HomeMy WebLinkAboutWA State 2017 Audit
Financial Statements and Federal Single Audit
Report
City of Pasco
For the period January 1, 2017 through December 31, 2017
Published September 27, 2018
Report No. 1022276
Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 Pat.McCarthy@sao.wa.gov
Office of the Washington State Auditor
Pat McCarthy
September 27, 2018
Mayor and City Council
City of Pasco
Pasco, Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report on the City of Pasco’s financial statements and compliance with
federal laws and regulations.
We are issuing this report in order to provide information on the City’s financial condition.
Sincerely,
Pat McCarthy
State Auditor
Olympia, WA
Washington State Auditor’s Office Page 3
TABLE OF CONTENTS
Schedule of Findings and Questioned Costs ................................................................................... 4
Schedule of Audit Findings and Responses .................................................................................... 6
Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards..................................................................................................... 9
Independent Auditor's Report on Compliance for Each Major Federal Program and Report on
Internal Control Over Compliance in Accordance With the Uniform Guidance ......................... 12
Independent Auditor's Report on Financial Statements ................................................................ 15
Financial Section ........................................................................................................................... 19
Corrective Action Plan for Findings Reported Under Uniform Guidance ................................. 106
About the State Auditor's Office ................................................................................................. 108
Washington State Auditor’s Office Page 4
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
City of Pasco
January 1, 2017 through December 31, 2017
SECTION I – SUMMARY OF AUDITOR’S RESULTS
The results of our audit of the City of Pasco are summarized below in accordance with Title 2 U.S.
Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Financial Statements
We issued an unmodified opinion on the fair presentation of the financial statements of the
governmental activities, the business-type activities, each major fund and the aggregate discretely
presented component units and remaining fund information in accordance with accounting
principles generally accepted in the United States of America (GAAP).
Internal Control over Financial Reporting:
• Significant Deficiencies: We reported no deficiencies in the design or operation of internal
control over financial reporting that we consider to be significant deficiencies.
• Material Weaknesses: We identified deficiencies that we consider to be material
weaknesses.
We noted no instances of noncompliance that were material to the financial statements of the City.
Federal Awards
Internal Control over Major Programs:
• Significant Deficiencies: We reported no deficiencies in the design or operation of internal
control over major federal programs that we consider to be significant deficiencies.
• Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
Washington State Auditor’s Office Page 5
We issued an unmodified opinion on the City’s compliance with requirements applicable to its
major federal program.
We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a).
Identification of Major Federal Programs:
The following program was selected as a major program in our audit of compliance in accordance
with the Uniform Guidance.
CFDA No. Program or Cluster Title
66.468 Drinking Water State Revolving Fund Cluster – Capitalization Grants
for Drinking Water State Revolving Funds
The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by
the Uniform Guidance, was $750,000.
The City qualified as a low-risk auditee under the Uniform Guidance.
SECTION II – FINANCIAL STATEMENT FINDINGS
See finding 2017-001.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED
COSTS
None reported.
Washington State Auditor’s Office Page 6
SCHEDULE OF AUDIT FINDINGS AND RESPONSES
City of Pasco
January 1, 2017 through December 31, 2017
2017-001 The City’s internal controls over reporting of post-employment
benefits other than pensions were inadequate to ensure accurate
reporting on the financial statements.
Background
City Council, State and federal agencies, and the public rely on the information
included in the financial statements and report to make decisions. City
management is responsible for desi gning and maintaining internal controls to
ensure financial statements are fairl y presented in accordance with generally
accepted accounting principles (GAAP) and provide reasonable assurance
regarding the reliabilit y of financial reporting.
Our audit identified material weaknesses in internal controls over financial
reporting that affected the City’s ability to produce reliable financial statements.
Government Auditing Standards requires that the auditor communicate a material
weakness as a finding.
Description of Condition
We identified the following deficiencies in internal controls that represent a
material weakness:
• Although District staff reviewed the Budgeting, Accounting, and Reporting
System (BARS) Manual for guidance when preparing the City’s financial
statements, they did not accurately apply guidance on how to report items
such as post-employment benefits other than pensions
• City management performed a review of the financial statements but did not
detect a significant issue during the review process
Washington State Auditor’s Office Page 7
• During the audit period, the City implemented a new, complex requirement
to report post-employment benefits other than pensions. City staff were not
sure how to report the post-employment benefits and did not fully
understand GASB requirements to report account balances correctly.
Effect of Condition
The City’s financial statements contained significant errors that management did
not detect. Our audit found the City did not correctly implement the new
requirement to report its post-employment benefits other than pensions, causing it
to under-report its revenues by about $8 million and omit a prior-period adjustment
of about $8 million.
The City subsequently corrected the financial statements as a result of our audit.
Recommendations
We recommend the City:
• Establish a process for reviewing and implementing accounting and
reporting changes
• Ensure someone who understands the reporting requirements performs an
independent review of the financial statements, notes and additional
schedules at the appropriate level of detail to ensure information prepared
is complete and accurate
City’s Response
The City acknowledges weaknesses in its internal control over accounting and
financial statement preparation, however, the City does not agree with the State
Auditor’s determination of a material weakness. The issue noted by SAO was
related to the classification of line items that had no financial impact on the
statement.
This particular misstatement is due to a one-time restatement of fund balance
during the implementation of new GASB standard. Guidance on presentation of the
restatement was difficult to find, however, the City recognizes the resources
available at SAO and will utilize such resource in future. The governmental
revenues were appropriately presented in the Fund Financial Statements. The
statement also directed reader to Note 15 that fully disclosed the restatement. The
misstatement noted has been corrected as noted by SAO. In 2018, the City procured
a Comprehensive Annual Financial Software, which is expected to significantly
reduce time needed to prepare annual financial statement and reduce human
Washington State Auditor’s Office Page 8
errors, giving the City more time to review implementation of new financial
guidance.
We extend our appreciation to the State Auditor’s Office for assisting the City in
identifying the deficiency in our procedure.
Auditor’s Remarks
We appreciate the City's commitment to resolve this finding and thank the City for
its cooperation and assistance during the audit. We will review the corrective action
taken during our next regular audit.
Applicable Laws and Regulations
Statement No. 45 of the Governmental Accounting Standards Board
Statement No. 75 of the Governmental Accounting Standards Board
RCW 43.09.200 Local government accounting – Uniform system of accounting
Government Auditing Standards, December 2011 Revision, paragraph .23
The American Institute of Certified Public Accountants defines significant
deficiencies and material weaknesses in its Codification of Statements on Auditing
Standards, section 115
Budgeting, Accounting, and Reporting System (BARS) Manual – Accounting,
Accounting Principles and Internal Control
Washington State Auditor’s Office Page 9
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
City of Pasco
January 1, 2017 through December 31, 2017
Mayor and City Council
City of Pasco
Pasco, Washington
We have audited, 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, the financial statements of the
governmental activities, the business-type activities, each major fund and the aggregate discretely
presented component units and remaining fund information of the City of Pasco, as of and for the
year ended December 31, 2017, and the related notes to the financial statements, which collectively
comprise the City’s basic financial statements, and have issued our report thereon dated
September 24, 2018. As discussed in Note 15 to the financial statements, during the year ended
December 31, 2017, the City implemented Governmental Accounting Standards Board Statement
No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit of the financial statements, we considered the City’s internal
control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s
internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s
internal control.
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies and therefore, material weaknesses or significant
deficiencies may exist that were not identified. However, as described in the accompanying
Washington State Auditor’s Office Page 10
Schedule of Audit Findings and Responses, we identified certain deficiencies in internal control
that we consider to be material weaknesses.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control such that there is a reasonable possibility that a
material misstatement of the City's financial statements will not be prevented, or detected and
corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of
deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance. We consider the deficiencies described in
the accompanying Schedule of Audit Findings and Responses as Finding 2017-001 to be a material
weaknesses.
COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City’s financial statements are free
from material misstatement, we performed tests of the City’s compliance with certain provisions
of laws, regulations, contracts and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required
to be reported under Government Auditing Standards.
CITY’S RESPONSE TO FINDINGS
The City’s response to the findings identified in our audit is described in the accompanying
Schedule of Audit Findings and Responses. The City’s response was not subjected to the auditing
procedures applied in the audit of the financial statements and, accordingly, we express no opinion
on the response.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
City’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City’s internal control and
Washington State Auditor’s Office Page 11
compliance. Accordingly, this communication is not suitable for any other purpose. However,
this report is a matter of public record and its distribution is not limited. It also serves to
disseminate information to the public as a reporting tool to help citizens assess government
operations.
Pat McCarthy
State Auditor
Olympia, WA
September 24, 2018
Washington State Auditor’s Office Page 12
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR
EACH MAJOR FEDERAL PROGRAM AND REPORT ON
INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE
WITH THE UNIFORM GUIDANCE
City of Pasco
January 1, 2017 through December 31, 2017
Mayor and City Council
City of Pasco
Pasco, Washington
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM
We have audited the compliance of the City of Pasco, with the types of compliance requirements
described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could
have a direct and material effect on each of the City’s major federal programs for the year ended
December 31, 2017. The City’s major federal programs are identified in the accompanying
Schedule of Findings and Questioned Costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and
conditions of its federal awards applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal
programs based on our audit of the types of compliance requirements referred to above. We
conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States; and the audit
requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Those standards and the Uniform Guidance require that we plan and perform the audit to obtain
reasonable assurance about whether noncompliance with the types of compliance requirements
Washington State Auditor’s Office Page 13
referred to above that could have a direct and material effect on a major federal program occurred.
An audit includes examining, on a test basis, evidence about the City’s compliance with those
requirements and performing such other procedures as we considered necessary in the
circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major
federal program. Our audit does not provide a legal determination on the City’s compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended December 31, 2017.
REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Management of the City is responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and
performing our audit of compliance, we considered the City’s internal control over compliance
with the types of requirements that could have a direct and material effect on each major federal
program in order to determine the auditing procedures that are appropriate in the circumstances
for the purpose of expressing an opinion on compliance for each major federal program and to test
and report on internal control over compliance in accordance with the Uniform Guidance, but not
for the purpose of expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the City's internal control over
compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on
a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance
requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Washington State Auditor’s Office Page 14
Our consideration of internal control over compliance was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control
that might be material weaknesses or significant deficiencies. We did not identify any deficiencies
in internal control over compliance that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
Purpose of this Report
The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other
purpose. However, this report is a matter of public record and its distribution is not limited. It
also serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
Pat McCarthy
State Auditor
Olympia, WA
September 24, 2018
Washington State Auditor’s Office Page 15
INDEPENDENT AUDITOR’S REPORT ON
FINANCIAL STATEMENTS
City of Pasco
January 1, 2017 through December 31, 2017
Mayor and City Council
City of Pasco
Pasco, 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 discretely presented component units
and remaining fund information of the City of Pasco, as of and for the year ended December 31,
2017, and the related notes to the financial statements, which collectively comprise the City’s basic
financial statements as listed on page 19.
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
Washington State Auditor’s Office Page 16
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the City’s preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such
opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
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 discretely presented component units and remaining fund
information of the City of Pasco, as of December 31, 2017, and the respective changes in financial
position and, where applicable, cash flows thereof, and the budgetary comparison for the General
Fund, for the year then ended in accordance with accounting principles generally accepted in the
United States of America.
Matters of Emphasis
As discussed in Note 15 to the financial statements, in 2017, the City adopted new accounting
guidance, Governmental Accounting Standards Board Statement No. 75, Accounting and
Financial Reporting for Postemployment Benefits Other Than Pensions. 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 and required supplementary information listed on page 19
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
Washington State Auditor’s Office Page 17
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 Schedule of
Expenditures of Federal Awards is presented for purposes of additional analysis as required by
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). This schedule
is not a required part of the basic financial statements. Such information is the responsibility of
management and was derived from and relates directly to the underlying accounting and other
records used to prepare the basic financial statements. The information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial
statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the information is fairly stated,
in all material respects, in relation to the basic financial statements taken as a whole.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING
STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated
September 24, 2018 on our consideration of the City’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
Washington State Auditor’s Office Page 18
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.
Pat McCarthy
State Auditor
Olympia, WA
September 24, 2018
Washington State Auditor’s Office Page 19
FINANCIAL SECTION
City of Pasco
January 1, 2017 through December 31, 2017
REQUIRED SUPPLEMENTARY INFORMATION
Management’s Discussion and Analysis – 2017
BASIC FINANCIAL STATEMENTS
Statement of Net Position – 2017
Statement of Activities – 2017
Balance Sheet – Governmental Funds – 2017
Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental
Funds – 2017
Reconciliation of Governmental Funds Statement of Revenues, Expenditures and
Changes in Fund Balance to the Statement of Activities – 2017
Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget to Actual
– General Fund – 2017
Statement of Net Position – Proprietary Funds – 2017
Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds
– 2017
Statement of Cash Flows – Proprietary Funds – 2017
Statement of Net Position – Fiduciary Funds – 2017
Statement of Changes in Fiduciary Net Position – Fiduciary Funds – 2017
Notes to the Financial Statements – 2017
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Changes in the Net OPEB Liability – Old Fire OPEB – 2017
Schedule of Investment Returns – Old Fire OPEB – 2017
Schedule of Contributions – LEOFF 1 OPEB – 2017
Schedule of Changes in Net OPEB Liability – LEOFF 1 OPEB – 2017
Schedule of Proportionate Share of Net Pension Liability – PERS PLAN 1, PERS
PLAN 2/3, LEOFF 1 and LEOFF 2 – 2017
Schedule of Employer Contributions – PERS PLAN 1, PERS PLAN 2/3, LEOFF 1 and
LEOFF 2 – 2017
Washington State Auditor’s Office Page 20
Schedule of Contributions – Fire Pension Fund – 2017
Schedule of Investment Returns – Fire Pension Plan – 2017
Schedule of Changes in the Net Position Pension Liability and Related Ratios – Fire
Pension Fund – 2017
SUPPLEMENTARY AND OTHER INFORMATION
Schedule of Expenditures of Federal Awards – 2017
Notes to the Schedule of Expenditures of Federal Awards – 2017
MANAGEMENTS’ DISCUSSION AND ANALYSIS
As management of the City of Pasco, we offer readers of the financial statements this narrative
overview and analysis of the financial activities of the City of Pasco for the fiscal year ended
December 31, 2017. We encourage readers to consider the information that we have furnished in
our letter of transmittal which can be found starting on page 1 of this report. All amounts, unless
otherwise indicated, are expressed in thousands of dollars.
Financial Highlights
The assets and deferred inflows of the City of Pasco exceeded liabilities and deferred
outflows at the close of the most recent fiscal year by $414,540. Of this amount, $56.11
may be used to meet the government’s ongoing obligations to the citizens and creditors.
The City of Pasco’s total net position improved by $7,024. Approximately 91% of the
increase in net position is due to increases in business-type activities and 9% is due to
governmental-type activities. Significant portion of the increase is attributable to capital
grants and contributions received from developers in the form of donated infrastructure.
As of the close of the current fiscal year, the City of Pasco’s governmental funds reported
combined ending fund balances of $36,455, an increase of $1,363 in comparison with the
prior year, which is inclusive of prior period adjustments that restated fund balance.
At the end of the current fiscal year, the unrestricted, unassigned fund balance for the
City’s General Fund was $13,118, which also represents 29% of total General Fund
expenditures. There was an excess of revenues over expenditures of $861; transfers out
totaling $2,403. Of the transfers out, $1,090 was for one-time expenditures (to cover
construction project capital spending) and $1,313 for cash flow and other subsidies to
Special Revenue funds.
Implementation of GASB 74 - Financial reporting for postemployment benefit plans other
than pension plans, which dictates unfunded OPEB liabilities to be recognized on the face
of an agency's financial statement, has impacted the City for $11,992.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the City of Pasco’s basic
financial statements. Those financial statements comprise three components: 1) government-
wide financial statements, 2) fund financial statements, and 3) notes to the financial statements.
This report also contains other supplementary information in addition to the basic financial
statements themselves.
Government-wide Financial statements. The government-wide financial statements are
designed to provide readers with a broad overview of the City of Pasco’s finances in a manner
similar to a private-sector business. The Statement of Net Position presents information on all of
the City of Pasco’s assets and liabilities with the difference between the two reported as net
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position. Over time increases or decreases in net position may serve as a useful indicator of
whether the financial position of the City of Pasco is improving or deteriorating.
The statement of activities presents information showing how the government’s net position
changed during the most recent fiscal year. All changes in net position are reported as soon as
the underlying event giving rise to the change occurs, regardless of the timing of related cash
flows. Thus, revenues and expenses are reported in this statement for some items that will only
result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation
leave).
The government-wide financial statements distinguish functions of the City of Pasco that are
principally supported by taxes and intergovernmental revenues (Governmental Activities) from
activities that are supported by fees and charges (Business-Type Activities). The governmental
activities of the City of Pasco include general government, public safety, utilities and
environment, transportation, economic environment, and culture and recreation. The business -
type activities of the City of Pasco include water/sewer (which cover water, sewer, irrigation,
process-reuse and storm water activities), equipment maintenance and equipment replacement
services.
The government-wide financial statements can be found on pages 24-25 of this report.
Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain
control over resources that have been segregated for specific activities or objectives. The City
of Pasco, like other state and local governments, uses fund accounting to ensure and demonstrate
compliance with finance-related legal requirements. All of the funds of the City of Pasco can be
divided into three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental Funds. Governmental funds are used to account for essentially the same
functions reported as governmental activities in the government-wide financial statements.
However, unlike the government-wide financial statements, governmental fund financial
statements focus on near-term inflows and outflows of spendable resources, as well as on
balances of spendable resources available at the end of the fiscal year. Such information may be
useful in evaluating a government’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide statements. By doing
so, readers may better understand the long-term impact of the government’s near-term financing
decisions. Both the governmental fund balance sheet and the governmental fund statements of
revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
The City of Pasco maintains thirty-one individual governmental funds including the general fund.
Information is presented separately in the governmental fund balance sheet and in the
governmental fund statement of revenues, expenditures and changes in fund balances for the
general fund, which is a major fund as defined by the Governmental Accounting Standards
Board. In 2017, the General Fund and the Construction Fund were the only major governmental
funds. Data from the other funds are combined into a single, aggregate presentation. Individual
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fund data for each of these non-major governmental funds is provided in the form of Combining
Statements elsewhere in this report.
The City of Pasco adopts an annual appropriated budget for its General Fund. A budgetary
comparison statement has been provided for the General Fund to demonstrate compliance with
this budget.
The basic governmental fund financial statements can be found starting on page 24 of this report.
Proprietary Funds. The City of Pasco maintains two different types of proprietary funds.
Enterprise funds are used to report the same functions presented as business-type activities in the
government-wide financial statements. The City of Pasco uses an enterprise fund to account for
the water/sewer utility. An Internal service fund is an accounting device used to accumulate and
allocate costs internally to the City of Pasco’s various functions. The City of Pasco uses internal
service funds to account for its equipment maintenance and replacement, central stores and
medical/dental insurance. As the central stores, medical/dental insurance and certain equipment
maintenance and replacement services predominately benefit governmental rather than business-
type functions, they have been included with governmental activities in the government-wide
financial statements.
Proprietary funds provide the same type of information as the government-wide financial
statements, only in more detail. The enterprise fund financial statements provide separate
information for the water/sewer fund. Data from the other two internal service funds (equipment
maintenance and equipment replacement of utility equipment) are combined into a single,
aggregated presentation in the basic proprietary fund financial statements starting on page 30.
Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties
outside the government. Generally Fiduciary funds are not reflected in the government-wide
financial statements because the resources of those funds are not available to support the City of
Pasco’s own programs. However with the implementation of GASB Statement 68, Accounting
and Financial Reporting For Pensions, and GASB Statement 74, Financial Reporting For
Postemployment Benefit Plans Other Than Pension Plans, the City is required to include net
Pension and OPEB Liabilities and Assets and the related Deferred Inflows and Outflows of
Resources of the Fiduciary Funds in the Government Wide Statements. The accounting used for
the fiduciary funds is much like that used for enterprise funds except for agency funds which
only show assets and liabilities. The basic fiduciary fund financial statements can be found
starting on page 33 of this report.
Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data
provided in the government-wide and fund financial statements. The notes to the financial
statements can be found starting on page 34.
Government-wide Overall Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government’s
financial position. In the case of the City of Pasco, assets and deferred inflows exceeded liabilities
and deferred outflows by $414.55 million at the close of the most recent fiscal year. The largest
portion of the City of Pasco’s net position $358.44 million (86%) reflects its investment in capital
Page 23
assets (e.g. buildings, machinery, equipment, infrastructure, construction in progress) less any
related outstanding debt used to acquire those assets. The city of Pasco uses these capital assets
to provide services to citizens; consequently, these assets are not available for future spending.
Although the City of Pasco’s investment in its capital assets is reported net of related debt, it
should be noted that the resources needed to repay this debt must be provided from other
resources, since the capital assets themselves cannot be used to liquidate these liabilities. 4 %
($18.10 million) of the City of Pasco’s net position represents resources that are subject to
external restrictions on how they may be used. The remaining $38.01 million of unrestricted net
position (9%) may be used to meet the government’s ongoing obligations to citizens and
creditors.
At the end of the current fiscal year, the City of Pasco is able to report positive balances in all
three categories of net position, both for the government as a whole, as well as for its separate
governmental and business-type activities. The same held true for the prior fiscal year.
As mentioned in the financial highlights, The City’s net position increased by $7.02 million,
during the current fiscal year. All of the increase in the City’s net position was attributable to
capital grants and contributions received from developers in the form of donated infrastructure
related to residential and commercial development and state and federal grants received for street
construction and improvement projects, and, water and sewer infrastructure improvements.
2017 2016 2017 2016 2017 2016
NonCapital assets 63.33$ 51.73$ 38.60$ 25.02$ 101.93$ 76.75
Capital assets 227.02 223.53 187.67 180.87 414.69 404.40
Total assets 290.35 275.26 226.27 205.89 516.62 481.15
Deferred Outflows 1.95 3.41 0.43 0.57 2.38 3.98
Current liabilities 8.94 7.85 6.34 4.32 15.28 12.17
Noncurrent liabilities 32.91 24.14 52.21 40.72 85.12 64.86
Total liabilities 41.85 31.99 58.55 45.04 100.40 77.03
Deferred Inflows 3.62 0.49 0.43 0.08 4.05 0.57
Net position:
Investment in capital assets 217.06 212.71 141.37 141.48 358.43 354.19
Restricted 18.10 16.90 - - 18.10 16.90
Committed 5.37 4.40 - 5.37 4.40
Unrestricted 6.30 12.18 26.34 19.86 32.64 32.04
Total net position 246.83$ 246.19$ 167.71$ 161.34$ 414.54$ 407.53$
City of Pasco's Net Position (in millions)
Governmental Activities Business-Type Activities Total Primary Government
Page 24
Governmental Activities. Governmental activities decreased the City of Pasco’s net position by
($16.73). The decrease is attributable to the implementation of GASB 74 as mentioned in the
financial highlights section. In 2017, the city added 10 positions: 1 in the Police Department, 6
in the Fire Department, 1 in the Administrative & Community Services Department, and 2 in
Community and Economic Development. Additionally, in 2016, the City also approved
additional 11 positions, eight of which were Public Safety hires.
