Loading...
HomeMy WebLinkAboutCity Council Committees - Public Facilities District Board - 07/14/2016 • KENT KENS�Q Wns,I,.GTON Public Facilities District Board Agenda Board Members: Chair Mike Miller-Lew Sellers-Randall Smith-Jeff Piecewicz-Carmen Goer Officers: Chair Mike Miller - Secretary Sue Hanson - Treasurer Aaron BeMiller SPECIAL MEETING July 14, 2016 at 1:00 p.m. Kent City Hall, Centennial Building, Room 401 Item Description Action Speaker 1. Call to order Chair Miller 2. Roll Call Chair Miller 3. City of Kent Public Facilities District 2015 Audit Robert Manalili Exit Conference Asst, State Auditor 4. Adjournment Chair Miller Unless otherwise noted, the Public Facilities District meets at 4 p.m. on the last Thursday of each quarter at the ShoWare Center, 625 West James Street, Kent, WA 98032. For additional information please contact Sue Hanson, Interim City Clerk at 253-856-5727 or via email at shanson@kentwa.gov. Any person requiring a disability accommodation should contact the City Clerk's Office at 253-856-5725 in advance. For TDD relay service call Washington Telecommunications Relay Service at 1-800-833-6388. I Nova e¢9 Washington State Auditor's Office July 11, 2016 Board of Directors City of Kent Special Events Center Public Facilities District Public Facilities District 400 4th Avenue South Kent, WA, 98032 Dear Directors: We have completed our audit of the City of Kent Special Events Center Public Facilities District for the fiscal year 2015 and wanted to share our preliminary results with you. We are inviting you to attend an exit conference with City staff that we have scheduled for 1:00 PM on July 14, 2016 at the Centennial Building 4th floor conference room. We believe participation at the exit conference by you and others charged with the management and governance of the District is an essential part of our audit process. It gives you an opportunity to hear our conclusions and discuss with us the resolution of any audit issues. Please note that if a quorum of board members attend the exit conference, the District is responsible for ensuring requirements of the Open Public Meetings Act are met. If you have any questions or matters that you would like to discuss with us before the exit conference, feel free to contact me at 253-372-6250 or by email at manalilr@sao.wa.gov. Sincerely, Robert Manalili Assistant State Auditor Insurance Building,P.O.Box 40021 •Olympia,Washington 98504-0021 •(360)902-0370 •TDD Relay(800)833-6388 Hanson, Sue From: BeMiller,Aaron Sent: Tuesday, July 12, 2016 12:43 PM To: Mike Miller (mike.miller@homestreet.com); Piecewicz, Jeff; Smith, Randall; Ica rmen.goers@gmail.com'; 'Lew Sellers' Cc: 'Choy,Wendy (SAO)'; Armijo, Sadie (SAO); Brennecke, Lavina; Leahy, Daniel; Goehring, Robert; 'manalilr@sao.wa.gov';Wolters, Ben; 'Hansen,Janise (SAO)'; Mark Rapozo (mark.rapozo@sao.wa.gov); Hanson, Sue Subject: PFD Exit Conference Attachments: Exit Invitation.docx Good afternoon PFD Board members— A few weeks ago the State Auditor's Office (SAO) contacted us to let us know that the PFD audit was complete and asked if we wanted a formal or informal exit conference. I contacted Chair Miller and asked him if he wanted a formal exit conference,with Board members present, or an informal exit conference, with city staff present. As there are no audit findings the Chair preferred an informal exit conference with a report from me at our next board meeting scheduled for 7/28. We informed SAO of the Chairs decision via email on June 28th. My expectation is that the exit conference will take only a few minutes. However, we received a requirement from SAO late yesterday afternoon to send Board members the attached invitation to the exit conference scheduled for Thursday 7/14 at 1.00pm. I am frustrated that we are only receiving notice of this obligation from SAO days before the scheduled meeting, especially as this meeting was originally scheduled back on 6/30. If you are interested in attending please let me know so we are aware of who will be in attendance. The Open Public Meeting Act requires notice of a special meeting if a quorum exists at least 24 hours prior to the meeting time. Because of this late notice from SAO, I am taking the steps to post notice of a special meeting for the PFD Board just to be safe. Even with the posting of a special meeting, Board members are invited, but are not required to attend the exit conference. I am sorry for any confusion caused by this email and short notice period but we are responding to a directive from SAO. Please feel free to contact me with any questions/concerns. Aaron Aaron BeMiller, Finance Director Administration Division I Finance Department 220 Fourth Avenue South, Kent, WA 98032 Phone 253-856-5260 1 Fax 253-856-6700 abemiller@KentWA.aov CITY OF KENT,WASHINGTON KentWA.gov Facebook �r� ;:��s YouTube PLEASE CONSIDER THE ENVIRONMENT BEFORE PRINTING THIS E-MAIL 1 CITY OF KENT SPECIAL EVENTS CENTER-PUBLIC FACILITIES DISTRICT 2013 NAME ADDRESS EMAIL PHONE:direct/fax/cell SECONDARY CONTACT BOARD OF DIRECTORS ... ... ... ._. __ _. ... _.. Michael Miller,Board Member Homestreet Bank mike.miller@homestreet.com dir:253.850.9965/cell:206.595.7536 Rosanne Everett(Assistant) Carmen Goers,Board Member Wells Fargo Banking carmen.goers(a gmail.com dir: 253.656.4407/cell: 206.683,1655 Antoinette Madamba(Assistant) 6811 S.204th Street,Suite 380 253.656.4417 Lew Sellers,Board Member Kent Valley Hockey Association lew sellers0hotmail.com dir: 253.854.3792/cell: 206.914.9619 Karen Sellers(Wife) 6015 S.240th Street km sellers(a)hotmail.com cell: 253.921.7355 Randall Smith,Board Member 324 First Avenue South rs(8a b�ldgmaint.com dir:253.850.6061,ext.1005/cell: 206.423.7857 Irene Tishchenko itc@apbldgmaint.com Jeff Piecewicz,Board Member 14100 SE 282nd Street ieff.piecewicz(obcomcast.net dir: 253.639.8408/425.463.4176 ieff.piecewicz@dcma.mil CITY.REPRESENTATIVES _. _.. oke,Mayor City of Kent Mayor's Office scooke(alkentwa.aov dir: 253.856.5700/fax: 253.856.6700 Patrick Briggs(Executive Assistant) 220 Fourth Ave.S. pbriggs0kentwa.gov 253.856.5721 ieson,Chief Administrative Officer City of Kent Mayor's Office dmathesonekentwa.aov dir: 253.856.5711/fax: 253.856.6700 Pam Clark(Executive Assistant) 220 Fourth Ave.S. pclark(@kentwa.aov 253.856.5723 s,Economic Development Director City of Kent Mayor's Office bwolters(6kentwa.gov dir:253.856.5703/fax: 253.856.6700 Julie Pulliam(Administrative Assistant III) 220 Fourth Ave.S. ipulliam(alkentwa.00v 253.856.5702 Iler,Finance Director City of Kent Finance Department abemiller(a)kentwa.gov dir:253.856.5260/fax: 253.856.6255 220 Fourth Ave.S. ker,City Attorney City of Kent Law Department tbrubaker@kentwa.gov dir:253.856.5782/fax: 253.856.6770 Kim Komoto(Paralegal) 220 Fourth Ave.S. kkomoto(a)kentwa.aov 253.856.5774 er,Outside Counsel Foster Pepper,PLLC soith(a)foster.com dir:206.447.8965/fax: 206.447.9700 1111-3rd Ave.,Suite 3400 Seattle,WA 98101-3299 loore,City Clerk City of Kent Clerk's Office