Preliminary Official Statement Dated

SALE DATE: MARCH 11, 2010 SALE TIME: 2010A BONDS, 7:30 A.M., PACIFIC TIME 2010B BONDS, 8:30 A.M., PACIFIC TIME PRELIMINARY OFFICIAL STATEMENT DATED MARCH 2, 2010 RATINGS: (Applied for) Fitch: ___ Moody’s: ___ New Issue Standard & Poor’s: ___ Book-Entry Only (See “Other Bond Information—Ratings” herein.) In the opinion of Bond Counsel, interest on the 2010A Bonds is not excludable from gross income for federal income tax purposes. In the opinion of Bond Counsel, under existing federal law and assuming compliance with applicable requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issue date of the Bonds, interest on the 2010B Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. However, while interest on the 2010B Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the 2010B Bonds received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on the 2010B Bonds received by certain S corporations may be subject to tax, and interest on the 2010B Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. Receipt of interest on the 2010B Bonds may have other federal tax consequences for certain taxpayers. See “Legal and Tax Information” herein. ntiallyin this form. THE CITY OF SEATTLE, WASHINGTON bsta

eliminary Official Statementto $58,235,000* Limited Tax General Obligation Improvement Bonds, 2010A the Pr (Taxable Build America Bonds-Direct Payment) $143,190,000* Limited Tax General Obligation Improvement and Refunding Bonds, 2010B DATED: DATE OF INITIAL DELIVERY DUE: AUGUST 1, AS SHOWN ON PAGES i AND ii The City of Seattle Limited Tax General Obligation Improvement Bonds, 2010A (Taxable Build America Bonds-Direct Payment) (the “2010A Bonds’), and Limited Tax General Obligation Improvement and Refunding Bonds, 2010B (the “2010B Bonds”), will be issued as fully registered bonds under a book-entry only system, registered in the name of Cede & Co. as bondowner and nominee for DTC. The 2010A Bonds and the 2010B Bonds collectively are referred to in this Official Statement as the “Bonds.” DTC will act as initial securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interest in the Bonds purchased. Interest on the Bonds will be paid semiannually on each February 1 and August 1, beginning August 1, 2010. The principal of and interest on the Bonds are payable by the City’s Bond Registrar, currently the fiscal agent of the State of Washington (currently The Bank of New York Mellon in New York, New York), to DTC, which is obligated in turn to remit such payments to its participants for subsequent disbursement to beneficial owners of the Bonds, as described in “Description of e City will completee City will and deliveran Official Statementsu the Bonds—Book-Entry Transfer System” and in Appendix C. The Bonds are being issued to (i) pay for part of the costs of various projects, (ii) refund certain outstanding bonds of the City (the “Refunded Bonds”) as described under “Use of Proceeds,” and (iii) pay the costs of issuing the Bonds and refunding the and change. The City has authorized the distribution of Refunded Bonds. See “Use of Proceeds.”

ction The Bonds are subject to redemption prior to maturity as described herein. See “Description of the Bonds—Redemption of Bonds.” ale of the Bonds, th The Bonds are general obligations of The City of Seattle, Washington (the “City”). The Bonds are secured by the City’s irrevocable pledge to include in its budget and levy taxes annually within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City on all of the taxable property within the City in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds. The full faith, credit and resources of the City are pledged irrevocably for the annual levy and collection of the taxes pledged to the Bonds and the prompt payment of the principal of and interest on the Bonds. The Bonds do not constitute a debt of the State of Washington or any political subdivision thereof other than the City.

MATURITY SCHEDULES LOCATED ON PAGES i AND ii Each series of the Bonds is offered for delivery by the purchaser of such series when, as and if issued, subject to the approving legal opinion of Foster Pepper PLLC, Seattle, Washington, Bond Counsel. The form of Bond Counsel’s opinion is attached hereto as Appendix B. It is anticipated that the Bonds will be available for delivery at DTC’s facilities in New York, New York, or delivered to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about March 31, 2010. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire official statement to obtain information essential to the making of an informed investment decision. prospective purchasers and others. Upon the s Dated: This is a Preliminary Official Statement, subject to corre

* Preliminary, subject to change.

No dealer, broker, salesperson, or other person has been authorized by the City to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Bonds, nor will there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the City, DTC and certain other sources that the City believes to be reliable. The information and expressions of opinion contained herein are subject to change without notice. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact or representations that the estimates will be realized. Neither the City’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the projected financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon a specific exemption contained in such act, nor have they been registered under the securities laws of any state.

MATURITY SCHEDULE

THE CITY OF SEATTLE, WASHINGTON $58,235,000(1) Limited Tax General Obligation Improvement Bonds, 2010A (Taxable Build America Bonds-Direct Payment)

Due Interest August 1 Amounts(2) Rates Yields CUSIP Numbers(3) 2020 $ 5,210,000 % % 2021 5,180,000 2022 6,860,000 2023 11,890,000 2024 12,600,000 2025 13,210,000 2026 610,000 2027 635,000 2028 655,000 2029 680,000 2030 705,000

(1) Preliminary, subject to change. (2) Preliminary, subject to change. These amounts will constitute principal maturities of the 2010A Bonds unless 2010A Term Bonds are specified by the successful bidder, in which case these amounts may constitute mandatory sinking fund redemptions of 2010A Term Bonds. (3) CUSIP is a registered trademark of the American Bankers Association. The CUSIP numbers herein are provided by Standard and Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP numbers are provided for convenience of reference only. CUSIP numbers are subject to change. The City takes no responsibility for the accuracy of such CUSIP numbers.

i MATURITY SCHEDULE

THE CITY OF SEATTLE, WASHINGTON $143,190,000(1) Limited Tax General Obligation Improvement and Refunding Bonds, 2010B

Due Interest August 1 Amounts(1) Rates Yields CUSIP Numbers(3) 2010 $ 730,000 % % 2011 2,990,000 2012 6,730,000 2013 9,790,000 2014 9,690,000 2015 10,440,000 2016 11,235,000 2017 11,365,000 2018 11,275,000 2019 11,610,000 2020 7,600,000 2021 7,950,000(2) 2022 5,575,000(2) 2023 4,545,000(2) 2024 3,230,000(2) 2025 3,415,000(2) 2026 3,615,000(2) 2027 3,820,000(2) 2028 4,040,000(2) 2029 4,270,000(2) 2030 4,510,000(2) 2031 4,765,000(2)

(1) Preliminary, subject to change. (2) These amounts will constitute principal maturities of the Bonds unless Term Bonds are specified by the successful bidder, in which case these amounts may constitute mandatory sinking fund redemptions of Term Bonds. (3) CUSIP is a registered trademark of the American Bankers Association. The CUSIP numbers herein are provided by Standard and Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP numbers are provided for convenience of reference only. CUSIP numbers are subject to change. The City takes no responsibility for the accuracy of such CUSIP numbers.

TABLE OF CONTENTS Page Official Notice of Bond Sale ...... v Description of the Bonds ...... 1 Registration and Denomination ...... 1 Designation of the 2010A Bonds as Build America Bonds ...... 2 Federal Credit Payments for Build America Bonds ...... 2 Redemption of Bonds ...... 2 No Acceleration of the Bonds ...... 5 Purchase ...... 5 Book-Entry Transfer System ...... 5 Refunding or Defeasance of Bonds ...... 6 Use of Proceeds ...... 6 Refunding Plan ...... 6 Sources and Uses of Funds ...... 8 Security and Sources of Payment for the Bonds ...... 8 General Fund Revenue Sources ...... 9 General Property Taxes ...... 9 Retail Sales and Use Taxes ...... 14 Business Taxes ...... 15 Real Estate Excise Taxes ...... 15 Business Taxes on City Utilities ...... 15 Miscellaneous ...... 15 Legislative Changes Affecting City Business Taxes ...... 15 Debt Information...... 16 General Obligation Debt Capacity ...... 16 Debt Capacity and Debt Service Summaries ...... 16 Authorized Investments ...... 21 The City of Seattle ...... 21 Municipal Government ...... 21 Financial Management ...... 21 Risk Management ...... 23 Pension System ...... 23 Post-Employment Retirement Benefits ...... 24 Labor Relations ...... 24 Initiative and Referendum ...... 24 Legal and Tax Information ...... 25 No Litigation Affecting the Bonds or Taxing Authority ...... 25 Other Litigation ...... 25 Approval of Counsel ...... 25 Continuing Disclosure Undertaking ...... 28 Other Bond Information ...... 29 Ratings ...... 29 Purchasers of the Bonds ...... 30 Official Statement ...... 30

The City’s 2008 Comprehensive Annual Financial Report ...... Appendix A Form of Legal Opinion ...... Appendix B Book-Entry Transfer System ...... Appendix C Demographic and Economic Information ...... Appendix D

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THE CITY OF SEATTLE

CITY OFFICIALS AND CONSULTANTS

MAYOR AND CITY COUNCIL Mike McGinn Mayor

Richard Conlin President, City Council Sally Bagshaw Council Member Tim Burgess Council Member Sally Clark Council Member Jean Godden Council Member Bruce Harrell Council Member Nick Licata Council Member Mike O’Brien Council Member Tom Rasmussen Council Member

CITY ADMINISTRATION Dwight D. Dively Director of Finance Pete Holmes City Attorney

BOND COUNSEL Foster Pepper PLLC Seattle, Washington

FINANCIAL ADVISOR Seattle-Northwest Securities Corporation Seattle, Washington

OFFICIAL NOTICE OF BOND SALE

THE CITY OF SEATTLE, WASHINGTON $58,235,000* Limited Tax General Obligation Improvement Bonds, 2010A (Taxable Build America Bonds-Direct Payment) $143,190,000* Limited Tax General Obligation Improvement and Refunding Bonds, 2010B

Electronic bids for purchase of The City of Seattle Limited Tax General Obligation Improvement Bonds, 2010A (Taxable Build America Bonds-Direct Payment) (the “2010A Bonds”), and Limited Tax General Obligation Improvement and Refunding Bonds, 2010B (the “2010B Bonds”), will be received by The City of Seattle, Washington (the “City”), by the Director of Finance via BiDCOMP/PARITY’s electronic bidding service, in the manner described below, on

MARCH 11, 2010, AT

2010A BONDS: 7:30 A.M., PACIFIC TIME, 2010B BONDS: 8:30 A.M., PACIFIC TIME, or such other day or time and under such other terms and conditions as may be established by the Director of Finance and communicated by wire service not less than 18 hours prior to the time bids are to be received. The 2010A Bonds and the 2010B Bonds collectively are referred to in this Official Notice of Bond Sale as the “Bonds.” Bids must be submitted electronically via BiDCOMP/PARITY in accordance with this Official Notice of Bond Sale. For further information about BiDCOMP/PARITY, potential bidders may contact BiDCOMP/PARITY at 212-404-8102. Hard copy bids will not be accepted. The City will make an official bid form (the “Official Bid Form”) for each series of the Bonds available to BiDCOMP/PARITY and as described under “Bidding Information and Award—Bid Forms” at least 18 hours prior to the time bids are to be received. No bid will be received after the time for receiving bids specified above. All proper bids received with respect to the Bonds are expected to be considered and acted on by the City Council on March 11, 2010. No bid will be awarded until the City Council has adopted a resolution accepting the bid at its meeting. Modification, Cancellation, Postponement. Bidders are advised that the City may modify the terms of this Official Notice of Bond Sale prior to the time for receipt of bids, including to change the principal amount and principal payments of one or more series of the Bonds if the City elects not to refund all or any of the bonds expected to be refunded with the 2010B Bonds or because the City elects to change the principal amounts of the two series or to change the redemption provisions. Any such modification will be announced through The Bond Buyer Wire (available on TM3, the Thomson Municipal Market Monitor, at http://www.tm3.com, which reference is not incorporated herein by reference) (the “News Service”), prior to 1:00 p.m., Pacific Time, on March 10, 2010. In addition, the City may cancel or postpone the date and time for the receipt of bids for the Bonds at any time prior to the opening of the bids. Notice of such cancellation or postponement will be communicated through the News Service as soon as practicable following such cancellation or postponement. As an accommodation to bidders, telephone, facsimile or electronic notice of any amendment or modification of this Official Notice of Bond Sale will be given to any bidder requesting such notice from the City’s Financial Advisor at the address and phone number provided under ”Contact Information” in this Official Notice of Bond Sale.

* Preliminary, subject to change.

CONTACT INFORMATION

City of Seattle Debt Manager Michael van Dyck (206) 684-8347 [email protected] Financial Advisor Rob Shelley, Seattle-Northwest Securities office (206) 628-2879; cell (206) 601-2249 [email protected] Bond Counsel Hugh Spitzer, Foster Pepper PLLC (206) 447-8965 [email protected]

DESCRIPTION OF THE BONDS

Bond Details The Bonds will be dated the date of their initial delivery. Interest on the Bonds will be paid semiannually on each February 1 and August 1, beginning August 1, 2010.

Registration and Book-Entry Only System The Bonds are issuable only as fully registered bonds and when issued will be registered in the name of Cede & Co. as registered owner and nominee for the Depository Trust Company (“DTC”), New York, New York. DTC will act as initial securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interest in the Bonds purchased. The principal of and interest on the Bonds are payable by the City’s Bond Registrar, currently the fiscal agent of the State of Washington (currently The Bank of New York Mellon in New York, New York) to DTC, which is obligated in turn to remit such payments to its participants for subsequent disbursement to beneficial owners of the Bonds.

Election of Maturities 2010A Bonds. The successful bidder for the 2010A Bonds shall designate whether some or all of the principal amounts of the 2010A Bonds, as set forth below, shall be retired on August 1 of each respective year as serial bonds maturing in such year, or as amortization installments of 2010A Term Bonds maturing on those respective dates in the years specified by the bidder. 2010A Term Bonds, if any, must consist of the total principal payments of two or more consecutive years and mature in the latest of those years.

Serial Maturities Years or Amortization (August 1) Installments* 2020 $ 5,210,000 2021 5,180,000 2022 6,860,000 2023 11,890,000 2024 12,600,000 2025 13,210,000 2026 610,000 2027 635,000 2028 655,000 2029 680,000 2030 705,000 * Preliminary, subject to change. These amounts will constitute principal maturities of the 2010A Bonds unless 2010A Term Bonds are specified by the successful bidder, in which case these amounts may constitute mandatory sinking fund redemptions of 2010A Term Bonds.

2010B Bonds. The successful bidder for the 2010B Bonds shall designate whether some or all of the principal amounts of the 2010B Bonds, as set forth below, shall be retired on August 1 of each respective year as serial bonds maturing in such year, or as amortization installments of 2010B Term Bonds maturing on those respective dates in the years specified by the bidder. 2010B Term Bonds, if any, must consist of the total principal payments of two or more consecutive years and mature in the latest of those years.

Serial Maturities Years or Amortization (August 1) Installments(1) 2010 $ 730,000 2011 2,990,000 2012 6,730,000 2013 9,790,000 2014 9,690,000 2015 10,440,000 2016 11,235,000 2017 11,365,000 2018 11,275,000 2019 11,610,000 2020 7,600,000 2021 7,950,000(2) 2022 5,575,000(2) 2023 4,545,000(2) 2024 3,230,000(2) 2025 3,415,000(2) 2026 3,615,000(2) 2027 3,820,000(2) 2028 4,040,000(2) 2029 4,270,000(2) 2030 4,510,000(2) 2031 4,765,000(2) (1) Preliminary, subject to change. (2) These amounts will constitute principal maturities of the 2010B Bonds unless 2010B Term Bonds are specified by the successful bidder, in which case these amounts may constitute mandatory sinking fund redemptions of 2010B Term Bonds.

Redemption Optional Redemption—2010A Bonds. The City reserves the right and option to redeem the 2010A Bonds prior to their stated maturity dates at any time, as a whole or in part, at a price of par plus the Make-Whole Premium (as defined in the Preliminary Official Statement), if any, calculated using the Treasury Rate (as defined in the Preliminary Official Statement) plus 25 basis points, together with accrued interest to the date fixed for redemption. Extraordinary Optional Redemption—2010A Bonds. The City reserves the right and option to redeem the 2010A Bonds prior to their stated maturity dates upon the occurrence of an Extraordinary Event, as a whole or in part, at a price of par plus the Extraordinary Redemption Premium (as defined in the Preliminary Official Statement), if any, calculated using the Treasury Rate (as defined in the Preliminary Official Statement) plus 100 basis points, together with accrued interest to the date fixed for redemption. An “Extraordinary Event” will have occurred if a material adverse change has occurred to Section 54AA or Section 6431 of the Internal Revenue Code of 1986, as amended (the “Code”) (as such Sections were added by Section 1531 of the American Recovery and Reinvestment Act of 2009 pertaining to “Build America Bonds”) pursuant to which the City’s 35 percent direct payments from the United States Treasury in respect of interest on the 2010A Bonds are reduced or eliminated.

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Optional Redemption—2010B Bonds. The 2010B Bonds maturing on or before August 1, 2020, are not subject to redemption prior to maturity. The City reserves the right and option to redeem the 2010B Bonds maturing on or after August 1, 2021, prior to their stated maturity dates at any time on and after August 1, 2020, as a whole or in part, at a price of par plus accrued interest to the date fixed for redemption. Selection of Bonds for Redemption. If fewer than all of a series of Bonds are to be redeemed prior to maturity, the selection of such Bonds for redemption shall be made as described in the Preliminary Official Statement in “Description of the Bonds—Redemption of Bonds.”

Purpose The Bonds are being issued to (i) pay for part of the costs of various projects, (ii) refund certain outstanding bonds of the City (the “Refunded Bonds”), and (iii) pay the costs of issuing the Bonds and refunding the Refunded Bonds.

Security The Bonds are general obligations of the City, secured by the City’s irrevocable pledge to include in its budget and levy taxes annually within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City on all of the taxable property within the City in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds. The full faith, credit and resources of the City are pledged irrevocably for the annual levy and collection of the taxes pledged to the Bonds, and the prompt payment of the principal of and interest on the Bonds.

THE BONDS DO NOT CONSTITUTE A DEBT OF THE STATE OF WASHINGTON OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE CITY.

BIDDING INFORMATION AND AWARD

Bidders are invited to submit bids for the purchase of either or both series of the Bonds fixing the interest rate or rates that the Bonds will bear. Interest rates bid shall be in multiples of 1/8 or 1/100 of one percent, or both. No more than one rate of interest may be fixed for any one maturity. All bids shall be without condition. The City strongly encourages the inclusion of Women and Minority Business Enterprise firms in bidding syndicates. 2010A Bonds. No bid will be considered for the 2010A Bonds that is less than an amount equal to 98 percent nor more than an amount equal to 102 percent of the par value of the 2010A Bonds or for less than the entire offering of the 2010A Bonds. Each individual maturity must be reoffered at a yield that will produce a price of not more than 102.0 percent. 2010B Bonds. No bid will be considered for the 2010B Bonds that is less than an amount equal to 100 percent of the par value of the 2010B Bonds nor more than an amount equal to 114 percent of the par value of the 2010B Bonds. No bid for less than the entire offering of the 2010B Bonds will be accepted. Each individual maturity must be reoffered at a yield that will produce a price of not less than 98 percent of the principal amount for that maturity. For the purpose of the preceding sentence, “price” means the lesser of the price at the redemption date or the price at the maturity date.

Adjustment of Principal Amounts Before Bid Opening Bidders are advised that the City may increase or decrease the total principal amount of either or both series of the Bonds and/or the amounts of individual maturities stated in this Official Notice of Bond Sale (including any amendments issued by the City through a wire service) prior to the bidding. If such changes are made, they will be reflected in the Official Bid Forms to be made available through BiDCOMP/PARITY.

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Official Bid Forms The Official Bid Forms will be made available by 1:00 p.m., Pacific Time, on March 10, 2010. The City will provide the Official Bid Forms to BiDCOMP/PARITY. The Official Bid Forms also can be obtained from either the City’s Debt Manager or the City’s Financial Advisor. See “Contact Information.”

Bidding Process By submitting an electronic bid for either or both series of the Bonds, each bidder thereby agrees to the following terms and conditions: (i) If any provision in this Official Notice of Bond Sale conflicts with information or terms provided to or required of the bidder by BiDCOMP/PARITY, this Official Notice of Bond Sale (including any amendments issued by the City through a wire service) and the applicable Official Bid Form shall control. Information provided by BiDCOMP/PARITY to bidders shall form no part of any bid or of any contract between the successful bidder and the City unless that information is included in this Official Notice of Bond Sale or in the applicable Official Bid Form to be made available by the City. (ii) The bidder is solely responsible for making necessary arrangements to access BiDCOMP/PARITY for purposes of submitting a timely bid that is in compliance with the requirements of this Official Notice of Bond Sale (including any amendments issued by the City through a wire service) and with the applicable Official Bid Form. (iii) The City shall have no duty or obligation to provide or assure access to BiDCOMP/PARITY, and shall not be responsible for the proper operation of BiDCOMP/PARITY or have any liability for any delays or interruptions of, or any damages caused by, use or attempted use of BiDCOMP/PARITY. (iv) BiDCOMP/PARITY is not the City’s agent, but rather is the bidder’s agent in submitting its bid to the City. (v) The City will regard the electronic transmission of each bid it receives through BiDCOMP/PARITY (including information regarding the purchase price of the Bonds and interest rates for any maturity of the Bonds) as being submitted on the Official Bid Form to be made available by the City and executed on behalf of the named bidder by a duly authorized signatory. (vi) If an electronic bid for the Bonds is accepted by the City, this Official Notice of Bond Sale (including any amendments issued by the City through a wire service), the applicable Official Bid Form to be made available by the City and the information regarding the purchase price of each series of the Bonds, any Term Bonds specified, and the interest rates for each maturity of each series of the Bonds that is submitted electronically to the City through BiDCOMP/PARITY shall form a contract between the bidder and the City, and the bidder shall be bound by the terms of such contract whether or not such bidder in fact attempted or intended to submit a bid on those terms.

Good Faith Deposit In order to be considered by the City Council, all bids must be backed by a good faith deposit in the amount of $600,000 with respect to the 2010A Bonds and $1,450,000 with respect to the 2010B Bonds. The good faith deposit for each series of the Bonds must be paid by federal funds wire transfer within 90 minutes after the verbal award to the successful bidder for such series. Wiring instructions will be provided to the successful bidder for such series at the time of the verbal award. The good faith deposit of the successful bidder for each series of the Bonds shall be retained by the City as security for the performance of the successful bidder and shall be applied to the purchase price of such series of the Bonds upon the delivery of such series of the Bonds to the successful bidder. Pending delivery of the Bonds, each good faith deposit may be invested for the sole benefit of the City. If the Bonds of a series are ready for delivery and the successful bidder for such series fails or neglects to complete the purchase of such series of the Bonds within 30 days following the acceptance of its bid, the applicable good faith deposit shall be retained by the City as reasonable liquidated damages and not as a penalty.

Award The Bonds of each series will be sold to the bidder making a bid conforming to the terms of the offering and which, on the basis of the City’s determination of the lowest true interest cost, is the best bid. The true interest cost to the City will be the rate that, when used to discount to the date of the applicable series of the Bonds all future payments of principal and interest (using semiannual compounding and a 30/360 day basis), produces an amount equal to the bid amount, without regard to the interest accrued to the date of delivery of such series of the Bonds. The true interest cost calculations for any bids received on a series of Bonds will be performed by the City’s Financial Advisor, and the City will base its determination of the best bid for a series of Bonds solely on such calculations. If there are two or more equal bids for a series of the Bonds and those bids are the best bids received, the Director of Finance will determine by lot which bid will be presented to the City Council. For bids submitted for the 2010A Bonds, the true interest cost to the City will be determined after subtracting 35 percent of each interest payment. The City reserves the right to reject any or all bids submitted and to waive any formality or irregularity in any bid or the bidding process. If all bids for a series of the Bonds are rejected, then such series of the Bonds may be sold in the manner provided by law. Any bid presented after the time specified for the receipt of bids will not be accepted, and any bid not backed by the required good faith deposit will not be considered by the City Council. The successful bid for each series of the Bonds shall remain in effect until 5:00 p.m., Pacific Time, on the day of such bid opening.

Adjustment of Principal Amounts and Bid Price After Bid Opening The City has reserved the right to increase or decrease the preliminary principal amount of the 2010A Bonds by an amount not to exceed ten percent of the principal amount of the 2010A Bonds following the opening of the bids. The City also reserves the right to increase or decrease the preliminary principal amount of any maturity shown on the Official Bid Form for the 2010A Bonds by an amount not to exceed 15 percent of the preliminary principal amount of that maturity. The City has reserved the right to increase or decrease the preliminary principal amount of the 2010B Bonds by an amount not to exceed 10 percent of the principal amount of the 2010B Bonds following the opening of the bids. The City also reserves the right to increase or decrease the preliminary principal amount of any maturity shown on the Official Bid Form for the 2010B Bonds by an amount not to exceed the greater of $300,000 or 20 percent of the preliminary principal amount of that maturity. The price bid by the successful bidder for either series of the Bonds will be adjusted by the City on a proportionate basis to reflect an increase or decrease in the principal amount and maturity schedule. In the event that the City elects to alter the bond size of either series of the Bonds after the bid pursuant to this Official Notice of Bond Sale, the underwriter’s discount, expressed in dollars per thousand, will be held constant. The City will not be responsible in the event and to the extent that any adjustment affects (i) the net compensation to be realized by the successful bidder, or (ii) the true interest cost of the winning bid or its ranking relative to other bids.

Issue Price Information Upon award of the Bonds, the successful bidder for each series of the Bonds shall advise the City and Bond Counsel of the initial reoffering prices to the public of each maturity of such series of the Bonds (the “Initial Reoffering Prices”), for the City’s inclusion in the final Official Statement for the Bonds. Prior to delivery of the Bonds, each successful bidder shall furnish to the City and Bond Counsel a certificate in form and substance acceptable to Bond Counsel: (i) confirming the Initial Reoffering Prices, (ii) certifying that a bona fide offering of the applicable series of the Bonds has been made to the public (excluding bond houses, brokers and other intermediaries), (iii) stating the first price at which a substantial amount (at least ten percent) of each maturity of such series of the Bonds was sold to the public (excluding bond houses, brokers and other intermediaries),

(iv) if the first price at which a substantial amount of any maturity of such series of the Bonds does not conform to the Initial Reoffering Price of that maturity, providing an explanation of the facts and circumstances that resulted in that nonconformity, and (v) stating which maturities, if any, are amortization installments of Term Bonds maturing in the years specified by the bidder.

The first price at which a substantial amount of any maturity of the 2010A Bonds is sold to the public, as described above, shall not exceed the principal amount of such maturity by more than 0.25 percent multiplied by the number of complete years to the maturity date of such maturity.

Insurance Bids for either or both series of the Bonds shall not be conditioned upon obtaining insurance or any other credit enhancement, or upon City acceptance of any of the terms of insurance or other credit enhancement. If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment therefor, any purchase of such insurance or commitment therefor shall be at the sole option and expense of the bidder, and any increased costs of issuance of the Bonds resulting by reason of such insurance, unless otherwise paid, shall be paid by such bidder, but shall not, in any event, be paid by the City. Any failure of the Bonds to be so insured or of any such policy of insurance to be issued shall not in any way relieve the purchaser of its contractual obligations arising from the acceptance of its proposal for the purchase of the applicable series of the Bonds. If the successful bidder purchases insurance for any of the 2010A Bonds, the City will not modify the Official Statement to include information regarding such insurance and will not treat such insurance as a qualified guarantee of such 2010A Bonds. In addition, the amount of the underwriter's discount of a successful bidder that purchases insurance for any of the 2010A Bonds shall be reduced by the amount, if any, that the use of the underwriter's discount directly or indirectly to pay the premium for such insurance would cause more than two percent of the sale proceeds of the 2010A Bonds to be used to pay costs of issuance of the 2010A Bonds. If the successful bidder purchases insurance for any of the 2010B Bonds, the City may require the successful bidder to furnish to the City and Bond Counsel a certificate in form and substance acceptable to Bond Counsel confirming that (i) the present value (calculated using the same yield as the yield on the insured 2010B Bonds) of the insurance premium is less than the present value (calculated using the same yield as the yield on the insured 2010B Bonds) of the interest cost savings represented by the comparative differences between interest amounts that would have been payable on the various maturities of the insured 2010B Bonds at interest rates on the insured 2010B Bonds issued with and without the insurance on the insured 2010B Bonds, and (ii) in the process of requesting competitive proposals to provide such insurance, such insurance provided the lowest cost.

DELIVERY

The City will deliver the Bonds (consisting of one certificate for each maturity of each series of the Bonds) to DTC in New York, New York, or to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer, prior to the date of closing. Closing shall occur within 30 days of the sale date. Settlement shall be in immediately available federal funds in Seattle, Washington, on the date of delivery. If, prior to the delivery of the 2010B Bonds, the interest receivable by the owners of the 2010B Bonds becomes includable in gross income for federal income tax purposes, or becomes subject to federal income tax other than as described in the Official Statement for the 2010B Bonds, the successful bidder for the 2010B Bonds, at its option, may be relieved of its obligation to purchase the 2010B Bonds and in that case the good faith deposit accompanying its bid will be returned without interest.

Legal Opinion The approving legal opinion of Foster Pepper PLLC, Seattle, Washington, Bond Counsel, will be provided to the purchaser of each series of the Bonds at the time of the delivery of the Bonds. A no-litigation certificate will be included in the closing documents of the Bonds.

CUSIP Numbers It is anticipated that CUSIP identification numbers will appear on the Bonds if requested by the purchaser, but neither the failure to insert such numbers on the Bonds nor any error with respect thereto shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Bonds in accordance with the terms of this Official Notice of Bond Sale. The successful bidder for each series of the Bonds is responsible for obtaining CUSIP numbers for such series of the Bonds. The charge of the CUSIP Service Bureau shall be paid by the successful bidder; however, all expenses for printing CUSIP numbers on the Bonds shall be paid by the City.

CONTINUING DISCLOSURE UNDERTAKING

In order to assist bidders in complying with paragraph (b)(5) of the Rule, the City will undertake to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and also will be set forth in the final Official Statement.

OFFICIAL STATEMENT AND OTHER INFORMATION

Preliminary Official Statement The Preliminary Official Statement is in a form that the City expects to deem final for the purpose of paragraph (b)(1) of the Rule, but is subject to revision, amendment and completion in a final Official Statement, which the City will deliver, at the City’s expense, to each purchaser through its designated representative not later than seven business days after the City’s acceptance of the purchaser’s bid, in sufficient quantities to permit the successful bidder(s) to comply with the Rule. By submitting the successful proposal for either or both series of the Bonds, the purchaser’s designated senior representative agrees: (i) to provide to the City’s Debt Manager, in writing, within 24 hours after the acceptance of the bid, pricing and other related information, including Initial Reoffering Prices of the Bonds, necessary for completion of the final Official Statement; (ii) to disseminate to all members of the underwriting syndicate, if any, copies of the final Official Statement, including any amendments or supplements prepared by the City; (iii) to take any and all actions necessary to comply with applicable rules of the Securities and Exchange Commission and Municipal Securities Rulemaking Board governing the offering, sale and delivery of the Bonds to ultimate purchasers, including the delivery of a final Official Statement to each investor who purchases Bonds; and (iv) to file the final Official Statement or cause it to be filed with the Municipal Securities Rulemaking Board within one business day following its receipt from the City. The Preliminary Official Statement (with the Official Notice of Bond Sale) and the Official Bid Forms may be obtained upon request to the City’s Debt Manager or to Seattle-Northwest Securities Corporation. See “Contact Information” in this Official Notice of Bond Sale.

Official Statement At closing, the City will furnish a certificate of an official or officials of the City, stating that, to the best knowledge of such official(s) and relying on the opinions of Bond Counsel where appropriate, as of the date of the Official Statement and as of the date of delivery of the Bonds, (i) the information (including financial information) regarding the City contained in the Official Statement was and is true and correct in all material respects and did not and does not contain any untrue statement of a material fact or omit any statement or information which is necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (however, the City will make no representation regarding Bond Counsel’s form of opinion or the

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information provided by DTC, The Bank of New York Mellon or any entity providing bond insurance, reserve insurance or other credit facility); and (ii) the descriptions and statements, including financial data, of or pertaining to other bodies and their activities contained in the Official Statement have been obtained from sources that the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect.

DATED at Seattle, Washington, this 2nd day of March, 2010.

/s/ Dwight D. Dively Director of Finance

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OFFICIAL STATEMENT

The City of Seattle, Washington (the “City”), a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington (the “State”), furnishes this Preliminary Official Statement in connection with the offering of $58,235,000* aggregate principal amount of its Limited Tax General Obligation Improvement Bonds, 2010A (Taxable Build America Bonds-Direct Payment) (the “2010A Bonds”), and $143,190,000* aggregate principal amount of its Limited Tax General Obligation Improvement and Refunding Bonds, 2010B (the “2010B Bonds”), dated the date of their initial delivery. The 2010A Bonds and the 2010B Bonds collectively are referred to as the “Bonds.”

The Bonds are issued by the City pursuant to Titles 35 and 39 of the Revised Code of Washington (“RCW”) and the Seattle City Charter, Ordinance 121651, as amended by Ordinance 122286, Ordinance 123156, and Resolution ______(collectively, the “Bond Legislation”).

Appendix A to this Official Statement contains the City’s 2008 Comprehensive Annual Financial Report. Appendix B is the form of legal opinion of Foster Pepper PLLC of Seattle, Washington (the “Bond Counsel”). Appendix C is a description provided by The Depository Trust Company (“DTC”) of DTC procedures with respect to book-entry bonds. Appendix D provides economic and demographic information. Capitalized terms that are not defined herein have the meanings set forth in the Bond Legislation.

DESCRIPTION OF THE BONDS

Registration and Denomination The Bonds are issuable only as fully registered bonds under a book-entry transfer system, registered in the name of Cede & Co. as bondowner and nominee for DTC. DTC will act as initial securities depository for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds purchased. The Bonds will be issued in denominations of $5,000 or any integral multiple thereof within a single maturity.

The Bonds will be dated the date of their initial delivery, and will mature on the dates and in the amounts set forth on pages i and ii of this Official Statement. Interest on the Bonds is payable semiannually on each February 1 and August 1, beginning August 1, 2010, at the rates set forth on pages i and ii of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. Principal of the Bonds is payable on August 1, in the years and in the amounts set forth on pages i and ii of this Official Statement.

The principal of and interest on the Bonds are payable by the City’s Bond Registrar, currently the fiscal agent of the State of Washington (currently The Bank of New York Mellon in New York, New York), to DTC, which is obligated in turn to remit such payments to its participants for subsequent disbursement to beneficial owners of the Bonds, as described under “Book-Entry Transfer System” and in Appendix C.

* Preliminary, subject to change.

Designation of the 2010A Bonds as Build America Bonds The City has made irrevocable elections to have Section 54AA of the Internal Revenue Code of 1986, as amended (the “Code”), apply to the 2010A Bonds so that the 2010A Bonds are designated “Build America Bonds,” and furthermore to have subsection 54AA(g) of the Code apply to the 2010A Bonds so that the 2010A Bonds are treated as “qualified bonds” with respect to which the City will be allowed a credit payable by the U.S. Treasury to the City pursuant to Section 6431 of the Code in an amount equal to 35 percent of the interest payable on the 2010A Bonds on each interest payment date. As a result of these elections, interest on the 2010A Bonds is not excludable from gross income of owners of the 2010A Bonds for federal income tax purposes, and owners of the 2010A Bonds will not be allowed any federal tax credits as a result of ownership or receipt of interest payments on the 2010A Bonds. See “Legal and Tax Information—Tax Matters—2010A Bonds” herein. The obligation of the U.S. Treasury under Section 6431 of the Code to make direct payments to the City in respect of interest payments on the 2010A Bonds does not constitute a full faith and credit guarantee of the 2010A Bonds by the United States of America.

Federal Credit Payments for Build America Bonds Federal credit payments expected to be received by the City in respect of the 2010A Bonds are a component of General Fund revenues.

The Code establishes certain ongoing requirements that must be met subsequent to the delivery of the 2010A Bonds in order for the City to continue to receive federal credit payments. Many of these requirements are identical to those applicable to the 2010B Bonds, such as requirements relating to the use and expenditure of the available project proceeds of the 2010A Bonds, yield and other restrictions on investments of available project proceeds.

The Internal Revenue Service has advised that, in general, the federal credit payments made in respect of Build America Bonds such as the 2010A Bonds are payments that are treated as overpayment of tax. Accordingly, rules relating to overpayments of tax, such as credits against liabilities in respect of an internal revenue tax and offsets, interest on overpayments of tax and limitations on credits or refunds of overpayments of tax also apply to the federal credit payments made in respect of Build America Bonds.

Noncompliance by the City with any of the provisions required to claim the federal credit payments, or an internal revenue tax liability of the City (such as a federal payroll tax liability) against which federal credit payments may be offset, could result in the City not receiving expected federal credit payments.

The City has authorized the Director of Finance to take such actions as are necessary or appropriate for the City to receive from the U.S. Treasury the applicable federal credit payments in respect of the 2010A Bonds, such as the timely filing with the Internal Revenue Service of Form 8038-CP-“Return for Credit Payments to Issuers of Qualified Bonds” in the manner prescribed by Internal Revenue Service Notice 2009-26. The City also has covenanted in the Ordinance that it will not take or permit to be taken on its behalf any action that would adversely affect the entitlement of the City to receive from the United States Treasury the applicable federal credit payments in respect of the 2010A Bonds. The City has covenanted to comply with the provisions of the Code compliance with which would result in the interest on the 2010A Bonds being excluded from gross income for federal income tax purposes but for an irrevocable election to have Section 54AA of the Code apply to the 2010A Bonds.

Redemption of Bonds Optional Redemption—2010A Bonds. The City reserves the right and option to redeem the 2010A Bonds prior to their stated maturity dates at any time, as a whole or in part, at a price of par plus the Make-Whole Premium, if any, together with accrued interest to the date fixed for redemption.

“Make-Whole Premium” means, with respect to any redemption date for a particular 2010A Bond, the excess, if any, of (i) the sum of the present value of the remaining scheduled payments of principal of and interest on

such 2010A Bond, not including any portion of those payments of interest accrued and unpaid as of such redemption date, discounted to such redemption date on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the “Treasury Rate” plus 25 basis points, over (ii) the principal amount of such 2010A Bond.

“Treasury Rate” means, with respect to any redemption date for a particular 2010A Bond, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity of the Comparable Treasury Issue, assuming that the Comparable Treasury Issue is purchased on the redemption date for a price equal to the Comparable Treasury Price, as calculated by the Designated Investment Banker.

“Comparable Treasury Issue” means, with respect to any redemption date for a particular 2010A Bond, the United States Treasury security or securities selected by the Designated Investment Banker that has an actual or interpolated maturity comparable to the remaining average life of such 2010A Bond, and that would be utilized in accordance with customary financial practice in pricing new issues of debt securities of comparable maturity to the remaining average life of such 2010A Bond.

“Comparable Treasury Price” means, with respect to any redemption date for a particular 2010A Bond: (i) the most recent yield data for the applicable United States Treasury maturity index from the Federal Reserve Statistical Release H.15 Daily Update (or any comparable or successor publication) reported, as of 11:00 a.m., New York City time, on the Valuation Date; or (ii) if the yield described in (i) above is not reported as of such time or the yield reported as of such time is not ascertainable, the average of four Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or if the Designated Investment Banker obtains fewer than four Reference Treasury Dealer Quotations, the average of all quotations obtained by the Designated Investment Banker.

“Designated Investment Banker” means one of the Reference Treasury Dealers appointed by the City.

“Reference Treasury Dealer” means each of four firms, specified by the City from time to time, that are primary United States Government securities dealers in the City of New York (each, a “Primary Treasury Dealer”); provided, that if any of them ceases to be a Primary Treasury Dealer, the City will substitute another Primary Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date for a particular 2010A Bond, the average, as determined by the Designated Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the Valuation Date.

“Valuation Date” means the third business day preceding the redemption date.

Extraordinary Optional Redemption—2010A Bonds. The City reserves the right and option to redeem the 2010A Bonds prior to their stated maturity dates upon the occurrence of an Extraordinary Event, as a whole or in part, at a price of par plus the Extraordinary Redemption Premium, if any, together with accrued interest to the date fixed for redemption.

An “Extraordinary Event” will have occurred if a material adverse change has occurred to Section 54AA or Section 6431 of the Code (as such Sections were added by Section 1531 of the American Recovery and Reinvestment Act of 2009 pertaining to “Build America Bonds”) pursuant to which the City’s 35 percent direct payments from the United States Treasury in respect of interest on the 2010A Bonds are reduced or eliminated.

“Extraordinary Redemption Premium” means, with respect to any redemption date for a particular 2010A Bond, the excess, if any, of (i) the sum of the present value of the remaining scheduled payments of principal of and interest on such 2010A Bond, not including any portion of those payments of interest accrued and unpaid as of such redemption date, discounted to such redemption date on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the “Treasury Rate” plus 100 basis points, over (ii) the principal amount of such 2010A Bond.

Mandatory Redemption. If not previously redeemed as described above or purchased under the provisions as described below, the ____ Term Bonds due on August 1, ____, will be called for redemption at a price of par, plus accrued interest to the date fixed for redemption, on August 1 in the years and amounts as follows:

TERM BOND TERM BOND TERM BOND Years Amounts Years Amounts Years Amounts

* * * * Maturity.

If the City redeems ____ Term Bonds under the optional or extraordinary optional redemption provisions described above or purchases or defeases ____ Term Bonds, the ____ Term Bonds of such series and maturity so redeemed, purchased or defeased (irrespective of their actual redemption or purchase prices) will be credited at the par amount thereof against one or more scheduled mandatory redemption amounts for those _____ Term Bonds in the manner described below regarding the selection of Bonds for redemption.

Selection for Redemption—2010A Bonds. If fewer than all of the 2010A Bonds are to be redeemed prior to maturity, the City will select the maturity or maturities to be redeemed. If fewer than all of the bonds of a single maturity of 2010A Bonds are to be redeemed prior to maturity, then: (i) if such 2010A Bonds are in book-entry form at the time of such redemption, the Bond Registrar is required to instruct DTC to instruct the DTC Participants to select the specific 2010A Bonds for redemption pro rata within each maturity, and neither the City nor the Bond Registrar will have any responsibility to ensure that DTC or the DTC Participants properly select such 2010A Bonds for redemption, and (ii) if such 2010A Bonds are not in book-entry form at the time of such redemption, on each redemption date, the Bond Registrar is required to select the specific 2010A Bonds for redemption pro rata within each maturity.

The portion of any 2010A Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or any integral multiple thereof, to be selected, as the case may be, by DTC in accordance with the Letter of Representations or by the Bond Registrar in such manner as the Bond Registrar in its discretion may deem to be fair and appropriate.

Selection for Redemption— 2010B Bonds. If fewer than all of the 2010B Bonds are to be redeemed prior to maturity, the City will select the maturity or maturities to be redeemed. If fewer than all of the bonds of a single maturity of 2010B Bonds are to be redeemed prior to maturity, then: (i) if such 2010B Bonds are in book-entry form at the time of such redemption, DTC is required to select the specific 2010B Bonds in accordance with the Letter of Representations, and

(ii) if such 2010B Bonds are not in book-entry form at the time of such redemption, on each redemption date, the Bond Registrar is required to select the specific 2010B Bonds for redemption by lot or in such manner as the Bond Registrar in its discretion may deem to be fair and appropriate.

The portion of any 2010B Bond of a denomination more than $5,000 to be redeemed will be in the principal amount of $5,000 or any integral multiple thereof, to be selected, as the case may be, by DTC in accordance with the Letter of Representations or by the Bond Registrar in such manner as the Bond Registrar in its discretion may deem to be fair and appropriate.

Notice of Redemption. Notice of any intended redemption of Bonds will be given not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice. The requirements of this section will be deemed to have been fulfilled when notice is mailed, whether or not it actually is received by the owner of any Bond. As long as the Bonds are held in book-entry form, notices will be given in accordance with procedures established by DTC. See “Description of the Bonds—Book-Entry Transfer System” and Appendix C.

In the case of an optional redemption, the notice may state that the City retains the right to rescind the redemption notice and the related optional redemption of the Bonds by giving a notice of rescission to the affected registered owners at any time prior to the scheduled optional redemption date. Any notice of optional redemption that is so rescinded will be of no effect, and the Bonds for which the notice of optional redemption has been rescinded will remain outstanding.

Effect of Redemption. Interest on Bonds called for redemption will cease to accrue on the date fixed for redemption unless the Bonds called are not redeemed when presented pursuant to the call.

No Acceleration of the Bonds The Bonds are not subject to acceleration upon the occurrence of a default. The City, therefore, would be liable only for principal and interest payments as they become due. In the event of multiple defaults in payment of principal of or interest on the Bonds, the registered owners would be required to bring a separate action for each such payment not made. If the City encounters difficulties in making timely payment of debt service on its various general obligations, this could give rise to a difference in interests between registered owners of earlier and later maturing Bonds.

Purchase The City reserves the right to purchase in the open market any of the Bonds at any time at any price acceptable to the City plus accrued interest to the date of purchase.

Book-Entry Transfer System Book-Entry Bonds. DTC will act as initial securities depository for the Bonds. The ownership of one fully registered Bond for each maturity of each series of the Bonds, as set forth on pages i and ii of this Official Statement, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix C for additional information. As indicated therein, certain information in Appendix C has been provided by DTC. The City makes no representation as to the accuracy or completeness thereof. Purchasers of the Bonds should confirm this information with DTC or its participants.

Termination of Book-Entry Transfer System. If DTC resigns as the securities depository and the City is unable to retain a qualified successor to DTC, or if the City determines that a continuation of the book-entry transfer system is not in the best interest of the City, the City will deliver at no cost to the beneficial owners of the Bonds or their nominees Bonds in registered certificate form, in the denomination of $5,000 or any integral multiple thereof within a single maturity. Thereafter, the principal of the Bonds will be payable upon due presentment and surrender thereof at the principal office of the Bond Registrar. Interest on the Bonds will be

payable by check or draft mailed by the Bond Registrar on the interest payment date to the registered owners at the address appearing upon the Bond Register on the 15th day of the month preceding an interest payment date, or, at the written request of a registered owner of $1,000,000 or more in aggregate principal amount of Bonds, by wire transfer to an account in the United States designated by such registered owner in writing prior to the Record Date. The Bonds then will be transferable as provided in the Bond Legislation.

Refunding or Defeasance of Bonds The City may issue refunding obligations or use money available from any other lawful source to redeem, retire, release, refund, or defease the Bonds (the “Defeased Bonds”). If sufficient money and/or Government Obligations (taking into account known earned income from the investment thereof) are set aside in a special fund pledged irrevocably to the redemption, retirement, release, refunding, or defeasance of the Defeased Bonds (the “Trust Account”), then all right and interest of the owners of the Defeased Bonds in the covenants of the Bond Legislation and in the fund and accounts pledged to the payment of the Defeased Bonds will cease and become void. Such owners thereafter will receive payment of the principal of and interest or redemption price on the Defeased Bonds from the Trust Account.

The term “Government Obligations” has the meaning given in chapter 39.53.010 RCW, as amended, currently: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, and bank certificates of deposit secured by such obligations; (ii) bonds, debentures, notes, participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank system, the Export-Import Bank of the United States, Federal Land Banks or the Federal National Mortgage Association; (iii) public housing bonds and project notes fully secured by contracts with the United States; and (iv) obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, to the extent insured or to the extent guaranteed as permitted under any other provision of State law.

After the establishing and full funding of such a Trust Account, the City then may apply any money in any other fund or account established for the payment or redemption of the Defeased Bonds to any lawful purposes as it may determine.

If the City defeases any of the 2010A Bonds, such 2010A Bonds may be deemed to be retired and “reissued” for federal income tax purposes as a result of the defeasance. See “Legal and Tax Information—Tax Matters—2010A Bonds—Disposition or Retirement.”

USE OF PROCEEDS

The proceeds of the Bonds will be used to (i) pay for part of the costs of various projects, (ii) refund certain outstanding bonds of the City (the “Refunded Bonds”), as described below under “Refunding Plan,” and (iii) pay the costs of issuing the Bonds and refunding the Refunded Bonds.

Refunding Plan If market conditions are favorable, a portion of the proceeds of the 2010B Bonds will be used to advance refund all or a portion of the City’s outstanding callable Limited Tax General Obligation Bonds, 2001 (the “2001 Refunded Bonds”), and a portion of the City’s outstanding callable Limited Tax General Obligation Improvement and Refunding Bonds, 2002 (the “2002 Refunded Bonds” and together with the 2001 Refunded Bonds, the “Refunded Bonds”) as shown below, to realize debt service savings. The Refunded Bonds will be called on the dates and at the redemption prices shown in the table below.

REFUNDED BONDS Redemption Maturity Par Price as Redemption CUSIP Date Amount($ ) Coupon(%) Percent of Par Date Numbers Limited Tax General Obligation Bonds, 2001 (Various Purposes) Serials 08/10/2012 3,655,000 5.000 100 08/01/2011 812626HM4 08/10/2013 3,835,000 5.000 100 08/01/2011 812626HN2 08/10/2014 4,040,000 5.000 100 08/01/2011 812626HP7 08/10/2015 4,255,000 5.250 100 08/01/2011 812626HQ5 08/10/2016 4,485,000 5.375 100 08/01/2011 812626HR3 08/10/2017 4,490,000 5.375 100 08/01/2011 812626HS1 08/10/2018 4,745,000 5.375 100 08/01/2011 812626HT9 08/10/2019 5,010,000 5.000 100 08/01/2011 812626HU6 08/10/2020 5,280,000 5.050 100 08/01/2011 812626HV4 08/10/2021 5,585,000 5.100 100 08/01/2011 812626HW2 08/10/2022 3,110,000 5.000 100 08/01/2011 812626HX0 08/10/2023 3,290,000 5.000 100 08/01/2011 812626HY8 08/10/2024 3,480,000 5.000 100 08/01/2011 812626HZ5 08/10/2025 3,680,000 5.000 100 08/01/2011 812626JA8 08/10/2026 3,890,000 5.000 100 08/01/2011 812626JB6 Term 08/01/2031 23,060,000 5.100 100 08/01/2011 812626JG5 Subtotal 85,890,000 Limited Tax General Obligation Improvement and Refunding Bonds, 2002 Serials 07/01/2013* 2,855,000 5.000 100 07/01/2012 812626JX8 07/01/2014* 3,000,000 5.000 100 07/01/2012 812626JY6 07/01/2015* 3,140,000 5.000 100 07/01/2012 812626JZ3 07/01/2016* 3,300,000 5.000 100 07/01/2012 812626KA6 07/01/2017* 3,465,000 5.000 100 07/01/2012 812626KB4 07/01/2018 2,330,000 5.000 100 07/01/2012 812626KC2 07/01/2019 2,450,000 5.000 100 07/01/2012 812626KD0 07/01/2020 2,565,000 5.000 100 07/01/2012 812626KE8 07/01/2021 2,700,000 5.125 100 07/01/2012 812626KF5 07/01/2022 2,830,000 5.125 100 07/01/2012 812626KG3 07/01/2023 1,640,000 5.125 100 07/01/2012 812626KH1 Subtotal 30,275,000

Total 116,165,000

* Partial maturities.

Procedure. From a portion of the proceeds of the Bonds, and with other money available, the City will purchase certain direct, noncallable obligations of the United States (“Acquired Obligations”), which will be deposited in the custody of U.S. Bank, National Association, or such other duly appointed successors (the “Refunding Trustee”). The maturing principal of the Acquired Obligations, interest earned thereon and cash, if necessary, will pay the principal of and interest and call premium, if any, on the Refunded Bonds up to and including the respective call dates shown in the table above.

The Acquired Obligations, along with interest earned thereon and cash, if necessary, will be pledged irrevocably to and held in trust for the benefit of the owners of the Refunded Bonds by the Refunding Trustee, pursuant to a Refunding Trust Agreement to be executed by the City and the Refunding Trustee.

The mathematical accuracy of (i) the computations of the adequacy of the maturing principal amounts of and interest on the Acquired Obligations to be held by the Refunding Trustee to pay principal and interest on the

Refunded Bonds as described above, and (ii) the computations supporting the conclusion of Bond Counsel that the 2010B Bonds are not “arbitrage bonds” under Section 148 of the Internal Revenue Code of 1986, as amended (the “Code”), will be verified by Causey, Demgen & Moore, Inc., independent certified public accountants.

Sources and Uses of Funds The proceeds of the Bonds will be applied as follows:

2010A BONDS 2010B BONDS TOTAL SOURCES OF FUNDS Par Amount of Bonds $ - Net Original Issue Premium - Total Sources of Funds $ - $ - $ -

USES OF FUNDS Project Fund Deposit $ - Deposit with Refunding Trustee - Costs of Issuance* - Total Uses of Funds $ - $ - $ - * Includes rating agency fees, financial advisory fees, legal fees, printing costs, and other costs.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

The Bonds are general obligations of the City. The full faith, credit and resources of the City are pledged irrevocably for the annual levy and collection of the taxes pledged to the Bonds and the prompt payment of the principal of and interest on the Bonds. The Bonds are secured by the City’s irrevocable pledge to include in its budget and levy taxes annually within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City on all of the taxable property within the City in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds. The Bonds do not constitute a debt or indebtedness of the State or any political subdivision thereof other than the City.

GENERAL FUND REVENUE SOURCES

The following table sets forth sources of General Fund revenues for the years 2004 through 2008 (in thousands):

GENERAL FUND REVENUE SOURCES ($000)

2008 2007 2006 2005 2004 Taxes General Property $ 238,257 $ 218,563 $ 209,697 $ 204,124 $ 197,921 Retail Sales and Use 171,917 171,846 155,311 146,060 130,961 Business 217,304 220,602 197,955 184,002 167,431 Excise 36,091 76,918 58,572 50,654 38,658 Other 167 183 7,025 4,853 5,107 Penalties and Interest 2,193 3,859 3,004 1,894 1,754 Interfund Business 79,526 78,169 74,799 68,099 60,666 Total Taxes $ 745,455 $ 770,140 $ 706,363 $ 659,686 $ 602,498

License and Permits $ 18,269 $ 22,680 $ 19,953 $ 18,686 $ 13,752 Grants, Shared Revenues and Contributrions 19,725 18,916 21,008 22,910 22,278 Charges for Services 62,548 64,750 52,924 54,387 50,230 Fines and Forfeits 22,110 19,497 18,320 17,023 18,135 Miscellaneous 46,558 62,750 44,389 36,592 39,679

Total General Fund Revenues $ 914,665 $ 958,733 $ 862,957 $ 809,284 $ 746,572 Source: City of Seattle Department of Executive Administration, Central Accounting

Major sources of General Fund revenues are described below.

General Property Taxes The following provides a general description of the City’s authority with regards to ad valorem property taxes and limitations on that authority, the method of determining the assessed value of real and personal property, tax collection procedures, and tax collection information.

Authorized Property Taxes. The City is authorized to levy both “regular” property taxes and “excess” property taxes. (i) Regular Property Taxes. Regular property taxes are subject to constitutional and statutory limitations as to rates and amounts and commonly are imposed by taxing districts for general municipal purposes, including the payment of debt service on limited tax general obligation indebtedness, such as the Bonds. Regular property taxes do not require voter approval except as described below. (ii) Excess Property Taxes. Excess property taxes are not subject to limitation as to rate or amount but must be authorized by a 60 percent approving popular vote, as provided in Article VII, Section 2, of the State Constitution and RCW 84.52.052. To be valid, such popular vote must have a minimum voter turnout of 40 percent of the number who voted at the last City general election, except that one-year excess tax levies also are valid if the turnout is less than 40 percent and the measure receives a number of affirmative votes equal to or greater than 24 percent of the number who voted at the last City general election. Excess levies may be imposed without a popular vote when necessary to prevent impairment of the obligations of contracts when ordered to do so by a court of last resort.

Regular Property Tax Limitations. Regular property tax levies are subject to rate limitations and amount limitations, as described below, and to the uniformity requirement of Article VII, Section 1, of the State Constitution, which specifies that a taxing district (such as the City) must levy the same rate throughout the

district. Aggregate property taxes may vary within the City due to the overlapping of different taxing districts within the City. See “Representative Overlapping Levy Rates for City Residents, Collection Year 2008” for an example of the levy rates of taxing districts that overlap within the City.

Information relating to regular property tax limitations and requirements is based on existing statutes and constitutional provisions. Changes in such laws could alter the impact of other interrelated tax limitations on the City. Under existing laws and circumstances, none of the property tax limitations currently affect the ability of the City to levy property taxes at rates sufficient to pay the debt service on the Bonds. See “Initiative and Referendum.” (i) Maximum Regular Property Tax Rate Limitations. The City’s effective maximum regular property tax levy for municipal purposes, including the payment of debt service on limited tax general obligation bonds such as the Bonds, is $3.60 per $1,000 of assessed value. This maximum rate limitation is derived from two statutes: RCW 84.52.043 limits the regular property tax levy of the City to $3.375/$1,000, and RCW 41.16.060 allows an additional $0.225/$1,000 as part of the regular tax levy for any municipal purpose if not required to fund certain firefighter pension programs. Based on the most recent actuarial valuation of the City’s firefighter pension programs, the City is not required to levy the additional $0.225/$1,000 for these programs, making that taxing authority available for general municipal purposes. However, the City has allocated a percentage of the regular tax levy to fund firefighter pension programs. Certain regular taxes are not included within the $3.60/$1,000 limitation. The limitation is exclusive of any levy for the maintenance of a local improvement guaranty fund, which may not exceed the greater of (a) 12 percent of the outstanding obligations guaranteed by the fund or (b) the total amount of delinquent assessments and interest accumulated on the delinquent assessments (RCW 35.54.060). The limitation also is exclusive of certain voter-approved regular property taxes: (a) up to $0.50/$1,000 for emergency medical services (authorized by RCW 84.52.069) and (b) up to $0.50/$1,000 to finance affordable housing for very low income households (authorized by RCW 84.52.105). The City currently does not levy taxes for emergency medical services, but King County (the “County”) is imposing such a tax within the County, including within the City. The City imposes an affordable housing tax levy under RCW 84.52.105 which was $0.08128/$1,000 in 2009. (ii) One Percent Aggregate Regular Property Tax Levy Rate Limitation. Aggregate regular property tax levies by the State and all taxing districts, except port districts and public utility districts, are subject to a rate limitation of one percent of the true and fair value of property (or $10.00/$1,000). This requirement is imposed by Article VII, Section 2, of the State Constitution and RCW 84.52.050. (iii) $5.90/$1,000 Aggregate Regular Property Tax Levy Rate Limitation. Within the one percent limitation described above, aggregate regular property tax levies by all taxing districts except the State, port districts and public utility districts are subject to a rate limitation of $5.90/$1,000 of assessed value by RCW 84.52.043(2). This limitation is exclusive of the voter-approved levies for emergency medical services, for very low income housing and for acquiring conservation futures. If aggregate regular property tax levies exceed the one percent or $5.90/$1,000 limitations, then, in order to bring the aggregate levy into compliance, the voter-approved levies described above as being excluded from the $5.90/$1,000 limit and levies imposed by the County at the request of “junior” taxing districts within the affected area are reduced or eliminated according to a detailed prioritized list (RCW 84.52.010). Junior taxing districts are defined by RCW 84.52.043 as taxing districts other than the State, counties, cities, towns, road districts, port districts, and public utility districts. (iv) Regular Property Tax Increase Limitation. The regular property tax increase limitation (Chapter 84.55 RCW), limits the total dollar amount of regular property taxes levied by an individual local taxing district such as the City to the amount of such taxes levied in the highest of the three most recent years multiplied by a limit factor, plus an adjustment to account for taxes on new construction, improvements and State-assessed property at the previous year’s rate. The limit factor is 101 percent, unless a greater amount is approved by a simple majority of the voters. If a newly created taxing district is authorized to

levy regular property taxes, it can initiate its levy at the maximum permitted statutory levy rate, unless that rate would exceed any of the limitations described above. RCW 84.55.092 allows the property tax levy to be set at the amount that would be allowed if the tax levy for taxes due in each year since 1986 had been set at the full amount allowed under Chapter 84.55 RCW. This is sometimes referred to as “banked” levy capacity. A taxing district such as the City may levy an amount that is greater than what otherwise would be allowed by the tax increase limitation in chapter 84.55 RCW only with the approval of a majority of its voters. This is known as a “levy lid lift.” It does not authorize the taxing district to exceed the constitutional and statutory tax rate limitations described above. Under RCW 84.55.050, a levy lid lift may be for an indefinite period of time or for a limited period of time, may specify a rate of increase other than the limit factor for up to six consecutive years (cities, towns and counties), or may be restricted to satisfaction of a limited purpose. These features, in any combination, may be included in the proposition presented to voters at the discretion of the taxing district. The regular property tax increase limitation applies to the total dollar amount levied rather than to levy rates. Therefore, if a taxing district levies within the limits described above (without a voter-approved levy lid lift), increases in the assessed value of all property in the taxing district (excluding new construction, improvements and State-assessed property) that exceed the rate of growth in taxes allowed by the limit factor result in decreased regular tax levy rates. On the other hand, decreases in the assessed value of all property in the taxing district (including new construction, improvements and State-assessed property) or increases in such assessed value that are less than the rate of growth in taxes imposed, among other events, may result in increased regular tax levy rates.

Assessed Value Determination. The County Assessor (the “Assessor”) determines the value of all real and personal property throughout the County (including the City) that is subject to ad valorem taxation, with the exception of certain public service properties for which values are determined by the State Department of Revenue. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the State Department of Revenue.

For tax purposes the assessed value of property is 100 percent of its true and fair value. Since 1996, all property in the County has been subject to on-site appraisal and revaluation every six years, and is revalued each year based on annual market adjustments. Personal property is valued each year based on affidavits filed by the property owner. The property is listed by the Assessor on a roll at its current assessed value and the roll is filed in the Assessor’s office. The Assessor’s determinations are subject to revision by the County Board of Appeals and Equalization and, if appealed, subject to further revision by the State Board of Tax Appeals. At the end of the assessment year, in order to levy taxes payable the following year, the City Council receives the Assessor’s final certificate of assessed value of property within the City.

Tax Collection Procedure. Property taxes are levied in specific amounts by the respective taxing districts. Certain taxing districts must levy their taxes through the county legislative authority, and other taxing districts (including the City) are authorized to levy taxes directly. The levies must be certified to the Assessor by November 30. The rate for all taxes levied for all taxing districts is determined, calculated and fixed by the Assessor based upon the assessed value of the property within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district on a tax roll which contains the total amount of taxes levied and to be collected. The tax roll is delivered to the King County Treasury Division Manager (an appointed official) who creates a tax account for each taxpayer and is responsible for the collection of taxes due to each account. All taxes are due and payable on the 30th of April of each tax year, but if the amount due from a taxpayer exceeds $50, one-half may be paid then and the balance must be paid no later than October 31 of that year. The methods of giving notice of payment of taxes due, accounting for the money collected, dividing the taxes collected among the various taxing districts, giving notice of delinquency, and collection procedures are all covered by detailed statutes. Subject to Internal Revenue Service liens on personal property filed prior to the levy of taxes and possibly the “Homestead Exemption,” the lien for property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation. By law the County may commence foreclosure of a tax lien on real property after three years have

passed since the first delinquency. State courts have not decided if the homestead law (Chapter 6.13 RCW) gives the occupying homeowner a right to retain the first $125,000 of proceeds of a forced sale of a family residence for delinquent general property taxes. The United States Bankruptcy Court for the Western District of Washington has held that the Homestead Exemption applies to the lien for property taxes, while the State Attorney General has taken the position that it does not.

The following tables set forth financial information regarding the City’s tax collection record, ad valorem levy rates and an example of representative overlapping levy rates for one levy code area of the City.

CITY PROPERTY TAX COLLECTION RECORD Assessed Ad Valorem Tax Collected Total Collected Collection Year Value Tax Levy(1) Year Due(2) As of 12/31/09(2)

2010 $123,684,314,249 $343,232,198 N/A N/A 2009 137,195,493,756 335,813,292 98.12% 98.12% 2008 121,621,130,668 314,771,853 98.20% 99.48% 2007 106,208,487,451 313,522,925 98.28% 99.82% 2006 95,706,633,290 273,853,601 98.19% 99.98% 2005 88,278,105,726 268,168,810 98.20% 100.00% (1) The General Levy includes nonvoted regular levies and voted levy lid lifts for the Pike Place Market, low-income housing, families and education, parks and open space, fire facilities, and transportation. (2) Based on adjusted levy amounts. Source: King County Department of Assessments and Finance Department

AD VALOREM LEVY RATES AND LEVY AMOUNTS OF THE CITY

Levy Rates (Per $ 1000 of Assessed Value) Levy Amounts Collection Unlimited Unlimited Year General(1) Tax Bonds Total G eneral (2) Tax Bonds Total

2010 $2.78928 $0.13564 $2.92492 $343,232,198 $16,568,310 $359,793,734 2009 2.44741 0.13386 2.58127 335,813,292 18,251,236 354,064,528 2008 2.60108 0.17257 2.77365 314,771,853 20,740,612 335,512,465 2007 2.96926 0.25152 3.22078 313,522,925 26,352,938 339,875,863 2006 2.87983 0.27801 3.15784 273,853,601 26,217,139 300,070,740 2005 3.05240 0.30104 3.35344 268,168,810 26,203,121 294,371,931 (1) The General Levy Rate for taxes collected in 2005 through 2009 included a special voted very low-income housing regular levy of $0.06255 which does not count against the City’s general regular property tax levy rate limit of $3.60 per $1,000 of assessed value. (2) The General Levy includes nonvoted regular levies and voted levy lid lifts for the Pike Place Market, low-income housing, families and education, parks and open space, fire facilities, and transportation. Source: King County Department of Assessments

REPRESENTATIVE OVERLAPPING LEVY RATES FOR CITY RESIDENTS COLLECTION YEAR 2010 (Per $1,000 of Assessed Value) State Schools $2.22253 Seattle School District No. 1 1.98477 The City 2.92492 King County 1.28499 Port of Seattle 0.21597 Emergency Medical Services 0.30000 Flood Zone 0.10514 Ferry District 0.00348

Total $9.04180 Note: Levy rate paid by taxpayers within the City’s levy code area with the largest assessed value. This table includes both regular and excess property tax levies. Excess tax levies are not subject to the one percent aggregate regular property tax levy limitation described under “Regular Property Tax Limitations.” Source: King County Department of Assessments

Major Taxpayers. The following table presents those taxpayers within the City with the highest 2009 assessed value for tax collection year 2010.

2010 PRINCIPAL PROPERTY TAXPAYERS (OVER $100 MILLION ASSESSED VALUE) Percentage of Total Assessed Taxpayer(1) Type of Business Assessed Value ($ ) Value (%)

Union Square Limited Partnership Real Estate 542,731,107 0.44 The Boeing Company Aerospace 528,651,080 0.43 Wright-Runstad & Co. Real Estate 446,715,920 0.36 Qwest Corporation Inc. Communication 421,809,183 0.34 Columbia Center Property Real Estate 382,294,100 0.31 City Centre Associates JV Real Estate 338,484,599 0.27 Martin Selig Real Estate 296,315,390 0.24 999 Third Avenue Property Real Estate 243,145,000 0.20 Northwestern Mutual Life(2) Real Estate 207,764,452 0.17 Block 24 Seattle LTD LP (Gerald Hines) Real Estate 206,600,830 0.17 Puget Sound Energy-Gas/Electric Utility 183,406,686 0.15 Seattle Sheraton Hospitality 164,817,127 0.13 Starwood Hotel & Resorts (Westin Hotel) Hospitality 153,568,200 0.12 W2007 Seattle(3) Real Estate 151,300,400 0.12 Tishman Speye(4) Real Estate 141,296,800 0.11 Northgate Shopping Mall Retail 130,079,000 0.11 Safeway Retail 125,263,576 0.10 Westlake Center Association Real Estate 111,364,582 0.09 Virginia Mason Hospital Health Care 108,607,071 0.09 Total 4,884,215,103 3.95

Total City Assessed Value for Tax Collection Year 2010 123,684,314,249

(1) The above listing includes taxpayers paying real and personal property taxes as property owners. It does not include governmental entities or taxpayers paying leasehold excise taxes based on rental payments for property they lease from governments. (2) Formerly Washington Mutual-Art Museum. (3) Formerly Archon Group LP. (4) Formerly WA-Second&Seneca LLC. Source: King County Department of Assessments

Retail Sales and Use Taxes A sales tax of 8.8 percent is charged on all gross retail sales in the City (excluding food products for off- premises consumption and certain other exempt items). The aggregate 8.8 percent tax rate is broken down as follows: 6.5 percent to the State, 0.85 percent to the City, 0.15 percent to the County, 0.8 percent to the County to support public transportation, 0.4 percent to the Central Puget Sound Regional Transit Authority, and 0.1 percent to support criminal justice purposes. The first ten percent of the revenues generated by the 0.1 percent criminal justice tax is allocated to the County. The remaining 90 percent of the criminal justice tax revenues is allocated to the County and cities within the County based on population. The proceeds of the

0.1 percent criminal justice tax may not be used to replace pre-existing funding. The State is responsible for collecting all revenues and remits the City’s portion of the taxes on a monthly basis.

The use tax supplements the sales tax by taxing the use in the State of certain services and by taxing the use of personal property on which a sales tax has not been paid (such as items purchased in a state that imposes no sales tax).

Business Taxes The City imposes a tax for the act or privilege of engaging in business activities. The City imposes this business and occupation tax at varying rates, depending on the class of business, based on the value of products, gross proceeds of sales or gross income of the business, as applicable. Certain businesses are exempted, and deductions and credits are allowed. The maximum rate at which cities may levy the business and occupation tax is two-tenths of one percent, but cities whose tax rates were higher than this level when the limit was imposed can maintain their current tax rates. Some additional rate increases are possible within the parameters set by State law. The City’s tax is in addition to the business and occupation tax imposed by the State. The City also imposes a six percent utility business and occupation tax on the natural gas, telephone and steam utilities and a ten percent utility tax on cable television utilities within the City. These utility taxes are not subject to the 0.2 percent rate limit.

Real Estate Excise Taxes The City imposes a real estate excise tax of one-half of one percent on sales of real property in the City. The proceeds are used for qualifying capital projects. A portion of the revenue is used for the payment of certain of the City’s general obligation bonds issued to finance those projects. The City’s tax is in addition to the current State real estate excise tax of 1.28 percent.

Business Taxes on City Utilities The City imposes a utility business and occupation tax, based on gross income, of six percent on the City- owned electric utility, 11.5 percent on the City-owned drainage utility, 11.5 percent on the City-owned solid waste utility, 12 percent on the City-owned wastewater utility, and 15.54 percent on the City-owned water utility.

Miscellaneous In 2008, parking fees and rents accounted for approximately 44 percent of miscellaneous revenues.

Legislative Changes Affecting City Business Taxes Recent and pending changes in tax legislation at both the state and national level could affect City revenues. The following are identified as pending developments in the law, but other legislation affecting the City’s taxing power may be pending or may arise at any time.

Streamlined Sales Tax Project. Washington and about 22 other states are participating in a “streamlined sales tax” project to enact similar definitions and administrative provisions for retail sales taxes. The purpose of the project is to regularize sales taxes nationwide in order to make it possible for Congress to allow sales taxes to be imposed on Internet and mail-order commerce across state lines. Many Internet retailers have agreed to voluntarily collect sales taxes for states participating in the streamlined system. Washington adopted the new approach as of July 1, 2008. The most significant aspect of the system is destination-based sourcing, which shifts revenue from jurisdictions from which retail goods are shipped to jurisdictions where those goods are delivered. State projections suggested there would be a small net loss for the City, but actual results showed that the City experienced a small increase. Destination-based sourcing will benefit the City in the long run as more Internet sales are subject to tax.

Business and Occupation Tax Model Ordinance. Legislation passed by the State Legislature in 2003 required Washington cities that impose gross receipts business and occupation (“B&O”) taxes to adopt provisions of a “model ordinance” governing those local taxes in order to eliminate multiple taxation of the same event or activity. The City adopted the “model ordinance” effective January 1, 2002. Adoption of the ordinance caused very little impact on the City’s revenues. However, the State legislation also contained a provision for the assignment of revenue that became effective in 2008, which was projected to reduce B&O revenues by about $23 million annually. To offset this, the City implemented a complementary square footage tax as of January 1, 2008. Because the new tax structure is designed so that no business will pay more taxes under the new system than under the old system, the City projected a net revenue loss of about $3 million for 2008. Actual results for 2008 suggest that the new system generated almost exactly the same revenue as the old system would have, but results for the first three quarters of 2009 imply that the original estimate of the loss may be correct, as more businesses become familiar with the new system. This projected loss has been incorporated into the City’s revenue estimates.

DEBT INFORMATION

The power of the City to contract debt of any kind is controlled and limited by State law. All debt must be incurred in accordance with detailed budget procedures and paid from identifiable receipts and revenues. The budget must be balanced for each fiscal year. It is unlawful for an officer or employee of the City to incur a current liability in excess of budgetary appropriations.

General Obligation Debt Capacity Under State statutes, City unlimited tax general obligation indebtedness backed by excess property taxes (subject to 60 percent approval by voters at an election with at least 40 percent turnout) is limited to 2.5 percent of assessed value for general purposes, 2.5 percent for utility purposes and 2.5 percent for open space/park facilities. Within the 2.5 percent of assessed value for general purposes, the City may, without a vote of the electors, incur general obligation indebtedness, including leases, in an amount not to exceed 1.5 percent of assessed value. The combination of unlimited tax and limited tax general obligation debt for general purposes cannot exceed 2.5 percent of assessed value and for all purposes may not exceed 7.5 percent of assessed value. These State laws are subject to constitutional limits.

The City may incur debt within the constitutional and statutory limitations on indebtedness without a vote of the electorate in a number of ways. The most common are general obligation bonds, conditional sales contracts, and financing leases with an option to purchase.

Debt Capacity and Debt Service Summaries The following table sets forth the computation of the City’s estimated legal debt capacity as of December 31, 2009, based on a total assessed value for collection of taxes in 2010 of $123,684,314,249. Giving effect to the issuance of the Bonds, there remains $1,109,521,870* of unlimited tax general obligation debt capacity for general purposes and $933,729,236* of limited tax general obligation debt capacity. The subsequent tables show the annual principal and interest due on the Bonds and all outstanding general obligations of the City and the City’s net direct and overlapping debt and debt ratios.

* Preliminary, subject to change.

ESTIMATED LEGAL DEBT CAPACITY(1) (as of December 31, 2009) [

General Capacity Special Purpose Capacity Assessed Value as of February 24, 2010(2) AB $123,684,314,249 Voted Voter-Approved Voter-Approved Total Non-voted (2.5% less O pen Space and Parks Utility Purpose Capacity (1.5% of AV) Column A) (2.5% of AV) (2.5% of AV) (7.5% of AV)

2.5% of AV $ - $ 3,092,107,856 $ 3,092,107,856 $ 3,092,107,856 $ 9,276,323,569 1.5% of AV 1,855,264,714 (1,855,264,714) - - -

$ 1,855,264,714 $ 1,236,843,142 $ 3,092,107,856 $ 3,092,107,856 $ 9,276,323,569 Debt Outstanding(3) The Bonds(4) $ (201,425,000) $ - $ - $ - $ (201,425,000) Outstanding Bonds(5) (695,845,000) (129,715,000) - (3,135,000) (828,695,000) The Refunded Bonds 116,165,000 - - - 116,165,000 Accreted Value of 1998 E Bonds (9,693,588) - - - (9,693,588) Guarantee on PDA bonds(6) (82,501,132) - - - (82,501,132) Compensated Absences(7) (70,035,868) - - - (70,035,868) Total Debt Outstanding(4) $ (943,335,588) $ (129,715,000) $ - $ (3,135,000) $ (1,076,185,588)

Available Net Assets in Redemption and Other Funds(8) $ 11,894,304 $ 2,393,728 $ - $ - $ 14,288,032 Compensated Absences for Sick Leave(7) 9,905,806 - - - 9,905,806 Net Debt Outstanding (4) $ (921,535,478) $ (127,321,272) $ - $ (3,135,000) $ (1,051,991,750)

(4) Legal Debt Margin $ 933,729,236 $ 1,109,521,870 $ 3,092,107,856 $ 3,088,972,856 $ 8,224,331,819

FOOTNOTES TO TABLE: (1) Debt limits are established by State law in RCW 39.36.020 and 35.42.200 within State constitutional limits. See “General Obligation Debt Capacity.” The figures in this table do not include $19.7 million (December 31, 2008) of outstanding City obligations to repay loans from the Washington State Public Works Assistance Account, as the State’s statutory debt limits do not apply to amounts borrowed from state and federal governments under RCW 39.36. However, Public Works Assistance Account indebtedness does count within the limits in Art. VIII of the State Constitution, which prohibits the City’s debt from exceeding 1.5 percent of the assessed value of taxable property without a vote of the people or a total of 5.0 percent of the assessed value of taxable property for general municipal purposes with a vote of the people. (2) RCW 39.36.015 allows incorporated cities to use the “last assessment for city purposes.” This assessment was issued as of February 24, 2010, for taxes payable in 2010. (3) State law and the State Auditor’s Office require that the liabilities for warrants outstanding and other miscellaneous obligations of the General Fund, other tax-supported funds and internal service funds be included as debt in calculating the legal debt margin, except when cash, investments and other cash equivalent assets in any of these individual funds exceed current liabilities. (4) Preliminary, subject to change. (5) Does not include 1998 Series E deferred interest bonds. (6) The City has guaranteed certain Public Development Authority bonds thereby creating contingent obligations. The total amounts outstanding on those bonds are treated here as City debt. Currently the City is contingently liable on debt issued by the Pike Place Market Preservation and Development Authority, the Seattle Indian Services Commission, the Museum Development Authority, and the Seattle-Chinatown International District Preservation Development Authority. (7) As of December 31, 2008. The State Auditor’s Office requires that the liability for compensated absences, to the extent that it is a certain obligation of a determined amount or employee vested, be included as debt in calculating the legal debt margin. All compensated absences except the sick leave estimate meet this criteria. (8) As of December 31, 2008. It does not include available net assets in the Local Improvement Guaranty Fund and the Interfund Notes Payable Fund because special assessment bonds related to them, if any, are not included in the computation of legal debt margin.

SUMMARY OF GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS

Unlimited Tax Limited Tax Unlimited and Limited Outstanding Outstanding (1) The 2010A Bonds(2) The 2010B Bonds(2) Tot a l (2) Total (Including the Bonds)(2) Principal Interest Total Principal Interest Principal Interest(3)(4) Principal Interest(5) Prinicipal Interest(4) To t a l (2)(4) Principal Interest(4) Tot a l (4) 2010$ 11,355,000 $ 5,713,310 $ 17,068,310 $ 46,590,579 $ 32,180,182 $ - $ 1,001,781 $ 730,000 $ 2,037,717 $ 47,320,579 $ 35,219,679 $ 82,540,258 $ 58,675,579 $ 40,932,989 $ 99,608,568 2011 11,835,000 5,204,635 17,039,635 47,487,840 27,219,642 - 3,005,343 2,990,000 6,098,550 50,477,840 36,323,535 86,801,375 62,312,840 41,528,170 103,841,010 2012 12,375,000 4,650,160 17,025,160 46,613,695 25,184,497 - 3,005,343 6,730,000 6,008,850 53,343,695 34,198,690 87,542,385 65,718,695 38,848,850 104,567,545 2013 12,220,000 4,135,266 16,355,266 42,055,360 23,221,297 - 3,005,343 9,790,000 5,806,950 51,845,360 32,033,590 83,878,950 64,065,360 36,168,856 100,234,216 2014 12,030,000 3,636,566 15,666,566 39,229,491 20,695,336 - 3,005,343 9,690,000 5,415,350 48,919,491 29,116,029 78,035,519 60,949,491 32,752,595 93,702,085 2015 12,510,000 3,135,779 15,645,779 32,708,669 18,168,694 - 3,005,343 10,440,000 5,027,750 43,148,669 26,201,787 69,350,456 55,658,669 29,337,566 84,996,235 2016 13,025,000 2,614,754 15,639,754 31,044,547 16,623,475 - 3,005,343 11,235,000 4,610,150 42,279,547 24,238,967 66,518,514 55,304,547 26,853,721 82,158,268 2017 13,560,000 2,065,104 15,625,104 31,956,022 15,182,264 - 3,005,343 11,365,000 4,160,750 43,321,022 22,348,356 65,669,378 56,881,022 24,413,460 81,294,482 2018 13,830,000 1,496,385 15,326,385 30,066,729 13,666,769 - 3,005,343 11,275,000 3,706,150 41,341,729 20,378,262 61,719,990 55,171,729 21,874,647 77,046,375 2019 6,415,000 905,535 7,320,535 31,836,853 12,233,927 - 3,005,343 11,610,000 3,255,150 48,656,853 18,494,419 67,151,272 55,071,853 19,399,954 74,471,807 2020 6,695,000 623,275 7,318,275 30,956,853 10,749,108 5,210,000 3,005,343 7,600,000 2,790,750 43,736,853 16,545,201 60,282,053 50,431,853 17,168,476 67,600,328 2021 7,000,000 322,000 7,322,000 33,839,921 9,461,268 5,180,000 2,758,389 7,950,000 2,486,750 48,649,921 14,706,406 63,356,327 55,649,921 15,028,406 70,678,327 2022 - - - 30,164,822 7,839,242 6,860,000 2,505,087 5,575,000 2,089,250 47,629,822 12,433,578 60,063,400 47,629,822 12,433,578 60,063,400 2023 - - - 24,559,822 6,409,038 11,890,000 2,162,773 4,545,000 1,810,500 41,704,822 10,382,311 52,087,132 41,704,822 10,382,311 52,087,132 2024 - - - 26,466,389 5,206,459 12,600,000 1,551,627 3,230,000 1,583,250 42,906,389 8,341,336 51,247,725 42,906,389 8,341,336 51,247,725 2025 - - - 27,686,389 3,883,540 13,210,000 891,387 3,415,000 1,421,750 31,711,389 6,196,676 37,908,065 31,711,389 6,196,676 37,908,065 2026 - - - 19,681,389 2,502,358 610,000 185,973 3,615,000 1,251,000 23,931,389 3,939,330 27,870,719 23,931,389 3,939,330 27,870,719 2027 - - - 9,536,389 1,526,676 635,000 152,789 3,820,000 1,070,250 14,011,389 2,749,714 16,761,103 14,011,389 2,749,714 16,761,103 2028 - - - 8,361,389 1,057,894 655,000 117,610 4,040,000 879,250 13,081,389 2,054,753 15,136,142 13,081,389 2,054,753 15,136,142 2029 - - - 4,131,389 650,167 680,000 80,406 4,270,000 677,250 9,106,389 1,407,822 10,514,211 9,106,389 1,407,822 10,514,211 2030 - - - 2,710,000 478,470 705,000 41,102 4,510,000 463,750 7,220,000 983,322 8,203,322 7,220,000 983,322 8,203,322 2031 - - - 2,850,000 337,810 - - 4,765,000 238,250 7,615,000 576,060 8,191,060 7,615,000 576,060 8,191,060 2032 - - - 3,000,000 189,910 - - - - 3,000,000 189,910 3,189,910 3,000,000 189,910 3,189,910 2033 - - - 440,000 34,250 - - - - 440,000 34,250 474,250 440,000 34,250 474,250 2034 - - - 465,000 11,625 - - - - 465,000 11,625 476,625 465,000 11,625 476,625 Total $ 132,850,000 $ 34,502,769 $ 167,352,769 $ 604,439,534 $ 254,713,898 $ 58,235,000 $ 41,502,344 $143,190,000 $ 62,889,367 $ 805,864,534 $ 359,105,609 $ 1,164,970,142 $ 938,714,534 $393,608,377 $ 1,332,322,911

(1) Excludes debt service allocable to the Refunded Bonds. Includes debt service on Public Works Trust Fund loans and leases, notes and contracts. (2) Preliminary, subject to change. (3) Preliminary; assumes interest rates ranging from 1.27% to 5.98%. (4) Reflects taxable rates on the 2010A Bonds, but does not reflect the 35 percent interest credit associated with the 2010A Bonds. (5) Preliminary; assumes interest rates ranging from 2.00% to 5.00%.

