Document Redmond_doc_deba0c8a5d

2016 Comprehensive Annual Financial Report For the fiscal year ended December 31, 2016 City of Redmond, Washington Live. Play. Work. Invest ---PAGE BREAK--- VISION Work together to realize Redmond’s future as a city with two vibrant urban centers, improve connections to our neighbors, and provide high quality, responsive services in partnership with an engaged community. 15670 NE 85th Street Redmond, WA 98073 [PHONE REDACTED] ph [PHONE REDACTED] fax www.redmond.gov ---PAGE BREAK--- CITY OF REDMOND, WASHINGTON COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016 PREPARED BY THE FINANCE DEPARTMENT MICHAEL E. BAILEY, CPA DIRECTOR OF FINANCE AND INFORMATION SERVICES MALISA FILES DEPUTY DIRECTOR OF FINANCE AND INFORMATION SERVICES GINI SCHACKER ACCOUNTING SERVICES MANAGER STEPHANIE WOO, ABA SENIOR ACCOUNTANT NIDA HERMOSO ACCOUNTANT RYAN EDWARDSEN ACCOUNTANT KELLEY WOOD TREASURY MANAGER IRENE MOCK DEPARTMENT ADMINISTRATIVE COORDINATOR ---PAGE BREAK--- City of Redmond, Washington Comprehensive Annual Financial Report For the Year Ended December 31, 2016 Table of Contents Page Introductory Section GFOA Certificate of Achievement i City Officials ii Organization Chart iii Letter of Transmittal iv Financial Section Auditor’s Opinion viii Management’s Discussion and Analysis 1 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 13 Statement of Activities 14 Fund Financial Statements Balance Sheet – Governmental Funds 15 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 17 Statement of Net Position - Proprietary Funds 18 Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds 20 Statement of Cash Flows - Proprietary Funds 21 Statement of Fiduciary Net Position - Fiduciary Funds 23 Statement of Changes in Fiduciary Net Position - Fiduciary Funds 23 Notes to the Financial Statements Note 1: Summary of Significant Accounting Policies 24 Note 2: Reconciliation of Government-wide and Fund Financial Statements 31 Note 3: Deposits and Investments 32 Note 4: Governmental Fund Balances 35 Note 5: Receivables 36 Note 6: Capital Assets 37 Note 7: Pension Plans 39 Note 8: Other Postemployment Benefits 52 Note 9: Construction Commitments 54 Note 10: Interfund Transfers 54 Note 11: Long-Term Obligations 54 Note 12: Leases 58 Note 13: Component Units 58 Note 14: Joint Ventures and Operations 59 Note 15: Contingencies and Litigation 64 Note 16: Risk Management 64 Note 17: Accounting and Reporting Changes 66 Note 18: Subsequent Events 67 Note 19: Prior Period Adjustments 68 Note 20: Budget to GAAP Reconciliation 68 ---PAGE BREAK--- City of Redmond, Washington Comprehensive Annual Financial Report For the Year Ended December 31, 2016 Table of Contents Page Required Supplementary Information Schedules of Revenues, Expenditures and Changes in Fund Balance, Budget and Actual: General Fund 69 Schedule of Proportionate Share of the Net Pension Liability – PERS 1 70 Schedule of Proportionate Share of the Net Pension Liability – PERS 2, 3 71 Schedule of Proportionate Share of the Net Pension Liability – PSERS 72 Schedule of Proportionate Share of the Net Pension Liability – LEOFF 1 73 Schedule of Proportionate Share of the Net Pension Liability – LEOFF 2 74 Schedule of Employer Contributions – PERS 1 75 Schedule of Employer Contributions – PERS 2, 3 76 Schedule of Employer Contributions – PSERS 77 Schedule of Employer Contributions – LEOFF 1 78 Schedule of Employer Contributions – LEOFF 2 79 Schedule of Changes in Net Pension Liability– Firefighter’s Pension Plan 80 Schedule of Contributions – Firefighter’s Pension Plan 81 Schedule of Investment Returns – Firefighter’s Pension Plan 82 Schedule of Funding Progress – LEOFF 1 Retiree Medical Benefits 83 Combining and Individual Fund Statements and Schedules Nonmajor Governmental Funds Descriptions 84 Combining Balance Sheet - Nonmajor Governmental Funds 85 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 89 Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: Capital Investments Program Capital Projects Fund 93 Recreation Activities Special Revenue Fund 94 Development Review Special Revenue Fund 95 Cable Access Special Revenue Fund 96 Operating Grants Special Revenue Fund 97 Advanced Life Support Special Revenue Fund 98 Aid Car Dispatch Special Revenue Fund 99 Real Estate Excise Tax Special Revenue Fund 100 Felony Seizure Special Revenue Fund 101 Tourism Special Revenue Fund 102 Solid Waste Recycling Special Revenue Fund 103 Regular Levy Debt Service Fund 104 Internal Service Funds Descriptions 105 Combining Statement of Net Position - Internal Service Funds 106 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position - Internal Service Funds 108 Combining Statement of Cash Flows - Internal Service Funds 110 Agency Funds Descriptions 112 Combining Statement of Fiduciary Net Position - Agency Funds 113 Combining Statement of Changes in Assets and Liabilities - All Agency Funds 114 Capital Assets Used in the Operation of Governmental Funds Comparative Schedules by Source 116 Schedule by Function and Activity 117 Schedule of Changes by Function and Activity 119 ---PAGE BREAK--- City of Redmond, Washington Comprehensive Annual Financial Report For the Year Ended December 31, 2016 Table of Contents Page Statistical Section Introduction 120 Financial Trends Net Position by Component 121 Changes in Net Position 122 Fund Balances, Governmental Funds 124 Changes in Fund Balances, Governmental Funds 125 Revenue Capacity Assessed Value and Actual Value of Taxable Property 127 Direct and Overlapping Property Tax Rates 128 Principal Property Taxpayers 129 Property Tax Levies and Collections 130 Summary of Sales Tax Revenues 131 Debt Capacity Ratios of Outstanding Debt by Type 132 Ratios of General Bonded Debt Outstanding 133 Direct and Overlapping Governmental Activities Debt 134 Legal Debt Margin Information 135 Pledged-Revenue Coverage 136 Demographic and Economic Information Demographic and Economic Statistics 139 Principal Employers 140 Operating Information Full-time Equivalent City Government Employees by Function/Program 141 Operating Indicators by Function/Program 142 Capital Asset Statistics by Function/Program 143 ---PAGE BREAK--- 2016 Comprehensive Annual Financial Report i City of Redmond ---PAGE BREAK--- ELECTED OFFICIALS MAYOR JOHN MARCHIONE CITY COUNCIL ANGELA BIRNEY BYRON SHUTZ KIMBERLY ALLEN HANK MYERS VICE PRESIDENT DAYLE (HANK) MARGESON DAVID CARSON JOHN STILIN PRESIDENT EXECUTIVE STAFF & LEGAL COUNSEL DEPUTY CITY ADMINISTRATOR DEPUTY CITY ADMINISTRATOR FINANCE & INFORMATION SERVICES DIRECTOR FIRE CHIEF HUMAN RESOURCES DIRECTOR PARKS & RECREATION DIRECTOR PLANNING & COMMUNITY DEVELOPMENT DIRECTOR POLICE CHIEF PUBLIC WORKS DIRECTOR CITY ATTORNEY BOND ATTORNEY PROSECUTOR JANE CHRISTENSON ERIKA VANDENBRANDE MICHAEL E. BAILEY TOMMY SMITH MELLODY MATTHES MAXINE WHATTAM ROB ODLE KRISTI WILSON LINDA DE BOLDT OGDEN MURPHY WALLACE PACIFICA LAW GROUP LARRY MITCHELL 2016 Comprehensive Annual Financial Report ii City of Redmond ---PAGE BREAK--- THE PUBLIC Arts Commission Board of Appeals Civil Service Commission Design Review Board Disability Board Library Board Park & Trails Commission Planning Commission Salary Commission Wednesday, January 09, 2013 ORGANIZATIONAL STRUCTURE CITY OF REDMOND MAYOR COUNCIL CITIZEN ADVISORY BOARDS & COMMISSIONS Capital Investment Planning City Administration Cross-Departmental Initiatives Eastside Public Safety Communications Agency Legal Services Office of Communications Policy Analysis Regional Initiatives/Partnerships City Legislation Policy Development Redmond Public Corporation HUMAN RESOURCES FINANCE & INFORMATION SERVICES PUBLIC WORKS PLANNING & COMMUNITY DEVELOPMENT FIRE PARKS & RECREATION POLICE Accounting & Financial Reporting Central Purchasing City Clerk Financial Planning Hearing Examiner Information Technology Reprographics Risk Management Treasury & Investments Utility Billing Benefits/Compensation Employment Labor Relations Safety Training Workers’ Compensation Building Permits Business License Code Enforcement Demographics & Data Development Engineering Development Review Economic Development Human Services Inspections Long Range Planning Tourism Transportation Demand Management Transportation Planning & Engineering Construction Engineering Facilities Maintenance Financial & Administrative Services Fleet Maintenance Natural Resources Real Property Solid Waste Recycling Stormwater Management Street & Sidewalk Maintenance Traffic Operations Safety & Engineering Water/Wastewater Management Advanced Life Support Apparatus Maintenance Emergency Medical Services Fire Prevention Fire Suppression Public Education Training Administration/Planning/Development Arts & Cultural Programs Events/Marketing Park Operations/Maintenance Recreation Programs Senior Programs Teen Programs Community Policing Crime Prevention/Police Partners Emergency Dispatch Investigation Patrol Records/Evidence Traffic Training Office of Emergency Management 2016 Comprehensive Annual Financial Report iii City of Redmond ---PAGE BREAK--- June 28, 2017 Mayor Marchione, The Redmond City Council, and Citizens of Redmond, Washington: I am pleased to provide the Comprehensive Annual Financial Report of the City of Redmond for the fiscal year ended December 31, 2016. This report is published annually as the official annual financial report and complies with State law (RCW 43.09.230) requiring annual reports for Washington municipal governments to be certified and filed with the Washington State Auditor’s Office. As management for the City, we are responsible for both the accuracy of the data, and the completeness and fairness of the presentation, including all related disclosures. The City operates under a system of accounting internal controls that are concerned with the safeguarding of assets and the reliability of financial records. The definition of accounting control assumes reasonable, but not absolute, assurance that the objectives expressed in it will be accomplished by the system. The concept of reasonable assurance recognizes that the cost of internal control should not exceed the benefits expected to be derived. Cities and counties of the State of Washington use the Budgeting, Accounting and Reporting System (BARS) developed and prescribed by the Office of the State Auditor. State law provides for an annual independent audit to be conducted by the Office of the State Auditor. This report includes the auditor’s opinion with respect to the city’s financial statements. Generally Accepted Accounting Principles (GAAP) requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Redmond’s MD&A can be found immediately following the independent auditor’s report. Profile of the Government Incorporated in 1912, Redmond is the nineteenth largest city in the state of Washington encompassing an area of 17.15 square miles east of downtown Seattle on the east side of Lake Washington. Redmond has grown from a population of 1,453 in 1960 to a 2016 population of 60,560. Redmond is a non-charter code city, operating under Section 35A of the Revised Code of Washington. It has a Mayor/Council form of government. The Mayor and the seven member City Council are elected for staggered four-year terms and are elected at-large. Members of the City Council are responsible for establishing the general direction and policies for the City and for providing the resources necessary to carry out those policies. As the City’s chief administrator, the Mayor is responsible for carrying out the policy and direction set by the City Council. This includes the enforcement of laws and ordinances, the execution of contracts and agreements, and maintenance of peace and order in the City. The City of Redmond provides a full range of municipal services, including police and fire, emergency medical services, planning and zoning, street maintenance and construction, parks and recreation, and general administrative services. The City operates enterprise funds for water and wastewater services and stormwater management. City Hall • 15670 NE 85th Street • PO Box 97010 • Redmond, WA 98073-9710 2016 Comprehensive Annual Financial Report iv City of Redmond ---PAGE BREAK--- This report includes all funds, agencies, and boards and commissions that are controlled by, or dependent on, the City’s executive and legislative departments. Included as blended component units in the Capital Improvements Program Fund is Redmond Community Facilities District 2014-1 (CFD 2014-1) which was created for the purpose of financing the construction of a pedestrian / bicycle bridge over State Route 520 at the Overlake Transit Station and Redmond Community Facilities District 2016-1 (CFD 2016-1) which was created for the purpose of financing multimodal improvements on 154th Avenue NE and NE 51st Street, and NE 31st Street and 156th Avenue NE. Additional information on the reporting entity can be found in the Notes to the Financial Statements. The City prepares a biennial budget on the modified accrual basis in accordance with the Revised Code of Washington (RCW) 35A.34. Biennial budgets must be adopted by the City Council prior to the first of each odd-numbered calendar year. Reviews are conducted at mid-biennium and any changes for the second half of the biennium are adopted by the City Council. The biennial budget serves as the foundation for the City of Redmond’s financial planning and control. The budget is prepared by fund, City priority and department. A budget increase, decrease or the addition of new personnel to a fund must be authorized by the City Council. Appropriation changes within a fund may be authorized by the Mayor. Local Economy Redmond has evolved from a small town with logging and farming as its chief industries into a city of very diverse industries. Led by a significant technology industry, the local economy also includes light manufacturing, business parks, a large outdoor mall adjacent to the downtown retail core, and, most recently space exploration companies. The largest employer in Redmond is Microsoft which has its world headquarters and about 34 thousand employees located in the City. Other significant employers in our city include Terex (formerly Genie Industries) (2,656 employees), Eurest Dining Services @ Microsoft (1,041 employees), Aerotek Inc. (978 employees), Nintendo of America (945 employees), AT&T Mobility (826 employees) and United Parcel Service (757 employees). Like most cities across the country, Redmond saw a significant decline in economic activity and tax revenues during the 2008/2009 recession. Since that time the recovery has been slow but steady. We are seeing significant investments in the local economy (in the form of commercial developments) and the city's tax revenues are showing some growth as a result. Sales taxes in 2016 continues to recover from lackluster performance and is projected to grow from 2015 levels. The recovery reflects the City’s focus on economic development and creating a City that is a place to live and invest. Such a focus resulted in Redmond being named one of the top four cities to live in the Northwest by ForRent.com. Several significant projects continue in the downtown area and have included large multi-use developments and new hotel facilities. The city is continuing to make major investments in roadways, utility infrastructure and parks facilities in pursuit of the transformation of its two urban centers (the historic downtown and the “Overlake” area which is the primary location of technology firms). The City is dedicating time and effort to welcome light rail into Overlake in 2023 and Downtown in 2024, adding another element to a vibrant and growing Redmond. Long-term Financial Planning and Relevant Financial Policies In line with the City Council’s financial strategy to maintain a diversified and stable revenue system, the city consistently develops long term financial plans and adjusts revenue strategies accordingly. Three of these revenue sources, utility tax rate, business license fees, and developer fees, were increased by Council vote in 2006. In 2007 voters approved three Levy Lid Lifts to provide additional revenue in 2008. In adopting the 2017-2018 budget the council again increased business license fees to keep up with rising costs. Beginning early in 2008, the Mayor and Council initiated a “Budgeting by Priorities” process. This process helped to align community priorities with efficient delivery of city services through the development of the 2009/2010 biennium budget. It also includes performance indicators to gauge the degree of success in addressing the community priorities with city resources. This process has been used since that time, including the past five biennial budgets. 2016 Comprehensive Annual Financial Report v City of Redmond ---PAGE BREAK--- City financial policies restrict the use of borrowed funds to capital improvements that can’t be financed from current revenues. Debt is not used for current operations. The City issued bonds in 2008 for significant transportation improvements to support development in the downtown and to improve its utility systems. The City again issued bonds to finance acquisition of park land in the downtown in early 2011. In 2013 the city refinanced the capital lease obligation to Redmond Community Properties for the construction of its city hall with the issuance of limited tax general obligation bonds. This resulted in transfer of ownership of City Hall from Redmond Community Properties to the City, and a total savings of more than $1.5 million in debt service payments. In 2014 the City issued $22.95 million in bonds to finance significant investment in storm water management systems. During 2015 and 2016, the City refunded the bonds issued in 2008 and borrowed $6 million to complete a priority transportation project in the downtown. The refunding of the 2008 bonds saved more than $240,000 per year for the next ten years. More information about city bonds and debt can be found in the Notes to the Financial Statements in this report. To ensure the City keeps abreast of and incorporates economic conditions into its financial plans, revenues are projected for the next six years and the forecast is updated annually (and available on the city’s website). Operating expenses are supported by ongoing revenues per City policy. Short-term financial planning is inherent in the development of the City’s biennial budget. In addition, the City’s long- term capital needs and potential funding sources are assessed as part of its “Capital Investment Strategy”. In this effort the city forecasts capital needs consistent with its vision and it comprehensive land use plan through the year 2030. Major Initiatives The City continues to invest in the significant capital facilities that are necessary to realize the City’s vision of two urban centers, connected to great neighborhoods. Projects in 2016 included the completion of the Cleveland Streetscape and the Redmond Central Connector phase 1 projects as a part of the revitalization of Downtown. In addition, the design of Redmond’s Downtown Park design was completed to get ready for construction of the City premier’s gathering place. Other investments were made in the City’s many parks such as reconstruction of restrooms at Farrel-McWhirter Park and adding arena lights for horsemanship classes. Community park improvements included the phase 2 Perrigo Park development project, the goal of which is to continue to supply the community with extraordinary places to recreate. On the transportation side, continuation of changing the Downtown two-way streets – Cleveland and Redmond Way – into two way streets will get the City ready for light rail service in a few years. Large community events continue to build the sense of community in Redmond. Derby Days, held in mid- July, celebrates Redmond’s bicycling heritage. The festival features the Criterium, which is the City’s oldest event and the nation’s longest running bicycle race, a 5K run/walk, parades, live entertainment, and much more. Redmond Lights, is the City’s annual year-end holiday celebration, running from early December through early January. In 2014 a new, multi-day community event was added. "So-Bazaar" is a market and imaginative platform for local artists, artisans, chefs, and entertainers. National Night Out, “America’s Night Out Against Crime” began in 1984 in an effort to promote involvement in crime prevention activities, police-community partnerships, neighborhood camaraderie and send a message to criminals letting them know that neighborhoods are organized and fighting back. National Night Out takes place annually, on the first Tuesday of August. The event celebrates safety and crime prevention successes and works to expand and strengthen programs to help make neighborhoods a safer place year round. In Redmond, it has continued to grow into a significant point of connection between the city, its neighborhoods and among the neighbors themselves. Awards and Acknowledgments The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Redmond for its Comprehensive Annual Financial Report for the fiscal year ended December 31, 2015. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current 2016 Comprehensive Annual Financial Report vi City of Redmond ---PAGE BREAK--- comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of the Comprehensive Annual Financial Report could not have been accomplished without the efforts and dedication of City staff. I am very proud of those who have devoted numerous hours of service to the community in this effort. I would like to express my appreciation to the staff, including personnel from various departments and agencies who assisted in its preparation. Also, I would like to thank the Mayor and the City Council for their continued interest and support in planning and conducting the financial operations of the City in a committed and responsible manner. Respectfully submitted, Malisa Files Finance Director 2016 Comprehensive Annual Financial Report vii City of Redmond ---PAGE BREAK--- INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS June 28, 2017 Mayor and City Council City of Redmond Redmond, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Redmond, King County, Washington, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s Office of the Washington State Auditor Pat McCarthy 2016 Comprehensive Annual Financial Report viii City of Redmond ---PAGE BREAK--- internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion 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 Redmond, King County, Washington, as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis – Correction of Prior Year Misstatement As discussed in Note 19 to the financial statements, the 2015 financial statements have been restated to correct a misstatement. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 1 through 12, budgetary comparison information on page 69, pension plan information on pages 70 through 79, pension trust fund information on pages 80 through 82, and information on postemployment benefits other than pensions on page 83 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying information listed as combining and individual financial statements and schedules on pages 84 through 119 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. This information has been subjected to auditing 2016 Comprehensive Annual Financial Report ix City of Redmond ---PAGE BREAK--- procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The information identified in the table of contents as the Introductory and Statistical Sections is presented for purposes of additional analysis and is not a required part of the basic financial statements of the City. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we will also issue our report dated June 28, 2017, 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. That report will be issued under separate cover in the City’s Single Audit Report. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Sincerely, Pat McCarthy State Auditor Olympia, WA 2016 Comprehensive Annual Financial Report x City of Redmond ---PAGE BREAK--- Management’s Discussion And Analysis The management discussion and analysis section of the City of Redmond’s Comprehensive Annual Financial Report provides an overview of the City’s financial activities for the year ending December 31, 2016, and resulting changes in the financial position as of December 31, 2016. For a better understanding of Redmond’s finances for the previous year, readers should consider this information in conjunction with the preceding letter of transmittal, the financial statements and notes to the financial statements that follow. Financial Highlights In 2016, the City held a steady course focusing on the vision of two vibrant urban centers by continuing work in the downtown corridor, planning for future development in the Overlake area and connecting established neighborhoods. As shown below, the City continues its legacy of prudent financial management.  The assets and deferred outflows of resources of the City of Redmond exceeded its liabilities at fiscal year-end by $891.2 million (net position), an increase of $107.3 million or 13.6% over 2015. Of this amount, a majority ($679.5 million) is a net investment in capital assets. The unrestricted net position totals $117.3 million and may be used to meet the city’s ongoing obligations to citizens and creditors. In addition, the restricted net position totals $94.4 million and is earmarked for debt service, capital projects and special revenue funds.  The addition of two blended component units - Redmond CFD 2014-1 and Redmond CFD 2016-1 increased total net position $49.0 million. For additional information, see Note 13 Component Units, Note 17 Accounting and Reporting Changes, and Note 19 Prior Period Adjustments.  At December 31, 2016, the City’s governmental activities reported combined ending net position of $493.4 million, an increase of $88.0 million over 2015. Approximately 8.3% of this amount ($41.1 million) is available for spending at the City’s discretion (unrestricted net position).  The City of Redmond’s total outstanding long-term debt increased by $8.2 million during the fiscal year. This is primarily due to the issuance of new general obligation bonds of $6.0 million to support transportation projects, and an increase of 6.8 million in net pension liability, compensated absences, and other post-employment benefits, reduced by $4.6 million in principal payments and amortization of premiums. See notes 7 and 11 to the financial statements for more information. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Redmond’s basic financial statements, which are comprised of three components: 1) government wide financial statements, 2) fund financial statements and 3) notes to the financial statements. Other supplementary information, intended to furnish additional detail to support the basic financial statements, is also contained in the report. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Redmond’s finances, in a manner similar to a private-sector business. 2016 Comprehensive Annual Financial Report 1 City of Redmond ---PAGE BREAK--- The Statement of Net Position presents financial information on all of the City of Redmond’s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Redmond is improving or deteriorating. The Statement of Activities presents information designed to show how the City’s net position changed during the year. The 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 the degree to which each function supports itself or relies on taxes and other general funding sources for support. All activity on this 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 (but not limited to) 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. Both the government-wide financial statements distinguish functions of the City of Redmond that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Redmond include general government (finance, executive and human resources), security (police and fire), physical environment, economic environment, transportation, mental/physical health, and culture and recreation. The City’s business-type activities are limited to water/wastewater and stormwater utilities. Governmental activities are primarily supported by taxes, charges for services, and grants. Business-type activities are primarily self-supporting through user fees and charges. 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 Redmond, like other state and local governments, uses fund accounting to ensure and show compliance with finance-related legal requirements. The City’s funds are divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds are used to account for essentially the same functions as are reported as governmental activities in the government-wide financial statements. These reports use a different “basis of accounting” than that used in 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 can 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 2016 Comprehensive Annual Financial Report 2 City of Redmond ---PAGE BREAK--- fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances. The City of Redmond maintains fourteen individual governmental funds. The City’s two major governmental funds – the general fund and the capital investments program 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 in this statement into a single column labeled other governmental funds. Individual fund data for each of the other governmental funds can be found in combining statements later in this report. The City maintains budgetary control over its operating funds through the adoption of a biennial budget. Budgets are adopted at the fund level for all funds in accordance with state law. All budgetary comparison schedules are included following the other governmental funds’ combining statements in this report. Following is a brief analysis of each of the City’s 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. At the end of 2016, the fund balance of the General Fund was $38.6 million, which represents an increase from the prior year of $1.4 million. General Fund revenues increased by $3.6 million in 2016. The key elements of this increase are as follows:  Taxes increased by $3.3 million including growth in property taxes by $0.4 million due to a rise in new construction and the 1% levy increase allowed by law. Redmond also experienced growth in sales tax including a net increase of $2.4 million due to the economic activity, major retailer opening in Redmond and increased contributions for criminal justice.  Charges for services decreased by $0.9 million.  Licenses and permits grew by $0.8 million. General Fund expenditures increased $4.0 million over 2015, due to an increase in staffing costs related to the development surge, retroactive payments from a new Fire contract and one- time capital outlays. The Capital Investments Program Fund (CIP Fund) accounts for financial resources to be used for the acquisition, construction, and preservation of major capital facilities other than those financed by proprietary funds. At the end of 2016, the fund balance of the Capital Investments Program Fund was $33.4 million, which represents an increase from the prior year of $7.9 million.  Capital Investment Program Fund revenues increased by $10.8 million (171.2%) in 2016, primarily due to the addition of the two Redmond Community Facilities Districts, blended component units as discussed in Note 13 Component Units, and an increase of $8.6 million in charges for services related to planning fees.  Capital Investment Program Fund expenditures increased by $2.5 million (11.6%) in 2016, due to projects such as the design of Downtown Park, the construction of the one- way street conversion of Redmond Way and Cleveland Streets and renovation of the Public Safety Building.  Capital Investments Program Fund net transfers between other funds increased by $7.2 million primarily due to additional transfers from the General Fund to support capital investment fund projects, some of which are mentioned above. 2016 Comprehensive Annual Financial Report 3 City of Redmond ---PAGE BREAK--- Proprietary funds 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 the services received. The City of Redmond 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 and the community. Internal service funds are used to account for goods and services provided internally to various City departments. The same basis of accounting is used for proprietary funds in both the government-wide statements and the individual fund statements. 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 than is reported in the government-wide statements. The enterprise fund statements provide separate information for the City’s water/wastewater utility, an Urban Planned Development (UPD) water/wastewater utility outside the City limits, and the City’s stormwater utility. 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, insurance premiums and claims, medical self-insurance, worker’s compensation self- insurance program, and information technology. Internal service fund activities are predominantly governmental and have been included in the governmental activities columns of the government- wide Statement of Net Position and Statement of Activities. Fiduciary funds account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments or other funds. Fiduciary funds are not included in the government-wide financial statements because their assets are not available to support the City of Redmond’s activities. The City has two types of fiduciary funds, a pension fund and agency funds. The accounting for the pension fund is on the accrual basis. Agency funds are custodial in nature and do not include revenues and expenses as they do not measure the results of operations. Notes to the financial statements The notes to the financial statements provide additional information that is important for 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 In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s progress in funding its obligation to provide pension benefits, and lifetime medical benefits to uniformed personnel hired before October 1, 1977. Required supplementary information may be found immediately following the notes to the financial statements. The combining statements for other governmental funds, internal service funds, and agency-type fiduciary funds are presented immediately following the required supplementary information. 2016 Comprehensive Annual Financial Report 4 City of Redmond ---PAGE BREAK--- Government–wide Financial Analysis Statement of Net Position The Statement of Net Position can serve as a useful indicator of the City’s financial position. The City of Redmond’s net position at December 31, 2015 and 2016 total $783.9 million and $891.2 million, respectively. The City’s overall net position increased $107.3 million (13.6%) from the prior fiscal year. The reasons for this overall increase are discussed in the following sections for governmental activities and business-type activities. By far, the largest portion of the City’s net position ($679.5 million; 76.2%) reflects net investment in capital assets land, buildings, machinery, equipment, vehicles, and infrastructure), less any related outstanding debt that was used to acquire those assets. The City uses these capital assets to provide a variety of services to citizens. Accordingly, these assets are not available for future spending. Although investment in capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position ($94.4 million; 10.6%) represents resources that are subject to external restrictions on how they may be used. The largest portion of these funds is restricted for capital projects ($65.5 million), net pension asset ($6.7 million), and police, fire and advance life support ($7.5 million). The remaining balance of $117.3 million (13.2%) is unrestricted and may be used to meet the City’s ongoing obligations to its citizens and creditors. Following is a condensed version of the government-wide Statement of Net Position for 2016 compared to 2015. City of Redmond’s Net Position (in thousands) Governmental Activities Business-Type Activities Total 2016 2015 2016 2015 2016 2015 Current and other assets $ 166,873 $ 104,691 $ 94,272 $ 86,755 $ 261,145 $ 191,446 Net pension asset 6,655 11,084 - - 6,655 11,084 Capital assets, net of 425,963 395,396 347,628 336,859 773,591 732,255 accumulated depreciation Total assets $ 599,491 $ 511,171 $ 441,900 $ 423,614 $ 1,041,391 $ 934,785 Deferred outflows: Debt refunding 3,501 2,323 - - 3,501 2,323 Pensions 8,499 4,203 1,062 625 9,561 4,828 Total assets and deferred outflows $ 611,491 $ 517,697 $ 442,962 $ 424,239 $ 1,054,453 $ 941,936 Long-term liabilities $ 75,599 $ 71,669 $ 34,847 $ 36,889 $ 110,446 $ 108,558 Net pension liability 26,931 21,885 6,145 5,122 33,076 27,007 Other liabilities 14,974 12,268 4,009 2,876 18,983 15,144 Total liabilities $ 117,504 $ 105,822 $ 45,001 $ 44,887 $ 162,505 $ 150,709 Deferred inflows - Pensions 582 6,514 185 783 767 7,297 Total liabilities and deferred inflows $ 118,086 $ 112,336 $ 45,186 $ 45,670 $ 163,272 $ 158,006 Net investment in capital assets $ 366,768 $ 334,538 $ 312,718 $ 304,494 $ 679,486 $ 639,032 Restricted 85,499 42,937 8,917 8,917 94,416 51,855 Unrestricted 41,138 27,885 76,141 65,158 117,279 93,043 Total net position $ 493,405 $ 405,361 $ 397,776 $ 378,569 $ 891,181 $ 783,930 2016 Comprehensive Annual Financial Report 5 City of Redmond ---PAGE BREAK--- Changes in net position The change in net position table illustrates the increases or decreases in net position of the City resulting from its operating activities. Following is a condensed version of the City’s changes in net position. The table shows the revenues, expenses, and related changes in net position in tabular form for the governmental activities separate from the business-type activities for 2016 and 2015. City of Redmond’s Changes in Net Position (in thousands) Governmental Activities Business-Type Activities Total 2016 2015 2016 2015 2016 2015 Revenues: Program revenues: Charges for services $ 47,229 $ 39,907 $ 54,486 $ 54,544 $ 101,715 $ 94,451 Operating grants and contributions 3,841 1,898 787 2,671 4,628 4,569 Capital grants and contributions 5,003 3,913 13,779 8,433 18,782 12,346 General revenues: Property taxes 23,967 23,564 - - 23,967 23,564 Sales taxes 27,979 25,385 - - 27,979 25,385 Other taxes 24,490 23,171 - - 24,490 23,171 Investment interest 1,896 765 612 434 2,508 1,199 Miscellaneous 32,992 4,880 175 279 33,167 5,159 Total revenues $ 167,397 $ 123,483 $ 69,839 $ 66,361 $ 237,236 $ 189,844 Expenses: General government $ 22,766 $ 21,021 $ - $ - $ 22,766 $ 21,021 Security 53,615 49,832 - - 53,615 49,832 Economic environment 6,509 6,137 - - 6,509 6,137 Transportation 13,327 13,339 - - 13,327 13,339 Culture and recreation 12,065 12,358 - - 12,065 12,358 Interest on long term debt 2,615 2,731 1,302 917 3,917 3,648 Water/Wastewater - - 34,227 32,648 34,227 32,648 UPD Water/Wastewater - - 5,887 5,900 5,887 5,900 Stormwater - - 9,216 7,989 9,216 7,989 Total expenses $ 110,897 $ 105,418 $ 50,632 $ 47,454 $ 161,529 $ 152,872 Increase/(Decrease) in net position 56,500 18,065 19,207 18,907 75,707 36,972 Net position - beginning 405,361 381,914 378,569 365,125 783,930 747,039 Prior period adjustments 31,544 22,209 - - 31,544 22,209 Changes in accounting principles- GASB 68 - (16,827) - (5,463) - (22,290) Net position - ending $ 493,405 $ 405,361 $ 397,776 $ 378,569 $ 891,181 $ 783,930 2016 Comprehensive Annual Financial Report 6 City of Redmond ---PAGE BREAK--- Governmental activities During the 2016 fiscal year, net position for governmental activities increased $88.0 million compared to $23.5 million in 2015. Key elements of the increase are as follows:  Total assets and deferred outflows from Governmental activities increased by $93.8 million - Cash and investments increased $44.8 million from 2015 to 2016 primarily due to addition of the two Redmond Community Facilities Districts. - Special assessments receivable of $17.8 million were added for the two Community Facilities Districts. Taxes receivable decreased $1.4 million and all other receivables, inventory and prepaid expenses increased $1.0 million - Investment in capital assets increased by $30.6 million which is consistent with the City’s plans for investments in infrastructure and technology and includes assets contributed by developers as a result of the City’s development surge. - Net pension asset decreased $4.4 million, and deferred outlows for pensions increased $4.3 million. See Note 7 – Pensions for additional information. - Deferred outflows for debt refunding increased $1.2 million due to refunding $11.7 million in 2008 LTGO bonds.  