annual FINANCIAL REPORT Fund Fleet ServiceS

Transcription

1 annual Fleet ServiceS 2009 Fund FINANCIAL REPORT

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3 Public Utility Board LAURA FOX Chair PETER THEIN Vice-Chair ROBERT CASEY Secretary DAVID NELSON Member WOODROW JONES Member WILLIAM A. GAINES Director of Utilities/CEO THEODORE C. COATES Power Superintendent/COO FRANK CASTRO Manager, Fleet Services ROBERT K. BILES Finance Director DEPARTMENT OF PUBLIC UTILITIES CITY OF TACOMA

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5 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND TABLE OF CONTENTS MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL DATA COMPARATIVE BALANCE SHEETS STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS STATEMENT OF NET ASSETS EQUITY DISTRIBUTION.. 13 STATEMENTS OF CASH FLOWS NOTES TO FINANCIAL STATEMENTS STATISTICAL DATA TEN YEAR FINANCIAL REVIEW FIXED ASSETS TAXES AND EMPLOYEE WELFARE CONTRIBUTIONS GRAPHS MANAGER'S REPORT

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7 MANAGEMENT DISCUSSION AND ANALYSIS The following discussion and analysis of the financial performance of the Fleet Services Fund provides an overview of the financial activities for the years ended December 31, 2009 and The information presented here should be read in conjunction with the financial statements as a whole, including the footnotes and other supplementary information that is provided. Overview of the Financial Statements The City of Tacoma Finance Department and the management of Fleet Services are responsible for preparing the accompanying financial statements and for their integrity. The statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis and include amounts that are based on management's best estimates and judgments. The basic financial statements, presented on a comparative basis for the years ended December 31, 2009 and 2008, include Balance Sheets, Statements of Revenues, Expenses and Changes in Net Assets, and Statements of Cash Flows. The Balance Sheets present information on all of the Fund s assets and liabilities, with the difference between the two reported as net assets. The Statements of Revenues, Expenses and Changes in Net Assets report all of the revenues and expenses during the time periods indicated. The Statements of Cash Flows provide information on cash receipts and disbursements during the year and report changes in cash resulting from operations, investing and financing activities. The notes to the financial statements, presented at the end of the basic financial statements, provide additional disclosures that are essential to a full understanding of the data provided in the financial statements. They are an integral part of the Fund s presentation of financial position, results of operations, and changes in cash flows. Management has established and maintains a system of internal control that provides reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition and the prevention and detection of fraudulent financial reporting. The system of internal control provides for appropriate division of responsibility and is documented by written policies and procedures. The concept of reasonable assurance is based on the recognition that the cost of a system of internal control should not exceed the benefits derived. Financial Statement Analysis During 2009, Fleet Services realized net income of $1.8 million, a decrease of $539,000 from the net income of $2.3 million recorded in Operating revenues decreased 4.3% or $332,000 in Operating expenses also decreased 4.3% or $283,000. The overall result is a net decrease in operating income of $49,000 from a year earlier. In 2008, the Fund reported net income of $2.3 million compared to net income of $1.8 million a year earlier. Operating revenues increased by $718,000 or 10.1% in 2008 and operating expenses increased 6.6% or $408,000, resulting in an increase in operating income of $310,000 over

8 Selected Financial Information (000's omitted) Category Operating Revenues $7,482 $7,815 $7,097 Operating Expenses 6,300 6,583 6,175 Operating Income 1,182 1, Other Income (Loss) Transfers In Change in Net Assets (Net Income) $1,777 $2,316 $1,835 Current Assets $23,665 $23,371 $20,805 Capital Assets (Net) 18,100 17,666 17,163 Total Assets 41,765 41,037 37,968 Total Liabilities (Current) 754 1,802 1,049 Invested in Capital Assets 18,100 17,666 17,163 Restricted 23,478 23,144 22,297 Unrestricted (566) (1,576) (2,541) Total Net Assets $41,012 $39,235 $36,919 Revenues Fleet Services operating revenue is comprised of five categories: Maintenance, Capital Recovery, Administrative Overhead, Fuel and Fuel Loading and Pool Car Rentals. As reported above, total operating revenues decreased $332,000 (4.3%) from $7.8 million in 2008 to $7.5 million in operating revenues reported an increase over 2007, up $718,000 (10.1%) from $7.1 million to $7.8 million. Maintenance revenue is comprised primarily of staff labor. The department was understaffed for the year 2009 causing labor revenues to decrease $48,000. Combined with an increase of approximately $17,000 in revenue generated from vendor services maintenance revenue is down a net of $31,000 (1.5%) compared to In 2008, labor, vendor services and warehouse overhead revenues all increased $15,000, $13,000 and $2,000 respectively. Combined with a decrease in miscellaneous work order revenue of $12,000, total maintenance revenue increased $18,000 (0.8%) over Capital recovery revenue also decreased by $263,000 (5.5%) to $4.6 million compared to $4.8 million last year. Capital recovery revenues, collected as replacement fees on each vehicle and piece of equipment, are customer driven and based on the anticipated equipment replacement needs for each business unit. In 2009, management continued with its practice of crediting customers with three months replacement contributions. In 2008, capital recovery revenue increased by $783,000 (19.3%) to $4.8 million compared to $4.0 million in

