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FY 2023 Annual Report (2)Financial Statements Audit Report 31*ty of Port FIRM 111 111511 IFIIIIIIINII 1 1 Jill 11111111 .. Published March 6, 2025 Report No. 103674 ooScan to see another great way we're helping advance ❑#GoodGovernment � .vim Office of the Washington State Auditor Pat McCarthy March 6, 2025 Mayor and City Council City of Port Orchard Port Orchard, Washington Report on Financial Statements Please find attached our report on the City of Port Orchard's financial statements. We are issuing this report in order to provide information on the City's financial activities and condition. Sincerely, Pat McCarthy, State Auditor Olympia, WA Americans with Disabilities In accordance with the Americans with Disabilities Act, we will make this document available in alternative formats. For more information, please contact our Office at (564) 999-0950, TDD Relay at (800) 833-6388, or email our webmaster at webmasterL&sao.wa.gov. Insurance Building, P.O. Box 40021 • Olympia, Washington 98504-0021 • (564) 999-0950 • Pat. McCarthy@sao.wa.gov Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ..................................................................................................... 4 Independent Auditor's Report on the Financial Statements ............................................................ 7 FinancialSection ........................................................................................................................... 11 About the State Auditor's Office ................................................................................................... 35 Office of the Washington State Auditor sao.wa.gov Page 3 City of Port Orchard January 1, 2023 through December 31, 2023 Mayor and City Council City of Port Orchard Port Orchard, Washington We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the City of Port Orchard, as of and for the year ended December 31, 2023, and the related notes to the financial statements, which collectively comprise the City's financial statements, and have issued our report thereon dated February 24, 2025. We issued an unmodified opinion on the fair presentation of the City's financial statements in accordance with its regulatory basis of accounting. We issued an adverse opinion on the fair presentation with regard to accounting principles generally accepted in the United States of America (GAA:P) because the financial statements are prepared by the City using accounting practices prescribed by state law and the State Auditor's Budgeting, Accounting and Reporting System (BARS) manual described in Note 1, which is a basis of accounting other than GAAP. The effects on the financial statements of the variances between the basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. REPORTING in planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Office of the Washington State Auditor sao.wa.gov Page 4 A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described above and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. However, this Office of the Washington State Auditor sao.wa.gov Page 5 report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. Pat McCarthy, State Auditor Olympia, WA February 24, 2025 Office of the Washington State Auditor sao.wa.gov Page 6 City of Port Orchard January 1, 2023 through December 31, 2023 Mayor and City Council City of :Port Orchard Port Orchard, Washington Unmodified and Adverse Opinions We have audited the financial statements of the City of Port Orchard, as of and for the year ended December 31, 2023, and the related notes to the financial statements, as listed in the financial section of our report. As described in Note 1, the City has prepared these financial statements to meet the financial reporting requirements of state law and accounting practices prescribed by the State Auditor's Budgeting, Accounting and Reporting System (BARS) Manual. Those accounting practices differ from accounting principles generally accepted in the United States of America (GAAP). The differences in these accounting practices are also described in Note 1. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the cash and investments of the City of Port Orchard, and its changes in cash and investments, for the year ended December 31, 2023, on the basis of accounting described in Note 1. Adverse Opinion on U.S. GAALI The financial statements referred to above were not intended to, and in our opinion, they do not, present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the City of Port Orchard, as of December 31, 2023, or the changes in financial position or cash flows thereof for the year then ended, because of the significance of the matter discussed below. Office of the Washington State Auditor sao.wa.gov Page 7 Basis for Unmodified and Adverse Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GARS) and Government Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit unmodified and adverse opinions. Matter Giving Rise to Adverse Opinion on U.S. GAA Auditing standards issued by the American Institute of Certified Public Accountants (AICPA) require auditors to formally acknowledge when governments do not prepare their financial statements, intended for general use, in accordance with GAAP. As described in Note 1 of the financial statements, the financial statements are prepared by the City in accordance with state law using accounting practices prescribed by the BARS Manual, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the regulatory basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material and pervasive. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of state law and the BARS Manual described in Note 1. This includes determining that the basis of accounting is acceptable for the presentation of the financial statements in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Office of the Washington State Auditor sao.wa.gov Page 8 Auditor's Responsibilities fort e Audit oft e Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. Performing an audit in accordance with GAAS and Government Auditing Standards includes the following responsibilities: • Exercise professional judgment and maintain professional skepticism throughout the audit; • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements; • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, no such opinion is expressed; • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements; • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time; and • We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City's financial statements. The Schedule of Liabilities is presented for purposes of additional analysis, as required by the prescribed BARS manual. This schedule is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to Office of the Washington State Auditor sao.wa.gov Page 9 prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. OTHER RE PT N E T ED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated February 24, 2025 on our consideration of the City's internal control over financial reporting and on the tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Pat McCarthy, State Auditor Olympia, WA February 24, 2025 Office of the Washington State Auditor sao.wa.gov Page 10 City of Port Orchard January 1, 2023 through December 31, 2023 FINANCIAL STATEMENTS Fund Resources and Uses Arising from Cash Transactions — 2023 Fiduciary Fund Resources and Uses Arising from Cash Transactions — 2023 Notes to Financial Statements — 2023 SUPPLEMENTARY AND OTHER INFORMATION Schedule of Liabilities — 2023 Office of the Washington State Auditor sao.wa.gov Page 11 City of Port Orchard Pvs,4#f For the Year Ended December 31, 2023 Beginning Cash and Investments 308 Beginning Cash and Investments 388/588 Net Adjustments Revenues 310 Taxes 320 Licenses and Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines and Penalties 360 Miscellaneous Revenues Total Revenues: Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural/Economic Environment 560 Social Services 570 Culture and Recreation Total Expenditures: Excess (Deficiency) Revenues over Expenditures Other Increases in Fund Resources 391-393, 596 Debt Proceeds 397 Transfers -In 385 Special or Extraordinary Items 381, 382, 389, Other Resources 395,398 Total Other Increases in Fund Resources: Other Decreases in Fund Resources 594-595 Capital Expenditures 591-593, 599 Debt Service 597 Transfers -Out 585 Special or Extraordinary Items 581,582,589 Other Uses Total Other Decreases in Fund Resources: Increase (Decrease) in Cash and Investments: Ending Cash and Investments 50821 Nonspenclable 50831 Restricted 50841 Committed 50851 Assigned 50891 Unassigned Total Ending Cash and Investments The accompanying notes are an integral part of this statement. Total for All 104 Special Funds 001 Current 103 Criminal Investigative (Memo Only) Expense Justice Unit 71,128,008 19,831,909 647,725 98,895 17,520,461 14,876,449 368,476 1,534,556 1,496,542 - 2,054,120 1,322,193 80,644 24,496,103 770,868 - 232,501 112,922 - - 3,813,926 1,159,088 36,781 3,310 49,651,667 19,738,062 485,901 3,310 4,444,957 3,865,883 - - 6,548,423 6,166,828 381,295 300 9,150,008 - - - 3,259,132 2,453,687 1,425,605 1,314,370 57,536 57,536 958,513 958,513 - - 25,844,174 14,816,817 381,295 300 23,807,493 4,921,245 104,606 3,010 11,900,686 - - - 4,721,305 917,407 509,106 75,886 17,131,097 993,293 11,562,669 102,565 1,238,463 132,471 4,721,305 1,025,372 416,100 33,414 17,938,537 1,293,822 - - 23,000,053 4,620,716 104,606 3,010 24,995,972 1,001,782 752,331 88,470 65,616 65,616 - - 48,952,572 3,271,326 13,435 20,113,901 20,113,901 - - 94,128,061 24,452,625 752,331 101,905 Page 12 City of Port Orchard Pvs,4#f For the Year Ended December 31, 2023 206 Bond 107 Community 108 Paths & 111 Impact Redemption Events Trails Mitigation Fee Fund Beginning Cash and Investments 308 Beginning Cash and Investments 321,780 13,784 5,304,555 388/588 Net Adjustments - - - Revenues 310 Taxes 163,426 320 Licenses and Permits - - 330 Intergovernmental Revenues 1,275 - 340 Charges for Goods and Services - 4,741,576 350 Fines and Penalties - - - 360 Miscellaneous Revenues 19,908 752 317,844 15 Total Revenues: 183,334 2,027 5,059,420 15 Expenditures 510 General Government - - 579,074 - 520 Public Safety - 530 Utilities - 540 Transportation - 111,872 550 Natural/Economic Environment 111,235 - 560 Social Services - 570 Culture and Recreation - - Total Expenditures: 111,235 - 690,946 - Excess (Deficiency) Revenues over Expenditures: 72,099 2,027 4,368,474 15 Other Increases in Fund Resources 391-393, 596 Debt Proceeds - - - - 397 Transfers -In 399,652 385 Special or Extraordinary Items - 381,382,389, Other Resources - 395,398 Total Other Increases in Fund Resources: - - 399,652 Other Decreases in Fund Resources 594-595 Capital Expenditures - - - 591-593, 599 Debt Service - - - 299,652 597 Transfers -Out - - 1,548,341 - 585 Special or Extraordinary Items - - - 581,582,589 Other Uses - - - - Total Other Decreases in Fund Resources: - - 1,548,341 299,652 Increase (Decrease) in Cash and Investments: 72,099 2,027 2,820,133 100,015 Ending Cash and Investments 50821 Nonspenclable - - - - 50831 Restricted 393,879 15,811 8,124,688 100,015 50841 Committed - - - - 50851 Assigned 50891 Unassigned - - - - Total Ending Cash and Investments 393,879 15,811 8,124,688 100,015 The accompanying notes are an integral part of this statement. Page 13 City of Port Orchard Pvs,4#f For the Year Ended December 31, 2023 Beginning Cash and Investments 308 Beginning Cash and Investments 388/588 Net Adjustments Revenues 310 Taxes 320 Licenses and Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines and Penalties 360 Miscellaneous Revenues Total Revenues: Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural/Economic Environment 560 Social Services 570 Culture and Recreation Total Expenditures: Excess (Deficiency) Revenues over Expenditures Other Increases in Fund Resources 391-393, 596 Debt Proceeds 397 Transfers -In 385 Special or Extraordinary Items 381, 382, 389, Other Resources 395,398 Total Other Increases in Fund Resources: Other Decreases in Fund Resources 594-595 Capital Expenditures 591-593, 599 Debt Service 597 Transfers -Out 585 Special or Extraordinary Items 581,582,589 Other Uses Total Other Decreases in Fund Resources: Increase (Decrease) in Cash and Investments: Ending Cash and Investments 50821 Nonspenclable 50831 Restricted 50841 Committed 50851 Assigned 50891 Unassigned Total Ending Cash and Investments The accompanying notes are an integral part of this statement. 302 Capital 304 Street 309 Real Estate Construction Capital Projects Excise Tax 411 Water Utility 547,631 2,299,051 4,182,707 12,363,634 2,112,110 228,355 294,741 - - - 5,986,155 - - - 47,139 76,684 114,989 136,485 740,253 305,039 409,730 2,248,595 6,773,547 3,179,067 - - - 3,179,067 305,039 409,730 2,248,595 3,594,480 11,121,075 - - 186,981 2,005,465 965,795 432,986 - - - - 10,586 13,126,540 965,795 432,986 197,567 4,614,244 1,521,656 - 1,952,252 119,493 - - 464,369 1,350,394 797,198 - - - - 18,586 6,084,131 1,521,656 797,198 2,435,207 7,347,448 (146,131) 1,884,383 1,356,840 7,606,594 845,312 6,067,090 288,485 1,307,608 13,720,474 7,895,079 2,152,920 6,067,090 13,720,474 Page 14 City of Port Orchard Pvs,4#f For the Year Ended December 31, 2023 Beginning Cash and Investments 308 Beginning Cash and Investments 388/588 Net Adjustments Revenues 310 Taxes 320 Licenses and Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines and Penalties 360 Miscellaneous Revenues Total Revenues: Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural/Economic Environment 560 Social Services 570 Culture and Recreation Total Expenditures: Excess (Deficiency) Revenues over Expenditures Other Increases in Fund Resources 391-393, 596 Debt Proceeds 397 Transfers -In 385 Special or Extraordinary Items 381, 382, 389, Other Resources 395,398 Total Other Increases in Fund Resources: Other Decreases in Fund Resources 594-595 Capital Expenditures 591-593, 599 Debt Service 597 Transfers -Out 585 Special or Extraordinary Items 581,582,589 Other Uses Total Other Decreases in Fund Resources: Increase (Decrease) in Cash and Investments: Ending Cash and Investments 50821 Nonspenclable 50831 Restricted 50841 Committed 50851 Assigned 50891 Unassigned Total Ending Cash and Investments The accompanying notes are an integral part of this statement. 