Total liabilities and deferred inflows from Governmental activities increased by $5.8 million - Debt increased by $3.9 million due to issuance of $6.0 million in LTGO Bonds, offset by principal payments on debt previously held by the City. See Note 11 to the financial statements for more information. - Net pension liability increased by $5.1 million. See Note 7 – Pensions for additional information. - Other current liabilities increased by $2.7 million, primarily due to year-end accounts payable related to projects such as the Redmond Central Connector and the Couplet Conversion.  Total revenue increased between 2015 and 2016 by $43.9 million or 35.5%. - Total tax revenues increased by $4.3 million compared to 2015 due to growth in property taxes related to new construction, sales taxes and excise taxes in 2016 as compared to 2015. - Program revenues increased by $10.4 million (22.6%) due to increased economic activity in the City resulting in additional impact fees restricted to capital investment projects. - Miscellaneous revenue increases of $28.1 million include contributed capital of $14.8 million for capital projects, and $15.3 million in special assessments revenue for Redmond Community Facilities District 2016-1. - Total expenses increased by $5.5 million primarily attributable to capital construction to further the goals of the City’s Capital Investment Strategy. The graph that follows compares program revenues to program expenses from the Statement of Activities and illustrates the impact of various city functions on net position from operations before taxes, for the governmental activities for 2016. 2016 Comprehensive Annual Financial Report 7 City of Redmond ---PAGE BREAK--- General Fund Budgetary Highlights The City of Redmond budgets on a biennial basis and in comparing the original budget to the final budget for 2015-2016, several changes took place including:  Recognizing the difference between budgeted and actual beginning fund balances.  Recognizing the City’s pension obligation under GASB 68 of $0.9 million.Recognizing additional funds ($0.1 million) received from King County for Basic Life Support services specifically related to retroactive payments for a new Fire contract, costs related to the Fair Labor Standards Act, equipment and student training.  Recognizing revenue and expenses related to the development surge being experienced by the City.  Recognizing grant revenues for capital projects, special programs and community event contributions in the City’s Public Works, Fire, Parks and Planning Departments.  Refinancing long term general obligation debt as well as borrowing new money for transportation projects of $30 million.  Other miscellaneous adjustments for insurance reimbursements and utility changes. Total actual revenues came in $4.7 million over budget, including fund balances, due to various factors, including:  Sales and use tax accounted for most of the net change, coming in $1.8 million or 3.7% over budgeted levels. Increased economic activity from construction and retail sectors has grown since 2015 including opening of a major retailer in east Redmond.  Development revenue also increased over the year due to the development surge being experienced by the City. Development revenue increased by $0.3 million over 2013-2014 levels.  After a few years of being below budget, utility tax revenue increased from a budgeted $19 million in 2015-2016 to end the biennium at approximately $21 million. This $2 million increase represented a 10.5% rise over budgeted amounts. $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 General government Security Physical environment Economic environment Transportation Culture and recreation Expenses and Program Revenues ‐ Governmental Activities Program Revenues Expenses 2016 Comprehensive Annual Financial Report 8 City of Redmond ---PAGE BREAK---  State entitlement revenue made up the remaining differences in the increases between budget and actuals in 2016. Liquor board profits, liquor excise and criminal justice entitlements made up the bulk of the $400,000 revenue over the projected budget. Total actual expenditures were $12.9 million under budget in the General Fund due to:  Of the $12.9 million under expenditures, $9 million is due to regular salary savings in the general government and security of persons and property categories including approximately $2 million in the City’s salary and benefit contingency which is budgeted to mitigate labor contract settlement agreements that are higher than anticipated.  In the transportation category, approximately $2.8 million was underspent compared to budget due to savings in the salary and benefit and professional services categories. The City embarked on facility master planning efforts that will not be complete until 2017.  Approximately $2.6 million in capital outlay expenditures remained unspent at the end of the 2015-2016 biennium. These underexpenditures were due to the lag time between ordering fire engine replacments and when they are delivered. The City expects for the expenditures to occur on fire vehicle replacments in 2017. Business-type Activities Business-type activities account for 44.6% of the City’s net position. Business-type activities of the City’s utilities increased the City of Redmond’s net position by $19.2 million Key elements of this increase are as follows:  Investment in capital assets increased $10.8 million or 3.2% between 2015 and 2016.  The Water/Wastewater utility showed operating income of $1.4 million in 2016 compared to $3.0 million in 2015, while the Novelty Hill Water/Wastewater utilities showed an operating income of $0.5 million compared to $1.0 million in 2015. This is primarily related to a higher level of development activities than seen in the previous year. When non-operating income and capital contributions are included, the change in net position is $7.3 million for the Water/Wastewater utility and $1.4 million for the UPD Water/Wastewater utility.  The Storm water utility showed operating income of $3.2 million in 2016 compared to $4.0 million in 2015, primarily due to increases in administrative and general, maintenance and operations and depreciation expenses, primarily due to delivery of significant capital projects. When non-operating income and capital contributions are included, the change in net position is $10.5 million, compared to $8.3 million in 2015. This is primarily due to increases in grant revenues and capital contributions. The City continues to do significant work in the Overlake and Downtown urban centers including of the two-way street conversion and infrastructure related to future light rail stations.The graph that follows compares program revenues to program expenses from the Statement of Activities and illustrates the revenues by source separately for the business-type activities for 2016. The graph that follows compares program revenues to program expenses from the Statement of Activities and illustrates the revenues by source separately for the business-type activities for 2016: 2016 Comprehensive Annual Financial Report 9 City of Redmond ---PAGE BREAK--- . City of Redmond’s Capital Assets (net of depreciation) The City of Redmond’s investment in capital assets for its governmental and business-type activities (not including investment in joint ventures) as of December 31, 2016, amounts to $773.6 million (net of accumulated depreciation) an increase of $41.3 million from 2015. Investment in capital assets includes land, art and construction in progress, which are not subject to depreciation. The other capital assets, buildings and building improvements, improvements other than buildings, machinery and equipment, and infrastructure are subject to depreciation. Governmental type capital assets (net of depreciation) totaled $426.0 million in 2016, an increase of $30.6 million from 2015. Business-type capital assets (net of depreciation) totaled $347.6 million, an increase of $10.8 million from 2015. In addition to the effects of depreciation, these increases are the result of land acquisitions, improvements to buildings, contributed capital, and construction in progress. More information on the City’s Capital Assets can be found in Note 6 – Capital Assets, in the Notes to the Financial Statements. $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 Water/Wastewater UPD Water/Wastewater Stormwater Expenses and Program Revenues ‐ Business‐type Activities Program Revenues Expenses 2016 2015 2016 2015 2016 2015 Land & Land Rights 134,330 $ 126,464 $ 27,224 $ 25,620 $ 161,554 $ 152,084 $ Buildings/ Bldg. Improvements 53,536 55,021 29,567 30,326 83,103 85,347 Improvements other than Buildings 20,070 19,895 280,169 268,996 300,239 288,891 Machinery and Equipment 14,257 10,436 901 921 15,158 11,357 Construction in Progress 29,625 17,626 9,767 10,996 39,392 28,622 Infrastructure 173,595 165,405 - - 173,595 165,405 Art 549 549 - - 549 549 Total 425,962 $ 395,396 $ 347,628 $ 336,859 $ 773,590 $ 732,255 $ Governmental Activities Business-Type Activities Total 2016 Comprehensive Annual Financial Report 10 City of Redmond ---PAGE BREAK--- City of Redmond’s Outstanding Debt At the end of 2016, the City of Redmond had total bonded debt outstanding of $88.0 million. Of this amount, $60.4 million is general obligation bonds (City Hall, Bear Creek Parkway, transportation and parks); and $27.6 million is revenue bonded debt for the water/wastewater and stormwater utilities. In September 2013 the City issued $33.1 million in limited tax general obligation refunding bonds to advance refund $32.8 million of outstanding 2004 Limited Tax General Obligation Lease Revenue Bonds for City Hall and the parking garage. The refunding resulted in deferred outflows of $1.5 million. In December, 2015, the City issued $9,280,000 in limited tax general obligation refunding bonds with an interest rate of 3.00% to advance refund $8,940,000 of outstanding 2008 Limited Tax General Obligation Bonds. The refunding resulted in deferred outflows of $1.0 million. In January, 2016, the City issued $11,630,000 in limited tax general obligation refunding bonds with an interest rate of 2.0%-5.0% to advance refund $11,675,000 of outstanding 2008 Limited Tax General Obligation Bonds. The refunding resulted in deferred outflows of $1,386,462. The remaining combined deferred outflows of $3.5 million for debt refunding is reported as deferred outflows of resources in the Statement of Net Position. In January, 2016, the City also issued $6,000,000 in new limited tax general obligation bonds with an interest rate of 2.0%-5.0% to provide funds to finance the costs of transportation improvements. As discussed in Note 7, Net pension liability increased $6.1 million. For further details related to the outstanding debt please refer to note 11 – Long-term Obligations, in the Notes to the Financial Statements. Economic Factors and Next Year’s Budget and Rates The City of Redmond budget is an important part of Redmond’s Six-Year Financial Plan that is focused on the mission of the City of two robust urban centers – Downtown and Overlake and connected neighborhoods. The Six-Year Financial Plan builds upon the City’s sound financial strategy by providing a framework that allows the City to “catch up” with needed maintenance, “keep up” with growth and demands for service and “step up” to some of the needs and opportunities that become available. Through innovation and efficiencies, Redmond continues to 2016 2015 2016 2015 2016 2015 General obligation bonds 60,380 $ 58,530 $ - $ - $ 60,380 $ 58,530 $ G.O. bond premiums 4,626 3,140 - - 4,626 3,140 Revenue bonds - - 27,630 29,170 27,630 29,170 Revenue bond issuance premiums - - 3,009 3,195 3,009 3,195 Public Works Trust Fund loans 1,417 1,511 4,272 4,412 5,689 5,923 Other post-employment benefits 4,648 4,032 - - 4,648 4,032 Compensated absences 4,528 4,456 591 563 5,119 5,019 Net pension liability 26,931 21,885 6,145 5,122 33,076 27,007 Total 102,530 $ 93,554 $ 41,647 $ 42,462 $ 144,177 $ 136,016 $ Governmental Activities Business-Type Activities Total City of Redmond's Long-term Debt (in thousands) 2016 Comprehensive Annual Financial Report 11 City of Redmond ---PAGE BREAK--- provide quality services that meet or exceed the expectations of our community members. Strong financial stewardship and quality customer service is a hallmark of Redmond city government and is evidenced by the City’s AAA bond rating. In addition, planning and construction continues in the Downtown area with conversion of the two one-way arterial streets to two way throughfares and Downtown Park. With the passage of the Sound Transit 3 initiative, the City anticipates light rail to become a part of the Overlake neighborhood and then make its way Downtown by 2025. The City has fostered relationships, both private and with other government organizations, to ensure Downtown and Overlake continue to be a thriving neighborhoods. Redmond’s success in partnering with other entities is evidenced by the two Community Facility Districts to build a pedestrian bridge in conjunction with Microsoft and Sound Transit as well as make needed transportation improvements with Microsoft. Continuing to accommodate growth in its urban centers, means that Redmond will continue to protect single-family neighborhoods by replacing aging infrastructure and providing mobility options for its residents. In 2016, General Fund revenue ended the year over expectations mostly due to growth in sales tax receipts as a result of a more robust economy, a development surge and location of a major retailer in the eastern portion of the City. Departments successfully managed their expenditures, and as a result, General Fund expenditures were approximately 6% below the authorized budget. The City experienced growth in licenses and permits due to a surge in commercial development activity which began in 2014 and is anticipated to last through 2018. In future years, Redmond anticipates making progress on its capital improvement goals by continuing the work in downtown Redmond on the new Downtown Park (beginning construction in 2017) and converting the Redmond Way and Cleveland one-way streets into two-way thoroughfares (construction began in 2016). The City will continue to make investments in transportation improvements, parks and trails, infrastructure rehabilitation and safety improvements as well as continue the planning to welcome light rail into the City. The City’s Six-Year Financial Plan provides adequate funding for all City services while continuing to seek efficiencies in service delivery. In addition, the Capital Investment Program continues to remain strong with projects aligned with the City’s vision, long-range plans and in partnership with neighboring organizations. Requests for Information This financial report is designed to provide a general overview of the City of Redmond’s finances for readers with an interest in the government’s finances. Questions concerning any of the information provided in this report, or requests for additional information, may be addressed to the Director of Finance & Information Services, City of Redmond, PO Box 97010, Redmond, WA 98073-9710. 2016 Comprehensive Annual Financial Report 12 City of Redmond ---PAGE BREAK--- Governmental Business-Type Activities Activities Total ASSETS Cash and cash equivalents $ 25,714,821 $ 16,811,727 $ 42,526,548 Investments (Note 3) 105,328,042 62,407,570 167,735,612 Receivables: Taxes 7,188,459 - 7,188,459 Accounts 336,136 5,140,603 5,476,739 Interest 304,657 205,798 510,455 Special assessments 17,809,000 - 17,809,000 Due from other governments 4,454,240 619,422 5,073,662 Inventory 35,885 98,557 134,442 Prepaid insurance 478,408 - 478,408 Net pension asset 6,655,365 - 6,655,365 Restricted assets: Deposit cash 454,815 55,681 510,496 Deposit investments 4,768,898 - 4,768,898 Revenue bond reserve - 2,809,909 2,809,909 Rate stabilization fund - 6,107,077 6,107,077 Advance on service contract - 15,444 15,444 Capital assets (Note Land, artwork, construction in progress 164,503,895 36,990,770 201,494,665 Depreciable capital assets, net 261,457,745 310,637,610 572,095,355 Total assets 599,490,366 441,900,168 1,041,390,534 Deferred outflow of resources: Debt refunding 3,501,237 - 3,501,237 Pensions 8,499,453 1,061,494 9,560,947 Total deferred outflows 12,000,690 1,061,494 13,062,184 Total assets and deferred outflows 611,491,056 442,961,662 1,054,452,718 LIABILITIES Payables: Accounts/claims 6,981,409 1,721,011 8,702,420 Employee wages 2,663,281 762,715 3,425,996 Interest 195,818 107,217 303,035 Due to other governments 634,989 1,361,977 1,996,966 Unearned revenues 439,148 - 439,148 Customer deposits 4,060,064 55,681 4,115,745 Noncurrent liabilities (Note 11): Due within one year 7,906,956 1,590,000 9,496,956 Due in more than one year 67,692,065 33,256,580 100,948,645 Net pension liability 26,931,151 6,145,104 33,076,255 Total liabilities 117,504,881 45,000,285 162,505,166 Deferred inflow of resources: Pensions 581,516 185,360 766,876 Total deferred inflows 581,516 185,360 766,876 Total liabilities and deferred inflows 118,086,397 45,185,645 163,272,042 NET POSITION Net investment in capital assets (Note 6) 366,767,495 312,717,766 679,485,261 Restricted for: Net pension asset 6,655,365 - 6,655,365 Advance life support 822,663 - 822,663 Cable access 907,126 - 907,126 Parks 618,658 - 618,658 Police 4,980,314 - 4,980,314 Fire 1,732,965 - 1,732,965 Debt service 2,182,564 2,809,909 4,992,473 Capital projects 65,535,431 - 65,535,431 Tourism 640,194 - 640,194 Planning-Transportation 755,959 - 755,959 Recycling 667,858 - 667,858 Rate stabilization fund - 6,107,077 6,107,077 Unrestricted 41,138,067 76,141,265 117,279,332 Total Net Position $ 493,404,659 $ 397,776,017 $ 891,180,676 CITY OF REDMOND STATEMENT OF NET POSITION DECEMBER 31, 2016 The notes to the financial statements are an integral part of this statement 2016 Comprehensive Annual Financial Report 13 City of Redmond ---PAGE BREAK--- Net (Expense) Revenue and Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-Type Function/Program Expenses Services Contributions Contributions Activities Activities Total Governmental activities: General government $ 22,766,450 $ 3,121,710 $ 4,230 $ - $ (19,640,510) $ - $ (19,640,510) Security 53,614,696 16,442,060 1,522,709 - (35,649,927) - (35,649,927) Economic environment 6,509,168 24,641,474 946,333 69,625 19,148,264 - 19,148,264 Transportation 13,326,951 372,214 1,201,344 4,933,510 (6,819,883) - (6,819,883) Culture and recreation 12,065,286 2,651,408 166,299 - (9,247,579) - (9,247,579) Interest on long-term debt 2,615,229 - - - (2,615,229) - (2,615,229) Total governmental activities 110,897,780 47,228,866 3,840,915 5,003,135 (54,824,864) - (54,824,864) Business-type activities Water/Wastewater 34,226,585 35,665,631 71,373 5,775,182 - 7,285,601 7,285,601 UPD Water/Wastewater 5,887,383 6,427,720 - 672,369 - 1,212,706 1,212,706 Stormwater 9,216,236 12,392,611 715,715 7,331,069 - 11,223,159 11,223,159 Total business-type activities 49,330,204 54,485,962 787,088 13,778,620 - 19,721,466 19,721,466 Total government $ 160,227,984 $ 101,714,828 $ 4,628,003 $ 18,781,755 (54,824,864) 19,721,466 (35,103,398) General revenues: Taxes Property 23,967,392 - 23,967,392 Sales 27,978,577 - 27,978,577 Business and Occupation 15,739,069 - 15,739,069 Excise 8,750,977 - 8,750,977 Investment interest 2,037,743 736,362 2,774,105 Gain (loss) in change of fair value (141,583) (124,283) (265,866) Miscellaneous 18,216,748 175,321 18,392,069 Interest expense - (1,301,877) (1,301,877) Contributions/Gain on capital assets 14,775,496 - 14,775,496 Total general revenues 111,324,419 (514,477) 110,809,942 Change in net position 56,499,555 19,206,989 75,706,544 Net position-beginning 405,361,056 378,569,028 783,930,084 Prior Period Adjustments 31,544,048 - 31,544,048 Net position-ending $ 493,404,659 $ 397,776,017 $ 891,180,676 The notes to the financial statements are an integral part of this statement CITY OF REDMOND STATEMENT OF ACTIVITIES For the Year Ended December 31, 2016 Program Revenues 2016 Comprehensive Annual Financial Report 14 City of Redmond ---PAGE BREAK--- Capital Improvements Other Governmental Program Governmental Funds General Fund Funds Total ASSETS Cash and cash equivalents $ 7,593,186 $ 11,933,232 $ 2,574,543 $ 22,100,961 Investments 28,403,663 50,496,431 11,160,584 90,060,678 Receivables: Taxes 6,113,441 - 1,075,018 7,188,459 Accounts 233,034 1,631 101,471 336,136 Interest 102,260 126,049 32,294 260,603 Special assessments - 17,809,000 - 17,809,000 Due from other funds 820,166 - - 820,166 Due from other governments 43,203 2,269,547 2,141,491 4,454,241 Restricted assets: Deposit investments 4,755,710 3,188 10,000 4,768,898 Cash 454,814 - - 454,814 Total Assets $ 48,519,477 $ 82,639,078 $ 17,095,401 $ 148,253,956 LIABILITIES Accounts/claims payable $ 3,125,731 $ 2,170,258 $ 152,327 $ 5,448,316 Employee wages payable 2,139,314 34,110 336,982 2,510,406 Due to other funds - - 820,166 820,166 Due to other governments 368,161 208,907 7,924 584,992 Payable from restricted assets: Deposits payable 4,046,876 3,188 10,000 4,060,064 Unearned revenues 280,007 - 159,141 439,148 Total Liabilities 9,960,089 2,416,463 1,486,540 13,863,092 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-special assessments - 46,867,049 - 46,867,049 Total deferred inflows - 46,867,049 - 46,867,049 FUND BALANCES (DEFICITS) Spendable: Restricted 6,379,366 10,853,904 13,842,304 31,075,574 Committed 6,462,389 - 1,766,557 8,228,946 Assigned 11,936,704 22,501,663 - 34,438,367 Unassigned 13,780,929 - - 13,780,929 Total Fund Balances (deficits) 38,559,388 33,355,567 15,608,861 87,523,816 Total Liabilities, Deferred Inflows, and Fund Balance $ 48,519,477 $ 82,639,079 $ 17,095,401 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and therefore not reported in the funds. 420,290,810 Internal service funds are used by management to charge the costs of certain activities, such as insurance, information services, and fleet maintenance, to individual funds. The assets and liabilities of these internal service funds are included in governmental activities in the Statement of Net Position. 20,702,111 Some liabilities, including bonds,loans, and compensated absences payable, are not due and payable in the current period and therefore are not reported in the funds. (Note 2) (72,018,286) The Net Pension Asset, Net Pension Lability, and deferred inflows and deferred outflows are reported in the government-wide statement of net position but not in the governmental balance sheet (9,960,841) Special assessments are susceptible to full accrual in the government-wide statements, 46,867,049 but are reported as deferred inflows in the governmental funds. Net position of governmental activities $ 493,404,659 CITY OF REDMOND BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2016 2016 Comprehensive Annual Financial Report 15 City of Redmond ---PAGE BREAK--- Capital Improvements Other Total General Program Governmental Governmental Fund Fund Funds Funds REVENUES Taxes $ 66,557,909 $ - $ 9,878,107 $ 76,436,016 Licenses and permits 10,479,358 - 1,213,859 11,693,217 Contributions 93,397 40,000 35,836 169,233 Intergovernmental 3,340,581 5,003,135 331,100 8,674,816 Charges for services 13,923,030 10,488,273 10,479,750 34,891,053 Fines and forfeitures 554,575 - 90,023 644,598 Investment income 387,030 309,418 130,843 827,291 Net Change in Fair Value of Investment 13,947 (57,944) (25,856) (69,853) Miscellaneous 469,869 1,295,871 296,767 2,062,507 Total Revenues 95,819,696 17,078,753 22,430,429 135,328,878 EXPENDITURES Current: General government 16,272,324 4,948 - 16,277,272 Security of persons and property 45,215,599 - 6,731,198 51,946,797 Transportation 9,310,822 - 1,331,096 10,641,918 Economic environment 4,742,255 - 1,675,645 6,417,900 Social Services 896,911 - 274,757 1,171,668 Culture and recreation 8,211,622 - 2,485,476 10,697,098 Capital outlay 4,058,896 22,967,989 1,170,694 28,197,579 Debt service: Principal 94,451 705,000 3,400,000 4,199,451 Interest and debt issue costs 3,778 191,287 2,312,248 2,507,313 Total Expenditures 88,806,658 23,869,225 19,381,114 132,056,996 Excess (deficiency) of revenues Over (under) expenditures 7,013,038 (6,790,472) 3,049,315 3,271,881 OTHER FINANCING SOURCES (USES) G.O. bonds proceeds - - 6,000,000 6,000,000 Premium on G.O. bonds issued - - 1,052,491 1,052,491 Refunding bonds issued - - 11,630,000 11,630,000 Premium on refunding bonds issued - - 1,431,462 1,431,462 Payment to refunded bond escrow agent - - (12,964,924) (12,964,924) Disposition of capital assets 2,009,702 - 47,500 2,057,202 Transfers in (Note 10) 860,213 15,333,822 6,019,658 22,213,693 Transfers out (Note 10) (8,492,091) (726,289) (12,827,237) (22,045,617) Total other financing sources and uses (5,622,176) 14,607,533 388,950 9,374,307 Net change in fund balances 1,390,862 7,817,061 3,438,265 12,646,188 Fund balances-beginning 37,168,526 25,538,506 12,170,596 74,877,628 Fund balances-ending $ 38,559,388 $ 33,355,567 $ 15,608,861 $ 87,523,816 The notes to the financial statements are an integral part of this statement CITY OF REDMOND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2016 2016 Comprehensive Annual Financial Report 16 City of Redmond ---PAGE BREAK--- Amounts reported for governmental funds in the statement of activities are different because: Net change in fund balances-total governmental funds. $ 12,646,188 Governmental funds report capital outlays as expenditures. However in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays of $28,197,579, contributions of $7,304,091 and interfund transfers of $1,599,202, exceed depreciation 25,536,577 expense of $9,487,876 and disposals of $2,076,419 in the current period. Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. (Note 2) 52,211,183 Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of long-term debt is an expenditure in the governmental funds, yet the repayment reduces long-term liabilities in the statement of net position. Governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the government-wide statement of activities: This is the amount by which proceeds exceeded repayments. (Note 2) (2,063,458) Internal service funds are used by management to charge the costs of certain activities, such as insurance, information services, and fleet maintenance, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. (367,166) 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. (Note 2) (668,640) Pension expenses reported in the governmental fund statements are not reported as expenditures in the statement of activities. 748,919 (31,544,048) Change in net position of governmental activities $ 56,499,555 The notes to the financial statements are an integral part of this statement CITY OF REDMOND RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2016 A prior period adjustment for Redmond Community Facilities District 2014-1 is reported in the entity-wide statements but not in the governmental funds statements 2016 Comprehensive Annual Financial Report 17 City of Redmond ---PAGE BREAK--- Page 1 of 2 Governmental Activities Water/ UPD Water/ Stormwater Internal Wastewater Wastewater Management Totals Service Funds ASSETS Current assets: Cash and cash equivalents $ 7,099,617 $ 3,960,485 $ 5,751,625 $ 16,811,727 $ 3,613,859 Investments 24,798,275 14,891,102 22,718,193 62,407,570 15,267,364 Accounts and contracts receivable 3,346,710 541,132 1,252,761 5,140,603 - Interest receivable 86,998 48,536 70,264 205,798 44,054 Due from other Governments 18,599 - 600,823 619,422 - Inventory 98,557 - - 98,557 35,885 Prepaid insurance - - - - 478,408 Restricted assets: Customer deposits: Cash and cash equivalents 16,373 32,000 7,308 55,681 - Revenue Bond Reserve: Investments 1,175,500 - 1,634,409 2,809,909 - Rate stabilization fund: Investments 4,177,811 1,929,266 - 6,107,077 - Total current assets 40,818,440 21,402,521 32,035,383 94,256,344 19,439,570 Noncurrent assets: Advance on service contract 12,249 3,195 - 15,444 - Capital assets: Land and land rights 4,421,753 3,274,106 19,528,444 27,224,303 584,292 Buildings 25,377,864 11,031,564 1,549,496 37,958,924 715,786 Improvements other than buildings 173,191,819 64,514,809 127,124,393 364,831,021 356,198 Equipment 579,608 262,471 663,251 1,505,330 13,471,581 Construction in progress 4,149,043 55,703 5,561,721 9,766,467 140,767 Less accumulated depreciation (57,594,009) (17,145,175) (18,918,481) (93,657,665) (9,597,794) Total capital assets (net of depreciation) 150,126,078 61,993,478 135,508,824 347,628,380 5,670,830 Total noncurrent assets 150,138,327 61,996,673 135,508,824 347,643,824 5,670,830 Total assets 190,956,767 83,399,194 167,544,207 441,900,168 25,110,400 Deferred outflow of resources: Pension GASB 68 519,876 159 541,459 1,061,494 493,996 Total deferred outflows 519,876 159 541,459 1,061,494 493,996 Total assets and deferred outflows $ 191,476,643 $ 83,399,353 $ 168,085,666 $ 442,961,662 $ 25,604,396 The notes to the financial statements are an integral part of this statement CITY OF REDMOND STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2016 Business-type Activities Enterprise Funds 2016 Comprehensive Annual Financial Report 18 City of Redmond ---PAGE BREAK--- Page 2 of 2 Governmental Activities Water/ UPD Water/ Stormwater Internal Wastewater Wastewater Management Totals Service Funds LIABILITIES Current liabilities: Accounts payable $ 1,033,411 $ 36,608 $ 650,992 $ 1,721,011 $ 1,533,092 Employee wages payable 167,568 1,106 121,337 290,011 152,875 Compensated absences 288,073 - 184,631 472,704 220,252 Due to other governments 24,365 5 1,337,607 1,361,977 49,999 Current portion of revenue bonds payable 790,000 - 800,000 1,590,000 - Accrued interest payable 26,070 - 81,147 107,217 - Current liabilities payable from restricted assets: Customer deposits payable 16,373 32,000 7,308 55,681 - Total current liabilities 2,345,860 69,719 3,183,022 5,598,601 1,956,218 Noncurrent liabilities: Revenue bonds payable, net 5,876,801 - 23,172,151 29,048,952 - Loans payable - - 4,089,452 4,089,452 - Compensated absences 72,018 - 46,158 118,176 55,063 Net Pension Liability 3,143,453 1,297 3,000,354 6,145,104 2,821,778 Total noncurrent liabilities 9,092,272 1,297 30,308,115 39,401,684 2,876,841 Total liabilities 11,438,132 71,016 33,491,137 45,000,285 4,833,059 Deferred inflow of resources: Pension GASB 68 150,771 198 34,391 185,360 69,226 Total deferred inflows 150,771 198 34,391 185,360 69,226 Total liabilities and deferred inflows 11,588,903 71,214 33,525,528 45,185,645 4,902,285 NET POSITION Net investment in capital assets 143,459,277 61,993,478 107,265,011 312,717,766 5,670,830 Restricted for debt service 1,175,500 - 1,634,409 2,809,909 - Restricted for rate stabilization 4,177,811 1,929,266 - 6,107,077 - Unrestricted 31,075,152 19,405,395 25,660,718 76,141,265 15,031,281 Total net position $ 179,887,740 $ 83,328,139 $ 134,560,138 $ 397,776,017 $ 20,702,111 The notes to the financial statements are an integral part of this statement Business-type Activities Enterprise Funds CITY OF REDMOND STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2016 2016 Comprehensive Annual Financial Report 19 City of Redmond ---PAGE BREAK--- Governmental Activities- Water/ UPD Water/ Stormwater Internal Wastewater Wastewater Management Totals Service Funds Operating revenues: Charges for services $ 21,524,344 $ 4,420,223 $ 12,385,888 $ 38,330,455 $ 16,874,332 Metro service 14,141,290 2,007,497 - 16,148,787 - Charges for replacement - - - - 2,458,497 Charges for insurance - - - - 1,184,997 Total operating revenues 35,665,634 6,427,720 12,385,888 54,479,242 20,517,826 Operating expenses: Administrative and general 3,074,358 371,020 2,730,204 6,175,582 - Purchased water 7,509,076 1,104,077 - 8,613,153 - Metro service 13,977,580 2,006,767 - 15,984,347 - Supplies - - - - 338,685 Maintenance and operations 4,925,344 880,536 3,810,668 9,616,548 20,455,039 Taxes 741,588 152,912 196,191 1,090,691 - Depreciation and amortization 3,998,639 1,372,071 2,479,173 7,849,883 1,101,141 Total operating expenses 34,226,585 5,887,383 9,216,236 49,330,204 21,894,865 Operating income (loss) 1,439,049 540,337 3,169,652 5,149,038 (1,377,039) Nonoperating revenues (expenses): Interest and investment revenue 304,909 172,397 259,056 736,362 163,278 Net change in fair value of the investment (54,063) (30,279) (39,941) (124,283) (22,604) Grant income 71,373 - 715,715 787,088 - Interest expense (322,709) - (979,168) (1,301,877) - Gain (Loss) on disposal of capital assets - - - - 206,035 Insurance recovery - - - - 495,753 Lease and other revenue 96,502 78,819 6,723 182,044 335,487 Total nonoperating revenues (expenses) 96,012 220,937 (37,615) 279,334 1,177,949 Income before contributions and transfers 1,535,061 761,274 3,132,037 5,428,372 (199,090) Capital contributions 5,775,182 672,369 7,331,069 13,778,620 - Transfers out - - - - (168,076) Change in net position 7,310,243 1,433,643 10,463,106 19,206,992 (367,166) Total net position - beginning, as previously reported 172,577,497 81,894,496 124,097,032 378,569,025 21,069,277 Total net position - ending $ 179,887,740 $ 83,328,139 $ 134,560,138 $ 397,776,017 $ 20,702,111 The notes to the financial statements are an integral part of this statement Enterprise Funds CITY OF REDMOND STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For the Year Ended December 31, 2016 Business-type Activities- 2016 Comprehensive Annual Financial Report 20 City of Redmond ---PAGE BREAK--- Page 1 of 2 Governmental Activities- Water/ UPD Water/ Stormwater Internal Wastewater Wastewater Management Totals Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 35,464,633 $ 6,396,708 $ 12,178,988 $ 54,040,329 $ 18,140,112 Cash received for replacement - - - - 2,458,497 Cash payments to suppliers (23,130,081) (3,299,916) (1,366,847) (27,796,844) (4,622,175) Cash payments to employees (3,992,906) 927 (3,040,851) (7,032,830) (15,751,172) Cash payments to other governments (731,136) (153,083) (128,718) (1,012,937) 15,186 Cash payments from other governments - - - - - Internal activity - payments to other funds (2,287,453) (1,085,387) (2,194,934) (5,567,774) (571,834) Other operating receipts (4,824) (6,206) (11,031) (5,295) Net cash provided (used) by operating activities 5,318,233 1,859,248 5,441,432 12,618,913 (336,681) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in/transfers out - - - - (168,076) Grant proceeds 57,399 - 299,008 356,407 - Other non-operating revenues (expenses) - - - - 831,249 Net cash provided by noncapital financing activities 57,399 - 299,008 356,407 663,173 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (3,034,374) (60,082) (5,904,586) (8,999,042) (785,949) Proceeds from sale of other assets 96,504 78,818 6,727 182,049 206,035 Cash payments to suppliers 9,172 (13,451) (152,736) (157,015) - Cash payments to other governments - - 1,057,079 1,057,079 - Cash received from customers - - (28,214) (28,214) - Capital contributions 1,878,610 - 2,302,990 4,181,600 - Grant Proceeds - - 173,100 173,100 - Interest paid on other debt - - (152,356) (152,356) - Principal paid on other debt - - (140,338) (140,338) - Interest paid on revenue bonds (349,888) - (989,760) (1,339,648) - Principal paid on revenue bonds (755,000) - (785,000) (1,540,000) - Net cash provided (used) for capital and related financing activities (2,154,976) 5,285 (4,613,094) (6,762,785) (579,914) CASH FLOWS FROM INVESTING ACTIVITIES Internal activity, net investment purchases (971,139) (582,392) 480,732 (1,072,799) 1,128,809 Interest on investments 230,047 130,321 205,138 565,506 133,323 Net cash provided (used) in investing activities (741,092) (452,071) 685,870 (507,293) 1,262,132 Net increase (decrease) in cash and cash equivalents 2,479,564 1,412,462 1,813,216 5,705,242 1,008,710 Cash and cash equivalents-beginning of year 4,636,426 2,580,023 3,945,717 11,162,166 2,605,159 Cash and cash equivalents-end of year $ 7,115,990 $ 3,992,485 $ 5,758,933 $ 16,867,408 $ 3,613,869 Enterprise Funds CITY OF REDMOND STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2016 Business-type Activities- The notes to the financial statements are an integral part of this statement 2016 Comprehensive Annual Financial Report 21 City of Redmond ---PAGE BREAK--- Page 2 of 2 Governmental Activities- Water/ UPD Water/ Stormwater Internal Wastewater Wastewater Management Totals Service Funds Cash and cash equivalents Operating fund cash $ 7,099,617 $ 3,960,485 $ 5,751,625 $ 16,811,727 $ 3,613,859 Customer deposits 16,373 32,000 7,308 55,681 - Cash and cash equivalents-end of year $ 7,115,990 $ 3,992,485 $ 5,758,933 $ 16,867,408 $ 3,613,859 Reconciliation of operating income to net cash provided by operating activities Operating income (loss) $ 1,439,046 $ 540,337 $ 3,169,652 $ 5,149,035 $ (1,377,039) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 3,998,639 1,372,071 2,479,173 7,849,883 1,101,141 Decrease (increase) in accounts receivable (200,998) (31,012) (206,900) (438,910) 80,783 Decrease (increase) in inventory 8,992 - - 8,992 1,127 Decrease (increase) in prepaid expenses - - - - (25,237) Increase (decrease) in accounts payable 13,757 (22,903) (24,863) (34,009) 3,215 Increase (decrease) due to other governments 10,453 (171) 67,473 77,755 15,186 Increase (decrease) in employee wages payable 3,596 927 (14,709) (10,186) (146,790) Increase (decrease) in compensated absences payable 49,572 - (22,188) 27,384 16,228 Increase (decrease) in customer deposits payable - - - - - Increase (decrease) in GASB 68 adjustment (4,824) (6,206) (11,031) (5,295) Increase (decrease) in unearned revenue - - - - - Net cash provided (used) by operating activities $ 5,318,233 $ 1,859,248 $ 5,441,432 $ 12,618,913 $ (336,681) Noncash investing, capital and financing activities: Developers contributed infrastructure valued at $ 3,896,572 $ 672,369 $ 5,028,079 $ 9,597,020 $ - Fair value of investments decreased by (130,723) (72,925) (105,582) (309,230) (66,192) The notes to the financial statements are an integral part of this statement Enterprise Funds CITY OF REDMOND STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2016 Business-type Activities- 2016 Comprehensive Annual Financial Report 22 City of Redmond ---PAGE BREAK--- Firefighters Pension Agency Fund Funds* ASSETS Cash and cash equivalents $ 333,123 $ 1,422,681 Investments: U.S. Government Securities 1,136,099 790,864 Money Market Funds 112,856 78,561 Local Government Investment Pool 163,989 114,156 Receivables: Accounts Receivable - 5,608 Interest 143 - Total Assets 1,746,210 2,411,870 LIABILITIES Due to other governments $ - $ 718,547 Custodial - 423,600 Trust account - 1,269,723 Total Liabilities - 2,411,870 NET POSITION Net position restricted for pensions 1,746,210 - Total Net Position $ 1,746,210 $ - Firefighters Pension Fund ADDITIONS Intergovernmental revenue $ 154,159 Investment interest 14,993 Total additions 169,152 DEDUCTIONS Benefit payments 27,772 Administrative expenses 1,500 Total deductions 29,272 Change in net position 139,880 Net position-beginning 1,606,330 Net position-ending $ 1,746,210 The notes to the financial statements are an integral part of these statements CITY OF REDMOND STATEMENT OF NET POSITION FIDUCIARY FUNDS As of December 31, 2016 * Beginning in 2016 the Redmond Community Facilities District 2014-1 is reported as a blended component unit in the governmental Capital Improvements Program Fund. See the Combining Statement of Fiduciary Net Position, the Combining Statement of Changes in Assets and Liabilities All Agency Funds, Note 17 Accounting and Reporting Changes, and Note 19 Prior Period Adjustments for more information. CITY OF REDMOND STATEMENT OF CHANGES IN NET POSITION FIDUCIARY FUNDS For the year ended December 31, 2016 2016 Comprehensive Annual Financial Report 23 City of Redmond ---PAGE BREAK--- NOTE 1: Summary of Significant Accounting Policies The City of Redmond was incorporated on December 31, 1912 and operates under the laws of the State of Washington applicable to a Non-Charter Mayor/Council form of government (elected Mayor and City Council composed of seven members). Both Mayor and Council are elected to four-year terms. The City provides general government services including public safety, highways and streets, parks and recreation, planning and zoning, permits and inspection, sanitation, general administrative, and water and wastewater services. The accounting and reporting policies of the City of Redmond conform to generally accepted accounting principles for governments and are regulated by the Washington State Auditor’s Office. The City’s Comprehensive Annual Financial Report (CAFR) is prepared in accordance with Governmental Accounting Standards Board (GASB) Statements and the following notes detail the City’s significant accounting policies. Reporting Entity The City’s CAFR includes the financial statements for the City of Redmond and its component units; entities for which the City is considered to be financially accountable. The City has two blended component units, Redmond Community Facilities District 2014-1 (CFD 2014-1), which was created in 2014 for the purpose of financing the construction of a pedestrian/bicycle bridge over SR 520 at the Overlake Transit Station, and Redmond Community Facilities District 2016-1 (CFD 2016-1), which was created in 2016 for the purpose of financing multimodal improvements on 154th Avenue NE and NE 51st Street, and NE 31st Street and 156th Avenue NE. The CFDs are reported as blended component units in the Capital Investments Program funds of the City of Redmond because the City appoints a majority of the Board members, has the ability to impose its will on the organizations through the ability to appoint, hire, reassign or dismiss those persons responsible for the day-to-day operation of the organizations, and the CFD’s provide services almost entirely to the City. (See Note 13 - Component Units for additional information.) Basic Financial Statements The City’s basic financial statements consist of government-wide statements, including a Statement of Net Position and a Statement of Activities, and fund financial statements which provide a more detailed level of financial information. The government-wide financial statements report information on all of the non-fiduciary activities of the primary government and its component units. The effect of inter-fund 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 segments 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 instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of related 2016 Comprehensive Annual Financial Report 24 City of Redmond ---PAGE BREAK--- 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 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 collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. 