Tax revenues for the City have been increasing at a steady race, reflecting a healthy and growing
economy. Property sales tax revenue increased by 2.5%, Sales tax revenue increased by 6.3%,
and Real Estate Excise tax revenue increased by 20.9%. During the same period, utility tax
revenue increased by 16.4%, primarily due to longer and colder weather.
2017 2016 2017 2016 2017 2016
Revenues
Program revenues:
Charges for services 16.27$ 23.50$ 25.82$ 23.47$ 42.09$ 46.97$
Operating grants & contributions 1.04 1.32 0.07 0.01 1.11 1.33
Capital grants & contributions 14.19 25.05 5.27 7.19 19.46 32.24
General revenues:
Property taxes 7.96 7.93 7.96 7.93
Other taxes 29.82 26.80 29.82 26.80
Investment income and miscellaneous 4.09 2.26 0.21 0.15 4.30 2.41
Total revenues 73.37 86.86 31.37 30.82 104.74 117.68
Program expenses:
General government 8.59 8.72 8.59 8.72
Public safety 30.66 29.38 30.66 29.38
Transportation 17.89 16.63 17.89 16.63
Economic environment 6.89 5.62 6.89 5.62
Culture and recreation 9.17 8.93 9.17 8.93
Interest on long term debt 0.45 0.50 0.45 0.50
Water 10.20 9.48 10.20 9.48
Sewer 8.99 8.57 8.99 8.57
Process water reuse 2.59 3.17 2.59 3.17
Storm water 1.30 1.53 1.30 1.53
Irrigation 1.99 1.65 1.99 1.65
Total expenses 73.65 69.78 25.07 24.40 98.72 94.18
Changes in net position (0.28) 17.08 6.30 6.42 6.02 23.50
Transfers (0.07) - 0.07 - - -
Total changes in net position (0.35)$ 17.08$ 6.37$ 6.42$ 6.02$ 23.50$
Governmental Activities
City of Pasco's Change in Net Position (in millions)
Business-Type Activities Total Primary Government
Page 25
GOVERNMENTAL ACTIVITIES – REVENUES BY SOURCE
GOVERNMENTAL ACTIVITIES – EXPENSES AND PROGRAM REVENUES
Business-Type Activities. 91% of the increase in the City of Pasco’s net position is related to
business-type activities. In 2017, the business type activities made up 40% of the City’s net
Charges for
services
22%
Operating
grants &
contributions
1%
Capital grants
& contributions
19%
Property taxes
11%
Other taxes
41%
Investment
income and
miscellaneous
3%
Sources of Revenues 2017
Charges for
services
27%
Operating
grants &
contributions
1%
Capital grants
&
contributions
29%
Property taxes
9%
Other taxes
31%
Investment
income and
miscellaneous
3%
Sources of Revenues 2016
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
MILLIONS2017 Expenses 2017 Revenue 2016 Expense 2016 Revenue
Page 26
position. This significant impact is due to recognition of the unfunded OPEB liabilities on the
City’s financial statement for the first time as required by GASB 74. The net position for
business-type activities has stayed steady over the last year.
UTILITY ACTIVITIES – EXPENSES AND PROGRAM REVENUES COMPARISON
Financial Analysis of the City’s Funds.
As noted earlier, the City of Pasco uses fund accounting to ensure and demonstrate compliance
with finance related legal requirements.
Governmental Funds. The focus of the City of Pasco’s governmental funds is to provide
information on near-term inflows, outflows and balances of spendable resources. Such
information is useful in assessing the City of Pasco financing requirements. In particular,
unreserved fund balance may serve as a useful measure of a government’s net resources available
for spending at the end of the fiscal year.
As of the end of the 2017, the City of Pasco governmental funds reported combined ending fund
balances of $36,455, which is an increase of $1,363 from the prior year. Approximately 36% of
this total amount, $12,987 constitutes unassigned fund balance, which is available for spending
at the government’s discretion.
The General Fund is the chief operating fund of the City of Pasco. At the end of 2017, unassigned
fund balance of the general fund was $13,118. As a measure of the general fund’s liquidity, it
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
Water Sewer Process Water
Reuse
Stormwater IrrigationMILLIONS
2017 Expenses 2017 Revenue 2016 Expense 2016 Revenue
Page 27
may be useful to compare unrestricted, unassigned fund balance to total expenditures. This
represents 29% of total expenditures.
The fund balance of the City of Pasco’s General Fund decreased by $1,064 during 2017, which
is 2.3% of current year revenues. Overall revenues increased by $3,045 (7%) and total
expenditures increased by $5,411 (13.6%). General fund tax revenues increased by $2,342
(7.5%). Property taxes increased approximately 2% due to new construction and steady
valuations, and sales taxes increased by 6% with the continued steady economic recovery.
The City was able to increase the number of approved personnel posi tions, by adding ten
positions. The General Fund revenues of $46,015 exceeded expenditures of $45,155 before
transfers in/out.
Proprietary Funds. The City of Pasco enterprise funds provide the same type of information
found in the government-wide financial statements, but in more detail and separately states the
activity of the Water/Sewer Utility from the internal service funds. Unrestricted net position of
the utility fund at the end of 2017 was $32,777. The working capital ratio is the current assets
less current liabilities and is a measure of liquidity for the utility to meet its short -term payment
obligations. At the end of 2017, the utility is well positioned as it has current assets of $34,875
available to meet its current liability obligations of $6,313, resulting in a working capital ratio of
5.5. The utility showed a gain before contributions and transfers of $759. This was more than
offset by $5,267 in capital contributions. The City continues to invest in new infrastructure due
to the growth of its population, as well as due to the need to address aging infrastructure issues.
The City has a meter and service replacement program with the goal of replacing its meters on
an average of once every ten years. Local improvement districts (LIDs) are used by the utility to
supplement the ratepayers’ participation in capital construction.
General Fund Budgetary Highlights
The legal level of appropriation is at the fund level. The budget by function is shown to provide
information that is more detailed. There were increases to the original budget by $991 in
expenses, and $1,272 in transfer out appropriations. Majority of the increase was for public
safety at the rate of $1,375.
Actual revenues and expenses both were 105% of the original budget. Revenues are generally
estimated low in order to protect the city from unanticipated funding fluctuations. The City also
started accruing Payroll, which resulted in approximately $1,500; this accrual was not planned
during 2017 budget process.
Capital Asset and Debt Administration
Capital Assets. The City of Pasco’s investment in capital assets for its governmental and
business-type activities as of December 31, 2017 amounts to $411,320 (net of accumulated
depreciation). This investment in capital assets includes land, buildings, improvements
machinery and equipment, park facilities, roads, water and sewer treatment plants, etc. The total
change in the City of Pasco’s capital assets (net of depreciation) for the current year was an
increase of $3,490 for governmental activities and an increase of $6,500 for business-type
Page 28
activities. $10,833 and $3,439 in noncash capital contributions were made to governmental and
business-type activities, respectively, in 2017.
Major capital asset activity during the current fiscal year included the following:
Capital spending in governmental funds for 2017 was $6,802: $268 for general
governmental purposes, $1,053 for public safety purposes, $4,152 for transportation
purposes and $1,352 for culture and recreation purposes. The largest projects for 2017
was $2,103 spending for the 20th Avenue Safety Improvement, and $996 for Police
Community Services Station.
Capital spending in the utility fund (major component of business-activities) for 2017
was $10,206. The largest projects were Columbia Water Supply project at $6,559,
Butterfield WTP 24 Inch Valve Replacement at $478, and Capital Avenue Lift Station at
$399 in 2017.
Additional information on the City of Pasco’s capital assets can be found in note 5 starting on
page 54 of this report.
Long-term Debt. At the end of 2017, the City of Pasco had total outstanding debt of $60.77
million. Of this amount, $9.66 million comprised debt backed by the full faith and credit of the
government. $51.09 million of the City of Pasco bonded debt represents bonds secured primarily
by specified revenue resources (e.g. revenue bonds). The city also has $0.02 million in special
assessment bonds.
Additional information on the City of Pasco’s long-term liabilities can be found in note 7 starting
on page 52 of this report.
2017 2016 2017 2016 2017 2016
Land 16.83$ 15.37$ 2.83$ 2.73$ 19.66$ 18.10$
Construction in process 12.72 16.28 10.31 9.09 23.03 25.37
Buildings and structures 31.52 23.95 34.00 34.31 65.52 58.26
Other improvements 3.16 3.24 0.20 0.06 3.36 3.30
Machinery and equipment 8.69 7.54 7.04 7.09 15.73 14.63
Infrastructure 154.10 157.15 129.92 124.52 284.02 281.67
Total capital assets 227.02$ 223.53$ 184.30$ 177.80$ 411.32$ 401.33$
City of Pasco's Capital Assets at Year-End (in millions)
(Net of Depreciation)
Governmental Activities Total Primary GovernmentBusiness-Type Activities
Page 29
Economic Factors and Next Year’s Budgets and Rates (amounts not in thousands)
In 2017, the Pasco economy was stable and continued to grow. The city issued 2,616 building
permits representing approximately $200 million in construction value. The number of permits
for the City increased by 8% in 2017, however, the construction value went down by 22%. This
discrepancy is due to permit for AutoZone facility in 2016. Of the total permits, 468 were for
new single-family residences, which equates to $119 million in construction value. The average
value of a new home in Pasco was approximately $254,000, in 2017. This stable economy was
reflected in Standard & Poor’s rating the 2017 utility bond issue as AA-/Stable and the 2015
General Obligation bond issue as AA-/Stable.
In 2012, the county’s residents approved a new three-tenths of one percent sales tax increase
devoted to criminal justice. This new revenue source funded a new four-person Street Crimes
unit in the city’s police department; paid for the replacement of the city’s Municipal Court
building; and funded the construction of the city’s new Police Community Services Building,
which broke ground in the spring of 2015, and was completed in the spring of 2017.
In late in 2012, the city annexed a part of Franklin County. 2014 was the first year the city
received the additional property taxes from the annexation. The annexed area was in a part of the
county already surrounded by the city. In the spring of 2015, the city annexed the Road 80 area.
This annexation covers 688 acres and represents an addition of property assessed at
$118,000,000. The City has continued its annexation process as the City continues to grow. The
City annexed property assessed at $520,000 in 2017.
The only fund larger than the General Fund is the Water/Sewer Utility Fund. The Water/Sewer
Utility Fund has grown rapidly over the past few years as it provides services to the thousands of
new homes built over the past decade. Since 2015, City has conducted comprehensive rate studies
for Water, Sewer, Stormwater, and Irrigation services and implemented necessary annual rate
increases. 2017’s rate increases are 5% for water; 9% for sewer; 3% for irrigation; 15% for
Stormwater, and 3% for ambulance services.
Requests for Information
This financial report is designed to provide a general overview of the City of Pa sco’s finances
for all those with an interest in the government’s finances. Questions concerning any of the
information provided in this report or requests for additional financial information should be
addressed to the Finance Director, PO Box 293, Pasco, WA 99301.
2017 2016 2017 2016 2017 2016
General Obligation Bonds 9.66$ 10.43$ 2.27$ 3.38$ 11.93$ 13.81$
Special Assessement Bonds 0.02 0.05 0.02 0.05
Loans & Notes - 0.01 6.30 0.51 6.30 0.52
Revenue Bonds - 42.52 35.10 42.52 35.10
9.68$ 10.49$ 51.09$ 38.99$ 60.77$ 49.48$
Governmental Activities Total Primary GovernmentBusiness-Type Activities
City of Pasco's Bonds and Notes
(in millions)
Page 30
Governmental Business-Type Component Unit
Activities Activities Total
Pasco Public
Facility District
ASSETS
Current assets:
Cash & cash equivalents 24,986,186$ 11,993,618$ 36,979,804$ 57,407$
Restricted cash:
Program, grant, donations 1,328,996 1,328,996
Customer deposits 465,895 2,505,136 2,971,031
Unspent bond proceeds - 10,126,907 10,126,907
Debt covenants 214,582 1,016,542 1,231,124
Investments 14,265,159 6,881,616 21,146,775
Receivables (net of allowances):
Taxes 4,485,538 4,485,538 89,199
Customers 3,178,304 1,578,606 4,756,910
Grants 1,569,886 4,255,202 5,825,088
Due from Other funds 1,560,000 1,560,000
Due from other governments 100,000 100,000
Inventories - 236,790 236,790
Total current assets 52,154,546 38,594,417 90,748,963 146,606
Noncurrent assets:
Restricted cash 455,983 1,624,029 2,080,012
Restricted investments - Debt/IBNR/LID 402,958 1,638,087 2,041,045
Special assessments 330,308 102,879 433,187
Net Pension Asset 8,519,268 8,519,268
Net OPEB Asset 1,410,992 1,410,992
Joint Ventures 55,777 55,777
Capital assets not being depreciated:
Land 16,831,768 2,830,911 19,662,679
Construction work in progress 12,717,587 10,310,773 23,028,360
Capital assets net of accumulated depreciation:
Buildings and structures 31,522,941 34,000,886 65,523,827
Other improvements 3,162,778 196,951 3,359,729
Machinery and equipment 8,691,024 7,043,103 15,734,127
Infrastructure 154,090,363 129,923,990 284,014,353
Total noncurrent assets 238,191,747 187,671,609 425,863,356 -
Total assets 290,346,293 226,266,026 516,612,319 146,606
DEFERRED OUTFLOWS OF RESOURCES
Pension & OPEB related 1,950,865 431,607 2,382,472 -
LIABILITIES
Current liabilities:
Accounts payable 2,775,803 2,188,777 4,964,580 129,328
IBNR payable from restricted assets 1,687,670 1,687,670
Due to other funds 1,560,000 1,560,000
Deposits payable from restricted assets 343,993 358,052 702,045
Accrued interest payable from restricted assets - 203,454 203,454
Compensated absences - current 1,772,392 243,180 2,015,572
Loans due to other governments - current - 462,136 462,136
Bonds - current 805,000 2,887,599 3,692,599
Total current liabilities 8,944,858 6,343,198 15,288,056 129,328
Noncurrent liabilities:
Compensated absences 939,710 2,702 942,412
Net OPEB obligation 16,179,101 16,179,101
Notes payable - 5,838,203 5,838,203
Bonds payable (net of premium)9,151,960 43,872,441 53,024,401
Net pension obligation 6,634,394 2,499,875 9,134,269
Total noncurrent liabilities 32,905,165 52,213,221 85,118,386
Total liabilities 41,850,023 58,556,419 100,406,442 129,328
DEFERRED INFLOWS OF RESOURCES -
Pension & OPEB related 3,619,574 428,780 4,048,354
NET POSITION
Net investment in capital assets 217,059,501 141,373,142 358,432,643
Restricted for:
Cemetery (nonexpendable)505,174 505,174
Program, grant, donations 44,284 44,284
Streets and boulevards 7,996,530 7,996,530
Litter and housing abatement 415,536 415,536
Park development 1,723,175 1,723,175
Culture and recreation (3,699) (3,699)
Capital improvement 6,979,994 6,979,994
Economic development 63,572 63,572
Debt repayment/guarantee 371,214 371,214
Committed for:
Landfill 407,344 407,344
Special revenue funds 4,407,873 4,407,873
Construction projects 556,633 556,633
Unrestricted 6,300,430 26,339,292 32,639,722 17,278
Total Net Position 246,827,561$ 167,712,434$ 414,539,995$ 17,278$
The notes to the financial statements are an integral part of this statement.
Statement of Net Position
December 31, 2017
Page 31
Charges for Operating Capital
Services, Fines &Grants and Grants and Governmental Business-Type Component Unit
Functional Programs
Expenses Licenses Contributions Contributions Activities Activities Total Pasco Public
Facility District
Primary Government:
Governmental activities:
General government 7,593,970$ 4,759,008$ -$ -$ (2,834,962)$ -$ (2,834,962)$ -$
Public safety 30,660,677 8,524,778 532,283 - (21,603,616) - (21,603,616) -
Transportation 17,893,303 2,609,071 22,647 14,017,054 (1,244,531) - (1,244,531) -
Natural & economic environment 6,893,606 6,095,653 457,673 162,924 (177,356) - (177,356) -
Culture and recreation 9,167,992 2,904,673 28,425 9,095 (6,225,799) - (6,225,799) -
Interest on long term debt 438,309 (438,309) - (438,309) -
Total governmental activities 72,647,857 24,893,183 1,041,028 14,189,073 (32,524,573) - (32,524,573) -
Business-type activities:
Water 10,172,389 10,227,241 - 2,168,410 2,223,262 2,223,262 -
Irrigation 1,992,558 1,458,565 - 520,340 (13,653) (13,653) -
Sewer 8,986,586 8,809,264 - 2,207,326 2,030,004 2,030,004 -
Process Water Reuse 2,589,778 3,745,301 55,587 - 1,211,110 1,211,110 -
Storm Water 1,302,643 1,575,287 12,958 371,451 657,053 657,053 -
Total business-type activities 25,043,954 25,815,658 68,545 5,267,527 - 6,107,776 6,107,776 -
Total primary government 97,691,811$ 50,708,841$ 1,109,573$ 19,456,600$ (32,524,573) 6,107,776 (26,416,797) -
Component units
Pasco Public Facility District
Total component units 533,926$ 20,000$ -$ -$ (513,926)
General Revenues:
Taxes:
Property taxes 7,963,302 7,963,302
Sales taxes 15,818,075 15,818,075 513,004
B&O taxes 10,512,227 10,512,227
Excise taxes 3,487,288 3,487,288
Intergovermental 3,609,085 3,609,085
Investment income and miscellaneous 485,195 208,934 694,129 329
Transfers (65,000) 65,000 -
Total general revenues and transfers 41,810,172 273,934 42,084,106 (593)
Change in net position 9,285,599 6,381,710 15,667,309 (593)
Net position - beginning 246,185,564 161,330,724 407,516,288 17,871
Adjustments to Beginning Net Position (8,643,602) (8,643,602)
See Note 15)
Net position - ending 246,827,561$ 167,712,434$ 414,539,995$ 17,278$
The notes to the financial statements are an integral part of this statement.
Program Revenues
Net Revenue (Expenses) and Changes in Net Position
Primary Government
Statement of Activities
For the Year Ended December 31, 2017
Page 32
Other
General Construction Governmental Total
ASSETS
Cash & cash equivalents 5,048,250$ 5,402$ 15,657,995$ 20,711,647$
Restricted cash
Program, grant, donation 44,284 - 44,284
Customer deposits 351,812 114,083 465,895
Cemetery endowement 455,983 455,983
Debt service 214,582 214,582
Investments 4,864,419 4,987,650 9,852,069
Receivables (net of allowances):
Taxes 3,813,203 672,335 4,485,538
Customers 1,268,328 6 1,909,970 3,178,304
Interfund loans 344,131 344,131
Grants 27,434 1,378,400 164,052 1,569,886
Special assessments & loans 330,308 330,308
Due from other funds 1,560,000 1,560,000
Due from other governments 100,000 100,000
Total assets 16,977,730 1,383,808 24,951,089 43,312,627
LIABILITIES
Accounts payable 1,964,552 352,175 583,611 2,900,338
Interfund loans payable 386,043 386,043
Due to other funds 475,000 1,085,000 1,560,000
Deposits payable from restricted assets 234,697 109,296 343,993
Total liabilities 2,199,249 827,175 2,163,950 5,190,374
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue 1,209,086 458,085 1,667,171
FUND BALANCES (DEFICITS)
Nonspendable
Cemetery permanent fund 505,174 505,174
Restricted
Program, grant, donation 44,284 44,284
Street and boulevard 7,996,530 7,996,530
Litter & housing abatement 415,536 415,536
Park development 1,723,175 1,723,175
Cultural and recreation (3,699) (3,699)
Capital improvements 6,979,994 6,979,994
Economic development 63,572 63,572
Debt repayment/guarantee - 371,214 371,214
Committed
Landfill claims 407,344 407,344
Special revenue funds 4,407,873 4,407,873
Construction projects 556,633 556,633
Unassigned 13,117,767 (130,315) 12,987,452
Total fund balances 13,569,395 556,633 22,329,054 36,455,082
Total liabilities, deferred inflows of resources
and fund balances 16,977,730$ 1,383,808$ 24,951,089$
Amounts reported for governmental activities in the statements of net position
are different because:
Long-term assets used in governmental activities are not financial resources and
therefore are not reported in the government funds.231,194,823
Deferred pension outflows are not available to pay for current period expenditures and
therefore are not reported in the governmental funds.1,925,471
Long-term liabilities are not due and payable in the current period and therefore
are not reported in the funds. Proceeds from new debt and repayments of exisiting
debts are recorded as resources and expenditures for fund reporting but are additions
and reductions of liabilities for government wide reporting.(34,986,479)
Deferred inflows and proceeds from asset sales in governmental funds is susceptible to full
accrual therefore are not reported in the Statement of Net Activities. Other expenses are
susceptible to full accrual and are reported in the Statement of Net Activities but not
in the governmental funds.(2,325,174)
Internal Service funds are used by management to charge the costs of certain
activities to individual funds. The assets and liabilities of some internal service funds
are included in the governmental activities in the statement of net position. Interfund loans
between governmental activities are excluded.14,563,838
Net position of governmental activities ( see page 24)246,827,561$
The notes to the financial statements are an integral part of this statement.