rmoore((Dkentwa.gov dir:253.856.5728/fax: 253.856.6725 220 Fourth Ave.S. SHOWARECENTER REPRESENTATIVES s,General Manager thiggins0showarecenter.com dir: 253.856.6701 Marketing Director ShoWare Center rhart(a)showarecenter.com :s,Operations Director 625 West James Street iholmesCalshowarecenter.com r,Finance Director avoter(lashowarecenter.com dir:253.856.6704 ibell,Seattle Thunderbirds Vice President/Assistant General Manager colinc(alseattlethunderbirds.com dir: (425)869-7825/fax: (425)497-0812 14326-124th Ave.NE Kirkland,WA 98034 C:\Users\Shanson\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\PBODDX6Z\2016 Contact Numbers PFD Board.xls 7/12/2016 Washington Government that works for citizens Troy Kelley Exit Conference: City of Kent Special Events Center State Auditor Public Facilities District Deputy State Auditor About our Office Jan Jutte, CPA The Washington State Auditor's Office's vision is government that works for Director of Local Audit citizens. Our goal is for government that works better, costs less and earns Kelly Collins, CPA greater public trust. (360) 902-0091 The purpose of this meeting is to share our audit results and draft reporting. Kelly.Collins@sao.wa.gov We value and appreciate your participation. Audit Highlights Deputy Director of Local We would like to thank Dan Leahy, audit liaison, who provided assistance Audit throughout the audit process and timely responses to all our audit requests. Mark Rapozo (360) 902-0362 Audit Scope Mark.Rapozo@sao.wa.gov We performed the following audits for the City of Kent Special Events Center Public Facilities District: Audit Manager • Financial statement audit for 2015 See draft report. Wendy Choy (253)372-6250 ext.10 Financial Statement required communications Wendy.Choy@sao.wa.gov In relation to our report, we would like to bring to your attention: • There were no uncorrected misstatements in the audited financial Assistant Audit Manager statements. Janise Hansen • There were no material misstatements in the financial statements (253)372-6250 ext.114 corrected by management during the audit. Janise.Hansen@sao.wa.gov Audit Lead Recommendations not included in the Audit Reports Robert Manalili, CPA Exit Items (253)372-6250 Robert.Manali2-6250.wa.gov We have provided exit recommendations for management's consideration. Exit items address control deficiencies or non-compliance with laws or regulation that have an insignificant or immaterial effect on the entity, or errors with an www.sao.wa.gov immaterial effect on the financial statements. Exit items are not referenced in the audit report. Concluding Comments Report Publication Audit reports are published on our website and distributed via e-mail in an electronic .pdf file. We also offer a subscription service that allows you to be notified by email when audit reports are released or posted to our website. You can sign up for this convenient service at: https://I)ortal.sao.wa.gov/saoportal/Login.aspx Audit Cost At the entrance conference, we estimated the cost of the audit to be $7,448 and actual audit costs will approximate that amount. Audit Survey When your report is released you will receive an audit survey from us. We value your opinions on our audit services and hope you provide feedback. Your Next Scheduled Audit Your next audit is scheduled to be conducted in June 2017 and will cover the following general areas: • Financial Statement The estimated cost for the next audit based on current rates is $7,448. This preliminary estimate is provided as a budgeting tool and not a guarantee of final cost. If expenditures of federal awards are $750,000 or more in any fiscal year, notify our Office so we can schedule your audit to meet federal single audit requirements. Federal awards can include grants, loans, and non-cash assistance such as equipment and supplies itM - StateWa shinqton • Governmentitor's Office Financial Statements Audit Report City of Kent Special Events Center Public Facilities District King County For the period January 1, 2015 through December 31, 2015 Published Report No. 1017121 p �� . �0 Washington State Auditor's Office Issue Date—(Issued by OS) Board of Directors City of Kent Special Events Center Public Facilities District Kent, Washington Report on Financial Statements Please find attached our report on the City of Kent Special Events Center Public Facilities District's financial statements. We are issuing this report in order to provide information on the District's financial condition. - Sincerely, r TROY KELLEY STATE AUDITOR OLYMPIA, WA N Insurance Building,P.O.Box 40021 0 Olympia,Washington 98504-0021 0(360)902-0370 0 TDD Relay(800)833-6388 i� TABLE Ctb Independent Auditor's Report On Internal Control Over Financial Reporting And On c Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards .......................................................................4 Independent Auditor's Report On Financial Statements................................................................ 6 FinancialSection............................................................................................................................. 9 About The State Auditor's Office................................................................................................. 24 ii l� e N N a co INDEPENDENT AUDITOR'SREPORT ON INTERNAL CONTROL OVER FINANCIAL cn REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTSIN ACCORDANCE GOVERNMENT AUDITING i • Ri City of Dent Special Events Center Public Facilities District Ding County January 1, 2015 through December 31, 2015 Board of Directors City of Kent Special Events Center Public Facilities District Kent, Washington We have audited, in accordance with auditing standards generally accepted in the United States O of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States,the financial statements of the governmental activities and each major fund of the City of Kent Special Events Center Public Facilities District, King County, Washington, as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated June 27, 2016. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to M 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 District's financial statements will not be Wprevented, 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. t0 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did �r not identify any deficiencies in internal control that we consider to be material weaknesses. However,material weaknesses may exist that have not been identified. it COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of the District's compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly,we do not express such an opinion. *, The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Z t PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District'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 District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. TROY KELLEY STATE AUDITOR OLYMPIA, WA June 27, 2016 O INDEPENDENT AUDITOR'S REPORT FINANCIAL STATEMENTS City of Kent Special Events Center Public Facilities District r King County - January 1, 2015 through December 31, 2015 b Board of Directors City of Kent Special Events Center Public Facilities District Kent, Washington - REPORT ON THE FINANCIAL STATEMENTS t We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Kent Special Events Center Public Facilities District, King County, 0 Washington, as of and for the year ended December 31, 2015, and the related notes to the Z financial statements, which collectively comprise the District's basic financial statements as listed on page 9. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United M States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards N require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial N cfl statements, whether due to fraud or error. In making those risk assessments, the auditor to considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, r the respective financial position of the governmental activities and each major fund of the City of Kent Special Events Center Public Facilities District, as of December 31, 2015, and the respective changes in financial position thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 10 through 13 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's N responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any M assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 0 OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated June 25, 2016 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant kagreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance. I TROY KELLEY STATE AUDITOR • OLYMPIA, WA June 27,2016 z N Ci Q� �0 G'M N FINANCIAL SECTION ` City of Kent Special Events Center Public Facilities District King County January 1, 2015 through December 31, 2015 k REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis—2015 BASIC FINANCIAL STATEMENTS Governmental Funds Balance Sheet/Statement of Net Position—2015 Governmental Funds Revenues, Expenditures and Changes in Fund Balance/Statement of ,M Activities—2015 Notes to Financial Statements—2015 e City of Kent Special Events Center Management's Discussion and Analysis Public Facilities District (PFD) For the Year Ended December 31, 2015 INTRODUCTION: The City of Kent formed the City of Kent Special Events Center Public Facilities District (PFD) in August 2007. The corporation was established pursuant to State legislation and codified under RCW 35.57, with the powers and authority set forth by law. The purpose of the PFD is to provide the financing necessary to construct an events center in the City of Kent. The PFD provided the financing for the design and construction of the special events center, known as ShoWare Center. Although the PFD provided much of the funding for the center, the asset is owned by the City of Kent per the interlocal agreement between the PFD and the City. This discussion and analysis of the PFD's financial performance provides an overview of the PFD's financial activities for the fiscal year ended December 31, 2015. The intent of this discussion and analysis is to look at the PFD's financial performance as a whole. Readers should also review the notes and basic financial statements to enhance their understanding of the PFD's financial performance. FINANCIAL HIGHLIGHTS: • Net position ($80,532,873) decreased by $2,220,888 or 2.8 percent from 2014 levels. • Long-term net bonded debt of $59,430,869 decreased by $904,735 or 1.5 percent from 2014 levels. The key factor impacting the decrease was the annual debt service payments. • Long-term notes payable of $21,938,203 increased $3,218,906 (principal and interest) or 17.2 percent with the 2015 payment and accrued interest from the City and accrued interest under the Contingent Loan and Support Agreement. • Sales tax revenues of $830,283 increased by $45,953 or 5.9 percent compared to amounts collected in 2014. OVERVIEW OF THE FINANCIAL STATEMENTS: This discussion and analysis is intended to serve as an introduction to the City of Kent Special Events Center Public Facilities District (PFD) basic financial statements. The PFD's basic financial statements are comprised of governmental funds: (1) Balance Sheet/Statement of Net Position, (2) Revenues, Expenditures and Changes in Fund Balance/Statement of Activities and (3) notes to the financial statements. The government-wide financial statements and fund financial statements have been combined in the basic financial statements segregated in separate columns and are accompanied by a reconciliation between the statements (see the "Adjustments" column for details). • Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the PFD's finances in a manner similar to a private-sector business. The government-wide financial statements include 1) Statement of Net Position and 2) Statement of Activities. • Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The PFD City of Kent Special Events Center Management's Discussion and Analysis Public Facilities District (PFD) For the Year Ended December 31, 2015 uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the PFD are major governmental funds for the purposes of this financial report. The focus of these funds is on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the PFD's near-term financing requirements. The fund financial statements include 1) Balance Sheet and 2) Revenues, Expenditures and Changes in Fund Balance. Balance Sheet/Statement of Net Position - This statement presents a snap-shot view of the assets of the PFD, the liabilities it owes and the net difference or net position. It focuses on the resources available for future operations. Revenues, Expenditures and Changes in Fund Balance/Statement of Activities - This statement presents all revenues and expenditure of the PFD during the fiscal year, including other sources and uses. Notes to the financial statements - The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements and should be read in conjunction with the financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS: The PFD's overall financial position decreased in 2015 by $2,220,889 or 2.8 percent from 2014 levels to a deficit of$80,532,873. This decrease in fund balance primarily reflects the increase in notes payable of $3,218,906 (principal and interest) offset by the reduction in outstanding net bonded debt of$904,735. City of Kent's Special Events Center Public Facilities District Statement of Net Position 2015 2014 Assets Current and other assets $ 1,084,019 $ 994,304 Total Assets 1,084 019 994,304 Liabilities Long-term debt 81,616,892 79,306,289 Total Liabilities 81,616,892 79,306,289 Net Position Unrestricted (80,532873) (78 311,985) Total Net Position $(80,532,873) $(78 311 985) Highlights from the Statement of Net Position: • Taxes receivables ($154,558) increased by $10,530 or 7.3%. The increase in the receivable is due to the higher sales tax revenues in 2015 (5.9 percent increase