9 Administrative overhead revenue saw virtually no change between 2009 and However, in 2008, administrative overhead revenues decreased $127,000 (16.2%) compared to This was due to a decision made by management that went into effect January 1, 2008 to reduce the overhead rate by $11.72 for each equipment request. This fee was allocated to recouping SAP implementation costs. Fuel and fuel loading revenues have dropped considerably in 2009, $32,000 (32.4%), compared to last year due to lower fuel prices. The opposite occurred in 2008 when fuel prices spiked to near record highs causing fuel revenues to increase by $15,000 (17.8%) compared to Pool car rental revenue decreased by $5,000 (4.9%) compared to 2008 due to slightly less usage of the pool vehicles. In 2008 pool car rental revenue was up $29,000 (41%) compared to 2007 due to higher pool vehicle activity. The increase was attributed to more frequent requests to use hybrid vehicles and an increase in hybrid vehicle fees. Expenses Fleet Services operating expense is comprised of four major categories: Repairs and service, stores operations, administration and deprecation. A new rent rate was calculated for 2009/2010 by Tacoma Power and applied to all of Tacoma Power s internal tenants which include Fleet Services. The rent rate is a direct factor contributing to the increase in Fleets repairs and service category. Repairs and service expense in 2009 totaled $2.0 million, an increase of $212,000 (11.8%) from Shop operations, the largest part of repairs and service expense, provide preventive and corrective maintenance and repairs to vehicles and pieces of equipment for Tacoma Public Utilities, including Power, Water, Rail, Customer Service and other service groups. Shop operations expense is up $196,000 (10.9%) from 2008 primarily due to the increase in the rent rate of $141,000. In 2008, repairs and service expense saw a slight increase of $12,000 (0.7%) over Fleet maintains a parts warehouse known as stores operations. Stores operation expense decreased $344,000 (63.0%) in 2009 compared to This is directly related to the $327,000 adjustment to correct the fuel inventory in 2008 which was overstated in 2003 during migration to SAP. Stores operation expense was up in 2008, $381,000 (230.8%) compared to 2007, also due to the fuel inventory correction. Administration expense decreased $51,000 (4.5%) in 2009 compared to This is primarily due to a decrease in City applied assessments of $25,000. Administration expense increased 14.7% or $146,000 in 2008 compared to 2007 due to the upgrade of the Pool Car System. In 2009, seventy six vehicles and pieces of equipment were retired while fifty vehicles and equipment were capitalized. This resulted in a net decrease in depreciation expense of $100,000 (3.2%) compared to In 2008, twenty two vehicles and pieces of equipment were retired or transferred while forty eight vehicles and equipment were capitalized. Fourteen of those additions occurred in December of 2008 and depreciation started for those in January Thus, depreciation expense netted a decrease of $131,000, or 4.1% compared to

10 OPERATING REVENUES (in millions) OPERATING EXPENSES (in millions) $ $ Administrative, Fuel & Pool Car Capital Recovery Maintenance Repair/ Service Deprec Admin Stores Oper/Other Operating Ratio The Fund's operating ratios, a common measure of efficiency and defined as operating expenses as a percentage of revenue, for 2009, 2008, and 2007 are 84.2%, 84.2%, and 87%. The Fund normally needs to maintain a low operating ratio in order to generate the funds necessary for its extensive capital outlay program. The graph shows how that percentage has fluctuated over the years. OPERATING RATIOS Percent

