (11,694) NET ASSETS, BEGINNING OF YEAR 636,157 25,458 661,615 PRIOR PERIOD ADJUSTMENT 496,939 - 496,939 NET ASSETS, BEGINNING OF YEAR 1,133,096 25,458 1,158,554 NET ASSETS, END OF YEAR $1,127,914 $ 18,946 $1,146,860 See accompanying accountants'compilation report. - - 73 City of Spokane Valley Combining Statement of Cash Flows - Internal Service Funds Year Ended December 31, 2006 Equipment Rental and Risk Replacement Management Total CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers and users $ 22,442 $ - $ 22,442 Receipts from interfund services provided - 161,523 161,523 Payments to suppliers and for services 1,275 (171,173) (169,898) Net cash(used in)provided by operating activities 23,717 (9,650) 14,067 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES . Transfers in(out) - - - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from sale of capital assets 45,428 - 45,428 CASH FLOWS FROM INVESTING ACTIVITIES: • Interest received 36,070 999 37,069 NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 105,215 (8,651) 96,564 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 720,984. 30,750 751,734 CASH AND CASH EQUIVALENTS, END OF YEAR $ 826,199 $ 22,099 $ 848,298 RECONCILIATION OF LOSSFROM OPERATIONS TO NET CASH PROVIDED BY(USED IN) OPERATING ACTIVTIES: Loss from operations $074,384) $ (7,511) $081,895) Adjustments to reconcile loss from operations to net cash provided by(used in)operating activities: Depreciation 174,384 - 174,384 Decrease(increase) in assets: Due from other funds 22,442 - 22,442 Increase(decrease)in liabilities: Accounts payable 1,068 - 1,068 Due to other governments , - (2,139) (2,139) Deposits and other payables. 207 - 207 Total adjustments 198,101 (2,139) 195,962 Net cash provided by(used in)operating activities $ 23,717 $ (9,650) $ 14,067 See accompanying accountants'compilation report. 74 • STATISTICAL SECTION City of Spokane Valley Net Assets by Component Fiscal Year 2003 2004 2005 2006 Governmental activities: Invested in capital assets,net of related debt $ 63,878,148 $ 62,079,431 $ 56,028,362 $ 53,865,089 Restricted 1,322,142 7,994,118 7,248,194 13,357,701 Unrestricted 4,876,957 11,039,759 18,712,154 21,965,297 Total governmental activities net assets $70,077,247 $81,113,308 $81,988,710 $89,188,087 Business-type activities; Invested in capital assets,net of related debt - $ 327,535 Restricted - - - - Unrestricted 794,083 1,269,689 1,277,396 1,613,773 Total business-type activities net assets $ 794,083 $ 1,269,689 $ 1,277,396 $ 1,941,308 Primary government; Invested in capital assets,net of related debt $ 63,878,148 $ 62,079,431 $ 56,028,362 $ 54,195,284 Restricted 1,322,142 7,994,118 7,248,194 13,357,701 Unrestricted 5,671,040 12,309,448 19,989,550 24,076,004 Total primary government net assets $70,871,330 $82,382,997 $83,266,106 $91,628,989 See accompanying accountants'compilation report. 75 • City of Spokane Valley Changes in Net Assets • Fiscal Year 2003 2004 2005 2006 Expenses: Governmental activities General government $ 2,989,605 $ 3,359,728 $ 3,471,165 $ 4,903,530 Public safety 7,394,944 13,327,807 15,934,473 15,741,625 Physical environment 821,886 1,124,472 986,414 1,484,594 Transportation 9,054,667 13,360,562 14,943,598 13,259,749 Economic environment 752,172 1,562,221 2,019,995 1,867,096 Mental and physical health 8,858 42,513 44,174 - Culture and recreation 932,713 3,443,688 3,784,970 1,884,302 Interest on long-term debt 35,923 514,531 449,980 408,999 Total governmental activities expenses 21,990,768 36,735,522 41,634,769 39,549,895 Business type activities Sewer 720,393 1,597 - - Stormwater management 4,142 75,041 . 