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 and claims and judgments, are recorded only when payment is due. Under the modified accrual basis of accounting, property taxes, sales taxes, utility taxes, franchise taxes, 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 period. Grant revenue is recognized for cost reimbursement grants when the expenditure occurs in accordance with GASB Statement 33. When the expenditure is incurred, grant revenue is considered to have been earned and therefore available and recognized as revenue. Entitlement grant revenue is not tied to expenditures and is recognized when the City is entitled to receive it according to the grant agreement. Financial Statement Presentation The City reports the following major governmental funds: The General Fund is the general operating fund of the City. It accounts for all financial resources and transactions except those required to be accounted for in another fund. The Capital Investments Program Fund accounts for financial resources to be used for the acquisition, construction, and preservation of major capital facilities other than those financed by proprietary funds. The City reports the following major proprietary funds: The Water/Wastewater Fund accounts for the activities of providing water and sewer services to its citizens. The UPD Water/Wastewater Fund accounts for the activities of providing water and sewer services to an urban planned development outside the City limits. Both of these utilities’ operations are self- supported through user charges. The Stormwater Management Fund accounts for the operation, construction, and maintenance of the City’s stormwater management system. The utility’s operations are self-supported through fees. Additionally, the City reports the following fund types: Internal Service Funds account for fleet maintenance, information technology, and insurance services provided to other departments of the City on a cost reimbursement basis. Agency Funds account for assets held by the City as an agent for private individuals or other governments. Agency funds are custodial in nature (assets equal liabilities) and do not involve the measurement of the results of operations. The City has three Agency Funds: Intergovernmental Custodial, Municipal Employees Benefit Trust, and Contractor’s Deposits. The Pension Trust Fund accounts for the activities of the Firefighter’s Pension Fund, which accumulates resources for excess pension benefit payments to qualified firefighters. Special Revenue Funds are used to account for specific revenues that are restricted to or reserved for expenditures for particular purposes. 2016 Comprehensive Annual Financial Report 25 City of Redmond ---PAGE BREAK--- Debt Service Funds account for the accumulation of resources for and the payment of general obligation and special assessment bonds. The City does not have any permanent funds. As a general rule the effect of inter-fund activity has been eliminated from the government-wide financial statements. Direct expenses of the functional categories are included in the government-wide Statement of Activities while indirect expense allocations are eliminated. Indirect expenses are primarily charged to the various functions through the use of internal service funds for fleet maintenance and information technology. Elimination of payments to internal service funds are treated as expense reductions. No other indirect expenses are allocated to the various governmental functions. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government’s utility functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. The proprietary fund statements distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s utility funds and internal service funds are charges to customers for sales and services, vehicle replacement, and insurance. The City also recognizes as operating revenue the portion of utility connection fees intended to recover the cost of connecting new customers to the water and sewer system. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, taxes, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Budgets and Budgetary Accounting The City of Redmond budgets its funds in accordance with the Revised Code of Washington (RCW) 35A.34. In compliance with the code, budgets for all funds are established with the exception of the LID Control and the LID Guaranty Debt Service Funds, and Fiduciary funds. Budgets established for proprietary funds are “management budgets” and as such are not required to be shown in this report. The biennial budget is proposed by the Mayor and adopted by the City Council with legal budgetary control at the fund level for all funds. Expenditures and other financing uses may not exceed budgeted appropriations at these levels. The Mayor may authorize transfers within all funds. The City Council must approve by ordinance any additional appropriations which increase the total at the fund level. Any unexpended appropriation balances lapse at the end of the biennium. In addition to authorizing the budget, the City Council biennially approves the Capital Investments Program. This is a six-year plan for capital project expenditures and anticipated revenue sources. Expenditures and revenues for these projects are budgeted in the Capital Projects Funds and Enterprise Funds. The City prepares all biennial budgets on the modified accrual basis which conforms to generally accepted accounting principles. The CAFR includes budgetary comparisons for the general and capital projects governmental funds with legally adopted budgets. The budget process and the time limits under which a budget must be developed are established by State law. The City uses a “budgeting for outcomes” format and follows the procedures outlined below in the year preceding the first year of the two-year budget to establish its biennial budget:  In winter, community meetings are held to affirm or revise the City’s budget priorities. The Mayor appoints staff and citizens to teams which interpret these priorities and develop the primary factors that the City should support to pursue the given priority. These factors are used by staff to develop budget offers.  In spring, the Mayor develops and submits a budget calendar to the City Council for approval. 2016 Comprehensive Annual Financial Report 26 City of Redmond ---PAGE BREAK---  In June, the City Clerk publishes notice for the first public hearing. Also around mid-year staff prepares a six-year forecast and reviews this forecast with the City Council at a public meeting.  Throughout the summer, City staff create budget offers and review revenue and expenditure estimates.  In October, preliminary budget estimates are made available to the public.  Sixty days before the ensuing fiscal year, the Mayor files the preliminary budget with the City Clerk’s office.  During the first two weeks of November, the City Clerk publishes notice of the filing of the preliminary budget and publishes notice of public hearings.  The City Council holds a series of study sessions to review the preliminary budget to determine if they wish to make any modifications to the Mayor’s recommended programs.  Public hearings are held prior to the adoption of the budget for the public to comment on recommended programs and to offer ideas for new programs.  Prior to the beginning of the first calendar year of the biennial budget, the City Council, by a majority of the members present, adopts a final operating budget by ordinance.  The Final Budget document is printed and distributed and posted on the City’s website after adoption. Assets, Liabilities, and Net Position Cash and Investments It is the City’s policy to invest temporary cash surpluses. These investments are reported on the Statement of Net Position and the governmental funds Balance Sheet as cash and cash equivalents or investments. Included in cash and cash equivalents are currency on hand, demand deposits with banks or other financial institutions, investments with the Local Government Investment Pool, investments in U.S. Government Mutual Funds and investments with original maturities of three months or less. Interest is allocated to each fund on the basis of investments owned. In accordance with City policy and Washington State law, authorized investment purchases include Certificates of Deposit with financial institutions qualified by the Washington Public Deposit Protection Commission, US Treasury and Agency Securities, Bankers’ Acceptances, Bonds of Washington State and any local government in Washington State which have, at the time of purchase, one of the three highest credit ratings of a nationally recognized rating agency, repurchase agreements, the State Investment Pool (which is a 2a7-like pool), and mutual funds used specifically for debt issues related to arbitrage. The City reports its deposit and investment risk disclosures in accordance with GASB 40 and GASB 72 (see Note In accordance with GASB 31 and GASB 79, investments in external 2a7-like pools, money market investments, and participating interest-earning investment contracts with remaining maturities of one year or less at the time of purchase are stated at amortized cost. All other investments including the Firefighter’s Pension Fund are stated at fair value. Receivables The City of Redmond recognizes receivables in its financial statements based on the accounting requirements for that statement. These receivables are as follows: Property Taxes The City’s property tax collections records show that approximately 99% of the property taxes due are collected during the year of levy and delinquent taxes are collected in the next few years. The City performs an analysis of all uncollected property taxes to test materiality of the uncollected balance as well as the collectability. Based on this analysis the City will determine the classification of the uncollected portion of property taxes; revenue versus uncollected property taxes. When property taxes become three years 2016 Comprehensive Annual Financial Report 27 City of Redmond ---PAGE BREAK--- delinquent, the County is required by State statute to foreclose on the property. Historically, all taxes have been collected; therefore no allowance for uncollectible taxes is recorded. Sales Taxes There is a running two-month lag in remittance of sales tax to the City. Sales taxes collected in November and December are not remitted by the State to the City until January and February of the following year and they are reported as receivables at year-end. There is no allowance for uncollectible sales taxes because all sales taxes are required by law to be collected by businesses at the time of sale and remitted to the State. Investment Interest Interest receivable consists of interest earned on investments at the end of the year, accrued interest on investments purchased between interest dates, and accrued interest and penalties on special assessments receivable. In proprietary funds and the government-wide Statement of Net Position, investment interest is recorded as receivable, regardless of its payment date. In the governmental fund statements and schedules, investment interest is recorded as receivable if it will be paid to the City within 60 days of year- end. Accounts Receivable Customer accounts receivable consist of amounts owed by private individuals or organizations for goods and services provided. Unbilled services provided to utility customers are estimated at year-end and included in accounts receivable. Uncollectible amounts are considered immaterial and the direct write-off method is used. Interfund Transactions Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e. the current portion of interfund loans) or “advances to/from other funds” (i.e. the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds”. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Inventories Inventories are defined as assets which may be held for internal consumption or for resale. The City uses the following policies in valuing and recording inventory items: In proprietary funds a perpetual inventory is maintained, in which the cost is held in an asset account when inventory items are purchased, and expensed when the item is consumed. The first-in, first-out valuation method, which approximates market, is used to value the inventory. A physical inventory is taken at year- end. No inventory is maintained in governmental funds; however, the internal service fund inventories are included in the “Governmental Activities” on the Statement of Net Position. Restricted Assets Restricted assets include those monies reserved for customers’ deposits, bond reserve monies and impact fees. Advance on Service Contract For fiscal years prior to December 31, 2012, the City amortized under guidance provided by FASB 71 the Tolt Pipeline project and the Tolt Meter project with the City of Seattle. In further review, this is not a deferred outflow of resources but rather an advance on a service contract. Capital Assets General capital assets are those assets not specifically related to activities reported in the proprietary funds. These assets generally result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the government-wide Statement of Net Position but are not reported in the fund financial statements. Capital assets utilized by the proprietary funds are reported both in the business-type activities 2016 Comprehensive Annual Financial Report 28 City of Redmond ---PAGE BREAK--- column of the government-wide Statement of Net Position and in the respective funds. Capital assets are defined by the City as land, buildings, machinery, equipment, software, vehicles, transportation and utility infrastructure and other improvements with an original cost of $10,000 or more each and an estimated useful life of more than one year, and all artwork regardless of its initial cost. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition 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. Land, construction in progress, and works of art are not depreciated. Property, plant, and equipment of the City are depreciated using the straight-line method over the following estimated useful lives: Asset Years Buildings/Building improvements 50 Other improvements 15-50 Vehicles 3-15 Machinery and equipment 6-20 Utility infrastructure 10-100 Streets, paths, trails 50 Street lights and traffic signals 30 Compensated Absences It is the City’s policy to permit employees to accumulate earned but unused vacation, compensatory time in lieu of overtime and sick leave benefits. Twenty-five percent of unused sick leave is payable at retirement or death. Any outstanding sick leave is lost at resignation; therefore, outstanding sick leave at year-end is not accrued because the payment cannot be deemed probable nor can the amount be reasonably estimated. All vacation and compensatory time is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all state sponsored pension plans and additions to/deductions from those plans’ fiduciary net position have been determined on the same basis as they are reported by the Washington State Department of Retirement Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Other Post-Employment Benefits Lifetime full medical coverage is provided to uniformed Police and Fire personnel who became members of the Law Enforcement Officers and Fire Fighters (LEOFF 1) retirement system prior to October 1, 1977. A liability for the accumulated unfunded actuarially required contribution is reported in the Statement of Net Position. The actual medical costs are reported as expenditures in the year they are incurred, and are paid out of the General Fund. Deferred Outflows/Inflows of Resources In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has two items that qualify for reporting in this category. Deferred charges on debt refunding result from the difference in the carrying value of refunded debt and the reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Deferred outflows related to pension plans are discussed in detail in Note 7: Pension Plans. 2016 Comprehensive Annual Financial Report 29 City of Redmond ---PAGE BREAK--- In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The City has one item that qualifies for reporting in this category. Deferred inflows related to pension plans are discussed in detail in Note 7: Pension Plans. Long-Term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business- type activities, or proprietary fund type Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Balance 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. Fund balances are categorized as Nonspendable or Spendable amounts as follows: Nonspendable Fund Balance: fund resources that are in a form that either never could be spent or in a form that is temporarily not spendable. This can include resources that are spendable in form but are under legal restrictions that temporarily or permanently bar spending. Spendable amounts are further segregated into categories based on the degree to which the uses of resources are constrained.  Restricted Fund Balance: fund resources that are subject to restrictions that are legally enforceable by outside parties. This includes resources raised through enabling legislation.  Committed Fund Balance: fund resources that are legally limited by the resolution by the City Council. A resolution must be taken to impose limitations on the use of these resources, and another resolution is required to modify or eliminate those limitations.  Assigned Fund Balance: fund resources that are limited by the mayor, or department directors based on delegation, for its intended use. This type of limitation can be imposed by the highest level of decision making within the entity or a designee, but little or no formal action is required to modify or eliminate those limitations.  Unassigned Fund Balance: Unrestricted fund balance not committed or assigned in the General Fund is considered unassigned. Also negative fund balance in any other governmental fund is unassigned. The city only reports positive unassigned fund balance in the General Fund. Flow assumption: When expenditure is incurred for purposes for which both restricted and unrestricted resources are available, it is the City’s policy to use restricted resources first. When expenditure is incurred for purposes for which unrestricted (committed, assigned, and unassigned) resources are available, and amounts in any of these unrestricted classifications could be used, it is the City’s policy to spend committed resources first, then assigned and unassigned, in that order. However, prior to the commencement of any project, the flow assumption is reviewed to ensure that the proper resources are being used. 2016 Comprehensive Annual Financial Report 30 City of Redmond ---PAGE BREAK--- NOTE 2: Reconciliation of Government-Wide and Fund Financial Statements Explanation of aggregated differences between the governmental fund balance sheet and the government- wide statement of net position The governmental fund balance sheet includes reconciliation between total fund balance and total net position as reported in the government-wide statement of net position. The details of the aggregated differences are presented below. Some liabilities, including bonds, loans and compensated absences payable, are not due and payable in the current period and therefore are not reported in the funds: The net pension asset, net pension liability, and deferred inflows and deferred outflows are reported in the government-wide statement of net position but not in the governmental balance sheet Explanation of aggregated differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities The governmental fund statement of revenues, expenditures, and changes in fund balances includes reconciliation between net changes in fund balances – total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. The details of the aggregated differences are presented below. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds: Developer/Private asset contributions $ 5,344,134 Unavailable revenue – special assessments 46,867,049 Net adjustment to increase net change in fund balances - governmental funds to arrive at change in net position- governmental activities $ 52,211,183 Repayment of the principal of long-term debt consumes the current financial resources of governmental funds, and governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the government-wide statement of activities: G.O Bonds payable $ (60,380,000) Unamortized bond premiums (4,625,635) Deferred outflows on refunding 3,501,237 Loans payable (1,416,761) Accrued interest payable (195,818) Compensated absences (4,252,816) Other post-employment benefits (4,648,494) Net adjustment to reduce fund balance - total governmental funds To arrive at net position – governmental activities $ (72,018,286) Net pension asset $ 6,655,365 Deferred outflows of resources 8,005,457 Net pension liability (24,109,373) Deferred inflows of resources (512,290) $ (9,960,841) 2016 Comprehensive Annual Financial Report 31 City of Redmond ---PAGE BREAK--- Principal repayments: General obligation bonds $ 15,780,000 Public Works Trust Fund Loans repayment 94,451 Amortization/(addition) of debt premiums (1,485,903) Amortization of deferred outflows on refunding (142,419) Proceeds from long-term debt issuance (17,630,000) Deferred outflows from long-term debt issuance 1,320,413 Net adjustment to decrease net change in fund balances- governmental funds to arrive at change in net position- governmental activities $ 2,063,458 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: Change in accrued interest payable $ 4,003 Change in compensated absences payable (56,371) Change in other post-employment benefits payable (616,272) Net adjustment to decrease net change in fund balances- governmental funds to arrive at change in net position- governmental activities $ (668,640) NOTE 3: Deposits and Investments Deposits As of December 31, 2016 the carrying amount of the City's cash demand deposits with KeyBank was $1,108,025 and the in-transit items were $192,215. The carrying amount and bank balance of the City's cash demand deposits at U.S. Bank at December 31, 2016 was $766,476. $5,022,554 was held at Opus Bank in a certificate of deposit and $10,904,923 was held in public funds money market accounts at KeyBank, Opus and Wells Fargo Banks. $1,190,876 retained from contractors pending acceptance of City construction projects was held in escrow or savings accounts at various banks. $146,205 was held in a City of Redmond Client Trust Account at Wells Fargo. Petty cash totaled $48,500, of which $35,770 was allocated to various City offices. Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the City will not be able to recover deposits or collateral securities that are in the possession of an outside party. The City of Redmond’s deposits are entirely covered by the Federal Depository Insurance Corporation (FDIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington State Public Deposit Protection Commission The FDIC insures the first $250,000 of the City’s deposits. The deposit balances over $250,000 are insured by the State statute permits additional amounts to be assessed on a pro rata basis to members of the pool in the event the pool’s collateral should be insufficient to cover a loss. Investments Investments are stated at fair value, based on quoted market prices in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in the fair-value of investment is recognized as an increase or decrease to the investment assets and investment income. Interest income on investments is recognized in non-operating revenue as earned. Changes in fair value of investments are recognized on the Statements of Revenues, Expenses, and Changes in Net Position. Interest Rate Risk As a means of limiting its exposure to interest rate risk, the City’s policy requires that it diversifies its investments by security type and institution, and limits holdings in any one type of investment with any one issuer. The City coordinates its investment maturities to closely match cash flow needs and restricts the maximum investment term to less than five years from the purchase date. Credit Risk State law and City policy limit investments to those authorized by State Statute including commercial paper and bonds of the State of Washington and any local government in the State of Washington which have, at the time of 2016 Comprehensive Annual Financial Report 32 City of Redmond ---PAGE BREAK--- investment, one of the three highest credit ratings of a nationally recognized rating agency. The City further limits its holdings in commercial paper to 10% of the portfolio and 10% per issuer, and local government bonds to 25% of the portfolio and 10% of issuer. At December 31, 2016 the City held no investments in commercial paper. Additionally, the City restricts its investment in mutual fund bonds to be used for arbitrage purposes only. Concentration of Credit Risk The City diversifies its investments by security type and institution. 100% of the City’s portfolio may be invested in US Treasury Notes, Bonds or Certificates, US Government Sponsored Corporations, or the State Investment Pool. 50% of the portfolio may be invested in Certificates of Deposit with no more than 10% held by any one issuer and not exceeding 20% of the issuer’s net worth. 25% of the portfolio may be invested in Bankers Acceptances (10% per issuer), State of Washington or Local Government Bonds (10% per issuer), and Repurchase Agreements (25% per dealer). 10% of the portfolio may be invested in Commercial Paper and other authorized investments. On December 31, 2016 more than five percent of the City’s investments were held in Federal Farm Credit Bank, Federal Home Loan Bank, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation bonds. Investments Measured at Amortized Cost Investments reported as cash equivalents: Amortized Cost Less Than 1 Year Money Market $ 10,904,923 $ 10,904,923 Certificate of Deposit 5,022,554 5,022,554 Local Government Investment Pool 26,533,033 26,533,033 Total $ 42,460,510 $ 42,460,510 The Washington State Local Government Investment Pool (LGIP) operates in a manner consistent with the SEC’s Rule 2a-7 of the Investment Company Act of 1940 and is similar to a money market fund recognized by the Securities and Exchange Commission. The LGIP manages a portfolio of securities that meet the maturity, quality, diversification, liquidity and market value calculation requirements set forth by the Governmental Accounting Standard Board (GASB) for external investment pools that elect to measure, for financial reporting purposes, investments at amortized cost. The funds are limited to high quality obligations with regulated maximum and average maturities to minimize both market and credit risk. Investments are reported on trade date basis in accordance with generally accepted accounting principles (GAAP). The LGIP transacts with its participants at a stable net asset value per share of $1.00, the same method used for reporting. Participants may contribute or withdraw funds on a daily basis. Participants must inform the Office of the State Treasurer (OST) of any contribution or withdrawal over one million dollars no later than 9 a.m. on the same day the transaction is made. Contributions or withdrawals for one million dollars or less can be requested at any time prior to 10am, at the sole discretion of OST. All participants are required to file with the State Treasurer documentation containing the names and titles of the officials authorized to contribute or withdraw funds. The LGIP does not impose liquidity fees or redemption gates on participant withdrawals. Investments Measured at Fair Value The City measures and reports investments at fair value using the valuation input hierarchy established by generally accepted accounting principles, as follows: Level 1: Prices quoted in active markets for identical securities, Level 2: Quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are not observable. Level 3: Unobservable inputs for an asset or liability. The fair values and levels noted in the following table have been provided by the City’s investment custodian, Wells Fargo Bank, who obtains information through Interactive Data (IDC). IDC evaluates the various securities and obtains feeds from a number of live data and market sources including active market makers and inter-dealer brokers, relative credit information, observed market movements and sector news. IDC reviews sources on the basis of their historical accuracy for individual issues and maturity ranges. 2016 Comprehensive Annual Financial Report 33 City of Redmond ---PAGE BREAK--- At December 31, 2016, the City had the following investments measured at fair value: The table below identifies the types of investments, concentration of investments in any one issuer, and maturities of the City’s investment portfolio as of December 31, 2016: *The fair value of the investments in the Washington State Local Government Investment Pool are the same as the amortized cost of the pool shares, and are considered Cash and Cash Equivalents. The table below identifies the credit risk of the City’s investment portfolio as of December 31, 2016: Reconciliation of cash and investments by type to the financial statements is detailed in the following tables: Quoted Prices Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Investment Type (Level 1) (Level 2) (Level 3) Total U.S. Agency Securities $ - $ 165,381,266 $ - $ 165,381,266 U.S. Treasury Securities 16,995,670 - - 16,995,670 Local Government Bonds - 1,441,084 - 1,441,084 Total $ 16,995,670 $ 166,822,350 $ - $ 183,818,020 Fair Value Measurement Using Investment Type Fair Value Less Than 1 Year 1 to 5 Years % of Total Portfolio Federal Farm Credit Bank $ 38,323,909 $ 9,003,560 $ 29,320,349 18.22% Federal Home Loan Bank 23,944,490 8,999,730 14,944,760 11.38% Federal Home Loan Mortgage Corporation 55,985,719 9,010,190 46,975,529 26.62% Federal National Mortgage Association 47,127,148 2,001,380 45,125,768 22.40% Local Government Bonds 1,441,084 1,441,084 - 0.69% Treasury Notes 16,995,670 11,996,950 4,998,720 8.08% Subtotal 183,818,020 42,452,894 141,365,126 87.39% Local Government Investment Pool* 26,533,033 26,533,033 - 12.61% Total $ 210,351,053 $68,985,927 $ 141,365,126 100.00% Percentage of Total Portfolio 32.80% 67.20% 100.00% Maturities Investment Type Fair Value S&P Moody's U.S. Agency Securities Federal Farm Credit Bank $ 38,323,909 AA+ AAA Federal Home Loan Bank 23,944,490 AA+ AAA Federal Home Loan Mortgage Corporation 55,985,719 AA+ AAA Federal National Mortgage Association 47,127,148 AA+ AAA Subtotal 165,381,266 Local Government Bonds King Cnty Wash School Dist No. 411 1,441,084 AA+ AAA U.S. Treasury Securities U.S. Treasury Notes 16,995,670 AA+ AAA Total 183,818,020 $ Ratings Cash & Investments by Type Opus Bank-certificate of deposit $ 5,022,554 Opus Bank-money market KeyBank-money market Wells Fargo-money market 5,074,775 3,740,414 2,089,734 State Investment Pool (LGIP) 26,533,033 KeyBank public checking 1,108,025 Deposits/Debits in transit at 12/31/2016 184,461 2016 Comprehensive Annual Financial Report 34 City of Redmond ---PAGE BREAK--- NOTE 4: Governmental Fund Balances Governmental fund balances are classified as either spendable or non-spendable. Spendable fund balances are further categorized as restricted, committed, assigned, and unassigned. Restricted amounts are restricted by contract or grant document, committed amounts committed by codification by the City Council and the assigned are assigned by action by the City’s mayor or department director based on delegated authority. The breakdown of what makes up each of the fund balance categories from the governmental Balance Sheet that is designated for a particular purpose is shown below. Restricted For: Advance life support $ 822,663 Cable access 907,126 Capital projects 10,853,904 Debt service 2,182,564 Fire 1,202,721 Parks 618,658 Planning-transportation 8,275,002 Police 4,450,070 Reserves 454,814 Solid waste recycling 667,858 Tourism 640,194 Total $ 31,075,574 Checks/Credits in transit at 12/31/2016 (1,099,474) U.S. Bank deposit in transit 766,476 Petty Cash/Advance Travel 35,770 Wells Fargo Wright Runstad trust account 146,205 Contractors’ Retainage Money Market 1,190,876 Federal Home Loan Bank 23,944,490 Federal Farm Credit Bank 38,323,909 Federal Home Loan Mortgage Corporation 55,985,719 Federal National Mortgage Association 47,127,148 Local Gov't Bonds 1,441,084 US Treasury Notes 16,995,670 Grand Total Cash & Investments by Type $228,610,867 Cash & Equivalents* Restricted Cash Rate Stabilization Fund Investments Restricted Investments Governmental Funds General Fund $ 7,593,186 $ 454,814 $ - $ 28,403,663 $ 4,755,710 Capital Investments Program Fund 11,933,232 - - 50,496,431 3,188 Other Governmental Funds 2,574,543 - - 11,160,584 10,000 Proprietary Funds Water/Wastewater 7,099,617 16,373 4,177,811 24,798,275 1,175,500 UPD Water/Wastewater 3,960,485 32,000 1,929,266 14,891,102 - Stormwater Management 5,751,625 7,308 - 22,718,193 1,634,409 Internal Service Funds 3,613,859 - - 15,267,364 - Fiduciary Funds Firefighter’s Pension Fund 333,123 - - - 1,412,944 Agency Funds 1,422,681 - - - 983,581 $ 44,282,351 $ 510,495 $ 6,107,077 $167,735,612 $ 9,975,332 Grand Total Cash & Investments by Statements $228,610,867 2016 Comprehensive Annual Financial Report 35 City of Redmond ---PAGE BREAK--- NOTE 5: Receivables Property Taxes The King County Treasurer acts as an agent to collect property taxes levied in the County for all taxing authorities. Collections are distributed on a daily basis. Property Tax Calendar January 1 Taxes are levied and become an enforceable lien against properties. February 14 Tax bills are mailed. April 30 First of two equal installment payments is due. May 31 Assessed value of property established for next year's levy at 100 percent of market value. October 31 Second installment is due. Property taxes are recorded as a receivable when levied. During the year, property tax revenues are recognized when cash is received. At year-end, property tax revenues are recognized for December collections to be distributed by the county treasurer in January and February. Under Washington State law a city may levy property taxes up to $3.60 per $1,000 of assessed valuation. The assessed value was $17,305,359,936 for the City in 2016. The City of Redmond's maximum property tax levy rate has been reduced from $3.60 to $3.10, or $.50, as a result of annexing to the King County Library District in May, 1990. In addition to the limitation previously noted, the City's levy rate is also subject to the following: Washington State law in RCW 84.55.010 limits the growth of regular property taxes to one percent per year or IPD, whichever is less, after adjustments for new construction and annexations, unless an increase greater than this limit is approved by the voters. If the assessed valuation increases by more than one percent due to revaluation, the levy rate will be decreased. Committed For: Arts $ 307,272 Capital equipment replacement 2,921,633 Development Review 1,110,224 Fire equipment 1,896,304 Parks maintenance 1,308,680 Police 8,500 Recreation activities 656,333 Travel 20,000 Total $ 8,228,946 Assigned For: Capital projects $ 22,501,663 Community events 12,771 Maintenance 1,011,788 Human services fund 22,320 Parks 39,965 Real Property Fund 1,980,286 Reserves 6,707,246 Transportation 849,830 Business tax 1,312,498 Total $ 34,438,367 2016 Comprehensive Annual Financial Report 36 City of Redmond ---PAGE BREAK--- The Washington State Constitution limits the total regular property tax levy to a maximum of one percent of assessed valuation or $10 per $1,000 of the market value of a property. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the one percent limit. Accordingly, the City levied $1.41 per $1,000 of assessed value for general governmental services and no additional voter-approved excess tax levy. NOTE 6: Capital Assets Capital asset activity for the year ended December 31, 2016 was as follows: NET INVESTMENT IN CAPITAL ASSETS Beginning Ending Balance Increases Decreases Balance Primary Government GOVERNMENTAL ACTIVITIES Capital assets, not being depreciated: Land 126,464,300 $ 9,922,006 $ (2,056,627) $ 134,329,679 $ Construction in Progress 17,625,762 23,956,328 (11,956,753) 29,625,337 Art 548,878 - - 548,878 Total capital assets, not being depreciated 144,638,940 $ 33,878,334 $ (14,013,380) $ 164,503,894 $ Capital Assets, Being Depreciated: Buildings/Building Improvements 76,195,709 $ 106,168 $ - $ 76,301,877 $ Improvements Other than Buildings 33,296,483 1,328,163 - 34,624,646 Machinery and Equipment 28,968,524 6,077,207 (2,554,728) 32,491,003 Infrastructure 260,666,965 13,257,118 (28,190) 273,895,893 Total capital assets, being depreciated 399,127,681 $ 20,768,656 $ (2,582,918) $ 417,313,419 $ Less Accumulated Depreciation for: Buildings/Building Improvements (21,174,622) $ (1,591,095) $ - $ (22,765,717) $ Improvements Other than Buildings (13,401,402) (1,153,341) - (14,554,743) Machinery and Equipment (18,533,430) (2,116,356) 2,415,395 (18,234,391) Infrastructure (95,261,048) (5,728,226) 688,451 (100,300,823) Total accumulated depreciation (148,370,502) $ (10,589,018) $ 3,103,846 $ (155,855,674) $ Total capital assets, being depreciated, net 250,757,179 $ 10,179,638 $ 520,928 $ 261,457,745 $ Governmental activities capital assets, net 395,396,119 $ 44,057,972 $ (13,492,452) $ 425,961,639 $ Governmental Activities Capital assets not being depreciated $ 164,503,894 Capital assets being depreciated 417,313,419 Less accumulated depreciation (155,855,674) Less GO Bonds (60,380,000) Less bond premium (4,625,634) Plus unspent bond proceeds 3,727,014 Less Public Works Trust Fund loans (1,416,761) Plus deferred outflow on refunding bonds 3,501,237 Governmental Activities, net investment in capital assets $ 366,767,495 2016 Comprehensive Annual Financial Report 37 City of Redmond ---PAGE BREAK--- Depreciation expense was charged to functions/programs of the primary government as follows: NET INVESTMENT IN CAPITAL ASSETS Beginning Balance Increases Decreases Ending Balance BUSINESS-TYPE ACTIVITIES Capital assets, not Being depreciated: Land $ 25,620,274 $ 1,604,029 $ - $ 27,224,303 Construction In Progress 10,996,454 8,916,246 (10,146,233) 9,766,467 Total capital assets, not being depreciated $ 36,616,728 $ 10,520,275 $ (10,146,233) $ 36,990,770 Capital Assets, Being Depreciated: Buildings/Building Improvements $ 37,958,924 $ - $ - $ 37,958,924 Improvements Other Than Buildings 346,744,668 18,174,616 (88,263) 364,831,021 Machinery and Equipment 1,457,925 47,405 - 1,505,330 Total capital assets, being depreciated $ 386,161,517 $ 18,222,021 $ (88,263) $ 404,295,275 Less Accumulated Depreciation for: Buildings/Building Improvements $ (7,632,609) $ (759,179) $ - $ (8,391,788) Improvements Other than Buildings (77,749,493) (7,000,937) 88,263 (84,662,167) Machinery and Equipment (537,428) (66,279) - (603,707) Total accumulated depreciation $ (85,919,530) $ (7,826,395) $ 88,263 $ (93,657,662) Total capital assets, being depreciated, net $ 300,241,987 $ 10,395,626 $ - $ 310,637,613 Business-Type activities capital assets, net $ 336,858,715 $ 20,915,901 $ (10,146,233) $ 347,628,383 Business-Type Activities Capital assets not being depreciated $ 36,990,770 Capital assets being depreciated 404,295,275 Less accumulated depreciation (93,657,662) Less Revenue bonds (27,630,000) Less bond premium (3,008,952) Less PWTF loan (4,271,662) Business-Type Activities, net investment in capital assets $ 312,717,767 2016 Comprehensive Annual Financial Report 38 City of Redmond ---PAGE BREAK--- Depreciation expense was charged to Business-Type Activities as follows: The Business-Type Activities also had $23,487 in amortization expense that is included with depreciation expense in the financial statements. Depreciation allocates the cost of capital assets over their estimated useful lives. This results in the cost of the asset being expensed to the operating statements to more closely match the revenue the asset is generating. In 2016 the City reviewed the estimated useful lives of approximately $44 million worth of capitalized “improvements other than buildings” assets for stormwater funds, such as Overlake village south detention vault and Bear Creek rehabilitation and habitat improvement project. The estimated useful lives of some of these assets were revised from a standard of 40 years to 25, 50, 75, and 100 years, depending on the type of asset, actual experience, and intended use. As a result of this adjustment actual depreciation expense for these assets as $757,602, which was $343,179 less than if the previous 40 year useful life was applied. The City plans to work with a consultant in 2017 to review the useful lives for all other utility assets. Note 7: Pension Plans The following table represents the aggregate pension amounts for all plans subject to the requirements of the GASB Statement 68, Accounting and Financial Reporting for Pensions for the year 2016: Aggregate Pension Amounts – All Plans Pension liabilities $ 33,076,255 Pension assets* $ 6,655,365 Deferred outflows of resources $ 9,560,947 Deferred inflows of resources $ 766,876 Pension expense/expenditures** $ 5,228,149 *Includes $1,060,487 pension asset for the Firefighters Pension Plan, presented in the section following State Sponsored Pension Plans. **Includes $6,493 pension expense for the Firefighters Pension Plan. State Sponsored Pension Plans Substantially all of the City’s 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 state Legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. Business-Type Activities Water/Wastewater $ 3,975,151 UPD Water/Wastewater 1,372,071 Stormwater 2,479,173 Total Depreciation Expense – Business-type Activities $ 7,826,395 Type of Assets Useful Life-Prior Year Useful Life- Current Year Storm drains and appurtenances 40 100 Vault 40 100 Mains Pipes 40 100 Habitat Improvements 40 100 Filters 40 25 General Plant 40 50 Culvert 40 75 Ponds 40 100 Electric Pump Equipment 40 25 2016 Comprehensive Annual Financial Report 39 City of Redmond ---PAGE BREAK--- The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems Communications Unit P.O. Box 48380 Olympia, WA 98540-8380 Or the DRS CAFR may be downloaded from the DRS website at www.drs.wa.gov. Public Employees’ Retirement System (PERS) PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher education employees not participating in higher education retirement programs. PERS is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component. PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s years of service. The AFC is the average of the member’s 24 highest consecutive service months. Members are eligible for retirement from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. Members retiring from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of-living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. Contributions The PERS Plan 1 member contribution rate is established by State statute at 6 percent. The employer contribution rate is developed by the Office of the State Actuary and includes an administrative expense component that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage of covered payroll) for 2016 were as follows: PERS Plan 1 Actual Contribution Rates: Employer Employee* PERS Plan 1 6.23% 6.00% PERS Plan 1 UAAL 4.77% 6.00% Administrative Fee 0.18% - Total 11.18% 6.00% PERS Plan 2/3 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s years of service for Plan 2 and 1 percent of AFC for Plan 3. The AFC is the average of the member’s 60 highest-paid consecutive service months. There is no cap on years of service credit. Members are eligible for retirement with a full benefit at 65 with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan 2/3 members who have at least 20 years of service credit and are 55 years of age or older, are eligible for early retirement with a benefit that is reduced by a factor that varies according to age for each year before age 65. PERS Plan 2/3 members who have 30 or more years of service credit and are at least 55 years old can retire under one of two provisions:  With a benefit that is reduced by three percent for each year before age 65; or  With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return- to-work rules. 2016 Comprehensive Annual Financial Report 40 City of Redmond ---PAGE BREAK--- PERS Plan 2/3 members hired on or after May 1, 2013 have the option to retire early by accepting a reduction of five percent for each year of retirement before age 65. This option is available only to those who are age 55 or older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44. PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined contribution rates are set at a minimum of 5 percent and escalate to 15 percent with a choice of six options. Employers do not contribute to the defined contribution benefits. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan. Contributions The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. The Plan 2/3 employer rates include a component to address the PERS Plan 1 UAAL and an administrative expense that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates and Plan 3 contribution rates. The PERS Plan 2/3 required contribution rates (expressed as a percentage of covered payroll) for 2016 were as follows: PERS Plan 2/3 Actual Contribution Rates: Employer 2/3 Employee 2 PERS Plan 2/3 6.23% 6.12% PERS Plan 1 UAAL 4.77% - Administrative Fee 0.18% - Employee PERS Plan 3 - varies Total 11.18% 6.12% The City’s actual PERS plan contributions were $1,640,436 to PERS Plan 1 and $2,112,355 to PERS Plan 2/3 for the year ended December 31, 2016. Public Safety Employees’ Retirement System (PSERS) PSERS Plan 2 was created by the 2004 Legislature and became effective July 1, 2006. To be eligible for membership, an employee must work on a full time basis and:  Have completed a certified criminal justice training course with authority to arrest, conduct criminal investigations, enforce the criminal laws of Washington, and carry a firearm as part of the job; or  Have primary responsibility to ensure the custody and security of incarcerated or probationary individuals; or  Function as a limited authority Washington peace officer, as defined in RCW 10.93.020; or  Have primary responsibility to supervise eligible members who meet the above criteria. PSERS membership includes:  PERS 2 or 3 employees hired by a covered employer before July 1, 2006, who met at least one of the PSERS eligibility criteria and elected membership during the period of July 1, 2006 to September 30 2006; and  Employees hired on or after July 1, 2006 by a covered employer, that meet at least one of the PSERS eligibility criteria. 2016 Comprehensive Annual Financial Report 41 City of Redmond ---PAGE BREAK--- PSERS covered employers include:  Certain State of Washington agencies (Department of Corrections, Department of Natural Resources, Gambling commission, Liquor Control Board, Parks and Recreation Commission, and Washington State Patrol),  Washington State Counties,  Washington State Cities (except for Seattle, Spokane, and Tacoma),  Correctional entities formed by PSERS employers under the Interlocal Cooperation Act. PSERS Plan 2 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the average final compensation (AFC) for each year of service. The AFC is based on the member’s 60 consecutive highest creditable months of service. Benefits are actuarially reduced for each year that the member’s age is less than 60 (with ten or more service credit years in PSERS), or less than 65 (with fewer than ten service credit years). There is no cap on years of service credit. Members are eligible for retirement at the age of 65 with five years of service; or at the age of 60 with at least ten years of PSERS service credit; or at age 53 with 20 years of service. Retirement before age 60 is considered an early retirement. PSERS members who retire prior to the age of 60 receive reduced benefits. If retirement is at age 53 or older with at least 20 years of service, a three percent per year reduction for each year between the age at retirement and age 60 applies. PSERS Plan 2 retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PSERS Plan 2 members are vested after completing five years of eligible service. Contributions The PSERS Plan 2 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2. The Plan 2 employer rates include components to address the PERS Plan 1 unfunded actuarial accrued liability and administrative expense currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates. The PSERS Plan 2 required contribution rates (expressed as a percentage of current-year covered payroll) for 2016 were as follows: PSERS Plan 2 Actual Contribution Rates: Employer Employee PSERS Plan 2 6.59% 6.59% PERS Plan 1 UAAL 4.77% - Administrative Fee 0.18% - Total 11.54% 6.59% The City’s actual plan contributions were $17,958 to PSERS Plan 2 and $12,998 to PERS Plan 1 for the year ended December 31, 2016. Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) LEOFF membership includes all full-time, fully compensated, local law enforcement commissioned officers, firefighters, and as of July 24, 2005, emergency medical technicians. LEOFF is comprised of two separate defined benefit plans. LEOFF Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined per year of service calculated as a percent of final average salary (FAS) as follows:  20+ years of service – 2.0% of FAS  10-19 years of service – 1.5% of FAS  5-9 years of service – 1% of FAS 2016 Comprehensive Annual Financial Report 42 City of Redmond ---PAGE BREAK--- The FAS is the basic salary received at the time of retirement, provided a member has held the same position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months’ salary within the last ten years of service. Members are eligible for retirement with five years of service at the age of 50. Other benefits include duty and non-duty disability payments, a cost-of living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. Contributions Starting on July 1, 2000, LEOFF Plan 1 employers and employees contribute zero percent, as long as the plan remains fully funded. The LEOFF Plan I had no required employer or employee contributions for fiscal year 2016. Employers paid only the administrative expense of 0.18 percent of covered payroll. LEOFF Plan 2 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the final average salary (FAS) per year of service (the FAS is based on the highest consecutive 60 months). Members are eligible for retirement with a full benefit at 53 with at least five years of service credit. Members who retire prior to the age of 53 receive reduced benefits. If the member has at least 20 years of service and is age 50, the reduction is three percent for each year prior to age 53. Otherwise, the benefits are actuarially reduced for each year prior to age 53. LEOFF 2 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 2 members are vested after the completion of five years of eligible service. Contributions The LEOFF Plan 2 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2. The employer rate included an administrative expense component set at 0.18 percent. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. The LEOFF Plan 2 required contribution rates (expressed as a percentage of covered payroll) for 2016 were as follows: LEOFF Plan 2 Actual Contribution Rates: Employer Employee State and local governments 5.05% 8.41% Administrative Fee 0.18% - Total 5.23% 8.41% Ports and Universities 8.41% 8.41% Administrative Fee 0.18% - Total 8.59% 8.41% The City’s actual contributions to the plan were $1,339,697 for the year ended December 31, 2016. The Legislature, by means of a special funding arrangement, appropriates money from the state General Fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. For the state fiscal year ending June 30, 2016, the state contributed $60,375,158 to LEOFF Plan 2. The amount recognized by the City as its proportionate share of this amount is $842,172. Actuarial Assumptions The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial valuation completed in 2016 with a valuation date of June 30, 2015. The actuarial assumptions used in the valuation were based on the results of the Office of the State Actuary’s (OSA) 2007-2012 Experience Study. Additional assumptions for subsequent events and law changes are current as of the 2015 actuarial valuation report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, 2016. 2016 Comprehensive Annual Financial Report 43 City of Redmond ---PAGE BREAK--- Plan liabilities were rolled forward from June 30, 2015, to June 30, 2016, reflecting each plan’s normal cost (using the entry-age cost method), assumed interest and actual benefit payments.  Inflation: 3.0% total economic inflation; 3.75% salary inflation  Salary increases: In addition to the base 3.75% salary inflation assumption, salaries are also expected to grow by promotions and longevity.  Investment rate of return: 7.5% Mortality rates were based on the RP-2000 report’s Combined Healthy Table and Combined Disabled Table, published by the Society of Actuaries. The OSA applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis; meaning, each member is assumed to receive additional mortality improvements in each future year throughout his or her lifetime. There were minor changes in methods and assumptions since the last valuation.  For all systems, except LEOFF Plan 2, the assumed valuation interest rate was lowered from 7.8% to 7.7%. Assumed administrative factors were updated.  Valuation software was corrected on how the nonduty disability benefits for LEOFF Plan 2 active members is calculated.  New LEOFF Plan 2 benefit definitions were added within the OSA valuation software to model legislation signed into law during the 2015 legislative session. Discount Rate The discount rate used to measure the total pension liability for all DRS plans was 7.5 percent. To determine that rate, an asset sufficiency test included an assumed 7.7 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. (All plans use 7.7 percent except LEOFF 2, which has assumed 7.5 percent). Consistent with the long-term expected rate of return, a 7.5 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue being made at contractually required rates (including PERS 2/3, PSERS 2, SERS 2/3, and TRS 2/3 employers, whose rates include a component for the PERS 1, and TRS 1 plan liabilities). Based on these assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.5 percent was used to determine the total liability. Long-Term Expected Rate of Return The long-term expected rate of return on the DRS pension plan investments of 7.5 percent was determined using a building-block-method. The Washington State Investment Board (WSIB) used a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, including inflation) to develop each major asset class. Those expected returns make up one component of WSIB’s capital market assumptions. The WSIB uses the capital market assumptions and their target asset allocation to simulate future investment returns at various future times. The long-term expected rate of return of 7.5 percent approximately equals the median of the simulated investment returns over a 50-year time horizon. Estimated Rates of Return by Asset Class Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2016, are summarized in the table below. The inflation component used to create the table is 2.2 percent and represents the WSIB’s most recent long-term estimate of broad economic inflation. 2016 Comprehensive Annual Financial Report 44 City of Redmond ---PAGE BREAK--- Asset Class Target Allocation % Long-Term Expected Real Rate of Return Arithmetic Fixed Income 20% 1.70% Tangible Assets 5% 4.40% Real Estate 15% 5.80% Global Equity 37% 6.60% Private Equity 23% 9.60% 100% Sensitivity of the Net Pension Liability/(Asset) The table below presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.5 percent, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.5 percent) or 1-percentage point higher (8.5 percent) than the current rate. 1% Decrease Current Discount Rate 1% Increase PERS 1 $ 18,318,327 $ 15,190,592 $ 12,498,984 PERS 2/3 32,873,317 17,854,484 (9,294,290) PSERS 2 135,383 31,179 (43,046) LEOFF 1 (406,059) (683,554) (920,750) LEOFF 2 13,772,709 (4,911,324) (18,993,660) Pension Plan Fiduciary Net Position Detailed information about the State’s pension plans’ fiduciary net position is available in the separately issued DRS financial report. Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the City reported a total pension liability of $33,076,255 for its proportionate share of the net pension liabilities, and a total pension asset of $5,594,878 for its proportionate share of the net pension assets as follows: Liability (or Asset) PERS 1 $ 15,190,592 PERS 2/3 17,854,484 PSERS 2 31,179 LEOFF 1 (683,554) LEOFF 2 (4,911,324) The amount of the asset reported above for LEOFF Plans 1 and 2 reflects a reduction for State pension support provided to the City. The amount recognized by the City as its proportionate share of the net pension asset, the related State support, and the total portion of the net pension asset that was associated with the City were as follows: LEOFF 1 Asset LEOFF 2 Asset Employer’s proportionate share 683,554 4,911,324 State’s proportionate share of the net pension asset associated with the employer 4,623,539 3,201,825 TOTAL 5,307,093 8,113,149 2016 Comprehensive Annual Financial Report 45 City of Redmond ---PAGE BREAK--- At June 30, the City’s proportionate share of the collective net pension liabilities was as follows: Proportionate Share 6/30/15 Proportionate Share 6/30/16 Change in Proportion PERS 1 0.277269% 0.282854% 0.005585% PERS 2/3 0.349456% 0.354613% 0.005157% PSERS 2 0.092909% 0.073365% -0.019544% LEOFF 1 0.061310% 0.066346% 0.005036% LEOFF 2 0.905449% 0.844407% -0.061042% Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30 are used as the basis for determining each employer’s proportionate share of the collective pension amounts reported by the DRS in the Schedules of Employer and Nonemployer Allocations for all plans except LEOFF 1. LEOFF Plan 1 allocation percentages are based on the total historical employer contributions to LEOFF 1 from 1971 through 2000 and the retirement benefit payments in fiscal year 2016. Historical data was obtained from a 2011 study by the Office of the State Actuary (OSA). In fiscal year 2016, the state of Washington contributed 87.12 percent of LEOFF 1 employer contributions and all other employers contributed the remaining 12.88 percent of employer contributions. LEOFF 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. The allocation method the plan chose reflects the projected long-term contribution effort based on historical data. In fiscal year 2016, the state of Washington contributed 39.46 percent of LEOFF 2 employer contributions pursuant to RCW 41.26.725 and all other employers contributed the remaining 60.54 percent of employer contributions. The collective net pension liability (asset) was measured as of June 30, 2016, and the actuarial valuation date on which the total pension liability (asset) is based was as of June 30, 2015, with update procedures used to roll forward the total pension liability to the measurement date. Pension Expense For the year ended December 31, 2016, the City recognized pension expense as follows: Pension Expense PERS 1 $ 1,113,326 PERS 2/3 2,587,197 PSERS 2 22,288 LEOFF 1 (138,859) LEOFF 2 1,637,705 TOTAL $ 5,221,656 Deferred Outflows of Resources and Deferred Inflows of Resources At December 31, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PERS 1 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ - $ - Net difference between projected and actual investment earnings on pension plan investments $ 382,475 $ - Changes of assumptions $ - $ - Changes in proportion and differences between contributions and proportionate share of contributions $ - $ - Contributions subsequent to the measurement date $ 833,846 $ - TOTAL $ 1,216,321 $ - 2016 Comprehensive Annual Financial Report 46 City of Redmond ---PAGE BREAK--- PERS 2/3 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 950,739 $ 589,406 Net difference between projected and actual investment earnings on pension plan investments $ 2,184,874 $ - Changes of assumptions $ 184,541 $ - Changes in proportion and differences between contributions and proportionate share of contributions $ 274,897 $ - Contributions subsequent to the measurement date $ 1,065,100 $ - TOTAL $ 4,660,150 $ 589,406 PSERS Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 10,620 $ - Net difference between projected and actual investment earnings on pension plan investments $ 6,430 $ - Changes of assumptions $ 121 $ - Changes in proportion and differences between contributions and proportionate share of contributions $ - $ 1,682 Contributions subsequent to the measurement date $ 9,236 $ - TOTAL $ 26,408 $ 1,682 LEOFF 1 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ - $ - Net difference between projected and actual investment earnings on pension plan investments $ 69,482 $ - Changes of assumptions $ - $ - Changes in proportion and differences between contributions and proportionate share of contributions $ - $ - Contributions subsequent to the measurement date $ - $ - TOTAL $ 69,482 $ - 2016 Comprehensive Annual Financial Report 47 City of Redmond ---PAGE BREAK--- LEOFF 2 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 672,984 $ - Net difference between projected and actual investment earnings on pension plan investments $ 1,764,836 $ - Changes of assumptions $ 18,518 $ - Changes in proportion and differences between contributions and proportionate share of contributions $ 411,573 $ 175,793 Contributions subsequent to the measurement date $ 720,676 $ - TOTAL $ 3,588,586 $ 175,793 Deferred outflows of resources related to pensions resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Firefighters’ Pension Plan The City is the administrator of the Firefighters’ Pension Plan (FPP), a single-employer defined benefit pension plan established in conformance with Revised Code of Washington (RCW) 41.18. The Pension Board consists of five members: the Mayor, who is the chairman of the board, the City Clerk, the City Treasurer, and two regularly employed firefighters elected by secret ballot of the firefighters, each of whom serve two-year terms. Costs of administering the Plan are paid from the Firefighters’ Pension Plan. The Plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to Plan members and beneficiaries. Retirement benefit provisions are established in state statute and may be amended only by the State Legislature. Membership is limited to firefighters employed prior to March 1, 1970 when the LEOFF retirement system was established. The City’s obligation under the Plan consists of paying the difference between pension and medical benefits provided by LEOFF and those provided by the FPP for covered firefighters who retire after March 1, 1970. Benefits and refunds of the Plan are recognized when due and payable in accordance with the terms of the Plan. At December 31, 2016, there are two inactive plan members currently receiving benefits, one inactive plan member not receiving benefits because LEOFF benefits exceed those provided by FPP, and there are no active plan members. The pension plan is closed to new entrants. Inflows Outflows Inflows Outflows Inflows Outflows Inflows Outflows Inflows Outflows Inflows Outflows 2017 - (94,173) (184,190) 294,113 (290) 2,097 - (14,359) (41,855) 58,359 (226,335) 246,037 2018 - (94,173) (184,190) 294,113 (290) 2,097 - (14,359) (41,855) 58,359 (226,335) 246,037 2019 - 351,262 (184,190) 1,924,318 (290) 6,058 - 60,176 (41,855) 1,540,597 (226,335) 3,882,412 2020 - 219,560 (36,837) 1,082,505 (290) 4,747 - 38,023 (41,855) 1,086,331 (78,982) 2,431,167 2021 - - - - (290) 2,142 - - (8,373) 124,265 (8,663) 126,407 2022 - - - - (232) 30 - - - - (232) 30 Total Deferred (Inflows)/Outflows - 382,475 (589,406) 3,595,050 (1,682) 17,172 - 69,482 (175,793) 2,867,910 (766,881) 6,932,090 LEOFF 1 LEOFF 2 Year Ending December 31: Total PERS 1 PERS 2/3 PSERS 2 2016 Comprehensive Annual Financial Report 48 City of Redmond ---PAGE BREAK--- Under State law, the FPP is provided an allocation of 25% of all moneys received by the State from taxes on fire insurance premiums, interest earnings, member contributions made prior to the inception of LEOFF, and City contributions required to meet projected future pension obligations. These on-behalf tax revenues were recognized in the general fund and expensed out to the Firefighters’ Pension Plan. The fire insurance premium for 2016 was $154,159, which was sufficient to pay the 2016 Firefighter’s Pension Plan expenses of $29,271. The financial activity of the Firefighters’ Pension Plan is presented in the Statement of Net Position – Fiduciary Funds, and the Statement of Changes in Net Position – Fiduciary Funds. No separate stand-alone financial report is issued for the Firefighters’ Pension Plan. Although the City administers the pension plan, it is funded 100% by a percentage of the tax on fire insurance premiums which is received from the state annually. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Firefighters’ Pension Plan and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Investment Policy The Firefighter’s Pension Plan follows the City’s policy to invest temporary cash surpluses. These investments are reported on the Statement of Net Position - Fiduciary Funds as cash and cash equivalents or investments. Included in cash and cash equivalents are currency on hand, demand deposits with banks or other financial institutions, investments with the Local Government Investment Pool, investments in U.S. Government Mutual Funds and investments with original maturities of three months or less. Interest is allocated to the fund on the basis of investments owned. In accordance with City policy and Washington State law, authorized investment purchases include Certificates of Deposit with financial institutions qualified by the Washington Public Deposit Protection Commission, US Treasury and Agency Securities, Bankers’ Acceptances, Bonds of Washington State and any local government in Washington State which have, at the time of purchase, one of the three highest credit ratings of a nationally recognized rating agency, repurchase agreements, the State Investment Pool (which is a 2a7-like pool), and mutual funds used specifically for debt issues related to arbitrage. In accordance with GASB 31, investments in external 2a7-like pools, money market investments, and participating interest-earning investment contracts with remaining maturities of one year or less at the time of purchase are stated at amortized cost. All other investments including the Firefighter’s Pension Plan are stated at fair value. The City reports its deposit and investment risk disclosures in accordance with GASB 40 and GASB 72. See Note 3 – Deposits and Investments for detail. Net Pension Liability The Net Pension Liability was measured as of January 1, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The components of the City's net pension liability (asset) for the Firefighter’s Pension Plan at December 31, 2016 are as follows: Total pension liability $ 685,451 Less: Plan fiduciary net position (1,745,938) City’s net pension liability (asset) $ (1,060,487) Plan fiduciary net position as a percentage of the total pension liability 254.71% 2016 Comprehensive Annual Financial Report 49 City of Redmond ---PAGE BREAK--- City of Redmond Firefighter’s Pension Plan Changes in Net Pension Liability The Schedule of Changes in Net Pension Liability and Schedule of Contributions presented in Required Supplementary Information following the notes to the financial statements presents ten-year trend information about whether the net pension liability (asset) is increasing or decreasing over time and the factors affecting the changes. Annual Money-weighted Rate of Return For 2016, the money-weighted rate of return for the Firefighter’s Pension Plan investments was 0.88%. The annual money-weighted rate of return on pension plan investments is calculated as the internal rate of return on pension plan investments, net of pension plan investment expense. The money-weighted rate of return expresses investment performance, net of pension plan investment expense, adjusted for the changing amounts actually invested. The Schedule of Investment Returns presented in Required Supplementary information following the notes to the financial statements presents ten-year trend information for the annual money-weighted rate of return. Discount Rate and Investment Earnings The discount rate is the single rate that reflects the long-term expected rate of return on pension plan investments that are expected to be used to finance payment of benefits, to the extent that the pension Plan’s Fiduciary net Position is projected to be sufficient to make projected benefit payments and pension plan assets are expected to be invested using a strategy to achieve that return, and a yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on another scale), to the extent that conditions for use of the long-term expected rate of return are not met. Since the Fiduciary net Position is projected to be positive in all future years, the discount rate is equal to the Investment Earnings assumption of 3.2%. Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Firefighters' Pension Plan – Balances at 1/1/2016 $ 567,121 $ 1,606,330 $ (1,039,209) Changes for the year: Service Cost - - - Interest 17,704 - 17,704 Changes in benefit terms - - - Differences between expected and actual experience 128,397 - 128,397 Changes of assumptions - - - Contributions – employer - 154,159 (154,159) Contributions – employees - - - Net investment income - 14,720 (14,720) Benefit payments, including refunds of contributions (27,771) (27,771) - Administrative expense - (1,500) 1,500 Other changes - - - Net changes 118,330 139,608 (21,278) Balance at 12/31/2016 685,451 1,745,938 (1,060,487) 2016 Comprehensive Annual Financial Report 50 City of Redmond ---PAGE BREAK--- Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability of the Firefighters’ Pension Plan, calculated using the discount rate of 3.2%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1- percentage-point lower or 1-percentage-point higher than the current rate: Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of January 1, 2017, using the following actuarial assumptions, applied to all periods included in the measurement: Salary Increases (inflation only) 3.5% Investment earnings 3.2% Growth in membership 0.0% Postretirement benefit increases Related to salaries 3.5% Related to Consumer Price Index 2.5% Actuarial Cost Method Entry Age Normal Valuation of Assets Market value basis Future fire insurance premium tax revenues are assumed to increase at the rate of 2.5% per year and are assumed to stop after 2020. Mortality rates were based on the RP-2000 Mortality Table (combined healthy) projected to 2019 using 50% of Projection Scale AA, with ages set back one year for males and forward one year for females (set forward two years for disabled members). Municipal Employees Benefit Trust By majority vote, City employees approved the City's withdrawal from the Social Security System pursuant to U.S.C.A., Section 418 effective January 1, 1975. Permanent employees working 1,040 or more hours per year are eligible but not required to participate in the plan. Temporary employees working less than 1,040 hours per year are required to participate in the plan. Participating permanent employees may choose to defer income tax in accordance with Internal Revenue Code Section 401K, on all, part or none of their contribution while temporary employees may not defer income tax on any of their contribution. There were 829 permanent and 294 temporary participants with account balances at December 31, 2016. The Municipal Employees Benefit Trust Plan is a defined contribution plan with participants contributing an amount equal to the current Social Security rate One hundred percent of the contributions made by employees hired before April 1, 1986 go to MEBT. Employees hired on or after April 1, 1986 contribute 6.2% to MEBT and 1.45% to Medicare. Permanent employees may make additional contributions up to the limit set by the Internal Revenue Code. The City contributes 7.65% for permanent employees and 4.75% for temporary employees. Of the City’s contribution, 1.45% goes to Medicare for employees hired on or after April 1, 1986. Eighty percent of the remaining City contribution goes to MEBT and 20% to administrative fees. The City's contribution is based on the payroll for all employees who are eligible to participate in the plan, regardless of the number of participants. The City’s payroll for participating employees in 2016 was $56,801,159. Employee contributions were $3,538,489. City contributions were $3,538,489. The City's total payroll was $62,419,723. Plan assets consisting of stocks, bonds, and guaranteed insurance contracts, are not the property of the City and are not subject to the claims of the City's general creditors. The Plan is administered by the Plan Committee consisting of seven employee members appointed by the City. The Plan Committee administers the MEBT Plan according to the Plan Document adopted by the City and all applicable IRS regulations. Plan provisions may be 1% Decrease Current Discount Rate 1% Increase City's net pension liability (asset) $ (984,671) (1,060,487) $(1,129,952) 2016 Comprehensive Annual Financial Report 51 City of Redmond ---PAGE BREAK--- established or amended by a majority vote of the Plan Committee. Employees who elect not to participate in the Municipal Employees Benefit Trust plan retain the disability and survivor income insurance provided by the Standard Insurance Company. Actuarial determinations are not required because long term disability insurance and survivor income insurance are provided by a group insurance policy with Standard Insurance Company, and each participant shall at his normal retirement date instruct the Plan Committee to acquire a non-forfeitable, non-transferable annuity contract, pay retirement benefits in or annual installments (no contributions by the City or the participant shall be added to his account after retirement), pay a single sum in cash, or elect to defer any or all retirement benefits to a later date. NOTE 8: Other Postemployment Benefits Plan Description As required by the Revised Code of Washington (RCW) Chapter 41.26, the City provides lifetime medical care for members of the Law Enforcement Officers and Firefighters (LEOFF) retirement system hired before October 1, 1977 under a defined benefit healthcare plan administered by the City. The members’ necessary hospital, medical, and nursing care expenses not payable by worker’s compensation, social security, insurance provided by another employer, other pension plan, or any other similar source are covered. Most medical coverage for eligible retirees is provided by one of the City’s employee medical insurance programs. Under the authorization of the LEOFF Disability Board, direct payment is made for other retiree medical expenses not covered by standard medical plan benefit provisions. Financial reporting for the LEOFF retiree healthcare plan is included in the City’s Comprehensive Annual Financial Report. Funding Policy Funding for LEOFF retiree healthcare costs is provided entirely by the City as required by RCW. The City’s funding policy is based upon pay-as-you-go financing requirements. Annual OPEB Cost and Net OPEB Obligation The City’s annual other postemployment benefit (OPEB) cost is calculated based upon the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities over a period of thirty years as of January 1, 2009. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB. The net OPEB obligation of $4,648,496 is included as a noncurrent liability on the Statement of Net Position. Fiscal Year Ending 12/31/2014 Fiscal Year Ending 12/31/2015 Fiscal Year Ending 12/31/2016 Determination of Annual Required Contribution: 1-Annual Normal Cost (BOY) $ 57,908 $ 40,376 $ - 2-Amortization of UAAL (BOY) 849,114 1,024,563 1,067,289 3-Interest to EOY + x 36,281 37,273 37,355 4-ARC at EOY $ 943,303 $ 1,102,212 $ 1,104,644 5-Interest on Net OPEB Obligation $ 124,607 $ 122,106 $ 141,128 6-Adjustment to ARC 191,739 209,907 249,409 7-Annual OPEB Cost $ 876,171 $ 1,014,411 $ 996,363 8-Employer Contributions 502,601 470,928 380,091 9-Change in Net OPEB Obligation – 373,570 543,483 616,272 10-Net OPEB Obligation-BOY [(11) prior year] $ 3,115,171 $ 3,488,741 $ 4,032,224 Net OPEB Obligation-end of year + (10)] $ 3,488,741 $ 4,032,224 $ 4,648,496 * is the assumed interest rate that year: 4.0% in 2014, 3.5% in 2015, 3.5% in 2016. 2016 Comprehensive Annual Financial Report 52 City of Redmond ---PAGE BREAK--- The City’s OPEB cost, the percentage of OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years were as follows: Fiscal Year Ended Annual OPEB Cost Contribution as a Percentage of OPEB Cost Net OPEB Obligation 12/31/2014 $ 876,171 57% $ 3,488,741 12/31/2015 $ 1,014,411 46% $ 4,032,224 12/31/2016 $ 996,363 38% $ 4,648,496 As of January 1, 2015, the most recent actuarial valuation date, the plan was 0% funded. The City’s funding progress, the accrued liability for benefits, the actuarial value of the assets, the unfunded actuarial accrued liability (UAAL), the covered payroll, and the UAAL as a percentage of covered payroll for 2016 and preceding years were as follows: Fiscal Year Ended Actuarial Value of Assets Actuarial Accrued Liabilities Entry Age Unfunded Actuarial Accrued Liabilities (UAAL) Funded Ratio Covered Payroll UAAL As a Percentage of Covered Payroll Dec. 31, 2006 - 8,512,284 8,512,284 - 764,518 1,113% Dec. 31, 2007 - 8,512,284 8,512,284 - 557,587 1,527 Dec. 31, 2008 - 8,512,284 8,512,284 - 446,200 1,908 Dec. 31, 2009 - 9,290,267 9,290,267 - 442,308 2,100 Dec. 31, 2010 - 9,430,652 9,430,652 - 461,106 2,045 Dec. 31, 2011 - 9,549,490 9,549,490 - 480,703 1,987 Dec. 31, 2012 - 14,420,000 14,420,000 - 262,000 5,504 Dec. 31, 2013 - 14,664,000 14,664,000 - 249,000 5,889 Dec. 31, 2014 - 14,893,000 14,893,000 - 249,000 5,981 Dec. 31, 2015 - 17,029,000 17,029,000 - 23,000 74,039 Dec. 31, 2016 - 17,255,000 17,255,000 - - N/A Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short- term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. In the January 1, 2015 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions used included a 3.50% discount rate, which is based upon the long-term investment yield on the investments that are expected to be used to finance payment of benefits. A medical inflation rate of 7.4% in 2015, grading down to an ultimate rate of 4.1%, was used along with a long-term care inflation rate of 4.75%. The UAAL is being amortized on a closed basis at the assumed discount rate. The remaining amortization period at January 1, 2015 was 24 years. 2016 Comprehensive Annual Financial Report 53 City of Redmond ---PAGE BREAK--- Note 9: Construction Commitments At December 31, 2016 the City had significant contractual obligations on construction projects: (In thousands) Transportation Projects $9,894 Transportation Maintenance 69 General Government 111 Utilities Projects 3,291 Total $13,365 Note 10: Interfund Transfers Interfund transfers are used to move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, to move receipts for debt service from the fund collecting the receipts to a debt service fund as debt service payments become due, and to use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Interfund transfers at December 31, 2016 were as follows: Transfer from General Fund Capital Investments Program Fund Other Governmental Funds Internal Service Funds Total Transfer to General Fund $ - $ 550,000 $ 142,137 $ 168,076 $ 860,213 Capital Investments Program Fund 2,648,722 - 12,685,100 - 15,333,822 Other Governmental Funds 5,843,369 176,289 - - 6,019,658 Total $ 8,492,091 $ 726,289 $ 12,827,237 $ 168,076 $ 22,213,693 Note 11: Long-Term Obligations General Obligation Bonds The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the City. General obligation bonds have been issued for general government activities and are being repaid from debt service funds. In 2013 the City issued $33,085,000 in limited tax general obligation refunding bonds with an interest rate of 3.75% to advance refund $32,760,000 of outstanding 2004 Limited Tax General Obligation Lease Revenue Bonds. The reacquisition price exceeded the net carrying amount of the old debt by $1,530,533. This amount is being charged to operations through the year 2035 using the straight-line method. The remaining balance of $1,304,660 is reported as a deferred outflow in the statement of net position. In November, 2015, the City Council of the City of Redmond adopted ordinance 2809, providing for the issuance of two series of Limited Tax General Obligation and Refunding Bonds in the aggregate principal amount of not to exceed $31,000,000 to provide funds to finance the costs of transportation improvements, to refund certain 2016 Comprehensive Annual Financial Report 54 City of Redmond ---PAGE BREAK--- outstanding limited tax general obligations of the City, and to finance costs of issuance of each series of bonds. In December, 2015, the City issued $9,280,000 in limited tax general obligation refunding bonds with an interest rate of 3.00% to advance refund $8,940,000 of outstanding 2008 Limited Tax General Obligation Bonds. The reacquisition price exceeded the net carrying amount of the old debt by $951,425. This amount is being charged to operations through the year 2035 using the straight-line method. The remaining balance of $876,164 is reported as a deferred outflow in the statement of net position. In January, 2016, the City issued $11,630,000 in limited tax general obligation refunding bonds with an interest rate of 2.0%-5.0% to advance refund $11,675,000 of outstanding 2008 Limited Tax General Obligation Bonds. The reacquisition price exceeded the net carrying amount of the old debt by $1,386,462. This amount is being charged to operations through the year 2035 using the straight-line method. The remaining balance of $1,320,413 is reported as a deferred outflow in the statement of net position. In January, 2016, the City also issued $6,000,000 in limited tax general obligation bonds with an interest rate of 2.0%-5.0% to provide funds to finance the costs of transportation improvements. General obligation bonds outstanding at December 31, 2016 are as follows: Issue Maturity Interest Amount Redemptions Outstanding Date Date Rate Issued to Date 12/31/2016 2008 LTGO Bonds 9/4/2008 12/1/2028 3.5% - 5.0% $ 33,935,000 $ 30,825,000 $ 3,110,000 2011 LTGO Bonds 3/16/2011 12/1/2021 2.0% - 4.5% 8,035,000 4,050,000 3,985,000 2013 LTGO Refunding Bonds 9/12/2013 12/1/2035 1.75% - 5.0% 33,085,000 6,325,000 26,760,000 2015 LTGO Refunding Bonds 12/15/2015 12/1/2028 3.0% 9,280,000 - 9,280,000 2016 LTGO Refunding Bonds 1/21/2016 12/1/2024 2.0% - 5.0% 11,630,000 200,000 11,430,000 2016 LTGO Bonds 1/21/2016 12/1/2035 2.0% - 5.0% 6,000,000 185,000 5,815,000 Total General Obligation Bonds $ 101,965,000 $ 41,585,000 $ 60,380,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Governmental Activities Year Ending December 31 Principal Interest 2017 4,190,000 2,325,019 2018 4,320,000 2,196,019 2019 4,450,000 2,059,119 2020 4,610,000 1,899,719 2021 3,935,000 1,724,844 2022-2026 17,200,000 6,678,156 2027-2031 13,295,000 3,313,431 2032-2036 8,380,000 984,700 $ 60,380,000 $ 21,181,007 2016 Comprehensive Annual Financial Report 55 City of Redmond ---PAGE BREAK--- Revenue Bonds The City issues revenue bonds to finance construction projects for the City’s utilities. Revenue bonds are payable from revenues generated by the user fees, and are backed by the Water/Wastewater and Stormwater utilities. Revenue bonds generally require a cash reserve be maintained of 120% of the current portion of revenue bonds payable, plus interest. Revenue bonds outstanding at year end are as follows: Issue Date Maturity Date Interest Rate Amount Issued Redemptions to Date Outstanding 12/31/2016 2008 Water/ Wastewater Bonds 12/3/2008 12/1/2023 4.0% - 5.0% $ 11,755,000 $ 5,255,000 $ 6,500,000 2014 Stormwater Bonds 7/24/2014 12/1/2034 3.26% - 4.25% $ 22,950,000 $ 1,820,000 $ 21,130,000 Total Revenue Bonds $ 34,705,000 $ 7,075,000 $ 27,630,000 Annual debt service requirements to maturity for revenue bonds are as follows: Business-type Activities Year Ending December 31 Principal Interest 2017 1,590,000 1,286,598 2018 1,650,000 1,224,198 2019 1,710,000 1,158,098 2020 1,795,000 1,087,535 2021 1,865,000 1,011,160 2022-2026 7,420,000 3,756,550 2027-2031 6,710,000 2,141,800 2032-2036 4,890,000 425,180 $ 27,630,000 $ 12,091,119 Public Works Trust Fund Loans The City’s governmental activities currently have one State of Washington Public Works Trust Fund Loan with principal outstanding of $1,416,763. The interest rate is 0.25%. This loan is considered an obligation of the general government and is being repaid from General Fund revenues which are transferred to the Capital Investments Program Fund where the loan payments are recorded. The City’s business type activities currently have one on State of Washington Public Works Trust Fund Loan outstanding. In 2012 the City Council of the City of Redmond adopted the Resolution #1371 in 2012 accepting a Washington State Department of Ecology (DOE) loan for funding towards the Redmond Way Water Quality Facility. The loan amount of $4,412,000 was drawn down on September 2, 2015. The loan bears interest at the rate of 2.6% per annum, calculated on the basis of a 365 day year. The final loan amount will be repaid from the City’s utility funds in equal installments semiannually over a term of twenty years. 2016 Comprehensive Annual Financial Report 56 City of Redmond ---PAGE BREAK--- Public Works Trust Fund Loans outstanding at December 31, 2016 are as follows: Year Ending Principal Interest Principal Interest 2017 94,451 3,542 182,210 110,483 2018 94,451 3,306 187,005 105,689 2019 94,451 3,070 191,925 100,769 2020 94,451 2,834 196,975 95,719 2021 94,451 2,597 202,158 90,536 2022-2026 472,254 9,445 1,093,432 370,037 2027-2031 472,254 3,542 1,245,056 218,412 2032-2036 - - 972,902 51,526 1,416,763 $ 28,336 $ 4,271,663 $ 1,143,171 $ Governmental Activities Business Type Activities Changes in Long-Term Liabilities Long-term liability activity for the year ended December 31, 2016 was as follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Governmental Activities: Bonds Payable: G.O. Bonds $ 58,530,000 $ 17,630,000 $ (15,780,000) $ 60,380,000 $ 4,190,000 Premiums 3,139,732 2,483,953 (998,050) 4,625,635 - Total bonds payable 61,669,732 20,113,953 (16,778,050) 65,005,635 4,190,000 PWTF loans 1,511,212 - (94,451) 1,416,761 94,451 Other post-employment benefits payable 4,032,222 616,272 - 4,648,494 - Compensated absences 4,455,533 3,937,646 (3,865,048) 4,528,131 3,622,505 Net pension liability 21,885,095 5,046,054 - 26,931,149 - Governmental activity long-term liabilities $ 93,553,794 $ 29,713,925 $ (20,737,549) $ 102,530,170 $ 7,906,956 Business-Type Activities: Beginning Balance Additions Reductions Ending Balance Due Within One Year Bonds Payable: Revenue Bonds $ 29,170,000 $ - $ (1,540,000) $ 27,630,000 $ 1,590,000 For issuance premiums 3,194,706 - (185,755) 3,008,951 - Total Bonds Payable 32,364,706 - (1,725,755) 30,638,951 1,590,000 PWTF loans 4,412,000 - (140,338) 4,271,662 182,210 Compensated absences 563,495 408,390 (381,005) 590,880 472,704 Net pension liability 5,121,872 1,023,232 - 6,145,104 - Business-type activity long-term liabilities $ 42,462,073 $ 1,431,622 $ (2,247,098) $ 41,646,597 $ 2,244,914 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. At year end $2,821,778 of internal service funds net pension liability and $275,315 compensated absences are included in the above amounts. Compensated absences for governmental activities are liquidated in the governmental fund from which the employee’s salary is paid. Governmental funds typically used to liquidate compensated absences are the General Fund, Recreation Activities Fund, Advanced Life Support Fund, and the Recycling Fund. 2016 Comprehensive Annual Financial Report 57 City of Redmond ---PAGE BREAK--- Arbitrage Arbitrage occurs when the City invests funds borrowed at tax-exempt rates of interest in higher yielding taxable securities. These interest earnings in excess of interest expense must be remitted to the federal government. At the fund level, the City recognizes this liability only when it is due and payable. The City had no arbitrage excess earnings liability in 2016. Additional information on the City’s long-term liabilities is provided in the City’s Debt Manual which is available at: http://www.redmond.gov/Government/FinancesandBudget/FinancialReports/. NOTE 12: Leases Operating Leases: Copier Leases Operating lease obligations are primarily for rental of copy machines. Total expenditures for leases were $11,543 for the year ended December 31, 2016. The future minimum lease payments are as follows: Year Ending December 31 Amount 2017 $ 48,589 2018 48,589 2019 48,589 2020 48,589 2021 48,589 Total $ 242,945 Note 13: Component Units RCW 36.145 authorizes cities to form Community Facilities Districts (CFD’s) when the owners of one hundred percent (100%) of the land to be included in the district petition the city to do so. The Community Facilities Districts are independently governed, special purpose districts, vested with the corporate authority included under Article VII, section 9 of the state Constitution to make local improvements by special assessments. The City has formed two Community Facilities Districts: Redmond Community Facilities District 2014-1 is a special purpose district formed on July 15, 2014 by Resolution No. 1411 of the City Council of the City of Redmond, Washington, in response to a petition from Microsoft Corporation to form a community facilities district for the purpose of financing the construction of a pedestrian/bicycle bridge over SR 520 at the Overlake Transit Station and the construction of canopy coverage for waiting areas at the Overlake Transit Station. Construction of the improvements will be financed through special assessments of $33,300,000 levied against specific Microsoft Corporation properties. The assessment will be paid in fifteen equal annual installments, with the first installment due in November, 2015. The project will be advance-funded by Microsoft in annual installments between December 2014 and December 2017. The design and construction of the project elements will be administered by Sound Transit. Sound Transit has agreed to pay any cost of the 2016 Comprehensive Annual Financial Report 58 City of Redmond ---PAGE BREAK--- improvements in excess of the assessed amounts. The improvements will be capital assets of the City of Redmond. Redmond Community Facilities District 2016-1 is a special purpose district formed on June 21, 2016 by Resolution No. 1453 of the City Council of the City of Redmond, Washington, in response to a petition from Microsoft Corporation to form a community facilities district for the purpose of financing multimodal improvements of eastbound and westbound left-turn lanes at the intersection of 154th Avenue NE and NE 51st Street along with bicycle lanes along NE 51st Street from 154th Avenue NE to the SR 520 eastbound on-ramp; and separately, multimodal improvements including bicycle lanes along NE 31st Street from the roundabout just east of SR 520 to 156th Avenue NE along with improvements to the intersection of NE 31st Street and 156th Avenue NE. Construction of the improvements will be financed through special assessments of $15,618,000 levied against specific Microsoft Corporation properties. The assessment will be paid in fifteen equal annual installments, with the first installment due in November, 2017. The project will be advance-funded by Microsoft in annual installments between December 2016 and December 2017. The design and construction of the project will be administered by the City. The improvements will be capital assets of the City of Redmond. Each Community Facilities District’s Board of Supervisors consists of three members of the Redmond City Council and two representatives nominated by the petitioner (Microsoft). The City Finance Director is the Treasurer for the CFD’s, and City staff provides accounting and reporting services. Because the City appoints a majority of the Board members, has the ability to impose its will on the organizations through the ability to appoint, hire, reassign or dismiss those persons responsible for the day-to-day operation of the organizations, and the CFD’s provide services almost entirely to the City, the CFD’s are reported as blended component units in the Capital Investments Program funds in the City of Redmond’s Comprehensive Annual Financial Report for the fiscal year ended December 31, 2016. Questions concerning the CFD’s or requests for financial statements may be addressed to Redmond Community Facilities District Treasurer, c/o Director of Finance, City of Redmond, PO Box 97010, Redmond, WA 98073-9710. NOTE 14: Joint Ventures and Operations Water Storage and Pumping Facility In February 1990, the City of Redmond joined with the City of Bellevue to construct, operate, and maintain a joint- use water storage and pumping facility located on the common boundary of the two cities. The City of Redmond has an undivided interest in the facility of 44%, and the City of Bellevue has an undivided interest of 56%. The City of Redmond’s share of costs to construct the joint-use facility totaled $2,078,539 and is reported on the business- type activity financial statements as improvements other than buildings. The City recognizes depreciation expense annually. Accumulated depreciation totals $1,615,024 with a net book value of $463,515. The city reimbursed the City of Bellevue $30,148 for its share of operating costs in 2016. Budget monitoring information can be obtained from the City of Bellevue Budget Department, 450 – 110th Avenue NE, Bellevue, WA 98004. Cascade Water Alliance In April 1999, the City of Redmond entered into an interlocal agreement with seven other water providers in the region to create the Cascade Water Alliance. The purpose of the Alliance is to provide water supply to meet current and future needs of the Alliance’s members in a cost-effective and environmentally responsible manner. The Alliance is governed by a Board of Directors consisting of one individual representative appointed by resolution of the member’s legislative authority. Each member entity must pay annual dues based on the number of units served by the water system within their jurisdiction. The City of Redmond’s dues for 2016 were $596,715. The City of Redmond also paid the Alliance $2,233,860 in 2016 for Regional Capital Facilities Charges for new hookups to the water system that Redmond collected from new customers. 2016 Comprehensive Annual Financial Report 59 City of Redmond ---PAGE BREAK--- A member may withdraw from the Alliance with a resolution of its legislative authority expressing such intent. The Board will then determine the withdrawing member’s obligations to the Alliance, as well as the withdrawing member’s allocable share of the Alliance’s then-existing obligations. The member’s withdrawal shall be effective upon payment of obligations. Members do not hold legal ownership rights in any assets owned by the Alliance. In 2011, the CWA’s Board passed a resolution offering to purchase the outstanding credits from its members at a discounted rate. These credits were awarded to its members who transferred or retained an independent water supply in excess of its needs. The Alliance’s members were allowed to use such credits to apply against future The CWA offered to buy out the RCFC credits at $2,500 per Cascade Equivalent Residential Unit (CERU) from its members. The City of Redmond chose the one-time redemption option. The payment was finalized and the total of $ 3,076,875 was sent to the City of Redmond in December 2012. Such receipt was reported as capital contributions in the city’s Water/Wastewater fund on the proprietary funds’ Statement of Revenues, Expenses, and Changes in Fund Net Position. These monies will be held to be used to call the outstanding revenue bonds issued in 2008 when these become callable in 2019. Audited financial information can be obtained from Cascade Water Alliance, 520 - 112th Avenue NE, Suite 400, Bellevue, WA 98004. Eastside Narcotics Task Force (ENTF) The Eastside Narcotics Task Force (ENTF) was a coalition of the Cities of Redmond, Bellevue, and Kirkland, the King County Prosecutor’s Office, the Washington State Patrol, and the US Postal Service for the purpose of mutual support in the fight against drug crimes. Dissolution of the Task Force occurred on June 30th, 2016, due to lack of funding resulting from the legalization of marijuana. There were no significant events pertaining to ENTF either before, during, or after dissolution. After remaining liabilities are settled the City will receive a net disbursement of $23,407 for its share of the remaining funds, which is restricted to law enforcement uses only. Budget monitoring information can be obtained from Eastside Narcotics Task Force, c/o Carl Krikorian, Police Fiscal Manager, Bellevue Police Department, 450 – 110th Avenue NE, Bellevue, WA 98004 or P.O. Box 90012, Bellevue, WA 98009. A Regional Coalition for Housing (ARCH) In November 1992, the City of Redmond joined the Cities of Kirkland, Bellevue, and King County to establish A Regional Coalition for Housing (ARCH). The agreement was recently amended in 2010. Since its inception, King County, the Cities of Redmond, Bellevue, Kirkland, Bothell, Clyde Hill, Hunts Point, Issaquah, Kenmore, Mercer Island, Newcastle, Sammamish, Woodinville, Yarrow Point, and Beaux Arts Village joined ARCH. ARCH’s purpose is to cooperatively formulate affordable housing goals and policies and to foster efforts to provide affordable housing for low and moderate-income households by combining public funding with private- sector resources. ARCH assists member governments in developing housing policies, strategies, programs, and development regulations; identifies and prioritizes projects which the member cities fund directly through their own grants, Community Development Block Grants and US Department of Housing and Urban Development’s (HUD) grants. ARCH is governed by an Executive Board composed of a Chief Executive Officer from each member. The Executive Board is responsible for review and approval of all budgetary, financial, policy and contractual matters. The Board is assisted by an administrative staff and a Citizen Advisory Board. Each member city provides operating funding and contributes operating revenues as specified in the annual budget for ARCH. Contributions from the member cities are based on each member’s population. Contributions by member agencies are held in the ARCH Housing Trust Fund Account and dispersed by the Administering Agency for approved projects. In 2016 the city contributed $72,587 for operations or 11.117% of the total contributions for operations by all members. The City has accumulated $393,133 in the Trust Fund for funding affordable housing projects. Members may withdraw from the ARCH agreement by giving one year’s written notice to the Executive Board, by December 31st of any year, of its intention to terminate, effective December 31st of the following year. Members remain legally and financially responsible for any obligation incurred while a member of ARCH. Upon dissolution, the agreement provides for distribution of all property and assets among the members based on the percentage 2016 Comprehensive Annual Financial Report 60 City of Redmond ---PAGE BREAK--- of the total annual contributions during the period of the agreement paid by each member. The City’s share of assets is deemed immaterial and thus is not reflected in the financial statements. Budget monitoring information can be obtained from ARCH, c/o Art Sullivan, 16225 NE 87th Street, A-3, Redmond, WA 98052. EPSCA The Eastside Public Safety Communications Agency (EPSCA), an emergency regional radio access service provider operation, was established on May 26, 1992, by an interlocal agreement among the Cities of Redmond, Bellevue, Kirkland, and Mercer Island. The Agreement was amended in 1993, to include the City of Issaquah as an additional Principal. EPSCA began principal operations of the 800 MHz radio system in December 1995. EPSCA is governed by an Executive Board, which is comprised of the Chief Executive Officers of the Principals. The Executive Board is responsible for review and approval of all budgetary, financial, and contractual matters. An Operations Committee, composed of the Chief of Police and Fire Chief of each Principal, reports to the Board and oversees budget preparation, rates, revenues, expenditures, policies and other operational issues. The Committee also includes representation from non-Principal EPSCA user agencies. EPSCA has developed an Eastside radio communications system which is integrated with a regional radio communications network. Its capital funding derives from a September 15th, 1992 voter-approved King County excess property tax levy of $57,016,764. EPSCA’s portion of the levy was $10,004,469. Operating revenues derive from fees charged to the Principals for communications services and from subscriber fees for communications services. The City of Redmond paid $136,704 to EPSCA in 2015 for the 800 MHz radios that are in use throughout the City. These fees would change when the access fee rate change or when radios are added or removed from the system. The interlocal agreement among the Eastside cities provides for a weighted vote according to the proportion of each Principal’s system radios in relation to the total number of system radios used by all Principals. As of December 31st, 2015, the weighted vote percentage was shown as follows: Redmond 23.807% Bellevue 46.341% Kirkland 18.399% Mercer Island 6.098% Issaquah 5.356% These percentages are reviewed and adjusted annually at January 1st, based on the number of radios on the system in use by current Principals as of December 31st of the preceding year. Upon dissolution, the interlocal agreement provides for distribution of assets among the Principals based on weighted voting percentages in force at the time of dissolution. Budget monitoring and compiled financial statements for EPSCA can be obtained from EPSCA, c/o Jessie Morgan, MS PSEPS, P.O. Box 97010, Redmond, WA 98073-9710. Hazardous Materials Unit and Response Team (HazMat) In January 1984, the City of Redmond joined the Cities of Bellevue, Kirkland, Bothell, and King County Fire Protection Districts 16 and 36 to form a Hazardous Materials Unit and Response Team (HazMat). The agreement was recently modified on July 13th, 2004. Current members are the Cities of Redmond, Bellevue, Kirkland, Bothell, Snoqualmie, along with Eastside Fire & Rescue, Woodinville Fire & Life Safety District, and King County Fire Districts 27 & 45. The purpose of the HazMat agreement is to provide equipment and personnel for improving the quality of emergency services through development of the cooperative HazMat unit as a normal function of fire protection services. Eastside is better prepared to respond to any HazMat incident with low frequency but high risk through this existing collaborative model 2016 Comprehensive Annual Financial Report 61 City of Redmond ---PAGE BREAK--- The HazMat team is governed by a Joint Board which is composed of the Fire Chiefs of the member agencies plus one member from the HazMat team. The Joint Board is responsible for formulating policy, establishing annual budgets, and acquiring, holding, and disposing of real and personal property. With the exception of the member from the HazMat team, each representative on the Joint Board has a vote on all matters. The City of Bellevue has the administrative authority for operations conducted pursuant to the agreement and provides administrative and secretarial support to the Joint Board. Members withdrawing from the agreement relinquish all rights to any reserve funds, equipment, or material purchased. Upon dissolution, the agreement provides for distribution of assets among the members based on the percentage of the total annual charges paid by each member during the period of the agreement. The HazMat team has no outstanding debt or leases in 2016. Operating revenues are provided by an annual charge assessed each member based on each member’s property values and number of emergency incidents. The City of Redmond paid the HazMat team $12,253 for 2016’s contract fee. Budget monitoring information can be obtained from Eastside Hazardous Materials Joint Board, c/o Babette Bechtold, Bellevue Fire Department, P.O. Box 90012, Bellevue, WA 98004. Community Connectivity Consortium The Community Connectivity Consortium is a public corporation organized pursuant to the ordinances and approvals of the Consortium members and RCW 35.21.730 through 35.21.759 and RCW 39.34. The Consortium was created in 2011 and is governed by sixteen public agencies who are voting members: cities of Redmond, Bellevue, Kirkland, Renton, Auburn, Kent, Tukwila, Lake Washington School District, University of Washington, Bellevue College, Bellevue School District, Evergreen Hospital, Renton School District, Valley Communication Center, NORCOM, and King County. The Consortium sets the terms and conditions for sharing fiber optic installation projects, outlines how the parties will work together on fiber projects and establishes the original backbone of the Fiber Consortium network through contributions of budget, fiber assets, conduit, right of way and staff expertise. It has built over 35 miles of fiber optic cable, creating strategic connection points along the way. The partners use the fiber network to connect schools and universities to enhance learning; to connect hospitals, medical facilities and clinics to improve health care; connect government facilities for public safety, transportation and other needs; and to provide an open access network to serve the public with wireless and broadband access. The City of Redmond petitioned to join the Consortium as a non-voting member on May 14th, 2012, and became a voting member at the following year. Redmond has the option to participate in fiber projects with project agreement that documents scope, roles and responsibilities, ownership, share of the overall project cost, etc. In 2016 a fiber ring was designed and implemented, and as a result, a local loop connecting Redmond, Lake Washington School District, Kirkland and Bellevue was completed. Redmond has now connected to the Bellevue node of the ring, which opens up opportunities to access a variety of service providers for data center colocation, cloud services, internet, etc. As a member, Redmond paid approximately $5,355 for its annual dues in 2016. The Board can recommend new projects or services with increased dues and all members get to vote on the recommended budget each May. Besides getting the connectivity any member needs, members with similar interests may share the cost of new projects with one another. Redmond has equitable interest in the projects it chooses to participate in. If the City decides to leave the Consortium, the assets Redmond acquired under any project agreements remains Redmond’s. For additional information, please contact Brenda Cooper, Board Chair, CIO City of Kirkland, [EMAIL REDACTED]. North King County Regional Public Safety Communication Agency (NORCOM) In November 2007, the City of Kirkland, with the Cities of Bellevue, Bothell, Clyde Hill, Medina, Mercer Island, and Snoqualmie, along with Eastside Fire and Rescue, King County Fire Protection Districts 27 and 45, King and Kittitas County Fire Protection District 51, Fire Department, Shoreline Fire Department, and Woodinville Fire and Life Safety District entered into an interlocal agreement to establish and maintain a consolidated emergency service communications center to the public for emergency medical services, fire and police. 2016 Comprehensive Annual Financial Report 62 City of Redmond ---PAGE BREAK--- In 2008, the City of Redmond joined as a subscriber. Prior to the interlocal agreement, the formation efforts were carried out under a Joint Powers Agreement originally approved in 2005 and amended in 2006 and 2007. On July 1st, 2009, the separate dispatch operations of the Cities of Bellevue and Kirkland were combined and began operating as the North East King County Regional Public Safety Communications Agency (or NORCOM). NORCOM includes 911 telephone answering, computer aided dispatch of fire, police and EMS resources, public safety field technology and a records management system. Operating revenues are provided by user fees charged to each member based on average call volume. The City of Redmond paid $601,307 to NORCOM for calls for services and $42,093 for subscriber’s fees in 2016. Redmond will become a principal agency on January 1st, 2017. Additional financial information can be obtained from NORCOM, c/o Gwen Pilo, Finance Manager, P.O. Box 50911, Bellevue. WA 98015-0911. Redmond LOOP Partnership between the City of Redmond and King County Metro The Redmond LOOP is a two-year “Alternative Transit” pilot project developed as part of King County Metro’s Redmond Education Hill, SE Redmond, and Downtown neighborhoods. The LOOP shuttle service agreement was finalized in September 2016 and is scheduled to expire in October 2018. The shuttle operates from Monday through Friday from 9am to 3:30pm using a designated route with Flexible Service Areas. The objective of the Redmond LOOP Parternship is to improve mobility and increase travel options and access to public transportation in the City. This alternative to traditional transit service is designed to meet community transportation needs not met by fixed-route or other traditional transit service, or in locations where fixed-route bus service is cost prohibitive. The City’s responsibilities are to contract with a vendor to provide drivers, backup drivers, and dispatch services, to ensure that the vendor meets Metro requirements; to assist with operational issues such as permitting and signage in the right-of-way, lead marketing, outreach, and branding. $125,000 of City funding for this project was approved as part of 2015-2016 budget. King County Metro contributes up to $40,000 per year towards eligible City costs, in addition to vehicles, maintenance, and other support under this contract. Either party may terminate the agreement by providing the other party written notice via certified mail. All costs incurred before proper notification of termination will be borne by the parties in accordance with the terms of the agreement. For additional information, please contact Chester Knapp, Senior Planner, City of Redmond, MS: 4SPL, 15670 NE 85th Street, Redmond, WA 98073-9710. North Sound Metro SWAT and Crisis Negotiating Team In 2016, Redmond joined the North Sound Metro Special Weapons and Tactics (SWAT) and Crisis Negotiating Team (CNT), which is a regional team made up of the following cities: Bothell, Edmonds, Kirkland, Lake Forest Park, Mill Creek, Monroe, Mountlake Terrace, Mukilteo and Redmond. Redmond joined this team for the purpose of combining resources to create a specially trained and equipped unit to respond to and resolve criminal activity of a high risk nature. The Executive Board is comprised of the Police Chiefs of all participating cities. The Board reviews and approves changes and updates to the SWAT Policy and Procedures Manual and gives approval and direction on operational matters. Operating revenues are provided by contributions from the participating cities based on population. The City of Redmond’s dues were $4,174 for 2016. Upon termination of the SWAT team, any funds or jointly purchased assets will be distributed to the participating cities. The City’s share of assets is deemed immaterial and thus is not reflected in the financial statements. Budget monitoring information can be obtained from Assistant Chief Jim Lawless, City of Edmonds, 250 – 5th Avenue North, Edmonds, WA 98020. 2016 Comprehensive Annual Financial Report 63 City of Redmond ---PAGE BREAK--- NOTE 15: Contingencies and Litigation As of December 31, 2016, there were a number of damage claims and lawsuits pending against the City. However, in our opinion, neither the potential liability from any single claim or lawsuit, nor the aggregate potential liability resulting from all pending claims nor lawsuits, would affect materially, the financial condition of the City. NOTE 16: Risk Management The city is exposed to various risks of loss such as: theft, damage, destruction of assets, errors & omissions, injuries or property damage to others, employees’ health, and natural disasters. The city has three internal service funds to account for and finance its self-insured risks of loss. The city purchases commercial insurance for claims in excess of anticipated self-insured losses. All funds of the city participate in the self-insurance programs and make payments to the self-insurance funds based on estimates of the amounts needed to pay excess insurance and related risk management and service costs, prior and current year claims paid in the current year, and to maintain adequate reserves for catastrophic losses in a given year. Property and Liability Claims Program: The self-insured portion of the Insurance Claims and Reserve Fund provides coverage up to a maximum of $25,000 per occurrence for related claims and expenses. There was one claim that settled in 2016 which exceeded the city’s self-insurance limit; in 2015 there were no claims which exceeded the city’s self-insurance limit; in 2014 there was one claim which exceeded the city’s self-insurance limit. Reserves for open claims are established by an independent claims adjusting firm on a case reserve basis based on the assessment of the settlement potential and costs specifically associated with a particular claim, given the information available at the time. Cases are reviewed at least and are subject to periodic audits. Lawsuits are reviewed and handled directly by the city Attorney or the excess insurer’s appointed legal counsel. The city’s current approach to risk management stems from 2010 when the city conducted a comprehensive review of its property and liability risk programs. As a result, the city issued a request for proposal (RFP) for a broker/consultant and selected Bannon Carlson & Kessel, Inc. Bannon Carlson & Kessel, Inc. then conducted a search for service providers to meet the city’s needs. This resulted in the city selecting Travelers Insurance for liability coverage and retaining Affiliated FM for property coverage. As a result, the city’s risk program changed from a $100,000 self-insured retention for general liability claims to a $25,000 deductible. A deductible limit applies to all claim costs while a self-insured retention only applies to any judgment or settlement. The liability limits were extended to $20 million for general liability as described in the table below. There was one claim which settled in excess of deductible amounts in 2016; in 2015 there were no claims which exceeded the deductible amounts; in 2014 there was one claim which exceeded the deductible amounts. Property insurance coverage has remained with Travelers since September 1, 2013. Medical Self Insurance Program: For 2016 the Medical Self-Insurance Fund provided coverage up to a maximum of $150,000 per person per calendar year with the Excess Insurance covering an Unlimited Major Medical Maximum. There was one claimant who exceeded the per-person limit in 2016; in 2015 there were six claimants who exceeded the per- person limit; in 2014 there were three claimants who exceeded the per-person limit. All funds of the city from which employee wages are paid make premium payments to the Medical Self-Insurance Fund based on health insurance rates derived from actual fund experience and historical and market trend rates. Council authorized the city to self-insure workers’ compensation benefits effective January 1, 1998 for employee injuries and illnesses. For 2016 the city self-insures $500,000 of each accident or illness and purchases excess insurance above that, up to the statutory requirements. No reported claim for 2016, 2015, or 2014 exceeded the city’s self-insurance coverage. Claims handling is currently contracted to an independent, qualified third party administrator (TPA). 