Balance Sheet
Governmental Funds
December 31, 2017
Page 33
General Other
Fund Construction Governmental Total
REVENUES
Taxes 33,329,261$ -$ 4,451,632$ 37,780,893$
Licenses and permits 2,177,235 398,420 2,575,655
Intergovernmental revenue 2,130,299 3,192,349 2,628,512 7,951,160
Charges for services 6,932,637 11,505,730 18,438,367
Fines and forfeitures 788,474 171,813 960,287
Miscellaneous revenue 657,342 62,134 2,072,256 2,791,732
Total revenues 46,015,248 3,254,483 21,228,363 70,498,094
EXPENDITURES
Current:
General government 8,775,433 63,141 - 8,838,574
Public safety 25,360,912 377,209 6,514,849 32,252,970
Transportation 1,786,262 87 2,662,527 4,448,876
Natural & economic environment 2,071,815 215,039 4,498,680 6,785,534
Culture and recreation 5,810,905 192,078 2,760,218 8,763,201
Capital outlay:
General government 97,239 170,951 - 268,190
Public safety 57,515 924,857 71,135 1,053,507
Transportation - 4,136,997 15,286 4,152,283
Natural & economic environment - (41,996) 18,597 (23,399)
Culture and recreation 11,416 1,340,210 - 1,351,626
Debt service:
Principal 781,930 25,000 806,930
Interest 401,176 37,133 438,309
Total expenditures 45,154,603 7,378,573 16,603,425 69,136,601
Excess of revenues over (under) expenditures 860,645 (4,124,090) 4,624,938 1,361,493
OTHER FINANCING SOURCES (USES)
Sale of assets - 66,693 66,693
Transfers in 638,000 4,455,223 1,373,163 6,466,386
Transfers out (2,402,717) (4,128,669) (6,531,386)
Total other financing sources (uses)(1,764,717) 4,455,223 (2,688,813) 1,693
Net change in fund balances (904,072) 331,133 1,936,125 1,363,186
Fund balances - beginning (Adjusted- 14,473,467 225,500 20,392,929 35,091,896
See Note15)
Fund balances - ending 13,569,395$ 556,633$ 22,329,054$ 36,455,082$
The notes to the financial statements are an integral part of this statement.
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the Year Ended December 31, 2017
Page 34
Net change in fund balances - total governmental funds 1,363,186$
Amounts reported for governmental activities in the Statement of Activities are
different because of the following reconciling items:
Governmental funds report capital outlays as expenditures. However, in the statement
of net position they are reported net of depreciation as a capital asset. Capital assets contributed
by private developers do not provide current resources and are not reported as revenues in the funds.2,355,750
The issuance of long-term debt (e.g. bonds, notes) provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt consumes current
financial resources of governmental funds. Neither transaction, however, has any affect on net
assets. 806,930
Revenues reported in the statement of activies that do not provide current financial resources
are not reported as revenues in the funds.599,869
Some expenses such as for compensated absences, pension expense, gain on disposal of assets, etc.
are reported in the Statement of Net Activities do not the use of current financial resources and, therefore, 714,941
are not reported as expenditures in the governmental funds.
Internal service funds are used by management to charge the costs of certain activities to
individual funds. The net revenue of certain activity is reported with governmental
activities. Interfund transfers between govermental funds are eliminated in the Statement of Net Activities.3,444,923
Change in net position of governmental activities (see page 25)9,285,599$
The notes to the financial statements are an integral part of this statement.
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balance of Governmental Funds to the Statement of Activities
For the Year Ended December 31, 2017
Page 35
Original Final Variance to
Budget Budget Actual Final Budget
REVENUES
Taxes 31,996,655$ 32,596,655$ 33,329,261$ 732,606$
Licenses and permits 1,921,964 2,121,964 2,177,235 55,271
Intergovernmental revenue 2,118,837 2,123,737 2,130,299 6,562
Charges for services 6,523,156 6,279,131 6,932,637 653,506
Fines and forfeitures 872,100 861,100 788,474 (72,626)
Miscellaneous revenue 498,760 509,260 657,342 148,082
Total revenues 43,931,472 44,491,847 46,015,248 1,523,401
EXPENDITURES
Current:
General government 8,885,624 8,653,358 8,775,433 122,075
Public safety 23,791,956 25,167,299 25,360,912 193,613
Transportation 1,845,649 1,545,369 1,786,262 240,893
Natural & economic environment 1,914,449 1,941,449 2,071,815 130,366
Culture and recreation 5,172,706 5,276,373 5,810,905 534,532
Capital outlay:
General government 76,600 114,089 97,239 (16,850)
Public safety 82,396 62,000 57,515 (4,485)
Culture and recreation - - 11,416 11,416
Debt service:
Principal 770,000 770,000 781,930 11,930
Interest 399,400 399,400 401,176 1,776
Total expenditures 42,938,780 43,929,337 45,154,603 1,225,266
Excess of revenues over (under) expenditures 992,692 562,510 860,645 2,748,667
OTHER FINANCING SOURCES (USES)
Transfers in 493,000 638,000 638,000 -
Transfers out (1,478,000) (2,750,000) (2,402,717) 347,283
Total other financing uses (985,000) (2,112,000) (1,764,717) 347,283
Net change in fund balances 7,692 (1,549,490) (904,072) 3,095,950
Fund balances - beginning (adjusted see note
15) 13,038,450 14,633,214 14,473,467 (159,747)
Fund balances - ending 13,046,142$ 13,083,724$ 13,569,395$ 2,936,203$
Interfund loan activity included for budget purposes but not
included in Statement of Revenues, Expenditures and Changes
in Fund Balance -
Fund balances - ending 13,569,395$
The notes to the financial statements are an integral part of this statement.
Statement of Revenues, Expenditures, and Changes in Fund Balances-Budget to Actual
General Fund
For the Year Ended December 31, 2017
Page 36
Water/Sewer Internal
Utility Service
ASSETS
Current assets:
Cash and cash equivalents 9,786,786$ 6,481,371$
Restricted cash equivalents:
Claims incuured but not reported (IBNR)1,284,712
Customer deposits 2,505,136
Unspent bond proceeds 10,126,907
Revenue bond covenants 1,016,542
Investments 5,369,052 5,925,654
Receivables (net of allowances):
Customers 1,578,606 -
Grants 4,255,202 -
Inventory 236,790 -
Total current assets 34,875,021 13,691,737
Noncurrent assets:
Restricted cash - bond reserve 1,624,029 -
Restricted investments- bond covenants & IBNR 1,638,087 402,958
Special assessments 102,879 -
Interfund loan 14,567
Capital assets not being depreciated:
Land 2,830,911 -
Construction work in progress 10,310,773 1,274,589
Capital assets net of accumulated depreciation:
Buildings and structures 34,000,886 -
Other Improvements 196,951 -
Machinery and equipment 5,571,342 6,081,185
Infrastructure 129,923,990 -
Total noncurrent assets 186,199,848 7,773,299
Total assets 221,074,869 21,465,036
DEFERRED OUTFLOWS
Pension related 431,607 25,394
LIABILITIES
Current liabilities:
Accounts payable 2,158,526 (94,284)
IBNR payable from restricted assests 1,687,670
Other liabilities
Customer deposits payable from restricted assets 358,052
Accrued interest payable from restricted assets 203,454
Compensated absences - current portion 243,180 -
Loans due to other governments - current portion 462,136
Revenue bonds - current portion 2,887,599
Total current liabilities 6,312,947 1,593,386
Noncurrent liabilities:
Compensated absences 2,702 -
Loans due to other governments 5,838,203 -
Current Portion Loan PayableRevenue bonds payable (net of premium)43,872,441 -
Net pension obligation 2,499,875 147,074
Total noncurrent liabilities 52,213,221 147,074
Total liabilities 58,526,168 1,740,460
DEFERRED INFLOWS
Pension related 428,780 25,226
NET POSITION
Net investment in capital assets 129,774,474 7,355,774
Unrestricted 32,777,054 12,368,970
Total net position 162,551,528$ 19,724,744$
5,160,906
Net position of business-type activities (see page 24) 167,712,434$
The notes are an integral part of this statement.
Statement of Net Position
Proprietary Funds
December 31, 2017
Adjustment for the net effect of the current year
activity between the internal service funds and the
enterprise fund
Page 37
Business Type
Water/Sewer Internal
Utility Service
OPERATING REVENUES
Permits 185,594$ -$
Charges for services 25,630,064 11,450,233
Total operating revenues 25,815,658 11,450,233
OPERATING EXPENSES
Depreciation 6,494,372 994,448
Salaries and wages 3,461,415 368,479
Personnel benefits 1,648,291 128,147
Supplies 1,839,791 883,871
Services 9,899,512 5,611,879
Total operating expenses 23,343,381 7,986,824
OPERATING INCOME 2,472,277 3,463,409
NONOPERATING REVENUES (EXPENSES)
Investment income 94,516 115,280
Investment gain (loss)21,952 43,518
Miscellaneous 28,093 127,950
Rents and leases 64,373 -
Grant 68,545 -
Gain (Loss) on disposal of property (362,047) (14,635)
Interest expense (1,629,125) -
Total nonoperating revenues (expenses)(1,713,693) 272,113
Income (loss) before contributions
and transfers 758,584 3,735,522
Capital contributions 5,267,527 -
Transfers in 65,000 -
Changes in net position 6,091,111 3,735,522
Net position - beginning 156,460,417 15,989,222
Net position - ending 162,551,528 19,724,744$
Changes in net position 6,091,111
Adjustment for the net effect the current year activity between
the internal service funds and the enterprise fund 290,599
Change in net position of business-type activities (page 25)6,381,710$
The notes to the financial statements are an integral part of this statement.
Statement of Revenues, Expenses, and Changes in Net Position
Proprietary Funds
For the Fiscal Year Ended 12/31/2017
Page 38
Water/Sewer Internal
Utility Service
CASH FLOW FROM OPERATING ACTIVITIES
Receipts from customers 26,293,338$ 11,484,852$
Payments to employees (5,044,867) (520,645)
Payments to suppliers (10,371,749) (6,707,189)
Net cash provided by (used for) operating activities 10,876,722 4,257,018
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:-
Operating grants 68,545 -
Miscellaneous 28,093 127,950
Rents and leases 64,373 -
Net cash provided from noncapital financial activities 161,011 127,950
CASH FLOW FROM CAPITAL AND RELATED FINANCING
ACTIVITIES
Proceeds from sale of assets - 56,799
Acquisition and construction of capital assets (10,194,258) (1,939,289)
Principal paid on capital debt (3,281,308) -
Interest paid on capital debt (3,085,017) -
Bond proceeds received 9,998,510 -
Payments received from notes and loans 6,005,655 -
Transfers in (out) for capital 65,000 -
Capital charges 1,827,575
Capital grant and contribution proceeds (4,244,265) -
Net cash provided by (used for) capital and related financing activities (2,908,108) (1,882,490)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 3,012,612 1,117,656
Purchase of investments (5,658,715) (1,039,399)
Interest on investments 116,468
Interfund loan repayment - 525,938
Net cash provided from investing activities (2,529,635) 604,195
Net increase (decrease) in cash and cash equivalents 5,599,990 3,106,673
Beginning cash and cash equivalents 19,459,410 4,659,410
Ending cash and cash equivalents 25,059,400 7,766,083
Reconciliation of operating income (loss) to net cash provided by
(used for) operating activities:
Net Operating Income 2,472,277 3,463,409
Adjustment to reconcile operating income (loss) to net cash provided by
(used for ) operating activities:
Depreciation expense 6,494,372 994,448
(Increase) decrease in customer receivables 546,201 34,619
(Increase) decrease in inventories (40,023) -
Increase (decrease) in accounts payable 1,407,577 (211,439)
(Decrease) increase in accounts customer deposits payable (68,521)
(Decrease) increase in compensated absences 11,871
(Increase) decrease in pension deferred outflow 140,912 14,644
Increase (decrease) in pension obligation (437,950) (58,380)
Increase (decrease) in pension deferred inflow 350,006 19,717
Net cash provide by (Used for) Operating Activities 10,876,722$ 4,257,018$
NON CASH ACTIVITIES
Contributions of capital assets 3,439,952 -
Total noncash activities 3,439,952$ -$
The notes to the financial statements are an integral part of this statement.
Statement of Cash Flows
Proprietary Funds
For the Fiscal Year Ended 12/31/2017
Page 39
Pension and Other
Post-Employment
Benefits Agency
ASSETS
Cash & cash equivalents 475,322$ 643,774$
Receivables
Interfund Loan 27,346
Investments
Federal Agency 24,889
Mutual Funds 5,258,209
Total assets 5,785,766 643,774
LIABILITIES
Due to others - 643,774
Total liabilities - 643,774$
NET POSITION
Held in trust for pension benefits/other
post employment benefits 5,785,766$
The notes to the financial statements are an integral part of this statement.
Statement of Net Position
Fiduciary Funds
December 31, 2017
Pension and Other
Post-Employment
Benefits
ADDITIONS
Taxes 63,504$
Investment earnings
Interest 802,170
Dividends 89,802
Total Additions 955,476
DEDUCTIONS
Pension benefits 120,503
Medical premiums 94,835
Administrative expenses 59,921
Total deductions 275,259
Change in net position 680,217
Net position - beginning 5,105,549
Net position - ending 5,785,766$
The notes to the financial statements are an integral part of this statement.
Statement of Changes in Net Position
Fiduciary Funds
For the year ended December 31, 2017
Page 40
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Pasco have been prepared in conformity with generally
accepted accounting principles (GAAP) as applied to governmental units. The Governmental
Accounting Standards Board (GASB) is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. The significant accounting policies
are described below.
A. Reporting Entity
The City of Pasco was incorporated on May 4, 1891 and operates under the laws of the
state of Washington applicable to a Non-Charter Code City with a Council/Manager
form of government. As required by the generally accepted accounting principles the
financial statements present City of Pasco as a primary government unit. The
component unit discussed below is included in the City reporting entity because of the
significance of its operational relationship with the City of Pasco.
The Pasco Public Facility was created in 2002 pursuant to Chapter 35.57 of the Revised
Code of Washington for the purposes of acquiring, constructing, operating and
financing one or more regional centers through cooperative and joint ventures with the
City of Kennewick. The PFD is discreetly presented in the component unit column in
the government-wide financial statements to emphasize that is a legally separate entity.
B. Basis of Presentation - Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the
statement of activities) report information on all of the non-fiduciary activities of the
primary government and its component unit. Although fiduciary funds are excluded
from the government-wide financial statements, all pension and other post-employment
benefits (OPEB) components of fiduciary funds are required to be reported in the
government-wide financial statements. For the most part, 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 segment is offset by program revenues. Direct expenses are those that
are clearly identifiable with a specific function or segment. Our policy is to allocate
indirect costs to 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 or a particular function
or segment. Taxes and other items not properly included among program revenues are
reported instead as general revenues.
Page 41
As a general rule the effect of the inter-fund activity has been eliminated from the
government–wide financial statements. Exceptions to this rule include business taxes
the utility pays to the general fund, activities in internal service funds in which outside
parties are engaged and certain other service functions between funds, that if eliminated
may misrepresent the cost reported for various other functions of the government.
Separate fund financial statements are provided for governmental funds, proprietary
funds, and fiduciary funds. Major individual governmental funds and major individual
enterprise funds are reported as separate columns in the fund financial statements.
The City of Pasco reports the following major governmental funds:
The General Fund: The General (or current expense) Fund is the City of Pasco’s
primary operating fund. It accounts for all financial resources of the general
government, except those required or elected to be accounted for in separate fund.
The Construction Fund: the Construction Fund is a capital project fund used to
account for significant construction and capital acquisition related to governmental
activities.
The City of Pasco reports the following major proprietary fund:
The Water/Sewer Fund: the Water/Sewer Fund accounts for water, sewer, water
reuse, storm water and irrigation utilities activities.
Additionally, the City of Pasco reports the following fund types:
Special Revenue funds are used to account for specific revenue sources that are
restricted, committed, or assigned to expenditures for a particular purpose.
Debt Services funds are used to account for the resources accumulated and
payments made for principal and interest on long–term general obligation debt of
governmental funds.
Permanent funds are used to report resources that are legally restricted to the extent
that only earnings, not principal, may be used for purposes that support the
government’s program.
Internal Service funds are used to account for equipment replacement and
operations, central stores, as well as medical/dental insurance services provided to
other departments on a cost-reimbursement basis.
Pension Trust funds are used to account for the sources and uses of funds to meet
the pension benefit and other post-employment benefit obligations made to firemen
covered under the Plan prior to the creation of the Law Enforcement Officers and
Fire Fighters’ (LEOFF) pension system in 1970.
Page 42
Agency funds are used to report resources held by the city in a purely custodial
capacity on behalf of the Animal Control Authority and on behalf of all employees
for Payroll Clearing and those employees with Flexible Spending Accounts.
C. Measurement Focus, Basis of Accounting
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 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 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. The City considers property taxes as available if they are collected
within 60 days after year end. 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 judgements are recorded
only when payment is due.
Property taxes, licenses, and interest associated within the current period are all
considered to be susceptible to accrual and so have been recognized as revenues of the
current period. All other revenue items are considered to be measurable and available
only when cash is received by the City.
Proprietary fund financial statements are reported using the economic resources
measurement focus and full-accrual basis of accounting. Revenues are recorded when
earned and expenses are recorded when a liability is incurred regardless of the timing
of the cash flows. Proprietary funds 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 Water/Sewer
Fund are charges to customers. The major services provided by the proprietary fund are
water, sewer, storm drain, irrigation and industrial waste water processing. Operating
expenses for enterprise funds and internal service funds include the cost of sales and
services, administrative expenses, and depreciation on capital assets. All revenues and
expenses not meeting this definition are reported as non-operating revenues and
expenses.
Page 43
D. Budgetary Information
1. Scope of Budget
Annual appropriated budgets are adopted for the general and special revenue and on a
modified accrual basis. Budgets for debt service and capital project funds are adopted at
the level of the individual debt issue or project and for fiscal periods that correspond to
the lives of debt issues or projects. The City also adopts appropriated budgets for
proprietary, debt service, and internal service funds. All budgets are adopted at the fund
level.
Appropriations for all funds lapse at year-end. Budgets for capital outlays are re-
appropriated until the purpose of the appropriation has been accomplished or abandoned.
2. Amending the Budget
The City Manager is authorized to transfer budgeted amounts within the funds.
However, any revisions that alter the total appropriations of a fund, or which affects the
number of authorized employee positions, salary ranges, hours, or other conditions of
employment must be approved by the City Council.
When City Council determines it is in the best interest of the City of Pasco to increase or
decrease the appropriation for a particular fund, it may do so by ordinance approved by
one more than the majority.
The financial statements contain the original and final budget information. The original
budget is the first complete appropriated budget. The final budget is the original budget
adjusted by all reserves, transfers, allocations, supplemental appropriations, and other
legally authorized changes applicable for the fiscal year.
Excess of Expenditures over Appropriations
The City Street Fund exceeded budgeted appropriations at year end. This was due
primarily to the accrual of salary and benefits for a full payroll that had not been
budgeted.
Deficit Fund Net Position
The LID Loan Fund, a non-major debt service fund of the City, ended the year with a
negative fund balance of ($130,315). The negative fund balance is a result of required
accounting practices. Previously most LID’s were financed with a bond issue which is
not reflected on the balance sheet of the governmental fund. The current LID’s are
financed with inter-fund loans which are recorded as a loan payable on the balance sheet.
Since GASB requires future principal payments to be recorded as deferred inflows on the
balance sheet. Both items are recorded on the liability side of the balance sheet with only
the LID assessments receivable on the asset side. The result is almost always a negative
net position for the fund. The deficit fund balance will be corrected as the loans are paid
off.
The Golf Course Fund has a negative fund balance of $3,699 for year ending December
31, 2017. Following year end entries, staff discovered a disparity between the City year
Page 44
end golf course revenues and the revenue reported by the management company that
operates the golf course. An in depth analysis of the fund determined staff had entered
sales of gift cards as revenue instead of a liability for deferred or unavailable revenue.
All entries were corrected, resulting in a negative fund balance for the fund.
E. Assets, Liabilities, Deferred Inflows, Deferred Outflows, Fund Balance/Net Position
1. Deposits and investments
The government’s cash and cash equivalents are considered to be cash on hand, demand
deposits, and short-term investments with original maturities of three months or less from
the date of acquisition.
State statutes and the city’s investment policies authorize the city to invest in obligations
of the U.S. treasury, repurchase agreements and the State Treasurer’s Local Government
Investment Pool (LGIP). The interest on these investments is prorated to the various
funds on a monthly basis.
The City’s deposits are covered by federal depository insurance (FDIC and FSLIC) or by
collateral held in the multiple financial institution collateral pool administered by the
Washington Public Deposit Protection Commission (PDPC).
Investments are generally reported at fair value for the items held. The LGIP operates in
accordance with appropriate state laws and regulations. The reported value of the pool is
the same as the fair value of the pool shares. See additional deposit, investment and
restricted asset information in Note 3.
2. Receivables and payables
Taxes receivable consist of property taxes, sales taxes, business and occupation taxes, and
excise taxes. Property taxes are levied January 1 on property values assessed as of
December of the prior year. The tax levy is divided into two billings; the first billing is
due April 30 and the second is due October 31. Detailed information on property tax can
be found in Note 4.
Sales and excise taxes. The state is the collection agent for sales tax and other state shared
revenues in the State of Washington. The vendor has until approximately the end of the
following month to remit sales tax to the state for taxable sales. The state then has
approximately another month to remit the city’s portion of the tax to the city.
Utility occupation taxes. The city assessed a gross revenue tax and use on certain utilities
within the city. The rate is for these taxes are eight and one-half percent.
Other receivables. As of December 31, 2017 the only major fund of the city to have an
allowance for uncollectible accounts was the General Fund. The gross Municipal Court
receivable for the City is $11,007,266 of which $10,070,548 is not expected to be
collected (allowance for uncollectible accounts) and thus only the net amount of $936,718
is included in the financial statements. The estimate for uncollectible is based on historical
collections and the fact that in recent years’ lawmakers have removed the City’s ability
Page 45
to hold citizens accountable for nonpayment of fines. Non-major funds receivable
balances include the applicable allowance for uncollectible accounts (which relates to
ambulance services) of $100,000.
Special assessments and unavailable revenue. Governmental funds report unavailable
revenue in connection with receivables for revenues that are not considered to be available
to liquidate liabilities of the current period. Governmental funds also defer revenue
recognition in connection with resources that have been received but not yet earned. At
the end of the current fiscal year, the various components of deferred inflows reported in
the governmental funds were as follows:
Unavailable Revenue – Property Taxes $ 172,367
Unavailable Revenue – Municipal Court 936,719
Unavailable Revenue – Other 100,000
Unavailable Revenue – CDBG P & I Revenue 127,441
Unavailable Revenue- - Cemetary 62,919
Unavailable Revenue – Golf Gift Certificates 64,857
Unavailable Revenue – Special Assessments/Loans 202,868
Total Unavailable Revenues $1,667,171
Loans receivable. Loans receivables consist of amounts owed on an open account from
private individuals or organizations for goods and services rendered. Since the City is
unable by law to grant credit to any entity, all loans receivables related to grant monies
received from other agencies which have authorized the loan as part of the grant process.
Repayments of these loans are used to establish revolving loan funds for loans that match
the original grant purpose.
