HomeMy WebLinkAboutR-2007-048 Purchase of Limited Tax General Obligation & Refunding BondsRESOLUTION NO. R-2007- 48
A RESOLUTION of the City Council of the City of Yakima,
Washington, authorizing the execution and delivery of a
contract for purchase of the City's Limited Tax General
Obligation and Refunding Bonds, 2007 in the principal
amount of $8,980,000, fixing certain terms of the bonds
and approving the form of the official statement.
WHEREAS, the City of Yakima, Washington (the "City"), by Ordinance No. 2007-09
passed on March 20, 2007 (the "Bond Ordinance"), authorized the issuance of limited tax
general obligation and refunding bonds of the City in the aggregate principal amount of not to
exceed $9,500,000 (the "Bonds") to refund certain outstanding Limited Tax General Obligation
Bonds, 2002 (the "2002 Bonds"), to provide funds to remodel a fire station, to renovate
downtown, including sidewalks, streetlamps, curbs, gutters and other improvements, and to
finance the widening of River Road (collectively, the "Projects"); and
WHEREAS, Seattle -Northwest Securities Corporation (the "Purchaser") has made an
offer to purchase the Bonds dated April 17, 2007 (the "Bond Purchase Agreement"), a copy of
which has been presented at this meeting and is on file with the City Clerk, and it is in the best
interest of the City that the Bonds be sold on the terms set forth in such Bond Purchase
Agreement and as provided in the Bond Ordinance and this resolution; and
WHEREAS, the Bond Ordinance provides that the City shall approve the interest rates,
maturity amounts, redemption provisions, and certain other terms of such Bonds, by resolution;
NOW, THEREFORE, the City of Yakima does resolve:
Section 1. Definitions. Capitalized teems used herein and not otherwise defined shall
have the same meanings, respectively, in this resolution as such terms are given in Section 1 of
the Bond Ordinance.
Section 2. Acceptance of Offer. The City Council hereby finds that the Bond
Purchase Agreement is fair and reasonable and in the best interest of the City and that the Bonds
shall be sold to the Purchaser upon the terms and conditions set forth in the Bond Purchase
Agreement and upon the basis of the representations therein set forth. The City Council further
finds that all conditions precedent to or concurrent with the acceptance of the Bond Purchase
Agreement by the City Council have been met.
The City Council hereby accepts the Bond Purchase Agreement and authorizes and
directs the Director of Finance and Budget to execute the Bond Purchase Agreement and deliver
it to the Purchaser.
The Bonds shall be issued and delivered to the Purchaser upon payment of the purchase
price specified in the Bond Purchase Agreement, plus accrued interest from their date to the date
of their delivery.
Section 3 Terms, Schedule of Maturities and Interest Rates. The Bonds shall be in
the principal amount of $8,980,000 and designated the "City of Yakima Limited Tax General
Obligation and Refunding Bonds, 2007." The Bonds shall be dated as of May 8, 2007, shall be
fully registered as to both principal and interest, shall be in the denomination of $5,000 each or
any integral multiple thereof, provided that no Bond shall represent more than one maturity, shall
be numbered separately in such manner and with any additional designation as the Bond
Registrar deems necessary for purposes of identification and control.
The Bonds shall bear interest payable on November 1, 2007 and semiannual thereafter on
the first days of May and November and shall mature on May 1 of the following years in the
following amounts and shall bear interest as follows:
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Maturity Date
(May 1)
Principal Amount Interest Rate
2008 $ 270,000 4.00%
2009 275,000 4.00
2010 290,000 4.00
2011 305,000 4.00
2012 315,000 4.00
2013 580,000 4.00
2014 595,000 4.00
2015 630,000 5.00
2016 655,000 5.00
2017 700,000 5.00
2018 495,000 4.00
2019 520,000 4.00
2020 535,000 4.00
2021 560,000 4.00
2022 580,000 4.05
2023 395,000 4.10
2024 405,000 4.10
2025 430,000 4.125
2026 445,000 4.15
Section 4. Optional Redemption. The City hereby reserves the right to redeem the
outstanding Bonds maturing on and after May 1, 2018, in whole or in part (maturities to be
selected by the City and randomly within a maturity in such manner as DTC or the Bond
Registrar, as appropriate, shall determine) on May 1, 2017, and on any date thereafter, at par,
plus accrued interest to the date of redemption.
Section 5. Execution and Delivery of the Bonds. The proper officers of the City
Council and the Director of Finance and Budget of the City are hereby authorized and directed to
do all things necessary or proper for the printing, execution and delivery of the Bonds to the
Purchaser in accordance with the terms of the Bond Purchase Agreement and the Bond
Ordinance, as well as this resolution, and for the proper application and use of the proceeds of
such sale.
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Section 6. Official Statement. The City approves the preliminary official statement,
dated April 9, 2007, presented to the City Council and ratifies the Underwriter's distribution of
the preliminary official statement in connection with the offering of the Bonds. Pursuant to the
Rule, the City deems the preliminary official statement as final as of its date except for the
omission of information dependent upon the pricing of the Bonds and the completion of the
Bond Purchase Agreement. The City agrees to cooperate with the Underwriter to deliver or
cause to be delivered, within seven business days from the date of the sale of the Bonds and in
sufficient time to accompany any confirmation that requests payment from any customer of the
Underwriter, copies of a final official statement in sufficient quantity to comply with
paragraph (b)(4) of the Rule and the rules of the MSRB. The City authorizes the Underwriter to
use the official statement, substantially in the form of the preliminary official statement, in
connection with the sale of the Bonds. The City Manager and the Director of Finance and
Budget are hereby authorized to review and approve on behalf of the City the final Official
Statement relative to the Bonds with such additions and changes as may be deemed necessary or
advisable to them.
Section 7. Disposition of Bond Proceeds; Refunding Plan.
(a) Refunding Plan. For the purpose of realizing a debt service savings, the City
Council proposes to apply the proceeds of the Bonds for the purpose of providing for the
payment of the principal of and interest on all of the outstanding $4,745,000 of the 2002 Bonds
maturing in the years 2013 through 2026 (the "Refunded Bonds"). The Refunded Bonds shall be
called for redemption at a price of 100% on June 1, 2012.
(b) Refunding Account. There is hereby authorized to be created in the Debt Service
Fund an account known as the "Refunding Account," which account is to be drawn upon for the
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sole purpose of paying the principal of and interest on the Refunded Bonds until their respective
dates of redemption and of paying costs related to the refunding of the Refunded Bonds.
The proceeds of sale of the Bonds shall be credited to the Refunding Account. Money in
the Refunding Account shall be used immediately upon receipt to defease the Refunded Bonds as
authorized by the Ordinance and to pay costs of issuance. The City shall defease the Refunded
Bonds and discharge such obligations by the use of money in the Refunding Account to purchase
certain Government Obligations (which obligations so purchased are herein called "Acquired
Obligations"), bearing such interest and maturing as to principal and interest in such amounts
and at such times which, together with any necessary beginning cash balance, will provide for
the payment of:
(1) interest on the Refunded Bonds due and payable through and including
June 1, 2012; and
(2) the redemption price of the Refunded Bonds (100% of the principal
amount thereof) on June 1, 2012.
Such Acquired Obligations shall be purchased for the Refunded Bonds at a yield not
greater than the yield permitted by the Code and regulations relating to acquired obligations in
connection with refunding bond issues.
(c) Escrow Agent/Escrow Agreements To carry out the refunding and defeasance of
the Refunded Bonds, the Director of Finance and Budget is hereby authorized to appoint as
escrow agent a bank or trust company qualified by law to perform the duties described herein
(the "Escrow Agent"). A beginning cash balance, if any, and Acquired Obligations shall be
deposited irrevocably with the Escrow Agent on the date of issuance of the Bonds in an amount
sufficient to defease the Refunded Bonds. The proceeds of the Bonds remaining in the
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Refunding Account after acquisition of the Acquired Obligations and provision for the necessary
beginning cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the
Acquired Obligations and expenses of the issuance of the Bonds.
In order to carry out the purposes of this section, the Director of Finance and Budget is
authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit
Agreement for the Bonds.
(d) Implementation of Refunding Plan. The City will irrevocably set aside sufficient
funds out of the purchase of Acquired Obligations from proceeds of the Bonds to make the
payments described in subsections (a) and (b) of this section.
The City hereby irrevocably calls the Refunded Bonds for redemption on June 1, 2012 in
accordance with the provisions of Ordinance No. 2002-22, as amended by Ordinance
No. 2002-27, authorizing the redemption and retirement of the Refunded Bonds prior to their
fixed maturities. Said defeasance and call for redemption of the Refunded Bonds shall be
irrevocable after the final establishment of the applicable escrow account and delivery of the
applicable Acquired Obligations to the Escrow Agent. The Escrow Agent is hereby authorized
and directed to provide for the giving of notice of the redemption of the Refunded Bonds in
accordance with the applicable provisions of Ordinance Nos. 2002-22 and 2002-27.
Section 8. Insurance.
(a) Acceptance of Insurance. In accordance with the offer of the Purchaser to
purchase the Bonds, the Council hereby approves the commitment of XL Capital Assurance Inc.
(the "Insurer") to provide a bond insurance policy guaranteeing the payment when due of
principal of and interest on the Bonds (the "Bond Insurance Policy"). The Council further
authorizes and directs all proper officers, agents, attorneys and employees of the City to
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cooperate with the Insurer in preparing such additional agreements, certificates, and other
documentation on behalf of the City as shall be necessary or advisable in providing for the Bond
Insurance Policy.
(b) Payments Under the Bond Insurance Policy. As long as the Bond Insurance
Policy is in full force and effect, the City and the Bond Registrar shall comply with the following
provisions:
(1) If, on the third Business Day prior to the related scheduled interest
payment date or principal payment date ("Payment Date"), there is not on deposit with the Bond
Registrar money sufficient to pay the principal of, and interest on, the Bonds due on such
Payment Date, the City or the Bond Registrar shall give notice to the Insurer and to its
designated agent (if any) (the "Insurer's Fiscal Agent"), by telephone or telecopy, of the amount
of such deficiency by 10:00 a.m., New York City time, on such Business Day. If, on the
Business Day prior to the related Payment Date, there is not on deposit with the Bond Registrar
money sufficient to pay the principal of, and interest on, the Bonds due on such Payment Date,
the Bond Registrar shall make a claim under the Bond Insurance Policy and give notice to the
Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of any deficiency in
the amount available to pay principal and interest, and the allocation of such deficiency between
the amount required to pay interest on the Bonds and the amount required to pay principal of the
Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 10:00 a.m., New
York City time, on such Business Day, by delivering the Notice of Nonpayment and Certificate.
For the purposes of the preceding paragraph, "Notice" means telephonic or telecopied
notice, subsequently confirmed in a signed writing, or written notice by registered or certified
mail, from the City or Bond Registrar to the Insurer, which notice shall specify (a) the name of
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the entity making the claim, (b) the policy number, (c) the claimed amount and (d) the date such
claimed amount will become Due for Payment. "Nonpayment" means the failure of the City to
have provided sufficient funds to the Bond Registrar for payment in full of all principal of, and
interest on, the Bonds that are Due for Payment. "Due for Payment," when referring to the
principal of insured bonds, means when the stated maturity date or mandatory redemption date
for the application of a required sinking fund installment has been reached and does not refer to
any earlier date on which payment is due by reason of call for redemption (other than by
application of required sinking fund installments or other advancement of maturity, unless the
Insurer shall elect, in its sole discretion, to pay such principal); and when referring to interest on
Bonds, means when the stated date for payment of interest has been reached. "Certificate"
means a certificate in form and substance satisfactory to the Insurer as to the Bond Registrar's
right to receive payment under the Bond Insurance Policy.
(2) The Bond Registrar shall designate any portion of payment of principal on
Bonds paid by the Insurer at maturity on its books as a reduction in the principal amount of
Bonds registered to the then current Registered Owner, whether DTC or its nominee or
otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of the
Insurer, as the case may be, in a principal amount equal to the amount of principal so paid
(without regard to authorized denominations); provided, however, that the Bond Registrar's
failure to so designate any payment or issue any replacement Bond shall have no effect on the
amount of principal or interest payable by the City on any Bond or the subrogation rights of the
Insurer.
(3) The Bond Registrar shall keep a complete and accurate record of all funds
deposited by the Insurer into the Policy Payments Account (as hereinafter defined) and the
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allocation of such funds to payment of interest on and principal paid with respect to any Bond.
The Insurer shall have the right to inspect such records at reasonable times upon reasonable
notice to the Bond Registrar.
(4) Upon payment of a claim under the Bond Insurance Policy, the Bond
Registrar shall establish a separate special purpose trust account for the benefit of owners of
Bonds referred to herein as the "Policy Payments Account" and over which the Bond Registrar
shall have exclusive control and sole right of withdrawal. The Bond Registrar shall receive any
amount paid under the Bond Insurance Policy in trust on behalf of owners of Bonds and shall
deposit any such amount in the Policy Payments Account and distribute such amount only for
purposes of making the payments for which a claim was made. Such amounts shall be disbursed
by the Bond Registrar to owners of Bonds in the same manner as principal and interest payments
are to be made with respect to the Bonds under Section 3 hereof It shall not be necessary for
such payments to be made by checks or wire transfers separate from the check or wire transfer
used to pay debt service with other funds available to make such payments. Funds held in the
Policy Payments Account shall not be invested by the Bond Registrar and may not be applied to
satisfy any costs, expenses or liabilities of the Bond Registrar. Any funds remaining in the
Policy Payments Account following an insured Bond payment date shall promptly be remitted to
the Insurer.
(c) Provisions Relating to Bond Insurance Policy. As long as the Bond Insurance
Policy is in full force and effect, the City shall comply with the following provisions:
(1) Notice to the Insurer. Any notices required to be given by the City shall
also be given to the Insurer, Attn: Surveillance.
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(2) Amendments. Prior written consent of the Insurer is required for any
amendment to this resolution. The City shall give the Insurer notice of any such proposed
amendment. A copy of any amendment to this resolution that is consented to by the Insurer shall
be sent to Standard & Poor's Rating Services, a Division of The McGraw-Hill Companies, Inc.
(3)
Remedies. The Insurer shall be entitled to control and direct the
enforcement of all rights and remedies granted to owners of the Bonds. The Insurer shall be
recognized as the owner of each Bond for the purposes of exercising all rights and privileges
available to owners of the Bonds. The Insurer shall have the right to institute any suit, action, or
proceeding at law or in equity under the same terms as an owner of the Bonds.
(4) The Insurer as Third Party Beneficiary. The Insurer shall be a third -party
beneficiary under this resolution.
(5) Subrogation. If principal and/or interest due on the Bonds is paid by the
Insurer, such Bonds shall remain outstanding under this resolution for all purposes, and shall not
be deemed defeased or otherwise satisfied, or paid by the City, and the pledge of taxes and all
covenants, agreements and other obligations of the City to the owners of the Bonds shall
continue to exist and shall run to the benefit of the Insurer, and the Insurer shall be subrogated to
the rights of such owners.
Section 9. Ratification of Past Acts. All actions and proceedings heretofore taken by
the officers, agents, attorneys and employees of the City in connection with the issuance and sale
of the Bonds are hereby ratified, approved and confirmed.
Section 10. Effective Date. This resolution shall take effect immediately.
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ADOPTED at a regular meeting of the City Council of the City of Yakima this 17th day
of April, 2007.
ATTEST:
Deborah Moore, City Clerk
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CITY OF YAKIMA, WASHINGTON
By
David Edler, Mayor
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APPENDIX A
BOND PURCHASE AGREEMENT
PAWN \NMN2WE04/12/0703/29/07
SEATTLE -NORTHWEST
SECURITIES CORPORATION
April 17, 2007
Honorable Mayor and City Council
City of Yakima
129 North Second Street
Yakima, Washington 98901
Re: City of Yakima, Washington
$8,980,000 Limited Tax General Obligation and Refunding Bonds, 2007
Honorable Mayor and City Council:
Seattle -Northwest Securities Corporation (the "Underwriter") offers to enter into this purchase
agreement (the "Purchase Agreement") with the City of Yakima, Washington (the "Issuer"),
(each of the Underwriter and the Issuer may be referred to herein as a "Party" or collectively as
the "Parties").
This offer is contingent upon acceptance by the Issuer by execution and delivery of this Purchase
Agreement to the Underwriter at or prior to 11:59 p.m. Pacific Time on the date hereof, by
means of hand delivery, facsimile or other secure electronic transmission, such as a PDF file.
Upon execution of this Purchase Agreement by the Parties, this Purchase Agreement will
constitute a binding agreement between the Issuer and the Underwriter.
Capitalized terms in this Purchase Agreement that are not otherwise defined herein shall have the
meanings given to such terms in the Ordinance as defined below:
1. Authorization and Documents
The issuance, sale and delivery of the Bonds (as defined below) shall be authorized by an
ordinance passed by the Mayor and City Council of the Issuer on March 20, 2007 and a
resolution adopted by the Mayor and City Council of the Issuer on April 17, 2007
(collectively, the "Ordinance"). The transaction at which the Bonds are delivered by the
Issuer to the Underwriter and paid for by the Underwriter is referred to herein as the
"Closing" and the date of such transaction, the "Closing Date."
The Ordinance includes an undertaking to provide certain information to DisclosureUSA
(so long as such method of disclosure continues to be approved by the Securities and
Exchange Commission for such purposes) or to nationally recognized municipal
securities information repositories and regulatory bodies or their designees. The
Ordinance and this Purchase Agreement are collectively referred to herein as the
"Documents."
2. Purchase and Sale
1420 Fifth Avenue, Suite 4300 Seattle, WA 98101 (206) 628-2882 www.seattlenorthwestcom
Washington Oregon Idaho Utah
Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 2
Subject to the terms and conditions of this Purchase Agreement, the Underwriter hereby
agrees to purchase from the Issuer for offering to the public and the Issuer hereby agrees
to sell to the Underwriter all, but not less than all of the $8,980,000 aggregate principal
amount of Limited Tax General Obligation and Refunding Bonds, 2007 (the "Bonds").
The Bonds shall be dated, shall mature, shall bear interest, shall be payable, and shall
have redemption provisions, all as set forth in Exhibit C attached hereto. The
Underwriter's purchase price for the Bonds also is set forth in Exhibit C.
3. Fiscal Agent; Enhancement; Insurance
a) The fiscal agent of the State of Washington shall be the fiscal agent for the Bonds,
serving as registrar, authenticating agent and paying agent (the "Bond Registrar").
The Bonds shall be payable and shall be secured as provided in the Ordinance and
as described in the document entitled Preliminary Official Statement, which is
dated April 9, 2007 and which describes the Issuer and the Bonds (the "POS.")
b) Payment when due of the regularly scheduled principal of and interest on the
Bonds shall be insured by a municipal bond insurance policy (the "Policy") issued
by XL Capital Assurance Inc. (the "Insurer").
4. Offering
The Underwriter agrees to make a bona fide public offering of all the Bonds, at prices not
in excess of the initial public offering prices or at yields not lower than the initial yields
as set forth in Exhibit C attached hereto.
5. Official Statement
a) In the Ordinance, the Issuer has ratified and "deemed final" the POS for purposes
of Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the
"Rule"). The Issuer approves and ratifies the use and distribution by the
Underwriter of the POS in connection with the public offering for sale of the
Bonds by the Underwriter.
b) The final official statement shall be substantially in the form of the POS with only
such changes permitted by the Rule as shall have been reviewed by the
Underwriter (such final official statement, incorporating such changes, if any,
shall be referred to herein as the "Final Official Statement"). The Issuer shall
cooperate with the Underwriter in the preparation of the Final Official Statement
for delivery within seven (7) business days after the date hereof and, in any event,
for delivery in sufficient time to accompany any order confirmation from the
Underwriter to its customer, and in sufficient time to permit the Underwriter to
comply with the provisions of the Rule and with all applicable rules of the
Municipal Securities Rulemaking Board.
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Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 3
c) The Issuer will not amend or supplement the Final Official Statement without the
consent of the Underwriter. The Issuer agrees to notify the Underwriter promptly
if, on or prior to the 25th day after the End of the Underwriting Period (as defined
below), any event shall occur, or information come to the attention of the Issuer,
that would cause the Final Official Statement (whether or not previously
supplemented or amended), as of its date, to contain any untrue statement of a
material fact or to omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If, in the opinion of the Issuer, such event requires the preparation
and distribution of a supplement or amendment to the Final Official Statement,
the Issuer at its expense and with Underwriter's assistance, shall amend or
supplement the Final Official Statement in a form and manner approved by the
Underwriter and will provide such number of copies of the supplement or
amendment to the Final Official Statement, as the Underwriter may reasonably
request. For purposes of this Purchase Agreement, the "End of the Underwriting
Period" shall occur on the Closing Date.
6. Representations, Warranties and Covenants
The Issuer represents, warrants and covenants to the Underwriter that as of the date
hereof and as of the Closing Date:
a) The Issuer is a municipal corporation duly organized and validly existing under
the laws and Constitution of the State of Washington;
b) The Issuer has duly passed the Ordinance and it is a valid, legal and binding
ordinance of the Issuer;
c) The Issuer is duly authorized and has full legal right, power, and authority to
issue, sell and deliver the Bonds and perform its obligations under the
Documents;
d) The Ordinance is in full force and effect and has not been superseded, rescinded
or amended;
e) The Issuer has full legal right, power and authority to and will apply or cause to
be applied the proceeds of the Bonds as described in the Ordinance;
f) The execution of and performance by the Issuer of its obligations under the
Documents will not cause the Issuer to be (i) in violation of any constitutional
provision, law, court decree, administrative regulation or judgment or (ii) in
material default under any loan agreement, indenture, bond, note, resolution or
other material agreement or instrument to which the Issuer is a party or to which
the Issuer or any of its properties or assets is otherwise subject;
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Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 4
g)
All governmental approvals or authorizations required to be obtained by the
Issuer prior to the Closing in connection with the issuance and delivery of the
Bonds or the performance by the Issuer of its obligations under the Documents
have been or will be obtained prior to Closing;
h) No filing or registration of the Ordinance or other instrument or financing
statement is required to be made to create, protect or preserve the pledge of taxing
power under the Ordinance or is required for the validity and enforceability of the
Ordinance;
As of the Closing, the Bonds will be legal, valid and binding obligations of the
Issuer, and, subject only to the laws of bankruptcy and insolvency, will be
enforceable in accordance with their terms and will be in full force and effect;
Except as described in the Final Official Statement there is no action, suit,
proceeding, inquiry or investigation before or by any court, governmental agency,
public board or body pending or, to the knowledge of the Issuer, threatened
against the Issuer, (i) in any way questioning the legal existence of the Issuer or
the titles of the officers of the Issuer to their respective offices; (ii) in any way
affecting or contesting or seeking to prohibit, restrain or enjoin the issuance or
delivery of the Bonds; (iii) wherein an unfavorable decision, ruling, or finding
would have a material adverse effect on the collection and application of taxes
that may be levied for the benefit of the Issuer for the payment of the Bonds, the
financial condition of the Issuer, or would have an adverse effect on the validity
or enforceability of the Bonds or the Ordinance, or which would in any way
adversely affect the exclusion of interest on the Bonds from gross income for
federal income tax purposes; or (iv) contesting the completeness or accuracy of
the POS or the Final Official Statement; (v) to the actual knowledge of the Issuer,
there is no reasonable basis for any action, proceeding, inquiry or investigation of
the nature described in the foregoing clauses (i) through (iv);
k) The financial statements of the Issuer contained in the Final Official Statement
fairly present the financial position of the Issuer as of the dates and for the periods
therein set forth in accordance with the accounting standards applicable to the
Issuer, and since the date thereof, there has been no material adverse change in the
financial position of the Issuer;
1) In connection with the financing process, the Underwriter may have provided the
format for and certain of the content for inclusion in the POS and may have
assumed principal drafting responsibility for the preparation of the POS and may
coordinate the preparation and dissemination of the Final Official Statement. The
Issuer understands and acknowledges, however, that the ultimate responsibility
for the POS and the Final Official Statement with respect to content, accuracy and
completeness is the responsibility of the Issuer as an issuer of municipal
securities. The Issuer hereby represents and warrants to the Underwriter that the
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Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 5
POS did not, as of its date, and the Final Official Statement will not, as of its date
and at the Closing Date, contain any untrue statement of material fact nor omit
any statement or information which is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that no representation or warranty is made with respect to
information within the POS or the Final Official Statement relating to DTC, the
book entry system, the Insurer or the Underwriter; and
m) The Issuer has not failed to comply with any prior undertaking under the Rule in
the past five years.
7. Termination
The Underwriter may terminate its obligation under this Purchase Agreement, without
liability therefor, by notifying the Issuer of its election to do so in writing if, after the
execution of this Purchase Agreement and prior to the Closing, any one or more of the
following events shall have occurred and such event, in the reasonable opinion of the
Underwriter (i) would materially and adversely affect the marketability of the Bonds or
the prices or yields of the Bonds as set forth in Exhibit C, or (ii) would materially and
adversely affect the Underwriter's ability to enforce contracts for the sale of the Bonds:
a) A material disruption in commercial banking or securities settlement or clearance
services; or
b) The United States shall have become engaged in hostilities or existing hostilities
shall have escalated or a national emergency or other national or international
calamity, including but not limited to terrorist attack(s) or other event; or
c) A general suspension of trading or other material restrictions not in force as of the
date of this Purchase Agreement on the New York Stock Exchange or other
national securities exchange; or
d) Declaration of a general banking moratorium by the United States, New York
State or Washington State authorities; or
e) Legislation with respect to eliminating or reducing the exemption from federal or
state taxation for interest income received on obligations of the general character
of the Bonds shall be introduced or enacted by the legislature of the State of
Washington or by Congress of the United States or adopted by either the United
States House of Representatives or the United States Senate or shall have been
recommended to the Congress or otherwise endorsed for passage by the Treasury
Department of the United States, the Internal Revenue Service or by the chairman
of the Senate Finance Committee or a decision or an order or ruling with respect
to eliminating or reducing such exemption, shall have been issued by a court of
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Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 6
the United States, including the United States Tax Court, or by or on behalf of the
Treasury Department of the United States or the Internal Revenue Service; or
f) Legislation shall hereafter be enacted, or actively considered for enactment, or a
decision by a court of the United States shall hereafter be rendered, or a ruling,
stop order or regulation by the Securities and Exchange Commission or other
governmental agency having jurisdiction of the subject matter shall hereafter be
made, the effect of which is or would be that the offering and sale of the Bonds
would be illegal or that:
g)
i) The Bonds are not exempt from the registration, qualification or similar
requirements of the Securities Act of 1933, as amended and as then in
effect (the "33 Act") or distribution of the Bonds, as contemplated herein
or in the Final Official Statement, is in violation of or not exempt from the
registration, qualification or other requirements of the 33 Act, as amended
and as then in effect, or the Securities Exchange Act of 1934, as amended
and then in effect or the Investment Company Act of 1940, as amended
and then in effect (the "Investment Company Act") or, in each case, the
rules or regulations promulgated thereunder as then in effect; or
ii) The Ordinance is not exempt from the registration, qualification or other
requirements of the Trust Indenture Act of 1939, as amended and as then
in effect; or
iii) This Purchase Agreement is subject to the Investment Company Act or
requires any registration under the Investment Company Act; or
Any litigation, except as described in the Final Official Statement, shall be
instituted or pending at Closing to restrain or enjoin the authorization, issuance,
execution, sale or delivery of the Bonds or the execution and delivery of any of
the Documents, or in any way contesting or affecting any authority for or the
validity or enforceability of the Bonds, the Ordinance or any of the other
Documents, any moneys or securities provided for the payment of the Bonds or
the existence or powers of the Issuer; or
h) Any legislation, ordinance, rule or regulation shall be introduced in or enacted by
any governmental body, board, department or agency of Washington State or of
the United States, or a decision by any court of competent jurisdiction within
Washington State or any court of the United States shall be rendered materially
affecting the Issuer or the Bonds; or
i) There shall have been established any new restrictions on transactions in
securities materially affecting the free market for securities or the extension of
credit by, or the charge to the net capital requirements of the Underwriter,
including without limitation, the fixing of minimum or maximum prices for
-6-
Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 7
j)
trading or maximum ranges of prices, by any exchange, the Securities and
Exchange Commission, any other federal or state agency or the Congress of the
United States, or by Executive Order; or
Except for such changes to the Final Official Statement as provided in
Section 5(c) of this Purchase Agreement, there shall have been a material adverse
change in the affairs of the Issuer or there shall exist any event or fact or set of
facts that either (a) makes untrue or incorrect in any material respect any
statement or information contained in the Final Official Statement or (b) is not
reflected in the Final Official Statement but should be reflected therein to make
the statements and information contained therein under the circumstances in
which made not misleading in any material respect; or
k) The withdrawal or downgrading of any rating of the Bonds by a national rating
agency from those shown in (c)(i) of Exhibit B.
8. Closing; Conditions of Closing
The Closing shall occur on such date and at such time and place as is set forth in
Exhibit C or otherwise agreed between the Issuer and the Underwriter, and subject to the
satisfaction of the terms and conditions of this Purchase Agreement. At Closing, the
following shall occur: the Issuer will deliver the duly executed Bonds or cause to be
delivered to the fiscal agent for re -delivery through Fast Automated Transfer System to
DTC and will deliver or cause to be delivered to the Underwriter the Ordinance; the
Underwriter will accept such delivery and pay the purchase price of the Bonds as set
forth in Exhibit C hereof in same day funds. The Issuer shall cause the applicable CUSIP
identification numbers to be printed on the Bonds of each maturity, but neither the failure
to print such number on any such Bond nor any error with respect thereto shall constitute
cause for a failure or refusal by the Underwriter to accept delivery of and to pay for the
Bonds. The Bonds shall be prepared and delivered to the Bond Registrar at or prior to the
Closing Date.
In addition to the other requirements of this Purchase Agreement, Underwriter's
obligations hereunder are subject to and conditioned upon Issuer, at or prior to the
Closing Date, delivering or making available to Underwriter copies of the Documents
and such items as are listed in Exhibit B attached hereto and incorporated herein.
9. Fees and Expenses
The Issuer will pay the cost of preparing, printing and executing the Bonds; the fees and
disbursements of Bond Counsel; bond registration and rating fees and expenses; the bond
insurance premium; the escrow agent fee; escrow verification fee; the cost of printing and
distributing the POS and Final Official Statement; travel and lodging expenses of the
Issuer's employees and representatives; and other expenses of the Issuer.
-7-
Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 8
The Underwriter will pay fees and disbursements of its counsel, if any, the cost of
preparation and filing of blue sky and legal investment surveys where necessary, the
Underwriter's travel expenses, and other expenses of the Underwriter. As a convenience
to the Issuer, the Underwriter may from time to time, but only upon the prior written
direction from the Issuer, make arrangements for certain items for which Issuer is
responsible hereunder, such as printing of the POS and the Final Official Statement and
travel or lodging arrangements for the Issuer's representatives.
The Underwriter also may advance for the Issuer's account when appropriate and when
directed in advance in writing by the Issuer, the cost of the items for which the Issuer is
responsible by making payments to third -party vendors. In such cases, the Issuer shall
pay such costs or expenses directly, upon submission of appropriate invoices by the
Underwriter, or promptly reimburse the Underwriter in the event the Underwriter has
advanced such costs or expenses for the Issuer's account. It is understood that the Issuer
shall be primarily responsible for payment of all such items and that the Underwriter may
agree to advance the cost of such items from time to time solely as an accommodation to
the Issuer and on the condition that it shall be reimbursed in full by the Issuer.
10. Miscellaneous
a) All matters relating to the Purchase Agreement shall be governed by the laws of
the state of Washington.
b) This Purchase Agreement is intended to benefit only the parties hereto. Unless it
can be shown that the untruth of any representation or warranty of the Issuer or
the violation of any agreement of the Issuer hereunder actually was or should
have been discovered by the Underwriter through its review of the information in
the Final Official Statement in accordance with and as a part of its responsibilities
under federal securities laws as applied to the facts and circumstances of this
transaction, all representations and warranties and agreements of the Issuer in this
Purchase Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of the Underwriter, (ii) delivery of
and payment for the Bonds hereunder, or (iii) any termination of this Purchase
Agreement. If the Issuer fails to satisfy any of the foregoing conditions or
covenants, or if the Underwriter's obligations are terminated for any reason
permitted under this Purchase Agreement, then neither the Underwriter nor the
Issuer shall have any further obligations under this Purchase Agreement, except
that any expenses incurred shall be borne in accordance with the Fees and
Expenses Section hereof.
c) Any notice or other communication to be given to the Issuer by the Underwriter
under this Purchase Agreement may be given by delivering the same in writing to
the Director of Finance and Budget or other authorized official of the Issuer at
129 North Second Street, Yakima, Washington 98901; and any notice or other
communication to be given to the Underwriter by the Issuer under this Purchase
-8-
Honorable Mayor and City Council
City of Yakima, Washington
April 17, 2007
Page 9
Agreement may be given by delivering the same in writing to the attention of the
officer of the Underwriter executing this Purchase Agreement at Seattle -
Northwest Securities Corporation, 1420 Fifth Avenue, Suite 4300, Seattle,
Washington, 98101. Written communications may be delivered by electronic
means.
d) This Purchase Agreement may be executed in any number of counterparts, all of
which shall be one and the same instrument, and either Party hereto may execute
this Purchase Agreement by signing any such counterpart.
e) This Purchase Agreement, including all documents incorporated herein by
reference, constitutes the entire agreement between and among the Parties,
supersedes any other representations, understandings or communications between
the Parties or their representatives, and may be amended only in a writing signed
by both Parties. This Purchase Agreement is intended solely for the benefit of the
Parties (including any successors and assigns thereof but not any holder of any
Bonds). No other person shall acquire or have any rights hereunder or by virtue
hereof.
Respectfully submitted,
SEATTLE -NORTHWEST SECURITIES CORPORATION
By:
Lindsay A. Sovde, Vice President
Accepted April 17, 2007
City of Yakima, Washington
BY:)J?�t�`{
Rita M. DeBord, Director of Finance and Budget Time Signed
-9-
EXHIBIT A
FINAL PRICING NUMBERS
BOND DEBT SERVICE
City of Yakima, Washington
LTGO & Refunding Bonds, 2007
FINAL NUMBERS
Dated Date 05/08/2007
Delivery Date 05/08/2007
Period Annual
Ending Principal Coupon Interest Debt Service Debt Service
05/08/2007
11/01/2007 183,257 46 183,257 46 183,257 46
05/01/2008 270,000 4.000% 190,672.50 460,672.50
11/01/2008 185,272.50 185,272.50 645,945.00
05/01/2009 275,000 4.000% 185,272.50 460,272.50
11/01/2009 179,772.50 179,772.50 640,045.00
05/01/2010 290,000 4.000% 179,772.50 469,772.50
11/01/2010 173,972.50 173,972.50 643,745.00
05/01/2011 305.000 4.000% 173,972.50 478,972.50
11/01/2011 167,872.50 167,872.50 646,845.00
05/01/2012 315,000 4.000% 167,872.50 482,872.50
11/01/2012 161,572.50 161,572.50 644,445.00
05/01/2013 580,000 4.000% 161,572.50 741,572.50
11/01/2013 149,972.50 149,972.50 891,545.00
05/01/2014 595,000 4.000% 149,972.50 744,972.50
11/01/2014 138,072.50 138,072.50 883,045.00
05/01/2015 630,000 5.000% 138,072.50 768,072.50
11/01/2015 122,322.50 122,322.50 890,395.00
05/01/2016 655,000 5.000% 122.322.50 777,322.50
11/01/2016 105,947.50 105,947.50 883,270.00
05/01/2017 700.000 5.000% 105,947.50 805,947.50
11/01/2017 88,447.50 88,447.50 894,395.00
05/01/2018 495,000 4.000% 88,447.50 583,447.50
11/01/2018 78,547.50 78,547.50 661,995.00
05/01/2019 520,000 4.000% 78,547.50 598,547.50
11/01/2019 68,147.50 68,147.50 666,695.00
05/01/2020 535,000 4.000% 68,147.50 603,147.50
11/01/2020 57,447.50 57,447.50 660,595.00
05/01/2021 560,000 4.000% 57,447.50 617,447.50
11/01/2021 46,247.50 46,247.50 663,695.00
05/01/2022 580,000 4.050% 46,247.50 626,247.50
11/01/2022 34,502.50 34,502.50 660,750.00
05/01/2023 395,000 4 100% 34,502.50 429,502.50
11/01/2023 26,405.00 26,405.00 455,907.50
05/01/2024 405,000 4.100% 26,405.00 431,405.00
11/01/2024 18,102.50 18,102.50 449,507.50
05/01/2025 430,000 4.125% 18,102.50 448,102.50
11/01/2025 9,233.75 9,233.75 457,336.25
05/01/2026 445,000 4.150% 9,233 75 454,233.75 454,233.75
8,980,000 3,997,647 46 12,977,647 46 12,977,647 46
Apr 16, 2007 2:22 pm Prepared by Seattle -Northwest Securities Corp - JMW (k:'analysis\dbc\city\Yakima:2007) Page 3
Bond Component
BOND PRICING
City of Yakima, Washington
LTGO & Refunding Bonds, 2007
FINAL NUMBERS
Maturity Yield to Call Call Premium
Date Amount Rate Yield Price Maturity Date Price (-Discount)
Serial Bonds.
