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Home My WebLink AboutWA State 2020 Financial and Federal Single Audit Report Published June 28, 2021 Report No. 1028630 Find out what’s new at SAO by scanning this code with your smartphone’s camera Financial Statements and Federal Single Audit Report City of Pasco For the period January 1, 2020 through December 31, 2020 Insurance Building, P.O. Box 40021  Olympia, Washington 98504-0021  (564) 999-0950  Pat.McCarthy@sao.wa.gov Office of the Washington State Auditor Pat McCarthy June 28, 2021 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 Americans with Disabilities In accordance with the Americans with Disabilities Act, we will make this document available in alternative formats. For more information, please contact our Office at (564) 999-0950, TDD Relay at (800) 833-6388, or email our webmaster at webmaster@sao.wa.gov. Office of the Washington State Auditor sao.wa.gov TABLE OF CONTENTS Schedule of Findings and Questioned Costs ................................................................................... 4 Summary Schedule of Prior Audit Findings .................................................................................... 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..................................................................................................... 7 Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance in Accordance With the Uniform Guidance ........................... 9 Independent Auditor's Report on the Financial Statements .......................................................... 12 Financial Section ........................................................................................................................... 15 About the State Auditor's Office ..................................................................................................106 Page 3 Office of the Washington State Auditor sao.wa.gov SCHEDULE OF FINDINGS AND QUESTIONED COST S City of Pasco January 1, 2020 through December 31, 2020 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 no 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. 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). Page 4 Office of the Washington State Auditor sao.wa.gov 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 21.019 COVID-19 – Coronavirus Relief Fund The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by the Uniform Guidance, was $750,000. The City did not qualify as a low-risk auditee under the Uniform Guidance. SECTION II – FINANCIAL STATEMENT FIND INGS None reported. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None reported. Page 5 Office of the Washington State Auditor sao.wa.gov SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS City of Pasco January 1, 2020 through December 31, 2020 This schedule presents the status of findings reported in prior audit periods. Audit Period: 1/1/2019 – 12/31/2019 Report Ref. No.: 1027509 Finding Ref. No.: 2019-001 Finding Caption: The City’s internal controls over financial reporting were inadequate to ensure accurate reporting. Background: The City’s elected officials, state, and federal agencies, and the public rely on the information included in the financial statements and reports to make decisions. City management is responsible for designing, implementing and maintaining internal controls that provide reasonable assurance regarding the reliability of financial reporting. Government Auditing Standards, prescribed by the Comptroller General of the United States, requires the auditor to communicate material weaknesses, defined below in the Applicable Laws and Regulations section, as a finding. Status of Corrective Action: (check one) ☒ Fully Corrected ☐ Partially Corrected ☐ Not Corrected ☐ Finding is considered no longer valid Corrective Action Taken: The City has implemented several internal controls over financial reporting including a checklist, additional training and implementation of a new financial reporting software. We believe these measures have corrected items noted in the prior audit. Finance Department  (509) 545-3420  Fax (509) 544-3082 P.O. Box 293  525 N. Third Ave.  Pasco, WA 99301 Page 6 Office of the Washington State Auditor sao.wa.gov INDEPENDENT AUDITOR’S REPORT 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, 2020 through December 31, 2020 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, 2020, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated June 22, 2021. As discussed in Note 18 to the financial statements, the full extent of the COVID-19 pandemic’s direct or indirect financial impact on the City is unknown. Management’s plans in response to this matter are also described in Note 18. 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. 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 Page 7 Office of the Washington State Auditor sao.wa.gov deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of the City’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. 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 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 June 22, 2021 Page 8 Office of the Washington State Auditor sao.wa.gov INDEPENDENT AUDITOR’S REPORT 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, 2020 through December 31, 2020 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, 2020. 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 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. Page 9 Office of the Washington State Auditor sao.wa.gov 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, 2020. REPORT ON INTE RNAL 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. 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. Page 10 Office of the Washington State Auditor sao.wa.gov 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 June 22, 2021 Page 11 Office of the Washington State Auditor sao.wa.gov INDEPENDENT AUDITOR’S REPORT Report on the Financial Statements City of Pasco January 1, 2020 through December 31, 2020 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, 2020, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed on page 15. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing Page 12 Office of the Washington State Auditor sao.wa.gov 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, 2020, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General and Ambulance funds 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 18 to the financial statements, the full extent of the COVID-19 pandemic’s direct or indirect financial impact on the City is unknown. Management’s plans in response to this matter are also described in Note 18. 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 15 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Page 13 Office of the Washington State Auditor sao.wa.gov 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 as a whole. 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 B Y GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated June 22, 2021 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 June 22, 2021 Page 14 Office of the Washington State Auditor sao.wa.gov FINANCIAL SECTION City of Pasco January 1, 2020 through December 31, 2020 REQUIRED SUPPLEMENTARY INFORMATION Management’s Discussion and Analysis – 2020 BASIC FINANCIAL STATEMENTS Statement of Net Position – 2020 Statement of Activities – 2020 Balance Sheet – Governmental Funds – 2020 Reconciliation of Balance Sheet to the Statement of Net Position – 2020 Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds – 2020 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities – 2020 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget to Actual – General Fund – 2020 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget to Actual – Ambulance Fund – 2020 Statement of Net Position – Proprietary Funds – 2020 Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds – 2020 Statement of Cash Flows – Proprietary Funds – 2020 Statement of Net Position – Fiduciary Funds – 2020 Statement of Changes in Fiduciary Net Position – Fiduciary Funds – 2020 Notes to Financial Statements – 2020 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in the Net OPEB Liability and Related Ratios – Old Fire OPEB – 2020 Schedule of Investment Returns – Old Fire OPEB – 2020 Schedule of City Contributions – LEOFF 1 OPEB – 2020 Schedule of Changes in the Total OPEB Liability and Related Ratios – LEOFF 1 OPEB – 2020 Page 15 Office of the Washington State Auditor sao.wa.gov Schedule of Changes in the City’s Net Pension Liability and Related Ratios – Fire Pension Fund – 2020 Schedule of Contributions – Fire Pension Fund – 2020 Schedule of Proportionate Share of Net Pension Liability (Asset) – PERS 1, PERS 2/3, LEOFF 1, LEOFF 2 – 2020 Schedule of Employer Contributions – PERS 1, PERS 2/3, LEOFF 2 – 2020 SUPPLEMENTARY AND OTHER INFORMATION Schedule of Expenditures of Federal Awards – 2020 Notes to the Schedule of Expenditures of Federal Awards – 2020 Page 16 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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, 2020. 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. Financial Highlights x The assets and deferred outflows of the City of Pasco exceeded liabilities and deferred inflows, or net position, at the close of December 31, 2020 by $545,129,459. Of this amount, $36,205,583 may be used to meet the government’s ongoing obligations to the citizens and creditors. While not formally restricted, City has assigned $1,230,430 of the unrestricted fund to future Community Center project. x The City of Pasco’s total net position improved by $42,768,903. Approximately 67% of the increase in net position is due to increases in governmental-type activities and 33% is due to business-type activities. A significant portion of the increase is attributable to capital grants and contributions received from developers in the form of donated infrastructure, as well as significant capital projects in progress for governmental and business type activities. x Expenses were $19,588,437 greater than the program revenues generated for governmental activities. Program revenues exceeded expenses by $11,363,497 for business-type activities. x As of the close of the current fiscal year, the City of Pasco’s governmental funds reported combined ending fund balances of $76,931,960. This represents an increase of $6,002,800 in comparison with the prior year. x At the end of the current fiscal year, the unrestricted, unassigned fund balance for the City’s General Fund was $25,873,815, which also represents 51% of total General Fund expenditures. This is an increase of $5,611,190 over prior year, attributable to allocation of CARES Act grants, minimal economic impact due to COVID-19 pandemic, and modest increase in expenses due to deferment of activities during the pandemic. Committed fund balance reported in City’s General Fund was $494,541, which consisted of landfill claims and surplus revenue from City’s electronic traffic safety cameras (RedFlex). City also sold its senior center in 2016, proceeds of which are assigned to construction of future community/senior center. Finally, restricted fund balance in the general fund was $11,153,347, largely due to unspent debt proceeds from City’s 2019 LTGO funds to relocate two fire stations, build a new animal shelter, and upgrade GESA Stadium. The funds are expected to be fully expended by end of 2023. x The City of Pasco’s total net capital assets increased by $37,507,394 during the year ended December 31, 2020. Majority of the increase can be attributed to investment made in the City’s infrastructure including parks, facilities, streets, and utility infrastructure. 61% of the increase in net capital assets are contributable to governmental activities. Page 17 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report x At the end of the December 31, 2020, City’s outstanding debt increased by $11,589,423. Within the governmental activities, total outstanding debt decreased by $1,481,850, which reflects principal of $1,330,000 and related annual recognition of premium amortization of $151,850 on debt obligations. Within business-type activities, total debt increased by $13,071,274. Debt increased by the addition of new bond proceeds of $16,415,000, plus a premium tied to the issuance of $1,063,759, the refunding debt to replace two outstanding bond issues of $7,135,000 and the initial draw against a Public Works Board loan of $107,221. Outstanding debt decreased with the removal of the face value of the two refunded bonds totaling, $8,565,000, annual principal payments totaling $2,938,412 and the year’s value of amortization related to bonds outstanding of $146,295. 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. The financial statements are comprised of 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 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. Fund Financial Statements. A fund is a grouping of related accounts that are 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 Page 18 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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 (31) 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 (GASB). In 2020, the General Fund, Ambulance Fund, and the Construction Fund were the only major governmental funds. LID Fund was categorized as major governmental fund for 2019 due to construction of Chapel Hill Boulevard funded by LID bond. The fund is not eligible to be categorized as a major fund in 2020. Data from the other funds are combined into a single, aggregate presentation. Individual 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 a biennial appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. 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. Page 19 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. 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. 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. Government-wide Overall Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. The net position for governmental and business-type activities is $545,129,459 at the close of the fiscal year after applying prior period adjustments. Adjustments for prior period activity, relating to the government wide statement of net position presentation resulted in an additional $4,176,580 decrease. A discussion of these adjustments can be found under the heading Note 17: Prior Period Adjustments. The largest portion of the City of Pasco’s net position $430,038,793 (79%) reflects its investment in capital 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. $78,885,083 (14.5%) of the City’s net position represents resources that are subject to external restrictions on how they may be used. The remaining $36,205,583 (6.5%) of unrestricted net position may be used to meet the government’s ongoing obligations to citizens and creditors. Governmental unrestricted fund has increased by $21,277,068 and is largely contributed to healthy increase in fund balances across governmental funds, including General and Ambulance Fund. Furthermore, payoff of inter-fund loan for Local Improvement District 150 (LID 150) contributed increase in unrestricted net position in 2020. Business-type net position decreased by $11,348,320. Historically capital revenue was accounted for as restricted asset but was not presented as restricted net position. 2020 therefore presents net position in accordance with accounting standard. Page 20 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. However, Pasco Public Facility District, component unit, reported a negative net position of $29,680 due to ongoing activity around feasibility study to build an aquatic facility. A ballot measure to be presented to voters to consider additional sales tax to build and operate the facility is expected in 2021. Mitigations will be implemented to address fund balance shortfall in correspondence with the success or failure of the ballot measure. As mentioned in the financial highlights, the City’s net position increased by $42,768,903, during the current fiscal year. Much 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, as well as significant projects in progress throughout City’s different funds. City has been reserving its fund balance for significant capital projects in transportation, parks, and utilities. 2020 2019 2020 2019 2020 2019 NonCapital assets 116,565,630 110,951,621 55,307,673 43,900,348 171,873,303 154,851,969 Capital assets 280,610,030 258,326,542 216,992,364 201,768,458 497,602,394 460,095,000 Total assets 397,175,660 369,278,163 272,300,037 245,668,806 669,475,697 614,946,969 Total of deferred outflows of resource 2,739,580 2,771,603 414,408 467,590 3,153,988 3,239,193 Current liabilities 10,057,773 8,932,827 6,695,964 6,151,149 16,753,737 15,083,976 Noncurrent liabilities 44,212,096 46,137,578 58,738,596 46,287,434 102,950,692 92,425,012 Total liabilities 54,269,869 55,070,405 65,434,560 52,438,583 119,704,429 107,508,988 Total deferred inflows of resources 7,420,670 7,439,022 375,127 877,596 7,795,797 8,316,618 Net position: Net investment in capital assets 262,403,197 247,553,877 167,635,596 160,514,038 430,038,793 408,067,915 Restricted 53,973,154 61,415,180 24,911,929 6,600,716 78,885,083 68,015,896 Unrestricted 21,848,350 571,282 14,357,233 25,705,463 36,205,583 26,276,745 Total net position 338,224,701 309,540,339 206,904,758 192,820,217 545,129,459 502,360,556 Governmental Activities Business-Type Activities Total Primary Government City of Pasco's Net Position Page 21 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Governmental Activities. Governmental activities increased the City of Pasco’s net position by $28,684,365 after prior period adjustments. Key elements of the current year’s increase in net position and changes relative to the prior year follow. x Program revenues increased by approximately $24,000,000, largely contributable to capital grants and contributions in the transportation area received from developers in the form of donated infrastructure. Other increases are attributable Operating grants and contributions also saw an increase largely due to increase in pension asset and increase COVID-19 assistance grants from the Federal and State government. Charges for services decreased by $7,250,000, however, this is due to one-time activity of Local Improvement District (LID) related revenue in 2019 and should have been classified as a general revenue rather than charge for service. Charges for services were also impacted by reduction in revenue from recreational activities due to COVID-19 pandemic. x Tax revenues are the largest source of revenue within the governmental activities for the City have been increasing at a steady pace, reflecting a healthy and growing economy. x Property tax revenue increased by 3.4% in 2020, or by approximately $369,000. This increase was largely attributable to growth in new construction. City banked its statutorily authorized increase in property tax rate in 2020. x Sales tax revenue increased by 6.2% in 2020, or approximately $1,099,000. There is no one factor to account for this increase, but strong local economy even throughout the pandemic, growth in economic development within the City, and strong growth in construction. Marketplace Fairness Act requires out-of-state businesses without a physical presence in Washington State, but who make sales to Washington consumers, to 2020 2019 2020 2019 2020 2019 Revenues Program revenues: Charges for services 29,810,827 37,064,470 32,858,079 29,672,471 62,668,906 66,736,941 Operating grants & contributions 11,221,281 1,470,380 282,000 7,852 11,503,281 1,478,232 Capital grants & contributions 29,526,743 7,977,167 6,809,743 4,107,571 36,336,486 12,084,738 General revenues: Property taxes 11,066,380 10,697,869 11,066,380 10,697,869 Other taxes 32,659,299 34,208,598 32,659,299 34,208,598 Investment income and miscellaneous 7,975,208 4,569,689 312,239 643,068 8,287,447 5,212,757 Total revenues 122,259,738 95,988,173 40,262,061 34,430,962 162,521,799 130,419,135 Program expenses: General government 12,456,759 9,039,463 12,456,759 9,039,463 Public safety 40,014,643 31,003,077 40,014,643 31,003,077 Transportation 20,092,531 11,770,120 20,092,531 11,770,120 Economic environment 8,522,809 7,807,430 8,522,809 7,807,430 Culture and recreation 7,950,814 5,953,440 7,950,814 5,953,440 Interest on long term debt 1,109,732 526,169 1,109,732 526,169 Water 11,278,305 14,340,208 11,278,305 14,340,208 Irrigation 1,953,508 1,811,366 1,953,508 1,811,366 Sewer 8,945,634 (136,696) 8,945,634 (136,696) Process water reuse 5,053,060 3,221,517 5,053,060 3,221,517 Storm water 1,355,818 1,358,525 1,355,818 1,358,525 Total expenses 90,147,288 66,099,699 28,586,325 20,594,920 118,733,613 86,694,619 32,112,450 29,888,474 11,675,736 13,836,042 43,788,186 43,724,516 Transfers (1,233,333) 540,462 1,233,333 (540,462) - - Special Item: Gain on sale of asset 508,391 1,290,215 (11,722) 85,000 496,669 1,375,215 Change in net position 31,387,508 31,719,151 12,897,347 13,380,580 44,284,855 45,099,731 Prior period adjustment (2,703,146) 1,513,067 1,187,194 (47,195) (1,515,952) 1,465,872 Total change in net position 28,684,362 33,232,218 14,084,541 13,333,385 42,768,903 46,565,603 *See Note 5- and explanation of changes in useful lives. City of Pasco's Change in Net Position Increase in net position before transfers Business-Type Activities Total Primary GovernmentGovernmental Activities Page 22 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report follow tax collection laws of Washington State. It is not possible to quantify the impact of this law yet, but we believe that increase in sales tax was also benefitted by passing of this law and increase in online sales during the pandemic. x Utility taxes (B&O Taxes) decreased by 4.4%, mainly due to decrease in electric utility revenue. Area experienced severe winter conditions during winter of 2019, whereas, by comparison, winter of 2020 was mild. The decrease could be attributed to this change in weather patterns. Franklin Public Utility District provides electric services to all Pasco residents. x Excise tax revenue, which includes Real Estate Excise Tax (REET), admissions, leasehold, and gambling tax, reduced by 44.3%, which equates to $2,138,000. This significant decrease is directly due to COVID-19 pandemic. Closure of venues like casinos and movie theaters, as well as impacts to real estate transactions during the second and third quarter of the year impacted the revenue source significantly. Furthermore, 2019 saw a significant increase in REET revenue and the trend was expected to go down in 2020. On a full accrual basis, expenses within the governmental activities increased by 36% or approximately $24,000,000. However, excluding capital outlay, pension, and depreciation expense, expenses increased by approximately $2,600,000, an increase of 4%. Significant increases were in the areas of Public Safety based on changes to pension liability, also Transportation where an accounting estimate change put in place in 2019 resulted in decrease of depreciation expenses for the year. Transportation expenses for year ending December 31, 2020 reflects standard depreciation schedule after the implementation of the 2019 accounting estimate change. Following charts illustrate different component of the City’s revenue from governmental activities. As illustrated in graph, City’s largest source of revenue is taxes, making up approximately 36% of the total revenue. Charges for services are another reliable revenue source for the City, accounting for 24% of the total revenue received by the City to support governmental activities. Capital and operating grants and contributions made up over 33% of the revenue. However, it is important to note that this revenue source is impacted by construction trends, as the chart illustrates. Page 23 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report GOVERNMENTAL ACTIVITIES – REVENUES BY SOURCE GOVERNMENTAL ACTIVITIES – EXPENSES AND PROGRAM REVENUES Business-Type Activities. 