NET DIRECT AND OVERLAPPING DEBT (Estimated as of December 31, 2009)

Outstanding Direct Debt(1) Unlimited Tax Bonds $ 132,850,000 Limited Tax Bonds(2) 589,373,588 The Bonds - Limited Tax(3) 201,425,000 Less: Cash and Investments in Debt Service Funds(4) (14,288,032) Net Direct Debt(3) $ 909,360,556

Estimated Overlapping Debt(5) King County(6) $ 375,032,115 Port of Seattle 127,454,261 Seattle School District No. 001 328,553,440 Highline School District No. 401 31,098

Total Estimated Overlapping Debt $ 831,070,914

(3) Total Estimated Net Direct and Overlapping Debt $ 1,740,431,470

(1) Excludes public development authority bonds guaranteed by the City, for which the City does not pay debt service, and the Refunded Bonds. (2) Includes outstanding capital lease purchase agreements and the accreted value of the 1998E Bonds. Excludes the Refunded Bonds and Public Works Trust Fund loans. (3) Preliminary, subject to change. (4) As of December 31, 2008. (5) As of December 31, 2009. Allocated to the City according to its share of assessed value, as of December 31, 2008. (6) Excludes limited tax general obligation debt issued for the baseball stadium, sewer revenue bonds and limited sales tax revenue bonds.

CITY BONDED DEBT RATIOS(1) (Assessed Value as of December 29, 2009)

Assessed Value for 2010 Collections(2) $123,684,314,249 2009 Population Estimate(3) 602,000 Assessed Valuation 100% of True and Fair Value Net Direct Debt to Assessed Value 0.74% Net Direct and Overlapping Debt to Assessed Value 1.41% Per Capita Assessed Value 205,456 Per Capita Net Direct Debt $1,511 Per Capita Net Direct and Overlapping Debt $2,891

Net Direct Debt $909,360,556 Net Direct and Overlapping $1,740,431,470 (1) Includes the Bonds; preliminary, subject to change. (2) Source: King County Assessor (3) Source: State of Washington Office of Financial Management’s 2009 estimate

AUTHORIZED INVESTMENTS

Chapter 35.39 RCW permits the investment by cities and towns of their inactive funds or other funds in excess of current needs in the following authorized investments: U.S. Bonds, U.S. certificates of indebtedness, State bonds or warrants, general obligation or utility revenue bonds of any city or town in the State, their own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund, and any other investment authorized by law for any other taxing district. Under Chapter 39.59 RCW, a city or town also may invest in the general obligation bonds of any other state or local government which have at the time of the investment one of the three highest credit ratings of a nationally recognized rating agency and any investments authorized for the State Treasurer. Under Chapter 43.84 RCW, the State Treasurer may invest in obligations of the U.S. Government, its agencies and wholly owned corporations, in State, county, municipal, or school district general obligation bonds within the statutory limitation of indebtedness, in motor vehicle fund warrants, in the obligations of the Federal Home Loan Bank, Fannie Mae and other government- sponsored enterprises, in bankers’ acceptances, in negotiable certificates of deposit of any national or state commercial or mutual savings bank or savings and loan association, and in commercial paper.

Money available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the general government in accordance with City ordinances or resolutions.

Authorized Investments for Bond Proceeds. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the initiating ordinances, resolutions or bond covenants may lawfully prescribe. In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds with portfolios consisting of U.S. Treasury and federally guaranteed agency securities with average maturities of less than four years, municipal securities which have at the time of investment one of the four highest credit ratings of a nationally recognized rating agency, and money market funds consisting of the same, so long as municipal securities held in the fund(s) have at the time of investment one of the two highest credit ratings of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for investment by local governments.

See “The City of Seattle—Financial Management—Investments” herein for a discussion of the City’s current investment policies and practices.

THE CITY OF SEATTLE

The following provides general information about the City.

Municipal Government Incorporated in 1869, the City of Seattle, Washington, is the largest city in the Pacific Northwest and is the County seat. The City’s elected officials include a mayor, nine City Council members and a city attorney. These officials are elected at large to four-year terms. The City provides four utility services funded by rates and charges: electricity, water, drainage and wastewater, and solid waste.

Financial Management City financial management functions are provided by the Department of Finance and the Department of Executive Administration. Dwight D. Dively is the Director of Finance. Mr. Dively is a graduate of Rose- Hulman Institute of Technology, holds a master’s degree from Princeton University in public affairs, and has a Ph.C. in civil engineering from the University of Washington.

Accounting. The accounting and reporting policies of the City conform to generally accepted accounting principles for municipal governments and are regulated by the State Auditor’s Office, which maintains a resident staff at the City to perform a continual current audit as well as the annual post-fiscal year audit of City

financial operations. The Department of Finance maintains general supervision over the financial affairs of the City.

Auditing. The State Auditor is required to examine the affairs of all local governments at least once every three years; the City is audited annually. The examination must include, among other things, the financial condition and resources of the City, compliance with the laws and Constitution of the State, and the methods and accuracy of the accounts and reports of the City. Reports of the State Auditor’s examinations are required to be filed in the office of the State Auditor and in the Department of Finance. The City’s Comprehensive Annual Financial Report may be obtained from the Department of Finance by calling (206) 684-8347. The City’s Comprehensive Annual Financial Report for 2008 is attached as Appendix A.

Municipal Budget. City operations are guided by a budget prepared under the direction of the Mayor by the Department of Finance pursuant to State statute (Chapter 35.32A RCW). The proposed budget is submitted to the City Council by the Mayor each year not later than 90 days prior to the beginning of the next fiscal year. Currently the fiscal year of the City is from January 1 through December 31. The City Council considers the proposed budget, holds public hearings on its contents and may alter and revise the budget at its discretion, subject to the State requirement that budgeted revenues must at least equal expenditures. The City Council is required to adopt the budget at least 30 days before the beginning of the next fiscal year. The 2010 budget was adopted on November 23, 2009.

Investments. The information in this section does not pertain to pension funds, which are administered by the Seattle City Employees’ Retirement System (see “Pension System”), and some debt issuance proceeds that are administered by trustee service providers.

All cash-related transactions for the City, including its utilities, are administered by the Treasury Division of the Department of Executive Administration. City cash is deposited into a single bank account and cash expenditures are paid from a consolidated disbursement account. Investments of temporarily idle cash may be made, according to existing City Council-approved policies, by the Treasury Division in the following securities: (i) U.S. Treasury and agency issues; (ii) bankers’ acceptances sold on the secondary market; (iii) repurchase and reverse repurchase agreements, when structured with securities eligible for purchase and when executed under an approved Master Repurchase Agreement with selected primary dealers; and (iv) commercial paper purchased in the secondary market which has received the highest ratings of at least two nationally recognized rating agencies.

State statutes, City ordinances and Department of Executive Administration policies require the City to minimize market risks by safekeeping all purchased securities according to governmental standards for public institutions and by maintaining safety and liquidity above consideration for returns. Current City investment policies require periodic reporting about the City’s investment portfolio to the Mayor and the City Council. The City’s investment operations are reviewed by the City Auditor and by the State Auditor.

As of December 31, 2009, the combined investment portfolios of the City totaled $941.9 million at book value. The City’s cash pool is constituted solely of City funds. The City does not invest any funds in other pools, with the exception of tax collection receipts initially held by the County and funds of the Seattle City Employees’ Retirement System and the Deferred Compensation Plan. For 2009, the yield on the City’s consolidated pool of investments was 1.7 percent. As of December 31, 2009, the average maturity date of the portfolio was November 30, 2010.

Approximately 41.4 percent, or $389.9 million, was invested in securities with maturities of three months or less. The City held no securities with maturities longer than 15 years.

Investments were allocated as follows: Government-Sponsored Enterprises 57.5% Commercial Paper 25.2 Repurchase Agreements 12.4 Mortgage-Backed Securities 2.4 U.S. Treasuries 1.4 Taxable Municipal Bonds 1.1

Interfund Loans. City ordinances authorize the Director of Finance to approve interfund loans for a duration of up to 90 days and to establish a rate of interest on such loans. Extension or renewal of interfund loans requires City Council approval by ordinance. The Director of Finance also is authorized by City ordinance to make loans to individual funds participating in a common investment portfolio by carrying funds in a negative cash position for a period of up to 90 days, or for a longer period upon approval by ordinance, to the extent that such loans can be supported prudently by the common investment portfolio and the borrowing fund is reasonably expected to be able to repay the loan. Loans of this type bear interest at the common investment portfolio’s rate of return.

Risk Management The City purchases excess liability insurance to address general, automobile, professional, public official, and other exposures. The policies provide $25 million limits above a $5 million self-insured retention per occurrence. The City also purchases all risk property insurance, including earthquake and flood, that provide up to $200 million in limits subject to a schedule of deductibles. City hydroelectric and other utility facilities and functions are not covered by the property or liability policies.

The City insures a primary level of fiduciary, crime liability, inland marine, and various commercial general liability, medical, accidental death and dismemberment, and miscellaneous exposures. Bonds are purchased for public official, notary public and pension exposures.

Pension System City employees are covered in one of the following defined benefit pension plans: Seattle City Employees’ Retirement System (“SCERS”), Firefighter’s Pension Fund, Police Relief and Pension Fund, and Law Enforcement Officers’ and Fire Fighters’ Retirement System (“LEOFF”). The first three are administered by the City; the State administers LEOFF through the Department of Retirement Systems. Information about LEOFF is available from the State by calling (800) 547-6657.

Nearly all permanent non-uniformed City employees participate in SCERS, a single-employer public employee retirement system. The payroll for City employees covered by SCERS for the year ended December 31, 2008, was $551.8 million; total City payroll was $837.1 million. Participating City employees are required to contribute 8.03 percent of their annual base salary to SCERS, which is matched by a comparable City contribution. Combined employee and employer contributions to SCERS totaled approximately $92.9 million for the year ended December 31, 2008. The latest actuarial evaluation of SCERS was conducted by Milliman as of January 1, 2008. This showed the actuarial value of net assets available for benefits was $2.119 billion and the actuarial value for accrued liabilities was $2.295 billion, leaving an unfunded accrued actuarial liability of approximately $175 million. The resulting funding ratio was 92.4 percent. The City’s Retirement Office estimates that this ratio has fallen to approximately 65 percent as of December 2009, based on the market value of the system’s assets. The system does not use “smoothing” in valuing assets. A new actuarial study is underway and is expected to be completed in June 2010.

The Firefighter’s Pension Fund and the Police Relief and Pension Fund are single-employer pension plans that were established by the City in compliance with State law. Since the effective date of LEOFF in 1970, no payroll for employees was covered under these City plans, and the primary liability for pension benefits for these City plans shifted from the City to the State. However, the City was still liable for all benefits of employees in service at that time plus certain future benefits. The City's contribution to these City plans and for medical benefits associated with these plans in 2008 was $35.9 million; there were no current member

contributions. The City has been pre-funding a portion of future pension obligations in the Firefighter’s Pension Fund.

Post-Employment Retirement Benefits The City’s liability for other post-employment benefits (“OPEB”) is limited to the implicit rate subsidy for retiree health benefits, which is the difference between (i) what retirees pay for their health insurance as a result of being included with active employees for rate-setting purposes, and (ii) the estimated required premiums if their rates were set based on claims experience of the retirees as a group separate from active employees. The City has assessed its OPEB liability in order to satisfy the expanded reporting requirements specified by the Governmental Accounting Standards Board Statement No. 45 (“GASB 45”). While GASB 45 requires reporting and disclosure of the unfunded OPEB liability, it does not require that it be funded. In conformance with GASB 45 requirements, the City began reporting its OPEB liability beginning with the fiscal year ended December 31, 2007.

The City engaged Aon Consulting to prepare an actuarial study quantifying the City’s OPEB liability. The study was completed on September 19, 2008, and concluded that as of the actuarial valuation date of January 1, 2008, the City’s unfunded actuarial accrued liability, under its current pay-as-you-go policy, was equal to $78.8 million. In fiscal year 2008, the City contributed approximately $2.2 million for these benefits on a pay-as-you-go basis. According to the actuarial study, the City’s annual required contribution in fiscal year 2008 to fund this liability was $8.6 million.

Labor Relations The City has 36 separate departments and offices with approximately 13,500 regular and temporary employees. Twenty-five different unions and 44 bargaining units represent approximately 74 percent of the City’s regular employees. The City has agreements with the coalition of City unions (representing most of the non-uniformed employees), Firefighters Local 27, Fire Chiefs Local 2898, and the Seattle Police Management Association that extend through 2011, and an agreement with the International Brotherhood of Electrical Workers Local 77 that extends through 2012. The City’s labor agreement with the Seattle Police Officers’ Guild expires at the end of 2010.

INITIATIVE AND REFERENDUM

Under the State Constitution, Washington voters may initiate legislation (either directly to the voters, or to the State Legislature and then, if not enacted, to the voters) and require legislation passed by the State Legislature to be referred to the voters. Any law approved in this manner by a majority of the voters may not be amended or repealed by the State Legislature within a period of two years following enactment, except by a vote of two- thirds of all the members elected to each house of the State Legislature. After two years, the law is subject to amendment or repeal by the State Legislature in the same manner as other laws. The Washington State Constitution may not be amended by initiative.

Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent (initiative) and four percent (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election.

In recent years, several state-wide initiative petitions to repeal or reduce the growth of taxes and fees, including City taxes, have garnered sufficient signatures to reach the ballot. Some of those tax and fee initiative measures have been approved by the voters and, of those, some remain in effect while others have been invalidated by the courts. Tax and fee initiative measures continue to be filed, but it cannot be predicted whether any more such initiatives might gain sufficient signatures to qualify for submission to the State Legislature and/or the voters or, if submitted, whether they ultimately would become law.

Under the City Charter, Seattle voters may initiate City Charter amendments and local legislation, including modifications to existing legislation, and through referendum may prevent legislation passed by the City Council from becoming law.

LEGAL AND TAX INFORMATION

No Litigation Affecting the Bonds or Taxing Authority There is no litigation pending with process properly served on the City questioning the validity of the Bonds or the power and authority of the City to issue the Bonds or the power and authority of the City to levy and collect the taxes pledged to the Bonds.

Other Litigation Various lawsuits and claims are pending against the City involving claims for money damages. (See, e.g., the discussion of claims in Appendix A—The City’s 2008 Comprehensive Annual Financial Report—Note 14, Contingencies.) Based on its past experience, the City has concluded that its ability to repay the Bonds on a timely basis will not be impaired by the aggregate amount of uninsured liabilities of the City and the timing of any anticipated payments of judgments that might result from suits and claims.

Approval of Counsel Legal matters incident to the authorization, issuance and sale of Bonds by the City are subject to the approving legal opinion of Foster Pepper PLLC, Seattle, Washington, Bond Counsel. The form of the opinion of Bond Counsel with respect to the Bonds is attached hereto as Appendix B. Bond Counsel will be compensated only upon the issuance and sale of the Bonds.

Tax Matters—2010A Bonds THIS ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE 2010A BONDS. THIS ADVICE IS NOT INTENDED OR WRITTEN BY FOSTER PEPPER PLLC TO BE USED, AND MAY NOT BE USED, BY ANY PERSON OR ANY ENTITY FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED ON ANY PERSON OR ENTITY UNDER THE CODE. PROSPECTIVE PURCHASERS OF THE 2010A BONDS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The following discussion generally describes certain aspects of the principal U.S. federal tax treatment of U.S. persons that are beneficial owners (“Owners”) of the 2010A Bonds who have purchased the 2010A Bonds in the initial offering and who hold the 2010A Bonds as capital assets within the meaning of Section 1221 of the Code. For purposes of this discussion, a “U.S. person” means an individual who, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source of income, or (iv) a trust, if either (a) a United States court is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a United States person under the applicable Treasury regulations.

This summary is based on the Code, published revenue rulings, administrative and judicial decisions, and existing and proposed Treasury regulations (all as of the date hereof and all of which are subject to change, possibly with retroactive effect). This summary does not discuss all of the tax consequences that may be relevant to an Owner in light of its particular circumstances, such as an Owner who may purchase the 2010A Bonds in the secondary market, or to Owners subject to special rules, such as certain financial institutions, insurance companies, tax-exempt organizations, non-U.S. persons, taxpayers who may be subject to the alternative minimum tax or personal holding company provisions of the Code, or dealers in securities. Accordingly, before deciding whether to purchase any of the 2010A Bonds, prospective purchasers should consult their own tax advisors regarding the United States federal income tax consequences, as well as tax consequences under the laws of any state, local or foreign taxing jurisdiction or under any applicable tax treaty, of purchasing, holding, owning, and disposing of the 2010A Bonds.

In General. As described herein under “Description of the Bonds—Designation of the 2010A Bonds as Build America Bonds,” the City has made irrevocable elections to have the 2010A Bonds treated as Build America Bonds within the meaning of Section 54AA(d) of the Code that are “qualified bonds” within the meaning of Section 54AA(g) of the Code. As a result of these elections, interest on the 2010A Bonds is not excludable from the gross income of the Owners for federal income tax purposes, and Owners of the 2010A Bonds will not be allowed any federal tax credits as a result of ownership or receipt of interest payments on the 2010A Bonds.

Payments of Interest. Interest paid on the 2010A Bonds will generally be taxable to Owners as ordinary interest income at the time it accrues or is received, in accordance with the Owner’s method of accounting for U.S. federal income tax purposes. Owners who are cash-method taxpayers will be required to include interest in income upon receipt of such interest payment; Owners who are accrual-method taxpayers will be required to include interest as it accrues, without regard to when interest payments are actually received.

Disposition or Retirement. Upon the sale, exchange or other disposition of a 2010A Bond, or upon the retirement of a 2010A Bond (including by redemption), an Owner will recognize a capital gain or loss equal to the difference, if any, between the amount realized upon the disposition or retirement (excluding any amounts attributable to accrued but unpaid interest, which will be taxable as such) and the Owner’s adjusted tax basis in the 2010A Bond. Any such gain or loss will be United States source gain or loss for foreign tax credit purposes. If the City defeases any of the 2010A Bonds, such 2010A Bonds may be deemed to retired and “reissued” for federal income tax purposes as a result of the defeasance. In such event, the Owner of a 2010A Bond would recognize a gain or loss on the 2010A Bond at the time of defeasance.

Backup Withholding. An Owner may, under certain circumstances, be subject to “backup withholding” (currently the rate of this withholding tax is 28 percent, but may change in the future) with respect to interest [or original issue discount] on the 2010A Bonds. This withholding generally applies if the Owner of a 2010A Bond (i) fails to furnish the Bond Registrar or other payor with its taxpayer identification number, (ii) furnishes the Bond Registrar or other payor with an incorrect taxpayer identification number, (iii) fails to report properly interest, dividends or other “reportable payments” as defined in the Code, or (iv) under certain circumstances, fails to provide the Bond Registrar or other payor with a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is its correct number and that the Owner is not subject to backup withholding. Any amount withheld may be creditable against the Owner’s U.S. federal income tax liability and be refundable to the extent it exceeds the Owner’s U.S. federal income tax liability.

The amount of “reportable payments” for each calendar year and the amount of tax withheld, if any, with respect to payments on the 2010A Bonds will be reported to the Owners and to the Internal Revenue Service.

Tax Exemption—2010B Bonds Exclusion from Gross Income. In the opinion of Bond Counsel, under existing federal law and assuming compliance with applicable requirements of the Code that must be satisfied subsequent to the issue date of the Bonds, interest on the 2010B Bonds will be excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals.

Continuing Requirements. The City is required to comply with certain requirements of the Code after the date of issuance of the 2010B Bonds in order to maintain the exclusion of the interest on the 2010B Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of proceeds of the 2010B Bonds and the facilities financed or refinanced with proceeds of the 2010B Bonds, limitations on investing gross proceeds of the 2010B Bonds in higher yielding investments in certain circumstances, and the requirement to comply with the arbitrage rebate requirement to the extent applicable to the 2010B Bonds. The City has covenanted in the Resolution to comply with those requirements, but if the City fails to comply with those requirements, interest on the 2010B Bonds could become taxable retroactive to the date of issuance of the 2010B Bonds.

Corporate Alternative Minimum Tax. While interest on the 2010B Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, under Section 55 of the Code, tax-exempt

interest, including interest on the 2010B Bonds, received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable income of a corporation will be increased by 75 percent of the excess of the corporation’s adjusted current earnings (including any tax-exempt interest) over the corporation’s alternative minimum taxable income determined without regard to such increase. A corporation’s alternative minimum taxable income, so computed, that is in excess of an exemption of $40,000, which exemption will be reduced (but not below zero) by 25 percent of the amount by which the corporation’s alternative minimum taxable income exceeds $150,000, is then subject to a 20 percent minimum tax.

A small business corporation is exempt from the corporate alternative minimum tax for any taxable year beginning after December 31, 1997, if its average annual gross receipts during the three-taxable-year period beginning after December 31, 1993, did not exceed $5,000,000, and its average annual gross receipts during each successive three-taxable-year period thereafter ending before the relevant taxable year did not exceed $7,500,000.

Tax on Certain Passive Investment Income of S Corporations. Under Section 1375 of the Code, certain excess net passive investment income, including interest on the 2010B Bonds, received by an S corporation (a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the close of the taxable year may be subject to federal income taxation at the highest rate applicable to corporations if more than 25 percent of the gross receipts of such S corporation is passive investment income.

Foreign Branch Profits Tax. Interest on the 2010B Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the 2010B Bonds are owned by, and effectively connected with a trade or business of, a United States branch of a foreign corporation.

Possible Consequences of Tax Compliance Audit. The Internal Revenue Service (the “IRS”) has established a general audit program to determine whether issuers of tax-exempt obligations, such as the 2010B Bonds, are in compliance with requirements of the Code that must be satisfied in order for interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS would commence an audit of the 2010B Bonds. Depending on all the facts and circumstances and the type of audit involved, it is possible that commencement of an audit of the 2010B Bonds could adversely affect the market value and liquidity of the 2010B Bonds until the audit is concluded, regardless of its ultimate outcome.

Certain Other Federal Tax Consequences—2010B Bonds 2010B Bonds Not “Qualified Tax-Exempt Obligations” for Financial Institutions. Section 265 of the Code provides that 100 percent of any interest expense incurred by banks and other financial institutions for interest allocable to tax-exempt obligations acquired after August 7, 1986, will be disallowed as a tax deduction. However, if the tax-exempt obligations are obligations other than private activity bonds, are issued by a governmental unit that, together with all entities subordinate to it, does not reasonably anticipate issuing more than $30,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) in the current calendar year, and are designated by the governmental unit as “qualified tax-exempt obligations,” only 20 percent of any interest expense deduction allocable to those obligations will be disallowed.

The City is a governmental unit that, together with all subordinate entities, reasonably anticipates issuing more than $30,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) during the current calendar year and has not designated the 2010B Bonds as “qualified tax-exempt obligations” for purposes of the 80 percent financial institution interest expense deduction. Therefore, no interest expense of a financial institution allocable to the 2010B Bonds is deductible for federal income tax purposes.

Reduction of Loss Reserve Deductions for Property and Casualty Insurance Companies. Under Section 832 of the Code, interest on the 2010B Bonds received by property and casualty insurance companies will reduce tax

deductions for loss reserves otherwise available to such companies by an amount equal to 15 percent of tax- exempt interest received during the taxable year.

Effect on Certain Social Security and Retirement Benefits. Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the 2010B Bonds into account in determining gross income.

Other Possible Federal Tax Consequences. Receipt of interest on the 2010B Bonds may have other federal tax consequences as to which prospective purchasers of the 2010B Bonds should consult their own tax advisors.

ERISA Considerations The Employees Retirement Income Security Act of 1974, as amended (“ERISA”), and the Code generally prohibit certain transactions between a qualified employee benefit plan under ERISA or tax-qualified retirement plans and individual retirement accounts under the Code (collectively, the “Plans”) and persons who, with respect to a Plan, are fiduciaries or other “parties in interest” within the meaning of ERISA or “disqualified persons” within the meaning of the Code. All fiduciaries of Plans should consult their own tax advisors with respect to the consequences of any investment in the Bonds.

Continuing Disclosure Undertaking Basic Undertaking to Provide Annual Financial Information and Notice of Material Events. To meet the requirements of paragraph (b)(5) of United States Securities and Exchange Commission (“SEC”) Rule 15c2-12 (the “Rule”), as applicable to a participating underwriter for the Bonds, the City will undertake in the Bond Legislation (the “Undertaking”) for the benefit of holders of the Bonds, as follows.

Annual Financial Information. The City will provide or cause to be provided, either directly or through a designated agent, to the Municipal Securities Rulemaking Board (the “MSRB”), in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB, annual financial information and operating data of the type included in this Official Statement with respect to the City, as generally described below (“annual financial information”): (i) annual financial statements of the City, prepared in accordance with generally accepted accounting principles applicable to governmental units (except as otherwise noted therein), as such principles may be changed from time to time and as permitted by State law, which statements will not be audited, except that if and when audited financial statements are otherwise prepared and available to the City they will be provided; (ii) a statement of authorized, issued and outstanding general obligation debt of the City; (iii) the assessed value of the property within the City subject to ad valorem taxation; and (iv) ad valorem tax levy rates and amounts and percentage of taxes collected.

Annual financial information described above will be provided to the MSRB not later than the last day of the ninth month after the end of each fiscal year of the City, as such fiscal year may be changed as permitted or required by State law, commencing with the City’s fiscal year ended December 31, 2009. The annual information may be provided in a single or in multiple documents, and may be incorporated by specific reference to documents available to the public on the Internet website of the MSRB or filed with the SEC.

The City also will provide or cause to be provided to the MSRB timely notice of a failure by the City to provide required annual financial information on or before the date specified above.

Material Events. The City further will provide or cause to be provided to the MSRB timely notice of the occurrence of any of the following events with respect to the Bonds, if applicable and material: (i) principal and interest payment delinquencies; (ii) non-payment related defaults;

(iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (vii) modifications to the rights of the holders of the Bonds; (viii) Bond calls (other than scheduled mandatory redemptions of Term Bonds); (ix) defeasances; (x) release, substitution or sale of property securing repayment of the Bonds; and (xi) rating changes.

For purposes of this section, “Continuing Disclosure Undertaking,” the term “holders of the Bonds” shall have the meaning intended for such term under the Rule.

Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or any broker, dealer, municipal securities dealer, participating underwriter, rating agency, or the MSRB, under the circumstances and in the manner permitted by the Rule.

The City will give notice to the MSRB of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended information will include a narrative explanation of the effect of that change on the type of information to be provided.

Termination of Undertaking. The City’s obligations under the Undertaking will terminate upon the legal defeasance, prior redemption or payment in full of all of the then outstanding Bonds. In addition, the Undertaking, or any provision thereof, will be null and void if the City (i) obtains an opinion of nationally recognized bond counsel or other counsel familiar with the federal securities laws to the effect that those portions of the Rule which require the Undertaking, or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (ii) so notifies the MSRB of such termination.

Remedy for Failure to Comply with Undertaking. The City has agreed to proceed with due diligence to cause any failure to comply with the Undertaking to be corrected as soon as practicable after the City learns of that failure.

No failure by the City (or any other obligated person) to comply with the Undertaking will constitute a default with respect to the Bonds. The sole remedy of any holder of a Bond will be to take such actions as that holder deems necessary and appropriate to compel the City or other obligated person to comply with the Undertaking. The Undertaking will inure to the benefit of the City and any holder of the Bonds, and will not inure to the benefit of or create any rights in any other person.

Other Continuing Disclosure Undertakings of the City. The City has entered into undertakings to provide annual information and the notice of the occurrence of certain events with respect to all bonds issued by the City on or after July 3, 1995, subject to the Rule. The City is in compliance with all such undertakings.

OTHER BOND INFORMATION

Ratings The Bonds have been rated “___”, “___” and “___” by Fitch Ratings, Moody’s Investors Service and Standard & Poor’s Ratings Services, respectively. The ratings reflect only the views of the rating agencies and an explanation of the significance of the ratings may be obtained from the respective rating agencies. No

application was made to any other rating agency for the purpose of obtaining an additional rating on the Bonds. There is no assurance that the ratings will be retained for any given period of time or that the ratings will not be revised downward, suspended or withdrawn entirely by the rating agencies if, in their judgment, circumstances so warrant. Any such downward revision, suspension or withdrawal of the ratings will be likely to have an adverse effect on the market price of the Bonds.

Purchasers of the Bonds The 2010A Bonds are being purchased by ______at a price of $______. The 2010A Bonds will be reoffered at the prices or yields set forth on page i of this Official Statement. The 2010B Bonds are being purchased by ______at a price of $______. The 2010B Bonds will be reoffered at the prices or yields set forth on page ii of this Official Statement.

The purchaser of each series of the Bonds may offer and sell such series of the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the initial offering prices set forth on pages i and ii hereof, and such initial offering prices may be changed from time to time by the Purchaser. After the initial public offering, the public offering prices may be varied from time to time.

Official Statement So far as any statements are made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Information concerning the City contained in this Official Statement has been furnished by the City. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the owners of any of the Bonds.

Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. The City specifically disclaims any obligations to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of this Official Statement, except as otherwise expressly provided under “Legal and Tax Information—Continuing Disclosure Undertaking.”

The execution and delivery of this Official Statement have been duly authorized by the City.

THE CITY OF SEATTLE

By: Dwight D. Dively Director of Finance

APPENDIX A

THE CITY’S 2008 COMPREHENSIVE ANNUAL FINANCIAL REPORT

A-1

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A-2 The City of Seattle Washington

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Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2008

Department of Executive Administration Introduction

This page is intentionally left blank. Table of Contents The City of Seattle

Statement Page

Fund Financial Statements Comprehensive Annual Financial Report Governmental Funds ...... 37 B-3 Balance Sheet – Governmental Funds ...... 38 For Year Ended December 31, 2008 B-4 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ...... 42 B-5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of TABLE OF CONTENTS Governmental Funds to the Statement of Activities...... 44 Page Proprietary Funds...... 45 B-6 Statement of Net Assets – Proprietary Funds...... 46 INTRODUCTION B-7 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds...... 55 Table of Contents...... V B-8 Statement of Cash Flows – Proprietary Funds ...... 58 Organizational Chart - City...... X Fiduciary Funds ...... 64 Elected Officials...... XI B-9 Statement of Net Assets – Fiduciary Funds ...... 65 Letter of Transmittal ...... XIII B-10 Statement of Changes in Net Assets – Fiduciary Funds...... 66 Certificate of Achievement for Excellence in Financial Reporting ...... XXII Organizational Chart – Department of Executive Administration ...... XXIII Note Notes to the Financial Statements FINANCIAL SECTION (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...... 69 (2) STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY...... 77 INDEPENDENT AUDITOR’S REPORT Table 2-1 Appropriation Changes – General Fund...... 77 State of Washington - Office of the State Auditor ...... 3 Table 2-2 Fund Balances Designated for Special Purposes...... 79 Table (3) CASH AND INVESTMENTS ...... 79 MANAGEMENT’S DISCUSSION AND ANALYSIS Table 3-1 Investments and Maturities - Treasury Residual Investments and Securities Held for Dedicated Funds...... 80 FINANCIAL HIGHLIGHTS...... 7 Table 3-2 Concentration of Credit Risk...... 81 OVERVIEW OF THE FINANCIAL STATEMENTS ...... 7 Table 3-3 SCERS’ Investments...... 81 A-1 Condensed Statement of Net Assets...... 9 Table 3-4 SCERS’ Fixed Income Portfolio ...... 82 Changes in Net Assets Resulting from Changes in Revenues and Expenses...... 10 A-2 Table 3-5 SCERS’ Fixed Income Ratings by Standard and Poor’s ...... 82 FINANCIAL ANALYSIS OF CITY FUNDS ...... 16 Table 3-6 SCERS’ Asset Allocation...... 82 A-3 Revenue, Expenditure, and Fund Balance Summary – Governmental Funds...... 16 Table 3-7 SCERS’ Securities Lent and Collateral ...... 83 A-4 Revenue, Expenditure, and Fund Balance Summary – General Fund Subfunds ...... 19 (4) RECEIVABLES AND INTERFUND TRANSACTIONS...... 84 GENERAL FUND BUDGETARY HIGHLIGHTS...... 22 Table 4-1 Tax Revenues and Receivables ...... 84 CAPITAL ASSETS ...... 23 Table 4-2 Due From and To Other Funds...... 85 A-5 Capital Assets at Year End, Net of Depreciation ...... 23 Table 4-3 Interfund Transfers...... 86 DEBT ADMINISTRATION...... 24 (5) CAPITAL ASSETS...... 87 ECONOMIC FACTORS ...... 25 Table 5-1 Changes in Capital Assets ...... 87 Table 5-2 Depreciation Expense by Function...... 88

Statement (6) COMPENSATED ABSENCES ...... 88 Table 6-1 Compensated Absences in Intermal Service Funds...... 88 BASIC FINANCIAL STATEMENTS Table 6-2 Compensated Absences in Enterprise Funds...... 89 Government-wide Financial Statements Table 6-3 Compensated Absences in Pension Trust Funds ...... 89 B-1 Statement of Net Assets...... 29 B-2 Statement of Activities ...... 32 V VI Table of Contents The City of Seattle

Note Page Statement or Schedule Page (7) LEASES...... 89 REQUIRED SUPPLEMENTARY INFORMATION Table 7-1 Operating Lease Commitments – Governmental Activities ...... 90 Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual Table 7-2 Operating Lease Commitments – Business-Type Activities ...... 90 Notes to Required Supplementary Information ...... 135 Table 7-3 Major Sources of Rental Income on Real Property Managed by Fleets and Facilities...... 91 C-1 General Fund ...... 136 (8) LONG-TERM DEBT...... 91 C-2 Transportation Fund ...... 137 Table 8-1 General Obligation Bonds ...... 92 C-3 Low-Income Housing Fund...... 138 Table 8-2 Annual Debt Service Requirements to Maturity – General Obligation Bonds ...... 93 Pension Plan Information Table 8-3 Special Assessment Bonds with Governmental Commitment ...... 93 Notes to Required Supplementary Information ...... 139 Table 8-4 Annual Debt Service Requirements to Maturity – Special Assessment Bonds with C-4 Schedule of Funding Progress ...... 140 Governmental Commitment ...... 93 C-5 Schedule of Employer Contributions...... 141 Table 8-5 Annual Debt Service Requirements to Maturity - Seattle Department of Transportation Public Works Trust Loan Notes...... 94 COMBINING AND INDIVIDUAL FUND AND OTHER SUPPLEMENTARY Table 8-6 Revenue Bonds ...... 95 INFORMATION Table 8-7 Annual Debt Service Requirements to Maturity-Revenue Bonds ...... 96 Nonmajor Governmental Funds...... 147 Table 8-8 Annual Debt Service Requirements to Maturity – Seattle Public Utilities Public Works D-1 Combining Balance Sheet – Nonmajor Governmental Funds – Summary by Fund Type ...... 151 Trust Loan and Other Notes...... 97 D-2 Combining Balance Sheet – Nonmajor Governmental Funds – Special Revenue ...... 152 Table 8-9 Changes in Long-Term Liabilities...... 98 D-3 Combining Balance Sheet – Nonmajor Governmental Funds – Debt Service ...... 155 Table 8-10 Refunded/Defeased Bonds...... 100 D-4 Combining Balance Sheet – Nonmajor Governmental Funds – Capital Projects ...... 156 (9) ENVIRONMENTAL LIABILITIES ...... 101 D-5 Combining Balance Sheet – Nonmajor Governmental Funds – Permanent...... 161 (10) PENSIONS, DEFERRED COMPENSATION, AND OTHER POSTEMPLOYMENT BENEFITS...... 102 D-6 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Table 10-1 Pension Plan Information ...... 103 Nonmajor Governmental Funds - Summary by Fund Type ...... 162 Table 10-2 Annual Pension Cost and Net Pension Obligation – Seattle City Employees’ Retirement System.....105 D-7 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Table 10-3 Annual Pension Cost and Net Pension Obligation – Firemen’s Pension and Police Relief and Nonmajor Governmental Funds – Special Revenue...... 163 Pension Funds ...... 108 D-8 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Table 10-4 Statement of Net Assets – Firemen’s Pension and Police Relief and Pension Funds...... 109 Nonmajor Governmental Funds – Debt Service...... 166 Table 10-5 Statement of Changes in Plan Net Assets – Firemen’s Pension and Police Relief D-9 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – and Pension Funds...... 109 Nonmajor Governmental Funds – Capital Projects ...... 167 Table 10-6 Annual OPEB Cost and Net OPEB Obligation ...... 114 D-10 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Table 10-7 OPEB Information...... 116 Nonmajor Governmental Funds – Permanent ...... 172 (11) COMPONENT UNIT ...... 117 Budget and Actual Statements Table 11-1 Condensed Statement of Net Assets – The Seattle Public Library Foundation ...... 118 Statements of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual Table 11-2 Condensed Statement of Activities – The Seattle Public Library Foundation...... 118 D-11 General Fund ...... 175 (12) JOINT VENTURES...... 119 D-12 Transportation Fund...... 179 (13) COMMITMENTS...... 119 D-13 Low-Income Housing Fund...... 180 Table 13-1 Long-Term Purchased Power ...... 120 D-14 Park and Recreation Fund ...... 181 Table 13-2 Estimated Future Payments Under Purchase Power Contracts and Transmission Contracts...... 122 D-15 Library Fund...... 182 (14) CONTINGENCIES...... 126 D-16 Seattle Center Fund ...... 183 Table 14-1 Reconciliation of Changes in Aggregate Liabilities for Claims ...... 127 D-17 Human Services Operating Fund...... 184 (15) RESTATEMENTS, PRIOR-PERIOD ADJUSTMENTS, D-18 Office of Housing Fund...... 185 CHANGES IN ACCOUNTING PRINCIPLES, AND RECLASSIFICATIONS...... 130 Nonmajor Enterprise Funds ...... 189 (16) SUBSEQUENT EVENTS ...... 131 E-1 Combining Statement of Net Assets – Nonmajor Enterprise Funds ...... 190 E-2 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets – Nonmajor Enterprise Funds...... 194 E-3 Combining Statement of Cash Flows – Nonmajor Enterprise Funds ...... 196 VII VIII Table of Contents

Statement or Schedule Page City Council

Internal Service Funds...... 203 r

F-1 Combining Statement of Net Assets – Internal Service Funds ...... 204 r r of the Office of the of the

F-2 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets – Internal Service Funds ...... 205 Office Office Mayo Affairs Finance Office of Office of Legislative Information Technology City Audito Environment Hearing Examine

F-3 Combining Statement of Cash Flows – Internal Service Funds...... 206 Sustainability and Intergovernmental Fiduciary Funds ...... 211 G-1 Combining Statement of Net Assets – Pension Trust Funds...... 213 Administration

G-2 Combining Statement of Changes in Plan Net Assets – Pension Trust Funds...... 214 t m Combining Statement of Changes in Assets and Liabilities – Agency Funds ...... 216

G-3 and and Civil Fleets Syste Service Facilities Elections Personnel Office for Executive Retirement Ethics and Employees’ Employees’ Civil Rights Commission Commission Managemen Administration CAPITAL ASSETS Office of Policy Capital Assets Used in the Operation of Governmental Funds H-1 Schedule by Source ...... 221 ortation p and H-2 Schedule by Function ...... 222 City Light Public Seattle Seattle Utilities Utilities Transportation H-3 Schedule of Changes by Function ...... 224 Trans

STATISTICS t t t men

Table p and and Housing Planning Office of Office of Statistical Information...... 227 Economic Developmen Developmen Develo Neighborhoods Neighborhoods S-1 Net Assets by Component...... 228 of Mayor S-2 Changes in Net Assets...... 229 Seattle Citizens S-3 Fund Balances of Governmental Funds ...... 231 S-4 Changes in Fund Balances of Governmental Funds ...... 232 and Health Human Seattle-

S-5 Tax Revenues by Source...... 234 Services King County Public Health S-6 Assessed Value and Estimated Actual Value of Taxable Property...... 234 Human Services S-7 Direct and Overlapping Property Tax Rates ...... 235 S-8 Principal Property Taxpayers...... 235 S-9 Principal Revenue Sources...... 236 CITY ORGANIZATION CHART and and S-10 Property Tax Levies and Collections ...... 238 and Parks Center Seattle Library Library Recreation Recreation Arts, Culture, Office of Arts

S-11 Ratios of Outstanding Debt by Type...... 239 Cultural Affairs S-12 Ratios of Net General Bonded Debt Outstanding ...... 240 S-13 Direct and Overlapping Governmental Activities Debt...... 240 S-14 Legal Debt Margin Information...... 241 S-15 Pledged-Revenue Coverage ...... 242 and Fire Law Court Board Police Public Safety Pension

Demographic and Economic Statistics...... 243 Municipal Firefighters’ Commission

S-16 Police Relief Civil Service Public Safety Pension Board S-17 Principal Industries ...... 243

Full-Time-Equivalent City Government Employees by Department/Office...... 244 City S-18 Attorney S-19 Operating Indicators by Department/Office...... 246 S-20 Capital Asset Statistics by Department/Office...... 248 Miscellaneous Statistics ...... 252 Judges Municipal

IX CITY OF SEATTLE ELECTED OFFICIALS

Gregory J. Nickels Thomas A. Carr Mayor City Attorney

CITY COUNCIL

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Tim Burgess Sally Clark Richard Conlin Council President

Jan Drago Jean Godden Bruce Harrell

Nick Licata Richard J. McIver Tom Rasmussen

City of Seattle Council is composed of nine members elected at large to four-year terms. The City provides the full Department of Finance range of municipal services authorized by its charter and operates four rate-funded utilities.

The City of Seattle is a primary government for financial reporting purposes. Its governing body is Dwight Dively, Director Gregory J. Nickels, Mayor elected by the citizens in a general, popular election. This report includes all organizations and activities for which elected City officials exercise financial accountability. Certain organizations created by or related to the City, for which the City is not financially accountable, have been excluded from this report. July 30, 2009 A joint venture, a component unit, and contingent liabilities, which exist from relationships with organizations created by the City, are included in this report. The notes to the financial statements further discuss the City as a financial reporting entity. The Honorable Mayor and Members of the City Council: The City provides a full range of services. The City builds and repairs roads and maintains electric, water, solid waste, sewer and drainage services. It provides police and fire protection as well as judicial I am pleased to submit to you the 2008 Comprehensive Annual Financial Report (CAFR) of the City of services. It administers land use policy, and takes an active role in commercial and industrial Seattle, Washington. The Department of Executive Administration has prepared this report to present the development and environmental protection. The City designs and maintains many parks and golf courses, financial position of the City of Seattle on December 31, 2008, and the results of its operations and the coordinates recreation activities, maintains libraries, fosters neighborhood livability, and works to cash flows of its proprietary fund types and changes in plan net assets of its pension and private-purpose preserve a satisfactory living environment for both the community and individuals. trust funds for the year then ended. The financial statements and supporting schedules have been prepared in accordance with generally accepted accounting principles and meet the requirements of the State Auditor and the City Charter. BUDGETS AND BUDGETARY ACCOUNTING Washington State law requires an annual audit of the City's financial statements by the independently elected State Auditor. The State Auditor conducts his examination in accordance with generally accepted The City Council approves the City's operating budget. In addition, the City Council annually approves auditing standards and provides an independent assessment that helps assure fair presentation of the City's two separate but related financial planning documents: the Capital Improvement Program (CIP) plan and financial position and results of operations and the cash flows of its proprietary fund types and changes in the Community Development Block Grant (CDBG) program allocation. plan net assets of its pension and private-purpose trust funds. In addition to the opinion on the City's financial statements included in this report, the State Auditor also issues separate reports on internal The operating budget is proposed by the Mayor and adopted by the City Council at least 30 days before control and compliance with laws and regulations that meet the requirements of the Single Audit Act and the beginning of the fiscal year. The budget is designed to allocate available resources on a biennial basis related OMB Circular A-133. These reports are available in the City’s separately issued Single Audit among the City's public services and programs and provides for associated financing decisions. On a Report. biennial basis, the annual budget is adopted and the following year’s budget is endorsed. The budget appropriates fiscal year expenditures and establishes employee positions by department and fund except The accuracy of the City's financial statements and the completeness and fairness of their presentation is for project-oriented, multi-year appropriations made for capital projects, grants, or endowments. the responsibility of City management. The City maintains a system of internal accounting controls designed to provide reasonable assurance that assets are safeguarded against loss or unauthorized use, and The CIP plan is also proposed by the Mayor and adopted by the City Council at least 30 days before the that financial records can be relied upon to produce financial statements in accordance with generally beginning of the fiscal year. The CIP is a six-year plan for capital project expenditures and anticipated accepted accounting principles. The concept of reasonable assurance recognizes that the cost of financing by fund source. It is revised and extended annually. The City Council adopts the CIP as a maintaining the system of internal accounting controls should not exceed benefits likely to be derived. planning document and appropriates the multi-year expenditures identified in the CIP through the Comprehensive written policies support the system and the Office of City Auditor reviews internal adoption of the annual budget. The CIP is consistent with the City’s Comprehensive Plan and includes accounting controls based upon request or observed need. information required by the State’s Growth Management Act.

Management’s discussion and analysis (MD&A) immediately follows the State Auditor’s report. It The CDBG planning process allocates the annual grant awarded by the federal government to City provides a narrative introduction, overview, and analysis to accompany the basic financial statements. departments and non-City organizations. Although this federally funded program has unique timetables This letter of transmittal complements the MD&A and should be read in conjunction with it. and requirements, the City coordinates it with the annual budget and CIP processes to improve preparation and budget allocation decisions and streamline budget execution. PROFILE OF THE GOVERNMENT The adopted budget generally makes appropriations for operating expenses at the budget control level The City of Seattle was incorporated on December 2, 1869. The City operates under a City Charter within the departments. Capital projects programmed in the CIP are appropriated in the budget at the adopted on March 12, 1946, providing for a nonpartisan Mayor-Council form of government. The City program or project level. Grant-funded activities are controlled as prescribed by law and federal or state regulations.

600 Fourth Ave., 6th Floor, P.O. Box 94747, Seattle, Washington 98124-4747 Tel: (206) 233-0031 TDD: (206) 615-0476 Fax: (206) 233-0022 http://www.cityofseattle.net

NATIONAL AND LOCAL ECONOMY already realigned staffing in geographic sectors to reflect current population and calls for police response. The final step in the plan involves changing officers’ shifts to provide more staffing on critical days and U.S. Economy. Analysis by IHS Global Insight shows mixed signs from a number of economic times. indicators. The decline of Gross Domestic Product (GDP) has slowed in the second quarter and is expected to begin to grow slowly in the second half of the year. Nationally, more jobs were lost in June A variety of capital projects are under way to support the City’s public safety programs. Most notable is than in May, but employment losses are projected to slow down in the second half of the year. the voter-approved Fire Facilities and Emergency Response Levy, which provides partial funding to Unemployment may not peak until the first half of 2010, at around 10.3%. replace or remodel almost all of the City’s fire stations and related facilities. Other City funds, notably the Real Estate Excise Tax (REET), cover the remainder of the costs. The Levy program has already The housing market is showing signs of stabilization but inventory remains high. House prices continue produced a new Fire Station 10, which is co-located with the new Fire Alarm Center and the new to fall but at a slower pace. The FHFA house price index is expected to drop 9.2% by the end of 2009 Emergency Operations Center. The program has also funded two new fireboats and the refit of the “Chief compared to a year ago, and by another 6.3% by the end of 2010. Consumer spending in the second Seattle” fireboat will begin in 2009. Twenty-one neighborhood fire station projects will be completed or quarter was down 0.3% from the first quarter but is expected to grow slowly with support from increases under development in 2009-2010, although some had to be delayed for a few months due to declining in unemployment insurance and food stamps, reductions in tax withholdings, and a 5.8% social security REET revenues. cost-of-living increase in January. Major risks still remain for the economy, including in finance and banking, as credit conditions remain tight. Continuing slow downs in job losses would be needed to Seattle and several other cities are in the early stages of the process to site a jail for people charged with sustain the tentative signs of stabilization. and convicted of misdemeanors. For more than two decades, King County has housed prisoners for cities. However, the County believes it will run out of jail space early in the next decade, and has informed cities it will no longer accept their misdemeanants at that point. A group of cities in northern and eastern King Puget Sound Region Economy. Puget Sound economy lags the nation by around one quarter. The County are working together to site and build a municipal jail for misdemeanor offenders. Money is Puget Sound Economic Forecaster (PSEF) published by Dick Conway and Doug Pedersen predicts that included in the 2009 budget to continue these efforts. regional recovery will begin in the second quarter of 2010. Home sales have stabilized but prices are still falling. Employment is expected to hit bottom in the first quarter of 2010 then grow at 1.7 % annual rate Human Services. The demand for human services, such as food assistance and emergency shelter, grows by year end. Total taxable sales are predicted to drop 13.8% this year but are expected to rebound in 2011 during difficult economic times. The City of Seattle devotes a far higher share of its General Fund budget and 2012. to such programs than any other city in the state. The 2009 and 2010 Budgets include three significant expansions of current services: In April 2009, the Northwest Multiple Listing Service (NMLS) points to a 15% increase in pending home sales in King County over a year ago as a sign of a bottoming local housing market. April prices for Housing First. The City is a signatory to the 10-Year Plan to End Homelessness in King County. single-family homes in Seattle were down 9.3% over a year ago, and condo prices were down 14.2%. In support of this plan, the City has been providing funds to the Housing First initiative, which Closed sales were also down 30.0% and 48.5% respectively. provides housing and supporting services to chronically homeless individuals. Approximately 265 units have already been put into service and have proven to dramatically reduce costs for As of May 2009 the regional unemployment rate is 8.4% compared to 9.4% nationally. Seattle-area emergency room visits, jail stays, and other public services. The biennial budget provides funding employment is down about 63,000 from the recent peak in August 2008, a decline of 4.2%. for the capital and operating costs of additional units.

Seattle real estate excise tax (REET) revenues continue to decline. The first quarter of 2009 had large Shelter. Although the 10-Year Plan envisions the reduction of shelter beds as permanent and declines in activity and sale prices. The commercial sector had a year over year -58.1% growth rate in transitional housing is created, demand for shelter has increased in the last year. The Adopted sales transactions leading to a -69.2% change in tax receipts. Only 78 commercial property transactions Budget adds slightly more than $1.1 million in 2009 for shelter and day-services programs. This took place in the first quarter, the lowest number on record dating back to 1982. money pays for additional shelter facilities and programs, including a site in the South Lake Union area opened in 2008 and a new emergency program for family shelter. It also covers higher costs for some programs that the City has supported in the past but that cannot stay open without INITIATIVES additional City funding.

2009 Budget. Mayor Greg Nickels established four major priorities when he took office seven years ago: Food. The 2008 Budget included a one-time add of $400,000 to support food programs. This is get Seattle moving, keep our neighborhoods safe, create jobs and opportunity for all, and build strong removed in the 2009 Budget, but an additional $829,000 is added in 2009 to assist food programs. families and healthy communities. The 2009 Adopted Budget continues to focus on these priorities, This brings total General Fund support for food assistance to $3.61 million in 2009, compared which are generally consistent with goals identified by the City Council in budget priority resolutions. with $2.79 million in 2008. The additional money will be targeted to “bulk buy” programs, which purchase food at low prices and distribute it to food banks, and to delivery of meals to seniors and Public Safety. Public safety is a basic responsibility of City government and is the City’s highest priority. other people who find it difficult to leave their homes. Mayor Nickels’ neighborhood policing initiative includes a plan to add about 21 patrol officers per year between 2005 and 2012. The 2009 and 2010 Budgets follow through on this commitment, which means Some of these additions are covered by reductions in programs that have a lower priority in the Human the Police Department will have 112 more officers in 2010 than it had in 2005. By adding officers, the Services Department’s Strategic Investment Plan. Three pilot programs started in 2007 to link public City will be able to implement the Neighborhood Policing Plan during this biennium. This plan has safety and human services efforts are funded in 2009 and will be evaluated that year. The 2010 Endorsed

Budget does not include funding for these programs and thus may need to be modified depending on the September 2008, which lays out expectations for how the City will respond to calls, follow up on results of the evaluation. requests, and track performance. Several customer service initiatives are under way or have been completed, including improving processes to respond to abandoned vehicles, graffiti, and requests for Youth Violence Prevention. Mayor Nickels announced the Seattle Youth Violence Prevention Initiative various types of permits. in early September 2008. This initiative recognizes that while crime in Seattle is at a 40-year low, criminal activity by teenage youth has not declined in recent years, and the ready availability of guns has This budget reflects the use of the Seattle Public Utilities call center to begin to handle a wider range of led to several deaths. The initiative will focus new and existing resources in three geographic areas: calls, and includes support for the call center from the General Fund to cover the appropriate share of central, southeast, and southwest Seattle. The program is still in the design phase, but it is expected to costs. The budget also includes a technology project to convert City email and related software to a more include a network in each area that will deliver a wide array of services, including counseling, referrals to effective system and add customer relations improvements. job training, and individual and group programming. Staff will perform active outreach to teens in these neighborhoods at greatest risk of perpetrating or being victims of violence. Total funding for the biennium Utilities. Seattle operates four utilities organized in two departments. Seattle City Light (SCL) provides is about $7.8 million, with $3.5 million of this total being redirected from existing programs. electrical service to Seattle and surrounding areas. Seattle Public Utilities (SPU) houses three utilities that provide water, solid waste, and drainage and wastewater services. Together, the two departments account Transportation. The City of Seattle has vastly increased funding for transportation projects and for 53% of the City’s overall 2009 budget. maintenance over the last eight years. Much of this is due to “Bridging the Gap,” a program started in 2007 that includes funds from a voter-approved property tax levy, a new commercial parking tax, and a City Light has dramatically improved its financial situation since the West Coast power crisis in 2000 and tax on employers for those employees who do not use alternatives to single-occupancy vehicles. The 2001. The utility’s debt-to-capitalization ratio has been lowered from 85% in 2001 to 65.9% in 2008. Bridging the Gap program funds a wide range of initiatives, including major capital projects, There is no rate increase for 2009 and rates are approximately 12% lower than they were in 2004. rehabilitation of bridges, additional transit hours purchased from King County Metro, replacement of traffic signals and signs, street resurfacing, and construction of new bike lanes, trails, and sidewalks. The utility expands its conservation program as part of its 2009 budget. This is a major factor in achieving Mayor Nickels’ goal to reduce the production of greenhouse gases and achieve the goals set out Completion of the Burke-Gilman Trail has been a longstanding goal for Mayor Nickels. The 2009 and in the Kyoto Protocol. The expanded conservation program is expected to double energy savings over 2010 Budgets include money to build the “missing link” in the trail. This money is generated by using previous plans. City-issued bonds to fund design and construction in the next two years, with the bonds to be repaid by money already committed from the Parks Levy approved by the voters in November, Bridging the Gap, City Light will continue to invest in improved capital facilities and maintenance. The utility started its and King County’s Proposition 2 levy. The same sources of funding will also support further asset management program in 2008 and undertakes a pole condition inventory starting in 2009. SCL will development of the Cheshiahud Lake Union Loop and the Chief Sealth Trail in southeast Seattle. continue to work with the Department of Information Technology to study the potential of an automated meter network, possibly combined with a citywide broadband system or other communications The 2009 and 2010 Budgets include additional money for two major transportation projects, the Alaskan infrastructure. The City is seeking federal economic recovery funds to support the automated metering Way Viaduct Replacement and the expansion and rehabilitation of the Spokane Street Viaduct. A deep project. bored tunnel under downtown Seattle is the selected option to replace the Alaskan Way Viaduct. The Adopted Budget includes a mix of General Fund, City General Obligation debt, utility funds, and grants SPU implemented new solid waste collection contracts in 2009. Residents now have three separate to continue the City’s work on project design and utility relocation. The City will implement a parking services: recycling, organics, and garbage. The major change is to provide weekly collection of organics, management strategy and electronic signage to improve access to parking and thus improve traffic flow which include yard waste and all types of food waste. This program is a key step in reaching the City’s during construction. The Alaskan Way project also includes continued work to replace the Seawall, goal to recycle more than 60% of the waste stream. including construction of sections to test various options. SPU has several major capital projects underway that continue in the 2009-2010 biennium. The water The first phase of construction on Spokane Street will build a ramp from eastbound Spokane Street to utility will continue its program to bury reservoirs. The Parks Department has its own funding to plan Fourth Avenue South, which will provide a new option for traffic from West Seattle to downtown during parks on top of the buried reservoirs in conjunction with SPU’s projects. Covering the reservoirs will add replacement of the Alaskan Way Viaduct. Later phases will widen and strengthen the overhead structure 76 acres of open space. The drainage and wastewater utility will continue design and construction of a and repave the surface street. This project also is funded with a mix of debt supported by Bridging the detention facility to solve the longstanding flooding problems in the Madison Valley neighborhood. The Gap revenues, utility funds, and grants. solid waste utility will continue its program to replace the north and south transfer stations.

The commercial parking tax is generating considerably more revenue than was originally expected. This General Government Capital Programs. The City has longstanding policies to provide adequate funding revenue is directed to a variety of programs, but most notably to additional street paving, sidewalk to maintain the existing facilities and systems of general government departments, including Parks, construction, and completion of design for improvements to Linden Avenue North. In total, the Seattle Seattle Center, the Library, and Fleets and Facilities. These asset preservation programs are funded Department of Transportation (SDOT) expects to build about 26 blocks of new sidewalks in 2009 and mostly from revenues from the Real Estate Excise Tax (REET) that are deposited in the Cumulative repave about 20 lane-miles of streets. Reserve Subfund (CRS). REET is a 0.5% tax on any sale of property within the city. REET revenues grew steadily throughout the decade as the commercial and residential real estate markets soared. Customer Service. Mayor Nickels launched his customer service initiative in 2007 to improve the way REET reached an unprecedented level of $73 million in 2007, with much of this peak being due to a the City interacts with its residents and businesses. The Mayor issued the “Customer Bill of Rights” in major commercial real estate portfolio being sold twice during the year.

$30 million in five years if the state government has provided a revenue source for the proposed The 2008 Adopted Budget expected about $51 million in REET revenue. However, there were very few remodeling of KeyArena in 2009 and if no NBA team has started play in Seattle by that time. commercial real estate transactions that year and the residential market slowed significantly, even though the Seattle market has performed far better than in most other metropolitan areas. As a result, the REET The City Council approved legislation in conjunction with the budget that directed the use of the forecast was lowered dramatically and the Mayor made mid-year cuts to rebalance the 2008 CRS budget. settlement funds: The forecast used for the 2009Bbudget predicted only modest growth to $32 million in 2009. When it became clear early in the year that even this forecast was too optimistic, further cuts in REET spending $34.2 million to defease the existing City debt related to KeyArena. These funds will be placed in were made. escrow to make the remaining principal and interest payments on the bonds. This would eliminate the debt used to pay for the remodel of KeyArena in 1994. These lower revenue figures limit the number and scope of general government capital projects that can be pursued. The Mayor and City Council made it a priority to continue spending on regular asset $2.8 million to pay legal fees incurred during the City’s litigation with the team. preservation projects, such as roof repairs, safety programs, and projects to reduce utility consumption. The Adopted Budget includes the Mayor’s commitment to add one artificial turf field each year to the $1.4 million to cover General Fund revenue losses in 2008. This reflects the amount of money the parks system. Fields with artificial turf can be used far more than grass or sand fields in Seattle’s climate, General Fund was projected to receive in the fourth quarter of 2008 from Sonics-related revenues. and are also less costly to maintain. $250,000 to offset revenue losses at Seattle Center in 2009. The late departure of the Sonics Two significant new facilities are supported by debt that is included in the 2009 budget. A total of $10.6 meant that the Center did not have the opportunity to book replacement events on many dates. No million is proposed to complete acquisition and development of the new Northgate Park. This park will be funds are provided for 2010 because the Center should have time to book events into the building. built on the site of a King County Metro Park and Ride facility that is moving to a new location in the spring of 2009. This project also includes improvements to sidewalks and medians on the adjoining Fifth $2.3 million for capital improvements to KeyArena. The basic structure of KeyArena was built Avenue Northeast. The 2009 budget includes $4.5 million to fund design of a new Rainier Beach for the Seattle World’s Fair in 1962, and the building was extensively remodeled in 1994. As the Community Center as well. Additional funding for this facility will be available from the Parks Levy. facility ages, investment in asset preservation projects and new technologies is needed. This money will be spread over the 2008-2010 period. Two major voter-approved capital programs neared completion in 2008. The Libraries for All bond measure replaced or remodeled all the City’s libraries and added four new ones. The last facility project, $1.1 million for site improvements at the former Fun Forest location. The Fun Forest amusement the remodeling of the Magnolia Library, was finished in 2008. The ProParks Levy expired in 2008 and park will close at the end of 2009. The Seattle Center Century 21 Master Plan has an ambitious has funded the purchase, development, and rehabilitation of parks and open space throughout the city. design to reuse this space, but funding will not be available until mid-2011 at the earliest. The Some funds remain to be spent in 2009. The new Parks Levy approved by voters in November will money from the Sonics settlement will support site clearing and interim facilities for this space. continue many of these efforts. To the extent possible, the interim improvements will be designed to fit into the Century 21 plan.

SDOT also receives money from REET. As with other departments, SDOT’s 2009 and 2010 REET $1.5 million for the Theater Commons development. The Theater Commons is a long-envisioned funding is focused on basic maintenance programs, such as bridge repainting, street resurfacing, and project to improve open spaces in the northwest portion of the Seattle Center campus. It is safety programs. included in the Century 21 plan. The City needs to proceed with the project in the next biennium

or it will lose a substantial grant for the project. Environmental Protection. The City of Seattle has been a leader in environmental protection for more than three decades. The 2009-2010 Budget continues this commitment. As noted previously, City Light $1.5 million to offset General Fund support for Seattle Center’s operating budget, including two will expand its energy conservation program and the City’s other efforts to reduce greenhouse gases will staff positions to continue to develop the Century 21 plan. continue. The Department of Planning and Development and the Office of Sustainability and

Environment will continue to lead the “green building” effort, which helps public and private building Many of these transactions occurred in 2008. Some funds are appropriated in 2009 for Seattle Center’s owners build and remodel facilities in ways that reduce carbon footprints. The City’s vehicle fleet is operations and capital projects, and remaining funds are proposed to be appropriated for similar purposes continuing to shift away from oil-based fuels to include hybrid and electric vehicles. City departments in the 2010 budget. are exceeding the 2-for-1 tree replacement policy that is designed to help restore tree cover in the city. Race and Social Justice. Mayor Nickels continues to emphasize his Race and Social Justice Initiative, which is intended to assure that all Seattle residents have access to services. The 2009-2010 Adopted KeyArena Settlement. The National Basketball Association’s Seattle Sonics were the prime tenant of Budget includes several new programs focused on immigrants and communities of color. For example, KeyArena (formerly the Seattle Center Coliseum) since the team was formed. In October 2006, the team the budget for the Department of Neighborhoods includes $40,000 to help pay for translations of was sold to a group of investors based in Oklahoma City. The new ownership took steps to break its lease important City documents into languages commonly spoken by immigrants, plus $50,000 to support a at KeyArena so the team could relocate to Oklahoma City. In August 2008, the City and the ownership Hispanic Information Center/Centro de Informaion Hispano in the South Park neighborhood. group settled the resulting litigation. The settlement provided a $45 million payment to the City in exchange for the team being able to void the last two years of its lease. The City will receive an additional

In addition to these specific initiatives, the overall approach to developing the 2009-2010 Budget required staff and decision makers to consider potential race and social justice implications of proposals. Final budget decisions were influenced by these considerations to make sure all communities were treated fairly The Government Finance Officers Association of in the budget process. the United States and Canada (GFOA) awarded

a Certificate of Achievement for Excellence in

Financial Reporting to the City of Seattle for its CERTIFICATE OF ACHIEVEMENT comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2007. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a This was the twenty-eighth consecutive year that Certificate of Achievement for Excellence in Financial Reporting to the City of Seattle for its the government has achieved this prestigious comprehensive annual financial report for the fiscal year ended December 31, 2007. The Certificate of award. In order to be awarded a Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for Achievement, a government must publish an preparation of state and local government financial reports. easily readable and efficiently organized

I would like to express my appreciation to the entire staff of Accounting Services, other members of the comprehensive annual financial report. This Department of Executive Administration, and other City departments who contributed to the preparation report must satisfy both generally accepted of this report. Finally, I thank you for your interest and continuing support in planning and conducting accounting principles and applicable legal the City's financial operations in a responsible manner. requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current

comprehensive annual financial report continues

to meet the Certificate of Achievement Programs requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

City of Seattle DEPARTMENT OF EXECUTIVE ADMINISTRATION

Director Fred Podesta

Business Technology Accounting Services Revenue and Consumer Affairs Human Resources Bryon Tokunaga Victoria Galinato Denise Movius Cindy Eckholt

Contracting Purchasing Treasury Services Risk Management Seattle Animal Shelter Linneth Riley-Hall Nancy Locke Teri Allen Bruce Hori Don Jordan This pageisintentionallyleftblank. Financial Section

This page is intentionally left blank. the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinions. Washington State Auditor Brian Sonntag In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of the City of Seattle, King County, Washington, as of INDEPENDENT AUDITOR’S REPORT December 31, 2008, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

July 30, 2009 In accordance with Government Auditing Standards, we will also issue our report dated July 30, 2009, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The Mayor and City Council purpose of that report is to describe the scope of our testing of internal control over financial reporting and City of Seattle compliance and the results of that testing, and not to provide an opinion on the internal control over Seattle, Washington financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

We have audited the accompanying financial statements of the governmental activities, the business-type The management’s discussion and analysis on pages 7 through 26, budgetary comparison information on activities, each major fund, and the aggregate discretely presented component unit and remaining fund pages 135 through 138 and pension trust fund information on pages 139 through 141 are not a required information of the City of Seattle, King County, Washington, as of and for the year ended December 31, part of the basic financial statements but are supplementary information required by the Governmental 2008, which collectively comprise the City’s basic financial statements as listed in the table of contents. Accounting Standards Board. We and other auditors have applied certain limited procedures, which These financial statements are the responsibility of the City’s management. Our responsibility is to consisted principally of inquiries of management regarding the methods of measurement and express opinions on these financial statements based on our audit. We did not audit the financial presentation of the required supplementary information. However, we did not audit the information and statements of the following funds: express no opinion on it.

The Light Fund, Water Fund, and Drainage and Wastewater Fund, which are major funds that Our audit was performed for the purpose of forming opinions on the financial statements that collectively collectively represent 95 percent, 98 percent, and 89 percent, respectively, of the assets, net comprise the City’s basic financial statements. The accompanying information listed as combining and assets, and revenues of the business-type activities. individual fund and other supplementary information on pages 147 through 217 is presented for purposes The financial statements of the Solid Waste Fund, which represent 3 percent, 1 percent, and 8 of additional analysis and is not a required part of the basic financial statements. This information has percent, respectively, of the assets, net assets, and revenues of the business-type activities, and been subjected to auditing procedures applied by us and other auditors in the audit of the basic financial 8 percent, 1 percent, and 15 percent, respectively, of the assets, net assets, and revenues of the statements and, in our opinion, based on our audit and the reports of other auditors, is fairly stated, in all aggregate discretely presented component unit and remaining fund information. material respects, in relation to the basic financial statements taken as a whole. The financial statements of the Seattle City Employees’ Retirement System, which represent 65 percent, 88 percent, and 15 percent, respectively, of assets, net assets, and revenues of the The information identified in the table of contents as the Introductory Section, Statistical Section and aggregate discretely presented component unit and remaining fund information. Capital Assets information on pages 221 through 224 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the City. Such information has not been Those financial statements were audited by other auditors whose reports thereon have been furnished to subjected to the auditing procedures applied by us and the other auditors in the audit of the basic us, and our opinions, insofar as they relate to the amounts included for the Light, Water, Solid Waste, and financial statements and, accordingly, we express no opinion on it. Drainage and Wastewater funds and the Seattle City Employees’ Retirement System are based solely on the reports of the other auditors. The partial prior year comparative information has been derived from the City’s 2007 financial statements and, in our report dated June 30, 2008, based on our audit and the Sincerely, reports of other auditors, we expressed unqualified opinions on the respective financial statements of the governmental activities, business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and BRIAN SONNTAG, CGFM perform the audit to obtain reasonable assurance about whether the financial statements are free of STATE AUDITOR material misstatement. The financial statements of the Water, Solid Waste, and Drainage and Wastewater funds and the Seattle City Employees’ Retirement System were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting

Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388 FAX (360) 753-0646 http://www.sao.wa.gov Management’s Discussion and Analysis

This page is intentionally left blank. Management’s Discussion and Analysis The City of Seattle

net cost of the various activities of the City. The report summarizes and simplifies analysis of the revenues and expenses of MANAGEMENT’S DISCUSSION AND ANALYSIS the various City activities and the degree to which activities are subsidized by general revenues. The government-wide financial statements distinguish functions of the City that are principally supported by taxes and The City of Seattle (City) presents this Management’s Discussion and Analysis (MD&A) of its financial activities for the intergovernmental revenues (governmental activities) from other functions that recover all or a significant portion of their fiscal year ended December 31, 2008. This discussion and analysis focuses on significant financial issues, provides an costs through user fees and charges (business-type activities). The governmental activities of the City include general overview of the City’s financial activity, highlights significant changes in the City’s financial position, and identifies government activities, judicial activities, public safety, physical environment, transportation, economic environment, health material variances between the approved budget and actual spending. and human services, and culture and recreation. The business-type activities of the City include an electric utility, a water utility, a waste disposal utility, a sewer and drainage utility, construction and land use operations, and parking facilities. The City encourages readers to consider the information presented here in conjunction with additional information provided in its letter of transmittal. Fund Financial Statements

FINANCIAL HIGHLIGHTS A fund is a group of related accounts used to maintain control over resources that are segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance At the end of fiscal year 2008 the assets of the City of Seattle exceeded its liabilities by $4.009 billion. Net assets with finance-related legal requirements. There are three categories of City funds: governmental funds, proprietary funds, invested in capital assets (net of depreciation and related debt) account for 82.6 percent of this amount ($3.312 billion). and fiduciary funds. The remaining net assets of $696.7 million may be used to meet the City’s ongoing obligations to citizens and creditors. Governmental funds account for essentially the same functions reported as governmental activities in the government-wide The City’s net assets increased by $269.4 million (7.2 percent) during the fiscal year. The governmental net assets financial statements. Most of the City’s basic services are reported in the governmental funds. These statements, however, increased by $121.4 million (4.8 percent) over the amount reported in 2007. Business-type net assets increased by focus on cash and other assets that can readily be converted to available resources, as well as any balances remaining at $148.1 million (12.2 percent). The business-type increase included net income of $131.6 million for City Light, year-end. Such information is useful in determining what financial resources are available in the near future to finance the $0.5 million for the Water Utility, net income of $12.5 million for Drainage and Wastewater Utility, and $3.4 million for City’s programs. nonmajor funds. The balance of the offset is the result of the consolidation of the Internal Service Funds’ activities related to the Enterprise Funds. Readers may better understand the long-term impact of the government’s near-term financing decisions by comparing the information presented for the governmental funds with similar information presented for governmental activities in the At the close of 2008 the City’s governmental funds reported a combined ending fund balance of $629.3 million, an government-wide financial statements. Both the governmental funds Balance Sheet and the governmental funds Statement increase of $37.5 million (6.3 percent). Of the major funds, the fund balance of the General Fund decreased of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate the comparison. $55.6 million, the Transportation Fund increased $9.2 million, and the Low-Income Housing Fund increased by $6.4 million. The fund balances of the nonmajor governmental funds increased by $77.5 million. The nationwide The City maintains numerous governmental funds that are organized according to type (general, special revenue, debt economic downturn had an impact on the City’s tax revenues which decreased $22.7 million (2.4 percent). service, capital projects, and permanent funds). Information for the three major governmental funds is presented separately Approximately $227.5 million (36.2 percent) of the combined ending fund balance is unreserved fund balance available in the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures, and Changes in to the City for discretionary spending. Fund Balances; information for the nonmajor funds is presented in the aggregate. The City’s major governmental funds are the General Fund, Transportation Fund, and Low-Income Housing Fund. Information for each of the nonmajor At the end of 2008 the unreserved fund balance for the General Fund was $131.1 million or 18.3 percent of total General governmental funds is provided in the combining statements in this report. Fund expenditures of $714.9 million. The General Fund’s unreserved fund balance decreased by approximately $66.6 million from the prior year’s amount of $197.7 million, reflecting significant decreases in taxes and program Proprietary funds account for services for which the City charges outside customers and internal City departments. income and interest, and the continued level of operating expenditures. Proprietary funds provide the same information as shown in the government-wide financial statements, only in more detail. The City maintains the following two types of proprietary funds: The City’s total outstanding bonded debt increased by approximately $442.4 million (13.1 percent) to $3.830 billion during the current fiscal year. During the year, general obligation bonded debt for limited tax (LTGO) and unlimited tax Enterprise funds report the same functions presented as business-type activities in the government-wide financial (UTGO) decreased by $44,000 while the total revenue bonds increased by $$442.5 million. On the special assessment statements. The proprietary funds financial statements provide separate information for the Seattle City Light Fund, bonds the City issued in 2006 for the design and construction of the South Union Streetcar and backed by the collection Water Fund, and the Drainage and Wastewater Fund, which are considered to be major enterprise funds. Information for of assessments from property owners within the local improvement district, a bond maturity and call payment of nonmajor enterprise funds is presented in the aggregate. Information for each of the nonmajor enterprise funds is $1.3 million (6.5 percent) in 2008 reduced the bonds outstanding further to $19.2 million. provided in the combining statements in this report.

OVERVIEW OF THE FINANCIAL STATEMENTS Internal service funds report activities that provide supplies and services for various City programs and activities. The City uses internal service funds to account for its fleets and facilities services, information technology services, and This discussion and analysis is an introduction to the City of Seattle’s basic financial statements which consist of three engineering services. Because these services largely benefit governmental rather than business-type functions, they have components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial been included within the governmental activities in the government-wide financial statements. The internal service statements. The report also contains other supplementary information in addition to the basic financial statements. funds are combined into a single aggregated presentation in the proprietary funds financial statements. Information for each of the internal service funds is provided in the combining statements in this report. Government-Wide Financial Statements Proprietary funds statements follow the governmental funds statements in this report. The government-wide financial statements provide a broad overview of the City’s finances in a manner similar to that of private-sector business. Fiduciary funds account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of these funds are not available to support City programs. The accounting used for fiduciary funds is similar to that used for proprietary funds. The City’s fiduciary funds The Statement of Net Assets presents information on all City assets and liabilities, with the difference between the two include the Employees’ Retirement Fund, the Firemen’s Pension Fund, the Police Relief and Pension Fund, the S. L. Denny reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of the City’s financial Private-Purpose Trust Fund, and various agency funds. health.

The Statement of Activities presents changes in net assets during the current reporting period. All changes to net assets are reported as of the date of the underlying event, rather than when cash is received or disbursed. Thus, some reported revenues and expenses result in cash flows in future periods. The Statement of Activities focuses on both the gross and the

7 8 Management’s Discussion and Analysis The City of Seattle

Notes to the Financial Statements Table A-2 CHANGES IN NET ASSETS RESULTING FROM CHANGES IN REVENUES AND EXPENSES The notes to the financial statements are an integral part of the financial statements. They provide additional disclosures that are essential to a full understanding of the information provided in the government-wide and fund financial statements. (In Thousands) The notes to the financial statements immediately follow the basic financial statements in this report. Governmental Activities Business-Type Activities Total Restated Restated Restated Required Supplementary Information 2008 2007 2008 2007 2008 2007 Revenues This report also contains other required supplementary information (RSI) on budgetary comparisons for major governmental Program Revenues funds and pension plan funding. Charges for Services $ 263,746 $ 224,256 $ 1,426,864 $ 1,368,974 $ 1,690,610 $ 1,593,230 Operating Grants and Contributions 95,236 93,182 4,099 6,207 99,335 99,389 Capital Grants and Contributions 31,527 31,577 81,425 53,063 112,952 84,640 Combining Statements General Revenues Property Taxes 368,515 359,651 - - 368,515 359,651 Sales Taxes 171,917 171,846 - - 171,917 171,846 The combining statements referred to earlier in connection with the nonmajor funds, internal service funds, and fiduciary Business Taxes 330,369 332,238 - - 330,369 332,238 funds are presented immediately following the required supplementary information. Other Taxes 63,896 93,959 - - 63,896 93,959 Other 39,601 34,047 15,238 19,382 54,839 53,429 Total Revenues 1,364,807 1,340,756 1,527,626 1,447,626 2,892,433 2,788,382 GOVERNMENT-WIDE FINANCIAL ANALYSIS Expenses Governmental Activities As noted earlier, net assets may serve as a useful indicator of a government’s financial position. Table A-1 is a condensed General Government 143,855 103,324 - - 143,855 103,324 version of the statement of net assets for the City of Seattle. At the close of the current fiscal year the City’s total assets Judicial 26,762 24,030 - - 26,762 24,030 Public Safety 455,701 396,669 - - 455,701 396,669 exceeded liabilities by $4.009 billion. Physical Environment 7,707 9,991 - - 7,707 9,991 Transportation 127,872 124,493 - - 127,872 124,493 Economic Environment 104,660 98,337 - - 104,660 98,337 Statement of Net Assets Health and Human Services 69,181 63,275 - - 69,181 63,275 Culture and Recreation 257,578 224,454 - - 257,578 224,454 Interest on Long-Term Debt 39,336 34,048 - - 39,336 34,048 Business-Type Activities Table A-1 CONDENSED STATEMENT OF NET ASSETS Light - - 791,837 764,786 791,837 764,786 Water - - 180,855 169,631 180,855 169,631 (In Thousands) Drainage and Wastewater - - 231,318 225,833 231,318 225,833 Solid Waste - - 120,941 119,714 120,941 119,714 Governmental Activities Business-Type Activities Total Planning and Development - - 56,882 56,139 56,882 56,139 Downtown Parking Garage - - 8,545 8,336 8,545 8,336 Restated Restated Restated Total Expenses 1,232,652 1,078,621 1,390,378 1,344,439 2,623,030 2,423,060 2008 2007 2008 2007 2008 2007 Excess Before Transfers 132,155 262,135 137,248 103,187 269,403 365,322 Transfers (10,803) (10,612) 10,803 10,612 - - Current and Other Assets $ 1,220,441 $ 1,172,215 $ 1,399,274 $ 934,389 $ 2,619,715 $ 2,106,604 Increase in Net Assets 121,352 251,523 148,051 113,799 269,403 365,322 Capital Assets and Construction in Net Assets - Beginning of Year 2,528,975 2,277,452 1,210,815 1,097,016 3,739,790 3,374,468 Progress, Net of Accumulated Depreciation 2,866,199 2,744,196 3,480,050 3,297,785 6,346,249 6,041,981 Nets Assets - End of Year $ 2,650,327 $ 2,528,975 $ 1,358,866 $ 1,210,815 $ 4,009,193 $ 3,739,790 Total Assets 4,086,640 3,916,411 4,879,324 4,232,174 8,965,964 8,148,585

Current Liabilities 240,768 226,541 427,874 298,654 668,642 525,195 Noncurrent Liabilities 1,195,545 1,160,893 3,092,584 2,722,705 4,288,129 3,883,598 Total Liabilities 1,436,313 1,387,434 3,520,458 3,021,359 4,956,771 4,408,793 Analysis of Changes in Net Assets Net Assets Invested in Capital Assets, Net of Related Debt 2,184,161 2,011,575 1,128,319 967,028 3,312,480 2,978,603 Restricted 271,204 194,617 63,913 48,562 335,117 243,179 In 2008 the City’s total net assets increased by $269.4 million (7.2 percent). The increase is explained in the following Unrestricted 194,962 322,785 166,634 195,225 361,596 518,010 discussion of governmental and business-type activities. Total Net Assets $ 2,650,327 $ 2,528,977 $ 1,358,866 $ 1,210,815 $ 4,009,193 $ 3,739,792

The largest portion of the City’s net assets (82.6 percent) reflects an investment of $3.312 billion in capital assets, such as land, buildings, and equipment, less any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, the resources needed to repay the debt must be provided from other sources, as capital assets cannot be used to liquidate these liabilities.

An additional portion of the City’s net assets, $335.1 million (8.4 percent), represents resources that are subject to restrictions on how they may be used. The remaining balance of unrestricted net assets, $361.6 million (9.0 percent), may be used to meet the government’s obligation to citizens and creditors. Unrestricted net assets for governmental activities decreased 39.6 percent from $322.8 million in 2007 to $195.0 million in 2008.

The net assets for the business-type activities increased between 2007 and 2008 from $1.211 billion to $1.359 billion. The increase in net assets is attributed primarily to the performance of the City Light Utility, which in 2008 generated $877.4 million in charges for services and other revenues, up from $832.5 million in 2007. City Light generated an operating income of $146.7 million.

9 10 Management’s Discussion and Analysis The City of Seattle

Governmental Activities Governmental Activities. The charts on the previous page present the City’s governmental expenses and revenues by function and its revenue by source. Public safety is the largest governmental expense of the City, followed by culture and recreation, general government, transportation, economic environment, health and human services, judicial, and physical environment. General revenues such as the property, business, and sales taxes are not shown by function because they are EXPENSES AND PROGRAM REVENUES - GOVERNMENTAL ACTIVITIES used to support Citywide program activities. Governmental activities increased the City’s net assets by $121.4 million in (In Thousands) 2008 compared to an increase of $251.5 million in 2007. Key factors in the change are as follows:

500,000 In 2008 total revenues for governmental activities were $1.365 billion, $24.1 million or 1.8 percent higher than 2007. 450,000 Program revenue related to services increased by $39.5 million or 18.0 percent in 2008. Revenue from licenses and permits 400,000 were up overall with a significant increase in cable franchise fees and street use permit fees. Revenues for various recreational activities and concessions increased as did parking and building and space rental revenues. 350,000 Revenue generated by grants and contributions decreased by $2.0 million in 2008. While 2008 operating grants increased 300,000 by only 2.2 percent, capital grants decreased by 0.2 percent compared to 2007.

250,000 Property taxes, the largest source of revenue supporting governmental activities, increased by $8.9 million or 2.5 percent compared to 2007. Property tax is levied primarily on real estate owned by individuals and businesses. State law limits 200,000 Expenses growth in the amount of tax that a jurisdiction can collect but does allow for additional voter approved lid lifts. Revenues 150,000 The retail sales and use (sales) tax is imposed on the sale of most goods and certain services in Seattle. The tax is collected 100,000 and remitted to the state. The state provides the City with its share on a monthly basis. Sales tax revenues remained relatively constant between 2007 and 2008 holding at $172.0 million. 50,000 Business taxes are the second largest contributor to governmental revenues. The business and occupation (B&O) tax, the - major business tax, is levied by the City on the gross receipts of most business activities occurring in Seattle. The City also levies a B&O tax on the gross income derived from sales of utility services within Seattle. In 2008 B&O tax revenues remained constant, decreasing by only $1.9 million or 0.6 percent. Judicial General Physical Recreation Economic

Culture and Other tax revenues decreased $30.1 million during 2008. Seattle’s extraordinary activity in the commercial real estate Government Environment Environment Public Safety Health and Health Interest on Interest

Transportation market came to an end in 2008. The revenue from real estate excise taxes decreased by $40.7 million from $77.0 million in Human Services Human Long-Term Debt Long-Term 2007 to $36.3 million in 2008.

Other revenues significantly increased in 2008 from $891 thousand to $15.3 million, resulting from the one-time sale of properties in 2008.

REVENUES BY SOURCE - GOVERNMENTAL ACTIVITIES Also contributing to the change in revenues, investment earnings went down by $7.4 million (23.0 percent) in 2008. The rate of return for investments decreased from an average of 5.1 percent in 2007 to an average of 3.9 percent in 2008.

Ot h er In 2008 total expenses for governmental activities were $1.233 billion compared to $1.079 billion in 2007, $154.0 million or Ot h er Revenues 14.3 percent higher than 2007’s expenses. General government expenses went up $40.5 million, a 39.2 percent increase over Taxes 3% Charges for Services 2007. 5% 19% Public safety expenses increased $59.0 million, a 14.9 percent increase over 2007. The increase is attributed to several Business Taxes factors: staffing increases at both the Police and Fire Departments, a cost-of-living salary adjustment, increased overtime 24% and employee benefit expenses, and cost increases for technical and professional services. Operating Grants and Contributions Judicial expenses went up $2.7 million or 11.4 percent. In addition to the cost-of-living salary adjustment and health care 7% increases, staff was added to implement the Seattle Justice Information System’s handheld ticketing devices data exchanges between the Court and Seattle Police Department. The Municipal Court also added probation staff to increase the supervision of probationers and in support of its expanded menu of alternatives to incarceration.

Physical environment expenses decreased $2.3 million, a 22.9 percent decrease compared to 2007. In addition to the Citywide adjustments to labor costs and changes in inflation assumptions for other costs, expenses went up due to additional programs and staffing within the Revenue and Consumer Affairs Division of the Department of Executive Administration. Capital Grants Staff was added to improve customer wait times, alleviate backlogs in processing City tax payments, and attend to other and Cont ribut i ons customer service needs. The Licensing Operations Unit’s budget also increased to implement a commercial recycling 2% licensing program. Sales Taxes Property Taxes 13% 27% Transportation expenses increased $3.4 million, a 2.7 percent increase compared to 2007. The overall level of expenditures is cyclical in nature as the majority of these are for capital projects. For capital spending, major projects are in the initial Total $1,364.8 Million 11 12 Management’s Discussion and Analysis The City of Seattle planning and development phases and have yet to commence major construction; these projects include the Alaskan Way Business-Type Activities Viaduct and Seawall Replacement projects.