1,022,193 1,102,346 Total business-type activities expenses 724,535 76,638 1,022,193 1,102,346 Total primary government expenses $22,715,303 $36,812,160 $42,656,962 $40,652,241 Program revenues: Governmental activities: Charges for services: General government $. 207 $ 2,306 $ - $ 947,190 Public safety 617,859 1,261,955 1,180,018 582,872 Physical environment 28,498 73,279 106,324 - Transportation 20,284 - - - Economic environment 887,886 1,629,613 3,102,880 2,253,318 Culture and recreation 122,152 152,034 414,257 576,401 Operating grants and contributions 19,807 90,305 84,284 - Capital grants and contributions 70,687,614 11,689,821 1,392,873 8,039,238 Total governmental activities program revenues 72,384,307 14,899,313 6,280,636 12,399,019 Business-type activities Charges for services: Stormwater management 559,510 776,859 1,252,006 1,557,916 Total governmental activities program revenues 559,510 776,859 1,252,006 1,557,916 • Total primary government revenues 72,943,817 15,676,172 7,532,642 13,956,935 • Net(expense)revenue Governmental activities 50,393,539 (21,836,209) (35,354,133) (27,150,876) Business-type activities (165,025) 700,221 229,813 484,198 Total primary government net expense $ 50,228,514 $(21,135,988) $(35,124,320) $(26,666,678) • • See accompanying independent auditors'report. 76 City of Spokane Valley Governmental Activities Tax Revenues By Source Fiscal Year 2003 2004 2005 2006 Tax Revenue- Sources* Property tax $ 6,995,965 $ 8,980,837 $ 9,509,339 $ 8,727,251 Sales and use tax 9,981,719 16,531,976 16,868,850 18,841,917 Excise tax 3,537,370 5,796,164 2,494,958 3,105,637 Other taxes 1,269,878 1,103,277 1,416,885 911,464 * Amounts shown on the accrual basis of accounting See accompanying independent auditors'report. 77 City of Spokane Valley Fund Balances of Governmental Funds Fiscal Year 2003 2004 2005 2006 General Fund* Reserved $ - $ 300,000 $ - $ - Unreserved (2,437,396) 4,493,460 7,047,500 8,706,612 Total general fund $ (2,437,396) $ 4,793,460 $ 7,047,500 $ 8,706,612 All Other Governmental Funds* Reserved $ 2,890,000. $ - $ - $ 8,325,198 Unreserved Special Revenue Funds 2,669,350 4,150,693 5,340,111 10,616,732 Capital Projects Funds 10,513,560 7,994,118 7,248,194 4,232,425 Debt Service Funds - - - - Total all other governmental funds $ 16,072,910 $ 12,144,811 $ 12,588,305 $23,174,355 * Amounts shown on the modified accrual basis of accounting See accompanying independent auditors'report. 78 City of Spokane Valley Changes in Fund Balances of Governmental Funds Fiscal Year • 2003 2004 2005 2006 Revenues* Taxes $ 17,486,759 $ 27,122,530 $ 30,262,686 $ 31,260,435 Licenses and permits 1,088,165 1,779,081 2,406,520 2,253,318 Intergovernmental revenues 2,124,965 3,633,119 4,880,524 8,039,238 • Charges for serives 477,342 792,482 895,974 682,465 Fines and forfeitures 533,496 1,196,234 1,180,016 582,872 Miscellaneous 73,110 282,388 950,330 1,790,686 Total revenues 21,783,837 34,805,834 40,576,050 44,609,014 Expenditures* Current General government 2,874,697 3,178,887 4,614,278 4,211,163 