500 Equipment 421 Storm 431 Sewer Rental and Drainage Utility Utility Revolving 2,546,821 18,979,434 3,990,082 38,014 126,912 - - 1,871,483 9,874,789 1,251,232 22,247 50,193 - 114,219 903,307 190,291 2,172,875 10,828,289 1,441,523 1,394,683 4,576,258 - - - 693,573 1,394,683 4,576,258 693,573 778,192 6,252,031 747,950 - 592,630 - 700 375,056 46,878 700 967,686 46,878 579,656 1,792,586 999,710 188,177 33,288 1,013 500 363,600 - 768,333 2,189,474 1,000,723 10,559 5,030,243 (205,895) 2,557,380 24,009,677 3,784,187 2,557,380 24,009,677 3,784,187 Page 15 City of Port Orchard 7iduciary Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2023 388 Beginning Cash and Investments 81 388&588 Net Adjustments 310-390 Additions 108.077 510-590 Deductions 108.731 Net Increase (zoomas*)inCash and («4) 588 Ending Cash and Investments 27 The accompanying notes are enintegral part ofthis statement. CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 Note 1-Summary of Significant Accounting Policies The City of Port Orchard was incorporated on September 1, 1890 and operates under the laws of the state of Washington applicable to a city. The City is a general-purpose local government and provides public safety, street improvement, park and recreation, and general administrative services. In addition, the City owns and operates a water, sewer, and storm drainage system. The City reports financial activity in accordance with the Cash Basis Budgeting, Accounting and Reporting System (BARS) Manual prescribed by the State Auditor's Office under the authority of Washington State law, Chapter 43.09 RCW. This manual prescribes a financial reporting framework that differs from generally accepted accounting principles (GAAP) in the following manner: • Financial transactions are recognized on a cash basis of accounting as described below. • Component units are required to be disclosed, but are not included in the financial statements. • Government -wide statements, as defined in GAAP, are not presented. • All funds are presented, rather than a focus on major funds. • The Schedule of Liabilities is required to be presented with the financial statements as supplementary information. • Supplementary information required by GAAP is not presented. • Ending balances for proprietary and fiduciary funds are presented using classifications that are different from the ending net position classifications in GAAP. A. Fund Accountin Financial transactions of the government are reported in individual funds. Each fund uses a separate set of self -balancing accounts that comprises its cash and investments, revenues and expenditures. The government's resources are allocated to and accounted for in individual funds depending on their intended purpose. Each fund is reported as a separate column in the financial statements, except for fiduciary funds, which are presented by fund types. The total column is presented as "memo only" because any interfund activities are not eliminated. The following fund types are used: C;Pnprnl Fiend This fund is the primary operating fund of the government. It accounts for all financial resources except those required or elected to be accounted for in another fund. Page 17 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 Special Revenue Funds These funds account for specific revenue sources that are restricted or committed to expenditures for specified purposes of the government. Debt Service Funds These funds account for the financial resources that are restricted, committed, or assigned to expenditures for principal, interest and related costs on general long-term debt. Capital Projects Funds These funds account for financial resources which are restricted, committed, or assigned for the acquisition or construction of capital facilities or other capital assets. PROPRIETARY FUND TYPES: Ente rise Funds These funds account for operations that provide goods or services to the general public and are supported primarily through user charges. Internal Service Funds These funds account for operations that provide goods or services to other departments or funds of the government on a cost reimbursement basis. FIDUCIARY FUND TYPES: Fiduciary funds account for assets held by the government in a trustee capacity or as a custodian on behalf of others. Custodial Funds These funds are used to account assets that the government holds on behalf of others in a custodial capacity. B. Basis of Accounting and Measurement Focus Financial statements are prepared using the cash basis of accounting and measurement focus. Revenues are recognized when cash is received and expenditures are recognized when paid. In accordance with state law the City also recognizes expenditures paid during twenty days after the close of the fiscal year for claims incurred during the previous period. Page 18 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 C. Cash and Investments See Note 3- Deposits and Investments. D. Capital Assets Capital assets are assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one year. Capital assets and inventory are recorded as capital expenditures when purchased. E. Compensated Absences Vacation leave may be accumulated up to 320 hours at year end and up to 240 hours is payable upon separation or retirement. Sick leave may be accumulated up to 960 hours at year end and for all employees except LEOFF 11 employees upon separation or retirement employees do not receive payment for unused sick leave. LEOFF 11 employees' (excluding management) sick leave may be accumulated up to 1040 hours and up to 400 hours is payable upon separation or retirement to the employee's respective medical health retirement/voluntary employee's beneficiary association account (HRA/VEBA). LEOFF 11 employees' (excluding management) vacation leave may be accumulated up to 320 hours and up to 240 hours is payable in cash upon separation or retirement while the remaining 80 hours are payable to the employee's respective medical health retirement/voluntary employee's beneficiary association account (HRA/VEBA). LEOFF 11 employees (excluding management) earn 120 hours holiday leave annually and may carry over 96 hours at year end. Holiday leave is payable upon separation or retirement up to 96 hours. Payments