Economic environment expenses went up by $6.3 million or 6.4 percent. The Office of Housing increased expenses by EXPENSES AND PROGRAM REVENUES - BUSINESS-TYPE ACTIVITIES $0.8 million for the multifamily production and preservation program. The Office of Economic Development added one position and increased expenses by $0.8 million in its work force development program. (In Thousands) 1,000,000 Health and human services expenses showed an increase of $5.9 million or 9.3 percent. The Educational Development Services levy which is supported by multiple departments increased expenses by $0.5 million. The increase of $5.0 million 900,000 in the Human Services Department is mainly due to changes in the Aging and Disability Services programs. 800,000 At $257.6 million, culture and recreation expenses were up $33.1 million in 2008 or 14.8 percent higher than 2007. Library's expenses increased approximately $4.0 million, mainly for increasing the library’s public book collections and 700,000 operating new or remodeled facilities. Expenses for the Department of Parks and Recreation increased $8.6 million primarily due to the opening of new facilities, new community center hours, and the expansion of specialized programs. 600,000

In July 2008 the City issued LTGO bonds in the amount of $139.8 million; a portion of the bond proceeds were used to 500,000 defease the LTGO 96C bonds for $5.6 million and the LTGO 96 D bonds for $51.9 million and a portion to finance capital improvement projects. The City’s total outstanding general obligation bonded debt decreased $44,000 to $785.7 million 400,000 Expenses during the current fiscal year. Interest on long-term debt went up by $5.3 million or 15.5 percent for 2008. Revenues 300,000

200,000

100,000

- Li ght Water Parking Garage Downtown Wastewater Solid Waste Planning and Planning Drainage and Development

REVENUES BY SOURCE - BUSINESS-TYPE ACTIVITIES

Capital Grants Other and Revenues Contributions 1% 5%

Ch arge s for Se rvic es 94%

Total $1,527.6 Million 13 14 Management’s Discussion and Analysis The City of Seattle

Business-Type Activities. Business-type activities increased the City’s net assets by $148.0 million to $1.359 billion, an FINANCIAL ANALYSIS OF CITY FUNDS increase of 12.2 percent. In addition an adjustment of $2.7 million was made to reflect the consolidation of internal service fund activities related to enterprise funds. Key factors for the change were as follows: As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The City Light Utility realized a net increase of $131.6 million in net assets in 2008; an increase of $10.8 million compared to net income of $120.8 million in 2007, as restated, was due to higher retail revenues and lower Bonneville Power Administration (BPA) costs, primarily as a result of colder temperatures experienced in the earlier and later parts of the year and substantial cash payments from BPA for the Residential Exchange Program. The increase in operating revenues was Table A-3 REVENUE, EXPENDITURE, AND FUND BALANCE SUMMARY higher or more than offset the increase in operating expenses. GOVERNMENTAL FUNDS The Water Utility experienced an increase of $0.5 million in net assets in 2008. Operating revenues increased by (In Thousands) $4.2 million mainly due to an increase in retail services. Operating expenses increased by $8.2 million due to several factors, the most significant of which was a $3.2 million increase in depreciation. This resulted from an increase in capital assets Major Funds which began depreciating during 2008. Additional expenses were incurred for tank improvements, security and emergency General Fund Transportation Fund Low-Income Housing Fund management programs, and claims. Capital contributions and grants revenue increased by $10.0 million in 2008, primarily 2008 2007 2008 2007 2008 2007 from the receipt of infrastructure assets donated by Sound Transit. Revenues The Drainage and Wastewater Utility net assets increased $12.5 million in 2008. Operating revenues increased by Taxes $ 745,455 $ 770,140 $ 54,787 $ 43,455 $ 11,725 $ 11,849 Licenses and Permits 18,269 22,680 10,036 9,821 - - $21.7 million primarily due to rate increases for both wastewater and drainage services. The increase was offset by a rise in Grants, Shared Revenues, and Contributions 19,725 18,916 34,279 33,490 8,059 7,601 operating expenses of $8.5 million, including a $2.2 million increase in tax expense due to higher revenues and a Charges for Services 62,547 64,750 25,336 30,638 35 18 $3.3 million increase in depreciation expense for capital assets that began depreciating in 2008. Contributions and grants Fines and Forfeits 22,110 19,497 10 10 - - funding increased by $20.7 million in 2008, primarily from the receipt of infrastructure assets donated by Sound Transit. Parking Fees and Space Rent 20,625 21,360 63 73 27 27 Program Income, Interest, and Miscellaneous Revenues 25,932 41,390 389 838 15,070 17,514 The Solid Waste Utility net assets increased $6.6 million 2008. Operating revenues increased by $2.4 million mainly due to Total Revenues 914,663 958,733 124,900 118,325 34,916 37,009 rate increases in 2008. The revenue increase was offset by an increase of $0.9 million in operating expenses. Expenditures 714,897 633,766 196,988 191,859 30,606 25,913 The Planning and Development Fund net assets decreased by $1.3 million in 2008 as compared to an increase of $5.5 million in 2007. Operating revenues decreased by $6.3 million mainly due to a significant decline in building Other Financing Sources and Uses construction revenues in 2008. Operating contributions and grants increased by $0.4 million and transfers in from other Long-Term Debt Issued and City funds increased by $0.2 million. The increases were offset by a rise in operating expenses of $0.7 million. Investment Refunding Payments, Net ------income declined by $0.3 million in 2008. Sales of Capital Assets 373 3,868 - - 32 - Transfers In (Out) (255,757) (243,105) 81,329 86,392 2,074 - Total Other Financing Sources and Uses (255,384) (239,237) 81,329 86,392 2,106 - The Downtown Parking Garage Fund experienced a decrease of $2.0 million in net assets.

Fund Balances Reserves Legally Segregated for Future Use 139,067 123,935 32,602 23,361 17,228 53,108 Reserves Not Available for Appropriation 1,258 5,415 2 2 - - Unreserved 131,085 197,678 - - 52,773 10,477 Total Fund Balances $ 271,410 $ 327,028 $ 32,604 $ 23,363 $ 70,001 $ 63,585

15 16 Management’s Discussion and Analysis The City of Seattle

Table A-3 REVENUE, EXPENDITURE, AND FUND BALANCE SUMMARY Governmental Funds GOVERNMENTAL FUNDS (continued) The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of (In Thousands) resources available for spending. This information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance measures the City’s net resources available for spending at the end of the fiscal year. Nonmajor Funds Governmental funds reported by the City include the General Fund, special revenue funds, debt service funds, capital Special Revenue Funds Debt Service Funds project funds, and permanent funds. 2008 2007 2008 2007 As of the end of the current fiscal year the City’s governmental funds reported combined ending fund balances of Revenues $629.3 million, an increase of $37.5 million in comparison to 2007. Approximately $227.5 million of this amount Taxes $ 58,733 $ 56,081 $ 20,592 $ 26,206 constitutes unreserved fund balance which is available for spending at the City’s discretion within the purposes specified for Licenses and Permits 786 938 - - Grants, Shared Revenues, and Contributions 64,606 61,882 2 2 the City’s funds. The remainder of fund balance is reserved to indicate that it is not available for new spending because it Charges for Services 54,852 53,448 - - has been committed for other purposes, such as (1) payment on existing contracts and purchase orders, $3.1 million; Fines and Forfeits 3,452 3,194 - - (2) funding of continuing projects and programs in future periods, $333.7 million; (3) payment of debt service, Parking Fees and Space Rent 16,771 16,188 248 259 $29.4 million; and (4) a variety of other purposes, $35.6 million. Program Income, Interest, and Miscellaneous Revenues 52,598 11,782 1,088 1,459 Total Revenues 251,798 203,513 21,930 27,926 Revenues for governmental funds overall totaled approximately $1.406 billion in the fiscal year ended December 31, 2008, which represents a decrease of approximately $6.7 million or 0.5 percent from the prior fiscal year of $1.413 billion. Expenditures 362,041 335,293 118,300 97,708 Expenditures in governmental funds amounted to $1.477 billion, an increase of approximately $95.6 million or 6.9 percent compared to $1.381 billion spent in 2007. In the aggregate, expenditures for governmental funds exceeded revenues by approximately $71.2 million. Other Financing Sources and Uses Long-Term Debt Issued and Refunding Payments, Net - - 246 147 The General Fund is the chief operating fund of the City. It is comprised of thirteen subfunds: General, Judgment/Claims, Sales of Capital Assets 3 479 - - Arts Account, Cable Television Franchise, Cumulative Reserve, Neighborhood Matching, Development Rights, Emergency, Transfers In (Out) 116,138 141,418 95,232 69,170 Special Employment Program, Industrial Insurance, Unemployment Compensation, Health Care, and Group Term Life Total Other Financing Sources and Uses 116,141 141,897 95,478 69,317 Insurance. Table A-4 provides a summary of the status of the various subfunds at year-end 2008.

Fund Balances At the end of 2008 the total fund balance of the General Fund was $271.4 million. Fund balance decreased by $55.6 million Reserves Legally Segregated for Future Use 11,862 23,914 15,104 15,996 in 2008 compared to 2007. Reserves Not Available for Appropriation 11,399 7,902 - - Unreserved 43,564 29,112 - - Total Fund Balances $ 66,825 $ 60,928 $ 15,104 $ 15,996 Total revenues for the General Fund amounted to $914.7 million, a decrease of $44.1 million, 4.6 percent lower than 2007. Tax revenues decreased by $24.7 million, a 3.2 percent drop. Tax revenues in 2008 were down due to the economic slow down in the region, declining new construction, and the dramatic decline in real estate sales.

Program income, interest, and miscellaneous revenues decreased by $15.5 million. Revenues derived from charges for Nonmajor Funds Total Governmental Funds services went down $2.2 million, parking fees and space rent down $0.7 million, and license revenue down $4.4 million. Capital Projects Funds Permanent Funds Against the overall downward trend of revenues, fines and forfeits went up by $2.6 million.

2008 2007 2008 2007 2008 2007 General Fund expenditures increased by $81.1 million or 12.8 percent in 2008, from $633.8 million to $714.9 million. Revenues Public safety current expenditures were up 43.1 million (11.6 percent). The current expenditures for general government Taxes $ 43,252 $ 49,510 $ - $ - $ 934,544 $ 957,241 increased $37.9 million (25.7 percent). The capital outlay for culture and recreation increased $5.5 million. Judicial Licenses and Permits - - - - 29,091 33,439 current expenditures went up $2.4 million. Grants, Shared Revenues, and Contributions 7,053 8,956 48 21 133,772 130,868 Charges for Services 27 198 - - 142,797 149,052 Fines and Forfeits - - - - 25,572 22,701 The other financing sources and uses category decreased the General Fund’s fund balance position by $255.4 million in Parking Fees and Space Rent 227 123 - - 37,961 38,030 2008 compared to $239.2 million in 2007. The net transfers out increased by $12.6 million in 2008. Program Income, Interest, and Miscellaneous Revenues 6,904 8,092 96 128 102,077 81,203 Total Revenues 57,463 66,879 144 149 1,405,814 1,412,534 The Transportation Fund, a special revenue fund, develops, maintains, and operates the transportation system inclusive of streets, bridges, ramps, retaining walls, sea walls, bike trails, street lights, and other road infrastructure. At the end of the fiscal year the fund balance increased by $9.2 million. The revenues consist of an excess property tax levy, an employee Expenditures 54,066 96,724 75 55 1,476,973 1,381,318 hours tax, and a commercial parking tax. Transportation’s expenditures totaled $197.0 million for 2008, up $5.1 million or 2.7 percent. Other Financing Sources and Uses Long-Term Debt Issued and Refunding Payments, Net 90,209 38,731 - - 90,455 38,878 The Low-Income Housing Fund, a special revenue fund and one of the major governmental funds of the City, manages Sales of Capital Assets - - - - 408 4,347 activities undertaken by the City to preserve, rehabilitate, or replace low-income housing. It also accounts for the seven-year Transfers In (Out) (21,194) (35,032) (10) (15) 17,812 18,828 housing levy approved by voters in 1995 and an additional seven-year levy that was approved by the voters in Total Other Financing Sources and Uses 69,015 3,699 (10) (15) 108,675 62,053 November 2002. At a fund balance of $70.0 million, the Low-Income Housing Fund ended the year with an increase of $6.4 million. Revenues from 2007 to 2008 decreased by $2.1 million or 5.6 percent. The expenditures increased from $25.9 million to $30.6 million. The increase in expenditures is attributed to the cyclical nature of the fund. Multifamily Fund Balances construction projects can span several years from acquisition to final construction. Further driving the variations is the Reserves Legally Segregated for Future Use 171,057 100,494 26 2 386,946 340,810 Reserves Not Available for Appropriation - - 2,183 2,186 14,842 15,505 cyclical nature of downtown construction and their associated costs. Unreserved - (1,846) 121 83 227,543 235,504 Total Fund Balances $ 171,057 $ 98,648 $ 2,330 $ 2,271 $ 629,331 $ 591,819 In 2008 the other special revenue funds showed a $5.9 million or 9.7 percent increase in fund balance as a result of operations. Total revenues for the special revenue funds were up $48.3 million, a 23.7 percent increase from 2007. Program income, interest, and miscellaneous revenues increased by $40.8 million. This was mainly due to the Key Arena Settlement 17 18 Management’s Discussion and Analysis The City of Seattle

for $45.0 million. Expenditures increased by $26.7 million, up 8.0 percent from 2007. The largest increases were in the Table A-4 REVENUE, EXPENDITURE, AND FUND BALANCE SUMMARY Human Services Operating Fund (up $9.3 million) due to a large increase in funding for various services and programs, including support for the Ten-Year Plan to End Homelessness, and in the Park and Recreation Fund where expenditures GENERAL FUND SUBFUNDS (continued) increased $8.9 million. The other financing sources and uses category decreased in 2008, down $25.8 million or (In Thousands) 18.2 percent compared to 2007. This decrease resulted from a decrease in net transfers among other funds of $25.3 million.

The fund balance in the capital projects funds showed a $72.4 million or 73.4 percent increase in 2008. The most Special significant increases came from the 2008 Multipurpose Long-Term General Obligation Fund increasing the fund balance Neighborhood Development Employment Industrial $73.0 million for the bond proceeds received. Fire Facilities fund balance increased $11.8 million as development work on Matching Rights Emergency Program Insurance the City’s fire stations continued. Revenues for the capital projects funds went down $9.4 million or 14.1 percent compared Revenues to 2007. Grants, shared revenues, and contributions decreased by $1.9 million or 21.2 percent. Tax revenues decreased by Taxes $ - $ - $ - $ - $ - $6.3 million or 12.6 percent. Expenditures for capital projects decreased $42.6 million, a 44.1 percent decrease compared to Licenses and Permits - - - - - the 2007 expenditures of $96.7 million. Grants, Shared Revenues, and Contributions - - - - - Charges for Services - - - 258 411 Fines and Forfeits - - - - - The 2008 fund balances of the debt service funds decreased by $0.9 million. The permanent funds remained at about the Parking Fees and Space Rent - - - - - same levels as 2007. Program Income, Interest, and Miscellaneous Revenues - (638) 48 - 1,494 Total Revenues - (638) 48 258 1,905 Table A-4 REVENUE, EXPENDITURE, AND FUND BALANCE SUMMARY Expenditures 4,169 - 4,150 275 - GENERAL FUND SUBFUNDS (In Thousands) Other Financing Sources and Uses Sales of Capital Assets - - - - - Transfers In (Out) (93) - (926) - - Total Other Financing Sources and Uses (93) - (926) - - Cable Judgment/ Arts Television Cumulative General Claims Account Franchise Reserve Fund Balances Reserves Legally Segregated for Future Use 4,315 - 974 - - Revenues Reserves Not Available for Appropriation - - - - - Taxes $ 715,135 $ - $ - $ - $ 30,320 Unreserved 581 21 39,923 88 6,681 Licenses and Permits 11,882 - - 6,387 - Total Fund Balances $ 4,896 $ 21 $ 40,897 $ 88 $ 6,681 Grants, Shared Revenues, and Contributions 17,678 - - - 2,047 Charges for Services 50,928 9,695 - - 1,255 Fines and Forfeits 22,110 - - - - Parking Fees and Space Rent 20,607 - - - 18 Program Income, Interest, and Miscellaneous Revenues 7,177 - 48 276 3,771 Total Revenues 845,517 9,695 48 6,663 37,411 Total General Fund Expenditures 633,302 14,676 992 6,979 38,594 Group Unemployment Health Term Life Compensation Care Insurance 2008 2007 Other Financing Sources and Uses Sales of Capital Assets 3 - - - 370 Revenues Transfers In (Out) (236,697) - - - (18,041) Taxes $ - $ - $ - $ 745,455 $ 770,140 Total Other Financing Sources and Uses (236,694) - - - (17,671) Licenses and Permits - - - 18,269 22,680 Grants, Shared Revenues, and Contributions - - - 19,725 18,916 Charges for Services - - - 62,547 64,750 Fund Balances Fines and Forfeits - - - 22,110 19,497 Reserves Legally Segregated for Future Use 18,213 13,975 896 - 79,915 Parking Fees and Space Rent - - - 20,625 21,360 Reserves Not Available for Appropriation 1,258 - - - - Program Income, Interest, Unreserved 25,298 (4) 221 7,063 26,960 and Miscellaneous Revenues (961) 14,673 44 25,932 41,390 Total Fund Balances $ 44,769 $ 13,971 $ 1,117 $ 7,063 $ 106,875 Total Revenues (961) 14,673 44 914,663 958,733

Expenditures - 11,760 - 714,897 633,766

Other Financing Sources and Uses Sales of Capital Assets - - - 373 3,868 Transfers In (Out) - - - (255,757) (243,105) Total Other Financing Sources and Uses - - - (255,384) (239,237)

Fund Balances Reserves Legally Segregated for Future Use - 20,779 - 139,067 123,935 Reserves Not Available for Appropriation - - - 1,258 5,415 Unreserved 4,398 19,441 414 131,085 197,678 Total Fund Balances $ 4,398 $ 40,220 $ 414 $ 271,410 $ 327,028

19 20 Management’s Discussion and Analysis The City of Seattle

Proprietary Funds Net cash provided by operating activities increased to $26.3 million in 2008 from $5.5 million in 2007. Total operating and restricted cash and investments were $72.4 million in 2008 as compared to $26.8 million in 2007, an increase of $45.6 million, primarily due to bonds issued in 2008. The City’s proprietary funds provide the same type of information found in the government-wide financial statements but in more detail. Utility plant, net of accumulated depreciation, and other capital assets increased to $570.5 million in 2008 from $516.9 million in 2007, an increase of $53.6 million. Acquisition of new assets included $43.2 million for pipe and City Light Utility. The Utility realized net income of $131.6 million in 2008 compared to $120.8 million in 2007, as maintenance rehabilitation, channel improvements at Delridge Basin, and drainage improvements at 30th Avenue SW. restated, or an increase of $10.8 million (8.9 percent) higher than 2007. Higher retail revenues along with lower Bonneville Significant capital was spent on storm water and local drainage infrastructure, improvements to facilities and equipment, Power Administration (BPA) costs, primarily as a result of substantial cash payments from BPA for the Residential and the Protection of Beneficial Uses improvement projects. Exchange Program, more than offset the decrease in net short-term wholesale power revenues and related transactions and higher non-power operating expenses. The Drainage and Wastewater Utility had $402.0 million outstanding revenue bond liabilities in 2008, as compared to $325.5 million in 2007. In 2008 the SPU issued $84.6 million of revenue bonds for its drainage and wastewater system. Net cash provided by operating activities increased by $18.7 million to $236.8 million in 2008 compared to $218.1 million Interest expense was $16.7 million in 2008 and $14.9 million in 2007. Total liabilities, including revenue bonds, were in 2007. Restricted assets increased considerably by $235.9 million to $267.0 million in 2008 compared to $31.1 million in $473.2 million in 2008 and $382.5 million in 2007. 2007. Nearly all of the increase is attributable to the $235.9 million in bond proceeds remaining from $257.4 million in bonds issued in December 2008. The bond proceeds were deposited in the Construction Account, which had a balance of $164.0 million at year end comprised of $37.8 million in cash and $126.2 million in short-term investments. An additional Total net assets were $240.2 million in 2008 and $227.6 million in 2007. $72.0 million was set aside for the purpose of refunding all the Utility’s variable rate bonds in early February 2009. The Contingency Reserve Account remained constant at $25.0 million as established in 2005. Utility plant and other capital Fiduciary Funds assets were $1.662 billion and $1.591 billion in 2008 and 2007, respectively, a net increase of $70.9 million. The majority of the capital asset additions were in the distribution system, hydraulic production, and transmission. The City maintains fiduciary funds for the assets of the City of Seattle Employees’ Retirement system (SCERS), the Firemen’s Pension Fund, the Police Relief and Pension Fund, the S.L. Denny Private Purpose Trust, and various agency Total net revenue bonds payable were $1.529 billion in 2008 and $1.342 billion in 2007, a net increase of $186.9 million. funds. Total net assets of the combined fiduciary funds at the end of 2008 were $1.528 billion; SCERS represents Interest expenses were $61.1 million in 2008 and $66.4 million in 2007. Future debt service requirements on the 99.2 percent of this amount. subordinate lien bonds, based on 2008 end-of-year actual interest rates, range from 0.5 percent to 0.65 percent through year 2021. Including long-term debt, the total liabilities were $1.702 billion in 2008 and $1.512 billion in 2007, as restated. SCERS assets that are held in trust for the payment of future benefits exceeded current amounts owed as of December 31, 2008, by $1.477 billion. SCERS fund assets decreased in valuation by $642.0 million (30.3 percent) during 2008, primarily Total net assets were $790.1 million in 2008 and $658.5 million in 2007, as restated. due to market conditions and volatility experienced by all investors in 2008. The fund’s portfolio is a diversified fund, invested in U.S. equities and fixed income, as well as non-U.S. equities. Additionally, there are allocations to real estate and Water Utility. The net operating income of the Water Utility decreased by $4.0 million to $17.7 million in 2008 from other alternative asset classes. The fund uses the services of both active and index fund professional money managers. The $21.7 million in 2007. Operating expenses increased by $8.2 million due to several factors, the most significant of which fund experienced dividend and interest receipts in excess of $23.0 million during 2008. The 2008 employee and employer was an increase in depreciation expense of $3.2 million. This resulted from capital assets that were placed in service in 2007 contributions increased from 2007 by $11.1 million for total contributions of $91.9 million. The largest part of the 2008 and began depreciating in 2008. Engineering services expenses rose by $1.5 million, mainly for water tank improvements increase in total expenses (deductions) resulted from retiree benefits increasing by 4.4 percent to $102.7 million. and coating projects, cathodic protection inspections, and water design studies. Field operations expenses increased by $1.3 million, mainly for security and emergency management projects, and water main maintenance. General and During 2008 retroactive escalator payments totaling $4.7 million were paid to members of the Firemen’s Pension and the administrative expenses increased by $1.1 million due to increases in claims costs for emergency response during the Police Pension pursuant to a labor agreement between the City of Seattle and the Seattle Police Officers’ Guild, Seattle December 2008 snow storms and water treatment contract costs. The Utility realized a net income of $0.5 million in 2008 Firefighters Local 27 and Seattle Fire Chiefs Association Local 2898. At December 31, 2008, the net assets held in trust in as compared to a net income of $1.2 million in 2007. the Firemen’s Pension Fund and the Police Relief and Pension Fund for the payment of future benefits were $11.5 million and $0.4 million, respectively. Net cash provided by operating activities increased to $59.7 million in 2008 from $58.3 million in 2007, an increase of $1.4 million. Total operating and restricted cash and investments were $204.4 million in 2008 compared to $56.3 million in 2007, an increase of $148.1 million. This increase in cash and investments is primarily due to a bond issue in December GENERAL FUND BUDGETARY HIGHLIGHTS 2008. The City’s final 2008 budget that includes support to other funds for the General Fund was $1.133 billion. This amount Utility plant, net of accumulated depreciation, and other capital assets for the year ended December 31, 2008, amounted to differed from the original budget due to supplemental legislation/appropriations approved by the City Council during the $1.132 billion. This represents a net increase of approximately $46.7 million in 2008. Significant asset acquisitions included year. In fiscal year 2008 the General Fund’s original budget was $1.079 billion, which was increased $53.6 million $18.0 million for new distribution pipelines, $13.2 million for water pipeline replacements, and $12.0 million for reservoir (5.0 percent) for supplemental appropriation and budget carry forward for continuing capital and grant project. covering projects. The Water Utility has $105.3 million in construction work in progress as of December 31, 2008. The most significant budget revisions are described below: The Water Utility had revenue bonds totaling $1.025 billion in 2008 as compared to $841.8 million in 2007. In December 2008 the Seattle Public Utilities (SPU) issued $205.1 million of revenue and refunding bonds for its water system. A At year-end 2008 actual expenditures were $151.8 million less than budgeted. Of this amount $114.5 million of the portion of the proceeds from the issuance was set aside in the fund’s restricted cash to be used in early 2009 to refund all budget was carried over into 2009 to cover outstanding encumbrances, grants, and capital spending. $93.0 million of the 1995 and 2002 adjustable-rate revenue bonds. The remaining proceeds will be used for certain capital improvement projects and conservation programs for the Utility. The recent slowdown in the local real estate market has resulted in a significantly lower real estate excise tax revenue forecast for 2008. Actual revenues for 2008 were $36.3 million, down from $77.0 million or 52.9 percent decrease. Total net assets were $304.3 million in 2008 and $303.8 million in 2007. The Real Estate Excise Tax (REET I and II) Cumulative Reserve Subfunds had supplemental budget appropriations Drainage and Wastewater Utility. The Utility realized operating income of $2.3 million in 2008 as compared to an approved by Council that reduced the original budget by $8.6 million. The majority of this amount was identified during operating loss of $10.9 million in 2007. Operating revenue increased $21.7 million and operating expenses increased a review of the capital projects with abandoned or excess budget. $8.5 million between 2008 and 2007. The Utility realized a net income of $12.5 million in 2008 and a net loss of $17.8 million in 2007. The net income in 2008 was primarily due to drainage and wastewater rate increases as well as an The majority of the carry forward budget for capital and grant projects is within the General Fund, 25.4 percent, and the increase in capital contributions and grants. REET I and REET II Cumulative Reserve Subfunds at 19.6 percent and 30.0 percent. The amount of carry forward budgets in 2007 was $93.1 million; this amount increased 19.0 percent to $114.5 million for 2008. Of this amount, $98.5 million is budgeted for capital spending and $16.0 million for grant obligations.

21 22 Management’s Discussion and Analysis The City of Seattle

The Police Department’s revised budget was $253.4 million; actual expenditures were $241.8 million or 95.4 percent of Capital assets, net of depreciation, for business-type activities increased $182.2 million as follows: the budget. The original budget was increased by supplemental ordinance for $30.5 million which includes the acceptance of $11.5 million in grants. City Light capital assets increased by $70.9 million which included (1) a $98.9 million increase in distribution plant for underground conduit ($24.2 million), transformers ($13.1 million), underground conductors ($10.0 million), network The Fire Department’s revised budget was $152.1 million; actual expenditures were $149.6 million or 98.3 percent of the underground conduit ($9.9 million), poles ($9.4 million), overhead, underground, and network services ($9.1 million), budget. The original budget was increased by supplemental ordinance for $2.4 million which includes the acceptance of network underground conductors ($7.4 million), overhead conductors, streetlights, meters, substation equipment, and $1.7 million in grants. The Fire Department’s carryforward budget is $2.4 million, of which $1.6 million relates to grant lighting upgrades; (2) an $11.0 million increase in general plant for system developments, purchases of vehicles, projects, and the remaining $800,000 is for continuing capital spending. computer equipments, communication equipment, other equipment and tools, and structure improvement, including lighting upgrade and lobby upgrade at the Seattle Municipal Tower; (3) an $8.9 million increase in hydroelectric The City Council authorized the acceptance of all grant funds. If a grant is not included as a part of the adopted budget, production plant for replacements of generator, runner cone, transformer, and transformer bank, installations of drain a separate ordinance is required. In 2008 over $13.8 million in additional grant funds were appropriated. The majority valve, control boxes and joint volt controller, governor control, inverter, battery, and transformer bushings, seismic of grant awards totaling $10.6 million went to the Police Department and $1.6 million was given to the Fire Department. upgrade, emergency generator, overhaul of turbine at Gorge, and purchase of equipment; and (4) a $5.4 million increase in transmission plant for transmission lines replacement, water system, transmission poles and towers, other transmission plant assets and replacement of disconnect, breaker, other station equipment, and relays. The additions were offset by a corresponding increase in accumulated depreciation of $62.8 million which along with an increase in construction in CAPITAL ASSETS progress of $8.1 million contributed $69.8 million to the net increase in the capital assets. In addition, there were an increase of $0.8 million in land and land rights for the wildlife habitat development projects at Skagit and an acquisition The following schedule shows the City’s investment in capital assets. of easement for distribution plant assets, net of land transfer of two 4KV substations, and $0.3 million in the One Percent for Art inventory.

Table A-5 CAPITAL ASSETS AT YEAR END, NET OF DEPRECIATION Drainage and Wastewater Utility capital assets increased by $53.6 million. Major capital improvements included pipe and maintenance rehabilitation at the Thorton Creek water quality channel; heavy equipment purchases, such as vactor (In Thousands) trucks; drainage improvements at 30th Avenue SW; channel improvements at Delridge Basin; infrastructure at the Madison Valley Detention Pond; and an information billing system. Construction in progress at December 31, 2008, Governmental Activities Business-Type Activities Total amounted to $48.6 million. Restated Restated 2008 2007 2008 2007 2008 2007 Water Utility capital assets, increased by $46.7 million. Increases included new distribution pipelines, pipeline Land $ 436,123 $ 415,811 $ 100,800 $ 99,323 $ 536,923 $ 515,134 replacement for the Sound Transit project, completed reservoir covering projects, pump stations, improvements at the Plant in Service, Excluding Land - - 3,017,123 2,856,738 3,017,123 2,856,738 Cedar River watershed, water tanks upgrades, and operations facilities and security improvements. Construction in Buildings and Improvements 1,490,857 1,376,754 40,088 42,092 1,530,945 1,418,846 Machinery and Equipment 122,506 125,083 7,290 8,168 129,796 133,251 progress at December 31, 2008, amounted to $105.3 million. Infrastructure 629,263 587,456 - - 629,263 587,456 Construction in Progress 175,990 228,130 296,594 273,533 472,584 501,663 Nonmajor enterprise funds capital assets increased by $11.1 million, largely due to the increase in construction in Other Capital Assets 11,460 10,961 18,155 17,932 29,615 28,893 progress for the South Recycling and Disposal Station and the acquisition of land for the expansion of solid waste Total Capital Assets $ 2,866,199 $ 2,744,195 $ 3,480,050 $ 3,297,786 $ 6,346,249 $ 6,041,981 facilities.

More detailed financial information about the City’s capital asset activities is presented in Note 5 to the financial statements. Capital assets, net of depreciation, for governmental activities increased by $122.0 million in 2008. Major increases included the following: DEBT ADMINISTRATION Seattle Center capitalized improvements, amounting to $4.0 million, to various facilities. The completion cost of $15.4 million for the construction of Parking Garage Building held in trust during the sale of Parking Lot #2 in 2006 was At the end of the fiscal year 2008 the City had $3.830 billion in outstanding bonded debt that included general obligation also capitalized. Construction in progress increased by $2.5 million over last year. and revenue bonds, compared to $3.387 billion in 2007. This represents an increase of approximately $442.5 million (13.1 percent). Additionally, the special assessments bonds that the City issued in 2006, without lending its full faith and credit but obligated in some manner for the design and construction of the South Lake Union Streetcar, decreased to The Department of Parks and Recreation completed construction of various community centers and parks at a cost of $19.2 million. A maturity and bond call payment of $1.3 million occurred in 2008 using special assessment collections $40.7 million, such as Sand Point Magnusson Park, $5.4 million; Sand Point Magnusson wetland, $2.5 million; from property owners within Local Improvement District No. 6750. Washington Park Arboretum, $1.6 million; South Lake Union Park II, $1.7 million; Urban Forestry, $1.1 million; Southwest Pool renovation, $1.6 million; Ballfield lighting replacement, $1.1 million; Georgetown playfield, $1.3 million; and others, $16.3 million. Several parcels of land were purchased at $6.4 million, including Denny In 2008 the City issued LTGO bonds to finance various capital improvement projects and improvements including the Triangle, $2.5 million; Ballard Park Baker addition, $3.1 million; and others, $0.8 million. Construction in progress at Spokane-Mercer-Lander Streets ($50.9 million), King Street Station ($3.1 million) Bridge Seismic ($1.5 million), Pay December 31, 2008, stood at $3.6 million, a decrease of $0.4 million over last year. Stations ($2.1 million), Fire Station ($21.7 million), South Lake Union ($1.9 million) and refunding bonds ($54.9 million) to payoff and redeem the LTGO variable-rate bonds Series 1996C and 1996D totaling $56.9 million on the date of the bond sale. The City also issued revenue bonds: $257.4 million for the Light Fund to finance certain capital improvements and The Department of Transportation capitalized $75.2 million for various infrastructure assets (roads, bridges, sidewalks, conservation programs and to pay off all of its adjustable-rate subordinate lien bonds ($70.2 million) in February 2009 when signs, illuminations, and others). Land and land rights of $33,147 were also capitalized. Construction in progress at the bonds will be called; $205.1 million for the Water Fund for certain capital improvements and conservation programs and December 31, 2008, increased by $26.0 million over the last year. to pay off all of its adjustable-rate bonds ($93.0 million) in February 2009 when the bonds will be called; $84.6 million for Drainage and Wastewater Fund to finance certain capital improvements and additions to the drainage and wastewater The Library expended $9.8 million for various library improvements and renovations, such as Magnolia Branch, system. $4.1 million; Northgate Branch, $2.1 million; and others, $3.6 million. Construction in Progress at December 31, 2008, was $4.5 million. The City defeased $31.6 million of the remaining Key Arena outstanding LTGO bonds issued in 2002, 2003, and 2005 using $34.2 million of the proceeds of the Key Arena Settlement, and defeased $0.4 million of the McCaw Hall outstanding The Fleets and Facilities Department incurred $6.9 million to complete construction of various City facility portion of the 2003 LTGO bonds using 1999 levy money for Seattle Center approved by the voters in 1998. improvements. Land parcels were acquired for various fire stations for $3.4 million. Construction of the Fire Station No. 10 at a cost of $44.2 million and the Joint Training Facility Building in the amount of $25.9 million were completed The City’s bond ratings remained the same as in the previous year. The City’s UTGO bonds are rated Aaa by Moody’s and capitalized. Transportation equipment and vehicles were purchased for $19.2 million. Construction in progress at Investors Service, AAA by Fitch Ratings, and AAA by Standard & Poor’s. The City’s LTGO bonds are rated Aa1 by December 31, 2008, was $20.0 million. Moody’s Investors Service, AA+ by Fitch Ratings, and AAA by Standard & Poor’s. The City maintained its high bond ratings on its Light, Water, Drainage and Wastewater, and Solid Waste revenue bonds. 23 24 Management’s Discussion and Analysis The City of Seattle

The City’s limited and unlimited general obligation debt is capped at 7.5 percent of assessed value by state law. The 2009 Financial Contact assessed value of taxable properties for the City is $137.830 billion. At the end of 2008 the net outstanding general obligation debt of the City that includes bonds, leases, compensated absences net of sick leave, and guarantees of The City’s financial statements are designed to provide users with a general overview of the City’s finances as well as to indebtedness amounted to $925.5 million, well below the limit of $10.337 billion, rendering the City’s legal debt margin of demonstrate the City’s accountability to its citizens, investors, creditors, and other customers. If you have a question about $9.412 billion. Within the 7.5 percent limitation, state law restricts outstanding LTGO bonds to 1.5 percent of assessed the report, please contact the City of Seattle, Department of Executive Administration, Accounting Services Division, value. At year-end 2008 the net outstanding LTGO debt was $781.1 million. P.O. Box 94669, Seattle, WA 98124-4669 (Telephone 206-386-9124). The City is self-insured for workers compensation and for most health care costs. The City carries general liability insurance with a self-insured retention. For these claims, including those incurred but not reported, the City recognized a total liability of $117.4 million ($85.7 million for governmental activities and $31.7 million for business-type activities) at the end of the year. In addition, City utilities recognized $34.7 million in estimated environmental liabilities. Other obligations were accrued compensation absences and other notes and contracts. The other notes and contracts included draws from the State’s Public Works Trust Loan (PWTL) Program which are serviced with revenues from two participating City departments, one with a governmental-type fund and one whose PWTL activities are reported in two of its business- type funds.

More detailed information about the City’s long-term liabilities is presented in Note 8 to the financial statements.

ECONOMIC FACTORS

In 2008 after fully recovering from the recession early in the decade, the Puget Sound region has been affected by a period of considerable economic uncertainty. The national economy continues to suffer from a dramatic downturn in the housing market, turmoil among financial institutions, and increasing job losses. It is in this economic condition that the City’s 2009 budget was prepared. However, the economy in the Puget Sound area is considerably stronger that the nation as a whole. The Seattle area is benefiting from continued strength in the software, biotechnology, aerospace, and construction industries despite setbacks in employment due to layoffs. But during the ensuing months the national and international economies adversely affect the regional economy. The City projected a decline in the aggregate General Fund revenue estimate for the years 2008 through 2010 by about $19.0 million, requiring additional budget cuts during the City Council review process.

General Subfund. Revenue estimates in 2009 are projected to increase to $872.3 million compared to the revised 2008 projection of $852.8 million, a 2.3 percent increase. The projected tax revenues growth rate is 1.6 percent overall to $779.9 million from $767.5 million. This includes property taxes (3.1 percent increase), sales tax revenues (1.6 percent decrease), external business and occupation (B&O) taxes (1.1 percent increase), and internal B&O taxes from sales by the City utilities (8.1 percent increase). External service charges and receipts from fines and forfeitures are expected to increase at 9.7 percent and 9.2 percent, respectively. While interest on investments will decline 26.4 percent, parking meter collections are expected to increase by 31.5 percent.

Utilities. The 2009 budget for City Light promotes the City’s goal of maintaining carbon neutrality by mitigating greenhouse gas emissions and researching the effect of climate change on City Light watersheds, providing customer incentives and programs to increase energy conservation, funding green City building improvements with the creation of an Energy Efficiency Fund, and acquiring new renewable resources as required by Initiative 937. Capital budget reductions of $91.5 million are adopted, relative to the capital spending originally planned for 2009 on account of deferring projects including the utility relocation of the Alaskan Way Project costing $65.0 million. The adopted budget projected a reduction in operations and maintenance including spending on the Boundary Relicensing Program. There will be no rate increases in 2009. City Light’s recent financial performance has been very strong and the utility’s financial position continues to improve. However, although City Light earned considerable revenue in the wholesale energy market in previous years, this source of revenue is both volatile and unpredictable, thus uncertain, as it depends heavily on weather conditions and natural gas prices that are outside the City’s control.

The Seattle Public Utilities (SPU) 2009 budget continues to provide funding for services benefiting its customers in a variety of ways while achieving new efficiencies. Investments in basic infrastructure and operations will enable SPU to provide reliable high-quality water to customers, manage stormwater and wastewater properly, and provide the residents of Seattle with innovative recycling and solid waste service. The Department has begun applying the asset management process to its operating budget and programs as part of achieving efficiencies. It includes using the “triple bottom line” approach which evaluates the projects and procedures based on their economic, social, and environmental benefits, as well as being able to meet customer service levels.

While the City had a net increase of 167 projected full-time-equivalent positions in 2008, the 2009 Adopted Budget projected a net decrease of just 34 positions that includes position abrogations, a reflection of economic uncertainties.

25 26 Government-wide Financial Statements

This page is intentionally left blank. Government-wide Financial Statements The City of Seattle

B-1 STATEMENT OF NET ASSETS B-1 STATEMENT OF NET ASSETS Page 1 of 3 December 31, 2008 Page 2 of 3 December 31, 2008 (In Thousands) (In Thousands)

Component Component Primary Government Unit Primary Government Unit Comparative Totals Comparative Totals Seattle Public Seattle Public Governmental Business-Type Restated Library Governmental Business-Type Restated Library Activities Activities 2008 2007 Foundation Activities Activities 2008 2007 Foundation

ASSETS LIABILITIES Current Assets Current Liabilities

Operating Cash and Equity in Pooled Investments $ 656,851 $ 137,373 $ 794,224 $ 765,726 $ 5,000 Accounts Payable $ 75,306 $ 65,790 $ 141,096 $ 129,292 $ 866 Restricted Cash and Equity in Pooled Investments - 35,344 35,344 3,626 - Salaries, Benefits, and Taxes Payable 38,326 18,068 56,394 47,239 - Restricted Investments - 60,274 60,274 - - Contracts Payable 7,405 176 7,581 8,004 - Restricted Investment Interest Receivable - 1,108 1,108 - - Due to Other Governments 7,764 8,542 16,306 17,348 - Investments - - - - 34,667 Interest Payable 10,803 39,440 50,243 50,358 - Receivables, Net of Allowances 84,935 191,615 276,550 276,328 526 Taxes Payable 38 9,446 9,484 9,852 - Internal Balances 12,272 (12,272) - - - Deposits Payable 963 - 963 1,227 - Due from Other Governments 73,125 8,748 81,873 76,535 - Deferred Credits 4,328 18,619 22,947 19,519 148 Hydrant Settlement Receivable - 10,088 10,088 - - Current Portion of Long-Term Debt Inventories 2,787 33,961 36,748 34,966 - Bonds Payable 49,645 219,640 269,285 154,974 - Prepaid and Other Current Assets 666 1,337 2,003 1,187 1 Special Assessment Bonds with Governmental Commitment 940 - 940 1,060 - Deferred Bond Interest - 790 790 666 - Total Current Assets 830,636 467,576 1,298,212 1,158,368 40,194 Compensated Absences Payable 15,712 2,520 18,232 18,041 - Purchased Power Obligation - - - 11,970 - Notes and Contracts Payable 2,134 863 2,997 2,824 - Noncurrent Assets Claims Payable 27,013 19,587 46,600 39,330 - Habitat Conservation Program Liability - 5,453 5,453 9,528 - Restricted Cash and Equity in Pooled Investments 325 263,544 263,869 122,123 - Muckleshoot Liability - - - 1,000 - Restricted Investments - 198,472 198,472 18,652 - Restricted Investment Interest Receivable - 849 849 279 - Landfill Closure and Postclosure Liability - 1,115 1,115 1,465 - Arbitrage Rebate Liability - - - 26 - Unamortized Debt Costs 3,042 18,767 21,809 17,672 - Other Current Liabilities 391 17,825 18,216 1,472 - Contracts and Notes 284,996 41 285,037 282,987 - Capitalized Purchased Power Commitment - - - 4,749 - Deferred Conservation Costs, Net - 185,895 185,895 180,927 - Total Current Liabilities 240,768 427,874 668,642 525,195 1,014 Deferred Landfill Closure and Postclosure Costs, Net - 26,979 26,979 30,211 - Net Pension Asset 81,899 - 81,899 78,434 - Noncurrent Liabilities Deferred Muckleshoot Settlement Costs - 2,275 2,275 2,400 - Other Deferred Charges and Noncurrent Assets 19,543 234,876 254,419 209,802 2,459 Bonds Payable, Net of Capital Assets, Net of Accumulated Depreciation Unamortized Premiums, Discounts, and Other 692,295 2,908,340 3,600,635 3,256,002 - Land and Land Rights 436,123 100,800 536,923 515,134 - Deferred Bond Interest - 3,467 3,467 3,664 - Plant in Service, Excluding Land - 3,017,123 3,017,123 2,856,738 - Special Assessment Bonds with Governmental Commitment 18,265 - 18,265 19,485 - Buildings and Improvements 1,490,857 40,088 1,530,945 1,418,846 - Compensated Absences Payable 57,773 23,372 81,145 75,928 - Machinery and Equipment 122,506 7,290 129,796 133,251 7 Claims Payable 58,708 46,812 105,520 82,680 - Infrastructure 629,263 - 629,263 587,456 - Notes and Contracts Payable 17,604 19,377 36,981 26,150 - Construction in Progress 175,990 296,594 472,584 501,663 - Purchased Power Obligation - - - (7,221) - Other Capital Assets 11,460 18,155 29,615 28,893 - Landfill Closure and Postclosure Liability - 24,925 24,925 25,612 - Vendor Deposits Payable 325 913 1,238 525 - Habitat Conservation Program Liability - 4,154 4,154 4,018 - Total Noncurrent Assets 3,256,004 4,411,748 7,667,752 6,990,217 2,466 Muckleshoot Liability - 495 495 495 - Deferred Credits 326,949 55,881 382,830 379,591 - Total Assets 4,086,640 4,879,324 8,965,964 8,148,585 42,660 Arbitrage Rebate Liability 445 - 445 406 - Unfunded Other Post Employment Benefits 21,066 4,531 25,597 11,699 - Net Pension Obligation 1,398 - 1,398 2,797 - Other Noncurrent Liabilities 717 317 1,034 1,767 -

Total Noncurrent Liabilities 1,195,545 3,092,584 4,288,129 3,883,598 -

Total Liabilities 1,436,313 3,520,458 4,956,771 4,408,793 1,014

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 29 30 Government-wide Financial Statements The City of Seattle

B-1 STATEMENT OF NET ASSETS B-2 STATEMENT OF ACTIVITIES Page 3 of 3 December 31, 2008 Page 1 of 2 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Component Program Expenses Program Revenues Primary Government Unit Comparative Totals Seattle Public Governmental Business-Type Restated Library Operating Capital Grants Activities Activities 2008 2007 Foundation Indirect Charges for Grants and and Functions/Programs Expenses Expenses Services Contributions Contributions NET ASSETS

Invested in Capital Assets, Net of Related Debt $ 2,184,161 $ 1,128,319 $ 3,312,480 $ 2,978,603 $ 7 GOVERNMENTAL ACTIVITIES Restricted for Debt Service 29,349 15,120 44,469 35,034 - General Government $ 145,143 $ (1,288) $ 102,697 $ 10,515 $ - Contingency Reserve Account - 25,000 25,000 25,000 - Judicial 26,762 - 22,032 182 - Capital Projects 201,573 - 201,573 117,416 101 Public Safety 456,534 (833) 16,254 9,341 - Education and Development Services 17,173 - 17,173 16,724 3,675 Physical Environment 7,707 - 1,632 10 - Special Deposits 20,779 388 21,167 23,552 - Transportation 127,366 506 44,093 13,579 20,701 Deferred Conservation and Environmental Costs - 7,171 7,171 9,256 - Economic Environment 104,660 - 17,440 25,498 5,508 Bonneville Power Administration Projects - 1,891 1,891 2,393 - Health and Human Services 69,181 - 12 31,050 - Deferred External Infrastructure Costs - 8,255 8,255 7,016 - Culture and Recreation 257,578 - 59,586 5,061 5,318 Muckleshoot Settlement - 542 542 545 - Interest on Long-Term Debt 39,336 - - - - Other Deferred Charges - 5,546 5,546 4,057 - Other Purposes - - - - 183 Total Governmental Activities 1,234,267 (1,615) 263,746 95,236 31,527 Nonexpendable 2,330 - 2,330 2,186 26,474 Unrestricted 194,962 166,634 361,596 518,010 11,206 BUSINESS-TYPE ACTIVITIES

Total Net Assets $ 2,650,327 $ 1,358,866 $ 4,009,193 $ 3,739,792 $ 41,646 Light 791,057 780 872,099 2,308 39,926 Water 180,534 321 163,996 167 17,172 Drainage and Wastewater 231,110 208 216,957 310 24,323 Solid Waste 120,840 101 124,353 724 4 Planning and Development 56,677 205 42,929 590 - Downtown Parking Garage 8,545 - 6,530 - -

Total Business-Type Activities 1,388,763 1,615 1,426,864 4,099 81,425

Total Government-Wide Activities $ 2,623,030 $ - $ 1,690,610 $ 99,335 $ 112,952

COMPONENT UNIT $ 5,503 $ - $ - $ 3,342 $ -

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 31 32 Government-wide Financial Statements

B-2 STATEMENT OF ACTIVITIES Page 2 of 2 For the Year Ended December 31, 2008 (In Thousands)

Net Revenue (Expense) and Changes in Net Assets Component Primary Government Unit Comparative Totals Seattle Public Governmental Business-Type Restated Library Activities Activities 2008 2007 Foundation

GOVERNMENTAL ACTIVITIES

General Government $ (30,643) $ - $ (30,643) $ (22,403) Judicial (4,548) - (4,548) (3,907) Public Safety (430,106) - (430,106) (364,109) Physical Environment (6,065) - (6,065) (8,315) Transportation (49,499) - (49,499) (62,144) Economic Environment (56,214) - (56,214) (41,476) Health and Human Services (38,119) - (38,119) (35,843) Culture and Recreation (187,613) - (187,613) (157,359) Interest on Long-Term Debt (39,336) - (39,336) (34,048)

Total Governmental Activities (842,143) - (842,143) (729,604)

BUSINESS-TYPE ACTIVITIES

Light - 122,496 122,496 111,006 Water - 480 480 (1,778) Drainage and Wastewater - 10,272 10,272 (20,109) Solid Waste - 4,140 4,140 2,751 Planning and Development - (13,363) (13,363) (6,534) Downtown Parking Garage - (2,015) (2,015) (1,530) This page is intentionally left blank.

Total Business-Type Activities - 122,010 122,010 83,806

Total Government-Wide Activities (842,143) 122,010 (720,133) (645,798)

COMPONENT UNIT $ (2,161) General Revenues

Property Taxes 368,515 - 368,515 359,651 - Sales Taxes 171,917 - 171,917 171,846 - Business Taxes 330,369 - 330,369 332,238 - Excise Taxes 36,091 - 36,091 76,918 - Other Taxes 25,395 - 25,395 12,765 - Penalties and Interest on Delinquent Taxes 2,410 - 2,410 4,276 - Unrestricted Investment Earnings (Loss) 24,140 13,530 37,670 52,261 (10,485) Gain on Sale of Capital Assets 15,461 1,708 17,169 1,167 -

Transfers (10,803) 10,803 - - -

Total General Revenues (Loss) and Transfers 963,495 26,041 989,536 1,011,122 (10,485)

Divested Activities

Transfer of Net Assets to Washington Talking Book & Braille Library - - - - (1,964)

Changes in Net Assets 121,352 148,051 269,403 365,324 (14,610)

Net Assets - Beginning of Year 2,528,975 1,210,815 3,739,790 3,389,074 53,120 Prior-Year Adjustments - - - (14,606) 3,136

Net Assets - Beginning of Year as Restated 2,528,975 1,210,815 3,739,790 3,374,468 56,256

Net Assets - End of Year $ 2,650,327 $ 1,358,866 $ 4,009,193 $ 3,739,792 $ 41,646

The accompanying notes are an integral part of these financial statements. 33 Fund Financial Statements

This page is intentionally left blank. Fund Financial Statements The City of Seattle

MAJOR GOVERNMENTAL FUNDS B-3 BALANCE SHEET Page 1 of 4 GOVERNMENTAL FUNDS The General Fund is the primary operating fund of the City. It accounts for all financial resources except those required to be December 31, 2008 accounted for in another fund. It derives the majority of its revenues from property, sales, business, and utility taxes. (In Thousands) The Transportation Fund accounts for revenues for construction, improvement, repair, or maintenance of City streets and waterways. Revenues include taxes on the sale, distribution, or use of motor vehicle fuel; motor vehicle excise taxes designated Low-Income for street purposes; and grants. General Transportation Housing

ASSETS The Low-Income Housing Fund manages activities undertaken by the City to preserve, rehabilitate, or replace low-income housing. It also accounts for a seven-year housing levy approved by the voters in 2002 to provide, produce, and/or preserve Cash and Equity in Pooled Investments $ 237,915 $ 22,418 $ 71,956 Receivables, Net of Allowances affordable housing in Seattle and to assist low-income tenants in Seattle. Taxes 49,173 5,145 90 Accounts 2,307 3,570 16 Contracts and Notes 4 6 - Descriptions for the nonmajor governmental funds are provided in the Combining and Individual Fund and Other Supplementary Special Assessments - Delinquent - - - Information section. Interest and Dividends 116 408 181 Unbilled and Others - 2,088 - Due from Other Funds 14,634 11,527 2 Due from Other Governments 39,326 12,290 175 Inventories 75 - - Prepaid and Other Current Assets 639 - - Deposits With Vendor 2 - - Contracts and Notes - Noncurrent 7,973 - 234,893 Advances to Other Funds - - - Deferred Charges and Other Assets - - -

Total Assets $ 352,164 $ 57,452 $ 307,313

LIABILITIES

Accounts Payable $ 19,570 $ 12,718 $ 95 Contracts Payable 576 4,520 - Due to Other Funds 6,165 2,345 2,153 Due to Other Governments 2,640 3 1 Salaries, Benefits, and Taxes Payable 23,149 3,679 - Interest Payable 174 27 1 Deposits Payable 367 228 117 Revenue Collected/Billed in Advance - Current 1,847 1 - Other Current Liabilities 206 - - Advances from Other Funds - - - Deferred Revenues 26,060 1,327 234,945

Total Liabilities 80,754 24,848 237,312

The accompanying notes are an integral part of these financial statements. 37 38 Fund Financial Statements The City of Seattle

B-3 BALANCE SHEET B-3 BALANCE SHEET Page 2 of 4 GOVERNMENTAL FUNDS Page 3 of 4 GOVERNMENTAL FUNDS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Comparative Totals Other Restated Low-Income Governmental 2008 2007 General Transportation Housing

ASSETS FUND BALANCES

Cash and Equity in Pooled Investments $ 271,470 $ 603,759 $ 563,490 Reserves Legally Segregated for Future Use Receivables, Net of Allowances Capital Improvements $ 93,312 $ 32,602 $ - Taxes 7,277 61,685 63,025 Continuing Appropriations 8,719 - 17,228 Accounts 8,092 13,985 9,524 Debt Service 13,975 - - Contracts and Notes 3 13 2,316 Encumbrances 2,282 - - Special Assessments - Delinquent 150 150 53 Health Care Rate Stabilization 20,779 - - Interest and Dividends 672 1,377 2,986 Reserves Not Available for Appropriation Unbilled and Others 1,053 3,141 2,595 Endowments - - - Due from Other Funds 8,393 34,556 25,133 Gifts --- Due from Other Governments 20,651 72,442 68,177 Interfund Loans - - - Inventories 532 607 963 Inventories - - - Prepaid and Other Current Assets - 639 52 Petty Cash 1,258 2 - Deposits With Vendor 4 6 - Unreserved, Reported in Contracts and Notes - Noncurrent 42,130 284,996 282,922 Major Funds Advances to Other Funds - - 1,696 Designated for Special Purpose 29,497 - - Deferred Charges and Other Assets 19,542 19,542 20,863 Undesignated 101,588 - 52,773 Special Revenue Funds Total Assets $ 379,969 $ 1,096,898 $ 1,043,795 Designated for Special Purpose - - - Undesignated - - - LIABILITIES Capital Projects Funds - - - Permanent Funds - - - Accounts Payable $ 25,310 $ 57,693 $ 58,430 Contracts Payable 2,309 7,405 7,340 Total Fund Balance 271,410 32,604 70,001 Due to Other Funds 15,502 26,165 16,039 Due to Other Governments 5,119 7,763 8,669 Total Liabilities and Fund Balance $ 352,164 $ 57,452 $ 307,313 Salaries, Benefits, and Taxes Payable 8,873 35,701 29,771 Interest Payable 10 212 128 Deposits Payable 250 962 1,227 Revenue Collected/Billed in Advance - Current 2,480 4,328 3,336 Other Current Liabilities 184 390 308 Advances from Other Funds - - 1,696 Deferred Revenues 64,616 326,948 325,032

Total Liabilities 124,653 467,567 451,976

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 39 40 Fund Financial Statements The City of Seattle

B-3 BALANCE SHEET B-4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Page 4 of 4 GOVERNMENTAL FUNDS Page 1 of 2 IN FUND BALANCES December 31, 2008 GOVERNMENTAL FUNDS (In Thousands) For the Year Ended December 31, 2008 (In Thousands) Comparative Totals Other Restated Governmental 2008 2007 Low-Income FUND BALANCES General Transportation Housing

Reserves Legally Segregated for Future Use REVENUES Capital Improvements $ 174,501 $ 300,415 $ 158,827 Continuing Appropriations 7,313 33,260 109,688 Taxes $ 745,455 $54,787 $11,725 Debt Service 15,375 29,350 34,834 Licenses and Permits 18,269 10,036 - Encumbrances 860 3,142 14,003 Grants, Shared Revenues, and Contributions 19,725 34,279 8,059 Health Care Rate Stabilization - 20,779 23,458 Charges for Services 62,547 25,336 35 Reserves Not Available for Appropriation Fines and Forfeits 22,110 10 - Endowments 2,050 2,050 2,050 Parking Fees and Space Rent 20,625 63 27 Gifts 10,976 10,976 7,350 Program Income, Interest, and Miscellaneous Revenues 25,932 389 15,070 Interfund Loans - - 1,696 Inventories 532 532 663 Total Revenues 914,663 124,900 34,916 Petty Cash 24 1,284 3,746 Unreserved, Reported in EXPENDITURES Major Funds Designated for Special Purpose - 29,497 29,758 Current Undesignated - 154,361 178,397 General Government 185,390 - - Special Revenue Funds Judicial 26,584 - - Designated for Special Purpose 879 879 670 Public Safety 415,201 - - Undesignated 42,685 42,685 28,442 Physical Environment 8,180 - - Capital Projects Funds - - (1,846) Transportation 11,355 93,811 - Permanent Funds 121 121 83 Economic Environment 20,871 - 30,594 Health and Human Services 272 - - Total Fund Balance 255,316 629,331 591,819 Culture and Recreation 5,545 - - Capital Outlay Total Liabilities and Fund Balance $ 379,969 General Government 7,877 - - Public Safety 2,426 - - Physical Environment 5 - - Transportation - 100,636 - Amounts reported for governmental activities in the statement of net assets are different because: Economic Environment - - 12 Culture and Recreation 31,191 - - Capital assets used in governmental activities are not financial resources and, therefore, are not Debt Service reported in the funds. 2,776,854 2,660,925 Principal - 2,185 - Advance Refunding to Escrow - - - Other long-term assets are not available to pay for current-period expenditures and, therefore, are Interest - 356 - deferred in the funds. 6,642 6,489 Bond Issuance Cost - - - Internal service funds are used by management to charge the costs of Fleets and Facilities, Information Technology, and Engineering Services to individual funds. The assets and liabilities of the internal Total Expenditures 714,897 196,988 30,606 service funds are included in the governmental activities in the statement of net assets. Adjustments to reflect the consolidation of internal service fund (ISF) activities related to enterprise funds and Excess (Deficiency) of Revenues over Expenditures 199,766 (72,088) 4,310 prior-year adjustment (B-6) are added back to ISF total net assets, and the latter amounts are included in governmental activities. 130,963 122,856 OTHER FINANCING SOURCES (USES) Net pension asset net of pension obligations 80,501 75,637 Long-Term Debt Issued --- Refunding Debt Issued - - - Long-term liabilities, including bonds payable, are not due and payable in the Premium on Bonds Issued - - - current period and, therefore, are not reported in the funds. Payment to Refunded Bond Escrow Agent - - - Claims Payable - Current (36,791) (25,105) Sales of Capital Assets 373 - 32 Accrued Interest Payable (10,591) (11,366) Transfers In 7,440 86,673 2,074 Current Portion of Long-Term Debt (52,719) (57,974) Transfers Out (263,197) (5,344) - Compensated Absences Payable (15,423) (15,448) General Obligation Bonds Payable (671,515) (664,440) Total Other Financing Sources (Uses) (255,384) 81,329 2,106 Less Bond Discount and Premium (22,222) (16,522) Special Assessment Bonds (18,265) (19,485) Net Change in Fund Balance (55,618) 9,241 6,416 Unamortized Losses on Refunding 1,443 3,016 Deferred Credits 3,042 2,674 Fund Balances - Beginning of Year 327,028 23,363 63,585 Notes and Other Long-Term Liabilities (17,603) (19,738) Compensated Absences - Long-Term (54,612) (51,288) Fund Balances - End of Year $ 271,410 $ 32,604 $ 70,001 Claims Payable - Long-Term (45,770) (32,935) Workers' Compensation (12,074) (10,860) Arbitrage (445) (432) Unfunded Other Post Employment Benefits (20,419) (8,846) Net Adjustments 2,020,996 1,937,158

Net Assets of Governmental Activities $ 2,650,327 $ 2,528,977

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 41 42 Fund Financial Statements The City of Seattle

B-4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES B-5 RECONCILIATION OF THE STATEMENT OF REVENUES, Page 2 of 2 IN FUND BALANCES EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands) Comparative Totals Comparative Totals Other 2008 2007 Governmental 2008 2007 Amounts reported for governmental activities in the statement of activities are different because: REVENUES Net change in fund balance - total governmental funds $ 37,516 $ 93,268 Taxes $ 122,577 $934,544 $957,242 Licenses and Permits 786 29,091 33,439 Governmental funds report capital outlay as expenditures. However, in the statement of activities the cost Grants, Shared Revenues, and Contributions 71,709 133,772 130,869 Charges for Services 54,879 142,797 149,049 of those assets is allocated over the estimated useful lives and reported as depreciation expense: Fines and Forfeits 3,452 25,572 22,701 Depreciation expense for the year (91,613) (78,800) Parking Fees and Space Rent 17,246 37,961 38,029 Capital outlay reported as expenditures 173,364 235,074 Program Income, Interest, and Miscellaneous Revenues 60,686 102,077 81,200 Retirement and sale of capital assets 15,053 (3,457) Capital assets received as donations 18,874 - Total Revenues 331,335 1,405,814 1,412,529 Revenues in the statement of activities that do not provide current financial resources are not reported EXPENDITURES as revenues in the funds. (9,914) 446 Current General Government 12,201 197,591 154,672 The issuance of long-term debt (e.g. bonds, leases) provides current financial resources to governmental Judicial - 26,584 24,142 funds while the repayment of the principal of long-term debt consumes the current financial resources of Public Safety 5,904 421,105 377,367 governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental Physical Environment 274 8,454 10,752 funds report the effect of issuance cost, premium, discount, and similar items when debt is first issued, Transportation 2,366 107,532 95,474 whereas these amounts are deferred and amortized in the statement of activities. These amounts are the Economic Environment 58,438 109,903 103,350 Health and Human Services 69,760 70,032 64,490 result of the differences in the treatment of long-term debt and related items: Culture and Recreation 210,569 216,114 199,214 Proceeds of general obligation bonds (84,960) (36,365) Capital Outlay Premium on general obligation bonds (7,545) (4,178) General Government 3,432 11,309 16,823 Proceeds from bond refunding (54,870) (60,870) Public Safety 10,217 12,643 38,345 Principal payments bonds/notes 51,859 61,237 Physical Environment - 5 10 Bond interest (1,520) 462 Transportation - 100,636 105,079 Remittance to refunding escrow using City funds 35,152 6,270 Economic Environment 10 22 270 Culture and Recreation 40,475 71,666 88,641 Bond issuance costs 615 233 Debt Service Remittance to refunding escrow using refunding proceeds 56,920 62,535 Principal 49,670 51,855 61,236 Amortization of debt expense (247) (257) Advance Refunding to Escrow 35,152 35,152 6,270 Interest 35,382 35,738 34,923 Some expenses reported in the statement of activities do not require the use of current financial resources Bond Issuance Cost 632 632 256 and, therefore, are not reported as expenditures in governmental funds: Compensated absences (3,299) (7,112) Total Expenditures 534,482 1,476,973 1,381,314 Injury and damage claims (13,898) (15,659) Excess (Deficiency) of Revenues over Expenditures (203,147) (71,159) 31,215 Workers' compensation (1,618) (1,600) Arbitrage (13) (432) OTHER FINANCING SOURCES (USES) Unfunded OPEB liabilities (11,574) (8,846) Net pension asset 4,864 (2,428) Long-Term Debt Issued 84,960 84,960 36,365 Refunding Debt Issued 54,870 54,870 60,870 Internal service funds are used by management to charge the cost of Fleets and Facilities, Information Premium on Bonds Issued 7,545 7,545 4,178 Payment to Refunded Bond Escrow Agent (56,920) (56,920) (62,535) Technology, and Engineering Services to individual funds. Adjustments reflect the consolidation of Sales of Capital Assets 3 408 4,348 internal service funds activities to governmental funds: Transfers In 253,891 350,078 306,914 Operating loss (income) allocated to enterprise funds 33 (2,178) Transfers Out (63,725) (332,266) (288,087) Net revenue of internal service funds activities reported with governmental activities 8,173 14,182

Total Other Financing Sources (Uses) 280,624 108,675 62,053 Change in Net Assets of Governmental Activities $ 121,352 $ 251,525 Net Change in Fund Balance 77,477 37,516 93,268

Fund Balances - Beginning of Year 177,839 591,815 498,551

Fund Balances - End of Year $ 255,316 $ 629,331 $ 591,819

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 43 44 Fund Financial Statements The City of Seattle

MAJOR PROPRIETARY FUNDS B-6 STATEMENT OF NET ASSETS Page 1 of 9 PROPRIETARY FUNDS The Light Fund (City Light) accounts for the operations of the City-owned electric utility. City Light owns and operates December 31, 2008 generating, transmission and distribution facilities and serves approximately 390,000 customers in the Seattle area. (In Thousands) The Water Fund accounts for the operations of the City-owned water utility. It maintains three separate sources of water supply, namely the Tolt and Cedar River watersheds, and Seattle wellfields; approximately 224 miles of supply mains, 1,673 miles of Business-Type Activities - Enterprise Funds distribution lines and distribution storage capacity of 370 million gallons in reservoirs, tanks, and standpipes. The distribution L i g h t W a t e r system serves a population of about 634,000 people. The utility also sells to 25 surrounding cities and water districts that provide Restated water to an additional 746,000 people. 2008 2007 2008 2007 ASSETS The Drainage and Wastewater Fund accounts for the operations of the City-owned sewer and drainage utility facilities and pumping stations. Those facilities and stations are necessary to collect the sewage of the City and discharge it into King County's Current Assets treatment and disposal systems. The utility maintains about 1,904 miles of sewers and drainage mainlines, one-half of which are Operating Cash and Equity in Pooled Investments $ 63,121 $ 87,724 $ 7,340 $ 6,799 separate sanitary sewers and storm mainlines. In addition, the City manages 65 pumping stations. Restricted Cash and Equity in Pooled Investments - - 33,639 1,883 Restricted Investments - - 60,274 - Restricted Investment Interest Receivable - - 1,108 - Descriptions for the nonmajor enterprise funds and the internal service funds are provided in the Combining and Individual Fund Receivables, Net of Allowances Accounts 63,135 67,660 10,063 9,329 and Other Supplementary Information section. Interest and Dividends 686 617 - - Unbilled 60,079 59,515 8,936 8,291 Energy Contracts, Notes, and Other Contracts 6,631 855 22 2,775 Due from Other Funds 476 692 656 1,245 Due from Other Governments 5,457 2,712 1,253 2,160 Hydrant Settlement Receivable - - 10,088 - Materials and Supplies Inventory 28,949 26,936 4,996 4,514 Prepayments and Other Current Assets 1,228 1,052 103 68

Total Current Assets 229,762 247,763 138,478 37,064

Noncurrent Assets

Restricted Cash and Equity in Pooled Investments 140,840 31,109 30,892 32,996 Restricted Investments 126,179 - 72,293 14,661 Restricted Investment Interest Receivable - - 849 251 Unamortized Bond Issue Costs, Net 9,435 6,497 5,123 4,733 Notes and Contracts Receivable - - 42 66 Capitalized Purchased Power Commitment - 4,749 - - Deferred Conservation Costs, Net 149,512 141,584 36,382 39,344 Deferred Landfill Closure and Postclosure Costs, Net - - - - Deferred External Infrastructure Costs - - - - Capitalized Relicensing Costs 54,374 40,917 - - Deferred Muckleshoot Settlement Costs - - 2,275 2,400 Other Deferred Charges 120,039 106,099 10,661 4,316 Capital Assets Land and Land Rights 41,852 41,051 33,784 33,493 Plant in Service, Excluding Land 2,730,371 2,605,862 1,435,137 1,350,949 Less Accumulated Depreciation (1,237,407) (1,174,568) (443,119) (406,556) Building and Improvements - - - - Less Accumulated Depreciation - - - - Machinery and Equipment - - - - Less Accumulated Depreciation - - - - Construction in Progress 112,390 104,241 105,279 106,449 Other Property, Net 14,983 14,708 811 855

Total Noncurrent Assets 2,262,568 1,922,249 1,290,409 1,183,957

Total Assets 2,492,330 2,170,012 1,428,887 1,221,021

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 45 46 Fund Financial Statements The City of Seattle

B-6 STATEMENT OF NET ASSETS B-6 STATEMENT OF NET ASSETS Page 2 of 9 PROPRIETARY FUNDS Page 3 of 9 PROPRIETARY FUNDS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Business-Type Activities - Business-Type Activities - Enterprise Funds Enterprise Funds Governmental Activities - Drainage and Wastewater Nonmajor Funds Comparative Totals Internal Service Funds Restated Restated 2008 2007 2008 2007 2008 2007 2008 2007

ASSETS ASSETS Current Assets Current Assets

Operating Cash and Equity in Pooled Investments $ 20,870 $ 18,075 $ 46,043 $ 41,728 Operating Cash and Equity in Pooled Investments $ 137,374 $ 154,326 $ 53,092 $ 47,910 Restricted Cash and Equity in Pooled Investments 1,705 1,743 - - Restricted Cash and Equity in Pooled Investments 35,344 3,626 - - Restricted Investments - - - - Restricted Investments 60,274 - - - Restricted Investment Interest Receivable ---- Restricted Investment Interest Receivable 1,108 - - - Receivables, Net of Allowances Receivables, Net of Allowances Accounts 13,727 12,710 14,129 14,643 Accounts 101,054 104,342 537 1,359 Interest and Dividends 188 73 217 331 Interest and Dividends 1,091 1,021 136 221 Unbilled 13,521 13,245 281 194 Unbilled 82,817 81,245 - 79 Energy Contracts, Notes, and Other Contracts 1 1 - - Energy Contracts, Notes, and Other Contracts 6,654 3,631 - - Due from Other Funds 1,336 1,203 1,018 1,383 Due from Other Funds 3,486 4,523 6,410 9,130 Due from Other Governments 705 1,209 1,332 845 Due from Other Governments 8,747 6,926 682 1,431 Hydrant Settlement Receivable - - - - Hydrant Settlement Receivable 10,088 - - - Materials and Supplies Inventory - - 16 36 Materials and Supplies Inventory 33,961 31,486 2,180 2,516 Prepayments and Other Current Assets 6 - - - Prepayments and Other Current Assets 1,337 1,120 21 14

Total Current Assets 52,059 48,259 63,036 59,160 Total Current Assets 483,335 392,246 63,058 62,660

Noncurrent Assets Noncurrent Assets

Restricted Cash and Equity in Pooled Investments 49,810 2,953 42,001 54,867 Restricted Cash and Equity in Pooled Investments 263,543 121,925 325 198 Restricted Investments - 3,991 - - Restricted Investments 198,472 18,652 - - Restricted Investment Interest Receivable - 28 - - Restricted Investment Interest Receivable 849 279 - - Unamortized Bond Issue Costs, Net 2,910 2,360 1,299 1,408 Unamortized Bond Issue Costs, Net 18,767 14,998 - - Notes and Contracts Receivable - - - - Notes and Contracts Receivable 42 66 - - Capitalized Purchased Power Commitment ---- Capitalized Purchased Power Commitment - 4,749 - - Deferred Conservation Costs, Net - - - - Deferred Conservation Costs, Net 185,894 180,928 - - Deferred Landfill Closure and Postclosure Costs, Net - - 26,978 30,211 Deferred Landfill Closure and Postclosure Costs, Net 26,978 30,211 - - Deferred External Infrastructure Costs 21,288 21,433 - - Deferred External Infrastructure Costs 21,288 21,433 - - Capitalized Relicensing Costs ---- Capitalized Relicensing Costs 54,374 40,917 - - Deferred Muckleshoot Settlement Costs - - - - Deferred Muckleshoot Settlement Costs 2,275 2,400 - - Other Deferred Charges 16,768 14,149 11,746 2,026 Other Deferred Charges 159,214 126,590 - - Capital Assets Capital Assets Land and Land Rights 10,492 10,107 14,672 14,672 Land and Land Rights 100,800 99,323 39 39 Plant in Service, Excluding Land 705,747 638,751 52,872 49,807 Plant in Service, Excluding Land 4,924,127 4,645,369 - - Less Accumulated Depreciation (194,929) (179,895) (31,550) (27,612) Less Accumulated Depreciation (1,907,005) (1,788,631) - - Building and Improvements - - 60,131 60,131 Building and Improvements 60,131 60,131 3,688 2,890 Less Accumulated Depreciation - - (20,044) (18,039) Less Accumulated Depreciation (20,044) (18,039) (916) (853) Machinery and Equipment - - 15,160 14,439 Machinery and Equipment 15,160 14,439 168,689 161,261 Less Accumulated Depreciation - - (7,869) (6,271) Less Accumulated Depreciation (7,869) (6,271) (84,227) (81,923) Construction in Progress 48,621 47,355 30,305 15,488 Construction in Progress 296,595 273,533 2,072 1,858 Other Property, Net 597 603 1,765 1,766 Other Property, Net 18,156 17,932 - -

Total Noncurrent Assets 661,304 561,835 197,466 192,893 Total Noncurrent Assets 4,411,747 3,860,934 89,670 83,470

Total Assets 713,363 610,094 260,502 252,053 Total Assets 4,895,082 4,253,180 152,728 146,130

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 47 48 Fund Financial Statements The City of Seattle

B-6 STATEMENT OF NET ASSETS B-6 STATEMENT OF NET ASSETS Page 4 of 9 PROPRIETARY FUNDS Page 5 of 9 PROPRIETARY FUNDS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Business-Type Activities - Enterprise Funds Business-Type Activities - Enterprise Funds L i g h t W a t e r Drainage and Wastewater Nonmajor Funds Restated 2008 2007 2008 2007 2008 2007 2008 2007

LIABILITIES LIABILITIES Current Liabilities Current Liabilities

Accounts Payable $ 47,458 $ 43,370 $ 5,231 $ 7,363 Accounts Payable $ 6,992 $ 4,155 $ 8,784 $ 9,098 Salaries, Benefits, and Payroll Taxes Payable 9,703 8,304 3,481 2,653 Salaries, Benefits, and Payroll Taxes Payable 2,422 1,858 2,462 2,171 Compensated Absences Payable 1,327 1,223 441 403 Compensated Absences Payable 340 311 412 385 Due to Other Funds 7,162 11,452 3,362 3,593 Due to Other Funds 3,679 4,198 1,617 1,762 Due to Other Governments - 23 62 - Due to Other Governments 8,181 8,239 298 417 Interest Payable 18,505 19,445 12,471 12,463 Interest Payable 5,981 5,750 2,483 1,130 Deferred Bond Interest - - - - Deferred Bond Interest - - 790 666 Taxes Payable 8,607 8,987 430 426 Taxes Payable 204 186 205 216 General Obligation Bonds Due Within One Year - - - - General Obligation Bonds Due Within One Year - - 1,205 1,179 Revenue Bonds Due Within One Year 80,620 70,460 121,495 21,385 Revenue Bonds Due Within One Year 9,785 8,070 6,535 4,690 Energy and Other Contracts Payable 176 664 - - Energy and Other Contracts Payable - - - - Claims Payable 6,948 5,980 1,505 1,240 Claims Payable 5,603 5,917 5,531 668 Purchased Power Obligation - 11,970 - - Purchased Power Obligation - - - - Notes and Contracts Payable - 285 555 118 Notes and Contracts Payable 308 233 - - Habitat Conservation Program Liability - - 5,453 9,528 Habitat Conservation Program Liability - - - - Muckleshoot Liability - - - 1,000 Muckleshoot Liability ---- Landfill Closure and Postclosure Liability ---- Landfill Closure and Postclosure Liability - - 1,115 1,465 Deferred Credits 9,819 8,512 2,417 2,246 Deferred Credits 3,558 2,739 2,826 2,686 Other Current Liabilities 820 958 16,211 - Other Current Liabilities - - 795 141

Total Current Liabilities 191,145 191,633 173,114 62,418 Total Current Liabilities 47,053 41,656 35,058 26,674

Noncurrent Liabilities Noncurrent Liabilities Compensated Absences Payable 12,336 11,343 4,124 3,876 Compensated Absences Payable 3,179 2,988 3,734 3,447 Claims Payable 24,419 24,368 3,689 2,473 Claims Payable 12,858 10,615 5,846 636 Long-Term Purchased Power Obligation - 4,749 - - Long-Term Purchased Power Obligation - - - - Less Obligation Due Within One Year - (11,970) - - Less Obligation Due Within One Year - - - - Public Works Trust Loan - - 7,679 591 Public Works Trust Loan 11,698 5,821 - - Landfill Closure and Postclosure Liability ---- Landfill Closure and Postclosure Liability - - 24,925 25,612 Vendor and Other Deposits Payable - - 167 120 Vendor and Other Deposits Payable 745 189 - 17 Habitat Conservation Program Liability - - 4,154 4,019 Habitat Conservation Program Liability - - - - Muckleshoot Liability - - 495 495 Muckleshoot Liability ---- Deferred Credits 27,373 26,659 14,219 12,571 Deferred Credits - - 14,289 15,329 Unfunded Other Post Employment Benefits 2,247 1,257 875 486 Unfunded Other Post Employment Benefits 674 358 735 391 Other Noncurrent Liabilities 140 194 67 637 Other Noncurrent Liabilities 103 110 6 16 General Obligation Bonds, Due Serially - - - - General Obligation Bonds, Due Serially - - 64,524 65,702 Less Bonds Due Within One Year - - - - Less Bonds Due Within One Year - - (1,205) (1,179) Bond Discount and Premium, Net - - - - Bond Discount and Premium, Net - - 4,019 4,222 Deferred Loss on Advanced Refunding ---- Deferred Loss on Advanced Refunding - - - (738) Deferred Bond Interest - - - - Deferred Bond Interest - - 4,258 4,330 Less Accrued Interest Due Within One Year - - - - Less Accrued Interest Due Within One Year - - (790) (666) Revenue Bonds 1,529,375 1,342,460 1,025,480 841,785 Revenue Bonds 402,035 325,460 87,005 91,695 Less Bonds Due Within One Year (80,620) (70,460) (121,495) (21,385) Less Bonds Due Within One Year (9,785) (8,070) (6,535) (4,690) Bond Discount and Premium, Net 28,318 28,551 29,354 27,862 Bond Discount and Premium, Net 9,204 8,154 3,442 3,701 Deferred Loss on Advanced Refunding (32,499) (37,277) (17,335) (18,727) Deferred Loss on Advanced Refunding (4,567) (4,818) (376) (605)

Total Noncurrent Liabilities 1,511,089 1,319,874 951,473 854,803 Total Noncurrent Liabilities 426,144 340,807 203,877 207,220

Total Liabilities 1,702,234 1,511,507 1,124,587 917,221 Total Liabilities 473,197 382,463 238,935 233,894

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 49 50 Fund Financial Statements The City of Seattle

B-6 STATEMENT OF NET ASSETS B-6 STATEMENT OF NET ASSETS Page 6 of 9 PROPRIETARY FUNDS Page 7 of 9 PROPRIETARY FUNDS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Business-Type Activities - Enterprise Funds Governmental Activities - Business-Type Activities - Enterprise Funds Comparative Totals Internal Service Funds L i g h t W a t e r Restated Restated Restated 2008 2007 2008 2007 2008 2007 2008 2007

LIABILITIES NET ASSETS Current Liabilities Invested in Capital Assets, Net of Related Debt $ 604,153 $ 450,344 $ 290,311 $ 295,738 Restricted for Accounts Payable $ 68,465 $ 63,986 $ 7,393 $ 9,434 Debt Service 844 200 8,936 - Salaries, Benefits, and Payroll Taxes Payable 18,068 14,986 2,628 2,484 Contingency Reserve Account 25,000 25,000 - - Compensated Absences Payable 2,520 2,322 289 271 Special Deposits and Other 388 94 - - Due to Other Funds 15,820 21,005 2,677 1,742 Deferred Conservation and Environmental Costs - - 6,918 7,035 Due to Other Governments 8,541 8,679 - - Bonneville Power Administration Projects - - 1,891 2,393 Interest Payable 39,440 38,788 - 76 Deferred External Infrastructure Costs - - - - Deferred Bond Interest 790 666 - - Muckleshoot Settlement - - 542 545 Taxes Payable 9,446 9,815 37 37 Other Deferred Charges - - 1,089 1,001 General Obligation Bonds Due Within One Year 1,205 1,179 - 860 Unrestricted 159,711 182,867 (5,387) (2,912) Revenue Bonds Due Within One Year 218,435 104,605 - - Energy and Other Contracts Payable 176 664 - - Total Net Assets $ 790,096 $ 658,505 $ 304,300 $ 303,800 Claims Payable 19,587 13,805 441 421 Purchased Power Obligation - 11,970 - - Adjustment to Reflect the Consolidation of Internal Notes and Contracts Payable 863 636 - - Service Fund Activities Related to Enterprise Funds Habitat Conservation Program Liability 5,453 9,528 - - Muckleshoot Liability - 1,000 - - Net Assets of Business-Type Activities Landfill Closure and Postclosure Liability 1,115 1,465 - - Deferred Credits 18,620 16,183 - - Other Current Liabilities 17,826 1,099 2 65

Total Current Liabilities 446,370 322,381 13,467 15,390

Noncurrent Liabilities Compensated Absences Payable 23,373 21,654 3,161 2,985 Claims Payable 46,812 38,092 863 793 Long-Term Purchased Power Obligation - 4,749 - - Less Obligation Due Within One Year - (11,970) - - Public Works Trust Loan 19,377 6,412 - - Landfill Closure and Postclosure Liability 24,925 25,612 - - Vendor and Other Deposits Payable 912 326 325 198 Habitat Conservation Program Liability 4,154 4,019 - - Muckleshoot Liability 495 495 - - Deferred Credits 55,881 54,559 - - Unfunded Other Post Employment Benefits 4,531 2,492 647 360 Other Noncurrent Liabilities 316 957 717 810 General Obligation Bonds, Due Serially 64,524 65,702 - 860 Less Bonds Due Within One Year (1,205) (1,179) - (860) Bond Discount and Premium, Net 4,019 4,222 - 18 Deferred Loss on Advanced Refunding - (738) - - Deferred Bond Interest 4,258 4,330 - - Less Accrued Interest Due Within One Year (790) (666) - - Revenue Bonds 3,043,895 2,601,400 - - Less Bonds Due Within One Year (218,435) (104,605) - - Bond Discount and Premium, Net 70,318 68,268 - - Deferred Loss on Advanced Refunding (54,777) (61,427) - -

Total Noncurrent Liabilities 3,092,583 2,722,704 5,713 5,164

Total Liabilities 3,538,953 3,045,085 19,180 20,554

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 51 52 Fund Financial Statements The City of Seattle

B-6 STATEMENT OF NET ASSETS B-6 STATEMENT OF NET ASSETS Page 8 of 9 PROPRIETARY FUNDS Page 9 of 9 PROPRIETARY FUNDS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

NET ASSETS NET ASSETS Invested in Capital Assets, Net of Related Debt $ 216,579 $ 206,654 $ 17,276 $ 14,292 Invested in Capital Assets, Net of Related Debt $ 1,128,319 $ 967,028 $ 89,345 $ 82,394 Restricted for Restricted for Debt Service 5,340 - - - Debt Service 15,120 200 - - Contingency Reserve Account - - - - Contingency Reserve Account 25,000 25,000 - - Special Deposits and Other - - - - Special Deposits and Other 388 94 - - Deferred Conservation and Environmental Costs 203 2,222 50 - Deferred Conservation and Environmental Costs 7,171 9,257 - - Bonneville Power Administration Projects - - - - Bonneville Power Administration Projects 1,891 2,393 - - Deferred External Infrastructure Costs 8,255 7,016 - - Deferred External Infrastructure Costs 8,255 7,016 - - Muckleshoot Settlement - - - - Muckleshoot Settlement 542 545 - - Other Deferred Charges 4,115 2,410 342 646 Other Deferred Charges 5,546 4,057 - - Unrestricted 5,674 9,329 3,899 3,221 Unrestricted 163,897 192,505 44,203 43,182

Total Net Assets $ 240,166 $ 227,631 $ 21,567 $ 18,159 Total Net Assets 1,356,129 1,208,095 $ 133,548 $ 125,576

Adjustment to Reflect the Consolidation of Internal Adjustment to Reflect the Consolidation of Internal Service Fund Activities Related to Enterprise Funds Service Fund Activities Related to Enterprise Funds 2,737 2,720

Net Assets of Business-Type Activities Net Assets of Business-Type Activities $ 1,358,866 $ 1,210,815

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 53 54 Fund Financial Statements The City of Seattle

B-7 STATEMENT OF REVENUES, EXPENSES, AND B-7 STATEMENT OF REVENUES, EXPENSES, AND Page 1 of 3 CHANGES IN FUND NET ASSETS Page 2 of 3 CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS PROPRIETARY FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Business-Type Activities - Enterprise Funds Business-Type Activities - Enterprise Funds L i g h t W a t e r Drainage and Wastewater Nonmajor Funds Restated 2008 2007 2008 2007 2008 2007 2008 2007

OPERATING REVENUES OPERATING REVENUES

Charges for Services and Other Revenues $ 877,393 $ 832,525 $ 164,405 $ 160,161 Charges for Services and Other Revenues $ 224,109 $ 202,408 $ 175,724 $ 179,893 OPERATING EXPENSES OPERATING EXPENSES

Long-Term Purchased Power 181,689 220,194 - - Long-Term Purchased Power - - - - Short-Term Wholesale Power Purchases 52,501 33,431 - - Short-Term Wholesale Power Purchases - - - - Generation 27,978 24,974 - - Generation - - - - Transmission 48,790 45,138 - - Transmission - - - - Distribution 60,699 53,754 - - Distribution - - - - Energy Management and Other Power Expenses 119,534 90,541 - - Energy Management and Other Power Expenses - - - - Utility Systems Management - - 20,839 20,839 Utility Systems Management 21,518 21,369 1,731 5,006 Field Operations - - 19,911 18,653 Field Operations 16,134 13,601 9,548 8,868 Engineering Services - - 6,200 4,724 Engineering Services 11,934 8,045 257 191 Customer Services 33,402 31,242 8,163 7,549 Customer Services 5,280 4,985 11,948 10,162 Wastewater Treatment - - - - Wastewater Treatment 98,294 98,425 - - Solid Waste Collection - - - - Solid Waste Collection - - 59,689 59,450 Operations and Maintenance - - - - Operations and Maintenance - - 47,556 47,714 General and Administrative 66,141 59,476 26,152 25,070 General and Administrative 22,169 25,908 20,095 18,622 City Business and Occupation Taxes 33,842 33,396 19,029 18,561 City Business and Occupation Taxes 25,567 23,688 17,203 17,307 Other Taxes 28,062 25,711 5,762 5,609 Other Taxes 2,753 2,404 1,725 1,674 Amortization of Landfill and Postclosure Costs - - - - Amortization of Landfill and Postclosure Costs - - 3,233 3,195 Depreciation and Other Amortization 78,055 77,066 40,616 37,436 Depreciation and Other Amortization 18,182 14,931 8,489 7,429

Total Operating Expenses 730,693 694,923 146,672 138,441 Total Operating Expenses 221,831 213,356 181,474 179,618

Operating Income (Loss) 146,700 137,602 17,733 21,720 Operating Income (Loss) 2,278 (10,948) (5,750) 275 NONOPERATING REVENUES (EXPENSES) NONOPERATING REVENUES (EXPENSES)

Investment and Interest Income 5,956 10,217 1,066 3,909 Investment and Interest Income 2,758 2,549 3,750 2,430 Interest Expense (61,087) (66,386) (34,378) (37,378) Interest Expense (16,742) (14,947) (7,061) (5,477) Amortization of Debt Costs (2,008) (2,176) (283) (291) Amortization of Debt Costs (116) (110) (105) (63) Gain (Loss) on Sale of Capital Assets 3,150 530 (1,020) (199) Gain (Loss) on Sale of Capital Assets (508) (40) 86 (15) Contributions and Grants 2,308 3,909 167 695 Contributions and Grants 310 944 1,314 659 Others, Net (3,355) (5,136) 43 5,531 Others, Net 232 1,092 367 (963)

Total Nonoperating Revenues (Expenses) (55,036) (59,042) (34,405) (27,733) Total Nonoperating Revenues (Expenses) (14,066) (10,512) (1,649) (3,429)

Income (Loss) Before Capital Contributions and Grants and Transfers 91,664 78,560 (16,672) (6,013) Income (Loss) Before Capital Contributions and Grants and Transfers (11,788) (21,460) (7,399) (3,154)

Capital Contributions and Grants 39,927 42,203 17,172 7,191 Capital Contributions and Grants 24,323 3,641 4 28 Transfers In ---- Transfers In - - 10,803 10,612 Transfers Out ---- Transfers Out ----

Change in Net Assets 131,591 120,763 500 1,178 Change in Net Assets 12,535 (17,819) 3,408 7,486

Net Assets - Beginning of Year 658,505 547,561 303,800 302,622 Net Assets - Beginning of Year 227,631 245,450 18,159 10,673 Prior-Year Adjustment - (9,819) - - Prior-Year Adjustment - - - -

Net Assets - Beginning of Year as Restated 658,505 537,742 303,800 302,622 Net Assets - Beginning of Year as Restated 227,631 245,450 18,159 10,673

Net Assets - End of Year $ 790,096 $ 658,505 $ 304,300 $ 303,800 Net Assets - End of Year $ 240,166 $ 227,631 $ 21,567 $ 18,159

Change in Net Assets of Business-Type Activities Change in Net Assets of Business-Type Activities

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 55 56 Fund Financial Statements The City of Seattle

B-7 STATEMENT OF REVENUES, EXPENSES, AND B-8 STATEMENT OF CASH FLOWS Page 3 of 3 CHANGES IN FUND NET ASSETS Page 1 of 6 PROPRIETARY FUNDS PROPRIETARY FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands) Business-Type Activities - Enterprise Funds Business-Type Activities - L i g h t W a t e r Enterprise Funds Governmental Activities - Restated Comparative Totals Internal Service Funds 2008 2007 2008 2007 Restated Restated 2008 2007 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES OPERATING REVENUES Cash Received from Customers $ 782,043 $ 763,543 $ 157,382 $ 156,057 Cash Paid to Suppliers (300,357) (321,518) (19,802) (25,298) Charges for Services and Other Revenues $ 1,441,631 $ 1,374,987 $ 162,499 $ 171,183 Cash Paid to Employees (181,802) (164,781) (53,237) (46,879) Cash Paid for Taxes (63,105) (59,144) (24,659) (25,575) OPERATING EXPENSES Net Cash from Operating Activities 236,779 218,100 59,684 58,305 Long-Term Purchased Power 181,689 220,194 - - CASH FLOWS FROM NONCAPITAL Short-Term Wholesale Power Purchases 52,501 33,431 - - FINANCING ACTIVITIES Generation 27,978 24,974 - - Principal and Interest Paid on Loan/Note (291) (290) - - Transmission 48,790 45,138 - - Operating Grants Received 2,416 3,894 167 695 Distribution 60,699 53,754 - - Service for Others - - - - Energy Management and Other Power Expenses 119,534 90,541 - - Transfers In ---- Utility Systems Management 44,088 47,214 - 123 Transfers Out ---- Field Operations 45,593 41,122 - - Receipts for Energy Conservation Augmentation 782 1,917 - - Engineering Services 18,391 12,960 - 7,583 Payments for Energy Conservation Augmentation (18,996) (13,693) - - Customer Services 58,793 53,938 - - Other Non-Operating Cash Inflows - - 732 1,181 Wastewater Treatment 98,294 98,425 - - Other Non-Operating Cash Outflows - - (689) (171) Solid Waste Collection 59,689 59,450 - - Gains from Bankruptcy Distributions 718 525 - - Operations and Maintenance 47,556 47,714 99,595 94,549 General and Administrative 134,557 129,076 14,622 14,407 Net Cash from Noncapital Financing Activities (15,371) (7,647) 210 1,705 City Business and Occupation Taxes 95,641 92,952 5 5 Other Taxes 38,302 35,398 300 259 CASH FLOWS FROM CAPITAL AND Amortization of Landfill and Postclosure Costs 3,233 3,195 - - RELATED FINANCING ACTIVITIES Depreciation and Other Amortization 145,342 136,862 14,512 14,538 Proceeds from Sale of Bonds and Other Long-Term Debt 260,619 - 216,114 - Principal Payments on Long-Term Debt and Refunding (70,460) (71,049) (21,940) (20,003) Total Operating Expenses 1,280,670 1,226,338 129,034 131,464 Capital Expenditures and Deferred Charges Paid (165,893) (156,979) (73,947) (82,574) Interest Paid on Long-Term Debt (65,218) (69,955) (38,807) (38,945) Operating Income (Loss) 160,961 148,649 33,465 39,719 Capital Fees and Grants Received 25,271 37,456 4,805 7,191 Premium from Sale of Long-Term Debt - - - - NONOPERATING REVENUES (EXPENSES) Loss from Advanced Refunding of Long-Term Debt - - - - Interest Received for Suburban Infrastructure Improvements 440 - - - Investment and Interest Income 13,530 19,105 2,468 2,672 Debt Issuance Costs (3,358) - (673) - Interest Expense (119,268) (124,188) 51 14 Interfund Proceeds on Sale of Property 2,653 - - - Amortization of Debt Costs (2,512) (2,640) - - Proceeds from Sale of Capital Assets - 5 158 4,683 Gain (Loss) on Sale of Capital Assets 1,708 276 (251) 130 Contributions and Grants 4,099 6,207 849 968 Net Cash from Capital and Related Financing Activities (15,946) (260,522) 85,710 (129,648) a Others, Net (2,713) 524 - 176 CASH FLOWS FROM INVESTING ACTIVITIES Total Nonoperating Revenues (Expenses) (105,156) (100,716) 3,117 3,960 Proceeds from Sale of Investments - - 14,675 77,548 Purchases of Investments (125,780) - (131,250) (31,688) Income (Loss) Before Capital Contributions and Grants and Transfers 55,805 47,933 36,582 43,679 Interest Received on Investments 5,446 10,251 1,164 3,513 Net Cash from Investing Activities (120,334) 10,251 (115,411) 49,373 Capital Contributions and Grants 81,426 53,063 6 85 Transfers In 10,803 10,612 - - Net Increase (Decrease) in Cash and Transfers Out - - (28,616) (29,440) Equity in Pooled Investments 85,128 (39,818) 30,193 (20,265) CASH AND EQUITY IN POOLED INVESTMENTS Change in Net Assets 148,034 111,608 7,972 14,324 Beginning of Year 118,833 158,651 41,678 61,943 Net Assets - Beginning of Year 125,576 112,570 End of Year $ 203,961 $ 118,833 $ 71,871 $ 41,678 Prior-Year Adjustment - (1,318) CASH AT THE END OF THE YEAR CONSISTS OF Net Assets - Beginning of Year as Restated 125,576 111,252 Operating Cash and Equity in Pooled Investments $ 63,121 $ 87,724 $ 7,340 $ 6,799 Net Assets - End of Year $ 133,548 $ 125,576 Current Restricted Cash and Equity in Pooled Investments - - 33,639 1,883 Noncurrent Restricted Cash and Equity in Pooled Investments 140,840 31,109 30,892 32,996 Adjustment to Reflect the Consolidation of Internal Total Cash at the End of the Year $ 203,961 $ 118,833 $ 71,871 $ 41,678 Service Fund Activities Related to Enterprise Funds 17 2,191

Change in Net Assets of Business-Type Activities $ 148,051 $ 113,799 a Increases and decreases in the fair value of investments are treated as additions or deductions to cash and equity in pooled investments and long-term investments. Information on the increases or decreases in the fair value of long-term investments is shown in the Schedule of Noncash Activities of the Statement of Cash Flows.