Customer accounts receivable consist of amounts owed from private individuals or
organizations for goods and services. The allowance for uncollectible accounts for the
ambulance fund is approximately 9.2% of the outstanding ambulance transport service
revenue receivables at December 31, 2017.
Grants receivable are reported for grants where qualified expenditures have been made
prior to the end of the year.
Other receivables include municipal court receivables, and interest receivable. Accrued
interest at year end consists of amounts earned by investments, notes and contracts at the
end of the year.
Special assessments are recorded when levied. Special assessments receivable consist of
future unbilled principal. Deferred assessments consist of unbilled special assessments
that are liens against the property benefitted. As of December 31, 2017, $6,694.39 of
delinquent assessments were outstanding in Governmental Funds and $7,128.83 were
outstanding in the Business Funds (Sewer). Assessed property owners are responsible for
debt repayment. The city guarantee’s the debt to the extent of the LID guarantee fund.
3. Amounts Due to and from Other Funds and Governments, Interfund Loans and
Advances Receivable
Page 46
Activities between funds that are representative of lending/borrowing arrangements
outstanding at the end of the fiscal year are referred to as either interfund loans
receivable/payable or advances to/from other funds. 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. A separate
schedule of interfund loans receivable is furnished in Note 6.
4. Inventories
Inventories in governmental funds consist of expendable supplies held for consumption.
The cost is recorded as an expenditure at the time purchase. There are currently no
inventories in governmental funds. Inventories in proprietary funds are valued using a
last in first out (LIFO) method.
5. Restricted Assets and Liabilities
These accounts contain resources for construction and debt service, including current
and delinquent special assessments receivable, in the enterprise fund. The current
portion of related liabilities is shown as Payables from Restricted Assets. Additional
information on Restricted Assets can be found in Note 3.
6. Capital Assets
Capital assets, which include property, plant, and equipment and infrastructure assets,
are reported in the applicable governmental or business-type columns in the government-
wide financial statements. Capital assets, other than infrastructure, are defined by the
City as assets with an initial, individual cost of more than $5,000 and an estimated useful
life in excess of one year. Such assets are recorded at historical cost or estimated
historical cost if purchased or constructed.
The government reports infrastructure assets on a network and subsystem basis. Such
assets are recorded at historical cost if purchased or constructed. Donated capital assets
are recorded at estimated fair market value at the date of donation. Additions,
improvements and other capital outlays that significantly extend the useful life of an
asset are capitalized. The cost of normal maintenance and repairs and street preservation
activities that do not add to the value of the asset or materially extend asset lives are not
capitalized. Assets are depreciated over their useful lives using the straight line
depreciation method.
Major outlays for capital assets and improvements are reported as Construction Work in
Progress as projects are constructed. Interest, if material to the cost of the asset that is
incurred during the construction phase of the capital assets of business-type activities is
included as part of the capitalized value of the assets constructed. Capital Assets and
improvements are capitalized once the project is completed. There were no capitalized
interest costs capitalized by the City during fiscal year 2017.
Page 47
Capitalization thresholds (the dollar value above which an asset acquisitions are added
to the capital asset accounts and estimated useful lives of capital assets are as follows:
Assets Threshold Useful Lives
Land All NA
Building & Structure $5,000 5 - 50
Other improvements $5,000 5 - 100
Machinery & Equipment & Vehicles $5,000 1 - 50
Infrastructure $5,000 5 - 50
7. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial 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(s) and so will not be recognized as an outflow of resources
(expense/expenditure) until then.
In addition to liabilities, the statement of financial 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(s) and will not be recognized as an inflow of resources (revenue)
until that time.
The city has one type of item, unavailable revenues which arises only under a modified
accrual basis of accounting, which qualifies as a deferred inflow. Unavailable revenue is
reported only in the governmental funds balance sheet. The governmental funds report
unavailable revenues for 2017 as follows:
a. Uncollected property taxes levied.
b. Unbilled special assessments levied against benefited property for the cost of local
improvements. An allowance for uncollectible accounts is not necessary since the
assessments are liens against the property benefited.
c. Rain checks and gift certificates issued by the golf course and certain headstones and
liner sales by the cemetery which obligate the city to future services.
d. CDBG Loans Unbilled Principal.
e. Uncollected Municipal Court Fines outstanding.
f. Donations for police body cams that will be refunded if the department decides against
body cams.
In addition to unavailable revenues, changes in pension assumptions and calculation
variables also create deferred inflows and deferred outflows. These are reported in the
enterprise funds and at the government wide level in the Statement of Net Position.
Page 48
8. Compensated Absences
The City accrues accumulated unpaid vacation and sick leave and associated employee
related costs when earned (or estimated to be earned) by the employee. All vacation and
sick pay is accrued when incurred in the government-wide, proprietary, and fiduciary fund
financial statements. In governmental funds, such amounts are not accrued using the
modified accrual basis of accounting but are reported as a liability in the government-wide
financial statements.
Sick leave may be accumulated up to a maximum of 960 hours for all employees except
firefighters. Firefighter sick leave may be accumulated up to a maximum of 840 hours.
Upon resignation, retirement or death, sick leave is payable at a rate of 25% of accrued
hours up to a maximum accrual base of 720 hours. Vacation leave may be accumulated up
to a maximum of one and a half times the employee’s annual vacation accrual rate and is
payable upon resignation, retirement or death.
9. 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.
10. Long-term Obligations
In the government-wide 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
statements of net position.
Bond premiums and discounts, as well as issuance costs, when material, are deferred and
amortized over the life of the bonds using the effective interest 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 uses. Issuance costs, whether or not withheld from actual
debt proceeds received, are reported as professional service costs.
Page 49
11. Fund Balance and Fund Flow Policies
Fund balance of governmental funds is reported in various categories based on the nature
of any limitations requiring the use of resources for specific purposes. The government
itself can establish limitations on the use of resources through either a commitment
(committed fund balance) or an assignment (assigned fund balance).
The committed fund balance classification includes amounts that can be used only for
specific purposes determined by formal action of the government’s highest level of
decision-making authority. The city council is the highest level of decision making
authority for the government that can, by adoption of an ordinance prior to the end of the
fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance
remains in place until a similar action is taken (the adoption of another ordinance) to
remove or revise the limitation.
Amounts in the assigned fund balance classification are intended to be used by the
government for specific purposes but do not meet the criteria to be classified as
committed. The council may also assign fund balance as it does when appropriating fund
balance to cover a gap between estimated revenue and appropriations in the subsequent
year’s appropriated budget. Unlike commitments, assignments generally only exist
temporarily. In other words, an additional action does not normally have to be taken for
the removal of an assignment. Conversely, as discussed above, an additional action is
essential to either remove or revise a commitment.
The City has not adopted a specific flow of funds policy relating to the use of restricted
and unrestricted resources when both are available. Therefore, the statements are prepared
using the default option provided in GASB 54 which provides that when both restricted
and unrestricted resources are available, restricted resources are used first.
In the fund financial statements, governmental funds report restrictions of fund balance as
follows:
Nonspendable fund balance - includes amounts that are not in spendable form such as
inventory or are required to be maintained intact such as the principal of a permanent fund.
Restricted fund balance - includes amounts that can be spent only for the specific purpose
stipulated by external resource providers such as for grant providers, bondholders, higher
levels of government, or through enabling legislation.
Committed fund balance – includes amounts that can be used only for the specific purposes
determined by a formal action of the city council. Commitments may be changed or lifted
only by the City Council taking the same formal action that imposed the constraint
originally.
Page 50
Assigned fund balance – includes amounts intended to be used by the government for
specific purposes. Intent can be expressed by the governing body or by an official
designated by the governing body to which the governing body designates authority.
Unassigned fund balance - includes amounts that are available for any purpose.
NOTE 2: RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL
STATEMENTS
A. Explanation of certain differences between the governmental funds balance sheet
and the government-wide statement of net position.
The governmental fund balance sheet includes a reconciliation between fund balance – total
governmental funds and net position – governmental activities as reported in the
government-wide statement of net position. One element of that reconciliation explains that
“Long-term assets used in governmental activities are not financial resources and,
therefore, are not reported in the funds”. The following shows the detail of these capital
asset changes net of accumulated depreciation:
Joint Venture 81,047$
Land 15,373,198
Construction in process 16,282,190
Building 23,948,557
Other Improvements 3,236,788
Equipment 2,839,879
Infrastructure 157,147,154
Pension Assets 4,309,575
OPEB Assets 1,028,367
Current year change in pension asset 4,592,318
Current year spending in construction work in progress 6,531,019
Current year capital purchases 271,188
Current year capital donations received 10,833,800
Current year increase in Joint Venture (25,270)
Current year depreciation (15,254,987)
Net adjustment to add to government wide fund balance to arrive at
Net Position Governmental Activities 231,194,823$
Beginning Balance of Capital Asset Excluded from Fund Level:
Page 51
B. Explanation of certain differences between the governmental funds statement of
revenues, expenditures, and changes in fund balances and the government-wide
statement of activities
The governmental funds’ 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 first element of that reconciliation relates to capital activity as
follows:
Compensated absences (2,490,548)
OPEB obligation (16,078,996)
Pension obligation (8,313,665)
Bonds Payable (10,751,932)
Current Year changes to pension obligation 1,826,345
Current year principal payments reducing debt 822,317
Net adjustment to reduce government-wide fund balance to arrive at
Net Position Governmental Activities (34,986,479)$
Another element of that reconciliation explains that "Long-term liabilities are not due and
payable in the current period and are not reported in the funds." The following show the
detail of these liability changes.
Beginning Balance of Long -Term Liabilities Excluded from Fund Level:
Capital outlays for:
Land -$
Construction in process 6,531,019
Machinery and equipment 271,188
Contributed capital assets 10,833,800
Current year depreciation (15,254,987)
Gain on Joint venture (25,270)
Net capital activity 2,355,750$
New Debt issued -$
Debt repayment (806,930)
Net debt activity (806,930)$
The second element of that reconciliation related to debt activity as follows
Page 52
NOTE 3: DEPOSITS, INVESTMENTS AND RESTRICTED ASSETS
Deposits
As of December 31, 2017 the carrying amount of the City’s cash balances was $55,966,004 which
consisted of $17,390,191 in the City’s checking account at US Bank, $39,365,326 deposited in the
Local Government Investment Pool, deposits in transit of $349,734, $25,171 in cash drawers/petty
cash, less outstanding checks of $1,164,418. A portion, $1,176,503, of the deposits are maintained
for the benefit of the fiduciary funds the City supports.
Custodial Credit Risk
Custodial Credit Risk is the risk that in the event of a failure of the counterparty to an investment
transaction the City would not be able to recover the value of the investment or collateral securities.
The City’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) or by
collateral held in a multiple financial institution collateral pool administered by the Washington
Public Deposit Protection Commission (WPDPC). The FDIC insures the first $250,000 of the
City’s deposits. The deposit balances over $250,000 are insured by the WPDPC. State statute
permits additional amounts to be assessed on a pro rata basis to members of the WPDPC pool in
the unlikely 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
Interest rate risk. Interest rate risk is the risk that changes in interest rates will adversely affect the
fair value of an investment. In accordance with its investment policy, the City manages its exposure
to declines in fair value by limiting the maturity of investments. To achieve its financial objective
of maintaining liquidity to meet all operating requirements, the City typically selects investments
that have shorter average maturities.
Credit Risk
State law and the City investment policy limit investments to those authorized by State Statute.
The City of Pasco holds investments in U.S. Government Agency Securities , the Local
Government Investment Pool (LGIP) and demand deposits at U.S. Bank. The investment policy
for “credit risk” does not extend beyond the types of authorized investments and the concentration
of credit risk described below. As of December 31, 2017 the City’s investments in agency
securities were all rated AAA. The LGIP is not registered with the SEC and the fair value of the
city’s position in the pool is the same as the value of the pool shares. The LGIP is regulated by the
state of Washington’s state finance committee. Credit risk is limited as most investments are either
obligations of the U.S. Government, government sponsored enterprises, insured demand deposit
accounts or certificates of deposit.
Concentration of Credit Risk
Page 53
Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s
investment in a single issuer. It is the policy of the city to diversify its investment portfolio to
eliminate the risk of loss resulting from overconcentration of assets in a specific class of securities.
With the Exception of U.S. Government Agency Securities and the State Treasurer’s Local
Government Investment Pool (LGIP) no more than twenty percent of the city’s total investment
portfolio should be invested in a single security type and not more than twenty percent should be
invested with a single financial institution.
Local Government Investment Pool
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. 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 Standards Board (GASB) for external
investment pools, that elect to measure, for financial reporting purposes, investments at amortized
cost. For GASB reporting purposes funds in the LGIP are reported as cash equivalents.
Investments Reported as Cash Equivalents as of December 31, 2017
Amortized Cost Less than 1 Year
Local Government Investment Pool $39,365,326.39 $39,365,326.39
In addition to the City of Pasco investments presented in the series of tables following this section,
the City’s Old Fire Pension and Old Fire OPEB Funds report the following investments in their
Trust Funds:
.
Investments Measured at Fair Value
The City measures and reports investments at fair value using the valuation input hierarchy
established by Generally Accepted Accounting Principles (GAAP), as follows:
Level 1: Prices quoted in active markets for identical securities,
Level 2: Quoted market prices for similar assets or liabilities, quoted prices for identical or similar
assets or liabilities in markets that are not active, or other than quoted prices that are not
observable.
Level 3: Unobservable inputs for an asset or liability.
Old Fire Pension Trust Fund Investments FMV 12/31/17 Interest Rate Maturity
Small Business Admn Participation SBAP 24,888.84$ 5.37% 10/1/2026
The Investment Co. of America Mutual Funds 2,271,878.28 *Varies N/A
Total 2,296,767.12$
*YTD Return 19.74%
Old Fire OPEB Trust Fund Investments FMV 12/31/17 Interest Rate Maturity
WAMU Investors Fund A Mutual Funds 2,986,331.15 *Varies N/A
Total 2,986,331.15$
*YTD Return 20.19%
Page 54
Safekeeping for the City’s investments is provided by U.S. Bank. U.S. Bank contracts with
Independent Directors Council (IDC) to provide fair market values of investments on a monthly
basis. The pricing methodology varies depending on multiple components, including if an
investment is being actively traded. In depth pricing methodology is available from IDC.
As of December 31, 2017, 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, 2017. The City’s investments
are all government agency issues and not subject to the 20% maximum.
The following table depicts Weighted Average Maturity (WAM) for all City investments with
maturities, by number of months.
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. Government Agency Securities -$ 23,187,820$ -$ 23,187,820$
Fair Value Measurement Using
Investment Type Fair Value
Less than 1
year 1 to 5 years
% of Total
Portfolio
SBA Participation 125,937$ -$ 125,937$ 0.54%
Federal Farm Credit Bank 5,954,807 2,985,113 2,969,694 25.68%
Federal Home Loan Bank 1,994,321 998,563 995,758 8.60%
Federal Home Loan Mtg. Corporation 2,738,456 2,738,456 - 11.81%
FICO Strips 4,295,221 2,300,795 1,994,426 18.52%
Federal National Mortgage Association 1,980,628 - 1,980,628 8.54%
Resolution Funding Corporation 2,058,455 - 2,058,455 8.88%
Resolution Funding Corporation-Strips 4,039,995 - 4,039,995 17.42%
Total Investments 23,187,820$ 9,022,927$ 14,164,893$ 100.00%
38.91% 61.09% 100.00%
Maturities
Page 55
Restricted assets. The corpus of permanent funds is included in restricted assets. The Water/Sewer
utility issued bond proceeds prior to 2018 for construction projects which were not fully expended
by the end of the current year. The remaining funds are restricted for construction purposes. Certain
resources set aside for the repayment of revenue bonds are classified as restricted assets on the
balance sheet because they are maintained in a separate account and their use is limited by
applicable bond covenants. The “bond debt service” account is used by the Water/Sewer fund to
report resources set aside to subsidize potential deficiencies from the Water/Sewer operations that
could adversely affect debt service payments. The Water/Sewer fund has constructed projects and
assessed special assessments to recover certain portions of the construction costs. Those
assessments receivable are pledged to pay for the related special assessment debt and are therefore
restricted to that purpose. Cash from customers as deposits are also restricted. Restricted assets
(cash and investments) are comprised of the following:
A B C D =B*D
Maturity Date
# of Months to
Maturity
Fair Market
Value as
12/31/17 % of total WAM
02/01/2027 110 125,937 0.54% 0.597429
06/08/2018 6.0 998,563 4.31% 0.258385
07/05/2018 7.0 1,991,128 8.59% 0.601087
07/27/2018 7.0 2,738,456 11.81% 0.826692
09/14/2018 9.0 993,985 4.29% 0.385800
12/27/2018 12.0 2,300,795 9.92% 1.190692
03/08/2019 14.0 995,758 4.29% 0.601204
06/13/2019 18.0 1,980,628 8.54% 1.537501
09/26/2019 21.0 1,994,426 8.60% 1.806247
10/15/2019 22.0 2,058,455 8.88% 1.953009
07/15/2020 31.0 2,035,390 8.78% 2.721131
10/15/2020 34.0 2,004,605 8.65% 2.939326
12/06/2021 48.0 2,969,694 12.81% 6.147422
26.1 23,187,820$ 100.00% 21.565925
Calculation of Weighted Average Maturity (WAM)
Page 56
NOTE 4: PROPERTY TAX
Property Taxes. The county treasurer acts as an agent to collect property taxes levied in the county
for all taxing authorities. Collections are distributed by the 10th day of the following month.
Property taxes are recorded as a receivable when levied, offset by deferred revenue. During the
year property tax revenues are recognized when cash is collected and deferred property tax revenue
is reduced. The amount of taxes receivable at year-end that would be collected soon enough to be
available to pay liabilities of the current period is immaterial. Property tax collected in advance of
the fiscal year to which it applies is recorded as a deferred inflow and recognized as revenue of the
period to which it applies. No allowance for uncollectible tax is established because delinquent
taxes are considered fully collectible. Prior year tax levies were recorded using the same principle
and delinquent taxes are evaluated annually. The reported balances include tax payments from the
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% of market value.
October 31 Second installment is due.
Property Tax Calendar
Page 57
county received through December 31, 2017. Delinquent taxes totaled $172,367 and since these
funds are not available, revenue recognition is deferred. Subsequent collections of delinquent
amounts will be recorded in revenue in the period actually received.
The City may levy up to $3.60 per $1,000 of assessed valuation for general governmental services
subject to two limitations:
a. Chapter 84.55.010 of the Revised Code of Washington limits the growth of non-voted
property taxes to the lesser of 1% per year, or the Implicit Price Deflator. Adjustments
for new construction and annexations are excluded from this calculation.
b. The Washington State Constitution limits the total regular property taxes to one percent
of assessed valuation or $10 per $1,000 of value. If the taxes of all districts exceed this
amount, each is proportionately reduced until the total is at or below the one percent
limit.
The City’s regular levy for 2017 was $1.8802 per $1,000 on an assessed valuation of
$4,227,977,752. This resulted in a total regular levy of $7,949,354 for 2017. The City did not levy
any taxes for special levies in 2017.
NOTE 5: CAPITAL ASSETS AND CWIP
Capital asset activity for the year ended December 31, 2017 was as follows:
Governmental Activities:
Beginning
Balance
01/01/17
Prior Period
Adjustments
Beginning
Balance
01/01/17
Current Period
Increases
Current Period
Decreases
Ending Balance
12/31/17
Capital assets, not being depreciated
Land 15,373,198$ -$ 15,373,198$ 1,525,263$ 66,693$ 16,831,768$
Construction in progress 16,282,189 123,740 16,405,929 8,310,457 11,998,799 12,717,587
Total capital assets, not being depreciated 31,655,387 123,740 31,779,127 9,835,720 12,065,492 29,549,355
Capital assets, being depreciated:
Building & structure 40,218,765 - 40,218,765 8,463,526 95,314 48,586,977
Other improvements 9,792,764 - 9,792,764 234,287 13,356 10,013,695
Machinery and equipment 15,499,514 - 15,499,514 2,319,802 112,926 17,706,390
Infrastructure 252,191,102 (123,740) 252,067,362 10,699,635 44,727 262,722,270
Total capital assets being depreciated 317,702,145 (123,740) 317,578,405 21,717,250 266,323 339,029,332
Less accumulated depreciation:
Building & structure 16,270,207 - 16,270,207 885,288 91,459 17,064,036
Other improvements 6,555,978 - 6,555,978 307,276 12,337 6,850,917
Machinery and equipment 7,955,673 - 7,955,673 1,155,470 95,777 9,015,366
Infrastructure 95,043,948 - 95,043,948 13,627,958 39,999 108,631,907
Total accumulated depreciation 125,825,806 - 125,825,806 15,975,992 239,572 141,562,226
Total capital assets, being depreciated, net 191,876,339 (123,740) 191,752,599 5,741,258 26,751 197,467,106
Governmental activities capital assets net 223,531,726$ -$ 223,531,726$ 15,576,978$ 12,092,243$ 227,016,461$
Page 58
Depreciation expense by function:
Construction commitments
The City of Pasco has active construction projects as of December 31, 2017. The projects include
street construction and various utility related projects. At year end, the city’s commitments with
contractors are as follows:
Business Type Activities:
Beginning
Balance
01/01/17
Prior Period
Adj
Beginning
Balance
01/01/17
Current Period
Increases
Current Period
Decreases
Ending Balance
12/31/17
Capital assets, not being depreciated
Land 2,725,435$ -$ 2,725,435$ 105,476$ -$ 2,830,911$
Construction in process 9,086,415 - 9,086,415 9,951,716 8,727,358 10,310,773
Total capital assets, not being depreciated 11,811,850 - 11,811,850 10,057,192 8,727,358 13,141,684
Capital assets, being depreciated:
Building & structure 77,252,880 - 77,252,880 2,042,246 70,465 79,224,661
Other Improvements 56,947 - 56,947 141,143 - 198,090
Machinery and equipment 11,924,161 11,924,161 936,229 48,632 12,811,758
Infrastructure 166,255,777 - 166,255,777 9,751,375 1,585,954 174,421,198
Total capital assets being depreciated 255,489,765 - 255,489,765 12,870,993 1,705,051 266,655,707
Less accumulated depreciation:
Building & structure 42,946,722 - 42,946,722 2,342,178 65,125 45,223,775
Other Improvements - - - 1,139 - 1,139
Machinery and equipment 4,835,115 - 4,835,115 963,216 29,676 5,768,655
Infrastructure 41,731,134 - 41,731,134 3,461,284 695,210 44,497,208
Total accumulated depreciation 89,512,971 - 89,512,971 6,767,817 790,011 95,490,777
Total capital assets, being depreciated, net 165,976,794 - 165,976,794 6,103,176 915,040 171,164,930
Business activities capital assets net 177,788,644$ -$ 177,788,644$ 16,160,368$ 9,642,398$ 184,306,614$
Governmental activities:
General government 407,012$
Public Safety 582,238
Transportation 13,745,303
Economic environment 198,981
Culture & recreation 1,042,458
Total depreciation expense - governmental activities 15,975,992$
Business-type activities:
Water 2,742,439$
Irrigation 562,407
Sewer 2,813,594
Process water reuse facility 451,281
Stormwater 198,096
Total depreciation expense- business-type activities:6,767,817$
Page 59
NOTE 6: INTERFUND BALANCES AND TRANSFERS
Inter-fund loans
The composition of inter-fund loan balances as of December 31, 2017 are presented in the
following table. These loans are included in the Fund Financial Statements but eliminated from the
Government Wide Statement of Net Assets because they are internal borrowings. There are also
one day loans totaling $1,560,000, for funds with negative cash at year end that are classified as
Due To and Due From transactions in the Government Wide and Fund Financial Statements.