are recognized as expenditures when paid. F. Long -Term Debt See Note 5- Long-term Debt. G. Restricted and Committed Portion of Ending Cash and Investments Beginning and Ending Cash and Investments are reported as restricted or committed when it is subject to restrictions on use imposed by external parties or due to internal commitments established by ordinance. When expenditures that meet restrictions are incurred, the City intends to use the most restricted resources first. Restrictions and commitments of Ending Cash and Investments consist of $25,061,588. Page 19 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 Cash & Investments Purpose Amount Restricted Affordable Housing $ 169,737 Restricted 2021 Legislative Law Enforcement Funding $ 31,215 Restricted PCB Settlement $ 17,984 Restricted Opoid Settlement $ 25,333 Restricted Public Transportation Tax $ 757,513 Restricted Criminal Justice $ 752,331 Restricted Law Enforcement Investigations $ 88,470 Restricted Tourism $ 393,879 Restricted Paths & Trails $ 15,811 Restricted Capital Projects $ 100,015 Restricted Capital Projects $ 6,067,090 Restricted Parks Projects $ 1,945,092 Restricted Transportation Projects $ 5,413,445 Restricted McCormick Woods Transportation Projects $ 419,466 Restricted Old Clifton/Anderson Hill Intersection Improvements $ 346,685 Restricted LTGO Bond Proceeds $ 7,606,594 Restricted Transportation Improvement Board- Grant Received in Advance $ 690,475 Restricted Blueberry/Bethel Roundabout $ 154,837 Committed Recreational Programs, Activities, or Capital Projects $ 65,616 Total $ 25,061,588 Note 2 — Budget Compliance The City of Port Orchard adopts biennial appropriated budgets for all funds. These budgets are appropriated at the fund level. The budget constitutes the legal authority for expenditures at that level. Biennial appropriations for these funds lapse at the end of biennial period. Biennial appropriated budgets are adopted on the same basis of accounting as used for financial reporting. Page 20 sm CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 appropriatea ana actual ex encuures for the ie a1i acio tea nua ets were as zoitow Fund 2023-2024 Final Appropriated Biennial Budget 2023 Actual Expenditures Variance Fund: 001 - Current Expense $ 46,837,200 $ 14,467,516 $ 32,369,684 Fund: 002 - City Street Fund $ 8,978,300 $ 2,588,272 $ 6,390,028 Fund: 003 - Stabilization Fund $ 2,921,000 $ $ 2,921,000 Fund: 103 - Criminal Justice $ 1,422,800 $ 381,295 $ 1,041,505 Fund: 104 - Special Investigative Unit $ 106,900 $ 300 $ 106,600 Fund: 107 - Community Events $ 549,200 $ 111,235 $ 437,965 Fund: 108 - Paths & Trails $ 15,800 $ - $ 15,800 Fund: 109 - Real Estate Excise Tax $ 8,015,800 $ 797,198 $ 7,218,602 Fund: 111 - Impact Mitigation Fee $ 16,181,800 $ 2,239,287 $ 13,942,513 Fund: 206 - Bond Redemption Fund Fund: 302 - Capital Construction Fund: 304 - Street Capital Projects $ 1,797,400 $ 22,731,300 $ 17,512,400 $ 299,652 $ 6,084,131 $ 1,521,656 $ 1,497,748 $ 16,647,169 $ 15,990,744 Fund: 411 - Water Operating $ 11,696,900 $ 3,712,492 $ 7,984,408 Fund: 412 - Water Stabilization $ 1,066,500 $ - $ 1,066,500 Fund: 413 - Water Capital $ 22,658,800 $ 2,450,473 $ 20,208,327 Fund: 414 - Water Debt Service $ 3,096,300 $ 663,039 $ 2,433,261 Fund: 421 - Storm Drainage Utility $ 4,900,900 $ 1,765,516 $ 3,135,384 Fund: 422 - Storm Drainage Stabilization $ 543,000 $ - $ 543,000 Fund: 423 - Storm Drainage Capital Facil $ 893,200 $ 555,793 $ 337,407 Fund: 424 - Storm Drainage Debt Service $ 398,400 $ 177,877 $ 220,523 Fund: 431 - Sewer Operating $ 17,306,100 $ 4,712,626 $ 12,593,474 Fund: 432 - Sewer Stabilization $ 1,546,300 $ - $ 1,546,300 Fund: 433 - Sewer Capital $ 30,457,200 $ 1,771,921 $ 28,685,279 Fund: 434 - Sewer Debt Service $ 1,927,200 $ 17,346 $ 1,909,854 Fund: 500 - Equipment Rental and Revolving $ 9,255,300 $ 1,694,296 $ 7,561,004 Fund: 632 - Wastewater Treatment Facil Fee $ 10,334,900 $ 563,600 $ 9,771,300 Fund 109 Real Estate Excise Tax (above) is reported on the financial statements as Fund 309 Real Estate Excise Tax. Due to a change in accounting principles the Wastewater Treatment Facility Fee Fund 632 is reported as part of the Sewer Utility on the Financial Statements. Budgeted amounts are authorized to be transferred between departments within any fund; however, any revisions that alter the total expenditures of a fund, or that affect the number of authorized employee positions, salary ranges, hours, or other conditions of employment must be approved by the City's legislative body. Page 21 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 Note 3—DeDosits and Investments Investments are reported at amortized cost. Deposits and investments by type at December 31, 2023 are as follows: investment held by city City's Own as an agency for other Type of Investment Investments local governments Total Cash on Deposit $ 2,215,424 $ 27 2,215,451 Washington State Local Government Investment Pool (LGIP) $ 70,043,036 70,043,036 Kitsap County Investment Pool (KCIP) $ 21,869,601 21,869,601 Total $ 94,128,061 $ 27 94,128,088 It is the City's policy to invest all temporary cash surpluses. The interest on these investments is prorated to the various funds. Investments in the State Local Government Investment Pool (LGIP) The city is a voluntary participant in the Local Government Investment Pool, an external investment pool operated by the Washington State Treasurer. The pool is not rated and not registered with the SEC. Rather, oversight is provided by the State Finance Committee in accordance with Chapter 43.250 RCW. Investments in the LGIP are reported at amortized cost, which is the same as the value of the pool per share. The LGIP does not impose any restrictions on participant withdrawals. The Office of the State Treasurer prepares a stand-alone financial report for the pool. A copy of the report is available from the Office of the State Treasurer, PO Box 40200, Olympia, Washington 98504-0200, online at www.tre.wa.gov. Investments in Kitsap County Investment Pool The city is an involuntary participant in the Kitsap County Investment Pool, an external investment pool operated by the County Treasurer. The pool is not rated or registered with the SEC. Rather, oversight is provided by the County Finance Committee in accordance with RCW 36.48.070. The city reports its investment in the pool at amortized cost, which is the same as the value of the pool per share. The KCIP does not impose liquidity fees or redemption gates on participant withdrawals. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in event of a failure of a depository financial institution, the city would not be able to recover deposits or would not be able to recover collateral Page 22 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 securities that are in possession of an outside party. The Cty's deposits and certificates of deposit are mostly covered by federal depository insurance (FDIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). All investments are insured, registered or held by the city or its agent in the government's name. Compensating Balances The amounts reported as cash and cash equivalents also include compensating balances maintained with certain banks in lieu of payments for services rendered. The average compensating balance maintained during 2023 was approximately $2,486,413 Note 4 - Property Tax The county treasurer acts as an agent to collect property tax levied in the county for all taxing authorities. Collections are distributed at the end of each month. Property tax revenues are recognized when cash is received by the City. Delinquent taxes are considered fully collectible because a lien affixes to the property after tax is levied. The City's regular levy for the year 2023 was $1.121112 per $1,000 on an assessed valuation of $3,042,683,290 for a total regular levy of $3,411,191. � 1 1 Debt Service The accompanying Schedule of Liabilities provides more details of the outstanding debt and liabilities of the City and summarizes the City's debt transactions for year ended December 31, 2023. Page 23 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 The debt service requirements for general obligation bonds, notes payable, and intergovernmental loans are as follows: 2024 1,115,887 714,311 1,830,198 2025 1,166,178 660,856 1,827,035 2026 1,196,477 630,416 1,826,893 2027 1,216,783 598,759 1,815,543 2028 1,247,097 566,241 1,813,338 2029-2033 6,115, 340 2,300,898 8,416, 238 2034-2038 4,487,279 1,442,025 5,929,304 2039-2043 3,886,014 579,510 4,465,524 2044-2048 75,452 905 76,357 2049-2053 75,452 905 76,357 2054-2058 15,090 181 15,271 Grand Total 20,597,051 7,95,007 28,092,057 The city has entered into agreements for the following loans with no activity to report for Fiscal Year 2023: Maturity Contract Payment Total Loan Number Description Project Interest Rate Due Date Amount 058-22 Drinking Water State Revolving Fund Loan Well No. 11 Development, Treatment & Booster Pump 1.75% 10(212046 $ 8A8Q,000 028-24 Public Works Board Bay Street Lift Station-Preconstruction 0.69% 10l4(2028 $ 850,000 l►`mffm c The city leases land from the State for $20,339.45 per year under a lease agreement that is for 12 years. The lease began June of 2012 and will end June of 2024 that cannot be cancelled. The city leases a storage building from the State for $967.17 per month under a lease agreement that is for 3 years. The lease began April of 2022 and will end March of 2025 and can be cancelled with 90 days' notice. The city leases office space from Hillstrom Holdings for $3,600 per month under two lease agreements with an initial term of three years. These leases began January of 2023 and will end December of 2025 there is an option to be renewed twice for an additional three years each time ending in December of 2031. Th city leased four copiers from Pacific Office Automation for $534 per month under a five year lease agreement that began August 2018 and will end August 2023 and cannot be cancelled. This agreement ended in 2023. Page 24 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 The total amount paid for leases in 2023 was $78,798. As of December 31, 2023, the future lease payments are as follows: P-MR. ", -7. rOT-M-1, 91 M M "M 2024 $ 55,931 2025 $ 47,934 2026 $ 45,844 2027 $ 46,761 2028 $ 47,696 2029-2031 $ 148,889 Total $ 393,056 � MOTEMMIlm During the year ended 2023, the city adopted guidance for the presentation and disclosure of Subscription Based Information Technology Arrangements (SBITA), as required by the BARS manual. This requirement resulted in the addition of a subscription liability reported on the Schedule of Liabilities. These liabilities are included on the Schedule 9- Schedule of Long-term Liabilities. The city made an annual subscription payment of $7,500 in 2023 for agenda management software. The SBITA contract began in 2023 has a term for three years and includes an option to extend automatically in 12-month terms unless either party chooses to terminate. The lease amount increases by 7% each year. The city made an annual subscription payment of $15,000 in 2023 for online permitting software. The SBITA contract began in 2022 has an initial term for three years and includes an option to extend automatically in 12-month terms unless either party chooses to terminate. The city made an annual subscription payment of $20,088 in 2023 for permitting software. The SBITA contract began in 2022 has a term for three years and includes an option to extend automatically in 12-month terms unless either party chooses to terminate. The lease amount increases by 2.5% each year. The city made an annual subscription payment of $50,672 in 2023 for financial software. The SBITA contract began in 2018 has an initial term for five years and includes an option to extend automatically in 12-month terms unless either party chooses to terminate. The total amount paid for leases in 2023 was $93,260. As of December 31, 2023, the future SBITA payments are as follows: Page 25 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 The LEOFF I Retiree Medical Plan is a closed, single -employer, defined -benefit OPEB plan administered by the City as required by RCW 41.26. The plan pays for 100% of eligible retirees' healthcare costs on a pay-as-you-go basis. As of December 31, 2023, the plan had three members, all retirees. As of December 31, 2023, the city's total OPEB liability was $1,549,712 as calculated using the alternative measurement method. For the year ended December 31, 2023 the City paid $38,085 in benefits. 11ote ' Pension Plans StateA. Sj2onsored Pension Plans Substantially all City's full-time and qualifying part-time employees participate in the following statewide retirement systems administered by the Washington State Department of Retirement Systems (DRS), under cost -sharing, multiple -employer public employee defined benefit and defined contribution retirement plans: Public Employees' Retirement System (PERS) and Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF). The State Legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. The Department of Retirement Systems, a department within the primary government of the State of Washington, issues a publicly available Comprehensive Annual Financial Report (ACFR) that includes financial statements and required supplementary information for each plan. The DRS ACFR may be downloaded from the DRS website at www.drs.wa.gov. At June 30, 2023, the City's proportionate share of the collective net pension liabilities (assets) was as follows: f 0% I ,531 :4 1 0 4% t 1.00 4• Page 26 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 Only the net pension liabilities are reported on the schedule 09. The City also participates in LEOFF Plan 1. The LEOFF Plan 