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 57 58 Fund Financial Statements The City of Seattle

B-8 STATEMENT OF CASH FLOWS B-8 STATEMENT OF CASH FLOWS Page 2 of 6 PROPRIETARY FUNDS Page 3 of 6 PROPRIETARY FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers $ 224,007 $ 201,006 $ 176,735 $ 179,880 Cash Received from Customers $ 1,340,167 $ 1,300,486 $ 166,497 $ 169,519 Cash Paid to Suppliers (129,946) (139,160) (102,000) (104,311) Cash Paid to Suppliers (552,105) (590,287) (67,447) (66,834) Cash Paid to Employees (39,582) (30,246) (48,883) (46,335) Cash Paid to Employees (323,504) (288,241) (46,749) (44,337) Cash Paid for Taxes (28,141) (26,149) (20,152) (19,792) Cash Paid for Taxes (136,057) (130,660) (303) (270) Net Cash from Operating Activities 26,338 5,451 5,700 9,442 Net Cash from Operating Activities 328,501 291,298 51,998 58,078 CASH FLOWS FROM NONCAPITAL CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES FINANCING ACTIVITIES Principal and Interest Paid on Loan/Note - - - - Principal and Interest Paid on Loan/Note (291) (290) - (2,500) Operating Grants Received 310 944 1,314 659 Operating Grants Received 4,207 6,192 849 968 Service for Others - - - (1,002) Service for Others - (1,002) - - Transfers In - - 10,803 10,612 Transfers In 10,803 10,612 - - Transfers Out ---- Transfers Out - - (28,615) (29,440) Receipts for Energy Conservation Augmentation - - - - Receipts for Energy Conservation Augmentation 782 1,917 - - Payments for Energy Conservation Augmentation - - - - Payments for Energy Conservation Augmentation (18,996) (13,693) - - Other Non-Operating Cash Inflows - - 367 40 Other Non-Operating Cash Inflows 1,099 1,221 - - Other Non-Operating Cash Outflows (1,796) (3,857) - - Other Non-Operating Cash Outflows (2,485) (4,028) - - Gains from Bankruptcy Distributions - - - - Gains from Bankruptcy Distributions 718 525 - - Net Cash from Noncapital Financing Activities (1,486) (2,913) 12,484 10,309 Net Cash from Noncapital Financing Activities (4,163) 1,454 (27,766) (30,972) CASH FLOWS FROM CAPITAL AND CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES RELATED FINANCING ACTIVITIES Proceeds from Sale of Bonds and Other Long-Term Debt 92,211 694 - 143,578 Proceeds from Sale of Bonds and Other Long-Term Debt 568,944 144,272 - - Principal Payments on Long-Term Debt and Refunding (8,314) (9,408) (5,869) (94,887) Principal Payments on Long-Term Debt and Refunding (106,583) (195,347) (878) (815) Capital Expenditures and Deferred Charges Paid (48,995) (21,509) (18,294) (4,459) Capital Expenditures and Deferred Charges Paid (307,129) (265,521) (20,580) (20,854) Interest Paid on Long-Term Debt (18,289) (14,887) (6,580) (4,829) Interest Paid on Long-Term Debt (128,894) (128,616) (25) (86) Capital Fees and Grants Received 2,080 1,074 4 27 Capital Fees and Grants Received 32,160 45,748 - - Premium from Sale of Long-Term Debt - - - 4,357 Premium from Sale of Long-Term Debt - 4,357 - - Loss from Advanced Refunding of Long-Term Debt - - - (1,249) Loss from Advanced Refunding of Long-Term Debt - (1,249) - - Interest Received for Suburban Infrastructure Improvements - - - - Interest Received for Suburban Infrastructure Improvements 440 - - - Debt Issuance Costs (666) - - (188) Debt Issuance Costs (4,697) (188) - - Interfund Proceeds on Sale of Property - - - - Interfund Proceeds on Sale of Property 2,653 - - - Proceeds from Sale of Capital Assets 72 - 141 (15) Proceeds from Sale of Capital Assets 371 4,673 6 166 Net Cash from Capital and Related Financing Activities 18,099 (44,036) (30,598) 42,335 Net Cash from Capital and Related Financing Activities 57,265 (391,871) (21,477) (21,589) a a CASH FLOWS FROM INVESTING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sale of Investments 4,000 90,541 - - Proceeds from Sale of Investments 18,675 168,089 - - Purchases of Investments - (64,260) - - Purchases of Investments (257,030) (95,948) - - Interest Received on Investments 2,663 2,585 3,864 2,198 Interest Received on Investments 13,137 18,547 2,554 2,625 Net Cash from Investing Activities 6,663 28,866 3,864 2,198 Net Cash from Investing Activities (225,218) 90,688 2,554 2,625 Net Increase (Decrease) in Cash and Net Increase (Decrease) in Cash and Equity in Pooled Investments 49,614 (12,632) (8,550) 64,284 Equity in Pooled Investments 156,385 (8,431) 5,309 8,142 CASH AND EQUITY IN POOLED INVESTMENTS CASH AND EQUITY IN POOLED INVESTMENTS Beginning of Year 22,771 35,403 96,594 32,310 Beginning of Year 279,876 288,307 48,108 39,966 End of Year $ 72,385 $ 22,771 $ 88,044 $ 96,594 End of Year $ 436,261 $ 279,876 $ 53,417 $ 48,108 CASH AT THE END OF THE YEAR CONSISTS OF CASH AT THE END OF THE YEAR CONSISTS OF Operating Cash and Equity in Pooled Investments $ 20,870 $ 18,075 $ 46,043 $ 41,728 Operating Cash and Equity in Pooled Investments $ 137,374 $ 154,326 $ 53,092 $ 47,910 Current Restricted Cash and Equity in Pooled Investments 1,705 1,743 - - Current Restricted Cash and Equity in Pooled Investments 35,344 3,626 - - Noncurrent Restricted Cash and Equity in Pooled Investments 49,810 2,953 42,001 54,866 Noncurrent Restricted Cash and Equity in Pooled Investments 263,543 121,924 325 198 Total Cash at the End of the Year $ 72,385 $ 22,771 $ 88,044 $ 96,594 Total Cash at the End of the Year $ 436,261 $ 279,876 $ 53,417 $ 48,108 a a Increases and decreases in the fair value of investments are treated as additions or deductions to cash and equity in pooled investments and long-term Increases and decreases in the fair value of investments are treated as additions or deductions to cash and equity in pooled investments and long-term investments. Information on the increases or decreases in the fair value of long-term investments is shown in the Schedule of Noncash Activities of the investments. Information on the increases or decreases in the fair value of long-term investments is shown in the Schedule of Noncash Activities of the Statement of Cash Flows. Statement of Cash Flows.

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 59 60 Fund Financial Statements The City of Seattle

B-8 STATEMENT OF CASH FLOWS B-8 STATEMENT OF CASH FLOWS Page 4 of 6 PROPRIETARY FUNDS Page 5 of 6 PROPRIETARY FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Business-Type Activities - Enterprise Funds Business-Type Activities - Enterprise Funds L i g h t W a t e r Drainage and Wastewater Nonmajor Funds Restated 2008 2007 2008 2007 2008 2007 2008 2007

RECONCILIATION OF OPERATING INCOME (LOSS) RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES TO NET CASH FROM OPERATING ACTIVITIES

Operating Income (Loss) $ 146,700 $ 137,602 $ 17,733 $ 21,720 Operating Income (Loss) $ 2,278 $ (10,948) $ (5,750) $ 275

Adjustments to Reconcile Net Operating Income (Loss) to Adjustments to Reconcile Net Operating Income (Loss) to Net Cash from Operating Activities Net Cash from Operating Activities Depreciation and Amortization 79,825 78,520 40,616 37,436 Depreciation and Amortization 18,182 14,931 11,722 10,624 Amortization of Deferred Power Costs 7,200 6,601 - - Amortization of Deferred Power Costs - - - - Changes in Operating Assets and Liabilities Changes in Operating Assets and Liabilities Accounts Receivable (3,481) 2,638 (10,822) 224 Accounts Receivable (1,017) (79) 514 (146) Unbilled Receivables (564) 4,970 (645) (977) Unbilled Receivables (276) (1,076) (87) 43 Bad Debt Expense 4,729 4,062 - - Bad Debt Expense - - - - Power Revenue and Expense 594 (113) - - Power Revenue and Expense - - - - Other Receivables (574) (657) 2,777 (2,703) Other Receivables - - - - Due from Other Funds (216) 706 589 (855) Due from Other Funds (915) (214) 813 (725) Due from Other Governments 2,745 1,733 907 (810) Due from Other Governments 504 (751) (488) (460) Materials and Supplies Inventory (5,595) (6,579) (482) 132 Materials and Supplies Inventory - - 20 43 Accounts Payable 9,246 (9,216) (701) 2,105 Accounts Payable 2,837 233 (313) 279 Salaries, Benefits, and Payroll Taxes Payable 1,399 (612) 828 179 Salaries, Benefits, and Payroll Taxes Payable 563 255 293 147 Compensated Absences Payable 1,097 1,173 675 783 Compensated Absences Payable 220 810 434 427 Due to Other Funds (4,290) 4,096 (359) (768) Due to Other Funds (518) (631) (145) (369) Due to Other Governments (23) - 62 - Due to Other Governments (58) 577 (119) 56 Claims Payable (968) (5,045) 482 (166) Claims Payable 2,835 1,335 155 61 Taxes Payable (380) (544) 132 (12) Taxes Payable 18 (22) (11) 1 Deferred Credits (2,061) (8,727) 498 695 Deferred Credits 813 742 (280) 484 Other Assets and Liabilities 1,396 7,492 7,394 1,322 Other Assets and Liabilities 872 289 (1,058) (1,298)

Total Adjustments 90,079 80,498 41,951 36,585 Total Adjustments 24,060 16,399 11,450 9,167

Net Cash from Operating Activities $ 236,779 $ 218,100 $ 59,684 $ 58,305 Net Cash from Operating Activities $ 26,338 $ 5,451 $ 5,700 $ 9,442

SCHEDULE OF NONCASH ACTIVITIES SCHEDULE OF NONCASH ACTIVITIES In-Kind Capital Contributions $ 12,830 $ 5,769 $ - $ - In-Kind Capital Contributions $ - $ - $ - $ - Amortization of Debt Related Costs, Net 2,007 (2,176) - - Amortization of Debt Related Costs, Net - - - - Change in Valuation of Derivative Financial Instruments 6,264 (6,298) - - Change in Valuation of Derivative Financial Instruments - - - - Change in Valuation of Deferrals on Power Exchange (1,303) (23) - - Change in Valuation of Deferrals on Power Exchange - - - - Allowance for Funds Used During Construction 3,213 2,691 - - Allowance for Funds Used During Construction - - - - Power Exchange Revenues 64,059 50,546 - - Power Exchange Revenues - - - - Power Exchange Expenses (63,655) (50,402) - - Power Exchange Expenses ---- Change in Capitalized Purchased Power Commitment/Obligation (4,749) (10,653) - - Change in Capitalized Purchased Power Commitment/Obligation - - - - Power Revenue Netted against Power Expenses 14,266 12,444 - - Power Revenue Netted against Power Expenses - - - - Power Expense Netted against Power Revenues (57,909) (43,172) - - Power Expense Netted against Power Revenues - - - - Fair Value Adjustment of Long-Term Investments - - 105 10 Fair Value Adjustment of Long-Term Investments (3) 3 - - Contributed Infrastructure - - 12,366 2,154 Contributed Infrastructure 22,243 2,295 - -

Total Noncash Activities $ (24,977) $ (41,274) $ 12,471 $ 2,164 Total Noncash Activities $ 22,240 $ 2,298 $ - $ -

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 61 62 Fund Financial Statements The City of Seattle

B-8 STATEMENT OF CASH FLOWS FIDUCIARY FUNDS Page 6 of 6 PROPRIETARY FUNDS For the Year Ended December 31, 2008 PRIVATE-PURPOSE TRUST FUND (In Thousands) The S. L. Denny Fund holds a nonexpendable gift. The investment income is available for aid to disabled firemen.

Business-Type Activities - Enterprise Funds Governmental Activities - Descriptions for the pension trust funds and agency funds are provided in the Combining and Individual Fund and Other Comparative Totals Internal Service Funds Supplementary Information section. Restated Restated 2008 2007 2008 2007

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES

Operating Income (Loss) $ 160,961 $ 148,649 $ 33,465 $ 39,719

Adjustments to Reconcile Net Operating Income (Loss) to Net Cash from Operating Activities

Depreciation and Amortization 150,345 141,511 14,512 14,538 Amortization of Deferred Power Costs 7,200 6,601 - - Changes in Operating Assets and Liabilities Accounts Receivable (14,806) 2,637 823 (448) Unbilled Receivables (1,572) 2,960 79 17 Bad Debt Expense 4,729 4,062 - - Power Revenue and Expense 594 (113) - - Other Receivables 2,203 (3,360) - - Due from Other Funds 271 (1,088) 2,720 (2,649) Due from Other Governments 3,668 (288) 749 1,266 Materials and Supplies Inventory (6,057) (6,404) 337 (206) Accounts Payable 11,069 (6,599) (2,041) 4,867 Salaries, Benefits, and Payroll Taxes Payable 3,083 (31) 143 263 Compensated Absences Payable 2,426 3,193 194 (216) Due to Other Funds (5,312) 2,328 934 654 Due to Other Governments (138) 633 - - Claims Payable 2,504 (3,815) 90 (11) Taxes Payable (241) (577) 1 (3) Deferred Credits (1,030) (6,806) - - Other Assets and Liabilities 8,604 7,805 (8) 287

Total Adjustments 167,540 142,649 18,533 18,359

Net Cash from Operating Activities $ 328,501 $ 291,298 $ 51,998 $ 58,078

SCHEDULE OF NONCASH ACTIVITIES

In-Kind Capital Contributions $ 12,830 $ 5,769 $ 6 $ 85 Amortization of Debt Related Costs, Net 2,007 (2,176) - - Change in Valuation of Derivative Financial Instruments 6,264 (6,298) - - Change in Valuation of Deferrals on Power Exchange (1,303) (23) - - Allowance for Funds Used During Construction 3,213 2,691 - - Power Exchange Revenues 64,059 50,546 - - Power Exchange Expenses (63,655) (50,402) - - Change in Capitalized Purchased Power Commitment/Obligation (4,749) (10,653) - - Power Revenue Netted against Power Expenses 14,266 12,444 - - Power Expense Netted against Power Revenues (57,909) (43,172) - - Fair Value Adjustment of Long-Term Investments 102 13 - - Contributed Infrastructure 34,609 4,449 - -

Total Noncash Activities $ 9,734 $ (36,812) $ 6 $ 85

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 63 64 Fund Financial Statements The City of Seattle

B-9 STATEMENT OF NET ASSETS B-10 STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS FIDUCIARY FUNDS December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Pension S. L. Denny Pension S.L. Denny Trust Private-Purpose Agency Trust Private-Purpose Funds Trust Funds Funds Trust

ASSETS ADDITIONS

Cash and Equity in Pooled Investments $ 30,238 $ 203 $ 13,895 Contributions Employer $ 90,443 $ - Short-Term Investments 6,542 - - Plan Member 45,986 -

Securities Lending Collateral 69,839 - - Total Contributions 136,429 -

Investments at Fair Value Investment Income (Loss) U.S. Government Obligations 93,704 - - Domestic Corporate Bonds 156,963 - - From Investment Activities Domestic Stocks 482,488 - - Net Appreciation (Depreciation) in Fair Value of Investments (639,841) - International Stocks 225,343 - - Interest 18,366 8 Real Estate 216,701 - - Dividends 5,543 - Alternative/Venture Capital 163,165 - - Mezzanine Debt 123,114 - - Total Investment Activities Income (Loss) (615,932) 8 Total Investments at Fair Value 1,461,478 - - Investment Activities Expenses Investment Management Fees 3,107 - Receivables Performance Measurement Fees 165 - Employer - Due from Other Funds 214 - - Investment Custodial Fees 94 - Employer - Other 6,351 - 777 Interest and Dividends 2,638 - - Total Investment Activities Expenses 3,366 - Due from Other Governments 3 - - Net Income (Loss) from Investment Activities (619,298) 8 Total Receivables 9,206 - 777 From Securities Lending Activities Equipment, at Cost, Net of Accumulated Depreciation 3 - - Securities Lending Income 3,522 -

Total Assets 1,577,306 203 14,672 Securities Lending Expenses Borrower Rebates 2,542 - LIABILITIES Management Fees 244 -

Accounts Payable - - 3 Total Securities Lending Expenses 2,786 - Refunds Payable and Other 12,565 - - Salaries, Benefits, and Payroll Taxes Payable - - 4,970 Net Income (Loss) from Securities Lending Activities 736 - Deposits Payable - - 9,688 Claims/Judgments Payable - - 11 Total Net Investment Income (Loss) (618,562) 8 Securities Lending Collateral 75,394 - - Total Additions (482,133) 8 Total Liabilities 87,959 - 14,672 DEDUCTIONS Net Assets Held in Trust for Pension Benefits and Other Purposes $ 1,489,347 $ 203 $ - Benefits 144,495 - Refund of Contributions 10,223 - Administrative Expense 3,010 -

Total Deductions 157,728 -

Change in Net Assets (639,861) 8

Net Assets - Beginning of Year 2,129,208 195

Net Assets - End of Year $ 1,489,347 $ 203

The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. 65 66 Notes to Financial Statements

This page is intentionally left blank. Notes to Financial Statements The City of Seattle

Organizations Excluded: Related Organizations

Organizations for which the City has appointed a voting majority of the members of the governing body, but for which the City is not financially accountable, are as follows:

Housing Authority of the City of Seattle

City of Seattle Industrial Development Corporation

Burke-Gilman Place Public Development Authority NOTES TO FINANCIAL STATEMENTS ACCOUNTING STANDARDS In 2008 the City implemented the following Government Accounting Standards Board (GASB) and Financial Accounting December 31, 2008 Standards Board (FASB) statements: GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This statement establishes standards of accounting and reporting for pollution remediation obligations that address current or potential (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES detrimental effects of existing pollution by participating in pollution remediation activities but do not include prevention or control obligations with respect to current operations such as obligations to install smokestack scrubbers, treat The accounting and reporting policies of the City of Seattle are regulated by the Washington State Auditor's Office and effluent, or use environment-friendly products – for example, low-sodium road salts. This statement does not apply to conform to generally accepted accounting principles for governments as prescribed by the Governmental Accounting landfill closure and postclosure care obligations within the scope of GASB Statement No. 18, Accounting for Municipal Standards Board (GASB). The City's significant accounting policies are described below. Waste Landfill Closure and Postclosure Care Costs; other future pollution remediation activities that are required upon retirement of an asset except to those activities at the time of the retirement if obligating events are met and a liability has REPORTING ENTITY not been recorded previously; recognition of asset impairments or liability recognition for unpaid claims by insurance activities and accounting for nonexchange transactions such as brownfield redevelopment grants. The City of Seattle (the primary government for financial reporting purposes) consists of the funds, departments, agencies, boards and commissions (referred to in this note as organizations) over which the City exercises financial accountability, GASB Statement No. 50, Pension Disclosures. This statement establishes and modifies requirements related to financial and a component unit over which the City is not financially accountable but is required to be reported due to the nature and reporting by pension plans and by employers that provide defined benefits and defined contribution pensions. It amends significance of its relationship with the City. Additional information on the component unit may be found in Note 11. The Statement No. 25, paragraphs 27, 32, 36, 37, 40 and 41 and it supersedes footnotes 17 and 18 of that statement. It also City does not have other relationships with organizations of such nature and significance that exclusion would render the amends paragraphs 20-22 and footnotes 10 and 17 of Statement No. 27. City's financial statements incomplete or misleading. FASB Statement No. 157 as amended, Fair Value Measurements. Under this standard, fair value is defined as the exchange price in an orderly transaction between market participants that would be received to sell the asset or paid to Indicators of Financial Accountability transfer the liability (i.e., the exit price) in the market in which the reporting entity would transact, that is, the principal or most advantageous market for the asset or liability. Fair value is the result of a hypothetical transaction at the The financial statements include the organizations for which the elected officials of the City of Seattle are financially measurement date. This standard applies under other accounting pronouncements that require or permit fair value accountable. Criteria indicating financial accountability include, but are not limited to, the following: measurements. The statement establishes a fair value hierarchy consisting of three levels and also provides three valuation approaches. The level within which the fair value measurement in its entirety falls is determined based on the Appointment by the City of a majority of voting members of the governing body of an organization, and lowest level input that is significant to the fair value measurement in its entirety. In measuring fair value the City in its Light Fund maximized the use of observable inputs that, at their lowest significant level, were other than quoted prices. - Ability of the City to impose its will on the daily operations of an organization, such as the power to remove The City applied fair value to investments and equity in pooled investments, exchange energy contracts, short-term appointed members at will; to modify or approve budgets, rates, or fees; or to make other substantive decisions; or energy forward derivative instruments, asset retirement obligations, and long-term debt. The adoption of the statement did not have a material impact on the Light Fund’s financial condition and results of operations; disclosures with respect to fair value measurements were approved and required. - Provisions by the organization of specific financial benefits to the City; or FASB Statement No. 159, Fair Value Option for Financial Assets and Financial Liabilities. This statement permits - Imposition by any organization of specific financial burdens on the City, such as the assumption of deficits or entities to choose to measure certain financial assets and financial liabilities at fair value. Unrealized gains and losses on provision of support; items for which the fair value option is elected would be reported in net income or deferred in accordance with FASB Statement No. 71, if applicable. The City, relevant to its Light Fund, did not elect to use the fair value option under this Or, fiscal dependency by the organization on the City, such as from the lack of authority to determine its budget or statement for any financial assets and liabilities at implementation and, as such, the adoption of FASB Statement No. 159 issue its own bonded debt without City approval. did not have any material impact on its financial condition and results of operation.

Joint Venture GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

A joint venture is an organization that results from a contractual arrangement and is owned, operated, or governed by two or Government-wide financial statements consist of the Statement of Net Assets and the Statement of Activities. These more participants as a separate activity. In addition to joint control, each participant must have either an ongoing financial statements report the financial position and activities of the primary government. For the most part, the effect of interfund interest or an ongoing financial responsibility. The City participates in a joint venture with King County with regard to the activity has been removed from these statements. Governmental activities, which are normally supported by taxes and Seattle-King County Work Force Development Council. Additional information on the existing joint venture may be found intergovernmental revenues, are reported separately from business-type activities, which rely significantly on charges and in Note 12. fees for their services. Resources of fiduciary activities, which are not available to finance governmental programs, are excluded from the government-wide financial statements.

69 70 Notes to Financial Statements The City of Seattle

Statement of Net Assets The Water Fund accounts for operating the City's water utility. The Utility maintains more than 224 miles of water supply mains, 1,673 miles of distribution lines, and 370 million gallons of distribution storage capacity in the Cedar and Tolt Rivers and Highline Well Field watersheds. The distribution system serves a population of close to 634,000 people. The Statement of Net Assets reports all financial and capital resources. The difference between assets and liabilities is net The Utility also sells to 25 surrounding cities and water districts that provide water to an additional 746,000 people. The assets. Net assets are displayed in three components: invested in capital assets, net of related debt; restricted; and average daily total consumption is about 117 million gallons of water. unrestricted. The Drainage and Wastewater Fund accounts for operating the sewer and drainage utility facilities and its pumping The amount reported as invested in capital assets, net of related debt, consists of capital assets, net of accumulated stations. These facilities and stations are necessary to collect the sewage of the City and discharge it into the King depreciation, reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable County Department of Natural Resources Wastewater Treatment System for treatment and disposal. to the acquisition, construction, or improvement of those assets. Net assets are restricted when constraints placed on net asset use are either (1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation. Additionally, the City reports the following fund types:

For permanent endowments, net assets are displayed showing the nonexpendable and the expendable components Permanent funds account for resources that are legally restricted to the extent that only earnings, and not principal, are separately. Nonexpendable net assets are those that are required to be retained in perpetuity and are reported as restricted available for disbursement. Earnings of the H. H. Dearborn Fund and the Beach Maintenance Trust Fund are used net assets. Unrestricted net assets are those that are not “invested in capital assets, net of related debt” or “restricted.” for charitable purposes and maintenance of public beaches, respectively. Internal service funds account for support services provided to other City departments, such as motor pool, office Statement of Activities space, managing the design and construction phases of capital improvement projects, telecommunications, data communications, radio systems, and the fiber optic network. The Statement of Activities displays the degree to which the direct expenses of a given function or segment is funded by program revenues. Direct expenses are those that are clearly identifiable to a specific function. Direct expenses include Fiduciary funds account for assets held in a trustee or agency capacity. The City has three pension trust funds: depreciation on capital assets that are clearly associated with a given function. In general, expenses related to personnel functions are reported as indirect expenses. Program revenues include charges for services, grants, and contributions that The Employees' Retirement Fund receives employees' payroll deductions for retirement and the City's matching are restricted for specific purposes. Taxes and other revenues not included as program revenues are reported as general contributions. It pays pension benefits to retired City employees. revenues. The Firemen's Pension Fund accounts for revenues from a portion of the state-levied fire insurance premium tax Interfund activity within governmental funds of the City is eliminated, except for the effect of services provided by the and significantly from pension and benefits contributions of the General Fund. It pays medical and pension benefits business-type activities, such as the sale of utility services to the general government and to other funds. This avoids to sworn firemen. misstatement of program revenues of the selling function and expenses of the various users. Operating income or (loss) reported by internal service funds in the fund financial statements are allocated back to the City departments either as a reduction or addition to their expenses by function. The Police Relief and Pension Fund receives support almost entirely from the General Fund to pay for sworn police personnel's medical and pension benefits that are not covered by the state's Law Enforcement Officers’ and Fire Fighters' Retirement System and/or industrial insurance. Fund Financial Statements The City uses agency funds to report assets that are held in a custodial relationship. Agency funds are not used to Separate fund financial statements are provided to report additional and detailed information for governmental funds, support the government’s own programs and so these funds are excluded from the government-wide financial proprietary funds, and fiduciary funds. Even though fiduciary funds are excluded from the government-wide financial statements. The City reports the following as agency funds: Guaranty Deposits, Payroll Withholding, Salary, statements, these funds are reported in the fund financial statements under the Statement of Fiduciary Net Assets and the Voucher, and Pass-Through Grants Funds. Statement of Changes in Fiduciary Net Assets. Major individual governmental funds and major individual enterprise funds are presented in separate columns in the fund financial statements. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The City reports the following major governmental funds: Government-wide Financial Statements The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government except those required to be accounted for in other funds. Government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like The Transportation Fund accounts for revenues for construction, improvement, repair, or maintenance of City streets transactions are recognized when the exchange takes place. Basis of accounting refers to the timing of when revenues and and waterways. Revenues include taxes on the sale, disposition, or use of motor vehicle fuel; motor vehicle excise taxes expenditures or expenses and transfers are recognized in the accounts and reported in the financial statements. designated for street purposes; and grants. Governmental Fund Financial Statements The Low-Income Housing Fund accounts for activities undertaken by the City to rehabilitate, replace, and preserve low-income housing stock and to assist low-income tenants in Seattle. It is supported by a seven-year housing levy Financial statements for governmental funds are prepared using the current financial resources measurement focus and the approved by the voters in 2002 and federal grants. The fund accounts for long-term housing loan assistance programs modified accrual basis of accounting. Revenues are recorded when susceptible to accrual, i.e., both measurable and that are either deferred or amortized. Most of the loans are deferred and are payable in full on sale, on change of use, or available. Available means collectible within the current period or soon enough thereafter (generally 60 days) to pay current at the end of the loan term. Terms will generally permit borrowers to further defer payment of principal, deferred liabilities. Revenues that are measurable but not available are recorded as receivables and offset by deferred revenues. interest, and contingent interest by extending the loan term. Majority of the current loans are deferred for 50 years and Property taxes, business and occupation taxes, and other taxpayer-assessed tax revenues that are due for the current year are may be extended for an additional 25 years. Amortizing loans will be required if project budgets can afford repayment considered measurable and available and are therefore recognized as revenues even though a portion of the taxes may be and meet required rent levels. collected in the subsequent year. Special assessments are recognized as revenues only to the extent that those individual installments are considered as current assets. Intergovernmental revenues received as reimbursements for specific purposes The City reports the following major proprietary funds: are recognized when the expenditures are recognized. Intergovernmental revenues received but not earned are recorded as deferred revenues. Licenses, fines, penalties, and miscellaneous revenues are recorded as revenues when received in cash The Light Fund (City Light) accounts for operating the City's electric utility which owns and operates generating, because they are generally not measurable until actually received. Investment earnings are accrued as earned. transmission, and distribution facilities. The Utility supplies electricity to approximately 390,000 customers in the Seattle area as well as to other city agencies. Expenditures are recorded when the liability is incurred except for interest on long-term debt, judgments and claims, workers’ compensation, and compensated absences, which are recorded when paid. 71 72 Notes to Financial Statements The City of Seattle

Proprietary Fund Financial Statements Under the City’s investment policy all temporary cash surpluses are invested, either directly or through a "sweep account." Pooled investments are reported on the combined balance sheets as Cash and Equity in Pooled Investments. Interest earned on the pooled investments is prorated to individual funds at the end of each month on the basis of their average daily cash Financial statements for proprietary funds are prepared using the economic resources measurement focus and the accrual balances during the month when interest was earned. basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when incurred. Certain costs in the enterprise funds are deferred and expensed in future years as the utility rates recover these costs. Since the participating funds in the City’s internal investment pool use the pool as if it were a demand deposit account, the proprietary fund equity in pooled investments is considered cash for cash flow reporting purposes. The revenues of the four utilities, which are based upon service rates authorized by the City Council, are determined by monthly or bimonthly billings to customers. Amounts received but not earned at year-end are reported as deferred revenues. Investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial Earned but unbilled revenues are accrued. instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses The City of Seattle has the following policies in managing its investments: generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal activity. The principal operating revenues of the City’s Light, Water, Solid Waste, Drainage and Wastewater The City seeks to preserve principal while maximizing income and maintaining liquidity to meet the City’s need for Utilities, the Downtown Parking Garage, the Planning and Development Fund, and the City’s internal service funds are cash. charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of personnel services, contractual services, other supplies and expenses, and depreciation on capital assets. All other Investment decisions should further the City’s social policies established by ordinance or policy resolutions of the City revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Council.

Pursuant to GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental A City social policy shall take precedence over furthering the City’s financial objectives when expressly authorized by Entities That Use Proprietary Fund Accounting, the City has chosen flexible application and reporting in accordance with City Council resolution, except where otherwise provided by law or trust principles. the election of each fund. City Light elected to apply all GASB pronouncements as well as all FASB statements and interpretations except where they conflict with GASB pronouncements. All other enterprise funds elected to apply all GASB Securities purchased shall have a maximum maturity of fifteen years, and the average maturity of all securities shall be pronouncements and those FASB statements and interpretations issued on or before November 30, 1989, except when they less than five years. contradict GASB pronouncements. All transactions are done on a delivery-versus-payment basis. Fiduciary Fund Financial Statements The standard of prudence to be used by investment personnel shall be the “Prudent Person Rule” and will be applied in Financial statements for the pension trust and private-purpose trust funds are prepared using the economic resources the context of managing an overall portfolio. measurement focus and the accrual basis of accounting. All assets, liabilities, and additions to and deductions from (including contributions, benefits, and refunds) plan net assets of the retirement funds are recognized when the transactions Securities shall not be purchased with trading or speculation as the dominant criterion for the selection of the security. or events occur. Employee and employer contributions are reported in the period in which the contributions are due. Member benefits, including refunds, are due and payable by the plan in accordance with plan terms. The Seattle City Employees’ Retirement System has its investment management policies set by the Retirement Board. State law allows the System to invest in longer term maturities and in a broader variety of securities, such as real estate and equity Agency funds, unlike the other types of fiduciary funds, report only assets and liabilities. Agency funds do not have a issues. The Board policies require that investments in any one corporation or organization may not exceed five percent of measurement focus since they do not report equity and cannot present an operating statement reporting changes in equity. net assets available for benefits. Less than five percent of plan assets can be invested in derivative securities. All They do, however, use the accrual basis of accounting to recognize receivables and payables. derivatives are high quality non-leveraged securities consisting of collateralized mortgage obligations (CMOs), Treasury strips, convertible bonds, futures, options, etc. These derivatives cause little exposure to credit risk, market risk, or legal BUDGETS AND BUDGETARY ACCOUNTING risk. Venture capital and real estate equities are reported at fair value that has been determined by independent appraisers.

Budgetary accounts are integrated in the fund database for all budgeted funds, including capital improvement projects funds Receivables and the Community Development Block Grant (CDBG) Fund. However, the annual financial report includes budgetary comparisons for annually budgeted governmental operating funds only. Note 2, Stewardship, Compliance, and Customer accounts receivable consist of amounts owed by private individuals and organizations for goods delivered or Accountability, discusses in detail the City’s budgetary policies and processes. services rendered in the regular course of business operations. Notes and contracts receivable arise from a written agreement or contract with private individuals or organizations. Receivables are shown net of allowances for uncollectible ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY accounts. Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is Cash and Investments referred to as either interfund loans receivable/payable or advances to/from other funds. All other outstanding balances between funds are reported as due to/due from other funds. The City is authorized to purchase U.S. Treasury and government agency securities, certificates of deposits and other investment deposits issued by Washington State depositories that qualify under the Washington State Deposit Protection Act Advances to other funds in governmental funds are equally offset by a fund balance reserve account, which indicates that as defined by RCW 39.58, bankers’ acceptances purchased in the secondary market, commercial paper purchased in the they do not constitute available spendable resources since they are not a component of net current assets. secondary market and having received the highest rating by at least two nationally recognized rating agencies, repurchase and reverse repurchase agreements with “primary dealers” that have executed master repurchase agreements, public funds in the local government investment pool (LGIP) in the State Treasury, and other securities as authorized by law. Inventories

The City and the City Employees’ Retirement System are also allowed under state law to make securities lending Inventories are generally valued using the weighted-average cost method and consist of expendable materials and supplies transactions. Gross income from securities lending transactions as well as the various fees paid to the institution that held for consumption. oversees the lending activity is recorded in the operating statements. Assets and liabilities include the value of the collateral that is being held. Under the authority of RCW 41.28.005 and the Seattle Municipal Code 4.36.130, the System’s Board of The cost is recorded as expenditure in governmental funds at the time individual inventory items are purchased. This is Administration adopted investment policies that define eligible investments, which include securities lending transactions. known as the purchase method. Governmental fund inventories are equally offset by a fund balance reserve to indicate that Securities lent must be collateralized with cash or securities having 102 percent of the market value of the loaned securities. they do not constitute available spendable resources even though they are included in net current assets. The City and the Retirement System cannot pledge or sell collateral securities without a borrower default. 73 74 Notes to Financial Statements The City of Seattle

Inventories in the proprietary funds are expensed as consumed. Accumulated Compensated Absences

Capital Assets Compensated absences, including payroll taxes, are reported as current and noncurrent liabilities in the statement of net assets. Actual balances are accrued for all types of compensated absences except sick leave, the liability for which is The City classifies assets with an estimated useful life in excess of one year as capital assets. As a general rule, items with generally estimated using the termination method. an initial individual cost of $5,000 or more are capitalized. Vacation Pay Governmental infrastructure assets include long-lived capital assets, such as roads, bridges, and tunnels that normally can be preserved for a significantly greater number of years than most capital assets. Estimated historical costs were established Employees earn vacation based upon their date of hire and years of service and may accumulate earned vacation up to a based on the City’s street reports to the state. Works of art have been valued at historical cost. In cases where the historical maximum of 480 hours. Unused vacation at retirement or termination is considered vested and payable to the employee. cost is not available the method used was “backtrending,” i.e., deflating the current replacement cost using the appropriate price index. Donated capital assets are valued at their estimated fair market value at the time of donation. For proprietary Sick Pay funds, contributions of capital assets are reported under Capital Contributions and Grants in the Statement of Revenues, Expenses, and Changes in Fund Net Assets. Employees earn up to 12 days of sick leave per year and may accumulate sick leave balances without limit.

Most capital assets are depreciated for the governmental funds. Annual depreciation is recorded in government-wide The City is mandated, upon retirement of a represented employee who is covered by an agreement between the City and an financial statements as an expense of the governmental function for which the assets are being used. Depreciation is individual union, that is part of the Coalition of City Unions, that has been duly ratified by members and upon receipt of a computed using the straight-line method over estimated service lives as follows: signed hold harmless agreement and membership form, to contribute on behalf of such employee to the City's Health Utility plant in service 33 - 100 years Reimbursement Arrangement - Voluntary Employees' Beneficiary Association (HRA-VEBA) program an amount equal to Buildings 25 - 50 years 35 percent of the member's unused sick leave balance. If the eligible employee fails to submit the signed hold harmless Improvements other than buildings 25 - 50 years agreement and the membership enrollment form by their last working day of employment, their entire sick leave balance is Infrastructure 10 - 50 years forfeited. Machinery and equipment 2 - 25 years Retiring employees who are not eligible to participate in the HRA-VEBA program may elect to either cash out 25 percent of Composite rates are used in the enterprise funds for depreciating asset groups. Consequently, when an asset is retired, its the value of their sick leave balance or defer receipt of 35 percent of the value of their sick leave balance to the City's original cost together with removal costs less salvage is charged to accumulated depreciation. The cost of current 457 Plan and Trust, subject to the year-to-date or life-to-date limitations on deferrals and contributions to such account. If maintenance and repairs is charged to expense, while the cost of renewals and betterments is capitalized. the 35-percent value of the sick leave balance exceeds the maximum amount deferred to the City's 457 Plan and Trust, the employee shall receive a taxable cash payment equal to the amount, if any, by which the 25 percent of value of the sick leave balance exceeds the portion of the 35-percent amount that was allowed to be deferred. Restricted Assets Other Compensated Absences In accordance with the utility bond resolutions, state law, or other agreements, separate restricted assets have been established. These assets are restricted for specific purposes including the establishment of bond reserve funds, financing Other compensated absences include compensatory time in lieu of overtime pay, merit credits earned by firefighters, the ongoing capital improvement programs of the various utilities, and other purposes. furlough earned by police, holiday earned by library and police employees, and other compensation earned by City employees under law or union contracts. Unused compensated absences are payable at retirement or termination. Deferred Charges Risk Management Deferred charges may include preliminary costs of projects and information systems, programmatic conservation costs, certain purchased power expenses, the cost of future construction of plant owned and operated by other entities for future A liability for claims is reported if information prior to the issuance of the financial statements indicates that it is probable services, and charges related to bond issues. that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Claims liabilities are discounted at the City’s average investment rate of return (Note 14). Costs for proposed projects incurred by the enterprise funds pending construction of the facility are deferred. Costs relating to projects ultimately constructed are transferred to utility plant; costs are charged to expense if a project is abandoned or deferred if the costs are to be recovered through future use. Conservation program costs in the Light and Water Utilities Other Accrued Liabilities which result in long-term benefits and reduce or postpone other capital expenditures are capitalized and amortized over their expected useful lives due to the Utilities’ capital financing plans and rate-setting methodology. Costs of administering the Other accrued liabilities include deposits, interest payable on obligations, and lease-purchase agreements. overall program are expensed as incurred. Interfund Activity and Contracts/Advances In the proprietary funds the bond premium and discount are amortized using the effective-interest method over the term of the bonds. The excess costs incurred over the carrying value of bonds refunded on early extinguishment of debt is Interfund activity and balances in the funds are eliminated or reclassified in the process of aggregating data for the amortized as a component of interest expense using either straight-line or effective-interest methods over the shorter of the Statement of Net Assets and the Statement of Activities. remaining life of the old debt or the life of the new bond issue. Bond issue costs are amortized over the life of the bond. For all other funds, deferrals and amortizations are recognized and reported directly in the government-wide financial statements under governmental activities. Interfund debt is recorded in the appropriate funds even though such debt may result in a noncurrent liability for a governmental fund because the debt is not a general obligation of the City.

Prepaid Items Deferred Revenues In governmental funds the City accounts prepayments using the consumption method and, therefore, it recognizes expenditures as prepaid items expire. The City recognizes a reservation of fund balance for prepaid items only when the Deferred revenues include amounts collected before revenue recognition criteria are met as well as amounts recorded as amount in the fund is materially significant. receivables, which under the modified accrual basis of accounting, are measurable but not yet available. The deferred items consist primarily of delinquent property taxes, contracts, mortgages receivable, grant funds received in advance of expenditures, portions of local improvement districts special assessments that are due in succeeding years in governmental funds, and the amounts loaned by the Housing and Community Development Revenue Sharing Fund, a special revenue fund, under authorized federal loan programs. 75 76 Notes to Financial Statements The City of Seattle

Deferred credits include deferred revenues and revenues collected or billed in advance. The CIP plan is also proposed by the Mayor and adopted by the City Council at least 30 days before the beginning of the fiscal year. The CIP is a six-year plan for capital project expenditures and anticipated financing by fund source. It is revised and extended annually. The City Council adopts the CIP as a planning document but does not appropriate the Reservations and Designations multiyear expenditures identified in the CIP. These expenditures are legally authorized through the annual operating budget or by specific project ordinances during the year. A reservation is used to segregate a portion of fund balance that is either not appropriable for expenditures or is legally restricted for a specific future use. The amounts not appropriable for expenditures are reported as fund balance reserved for The CDBG planning process allocates the annual grant awarded by the federal government. Allocations are made to both noncurrent assets, inventories, petty cash, and prepaid items. The amounts legally segregated for specific future uses are City and non-City organizations. Legal authority is established each year by a separate appropriation ordinance for the reported as fund balance reserved for capital improvements and grants, debt service including judgments and claims, Housing and Community Development Revenue Sharing Fund. employee benefits, endowments and gifts, employee retirement systems, continuing appropriations, and encumbrances. Budgetary control for the operating budget generally is maintained at the budget control level within departments with the In cases where a governmental fund does not have enough available unreserved fund balance, the fund balance reserved for following exceptions: the Library Fund has its total budget set at fund level by the City Council, but its actual expenditures that fund is limited to the extent of the amount available. are controlled by the Library Board; capital projects programmed in the CIP are controlled at the project or project-phase level or program depending on legal requirements; grant-funded activities are controlled as prescribed by law and federal Program Revenues regulations.

Program revenues are revenues derived directly from the program itself. These revenues reduce the net cost of the function The City Council may by ordinance abrogate, decrease, or reappropriate any unexpended budget authority during the year. to be financed from the City’s general revenues. The Statement of Activities separately reports three categories of program The City Council, with a three-fourths vote, may also increase appropriations. Emergency Subfund appropriations related to revenues: (1) charges for services, (2) operating grants and contributions, and (3) capital grants and contributions. Taxes settlement of claims, emergency conditions, or laws enacted since the annual operating budget ordinance require approval and other revenues that do not meet the criteria of program revenues are reported as general revenues. by two-thirds of the City Council.

The Finance Director may approve the transfer of appropriations. Beginning in 2003 the following restrictions to budget Prior-Year Comparative Data transfers within a budget year were imposed by ordinance. Total budget transfers into a budget control level may not exceed 10 percent of its original budgeted allowance, and in no case may they be greater than $500,000. Total transfers out may not The basic financial statements include certain prior-year summarized comparative information in total but not at the level of exceed 25 percent of the original budgeted allowance. For capital items the affected budget is both the original appropriated detail required for a presentation in conformity with generally accepted accounting principles. Accordingly, such budget for the current year and the unexpended budget carried over from prior years. Within a budget control level information should be read in conjunction with the City of Seattle’s financial statements for the year ended December 31, departments may transfer appropriations without the Finance Director’s approval. 2007, from which the summarized information was derived. Budgetary comparisons for proprietary funds may be requested from the Department of Executive Administration. Budget figures consist of the adopted annual budget, which includes appropriation carryovers from previous years, and any revisions adopted by ordinance during the year. The budgetary basis is substantially the same as the accounting basis in all governmental fund types except for the treatment of encumbrances that do not lapse, those whose budgets were approved by (2) STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY the Department of Finance to carry over to the following year, and are included with expenditures.

BUDGETARY INFORMATION FUND BALANCE DESIGNATED FOR SPECIAL PURPOSES

The City budgets for the General Fund and some special revenue funds on an annual basis. The special revenue funds Within the fund financial statements the City reports fund balances as “Unreserved Designated for Special Purposes” on the which have legally adopted annual budgets are the Park and Recreation Fund, the Transportation Fund, the Library Fund, Balance Sheet of its governmental funds. In the General Fund, the balances comprise of amounts billed and collected the Seattle Center Fund, the Human Services Operating Fund, the Office of Housing Fund, and the Low-Income Housing internally by the City’s Personnel Department for purposes of industrial insurance, unemployment compensation, special Fund. employment, life insurance, and health care.

The City Council approves the City's operating budget. In addition, the City Council annually approves two separate but Also included in the balance are revenues collected within the Cable TV Franchise Subfund. The Cable Television related financial planning documents: the Capital Improvement Program (CIP) plan and the Community Development Block Franchise Subfund, created by Ordinance 118196, collects revenues from the cable providers and must use the funds Grant (CDBG) program allocation. according to the usage policies established in Council Resolution 30379.

The operating budget is proposed by the Mayor and adopted by the City Council at least 30 days before the beginning of the The designation in the Seattle Center Fund is for the repairs and maintenance of the McCaw Hall, its kitchen equipment fiscal year. The budget is designed to allocate available resources on a biennial basis among the City's public services and purchases and for operations. programs and provides for associated financing decisions. The budget appropriates fiscal year expenditures and establishes employee positions by department and fund except for project-oriented, multiyear appropriations made for capital projects, grants, or endowments. All amounts reported as designated for special purposes are legally segregated for specific future use. The total amount reported is broken down by fund and by year in the following table.

Table 2-1 APPROPRIATION CHANGES – GENERAL FUND (In Thousands)

2008

Annual Budget $ 1,146,994

Carryovers Encumbrances 5,829 Continuing Appropriations 87,280 Intrafund (28,243)

Budget Revisions 58,437

Total Budget $ 1,270,297 77 78 Notes to Financial Statements The City of Seattle

Table 2-2 FUND BALANCES DESIGNATED FOR SPECIAL PURPOSES CITY TREASURY INVESTMENTS (In Thousands) Note 1 describes the investment policies of the City. Banks or trust companies acting as the City's agents hold all of the City's investments in the City's name. As of December 31, 2008, the City’s cash investment pool had the following Restated investments and maturities. Fund 2008 2007

General Fund Group Term Life Insurance $ 414 $ 370 Table 3-1 INVESTMENTS AND MATURITIES Health Care 13,564 13,831 TREASURY RESIDUAL INVESTMENTS AND Unemployment Compensation 4,398 5,359 Industrial Insurance 6,681 4,776 SECURITIES HELD FOR DEDICATED FUNDS Special Employment Program 106 106 Cable TV Franchise 4,334 5,316 (In Thousands) Special Revenue Fund Seattle Center McCaw Hall 879 670 Fair Value Securities Weighted $ 30,376 $ 30,428 Treasury Held for Average Residual Dedicated Carrying Maturity Investments Investments Funds Amount (Days)

Repurchase Agreements $ 95,760 $ - $ 95,760 2 DEFICITS IN FUND BALANCES AND NET ASSETS U.S. Government Obligations 15,286 - 15,286 151 U.S. Government Securities and U.S. Government- Sponsored Enterprises Securities 784,028 213,793 997,821 703 The Downtown Parking Garage Fund has negative fund net assets of $20.3 million. This is mostly attributable to cumulative Commercial Paper 215,172 44,986 260,158 15 depreciation expenses which were not planned to be covered by operating revenues. The Garage generates revenues to cover Municipal Bonds 13,342 - 13,342 469 debt service payments and operating expenses, excluding depreciation. The negative fund equity will continue; however, garage revenues are expected to remain sufficient to meet cash requirements for the foreseeable future. Total $ 1,123,588 $ 258,779 $ 1,382,367 Weighted Average Maturity of The Seattle Streetcar Fund has negative fund balance of $1.95 million. The fund was created by Ordinance 122424. This the Treasury Residual Investments and ordinance also allows a loan from the City’s Consolidated (Residual) Cash Pool of up to $2.2 million. This loan is to be Securities Held for Dedicated Funds 517 repaid no later than December 31, 2018, from the sale of surplus property, grants, donations, transfers, and other monies as authorized by ordinance. Interest Rate Risk. Interest rate risk is the risk that changes in interest rates over time will adversely affect the fair value of an investment. To manage exposure to declines in fair values, the City adopted an investment policy that limits the weighted average maturity of its investment portfolio to no longer than five years. Furthermore, to achieve its financial objective of maintaining liquidity to meet its operating cash flow needs, the City typically selects investments that have (3) CASH AND INVESTMENTS much shorter average maturities. Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. In CASH AND EQUITY IN POOLED INVESTMENTS accordance with its investment policy the City manages exposure to credit risk in commercial paper by purchasing programs with the highest rating by at least two nationally recognized statistical rating organizations (NRSROs); conducting internal Cash resources of all City funds are combined to form a cash pool that is managed by the Department of Executive due diligence of each commercial paper program purchased and maintaining an approved purchased list of names as well as Administration. Under the City’s investment policy, all temporary cash surpluses in the pool are invested. Each fund’s list of names to avoid; and paid subscriptions to Moody’s Investors Service and Fitch Ratings. As of December 31, 2008, share of the cash pool is included in the participating fund’s balance sheet under the caption “Cash and Equity in Pooled the City’s investments in commercial paper were rated P-1 by Moody’s Investors Service, A-1+ or A-1 by Standard & Investments.” The pool operates like a demand deposit account in that all City funds may deposit cash at any time and also Poor’s, or F-1 or F1+ by Fitch Ratings. The same internal due diligence is conducted for purchasing taxable municipal withdraw cash out of the pool without prior notice or penalty. securities issued outside of the State of Washington. The municipal bonds were rated VMIG1, Aaa, Aa1, Aa2 by Moody’s Investors Service and A-1+, A-1, AAA, AA+ or AA by Standard & Poor’s. Custodial Credit Risk – Deposits. As of December 31, 2008, the City’s cash pool had cash in the vault of $0.1 million and $23.9 million on deposit with the City’s custodial banks which includes cash that had been credited in the City books but The City also purchases obligations of government-sponsored enterprises which are eligible as collateral for advances to remains in the bank to cover checks that had been issued by the City but were unredeemed at the end of the year. The member banks as determined by the Board of Governors of the Federal Reserve System. These include, but are not limited Federal Deposit Insurance Corporation (FDIC) insures the City’s deposits up to $0.25 million; the rest is uninsured and to, debt securities of the Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal Farm Credit Bank, uncollateralized and is therefore exposed to custodial risk, which is the risk that deposits may not be returned to the City in and Federal National Mortgage Association. As of December 31, 2008, these investments were rated Aaa by Moody’s the event of bank failure. The City minimizes exposure to custodial credit risk for deposits by requiring depositary banks to Investors Service and AAA by Standard & Poor’s. have sufficient capital to support the activities of City accounts. Banks having a deposit relationship with the City are also required to provide financial statements for the City’s use in reviewing the bank’s financial condition. All deposits not The City’s investments in repurchase agreements require a master repurchase agreement executed with the counterparty. covered by FDIC insurance are under the jurisdiction of the Washington State Public Deposit Protection Commission Securities delivered as collateral must be priced at a minimum of 102 percent of their market value for U.S. Treasuries and (Commission), established in RCW 39.58 that also regulates public depositary financial institutions within the state. The at higher margins of 103 percent to 105 percent for debentures of U.S. federal government-sponsored enterprises, mortgage- Commission requires public depositaries a pledge agreement with the Commission and a trustee, and shall at all times backed pass-throughs, banker’s acceptances, and commercial paper. In addition, collateral securities must have the highest maintain, segregated from its other assets, eligible collateral in the form of securities described in RCW 39.58.050 (5) and credit ratings of at least two nationally recognized statistical rating organizations (NRSROs). As of December 31, 2008, the (6) having a value at least equal to its maximum liability. Such collateral shall be segregated by deposit with depositary's securities underlying the City’s investment in repurchase agreements included collateral other than U.S. Treasuries, and the trustee and shall be clearly designated as security for the benefit of public depositors. The collateral is used, through the repurchase agreements were not rated. depositary’s trustee, when the Commission assesses the depositary bank in cases where losses are incurred by depositors, net of deposit insurance already received by them. Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. In accordance with its investment policy, the City manages exposure to concentration of credit risk for the City’s investments portfolio as a whole. The City limits its investments in any one issuer as follows: 10 percent of the portfolio per bank for certificates of deposit or bankers’ acceptances; 5 percent for commercial paper or municipal bonds; and 20 percent per U.S. government agency. However, U.S. government real estate mortgage investment conduits 79 80 Notes to Financial Statements The City of Seattle

(REMICs), collateralized mortgage obligations (CMOs) and pass-through securities are not subject to maximum agency Table 3-4 SCERS’ FIXED INCOME PORTFOLIO limitations but are limited to a maximum asset allocation of 25 percent of the total portfolio. The City’s investments in which five percent or more is invested in any single issuer as of December 31, 2008, are shown in the following table. (In Thousands)

Investment Maturities (In Years) Investment Type Fair Value <1 1 - 5 6 - 10 >10 Table 3-2 CONCENTRATION OF CREDIT RISK Fixed Income (In Thousands) U.S. Government Treasuries, Notes, and Bonds $ 9,627 $ 509 $ 3,078 $ 1,962 $ 4,078 Percent of Treasury Inflation-Protected Securities 2,951 - - 526 2,425 Total Agencies 8,409 999 2,301 1,515 3,594 Issuer Fair Value Investments Mortgage-Backed Government Pass-Throughs 71,253 1,383 2 3,521 66,347 Federal Home Loan Mortgage Corp. (Freddie Mac) $ 334,911 24 % Corporate Pass-Throughs 43,726 4,590 108 - 39,028 Federal National Mortgage Association (Fannie Mae) 296,604 21 Government Collateralized Mortgage Obligations 1,000 - - 1 999 Federal Home Loan Bank 255,135 18 Corporate Federal Farm Credit Bank 111,170 8 Bonds 60,889 1,766 16,664 25,802 16,657 Wells Fargo Bank 95,760 7 Asset-Backed 25,152 747 1,812 5,640 16,953 Siemens Capital 69,981 5 Private Placements 12,649 1,112 3,742 3,519 4,276 CDO's and CLO's 2,519 - 374 76 2,069 Convertible Bonds 3,659 157 1,378 88 2,036

Total Portfolio $ 241,834 $ 11,263 $ 29,459 $ 42,650 $ 158,462 Custodial Credit Risk – Investments. The custodial credit risk for investments is the risk that, in the event of failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside counterparty. The City minimizes custodial credit risk for its investments by having its investment securities held by the City’s contractual custodian agent and not by the counterparty or the counterparty’s trust department Interest Rate Risk. SCERS’ investment policy requires the Retirement Board to provide its investment managers with a set or agent. Additionally, the City mitigates custodial risk by settling its trades delivery versus payment through the City’s of investment guidelines that specify eligible investments and applicable restrictions necessary for risk control. Managers custodian. In accordance with its investment policy the City also maintains a list of approved securities dealers to provide do not have authority to depart from those guidelines. investment services to the City. The securities dealers include primary dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule). The City conducts its own financial due SCERS’ investment policy does not limit fixed income investments based on ratings by nationally recognized rating diligence of each counterparty before adding the securities dealer to the City’s list of approved dealers. agencies. Speculative investments are avoided based on the Prudent Person Rule as defined by RCW 35.39, and policy specifies target percentages for diversification in order to minimize risk of large losses. Foreign Currency Risk. The City Treasury investment pool and securities held for dedicated funds portfolios do not invest in foreign currencies. Table 3-5 SCERS’ FIXED INCOME RATINGS BY STANDARD AND POOR’S INVESTMENTS OF THE SEATTLE CITY EMPLOYEES’ RETIREMENT SYSTEM (SCERS) (In Thousands)

Investments of the Seattle City Employees’ Retirement System are accounted for in the Employees’ Retirement Fund, a CCC fiduciary fund which is not included in the Citywide financial statements because its resources belong to the retirement and Not system and do not support City programs. Investment Type AAA AA A BBB BB B Below Rated

Fixed Income The retirement fund investments are made in accordance with the Prudent Person Rule as defined by RCW 35.39.060. Mortgage-Backed Corporate Pass-Throughs $ 29,063 $ 762 $ 529 $ 407 $ 1,904 $ 2,425 $ 410 $ 8,226 Corporate Table 3-3 SCERS’ INVESTMENTS Bonds 1,965 3,282 24,422 19,941 3,774 1,945 3,860 1,700 Asset-Backed 2,838 1,107 2,484 1,061 976 460 - 16,226 (In Thousands) Private Placements 565 987 1,857 4,306 1,785 - 654 2,495 CDO's and CLO's - - - 244 - - - 2,275 Investments Amount Convertible Bonds - 492 758 767 553 440 21 628

U.S. Government Obligations $ 93,240 Total Portfolio $ 34,431 $ 6,630 $ 30,050 $ 26,726 $ 8,992 $ 5,270 $ 4,945 $ 31,550 Domestic Corporate Bonds 156,963 Domestic Stocks 482,488 International Stocks 225,343 Other Short-Term Investment Funds 6,542 Securities Lending 69,839 Table 3-6 SCERS’ ASSET ALLOCATION Mezzanine Debt 123,114 Real Estate 216,701 Asset Class Actual Target Alternative/Venture Capital 163,165 Cash and Cash Equivalents 0.5 % 1.0 % Total $ 1,537,395 Equities Domestic 32.8 38.0 International 15.3 20.0 Credit Risk. In accordance with its policy the Retirement Board provides its investment managers with a set of investment Alternative 11.1 10.0 guidelines that specify eligible investments and applicable restrictions necessary for risk control. Managers do not have Debt authority to depart from those guidelines. Bonds 17.1 14.0 Mezzanine 8.4 5.0 Real Estate 14.8 12.0 SCERS’ fixed income portfolio is primarily managed by three external money management firms. SCERS’ investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from interest Total 100. 0 % 100.% 0 rates.

81 82 Notes to Financial Statements The City of Seattle

Concentration of Credit Risk. The Investment Committee reviews its portfolio holdings quarterly to ensure compliance with REVERSE REPURCHASE AGREEMENTS the specified targets. Regular systematic rebalancing of the portfolio back to the target percentages are undertaken to ensure compliance with the specified targets. In line with its policy, SCERS does not have any investments in any issuer that represent more than five percent of SCERS’ net assets, except for investments in U.S. government obligations or U.S. RCW 35.39.030 and City investment policy allow the investment of City moneys in excess of current City needs in reverse government agency securities. The Retirement Board provides its investment managers with a set of investment guidelines repurchase agreements. However, the City does not engage itself in this type of investment strategy. that specify eligible investments, minimum diversification standards, and applicable restrictions necessary for diversification. Managers do not have authority to depart from those guidelines. Portfolio rebalancing was not performed in the fourth quarter of 2008 because of the overall volatility in the stock market with hindrance to liquidity not seen since the early 1920’s. (4) RECEIVABLES AND INTERFUND TRANSACTIONS Custodial Credit Risk. SCERS mitigates custodial credit risk by having its investment securities held by SCERS’ custodian and registered in SCERS’ name. Table 4-1 TAX REVENUES AND RECEIVABLES Foreign Currency Risk. Foreign currency risk is the risk that changes in exchange rates that will adversely impact the fair (In Thousands) market value of an investment. SCERS’ currency risk exposure or exchange rate risk primarily resides within the international equity holdings. SCERS’ investment managers maintain adequately diversified portfolios to limit currency December 31 December 31 security risk. Per SCERS’ policy, individual manager guidelines include the ranges of acceptable exposure. 2008 2008 Revenues Receivables

SECURITIES LENDING TRANSACTIONS Property Taxes $ 368,515 $ 15,203 General Business and Occupation Taxes 330,369 51,232

The City cash pool and the Seattle City Employees’ Retirement System are allowed to engage in securities lending Totals $ 698,884 $ 66,435 transactions similar to that instituted by the Washington State Treasurer’s Office and other municipal corporations in the State of Washington.

Under the authority of RCW 41.28.005 and the SMC 4.36.130, the Seattle City Employees’ Retirement System Board of TAXING POWERS AND LIMITATIONS Administration adopted investment policies that define eligible investments, which include securities lending transactions whereby securities are loaned for the purpose of generating additional income to SCERS. Gross income from securities State law limits the regular property tax rate for general City operations to $3.60 per $1,000 of assessed value. This includes lending transactions of SCERS as well as the various fees paid to the institution that oversees the lending activity is reported $3.375 for general municipal purposes and an additional $0.225 for the Firemen's Pension Fund and for general municipal in the fund’s operating statements. Assets and liabilities include the value of the collateral that is being held. purposes under conditions spelled out in state law. From 1997 through 2001 state law limited the annual growth in the City's regular property tax levy to the lesser of 106 percent or the annual rate of inflation. The passage of Initiative 747 in The market value of the required collateral must meet or exceed 102 percent of the market value of the securities loaned, November 2001 reduced the 106 percent to 101 percent. In early November 2007 the State Supreme Court upheld a lower providing a margin against a decline in the market value of the collateral. There are no restrictions on the amount of court ruling that Initiative 747 was unconstitutional. This decision would have returned the growth limit factor to securities that may be loaned. The contractual agreement with the SCERS’ custodian provides indemnification in the event 106 percent. On November 29, 2007, the legislature, in special session, passed and the governor signed into law language the borrower fails to return the securities lent or fails to pay SCERS’ income distribution by the securities’ issuers while the identical to that of Initiative 747. Thus, the limit factor remains 101 percent. The growth limit does not count tax revenues securities are on loan. Cash and U.S. government securities were received as collateral for these loans. from new construction or property remodeled within the last year. With simple-majority voter approval, the City can levy additional property taxes above the 101 percent annual growth limit, as long as the City’s regular levy rate per $1,000 of assessed value does not exceed the $3.60 limit. Excess tax levies for capital purposes require a 60-percent approval by SCERS invests cash collateral received; accordingly, any investment made with cash collateral is reported as an asset. A voters and do not fall under either of the limits. The City levied $1.70 per $1,000 for general operations and Firemen's corresponding liability is recorded as SCERS must return the cash collateral to the borrower upon the expiration of the loan. Pension Fund in 2008. In addition, the levy included $1.07 per $1,000 of assessed value for debt service and other voter- In 2008 SCERS experienced a default on a cash collateral purchase as a result of the Lehman Brothers bankruptcy. SCERS approved levies. The total 2008 levy was $2.77 per $1,000 of assessed value. Not included in this total is the levy for is working with the custodian through the bankruptcy process. The defaulted dollar value of the asset is de minimis to the Emergency Medical Services, which was renewed by voters at election in November 2007 at $0.30 per $1,000 of assessed overall portfolio value. Additionally, as a result of the 2008 credit crisis, in the fourth quarter of 2008, the custodian was value. instructed not to exceed $100 million dollars of collateralized obligations. Property taxes are levied by the County Assessor and collected by the County Finance Director. Assessments are based on 100 percent of true and fair-market value. They are levied and become a lien on the first day of the levy year. They may be Table 3-7 SCERS’ SECURITIES LENT AND COLLATERAL paid in two equal installments if the total amount exceeds $30. The first half is due on April 30, or else the total amount (In Thousands) becomes delinquent May 1. The balance is due October 31, becoming delinquent November 1. Delinquent taxes bear interest at the rate of one percent per month until paid and are subject to additional penalties of three percent and another 2008 2007 eight percent on the total unpaid delinquent balance on June 1 and December 1, respectively. Foreclosure action is Fair Values of Fair Values of commenced on properties when taxes are delinquent for three years. Type of Securities Lent Securities Lent Collateral Securities Lent Collateral

U.S. Government and Agencies $ 11,359 $ 11,692 $ 19,437 $ 19,634 INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS U.S. Corporate Fixed Income 9,809 10,043 11,005 11,363 U.S. Equities 53,017 53,659 69,874 72,326 The City reports interfund balances between funds. The interfund balances are presented in the balance sheets for Total Securities Lent $ 74,185 $ 75,394 $ 100,316 $ 103,323 governmental funds and statements of net assets for proprietary funds.

Collateral 2008 2007 The following table shows the current interfund balances at December 31, 2008, as reported in the fund financial statements.

U.S. Corporate Obligations $ 22,501 $ 27,501 Bank Obligations 11,000 17,998 Repurchase Agreements 8,428 470 Asset-Backed Securities 9,466 14,359 Certificates of Deposit 23,999 42,995

Total Collateral $ 75,394 $ 103,323

83 84 Notes to Financial Statements The City of Seattle

Table 4-2 DUE FROM AND TO OTHER FUNDS Table 4-2 DUE FROM AND TO OTHER FUNDS (continued) (In Thousands) (In Thousands) Receivable Fund Payable Fund(s) Amount Receivable Fund Payable Fund(s) Amount Nonmajor Governmental Drainage and Wastewater $ 351 General Drainage and Wastewater $ 2,341 Nonmajor Enterprise 271 Nonmajor Enterprise 777 General 1,332 Nonmajor Governmental 4,388 Nonmajor Governmental 2,116 Internal Service 1,832 Internal Service 545 Transportation 782 Low-Income Housing 2,153 Light 2,949 Transportation 341 Water 1,565 Light 1,073 Water 211 Total General Fund 14,634 Total Nonmajor Governmental Funds 8,393 Transportation Drainage and Wastewater 156 Nonmajor Enterprise 121 Nonmajor Enterprise Drainage and Wastewater 396 General 1,840 Nonmajor Enterprise 1 Nonmajor Governmental 7,771 General 55 Internal Service 32 Nonmajor Governmental 18 Light 1,189 Internal Service 3 Water 418 Transportation 11 Light 287 Total Transportation 11,527 Water 247

Light Drainage and Wastewater 79 Total Nonmajor Enterprise Funds 1,018 Nonmajor Enterprise 38 General 185 Internal Service Drainage and Wastewater 120 Nonmajor Governmental 6 Nonmajor Enterprise 161 Internal Service 87 General 2,060 Transportation 20 Nonmajor Governmental 1,138 Water 61 Internal Service 164 Light 914 Total Light Fund 476 Transportation 1,047 Water 806 Water Drainage and Wastewater 224 Nonmajor Enterprise 167 Total Internal Service Funds 6,410 General 3 Transportation 37 Grand Total $ 44,666 Light 225

Total Water Fund 656

Low-Income Housing Nonmajor Governmental 2 The balances in Table 4-2 resulted from the time lag between the dates that (1) interfund goods and services were provided Total Low-Income Housing 2 or reimbursable expenditures occurred, (2) transactions were recorded in the accounting system, and (3) payments between Fiduciary Drainage and Wastewater 12 funds were made. Nonmajor Enterprise 9 General 64 Table 4-3 INTERFUND TRANSFERS Nonmajor Governmental 61 Internal Service 3 (In Thousands) Transportation 24 Light 22 Transfers Out Water 19 Nonmajor Total Fiduciary 214 Transfers In General Governmental Internal Service Transportation Total

Drainage and Wastewater Nonmajor Enterprise 72 General Fund $ - $ 3,440 $ 4,000 $ - $ 7,440 General 626 Low-Income Housing 2,074 - - - 2,074 Nonmajor Governmental 4 Nonmajor Enterprise 10,803 - - - 10,803 Internal Service 12 Nonmajor Governmental 187,191 36,740 24,616 5,344 253,891 Transportation 83 Transportation 63,128 23,545 - - 86,673 Light 504 Water 35 Total Transfers $ 263,196 $ 63,725 $ 28,616 $ 5,344 $ 360,881

Total Drainage and Wastewater Fund 1,336 Transfers are used to (1) move revenues from the fund wherein the statute or budget requires them to be collected to the fund wherein the statute or budget requires them to be expended and (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.

85 86 Notes to Financial Statements The City of Seattle

(5) CAPITAL ASSETS Table 5-2 DEPRECIATION EXPENSE BY FUNCTION (In Thousands) Table 5-1 CHANGES IN CAPITAL ASSETS (In Thousands) GOVERNMENTAL ACTIVITIES General Government $ 21,152 Restated Public Safety 4,600 Balance Balance Transportation 33,897 January 1 Additions Deletions December 31 Economic Environment 7 Culture and Recreation 31,957 a GOVERNMENTAL ACTIVITIES Subtotal 91,613

CAPITAL ASSETS NOT BEING DEPRECIATED Capital assets held by internal service funds are charged to the various functions based on their usage of the assets 15,226 Land $ 415,811 $ 20,312 $ - $ 436,123 Construction in Progress 228,130 170,417 222,557 175,990 Total Governmental Activities $ 106,839 Total Capital Assets Not Being Depreciated 643,941 190,729 222,557 612,113 BUSINESS-TYPE ACTIVITIES CAPITAL ASSETS BEING DEPRECIATED Light $ 80,889 Buildings and Improvements 1,780,249 158,788 - 1,939,037 Water 37,743 Machinery and Equipment 247,000 27,640 15,035 259,605 Solid Waste 4,960 Infrastructure 1,051,031 75,285 - 1,126,316 Drainage and Wastewater 15,384 Other Capital Assets 11,933 656 - 12,589 Planning and Development 1,492 Parking Garage 2,112 Total Capital Assets Being Depreciated 3,090,213 262,369 15,035 3,337,547 Total Business-Type Activities $ 142,580 Accumulated Depreciation

Buildings and Improvements 403,495 44,685 - 448,180 Machinery and Equipment 121,917 28,520 13,338 137,099 Infrastructure 463,575 33,478 - 497,053 Other Capital Assets 972 157 - 1,129 (6) COMPENSATED ABSENCES Total Accumulated Depreciation 989,959 106,840 13,338 1,083,461 The following discussion on the general liabilities of the City and the tables for the other City funds present the accrued Total Capital Assets Being Depreciated, Net 2,100,254 155,529 1,697 2,254,086 compensated absences at the end of 2008 and 2007. The tables show the accrued liabilities by group between governmental Governmental Activities Capital Assets, Net $ 2,744,195 $ 346,258 $ 224,254 $ 2,866,199 and business-type activities, and pension trust funds, and further by type of funds, as applicable.

BUSINESS-TYPE ACTIVITIES GOVERNMENTAL ACTIVITIES CAPITAL ASSETS NOT BEING DEPRECIATED Governmental Funds Land $ 99,323 $ 1,979 $ 502 $ 100,800 Unpaid compensated absences associated with governmental fund operations of $70.0 million and $66.7 million at Construction in Progress 273,533 303,355 280,294 296,594 December 31, 2008 and 2007, respectively, have been recorded in the government-wide financial statements. These Total Capital Assets Not Being Depreciated 372,856 305,334 280,796 397,394 amounts include unpaid holiday, compensatory, merit, and furlough time of $14.4 million and $14.9 million at the end of 2008 and 2007, respectively; accumulated unpaid vacation pay of $45.7 million and $42.2 million at the end of 2008 and CAPITAL ASSETS BEING DEPRECIATED 2007, respectively; and the balance for sick leave (estimated based on the termination method) of $9.9 million and Plant in Service, Excluding Land 4,645,368 296,322 17,562 4,924,128 $9.7 million at December 31, 2008 and 2007, respectfully. Buildings 60,131 - - 60,131 Machinery and Equipment 14,439 721 - 15,160 Internal Service Funds Other Capital Assets 20,537 286 51 20,772

Total Capital Assets Being Depreciated 4,740,475 297,329 17,613 5,020,191 Table 6-1 COMPENSATED ABSENCES IN INTERNAL SERVICE FUNDS

Accumulated Depreciation (In Thousands) Plant in Service, Excluding Land 1,788,630 138,963 20,588 1,907,005 2008 2007 Buildings 18,039 2,004 - 20,043 Machinery and Equipment 6,271 1,599 - 7,870 Fleets and Facilities $ 1,817 $ 1,731 Other Capital Assets 2,605 12 - 2,617 Information Technology 1,633 1,525

Total Accumulated Depreciation 1,815,545 142,578 20,588 1,937,535 Totals $ 3,450 $ 3,256

Total Capital Assets Being Depreciated, Net 2,924,930 154,751 (2,975) 3,082,656

Business-Type Activities Capital Assets, Net $ 3,297,786 $ 460,085 $ 277,821 $ 3,480,050

a The capital assets for governmental activities include the capital assets of the internal service funds. Schedules H-1, H-2, and H-3 provide additional information on the governmental funds capital assets.