Interfund transfers
Transfers between funds during the year ended December 31, 2017 are as follows:
CATEGORY PROJECT NAME SPENT TO
DATE
REMAINING
COMMITMENT
Sewer Pearl Street Lift Station 16,824$ 212,311$
Street Argent Road Widening 271,513 136,142
Street Oregon Ave Corridor 860,311 6,972,772
Street Road 68 Interchange 134,269 176,280
Street Overlay 2017 Trail Rehabilitation 74,539 186,625
Water Columbia Water Supply 7,503,293 3,394,965
Water Butterfield PLC Upgrade 23,687 466,891
Economic
Development
Process Water
Resource Facility Plan 180,960 726,984
Process Water
Resource Facility
Irrigation Pump
Station Building 11,936 150,704
TOTAL 9,077,332$ 12,423,674$
Loan Purpose
Nonmajor Special
Revenue
Nonmajor Debt
Service Total
Nonmajor Special Revenue Parking Lot Repaving 123,483 - 123,483
Nonmajor Special Revenue LID Financing - 220,647 220,647
Nonmajor Internal Service LID Financing - 14,567 14,567
Nonmajor Fiduciary LID Financing - 27,346 27,346
123,483$ 262,560$ 386,043$
INTERFUND LOANS DUE FROM
TotalINTERFUND LOANS DUE TO General Nonmajor Special
Revenue
Nonmajor Debt
Service Total
General -$ 338,000$ 300,000$ 638,000$
Nonmajor Special Revenue 1,313,000 60,163 - 1,373,163
Nonmajor Debt Service - - - -
Major Construction 1,024,716 3,430,506 - 4,455,222
Major Utility 65,000 - - 65,000
Total 2,402,716$ 3,828,669$ 300,000$ 6,531,385$ TRANSFER TOTRANSFER FROM
Page 60
Transfers are used to 1) move unrestricted general fund revenues to finance various programs that
the government must account for in other funds in accordance with budgetary authorizations,
including amounts provided as subsidies or matching funds for various grant programs; 2) move
investment earnings or operating subsidies from one fund to its designated, authorized purpose
carried out by another fund; 3) move resources designated for construction to and from
construction funds as projects are created and/or completed.
There were one time transfers for the purpose of construction between several special revenue
funds, the general fund and the construction funds. There were on-going transfers to move grant
support from the Community Development Block Grant fund to the general fund for qualified
grant activities; from earnings and fund balance of the Boulevard Maintenance fund to the general
fund to pay for boulevard maintenance activities and from the general fund to the ambulance fund.
NOTE 7: CHANGES IN LONG-TERM LIABILITIES
Changes in long-term liabilities -governmental. The City liquidates most governmental debt
service from the General Fund while compensated absences are generally liquidated from General,
Street and Ambulance funds. The average percentage of usage of compensated absences varies
significantly between governmental and business type funds, therefore the City uses the most
current year usage amounts for projecting compensated absences due within one year. This method
is the most accurate by following the current trend for of each type of funds. Internal service funds
predominantly serve the governmental funds and their long-term liabilities are included as part of
the totals for governmental activities. In 2017 liabilities for Internal Service Funds included with
Governmental activities was $147,074.
The table below reflects the change in Long-Term Liabilities for Governmental activities for year
ended December 31, 2017.
Changes in long-term liabilities – business type. All business type funds liquidate their own
compensated absences, judgements, and claims.
GOVERNMENTAL ACTIVITIES
Beginning Balance
01/01/2017 Additions Reductions
Ending Balance
12/31/17
Due Within One
Year
General Obligation Bonds 10,430,000$ -$ (770,000)$ 9,660,000$ 795,000$
Premiums 292,347 - (15,387) 276,960 15,387
Total GO Bonds Payable 10,722,347 - (785,387) 9,936,960 810,387
Special Assessment Bond 45,000 - (25,000) 20,000 10,000
External Loans1 11,930 - (11,930) - -
Compensated Absences 2,490,548 1,993,946 (1,772,392) 2,712,102 1,772,392
OPEB Obligations2 4,086,203 12,092,898 - 16,179,101 -
Pension Obligations 8,519,119 - (1,884,725) 6,634,394 -
Governmental Activity Long-Term Activity 25,875,147$ 14,086,844$ (4,479,434)$ 35,482,557$ 2,592,779$
1The Airport Loan was reconciled with the Port of Pasco and paid in full.
2The City implemented GASB 75 in 2017, requiring the City to report the total accrued actuarial OPEB liability instead of the cumulative underfunding.
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The table below reflects the change in Long-Term Liabilities for Business Type activities for year
ended December 31, 2017.
NOTE 8: LONG TERM DEBT
The city issues general obligation bonds to finance capital improvements such as street projects,
softball fields, library improvements, police station and other municipal facilities. Revenue bonds
are issued to finance capital facilities, facility improvements and equipment purchases for the
City’s utilities. General obligation bonds have been issued for both general government and
business-type activities. Governmental debt is considered obligations of the general government
and is repaid with general governmental resources. Proprietary fund revenues are used to repay
revenue and refunding bonds as well as certain loans to proprietary funds. Bonded indebtedness
has also been entered into to advance refund general obligation and revenue bonds.
Governmental Debt
The City’s outstanding general obligation bonds are comprised of 2011 refunding bonds and a
2015 bond issue that funded the construction of a new police station. A Public Safety Sales tax of
three-tenths of one percent, implemented in 2012 was identified as the source of repayment of the
bonds. These issues are repaid from the General Fund.
General obligation bonds outstanding as of December 31, 2017 are as follows:
BUSINESS TYPE ACTIVITIES
Beginning
Balance Additions Reductions
Ending Balance
12/31/17
Due Within One
Year
Revenue Bonds 35,055,000$ 9,415,000$ (1,955,000)$ 42,515,000$ 1,760,000$
LTGO Bonds 3,383,003 - (1,112,418) 2,270,585 1,127,599
Premiums 1,489,145 583,510 (98,200) 1,974,455 123,486
Total Bonds Payable 39,927,148 9,998,510 (3,165,618) 46,760,040 3,011,085
State Loans3 508,443 6,005,656 (213,759) 6,300,340 462,136
Compensated Absences 234,011 255,051 (243,180) 245,882 243,180
Pension Obligations 2,937,825 (437,950) 2,499,875 -
Business Activity Long-Term Activity 43,607,427 16,259,217 (4,060,507) 55,806,137 3,716,401
Total Changes in Business Type &
Governmental Long-Term Liabilities 69,482,574$ 30,346,061$ (8,539,941)$ 91,288,694$ 6,309,180$
3The City recognized loan draws from the State Revolving Fund totaling $6,005,656 in 2017.
GOVERNMENTAL DEBT - BONDS
Purpose Issuance Amount Final Maturity Interest Rates
Outstanding as of
December 31, 2017
Due Within 1
Year
2011 LTGO Refunding 2001 LTGO 4,110,000$ 12/1/2020 3.00%-4.00% 1,480,000$ 475,000
2015 LTGO Police Station 8,795,000 12/1/2035 3.00%-4.00% 8,180,000 320,000
2010 LID 145 Financing 785,129 11/15/2020 2.25%-5.00%20,000 10,000
9,680,000$ 805,000$ Total Governmental Debt
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For presentation purposes, the remaining LID 145 Bonds ($20,000) are being included in the table
for general obligation debt because the LID is accounted for in a Governmental Fund (Debt Service
Fund).
Special Assessment Debt
As of December 31, 2017, LID 145 has $20,000 in bonds outstanding and $14,155 available for
debt service, with assessments of $20,881 due in 2018. The LID Guarantee Fund ended the year
with a balance of $336,178.
The annual debt service requirements to maturity for general obligation bonds and LID Bonds is
presented in the following table.
Business Type Debt
In 2017 the City’s Water/Sewer utility issued $9.4 million in improvement revenue bonds to
provide funding and reimbursement for multiple sewer capital projects. The projects include
upgrades and replacement of several sewer lift stations, treatment plant upgrades, relining projects
and certain immediate needs projects identified by staff and consultants. These bonds will be
repaid from revenues from the Water/Sewer utility. The City is also liable for two state loans; 1)
Public Works trust fund loan secured for the Riverview Trunk Sewer Intercept project that will be
satisfied in 2020, and 2) Drinking Water Loan for the Columbia Water Supply Project, which is
still in the construction phase with final draws expected in 2018.
As of December 31, 2017, restricted cash and investments in the proprietary funds contain
$4,278,658 in sinking funds and reserves as required by bond indentures.
Revenue Bonds, General Obligation Bonds and Loans outstanding for Business Type Accounts
are as follows:
GOVERNMENTAL DEBT
Year Ending
December 31 Principal Interest Total Debt Service
2018 805,000$ 372,700$ 1,177,700$
2019 840,000 340,400 1,180,400
2020 860,000 306,700 1,166,700
2021 360,000 272,300 632,300
2022 375,000 257,900 632,900
2023-2027 2,115,000 1,051,900 3,166,900
2028-2032 2,555,000 612,988 3,167,988
2033-2035 1,770,000 134,250 1,904,250
TOTAL 9,680,000$ 3,349,138$ 13,029,138$
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The debt service requirements to maturity for all Business Type debt is as follows:
For financial statement presentation the City’s non-current portion of bonds payable are presented
net of premium while current bonds payable reflect actual principal payments due within one year.
The following table illustrates the breakdown by fund for current and non-current bonds payable
and the effect of premium on balances. Balances shown are as of December 31, 2017.
BUSINESS TYPE DEBT -BONDS
Purpose Issuance Amount Final Maturity Interest Rates
Outstanding as of
December 31, 2017
Due Within 1
Year
2009 Water/Sewer Capital Projects 10,045,000$ 05/01/2029 1.35%-4.75%6,485,000$ 475,000$
2010A Refunding Water/Sewer 9,070,000 06/01/2029 3.00%-5.00%4,480,000 295,000
2010T Refunding & Capital-Reuse 1,240,000 06/01/2018 4.62%180,000 180,000
2013A Sewer Capital Projects 2,520,000 12/01/2028 3.00%-4.00%2,120,000 100,000
2013T Capital Projects Reuse Facility 7,235,000 12/01/2028 .69%-4.89%5,925,000 445,000
2015 Water/Sewer Capital Projects 14,380,000 12/01/2040 2.00%-5.00%13,910,000 265,000
2017 Sewer Improvement Revenue Bonds 9,415,000 12/01/2042 3.30%-4.00%9,415,000 -
2016 Sewer Refunding LTGO Bond-pay SRF Loan 3,959,939 07/01/2019 1.36%2,270,585 1,127,599
44,785,585$ 2,887,599$
BUSINESS TYPE DEBT -LOANS
Purpose Issuance Amount Final Maturity Interest Rates
Outstanding as of
December 31, 2017
Due Within 1
Year
PW00-691-043 Riverview Trunk Sewer Interceptor 1,890,000$ 06/30/2020 0.50%333,421$ 111,141$
DM15-952-037 Columbia Water Supply Project*6,810,430 10/01/2034 1.50%5,966,919 350,995
6,300,340$ 462,136$
51,085,925$ 3,349,735$ Total Business Type Debt
*The Columbia Water Supply Project Loan is approved for $6,810,430 and has recorded draws of $6,005,656 through December 31, 2017.
BUSINESS TYPE DEBT
Year Ending
December 31 Principal Interest Total Debt Service
2018 3,242,740$ 1,904,285$ 5,147,025$
2019 3,656,810 1,842,601 5,499,411
2020 2,583,822 1,747,874 4,331,696
2021 2,492,682 1,659,855 4,152,537
2022 2,192,682 1,566,204 3,758,886
2023-2027 11,283,412 6,503,086 17,786,498
2028-2032 8,548,412 4,422,066 12,970,478
2033-2037 8,015,365 2,823,071 10,838,436
2038-2042 9,070,000 1,036,825 10,106,825
TOTAL 51,085,925$ 23,505,867$ 74,591,792$
Business Type Bonds Water Sewer Reuse Sub Total Governmental Total
Current Bonds Payable 777,500$ 1,485,099$ 625,000$ 2,887,599$ 805,000$ 3,692,599$
Non Current -Bonds Payable 15,627,200 20,790,786 5,480,000 41,897,986 8,875,000$ 50,772,986
Bond Premium 789,506 1,184,949 1,974,455 276,960 2,251,415
Total Non Current Bonds Payable Net of Premium 16,416,706 21,975,735 5,480,000 43,872,441 9,151,960 53,024,401
Total Bonds Payable at 12/31/17 17,194,206$ 23,460,834$ 6,105,000$ 46,760,040$ 9,956,960$ 56,717,000$
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Defeased Debt. In prior years the City defeased certain revenue bonds by placing the proceeds of
new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds.
Accordingly, the trust account assets and the liability for defeased bonds were not included in the
City’s financial statements. In 2017 the remaining $315,000 of outstanding defeased debt of the
City was redeemed.
Operating leases. The city leases its front-line police vehicles. Leases are generally for a three-
year period. Generally, at the end of the three-year period the lease ends and the city returns the
vehicles. New vehicles and leases are then acquired. The following represents the future annual
minimum lease payments:
NOTE 9: RISK MANAGEMENT
The City of Pasco maintains insurance against most normal hazards except for unemployment and
automobile collision, where it has elected to become self-insured.
For unemployment claims, the City is on a 100% reimbursable program with the State where the
City pays all unemployment claims charged against it.
The city of Pasco is a member of the Washington Cities Insurance Authority (WCIA). Utilizing
Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation
Act), nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose
of providing a pooling mechanism for jointly purchasing insurance, jointly self-insuring, and / or
jointly contracting for risk management services. WCIA has a total of 161 members.
New members initially contract for a three-year term, and thereafter automatically renew on an
annual basis. A one-year withdrawal notice is required before membership can be terminated.
Termination does not relieve a former member from its unresolved loss history incurred during
membership.
Liability coverage is written on an occurrence basis, without deductibles. Coverage includes
general, automobile, police, errors or omissions, stop gap, employment practices and employee
benefits liability. Limits are $4 million per occurrence in the self-insured layer, and $21 million
in limits above the self-insured layer is provided by reinsurance. Total limits are $25 million per
occurrence subject to aggregates and sublimits. The Board of Directors determines the limits and
terms of coverage annually. Although WCIA offers property and other physical damage coverage,
the City of Pasco purchases only the Liability coverage through WCIA.
Year Ending December Amount
2018 497,465
2019 401,457
2020 247,348
2021 199,651
2022 58,872
Total 1,404,794$
Police vehicles
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Insurance for property, fidelity, inland marine, and boiler and machinery coverage are purchased
through Conover Insurance and various deductibles apply by type of coverage.
WCIA In -house services include risk management consultation, loss control field services, and
claims and litigation administration. WCIA contracts for certain claims investigations, consultants
for personnel and land use issues, insurance brokerage, actuarial, and lobbyist services.
WCIA is fully funded by its members, who make annual assessments on a prospectively rated
basis, as determined by an outside, independent actuary. The assessment covers loss, loss
adjustment, reinsurance and other administrative expenses. As outlined in the interlocal, WCIA
retains the right to additionally assess the membership for any funding shortfall.
An investment committee, using investment brokers, produces additional revenue by investment
of WCIA’s assets in financial instruments which comply with all State guidelines.
A Board of Directors governs WCIA, which is comprised of one designated representative from
each member. The Board elects an Executive Committee and appoints a Treasurer to provide
general policy direction for the organization. The WCIA Executive Director reports to the
Executive Committee and is responsible for conducting the day to day operations of WCIA.
The City is self-insured for medical and dental coverage for its employees. A third party
administrator, Benefits Management, Inc., processes all claims for reimbursement. The third party
administrator provides utilization management services and requires pre-authorization for all non-
emergency hospital confinements. The City currently maintains four months of program expense
in cash reserves for medical and dental claims. Program expense includes average claims as well
as administrative and third party provider costs. To limit the exposure for large claims, the City
purchases individual stop-loss coverage from a commercial insurance carrier that limits the City's
exposure for claim losses to $100,000 per individual. The amount of medical/dental claims in
excess of commercial insurance for the last three years are:
NOTE 10: JOINT AGREEMENT/JOINT VENTURES
A. Bi-County Police Information Network
The Bi-County Police Information Network (BI-PIN) was established November 24, 1982, when an
Interlocal Agreement was entered into by eight participating municipal corporations; the cities of
Kennewick, Pasco, Richland, Connell, West Richland, and Prosser, and Benton and Franklin
Counties. BI-PIN established to assist the participating police and sheriff's departments in the
deterrence and solution of criminal incidents. BI-PIN served by an Executive Committee composed
of the City Manager of each of the cities and a member from each of the Boards of County
Commissioners of Benton and Franklin Counties. A liaison from the Bi-County Chiefs and Sheriffs
is an ex officio, non-voting member.
The allocation of financial participation among the participating jurisdictions based upon the
approved budget for that year and billed quarterly in advance to each agency. On dissolution of the
Interlocal Agreement, the net position shared based upon participant contribution.
2015 2016 2017
4,627,663$ 4,858,665$ 4,463,350$
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Effective January 1, 1992, the City of Kennewick assumed responsibility for operation of the BI-PIN
system. As the Operating Jurisdiction, Kennewick provides all necessary support services for the
operation of BI-PIN such as accounting, legal services, and risk management and information
systems.
The City of Pasco's equity interest in BI-PIN was $33,923 on December 31, 2017, which is reported
as an investment in joint ventures in the government-wide statement of net position. The change in
equity is reflected in the government-wide statement of activities under Public Safety. The City does
not anticipate any income distributions from BI-PIN since charges are assessed only to recover
anticipated expenses.
Complete separate financial statements for BI-PIN obtained at the City of Kennewick, 210 W. 6th
Ave., Kennewick, Washington, 99336.
B. Metro Drug Forfeiture Fund
The Metropolitan Controlled Substance Enforcement Group (Metro) established prior to 1987, when
Interlocal Agreement entered into by six participating municipal corporations, the cities of
Kennewick, Pasco, Richland, and West Richland, and Benton and Franklin Counties. Metro
established to account for the proceeds of forfeitures, federal grants, and court ordered contributions,
and to facilitate the disbursement of those proceeds for the purpose of drug enforcement and
investigations. Metro served by an Executive Committee composed of the City Manager or designee
of each of the cities and a member from each of the Boards of County Commissioners of Benton and
Franklin Counties. In addition, a Governing Board consisting of the Chiefs of Police from the cities
and the Sheriffs from the counties administers daily activity.
Effective July 1, 2009, the City of Kennewick assumed responsibility for the operation of Metro. As
the Operating Jurisdiction, Kennewick provides accounting services for the operation of Metro.
The City of Pasco's equity interest in Metro was $21,854 on June 30, 2017, which reported as an
investment in joint ventures in the government-wide statement of net position. The change in equity
is reflected in the government-wide statement of activities under Public Safety. The City does not
anticipate any income distributions from Metro.
Complete separate financial statements for Metro obtained at the City of Kennewick, 210 West Sixth Avenue,
Kennewick, Washington.
Tri-City Animal Control Authority
In 2005 the city entered into an interlocal agreement with the cities of Kennewick and Richland to
jointly fund the operations of the Animal Control Authority (ACA). The ACA was established to
provide animal control and sheltering services. ACA is served by an Executive Committee
composed of the City Manager, or designee, of each of the cities.
In 2005, the City of Pasco was designated as the Operation Jurisdiction for the ACA. As the
Operating Jurisdiction, the City provides all necessary support services for the operation such as
accounting, contract administration and risk management.
Complete separate financial statements for ACA may be obtained from the City of Pasco, P.O. Box
293, Pasco, Washington 99301.
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NOTE 11: RELATED PARTIES/ORGANIZATIONS
Pasco Public Facility District
Pursuant to RCW 35.57 (the “City PFD Act”) the Pasco Public Facilities District was formed and
created by Ordinance No. 3558 on July 15, 2002, coextensive with the boundaries of the City, with
the powers and authority set forth in the City PFD Act. The District was established for the purpose
of acquiring, constructing, owning, remodeling, maintaining, equipping, re-equipping, repairing,
financing, operating one or more Regional Centers, as defined by the RCW 35.57.020 and/or
participating with any other qualified public facilities district in a cooperative and joint
development of a Regional Center in the Tri-Cities area by interlocal agreement.
The members of the board of directors of the District (the “PFD Board”) shall be selected and
appointed by the Council, as required by the RCW. The PFD Board consisted of five members.
Three of the members will be appointed based on recommendations from local organizations. The
members serve four-year terms. The Council may, by resolution, remove a member for any reason.
Vacancies will be filled by appointment by the Council.
All corporate powers of the District will be exercised by or under the authority of the PFD Board;
and the business, property and affairs of the District shall be managed under the direct ion of the
PFD Board, except as may be otherwise provided for by law or in its Charter.
Complete separate financial statements for the District may be obtained from the City of Pasco,
P.O. Box 293, Pasco, WA 99301.
Downtown Pasco Development Authority
Pursuant to RCW 35.21, the Downtown Pasco Development Authority was formed and created by
Ordinance No. 3985 (the DPDA Act) on December 20, 2010, coextensive with the boundaries of
the City, with the powers and authority set forth in the City DPDA Act. The Authority was created
to administer and e xecute Federal grants or programs; to receive and administer private
funds, goods or services for any lawful public service; and to perform any lawful public
purpose or public function to provide for the revitalization and enhancement of the
downtown Pasco area.