Public safety 7,394,857 13,324,116 15,926,633 15,733,006 Physical environment 817,532 1,098,404 953,622 1,472,743 Transportation 1,501,884 3,147,222 2,965,737 2,959,923 Economic environment 757,541 1,588,392 2,037,583 1,853,090 Mental and physical health 8,858 42,513 44,174 - Culture and recreation 879,047 3,376,724 3,642,988 1,755,015 Debt Service: Principal - 145,000 373,918 213,370 Interest 34,891 478,986 208,917 414,535 Bond issue costs 109,019 1,130 - - Capital outlay 923,662 8,242,737 6,173,177 8,365,569 Total expenditures 15,301,988 34,624,111 36,941,027 36,978,414 • Excess of revenue over expenditures 6,481,849 181,723 3,635,023 .7,630,600 Other financing sources(uses)*: Contributions - 2,883,691 23,680 - Extraordinary gain,fire proceeds - - - 109,317 Transfers in 312,103 1,988,886 6,763,135 9,090,652 Transfers out (1,271,103) (1,751,542) (5,931,828) (9,071,346) Long-term debt issued 9,430,000 - - 1,260,910 Premium on long-term debt 191,485 - . .. - Discount on long-term debt (67,164) - - - Total other financing sources(uses) 8,595,321 3,121,035 854,987 1,389,533 Net change in fund balance 15,077,170 3,302,758 4,490,010 9,020,133 Fund balance-beginning (1,441,656) 13,635,514 16,938,272 22,479,420 Fund balance-ending $ 13,635,514 $ 16,938,272 $ 21,428,282 $ 31,499,553 * Balances are shown on the modified accrual basis of accounting • • See accompanying independent auditors'report. 79 City of Spokane Valley Assessed and Estimated Actual value of Taxable Property Fiscal Year 2003+ 2004 2005 2006 Real Property Assessed value $ - $3,999,483,249 $4,066,812,360 $4,558,391,149 Estimated actual value - 4,450,200,737 4,530,209,970 5,056,991,058 Personal Property* Assessed value - 309,826,177 339,053,340 343,237,223 Estimated actual value - 309,826,177 339,053,340 343,237,223 Exemptions Real property - 450,717,488 463,397,610 498,599,909 Total Assessed value - 4,309,309,426 4,405,865,700 4,901,628,372 Estimated actual value - 4,760,026,914 4,869,263,310 5,400,228,281 Ratio of Total Assessed value to total estimated actual value 90.5% 90.5% 90.8% Source: Spokane County Assessor's Office + No data available,year of incorporation * It is the policy of Spokane County's Assessor's Office to value property at 100%of market value. As as a result, assessed and actual values are the same. See accompanying independent auditors'report. 80 City of Spokane Valley Property Tax Rates - Direct and Overlapping Governments Fiscal Year 2003 2004 2005 2006 Spokane Valley 0% 2.108% 2.108% 1.599% Spokane County 1.478 1.497 1.959 1.378 Fire Districts 2.999 1:728 1.959 2.156 State School 2.917 2.942 2.912 2.631 School Districts 6.140 6.645 6.016 5.341 Library Bond 0.088 0.087 0.063 0.063 Other 2.370 - - - Total Direct and Overlapping Rates 15.992% 15.007% 15.017% 13.168% Source: Spokane County Assessors Office Overlapping rates are those of local and county governments that apply to property owners with the City of Spokane Valley. Not all overlapping rates apply to all Spokane Valley property owners(e.g., the rates apply to all Spokane Valley property owners(e.g., the rates for special districts apply only to the proportion of the government's property owners whose property is located within the geographic boundaries of the special district). See accompanying independent auditors'report 81 City of Spokane Valley