33% of the increase in the City of Pasco’s net position is related to business-type activities. In 2020, the business type activities made up 38% of the City’s net position. The net position for business-type activities has increased by $14,084,0541. This value represents an improvement to net position in 2020 of seven percent. Asset value increased 10% primarily related to investment in capital investment. Liabilities increased 24%. This increase reflects the issuance of new bond debt that was incurred to support investment in the City’s process water reuse facility. The City increased rates for Water (3%) and Sewer (4%) in 2020. Investment in aging infrastructure, coupled with investment in new facilities to support anticipated growth has occurred over the past couple of years. This effort continued in 2020 and is reflected in City’s 2020-2025 Capital Improvement Plan. Improvements. Funding for the Charges for services 24% Operating grants & contributions 9% Capital grants & contributions 24% Property taxes 9% Other taxes 27% Investment income and miscellaneous 3% Investment income and miscellaneous 7% Sources of Revenues 2020 Charges for services 38% Operating grants & contributions 2% Capital grants & contributions 8% Property taxes 11% Other taxes 35% Gain on sale of asset 1% Sources of Revenues 2019 - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 2020 Expenses 2020 Revenue 2019 Expense 2019 Revenue Page 24 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report necessary capital improvements will be provided by a combination of grants, accumulated unrestricted fund balance, low interest loans, and revenue bonds. 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. For the period ended on December 31, 2020, the City of Pasco governmental funds reported combined ending fund balances of $76,931,960, which is an increase of $6,002,530, or 8.5% from the prior year. Approximately 34% of this total amount, $25,315,988 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 2020, unassigned fund balance of the General Fund was $25,873,815. As a measure of the General Fund’s liquidity, it may be useful to compare unrestricted, unassigned fund balance to total expenditures. This represents 52.0% of total expenditures. The overall fund balance of the City of Pasco’s General Fund decreased during 2020 by $2,499,346. This total includes unspent bond proceeds of $9,959,062. Strong sales tax other growth-related revenues, as well as infusion of federal government gaming taxes improved the funds financial standing. Overall revenues increased by $2,651,121 (4.8%) and total expenditures increased by $2,543,791(5.3%). General fund tax revenues decreased by $33,242 (0.1%), mainly due to reduction in utility taxes (weather factor) and significant reduction in gaming and admissions taxes (COVID-19 pandemic). Property taxes increased approximately $368,511 (3.4%) due to new construction and steady valuations. It is important to note that property sales tax increased by 28.1% in the last reporting period, due to Council utilizing banked capacity for - 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 Water Sewer Process Water Reuse Stormwater Irrigation 2020 Expenses 2020 Revenue 2019 Expense 2019 Revenue Page 25 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report property taxes. Sales taxes increased by $1,099,423 (6.2%) with the continued steady economic activity despite the pandemic. The growth in sales tax revenue in the last reporting period was 6.3%. The City added an Application Specialist, and a Deputy Court Clerk to the General Fund position during the 2021-2022 biennial budget adoption. The General Fund revenues of $58,400,297 exceeded expenditures of $50,124,151, or by $8,276,146 before transfers in/out. Transfers in/out net outflow was $11,075,916, mainly related to construction of two new fire stations. Proprietary Funds. The City of Pasco enterprise funds provide the same type of information found in the government-wide financial statements. The activity of the Water/Sewer Utility, a major fund, is separately stated from that of the internal service funds. Unrestricted net position of the utility fund at the end of 2020 was $9,491,278. A working capital ratio is the value of 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 2020, the utility is well positioned as it has current assets of $46,355,743 available to meet its current liability obligations of $6,688,551, resulting in a working capital ratio of 6.93. The increase in current assets is impacted by unspent bond proceeds and fees collected for new service areas. The total value of these funds are anticipated to be used in 2021 to support capital improvements. Exclusive of capital related activity, current assets increased by the virtue of an improved cash balance and a small increase in accounts receivable at year end. Current liabilities increased slightly as compared to year end 2019. Primarily, this increase was a reflection of an increase to the coming year’s debt service tied to the new bond issuance. The utility showed a gain before contributions and transfers of $3,770,777 a decrease of a $5,601,095 over the prior year. While charges for services increased in 2020, the growth in utility expenses was greater. This increase, however, was largely the reflection of accounting estimate changes that occurred in 2019. Therefore, the comparison of the two years is not representative of operational, ongoing costs. Instead the 2019 value for depreciation was significantly small and represented a one-time change. For remaining operational expenses, labor costs were nearly flat, supplies increased by 30% ($491,308) and service expenses by 27% (2,909,947). Included in the reported labor cost are the impact of changes in compensated absence and pension liabilities. The offset to the rise or fall of the liabilities as of each year end is labor expense for the given year. With the accrual impact removed, labor cost of the utility increased 3.9%. Supplies expense increased primarily as a reflection of more maintenance effort and the purchase of water rights. Finally, the increase is service expense is tied to consultant agreements for various plans and studies, a ten percent increase in utility taxes that rises with the growth of revenues recognized, and a large contract that provides for the clearing of sediment from the Process Water Reuse Facility storage pond. Capital contributions to the fund for year 2020 amounted to $6,809,743. These contributions are tied to service area growth for the utilities and, as such, must be spent on capital expansion. As mentioned before, the City continues to invest in new infrastructure to support the growth of its population and address aging infrastructure issues. General Fund Budgetary Highlights City of Pasco adopted its first Biennial Budget for 2019-2020 period. The legal level of appropriation is at the fund level and the authorization is for the true biennial period. The budget by function is shown to provide information that is more detailed. As required by the Revised Page 26 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Code of Washington (RCW), City adjusted the budget as necessary. The City remained within budget, which was its first biennial budget. Unprecedented uncertainty brought upon by COVID- 19 pandemic resulted in underestimation of revenues, while authorized expenses were delayed until full impact of the pandemic to revenue were known. Furthermore, City’s capital purchases and projects were delayed due to various factors like Washington State’s Stay Home Stay Healthy orders, unavailability of raw materials, or slowdown due to COVID-19 safety protocol in place. Capital Asset and Debt Administration Capital Assets. Capital Assets. The City of Pasco’s investment in capital assets for its governmental and business-type activities as of December 31, 2020 amounts to $497,602,394 (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 $22,283,488 for governmental activities and an increase of $15,223,906 for business-type activities. Major capital asset activity during the current fiscal year included the following: x Capital spending in governmental funds for 2020 was $11,522,609: $518,246 for general governmental purposes, $8,892,661 for public safety purposes, $801,554 for transportation purposes, $306,494 for Economic development and $1,003,655 for culture and recreation purposes. The largest projects for 2020 were Fire Station 83 replacement $5,110,789 and Fire Station 84 replacement $3,403,355. x Capital spending in the utility fund (major component of business-activities) for 2020 was $15,005,805. The largest projects were PWRF Irrigation Pump Station improvements at $8,315,133, WWTP project 1 at $2,242,138 and Pearl Street Lift station at $1,177,788. Additional information on the City of Pasco’s capital assets can be found in Note 5. Long-term Debt. At the end of 2020, the City of Pasco had total outstanding debt of $89,909,652 million. Of this amount, $24,795,000 million comprised of debt backed by the full faith and credit of the government. The business type debt total of $60,926,410 is primarily composed of $54,041,892 million of bonds secured primarily by specified revenue resources (e.g. revenue bonds). The remaining business type debt is composed of low interest loans, namely from two State of Washington sponsored programs; the Public Works Board Loan and the Department of Health, and a Hanford Area Economic Investment Fund (HAEIF) loan. In 2020, the City issued a Revenue bond of $16,415,000 million for Reuse Facility. 2020 2019 2020 2019 2020 2019 Land 23,877,045 19,473,173 3,882,418 3,149,049 27,759,463 22,622,222 Construction in process 20,525,366 17,651,905 18,494,884 10,452,939 39,020,250 28,104,844 Buildings and structures 34,574,138 33,708,388 45,619,874 46,634,972 80,194,012 80,343,360 Other improvements 3,561,348 3,830,838 496,028 441,411 4,057,376 4,272,249 Machinery and equipment 8,869,436 8,708,297 9,540,645 9,655,181 18,410,081 18,363,478 Infrastructure 189,202,697 174,953,941 138,958,515 131,434,906 328,161,212 306,388,847 Total capital assets 280,610,030 258,326,542 216,992,364 201,768,458 497,602,394 460,095,000 Governmental Activities Total Primary GovernmentBusiness-Type Activities City of Pasco's Capital Assets at Year-End (in millions) (Net of Depreciation) Page 27 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Additional information on the City of Pasco’s long-term liabilities can be found in Note 7. Economic Factors and Next Year’s Budgets and Rates In 2020, the Pasco economy was stable and continued to grow. The City issued 2,930 building permits, an increase of 6.4% from the previous year. This represents approximately $284,638,000 in construction value. Of the total permits, 539 were for new single-family residences, which equates to $135,000,000 in construction value. The average value of a new home in Pasco was approximately $320,000 in 2020, an increase of 18% over the prior year. The strength of the City’s growing economy is confirmed by the Standard & Poor’s rating the City’s 2019 General Obligation and most recently through their rating of the City’s 2020 Utility bond issue as AA-/Stable. The City’s ability to maintain its rating during a time of unprecedented economic certainty and volatility due to the COVID-19 pandemic is reflective of the City’s bright long and short-term economic prospects. Businesses have continued making a significant investment in Pasco through new or existing infrastructure. In total, the City received more than $132,000,000 investment in construction for commercial and industrial purposes, an increase of $34,000,000. Voters have continually approved school bonds to expand the areas to school system to accommodate growth. The heavy investment in school infrastructure is indicative of the growth Pasco has sustained and looks to accommodate in the future, as well as the area’s commitment to providing a well-educated and technologically adept workforce capable of meeting the future needs of regional, national, as well as international employers. Pasco School District had accounted for $52,000,000 in commercial permits in 2019, whereas there were no permits issued for schools in 2020. Future schools are anticipated to be built in near future. The City is also home to Columbia Basin College, which provides two-year and four-year degrees to students in the region. The college held its first classes in 1955, and from the initial enrollment of 272 students to more than 6,800 students today, it continues to meet the higher education needs of the community. It started the operation of a student housing building, which provides 45 units to house 125 students; with the goal of building 375 single, double, and quad units in the future. In 2019, the college was the third largest employer in Franklin County with over 760 employees. Road 68 Corridor continues to be an important economic activity center for the City. The area has been growing each year, largely providing retail, restaurant, and accommodation services. The area provides estimated 1,882 jobs, an increase of 42% since 2015. Preliminary permitting discussions are underway for another hotel adjacent to the Pasco Sporting Complex and The HAPO Center, an indication of its growing regional attraction. COVID-19 pandemic has 2020 2019 2020 2019 2020 2019 General Obligation Bonds 28,983,242 30,465,093 - - 28,983,242 30,465,093 Special Assessment Bonds - - - - - - Loans & Notes - - 6,884,518 7,415,706 6,884,518 7,415,706 Revenue Bonds - - 54,041,892 40,439,430 54,041,892 40,439,430 28,983,242 30,465,093 60,926,410 47,855,136 89,909,652 78,320,229 Governmental Activities Total Primary GovernmentBusiness-Type Activities City of Pasco's Bonds and Notes (in millions) Page 28 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report impacted the tourism and convention industry, however, all indication show a quick recovery to normal by end of 2021. The City is also working with landowners on developing the Broadmoor area, a location central to the Tri-Cities region and a blank space ready for development. The City extended sewer services to the area in the summer of 2019 and has completed the environmental review process for the master planned development of a two-thousand-acre area encompassing what is known as the Broadmoor Area. The development plan envisions the area to include a combination of homes, condominiums, apartments, offices, stores, mixed-use and a transportation system of bike/pedestrian trails, transit and boulevards focused on connectivity and walkability. Major retailor like Costco are expected to be serving the residents of Pasco and its neighboring areas. This is expected to spur significant economic development activity in this area in the near future. City’s business-type activities will be impacted significantly by providing utility services to the residential, commercial, and industrial growth. Large capital projects to repair, maintain, expand, and build new facilities are planned, including but not limited to the improvement of City’s Wastewater Treatment Plant, Water Treatment Plan, Process Water Reuse Facility (industrial wastewater), as well as new water reservoirs. The City has utilized established rate models on a yearly basis to ensure appropriate revenues are generated to maintain services. New rate study to revamp the model is planned for 2021. Council has approved rate increases on all utility services since 2015, however due to hardships created by COVID-19 pandemic, recommended rate increases might not be feasible. A copy of City of Pasco’s most recent 2021-2022 Biennial Budget can be access on the City’s website at https://www.pasco-wa.gov/1104/2021-2022-Budget . Requests for Information This financial report is designed to provide a general overview of the City of Pasco’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. Page 29 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Component Units Governmental Activities Business-type Activities Total Pasco Public Facility District ASSETS Current assets: Cash and cash equivalents $ 60,508,002 $ 20,978,271 $ 81,486,273 $ 22,122 Restricted Cash: Program, grant, donation 3,796,155 - 3,796,155 - Customer deposits 397,810 469,184 866,994 - Capital Development - 9,158,845 9,158,845 - Permit and plan check 810,588 - 810,588 - Unspent bond proceeds 10,776,409 11,534,736 22,311,145 - Debt Service 194,531 372,997 567,528 - Investments 11,153,890 5,362,851 16,516,741 - Receivables (net of allowances) Taxes 4,772,937 - 4,772,937 109,684 Customers 4,069,292 2,901,811 6,971,103 - Grants 1,138,145 97,055 1,235,200 - Due from other governments 100,000 - 100,000 - Prepaids - 84,315 84,315 - Inventories - 269,043 269,043 - Total current assets 97,717,759 51,229,108 148,946,867 131,806 Noncurrent Assets: Cemetery Endowment 470,351 - 470,351 - Debt Covenants - 4,049,192 4,049,192 - Special assessments 1,456,200 29,373 1,485,573 - Net pension asset 12,985,759 - 12,985,759 - Net OPEB asset 2,494,698 - 2,494,698 - Joint Ventures 1,440,863 - 1,440,863 - Capital assets not being depreciated: Land 23,877,045 3,882,418 27,759,463 - Construction work in progress 20,525,366 18,494,884 39,020,250 - Capital assets net of accumulated depreciation Buildings and structures 34,574,138 45,619,874 80,194,012 - Other improvements 3,561,348 496,028 4,057,376 - Machinery and equipment 8,869,436 9,540,645 18,410,081 - Infrastructure 189,202,697 138,958,515 328,161,212 - Total noncurrent assets 299,457,901 221,070,929 520,528,830 - Total assets 397,175,660 272,300,037 669,475,697 131,806 DEFERRED OUTFLOWS OF RESOURCES Pension Related 2,739,580 379,502 3,119,082 - Debt refunding - 34,906 34,906 - Total deferred outflows of resources 2,739,580 414,408 3,153,988 - Total assets and deferred outflows of resources 399,915,240 272,714,445 672,629,685 131,806 LIABILITIES Current liabilities: Accounts payable 4,614,406 2,238,574 6,852,980 161,487 Deposits payable from restricted assets 397,810 469,184 866,994 - Accrued interest payable from restricted assets - 203,841 203,841 - Compensated absences - current 2,259,113 287,746 2,546,859 - Loans due to other governments - current - 553,917 553,917 - Bonds payable - current (net of premium) 1,026,851 2,540,298 3,567,149 - Net pension liability 1,137,164 402,404 1,539,568 - Total OPEB liability 622,429 - 622,429 - Total current liabilities 10,057,773 6,695,964 16,753,737 161,487 Noncurrent liabilities: Compensated absences 1,822,948 16,141 1,839,089 - Total OPEB liability 12,347,019 - 12,347,019 - Net pension liability 2,085,738 890,260 2,975,998 - Bonds payable (net of premium) 27,956,391 51,501,594 79,457,985 - Notes & loans payable - 6,330,601 6,330,601 - Total non current liabilities 44,212,096 58,738,596 102,950,692 - Total liabilities 54,269,869 65,434,560 119,704,429 161,487 DEFERRED INFLOWS OF RESOURCES Pension related 3,223,563 373,529 3,597,092 - Property taxes 144,340 - 144,340 - Special assessments 1,358,407 - 1,358,407 - Municipal court 758,009 - 758,009 - OPEB related 227,501 - 227,501 - Other deferred revenues 1,708,850 1,598 1,710,448 - Total deferred inflows of resources 7,420,670 375,127 7,795,797 - Total liabilities and deferred inflows of resources 61,690,539 65,809,687 127,500,226 161,487 NET POSITION Net investment in capital assets 262,403,197 167,635,596 430,038,793 - Restricted for: Cemetery Endowment (nonexpendable) 601,575 - 601,575 - Program, grant, donations 383,697 - 383,697 - Streets and boulevards 9,949,595 - 9,949,595 - Litter and housing abatement 636,511 - 636,511 - Park development 3,426,183 - 3,426,183 - Permit & plan check fee 810,588 - 810,588 - Culture and recreation 30,056 - 30,056 - Capital Improvement 20,366,764 20,693,581 41,060,345 - Economic development 102,359 - 102,359 - Pensions 12,985,759 - 12,985,759 - State Law WAC 1,990,838 - 1,990,838 - OPEB 2,494,698 - 2,494,698 - Debt repayment/guarantee 194,531 4,218,348 4,412,879 - Unrestricted 21,848,350 14,357,233 36,205,583 (29,681) Total net position $ 338,224,701 $ 206,904,758 $ 545,129,459 $ (29,681) The notes to financial statements are an integral part of this statement. Statement of Net Position December 31, 2020 Primary Government Page 30 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Component Unit Functions/Programs Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Business-type Activities Total Pasco Public Facility District Primary government: Governmental activities: General Government $ 12,456,759 $ 4,467,477 $ 5,850,221 $ - $ (2,139,061) $ - $ (2,139,061) $ - Public Safety 40,014,643 12,713,958 4,024,192 - (23,276,493) - (23,276,493) - Transportation 20,092,531 3,528,420 20,761 29,418,925 12,875,575 - 12,875,575 - Natural & Economic environment 8,522,809 6,818,204 1,270,486 - (434,119) - (434,119) - Cultural & Community Activities 7,950,814 2,282,768 55,621 107,818 (5,504,607) - (5,504,607) - Interest on long term debt 1,109,732 - - - (1,109,732) - (1,109,732) - Total governmental activities 90,147,288 29,810,827 11,221,281 29,526,743 (19,588,437) - (19,588,437) - Business-type activities: Water 11,278,305 12,321,151 140,729 2,276,822 - 3,460,397 3,460,397 - Irrigation 1,953,508 1,914,767 6,542 511,768 - 479,569 479,569 - Sewer 8,945,634 10,550,202 39,597 2,965,170 - 4,609,335 4,609,335 - PW Reuse Facility 5,053,060 5,919,251 24,833 500,000 - 1,391,024 1,391,024 - Storm Water 1,355,818 2,152,708 70,299 555,983 - 1,423,172 1,423,172 - Total business-type activities 28,586,325 32,858,079 282,000 6,809,743 - 11,363,497 11,363,497 - Total primary government $ 118,733,613 $ 62,668,906 $ 11,503,281 $ 36,336,486 (19,588,437) 11,363,497 (8,224,940) - Component units: Pasco Public Facility District $ 701,873 $ 20,000 $ 218 $ - $ - $ - $ - $ (681,655) Total component units $ 701,873 $ 20,000 $ 218 $ - - - - (681,655) 11,066,380 - 11,066,380 - 18,849,956 - 18,849,956 635,125 11,116,843 - 11,116,843 - 2,692,500 - 2,692,500 - 4,077,539 - 4,077,539 - 3,897,669 312,239 4,209,908 141 (1,233,333) 1,233,333 - - 508,391 (11,722) 496,669 - 50,975,945 1,533,850 52,509,795 635,266 31,387,508 12,897,347 44,284,855 (46,389) 309,540,339 192,820,217 502,360,556 16,709 (2,703,146) 1,187,194 (1,515,952) - $338,224,701 $206,904,758 $545,129,459 $ (29,680) Prior Period- Adjustments Net position - ending The notes to financial statements are an integral part of this statement. Intergovernmental Investment income and miscellaneous Transfers Disposition of capital asset Net position - beginning Change in net position Program Revenues Total general revenues, special items, and transfers City of Pasco Statement of Activities For the Year Ended December 31, 2020 Excise taxes Net (Expense) Revenue and Changes in Net Position Primary Government General revenues: Property taxes Sales taxes B&O taxes Page 31 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report General Fund Ambulance Construction Total Nonmajor Funds Total Governmental Funds ASSETS Cash and cash equivalents $19,177,895 $4,462,714 $ 1,153,683 $ 25,899,097 $ 50,693,389 Restricted Cash Program, grant, donation 383,697 - - 1,421,620 1,805,317 Customer Deposits 259,244 126,280 - 12,286 397,810 Unspent bond proceeds 9,959,062 - - 817,347 10,776,409 Permit and Plan Check 810,588 - - - 810,588 Debt service - - - 194,529 194,529 Investments 3,634,044 - - 5,254,177 8,888,221 Restricted Cemetery Endowment - - - 470,351 470,351 Receivables (net of allowances) Taxes 4,505,597 - - 267,340 4,772,937 Customers 1,379,870 2,324,462 - 364,948 4,069,280 Interfund loans 1,053,002 - - 67,708 1,120,710 Grants 820,098 16,850 171,563 129,634 1,138,145 Special assessments & loans - - - 1,456,201 1,456,201 Due from other governments - - - 100,000 100,000 Total assets $41,983,097 $6,930,306 $ 1,325,246 $ 36,455,238 $ 86,693,887 LIABILITIES Accounts payable 1,995,134 298,953 1,325,246 654,468 4,273,801 Interfund loans payable - - - 1,120,710 1,120,710 Pay from restricted assets - Deposits 259,244 126,280 - 12,286 397,810 Total liabilities 2,254,378 425,233 1,325,246 1,787,464 5,792,321 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 144,339 - - - 144,339 Unavailable revenue - special assessments - - - 1,358,407 1,358,407 Unavailable revenue - court receivables 758,009 - - - 758,009 Unavailable revenue - other 74,238 - - 1,634,613 1,708,851 Total deferred Inflows of resources 976,586 - - 2,993,020 3,969,606 Total liabilities includes deferred inflows 3,230,964 425,233 1,325,246 4,780,484 9,761,927 FUND BALANCES (DEFICITS) Restricted Capital improvements 9,959,062 - - 10,407,702 20,366,764 Cemetery endowment - - - 601,575 601,575 Culture & Recreation - - - 30,056 30,056 Debt Guarantee - - - 194,530 194,530 Economic development - - - 102,359 102,359 Litter & housing abatement - - - 636,511 636,511 Park development - - - 3,426,183 3,426,183 Permit & Plan Check Fee 810,588 - - - 810,588 Program, grant, donation 383,697 - - - 383,697 Street and boulevard - - - 9,949,595 9,949,595 Committed Landfill claims 407,343 - - - 407,343 Red Flex 87,198 - - - 87,198 Special revenue funds - 6,505,073 - 6,884,070 13,389,143 Assigned Future Project-Community Center 1,230,430 - - - 1,230,430 Unassigned 25,873,815 - - (557,827) 25,315,988 Total fund balances (deficits) $38,752,133 $6,505,073 $ - $ 31,674,754 $ 76,931,960 Total liabilities , deferred inflows of resources and fund balances (deficits) $41,983,097 $6,930,306 $ 1,325,246 $ 36,455,238 $ 86,693,887 The notes to financial statements are an integral part of this statement. City of Pasco Balance Sheet Governmental Funds December 31, 2020 Page 32 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report $76,931,960 292,173,746 2,700,104 (49,123,191) (3,412,210) 18,954,292 $338,224,701 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. Net position of governmental activities The notes to financial statements are an integral part of this statement. City of Pasco Reconciliation of Balance Sheet To the Statement of Net Position December 31, 2020 Fund balances of governmental funds Amounts reported for governmental activities in the statement of net position are different because: Long-term assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Deferred pension outflows are not available to pay for current period expenditures and therefore are not reported in the governmental funds. 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 existing debts are recorded as resources and expenditures for fund reporting but are additions and reductions of liabilities for government wide reporting. Deferred inflows and proceeds from asset sales in governmental 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. Page 33 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report General Fund Ambulance Construction Total Nonmajor Funds Total Governmental Funds REVENUES Taxes $ 40,958,451 $ - $ - $ 2,767,228 $ 43,725,679 Licenses and permits 2,596,305 - - 292,202 2,888,507 Intergovernmental 5,353,013 5,534,454 274,176 2,659,425 13,821,068 Charges for service 7,307,788 6,640,657 - 7,759,555 21,708,000 Fines and forfeitures 1,030,518 - - 219,877 1,250,395 Investment interest 85,744 - - 170,287 256,031 Miscellaneous 1,068,478 18,101 - 2,229,755 3,316,334 Total revenues 58,400,297 12,193,212 274,176 16,098,329 86,966,014 EXPENDITURES Current: General Government 10,705,175 - 104,380 - 10,809,555 Public Safety 27,467,439 8,030,096 1,345,726 - 36,843,261 Transportation 1,921,878 - 264,893 2,912,495 5,099,266 Natural & Economic environment 2,940,153 - - 5,432,841 8,372,994 Cultural & Community Activities 4,415,100 - 45,451 2,582,406 7,042,957 Capital outlay: General Government 175,488 - 342,758 - 518,246 Public Safety 111,603 44,651 8,736,406 - 8,892,660 Transportation 9,320 - 782,894 9,340 801,554 Natural & Economic environment - - - 306,494 306,494 Cultural & Community Activities - - 1,003,655 - 1,003,655 Debt service: Principal retirement 1,285,000 - - 45,000 1,330,000 Interest 1,092,995 - - 186,138 1,279,133 Total expenditures 50,124,151 8,074,747 12,626,163 11,474,714 82,299,775 Excess (deficiency) of revenues over expenditures 8,276,146 4,118,465 (12,351,987) 4,623,615 4,666,239 OTHER FINANCING SOURCES (USES) Insurance recoveries 41,731 28,645 - 254,929 325,305 Sale of asset - - - 976,521 976,521 Transfers in 221,387 420,000 12,357,004 2,986,667 15,985,058 Transfers out (11,297,303) - (11,860) (5,199,044) (16,508,207) Total other financing sources (uses) (11,034,185) 448,645 12,345,144 (980,927) 778,677 Net change in fund balances (2,758,039) 4,567,110 (6,843) 3,642,688 5,444,916 Fund balances - beginning 41,251,478 1,937,963 446,033 27,851,570 71,487,044 Prior Period Adjustment 258,694 - (439,190) 180,496 - Fund balances - ending $ 38,752,133 $ 6,505,073 $ - $ 31,674,754 $ 76,931,960 The notes to financial statements are an integral part of this statement. City of Pasco Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2020 Page 34 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report $5,444,916 23,991,813 5,715,848 (3,916,754) (710,185) (468,130) $31,387,508 The notes to financial statements are an integral part of this statement. Net change in fund balances - total governmental funds Amounts reported for governmental activities in the statement of net position are different because: Governmental funds report capital outlays as expenditures. In the statement of activities, the cost of assets are allocated over the useful life of the asset as depreciation expense. The issuance of long-term debt (e.g. bonds, notes) provides current financial resources to governmental funds, while the repayment of the principle of long-term debt consumes current financial resources of governmental funds. Neither transaction, however, has any affect on net position. Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended December 31, 2020 1,330,000 Revenues reported in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Some expenses such as for compensated absences, pension expense, amortization on bond premium, etc. reported in the Statement of Activities do not re quire the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Internal service funds are used by management to charge the cos ts of certain activities to individual funds. The net revenue of certain activity is reported with governmental activities. Interfund transfers between governmental funds are eliminated in the Statements of Activities. The net effect of various miscellaneous transactions involving capital assets (i.e., sale of assets and capital contributions) and the net impact to assets. Change in net position of governmental activities Page 35 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Variance with Original Final 2019/20 Actual Final Budget REVENUES Taxes $ 74,418,849 $ 77,948,924 $ 81,950,144 $ 4,001,220 Licenses and permits 4,459,000 5,385,111 5,353,252 (31,859) Intergovernmental 4,737,868 6,763,455 7,906,227 1,142,772 Charges for service 15,417,018 14,458,396 14,800,951 342,555 Fines and forfeitures 1,811,200 2,064,948 2,044,964 (19,984) Miscellaneous 1,195,800 2,633,985 2,008,191 (625,794) Investment income 85,744 85,744 Total revenues 102,039,735 109,254,819 114,149,473 4,894,654 EXPENDITURES Current: General Government 20,364,016 23,206,054 21,619,838 (1,586,216) Public Safety 53,558,905 55,948,815 53,885,081 (2,063,734) Transportation 3,886,421 3,651,171 3,587,696 (63,475) Natural & Economic environment 4,577,273 5,357,273 5,311,371 (45,902) Cultural & Community Activities 11,681,606 9,770,763 9,175,869 (594,894) Capital outlay: General Government 589,702 684,521 198,506 (486,015) Public Safety 150,000 291,359 232,983 (58,376) Transportation - 9,320 9,320 - Culture and recreation - - 7,439 7,439 Debt service: Principal 2,778,734 5,745,734 2,115,000 (3,630,734) Interest 2,446,900 2,446,900 1,561,408 (885,492) Total expenditures 100,033,557 107,111,910 97,704,511 (9,407,399) Excess (deficiency) of revenues over expenditures 2,006,178 2,142,909 16,444,962 (4,512,745) OTHER FINANCING SOURCES (USES) Debt proceeds - bond Issued 17,250,000 22,000,000 16,445,000 (5,555,000) Debt proceeds- premium on bond issued 3,738,905 3,738,905 Interfund loan Rev/Exp - 2,242,000 - (2,242,000) Transfers in 455,200 855,200 452,987 (402,213) Transfers out (18,999,116) (27,353,913) (15,507,513) 11,846,400 Sale of asset - 1,045,223 1,045,223 - Insurance recoveries - 1,943 101,209 99,266 Total other financing sources (uses) (1,293,916) (1,209,547) 6,275,811 7,485,358 Net change in fund balances 712,262 933,362 22,720,773 2,972,613 Fund balances - beginning 13,290,429 15,790,933 15,790,933 - Prior Period Adjustment - - 240,427 240,427 Fund balances - ending $ 14,002,691 $ 16,724,295 $ 38,752,133 $ 3,213,040 Budgeted Amounts The notes to financial statements are an integral part of this statement. 2019/2020 Biennial CityofPasco Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual General Fund For the Year Ended December 31, 2020 Page 36 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Variance with Original Final 2019/20 Actual Final Budget REVENUES Intergovernmental $ 3,107,720 $ 5,652,300 $ 8,011,953 $ 2,359,653 Charges for service 12,635,684 12,519,240 13,110,653 591,413 Miscellaneous - 53,864 44,544 (9,320) Total revenues 15,743,404 18,225,404 21,167,150 2,941,746 EXPENDITURES Current: Public Safety 22,482,463 16,106,017 15,652,869 (453,148) Capital outlay: Public Safety 87,000 87,000 63,386 (23,614) Debt service: Principal - 1,340,000 48,680 (1,291,320) Total expenditures 22,569,463 17,533,017 15,764,935 (1,768,082) Excess (deficiency) of revenues over expenditures (6,826,059) 692,387 5,402,215 (4,709,828) OTHER FINANCING SOURCES (USES) Transfers in 840,000 1,540,000 1,540,000 - Transfer out - (700,000) - 700,000 Insurance recoveries - - 28,655 28,655 Total other financing sources (uses) 840,000 840,000 1,568,655 728,655 Net change in fund balances (5,986,059) 1,532,387 6,970,870 5,438,483 Fund balances - beginning 1,228,550 (465,797) (465,797) - Prior Period Adjustment - - - Fund balances - ending $ (4,757,509) $ 1,066,590 $ 6,505,073 $ 5,438,483 Budgeted Amounts The notes to financial statements are an integral part of this statement. 2019/2020 Biennial CityofPasco For the Year Ended December 31, 2020 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual Ambulance Fund Page 37 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Business-type Activities Water/ Sewer Utility Internal Service Funds ASSETS Current assets: Cash and cash equivalents $ 17,036,860 $ 13,756,025 Restricted Cash Customer deposits 469,184 - Self-insured reserve - 1,990,838 Capital development 9,158,845 - Unspent bond proceeds 11,534,736 - Debt Service 372,997 - Investments 4,430,897 3,197,623 Receivables (net of allowances) Customers 2,901,811 12 Grants 97,055 - Prepaids 84,315 - Inventory 269,043 - Total current assets 46,355,743 18,944,498 Noncurrent assets: Restricted Debt covenants 4,049,192 - Special assessments & loans 29,373 - Capital assets not being depreciated: Land 3,882,418 - Construction in progress 18,494,884 155,750 Capital assets net of accumulated depreciation: Buildings and structures 45,619,874 - Other improvements 496,028 - Machinery and equipment 7,423,604 7,318,895 Infrastructure 138,958,515 - Total noncurrent assets 218,953,888 7,474,645 Total assets 265,309,631 26,419,143 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflow Related to Pension 379,502 39,476 Deferred Outflow Related Debt refunding 34,906 - Total deferred outflows of resources 414,408 39,476 Total assets and deferred outflows of resources $ 265,724,039 $ 26,458,619 LIABILITIES Current liabilities: Accounts payable 2,231,161 348,018 Other liabilities Pay from restricted assets - Deposits 469,184 - Pay from restricted asset - interest 203,841 - Compensated absences 287,746 - Notes & loans Payable 553,917 - Net Pension Liability 402,404 4,204 Revenue bonds 2,540,298 - Total current liabilities 6,688,551 352,222 Noncurrent liabilities: Compensated absences 16,141 - Notes & loans Payable 6,330,601 - Revenue bonds payable (net of premium) 51,501,594 - Net pension liability 890,260 130,258 Total noncurrent liabilities 58,738,596 130,258 Total liabilities 65,427,147 482,480 DEFERRED INFLOWS OF RESOURCES Unavailable revenue 1,598 - Pension Related 373,529 38,854 Total deferred inflows of resources 375,127 38,854 Total liabilities and deferred inflows of resources 65,802,274 521,334 NET POSITION Net investment in capital assets 165,518,555 7,474,645 Restricted for: State Law WAC - 1,990,838 Capital improvement 20,693,583 - Debt repayment/guarantee 4,218,349 - Unrestricted 9,491,278 16,471,802 Total net position $ 199,921,765 $ 25,937,285 Adjustment for the net effect of the current year activities between the internal service funds and the enterprise fund 6,982,993 Net position of business-type activities $ 206,904,758 The notes to financial statements are an integral part of this statement. City of Pasco Statement of Net Position Proprietary Funds December 31, 2020 Page 38 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Water/ Sewer Utility Internal Service Funds OPERATING REVENUES Permits $ 202,610 $ - Charges for service 32,655,469 10,494,989 Total operating revenues 32,858,079 10,494,989 OPERATING EXPENSES Depreciation 6,395,620 44,828 Salaries & wages 3,984,669 488,849 Personnel benefits 1,407,304 169,451 Supplies 2,119,290 878,697 Services 13,658,473 6,824,374 Total operating expenses 27,565,356 8,406,199 Operating income (loss) 5,292,723 2,088,790 NONOPERATING REVENUES (EXPENSES) Investment income 235,648 123,526 Miscellaneous 5,331 195,873 Rents and leases 54,959 - Grants 282,000 21,883 Insurance recoveries 16,301 121,242 Sale of asset - 467,141 Gain (Loss) on disposal of property (11,722) (265,499) Interest expense (2,104,463) - Total nonoperating revenues (expenses) (1,521,946) 664,166 Income (loss) before contributions and transfers 3,770,777 2,752,956 Capital contributions 6,809,743 - Transfers in 1,233,333 - Transfers out - (710,184) Change in net position 11,813,853 2,042,772 Total net position - beginning 186,920,718 23,894,513 Prior Period Adjustment 1,187,194 - Total net position - ending $ 199,921,765 $ 25,937,285 Changes in net position 11,813,853 Adjustment for the net effect the current year activity between the internal service funds and the enterprise fund 1,083,494 Change in net position of business-type activities 12,897,347 The notes to financial statements are an integral part of this statement. City of Pasco Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended December 31, 2020 Business-type Activities Page 39 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Water/ Sewer Utility Internal Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 32,285,806 $ 10,496,481 Payments to employees (5,738,359) (675,874) Payments to suppliers (15,934,109) (7,583,600) Net cash provided (used) by operating activities 10,613,338 2,237,007 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Grants O&M 282,000 21,883 Insurance recoveries 16,301 121,242 Miscellaneous 5,331 195,873 Rents and leases 54,959 - Net cash provided from noncapital financial activities 358,591 338,998 CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of asset - 467,141 Acquisition and construction of capital assets (15,069,598) (1,377,632) Principal paid on capital debt (3,426,718) - Interest paid on capital debt (2,202,891) - Bond proceeds received 16,234,072 - Loan proceeds 107,220 - Payments received from notes and loans 12,564 - Transfers in (out) for capital 1,233,333 (710,184) Capital charges 1,922,080 - Capital grant and contribution proceeds 414,732 - Net cash provided by (used for) capital and related financing activities $ (775,206) $ (1,620,675) CASH FLOWS FROM INVESTING ACTIVITIES Investment income 45,268 32,669 Purchase of investments (483,018) 874,349 Interest on investments 190,380 90,857 Net cash provided from investing activities (247,370) 997,875 Net increase (decrease) in cash and cash equivalents 9,949,353 1,953,205 Beginning cash and cash equivalents 32,672,461 13,793,658 Ending cash and cash equivalents $ 42,621,814 $ 15,746,863 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Net Operating Income 5,292,723 2,088,790 Adjustment to reconcile operating income (loss) to net cash provided by (used for ) operating activities: Depreciation expense 6,395,621 44,828 (Increase) decrease in customer receivables (600,485) 1,492 (Increase) decrease in prepaid - - (Increase) decrease in inventories 49,767 - Increase (decrease) in accounts payable (171,207) 119,472 Increase (decrease) in salaries & benefits payable 41,368 7,277 (Decrease) increase in accounts customer deposits payable 28,211 - (Decrease) increase in compensated absences (6,890) - (Increase) decrease in deferred outflows pensions 88,088 5,022 (Increase) decrease in deferred outflows- debt refunding (34,906) - Increase (decrease) in pension liability 33,517 14,636 Increase (decrease) in deferred inflow pension (502,469) (44,510) Net cash provided (used) by operating activities $ 10,613,338 $ 2,237,007 NON CASH ACTIVITIES Contributions of capital assets 4,378,399 - Total noncash activities $ 4,378,399 $ - The notes to financial statements are an integral part of this statement. City of Pasco Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2020 Business-type Activities Page 40 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Pension and Other Post-Employment Custodial Benefits Funds ASSETS Cash & cash equivalents 483,336$ 55,685$ Receivables Loan 8,469 - Taxes for other governments - 109,684 Investments Federal Agency 10,567 - Mutual Funds 6,496,887 - Total assets 6,999,259 165,369 LIABILITIES Accounts Payable - 163,727 Due to other governments - 89 Total liabilities - 163,816 NET POSITION RESTRICTED FOR: Pensions 3,367,117 - Postemployment benefits other than pensions 3,632,142 - Individuals, organizations and other governm - 1,642 TOTAL NET POSITION 6,999,259$ 1,642$ The notes to the financial statements are an integral part of this statement. Statement of Net Position Fiduciary Funds December 31, 2020 Pension and Other Post-Employment Benefits Custodial Funds ADDITIONS Taxes 89,252$ -$ Interest, dividends, and other 617,843 230 Sales tax collections for other governments - 635,125 Intergovernmental grants and other payments - 54,752 Total Additions 707,095 690,107 DEDUCTIONS Pension benefits 111,111 - Medical premiums 87,540 - Capital - 34,534 Services 6,848 701,873 Total deductions 205,499 736,407 Change in net position 501,596 (46,300) Net position - beginning 6,497,663 47,942 Net position - ending 6,999,259$ 1,642$ The notes to the financial statements are an integral part of this statement. Statement of Changes in Fiduciary Net Position For the year ended December 31, 2020 Trust Funds Page 41 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. Complete separate financial statements for the District may be obtained from the City of Pasco, P.O. Box 293, Pasco, WA 99301. 