05/01/2008 270,000 4.000% 3.620% 100.362 977 40
05/01/2009 275,000 4.000% 3.640% 100.681 1,872.75
05/01/2010 290,000 4.000% 3.650% 100.979 2,83910
05/01/2011 305,000 4.000% 3.680% 101.174 3,580.70
05/01/2012 315,000 4.000% 3.700% 101.352 4,258.80
05/01/2013 580,000 4.000% 3.740% 101.381 8,009.80
05/01/2014 595,000 4.000% 3.780% 101.338 7,961.10
05/01/2015 630,000 5.000% 3.800% 108.193 51,615.90
05/01/2016 655,000 5 000% 3.840% 108.740 57,247 00
05/01/2017 700,000 5.000% 3.880% 109.194 64,358.00
05/01/2018 495,000 4.000% 3.930% 100.572 C 3.935% 05/01/2017 100.000 2,831.40
05/01/2019 520,000 4.000% 3.990% 100.080 C 3.991% 05/01/2017 100.000 416.00
05/01/2020 535,000 4.000% 4.020% 99 798 -1,080.70
05/01/2021 560,000 4.000% 4.050% 99469 -2,973.60
05/01/2022 580,000 4.050% 4.080% 99.665 -1,943.00
05/01/2023 395,000 4.100% 4.100% 100.000
05/01/2024 405,000 4.100% 4.120% 99 756 -988.20
05/01/2025 430,000 4.125% 4.150% 99.684 -1,358.80
05/01/2026 445,000 4.150% 4.180% 99.608 -1,744 40
8,980,000 195,879.25
Dated Date 05/08/2007
Delivery Date 05/08/2007
First Coupon 11/01/2007
Par Amount 8,980,000.00
Premium 195,879.25
Production
Underwriter's Discount
Purchase Price
Accrued Interest
Net Proceeds
9,175,879.25
-62,860.00
102.181283%
-0.700000%
9,113,019.25 101.481283%
9,113,019.25
Apr 16, 2007 2:22 pm Prepared by Seattle -Northwest Securities Corp - JMW (lc:\analysis\dbc\city\Yakima:2007) Page 2
Sources:
Bond Proceeds:
Par Amount
Net Premium/OID
SOURCES AND USES OF FUNDS
City of Yakima, Washington
LTGO & Refunding Bonds, 2007
FINAL NUMBERS
Dated Date 05/08/2007
Delivery Date 05/08/2007
07LTGO1 07LTGO2 07LTGO3 RO2LTGO Total
Other Sources of Funds:
Bond Fund Contribution (6/1/07 payment)
1,765,000.00 1,490,000 00 815,000.00 4,910,000.00 8,980,000 00
65,920.90 32,242.85 17,841.20 79,874.30 195,879.25
1,830,920.90 1,522,242.85 832,841.20 4,989,874.30 9,175,879.25
115,606.25 115,606.25
1,830,920.90 1,522,242.85 832,841.20 5,105,480.55 9,291,485.50
Uses:
07LTGO1 07LTGO2 07LTGO3 RO2LTGO Total
Project Fund Deposits:
River Road Proceeds
Downtown Futures Proceeds
Fire Station Proceeds
Refunding Escrow Deposits:
Cash Deposit
SLG Purchases
1,807,000.00 1,807,000 00
1,500,000.00 1,500,000 00
820,000.00 820,000.00
1,807,000.00 1,500,000.00 820,000.00 4,127,000.00
2.24
5,032,405.00
2.24
5,032,405.00
Delivery Date Expenses:
Cost of Issuance
Underwriter's Discount
Bond Insurance (XLCA @ 18.9 bps)
Other Uses of Funds:
Additional Proceeds
5,032,407.24 5,032,407.24
5,338.24 4,506.50 2,464.97 20,050.29 32,360 00
12,355.00 10,430.00 5,705 00 34,370 00 62,860.00
4,220.48 3,854.00 2,110.39 14,342.88 24,527 75
21,913 72 18,790.50 10,280.36 68,763 17 119,747 75
2,00718 3,452.35 2,560.84 4,31014 12,330.51
1,830,920.90
1,522,242.85 832,841.20
5,105,480.55 9,291,485.50
Apr 16, 2007 2:22 pm Prepared by Seattle -Northwest Securities Corp - JMW
(k:\analysis\dbc\city\Yak
ma:2007) Page 1
EXHIBIT B
CLOSING DOCUMENTS
Issuer's Closing Documents
At Closing, Issuer shall provide the following:
a) Copies of the Ordinance and the Blanket Issuer Letter of Representation;
b) The approving opinion of Bond Counsel dated as of the Closing Date and addressed to
the Issuer and Underwriter, substantially in the form set forth in Appendix A to the Final
Official Statement and a letter addressed to the Insurer, to the effect that the Insurer may
rely upon such opinion as if it were addressed to the Insurer;
c) Evidence of each of the following:
i) That Standard & Poor's ("S&P") has assigned its (i) underlying rating of "A" to
the Bonds and that such rating is in full force and effect on and as of the date of
Closing and (ii) insured rating of "AAA", based upon the Issuer's purchase of the
Policy issued by the Insurer;
ii) Issuer's purchase of the Policy, including a copy of the Policy and an opinion of
counsel to the Insurer in form and substance satisfactory to the Underwriter;
iii) Designation of the Bonds as "qualified tax-exempt obligations" for banks, thrift
institutions and other financial institutions, as defined in Section 265(b)(3) of the
Internal Revenue Code of 1986, as amended.
d) A report from Grant Thornton LLP (the "Verification Agent") verifying the accuracy of
(a) the mathematical computations concerning the adequacy of the maturing principal
amounts of and interest earned on the Government Obligations, together with other
escrowed moneys, to be placed in the escrow account to pay when due, pursuant to stated
maturity or call for redemption, as the case may be, the principal of, premium, if any, and
interest on the Refunded Bonds and (b) the mathematical computations of the yield on the
Bonds and the yield on the Government Obligations purchased with a portion of the
proceeds of the sale of the Bonds, together with a letter from the Verification Agent
consenting to the inclusion in the POS and in the Final Official Statement under the
heading "Verification" of references to the Verification Agent and to its report.
e) A copy of completed Form 8038-G;
f) The following certifications, which may be combined, executed by an authorized officer
of the Issuer and dated as of the Closing Date, to the effect that:
i) The representations, warranties and covenants of the Issuer contained herein and
in the Ordinance are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date;
g)
ii) No litigation or other proceedings are pending or, to the knowledge of the Issuer,
threatened in any court in any way (a) affecting the position or title of the
authorized officers of the Issuer, or (b) seeking to restrain or to enjoin the
authorization, issuance, sale or delivery of, or security for, any of the Bonds, or
(c) contesting or affecting the validity or enforceability of the Bonds, the
Ordinance, this Purchase Agreement, or (d) contesting the completeness or
accuracy of the POS or the Final Official Statement, or (e) contesting the powers
of the Issuer or its authority with respect to the Bonds, the Ordinance or this
Purchase Agreement, or (f) materially affecting the finances of the Issuer. For the
purpose of this subparagraph, the Issuer may rely upon a certificate of the Issuer's
legal counsel with respect to the legal matters set forth therein;
iii) No event affecting the Issuer has occurred since the date of the Final Official
Statement which should be disclosed in the Final Official Statement for the
purpose for which it is to be used or which is necessary to disclose therein in
order to make the statements therein not misleading, and the Final Official
Statement does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
Such additional certificates, instruments or opinions or other evidence as the Underwriter
or the Bond Counsel may deem reasonably necessary or desirable to evidence the due
authorization, issuance, execution, authentication and delivery of the Bonds, the truth and
accuracy as of the time of the Closing of the representations and warranties contained in
this Purchase Agreement, and the conformity of the Bonds and Ordinance with the terms
thereof as summarized in the POS and the Final Official Statement, and to cover such
other matters as the Underwriter or the Bond Counsel reasonably requests.
Underwriter's Closing Documents
At Closing, Underwriter shall deliver or cause to be delivered to the Issuer or Bond Counsel a
receipt for the Bonds including therein a representation that all closing conditions set forth in this
Purchase Contract have been provided to the satisfaction of the Underwriter or waived by it.
EXHIBIT C
DESCRIPTION OF THE BONDS
(a) Principal Amount: $8,980,000
(b) Purchase Price:
(c) Denominations:
(d) Form:
(e) Interest Payment Dates:
$9,113,019.25 ($101.481283 per $100),
representing a net original issue premium of
$195,879.25 and an underwriter's discount of
$62,860.00.
$5,000, or integral multiples thereof
Registered; Book -entry only
May 1 and November 1, commencing November 1,
2007.
(f) Maturity and Interest Rates: The Bonds shall mature on May 1 of each year and
bear interest as follows:
Due Interest CIJSW
May 1. Apietu1.t8. Rates.. Yielder 984=
2008 $ 270,000 4.000% 3.62% QN7
2009 275,000 4.000 3.64 QP2
2010 290,000 4.000 3.65 QQO
2011 305,000 4.000 3.68 QR8
2012 315,000 4.000 3.70 QS6
2013 580,000 4.000 3.74 QT4
2014 595,000 4.000 3.78 QU1
2015 630,000 5.000 3.80 QV9
2016 655,000 5.000 3.84 QW7
2017 700,000 5.000 3.88 QX5
Due Interest CUS4
May t Amounts ' Rates` ' :Weide . 98.4521:'
2018* $ 495,000 4.000% 3.93% QY3
2019* 520,000 4.000 3.99 QZO
2020 535,000 4.000 4.02 RA4
2021 560,000 4.000 4.05 RB2
2022 580,000 4.050 4.08 RCO
2023 395,000 4.100 4.10 RD8
2024 405,000 4.100 4.12 RE6
2025 430,000 4.125 4.15 RF3
2026 445,000 4.150 4.18 RG1
* Priced to the call date of May 1, 2017.
(g) Optional Redemption:
The Bonds maturing on May 1 in years 2008
through May 1, 2017 are not subject to redemption
prior to maturity. The Bonds maturing on or after
May 1, 2018 are subject to redemption at the option
of the Issuer, in whole or in part on any date on or
after May 1, 2017 at a price of par plus accrued
interest, if any, to the date of redemption.
(h) Dated Date:
(i) Offer Expires:
a)
(k)
Bond Counsel:
Closing:
(1) Delivery:
(m) Bond Insurance:
(n) Ratings:
Date of Delivery, expected to be May 8, 2007.
11:59 p.m. Pacific Time, April 17, 2007.
K&L Preston Gates Ellis LLP
Via conference call initiated by Bond Counsel on
May 8, 2007 at 9:00 a.m.
To the Bond Registrar on behalf of DTC by Fast
Automated Securities Transfer.
Payment of the principal of and interest on the
Bonds, when due, will be insured by the Policy to
be issued by the Insurer simultaneously with the
delivery of the Bonds.
S&P will assign its rating of "AAA" to the Bonds
based on the Issuer's purchase of the Policy
described above. Furthermore, S&P has assigned
its underlying rating of "A" to the Bonds.
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. a
For Meeting Of 4-17-2007
ITEM TITLE: A Resolution authorizing the execution and delivery of a contract for the purchase
of the City's Limited Tax General Obligation and Refunding Bonds, 2007, in the aggregate
principal amount of $8,980,000, fixing terms of the Bonds, ratifying certain acts and proceedings
and approving the form of the Official Statement.
SUBMITTED BY: Rita DeBord, Finance Directo
CONTACT PERSON/TELEPHONE: Tim Jens reasury Services Officer; # 575-6070
SUMMARY EXPLANATION: On March 20, 2007 the City Council passed Ordinance number
2007-09 authorizing the issuance of up to $9,500,000 Limited Tax General Obligation and
Refunding Bonds (LTGO), the proceeds from which are to be used to fund various capital
projects; a) Remodel of West Valley Fire Station, b) Modifications to River Road and c) financing
for the Downtown Futures Initiative; and refund the 2002 LTGO's issued for Phase III of the
Convention Center remodel. At that time, staff was directed and authorized to perform all
proceedings and tasks necessary to accomplish this transaction.
Since then, staff completed a comprehensive credit review with Standard and Poor's, which
resulted in affirmation of the City's "A" credit rating with a Stable Outlook. This is an investment
Continued...
Resolution X Ordinance _ Other (Specify) Bond Purchase Agreement from Seattle Northwest
Securities, credit report from Standard & Poor's and final amortization schedules
Contract X Mail to (name and address). Phone
Funding Source
APPROVED FOR SUBMITTAL:
City Man
STAFF RECOMMENDATION: Adopt Resolution accepting purchase offer
BOARD/COMMISSION RECOMMENDATION:
COUNCIL ACTION: Resolution adopted. RESOLUTION R-2007-48
Legal/BD
rev effective 7/21/92
grade credit rating, reflecting good management of the City's financial affairs and a stable local
economy (See credit report attached). The sale of the bonds took place on April 16th, and resulted
in a purchase offer from Seattle Northwest Securities for $8,980,000 of these 2007 LTGO's bonds.
The new money portion of the bonds is $4,070,000 for the West Valley Fire Station remodel, the
River Road Project and the Downtown Futures Initiative, at an interest cost of 4.07% including
legal and underwriting costs (amortization schedules on the three projects are included in this
packet for your review); the refunding bonds are in the par amount of $4,910,000 to refund
$4,745,000 of the 2002 LTGO's at an interest cost of 4.17%, resulting in average debt service
savings of about $12,000 annually, or 5162,000 at present value over the life of the issue. This
savings is about 3.5% of the refunded bonds. Total interest cost on the combined sale is 4.13%,
including issuance and bond insurance costs.
Items for Council Consideration at the April 17, 2007 regular Council meeting are as follows:
• Bond Sale Resolution; prepared by the City's Bond Counsel, KL Preston Gates (enclosed)
• Bond Purchase Agreement from Seattle Northwest Securities (enclosed)
• Preliminary Official Statement (included in your packet on Friday).
Additionally the following documents are enclosed for your information:
• Amortization Schedule(s)
• Credit Report from Standard & Poor's
In today's interest rate environment, staff feels this is an acceptable offer and recommends
Council to approve the sale of the 2007 LTGO and Refunding bonds by adopting the Resolution.
Legal/BD
rev effective 7/21/92
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No q
For Meeting Of: April 17, 2007
ITEM TITLE: A Resolution authorizing the execution and delivery of a contract for sale and purchase of
the City's Limited Tax General Obligation Bonds (The Bonds) in the aggregate amount of not to exceed
$9,500,000 and fixing the terms of The Bonds, approving the form of the Official Statement and ratifying
certain acts and proceedings.
SUBMITTED BY: Rita DeBord, Finance Direct
CONTACT PERSON / TELEPHONE: Tim Jen efi, / reasury Services Officer; # 575-6070
SUMMARY EXPLANATION: On March 20,2007, Cy Council passed Ordinance #2007-09 authorizing the
issuance of up to $9.5 million of Limited Tax General Obligation Bonds of the City for the purpose of
providing funds for certain new capital projects and advance refunding certain outstanding bonds and
directing staff to take all appropriate actions and perform all proceedings and tasks necessary to
accomplish this transaction
Therefore, staff engaged in a credit rating interview with Standard and Poor's on April 10th and completed
the Preliminary Official Statement, dated April 9, 2007. Staff anticipates receiving Standard and Poor's
rating on Thursday, April 12th and has a bond -pricing meeting scheduled with the Bond Underwriters,
Seattle Northwest Securities, scheduled for Friday, April 13th. (Note due to market fluctuations, the projected
savings from the refinancing of the 2002 Limited Tax General Obligation Bonds has decreased significantly over the
past two weeks. Staff is closely monitoring the bond market and, during our pricing call on Friday, April 13 h., we will
make a final determination regarding whether to move forward with refunding of these bonds or pulling them from the
overall bond issue and waiting for more favorable market conditions before proceeding with the refunding At this
point in time, we do not anticipate any problems in the issuance of the "new money" portion of this bond issue )
The actual pricing of the Bonds (at which time the bonds are officially offered for sale and investors make purchase
offers) is scheduled for Monday, April 16, 2007. Once these items are known and the pricing is complete,
all of the final terms and conditions of The Bond purchase offer will be known, including the interest rates,
discounts/premiums if any, the final amortization schedule, etc. Assuming a reasonable offer has been
made, staff will submit this offer to Council for your consideration at your regular business meeting on
Tuesday, April 17th, Subject to Council's acceptance and authorization of the bond purchase offer, the
transaction will be executed and scheduled to close within 30 days after Council authorization; the City will
receive the bond proceeds at closing
In order to accept and authorize staff to execute the purchase offer, Council would need to approve: (1) the
purchase offer, (2) The Bond Resolution and (3) the Final Preliminary Official Statement (POS). Enclosed,
you will find the Final POS and draft versions of the Purchase Offer and The Bond resolution for your
review (Final documents will be provided to Council on Tuesday )
Resolution X Ordinance Other (Specify) Final POS and draft Sale/Purchase offer_
Contract Mail to (name and address) Phone:
Funding Source
APPROVED FOR SUBMITTAL: , �'' City Manager
STAFF RECOMMENDATION Adopt Resolution, Purchase Offer and final POS
BOARD/COMMISSION RECOMMENDATION
COUNCIL ACTION Resolution adopted. RESOLUTION NO. R-2007-48
PRELIMINARY OFFICIAL STATEMENT DATED APRIL 9, 2007
$9,200,000*
City of Yakima, Washington
Limited Tax General Obligation and Refunding Bonds, 2007
DATED: Date of Delivery DUE: May 1, as shown below
STANDARD & POOR'S RATING—Applied for.
BANK QUALIFIED —The City has designated the Bonds as "qualified tax-exempt obligations" for purposes of section
265(b)(3)(B) of the Code. See "Tax Matters" herein for a discussion of this designation.
BOOK -ENTRY ONLY—The Bonds will be issued as fully registered bonds in denominations of $5,000, or integral multiples
thereof, and will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust
Company ("DTC"). DTC will act as securities depository for the Bonds. Purchasers will not receive certificates
representing their interest in the Bonds purchased.
PRINCIPAL AND INTEREST PAYMENTS—Interest on the Bonds will be payable semiannually on each May 1 and
November 1, commencing on November 1, 2007, to maturity or earlier redemption. Principal of and interest on the
Bonds will be payable by the fiscal agency of the State of Washington in New York, New York, currently The Bank of
New York (the "Bond Registrar"), as further described herein. For so long as the Bonds remain in a "book -entry only"
transfer system, the fiscal agent will make such payments only to DTC, which in turn is obligated to remit such principal
and interest to its Participants for subsequent disbursement to Beneficial Owners of the Bonds as further described
herein in Appendix B —Book -Entry Transfer System.
MATURITY SCHEDULE —
Due Interest Price or Due Interest Price or
May 1 Amount* Rate Yield CUSIP May 1 Amount* Rate Yield CUSIP
2008 $ 300,000 % 2018 $ 495,000 %
2009 305,000 2019 520,000
2010 315,000 2020 535,000
2011 325,000 2021 560,000
2012 345,000 2022 580,000
2013 600,000 2023 395,000
2014 625,000 2024 410,000
2015 650,000 2025 430,000
2016 665,000 2026 445,000
2017 700,000
OPTIONAL REDEMPTION—The Bonds are subject to redemption prior to their stated maturities as further described herein.
See "Description of the Bonds - Redemption Provisions."
SECURITY—The Bonds are limited tax general obligations of the City. The City has irrevocably covenanted and agreed for
as long as any of the Bonds are outstanding and unpaid that each year it will include in its budget and levy ad valorem
taxes upon all the property within the City subject to taxation in an amount that will be sufficient, together with all other
revenues and money of the City legally available for such purposes, to pay the principal of and interest on the Bonds as
the same shall become due. The full faith, credit and resources of the City have been pledged irrevocably for the annual
levy and collection of such taxes and the prompt payment of such principal and interest. There are limitations on the
ability of a city in the State of Washington to raise property taxes. The Bonds do not constitute a debt or indebtedness of
the State of Washington or any political subdivision thereof other than the City. See "Security for the Bonds" and
"Taxing Authority" herein.
TAX EXEMPTION—In the opinion of K&L Preston Gates Ellis LLP, Bond Counsel, assuming compliance with certain covenants of the
City, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the
Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the Bonds
may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. See "Tax
Matters" herein for a discussion of the opinion of Bond Counsel.
DELIVERY— The Bonds are offered for sale to the original purchaser subject tothe final approving legal opinion of K&L
Preston Gates Ellis LLP, Seattle, Washington, Bond Counsel. It is expected that the Bonds will be available for delivery
to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer, on or about May 1, 2007.
* Preliminary, subject to change.
This cover page contains certain information for quick reference only. 11 is not a summary of the issue. Investors must read the entire Official Statement to
obtain information essential to the making of an informed investment decision.
Milli SEATTLE -NORTHWEST
UUU SECURITIES CORPORATION
(This Pio Tntantinnally T aft Rlanic\
City of Yakima, Washington
129 North Second Street
Yakima, Washington 98901
Phone: (509) 575-6000
Fax: (509) 576-6614
www.ci.yakima.wa.us*
David Edler
Neil McClure
Ron Bonlender
Micah Cawley
Norm Johnson
Bill Lover
Susan Whitman
Richard A. Zais, Jr.
Dave Zabell
Rita M. DeBord, CPA
Ray Paolella
Timothy Jensen
Cindy Epperson
Mayor and City Council
Mayor
Assistant Mayor
Council Member
Council Member
Council Member
Council Member
Council Member
Administrative Officials
City Manager
Assistant City Manager
Director of Finance & Budget
City Attorney
Treasury Services Officer
Financial Services Manager
Bond Counsel
K&L Preston Gates Ellis LLP
Seattle, Washington
206-623-7580
Bond Registrar
The Bank of New York
New York, New York
1-800-438-5473
* The City's website is not part of this Official Statement, and investors should not rely on information presented in
the City's website in determining whether to purchase the Bonds. This inactive textual reference to the City's
website is not a hyperlink and does not incorporate the City's website by reference.
This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is
unlawful to make such an offer. No dealer, salesperson or other person has been authorized by the City or the Underwriter to
give any information or to make any representations, other than those contained herein, in connection with the offering of the
Bonds and, if given or made, such information or representations must not be relied upon. The information and expressions of
opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made
hereunder will, under any circumstances, create an implication that there has been no change in the affairs of the City since the
date hereof
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the
information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal
securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy
or completeness of such information.
This Preliminary Official Statement has been "deemed final" by the City, pursuant to Rule 15c2-12 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, except for information which is
permitted to be excluded from this Preliminary Official Statement under said Rule 15c2-12.
In connection with this offering, the Underwriter may over -allot or effect transactions that stabilize or maintain the market price
of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be
discontinued at any time.
ii
(Thio Para Tnfan+innally T a1f Rlanikl
Table of Contents
Page
Description of the Bonds 1
Principal Amount, Date, Interest Rates and Maturities 1
Redemption Provisions 1
Purchase 1
Bond Registrar and Registration Features 2
Book -Entry Bonds 2
Authorization for Issuance 2
Purpose and Use of Proceeds 2
Purpose 2
Plan of Refunding 2
Refunding Procedure 3
Verification of Mathematical Calculations 3
Sources and Uses of Funds 4
Security for the Bonds 4
General 4
Additional Revenue for the New Money Portion of the Bonds 4
Additional Revenue for the Refunding Portion of the Bonds 5
Bonded Indebtedness 5
Summary of Limited Tax General Obligation Bond Debt Service Requirements 8
Net Direct and Overlapping Debt 9
Debt Payment Record 9
Future Financings 9
Taxing Authority 10
Authorized Property Tax Levies 10
The City's Property Tax Levies 10
Overlapping Taxing Districts 11
General Property Taxes 11
Regular Property Tax Limitations 12
Assessed Value 13
Tax Collection Procedure 13
Tax Collection Record 14
Major Property Taxpayers 14
Authorized Investments 15
Local Government Investment Pool 15
Authorized Investments for Bond Proceeds 15
City of Yakima Comparative General Fund Balance Sheet 16
Comparative General Fund Statement of Revenues, Expenditures and Changes in Fund Balance 17
The City 18
Key Administrative Staff 18
Labor Relations 19
Pension System 19
Other Post Employment Benefits 21
Risk Management 22
Accounting Policies 23
Budgetary Process 23
Cash and Investments 24
Auditing of City Finances 24
Demographic Information 25
Initiative and Referendum 27
State Initiatives 27
Tax Matters 28
Qualified Tax -Exempt Obligations 29
Rating 29
Continuing Disclosure 29
Legal and Underwriting 30
Approval of Counsel 30
Litigation 31
Official Statement 31
Underwriting 31
Concluding Statement 31
Opinion of Bond Counsel Appendix A
Book -Entry Transfer System Appendix B
2005 Annual Financial Report Appendix C
iii
(chic Patro Trvi-orifirrnallcr T o4 Rlanlrl
OFFICIAL STATEMENT
$9,200,000*
City of Yakima, Washington
Limited Tax General Obligation and Refunding Bonds, 2007
The City of Yakima, Washington (the "City"), a municipal corporation duly organized and existing under and
by virtue of the laws of the State of Washington (the "State"), furnishes this Official Statement in connection
with the offering of $9,200,000* aggregate principal amount of the above -referenced bonds (the `Bonds"). This
Official Statement provides information concerning the City and the Bonds.
Description of the Bonds
Principal Amount, Date, Interest Rates and Maturities
The Bonds will be issued in the aggregate principal amount of $9,200,000* and will be dated and bear interest
from the date of initial delivery to the Underwriter. The Bonds will mature on the dates and in the principal
amounts and will bear interest (payable semiannually on each May 1 and November 1, commencing
November 1, 2007) until the maturity or earlier redemption of the Bonds at the rates set forth on the cover of
this Official Statement. Interest on the Bonds will be computed on the basis of a 360 -day year consisting of
twelve 30 -day months. Principal of and interest on the Bonds will be payable by the fiscal agency of the State
of Washington in New York, New York, currently The Bank of New York (the "Bond Registrar").
Redemption Provisions
Optional Redemption. The Bonds maturing in years 2008 through 2017, inclusive, are not subject to optional
redemption prior to maturity. The Bonds maturing on and after May 1, 2018 are subject to redemption at the
option of the City, in whole or in part (and if in part, with maturities to be selected by the City) on any date on
and after May 1, 2017 at the price of par, plus accrued interest, if any, to the date of redemption.
For as long as the Bonds are in book -entry only form, if fewer than all of the Bonds of a maturity are called for
redemption, the selection of Bonds within a maturity to be redeemed shall be made by The Depository Trust
Company, New York, New York ("DTC"), in accordance with its operational procedures then in effect. See
Appendix B attached hereto. If the Bonds are no longer held in book -entry only form, then the Bond Registrar
will select Bonds for redemption using a random selection method.
Notice of Redemption. For as long as the Bonds are held in book -entry only form, the Bond Registrar will
provide notice to DTC only, and it will be the responsibility of DTC to disseminate notices to DTC
participants. The City will not provide any notice of redemption to beneficial owners of Bonds. See "Book -
Entry Bonds."
If the Bonds are no longer kept in book -entry only form, notice of redemption will be given not fewer than 30
days nor more than 60 days prior to the redemption date by first-class mail, postage prepaid, to the registered
owner of any Bond to be redeemed at the address appearing on the bond registration books maintained by the
Bond Registrar. Interest on the Bonds called for redemption shall cease to accrue on the date fixed for
redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call.
Purchase
The City reserves the right and option to purchase any or all of the Bonds offered to the City at any time at any
price. All Bonds so purchased shall be canceled.
* Preliminary, subject to change.
1
Bond Registrar and Registration Futures
The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede &
Co. as Bond Owner and as nominee for DTC. DTC will act as securities depository for the Bonds. Individual
purchases and sales of the Bonds may be made in book -entry form only in minimum denominations of $5,000
within a single maturity and integral multiples thereof. Purchasers ("Beneficial Owners") will not receive
certificates representing their interest in the Bonds.
Principal of and interest on the Bonds will be payable by the Bond Registrar (or such other fiscal agency or
agencies as the State may from time to time designate). So long as Cede & Co. is the registered owner of the
Bonds, principal of and interest on the Bonds are payable by wire transfer by the Bond Registrar to DTC,
which inturn is terd to remit such
a
obligprincipal and interest to its Participants for subsequent disbursement
Yr r� r subsequent
to the Beneficial Owners of the Bonds, as further described herein in Appendix B.
Book -Entry Bonds
DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each
maturity of the Bonds, as set forth on the cover of this Official Statement, each in the aggregate principal
amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix B
attached hereto for additional information.
Procedure in the Event of Revisions of Book -entry Transfer System. If DTC-; resigns as the securities depository and
the City is unable to retain a qualified successor to DTC, or the City has determined that it is in the best
_1 the City
'die book -entry _I . ansf_r _ that interests o1 the Beneficial
ll-.-_.ers
interest CJL V2 Ll LC l..SLV not to continue LS IC system of transfer LJiCd Vl LS LAL 11ltCr CJl9 V! 6l LC UCSLClSL20.d V WiLClb
of the Bonds might be affected adversely if the book -entry system of transfer is continued, the City will
execute, authenticate and deliver at no cost to the Beneficial Owners of the Bonds or their nominees Bonds in
fully registered form, in the denomination of $5,000 or any integral multiple thereof within a maturity. In the
event the Bonds are transferred by the City to fully registered form, the Bonds may be payable by the Bond
Registrar or the State's co -fiscal agent, which is currently Wells Fargo Bank, National Association, in Seattle,
Washington. Thereafter, the principal of the Bonds will be payable upon due presentment and surrender
thereof at the principal office of the Bond Registrar; interest on the Bonds will be payable by check or draft
mailed on the interest payment date to the owners of the Bonds at the address appearing on the Bond Register
on the 15th day of the month next preceding the interest payment date, and the Bonds will be transferable as
provided in the ClydinanrP (defined below).
Authorization for Issuance
Under and in accordance with State laws, the Bonds are issued pursuant to Ordinance No. 2007-09 passed by
the City Council (the "Council") on March 20, 2007 and Resolution No. adopted by the Council on
2007 (collectively, the "Ordinance"), and the authority of RCW chapters 39.36, 39.46, 35.37 and
39.53.
Purpose ansa use of Proceeds
Purpose
The proceeds from the sale of the Bonds will be used to (i) remodel a fire station; (ii) renovate the downtown
area of the City, inclnclinv ciriewalkc ctreetlamnc miners and nthPr imnrnvamentc° (iii) make
infrastructure improvements to River Road; (iv) refund a portion of the City's outstanding debt to obtain the
benefit of savings in annual and total debt service requirements; and (v) pay the costs of issuance of the Bonds.
Plan of Refunding
A portion of the proceeds of the Bonds may be used to provide funds to establish an irrevocable trust escrow
to refund a portion of the City's outstanding obligations. The candidates authorized to be refunded with the
proceeds of the Bonds are identified below. Depending on market conditions on the pricing date and the
savings available to the City as a result of such refunding, the City may include none, all or a portion of
$4,745,000 of the City's callable Limited Tax General Obligation Bonds, 2002, dated June 1, 2002 (the "2002
2
Bonds"), maturing on June 1 in the years 2013, 2014, 2016 through 2022, inclusive, and 2026 (the "Refunded
Bonds"). Information on the Refunded Bonds is as follows:
Refunded Amount Redemption
Maturities* Refunded* Date Price
2013, 2014, 2016-2022, 2026 $ 4,745,000 06/01/12 100%
* Preliminary, subject to change.
Refunded Bonds*
Maturity Years Principal Interest CUSIP
(Tune 1) Amounts Rates Numbers
2013 $ 245,000 4.35% 984521MP6
2014 255,000 4.50 984521MQ4
2016* 550,000 4.70 984521MS0
2017 295,000 4.75 984521MT8
2018 310,000 4.80 984521MU5
2019 325,000 4.95 984521MV3
2020 340,000 5.00 984521MW1
2021 355,000 5.00 984521MX9
2022 375,000 5.00 984521MY7
2026* 1,695,000 5.00 984521NC4
* Term Bond.
Refunding Procedure
If the City proceeds with the refunding, a portion of the proceeds of the Bonds would be used to acquire
certain direct non -callable United States government obligations (referred to herein as "Government
Obligations") by U.S. Bank National Association ("Escrow Agent"). The maturing principal of the
Government Obligations, interest earned thereon, and necessary cash balance, if any, will be used to provide
payment of the interest on the Refunded Bonds until June 1, 2012 and the redemption price (100%) on June 1,
2012.
The Government Obligations, interest earned thereon, and necessary cash balance, if any, will irrevocably be
pledged to and held in trust for the benefit of the owners of the Refunded Bonds by the Escrow Agent,
pursuant to an escrow agreement to be executed by the City and the Escrow Agent.
Verification of Mathematical Calculations
Grant Thornton LLP, a firm of independent public accountants, will deliver on or before the delivery date of
the Bonds, its verification report indicating that it has verified, in accordance with attestation standards
established by the American Institute of Certified Public Accountants, the mathematical accuracy of (a) the
mathematical computations of the adequacy of the cash and the maturing principal of and interest on the
Government Obligations, to pay, when due, the interest on and redemption price of the Refunded Bonds and
(b) the mathematical computations of yield used by Bond Counsel to support its opinion that interest on the
Bonds will be excluded from gross income for federal income tax purposes.
The verification performed by Grant Thornton LLP will be solely based upon data, information and
documents provided to Grant Thornton LLP by the Underwriter and its representatives. Grant Thornton LLP
has restricted its procedures to recalculating the computations provided by the Underwriter and its
representatives and will not evaluate or examine the assumptions or information used in the computations.
3
Sources and hfiL
Uses of Funds >>))
The proceeds of e Bonds are estimated to be applied as follows:
Sources of Funds
Par Amount of Bonds(1) $ 9,200_,000
Net Premium/ (Discount)
Total Sources of Funds $
Use of Funds
Funds Available for Projects $
Escrow Requirements
T......... -.,c,. C....i... (91
Issuance Costs `-'
Total Use of Funds $
(1) Preliminary, subject to change.
(2) Includes Bond Counsel fees, rating fees, bond insurance premium, underwriter's discount, and other costs associated
with the issuance of the Bonds.
Security for the Bonds
General
The Rnn(lc ora 14m4te,4 +ov nonoral nhligatinn hnn(le n4 the city. The city, as ati+hnrixorl hi, law anll the
Ordinance, has irrevocably pledged that, unless the principal of and interest on the Bonds are paid from other
sources, it will make annual levies of taxes, within the constitutional and statutory tax limitations provided by
law without a vote of the electors of the City, upon all of the property in the City subject to taxation in
amounts, together with all other revenues and money of the City legally available for such purposes, sufficient
to pay such principal and interest as the same shall become due.
The Bonds do not constitute a debt or indebtedness of the State or any political subdivision thereof other than
the City. 1
Additional T2evenue for the New 1‘4oney Portion of the Bonds
The City will also use revenues and money legally available to the City, including gas taxes made available by
the retirement of two debt issues in 2008 and State mandated increases in the gas tax rate that will result in
increased gas tax allocations from the State, in the case of the portion of the Bonds used for the River Road
project, and real estate excise taxes ("REET") in the case of the portion of the Bonds used for the downtown
renovation project, to pay the principal of and interest on the new money portion of the Bonds. REET is split
into two parts, REET 1 and REET 2, both at 1/4 of one percent of the sale price of the real estate. The City is
dedicating REET 2 to the payment of the Bonds used for the downtown renovation project. The following
tables provide a history of the revenue from gas taxes and REET for the City.
City of Yakima
Historical Gas Tax and REET Revenue
Gas Taxes REET 2
2006 $ 1,299,298 :y 894,037
2005 1,164,787 878,934
20041,111,681 706,670
2003 1,125,915 N/A (1)
2002 1,156,907 N/A (1)
(1) The City did not begin collecting taxes for REET 2 until 2004.
Source: City of Yakima.
4
Additional Revenue for the Refunding Portion of the Bonds
The refunding portion of the Bonds will be paid from legally dedicated revenue sources that include an
additional pledge of sales tax revenue levied under RCW 82.14.390 and Hotel/Motel taxes levied under RCW
67.28. The State Legislature made these revenue sources available to the City in 2002 and 1996, respectively,
for the purpose of constructing and operating a regional convention center. This revenue stream will continue
as long as there are bonds outstanding to which this revenue is pledged for debt service.
City of Yakima
Historical Sales Tax and Hotel/Motel Tax Revenue
Sales Tax Hotel/Motel Tax
2006 $ 635,902 $ 1,016,499
2005 604,565 939,571
2004 577,700 922,117
2003 559,205 910,387
2002 531,120 931,443
Source: City of Yakima.
Bonded Indebtedness
As prescribed by State statutes, the unlimited tax general obligation indebtedness permitted for cities, subject to
a 60 percent majority vote of registered voters, is limited to 2.5 percent of assessed value for general purposes, 2.5
percent for utilities and 2.5 percent for open space/park facilities. Within the 2.5 percent of assessed value for
general purposes, the City may, without a vote of the electors, incur general obligation indebtedness in an
amount not to exceed 1.5 percent of assessed value. Additionally, within the 2.5 percent of assessed value for
general purposes, the City may, also without a vote of the electors, enter into leases if the total principal
component of the lease payments, together with the other nonvoted general obligation indebtedness of the
City, does not exceed 1.5 percent of assessed value. The combination of unlimited tax and limited tax general
obligation debt for general purposes, including leases, cannot exceed 2.5 percent of assessed value and for all
purposes cannot exceed 7.5 percent of assessed value. The Bonds are issued without a vote.
The City may, without a vote of the electorate, issue debt as follows:
(1) Pursuant to an ordinance specifying the amount and object of the expenditure of the proceeds,
the City Council may borrow money for corporate purposes and issue bonds and notes within
the constitutional and statutory limitations on indebtedness.
(2) The City may execute conditional sales contracts for the purchase of real or personal property.
(3) The City may execute leases with or without an option to purchase.
5
Computation of Debt Capacity
(As of May 1, 2007)
2007 Collection Year Assessed Value (1)
Nonvoted Debt Capacity
1.5% of Assessed Value
Less: Outstanding Nonvoted Debt (2)
Less: The Bonds (3)
Remaining Nonvoted Debt Capacity
Voted and Nonvuted Debt Capacity
2.5% of Assessed Value
Less: Outstanding Nonvoted Debt (2)
Less: The Bonds (3)
Less: Outstanding Voted Debt
Total Remaining Voted and Nonvoted Debt Capacity
Voted Utility Debt Capacity
2.5% of Assessed Value
Less: Outstanding Utility Obligations
Total Remaining Utility Debt Capacity
Voted Open Space/Park Debt Capacity
2.5% of Assessed Value
Less: Outstanding Open Space/Park 'Obligations
Total Remaining Open Space/Park Debt Capacity
(1) Provided by the Yakima County Assessor.
(2) Includes limited tax general obligation debt and lease purchase agreements; excludes the Refunded Bonds.
(3) Preliminary, subject to change v v
Source: City of Yakima.
$ 4,586,923,853
68,803,858
(11,734,053)
(9,200,000)
47,869,805
114,673,096
(11,734,053)
(9,200,000)
(2,010,000)
91,729,043
114,673,096
0
$ 114,673,096
$ 114,673,096
n
$ 114,673,096
6
General Obligations: Non -voted (1)
Limited Tax General Obligations
LTGO 1996
LTGO 1998
LTGO 2002
LTGO 2002 Line of Credit
LTGO 2003 Series A
LTGO 2003 Series B
LTGO Refunding 2004
LTGO 2005
The Bonds (this issue)
LTGO Bond Total
Lease Purchase Agreements
Police Video
Printer/ copier
Mobile Wireless Data Network
Printer/copier
Purchase Contract Total
Outstanding Debt
(As of May 1, 2007)
Long Term Borrowing
Date of Date of
Issue Maturity
01/01/96 11/01/07
04/01/98 06/01/08
05/01/02 06/01/12 (2)
06/01/02 06/01/07
06/01/03 12/01/23
06/01/03 12/01/13
09/01/04 11/01/19
12/01/05 12/01/15
05/01/07 05/01/26
Amount
Issued
$ 6,000,000
1,430,000
6,735,000
5,000,000
1,430,528
4,155,000
4,175,000
775,000
9,200,000 (4)
Amount
Outstanding
$ 235,000
340,000
1,280,000
44,569 (3)
1,430,528
3,225,000
4,035,000
695,000
9,200,000 (4)
33,775,528 20,485,097
11/03/03 11/03/08 491,838
06/01/04 03/01/09 93,414
07/09/04 04/09/09 325,000
10/15/04 07/15/09 54,255
964,507
Total Non -voted General Obligations $ 30,664,507
204,933
43,911
168,951
31,161
448,956
$ 20,934,053
General Obligations: Voter Approved
Unlimited Tax General Obligation Bonds
UTGO Refunding 2004 09/01/04 12/01/14 $ 2,300,000 $ 2,010,000
UTGO Bond Total $ 2,300,000 $ 2,010,000
(1) Does not include special assessment notes and warrants outstanding in the amount of $5,409 and $564,500,
respectively, as of March 1, 2007. Also does not include City's obligation pursuant to an interlocal agreement with
Yakima County to pay approximately $75,000 annually through 2008.
(2) The Date of Maturity reflects the redemption of the Refunded Bonds. The June 1, 2007 through 2012 principal
payments remain after this refunding.
(3) A portion of the proceeds of the new money portion of the Bonds will be used to pay down $500,000 of the line of
credit at closing. As of April 9, 2007, the balance on the line of credit is $544,569.
(4) Preliminary, subject to change.
7
Summary of Limited Tax General Obligation Bond Debt Service Requirements
(As of May 1, 2007)
Calendar Outstanding LTGO Bonds (1) The Bonds (2) '1'otal Debt
Years Principal Tnterest Principal Tnterest Service
2007 $ 1,187,615 $ 265,075 $ 0 $ 177,388 $ 1,630,078
2008 1,229,861 308,889 300,000 349,318 2,188,068
2009 1,154,241 292,130 305,000 338,218 2,089,588
2010 1,158,125 266,614 315,000 326,655 2,066,394
2011 1,187,419 236,395 325,000 314,804 2,063,618
2012 1,221,614 205,646 345,000 302,490 2,074,750
2013 1,013,534 175,123 600,000 285,008 2,073,665
2014 520,455 147,442 625,000 262,189 1,555,086
2015 537,376 134,864 650,000 238,376 1,560,616
nn-i,"AO 1 f Inc '7')O /_/_C /Inn n1 CC,/ 1 /1=,1AQ7
6
210 4`40,196 1GJ,/JO VOJ,OVV 21J,✓✓., i,2✓2,Z6/
2017 458,302 113,852 700,000 187,348 1,459,502
n 7 -a0n nn n 9_r5 000 164;173 i 232,800
•018 470,855 1 �.,$.� 4 . ,L„ -� -
2019 408,409 90,662 520,000 1/41,233 1,163,303
2020 65,464 82,333 535,000 123,526 806,323
2021 61,613 84,133 560,000 101,900 807,646
2022 59,687 88,246 580,000 79,240 807,174
2023 57,762 92,238 395,000 59,740 604,740
2024 0 0 410,000 43,639 453,639
2025 0 0 430,000 26,730 456,730
2026 0 0 445,000 9,011 454,011
Total $ 11,240,528 $ 2,812,201 $ 9,200,000 $ 3,747,485 $ 27,000,214
(1) Does not include the 2002 LTGO Line of Credit (see "Bonded Indebtedness -Outstanding Debt" for details); excludes
the Refunded Bonds.