Principal Property Taxpayers Taxpayer Spokane Valley Mall Avista Corporation Akaiser Aluminum,Inc. Park SPE,LLC Honeywell Electronic Materials Qwest Corporation Itron Inc. CPM Development Corp. Cellco Partnership dba Verizon Cedar Chateau Estates Type of Business Retail Malls Electric and Gas Utility Aluminum Manufacturer Real Estate Electronics Manufacturer Telephone Utility Electonics Manufacturer Concrete and Asphalt Telephone Utility Real Estate 2006 Taxable Assessed Valuation $ 57,062,622 55,972,538 45,415,950 45,246,500 31,168,817 22,132,891 20,754,510 18,111,548 17,732,508 14,717,120 Total-Ten Principal Taxpayers 328,315,004 Total-All Other Taxpayers 4,573,313,368 $4,901,628,372 Source: Spokane County Treasurer Sec accompanying independent auditors'report. Percent A/V to Rank Total A/V 1 2 3 4 5 6 7 8 9 10 1.16% 1.14% 0.93% 0.92% 0.64% 0.45% 0.42% 0.37% 0.36% 0.30% 2005 Taxable Assessed Valuation $ 56,377,080 54,933,310 49,422,892 43,136,600 30,089,109 32,677,558 23,634,615 18,230,478 N/A 12,659,867 6.70% 321,161,509 93.30% 4,212,541,740 $4,533,703,249 Percent A/V to Rank Total A/V 1 1.24% 2 1.21% 3 1.09% 4 0.95% 6 0.66% 5 0.72% 7 0.52% 8 0.40% 0.00% 10 0.28% 2004 Taxable Assessed Valuation Percent A/V to Rank Total AN $ 56,377,080 2 1.28% 49,988,659 3 1.13% 61,709,547 1 1.40% 41,960,700 4 0.95% 15,129,873 8 0.34% 18,957,436 5 0.43% 16,913,447 7 0.38% 12,765,566 6 0.29% N/A 0.00% 12,751,741 10 0.29% 7.08% 286,554,049 92.92% 4,122,705,802 $4,409,259,851 6.50% 93.50% 82 • • City of Spokane Valley Property Tax Levies and Collections* Fiscal Year • 2003 2004 2005 2006 Total tax levy $ 7,028,939 $ 9,265,809 $ 9,870,000 $ 8,084,062 Current tax collections and adjustments 6,716,080 9,025,239 9,333,284 7,899,666 Percent of current taxes collected 95.5% 97.4% 94.6% 97.7% Delinquent tax collections - 187,316 176,055 144,206 Total tax collections 6,716,080 9,212,555 9,509,339 8,043,872 Ratio of total tax collections to total tax levy 95.5% 99.4% 96.3% 99.5% Outstanding delinquent taxes $ 312,859 $ 366,113 $ 601,231 $ 262,704 Ratio of delinquent taxes to total tax levy 4.5% 4.0% 6.1% 3.2% * For the first year of incorporation the County is obligated to transmit county road taxes collected from the date of incorporation to the City. These taxes are to be used for street and road maintenance and are credited to the Street Fund. • • • • See accompanying independent auditors'report. • 83 City of Spokane Valley Ratios of Outstanding Debt by Type - Last Four Fiscal Years Fiscal Year 2003 2004 2005 2006 General obligation bonds $ 9,430,000 $ 9,285,000 $ 9,120,000 $ 8,945,000 Special assessment bonds - - -Capital leases - - - - Business type activities - - - - Total Primary Government $ 9,430,000 $ 9,285,000 $ 9,120,000 $ 8,945,000 Net direct bonded debt per capita $ 115 $ 111 $ 107 $ 103 See accompanying independent auditors'report. 