87 88 Notes to Financial Statements The City of Seattle

BUSINESS-TYPE ACTIVITIES lease term. Seattle Center paid rent, including property taxes on the lease property, in the amount of approximately $293,290 and $283,099 in 2008 and 2007, respectively, on the lease. Rents are paid as they become due and payable. Enterprise Funds Minimum payments under the leases are: Table 6-2 COMPENSATED ABSENCES IN ENTERPRISE FUNDS

(In Thousands) Table 7-1 OPERATING LEASE COMMITMENTS 2008 2007 GOVERNMENTAL ACTIVITIES Light $ 13,663 $ 12,566 (In Thousands) Water 4,565 4,279 Drainage and Wastewater 3,519 3,299 Solid Waste 1,427 1,337 Minimum Lease Payments Planning and Development 2,719 2,495 Year Ending Fleets and Seattle December 31 Facilities Center Total Totals $ 25,893 $ 23,976 2009 $ 3,804 $ 286 $ 4,090 2010 3,395 169 3,564 2011 2,808 - 2,808 2012 2,544 - 2,544 PENSION TRUST FUNDS 2013 2,262 - 2,262 2014 - 2016 2,618 - 2,618

Table 6-3 COMPENSATED ABSENCES IN PENSION TRUST FUNDS Total $ 17,431 $ 455 $ 17,886 (In Thousands) 2008 2007 Business-Type Activities Employees' Retirement $ 80 $ 62 Firemen's Pension 65 33 In December 1994 the City entered into an agreement on behalf of the Seattle City Light Department for a ten-year lease of Police Relief and Pension 62 75 office facilities in downtown Seattle commencing February 1, 1996. In early 1996 the City purchased the building in which Totals $ 207 $ 170 these facilities are located, thus becoming the Department’s lessor. This lease extended through December 2006. Beginning in 2007 the Department made monthly lease payments to the City through the central cost allocation process, similar to all other payments for tenancy of the City property and through the budget process. The Department also leases office equipment and smaller facilities for various purposes through long-term operating lease agreements. Expense under Compensated absences in governmental activities and business-type activities are presented in the aggregate in Note 8, all leases totaled $0.4 million and $6.9 million in 2008 and 2007, respectively. Long-Term Debt, Table 8-9, which also shows the amount estimated to be due within the year. The Seattle Public Utilities has non-cancelable operating lease commitments for real and personal property for its three funds: Water Fund, Drainage and Wastewater Fund, and Solid Waste Fund. The minimum payments made respectively in 2008 and 2007 were: $628,449 and $612,443 for the Water Fund; $100,528 and $98,233 for the Drainage and Wastewater (7) LEASES Fund, and $158,051 and $151,456 for the Solid Waste Fund. Rents are paid as they become due and payable.

CAPITAL LEASES Minimum payments under the leases are:

The City has no capital leases as of December 31, 2008. Table 7-2 OPERATING LEASE COMMITMENTS OPERATING LEASES BUSINESS-TYPE ACTIVITIES (In Thousands) Governmental Activities Minimum Payments The City, through its Fleets and Facilities Department, manages buildings and facilities that are owned by the City and has Year Ending City Drainage & Solid operating lease commitments on real property owned by private entities. Many lease commitments on private properties are December 31 Light Water Wastewater Waste Total for a term of five years or longer and may be renewed as required by the City tenant departments. The lease agreements show a periodic schedule of rental amounts. Fleets and Facilities paid rentals of approximately $3.5 million and 2009 $ 174 $ 449 $ 103 $ 165 $ 891 2010 10 363 105 171 649 $3.2 million in 2008 and 2007, respectively, on the lease commitments. There are no projected rent increases apart from 2011 4 360 103 168 635 lease agreements entered into by the City. 2012 1 356 100 164 621 2013 - 252 65 170 487 In addition, Seattle Center leases a building for office space and workshop on a type of lease called a “triple net lease” for its 2014 - 2016 - 693 174 513 1,380 Technical Facilities Management. The lease agreement commenced on July 17, 2000, and expires on July 30, 2010, Tot al $ 189 $ 2,473 $ 650 $ 1,351 $ 4,663 requiring a fixed rent of $18,500 per month subject to increases on each July 1 beginning in 2001 and every year thereafter by the percentage of change, if any, in the Consumer Price Index (CPI) for All Urban Consumers, United States Average for All Items (1982 - 84 = 100) published by the Bureau of Labor Statistics, United States Department of Labor CPI from the CPI last published in the preceding year, but not to exceed five percent for any lease year. If there is a decline in the CPI, LEASE REVENUES - GOVERNMENTAL ACTIVITIES the fixed rent during the succeeding year will be equal to the fixed rent during the immediate preceding year. All other amounts required by the landlord to be paid by Seattle Center on the lease shall constitute additional rent. On a triple net The Fleets and Facilities Department collects occupancy charges from the various tenants occupying real property owned or lease Seattle Center will pay all impositions on the lease, insurance premiums, utilities, taxes, operating expenses, leased by the City. These tenants include other City departments, other government offices, social service agencies, and maintenance charges, repair costs, and other charges, costs, and expenses which arise or may be contemplated during the private businesses. Social service agencies frequently pay occupancy charges at reduced rates in consideration of offsetting 89 90 Notes to Financial Statements The City of Seattle

benefits accruing to the City as a result of the services they provide to the public. Rental revenues derived from these The following table presents the individual general obligation bonds outstanding as of December 31, 2008, and other activities are accounted for in the Fleets and Facilities Fund, an internal service fund, and are shown in the following table. relevant information on each outstanding bond issue.

Table 7-3 MAJOR SOURCES OF RENTAL INCOME ON REAL PROPERTY MANAGED BY Table 8-1 GENERAL OBLIGATION BONDS FLEETS AND FACILITIES (In Thousands) (In Millions) Effective Bonds Issuance Maturity Interest Bond Redemptions Outstanding 2008 2007 a Name and Purpose of Issue Date Date Rate Issuance 2008 To Date December 31 Non-City Property Occupied by City Departments $ 3.6 $ 3.3 City-Owned Property Occupied by City Departments 55.9 54.6 LIMITED TAX GENERAL OBLIGATION City-Owned Property Leased to Non-City Tenants 2.9 3.1 (LTGO) BONDS - NON-VOTED

Total $ 62. 4 $ 61. 0 Various Purpose - Key Tower, Police Support b Facility, 1996, Series C 08/28/96 01/15/20-26 2.750 $ 5,595 $ 5,595 $ 5,595 $ - Various Purpose - Key Tower, Police Support b Facility, 1996, Series D 10/06/99 01/15/23-24 1.500 51,925 51,925 51,925 - Refunding - Various LTGO Bonds, 1998, Series B 03/17/98 09/01/98-12 4.493 43,710 2,700 33,300 10,410 c Additionally, in 2008 the SeaPark Garage and the Seattle Municipal Tower Building generated $3.2 million total parking Deferred Interest Parking Garage, 1998, Series E 11/12/98 12/15/01-14 4.714 13,042 1,178 6,148 6,894 revenues, which were recorded in the Fleets and Facilities Fund. Various Purpose - Civic Center, Galer St, 1999, Series B 10/19/99 12/01/00-28 5.677 85,500 3,030 82,305 3,195 Various Purpose - Civic Center, South Police Also, in 2008 the City recognized $6.5 million in parking revenues in the Downtown Parking Garage Fund, an enterprise Precincts, Training Facilities, Information fund, from the operation of the garage at Pacific Place. Technology, Etc., 2001 08/21/01 08/01/02-31 4.908 129,760 4,560 33,615 96,145 Improvement (Various) and Refunding, 2002 01/30/02 07/01/02-32 4.778 125,510 5,120 49,780 75,730 Improvement (Various) and Refunding, 2002, Series B 09/26/02 10/01/03-14 3.127 64,560 28,365 64,560 - Various Purpose and Refunding, 2003 02/26/03 08/01/04-23 3.469 60,855 8,350 50,100 10,755 Refunding, 2004 05/24/04 07/01/04-20 4.118 91,805 5,095 12,955 78,850 (8) LONG-TERM DEBT Various Purpose and Refunding, 2005 03/23/05 08/01/05-28 4.167 129,540 6,770 26,545 102,995 Various Purpose and Refunding, 2006 04/26/06 03/01/07-26 4.254 24,905 1,530 2,990 21,915 Various Purpose and Refunding, 2007 05/02/07 10/01/07-28 4.251 95,550 1,845 3,400 92,150 GENERAL OBLIGATION BONDS Various Purpose and Refunding, 2008 07/02/08 12/01/08-28 4.398 139,830 - - 139,830 Total Limited Tax General Obligation Bonds 1,062,087 126,063 423,218 638,869 The City issues general obligation bonds to provide funding for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business-type activities. General obligation bonds are UNLIMITED TAX GENERAL direct obligations and pledge the full faith and credit of the City. The City issues two types of general obligation bonds, OBLIGATION (UTGO) BONDS - VOTED limited tax general obligation bonds (LTGO) and unlimited tax general obligation bonds (UTGO). Fire Station/Shops, 1968, Series 1 10/01/68 10/01/70-08 4.726 1,700 90 1,700 - Sewer Improvement, 1968, Series 1 10/01/68 10/01/70-08 4.726 7,000 370 7,000 - Refunding-Various UTGO Bonds, 1998, Series A 03/17/98 09/01/98-17 4.470 53,865 4,215 43,355 10,510 The original amount of general obligation bonds issued for bonds outstanding at the end of 2007 was $1.350 billion. The Library Facilities, 1999, Series A 07/01/99 12/01/00-18 5.135 100,000 4,905 94,870 5,130 amount of bonds outstanding at December 31, 2007, was $785.7 million. The following paragraphs discuss the general Improvement (Library Facilities) and obligation bonds issued and defeased during 2008. Refunding, 2002 09/26/02 12/01/03-21 3.892 117,025 4,230 45,100 71,925 Refunding, 2007 05/02/07 12/01/07-18 3.886 60,870 - 1,620 59,250 On July 2, 2008, the City issued the $139.8 million LTGO Improvement and Refunding Bonds, 2008, with interest rates of 5.0 percent, that mature serially from December 1, 2009, through December 1, 2028. The proceeds of the LTGO bonds are Total Unlimited Tax General Obligation Bonds 340,460 13,810 193,645 146,815 used to pay all or part of the costs of construction and acquisition of various City capital projects, including the Total General Obligation Bonds $ 1,402,547 $ 139,873 $ 616,863 $ 785,684 Spokane/Mercer/Lander Bridging the Gaps (BTG), King Street Station, Bridge Seismic, Bridge Rehabilitation, Paystations, Fire Station Projects, South Lake Union Projects, and to totally refund $57.2 million of the City’s 1996 LTGO Variable Rate C and D bonds. The proceeds of $56.9 million from the refunding bonds were used to pay on the bond issue date these variable-rate bonds. An additional $0.6 million was paid by the City from its own resources to completely pay off the a bonds. Further discussion on the refunding is shown in the Advance and Current Refundings section of this note. Includes all bonds that matured to date and all called, refunded, and defeased bonds on issues that have outstanding balances at the beginning of the year. b Variable-rate bonds – interest rates in effect July 1, 2008. The bonds were refunded by tax-exempt bonds on July 2, 2008. On December 17, 2008, the City defeased $31.6 million of the remaining Key Arena outstanding LTGO bonds issued in c 2002, 2003, and 2005 and $0.4 million of the Mc Caw Hall outstanding portion of the 2003 LTGO bonds. The City placed The accreted value of the outstanding bonds as of December 31, 2008, is $11,150,756. The difference is also recognized as long-term accrued interest in the its own resources of $34.6 million, of which $0.4 million came from the 1999 Seattle Center Redevelopment Parks Downtown Parking Garage Fund, an enterprise fund, where the bond outstanding is also recorded. Community Center Fund and $34.2 million came from the Key Arena Settlement Proceeds Fund, into an irrevocable trust to provide for future debt service payments on the bonds. Table 8-10, Advance Refunding and Current Refundings section of The requirements to amortize the general obligation bonds as of December 31, 2008, are presented in the following table. this note, includes information on the defeased bonds. Debt service for the LTGO bonds is met by transfers generally from the General Fund and certain special revenue funds and by reimbursements from proprietary funds of the City. Debt service for the UTGO bonds is covered by property tax levies that authorized the bond issues and were approved by at least 60 percent of the voters in elections in which the number of The City had no short-term general obligation debt at the end of 2008. voters exceeded 40 percent of the voters in the most recent election preceding the election to vote on the bond issue.

91 92 Notes to Financial Statements The City of Seattle

Table 8-2 ANNUAL DEBT SERVICE REQUIREMENTS TO MATURITY NOTES AND CONTRACTS PAYABLE – GOVERNMENTAL ACTIVITIES GENERAL OBLIGATION BONDS The Seattle Department of Transportation (SDOT) has outstanding notes drawn in several years from the Washington (In Thousands) State’s Public Works Trust Loan program administered by the Washington State Public Works Board, a division of the Department of Community, Trade and Economic Development. The notes were drawn at varying low annual interest rates Year Ending Governmental Activities Business-Type Activities ranging from 0.5 to 3.0 percent. The proceeds of the loan support City road and bridge improvements. There were no December 31 Principal Interest Principal Interest Total amounts drawn in 2008 and the City paid $2.2 million and $0.4 million in principal and interest, respectively, in 2008. The 2009 $ 49,645 $ 34,514 $ 1,205 $ 3,672 $ 89,036 outstanding balance on the notes at December 31, 2008, is $19.7 million. The following table presents the annual debt 2010 47,335 32,186 1,226 3,806 84,553 service requirements to maturity on the notes as of the end of 2008. 2011 47,405 29,878 1,247 3,940 82,470 2012 47,865 27,578 1,257 4,094 80,794 2013 45,855 25,321 1,262 4,259 76,697 2014 - 2018 206,360 113,999 15,727 14,082 350,168 Table 8-5 ANNUAL DEBT SERVICE REQUIREMENTS TO MATURITY 2019 - 2023 166,110 48,927 26,625 8,222 249,884 2024 - 2028 86,405 17,403 15,975 1,455 121,238 SEATTLE DEPARTMENT OF TRANSPORTATION 2029 - 2032 24,180 2,793 - - 26,973 PUBLIC WORKS TRUST LOAN NOTES Tot al $ 721,160 $ 332,599 $ 64,524 $ 43,530 $ 1,161,813 (In Thousands)

Year Ending SPECIAL ASSESSMENTS BONDS WITH GOVERNMENTAL COMMITMENT December 31 Principal Interest Total The bonds are special fund obligations of the City, the debt service of which will be paid from collections from related local 2009 $ 2,134 $ 354 $ 2,488 2010 2,049 312 2,361 improvement district (LID) assessments levied against the benefited properties located within the boundaries of the LID. 2011 1,945 270 2,215 Though guaranteed by the City’s LID Guaranty Fund, this type of special assessment bonds does not constitute an obligation 2012 1,847 231 2,078 or any political subdivision thereof other than the City, and neither the full faith and credit nor the taxing power of the City 2013 1,723 195 1,918 is pledged to the payment of the bonds. The amount of special assessment bonds outstanding at the end of 2008 was 2014 - 2018 6,620 543 7,163 $19.2 million. There were no new bond issues in 2008. 2019 - 2023 3,420 108 3,528 Total $ 19,738 $ 2,013 $ 21,751 The following table shows more detail on the outstanding issue.

Table 8-3 SPECIAL ASSESSMENT BONDS WITH GOVERNMENTAL COMMITMENT REVENUE BONDS (In Thousands) The City also issues revenue bonds to provide financing for the capital programs of the four utilities of the City, namely, Effective Bonds City Light and the utilities grouped under Seattle Public Utilities, which are Water, Drainage and Wastewater, and Solid Issuance Maturity Interest Bond Redemptions Outstanding Waste. The City does not pledge its full faith and credit for the payment of debt service on revenue bonds. Payment of debt Name of Issue Date Date Rate Issuance 2008 To Date December 31 service on the bonds issued for each utility is derived solely from the revenues generated by the related utility. The original amount of revenue bonds and anticipation notes issued for bonds outstanding at the end of 2007 was approximately Local Improvement District No. 6750 Bonds, 2006 09/13/06 12/15/07-24 4.102 $ 21,925 $ 1,340 $ 2,720 $ 19,205 $3.506 billion. The total outstanding amount at December 31, 2007, was $2.601 billion. During 2008 an additional $547.1 million of revenue and refunding bonds were issued as follows. The requirements to amortize the special assessments with governmental commitment as of December 31, 2008, are shown below. City Light On December 30, 2008, the City issued $257.4 million in Municipal Light and Power Improvement and Refunding Revenue Table 8-4 ANNUAL DEBT SERVICE REQUIREMENTS TO MATURITY Bonds that bear interest at rates ranging from 4.0 percent to 6.0 percent and mature serially from April 1, 2009, to September 1, 2029. Proceeds in the amount of $187.2 million in new money are to be used to finance certain capital SPECIAL ASSESSMENT BONDS WITH GOVERNMENTAL COMMITMENT improvements and conservation programs and to refund certain of the City’s outstanding Municipal Light and Power bonds. The remaining $70.2 million were used to fully refund the existing Municipal Light and Power variable rate bond series (In Thousands) 1990, 1990A, 1991B, 1993, and 1996, totaling $72.0 million, with a call date of early February 2009. The refunding proceeds were held in the restricted debt service reserve account in the Light Fund. Year Ending December 31 Principal Interest Total Water 2009 $ 940 $ 35 $ 975 2010 1,220 46 1,266 2011 1,220 46 1,266 On December 15, 2008, the City issued $205.1 million of Water System Revenue Improvement and Refunding Bonds. 2012 1,220 47 1,267 Principal payments on the bonds are due annually beginning in 2009 and ending in 2038 at interest rates ranging from 2013 1,220 47 1,267 4.0 percent to 5.25 percent. A portion of the proceeds from the issuance was set aside in Water Fund’s restricted debt service 2014 - 2018 6,075 244 6,319 2019 - 2023 6,095 256 6,351 reserve account to be used on February 4, 2009, to refund all $93.0 million of the 1995 and 2002 Adjustable Rate Water 2024 1,215 52 1,267 Revenue Bonds. The remaining proceeds will be used for certain capital improvements projects and conservation programs of the Fund. Total $ 19,205 $ 773 $ 19,978 Drainage and Waste Water

On April 16, 2008, the City issued $84.6 million of Drainage and Wastewater Revenue Bonds, with varying annual principal payments due beginning in 2009 and ending in 2038, at interest rates ranging from 4.0 percent to 5.0 percent. Proceeds of 93 94 Notes to Financial Statements The City of Seattle

the revenue bonds are being used to finance certain capital improvements and additions to the drainage and wastewater The requirements to amortize the revenue bonds of December 31, 2008, are presented below. system.

The business-type funds had no short-term debt at December 31, 2008. Table 8-7 ANNUAL DEBT SERVICE REQUIREMENTS TO MATURITY REVENUE BONDS The following table presents the individual revenue bonds outstanding as of December 31, 2008, and other pertinent information on each outstanding bond issue. (In Thousands)

Table 8-6 REVENUE BONDS Year Ending Light Water Drainage and Wastewater Solid Waste December 31 Principal Interest Principal Interest Principal Interest Principal Interest Total (In Thousands) 2009 $ 80,620 $ 70,827 $ 121,495 $ 41,843 $ 9,785 $ 19,565 $ 6,535 $ 4,205 $ 354,875 Effective Bonds 2010 87,440 70,297 25,425 44,233 10,225 19,112 1,980 3,865 262,577 2011 87,020 66,302 26,565 43,078 10,685 18,666 2,075 3,773 258,164 Issuance Maturity Interest Bond Redemptions Outstanding a b 2012 88,120 62,576 28,820 41,802 11,150 18,201 2,185 3,667 256,521 Name and Purpose of Issue Date Dates Rates Issuance 2008 To Date December 31 2013 92,510 58,296 30,160 40,438 11,665 17,685 2,295 3,555 256,604 2014 - 2018 453,560 224,337 174,030 178,725 67,465 79,351 13,365 15,884 1,206,717 MUNICIPAL LIGHT AND 2019 - 2023 378,290 121,101 217,340 130,552 80,405 60,786 15,255 12,272 1,016,001 POWER (ML&P) BONDS 2024 - 2028 242,685 32,826 199,755 76,556 87,885 39,972 19,050 8,046 706,775 2029 - 2033 19,130 616 140,220 32,645 74,465 18,556 24,265 2,840 312,737 1990 Subordinate Lien 11/27/90 11/01/96-15 0.40-5.25 $ 25,000 $ 1,400 $ 12,400 $ 12,600 2034 - 2038 - - 61,670 6,862 38,305 4,268 - - 111,105 1991 Subordinate Lien, Series A 11/20/91 05/01/11-16 0.40-6.00 25,000 - - 25,000 1991 Subordinate Lien, Series B 11/20/91 05/01/98-11 0.40-6.00 20,000 2,500 13,000 7,000 1993 Subordinate Lien 11/17/93 11/01/99-18 0.40-3.42 22,000 1,100 9,200 12,800 Total $ 1,529,375 $ 707,178 $ 1,025,480 $ 636,734 $ 402,035 $ 296,162 $ 87,005 $ 58,107 $ 4,742,076 1996 Subordinate Lien 12/11/96 06/01/02-21 0.55-5.75 19,800 840 5,225 14,575 1997 Parity 12/30/97 07/01/03-22 5.131 30,000 1,155 6,225 23,775 1998 Parity, Series A, Refunding 01/27/98 07/01/98-20 4.884 104,650 4,590 22,260 82,390 1998 Parity, Series B 10/29/98 06/01/04-24 4.919 90,000 3,080 14,195 75,805 1999 Parity 10/27/99 10/01/06-24 5.960 158,000 8,000 152,500 5,500 2000 Parity 12/27/00 12/01/06-25 5.298 98,830 3,150 9,040 89,790 NOTES AND CONTRACTS PAYABLE – BUSINESS-TYPE ACTIVITIES 2001 Parity 03/29/01 03/01/04-26 5.082 503,700 16,290 39,430 464,270 2002 Parity, Refunding 12/04/02 12/01/03-14 3.470 87,735 10,230 48,745 38,990 2003 Parity, Refunding 08/20/03 11/01/04-28 3.517 251,850 11,875 92,880 158,970 Water 2004 Parity 12/23/04 08/01/05-29 4.159 284,855 6,250 24,320 260,535 2008 Parity 12/30/08 04/01/09-29 5.222 257,375 - - 257,375 During 1993 the Seattle Public Utilities (SPU), for its Water Fund, entered into an agreement to borrow up to $2.2 million Total Light Bonds 1,978,795 70,460 449,420 1,529,375 from the Washington State Department of Community, Trade, and Economic Development under its Public Works Trust MUNICIPAL WATER BONDS Loan program for the construction of certain capital improvements. Amounts borrowed under the agreement accrue interest 1995 Adjustable Rate 09/20/95 09/01/00-25 0.500 45,000 1,400 10,700 34,300 at 1.0 percent per annum and are to be repaid in 19 annual installments plus interest. 1998 Parity 07/04/98 10/01/99-27 5.110 80,000 1,955 16,125 63,875 1999 Parity 06/23/99 03/01/00-29 5.373 100,000 2,185 97,715 2,285 During 2008 the Fund borrowed $8.1 million from the Washington State Department of Community, Trade, and Economic 1999 Parity, Series B 10/23/99 07/01/01-29 5.912 110,000 2,360 107,525 2,475 2001 Parity 11/20/01 11/01/05-31 4.972 52,525 1,165 4,425 48,100 Development under its Public Works Trust Loan Program from the Drinking Water State Revolving Fund. Proceeds from 2002 Adjustable Rate, Series A 05/15/02 05/15/03-32 0.780 32,500 - 3,800 28,700 two loans were used to finance the Myrtle and Beacon reservoir projects. Beginning in 2008 amounts borrowed for the 2002 Adjustable Rate, Series B 05/15/02 05/15/03-32 0.850 32,500 - 2,500 30,000 Myrtle and Beacon reservoirs are repaid over a period of 17 and 18 years, respectively, and accrue interest at 1.5 percent per 2003 Parity, Refunding 05/12/03 09/01/03-33 4.083 271,320 7,450 61,150 210,170 annum. 2004 Parity 10/25/04 09/01/05-34 4.580 84,750 1,465 6,170 78,580 2005 Parity, Refunding 12/28/05 09/01/06-29 4.482 138,040 1,650 4,340 133,700 2006 Parity, Refunding 10/23/06 02/01/08-37 4.424 189,970 1,755 1,755 188,215 Amounts paid to the loan in 2008 totaled $555,293 and $7,000 in principal and interest, respectively. The combined 2008 Parity, Refunding 12/15/08 12/15/09-38 4.753 205,080 - - 205,080 outstanding balance of these two loans at December 31, 2008, amounts to approximately $8.2 million, the minimum debt Total Water Bonds 1,341,685 21,385 316,205 1,025,480 service requirements to maturity that is included in Table 8-8. MUNICIPAL DRAINAGE AND WASTEWATER BONDS Drainage and Wastewater 1998 Parity 05/15/98 11/01/98-18 5.122 24,170 575 5,170 19,000 1999 Parity 09/28/99 11/01/00-29 5.720 55,000 1,165 53,775 1,225 2001 Parity 06/22/01 11/01/02-31 5.260 60,680 1,235 7,765 52,915 SPU, for its Drainage and Wastewater Fund, drew $693,600 on a loan from the State of Washington Department of Ecology 2002 Refunding 12/17/02 07/01/03-32 4.751 78,550 1,900 9,705 68,845 in 2007. The loan agreement originated in 2005 and allows borrowings up to $2.7 million to support the construction of 2004 Parity 10/28/04 09/01/05-34 4.609 62,010 1,120 4,165 57,845 improvements of the High Point Natural Drainage Systems project. Amounts borrowed under the agreement accrue interest 2006 Refunding 11/01/06 02/01/07-37 4.180 121,765 2,075 4,205 117,560 at 1.5 percent per annum and are to be repaid in 20 annual installments. 2008 Parity 04/16/08 06/01/09-38 4.830 84,645 - - 84,645 Total Drainage and Wastewater Bonds 486,820 8,070 84,785 402,035 During 2006 the Utility began receiving draws on a loan from the Washington State Department of Community, Trade, and SOLID WASTE BONDS Economic Development under its Public Works Trust Loan Program for the construction of the South Park Flood Control 1999 Refunding 01/19/99 08/01/99-09 4.839 40,900 4,630 36,270 4,630 and Local Drainage Program. Amounts borrowed under the agreement accrue interest at 0.5 percent per annum and are to 1999 Parity, Series B 10/26/99 11/01/00-19 5.732 5,500 255 5,245 255 be repaid over 20 years. In 2008 the Fund withdrew $850,000 from this loan. 2007 Revenue & Refunding 12/12/07 02/01/08-33 4.505 82,175 1,650 55 82,120 Total Solid Waste Bonds 128,575 6,535 41,570 87,005 In 2008 the Fund began receiving draws on a loan in the amount of $5.2 million from the Washington State Department of Total Utility Revenue Bonds $ 3,935,875 $ 106,450 $ 891,980 $ 3,043,895 Ecology for construction and site improvements of the Thornton Creek Water Quality Channel. Amounts borrowed under this agreement accrue interest at 1.5 percent per annum and are to be repaid over 20 years beginning in June 2010. The Fund also received $185,000 from another existing Public Works Trust loan for the construction of the Thornton Creek a Natural Drainage Systems The ML&P subordinate lien bonds are variable rate bonds for which the life-to-date actual low and high rates are shown. The Municipal Water adjustable-rate bonds show the interest rate in effect at the end of 2008. Interest rates in effect at December 31, 2008, were used to calculate annual interest requirements for these obligations. All adjustable-rate revenue bonds were refunded on February 4, 2009. Total loans outstanding as of December 31, 2008, amount to $12.0 million. b Includes all bonds that matured to date and all called, refunded, and defeased bonds on issues that have outstanding balances at the beginning of the year.

95 96 Notes to Financial Statements The City of Seattle

In 2008 amounts paid from the Drainage and Water totaled $243,550 in principal and approximately $57,000 in interest for The following table shows the long-term liability activities during the year ended December 31, 2008. all of the loans.

a Table 8-8 ANNUAL DEBT SERVICE REQUIREMENTS TO MATURITY Table 8-9 CHANGES IN LONG-TERM LIABILITIES SEATTLE PUBLIC UTILITIES (In Thousands) PUBLIC WORKS TRUST LOAN AND OTHER NOTES Restated (In Thousands) Beginning Ending Due Within One Balance Additions Reductions Balance Year GOVERNMENTAL ACTIVITIES Year Ending Water Drainage and Wastewater December 31 Principal Interest Principal Interest Total Bonds Payable General Obligation Bonds $ 720,025 $ 139,830 $ 138,695 $ 721,160 $ 49,645 2009 $ 555 $ 120 $ 295 $ 59 $ 1,029 Add (Deduct) Deferred Amounts 2010 555 113 662 135 1,465 Issuance Premiums 16,542 7,545 1,863 22,224 - 2011 556 105 666 127 1,454 Issuance Discounts (2) - - (2) - 2012 555 97 671 119 1,442 On Refunding (3,016) - (1,574) (1,442) - Special Assessment Bonds with 2013 556 90 669 111 1,426 b 2014 - 2018 2,185 344 3,347 442 6,318 Governmental Commitment 20,545 - 1,340 19,205 940 2019 - 2023 2,185 180 3,445 259 6,069 Total Bonds Payable 754,094 147,375 140,324 761,145 50,585 2024 - 2028 1,087 29 2,099 81 3,296 Notes and Contracts 2029 - - 152 1 153 Capital Leases 3 - 3 - - Other Notes and Contracts 21,923 - 2,185 19,738 2,134 Total $ 8,234 $ 1,078 $ 12,006 $ 1,334 $ 22,652 Total Notes and Contracts 21,926 - 2,188 19,738 2,134 Compensated Absences 69,992 71,122 67,629 73,485 15,712 Claims Payable Workers' Compensation 17,843 8,004 6,295 19,552 6,614 General Liability 49,012 31,853 17,855 63,010 17,240 Health Care Claims 3,259 3,158 3,258 3,159 3,158 c Total Claims Payable 70,114 43,015 27,408 85,721 27,012 Arbitrage Rebate Liability 432 39 26 445 - Total Long-Term Liabilities from Governmental Activities $ 916,558 $ 261,551 $ 237,575 $ 940,534 $ 95,443 BUSINESS-TYPE ACTIVITIES Bonds Payable General Obligation Bonds $ 65,702 $ - $ 1,178 $ 64,524 $ 1,205 Revenue Bonds 2,601,400 547,100 104,605 3,043,895 218,435 Add (Deduct) Deferred Amounts Issuance Premiums 74,048 7,563 5,888 75,723 - Issuance Discounts (1,559) - (172) (1,387) - On Refunding (62,165) - (7,388) (54,777) - Total Bonds Payable 2,677,426 554,663 104,111 3,127,978 219,640 Accrued Interest - Deferred Interest Bonds 4,330 593 666 4,257 790 Notes and Contracts - Other 7,049 14,276 1,085 20,240 863 Compensated Absences 23,977 29,968 28,053 25,892 2,520 Claims Payable Workers' Compensation 6,627 3,554 2,723 7,458 2,523 General Liability 18,035 12,401 6,197 24,239 6,632 d, e Environmental Liability General Contamination Cleanup 27,237 14,874 7,410 34,701 10,431 c Total Claims Payable 51,899 30,829 16,330 66,398 19,586 Muckleshoot Liability 1,495 - 1,000 495 - Habitat Conservation Program Liability 13,547 - 3,940 9,607 5,453 Landfill Closure and Postclosure Costs 27,077 1,115 2,152 26,040 1,115 Purchased Power Obligation 4,749 - 4,749 - - Total Long-Term Liabilities from Business-Type Activities $ 2,811,549 $ 631,444 $ 162,086 $ 3,280,907 $ 249,967

a Some amounts may have rounding differences with Statements of Net Assets. b The Special Assessment Bonds carry neither premiums nor discounts. c See Note 14, Contingencies, for a discussion of risk management, environmental, and other matters. The table in Note 14 also includes information on workers’ compensation and health care. d Restated beginning balance is due to implementation of GASB 49. e See Note 9, Environmental Liabilities for detailed discussion. 97 98 Notes to Financial Statements The City of Seattle

The City’s internal service funds predominantly serve governmental funds. For this reason the above totals in the The following is a schedule of outstanding bonds that are either refunded or defeased. governmental activities include the long-term liabilities for these funds. At the end of the year compensated absences and claims payable of these funds amounted to approximately $3.4 million and $1.3 million, respectively, and are liquidated Table 8-10 REFUNDED/DEFEASED BONDS from each fund’s own resources. Notes and contracts (including public works trust loans), compensated absences, and workers’ compensation other than those pertaining to the internal service funds are liquidated using the respective (In Thousands) governmental funds of operating City departments, including those funded by the General Fund. General liability and health care claims relating to internal service funds are liquidated using the General Fund. Liabilities for compensated absences for Amount Trustee governmental activities in governmental funds that have department operating budgets, though they are reported as a general Effective Original Transferred Redemptions Defeased obligation of the City, are paid from these funds when these compensated absences are used by the employees or cashed out Issuance Maturity Interest Bond To To Date Outstanding by them at termination or retirement. Arbitrage rebate liabilities in governmental activities are paid as they become due and Name of Issue Date Date Rate Issuance Trustee 2008 December 31 usually come from available resources in governmental funds that received the related bond proceeds and investment GENERAL OBLIGATION BONDS earnings from the proceeds. Limited Tax (Non-Voted) Various Purpose - Key Tower, Police Support In addition to paying for debt service on the bond issues for business-type City operations, each business-type fund Facility, 1996, Series C 08/28/96 01/15/20-26 2.750 % $ 5,595 $ 5,595 $ 5,595 $ - liquidates its respective other long-term liabilities, with the exception of the Department of Planning and Development Various Purpose - Key Tower, Police Support (DPD) for general liability. The General Fund pays for DPD’s general liability, if any. Environmental liabilities of Facility, 1996, Series D 10/06/99 01/15/23-24 1.500 51,925 51,925 51,925 - Refunding - Various LTGO Bonds, business-type activity funds are paid respectively from the utility funds. Purchased power obligations are obligations of 1998, Series B, Defeased 9/26/05 03/17/98 09/01/98-12 4.493 43,710 620 235 385 City Light and therefore paid from the Light Fund. For further discussion on purchased power, see Note 13, Commitments. Parking Garage, 1998, Series F, Refunded 05/02/07 11/12/98 12/15/14-28 5.148 60,805 60,805 60,805 - Various Purpose - Civic Center, ADVANCE AND CURRENT REFUNDINGS Galer St, 1999, Series B, Refunded 3/23/05 10/19/99 12/01/00-28 5.677 85,500 49,865 - 49,865 Improvement (Various) and In order to lower interest costs the City refunded and defeased certain bonds. To do so, the City issued new refunding bonds Refunding, 2002, Defeased 9/26/05 01/30/02 07/01/02-32 4.778 125,510 8,470 1,685 6,785 to refund certain prior bond issues and also used its own resources to defease certain prior bond issues. City resources and Various Purpose and Refunding, 2002, Series B the proceeds of refunding bonds are placed in irrevocable trusts for the purchase of federal, state, and local government Defeased 12/17/08 09/26/02 10/01/03-14 3.127 64,560 24,730 - 24,730 securities to provide for all future debt service on the old bonds. As a result, the old bonds including those refunded are Various Purpose and Refunding, 2003, Defeased 4/4/07 02/26/03 08/01/04-23 3.469 60,855 2,715 285 2,430 considered defeased, and the corresponding liabilities are not included in the statement of net assets. The following Various Purpose and Refunding, 2003, paragraphs discuss the advance and current refundings that occurred in 2008. Defeased 8/30/07 3,180 145 3,035 Various Purpose and Refunding, 2003, Defeased 12/17/08 6,480 - 6,480 The refunding portion of the $139.8 million LTGO Improvement and Refunding Bonds, 2008, issued on July 2, 2008, in the Various Purpose and Refunding, 2005, amount of $54.9 million fully refunded the $57.5 million 1996 LTGO, Series C & D variable-rate bonds. The aggregate total Defeased 12/17/08 03/23/05 08/01/05-28 4.167 129,540 775 - 775 debt service on the refunding bonds requires a cash flow of $98.8 million including interest of $43.9 million. Unlimited Tax (Voted) The detail of the $32.0 million defeasance in 2008 of the 2002 series B, 2003, and 2005 LTGO bonds discussed earlier in Library Facilities, 1999, Series A, the note is also shown in Table 8-10 that follows. Refunded 05/02/07 07/01/99 12/01/00-18 5.135 100,000 59,205 - 59,205

REVENUE BONDS

Municipal Light and Power 1999 Parity 10/27/99 10/01/06-23 5.960 158,000 138,250 - 138,250

Municipal Water 1999 Parity 06/23/99 03/01/00-29 5.373 100,000 81,000 - 81,000 1999 Parity, Series B 10/23/99 07/01/01-29 5.912 110,000 91,360 - 91,360

Drainage and Wastewater 1999 Parity 09/28/99 11/01/00-29 5.720 55,000 45,205 - 45,205

Solid Waste 1999 Parity, Series B 10/26/99 11/01/00-19 5.732 5,500 3,415 - 3,415

Total Refunded/Defeased Bonds $ 1,156,500 $ 633,595 $ 120,675 $ 512,920

ARBITRAGE

Since 1995 the City has been reviewing arbitrage rebate liability on its outstanding tax-exempt bonds and certificates of participation under Section 148(f) of the Internal Revenue Code. For bonds that have reached their installment computation dates (bonds outstanding for five years initially and every five years thereafter until the last of the bond issue matures) the City paid no rebate in 2007 but paid approximately $26,000 arbitrage rebate in 2008 on the City’s general obligation bonds. The City paid no rebate in 2007 and in 2008, for the Municipal Light and Power, Water System, Drainage and Wastewater, and Solid Waste revenue bonds. There is approximately $445,000 estimated arbitrage liability recognized at the end of 2008 on the general obligation bonds. There is no estimated arbitrage liability at the end of 2008 on the revenue bonds.

99 100 Notes to Financial Statements The City of Seattle

The City is aggressively pursuing other third parties that may have contributed to the contamination of the sites noted above. (9) ENVIRONMENTAL LIABILITIES The City’s estimate for not-yet-realized recoveries from other parties for their share of remediation work that offset the City’s estimated environmental liability was $21.4 million and $5.5 million, at December 31, 2008 and 2007, respectively. Effective January 1, 2008, the City implemented GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations to account for environmental liabilities. The effect of this implementation was to restate net assets The changes in the provision for environmental liability, net of recovery (in thousands) at December 31, 2008 and 2007 are on the Statement of Net Assets as of January 1, 2007, restate the environmental liability as of December 31, 2007, and restate as follows: the Statement of Activities for 2007. The City’s beginning net assets for 2007 was decreased by $9.8 million. Total environmental liabilities were restated to $27.2 million at the end of 2007, an increase of $2.6 million. Change in net assets for 2007 was restated to $365.3 million, an increase of $7.3 million. Restated 2008 2007

Following is a brief description of the significant Superfund sites: Environmental Liability – Beginning of Year $ 27,234 $ 27,154 Payments or Amortization (7,407) (5,550) The Harbor Island Superfund Site. Harbor Island was designated as a federal Superfund site by the Environmental Incurred Environmental Liability 14,874 5,630 Protection Agency (EPA) in 1983. The City and other entities are sharing costs of investigating contamination in the East Waterway alongside Harbor Island. The City’s involvement stems from its sale of transformers to a company on Environmental Liability – End of Year $ 34,701 $ 27,234 Harbor Island, discharges from storm drains, and combined sewer outflows. In 2006 the EPA issued an Administrative Order on Consent (AOC) for a Supplemental Remedial Investigation and Feasibility Study (RI/FS). Subsequent to an agreement between the EPA, the Port of Seattle (Port), King County, and the City, the Port alone signed the order. Both the City and King County signed a Memorandum of Agreement with the Port to participate as cost share The provision for environmental liability (in thousands) included in current and noncurrent liability at December 31, 2008 partners in the work required by the EPA. No specific requirements for remediation by Potentially Responsible Parties and 2007, is as follows: (PRPs) have been made by the EPA as of the date of this note. Restated The Lower Duwamish Waterway Superfund Site. The site was designated as a federal Superfund site by the EPA in 2008 2007 2001 for contaminated sediments due to land ownership or use of property along the river, discharges from storm drains, and combined sewer outflows into the river. The City is one of four parties who signed an AOC with the EPA Claims Payable, Current $ 10,431 $ 5,589 and Washington State Department of Ecology (DOE) to conduct a RI/FS to prepare a site remedy. No specific Claims Payable, Noncurrent 24,270 21,645 requirements for remediation by PRPs have been made by the EPA as of the date of this note. For some specific early action sites, the City and other PRPs have voluntarily agreed to initiate clean-up under AOC. In order to manage the Total $ 34,701 $ 27,234 liability, the City is working with the EPA and other PRPs on a RI/FS to evaluate the risk to human health and the environment within the six-mile Superfund area, identify the possible early action clean-up sites, and generally evaluate the feasibility of clean-up options for use in the ultimate remedial actions that the EPA will require. Information on the City’ environmental liability is also presented in Note 8, Table 8-9.

North Boeing Field/Georgetown Steam Plant. The City, King County, and Boeing have signed an Administrative Order by the DOE requiring them to investigate and possibly remove contamination in an area that encompasses North Boeing Field, the Georgetown Steam Plant, and the King County Airport. (10) PENSIONS, DEFERRED COMPENSATION, AND OTHER POSTEMPLOYMENT BENEFITS Gas Works Park Sediment Site. In 2002 the DOE named the City and Puget Sound Energy (PSE) as PRPs for contamination at the Gas Works Sediments Site in North Lake Union. The City and PSE signed an Agreed Order with City of Seattle employees are covered in one of the following defined benefit pension plans: Seattle City Employees’ the DOE in 2005 to initiate a City-led RI/FS in the western portion of the site and a PSE-led RI/FS in the eastern Retirement System (SCERS), Firemen’s Pension Fund, Police Relief and Pension Fund, and Law Enforcement Officers’ and portion. The City is now working to complete the RI/FS for the western portion for submittal to the DOE. The RI/FS Fire Fighters’ Retirement System (LEOFF). The first three plans are considered part of the City’s reporting entity and are includes an evaluation of the nature and extent of contamination on the site, an evaluation of multiple alternatives for reported as pension trust funds. The State of Washington through the Department of Retirement Systems (DRS) administers remediating the sediments, and a recommended preferred alternative. and reports LEOFF Plans 1 and 2. South Park. The DOE has indicated that it will require the clean-up and remediation of the historic South Park landfill sites under the State Model Toxics Control Act. No specific requirements for remediation by PRPs have been made by the DOE as of the date of this note. In order to manage the liability, the City is working with the DOE and other PRPs on a RI/FS to evaluate the risk to human health and the environment and to assess the feasibility of clean-up options for use in the ultimate remedial actions that the DOE may require.

South Park Bus Barn. The South Park Bus Barn, located near the South Park Landfill, was entered into the DOE’s Voluntary Cleanup Program. This parcel of property was purchased by the City in 2008 and currently no other PRP has been named. The RI/FS are substantially complete as of the date of this note and the City is working with the DOE to assess the feasibility of clean-up options for use in the ultimate remedial actions that are required. Work is expected to begin during 2009 and be completed in 2010.

The City has included in its estimated liability those portions of the environmental remediation work that are currently deemed to be reasonably estimable. Cost estimates were developed using the expected cash flow technique in accordance with GASB Statement No. 49. Estimated outlays were based on current cost and no adjustments were made for discounting or inflation. Cost scenarios were developed for a given site based on data available at the time of estimation and will be adjusted for changes in circumstance. Scenarios consider the relevant potential requirements and are adjusted when benchmarks are met or when new information revises estimated outlays, such as changes in the remediation plan or operating conditions. Costs were calculated on a weighted average that was based on the probabilities of each scenario being selected and reflected cost-sharing agreements in effect. In addition, certain estimates were derived from independent engineers and consultants. The estimates were made with the latest information available; as new information becomes available, estimates may vary significantly due to price increases or reductions, technology, or applicable laws or regulations.

101 102 Notes to Financial Statements The City of Seattle

Table 10-1 PENSION PLAN INFORMATION SCERS provides retirement, death, and disability benefits. Retirement benefits vest after 5 years of credited service, while death and disability benefits vest after 10 years of service. Retirement benefits are calculated as 2 percent multiplied by Employees’ Firemen’s Police Relief LEOFF LEOFF years of creditable service, multiplied by average salary, based on the highest 24 consecutive months. The benefit is Retirement Pension and Pension Plan 1 Plan 2 actuarially reduced for early retirement. City employees may retire at any age with 30 years of service, at age 52 or older with 20-29 years of service, at age 57 or older with 10-19 years of service, and at age 62 or older with 5 to 9 years of Actuarial Valuation Date 1/1/2008 1/1/2009 1/1/2009 6/30/2007 6/30/2007 service. These benefit provisions and all other requirements are established and may be amended by City ordinances.

a Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Aggregate Refer to the Other Postemployment Benefits section of this note for discussion of the City’s implicit rate subsidies to retirees for health care coverage. Asset Valuation Method Fair Value Fair Value Fair Value 8-Year Graded 8-Year Graded Smoothed Smoothed The Seattle City Employees’ Retirement System issues a stand-alone financial report. A copy of the report is available from b b Fair Value Fair Value the Seattle City Employees’ Retirement System at 720 Third Avenue, Suite 1000, Seattle, WA 98104; by telephone at 206-386-1293; or by accessing the web site http://www.seattle.gov/retirement/annual_report.htm. Amortization c Method Level % Level $ Level $ Level %/Level $ N/A Summary of Significant Accounting Policies Period 30.0 years 28.0 years 28.0 years 17.75 years N/A Approach Open Closed Closed Closed N/A Basis of Accounting

Actuarial Assumptions d d The Seattle City Employees’ Retirement System is accounted for as a pension trust fund. The financial statements were Inflation Rate (CPI) 3.50% 2.50% 2.50% 3.50% 3.50% prepared using the economic resources measurement focus and the accrual basis of accounting as discussed in Note 1. All Investment Rate of Return 7.75% 4.50% 4.50% 8.00% 8.00% d d assets, liabilities, and additions to and deductions from (including contributions, benefits, and refunds) plan net assets are Projected Salary Increases - General 4.00% 3.50% 3.50% 4.25% 4.25% e e recognized when the transactions or events occur. Employee and employer contributions are reported in the period in which Projected Salary Increases - Step Merit N/A N/A N/A Varies Varies the contributions are due. Member benefits, including refunds, are due and payable by the plan in accordance with plan f f Postretirement Benefit Increases 0.67% Varies Varies CPI Increase CPI Increase terms. (Maximum 3%) Investments, including security lending transactions as discussed in Note 3, are reported at fair market value. The fair market value of investments in common stock, international equities, fixed income, international fixed income, and short- a term investments is based on the quoted market price. The fair market value of venture capital and real estate equities has The aggregate cost method does not identify or separately amortize unfunded actuarial liabilities. been determined by independent appraisers. Securities and security lending transactions are reflected in the financial b The actuarial value of assets is calculated under an adjusted market value method by starting with the market value of assets. For subsequent years the actuarial statements on a trade-date basis. Investment policies as set by the Retirement Board require that investments in any one value of assets is determined by adjusting the market value of assets to reflect the difference between the actual investment return and the expected investment corporation or organization may not exceed 5 percent of net assets available for benefits. return during each of the last eight years or, if fewer, the completed years since adoption. c Funding is Level %; GASB is Level $. Contributions and Reserves d Long-term assumption is listed. Specific short-term assumptions were used through 2010. e For specific information, please refer to the 2007 Actuarial Valuation Report issued by the Washington Office of State Actuary. Member and employer contribution rates are established by SMC 4.36. f Based upon salary increase assumptions for benefits that increased based on salary. Based upon CPI assumptions for benefits that increased based upon CPI. SCERS funding policy provides for periodic employee and employer contributions at actuarially determined rates expressed as percentages of annual covered payroll to accumulate sufficient assets to pay benefits when due. Funds accumulated and investment earnings are used to pay present and future benefit obligations and administrative expenses. The employer SEATTLE CITY EMPLOYEES' RETIREMENT SYSTEM contribution rate is determined by the actuarial formula identified as the Entry-Age Cost Method. The formula determines the amount of contributions necessary to fund the current service cost, representing the estimated amount necessary to pay Plan Description for benefits earned by the employees during the current service year and the amount of contributions necessary to pay for prior service costs. Total necessary contributions, including amounts necessary to pay administrative costs, are determined The Seattle City Employees’ Retirement System (SCERS) is a single-employer defined-benefit public employee retirement through biennial actuarial valuations. system established and administered by the City in accordance with Seattle Municipal Code (SMC) 4.36. Actuarially determined contribution rates are currently 8.03 percent for members and 8.03 percent for the employer. Plan All employees of the City of Seattle are eligible for membership in the system with the exception of law enforcement member and employer contributions for 2008 are $45,986,138 and $45,961,040, respectively. There are no long-term officers and fire fighters who are covered under the statewide LEOFF plans administered by the state Department of contracts for contributions outstanding and no legally required reserves. Retirement Systems. Employees of METRO and the King County Health Department who established membership in the system when these organizations were City of Seattle departments were allowed to continue their membership. Current Actuarial data for SCERS are determined through biennial actuarial valuations. The latest valuation date is January 1, 2008, membership in SCERS consisted of the following at December 31, 2008: and reflects measurements through the year ending 2007. Based on this valuation, the actuarial value of plan net assets available for benefits was $2,119 million, and the actuarial accrued liability was $2,295 million. The unfunded actuarial accrued liability (UAAL) was $175 million and the funding ratio was 92.4 percent. Retirees and Beneficiaries Receiving Benefits 5,474 Terminated Plan Members Entitled To But Not Yet Receiving Benefits, Vested 1,764 Terminated Plan Members Who Have Restored Their Contributions Due to the Provisions of the Portability Statutes and May Be Eligible for Future Benefits, Vested 274 Active Plan Members, Vested and Non-vested 8,793

103 104 Notes to Financial Statements The City of Seattle

The three-year trend information (in thousands) presented directly below and the annual pension cost and net pension obligation The funded status of the Plan as of the latest valuation study is presented below (in thousands). The Required data in Table 10-2 cover the years 2005-2007; actuarial valuations were not performed for the years 2006 and 2008. Supplementary Information section, C-4, Pension Plan Information Schedule of Funding Progress, displays multiyear trend information as to the value of the plan assets decreasing or increasing over time relative to the AAL’s for benefit. Fiscal Year Annual Total Percentage Net Pension Ending Pension Cost Employer of APC Obligation Actuarial Actuarial Accrued Unfunded UAAL as December 31 (APC) Contribution Contributed (NPO) Value of Liability (AAL) AAL Funded Covered Percentage of Assets Entry Age (UAAL) Ratio Payroll Covered Payroll 2005 $ 34,095 $ 35,897 105 % $ (78,064) 2006 37,755 37,939 100 (78,249) $2,119,400 $2,294,600 $175,200 92.4% $501,900 34.9% 2007 40,115 40,300 100 (78,434) Authority to change benefit and contribution rates rests with the City Council. City ordinance does not permit a reduction in Annual pension cost (APC) and net pension obligation (NPO) (in thousands) were: the employer contribution rate to less than the employee rate. Trend information on SCERS employer contribution is shown in the Required Supplementary Information section, C-5. Annual Required Annual Fiscal Year Contribution Pension Total NPO NPO In the last four months of 2008 substantial declines occurred in almost all sectors of worldwide financial markets. Thus, the Ending (ARC ) Interest ARC Cost Employer Change in Beginning Ending actuarial status of the Employees’ Retirement Fund at the end of 2008 is substantially lower than shown in the results of the December 31 at End of Year on NPO Adjustment (APC) Contributions NPO Balance Balance January 1, 2008 actuarial report. A new actuarial report will be prepared as of January 1, 2010. This report will include updated asset valuations as well as possible changes in assumptions, such as lower assumed investment returns and lower assumed wage growth. 2007 $40,300 $ (6,064) $ 5,879 $ 40,115 $40,300 $ (185) $ (78,249) $ (78,434) The City's contracts with all labor unions that represent members of SCERS describe how contribution rates would be During 2007 the Seattle City Employees’ Retirement System’s net pension asset increased from $78.2 million to changed in the event higher contributions are needed to improve the financial status of the Employees’ Retirement Fund. $78.4 million, an increase of $185 thousand as calculated in the following table. Under these contracts, the City and employees will share any contribution rate increase equally, up to a maximum increase of 2 percent in the employee contribution (in other words, the employee contribution can increase from the current Table 10-2 ANNUAL PENSION COST AND NET PENSION OBLIGATION 8.03 percent to 10.03 percent). If a contribution rate increase is needed, the City intends to apply the same formula to non- represented employees. SEATTLE CITY EMPLOYEES’ RETIREMENT SYSTEM For the Year Ended December 31, 2008 (In Thousands) FIREMEN’S PENSION AND POLICE RELIEF AND PENSION FUNDS

a a 2007 2005 Plan Description

Total Normal Cost Rate 12.50 % 13.05 % The Firemen’s Pension and the Police Relief and Pension Funds are single-employer defined-benefit pension plans that were Employee Contribution Rate 8.03 8.03 established by the City in compliance with the requirements of the Revised Code of Washington (RCW) 41.18 and 41.20. Employer Normal Cost Rate 4.47 5.02 Since the effective date of the state LEOFF on March 1, 1970, no payroll for employees was covered under these pension Total Employer Contribution Rate 8.03 % 8.03 % plans, and the primary liability for pension benefits for these plans shifted from the City to the state LEOFF. However, the Amortization Payment Rate 3.56 3.01 Amortization Period (Year) 18.00 30.20 City was still liable for all benefits in pay status at that time plus any future benefits payable to active law enforcement GASB 27 Amortization Rate 3.56 3.01 officers and firefighters on March 1, 1970, under the old City plan in excess of current LEOFF benefits. Generally, benefits under the LEOFF system are greater than or equal to the benefits under the old City plan when payment begins. However, b Total Annual Required Contribution (ARC) Rate 8.03 8.03 LEOFF retirement benefits increase with the consumer price index (CPI - Seattle) while some City benefits increase with c wages of current active members. If wages go up faster than the CPI, the City becomes liable for this residual amount. Due Covered Employee Payroll $ 501,862 $ 447,040 to this leveraging effect, projection of the City of Seattle’s liabilities is especially sensitive to the difference between wage and CPI increase assumptions. ARC $ 40,300 $ 35,897 Interest on Net Pension Obligation (NPO) (6,064) (5,910) Adjustment to ARC 5,879 4,108 All law enforcement officers and firefighters of the City who served before March 1, 1970, are participants of these pension plans, and may be eligible for a supplemental retirement benefit plus disability benefits under these plans. Those officers Annual Pension Cost (APC) $ 40,115 $ 34,095 and firefighters hired between March 1, 1970, and September 30, 1977, are not eligible for a supplemental retirement Employer Contribution $ 40,300 $ 35,897 benefit, but may be eligible for disability benefits under this plan. Eligible law enforcement officers may retire with full benefits after 25 years of service at any age and firefighters at age 50 after completing 25 years of service. These pension Change in NPO $ (185) $ (1,802) plans provide death benefits for eligible active and retired employees. In addition, these plans provide medical benefits in NPO at Beginning of Year (78,249) (76,262) accordance with state statutes and City ordinances to active and retired members from the City. Currently 1,106 fire and NPO at End of Year $ (78,434) $ (78,064) 985 police retirees meet these eligibility requirements. The City fully reimburses the amount of valid claims for medical and hospitalization costs incurred by active members and pre-Medicare retirees. The City also reimburses the full amount of premiums for part B of Medicare for each retiree eligible for Medicare. Total postemployment medical benefits for Firemen’s Pension were $8.5 million in 2008 and $9.0 million in 2007; and for Police Relief and Pension, $11.3 million in 2008 and $10.5 million in 2007. a Actuarial studies are done every two years. No study was done for years 2006 and 2008. b Refer to the Other Postemployment Benefits section of this note for discussion of the City’s implicit rate subsidies to retirees If the amortization period determined by the actual contribution rate exceeds the maximum amortization period required by GASB Statement No. 27, the ARC for health care coverage as well as medical benefits for retirees under the Firemen’s Pension and Police Relief and Pension is determined using an amortization of the funding excess over 30 years. c plans. Covered payroll includes compensation paid to all active employees on which contributions were made in the year preceding the valuation date.

105 106 Notes to Financial Statements The City of Seattle

The Firemen’s Pension and Police Relief and Pension benefit provisions are established in the state statute, RCW 41.16, The funded status of the plans at the last valuation date is presented below (in thousands). The Required Supplementary 41.18, and 41.20, and may be amended only by the state Legislature. Retirement benefits are determined under RCW 41.18 Information section, C-4, displays multiyear trend information as to the value of the plan assets decreasing or increasing and 41.26 for Firemen’s Pension and RCW 41.20 and 41.26 for Police Relief and Pension. Medical benefit payments for over time relative to the AALs for benefits. both plans are based on estimates of current and expected experience.

Current membership in Firemen’s Pension and Police Relief and Pension consisted of the following at December 31, 2008: Actuarial Actuarial Accrued Unfunded UAAL as Value of Liability (AAL) AAL Funded Covered Percentage of Firemen’s Police Relief Assets Entry Age (UAAL) Ratio Payroll Covered Payroll Pension and Pension

Retirees and Beneficiaries Receiving Benefits 867 858 Firemen’s Pension Fund $11,498 $141,621 $130,123 8.0% N/A N/A Terminated Plan Members Entitled To But Police Relief and Pension Fund 423 132,632 132,209 0.0 N/A N/A Not Yet Receiving Benefits - - Active Plan Members, Vested 47 47 In July 1994 the City adopted a funding policy under Ordinance 117216 that is designed to fully fund the AAL of the Active Plan Members, Nonvested - - Firemen’s Pension Fund by the year 2018 plus additional contributions, if necessary, to fund benefit payments in excess of contributions to fully fund all retirement benefit liabilities by December 31, 2018. In 2006 the Board of Directors amended These pension plans do not issue separate financial reports. the fully funded date from 2018 to December 31, 2023. The level contributions were set aside in the Firemen’s Pension Actuarial Account with a fund balance of $9.4 million as of December 31, 2008. The funding policy does not fund for Summary of Significant Accounting Policies future medical liabilities. No similar program has been established for the Police Relief and Pension Fund. The AAL as of December 31, 2008, based on the actuarial valuation as of January 1, 2009, was $141.6 million for The Firemen’s Pension and Police Relief and Pension Funds are accounted for as pension trust funds. The financial Firemen’s Pension and $132.6 million for Police Relief and Pension. The Police Relief and Pension AAL is funded on a statements were prepared using the economic resources measurement focus and the full accrual basis of accounting as pay-as-you-go basis. Annual requirements are funded through the City’s adopted budget, and any budget requirements shown in Note 1. All assets, liabilities, and additions to and deductions from (including contributions, benefits, and refunds) exceeding the adopted budget are fully covered by supplemental appropriations. plan net assets of the retirement funds are recognized when the transaction or events occur. Employer contributions are reported in the period in which the contributions are due. Member benefits, including refunds, are due and payable by the plan in accordance with the plan terms. Trend information on employer contributions for the Firemen’s Pension and the Police Relief and Pension plans is presented in the Required Supplementary Information section, C-5. Investments are recorded at fair value as shown in Note 3. Fair value of investments is based on quoted market prices. The net pension obligation of Firemen’s Pension Fund is a $3.5 million net pension asset at December 31, 2008. The net pension obligation of Police Relief and Pension Fund is a $1.4 million net pension liability at December 31, 2008. Contributions and Reserves

Since both pension plans were closed to new members effective October 1, 1977, the City is not required to adopt a plan to Table 10-3 ANNUAL PENSION COST AND NET PENSION OBLIGATION fund the actuarial accrued liability (AAL). An actuarial fund was established for the Firemen’s Pension in July 1994 and is discussed in more detail below; the City funds the Police Relief and Pension Fund as benefits become due. Contributions FIREMEN’S PENSION AND POLICE RELIEF AND PENSION FUNDS are no longer required from plan members or the City departments they represent. Under state law, partial funding of the For the Year Ended December 31, 2008 Firemen’s Pension Fund may be provided by an annual tax levy of up to $0.45 per $1,000 of assessed value of all taxable property of the City. The Firemen’s Pension Fund also receives a share of the state tax on fire insurance premiums. (In Thousands) Additional funding through the General Fund adopted budget is provided to both pension funds as necessary. The Police Relief and Pension Fund also gets police auction proceeds of unclaimed property. Administrative costs for the Firemen’s Firemen’s Pension Police Relief and Pension Pension are financed by real estate property tax and fire insurance premium tax. Administrative costs for the Police Relief 2008 2007 2006 2008 2007 2006 and Pension are financed by police auction proceeds and the General Fund. Contribution rates are not applicable to these Annual Required Contribution (ARC) plans. Annual Normal Cost - Beginning of Year $ - $ - $ - $ - Amortization of UAAL - Beginning of Year 10,153 9,068 8,797 7,403 Three-year trend information (in thousands) for the Firemen’s Pension and the Police Relief and Pension Funds as of the Interest to End of Year 520 465 451 379 January 1, 2009, actuarial valuation are: ARC at End of Year 10,673 9,533 $ 9,385 9,248 7,782 $6,056 Fiscal Year Annual Pension Percentage Net Pension Interest on NPO 46 - - 97 - - Ending Cost of APC Obligation Adjustment to ARC (57) - - (121) - - Retirement System December 31 (APC) Contributed (NPO) Annual Pension Cost (APC) 10,662 9,533 9,385 9,224 7,782 6,056 Firemen’s Pension Fund 2006 $ 9,385 100 %$ - 2007 9,533 91 900 Employer Contribution 15,027 8,633 9,385 9,723 5,885 6,056 2008 10,662 141 (3,465) Change in NPO (4,365) 900 - (499) 1,897 -

NPO at Beginning of Year 900 - - 1,897 - -

Police Relief and Pension Fund 2006 6,056 100 - NPO at End of Year $ (3,465) $ 900 $ - $ 1,398 $ 1,897 $ - 2007 7,782 76 1,897 2008 9,224 105 1,398

There are no securities held by the City for these pension funds except for the Firemen’s Pension Actuarial Account Following are the Firemen’s Pension and the Police Relief and Pension financial statements for fiscal year ending described below. No loans are provided by the funds to the City or other related parties. December 31, 2008.

107 108 Notes to Financial Statements The City of Seattle

Table 10-4 STATEMENT OF NET ASSETS LAW ENFORCEMENT OFFICERS’ AND FIRE FIGHTERS’ RETIREMENT SYSTEM (LEOFF) FIREMEN’S PENSION AND POLICE RELIEF AND PENSION FUNDS PLANS 1 AND 2 December 31, 2008 (In Thousands) Plan Description

Firemen’s Police Relief LEOFF is a cost-sharing, multiple-employer retirement system comprised of two separate defined-benefit plans. LEOFF Pension and Pension 2008 2007 participants who joined the system by September 30, 1977, are Plan 1 members. Those who joined on or after October 1, 1977, are Plan 2 members. ASSETS Cash and Equity in Pooled Investments $ 11,942 $ 2,170 $ 14,112 $ 11,728 LEOFF was established in 1970 by the state Legislature. Membership includes all full-time, fully compensated, local law enforcement officers and fire fighters. Membership is comprised primarily of non-state employees, with Department of Fish Investments at Fair Value and Wildlife enforcement officers who were first included prospectively effective July 27, 2003, being a major exception. U.S. Government Obligations 464 - 464 460 Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established by Initiative 790 to provide governance of Receivables Plan 2. The Board’s duties include adopting contribution rates and recommending policy changes to the Legislature for Employer - Other 22 - 22 38 Plan 2. LEOFF retirement benefit provisions are established in state statute and may be amended only by the state Interest and Dividends - - - - Legislature. Washington State Department of Retirement Systems (DRS) administers LEOFF. Total Receivables 22 - 22 38 LEOFF retirement benefits are financed from a combination of investment earnings, employer and employee contributions, Total Assets 12,428 2,170 14,598 12,226 and a special funding situation in which the state pays through state legislative appropriations. Employee contributions to LIABILITIES Plans 1 and Plan 2 accrue interest at a rate specified by DRS. During fiscal year 2008 the DRS-established rate on employee contributions was 5.5 percent compounded quarterly. Employees in Plan 1 and 2 can elect to withdraw total employee Refunds Payable and Other - Other 930 1,747 2,677 2,416 contributions and interest earnings upon separation from LEOFF-covered employment. Total Liabilities 930 1,747 2,677 2,416 Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible Net Assets Held in Trust for Pension Benefits $ 11,498 $ 423 $ 11,921 $ 9,810 for retirement with 5 years of service at the age of 50. The benefit per year of service calculated as a percent of final average salary (FAS) is as follows: Term of Service Percent of FAS Table 10-5 STATEMENT OF CHANGES IN PLAN NET ASSETS 20+ 2.0 % 10 - 19 1.5 FIREMEN’S PENSION AND POLICE RELIEF AND PENSION FUNDS 5 - 9 1.0 For Year Ended December 31, 2008 The FAS is the basic monthly salary received at the time of retirement, provided a member has held the same position or rank (In Thousands) for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months’ salary within the last 10 years of service. A cost-of-living allowance is granted, indexed to the Seattle Consumer Price Index. Postemployment LEOFF Plan 1 members may purchase up to five years of additional service credit once eligible for retirement. The credit can Defined Benefit Healthcare Comparative Totals only be purchased at the time of retirement and cannot be used to qualify for any retirement eligibility or benefit reductions Firemen’s Police Relief Firemen’s Police Relief based upon years of service. This credit is to be used exclusively to provide the member with a monthly annuity that is paid in Pension and Pension Pension and Pension 2008 2007 addition to the member’s retirement allowance. ADDITIONS

Contributions Plan 2 retirement benefits are vested after an employee completes 5 years of eligible service. Plan 2 members may retire at the Employer $ 15,027 $ 9,723 $ 8,453 $ 11,279 $ 44,482 $ 34,072 age of 50 with 20 years of service or at the age of 53 with 5 years of service, with an allowance of 2 percent of the FAS per year of service (FAS is based on the highest consecutive 60 months). Plan 2 retirements prior to the age of 53 are reduced Investment Income 3 percent for each year that the benefit commences prior to age 53 and to reflect the choice of a survivor option. There is no From Investment Activities cap on years of service credit; and a cost-of-living allowance is granted, indexed to the Seattle Consumer Price Index, capped Net Appreciation (Depreciation) in at 3 percent annually. LEOFF Plan 2 members may purchase up to five years of additional service credit at retirement. Fair Value of Investments 38 - - - 38 62 Interest 357 - - - 357 422 Plan 1 provides death and disability benefits. Death benefits for Plan 1 members on active duty consist of the following: (1) if Total Net Investment Income 395 - - - 395 484 eligible spouse, 50 percent of the FAS, plus 5 percent of FAS for each surviving child, with a limitation on the combined allowances of 60 percent of the FAS; or (2) if no eligible spouse, 30 percent of FAS for the first child plus 10 percent for each Total Additions 15,422 9,723 8,453 11,279 44,877 34,556 additional child, subject to a 60-percent limitation of FAS. In addition, a duty death benefit of $150,000 is provided to Plan 1 DEDUCTIONS and Plan 2 members. Benefits 12,382 9,678 8,453 11,279 41,792 35,256 Plan 1 disability allowance is 50 percent of the FAS plus 5 percent for each child up to a maximum of 60 percent. Upon Administrative Expense 547 427 - - 974 861 recovery from disability before the age of 50, a member is restored to service with full credit for service while disabled. Upon Total Deductions 12,929 10,105 8,453 11,279 42,766 36,117 recovery after the age of 50, the benefit continues as the greater of the member’s disability allowance or service retirement allowance. Change in Net Assets 2,493 (382) - - 2,111 (1,561)

Net Assets - Beginning of Year 9,005 805 - - 9,810 11,371 Plan 2 provides disability benefits. There is no minimum amount of service credit required for eligibility. The Plan 2 allowance amount is 2 percent of the FAS for each year of service. Benefits are actuarially reduced for each year that the Net Assets - End of Year $ 11,498 $ 423 $ - $ - $ 11,921 $ 9,810 member’s age is less than 53 unless the disability is duty-related and to reflect the choice of a survivor option. If the member has at least 20 years of service and is age 50, the reduction is 3 percent for each year prior to age 53.

109 110 Notes to Financial Statements The City of Seattle

Plan 2 members who leave service because of a line-of-duty disability are allowed to withdraw 150 percent of accumulated Plan 1 Plan 2 member contributions. This withdrawal benefit is not subject to federal income tax. Alternatively, Plan 2 members who leave service because of a line-of-duty disability may be eligible to receive a retirement allowance of at least 10 percent of final Retirees and Beneficiaries Receiving Benefits 8,161 924 average salary and two percent per year of service beyond 5 years. The first 10 percent of the FAS is not subject to federal Terminated Members Entitled To But income tax. Not Yet Receiving Benefits 4629 Active Plan Members, Vested 513 12,391 The following changes to the LEOFF plans are the result of recent years’ legislation: Active Plan Members, Nonvested - 3,708

Effective March 14, 2006: Total 8,678 17,652

Plan 2 members who are severely disabled in the line of duty and incapable of substantial gainful employment in any All law enforcement officers and fire fighters of the City of Seattle participate in LEOFF. Current active members (vested capacity in the future, can receive a catastrophic disability benefit equal to 70 percent of their final average salary subject and non-vested) are 109 under Plan 1 and 2,223 under Plan 2. to offsets for workers’ compensation and Social Security disability benefits received. (HB 2932, Chapter 39, Laws 2006) DRS prepares a stand-alone financial report. A copy of the report that includes financial statements and required Effective June 7, 2006: supplementary information for LEOFF may be obtained by writing to Washington State Department of Retirement Systems, PO Box 48380, Olympia, Washington 98504-8380; by calling 360-664-7000 in Olympia or 1-800-547-6657; or by Coverage is extended for the $150,000 death benefit to Plan 2 members who die from a duty-related illness such as an accessing their web site at http://www.drs.wa.gov. infectious disease or cancer, which results from a job-related exposure. (SHB 2933, Chapter 351, Laws 2006) Summary of Significant Accounting Policies Survivors of Plan 2 members who are killed in the line of duty are reimbursed for the cost of ongoing health care insurance coverage. (SB 6723, Chapter 345, Laws 2006) LEOFF plans are accounted for in pension trust funds of DRS using the economic resources measurement focus and the accrual basis of accounting. Plan member contributions are recognized as revenues in the period in which the contributions Effective July 1, 2006: are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plans. The benefit cap of 60 percent of a LEOFF Plan 1 member’s final average salary is removed for a member enrolled on or after February 19, 1974. (SHB 2688, Chapter 350, Laws 2006). Investments are presented at fair value. The fair value of investments is based on published market prices and quotations from national security exchanges and security pricing services or by the respective fund managers for securities that are not LEOFF Plan 2 members may purchase up to five years of additional service credit at retirement. (HB 1269, Chapter 21, actively traded. Privately held mortgages are valued at cost which approximates fair market value. Certain pension trust Laws 2005). fund investments, including real estate and private equity, are valued based on appraisals or by independent advisors. LEOFF pension plans have no investments of any commercial or industrial organization whose market value exceeds LEOFF Plan 1 members may purchase up to five years of additional service credit once eligible for retirement. This 5 percent or more of each plan’s net assets. credit can only be purchased at the time of retirement, and cannot be used to qualify for any retirement eligibility or benefit reductions based upon years of service. This credit is to be used exclusively to provide the member with a Contributions and Reserves monthly annuity that is paid in addition to the member’s retirement allowance. (HB 2690, Chapter 214, Laws 2006). Funding Policy Effective July 22, 2007: The state Legislature establishes laws pertaining to the creation and administration of LEOFF plans. Plan members together LEOFF Plan 2 members may purchase up to 24 consecutive months of service credit (up from 12 months) for each with their employers and the state provide funding for all costs of the system based upon actuarial valuations. The state period of temporary duty disability. (SHB 1261, Chapter 40, Laws of 2007). establishes benefit levels and approves the actuarial assumptions used in determining contribution levels.

The portability of retirement benefits is changed by: (1) adding LEOFF Plan 2 to those plans that are able to combine Starting on July 1, 2000, Plan 1 employers and employees will contribute zero percent as long as the plan remains fully service under portability for indexing purposes, (2) allowing compensation that is reportable in all dual member systems, funded. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plan. except in the Washington State Patrol Retirement System (WSPRS), to be included in the calculation of all dual Plan 2 employers and employees are required to pay at the level adopted by the Plan 2 Retirement Board in accordance with members’ benefits, and (3) removing the “maximum benefit rule” for dual members who have less than 15 years of RCW 41.45. All employers are required to contribute at the level required by state law. service in one capped plan and service in one uncapped plan. (SHB 1264, Chapter 207, Laws 2007). Required contribution rates for cities (expressed as a percentage of current year covered payroll) at the close of fiscal year The $150,000 duty-related death benefit is extended to include death from occupational disease or duty-related illness. 2007 are as follows: (SHB 1266, Chapter 487, Laws of 2007). LEOFF Actual The terms of the employer representatives on the LEOFF Plan 2 Board are now staggered so that no more than one Contribution Rates position expires in the same year. Legislative terms are now two years and run from January through December. After January 1, 2008, one member of the Board must be a retired LEOFF Plan 2 participant. (SHB 1679, Chapter 303, Laws Plan 1 Plan 2 of 2007). Employer (includes an administrative expense rate of 0.16 percent) 0.16 % 5.35 % An exception is made to the five-year waiting period required before transferring prior Washington State Public Employee - 8.64 Employees’ Retirement System (PERS) service credit for those Emergency Medical Technicians who joined LEOFF State of Washington Contributions - 3.45 Plan 2 as a result of legislation passed in 2003 and 2005 and who retire due to disability, or die. (HB 1680, Chapter 304, Laws of 2007). Administration of the LEOFF plans was funded by an employer rate of 0.16 percent of employee salaries.

There were no other material changes in benefit provisions for the fiscal year ended June 30, 2008. LEOFF pension benefit The state Legislature has the ability, by means of a special funding arrangement, to appropriate money from the state provisions have been established by RCW 41.26. General Fund to supplement the current service liability and fund the prior service costs of Plans 1 and 2 in accordance with the requirements of the Pension Funding Council and LEOFF Plan 2 Retirement Board. However, this special funding There are 87 participating employers in LEOFF Plan 1 and 374 participating employers in Plan 2 as of June 30, 2008. situation is not mandated by the state constitution and this funding requirement could be returned to the employers by a Membership in LEOFF consisted of the following as of the latest actuarial valuation date of June 30, 2007. change of statute. For fiscal year 2007 the state contributed $45.9 million to Plan 2. 111 112 Notes to Financial Statements The City of Seattle

Employer Contributions Required and Paid It is the opinion of the City's legal counsel that the City has no liability for losses under the plan. Under the plan, participants select investments from alternatives offered by the plan administrator, who is under contract with the City to LEOFF annual required contributions (in millions) and percentage contributed in accordance with the funding policy were: manage the plan. Investment selection by a participant may be changed from time to time. The City manages none of the investment selections. By making the selection, enrollees accept and assume all risks that pertain to the plan and its Plan 1 Plan 2 administration. Annual Annual Required Percentage Required Percentage The City placed the deferred compensation plan assets into trust for the exclusive benefit of plan participants and Year Contribution Contributed Contribution Contributed beneficiaries in accordance with Governmental Accounting Standards Board (GASB) Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. 2006 $ - N/A $ 101.3 79 % 2007 0.1 N/A 94.9 101 The City has little administrative involvement and does not perform the investing function for the plan. The City does not 2008 - N/A 102.1 117 hold the assets in a trustee capacity and does not perform fiduciary accountability for the plan. Therefore, the City employees’ deferred compensation plan created in accordance with IRC 457 is not reported in the financial statements of the City.

The City of Seattle required and actual contributions (in thousands) are shown in the following table. Percentages contributed are not available. OTHER POSTEMPLOYMENT BENEFITS (OPEB) Plan 1 Plan 2 Plan description and funding policy 2006 $ 21 $ 8,082 2007 18 9,381 Health Care Blended Premium Subsidy. Employees retiring under City of Seattle or the LEOFF 2 retirement plans may 2008 15 10,649 continue their health insurance coverage under the City’s health insurance plans for active employees. LEOFF 1 employees retiring under Washington State PERS are covered under the LEOFF 1 retiree health plan but are eligible to have their There are no long-term contracts for contributions under the LEOFF retirement plans. spouses and/or dependents covered under the City health insurance plans. When a retired participant dies, the spouse remains fully covered until age 65 and covered by the Medicare supplement plan thereafter. Employees that retire with Reserves disability retirement under the City of Seattle, Washington LEOFF 2 plan, or Social Security may continue their health coverage through the City with same coverage provisions as other retirees. Eligible retirees self-pay 100 percent of the premium based on blended rates which were established by including the experience of retirees with the experience of active Member Reserves. The member reserves reflect the total liability for all contributions made by members. These reserves employees for underwriting purposes. The City provides implicit subsidy of the post-retirement health insurance costs and are increased by employee contributions and interest earnings and are decreased by contributions refunded and contributions funds the subsidy on a pay-as-you-go basis. The postemployment benefit provisions are established and may be amended transferred to the benefit reserves for current year retirees. The member reserves are considered fully funded. Member by City ordinances. reserves (in thousands) were: June 30, 2008 June 30,2007 Firemen’s Pension and Police Relief and Pension Plans. The Firemen’s Pension and Police Relief and Pension plans provide medical benefits for eligible retirees. The benefits are authorized under state statute, RCW 41.18 and 41.26 for Plan 1 $ 62,457 $ 72,945 Firemen’s Pension, and RCW 41.20 and 41.26 for Police Relief and Pension, and may be amended by the state legislature. Plan 2 1,379,022 1,232,440 The City funds these benefits on a pay-as-you go basis.

Benefit Reserves. The benefit reserves reflect the funded liability associated with all retired members. These reserves are Annual OPEB Cost and Net OPEB Obligation increased by employer contributions, state contributions, investment earnings, and employee contributions which are attributable to current year retirees. These reserves are decreased by the amounts of pensions actually paid in the current Based on the actuarial valuation dates noted under Funded Status and Funding Progress and in Table 10-7, the City’s annual year, interest payments transferred to the member reserves, and administrative expenses. Benefit reserves (in thousands) cost for fiscal year ended December 31, 2008, the amount of expected contributions to the plans and changes in net were: obligation in each plan are as follows: June 30, 2008 June 30, 2007 Table 10-6 ANNUAL OPEB COST AND NET OPEB OBLIGATION

Plan 1 $ 5,972,700 $ 6,343,265 Healthcare Plan 2 3,936,384 3,952,783 Blended Firemen’s Police Relief and Premium Pension Pension Subsidy (LEOFF1) (LEOFF1) Total The funded status of each of the benefit reserves is the same as the funded status of each of the respective pension plans. Annual Required Contribution $ 8,751,992 $ 13,269,644 $ 14,029,863 $ 36,051,499 Interest on Net OPEB Obligation 384,860 79,309 111,514 575,683 Adjustment to Annual Required Contribution (508,523) (98,580) (138,610) (745,713) DEFERRED COMPENSATION PLAN Annual OPEB Cost (Expense) 8,628,329 13,250,373 14,002,767 35,881,469

The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code (IRC) Expected Contribution (Employer-Paid Benefits) 2,250,276 8,453,011 11,278,886 21,982,173 Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is payable to employees upon termination, retirement, death, or unforeseen emergency. Increase in Net OPEB Obligation 6,378,053 4,797,362 2,723,881 13,899,296 Net OPEB Obligation – Beginning of Year 7,974,722 1,547,498 2,175,876 11,698,096 Beginning in 2006 the Deferred Compensation Plan (DCP) was amended to allow separating employees to cash out accrued vacation balances into their DCP accounts. Eligible retiring employees may also cash out up to 35 percent of their sick Net OPEB Obligation – End of Year $ 14,352,775 $ 6,344,860 $ 4,899,757 $ 25,597,392 leave balances into their DCP accounts. Vacation and sick leave cash-outs made to the DCP are considered contributions and are subject to the maximum annual contribution limit. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plans, and the net OPEB obligation of each plan for 2008 and one year preceding are as follows:

113 114 Notes to Financial Statements The City of Seattle

Percentage of Table 10-7 OPEB INFORMATION Fiscal Annual Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed Obligation Healthcare Blended Firemen’s Pension Police Relief and Pension Description Premium Subsidy (LEOFF1) (LEOFF1)

Healthcare Blended Premium Subsidy 12/31/2007 $ 9,328,990 14.5% $ 7,974,722 Actuarial Valuation Date 1/1/2008 1/1/2009 1/1/2009 12/31/2008 8,628,329 6.5 14,352,775 Actuarial Cost Method Entry Age Normal Entry Age Normal Entry Age Normal Firemen’s Pension (LEOFF1) 12/31/2007 10,624,239 85.0 1,547,498 Amortization Method Level amount over past and future 30-year, closed as of 1/1/2007 30-year, closed as of 1/1/2007 12/31/2008 13,250,373 64.0 6,344,860 service Remaining Amortization Period 30 years 28 years 28 years Police Relief and Pension (LEOFF1) 12/31/2007 12,653,428 83.0 2,175,876 12/31/2008 14,002,767 81.0 4,899,757 Records and Data N/A Supplied by the City Supplied by the City Replacement of Terminated Employees N/A Closed. No new members Closed. No new members Funded Status and Funding Progress permitted. permitted. Valuation of Assets N/A. No assets as of valuation N/A. No assets as of valuation N/A. No assets as of valuation Based on the actuarial valuation dates for each of the plans, the unfunded actuarial accrued liability (UAAL) was equal to date. date. date. the actuarial accrued liability (AAL) due to the City’s pay-as-you-go policy. Following is the funded status (in thousands) Assumptions: for each of the plans for the last two actuarial studies: Discount Rate 4.826% 4.50% 4.58% UAAL as a Medical Inflation 9.0%, decreasing by 0.5% each 9.0%, decreasing by 0.5% each Actuarial Entry Age Percentage year for 8 years until it reaches an year for 8 years until it reaches an ultimate rate of 5.0% ultimate rate of 5.0% Actuarial Value of Normal Funded Covered of Covered Valuation Assets AAL UAAL Ratio Payroll Payroll Traditional and Preventive Plans 10.5%, decreasing by 0.5% each year for 11 years until it reaches an Date (a) (b) (b-a) (a/b) (c) ((b-a) / c) ultimate rate of 5.0%

Group Health Standard and 10.9% decreasing by 0.4 % in Healthcare Blended Premium Subsidy 1/1/2006 - $84,338 $84,338 - N/A N/A Deductible Plans 2009 and 0.5% for 11 succeeding 1/1/2008 - 78,816 78,816 - N/A N/A years until it reaches an ultimate rate of 5.0% Firemen’s Pension (LEOFF1) 1/1/2008 - 198,150 198,150 - N/A N/A Long-Term Care Inflation Rate N/A 5.00% 5.00% 1/1/2009 - 221,915 221,915 - N/A N/A Participation/Service Retirement 40% of actives who retire are All actives are assumed to retire at All actives are assumed to retire at assumed to participate. This the valuation date. the valuation date. Police Relief and Pension (LEOFF1) 1/1/2008 - 209,502 209,502 - N/A N/A assumption was developed by comparing the count of pre-65 1/1/2009 - 235,472 235,472 - N/A N/A retirees currently covered under the Plan with the count of pre-65 retirees shown in the 2006 Actuarial Methods and Assumptions valuation report prepared by Mellon for the City of Seattle Employees’ Retirement System. Projections of benefits are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits in force at the time of the valuation and the pattern of sharing of benefit costs between the Mortality Mortality assumptions for For active and service-retired For active and service-retired employer and plan members to that point. Actuarial calculations reflect a long-term perspective and employ methods and LEOFF employees are based on employees, basis is RP 2000 employees, basis is RP 2000 assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of any the actuarial 2000 Combined Mortality Table (Combined Mortality Table (Combined Health Table for Males and Healthy). For disabled members, Healthy). For disabled members, assets. Significant methods and assumptions are as follows: Females. Mortality assumptions basis is RP 2000 Mortality Table basis is RP 2000 Mortality Table for general service actives and (Combined Healthy) with ages (Combined Healthy) with ages retirees are based on the Group set forward 2 years and a 0.005 set forward 2 years and a 0.005 Annuity Mortality (GAM) 1994 minimum. minimum. Static Table (Final) with ages set forward one year for both males and females for actives; and ages set forward one year for males but with no age adjustment for females for retirees.

Marital Status 60% of members electing N/A N/A coverage are assumed to be married or to have a registered domestic partner. Male spouses are assumed to be two years older than their female spouses.