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. Starting on July 1, 2000, employers and employees contribute zero percent. [WOUMMM The City also participates in the LEOFF Plan 2. The Legislature, by means of a special funding arrangement, appropriates money from the state general fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. The City of Port Orchard is a member of the Association of Washington Cities Risk Management Service Agency (AWC RMSA. Chapter 48.62 RCW authorizes the governing body of any one or more governmental entities to form together into or join a pool or organization for the joint purchasing of insurance, and/or joint self -insuring, and/or joint hiring or contracting for risk management services to the same extent that they may individually purchase insurance, self -insure, or hire or contract for risk management services. An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter 39.34 RCW, the Interlocal Cooperation Act. The AWC RMSA was formed on January 1, 1989, when 32 municipalities in the State of Washington joined by signing an Interlocal Governmental Agreement to pool their self -insured losses and jointly purchase insurance and administrative services. As of December 31, 2023, 106 entities participate in the AWC RMSA pool. The AWC RMSA allows members to establish a program of joint insurance and provides risk management services to all members. All coverages, with the exception of pollution liability, are on an occurrence basis. The AWC RMSA provides all risk property, comprehensive crime, general liability, automobile liability, police liability, public officials' liability, employee fidelity and faithful performance, pollution liability, cyber liability, and equipment breakdown insurance coverage. Equipment breakdown is included with the property insurance carrier. Pollution and cyber liability coverages are stand-alone policies which the AWC RMSA procures for its members. The AWC RMSA allows members with airports to group purchase airport liability coverage, and members with drones to group purchase property and liability coverage. Page 27 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 Members pay an annual assessment to the AWC RMSA. The AWC RMSA is responsible for payment of all covered causes of loss against the jurisdiction above the stated retention. All members in the AWC RMSA have $15 million in both per occurrence and aggregate liability limits. AWC RMSA is self -insured for its Self -Insured Retention (SIR) of $500,000, per occurrence, and is reinsured by National League of Cities Mutual Insurance Company (NLC MIC) for the additional $500,000. $9.5 million in excess liability coverage limits is provided through an excess liability policy purchased from National League of Cities Mutual Insurance Company (NLC MIC). The $5 million in excess liability coverage limits above the first layer of excess coverage is purchased from Hallmark Specialty Insurance Company. Since AWC RMSA is a cooperative program, there is joint liability among the participating members. The property reinsurance coverage is purchased through NLC MIC and excess property coverage is purchased through AIG Specialty Insurance Company and CHUBB. In 2023, AWC RMSA carried a retention of $300,000, NLC MIC reinsures up to $3 million, AIG Specialty Insurance Company provides excess insurance up to $50 million, and CHUBB provides the remaining limits up to a total of $250 million. All commercial policies have been purchased through the pool's Broker of Record, Aon. Members contract to remain in the AWC RMSA pool for a minimum of one year and must give a one-year notice before terminating participation. Even after termination, a member is still responsible for contributions to the Pool for any unresolved, unreported, and in -process claims for the period they were signatory to the Interlocal Governmental Agreement. The AWC RMSA establishes a loss fund for both reported and unreported insured events, which includes estimates of both future payments of losses and related claim adjustment expenses. In accordance with WAC 200.100.02023, the AWC RMSA is governed by a board of directors, which is comprised of elected officials of participating members. Note 11. Joint Ventures In 1983, the City of Port Orchard and West Sound Utility District (previously the Karcher Creek Sewer District) amended an intergovernmental agreement relating to the construction and management of the secondary wastewater treatment facility. In April of 2014 the City and District signed an interlocal agreement for the management and operation of the j oint wastewater treatment facility for an additional term of 25 years. This joint venture establishes a Sewer Advisory Committee (SAC) consisting of three representatives from each entity who prepare and monitor the Facility's budget. The District and the City share 50% ownership in the facility's total assets. The Utility District is responsible for the daily operation of the facility. The participants pay their share of the expenses based on their portion of flow into the facility. The City and the District pay the joint venture an amount determined during the budget process to cover maintenance, operation, Page 28 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 capital improvements and debt monthly. The current cost sharing is 48.83% City and 51.17% District and in 2023 the city paid $1,710,786. The City was the lead agency on the wastewater treatment plant expansion project, and is the signatory on two Public Works Trust Fund Loans for the Facility's expansion. In 2004, the city guaranteed two Public Works Trust Funds loans of the South Kitsap Water Reclamation Facility, a legally separate entity. In the event that the South Kitsap Water Reclamation Facility is unable to make a payment, City of Port Orchard will be required to meet the obligation. The total amount of outstanding debt subject of this guarantee at year end was $361,800. Revenues of the facility are used to make debt service payments on the two loans. Annually, the facility makes a payment to the City to cover the debt service on these loans. The SAC recommended and the City Council and the District Commissioners approved using a portion of Wastewater Treatment Facility Fees collected by each jurisdiction to help make the annual debt payments. This cost sharing formula is 50% and in 2023 each entity paid $200,000. Note 12. Shmiftcant Commitments or ObliLyations 580 Zone Reservoir (Water CFC Reimbursement): At the year-end the city had a commitment for a development agreement C003-07 Amendment 1, adopted in 2019 with McCormick Communities, LLC. The agreement allows for reimbursement for construction of the 580 Zone Reservoir for a total of $2,789,915. The reimbursement is paid from the Water Capital Facility Fees collected by the city from development within the Western Service Area pursuant to the reimbursement