2016 Comprehensive Annual Financial Report 64 City of Redmond ---PAGE BREAK--- As of December 31, 2016, the city had reserves of $1,319,242 in the Insurance Fund, $9,266,983 in the Medical Self-Insurance Fund, and $625,325 in the Workers’ Compensation Fund to provide against risk of future loss. Claims liabilities of $35,586 have been reported in the Insurance Fund, $929,111 in the Medical Self-Insurance Fund, and $163,574 in the Workers’ Compensation Fund based on estimates provided by the city’s third party administrators. Historical claims liabilities for incurred but not reported (IBNR) in the Insurance Claims and Reserve Fund average 15% to 17% of paid claims for the year. Reported claims liabilities are based on the requirements of GASB Statement 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the self-insurance funds’ claims liabilities in 2015 and 2016 were: Medical Workers' Insurance Insurance Compensation Fund Fund Fund December 31, 2015: Unpaid claims, beginning of fiscal year $ - $ 1,205,600 $ 38,878 Claims incurred (including IBNRs) 296,689 8,313,432 397,015 Claims payments (296,689) (8,528,758) (394,407) Unpaid claims-December 31, 2015: $ - $ 990,274 $ 41,486 December 31, 2016: Unpaid claims, beginning of fiscal year $ - $ 990,274 $ 41,486 Claims incurred (including IBNRs) 238,921 9,079,930 652,406 Claims payments (203,335) (9,141,093) (530,318) Unpaid claims-December 31, 2016: $ 35,586 $ 929,111 $ 163,574 Commercial insurance policies were purchased to protect the city from claims which exceed the coverage provided by the self-insurance funds. Coverage Self-Insured Retention Property policy limit $150,000,000 $100,000 Earth movement $50,000,000 3%/$100,000 minimum per location Flood $50,000,000 $100,000 Employee theft $1,000,000 $10,000 General liability – per occurrence $1,000,000 $25,000 General liability – aggregate $2,000,000 Law enforcement $1,000,000 $25,000 Employment related practices $1,000,000 $25,000 Auto liability $1,000,000 $25,000 Umbrella excess liability $20,000,000 $10,000 (excess of general liability, auto, law enforcement liability) Employment-related practices excess $9,000,000 Underground storage tank liability $1,000,000 $5,000 Blanket fidelity (employee dishonesty) $1,000,000 $10,000 deductible Excess workers’ compensation statutory $500,000 Excess medical insurance unlimited $150,000 2016 Comprehensive Annual Financial Report 65 City of Redmond ---PAGE BREAK--- NOTE 17: Accounting and Reporting Changes Change in reporting entity For the fiscal years ending December 31, 2015 and 2014, Redmond CFD 2014-1 was reported as a component unit in the City of Redmond’s fiduciary funds. In 2016 a second CFD was created, which led to further analysis of the reporting structure of these new and unusual entities. Because the City appoints a majority of the Board members, has the ability to impose its will on the organizations through the ability to appoint, hire, reassign or dismiss those persons responsible for the day-to-day operation of the organizations, and the CFD’s provide services almost entirely to the City, it was determined to be appropriate to report both CFD’s as blended component units in the City’s Capital Investments Program funds. CFD 2014-1 is no longer included in the Fiduciary Funds Statements. The analysis of revenue recognition also resulted in changes in how the assessment revenue is recognized, resulting in a prior period adjustment of $31,544,048 to beginning net position in the Statement of Activities. Questions concerning the CFD’s or requests for financial statements may be addressed to Redmond Community Facilities District Treasurer, c/o Director of Finance, City of Redmond, PO Box 97010, Redmond, WA 98073-9710. GASB Statement Implementation The following GASB Statements became effective in 2016: GASB Statement No. 72, Fair Value Measurement and Application provides guidance for determining a fair value measurement for financial reporting purposes, and for applying fair value to certain investments and disclosures related to all fair value measurements. Note 3 – Deposits and Investments discusses the Fair Value Hierarchy and how this hierarchy is applied to City deposits and investments. GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishes requirements for defined contribution pensions that are not within the scope of Statement 68. The City of Redmond does not have any such pension plans. It also amends certain provisions of Statement No. 67, Financial Reporting for Pension Plans, and Statement 68 for pension plans and pensions that are within their respective scopes, and clarifies the information that is required to be presented as notes to the 10-year schedules of required supplementary information about investment-related factors that significantly affect trends in the amounts reported, accounting and financial reporting for separately financed specific liabilities of individual employers and nonemployer contributing entities for defined benefit pensions, and the timing of employer recognition of revenue for the support of nonemployer contributing entities not in a special funding situation. GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments identifies the hierarchy of generally accepted accounting principles (GAAP) in the current governmental financial reporting environment, reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. GASB Statement No. 77, Tax Abatement Disclosures requires governments that enter into tax abatement agreements to disclose specific information about the agreements. The City of Redmond does not currently have any tax abatement agreements. GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans amends the scope and applicability of Statement 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple-employer defined benefit pension plan that is not a state or local governmental pension plan, is used to provide defined benefit pensions both to employees of state or local governmental employers and to employees of employers that are not state or local governmental employers, and has no predominant state or local 2016 Comprehensive Annual Financial Report 66 City of Redmond ---PAGE BREAK--- governmental employer (either individually or collectively with other state or local governmental employers that provide pensions through the pension plan). The City of Redmond does not have any pension plans that are within the scope of this statement. GASB Statement No. 79, Certain External Investment Pools and Pool Participants establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. The City of Redmond’s external investment pool, the Local Government Investment Pool, meets the criteria in this Statement and measures all of its investments at amortized cost. This Statement establishes additional note disclosure requirements for qualifying external investment pools that measure all of their investments at amortized cost for financial reporting purposes and for governments that participate in those pools. These disclosures for the City of Redmond are included in Note 3 – Deposits and Investments. Capital Assets Useful Lives In 2016 the City reviewed the estimated useful lives of approximately $44 million worth of capitalized “improvements other than buildings” assets for stormwater funds, such as Overlake village south detention vault and Bear Creek rehabilitation and habitat improvement project. The estimated useful lives of some of these assets were revised from a standard of 40 years to 25, 50, 75, and 100 years, depending on the type of asset, actual experience, and intended use. As a result of this adjustment actual depreciation expense for these assets as $757,602, which was $343,179 less than if the previous 40 year useful life was applied. The City plans to work with a consultant in 2017 to review the useful lives for all other utility assets. See Note 6 Capital Assets for additional information. NOTE 18: Subsequent Events City Council City Council Vice President Kimberly Allen resigned, effective January 31, 2017. Tanika Padhye was appointed to position 4 of the Redmond City Council in March 2017, and will serve the remainder of Kimberly Allen’s term until the November 2017 election. John Stilin was appointed by the City Council to the position of Vice President, effective March 21, 2017. Finance and Information Services Department Effective April 1, 2017, the Finance and Information Services Department became two separate departments: The Finance Department includes Financial Planning, Treasury, Procurement and Contracting, Accounting and Reporting, Accounts Payable, and Payroll. The former Deputy Finance Director, Malisa Files, has been appointed Finance Director. The Technology and Information Services Department includes Information Services, City Clerk, and Risk Management. The former Finance Director, Mike Bailey, has been appointed the Technology and Information Services Director. Redmond Community Facilities District 2014-1 Redmond Community Facilities District 2014-1, Microsoft and Sound Transit are currently negotiating amendments to previous agreements and assessments, to allow for redesign of the planned bridge. The project is “on hold” until these negotiations are completed, necessary hearings take place, and approvals are obtained. 2016 Comprehensive Annual Financial Report 67 City of Redmond ---PAGE BREAK--- Redmond Community Facilities District 2016-1 Redmond Community Facilities District 2016-1, Microsoft and the City are currently designing the 40th Street Trunk Line which will change the agreements and assessments related to CFD 2016-1. The original project will go forward and the new project will be added when the necessary agreements, hearings and approvals take place. NOTE 19: Prior Period Adjustments Redmond CFD 2014-1 For the fiscal years ending December 31, 2015 and 2014, Redmond CFD 2014-1 was reported as a component unit in the City of Redmond’s fiduciary funds. In 2016 a second CFD was created, which led to further analysis of the reporting structure of these new and unusual entities. Because the City appoints a majority of the Board members, has the ability to impose its will on the organizations through the ability to appoint, hire, reassign or dismiss those persons responsible for the day-to-day operation of the organizations, and the CFD’s provide services almost entirely to the City, it was determined to be appropriate to report both CFD’s as blended component units in the City’s Capital Investments Program funds. CFD 2014-1 is no longer included in the Fiduciary Funds Statements. The analysis of revenue recognition also resulted in changes in how the assessment revenue is recognized, resulting in a prior period adjustment of $31,544,048 to beginning net position in the Statement of Activities. NOTE 20: Budget to GAAP Reconciliation Differences Between 2015-2016 Biennium Budgetary Inflows and Outflows and GAAP Revenues and Expenditures General Fund REVENUES AND OTHER SOURCES: Budget and Actual Statement 2015/2016 Biennium $ 194,101,638 Less: 2015 Revenues and other sources (95,412,027) Statement of Revenues and Expenditures $ 98,689,611 EXPENDITURES AND OTHER USES: Budget and Actual Statement 2015/2016 Biennium $ 190,285,693 Less: 2015 Expenditures and other uses (92,986,944) Statement of Revenues and Expenditures $ 97,298,749 2016 Comprehensive Annual Financial Report 68 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Taxes $ 126,573,121 $ 126,573,121 $ 63,338,221 $ 66,557,909 $ 129,896,130 $ 3,323,009 Licenses and permits 19,884,410 19,972,775 9,720,283 10,479,358 20,199,641 226,866 Contributions 659,991 659,991 66,687 93,397 160,084 (499,907) Intergovernmental 3,607,494 4,530,744 3,103,642 3,340,581 6,444,223 1,913,479 Charges for services 28,434,052 28,581,271 14,815,209 13,923,030 28,738,239 156,968 Fines and forfeitures 1,118,006 1,118,006 613,556 554,575 1,168,131 50,125 Investment income 845,167 809,693 307,514 387,030 694,544 (115,149) Net change in fair value of investment - - (99,443) 13,947 (85,496) (85,496) Miscellaneous 1,042,978 1,078,118 304,097 469,869 773,966 (304,152) Total Revenues 182,165,219 183,323,719 92,169,766 95,819,696 187,989,462 4,665,743 EXPENDITURES Current General government 36,750,182 35,701,973 16,414,295 16,272,324 32,686,619 3,015,354 Security of persons and property 91,872,018 92,587,742 44,684,473 45,215,599 89,900,072 2,687,670 Physical environment - - 16,957 10,550 27,507 (27,507) Transportation 19,684,762 20,813,095 8,752,185 9,300,272 18,052,457 2,760,638 Economic development 9,735,608 9,526,887 4,648,988 4,742,255 9,391,243 135,644 Social Services 1,651,753 1,875,048 882,947 896,911 1,779,858 95,190 Culture and recreation 18,296,080 18,079,785 8,841,562 8,211,622 17,053,184 1,026,601 Capital outlay 7,123,808 7,123,808 488,709 4,058,896 4,547,605 2,576,203 Debt service Principal 1,179,912 777,223 94,451 94,451 188,902 588,321 Interest and Issuance Costs - - 4,014 3,778 7,792 (7,792) Total Expenditures 186,294,123 186,485,561 84,828,581 88,806,658 173,635,239 12,850,322 Excess (deficiency) of revenues over (under) expenditures (4,128,904) (3,161,842) 7,341,185 7,013,038 14,354,223 17,516,065 OTHER FINANCING SOURCES (USES) Insurance recoveries - - 7,460 - 7,460 7,460 Disposition of capital assets 304,480 444,640 - 2,009,702 2,009,702 1,565,062 Transfers in 8,257,435 8,257,435 3,234,801 860,213 4,095,014 (4,162,421) Transfers out (15,668,970) (16,581,659) (8,158,363) (8,492,091) (16,650,454) (68,795) Total other financing sources and uses (7,107,055) (7,879,584) (4,916,102) (5,622,176) (10,538,278) (2,658,694) Net change in fund balance (11,235,959) (11,041,426) 2,425,083 1,390,862 3,815,945 14,857,371 Fund balance-beginning 33,312,726 35,911,896 34,817,143 37,168,526 34,817,143 (1,094,753) Prior period adjustment - - (73,700) - (73,700) (73,700) Fund balance-ending $ 22,076,767 $ 24,870,470 $ 37,168,527 $ 38,559,388 $ 38,559,388 $ 13,688,918 City of Redmond Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the year ended December 31, 2016 2016 Comprehensive Annual Financial Report 69 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Employer's proportion of the net pension liability (asset) % 0.279429% 0.277269% 0.282854% Employer's proportionate share of the net pension liability (asset) $ 14,076,367 14,503,747 15,190,592 TOTAL $ 14,076,367 14,503,747 15,190,592 Employer's covered employee payroll $ 30,276,307 31,572,345 33,640,475 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll % 46.49% 45.94% 45.16% Plan fiduciary net position as a percentage of the total pension liability % 61.19% 59.10% 57.03% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. 2014 and 2015 have been corrected As of June 30, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Proportionate Share of the Net Pension Liability PERS 1 2016 Comprehensive Annual Financial Report 70 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Employer's proportion of the net pension liability (asset) % 0.344517% 0.349456% 0.354613% Employer's proportionate share of the net pension liability (asset) $ 6,963,932 12,486,262 17,854,484 TOTAL $ 6,963,932 12,486,262 17,854,484 Employer's covered employee payroll $ 29,576,019 31,081,296 33,183,481 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll % 23.55% 40.17% 53.81% Plan fiduciary net position as a percentage of the total pension liability % 93.29% 89.20% 85.82% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of June 30, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Proportionate Share of the Net Pension Liability PERS 2, 3 2016 Comprehensive Annual Financial Report 71 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Employer's proportion of the net pension liability (asset) % 0.090607% 0.092909% 0.073365% Employer's proportionate share of the net pension liability (asset) $ (13,121) 16,958 31,179 TOTAL $ (13,121) 16,958 31,179 Employer's covered employee payroll $ 246,193 268,804 242,743 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll % ‐5.33% 6.31% 12.84% Plan fiduciary net position as a percentage of the total pension liability % 105.01% 95.08% 90.41% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of June 30, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Proportionate Share of the Net Pension Liability PSERS 2016 Comprehensive Annual Financial Report 72 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Employer's proportion of the net pension liability (asset) % 0.058235% 0.061310% 0.066346% Employer's proportionate share of the net pension liability (asset) $ (706,269) (738,921) (683,554) State's proportionate share of the net pension liability (asset) associated with the employer $ (4,777,186) (4,998,043) (4,623,539) TOTAL $ (5,483,455) (5,736,964) (5,307,093) Employer's covered employee payroll $ 245,905 182,331 ‐ Employer's proportionate share of the net pension liability as a percentage of covered employee payroll % ‐287.21% ‐405.26% N/A Plan fiduciary net position as a percentage of the total pension liability % 126.91% 127.36% 123.74% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of June 30, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Proportionate Share of the Net Pension Liability LEOFF 1 2016 Comprehensive Annual Financial Report 73 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Employer's proportion of the net pension liability (asset) % 0.863922% 0.905449% 0.844407% Employer's proportionate share of the net pension liability (asset) $ (11,464,616) (9,306,205) (4,911,324) State's proportionate share of the net pension liability (asset) associated with the employer $ (7,414,046) (6,153,272) (3,201,826) TOTAL $ (18,878,662) (15,459,477) (8,113,150) Employer's covered employee payroll $ 24,071,949 26,361,527 25,582,420 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll % ‐47.63% ‐35.30% ‐19.20% Plan fiduciary net position as a percentage of the total pension liability % 116.75% 111.67% 106.04% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of June 30, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Proportionate Share of the Net Pension Liability LEOFF 2 2016 Comprehensive Annual Financial Report 74 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Statutorily or contractually required contributions $ 1,261,298 1,444,684 1,653,434 Contributions in relation to the statutorily or contractually required contributions $ (1,261,298) (1,444,684) (1,653,434) Contribution deficiency (excess) $ ‐ ‐ ‐ Covered employer payroll $ 30,895,042 32,615,637 34,388,717 Contributions as a percentage of covered employee payroll % 4.08% 4.43% 4.81% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. 2014 and 2015 have been corrected As of December 31, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Employer Contributions PERS 1 2016 Comprehensive Annual Financial Report 75 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Statutorily or contractually required contributions $ 1,515,304 1,814,140 2,112,355 Contributions in relation to the statutorily or contractually required contributions $ (1,515,304) (1,814,140) (2,112,355) Contribution deficiency (excess) $ ‐ ‐ ‐ Covered employer payroll $ 30,326,719 32,160,083 33,906,036 Contributions as a percentage of covered employee payroll % 5.00% 5.64% 6.23% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of December 31, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Employer Contributions PERS 2, 3 2016 Comprehensive Annual Financial Report 76 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Statutorily or contractually required contributions $ 16,737 15,367 17,958 Contributions in relation to the statutorily or contractually required contributions $ (16,737) (15,367) (17,958) Contribution deficiency (excess) $ ‐ ‐ ‐ Covered employer payroll $ 263,961 237,629 272,507 Contributions as a percentage of covered employee payroll % 6.34% 6.47% 6.59% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of December 31, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Employer Contributions PSERS 2016 Comprehensive Annual Financial Report 77 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Statutorily or contractually required contributions $ ‐ ‐ ‐ Contributions in relation to the statutorily or contractually required contributions $ ‐ ‐ ‐ Contribution deficiency (excess) $ ‐ ‐ ‐ Covered employer payroll $ 242,276 57,888 ‐ Contributions as a percentage of covered employee payroll % 0.00% 0.00% 0.00% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of December 31, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Employer Contributions LEOFF 1 2016 Comprehensive Annual Financial Report 78 City of Redmond ---PAGE BREAK--- 2014 2015 2016 Statutorily or contractually required contributions $ 1,243,996 1,350,946 1,339,697 Contributions in relation to the statutorily or contractually required contributions $ (1,243,996) (1,350,946) (1,339,697) Contribution deficiency (excess) $ ‐ ‐ ‐ Covered employer payroll $ 24,634,822 26,751,402 26,528,575 Contributions as a percentage of covered employee payroll % 5.05% 5.05% 5.05% * Until a full 10‐year trend is compiled, information is presented only for those years for which information is available. As of December 31, 2016 Last 10 Fiscal Years* REQUIRED SUPPLEMENTARY INFORMATION City of Redmond Schedule of Employer Contributions LEOFF 2 2016 Comprehensive Annual Financial Report 79 City of Redmond ---PAGE BREAK--- 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Total Pension Liability(1) Service cost (Entry Age Normal Cost) - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ Interest 17,704 15,014 10,399 17,645 17,590 20,627 20,705 28,542 28,580 24,961 Changes of benefit terms - - - - - - - - - - Differences between expected and actual experience 128,397 97,140 154,238 (231,779) (1,918) (98,267) (6,793) 223,274 (18,525) 38,329 Changes of assumptions - - - - - - - - - - Benefit payments, including refunds of contributions (27,771) (28,466) (12,372) (12,224) (15,672) (18,834) (13,912) (11,124) (10,055) (13,146) Net Change in Total Pension Liability 118,330 83,688 152,265 (226,358) - (96,474) - 240,692 - 50,144 Total Pension Liability - Beginning 567,121 483,433 331,168 557,526 557,526 654,000 654,000 413,308 413,308 363,164 Total Pension Liability - Ending 685,451 $ 567,121 $ 483,433 $ 331,168 $ 557,526 $ 557,526 $ 654,000 $ 654,000 $ 413,308 $ 413,308 $ Discount rate used to measure total pension liability at end of year 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 7.00% 7.00% Plan Fiduciary Net Position Contributions - Employer 154,159 $ 146,358 $ 145,808 $ 138,204 $ 127,252 $ 135,412 $ 133,868 $ 119,354 $ 121,832 $ 106,728 $ Contributions - Member - - - - - - - - - - Net Investment Income 14,720 9,511 10,994 12,269 8,757 9,043 128 24,919 30,027 32,031 Benefit payments, including refunds of contributions (27,771) (28,466) (12,372) (12,224) (15,672) (18,834) (13,912) (11,124) (10,055) (13,146) Administrative Expense (1,500) (5,500) (5,261) (1,350) (5,264) (1,000) (7,000) - - (1,262) Other - - - - - - - (2,750) (6,684) (1,329) Net Change in Plan Fiduciary Net Position: 139,608 121,903 139,169 136,899 115,073 124,621 113,084 130,399 135,120 123,022 Money weighted rate of return net of investment expenses 0.88% 0.62% 0.78% 0.97% 0.76% 0.88% 0.01% 2.85% 3.62% 5.99% Plan Fiduciary Net Position - Beginning 1,606,330 1,484,427 1,345,258 1,208,359 1,093,286 968,665 855,581 725,182 590,062 467,040 Plan Fiduciary Net Position - Ending 1,745,938 $ 1,606,330 $ 1,484,427 $ 1,345,258 $ 1,208,359 $ 1,093,286 $ 968,665 $ 855,581 $ 725,182 $ 590,062 $ Net Pension Liability (Asset) - Ending - (1,060,487) $ (1,039,209) $ (1,000,994) $ (1,014,090) $ (650,833) $ (535,760) $ (314,665) $ (201,581) $ (311,874) $ (176,754) $ Plan fiduciary net position as a percentage of the total pension liability 254.71% 283.24% 307.06% 406.22% 216.74% 196.10% 148.11% 130.82% 175.46% 142.77% Covered employee payroll - $ - $ - $ - $ - $ - $ 91,040 $ 91,040 $ 85,323 $ 82,200 $ Net pension liability (asset) as a percentage of covered employee payroll n/a n/a n/a n/a n/a n/a -345.63% -221.42% -365.52% -215.03% Required Supplementary Information City of Redmond Firefighter's Pension Plan Schedule of Changes in Net Pension Liability Last 10 Fiscal Years 2016 Comprehensive Annual Financial Report 80 City of Redmond ---PAGE BREAK--- 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Actuarially determined contribution - $ - $ - $ - $ - $ (13,832) $ (13,832) $ (15,979) $ - $ 606 $ Actual contribution in relation to the above 154,159 $ 146,358 $ 145,808 $ 138,204 $ 127,252 $ 135,412 $ 133,868 $ 119,354 $ 121,832 $ 106,728 $ Contribution deficiency (excess) 154,159 $ 146,358 $ 145,808 $ 138,204 $ 127,252 $ 149,244 $ 147,700 $ 135,333 $ 121,832 $ 106,122 $ Covered employee payroll n/a n/a n/a n/a n/a n/a 91,040 $ 91,040 $ 85,323 $ 82,200 $ Contributions as a % of covered employee payroll n/a n/a n/a n/a n/a n/a 162.2% 148.7% 142.8% 129.1% Notes to Schedule Valuation date: January 1, 2016 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Cost Amortization method Level amortization of the Net Pension Liability as a level dollar amount over a five-year period. Asset valuation method Market value Salary increases 3.50% Investment rate of return 3.20% Growth in membership 0% Postretirement benefit increases 1. Related to salaries 3.50% 2. Related to Consumer Price Index 2.50% Retirement age 65 Mortality Based on the RP-2000 Mortality Table (combined healthy) for males. City of Redmond Firefighter's Pension Plan Schedule of Contributions Last 10 Fiscal Years Required Supplementary Information 2016 Comprehensive Annual Financial Report 81 City of Redmond ---PAGE BREAK--- 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Annual money-weighted rate of return, net of investment expense 0.88% 0.62% 0.78% 0.97% 0.76% 0.88% 0.01% 2.85% 3.62% 5.99% City of Redmond Firefighter's Pension Plan Schedule of Investment Returns Last 10 Fiscal Years Required Supplementary Information 2016 Comprehensive Annual Financial Report 82 City of Redmond ---PAGE BREAK--- Fiscal Year Ended Actuarial Value of Assets Actuarial Accrued Liabilities Entry Age Unfunded Actuarial Accrued Liabilities (UAAL) Funded Ratio Covered Payroll UAAL As a Percentage of Covered Payroll Dec. 31, 2007 - $ 8,512,284 $ 8,512,284 $ 0% 557,587 $ 1527% Dec. 31, 2008 - $ 8,512,284 $ 8,512,284 $ 0% 446,200 $ 1908% Dec. 31, 2009 - $ 9,290,267 $ 9,290,267 $ 0% 442,308 $ 2100% Dec. 31, 2010 - $ 9,430,652 $ 9,430,652 $ 0% 461,106 $ 2045% Dec. 31, 2011 - $ 9,549,490 $ 9,549,490 $ 0% 480,703 $ 1987% Dec. 31, 2012 - $ 14,420,000 $ 14,420,000 $ 0% 262,000 $ 5504% Dec. 31, 2013 - $ 14,664,000 $ 14,664,000 $ 0% 249,000 $ 5889% Dec. 31, 2014 - $ 14,893,000 $ 14,893,000 $ 0% 249,000 $ 5981% Dec. 31, 2015 - $ 17,029,000 $ 17,029,000 $ 0% 23,000 $ 74039% Dec. 31, 2016 - $ 17,255,000 $ 17,255,000 $ 0% - $ N/A Schedule of Funding Progress Required Supplementary Information LEOFF I Medical Benefits 2016 Comprehensive Annual Financial Report 83 City of Redmond ---PAGE BREAK--- Nonmajor Governmental Funds Special Revenue Funds Special Revenue Funds are used to account for specific revenues that are restricted to/committed for expenditures for particular purposes. The Recreation Activities Fund provides salaries, equipment and supplies needed to conduct year-round recreational programs. Funding comes from class fees, sports leagues, and transfers from the General Fund. The Development Review Fund was established in 2013 to provide support services for large, private development in the City. Funding is provided through fees negotiated with developers. The Cable Access Fund was established in 2003 to monitor expenditures for cable access equipment, public education, service enhancement, and government access to television. The primary source of revenues is fees and contributions from cable television subscribers. The Operating Grants Fund includes expenditures for special studies and pilot programs to support commute trip reduction in partnership with area employers. It is funded by federal, state, and local grants, private contributions and a portion of the business tax surcharge. The Advanced Life Support Fund accounts for the provision of Advanced Life Support (ALS) services (paramedic) within the City and Fire District 34 areas. The City provides these services in contract with King County Medic One and the County provides the resources for this service. The Aid Car Donation Fund accounts for donations of monies for the acquisition, maintenance and repair of a medical emergency aid car and other fire department emergency equipment and supplies. The Real Estate Excise Tax Fund accounts for proceeds of the ½ of 1% Real Estate Excise Tax. This tax is collected by King County at the time property is sold in the City of Redmond and then remitted to the City. These funds must be used for construction of capital projects. The Felony Seizure Fund accounts for monies and proceeds from the sale of property seized during drug and felony investigations. These funds are legally required to be expended on drug and felony related police activities. The Tourism Fund is supported by a 1% special excise tax on overnight lodging in Redmond. This tax provides resources to support tourism development and promotion activities in Redmond. The Solid Waste Recycling Fund accounts for monies received primarily through garbage franchise fees. Fund expenditures made are to develop, administer and improve solid waste collection and education. Debt Service Funds Debt Service Funds account for the accumulation of resources for and the payment of general obligation and special assessment bonds. The Special Levy Fund accounts for the debt service on the voter-approved general obligation bonds. There are currently no bond issues outstanding that are paid from this fund. In 1994 the City issued bonds to purchase land and build a new fire station. These bonds were refunded in 2008. These bonds were retired in 2013. The Regular Levy Fund accounts for the debt service on City Council approved (councilmanic) general obligation debt. These currently include 2008 long-term general obligation bonds to fund the Bear Creek Parkway expansion as well as refunding the 1998 Fire bonds, 2011 long-term general obligation bonds to fund Park improvements, and 2013 City Hall refunding bonds. 2016 Comprehensive Annual Financial Report 84 City of Redmond ---PAGE BREAK--- Page 1 of 4 Recreation Development Cable Operating Activities Review Access Grants ASSETS Cash and cash equivalents $ 162,828 $ 188,201 $ 173,564 $ 146,309 Investments 678,578 795,829 733,943 618,695 Receivables: Taxes - - - - Accounts 39,357 - - 62,114 Interest 1,979 2,299 2,117 1,786 Due from other governments - 151,715 - 19,100 Restricted assets: Deposit investment 10,000 - - - Total Assets $ 892,742 $ 1,138,044 $ 909,624 $ 848,004 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 22,745 $ 8,326 $ 2,498 $ 64,965 Employee wages payable 44,523 19,494 - 27,080 Due to other funds - - - - Due to other governments - - - - Payable from restricted assets: Deposits payable 10,000 - - - Deferred-unearned revenue 159,141 - - - Total Liabilities 236,409 27,820 2,498 92,045 Fund balances Nonspendable - - - - Spendable: Restricted - - 907,126 755,959 Committed 656,333 1,110,224 - - Total Fund Balances 656,333 1,110,224 907,126 755,959 Total Liabilities and Fund Balances $ 892,742 $ 1,138,044 $ 909,624 $ 848,004 NONMAJOR GOVERNMENTAL FUNDS CITY OF REDMOND COMBINING BALANCE SHEET December 31, 2016 Special Revenue Funds 2016 Comprehensive Annual Financial Report 85 City of Redmond ---PAGE BREAK--- ASSETS Cash and cash equivalents Investments Receivables: Taxes Accounts Interest Due from other governments Restricted assets: Deposit investment Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts payable Employee wages payable Due to other funds Due to other governments Payable from restricted assets: Deposits payable Deferred-unearned revenue Total Liabilities Fund balances Nonspendable Spendable: Restricted Committed Total Fund Balances Total Liabilities and Fund Balances COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS Page 2 of 4 Special Revenue Funds Advanced Aid Car/ Real Estate Life Support Dispatch Donation Excise Tax $ - $ 40,730 $ 1,242,219 - 172,233 5,252,661 - - 1,008,938 - - - - 496 15,225 1,872,370 - - - - - $ 1,872,370 $ 213,459 $ 7,519,043 $ 14,312 $ - $ - 215,229 - - 820,166 - - - - - - - - - - - 1,049,707 - - - - - 822,663 213,459 7,519,043 - - - 822,663 213,459 7,519,043 $ 1,872,370 $ 213,459 $ 7,519,043 CITY OF REDMOND December 31, 2016 2016 Comprehensive Annual Financial Report 86 City of Redmond ---PAGE BREAK--- ASSETS Cash and cash equivalents Investments Receivables: Taxes Accounts Interest Due from other governments Restricted assets: Deposit investment Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts payable Employee wages payable Due to other funds Due to other governments Payable from restricted assets: Deposits payable Deferred-unearned revenue Total Liabilities Fund balances Nonspendable Spendable: Restricted Committed Total Fund Balances Total Liabilities and Fund Balances COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS Page 3 of 4 Special Revenue Funds Felony Solid Waste Seizure Tourism Recycling Total $ 26,973 $ 70,644 $ 106,624 $ 2,158,092 114,060 582,666 450,887 9,399,552 - - 66,080 1,075,018 - - - 101,471 329 1,684 1,298 27,213 - - 98,306 2,141,491 - - - 10,000 $ 141,362 $ 654,994 $ 723,195 $ 14,912,837 $ - $ 14,800 $ 24,681 $ 152,327 - - 30,656 336,982 - - - 820,166 7,924 - - 7,924 - - - 10,000 - - - 159,141 7,924 14,800 55,337 1,486,540 - - - - 133,438 640,194 667,858 11,659,740 - - - 1,766,557 133,438 640,194 667,858 13,426,297 $ 141,362 $ 654,994 $ 723,195 $ 14,912,837 December 31, 2016 CITY OF REDMOND 2016 Comprehensive Annual Financial Report 87 City of Redmond ---PAGE BREAK--- ASSETS Cash and cash equivalents Investments Receivables: Taxes Accounts Interest Due from other governments Restricted assets: Deposit investment Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts payable Employee wages payable Due to other funds Due to other governments Payable from restricted assets: Deposits payable Deferred-unearned revenue Total Liabilities Fund balances Nonspendable Spendable: Restricted Committed Total Fund Balances Total Liabilities and Fund Balances COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS Page 4 of 4 Total Nonmajor Regular Levy Governmental GO Bonds Total Funds $ 416,451 $ 416,451 $ 2,574,543 1,761,032 1,761,032 11,160,584 - - 1,075,018 - - 101,471 5,081 5,081 32,294 - - 2,141,491 - - 10,000 $ 2,182,564 $ 2,182,564 17,095,401 $ - $ - $ 152,327 - - 336,982 - - 820,166 - - 7,924 - - 10,000 - - 159,141 - - 1,486,540 - - - 2,182,564 2,182,564 13,842,304 - - 1,766,557 2,182,564 2,182,564 15,608,861 $ 2,182,564 $ 2,182,564 $ 17,095,401 December 31, 2016 Debt Service Fund CITY OF REDMOND 2016 Comprehensive Annual Financial Report 88 City of Redmond ---PAGE BREAK--- Page 1 of 4 Recreation Development Cable Operating Activities Review Access Grants REVENUES Taxes $ - $ - $ - $ - Licenses and Permits 2,088 1,104,234 - 107,537 Contributions 29,227 - 4,230 - Intergovernmental - - - 225,130 Charges for services 2,289,547 - - - Fines and forfeitures - - - - Investment income 9,167 7,246 7,685 6,624 Net change in fair value of investment (915) (2,336) (765) (792) Miscellaneous 312,904 - - - Total Revenues 2,642,018 1,109,144 11,150 338,499 EXPENDITURES Current Security of persons and property 110 69,719 - - Transportation - - - 1,331,096 Economic environment - 591,819 41,779 - Social Services 274,757 - - - Culture and recreation 2,485,426 - - 50 Capital outlay - - 76,732 - Debt service: Principal - - - - Interest and debt issue costs - - - - Total Expenditures 2,760,293 661,538 118,511 1,331,146 (118,275) 447,606 (107,361) (992,647) OTHER FINANCING SOURCES (USES) G.O. bonds proceeds - - - - Premium on G.O. bonds issued - - - - Refunding bonds issued - - - - Premium on refunding bonds issued - - - - Payment to refunded bond escrow agent - - - - Disposition of capital assets - - - - Transfers in - - - 1,016,976 Transfers out - - - - Total other financing sources (uses) - - - 1,016,976 Net change in fund balances (118,275) 447,606 (107,361) 24,329 Fund balances-beginning 774,608 662,618 1,014,487 731,630 Fund balances-ending $ 656,333 $ 1,110,224 $ 907,126 $ 755,959 Excess (deficiency) of revenues over (under) expenditures For the Year Ended December 31, 2016 Special Revenue Funds AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS CITY OF REDMOND COMBINING STATEMENT OF REVENUES, EXPENDITURES 2016 Comprehensive Annual Financial Report 89 City of Redmond ---PAGE BREAK--- REVENUES Taxes Licenses and Permits Contributions Intergovernmental Charges for services Fines and forfeitures Investment income Net change in fair value of investment Miscellaneous Total Revenues EXPENDITURES Current Security of persons and property Transportation Economic environment Social Services Culture and recreation Capital outlay Debt service: Principal Interest and debt issue costs Total Expenditures OTHER FINANCING SOURCES (USES) G.O. bonds proceeds Premium on G.O. bonds issued Refunding bonds issued Premium on refunding bonds issued Payment to refunded bond escrow agent Disposition of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances-beginning Fund balances-ending Excess (deficiency) of revenues over (under) expenditures Page 2 of 4 Advanced Aid Car/ Real Estate Life Support Dispatch Donations Excise Tax $ - $ - $ 8,200,143 - - - 704 1,675 - 1,290 - - 7,002,080 - - - 14,200 - 108 2,241 63,148 - 207 (13,376) 897 51,186 - 7,005,079 69,509 8,249,915 6,636,994 24,114 - - - - - - - - - - - - - 866,414 227,548 - - - - - - - 7,503,408 251,662 - (498,329) (182,153) 8,249,915 - - - - - - - - - - - - - - - 47,500 - - - - - - - (5,685,100) 47,500 - (5,685,100) (450,829) (182,153) 2,564,815 1,273,492 395,612 4,954,228 $ 822,663 $ 213,459 $ 7,519,043 For the Year Ended December 31, 2016 Special Revenue Funds AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS CITY OF REDMOND COMBINING STATEMENT OF REVENUES, EXPENDITURES 2016 Comprehensive Annual Financial Report 90 City of Redmond ---PAGE BREAK--- REVENUES Taxes Licenses and Permits Contributions Intergovernmental Charges for services Fines and forfeitures Investment income Net change in fair value of investment Miscellaneous Total Revenues EXPENDITURES Current Security of persons and property Transportation Economic environment Social Services Culture and recreation Capital outlay Debt service: Principal Interest and debt issue costs Total Expenditures OTHER FINANCING SOURCES (USES) G.O. bonds proceeds Premium on G.O. bonds issued Refunding bonds issued Premium on refunding bonds issued Payment to refunded bond escrow agent Disposition of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances-beginning Fund balances-ending Excess (deficiency) of revenues over (under) expenditures Page 3 of 4 Felony Solid Waste Seizure Tourism Recycling Total $ - $ 406,076 $ - $ 8,606,219 - - - 1,213,859 - - - 35,836 - - 104,680 331,100 - - 802,582 10,094,209 75,823 - - 90,023 805 6,194 4,506 107,724 (408) (1,151) (837) (20,373) - - (70,649) 294,338 76,220 411,119 840,282 20,752,935 261 - - 6,731,198 - - - 1,331,096 - 208,671 833,376 1,675,645 - - - 274,757 - - - 2,485,476 - - - 1,170,694 - - - - - - - - 261 208,671 833,376 13,668,866 75,959 202,448 6,906 7,084,069 - - - - - - - - - - - - - - - - - - - - - - - 47,500 - - - 1,016,976 - (142,137) - (5,827,237) - (142,137) - (4,762,761) 75,959 60,311 6,906 2,321,308 57,479 579,883 660,952 11,104,989 $ 133,438 $ 640,194 $ 667,858 $ 13,426,297 For the Year Ended December 31, 2016 Special Revenue Funds AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS CITY OF REDMOND COMBINING STATEMENT OF REVENUES, EXPENDITURES 2016 Comprehensive Annual Financial Report 91 City of Redmond ---PAGE BREAK--- REVENUES Taxes Licenses and Permits Contributions Intergovernmental Charges for services Fines and forfeitures Investment income Net change in fair value of investment Miscellaneous Total Revenues EXPENDITURES Current Security of persons and property Transportation Economic environment Social Services Culture and recreation Capital outlay Debt service: Principal Interest and debt issue costs Total Expenditures OTHER FINANCING SOURCES (USES) G.O. bonds proceeds Premium on G.O. bonds issued Refunding bonds issued Premium on refunding bonds issued Payment to refunded bond escrow agent Disposition of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances-beginning Fund balances-ending Excess (deficiency) of revenues over (under) expenditures Page 4 of 4 Total Nonmajor Regular Levy Governmental GO Bonds Total Funds $ 1,271,888 $ 1,271,888 $ 9,878,107 - - 1,213,859 - - 35,836 - - 331,100 385,541 385,541 10,479,750 - - 90,023 23,119 23,119 130,843 (5,483) (5,483) (25,856) 2,429 2,429 296,767 1,677,494 1,677,494 22,430,429 - - 6,731,198 - - 1,331,096 - - 1,675,645 - - 274,757 - - 2,485,476 - - 1,170,694 3,400,000 3,400,000 3,400,000 2,312,248 2,312,248 2,312,248 5,712,248 5,712,248 19,381,114 (4,034,754) (4,034,754) 3,049,315 6,000,000 6,000,000 6,000,000 1,052,491 1,052,491 1,052,491 11,630,000 11,630,000 11,630,000 1,431,462 1,431,462 1,431,462 (12,964,924) (12,964,924) (12,964,924) - - 47,500 5,002,682 5,002,682 6,019,658 (7,000,000) (7,000,000) (12,827,237) 5,151,711 5,151,711 388,950 1,116,957 1,116,957 3,438,265 1,065,607 1,065,607 12,170,596 $ 2,182,564 $ 2,182,564 $ 15,608,861 CITY OF REDMOND COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2016 Debt Service Fund 2016 Comprehensive Annual Financial Report 92 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Intergovernmental $ 10,842,122 $ 13,842,122 $ 3,913,775 $ 5,003,135 $ 8,916,910 $ (4,925,212) Contributions 248,133 248,133 68,500 40,000 108,500 (139,633) Charges for services 8,926,684 8,926,684 1,945,511 10,488,273 12,433,784 3,507,100 Investment income 667,574 667,574 255,961 309,418 565,379 (102,195) Net change in fair value of investment - - (65,807) (57,944) (123,751) (123,751) Miscellaneous 374,156 374,156 178,602 1,295,871 1,474,473 1,100,317 Total Revenues 21,058,669 24,058,669 6,296,542 17,078,753 23,375,295 (683,374) EXPENDITURES Current General government - - - 4,948 4,948 (4,948) Physical environment 20,000 20,000 - - - 20,000 Capital outlay 50,378,946 50,378,946 20,438,118 22,967,989 43,406,107 6,972,839 Debt service Principal - 1,385,000 751,886 705,000 1,456,886 (71,886) Interest - 409,176 218,847 191,288 410,135 (959) Total Expenditures 50,398,946 52,193,122 21,408,851 23,869,225 45,278,076 6,915,046 Excess (deficiency) of revenues over (under) expenditures (29,340,277) (28,134,453) (15,112,309) (6,790,472) (21,902,781) 6,231,672 OTHER FINANCING SOURCES (USES) Bond/loan proceeds 5,250,000 5,250,000 - - - (5,250,000) Transfers in 20,301,961 20,811,961 10,409,639 15,333,822 25,743,461 4,931,500 Transfers out (10,227,883) (10,227,883) (3,046,300) (726,289) (3,772,589) 6,455,294 Total other financing sources and uses 15,324,078 15,834,078 7,363,339 14,607,533 21,970,872 6,136,794 Net change in fund balance (14,016,199) (12,300,375) (7,748,970) 7,817,061 68,091 12,368,466 Fund balance-beginning 28,338,986 33,783,941 33,783,942 25,538,506 33,783,942 1 Prior period adjustment - - (496,466) - (496,466) (496,466) Fund balance-ending $ 14,322,787 $ 21,483,566 $ 25,538,506 $ 33,355,567 $ 33,355,567 $ 11,872,001 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL CAPITAL IMPROVEMENTS PROGRAM CAPITAL PROJECTS FUNDS For the year ended December 31, 2016 2016 Comprehensive Annual Financial Report 93 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Licenses and permits $ - $ - $ - $ 2,088 $ 2,088 $ 2,088 Charges for services 4,665,269 4,665,269 2,338,196 2,289,547 4,627,743 (37,526) Contributions 16,208 16,208 28,004 29,227 57,231 41,023 Investment income 24,312 24,312 9,432 9,167 18,599 (5,713) Net change in fair value of investment - - (2,281) (915) (3,196) (3,196) Miscellaneous 615,914 615,914 308,854 312,904 621,758 5,844 Total Revenues 5,321,703 5,321,703 2,682,205 2,642,018 5,324,223 2,520 EXPENDITURES General government 464,843 - - - - - Security of persons and property - - - 110 110 (110) Social Services 280,711 527,017 273,505 274,757 548,262 (21,245) Culture and recreation 4,920,253 5,138,790 2,378,644 2,485,426 4,864,070 274,720 Total Expenditures 5,665,807 5,665,807 2,652,149 2,760,293 5,412,442 253,365 Excess (deficiency) of revenues over (under) expenditures (344,104) (344,104) 30,056 (118,275) (88,219) 255,885 Net change in fund balance (344,104) (344,104) 30,056 (118,275) (88,219) 255,885 Fund balance-beginning 629,564 744,551 744,552 774,608 744,552 1 Fund balance-ending $ 285,460 $ 400,447 $ 774,608 $ 656,333 $ 656,333 $ 255,886 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL RECREATION ACTIVITIES SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 94 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Licenses and permits $ 700,344 $ 1,974,904 $ 1,099,484 $ 1,104,234 $ 2,203,718 $ 228,814 Charges for services 946 946 - - - (946) Investment income 3,531 3,531 4,122 7,246 11,368 7,837 Net change in fair value of investment - - (1,358) (2,336) (3,694) (3,694) Total Revenues 704,821 1,979,381 1,102,248 1,109,144 2,211,392 232,011 EXPENDITURES Security of persons and property - - - 69,719 69,719 (69,719) Economic Environment 1,249,188 1,753,597 709,390 591,819 1,301,210 452,387 Total Expenditures 1,249,188 1,753,597 709,390 661,538 1,370,929 382,668 Excess (deficiency) of revenues over (under) expenditures (544,367) 225,784 392,858 447,606 840,463 614,679 Net change in fund balance (544,367) 225,784 392,858 447,606 840,463 614,679 Fund balance-beginning 700,131 269,761 269,761 662,618 269,761 - Fund balance-ending $ 155,764 $ 495,545 $ 662,619 $ 1,110,224 $ 1,110,224 $ 614,679 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL DEVELOPMENT REVIEW FUND 2016 Comprehensive Annual Financial Report 95 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Contributions $ - $ - $ 7,879 $ 4,230 $ 12,109 $ 12,109 Investment income (10,000) (20,000) 9,061 7,685 16,746 36,746 Net change in fair value of investment - - (2,642) (765) (3,407) (3,407) Total Revenues (10,000) (20,000) 14,298 11,150 25,448 45,448 EXPENDITURES Economic Environment 130,950 266,910 99,809 41,779 141,588 125,322 Capital outlay 50,000 50,000 69,121 76,732 145,853 (95,853) Total Expenditures 180,950 316,910 168,930 118,511 287,441 29,469 Excess (deficiency) of revenues over (under) expenditures (190,950) (336,910) (154,632) (107,361) (261,993) 74,917 Net change in fund balance (190,950) (336,910) (154,632) (107,361) (261,993) 74,917 Fund balance-beginning 959,974 1,169,118 1,169,119 1,014,487 1,169,119 1 Fund balance-ending $ 769,024 $ 832,208 $ 1,014,487 $ 907,126 $ 907,126 $ 74,918 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL CABLE ACCESS SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 96 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Intergovernmental $ 953,203 $ 953,203 $ 174,831 $ 225,130 $ 399,961 $ (553,242) Licenses and Permits - - 104,264 107,537 211,801 211,801 Investment income 10,569 10,569 6,455 6,624 13,079 2,510 Net change in fair value of investment - - (2,080) (792) (2,872) (2,872) Total Revenues 963,772 963,772 283,470 338,499 621,969 (341,803) EXPENDITURES Transportation 3,450,104 3,399,575 1,292,403 1,331,096 2,623,499 776,076 Culture and recreation - - 45 50 95 (95) Total Expenditures 3,450,104 3,399,575 1,292,448 1,331,146 2,623,594 775,981 Excess (deficiency) of revenues over (under) expenditures (2,486,332) (2,435,803) (1,008,978) (992,647) (2,001,625) 434,178 OTHER FINANCING SOURCES (USES) Transfers in 2,023,642 2,023,642 1,006,666 1,016,976 2,023,642 - Total other financing sources (uses) 2,023,642 2,023,642 1,006,666 1,016,976 2,023,642 - Net change in fund balance (462,690) (412,161) (2,312) 24,329 22,017 434,178 Fund balance-beginning 503,763 733,942 733,942 731,630 733,942 - Fund balance-ending $ 41,073 $ 321,781 $ 731,630 $ 755,959 $ 755,959 $ 434,178 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL OPERATING GRANTS SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 97 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Intergovernmental $ - $ - $ 8,062 $ 1,290 $ 9,352 $ 9,352 Charges for services 13,216,371 13,989,269 6,594,002 7,002,080 13,596,082 (393,187) Investment income - - 252 108 360 360 Contributions - - 15 704 719 719 Miscellaneous - - - 897 897 897 Total Revenues 13,216,371 13,989,269 6,602,331 7,005,079 13,607,410 (381,859) EXPENDITURES Security of persons and property 12,296,028 12,296,028 6,454,742 6,636,994 13,091,736 (795,708) Capital outlay - - - 866,414 866,414 (866,414) Total Expenditures 12,296,028 12,296,028 6,454,742 7,503,408 13,958,150 (1,662,122) Excess (deficiency) of revenues over (under) expenditures 920,343 1,693,241 147,589 (498,329) (350,740) (2,043,981) OTHER FINANCING SOURCES (USES) Disposition of capital assets - - - 47,500 47,500 47,500 Total other financing sources (uses) - - - 47,500 47,500 47,500 Net change in fund balance 920,343 1,693,241 147,589 (450,829) (303,240) (1,996,481) Fund balance-beginning 451,250 1,125,903 1,125,903 1,273,492 1,125,903 - Fund balance-ending $ 1,371,593 $ 2,819,144 $ 1,273,492 $ 822,663 $ 822,663 $ (1,996,481) For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL ADVANCED LIFE SUPPORT SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 98 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Contributions $ 8,104 $ 8,104 $ 1,922 $ 1,675 $ 3,597 $ (4,507) Fines and forfeitures - - 5,100 14,200 19,300 19,300 Investment income 6,686 6,686 3,166 2,241 5,407 (1,279) Net change in fair value of investment - - (1,006) 207 (799) (799) Miscellaneous 145,874 145,874 52,317 51,186 103,503 (42,371) Total Revenues 160,664 160,664 61,499 69,509 131,008 (29,656) EXPENDITURES Security of persons and property 60,000 60,000 30,852 24,114 54,966 5,034 Capital outlay 150,000 150,000 11,017 227,548 238,565 (88,565) Total Expenditures 210,000 210,000 41,869 251,662 293,531 (83,531) Excess (deficiency) of revenues over (under) expenditures (49,336) (49,336) 19,630 (182,153) (162,523) (113,187) Net change in fund balance (49,336) (49,336) 19,630 (182,153) (162,523) (113,187) Fund balance-beginning 333,138 375,981 375,982 395,612 375,982 1 Fund balance-ending $ 283,802 $ 326,645 $ 395,612 $ 213,459 $ 213,459 $ (113,186) For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL AID CAR DISPATCH SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 99 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Taxes $ 8,363,600 $ 8,863,600 $ 7,151,603 $ 8,200,143 $ 15,351,746 $ 6,488,146 Investment income - - 42,880 63,148 106,028 106,028 Net change in fair value of investment - - (11,006) (13,376) (24,382) (24,382) Total Revenues 8,363,600 8,863,600 7,183,477 8,249,915 15,433,392 6,569,792 OTHER FINANCING SOURCES (USES) Transfers out (12,190,883) (12,690,883) (7,947,283) (5,685,100) (13,632,383) (941,500) Total other financing sources (uses) (12,190,883) (12,690,883) (7,947,283) (5,685,100) (13,632,383) (941,500) Net change in fund balance (3,827,283) (3,827,283) (763,806) 2,564,815 1,801,009 5,628,292 Fund balance-beginning 4,504,932 5,718,034 5,718,034 4,954,228 5,718,034 - Fund balance-ending $ 677,649 $ 1,890,751 $ 4,954,228 $ 7,519,043 $ 7,519,043 $ 5,628,292 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL REAL ESTATE EXCISE TAX SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 100 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Fines and forfeitures $ 6,000 $ 6,000 $ 10,801 $ 75,823 $ 86,624 $ 80,624 Investment income 1,200 1,200 494 805 1,299 99 Net change in fair value of investment - - (121) (408) (529) (529) Total Revenues 7,200 7,200 11,174 76,220 87,394 80,194 EXPENDITURES Security of persons and property - - 10,540 261 10,800 (10,800) Total Expenditures - - 10,540 261 10,800 (10,800) Excess (deficiency) of revenues over (under) expenditures 7,200 7,200 634 75,959 76,594 69,394 Net change in fund balance 7,200 7,200 634 75,959 76,594 69,394 Fund balance-beginning 34,765 56,844 56,844 57,479 56,844 - Fund balance-ending $ 41,965 $ 64,044 $ 57,478 $ 133,438 $ 133,438 $ 69,394 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FELONY SEIZURE SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 101 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Taxes $ 774,676 $ 774,676 $ 387,138 $ 406,076 $ 793,214 $ 18,538 Investment income 9,855 9,855 4,833 6,194 11,027 1,172 Net change in fair value of investment - - (1,553) (1,151) (2,704) (2,704) Total Revenues 784,531 784,531 390,418 411,119 801,537 17,006 EXPENDITURES Economic development 444,980 444,980 161,552 208,671 370,223 74,757 Capital Outlay - - - - - - Total Expenditures 444,980 444,980 161,552 208,671 370,223 74,757 Excess (deficiency) of revenues over (under) expenditures 339,551 339,551 228,866 202,448 431,314 91,763 OTHER FINANCING SOURCES (USES) Transfers out (280,000) (280,000) (137,863) (142,137) (280,000) - Total other financing sources (uses) (280,000) (280,000) (137,863) (142,137) (280,000) - Net change in fund balance 59,551 59,551 91,003 60,311 151,314 91,763 Fund balance-beginning 485,359 488,880 488,880 579,883 488,880 - Fund balance-ending $ 544,910 $ 548,431 $ 579,883 $ 640,194 $ 640,194 $ 91,763 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL TOURISM SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 102 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Intergovernmental $ 267,300 $ 267,300 $ 160,590 $ 104,680 $ 265,270 $ (2,030) Charges for services 1,237,119 1,397,119 553,222 802,582 1,355,804 (41,315) Investment income 5,359 5,359 4,176 4,506 8,682 3,323 Net change in fair value of investment - - (1,256) (837) (2,093) (2,093) Miscellaneous - - 70,904 (70,649) 255 255 Total Revenues 1,509,778 1,669,778 787,636 840,282 1,627,918 (41,860) EXPENDITURES Physical environment 1,549,058 1,549,058 640,223 833,376 1,473,599 75,459 Total Expenditures 1,549,058 1,549,058 640,223 833,376 1,473,599 75,459 Excess (deficiency) of revenues over (under) expenditures (39,280) 120,720 147,413 6,906 154,319 33,599 Net change in fund balance (39,280) 120,720 147,413 6,906 154,319 33,599 Fund balance-beginning 466,405 513,539 513,539 660,952 513,539 - Fund balance-ending $ 427,125 $ 634,259 $ 660,952 $ 667,858 $ 667,858 $ 33,599 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL SOLID WASTE RECYCLING SPECIAL REVENUE FUND 2016 Comprehensive Annual Financial Report 103 City of Redmond ---PAGE BREAK--- Variance with Original Final Actual Final Budget Budget Budget 2015 2016 2015-2016 Positive 2015-2016 2015-2016 Actual Actual Biennium (Negative) REVENUES Taxes $ 2,513,966 $ 2,513,966 $ 1,242,078 $ 1,271,888 $ 2,513,966 $ - Charges for services 770,447 770,447 384,905 385,541 770,446 Investment income - - 9,091 23,119 32,210 32,210 Net change in fair value of investment - - (2,691) (5,483) (8,174) (8,174) Miscellaneous - - - 2,429 2,429 2,429 Total Revenues 3,284,413 3,284,413 1,633,383 1,677,494 3,310,877 26,464 EXPENDITURES Principal 10,749,112 6,110,000 2,910,000 3,400,000 6,310,000 (200,000) Interest 1,830 5,292,749 2,463,314 2,312,248 4,775,562 517,187 Total Expenditures 10,750,942 11,402,749 5,373,314 5,712,248 11,085,562 317,187 Excess (deficiency) of revenues over (under) expenditures (7,466,529) (8,118,336) (3,739,931) (4,034,754) (7,774,685) 343,651 OTHER FINANCING SOURCES (USES) G.O. bonds proceeds - 6,000,000 - 6,000,000 6,000,000 - Premium on G.O. bonds issued - 1,052,491 - 1,052,491 1,052,491 - Refunding bonds issued - 23,057,525 9,280,000 11,630,000 20,910,000 (2,147,525) Premium on refunding bonds issued - - 716,063 1,431,462 2,147,525 2,147,525 Payment to refunded bond escrow agent (22,856,349) (9,996,063) (12,964,924) (22,960,987) (104,638) Transfers in 7,464,698 7,867,387 4,774,341 5,002,682 9,777,023 1,909,636 Transfers out - (7,000,000) - (7,000,000) (7,000,000) - Total other financing sources (uses) 7,464,698 8,121,054 4,774,341 5,151,711 9,926,052 1,804,998 Net change in fund balance (1,831) 2,718 1,034,410 1,116,957 2,151,367 2,148,649 Fund balance-beginning 29,396 31,197 31,197 1,065,607 31,197 - Fund balance-ending $ 27,565 $ 33,915 $ 1,065,607 $ 2,182,564 $ 2,182,564 $ 2,148,649 For the year ended December 31, 2016 CITY OF REDMOND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL REGULAR LEVY DEBT SERVICE FUND 2016 Comprehensive Annual Financial Report 104 City of Redmond ---PAGE BREAK--- Internal Service Funds Internal Service Funds are used to account for the financing of goods and services provided by one department or agency to another department or agency of the City. The Fleet Maintenance Fund accounts for the cost of maintaining all City vehicles and construction equipment except fire equipment. All costs, including depreciation, are included in establishing the rate to be charged to each department. The Insurance Fund accounts for the payment of all City insurance premiums and claims for which each City department is charged. The Medical Self-Insurance Fund accounts for all revenues, expenses and reserves associated with the City's medical self-insurance program. The Worker’s Compensation Fund accounts for all revenues, expenses, and reserves associated with the City’s self-insurance program workman’s compensation. The Information Technology Fund accounts for the costs of information technology implementation, management, and support for all City departments. 2016 Comprehensive Annual Financial Report 105 City of Redmond ---PAGE BREAK--- Page 1 of 2 Fleet Medical Maintenance Insurance Self-Insurance ASSETS Current assets: Cash and cash equivalents $ 1,046,957 $ 176,468 $ 1,946,057 Investments 4,410,742 746,226 8,229,218 Receivables: Interest 12,726 2,153 23,746 Inventory 35,885 - - Prepaid Insurance - 478,408 - Total current assets 5,506,310 1,403,255 10,199,021 Noncurrent assets: Land 584,292 - - Construction in progress 27,248 - - Buildings 510,196 - - Improvements other than buildings 248,876 - - Equipment 12,678,081 - - Less accumulated depreciation (9,207,186) - - Total capital assets (net of depreciation) 4,841,507 - - Total noncurrent assets 4,841,507 - - Total Assets $ 10,347,817 $ 1,403,255 $ 10,199,021 Deferred outflow of resources: Pension GASB 68 81,490 8,126 142 Total deferred outflows 81,490 8,126 142 Total assets and deferred outflows 10,429,307 1,411,381 10,199,163 LIABILITIES Current liabilities: Accounts payable $ 48,782 $ 37,921 $ 930,846 Employee wages payable 25,772 2,196 - Compensated absences 49,544 4,833 - Due to other governments - - - Total current liabilities 124,098 44,950 930,846 Noncurrent liabilities: Compensated absences 12,386 1,208 - Net Pension Liability 436,444 45,331 1,157 Total noncurrent liabilities 448,830 46,539 1,157 Total Liabilities 572,928 91,489 932,003 Deferred inflow of resources: Pension GASB 68 (1,597) 650 177 Total deferred inflows (1,597) 650 177 Total liabilities and deferred inflows 571,331 92,139 932,180 NET POSITION Net investment in capital assets 4,841,507 - - Unrestricted 5,016,469 1,319,242 9,266,983 Total net position $ 9,857,976 $ 1,319,242 $ 9,266,983 The notes to the financial statements are an integral part of this statement. December 31, 2016 CITY OF REDMOND COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS 2016 Comprehensive Annual Financial Report 106 City of Redmond ---PAGE BREAK--- Page 2 of 2 Workers' Information Compensation Technology Total ASSETS Current assets: Cash and cash equivalents $ 185,453 $ 258,924 $ 3,613,859 Investments 784,221 1,096,957 15,267,364 Receivables: Interest 2,263 3,166 44,054 Inventory - - 35,885 Prepaid Insurance - - 478,408 Total current assets 971,937 1,359,047 19,439,570 Noncurrent assets: Land - - 584,292 Construction in progress - 113,519 140,767 Buildings - 205,590 715,786 Improvements other than buildings - 107,322 356,198 Equipment - 793,500 13,471,581 Less accumulated depreciation - (390,608) (9,597,794) Total capital assets (net of depreciation) - 829,323 5,670,830 Total noncurrent assets - 829,323 5,670,830 Total Assets $ 971,937 $ 2,188,370 $ 25,110,400 Deferred outflow of resources: Pension GASB 68 19,425 384,813 493,996 Total deferred outflows 19,425 384,813 493,996 Total assets and deferred outflows 991,362 2,573,183 25,604,396 LIABILITIES Current liabilities: Accounts payable $ 218,383 $ 297,160 $ 1,533,092 Employee wages payable 4,253 120,654 152,875 Compensated absences 6,204 159,671 220,252 Due to other governments 49,999 - 49,999 Total current liabilities 278,839 577,485 1,956,218 Noncurrent liabilities: Compensated absences 1,551 39,918 55,063 Net Pension Liability 91,599 2,247,247 2,821,778 Total noncurrent liabilities 93,150 2,287,165 2,876,841 Total Liabilities 371,989 2,864,650 4,833,059 Deferred inflow of resources: Pension GASB 68 (5,952) 75,948 69,226 Total deferred inflows (5,952) 75,948 69,226 Total liabilities and deferred inflows 366,037 2,940,598 4,902,285 NET POSITION Net investment in capital assets - 829,323 5,670,830 Unrestricted 625,325 (1,196,738) 15,031,281 Total net position $ 625,325 $ (367,415) $ 20,702,111 The notes to the financial statements are an integral part of this statement. December 31, 2016 CITY OF REDMOND COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS 2016 Comprehensive Annual Financial Report 107 City of Redmond ---PAGE BREAK--- Page 1 of 2 Fleet Medical Maintenance Insurance Self-Insurance Operating revenues: Charges for services $ 73,170 $ 1,084,229 $ 10,886,476 Charges for replacement 2,458,497 - - Charges for insurance - - - Total operating revenues 2,531,667 1,084,229 10,886,476 Operating expenses: Supplies 214,769 - - Maintenance and operations 1,283,049 1,017,365 11,824,064 Depreciation and amortization 987,275 - - Total Operating Expenses 2,485,093 1,017,365 11,824,064 Operating income (loss) 46,574 66,864 (937,588) Nonoperating revenues (expenses): Interest and investment revenue 45,800 8,670 89,532 Net change in fair value of the investment (8,121) (1,534) (11,346) Gain (Loss) on disposal of capital assets 206,035 - - Insurance recovery - 203,756 291,997 Lease and other revenue 7,125 - 328,362 Total nonoperating revenues (expenses) 250,839 210,892 698,545 Income (loss) before contributions and transfers 297,413 277,756 (239,043) Transfers out - - (168,076) Change in net position 297,413 277,756 (407,119) Total net position - beginning, as previously reported 9,560,563 1,041,486 9,674,102 Total net position - ending $ 9,857,976 $ 1,319,242 $ 9,266,983 The notes to the financial statements are an integral part of this statement. INTERNAL SERVICE FUNDS For the year ended December 31, 2016 CITY OF REDMOND COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION 2016 Comprehensive Annual Financial Report 108 City of Redmond ---PAGE BREAK--- Page 2 of 2 Workers' Information Compensation Technology Total Operating revenues: Charges for services $ - $ 4,830,458 $ 16,874,333 Charges for replacement - - 2,458,497 Charges for insurance 1,184,996 - 1,184,996 Total operating revenues 1,184,996 4,830,458 20,517,826 Operating expenses: Supplies 130 123,786 338,685 Maintenance and operations 1,055,682 5,274,879 20,455,039 Depreciation and amortization - 113,866 1,101,141 Total Operating Expenses 1,055,812 5,512,531 21,894,865 Operating income (loss) 129,184 (682,073) (1,377,039) Nonoperating revenues (expenses): Interest and investment revenue 7,513 11,763 163,278 Net change in fair value of the investment (1,586) (17) (22,604) Gain (Loss) on disposal of capital assets - - 206,035 Insurance recovery - - 495,753 Lease and other revenue - - 335,487 Total nonoperating revenues (expenses) 5,927 11,746 1,177,949 Income (loss) before contributions and transfers 135,111 (670,327) (199,090) Transfers out - - (168,076) Change in net position 135,111 (670,327) (367,166) Total net position - beginning, as previously reported 490,214 302,912 21,069,277 Total net position - ending $ 625,325 $ (367,415) $ 20,702,111 The notes to the financial statements are an integral part of this statement. INTERNAL SERVICE FUNDS For the year ended December 31, 2016 CITY OF REDMOND COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION 2016 Comprehensive Annual Financial Report 109 City of Redmond ---PAGE BREAK--- Page 1 of 2 Fleet Medical Maintenance Insurance Self-Insurance CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 73,172 $ 1,084,231 $ 10,967,252 Cash received for replacement 2,458,495 - - Cash payments to suppliers (680,987) (1,059,516) (596,439) Cash payments to employees (627,788) (54,218) (11,294,615) Cash payments to other governments (149) - - Internal activity - payments to other funds (198,010) (17,746) - Other operating receipts (998) (92) - Net cash provided (used) by operating activities 1,023,735 (47,341) (923,802) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in/transfers out - - (168,076) Other non-operating revenues (expenses) 7,125 203,756 620,368 Net cash provided by noncapital financing activities 7,125 203,756 452,292 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (677,008) - - Proceeds from sale of capital assets 206,035 - - Net cash provided (used) for capital and related financing activities (470,973) - - CASH FLOWS FROM INVESTING ACTIVITIES Internal activity, net investment purchases (214,151) (90,591) 892,968 Interest on investments 34,432 6,471 75,192 Net cash provided (used) in investing activities (179,719) (84,120) 968,160 Net increase (decrease) in cash and cash equivalents 380,168 72,295 496,650 Cash and cash equivalents-beginning of year 666,789 104,173 1,449,407 Cash and cash equivalents-end of year $ 1,046,957 $ 176,468 $ 1,946,057 Cash and cash equivalents Operating fund cash $ 1,046,957 $ 176,468 $ 1,946,057 Cash and cash equivalents-end of year $ 1,046,957 $ 176,468 $ 1,946,057 Reconciliation of operating income to net cash provided by operating activities: Operating income (loss) $ 46,576 $ 66,866 $ (937,595) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 987,275 - - Decrease (increase) in accounts receivable - - 80,783 Decrease (increase) in inventory 1,127 - - Decrease (increase) in prepaid expenses - (25,237) - Increase (decrease) in accounts payable (18,940) (88,724) (66,748) Increase (decrease) due to other governments (149) - - Increase (decrease) in employee wages payable 2,187 84 (11) Increase (decrease) in compensated absences payable 6,657 (238) (231) Increase (decrease) in GASB 68 Adjustment (998) (92) - Net cash provided (used) by operating activities $ 1,023,735 $ (47,341) $ (923,802) Noncash investing, capital and financing activities: Fair value of investments decreased by (19,123) (3,235) (35,678) The notes to the financial statements are an integral part of this statement For the Year Ended December 31, 2016 CITY OF REDMOND COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS 2016 Comprehensive Annual Financial Report 110 City of Redmond ---PAGE BREAK--- Page 2 of 2 Workers' Information Compensation Technology Total CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,184,997 $ 4,830,460 $ 18,140,112 Cash received for replacement - - 2,458,495 Cash payments to suppliers (216,094) (2,069,147) (4,622,183) Cash payments to employees (811,132) (2,963,419) (15,751,172) Cash payments to other governments 15,335 - 15,186 Internal activity - payments to other funds (16,971) (339,107) (571,834) Other operating receipts (292) (3,913) (5,295) Net cash provided (used) by operating activities 155,843 (545,126) (336,691) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in/transfers out - - (168,076) Other non-operating revenues (expenses) - - 831,249 Net cash provided by noncapital financing activities - - 663,173 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets - (108,941) (785,949) Proceeds from sale of capital assets - - 206,035 Net cash provided (used) for capital and related financing activities - (108,941) (579,914) CASH FLOWS FROM INVESTING ACTIVITIES Internal activity, net investment purchases (86,494) 627,077 1,128,809 Interest on investments 5,243 11,985 133,323 Net cash provided (used) in investing activities (81,251) 639,062 1,262,132 Net increase (decrease) in cash and cash equivalents 74,592 (15,005) 1,008,700 Cash and cash equivalents-beginning of year 110,861 273,929 2,605,159 Cash and cash equivalents-end of year $ 185,453 $ 258,924 $ 3,613,859 Cash and cash equivalents Operating fund cash $ 185,453 $ 258,924 $ 3,613,859 Cash and cash equivalents-end of year $ 185,453 $ 258,924 $ 3,613,859 Reconciliation of operating income to net cash provided by operating activities: Operating income (loss) $ 129,185 $ (682,071) $ (1,377,039) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization - 113,866 1,101,141 Decrease (increase) in accounts receivable - - 80,783 Decrease (increase) in inventory - - 1,127 Decrease (increase) in prepaid expenses - - (25,237) Increase (decrease) in accounts payable 8,139 169,478 3,205 Increase (decrease) due to other governments 15,335 - 15,186 Increase (decrease) in employee wages payable 1,257 (150,307) (146,790) Increase (decrease) in compensated absences payable 2,219 7,821 16,228 Increase (decrease) in GASB 68 Adjustment (292) (3,913) (5,295) Net cash provided (used) by operating activities $ 155,843 $ (545,126) $ (336,691) Noncash investing, capital and financing activities: Fair value of investments decreased by (3,400) (4,756) (66,192) The notes to the financial statements are an integral part of this statement For the Year Ended December 31, 2016 CITY OF REDMOND COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS 2016 Comprehensive Annual Financial Report 111 City of Redmond ---PAGE BREAK--- Agency Funds Agency Funds are used to report resources held by the reporting government in a purely custodial capacity (assets equal liabilities). Agency funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. The Intergovernmental Custodial Fund accounts for revenues which are transferred to other governmental agencies. The Municipal Employees Benefit Trust (MEBT) accounts for retirement monies until they are transferred to an investment firm. In 1975, City employees voted to replace the Federal Social Security Program with this private retirement plan. The Contractor’s Deposit Fund accounts for cash bond deposits received from contractors or private parties and amounts retained from contractor's payments on City projects as a performance guarantee. 2016 Comprehensive Annual Financial Report 112 City of Redmond ---PAGE BREAK--- Redmond Community Inter- Facilities Governmental Contractor's District Custodial MEBT Deposits 2014-1* Total ASSETS Cash and cash equivalents $ 135,975 $ 80,791 $ 1,205,915 $ - $ 1,422,681 Accounts receivable 5,608 - - - 5,608 Investments 576,964 342,809 63,808 - 983,581 Total assets $ 718,547 $ 423,600 $ 1,269,723 $ - $ 2,411,870 LIABILITIES Due to other governments $ 718,547 $ - $ - $ - $ 718,547 Custodial - 423,600 - - 423,600 Trust account - - 1,269,723 - 1,269,723 Total liabilities $ 718,547 $ 423,600 $ 1,269,723 $ - $ 2,411,870 CITY OF REDMOND COMBINING STATEMENT OF FIDUCIARY NET POSITION AGENCY FUNDS December 31, 2016 * The Redmond Community Facilities District 2014-1 is now reported as a blended component unit in the governmental Capital Improvements Program Fund. See Note 17 Accounting and Reporting Changes and Note 19 Prior Period Adjustments for more information. 