for the year). • Outstanding long-term bonded debt was reduced by $904,735 primarily as the result of the principal payment made during 2015. • Notes payable increased by $3,218,906 or 17.2 percent in 2015 with the City's 2015 support under the contingent loan and support agreement and accrued interest on the note. • The PFD's deficit net position is the result of the agreement established between the PFD and the City of Kent. The PFD was established to provide the financing necessary to construct an events center in the City of Kent. The PFD issued bonds to fund the design and City of Kent Special Events Center Management's Discussion and Analysis Public Facilities District (PFD) For the Year Ended December 31, 2015 construction of the special events center, known as ShoWare Center. Although the PFD provided much of the funding for the construction of the center, the asset is owned by the City of Kent. Since the asset resides within the financials of the City of Kent, but the long- term debt belongs to the PFD, the PDF will likely show a deficit net position throughout the life of the bonds. The last of the bonds will mature in December 2037. The following table details the changes in net position. City of Kent's Special Events Center Public Facilities District Statement of Activities 2015 2014 Revenues Sales tax $ 830,283 $ 784,330 Investment earnings 665 308 Total Revenues 830 948 784,638 Expenses Interest expense 3,051,836 3,532,961 Total Expenses 3,051,836 3,532,961 Decrease in net position (2,220,888) (2,748,323) Net Position—January 1 (78,311,985) (75,563,662) Net Position—December 31 $(80,532,873) $(78 311 985) Overall, the PFD saw a decrease in net position of$2,220,836. Key highlights: • Sales tax revenue ($830,283) increased by $45,953 or 5.9 percent compared to the previous year as the result of the improving economy. • Interest expense ($3,051,836) decreased by $481,125 or 13.6 percent as compared to 2014 due to 2014 having catchup interest on the note. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS: The focus of the governmental funds is to provide information on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in assessing the PFD's near-term financing requirements. At the end of the current fiscal year, the PFD's governmental funds reported combined ending fund balances of$283,216, an increase of$134,117 from the previous year. Any fund balance available in the funds is restricted for future payments on the PFD's debt. The General Fund is the chief operating fund of the PFD. At the end of the current fiscal year, fund balance of the General Fund was $283,216 representing a $134,117 or 90.0 percent increase from the 2014 balance. The primary revenue sources for the general fund are sales tax revenues and interest income. Sales taxes for 2015 were $830,283, an increase of$45,953 or 5.9 percent from 2014. Interest income for 2015 was $665, up 115.9 percent from 2015 with higher cash balances due to the revenue increase and slowly rising interest rates. The Debt Service Fund is used to account for payment of principal and interest of long-term debt. Transfers from the PFD's General Fund along with loans from the City provide the financing source to cover such debt. During 2015, the PFD paid $865,000 toward principal and $3,016,053 for interest expense for debt service. City of Kent Special Events Center Management's Discussion and Analysis Public Facilities District (PFD) For the Year Ended December 31, 2015 LONG-TERM DEBT: At the end of the current fiscal year, the PFD had total net bonded debt outstanding of $59,430,869 and $21,938,203 note payable to the City. Under a Contingent Loan and Support Agreement, the City has irrevocably pledged its full faith, credit and resources for making the City contingent loan payments to the PFD as required in order for the PFD to meet their debt service requirements on the bonds, to the extent that PFD sales tax revenues are not sufficient for that purpose. City of Kent's Special Events Center Public Facilities District Outstanding Debt December 31 2015 2014 Net sales tax bonds $ 54,020,869 $ 54,060,604 Revenue bonds 5,410,000 6,275,000 Notes payable 21 938.203 18 719,297 Total bonded debt $ 81,369,072 $ 79,054,901 The District's total bonded debt decreased by $904,735 or 1.5 percent during the current fiscal year. The required debt service payments were made during 2015. The notes payable to the City increased by $3,218,906. The PFD carries an "AA" rating from Standard and Poor's as of April 6, 2015 and an "A2" rating from Moody's as of April 17, 2015. Additional information on the PFD's long-term debt can be found in Note 5 of this report. ECONOMIC OUTLOOK: The PFD continues to be faced with many of the challenges of the slow recovery to the recent recession. Its primary revenue source is sales tax revenue which, although slowly recovering, continues to lag from the pre-recession levels. Per the PFD's intergovernmental agreement with the City, it receives loans from the City to help cover its debt service should it not receive enough in sales tax revenue during the year. Part of that funding comes from the proceeds of the ShoWare Center operations. With the slow economic recovery, the ShoWare Center continues to not meet expectations as far as the number of events and the number of attendees at such events. Because of this, the PFD turns to the general operations of the City of Kent to help cover the annual debt service costs. During 2015, the PFD received $3,184,222 from the City. For 2016, the City has budgeted accordingly to reflect the needs of the PFD to cover such costs. REQUESTS FOR INFORMATION: This financial report is designed to provide a general overview of the City of Kent Special Events Center Public Facilities District (PFD) finances. Questions concerning the information provided in this report may be addressed to: City of Kent Special Events Center, Public Facilities District c/o Finance Department 220 Fourth Avenue South Kent, WA 98032 CITY OF KENT SPECIAL EVENTS CENTER PFD GOVERNMENTAL FUNDS BALANCE SHEET/STATEMENT OF NET POSITION December 31,2015 Debt Service Adjustments Statement of General Fund Fund Totals (note 2) Net Position ASSETS Restricted assets: Cash&equity in pooled investments(Note 3) $ 128,658 $ $ 128,658 $ $ 128,658 Receivables(net of allowance for estimated uncollectables(Note 4) Other taxes receivable 154,558 154,558 154,558 Prepaid Insurance _ Current 44,402 44,402 Long-term 756,401 756,401 TOTAL ASSETS 283,216 283,216 800,803 1,084,019 LIABILITIES Accrued interest payable - - 247,820 247,820 Due within one year: Revenue bonds payable,current portion(Note 5) 980,000 980,000 Due in more than one year: Sales Tax bonds payable,non-current portion(net of unamortized bond premium)(Note 5) 54,020,869 54,020,869 Revenue bonds payable,noncurrent portion(Note 5) 4,430,000 4,430,000 Notes Payable 21,938,203 21,938,203 TOTAL LIABILITIES - 81,616,892 81,616,892 FUND BALANCE Restricted 283,216 283,216 (283,216) - TOTAL LIABILITIES AND FUND BALANCE 283,216 283,216 81,333,676 NET POSITION Unrestricted (80,532,873) TOTAL NET POSITION (80,532,873) See accompanying notes to the financial statements CITY OF KENT SPECIAL EVENTS CENTER PFD GOVERNMENTAL FUNDS STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES/STATEMENT OF ACTIVITIES For the Year Ended December 31,2015 Debt Service Adjustments Statement of General Fund Fund Totals (note 2) Activities REVENUES Taxes: Sales and use tax 830,283 830,283 830,283 Miscellaneous revenue: Interest income 665 665 665 TOTAL REVENUES 830,948 - 830,948 830,948 EXPENDITURES/EXPENSES Debt service pal - 865,000 865,000 (865,000) - Principal st 3,016,053 3,016,053 35,783 3,051,836 Inter TOTAL EXPENDITURES/EXPENSES - 3,881,053 3,881,053 (829,217) 3,051,836 EXCESS(DEFICIENCY)OF REVENUES OVER EXPENDITURES/EXPENSES 830,948 (3,881,053) (3,050,105) 829,217 (2,220,888) OTHER FINANCING SOURCES(USES) Issuance of notes payable 3,184,222 3,184,222 (3,184,222) Transfers in 696,831 696,831 (696,831) Transfers out (696,831), - (696,831) 696,831 TOTAL OTHER FINANCINGS SOURCES(USES) (696,831) 3,881,053 3,184,222 (3,184,222) NET CHANGE IN FUND BALANCE 134,117 - 134,117 (134,117) NET CHANGE IN NET POSITION (2,3S5,005) (2,220,888) FUND BALANCES/NET POSITION Beginning of year 149,099 149,099 (78,311,985) End ofyear 283,216 283,216 (80,532,873) See accompanying notes to the financial statements Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 �. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Reporting Entity The City of Kent established the Kent Special Events Center Public Facilities District (PFD) in August 2007. The district was established pursuant to State legislation and codified under RCW 35.57, with the powers and authority set forth by law. The PFD is established for the sole purpose of pursuing the design, construction, and/or financing of a regional center comprised of a Special Events Center, individually or in cooperation with any other governmental and/or private entities as allowed by law. On February 29, 2008, the PFD issued bonds in the amount of$63,280,000. For the fiscal year ended December 31, 2015, the PFD generated $830,948 in revenue and had a deficit net position of $80,532,873. Per the Interlocal agreement entered into between the City and PFD, monies were remitted to the City to cover the expenditures on the construction of the events center to date. Based on the criteria of Statement No. 14, as amended by Statement No. 61, of the Government Accounting Standards Board (GASB), "The Financial Reporting Entity", the City has included the PFD in the City's financial statements utilizing the discrete presentation method. The City appoints a voting majority of the PFD board, and the organization presents a potential financial benefit or burden to the City. A copy of the Cit� of Kent's Comprehensive Annual Financial Report is available at the City of Kent located at 220—4t Avenue South, Kent, WA 98032. A copy of the City of Kent's Special Events Center Public Facilities District's financial statements is available at the City of Kent located at 220—4th Avenue South, Kent, WA 98032. The following provides a summary of the City's more significant accounting policies. They are presented to assist the reader in interpreting the financial statements and other data in this report. b. Basic financial statements The basic financial statements include both entity-wide and fund financial statements. The district uses an alternate presentation allowable under accounting principles generally accepted in the United States that combines the fund statements and entity wide statements (the Governmental Funds Balance Sheet / Statement of Net Position and the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance/Statement of Activities). c. Measurement focus, basis of accounting and financial statement presentation The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. The government-wide financial statements use the economic resources measurement focus, and the accrual 'basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of cash flows The modified accrual basis of accounting is used by the PFD for the fund statements. Revenues and other financial resources are recognized when they become susceptible to accrual, i.e., when the related funds become both measurable and available to finance expenditures of the current period. To be considered "available", revenue must be collected during the current period or soon enough thereafter to pay current liabilities. For this purpose, revenue is considered to be available when collected within sixty days after year-end. However, debt service expenditures, and payments for claims and judgments are recorded when due. Sales taxes and intergovernmental revenues are susceptible for accrual. Investment earnings are accrued when earned. Charges for services, fines and forfeitures, licenses and permits, and other Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 miscellaneous revenues are recorded upon receipt and are not susceptible for accrual. Expenditures are recognized when the related fund liability is incurred. Since the recognition of depreciation does not reduce net financial resources, it is not considered an expenditure. Other exceptions include (1) inventories of materials and prepaid items are reported as expenditures when purchased, (2) interest on long-term debt is not accrued, but is recorded as an expenditure when due. The PFD reports the following major governmental funds: General Fund - The PFD's General Fund is maintained in the office of the Treasurer separate and distinct from all other funds and accounts for the financial resources of the PFD which are not accounted for in any other fund. Principal sources of revenue are comprised of sales and use tax and interest income. Primary uses are transfers to the PFD's Debt Service Fund to cover its annual debt payment. For so long as the bonds or any additional bonds remain outstanding, all District revenue will be transferred to and deposited in the District General Fund when and as received from the city. Debt Service Fund —The Debt Service Fund is maintained in the office of the Treasurer separate and distinct from all other funds. This fund is used to account for payment of principal and interest of long- term debt. Transfers from the PFD's General Fund along with intergovernmental funds revenue provide the financing sources to cover such debt. d. Budgetary Information The PFD is not legally required to adopt an annual budget, and therefore does not adopt a budget or provide budgetary statements in this report. e. Assets deferred outflows liabilities deferred inflows, and net position (1) Cash and cash equivalents The PFD has defined cash and cash equivalents as cash on hand, demand deposits, and any short-term investments, including restricted assets, with original maturities of three months or less from the date of purchase. Included in this category are all