115 116 Notes to Financial Statements The City of Seattle

Table 10-7 OPEB INFORMATION (continued) Table 11-1 CONDENSED STATEMENT OF NET ASSETS THE SEATTLE PUBLIC LIBRARY FOUNDATION Healthcare Blended Firemen’s Pension Police Relief and Pension Description Premium Subsidy (LEOFF1) (LEOFF1) December 31, 2008

Assumptions (continued): (In Thousands)

Morbidity Factors N/A N/A Restated 2008 2007 Traditional Plan Morbidity rate ranges assumed for ages 50 through 64 are as follows: ASSETS 100.5% to 166.3% for male retirees, 74.0% to 122.5% for Cash, Investments, and Other Assets $ 42,653 $ 57,237 female retirees, 141.8% to 234.7% Capital Assets, Net 7 8 for male spouses, and 104.5% to 172.9% for female spouses. Total Assets 42,660 57,245

Preventive Plan Morbidity rate ranges assumed for LIABILITIES ages 50 through 64 are as follows: 105.10% to 173.9% for male Current Liabilities 1,014 989 retirees, 77.4% to 128.1% for female retirees, 139.9% to 231.6% Total Liabilities 1,014 989 for male spouses, and 103.1% to 170.6% for female spouses. NET ASSETS

For these two plans, because the Invested in Capital Assets, Net of Related Debt 7 8 retirees’ spouses pay a lower Restricted 30,433 38,166 premium for their health care Unrestricted 11,206 18,082 coverage than the retirees, the net cost to the City for the spouse Total Net Assets $ 41,646 $ 56,256 coverage is greater than for a retiree of the same gender and age. The morbidity factors were adjusted to reflect this discrepancy. Table 11-2 CONDENSED STATEMENT OF ACTIVITIES Group Health Standard and Morbidity rate ranges assumed for THE SEATTLE PUBLIC LIBRARY FOUNDATION Deductible Plans ages 50 through 64 for retirees and spouses are: 113.3% to For Year Ended December 31, 2008 187.5% for males and 83.4% to 138.1% for females. (In Thousands)

Other Considerations Active employees with current N/A N/A Restated spouse and/or dependent coverage are assumed to elect the same plan 2008 2007 and coverage. PROGRAM REVENUES

Contributions/Endowment Gain $ 3,342 $ 4,270

GENERAL REVENUES (11) COMPONENT UNIT Investment Income (Loss) (10,485) 3,343 SEATTLE PUBLIC LIBRARY FOUNDATION Total Program Support and Revenues (Loss) (7,143) 7,613 EXPENSES The Seattle Public Library Foundation is a Washington non-profit corporation, a public charity organized exclusively for Support to Seattle Public Library 4,731 3,693 educational, charitable, and scientific purposes to benefit and support the Seattle Public Library. The Foundation provides Management and General 380 395 goods, services, and facilities above the tax-based funding of the Seattle Public Library. The Foundation is located in Fundraising 392 389 Seattle, governed by a Board of Directors, and possesses all the requisite corporate powers to carry out the purposes for which it was formed. Total Expenses 5,503 4,477 DIVESTED ACTIVITIES The City of Seattle is not financially accountable for the Seattle Public Library Foundation. The Foundation is considered a component unit in accordance with GASB Statement No. 39, Determining Whether Certain Organizations Are Component Transfer of Net Assets to Washington Talking Book & Braille Library (1,964) - Units—an amendment of GASB Statement No. 14, and is presented discretely in the City’s financial statements because Total Divested Activities (1,964) - (1) the economic resources received or held by the Foundation are entirely for the direct benefit of the Seattle Public Library; (2) the Seattle Public Library is legally entitled to access a majority of the economic resources received or held by Change in Net Assets (14,610) 3,136 the Foundation; (3) the economic resources received or held by the Foundation are significant to the Seattle Public Library. NET ASSETS The Seattle Public Library Foundation reports on a fiscal year-end consistent with the City of Seattle, the primary Net Assets - Beginning of Year 56,256 53,120 government. The Foundation issues its own audited financial statements. Please note that the figures stated last year for 2007 were preliminary and changed post audit; in addition, year 2007 was restated as noted below. To obtain complete Net Assets - End of Year $ 41,646 $ 56,256 audited statements for all years, please contact: Seattle Public Library Foundation, 1000 Fourth Avenue, Seattle, WA 98104, phone (206) 386-4130.

117 118 Notes to Financial Statements The City of Seattle

The Foundation restated its financial statements for 2007 for: 1) Certain net assets that relate to contributions to the CITY LIGHT Libraries for All Capital Campaign from 1999 through 2007 were previously classified as restricted. However, a 2008 review of the contributions revealed that $6.3 million of the contributions did not have a donor-imposed restriction, with $1.4 million remaining at the end of 2007. The effect of this was an increase in Unrestricted Net Assets and a decrease in Energy received under long-term purchased power agreements in average annual megawatts (aaMW) is shown in the Restricted Net Assets for $1.4 million with no effect on the total net assets. 2) It was discovered in 2008 that receipts from following table. 2005 through 2007 processed by the Foundation on behalf of the Seattle Public Library that represent payments for space rental under rental agreements were recorded by the Foundation as its own service fee revenues. The Foundation restated its Table 13-1 LONG-TERM PURCHASED POWER results for the affected years by reducing unrestricted net assets at the beginning of 2007 by $120,939 with the change in net (In Average Annual Megawatts) assets for 2007 reduced by $53,157. 2008 2007

Bonneville Power Administration Block 239.0 242.2 Bonneville Power Administration Slice 412.1 411.3

(12) JOINT VENTURES Lucky Peak 35.4 31.2 British Columbia - Ross Dam 35.3 35.8 SEATTLE-KING COUNTY WORKFORCE DEVELOPMENT COUNCIL State Line Wind 49.2 44.0 Grant County Public Utility District 2.6 2.9 The Seattle-King County Workforce Development Council (WDC) is a joint venture between King County and the City of Grand Coulee Project Hydroelectric Authority 29.6 29.1 British Columbia-Boundary Encroachment 1.9 1.9 Seattle. It was established as a nonprofit corporation in the State of Washington on July 1, 2000, as authorized under the Renewable Energy 2.2 - Workforce Investment Act (WIA) of 1998. It functions as the Department of Labor pass-through agency to receive the Exchange Energy at fair value 17.1 6.3 employment and training funds for the Seattle-King County area. The King County Executive and the Mayor of the City of Long-Term Purchased Power Booked Out (34.9) (22.5) Seattle, serving as the chief elected officials (CEO) of the local area, have the joint power to appoint the members of the WDC board of directors and the joint responsibility for administrative oversight. An ongoing financial responsibility exists Total Long-Term Purchased Power 789. 5 782. 2 because the CEO is potentially liable to the grantor for disallowed costs. If expenditure of funds is disallowed by the grantor agency, the WDC can recover the funds in the following order: (1) the agency creating the liability; (2) the insurance carrier; (3) future program years; and (4) as a final recourse, from King County and the City of Seattle who each will be Purchased and Wholesale Power responsible for one-half of the disallowed amount. As of December 31, 2008, there are no outstanding program eligibility issues that may lead to a City of Seattle liability. Bonneville Power Administration

The WDC contracts with the City of Seattle which provides programs related to the WIA Youth In-School Program. For the City Light (the Utility) purchases electric energy from the U.S. Department of Energy, Bonneville Power Administration year 2008, WDC has paid $0.5 million to the City of Seattle. (BPA), under the Block and Slice Power Sales Agreement, a 10-year contract that expires September 30, 2011. The agreement provides power equal to the Utility’s annual net requirement, defined as the difference between projected load The WDC issues independent financial statements that may be obtained from its offices at 2003 Western Avenue, Suite 250, and firm resources declared to serve that load. The Block product provides fixed amounts of power per month. Seattle, WA 98121-2162. The Utility and BPA amended the Block agreement in 2006 to enable the Utility to participate in the BPA Flexible Priority Firm (PF) Program. Under the provisions of this program, the Block product is subject to a Flexible PF Charge on a power bill increasing the amount payable by the Utility for power service in a given month followed by reductions in the amount payable for power service in subsequent months until the charge is recovered. Participation in the program provides the (13) COMMITMENTS Utility with a monthly discount on its Block bill whether or not the Flexible PF Charge is applied. In order to participate, the Utility was required to enter into an irrevocable standby letter of credit for $16.5 million issued by the Bank of America GENERAL with a term from October 1, 2006 through September 30, 2009. The Flexible PF Charge was not applied in 2008 or 2007. The terms of the Slice product specify that the Utility will receive a fixed percentage (4.6676 percent) of the actual output of Capital Improvement Program the Federal Columbia River Power System. The cost of Slice power is based on the Utility’s same percentage (4.6676 percent) of the expected costs of the system and is subject to true-up adjustments based on actual costs with The City adopted the 2008-2009 Capital Improvement Program (CIP) which functions as a capital financing plan totaling specified exceptions. Subsequent amendments to the contract provide that BPA will pay the Utility for qualified energy $3.8 billion for the years 2008-2013. The adopted CIP for 2008 was $671.5 million, consisting of $435.2 million for City- savings realized through specified programs and decrement Block purchases accordingly. owned utilities and $236.3 million for nonutility departments. The utility allocations are: $262.0 million for City Light, $79.5 million for Water, $73.8 million for Drainage and Wastewater, $10.0 million for Solid Waste, and $9.9 million for BPA’s Residential Exchange Program (REP) was established as a mechanism to distribute financial benefits of the Federal Seattle Public Utilities’ technology projects. Expenditures may vary significantly based upon facility requirements and Columbia River Power System to residential customers of the region’s investor owned utilities (IOUs). In May 2007, the unforeseen events. A substantial portion of contractual commitments relates to these amounts. Ninth Circuit Court rulings found the 2000 REP Settlement Agreements with IOUs inconsistent with the Northwest Power Act. In 2008 the Utility received $24.4 million in interim payments and billing credits related to both the Block and Slice agreements.

In December 2008 the Utility entered into a new contract to purchase both Block and Slice energy from BPA for the period October 1, 2011 through September 30, 2028. The Block quantities, Slice percentage, and BPA rates were not finalized as of the end of 2008. Accordingly, certain estimates and assumptions were used in the calculations in the estimated future payments table below.

119 120 Notes to Financial Statements The City of Seattle

Lucky Peak Table 13-2 ESTIMATED FUTURE PAYMENTS UNDER PURCHASE POWER CONTRACTS AND TRANSMISSION CONTRACTS In 1984 the Utility entered into a purchase power agreement with four irrigation districts to acquire 100 percent of the net surplus output of a hydroelectric facility that began commercial operation in 1988 at the existing Army Corps of Engineers (In Thousands) Lucky Peak Dam on the Boise River near Boise, Idaho. The irrigation districts are owners and license holders of the project, and the Federal Energy Regulatory Commission (FERC) license expires in 2030. The agreement, which expires in Estimated Year Ending a 2038, obligates the Utility to pay all ownership and operating costs, including debt service, over the term of the contract, December 31 Payments whether or not the plant is operating or operable. To properly reflect its rights and obligations under this agreement, the Utility included as an asset and liability the outstanding principal of the project’s debt, net of the balance in the project’s 2009 $ 257,222 reserve account. The project’s debt matured and was paid in full in July 2008 and accordingly, the asset and liability 2010 278,728 previously recorded were amortized to zero as of December 31, 2008. 2011 274,054 2012 258,907 British Columbia-High Ross Treaty 2013 261,600 2014 - 2018 1,405,881 In 1984 an agreement was reached between the Province of British Columbia and the City of Seattle under which British 2019 - 2023 1,445,214 Columbia will provide the Utility with energy equivalent to that which would have resulted from an addition to the height of b, c Ross Dam. Delivery of this energy began in 1986 and is to be received for 80 years. 2024 - 2028 1,204,439 2029 - 2033 52,340 d In addition to the direct costs of energy under the agreement, the Utility incurred costs of approximately $8.0 million in 2034 - 2038 53,728 prior years related to the proposed addition and was obligated to help fund the Skagit Environmental Endowment 2039 - 2043 3,183 Commission through four annual $1.0 million payments. These other costs were deferred and are being amortized to 2044 - 2065 18,913 purchase power expense over 35 years through 2035. Total $ 5,514,209 Energy Exchanges

a Northern California Power Agency (NCPA) and the Utility executed a long-term Capacity and Energy Exchange Agreement 2009 to 2015 includes estimated REP recoveries from BPA. b in March 1993. The Utility delivers energy to NCPA from June through October 15. NCPA returns energy under BPA transmission contract expires July 31, 2025. c conditions specified in the contract at a 1.2:1 ratio of exchange power from November through April. The agreement, which BPA new Block and Slice contract expires September 30, 2028. includes a financial settlement option, may be terminated effective May 31, 2014, or any May 31 thereafter with seven d years’ advance written notice by either party. Lucky Peak contract expires September 30, 2038.

Renewable Energy Purchase and/or Exchanges The effects of changes that could occur to transmission as a result of FERC’s implementation of the Federal Power Act as amended August 8, 2005, are not known and are not reflected in the estimated future payments except for inclusion of costs associated with ColumbiaGrid. The Utility executed an agreement in January 2007 with ColumbiaGrid, a nonprofit The Energy Independence Act, Chapter 19.285 Revised Code of Washington, requires qualifying utilities in Washington membership corporation formed to improve the operational efficiency, reliability, and planned expansion of the Northwest State to meet certain annual targets of eligible new renewable resources and/or equivalent renewable energy credits as a transmission grid. percentage of total energy delivered to retail customers. The annual targets are: at least 3 percent by 2012, at least 9 percent by 2016, and at least 15 percent by 2020. Similar legislation is in effect or contemplated in other states. Long-term renewable purchase or exchange agreements were executed with the Sacramento Municipal Utility District in 2007 and City Payments under these long-term power contracts totaled $219.2 million and $230.8 million in 2008 and 2007, respectively. of Redding in 2008. There were no renewable energy transactions with City of Redding during 2008. Payments under the transmission agreements amounted to $39.9 million and $37.1 million in 2008 and 2007, respectively.

Fair Value of Exchange Energy Skagit and South Fork Tolt Licensing Mitigation and Compliance

Receivable and deferred balances at December 31, 2008, were based on an income valuation technique that utilized Platts In 1995 FERC issued a license for operation of the Skagit hydroelectric facilities through April 30, 2025. On July 20, 1989, M2M Power Curves, Dow Jones U.S. Daily Electricity Price Indexes for settled deliveries, and interest rate forecasts from the FERC license for operation of the South Fork Tolt hydroelectric facilities through July 19, 2029, became effective. As a HIS Global Insight that are used to calculate discount rates. Risk was evaluated internally resulting in no valuation condition for both of these licenses, the Utility has taken and will continue to take required mitigating and compliance adjustments. measures. Total Skagit mitigation costs, excluding Endangered Species Act (ESA) costs, from the effective date until expiration of the federal operating license were estimated at December 31, 2008, to be $97.4 million, of which $63.7 million Estimated Future Payments under Purchase Power and Transmission Contracts had been expended. South Fork Tolt costs were estimated at $5.3 million, of which $1.8 million was expended through 2008. Capital improvements, other deferred costs, and operations and maintenance costs are included in the estimates for both licenses. The Utility’s estimated payments under its contracts with BPA, the Public Utility Districts (PUDs), irrigation districts, Lucky Peak Project, British Columbia – High Ross Agreement, PacifiCorp Power Marketing Inc. (now Iberdrola Renewables), and PacifiCorp for wind energy and net integration and exchange services, and for transmission with BPA, Application Process for New Boundary License ColumbiaGrid, and others for the period from 2008 through 2065, undiscounted, are shown in the following table. The Utility’s FERC license for the Boundary Project expires on September 30, 2011. The Utility intends to submit an application for a new license by September 30, 2009. Application process costs are estimated at $61.3 million, of which $36.2 million had been expended and deferred as of December 31, 2008. A new license may require additional mitigation efforts for endangered species, including water quality standards, the full extent of which is not known at this time. Cost projections for new license requirements are not included in the forecast.

Endangered Species

Several fish species that inhabit waters where hydroelectric projects are owned by the Utility or where the Utility purchases power have been listed under the Endangered Species Act (ESA) as threatened or endangered. On the Columbia River System, the National Oceanographic Atmospheric Administration (NOAA) Fisheries has developed a broad species recovery plan for listed salmon and steelhead, including recommendations for upstream and downstream fish passage 121 122 Notes to Financial Statements The City of Seattle

requirements. These requirements include minimum flow targets for the entire Columbia Basin designed to maximize the SEATTLE PUBLIC UTILITIES (SPU) survival of migrating salmon and steelhead. As a result, the Utility’s power generation at its Boundary Project is reduced in the fall and winter when the region experiences its highest sustained energy demand. The Boundary Project’s firm capability is also reduced. Water Fund

In Puget Sound both bull trout and Chinook salmon were listed as threatened species in 1999 by the U.S. Fish and Wildlife Habitat Conservation Program Liability Service (USFWS) and NOAA Fisheries, respectively. In 2007, NOAA Fisheries also listed steelhead as threatened in Puget Sound. These ESA listings affect City Light’s Skagit, Tolt, and Cedar Falls hydroelectric projects. Bull trout are present in SPU prepared a comprehensive environmental management plan for its Cedar River Watershed. The purpose of the Habitat the waters of Skagit and Cedar River projects, including the reservoirs; and incidental observations have been made in the Conservation Plan (HCP) is to protect all species of concern that may be affected by SPU and City Light in the Cedar River Tolt River downstream of Tolt Reservoir. Chinook salmon and steelhead are present downstream of all of these projects. Watershed while allowing the City to continue to provide high quality drinking water to the region. The federal government has accepted the HCP. The total cost of implementing the HCP is expected to be $99.6 million (in 2008 dollars) over a A draft recovery plan and proposed critical habitat for Puget Sound bull trout was issued by the U.S. Fish and Wildlife period of 50 years. Expenses are being funded from a combination of operating revenues and debt. The cost of HCP to SPU Service in July 2004. The Puget Sound bull trout recovery plan was finalized by the USFWS in 2008. The USFWS is is $57.0 million thru 2008. The remaining cost of $42.6 million is comprised of a $9.6 million liability and an estimate of presently completing a five-year review of the bull trout listing, which designated this species as listed within coterminous $33.0 million for construction and operating commitments. The construction activities will be capitalized and the operating United States. Critical habitat was designated for bull trout by the USFWS, and includes the Skagit and Tolt Rivers and activities will be expensed as incurred. Lake Washington downstream of the Cedar River. All critical habitat designations are downstream of the City Light’s projects. Muckleshoot Liability

The City of Seattle’s reservoirs (Ross, Diablo, Gorge, Tolt, and Chester Morse) were not designated as critical habitat for The City of Seattle is committed to work with the Muckleshoot Tribe in order to achieve salmon recovery in the Cedar bull trout. The final recovery plan for Puget Sound Chinook salmon was developed by regional stakeholders under the River-Lake Washington system. The Tribe’s exercise of its treaty rights to hunt and gather in the Cedar River Municipal authority of NOAA Fisheries and was adopted by NOAA Fisheries in January 2007. Critical habitat has been designated for Watershed, its interest in wildlife management in the Watershed, and its interest in conducting traditional activities are being Puget Sound Chinook salmon and includes that mainstream rivers downstream of the City’s hydroelectric projects. The addressed in an agreement between the Muckleshoot Tribe, the National Marine Fisheries Service, and the City of Seattle. recovery planning process for Puget Sound steelhead was initiated by NOAA Fisheries in 2008. In 2005 the Water Fund committed $14.0 million to the Muckleshoot Tribe for fishery purposes, $2.5 million for wildlife studies, $0.5 million for habitat improvements, and $1.0 million in lieu of properties on the White River and at Yakima Pass. The Puget Sound Steelhead Technical Recovery Team is presently identifying the distinct populations and recovery targets The Water Fund recorded a liability of $18.0 million in 2005 and increased the liability by $0.5 million in 2006 due to an for in the region. While it is unknown how other listings will affect the Utility’s hydroelectric projects and operations, the increase in expected costs to acquire Yakima Pass land. The costs of $3.0 million for wildlife studies and habitat Utility is carrying out an ESA Early Action program in cooperation with agencies, tribes, local governments, and salmon improvements were deferred and amortized over a 10-year period beginning in 2006. The remainder of costs was groups for bull trout, Chinook salmon, and steelhead. capitalized in 2006 as land rights.

The Utility has been participating in the implementation of the Chinook salmon recovery plan on both regional and In 2006 the Water Fund paid $17.0 million to the Muckleshoot Tribe. In 2008 the Water Fund paid $1.3 million in lieu of watershed levels. On the Cedar, the Utility’s activities are covered by a Habitat Conservation Plan that authorizes operations the White River property. The remaining $0.5 million liability was held for the purchase of the Yakima Pass property to be with regard to all listed species. In addition to the ESA, hydroelectric projects must also satisfy the requirements of the transferred to the Tribe after acquisition. Due to delays in acquiring the Yakima Pass property, the remaining $0.5 million Clean Water Act in order to obtain a FERC license. Total costs through 2011, estimated at December 31, 2008, for the ESA liability was recorded in the other noncurrent liabilities. were $38.5 million, of which $31.9 million had been expended. Distribution System Reservoirs Project Impact Payments The Water Fund is required by the Washington State Department of Health (WDOH) to complete a program to cover its Effective November 1999 the Utility committed to pay a total of $11.6 million and $7.8 million over ten years ending in open, above-ground distribution system reservoirs by the year 2020. The total cost of burying five reservoirs is expected to 2008 to Pend Oreille County and Whatcom County, respectively, for impacts on county governments from the operations of be approximately $162.7 million through the year 2013, and the cost beyond 2013 is not estimable. The total cost incurred the Utility’s hydroelectric projects. The payments compensate the counties and certain school districts and towns located in as of December 31, 2008, was $67.2 million. Seattle Public Utilities has $13.3 million of authorized Public Works Trust these counties for lost revenues and additional financial burdens associated with the projects. The Boundary Project located loans from WDOH to fulfill its obligation to improve the security of the drinking water system. As of December 31, 2008, on the Pend Oreille River affects Pend Oreille County, and Skagit River hydroelectric projects affect Whatcom County. The an amount of $10.3 million was outstanding on the loans and $3.0 million was authorized and available. combined impact compensation, including an annual inflation factor of 3.1 percent and retroactive payments totaled $1.4 million and $1.3 million to Pend Oreille County, and $0.9 million and $0.9 million to Whatcom County in 2008 and Untreated Water Supply Contract 2007, respectively. The Seattle City Council authorized a contract with the City of North Bend to provide untreated water for mitigation Effective February 2009 the Utility renewed its contract with Whatcom County, committing to pay a total of $15.8 million purposes. SPU executed the contract with North Bend on February 7, 2008. Under the contract the Utility will supply water over 15 years ending in 2023. The Utility is currently in negotiations with Pend Oreille County. up to an annual average of 1.1 million gallons per day at the basic services rates until January 1, 2067.

Streetlight Litigation Drainage and Wastewater Fund In November 2003 the Washington Supreme Court ruled that a 1999 ordinance related to inclusion of streetlight costs in the Utility’s general rate base for Seattle and Tukwila customers was unlawful. As a result of this decision the Utility resumed Wastewater Disposal Agreement billing the City for streetlight costs. In May 2004, trial court proceedings resulted in a ruling that required the Utility to refund the amount collected from ratepayers since December 1999 attributable to streetlight costs. A total of $20.0 million SPU has a wastewater disposal agreement with the King County Department of Natural Resources Wastewater Treatment in refunds, net of attorney and administrative fees, was paid to ratepayers by the end of December 2006. Division expiring in 2036. The monthly wastewater disposal charge paid to the Division is based on the Division's budgeted cost for providing the service. The charges are determined by water consumption and the number of single-family In 2006 the State Supreme Court also ruled that certain greenhouse gas offset contracts must be paid for by the City’s residences as reported by SPU and other component agencies. The 2008 and 2007 payments to the Division were General Fund, although the Court reconsidered that decision. approximately $98.0 million and $97.3 million, respectively.

In 2007 the streetlight litigation ended with (1) the State Supreme Court’s denial of a motion for reconsideration of its decision that certain greenhouse gas offset contracts must be paid for by the City’s General Fund rather than the Utility and (2) the Court of Appeals award of approximately $1.3 million in attorney fees for causing for the Utility to change its ordinance governing certain utilities relocation expenses related to Sound Transit construction. The Utility paid just over $1.0 million of the award and another City of Seattle department paid the remainder. 123 124 Notes to Financial Statements The City of Seattle

Solid Waste Fund (14) CONTINGENCIES

Contractual Obligations The City is exposed to the risk of loss from torts, theft of or damage to assets, business interruption, errors or omissions, law enforcement actions, contractual actions, natural disasters, failure to supply utilities, environmental regulations, and other The City contracts with private companies for the collection of residential garbage, yard waste, and recycling. The contracts third-party liabilities. The City also bears the risk of loss for job-related illnesses and injuries to employees. The City has include certain additional costs related to bulky items collection and backyard service. Residential collection contracts with been self-insured for most of its general liability risks prior to January 1, 1999, for workers’ compensation since 1972, and two private companies were consummated in April 2000. The contracts were scheduled to end on March 31, 2007. In 2007 for employees' health care benefits starting in 2000. the City extended the contracts until March 31, 2009. Total payments under the current contracts during 2008 and 2007 were $22.0 million and $22.4 million, respectively. Since January 1, 1999, the City obtained excess general liability insurance coverage for occurrences on or after said date which covers losses over $2.5 million per occurrence self-insured retention, with a $25.0 million limit per occurrence and in In 1990 the City signed a 38-year contract with Washington Waste Systems (WWS) for the disposal of nonrecyclable City the aggregate. Starting February 1, 2002 through 2006, the City's excess general liability insurance covers losses over waste, including the City’s commercial waste collected by two state-franchised haulers. In 1996 and again in 2001 the City $5.0 million per occurrence self-insured retention, with a $25.0 million limit per occurrence and in the aggregate. In renegotiated this contract to extend the first date at which it can choose to unilaterally terminate the contract from March 31, June 2007 the limit was increased to $30.0 million over a $5.0 million self-insured retention. 2000, to March 31, 2009. In exchange, WWS agreed to change the contract prices from $44.87 per ton in 1996 to $41.57 per ton beginning April 1, 1997, and $43.73 per ton beginning April 1, 2002. In addition, WWS agreed to reduce the The City also purchased an all-risk comprehensive property insurance policy that provides $500.0 million in limits, subject price escalator in the contract from 90 percent of the Seattle-Tacoma CPI to 80 percent, effective April 1, 1998, and to to various deductible levels depending upon the type of asset and value of the building. This includes $100.0 million in 70 percent of CPI beginning April 1, 2003. WWS also agreed to further reduce the CPI-adjusted tonnage rate by $1.50 per earthquake and flood limits. Hydroelectric and other utility producing and processing projects owned by the City are not ton for rates effective April 1, 2003, 2005, and 2007. The Utility paid WWS $17.6 million in 2008 and $19.5 million in covered by the property policy. The City also purchased insurance for excess workers’ compensation, fiduciary and crime 2007 under this contract. liability, inland marine transportation, volunteers, and an assortment of commercial general liability, medical, accidental death and dismemberment, and miscellaneous policies. Bonds are purchased for public officials, notaries public, pension For several years the City negotiated with the state-franchised haulers that have collected commercial waste in the City to exposures, and specific projects and activities as necessary. bring them under contract with the City. The negotiations were successful and as of April 1, 2001, commercial garbage is collected under these new contracts. Payments under these contracts totaled approximately $15.3 million and $15.8 million The City did not purchase any annuity contracts in 2008 to resolve litigation. No structured settlements were entered into by in 2008 and 2007, respectively. The contracts were scheduled to expire on March 31, 2008, but the City extended the the City in 2008. No large liability settlements were received in 2008, and a liability settlement of $5.3 million was received contracts to March 31, 2009. As part of these commercial collection contracts, the City also negotiated a long-term yard from an insurer in 2007. No settlements made in 2008, 2007, or 2006 were in excess of insurance coverage. waste processing contract with Cedar Grove Composting, Inc., and changes to the disposal contract. The first opt-out date on the disposal contract was pushed out from March 31, 2006, to March 31, 2009, for price reductions of $1.50 per ton in Claims liabilities are based on the estimated ultimate cost of settling claims, which include case reserve estimates and 2003, an additional $1.50 per ton in 2005, and a final $1.50 per ton in 2007. Under this contract the Utility paid $1.7 million incurred but not reported (IBNR) claims. Liabilities for lawsuits and other claims are assessed and projected annually using and $1.8 million in 2008 and 2007, respectively. historical claims, lawsuit data, and current reserves. The Personnel Department estimates case reserves for workers’ compensation using statistical techniques and historical experience. The ultimate cost of settling claims was estimated for Landfill Closure and Postclosure Care lawsuits, workers’ compensation, and other claims based on independent actuarial studies performed in 2008 on data as of year-end 2007 and for health care as of year-end 2008. IBNR undiscounted totaled $52.1 million and $7.2 million at At December 31, 2008 and 2007, accrued landfill and postclosure costs consisted primarily of monitoring, maintenance, and December 31, 2008 and 2007, respectively. The $44.9 million increase in the IBNR amount in 2008 compared to 2007 was repair costs. It is the City Council’s policy to include the Fund’s share of all landfill closure and postclosure costs in the mainly due to the higher estimates of liabilities by $21.1 million while the liability reserves decreased by $22.5 million. revenue requirements used to set future solid waste rates. Therefore, total estimated landfill closure and postclosure care Changes in the reserves and liability estimates for workers’ compensation claims accounted for the remaining $1.3 million costs are accrued and also reflected as deferred costs in the accompanying financial statements. These costs are being change in IBNR. amortized as they are recovered from ratepayers. Actual costs for closure and postclosure care may be higher due to inflation, changes in technology, or changes in regulations. Such amounts would be added to the liability and deferred costs Estimated claims expenditures are budgeted by the individual governmental and proprietary funds. Actual workers’ when identified. compensation claims are processed by the General Fund and reimbursed by the funds that incurred them. Operating funds pay health care premiums to the General Fund, and the latter pays for all actual health care costs. The General Fund In prior years SPU delivered its refuse to two leased disposal sites: Midway and Kent-Highlands landfills. Subsequent to originally pays for lawsuits, claims, and related expenses and receives reimbursements from City Light, Water, Drainage signing the original lease agreement, federal and state requirements for closure of landfill sites were enacted. The Solid and Wastewater, Solid Waste, and the retirement funds for payments and expenses incurred by these funds. Waste Fund stopped disposing of municipal waste at the Midway site in 1983 and at the Kent-Highlands site in 1986. Claims liabilities include claim adjustment expenditures if specific and incremental to a claim. Recoveries from unsettled Subsequent to their closings both Kent-Highlands and Midway landfills were declared Superfund sites by the federal claims, such as salvage or subrogation, and on settled claims are deposited in the General Fund and do not affect reserves for government. In the same time period nearby landowners, residents, and the federal and state governments made various general government. Workers’ compensation annual subrogation recoveries amounted to $0.2 million in both years 2008 claims of damages related to these landfills and sought various forms of relief. These claims have been settled, and the City and 2007. All workers’ compensation recoveries are deposited into the General Fund. Lawsuit and other claim recoveries does not anticipate further actions related to the Kent-Highlands and Midway landfills. Any future changes in the accrued of payments reimbursed by the utilities are deposited into the paying utility fund and do not affect the utility reserves. landfill liability will be reflected in Solid Waste Fund rates. Claim liabilities recorded in the financial statements are discounted at 3.905 percent for 2008 and 5.075 percent for 2007, In 1996 the City filed suit against various parties that disposed of waste at the Kent-Highlands landfill. In its suit the City the City's average annual rates of return on investments. The total discounted liability at December 31, 2008, was asserted that these parties (according to the Comprehensive Environmental Response, Compensation and Liability Act) were $117.4 million consisting of $87.2 million for general liability, $3.2 million for health care, and $27.0 million for workers’ liable for a portion of the cost of closing the Kent-Highlands landfill. The City completed settlement with the defendants in compensation. this suit in December 1997 and has recovered approximately $2.2 million. The City settled a similar suit relating to the Midway landfill in 1994 and has since recovered $6.4 million. The City does not anticipate any further legal actions relating to either landfill.

125 126 Notes to Financial Statements The City of Seattle

Table 14-1 RECONCILIATION OF CHANGES IN currently are in excess of $100.0 million. In 2003 FERC declined to grant refunds on the grounds that there was no equitable way to do so. The City and other parties appealed to the Ninth Circuit. In August 2007 on appeal from an AGGREGATE LIABILITIES FOR CLAIMS adverse decision by FERC, the Ninth Circuit held that FERC had abused its discretion in denying all refund relief in the (In Thousands) Pacific Northwest and remanded the consideration of refunds to FERC. Petitions for rehearing before the Ninth Circuit are pending. General Liability Health Care Workers’ Compensation Total City Joint Training Facility. In May 2005 the Army Corps of Engineers issued a stop-work order to the Fleets and Facilities 2008 2007 2008 2007 2008 2007 2008 2007 Department regarding construction of the City’s Joint Training Facility. The Corps contended that the City had violated the Federal Clean Water Act by filling a wetland without a permit. In 2006 the City and the Corps finalized a settlement UNDISCOUNTED agreement that required the City to perform mitigation on the Joint Training Facility site and also on a site adjacent to the Duwamish River. This matter is considered resolved after the City completed the wetland mitigation work required in its Balance - Beginning of Fiscal Year $ 77,139 $ 53,536 $ 3,424 $ 3,188 $ 28,949 $ 25,197 $ 109,512 $ 81,921 Less Payments and Expenses settlement with the Army Corps of Engineers. During the Year (26,017) (15,364) (69,836) (66,765) (11,582) (11,609) (107,435) (93,738) Plus Claims and Changes in Estimates 47,098 38,967 69,693 67,001 13,444 15,361 130,235 121,329 World Trade Organization (WTO) Conference. The WTO Conference was held in Seattle in 1999. This event spawned 407 claims and 26 lawsuits against the City. All of these claims and actions have been resolved. No material amounts Balance - End of Fiscal Year $ 98,220 $ 77,139 $ 3,281 $ 3,424 $ 30,811 $ 28,949 $ 132,312 $ 109,512 were paid in 2009 and since the City’s insurance company has accepted responsibility for all exposures in excess of the self-insured retention amount, which has been exhausted, no further monies will be paid by the City. UNDISCOUNTED BALANCE AT END OF FISCAL YEAR CONSISTS OF State Route 519 Improvements. Part of these improvements included the movement of a Burlington Northern Santa Fe Railroad (BNSF) spur track. The City and BNSF entered into a contract regarding the movement of the spur track. In Governmental Activities $ 70,932 $ 56,388 $ 3,281 $ 3,424 $ 22,303 $ 21,109 $ 96,516 $ 80,921 Business-Type Activities 27,287 20,750 - - 8,508 7,840 35,795 28,590 part, the contract provided that BNSF would move its spur track upon the City’s construction contractor providing BNSF Fiduciary Activities 11----11 with the contractually specified notice. Even though BNSF was given the required notice, BNSF failed to move the spur track. As a result, the City has paid material sums of money for an improvement that is not usable unless the spur rack is Balance - End of Fiscal Year $ 98,220 $ 77,139 $ 3,281 $ 3,424 $ 30,811 $ 28,949 $ 132,312 $ 109,512 moved, and the City’s construction contractor has suffered significant delay damages. BNSF has raised several defenses to its failure to move the spur track. The City has not made a formal demand upon BNSF for damages. The likelihood DISCOUNTED/RECORDED BALANCE AT of a material recovery on any claims that may be made against BNSF cannot be predicted. END OF FISCAL YEAR CONSISTS OF Business Tax Refunds. Four cases involving potential tax refunds were filed as follows. (1) A telecommunications Governmental Activities $ 63,011 $ 49,012 $ 3,158 $ 3,259 $ 19,552 $ 17,843 $ 85,721 $ 70,114 company filed a case with the City of Seattle Hearing Examiner in December 2005 challenging approximately Business-Type Activities 24,239 18,035 - - 7,458 6,627 31,697 24,662 $4.0 million to $5.5 million in utility taxes and interest it paid covering the period from January 1997 through Fiduciary Activities 11----11 March 2005. It is not possible to predict the likelihood of a material adverse outcome. (2) An assessment of the City’s 87,251 67,048 3,158 3,259 27,010 24,470 117,419 94,777 telephone utility tax against cable modem providers was appealed. The court ruled in favor of the taxpayer and entered Balance - End of Fiscal Year $ $ $ $ $ $ $ $ judgment against the City for approximately $2.2 million in December 2005. The City paid the judgment in 2005, and the City appealed the adverse ruling. The Court of Appeals reversed the trial court and ruled in favor of the City in Pending litigations, claims, and other matters are as follows: December 2006. A cable company petitioned the Washington Supreme Court for review of the Court of Appeals’ decision. The review was accepted and the Washington Supreme Court ruled in favor of the cable company. No further Boeing West Substation. In 2002 the Boeing Company discovered PCB contamination in soil adjacent to a City Light amounts are due and owing. (3) A health care organization appealed an assessment of the City’s business and substation at Boeing’s Plant 2. Boeing claims the contamination came from City Light equipment and that City Light is occupation (B&O) tax on income received for its provision of medical services to its members. The company challenged therefore liable for more than $2.0 million that Boeing has spent and is still spending to investigate and remove the assessment, alleging that the income is exempt from the measure of tax because it is income derived from insurance contaminated material. City Light denies that its equipment was the source and considers its liability to be zero. premiums rather than from rendition of medical services. The company also challenged the legality of B&O tax in However, whether or not City Light will ultimately be deemed liable is unknown. general arguing that the City has not complied with state law requiring it to impose interest on delinquent taxes in accordance with state law, thus invalidating the City’s B&O tax. The Court of Appeals ruled in favor of the City on the Storage Tanks. Seattle Public Utilities (SPU) anticipates future environmental cleanup costs related to lead-based paint issue of validity of the City’s B&O tax in July 2008. However, the Court ruled in favor of the health care organization and arsenic contamination surrounding several standing water tanks, as well as expected remediation efforts associated on the issue of premiums, resulting in a refund of the full amount of the assessment plus interest. No further amounts are with underground fuel tank replacements. SPU’s liability relating to City property remediation and to possible private due and owing. (4) A Seattle-based company appealed its B&O tax assessment in 2008. The case is set for a hearing claimants is indeterminate. before the City of Seattle Hearing Examiner in June 2009. The issue on appeal is whether the company is allowed to allocate the income earned from its 450 Seattle-based employees to a California Limited Liability Company. The California company has no employees and no property. The company performs services in Seattle and, pursuant to a City Light Energy Crisis Litigation. The City is involved in various legal proceedings relating to the enormous price contract with the California company, sends out invoices in the California company’s name. The Department of spikes in energy costs in California and the rest of the West Coast in 2000 and 2001. Executive Administration, Revenue and Consumer Affairs assessed the Seattle company for the income. If the Seattle company prevails, it is possible that other companies will attempt to use similar structures to avoid taxes. It is not California Refund Case, Appeals, and Related Litigation. In the proceeding before the Federal Energy Regulatory possible to predict the likelihood of a material adverse outcome. Commission (FERC) various public and private California entities sought refunds in wholesale electric markets that had been created by the State of California. City Light had sold energy in one of these markets. The City faced potential Costs Charges to Ratepayers. The class action plaintiffs alleged that fire hydrant costs were improperly paid by SPU liability of approximately $6.5 million, subject to offsets. In 2001 FERC ordered refunds to the extent that actual energy water ratepayers in Seattle and the suburbs. The plaintiffs sought refunds of the costs of fire hydrant service. Most of prices exceeded rates that FERC determined to be “just and reasonable.” On appeal the Court of Appeals for the Ninth the issues in this case were resolved in prior years. In 2007 the City briefed and/or argued two issues on the appellate Circuit held that FERC has no authority to order governmental entities such as the City to pay refunds. Following this level: (1) the City’s authority to increase an excise tax upon SPU in the amount necessary for the General Fund to pay ruling the three major California investor-owned utilities sought refunds from City Light and other governmental entities the ongoing costs of fire hydrants and (2) whether statutory interest or a significantly less expensive “cost of money” in federal district court on a breach of contract theory. In March 2007 the court dismissed all claims on procedural approach should be applied to refunds previously made by SPU to ratepayers. In addition, the suburban cities appealed grounds. The investor-owned utilities have appealed the dismissal and also have filed a lawsuit in state court in the trial court decision that their general funds should pay for fire hydrants. California against the same governmental entities and on the same theory as in the federal action. In April 2007 the three major California investor-owned utilities refiled their claims in state court. In December 2007 the trial court denied a request to dismiss the case. It is impossible to predict whether a material adverse outcome will occur. In October 2008 the Washington Supreme Court ruled in the City’s favor on the excise tax issue, holding that the City had the authority to impose the tax on SPU. However, the Court disagreed with the position taken by the City on the interest rate issue, holding that the City must pay the statutory rate of 12 percent interest on refund payments. The King Pacific Northwest Refund Case and Appeal. In the proceeding before FERC various sellers of energy, including the County Superior Court entered final judgment in the case in December 2008. The judgment required the General Fund City, sought refunds on energy sales in the Pacific Northwest between May 2000 and June 2001. City Light’s claims to pay SPU $13.6 million plus 3.18 percent interest from the date of the final judgment until paid. The judgment required 127 128 Notes to Financial Statements The City of Seattle

SPU to pay $4.1 million to plaintiffs’ counsel in attorneys’ fees, $37,760 for reimbursement for plaintiffs’ litigation On December 31, 2008, eight accounts remained outstanding with a combined total amount of $20.0 million. BEDI grant expenses, and $5,000 to the class representative. The judgment further required SPU to make refunds to water funds amounting to $1.5 million are being held as loan loss reserves for seven of the eight accounts. ratepayers for fire hydrant expenses that had been included in water bills for the period March 1, 2002, through December 31, 2004, plus 12 percent interest until paid. The total amount to be refunded to ratepayers was $20.3 million plus 12 percent interest less the amounts listed above for attorneys’ fees, litigation expenses, and class representative GUARANTEES OF THE INDEBTEDNESS OF OTHERS payments. Finally, the judgment required the City of Burien to pay SPU $131,533 and required the City of Lake Forest Park to pay SPU $74,171 plus interest on both payments of 3.18 percent interest from April 30, 2007, until paid. The City has contingent liability for the following bonds issued by public development authorities chartered by the City which are not component units of the City: Cedar River Sockeye Hatchery. A lawsuit was filed alleging that the National Marine Fisheries Service erred in issuing an incidental take permit to the City for SPU’s planned construction and operation of a sockeye hatchery based on the Museum Development Authority Cedar River Habitat Conservation Plan. The City intervened as a defendant. It is impossible to predict whether a material adverse outcome will result. If the lawsuit results in SPU being unable to construct the hatchery, then, under a Special obligation bonds issued on November 16, 2005, in the amount of $60,720,000, of which $59,355,000 was settlement of another lawsuit with the Muckleshoot Tribe, SPU would owe the Tribe up to $14.0 million. outstanding at December 31, 2008. The bonds will be fully retired by April 1, 2031.

Grand Coulee Project Hydro Authority (GCPHA) Litigation. The City and the City of Tacoma (the “Cities”) are in an Pike Place Market Preservation and Development Authority ongoing contract dispute with the GCPHA over the amount of incentive payments due to the GCPHA under five identical long-term power purchase contracts. Seattle and Tacoma each are responsible for half of the incentive Special obligation deferred-interest refunding bonds issued on March 7, 1991, in the amount of $1,376,671, of which payments. The paid but disputed amount for contract years 2002 and 2003 (approximately $5.4 million) was submitted $483,742 was outstanding at December 31, 2008. The bonds will be fully retired by November 1, 2011. to an arbitrator in May 2006. Thereafter the GCPHA claimed approximately $2.0 million for the 2004 contract year. The court prevented the GCPHA from collecting on that invoice while the arbitration proceeded but required the Cities Special obligation refunding bonds issued on November 1, 1996, in the amount of $6,210,000 to refund Series 1991A. The to deposit the 2004 disputed amount with the court. The GCPHA then claimed $3.4 million in incentive payments for outstanding amount at December 31, 2008 was $4,630,000. The bonds will be fully retired by December 1, 2021. the 2005 contract year, and the Cities again were ordered to deposit that amount with the court. The arbitrator ultimately decided against the Cities on the 2002 and 2003 contract years, and the court denied the Cities request for refunds. Based on this decision the court released the disputed $5.4 million for contract years 2004 and 2005 to the GCPHA. The Special obligation refunding bonds issued on March 28, 2002, in the amount of $5,925,000, $4,715,000 of which was Cities appealed the trial court’s decision to confirm the arbitrator’s decision. In 2008 the Court of Appeals affirmed the outstanding on December 31, 2008. The bonds will be fully retired on November 1, 2017. trial court and arbitrator decisions, ending the litigation. Seattle Chinatown-International District Preservation and Development Authority Underground Reservoirs Construction. During the course of construction of the new covered underground reservoirs, the City discovered leaking in the roofs of the reservoirs. The City directed the contractor to make repairs. Both the City Special obligation bonds, Series A, issued on December 12, 2002, in the amount of $7,700,000. The outstanding amount at and the contractor filed claims with the City’s builder’s risk insurer. The builder’s risk insurer denied coverage in December 31, 2008 was $2,835,000. The bonds will be fully retired by October 1, 2032. April 2009. The contractor as an additional insured under the builder’s risk policy filed suit against the builder’s risk insurer, claiming that the denial of coverage was made in bad faith and claiming damages of not less than $2.0 million. Special obligation bonds, Series B, issued on December 12, 2002, in the amount of $2,790,000. The outstanding amount at Additionally, as part of its lawsuit the contractor alleged that the leaking was caused by defective design. It is not December 31, 2008 was $2,565,000. The bonds will be fully retired by October 1, 2032. possible to predict the outcome of this matter. Special obligation refunding bonds issued on September 26, 2007, in the amount of $7,355,000 which is outstanding at Other Miscellaneous Lawsuits and Claims. Two cases involving alleged injuries and damages sustained from a collision December 31, 2008. The bonds will be fully retired by August 1, 2026. during a police pursuit and a police action were caused by City negligence. Another lawsuit was filed by a plaintiff’s estate seeking damages for the plaintiff’s alleged wrongful death as the result of a traffic collision involving a City Seattle Indian Services Commission vehicle. The likelihood of material recoveries in these lawsuits and claims are indeterminate. Special obligation refunding bonds issued on March 28, 2002, in the amount of $3,710,000. The amount outstanding at There may be other litigation or claims involving alleged substantial sums of money owing; however, the prospect of December 31, 2008 was $2,700,000. The bonds will be fully retired on November 1, 2017. material adverse outcomes therein is remote. Other than the aforementioned cases and the claim liabilities recorded in the financial statements, there were and are no outstanding material judgments against the City. Special obligation revenue refunding bonds issued on November 1, 2004, in the amount of $5,210,000, of which $5,060,000 was outstanding as of December 31, 2008. The bonds will be fully retired on November 1, 2024. U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) SECTION 108 LOAN PROGRAM The City of Seattle participates in the HUD Section 108 loan program. In the Section 108 program HUD obtains funds from (15) RESTATEMENTS, PRIOR-PERIOD ADJUSTMENTS, CHANGES private investors at a very low cost (i.e., low interest rate). Low-cost funds are available because HUD guarantees repayment to the private investors. HUD, in turn, provides the low-cost funds to jurisdictions nationwide including the City of Seattle. IN ACCOUNTING PRINCIPLES, AND RECLASSIFICATIONS The City re-lends the funds to private borrowers. HUD deposits the funds directly with the City's loan servicing agent, the Bank of New York. The Bank of New York disburses funds on behalf of the City to the private borrowers. Prior-period adjustments in government-wide financial statements under governmental activities include the following: (1) 2008 reduction in work in progress for work done by the Department of Information Technology in the amount of The Brownfields Economic Development Initiative Grant (BEDI) program is a federal grant that is directly linked to the $1.3 million inadvertently recorded as capital asset in 2006 when the asset was actually owned by an outside entity and (2) Section 108 loan program. The City uses BEDI grant funds as a loan loss reserve and interest subsidy on Section 108 loans. 2008 reduction in land of $3.6 million purchased by the Department of Parks and Recreation was accounted twice in the The U.S. Treasury deposits the grant funds with the City. The City then disburses the grant funds to the loan servicing agent. City’s Asset Management system, once in 2000 and again in 2003.

Pursuant to RCW 35.21.735 the City is expressly authorized to participate in the Section 108 loan program. The state statute A prior-period adjustment and a restatement of 2007 liabilities and revenues and expenses and change in equity in and the City's contracts/agreements with HUD clarify that the City never pledges its full faith and credit. Future block grant government-wide financial statements under business-type activities resulted from the implementation of GASB Statement funds are pledged to HUD in the event of borrower default. Each loan is secured by a deed of trust and/or bank-issued letter No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations in the Light Fund. The prior-period of credit that provides the City with security in the event of borrower default. Additionally, the BEDI grant funds may be adjustment represents a decrease of $9.8 million in environmental liabilities at the end of 2006 and a restatement of used by the City to protect against loan default. environmental liabilities at the end of 2007 by an increase of $2.6 million.

129 130 Notes to Financial Statements

The above adjustments affected the 2007 government-wide financial statements as follows: (1) Increased net assets by $2.4 million with reduction of government-wide assets by $4.8 million and net liabilities going down by $7.2 million and (2) Increased changes in net assets for $7.3 million.

Certain reclassifications were made in the financial statements for prior years to conform to the presentation in the current year.

(16) SUBSEQUENT EVENTS

Bond Issues. On March 25, 2009, pursuant to City Ordinance 122848, the City issued the Limited Tax General Obligation Improvement and Refunding Bonds, 2009, in the amount of $99.86 million. The proceeds of the bonds are used to pay for part of the cost of various capital projects and to currently refund all $4.63 million outstanding City-guaranteed Pike Place Special Obligation Bonds, 1996, issued by the Pike Place Market Preservation and Development Authority, a City instrumentality, to realize debt service savings.

On February 4, 2009, the City called all outstanding Municipal Light & Power (ML&P), Series 1990, 1991, 1993, and 1996 adjustable-rate revenue bonds totaling $72.0 million. The refunding bond proceeds of the 2008 ML&P Revenue and Refunding Bonds issued in December 2008 were specifically set aside in the Light Fund’s Debt Service Account for this purpose.

Also on February 4, 2009, the City called all outstanding Municipal Water, Series 1995 and 2002 adjustable-rate revenue bonds totaling $93.0 million. The refunding bond proceeds of the 2008 Municipal Water System Improvement and Refunding Bonds issued in December 2008 were specifically set aside in the Water Fund’s Debt Service Account for this purpose. This page is intentionally left blank. Fair Value of Pooled and Dedicated Investments. On December 16, 2008, the Federal Reserve Board set its target Federal Funds rate to a range from 0 percent to 0.25 percent and has left the rate unchanged at subsequent Federal Open Market Committee meetings on January 28, 2009, March 18, 2009, and April 29, 2009. Interest rates have increased along the yield curve since year-end 2008, but changes in the fair value of the City’s investment pool and dedicated investments have been insignificant through April 2009 due to the short duration of the investments.

Purchase of Land and Related Environmental Remediation. In March 2009 City Light consummated an agreement to purchase land in downtown Seattle for a proposed new substation in the amount of $31.8 million. As part of the agreement, an environmental investigation was performed to assess the nature and extent of existing hazardous substances on the property purchased. The agreement allowed for a remediation credit against the purchase price representing the estimated cost of environmental remediation of the property. The remediation credit was determined to be approximately $6.0 million. City Light is responsible for performing environmental remediation for this purchased property.

131 Required Supplementary Information

This page is intentionally left blank. Required Supplementary Information The City of Seattle

SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN C-1 GENERAL FUND FUND BALANCES – BUDGET AND ACTUAL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL NOTES TO REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended December 31, 2008 (In Thousands)

The schedules of revenues, expenditures, and changes in fund balances – budget and actual are presented on a budgetary basis Budgeted Amounts (Non-GAAP). A reconciliation of the budgetary fund balance to the GAAP fund balance is shown on the face of each schedule. Original Final Actual Variance REVENUES The budgetary basis of accounting is substantially the same as the modified accrual basis of accounting in all governmental funds Taxes except for the treatment of encumbrances that do not lapse, those whose budgets were approved by the Department of Finance to General Property Taxes $ 234,478 $ 234,478 $ 238,258 $ 3,780 carry over to the following year. These encumbrances are included with expenditures in the City’s budgetary basis of accounting. Retail Sales and Use Taxes 175,637 175,637 171,917 (3,720) Business Taxes 221,492 221,492 217,304 (4,188) Excise Taxes 56,146 56,146 36,257 (19,889) Other Taxes - - 2,193 2,193 Interfund Business Taxes 79,666 79,666 79,526 (140) Total Taxes 767,419 767,419 745,455 (21,964) Licenses and Permits 17,294 17,294 18,269 975 Grants, Shared Revenues, and Contributions 25,308 40,493 19,725 (20,768) Charges for Services 49,265 53,370 62,547 9,177 Fines and Forfeits 21,540 21,540 22,110 570 Parking Fees and Space Rent 22,261 22,261 20,625 (1,636) Program Income, Interest, and Miscellaneous Revenues 156,600 156,636 25,932 (130,704) Total Revenues 1,059,687 1,079,013 914,663 (164,350) EXPENDITURES AND ENCUMBRANCES Current General Government 186,859 201,518 181,240 20,278 Judicial 25,988 26,738 26,584 154 Public Safety 401,462 432,486 415,201 17,285 Utilities and Environment 8,166 8,688 8,180 508 Transportation 12,291 12,258 11,355 903 Economic Environment 20,538 26,244 20,871 5,373 Health and Human Services 1,701 951 272 679 Culture and Recreation 15,189 14,506 5,545 8,961 Capital Outlay General Government 46,473 49,940 12,027 37,913 Public Safety 5,067 4,116 2,426 1,690 Utilities and Environment 20 20 5 15 Transportation 10,934 10,934 - 10,934 Economic Environment 7,770 2,720 - 2,720 Culture and Recreation 78,885 75,562 31,191 44,371 Total Expenditures and Encumbrances 821,343 866,681 714,897 151,784

Excess (Deficiency) of Revenues over (under) Expenditures and Encumbrances 238,344 212,332 199,766 (12,566)

OTHER FINANCING SOURCES (USES) Sales of Capital Assets - - 373 373 Transfers In 5,093 4,273 7,440 3,167 Transfers Out (257,917) (266,135) (263,197) 2,938 Total Other Financing Sources (Uses) (252,824) (261,862) (255,384) 6,478

Net Change in Fund Balance $ (14,480) $ (49,530) (55,618) $ (6,088)

Fund Balance - Beginning of Year 315,886 Encumbrances Continued from Last Year 5,727 Changes in Unappropriable Reserves 1,875

Fund Balance (Budgetary) - End of Year 267,870

Adjustments to Conform to Generally Accepted Accounting Principles Reserves Not Available for Appropriation 1,258 Encumbrances 2,282 Reimbursements Budgeted as Revenues (11,342) Budgeted as Expenditures 11,342 Pass-Thru Receipts Budgeted as Revenues (359) Budgeted as Expenditures 359

Fund Balance (GAAP) - End of Year $ 271,410

135 136 Required Supplementary Information The City of Seattle

C-2 TRANSPORTATION FUND C-3 LOW-INCOME HOUSING FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL FUND BALANCES – BUDGET AND ACTUAL For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Budgeted Amounts Budgeted Amounts Original Final Actual Variance Original Final Actual Variance

REVENUES REVENUES Taxes Taxes General Property Taxes $ 37,121 $ 37,121 $ 37,517 $ 396 General Property Taxes $ 12,118 $ 12,118 $ 11,725 $ (393) Business Taxes 3,920 3,920 12,727 8,807 Grants, Shared Revenues, and Contributions 12,075 12,075 8,059 (4,016) Other Taxes 5,507 5,507 4,329 (1,178) Charges for Services 1,832 1,832 35 (1,797) Interfund Business Taxes - - 214 214 Parking Fees and Space Rent - - 27 27 Total Taxes 46,548 46,548 54,787 8,239 Program Income, Interest, and Miscellaneous Revenues 10,160 11,101 15,070 3,969 Licenses and Permits 2,150 2,150 10,036 7,886 Grants, Shared Revenues, and Contributions 49,566 59,482 34,279 (25,203) Total Revenues 36,185 37,126 34,916 (2,210) Charges for Services 37,155 40,572 25,336 (15,236) Fines and Forfeits - - 10 10 EXPENDITURES AND ENCUMBRANCES Parking Fees and Space Rent - - 63 63 Program Income, Interest, and Miscellaneous Revenues 450 450 389 (61) Current Economic Environment 48,521 49,579 30,594 18,985 Total Revenues 135,869 149,202 124,900 (24,302) Capital Outlay Economic Environment 45,690 45,749 12 45,737 EXPENDITURES AND ENCUMBRANCES Total Expenditures and Encumbrances 94,211 95,328 30,606 64,722 Current Transportation 140,742 146,678 93,811 52,867 Excess (Deficiency) of Revenues over Capital Outlay (under) Expenditures and Encumbrances (58,026) (58,202) 4,310 62,512 Transportation 140,627 178,288 100,636 77,652 Debt Service OTHER FINANCING SOURCES (USES) Principal - 845 2,185 (1,340) Interest 6,167 6,167 356 5,811 Sales of Capital Assets - - 32 32 Transfers In 4,950 4,950 2,074 (2,876) Total Expenditures and Encumbrances 287,536 331,978 196,988 134,990 Total Other Financing Sources (Uses) 4,950 4,950 2,106 (2,844) Excess (Deficiency) of Revenues over (under) Expenditures and Encumbrances (151,667) (182,776) (72,088) 110,688 Net Change in Fund Balance $ (53,076) $ (53,252) 6,416 $ 59,668

OTHER FINANCING SOURCES (USES) Fund Balance - Beginning of Year 56,399 Encumbrance Continued from Last Year 7,186 Proceeds of Long-Term Debt 378 378 - (378) Transfers In 50,685 66,593 86,673 20,080 Fund Balance (Budgetary and GAAP) - End of Year $ 70,001 Transfers Out - (1,842) (5,344) (3,502)

Total Other Financing Sources (Uses) 51,063 65,129 81,329 16,200

Net Change in Fund Balance $ (100,604) $ (117,647) 9,241 $126,888

Fund Balance - Beginning of Year 23,321 Encumbrance Continued from Last Year 40

Fund Balance (Budgetary) - End of Year 32,602

Adjustments to Conform to Generally Accepted Accounting Principles Reserves Not Available for Appropriation 2

Fund Balance (GAAP) - End of Year $ 32,604

137 138 Required Supplementary Information The City of Seattle

PENSION PLAN INFORMATION C-4 PENSION PLAN INFORMATION SCHEDULE OF FUNDING PROGRESS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2008 (In Thousands) Defined benefit pension plans are required to provide two schedules of long-term actuarial data, Schedule of Funding Progress and Schedule of Employer Contributions as of the plans’ reporting dates for the past six consecutive fiscal years. The information Unfunded Actuarial Actuarial presented in these schedules was part of the latest actuarial valuations at the dates indicated in Note 10, Table 10-1. UAAL as a Actuarial Accrued Accrued Percentage Liabilities Liabilities Covered Valuation Date Actuarial Value a b Funded c of Covered Retirement System January 1, 2009 of Assets (AAL) (UAAL) Ratio Payroll Payroll

d Seattle City Employees' Retirement 1998 $ 1,224,600 $ 1,266,700 $ 42,100 96.7 % $341,500 12.3 % System (SCERS) 1999 1,375,000 1,326,600 (48,400) 103.6 370,400 (13.1) 2000 1,582,700 1,403,100 (179,600) 112.8 383,600 (46.5) 2002 1,383,700 1,581,400 197,700 87.5 405,100 48.8 2004 1,527,500 1,778,900 251,400 85.9 424,700 59.2 2006 1,791,800 2,017,500 225,800 88.8 447,000 50.5 e 2008 2,119,400 2,294,600 175,200 92.4 501,900 34.9

Firemen's Pension Fund 2003 3,573 98,471 94,898 4.0 N/A N/A 2004 4,803 89,071 84,268 5.0 N/A N/A 2005 6,221 88,705 82,484 7.0 N/A N/A 2006 8,717 107,295 98,578 8.0 N/A N/A 2007 10,045 154,518 144,473 7.0 N/A N/A 2008 9,005 168,384 159,379 5.0 N/A N/A 2009 11,498 141,621 130,123 8.0 N/A N/A

Police Relief and Pension Fund 2004 801 65,418 64,617 1.0 N/A N/A 2005 1,752 65,693 63,941 3.0 N/A N/A 2006 1,967 69,935 67,968 3.0 N/A N/A 2007 1,327 119,280 117,953 1.0 N/A N/A 2008 805 138,897 138,092 1.0 N/A N/A 2009 423 132,632 132,209 0.0 N/A N/A

a Actuarial present value of benefits less actuarial present value of future normal costs based on Entry Age Actuarial Cost Method for SCERS and Projected Unit Credit Actuarial Cost Method for Firemen’s Pension and Police Relief and Pension. b Actuarial accrued liabilities less actuarial value of assets, funding excess if negative. c Covered payroll includes compensation paid to all active employees on which contributions are calculated. Not applicable for Firemen’s Pension and Police Relief and Pension plans. These plans primarily cover inactive participants and there are no current member contributions. d Reflects increased COLA benefits adopted by the City Council after the valuation was completed. e Actuarial data for SCERS are determined through biennial actuarial valuations. The latest actuarial valuation was completed as of January 1, 2008.

139 140 Required Supplementary Information

C-5 PENSION PLAN INFORMATION SCHEDULE OF EMPLOYER CONTRIBUTIONS December 31, 2008 (In Thousands)

Fiscal Actual Annual Year Covered Actual Employer Required Percentage Employee Employer Contribution Ending a b Contribution c of ARC Retirement System December 31 Payroll Contribution Percentage (ARC) Contributed

Seattle City Employees' Retirement 2000 $ 383,600 $ 30,800 8.03 % 4.50 % 178 % System (SCERS) 2001 405,100 32,700 8.03 3.04 264 2002 454,500 36,600 8.03 3.04 264 2003 424,700 34,200 8.03 8.03 100 2004 456,800 36,700 8.03 8.03 100 2005 447,000 35,900 8.03 8.03 100 2006 472,500 37,900 8.03 8.03 100 2007 501,900 40,300 8.03 8.03 100 d 2008 570,530 45,814 8.03 8.03 100

Firemen's Pension Fund 2003 N/A 9,167 N/A $ 9,167 100 2004 N/A 9,315 N/A 9,315 100 2005 N/A 9,704 N/A 9,704 100 2006 N/A 9,385 N/A 9,385 100 e 2007 N/A 8,633 N/A 9,533 91 2008 N/A 15,027 N/A 10,673 141 This page is intentionally left blank.

Police Relief and Pension Fund 2003 N/A 7,403 N/A $ 7,403 100 2004 N/A 8,244 N/A 8,244 100 2005 N/A 7,187 N/A 7,187 100 2006 N/A 6,056 N/A 6,056 100 e 2007 N/A 5,885 N/A 7,783 76 2008 N/A 9,723 N/A 9,248 105

a Computed as the dollar amount of the actual employer contribution made as a percentage of payroll divided by the contribution rate, expressed as a percentage of payroll for SCERS. Not applicable to the Firemen’s Pension and Police Relief and Pension because these plans primarily cover inactive participants and there are no current member contributions. b The actual and required employer contributions for the SCERS are expressed as a percentage of payroll after first recognizing the $12 per employee assessment made for the death benefits. This assessment per employee is included in the actual employer contributions reported and has been previously recognized by the actuary in determining the ARC. c The City makes employer contributions as a percentage of actual payroll for SCERS as set in City ordinance. Thus, as long as the percentage equals the percentage required by the most recent actuarial valuation, the dollar amount of the ARC is equal to the actual dollar amount of the employer contributions. The City ordinance does not permit a reduction in the employer contribution rate less than the employee contribution rate. Thus, the City’s SCERS contributions exceeded the ARC for 1999 through 2001 and resulted in a negative net pension obligation (NPO) amount. d Actuarial data for SCERS are determined through biennial actuarial valuations. The latest actuarial valuation was completed as of January 1, 2008. e Projected benefit payments and liabilities increased significantly between the 2005 actuarial valuation and the valuation completed in 2007. The primary contributing factor was the change in actuarial assumptions to reflect that long-run wages were expected to increase faster than the Consumer Price Index.

141 Combining and Individual Fund and Other Supplementary Information This page is intentionally left blank. Nonmajor Governmental Funds

This page is intentionally left blank. Nonmajor Governmental Funds The City of Seattle

NONMAJOR GOVERNMENTAL FUNDS The Interfund Notes Payable - Local Improvement Districts (LIDs) Fund accounts for the payments of interest and principal on interfund notes payable to the Cumulative Reserve Subfund, a General Fund subfund. The proceeds of the notes funded the SPECIAL REVENUE FUNDS activities of certain LID districts. The Park and Recreation Fund accounts for the operation of the City's parks system. The City Charter requires that the City The Local Improvement Guaranty Fund receives surpluses and guarantees faithful compliance of bond covenants on deposit ten percent of all business and occupation taxes, fines, penalties, and other licenses into this fund. The fund also receives completed or defeased LID bond funds. When required, it shall be funded by excess general property tax levies or by the General usage fees and support from the General Fund. Fund. The City is legally obliged to maintain a fund level at 10 percent of net outstanding LID debt.

The Library Fund accounts for the operations of the City's libraries. The Library Board governs the Library's operations and the City Council appropriates moneys for its regular operating requirements. The Library also receives support from the State of Washington, other governmental units, and private donors. CAPITAL PROJECTS FUNDS

The Seattle Streetcar Fund accounts for payments to King County, based on certain formulas, for operating and maintaining the The 2005 Multipurpose Long-Term General Obligation Bond Fund was established in 2004 to account for startup activities City’s streetcar. The fund is supported by revenues from sponsorship agreements; federal, state, county or other grants or related to the acquisition of parking pay stations. The fund obtained a bridge loan in 2004 from the City’s consolidated residual transfers; private funding, donations, or gifts; property sales proceeds or other moneys supported by ordinance (Ordinance cash pool. The loan was repaid and additional capital improvement programs were funded in 2005 when the 2005 bonds were 122424). issued. The 2005 bond issue included financing for the Central Library Garage, Pier 59 Aquarium improvement, Fremont Bridge approaches and bridgeway, and SR519 projects (Ordinances 121329 and 121663). The Key Arena Settlement Proceeds Fund accounts for all proceeds received pursuant to the settlement of the Key Arena litigation for which shall be used and applied in accordance with appropriations by the City Council (Ordinance 122834). The Transportation Bond Fund was established in 1997 to account for part of the proceeds of a limited tax general obligation bond issue in the amount of $9.5 million for designated transportation programs and projects (Ordinances 118503 and 118528). The Seattle Center Fund accounts for the operations of the Seattle Center. The Center is a 74-acre convention, performance, and family entertainment complex on the site of the 1962 Seattle World's Fair. The Libraries for All Fund was established in 1998 to account for the proceeds of an unlimited tax general obligation (UTGO) bond issue of $100 million in 1999 for paying part of the cost of the new central library and community libraries. Additionally in The Human Services Operating Fund accounts for grants and General Fund moneys for programs to aid low-income persons, 2002 the City issued $94.9 million in UTGO bonds, the proceeds of which are used to pay for the cost of the ongoing construction youths, and the elderly. of these facilities. The 1999 and 2002 bond issues were authorized by Ordinance 119185 in accordance with the bond levy approved by voters of the City in November 1998 pursuant to Ordinance 119019. The Office of Housing Fund accounts for activities pertaining to housing development, application for and compliance with conditions for housing loans and grants. The Public Safety Facilities and Equipment Fund was established in December 1990 to account for the improvement of public safety equipment. In 1990 the fund received transfers of reimbursable appropriations from the Cumulative Reserve Subfund and The Housing and Community Development Revenue Sharing Fund receives federal Community Development Block Grant expended $1 million for the improvement and construction of certain facilities. In 1991 the fund received $8 million from the and Urban Development Action Grant moneys to provide housing and community development assistance to low- and moderate- sale of limited tax levy general obligation bonds. In 1996 the fund received $17.6 million from the sale of limited tax general income persons. obligation bonds (Ordinances 115453, 116797, 118108, 118184, 118225, and 118364).

The Education and Development Services Fund accounts for a seven-year levy approved by the voters in 1997 and another The Shoreline Park Improvement Fund accounts for Local Improvement subprogram moneys for shoreline and beach park approved in 2004 to provide educational and developmental services to supplement the basic education activities financed by the improvements that were received as METRO mitigation grants related to the expansion of the West Point sewage treatment plant State of Washington (Ordinances 118557 and 121529). (Ordinance 115496).

The Business Improvement Areas Fund accounts for moneys that businesses assess themselves for parking, festivals, and other The Community Improvement Fund accounts for moneys from community improvement contributions by METRO for public nongovernmental activities. improvements in the Alki and Discovery Park areas to mitigate the negative construction impacts in those communities (Ordinance 115496). The General Trust Fund accounts for amounts received with restrictions under contractual agreements. The City Facilities Renovation and Improvement Fund received $22.2 million of unlimited tax general obligation bond The Municipal Arts Fund receives at least one percent of the total cost of City capital construction projects. The City uses these proceeds under the 1-2-3 Bond/Levy Program approved by voters in September 1984. It provides funds to renovate libraries, fire moneys to buy visual arts. stations, Seattle Center facilities, harbor patrol stations, and other facilities (Ordinance 111717).

The General Donations and Gift Trust Fund holds a variety of gifts and donations which have restrictions on their use. The Capital Facilities Project Fund was established in 1992 to receive $35 million from the sale of limited tax general Programs eligible to receive support from this fund include the gift catalog, animal control, emergency medical assistance obligation bonds for financing housing, health, open space, parks, and recreation facilities included in the City's comprehensive program, horse patrol, and K-9 corps. plan (Ordinance 116105). The fund was closed in 2008. The Conservation Futures Fund was established in 1990 to account for the proceeds from the Conservation Futures Levy which are allocated to the City by King County and for the City's matching amounts. The funds are to acquire suitable greenbelt areas for conserving and enhancing the quality of the environment (Ordinances 114763, 114978, and 116908). DEBT SERVICE FUNDS The Open Spaces and Trails Bond Fund was established in 1989. It accounts for $41.8 million which is Seattle's portion of the The General Bond Interest and Redemption Fund receives moneys from excess property tax levies to pay interest costs and King County general obligation bond issued to finance the preservation of greenbelts, natural areas, other undeveloped open principal redemptions on voter-approved general obligation bonds. It also receives moneys from the General Fund, the Fleets and spaces, and to acquire and develop recreational trails within the City (Ordinance 114900). Facilities Fund, and other City funds to pay for interest costs and principal redemptions on councilmanic limited tax general obligation bonds. The Seattle Center and Parks Multipurpose Levy Fund was established to account for the 8-year $72 million property tax levy approved by voters in 1999 for improvements to the Seattle Center Opera House, replacement of the Flag Pavilion with a new 147 148 Nonmajor Governmental Funds The City of Seattle

Festivals Pavilion, and the construction and remodeling of community centers (Ordinance 119522). It also accounts for the 8- Aquarium. Funds for these projects were initially provided from interfund loans to be repaid from future proceeds of limited tax year $129.2 million property tax levy approved by the voters in 2000 for improving maintenance and programs of existing parks, general obligation bonds to be issued by the City (Ordinance 122121). The other part of the proceeds of the bond issue including the Woodland Park Zoo; acquiring, developing, and maintaining new neighborhood parks, green spaces, playfields, (Ordinance 122286) also provided funding for the Parking Pay Stations, Alaska Tunnel/Seawall, Monorail Rehabilitation projects trails, and boulevards; and recreational programming for funding safe out-of-school and senior activities (Ordinance 120024). and the Zoo Garage construction for which this fund also accounts for.

The Denny Triangle Public Amenity Fund was established in 2001 to account for proceeds from contributions by developers in The 2008 Multipurpose Long-Term General Obligation Bond Fund was established in 2007 to account for capital costs the Denny Triangle using the Transfer of Development Credits (TDC) Program provisions and from contributions by King related to the South Rainier Street Grade Separation, Spokane Street Viaduct, Mercer Corridor, and King Street Multimodal County to fund amenities in the Denny Triangle Urban Village in support of the TDC program, and interest earned on such funds Terminal projects. Initial funds for these projects were provided from interfund loans to be repaid from proceeds of limited tax (Ordinance 119729). general obligation bonds issued in 2008 by the City (Ordinance 122417). The bond ordinance finally allocated the bond proceeds to the King Street Multimodal Terminal, Bridge Seismic, Rehabilitation and Replacement, Pay Stations, Fire Station projects and The Seattle Center Redevelopment/Parks Community Center Fund was established in 1991 to provide partial funding for the South Lake Union Property Proceeds Account (Ordinance 122553). certain needed improvements to the Seattle Center and full City funding for certain improvements to selected community centers. It received the proceeds of the $14.75 million limited tax general obligation bond issue and grant moneys from Washington State Department of Community Development. The fund also received the proceeds of the $3.22 million sale of limited tax general obligation bond anticipation notes to finance preconstruction costs for redevelopment of the Seattle Center Coliseum during 1993 PERMANENT FUNDS (Ordinances 115844 and 116720). The H. H. Dearborn Fund holds a $50,000 nonexpendable gift to the City. The investment income is available for charitable purposes. The Municipal Civic Center Fund was established in 1998 to account for the planning, design, and construction of the new Municipal Courthouse and police headquarters, the new City Hall, Key Tower major improvements, and other capital projects The Beach Maintenance Trust Fund received $2.0 million appropriated from the City's Shoreline Park Improvement Fund. The relating to the Civic Center (Ordinance 119304). earnings on this fund are used solely to maintain public beaches in Seattle. The South Police Stations Fund was established in 1999 to account for moneys to be used for the design of the new South Police Station and modification of existing stations (Ordinance 119432).

The Public Safety Information Technology Fund was established in 1999 to account for part of the proceeds from the sale of limited tax general obligation bonds for the purpose of acquiring public safety information technology (Ordinance 119630).

The 2003 Fire Facilities Fund was established to account for the 9-year additional property tax levy of $167.2 million approved by the voters. The purpose of the levy is to pay all or part of the cost of neighborhood fire stations, support facilities, marine apparatus, emergency preparedness, and other emergency response facilities (Ordinance 121230).

The 2001 Capital Facilities Bond Fund was established to account for the costs of the design, construction, and acquisition of property for various City purposes (Ordinances 120169 and 120398). The fund was closed in 2008.

The 2002 Capital Facilities Bond Fund accounts for the proceeds of the sale of limited tax general obligation bonds in January 2002 in the amount of $13.2 million as it relates to the Department of Parks and Recreation’s Roy Street Shops Replacement Project (Ordinances 120646 and 120862). The fund was closed in 2008.

The 2002B Long-Term General Obligation Project Fund was established to account for the proceeds of $46.9 million limited tax general obligation bonds issued in September 2002 to provide funding for various new capital projects of the City in 2002 (Ordinance 120894).

The 2003 Long-Term General Obligation Project Fund was established to account for the proceeds of bonds issued in February 2003 to provide funding for Seattle Center’s Roof and Structural Repairs, Fleets and Facilities Department’s Park 90/5 Facility Earthquake Repair, and the SR519 and Alaskan Way Viaduct/Seawall Projects of the Seattle Department of Transportation (Ordinance 120979).

The 2006 Multipurpose Long-Term General Obligation Bond Fund was established to account for up to $24.1 million proceeds of limited tax general obligation bonds issued in 2006 for funding for the costs of the Viaduct, Pier 59, Mercer Corridor, and South Lake Union Streetcar projects; as well as for the refinancing of earthquake repair costs of the Park 90/5 Facility (Ordinance 121982).

The Local Improvement Fund, District No. 6750 was established in 2006 to account for the construction of a streetcar line serving downtown Seattle, Denny Triangle, and South Lake Union, to be funded from proceeds of local improvement bonds and special assessments upon property in the local improvement district (Ordinance 121951).