(2) Preliminary, subject to change.
8
Overlapping Taxing District
Yakima School District No. 7
West Valley School District No. 208
Yakima County
Naches School District No. 3
Total
Summary of Overlapping Debt
(As of February 1, 2007)
2007 Assessed
Value
$ 3,779,689,607
1,891,405,806
12,599,607,728
576,713,011
Percent
Overlap
94.04%
51.40
35.99
0.29
Source: Yakima County Assessor and Treasurer and individual taxing districts.
Outstanding
GO Debt
$ 29,675,000
58,610,000
41,565,000
2,640,000
Estimated
Overlapping
Debt
$ 27,907,614
30,124,537
14,961,146
7,638
$ 73,000,935
Net Direct and Overlapping Debt
The following tables present information regarding the City's direct debt (including the Bonds) and the
estimated portion of the debt of overlapping taxing districts allocated to the City's residents.
Regular Assessed Value (2007 Collection Year) (1) $ 4,586,923,853
Estimated 2006 Population (2) 81,710
Debt Information
Net Direct Debt (3) $ 13,744,053
Estimated Net Overlapping Debt (as previously detailed herein) 73,000,935
Total Net Direct and Overlapping Debt $ 86,744,988
(1) Provided by the Yakima County Assessor's Office.
(2) Estimate derived from the State of Washington, Office of Financial Management, Forecasting Division.
(3) Includes the Bonds plus limited and unlimited tax general obligation debt and lease purchase agreements; excludes
the Refunded Bonds.
Bonded Debt Ratios
Net Direct Debt to Assessed Value
Net Direct and Overlapping Debt
to Assessed Value
Per Capita Assessed Value
Per Capita Net Direct Debt
Per Capita Total Net Direct and Net Overlapping Debt
0.30%
1.89%
$ 56,137
$ 168
$ 1,062
Debt Payment Record
The City has promptly met all debt service payments on outstanding obligations. No refunding bonds have
been issued to prevent an impending default.
Future Financings
Other than the Bonds, the City has no authorized but unissued general obligation bonds outstanding, nor does
it anticipate issuing additional long-term debt within the next 12 months.
9
Taxing Authority
Authorized Property Tax Levies
The City is authorized to impose (1) a regular levy (up to $3.60/$1,000, less the Library District levy, not to
exceed $0.50/$1,000) of assessed value) and (2) excess levies (unlimited as to rate or amount). The City's
regular levy for the 2007 collection year is $3.1165/$1,000. The regular levy is imposed without a vote of the
people for general purposes, including payment of debt service on the Bonds, and is subject to limitations (see
"General Property Taxes—Regular Property Tax Limitations" herein). Excess levies are imposed, upon voter
approval, to pay debt service on unlimited tax general obligation bonds. An excess levy also may be imposed
without a vote to prevent the impairment of a contract (RCW 84.52.052).
The City's Property Tax Levies
The following table shows the City's levy rates and dollar amounts Levied since 2003.
Ad Valorem Tax Levies
(Dollars per $1,000 of Assessed Value)
Collection Levy Rates Levy Amounts
Year General Bond 4) Total General Bond (1) Total
nnn % /7\ inn 11,r inn n/An inn 101 A m1 A nnA 1)/n d' nn4 nnn d:1 A coo 1)e")
GUU/ ' ' pJ.110:) pU.UO`t7 pJ.101't qi 1`t,47‘t,70:) 4' 47Y,000 4'1Y,J00,7UJ
2006 3.3813 0.0729 3.4542 14,099,088 300,000 14,399,088
205 1.e.395 0.0763 3,158 1 M1) A 9 301)1)011 13,961),637
2004 3.4718 0.0841 3.5559 13,276,452 315,833 13,592,285
2003 3.5214 0.0957 3.6171 12,935,578 345,000 13,280,578
(1) For repayment of voted bonds; not subject to limitation on levy rates or levy amounts,
(2) In 2006 the voters of the City elected to annex to the Yakima County Rural Library District (the "Library District"). This
transaction caused a transfer of up to $0.50/$1,000 of property tax authority from the City to -the Library District. This
reduced the City's maximum levy to $3.60/$1,000 less the Library levy - capped at $0.50/$1,000. In return, the City
was released from its annual contractual obligation to pay the Library District an annual operating subsidy, amounting
to approximately $0.32/$1,000 in2006. This annexation increased the 2007 combined rate from $3.38/ $1,000 (the 2006
rate) to $3.60/$1,000 _ a $0.22/$1,000 increase. Of this voter -approved increase, the Library District is receiving an
additional $0.15/$1,000, and the City is receiving an additional $0.07/$1,000. The effect of the transaction amounts to a
greater operating levy for the Library District and about $650,000 annually in additional property tax revenue to the
City.
Sources: Yakima County Assessor's and Treasurer's Office.
10
Overlapping Taxing Districts
The overlapping taxing districts within the City have the statutory power to levy regular property taxes at the
following rates, subject to the limitations provided by chapter 84.55 RCW, and levy excess voter approved
property taxes. For purposes of demonstration, representative levy rates for "levy code 333" of Yakima
County (the "County"), as well as the statutory levy authority of each type of potential overlapping district,
are listed below.
Total Representative Total Statutory
Levy Rates Levy Authority
Per $1,000 of Per $1,000 of
Assessed Value Assessed Value
Yakima County $ 1.7383 $1.80 (2)
County (Road Levy) n/a (1) 2.25
Library District n/a (1) 0.50
Fire Protection District n/a (1) 1.50
Port District n/a (1) 0.45
The City 3.1814 3.60 (3)
Hospital District n/a (1) 0.75
State Schools 2.2536 3.60 (4)
Yakima School District No. 7 4.7269
County Emergency Services 0.2303
Total rate for Yakima County levy code 333: $ 12.1305
(1) Yakima County levy code 333 is included within the incorporated portion of Yakima County and therefore does not
have a road levy. Likewise, it does not contain either a fire district, library district, port district or a hospital district.
(2) Pursuant to RCW 84.52.043(1), a county may increase its levy from $1.80 per $1,000 to a rate not to exceed $2.475 per
$1,000 for general county purposes if (i) the total levies for both the county and any road district within the county do
not exceed $4.05 per $1,000 and (ii) no other taxing district has its levy reduced as a result of the increased county levy.
Of Yakima County's total levy rate of $1.7383, the nonvoted levy rate is $1.6697 and $0.0686 is the voted portion.
(3) RCW 41.16.060. $0.225 of the total $3.60 can be used for pension funding purposes, if required; otherwise this tax may
be levied and used for any other municipal purpose. The total levy includes a regular levy of $3.1165 and a voted
bond levy of $0.0649.
(4) RCW 84.52.043(1). The levy by the State shall not exceed $3.60 per $1,000 assessed value adjusted to the State
equalized value in accordance with the indicated ratio fixed by the State Department of Revenue to be used
exclusively for the support of the common schools.
Source: Yakima County Assessor for Levy Code 333.
General Property Taxes
The following provides a general description of the City's taxing authority and limitations thereon, the method
of determining the assessed value of real and personal property, tax collection procedures, and tax collection
information.
Authorized Property Taxes. The City is authorized to levy both "regular" property taxes and "excess" property
taxes.
(1) Regular Property Taxes. Regular property taxes are subject to constitutional and statutory limitations
as to rates and amounts and commonly are imposed by taxing districts for general municipal
purposes, including the payment of debt service on limited tax general obligation indebtedness, such
as the Bonds. Regular property taxes do not require voter approval except as described below.
(2) Excess Property Taxes. Excess property taxes are not subject to limitation as to rates or amounts but
must be authorized by a 60 percent approving popular vote, as provided in Article VII, Section 2, of
the State Constitution and RCW 84.52.052. To be valid, such popular vote must have a minimum
voter turnout of 40 percent of the number who voted at the last City general election, except that one-
year excess tax levies also are valid if the turnout is less than 40 percent and the measure receives a
number of affirmative votes equal to or greater than 24 percent of the number who voted at the last
City general election. Excess levies may be imposed without a popular vote when necessary to
prevent impairment of the obligations of contracts.
11
Regular Property Tax Limitations
The authority of a City to levy taxes without a vote of the people for general City purposes, including the
payment of debt service on limited tax general obligation indebtedness, is subject to the limitations described
below. Information relating to regular property tax limitations is based on existing statutes and constitutional
provisions. Changes in such laws could alter the impact of other interrelated tax limitations on the City.
Regular property tax levies are subject to rate limitations and amount limitations, as described below, and to
the uniformity requirement of Article VII, Section 1 of the State Constitution, which specifies that a taxing
district must levy the same rate on similarly classified property throughout the district. Aggregate property
taxes vary within the County because of its different overlapping taxing districts. In the event that the
maximum permissible levy valie5 within the City, ute low -est permissible laic for any part of LIiC City would be
applied to the entire City.
Maximum Rate Limitation. Title 84 RCW authorizes the imposition of regular tax levies to various statutory
maximums (see "Overlapping Taxing Districts" herein).
The One Percent Aggregate Regular Levy Limitation. Article VII, Section 2 of the Washington Constitution, as
amended in 1973, limits aggregate regular property tax levies by the State and all taxing districts, except port
districts and public utility districts, to one percent of the true and fair value of property. RCW 84.52.050
provides the same limitation by statute.
$ .9O/$1 ,vv OOO Aggregate Regular Levi; Lumtafion. Within the one percent limitation describeddescribedabove,
RCW 84.52,043(2) imposes an aggregate limitation on regular tax levies by all taxing districts, other than the
State, of $5.90/$1,000 of assessed value, except levies for any port or public utility district; excess levies
authorized in Article VII, Section 2 of the State Constitution; and certain levies for acquiring conservation
futures, for emergency medical services or care, and to finance affordable housing.
Uniformity Requirement. Article VII, Section 1 of the Washington Constitution requires that property taxes be
levied at a uniform rate upon the saltie class of property' Vvit in tuie .err iior tai limits of a taxing district levying
such taxes. It is possible because of different overlapping taxing districts in different areas of the City that the
maximum permissible levy might vary within the City. In that event, to comply with the constitutional
requirement for uniformity of taxation, the lowest permissible rate for any part of the City would be applied to
the entire City.
Prioritization of Levies. RCW 84.52,010 provides that if aggregate levies certified by all taxing districts exceed
the aggregate levy limitations described above, levies certified by junior taxing districts are reduced or
eliminated in order to bring the aggregate levy into compliance with the statutory maximum prescribed by
RCW 04.52.050 and 84.52.043. RCW 84.52.043 defines "junior taxing districts" as all taxing districts other than
the state, counties, road districts, cities, towns, port districts, and public utility districts.
The tax levy for unlimited fay general obligation bonds is special excess levy approved by the voters, and as
such, is not subject to the limitations on regular levies described above.
Levy Amount Limitation ("Levy Lid"). The regular property tax increase limitation (chapter 84.55 RCW) limits
the total dollar amount of regular property taxes levied by an individual local taxing district such as the City
LV IC ClilV V! 3l1lYiL ,LQAGOl CVIGL4 11 LI LG highest
lglejt i! the three 11lVJl L,Ciiii_liiiu by % limit factor, ,
plus an adjustment at the previous year's levy rate to account for taxes on new construction, annexations,
improvements, State -assessed property and wind -power turbines assessed as real property.
Under Initiative 747 ("I-747") passed by the voters in 2001, the limit factor is the lesser of 101 percent of the
highest levy in the three previous years or 100 percent plus inflation, unless a greater amount is approved by
a simple majority of the voters. On June 13, 2006, a King County Superior Court ruled Washington State
Initiative 747 unconstitutional. Initiative 747 limits annual increases in the amount of regular property taxes
levied by the City. Since Initiative 747, the City has generally been subject to a one percent limit on annual
increases (except for, among other things, increases resulting from new construction). The recent King County
Superior Court order voided the Initiative and enjoined the State of Washington from enforcing the Initiative.
12
The State Attorney General filed an appeal to the State Supreme Court and has been granted a stay of the
lower court's decision pending the State Supreme Court's final decision. The State Supreme Court is expected
to hear the case in 2007. The City cannot predict whether the Superior Court decision invalidating the
Initiative will be upheld or, if upheld, whether the Legislature would re-enact the one percent limit rather than
permitting a return to the higher limits m effect prior to Initiative 747 (generally permitting annual increases
equal to the lesser of inflation or six percent).
RCW 84.55.092 allows the property tax levy to be set at the amount that would be allowed if the tax levy for
taxes due in each year since 1986 had been set at the full amount allowed under Chapter 84.55 RCW. This is
sometimes referred to as "banked" levy capacity. The City does not have any banked levy capacity.
With a majority vote of its electors, a taxing district may levy, within the rate limitations described above,
more than what otherwise would be allowed by the tax increase limitation indefinitely or for a limited period
or to satisfy a limited purpose, as allowed by RCW 84.55.050. This is known as a "levy lid lift." A newly
created taxing district can initiate its levy at the maximum permitted statutory levy rate, unless that rate would
exceed any of the limitations described above.
Since the regular property tax increase limitation applies to the total dollar amount levied rather than to levy
rates, increases in the assessed value of all property in the taxing district (excluding new construction,
improvements and State -assessed property) which exceed the rate of growth in taxes allowed by the limit
factor result in decreased regular tax levy rates, unless voters authorize a higher levy or the taxing district uses
banked levy capacity. Decreases in the assessed value of all property in the taxing district (including new
construction, improvements and State -assessed property) or increases in such assessed value that are less than
the rate of growth in taxes imposed, among other events, may result in increased regular tax levy rates.
Special excess levies approved by a 60 percent majority of the voters and meeting minimum voter turnout
requirements are not subject to the rate or amount limitations on regular levies described above.
Assessed Value
The County Assessor, or equivalent thereof ("Assessor"), determines the value of all real and personal
property throughout the County that is subject to ad valorem taxation, except certain utility properties which
are valued by the State Department of Revenue. The Assessor is an elected official whose duties and methods
of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the
State Department of Revenue.
For tax purposes, the assessed value of property is 100 percent of its market value. Three approaches may be
used to determine real property value: market data, replacement cost and income generating capacity. In the
County, all property is subject to an annual property valuation and an on-site revaluation every six years. The
property is listed by the Assessor on a roll at its current assessed value and the roll is filed in the Assessor's
office. The Assessor's determinations are subject to revisions by the County Board of Equalization and, for
certain property, subject to further revisions by the State Board of Tax Appeals.
Tax Collection Procedure
Property taxes are levied in specific amounts and the rate for all taxes levied for all taxing districts in the
County is determined, calculated and fixed by the Assessor based upon the assessed value of the property
within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district on a
tax roll that contains the total amount of taxes to be so levied and collected. By January 15 of each year, the tax
roll is delivered to the County Treasurer, or equivalent thereof, who creates a tax account for each taxpayer
and is responsible for the collection of taxes due to each account. All such taxes are due and payable on April
30 of each year, but if the amount due from a taxpayer exceeds $50, one-half may be paid then and the balance
no later than October 31 of that year. Delinquent taxes are subject to interest at the rate of 12 percent per year
computed on a monthly basis from the date of delinquency until paid. In addition, a penalty of three percent
is assessed on June 1st of the year in which the tax was due and eight percent on December 1st of the year due.
All collections of interest on delinquent taxes are credited to the County's current expense fund. The method
of giving notice of payment of taxes due, the accounting for the money collected, the division of the taxes
among the various taxing districts, notices of delinquency, and collection procedures are covered by detailed
statutes. The lien on property taxes is prior to all other liens or encumbrances of any kind on real or personal
13
property subject to taxation. By law the County Treasurer may not commence foreclosure of a tax lien on real
property until three years have passed since the first delinquency. The State's courts have not decided
whether the Homestead Law (chapter 6.13 RCW) may give the occupying homeowner a right to retain the first
$40,000 of proceeds of the forced sale of the family residence or other "homestead" property for delinquent
general property taxes. (See Algona v. Sharp, 30 Wn. App. 837, 638 P.2d 627 (1982), holding the homestead
right superior to the improvement district assessments.) The United States Bankruptcy Court for the Western
District of Washington has held that the Homestead Exemption applies to the lien for property taxes, while the
State Attorney General has taken llC position that
ii. does not. )C.
Collection
Year
2007
2006
2005
2004
2003
2002
City of Yakima
Tax Collection Record
Regular Ad Valorem
Assessed Value (1) Tax Levy
$ 4,586,923,853 $14,588,963
4,169,739,611 14,399,088
3,971,667,847 13,960,632
3,824,096,823 13,592,285
3,673,433,781 13,280,578
3,268,615,861 12,390,073
Tax Collection
Year
of Levy
(2)
97.6%
96.1
96.8
96.7
95.4
As of
02/01/07
(2)
97.6%
99.0
99.5
99.9
99.9
(1) Assessed valuation is based upon 100 percent of actual valuation.
(2) In process of collection.
NOTE: Taxes are due and payable on April 30 of each year of the levy. The entire tax or first half must be paid on or
before April 30, otherwise the total amount becomes delinquent on May 1. The second half of the tax is payable
oil or before October 31, bec11TLlilg delinquent 11 TTOvelnlbcr 1.
Source: City of Yakima and Yakima County Assessor's Office,
Taxpayer
Yakima HMA Inc. (1)
Shields Bag & Printing Co.
Longview Fibre Co.
Qwest Corporation
Safeway Stores Inc,
Jeld-Wen Windows & Doors
Hansen Fruit Company LP
Washington Fruit & Produce
Yakima Valley Subsidiary
Cascade Natural Gas Corporation
City of Yakima
Major Property Taxpayers
Jape of Business
Hospital
Manufacturing
Manufacturing
Telecommunications
Food and beverage
Wood products
Fruit processing
Fruit processing
Medical services
Utilities
Subtotal - Ten of the City's Largest Taxpayers
All Other City Taxpayers
Total ('i -h, Taxpayers
J 1 J
(1) Formerly Providence Health Systems, a non-profit medical facility.
Regional Medical and Cardiac Center.
Source: Yakima County Treasurer's Office.
14
2007 Collection Year
Assessed Valuation
$ 53,515,199
34,815,751
24,007,854
21,543,014
20,102,613
17,430,035
16,791,638
16,293,819
14,847,150
14,439,196
233,786,269
4,353,137,584
4, 586,923,8.53
Percent of
City's
Total A.V.
1.17%
0.76
0.53
0.47
0.44
0.38
0.37
0.35
0.32
0.31
5.10
94.90
100.00 °!
Yakima HMA Inc. is doing business as Yakima
Authorized Investments
Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess of
current needs to the following authorized investments: United States bonds; United States certificates of
indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants
of a local improvement district which are within the protection of the local improvement guaranty fund law;
and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter
43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified
public depositories; in obligations of the US government, its agencies and wholly owned corporations; in
bankers' acceptances; in.commercial paper; in the obligations of the federal home loan bank, federal national
mortgage association and other government corporations subject to statutory provisions and may enter into
repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local
improvement district are also eligible investments (RCW 35.39.030).
Money available for investment may be invested on an individual fund basis or may, unless otherwise
restricted by law, be commingled within one common investment portfolio. All income derived from such
investment may be either apportioned to and used by the various participating funds or for the benefit of the
general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds
or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances,
resolutions or bond covenants may lawfully prescribe.
Local Government Investment Pool
The State Treasurer's Office administers the Washington State Local Government Investment Pool i (the
"LGIP"), a $5.1 billion dollar fund that invests money on behalf of more than 350 cities, counties and special
taxing districts. In its management of LGIP, the State Treasurer is required to adhere, at all times, to the
principles appropriate for the prudent investment of public finds. These are, in priority order, (i) the safety of
principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) to attain the highest
possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to
meet all cash flow demands.
The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the
opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants
increased safety of principal and the ability to achieve a higher investment yield than would otherwise be
available to them. The pool is restricted to investments with maturities of one year or less, and the average life
typically is less than 90 days. Investments permitted under the pool's guidelines include U.S. government and
agency securities, bankers' acceptances, high quality commercial paper, repurchase and reverse repurchase
agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State
depositories.
Authorized Investments for Bond Proceeds
In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds
with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of less
than four years; municipal securities rated in one of the four highest categories; and money market funds
consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest rating
categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money
market funds with portfolios of securities otherwise authorized by law for investment by local governments
(RCW 39.59.030).
See "The City - Cash and Investments" for more information regarding the City's investment practices.
15
City of Yakima
Comparative General Fund Balance Sheet
(Fiscal Years Ended December 31)
Unaudited Audited
2006 2005 2004 2003 2002
Assets and Other Debits
Cash & Equity in Pooled Investments $ 8,870,302 $ 7,497,410 $ 8,021,708 $ 8,55p 215 $ 7,704,560
Receivables:
Taxes 4,100,191 4,201,726 3,684,741 3,363,202 862,274
Accounts 51,652, 113,498 153,443 174,20G 174,086
Interest/Penalties 133,286 131,653 70,611 89,499 287,596
Other 0 0 6,397 0 0
Due from Other Funds 395,685 511,606 242,101 584,875 1,066,233
Due from Other Gov't Units 129,660 38,210 28,880 73,368 26,964
Inventories 50,181 48,671 44,150 27,933 26,802
Total Assets
13,730,958 12,542,774 12,252, 031 12,863,298 10,148, 515
Liabilities
Warrants/Accounts Payable 513,301 448,896 503,264 606,871 389,798
Wages/Benefits Payable 3,348,383 2,918,085 2,655,805 2,551,753 2,246,608
Due to Governments 55,552 46,513 37,258 22,399 24,585
Deposits Payable 247,429 58,511 68,183 271,744 214,524
Deferred Revenues 44,414 106,774 136,987 153,690 897,784
Total Liabilities
Fund Equity and Other Credits
Fund Balance:
4,209,079 3,578,779 3,401,497 3,606,457 3,773,299
Reserved 377,505 277,565 383,582 781,001 788,694
Unreserved 9,144,374 8,686,430 8,466,952 8,475,840 5,586,522
Total Fund Equity and Other Credits 9,521,879 8,963,995 8,850,534 9,256,841 6,375,216
Total Liabilities, Equity and Other Credits $ 13,730,958 $ 12,542,774 $ 12,252,031 $ 12,863,298 $ 10,148,515
Source: City of Yakima.
16
(1)
(2)
(3)
City of Yakima
Comparative General Fund Statement
of Revenues, Expenditures and Changes in Fund Balance
(Fiscal Years Ended December 31)
Revenues
Taxes and Special Assessments
Licenses and Permits
Intergovernmental
Charges for Services
Fines and Forfeitures
Interest
Other
Unaudited Audited
2006 2005 2004
$ 34,350,810 $ 32,066,945 $ 30,119,323
741,492 690,783 529,767
2,115,772 1,763,988 1,605,395
4,182,839 4,290,541 4,201,981
1,309,431 1,190,300 1,363,565
694,610 735,857 414,847
137,532 57,00.1 40,518
Total Revenues $ 43,532,486 $ 40,795,415 $ 38,275,396
Expenditures
General Government
Security of Persons and Property
Physical Environment
Economic Environment
Mental and Physical Health
Culture and Recreation
Capital Outlay
Debt Service
Total Expenditures
Excess of Revenues
Over (Under) Expenditures
Other Financing Sources (Uses)
Proceeds from Capital Lease Financing
Operating Transfers In
Operating Transfers (Out) (2)
Intergovernmental Agreements
Sale of Capital Assets
Comp. For Loss of Gen. Fixed Assets
Total Other Financing Sources (Uses)
Excess of Revenues and Other Sources
Over (Under) Expenditures/Other Uses
Fund Balance, January 1
Change in Reserve for Inventory
10,329,835 9,852,233 9,783,461
26,751,975 25,098,721 23,297,962
1,341,936 1,328,608 1,326,367
694,277 607,358 582,593
17,569 18,255 16,952
1,320,440 1,419,440 1,421,107
126,502 64,800 200,122
394,797 393,142 357,374
40,976,756 38,782,557 36,985,938
2,555,730 2,012,858 1,289,458
0 0 147,669
40,000 90,000 145,000
(2,100,949) (1,994,240) (2,005,430)
(39,095) 0 0
100,000 0 0
688 322 779
(1,999,356) (1,903,918)
2003
$ 28,294,713
469,716
1,739,409
3,861,959
1,396,796
425,786
(259,859) (1)
$ 35,928,520
8,963,242
22,262,081
1,230,396
503,422
15,327
1,405,448
56,641
211,843
2002
$ 26,565,287
405,856
1,749,790
3,723,724
1,631,877
558,359
56,453
$ 34,691,346
8,662,004
20,794,442
1,242,009
419,434
23,219
1,251,178
93,030
212,403
34,648,400 32,697,719
1,280,120 1,993,627
0 0
110,000 110,000
(1,845,427) (1,919,371)
0 0
0 0
1,143 2,774
(1,711,982) (1,734,284) (1,806,597)
556,374 108,940 (422,524) (454,164) 187,030
8,963,995 8,850,534 9,256,841 9,709,874 (3) 6,191,466
1,510 4,521 16,217 1,131 (3,280)
Ending Fund Balance $ 9,521,879 $ 8,963,995 $ 8,850,534
$ 9,256,841 $ 6,375,216
Prior period adjustment.
The majority of operating funds transferred out of the general fund are used to fund parks programs, contingency
funds and the City's public safety communications network.
In conjunction with GASB 34, the City also implemented GASB 33, which defines revenue recognition for "no
exchange" (i.e. tax) transactions. As a result of the implementation of GASB 33, a change in accounting principle was
determined to have occurred. This change caused a restatement of $3,334,658 in the General Fund beginning fund
balance to comply with the pronouncement.
Source: City of Yakima.
17
The City
The City of Yakima was incorporated in 1886. It is the tenth largest city in the State of Washington (the
"State"), and encompasses approximately 23 square miles. The City provides the full range of municipal
services including public safety (police, fire, building), public improvements (streets, traffic signals, storm
sewer, irrigation utility), sanitation (solid waste disposal, wastewater utility), water utility, irrigation utility,
community development, parks and recreation, and general administrative services.
The City operates under a council/manager form of government with a full-time city manager. The City
Council (the "Council") consists of seven council members. Four members are elected from individual
districts and three are elected at large. The mayor is chosen by the Council from within its own membership
every two years.
Elected Officials
City Council
David Edler, Mayor
Neil McClure, Asst. Mayor
Ronald J. Bonlender
Micah Cawley
Norm Johnson
Bill Lover
Susan J. Whitman
Term Expires
December 31, 2007
December 31, 2007
December 31, 2007
December 31, 2009
December 31, 2009
December 31, 2009
December 31, 2007
Key Administrative Staff
Richard A. Zais, jr., City Manager. Mr. Zais joined the City in 1973 as the Administrative Assistant to the City
Manager and was appointed to the position of City Manager in 1979. Mr. Zais is responsible for the
supervision and direction of a full-service city with seven operating departments. Mr. Zais administers the
$164 million annual City budget with a $55 million annual payroll for over 600 full-time employees. Mr. Zais
serves as the Council's chief advisor, appoints all administrative officers and employees and executes Council
policy and programs. Mr. Zais' educational background is in public administration with a B.A. and M.P.A.
from the University of Washington.
Rita M. DeBord, Director of Finance & Budget. Ms. DeBord joined the City in 1999 as the Finance Director,
coming from Puget Sound Energy Corporation. Ms. DeBord is responsible for all financial and treasury
services, budgeting and accounting, utility customer services and information systems for the City. During
her 21 years with Puget Sound Energy, Ms. DeBord served in many capacities including the following key
management positions: Manager of District Operations; Manager of Corporate Budgets; and Manager of
Information Systems Project. Ms. DeBord has a degree in Accounting from Central Washington University, is
a Certified Public Accountant ("CPA") and is a member of the American Institute of Certified Public
Accountants and the Washington Society of Certified Public Accountants,
Timothy Ivi. jensen, Treasury Services Officer. Mr. jensen joined the City ui 1990 as an accountant, coming from a
national public accounting firm where his primary duties were as a senior auditor. Mr. Jensen was appointed
the City's Treasury Services Officer in 2001 where he oversees the security of the City's investments, cash
management, and debt administration and performs high-level financial analysis. Mr. jensen obtained a
Bachelor of Science in Accounting from Central Washington University in 1986, passed the CPA exam, and
practiced as a CPA for six years. Mr. Jensen also studied Economics at the University of California, Berkeley
and the University of Nevada, Reno from 1974 through 1977. Mr. Jensen is an executive officer of the
Washington Finance Officers Association ("WFOA") and will be President of that organization in 2008. He has
served on the Board of Directors of WFOA since 1998. Mr. Jensen is a past member of the Washington State
Local Government Investment Pool Advisory Committee. He is also currently serving on the Washington
State Auditor's Local Government Advisory Committee and has served two different State Treasurers on
select issue committees.
18
Cindy J. Epperson, Financial Services Manager. Ms. Epperson joined the City in 1990 as an accountant, previously
working in the agricultural industry as an accounting manager and as a Senior Auditor for an international
accounting firm. Ms. Epperson was promoted to Financial Services Manager in 1998, where she has the
responsibility for the City's accounting systems and processes including financial statement preparation. Ms.
Epperson is a key strategic participator in the development of the City's budget, in maintaining the City's fiscal
stability, and in generating and/or analyzing complex financial proposals to further the City's critical goals
and objectives. Ms. Epperson obtained a Bachelor of Science degree in Accounting from the University of
Arkansas in Little Rock and passed the CPA exam
Labor Relations
The City currently employs approximately 652 full-time and 18 part-time and temporary employees. A
majority of the City's employees are represented by bargaining units as follows:
Bargaining Unit
AFSCME Municipal
YPPA
Fire Suppression
AFSCME Transit
Fire Communications
Fire PERS
Number
of Employees
282
114
81
47
11
14
Contract Expiration Date
December 31, 2009
December 31, 2005 (1)
December 31, 2006 (1)
December 31, 2006 (1)
December 31, 2006 (1)
December 31, 2006 (1)
(1) Currently under negotiation; City management has proposed a wage freeze for 2007.
The City considers its relationships with its employee groups and bargaining units to be satisfactory.
Pension System
Public Employees' Retirement System ("PERS"). Substantially all of the City's full-time and qualifying part-time
employees, other than those covered under union plans, participate in PERS. This is a statewide local
government retirement system administered by the Washington State Department of Retirement Systems,
under cost-sharing, multiple -employer defined benefit public employee retirement plans. The PERS system
includes three plans.
Participants who joined the system by September 30, 1977, are PERS Plan I members. Those joining thereafter
are enrolled in PERS Plan II. A third plan, entitled PERS Plan III, provides members with a defined benefit
plan similar to PERS Plan II and the opportunity to invest their retirement contributions in a defined
contribution plan.
PERS Plan I members are eligible for retirement at any age after 30 years of service, at age 60 with five years of
service, or at age 55 with 25 years of service. The annual pension is two percent of the average final
compensation per year of service, capped at 60 percent. The average final compensation is based on the
greatest compensation earned during any 24 eligible consecutive compensation months.
PERS Plan II members may retire at age 65 with five years of service or at 55 with 20 years of service. The
annual pension is two percent of the average final compensation per year of service. PERS Plan II retirements
prior to 65 are actuarially reduced. On July 1 of each year following the first full year of retirement service, the
benefit will be adjusted by the percentage change in the Consumer Price Index ("CPI") of Seattle, capped at
three percent annually.
PERS Plan III is structured as a dual benefit program that will provide members with the following benefits:
• A defined benefit allowance similar to PERS Plan II calculated as one percent of the average final
compensation per year of service (versus a two percent formula) and funded entirely by employer
contributions.
• A defined contribution account consisting of member contributions plus the full investment return
on those contributions.
19
Each biennium, the State Pension Funding Council adopts PERS Plan I employer contribution rates and PERS
Plan II employer and employee contribution rates. Employee contribution rates for PERS Plan I are
established by statute at six percent and do not vary from year to year. The employer and employee
contribution rates for PERS Plan II are set by the director of the Department of Retirement Systems, based on
recommendations by the Office of the State Actuary, to continue to fully fund PERS Plan II. Unlike PERS
Plan II, which has a single contribution rate (which is currently 2.25 percent), with PERS Plan III, the employee
chooses how much to contribute from one to six contribution rate options. Once an option has been selected,
t ----t - choice irrevocable ----1 ., ---- 1 hang --l-- er
the contribution rale ulul�e 1� irrevu�avie u1ue55 the employee changes employers.
All employers are required to contribute at the level established by State law. The methods used to determine
the contribution requirements are established under State statute in accordance with Chapters 41.40 and 41.26
RCW.
For the year ending December 31, 2006, the City's contribution of $732,732, or 3.01 percent of covered payrolls,
represents its full liability under the system, except that future rates may be adjusted to meet the system needs.
Adopted PERS Employer Contribution Rates
Effective Effective Effective Effective
7/1/06 1/1/07 7/1/07 7/1/08
T\Tnrmal Rate 4 I,f% 1 cifl% d.1 c?/, d Rq%
PERS I Unfunded Liability 0.01 1.78 1.69 2.57
Gain Sharing 0.00 0.00 0.62 0.62
DRS Admin. Expense -Rate 0.18
.10 V .10 0.18 0.18 .10
Total PERS Employer Rate 3.69% 5.46% 6.64% 8.20%
Law Enforcement Officers' and Fire Fighters' Retirement System ("LEOFF"). LEOFF is a cost-sharing multiple -
employer defined benefit pension plan. Membership in the plan includes all full-time, fully compensated local
law enforcement officers, and fire fighters. The LEOFF system includes two plans.
Participants who joined the system by September 30, 1977, are LEOFF Plan I members. Those joining
thereafter are enrolled in LEOFF Plan II. Retirement benefits are financed from employee and employer
contributions investment earnings and State contribµtions. Retirement benefits in both T EOFF Plan T and
LEOFF Plan II are vested after completion of five years of eligible service.
LEOFF Plan I members are eligible to retire with five years of service at age 50. The service retirement benefit
is dependent upon the final average salary and service credit years at retirement. On April 1 of each year
following the first full year of retirement service, the benefit will be adjusted by the percentage change in the
CPI of Seattle.
Term of Service
Percent of
Final Average
5-9 Years
1.0%
10-19 Years
1.5
20 or more years
2.0
T EOI T Plan
TT members _ eligible t the _ .,L 50 with r1(1 of service ..t 53 - -with �:..`. of
t,ivb n 1 heal �1 1.�LC1i vC1 are e 1 1 1e W retire u,, the f"�"C v1 vv .7141! �U years ; .J1 J1 +.+ .-.� . • _+.. _- • _- )�=-----
service. Retirement benefits prior to age 53 are actuarially reduced at a rate of three percent per year. The
benefit is two percent of the final average salary per year of service. The final average salary is determined as
the 60 highest paid consecutive service months. There is no limit on the number of service credit years, which
may be included in the benefit calculation. On July 1 of each year following the first full year of retirement
service, the benefit will be adjusted by the percentage change in the CPI of Seattle, capped at three percent
annually.
LEOFF Plan I employer and employee contribution rates are established by statute, and the State is responsible
for the balance of the funding at rates set by the Pension Funding Council to fully amortize the total costs of
the plan. Employer and employee rates for LEOFF Plan II are set by the director of the Department of
20
Retirement Systems, based on recommendations by the Office of the State Actuary, to continue to fully fund
the plan. LEOFF Plan II employers and employees are required to contribute at the level required by State
law. The methods used to determine the contribution rates are established under State statute in accordance
with Chapters 41.26 and 41.45 RCW.
For the year ending December 31, 2006, the City's contribution to LEOFF I (for participants who joined the
system by September 30, 1977) of 0.19 percent and to LEOFF II (participants who joined after September 30,
1977) of 4.9 percent of covered payroll totaled $15,174,689, representing its full liability under the system,
except that future rates may be adjusted to meet the system needs.
Historical trend information regarding all of these plans is presented in Washington State's Department of
Retirement Systems' annual financial report. A copy of this report may be obtained at:
Department of Retirement Systems
Point Plaza West
1025 East Union Street
P.O. Box 48380
Olympia, WA 98504-8380
Internet Address: www.drs.wa.gov
According to information provided by the Office of State Actuary, the LEOFF System currently has no
unfunded actuarial accrued liability.
Unfunded Pension Liabilities. The City maintains two single employer defined benefit pension plans, Firemen's
Pension and Police Pension, which are closed systems covering Firemen and Police Officers hired prior to
March 1, 1970. Both plans had their first annual actuarial valuation as of March 31, 1989, and actuarial studies
are performed every five years with the most recent update completed January 1, 2003. The required
contributions identified in these valuations have been the basis for recording the unfunded pension liability
since 1989.
The Police Pension is a department in the General Fund, and is operating on a pay-as-you-go basis. The
unfunded pension liability will be adjusted annually by comparing actual expenditures for pension benefits to
the actuarially determined contribution. The City intends to maintain this plan on a pay-as-you-go basis. This
fund had an unfunded pension liability of $4,309,741 at December 31, 2006.
The Firemen's Relief and Pension Fund is a trust fund, and has as its funding sources a portion of local
property taxes, a state tax on fire insurance premiums and interest income. This fund had an unfunded
pension liability of $1,073,261 at December 31, 2006. An actuarial study was completed January 1, 2003.
Other Post Employment Benefits
The Government Accounting Standards Board ("GASB") has issued a new standard concerning Accounting
and Financial Reporting by Employers for Post Employment Benefits Other than Pensions ("GASB 45"). In
addition to pensions, many state and local governmental employers provide other post employment benefits
("OPEB") as a part of total compensation to attract and retain the services of qualified employees. OPEB
includes post employment healthcare, as well as other forms of post employment benefits when provided
separately from a pension plan. The new standard provides for the measurement, recognition and display of
OPEB expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required
supplementary information in the financial reports. This pronouncement is effective for the City for the fiscal
year ending after December 15, 2007.
To date, the City has not had an actuarial study performed to comply with GASB 45. The City plans to have
an actuarial study performed by March 31, 2008 for the fiscal year ending December 31, 2007.
21
Risk Management
The City maintains reserve funds to provide for self-insurance coverage in the areas of Unemployment
Compensation, Medical/Dental coverage, and Workers' Compensation. In addition, the City maintains a Risk
Management Fund to provide for property, liability, and other coverages.
Unemployment Compensation. In 1978, the City established an Unemployment Compensation Reserve Fund to
provide unemployment compensation coverage for its employees, and thereby elected to participate with the
State in a cost -reimbursement instead of monthly premium program. In doing so, the City retained its right to
appeal awards and determinations made by the State Department of Employment Security.
Self-insured Medical/Dental Program. The City, in 1979, self-insured its medical and dental programs for all
1,___.,_ 1 1___ 1____ .] l.___.,__ 1_i_,_.1 1_ less 1_,.__ 1Lcu1 time The City
employees other than temporary employees and Ci1LfilUy CCJ hired W WU1R iC3J LilLiiL 1LLLll-Lila LC. 11LC City's
Human Resources Office administers the self-insured program and claims payment services are provided by
Health Care Management Administration, Inc.
Each operating fund is charged an amount per covered employee which would otherwise have been paid to
an insurance carrier. Interfund premiums to the Employee Health Benefit Reserve Fund for 2006 were
$6,641,801. Incurred but not reported claims of $984,044 were accrued as a liability.
In order to avoid catastrophic losses, the City "reinsures" the program by purchasing insurance known as
"stop -loss insurance." Two types of "stop -loss" insurance are purchased: (i) individual stop -loss, and
(ii) aggregate stop -loss, with both provided through Sun Life Insurance Company. Under the individual stop-
loss insurance, the City pays the first $15i i,000 of claims for an individual employee or dependent, Any
charges accrued by an individual in excess of $150,000 in a calendar year are thereafter reimbursed by Sun Life
up to $1 million per person. The aggregate stop -loss is designed to protect the City from multiple large claims
which may not reach the individual stop -loss attachment point of $150,000. The aggregate stop -loss
attachment point is calculated by determining the projected amount of claims for the year and adding an
additional 25 percent of that amount (125 percent of projected claims)
Workers' Compensation Program. The City self-insured its workers' col1Lpensat101L program for all employees
except those covered by the T EOFF T Retirement System in 1984. This workers' compensation program
provides coverage identical to the State -administered workers' compensation program; however, the City pays
only the direct injury -related costs and certain administrative fees. The program is administered by the City's
Human Resources Office with claims administration and safety services provided by NovaPro Risk Solutions
(formerly Ward North America).