2016 Comprehensive Annual Financial Report 113 City of Redmond ---PAGE BREAK--- 1/1/16 12/31/16 BALANCE ADDITIONS DELETIONS BALANCE INTERGOVERNMENTAL CUSTODIAL ASSETS Cash and cash equivalents $ 36,817 $ 3,048,710 $ 2,949,552 $ 135,975 Investments 232,397 1,049,037 704,470 576,964 Accounts receivable - 5,608 - 5,608 Total Assets $ 269,214 $ 4,103,355 $ 3,654,022 $ 718,547 LIABILITIES Accounts payable $ (1,779) $ 1,779 $ - $ - Due to other governments 270,993 5,173,242 4,725,688 718,547 Total Liabilities $ 269,214 $ 5,175,021 $ 4,725,688 $ 718,547 MEBT ASSETS Cash and cash equivalents $ 51,975 $ 10,258,803 $ 10,229,987 $ 80,791 Investments 328,079 1,850,744 1,836,014 342,809 Total Assets $ 380,054 $ 12,109,547 $ 12,066,001 $ 423,600 LIABILITIES Custodial $ 380,054 $ 8,845,983 $ 8,802,437 $ 423,600 Total Liabilities $ 380,054 $ 8,845,983 $ 8,802,437 $ 423,600 REDMOND COMMUNITY FACILITIES DISTRICT 2014-1* ASSETS Cash and cash equivalents $ 1,691,749 $ - $ 1,691,749 $ - Investments 10,647,423 - 10,647,423 - Interest receivable 24,222 - 24,222 - Construction in progress 938,943 - 938,943 - Total Assets $ 13,302,337 $ - $ 13,302,337 $ - LIABILITIES Accounts payable $ 727 $ - $ 727 $ - Custodial 13,301,610 - 13,301,610 - Total Liabilities $ 13,302,337 $ - $ 13,302,337 $ - CONTRACTORS DEPOSIT ASSETS Cash and cash equivalents $ 964,648 $ 1,309,107 $ 1,067,840 $ 1,205,915 Investments 219,215 509,105 664,512 63,808 Total Assets $ 1,183,863 $ 1,818,212 $ 1,732,352 $ 1,269,723 LIABILITIES Trust account $ 1,183,863 $ 1,209,650 $ 1,123,790 $ 1,269,723 Accounts payable - - - - Total Liabilities $ 1,183,863 $ 1,209,650 $ 1,123,790 $ 1,269,723 TOTALS - ALL AGENCY FUNDS ASSETS Cash and cash equivalents $ 2,745,189 $ 14,616,620 $ 15,939,128 $ 1,422,681 Investments 11,427,114 3,408,886 13,852,419 983,581 Accounts receivable - 5,608 - 5,608 Interest receivable 24,222 - 24,222 - Construction in progress 938,943 - 938,943 - Total Assets $ 15,135,468 $ 18,031,114 $ 30,754,712 $ 2,411,870 LIABILITIES Accounts payable $ (1,052) $ 1,779 $ 727 $ - Due to other governments 270,993 5,173,242 4,725,688 718,547 Custodial 13,681,664 8,845,983 22,104,047 423,600 Trust accounts 1,183,863 1,209,650 1,123,790 1,269,723 Total Liabilities $ 15,135,468 $ 15,230,654 $ 27,954,252 $ 2,411,870 * The Redmond Community Facilities District 2014-1 is now reported as a blended component unit in the governmental Capital Improvements Program Fund. See Note 17 Accounting and Reporting Changes and Note 19 Prior Period Adjustments for more information. CITY OF REDMOND COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS For the Year Ended December 31, 2016 2016 Comprehensive Annual Financial Report 114 City of Redmond ---PAGE BREAK--- CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS 2016 Comprehensive Annual Financial Report 115 City of Redmond ---PAGE BREAK--- 2016 2015 Governmental funds capital assets: Land $ 133,745,387 $ 125,880,008 Buildings 75,586,091 75,576,215 Improvements other than buildings 34,268,448 32,940,285 Machinery and equipment 19,019,422 15,228,675 Artwork 548,878 548,878 Infrastructure 273,895,893 260,666,965 Construction in progress 29,484,570 17,534,392 Total governmental funds capital assets $ 566,548,689 $ 528,375,418 Investments in governmental funds capital assets by source: General fund $ 333,601,295 $ 318,438,721 Special revenue funds 9,345,121 9,774,658 Impact fees 50,123,406 39,732,184 Federal grants 26,684,657 19,139,505 General obligation bonds 80,669,373 87,669,373 Private gifts 66,124,837 53,620,977 Total governmental funds capital assets $ 566,548,689 $ 528,375,418 This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net position. CITY OF REDMOND CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS COMPARATIVE SCHEDULES BY SOURCE DECEMBER 31, 2016 and 2015 2016 Comprehensive Annual Financial Report 116 City of Redmond ---PAGE BREAK--- Page 1 of 2 Improvements Other than Machinery and Function and Activity Land Buildings Buildings Equipment General government Finance $ - $ - $ - $ 3,749,428 Planning - - - 1,234,940 General government 42,538,161 36,574,075 8,140,840 (1,134,953) Public works/general 4,227,462 2,592,361 319,688 242,122 Total general government 46,765,623 39,166,436 8,460,528 4,091,537 Security Police - 7,531,872 92,458 2,154,054 Fire 3,263,488 17,930,731 287,807 11,796,954 Total security 3,263,488 25,462,603 380,265 13,951,008 Transportation 45,460,834 - - 319,783 Culture and recreation Parks and recreation 38,148,629 9,134,527 25,227,655 623,435 Senior center 106,814 1,822,525 200,000 33,660 Total culture and recreation 38,255,443 10,957,052 25,427,655 657,095 Total governmental funds capital assets $ 133,745,388 $ 75,586,091 $ 34,268,448 $ 19,019,423 December 31, 2016 CITY OF REDMOND CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY FUNCTION AND ACTIVITY 2016 Comprehensive Annual Financial Report 117 City of Redmond ---PAGE BREAK--- Page 2 of 2 Construction in Function and Activity Artwork Infrastructure Progress Total General government Finance $ - $ - $ - $ 3,749,428 Planning - - 404,454 1,639,394 General government 92,998 15,154,300 (15,616,623) 85,748,798 Public works/general - - (2,734,707) 4,646,926 Total general government 92,998 15,154,300 (17,946,876) 95,784,546 Security Police - - 10,566,294 20,344,678 Fire - - 165,157 33,444,137 Total security - - 10,731,451 53,788,815 Transportation - 250,253,067 31,397,946 327,431,630 Culture and recreation Parks and recreation 455,879 8,488,525 5,302,049 87,380,699 Senior center - - - 2,162,999 Total culture and recreation 455,879 8,488,525 5,302,049 89,543,698 Total governmental funds capital assets $ 548,877 $ 273,895,892 $ 29,484,570 $ 566,548,689 This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net position. December 31, 2016 CITY OF REDMOND CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY FUNCTION AND ACTIVITY 2016 Comprehensive Annual Financial Report 118 City of Redmond ---PAGE BREAK--- Governmental Governmental Funds Capital Funds Capital Assets Assets 1-1-2016 Additions Deductions 12-31-2016 Function and Activity General government Finance $ 3,449,723 $ 299,705 $ - $ 3,749,428 Planning 1,465,699 173,695 - 1,639,394 General government 75,511,657 10,313,873 76,732 85,748,798 Public works/general 7,157,968 1,152,008 3,663,050 4,646,926 Total general government 87,585,047 11,939,281 3,739,782 95,784,546 Security Police 14,108,425 6,236,253 - 20,344,678 Fire 30,247,090 4,723,705 1,526,658 33,444,137 Total security 44,355,515 10,959,958 1,526,658 53,788,815 Transportation 309,115,481 26,708,297 8,392,149 327,431,629 Culture and recreation Parks and recreation 85,156,376 4,228,517 2,004,193 87,380,700 Senior center 2,162,999 - - 2,162,999 Total culture and recreation 87,319,375 4,228,517 2,004,193 89,543,699 Total governmental funds capital assets $ 528,375,418 $ 53,836,053 $ 15,662,782 $ 566,548,689 This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net position. DECEMBER 31, 2016 CITY OF REDMOND CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY 2016 Comprehensive Annual Financial Report 119 City of Redmond ---PAGE BREAK--- Statistical Section This part of the City of Redmond’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Page Financial Trends 121 These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity 127 These schedules contain information to help the reader assess the City’s tax revenue sources. Debt Capacity 132 These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information 139 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. Operating Information 141 These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 2016 Comprehensive Annual Financial Report 120 City of Redmond ---PAGE BREAK--- Schedule 1 Net Position by Component (in thousands) Last Ten Fiscal Years Accrual Basis of Accounting 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Governmental activities Net investment in capital assets 231,771 $ 238,895 $ 256,114 $ 257,663 $ 266,802 $ 276,636 $ 281,614 $ 292,662 $ 334,538 $ 366,768 $ Restricted 24,320 24,203 25,938 29,689 24,278 23,862 32,721 33,146 42,938 85,499 Unrestricted 67,326 77,758 83,798 57,264 60,788 59,691 55,938 56,107 27,885 41,138 Total governmental activities net position 323,417 $ 340,856 $ 365,850 $ 344,616 $ 351,868 $ 360,189 $ 370,273 $ 381,915 $ 405,361 $ 493,405 $ Business-type activities Net investment in capital assets 212,565 $ 228,193 $ 234,272 $ 242,798 $ 256,195 $ 264,018 $ 282,586 $ 287,209 $ 304,494 $ 312,718 $ Restricted - 7,686 1,372 2,221 2,221 3,367 3,851 6,917 6,917 8,917 Unrestricted 35,988 37,126 48,280 51,970 50,415 57,802 58,123 70,999 67,158 76,141 Total business-type activities net position 248,553 $ 273,005 $ 283,924 $ 296,989 $ 308,831 $ 325,187 $ 344,560 $ 365,125 $ 378,569 $ 397,776 $ Primary government Net investment in capital assets 444,336 $ 467,088 $ 490,386 $ 500,461 $ 522,997 $ 540,654 $ 564,200 $ 579,871 $ 639,032 $ 679,486 $ Restricted 24,320 31,889 27,310 31,910 49,458 27,229 36,572 40,063 49,855 94,416 Unrestricted 103,314 114,884 132,078 109,234 88,244 117,493 114,061 127,106 95,043 117,279 Total primary government net position 571,970 $ 613,861 $ 649,774 $ 641,605 $ 660,699 $ 685,376 $ 714,833 $ 747,040 $ 783,930 $ 891,181 $ 2016 Comprehensive Annual Financial Report 121 City of Redmond ---PAGE BREAK--- Schedule 2 Changes in Net Position (in thousands) Last Ten Fiscal Years Page 1 of 2 Accrual Basis of Accounting 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Expenses Governmental activities: General government 13,390 $ 14,823 $ 18,222 $ 19,571 $ 22,195 $ 16,791 $ 18,474 $ 16,852 $ 21,021 $ 22,767 $ Security 41,105 40,940 40,319 36,764 37,563 45,901 46,494 46,622 49,832 53,615 Physical Environment 3,360 3,962 3,763 5,283 4,382 3,197 2,991 2,950 286 - Economic environment 3,488 3,689 4,664 5,719 5,155 4,979 4,738 4,984 5,851 6,509 Transportation 10,616 16,502 16,530 42,052 13,093 14,695 12,240 12,645 13,339 13,327 Mental/physical health 98 97 12 13 890 - - - - - Culture and Recreation 9,551 11,104 11,103 14,457 12,819 12,080 12,677 12,754 12,358 12,065 Interest on long-term debt 1,990 2,045 1,891 1,813 3,506 3,310 2,433 2,837 2,731 2,615 Total governmental activities expenses 83,598 93,162 96,504 125,672 99,603 100,953 100,047 99,644 105,418 110,898 Business-type activities: Water/wastewater 22,528 26,467 27,085 25,191 27,519 28,397 30,505 31,032 32,592 34,227 UPD Water/wastewater 5,466 5,908 4,963 5,542 5,752 6,121 5,988 5,981 5,900 5,887 Stormwater 6,188 6,580 6,746 6,407 7,061 7,249 6,935 7,581 7,989 9,216 Total business-type activities net position 34,182 38,955 38,794 37,140 40,332 41,767 43,428 44,594 46,481 49,330 Total primary government expenses 117,780 $ 132,117 $ 135,298 $ 162,812 $ 139,935 $ 142,720 $ 143,475 $ 144,238 $ 151,899 $ 160,228 $ Program Revenues Governmental activities: Charges for services: General government 3,040 $ 3,066 $ 3,198 $ 3,355 $ 8,640 $ 3,738 $ 3,416 $ 3,331 $ 3,114 $ 3,122 $ Security 13,223 13,881 15,764 13,776 15,825 16,450 15,566 15,140 17,993 16,442 Physical Environment 372 379 421 468 590 1,032 1,025 553 - Economic environment 12,874 14,256 16,573 9,132 3,491 13,487 14,649 14,857 15,142 24,642 Transportation 1,398 433 13 11 2,971 1,129 1,203 1,242 392 372 Culture and Recreation 1,774 1,793 2,050 2,171 3,351 2,555 2,284 2,587 2,713 2,651 Operating grants and contributions 5,903 7,383 2,830 8,334 760 4,571 1,350 1,718 1,898 3,841 Capital grants and contributions 5,227 5,240 19,834 3,419 2,513 1,648 3,180 4,147 3,913 5,003 Total governmental activities program revenues 43,811 46,431 60,683 40,666 37,551 44,168 42,680 44,047 45,718 56,073 2016 Comprehensive Annual Financial Report 122 City of Redmond ---PAGE BREAK--- Schedule 2 (continued) Changes in Net Position (in thousands) Last Ten Fiscal Years Page 2 of 2 Accrual Basis of Accounting 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Business-type activities: Charges for services: Water/wastewater 26,127 24,960 26,577 25,451 27,977 29,688 32,747 33,055 35,637 35,665 UPD Water/wastewater 5,525 5,098 4,829 5,362 5,850 6,600 6,682 6,798 6,947 6,428 Stormwater 11,315 10,715 10,656 11,002 11,154 11,117 11,494 11,737 11,961 12,393 Operating grants and contributions 523 19 58 602 599 1,194 5,013 5,678 2,671 787 Capital grants and contributions 21,160 20,735 6,681 7,060 6,403 9,449 6,900 8,442 8,433 13,779 Total business-type activities program revenues 64,650 61,527 48,801 49,477 51,983 58,048 62,836 65,710 65,649 69,052 Total primary government program revenues 108,461 $ 107,958 $ 109,484 $ 90,143 $ 89,534 $ 102,216 $ 105,516 $ 109,757 $ 111,367 $ 125,125 $ Net (Expense)/Revenue Governmental activities (39,787) $ (46,733) $ (35,821) $ (85,007) $ (62,080) $ (56,786) $ (57,368) $ (55,597) $ (59,700) $ (54,825) $ Business-type activities 30,470 22,571 10,007 12,337 11,180 16,280 19,408 21,116 19,168 19,722 Total primary government net expense (9,317) (24,162) (25,814) (72,670) (50,900) (40,506) (37,960) (34,481) (40,532) (35,103) General Revenues and Other Changes in Net Position Governmental Activities: Taxes Property taxes 13,039 18,589 19,446 20,930 21,978 22,611 22,234 22,817 23,564 23,967 Sales taxes 24,420 20,675 18,996 19,038 24,895 20,722 22,584 22,131 25,385 27,979 Other 27,404 19,578 19,263 18,664 19,338 20,221 20,473 19,396 23,170 24,490 Investment interest 5,135 4,087 2,087 1,114 937 632 162 836 765 1,896 Miscellaneous 4,203 1,121 1,008 4,103 2,063 1,049 1,991 1,136 1,682 18,217 Contribution/disposal of capital assets (384) 121 14 (76) 88 118 7 922 3,198 14,775 Transfers - - - - - - - - - - Total governmental activities 73,817 64,171 60,814 63,773 69,299 65,353 67,451 67,238 77,764 111,324 Business-type activities: Investment interest 1,668 1,740 737 623 519 227 400 434 (690) Miscellaneous 143 140 176 105 143 177 (262) (950) (694) 175 Transfers - - - - - - - - - - Total business-type activities 1,811 1,880 913 728 662 168 (35) (550) (260) (515) Total primary government 75,628 $ 66,051 $ 61,727 $ 64,501 $ 69,961 $ 65,521 $ 67,416 $ 66,688 $ 77,504 $ 110,809 $ Change in Net Position Governmental activities 34,030 $ 17,439 $ 24,994 $ (21,234) $ 7,252 $ 8,566 $ 10,084 $ 11,641 $ 18,064 $ 56,499 $ Business-type activities 32,280 24,452 10,919 13,065 11,842 16,449 19,373 20,566 18,908 19,207 Total primary government 66,310 $ 41,891 $ 35,913 $ (8,169) $ 19,094 $ 25,015 $ 29,457 $ 32,207 $ 36,972 $ 75,706 $ 2016 Comprehensive Annual Financial Report 123 City of Redmond ---PAGE BREAK--- Schedule 3 Fund Balances, Governmental Funds (in thousands) Last Ten Fiscal Years Modified Accrual Basis of Accounting 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Fund Reserved 32 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ Unreserved 14,653 16,177 6,489 4,504 - - - - - - Nonspendable** - - - - - - - - - - Spendable**: Restricted - - - - 6,139 7,087 7,083 7,380 7,106 6,379 Committed - - - - 16,689 8,266 8,997 8,947 9,442 6,462 Assigned - - - - - 11,472 12,364 10,166 11,019 11,937 Unassigned - - - - 11,105 11,977 8,792 8,324 9,601 13,781 Total* 14,685 $ 16,177 $ 6,489 $ 4,504 $ 33,933 $ 38,802 $ 37,236 $ 34,817 $ 37,168 $ 38,559 $ Reserved 1,608 $ 1,526 $ 1,244 $ 273 $ - $ - $ - $ - $ - $ - $ Unreserved, reported in: Special revenue funds 32,280 38,603 31,914 27,499 - - - - - - Capital projects funds 37,125 47,384 61,866 47,277 - - - - - - Nonspendable** - - - - - - - - - - Spendable**: Restricted - - - - 20,752 16,775 25,638 25,220 24,163 24,696 Committed - - - - 23,029 - 1,222 1,014 1,437 1,767 Assigned - - - - - 20,542 16,929 18,777 12,109 22,502 Unassigned - - - - - - - - - - Total all other governmental funds*: 71,013 $ 87,513 $ 95,024 $ 75,049 $ 43,781 $ 37,317 $ 43,789 $ 45,011 $ 37,709 $ 48,965 $ *In 2011 The substantial increase in the fund balance of the General Fund and decrease in the fund balance of All Other Governmental Funds resulted from the implementation of GASB 54. **Starting with the fiscal year ending December 31, 2011 the City implemented GASB 54 which required a new classification for fund balances. All Other Governmental Funds 2016 Comprehensive Annual Financial Report 124 City of Redmond ---PAGE BREAK--- Schedule 4 Changes in Fund Balances, Governmental Funds (in thousands) Last Ten Fiscal Years Page 1 of 2 Modified Accrual Basis of Accounting 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenues Taxes 64,271 $ 58,256 $ 57,101 $ 57,958 $ 66,211 $ 63,555 $ 65,291 $ 64,344 $ 72,119 $ 76,436 $ Licenses and permits 9,920 8,297 7,057 6,523 6,510 7,509 8,871 9,168 10,924 11,693 Contributions from property owners 3,677 2,629 10,554 6,474 270 987 518 470 173 169 Intergovernmental 17,459 18,077 26,569 18,465 18,404 19,999 19,907 21,669 7,361 8,675 Charges for services 9,258 12,325 15,448 8,880 9,860 13,046 12,571 12,102 26,631 34,891 Fines and forfeitures 826 864 1,053 1,038 2,204 1,952 812 637 629 645 Investment income 4,406 3,752 2,237 1,238 856 514 (18) 525 466 757 Miscellaneous 1,256 1,298 1,045 601 972 917 611 1,463 915 2,063 Total revenues 111,073 105,498 121,064 101,177 105,287 108,479 108,563 110,378 119,218 135,329 Expenditures General government 12,384 13,785 18,087 15,132 12,943 14,948 15,391 14,621 16,414 16,277 Security (persons/property) 40,155 39,775 43,229 41,858 42,191 44,126 44,583 47,251 51,181 51,947 Physical environment 3,382 3,817 3,728 3,475 4,405 3,098 3,038 3,249 657 - Transportation 6,712 6,685 9,260 6,552 8,200 8,958 8,097 8,063 10,045 10,642 Economic environment 3,382 3,907 4,343 4,649 4,864 4,830 4,624 5,293 5,620 6,418 Social Services 98 97 12 13 890 - - - 1,156 1,172 Culture and Recreation 8,690 9,901 10,060 10,913 10,642 11,159 11,606 11,869 11,220 10,697 Capital outlay 23,865 39,832 28,016 34,282 24,591 17,470 10,472 15,108 21,007 28,198 Debt service: Principal 2,540 2,448 3,109 3,008 3,584 4,955 4,262 3,666 3,756 4,199 Interest and debt issue costs 2,041 2,565 3,420 3,298 3,575 1,925 2,337 2,776 2,686 2,507 Total expenditures 103,249 122,812 123,264 123,180 115,885 111,469 104,410 111,896 123,742 132,057 Excess of revenues over (under) expenditures 7,824 $ (17,314) $ (2,200) $ (22,003) $ (10,598) $ (2,990) $ 4,153 $ (1,518) $ (4,524) $ 3,272 $ 2016 Comprehensive Annual Financial Report 125 City of Redmond ---PAGE BREAK--- Schedule 4 (continued) Changes in Fund Balances, Governmental Funds (in thousands) Last Ten Fiscal Years Page 2 of 2 Modified Accrual Basis of Accounting 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Other Finance Sources (Uses) Insurance recoveries - $ 111 $ - $ 8 $ 3 $ - $ - $ 45 $ 7 $ - $ Proceeds from borrowing - 36,560 - - 8,643 1,794 34,522 - 9,996 20,114 Bond proceeds to refunding trustee - (1,328) - - - - (34,291) - (9,996) (12,965) Disposition of capital assets 3,196 - 49 45 18 53 26 84 - 2,057 Transfers in 23,294 12,929 27,681 19,536 25,071 18,091 24,853 14,263 19,425 22,214 Transfers out (23,161) (12,966) (27,707) (19,547) (24,976) (18,544) (24,357) (14,070) (19,289) (22,046) Total other financing sources (uses) 3,329 35,306 23 42 8,759 1,394 753 322 143 9,374 Net change in fund balances 11,153 $ 17,992 $ (2,177) $ (21,961) $ (1,839) $ (1,596) $ 4,906 $ (1,196) $ (4,381) $ 12,646 $ Debt service as a percentage of noncapital expenditures 5.77% 6.04% 6.85% 7.09% 7.84% 7.32% 7.02% 6.66% 6.27% 6.46% 2016 Comprehensive Annual Financial Report 126 City of Redmond ---PAGE BREAK--- Schedule 5 Assessed Value and Actual Value of Taxable Property Last Ten Fiscal Years Total Taxable Fiscal Year 2007 9,821,026,886 $ 1,359,505,337 $ 11,180,532,223 $ 1.18 $ 2008 12,739,900,548 $ 1,332,371,332 $ 14,072,271,880 $ 1.47 $ 2009 13,205,438,085 $ 1,333,419,562 $ 14,538,857,647 $ 1.35 $ 2010 11,966,374,536 $ 1,362,914,250 $ 13,329,288,786 $ 1.58 $ 2011 11,283,288,467 $ 1,509,947,105 $ 12,793,235,572 $ 1.72 $ 2012 10,962,633,787 $ 1,712,255,548 $ 12,674,889,335 $ 1.78 $ 2013 11,110,361,194 $ 1,863,285,684 $ 12,973,646,878 $ 1.73 $ 2014 12,192,519,668 $ 1,942,543,498 $ 14,135,063,166 $ 1.63 $ 2015 13,995,021,898 $ 1,892,398,680 $ 15,887,420,578 $ 1.49 $ 2016 15,345,755,231 $ 1,959,604,705 $ 17,305,359,936 $ 1.41 $ Source: King County Accounting Division Real and personal property has been assessed at 100% of the estimated value. * Tax rates are per $1,000 of assessed value. Assessed Valuation Tax Rate* Total Direct Real Property Personal Property 2016 Comprehensive Annual Financial Report 127 City of Redmond ---PAGE BREAK--- Schedule 6 Direct and Overlapping Property Tax Rates Last Ten Fiscal Years General Obligation Total School Hospital Emer. Redmond Capital King Co. King Co. General Debt Direct WA King Port Of District District King Co. Medical Facilities Ferry*** Flood*** Fund Service Rate* State County Seattle #414 #2 Library Service Area** District District 2007 1.15 0.03 1.18 2.33 1.29 0.23 2.57 0.50 0.50 0.21 0.05 - - 8.86 2008 1.45 0.02 1.47 2.13 1.21 0.22 2.33 0.45 0.45 0.30 0.05 0.06 0.10 8.76 2009 1.33 0.02 1.35 1.96 1.10 0.20 2.23 0.40 0.42 0.27 0.04 0.05 0.09 8.11 2010 1.56 0.02 1.58 2.22 1.28 0.22 2.80 0.46 0.49 0.30 0.04 0.003 0.11 9.50 2011 1.70 0.02 1.72 2.28 1.34 0.22 2.98 0.48 0.57 0.30 0.05 0.004 0.11 10.05 2012 1.76 0.02 1.78 2.42 1.42 0.23 3.53 0.49 0.57 0.30 0.05 0.004 0.12 10.91 2013 1.73 - 1.73 2.57 1.54 0.23 3.75 0.52 0.57 0.30 0.05 0.004 0.13 11.39 2014 1.63 - 1.63 2.47 1.52 0.22 3.51 0.47 0.56 0.34 0.04 0.003 0.15 10.91 2015 1.49 - 1.49 2.29 1.34 0.19 3.30 0.40 0.50 0.30 0.04 0.003 0.14 9.99 2016 1.41 - 1.41 2.17 1.47 0.17 3.11 0.38 0.48 0.28 0.04 0.003 0.13 9.64 Source: King County Accounting Divison. *Tax rates are per $1,000 of assessed value. **New taxing district as of 2007. ***New taxing districts as of 2008. City Direct Rates Total Direct and Overlapping Rate Initiative 747 passed in November 2001, and subsequent actions by the Washington State Legislature in 2007 limited the annual optional increase in property tax levies to the lesser of one percent or the implicit price deflator. Overlapping Rates 2016 Comprehensive Annual Financial Report 128 City of Redmond ---PAGE BREAK--- Schedule 7 Principal Property Taxpayers Current Year and Ten Years Ago 2016 2007 Taxpayer Rank Rank Microsoft (includes $ 2,501,768,907 1 14.46% $ 2,316,225,030 1 20.72% AvalonBay Communities Inc 276,603,000 2 1.60% - - Puget Sound Energy 200,796,165 3 1.16% 113,466,334 3 1.01% Nintendo 162,087,154 4 0.94% 52,095,796 8 0.47% Bre WA Office Owner LLC 135,949,400 5 0.79% - - AT&T Mobility LLC 124,123,763 6 0.72% - - BRE Properties 122,017,000 7 0.71% 80,226,000 5 0.72% Essex Redmond Hill CW LLP 116,829,000 8 0.68% - - Bear Creek Associates 100,805,000 9 0.58% - - G&I VII Redmond Town Center 77,073,266 10 0.45% - - ASN-Washington Holding 72,367,000 0.42% 96,662,000 4 0.86% Hines Reit Daytona Laguna 63,483,000 0.37% - - Bre Select Hotels Redmond LLC 59,485,553 0.34% - - PS Business Parks LP (formerly Yett Family Partnership) 56,540,200 0.33% 59,272,700 7 0.53% Arden Realty 55,392,455 0.32% - - Safeco Insurance - - - - PPR Redmond Retail LLC (Redmond Town Center) - - 177,509,657 2 1.59% Communities Trust - - 68,218,000 6 0.61% Verizon - - 47,467,400 9 0.42% Aerojet General Corporation (General Dynamics) - - 23,698,402 10 0.21% TOTAL $ 4,125,320,863 23.84% $ 3,034,841,319 27.14% Source: King County Accounting Division. * In 2016 the estimated value of real and personal property in the City of Redmond was $17,305,359,936. * * In 2007 the estimated value of real and personal property in the City of Redmond was $11,180,532,223. Percentage of Total City Taxable Assessed Value* Percentage of Total City Taxable Assessed Value** Taxable Assessed Value Taxable Assessed Value 2016 Comprehensive Annual Financial Report 129 City of Redmond ---PAGE BREAK--- Schedule 8 Property Tax Levies and Collections Last Ten Calendar Years Fiscal Year Amount Percentage of Levy Amount Percentage of Levy 2007 12,957,835 $ 12,856,101 $ 99.2149% 100,768 $ 12,956,869 $ 99.993% 2008 18,692,476 18,510,492 99.0264% 180,705 18,691,197 99.993% 2009 19,537,575 19,322,310 98.8982% 214,135 19,536,445 99.994% 2010 21,034,558 20,844,302 99.0955% 187,053 21,031,355 99.985% 2011 22,025,065 21,853,561 99.2213% 170,638 22,024,199 99.996% 2012 22,468,221 22,311,302 99.3016% 155,437 22,466,739 99.993% 2013 22,307,557 22,156,984 99.3250% 144,658 22,301,642 99.973% 2014 22,859,121 22,717,813 99.3818% 126,046 22,843,859 99.933% 2015 23,582,383 23,424,013 99.3284% 121,847 23,545,859 99.845% 2016 24,271,904 24,070,897 99.1719% 4,983 24,075,880 99.192% Source: King County Assessor and City of Redmond Finance Department Collected within the Fiscal Year of the Levy Total Collections to Date Taxes Levied for the Fiscal Year* Collections in Subsequent Years 2016 Comprehensive Annual Financial Report 130 City of Redmond ---PAGE BREAK--- Schedule 9 Summary of Sales Tax Revenues Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Retail Trade Sales Tax Electronics and Appliances 638,768 $ 531,796 $ 1,087,674 $ 1,445,772 $ 1,087,674 $ 1,869,159 $ 1,903,851 $ 1,340,660 $ 1,384,435 $ 1,610,518 $ Furniture 262,470 436,382 266,049 288,418 266,049 338,453 361,114 396,235 431,383 437,312 General Merchandise 1,515,512 911,412 1,343,640 1,363,100 1,343,640 1,400,435 1,434,422 1,368,845 1,271,899 1,344,487 Miscellaneous Retail Trade 146,303 470,973 612,515 683,478 612,515 692,829 661,752 682,805 647,039 796,026 Other 4,356,254 4,196,636 2,375,512 2,501,637 2,375,512 2,557,826 2,765,333 2,900,178 3,091,632 3,129,752 Total - Retail Trade 6,919,307 6,547,199 5,685,390 6,282,405 5,685,390 6,858,702 7,126,472 6,688,723 6,826,388 7,318,095 Other Sectors Sales Tax Accommodation & Food Services 1,739,732 1,777,479 1,689,694 1,784,896 1,689,694 2,057,634 2,164,327 2,295,177 2,511,185 2,720,525 Construction 3,125,692 3,783,006 3,771,855 2,486,201 3,771,855 2,957,652 4,051,349 3,720,225 3,437,489 4,596,327 Information 4,814,199 1,051,283 1,385,499 974,378 1,385,499 1,452,926 1,422,008 1,537,307 3,206,629 2,038,313 Miscellaneous 2,229,314 1,867,005 1,621,406 1,650,525 1,621,406 1,937,798 2,036,384 2,334,976 2,627,185 11,243,537 Service 1,490,641 1,827,122 1,388,234 1,604,083 1,388,234 1,802,839 1,742,126 1,698,195 2,436,498 2,485,679 Wholesale 2,526,034 2,127,576 2,395,461 2,976,015 2,395,461 2,138,684 2,276,487 2,157,140 2,466,591 2,782,336 Total - Other Sectors Sales Tax 15,925,612 12,433,471 12,252,149 11,476,098 12,252,149 12,347,533 13,692,681 13,743,020 16,685,577 25,866,717 Adjustments * - 118,361 - - - - - - - - Total - Retail Trade & Other Sectors 22,844,919 $ 19,099,031 $ 17,937,539 $ 17,758,503 $ 17,937,539 $ 19,206,235 $ 20,819,153 $ 20,431,743 $ 23,511,965 $ 33,184,812 $ Sales Taxes - Miscellaneous 1,575,433 1,576,329 1,278,411 1,279,366 1,278,411 1,469,886 1,739,060 1,699,683 1,873,176 2,064,707 Total Sales Tax 24,420,352 $ 20,675,360 $ 19,215,950 $ 19,037,869 $ 19,215,950 $ 20,676,121 $ 22,558,213 $ 22,131,426 $ 25,385,141 $ 35,249,519 $ Notes: * Includes One-Time Adjustments in 2008, also includes an SST Mitigation payment of $85,660 in 2008. Sales Tax - Miscellaneous includes Sales Tax-Criminal Justice, Washington State Use Tax and Hotel/Motel Tax. 2016 Comprehensive Annual Financial Report 131 City of Redmond ---PAGE BREAK--- Schedule 10 Ratios of Outstanding Debt by Type Last Ten Fiscal Years Percentage Public Of Per General Special Works Total Capita Fiscal Obligation Assessment Trust Capital Private Revenue Primary Personal Debt Per Year Bonds Bonds Fund Loans Leases Contract Bonds Loans Government Income* Capita** 2007 40,531,384 $ 585,000 $ 1,867,058 $ - $ - $ - $ 465,385 $ 43,448,827 $ 1.49% 857 $ 2008 72,455,000 530,000 1,495,340 - - 11,755,000 85,356 86,320,696 2.91% 1,682 2009 70,040,000 170,000 1,161,728 - - 11,190,000 - 82,561,728 2.74% 1,591 2010 67,540,000 - 828,118 - - 10,600,000 - 78,968,118 2.59% 1,471 2011 72,270,000 - 548,686 - - 9,985,000 - 82,803,686 2.72% 1,501 2012 68,920,000 - 2,140,792 - - 9,345,000 - 80,405,792 2.51% 1,452 2013 65,280,000 - 1,843,885 - - 8,680,000 - 75,803,885 2.26% 1,358 2014 64,394,621 - 1,677,549 - - 30,660,000 - 96,732,170 2.67% 1,676 2015 58,530,000 - 1,511,212 - - 29,170,000 4,412,000 93,623,212 2.30% 1,582 2016 60,380,000 - 1,416,763 - - 27,630,000 4,271,663 93,698,426 2.13% 1,547 * 2016 per capita income of $72,530 from US Bureau of Economic Analysis. 2016 population total of 60,560 from State of Washington Office of Financial Management. Governmental Activities Business-Type Activities 2016 Comprehensive Annual Financial Report 132 City of Redmond ---PAGE BREAK--- Schedule 11 Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Percentage of Fiscal General Actual Taxable Year Obligation Bonds Value of Property* 2007 40,531,384 $ 0.36% 800 $ 2008 72,455,000 0.51% 1,412 2009 70,040,000 0.48% 1,350 2010 67,540,000 0.51% 1,258 2011 72,270,000 0.56% 1,310 2012 68,920,000 0.54% 1,245 2013 65,280,000 0.50% 1,169 2014 61,780,000 0.44% 1,071 2015 58,530,000 0.37% 989 2016 60,380,000 0.35% 997 Source: King County Accounting Division. * In 2016 the estimated value of real and personal property in the City of Redmond was $17,305,359,936 Details regarding the City's outstanding debt can be found in the notes to the financial statements. Per Capita 2016 Comprehensive Annual Financial Report 133 City of Redmond ---PAGE BREAK--- Schedule 12 Direct and Overlapping Governmental Activities Debt As of December 31, 2016 Estimated Net Debt Percentage Estimated Share of Outstanding Applicable* Overlapping Debt Overlapping Debt: King County 764,587,000 $ 4.06% 31,042,232 $ Port of Seattle 283,620,000 4.06% 11,514,972 School District #405 749,554,010 4.52% 33,879,841 School District #414 116,013,205 31.83% 36,927,003 Hospital District #2 207,937,008 24.09% 50,092,025 King CountyRural Library 97,581,556 6.98% 6,811,193 Fire District #34 - - - Total Overlapping Debt 2,219,292,779 170,267,266 Direct Debt: City of Redmond** 61,796,763 100.00% 61,796,763 Total Direct and Overlapping Debt 2,281,089,542 $ 232,064,029 $ *Applicable percentage is determined by the ration of assessed valuation of taxable property in overlapping unit to valuation of property subject to taxation in the City of Redmond. **City of Redmond Overlapping Debt - [prev. year] Tax Roll Source:King County Finance Office; King County Assessor Fire Dist #34 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 King County Port of Seattle S.D. #405 S.D. #414 Hospital District #2 K. C. Library City of Redmond Direct Debt 2016 Comprehensive Annual Financial Report 134 City of Redmond ---PAGE BREAK--- Schedule 13 Legal Debt Margin Information (in thousands) Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Debt limit 838,540 $ 955,493 $ 990,408 $ 998,139 $ 934,746 $ 970,751 $ 1,055,921 $ 1,190,433 $ 1,191,557 $ 1,397,331 $ Total net debt applicable to limit 40,287 72,182 69,767 67,267 71,996 70,785 67,124 63,458 60,041 61,797 Legal debt margin 798,253 $ 883,311 $ 920,641 $ 930,872 $ 862,750 $ 899,966 $ 988,797 $ 1,126,975 $ 1,131,516 $ 1,335,534 $ Total net debt applicable to limit as a percentage of debt limit 4.80% 4.80% 7.04% 6.74% 7.70% 7.29% 6.36% 5.33% 5.04% 4.42% Councilmanic Excess Levy - $ 465,777,022 $ 279,466,213 (279,466,213) 279,466,213 186,310,809 61,796,763 - 61,796,763 - - - 61,796,763 - 217,669,450 $ 186,310,809 $ 1,397,331,067 $ - 1,397,331,067 465,777,022 $ 465,777,022 $ - - 1,335,534,304 $ 61,796,763 61,796,763 - 61,796,763 - - - - - General Capacity Special Purpose Capacity Utility Purposes 1.50% of Assessed Value 465,777,022 $ - - 465,777,022 465,777,022 Debt Outstanding: Bonds Fiscal Year Total Capacity Statutory Debt Limit December 31, 2016 Assessed Value: Note: Under State law voters may approve general obligation debt issues of up to 7.5% of assessed valuation. This 7.5% debt capacity is allocated evenly among general government, parks/open space, and utilities resulting in a 2.5% limit for each. Within the 2.5% limit, the City Council has authority to issue bonds without voter approval for a combined total of up to 1.5% of the City's assessed valuation. $18,631,080,894 Parks and Open Space 465,777,022 $ - 2.50% of Assessed Value *Property assessed at 100% of the estimated value. Total Debt Outstanding Less amount available in Debt Service Fund Net Debt Outstanding Remaining Debt Capacity 2016 Comprehensive Annual Financial Report 135 City of Redmond ---PAGE BREAK--- Schedule 14 Pledged-Revenue Coverage Last Ten Fiscal Years Page 1 of 3 Less: Special Fiscal Gross Operating Net Available Coverage Assessment Year Revenue Expenses Revenue Principal Interest Collections Principal Interest Coverage 2007* $ N/A $ N/A $ N/A $ N/A $ N/A $ N/A $ 244,988 $ 195,000 $ 39,378 $ 1.05 2008 37,014,274 28,868,139 8,146,135 - - N/A 286,814 55,000 28,775 3.40 2009 40,094,938 28,376,280 11,718,658 565,000 532,513 10.68 92,929 360,000 25,796 0.24 2010^ 38,542,022 26,557,555 11,984,467 590,000 512,887 10.87 - 170,000 8,820 - 2011 41,162,374 29,963,912 11,198,462 615,000 489,288 10.14 - - - - 2012 45,741,065 30,807,455 14,933,610 640,000 464,688 13.52 - - - - 2013 46,932,427 32,346,978 14,585,449 665,000 439,088 13.21 - - - - 2014ᶲ 47,944,999 33,038,457 14,906,542 970,000 762,950 8.60 - - - - 2015 50,427,052 34,943,803 15,483,249 1,490,000 1,383,348 5.39 - - - - 2016 52,703,080 36,965,009 15,738,071 1,680,338 # 1,491,404 # 4.96 - - - - Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. The stormwater utility and the water/wastewater utility are combined into the waterworks utility for purposes of the 2008 debt issuance. * Revenue bond coverage ratio is not applicable as bonds were called early and paid off. Includes operating and investment income excluding unrealized gains or losses on investments. Excludes depreciation and amortization, includes operating transfers out. The 1993 Refunding Bond Issue required coverage of 1.25. The 2008 Revenue Bond Issue requires coverage of 1.20. ᶲ In 2014 the City issued the utility system revenue bonds not to exceed $26.70 million. This debt issuance is to provide funds to finance certain costs of additions, betterments, and extensions to the City's combined water supply, wastewater, storm, and surface water drainage system. ^ The Special Assessment bonds were paid in full in 2010 # This includes $4,412,000 loan funded by the Washington State Department of Ecology towards the Redmond Way Water Quality Facility. Historical Operating Results - Debt Service Coverage (Unaudited) 2012 2013 2014 2015 2016 Income (loss) before contributions and transfers 6,377,286 $ 11,669,167 $ 11,781,117 $ 9,256,897 $ 4,667,095 $ Adjustments: Interest and Fiscal Charges 438,741 412,866 669,491 916,981 1,301,877 Depreciation Expense 4,838,721 5,093,496 5,575,052 5,637,461 6,477,812 Grants (related to capital expenditures) (1,071,419) (4,810,737) (5,266,408) (2,364,078) (350,933) Rate Stabilization Account Transfers (1,146,447) (483,450) (800,000) (1,250,000) - Capital Facilities Charges 5,759,744 2,988,782 3,538,986 3,743,038 4,181,600 Net Revenue Available for Debt Services 15,196,626 $ 14,870,124 $ 15,498,238 $ 15,940,299 $ 16,277,451 $ Outstanding Parity Bonds Annual Debt Service 1,104,688 $ 1,104,088 $ 1,732,950 $ 2,873,348 $ 3,171,742 $ Debt Service Coverage 13.8 $ 13.5 $ 8.9 $ 5.6 $ 5.1 $ Net Revenues Available for Other Purposes 14,091,938 $ 13,766,036 $ 13,765,288 $ 13,066,951 $ 13,105,709 $ Water/Wastewater Revenue Bonds Special Assessment Bonds Debt Service Debt Service 2016 Comprehensive Annual Financial Report 136 City of Redmond ---PAGE BREAK--- Schedule 14 Pledged-Revenue Coverage Page 2 of 3 The following tables provide historical information regarding the number of water, wastewater and stormwater utility customers (accounts) for the past five years. 2011 2012 2013 2014 2015 2016 Single Family 11,129 11,203 11,372 11,524 11,688 11,890 Multifamily 208 210 208 208 209 210 Commercial 942 937 893 897 891 885 Irrigation 186 191 199 209 217 221 Other 10 10 12 13 15 19 Total 12,475 12,551 12,684 12,851 13,020 13,225 Transfer of accounts to the City of Kirkland from an earlier annexation. Multi-use (commercial, multifamily, irrigation.) 2011 2012 2013 2014 2015 2016 Single Family 10,583 10,665 10,830 11,000 11,175 11,378 Multifamily 205 211 233 209 210 213 Commercial 885 887 880 881 877 869 Irrigation 1 1 1 1 1 1 Other 10 10 18 14 16 19 Total 11,684 11,774 11,962 12,105 12,279 12,480 Transfer of accounts to the City of Kirkland from an earlier annexation. Multi-use (commercial, multifamily, irrigation.) Stormwater 2011 2012 2013 2014 2015 2016 Residential 10,710 10,790 10,932 11,087 11,244 11,428 Other 1,157 1,161 1,154 1,211 1,223 1,220 Total 11,867 11,951 12,086 12,298 12,467 12,648 Commercial and multifamily NUMBER OF WATER CUSTOMERS NUMBER OF WASTEWATER CUSTOMERS NUMBER OF STORMWATER CUSTOMERS 2016 Comprehensive Annual Financial Report 137 City of Redmond ---PAGE BREAK--- Schedule 14 Pledged-Revenue Coverage Page 3 of 3 LARGEST CUSTOMERS OF THE SYSTEM FOR THE YEAR ENDED DECEMBER 31, 2016 Customer Water Consumption (000'S) Water Billings Wastewater Billings King County Stormwater Billings Total Revenue % of Total Gross Revenue MICROSOFT 30,498 1,668,258 $ 328,522 $ 1,040,078 $ 1,077,832 $ 4,114,690 $ 7.99% CITY OF REDMOND 4,044 308,747 22,223 61,242 1,292,629 1,684,841 3.27% UNISEA INC 4,687 143,674 79,386 340,514 46,825 610,399 1.19% SIXTY-01 APARTMENT COMPLEX 4,484 208,091 68,368 211,585 64,173 552,217 1.07% DIG-KW REDMOND, LLC 3,838 165,572 53,399 175,461 47,971 442,403 0.86% ESSEX REDMOND HILL NE LP 3,625 151,723 55,296 173,239 51,002 431,260 0.84% ESSEX REDMOND HILL CWLP 2,964 127,495 48,765 153,468 46,667 376,395 0.73% CAMBRIAN APARTMENTS 04WA009 3,337 152,641 53,172 160,616 - 366,429 0.71% EASTSIDE RETIREMENT ASSN 2,841 126,077 38,695 124,558 65,716 355,046 0.69% KING COUNTY PARKS/MARYMOOR 2,722 177,438 - - - 177,438 0.34% 63,040 3,229,716 $ 747,826 $ 2,440,761 $ 2,692,815 $ 9,111,118 $ 17.69% Based on percentage of total Gross Revenue Reflects the amount paid to King County for wastewater treatment. King County wastewater treatment rates are passed directly to City customers. 2016 Comprehensive Annual Financial Report 138 City of Redmond ---PAGE BREAK--- Schedule 15 Demographic and Economic Statistics Last Ten Fiscal Years 2007 50,680 2,924,743 $ 57,710 $ 8,126 22,869 3.0 2008 51,320 2,983,796 $ 58,141 $ 8,098 23,144 3.6 2009 51,890 2,952,749 $ 56,904 $ 8,369 23,323 6.6 2010 53,680 2,959,700 $ 55,136 $ 8,789 24,227 7.0 2011 55,150 3,189,711 $ 57,837 $ 9,060 24,671 5.6 2012 55,360 3,326,582 $ 60,090 $ 9,288 24,770 4.5 2013 55,840 3,505,077 $ 62,770 $ 9,413 24,872 3.5 2014 57,700 3,974,203 $ 68,877 $ 9,628 25,549 3.8 2015 59,180 4,292,325 $ 72,530 $ 9,879 26,141 4.0 2016 60,560 4,392,417 $ 72,530 $ 10,402 26,509 3.2 * State of Washington, Office of Financial Management. # Fiscal Year Redmond Personal Income (in thousands)** King County Per Capita Personal Income*** Number of Housing Units Redmond Population* School Enrollment# Unemployment Rate## King County Per Capita Personal Income applied to Redmond population. Information is one year behind, 2016 will be updated in the 2017 CAFR King County Per Capita Personal Income as provided by Bureau of Economic Analysis. BEA is one year behind, 2016 will be updated in the 2017 CAFR Lake Washington School District total as of October, 2016; includes schools with Redmond addresses, although some are located in unincorporated King County. Statistics are not available to determine the number of students from the Redmond/King County populace. State of Washington, Department of Employment Security (figures are prorated on Redmond's relationship to the County's unemployment rate). 2016 Comprehensive Annual Financial Report 139 City of Redmond ---PAGE BREAK--- Schedule 16 Principal Employers Current Year and Nine Years Ago 2016 2007 Employer Employees Rank Employees Rank Microsoft Corporation 34,351 1 45.58% 32,911 1 42.68% Terex (formerly Genie Industries) 2,656 2 3.52% 3,472 2 4.50% Eurest Dining Services @ Microsoft 1,041 3 1.38% 697 9 0.90% Aerotek, Inc. 978 4 1.30% Nintendo of America Inc. (includes Nintendo Software Technology) 945 5 1.25% 767 8 0.99% AT&T Mobility 826 6 1.10% 1,412 4 1.83% United Parcel Service 757 7 1.00% Lake Washington School District * 1,013 6 1.31% Honeywell International Inc. 701 8 0.93% 819 7 1.06% CBRE, Inc. 491 9 0.65% Alstom Grid LLC 411 10 0.55% Volt Technical Resources, LLC 1,914 3 2.48% Group Health * 1,031 5 1.34% Vacation Ownership 631 10 0.82% TOTAL 43,157 57.27% 44,667 57.93% Source: City of Redmond Finance Dept., Business License Division *Employer exempt from business license requirement **Total city employment including exempt businesses listed is 75,363 for 2016. Percentage of Total City Employment** Percentage of Total City Employment*** 2016 Comprehensive Annual Financial Report 140 City of Redmond ---PAGE BREAK--- Schedule 17 Full-time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Function/Program General Government Executive 11.50 11.00 14.00 13.00 13.00 12.00 12.00 15.00 19.00 20.00 Finance and Information Services 62.60 63.60 59.97 55.81 56.81 54.50 54.50 53.50 56.00 57.00 Human Resources 9.63 9.63 13.43 11.50 11.50 11.50 11.50 11.50 11.54 11.54 Legal 4.25 4.25 4.25 4.25 4.25 3.75 3.75 3.75 3.75 3.75 Planning and Community Development 50.81 58.31 50.72 43.65 43.65 61.91 61.91 73.89 71.89 77.89 Security Police 115.50 127.50 128.40 127.30 127.10 129.10 128.10 129.30 130.41 129.41 Fire 149.20 171.20 168.50 164.50 160.50 160.25 160.25 160.50 163.50 164.50 Culture and Recreation 54.12 62.22 62.67 61.55 61.54 60.56 60.56 60.69 61.02 61.02 Public Works 75.75 77.75 79.05 72.71 72.76 66.23 66.23 66.23 72.02 75.98 Water/Wastewater 39.60 39.60 40.60 39.29 39.25 34.16 34.16 37.53 38.44 34.95 UPD Water/Wastewater 5.94 5.94 5.94 - - - - - - - Stormwater Management 29.77 29.77 28.77 31.67 31.67 30.85 30.85 27.60 26.90 26.93 Total 608.67 660.77 656.30 625.23 622.03 624.81 623.81 639.49 654.47 662.97 Source: City Budget Office 2016 Comprehensive Annual Financial Report 141 City of Redmond ---PAGE BREAK--- Schedule 18 Operating Indicators by Function/Program Last Ten Fiscal Years* Function/Program Police Calls dispatched 24,276 24,286 27,030 27,531 23,215 22,640 23,768 24,586 25,508 25,682 Parking violations 1,189 1,137 1,116 1,179 858 893 1,042 907 937 469 Traffic violations 7,381 9,381 10,532 13,574 7,990 5,033 4,875 5,036 5,990 5,080 Fire Calls for service (fire and aid) 9,896 10,508 10,740 10,404 9,587 9,783 9,941 10,653 9,864 10,955 Average response time (fire & aid) - minutes & seconds 7:14 6:30 6:30 6:24 6:43 6:41 5:12 5:16 6:44 5:38 Fire prevention maintenance inspections 1,394 1,500 2,587 1,606 1,690 1,452 1,658 841* 2,127 1,442 Operations inspections 19 495 - 256 1,353 - - - 598 246 Culture and Recreation # Preschool registrations 25,000 21,412 19,456 20,093 19,540 22,569 24,874 24,990 5,958 Youth registrations 24,377 26,415 18,046 19,118 23,244 27,525 21,344 23,092 16,105 Teen program registrations 28,047 25,097 18,722 19,512 15,764 16,272 16,048 17,027 17,739 Adult program registrations 61,450 59,959 43,151 41,920 45,313 43,180 39,379 38,633 47,408 Senior Center participants 45,028 45,807 37,443 41,785 45,050 46,279 46,241 44,771 48,544 Utility Services Residential units served 13,195 13,563 13,669 13,972 14,236 14,473 14,773 15,033 15,240 15,428 Commercial units served 1,451 1,474 1,482 1,429 1,434 1,439 1,407 1,428 1,437 1,431 Water Average daily demand (gallons) unavailableᶱ * The Fire Prevention Maintenance inspection program was re-structured through a LEAN initiative process during 2014, resulting in a reduced number of inspections completed for the year. Program was suspended January 2007 - March 2008 Data is no longer seperated for maintenance inspections # New programs were added in 2007 Method of calculation changed in 2007 to more accurately assess number of visitors Sewage treatment provided by King County Wastewater Treatment Division ᶱ Average daily demand number won't be available until April 2017. 2007 6,506,569 6,520,473 2016 2011 2008 2010 2009 2012 2015 6,754,372 5,900,305 5,877,325 6,132,129 6,441,596 6,594,716 7,095,464 2014 21,651 13,329 19,186 43,945 44,742 2013 2016 Comprehensive Annual Financial Report 142 City of Redmond ---PAGE BREAK--- Schedule 19 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Police Number of stations 1 1 1 1 1 1 1 1 1 1 Number of police vehicles 49 50 45 59 59 59 59 61 59 53 Fire Number of stations 6 6 6 6 6 7 7 7 7 7 Number of fire engines 11 11 9 9 8 8 8 8 8 8 Number of aid vehicles 15 15 16 15 16 16 16 16 16 16 Transportation Center lane miles of paved roads 137 138 138 142 143 143 146 146 148 149 Traffic signals 90 91 95 98 102 103 104 104 105 106 Street lights 1,132 1,290 1,286 1,279 1,343 1,456 1,512 1,554 1,604 1,638 Bridges 9 9 9 9 18 18 18 18 18 18 Culture and Recreation Number of developed parks 30 30 30 30 30 31 31 36 35 36 Number of undeveloped parks 7 7 8 8 8 11 11 15 13 15 Acres of developed parks 1,200 1,172 1,203 1,204 1,205 1,205 1,205 1,232 1,217 1,232 Acres of undeveloped parks 105 105 106 106 106 114 114 155 105 155 Miles of developed trails 44 44 44 36 37 37 37 36 45 36 Utility Services Water Storage Capacity (millions of gallons) 31.8 31.8 31.8 31.8 31.8 31.8 31.8 31.8 31.8 31.8 Number of wells 5 5 5 5 5 5 5 5 5 5 Miles of main 309 315 327 328 331 332 329 333 328 336 Sewer Number of manholes 6,733 6,937 6,645 6,651 6,716 6,760 6,801 6,901 6,977 7,050 Miles of main 214 219 211 212 214 215 216 219 221 229 Number of pumplift stations 23 23 23 23 23 24 23 23 23 23 Stormwater # of manholes/catch basins 9,951 10,327 10,475 10,529 10,578 10,674 10,830 11,050 11,169 11,444 Miles of pipe 167 172 173 174 175 178 179 183 185 189 Oil water separators 24 24 24 24 24 24 24 24 24 24 2016 Comprehensive Annual Financial Report 143 City of Redmond