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. 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 service. 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 Page 42 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. 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: x 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. x The Construction Fund: the Construction Fund is a capital project fund used to account for significant construction and capital acquisition related to governmental activities. x Ambulance Services Fund – Fund is used to account for all activities related to providing medical services, including ambulance transports to the residents of the City. Revenues sources generated from Federal assistance through the Ground Emergency Medical Transportation Payment program, service fees and ambulance utility rates. The City of Pasco reports the following major proprietary fund: x 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: x Special Revenue funds are used to account for specific revenue sources that are restricted, committed, or assigned to expenditures for a particular purpose. x 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. These funds include the Local Improvement Districts (LID) Guarantee fund which provides financial security for outstanding LID bonds. x Permanent funds are used to report resources that are legally restricted to the extent Page 43 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report that only earnings, not principal, may be used for purposes of supporting a specific City program. The City has one permanent fund, Cemetery Perpetual Care Fund. x 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. x 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. x Custodial 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 the Pasco Public Facility District. 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. Only the portion of special assessment receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. Proprietary fund financial statements are reported using the economic resources measurement focus and full-accrual basis of accounting. Revenues are recorded when Page 44 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. D. Budgetary Information 1. Scope of Budget Biennial appropriated budgets are adopted for the general fund and special revenue funds 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 project and for fiscal periods that correspond to the lives of debt issues or projects. The City also adopts appropriated budgets for proprietary and internal service funds as “management budgets”. All budgets are adopted at the fund level. Appropriations for all funds lapse at the end of the biennium. 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 after holding public hearing(s). The budget amounts shown in the financial statements are the final authorized amounts as revised during the year. The financial statements contain the original and final budget information. The original budget is the first complete appropriated budget. The final budget is the original budget adjusted by all reserves, transfers, allocations, supplemental appropriations, and other legally authorized changes applicable for the fiscal year. Excess of Expenditures over Appropriations Page 45 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Neither the General Fund, nor any major special revenue funds, reported expenditures in excess of budgeted appropriation. Deficit Fund Net Position The LID Loan Fund a debt service fund of the City, ended the year with a negative fund balance of ($701,174). 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 Rivershore Trail & Marina Maintenance Fund, a nonmajor special revenue fund of the City, ended the year with a negative fund balance of ($48,278). The negative fund balance is a result of the need to rebuild a marina dock due to weather related damage. There is an outstanding inter-fund loan liability used to fund the repairs. The Animal Control Fund, a nonmajor special revenue fund of the City, ended the year with a negative fund balance of ($47,980). The negative fund balance is a result of operation expenses exceeding revenues. E. Assets, Liabilities, Deferred Inflows, Deferred Outflows, Fund Balance/Net Position 1. Cash and Cash Equivalents It is the City’s policy to invest temporary cash surpluses. As of December 31, 2020, the City had invested $ 58,052,273 with the Washington State Local Government Investment Pool (LGIP). These investments are short-term investments of residual cash. This amount is classified on the Statement of Net Position as cash and cash equivalents. The interest earned on these investments is prorated to the various funds based upon their ownership of invested cash. For purposes of the statement of cash flows, the City considers all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. 2. Investments See (Note 3, Deposits and Investments) 3. Receivables Taxes receivable consist of property taxes, sales taxes, business and occupation taxes, gambling 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. Page 46 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Special assessments are levied against certain property owners when their property is the beneficiary of a City managed project. Based upon each property’s proportional share of the improvement an assessment is levied. When levied a receivable in recorded. Special assessments receivable consists of current, and any delinquent, assessments and related interest and penalties. As of December 31, 2020, $83,528 of special assessments receivable were delinquent. Customer accounts receivables consist of amounts owed from private individuals or organizations for goods and services, including amounts owed for which billings have not been prepared. Uncollectible amounts, except in two instances, are considered immaterial and the direct write-off method is used. The exceptions are in the ambulance fund and revolving abatement fund. An allowance is calculated based on historical write-offs. The total allowance recorded city wide as of December 31, 2020 is $179,929. Other receivables include municipal court receivables related to legal fines and charges and amounts due the City related to organizations or public entities with which the City has entered contractual relationships. The municipal court receivable is $11,086,230 of which $10,328,222 is not expected to be collected. Only the net receivable of $758,009 is recorded in the financial statements. The portion that is calculated as uncollectible is based upon the year’s collection rate. Of the receivables derive based upon contractual relationships they are the result of the provision of working funds or activity that created revenues that the City had not received as of yearend 2020. 4. Amounts Due to and from Other Governments, Interfund Loans and Advances Receivable 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 and payable is furnished in Note 6, Interfund Balances and Transfers. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. 5. 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 consist of materials and supplies used in both maintenance and capital activities. Inventories in proprietary funds are valued using a last in first out (LIFO) method. Page 47 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 6. Restricted Assets and Liabilities In accordance with utility bond ordinances, state law, or other agreements, separate restricted assets have been established. These accounts contain resources for construction and debt service, including current and delinquent special assessments receivable, in enterprise funds. The current portion of related liabilities is shown as Payables from Current Restricted Assets. Specific debt service reserve requirements are described in Note 8, Long-Term Debt. The restricted assets of the enterprise funds are composed of the following: 7. 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 $5,000 and an estimated useful life in excess of two years. Useful life estimates are periodically reassessed and adjusted based on actual experience and/or asset condition assessments. See Note 5, Capital Assets and CWIP for details on changes to useful life and depreciation. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The City reports infrastructure assets on a network and subsystem basis. Such assets are recorded at historical cost if purchased or constructed. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. The cost of normal maintenance and repairs and street preservation activities that do not add to the value of the asset or materially extend asset lives are not capitalized. Assets are depreciated over their useful lives using the straight line depreciation method. Major outlays for capital assets and improvements are reported as Construction Work in Progress as projects are constructed. Interest, if material to the cost of the asset that is incurred during the construction phase of the capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Capital Assets and improvements are capitalized once the project is completed. Customer Deposits 469,184$ Unspent Bond Proceeds 11,534,736 Debt Service 372,997 Capital Development: Water/Sewer capital expansion contributions 7,957,104 Water Rights 1,201,742$ Page 48 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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: 8. 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 2020 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. 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. Assets Useful Lives (Years) Land N/A Building & Structures 5-50 Other Improvements 5-100 Machinery & equipment & vehicles 2-50 Page 49 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 9.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. City-wide, excluding Firefighters and Police Sick leave may be accumulated up to a maximum of 960 hours for all employees except firefighters and police. 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. Firefighters Sick leave may be accumulated up to a maximum of 1,440 hours. For firefighters with less than 20 years of service with the City, sick leave is payable at a rate of 25% of accrued hours up to a maximum accrual base of 840 hours, upon resignation, retirement or death. For firefighters with 20 years or more of service with the City, sick leave is payable at a rate of 50% of accrued hours up to a maximum accrual base of 840 hours. Vacation leave may be accumulated up to a maximum of two times the employee’s annual vacation accrual rate and is payable upon resignation, retirement or death. Police Sick leave may be accumulated up to a maximum of 1,200. Upon resignation or death; sick leave is payable at a rate of 25% of accrued hours up to a maximum accrual base of 720 hours. Upon retirement, sick leave is payable at a rate of 35% up to a maximum of 1,200 hours. Vacation leave may be accumulated up to a maximum of two times the employee’s annual vacation accrual rate and is payable upon resignation, retirement or death. 10.Pensions and OPEB For purposes of measuring the net pension liability or asset, 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. Page 50 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pension, and pension expense information about the fiduciary net position of the City's Old Firemans' Pension Fund —610 (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. For this purpose, the Plan recognizes benefit payments when due and payable in accordance with the benefit terms. For purposes of measuring the total 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's LEOFF 1 Retiree Health Benefits 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. For this purpose, the Plan recognizes benefit payments when due and payable in accordance with the benefit terms. 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's Old Firemen’s Pension Fund (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. For this purpose, the Plan recognizes benefit payments when due and payable in accordance with the benefit terms 11.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 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. 12.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 Page 51 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. While the City has not formally established a policy for its use of unrestricted fund balance amounts, committed amounts would be reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of these unrestricted fund balance classifications could be used. 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. 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 the residual classification for the General Fund and includes all spendable amounts not contained in the other classifications. The General Fund is the only governmental fund that reports a positive unassigned fund balance amount. In other funds, the unassigned classification will be used only to report a deficit Page 52 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. 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 1,347,726$ Land 19,473,173 Construction in process 17,651,905 Building 33,708,388 Other Improvements 3,830,838 Equipment 3,677,069 Infrastructure 174,953,941 Pension Assets 14,520,434 OPEB Assets 2,270,659 Prior period adjustment - capital asset reduction (1,473,434) Current year change in pension asset (1,534,675) Current year change in OPEB asset 224,039 Current year spending in construction work in progress 11,522,611 Current year sale of capital assets (468,130) Current year capital donations received 29,252,567 Current year increase in Joint Venture 93,137 Current year depreciation (16,876,502) Net adjustment to add to government wide fund balance to arrive at Net Position Governmental Activities 292,173,746$ Beginning Balance of Capital Asset Excluded from Fund Level: Page 53 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Compensated absences (3,529,311)$ OPEB (12,231,327) Pension (3,420,483) Bonds payable (26,125,000) Bond Premium (4,340,093) Current year changes to compensated absences liabilities (552,750) Current year changes to pension liabilities 332,043 Current year changes to OPEB liabilities (738,121) Current year premium reduction 151,851 Current year principal payments reducing debt 1,330,000 Net adjustment to reduce government wide fund balance to arrive at Net Position Governmental Activities (49,123,191)$ Beginning Balance of Long-Term Liabilities Excluded from Fund Level: Another element of that reconciliation explains the "Long-term liabilities are not due and payable in the current and are not reported in the funds. The following show the detail of these liability changes. Deferred pension outflows 2,771,603$ Current year change in deferred pension outflow (71,499) Net adjustment to add to government wide fund balance to arrive at Net Position Governmental Activities 2,700,104$ Beginning Balance of Deferred Outflows Excluded from Fund Level: Deferred pension inflows (7,105,613)$ Deferred OPEB inflows (333,409) Current year change in pension related deferred inflows 3,920,904 Current year change in OPEB related deferred inflows 105,908 Net adjustment to add to government wide fund balance to arrive at Net Position Governmental Activities (3,412,210)$ Beginning Balance of Deferred Inflows Excluded from Fund Level: Page 54 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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: Cash and equivalents 9,022,307$ Restricted cash - IBNR 2,129,808 Investments 2,182,419 Receivables 1,504 Machinery and equipment 5,031,228 Deferred pension outflows 44,498 Accounts payable (213,560) Pension liabilities (119,826) Deferred pension inflows (83,364) Change in current year assets 1,061,471 Change in current year liabilities (141,681) Change in deferred outflows (5,022) Change in deferred inflows 44,510 Net adjustment to reduce government wide fund balance to arrive at Net Position Governmental Activities 18,954,292$ Effect of Internal Service Fund Government Type Activity on Statements: Land 264,953$ Construction in process 10,865,713 Machinery and equipment 391,945 Contributed capital assets 29,252,567 Current year depreciation (16,876,502) Gain on Joint venture 93,137 Net capital activity 23,991,813 Debt repayment 1,330,000 Net debt activity 1,330,000$ The second element of that reconciliation related to debt activity as follows Capital outlays for: Page 55 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report NOTE 3: DEPOSITS AND INVESTMENTS Summary of Deposit and Investment Balances Reconciliation of the City’s deposits and investment balances as of December 31, 2020, is as follows: Deposits Custodial Credit Risk Custodial credit risk for deposits is the risk that in the event of a failure of a depository financial institution, the City would not be able to recover deposits or will not be able to recover collateral securities that are in possession of an outside party. The City’s deposits and certificates of deposit are mostly covered by federal depository insurance (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. The City does not have a deposit policy for custodial credit risk beyond the requirements of state statute. Washington State law restricts deposit of funds to financial institutions physically located in Washington unless otherwise expressly permitted by statute and authorized 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 It is the City’s policy to invest all temporary cash surpluses. The interest on these investments is prorated to the various funds. 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. Investments are subject to the following risks. Government Wide Fiduciary Funds Cash on Hand 7,550 - Deposits with Private Financial Institutions 66,220,679 539,021 Deposits in transit 500,818 - Outstanding Checks (1,264,549) - Deposits in State LGIP 58,052,572 - Total Deposits 123,517,070 539,021 Investments 16,516,741 6,507,454 Total Investments 16,516,741 6,507,454 Page 56 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Interest Rate Risk Interest rate risk is the risk the City may face should interest rate variances affect the fair value of investments. 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. The following table depicts Weighted Average Maturity (WAM) for all City investments with maturities, by number of months. In addition to the interest rate risk disclosed below, the City includes investments with fair value highly sensitive to interest rate changes. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. 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, 2020 the City’s investments in agency securities were all rated AAA. The LGIP is not rated and 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 in accordance with RCW 43.250. 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. Investment Type Fair Value Less than 1 year 1 to 5 years 6 to 10 years SBA Participation 51,126$ -$ -$ 51,126$ Federal Farm Credit Bank 3,037,944 3,037,944 - Federal Home Loan Bank 5,004,446 - 5,004,446 - Federal National Mortgage Association 5,214,318 - 5,214,318 - Resolution Funding Corporation-Strips 3,208,907 3,208,907 - - Total Debt Securties 16,516,741$ 3,208,907$ 13,256,708$ 51,126$ Investment Maturities (in Years) Maturity Date # of Months to Maturity Fair Market Value as 12/31/20 % of total WAM 02/01/2027 73 51,126 0.31% 0.225966 11/25/2024 47 2,000,084 12.11% 5.691434 10/23/2023 34 3,004,362 18.19% 6.184532 01/19/2023 25 2,227,239 13.48% 3.371184 04/22/2024 40 2,987,079 18.09% 7.234064 01/15/2021 1 3,208,907 19.43% 0.194282 01/24/2024 37 3,037,944 18.39% 6.805454 37 16,516,741$ 100.00% 29.706916 Calculation of Weighted Average Maturity (WAM) Page 57 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Concentration of Credit Risk 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. 