Each operating fund is charged an appropriate accrual amount, per employee, based on rate requirements
prescribed by the State. Each year the reserve fund is reviewed to determine a contribution rate which
provides for an appropriate reserve. Interfund premiums to the Workers' Compensation Fund for 2006 were
$981,803. Based on the claim manager's estimate, the City has accrued incurred but not reported claims of
$636,219 at December 31, 2006.
In order to avoid catastrophic losses, the City "reinsures" the program by purchasing insurance known as
"stop -loss insurance." This insurance is provided through Wells Fargo Insurance Company under a policy
purchased from Employers Reinsurance Corporation. Under the individual stop -loss portion of the insurance,
the City pays the first $500,000 of a claim and the insurance company pays (a) the balance up to $1 million for
individual
�•] �1 l_ •___ _ /1\ .1_ 1__1___ •_ _ ( $25 ___illi___ C__. multiple _7___�- arising
11011 .. single an uaazav laz azul <luiilL 'vl ii%� las balance ilii Lv a$ ilLdniiiiiilli of y,Gv million for 11LiaiLlfiiC �iG 1�1L ii:✓zl.l� from ,,.. v..,.LbiC
incident.
Risk Management Program. The Risk Management Reserve Fund was established in 1986 when the City
elected to self -insure the liability exposure portion of its insurance program. Resources accrue to the fund
through interfund premiums to Operating Funds for appropriate insurance coverage and the replenishment
and building of reserves for potential liability claims. City contributions to the Risk Management Reserve
Fund for 2006 were $2,027,904. The Fund provides for administration, legal services, claims adjustment, and
for the purchase of property, excess liability and other insurance coverage.
22
Liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can
be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported.
The result of the process to estimate the claims liability is not an exact amount as it depends on many complex
factors, such as inflation, changes in legal doctrines and damage awards. Accordingly, claims are reevaluated
periodically to consider recent claim settlement trends, inflation and other economic and social factors. The
estimate of the claims liability also includes amounts for incremental claims adjustment expenses related to
specific claims. Based on these factors, the claims manager's estimate of claims liability was $1.1 million as of
December 31, 2006. In late 2005, the City joined an insurance pool and now maintains general liability
coverage of $15 million, insured by St. Paul Travelers with a $100,000 deductible. The City also joined the
Washington State Transit Insurance Pool (WSTIP) in September 2005. The deductible for the Transit Division
for this program is $5,000 with $12 million in general liability coverage.
Accounting Policies
Accounting records for the City are maintained in accordance with methods prescribed by the State Auditor
under the authority of Washington State law. The City financially reports on the calendar year basis and
employs a double -entry modified accrual system for all fund categories with the exception of proprietary,
nonexpendable and pension trust funds which require full accrual reporting. The modified accrual basis
differs from the accrual basis in the following ways: (i) purchases of capital assets are considered
expenditures; (ii) redemption of long-term debt is considered an expenditure when due; (iii) revenues are
recognized only when they become both measurable and available to finance expenditures of the current
period, revenues that are measurable but not available are recorded as receivable and offset by deferred
revenues; (iv) inventories and prepaid items are reported as expenditures when purchased; (v) interest on
long-term debt is not accrued but is recorded as an expenditure when due; and (vi) accumulated unpaid
vacation and sick pay are considered expenditures when paid. In accordance with GASB 34, the City has
implemented this accounting standard in its December 31, 2005 financial statement.
Fund Accounting. The accounts of the City are organized on the basis of funds each of which is considered a
separate accounting entity. The City uses governmental, proprietary and fiduciary funds. Each governmental
fund and expendable trust or agency fund is accounted for with a separate set of self -balancing accounts that
comprise its assets, liabilities, fund balances, revenues and expenditures. Proprietary and similar trust funds
use the revenue, expense and equity accounts of similar businesses in the private sector. The City's resources
are allocated to and accounted for in individual funds depending on what they are to be spent for and how
they are controlled.
Governmental Funds. All governmental funds are accounted for on a spending or "financial flow"
measurement focus. This means that only current assets and current liabilities are generally included on their
balance sheets. Their reported fund balance (net current assets) is considered a measure of "available
expendable resources." Governmental fund operating statements focus on measuring changes in financial
position, rather than net income; they present increases (revenues and other financing sources) and decreases
(expenditures and other financing uses) in net current assets.
Budgetary Process
The City Council annually approves the City's operating budget. The operating budget is designed to allocate
available resources among the City's services and programs and to provide for associated financing decisions.
Annual appropriated budgets are adopted on the modified accrual basis of accounting. For governmental
funds, there are no differences between budgetary basis and generally accepted accounting principles.
Budgetary accounts are integrated in fund ledgers for all budgeted funds, but the financial statements include
budgetary comparisons for the General Fund and Special Revenue Funds only. Budgets for debt service and
capital projects are adopted at the level of the individual debt issue or project and for fiscal periods that
correspond to the lines of debt issues or projects. Annual appropriated budgets are adopted at the fund level.
Subsidiary revenue and expenditure ledgers are used to compare the budgeted amounts with actual revenues
and expenditures. As a management control device, the subsidiary ledgers monitor expenditures for
individual functions and activities by object class. Appropriations for general and special revenue funds lapse
at year-end.
23
The City Manager is authorized to transfer budgeted appropriations between departments within any fund;
however, any revisions that alter the total expenditures of a fund, or that affect the number of permanently
authorized employee positions, salary ranges, or other conditions of employment must be approved by the
Council.
Cash and Investments
Cash and investments are managed under the guidance of the City's Investment Policy adopted by a
resolution of the Council. The policy was based on the Model Investment Policy prepared by the Municipal
Treasurers' Association of the United States and Canada and applies to all financial assets of the City.
Investments are made using the "prudent person" standard with primary objectives being safety of principal,
liquidity enabling the City to meet all operating requirements and a return on investment objective of attammg
a market rate of return through budgetary and economic cycles. City policies require the City to minimize
counterparty risks by safekeeping all purchased securities and conducting all trades on a delivery versus
payment basis. A report on the performance of the Treasury Division is prepared quarterly for review by the
Council and City Manager.
Investments of City funds except those of the Firemen's Relief and Pension Fund are limited to: (i) investment
deposits, including certificates of deposit with qualified public depositories as defined in chapter 39.59 RCW;
(ii) certificates, notes or bonds of the United States, or other obligations of the United States, or its agencies, or
of any corporation wholly owned by the government of the United States; (iii) obligations of government-
sponsored corporations which are eligible as collateral for advances to member banks as determined by the
Board of Governors of the Federal Reserve System; (iv) banker's acceptances sold on the secondary market; (v)
the LGIP; and (vi) high quality commercial paper.
The market value of investments held in the combined porifolios under the control of the Department of
Finance and Budget as of December 31, 2006 was $53.3 million. Of that amount, 43 percent was in agency
securities, 56 percent was in the LGIP and one percent was invested in U.S. Treasuries. See "Appendix C
2005 Annual Financial Report" for a breakdown of investments.
Auditing of City Finances
Accounting systems and budgetary controls are prescribed by the Office of the Sate Auditor in accordance
with RCW 43.09.200 and RCW 43.09.230. The City complies with the systems and controls prescribed by the
Office of the State Auditor and establishes procedures and records which reasonably assure safeguarding of
assets and the reliability of financial reporting (see "Authorized Investments" herein).
The State Auditor is required to examine the affairs of cities at least once every two years. The City is audited
annually. The examination must include, among other things, the financial condition and resources of the
City, whether the laws and constitution of the State are being complied with, and the methods and accuracy of
the accounts and reports of the City. Reports of the auditor's examinations are required to be filed in the office
of the State Auditor and in the finance department of the City.
The audited financial statements of the City for the year ended December 31, 2005, attached as Appendix C,
are incorporated by reference to this Official Statement and have been filed with the current nationally
recognized municipal securities information repositories ("NRMSIR").
24
Demographic Information
The City lies in central Washington State in the County about 142 miles southeast of
Seattle and 188 miles northeast of Portland, Oregon. The County ranks second in the
State in terms of square miles and seventh in terms of population. The City is the
County seat and the largest incorporated community in the County encompassing 23
square miles. Population history for both the City and County in recent years is
shown in the following table:
April 1
2006
2005
2004
2003
2002
Population
Yakima County and the City
Yakima
County
231,800
229,300
227,500
226,000
225,000
* The City completed an annexation of 1,990 citizens in June 2005.
Source: Washington State Office of Financial Management, June 2006.
of Yakima
City of
Yakima
81,710
79,480*
79,480
79,220
79,120
Economic Indicators
Major Employers. The economy of the City is based on government -related jobs and agriculture that produces
and processes tree fruits, hops, mint, vegetables, livestock, dairy and grapes for wine. The City is the center of
the County's economic activity.
Employer
Yakima Valley Memorial Hospital
Washington State D.S.H.S.
Yakima School District No. 7
Yakima County
Yakima Regional Medical
Wal-Mart
Tree Top, Inc.
City of Yakima
Yakima Valley Community College
A.B. Foods, Inc,
Snokist Growers
Shields Bag & Printing Company
E.P.I.C.
Washington Fruit & Produce Co.
Quality Transportation
West valley School District No. 208
Smith's Aerospace Actuation Systems
Yakima Forrest Products
Ace Hardware Wholesale Center
Central WA Comp. Mental
City of Yakima
Major Employers
Type of Business
Healthcare
Social Services
Education
Government
Healthcare
Retail
Fruit Processing
Government
Education
Food Processing
Fruit Processing
Printing
Social Services
Fruit Processing
Trucking
Education
Manufacturing
Wood Products
Hardware
Health Healthcare
Source: Yakima County Development Association, April 2007.
25
Number of
Employees
1,500
1,500
1,050
1,000
941
700
646
623
590
550
521
520
500
430
410
406
370
325
320
300
Tncnnip, Tisfnric personal income and per capita income levels for the Cnrrntv and the State are shown below
Yakima County and State of Washington
Total Personal and Per Capita Income
Yakima County
Total Personal Per Capita
Year Income (in millions) Income
2005* N/A N/A
2004 $5,766,499 $25,125
2003 5,457,597 24,057
2002 5,179,243 23,071
2001 5,151,726 23,067
2000 4,916,123 22,070
State of Washington
Total Personal Per Capita
Tnrnmc+ (in millinncl Tnrnmt
mss..-..��. , ______
$222,642,504
217,503,197
201,606,772
197,451,578
193,498,304
187,853,404
Source: U.S. Department of Commerce, Bureau of Economic Analysis, February 2007.
$35,409
35,041
32,882
32,549
32,291
31,779
Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable retail
sales for the City and the County are shown below:
City of Yakima and Yakima County
Taxable Retail Sales
Year
2006*
2005
2004
2003
2002
2001
City of Yakima
Yakima County
$ 1,056,146,195 $ 1,961,429,106
1,350,618,320 2,503,736,875
1,307,845,725 2,411,522,348
1,246,026,347 2,294,202,221
1,205,189,471 2,178,920,758
1,176,022,552 2,122,049,462
*Data through third quarter only.
Source: Washington State Department of Revenue, February 2007.
Building Permits. Residential building permits are an indicator of growth within a region. The number and
valuation of new single-family and multi -family residential building permits in the County are listed below:
Year
2006
2005
2004
2003
2002
2001
Yakima County
Residential Building Permits
New Single Family Units New Multi Family Units
Number Valuation
310
414
393
325
279
221
68,284,422
85,356,908
79,122,131
53,948,476
41,477,251
28,283,731
Source: Greater Yakima Valley Chamber of Commerce.
Number Valuation
26
N/A $ N/A
N/A N/A
4 200,672
33 2,468,9680
80 5,655,912
51 4,400,963
Total
Valuation
$ 68,284,422
85,828,413
79,322,803
56,417,4114
47,133,163
32,684,694
Employment. Employment within the County is described in the following tables. Civilian Labor Force data
is based on household surveys of residents. NAICS data are estimates based on surveys of employers and
benchmarked based on covered employment as reported by all employers.
Yakima MSA
Nonagricultural Wage & Salary Workers
and Labor Force and Employment Data
Annual Average
2006 2005 2004 2003 2002
Civilian Labor Force 118,800 119,200 117,300 114,700 112,700
Total Employment 110,300 110,200 107,100 103,500 101,700
Total Unemployment 8,500 9,000 10,200 11,200 11,000
Percent of Labor Force 7.2 7.6 8.7 9.8 9.8
NAICS INDUSTRY 2006 2005 2004 2003 2002
TOTAL NONFARM 78,700 75,900 75,100 74,900 74,000
TOTAL PRIVA I'b 61,400 59,000 58,400 58,300 57,800
GOODS PRODUCING 13,300 12,700 12,700 12,900 13,300
NAT. RESOURCES, MINING, and CONSTR. 4,000 3,600 3,400 3,200 3,100
MANUFACTURING 9,200 9,100 9,300 9,800 10,100
Non -Durable Goods 5,300 5,000 5,000 5,500 5,800
SERVICES PROVIDING 65,400 63,200 62,300 62,000 60,800
PRIVATE SERVICES PROVIDING 48,200 46,300 45,600 45,400 44,600
TRADE, TRANSPORTATION, & WAREHSG. 17,300 16,300 16,300 15,700 15,800
Wholesale Trade 4,600 4,200 4,000 3,800 3,900
Retail Trade 9,700 9,500 9,400 9,500 9,200
Transportation, Warehousing, and Utilities 3,100 2,700 2,900 2,400 2,700
PROFESSIONAL and BUSINESS SERVICES 4,300 4,200 4,200 4,500 4,500
EDUCATIONAL and HEALTH SERVICES 13,000 12,600 12,200 11,800 11,600
Health Services 11,900 11,500 11,100 10,800 10,700
LEISURE and HOSPITALITY 6,700 6,700 6,400 6,400 6,300
Food Services 4,800 4,800 4,600 4,600 4,500
GOVERNMENT 17,200 17,000 16,700 16,600 16,200
Federal Government 1,300 1,300 1,300 1,400 1,400
State Government 3,000 3,000 3,000 2,900 2,900
Local Government 12,900 12,700 12,400 12,300 11,900
Workers in Labor/Management Disputes 0 0 0 0 0
Source: Washington State Employment Security Department, February 2007.
Initiative and Referendum
State Initiatives
Under the State Constitution, the voters of the State have the ability to initiate legislation and require the
Legislature to refer legislation to the voters through the powers of initiative and referendum, respectively. The
initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are
submitted to the voters upon receipt of a petition signed by at least eight percent (initiative) and four percent
(referenda) of the number of voters registered and voting for the office of Governor at the preceding regular
gubernatorial election. Any law approved in this manner by a majority of the voters may not be amended or
repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of
all the members elected to each house of the Legislature. After two years, the law is subject to amendment or
repeal by the Legislature in the same manner as other laws.
27
Future Initiative l.ecisla(7on. Other tax and fee initiative measures have been and may be filed, but it cannot he
predicted whether any such initiatives might gain sufficient signatures to qualify for submission to the
Legislature and/or the voters or, if submitted, whether they ultimately would be approved.
Tax Matters
In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax
purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on
individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted
current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations.
Federal income tax law contains a number of requirements that apply to the Bonds, including investment
restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the use of
proceeds of the Bonds and the facilities financed or refinanced with proceeds of the Bonds and certain other
matters. The City has covenanted to comply with all applicable requirements.
Bond Counsel's opinion is subject to the condition that the City comply with the above -referenced covenants
and, in addition, will rely on representations by the City and its advisors with respect to matters solely within
the knowledge of the City and its advisors; respectively, which Bond Counsel has not independently verified.
If the City fails to comply with such covenants or if the foregoing representations are determined to be
inaccurate or incomplete, interest on the Bonds could be included in gross income for federal income tax
purposes retroactively- to the UQLC of issuance of the AIVA IUJ, regardless of the 14(1 LC 13111 VV 1111.11 11 LC event 11 l_a 11011lJA
taxability occurs. In rendering its opinion, Bond Counsel has relied on the report of Grant Thornton LLP with
respect to the accuracy of certain mathematical calculations.
Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state
income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds
should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the
Bonds, which may include original issue discount original issue premium, purchase at a market discount or at
a premium, taxation upon sale, redemption or other disposition, and various withholding requirements.
Prospective purchasers of the Bonds should be aware that e nership of +he Bends may result in collateral
federal income tax consequences to certain taxpayers, including, without limitation, financial institutions,
property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement
benefits, certain S corporations with "excess net passive income," foreign corporations subject to the branch
profits tax, life insurance companies and taxpayers who may be deemed to have incurred or continued
indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond
Counsel expresses no opinion regarding any collateral tax consequences. Prospective purchasers of the Bonds
should consult their tax advisors regarding collateral federal income tax consequences.
Payments of interest on tax-exempt obligations such as the Bonds, are in many cases required to be reported to
the Internal Revenue Service (the "IRS"). Additionally, backup withholding may apply to any such payments
made to any owner who is not an "exempt recipient" and who fails to provide certain identifying information.
Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are
exempt recipients.
Bond Counsel's opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion
represents Bond Counsel's legal judgment based on its review of existing law and in reliance on the
representations made to Bond Counsel and the City's compliance with its covenants. The IRS has established
an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is
includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will
commence an audit of the Bonds. Owners of the Bonds are advised that, if the IRS does audit the Bonds,
under current IRS procedures, at least during the early stages of an audit, the IRS will treat the City as the
taxpayer, and the owners of the Bonds may have limited rights to participate in the audit. The commencement
of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded,
regardless of the ultimate outcome.
28
Qualified Tax -Exempt Obligations
The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section
265(b)(3)(B) of the Code.
Rating
As noted on the cover page of this Official Statement, the City will apply for ratings for the Bonds from
Standard & Poor's Ratings Services. When and if obtained, the rating will reflect only the views of the rating
agency and an explanation of the significance of the rating may be obtained from the rating agency. There is
no assurance that the rating, once obtained, will be retained for any given period of time or that the rating will
not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so
warrant. Any such downward revision or withdrawal of the rating will be likely to have an adverse effect on
the market price of the Bonds.
Continuing Disclosure
In accordance with Section (b)(5) of Securities and Exchange Commission Rule 15c2-12 under the Securities
Exchange Act of 1934, as the same may be amended from time to time (the "Rule"), the City has agreed in the
Ordinance for the benefit of the Bond Owners or Beneficial Owners of the Bonds to provide or cause to be
provided to each NRMSIR and to the state information depository for the State of Washington (if one is
created) ("SID"), in each case as designated by the Securities and Exchange Commission (the "Commission")
in accordance with the Rule, the following annual financial information and operating data for the prior fiscal
year (commencing in 2008 for the fiscal year ended December 31, 2007): (i) annual financial statements, which
statements may or may not be audited showing ending fund balances, prepared in accordance with
regulations prescribed by the State Auditor pursuant to RCW 43.09.200 (or any successor statutes) and
generally of the type included in this Official Statement for the Bonds under the heading "Comparative
General Fund Statement of Revenues, Expenditures and Changes in Fund Balance;" (ii) the assessed valuation
of taxable property in the City; (iii) property taxes due and percentage of taxes collected; (iv) property tax levy
rate per $1,000 of assessed valuation; and (v) outstanding general obligation debt of the City.
Such annual information and operating data described above will be so provided on or before the end of nine
months after the end of the City's fiscal year. The City may adjust such date if the City changes its fiscal year
by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID. The City's
current fiscal year ends on December 31. In lieu of providing such annual financial information and operating
data, the City may cross-reference to other documents provided to the NRMSIR, the SID or to the Commission,
and, if such document is a final official statement within the meaning of the Rule, such document will be
available from the Municipal Securities Rulemaking Board ("MSRB").
If not provided as part of the annual financial information discussed above, the City will provide its audited
annual financial statement prepared in accordance with regulations prescribed by the State Auditor pursuant
to the statutes cited above (or any successor statutes) when and if available to each then existing NRMSIR and
the SID, if any.
Material Events. The City agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and
to each NRMSIR notice of the occurrence of any of the following events with respect to the Bonds, if material:
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults;
(3) Unscheduled draws on debt service reserves reflecting financial difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial difficulties;
(5) Substitution of credit or liquidity providers, or their failure to perform;
(6) Adverse tax opinions or events affecting the tax-exempt status of the Bonds;
(7) Modifications to the rights of Bond owners;
29
(8) Bond calls (optional, cnnftingent or unscheduled Bond calls other than scheduled sinking fund
redemptions for which notice is given pursuant to Exchange Act Release 34-238560);
(9) Defeasances;
(10) Release, substitution or sale of property, securing repayment of the Bonds; and
(11) Rating changes.
Solely for purposes of disclosure, and not intending to modify this undertaking, the City advises that no credit
enhancements, debt service reserves or property secure payment of the Bonds.
Notification Upon Failure to Provide Financial Data. The City has agreed in the Ordinance to provide or cause to
TsT17ARcm ....- ,.,, ,.i.,, cTT :c ,,, ,.r :a-.. t..;l, 4." ;�7,. i-- -
ivc iJrV VIU.CU, 11t a Ll11 LCly iilai ti LC1, 1V' cal.11 1 J1\1VJsJlli axL.4 1v 11 Li. 111i1, 1t (AI iy, itvuLi. va 1LJ 1Uxlizri iv vs. v 1'A4_ ciia.
annual financial information described above in this section under the subheading "General" on or prior to the
date set forth above in such subsection.
Termination/Modification. The City's obligations to provide notices of material events shall terminate upon the
legal defeasance, prior redemption or payment in full of all of the Bonds. Any provision of this section shall be
null and void if the City (1) obtains an opinion of nationally recognized bond counsel to the effect that the
portion of the Rule that requires that provision is invalid, has been repealed retroactively or otherwise does
not apply to the Bonds, and (2) notifies each NRMSIR and the SID, if any, of such opinion and the cancellation
of this section. The City may amend this section with an approving opinion of nationally recognized bond
counsel in accordance with the Rule.
The right of any bondowner or beneficial owner of Bonds to enforce the provisions of this section shall be
limited to a right to obtain specific enforcement of the City's obligations under this section, and any failure by
the City to comply with the provisions of this undertaking shall not be an event of default with respect to the
Bonds. For purposes of this section, "beneficial owner" means any person who has the power, directly or
indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons
holding Bonds through nominees or depositories.
Rnndowner's Remedies Related to continuing Disclosure Undertaking. A Bondnwne_r's nr a Beneficial Owner's
right to enforce the provisions related to continuing disclosure undertaking shall be limited to a right to obtain
specific enforcement of the City's obligations related thereto, and any failure by the City to comply with the
provisions of this undertaking shall not be an Event of Default with respect to the Bonds under the Ordinance.
For purposes of this section, "Beneficial Owner" means any person who has the power, directly or indirectly,
to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds
through nominees or depositories.
DisclosureUSA. The City may elect to submit the information required to be filed with the NRMSIRs and the
SID, if any, directly to DisclosureUSA.org unless or until the Commission withdraws its approval of this
submission process.
Prior Compliance with Continuing Disclosure Undertakings. The City has entered into undertakings with respect
to its obligations issued after July 3, 1995 subject thereto and is in compliance with its obligations thereunder.
arm aaa aAl nal b.1nb%aiA Sv asanan�
Approval of Counsel
Legal matters incident to the authorization, issuance and sale of Bonds by the City are subject to the approving
legal opinion of K&L Preston Gates Ellis LLP, Bond Counsel. A form of the opinion of Bond Counsel is
attached hereto. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Bond
Counsel has not been retained to review and has not reviewed this Official Statement for completeness or
accuracy and will not offer an opinion concerning this Official StatPmPnt. All or a portion of the fees of Bond
Counsel are contingent upon the issuance and sale of the Bonds.
30
Litigation
On February 15, 2005, Congdon Orchards, Inc. and Congdon Development Company, LLC (Congdon) filed a
damage claim with the City alleging Congdon has been wrongfully damaged by Yakima's breach of contract,
tortious conduct, negligence, breaches of duties, errors and omissions and other wrongful conduct. Congdon
alleged its damages exceed $21 million and continue. The City's legal staff believes the chances of recovery are
low based on recent court rulings.
There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority
of the City to issue the Bonds. There is no litigation pending or threatened which would materially affect the
City's ability to meet debt service requirements on the Bonds.
Because of the nature of its activities, the City is subject to certain pending legal actions which arise in the
ordinary course of business. The City believes, based on the information presently known, that the ultimate
liability for any of such legal actions will not be material to the financial position of the City.
Official Statement
In the Ordinance the City will deem final this Preliminary Official Statement as of its date for the purpose of
Securities and Exchange Commission Rule 15c2-12.
Underwriting
The Bonds are being purchased by Seattle -Northwest Securities Corporation, the Underwriter. The purchase
contract provides that the Underwriter will purchase all of the Bonds, if any are purchased, at a price of
percent of the par value of the Bonds. The Bonds will be reoffered at an average price of percent of the
par value of the Bonds. After the initial public offering, the public offering prices may be varied from time to
time.
Concluding Statement
So far as any statement herein includes matters of opinion, or estimates of future expenses and income,
whether or not expressly so stated, they are intended merely as such and not as representations of fact.
The information contained herein should not be construed as representing all conditions affecting the City or
the Bonds. Additional information may be obtained from the City. The statements relating to the Ordinance
are in summarized form, and in all respects are subject to and qualified in their entirety by express reference to
the provisions of such document in its complete form.
The agreements of the City are set forth in such documents, and the information assembled herein is not to be
construed as a contract with the Owners of the Bonds.
31
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
K&L
GATES
, 2007
City of Yakima
Yakima, Washington
Seattle -Northwest Securities Corporation
Seattle, Washington
K&L Preston Gates Ellis LLP
925 fourth Avenue
Suite 2900
Seattle, WA 98104-1158
T 206.623,7580 www.klgates,com
RE: City of Yakima, Washington
Limited Tax General Obligation and Refunding Bonds, 2007
Dear Ladies and Gentlemen:
We have acted as bond counsel to the City of Yakima, Washington (the "City") and
have examined a certified transcript of all of the proceedings taken in the matter of the
issuance by the City of its Limited Tax General Obligating and Refunding Bonds, 2007,
dated as of the date of their delivery, in the aggregate principal amount of $ (the
"Bonds"), issued for the purpose of financing to remodel a fire station, finance the downtown
renovation project and the River Road project, to refund certain outstanding bonds of the
City and to pay costs of issuing the Bonds. The Bonds are issued pursuant to Ordinance
No. and Resolution No. of the City (together, the "Bond Ordinance").
Capitalized terms used herein and not otherwise defined shall have the meanings given to
them in the Bond Ordinance.
The Bonds are subject to optional [and mandatory] redemption prior to their stated
maturities.
We have not been engaged nor have we undertaken to review the accuracy,
completeness or sufficiency of the official statement or other offering material related to the
Bonds (except to the extent, if any, stated in the official statement), and we express no
opinion relating thereto, or relating to the undertaking by the City to provide ongoing
disclosure pursuant to Securities and Exchange Commission Rule 15c2-12.
Regarding questions of fact material to our opinion, we have relied on representations
Ci+a� riff. Yakima
a�� vl
Seattle -Northwest Seecnritie_s Comoration
, 2007
Page 2
of the City in the Bond Ordinance and in the certified proceedings and on other certifications
of public officials and others furnished to us without undertaking to verify the same by
independent investigation.
Based on the foregoing, we are of the opinion that, under existing law:
1. The Bonds have been legally issued and constitute valid general obligations of
the City, except to the extent that the enforcement of the rights and remedies of the holders
and owners of the Bonds may be limited by laws relating to bankruptcy, insolvency,
moratorium, reorganization or other similar laws of general application affecting the rights of
creditors, by the application of equitable principles and the exercise of judicial discretion.
The Rnnd frdinatiee ie a legal valid and binding nhligation of the City_ has
been duly authorized, executed and delivered and is enforceable in accordance with its terms,
avnar,+ +n +11A av+ant anfnreamant may ha 1imitarl lhv la1a7Q rP1atina to 1►anlrnint'v
vnvvNL Lv LIIV vIkLvakI, uaL vulvlvvuavuasau.� vv aauu..vu v� ..... .. ., �..�,...""t,
insolvency, moratorium, reorganization or other similar laws of general application affecting
the rights of creditors, by the application of equitable principles and the exercise of judicial
discretion.
3. Both principal of and interest on the Bonds are payable out of annual levies of
ad valorem taxes to be made upon all of the taxable property within the City permitted to be
levied without a vote of the electorate in amounts that, together with sales and use tax levied
pursuant to RCW 82.14.390 and hotel/motel taxes levied pursuant to RCW 67.28 in the case
of the portion used to refund the Refunded Bonds, real estate excise taxes (REST) in the case
of the downtown renovation Project and gas taxes in the case of the River Road Project, and
other available funds, will be sufficient to pay such principal and interest as the same shall
become due.
4. Interest on the Bonds is excludable from gross income for federal income tax
purposes and is not an item of tax preference for purposes of the federal alternative minimum
tax imposed on individuals and corporations; however, interest on the Bonds is taken into
account iidetermining adjusted current earnings for Inc purpose of computing the alternative
minimum tax imposed on certain corporations. The opinion set forth in the preceding
sentence is subject to the condition that the City comply with all requirements of the Internal
Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the
Bon is rder that the interest the n ba nnil continue to be, exch"lable from gross• ineo e
.'.�"Jia`lAJ 111 `Jl S3:.1 L11CC:. SSC:.1 ::v. �..-..Y�..-- L. --..�.------__ _� 1J_-__
7 G•i�
for federal income tax purposes. The City has covenanted to comply with all applicable
requirements. Failure to comply with certain of such covenants may cause interest on the
Bonds to be included in gross income for federal income tax purposes retroactively to the
date of issuance of the Bonds.
The City has designated the Bonds as "qualified tax-exempt obligations" within the
meaning of Section 265(b)(3) of the Code.
City of Yakima
Seattle -Northwest Securities Corporation
, 2007
Page 3
Except as expressly stated above, we express no opinion regarding any other federal
or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds.
Owners of the Bonds should consult their tax advisors regarding the applicability of any
collateral tax consequences of owning the Bonds, which may include original issue discount,
original issue premium, purchase at a market discount or at a premium, taxation upon sale,
redemption or other disposition, and various withholding requirements.
The opinions above are qualified to the extent that the enforcement of the rights and
remedies of the owners of the Bonds may be limited by laws relating to bankruptcy,
reorganization, insolvency, moratorium or other similar laws of general application affecting
the rights of creditors, by the application of equitable principles and the exercise of judicial
discretion.
This opinion is given as of the date hereof, and we assume no obligation to update,
revise or supplement this opinion to reflect any facts or circumstances that may hereafter
come to our attention or any changes in law that may hereafter occur.
Very truly yours,
K&L PRESTON GATES ELLIS LLP
By
Nancy M. Neraas
K:\25739\00079\NMN\NMN L31 SX
(This Page Intentionally Left Blank)
Appendix B
Book -Entry Transfer System
(This Page Intentionally Left Blank)
THE DEPOSITORY TRUST COMPANY
SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING
BOOK -ENTRY -ONLY ISSUANCE
(Prepared by DTC— bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the
securities (the "Securities"). The Securities will be issued as fully -registered securities registered in the
name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully -registered Security certificate will be issued for [each issue
of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC.
[If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be
issued with respect to each $500 million of principal amount, and an additional certificate will be issued
with respect to any remaining principal amount of such issue.]
2. DTC, the world's largest securities depository, is a limited -purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues
of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments
from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facil-
itates the post -trade settlement among Direct Participants of sales and other securities transactions in
deposited securities, through electronic computerized book -entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct
Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clear-
ing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository
Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of
DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation
and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as
well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both
U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that
clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to
its Participants are on file with the Securities and Exchange Commission. More information about DTC
can be found at www.dtcc.com and www.dtc.org.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Securities on DTC's records. The ownership interest of each actual
purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book -entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect
only the identity of the Direct Participants to whose accounts such Securities are credited, which may or
may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will b0 govern0d 1J arrangements among them, subject to .any statutory or regulatory
requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents.
For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the
Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the
alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and
request that copies of notices be provided directly to them.]
[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.]
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities i mess al +horizeµl by a Direct Participant in accordance with DTC --s Procedures. Under itc usual
procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to
Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's
practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail
information from Issuer or Agent, on payable date in accordance with their respective holdings shown on
DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or
Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment
of redemption
edeSp6SOn pdVleed5, distributions, and dividend payments to Cede & Co, (or such
other nominee
nee as
may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, dis-
bursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through
its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the
Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an
optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the
Securities are transferred by Direct Participants on DTC's records and followed by a book -entry credit of
tendered Securities to [Tender/Remarketing] Agent's DTC account.]
10. DTC may discontinue providing its services as depository with respect to the Securities at any
time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a
_ ai._e 7_._e__� r+_____._L_ ___.._L•__t__ __._ _.____ire to L_ printed and delivered,
5i.ti. i:i;S;iVi il�I7'vou i3% io Leve vVtuifi lYii, Security iti.x stn aa.eee...:� are required to iv p:i.a... �,.,_._ �:s z...,..,,...,ab t'cs.. e...,
11. Issuer may decide to discontinue use of the system of book -entry -only transfers through DTC (or
a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
12. The information in this section concerning DTC and DTC's book -entry system has been obtained
from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
[3/04]
Appendix C
2005 Annual Financial Report
(This Page Intentionally Left Blank)
MANAGEMENT'S DISCUSSION AND ANALYSIS
The City of Yakima's discussion and analysis offers readers of the City's financial statements
a narrative overview and analysis of the City's financial activities for the fiscal year ended
December 31, 2005. We encourage readers to consider the information presented here in
conjunction with additional information that we have furnished in our letter of transmittal, and
in the financial statements and notes to the financial statements (which immediately follow this
discussion).
I. FINANCIAL HIGHLIGHTS
• The total assets of the City of Yakima exceeded its liabilities at December 31, 2005 by $181
million dollars. Net assets invested in capital (net of depreciation and related debt) account
for 83% of this amount, with a value of about $150 million. Of the remaining net assets, $23.5
million may be used to meet the government's ongoing obligations to citizens and creditors,
without legal restriction.
• The City's total net assets increased by $9.7 million. Over $6 million was the result of capital
grants and donations.
• As of December 31, 2005 the City of Yakima's governmental activities reported combined
ending net assets of over $77.2 million, an increase of $3.9 million in comparison with the
prior year. Of that amount, $65.5 million was invested in capital assets, almost $5 million
was legally restricted for specific projects or programs, and almost $9 million was available
for spending at the government's discretion.
• Unreserved fund balance for the General Fund was $8.7 million dollars at December 31,
2005. This balance represents 22.4% of total General Fund expenditures.
• The City of Yakima's total long-term debt at December 31, 2005 was nearly $69.3 million
(about $32.2 million in Governmental Activities, and $37.1 million in Business -Type
Activities), with a remaining capacity for non -voted General Obligation debt at $44 million.
Total debt decreased by $1.1 million during the current fiscal year because total debt service
payments exceeded the issuance of councilmanic General Obligation bonds for Parks Capital
projects ($750,000).
1I. OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City of Yakima's
basic financial statements. The basic financial statements are comprised of three components:
1) Government -wide financial statements, 2) Fund financial statements, and 3) Notes to the
financial statements.
Comprehensive Annual Financial Report (C.A.F.R.) — 3
A. GOVERNMENT -WIDE FINANCIAL STATEMENTS
There are two government -wide financial statements, the statement of net assets and the
statement of activities, which are designed to provide readers with a broad overview of
the City of Yakima's finances in a manner similar to a private -sector business. Both of
the government -wide financial statements distinguish functions of the City of Yakima
that are principally supported by taxes and intergovernmental revenues (referred to as
"governmental activities") from functions that are intended to recover all or a signification
portion of their costs through user fees and charges (referred to as "business -type
activities"). The governmental activities of the City of Yakima include a full range of local
governmental services provided to the public, such as public safety (police, municipal court,
fire, and building); public improvements (streets, traffic signals); parks and recreation;
community development, and general administrative services. The business -type activities
of the City of Yakima include sanitation (solid waste disposal and wastewater treatment);
potable and irrigation water systems; and transit.
THE STATEMENT OF NET ASSETS presents information on all of the City of Yakima's assets and
liabilities, with the difference between the two reported as net assets. This statement
serves a purpose similar to that of the balance sheet of a private -sector business. Over
time, increases or decreases in net assets may serve as a useful indicator of changes in the
City's financial position. However, this is just one indicator of financial health of the City.
Other indicators include the condition of the City's infrastructure systems (roads, drainage
systems, bridges, etc.), changes in property tax base, and general economic conditions
within the City.
THE STATEMENT OF ACTIVITIES presents information showing how the government's net assets
changed during 2005. Because it separates program revenue (revenue generated by
specific programs through charges for services, grants, and contributions) from general
revenue (revenue provided by taxes and other sources not tied to a particular program),
it shows to what extent each program has to rely on taxes for funding. All changes in net
assets are reported using the accrual basis of accounting which requires that revenue be
reported when earned and expenses be reported when the goods and services are received,
regardless of the timing of the cash flow. Items such as uncollected taxes, unpaid vendor
invoices for items received in 2005, and earned but unused vacation leave, will be included
in the statement of activities as revenue and expense, even though the cash associated with
these items will not be received or distributed in 2005.
B. FUND FINANCIAL STATEMENTS
A fund is a grouping of related accounts that is used to maintain control over resources
that have been segregated for specific activities or objectives. The City of Yakima, like
other state and local governments, uses fund accounting to ensure and demonstrate
compliance with finance -related legal requirements. All of the funds of the City of Yakima
can be divided into three categories: Governmental Funds, Proprietary Funds, and Fiduciary
Funds. Governmental Funds are used to account for most, if not all, of a government's tax -
supported activities. Proprietary Funds are used to account for a government's business
type activities, where all or part of the costs of activities are supported by fees and charges
that are paid directly by those who benefit from the activities. Fiduciary Funds are used
4—Comprehensive Annual Financial Report (C.A.F.R.)
to account for resources that are held by the government as a trustee or agent for parties
outside of the government. The resources of fiduciary funds cannot be used to support the
government's own programs.
1. GOVERNMENTAL FUNDS
The Governmental Fund 3alance Sheet and the Governmental Fund Statement of
Revenues, Expenditures, :tnd Changes in Fund Balances present separate columns of
financial data for the Gen>-ral Fund, the Community Development Fund, Parks and
Recreation, and Streets Find, all of which are considered to be major funds, based on
criteria established by GASB Statement #34. Data from the remaining governmental
funds are combined into a single, aggregated presentation. The governmental fund
financial statements can be found immediately following the government -wide
financial statements. Individual fund data for each of the non -major governmental
funds is provided in the firm of combining statements, outside of the basic financial
statements.
Governmental funds are used to account for Essentially the same functions reported as
governmental activities in the government -wide financial statements. However, unlike
government -wide financial statements which use accrual accounting, governmental
fund financial statements :acus on near-term :inflows and outflows of spendable
resources and on balances of spendable resources available at the end of the fiscal
year. Such information is useful in evaluating a government's near-term financing
requirements in comparison to near-term resources available.
Because the focus of governmental fund financial statements is narrower than that of
government -wide financial statements, it is useful to compare information presented for
governmental funds with similar information presented for governmental activities in
the government -wide financial 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 statement of revenues,
expenditures, and changes in fund balances provide reconciliation to the governmental
activities column in the government -wide statements, in order to facilitate this
comparison.
The City maintains budge Lary controls over its operating funds. The objective of
budgetary controls is to ensure compliance with legal provisions embodied in the annual
appropriated budget. Budgets for governmental funds are established in accordance
with state law, and are adopted on a fund level. Capital outlays are approved on an
item -by -item basis or project basis. A budgetary comparison statement is provided for
the General Fund and all Epecial revenue funds to demonstrate compliance with the
budget.