The members of the board of directors of the Authority (the “DPDA Board”) are selected and
appointed by the Mayor of the City of Pasco, subject to confirmation by the City Council. The
DPDA Board consists of nine members. Five of the members are representative of for-profit
business or property owners within the downtown area. At least two members are representative
of the banking and/or real estate profession, and at least two members are representatives of
business or corporate management. The members serve four-year terms. The Council may, by
resolution, remove a member for any reason. Vacancies will be filled by appointment by the
Mayor, subject to confirmation by the City Council.
All corporate powers of the Authority will be exercised by or under the authority of the DPDA
Board; and the business, property and affairs of the Authority shall be managed under the direction
of the DPDA Board, except as may be otherwise provided by law or in its Charter.
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In 2017, the City expended $118,691 in subsidies and pass-through grants to the DPDA. As part
of its charter, the DPDA was granted the right to receive the revenues generated by the Farmers’
Market and the Specialty Kitchen program. The activity from those two programs are not reflected
in the amount noted above.
Financial statements for the Authority may be obtained from the Downtown Pasco Development
Authority at 720 W. Lewis Street, Suite 131, Pasco, WA 99301.
Trade, Recreation, Agricultural Center
In 1994 the City entered into an agreement with Franklin County for the Trade, Recreation, and
Agricultural Center (TRAC). The City and Franklin County share in the costs of operating and
covering TRAC’s debt service. Franklin County handles all operating decisions and financial
reporting for TRAC.
The City accounts for its portion of TRAC activity in the TRAC Special Revenue Fund. For
calendar year 2017, the City of Pasco paid Franklin County $122,003 for operating expenditures.
Additionally, in 2014 the City provided $100,000 to the County to assist with TRAC’s cash flows.
This will be returned to the City in 2026, when the existing agreement lapses. It is classified on
the balance sheet as a non-current asset: Due from Other Government. As of December 31, 2017,
the TRAC Fund had a fund balance of $415,322.
Complete financial statements for TRAC may be obtained from Franklin County, 1016 N. 4 th
Avenue, Pasco, Washington.
Housing Authority of the City of Pasco and Franklin County
The Housing Authority of the City of Pasco and Franklin County was formed and created by
Ordinance No. 2299 on September 8, 1981, in order to pursue the rehabilitation and redevelopment
of blighted areas containing unsanitary or unsafe habitations located within the City of Pasco and
Franklin County. Its formation empowered the joint housing authority to exercise all rights referred
to under RCW 35.82 “Housing Authority Law.”
Three of the five Authority board members are appointed by the City Council.
In 2015, the City and the Authority entered into an agreement which established Payment in Lieu
of Taxes (PILOT) to the City starting in 2015 in order to defray the cost of the City providing
essential local public services.
Financial statements for the Authority may be obtained from the Housing Authority of the City of
Pasco and Franklin County, 2505 W. Lewis Street, Pasco, WA 99301.
NOTE 12: JOINTLY GOVERNED ORGANIZATIONS:
Tri-Cities Regional Public Facilities District
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Pursuant to RCW 35.57 the Tri-Cities Regional Public Facilities District was formed jointly by
the Cities of Pasco, Kennewick, and Richland. The District was established for the purpose of
acquiring, constructing, owning, remodeling, maintaining, equipping, re-equipping, repairing,
financing, operating one or more Regional Centers, as defined by the RCW 35.57.020 and/or
participating with any other qualified public facilities districts in a cooperative and joint
development of a Regional Center in the Tri-Cities area, by interlocal agreement.
The District is governed by a nine-member board, with three members representing each city.
Each member must either be a member of the City Council or the Public Facilities District of the
representative city.
Franklin County Emergency Management
Franklin County Emergency Management (FCEM) is a political subdivision of Franklin County
and its municipalities. The FCEM is responsible for coordinating and establishing emergency
response plans to prepare Franklin County for emergencies involving the following: Energy
Northwest; the Hanford Nuclear Reservation; the Pasco Airport; and all Homeland Security,
natural and man-made disasters
FCEM is governed by a seven-member board, with two County Commissioners, one City Manager
or designee from each of the following cities: Connell, Kahlotus, and Mesa. The City of Pasco
has two representatives on the board due to its population base.
Benton-Franklin Council of Governments
The Benton-Franklin Council of Governments (BFCG) is a voluntary association of the units of
local government, whose purpose is to facilitate a cooperative approach to regional problem
solving.
Seventeen regular voting members represent the two counties, local governments, including a
Public Utility District, a Transportation District, a Port and the Washington State Department of
Transportation. The City of Pasco has one City Council member as its voting representative on
the Board. In addition to regular voting members, there is one associate member and two affiliate
members.
Benton-Franklin Council of Governments Economic Development District
The Benton-Franklin Council of Governments Economic Development District (EDD) is a
voluntary association of the units of local government and private sector members whose purpose
is to facilitate a cooperative approach to regional economic development.
The board is comprised of the members of the Benton-Franklin Council of Governments plus nine
representatives from the private sector.
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NOTE 13: EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS
The City implemented GASB Statement 68, Accounting and Financial Reporting for Pensions in
January 2015. The following table represents the aggregate pension amounts for all State plans
subject to the requirements of the GASB Statement 68, Accounting and Financial Reporting for
Pensions for the year 2017.
State Sponsored Pension Plans
Substantially all 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.
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
Page 71
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 2017 were as follows:
For the year ended December 31, 2017, The city’s contributions to PERS Plan 1 was $4,077 which
includes the 0.18% Administrative Fee. For the purpose of calculating GASB 68 liability on the
PERS Plan 1, contributions include $610,152 for the UAAL component of the plan, which is
calculated and paid on PERS 2/3 wages.
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.
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 h ave 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
PERS Plan 1
Actual Contribution Rates Employer Employee*
PERS Plan 1 12.52%6.00%
Administrative Fee 0.18%
Total 12.70%6.00%
Page 72
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 2017 were as follows:
* For employees participating in JBM, the City’s contribution rate was 13.68%
For the year ended December 31, 2017 the city’s actual PERS Plan 2/3 contributions were
$1,482,728. This amount includes Administrative Fees and $610,152 for PERS Plan 1 UAAL.
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
PERS Plan 2/3
Actual Contribution Rates Employer 2/3 Employee 2*
PERS Plan 2/3 12.52%7.38%
Employee PERS Plan 3 Varies
Administrative Fee 0.18%
Total 12.70%7.38%
Page 73
The FAS is the basic monthly 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 1 had no required employer or employee
contributions for fiscal year 2017. 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 2017 were as follows:
The city’s contributions to the plan were $763,912 for the year ended December 31, 2017, which
includes 0.18% in Administrative Fees.
LEOFF Plan 2
Actual Contribution Rates Employer Employee
State and Local Governments 5.25%8.75%
Administrative Fee 0.18%
Total 5.43%8.75%
Page 74
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, 2017, the state contributed
$62,155,262 to LEOFF Plan 2. The amount recognized by the City as its proportionate share of
this amount is $438,297.
Actuarial Assumptions
The total pension liability (TPL) for each of the DRS plans was determined using the most recent
actuarial valuation completed in 2017 with a valuation date of June 30, 2016. Besides the discount
rate, the actuarial assumptions used in the valuation are summarized in the Actuarial Section of
DRS’ Comprehensive Annual Financial Report located on the DRA employer -resource GASB
webpage. The assumptions reflect the results of OSA’s 2007-2012 Experience Study and the 2015
Economic Experience Study.
Additional assumptions for subsequent events and law changes are current as of the 2016 actuarial
valuation report. The TPL was calculated as of the valuation date and rolled forward to the
measurement date of June 30, 2017. Plan liabilities were rolled forward from June 30, 2016, to
June 30, 2017, reflecting each plan’s normal cost (using the entry-age cost method), assumed
interest and actual benefit payments.
Inflation: 3% 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” 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 throughout the member’s lifetime.
Change in Assumptions and Methods:
Actuarial results that OSA provided reflect the following changes in assumptions and methods:
For all plans except LEOFF Plan 1, how terminated and vested member benefits are valued
was corrected.
How the basic minimum Cola in PERS Plan 1 and TRS Plan 1 is valued for legal order
payees was improved.
The average expected remaining service lives calculation was revised. It is used to
recognize the changes in pension expense to no longer discount future years of service back
to present day.
Page 75
Discount Rate
The discount rate used to measure the total pension liability for all DRS plans was 7.5 percent for
all plans. To determine that rate, an asset sufficiency test was completed to test whether each
pension plan’s fiduciary net position was sufficient to make all projected future benefit payments
for current plan members.
Consistent with current law, the asset sufficiency test included an assumed 7.70% 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 employers, whose rates
include a component for the PERS 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. In selecting this assumption, OSA reviewed the
historical experience data, considered the historical conditions that produced past annual
investment returns, and considered Capital Market Assumptions (CMAs) and simulated expected
investment returns the Washington State Investment Board (WSIB) provided
The CMAs contain three pieces of information for each class of assets WSIB currently invests in:
Expected Annual Return
Standard deviation of the annual return
Correlations between the annual returns of each asset class with every other asset class.
The WSIB uses the CMAs and their target asset allocation to simulate future investment returns at
various future times.
Estimated Rates of Return by Asset Class
The table below summarizes the 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, 2017.
The inflation component used to create the table is 2.20% and represents the WSIB’s most recent
long-term estimate of broad economic inflation.
Asset Class Target Allocation % Long-Term Expected Real Rate
of Return Arithmetic
Fixed Income 20%1.70%
Tangible Assets 5%4.90%
Real Estate 15%5.80%
Global Equity 37%6.30%
Private Equity 23%9.30%
100%
Page 76
Sensitivity of NPL
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.
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
For year ending December 31, 2017, the city reported a total pension liability of $9,134,269 and a
net pension (asset) of $(6,950,821) for its proportionate share of the net pension liabilities (assets).
The table below details these amounts by plan:
The amount of the asset reported above for LEOFF Plan 2 reflects a reduction for State pension
support provided to the city. The amount recognized by the city as its proportionate share of the
net pension liability/(asset), the related State support, and the total portion of the net pension
liability/(asset) that was associated with the city were as follows:
1% Decrease Current Rate Discount 1% Increase
6.50%7.50%8.50%
PERS Plan 1 5,760,816 4,728,992 3,835,211
PERS Plan 2/3 11,868,277 4,405,277 (1,709,545)
LEOFF Plan 1 (753,289) (1,015,536) (1,240,746)
LEOFF Plan 2 1,284,387 (5,935,285) (11,817,571)
Pension liabilities (9,134,269)$
Pension assets 6,950,821
Deferred outflows of resources 2,270,845
Deferred inflows of resources (3,565,644)
Pension expense/expenditures 1,038,889$
Aggregate Pension Amounts - All Plans
LEOFF 1 Asset LEOFF 2 Asset
Employer's proportionate share (1,015,536) (5,935,285)
State's proportionate share of the
net pension asset associated with
the employer (6,869,061) (3,850,108)
Total (7,884,597)$ (9,785,393)$
Page 77
At June 30, 2017, the city’s proportionate share of the collective net pension liabilities was as
follows:
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 Non-employer 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 2017.
Historical data was obtained from a 2011 study by the Office of the State Actuary (OSA). In fiscal
year 2017, 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 contrib utions.
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 2017, the state of Washington contributed 39.34 percent of LEOFF 2 employer
contributions pursuant to RCW 41.26.725 and all other employers contributed the remaining 60.65
percent of employer contributions
The collective net pension liability (asset) was measured as of June 30, 201 7, and the actuarial
valuation date on which the total pension liability (asset) is based was as of June 30, 201 6, with
update procedures used to roll forward the total pension liability to the measurement date.
Pension Expense
For the year ended December 31, 2017, the city recognized pension expense as follows:
Proportionate Proportionate Change in
Plan Share 6/30/16 Share 6/30/17 Proportion
PERS 1 0.098322% 0.099661% 0.001339%
PERS 2/3 0.122675% 0.126788% 0.004113%
LEOFF 1 0.066826% 0.066934% 0.000108%
LEOFF 2 0.400187% 0.427714% 0.027527%
PERS 1 358,000$
PERS 2 698,885$
LEOFF 1 (162,685)$
LEOFF 2 144,690$
TOTAL 1,038,890$
Pension Expense 2017
Page 78
Deferred Outflows of Resources and Deferred Inflows of Resources
At December 31, 2017, the city reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
-$ -$
- (176,473)
-
316,238
TOTAL 316,238$ (176,473)$
PERS 1
Differences between expected and actual
experience
Net difference between projected and actual
investment earnings on pension plan
investments
Changes of assumptions
Changes in proportion and differences between
contributions and proportionate share of
Contributions subsequent to the measurement
date
Deferred Outflows Deferred Inflows
of Resources of Resources
446,359$ (144,882)$
- (1,174,341)
46,792 -
303,578 (71,023)
464,082
TOTAL 1,260,811$ (1,390,246)$
PERS 2/3
Differences between expected and actual
experience
Net difference between projected and actual
investment earnings on pension plan
investments
Changes of assumptions
Changes in proportion and differences between
contributions and proportionate share of
contributions
Contributions subsequent to the measurement
date
Deferred Outflows Deferred Inflows
of Resources of Resources
-$
- (94,367)
- -
-
TOTAL -$ (94,367)$
LEOFF 1
Differences between expected and actual
experience
Net difference between projected and actual
investment earnings on pension plan
investments
Changes of assumptions
Changes in proportion and differences between
contributions and proportionate share of
contributions
Contributions subsequent to the measurement
date
Page 79
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:
Deferred Outflows Deferred Inflows
of Resources of Resources
260,867$ (225,076)$
- (1,332,513)
7,147 -
30,512 (346,969)
395,270
TOTAL 693,796$ (1,904,558)$
LEOFF 2
Differences between expected and actual
experience
Net difference between projected and actual
investment earnings on pension plan
investments
Changes of assumptions
Changes in proportion and differences between
contributions and proportionate share of
contributions
Contributions subsequent to the measurement
date
Deferred Outflows Deferred Inflows
of Resources of Resources
707,226$ (369,958)$
- (2,777,694)
53,939 -
334,090 (417,992)
1,175,590 -
TOTAL 2,270,845$ (3,565,644)$
Contributions subsequent to the measurement
date
TOTAL DEFERRED OUTFLOWS
AND INFLOWS FOR ALL PLANS
Differences between expected and actual
experience
Net difference between projected and actual
investment earnings on pension plan
investments
Changes of assumptions
Changes in proportion and differences between
contributions and proportionate share of
contributions
Year Ended 12/31 PERS 1 PERS 2/3 LEOFF 1 LEOFF 2 Total
2018 (119,284) (367,458) (59,223) (671,271) (1,217,236)
2019 37,660 160,206 15,972 79,521 293,359
2020 (8,744) (84,521) (6,378) (150,572) (250,215)
2021 (86,104) (448,294) (44,738) (605,519) (1,184,655)
2022 - 63,718 - (46,106) 17,612
Thereafter - 82,833 - (212,086) (129,253)
Total (176,472)$ (593,516)$ (94,367)$ (1,606,033)$ (2,470,388)$
Net Effect on Future Pension Expense
Page 80
Firemen's Pension
The following table represents the aggregate pension amounts for the Firemen’s’ Pension
Fund, subject to the requirements of GASB Statement 68 for the year 2017.
Plan Description
Plan Administration: The Firemen’s’ Pension Fund (FPF) is administered by the City of Pasco.
The plan is a single-employer defined benefit pension plan that provides pensions for
firefighters that were hired prior to 1970.
The municipal firefighters' pension board consists of the following five members, ex officio,
the mayor, or in a city of the first class, the mayor or a designated representative who shall be
an elected official of the city, who shall be chairperson of the board, the city comptroller or
clerk, the chairperson of finance of the city council, or if there is no chairperson of finance, the
city treasurer, and in addition, two regularly employed or retired firefighters elected by secret
ballot of those employed and retired firefighters who are subject to the jurisdiction of the board.
The members to be elected by the firefighters shall be elected annuall y for a two-year term.
The two firefighters elected as members shall, in turn, select a third eligible member who shall
serve as an alternate in the event of an absence of one of the regularly elected members. In case
a vacancy occurs in the membership of the firefighters or retired members, the members shall
in the same manner elect a successor to serve the unexpired term. The board may select and
appoint a secretary who may, but need not be a member of the board. In case of absence or
inability of the chairperson to act, the board may select a chairperson pro tempore who shall
during such absence or inability to perform the duties and exercise the powers of the
chairperson. A majority of the members of the board shall constitute a quorum and have power
to transact business.
Plan Membership: Plan membership is limited to active members of the Firefighters' Pension
Fund (FPF) as of March 1, 1970. On that date, the Washington Law Enforcement Officers' and
Firefighters' System (LEOFF) was established. FPF is responsible for paying the pensions of
those members retired prior to March 1, 1970 and for providing the "excess benefit", the excess
of FPF formula benefits over the LEOFF benefits. Therefore, the plan is closed to new
members. At December 31, 2017, FPF membership consisted of the following:
Inactive plan members retired prior to March 1, 1970 and receiving benefits: 0
Inactive plan members retired March 1, 1970 or after and receiving benefits: 8
Inactive plan members retired March 1, 1970 or after and not currently receiving benefits: 1
Active Plan Members: 0
Pension Liabilities -$
Pension Assets (1,568,447)
Deferred Outflows of Resources 111,627
Deferred Inflows of Resources (237,004)
Pension Expense (26,259)
Aggregate Pension Amounts -Old Fire Pension
Page 81
Benefits provided. All benefit terms are in statutes RCW 41.16, 41.18, and 41.26. FPF provides
retirement, disability, and death benefits. Each firefighter in service on March 1, 1970 receives
the greater of the benefit payable under the Washington Law Enforcement Officers' and
Firefighters' Retirement System and the benefits available under the provisions of prior law.
Where benefits under the old law exceed those under the new law for any firefighter, the excess
benefits are paid from the FPF of the city employing the member on March 1, 1970.
All members are retired and drawing benefits. One member is eligible for City benefits but
because of the formulary is only receiving benefits from the state. He continues to be eligible
for City benefits if they exceed the LEOFF benefit. Benefit payments provide for cost-of-living
adjustments to each member's retirement benefit. There are two types of increases: escalation
by salary in proportion to the current salary of the rank from which the firefighter retired, or an
increase proportionate to the increase in the Seattle-area CPI, with the change computed
annually. Regardless of the increase (or decrease) in the CPI, the benefits are increased at least
2% each year. The former applies to firefighters who retired from service after 1969, their
survivors, and to firefighters who retired for duty disability (but not their survivors) after 1969.
The latter applies to all other types of monthly benefits.
Contributions. In 2017 and prior years, the City was eligible to receive a share of the State’s
distribution of the fire insurance premium taxes, subject to providing benefits to covered
members of the Fire Pension Plan. In 2017 the plan received $63,503 from this tax. In addition
to the fire insurance premium tax the plan receives interest and dividends on plan assets. In
recent year’s actuarial valuations have supported the City’s assertion that the plan is fully
funded. The City did not contribute to the plan in 2017.
Pursuant to the provisions of RCW 41.16.060, the City is allowed to levy up to $0.45 per $1,000
of assessed valuation to maintain the Fire Pension Fund. Only $0.225 of the levy can be in
excess of the property tax limit pursuant to RCW 84.52.043 and a report from a qualified
actuary must show the property tax is necessary to maintain the fund. The City does not
currently levy the allowable property tax to fund the FPF.
Investments
The Fire Pension Plan does not have an investment policy for investing pension funds. At year
end investments are reported at quoted market price as provided by our broker, US Bank. At
December 31, the Fire Pension Plan had the following investments, reported at fair market
value.
Federal Agency $ 24,889
Mutual Funds $ 2,271,878
Rate of Return. For the year ended December 31, 2017, the annual money-weighted rate of
return on pension plan investments, net of pension plan investment expense, was 15.94%. The
money-weighted rate of return expresses investment performance, net of investment expense,
adjusted for the changing amount actually invested.
Page 82
Actuarial Assumptions: The total pension liability was determined by an actuarial valuation as
of December 31, 2017, using the following actuarial assumptions, applied to all periods
included in the measurement:
Inflation 2.50%
Salary increases 3.00%
*Investment rate of return 7.00%
The discount rate was changed was reduced from 7.1% to 7.0% as of 12/31/17
Healthy life mortality rates were based on the RP-2014 mortality table, total dataset, fully
generational projected with Scale MP-2014, set back one year for males and set forward one
year for females. Disabled life mortality rates were based on the RP-2014 mortality table, total
dataset, fully generational projected with Scale MP-2014, set back two years for males and
females.
The long-term expected rate of return on pension plan investments assumption was based on
the nature and mix of current and expected pension plan assets over a period of time
representative of the expected length of time between the first day of service and date of the
last benefit payment.
Discount rate. The discount rate used to measure the total pension liability was 7.0%. The
projection of cash flows used to determine the discount rate assumed City contributions were
equal to the statutorily calculated contribution of state fire insurance premiums for the next 20
years. Based on this assumption, the pension plan's fiduciary net position was projected to be
available to make all projected future benefit payment for current plan members. Therefore,
the long-term expected rate of return on pension plan investments was applied to all periods of
projected benefit payments to determine the total pension liability.
Sensitivity of the net pension liability to changes in the discount rate. The net pension liability
of the City, calculated using the discount rate of 7.0%, as well as what the City's net pension
liability would be if it were calculated using a discount rate that is one-percentage-point lower,
6.0%, or one-percentage point higher, 8.0%, than the current rate, follows:
Net Pension Liability
The components of the City’s net pension liability and funding status at December 31, 2017
are as follows:
1% Decrease Current Discount Rate 1% Increase
(1,461,517)$ (1,568,447)$ (1,660,198)$ Net Pension Liability
Page 83
The following table presents the changes in Net Pension Liability for year ending December 31,
2017.
Healthcare Actuaries performed an actuarial study on December 31, 2017 for this plan. The firm
also completed a roll forward update of the plan’s actuals for 2018. This plan does not have a
special funding situation.
Changes Since the Prior Valuation
1) The discount rate was changed from 7.10% to 7.00% as of December 31, 2017
2) The valuation reflects updated census information.
The City’s fiscal year and the Fire Pension Plan both observe a fiscal year ending December 31.