84 City of Spokane Valley Ratios of General Bonded Debt Oustanding Fiscal Year 2003 2004 2005 2006 Population 82,005 83,950 85,010 87,000 Assessed value $4,409,259,651 $4,527,968,717 $5,056,991,058 $5,056,991,058 Gross bonded debt 9,430,000 9,285,000 9,120,000 8,945,000 Less debt service fund cash/investments - - - - Net direct bonded debt 9,430,000 9,285,000 9,120,000 8,945,000 Ratio of net bonded debt to assessed value 0.21% 0.205% 0.180% 0.177% Net direct bonded debt per capita $ .115 $ 1 l 1 $ 107 $ 103 • • • • See accompanying independent auditors'report 85 City of Spokane Valley Computation of Direct and Overlapping Debt 31-Dec-06 G.O. Amount Debt Percent Applicable to Outstanding Overlapping Government Direct Debt: City of Spokane Valley $ 8,945,000 100.00% $ 8,945,000 Overlapping Debt: Fire District#8 - 9.67% - Spokane County Library District 3,380,000 41.41% 1,399,658 Spokane School District#81 206,739,765 4.65% 9,613,399 Central Valley School District#356 89,458,708 77.39% 69,232,094 East Valley School District#361 8,954,000 78.24% 7,005,610 West Valley School District#362 25,710,000 64.19% 16,503,249 Total overlapping debt 103,754,010 Total Direct and Overlapping Debt: $112,699,010 See accompanying independent auditors'report. 86 City of Spokane Valley Legal Debt Margin Information Fiscal Year 2004 2005 2006 Debt limit-general purposes $ 110,231,496 $ 113,199,218 $ 126,424,776 Total debt applicable to limit 9,486,398 9,368,843 9,106,838 Legal debt margin $ 100,745,098 $ 103,830,375 $ 117,317,938 Legal Debt Margin Calculation for Fiscal Year 2006 Assessed valuation $4,527,968,717 $5,056,991,058 • General purpose debt limit(2.5%total assessed value) 113,199,218 126,424,776 Debt applicable limit: General obligation bonds 9,285,000 8,945,000 General governmental liabilities 83,843 161,838 Total net debt applicable Imit 9,368,843 9,106,838 Margin of indebtedness available-general purpose $ 103,830,375 $ 117,317,938 Indebtedness for open space and parks facilities with a 3/5 vot(legal limit 2.5%) $ 113,199,218 $ 126,424,776 Indebtedness for utility purposes with a 3/5 vote(legal limit 2.5%) $ 113,199,218 $ 126,424,776 Total indebtness allowable(legal limit 7.5%) $ 339,597,654 $ 379,274,329 Less: Indebtness incurred-all purposes 9,368,843 9,106,838 Margin of indebtedness available-all purposes $ 330,228,811 $ 370,167,491 See accompanying independent auditors'report. 87 City of Spokane Valley • Computation.of Limitation of Indebtedness ASSESSED VALUATION $5,056,991,058 GENERAL PURPOSE INDEBTEDNESS(LEGAL LIMIT OF 2.5%OF TAXABLE PROPERTY VALUE) $ 126,424,776 GENERAL PURPOSE INDEBTEDNESS WITHOUT A VOTE • (LEGAL LIMIT 1.5%) $ 75,854,866 INDEBTEDNESS(LIABILITIES): Councilmanic Bonds $ 8,945,000 Less: Redemption Fund Assets-Cash and Investments in Bond Redemption Funds - 8,945,000 • General Government Liabilities: Employee Leave Benefits 161,838 Less:Redemption Fund Assets - 161,838 Less: Total Net General Indebtedness-Section A (9,106,838) Margin of Indebtedness Still Available • 66,748,028 GENERAL PURPOSE INDEBTEDNESS WITH A VOTE (LEGAL LIMIT 1.5%) 126,424,776 No Indebtedness Incurred - Remaining Voted G O Debt Capacity General Purposes 126,424,776 Total Indebtedness,Voted and Nonvoted Bonds (9,106,838) REMAINING VOTED AND NONVOTED GO DEBT CAPACITY-GENERAL PURPOSES $ 117,317,938 INDEBTEDNESS FOR OPEN SPACE AND PARKS FACILITIES WITH A 3/5 VOTE(LEGAL LIMIT 2.5%) 126,424,776 No Indebtedness Incurred - Remaining Voted G 0 Debt Capacity-Open Space and Park Purposes 126,424,776 • INDEBTEDNESS FOR UTILITY PURPOSES WITH A 3/5 VOTE(LEGAL LIMIT 2.5%) 126,424,776 No Indebtedness Incurred - Remaining Voted G 0 Debt Capacity-Open Space and Park Purposes 126,424,776 MARGIN OF INDEBTEDNESS AVAILABLE 370,167,491 Add:Indebtedness Incurred-All Purpose 9,106,838 TOTAL INDEBTEDNESS ALLOWABLE(Legal Limit 7.5%) $379,274,329 See accompanying independent auditors'report. 