2. PROPRIETARY FUNDS
There are two types of proprietary funds; Enterprise and Internal Service. Enterprise
Funds are used to report' the same functions presented as business -type activities in the
government -wide financial statements. The City uses enterprise funds to account for
Comprehensive Annual Financial Report (C.A.F.R.) —5
its Solid Waste (Refuse); Wastewater; DOME stic Water; Irrigation; and Transit functions.
Internal Service Funds (the second type of proprietary funds) accumulate and allocate
costs internally among the City's various functions. The revenues and expenses of
the internal service funds that are duplicated in other funds through allocations are
eliminated in the government -wide statements, with the remaining balances included in.
the governmental activities column.
Proprietary fund statements follow the governmental fund statements in this report.
They provide the same type of information as the government -wide :financial
statements, only in more detail, since both apply the accrual basis of accounting. In
comparing the Proprietary Fund Statement of Net Assets to the business -type column
on the Government -Wide Statement of Net Assets, you will notice that the total net
assets agree, and therefore need no reconciliation. In comparing the total assets and
total liabilities between the two statements, you will notice slightly different amounts.
This is because the "internal balances" line on the government -wide statement
combines the "due from other funds" (asset) and the "due to other funds" (liabilities)
from the proprietary fund statement in a single line in the asset section of the
government -wide statement.
Individual fund data for each of the non -major proprietary funds is provided in the
form of combining statements. The proprietary fund combining statements follow the
governmental fund combining statements .n this report.
3. FIDUCIARY FUNDS
Fiduciary funds are used to account for resources held for the benefit of parties outside
the government. Fiduciary funds are not reflected in the government -wide financial
statement because the resources of those finds are not available to support the City of
Yakima's own programs. The accounting used for fiduciary funds is much like that used
for proprietary funds.
The City of Yakima has one fiduciary fund for Firefighter pensions. The basic fiduciary
fund financial statements can be found following the proprietary fund financial
statements, pages 40-41.
C. NOTES TO THE FINANCIAL STATEMENTS
The notes provide additional information that is essential to a full understanding of the
data provided in the government -wide and fund financial statements. The notes to the
financial statements can be found immediately following the basic financial statements i.n
this report.
6 — Comprehensive Annual Financial Report (C.A.F.R.)
III. GOVERNMENT -WIDE FINANCIAL ANALYSIS
A. STATEMENT OF NET ASSETS
As noted earlier, net assets may serve over time as a useful indicator of a government's
financial position. The City of Yakima's net assets total $181 million at December 31, 2005.
The following table reflects the condensed Government -Wide Statement of Net Assets with
comparative totals for 2004.
Assets:
Current and Other Assets
Capital Assets
Total Assets
THE CITY OF YAKIMA'S NET ASSETS
GOVERNMENTAL BUSINESS -TYPE
ACTIVITIES
ACTIVITIES TOTAL
2005 2004 2005 2004 2005 2004
$39,485,030 837,857,295
84,304,653 82,727,162
8123,789,683 $120,589,457
Liabilities:
Payables and Other Liabilities $14,383,752
Long-term Liabilities Outstanding 32,149,342
Total Liabilities $46,533,094
Net Assets:
Inv in Cap Assets, Net of Rel Debt $63513,417
Restricted 4,792,290
Unrestricted 8,950,932
Total Net Assets $77,256589
$39,588,094 840,372,017
107,515,191 101,490,479
$147,103,285 $141,862,496
$14,994,156 $6,049,615 55,564,282
32,257,618 37,130,960 38,156,138
$4Z251,774 543,180575 $43,720,420
560,440,803 $86,609,490 $84,227,180
4,831,870 2,700,600 2,665,164
8,060,010 14,612,620 11,249,732
$73,332,683 $103,922,710 $98,142,076
$79,073,124 $78,229,312
191,819,844 184,217,641
$270,892,968 $262,446,953
$20,433,367 $20,558,438
69,280,302 70,413,756
$89,713,699 $90,972,194
$150,122,907
7,492,840
23,563,552
8181,179,299
0144,667,983
7,497,034
19,309,742
$171,474,759
The City of Yakima's total assets stand at almost $271 million as of December 31, 2005. Of
this amount, almost $192 million is accounted for by capital assets, which indudes some
infrastructure and construction in progress. Prior to 2003, infrastructure (roads, bridges,
drainage systems, etc.) was not included in capital asset reporting for governmental activities.
The new GASB Statement #34, implemented with the City's 12/31/03 Financial Statements,
requires that all capital assets, including infrastructure, be reported. Out of $84 million in capital
assets reported in Governmental activities at December 31, 2005, $40 million (48%) is accounted
for by infrastructure acquisitions (inducting the right-of-way land associated with these projects).
It should be noted that this represents a partial implementation of accounting for infrastructure;
only historical cost of street projects for the last 20 years is included. GASB 434 allows for a
delayed implementation of infrastructure reporting, and the City intends to fully report all
infrastructure within the guidelines and time lines set forth by the pronouncement.
Of the remaining City assets, approximately $59.9 million were accounted for in cash, cash
equivalents, and investments, $12.1 million in accounts receivable, $62 million in notes
receivable, and $.8 million spread among miscellaneous assets.
Comprehensive Annual Financial Report (C.A.F.R.) — 7
At December 31, 2005 the City had outstanding liabilities of $89.7 million, with slightly over
$69 million in long term liabilities. Of the long term liabilities, $4.5 million was due within
a year, with the remainder due over an extended period of time. Refer to the notes to the
financial statements (Note 7) for a more in depth discussion of long term debt.
Included in "Payables and Other Liabilities", for total Governmental and Business -Type
activities, in the table on the previous page, are $6.8 million in deferred revenue, $8.7 million
in accounts payable, and $4.8 million in accrued liabilities.
The largest portion of the City's net assets (82.9%) reflects its investment in capital, less any
outstanding related debt used to acquire those assets. The City's capital assets, which are
used to provide services to citizens, are investments in capital and are not available for
future spending. Although the City's investment in 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 sources, since the capital assets themselves cannot be used to liquidate these liabilities.
Approximately 4.1% of the City's net assets are subject to external restrictions on how they
may be used (restricted by the Revised Code of the State of Washington or by contractual
agreements with parties outside of the primary government). The remaining balance of $23.5
million (unrestricted net assets), represents the amount that may be used to meet the City's
ongoing obligations.
At December 31, 2005 the City of Yakima reports positive balances in all three categories
of net assets, for the government as a whole, as well as for governmental activities and
Business -type activities.
B. STATEMENT OF CHANGES IN NET ASSETS
The City of Yakima's total net assets increased by $9.7 million in 2005. Net assets for
governmental activities increased by $3.9 million while business -type activities increased by
$5.8 million.
Total revenues for the City of Yakima were $93.9 million in 2005. Governmental activities
provided $57.7 million (61%), while business -type activities added about $36.2 million (39%).
Expenses for the year totaled almost $84.2 million, with Governmental Activities accounting
for about $57 million or 67% and Business -type activities accounting for $27.2 million or 33%
Key elements in changes in net assets are shown in the table on the following page:
8 — Comprehensive Annual Financial Report (C.A.F.R.)
THE CITY OF YAKIMA CHANGES IN NET ASSETS (2005)
REVENUES:
Program Revenues
Charges for Services
Operating Grants & Contributions
Capital Grants & Contributions
General Revenues
Property Tax
Sales Tax
Other Taxes
State Entitlements
Other
Total Revenues
EXPENSES:
General Government
Security of Persons and Property
Physical Environment
Transportation
Economic Environment
Mental & Physical Health
Cultural & Rec. Environment
Interest on Long Term Debt
Transit
Refuse
Wastewater
Water
Irrigation
Total Expenses
Increases in Net Assets before
Non-operating Sources (uses)
Gain/loss on Sale of Capital Assets
Transfers
Debt Issue Cost
Acc. Loss on G.O.D. Refunding
Change in Net Assets
Net Assets - Beginning
Net Assets - Ending
GOVERNMENTAL
ACTIVITIES
BUSINESS -TYPE
ACTIVITIES
TOTAL
2005 2004
2005 2004
2003 2004
55,268,866 $5,388,971 $25,899,080 926,1335,468 $31,167,946 $31,524,439
5,133,664 4,541,545 3,102,508 1,802,791 8,236,172 6,344,336
3,921,071 9,310,853 2,386,711 2,053,301 6307,782 11,364,154
12,435,395 12,198,959 0 0 12,435,395 12,198,959
15,689,755 14,055,337 4,234,263 4,138,316 19,924,018 18,193,653
11,515,534 10,375,521 0 0 11,515,534 10375,521
2,953,049 2,774,032 0 0 2,953,049 2,774,032
792,858 457,204 559,834 268,933 1,352,692 726,137
$57,710,192 $59,102,422 $36,182,396 $34,398,809 $93,892,588 $93,501,231
97,380,940 $7,147,489 $0 $0 $7,380,940 $7,147,489
30,221,979 28,391,022 0 0 30,221,979 28,391,022
1,231,940 1,175,668 0 0 1,231,940 1,175,668
5,962,249 5,589,654 0 0 5,962,249 5,584,654
3,746,850 3,422,182 0 0 3,746,850 3,422,182
43,278 16,952 0 0 43,278 16,952
7,600,877 7,065,685 0 0 7,600,877 7365,685
809,068 849,837 0 0 809,068 849,837
0 0 6,282,080 5,526,118 6,282,080 5,526,118
0 0 3,154,231 2,751,448 3,154,231 2,751,448
0 0 11,172,540 11,564,592 11,172,540 11,564,592
0 0 4,921,257 4,586,339 4,921,257 4,586,339
0 0 1,644,801 1,219,919 1,644,801 1,219,919
836,997,181 $53,653,489 927,174909 $25,648,416 $84,172,090 979,301,905
$713,011 $5,448,933 $9,007,487 $8,750,393 59,720,498 $14,199,326
256,750 (1,012,474) (55,673) 7,799 201,077 (1,004,675)
2,949,900 2,797,066 (3,171,182) (2,989,781) (221,282) (192,715)
4,247 0 0 0 4,247 0
0 (474,146) 0 0 0 (471,146)
93,923,908 $6,759,379 $5,780,632 $5,768,411 $9,704,540 912,5227,790
973,332,683 966573,304 $98,142,076 $92,373,665 $171,474,759 9158946,969
977,256,591 $73,332,683 $103,922,708 $98,142,076 $181,179,299 $171,474,759
Comprehensive Annual Financial Report (C.A.F.R.) - 9
I. GOVERNMENTAL ACTIVITIES
Within governmental activities, tax revenue accounted for 68% of total revenue sources,
with grants and contributions accounting for 16%. The remaining 16% of revenue was
provided by charges for services, interest income, and miscellaneous revenues. (Note:
the revenue indicators in the following chi -ts do not include one-time only financing
sources, such as proceeds from new debt or the sale of assets.)
Governmental activities increased net assets by $3.9 million or 5%. Significant
fluctua tio.ns in revenue are as follows:
• Sales tax increased $1.6 million or 10% during the year. About tf of this increase can
be attributed to a new County -wide sales tax for criminal justice purposes approved
by voters in November 2004, which was imposed April 1, 2005. A large portion of the
remaining increase was generated by new construction and sales of durable goods,
which were precipitated by the low interest rate environment; recent annexation:5 that
are experiencing infill; and the City's designation as a Federal Renewal Community,
witch provides tax benefits for capital improvement for job creation.
• Other Taxes experienced an increase of $1.1 million or 11% from 2004 to 2005. About
1/3 of this increase was the result of a s:rong real estate market and related excise
tax. Another 1/3 was an increase in utility taxes, caused by a residential annexation
effective in the fall of 2005; a rate increase in natural gas also in the fall of 2005; and
usage fluctuations caused by weather conditions. The remaining third was the result
of new taxes --Cable Television tax was •'aised 1% early in 2005 to support the city -
owned Capitol Theatre maintenance, and a Tourist Promotion Area was formed late
in 2004 at the request of area lodging establishments, with a full year collected in
2005.
The largest program expenses consist of Security of persons and property (public safety),
general government and cultural and recreational environment, respectively. These
programs accounted for 79% of total governmental expenses.
For the most part, changes in expenses corresponded with inflation. Security of
Persoms and Property demonstrated an inc-ease of $1.8 million or 6.4% because of the
implementation of programmatic costs related to the new criminal justice sales tax
(mentioned above). Transportation increased by $37Z000 or 6.8% to meet new service
demands in a new annexation area.
Following are graphs which illustrate revenue by source and expenditures by program
for governmental funds in 2005.
10- Comprehensive Annual Financial Report (C.A.F.R.)
1S,000,000
REVENUES BY SOURCE – GOVERNMENTAL ACTIVITIES
Other Revenues
20%
EXPENSES AND PROGRAM REVENUES - GOVERNMENTAL ACTIVITIES
ElE.pemm
Wren -rare Revenues
ts,000Aop
Iopoe,000
15,00000
l0000,aoo
General savoy (Penins Phyamnl Ttanspmmlion Ernnomm
enalk Physical cult talk Warm ton Long.
Government and open), Environment Environment He. Recreational Term Debt
Environment
2. BUSINESS -TYPE ACTIVITIES
Of the $36.2 million in business -type revenues, 72% was provided by charges for
services, with the remaining amount provided by grants, contributions, transit sales tax
and interest income.
Business type revenues and expenses experienced the following fluctuations:
• Charges for Services decreased by $236,000 or 0.9%, because in 2004, wastewater
collected cumulative payments resolving one time in -arrears billings. Major
customers also implemented operational changes to reduce their total water/
wastewater costs.
• Operating Grants increased $1.3 million or 72%. Most of this increase resulted from
additional grants received by Transit for clean air/commute trip reduction purposes.
• Transit demonstrated an increase of $750,000 or 13.7% because of the additional
services provided relative to the operating grants mentioned above, and a major
increase in the cost of diesel fuel.
• Refuse increased $400,000 or 14.6% because of expansion of services related to
annexations along with the cost of diesel fuel.
• Wastewater experienced a decrease in expenses of $392,000 or 3.3% that can be
correlated to the decrease in charges for services (i.e. reduction in state taxes), along
with a reduction in depreciation expense—a function of timing of historical major
purchases.
• Water increased $335,000 or 7.3%, mainly due to the addition of depreciation on
recently completed improvements at the water treatment plant.
• Irrigation increased $425,000 or 35%, because 2005 was the first year of interest
expense on a revenue bond issued for a major rebuild of the irrigation system.
Of the $27.2 million in business -type expenses, 41% are associated with the wastewater
program and 23% with transit; domestic water programs represent about 18%, refuse
12% and irrigation 6%.
The following charts depict the expenses and program revenues, with a breakdown of
revenues by source for the business -type activities:
Comprehensive Annual Financial Report (C.A.F.R.) –11 12 — Comprehensive Annual Financial Report (C.A.F.R.)
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000 -
8,000,000
6,000,000
4,000,000
2,000,000
REVENUES BY SOURCE — BUSINIhSS-TYPE ACTIVITIES
ChugeskrServk,
71%,
EXPENSES AND PROGRAM REVENUES •- BUSINESS -TYPE ACTIVITIES
®Expenses
El Program Revenues
Transit
Refuse Sev,,.r
Water
Irrigation
Charges for services represent the majority (72%) of revenue in these funds. The only fund
that does not rely heavily on charges for service is the Transit fund, which is subsidized by a
voter -approved local option sales tax of 0.3%.
FY. FINANCIAL ANALYSIS OF THE CITY'S FUNDS
As noted earlier, the City of Yakima uses fund accounting to ensure and demonstrate
corrnpliance with finance -related :legal and regulatory requirements. Following is a financial
analysis of the City's governmental and proprietary funds.
Comprehensive Annual Financial Report (C.A.F.R.) —13
A. GOVERNMENTAL FUNDS ANALYSIS
The General Fund, Community Development (which administers the City's Community
Development Block Grants), Parks and Recreation Operations, and Streets and Traffic Operations
Funds are :he City's major funds (as defined in GASB #34) in 2005. Together these funds account
for 63% of total governmental fund assets and 52% of total governmental fund balances.
The focus of the City of Yakima's governmental funds is to provide information on near-
term inflows, outflows, and balances of spendable resources. In particular, unreserved fund
balance may serve as a useful measure of a government's net resources available for spending
at the end of the fiscal year. As of December 31, 2005, the City's governmental funds reported
combined fund balances of about $21.7 million. Of this total amount, about $16.9 million
(78%) is unreserved and available for spending within these funds. Reserved fund balance
of $4.8 million is not available for new spending because it was previously committed to; 1)
Liquidate contracts and purchase orders of the prior period ($3.35 million), 2) pay debt service
($.75 million), 3) generate income to pay for the perpetual care of the municipal cemetery (5.54
million), and for a variety of other restricted purposes (5.15 million).
The General Fund is the chief operating fund of the City of Yakima. At the end of the 2005
fiscal year, unreserved fund balance of the General Fund was $8.7 million, while total fund
balance is about $9 million. Unreserved fund balance is about 21% of total general fund
expenditures (which represents about a 2.5 mcnth reserve). Total assets in the General Fund
amounted to $12.5 million, accounting for 36% of total governmental fund assets.
The fund balance of the City of Yakima's General Fund increased by $100,000 during the
current fiscal year, virtually "breaking even" Inflationary increases in insurance rates,
including medical and property/liability; equipment; utilities and fuel were offset by growth
in sales and utility taxes (as described above).
The General Fund accounts for 64% of all governrnental fund revenue and 61% of all
expenditures.
The Community Development, Parks and Recl eation, and Streets funds all performed as
expected, each showing a slight gain in fund balance in 2005.
Other governmental funds ended with a net increase in fund balances of 51.6 million. This
was primarily due to the issuance of a Councilmanic General Obligation bond of 5750,000
for Parks capital projects. Additionally, the strong performance of real estate excise tax and
timing of capital projects resulted in an increased fund balance in transportation capital
funds.
B. ENTERPRISE FUNDS ANALYSIS
All of the enterprise funds of the City of Yakin.a, including Transit, Wastewater, Domestic
(potable) Water, Irrigation Water and Refuse are considered major funds in the City's 2005
(GASB 34) Financial Statements. These business -type activities demonstrated an increase in
net assets from $98.1 million to $103.9 million, for a difference of 55.8 million, due primarily
to capital grants/donations of about $2.4 million.
24— Comprehensive Annual Financial Report (C.A.F.R.)
As of December 31, 2005, the City's enterprise funds reported combined net assets of $103.9
million, with $45.4 million or approximately 44% being contributed by the Wastewater fund.
Of the $103.9 million, over $86.6 million (83%) of net assets is accounted for by investment in
capital assets, net of related debt, $2.7 million is restricted for debt service and $14.6 million
is unrestricted. The Notes to the Financial Statements (Note 9) present segment information
that is grouped according to revenue bond requirements for these business -type activities.
V. GENERAL FUND BUDGETARY HIGHLIGHTS
A. GENERAL FUND CHANGES IN BUDGET
The following table shows the 2005 General Fund Adopted (original) Budget, the amended
(final) Budget, Actual revenue and expenditure amounts and the variance of Actuals
compared to the Final budget.
VARIANCE WITH
FINAL BUDGET -
--- BUDGETED AMOUNTS --- ACTUAL POSITIVE
REVENUES ORIGINAL FINAL AMOUNTS (NEGATIVE)
Taxes and Special Assessments $30,557,769 $30,557769 $32,066,945 $1,509,176
Licenses and Permits 561,500 584,500 690,783 106,283
Intergovernmental Revenues 1,636,541 1,685,541 1,763,988 78,447
Charges for Services 4,209,710 4,228,710 4,290,541 61,831
Fines and Forfeits 1,462,200 1,462,200 1,190,300 (271,900)
Interest 550,000 550,000 735,857 185,857
Other Revenues 48,500 48,500 57,001 8,501
TOTAL REVENUES 939,026,220 $39,117,220 $40,795,415 $1,678,195
EXPENDITURES
Current
General Government $10,121,944 910,211,216 $9,852,233 $358,983
Security of Persons and Property 24,827,540 25,314,608 25,098,721 215,887
Physical Environment 1,310,117 1,353,917 1,328,608 25,309
Economic Environment 548,747 680,165 607,358 72,807
Mental & Physical Health 17,180 17,180 18,255 (1,075)
Cultural & Recreational Envmt. 1,420,440 1,420,440 1,419,440 1,000
Capital Outlay
General Government 110,000 198,000 56,685 141,315
Security of Persons and Property 5,000 5,000 0 5,000
Economic Environment 0 0 8,115 (8,115)
Debt Service
Principal Retirement 337,969 337,969 314,736 23,233
Interest 80,823 80,823 78,406 2,417
TOTAL EXPENDITURES $38,779,760 $39,619,318 $38,782,557 $836,761
Excess (Deficiency) of Revenues
Over (Under) Expenditures $246,460 ($502,098) $2,012,858 $2514,956
OTHER FINANCING SOURCES (USES)
Transfers In $110,000 $110,000 $90,000 ($20,000)
Transfers (Out) (1,974,000) (1,974,000) (1,994,240) (20,240)
Sale of Capital Assets 100,000 100,000 0 (100,000)
Comp. for Loss of Gen. Capital Assets 1,000 1,000 322 (678)
Total Other Financing Sources (Uses) ($1,763,000) ($1,763,000) ($1,903,918) ($140,918)
NET CHANGE IN FUND BALANCE ($1,516,540) ($2,265,098) $108,940 $2,374,038
Comprehensive Annual Financial Report (C.A.F.R.) -15
During the year, the 2005 General Fund budget was increased from $40.7 million to
$41.6 million, or by $840,000. (For the purposes of this discussion, the General Fund
budget includes both expenditures and transfers out) The increases in appropriations are
summarized as follows:
• $137,000 in outstanding encumbrances/commitments which were re -budgeted from the
prior year.
• $36,400 for a new Associate Planner position eh year) to be funded by annexation
resources.
• $461,400 for Public Safety overtime precipitated primarily by vacancies, extended
illnesses/injuries, and response to unanticipated "events"
• $95,000 to cover the increased volume/complexity of cases before the Hearings Examiner.
• $43,500 for fuel increases precipitated by a rapid increase in fuel costs in early 2005.
• $42,000 to provide temporary help in Engineering to assist with increased volume of
work.
• $24,000 to facilitate the merging of the city's Probation division into Yakima County
The increases related to the newly annexed area were funded by a corresponding increase in
property taxes related to this area; while the balance of adjustments were to be funded from
the General Fund reserves and/or current year revenue growth.
B. GENERAL FUND BUDGET TO ACTUAL
Total General Fund revenues were budgeted at about $39.1 million. Actual revenue of $40.8
million resulted in a positive variance of $1.7 million, a gain of 4.3% over the amended budget.
Sales tax contributed about $.65 million to this variance - fueled by new construction and
durable goods sales precipitated by the low interest rate environment, and the designation of
the City as a Federal Renewal Community, which provides tax incentives for "Commercial
Revitalization" projects. (Another $.11 million was gained in the related area of Licenses and
Permits.) Utility tax revenue was about $.3 million greater than budget, the result of usage
fluctuations and/or rate adjustments. An upturn in interest earnings added $.2 million.
General Fund expenditures, including transfers out, totaled $40.8 compared to the final
budget of $41.6 - resulting in a positive variance of $.8 or 2%. Most of this variance is in
the area of General Government, and is the result of the timing of project expenses in
Information Systems.
The General Fund budget is built assuming positive variances in both revenue and
expenditures. Revenue is conservatively estimated, while expenditure estimates utilize
highest probable costs. Historically, actual amounts have been close to "break even'; and
2005 is not an exception, with a net increase in fund balance of $109,000 (about .3% of the
total General Fund budget).
16 - Comprehensive Annual Financial Report (C.A.F.R.)
VI. CAPITAL ASSET AND DEBT ADMINISTRATION
A. CAPITAL ASSETS
The City of Yakima's total investment in capital assets, including construction in progress,
tor its governmental and business type activities as of December 31, 2005, amounts to
over $191.8 million (net of accumulated depreciation). This investment in capital assets
includes land, buildings, system improvements, machinery and equipment, park facilities,
infrastructure, and construction in progress on buildings and systems.
Major capital asset events during the 2005 fiscal year included the following:
• A variety of projects for street expansion/repair were ongoing during the year. $3.3
million was spent on Infrastructure projects in 2005, while the 2006 budget includes over
$16 million in planned prcjects, funded primarily by state and federal grants. The major
projects in 2005 and continuing into 2006 include the widening and improvement of the
major arterial that runs parallel to the airport, and a railroad grade separation project.
• The City has obtained State and Federal grants of 57.6 million for pedestrian safety
and lighting improvements in the downtown corridor, in conjunction with the city's
economic development emphasis. The total project is estimated to cost $9.6 million, with
$.5 million funded from existing resources, and $1.5 million by a future Councilmanic
LTGO bond issue. About 6360,000 was spent on this project in 2005.
• Vehicles, street equipment buses, and trucks were added to the fleet as either additional
equipment or replacements during the year, at a cost of $1.9 million.
• In the area of Public Safety, major capital projects undertaken include an update of the
mobile wireless data network ($200,000) and the purchase of a Fire engine ($195,000).
• Wastewater capital improvements include $3.1 million for new interceptor and trunk line
extensions and $2.6 million in treatment plant projects. The 2006 budget includes about
$5.6 million to continue upgrades at the plant, which will be funded by revenue bonds
issued earlier; and about 53.9 million for interceptor and trunk line extensions funded by
reserves and current capital transfers from the operating fund.
• The Domestic Water Treatment plant is continuing a capital program, and about 512
million was spent in 2005. '2unding was provided by a State Revolving Fund loan of about
$.7 million and other capital reserves. The 2006 budget includes about $1.1 million, to be
funded by capital rates and reserves.
• In 2003, the City Council approved the re -build of the irrigation delivery system, which
was estimated to cost approximately $14 million and be completed over an eight-year
period. The City issued revenue bonds for approximately $5.2 million to accomplish the
first phase of this project, and $1.4 million was spent in 2005.
Comprehensive Annual Financial Report (C.A.F.R.) —17
GOVERNMENTAI. BUSINESS -TYPE
ACTIVITIES ACTIVITIES TOTAL
2005 2004 2005 2004 2005 2004
CAPITAL ASSETS (Net of Depreciation)
Land 08,764,562 58,76.562
Building 35,615,829 27,431,439
Improvements Other Than Buildings 6,045,737 9,500,880
Machinery and Equipment 6,424,933 6,25.3,194
Infrastructure 18,405,297 21,182,907
Intangibles 0 0
Construction in Progress 9,048,295 9,586,100
TOTAL 084,304,653 082,727,162
$2,181,516
27,629,801
47,826,172
11,959,393
51,186,700
2'3,235523
47,873,144
10,361,427
0 0
115,659 115,659
17,802,700 11,718,026
$107,515,191 5101,490,479
$10,946,078
63,245,630
53,371,909
18,384,276
18,405,297
115,659
26,350,995
5191,319,849
510,951,202
56,669,9E2
57,379,024
16,614,621
21,182,9E7
115,6E9
21,304,126
$184,217,69 t
Additional information on the City of Yakima's capital assets can be found in Note 4E of this
report.
B. LONG-TERM DEBT
On December 31, 2005, the City of Yakima had total bonded debt outstanding of almost 547.5
million. GE this amount, 519.4 million is classified as governmental activity and backed by
the full faith and credit of the City. The remairirtg 528.1 million, represents bonds secured
solely by specific revenue sources (i.e. revenue bonds).
The City of Yakima's total bonded debt had a net decrease of $1.1 million during 2005.
Significant debt activity in 2005 included a new issue of $.75 million for Parks capital
improvements.
The City participates in a loan program administered by the State's Department of
Community Development, which are included as Intergovernmental loans in the long
term debt schedules. Infrastructure improvements, such as street, bridge, water, or sewage
projects, are eligible to compete for loan awards. This type of funding is preferred because
the interest rates for new loans range from 0.5% to L5% based on the percentage of local
match available for the project. (i.e. the higher :he match, the lower the interest rate). In 2005,
the City borrowed $.6 million for Wastewater projects utilizing this State program.
The City's remaining capacity for non -voted debt on December 31, 2005 was approximately
$44 million in comparison to the total legal limit of $62.5 million The City has a general
guideline of retaining 50% of its non -voted capacity for emergencies. The City of Yakima
maintains an 'A3" rating from Moody's and an " rating from Standard & Poor's
for general obligation debt. A summary of the City's bonded debt follows. Additional
information on the City's long-term debt can be found in Note 7
Flans for future bond issues include a Councilmanic LTGO targeted for the spring of 2007
Eased on current project estimates, the following is a summary cf the proposed amounts,
uses and planned revenue source for debt service:
18 — Comprehensive Annual Financial Report (C A .F.R.)
PROJECT DESCRIPTION
River Road - Expansion, signalization,
and utility upgrade of an arterial street
Complete Downtown Pedestrian
Safety and Lighting Improvements
Fire Station upgrade
TOTAL
SOURCE OF DEBT SERVICE
Gas Tax
AMOUNT OF ISSUE())
$1.7 Million
Real Estate Excise Tax 1.5 Million
Property Tax .61 Million
3.81 Million
(1) These issue amounts are based on the current estimated project costs and may be modified when actual bids are analyzed.
OUTSTANDING DEBT
Governmental Activities:
General Obligation Bonds
Revenue Bonds
Intergovernmental Loans
Special Assessment Debt
Unfunded Pension Liability
Compensated Absences
Other Debt
TOTAL
VII. ECONOMIC FACTORS
GOVERNMENTAL BUSINESS -TYPE
ACTIVITIES ACTIVITIES TOTAL
2005 2004 2005 2004 2005 2004
$19,365,097 $19,830,097 $0 $0 $19,365,097 $19,830,097
0 0 28,095,000 29,675,000 28,095,000 29,675,000
2,526,127 2,915,009 9,029,301 8,527,816 11,555,428 11,442,825
261,700 53,000 0 0 261,700 53,000
3,795,872 3,367,806 0 0 3,795,872 3,367,806
4,992,721 4,673,399 0 0 4,992,721 4,673,399
1,207,825 1,418,307 6,659 0 1,214,484 1,418,307
332,149,342 932,257,618 $37,130,960 $38,202,816 $69,280,302 $70,460,434
There are a number of factors that have a fiscal impact on various revenues of the City,
induding voter approved initiatives over the last few years, as well as changes in State and
Federal regulations. Following is a List of significant factors, which have an impact on the City's
revenues. The City is committed to the continued application of sound fiscal management
practices to ensure balanced budgets are maintained and critical core services are provided to
our citizens.
• In 2001 voters approved Initiative 747, which capped property tax growth each year at
a maximum of 1%, plus any additions for annexations and new construction. I-747 was
required to be fully implemented beginning with 2002. In the economic environment of low
inflation rates that existed in the first few years I-747 was effective, this restriction was not as
severe as it is becoming now that inflation rates have started to climb at a higher level.
• Since the closure of the Yakima Mall in 2003, the Downtown Merchants Association, the
mall owner and the City have been researching different uses/businesses for the downtown
area as it transitions from a retail center to a central business district. The City is actively
participating in several projects to upgrade the downtown as follows:
- The City was recently awarded State and Federal grants of about $7.6 million for
infrastructure improvements in the downtown core, with construction that began in mid
2005.
Comprehensive Annual Financial Report (C.A.F.R.) —19
- The City owned Capitol Theatre, located in the center of the downtown area, used a state
grant of $.5 million to make improvements to the HVAC system and expand/upgrade
restroom accommodations in 2004. Another $.5 million grant has been secured for
additional improvements in 2006.
- Additionally, the section 108 loan awarded by the City in 2005 was slated to be used to
improve a section of the former mall to include a new hotel and related retail facilities,
which opened in the spring of 2006.
• The non-agricultural unemployment rate (6.8% as of May, 2006) in the County continues to
be higher than the State average. The County's predominant industry is agriculture and food
related. This industry has a history of high unemployment rates and seasonal employment.
However, local economy has remained relatively stable in recent years. This unemployment
rate is 0.2% better than May of the prior year.
• In 2004 voters in Yakima County approved a 3/10 percent increase in the sales tax
rate; proceeds from which are dedicated to support Criminal Justice. The new tax was
implemented on April 1, 2005. Distribution is based on a formula whereby the county
receives 60%, and the balance is shared among the cities in the County on a per capita basis.
The City of Yakima expects to receive about $1.4 million annually from this increase and
is utilizing this revenue to hire an additional 12.75 FTE's in the areas of Police, Municipal
Court, Legal and Animal Control, and provide additional capital and technical support for
Criminal Justice operations.
• In 2006, City voters approved annexing into the Yakima County Rural Library District.
Currently, the City receives property taxes and contracts for Library services. In 2007,
related taxes will be levied directly by the Library, and the contract expense will be
eliminated.
• The City is continuing to annex property within the Urban Growth Boundary that is
being sewered. In 2005, a residential area with assessed value (AV) of $173 million and a
population of 1,942 was annexed in late summer. Another residential area with an AV of $62
million and population of 1,153 was effective early 2006. In both cases, utility taxes were
effective at the time of annexation, but City property taxes will be levied in the 2007 tax year.
The 2006 budget is balanced for all funds, within guidelines established by city management, to
accomplish municipal service levels and priorities set by City Council. To date, overall budget
results are performing as expected.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City of Yakima'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: City of Yakima - Finance Director, 129 North Second Street, Yakima, WA 98901.
20 — Comprehensive Annual Financial Report (C.A.F.R.)
BASIC FINANCIAL STATEMENTS
The basic financial statements and note disclosures comprise the minimum acceptable fair
presentation in conformity with General Accepted Accounting Principles (GAAP). Basic financial
statements are designed to be "liftable" from the Financial Section of the Comprehensive Annual
Financial Report (CAFR) for widespread distribution to users requiring less detailed information
than is contained in the full CAFR. Basic Financial Statements include:
GOVERNMENT -WIDE FINANCIAL STATEMENTS
1) Government -wide Statement of Net Assets - presents information on all City governmental
and business -type assets and liabilities, with the difference reported as net assets.
2) Government -wide Statement of Activities -presents information on all City governmental and
business -type revenues and expenses, with the difference reported as change in net assets.
FUND FINANCIAL STATEMENTS
3) Balance Sheet - Governmental Funds - presents the balance sheets for major funds and
aggregated amounts for all other governmental funds.
4) Reconciliation of the Balance Sheet to the Government -wide Statement of Net Assets
5) Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental
Funds - presents information for each major fund and aggregated information for all
other governmental funds.
6) Reconciliation of the State:nent of Revenues, Expenditures, and Changes in Fund
Balances to the Government -wide Statement c,.f Activities
Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget (GAAP Basis)
and Actual -presents budget information, along with actual results, on a separate statement
for each major fund which .nas a legally adopted budget. Departmental information is
included for the General Fund, in accordance with the City's legally adopted budget.
3) Statement of Net Assets - Proprietary Funds -- presents information on all assets and
liabilities, with the difference reported as change in net assets for each of the enterprise
funds, as well as a separate column of information for the internal service funds.
9) Statement of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds
- presents information for each of the enterprise funds, as well as a separate column for
aggregated information for internal service funds.
10) Statement of Cash Flows - presents information on the sources and uses of cash for each
of the enterprise funds and aggregated inform ation for internal service funds.
11) Statement of Fiduciary Net Assets - presents information on the pension trust, fund
assets and liabilities, withthe difference reported as net assets.
12) Statement of Changes in Fiduciary Net Assets - presents information on additions to and
deductions from the pension trust, with the difference reported as change in net assets.
13) Notes to Financial Statements - presents disclosure and further detail information
to assist the reader in a be Iter understanding of the financial statements and the data
presented within them.
Comprehensive Annual Financial Report (C.A.F.R.) - 21
CITY OF Yibi[gi
STATEMENT OF NET ASSETS
December 31, 2008
With comparative totals for December 31, 2004
ASSETS
Cash end Cash Equivalents
Investments at Amortized Cost
Receivables (Net)
Due from Other Government Units
Notes Receivable
Inventories
Unamortized Debt Issue Cost
Restricted Assets:
Casts and Cash Equivalents
Fiscal Agent
Investments at Amortized Cost
Capital Assets (Net of Accumulated Depreciation):
Land
Buildings
Improvements other Than Buildings
Machinery & Equipment
Construction in 'recess
Intangibles
Infrastructure
Total Capital Assets
Total Assets
LIABILITIES
Accounts payable and other current liabilities
Accrued Liabilities
Due to Other Government Units
Deferred revenue
Noncurrent liab.lities
Due within one year
Due in more than one year
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Debt service
Cap,iat projects
Other purposes
Unrestricted
Total net assets
GOVERNMEN1AL
ACTIVITIES
Page 1 of
BUSINESS -TYPE ..--TOTAL
ACTIVITIES 2005 2004
$15,732/ 69 $12,255,250 $27,987,719 525,133,388
9,361,287 19,823,438 29,135,225 31,647,9116
5,860,. 79 2,735,797 8,595,976 8,259,951
2,103;,30 1,458,181 3,561,911 3,267,144
6,228,804 5,374 6,234,178 6,615,890
189,996 447,375 637,371 458,511
0 158,999 158,999 170,203
0 1,000,600 1,000,600 2,665,114
8,065 3,080 11,145 11,145
0 1,700,000 1,700,000 0
8,764562 2,181,516 10,916,078 10,951,262
35,615,829 27,529,801 63,215,630 62,797,151
6,045,737 47,826,172 53,871,909 51,251,825
6,424,9 33 11,959,343 18,334,276 16,614,611
9,048,295 17,802,700 26,850,995 21,304,116
0 115,659 115,659 115,619
18,405,297 0 18,405,297 21,182,937
84,304,553 107,515,191 191,819,844 184,217,611
1123,789,983 $147,103,285 8270,892,968 $262,446233
$5,648,688 $3,094,102 $8,742,790 88,787,141
1,886,634 2,955,513 4,842,147 4,706,697
63,607 0 63,607 57,570
6,784,923 0 6,734,823 77,007,01,0
2,123,639 2,392,854 4,516,493 4,389,723
30,025,703 34,738,106 64,743,809 66,024,033
$46,533,094 $43,180,575 $89,713,669 $90„972,1;4
563,513, 417 $86,609,490 $150,122,907 $144,667,963
$753,266 $2,700,600 53,453,866 $3,434,210
929,202 0 929,202 474,319
3,109, 72 0 3,139,772 3,588,405
8,950,932 14,612,620 23,563,552 19,309,712
$77256,589 $103,922,710 $181,179,299 8171.474,759
The notes to the Imanttal statements are an integral part of this statement.
22 - Comprehensive Annual Financial Report (C.A.F.R.)