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, 2020. Local Government Investment Pool The City is a participant in the Local Government Investment Pool which was authorized by Chapter 294, Laws of 1986, and is managed and operated by the Washington State Treasurer. The State Finance Committee is the administrator of the statute that created the pool and adopts rules. The State Treasurer is responsible for establishing the investment policy for the pool and reviews the policy annually and proposed changes are reviewed by the LGIP advisory Committee. Investments in the LGIP, a qualified external investment pool, are reported at amortized cost which approximates fair value. The LGIP is an unrated external investment pool. The pool portfolio is invested in a manner that meets the maturity, quality, diversification and liquidity requirements set forth by the GASBS 79 for external investments pools that elect to measure, for financial reporting purposes, investments at amortized cost. The LGIP does not have any legally binding guarantees of share values. The LGIP does not impose liquidity fees or redemption gates on participant withdrawals. For GASB reporting purposes funds in the LGIP are reported as cash equivalents. The Office of the State Treasurer prepares a stand-alone LGIP financial report. A copy of the report is available from the Office of the State Treasurer, PO Box 40200, Olympia, Washington 98504-0200, online at http://www.tre.wa.gov. Investments Reported as Cash Equivalents as of December 31, 2020 Amortized Cost Less than 1 Year Local Government Investment Pool $58,052,573 $58,052,573 In addition to the City of Pasco investments presented in the series of tables following this section, the City’s Old Fire Pension and Old Fire OPEB Funds report the following investments in their Trust Funds: ISSUER *FAIR VALUE AT 12/31/20 PERCENTAGE SBA Participation 51,126 0.31% Federal Farm Credit Bank 3,037,944 18.39% Federal Home Loan Bank 5,004,446 30.30% Federal National Mortgage Association 5,214,318 31.57% Resolution Funding Corporation-Strips 3,208,907 19.43% TOTAL 16,516,741$ 100% *All investments were measured at Level 2, Significant Other Ob servable Inputs. Page 58 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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: Quoted prices in active markets for identical assets or liabilities; Level 2: These are 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. 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, 2020, the City had the following investments measured at fair value: NOTE 4: 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 10 th day of the following month. Old Fire Pension Trust Fund Investments FMV 12/31/20 Interest RateMaturity Small Business Admn Participation SBAP 10,567$ 5.37% 10/1/2026 The Investment Co. of America Mutual Funds 2,866,911 *Varies N/A Total 2,877,478 *YTD Return 19.74% Old Fire OPEB Trust Fund Investments FMV 12/31/20 Interest Rate Ma turity WAMU Investors Fund A Mutual Funds 3,629,976 *Varies N/A Total 3,629,976$ *YTD Return 20.19% Quoted Prices Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs 12/31/2020 (Level 1) (Level 2) (Level 3) Investment by Fair Value Level U.S. Government Agency Securities 16,516,741$ -$ 16,516,741$ -$ Total Investments measured at fair value 16,516,741$ -$ 16,516,741$ -$ Total Investments in Statement of Net Position 16,516,741$ Fair Value Measurement Using 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 59 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Property taxes are recorded as a receivable and revenue when levied, offset by deferred revenue. 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. As of 12/31/20 delinquent taxes totaled $191,905. 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 2020 was $1.8075 per $1,000 on an assessed valuation of $6,121,229,885. This resulted in a total regular levy of $11,064,358 for 2020. The City did not levy any taxes for special levies in 2020. NOTE 5: CAPITAL ASSETS AND CWIP Capital asset activity for the year ended December 31, 2020 was as follows: Governmental Activities: Beginning Balance 01/01/20 Prior Period Adjustments Adjusted Beginning Balance 01/01/20 Current Period Increases Current Period Decreases Ending Balance 12/31/20 Capital assets, not being depreciated Land 19,473,173$ -$ 19,473,173$ 4,871,110$ 467,238$ 23,877,045$ Construction in progress 17,651,905 (1,473,434) 16,178,471 11,483,255 7,136,360 20,525,366 Total capital assets, not being depreciated 37,125,078 (1,473,434) 35,651,644 16,354,365 7,603,598 44,402,411 Capital assets, being depreciated: Building & structure 48,019,277 - 48,019,277 1,998,549 - 50,017,826 Other improvements 7,379,718 - 7,379,718 26,447 - 7,406,165 Machinery and equipment 19,171,932 - 19,171,932 976,772 888,423 19,260,281 Infrastructure 278,681,072 - 278,681,072 29,172,946 1,068,632 306,785,386 Total capital assets being depreciated 353,251,999 - 353,251,999 32,174,714 1,957,055 383,469,658 Less accumulated depreciation: Building & structure 14,310,889 - 14,310,889 1,132,799 - 15,443,688 Other improvements 3,548,880 - 3,548,880 295,937 - 3,844,817 Machinery and equipment 10,463,635 - 10,463,635 549,242 622,032 10,390,845 Infrastructure 103,727,131 - 103,727,131 14,924,191 1,068,633 117,582,689 Total accumulated depreciation 132,050,535 - 132,050,535 16,902,169 1,690,665 147,262,039 Total capital assets, being depreciated, net 221,201,464 - 221,201,464 15,272,545 266,390 236,207,619 Governmental activities capital assets net 258,326,542$ (1,473,434)$ 256,853,108$ 31,626,910$ 7,869,988$ 280,610,030$ Page 60 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report In 2020, it was determined that a local improvement district funded project included utility assets. A prior period adjustment was necessary to properly assign assets to the functions they support. The change resulted in a reduction in governmental activities, with an offsetting increase in business type activities, in the amount of $1,395,293. Additionally, in the governmental activities, work originally anticipated to be capital in nature, amounting to $78,141, was determined instead to be facility maintenance. The total effect of prior period adjustments to governmental activities was $1,473,434. See note 17 for details. Depreciation expense by function: Business Type Activities: Beginning Balance 01/01/20 Prior Period Adjustments Adjusted Beginning Balance 01/01/20 Current Period Increases Current Period Decreases Ending Balance 12/31/20 Capital assets, not being depreciated Land 3,149,049$ -$ 3,149,049$ 733,369$ -$ 3,882,418$ Construction in process 10,452,939 1,187,194 11,640,133 15,896,929 9,042,178 18,494,884 Total capital assets, not being depreciated 13,601,988 1,187,194 14,789,182 16,630,298 9,042,178 22,377,302 Capital assets, being depreciated: Building & structure 69,682,771 - 69,682,771 653,444 - 70,336,215 Other Improvements 450,474 - 450,474 65,104 - 515,578 Machinery and equipment 17,357,705 - 17,357,705 947,976 82,055 18,223,626 Infrastructure 171,717,676 - 171,717,676 11,208,570 186,604 182,739,642 Total capital assets being depreciated 259,208,626 - 259,208,626 12,875,094 268,659 271,815,061 Less accumulated depreciation: Building & structure 23,047,799 - 23,047,799 1,668,542 - 24,716,341 Other Improvements 9,063 - 9,063 10,487 - 19,550 Machinery and equipment 7,702,524 - 7,702,524 1,050,790 70,333 8,682,981 Infrastructure 40,282,770 - 40,282,770 3,684,961 186,604 43,781,127 Total accumulated depreciation 71,042,156 - 71,042,156 6,414,780 256,937 77,199,999 Total capital assets, being depreciated, net 188,166,470 - 188,166,470 6,460,314 11,722 194,615,062 Business activities capital assets net 201,768,458$ 1,187,194$ 202,955,652$ 23,090,612$ 9,053,900$ 216,992,364$ General government 443,448$ Public Safety 481,910 Transportation 14,919,078 Economic environment 151,879 Culture & recreation 905,853 Total depreciation expense - governmental activities 16,902,169$ Water 2,772,979$ Irrigation 583,214 Sewer 2,422,139 Process water reuse facility 453,721 Stormwater 182,727 Total depreciation expense- business-type activities: 6,414,780$ Governmental activities: Business-type activities: Page 61 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Construction commitments The City of Pasco has active construction projects as of December 31, 2020. The projects include street construction and various utility related projects. At year end,the city’s commitments with contractors are as follows: NOTE 6: INTERFUND BALANCES AND TRANSFERS Inter-fund loans The composition of inter-fund loan balances as of December 31, 2020 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. CATEGORY PROJECT NAME SPENT TO DATE REMAINING COMMITMENT Fire Fire Station No. 84 & Admin Bldg 2,471,845 5,054,461 General Gesa Stadium Improvements 217,976 185,125 Process Water Resource Facility Embankment Repair -$ 667,895.76$ Process Water Resource Facility Columbia East Pump Station 2,749,181 47,032 Process Water Resource Facility Foster Wells Forcemain 4,421,389 717,789 Process Water Resource Facility Irrigation Pump Station 7,495,158 1,097,196 Sewer WWTP PLC Upgrade 815,092 37,527.26 Sewer Road 36 Lift Station - 593,685 Sewer NW Area Sewer LID - 1,726,861 Sewer 9th & Washington Lift Station- S. Maitland Lift Station (Combined)- 526,341 Streets Chapel Hill Blvd Extension 4,014,952 202,899 Streets Wrigley Drive Extension - 285,000 Streets Road 68 Signage & Striping - 95,924 Streets Court Street Overlay - 390,111 Water Wehe Water Main Replacement - 158,270 22,185,593$ 11,786,117$ TOTAL Loan Purpose Nonmajor Special Revenue Nonmajor Debt Service Total General Fund LID Financing -$ $ 827,452 827,452$ General Fund Marina dock repairs- Interim Financing 225,550 - 225,550 Nonmajor Special Revenue LID Financing - 67,709 67,709 225,550$ 895,160$ 1,120,710$ TotalINTERFUND LOANS DUE FROM INTERFUND LOANS DUE TO Page 62 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Inter-fund transfers Transfers between funds during the year ended December 31, 2020 are as follows: 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 grant purpose 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; 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, pension and OPEB liabilities from the General Fund. The only debt service not liquidated from the General Fund is debt related to the Gesa Stadium improvements which is repaid from the Stadium Fund. Compensated absences are mainly liquidated from General, Street and Ambulance funds. The fund for which the liability is incurred is responsible for liquidating the liability. The average percentage of usage of compensated absences varies significantly between governmental and business type funds, therefore the City uses a three-year average usage percentage for projecting compensated absences due within one year. This method is the most accurate by following the current trend for 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 2020 long-term liabilities for Internal Service Funds included with Governmental activities was $130,258. General Nonmajor Special Revenue Nonmajor Debt Service Major Construction Internal Service Total General -$ 220,902$ -$ 485$ -$ 221,387$ Nonmajor Special Revenue 2,012,981 252,127 - 11,375 710,184 2,986,667 Major Ambulance 420,000 - - - - 420,000 Major Construction 8,864,321 3,406,932 85,751 - - 12,357,004 Major Utility - 1,233,333 - - - 1,233,333 Total 11,297,302$ 5,113,294$ 85,751$ 11,860$ 710,184$ 17,218,391$ TRANSFER FROM TRANSFER TOPage 63 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report The table below reflects the change in Long-Term Liabilities for Governmental activities for year ended December 31, 2020. Changes in long-term liabilities –business type. All business type funds liquidate their own compensated absences, judgements, and claims. The table below reflects the change in Long-Term Liabilities for Business Type activities for year ended December 31, 2020. 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. Bonded indebtedness has also been entered into in prior years to advance refund several general obligation and revenue bonds. General obligation bonds have been issued for both general government and business-type activities and are being repaid for the applicable resources. Revenue bonds are issued to finance capital facilities, facility improvements and equipment purchases for the City’s utilities. 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. Governmental Debt The City’s outstanding general obligation bonds are comprised of a 2015 bond issue that funded the construction of a new police station and a 2019 bond issue to fund the construction of two fire GOVERNMENTAL ACTIVITIES Beginning Balance 01/01/2020 Additions Reductions Ending Balance 12/31/20 Due Within One Year General Obligation Bonds 26,125,000$ -$ (1,330,000)$ 24,795,000$ 875,000$ Premiums 4,340,091 - (151,850) 4,188,241 151,850 Total GO Bonds Payable 30,465,091 - (1,481,850) 28,983,241 1,026,850 Compensated Absences 3,529,310 3,022,125 (2,469,375) 4,082,060 2,259,113 OPEB Liabilities 12,231,327 738,121 - 12,969,448 622,429 Pension Liabilities 3,420,483 - (332,043) 3,222,902 1,137,164 Governmental Activity Long-Term Activity 49,646,211$ 3,760,246$ (4,283,268)$ 49,257,651$ 5,045,556$ BUSINESS TYPE ACTIVITIES Beginning Balance 01/01/2020 Additions Reductions Ending Balance 12/31/20 Due Within One Year Revenue Bonds 38,710,000$ 23,550,000$ (10,865,000)$ 51,395,000$ 2,390,000$ Premiums 1,729,428 1,063,759 (146,295) 2,646,892 150,299 Total Bonds Payable 40,439,428 24,613,759 (11,011,295) 54,041,892 2,540,299 State Loans 6,105,997 107,221 (510,799) 5,702,419 422,079 External Loan 1,309,712 - (127,613) 1,182,099 131,838 Compensated Absences 310,777 311,497 (318,387) 303,887 287,746 Pension Liabilities 1,259,147 33,517 - 1,292,664 402,404 Business Activity Long-Term Activity 49,425,061 25,065,994 (11,968,094) 62,522,961 3,784,366 Total Changes in Business Type & Governmental Long-Term Liabilities 99,071,272$ 28,826,240$ (16,251,362)$ 111,780,612$ 8,829,922$ Page 64 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report stations, improvements to the Gesa Stadium and the City’s contribution the construction of the Tri-City Animal Shelter. A Public Safety Sales tax of three-tenths of one percent, implemented in 2012 was identified as the source of repayment of the 2015 bond. These issues are repaid from the General Fund, with the exception of the Gesa Stadium bond which is repaid from the Stadium Fund. General obligation bonds outstanding as of December 31, 2020 are as follows: The annual debt service requirements to maturity for general obligation bonds is presented in the following table. Business Type Debt In 2020,the City’s Water/Sewer utility continued the construction of projects supported by a $9.4 million revenue bond that was issued at the end of 2017. The purpose of the bond was 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. In 2020, the city refunded two bonds and issued a $16.4 million revenue bond for Reuse Facility improvements. The City is also liable for two state loans; 1) Drinking Water Loan for the Columbia Water Supply Project. The Columbia Water Supply Project was completed in 2018. 2) Public Works Board loan for pre-construction of Reuse Facility improvements.The City is also liable for a local loan from the Hanford Area Economic Investment Fund Advisory Committee (HAEIFAC) for improvements for the Reuse Facility. As of December 31, 2020, restricted cash and investments in the proprietary funds contain $4,422,189 in sinking funds and reserves as required by bond indentures. Purpose Issuance Amount Final Maturity Interest Rates Outstanding as of December 31, 2020 Due Within 1 Year 2015 LTGO Police Station 8,795,000 12/1/2035 3.00%-4.00% 7,175,000 360,000 2019 LTGO Fire Stations 14,800,000 12/1/2049 4.00%-5.00% 14,096,000 422,300 2019 LTGO Gesa Stadium 1,645,000 12/1/2049 4.00%-5.00% 1,762,000 46,350 2019 LTGO Animal Shelter 1,645,000 12/1/2049 4.00%-5.00% 1,762,000 46,350 24,795,000$ 875,000$ GOVERNMENTAL DEBT - BONDS Total Governmental Debt Year Ending December 31 Principal Interest Total Debt Service 2021 875,000$ 1,142,800$ 2,017,800$ 2022 910,000 1,107,800 2,017,800 2023 945,000 1,071,400 2,016,400 2024 990,000 1,028,050 2,018,050 2025 1,045,000 982,600 2,027,600 2026-2030 5,945,000 4,154,913 10,099,913 2031-2035 5,260,000 2,856,675 8,116,675 2036-2040 2,480,000 1,970,500 4,450,500 2041-2045 3,180,000 1,283,500 4,463,500 2046-2049 3,165,000 405,000 3,570,000 TOTAL 24,795,000$ 16,003,238$ 40,798,238$ GOVERNMENTAL DEBT Page 65 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Revenue Bonds, General Obligation Bonds and Loans outstanding for Business Type Accounts are as follows: The annual 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 and discounts. Current bonds payable reflect actual principal payments including the current portion of the amortized premium due within one year. The following table illustrates the breakdown by fund type for current and non-current bonds payable and the effect of premium or discount on balances. Balances shown are as of December 31, 2020. Purpose Issuance Amount Final Maturity Interest Rates Outstanding as of December 31, 2020 Due Within 1 Year 2013A Sewer Capital Projects 2,520,000$ 12/01/2028 3.00%-4.00% 1,675,000$ 180,000$ 2013T Capital Projects Reuse Facility 7,235,000 12/01/2028 .69%-4.89% 4,550,000 490,000 2015 Water/Sewer Capital Projects 14,380,000 12/01/2040 2.00%-5.00%12,390,000 665,000 2017 Sewer Improvement Revenue Bonds1 9,415,000 12/01/2042 3.30%-4.00% 9,415,000 - 2020A Water/Sewer Revenue Bond 7,135,000 12/01/2029 4.00%-5.00% 7,135,000 680,000 2020B PWRF Revenue Bond 16,415,000$ 12/01/2050 1.17%-3.57%16,230,000 375,000 51,395,000$ 2,390,000$ 1 This bond requires interest-only payments until 2030. BUSINESS TYPE DEBT -BONDS Purpose Issuance Amount Final Maturity Interest Rates Outstanding as of December 31, 2020 Due Within 1 Year DM15-952-037 Columbia Water Supply Project 6,810,430$ 10/01/2034 1.50% 5,595,198$ 399,657$ HAEIFAC - Reuse Facility Improvement Loan 1,500,000 07/01/2028 3.20% 1,182,099 131,838 PWB- PWRF Pre-treatment Improvements 107,221$ 06/01/2024 0.84% 107,221 22,422 6,884,518 553,917 58,279,518$ 2,943,917$ Total Business Type Debt BUSINESS TYPE DEBT -LOANS Year Ending December 31 Principal Interest Total Debt Service 2021 2,943,917 2,094,934 5,038,851 2022 2,643,169 2,000,962 4,644,131 2023 2,657,559 1,916,955 4,574,514 2024 2,759,562 1,830,807 4,590,369 2025-2029 12,627,026 7,737,125 20,364,151 2030-2034 10,678,285 5,781,426 16,459,711 2035-2039 10,655,000 3,719,788 14,374,788 2040-2044 8,780,000 1,550,688 10,330,688 2044-2049 3,710,000 553,685 4,263,685 2050 825,000 29,469 854,469 TOTAL 58,279,518$ 27,215,839$ 85,495,357$ BUSINESS TYPE DEBT Bonds Governmental Business Type Total Current Bonds Payable 875,000$ 2,390,000$ 3,265,000$ Bond Premium/Discounts 151,850 150,298 302,148 Total Current Bonds Payable 1,026,850 2,540,298 3,567,148 Non Current - Bonds Payable 23,920,000 49,005,000 72,925,000 Bond Premium/Discounts 4,036,392 2,496,594 6,532,986 Total Non Current Bonds Payable 27,956,392 51,501,594 79,457,986 Total Bonds Payable (Net of Premium/Discounts ) 28,983,242$ 54,041,892$ 83,025,134$ Page 66 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Special Assessment Debt Local improvement districts (LID's) are created for the primary purposes of constructing streets, storm drainage, sidewalk, street lighting, water, and sewer improvements. The principal and interest on the bond issues are expected to be paid solely from special assessments collected. The assessments are liens against the property and are subject to foreclosure. The LID Guarantee Fund ended the year with a balance of $345,658. There is no external debt issue for local improvement districts, all outstanding debt is internally funded through inter-fund loans. See details in Note 6: Interfund Balances and Transfers 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. Total cost for such leases was $495,307 for the year ended December 31, 2020. 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. 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 162 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 $25 million per occurrence subject to aggregates and sublimits. The Board of Directors determines the limits and terms of coverage annually. Year Ending December Amount 2021 466,651$ 2022 296,844 2023 183,882 2024 51,325 2025 3,991 Total 1,002,692$ Police vehicles Page 67 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Insurance for property, automobile physical damage, fidelity, inland marine, and boiler and machinery coverage are purchased on a group basis. Various deductibles apply by type of coverage. Property coverage is self-funded from the members’ deductible to $750,000, for all perils other than flood and earthquake, and insured above that to $400 million per occurrence subject to aggregates and sublimits. Automobile physical damage coverage is self-funded from the members’ deductible to $250,000 and insured above that to $100 million per occurrence subject to aggregates and sublimits. 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 has not had claims in excess of insurance for the last three years. 