The components of FPF Plan Expense for 2017 are presented in the following table:
OLD FIRE PENSION - Funded Status as of December 31, 2017
Total Pension Liability 1,193,946$
Less: Plan Fiduciary Net Position 2,762,393
Fire Pension Fund Net Pension Liability/(Asset)(1,568,447)$
Plan Fiduciary Net Position as a Percentage of 231.37%
the Total Pension Liability
Covered Payroll NA
USSL as a percentage of covered payroll NA
Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability
(a)(b)(a)-(b)
Balances at January 1, 2017 1,147,676$ 2,441,145$ (1,293,469)$
Changes for the year:
Service Cost - - -
Interest 77,207 - 77,207
Differences between expected and
actual experience 79,758 - 79,758
Change in assumptions 9,808 - 9,808
Contributions- employer/other - 63,503 (63,503)
Contributions- employee - - -
Net investment income - 384,118 (384,118)
Benefit payments, including refunds -
of employee contributions (120,503) (120,503) -
Administrative expense - (5,870) 5,870
Other changes - - -
Net changes 46,270 321,248 (274,978)
Balances at December 31, 2017 1,193,946$ 2,762,393$ (1,568,447)$
Changes in Net Pension Liability
Page 84
Deferred Outflows of Resources and Deferred Inflows of Resources
At December 31, 2017, the city reported deferred outflows of resources and deferred inflows of
resources related to the Fire Pension Plan from the following sources:
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:
The schedule of changes in net pension liability and related ratios, schedule of employer
contributions and schedule of investment returns are presented as Required Supplementary
Information (RSI) and can be found immediately following the notes to the financial statements.
The tables present multi-year trend information about whether the actuarial value of plan assets
are increasing or decreasing relative to the actuarial accrued liability for benefits over time. The
pension plan has remained fully funded over the last five years and no additional contributions
were made by the City.
Components of 2017 Plan Expense
-$
77,207
(171,298)
5,870
79,758
9,808
(27,604)
(26,259)$
1) Service Cost
2) Interest on Liabilities
5) Differences between Expected and Actual Experience
6) Change in Assumptions
7) Differences Between Expected and Actual Earnings
3) Interest on Assets
4) Administrative Expenses
Deferred Outflows Deferred Inflows
of Resources of Resources
- -
111,627 (237,004)
- -
- -
- -
111,627$ (237,004)$ TOTAL
Firemen's Pension Plan
Changes in proportion and differences between contributions
and proportionate share of contributions
Difference between expected and actual experience
Net difference between projected and actual investment
earnings on pension plan investments
Changes of assumptions
Contributions subsequent to the measurement date
Year Ended
December 31 Fire Pension Plan
2018 (27,604)$
2019 (27,604)
2020 (27,604)
2021 (42,564)
2022 -
Thereafter -
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The Fire Pension Fund is reported in the City’s CAFR as a Fiduciary Fund. Pension Liability,
Pension Asset, Deferred Inflows and Deferred Outflows are reported in the Government Wide
Statement of Net Position. A copy of the plan statements can be obtained by request at the
following address: City of Pasco 525 N 3rd Ave., Pasco, WA 99301.
NOTE 14: OTHER POST-EMPLOYMENT BENEFITS
LEOFF 1 – Postemployment Healthcare Plan
In addition to the pension benefits outlined in Note 8, Employee Retirement Systems and Pension
Plans, the City of Pasco provides post-retirement health care benefits via a single employer defined
benefit plan in accordance with state statute for retired police officers and firefighters who are
eligible for lifetime healthcare under the Law Enforcement Officers’ and Firefighters’ (LEOFF1)
plan one retirement system.
The LEOFF 1 Disability Board is responsible for management of the LEOFF 1 OPEB plan, which
is mandated by RCW 41.26. The LEOFF 1 Disability Board consists of the following five
members: the mayor or a designated representative who shall be an elected official of the city, who
shall be chairperson of the board, a council member, a “citizen at large” appointed by the City, one
retired firefighter and one retired police officer. The members to be elected by the firefighters shall
be elected annually for a two-year term. The two firefighters elected as members shall, in turn,
select a third eligible member who shall serve as an alternate in the event of an absence of one of
the regularly elected members. In case a vacancy occurs in the membership of the firefighters or
retired members, the members shall in the same manner elect a successor to serve the unexpired
term. The board may select and appoint a secretary who may, but need not be a member of the
board. In case of absence or inability of the chairperson to act, the board may select a chairperson
pro tempore who shall during such absence or inability to perform the duties and exercise the
powers of the chairperson. A majority of the members of the board shall constitute a quorum and
have power to transact business.
In 2017 the City of Pasco implemented the provisions of GASB 74, Financial Reporting for
Postemployment Benefit Plans Other Than Pension Plans, and GASB 75, Accounting and
Financial Reporting for Postemployment Benefits Other Than Pensions. These statements address
both the OPEB Plan and the employer’s reporting requirements. GASB 75 requires the net OPEB
liability to be measured as the total OPEB liability, less the amount of the OPEB plan’s fiduciary
net position. The City, as employer is required to report the net OPEB liability or (asset), and
deferred inflows and outflows associated with the plan in the Government Wide Statement of Net
Position. The LEOFF 1 OPEB plan is funded on a pay as you go basis and as such, the plan does
not have assets accumulated for future payments.
In prior years the City reported this plan under the provisions of GASB 45, which calculated the
liability for the plan as the cumulative over/under funding of the annual required contribution, plus
associated interest. For 2016 an OPEB obligation of $4,086,206 was reported in the government
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wide statement of net positon. Net position was restated in 2017 to recognize the beginning Net
OPEB liability of $16,078,996.
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, prescription and nursing care
expenses not payable by worker's compensation, Medicare, or other insurance are covered. LEOFF
1 members are eligible for the plan when they terminate employment. The plan is closed to new
participants and there are currently 31 retired LEOFF 1 members in the plan and one remaining
active LEOFF 1 employee that will be eligible upon retirement. There are no inactive plan
members not receiving plan benefits. The plan requires members to sign up for Medicare and pay
the premiums when they reach age 65. The City contributes the full premium for the City’s
healthcare for all members. Although the premium charged is the same as active employees, 29 of
the 31 eligible members have primary coverage with Medicare and the City insurance is a
secondary provider. Only two members have primary coverage with the City. The Board must
approve any medical reimbursements not covered by Medicare or the City’s insurance. In 2017
the City paid $538,371 in monthly premiums for 31 members and $8,780 for additional items not
covered by Medicare or insurance. For year ending 2017, the City’s benefit payments totaled
$547,151, which is 279% of covered payroll. Plan members do not contribute to the plan and
spouses and other dependents are not eligible for this plan. There are no third party contributions
to this plan.
The LEOFF 1 OPEB Plan has no assets and is considered unfunded, the total liability is reported
in the Government Wide Statement of Net Position.
The components of the Net OPEB Liability of the City as of December 31, 2017, were as follows:
Total OPEB Liability $16,179,101
Plan Fiduciary Net Position 0
City’s Total OPEB Liability $16,179,101
Covered Payroll 196,197
Total OPEB Liability as a percentage of covered payroll 8246.4%
Healthcare Actuaries completed a full valuation under the new GASB 74 and 75 standards, of the
plan as of December 31, 2017.
Summary of Significant Accounting Policies: For purposes of measuring the net OPEB liability,
deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB
expense information about the fiduciary net position of the City of Pasco LEOFF 1 Plan, (the plan)
and additions to/deductions from the Plan’s fiduciary net position have been determined on the
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same basis as they are reported by the plan. For this purpose, the plan recognizes benefit payments
when due and payable in accordance with the benefit terms. The LEOFF 1 OPEB plan is accounted
for using a modified accrual basis of accounting.
Funding Policy: Pursuant to state statute, the City reimburses 100% of authorized LEOFF 1 retiree
healthcare costs. The City pays a monthly insurance premium to cover each retiree under its
medical insurance program as well as any remaining eligible out-of-pocket expenses. Retirees are
not required to contribute to the plan.
Actuarial Assumptions: The total liability in the December 31, 2017 actuarial valuation was
determined using the following actuarial assumptions, applied to all periods included in the
measurement, unless otherwise specified:
Inflation: 2.75%
Salary Increases: 3.75%
Healthcare cost trend rates: 7.0% in the first year, trending down to 3.84% over 58 years
Healthy mortality rates: RPH-2014 mortality table (headcount weighted), total dataset, fully
generational with mortality improvement scale MP-2017, set back one year for males and set
forward one year for females.
Disabled mortality rates: RPH-2014 mortality table (headcount weighted), total dataset, fully
generational with mortality improvement scale MP-2017, set forward two years for males and
females.
Discount Rate: The discount rate used to measure the total OPEB liability was 3.5%. The City’s
OPEB Plan is an unfunded plan, therefore the discount rate was set to the rate of tax-exempt, high
quality 20 year municipal bonds, as of the valuation date.
The changes in total OPEB liability for 2017 are presented in the following table.
Sensitivity of the total OPEB liability to changes in the discount rate. The total OPEB liability of
the City, as well as what the City’s total OPEB Liability would be if it were calculated using a
discount rate that is one point lower (2.50%) or one percentage point higher (4.50%) follows:
Total OPEB
Liability
Balances at January 1, 2017 16,078,996$
Changes for the year:
Service Cost 89,165
Interest 556,341
Benefit payments (545,401)
Net changes 100,105
Balances as of December 31, 2017 16,179,101$
1% Decrease Current Discount Rate 1% Increase
2.50%3.50%4.50%
18,241,716$ 16,179,101$ 14,449,805$
Total OPEB Liability
Page 88
Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The total
OPEB liability of the City, as well as what the City’s total OPEB Liability would be if it were
calculated using a healthcare cost trend rates that is one point lower (6.00%) or one percentage
point higher (8.00%) than current healthcare cost trend rates follows:
The plan incurred pension expense of $645,506 in 2017. Under GASB 75, the basic formula for
calculating OPEB expense is as follows:
There is a schedule of sources of changes in the net OPEB liability presented as RSI, immediately
following the notes to the financial statements. Because this plan is unfunded there are no
disclosures relating to Fiduciary Net Position or investment experience.
There were no Deferred Outflows or Deferred Inflows of resources related to this OPEB Plan for
2017.
Fire Pension – Postemployment Healthcare Plan
Effective December 31, 2017, the City of Pasco implemented the provisions of GASB 74,
Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and GASB 75,
Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. These
statements address both the OPEB Plan and the employer’s reporting requirements. GASB 75
requires the net OPEB liability to be measured as the total OPEB liability, less the amount of the
OPEB plan’s fiduciary net position. The City, as employer is required to report the net OPEB
liability or (asset), and deferred inflows and outflows associated with the plan in the Government
Wide Statement of Net Position.
1% Decrease Current Discount Rate 1% Increase
6.00%7.00%8.00%
Decreasing to 2.84% Decreasing to 3.84% Decreasing to 4.84%
14,519,605$ 16,179,101$ 18,113,316$
Total OPEB Liability
December 31, 2017
1) Service Cost 89,165$
2) Interest (on liabilities)556,341
3) Interest (on assets)-
4) Administrative Expenses -
5) Difference between expected and actual experience -
6) Change in Assumptions -
7) Difference between expected and actual earnings -
Total Expense 645,506$
Calculation of Expense under GASB 75
Page 89
The Old Fire OPEB Plan is a defined benefit plan administered through a trust. The Fire Pension
Board is responsible for management of the Old Fire OPEB plan, which is mandated by RCW
41.26. The Firefighters Pension Board consists of the following five members: the mayor or a
designated representative who shall be an elected official of the city, who shall be chairperson of
the board, the City Clerk, the City Finance Manager/Director and two elected retired firefighters
covered by the plan. The two firefighters elected as members shall, in turn, select a third eligible
member who shall serve as an alternate in the event of an absence of one of the regularl y elected
members. In case a vacancy occurs in the membership of the firefighters or retired members, the
members shall in the same manner elect a successor to serve the unexpired term. The board may
select and appoint a secretary who may, but need not be a member of the board. In case of absence
or inability of the chairperson to act, the board may select a chairperson pro tempore who shall
during such absence or inability to perform the duties and exercise the powers of the chairperson.
A majority of the members of the board shall constitute a quorum and have power to transact
business.
Plan Description: The Old Fire Pension OPEB covers firefighters that were hired prior to the
creation of the LEOFF 1 retirement system. As required by the Revised Code of Washington
(RCW) Chapter 41.26, the City provides these retirees lifetime medical care under a defined-
benefit healthcare plan administered by the City. The members' necessary hospital, medical,
prescription and nursing care expenses not payable by worker's compensation, Medicare, or other
insurance are covered. Plan members are eligible for the plan when they terminate employment.
The plan is closed to new participants and all eligible members are retired and drawing benefits.
There are currently 5 eligible members in the plan and spouses and beneficiaries are not eligible
for the plan. The plan requires members to sign up for Medicare and pay the premiums when they
reach age 65. The City contributes the full premium for the City’s healthcare for all members and
members do not contribute to the plan. Although the premium charged is the same as active
employees, all 5 members have primary coverage with Medicare and the City insurance is a
secondary provider. The Board must approve any medical reimbursements not covered by
Medicare or the City’s insurance. In 2017 the plan paid $94,835 in monthly premiums for 5
members and $50,003 for additional items not covered by Medicare or insurance.
The components of the Net OPEB Liability of the City as of December 31, 2017, were as follows:
Total OPEB Liability $ 1,612,381
Plan Fiduciary Net Position 3,023,373
City’s Total OPEB Liability (Asset) ($ 1,410,992)
Plan Fiduciary Net Position as a percentage of total OPEB 187.51%
Covered Payroll N/A
Total OPEB Liability as a percentage of covered payroll N/A
Healthcare Actuaries completed a full valuation under the new GASB 74 and 75 standards, of the
plan as of December 31, 2017.
Page 90
Summary of Significant Accounting Policies: For purposes of measuring the net OPEB liability,
deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB
expense information about the fiduciary net position of the Old Fire OPEB Plan, (the 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. Investments are reported at fair value. The Old Fire OPEB
plan is accounted for using a modified accrual basis of accounting.
Funding Policy: Pursuant to state statute, the City is wholly responsible for 100% of authorized
Old Fire OPEB retiree healthcare costs. The City pays a monthly insurance premium to cover each
retiree under its medical insurance program as well as any remaining eligible out-of-pocket
expenses. Retirees are not required to contribute to the plan.
Actuarial Assumptions: The total liability in the December 31, 2017 actuarial valuation was
determined using the following actuarial assumptions, applied to all periods included in the
measurement, unless otherwise specified
Inflation: 2.75%
Salary Increases: 3.75%
Healthcare cost trend rates: 6.0% in the first year, trending down to 3.84% over 58 years
Healthy mortality rates: RPH-2014 mortality table (headcount weighted), total dataset, fully
generational with mortality improvement scale MP-2017, set back one year for males and set
forward one year for females.
Disabled mortality rates: RPH-2014 mortality table (headcount weighted), total dataset, fully
generational with mortality improvement scale MP-2017, set forward two years for males and
females.
Discount Rate: The discount rate used to measure the total OPEB liability was 7.75%. The City’s
Old Fire OPEB Plan’s fiduciary net position was projected to be available to make all projected
future benefit payment for current members. Therefore, the long-term expected rate of return on
plan investments was applied to all periods of projected benefit payments to determine the total
OPEB liability.
The changes in total OPEB liability for 2017 are presented in the following table.
Page 91
Sensitivity of the total OPEB liability to changes in the discount rate. The total OPEB liability of
the City, as well as what the City’s total OPEB Liability would be if it were calculated using a
discount rate that is one point lower (6.75%) or one percentage point higher (8.75%) follows:
Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The total
OPEB liability of the City, as well as what the City’s total OPEB Liability would be if it were
calculated using a healthcare cost trend rates that is one point lower (5.00%) or one percentage
point higher (7.00%) than current healthcare cost trend rates follows:
The plan incurred pension expense of ($136,919) in 2017. Under GASB 75, the basic formula for
calculating OPEB expense is as follows:
Total OPEB Plan Fiduciary Net Net OPEB
Liability Position Liability
(a)(b)(c) = (a)-(b)
Balances at January 1, 2017 1,636,038$ 2,664,405$ (1,028,367)$
Changes for the year:
Service Cost - - -
Interest 121,181 - 121,181
Differences between expected and actual experience -
Change in assumptions - - -
Net investment income - 507,854 (507,854)
Contributions - - -
Benefit payments, including refunds -
of employee contributions (144,838) (144,838) -
Administrative expense - (4,048) 4,048
Other changes - - -
Net changes (23,657) 358,968 (382,625)
Balances at December 31, 2017 1,612,381$ 3,023,373$ (1,410,992)$
Changes in the Net OPEB Liability
1% Decrease Current Discount Rate 1% Increase
6.75%7.75%8.75%
(1,293,591)$ (1,410,992)$ (1,515,381)$
Total OPEB Liability
1% Decrease Current Discount Rate 1% Increase
5.00%6.00%7.00%
Decreasing to 2.84% Decreasing to 3.84% Decreasing to 4.84%
(1,511,086)$ (1,410,992)$ (1,300,465)$
Total OPEB Liability
Page 92
At December 31, 2017, the City reported deferred outflows of resources and deferred inflows of
resources related to OPEB from the following sources:
Amounts reported as deferred outflows or resources and deferred inflows of resources related to
OPEB will be recognized in OPEB expense as follows:
Investments: The Old Fire OPEB Plan does not have an investment policy. The board approves
any purchase or sale transactions regarding assets of the plan. The plan has only one investment,
a mutual fund that was purchased in 2003. The investment is detailed in the following table.
The Old Fire OPEB Plan does not have a specific reserve policy or requirement, however all
assets of the plan are considered assets of the trust and as such are obligated for payment of
current and future benefits to plan members.
Calculation of Expense under GASB 75
December 31, 2017
1) Service Cost -$
2) Interest (on liabilities)121,181.00
3) Interest (on assets)(200,722.00)
4) Administrative Expenses 4,048.00
5) Difference between expected and actual experience -
6) Change in Assumptions -
7) Difference between expected and actual earnings (61,426.00)
Total Expense (136,919)$
Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between actual and expected experience -$ -$
Change of assumptions - -
Net difference between projected and actual earnings on OPEB Plan Investments - (245,706)
Total -$ (245,706)$
Year Ended December 31 Amount
2018 (61,426)
2019 (61,426)
2020 (61,426)
2021 (61,426)
Name of Investment Type
Balance as of
12/31/17 Rating by Morningstar
2017 YTD
Return
Annualized
Return Since
1/1/03
Washington Mutual Investers Fund-A Mutual Fund $2,986,331 Gold 17.39% 9.32%
Name of Investment Type
Balance as of
12/31/17 Rating by Morningstar
Money
Weighted
Rate of
Return
Annualized
Return Since
1/1/03
Washington Mutual Investers Fund-A Mutual Fund $2,986,331 Gold 17.39% 9.32%
Page 93
NOTE 15: PRIOR PERIOD CORRECTIONS
In 2017 the City of Pasco implemented GASB 74, Financial Reporting for Postemployment Benefit
Plans Other Than Pension Plans, and GASB 75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions. These GASB Statements reflect a fundamental
overhaul in the standards for accounting and financial reporting for postemployment benefits other
than pensions (OPEB). Previously the City reported the cumulative difference between the Annual
Required Contribution (ARC) and the actual contribution for the LEOFF 1 Retiree OPEB plan.
The change in accounting rule means the City will now report the “Net OPEB Liability/(Asset)”
of the plan, as well as deferred inflows, deferred outflows and OPEB expense in the Government
Wide Statement of Net Position and Statement of Activities. The City will also report the Net
OPEB components of the Old Fire OPEB plan which is administered through a Pension Trust Fund.
During the implementation of GASB 74 and 75 it was determined that like the Net Asset of the
Old Fire OPEB Plan, the Net Pension Asset of the Old Fire Pension Plan should be reported and
not just the liability for the plan. The 2017 beginning balances for Governmental Activities were
restated to reduce net position by $8,523,282. The components of the restatement are presented in
the table below:
General Fund 100 and Capital Improvement Fund 193
During the City’s 20016 Financial Audit the audit staff discovered $159,746 in Real Estate Excise
Tax (REET) that had been erroneously credited and reported in the General Fund as Property Tax
revenue. A prior period adjustment has been completed to reduce revenue and cash in the General
Fund and increase the same balances in the Capital Improvement Fund 193.
Revolving Abatement Fund 190
In 2016, the City transitioned from one system to another to account for code enforcement and
abatement billings. Until the conversion was complete the existing receivables remain on the City’s
balance with the plan to remove those balances upon successful implementation of the new system.
A key member of that conversion process left the City’s employment before making the adjusting
entry leaving the outstanding balance of accounts receivable and related revenues too high in 2016.
As soon as this oversight was discovered, a prior period adjustment was made to correct. The prior
Restatements Due to GASB 74 & 75 12/31/2016 1/1/2017 Difference
LEOFF 1 OPEB Plan Net OPEB Liability 4,086,203$ 16,078,996$ 11,992,793$
Old Fire OPEB Plan Net OPEB Asset - (1,028,367) (1,028,367)$
Total 4,086,203$ 15,050,629$ 10,964,426$
Restatement of GASB 68 Liability 12/31/2016 1/1/2017 Difference
Old Fire Net Pension Liability 1,147,676$ -$ (1,147,676)$
Old Fire Net Pension Asset - (1,293,468) (1,293,468)
1,147,676$ (1,293,468)$ (2,441,144)$
8,523,282$ Total reduction to Net Position
Components of Pension and OPEB Restatements
Page 94
period adjustment reduced the accounts receivable balance by $102,500. The ultimate effect of this
adjusting entry also reduced the net position of the revolving abatement fund.
Additionally, as part of the transition to a new system of revolving abatement program billing, the
method of recognizing bad debt accounts sent to collection changed. This change revealed the need
to make a prior period adjustment for accounts sent to collection in 2017 but billed in 2016. Without
the adjustment, the revenue reported in 2017 would be understated. As with the adjustment detailed
above, this entry reduced the net position of the revolving abatement fund.
NOTE 16: CONTINGENCIES AND LITIGATION
The City has recorded in its financial statements all material liabilities, including applicable
estimates for situations that are not yet resolved but where, based on available information,
management believes it is probable that the City will have to make payment. The City has closely
reviewed all pending claims and it is management’s opinion, the City's insurance policies and self-
insurance reserves are adequate to pay all material known or pending claims. As discussed in Note
3. F, Long-term Debt, the City is contingently liable for repayment of debt.
The City participates in a number of Federal and State assisted programs. These grants are subject
to audit by the grantor or representative. Such audits could result in requests for reimbursement to
grantor agencies for expenditures disallowed under the terms of the grants. However, City
management believes that such disallowances, if any, will be immaterial.
Currently, there is an underground fire in a non-municipal Pasco landfill which closed in
1998. The Washington State Department of Ecology (DOE) is proposing to issue an enforcement
order to parties collectively known as Potentially Liable Persons (PLPs). The City entered into an
“Institutional Control” agreement with the DOE to regulate development and provide for the
conversion of private water wells located down-plume from the site to be abandoned in favor of
using the City’s municipal water system. It is the City’s understanding that, because of its entering
into this agreement, the DOE is excluding the City from being designated as a PLP.