CITY OF YK[iu2 _
STATEMENT OF ACTIVITIES Page 1 of 1
For the Year Ended December3l, 2005
With comparative totals for December 31, 2004
FUNCTIONS/PROGRAMS
Governmental Activities:
General Government
Security of Persons and Property
Physical Environment
Transportation
Economic Environment
PROGRAM REVENUES
CHARGES OPERATING CAPITAL
FOR
EXPENSES SERVICES
$7,380,940
30,221979
1,231,940
5,962,249
3,746,850
Mental & Physical Health 43,278
Cultural & Recreational Environment 7,600,877
Interest on Long•Term Debt 809,068
Total Governmental Activities $56,997,181
Business Type Activities:
Transit
Refuse
Wastewater
Water
Irrigation
Total Business Type Activities
Total
NET (EXPENSE) REVENUE
AND CHANGES IN NET ASSETS
BUSINESS
GRANTS 8 GRANTS 8 GOV'T TYPE
CONT'S CONT'S ACTIVITIES ACTIVITIES
5155,653 00 90 (97,225,287)
1,561,227 2,903,094 173,401 (25,584,257)
875,347 0 31,281 (325,312)
84,461 35,086 3393,368 (2,449,334)
1,059,285 2,129,498 0 (558,067)
0 0 0 (43,278)
1,532,893 65,986 323,021 (5,678,977)
0 0 0 (809,068)
$5,268,866 $5,133,664 53,921,071 ($42,673,580)
6,282,080 450,192
3,154,231 3,507,782
11,172,540 14,124,862
4,921,257 5,380,995
1,644,801 2,435,249
27,174,909 525,899,080
2,717,577 0
0 0
384,931 1,938,801
0 447910
0 0
53,102,508 $2,386,711
$84,172,090 $31,167946 58,236,172 56,307,782 (542,673,580) 54,213,390 ($38,460,190) (5,30,068,976)
TOTAL
2005 2004
50 (57,225,287)
0 (25,584,257)
0 (325,312)
0 (2,449,334)
0 (558,067)
0 (43,278)
0 (5,678977)
0 (809,068)
50 (942,673,580)
(56,951,237)
(23,435,615)
(487,033)
(741,822)
(760,791)
(16,952)
(1,168,833)
(849,837)
($34,412,120)
$0 (3,114,311) (3,114,311) (3,762,583)
0 353,551 353,551 583,932
0 5,276,054 5,276,054 4,278,376
0 907,648 900648 1,945,823
0 790,448 790,448 1,297,596
0 04,213,390 $4,213,390 $4,343,144
GENERAL REVENUES:
Taxes:
Property Taxes
Sales and Use Taxes
Franchise and Utility Taxes
Excise Taxes
Penalties and Interest
State Entitlements
Unrestricted Investment Earnings
Miscellaneous
Gain/Loss on Sale of Capital Assets
Transfers
Debt Issue Cost
Accounting Gain/Loss on General Obligation Refunding
Total general revenues, transfers, special item, and prior period adjustments
Change in net assets
Net assets -beginning
Net assets -ending
The notes to the Lnancial statements are an integral part of this statement.
512,435395 50 512,435,395 512,198,959
15,689,755 4,234,263 19,924,018 18,193,653
8,301,905 0 8,301905 7,763,357
3,212,905 0 3,212,905 2,612,164
724 0 724 1,839
2,953,049 0 2,953,049 2,774,032
735,857 559,834 1,295,691 683,780
50001 0 57,001 40,518
256,750 (55,673) 201,077 (1,004,675)
2,949,900 (3,171,182) (221,282) (192,715)
4,247 0 4,247 0
0 0 0 (474,146)
546597,488 51,567,242 548,164,730 542,596,766
03,923,908 55,780,632 $9,704,540 $12,520790
73,332,676 98,142,076 171,474,752 158,946,969
$70256,584 $103,922,708 9181,179,292 $171,474,759
Comprehensive Annual Financial Report (C.A.F.R.) - 23
BALANCE SHEET
GOVERNMENTAL FUNDS
December 31, 2005
With comparative totals for December 31, 2004
ASSETS
Cash Sr equity in pooled investments
Deposits w/ fiscal agent/trustee
Receivables:
Taxes
Accounts
Special Assessments
LID Assessments -Delinquent
LID Assessments - Deferred
Notes/Contracts
Interest/Penalties
Other Receivables
Due from Other Funds
Due from Other Government Units
Inventories
Investments, et Amortized Cost
Total Assets
LIABILITIES AND FUND BALANCES
Liabilities:
Warrants/Accounts Payable
Wages/Benefits Payable
Contracts Payable
Due to Other Funds
Due to Other Government Units
Deposits Payable
Deferred Revenue
Total Liabilities
CITY OF Yr t//2
Page 1 of 2
#000 #124 #13I #141 OTHER -----TOTAL
GENERAL COMMUNITY PARKS AND GOVERNMENTAL GOVERNMENTAL FUNDS
FUND DEVELOPMENT RECREATION STREETS FUNDS 2005 2004
92,880,717 9236,706 9688,781 9954,882 98,572222 513333,308 $10,571,232
0 0 100 0 0 100 100
4,201,726 0 0 0 297,007 4,498,733 3,890,806
113,498 2,202 8,413 861 142,451 267425 346,569
o o 0 0 2,697 2,697 2,060
0 0 0 0 1,732 1,732 965
0 0 0 0 365,622 365,622 171,807
0 6,196,175 0 0 32,629 6,228,804 6,610,516
131,653 0 0 8,278 21,505 161,436 89,137
0 0 0 0 75,302 75,302 290751
511,606 0 0 0 0 511,606 242,101
38,210 273,037 6,864 207,366 1,578,253 2,103,730 1,933,893
48,671 0 0 0 0 48,671 44,150
4,616,693 0 0 499,787 1,804,549 6,921,029 8,692,174
512,542,774 56,708,120 $704,158 $1671,174 512893,969 534,520,195 $32,893,261
$448,896 080,400
2918,085 73,501
0 0
0 0
46,513 0
58,511 250
106,774 6,198,377
$3,578,779 $6352,528
The notes to the financial statements are an integral part of this statement
$60,863 597,202 9920,644 $1,608,005 92,217,838
145,987 222,332 297,122 3,657,027 3,330,238
0 9,738 78,332 88,070 221,306
0 0 511,606 511,606 61,041
42 0 17,052 63,607 57,570
2,503 0 54,864 116,128 111,520
15,277 861 463,534 6,784,823 7,007,060
9224,672 $330,133 92,343,154 512,829,266 013,006,573
24 - Comprehensive Annual Financial Report (C.A.F.R.)
CITY OF r rNCur'eG
BALANCE SHEET
GOVERNMENTAL FUNDS
December 31, 2005
With comparative totals for December 31, 2,104
Fund 3alances:
Reserved Fon
Inventory
Encumbrances
Continuing Appropriations
Debt Service
Endowment
Parking and Business Improvement
Probation Center
Unreserved:
General Fund
Special Revenue Funds
Capital Projects Funds
Total Fund Balances
Page 2 of 2
#000 #124 #131 #141 OTHER TOTAL
GENERAL COMMUNITY PARKS AND GOVERNMENTAL GOVERNMENTAL FUNDS
FUND DEVELOPMENT RECREATION STREETS FUNDS 200S 2004
$48,671 $0 50 00 00 548,671 544,150
228,889 1,016,320 „000 108,233 1,068517 2,422,964 2,672,933
0 0 0 929,202 929,202 474,389
0 0 0 753,266 753,266 769,076
0 0 0 0 535,080 535,080 523,210
0 0 0 0 103,057 103,057 145,919
0 0 0 0 202,193
8,686,130 0 0 0 0 8,686,430 8666,952
0 (660,728) 470,486 1,232,808 3,874,034 4,924,600 4,110,456
0 0 0 0 3,287,659 3,287,659 2,477910
58,963,995 $355,592 5979,486 51,341,041 010,550,815 521,690,929 519,886,688
Total Liabilities and Fund Balances 012,542,779 56,708,120 5704,158 $1,671,174 $12,893,969
Amounts reported for governmental activities in tie statement of net assets are different because:
Capital assets used in governmental activities are not financial resources and,
therefore, are not reported in the funds.
Other long-term assets are not available to pay lir current -period expenditures and,
therefore, are deferred in the funds.
Intemal service funds are used by management o charge the costs of service to individual funds.
The assets and liabilities of the internal service funds are included in government
activities in the statement of net assets.
Long-term liabilities, including bonds payable, are not due and payable in the
current period and therefore are not reported n the funds.
Accrued interest payable on General Obligation .Debt
Net assets of governmental activities
The notes to the financial statements are an integral part of this statement.
581,493,835 080,225,595
0
6,305,353 5,566,067
(32,149,342) (32,257,618)
(84,193) (38,056)
077,256,582 573,332,676
Comprehensive Annual Financial Report (C.A.F.R.) -.25
CITY OF T,"16'
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL. FUNDS
For the Year Ended December 31, 2005
With comparative totals for December 3'1, 2004
REVENUES
Taxes and Special Assessments
Licenses and Permits
Intergovernmental Revenues
Charges for Services
Fines and Forfeits
Interest
Other Revenues
Total Revenues
EXPENDITURES
Current
General Government
Security of Persons and Property
Physical Environment
Transportation
Economic Environment
Mental & Physical Health
Cultural & Recre tional Envmt
Capital Outlay
General Government
Security of Persons and Property
Physical Environment
Transportation
Economic Environment
Cultural &Recreational Envmt
Debt Service
Principal retirement
Interest
Total Expenditures
Excess (deficiency) of revenues
over(under) expenditures
OTHER FINANCING SOURCES (USES)
Proceeds from Capital Lease Financing
Proceeds from L.T..Debt-G.O. Bonds
Proceeds from Intergovernmental Loans
Other Note Proceeds
Transfers In
Transfers (Out)
Intergovernmental Agreements
Sale of Capital Assets
Comp. for Loss of Caen. Capital Assets
Total Other Financ:ng,Sources (Uses)
Net Change m Fund Balances
0000
GENERAL
FUND
#124 #131
COMMUNITY PARKS 6
DEV REC
532,066,945
690,783
1,763988
4,290,541
1,190,300
735,857
57,001
540,795,915
59,852,233
25,098,721
1,328,608
0
#141 OTHER
GOVT
STREETS FUNDS
$0 01,841985
0 0
2,113,178 85,492
325,894 708,162
0 0
50,360 0
1,470 174,264
52,990902 $2,809,903
$0 $00
0
0 0
0 0
607,358 2,442,755 932,542
18,255 0 0
1,419,440 0 3,127,919
56,665 0
0 0
0 0
0 0
8,115 0
0 0
314,736
78406
538,782,557
0
0
52,442,755
2,012,858 48,147
$0 S0
0 0
0 0
0 0
90,000 0
(1,994,240) 0
0 0
0 0
322 0
($1903918) $0
0108,940 $48,147
Fund Balances -January 1 $8,850,534 $307,445
Change in Resere for Inventory 4,521 0
Fund Balances- December 3l 58,963,995 5355,592
The note, to the financial statements are. ,ntegml part of th,s statement.
Page 7of a
TOTAL
GOVERNMENTAL FUNDS
2000 2004
$3,326,997 85,321,498
0 0
1,2.19,850 6,656,281
67,751 203,434
0 0
9,236 74,255
5,938 1,001,268
54,629,772 513,256,736
998,694 $139,296
0 3,585518
32,716 337,311
4,355,170 245,464
0 197,955
0 25,023
3,153 2,349,144
0 0 18,577
0 0 578,628
0 0 873,666
0 5,870 3,322,440
0 0 359,386
0 0 109,743
0
0
53,560,461
(750,558)
0 1,815,639
0 734,525
04,495,553 014,692,315
$42,557625 $39,489,628
690,783 529,767
11,838,789 12,797,048
5,595,782 5,845,816
1,190,300 1,363,565
869,708 553,500
1,239,941 1,201,880
963,982,728 $61,781,209
$10,090,173 $9,905,374
28,684,239 26,958,702
1,698,635 1,707,162
4,500,634 4,203,596
3,680,610 3,380,184
43,278 16,952
6,899,656 6,452,453
75,262 377,541
578,628 1,503,516
873,666 29,658
3,328,310 5,629,506
367,501 155,959
109,743 1,791,821
2,130,375
812,931
563,973,641
1,931,782
849,837
$64,893,993
134,219 (1,435,579) 9,087 (3,112,789)
50 $0 50
0 0 759,597
0 148,286
0 371,075
0 2,824,583
(247,183) (1,347711)
0
0
963,710
(256,000)
0
7,410
42,641
9757,761
57,203
5472,283
0
0479,486
26 -Comprehensive Annual Financial Report (C.A.F.R.)
0 0
0 309,572
118,572 0
(5128,611) 03,065,402
$5,608 51,629,823
50 5472,669
759,597 7,262
148,286 0
371,075 0
3,878,293 3,693,203
(3,845,134) (3,954,109)
0 0
316,982 130,716
161,535 53,837
$1,790,634 5603578
$1,799,721 ($2,509,211)
$1,335,433 $8,920,992 $19,886,687 $22,379,682
0 0 4,521 16,217
91,341,041 010,550,815 521,690,929 819,886,688
CITY OF YKcirl2
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
For the Year Ended December 31, 2005
With comparative totals for December 31, 2004
Net change in fund balances as shown on Governmental Funds Statement of
Revenues, Expenditures, and Changes in Fund Balance:
Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which
capital outlays exceeded depreciation in the current period.
In the statement of activities, only the gain on the sale of fund assets is reported,
whereas in the governmental funds, the proceeds from the sale increase financial
resources. Thus, the change in net assets differs from the change in fund balance
by the cost of the fund assets.
Bond proceeds provide current financial resources to governmental funds,
but issuing debt increases long-term liabilities in the statement of net assets.
Repayments of the bond principal is an expenditure in the governmental
funds, but the repayment reduces the long-term liabilities in the statement of net assets.
This is the amount by which proceeds exceeded repayments.
Some expenditures reported in the statement of activities do not require the use of
current financial resources and therefore not reported as expenditures in
governmental funds (compensated absences, inventory).
Internal service funds are used by management to charge the costs of services to
individual funds. The net revenue (expenses) of certain internal service funds is
reported with governmental activities.
Change in net assets, as reflected on the Statement of Activities
The notes to the financial statements are an integral part of this statement.
2005
Page 1 of 1
2004
$1,799,721 ($2,509,211)
1,490,007
(221,767)
6,738,076
2,302,973
855,664 977,697
(739,004) (1,336,547)
739,286 586,384
$3,923,907 $6,759,372
Comprehensive Annual Financial Report (C.A.F.R.) - 27
CITY
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2005
REVENUES
Taxes and Special Assessments
Licenses and Permits
Intergovernmental Revenues
Charges for Services
Fines and Forfeits
Interest
Other Revenues
Total Revenues
EXPENDITURES
Current
General Government
Security of Persons and Property
Physical Environment
Economic Environment
Mental & Physical Health
Cultural Si Recreational Envmt
Capital Outlay
General Government
Security of Persons and Property
Economic Environment
Debt Service
Principal Retirement
Interest
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers In
Transfers (Out)
Sale of Capital Assets
Comp. for Loss of Gen. Capital Assets
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances -January 1
Change in Reserve for Inventory
Fund Balances -December 31
--- BUDGETED AMOUNTS ---
ORIGINAL FINAL ACTUAL AMOUNTS
$30,557,769
561,500
1,636,541
4,209,710
1,462,200
550,000
48,500
$39,026,220
Page 1 of 1
VARIANCE WITH
FINAL BUDGET -
POSITIVE
(NEGATIVE)
$30,557,769 $32,066,945 1,509,176
584,500 690,783 106,283
1,685,541 1,763,988 78,447
4,228,710 4,290,541 61,831
1,462,200 1,190,300 (271,900)
550,000 735,857 185,857
48,500 57,001 8,501
$39,117,220 $40,795,415 $1,678,195
$10,121,944 $10,211,216 $9,852,233 $358,983
24,827,540 25,314,608 25,098,721 215,887
1,310,117 1,353,917 1,328,608 25,309
548,747 680,165 607,358 72,807
17,180 17,180 18,255 (1,075)
1,420,440 1,420,440 1,419,440 1,000
110,000 198,000 56,685 141,315
5,000 5,000 0 5,000
0 0 8,115 (8,115)
337,969
80,823
$38,779,760
337,969 314,736 23,233
80,823 78,406 2,417
$39,619,318 $38,782,557 $836,761
$246,460 (8502,098) $2,012,858 $2,514,956
$110,000
(1,974,000)
100,000
1,000
($1,763,000)
$110,000 $90,000 ($20,000)
(1,974,000) (1,994,240) (20,240)
100,000 0 (100,000)
1,000 322 (678)
($1,763,000) ($1,903,918) ($140,918)
($1,516,540) ($2,265,098) $108,940 $2,374,038
$4,676,281
0
$3,159,741
The notes to the financial statements are an integral part of this statement
$4,676,281 98,850534 $4,174,253
0 4,521 4,521
$2,411,183 $8,963,995 $6,552,812
28 - Comprehensive Annual Financial Report (C.A.F.R.)
tITY OF /!C/CL,5(Z CITY OF /;(ibtf!L
COMMUNITY DEVELOPMENT FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2005
Page 1 of 3
PARKS AND RECREATION FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHAPIGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2005
Page 2of3
VARIANCE WITH VARIANCE WITH
FINAL BUDGET - FINAL BUDGET
--- BUDGETED AMOUNTS --- POSITIVE
»-- BUDGETED AMOUNTS --- POSITIVE
ORIGINAL FINAL ACTUAL AMOUNTS (NEGATIVE) ORIGINAL FINAL ACTUAL AMOUNTS (NEGATIVE)
REVENUES
REVENUES Taxes and Special Assessments $1,841,985 $1,841,985 61,841,985 $0
Intergovernmental Revenues $2,110,000 83,230,421 $2,113,178 ($1,117,243) Intergovernmental Revenues 51,506 51,506 85,492 33,986
Charges for Services 262,500 262,500 325,894 63,394 Charges for Services 825,520 825,520 708,162 (117,358)
Interest 36,566 36,566 50,360 13,794 Interest 1,000 1,000 0 (1,000)
Other Revenues 1,000 _ 1,000 1,470 _470 Other Revenues 129,700 129,700 174,264 44,564
Total Revenues $2,410,066 93,530,487 52,490,902 ($1,039,585) Total Revenues 52,849,711 $2,849,711 62,809,903 ($39,808)
EXPENDITURES
Current
Economic Environment $2,412,788 $3533,209 52,442,755 51,090,454
Capital Outlay
Economic environment 2,500 _ 2,500 0 2,500
Total Expenditures $2,415,288 53,535,709 52,442,755 51,092,954
Excess (Deficiency) of Revenues
Over (Under) Expenditures ($5,222) (55,222) 548,147 $53,369
Net Change in Fund Balances ($5,222) ($5,222) $48,147 $53,369
Fund Balances -January l 586,052 586,052 307,445 (278,607)
Fund Balances - December 31 $580,830 $580,830 $355592 ($225,2'
EXPENDITURES
Cu.nent
Economic Environment $441,059 $441,059 $432,542 $8,517
Mental & Physical Health 0 0 0
Cultural & Recreational Envmt 3,207,556 3,217,966 3,127,919 90,047
Capital Outlay
Cultural & Recreational Env. 6,500 6,097 0 8,097
Total Expenditures 53,655,115 $3,667,122 63,560,461 8106,o61
Excess (Deficiency) of Revenues
Over (Under) Expenditures (5805,404) (5817,111) (5750,558) 566,053
OTHER FINANCING SOURCES (USES)
Transfers In $900,000 $900,000 $963,710 $63,710
Transfers (Out) (256,000) (256,000) (256,000) 0
Sale of Capital Assets 0 0 7,410 7,410
Comp. for Loss of Gen. Capital Assets 50,000 50,000 42,641 (7,359)
Total other financing sources (uses) $694,000 $694,000 $757,761 $63,761
Net change in font balances ($111,404) ($123,411) 557,203 $130,614
Fund balances -January 1 422,812 422,812 472,283 49,471
Fund balances - December 31 5311,408 5299,401 5479,486 5180,085
The notes to the financial statements are an integr d part of ttus statement. Thy noses to the Sna ctal statements axe an Integral pare of this statement.
Comprehensive Annual Financial Report (C.A.F.R.) - 29 30 - Comprehensive Annual Financial Report (C.A.F.R.)
CITY OF /di/ a
STREETS FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2005
REVENUES
Taxes and Special Assessments
Intergovernmental Revenues
Charges for Services
Interest
Other Revenues
Total Revenues
EXPENDITURES
Current
General Government
Physical Environment
Transportation
Cultural & Recreational Envmt
Capital Outlay
Transportation
Total Expenditures
Excess (Deficiency) of Revenues
Over (Under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers (Out)
Comp. for Loss of Gen. Capital Assets
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - January 1
Fund Balances - December 31
Page 3 of 3
VARIANCE WITH
FINAL BUDGET -
--- BUDGETED AMOUNTS --- POSITIVE
ORIGINAL FINAL ACTUAL AMOUNTS (NEGATIVE)
$3,249,357 $3,441,055 $3,326,997 (114,058)
1,138500 1,173,586 1,219,850 46,264
5Z000 57,000 67,751 10,751
20,000 20,000 9,236 (10,764)
50 50 5,938 5,888
$4,464,907 $4,691,691 $4,629,772 ($61,919)
9109,338 $109,338 $98,644 $10,694
37,500 37,500 32,716 4,784
4,330,498 4,852,296 4,355,170 497,126
4,398 4,398 3,153 1,245
22,500 22,500 5,870 16,630
94504,234 $5,026,032 84,495553 $530,479
($39,327) ($334,341) $134,219 9468560
(5205542) ($247,542) ($247,183) 5359
0 0 118,572 118,572
($205,542) (8247,542) ($128,611) 5118,931
($244,869) (9581,883) $5,608 $587,491
726,394 726,394 1,335,433 609,039
$481,525 $144,511 51,341041 $1,196,530
The notes to the financial statements are an integral part of this statement.
Comprehensive Annual Financial Report (C.A.F.R.) - 31
CITY OF / G>r,�%
Washington
NOTES TO THE FINANCIAL STATEMENTS
Contents of the Notes
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 44
Reporting Entity ... 44
Government -Wide and Fund Financial Accounting ... 46
Measurement Focus, Basis of Accounting, and Financial Statement Presentation 46
Assets, Liabilities and Equities 49
NOTE 2 - RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS 52
Explanation of Certain Differences Between the Governmental Fund Balance Sheet 52
Explanation of Certain Differences Between the Governmental Fund Statements 53
NOTE 3 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 54
Budgets and Budgetary Accounting 54
Deficit Fund Equity 56
NOTE 4 - DETAILED NOTES ON ALL FUNDS 57
Deposits and Investments. 57
Property Taxes. 59
Receivables ... ... 60
Interfund Receivables, Payables and Transfers. ... .61
Capital Assets 62
Commitments 64
NOTE 5 - PENSION PLANS 64
Public Employees' Retirement System (PERS) 65
Law Enforcement Officers' and Firefighters' Retirement System (LEOFF) 67
Other Retirement Systems - Volunteer Firefighters Relief and Pension Fund. 69
Firemen's Pension. 69
Police Pension ... 70
42 - Comprehensive Annual Financial Report (C.A.F.R.)
NOTE 6 — SELF-INSURANCE FUNDS 71
Unemployment Compensation 71
Self -Insured Medical/Dental Program. ... 72
Workers' Compensation Program 72
Risk Management Program. 73
NOTE 7 — LONG-TERM DEBT AND CAPITAL LEASES 74
General Obligation Debt 75
Revenue Bonds .76
bitergovernmental Loans and Contractual Agreements .76
Special Assessment Debt with governmental Commitment 79
Lease Purchase Agreements. 79
Unfunded Pension Liabilities. 80
NOTE 8 — CONTINGENCIES 80
Section 108 Loan Program 80
Potential Litigation. 81
NOTE 9 — SEGMENT INFORMATION 81
NOTE 10 — JOINT VENTURES 82
NOTE I I — POST RETIREMENT BENEFITS OTHER THAN PENSION BENEFIT 84
NOTE 12 — OTHER DISCLOSURES 84
Subsequent Events 84
CITY OF / 6f:i
Washington
NOTES TO THE FINANCIAL STATEMENTS
Year ended
December :31, 2005
NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the City of Yakima, Washington, conform to Generally Accepted
Accounting Principles (GAAP) as applicable to governmental units. The City has adopted
the pronouncements of the Governmental Accounting Standards Board (GASB) which is
the accepted sl,andard-setting body for establishing governmental accounting and financial
reporting principles nationally. The following is a summary of the more significant policies. The
policies should be reviewed as an integral part of the financial statements and are presented to
assist the reader in interpreting the financial statements and other data in this report.
A. RIEPORTING ENTITY
The City of Yakima was incorporated in 1886, End operates under a Council / Manager
form of government with a full-time City Manager. The City of Yakima provides a full
range of municipal services, which include: pa ice, fire, engineering, parks, cemetery, street,
and administrative services. Included in the City's Enterprise Fund financial reports are -
water, irrigation, sanitary wastewater, solid waste, and transit. The Yakima Air Terminal is
operated under a joint venture agreement with Yakima County, see Note #10.
The City's financial statements include all func.s, agencies and boards which are financially
accountable to the City. Financial accountability is manifest wher: the primary government
appoints the majority of an organization's governing body and is able to impose its will on
that organ;zation or there is a potential for the organization to provide specific financial
burdens on the primary government. The primary government may be financially
accountable if an organization is fiscally dependent on the primary government regardless
o1 whether the organization has a separately elected governing board, a governing board
appointed by a higher level of government, or a jointly appointed board. An organization
is fiscally dependent if it is unable to determine its budget without another government
having the substantive authority to approve or modify the budget, to levy taxes or set rates
Comprehensive Annual Financial Report (C.A.F.R.) — 43 44— Comprehensive Annual Financial Report (C A.F.R.)
or charges without substantive approval by another government, or to issue bonded debt
without substantive approval by another government. Applying these criteria, the combined
financial statements do not include the financial position or results of operations of:
YAKIMA SCHOOL DISTRICT NO. 7: WEST VALLEY SCHOOL DISTRICT NO. 208; UNION GAP SCHOOL
DISTRICT NO. 2 These school districts are municipal corporations empowered by the state
to educate the children of the City of Yakima. These school districts have independently
elected boards of directors, adopt and control their own budgets and have their own taxing
authority.
YAKIMA COUNTY The County of Yakima was incorporated in 1865 under the authority of the
Revised Code of Washington. The County has an elected board of commissioners, adopts
and controls its own budget, and has its own taxing authority. The City has no legal interest
in or responsibility for the assets or liabilities of the County.
YAKIMA VALLEY REGIONAL LIBRARY The Yakima Valley Regional Library is a separate
county -wide municipal corporation with its own taxing authority. It provides library services,
under contract, for the City of Yakima, Yakima County and its other cities. The City has no
legal interest in or responsibility for the assets or liabilities of the Library.
YAKIMA HEALTH DISTRICT The Yakima Health District has its own board of directors, and
adopts and controls its own budget. The City has no legal interest in or responsibility for the
assets or liabilities of the Yakima Health District.
YAKIMA CONFERENCE OF GOVERNMENTS The Yakima Conference of Governments is an agency
comprised of the County, cities, and other boards which assists in long range planning
for the member entities. The City has no legal interest in or responsibility for its assets or
liabilities.
RELATED ORGANIZATION The City's officials are also responsible for appointing the members
of the boards of another organization, but the City's accountability for this organization does
not extend beyond making the appointments.
YAKIMA HOUSING AUTHORITY The Yakima Housing Authority was created by Resolution
No. D-1575, in 1971, and, under certain conditions, can be dissolved by the City. Yet, it is
an independent entity with distinct governmental character and organization. The City of
Yakima created the Housing Authority per Washington State Revised Code Chapter 35.82
which provides that liabilities incurred by the Housing Authority will be satisfied from its
assets, and that no person shall have any right of action against the City on account of its
debts, obligations, and liabilities.
YAKIMA REGIONAL PUBLIC FACILITIES DISTRICT Although a separate legal entity, the City has
elected to account for the operations of the Public Facilities District in a Non -major Special
Revenue Fund. The cities of Yakima, Selah and Union Gap formed a Public Facilities District
(PFD) for the purpose of expanding the Yakima Convention Center. The City appoints
a majority of the board members, and must approve the annual budget. The financial
Comprehensive Annual Financial Report (C.A.F.R.) — 45
agreement stipulates that all revenue derived by the PFD (primarily a state sales tax
credit) be transferred to the City and the City will use these funds for Center debt service
and operations, and reimbursement of administrative costs of the PFD.
B. GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS
The government -wide financial statements consist of the statement of net assets and the
statement of activities. These statements report information on all of the nonfiduciary
activities of the primary government. For the most part, the effect of interfund activity
has been removed from these statements. Governmental activities, which normally are
supported by taxes and intergovernmental revenues, are reported separately from business -
type activities, which rely to a significant extent on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a
given function or segment are offset by program revenues. Direct expenses are those that
are clearly identifiable with a specific function or segment. The City's policy is to allocate
indirect costs to individual functions, if they are non tax supported.
Program revenues include 1) charges to customers or applicants who purchase, use, or
directly benefit from goods, services, or privileges provided by a given function or segment,
and 2) grants and contributions that are restricted to meeting the operational or capital
requirements or a particular function or segment.
Taxes and other items not properly included among program revenues are reported instead
as general revenues.
Separate fund financial statements are provided for governmental funds, proprietary
funds, and fiduciary funds, even though the latter are excluded from the government -wide
financial statements. Major individual governmental funds and major individual enterprise
funds are reported as separate columns in the fund financial statements.
C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION
The government -wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund and
fiduciary fund financial statements. Under this measurement focus, 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.
All governmental fund financial statements are reported using the "current financial
resources" measurement focus and the modified accrual basis of accounting. Revenues are
recognized as soon as they are both measurable and available. Revenues are considered
to be available when they are collectible within the current period or soon enough
46 — Comprehensive Annual Financial Report (C.A.F.R.)
thereafter to pay liabilities of tae current period. For this purpose, the City considers
revenues to be available if they are collected within sixty days of the end of the current
fiscal period. Expenditures generally are recorded when a liability is incurred, as under
accrual accounting. However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments,, are recorded only when payment is due.
Certain charges for service, sales based taxes, and interest associated within the current
period are considered to be susceptible to accrual and so have been recognized as revenues
of the current fiscal period. Orly 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. Grants are considered .measurable and available to the extent that expenditures have
been made. Other intergovernmental revenues are considered measurable and available
when earned. Other revenues such as state shared revenue, licenses, fines and fees are not
considered susceptible to accrual since they are not generally measurable until received.
Expenditures are generally recognized when the related fund liability is incurred, as under
accrual accounting. All other revenue items are considered to be measurable and available
only when cash is received by the City.
The City of Yakima reports the following major governmental funds:
The General Fund is the City's primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for in
another fund.
The Community Development Fund accounts for the Office of Neighborhood Development,
which is the focus of the City's effort to improve economic opportunities and housing
conditions in Yakima. Federal Housing and Urban Development grants are the major
revenue source for this program.
The Parks and Recreation Fund accounts for park maintenance and recreation programs
primarily supported by tax levies and pool anct golf fees.
The Street Fund is required to be a separate fund for the purpose of accounting for the
disbursement of the Motor Vehicle Fuel Tax revenues paid by the State of Washington to
the City. Primarily, the fund is used for maintenance of existing City streets and traffic
signalization, and is also tax supported.
The City reports all enterprise funds as major funds:
The Transit Fund accounts for the operation of the City Transit System, funded primarily
by 0.03% sales tax, federal grants and fares.
The Refuse Fund accounts far the provision of garbage collection and disposal service of
the City.
The Water and Wastewater lands account for the provision of water and wastewater ser-
vices to the residents of the City and other outside utility agreements.
Comprehensive Annual Financial Report (C.A.F.R.) — 47
tt The Irrigation Utility Fund is responsible for the operation, maintenance and
reconstruction of the existing irrigation system.
Additionally, the government reports the following fund types:
• Internal Service Funds account for fleet management services, liability insurance,
employee benefit reserves, and public works administration services provided to
other departments or agencies of the government, or to other governments, on a cost:
reimbursement basis.
• Pension Trust Funds are used to account for' :he operations of trust established for
employee retirement benefits. They are accounted for in essentially the same manner as
proprietary funds because of the need for determining the periodic income of the trust.
Private -sector standards of accounting and financial reporting issued prior to December. 1,
1989, generally are followed in both the govern Hent -wide and proprietary fund financial
statements to the extent that those standards do not conflict with or contradict guidance
of the Governmental Accounting Standards Boards. Governments also have the option
of the following subsequent private -sector guic ance for their business -type activities
and enterprise funds, subject to this same limitation. The City has elected not to follow
subsequent: private -sector guidance.
As a general rule the effect of interfund activity has been eliminated from the government -
wide financial statements. Exceptions to this general rule are charges between the City's
utility functions and various other functions of the government. Elimination of these
charges would distort the direct costs and program revenues reported for the various
functions concerned.
Amounts reported as program revenues include: 1) charges to customers or applicants for
goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital
grants and contributions, including special assessments. Internally dedicated resources are
reported as general revenues rather than as program revenues. Likewise, general revenues
include all taxes.
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 proprietary fund's principal ongoing operations.
Tae principal operating revenues of the water, wastewater, refuse and irrigation enterprise
funds, and of the government's internal service: funds are charges to customers for sales and
services. Operating expenses for enterprise funds and internal service funds include the
cost of sales and services, administrative exper.ses, and depreciation on capital assets. All
revenues and expenses not meeting this definition are reported as non-operating revenues
and expenses.
When bots' restricted and unrestricted resources are available for use, it is the City's policy
to use restricted resources first, then unrestricted resources as they are needed.
48 - Comprehensive Annual Financial Report (C.A.F.R.)
D. ASSETS, LIABILITIES AND EQUITIES
L CASH AND INVESTMENTS
Cash and investments are managed under the guidance of the City's Investment Policy
adopted by Resolution No. R98-07 of the City Council. The policy was based on the
Model Investment Policy prepared by the Municipal Treasurers' Association of the
United States and Canada and applies to all financial assets of the City of Yakima.
Investments are made using the "prudent person" standard with primary objectives
being safety of principal, liquidity enabling the City to meet all operating requirements
and a return on investment objective of attaining a market rate of return through
budgetary and economic cycles.
• Investments of City funds except those of the Firemen's Relief and Pension Fund are
limited to:
1) Investment deposits, including certificates of deposit with qualified public
depositories as defined in Chapter 39.58 Revised Code of Washington.
2) Certificates, notes or bonds of the United States, or other obligations of the United
States, or its agencies, or of any corporation wholly owned by the government of
the United States (such as the Government National Mortgage Association).
3) Obligations of government-sponsored corporations which are eligible as collateral
for advances to member banks as determined by the Board of Governors of the
Federal Reserve System. (These include but are not limited to Federal Home
Loan Bank notes and bonds, Federal Farm Credit Bank consolidated notes and
bonds, Federal National Mortgage Association notes, debentures, and guaranteed
certificates of participation).
4) Bankers Acceptances and Commercial Paper purchased on the secondary market
5) Washington State Local Government Investment Pool.
6) General obligation bonds of any state or local government in the United States
and revenue bonds from jurisdictions in Washington state having a long-term
credit rating of no less than A3 as rated by Moody's or A- by Standard and Poor's.
• Repurchase and reverse repurchase agreements are excluded as eligible investments.
• Resources of the Firemen's Relief and Pension Fund may be invested in high quality
corporate bonds in addition to instruments listed above.
• The City purchases investments from SEC registered security broker- dealers and
banks having offices within Washington State.
Comprehensive Annual Financial Report (C.A.F.R.) — 49
The City's Treasury Services Officer, under the direction of the Director of Finance and
Budget, invests or deposits all temporary cash. These investments and time deposits do
not result in reductions to the cash balances of the various funds and are considered to
be cash equivalents to the funds under the definition promulgated in GASB Statement #9,
which states that investments purchased within ninety days of maturity are considered
to be cash equivalents. These amounts are reported on the Combined Balance Sheet as
part of "Cash and Cash Equivalents."
2. RECEIVABLES
Taxes receivable consist of property and other taxes including related interest and
penalties (See Note #4C). Accrued interest receivable consists of amounts earned on
investments, notes, and contracts as of year- end.
Special assessments are recorded when levied. Special assessments receivable consists
of current and delinquent assessments. Deferred assessments consist of unbilled special
assessments that are liens against the property benefited. As of December 31, 2005,
$1,732 of special assessments receivables were delinquent. Customer accounts receivable
consist of amounts due from private individuals or organizations for goods and services.
Notes and contracts receivable consist of amounts owed on open account from private
individuals or organizations for goods and services rendered. The major component of
the notes receivable category is in the Community Development fund, and represents a
revolving home ownership assistance program.
3. AMOUNTS DUE TO AND FROM OTHER FUNDS; INTERFUND LOANS AND ADVANCES RECEIVABLE
These accounts include all interfund receivables and payables. A separate schedule of interfund
loans receivable and payable is furnished in Note #4D. Long-term interfund loans are
separately identified as 'Advances"— at December 31, 2005 there were no interfund advances.
4. AMOUNTS DUE TO AND FROM OTHER GOVERNMENTAL UNITS
These accounts include amounts due to or from other governments for grants,
entitlements, temporary loans, taxes and charges for services, except amounts billed for
utility usage which is included in customer receivables.
5. INVENTORIES
Inventories in governmental funds consist of expendable supplies held for consumption.
The cost is recorded as an expenditure at the time individual inventory items are
purchased. The reserve for inventory is equal to the ending amount of inventory to indi-
cate that a portion of the fund balance is not available for future expenditure.
Inventories in the General Fund, Enterprise Funds and Internal Service Funds are valued
at cost on a moving average method.
6. RESTRICTED ASSETS AND LIABILITIES
These accounts contain resources for debt service reserve/redemption in the enterprise
funds. The current portion of related liabilities is shown as Payables from Restricted
Assets. Specific debt service reserve requirements are described in Note #7
50 - Comprehensive Annual Financial Report (C.A.F.R.)
The restricted assets of the enterprise funds are composed of the following:
Cash- Debt Service
Investment at Amortized Cost - Debt Service
Total
81,000,600
1,700,000
52 700,600
7. CAPITAL ASSETS (SEE NOTE 4E)
Capital assets, which include property, plant, equipment, and infrastructure assets (i.e.,
roads, bridges, sidewalks, and similar items), a.re reported in the applicable governmental
or business -type columns :n the government -wide financial statements. Capital assets
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. Such assets are recorded at historical
cost or estimated historical cost if purchased cat constructed. Donated capital assets are
recorded at estimated fair market value at the date of donation.
Infrastructure assets are long-lived assets that normally are stationary in nature and
normally can be preserved for a significantly greater number of years than most capital
assets. Examples of infrastructure include roads, bridges, drainage systems, water and
wastewater systems, and lighting systems.
When capital assets are purchased, they are capitalized and depreciated in the
government -wide financial statements and the proprietary fund statements. Capital
assets are recorded as expenditures of the current period in the governmental fund
financial statements.
The cost of normal maintenance and repairs that do not add to the value of the asset or
materially extend assets' lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed.
Interest incurred during the construction phase of the capital assets of business -type
activities is induded as part of the capitalized value of the assets constructed.
Property, plant, and equipment of the City is depreciated using the straight-line method
over the following estimated useful lives:
ESTIMATES SERVICE LIFE
Buildings
Improvements Other than Buildings
Utility Plant
Equipment
Intangibles (Organization Costs and Goodw2i
Infrastructure
25 -40 Years
7-50 Years
33 - 50 Years
2-25 Years
75 -100 Years
15 -50 Years
B. CUSTODIAL ACCOUNTS
These accounts reflect the iability for net monetary assets being held by the City in its
trustee or agency capacity
Comprehensive Annual Financial Report (C.A.F.R.) — 52
9. ACCRUED LIABILITIES
Other accrued liabilities include primarily i nterest payable on long-term debt, Public
Works Trust Loans and small miscellaneous payables not classified in other categories in
Enterprise Funds.
10. DEFERRED REVENUES
This account includes amounts recognized ar receivables but not: as revenue in governmental
funds because the revenue recognition criteria has not been met. (See Note #1C)
I I. NONCURRENT LIABILITIES
The contracts with employees calls for the accumulation of vacation and sick leave. At
termination of employment, employees mat' receive cash payment for all accumulated
vacation up to a certain number of hours and a percentage of sick leave, depending on
employee group. The payment is based on current wage at termination.
The amounts of unpaid vacation and sick le ave accumulated by City employees are
accrued as expenses when incurred in proprietary funds, which use the accrual basis
of accounting. In the governmental funds, only the amounts that normally would be
liquidated with expendable available financial resources are accrued as current -year
expenditures. The City uses the last -in, first -out method of recognizing the hours used of
compensated absences. Employees are charged for the last day of vacation or sick leave
earned when the leave is used. Thus, unless it is anticipated that compensated absences
will be used in excess of a normal year's accumulation, no additional expenditures are
accrued. Therefore, the entire unpaid liability for the governmental funds is a reconciling
item between the fund and government -wide presentations. For additional information
on long-term debt see Note 7
LL FUND EQUITY
Fund equity is recognized as fund balance in governmental fund types, and as net assets
in proprietary fund types. Certain fund equity may be reserved for a specific future
use, or to denote unavailability for current operations. Designations of fund balance
represent tentative management plans that are subject to change. Unless otherwise
noted, :and balances and retained earnings (deficits) are unreserved and undesignated.