11 Non-Operating Revenues (Expenses) Interest income decreased a net $75,000 (33.5%) from $223,000 in 2008 to $148,000 in 2009 due to less interest earned on the revenue pool interest income also saw a decrease of $198,000 compared to It is the practice of Fleet Services to arrange for public auction sale of vehicles and equipment that are declared surplus by the assigned sections. Fifty seven of the seventy six vehicles and equipment retired in 2009 were auctioned for a gain. Therefore, Fleet Services reported a net gain of $113,000, an increase of $98,000 (660%) compared to In 2008, only twenty two vehicles and equipment were retired and auctioned compared to fifty nine in Thus, Fleet Services recorded a net gain of $15,000 in 2008, down from $64,000 in Of special note this year, Fleet Services was awarded a grant from the State of Washington Department of Ecology. The Air Quality Program awarded Fleet Services a $136,000 Clean Diesel Grant for the installation of emissions control technology on city-owned heavy duty diesel vehicles and equipment. Fleet was able to retrofit fifty nine vehicles and equipment with the funds. As Fleet is an internal service fund, the grant proceeds were distributed to their customers, Power, Water, Rail and Customer Services, to offset the expense of the installations. Fixed Asset Additions Purchases of fleet vehicles and equipment in 2009 were $3.5 million with sixty six vehicles and pieces of equipment placed into service compared with $3.7 million in 2008 with forty eight vehicles and pieces of equipment placed into service. FLEET ADDITIONS & TRANSFERS (in millions) $

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13 FINANCIAL DATA - 7 -

14 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND COMPARATIVE BALANCE SHEETS DECEMBER 31, 2009 AND DECEMBER 31, 2008 ASSETS CURRENT Current Fund Cash & Equity in Pooled Investments $23,188,888 $22,970,222 Accounts Receivable... 3,732 5,310 Interdivision Receivable... 84,696 40,520 Materials and Supplies , ,118 Prepaid Expense Total Current Assets... 23,665,442 23,370,520 FIXED Office Furniture and Equipment , ,905 Stores and Shop Equipment , ,780 Transportation Equipment... 30,271,705 30,143,855 Power-Operated Equipment... 19,193,757 19,029,924 Construction Work in Progress... 1,121,898 19,887 Total Fixed Assets... 51,643,045 50,249,351 Accumulated Depreciation... (33,542,874) (32,582,957) Net Fixed Assets... 18,100,171 17,666,394 TOTAL ASSETS... $41,765,613 $41,036,914 The accompanying notes are an integral part of these financial statements

15 NET ASSETS AND LIABILITIES NET ASSETS Invested in Capital Assets... $18,100,171 $17,666,394 Restricted for: Tacoma Power... 16,452,908 16,306,346 Tacoma Water... 6,415,386 6,228,431 Tacoma Rail , ,342 Unrestricted... (565,900) (1,575,796) TOTAL NET ASSETS... 41,011,907 39,234,717 CURRENT LIABILITIES Accounts Payable , ,229 Wages Payable... 68,131 56,168 Interdivision Payable ,092 1,478,571 Employee Vacation and Sick Leave Accrual , ,748 Others ,481 Total Current Liabilities ,706 1,802,197 TOTAL LIABILITIES ,706 1,802,197 TOTAL NET ASSETS AND LIABILITIES... $41,765,613 $41,036,

16 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN NET ASSETS DECEMBER 31, 2009 AND DECEMBER 31, 2008 DECEMBER 31, DECEMBER 31, OPERATING REVENUE Maintenance Revenue... $187,533 $180,751 Capital Recovery... (846,585) (936,935) Administrative Overhead... 54,115 55,455 Fuel and Fuel Loading... 6,082 5,130 Pool Car Rental... 7,026 10,795 Total Operating Revenue... (591,829) (684,804) OPERATING EXPENSES Repairs and Servicing Shop Operations ,921 78,860 Outside Services Total Repairs and Servicing ,785 79,014 Stores Operations... 19, ,927 Administration... 57,254 92,023 Depreciation , ,960 Total Operating Expenses , ,924 OPERATING INCOME (LOSS)... (1,089,457) (1,432,728) NON-OPERATING REVENUES (EXPENSES) Interest Income... 70,530 93,686 Gain (Loss) on Disposition of Equipment Sale of Scrap Total Non-Operating Revenues (Expenses)... 70,530 93,686 Net Income Before Transfers... (1,018,927) (1,339,042) Transfers In... 31, ,510 NET INCOME (LOSS)... (987,445) (1,169,532) TOTAL NET ASSETS, AS ORIGINALLY STATED... PRIOR PERIOD ADJUSTMENTS... TOTAL NET ASSETS - JANUARY 1... TOTAL NET ASSETS - DECEMBER The accompanying notes are integral part of these financial statements