As of the issuance of this report, the City and the Franklin County Irrigation District are involved
in a contract dispute regarding the placement of an irrigation water line. No accrual was made to
reflect any anticipated expense for the City as of December 31, 2017. The dispute is presently in
the discovery stage of arbitration. Settlement efforts are likewise continuing. The dispute is
over a contract provision allocating responsibility for the relocation of one of the District’s lines
within the path of a street improvement project. The District is seeking specific performance to
require the City to relocate that line. The City disputes that claim. While there are no damages
demanded, if the District is successful the consequential costs to the City would include, not only
the cost of the line replacement, but also the acquisition of property rights for the relocated
line. Those combined costs could reach between $300,000 to $400,000. If the City and the
District are unable to resolve this dispute by agreement, it is anticipated that an arbitration
hearing will be held in approximately October, 2018, in Pasco, Washington.
NOTE 17: SUBSEQUENT EVENT
There are no subsequent events to report.
Page 95
Required Supplementary Information
Old Fire OPEB Fund
These schedules are presented to illustrate the requirements to show information for 10 years,
however until a full 10 year trend is compiled the City will present all available GASB 74/75
compliant information.
A schedule of funding progress for the Old Fire OPEB Fund is not included because the plan is
fully funded and there have been no contributions for the past five years.
Total OPEB Plan Fiduciary Net Net OPEB
Liability Position Liability
(a)(b) (c) = (a)-(b)
Balances at January 1, 2017 1,636,038$ 2,664,405$ (1,028,367)$
Changes for the year:
Service Cost - - -
Interest 121,181 - 121,181
Differences between expected and actual experience -
Change in assumptions - - -
Net investment income - 507,854 (507,854)
Contributions - - -
Benefit payments, including refunds -
of employee contributions (144,838) (144,838) -
Administrative expense - (4,048) 4,048
Other changes - - -
Net changes (23,657) 358,968 (382,625)
Balances at December 31, 2017 1,612,381$ 3,023,373$ (1,410,992)$
Schedule of changes in the Net OPEB Liability
Schedule of Investment Returns - Old Fire OPEB Plan
2017
Annual Money Weighted Rate of Return, Net
of Investment Expense 17.39%
Page 96
Required Supplementary Information
LEOFF 1 OPEB Fund
The Schedule of Investment Returns was not included for this plan because there are no fund
assets to invest. These schedules are presented to illustrate the requirements to show information
for 10 years, however until a full 10 year trend is compiled the City will present all available
GASB 74/75 compliant information.
For Year ending 12/31/17
Actuarially Determined Contribution 547,515$
Contribution in relation to the actuarially 547,515$
determined contribution
Contribution deficiency (excess) -
Covered Payroll 196,197$
Contributions as a % of Covered Payroll 279%
Notes to Schedule
Actuarial Cost Method Entry Age
Asset Valuation Method Not Applicable
Measurement Date December 31, 2017
Discount Rate 3.50%
Healthcare Cost Trend 7% in the first year
trending down to 3.84%
over 58 years
Schedule of City Contributions
Total OPEB
Liability
Balances at January 1, 2017 16,078,996$
Changes for the year:
Service Cost 89,165
Interest 556,341
Benefit payments (545,401)
Net changes 100,105
Balances as of December 31, 2017 16,179,101$
Schedule of changes in the Net OPEB Liability
Page 97
PERS PLAN 1 2014 2015 2016 2017
Employer's percentage of the net pension liability 0.097647%0.102321%0.098322%0.099661%
Employer's proportionate share of the collective net
pension liability 4,919,014$ 5,352,340$ 5,280,355$ 4,728,992$
Employer's covered employee payroll 342,721$ 163,430$ 104,245$ 34,781$
Employer's proportionate share of the net pension
liability as a percentage of covered employee payroll 1435.28%3275.00%5065.33%13596.48%
Plan fiduciary net position as a percentage of the total 61.19%59.10%57.03%61.24%
pension liability
PERS PLAN 2/3 2014 2015 2016 2017
Employer's percentage of the net pension liability 0.114462%0.125949%0.122675%0.126788%
Employer's proportionate share of the collective net
pension liability 2,313,690$ 4,500,230$ 6,176,589$ 4,405,277$
Employer's covered employee payroll 10,474,619$ 11,212,390$ 11,878,130$ 12,471,204$
Employer's proportionate share of the net pension
liability as a percentage of covered employee payroll 22.09%40.14%52.00%35.32%
Plan fiduciary net position as a percentage of the total 93.29%89.20%85.82%90.97%
pension liability
LEOFF 1 2014 2015 2016 2017
Employer's percentage of the net pension asset 0.067804%0.067488%0.066826%0.066934%
Employer's proportionate share of the collective net
pension asset (822,321)$ (813,380)$ (688,499)$ (1,015,536)$
Employer's covered employee payroll 219,984$ 207,267$ 226,769$ 197,219$
Employer's proportionate share of the net pension
asset as a percentage of covered employee payroll -373.81%-392.43%-303.61%-514.93%
Plan fiduciary net position as a percentage of the total 126.91%127.36%123.74%135.96%
pension asset
LEOFF 2 2014 2015 2016 2017
Employer's percentage of the net pension asset 0.365709%0.405844%0.400187%0.427714%
Employer's proportionate share of the collective net
pension asset (4,853,116)$ (4,171,265)$ (2,327,608)$ (5,935,285)$
State's proportionate share of the net pension asset
associated with the employer (3,193,777)(2,758,046)(1,517,431)(3,850,108)
TOTAL (8,046,893)$ (6,929,311)$ (3,845,039)$ (9,785,393)$
Employer's covered employee payroll 10,497,629$ 12,154,638$ 12,622,501$ 14,338,666$
Employer's proportionate share of the net pension
asset as a percentage of covered employee payroll -76.65%-57.01%-30.46%-68.24%
Plan fiduciary net position as a percentage of the total 116.75%111.67%106.04%113.36
pension asset
Schedule of Proportionate Share of the Net Pension Liability/(Asset)
As of June 30
Last 4 Fiscal Years
Page 98
These schedules will be built prospectively until they contain ten years of data.
PERS PLAN 1 2014 2015 2016 2017
Statutorily or contractually required contributions 31,484 16,252 10,583 4,077
Contributions in relation to the statutorily or contractually
required contributions (31,484) (16,252) (10,583) (4,077)
Contribution deficiency (excess)- - - -
Covered employer payroll 342,721$ 163,430$ 104,245$ 34,781$
Contributions as a percentage of covered employee payroll 9.19% 9.94% 10.15% 11.72%
PERS PLAN 2/3 2014 2015 2016 2017
Statutorily or contractually required contributions 964,775 1,140,430 1,327,926 1,482,156
Contributions in relation to the statutorily or contractually
required contributions (964,775) (1,140,430) (1,327,926) (1,482,156)
Contribution deficiency (excess)- - - -
Covered employer payroll 10,474,619$ 11,212,390$ 11,877,299$ 12,471,204$
Contributions as a percentage of covered employee payroll 9.21% 10.17% 11.18% 11.88%
LEOFF 1 2014 2015 2016 2017
Statutorily or contractually required contributions 396 373 407 355
Contributions in relation to the statutorily or contractually
required contributions (396) (373) (407) (355)
Contribution deficiency (excess)- - - -
Covered employer payroll 219,984$ 207,267$ 225,834$ 197,218$
Contributions as a percentage of covered employee payroll 0.18% 0.18% 0.18% 0.18%
LEOFF 2 2014 2015 2016 2017
Statutorily or contractually required contributions 549,396 635,688 660,156 763,912
Contributions in relation to the statutorily or contractually
required contributions (549,396) (635,688) (660,156) (763,912)
Contribution deficiency (excess)- - - -
Covered employer payroll 10,497,629$ 12,154,638$ 12,622,501$ 14,338,666$
Contributions as a percentage of covered employee payroll 5.23% 5.23% 5.23% 5.33%
Schedule of Employer Contributions
As of December 31
Last 4 Fiscal Years
Page 99
GASB 68 requires a disclosure of the changes in Net Pension Liability for the last 10 fiscal years, or as
many years as are available.
2015 2016 2017
Statutorially Determined Contribution 54,506$ 58,193$ 63,503$
Less Contributions Made (54,506) (58,193) (63,503)
Contribution Deficiency (excess)- - -
Covered-Employee Payroll -$ -$ -$
Contributions as a percentage of covered employee payroll n/a n/a n/a
This schedule will be built prospectively until it contains 10 years of data
Notes to Schedule:
Contributions came from State Fire Insurance Premiums.
Schedule of Contributions
Fire Pension Fund
Schedule of Investment Returns - Fire Pension Plan
2015 2016 2017
Annual Money Weighted Rate of Return, Net of
Investment Expense -0.86%12.14%15.94%
Fire Pension Fund - For Years Ended:
Total Pension Liability 2015 2016 2017
Service Cost -$ -$ -$
Interest 82,477 79,996 77,207
Changes of benefit terms - -
Differences between expected and actual experience - - 79,758
Changes of assumptions - - 9,808
Benefit payments, including refunds of employee contributions (116,770) (118,053) (120,503)
Net change in total pension liability (34,293) (38,057) 46,270
Total pension liability - beginning 1,220,026 1,185,733 1,147,676
Total pension liability - ending 1,185,733$ 1,147,676$ 1,193,946$
Plan Fiduciary Net Position
Contributions- employer 54,506$ 58,193$ 63,503$
Contributions - employee - -
Net investment income (19,689) 267,948 384,118
Benefit payments, including refunds of employee contributions (116,770) (118,053) (120,503)
Administrative expense (3,398) (4,414) (5,870)
Other - (3,500) -
Net change in plan fiduciary net position (85,351) 200,174 321,248
Plan fiduciary net position- beginning 2,326,321 2,240,970 2,441,145
Plan fiduciary net position-ending 2,240,970 2,441,144 2,762,393
City's net pension liability -(1,055,237)$ (1,293,468)$ (1,568,447)$
Plan fiduciary net position as a percentage of the total pension 188.99%212.70%231.37%
Covered employee payroll - -
City's net pension liability as a percentage of covered employee
payroll n/a n/a n/a
Notes to schedule:
Schedule of Changes in the City's Net Pension Liability and Related Ratios
The following assumptions were adopted as of 1/1/2017: discount rate 7.0%, salary increases 3.00%,
CPI 2.50%, mortality tables updated to RP-2014 with Scale MP-2014 projections.
Page 100
Federal Agency
(Pass-Through Agency)Federal Program
CFDA
Number
Other Award
Number
Expenditures
Passed through
to
Subrecipients Note
From Pass-
Through
Awards
From Direct
Awards Total
Economic Development Cluster
Economic Development
Administration, Department Of
Commerce (via Washington State
Department of Commerce)
Economic Adjustment
Assistance
11.307 07-79-07368 55,588 -55,588 -2
Total Economic Development Cluster: 55,588 -55,588 -
CDBG - Entitlement Grants Cluster
Office Of Community Planning
And Development, Department
Of Housing And Urban
Development
Community
Development Block
Grants/Entitlement
Grants
14.218 B-14-MC-53-
009-CDBG
-77,234 77,234 -3
Office Of Community Planning
And Development, Department
Of Housing And Urban
Development
Community
Development Block
Grants/Entitlement
Grants
14.218 B-16-MC-53-
009-CDBG
-147,277 147,277 -3
Office Of Community Planning
And Development, Department
Of Housing And Urban
Development
Community
Development Block
Grants/Entitlement
Grants
14.218 B-17-MC.53-
009-CDBG
-309,861 309,861 -3
Total CDBG - Entitlement Grants Cluster: -534,372 534,372 -
Office Of Community Planning
And Development, Department
Of Housing And Urban
Development (via Washington
State Department of Commerce)
Community
Development Block
Grants/State's program
and Non-Entitlement
Grants in Hawaii
14.228 08-F6401-014 10,349 -10,349 -3
Office Of Community Planning
And Development, Department
Of Housing And Urban
Development (via City of
Richland)
Home Investment
Partnerships Program
14.239 Home Program 162,560 -162,560 -3
City of Pasco
Schedule of Expenditures of Federal Awards
For the Year Ended December 31, 2017
The accompanying notes are an integral part of this schedule.Page 101
Federal Agency
(Pass-Through Agency)Federal Program
CFDA
Number
Other Award
Number
Expenditures
Passed through
to
Subrecipients Note
From Pass-
Through
Awards
From Direct
Awards Total
Violence Against Women Office,
Department Of Justice (via
Department of Commerce)
Violence Against
Women Formula Grants
16.588 2017 Stop
Violence
Against Women
34,698 -34,698 -2
Bureau Of Justice Assistance,
Department Of Justice
Bulletproof Vest
Partnership Program
16.607 2017 Bullet
Proof Vest
-6,070 6,070 -2
Criminal Division, Department Of
Justice (via US Marshalls)
Equitable Sharing
Program
16.922 Equitable
Sharing
16,035 -16,035 -5
Highway Planning and Construction Cluster
Federal Highway Administration
(fhwa), Department Of
Transportation (via Washington
Department of Transportation)
Highway Planning and
Construction
20.205 STPUS-0397
(018) LA-7866
22,622 -22,622 -2
Federal Highway Administration
(fhwa), Department Of
Transportation (via Washington
Department of Transportation)
Highway Planning and
Construction
20.205 STPUL-3315
(008) LA-8322
1,412 -1,412 -2
Federal Highway Administration
(fhwa), Department Of
Transportation (via Washington
Department of Transportation)
Highway Planning and
Construction
20.205 HSIP-3551
(004)- LA-8697
1,916,921 -1,916,921 -2
Federal Highway Administration
(fhwa), Department Of
Transportation (via Washington
State Department of
Transportation)
Highway Planning and
Construction
20.205 STPUL-9911
(010) LA-8321
1,145,646 -1,145,646 -2
Federal Highway Administration
(fhwa), Department Of
Transportation (via Washington
Department of Transportation)
Highway Planning and
Construction
20.205 STPUL-1823
(062) LA-8318
22,644 -22,644 -2
City of Pasco
Schedule of Expenditures of Federal Awards
For the Year Ended December 31, 2017
The accompanying notes are an integral part of this schedule.Page 102
Federal Agency
(Pass-Through Agency)Federal Program
CFDA
Number
Other Award
Number
Expenditures
Passed through
to
Subrecipients Note
From Pass-
Through
Awards
From Direct
Awards Total
Federal Highway Administration
(fhwa), Department Of
Transportation (via Washington
Department of Transportation)
Highway Planning and
Construction
20.205 STPUL-3522
(001) LA-8117
10,018 -10,018 -2
Total Highway Planning and Construction Cluster: 3,119,263 -3,119,263 -
Highway Safety Cluster
National Highway Traffic Safety
Administration (nhtsa),
Department Of Transportation
(via Washington Association of
Sherrif & Police Commission)
State and Community
Highway Safety
20.600 WASPC Traffic
Safety
Equipment
980 -980 -2
National Highway Traffic Safety
Administration (nhtsa),
Department Of Transportation
(via Washington Traffic Safety
Commission)
State and Community
Highway Safety
20.600 HVE 5,299 -5,299 -2
Total CFDA 20.600: 6,279 -6,279 -
National Highway Traffic Safety
Administration (nhtsa),
Department Of Transportation
(via Washington Traffic Safety
Commission)
National Priority Safety
Programs
20.616 2016-2017 Flex
Funding
2,189 -2,189 -2
Total Highway Safety Cluster: 8,468 -8,468 -
Drinking Water State Revolving Fund Cluster
Office Of Water, Environmental
Protection Agency (via
Washington Department of
Commerce)
Capitalization Grants for
Drinking Water State
Revolving Funds
66.468 DM 15-952-037
(DWSRF)
6,005,656 -6,005,656 -2,6
Total Drinking Water State Revolving Fund Cluster: 6,005,656 -6,005,656 -
Aging Cluster
City of Pasco
Schedule of Expenditures of Federal Awards
For the Year Ended December 31, 2017
The accompanying notes are an integral part of this schedule.Page 103
Federal Agency
(Pass-Through Agency)Federal Program
CFDA
Number
Other Award
Number
Expenditures
Passed through
to
Subrecipients Note
From Pass-
Through
Awards
From Direct
Awards Total
Administration For Community
Living, Department Of Health And
Human Services (via Yakima
County, Office of Aging & Long
Term Care)
Special Programs for
the Aging, Title III, Part
B, Grants for Supportive
Services and Senior
Centers
93.044 ALTC 15,370 -15,370 -2
Total Aging Cluster: 15,370 -15,370 -
Federal Emergency Management
Agency (fema), Department Of
Homeland Security (via Franklin
County Emergency Management)
Homeland Security
Grant Program
97.067 EE17-078
HSGP
(16SHSP)
10,993 -10,993 -2
Total Federal Awards Expended:9,438,980 540,442 9,979,422 -
City of Pasco
Schedule of Expenditures of Federal Awards
For the Year Ended December 31, 2017
The accompanying notes are an integral part of this schedule.Page 104
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
NOTE 1 – Basis of Accounting
The Schedule of Expenditures of Federal Awards is prepared on the same basis of accounting as
the City’s financial statements. The City uses a modified accrual basis of accounting for its
governmental funds and full accrual basis of accounting for its proprietary funds.
NOTE 2 – Program costs
The amounts shown as current year expenditures represent only the federal grant portion of the program
costs. Entire program costs, including the City’s portion, are more than shown. Such expenditures are
recognized following, as applicable, either the cost principles in OMB Circular A-87, Cost Principles for
State, Local, and Indian Tribal Governments, or the cost principles contained in Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
NOTE 3 – Revolving loan – Program income
The City participates in a Regional Revolving Loan program for economic development which is
operated by Benton Franklin Council of Governments. Under this federal pass-through grant,
repayments to the City are considered program income, and loans of such funds to eligible
recipients are considered expenditures.
The City participates in the Neighborhood Stabilization Program for recovering foreclosed
properties which are rehabilitated and sold as low-income housing. Under this federal pass-through
grant, the sale of low-income homes by the City is considered program income, and the cost of
rehabilitating homes and purchasing properties are considered expenditures.
The City also participates in the Housing and Urban Development HOME Program for low-income
individuals, as part of a regional consortium administered through the City of Richland. The City
is not privy to information on what portion of funds received from the City of Richland are derived
from program income.
NOTE 4 – Amounts awarded to subrecipients
The total amount of $162,560 passed through to sub-recipient City of Richland.
NOTE 5 – Department of Justice Equitable Sharing
The City reports these funds on the Schedule of Expenditures of Federal Awards when program
proceeds received rather than when expenditures incurred due to program stipulations.
NOTE 6 – Federal loan- Office of Water, Environmental Protection agency
In September of 2015, the City entered into a loan agreement with the State of Washington
Department of Commerce. As a beneficiary of the Drinking Water State Revolving Loan program
(DWSRF), the City also became a sub recipient of funds provided by the United States
Environmental Protection Agency, CFDA number 66.468. The total loan amount of $6,810,430
was approved for the purpose of construction of the Columbia Water Supply project less a 1% loan
fee of $67,430. As of December 31,2017, the outstanding loan balance is $5,966,918. This
balance is the result of draws against the total $6,073,85 less principal repayments of $106,167.
This loan is reported on the City’s schedule of liabilities.
NOTE 7 – Inidrect cost rate
The city has not elected to use the 10-percent de minimis indirect cost rate allowed under the
Uniform Guidance.
Page 105
Washington State Auditor’s Office Page 106
CORRECTIVE ACTION PLAN FOR FINDINGS REPORTED UNDER
UNIFORM GUIDANCE
City of Pasco
January 1, 2017 through December 31, 2017
This schedule presents the corrective action planned by the City for findings reported in this report
in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
(Uniform Guidance).
Finding ref number:
2017-001
Finding caption:
The City’s internal controls over reporting of post-employment
benefits other than pensions were inadequate to ensure accurate
reporting on the financial statements.
Name, address, and telephone of City contact person:
Richa Sigdel, Finance Director
525 N. 3rd
Pasco, WA 99301
(509) 545 - 3488
Corrective action the auditee plans to take in response to the finding:
The City acknowledges weaknesses in its internal control over accounting and financial
statement preparation, however, the City does not agree with the State Auditor’s determination
of a material weakness. The issue noted by SAO was related to the classification of line items
that had no financial impact on the statement.
This particular misstatement is due to a one-time restatement of fund balance during the
implementation of new GASB standard. Guidance on presentation of the restatement was
difficult to find, however, the City recognizes the resources available at SAO and will utilize
such resource in future. The governmental revenues were appropriately presented in the Fund
Financial Statements. The statement also directed reader to Note 15 that fully disclosed the
restatement. The misstatement noted has been corrected as noted by SAO. In 2018, the City
procured a Comprehensive Annual Financial Software, which is expected to significantly
FINANCE DEPARTMENT (509) 545-3420 I FAX (509) 544-3082
PO Box 293/525 North 3rd Avenue, Pasco, Washington 99301 / www.pasco-wa.gov
Washington State Auditor’s Office Page 107
reduce time needed to prepare annual financial statement and reduce human errors, giving the
City more time to review implementation of new financial guidance.
We extend our appreciation to the State Auditor’s Office for assisting the City in identifying
the deficiency in our procedure.
Anticipated date to complete the corrective action: 12/31/2018
Washington State Auditor’s Office Page108
ABOUT THE STATE A UDITOR’S OFFICE
The State Auditor's Office is established in the state's Constitution and is part of the executive
branch of state government. The State Auditor is elected by the citizens of Washington and serves
four-year terms.
We work with our audit clients and citizens to achieve our vision of government that works for
citizens, by helping governments work better, cost less, deliver higher value, and earn greater
public trust.
In fulfilling our mission to hold state and local governments accountable for the use of public
resources, we also hold ourselves accountable by continually improving our audit quality and
operational efficiency and developing highly engaged and committed employees.
As an elected agency, the State Auditor's Office has the independence necessary to objectively
perform audits and investigations. Our audits are designed to comply with professional standards
as well as to satisfy the requirements of federal, state, and local laws.
Our audits look at financial information and compliance with state, federal and local laws on the
part of all local governments, including schools, and all state agencies, including institutions of
higher education. In addition, we conduct performance audits of state agencies and local
governments as well as fraud, state whistleblower and citizen hotline investigations.
The results of our work are widely distributed through a variety of reports, which are available on
our website and through our free, electronic subscription service.
We take our role as partners in accountability seriously, and provide training and technical
assistance to governments, and have an extensive quality assurance program.
Contact information for the State Auditor’s Office
Public Records requests PublicRecords@sao.wa.gov
Main telephone (360) 902-0370
Toll-free Citizen Hotline (866) 902-3900
Website www.sao.wa.gov