agreement. The reimbursement amount is set and fixed at $1,000 per applicable connection of Water Capital Facility Charge Fees collected in the area by the city. In 2023, the city paid $211,000. As of December 31, 2023; the amount outstanding is $2,393,915. Note: The reimbursement amount is fixed at $1,000. Glenwood Connector Roadway(Transportation Impact Fee Reimbursement): At the year- end the city had a commitment for a development agreement C035-21 with McCormick Land Company. The agreement allows for a reimbursement for construction of the Glenwood Connector Roadway and the Old CliftonlFeigley intersection for a total of $2,200,296.37. The reimbursement is paid from the Transportation Impact Fees collected by the city from development within the McCormick Urban Village pursuant to the development agreement. Per the agreement reimbursement rate shall be increased annually by CPI-U (Seattle/Tacoma/Bellevue) for the most recent twelve-month period (January 1 st to December 31 st) prior to the date of the adjustment. Such adjustment shall take effect on March 1st each year, commencing on March 1, 2021. For 2021 the reimbursement amount was established at $720.80 and adjusted on March 1, 2021 to a value of $733.05. From March 1, 2021 thru Feb 28,2022 the value for reimbursement was $733.05. From March 1, 2022 thru Feb 28,2023 the value for reimbursement was $766.77. From March 1, Page 29 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 2023 thru Feb 28,2024 the value for reimbursement was $835.78. In 2023, the city paid $111,871.82. As of December 31, 2023, the amount outstanding is $1,225,470.83. Note: The reimbursement amount is annually adjusted per CPI-U effective March I each year. Old Clifton Road/Campus Parkway Roundabout (Transportation Impact Fee Credit): At the year-end the city had a commitment for a development agreement C035-21 with McCormick Communities, LLC. The agreement allows for a credit for construction of the Old Clifton Rd/Campus Pkwy Roundabout Transportation Impact Fee (TIF) Study 1.5C and McCormick Woods Drive Intersection TIF 2.08 and for a total up to $3.2 million or $1,600,000 for each project. The total credit amount will be established upon project acceptance and final certified cost if less than the total $3.2 million. The city established the maximum credit for the Old Clifton Road/Campus Parkway Roundabout with Resolution 002-23 on February 28,2023. The maximum credit was established pursuant to the agreement by adjusting the engineers estimate of $1.6 million by CPI-U of 1.7% on March 1, 2021, and an additional CPI-U increase of 4.6% on March 1, 2022, for a total maximum credit value of $1,702,051. The credit is given at the time Transportation Impact Fees are collected by the city from development. Per the agreement reimbursement rate shall be increased annually by CPI-U (Seattle/Tacoma/Bellevue) for the most recent twelve-month period (January I st to December 31st) prior to the date of the adjustment. Such adjustment shall take effect on March 1st each year. The Transportation Fee credit amount was established at $1,000 as of February 2021 and was adjusted on March 1, 2021 to a value of $1,017. From March 1, 2021, thru Feb 28,2022 the value for credit was $1,017. From March 1, 2022 thru Feb 28,2023 the value for credit was $1,063.78. From March 1, 2023, thru Feb 28,2024 the value for credit was $1,159.52. In 2023, the city provided a total credit amount of $155,205.48. As of December 31, 2023, the amount of credit available is $1,320,636. Note: The credit amount is annually adjusted per CPI-U effective March I each year. The Old Clifton Road/McCormick Woods Drive Intersection Improvement has not yet been constructed and therefore credit for this project has not yet been approved. Sidney Road Apartments (Park Impact Fee Credit): At the year-end the city had a commitment for a development agreement C076-21 with Sidney Road (Haven) Apartments, LLC. The agreement allows for the developer to receive a park impact fee credit for the Ruby Creek Regional Park (PK4) up to a total of $126,144 or certified costs if less than the identified max, if the Developer transfers the Planned Park Property to the City. The credit is given at the time park impact fees are collected by the city from the development if the Park property is deeded over to the City. As of December 31, 2023 no credit has been provided. McCormick Communities, LLC (Water CFC Credit): As of March 14, 2022, the city had a commitment for a development agreement C048-22 with McCormick Communities, LLC. The agreement allows for a max credit amount of $11,840,625 for certified construction cost if less than the max for the following five Water Capital Improvement Projects: Page 30 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 1. CIP No. 09 Well 12 Development, Treatment, and Booster Pump Station ($7 mil) 2. CIP No. 13 390 to 580 Zone Booster Station 2nd Lift (Glenwood) ($725,000) 3. CIP No. 14 390 to 580 Zone Transmission Main (to Glenwood PS) ($515,624) 4. CIP No. 15 580 to 660 Zone Booster Station ($750,000) The total credit amount will be established upon project acceptance and final certified cost if less than the total $11,840,625. The credit is given at the time water capital facility fees are collected by the city from the builders. The water capital facility fee credit amount was established at $5,920 as of March 1, 2022 and adjusted to $6,517.92 as of October 1, 2022 per the agreement and POMC. From October 1, 2022 thru September 30, 2023 the fee was $6,517.92. From October 1, 2023 thru September 30, 2024 the fee will be $6,817.74. In 2023, the city provided credit in the amount of $713,749.58 against CIP No.16 660 Zone Storage of $2,850,000 leaving a total credit balance for this project of $1,598,069.14. Note: The credit amount is annually adjusted per CPI-U effective October 1 each year per POMC 13.04.065 Sidney Rd(S)-Haven Townhomes (Transportation Impact Fee Credit): As of May 10, 2022, the city had a commitment for a development agreement C070-22 with Haven Townhomes LLC. The agreement allows for a credit for construction of the Sidney Rd (S) Widening Transportation Impact Fee (TIF) Study 2.05 for the west side of the street improvement for a total up to $315,949 or up to the full anticipate TIF's to be paid if certified costs are larger than expected. The credit is given at the time Transportation Impact Fees are charged by the city for this development. As of December 31, 2023 no credit has been provided. McCormick Communities, LLC (Park Impact Fee Credit): As of September 26, 2022, the city had a commitment for a development agreement C110-22 with McCormick Communities, LLC for park improvements as identified below. The agreement allows for a max credit amount of $5,320,285, to be limited to the total park impact fees due on the Project, the estimated cost for the Park Improvements