funds invested in the Local Government Investment Pool (LGIP). (2) Restricted assets Since the PFD is established for the sole purpose of pursuing the design, construction, and/or financing of a regional center comprised of a Special Events Center, all assets of the PFD are restricted for the repayment of the outstanding debt of the PFD. f. Interfund Transfers Transfers are required where revenue is generated in one fund and expenditures are paid for in other funds. In the case of the PFD, the interfund transfers which occur are transferred to the debt service fund to cover the annual debt service payments. A summary of transfers by fund type is as follows: Transfers In Transfers Out Major Funds General Fund $ - $ 696,831 Debt Service Fund 696 831 - Total $ 696,831 $ 696,831 Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE GOVERNMENT-WIDE STATEMENT OF NET POSITION Included in the Balance Sheet/Statement of Net Position is the reconciliation between fund balance — total governmental funds and net position — governmental activities as reported in compliance with GASB Statement No. 34. Those adjusting items can be found in the "Adjustment" column of the Governmental Funds Balance Sheet/Statement of Net Position. Details relating to those adjustments are shown below. Fund Balance—Total Governmental Funds $ 283,216 Accrue interest on long-term debt (247,820) Unamortized prepaid bond insurance on long-term debt 800,803 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds: Sales tax bonds (53,150,000) Unamortized premium (870,869) Revenue bonds (5,410,000) Note payable to the City of Kent (21,938,203) Net Position—ending of Governmental Activities $ (80,532,873) EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT- WIDE STATEMENT OF ACTIVITIES Included in the governmental fund statement of revenues, expenditures, and changes in fund balances/statement of activities is the reconciliation between net changes in fund balances— total governmental funds and changes in net position of governmental activities in compliance with GASB Statement No. 34. Those adjusting items can be found in the "Adjustment" column of the Governmental Fund Revenues Expenditures and Changes in Fund Balances/Statement of Activities. Details relating to those adjustments are shown below. Net change in Fund Balance—Total Governmental Funds $ 134,117 Issuance of Note Payable (3,184,222) Debt principal payments 865,000 Accrued interest on long-term liabilities (31,117) Current year amortization of prepaid bond insurance (44,402) Current year amortization of bond premiums 39,735 Change in Net Position of Governmental Activities $(2 220 889) 3. DEPOSITS AND INVESTMENTS The deposits and investment practices of the PFD are accounted for with a modified pooled cash arrangement. According to the investment policy presented in the Kent City Code Chapter 3.02, allowable investments consist of the State Treasurer's Investment Pool, banker's acceptances, certificates of Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 deposit, U.S. government securities, and U.S. governmental agency securities. DEPOSITS The PFD's deposits and certificates of deposit are entirely covered by federal depository insurance (FDIC) up to $100,000 and by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC) for amounts over $100,000 as per State Law (RCW 39.58). INVESTMENTS Investments in the State Treasurer's Local Government Investment Pool (LGIP) are valued at amortized cost, which approximates fair value. Certificates of deposits held by the LGIP are valued at historical costs, which also approximate fair value. Each month, earnings from the LGIP are deposited to the City's bank account. The State Investment Pool was created by State statute, and is governed by the State Finance Committee and administered by the State Treasurer. Reconciliation of cash, cash equivalents, deposits and investments to Statement of Net Position: Special Events Center PFD Cash on hand and in bank $ 128,658 Total Cash and investments $ 128,658 The PFD follows the City of Kent's investment policy. Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits, to the extent possible, the average life of the portfolio not to exceed five years. As of December 31, 2015, the weighted average of maturity for the portfolio was 981 days. The LGIP is an unrated 2a-7 like pool, as defined by GASB Statement No. 31. Accordingly, participants' balances in the LGIP are not subject to interest rate risk, as the weighted average maturity of the portfolio will not exceed 90 days. As of December 31, 2015, the LGIP had a weighted average maturity of 35 days. Credit Risk. State statute, as well as City policy, requires at the time of purchase that an investment carry a rating of one of the three highest credit ratings of a nationally recognized rating agency. As of December 31, 2015, the ratings for all fixed rate non-callable and callable agency securities were AAA. The LGIP is an unrated 2a-7 like pool. Per GASB Statement No. 40 guidelines, the LGIP balances are not subject to custodial credit risk. The credit risk of the LGIP is limited as most investments are either obligations of the US government, government sponsored enterprises, or insured demand accounts and certificates of deposit. Concentration of Credit Risk. According to the City's investment policy, with the exception of US Treasuries and the LGIP, no more than 25% of the City's total investment portfolio will be invested in securities offered by a single issuer. In accordance with GASB Statement No. 40, the City will report any investment in any one issuer that is 5% or more of the total City portfolio. As of December 31, 2015, the City did not have any investments meeting that criterion. Custodial Credit Risk. All bank deposits are covered 100% by federal depository insurance and pledged collateral on deposit with the Washington State Public Deposit Protection Commission (WSPDPC). Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 4. RECEIVABLES The PFD uses the modified accrual basis of accounting. In adopting this basis of accounting, the PFD recognizes revenue by recording various receivables and accrued revenue in its financial statements. The revenue recognition criteria by source is as follows: a. TAXES RECEIVABLE Sales and use taxes are collected by the state and remitted to the PFD on the last day of each month. Sales tax revenue is accrued at year end per GASB Statement No. 33, "Accounting and Financial Reporting for Nonexchange transactions." As of December 31, 2015, receivables totaled $154,558. 