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 (16 weeks) 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 $100,000 per individual. The amount of medical/dental claims in excess of commercial insurance for the last three years are: NOTE 10: JOINT AGREEMENT/JOINT VENTURES A. Bi-County Police Information Network The Bi-County Police Information Network (BI-PIN) was established November 24, 1982, when an Interlocal Agreement was entered into by eight participating municipal corporations; the cities of Kennewick, Pasco, Richland, Connell West Richland, and Prosser, and Benton and Franklin Counties. BI-PIN was established to assist the participating police and sheriff's departments in the deterrence and solution of criminal incidents. BI-PIN is served by an Executive Committee composed of the City Manager of each of the cities and a member from each of the Boards of County Commissioners of Benton and Franklin Counties. A liaison from the Bi-County Chiefs and Sheriffs is an ex officio, non-voting member. 2018 2019 2020 5,196,581$ 6,170,277$ 5,620,957$ Page 68 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report The allocation of financial participation among the participating jurisdictions is based upon the approved budget for that year and is billed quarterly in advance to each agency. On dissolution of the Interlocal Agreement, the net position will be shared based upon participant contribution. 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 total amount paid by BI-PIN in 2020 for these transactions was $119,000. BI-PIN is currently in the process of implementing a new RMS/JMS system as well as upgrading all supporting infrastructure. The City of Pasco's equity interest in BI-PIN was $279,824 on Dec 31, 2020, 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 may be 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 $34,327 on Dec 31, 2020, 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. C. SECOMM SECOMM provides public safety communications services to the Cities of Kennewick, Richland, Pasco and the Counties of Benton and Franklin. Each owns an equal share of SECOMM’s net assets. Financial participation is allocated among the five participants based on equal shares of capital expenses, predetermined fixed costs, direct costs and percentages of use. SECOMM also provides service through contracts to the Cities of West Richland and Prosser, Connell and the Benton and Franklin County Fire Protection Districts, Port of Pasco, Walla Walla Fire District #5 and the North Franklin County Hospital district. Page 69 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Service contract agencies are assessed on a cost per capita or cost per call basis. The City of Pasco’s equity interest in SECOMM as of December 31, 2020 was $1,126,712 which is reported as an asset in the government-wide Statement of Net Assets. The change in equity is reflected in Public Safety under the government-wide Statement of Activities. Upon dissolution of the Interlocal Agreement, the net assets will be shared equitably among the participants. Complete and separate financial statements for all operations of Benton County Emergency Services may be obtained at the City of Richland, 505 Swift Blvd, Richland, Washington. D. 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. 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 wasestablished 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 servefour-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 direction 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 Page 70 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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 execute 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. In 2020, the City expended $169,800 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. In Spring of 2019, Franklin County partnered with HAPO Community Credit Union for a ten year naming rights agreement. As such, for the purposes of this document, the terms HAPO Center and TRAC are interchangeable. The City accounts for its portion of TRAC activity in the TRAC Special Revenue Fund. For calendar year 2020, the City of Pasco paid Franklin County $276,871 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, 2020, the TRAC Fund had a fund balance of $524,766. Complete financial statements for TRAC may be obtained from Franklin County, 1016 N. 4th Avenue, Pasco, Washington. Page 71 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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 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 RCW35.57.020and/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. Page 72 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. Benton County Emergency Services (BCES) BCES was formed January 1, 1997 through an interlocal agreement entered into by the Cities of Richland, Kennewick, West Richland, Benton City and Prosser as well as Benton County. A second amended and restated interlocal agreement was made and entered into by and between the following entities: Benton County, Franklin County, the Cities of Kennewick, Richland, West Richland, Prosser, Benton City, and Pasco, Benton County Fire Protection Districts and the Public Utility District #1 of Benton County. An Executive Board oversees the operations of BCES and consists of the City Managers (or designee) from the Cities of Kennewick, Pasco and Richland, City Administrators from Prosser and West Richland, a Council member from Benton City, a Benton County Commissioner, a Franklin County Commissioner and a single representative collectively representing Benton County Fire Protection Districts. The City of Richland serves as the operating jurisdiction providing all the necessary administrative support services and reporting for BCES. The total amount paid by BCES in 2020 for these services was $411,026. No distributions of income to the City are expected since charges are assessed only to recover anticipated expenses. NOTE 13: EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS The following table represents the aggregate pension amounts for all plans for the year 2020: Pension liabilities 4,515,566$ Pension assets 12,985,759 Deferred outflows of resources 3,119,082 Deferred inflows of resources 3,597,092 Pension expense/expenditures 127,505$ Aggregate Pension Amounts - All Plans Page 73 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report State Sponsored Pension Plans Substantially all 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 that includes financial statements and required supplementary information for each plan. The DRS comprehensive annual financial report may be obtained by writing to: Department of Retirement Systems Communications Unit P.O. Box 48380 Olympia, WA 98540-8380 Or the DRS comprehensive annual financial report may be downloaded from the DRS website at www.drs.wa.gov. Public Employee’s Retirement System (PERS) PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher education employees not participating in higher education retirement programs. PERS is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component. PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s years of service. The AFC is the average of the member’s 24 highest consecutive service months. Members are eligible for retirement from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. Members retiring from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of-living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. Contributions The PERS Plan 1 member contribution rate is established by State statute at 6 percent. The employer contribution rate is developed by the Office of the State Actuary and includes an administrative expense component that is currently set at 0.18 percent. Each biennium, the state Page 74 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Pension Funding Council adopts Plan 1 employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage of covered payroll) for 2020 were as follows: * For employees participating in JBM, the contribution rate was 12.26%. 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: x With a benefit that is reduced by three percent for each year before age 65; or x 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 have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44. PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined contribution rates are set at a minimum of 5 percent and escalate to 15 percent with a choice of six options. Employers do not contribute to the defined Actual Contribution Rates Employer Employee* January – August 2020 PERS Plan 1 7.92%6.00% PERS Plan 1 UAAL 4.76% Administrative Fee 0.18% Total 12.86%6.00% September – December 2020 PERS Plan 1 7.92%6.00% PERS Plan 1 UAAL 4.87% Administrative Fee 0.18% Total 12.97%6.00% PERS Plan 1 Page 75 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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 2020were as follows: * For employees participating in JBM, the contribution rate was 19.75%. The City’s actual PERS plan contributions were $665,510 to PERS Plan 1 and $1,099,234 to PERS Plan 2/3 for the year ended December 31, 2020. 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: x 20+ years of service –2.0% of FAS x 10-19 years of service –1.5% of FAS x 5-9 years of service –1% of FAS 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 Actual Contribution Rates Employer 2/3 Employee 2* January – August 2020 PERS Plan 2/3 7.92%7.90% PERS Plan 1 UAAL 4.76% Administrative Fee 0.18% Employee PERS Plan 3 Varies Total 12.86%7.41% September – December 2020 PERS Plan 2/3 7.92%7.90% PERS Plan 1 UAAL 4.87% Administrative Fee 0.18% Employee PERS Plan 3 Varies Total 12.97%7.90% PERS Plan 2/3 Page 76 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report death benefit, if found eligible by the Department of Labor and Industries. LEOFF 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. Contributions Starting on July 1, 2000, LEOFF Plan 1 employers and employees contribute zero percent, as long as the plan remains fully funded. The LEOFF Plan I had no required employer or employee contributions for fiscal year 2020. 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 includes 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. Effective July 1, 2017, when a LEOFF employer charges a fee or recovers costs for services rendered by a LEOFF 2 member to a non-LEOFF employer, the LEOFF employer must cover both the employer and state contributions on the LEOFF 2 basic salary earned for those services. The state contribution rate (expressed as a percentage of covered payroll) was 3.44% in 2020. The LEOFF Plan 2 required contribution rates (expressed as a percentage of covered payroll) for 2020 were as follows: The City’s actual contributions to the plan were $965,108 for the year ended December 31, 2020. Actual Contribution Rates Employer Employee January – December 2020 State and local governments 5.15%8.59% Administrative Fee 0.18% Total 5.33%8.59% Ports and Universities 8.59%8.59% Administrative Fee 0.18% Total 8.77%8.59% LEOFF Plan 2 Page 77 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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, 2020, the state contributed $76,297,643 to LEOFF Plan 2. The amount recognized by the City as its proportionate share of this amount is $617,114. Actuarial Assumptions The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial valuation completed in 2020 with a valuation date of June 30, 2019. The actuarial assumptions used in the valuation were based on the results of the Office of the State Actuary’s (OSA) 2013-2018 Experience Study and the 2019 Economic Experience Study. Additional assumptions for subsequent events and law changes are current as of the 2019 actuarial valuation report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, 2020. Plan liabilities were rolled forward from June 30, 2019, to June 30, 2020, reflecting each plan’s normal cost (using the entry-age cost method), assumed interest and actual benefit payments. x Inflation:2.75% total economic inflation; 3.50% salary inflation x Salary increases: In addition to the base 3.50% salary inflation assumption, salaries are also expected to grow by promotions and longevity. x Investment rate of return:7.4% Mortality rates were developed using the Society of Actuaries’ Pub. H-2020 mortality rates, which vary by member status, as the base table. The OSA applied age offsets for each system, as appropriate, to better tailor the mortality rates to the demographics of each plan. OSA applied the long-term MP-2017 generational improvement scale, also developed by the Society Actuaries, to project mortality rates for every year after the 2010 base table. Mortality rates are applied on a generational basis; meaning, each member is assumed to receive additional mortality improvements in each future year throughout his or her lifetime. There were changes in methods and assumptions since the last valuation. x OSA updated its demographic assumptions based on the results of its latest demographic experience study. See OSA’s 2013-2018 Demographic Experience Study at leg.wa.gov/osa. x OSA updated the Early Retirement Factors and Joint-and-Survivor factors used in its model to match the ones implemented by DRS on October 1, 2020. These factors are used to value benefits for members who elect to retire early and for survivors of members that die prior to retirement. x The valuation includes liabilities and assets for Plan 3 members purchasing Total Allocation Portfolio annuities when determining contribution rates and funded status. Page 78 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report x OSA simplified its modeling of medical premium reimbursements for survivors of duty- related deaths in LEOFF 2. x OSA changed its method of updating certain data items that change annually, including the public safety duty-related death lump sum and Washington state average wage. OSA set these values at 2018 and will project them into the future using assumptions until the next Demographic Experience Study in 2025. See leg.wa.gov/osa for more information on this method change. Discount Rate The discount rate used to measure the total pension liability for all DRS plans was 7.4 percent. 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. Based on OSA’s 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 7.4 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 7.4 percent was determined using a building-block-method. In selecting this assumption, the Office of the State Actuary (OSA) reviewed the historical experience data, considered the historical conditions that produced past annual investment returns, and considered Capital Market Assumptions (CMA’s) and simulated expected investment returns provided by the Washington State Investment Board (WSIB). The WSIB uses the CMA’s and their target asset allocation to simulate future investment returns at various future times. Estimated Rates of Return by Asset Class Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2020, are summarized in the table below. The inflation component used to create the table is 2.2 percent and represents the WSIB’s most recent long-term estimate of broad economic inflation. Sensitivity of the Net Pension Liability/(Asset) The table below presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.4 percent, as well as what the City’s proportionate share of the net pension Fixed Income 20%2.20% Tangible Assets 7%5.10% Real Estate 18%5.80% Global Equity 32%6.30% Private Equity 23%9.30% 100% Asset Class Target Allocation % Long-Term Expected Real Rate of Return Arithmetic Page 79 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.4 percent) or 1-percentage point higher (8.4 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 At June 30, 2020, the City reported atotal pension asset of $10,853,518 and atotal pension liability of $4,515,567 for its proportionate share of the net pension liabilities as follows: The amount of the asset reported above for LEOFF Plans 1 and 2 reflects a reduction for State pension support provided to the city. The amount recognized by the city as its proportionate share of the net pension asset, the related State support, and the total portion of the net pension asset that was associated with the city were as follows: At June 30, the city’s proportionate share of the collective net pension liabilities was as follows: 1% Decrease Current Discount Rate 1% Increase -(6.40%)-(7.40%) -(8.40%) PERS 1 $ 3,842,982 $3,068,110 $ 2,392,342 PERS 2/3 9,006,462 1,447,457 (4,777,389) LEOFF 1 (1,061,325)(1,303,921) (1,513,807) LEOFF 2 $ (189,053) $(9,549,597) $ (17,214,015) Plan Liability (or Asset) PERS 1 $ 3,068,110 PERS 2/3 1,447,457 LEOFF 1 (1,303,921) LEOFF 2 $ (9,549,597) Plan LEOFF 1 Asset LEOFF 2 Asset Employer’s proportionate $ (1,303,921) $(9,549,597) State’s proportionate share of the net pension asset associated with the employer (8,819,690)(6,106,244) TOTAL $ (10,123,611) $ (15,655,841) Proportionate Share 6/30/19 PERS 1 0.0917660% 0.0869020% -0.0004864% PERS 2/3 0.1184860% 0.1131760% -0.0053100% LEOFF 1 0.0690310% 0.0690450% 0.0000140% LEOFF 2 0.4925440% 0.4681510% -0.0243930% Proportionate Share 6/30/20 Change in ProportionPlan Page 80 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30 are used as the basis for determining each employer’s proportionate share of the collective pension amounts reported by the DRS in the Schedules of Employer and Nonemployer Allocations for all plans except LEOFF 1. LEOFF Plan 1 allocation percentages are based on the total historical employer contributions to LEOFF 1 from 1971 through 2000 and the retirement benefit payments in fiscal year 2020. Historical data was obtained from a 2011 study by the Office of the State Actuary (OSA). In fiscal year 2020, the state of Washington contributed 87.12 percent of LEOFF 1 employer contributions and all other employers contributed the remaining 12.88 percent of employer contributions. LEOFF 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. The allocation method the plan chose reflects the projected long-term contribution effort based on historical data. In fiscal year 2020, the state of Washington contributed 39 percent of LEOFF 2 employer contributions pursuant to RCW 41.26.725 and all other employers contributed the remaining 61 percent of employer contributions. The collective net pension liability (asset) was measured as of June 30, 2020, and the actuarial valuation date on which the total pension liability (asset) is based was as of June 30, 2019, with update procedures used to roll forward the total pension liability to the measurement date. Pension Expense For the year ended December 31, 2020, the city recognized pension expense as follows: Deferred Outflows of Resources and Deferred Inflows of Resources At December 31, 2020, the city reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PERS 1 $ (49,470) PERS 2/3 92,969 LEOFF 1 (67,263) LEOFF 2 354,343 Old Fire Pension (203,074) TOTAL $ 127,505 Pension Expense PERS 1 Deferred Outflows of Deferred Inflows of Resources Differences between expected and actual experience $ - $ - Net difference between projected and actual investment earnings on pension plan investments - (17,082) Changes of assumptions - - Changes in proportion and differences between contributions and proportionate share of contributions - - Contributions subsequent to the measurement date 352,742 - TOTAL $ 352,742 $ (17,082) Page 81 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report PERS 2/3 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 518,168 $ (181,401) Net difference between projected and actual investment earnings on pension plan investments - (73,510) Changes of assumptions 20,616 (988,738) Changes in proportion and differences between contributions and proportionate share of contributions (144,669) (44,089) Contributions subsequent to the measurement date 578,831 - TOTAL $ 972,946 $ (1,287,738) LEOFF 1 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ - $ - Net difference between projected and actual investment earnings on pension plan investments - (13,639) Changes of assumptions - - Changes in proportion and differences between contributions and proportionate share of contributions - - Contributions subsequent to the measurement date - - TOTAL $ - $ (13,639) LEOFF 2 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 1,321,344 $ (169,371) Net difference between projected and actual investment earnings on pension plan investments - (106,438) Changes of assumptions 13,835 (1,478,701) Changes in proportion and differences between contributions and proportionate share of contributions (44,129) (286,107) Contributions subsequent to the measurement date 502,343 - TOTAL $ 1,793,394 $ (2,040,617) Old Fire Pension Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ - $ - Net difference between projected and actual investment earnings on pension plan investments - (238,016) Changes of assumptions - - Changes in proportion and differences between contributions and proportionate share of contributions - - Contributions subsequent to the measurement date - - TOTAL $ - $ (238,016) ALL PLANS Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 1,839,512 $ (350,772) Net difference between projected and actual investment earnings on pension plan investments - (448,685) Changes of assumptions 34,451 (2,467,439) Changes in proportion and differences between contributions and proportionate share of contributions (188,798) (330,196) Contributions subsequent to the measurement date 1,433,916 - TOTAL $ 3,119,082 $ (3,359,076) Page 82 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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, 2021. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Firemen's Pension 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. Year ended December 31:PERS 1 2021 $ (77,519) 2022 (2,438) 2023 23,653 2024 39,222 2025 - Thereafter $ - Year ended December 31:PERS 2/3 2021 $ (642,015) 2022 (184,974) 2023 (15,681) 2024 71,963 2025 (87,975) Thereafter $ (89,576) Year ended December 31: LEOFF 1 2021 $ (48,687) 2022 (2,538) 2023 13,841 2024 23,746 2025 - Thereafter $ - Year ended December 31: LEOFF 2 2021 $ (763,117) 2022 (150,850) 2023 84,973 2024 263,150 2025 (120,550) Thereafter $ (99,639) Page 83 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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 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. 