NOTE 2 — RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS
A. E)PLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET
AND THE GOVERNMENT -WIDE STATEMENT OF NET ASSETS.
T.he governmental fund balance sheet includes a reconciliation between fund balance -total
government funds and net assets -governmental activities as reported in the government -wide
statement of net assets. One element of that reconciliation explains that "long-term liabilities,
including bonds payable, are not due and payaole in the current period and therefore are not
reported in the funds." The details of this $32,149,342 difference are as follows:
52 — Comprehensive Annual Financial Report (C.A.F.R.)
Bonds Payable
Intergovernmental Loans
Contractual Agreements—Yakima County
Special Assessments—Notes
Lease Purchase Agreements
Unfunded Pension Liability
Compensated Absences
$19,365,097
2,526,127
568,167
261,700
639,658
3,795,872
4,992,721
Net adjustment to reduce fund balance -total governmental funds
to arrive at net assets —governmental activities $32,149,342
B. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT
OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT -WIDE
STATEMENT OF ACTIVITIES.
The governmental fund statement of revenues, expenditures, and changes in fund balances
includes a reconciliation between net changes in fund balances -total governmental funds
and changes in net assets of governmental activities as reported in the government -wide
statement of activities. One element of that reconciliation explains that "Governmental
funds report capital outlays as expenditures. However, in the statement of activities the cost
of those assets is allocated over their estimated useful lives and reported as depreciation
expense." The details of this $1,490,007 difference are as follows:
Capital Outlay $5,333,110
Depreciation Expense (3,843,103)
Net adjustment to increase net changes in fund balances -total
governmental funds to arrive at changes in net assets of
governmental activities $1,490,007
Another element of that reconciliation states that "The net effect of various miscellaneous
transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net
assets." The details of this ($221,767) difference are as follows:
In the statement of activities, only the gain on the sale of capital
assets is reported. However, in the governmental funds, the
proceeds from the sale increase financial resources. Thus, the
change in net assets differs from the change in fund balance
by the cost of the capital assets sold/disposed
Net adjustment to increase/(decrease) net changes in fiord
balances -total governmental funds to arrive at flanges in net
assets of governmental activities
(8221,767)
Another element of that reconciliation states that "the issuance of long-term debt (e.g., bonds,
leases) provides current financial resources to governmental funds, while the repayment of
the principal of long-term debt consumes the current financial resources of governmental
funds. Neither transaction, however, has any effect on net assets. Also, governmental funds
report the effect of issuance costs, premiums, discounts, and similar items when debt is first
Comprehensive Annual Financial Report (C.A.F.R.) — 53
issued, whereas these amounts are deferred and amortized in the statement of activities."
The details of this $855,664 difference are as follows:
Debt Issued or Incurred:
Issuance of General Obligation Bonds
Intergovernmental Loan
Contractual Agreement- Yakima County
Special Assessment Notes
Principal repayments:
General obligation debt
Intergovernmental loans
Contractual agreement—Yakima County
Special assessment notes
Lease purchase agreements
Net adjustment to decrease net changes in fund balances -total
governmental funds to arrive at changes in net assets of
governmental activities
($755,000)
(48,286)
(100,000)
(371,075)
1,220,000
437,168
128,274
162,375
182,208
$855,664
Another element of that reconciliation states that "Some expenses reported in the statement
of activities do not require the use of current financial resources and therefore are not re-
ported as expenditures in governmental funds." The details of this ($739,004) difference are
as follows:
Compensated Absences
Change in Unfunded Pension Liability
Change in Reserve for Inventory
Accrued Interest Payable
Net adjustment to decrease net changes in fund balances — total
governmental funds to arrive at changes in net assets of
governnnental activities
NOTE 3 — STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. BUDGETS AND BUDGETARY ACCOUNTING
($319,322)
(428,066)
4,521
3,863
($739,004)
I. SCOPE OF BUDGET
The City Council annually approves the City's operating budget. The operating budget
is designed to allocate annually available resources among the City's services and pro-
grams and to provide for associated financing decisions.
Annual appropriated budgets are adopted on the modified accrual basis of accounting.
For governmental funds, there are no differences between budgetary basis and gener-
ally accepted accounting principles. Budgetary accounts are integrated in fund ledgers
for all budgeted funds, but the financial statements include budgetary comparisons for
the General Fund and Special Revenue Funds only. Budgets for debt service and capi-
54 Comprehensive Annual Financial Report (C.A.F.R.)
tal projects are adopted at he level of the individual debt issue or project and for fiscal
periods that correspond to the lines of debt issues or projects. Budgetary comparisons for
proprietary funds, although not legally required, may be requested from the Department
of Finance and Budget.
Annual appropriated budgets are adopted at the fund level. Subsidiary revenue and
expenditure ledgers are used to compare the budgeted amounts with actual revenues
and expenditures. As a management control device, the subsidiary ledgers monitor ex-
penditures for individual functions and activities by object class.
Appropriations for general and special revenue funds lapse at year-end.
2. PROCEDURES FOR ADOPTING THE ORIGINAL BUDGET
The City's budget procedures are mandated by Washington State Law. The steps in the
budget process are as follows:
a. Prior to November 1, the City Manager submits a proposed budget to the City
Council. This budget is based on priorities established by the Council and estimates
provided by City departments during the proceeding months, and balanced with
revenue estimates.
b. The Council conducts public hearings on the proposed budget in November to obtain
taxpayer comments.
c. During mid-December, the budget is legally enacted through passage of an ordinance.
3. AMENDING THE BUDGET
The City Manager is authorized to transfer budgeted appropriations between
departments within any fund; however, any revisions that alter the total expenditures of
a fund, or that affect the number of permanently authorized employee positions, salary
ranges, or other conditions of employment must be approved by the City Council.
When the City Council determines that it is in the best interest of the City to increase or
decrease the appropriation for a particular fund, it may do so by an ordinance approved
by a one more than simple majority of those present after holding two public hearings.
The budget amounts shown in the financial statements represent the original adopted
budget and all supplemental appropriations. City-wide, supplemental appropriations
totaled $13.6 million. The principal four amendments were to reappropriate 2004
outstanding encumbrances in the amount of $2.9 million; the reappropriation of
non -lapsing appropriations in capital project funds in the amount of $.5 million; the
appropriation for Downtown Futures project initiatives - renovation for public walkways
in the amount of $4.8 million; and the appropriation for 96th Avenue interceptor - $.65
million.
Comprehensive Annual. Financial Report (C.A.F.R.) —.55
4. ENCUMBRANCES
Encumbrance accounting, under which purchase orders, contracts, and other
commiments for the expenditure of funds are recorded in order to reserve that portion
of the applicable appropriation, is employed as an extension of formal budgetary
integration in the governmental funds. Encumbrances are reported as reservations
of fund balances since they do not constitute expenditures or liabilities. The City
reappropriates outstanding encumbrances .n the subsequent year.
B. DEFICIT FUND/EQUITY
I. DEFICIT FUND EQUITIES
Temporary deficits of the Local Improvement Construction Fund arise because long-term
financing has not been issued. During the construction phase, the Local Improvement
District issues warrants, which accrue interest and are held a:, an investment internally,
shown on the balance sheet as Warrants Payable, resulting in a deficit fund balance.
When the LID is completed, bonds or notes are issued and the Warrants Outstanding are
redeemed eliminating the deficit.
The Refuse enterprise fund had a deficit fund balance of $9,711 at December 31, 2005.
A 5% increase for refuse rates had been approved by Council to cover operating cost
increases in the 2006 budget.
The Risk Management Reserve Internal Service fund had a deficit fund balance of
$351,468 at December 31, 2005. Even though the fund has approximately $1 million
in assets, the claims manager's estimate of outstanding claims and judgments
payable is over $1.3 million. The interfund contribution charged to operating funds
was increased by 15% in the 2006 budget to begin to eliminate this deficit and build
reserves.
2. DESIGNATED FUND BALANCES
This category is used to set aside governmental fund balances when city management
has plans or tentative commitments to expend resources for certain purposes in future
periods. Further legal action will be required to authorize the actual expenditures.
Special Revenue Funds have a designated fund balance of $925,208 for the Capitol
Theatre Reserve Fund for replacement of the Capitol Theatre. The Capital Project Funds
have a designated fund balance of $1,210,4E8 for replacement of equipment and other
capital improvements.
3. RESERVED FUND BALANCE IN PERMANENT FUNDS
The reserve of $535,080 in the Cemetery Trost Fund represents a portion of the
amounts paid for cemetery plots. Provisions of these sales reciuire $120 of the sales
price be held in trust and that the income cn the investment of these amounts be used
to maintain the plots. The Reserve for Endowments represents an endowment for
cemetery beautification. The provisions of the endowment stipulate that income from the
endowment be used only for grounds imp' ovements.
56 - Comprehensive Annual Financial Report (C.A.F.R.)
The $545,829 Reserve for Employees' Retirement System is the Firemen's Relief and
Pension Fund balance which represents the accumulated contributions made by the
government through property taxes (see Note #4) plus interest earnings and state fire
insurance premium tax proceeds.
NOTE 4 — DETAILED NOTES ON ALL FUNDS
A. DEPOSITS AND INVESTMENTS
In its 2005 Notes to the Financial Statements, the City of Yakima implemented GASB
Statement No. 40, Deposit and Investment Risk Disclosures — an amendment of GASB
Statement No. 3, issued in March 2003. The provisions of this Statement are effective for
financial statements for periods beginning after June 15, 2004. This statement addresses
common deposit and investment risks related to credit risk, concentration of credit risk,
interest rate risk, and foreign currency risk. As an element of interest rate risk, this
Statement requires certain disclosures of investments that have fair values that are highly
sensitive to changes in interest rates. The City holds no such investments as of the Statement
of Net Assets Date.
As required by state law, all deposits and investments of the City's funds are direct or
indirect obligations of the U.S. Government, high quality Municipal Bonds, Bankers'
Acceptances, high quality Commercial Paper or deposits with Washington State banks and
savings and loan institutions. Investments of trust funds are not subject to the preceding
limitations.
I. DEPOSITS
The City of Yakima maintains deposit relationships with several Washington State
commercial banks and savings and loan institutions.
The Public Deposit Protection Commission of the State of Washington (PDPC) covers
all deposits not covered by the Federal Depository Insurance Corporation (FDIC). The
PDPC is a statutory authority established under RCW 39.58. It constitutes a multiple
financial institution collateral pool that insures public deposits. In such a pool, a group
of financial institutions holding public funds pledge collateral to a common pool. The
PDPC provides protection by maintaining strict standards as to the amount of public
deposits financial institutions can accept, and by monitoring the financial condition of
all public depositaries and optimizing collateralization requirements. The City's agent in
the name of the City holds all deposits.
The City of Yakima had the following bank balances on hand on December 31, 2005:
Banks and Savings and Loan Institutions
Petty Cash and other Imprest Funds
Local Government Investment Pool (L.G.I.P.)
Total
$1,597,978
19,035
28,982,945
$30,599,958
Comprehensive Annual Financial Report (C.A.F.R.) — 57
Custodial credit risk: deposits — The custodial credit risk for deposits is the risk that, in
the event of a depository financial institution failure, the City's deposits with banks and
savings and loan associations may not be recovered. Because of the PDPC, the City's
deposits are not subject to this risk.
The LGIP is an un -rated 2a-7 like pool, as defined by GASB 31. Accordingly, participants'
balances in the LGIP are not subject to interest rate risk, as the weighted average
maturity of the portfolio will not exceed 90 days. Per GASB 40 guidelines, the balances
are also not subject to custodial credit risk. The credit risk of the LGIP is limited as
most investments are either obligations of the US government, government sponsored
enterprises, or insured demand deposit accounts and certificates of deposit. Investments
or deposits held by the LGIP are all classified as category 1 risk level investments. They
are either insured or held by a third -party custody provider in the LGIP's name.
Foreign currency risk: deposits — Foreign currency risk is the risk that changes in
exchange rates will adversely affect the fair value of an investment or a deposit. The City
of Yakima does not participate in making deposits or investments that are exposed to
this type of risk.
2. INVESTMENTS
As of December 31, 2005 The City of Yakima had the following investments:
INVESTMENT TYPES
Federal Agency Coupon Securities
Federal Agency Callable Securities
Treasury Securities
Municipal Securities
Total Portfolio
Weighted Average Maturity
CARRYING/ FAIR/ WEIGHTED AVERAGE
VALUE VALUE MATURITY (YEARS) 0)
52530,397 52,519999 .765
25,286,265 25,033,288 .802
1,000,886 984,045 L081
2,067,677 2,055,595 .515
$30 885,225 $30 592,927
(1) Macaualy modified duration, which approximates Weighted Average Maturity, is used for this purpose.
.780
Note: Investments are reported at Carrying Value on the Statement of Net Assets as
the Weighted Average Maturity of the portfolio is less than one year and the difference
between Carrying Value and Fair Value is considered immaterial.
3. INTEREST RATE RISK
In accordance with its adopted investment policy, the City manages its exposure to
declines in fair value due to rising interest rates by limiting the weighted average
maturity of the portfolio as a whole to not more than 2.5 years, and has a five-year
maximum investment limitation. Additionally, the City does not use derivatives, pass
through obligations or other extremely interest rate sensitive instruments in its portfolio.
Weighted average maturity on callable securities is calculated using the final maturity
date rather than the call date for conservatism.
58 — Comprehensive Annual Financial Report (C.A.F.R.)
INVESTMENT TYPES
Federal Agency Coupon Securities
Federal Agency Callable Securities
Treasury Securities
Municipal Securities
Total Portfolio
FAIR/ CARRYING/ LESS THAN I -:t
VALUE VALUE 1 YEAR YEARS
$2,519,999 $2,530,397 $1,998,075 6532,322
25,033,283 25,286,265 15,500,000 9,786,265
984,04!5 1,000,886 1,000,886 0
2,055,597 2,067,677 1,805,696 261,98111
530,592,929 $30,885,225 520,304,657 $10,580,568
(1) Represents 10.year LID Notes the Cr y is holding. All other investments in this category are under two-year final maturity.
4. CREDIT RISK
State law under, RCW sectons 35.39 and 39.59,limits investments that a Washington
class 1 City may hold to Direct and Indirect obligations of the US Government, high
quality Municipal Bonds of the State or Cities and Towns within the State, high quality
General Obligation bonds of another State or City and by administrative allowance not
in the RCW's, Bankers Acceptances and high quality Commercial Paper, holding one of
the 2 highest Credit ratings issued by Moody' and Standard and Poor's and the State
Treasurer's Local Government Investment Pool (L.G.I.P.). The LGIP is a 2(a)7 like pool
and investments in the pool are reported at the share price of 100% of dollars invested.
The City's own adopted Investment Policy adheres to the RCW's and also allows for
investment in high quality Commercial Paper, Banker's Acceptances and the LGIP (see
Deposit Note for information on the LGIP)
5. CUSTODIAL CREDIT RISK
The City's investment Policy does not include Repurchase, Reverse -Repurchase
agreements or securities lending as allowable investment activity, therefore no custodial
credit risk exists. All investments are held in the City's name by a third party custodian
through a Trust Agreement, and are considered Category 1 investments, with the
exception of the LGIP, (see Deposit Note 4A.1, above, for custodial risk details).
B. PROPERTY TAXES
The County Treasurer acts as an agent to collect property taxes levied within the county for
all taxing authorities. Collections are distributed after the end of each month, on the tenth day
of the following month.
January 1
February 14
April 30
May 31
October 31
PROPERTY TAX CALENDAR
Taxes are .evied and become an enforceable lien against properties.
Tax bills are mailed.
First of tyro equal installment payments is due.
Assessed ✓clue of property is established for next year's levy at 100 -percent of market value.
Second installment is due.
Comprehensive Annual Financial Report (C.A.F.R.) - 59
During the year, property tax revenues are recognized when cash is collected. At year-end,
property tax revenues are recognized for colle:tions in the hands of the County Treasurer at
December 31st. No allowance for uncollectible taxes is established because delinquent taxes
a re considered fully collectable.
The City is permitted by law to levy up to $3.60 per $1,000 of assessed valuation for general
government services. This amount may be reduced for any of the following reasons:
(a) The Washington State Constitution limits total regular property tax levies to one -percent
of assessed valuation or $10 per $1,000 of value. If the tax Ievies of all districts exceed this
amount, each is proportionately reduced until the total is at or below the one -percent limit.
(b) Washington State law, RCW 84.55.010 limits the total dollar amount of regular property
taxes that may be levied annually to 101% of the highest levy in the three previous years
(excluding new construction and state assessed property.)
Special levies approved by the voters are not subject to the above limitations.
For 2005, the City's regular tax levy was $3.4195 per $1,000 on a total assessed valuation of
$3,971,667,847 for a total regular levy of $13,660,632. Included in the City's regular levy is an
authorization to levy for the Firemen's Relief and Pension Fund (see Note 85). This levy is
subject to the same limitations as the levy fo- general government services. The Firernens
Relief and Pension portion of the regular tax levy for 2005 was 5.3540 per $1,000, or $1,405,779.
P,dditiora';.ly, special levies for G.O. Bond obligations totaled $300,000.
C. RECEIVABLES
Receivables as of year-end for the City's individual major funds, non -major, internal
service and agency funds in the aggregate, ir.cluding applicable allowance for
u ncollectible accounts are as follows:
INTEREST
SPECIAL DUE FROM &
TAXES ACCOUNTS AOMTS OTHER GVTS PENALTIES OTHER TOTAL
General Fund $4,201,726 $113,498 $0 $38,210 $131,653 50 $4,485,087
Community Development 0 6,198,377 0 273,037 0 0 6,471,419
Parks & Recreation 0 8,413 0 6,864 0 0 15,275'
Streets 0 861 0 207,366 8,278 0 216,505
Non -major Governmental 297,007 175,080 377,051 1,578,253 21,505 75,302 2,517,198
Transit 768,546 0 0 1,458,181 5,666 0 2,232,395
R> --fuse 0 212,698 0 0 0 0 212,696
'Wastewater 0 1,198,630 0 0 13,487 9,750 1,221,867
Water 0 101,773 0 0 9,028 0 110,801
Irrigation 0 208,305 0 0 27,500 0 235,805
Internal Service Funds 0 640,300 0 0 32,719 0 673,019
Total $5,267,279 08,857935 8379051 $3,561,911 $249,836 $85,052 518,392,064.
60 - Comprehensive Annual Financial Report (C.A.F.R.)
Revenues of the Water, Wastewater, Refuse and Irrigation are reported net of
uncollectible amounts. Total uncollectible amounts related to revenues of the current
period of approximately 1% of billed revenue are as follows:
Refuse
Wastewater
Water
Irrigation
Total
D. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
1. CLASSIFICATION OF INTERFUND TRANSACTIONS
Interfund transactions are classified as follows:
$35,047
128,547
53,488
24,333
$241,415
a. Transactions that would be treated as revenues, expenditures or expenses if they
involved external organizations, such as buying goods and services, are similarly
treated when they involve other funds of the City.
b. Transfers to support the operations of other funds are recorded as "Transfers" and
classified with "Other Financing Sources or Uses."
c. Contributions to the capital of enterprise or internal service funds, (transfers between
those funds and the general capital assets account group,) transfers to establish or
reduce working capital in other funds, and transfers of remaining balances when
funds are closed are classified as transfers and reported as non-operating revenues.
d. Loans between funds are classified as interfund loans receivable and payable or as
advances to and from other funds on the combined balance sheet depending on the
time period for which the loan was made. Interfund loans do not affect total fund
equity, but advances to other funds are offset by a reservation of fund equity.
2. INTERFUND LOANS AND RECEIVABLES
The following table depicts the temporary cash overdrafts in individual funds as of
December 31, 2005 - caused either by timing of cash flow or short-term over allocation of
investments:
DUE FROM DUE TO
OTHER FUNDS OTHER FUNDS
General Fund $511,606 $0
Special Revenue Funds:
Arterial Street 0 309,919
Tourist Promotion Fund 0 41,732
Capitol Theatre Reserve 0 93,446
Capital Project Funds:
Cumulative Reserve 0 66,509
Total $511,606 $511,606
Comprehensive Annual Financial Report (C.A.F.R.) - 61
3. INTERFUND TRANSFERS
Interfund transfers represent subsidies and contributions provided to other funds with
no corresponding debt or promise to repay. General Fund transfers are primarily used to
1) allocate the portion of utility taxes that are designated to support Parks and Recreation
and Law and Justice Capital programs; 2) Support the dispatch operation with a portion
of the telephone tax; and 3) contribute to the Contingency Fund. The Internal Service
transfer in represents capital contributions from other fund to purchase new vehicle
additions to the rolling stock fleet. Other transfers generally represent debt service and
capital project funding.
The following table depicts interfund operating transfer activity during 2005:
TRANSFER IN
GENERAL PARKS NON -MAJOR WASTE- INTERNAL
TRANSFER OUT FUND & REC GOV'T WATER SERVICE TOTAL
General Fund $0 $948,710 $1,045,530 $0 $0 $1,994,240
Parks and Recreation 0 0 256,000 0 0 256,000
Streets 0 0 247,183 0 0 247,183
Non -major Government 90,000 15,000 1,095,547 0 147,164 1,347,711
Wastewater 0 0 67,516 0 74,117 141,633
Water Operating Fund 0 0 64,058 32,939 0 96,997
Irrigation 0 0 48,750 0 0 48750
Total $90,000 3963,710 $2,824,584 $32,939 $221,281 $4,132,514
E. CAPITAL ASSETS
CAPITAL ASSET ACTIVITY FOR THE YEAR ENDED DECEMBER 31, 2005
GOVERNMENTAL ACTIVITIES
Capital Assets, Not Being Depreciated:
Land
Construction in Progress
Total Capital Assets, Not Being Depreciated
Capital Assets, Being Depreciated:
Buildings & Structures
Other Improvements
Equipment & Machinery
Infrastructures
Capitalized Leases
Total Capital Assets, Being Depreciated
Less Accumulated Depreciation fon
Buildings & Structures
Other Improvements
Equipment & Machinery
Infrastructures
Capitalized Leases
Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
BALANCE BALANCE
I/1/05 ADDITIONS ADJUSTMENTS DELETIONS 12/31/05
88,764562 $0 $0 $0 $8,764,562
9,586,100 4,637,312 (5,175,117) 0 9,048,295
918,350,662 $4,637,312 ($5,175,117) $0 $17,812,857
$44,717,209 $48,307 $3,061,426 ($119,211) $47,707,731
6,250,465 46,622 3,185,649 (350,837) 9,131,899
7,737,159 442,245 14,882 (979,542) 7,214,744
41,251,375 0 (1,086,840) 0 40,164,535
1,633,849 158,624 0 (471,604) 1,320,869
$101,590,057 $695,798 $5,175,117 ($1,921,194) 8105,539,778
($11,176,123) ($1,022,671) $0 $86,280 ($12,112,514)
(2,871,784) (525,872) 0 307,497 (3,090,159)
(4,786,902) (467,458) 0 834,046 (4,420,314)
(20,068,388) (1,690,850) 0 0 (21,759,238)
(811,927) (136,252 0 471,604 (476,575)
($39,715,124) ($3,843,103) $0 $1,699,427 ($41,858,800)
$61,874,933 ($3,147,305) $5,175,117 ($221,767) $63,680,978
Governmental Activities Capital Assets, Net $80,225595 $1,490,007 $0 ($221,767) $81,493,835
62 - Comprehensive Annual Financial Report (C.A.F.R.)
CAPITAL ASSET ACTIVITY FOR THE YEAR ENDED DECEMBER 31, 2005 (CONTINUED)
BALANCE BALANCE
1/1/05 ADDITIONS ADJUSTMENTS DELETIONS 12/31105
INTERNAL SERVICE FUNDS - GOV'T ACTIVITIIES
Capital Assets, Being Depreciated:
Buildings 520,552 $60 $0 $0 $20„612
Other Improvements 0 3,997 0 0 3,997
Machinery 5599,177 753,048 0 0 6,352,225
Total Capital Assets Being Depreciated $5,619,729 $757105 $0 $0 56,376,834
Less Accumulated Depreciation fon
Other Improvements $0 ($295) $0 $0 ($295)
Machinery (3,118,162) 571,637) 513 123,565 (3,565,72))
Total Accumulated Depreciation (53,118,162) ($571,932) $513 5123,565 ($3,566,016)
Total Capital Assets, Being Depreciated Net 52,501,567 5184,573 5513 $123,565 $2,810,218
Total Capital Assets- Governmental Activities $82,727,162 $167"580 $513 ($98,202) $84,304,653
BUSINESS -TYPE ACTIVITIES
Capital Assets, Not Being Depreciated:
Land 52,186,700 50 50 ($5,184) 52,181,516
Construction in Progress 11,718,026 8,440,003 (2,338,223) (17,106) 17,802,700
Total Capital Assets, Not Being Depreciated 513,904 726 58,440,003 ($2,338,223) (522,290) $19`_984,216
CAPITAL ASSETS, BEING DEPRECIATED:
Buildings & Structures $64,491,228 699,779 $149,195 50 564,740,202
Other Improvements 76,023,709 1,261,030 452,780 0 77,737,519
Equipment & Machinery 12,414,491 467,767 1,736,248 (649,078) 13,969,428
Completed Construction - Not Classified 2,232,245 0 0 0 2,232,245
Intangibles 221,830 0 0 0 221,830
Total Capital Assets, Being Depreciated $155,383,503 51,328,576 52,338,223 ($649,078) 5158,901,224
Less Accumulated Depreciation for:
Buildings&Structures ($35,272,550) ($1,954,637) 50 50 ($37,127,187)
Other Improvements (29,813,537) (1,719,672) 0 400 (31,532,809)
Equipment&Machinery (6,316,856) (630,022) 0 502,989 (6,443,989)
Completed Construction -Not Classified (569,273) (44,302) 0 0 (613,575)
Intangibles (106,171) 0 0 0 (106,171)
Total Accumulated Depreciation (572,078,387) (54,248,633) 0 5503,389 (575,823,631)
Total Capital Assets, Being Depreciated, Net $83,305,116 (52,420,057) $2,338,233 (5145,689) 583,077,593
Business -Type Activities Capital Assets, Net $97,209,842 56,019,946 $0 (5167,979) $103,061,809
INTERNAL SERVICE FUNDS - BUSINESS -TYPE ACTIVITIES
Capital Assets, Being Depreciated:
Buildings 516,845 (560) 50 $0 516,785
Other Improvements 0 3,254 0 0 3,254
Machinery 9,552,960 522,139 0 0 10,075,099
Total Capital Assets - Being Depreciated 59,569,805 5525,333 50 50 510,095,138
Less Accumulated Depreciation for:
Other Improvements 50 ($462) 00 $0 ($462)
Machinery (5,289,168) (465,261) 12,036 101,099 (5,641,294)
Total Accumulated Depreciation (55,289,168) ($965,723) 512,036 5101,099 (55,641,756)
Total Capital Assets, Being Depreciated, Net 54,280,637 $59,610 512,036 $101,099 $4,453,382
Total Capital Assets- Business -Type Activities $101,490,479 $6,079,556 512,036 (566,880) 5107,515,191
The City is still in the process of summarizing, categorizing, and costing Us infrastructure The balance presented for infrastructure represents
historical cost for major street projects from 1980 tbrough2005.
The 2005 adjustment column represents construction in progress that are completed and re -categorized as building improvements other than
building or infrastructure. This column also incudes a transfer of 51,705550 erroneously classified as infrastructure which should have been
classified as building.
Comprehensive Annual Financial Report (C.A.F.R.) - 63
Depreciation expense was charged to functions/programs as follows,
GOVERNMENTAL ACTIVITIES
General Government
Security of Persons and Property
Physical Environment
Transportation
Economic Environment
Cultural and Recreational Environment
Capital assets held by the City's internal service funds
are charged to the various functions based on
their usage of the assets
Total Depreciation -Governmental Activities
BUSINESS -TYPE ACTIVITIES
188,917
811,983
11,718
1,716,708
87,239
1,025,538
571,932
$49191.5,035
Transit 5592,872
Wastewater 2,673,195
Water 903,386
Irriganoa 79,179
Capital assets held by the City's internal service funds
are charged to the various functions based on
their usage of the assets 465,723
Total Depreciation- Business Type Activities $4,714,355
F. COMMITMENTS
1. CONSTRUCTION COMMITMENTS
The City has active construction projects an of December 31, 2005. The projects include
widening and construction of existing streets and Wastewater facility improvement and
collection system.
CONTRACT
PROJECT AMOUNT
Street Construction/Signalization 52,181,813
Wastewater Treatment Plant/Col. System 4,758,000
Total 86,939,813
REMAINING
SPENT TO DATE COMMITMENT
$119,116 52,062,697
3,582,698 1��75 3302
$3,701,814 53,237,999
Stree, constructions are being financed by gas tax and federal, state or local grants.
Wastewater is being financed by revenue bonds and wastewater utility revenues.
NOTE 5 - PENSION PLANS
Substantially all City 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
64 - Comprehensive Annual Financial Report (C,A.F.R.)
benefit and defined contribution retirement plans. The Department of Retirement Systems
(DRS), a department within the primary government of the State of Washington, issues a
publicly available comprehensive annual financial report (CAFR) that includes financial
statements and required supplementary information for each plan. The DRS CAFR may be
obtained by writing to:
Department of Retirement Systems
Communications Unit
P.O. Box 48380
Olympia, WA 98504-8380
The following disdosures are made pursuant to GASB Statement 27, Accounting for Pensions by
State and Local Government Employers.
A. PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) PLANS I, 2 & 3
PLAN DESCRIPTION
PERS is a cost-sharing multiple employer retirement system comprised of three separate
plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is
a combination defined benefit/defined contribution plan. Membership in the system
includes: elected officials; state employees; employees of the Supreme, Appeals, and
Superior courts (other than judges in a judicial retirement system); employees of legislative
committees; community and technical colleges, college and university employees (not
in national higher education retirement programs); judges of district and municipal
courts; and employees of local governments. PERS participants who joined the system
by September 30, 1977, are Plan I members. Those who joined on or after October 1, 1977
and by either, February 28, 2002 for state and higher education employees, or August 31,
2002 for local government employees, are Plan 2 members unless they exercise an option
to transfer their membership to Plan 3. PERS participants joining the system on or after
March 1, 2002 for state and higher education employees, or September 1, 2002 for local
government employees have the option of choosing membership in either PERS Plan 2
or PERS Plan 3. The option must be exercised within ninety days of employment. An
employee is reported in Plan 2 until a choice is made. Employees who fail to choose within
ninety days default to PERS Plan 3. PERS defined benefit retirement benefits are financed
from a combination of investment earnings and employer and employee contributions.
PERS retirement benefit provisions are established in state statute and may be amended
only by the State Legislature.
Plan 1 retirement benefits are vested after an employee completes five years of eligible
service. Plan 1 members are eligible for retirement at any age after thirty years of service,
or at the age of sixty with five years of service, or at age of 55 with 25 years of service. The
annual pension is two -percent of the average final compensation per year of service, capped
at sixty -percent. The average final compensation is based on the greatest compensation
during any 24 eligible consecutive compensation months. If qualified, after reaching the age
of 66 a cost -of -living allowance is granted based on years of service credit and is capped at
three -percent annually.
Comprehensive Annual Financial Report (C.A.F.R.) — 65
Plan 2 retirement benefits are vested after an employee completes five years of eligible
service. Plan 2 members may retire at the age of 65 with five years of service, or at age
55 with twenty -years of service, with an allowance of two -percent of the average final
compensation per year of service. The average final compensation is based on the greatest
compensation during any eligible consecutive sixty -month period. Plan 2 retirements prior
to the age of 65 receive reduced benefits. If retirement is at age 55 or older with at least thirty -
years of service, a three -percent per year reduction applies; otherwise an actuarial reduction
will apply. There is no cap on years of service credit; and a cost -of -living allowance is
granted (indexed to the Seattle Consumer Price Index), capped at three -percent annually.
Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit
component, and member contributions finance a defined contribution component. The
defined benefit portion provides a benefit calculated at one -percent of the average final
compensation per year of service. The average final compensation is based on the greatest
compensation during any eligible consecutive sixty -month period. Plan 3 members become
eligible for retirement if they have: at least ten years of service; or five years including twelve
months that were earned after age 54; or five service credit years earned in PERS Plan 2
prior to June 1, 2003. Plan 3 retirements prior to the age of 65 receive reduced benefits. If
retirement is at age 55 or older with at least thirty -years of service, a three -percent per year
reduction applies; otherwise an actuarial reduction will apply. There is no cap on years
of service credit; and Plan 3 provides the same cost -of -living allowance as Plan 2. The
defined contribution portion can be distributed in accordance with an option selected by
the member, either as a lump sum or pursuant to other options authorized by the Employee
Retirement Benefits Board.
There are 1169 participating employers in PERS. Membership in PERS consisted of the
following as of the latest actuarial valuation date for the plans of September 30, 2004:
Retirees and Beneficiaries Receiving Benefits
Terminated Plan Members Entitled to But Not Yet Receiving Benefits
Active Plan Members Vested
Active Plan Members Nonvested
Total
66,846
21,031
103,039
53,217
244,133
FUNDING POLICY
Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution
rates, Plan 2 employer and employee contribution rates; and Plan 3 employer contribution
rates. Employee contribution rates for Plan 1 are established by statute at six -percent and do
not vary from year to year. The employer and employee contribution rates for Plan 2 and
the employer contribution rate for Plan 3 are developed by the Office of the State Actuary
to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to
contribute at the level established by the Legislature. PERS Plan 3 defined contribution is a
non-contributing plan for employers. Employees who participate in the defined contribution
portion of PERS Plan 3 do not contribute to the defined benefit portion of PERS Plan 3.
The Employee Retirement Benefits Board sets Plan 3 employee contribution rates. Six rate
options are available ranging from five to 15 percent; two of the options are graduated
66 — Comprehensive Annual Financial Report (C.A.F.R.)
rates dependent on the employee's age. The methods used to determine the contribution
requirements are established under state statute in accordance with Chapters 41.40 and 4:1.45
RCW
The required contribution rate; expressed as a percentage of current -year covered payroll, as
of December 31, 2005, were as follows:
Employer*
Employee
PERS PLAN I
2.44%
6.00%
PERS PLAN 2
2.44%
1.18%
PERS PLAN 3
244%"
• The employer rates include the employer administrative expense fee currently set at 0.19%.
" Plan 3 defined benefitporson only.
". Venable from 5.0%minimum to 15.0% maximum based on rate selected by the PERS 3 member.
Both the City and the employees made the required contributions. The City's required
contributions for the years ended December 31 were as follows:
2005
2004
2003
PERS PLAN I
857,336
44,564
48,335
B. LAW ENFORCEMENT OFFICERS' .IND FIRE FIGHTERS'
RETIREMENT SYSTEM (LEOFF) PI.ANS I AND 2
PERS PLAN 2
$345,207
235,935
231,087
PERS PLAN 3
$48,343
32,255
22,198
PLAN DESCRIPTION
LEOFF is a cost-sharing multiple -employer retirement system comprised of two separate
defined benefit plans. Membership in the system includes all full-time, fully compensated,
local law enforcement officers and firefighters. LEOFF is comprised primarily of non -state
employees, with the exception of the Department of Fish and Wildlife enforcement officers,
who were first included prospectively effective July 27, 2003. LEOFF participants who joined
the system by September 30, 1977 are Plan 1 members. Those who joined on or after October
1, 1977 are Plan 2 members. Elective July 1, 2003, I:he LEOFF Plan 2 Retirement Board was
established to provide governance of LEOFF Plan 2. The Board's duties include adopting
contribution rates and recomm ending policy changes to the Legislature for the LEOFF
I'Ian 2 retirement plan. Effective January 1, 2003 firefighter emergency medical technicians
(EMTs) may transfer PERS Plan 1 or Plan 2 service credit to LEOFF Plan 2 if while employed
for the City the EMT's job was relocated to a fire department from another city, town, county
or district. LEOFF defined benefits are financed from a combination of investment earnings,
employer and employee contrlautions, and a special funding situation in which the state
pays the remainder through state legislative appropriations. LEOFF retirement benefit
provisions are established in state statute and may be amended only by the State Legislature
I'lan I retirement benefits are vested after an employee completes five years of eligible
service. Plan 1 members are ell gible for retirement with five years of service at age fifty. The
benefit per year of service calculated as a percent of final average salary is as follows:
Comprehensive Annual Financial Report (C.A.F. R.) — 67
TERM OF SERVICE
Twenty or More Years
Ten years, less than twenty years
Five years, less than ten years
PERCENT OF FINAL AVERAGE
2.0%
1.5%
1.0%
The final average salary 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 h:ghest consecutive 24 months' salary within
the last ten years of service. If membership was established in LEOFF after February 18, 1974,
the service retirement benefit is capped at sixty -percent of final average salary A cost -of
living allowance is granted (indexed to the Seattle Consumer Price Index).
Plan 2 retirement benefits are vested after an employee completes five years of eligible service.
Plan 2 members may retire at the age of fifty with twenty years of service, or at the age of 53
with five years of service, with an allowance of two -percent of the final average salary per
year of service. The final average salary is based on the highest consecutive sixty -months. Plan
2 retirements prior to the age of 53 are reduced three -percent for each year that the benefit
commences prior to age 53. There is no cap on years of service credit; and a cost -of -living
allowance is granted (indexed to the Seattle Consumer Price Index), capped at three -percent
annually.
There are 369 participating employers in LEOF'3 Membership in LEOFF consisted of the
following as of the latest actuarial valuation dare for the plans of September 30, 2004:
Retirees and Beneficiaries Receiving Benefits
Terminated Plan Members Entitled to But Not Yet Receiving Benefits
Active Plan Members Vested
Active Plan Members Nonvested
Total
8,542
528
12,079
3,523
24,672
FUNDING POLICY
Starting on July 1, 2000, Plan 1 employers and employees will contribute zero percent as long
as the plan remains fully funded. Employer and employee contribution rates are developed
by the Office of the State Actuary to fully fund the plan. Plan 2 employers and employees
are required to pay at the level adopted by the Department of Retirement Systems in
accordance with 41.45 RCW All employers are :equired to contribute at the level required
by state law. The Legislature, by means of a special funding arrangement, appropriated
money frorn the state General Fund to supplement the current service liability and fund the
prior service costs of Plan 1 in accordance with the requirements of the Pension Funding
Council. However, this special funding situation is not mandated by the state constitution
and this funding requirement could be returned to the employer:. by a change of statute.
The methods used to determine the contribution rates are established under state statute in
accordance with chapters 4126 and 41.45 RCW
68 — Comprehensive Annual Financial Report (C. A.F.R.)
The required contribution rates expressed as a percentage of current -year covered payroll, as
of December 31, 2004, were as follows:
Employer'
Employee
State
LEOFF PLAN 1
0.19%
0.00%
N/A
LEOFF PLAN II
4.39%"'
6.99%
2/9%
' The employer rates include the employer administrative expense fee currently set at 0.19%.
"The employer rate for ports and universities is 528%.
Both the City and the employees made the required contributions. The City's required con-
tributions for the years ending December 31 were as follows:
2005
2004
2003
LEOFF PLAN 1
$1,594
1,692
1,915
LEOFF PLAN II
9528,585
411,645
354,120
C. OTHER RETIREMENT SYSTEMS — VOLUNTEER FIRE FIGHTERS' RELIEF AND PENSION FUND
The Volunteer Fire Fighters' Relief and Pension Fund System is a cost-sharing multiple -
employer retirement system which was created by the Legislature in 1945 under Chapter
41.16 RCW. It provides pension, disability and survivor benefits. Membership in the system
requires service with a fire department of an electing municipality of Washington State except
those covered by LEOFF. The system is funded through member contributions of $30 per
year; employer contributions of $30 per year; and forty -percent of the Fire Insurance Premium
Tax; and earnings from the investment of moneys by the Washington State Investment Board.
However, members may elect to withdraw their contribution upon termination.
D. FIREMEN'S PENSION
The City has a single employer, defined benefit pension plan for Firefighters employed prior
to March 1, 1970 and governed by Washington State Law RCW 41.26. Under the terms of the
governing law, the pension member is entitled to payment from the City's pension plan for
those benefits in excess of those calculated under the LEOFF plan.