17 YEAR TO DATE DECEMBER 31, DECEMBER 31, 2009/2008 PERCENT VARIANCE CHANGE $2,096,838 $2,128,335 ($31,497) -1.5% 4,568,298 4,831,680 (263,382) -5.5% 656, ,821 (529) -0.1% 67,456 99,750 (32,294) -32.4% 93,436 98,226 (4,790) -4.9% 7,482,320 7,814,812 (332,492) -4.3% 1,985,010 1,789, , % 19,901 3,822 16, % 2,004,911 1,793, , % 202, ,055 (343,849) -63.0% 1,092,601 1,143,615 (51,014) -4.5% 2,999,842 3,100,034 (100,192) -3.2% 6,299,560 6,582,823 (283,263) -4.3% 1,182,760 1,231,989 (49,229) -4.0% 148, ,535 (74,517) -33.5% 112,695 14,828 97, % % 260, ,363 23, % 1,443,673 1,469,352 (25,679) -1.7% 333, ,483 (512,966) -60.6% 1,777,190 2,315,835 (538,645) -23.3% 39,234,717 36,918, ,234,717 36,918,882 $41,011,907 $39,234,

18 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND STATEMENT OF NET ASSETS DECEMBER 31, 2009 Invested in Capital Assets: Balance January 1, $17,666,394 Capital Additions... 1,393,694 Depreciation... (959,917) Total Invested in Capital Assets... $18,100,171 Restricted Net Assets: Balance January 1, ,144,118 Net Additions through December 31, ,517 Total Restricted Net Assets December 31, ,477,636 Unrestricted Net Assets: Balance January 1, (1,575,796) Net Reductions through December 31, ,009,896 Total Unrestricted Net Assets December 31, (565,900) TOTAL NET ASSETS DECEMBER 31, $41,011,907 The accompanying notes are an integral part of these financial statements

19 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND EQUITY DISTRIBUTION AS OF DECEMBER 31, 2009 TACOMA TACOMA TACOMA POWER WATER RAIL TOTAL Balance January 1, $28,530,398 $9,690,958 $1,013,361 $39,234,717 Contributions During Year , , ,517 Equity Contrib. at December 31, ,676,960 9,877,913 1,013,361 39,568,234 Current Year Operations: Total Operating Revenue *... 5,422,789 1,867, ,626 7,482,320 Less: Repairs & Servicing Expense * 1,453, ,511 51,347 2,004,911 Administration Expense ** , ,248 44,693 1,294,807 Depreciation Expense... 2,358, ,205 73,647 2,999,842 Total Expenses... 4,765,909 1,363, ,687 6,299,560 Net Operating Revenue , ,941 21,939 1,182,760 Add: Other Income *** ,614 65,854 6, ,913 Net Operating Results , ,795 28,384 1,443,673 Total Equity... $29,522,454 $10,447,708 $1,041,745 $41,011,907 * Allocated to each division based on total receipts from the divisions. ** Allocated to each division based on vehicle count. *** Allocated to each division based on total equity in the Fund

20 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND STATEMENTS OF CASH FLOWS YEAR TO DATE DECEMBER 31, DECEMBER 31, CASH FLOWS FROM OPERATING ACTIVITIES Cash from Customers... $7,439,722 $7,813,287 Cash Paid to Suppliers... (2,034,643) 354,912 Cash Paid to Employees... (2,347,224) (2,270,467) Net Cash Provided by Operating Activities... 3,057,855 5,897,732 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Expenditures, Net... (3,447,212) (3,612,184) Transfers In , ,483 Disposition of Equipment/Scrap ,895 14,828 Net Cash Used in Financing Activities... (3,000,800) (2,750,873) CASH FLOWS FROM INVESTING ACTIVITIES Interest Received , ,966 Net Cash Provided by (Used in) Investing Activities , ,966 Net Increase (Decrease) in Cash and Equity in Pooled Investments ,666 3,377,825 Cash and Equity in Pooled Investments at January 1 22,970,222 19,592,397 Cash and Equity in Pooled Investments at September 30.. $23,188,888 $22,970,222 These statements should be read in conjunction with the Notes to Financial Statements contained in the 2008 Annual Report

21 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: YEAR TO DATE DECEMBER 31, DECEMBER 31, Operating Income (Loss)... $1,182,760 $1,231,989 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation and Amortization... 2,999,842 3,100,034 Accounts Receivable... 1,578 (1,525) Receivables from Affiliates... (44,176) 579,448 Materials and Supplies... (33,814) 234,643 Other Current Assets Taxes and Other Payables ,744 (5,332) Payables to Affiliates... (1,366,479) 734,233 Salaries, Fringe Benefits and Compensated Absences Payable... 21,244 24,232 Total Adjustments... 1,875,095 4,665,743 Net Cash Provided by Operating Activities... $3,057,855 $5,897,