88 • City of Spokane Valley Demographic Statistics Fiscal Year 2003 2004 2005 2006 Population 82,050 83,950 85,010 87,000 Per capita income $ 26,107 $ 27,218 $ 28,065 $ 29,107 Area square miles 38.50 38.50 38.50 38.50 Taxable retail sales $1,072,774,225 $1,634,649,950 $1,807,983,422 $1,981,785,490 School enrollment 18,863 19,741 16,962 19,289 Unemployment rate 6.8% 6.6% . 5.9% 5.0% See accompanying independent auditors'report. 89 City of Spokane Valley Principal Employers 2004 2005 2006 Number of Number of Number of Employer Type of Business Employees Employees • Employees Dakotah Call Center 1,000 1,193 988 Huntwood Industries Custom Kitchen Cabinets 638 727 764 Kaiser Aluminum Aluminum Manufacturer 650 575 700 CPM Development Corp. . Concrete and Asphalt 449 550 680 Yoke's Washington Retail Grocery 447 479 524 Honeywell Electronic Materials High Purity Metals 473 439 396 Wagstaff Inc. Aluminum Casting 209 260 252 Itron Inc. Meter Data Readers 516 458 482 Tidyman's LLC Retail Grocery 272 272 201 • • • • • See accompanying independent auditors'report. 90 City of Spokane Valley Full-time Equivalent City Government Empoyees by Function Function 2003 2004 2005 2006 General Government 20 21 20 20 Public Safety - - - - Physical Environment 8 9 - 9 9 Transportation 2 1 3 4 Economic Environment 15 19 21 21 Culture and Recreation 5 4 7 7 Stormwater Management - - 2 3 50 54 62 64 See accompanying independent auditors'report. 91 City of Spokane Valley Capital Asset Statistics by Function Function 2003 2004 2005 2006 Highways and Streets Streets(miles) 424 431 431 431 Traffic signals 72 74 74 85 Parks Parks acreage 165 165 165 165 Parks 9 9 9 9 Swimming pools 3 3 3 3 Tennis courts 2 2 2 2 Community centers 1 1 1 1 Stormwater Managemetn Number of swales - - - 1,390 See accompanying independent auditors'report. 92 OTHER SUPPLEMENTAL SCHEDULES City of Spokane Valley Schedule of Expenditures of Federal Awards Year Ended December 31, 2006 Program Title U. S Department of Transportation: Passed through State of Washington Department of Transportation Pines/Mansfield Corridor Congestion Relief Appleway Avenue Reconstruction Broadway Avenue Overlay Dishman-Mica Rehabilitation Argonne Road Overlay 44th Avenue Pathway(Design) Barker Bridge Total federal assistance Notes to Schedule of Expenditures of Federal Awards: Federal CFDA Number 20.205 20.205 20.205 20.205 20.205 20.205 20.205 Other Identification Number CM-9932(032) STPUL-3842(002) STPUL-3846(005) STPUL-4041(011) STPUL-4041(012) STPE-4041(001) BRM-4123(004) Current Year Expenditures Indirect $ 205,659 154,096 688,935 45,730 263,954 11,427 380,264 Direct $1,750,065 $ Total $ 205,659 154,096 688,935 45,730 263,954 11,427 380,264 $1,750,065 Basis of accounting- The schedule of expenditures of federal awards is prepared on the same basis of accounting as the City's financial statements. The accrual basis of accounting is used for all funds except for the governmental funds which use the modified accrual basis of accounting. Expenditures- The amounts shown as current expenditures represent only the federal portion of program costs. Actual program costs, including the City's portion, may be more than shown. See accompanying independent auditors' report. 93