The 2007 Multipurpose Long-Term General Obligation Bond Fund was established in 2006 to account for the acquisition of real property in the Northgate area for future general municipal purposes and for the costs of improvements to the Seattle 149 150 Nonmajor Governmental Funds The City of Seattle

D-1 COMBINING BALANCE SHEET D-2 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS Page 1 of 3 NONMAJOR GOVERNMENTAL FUNDS SUMMARY BY FUND TYPE SPECIAL REVENUE December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Comparative Totals Special Debt Capital Revenue Service Projects Permanent Key Arena Funds Funds Funds Funds 2008 2007 Park and Seattle Settlement Recreation Library Streetcar Proceeds Seattle Center ASSETS ASSETS Cash and Equity in Pooled Investments $ 71,472 $ 15,111 $ 182,561 $ 2,326 $ 271,470 $ 198,799 Receivables, Net of Allowances Cash and Equity in Pooled Investments $ 3,318 $ 14,953 $ 44 $ 6,646 $ 2,671 Taxes 5,660 531 1,086 - 7,277 7,537 Receivables, Net of Allowances Accounts 8,092 - - - 8,092 3,936 Taxes 5,263 - - - - Contracts and Notes 3 - - - 3 2,302 Accounts 1,466 1,014 224 - 1,709 Special Assessments - Delinquent - - 150 - 150 53 Contracts and Notes ----- Interest and Dividends 146 12 509 5 672 860 Interest and Dividends - 26 - - 38 Unbilled and Others 1,053 - - - 1,053 994 Unbilled and Others 398 - - - 634 Due from Other Funds 5,470 - 2,923 - 8,393 5,304 Due from Other Funds 2,851 73 - - 107 Due from Other Governments 20,427 9 215 - 20,651 15,824 Due from Other Governments 319 14 - - - Inventories 532 - - - 532 922 Inventories 272 - - - 260 Deposits With Vendor 4 - - - 4 - Deposits With Vendor - - - - 4 Contracts and Notes - Noncurrent 42,130 - - - 42,130 40,119 Contracts and Notes - Noncurrent - - - - - Deferred Charges and Other Assets - 8 19,534 - 19,542 20,863 Total Assets $ 13,887 $ 16,080 $ 268 $ 6,646 $ 5,423 Total Assets $ 154,989 $ 15,671 $ 206,978 $ 2,331 $ 379,969 $ 297,513 LIABILITIES LIABILITIES Accounts Payable $ 2,607 $ 709 $ - $ - $ 950 Accounts Payable $ 22,062 $ - $ 3,248 $ - $25,310 $ 28,043 Contracts Payable 403 - - - - Contracts Payable 403 - 1,906 - 2,309 2,016 Due to Other Funds 2,206 62 2,214 - 111 Due to Other Funds 6,543 127 8,832 - 15,502 8,063 Due to Other Governments - - - - - Due to Other Governments 5,081 8 30 - 5,119 4,300 Salaries, Benefits, and Taxes Payable 3,844 2,092 - - 1,377 Salaries, Benefits, and Taxes Payable 8,852 - 21 - 8,873 7,555 Interest Payable - - 4 - - Interest Payable 6 4 - - 10 18 Deposits Payable 207 - - - 27 Deposits Payable 236 - 14 - 250 194 Revenue Collected/Billed in Advance - Current 460 - - - - Revenue Collected/Billed in Advance - Current 1,626 - 853 1 2,480 1,866 Other Current Liabilities 184 - - - - Other Current Liabilities 184 - - - 184 143 Advances from Other Funds - - - - - Advances from Other Funds - - - - - 1,696 Deferred Revenues 106 - 1 - 608 Deferred Revenues 43,171 428 21,017 - 64,616 65,780 Total Liabilities 10,017 2,863 2,219 - 3,073 Total Liabilities 88,164 567 35,921 1 124,653 119,674 FUND BALANCES FUND BALANCES Reserves Legally Segregated for Future Use Reserves Legally Segregated for Future Use Capital Improvements 765 - - 1,300 931 Capital Improvements 3,715 - 170,786 - 174,501 102,851 Continuing Appropriations 13 1,374 - - - Continuing Appropriations 7,287 - - 26 7,313 20,265 Encumbrances 64 139 - - - Debt Service - 15,104 271 - 15,375 16,236 Reserves Not Available for Appropriation Encumbrances 860 - - - 860 1,051 Gifts - 10,812 - - - Reserves Not Available for Appropriation Inventories 272 - - - 260 Endowments - - - 2,050 2,050 2,050 Petty Cash 17 7 - - - Gifts 10,843 - - 133 10,976 7,350 Unreserved Fund Balance Inventories 532 - - - 532 663 Designated for Special Purpose - - - - 879 Petty Cash 24 - - - 24 24 Undesignated 2,739 885 (1,951) 5,346 280 Unreserved Fund Balance Designated for Special Purpose 879 - - - 879 670 Total Fund Balances 3,870 13,217 (1,951) 6,646 2,350 Undesignated 42,685 - - 121 42,806 26,679 Total Liabilities and Fund Balances $ 13,887 $ 16,080 $ 268 $ 6,646 $ 5,423 Total Fund Balances 66,825 15,104 171,057 2,330 255,316 177,839

Total Liabilities and Fund Balances $ 154,989 $ 15,671 $ 206,978 $ 2,331 $ 379,969 $ 297,513

151 152 Nonmajor Governmental Funds The City of Seattle

D-2 COMBINING BALANCE SHEET D-2 COMBINING BALANCE SHEET Page 2 of 3 NONMAJOR GOVERNMENTAL FUNDS Page 3 of 3 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE SPECIAL REVENUE December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Comparative Totals Housing and Education General Community and Business Donations Human Services Office of Development Development Improvement General Municipal and Operating Housing Revenue Sharing Services Areas Trust Arts Gift Trust 2008 2007

ASSETS ASSETS Cash and Equity in Pooled Investments $ 8,461 $ 318 $ 4,061 $ 21,066 $ 607 Receivables, Net of Allowances Cash and Equity in Pooled Investments $ 3,025 $ 4,197 $ 2,105 $ 71,472 $ 68,501 Taxes - - - 397 - Receivables, Net of Allowances Accounts 3 - 49 - 1,870 Taxes - - - 5,660 5,720 Contracts and Notes - ---- Accounts - - 1,757 8,092 3,800 Interest and Dividends 6 - 8 52 2 Contracts and Notes 1 - 2 3 2,302 Unbilled and Others 21 ---- Interest and Dividends 7 - 7 146 262 Due from Other Funds 1,085 415 151 1 - Unbilled and Others - - - 1,053 994 Due from Other Governments 17,564 - 2,523 7 - Due from Other Funds 3 715 69 5,470 4,859 Inventories - - - - - Due from Other Governments - - - 20,427 15,555 Deposits With Vendor - - - - - Inventories - - - 532 922 Contracts and Notes - Noncurrent 1,064 - 41,066 - - Deposits With Vendor - - - 4 - Contracts and Notes - Noncurrent - - - 42,130 40,119 Total Assets $ 28,204 $ 733 $ 47,858 $ 21,523 $ 2,479 Total Assets $ 3,036 $ 4,912 $ 3,940 $ 154,989 $ 143,034 LIABILITIES LIABILITIES Accounts Payable $ 12,235 $ 58 $ 802 $ 3,537 $ 440 Contracts Payable ----- Accounts Payable $ 61 $ 8 $ 655 $ 22,062 $ 19,907 Due to Other Funds 305 11 561 501 - Contracts Payable - - - 403 304 Due to Other Governments 5,080 - - 1 - Due to Other Funds 257 101 214 6,543 4,524 Salaries, Benefits, and Taxes Payable 1,292 210 - - - Due to Other Governments - - - 5,081 4,284 Interest Payable - - - - - Salaries, Benefits, and Taxes Payable 3 33 1 8,852 7,520 Deposits Payable - 2 - - - Interest Payable - 2 - 6 12 Revenue Collected/Billed in Advance - Current 1,166 - - - - Deposits Payable - - - 236 180 Other Current Liabilities - ---- Revenue Collected/Billed in Advance - Current - - - 1,626 1,717 Advances from Other Funds - - - - - Other Current Liabilities - - - 184 143 Deferred Revenues 1,064 - 41,066 311 - Advances from Other Funds - - - - 35 Deferred Revenues - 15 - 43,171 43,481 Total Liabilities 21,142 281 42,429 4,350 440 Total Liabilities 321 159 870 88,164 82,107 FUND BALANCES FUND BALANCES Reserves Legally Segregated for Future Use Capital Improvements - - - - - Reserves Legally Segregated for Future Use Continuing Appropriations - - 5,278 - - Capital Improvements 719 - - 3,715 2,600 Encumbrances - 90 - 203 - Continuing Appropriations - 90 532 7,287 20,263 Reserves Not Available for Appropriation Encumbrances 96 267 1 860 1,051 Gifts - - - - - Reserves Not Available for Appropriation Inventories - - - - - Gifts - - 31 10,843 7,214 Petty Cash - - - - - Inventories - - - 532 663 Unreserved Fund Balance Petty Cash - - - 24 24 Designated for Special Purpose - - - - - Unreserved Fund Balance Undesignated 7,062 362 151 16,970 2,039 Designated for Special Purpose - - - 879 670 Undesignated 1,900 4,396 2,506 42,685 28,442 Total Fund Balances 7,062 452 5,429 17,173 2,039 Total Fund Balances 2,715 4,753 3,070 66,825 60,927 Total Liabilities and Fund Balances $ 28,204 $ 733 $ 47,858 $ 21,523 $ 2,479 Total Liabilities and Fund Balances $ 3,036 $ 4,912 $ 3,940 $ 154,989 $ 143,034

153 154 Nonmajor Governmental Funds The City of Seattle

D-3 COMBINING BALANCE SHEET D-4 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS Page 1 of 5 NONMAJOR GOVERNMENTAL FUNDS DEBT SERVICE CAPITAL PROJECTS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Comparative Totals Interfund Notes 2005 General Bond Payable – Local Local Multipurpose Interest and Improvement Improvement Long-Term Public Safety Redemption Districts Guaranty 2008 2007 General Transportation Libraries Facilities and Obligation Bond Bond for All Equipment ASSETS ASSETS Cash and Equity in Pooled Investments $ 14,297 $ 3 $ 811 $ 15,111 $ 15,590 Receivables, Net of Allowances Cash and Equity in Pooled Investments $ 1,558 $ 777 $ 401 $ 619 Taxes 531 - - 531 621 Receivables, Net of Allowances Interest and Dividends 10 - 2 12 34 Taxes ---- Due from Other Funds - - - - 244 Accounts - - - - Due from Other Governments 9 - - 9 8 Special Assessments - Delinquent - - - - Deferred Charges and Other Assets - 8 - 8 10 Interest and Dividends 3 2 1 1 Due from Other Funds - - - - Total Assets $ 14,847 $ 11 $ 813 $ 15,671 $ 16,507 Due from Other Governments - - - - Deferred Charges ---- LIABILITIES Total Assets $ 1,561 $ 779 $ 402 $ 620 Due to Other Funds $ 127 $ - $ - $ 127 $ 3 Due to Other Governments 8 - - 8 8 LIABILITIES Interest Payable 4 - - 4 - Deferred Revenues 420 8 - 428 500 Accounts Payable $ - $ - $ 17 $ - Contracts Payable - - 113 - Total Liabilities 559 8 - 567 511 Due to Other Funds 207 - 11 - Due to Other Governments - - - - FUND BALANCES Salaries, Benefits, and Taxes Payable - - - - Interest Payable - - - - Reserves Legally Segregated for Future Use Deposits Payable - - - - Debt Service 14,288 3 813 15,104 15,996 Revenue Collected/Billed in Advance - Current - - - - Advances from Other Funds - - - - Total Fund Balances 14,288 3 813 15,104 15,996 Deferred Revenues - - - -

Total Liabilities and Fund Balances $ 14,847 $ 11 $ 813 $ 15,671 $ 16,507 Total Liabilities 207 - 141 - FUND BALANCES

Reserves Legally Segregated for Future Use Capital Improvements 1,354 779 261 620 Debt Service - - - - Unreserved Fund Balance - - - -

Total Fund Balances 1,354 779 261 620

Total Liabilities and Fund Balances $ 1,561 $ 779 $ 402 $ 620

155 156 Nonmajor Governmental Funds The City of Seattle

D-4 COMBINING BALANCE SHEET D-4 COMBINING BALANCE SHEET Page 2 of 5 NONMAJOR GOVERNMENTAL FUNDS Page 3 of 5 NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS CAPITAL PROJECTS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Seattle Center Seattle Center Redevelopment/ City Facilities and Parks Parks Shoreline Park Community Renovation and Conservation Open Spaces Multipurpose Denny Triangle Community Municipal Civic South Police Improvement Improvement Improvement Futures and Trails Bond Levy Public Amenity Center Center Stations

ASSETS ASSETS Cash and Equity in Pooled Investments $ 3,852 $ 48 $ 85 $ 35 $ 301 Cash and Equity in Pooled Investments $ 31,441 $ 421 $ 8,074 $ 1,708 $ 42 Receivables, Net of Allowances Receivables, Net of Allowances Taxes - - - - - Taxes 580 - - - - Accounts - - - - - Accounts - - - - - Special Assessments - Delinquent - - - - - Special Assessments - Delinquent - - - - - Interest and Dividends 65 - - - 1 Interest and Dividends 89 1 20 4 - Due from Other Funds 62 - - - - Due from Other Funds 553 - - 6 - Due from Other Governments ----- Due from Other Governments 207 - - - - Deferred Charges - - - - - Deferred Charges - - - - -

Total Assets $ 3,979 $ 48 $ 85 $ 35 $ 302 Total Assets $ 32,870 $ 422 $ 8,094 $ 1,718 $ 42

LIABILITIES LIABILITIES Accounts Payable $ 119 $ - $ - $ - $ - Accounts Payable $ 840 $ - $ 151 $ 231 $ - Contracts Payable ----- Contracts Payable 346 - - 3 - Due to Other Funds 100 - - 5 - Due to Other Funds 659 291 16 8 - Due to Other Governments - - - - - Due to Other Governments 29 - - - - Salaries, Benefits, and Taxes Payable - - - - - Salaries, Benefits, and Taxes Payable ----- Interest Payable - - - - - Interest Payable - - - - - Deposits Payable ----- Deposits Payable - - - - - Revenue Collected/Billed in Advance - Current 6 - - - - Revenue Collected/Billed in Advance - Current 847 - - - - Advances from Other Funds - - - - - Advances from Other Funds - - - - - Deferred Revenues ----- Deferred Revenues 460 - 627 - -

Total Liabilities 225 - - 5 - Total Liabilities 3,181 291 794 242 -

FUND BALANCES FUND BALANCES

Reserves Legally Segregated for Future Use Reserves Legally Segregated for Future Use Capital Improvements 3,754 48 85 30 302 Capital Improvements 29,689 131 7,300 1,476 42 Debt Service - - - - - Debt Service - - - - - Unreserved Fund Balance - - - - - Unreserved Fund Balance - - - - -

Total Fund Balances 3,754 48 85 30 302 Total Fund Balances 29,689 131 7,300 1,476 42

Total Liabilities and Fund Balances $ 3,979 $ 48 $ 85 $ 35 $ 302 Total Liabilities and Fund Balances $ 32,870 $ 422 $ 8,094 $ 1,718 $ 42

157 158 Nonmajor Governmental Funds The City of Seattle

D-4 COMBINING BALANCE SHEET D-4 COMBINING BALANCE SHEET Page 4 of 5 NONMAJOR GOVERNMENTAL FUNDS Page 5 of 5 NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS CAPITAL PROJECTS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Comparative Totals 2002B 2003 2006 2007 2008 Long-Term Long-Term Multipurpose Local Multipurpose Multipurpose Public Safety 2003 General General Long-Term Improvement, Long-Term Long-Term Information Fire Obligation Obligation General District General General Technology Facilities Project Project Obligation Bond No. 6750 Obligation Bond Obligation Bond 2008 2007

ASSETS ASSETS

Cash and Equity in Pooled Investments $ 4,060 $ 27,587 $ 1,039 $ 1,797 $ 750 Cash and Equity in Pooled Investments $ 694 $ 19,500 $ 77,772 $ 182,561 $ 112,398 Receivables, Net of Allowances Receivables, Net of Allowances Taxes - 506 - - - Taxes - - - 1,086 1,196 Accounts - - - - - Accounts - - - - 136 Special Assessments - Delinquent - - - - - Special Assessments - Delinquent 150 - - 150 53 Interest and Dividends 5 64 2 4 2 Interest and Dividends 4 48 193 509 554 Due from Other Funds - 2,125 - 6 - Due from Other Funds - 122 49 2,923 201 Due from Other Governments - 8 - - - Due from Other Governments - - - 215 261 Deferred Charges - - - - - Deferred Charges 19,534 - - 19,534 20,853

Total Assets $ 4,065 $ 30,290 $ 1,041 $ 1,807 $ 752 Total Assets $ 20,382 $ 19,670 $ 78,014 $ 206,978 $ 135,652

LIABILITIES LIABILITIES

Accounts Payable $ 460 $ 475 $ 7 $ - $ - Accounts Payable $ - $ 177 $ 771 $ 3,248 $ 8,136 Contracts Payable - 1,348 - - - Contracts Payable - - 96 1,906 1,712 Due to Other Funds 81 78 - 22 - Due to Other Funds - 1,414 5,940 8,832 3,536 Due to Other Governments - 1 - - - Due to Other Governments - - - 30 8 Salaries, Benefits, and Taxes Payable 17 - - - - Salaries, Benefits, and Taxes Payable - - 4 21 35 Interest Payable - - - - - Interest Payable - - - - 6 Deposits Payable - 14 - - - Deposits Payable - - - 14 14 Revenue Collected/Billed in Advance - Current - - - - - Revenue Collected/Billed in Advance - Current - - - 853 100 Advances from Other Funds - - - - - Advances from Other Funds - - - - 1,661 Deferred Revenues - 396 - - - Deferred Revenues 19,534 - - 21,017 21,799

Total Liabilities 558 2,312 7 22 - Total Liabilities 19,534 1,591 6,811 35,921 37,007 FUND BALANCES FUND BALANCES

Reserves Legally Segregated for Future Use Reserves Legally Segregated for Future Use Capital Improvements 3,507 27,978 1,034 1,785 752 Capital Improvements 577 18,079 71,203 170,786 100,251 Debt Service - - - - - Debt Service 271 - - 271 240 Unreserved Fund Balance - - - - - Unreserved Fund Balance - - - - (1,846)

Total Fund Balances 3,507 27,978 1,034 1,785 752 Total Fund Balances 848 18,079 71,203 171,057 98,645

Total Liabilities and Fund Balances $ 4,065 $ 30,290 $ 1,041 $ 1,807 $ 752 Total Liabilities and Fund Balances $ 20,382 $ 19,670 $ 78,014 $ 206,978 $ 135,652

159 160 Nonmajor Governmental Funds The City of Seattle

D-5 COMBINING BALANCE SHEET D-6 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND NONMAJOR GOVERNMENTAL FUNDS CHANGES IN FUND BALANCES PERMANENT NONMAJOR GOVERNMENTAL FUNDS December 31, 2008 SUMMARY BY FUND TYPE (In Thousands) For the Year Ended December 31, 2008

Comparative Totals (In Thousands) Beach Maintenance Comparative Totals H. H. Dearborn Trust 2008 2007 Special Debt Capital Revenue Service Projects Permanent ASSETS Funds Funds Funds Funds 2008 2007

Cash and Equity in Pooled Investments $ 183 $ 2,143 $ 2,326 $ 2,310 REVENUES Receivables, Net of Allowances Interest and Dividends - 5 5 10 Taxes $ 58,733 $ 20,592 $ 43,252 $ - $122,577 $ 131,797 Licenses and Permits 786 - - - 786 938 Total Assets $ 183 $ 2,148 $ 2,331 $ 2,320 Grants, Shared Revenues, and Contributions 64,606 2 7,053 48 71,709 70,861 Charges for Services 54,852 - 27 - 54,879 53,646 LIABILITIES Fines and Forfeits 3,452 - - - 3,452 3,194 Parking Fees and Space Rent 16,771 248 227 - 17,246 16,570 Revenue Collected/Billed in Advance - Current $ - $ 1 $ 1 $ 49 Program Income, Interest, and Miscellaneous Revenues 52,598 1,088 6,904 96 60,686 21,461

Total Liabilities - 1 1 49 Total Revenues 251,798 21,930 57,463 144 331,335 298,467

FUND BALANCES EXPENDITURES Reserves Legally Segregated for Future Use Current Continuing Appropriations - 26 26 2 General Government 10,557 - 1,644 - 12,201 7,155 Reserves Not Available for Appropriation Public Safety 5,904 - - - 5,904 5,261 Endowments 50 2,000 2,050 2,050 Physical Environment 274 - - - 274 240 Gifts 133 - 133 136 Transportation 2,366 - - - 2,366 49 Unreserved Fund Balance - 121 121 83 Economic Environment 58,438 - - - 58,438 59,013 Health and Human Services 69,760 - - - 69,760 64,210 Total Fund Balances 183 2,147 2,330 2,271 Culture and Recreation 210,569 - - - 210,569 195,668 Capital Outlay Total Liabilities and Fund Balances $ 183 $ 2,148 $ 2,331 $ 2,320 General Government - - 3,432 - 3,432 3,973 Public Safety 197 - 10,020 - 10,217 31,198 Economic Environment 10 - - - 10 - Culture and Recreation 3,966 - 36,434 75 40,475 62,903 Debt Service Principal - 48,330 1,340 - 49,670 59,051 Advance Refunding to Escrow - 35,152 - - 35,152 6,270 Interest - 34,560 822 - 35,382 34,532 Bond Issuance Cost - 258 374 - 632 257

Total Expenditures 362,041 118,300 54,066 75 534,482 529,780

Excess (Deficiency) of Revenues over Expenditures (110,243) (96,370) 3,397 69 (203,147) (231,313)

OTHER FINANCING SOURCES (USES)

Long-Term Debt Issued - - 84,960 - 84,960 36,365 Refunding Debt Issued - 54,870 - - 54,870 60,870 Premium on Bonds Issued - 2,296 5,249 - 7,545 4,178 Payment to Refunded Bond Escrow Agent - (56,920) - - (56,920) (62,535) Sales of Capital Assets 3 - - - 3 479 Transfers In 153,674 95,232 4,985 - 253,891 212,598 Transfers Out (37,536) - (26,179) (10) (63,725) (37,057)

Total Other Financing Sources (Uses) 116,141 95,478 69,015 (10) 280,624 214,898

Net Change in Fund Balances 5,898 (892) 72,412 59 77,477 (16,415)

Fund Balances - Beginning of Year 60,927 15,996 98,645 2,271 177,839 194,254

Fund Balances - End of Year $ 66,825 $ 15,104 $ 171,057 $ 2,330 $ 255,316 $ 177,839

161 162 Nonmajor Governmental Funds The City of Seattle

D-7 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES D-7 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Page 1 of 3 IN FUND BALANCES Page 2 of 3 IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE SPECIAL REVENUE For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Housing and Community Key Arena Development Education and Business Park and Seattle Settlement Human Services Office of Revenue Development Improvement Recreation Library Streetcar Proceeds Seattle Center Operating Housing Sharing Services Areas

REVENUES REVENUES Taxes $ 34,056 $ - $ - $ - $ - Taxes $ 429 $ - $ - $ 16,595 $ 7,653 Licenses and Permits 786 - - - - Licenses and Permits ----- Grants, Shared Revenues, and Contributions 552 4,914 - - 324 Grants, Shared Revenues, and Contributions 42,894 284 12,158 156 - Charges for Services 42,218 623 460 - 5,443 Charges for Services 1,375 2,717 - - - Fines and Forfeits 2,376 1,054 - - - Fines and Forfeits 19 ---- Parking Fees and Space Rent 3,582 497 - - 12,692 Parking Fees and Space Rent - - - - - Program Income, Interest, and Miscellaneous Revenues 155 528 - 45,000 298 Program Income, Interest, and Miscellaneous Revenues 479 - 4,847 796 64

Total Revenues 83,725 7,616 460 45,000 18,757 Total Revenues 45,196 3,001 17,005 17,547 7,717

EXPENDITURES EXPENDITURES

Current Current General Government - - - 2,750 - General Government 7,806 - - - - Public Safety - - - - - Public Safety 4,393 - 210 353 - Physical Environment - - - - - Physical Environment - - - - - Transportation - - 2,366 - - Transportation - - - - - Economic Environment - - - - - Economic Environment 32,970 4,472 14,887 - 5,811 Health and Human Services - - - - - Health and Human Services 53,000 - - 16,745 - Culture and Recreation 120,756 54,798 - - 32,633 Culture and Recreation - - 40 - - Capital Outlay Capital Outlay Public Safety - - - - - Public Safety - - - - - Economic Environment - - - - - Economic Environment - 10 - - - Culture and Recreation 1,432 1,403 - - 104 Culture and Recreation - - 114 - - Debt Service Debt Service Principal - - - - - Principal - - - - - Interest - - - - - Interest - - - - -

Total Expenditures 122,188 56,201 2,366 2,750 32,737 Total Expenditures 98,169 4,482 15,251 17,098 5,811

Excess (Deficiency) of Revenues over Expenditures (38,463) (48,585) (1,906) 42,250 (13,980) Excess (Deficiency) of Revenues over Expenditures (52,973) (1,481) 1,754 449 1,906

OTHER FINANCING SOURCES (USES) OTHER FINANCING SOURCES (USES)

Sales of Capital Assets 3 - - - - Sales of Capital Assets - - - - - Transfers In 36,030 48,083 - - 14,995 Transfers In 52,806 1,670 - - - Transfers Out (1,108) (427) - (35,604) (264) Transfers Out -----

Total Other Financing Sources (Uses) 34,925 47,656 - (35,604) 14,731 Total Other Financing Sources (Uses) 52,806 1,670 - - -

Net Change in Fund Balances (3,538) (929) (1,906) 6,646 751 Net Change in Fund Balances (167) 189 1,754 449 1,906

Fund Balances - Beginning of Year 7,408 14,146 (45) - 1,599 Fund Balances - Beginning of Year 7,229 263 3,675 16,724 133

Fund Balances - End of Year $ 3,870 $ 13,217 $ (1,951) $ 6,646 $ 2,350 Fund Balances - End of Year $ 7,062 $ 452 $ 5,429 $ 17,173 $ 2,039

163 164 Nonmajor Governmental Funds The City of Seattle

D-7 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES D-8 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Page 3 of 3 IN FUND BALANCES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE DEBT SERVICE For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Comparative Totals Comparative Totals Interfund Notes General General Bond Payable – Local Local Donations Interest and Improvement Improvement General and Redemption Districts Guaranty 2008 2007 Trust Municipal Arts Gift Trust 2008 2007 REVENUES REVENUES Taxes $ 20,592 $ - $ - $ 20,592 $ 26,206 Taxes $ - $ - $ - $ 58,733 $ 56,081 Grants, Shared Revenues, and Contributions - 2 - 2 2 Licenses and Permits - - - 786 938 Parking Fees and Space Rent 248 - - 248 259 Grants, Shared Revenues, and Contributions 740 - 2,584 64,606 61,882 Program Income, Interest, and Miscellaneous Revenues 1,054 1 33 1,088 1,459 Charges for Services - 2,016 - 54,852 53,448 Fines and Forfeits 3 - - 3,452 3,194 Total Revenues 21,894 3 33 21,930 27,926 Parking Fees and Space Rent - - - 16,771 16,188 Program Income, Interest, and Miscellaneous Revenues 128 167 136 52,598 11,782 EXPENDITURES

Total Revenues 871 2,183 2,720 251,798 203,513 Debt Service Principal 48,330 - - 48,330 57,660 EXPENDITURES Advance Refunding to Escrow 35,152 - - 35,152 6,270 Interest 34,560 - - 34,560 33,634 Current Bond Issuance Cost 258 - - 258 144 General Government - - 1 10,557 7,155 Public Safety 723 - 225 5,904 5,261 Total Expenditures 118,300 - - 118,300 97,708 Physical Environment - - 274 274 240 Transportation - - - 2,366 49 Excess (Deficiency) of Revenues over Expenditures (96,406) 3 33 (96,370) (69,782) Economic Environment - - 298 58,438 59,013 Health and Human Services - - 15 69,760 64,210 OTHER FINANCING SOURCES (USES) Culture and Recreation - 1,510 832 210,569 195,668 Capital Outlay Refunding Debt Issued 54,870 - - 54,870 60,870 Public Safety 182 - 15 197 401 Premium on Bonds Issued 2,296 - - 2,296 1,812 Economic Environment - - - 10 - Payment to Refunded Bond Escrow Agent (56,920) - - (56,920) (62,535) Culture and Recreation - - 913 3,966 3,284 Transfers In 95,232 - - 95,232 69,173 Debt Service Transfers Out ----(3) Principal - - - - 11 Interest - - - - 1 Total Other Financing Sources (Uses) 95,478 - - 95,478 69,317

Total Expenditures 905 1,510 2,573 362,041 335,293 Net Change in Fund Balances (928) 3 33 (892) (465)

Excess (Deficiency) of Revenues over Expenditures (34) 673 147 (110,243) (131,780) Fund Balances - Beginning of Year 15,216 - 780 15,996 16,461

OTHER FINANCING SOURCES (USES) Fund Balances - End of Year $ 14,288 $ 3 $ 813 $ 15,104 $ 15,996 Sales of Capital Assets - - - 3 479 Transfers In 90 - - 153,674 143,425 Transfers Out (75) - (58) (37,536) (2,007)

Total Other Financing Sources (Uses) 15 - (58) 116,141 141,897

Net Change in Fund Balances (19) 673 89 5,898 10,117

Fund Balances - Beginning of Year 2,734 4,080 2,981 60,927 50,810

Fund Balances - End of Year $ 2,715 $ 4,753 $ 3,070 $ 66,825 $ 60,927

165 166 Nonmajor Governmental Funds The City of Seattle

D-9 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES D-9 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Page 1 of 5 IN FUND BALANCES Page 2 of 5 IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS CAPITAL PROJECTS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

2005 Multipurpose Long-Term Public Safety City Facilities General Transportation Libraries Facilities and Shoreline Park Community Renovation and Conservation Open Spaces Obligation Bond Bond for All Equipment Improvement Improvement Improvement Futures and Trails Bond

REVENUES REVENUES Taxes $ - $ - $ - $ - Taxes $ - $ - $ - $ - $ - Grants, Shared Revenues, and Contributions - - - - Grants, Shared Revenues, and Contributions 102 - - - - Charges for Services - - - - Charges for Services 27 - - - - Parking Fees and Space Rent ---- Parking Fees and Space Rent - - - - - Program Income, Interest, and Miscellaneous Revenues 87 31 28 45 Program Income, Interest, and Miscellaneous Revenues 184242 13

Total Revenues 87 31 28 45 Total Revenues 313 2 4 2 13 EXPENDITURES EXPENDITURES

Current Current General Government - - - - General Government - - - - - Capital Outlay Capital Outlay General Government - - - - General Government - - - - - Public Safety - - - - Public Safety - - - - - Culture and Recreation 705 - 1,073 - Culture and Recreation 870 - - 18 - Debt Service Debt Service Principal ---- Principal - - - - - Interest ---- Interest - - - - - Bond Issuance Cost - - - - Bond Issuance Cost - - - - -

Total Expenditures 705 - 1,073 - Total Expenditures 870 - - 18 -

Excess (Deficiency) of Revenues over Expenditures (618) 31 (1,045) 45 Excess (Deficiency) of Revenues over Expenditures (557) 2 4 (16) 13

OTHER FINANCING SOURCES (USES) OTHER FINANCING SOURCES (USES) Long-Term Debt Issued - - - - Long-Term Debt Issued - - - - - Premium on Bonds Issued - - - - Premium on Bonds Issued - - - - - Transfers In ---- Transfers In - - - - - Transfers Out (345) (2) - - Transfers Out (258) - - - -

Total Other Financing Sources (Uses) (345) (2) - - Total Other Financing Sources (Uses) (258) - - - -

Net Change in Fund Balances (963) 29 (1,045) 45 Net Change in Fund Balances (815) 2 4 (16) 13

Fund Balances - Beginning of Year 2,317 750 1,306 575 Fund Balances - Beginning of Year 4,569 46 81 46 289

Fund Balances - End of Year $ 1,354 $ 779 $ 261 $ 620 Fund Balances - End of Year $ 3,754 $ 48 $ 85 $ 30 $ 302

167 168 Nonmajor Governmental Funds The City of Seattle

D-9 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES D-9 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Page 3 of 5 IN FUND BALANCES Page 4 of 5 IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS CAPITAL PROJECTS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

2002B 2003 2006 Seattle Center Long-Term Long-Term Multipurpose Seattle Center Redevelopment/ Public Safety 2003 General General Long-Term and Parks Parks Information Fire Obligation Obligation General Multipurpose Denny Triangle Community Municipal Civic South Police Technology Facilities Project Project Obligation Bond Levy Public Amenity Center Center Stations REVENUES REVENUES Taxes $ - $ 20,905 $ - $ - $ - Taxes $ 22,341 $ - $ - $ - $ - Grants, Shared Revenues, and Contributions - - - 69 - Grants, Shared Revenues, and Contributions 5,559 - 4 - - Charges for Services ----- Charges for Services ----- Parking Fees and Space Rent - 53 - - - Parking Fees and Space Rent 174 - - - - Program Income, Interest, and Miscellaneous Revenues 92 908 43 75 45 Program Income, Interest, and Miscellaneous Revenues 1,236 18 369 80 2 Total Revenues 92 21,866 43 144 45 Total Revenues 29,310 18 373 80 2 EXPENDITURES EXPENDITURES Current Current General Government 1,644 - - - - General Government - - - - - Capital Outlay Capital Outlay General Government - - 24 26 - General Government - - - 802 - Public Safety - 10,020 - - - Public Safety - - - - - Culture and Recreation - - - 135 212 Culture and Recreation 28,837 - 2,347 - - Debt Service Debt Service Principal - - - - - Principal - - - - - Interest - - - - - Interest - - - - - Bond Issuance Cost - - - - - Bond Issuance Cost - - - - - Total Expenditures 1,644 10,020 24 161 212 Total Expenditures 28,837 - 2,347 802 - Excess (Deficiency) of Revenues over Expenditures (1,552) 11,846 19 (17) (167) Excess (Deficiency) of Revenues over Expenditures 473 18 (1,974) (722) 2 OTHER FINANCING SOURCES (USES) OTHER FINANCING SOURCES (USES) Long-Term Debt Issued - - - - - Long-Term Debt Issued - - - - - Premium on Bonds Issued - - - - - Premium on Bonds Issued - - - - - Transfers In - - - - - Transfers In 4,985 - - - - Transfers Out - - - (16) (1,436) Transfers Out (717) (296) - - - Total Other Financing Sources (Uses) - - - (16) (1,436) Total Other Financing Sources (Uses) 4,268 (296) - - - Net Change in Fund Balances (1,552) 11,846 19 (33) (1,603) Net Change in Fund Balances 4,741 (278) (1,974) (722) 2 Fund Balances - Beginning of Year 5,059 16,132 1,015 1,818 2,355 Fund Balances - Beginning of Year 24,948 409 9,274 2,198 40 Fund Balances - End of Year $ 3,507 $ 27,978 $ 1,034 $ 1,785 $ 752 Fund Balances - End of Year $ 29,689 $ 131 $ 7,300 $ 1,476 $ 42

169 170 Nonmajor Governmental Funds The City of Seattle

D-9 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES D-10 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Page 5 of 5 IN FUND BALANCES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS PERMANENT For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Comparative Totals Comparative Totals 2007 2008 Beach Local Multipurpose Multipurpose Maintenance Improvement, Long-Term Long-Term H. H. Dearborn Trust 2008 2007 District General General No. 6750 Obligation Bond Obligation Bond 2008 2007 REVENUES REVENUES Grants, Shared Revenues, and Contributions $ - $ 48 $ 48 $ 21 Program Income, Interest, and Miscellaneous Revenues 7 89 96 128 Taxes $ 6 $ - $ - $ 43,252 $ 49,510 Grants, Shared Revenues, and Contributions 1,319 - - 7,053 8,956 Total Revenues 7 137 144 149 Charges for Services - - - 27 198 Parking Fees and Space Rent - - - 227 123 EXPENDITURES Program Income, Interest, and Miscellaneous Revenues 899 974 1,767 6,904 8,092 Capital Outlay Total Revenues 2,224 974 1,767 57,463 66,879 Culture and Recreation - 75 75 55

EXPENDITURES Total Expenditures - 75 75 55

Current Excess (Deficiency) of Revenues over Expenditures 7 62 69 94 General Government - - - 1,644 - Capital Outlay OTHER FINANCING SOURCES (USES) General Government - - 2,580 3,432 3,973 Public Safety - - - 10,020 30,797 Transfers Out (10) - (10) (15) Culture and Recreation - 2,237 - 36,434 59,564 Debt Service Total Other Financing Sources (Uses) (10) - (10) (15) Principal 1,340 - - 1,340 1,380 Interest 822 - - 822 897 Net Change in Fund Balances (3) 62 59 79 Bond Issuance Cost - - 374 374 113 Fund Balances - Beginning of Year 186 2,085 2,271 2,192 Total Expenditures 2,162 2,237 2,954 54,066 96,724 Fund Balances - End of Year $ 183 $ 2,147 $ 2,330 $ 2,271 Excess (Deficiency) of Revenues over Expenditures 62 (1,263) (1,187) 3,397 (29,845)

OTHER FINANCING SOURCES (USES) Long-Term Debt Issued - - 84,960 84,960 36,365 Premium on Bonds Issued - - 5,249 5,249 2,366 Transfers In - - - 4,985 - Transfers Out - (7,136) (15,973) (26,179) (35,032)

Total Other Financing Sources (Uses) - (7,136) 74,236 69,015 3,699

Net Change in Fund Balances 62 (8,399) 73,049 72,412 (26,146)

Fund Balances - Beginning of Year 786 26,478 (1,846) 98,645 124,791

Fund Balances - End of Year $ 848 $ 18,079 $ 71,203 $ 171,057 $ 98,645

171 172 Budget and Actual

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D-11 GENERAL FUND D-11 GENERAL FUND Page 1 of 4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN Page 2 of 4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Final Final Budget Actual Encumbrances Variance Budget Actual Encumbrances Variance

REVENUES EXECUTIVE ADMINISTRATION

Taxes Executive Management $ 2,477 $ 2,474 $ 3 $ - General Property Taxes $ 234,478 $ 238,258 $ - $ 3,780 Financial Services 8,190 7,672 1 517 Retail Sales and Use Taxes 175,637 171,917 - (3,720) Business Technology 12,170 11,792 107 271 Business Taxes 221,492 217,304 - (4,188) Revenue and Consumer Affairs 5,493 5,398 10 85 Excise Taxes 56,146 36,257 - (19,889) Animal Shelter 3,371 3,284 - 87 Other Taxes - 2,193 - 2,193 Contracting 3,559 3,265 11 283 Interfund Business Taxes 79,666 79,526 - (140) Total Taxes 767,419 745,455 - (21,964) Total Department 35,260 33,885 132 1,243 Licenses and Permits 17,294 18,269 - 975 Grants, Shared Revenues, and Contributions 40,493 19,725 - (20,768) FINANCE 5,590 5,157 3 430 Charges for Services 53,370 62,547 - 9,177 Fines and Forfeits 21,540 22,110 - 570 FINANCE GENERAL Parking Fees and Space Rent 22,261 20,625 - (1,636) Program Income, Interest, and Miscellaneous Revenues 156,636 25,932 - (130,704) Appropriations to Special Purpose Funds 9,853 8,637 - 1,216 Reserves 22,642 20,188 16 2,438 Total Revenues 1,079,013 914,663 - (164,350) Support to Operating Funds 51,730 47,963 - 3,767 Transferred Programs 15,203 2,581 454 12,168 EXPENDITURES AND ENCUMBRANCES Contingency 250 - - 250 Support to Parks Capital Expenditures 814 243 34 537 ARTS AND CULTURAL AFFAIRS 3,964 3,684 279 1 Support to Fleets and Facilities Capital Expenditures 6,610 1,459 377 4,774

CITY AUDITOR 1,205 1,172 - 33 Total Finance General 107,102 81,071 881 25,150

CIVIL SERVICE COMMISSION 210 200 - 10 FIRE

CRIMINAL JUSTICE Resource Management 14,255 13,698 119 438 Safety and Employee Development 3,462 3,441 8 13 Jail Services 17,013 13,527 - 3,486 Operations 123,337 123,011 13 313 Indigent Defense Services 5,540 5,468 - 72 Fire Prevention 6,893 6,878 - 15 Grants and Reimbursables 4,161 2,553 - 1,608 Total Criminal Justice 22,553 18,995 - 3,558 Total Department 152,108 149,581 140 2,387 ETHICS AND ELECTIONS 625 588 - 37 HEARING EXAMINER 558 556 - 2 EXECUTIVE LAW Sustainability and Environment 1,604 1,437 115 52 Mayor's Office 3,000 2,699 - 301 Administration 1,373 1,370 - 3 Economic Development 10,241 8,263 119 1,859 Civil Law 9,699 9,691 - 8 Intergovernmental Relations 2,191 1,962 8 221 Criminal Prosecution 6,795 6,695 - 100 Civil Rights 2,628 2,382 - 246 Policy and Management 3,036 2,497 128 411 Total Department 17,867 17,756 - 111

Total Department 22,700 19,240 370 3,090 LEGISLATIVE 13,142 11,542 223 1,377

MUNICIPAL COURT

Court Operations 14,482 14,486 - (4) Corporate Services 6,115 5,960 105 50 Court Compliance 6,140 6,138 - 2

Total Department 26,737 26,584 105 48

175 176 Budget and Actual The City of Seattle

D-11 GENERAL FUND D-11 GENERAL FUND Page 3 of 4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN Page 4 of 4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Final Final Budget Actual Encumbrances Variance Budget Actual Encumbrances Variance

NEIGHBORHOODS JUDGMENTS/CLAIMS

Director's Office $ 1,405 $ 1,261 $ 106 $ 38 Judgments and Claims $ 12,544 $ 11,906 $ - $ 638 Customer Service and Operations 3,583 3,562 - 21 Police Actions 2,500 2,769 - (269) Community Building 3,785 2,876 118 791 Office for Education 401 273 106 22 Total Judgments/Claims 15,044 14,675 - 369 Customer Service Bureau 619 619 - - ARTS ACCOUNT 1,905 993 912 - Total Department 9,793 8,591 330 872 CABLE TELEVISION FRANCHISE 6,985 6,979 - 6 PERSONNEL CUMULATIVE RESERVE Employment and Training 3,041 2,826 208 7 Employee Health Services 3,296 3,003 91 202 Real Estate Excise Tax I 50,723 14,069 3,225 33,429 Citywide Personnel 3,751 3,736 - 15 Real Estate Excise Tax II 40,938 18,185 1,689 21,064 Labor Relations and Class Compensation 3,171 3,163 6 2 Capital Projects Asset Preservation 12,570 2,127 805 9,638 Capital Projects Street Vacation 197 - - 197 Total Department 13,259 12,728 305 226 Unrestricted 17,087 4,213 551 12,323

POLICE Total Cumulative Reserve 121,515 38,594 6,270 76,651

Chief of Police 16,598 6,778 211 9,609 NEIGHBORHOOD MATCHING 9,135 4,169 2,212 2,754 Professional Accountability 1,730 1,729 - 1 Deputy Chief Administration 33,116 32,978 90 48 EMERGENCY 4,170 4,150 - 20 Deputy Chief Operations 854 853 - 1 Homeland Security 536 533 - 3 SPECIAL EMPLOYMENT 420 275 - 145 Emergency Management Operations 1,955 1,599 - 356 Operations and Planning 8,237 8,229 - 8 INDUSTRIAL INSURANCE 5,110 - 303 4,807 Patrol Operations Administration 1,566 1,408 21 137 West Precinct Patrol 25,998 25,976 - 22 UNEMPLOYMENT COMPENSATION 861 - - 861 North Precinct Patrol 26,233 26,188 - 45 Metro Special Response 10,665 10,639 - 26 HEALTH CARE 15,268 11,760 - 3,508 South Precinct Patrol 13,772 13,768 - 4 East Precinct Patrol 22,021 22,014 - 7 GROUP TERM LIFE INSURANCE 54 - - 54 Southwest Precinct Patrol 12,967 12,960 - 7 Traffic Enforcement 15,782 15,746 - 36 Total Expenditures and Encumbrances 866,681 714,897 12,924 138,860 Criminal Investigation Administration 7,023 6,797 27 199 Violent Crimes Investigation 6,163 6,154 - 9 Excess (Deficiency) of Revenues over Narcotics Investigation 4,740 4,735 - 5 (under) Expenditures and Encumbrances 212,332 199,766 (12,924) (25,490) Special Investigations 4,512 4,510 - 2 Special Victims Program 5,393 5,390 - 3 OTHER FINANCING SOURCES (USES) Field Support Administration 472 468 - 4 Communications 12,279 12,193 - 86 Sales of Capital Assets - 373 - 373 Information Technology 10,488 9,963 110 415 Transfers In 4,273 7,440 - 3,167 Records/Files 2,847 2,807 - 40 Transfers Out (266,135) (263,197) - 2,938 Data Center Program 2,690 2,690 - - Human Resources Management 4,762 4,736 - 26 Total Other Financing Sources (Uses) (261,862) (255,384) - 6,478

Total Department 253,399 241,841 459 11,099 Net Change in Fund Balance $ (49,530) $ (55,618) $ (12,924) $ (19,012)

PUBLIC SAFETY CIVIL SERVICE COMMISSION 142 131 - 11 Fund Balance - Beginning of Year 327,028

Fund Balance - End of Year $ 271,410

177 178 Budget and Actual The City of Seattle

D-12 TRANSPORTATION FUND D-13 LOW-INCOME HOUSING FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Final Final Budget Actual Encumbrances Variance Budget Actual Encumbrances Variance

REVENUES REVENUES

Taxes Taxes General Property Taxes $ 37,121 $ 37,517 $ - $ 396 General Property Taxes $ 12,118 $ 11,725 $ - $ (393) Business Taxes 3,920 12,727 - 8,807 Grants, Shared Revenues, and Contributions 12,075 8,059 - (4,016) Other Taxes 5,507 4,329 - (1,178) Charges for Services 1,832 35 - (1,797) Interfund Business Taxes - 214 - 214 Parking Fees and Space Rent - 27 - 27 Total Taxes 46,548 54,787 - 8,239 Program Income, Interest, and Miscellaneous Revenues 11,101 15,070 - 3,969 Licenses and Permits 2,150 10,036 - 7,886 Grants, Shared Revenues, and Contributions 59,482 34,279 - (25,203) Total Revenues 37,126 34,916 - (2,210) Charges for Services 40,572 25,336 - (15,236) Fines and Forfeits - 10 - 10 EXPENDITURES AND ENCUMBRANCES Parking Fees and Space Rent - 63 - 63 Program Income, Interest, and Miscellaneous Revenues 450 389 - (61) Community Development 432 369 - 63 Management and Administration 1,487 134 - 1,353 Total Revenues 149,202 124,900 - (24,302) Multifamily Production and Preservation 77,818 23,565 - 54,253 Single Family 15,591 6,538 - 9,053 EXPENDITURES AND ENCUMBRANCES Total Expenditures and Encumbrances 95,328 30,606 - 64,722 Bridges and Structures 6,581 6,045 - 536 Engineering Services 3,319 3,256 - 63 Excess (Deficiency) of Revenues over Mobility Operations 37,399 34,599 - 2,800 (under) Expenditures and Encumbrances (58,202) 4,310 - 62,512 Right-of-Way Management 12,182 12,025 - 157 Street Maintenance 25,342 25,342 - - OTHER FINANCING SOURCES (USES) Urban Forestry 4,094 3,723 - 371 Department Management 6,440 5,935 - 505 Sales of Capital Assets - 32 - 32 General Expense 9,518 4,667 - 4,851 Transfers In 4,950 2,074 - (2,876) Major Maintenance/Replacement 73,661 43,392 - 30,269 Major Projects 71,694 21,063 - 50,631 Total Other Financing Sources (Uses) 4,950 2,106 - (2,844) Mobility Capital 81,748 36,941 - 44,807 Net Change in Fund Balance $ (53,252) 6,416 $ - $ 59,668 Total Expenditures and Encumbrances 331,978 196,988 - 134,990 Fund Balance - Beginning of Year 63,585 Excess (Deficiency) of Revenues over (under) Expenditures and Encumbrances (182,776) (72,088) - 110,688 Fund Balance - End of Year $ 70,001 OTHER FINANCING SOURCES (USES)

Proceeds of Long-Term Debt 378 - - (378) Transfers In 66,593 86,673 - 20,080 Transfers Out (1,842) (5,344) - (3,502)

Total Other Financing Sources (Uses) 65,129 81,329 - 16,200

Net Change in Fund Balance $ (117,647) 9,241 $ - $ 126,888

Fund Balance - Beginning of Year 23,363

Fund Balance - End of Year $ 32,604

179 180 Budget and Actual The City of Seattle

D-14 PARK AND RECREATION FUND D-15 LIBRARY FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Final Final Budget Actual Encumbrances Variance Budget Actual Encumbrances Variance

REVENUES REVENUES

Taxes Grants, Shared Revenues, and Contributions $ 7,051 $ 4,914 $ - $ (2,137) Business Taxes $ 23,822 $ 23,725 $ - $ (97) Charges for Services 793 623 - (170) Other Taxes 551 731 - 180 Fines and Forfeits 882 1,054 - 172 Interfund Business Taxes 9,878 9,600 - (278) Parking Fees and Space Rent 790 497 - (293) Total Taxes 34,251 34,056 - (195) Program Income, Interest, and Miscellaneous Revenues 1,576 528 - (1,048) Licenses and Permits 702 786 - 84 Grants, Shared Revenues, and Contributions 452 552 - 100 Total Revenues 11,092 7,616 - (3,476) Charges for Services 45,677 42,218 - (3,459) Fines and Forfeits 2,297 2,376 - 79 EXPENDITURES AND ENCUMBRANCES Parking Fees and Space Rent 2,015 3,582 - 1,567 Program Income, Interest, and Miscellaneous Revenues 177 155 - (22) Administrative and Public Services 63,859 54,609 258 8,992 Northgate Construction 289 67 15 207 Total Revenues 85,571 83,725 - (1,846) Historic Building Renovations 47 1 - 46 Library Capital Improvements 1,143 950 4 189 EXPENDITURES AND ENCUMBRANCES Library Technology Branch 22 5 - 17 Douglass-Truth Library Expansion 116 - 116 - Gasworks Park Contamination Remediation 142 40 - 102 Madrona Library Renovation 482 451 19 12 Swimming, Boating, and Aquatics 7,861 7,840 - 21 Storage and Transfer of Library 55 9 - 46 Recreation Facilities and Programs 18,950 18,884 - 66 Northeast Library 110 109 - 1 Facility and Structure Maintenance 12,705 12,491 - 214 Park Cleaning, Landscaping, and Restoration 25,288 24,842 - 446 Total Expenditures and Encumbrances 66,123 56,201 412 9,510 Seattle Conservation Corps 3,923 3,167 - 756 Seattle Aquarium 9,068 9,112 - (44) Excess (Deficiency) of Revenues over Woodland Park Zoo 6,425 6,338 - 87 (under) Expenditures and Encumbrances (55,031) (48,585) (412) 6,034 Planning, Development, and Acquisition 6,762 6,261 - 501 Judgments and Claims 1,117 1,116 - 1 OTHER FINANCING SOURCES (USES) Finance and Administration 5,685 5,169 - 516 Policy Direction and Leadership 3,340 3,290 - 50 Sales of Capital Assets (474) - - 474 Golf 8,405 7,901 - 504 Transfers In 45,131 48,083 - 2,952 Golf Capital Reserve 1,247 1,247 - - Transfers Out (428) (427) - 1 Enterprise 6,634 6,532 - 102 Environmental Learning and Programs 2,975 2,720 - 255 Total Other Financing Sources (Uses) 44,229 47,656 - 3,427 Horticulture and Urban Forestry 5,297 5,238 - 59 Net Change in Fund Balance $ (10,802) (929) $ (412) $ 9,461 Total Expenditures and Encumbrances 125,824 122,188 - 3,636 Fund Balance - Beginning of Year 14,146 Excess (Deficiency) of Revenues over (under) Expenditures and Encumbrances (40,253) (38,463) - 1,790 Fund Balance - End of Year $ 13,217 OTHER FINANCING SOURCES (USES)

Sales of Capital Assets - 3 - 3 Transfers In 36,167 36,030 - (137) Transfers Out (738) (1,108) - (370)

Total Other Financing Sources (Uses) 35,429 34,925 - (504)

Net Change in Fund Balance $ (4,824) (3,538) $ - $ 1,286

Fund Balance - Beginning of Year 7,408

Fund Balance - End of Year $ 3,870

181 182 Budget and Actual The City of Seattle

D-16 SEATTLE CENTER FUND D-17 HUMAN SERVICES OPERATING FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Final Final Budget Actual Encumbrances Variance Budget Actual Encumbrances Variance

REVENUES REVENUES

Grants, Shared Revenues, and Contributions $ - $ 324 $ - $ 324 Taxes Charges for Services 6,150 5,443 - (707) General Property Taxes $ - $ 429 $ - $ 429 Parking Fees and Space Rent 12,919 12,692 - (227) Grants, Shared Revenues, and Contributions 61,649 58,669 - (2,980) Program Income, Interest, and Miscellaneous Revenues 249 298 - 49 Charges for Services 1,968 1,375 - (593) Fines and Forfeits - 19 - 19 Total Revenues 19,318 18,757 - (561) Program Income, Interest, and Miscellaneous Revenues 150 479 - 329 EXPENDITURES AND ENCUMBRANCES Total Revenues 63,767 60,971 - (2,796)

Access 1,083 1,065 - 18 EXPENDITURES AND ENCUMBRANCES Administration 6,378 6,370 - 8 Cultural Facilities 326 238 - 88 Children, Youth, and Family Development 11,012 10,577 55 380 Commercial Events 785 572 - 213 Community Facilities 2,667 1,096 503 1,068 Festivals 595 363 - 232 Emergency and Transitional Services 24,737 21,923 - 2,814 Campus Grounds 12,250 14,335 - (2,085) Domestic and Sexual Violence Prevention 4,171 3,761 - 410 Key Arena 6,538 4,543 - 1,995 Leadership and Administration 8,276 7,812 20 444 McCaw Hall 3,655 2,887 - 768 Area Agency on Aging 47,484 41,837 - 5,647 Community Programs 2,438 2,364 - 74 Senior and Adult Self-Sufficiency 2,200 2,183 - 17 Public Health Services 11,052 10,903 120 29 Total Expenditures and Encumbrances 34,048 32,737 - 1,311 Early Learning and Family Support 14,951 13,852 50 1,049

Excess (Deficiency) of Revenues over Total Expenditures and Encumbrances 126,550 113,944 748 11,858 (under) Expenditures and Encumbrances (14,730) (13,980) - 750 Excess (Deficiency) of Revenues over OTHER FINANCING SOURCES (USES) (under) Expenditures and Encumbrances (62,783) (52,973) (748) 9,062 Transfers In 14,995 14,995 - - OTHER FINANCING SOURCES (USES) Transfers Out (265) (264) - 1 Transfers In 52,056 52,806 - 750 Total Other Financing Sources (Uses) 14,730 14,731 - 1 Net Change in Fund Balance $ (10,727) (167) $ (748) $ 9,812 Net Change in Fund Balance $ - 751 $ - $ 751 Fund Balance - Beginning of Year 7,229 Fund Balance - Beginning of Year 1,599 Fund Balance - End of Year $ 7,062 Fund Balance - End of Year $ 2,350

183 184 Budget and Actual

D-18 OFFICE OF HOUSING FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31, 2008 (In Thousands)

Final Budget Actual Encumbrances Variance

REVENUES

Grants, Shared Revenues, and Contributions $ 394 $ 284 $ - $ (110) Charges for Services 3,031 2,717 - (314)

Total Revenues 3,425 3,001 - (424)

EXPENDITURES AND ENCUMBRANCES Community Development 744 478 10 256 Management and Administration 2,126 1,954 93 79 Multifamily 1,476 1,305 - 171 Single Family 761 745 - 16

Total Expenditures and Encumbrances 5,107 4,482 103 522

Excess (Deficiency) of Revenues over (under) Expenditures and Encumbrances (1,682) (1,481) (103) 98 OTHER FINANCING SOURCES (USES)

Transfers In 1,657 1,670 - 13

Net Change in Fund Balance $ (25) 189 $ (103) $ 111 This page is intentionally left blank.

Fund Balance - Beginning of Year 263

Fund Balance - End of Year $ 452

185 Nonmajor Enterprise Funds

This page is intentionally left blank. Nonmajor Enterprise Funds The City of Seattle

NONMAJOR ENTERPRISE FUNDS E-1 COMBINING STATEMENT OF NET ASSETS Page 1 of 4 NONMAJOR ENTERPRISE FUNDS The Solid Waste Fund accounts for the operations of two City-owned transfer stations and for the administration of contracts December 31, 2008 with private companies for the collection of residential refuse and commercial garbage. Private individuals and City-administered (In Thousands) residential and commercial collectors bring solid waste to the transfer stations. Solid wastes collected at the transfer stations are compacted, loaded in containers, and hauled to the Argo cargo loading station. The containers at the Argo station are loaded on Solid Waste Planning and Development railcars and transported to a landfill in Arlington, Oregon, for final disposal. 2008 2007 2008 2007 The Planning and Development Fund accounts for building permit fees and moneys from the General Fund as well as the cost ASSETS of enforcing the City’s land use and building construction codes. Current Assets

The Downtown Parking Garage Fund accounts for the proceeds from the sale of bonds to pay for the cost of effecting the Operating Cash and Equity in Pooled Investments $ 14,123 $ 8,066 $ 31,585 $ 32,762 beneficial transfer to the City of the parking garage at Pacific Place in downtown Seattle. This fund also accounts for the Receivables, Net of Allowances Accounts 10,497 10,946 3,558 3,613 operation of the garage. Interest and Dividends 141 186 74 139 Unbilled 281 194 - - Due from Other Funds 323 667 695 716 Due from Other Governments 506 234 826 611 Materials and Supplies Inventory 11 28 5 8

Total Current Assets 25,882 20,321 36,743 37,849

Noncurrent Assets

Restricted Cash and Equity in Pooled Investments 42,001 54,850 - 17 Unamortized Bond Issue Costs, Net 1,074 1,172 - - Deferred Landfill Closure and Postclosure Costs, Net 26,978 30,211 - - Other Deferred Charges 11,746 2,026 - - Capital Assets Land and Land Rights 1,791 1,791 - - Plant in Service, Excluding Land 52,872 49,807 - - Less Accumulated Depreciation (31,550) (27,612) - - Buildings and Improvements - - - - Less Accumulated Depreciation - - - - Machinery and Equipment - - 14,509 13,788 Less Accumulated Depreciation - - (7,299) (5,808) Construction in Progress 29,663 14,788 642 700 Other Property, Net 1,765 1,766 - -

Total Noncurrent Assets 136,340 128,799 7,852 8,697

Total Assets 162,222 149,120 44,595 46,546

189 190 Nonmajor Enterprise Funds The City of Seattle

E-1 COMBINING STATEMENT OF NET ASSETS E-1 COMBINING STATEMENT OF NET ASSETS Page 2 of 4 NONMAJOR ENTERPRISE FUNDS Page 3 of 4 NONMAJOR ENTERPRISE FUNDS December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Downtown Parking Garage Comparative Totals Solid Waste Planning and Development

2008 2007 2008 2007 2008 2007 2008 2007

ASSETS LIABILITIES Current Assets Current Liabilities

Operating Cash and Equity in Pooled Investments $ 335 $ 900 $ 46,043 $ 41,728 Accounts Payable $ 7,329 $ 7,462 $ 1,156 $ 1,314 Receivables, Net of Allowances Salaries, Benefits, and Payroll Taxes Payable 1,031 8711,431 1,300 Accounts 74 84 14,129 14,643 Compensated Absences Payable 138 126 274 259 Interest and Dividends 2 6 217 331 Due to Other Funds 1,199 1,345 364 375 Unbilled - - 281 194 Due to Other Governments 256 289 42 128 Due from Other Funds - - 1,018 1,383 Interest Payable 1,763 410 - - Due from Other Governments - - 1,332 845 Deferred Bond Interest - - - - Materials and Supplies Inventory - - 16 36 Taxes Payable 141 144 - - General Obligation Bonds Due Within One Year - - - - Total Current Assets 411 990 63,036 59,160 Revenue Bonds Due Within One Year 6,535 4,690 - - Claims Payable 5,486 627 45 41 Noncurrent Assets Landfill Closure and Postclosure Liability 1,115 1,465 - - Deferred Credits 2,826 2,686 - - Restricted Cash and Equity in Pooled Investments - - 42,001 54,867 Other Current Liabilities 620 - 175 141 Unamortized Bond Issue Costs, Net 225 236 1,299 1,408 Deferred Landfill Closure and Postclosure Costs, Net - - 26,978 30,211 Total Current Liabilities 28,439 20,115 3,487 3,558 Other Deferred Charges - - 11,746 2,026 Capital Assets Noncurrent Liabilities Land and Land Rights 12,881 12,881 14,672 14,672 Plant in Service, Excluding Land - - 52,872 49,807 Compensated Absences Payable 1,289 1,211 2,445 2,236 Less Accumulated Depreciation - - (31,550) (27,612) Claims Payable 5,758 558 88 78 Buildings and Improvements 60,131 60,131 60,131 60,131 Landfill Closure and Postclosure Liability 24,925 25,612 - - Less Accumulated Depreciation (20,044) (18,039) (20,044) (18,039) Vendor and Other Deposits Payable - - - 17 Machinery and Equipment 651 651 15,160 14,439 General Obligation Bonds, Due Serially - - - - Less Accumulated Depreciation (570) (463) (7,869) (6,271) Less Bonds Due Within One Year - - - - Construction in Progress - - 30,305 15,488 Bond Discount and Premium, Net - - - - Other Property, Net - - 1,765 1,766 Deferred Loss on Advanced Refunding - - - - Deferred Bond Interest - - - - Total Noncurrent Assets 53,274 55,397 197,466 192,893 Less Accrued Interest Due Within One Year - - - - Revenue Bonds 87,005 91,695 - - Total Assets 53,685 56,387 260,502 252,053 Less Revenue Bonds Due Within One Year (6,535) (4,690) - - Bond Discount and Premium, Net 3,442 3,701 - - Deferred Loss on Advanced Refunding (376) (605) - - Deferred Credits - - 14,289 15,329 Unfunded Other Post Employment Benefits 273 152 462 239 Other Noncurrent Liabilities 6 16 - -

Total Noncurrent Liabilities 115,787 117,650 17,284 17,899

Total Liabilities 144,226 137,765 20,771 21,457

NET ASSETS Invested in Capital Assets, Net of Related Debt 9,424 5,612 7,852 8,680 Restricted for Deferred Conservation and Environmental Costs 50 - - - Other Deferred Charges 342 646 - - Unrestricted 8,180 5,097 15,972 16,409

Total Net Assets $ 17,996 $ 11,355 $ 23,824 $ 25,089

191 192 Nonmajor Enterprise Funds The City of Seattle

E-1 COMBINING STATEMENT OF NET ASSETS E-2 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES Page 4 of 4 NONMAJOR ENTERPRISE FUNDS Page 1 of 2 IN FUND NET ASSETS December 31, 2008 NONMAJOR ENTERPRISE FUNDS (In Thousands) For the Year Ended December 31, 2008 (In Thousands) Downtown Parking Garage Comparative Totals

2008 2007 2008 2007 Solid Waste Planning and Development

LIABILITIES 2008 2007 2008 2007

Current Liabilities OPERATING REVENUES

Accounts Payable $ 299 $ 322 $ 8,784 $ 9,098 Charges for Services and Other Fees $ 124,353 $ 121,931 $ 44,840 $ 51,156 Salaries, Benefits, and Payroll Taxes Payable - - 2,462 2,171 Compensated Absences Payable - - 412 385 OPERATING EXPENSES Due to Other Funds 54 42 1,617 1,762 Due to Other Governments - - 298 417 Utility System Management 1,731 5,006 - - Interest Payable 720 720 2,483 1,130 Field Operations 9,548 8,868 - - Deferred Bond Interest 790 666 790 666 Engineering Services 257 191 - - Taxes Payable 64 72 205 216 Customer Services 11,948 10,162 - - General Obligation Bonds Due Within One Year 1,205 1,179 1,205 1,179 Solid Waste Collection 59,689 59,450 - - Revenue Bonds Due Within One Year - - 6,535 4,690 Operations and Maintenance - - 45,189 45,554 Claims Payable - - 5,531 668 General and Administrative 7,995 7,529 12,100 11,093 Landfill Closure and Postclosure Liability - - 1,115 1,465 City Business and Occupation Taxes 17,189 17,292 - - Deferred Credits - - 2,826 2,686 Other Taxes 1,694 1,642 - - Other Current Liabilities - - 795 141 Amortization of Landfill and Postclosure Costs 3,233 3,195 - - Depreciation and Amortization 4,885 3,898 1,492 1,419 Total Current Liabilities 3,132 3,001 35,058 26,674 Total Operating Expenses 118,169 117,233 58,781 58,066 Noncurrent Liabilities Operating Income (Loss) 6,184 4,698 (13,941) (6,910) Compensated Absences Payable - - 3,734 3,447 Claims Payable - - 5,846 636 NONOPERATING REVENUES (EXPENSES) Landfill Closure and Postclosure Liability - - 24,925 25,612 Vendor and Other Deposits Payable - - - 17 Investment and Interest Income 2,420 712 1,283 1,608 General Obligation Bonds, Due Serially 64,524 65,702 64,524 65,702 Interest Expense (3,051) (1,471) - - Less Bonds Due Within One Year (1,205) (1,179) (1,205) (1,179) Amortization of Debt Costs (93) (52) - - Bond Discount and Premium, Net 4,019 4,222 4,019 4,222 Gain (Loss) on Sale of Capital Assets 86 (15) - - Deferred Loss on Advanced Refunding - (738) - (738) Contributions and Grants 724 525 590 134 Deferred Bond Interest 4,258 4,330 4,258 4,330 Others, Net 367 (1,002) - 39 Less Accrued Interest Due Within One Year (790) (666) (790) (666) Revenue Bonds - - 87,005 91,695 Total Nonoperating Revenues (Expenses) 453 (1,303) 1,873 1,781 Less Revenue Bonds Due Within One Year - - (6,535) (4,690) Bond Discount and Premium, Net - - 3,442 3,701 Income (Loss) Before Capital Contributions and Grants and Transfers 6,637 3,395 (12,068) (5,129) Deferred Loss on Advanced Refunding - - (376) (605) Deferred Credits - - 14,289 15,329 Capital Contributions and Grants 4 28 - - Unfunded Other Post Employment Benefits - - 735 391 Transfers In - - 10,803 10,612 Other Noncurrent Liabilities - - 6 16 Change in Net Assets 6,641 3,423 (1,265) 5,483 Total Noncurrent Liabilities 70,806 71,671 203,877 207,220 Net Assets - Beginning of Year 11,355 7,932 25,089 19,606 Total Liabilities 73,938 74,672 238,935 233,894 Net Assets - End of Year $ 17,996 $ 11,355 $ 23,824 $ 25,089 NET ASSETS Invested in Capital Assets, Net of Related Debt - - 17,276 14,292 Restricted for Deferred Conservation and Environmental Costs - - 50 - Other Deferred Charges - - 342 646 Unrestricted (20,253) (18,285) 3,899 3,221

Total Net Assets $ (20,253) $ (18,285) $ 21,567 $ 18,159

193 194 Nonmajor Enterprise Funds The City of Seattle

E-2 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES E-3 COMBINING STATEMENT OF CASH FLOWS Page 2 of 2 IN FUND NET ASSETS Page 1 of 4 NONMAJOR ENTERPRISE FUNDS NONMAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands) Solid Waste Planning and Development

Downtown Parking Garage Comparative Totals 2008 2007 2008 2007 2008 2007 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES OPERATING REVENUES Cash Received from Customers $ 125,546 $ 121,219 $ 43,662 $ 51,138 Cash Paid to Suppliers (72,499) (74,660) (27,121) (27,275) Charges for Services and Other Fees $ 6,531 $ 6,806 $ 175,724 $ 179,893 Cash Paid to Employees (19,071) (17,502) (29,812) (28,833) Cash Paid for Taxes (19,116) (18,999) - (1) OPERATING EXPENSES Net Cash from Operating Activities 14,860 10,058 (13,271) (4,971) Utility System Management - - 1,731 5,006 Field Operations - - 9,548 8,868 CASH FLOWS FROM NONCAPITAL Engineering Services - - 257 191 FINANCING ACTIVITIES Customer Services - - 11,948 10,162 Solid Waste Collection - - 59,689 59,450 Operating Grants 724 525 590 134 Operations and Maintenance 2,367 2,160 47,556 47,714 Service for Others - (1,002) - - General and Administrative - - 20,095 18,622 Transfers In - - 10,803 10,612 City Business and Occupation Taxes 14 15 17,203 17,307 Other Non-Operating Cash Inflows 367 - - 40 Other Taxes 31 32 1,725 1,674 Amortization of Landfill and Postclosure Costs - - 3,233 3,195 Net Cash from Noncapital Financing Activities 1,091 (477) 11,393 10,786 Depreciation and Amortization 2,112 2,112 8,489 7,429 CASH FLOWS FROM CAPITAL AND Total Operating Expenses 4,524 4,319 181,474 179,618 RELATED FINANCING ACTIVITIES Operating Income (Loss) 2,007 2,487 (5,750) 275 Proceeds from Sale of Bonds and Other Long-Term Debt - 84,393 - - Principal Paid on Long-Term Debt (4,690) (31,381) - - NONOPERATING REVENUES (EXPENSES) Capital Fees and Grants Received 4 27 - - Capital Expenditures and Deferred Charges Paid (17,631) (3,785) (663) (674) Investment and Interest Income 47 110 3,750 2,430 Interest Paid on Long-Term Debt (3,032) (1,868) - - Interest Expense (4,010) (4,006) (7,061) (5,477) Premium from Sale of Long-Term Debt - - - - Amortization of Debt Costs (12) (11) (105) (63) Loss from Advanced Refunding of Long-Term Debt - - - - Gain (Loss) on Sale of Capital Assets - - 86 (15) Debt Issuance Costs - - - - Contributions and Grants - - 1,314 659 Proceeds from Sale of Capital Assets 141 (15) - - Others, Net - - 367 (963) Net Cash from Capital and Related Financing Activities (25,208) 47,371 (663) (674) Total Nonoperating Revenues (Expenses) (3,975) (3,907) (1,649) (3,429) CASH FLOWS FROM INVESTING ACTIVITIES Income (Loss) Before Capital Contributions and Grants and Transfers (1,968) (1,420) (7,399) (3,154) Interest Received on Investments 2,465 526 1,348 1,561 Capital Contributions and Grants - - 4 28 Transfers In - - 10,803 10,612 Net Increase (Decrease) in Cash and Equity in Pooled Investments (6,792) 57,478 (1,193) 6,702 Change in Net Assets (1,968) (1,420) 3,408 7,486 CASH AND EQUITY IN POOLED INVESTMENTS Net Assets - Beginning of Year (18,285) (16,865) 18,159 10,673 Beginning of Year 62,916 5,438 32,778 26,076 Net Assets - End of Year $ (20,253) $ (18,285) $ 21,567 $ 18,159 End of Year $ 56,124 $ 62,916 $ 31,585 $ 32,778

CASH AT THE END OF THE YEAR CONSISTS OF

Operating Cash and Equity in Pooled Investments $ 14,123 $ 8,066 $ 31,585 $ 32,762 Noncurrent Restricted Cash and Equity in Pooled Investments 42,001 54,850 - 16

Total Cash at the End of the Year $ 56,124 $ 62,916 $ 31,585 $ 32,778

195 196 Nonmajor Enterprise Funds The City of Seattle

E-3 COMBINING STATEMENT OF CASH FLOWS E-3 COMBINING STATEMENT OF CASH FLOWS Page 2 of 4 NONMAJOR ENTERPRISE FUNDS Page 3 of 4 NONMAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Downtown Parking Garage Comparative Totals Solid Waste Planning and Development

2008 2007 2008 2007 2008 2007 2008 2007

CASH FLOWS FROM OPERATING ACTIVITIES RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Cash Received from Customers $ 7,527 $ 7,523 $ 176,735 $ 179,880 Cash Paid to Suppliers (2,380) (2,376) (102,000) (104,311) Operating Income (Loss) $ 6,184 $ 4,698 $ (13,941) $ (6,910) Cash Paid to Employees - - (48,883) (46,335) Cash Paid for Taxes (1,036) (792) (20,152) (19,792) Adjustments to Reconcile Net Operating Income (Loss) to Net Cash from Operating Activities Net Cash from Operating Activities 4,111 4,355 5,700 9,442 Depreciation and Amortization 8,118 7,093 1,492 1,419 CASH FLOWS FROM NONCAPITAL Changes in Operating Assets and Liabilities FINANCING ACTIVITIES Accounts Receivable 449 (916) 55 842 Unbilled Receivables (87) 43 - - Operating Grants - - 1,314 659 Due from Other Funds 791 (423) 22 (302) Service for Others - - - (1,002) Due from Other Governments (273) 151 (215) (611) Transfers In - - 10,803 10,612 Materials and Supplies Inventory 17 4 3 39 Other Non-Operating Cash Inflows - - 367 40 Accounts Payable (133) 422 (158) (44) Salaries, Benefits, and Payroll Taxes Payable 161 48 132 99 Net Cash from Noncapital Financing Activities - - 12,484 10,309 Compensated Absences Payable 211 245 223 182 Due to Other Funds (146) (430) (11) 23 CASH FLOWS FROM CAPITAL AND Due to Other Governments (33) 38 (86) 18 RELATED FINANCING ACTIVITIES Claims Payable 141 50 14 11 Taxes Payable (3) 5 - (1) Proceeds from Sale of Bonds and Other Long-Term Debt - 59,185 - 143,578 Deferred Credits 760 432 (1,040) 52 Principal Paid on Long-Term Debt (1,179) (63,506) (5,869) (94,887) Other Assets and Liabilities (1,297) (1,402) 239 212 Capital Fees and Grants Received - - 4 27 Capital Expenditures and Deferred Charges Paid - - (18,294) (4,459) Total Adjustments 8,676 5,360 670 1,939 Interest Paid on Long-Term Debt (3,548) (2,961) (6,580) (4,829) Premium from Sale of Long-Term Debt - 4,357 - 4,357 Net Cash from Operating Activities $ 14,860 $ 10,058 $ (13,271) $ (4,971) Loss from Advanced Refunding of Long-Term Debt - (1,249) - (1,249) Debt Issuance Costs - (188) - (188) Proceeds from Sale of Capital Assets - - 141 (15)

Net Cash from Capital and Related Financing Activities (4,727) (4,362) (30,598) 42,335 CASH FLOWS FROM INVESTING ACTIVITIES

Interest Received on Investments 51 111 3,864 2,198

Net Increase (Decrease) in Cash and Equity in Pooled Investments (565) 104 (8,550) 64,284

CASH AND EQUITY IN POOLED INVESTMENTS

Beginning of Year 900 796 96,594 32,310

End of Year $ 335 $ 900 $ 88,044 $ 96,594

CASH AT THE END OF THE YEAR CONSISTS OF

Operating Cash and Equity in Pooled Investments $ 335 $ 900 $ 46,043 $ 41,728 Noncurrent Restricted Cash and Equity in Pooled Investments - - 42,001 54,866

Total Cash at the End of the Year $ 335 $ 900 $ 88,044 $ 96,594

197 198 Nonmajor Enterprise Funds

E-3 COMBINING STATEMENT OF CASH FLOWS Page 4 of 4 NONMAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2008 (In Thousands)

Downtown Parking Garage Comparative Totals

2008 2007 2008 2007

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES

Operating Income (Loss) $ 2,007 $ 2,487 $ (5,750) $ 275 Adjustments to Reconcile Net Operating Income (Loss) to Net Cash from Operating Activities Depreciation and Amortization 2,112 2,112 11,722 10,624 Changes in Operating Assets and Liabilities Accounts Receivable 10 (72) 514 (146) Unbilled Receivables - - (87) 43 Due from Other Funds - - 813 (725) Due from Other Governments - - (488) (460) Materials and Supplies Inventory - - 20 43 Accounts Payable (22) (99) (313) 279 Salaries, Benefits, and Payroll Taxes Payable - - 293 147 Compensated Absences Payable - - 434 427 Due to Other Funds 12 38 (145) (369) Due to Other Governments - - (119) 56 Claims Payable - - 155 61 Taxes Payable (8) (3) (11) 1 Deferred Credits - - (280) 484 This page is intentionally left blank. Other Assets and Liabilities - (108) (1,058) (1,298)

Total Adjustments 2,104 1,868 11,450 9,167

Net Cash from Operating Activities $ 4,111 $ 4,355 $ 5,700 $ 9,442

199 Internal Service Funds

This page is intentionally left blank. Internal Service Funds The City of Seattle

INTERNAL SERVICE FUNDS F-1 COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS The Fleets and Facilities Fund accounts for support services to other City departments in the areas of vehicle purchases and December 31, 2008 motor pool maintenance and repairs; building and related facility operations and maintenance; architecture, engineering, and space planning; and real estate management. (In Thousands) Comparative Totals The Information Technology Fund accounts for support services provided by the Department of Information Technology to Fleets and Information Restated Facilities Technology 2008 2007 other City departments. The services include managing the City’s information technology resources, including Citywide telecommunications, data communications, and the physical infrastructure that supports them; the City’s telephone system, radio ASSETS system, and fiber optic network; Citywide application infrastructure; and interactive media services. Current Assets The Engineering Services Fund accounts for the design, construction, and management services performed for capital Cash and Equity in Pooled Investments $ 23,319 $ 29,773 $ 53,092 $ 47,910 improvement projects of other City departments and other entities. The fund was closed effective January 1, 2008. Receivables, Net of Allowances Accounts 123 414 537 1,359 Interest and Dividends 64 72 136 221 Unbilled ---79 Due from Other Funds 4,668 1,742 6,410 9,130 Due from Other Governments 399 283 682 1,431 Materials and Supplies Inventory 1,696 484 2,180 2,516 Prepayments and Other - 21 21 14

Total Current Assets 30,269 32,789 63,058 62,660

Noncurrent Assets

Restricted Cash and Equity in Pooled Investments 325 - 325 198 Capital Assets Land and Land Rights 39 - 39 39 Buildings and Improvements 3,688 - 3,688 2,890 Less Accumulated Depreciation (916) - (916) (853) Machinery and Equipment 137,297 31,392 168,689 161,261 Less Accumulated Depreciation (63,173) (21,054) (84,227) (81,923) Construction in Progress 692 1,380 2,072 1,858

Total Noncurrent Assets 77,952 11,718 89,670 83,470

Total Assets 108,221 44,507 152,728 146,130 LIABILITIES

Current Liabilities

Accounts Payable 4,983 2,410 7,393 9,434 Salaries, Benefits, and Payroll Taxes Payable 1,391 1,237 2,628 2,484 Due to Other Funds 1,005 1,672 2,677 1,742 Interest Payable - - - 76 Taxes Payable 32 5 37 37 Current Portion of Long-Term Debt General Obligation Bonds Due Within One Year - - - 860 Claims Payable 423 18 441 421 Compensated Absences Payable 116 173 289 271 Other Current Liabilities 2 - 2 65

Total Current Liabilities 7,952 5,515 13,467 15,390

Noncurrent Liabilities

Compensated Absences Payable 1,701 1,460 3,161 2,985 Claims Payable 828 35 863 793 Vendor and Other Deposits Payable 325 - 325 198 General Obligation Bonds, Due Serially - - - 860 Less Bonds Due Within One Year - - - (860) Bond Discount and Premium - - - 18 Unfunded Other Post Employment Benefits 380 267 647 360 Other Noncurrent Liabilities 119 598 717 810

Total Noncurrent Liabilities 3,353 2,360 5,713 5,164

Total Liabilities 11,305 7,875 19,180 20,554

NET ASSETS Invested in Capital Assets, Net of Related Debt 77,627 11,718 89,345 82,394 Unrestricted 19,289 24,914 44,203 43,182

Total Net Assets $ 96,916 $ 36,632 $ 133,548 $ 125,576

203 204 Internal Service Funds The City of Seattle

F-2 COMBINING STATEMENT OF REVENUES, EXPENSES, F-3 COMBINING STATEMENT OF CASH FLOWS AND CHANGES IN FUND NET ASSETS Page 1 of 2 INTERNAL SERVICE FUNDS INTERNAL SERVICE FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands) Comparative Totals Fleets and Information Engineering Restated Comparative Totals Facilities Technology Services 2008 2007 Fleets and Information Restated Facilities Technology 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES OPERATING REVENUES Cash Received from Customers $ 119,743 $ 46,347 $ 407 $ 166,497 $ 169,519 Cash Paid to Suppliers (45,600) (20,767) (1,080) (67,447) (66,834) Charges for Services $ 29,439 $ 43,642 $ 73,081 $ 83,533 Cash Paid to Employees (24,635) (21,823) (291) (46,749) (44,337) Rents, Parking, and Concessions 89,418 - 89,418 87,650 Cash Paid for Taxes (308) 5 - (303) (270)

Total Operating Revenues 118,857 43,642 162,499 171,183 Net Cash from Operating Activities 49,200 3,762 (964) 51,998 58,078

OPERATING EXPENSES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Operations and Maintenance 62,635 36,960 99,595 94,549 Utility Systems Management - - - 123 Payment of Interfund Advances - - - - (2,500) Engineering Services - - - 7,583 Operating Grants and Contributions Received 163 686 - 849 968 General and Administrative 9,659 4,963 14,622 14,407 Transfers Out (28,615) - - (28,615) (29,440) City Business and Occupation Taxes 5 - 5 5 Other Taxes 299 1 300 259 Net Cash from Noncapital Financing Activities (28,452) 686 - (27,766) (30,972) Depreciation and Amortization 11,690 2,822 14,512 14,538 CASH FLOWS FROM CAPITAL AND Total Operating Expenses 84,288 44,746 129,034 131,464 RELATED FINANCING ACTIVITIES

Operating Income (Loss) 34,569 (1,104) 33,465 39,719 Principal Payments on Long-Term Debt - (878) - (878) (815) Capital Expenditures and Deferred Charges Paid (18,661) (1,919) - (20,580) (20,854) NONOPERATING REVENUES (EXPENSES) Interest Paid on Long-Term Debt - (25) - (25) (86) Proceeds from Sale of Capital Assets - 6 - 6 166 Investment and Interest Income 1,356 1,112 2,468 2,672 Interest Expense - 51 51 14 Net Cash from Capital and Related Financing Activities (18,661) (2,816) - (21,477) (21,589) Gain (Loss) on Sale of Capital Assets (257) 6 (251) 130 Contributions and Grants 163 686 849 968 CASH FLOWS FROM INVESTING ACTIVITIES Others, Net - - - 176 Interest and Investment Income Received 1,389 1,165 - 2,554 2,625 Total Nonoperating Revenues (Expenses) 1,262 1,855 3,117 3,960 Net Increase (Decrease) in Cash and Income (Loss) Before Equity in Pooled Investments 3,476 2,797 (964) 5,309 8,142 Contributions, Grants, and Transfers 35,831 75136,582 43,679 CASH AND EQUITY IN POOLED INVESTMENTS Capital Contributions and Grants 6 - 6 85 Transfers Out (28,616) - (28,616) (29,440) Beginning of Year 20,168 26,976 964 48,108 39,966

Change in Net Assets 7,221 751 7,972 14,324 End of Year $ 23,644 $ 29,773 $ - $ 53,417 $ 48,108

Total Net Assets - Beginning of Year 89,695 35,881 125,576 112,570 Prior-Year Adjustment - - - (1,318) CASH AT THE END OF THE YEAR CONSISTS OF Total Net Assets - Beginning of Year as Restated 89,695 35,881 125,576 111,252 Current Assets Cash and Equity in Pooled Investments $ 23,319 $ 29,773 $ - $ 53,092 $ 47,910 Total Net Assets - End of Year $ 96,916 $ 36,632 $ 133,548 $ 125,576 Noncurrent Restricted Cash and Equity in Pooled Investments 325 - - 325 198

Total Cash at the End of the Year $ 23,644 $ 29,773 $ - $ 53,417 $ 48,108

205 206 Internal Service Funds

F-3 COMBINING STATEMENT OF CASH FLOWS Page 2 of 2 INTERNAL SERVICE FUNDS For the Year Ended December 31, 2008 (In Thousands)

Comparative Totals Fleets and Information Engineering Restated Facilities Technology Services 2008 2007

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES

Operating Income (Loss) $ 34,569 $ (1,104) $ - $ 33,465 $ 39,719

Adjustments to Reconcile Operating Income (Loss) to Net Cash from Operating Activities Depreciation and Amortization 11,690 2,822 - 14,512 14,538 Changes in Operating Assets and Liabilities Accounts Receivable 41 779 3 823 (448) Unbilled Receivables - 79 - 79 17 Due from Other Funds 1,048 1,267 405 2,720 (2,649) Due from Other Governments 55 694 - 749 1,266 Materials and Supplies Inventory 224 113 - 337 (206) Accounts Payable 579 (2,454) (166) (2,041) 4,867 Salaries, Benefits, and Payroll Taxes Payable 280 205 (342) 143 263 Compensated Absences Payable 85 109 - 194 (216) Due to Other Funds 556 1,242 (864) 934 654 Claims Payable 84 6 - 90 (11) Taxes Payable (4) 5 - 1 (3) Other Assets and Liabilities (7) (1) - (8) 287 This page is intentionally left blank. Total Adjustments 14,631 4,866 (964) 18,533 18,359

Net Cash from Operating Activities $ 49,200 $ 3,762 $ (964) $ 51,998 $ 58,078

SCHEDULE OF NONCASH ACTIVITIES

In-Kind Capital Contributions $ 6 $ - $ - $ 6 $ 85

207 Fiduciary Funds

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FIDUCIARY FUNDS

PENSION TRUST FUNDS

The Employees' Retirement Fund receives employees' payroll deductions for retirement and the City's matching contributions. It pays pension benefits to retired City employees. It also accounts for the investments and related earnings in the City’s employee retirement plan.

The Firemen's Pension Fund receives General Fund contributions and a portion of the state-levied fire insurance premium tax. These moneys pay for fire fighters' medical and pension benefits which are not covered by the State's Law Enforcement Officers' and Fire Fighters' Retirement System and/or industrial insurance.

The Police Relief and Pension Fund receives support almost entirely from the General Fund. The General Fund contributions pay for sworn police personnel's medical and pension benefits which are not covered by the state's Law Enforcement Officers' and Fire Fighters' Retirement System and/or industrial insurance.

AGENCY FUNDS

The Guaranty Deposits Fund holds temporary deposits of moneys from individuals or entities pending fulfillment of contractual agreements with the City.

The Payroll Withholding Fund receives City contributions and/or employee deductions for payroll taxes, such as Social Security (FICA), Medicare, and federal income tax; state retirement (LEOFF); savings bonds; and dependent child care. The contributions and deductions are paid to federal and state agencies and to other City funds. This page is intentionally left blank.

The Salary Fund pays salaries to all active City employees. The funds that record the expenditures transfer moneys into this fund.

The Voucher Fund pays for all expenditures of the City except payroll, retirement benefits, and certain payments made by check or wire transfer. The funds that record the expenditures transfer moneys into this fund.

The Pass-Through Grants Fund was established in 2006 to account for grants which are the equivalent of pure cash conduits. The City has no administrative and no direct involvement with the grant programs.