22 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fleet Services Fund was established in 1984 by City of Tacoma Ordinance No On January 1, 1985, most vehicles owned by the Tacoma Power, Tacoma Water and Tacoma Rail were transferred to this Fund. The purpose of the Fund is to provide for scheduled maintenance, repair, and replacement of Department vehicles. Basis of Financial Statements. The Fleet Service Fund is an Internal Service Fund of the City of Tacoma used for the operation of the Department of Public Utilities consolidated fleet management program with responsibilities for all vehicle administration under a fleet manager. The Fund accounts for its financial operation by using a self-balancing set of accounts established primarily for handling transactions of a nature peculiar to Fleet Service operations. A description of the Fund's principal accounting policies follows. Fixed Assets. Fixed assets are stated at cost and are depreciated primarily using a straightline method over the estimated useful life of the asset. Inventory. The inventory is valued on the moving average cost method. Revenues. Revenues are based on services rendered through the end of the year. Cash and Equity in Pooled Investments and Investments. The Fund's cash and investments are deposited with the City Treasurer in the City's general investment pool for the purpose of maximizing interest earnings through pooled investment activities. Cash and equity in pooled investments in the City s general investment pool are reported at fair value and changes in unrealized gains and losses are recorded in the Statements of Revenues, Expenses and Changes in Net Assets. Interest earned on such pooled investments is allocated to the participating funds based on each fund s average daily cash balance during the allocation period. The general investment pool operates like a demand deposit account in that all City departments may deposit cash into the pool at any time and can also withdraw cash out of the pool without prior notice or penalty. Accordingly, balances are considered to be cash equivalents. The City of Tacoma Investment Policy permits investments in Certificates of Deposit with qualified public depositories (as defined in RCW 39.58), obligations of the U.S. Treasury, Government Sponsored Agencies and Instrumentalities, bonds issued by any State or Local Government, Bankers Acceptances, Commercial Paper, Repurchase and Reverse Repurchase agreements, and the Washington State Local Government Investment Pool (LGIP). Liquidity required to meet the City s daily obligations is maintained by investing a portion of the City s Investment Pool in the WA State LGIP and/or a Municipal Investor demand deposit account maintained with U.S. Bank. The Fund's equity that portion of the City of Tacoma Investment Pool held in qualified public depositories at December 31, 2009 and 2008 is entirely covered by Federal Deposit Insurance Corporation (FDIC) and the Washington State Public Deposit Protection Commission

23 FLEET SERVICES FUND NOTES TO FINANCIAL STATEMENTS (continued) NOTE 2 TACOMA EMPLOYEES RETIREMENT SYSTEM FUND (TERS). Pursuant to GASB Statement No. 50, Pension Disclosures an amendment of GASB Statements No. 25 and No. 27, this note disclosure emphasizes the employer disclosures and detailed information presented in an independent Comprehensive Annual Financial Report (CAFR) issued by the Retirement System. Further detailed information regarding these disclosures can be found in that report which may be obtained by writing to Tacoma Employees Retirement System, 747 Market Street, Room 1544, Tacoma, Washington The System is a single employer, defined benefit retirement plan covering employees of the City of Tacoma and is administered in accordance with Revised Code of Washington (RCW) Chapter and Chapter 1.30 of the Tacoma Municipal Code. There are 1,846 vested retirees and beneficiaries of deceased retirees currently receiving benefits and 366 vested terminated employees entitled to future benefits but not yet receiving them. Currently, 3,148 active members are part of the System. 2. Basis of Accounting: The financial statements are prepared using the accrual basis of accounting. Employee and employer contributions are recognized as revenues in the period in which employee services are performed and expenses are recorded when the corresponding liabilities are incurred, regardless of when payment is made. The employer contribution rate is determined by the actuarial funding method identified as the entry age cost method. 3. Investments: Equity securities, fixed income securities, real estate, and short-term investments are all reported at fair market value. Fair market value was determined by the custodian bank utilizing standard industry practices and verified by the performance consultant. No investment in any one corporation or organization exceeded 5% of net assets available for benefits. 4. Contracts: The System has no securities of the employer or related parties included in the plan assets. The System has not made any loans to the employer in the form of notes, bonds or other instruments. 5. Contribution Rates: Covered employees are required by Chapter 1.30 of the Tacoma Municipal Code to contribute based on the rates provided in the following table: Applicable Period City Rate Member Rate Total Rate 1/1/1980 to 12/31/ % 8.89% 19.33% 1/1/1997 to 12/31/ % 7.68% 16.70% 1/1/2001 to 2/1/ % 6.44% 14.00% 2/2/2009 to 12/31/ % 7.36% 16.00% 1/1/2010 Forward 9.72% 8.28% 18.00% Contributions city-wide totaled $33.6 million in 2009 ($17.9 million employer contributions and $15.7 million employee contributions); contributions totaled $28 million in 2008 ($14.9 million employer contributions and $13.1 million employee contributions); and totaled $25.7 million in 2007 ($13.6 million employer contributions and $12.1 million employee contributions). 6. Funding Status and Progress: Historical trend information about TERS is presented herewith as supplementary information. This information is based on the most recent actuarial valuation performed, dated January 1, 2009, and is intended to help assess TERS funding status on a going-concern basis, assess progress made in accumulating assets to pay benefits when due, and make comparisons with other public employee retirement systems