5. LONG-TERM INDEBTEDNESS Bonded Debt In February 2008, the Public Facilities District (PFD) issued Special Events Center Sales Tax Bonds, 2008, of $53,150,000 and Special Events Center Revenue Bonds, 2008 (Taxable), of $10,130,000 to finance a portion of the costs of developing the Events Center, capitalizing interest on the Bonds, and paying costs of issuance for the Bonds. As of December 31, 2015, the PFD had total net bonded debt outstanding of $59,430,869. Of this amount, $54,020,869 or 90.9 percent comprises Sales Tax Bonds, which are secured by a pledge of Sales Tax Revenues (consisting of proceeds of the PFD's sales and use taxes). The remainder of the bonded debt ($5,410,000 or 9.1 percent) are payable from and secured by a pledge of PFD Revenues received from the City under the terms of the Contingent Loan and Support Agreement. Under the Contingent Loan and Support Agreement, the City has irrevocably pledged its full faith, credit and resources for the making of City Contingent Loan Payments to the PFD as required in order for the PFD to meet their debt service requirements on the bonds, if and to the extent that Sales Tax Revenue and/or Special Events Center revenues are not sufficient for that purpose. During 2015, the City provided to the PFD, $3,184,222, for a grand total of $21,938,203, including 260,529 in accrued interest from 2009 through 2015. Special Events Center Sales Tax Bonds, 2008, accrue interest at rates from 4.00% to 5.25% depending on maturity dates ranging from December 1, 2020 through December 1, 2037. Interest is payable semiannually on December 1 and June 1. Term Bonds of $9,290,000 are due December 1, 2028, at 4.75%, $16,885,000 of Term Bonds are due December 1, 2032, at 5.25%, and $9,180,000 Term Bonds are due December 1, 2036, at 5.25%. Special Events Center Revenue Bonds, 2008, accrue interest at rates from 3.159% to 5.754% depending on maturity dates ranging from December 1, 2009 through December 1, 2020. The following is a summary of long-term bonded debt transactions of the Special Events Center Public Facilities District for the year ended December 31, 2015: Outstanding Debt Retired, Outstanding Debt Extinguished Debt 1/1/15 &Amortized 12/31/15 Sales Tax Bonds $ 53,150,000 $ - $ 53,150,000 Plus: Unamortized Premium 910,604 (39,735) 870,869 Revenue Bonds 6,275,000 (865,000) 5,410,000 Total Long-term Debt Payable $ 60,335,604 $ (904,735) $ 59,430,869 Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 The following is a summary of bonded debt issuance and redemption information as of December 31, 2015: Issuance Maturity Interest Original Redemption Outstanding Due Within Date Date Rate Amount to Date 12/31/15 One Year Sales Tax Bonds 2008 2037 4-5.25% $ 53,150,000 $ $ 53,150,000 $ - Plus: Unamortized Premium 870,869 870,869 Revenue Bonds 2008 2020 3 16-5 75% 10,130,000 (4,720,000) 5,410,000 980,000 Total Bonded Debt $ 63,280,000 $(3 849 131) $ 59,430,869 $ 980,000 The Special Events Center Public Facilities District's annual debt service requirements to maturity for their sales tax and revenue bonds are as follows: Special Events Center Public Facilities District Year Principal Interest Total 2016 980,000 2,973,244 3,953,244 2017 1,100,000 2,921,755 4,021,755 2018 1,250,000 2,862,861 4,112,861 2019 1,400,000 2,794,061 4,194,061 2020-2024 9,715,000 12,706,290 22,421,290 2025-2029 15,535,000 9,795,900 25,330,900 2030-2034 18,680,000 5,181,000 23,861,000 2035-2037 9,900,000 1,012,500 10,912,500 Total $ 58 560 000 $ 40 247 611 $ 98,807,611 Notes Payable The City of Kent (City) and the Kent Special Events Center Public Facilities District (District) entered into a contingent loan and support agreement (the agreement) effective February 20, 2008. The contingent loan agreement remains in effect as long as the 2008 bonded debt of the District is outstanding (2037). Under the agreement, in the event that the District is unable to timely provide for the payment of principal or interest on any bonds, the City shall provide the District the amount necessary to make such timely payment. The City's obligation under the agreement is absolute and unconditional. The full faith, credit and resources of the City are pledged irrevocably for the payments of any District shortfalls on the debt payments. The City paid the District $3,184,222 under the agreement in 2015. Cumulatively, the City has paid the District $21,677,674 under the agreement. The agreement terms these payments as loans between the City and the District, payable by the District as District revenues become available for that purpose as defined with Section 4 of the agreement. Additionally, $260,529 interest has been accrued on the note for a total of $21,938,203 due to the City. To date, no repayments have been made on these loans and it is deemed unlikely that future District revenues will be available for this purposes. Therefore, no schedule has been set for the repayment of these loans and the entire balance is classified as long- term on the District's Statement of Net Position. Arbitrage Compliance All arbitrage compliance regulations as per Section 148(f) of the Internal Revenue Service regulations, as amended, of the Internal Revenue Code for the PFD's tax-exempt bonds are current. Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 6. FUND BALANCE/NET POSITION Fund Balance Fund balance presented in the governmental fund financial statements represent the difference between assets and liabilities reported within the governmental fund. Fund balance is classified into the following categories: Nonspendable — items that cannot be spent due to form; inventories, prepaid amounts, long-term loan receivables, or amounts that must be maintained intact legally. Restricted — amounts constrained for specific purposes imposed by external parties. The PFD has $283,216 restricted for debt service as of December 31, 2015. Committed — amounts constrained by the City Council, either through formal budget adoption, contract approvals or for other purposes formally approved by the Council. Assigned — all amounts remaining in governmental funds, other than the general fund, not classified as nonspendable, restricted or committed. Amounts reported as assigned also include year-end encumbrances that have received approval from the city council and re-appropriated in the following year's carry forward budget. Unassigned —any remaining fund balance in the general fund not classified as nonspendable, restricted, committed or assigned. The PFD considers restricted amounts to have been spent first when expenditures are incurred for purposes for which both restricted and unrestricted fund balances are available. When expenditures of unrestricted fund balance are incurred, the PFD considers committed amounts spent first, then assigned amounts and lastly, unassigned amounts. Net Position Although the PFD's governmental funds reflected a positive fund balance of $283,216 at December 31, 2015 (restricted for debt service), when adjusted to the district-wide financials presented in accordance with GASB Statement No. 34, the total liabilities exceed the total assets of the PFD resulting in a deficit net position. Per the interlocal agreement with the City of Kent, the PFD was created to finance the construction of the event center and make the debt service payments on the bonds sold to finance that construction. The capital assets, once constructed by the PFD, were turned over to the City, but the PFD retains the long-term debt. Because of this, the PFD's financials will reflect a deficit net position through the life of the bonds, December 2037. 