211 Fiduciary Funds The City of Seattle

G-1 COMBINING STATEMENT OF NET ASSETS G-2 COMBINING STATEMENT OF CHANGES PENSION TRUST FUNDS Page 1 of 2 IN PLAN NET ASSETS December 31, 2008 PENSION TRUST FUNDS (In Thousands) For the Year Ended December 31, 2008 (In Thousands) Comparative Totals Employees’ Firemen’s Police Relief Retirement Pension and Pension 2008 2007 Defined Benefit Employees’ Firemen’s Police Relief Retirement Pension and Pension ASSETS Cash and Equity in Pooled Investments $ 16,126 $ 11,942 $ 2,170 $ 30,238 $ 26,559 ADDITIONS

Short-Term Investments 6,542 - - 6,542 66,940 Contributions Employer $ 45,961 $ 15,027 $ 9,723 Securities Lending Collateral 69,839 - - 69,839 103,323 Plan Member 45,986 - - Investments at Fair Value Total Contributions 91,947 15,027 9,723 U.S. Government Obligations 93,240 464 - 93,704 135,366 Domestic Corporate Bonds 156,963 - - 156,963 102,792 Investment Income (Loss) Domestic Stocks 482,488 - - 482,488 763,844 International Stocks 225,343 - - 225,343 402,966 From Investment Activities Real Estate 216,701 - - 216,701 286,646 Net Appreciation (Depreciation) in Fair Value of Investments (639,879) 38 - Alternative/Venture Capital 163,165 - - 163,165 233,790 Interest 18,009 357 - Mezzanine Debt 123,114 - - 123,114 114,463 Dividends 5,543 - -

Total Investments at Fair Value 1,461,014 464 - 1,461,478 2,039,867 Total Investment Activities Income (Loss) (616,327) 395 - Receivables Investment Activities Expenses Employer - Due from Other Funds 214 - - 214 - Investment Management Fees 3,107 - - Employer - Other 6,329 22 - 6,351 4,421 Performance Measurement Fees 165 - - Employee - - - - 1,029 Investment Custodial Fees 94 - - Interest and Dividends 2,638 - - 2,638 2,616 Due from Other Governments 3 - - 3 4 Total Investment Activities Expenses 3,366 - -

Total Receivables 9,184 22 - 9,206 8,070 Net Income (Loss) from Investment Activities (619,693) 395 -

Equipment, at Cost, Net of Accumulated Depreciation 3 - - 3 3 From Securities Lending Activities Securities Lending Income 3,522 - - Total Assets 1,562,708 12,428 2,170 1,577,306 2,244,762 Securities Lending Expenses LIABILITIES Borrower Rebates 2,542 - - Management Fees 244 - - Refunds Payable and Other 9,888 930 1,747 12,565 12,231 Securities Lending Collateral 75,394 - - 75,394 103,323 Total Securities Lending Expenses 2,786 - -

Total Liabilities 85,282 930 1,747 87,959 115,554 Net Income (Loss) from Securities Lending Activities 736 - -

Net Assets Held in Trust for Pension Benefits $ 1,477,426 $ 11,498 $ 423 $ 1,489,347 $ 2,129,208 Total Net Investment Income (Loss) (618,957) 395 -

Total Additions (527,010) 15,422 9,723

DEDUCTIONS

Benefits 102,703 12,382 9,678 Refund of Contributions 10,223 - - Administrative Expense 2,036 547 427

Total Deductions 114,962 12,929 10,105

Change in Net Assets (641,972) 2,493 (382)

Net Assets - Beginning of Year 2,119,398 9,005 805

Net Assets - End of Year $ 1,477,426 $ 11,498 $ 423

213 214 Fiduciary Funds The City of Seattle

G-2 COMBINING STATEMENT OF CHANGES G-3 COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Page 2 of 2 IN PLAN NET ASSETS Page 1 of 2 AGENCY FUNDS PENSION TRUST FUNDS For the Year Ended December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands) Balance Balance January 1 Additions Deductions December 31 Postemployment Healthcare Comparative Totals Firemen’s Police Relief GUARANTY DEPOSITS FUND Pension and Pension 2008 2007 Assets ADDITIONS Cash $ 7,808 $ 13,832 $ 11,952 $ 9,688 Contributions Employer $ 8,453 $ 11,279 $ 90,443 $ 74,372 Total Assets $ 7,808 $ 13,832 $ 11,952 $ 9,688 Plan Member - - 45,986 40,535 Liabilities Total Contributions 8,453 11,279 136,429 114,907 Deposits Payable $ 7,808 $ 14,052 $ 12,172 $ 9,688 Investment Income (Loss) Total Liabilities $ 7,808 $ 14,052 $ 12,172 $ 9,688 From Investment Activities Net Appreciation (Depreciation) in Fair Value of Investments - - (639,841) 109,491 PAYROLL WITHHOLDING FUND Interest - - 18,366 19,087 Dividends - - 5,543 14,921 Assets

Total Investment Activities Income (Loss) - - (615,932) 143,499 Cash $ 1,098 $ 237,240 $ 234,958 $ 3,380 Accounts Receivable 717 780 756 741 Investment Activities Expenses Investment Management Fees - - 3,107 4,046 Total Assets $ 1,815 $ 238,020 $ 235,714 $ 4,121 Performance Measurement Fees - - 165 100 Investment Custodial Fees - - 94 60 Liabilities

Total Investment Activities Expenses - - 3,366 4,206 Accounts Payable $ 31 $ - $ 31 $ - Salaries, Benefits, and Payroll Taxes Payable 1,783 237,572 235,245 4,110 Net Income (Loss) from Investment Activities - - (619,298) 139,293 Claims/Judgments Payable 1 10 - 11

From Securities Lending Activities Total Liabilities $ 1,815 $ 237,582 $ 235,276 $ 4,121 Securities Lending Income - - 3,522 6,694 SALARY FUND Securities Lending Expenses Borrower Rebates - - 2,542 6,236 Assets Management Fees - - 244 114 Cash $ 21 $ 564,703 $ 563,900 $ 824 Total Securities Lending Expenses - - 2,786 6,350 Accounts Receivable 11 36 11 36

Net Income (Loss) from Securities Lending Activities - - 736 344 Total Assets $ 32 $ 564,739 $ 563,911 $ 860

Total Net Investment Income (Loss) - - (618,562) 139,637 Liabilities

Total Additions 8,453 11,279 (482,133) 254,544 Accounts Payable $ - $ - $ - $ - Salaries, Benefits, and Payroll Taxes Payable 32 13,140 12,312 860 DEDUCTIONS Total Liabilities $ 32 $ 13,140 $ 12,312 $ 860 Benefits 8,453 11,279 144,495 133,648 Refund of Contributions - - 10,223 11,526 Administrative Expense - - 3,010 2,687 VOUCHER FUND

Total Deductions 8,453 11,279 157,728 147,861 Assets

Change in Net Assets - - (639,861) 106,683 Cash $ - $ 2,703,993 $ 2,703,990 $ 3

Net Assets - Beginning of Year - - 2,129,208 2,022,525 Total Assets $ - $ 2,703,993 $ 2,703,990 $ 3

Net Assets - End of Year $ - $ - $ 1,489,347 $ 2,129,208 Liabilities Accounts Payable $ - $ 3 $ - $ 3

Total Liabilities $ - $ 3 $ - $ 3

215 216 Fiduciary Funds

G-3 COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Page 2 of 2 AGENCY FUNDS For the Year Ended December 31, 2008 (In Thousands)

Balance Balance January 1 Additions Deductions December 31

PASS-THROUGH GRANTS FUND

Assets Cash $ - $ 17,087 $ 17,087 $ -

Total Assets $ - $ 17,087 $ 17,087 $ -

Liabilities

Accounts Payable $ - $ 17,087 $ 17,087 $ -

Total Liabilities $ - $ 17,087 $ 17,087 $ -

TOTALS - ALL AGENCY FUNDS Assets

Cash and Equity in Pooled Investments $ 8,927 $ 3,536,855 $ 3,531,887 $ 13,895 Accounts Receivable 728 816 767 777

Total Assets $ 9,655 $ 3,537,671 $ 3,532,654 $ 14,672

Liabilities This page is intentionally left blank. Accounts Payable $ 31 $ 17,090 $ 17,118 $ 3 Salaries, Benefits, and Payroll Taxes Payable 1,815 250,712 247,557 4,970 Deposits Payable 7,808 14,052 12,172 9,688 Claims/Judgments Payable 1 10 - 11

Total Liabilities $ 9,655 $ 281,864 $ 276,847 $ 14,672

217 Capital Assets

This page is intentionally left blank. Capital Assets The City of Seattle

H-1 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS H-2 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY SOURCE Page 1 of 2 SCHEDULE BY FUNCTION December 31, 2008 December 31, 2008 (In Thousands) (In Thousands)

Restated 2008 2007 Land Buildings Improvements

General Government $ 120,021 $ 583,440 $ 105,555 CAPITAL ASSETS Security of Persons and Property - - - Land $ 436,084 $415,772 Buildings 1,287,831 1,190,140 Transportation 57,906 9,364 - Improvements Other than Buildings 647,518 587,219 Equipment 90,918 85,741 Economic Environment 1,124 - - Infrastructure 1,126,316 1,051,031 Construction in Progress 173,917 226,271 Judicial - - - Other Capital Assets 12,589 11,933 Culture and Recreation 257,033 695,027 541,963 Total Capital Assets $ 3,775,173 $ 3,568,107 Total $ 436,084 $ 1,287,831 $ 647,518 INVESTMENT IN CAPITAL ASSETS FROM General Fund $ 215,659 $ 199,065 Special Revenue Funds 2,052,958 1,892,778 Capital Project Funds 1,410,662 1,399,245 Donations 95,894 77,019

Total Investment in Capital Assets $ 3,775,173 $ 3,568,107

221 222 Capital Assets The City of Seattle

H-2 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS H-3 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS Page 2 of 2 SCHEDULE BY FUNCTION SCHEDULE OF CHANGES BY FUNCTION December 31, 2008 For the Year Ended December 31, 2008 (In Thousands) (In Thousands)

Other Capital Restated Equipment Infrastructure Assets Total Balance Balance January 1 Additions Deductions December 31 General Government $ 33,238 $ - $ - $ 842,254 General Government $ 758,629 $ 83,720 $ 95 $ 842,254 Security of Persons and Property 26,347 - - 26,347 Security of Persons and Property 23,268 3,281 202 26,347 Transportation 9,469 1,126,316 - 1,203,055 Transportation 1,108,396 94,659 - 1,203,055 Economic Environment 220 - - 1,344 Economic Environment 1,322 22 - 1,344 Judicial 290 - - 290 Judicial 290 - - 290 Culture and Recreation 21,354 - 12,589 1,527,966 Culture and Recreation 1,449,931 78,346 311 1,527,966 Total $ 90,918 $ 1,126,316 $ 12,589 3,601,256 Total 3,341,836 260,028 608 3,601,256 Construction in Progress 173,917 Construction in Progress 226,271 168,408 220,762 173,917 Total Investment in Capital Assets $ 3,775,173 Total Investment in Capital Assets $ 3,568,107 $ 428,436 $ 221,370 $ 3,775,173

223 224 Statistics

This page is intentionally left blank. Statistics The City of Seattle

STATISTICAL INFORMATION Table S-1 NET ASSETS BY COMPONENT Last Seven Fiscal Years The Statistical Section provides financial statement users with additional historical perspective, context, and detail for them to use in evaluating the information contained within the financial statements, notes to the financial statements, and required (Accrual Basis of Accounting) supplementary information with the goal of providing the user a better understanding of the City’s economic condition. (In Thousands)

Financial Trends 2008 2007 2006 2005

These tables contain information to help the reader understand how the City’s financial performance and well-being have GOVERNMENTAL ACTIVITIES changed over time. Invested in Capital Assets, Net of Related Debt $ 2,184,161 $ 2,011,575 $ 1,825,203 $ 1,679,338 Restricted 271,204 194,618 183,340 142,509 S-1 Net Assets by Component Unrestricted 194,962 322,784 273,696 211,426 S-2 Changes in Net Assets Total Governmental Activities Net Assets $ 2,650,327 $ 2,528,977 $ 2,282,239 $ 2,033,273 S-3 Fund Balances of Governmental Funds S-4 Changes in Fund Balances of Governmental Funds BUSINESS-TYPE ACTIVITIES Invested in Capital Assets, Net of Related Debt $ 1,128,319 $ 967,028 $ 813,091 $ 664,469 Revenue Capacity Restricted 63,913 48,561 59,161 147,980 Unrestricted 166,634 195,226 234,582 125,159

These tables contain information to help the reader assess the City’s most significant local revenue sources. Total Business-Type Activities Net Assets $ 1,358,866 $ 1,210,815 $ 1,106,834 $ 937,608 PRIMARY GOVERNMENT S-5 Tax Revenues by Source S-6 Assessed Value and Estimated Actual Value of Taxable Property Invested in Capital Assets, Net of Related Debt $ 3,312,480 $ 2,978,603 $ 2,638,294 $ 2,343,807 Restricted 335,117 243,179 242,501 290,489 S-7 Direct and Overlapping Property Tax Rates Unrestricted 361,596 518,010 508,278 336,585 S-8 Principal Property Taxpayers S-9 Principal Revenue Sources Total Primary Government Net Assets $ 4,009,193 $ 3,739,792 $ 3,389,073 $ 2,970,881 S-10 Property Tax Levies and Collections

Debt Capacity

These tables contain information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. 2004 2003 2002 GOVERNMENTAL ACTIVITIES S-11 Ratios of Outstanding Debt by Type S-12 Ratios of Net General Bonded Debt Outstanding Invested in Capital Assets, Net of Related Debt $ 1,584,694 $ 1,454,419 $ 1,328,297 Restricted 101,326 126,508 105,898 S-13 Direct and Overlapping Governmental Activities Debt Unrestricted 137,995 140,079 77,418 S-14 Legal Debt Margin Information S-15 Pledged-Revenue Coverage Total Governmental Activities Net Assets $ 1,824,015 $ 1,721,006 $ 1,511,613 BUSINESS-TYPE ACTIVITIES Demographic and Economic Information Invested in Capital Assets, Net of Related Debt $ 641,015 $ 676,051 $ 699,396 Restricted 114,795 178,897 278,815 These tables offer demographic and economic indicators to help the reader understand the environment within which the Unrestricted 90,616 (33,219) (162,022) City’s financial activities take place. Total Business-Type Activities Net Assets $ 846,426 $ 821,729 $ 816,189 S-16 Demographic and Economic Statistics PRIMARY GOVERNMENT S-17 Principal Industries Invested in Capital Assets, Net of Related Debt $ 2,225,709 $ 2,130,470 $ 2,027,693 Restricted 216,121 305,405 384,713 Operating Information Unrestricted 228,611 106,860 (84,604) Total Primary Government Net Assets $ 2,670,441 $ 2,542,735 $ 2,327,802 These tables contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs.

S-18 Full-Time-Equivalent City Government Employees by Department/Office S-19 Operating Indicators by Department/Office S-20 Capital Asset Statistics by Department/Office Miscellaneous Statistics

227 228 Statistics The City of Seattle

Table S-2 CHANGES IN NET ASSETS Table S-2 CHANGES IN NET ASSETS Page 1 of 2 Last Six Fiscal Years Page 2 of 2 Last Six Fiscal Years (Accrual Basis of Accounting) (Accrual Basis of Accounting) (In Thousands) (In Thousands)

2008 2007 2006 2005 2004 2003 2008 2007 2006 2005 2004 2003 GENERAL REVENUES AND TRANSFERS EXPENSES Governmental Activities Governmental Activities Taxes General Government $ 143,855 $ 103,323 $ 128,758 $ 102,362 $ 104,281 $ 101,322 Property Taxes $ 368,515 $ 359,651 $ 318,490 $ 311,613 $ 296,789 $ 252,702 Judicial 26,762 24,030 20,344 18,429 19,169 19,211 Sales Taxes 171,917 171,846 155,311 146,060 130,961 124,951 Public Safety 455,701 396,669 354,083 325,416 322,244 298,120 Business Taxes 330,369 332,238 311,015 280,139 253,733 248,467 Physical Environment 7,707 9,991 7,331 6,614 5,530 5,513 Excise 36,091 76,918 58,397 55,507 43,766 32,661 Transportation 127,872 124,493 87,610 87,542 88,606 92,749 Other Taxes 25,395 12,765 4,929 4,636 4,196 3,799 Economic Environment 104,660 98,337 78,957 91,060 78,455 85,130 Penalties and Interest on Delinquent Taxes 2,410 4,276 3,349 2,125 1,941 4,131 Health and Human Services 69,181 63,276 56,904 56,572 51,565 52,406 Unrestricted Investment Earnings 24,140 33,155 22,021 10,288 5,366 9,370 Culture and Recreation 257,578 224,455 215,081 199,169 196,280 164,488 Gain on Sale of Capital Assets 15,461 891 35,353 2,921 2,296 4,323 Interest on Long-Term Debt 39,336 34,048 35,399 39,539 41,499 43,216 Transfers (10,803) (10,612) (9,260) (8,456) (9,738) (9,569) Total Governmental Activities Expenses 1,232,652 1,078,622 984,467 926,703 907,629 862,155 Total Governmental Activities 963,495 981,128 899,605 804,833 729,310 670,835

Business-Type Activities Business-Type Activities Light 791,837 764,786 699,164 683,476 772,827 777,631 Unrestricted Investment Earnings 13,530 19,106 16,241 10,811 4,269 6,114 Water 180,855 169,631 161,943 148,992 127,865 124,611 Gain on Sale of Capital Assets 1,708 276 1,823 438 2,100 7,469 Drainage and Wastewater 231,318 225,833 199,378 178,447 168,689 156,786 Transfers 10,803 10,612 9,260 8,456 9,738 9,569 Solid Waste 120,941 119,714 114,527 110,044 112,920 112,114 Total Business-Type Activities 26,041 29,994 27,324 19,705 16,107 23,152 Planning and Development 56,882 56,139 50,203 43,487 45,320 37,114 Downtown Parking Garage 8,545 8,336 8,035 8,414 8,421 8,284 Total Primary Government 989,536 1,011,122 926,929 824,538 745,417 693,987 Total Business-Type Activities Expenses 1,390,378 1,344,439 1,233,250 1,172,860 1,236,042 1,216,540 CHANGES IN NET ASSETS Total Primary Governemt Expenses 2,623,030 2,423,061 2,217,717 2,099,563 2,143,671 2,078,695 Governmental Activities 121,352 251,524 241,749 208,530 115,860 73,115 PROGRAM REVENUES Business-Type Activities 148,051 113,800 166,259 91,183 24,699 5,540 Total Primary Government $ 269,403 $ 365,324 $ 408,008 $ 299,713 $ 140,559 $ 78,655 Governmental Activities Charges for Services General Government 102,697 69,636 51,071 47,054 43,857 47,394 Judicial 22,032 19,851 17,852 16,794 18,162 16,637 Public Safety 16,254 21,850 14,422 12,788 10,372 9,703 Physical Environment 1,632 1,660 1,587 1,220 1,064 985 Transportation 44,093 28,860 25,306 28,936 17,970 16,699 Economic Environment 17,440 25,100 7,519 12,765 11,072 9,759 Health and Human Services 12 17 62 4 5 - Culture and Recreation 59,586 57,283 62,768 50,192 49,925 43,860 Operating Grants and Contributions 95,236 93,184 93,850 93,656 86,701 82,391 Capital Grants and Contributions 31,527 31,577 52,174 66,991 55,051 37,007 Total Governmental Activities Program Revenues 390,509 349,018 326,611 330,400 294,179 264,435

Business-Type Activities Charges for Services Light 872,099 829,679 817,310 733,865 763,793 738,802 Water 163,996 159,967 153,171 145,865 141,305 129,414 Drainage and Wastewater 216,957 201,139 186,118 175,782 162,126 150,631 Solid Waste 124,353 121,913 112,474 111,228 115,144 114,821 Planning and Development 42,929 49,471 44,655 37,695 32,449 27,541 Downtown Parking Garage 6,530 6,805 6,608 6,180 6,185 5,559 Operating Grants and Contributions 4,099 6,208 2,412 2,973 2,618 667 Capital Grants and Contributions 81,425 53,063 49,437 30,750 21,014 31,493 Total Business-Type Activities Program Revenues 1,512,388 1,428,245 1,372,185 1,244,338 1,244,634 1,198,928

Total Primary Government Program Revenues 1,902,897 1,777,263 1,698,796 1,574,738 1,538,813 1,463,363

NET (EXPENSE) REVENUE

Governmental Activities (842,143) (729,604) (657,856) (596,303) (613,450) (597,720) Business-Type Activities 122,010 83,806 138,935 71,478 8,592 (17,612) Total Primary Government Net Expense (720,133) (645,798) (518,921) (524,825) (604,858) (615,332)

229 230 Statistics The City of Seattle

Table S-3 FUND BALANCES OF GOVERNMENTAL FUNDS Table S-4 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Seven Fiscal Years Page 1 of 2 Last Seven Fiscal Years (Modified Accrual Basis of Accounting) (Modified Accrual Basis of Accounting) (In Thousands) (In Thousands)

2008 2007 2006 2005 2008 2007 2006 2005

GENERAL FUND REVENUES Reserved $ 140,325 $ 129,350 $ 91,018 $ 95,855 Taxes $ 934,544 $957,242 $ 851,366 $799,928 Unreserved 131,085 197,678 150,280 107,817 Licenses and Permits 29,091 33,439 28,348 25,612 Grants, Shared Revenues, and Contributions 133,772 130,869 158,922 155,130 Total General Fund $ 271,410 $ 327,028 $ 241,298 $ 203,672 Charges for Services 142,797 149,049 125,245 127,436 Fines and Forfeits 25,572 22,701 21,230 19,759 ALL OTHER GOVERNMENTAL FUNDS Parking Fees and Space Rent 37,961 38,029 44,742 42,703 Program Income, Interest, and Reserved $ 261,463 $ 226,965 $ 218,682 $ 185,917 Miscellaneous Revenues 102,077 81,200 46,892 68,968 Unreserved, Reported in Special Revenue Funds 96,337 39,589 41,694 31,368 Total Revenues 1,405,814 1,412,529 1,276,745 1,239,536 Capital Projects Funds - (1,846) (3,125) - Permanent Funds 121 83 - - EXPENDITURES

Total All Other Governmental Funds $ 357,921 $ 264,791 $ 257,251 $ 217,285 Current General Government 197,591 154,672 160,282 136,309 Judicial 26,584 24,142 20,569 19,229 Public Safety 421,105 377,367 352,395 333,548 Physical Environment 8,454 10,752 7,574 6,902 Transportation 107,532 95,474 82,612 94,806 Economic Environment 109,903 103,350 83,327 95,186 Health and Human Services 70,032 64,490 58,723 57,017 Culture and Recreation 216,114 199,214 191,618 181,318 2004 2003 2002 Capital Outlay General Government 11,309 16,823 42,691 36,885 GENERAL FUND Judicial - - - 6 Public Safety 12,643 38,345 3,928 4,829 Reserved $ 91,507 $ 76,590 $ 69,169 Physical Environment 5 10 - - Unreserved 40,669 42,228 40,194 Transportation 100,636 105,079 80,913 61,555 Economic Environment 22 270 16 - Total General Fund $ 132,176 $ 118,818 $ 109,363 Health and Human Services - - - - Culture and Recreation 71,666 88,641 85,438 77,023 ALL OTHER GOVERNMENTAL FUNDS Debt Service Principal 51,855 61,236 71,672 92,198 Reserved $ 185,176 $ 250,350 $ 396,271 Advance Refunding to Escrow 35,152 6,270 - 9,596 Unreserved, Reported in Interest 35,738 34,923 37,599 36,462 Special Revenue Funds 18,391 10,586 29,492 Bond Issuance Cost 632 256 380 438 Capital Projects Funds (3,138) - 37 Other - - 177 40 Permanent Funds 19 161 624 Total Expenditures 1,476,973 1,381,314 1,279,914 1,243,347 Total All Other Governmental Funds $ 200,448 $ 261,097 $ 426,424 Excess (Deficiency) of Revenues over Expenditures (71,159) 31,215 (3,169) (3,811)

OTHER FINANCING SOURCES (USES)

Long-Term Debt Issued 84,960 36,365 49,635 60,840 Refunding Debt Issued 54,870 60,870 2,195 71,450 Premium on Bonds Issued 7,545 4,178 378 7,837 Payment to Refunded Bond Escrow Agent (56,920) (62,535) (2,253) (75,412) Sales of Capital Assets 408 4,348 35,756 27,218 Transfers In 350,078 306,914 282,578 290,069 Transfers Out (332,266) (288,087) (287,529) (289,857)

Total Other Financing Sources (Uses) 108,675 62,053 80,760 92,145

Net Change in Fund Balance $ 37,516 $ 93,268 $ 77,591 $ 88,334

Debt Service as a Percentage of Noncapital Expenditures 9.46% 8.96% 10.22% 12.92%

231 232 Statistics The City of Seattle

Table S-4 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Table S-5 TAX REVENUES BY SOURCE Page 2 of 2 Last Seven Fiscal Years Last Seven Fiscal Years (Modified Accrual Basis of Accounting) (Modified Accrual Basis of Accounting) (In Thousands) (In Thousands)

2004 2003 2002 General Retail Sales Property and Business Excise Other Total REVENUES Year Tax Use Tax Tax Tax Taxes Taxes

Taxes $ 731,373 $667,039 $659,155 2002 $ 264,889 $ 127,296 $ 244,641 $ 27,448 $ 8,588 $ 672,862 Licenses and Permits 19,028 17,500 15,134 2003 268,300 124,952 248,468 32,661 7,930 682,311 Grants, Shared Revenues, and Contributions 140,551 120,257 166,927 2004 296,775 130,961 253,733 43,766 6,137 731,372 Charges for Services 112,690 111,736 108,770 2005 311,461 146,060 280,163 55,507 6,737 799,928 Fines and Forfeits 20,795 19,498 17,697 2006 318,366 155,311 311,015 58,572 8,103 851,367 Parking Fees and Space Rent 49,548 48,119 46,125 2007 359,651 171,846 332,238 76,918 16,589 957,242 Program Income, Interest, and 2008 368,362 171,917 332,779 36,091 25,395 934,544 Miscellaneous Revenues 32,497 36,183 42,840

Total Revenues 1,106,482 1,020,332 1,056,648

EXPENDITURES

Current General Government 135,100 137,943 119,166 Judicial 19,057 19,116 19,381 Public Safety 310,112 296,290 281,667 Physical Environment 5,814 5,996 5,404 Transportation 69,448 83,412 79,393 Economic Environment 82,525 91,244 100,908 Health and Human Services 51,177 52,058 51,742 Culture and Recreation 182,128 170,820 172,612 Capital Outlay General Government 50,014 73,730 105,143 Table S-6 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE Judicial - - 125 Public Safety 5,804 3,433 775 OF TAXABLE PROPERTY Physical Environment - - 13 Transportation 43,788 18,459 27,017 Last Ten Fiscal Years Economic Environment - 2 339 Health and Human Services - - 651 Culture and Recreation 97,426 184,961 177,547 a Debt Service Assessed and Estimated Actual Value (In Thousands) Total Average Assessed Principal 50,736 45,241 42,993 Fiscal Real Personal Direct Annual Value Advance Refunding to Escrow 4,558 5,368 30,533 Year Property Property Total Tax Rate Growth Per Capita Interest 40,254 42,101 37,785 Bond Issuance Cost 799 381 1,087 1999 $ 47,644,309 $ 3,593,322 $ 51,237,631 $ 3.918 11.09 % $ 94,797 Other 160 139 727 2000 53,589,860 3,948,166 57,538,026 3.996 12.30 102,131 2001 61,417,305 4,206,170 65,623,475 3.940 14.05 115,514 Total Expenditures 1,148,900 1,230,694 1,255,008 2002 70,660,338 4,846,254 75,506,592 3.573 15.06 132,282 2003 75,582,369 4,545,919 80,128,288 3.401 6.12 140,109 Excess (Deficiency) of 2004 79,724,601 4,213,495 83,938,096 3.597 4.75 146,591 Revenues over Expenditures (42,418) (210,362) (198,360) 2005 84,157,435 4,120,671 88,278,106 3.585 5.17 154,063 2006 91,625,334 4,081,299 95,706,633 3.378 8.41 165,382 OTHER FINANCING SOURCES (USES) 2007 101,522,467 4,686,021 106,208,488 3.221 10.97 181,312 2008 116,641,027 4,980,103 121,621,130 2.774 14.51 205,164 Long-Term Debt Issued - 59,481 238,485 Refunding Debt Issued 91,805 4,040 69,360 Premium on Bonds Issued 4,322 2,747 5,837 Payment to Refunded Bond Escrow Agent (92,833) (4,039) (69,119) a Sales of Capital Assets 2,980 6,865 8,297 Real property has been assessed at 100 percent of estimated actual value. Transfers In 231,518 245,334 253,633 Transfers Out (242,663) (259,938) (278,792)

Total Other Financing Sources (Uses) (4,871) 54,490 227,701

Net Change in Fund Balance $ (47,289) $ (155,872) $ 29,341

Debt Service as a Percentage of Noncapital Expenditures 10.02% 9.96% 11.99%

233 234 Statistics The City of Seattle

a Table S-7 DIRECT AND OVERLAPPING PROPERTY TAX RATES Table S-9 PRINCIPAL REVENUE SOURCES Last Ten Fiscal Years Page 1 of 2 Current Year and Nine Years Ago (In Mills or Dollars per Thousand of Assessed Value) (In Thousands)

C i t y o f S e a t t l e Overlapping a CITY LIGHT Year Special Debt Dollars d 2008 1999 of General Revenue Service Fire City Port of Levied Annual b c Percent of Percent of Levy Fund Funds Funds Pension Total State County School Seattle Total ($1,000) Growth Customer Name Amount Revenue Rank Amount Revenue Rank

1999 2.819 0.587 0.287 0.225 3.918 3.359 1.774 3.207 0.239 12.497 $640,317 14.2 % Nucor Steel Corporation $ 17,213 3.14 % 1 2000 2.705 0.697 0.369 0.225 3.996 3.303 1.689 2.964 0.216 12.168 700,141 9.3 City of Seattle 16,007 2.92 2 2001 2.538 0.890 0.321 0.191 3.940 3.145 1.552 2.621 0.190 11.448 751,258 7.3 University of Washington 14,264 2.60 3 $ 8,541 2.29 %3 The Boeing Company 12,015 2.19 4 9,108 2.44 2 2002 2.334 0.776 0.278 0.185 3.573 2.989 1.450 2.460 0.190 10.662 805,033 7.2 Sabey Corporation 9,364 1.71 5 2003 2.250 0.600 0.356 0.195 3.401 2.897 1.349 2.395 0.259 10.301 825,422 2.5 King County 7,601 1.39 6 2,875 0.77 8 2004 2.402 0.880 0.315 - 3.597 2.757 1.431 2.360 0.254 10.399 872,872 5.7 Saint Gobain 5,015 0.92 7 2,969 0.80 7 2005 2.351 0.933 0.301 - 3.585 2.690 1.382 2.302 0.253 10.212 901,496 3.3 U. S. Government (excluding the Veterans Administration) 4,581 0.84 8 4,350 1.17 5 2006 2.230 0.870 0.278 - 3.378 2.498 1.329 2.192 0.233 9.630 921,573 2.2 Unico Properties/Union Square Ltd. 3,923 0.72 9 2007 2.084 1.091 0.252 - 3.427 2.325 1.290 2.006 0.232 9.280 985,615 6.9 2001 Sixth LLC 3,335 0.61 10 4,284 1.15 6 2008 1.997 0.904 0.173 - 3.074 2.132 1.363 1.895 0.224 8.688 1,056,632 7.2 Ash Grove Cement 2,767 0.74 10 Birmingham Steel Corporation 10,453 2.80 1 Ball-Foster Glass 4,544 1.22 4 Port of Seattle 2,340 0.63 9 a Source: King County Assessor and City of Seattle Budget Office. b Total Top Ten $ 93,318 17.% 04 $ 52,231 14.% 01 For the purposes of this table the City’s share of the Countywide Emergency Medical Service (EMS) levy is included in the General Fund’s tax levy rate. EMS rate is 0.30 in 2008. c a Fire Pension receives a percentage of the General Fund levy that is set by the City Council. However, starting in 2004, Seattle does not have a separate levy Source: Seattle City Light billing records. rate for this purpose. d Actual dollars levied may differ slightly from this figure due to certain property tax exemptions for low-income, elderly, and handicapped property owners.

b WATER Table S-8 PRINCIPAL PROPERTY TAXPAYERS e 2008 1999 Percent of Percent of Current Year and Nine Years Ago Customer Name Amount Revenue Rank Amount Revenue Rank

2008 1999 Cascade Water Alliance $ 16,537 11.06 % 1 $ 10,593 12.42 % 1 Northshore Utility District 4,923 3.29 2 2,265 2.66 2 Assessed Percentage of Assessed Percentage of Highline Water District 3,359 2.25 3 2,196 2.58 3 g g Valuation Assessed Valuation Assessed Woodinville Water District 3,127 2.09 4 2,137 2.51 4 f Taxpayer (In Millions) Valuation Rank (In Millions) Valuation Rank Soos Creek Water and Sewer District 2,893 1.93 5 1,611 1.89 5 City of Seattle 2,198 1.47 6 University of Washington 2,008 1.34 7 Union Square Limited Partnership $ 614.2 0.45 % 1 $ 368.5 0.69 % 4 King County Water District #20 1,795 1.20 8 1,263 1.48 6 Columbia Center Property 515.6 0.37 2 Port of Seattle 1,527 1.02 9 Wright-Runstad & Company 508.3 0.37 3 244.1 0.46 5 City of Mercer Island 1,462 0.98 10 859 1.01 8 Qwest Corporation, Inc. 438.0 0.32 4 608.3 1.14 1 Coal Creek Water District #107 1,089 1.28 7 (formerly U. S West Cedar River Water and Sewer District 843 0.99 9 Communications) City of Shoreline 718 0.84 10 The Boeing Company 417.3 0.30 5 418.7 0.78 2 City Center Associates JV 383.7 0.28 6 Total Top Ten $ 39,829 26.63 % $ 23,574 27.66 % Second and Union 326.8 0.24 7 (Washington Mutual-Art Museum) b 999 Third Avenue Property 323.8 0.23 8 Source: Seattle Public Utilities billing records. Martin Selig 307.3 0.22 9 216.1 0.40 8 Block 24 Seattle LTD LP (Gerald Hines) 224.8 0.16 10 117.8 0.22 9 EOP Northwest Properties 383.3 0.72 3 Puget Sound Energy/Gas 235.1 0.44 6 Bentall Corporation 234.6 0.44 7 Susa - DBA Seattle Sheraton 111.1 0.21 10

e Source: King County Assessor. f The above listing includes taxpayers paying real and personal property taxes as property owners. It does not include taxpayers paying leasehold excise taxes based on rental payments for property they lease from other entities. g Assessed valuations for taxes collected in the succeeding year.

235 236 Statistics The City of Seattle

Table S-9 PRINCIPAL REVENUE SOURCES Table S-10 PROPERTY TAX LEVIES AND COLLECTIONS Page 2 of 2 Current Year and Nine Years Ago Last Ten Fiscal Years (In Thousands) Collected within the a Fiscal Year of the Levy Total Collections to Date DRAINAGE AND WASTEWATER Percentage Subsequent b 2008 2000 Fiscal Original Adjusted of Adjusted Adjustments Net Levy Subsequent Percentage a Percent of Percent of Year Levy Levy Amount Levy to Date to Date Collections Amount of Net Levy Customer Name Amount Revenue Rank Amount Revenue Rank 1999 $ 198,336,396 $ 197,555,192 $ 193,391,180 97.89 % $ (138,480) $ 197,416,712 $ 4,025,350 $ 197,416,530 100.00 % University of Washington $ 5,452 2.53 % 1 $ 4,044 3.11 % 1 2000 227,521,963 227,021,914 221,866,901 97.73 (626,969) 226,394,945 4,518,795 226,385,696 100.00 City of Seattle 5,405 2.51 2 2001 256,449,940 255,338,715 249,952,677 97.89 19,938 255,358,653 5,383,443 255,336,120 99.99 Port of Seattle 1,896 0.88 3 500 0.38 5 2002 268,091,231 266,379,116 260,750,105 97.89 (148,187) 266,230,929 5,439,610 266,189,715 99.98 Seattle Housing Authority 1,744 0.81 4 2,245 1.73 2 2003 270,978,698 269,473,186 264,040,918 97.98 (84,487) 269,388,699 5,330,114 269,371,032 99.99 King County 1,182 0.55 5 2004 300,255,001 297,969,060 292,541,786 98.18 (41,154) 297,927,906 791,166 293,332,952 98.46 Seattle Public Schools 1,071 0.50 6 391 0.30 6 2005 314,357,618 313,008,315 307,392,432 98.21 (150,716) 312,857,599 1,355,301 308,747,733 98.69 Harborview Medical Center 875 0.41 7 2006 321,085,515 320,407,560 314,611,894 98.19 (200,278) 320,207,282 5,077,483 319,689,377 99.84 Burlington Northern Santa Fe Railway Company 699 0.32 8 2007 361,810,037 360,253,854 354,036,495 98.27 (197,220) 360,056,634 4,605,279 358,641,774 99.61 The Boeing Company 680 0.32 9 2008 371,971,172 370,579,618 363,923,901 98.20 - 370,579,618 - 363,923,901 98.20 Swedish Medical Center 674 0.31 10 528 0.41 4 Seattle Parks Department 695 0.53 3 Westin Hotel 342 0.26 7 Children's Hospital 328 0.25 8 a VA Medical Center 319 0.25 9 Net of initial adjustments in year of levy. Sheraton Hotel 295 0.23 10

Total Top Ten $ 19,678 9.14 % $ 9,687 7.45 %

a Source: Seattle Public Utilities (SPU) billing records. b Using 2000 data, the latest and closest available in SPU. SPU changed its billing system in 2002, and data prior to this year were discarded unless revenue bonds were issued for the year or ensuing year.

c SOLID WASTE d 2008 2000 Percent of Percent of Customer Name Amount Revenue Rank Amount Revenue Rank

City of Seattle $ 707 0.62 % 1 $ 168 0.20 % 1 Seattle Housing Authority 455 0.40 2 Goodwill Industries - Seattle 455 0.40 3 134 0.16 3 Swedish Hospital 454 0.39 4 University of Washington 412 0.36 5 108 0.13 5 Pike Place Market 331 0.29 6 Value Village 289 0.25 7 Harborview Medical Center 282 0.25 8 Clean Scapes 264 0.23 9 Charlie's Produce 252 0.22 10 Salvation Army 140 0.17 2 King County Housing Authority 126 0.15 4 Mehrer Drywall, Inc. 82 0.10 6 Emerald City Disposal 71 0.08 7 Shultz Miller, Inc. 49 0.06 8 St. Vincent De Paul 49 0.06 9 McBride Construction Resources 45 0.05 10

Total Top Ten $ 3,901 3.41 % $ 972 1.16 %

c Source: Seattle Public Utilities (SPU) billing records. d Using 2000 data, the latest and closest available in SPU. SPU changed its billing system in 2002, and data prior to this year were discarded unless revenue bonds were issued for the year or ensuing year.

237 238 Statistics The City of Seattle

a Table S-11 RATIOS OF OUTSTANDING DEBT BY TYPE Table S-12 RATIOS OF NET GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years Last Ten Fiscal Years (In Thousands, except Per Capita) General Bonded Percentage of Governmental Activities Fiscal Debt Outstanding Actual Taxable General Special Year (In Thousands) Value of Property Per Capita Fiscal Obligation Assessment Capital Year Bonds Bonds Leases 1999 $ 646,515 1.26 % $ 1,196 2000 616,300 1.07 1,094 2001 708,495 1.08 1,247 1999 $ 646,515 $ - $ 183 2002 878,495 1.16 1,539 2000 616,300 - 217 2003 885,715 1.11 1,549 2001 708,495 - 94 2004 835,020 1.55 1,458 2002 878,495 - 7 2005 794,075 0.90 1,386 2003 885,715 - 19 2006 746,365 0.78 1,290 2004 835,020 - 62 2007 785,727 0.74 1,340 2005 794,075 - 29 2008 721,160 0.59 1,216 2006 746,365 21,925 15 2007 720,025 20,545 3 2008 721,160 19,205 - a Does not include general obligation bonds issued for Downtown Parking Garage; debt service for these bonds is being paid for by user fee revenues derived from the garage.

Business-Type Activities Light and Power Solid Waste General Drainage and Revenue Revenue Fiscal Obligation Light and Wastewater Solid Waste Anticipation Anticipation Year Bonds Power Bonds Water Bonds Bonds Bonds Notes Notes

1999 $ 73,847 $1,041,342 $ 587,740 $ 137,250 $ 42,565 $ - $ - Table S-13 DIRECT AND OVERLAPPING 2000 73,847 1,103,992 572,560 134,025 39,470 - - 2001 73,829 1,469,662 607,490 191,725 36,220 182,210 - GOVERNMENTAL ACTIVITIES DEBT 2002 73,540 1,429,186 654,130 248,780 32,815 307,210 - 2003 73,177 1,521,526 731,485 244,410 29,230 - 6,200 December 31, 2008 2004 72,174 1,537,246 795,635 301,195 25,460 - 7,976 2005 71,124 1,472,650 776,790 294,870 21,495 - 11,976 Amount 2006 70,023 1,409,215 861,670 334,625 17,325 - 23,576 Percentage 2007 65,702 1,342,460 841,785 325,460 91,695 - - Net Debt Applicable to Applicable to 2008 64,524 1,529,375 1,025,480 402,035 87,005 - - Outstanding b Seattle Governmental Unit (In Thousands) Seattle (In Thousands)

Debt Repaid with Property Taxes c King County $ 1,048,574 35.67 % $ 374,026 Port of Seattle 378,065 35.67 134,856 Seattle School District No. 001 392,333 99.32 389,665 Primary Government Highline School District No. 401 313,620 0.01 31 Percentage of Fiscal a Debt Total Year Total Personal Income Per Capita Personal Income Subtotal Overlapping Debt 2,132,592 898,579 d 1999 $ 2,529,442 10.80 % $ 4,680 $ 23,425,811 City of Seattle Direct Debt 706,871 100.00 706,871 2000 2,540,411 9.88 4,509 25,700,599 2001 3,269,725 12.79 5,756 25,568,477 Total Direct and Overlapping Debt $ 2,839,463 $ 1,605,450 2002 3,624,163 13.96 6,349 25,966,263 2003 3,491,762 13.37 6,106 26,115,814 2004 3,574,768 13.80 6,243 25,905,569 2005 3,443,009 13.32 6,009 25,857,198 b 2006 3,484,739 12.41 6,022 28,079,681 Percentage rates were provided by King County except for City of Seattle. c 2007 3,407,675 10.96 5,813 31,104,558 Excludes proprietary fund debt, public facilities debt financed from special taxes and hotel and motel tax-financed debt. 2008 3,848,784 N/A 6,493 N/A d Excludes general obligation bonds paid for from proprietary funds’ operating revenues. a Personal income data is not available for 2008.

239 240 Statistics The City of Seattle

Table S-14 LEGAL DEBT MARGIN INFORMATION Table S-15 PLEDGED-REVENUE COVERAGE

a a Last Ten Fiscal Years General Capacity Special Purpose Capacity Open Spaces Utility (In Thousands) Councilmanic Voter-Approved and Parks Purposes a (1.5% of (2.5% of (2.5% of (2.5% of Total CITY LIGHT PARITY AND JUNIOR LIEN BONDS Assessed Value) Assessed Value) Assessed Value) Assessed Value) Capacity Fiscal Utility Service Less Operating Net Available Debt Service b Year Charges Expenses Revenue Interest Principal Coverage Latest Certified Assessed Value - $137,830,853,871 1999 $ 377,155 $ 233,796 $ 143,359 $ 42,010 $ 33,385 1.90 2.50% of Assessed Value $ - $ 3,445,771,347 $ 3,445,771,347 $ 3,445,771,347 $ 10,337,314,041 2000 446,154 341,512 104,642 49,126 34,080 1.26 2001 610,468 522,864 87,604 51,052 10,500 1.42 1.50% of Assessed Value 2,067,462,808 (2,067,462,808) - - - 2002 708,202 530,377 177,825 72,373 38,292 1.61 2003 741,559 577,077 164,482 68,689 37,030 1.56 2004 775,245 579,866 195,379 73,668 49,705 1.58 2,067,462,808 1,378,308,539 3,445,771,347 3,445,771,347 10,337,314,041 2005 749,289 500,372 248,917 68,932 64,596 1.86 2006 835,005 512,882 322,123 72,408 63,435 2.37 c Statutory Debt Limit Less Debt Outstanding 2007 783,775 527,353 256,422 69,858 66,755 1.88 d 2008 798,108 519,471 278,637 65,218 70,460 2.05 Bonds (643,125,396) (140,002,618) - (6,812,382) (789,940,396) e Guarantee on PDA Bonds (89,698,742) - - - (89,698,742) b f WATER Compensated Absences (70,035,868) - - - (70,035,868) Fiscal Utility Service Less Operating Net Available Debt Service Year Charges Expenses Revenue Interest Principal Coverage Total Debt Outstanding (802,860,006) (140,002,618) - (6,812,382) (949,675,006) 1999 $ 86,255 $34,959 $ 51,296 $ 19,177 $ 12,000 1.65 2000 105,358 38,710 66,648 27,239 14,077 1.61 Add: 2001 105,345 44,367 60,978 25,274 19,266 1.37 g Available Net Assets In Redemption Funds 11,894,304 2,393,728 - - 14,288,032 2002 118,160 47,168 70,992 30,415 16,701 1.51 f 2003 129,561 52,323 77,238 23,987 23,135 1.64 Compensated Absences for Sick Leave 9,905,806 - - - 9,905,806 2004 141,313 54,806 86,507 31,891 19,200 1.69 2005 146,119 55,026 91,093 34,347 19,970 1.68 2006 155,175 64,312 90,863 31,030 21,490 1.73 Net Debt Outstanding (781,059,896) (137,608,890) - (6,812,382) (925,481,168) 2007 160,161 67,058 93,103 35,030 17,185 1.78 2008 164,405 81,909 82,496 36,266 19,985 1.47 LEGAL DEBT MARGIN $ 1,286,402,912 $ 1,240,699,649 $ 3,445,771,347 $ 3,438,958,965 $ 9,411,832,873 c DRAINAGE AND WASTEWATER Total Net Debt Percentage of Net Fiscal Utility Service Less Operating Net Available Debt Service Fiscal Year Debt Limit Applicable to Limit Legal Debt Margin Debt to Debt Limit Year Charges Expenses Revenue Interest Principal Coverage 1999 $ 125,652 $ 100,295 $ 25,357 $ 3,333 $ 3,610 3.65 1999 $ 4,315,351,977 $ 803,906,293 $ 3,511,445,684 18.63% 2000 130,817 104,185 26,632 5,081 5,716 2.47 2000 4,921,760,643 775,243,975 4,146,516,668 15.75 2001 136,238 107,191 29,047 5,263 5,904 2.60 2001 5,662,994,364 870,367,524 4,792,626,840 15.37 2002 144,486 116,664 27,822 6,420 7,416 2.01 2002 6,009,621,624 1,050,516,663 4,959,104,961 17.48 2003 150,722 118,052 32,670 7,023 8,403 2.12 2003 6,295,357,173 1,058,206,882 5,237,150,291 16.81 2004 162,118 123,369 38,749 7,987 9,689 2.19 2004 6,620,857,929 978,203,235 5,642,354,694 14.77 2005 176,482 126,763 49,719 8,055 10,168 2.73 2005 7,177,997,496 992,974,845 6,185,022,651 13.83 2006 186,832 141,866 44,966 8,049 10,794 2.39 2006 7,965,636,558 943,898,454 7,021,738,104 11.85 2007 202,408 164,246 38,162 7,824 10,849 2.04 2007 9,121,584,801 923,986,450 8,197,598,351 10.13 2008 224,109 167,338 56,771 9,872 13,401 2.4 4 2008 10,337,314,041 925,481,168 9,411,832,873 8.95 d SOLID WASTE a Debt limits are established by state law in RCW 39.36.020 and 35.42.200. These figures do not include $19.7 million of outstanding City obligations to repay Fiscal Utility Service Less Operating Net Available Debt Service loans from the Washington State Public Works Assistance Account, as the State’s statutory debt limits do not apply to amounts loaned by the state and federal Year Charges Expenses Revenue Interest Principal Coverage governments under RCW 39.36. However, Public Works Assistance Account indebtedness does count within the limits in Article VIII of the State 1999 $ 81,093 $ 63,297 $ 17,796 $ 1,069 $ 3,835 3.63 Constitution, which prohibits the City’s debt from exceeding 1.5 percent of assessed value of taxable property without a vote of the people or a total of 2000 85,257 67,171 18,086 2,279 3,095 3.37 5.0 percent of assessed value of taxable property for general municipal purposes with a vote of the people. 2001 105,511 84,314 21,197 2,107 3,250 3.96 b 2002 112,090 90,011 22,079 1,945 3,405 4.13 RCW 39.36.015 allows incorporated cities to use the “last assessment for city purposes.” This assessment was issued as of February 25, 2009, for taxes 2003 111,738 85,669 26,069 1,767 3,585 4.87 payable in 2009. 2004 112,168 86,457 25,711 1,580 3,770 4.81 c State law and the State Auditor’s Office require that the liabilities for warrants outstanding and other miscellaneous obligations of the General Fund, other tax- 2005 111,231 86,768 24,463 1,382 3,965 4.58 2006 112,474 89,980 22,494 1,175 4,170 4.21 supported funds, and internal service funds be included as debt in calculating the legal debt margin, except when cash, investments, and other cash-equivalent 2007 121,931 93,562 28,369 978 4,390 5.28 assets in any of these individual funds exceed current liabilities. 2008 124,353 90,616 33,737 3,048 4,690 4.36 d $11,150,755, the accreted value of the 1998, Series E, bonds as of December 31, 2008, and not its par value outstanding of $6,893,602, is recognized in this table. a e Debt coverage ratios prior to 2005 were based on debt service amounts on parity bonds only; beginning in 2005 the debt service for Junior Lien bonds was The City guarantees Public Development Authority bonds which create contingent obligations. Currently the City is contingently liable on debt issued by the included. Operating expenses do not include interest, depreciation, or amortization expenses, except in 2002, 2003, and 2004 when the effect of $100 million Museum Development Authority, the Pike Place Market Preservation and Development Authority, the Seattle-Chinatown International District Preservation amortization of deferred power costs were also considered in the calculation of coverage ratio. Development Authority, and the Seattle Indian Service Commission. b f Operating expenses do not include City public utility taxes, depreciation and amortization, interest paid on revenue bonds, and drawdowns on the Bonneville The State Auditor’s Office requires that the liability for compensated absences, to the extent that it is a certain obligation of a determined amount or employee Power Administration account. Coverage ratio was calculated based on the annual debt service requirement on senior lien bonds only, with the exception of vested, be included as debt in calculating the legal debt margin. All compensated absences except the sick leave estimate meet this criteria. 1997 in which the basis was on the average annual debt service requirement for the same type of bonds. g c Does not include available net assets in the Local Improvement Guaranty Fund, Interfund Notes Payable Fund, and Local Improvement District No. 6750 Fund Debt service coverage ratio was based on average annual debt service. Interest and principal shown were calculated to match the requirements of bond because special assessment bonds related to them, if any, are not included in the computation of legal debt margin. covenants. Operating expenses do not include City utility taxes, depreciation and amortization, interest, and claims. d Debt service requirements for outstanding bond anticipation notes (BAN) were not included in calculating bond coverage ratio. There were outstanding BANS in 2003-2006. Operating expenses do not include City utility taxes, depreciation and amortization, and interest. 241 242 Statistics The City of Seattle

a Table S-16 DEMOGRAPHIC AND ECONOMIC STATISTICS Table S-18 FULL-TIME-EQUIVALENT Last Ten Fiscal Years Page 1 of 2 CITY GOVERNMENT EMPLOYEES

King County BY DEPARTMENT/OFFICE a b Population Per Capita Income Average Annual Last Seven Fiscal Years King Region Median Age Public School Unemployment c d e f Year King County Seattle County PMSA King County Enrollment Rate 2008 2007 2006 2005

1999 1,712,122 556,573 $ 44,719 $ 39,880 36.55 47,453 2.7 % PUBLIC SAFETY 2000 1,737,034 563,374 45,536 40,686 35.70 46,926 3.6 2001 1,758,300 568,100 45,965 41,229 35.92 46,796 5.1 Fire 1,163.05 1,146.05 1,142.80 1,127.05 2002 1,774,300 570,800 44,135 40,735 36.13 46,390 6.5 Firemen's Pension Board 4.00 4.00 4.00 4.00 Law 155.10 152.10 147.60 137.60 2003 1,779,300 571,900 45,334 41,788 36.38 46,730 6.8 Municipal Court 234.60 235.60 234.60 226.10 2004 1,788,300 572,600 49,533 45,122 36.60 46,416 4.6 Police 1,851.75 1,851.25 1,840.25 1,805.75 2005 1,808,300 573,000 49,488 45,680 36.83 46,200 4.8 Police Relief and Pension Board 3.00 3.00 3.00 3.00 2006 1,835,300 578,700 53,488 49,275 36.93 46,231 4.2 Public Safety 1.00 1.00 1.00 1.00 2007 1,861,300 586,200 57,710 53,061 36.97 45,276 3.7 2008 1,884,200 592,800 N/A N/A 37.00 45,055 4.3 ARTS, CULTURE, AND RECREATION Arts and Cultural Affairs 25.10 24.10 23.10 22.10 Library 533.41 529.03 506.17 478.56 a Parks and Recreation 1,002.95 989.45 979.44 941.75 As of April 1. Source: Washington State Office of Financial Management, “2008 Population Trends for Washington State” estimates only. Seattle Center 278.30 278.30 264.80 253.90 b Source: U. S. Bureau of Economic Analysis, adjusted for years 2005 and 2006. 2008 is not available. HEALTH AND HUMAN SERVICES c Source: U. S. Bureau of Economic Analysis includes Seattle, Bellevue, and Everett adjusted for years 2005 and 2006. 2008 is not available. Human Services 323.85 323.60 314.85 305.10 d Source: Washington State Office of Financial Management. NEIGHBORHOODS AND DEVELOPMENT e Source: Seattle Public Schools. Economic Development 10.50 10.50 21.60 21.00 f Housing 41.50 41.75 41.75 41.75 Preliminary. Source: Washington State Employment Security Department. Neighborhoods 87.00 85.00 86.50 86.25 Planning and Development 441.00 434.00 394.50 374.00 UTILITIES AND TRANSPORTATION

City Light 1,821.33 1,752.33 1,752.10 1,734.10 Seattle Public Utilities 1,458.06 1,367.94 1,402.40 1,399.40 Transportation 778.00 675.50 642.25 622.50 ADMINISTRATION Table S-17 PRINCIPAL INDUSTRIES gh City Auditor 9.00 9.00 9.00 9.00 Current Year and Nine Years Ago Civil Rights 22.50 22.50 22.50 22.50 Civil Service Commission 1.80 1.80 1.60 1.60 Employees' Retirement System 14.50 14.50 12.50 12.50 2008 1999 Ethics and Elections Commission 5.20 5.20 5.20 5.20 Number of Percentage of Number of Percentage of Executive Administration 251.00 246.00 245.00 232.95 Industry Employees Employment Rank Employees Employment Rank Finance 38.00 38.00 35.50 35.50 Fleets and Facilities 308.00 304.50 299.00 294.50 Retail Trade 146,400 10.0 % 1 145,500 11.0 % 2 Hearing Examiner 4.75 4.50 4.50 4.90 Manufacturing Durable Goods 137,400 9.0 2 166,000 12.0 1 Information Technology 217.00 216.00 203.50 191.50 Local Government 119,800 8.0 3 105,400 8.0 3 Intergovernmental Relations 10.50 10.50 10.50 10.50 Professional and Technical Services 108,400 7.0 4 89,000 6.0 4 Legislative 88.00 87.00 85.00 83.70 Food Services and Drinking Places 95,900 6.0 5 85,300 6.0 5 Mayor 25.50 24.50 22.50 22.50 Administrative and Waste Services 82,300 6.0 6 81,000 6.0 6 Personnel 123.50 121.50 105.00 101.50 Wholesale Trade 72,500 5.0 7 70,900 5.0 7 Policy and Management 18.50 18.50 16.00 15.00 State Government 60,000 4.0 8 54,200 4.0 8 Sustainability and Environment 7.00 6.00 5.00 4.00 Finance and Insurance 58,700 4.0 9 59,200 4.0 9 Ambulatory Health Care Services 54,900 4.0 10 42,800 3.0 10 Total Full-Time Equivalents 11,358.25 11,034.50 10,885.01 10,632.26

Total Top Ten Industries 936,300 63.0 899,300 65.0

a Source: City of Seattle Adopted Budgets. g Source: Washington Employment Security Department Labor Market and Economic Analysis. h Data is provided for King County, which includes the Seattle Metropolitan Area.

243 244 Statistics The City of Seattle

a Table S-18 FULL-TIME-EQUIVALENT Table S-19 OPERATING INDICATORS Page 2 of 2 CITY GOVERNMENT EMPLOYEES Page 1 of 2 BY DEPARTMENT/OFFICE BY DEPARTMENT/OFFICE Last Ten Fiscal Years

Last Seven Fiscal Years 2008 2007 2006 2005 2004

2004 2003 2002 PUBLIC SAFETY Fire PUBLIC SAFETY Property fire loss Total City $16,351,377 $17,664,500 $18,340,656 $16,657,222 $45,790,140 Fire 1,117.00 1,109.75 1,125.65 Per capita $27.52 $32.76 $31.69 $29.13 $80.07 Firemen's Pension Board 4.00 4.00 4.00 Law 146.10 144.60 154.10 Police Municipal Court 229.35 227.85 255.69 Municipal Court filings and citations Police 1,823.75 1,815.25 1,882.75 Non-traffic criminal filings 9,461 12,003 12,882 12,098 10,704 Police Relief and Pension Board 3.00 3.00 4.00 Traffic criminal filings 5,124 5,100 4,156 2,098 N/A Public Safety 1.00 1.00 1.00 DUI filings 1,167 1,390 1,496 1,437 N/A Non-traffic infraction filings 6,437 7,880 7,310 7,416 6,715 ARTS, CULTURE, AND RECREATION Traffic infraction filings 69,949 74,490 59,828 59,120 56,556 Parking infractions 477,024 430,240 385,852 438,303 505,790 Arts and Cultural Affairs 19.85 20.60 19.60 Library 452.31 445.80 462.35 ARTS, CULTURE, AND RECREATION Parks and Recreation 940.72 1,069.78 1,114.09 Seattle Center 284.82 287.62 301.46 Library Library cards in force 432,790 448,104 403,415 454,990 386,127 HEALTH AND HUMAN SERVICES Parks and Recreation Park use permits issued Human Services 324.35 327.85 344.98 Number 599 529 667 649 658 Amount $212,403 $75,459 $217,782 $229,420 $371,419 NEIGHBORHOODS AND DEVELOPMENT Facility use permits issued including pools Number 24,977 23,487 N/A N/A N/A Economic Development 23.00 23.75 40.50 Amount $2,571,854 $2,374,230 N/A N/A N/A Housing 43.25 43.50 57.25 Facility use permits issued excluding pools Neighborhoods 87.00 92.13 98.75 Number 23,577 22,113 2,314 N/A N/A Planning and Development 370.25 348.75 344.50 Amount $2,127,367 $1,997,402 $790,551 $567,975 $377,523 Picnic permits issued UTILITIES AND TRANSPORTATION Number 3,420 3,469 3,253 3,273 3,028 Amount $228,965 $229,715 $220,595 $218,045 $194,404 City Light 1,778.10 1,786.10 1,801.85 Ball field usage Seattle Public Utilities 1,392.90 1,366.73 1,286.73 Scheduled hours 147,911 145,481 144,760 142,360 147,482 Transportation 631.50 627.50 628.00 Amount $1,444,393 $1,600,578 $1,413,035 $1,474,107 $1,236,699 Weddings ADMINISTRATION Number 235 254 238 197 165 Amount $80,955 $87,900 $82,079 $69,670 $36,770 City Auditor 11.00 11.00 11.00 Civil Rights 21.50 22.00 24.50 NEIGHBORHOODS AND DEVELOPMENT Civil Service Commission 1.60 1.50 2.00 Employees' Retirement System 13.50 13.50 13.50 Planning and Development Ethics and Elections Commission 5.20 5.20 5.50 Permits Executive Administration 238.95 245.35 292.60 Number issued 7,893 8,865 8,453 7,178 7,209 Finance 34.00 35.00 35.50 Value of issued permits $2,528,645,340 $3,097,812,568 $2,084,124,540 $1,682,031,014 $1,597,349,890 Fleets and Facilities 321.50 313.00 334.00 Hearing Examiner 4.90 4.70 5.80 UTILITIES AND TRANSPORTATION Information Technology 190.50 174.00 176.00 City Light Intergovernmental Relations 11.50 11.50 12.50 Customers 387,715 383,127 379,230 375,869 372,818 Legislative 81.70 79.70 79.70 Operating revenues $877,392,652 $832,524,784 $831,810,233 $748,552,561 $777,918,589 Mayor 23.50 23.50 22.00 Personnel 128.00 123.50 138.17 Water Policy and Management 16.00 15.65 14.00 Population served 1,401,000 1,338,974 1,454,586 1,350,346 1,348,200 Sustainability and Environment 4.00 4.00 5.00 Billed water consumption, daily average, in gallons 117,406,451 120,690,060 124,955,842 118,854,138 127,725,423 Total Full-Time Equivalents 10,779.60 10,828.66 11,099.02 Operating revenues $164,405,030 $160,161,307 $155,175,008 $146,118,856 $141,313,235 Drainage and Wastewater Operating revenues $224,109,335 $202,407,690 $186,832,412 $176,482,071 $162,117,805 Solid Waste a Customers Source: City of Seattle Adopted Budgets. Residential garbage customers 166,914 166,052 165,551 165,561 163,977 Residential dumpsters customers 122,503 119,667 117,899 115,838 155,581 Commercial garbage customers 9,747 8,505 8,481 8,697 8,618 Operating revenues $124,353,043 $121,930,923 $112,474,339 $111,230,835 $112,167,705

245 246 Statistics The City of Seattle

Table S-19 OPERATING INDICATORS Table S-20 CAPITAL ASSET STATISTICS Page 2 of 2 BY DEPARTMENT/OFFICE Page 1 of 4 BY DEPARTMENT/OFFICE Last Ten Fiscal Years Last Ten Fiscal Years

2003 2002 2001 2000 1999 2008 2007 2006 2005 2004

PUBLIC SAFETY PUBLIC SAFETY Fire Fire Property fire loss Boats 3 2 2 2 2 Total City $22,433,417 $27,874,071 $62,898,264 $22,590,756 $16,481,474 Fire-fighting apparatus 162 163 163 163 163 Per capita $39.23 $49.48 $110.72 $41.77 $30.57 Stations 33 33 33 33 33 Training towers 2 1 1 1 1 Police Alarm center 1 1 1 1 1 Municipal Court filings and citations Utility shop 1 1 1 1 1 Non-traffic criminal filings 10,502 10,283 12,948 12,976 N/A Traffic criminal filings N/A N/A N/A N/A N/A Police DUI filings N/A N/A N/A N/A N/A Precincts 5 5 5 5 5 Non-traffic infraction filings 17,350 17,515 24,475 16,825 12,997 Detached units 77777 Traffic infraction filings 72,104 74,076 85,001 94,129 84,883 Vehicles Parking infractions 441,048 428,960 442,331 436,764 490,274 Patrol cars 265 265 252 252 252 Motorcycles 45 45 50 48 48 ARTS, CULTURE, AND RECREATION Scooters 53 50 53 55 58 Library Trucks, vans, minibuses 84 81 81 79 69 Library cards in force 352,194 377,720 494,353 451,616 455,489 Automobiles 199 197 194 189 187 Patrol boats 10 10 10 9 7 Parks and Recreation Bicycles 146 137 137 137 126 Park use permits issued Horses 8 8 8 8 9 Number 633 736 546 579 543 Amount $457,360 $327,115 $282,275 $252,526 $259,098 ARTS, CULTURE AND RECREATION Park use permits issued including pools Number N/A N/A N/A N/A N/A Library Amount N/A N/A N/A N/A N/A Central and branch libraries 27 24 24 24 24 Facility use permits issued excluding pools Mobile units 44444 Number N/A N/A N/A N/A N/A Books, audio and video materials, Amount $338,630 $300,508 $324,237 $281,943 $197,753 newspapers, and magazines - circulated 10,025,029 9,085,490 8,661,263 7,449,761 6,575,866 Picnic permits issued Collection, print and non-print 2,446,355 2,352,381 2,273,440 2,173,903 1,889,599 Number 2,921 3,205 3,764 2,800 3,400 Amount $175,663 $172,942 $129,018 $116,000 $103,451 Parks and Recreation Ball field usage Major parks 13 13 13 13 Scheduled hours 138,976 137,127 125,371 114,344 112,079 Open space acres acquired since 1989 654 638 630 630 630 Amount $982,042 $563,629 $476,174 $444,009 $390,482 Total acreage 6,171 6,155 6,036 6,036 6,036 Weddings Children's play areas 131 130 130 130 130 Number 160 147 108 N/A N/A Neighborhood playgrounds 38 38 38 38 38 Amount $38,820 $34,065 $29,445 N/A N/A Community playfields 33 33 33 33 33 Community recreation centers 26 26 26 25 25 NEIGHBORHOODS AND DEVELOPMENT Visual and performing arts centers 6 6 6 6 6 Planning and Development Theaters 2 2 2 2 2 Community indoor swimming pools 8 8 8 8 8 Permits Outdoor heated pools (one saltwater) 2 2 2 2 2 Number issued 6,683 6,728 6,658 6,510 6,770 Value of issued permits $1,175,475,274 $1,282,588,182 $1,736,825,632 $1,612,566,932 $1,669,777,218 Boulevards 18 18 18 18 18 Golf courses (includes one pitch and putt) 5 5 5 5 5 UTILITIES AND TRANSPORTATION Squares, plazas, triangles 62 62 62 62 62 Viewpoints 8 8 8 8 8 City Light Bathing beaches (life-guarded) 99997 Customers 365,445 360,632 350,000 349,559 345,513 Bathing beaches 99999 Operating revenues $741,761,472 $709,330,438 $632,453,970 $505,628,699 $372,750,765 Aquarium specimens on exhibit 10,216 10,655 10,655 14,600 14,577 Water Population served 1,330,327 1,340,012 1,327,742 1,288,165 1,281,400 Billed water consumption, daily average, in gallons 130,670,298 126,694,524 123,000,000 135,037,807 133,515,367 Operating revenues $129,561,327 $118,160,130 $105,345,318 $105,358,307 $86,254,799 Drainage and Wastewater Operating revenues $150,721,637 $144,485,761 $136,238,195 $130,816,605 $125,697,879 Solid Waste Customers Residential garbage customers 91,317 180,798 159,454 155,330 154,878 Residential dumpsters 111,822 110,807 108,886 105,989 103,913 Commercial garbage customers 8,710 8,856 9,092 N/A N/A Operating revenues $111,738,282 $112,089,944 $105,510,879 $85,257,112 $81,093,039

247 248 Statistics The City of Seattle

Table S-20 CAPITAL ASSET STATISTICS Table S-20 CAPITAL ASSET STATISTICS Page 2 of 4 BY DEPARTMENT/OFFICE Page 3 of 4 BY DEPARTMENT/OFFICE Last Ten Fiscal Years Last Ten Fiscal Years

2003 2002 2001 2000 1999 2008 2007 2006 2005 2004

PUBLIC SAFETY UTILITIES AND TRANSPORTATION

Fire City Light Boats 22222 Plant capacity (KW) 1,920,700 1,920,700 1,920,700 1,920,700 1,920,700 Fire-fighting apparatus 163 170 177 177 176 Maximum system load (KW) 1,900,878 1,767,805 1,822,342 1,714,080 1,798,926 Stations 33 33 33 33 33 Total system energy (1,000 KW) (firm load) 10,323,915 10,203,415 9,990,486 9,703,046 9,560,928 Training tower 1 1 1 1 1 Meters 402,418 396,206 391,446 387,032 383,883 Alarm center 1 1 1 1 1 Utility shop 11111 Water Reservoirs, standpipes, tanks 30 30 29 38 68 Police Fire hydrants 18,436 18,398 18,347 18,475 18,762 Precincts 55444 Water mains Detached units 7 7 13 13 10 Supply, in miles 224 182 182 181 181 Vehicles Distribution, in miles 1,673 1,674 1,704 1,644 1,657 Patrol cars 252 252 252 252 252 Water storage in thousand gallons 370,000 377,080 377,080 494,080 494,080 Motorcycles 41 41 38 38 38 Meters 187,154 185,395 183,699 182,037 181,038 Scooters 63 63 69 63 54 Trucks, vans, minibuses 67 67 62 62 55 Drainage and Wastewater Automobiles 181 181 173 172 169 Combined sewers, life-to-date, in miles 473 444 444 464 451 Patrol boats 7 7 7 7 8 Sanitary sewers, life-to-date, in miles 958 985 985 968 972 Bicycles 126 117 126 117 109 Storm drains, life-to-date, in miles 473 472 472 474 467 Horses 9 10 9 10 10 Pumping stations 65 68 68 68 68

ARTS, CULTURE AND RECREATION Solid Waste Transfer stations 2 2 2 2 2 Library Central and branch libraries 24 24 23 23 23 Transportation Mobile units 4 4 4 4 4 Arterial streets, in miles 1,531 1,531 1,534 1,534 1,534 Books, audio and video materials, Non-arterial streets (paved and unpaved), in miles 2,412 2,412 2,412 2,412 2,412 newspapers, and magazines - circulated 5,804,388 6,175,027 5,695,182 4,993,099 4,744,751 Sidewalks, in miles 2,258 2,256 1,956 1,956 1,954 Collection, print and non-print 2,004,718 2,031,276 2,002,866 2,017,267 1,968,254 Stairways 494 482 482 482 479 Length of stairways, in feet 35,215 34,775 34,643 34,643 33,683 Parks and Recreation Number of stairway treads 23,666 23,407 23,211 23,211 22,471 Major parks 13 13 13 13 13 Street trees Open space acres acquired since 1989 630 630 600 600 600 City-maintained 40,000 35,000 34,000 34,000 34,000 Total acreage 6,036 6,036 6,006 6,006 6,006 Maintained by property owners 125,000 105,000 100,000 100,000 100,000 Children's play areas 130 130 130 130 130 Total platted streets, in miles 1,666 1,666 1,666 1,666 1,666 Neighborhood playgrounds 38 38 38 38 49 Traffic signals 1,030 1,001 991 1,000 1,000 Community playfields 33 33 33 33 38 Parking meters Community recreation centers 24 24 24 24 24 Downtown 941 700 747 2,819 4,298 Visual and performing arts centers 6 6 6 6 7 Outlying 97 300 353 904 1967 Theaters 2 2 2 2 2 Parking pay stations a Community indoor swimming pools 88888 Downtown 850 1,215 925 758 500 Outdoor heated pools (one saltwater) 2 2 2 2 2 a Boulevards 18 18 18 18 18 Outlying 1,127 630 565 318 N/A Golf courses (includes one pitch and putt) 5 5 5 5 2 Bridges (movable) - City-owned and -operated 44444 Squares, plazas, triangles 62 62 62 62 5 Bridges (fixed) Viewpoints 8 8 8 8 62 City maintenance 88 88 84 84 85 Bathing beaches (life-guarded) 7 9 9 9 9 Partial City maintenance 55 55 55 61 58 Bathing beaches 9 9 9 9 9 Retaining walls/seawalls 582 582 582 582 561 Aquarium specimens on exhibit 14,577 20,825 20,825 97,757 100,334

a City redefined areas in 2008.

249 250 Statistics The City of Seattle

Table S-20 CAPITAL ASSET STATISTICS MISCELLANEOUS STATISTICS Page 4 of 4 BY DEPARTMENT/OFFICE December 31, 2008 - Unless Otherwise Indicated Last Ten Fiscal Years CITY GOVERNMENT VITAL STATISTICS 2003 2002 2001 2000 1999 Date of incorporation December 2, 1869 Rates per thousand of residents UTILITIES AND TRANSPORTATION Present charter adopted March 12, 1946 Births (2007) 13.5 Form: Mayor-Council (Nonpartisan) Deaths (2007) 7.4 City Light Plant capacity (KW) 1,920,700 1,920,700 1,920,700 1,920,700 2,028,100 GEOGRAPHICAL DATA PUBLIC EDUCATION (2008-09 School Year) Maximum system load (KW) 1,645,998 1,689,666 1,661,842 1,769,440 1,729,933 Total system energy (1,000 KW) (firm load) 9,610,856 9,610,761 9,510,504 10,170,218 10,097,177 Location: Enrollment (October 1) 45,055 Meters 380,828 379,257 375,953 372,329 368,942 Between Puget Sound and Lake Washington Teachers and other certified employees (October 1) 3,229 125 nautical miles from Pacific Ocean Water 110 miles south of Canadian border School programs Reservoirs, standpipes, tanks 38 32 32 32 32 Fire hydrants 18,356 18,635 18,345 18,258 18,218 Altitude: Regular elementary programs 54 Water mains Sea level 521 feet Regular middle school programs 10 Supply, in miles 181 173 171 163 163 Average elevation 10 feet Regular high school programs 10 Distribution, in miles 1,662 1,662 1,693 1,659 1,654 Land area 83.1 square miles K-8 school programs 10 Water storage, in gallons 506,570 506,570 506,570 506,570 506,570 Meters 180,149 179,268 179,330 178,122 177,122 Climate Alternative/Non-traditional school programs 9 Temperature Total number of school programs 93 Drainage and Wastewater 30-year average, mean annual 52.4 Combined sewers, life-to-date, in miles 587 584 583 583 582 January 2008 average high 43.6 Sanitary sewers, life-to-date, in miles 908 825 906 905 903 PROPERTY TAXES Storm drains, life-to-date, in miles 461 461 459 457 452 January 2008 average low 33.7 Assessed valuation (January 2008 ) $121,621,130,668 Pumping stations 68 68 68 74 72 July 2008 average high 74.9 Tax levy (City) $335,512,466 July 2008 average low 54.9 Solid Waste Rainfall Transfer stations 2 2 2 2 2 EXAMPLE – PROPERTY TAX ASSESSMENTS 30-year average, in inches 36.35 Real value of property $479,100 Transportation 2008-in inches 26.87 Assessed value $479,100 Arterial streets, in miles 1,534 1,508 1,524 1,524 1,524 Non-arterial streets (paved and unpaved), in miles 2,412 2,412 2,706 2,706 2,899 POPULATION Dollars per Sidewalks, in miles 1,953 1,952 1,952 1,949 1,949 City of Seattle Property Tax Levied By Thousand Tax Due Stairways 479 471 471 463 463 ab Length of stairways, in feet 33,683 32,787 32,787 34,766 34,766 Year Seattle Metropolitan Area City of Seattle $2.77365 $1,328.85 Number of stairway treads 22,471 22,108 22,108 23,451 23,451 1910 237,194 N/A Emergency medical services .30000 143.73 Street trees 1920 315,685 N/A State of Washington 2.13233 1,021.60 City-maintained 34,000 31,000 31,000 31,000 31,000 School District No. 1 1.89563 908.20 Maintained by property owners 100,000 90,000 90,000 90,000 90,000 1930 365,583 N/A Total platted streets, in miles 1,666 1,741 1,658 1,658 1,658 1940 368,302 N/A King County 1.20770 578.61 Traffic signals 1,000 1,000 1,000 975 975 1950 467,591 844,572 Port of Seattle .22359 107.12 Parking meters 1960 557,087 1,107,203 King County Ferry District .05500 26.35 Downtown 7,136 6,836 6,720 6,720 6,720 King County Flood Control Zone .10000 47. 91 Outlying 1967 1956 2003 2003 2003 1970 530,831 1,424,611 Parking pay stations 1980 493,846 1,607,618 Totals $8.68790 $4,162.37 Downtown N/A N/A N/A N/A N/A 1990 516,259 1,972,947 Outlying N/A N/A N/A N/A N/A 2000 563,374 2,279,100 Bridges (movable) - City-owned and -operated 4 4 4 4 4 PORT OF SEATTLE Bridges (fixed) 2001 568,100 2,376,900 Bonded Indebtedness City maintenance 85 86 86 87 86 2002 570,800 2,402,300 General obligation bonds $ 378,065,000 Partial City maintenance 58 58 58 57 56 2003 571,900 2,416,800 Utility revenue bonds 2,540,070,000 Retaining walls/seawalls 561 586 586 598 598 2004 572,600 2,433,100 Passenger facility charges bonds 209,685,000 2005 573,000 2,464,100 Commercial Paper 153,540,000 2006 578,700 2,507,100 2007 586,200 2,547,600 Waterfront (mileage) 2008 592,800 2,580,800 Salt water 13.4 Fresh water 0.7 King County 1,884,200 Value of Land Facilities Percentage in Seattle 31.46 Waterfront $2,011,149,952 a Sea-Tac International Airport $4,589,223,432 Source: Washington State Office of Financial Management. b Marine Container Facilities/Capacities Based on population in King and Snohomish Counties. 4 container terminals with 10 berths covering 500 acres ELECTIONS (November 4) 1.704 million TEU’s (20-ft. equivalent unit containers) 1 grain facility, 1 general cargo facility, 1 barge terminal Active registered voters 386,699 2 cruise terminals Percentage voted last general election 86.01 Total voted 332,603 Sea-Tac International Airport Scheduled passenger airlines 28 PENSION BENEFICIARIES Cargo airlines 6 Employees’ Retirement 5,234 Charter airlines 2 Firemen’s Pension 872 Loading bridges 74 Police Pension 671 251 252 Comprehensive Annual Financial Report 2008 Department of Executive Administration Production Staff Accounting Services Director Victoria C. Galinato

Central Accounting Manager Benjamin P. Pascual, CPA

Central Accounting and Reporting Jacqui Anderson, CPA - Inactive Tessie Atayde, CPA Fon Chang, CPA Yu-Ting (Grace) Chou Narci Damo Chau Du Mary Ferrari Cam Huynh, CPA Brandon W. Johns This page is intentionally left blank. Willy Liang, CPA Jackie Richards Steve Spada Inson Whang Jake Yoon

Special Accounting Conrad Magbalot Marie Tschirgi Jay Zhao

Production and Publishing Yu-Ting (Grace) Chou Mary Ferrari Jackie Richards

Administration Office Michael vanDyck Bruce Hori

Cover Chief Sealth in Tilikum Place Park at Fifth Avenue, Cedar Street, and Denny Way

Mayor Nickels photo by Davis Freeman

PRINTED ON 100% RECYCLED PAPER

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A-142

APPENDIX B

FORM OF LEGAL OPINION

B-1

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B-2

[FORM OF APPROVING LEGAL OPINION]

The City of Seattle, Washington

Re: The City of Seattle, Washington $______Limited Tax General Obligation Improvement Bonds, 2010A (Taxable Build America Bonds-Direct Payment) (the “2010A Bonds”); and $______Limited Tax General Obligation Improvement and Refunding Bonds, 2010B (the “2010B Bonds”)

We have served as bond counsel to The City of Seattle, Washington (the “City”), in connection with the issuance of the above referenced bonds (collectively, the “Bonds”), and in that capacity have examined such law and such certified proceedings and other documents as we have deemed necessary to render this opinion. As to matters of fact material to this opinion and of which attorneys within the firm involved in the issuance of the Bonds have no independent knowledge, we have relied upon representations contained in the certified proceedings and other certifications of public officials furnished to us.

The Bonds are issued by the City pursuant to the laws of the State of Washington, and Ordinance 121651, as amended, Ordinance 123156 and Resolution ______(collectively, the “Bond Legislation”) for general City purposes to provide the funds to (i) pay for part of the costs of various projects, (ii) carry out the advance refunding of the callable portion of the City’s Limited Tax General Obligation Bonds, 2001 and Limited Tax General Obligation Bonds, 2002, and (iii) to pay the costs of issuance and sale of the Bonds, all as provided in the Bond Legislation. Reference is made to the Bond Legislation for the definitions of capitalized terms used and not otherwise defined herein.

Under the Internal Revenue Code of 1986, as amended (the “Code”), the City is required to comply with certain requirements after the date of issuance of the 2010B Bonds in order to maintain the exclusion of the interest on the 2010B Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of 2010B Bond proceeds and the facilities financed or refinanced with 2010B Bond proceeds, limitations on investing gross proceeds of the 2010B Bonds in higher yielding investments in certain circumstances and the arbitrage rebate requirement to the extent applicable to the 2010B Bonds. The City has covenanted in the Bond Legislation to comply with those requirements, but if the City fails to comply with those requirements, interest on the 2010B Bonds could become taxable retroactive to the date of issuance of the 2010B Bonds. We have not undertaken and do not undertake to monitor the City’s compliance with such requirements.

As of the date of initial delivery of the Bonds to the purchaser thereof and full payment therefor, it is our opinion that under existing law:

1. The City is a duly organized and legally existing first class city under the laws of the State of Washington;

TEL: 206.447.4400 FAX: 206.447.9700 1111 THIRD AVENUE, SUITE 3400 SEATTLE, WASHINGTON 98101‐3299 WWW.FOSTER.COM SEATTLE WASHINGTON SPOKANE WASHINGTON 51051650.1 The City of Seattle, Washington [Date]

2. The City has duly authorized and approved the Bond Legislation, the Bonds have been duly authorized and executed by the City and the Bonds are issued in full compliance with the provisions of the Constitution and laws of the State of Washington, the Bond Legislation and other ordinances and resolutions of the City relating thereto;

3. The Bonds constitute valid general obligations of the City payable from annual ad valorem taxes to be levied within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City on all of the taxable property within the City, except only to the extent that enforcement of payment may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights and by the application of equitable principles if equitable remedies are sought;

4. Assuming compliance by the City after the date of issuance of the 2010B Bonds with applicable requirements of the Code, the interest on the 2010B Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals; however, while interest on the 2010B Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the 2010B Bonds received by corporations is to be taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on the 2010B Bonds received by certain S corporations may be subject to tax, and interest on the 2010B Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. We express no opinion regarding any other federal tax consequences of receipt of interest on the 2010B Bonds; and

5. The City, in the Bond Legislation, has declared its intention that interest on the 2010A Bonds not be excludable from gross income for federal income tax purposes.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur.

We express no opinion herein concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material relating to the issuance of the Bonds or otherwise used in connection with the Bonds.

We bring to your attention the fact that the foregoing opinions are expressions of our professional judgment on the matters expressly addressed and do not constitute guarantees of result.

Respectfully submitted,

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APPENDIX C

BOOK-ENTRY TRANSFER SYSTEM

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BOOK-ENTRY TRANSFER SYSTEM

The following information has been provided by DTC. The City makes no representation as to the accuracy or completeness thereof. Purchasers of the Bonds (the “beneficial owners”) should confirm the following with DTC or its participants (the “Participants”).

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered Bond certificate will be issued for each series and maturity of the Bonds, each in the aggregate principal amount of such series and maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post- trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to

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them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a series and maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or Bond Registrar, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Bond Registrar, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) are the responsibility of the City or the Bond Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Bond Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The following information has been provided by the City.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal or interest payment or redemption date.

The City and the Bond Registrar may treat DTC (or its nominee) as the sole and exclusive Registered Owner of the Bonds registered in such name for the purposes of payment of the principal of, premium, if any, or interest with respect to those Bonds, selecting Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Registered Owners of Bonds under this ordinance or the Bond Resolution, registering the transfer of Bonds, obtaining any consent or other action to be taken by Registered Owners of Bonds, and for all other purposes whatsoever; and the City and the Bond Registrar shall not be affected by any notice to the contrary. The City and the Bond Registrar shall not have any responsibility or obligation to any direct or indirect DTC participant, any person claiming a beneficial ownership interest in the Bonds under or through DTC or any such participant, or any other person which is not shown on the Bond Register as being a Registered Owner of Bonds, with respect to: (i) the Bonds; (ii) any records maintained by DTC or any such participant; (iii) the payment by DTC or such participant of any amount in respect of the principal of, premium, if any, or interest with respect to the Bonds; (iv) any notice which is permitted or required to be given to Registered Owners of Bonds under this ordinance or the Bond Resolution; (v) the selection by DTC or any such participant of any person to receive payment in the event of a partial redemption of the Bonds; or (vi) any consent given or other action taken by DTC as Registered Owner of the Bonds.

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APPENDIX D

DEMOGRAPHIC AND ECONOMIC INFORMATION

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DEMOGRAPHIC AND ECONOMIC INFORMATION

Seattle is the largest city in the Pacific Northwest and, as the County seat, is the center of King County’s economic activity. King County is the largest county in the State in population, number of cities and employment, and the twelfth most populated county in the United States. Of the State’s population, nearly 30 percent reside in King County, and of the County’s population, 32 percent live in the City of Seattle.

Population Historical and current population figures for the State of Washington, the County and the City are given below.

POPULATION King Year Washington County Seattle 1980 (2) 4,130,163 1,269,749 493,846 1990 (2) 4,866,692 1,507,319 516,259 2000 (2) 5,894,121 1,737,034 563,374

2001 (1) 5,974,900 1,758,300 568,100 2002 (1) 6,041,700 1,774,300 570,800 2003 (1) 6,098,300 1,779,300 571,900 2004 (1) 6,167,800 1,788,300 572,600 2005 (1) 6,256,400 1,808,300 573,000 2006 (1) 6,375,600 1,835,300 578,700 2007 (1) 6,488,000 1,861,300 586,200 2008 (1) 6,587,600 1,884,200 592,800 2009 (1) 6,668,200 1,909,300 602,000 (1) Source: State of Washington, Office of Financial Management (2) Source: U.S. Department of Commerce, Bureau of Census

Per Capita Income The following table presents per capita personal income for the Seattle Primary Metropolitan Statistical Area (“PMSA”), the County and the State. 2003 2004 2005 2006 2007 2008 Seattle PMSA $ 38,772 $ 41,131 $ 42,804 $ 46,054 $ 49,401 $ 50,471 King County 44,800 49,670 49,488 53,488 57,710 N/A State of Washington 33,214 35,347 36,227 38,639 41,207 42,356 Source: U.S. Bureau of Economic Analysis, U.S. Department of Commerce

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Construction The table below lists the value of housing construction for which building permits have been issued by entities within the City of Seattle. The value of public construction is not included in this table.

BUILDING PERMIT VALUES

New Single Family Units New Multi Family Units Year Number Value($) Number Value($) Total Value($) 2003 914 158,176,828 1,691 155,791,094 313,967,922 2004 754 129,729,132 2,790 227,540,589 357,269,721 2005 533 94,398,888 3,185 278,146,082 372,544,970 2006 482 90,534,640 5,538 597,085,138 687,619,778 2007 775 153,268,586 5,939 681,283,338 834,551,924 2008 595 122,997,326 4,256 562,871,753 685,869,079

2008* 552 113,823,398 3,995 536,325,204 650,148,602 2009* 199 43,835,423 549 65,759,834 109,595,257

* Stub years, through November. Source: U.S. Bureau of the Census

Retail Activity The following table presents taxable retail sales in Seattle and King County.

THE CITY OF SEATTLE AND KING COUNTY TAXABLE RETAIL SALES (000) King City of Year County Seattle 2004 $ 37,253,103,540 $ 12,868,301,227 2005 40,498,328,830 14,236,200,469 2006 43,993,478,514 15,564,363,159 2007 47,766,338,768 17,030,512,254 2008 45,711,920,389 17,096,581,492 2008* 22,761,952,403 8,399,720,514 2009* 19,102,154,079 7,364,731,258

* Stub years, through June. Source: Washington State Department of Revenue

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Industry and Employment

KING COUNTY RESIDENT CIVILIAN LABOR FORCE AND EMPLOYMENT AND NONAGRICULTURAL WAGE AND SALARY EMPLOYMENT*

Annual Average 2009 2008 2007 2006 2005 Civilian Labor Force 1,112,490 1,088,440 1,068,490 1,047,740 1,012,940 Total Employment 1,023,040 1,041,450 1,028,850 1,005,240 965,940 Total Unemployment 89,450 47,000 39,650 42,500 47,000 Percent of Labor Force 8.0 4.3 3.7 4.1 4.6

NAICS INDUSTRY 2009 2008 2007 2006 2005 Total Nonfarm 1,156,742 1,216,525 1,199,392 1,176,042 1,144,625 Total Private 990,050 1,050,308 1,036,183 1,014,033 983,300 Goods Producing 161,767 186,417 188,025 182,667 170,642 Natural Resources and Mining 542 583 692 692 675 Construction 57,950 73,858 74,300 69,617 63,050 Manufacturing 103,300 111,950 113,050 112,375 106,942 Services Providing 994,967 1,030,117 1,011,375 993,367 973,967 Trade, Transportation, and Utilities 211,733 224,717 224,125 224,275 222,917 Information 79,467 79,758 75,742 72,500 70,108 Financial Activities 70,800 75,875 77,008 77,508 76,400 Professional and Business Services 177,050 194,258 190,383 182,200 173,225 Educational and Health Services 140,158 133,500 127,733 124,700 122,750 Leisure and Hospitality 107,508 113,375 111,658 108,517 106,042 Other Services 41,533 42,458 41,508 41,658 41,233 Government 166,683 166,233 163,192 162,008 161,325 Workers in Labor/Management Disputes 0 958 0 8 850 * Columns may not add to totals due to rounding. Source: Washington State Employment Security Department

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The following table presents State-wide employment data in 2009 for certain major employers in the Puget Sound area.

PUGET SOUND AREA MAJOR EMPLOYERS

Employer Employees(1) The Boeing Company 74,300(2) U.S. Army Fort Lewis 40,100 Microsoft 36,400 University of Washington 20,600 Providence Health 14,100 King County Government 12,600 City of Seattle 9,900 Group Health Cooperative 9,100 MultiCare Health System 8,600 Costco 7,500 Weyerhaeuser 6,800 Alaska Air Group, Inc. 6,600 Washington Mutual Inc. (3) 6,200 Starbucks Corp. 4,900 Safeway 4,700 Nordstrom Inc. 4,400 Swedish Medical Center 3,900 Qwest 3,700 (1) Does not include part-time or seasonal employment figures. (2) From Boeing, as of April 30, 2009. (3) As of September 25, 2008, Washington Mutual Bank merged with financial assistance into JPMorgan Chase Bank, National Association. Source: Puget Sound Book of Lists, 2009 (rounded)

Other Issues A variety of additional issues may have an effect on the Puget Sound area’s economy, including but not limited to transportation infrastructure, endangered species listings, the commercial real estate market, and limits on residential development and resulting housing costs. The effects of these issues are interdependent and cannot be quantified.

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