24 FLEET SERVICES FUND NOTES TO FINANCIAL STATEMENTS (continued) 7. Actuarial Methods and Significant Actuarial Assumptions: Valuation Date: January 1, 2009 Actuarial Cost Method: Entry Age Amortization Method: Level Percentage of the System s Projected Payroll Remaining Amortization Period: 30 years; open Asset Valuation Method: Assets are valued at market value, with a four-year smoothing of all market value gains and losses. Actuarial Assumptions: Investment Rate of Return 7.75% Projected Salary Increases 4.25% Includes Inflation at 3.25% Post-Retirement Benefit Increases 2.125% SCHEDULE OF FUNDING PROGRESS: ($ in millions) Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) Entry Age (b) Unfunded AAL (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll (b-a/c) 1/1/05 $807.3 $ ($53.0) 107.0% $172.5 (30.7%) 1/1/07 $1,021.3 $ ($125.5) 114.0% $175.0 (71.7%) 1/1/09 $1,097.3 $ ($95.0) 109.5% $197.4 (48.1%) ANNUAL PENSION COST AND NET PENSION OBLIGATION: The City s annual pension cost and net pension obligation to the Retirement System for 2008 were as follows: ($ in millions) Annual Required Contribution (ARC) $14.3 Adjustment to ARC - Annual Pension Cost (APC) 14.3 Contributions made 14.9 Increase (Decrease) in Pension Obligation (0.6) Net Pension Obligation at beginning of year (0.4) Net Pension Obligation at end of year $(1.0) TREND INFORMATION ($ in millions) Year Ending Annual Pension Cost (APC) % of APC Contributed Net Pension Obligation 12/31/06 $ % $(0.4) 12/31/07 $ % $(0.4) 12/31/08 $ % $(1.0)

25 FLEET SERVICES FUND NOTES TO FINANCIAL STATEMENTS (continued) NOTE 3 FLEET SERVICES REFUND. Fleet Services management makes an annual assessment of the capital replacement reserve balance for appropriate funding levels. It is the Fund's policy to maintain the Fund's maximum balance at a level that will provide adequate purchasing power for two budget cycles and to return any excess funds to customers based on their scheduled monthly payments. The solvency of the Replacement Fund also allowed Fleet Services to return a portion of the interest earned on fund investments for the year to their customers. In 2009 and 2008, Fleet Services returned 75% of the interest earned on the capital replacement reserve to the appropriate users. The amounts refunded in 2009 and 2008 were $472,925 and $663,039, respectively

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27 STATISTICAL DATA

28 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND TEN-YEAR FINANCIAL REVIEW BALANCE SHEET ASSETS Current... $23,665,442 $23,370,520 $20,805,271 $20,585,239 Fixed - Net... 18,100,171 17,666,394 17,162,675 15,026,707 TOTAL ASSETS... 41,765,613 41,036,914 37,967,946 35,611,946 LIABILITIES Current ,706 1,802,197 1,049, ,266 NET ASSETS... 41,011,907 39,234,717 36,918,882 35,083,680 TOTAL LIABILITIES AND NET ASSETS $41,765,613 $41,036,914 $37,967,946 $35,611,946 STATEMENT OF INCOME OPERATING REVENUES Maintenance Revenue... $2,096,838 $2,128,335 $2,110,494 $1,913,593 Capital Recovery... 4,568,298 4,831,680 4,048,384 3,974,155 Pool Car Rental... 93,436 98,226 69,371 67,295 Administrative and Fuel , , , ,802 Total Operating Revenues... 7,482,320 7,814,812 7,096,633 6,809,845 OPERATING EXPENSES Repairs and Servicing... 2,004,911 1,793,119 1,781,438 1,880,979 Stores Operations , , , ,562 Administration... 1,092,601 1,143, , ,489 Depreciation... 2,999,842 3,100,034 3,230,966 3,309,694 Other Total Operating Expenses... 6,299,560 6,582,823 6,174,870 6,319,724 OPERATING INCOME (LOSS)... 1,182,760 1,231, , ,121 NON-OPERATING INCOME (EXPENSE) Interest Income , , , ,788 Net Other Income (Expense) ,895 14,828 63,918 86,438 Total Non-Operating Income (Expense) , , , ,226 Net Income (Loss) Before Transfers... 1,443,673 1,469,352 1,406, ,347 Transfers In * , , , ,891 NET INCOME (LOSS)... $1,777,190 $2,315,835 $1,835,202 $1,370,238 * Beginning with 2001, results have been classified to conform to the new GASB No. 34, Financial Reporting Model for Local Governments