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. Benefit terms 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. Employees Covered by Benefit Terms: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, 2020, the benefit terms covered the following employees: Count Inactive employees, spouses, or beneficiaries currently receiving benefit payment 9 Inactive employees entitled to but not yet receiving benefit payments: 0 Active employees: 0 Total 9 Category Page 84 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Contributions.As long as the FPF provides for benefits to covered members, the City will be eligible to receive a share of the State's distribution of the fire insurance premium taxes. The amount the City receives is 25% of all monies received by the State from taxes on fire insurance premiums. Contributions can also come from taxes paid pursuant to the provisions of RCW 41.16.060. This statute require that each municipality levy up to $0.45 (only $0.225 of which can be in excess of the property tax limit pursuant to RCW 84.52.043) per $1,000 of assessed valuation, based on reports by a qualified actuary, to maintain the fund. Reporting Period contributions: $89,252 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, 2020the Fire Pension Plan had the following investments, reported at fair market value. Federal Agency $ 10,567 Mutual Funds $ 2,866,912 Rate of Return.For the year ended December 31, 2020, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 12.07%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amount actually invested. Actuarial Assumptions:The total pension liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Discount Rate 7.00% Investment Rate of Return 7.00% Inflation 2.50% Salary increases 3.00% Mortality rates were based on tables from the Society of Actuaries. No experience reports were used There were no ad hoc postemployment benefit changes (including ad hoc COLAs) to the plan. 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 liabilities to changes in the discount rate. Sensitivity of the total and net pension liability to changes in the discount rate. The total and net pension liability of the City, as well as what the City's total and net pension liability would be if they were calculated using a discount rate that is one percentage point lower (6.00%) or one percentage point higher (8.00%) follows: Page 85 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Fiduciary Net Position.The components of the net pension liability of the City at December 31, 2020 were as follows: The following table presents the changes in Net Pension Liability for year ending December 31, 2020. Deferred Outflows of Resources and Deferred Inflows of Resources At December 31, 2020, the City recognized a pension expense of -$203,074. The City reported deferred outflows of resources and deferred inflows of resources related to the Fire Pension Plan from the following sources: 1% Decrease Current Discount Rate 1% Increase 6.00%7.00%8.00% 1,339,628$ 1,234,876$ 1,144,269$ Total Pension Liability (Asset) 1% Decrease Current Discount Rate 1% Increase 6.00% 7.00% 8.00% (2,027,489)$ (2,132,241)$ (2,222,848)$ Net Pension Liability (Asset) Total Pension Liability 1,234,876$ Plan Fiduciary Net Position 3,367,117 Net Pension Liability (Asset) (2,132,241)$ Plan Fiduciary Net Position as a % of Total Pension Liability 272.67% Total Pension Plan Fiduciary Net Net Pension Liability Position Liability Balances at January 1, 2020 1,281,794$ 3,027,021$ (1,745,227)$ Changes for the year: Service Cost - - - Interest 85,837 - 85,837 Differences between expected and actual experience (21,644) - (21,644) Change in assumptions - - - Contributions- employer/other - 89,252 (89,252) Contributions- employee - - - Net investment income - 364,053 (364,053) Benefit payments, including refunds of employee contribution (111,111) (111,111) - Administrative expense - (2,098) 2,098 Other changes - - - Net changes (46,918) 340,096 (387,014) Balances at December 31, 2020 1,234,876$ 3,367,117$ (2,132,241)$ Changes in Net Pension Liability Page 86 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in the pension expense as follows: The Fire Pension Fund is reported in the City’s comprehensive annual financial report 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: Defined Benefit Other Postemployment Benefit (OPEB) Plans The following table represents the aggregate OPEB amounts for all plans subject to the requirements of GASBS 75 for the year 2020: LEOFF 1 –Postemployment Healthcare Plan In addition to the pension benefits outlined in Note 13,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 Deferred Outflows Deferred Inflows of Resources of Resources -$ -$ - - - (238,016) - - -$ (238,016)$ Difference between expected and actual experience Net Difference between projected and actual earnings on pension plan investments Changes of assumptions TOTAL Firemen's Pension Plan Contributions subsequent to the measurement date Year Ended December 31 Amount 2021 (75,314) 2022 (32,753) 2023 (98,942) 2024 (31,007) 2025 - Thereafter - OPEB Liabilities 12,969,448$ OPEB Assets (2,494,697) Deferred Outflows of Resources - Deferred Inflows of Resources (227,501) OPEB Expense 1,068,068$ Aggregate OPEB Amounts - All Plans Page 87 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report firefighters who are eligible for lifetime healthcare under the Law Enforcement Officers’ and Firefighters’ (LEOFF1) plan one retirement system. 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 plan is funded on a pay-as-you-go basis and there are no assets accumulated in a qualifying trust. Benefits Provided:The members' necessary hospital, medical, prescription and nursing care expenses not payable by worker's compensation, Medicare, or other insurance are covered. Employees covered by benefit terms: At December 31, 2020, the following employees were covered by the benefit terms: Contributions:The City pays benefits as they come due. Contributions rate: Benefits Due Reporting period contributions: $ 526,399 Total OPEB Liability:The City’s total OPEB liability was valued as of December 31, 2019 and was used to calculate the total OPEB liability measured as of December 31, 2020. Actuarial Assumptions: The total OPEB liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Discount Rate: 2.00% Inflation: 2.00% Salary Increases: 3.75% Healthcare cost trend rates Pre-Medicare: 6.50%* Medicare: 6.00%* Mortality Rates are based on CalPERS tables. Projections of the sharing of benefit-related costs are based on an established pattern of practice. Experience studies were not used in this valuation. Inactive employees (retirees) pay 0% of the cost of benefits. There were no ad hoc postemployment benefit changes (including ad hoc COLAs) to the plan. *Trending down to 3.94% over 54 years. Applies to calendar years. Category Count Inactive employees, spouses, or beneficiaries currently receiving benefit payments: 30 Inactive employees entitled to but not yet receiving benefit payments: - Active employees 1 Total 31 Page 88 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Discount Rate: The discount rate used to measure the total OPEB liability was 2.00%. 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. 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 (1.00%) or one percentage point higher (3.00%) follows: Total OPEB Liability (asset) 1% Decrease Current Rate 1% Increase 1.00%2.00%3.00% $14,438,226 $ 12,969,448 $ 11,717,812 Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The healthcare trend for this valuation started at 6.00% and decreased to 3.94% over 54 years. 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: Total OPEB Liability (asset) 5.00% Decreasing to 2.94% 6.00% Decreasing to 3.94% 7.00% Decreasing to 4.94% $11,676,055 $ 12,969,448 $ 14,458,186 Changes in the Total OPEB Liability The changes in total OPEB liability for 2020 are presented in the following table. Plan Fiduciary Net Total OPEB Total OPEB Position Liability Liability (a) (b) (c) = (a)-(b) Balances at January 1, 2020 12,231,327$ -$ 12,231,327$ Changes for the year: Service Cost 61,124 - - Interest 330,804 - 330,804 Changes of Benefit Terms - Differences Between Expected and Actual Experienc (84,229) Changes in Assumptions 956,821 Benefit payments (526,399) (526,399) Net changes 738,121 - 738,121 Balance as of December 31, 2020 12,969,448$ - 12,969,448 Schedule of changes in the Total OPEB Liability Page 89 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report There is a schedule of sources of changes in the Total 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 2020. Fire Pension –Postemployment Healthcare Plan 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 single employer, defined benefit healthcare plan administered by the City. The Old Fire Pension OPEB covers firefighters that were hired prior to the creation of the LEOFF 1 retirement system. Benefits Provided: The members' necessary hospital, medical, and nursing care expenses not payable by worker's compensation, social security, insurance provided by another employer, or other pension plan, or any other similar source are covered. Most medical coverage for eligible retirees is provided by the City's employee medical insurance program. Under authorization of the LEOFF Disability Board, direct payment is made for other retiree medical expenses not covered by standard medical plan benefit provisions. Members of the Fire Pension plan purchase medical insurance through the City's medical insurance program. Employees Covered by Benefit Terms: At December 31, 2020 (the census date), the benefit terms covered the following employees: Contributions:Funding for LEOFF retiree healthcare costs is provided entirely by the City as required by the RCW. The City's funding policy is based upon pay-as-you-go financing requirements for any requirements in excess of amounts previously set aside in the Fire Pension OPEB trust fund. Reporting period contributions: $ - Actuarial Assumptions: The total OPEB liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Discount Rate: 7.75% Investment Rate of Return: 7.75% Category Count Inactive employees, spouses, or beneficiaries currently receiving benefit payments: 5 Inactive employees entitled to but not yet receiving benefit payments: - Active employees - Total 5 Page 90 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Inflation: 2.50% Healthcare cost trend rates: 5.50% trending down to 3.94% over 53 years. Applies to calendar years. Salary Increases: n/a Mortality Rates were based on tables from the Society of Actuaries Projections of the sharing of benefit-related costs are based on an established pattern of practice. No experience reports were used. Inactive employees (retirees) pay 0% of the cost of benefits. There were no ad hoc postemployment benefit changes (including an hoc COLAs) to the plan. Discount Rate: The discount rate used to measure the total OPEB liability is 7.75%. The 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 plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. Sensitivity of Liabilities to Changes in the Discount Rate and Healthcare Cost Trend Rate: Sensitivity of the total and net OPEB liability to changes in the discount rate. The total and net OPEB liability of the City, as well as what the City's total and net OPEB liability would be if they were calculated using a discount rate that is one percentage point lower (6.75%) or one percentage point higher (8.75%) follows: Sensitivity of the net OPEB liability to changes in the healthcare cost trend rates. The healthcare trend for this valuation started at 5.50% and decreased to 3.94% over 53 years. The total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point lower (4.50%) or one percentage point higher (6.50%) than current healthcare cost trend rates follows: 1% Decrease Current Discount Rate 1% Increase 6.75% 7.75% 8.75% 1,200,407$ 1,137,445$ 1,080,291$ Net OPEB Liability (Asset) (2,431,735)$ (2,494,697)$ (255,851)$ Total OPEB Liability (Asset) 1% Decrease Current Discount Rate 1% Increase 4.50%5.50%6.50% 1,073,428$ 1,137,445$ 1,206,935$ Net OPEB Liability (Asset) (2,558,714)$ (2,494,697)$ (2,425,207)$ Total OPEB Liability (Asset) Page 91 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Changes in the Net OPEB Liability The changes in net OPEB liability for 2020 are presented in the following table. At December 31, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Total OPEB Plan Fiduciary Net Net OPEB Liability Position Liability Balances at January 1, 2020 1,199,983$ 3,470,641$ (2,270,658)$ Changes for the year: Service Cost - - - Interest 89,471 - 89,471 Differences between expected and actual experience (60,969) (60,969) Change in assumptions - - - Net investment income - 254,531 (254,531) Contributions - - - Benefit payments (91,040) (91,040) - Administrative expense - (1,990) 1,990 Other changes - - - Net changes (62,538) 161,501 (224,039) Balances at December 31, 2020 1,137,445$ 3,632,142$ (2,494,697)$ Changes in the Net OPEB Liability Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual experience -$ -$ Changes in Assumptions - - Net difference between projected and actual investment earnings on pension plan investments - (227,501) Contributions subsequent to the measurement date - - TOTAL -$ (227,501)$ Old Firemen's Plan Year Ended December 31 Amount 2021 (96,521) 2022 (35,095) 2023 (97,762) 2024 1,877 2025 - Remaining - Page 92 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 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. NOTE 15: 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 8, 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 grantors or representatives. 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. Asof December 31, 2020, there was onedamage claims and one potential lawsuits pending against the City. However, in our opinion, neither the potential liability from any single claim or lawsuit, nor the aggregate potential liability resulting from pending claims nor lawsuits, would affect materially, the financial condition of the City. NOTE 16: SUBSEQUENT EVENTS On March 2, 2020, the City passed Ordinance No. 4483 establishing Local Improvement District (LID) No. 151 to support the construction of a new sanitary sewer trunk line and other sewer improvements in the Broadmoor area located in the northwest section of the City. The estimated assessment against benefiting properties is $5,770,000. The total estimated cost of the improvements is $6,880,000. On December 7th, 2020, a contract for the construction of the sewer trunk line was awarded. The completion of the full project will require interim funding in the form of a bond anticipation note. The City anticipates the project will be complete and LID bonds issued in less than two years. With the availability of General Fund reserves, in conjunction with the underwriter’s recommendation, the note will be secured internally. This plan is mutually beneficial by the avoidance of higher issuance costs associated with an external financing, which is passed on to assessed properties, and affording the General Fund a higher interest rate than typically available to the City based on conservative investment protections. The interest rate of the interim financing will be 3.25%. Name of Investment Type Balance as of 12/31/20 Rating by Morningstar 2020 YTD Return Annualized Return Since 1/1/03 Washington Mutual Investers Fund-A Mutual Fund $3,629,976 Gold 7.43 %9.56% Page 93 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report NOTE 17: PRIOR PERIOD ADJUSTMENT The following table itemizes the prior period adjustments made in 2020, along with the purposes for the adjustments: Purpose for prior period adjustments: 1. An audit of prior years' projects discovered the source of funding was coded incorrectly. This entry decreases assets of the correct funding source and increase assets to correct effect of prior funding treatment. 2. Projects originally planned as capital in nature were determined to be maintenance projects. The value of these projects as of end of 2019 was $78,141 which was included in CWIP. It should have been a prior year expense. This adjustment decreased CWIP directly on the Statement of Net Position, see Note 5 for details. 3. Assets totaling $1,395,293 were recognized as CWIP in 2019 as governmental in nature, instead are utility assets. These were reported in CWIP in 2019. This adjustment was made directly to CWIP to decreasing the government wide net position and increased for business type. Purpose for Adjustment (Decrease) Increase Adjustment to Fund Balance / Net Position Governmental Funds: General Fund 1 (76,690)$ 335,384$ 258,694$ Construction Fund 1 (631,447) 192,256 (439,191) Other Governmental Funds: City Streets Fund 1 - 39,056 39,056 Arterial Streets Fund 1 (105,846) - (105,846) I-182 Traffic Impact Fund 1 - 191,547 191,547 Street Overlay Fund 1 - 33,630 33,630 MLK Comm Center Fund 1 (9,720) - (9,720) Park Development Fund 1 - 30,000 30,000 Capital Improvement REET Fund 1 (224,125) 113,946 (110,179) Economic Development Fund 1- 112,008 112,008 Total Other Governmental Funds (339,690) 520,187 180,496 Total Governmental Funds:(1,047,827) 1,047,827 (0) Business-Type Funds: Water/Sewer Utility Fund 2 (208,099) - (208,099) 3- 1,395,293 1,395,293 Total Business-Type Funds:(208,099) 1,395,293 1,187,194 Total prior period adjustments - all funds (1,255,926) 2,443,120 1,187,194 Government-wide Financial Statements: 2 (78,141) - (78,141) 3 (1,395,293) - (1,395,293) (1,473,434) - (1,473,434) 4 (3,336,973) 75,943 (3,261,030) 5- 557,884 557,884 (3,336,973) 633,827 (2,703,146) Total Government-wide Governmental Activities (4,810,407) 633,827 (4,176,580) Prior Period Adjustments Statement of Net Position Statement of Activities Page 94 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report 4. An adjustment miscalculation in the composition of the government-wide statement resulted in a presentation error which omitted a liability. No fund adjustments were necessary. 5. Incorrect implementation of GASB 84 in 2019 resulted in the Cemetery Perpetual Care Fund reported as a custodial fund instead of a governmental permanent fund. NOTE 18: COVID-19 Pandemic In February 2020, the Governor of the state of Washington declared a state of emergency in response to the spread of the deadly new virus known as COVID-19. In the months following the declaration, precautionary measures to slow the spread of the virus were ordered. These measures included closing schools, cancelling public events, limiting public and private gatherings, and restricting business operations, travel and non-essential activities. COVID-19 pandemic has impacted the City of Pasco’s finances through reduction in tourism related economic activity and revenue. However, the area has been insulated from severe economic factors due to reasonable cost of living, and well-paying and stable jobs. The area also has a diversified economy including but not limited to agriculture, wine, research, and Hanford cleanup activity. Due to these factors, the area has been able to attract other industrial businesses to further boost the local economy like Volm Companies and AutoZone in recent times. COVID-19 has been devastating to our residents, small businesses, and restaurant and hospitality industry. However, diversification of its economy and stable jobs have allowed the City to weather the crises while issuing single family home permits at a greater rate than in 2019. Visit Tri-Cities, area’s regional tourism and visitor’s association, anticipates tourism industry returning to normal operations by end of 2022. These factors are dependent on factors that the City cannot control, like vaccinations or new strains. City saw a sharp decline in tourism related revenue, however, robust increase in sales tax offset such reduction. While the City has seen its delinquency in accounts receivable increase over the past year, federal, state and local assistance is being made available to residents needing help to pay for their utilities. City anticipates some write-off, but the amount is expected to be immaterial in nature. Similarly, City does not anticipate any of its capital projects to be cancelled due to inability to continue to provide funding. City has ample reserves to continue with projects in progress. Due to the strong growth, need to maintain our service level and strong financial condition, City has continued to add more staff as planned. The City does not anticipate reduction in workforce in the near future. In conclusion, while COVID-19 pandemic has been unprecedented in nature and has impacted our City and its residents negatively, we do not at this time anticipate any substantial changes to revenues and expenditures in near future. The length of time these measures will continue to be in place, and the full extent of the financial impact on the city is unknown at this time. Page 95 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Old Fire OPEB Fund A schedule of contributions 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. The OPEB plan's fiduciary net position is projected to have sufficient funds to pay all projected benefit payment for current plan members. Therefore, there are no future projected contributions. 