7. SUBSEQUENT EVENTS On April 21, 2016 the District received an upgrade on the Kent Public Facilities District Bonds from AA to AA+from Standard & Poor's Rating Service. On June 15, 2016, the City of Kent issued $64,575,000 in general obligation bonds for the purpose of refunding $53,150,000 of Public Facilities District Sales Tax Bonds. Although the bonds are now a formal debt of the City of Kent, the City and the PFD have entered into an Interlocal Financing Agreement whereby the City agrees to lend the District the proceeds of the 2016 Refunding bonds, and the District hereby borrows said sum from the City for the purpose of refunding the PFD's 2008 Sales Tax Bonds. The District agrees, in satisfaction of the District Bond, to remit all sales tax revenue and other Special Events Center revenues which are received by and available to the District to the City for Notes to the Financial Statements Special Events Center Public Facilities District December 31, 2015 the purpose of enabling the City to pay the principal of and interest on the 2016 Refunding Bonds on their scheduled maturity dates or earlier mandatory installment redemption dates. If at any time the sales tax revenue and other Special Events Center revenues are insufficient to provide for the payment of principal of and interest on the 2016 Refunding Bonds, the City shall provide for that deficiency from other available City revenues (city advance), and the amount of the city advance shall be deemed an additional loan by the City to the District. The District shall repay any city advances from available sales tax revenue and other Special Events Center revenues. The outstanding principal amount of any city advance shall bear interest at a rate set by the City's Finance Director on the date a loan is made, based on the then-current yield of the City's pooled investments. tV ABOUT i ' OFFICE The State Auditor's Office is established in the state's Constitution and is part of the executive branch of state government. The State Auditor is elected by the citizens of,Washington and serves four-year terms. We work with our audit clients and citizens to achieve our vision of government that works for ,a citizens, by helping governments work better, cost less, deliver higher value, and earn greater public trust. In fulfilling our mission to hold state and local governments accountable for the use of public resources, we also hold ourselves accountable by continually improving our audit quality and operational efficiency and developing highly engaged and committed employees. As an elected agency, the State Auditor's Office has the independence necessary to objectively perform audits and investigations. Our audits are designed to comply with professional standards as well as to satisfy the requirements of federal, state, and local laws. Our audits look at financial information and compliance with state, federal and local laws on the part of all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits of state agencies and local governments as well as fraud, state whistleblower and citizen hotline investigations. The results of our work are widely distributed through a variety of reports, which are available on our website and through our free, electronic subscription service. We take our role as partners in accountability seriously, and provide training and technical assistance to governments, and have an extensive quality assurance program. Contact information for the State Auditor's Office Public Records requests PublicRecordsasao.wa.g_ov_ Main telephone (360) 902-0370 Toll-free Citizen Hotline (866) 902-3900 Website www.sao.wa. og_v Washington worksGovernment that Troy Kelley Exit Conference: City of Kent Special Events Center State Auditor Public Facilities District Deputy State Auditor About our Office Jan Jutte, CPA The Washington State.Auditor's Office's vision is government that works for Director of Local Audit citizens. Our goal is for government that works better, costs less and earns Kelly Collins, CPA greater public trust. (360) 902-0091 The purpose of this meeting is to share our audit results and draft reporting. Kelly.Collins@sao.wa.gov We value and appreciate your participation. Audit Highlights Deputy Director of Local We would like to thank Dan Leahy, audit liaison, who provided assistance Audit throughout the audit process and timely responses to all our audit requests. Mark Rapozo (360) 902-0362 Audit Scope Mark.Rapozo@sao.wa.gov We performed the following audits for the City of Kent Special Events Center Public Facilities District: Audit Manager • Financial statement audit for 2015 See draft report. Wendy Choy (253)372-6250 ext.10 Financial Statement required communications Wendy.Choy@sao.wa.gov In relation to our report, we would like to bring to your attention: • There were no uncorrected misstatements in the audited financial Assistant Audit Manager statements. Janise Hansen . There were no material misstatements in the financial statements (253)372-6250 ext.114 corrected by management during the audit. Janise.Hansen@sao.wa.gov Audit Lead Recommendations not included in the Audit Reports Robert Manalili, CPA Exit Items (253)372-6250 Robert.Manalili@sao.wa.gov We have provided exit recommendations for management's consideration. Exit items address control deficiencies or non-compliance with laws or regulation that have an insignificant or immaterial effect on the entity, or errors with an www.sao.wa.gov immaterial effect on the financial statements. Exit items are not referenced in the audit report. Concluding Comments Report Publication Audit reports are published on our website and distributed via e-mail in an electronic .pdf file. We also offer a subscription service that allows you to be notified by email when audit reports are released or posted to our website. You can sign up for this convenient service at: https•//portal sao wa og v/saoportal/Login.aspx Audit Cost At.the entrance conference, we estimated the cost of the audit to be $7,448 and actual audit costs will approximate that amount. Audit Survey When your report is released you will receive an audit survey from us. We value your opinions on our audit services and hope you provide feedback. Your Next Scheduled Audit Your next audit is scheduled to be conducted in June 2017 and will cover the following general areas: Financial Statement The estimated cost for the next audit based on current rates is $7,448. This preliminary estimate is provided as a budgeting tool and not a guarantee of final cost. If expenditures of federal awards are $750,000 or more in any fiscal year, notify our Office so we can schedule your audit to meet federal single audit requirements. Federal awards can include grants, loans, and non-cash assistance such as equipment and supplies