29 $17,817,969 $16,332,680 $14,446,226 $12,893,546 $11,560,255 $11,330,171 16,560,346 17,669,199 18,263,218 19,306,053 19,294,171 19,898,182 34,378,315 34,001,879 32,709,444 32,199,599 30,854,426 31,228, ,569 1,070,185 1,171, , , ,826 33,722,746 32,931,694 31,537,565 31,432,751 30,369,886 30,751,527 $34,378,315 $34,001,879 $32,709,444 $32,199,599 $30,854,426 $31,228,353 $1,755,173 $1,753,175 $2,405,224 $2,730,983 $2,324,922 $2,831,671 3,820,736 3,709,522 3,598,191 3,061,835 1,271,330 2,574,914 47,586 67,074 52,858 59,574 44,651 78, , ,301 1,446,323 1,379,388 1,401,698 1,445,149 6,476,926 6,273,072 7,502,596 7,231,780 5,042,601 6,930,084 1,732,938 1,499,328 2,254,952 2,559,123 2,338,574 2,566, , , , , ,319 1,024, , ,827 1,143, , , ,982 3,366,900 3,520,908 4,059,602 2,366,697 2,324,316 2,236, ,128 96,736 5,187 6,181 6,190,730 6,114,569 8,295,867 6,699,086 6,380,932 6,604, , ,503 (793,271) 532,694 (1,338,331) 325,492 (70,738) (6,838) 133,332 6, , ,495 65,961 66,379 50,177 (18,796) (48,549) (152,358) (4,777) 59, ,509 (11,919) 139,366 50, , ,044 (609,762) 520,775 (1,198,965) 375, ,633 1,176, , ,090 1,054,064 - $791,052 $1,394,129 $104,814 $1,062,865 ($144,901) $375,

30 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND FLEET PLANT IN SERVICE FOR THE YEAR ENDED DECEMBER 31, 2009 FIXED ASSET ACCOUNTS Book Cost Additions 1/1/ Office Furniture and Equipment... $540,905 $ - Stores and Shop Equipment ,780 - Transportation Equipment... 30,143,855 1,897,401 Power-Operated Equipment... 19,029, ,380 Construction Work in Progress... 19,887 1,121,898 TOTAL FIXED ASSETS... $50,249,351 $3,519,679 ACCUMULATED DEPRECIATION ACCOUNTS Depreciation Accumulated Rate Depreciation % 1/1/09 Office Furniture and Equipment... Various $540,905 Stores and Shop Equipment... Various 484,042 Transportation Equipment... Various 18,317,823 Power-Operated Equipment... Various 13,240,188 TOTAL ACCUMULATED DEPRECIATION... $32,582,

31 Retirements Transfers & Book Cost 2009 Adjustments 12/31/09 $ - $ - $540, ,780 (1,772,391) 2,840 30,271,705 (353,594) 17,047 19,193,757 - (19,887) 1,121,898 ($2,125,985) $ - $51,643,045 Annual Accumulated Accrual Transfers & Depreciation Cr. Adjustments 12/31/09 $ - $ - $540,905 4, ,300 2,077,492 (1,691,685) 18,703, ,091 (348,240) 13,810,039 $2,999,841 ($2,039,925) $33,542,

32 CITY OF TACOMA, WASHINGTON DEPARTMENT OF PUBLIC UTILITIES FLEET SERVICES FUND TAXES AND EMPLOYEE WELFARE CONTRIBUTIONS FOR THE YEAR 2009 FEDERAL Social Security (FICA)... $125,519 STATE OF WASHINGTON Retail Sales Tax ,716 State Employment Security... 1,988 Total ,704 TOTAL TAXES... $419,223 Taxes as a % of Total Revenues of $7,482, % EMPLOYEE WELFARE CONTRIBUTIONS Industrial Insurance and Medical Aid... $9,427 City of Tacoma Pension Fund ,331 Washington Dental Service... 39,961 Pierce County Medical Bureau ,786 TOTAL EMPLOYEE WELFARE CONTRIBUTIONS... $480,