2017 2018 2019 2020 Total OPEB liability Service cost -$ -$ -$ -$ Interest 121,181 121,446 128,678 89,471 Changes of benefit terms - - - - Differences between expected and actual experience - 61,074 (295,126) (60,969) Changes of assumptions - - (250,033) - Benefit payments, including refunds of contributions (144,838) (90,659) (87,778) (91,040) Implicit Rate Subsidy Credit - - - - Net change in total OPEB liability (23,657) 91,861 (504,259) (62,538) Total OPEB liability - beginning 1,636,038 1,612,381 1,704,242 1,199,983 Total OPEB liability - ending 1,612,381 1,704,242 1,199,983 1,137,445 Plan fiduciary net position Net investment income 507,854 (84,994) 715,231 254,531 Contributions - employer - - - - Contributions - employee - - - - Benefit payments, including refunds of contributions (144,838) (90,659) (87,778) (91,040) Administrative expense (4,048) (2,542) (1,990) (1,990) Other - - - - Net change in plan fidiciary net position 358,968 (178,195) 625,463 161,501 Plan fiduciary net position - beginning 2,664,405 3,023,373 2,845,178 3,470,641 Plan fiduciary net position - ending 3,023,373 2,845,178 3,470,641 3,632,142 Net OPEB liability ending (1,410,992)$ (1,140,936)$ (2,270,659) (2,494,698) Plan fiduciary net position as a % of Total OPEB liability 187.5% 166.9% 289.2% 319.3% Covered-employee payroll N/A N/A N/A N/A Net OPEB liability as a % of covered-employee payroll N/A N/A N/A N/A Notes to Schedule: Schedule of Changes in Net OPEB Liability and Related Ratios *Until a full 10-year trend is compiled, only information for those years available is presented. The City adopted GASB 75 for the fiscal year ending December 31, 2017. Last 10 Fiscal Years* For the year ended December 31, 2020 Old Fire OPEB 2017 2018 2019 2020 Annual money-weighted rate of return, net of investment expense 19.61% -2.86% 25.54% 7.43% Notes to Schedule: *Until a full 10-year trend is compiled, only information for those years available is presented. Schedule of Investment Returns Old Fire OPEB For the year ended December 31, 2020 Last 10 Fiscal Years* Page 96 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report LEOFF 1 OPEB Fund The Schedule of Investment Returns was not included for this plan because there are no fund assets to invest. 2017 2018 2019 2020 547,515$ 609,121$ 633,129$ 526,399$ 547,515 609,121 633,129 526,399 -$ -$ -$ -$ 152,318$ 158,030$ 168,152$ 174,458$ 359% 385% 377% 302% Entry Age Not Applicable December 31, 2020 2.00% 6.00% *Until a full 10 year trend is compiled, only information for those years avialable is presented. The City adopted GASB 75 for the fiscal year ending December 31, 2017. Actuarial Cost Method Asset Valuation Method Measurement Date Discount Rate Heathlcare Cost Trend Schedule of City Contributions LEOFF 1 OPEB For the year ended December 31, 2020 Last 10 Fiscal Years* Actuarially Determined Contribution Contribution in relation to the actuarially determined contribution Contribution deficiency (excess) Covered Payroll Contribution as a % of Covered Payroll Notes to Schedule 2017 2018 2019 2020 Total OPEB liability Service cost 89,165$ 95,746$ 99,097$ 61,124$ Interest 556,341 557,569 560,203 330,804 Changes of benefit terms - - - - Differences between expected and actual experience - - (2,410,901) (84,229) Changes of assumptions - - (1,607,238) 956,821 Benefit payments (545,401) (609,121) (633,129) (526,399) Implicit Rate Subsidy Credit - - - Net change in total OPEB liability 100,105 44,194 (3,991,968) 738,121 Total OPEB liability - beginning 16,078,996 16,179,101 16,223,295 12,231,327 Total OPEB liability - ending 16,179,101 16,223,295 12,231,327 12,969,448 Covered-employee payroll** 152,318$ 158,030$ 168,152$ 174,458$ Total OPEB liability as a % of covered-employee pay 10621.9% 10266.0% 7274.0% 7434.1% Notes to Schedule: Schedule of Changes in Total OPEB Liability and Related Ratios LEOFF 1 OPEB For the year ended December 31, 2020 Last 10 Fiscal Years* *Until a full 10-year trend is compiled, only information for those years available is presented. The City adopted GASB 75 for the fiscal year ending December 31, 2017. Page 97 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report Old Fire Pension Fund Fire Pension Fund - For Years Ended: Total Pension Liability 2015 2016 2017 2018 2019 2020 Service Cost -$ -$ -$ -$ - - Interest 82,477 79,996 77,207 87,555 75,910 85,837 Changes of benefit terms - - - - - Differences between expected and actual experience - - 79,758 (2,791) 189,364 (21,644) Changes of assumptions - - 9,808 - (2,010) - Benefit payments, including refunds of employee contributions (116,770) (118,053) (120,503) (128,399) (131,781) (111,111) Net change in total pension liability (34,293) (38,057) 46,270 (43,635) 131,483 (46,918) Total pension liability - beginning 1,220,026 1,185,733 1,147,676 1,193,946 1,150,311 1,281,794 Total pension liability - ending 1,185,733$ 1,147,676$ 1,193,946$ 1,150,311$ 1,281,794$ 1,234,876$ Plan Fiduciary Net Position Net investment income (19,689)$ 267,948$ 384,118$ (139,435)$ 515,983$ 364,053$ Contributions- employer 54,506 58,193 63,503 73,414 81,458 89,252 Contributions - employee - - - - - - Benefit payments, including refunds of employee contributions (116,770) (118,053) (120,503) (128,399) (131,781) (111,111) Administrative expense (3,398) (7,914) (5,870) (4,923) (1,689) (2,098) Net change in plan fiduciary net position (85,351) 200,174 321,248 (199,343) 463,971 340,096 Plan fiduciary net position- beginning 2,326,321 2,240,970 2,441,145 2,762,393 2,563,050 3,027,021 Plan fiduciary net position-ending 2,240,970$ 2,441,144$ 2,762,393$ 2,563,050$ 3,027,021$ 3,367,117$ Net Pension Liability City's net pension liability - Ending (1,055,237)$ (1,293,468)$ (1,568,446)$ (1,412,739)$ (1,745,227)$ (2,132,241)$ Plan fiduciary net position as a percentage of the total pension liability 189.0% 212.7% 231.4% 222.8% 236.2% 272.7% Covered employee payroll - - - - - - City's net pension liability as a percentage of covered employee payroll n/a n/a n/a n/a n/a n/a Notes to schedule: The City adopted GASB 68 for the fiscal year ending December 31, 2015. Schedule of Changes in the City's Total Pension Liability and Related Ratios 2015 2016 2017 2018 2019 2020 Actuarially Determined Contribution (ADC)54,506$ 58,193$ 63,503$ 73,414$ 81,458$ 89,252$ Less Contributions Made (54,506) (58,193) (63,503) (73,414) (81,458) (89,252) Contribution Deficiency (excess)- - - - - - Covered-Employee Payroll -$ -$ -$ -$ -$ -$ Contributions as a percentage of covered employee payroll 0% 0% 0%0% 0% 0% Notes to Schedule: Actuarial Cost Method: Entry-age normal, level percent of pay Amortization Method: Closed period, level percent of pay Amortization Period: 20 years Inflation: 2.5% Assumed Payroll Growth: 3% Rate of Returen on Assets: 7% Mortality Rate: CalPERS Rates Retirement Rates: CalPERS Rates This schedule will be built prospectively until it contains 10 years of data Contributions came from State Fire Insurance Premiums Fire Pension Fund Schedule of Contributions 2015 2016 2017 2018 2019 2020 Annual Money Weighted Rate of Return, Net of Investment Expense -0.86% 12.14% 15.94% -5.10% 20.34% 12.07% Schedule of Investment Returns - Fire Pension Plan Page 98 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report State Plans *GASB 68 requires a disclosure of the changes in Net Pension Liability for the last 10 fiscal years, or as years are available. These schedules will be built prospectively until they contain ten years of data. PERS PLAN 1 2014 2015 2016 2017 2018 2019 2020 Employer's percentage of the net pension liability 0.097647% 0.102321% 0.098322% 0.099661% 0.093918% 0.091766% 0.086902% Employer's proportionate share of the collective net pension liability 4,919,014$ 5,352,340$ 5,280,355$ 4,728,992$ 4,194,410$ 3,528,728$ 3,068,110$ Covered payroll 10,817,340 11,375,820 11,376,115 12,505,985 13,010,425 13,173,229 13,190,638 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll 45.47% 47.05% 46.42% 37.81% 32.24% 26.79% 23.26% Plan fiduciary net position as a percentage of the total pension liability 61.19% 59.10% 57.03% 61.24% 63.22% 67.12%68.64% PERS PLAN 2/3 Employer's percentage of the net pension liability 0.114462% 0.125949% 0.122675% 0.126788% 0.120274% 0.118486%0.113176% Employer's proportionate share of the collective net pension liability 2,313,690 4,500,230 6,176,589 4,405,277 2,053,572 1,150,902 1,447,457 Covered payroll 10,474,619 11,212,390 11,878,130 12,471,204 13,008,696 13,173,229 13,190,638 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll 22.09% 40.14% 52.00% 35.32% 15.79% 8.74% 10.97% Plan fiduciary net position as a percentage of the total pension liability 93.29% 89.20% 85.82% 90.97% 95.77% 97.77%97.22% LEOFF 1 Employer's percentage of the net pension asset 0.067804% 0.067488% 0.066826% 0.066934% 0.067877% 0.069031%0.069045% Employer's proportionate share of the collective net pension asset (822,321) (813,380) (688,499) (1,015,536) (1,232,308) (1,364,474) (1,303,921) Covered payroll 219,984 207,267 226,769 197,219 162,162 163,046 182,264 Employer's proportionate share of the net pension asset as a percentage of covered employee payroll -373.81% -392.43% -303.61% -514.93% -759.92% -836.86% -715.40% Plan fiduciary net position as a percentage of the total pension liability 126.91% 127.36% 123.74% 135.96% 144.42% 148.78%146.88% LEOFF 2 Employer's percentage of the net pension asset 0.365709% 0.405844% 0.400187% 0.427714% 0.469232% 0.492544%0.468151% Employer's proportionate share of the collective net pension asset (4,853,116) (4,171,265) (2,327,608) (5,935,285) (9,526,433) (11,410,732) (9,549,597) Covered payroll 10,497,629$ 12,154,638$ 12,622,501$ 14,338,666$ 17,145,685$ 17,210,964$ 17,596,649$ Employer's proportionate share of the net pension asset as a percentage of covered employee payroll -46.23% -34.32% -18.44% -41.39% -55.56% -66.30% -54.27% Plan fiduciary net position as a percentage of the total pension liability 116.75% 111.67% 106.04% 113.36% 118.50% 119.43% 115.83% Schedule of Proportionate Share of the Net Pension Liability/(Asset) As of June 30 Last 10 Fiscal Years* Page 99 CCity of Pasco, Washington 2020 Comprehensive Annual Financial Report *GASB 68 requires a disclosure of the changes in Net Pension Liability for the last 10 fiscal years, or as years are available. These schedules will be built prospectively until they contain ten years of data. PERS PLAN 1 2014 2015 2016 2017 2018 2019 2020 Statutorily or contractually required contributions 31,484$ 16,252$ 500,426$ 614,166$ 658,434$ 651,374$ 665,510$ Contributions in relation to the statutorily or contractually required contributions (31,484) (16,252) (500,426) (614,166) (658,434) (651,374) (665,510) Contribution deficiency (excess)- - - - - - - Covered payroll 10,817,340 11,375,820 11,376,115 12,505,985 13,010,425 12,738,991 13,572,180 Contributions as a percentage of covered payroll 0.29%0.14%4.40%4.91%5.06%5.11%4.90% PERS PLAN 2/3 Statutorily or contractually required contributions 964,775 1,140,430 649,813 850,217 999,063 1,016,896 1,099,234 Contributions in relation to the statutorily or contractually required contributions (964,775) (1,140,430) (649,813) (850,217) (999,063) (1,016,896) (1,099,234) Contribution deficiency (excess)- - - - - - - Covered payroll 10,474,619 11,212,390 11,877,299 12,471,204 13,008,696 13,173,229 13,572,180 Contributions as a percentage of covered payroll 9.21% 10.17% 5.47% 6.82% 7.68% 7.72% 8.10% LEOFF 2 Statutorily or contractually required contributions 549,396 635,688 660,156 763,912 937,526 909,786 965,108 Contributions in relation to the statutorily or contractually required contributions (549,396) (635,688) (660,156) (763,912) (937,526) (909,786) (965,108) Contribution deficiency (excess)- - - - - - - Covered payroll 10,497,629$ 12,154,638$ 12,622,501$ 14,338,666$ 17,145,685$ 17,210,964$ 17,895,833$ Contributions as a percentage of covered payroll 5.23% 5.23% 5.23%5.33% 5.47% 5.29% 5.39% Schedue of Employer Contributions As of December 31 Last 10 Fiscal Years* Page 100 From Pass-Through AwardsFrom Direct Awards TotalASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OFCommunity Development Block Grants/Entitlement Grants14.218 B-16-MC-53-009-CDBG-25,74625,746- 1 & 3ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OFCommunity Development Block Grants/Entitlement Grants14.218 B-17-MC-53-009-CDBG-25,67625,676- 1 & 3ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OFCommunity Development Block Grants/Entitlement Grants14.218 B-18-MC-53-009-CDBG-25,74525,745- 1 & 3ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OFCommunity Development Block Grants/Entitlement Grants14.218 B-19-MC-53-009-CDBG-6,2686,268- 1 & 3ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OFCommunity Development Block Grants/Entitlement Grants14.218 B-20-MC-53-009-CDBG- 319,892 319,89251,154 1 & 3ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OFCOVID 19 - Community Development Block Grants/Entitlement Grants14.218B-20-MC-53-009-CDBG-223,071 223,071- 1 & 3- 626,398 626,39851,154ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF (via City of Richland)Home Investment Partnerships Program14.239 Home Program 33,688 - 33,688 - 1 & 3City of PascoSchedule of Expenditures of Federal AwardsFor the Year Ended December 31, 2020Federal Agency (Pass-Through Agency)Federal ProgramCFDA NumberOther Award NumberExpendituresPassed through to Subrecipients NoteCDBG - Entitlement Grants ClusterTotal CDBG - Entitlement Grants Cluster: The accompanying notes are an integral part of this schedule.Page 101 NATIONAL PARK SERVICE, INTERIOR, DEPARTMENT OF THE (via WA Department of Archaeology & Historic Preservation)Historic Preservation Fund Grants-In-Aid15.904 P18AP00010-00024,000-4,000- 1OJP BUREAU OF JUSTICE ASSISTANCE, JUSTICE, DEPARTMENT OFCOVID 19 - Coronavirus Emergency Supplemental Funding Program16.034 2020-VD-BX-0545-13,01213,012- 1OFFICE ON VIOLENCE AGAINST WOMEN (OVW), JUSTICE, DEPARTMENT OF (via WA Department of Commerce)Violence Against Women Formula Grants16.588 F19-31103-02334,698-34,698- 1OFFICE OF JUSTICE PROGRAMS, JUSTICE, DEPARTMENT OFBulletproof Vest Partnership Program16.607 2018 Bullet Proof Vest-8888 -1OFFICE OF JUSTICE PROGRAMS, JUSTICE, DEPARTMENT OFBulletproof Vest Partnership Program16.607 2019 Bullet Proof Vest-17,58617,586- 1-17,67417,674-COMMUNITY ORIENTED POLICING SERVICE, JUSTICE, DEPARTMENT OFPublic Safety Partnership and Community Policing Grants16.710 2017UMWX0103- 173,601 173,601- 1OFFICE OF JUSTICE PROGRAMS, JUSTICE, DEPARTMENT OFBody Worn Camera Policy and Implementation16.835 2018-BC-BX-0010-36,33236,332- 1FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA State Department of Transportion)Highway Planning and Construction20.205 STPUL 3515 (009) LA 962622,309 - 22,309 - 1 & 2FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA State Department of Transportion)Highway Planning and Construction20.205 STPUL 3515 (010) LA 964846,923 - 46,923 - 1 & 2FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA State Department of Transportion)Highway Planning and Construction20.205 STPUL 3552 (001) LA 960134,180 - 34,180 - 1 & 2Total CFDA 16.607:Highway Planning and Construction Cluster The accompanying notes are an integral part of this schedule.Page 102 FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA State Department of Transportion)Highway Planning and Construction20.205 STPUL-9911 (011)1,079 - 1,079 - 1 & 2FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA State Department of Transportion)Highway Planning and Construction20.205 STPUL 9911 (011) LA 983170,942-70,942- 1 & 2FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA State Department of Transportion)Highway Planning and Construction20.205 STPUS HLP 3530 (006) LA 7055652-652- 1 & 2FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA State Department of Transportion)Highway Planning and Construction20.205 STPUL 9911 (012) LA 9853617-617- 1 & 2176,702- 176,702-NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA Association of Sheriff & Police Commission)State and Community Highway Safety20.600 2020-HVE-3774-Washington Traffic Safety7,752-7,752- 1 & 2NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA Association of Sheriff & Police Commission)State and Community Highway Safety20.600 2021-HVE-4055-Region 14 Target Zero Task Force3,878-3,878- 1 & 211,630-11,630-NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WA Traffic Safety Commission)National Priority Safety Programs20.616 2021-AG-4151 1,106 - 1,106 - 1 & 212,736 - 12,736-DEPARTMENTAL OFFICES, TREASURY, DEPARTMENT OF THE (via WA Department of Commerce)COVID 19 - Coronavirus Relief Fund21.019 20-6514C-283 3,388,050 - 3,388,050 - 1DEPARTMENTAL OFFICES, TREASURY, DEPARTMENT OF THE (via Benton-Franklin Health District)COVID 19 - Coronavirus Relief Fund21.019 CBC West Testing Site1,060,649 - 1,060,649 - 1Total Highway Planning and Construction Cluster:Highway Safety ClusterTotal CFDA 20.600:Total Highway Safety Cluster: The accompanying notes are an integral part of this schedule.Page 103 DEPARTMENTAL OFFICES, TREASURY, DEPARTMENT OF THE (via WA State Office of Public Defense)COVID 19 - Coronavirus Relief Fund21.019 GRT2100122,000-22,000- 14,470,699- 4,470,699-ADMINISTRATION FOR COMMUNITY LIVING (ACL), HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via Yakima County, Office of Aging & Long Term Care)Special Programs for the Aging, Title III, Part B, Grants for Supportive Services and Senior Centers93.044 ALTCCOG 2019-744,011-4,011- 14,011-4,011-HEALTH RESOURCES AND SERVICES ADMINISTRATION, HEALTH AND HUMAN SERVICES, DEPARTMENT OFCOVID 19 - Provider Relief Fund93.498 HHS-58158577609-40,23640,236- 1FEDERAL EMERGENCY MANAGEMENT AGENCY, HOMELAND SECURITY, DEPARTMENT OFAssistance to Firefighters Grant97.044 EMW-2018-FP-00304-11,25111,251- 1FEDERAL EMERGENCY MANAGEMENT AGENCY, HOMELAND SECURITY, DEPARTMENT OF (via Franklin County Emergency Management)Homeland Security Grant Program97.067 E18-146, FFY 201715,900 - 15,900 - 1FEDERAL EMERGENCY MANAGEMENT AGENCY, HOMELAND SECURITY, DEPARTMENT OF (via Franklin County Emergency Management)Staffing for Adequate Fire and Emergency Response (SAFER)97.083 EMW-2016-FH-00428200,221- 200,221- 14,952,655 918,504 5,871,15951,154Total Aging Cluster:Total Federal Awards Expended:Total CFDA 21.019:Aging Cluster The accompanying notes are an integral part of this schedule.Page 104 City of Pasco Notes to the Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2020 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. 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 the 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 2 – Federal De Minimis Indirect Cost Rate The city has elected to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. NOTE 3 – Revolving loan – Program income 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 amount of loan funds disbursed to program participants for the year was $0. The amount of principal and interest in loan repayments received for the year was $9,186. 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. The amount of loan funds disbursed to program participants for the year was $30,000 and is presented in this schedule. The amount of principal and interest in loan repayments received for the year was $121,943. Page 105 Office of the Washington State Auditor sao.wa.gov ABOUT THE STATE A UDITOR’S OFFICE The State Auditor’s Office is established in the Washington State Constitution and is part of the executive branch of state government. The State Auditor is elected by the people of Washington and serves four-year terms. We work with state agencies, local governments and the public to achieve our vision of increasing trust in government by helping governments work better and deliver higher value. In fulfilling our mission to provide citizens with independent and transparent examinations of how state and local governments use public funds, we hold ourselves to those same standards by continually improving our audit quality and operational efficiency, and by developing highly engaged and committed employees. As an agency, the State Auditor’s Office has the independence necessary to objectively perform audits, attestation engagements and investigations. Our work is designed to comply with professional standards as well as to satisfy the requirements of federal, state and local laws. The Office also has an extensive quality control program and undergoes regular external peer review to ensure our work meets the highest possible standards of accuracy, objectivity and clarity. Our audits look at financial information and compliance with federal, state and local laws for all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits and cybersecurity audits of state agencies and local governments, as well as state whistleblower, fraud and citizen hotline investigations. The results of our work are available to everyone through the more than 2,000 reports we publish each year on our website, www.sao.wa.gov. Additionally, we share regular news and other information via an email subscription service and social media channels. We take our role as partners in accountability seriously. The Office provides training and technical assistance to governments both directly and through partnerships with other governmental support organizations. Stay connected at sao.wa.gov Find your audit team Request public records Search BARS manuals (GAAP and cash), and find reporting templates Learn about our training workshops and on-demand videos Discover which governments serve you — enter an address on our map Explore public financial data with the Financial Intelligence Tool Other ways to stay in touch Main telephone: (564) 999-0950 Toll-free Citizen Hotline: (866) 902-3900 Email: webmaster@sao.wa.gov Page 106