Projects or the actual costs incurred by McCormick (determined by the final certified construction cost) whatever amount is less. 1. Prior McCormick Payment C002-10 ($643,743) 2. McCormick Village Park Phase 3 ($1,250,000) 3. St. Andrew's Multi -Modal Trail (in McCormick Woods) ($979,012) 4. McCormick West Multi -Modal Trail Phase 1 ($1,468,518) 5. McCormick West Multi -Modal Trail Phase 2 ($979,012) The city provided a credit amount of $643,743 to reflect the prior payment and contract with McCormick Communities. In 2023, the city provided credit in the amount of $273,088 leaving a total credit balance for this project of $348,567. Page 31 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2023 Note: The maximum park impact fee credit per dwelling unit is fixed at $2,008 and will not be adjusted per the agreement. Blueberry Apartments (Transportation Impact Fee Credit): As of June 27, 2023, the city had a commitment for a development agreement C039-23 with Blueberry Apartments QOZB LLC. The agreement allows for a credit for dedication of certain property necessary for the City to construction a portion of Bethel Phase 1 of the Bethel/Sedgwiek Corridor Ph. l (TIF) Study 2.04A. The credit shall be limited to the lessor of the total transportation impact fees due on the project (currently estimated at $245,245.84) or the value of the Transportation improvement project property dedication. The credit is given at the time Transportation Impact Fees are charged by the city for this development. As of December 31, 2023 no credits has been provided. Diaz Meadows (Water CFC Credit): As of October 10, 2023, the city had a commitment for a development agreement C082-23 with Diaz Meadows LLC. The agreement allows for a credit for design, permitting and construction for a portion of the 580 to 390 Zone transmission project identified as project #8 on Water System Capital Improvement Plan for a total credit of $182,250. The credit is given at the time water capital facility fees are collected by the city from the builders. As of December 31, 2023 no credits has been provided. Blake Decision. In February 2021, the Washington State Supreme Court issued an opinion in State of Washington v. Blake, declaring that RCW 69.50.4013, Washington's simple possession of a controlled substance statute violates the due process clause of the state and federal constitution. Individuals convicted under that statute beginning in 1971 may be eligible to have their convictions vacated and/or be resentenced. All penalties, fines and restitution (Legal Financial Obligations "LFO") imposed in connection with simple possess convictions must be refunded. At this time the City does not have the information necessary to make an estimate of any potential liability. It is the city's position that this liability is the responsibility of the State. The State has thus far provided funding sufficient for the City to process vacations and refund LFOs. Page 32 0 O co C\j C m C m LO w C Q co 'T dt m m N m m C LO 0 Q C� 0i llzt lr rl-, 'Ili cc� (\! cc� cc� 0) W 0 Ixi LO to Ul) (D (D IlT m 'T r- 0) IzT CD co 0) N Cd cli C\j r-- (0 0 a) V) co p- LO co N 0 T w 0 Q U') co m (o N O -,t co co C.0 0 0 C Q C N Cli U) Cli � rl-, C) (C co Ili N cl CO (0 cc C) C LO to (N �T co �2 � .2 r- N It O 0 CD co m co m U') LO 0 Q co 0 m N 0 w O R "trt O) Lr) cc� cc� r_ In LO N CN a) 'IT r- O cz m U') 'IT m 1- m 0 C� a) Nm co m LO I- C C� Vi Ci C\! — C� LQ — Cli L6 Ul) co N LO (0 C6 m w co m �T C6 LO (D C co N 0) m cli C\j co 00 rl- LO co lzT m m m U*) N CD CD cli CD N 0 N 0 cq C) N 0 N 0 cq C) N CD N C) (N 0 r N(D co (D .2 m 0 O (D C 0 -i 0 -j CD M 0 U- LL 0 0 U) > a) > (1) m to 0 0 -0 0 U) X 0 co 0 m 0 m 0 co LLJ (3) -Z6 V) (n (n Cl) — 0 (n o c U) N >1 0 0 (D a_ 0- (n a) 0 — U) co L) 0 .0 L) co C: o E CD 16 c ui a- -0 -0 �c .0 Q. 0ca 0 z I= 0 a) CL 0 0 :3 CL :3 CL CL :3 0 (D co (D m N (N N N C) 0 I'll 1- Lr) — (.0 00 co (Y) 00 00 CO 00 00 00 6 L() cli (D cl� (D cl� a) 4 (D 4 co 0� co cyi (D C13 (D (yi co C6 (D 0) co cli w > N C\l CN N cli CN CN N N CN CN N CN Page 33 C) 0 N 0 C 0 m 4m cn m N co C U'> w 0 as u C6 PI- (6 — L6 — co co N Wm co N w C) C) co co m co CD C) 0 0 co 00 N [,-- co m co m a C"! fl� cl� L(i C� C� ll:� rll:, pl�, 0 Cl) CY) CD tl- LO 0 0 It m (N LO LO N C) C. 00 (D a) LO a) LO LR Ui 0 co m 0 OD cli co co co cli cr; 0 m (D C) Lo m m 00 to O cn co co cq d' CN (0 N V) N �T (N N C) (N CD cq 0 cq C:) N CD CN C) CN CD CN co C.0 LO co m 0 m CN m r (N m O 0 — 0 n 0 'a E O c X E > E (D E ip (D cn — a) 0 0 (n m co 70 (D < F- N Go a) E (D cn Cl) m U) w 0 U) CD co a) E 0) a) C/) 0 cn m 0 m N 0- m Q) m CO 0 06 a. E= ro IE5 CD -E 0 0 2 CL 0) < 0 a. U- 6r- Z Lq Iq Lq U� V� V� Lq ci m co m (0 co (Lo m (.0 co Qo Cl) co Cl) (o cli N cq C� C� N N Page 34 The State Auditor's Office is established in the Washington State Constitution and is part of the executive branch of state government. The State Auditor is elected by the people of Washington and serves four-year terms. We work with state agencies, local governments and the public to achieve our vision of increasing trust in government by helping governments work better and deliver higher value. In fulfilling our mission to provide citizens with independent and transparent examinations of how state and local governments use public funds, we hold ourselves to those same standards by continually improving our audit quality and operational efficiency, and by developing highly engaged and committed employees. As an agency, the State Auditor's Office has the independence necessary to objectively perform audits, attestation engagements and investigations. Our work is designed to comply with professional standards as well as to satisfy the requirements of federal, state and local laws. The Office also has an extensive quality control program and undergoes regular external peer review to ensure our work meets the highest possible standards of accuracy, objectivity and clarity. Our audits look at financial information and compliance with federal, state and local laws for all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits and cybersecurity audits of state agencies and local governments, as well as state whistleblower, fraud and citizen hotline investigations. The results of our work are available to everyone through the more than 2,000 reports we publish each year on our website, www.sao.wa.ov. Additionally, we share regular news and other information via an email subscription service and social media channels. We take our role as partners in accountability seriously. The Office provides training and technical assistance to governments both directly and through partnerships with other governmental support organizations. Other ways to stay in touch • Main telephone: (564) 999-0950 • Toll -free Citizen Hotline: (866) 902-3900 • Email: webmaster y)sao.waegov Office of the Washington State Auditor sao.wa.gov Page 35