33 TOTAL OPERATING REVENUES Year to Date - December 2009 ($7,482,320) Capital Recovery 61% Maintenance Revenues 28% All Others 11% TOTAL OPERATING REVENUES Year to Date - December 2008 ($7,814,812) Capital Recovery 62% Maintenance Revenues 27% All Others 11%

34 TOTAL OPERATING EXPENSES Year to Date - December 2009 ($6,299,560) Stores Operations 3% Repairs 32% Administration 17% Depreciation 48% TOTAL OPERATING EXPENSES Year to Date - December 2008 ($6,582,823) Stores Operations 8% Repairs 27% Administration 17% Depreciation 48%

35 MANAGER S REPORT Fleet Services completed a successful year providing vehicle and equipment maintenance and management services to our customers. Fleet Management Fleet Services continues to credit customers for vehicle and equipment replacement contributions. Customers were credited three months replacement contributions. This was possible because of a decision to keep the fund s maximum balance at a level that will provide adequate purchasing power for two budget cycles and return any excess funds to customers based on their scheduled monthly payments. The three-month credits amounted to $1,311,173. The solvency of the Replacement Fund also allowed Fleet Services to return interest earned on fund investments for the year to our customers. A total of $472,925 was credited to individual vehicle replacement funds through December 2009, with the allocation based on the amount each had paid into the fund. After returning these funds to customers, the Fleet Fund ended the year with a $23,188,889 cash and investment balance. This amount will allow us to continue monthly replacement payment credits in the next biennium. Fleet Services worked with customers during the year to assure they had the vehicles and equipment needed to perform their duties. Specification and purchasing procedures were completed for 66 pieces of equipment. Fleet Services arranged for public auction sale of 65 pieces of equipment that were declared surplus by the assigned sections. Fleet Maintenance Fleet Services maintenance shop performed 1625 preventive maintenance services and inspections and 4801 corrective work orders on Public Utilities and General Government equipment. Fleet Services also performed state-mandated emissions testing on 370 vehicles without any failures. T&D Fleet Services rolled out the Fleet Services Business Plan for 2009 and This business plan reflects the vision of T&D Fleet Services to create an annual strategic plan that will serve as a guide in providing direction to our workgroup. The plan includes 14 key performance indicators developed to directly support our customers and provide accountability to our ratepayers

36 Fleet Services received a grant from the Washington State Department of Ecology to retro-fit 59 diesel powered trucks with diesel oxidation catalysts. This work was completed in mid The diesel oxidation catalysts can reduce tailpipe emissions consisting of carbon monoxide, hydrocarbons, and particulates by 90% or more. Installation of these devices significantly reduces smoke and odor from diesel engines benefitting public health while improving the work environment of people who work near diesel engines. Tacoma Power T&D Fleet Services in partnership with the Puget Sound Clean Cities Coalition (PSCCC) and other participating municipalities submitted a grant application for the US9123D Recovery Act: Clean Cities Petroleum Reduction Technologies Projects for the Transportation Sector (Part D): Alternative Fuel and Advanced Technology Vehicles Pilot Grant Program. The grant proposal estimated at $504,000 for the incremental cost for 21 Hybrid Electric Vehicle purchases for TPU also includes electric vehicle charge stations installed at the main TPU campus for employee and customer use. The actual dollar amounts of the grant award for TPU will be finalized at the time the inter-local agreements are completed. Tacoma Power is identified as a strategic partner in the United States Department of Energy / ETEC Nissan Leaf ARRA stimulus grant award for test and demonstration of the Nissan Leaf electric vehicle. The project requires a partner agency to purchase the Dedicated Electric Nissan Leaf for approximately $30k. The $30k is the partner agencies cost share and includes a Home charge station installed at the home location. In addition to the home charge stations the project installs charge stations through-out the region where the vehicles will be operated. On average 2.5 charge station per vehicle deployed. In addition, the project includes a number of Fast Charge stations through-out the region. Operational data will be tracked and collected for the 36 months the project is expected to last. While the project has been approved, many of the details (how vehicles will be dispersed, where vehicles will be dispersed, location of charge stations, etc) are still being negotiated by ETEC and the Feds. Vehicles are not expected to be ready for deployment and delivery until 3 rd qtr Still there is much preparation that needs to happen with charge stations, etc. Tacoma Power will purchase at least 2 of these vehicles as partners in this project with more possible depending on the needs of TPU divisions and the final details regarding how the vehicles will be dispersed. The 2 vehicles were scheduled for replacement as part of our 2009/2010 budget preparation for the TPU convenience pool

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