The City's Firemen's Pension Fund is a closed group. No new members are permitted. Employees
attaining the age of fifty who have completed 25 or more years of service are entitled to annual
benefits of fifty -percent of their salary plus an additional two -percent for each year of service in
excess of 25 years — up to a maximum of sixty -percent of salary. The pension plan also provides
death and disability pension benefits plus sick benefits for eligible active and retired employees.
If the employee terminates his employment with the Fire Department and is not eligible for
any other benefit under the Firemen's Pension, the employee is entitled to the following:
• Return of accumulated contributions less any benefits paid.
• When a Firefighter would have had 25 -years of service, two -percent of salary for each
year of service.
Comprehensive Annual Financial Report (C.A.F.R.) — 69
Firefighters are no longer required to contribute to the Firemen's Pension. The City is
required to contribute the amount necessary to fund the Firemen's Pension, using the
aggregate projected benefit method. Under state law, partial funding of the Firemen's
Pension Fund may be provided by an annual tax levy of up to $.45 per $1,000 of assessed
valuation of all taxable property of the City. The Firemen's Pension Fund also receives a
proportionate share of the 25 percent of the tax on fire insurance premiums set aside by the
state for all paid firemen in the state. Additional funding is provided by investment interest
earnings.
During the year ended December 31, 2005, there were no plan amendments.
CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
The City's funding policy is to provide for periodic employer contributions at actuarially
determined rates that, expressed as percentages of annual covered payroll, are designed
to accumulate sufficient assets to pay benefits when due. The required contributions are
determined using an aggregate projected benefit funding method with the annual cost
increasing six -percent per year over the period ending December 31, 2012.
Under this method, the normal cost is a portion of the actuarial present value of benefits
allocated to a valuation year. The actuarial accrued liability is equal to the actuarial value of
assets. (Thus, there is no unfunded actuarial accrued liability under this method.)
Significant actuarial assumptions used to compute contribution requirements were the same
as those used to compute the standardized measure of the pension benefit obligation.
E. POLICE PENSION
The City has a single employer, defined benefit pension plan for Police Officers employed
prior to March 1, 1970 and governed by Washington State Law RCW 41.20 and 4126. Under
the governing law, the pension member is entitled to payment from the City's pension plan
for those benefits in excess of those calculated under the LEOFF plan. The City also covers
four members who were ineligible under the State Law Enforcement Officers and Fire
Fighters (LEOFF) Program.
The City's Police Pension Fund is a closed group. No new members are permitted.
Employees who have completed 25 years or more of service are entitled to annual benefits of
50% of their salary plus an additional 2% for each year of service in excess of 25 years — up
to a maximum of 60% of salary. The plan provides death and disability pension benefits plus
sick benefits for eligible active and retired employees.
If the employee terminates his employment with the Police Department and is not eligible
for any other benefit under the Police Pension, the employee is entitled to the following:
• Return of 75% of contributions made after June 8, 1955, less any benefits paid.
• When Police Officer would have had 25 years of service, 2% of salary for each year of service.
70 - Comprehensive Annual Financial Report (C.A.F.R.)
Plan members are no longer required to contribute to the Police Pension. The City is
operating on a pay-as-you-go basis.
During the year ended December 31, 2005, there were no plan amendments.
CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
The Police Pension is a department within the General Fund. The City engaged
Millimart U.S.A., Consultant ie Actuaries, to pert:orm the pension's actuarial study They
issued a valuation dated Janu. ary 1, 2003. The valuation provided actuarially determined
rates to accumulate sufficient assets to pay benefits when due rather than the current
pay-as-you-go basis. The required contributions are determined using an aggregate
projected benefit method with the annual cost increasing six -percent per year over the
period ending December 31, 2012.
Fire Pension
Fbhce Pension
SUMMARY OF FIREMEN'S PENSION AND POLICE PENSION
SCHEDULE OF FUNDING PROGRESS
DECEMBER 31, 2005
UNFUNDED
,ACTUARIAL UAAL AS A
ACTUARIAL ACTUARIAL ACCRUED PERCENTAGE
VALUATION VALUE ACCRUED LIABILITIES FUNDED COVERED COVERED
DATE OF ASSETS LIABILITIES (UAAL) RATIO PAYROLL PAYROLL
1/1/98 '169,599 $10,445,000 810,375,401 0.67% $270,000 3842.749,
1/1/03 557,889 8,520,000 7,862,111 77.729, 0 0.00%
1/1/98 0 8,277,000 8,277000 0.00% 264,000 3135.2:1
1/1/03 0 8,154,000 8,154,000 0.00% 0 0.00%
NOTE 6 — SELF-INSURANCE FUNDS
The City maintains Reserve Fund;: to provide for self-insurance coverage in the areas of
Unemployment Compensation, Medical/Dental coverage, and Workers' Compensation. In
addition, the City maintains a Risk. Management Fund to provide for property, liability, and
other coverage.
A. UNEMPLOYMENT COMPENSATION
I.n 1978, the City of Yakima established an Unemployment Compensation Reserve Fund
to provide unemployment compensation coverage for its employees, and thereby elected
to participate with the State of Washington in a cost -reimbursement instead of monthly
premium program. In doing so, the City retained its right to appeal awards and determin-
ations made by the State Department of Employment Security.
The City has contracted with Talx Corporation UC'eXpress to represent the City in appeal
hearings, and to provide audit) of state awards.
The State of Washington invoices the City on a quarterly basis for reimbursement of claims
which represent payment of unemployment compensation and related administrative
costs. Resources accrue to the Unemployment Compensation Reserve Fund through
Comprehensive Annual Financial Report (C.A.F..R.) — 71
monthly charges made to each Operating Fund based on employee earnings. Normal
accrual rates have been between .5 and .75 percent of gross payroll, while costs under
the monthly premium program would have been approximately three -percent of payroll.
The City has achieved considerable savings. Interfund premium;; are based primarily
upon the ir.sured funds claims experience and are reported as quasi-exte mal interfund
transactions, a total for 2005 of $167,628. Incurred but not reported claims of $31,142 have
been accrued as a liability.
B. SELF-INSURED MEDICAL/DENTAL PROGRAM
The City, in August, 1979, self-insured its medical and dental programs for all employees
other than temporary employees, employees hired to work less than half-time. The City's
Human Resources Office administers the self-insured program and claims payment services
are provided by Health Care Management Administration, Inc.
Each Operating Fund is charged an accrual amount per covered employee which would
otherwise have been paid to an insurance carrier These amounts are determined by the
City based upon recommendations made by Fisher Consulting. Factors considered by Fisher
Consulting include the amount of claims paid the previous year, increases over prior years,
claims administration costs, projected insurance industry inflation rates and the status of the
Fund's Reserve. Interfund premiums to the Employee Health Benefit Reserve Fund for 2005
were $6,308,651. Incurred but not reported claims of $1,041,979 have been accrued as a liability.
In order to avoid catastrophic losses, the City "reinsures" the program by purchasing insurance
known as "stop -loss insurance' Two types of "stcp-loss" insurance are purchased: 1) individual
stop -loss; and, 2) aggregate stop -loss, with both provided through Sunlife Insurance Co. Under
the individual stop -loss insurance, the City pays the first $150,000 of claims for an individual
employee or dependent. Any charges accrued by an individual in excess of $150,000 in a calendar
year are thereafter reimbursed by Sunlife, up to a lifetime maximum benefit of $1 million per
person. The aggregate stop -loss is designed to protect the City from multiple large claims which
may not reach the individual stop -loss attachment point ($150,000). The aggregate stop -loss
atl:achment point is calculated by determining the projected amount of claims for the year and
adding an additional 25% of that amount (125% of projected claims.)
C. WORKERS' COMPENSATION PROGRAM
The City self-insured its workers' compensation program for all employees except those
covered by the LEOFF I Retirement System in July, 1984. This workers' compensation
program provides coverage identical to the state administered workers' compensation pro-
gram; however, the City pays only the direct inury-related costs and certain administrative
fees. The program is administered by the City's Human Resources Office with claims admin-
isi:ration and safety services provided by Ward North America.
Each Operating Fund is charged an appropriate accrual amount, per employee, based on rate
requirements prescribed by the State of Washing) on. Each year the Reserve Fund is reviewed to
determine a contribution rate which provides for an appropriate reserve. Interfund premiums
to the Workers' Compensation Fund for 2005 were $1,137,268. Based on the claims manager's
estimate, the City has accrued incurred but not reported claims of $576,207 at December 31, 2005.
72 — Comprehensive Annual Financial Report (C. A.F.R.)
In order to avoid catastrophic losses, the City "reinsures" the program by purchasing
insurance known as "stop -loss" insurance. This insurance is provided through Acordia
NW, Inc under a policy purchased from Employers Reinsurance Corporation. Under
the individual stop -loss coverage, the City pays the first $500,000 of a claim and the
insurance company pays (a) the balance up to $1 million for an individual claim or (b)
the balance up to a maximum of $25 million for multiple claims arising from a single
incident.
D. RISK MANAGEMENT PROGRAM
The City is exposed to various risks of loss related to torts; theft of, damage to,
and destruction of assets; errors and omissions; and natural disasters. The Risk
Management Fund was established in 1986 to account for its risk management
program. Resources accrue to the fund through interfund premiums to operating
funds for appropriate insurance coverage and the replenishment and building of
reserves for potential liability claims. City contributions to the Risk Management
Reserve Fund for 2005 were $1,827,012. The fund provides for administration, legal
services, and claims adjustment; and for the purchase of property, general liability,
and other insurance coverage.
Liabilities of the fund are reported when it is probable that a loss has occurred and the
amount of the loss can be reasonably estimated. Liabilities include an amount for claims that
have been incurred but not reported (IBNRs). The result of the process to estimate the claims
liability is not an exact amount as it depends on many complex factors, such as inflation,
changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated
periodically to consider recent claim settlement trends, inflation, and other economic or
social factors. The estimate of the claims liability also includes amounts for incremental
daim adjustment expenses related to specific claims. Estimated recoveries, for example from
subrogation, are another component of the claims liability estimate. Based on these factors,
the claims manager's estimate of claims liability at December 31, 2005 is $1,200,000.
For many years, the City has been self insured for general liability claims and has
purchased excess liability insurance coverage. In 2005 this coverage was provided by
Genesis Underwriter Management Company; the coverage was $8 million with a $1 million
retention. In late 2005, the City joined an insurance pool and now maintains general liability
coverage of $15 million, insured by St. Paul Travelers with a $100,000 deductible. The City
also joined the Washington State Transit Insurance Pool (WSTIP) in September 2005. The
deductible for the Transit division for this program is $5,000 with $12 million general
liability coverage. Changes in the balance of claims liability during 2005 follows:
Unpaid Claims, January I
Incurred Claims (including IBNRs)
Claim Payments (including direct legal costs)
Unpaid Claims, December 31
2005 2004
$1,200,000 $1,240,000
1,119,622 1,035,000
(1,119,622) (1,075,000)
$1,200,000 $1,200,000
Comprehensive Annual Financial Report (C.A.F.R.) — 73
NOTE 7 — LONG-TERM DEBT AND CAPITAL LEASES
The State law provides that debt cannot be incurred in excess of the following percentages of the
value of the taxable property of the City.
I. General Purpose
Without a Vote (includes capital leases)
With a Vote
II. Utilities Purpose
1I1. Open Space and Parks Facilities
Total Legal Limit
LIMIT
BY SECTION
1.50
1.00% 250%
2.50
2.50
7.50
CUMULATIVE
LIMIT
2.505
5.00
7.50
The basic percentages for Section I are the maximum levels of indebtedness those sections may
incur. However, utility or parks indebtedness may each exceed 2.50% and reduce the general
indebtedness margin. The percentages are applied to the taxable assessed value (regular levies)
of $4,169,739,611 resulting in the debt limits, as of December 31, 2005, for the City as follows:
Legal Limit
Net Outstanding Indebtedness"
Margin Available
--- WITHOUT A VOTE --
GENERAL GENERAL
PURPOSE 1.5% PURPOSE 2.5%
WITH A VOTE
UTILITIES OPEN SPACE
5.0% & PARKS 7.5%
$62546,094
18,464,916
$44,081,178
$104,243,490
20,492,496
$83,750,994
$208,486,980
20,492,496
$187,994,484
• Indebtedness is the outstanding debt less cash, investments, and tax receivables available to redeem debt.
$312,730,470
20,492,496
$292,237,974
There have been no material violations of finance -related legal or contractual provisions in any
of the funds of the City. All bonded debt of the City is tax-exempt. We believe the City to be in
compliance with applicable IRS & SEC regulations.
The accompanying schedule of long-term debt provides a listing of the outstanding debt of the
City and summarizes the City's debt transactions for 2005.
GOVERNMENTAL ACTIVITIES
General Obligation Debt:
Line of Credit
Bonds
Total General Obligation Debt
Intergovernmental Loans
Contractual Agreement -Yakima Co.
Special Assessments -Notes
Lease Purchase Agreements
Unfunded Pension Liability
Vacation/Sick Leave Accrual
Total Gen. Long -Term Debt Payable
LONG-TERM DEBT
BALANCE PAYMENTS/ BALANCE AMOUNTS DUE
01/01/2005 ADDITIONS RETIREMENTS 12/31/2005 WITHIN I YEAR
$84,569 $0 $20,000 $64,569 $20,000
19,745,528 755,000 1,200,000 19,300,528 1,305,000
19,830,097 755,000 1,220,000 19,365,097 1,325,000
2,915,009 48,286 437,168 2,526,127 438,198
596,441 100,000 128,274 568,167 153,757
53,000 371,075 162,375 261,700 15,982
821,866 0 182,208 639,658 190,702
3,367,806 428,066 0 3,795,872 0
4,673,399 319,322 0 4,992,721 0
$32,257,618 $2,021,749 $2,130,025 $32,149,342 $2,123,639
74 — Comprehensive Annual Financial Report (C.A.F.R.)
BALANCE PAYMENTS/ BALANCE AMOUNTS DUE
01/81/2005 ADDITIONS RETIREMENTS 12/31/2005 WITHIN 1 YEAR
BUSINESS -TYPE ACTIVITIES
Revenue Debt Payable
Revenue Bonds $29,675,000 $0 $1,580,000 $28,095,000 $1,645,000
Intergovernmental Loans 8,527,816 1,244,883 743,398 9,029,301 743,398
SLED Loans -Yakima County 0 25,000 0 25,000 4,456
Unamortized Debt Issue Cost/
Premium/Discount/Deferred
Amount (46,679) 0 (28,338) (18,341) 0
Total Revenue Debt Payable $38,156_137 $1,269,883 42,295,060 $37,130,960 $2,392,854
TOTAL LONG TERM DEBT $70:113,755 $3 291 632 $4,425,085 $69,280,302 54516,493
A. GENERAL OBLIGATION DEBT
General obligation bonds consisr of serial and term bonds, to be retired through the fiscal year
ending December 31, 2026. The City levies a special property tax; collects motel/hotel taxes,
Business License fees, utility taxes, and receives State sales tax credits for the principal and interest
payments due within a fiscal year and provides the amounts in the respective Debt Service Fund.
In December 2005, the City issued $755,000; a ten year General obligation Bond with interest
rates of 4% for the first 7 years and 4.5% for the last 3 years of the life of the bond. This bond
is issued to fund various projects for Parks and Recreation (Kiwanis skate park, aquatic
spray toys and a 4th Kiwanis ballfield.)
AVERAGE
DATE OF OUT- ANNUAL
FINAL INTEREST ORIGINAL STANDING DEBT
MATURITY RATE ISSUE 12/31/2005 SERVICE
Special Property Tax Levy:
2004 Fire Imp. Bonds Ref. 1995 12/01/14 2.0% - 3.5% 2,300,000 $2,235,000 $291,299
IReg. Prop. Tax Levy:
G.O. Line of Credit -Paving Pkg. Lot 12/19/08 Variable 104,569 64,569 21,000
2005 Parks Capital Projects 12/01/15 4.0% -4.5% 755,000 755,000 94,313
Total Reg. Prop. Tax Levy 859,569 819,569
Reg. Property Tax Levy/Real Ex. Tax:
1998 Street Overlay Program Bonds 6/01/08 4.0% - 4.5% 1,430,000 500,000 178,015
Motel/Hotel Tax:
1996 Convention Center Exp. Bonds 11/01/07 5.29'7, 6,000,000 455,000 246,475
2004 Conv. Ctr. Exp. Bonds Ref.1996 11/01/19 2.0%-4.2'/ 4,175,000 4,070,000 387,957
Total Motel/Hotel Tax 10,175,000 4,525,000
l'ub. Fac. Dis. (State Sales Tax Credit):
2002 Convention Center Addition 6/01/26 3.0% -5.0% 6,735,000 6,210,000 470,555
Bus. Lic. & Real Estate Excise Tax:
2003 Sundome Expansion 12/01/23 2.34%-4.72% 1,430,528 1,430,528 139,984at
Utility Tax
2003 Criminal Justice/I-82 Ref 1994 12/01/13 4.35%-5.25% 4,155,000 3,645,000 $514,889
027,085,097 $19,365,097
CO Beginning in 2007.
Comprehensive Annual Financial Report (C.A.F.R.) - 75
B. REVENUE BONDS
'Water/Wastewater/Irrigation revenue bonds consist of serial and term bonds, to be retired
through the fiscal year ending December 31, 2034, with the exception of the Apple Tree Bond
which will mature September 1, 2041. The App.e Tree Bonds are subordinated debentures
and the City shall have no obligation to make any payment into this Apple Tree Bond from
any other source other than the Ahtanum coni ection charges. If I he bonds are not fully
retired by 2041, the system's obligation to pay dissolves. The Apple Tree Bonds are not parity
bonds. The Apple Tree Bonds do not have a lien on System Revenue beyond connection
charges frcm inside the project area. The princ:.pal and interest for the water/wastewater
parity revenue bonds are provided by the results of operations.
AVERAGE
DATE OF OUT- ANNUAL
FINAL INTEREST ORIGINAL STANDING DEBT
MATURITY RATE ISSUE 12/31/2005 SERVICE
1596 Water/Wastewater Revenue Bonds
(Refund of 1978 Issue) 12/01/08 4.0%-5.2% 53,31.0,000 51,003,000 $368,173
1998 Water/Wastewater Revenue Bonds
(Refund of 1991 Issue) 9/01/11 4.074-4.3% 4,715,000 2,840,000 547,648
1998 Water Revenue Bonds 9/01/18 4.0%-5.0% 3,195,000 2,355,000 243,047
2001 Apple Tree Bond 6/01/41 6.00% 600,000 600,000 N/A
2003 Wastewater Revenue Bonds 11/81/23 2.0%-5.0% 17,555,000 76,180,000 1,397,470
2004 Irrigation Revenue Bonds 9/01/34 2.0%-4.8% 5,215,000 5,120,000 320,256
434590,000 $28,095,000
The following Schedule sets forth revenue debt service requirements to maturity (in
thousands), and depicts both bond and intergovernmental loans and contracts.
REVENUE DEBT SERVICE
BONDED NOTES AND
DEBT INTEREST CONTRACTS INTEREST
2006 $1,645 $1,191 $743 462
2007 1,695 1,133 743 55
2008 1,750 1,073 743 413
2009 1,455 1,003 688 41
2010 1,505 952 661 35
2011-2015 6,120 3,991 2,735 96
2016-2020 6,440 2,615 1,062 31
2021-2025 4,590 1,055 483 2
2026-2030 1,155 444 0 0
2031-2035 1,140 140 0 0
$27,495 $13,597 $7,858 $37)1
At December 31, 2005, the City had $2,700,600 in reserved retained earnings for debt service
for the enterprise funds. These represent reserve requirements as contained in the various
indentures.
C. INTERGOVERNMENTAL LOANS AND CONTRACTUAL. AGREEMENTS
The City participated in a program administered by the State's Department of Community
Development on behalf of the Public Works Board. The program provides financial
assistance for general government activities, such as street / bridge improvements, or
76 - Comprehensive Annual Financial Report (C.A.F.R.)
proprietary activities, such as water or sewage projects. The City has 21 loans through the
Public Works Trust Fund as described in the chart below.
REAL ESTATE TRANSFER TAX:
PW -86-040
Tieton Dr, 40th Ave to 65th Ave
PW -87-002
Nob Hill Overpass
PW -5-89-962-0056
Resignalization and Lighting
PW -5-89-962-0057
Fruitvale Canal Wasteway Piping
PW -5-91-280-071
Fruitvale Canal Wasteway
ARTERIAL STREET GAS TAX:
PW -5-90-280-050
Tieton Drive, 5th Ave. to 16th Ave.
PW -5-91-280-070
N. 1st Avenue, Yakima Ave. to "I" St,
PW -5-95-791-052
Fair Avenue Improvements
PW -00-691-062
Downtown Yakima Rehab Project
GENERAL FUND SALES TAX:
CERB Loan t1C95-107
Utilities -Madison Ave. & 8th,
"J"St. &8th
Sub Total - General Long -Term Debt
WASTEWATER OPERATING REVENUE:
PW -88-962-54
Treatment Plant Rehabilitation
PW -5-92-280-046
Wastewater Collection System Impr.
PW -5-93-280-054
Wastewater Facility Rehabilitation
PW -5-94-784-049
Wastewater Collection System Impr,
PW -5-95-791-053
Headworks/Digester Rehabilitation
PW -5-95-791-054
Wastewater Impr. King St Collector
PW -01-691-071
Fruitvale Neighborhood
Wastewater -Water Project Phase I
PW -05-691-064
Fruitvale Neighborhood
Wastewater -Water Project Phase II
WATER OPERATING REVENUE:
PW -5-89-962-0058
Domestic Well and Pumphouse 3%
PW -03-027
Naches River Water Trtmnt Plant Impr S%
SRF -04-65104-037
Naches River Water Trtmnt Filter Rehab .5%
Sub -Total -Revenue Debt
INTEREST
MATURITY MAXIMUM OUTSTANDING
DATE AUTHORIZED 12/31/2005
3% 07/01/2006 $720,000 $37,895
1% 07/01/2007 213,454 20,654
1% 07/01/2009 765,000 168,602
3% 07/01/2009 174,879 25,508
3% 07/01/2011 1,188,000 364,013
3% 07/01/2010 803,157 158,780
1% 07/01/2011 1,155,000 299,826
1 07/01/2015 1,000,000 532,508
1% 06/10/2010 1,180,000 630,238
6% 07/01/2016 425,448 288,104
52,526,128
1 07/01/2008 945,000 166,737
1% 07/01/2012 1,120,000 432,117
1% 07/01/2013 3,221,708 1,364,045
1% 07/01/2014 1,481,000 368,091
1% 07/01/2015 3,030,558 1,633,744
1% 07/01/2015 209,367 116,851
5 07/01/2021 1,466,250 1,242,000
.5% 07/01/2025 2,307,000 461,400
Total Intergovernmental Loans
07/01/2009
07/01/2023
10/01/2025
495,000
2,694500
966,772
109,095
The loans have a term not to exceed twenty years and require 1/19'h of the original principal
plus interest to be paid each July lst. These are subordinate to utility systems' parity debt or
do not require a full -faith and credit pledge.
The City entered into a contractual agreement with Yakima County for financing an agricultural
trade and convention facility, the SunDome. The agreement will run over the term of County
bonds issued for this purpose. The County issued bonds in the amount of $1,280,000 in 1988, and
$3,000,000 in 1989. The City of Yakima is contractually responsible for the repayment of a portion
of the issues plus corresponding interest and will make semi-annual payments to the County
over the 20 year bond redemption schedule. In 2002, the City entered into a contractual agreement
with Yakima County for a Supporting Investments in Economic Development (SIED) Loan for
$44,000 to fund public infrastructure improvements related to Cascade Quality Molding. In 2003,
the City entered into a contractual agreement with Yakima County for a SIED Loan for $75,000 to
fund the Visitor's Center Information Project. In 2005, the City issued a contractual agreement
with Yakima County for a SIED loan: $25,000 to fund an eight inch sewer main about 700
feet from Washington Avenue to the Cub Crafters facility at the Yakima Air Terminal and
$100,000 to fund North Sixth Avenue improvements 30 foot wide curb and gutter, per side,
and a five foot sidewalk on the east side.
OUTSTANDING
FUNDING SOURCE MATURITY DATE ORIGINAL ISSUE 12/31/2005
1988 Issue Business Licenses 11/1/2007
1989 Issue Real Estate Excise Taxes 11/1/2009
2001 Issue Contracted Assessment 06/1/2011
2003 Issue Hotel/Motel Tax 06/1/2010
2005 issue Contracted Assessment 06/01/2010
2005 Issue Contracted Assessment 06/01/2010
$780,000
781,518
44,000
75,000
25,000
100,000
$1,805,518
$134,062
252,010
28,523
53,571
25,000
100,000
$593,166
The following schedule sets forth the general obligation debt and intergovernmental loans
and contracts, debt service requirements including interest, to maturity (in thousands):
GENERAL OBLIGATION DEBT SERVICE
NOTES AND
BONDED DEBT INTEREST CONTRACTS INTEREST
2006 $1,305 $676 $592 $84
2007 1,418 641 566 67
2008 1,465 599 493 49
2009 1,369 576 500 36
2010 1,408 544 384 22
2011-2015 6,330 2,102 525 43
2016-2020 3,400 1,320 34 2
2021-2025 2,150 635 0 0
2026-2026 455 11 0 0
$19,300 $7,104 $3,094 $303
2,425,050 At December 31, 2005, the City had $723,611 available in debt service funds to service the
General Obligation Bonds and notes.
710,170
9,029,300
$11555,428
Comprehensive Annual Financial Report (C.A.F.R.) - 77
There are a number of other limitations and restrictions contained in the various bond
indentures. The City is in compliance with all significant limitations and restrictions.
78 -Comprehensive Annual Financial Report (C.A.F.R.)
D. SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT
Debt service requirements for special assessment notes are met by assessments levied
against property owners. The special assessment debt are notes, that are due as moneys
become available from payments on individual assessments. Special assessment debts
currently outstanding are as fellows:
SPECIAL ASSESSMENT NOTES
LID #1053; 02/10/07 Wast;water
Alpine Court Installment Note; 9.25% Interest $6,000
LID #1054; 10/01/07 Wastewater
South 70th Avenue and Lindgren Drive Installment Note; 9.25% Interest 11,000
LID #1055; 06/05/10 Wastewater
North 85th Avenue Wastewater Installment Note; 13.75%Interest 26,500
LID #1056; 12/17/02 Wastewater
South 7th, 810, & 9th Av:nue Installment Note, 8.75% Interest 218,200
$261,700
Debt service requirements for special assessment notes/bonds are met by assessments levied
against property owners. Pursuant to RCW 35.54, tine City maintains a Local Improvement
Guarantee Fund for the purpose of guaranteeing, 02 the extent of the fund, the payments of: its
IID bonds. The fund balance at December 31, 2005 of the LID Guarantee Fund totaled $28,079.
E. LEASE PURCHASE AGREEMENTS
GENERAL CAPITAL ASSETS
As part of the City's capital equipment budgeting program, selected items are obtained via
lease purchase and municipal lease / deferred purchase plans. Since the leases are financing
agreements which transfer ownership to the City at the end of the lease term, the City records
the present value of future lease payments as a capital outlay expenditure and as an offset to
other financial sources in the year that the asset is received. The present value of payments due
in future periods is shown as a liability in the finan.tsal statements and the cost of the asset is
recorded in the financial statements. A summary of the leased equipment is detailed below.
EQUIPMENT IAS SET
Police In -Car Video System
Printer/Copier
Mobile Wireless Data Network
Printer/Copier
Total
$302,693
62,424
232,862
41,679
$639658
The following is a schedule of the future minimum lease payments under the above capital
lease, and the present value of net minimum lease payments at December 31, 2004.
FISCAL YEAR
2006
2007
2008
2009
Less: Amount Representing Interest
Present Value of Net Minimum Lease Payments
$209/148
209,448
209,448
46,378
(35,064)
8639,658
Comprehensive Annual Financial Report (C.A.F. R.) - 79
F. IJNFUNDED PENSION LIABILITIES
The City maintains two single employer defined benefit pension plans, Firemen's Pension
and Police Pension, which are closed systems covering Firemen and Police Officers hired
prior to March 1, 1970. Both plans had their first annual actuarial valuation. as of March 31,
1989, and the required contributions identified to these studies were the basis for recording
the unfunded pension liability since 1989.
The Police Pension is a department in the General Fund, and is operating on a pay-as-you-
go basis. The unfunded pension liability will be adjusted annually by comparing actual
expenditures for pension benefits to the actuari ally determined contribution. The City
intends to maintain this plan on a pay-as-you-go basis. The liability incurred is $428,066 in
2005, and tie outstanding balance at December 31, 2005 is 53,795,872.
The Firemen's Pension is a trust fund, and has as its funding sources a portion of local
property taxes, a state tax on fire insurance premiums, and interest income, This fund has an
unfunded pension liability of $1,007,694 at December 31, 2005.
See Note #6 for additional information on the pension funds.
NOTE 8 — CONTINGENCIES
The City participates in a number of federal and state assisted programs. These grants are
subject to audit: by the grantors or their representatives. Such audits could result in requests for
reimbursement to grantor agencies for expenditures disallowed under the terms of the grants.
City management believes that such disallowances, if any, will be immaterial.
A. SECTION 108 LOAN PROGRAM
In 2003, the City was authorized to administer a Housing and Urban Development (HUD)
Section 108 Loan program. HUD has authorized the City to lend up to a maximum of $6.945
million in two separate loan pools ($4 million in 2003, and $2.945 million in 2004). These
federal loans are available for the purpose of ftnding property rehabilitation for economic
development activities that will create new jobs within the target area. As of December 31,
2005, the City has approved all but $75,000 and that remainder was under negotiations.
The nature of this program is the City approve.; qualified projects for the loan within HUD
guidelines, and acts as a conduit for HUD funds. The loan proceeds flow directly to the
ultimate Corporate Borrower. Payments flow from the Corporate Borrower to the City's
Custodian and then to HUD. The loans are on ,m amortization schedule from 10 years
to 25 years. The HUD contract specifically provides that the loans are not full faith and
credit obligations of the City, but instead, future Community Development: Block Grant
(C:DBG) allocations are pledged on these loans. The City has entered into agreements to
collateralize their position within HUD underwriting guidelines. Additionally, the City
has been awarded a $1 million Economic Development Initiative EDI) grant from HUD
as a protec don in case of a default. As of December 31, 2005, all of the loans were current,
however, one of the loans is currently in default and the City is working with the Corporate
Borrowers on a resolution. (The EDI grant can be utilized for past due payments).
80 - Comprehensive Annual Financial Report (C.A.F.R.)
B. POTENTIAL LITIGATION
On February 15, 2005, Congdon Orchards, Inc. and Congdon Development Company, LLC
(Congdon) filed a damage claim with the City alleging Congdon has been wrongfully damaged
by Yakima's breaches of contract, negligence, tortuous conduct, breaches of duties, errors and
omissions, and other wrongful conduct. Congdon alleged its damages exceeded $21 million and
continue. The City believes that the chances of recovery are low.
Because of the nature of its activities, the City is subject to certain pending legal actions
which arise in the ordinary course of business. The City believes, based on the information
presently known, that the ultimate liability for any such legal actions will not be material to
the financial position of the City.
NOTE 9 — SEGMENT INFORMATION
For the purposes of revenue bond debt issuance, the water and wastewater utilities are combined
in a single segment (i.e., the System). Therefore, investors in the revenue bonds rely on the revenue
generated both activities for repayment. In 2004, the City issued the first $5 million of $10 million
revenue bonds authorized for the Irrigation system. The balance will be issued in 2007 or 2008.
Investors in these revenue bonds rely solely on the revenue generated from the irrigation utility for
repayment. Summary financial information for the System and irrigation utility is presented below.
CONDENSED STATEMENT OF NET ASSETS
Assets:
Current Assets
Restricted Assets
Capital Assets
Total Assets
Liabilities:
Current Liabilities
Noncurrent Liabilities
Total Liabilities
Net Assets:
Invested in Capital Assets, Net of Related Debt
Restricted
Unrestricted
Total Net Assets
CONDENSED STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN NET ASSETS
Operating Revenues:
Charges for Services
Other Operating Revenues
Total Operating Revenues
Operating Expenses:
Operations and Maintenance
Depreciation
Total Operating Expenses
Operating Income (Loss)
WATER I
WASTEWATER IRRIGATION TOTAL
$19,679,807 $7,362,931 $2Z042,738
2,665590 35,435 2,701,025
88,071,316 6,091,330 94,162,646
$110,416,713 $13,489,696 $123,906,409
$5,282,075 $477,015 $5,759,090
29,856,801 4,878,526 34,735,327
$35,138,876 55,355,541 $40,494,417
968,430,364 $4,517,567 $72,947,931
2,665,590 35,435 2,701,025
4,181,883 3,581,153 Z763,036
$75,277,837 $8,134,155 $83,411,992
519501,459 $2,433,323 $21,934,782
4,398 1,926 6,324
519505,857 $2,435,249 $21,941,106
$14,245,913 $1,303,908 915549,821
3,576,581 79,179 3,655,760
$17,822,494 $1,383,087 $19,205,581
51,683,363 $1,052,162 52,735,525
Comprehensive Annual Financial Report (C.A.F.R.) — 81
Non -Operating Revenues (Expenses)
Miscellaneous Interest (Net)
Other Non-operating (Net)
Total Non -Operating Revenues (Expenses)
Income (Loss) before contributions and Transfers
Capital Contributions
Transfers (Net)
Change in Net Assets
Total Net Assets - January I
Total Net Assets -December 31
CONDENSED STATEMENT OF CASH FLOWS
Net Cash Provided (Used) by:
Operating Activities
Capital and Related Financing Activities
Investing Activities
Net Increase (Decrease)
Beginning Cash and Cash Equivalents
Ending Cash and Cash Equivalents
NOTE 10 — JOINT VENTURES
WATER I
WASTEWATER IRRIGATION TOTAL
($520,211) ($102,914) ($623,125)
441,619 (7,665) 433,954
(578,592) ($110,579) ($189,171)
$1,604,771 5941,583 $2,546,354
$2,386,711 $0 $2,386,711
(205,691) (48,750) (254,441)
$3,785,791 $892,833 $4,678,624
$71,492,046 57,241,322 578,733,368
575,277,837 $8,134,155 $83,411,992
$5,602,581 $1,151,810 56,754,391
(7,374,049) (1,759,348) (9,133,397)
(604,328) (1,164,463) (1,768,791)
($2,375,796) ($1,772,001) ($4,147,797)
$9,950,029 $3,634,562 $13,584,591
87574,233 $1,862,561 $9,936,794
The City and the County of Yakima entered into a joint venture for operation of the Yakima Air
Terminal on July 1, 1982. The Yakima Air Terminal Board is comprised of five individuals; two
appointed by the City, two by the County, and one selected by the four appointees. Annually,
the governing bodies of the City and County each designate one of its members as an advisory
ex -officio member of the Air Terminal Board.
The City and the County contribute equally to the joint venture, share equally all profits and
losses, and own jointly, in equal shares, all properties or facilities. The Yakima Air Terminal is
presently self-sustaining. We have considered disdosure requirements promulgated in GASB
39 and have elected to continue to disclose the joint venture in a manner consistent with prior
years. We feel the effects of the joint venture on the combined Financial statements taken as a
whole is immaterial.
The Air Terminal budget is approved, amended and/or supplemented by joint resolution of
the City and County. Real property acquisition and sale in excess of $50,000 must be approved
by both the City and County. Issuance of bonds for Airport purposes by the City or County
requires both party's approval. Key financial data for the year ended December 31, 2005, is as
follows:
82 — Comprehensive Annual Financial Report (C.A.F.R.)
UNAUDITED
STATEMENT OF NET ASSETS
Assets:
Current Assets
Property, Plant and Equipment, Net
Intangible Assets, Net
Constructrm in Progress
Total Assets
Current Liabilities:
Net Assets:
Restricted Vet Assets
Unrestricted Net Assets
Total Net Assets
$612,846
8,010,062
217,272
1,439,500
$10,279,680
$135,814
59,551,519
592,347
$10,143,866
UNAUDITED
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS:
Total Operas ng Revenues
Operating E;.penses:
Operations/Maintenance
Depreciation
Total Operas ng Expenses
Total Operas ng Income (Loss)
Non-operating Revenues (Expenses)
Miscellaneous Interest Revenue
Operating Subsidies
Other
Total Non-cperating Revenues (Expenses)
Total Net Income (Loss)
Total Net Assets, January 1
Total Net A;sets, December 31
$867,434
897,147
1,268,982
82,166,129
(1,298,695)
$14,638
1,153,087
161,260
1,328,985
$30,290
$10,113,575
$10,143,865
Complete financial statements for the Airport can be obtained from the Yakima Air Terminal at
2400 West Washington Avenue, Yakima, WA, 98903.
Comprehensive Annual Financial Report (C.A.F.R.) — 83
NOTE II — POST RETIREMENT BENEFITS OTHER THAN PENSION BENEFIT
In addition to providing pension benefits, the City provides certain health care (100% of
medically necessary costs) and life insurance benefits for retired employees under the City's
Firemen's and .Police Pensions as prescribed by state statutes. Current employees under these
two pensions become eligible for those benefits if t:1ey reach normal retirement age while
working for the City. The cost of retiree health care insurance and life insurance benefits is
recognized as an expenditure as claims are paid. Both plans are being funded 100% by the City
on a pay-as-you-go basis. For 2005, the costs totalec. $668,873 for the Firemen's .Pension which has
a total of 82 participants currently eligible to receive benefits and $642,462 for the Police Pension
which has a total of 77 participants currently eligible to receive benefits.
NOTE 12 — OTHER DISCLOSURES
SUBSEQUENT EVENTS
In. April of 2006, citizens voted to annex the City into the Yakima County Rural Library
District. This affects the way the City pays for Library services. Instead of an annual
contract with the City, the Library District will receive a direct property tax allocation
starting in 2007 This annexation will reduce the City's maximum tax rate of $3.60/1,000 by
the Libraries actual levy, up to $.50/1,000
84 — Comprehensive Annual Financial Report (C.A.F.R.)
CITY OF
Required Supplementary Information
POLICE AND FIRE PENSION
SCHEDULE OF EMPLOYER CONTRIBUTIONS
December 31, 2005
POLICE
ACTUAL EMPLOYER MEDICAL BENEFIT ANNUAL
FISCAL CONTRIBUTIONS PAYMENTS & REQUIRED PERCENTAGE
YEAR TAXES & FIRE ADMINISTRATIVE NET EMPLOYER CONTRIBUTION OF ARC
ENDING INSURANCE PREMIUMS EXPENSES CONTRIBUTION (ARC) CONTRIBUTED
12/31/99 $1,090,801 $461,309 $629,492 9671522 93.74%
12/31/00 1,147,560 513,778 633,782 671,522 94.38%
12/31/01 933,831 442,878 490,953 671,522 73.11%
12/31/02 991,009 478,769 512,240 671,522 76.28%
12/31/03 1,133,242 561,692 571,550 657,086 8698%
12/31/04 1,287,904 702,241 585,663 657,086 89.13%
12/31/05 1,204,159 644,225 559,934 657,086 85.21%
FIRE
ACTUAL EMPLOYER MEDICAL BENEFIT ANNUAL
FISCAL CONTRIBUTIONS PAYMENTS & REQUIRED PERCENTAGE
YEAR TAXES & FIRE ADMINISTRATIVE NET EMPLOYER CONTRIBUTION OF ARC
ENDING INSURANCE PREMIUMS EXPENSES CONTRIBUTION (ARC) CONTRIBUTED
12/31/99 $1,221,698 $380,460 $841,238 $840,067 100.14%
12/31/00 1,256,578 445,493 811,085 840,067 96.55%
12/31/01 1,332,816 481,554 851,262 836,095 101.81%
12/31/02 1,325,372 530,732 794,640 836,095 95.04%
12/31/03 1,406,347 639,871 766,476 633,545 12098%
12/31/04 1,425,048 769,426 655,622 633,545 103.48%
12/31/05 1,960,423 706,947 753,476 633,595 118.93%0.
Comprehensive Annual Financial Report (C.A.F.R.) - 85