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HomeMy WebLinkAboutPRESENTATION 04/20/2009April 20, 2009 0 caporicci & iarson Cert fed Public Accountants April 9, 2009 To the Honorable Mayor and Members of City Council of the City of Petaluma Petaluma, California We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Petaluma for the year ended June 30, 2008, and have issued our report therein dated April 9, 2009. Professional standards require that we provide you with the following information related to our audit. Our Responsibilities under U.S. Generallv Accepted Auditinz Standards and OMB Circular A-133 Our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by City Council's oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles_ Our audit of the financial statements does not relieve the City Council or management of their responsibility for the financial statements. In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. We also considered internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures of the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-7.33. As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit. Also in accordance with OMB Circular A- 133, we examined, on a test basis, evidence about the City's compliance with the types of compliance requirements described in the "U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement" applicable to each of its major federal programs for the purpose of expressing an opinion on the City's compliance with those requirements. While our audit provides a reasonable basis for our opinion, it does not provide a Iegal determination on the City's compliance with those requirements. Toll Free Ph: (877) 862.2200 Oakland Orange County 180 GrandAvc.,Suite 1365 9Corporate Park.Strite 100 Oaldand, Callfamia 94612 Irvine, California 92606 Toll Free Fax: (866) 436-0927 Sacramento San Diego 777 Campus Communs Rd., Suite 200 4858 Mercury,Suite 106 Sacramento, California 95825 San Diego, California 92111 To the Honorable Mayor, Members of City Council and Management of the City of Petaluma Petaluma, California Page 2 Other Information in Documents Containing Audited Financial Statements Our responsibility for other information in documents containing audited financial statement is as follows: The Firm's responsibility for other information in documents containing the City's financial statements and report does not extend beyond the financial information identified in the report. The Firm does not have an obligation to perform any procedures to corroborate other information contained in these documents. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and tinning previously communicated to you. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Notes to the Basic Financial Statements including new accounting policies adopted, if any. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the finandaf statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: • Investments valuation • Reserve for uncollectible • Capital assets depreciation • Accrual for Workers' Compensation and General Liabilities The disclosures in the financial statements are transparent, consistent, and clear. Certain financial statement disclosures are particularly sensitive because of their significance to the financial statement users. The most sensitive disclosures affecting the financial statements were: • Summary of Significant Accounting Policies • Cash and Investments • Capital Assets • Long Term Debt • Pension Plan • Commitments and Contingencies • Subsequent Events To the Honorable Mayor, Members of City Council and Management of the City of Petaluma Petaluma, California Page 3 Difficulties Encountered in Petf'ornzingthe Andit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this Ietter, professional standards define a disagreement with management as a financial accounting, reporting or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter - 0 ther Audit etter_ 0therAudit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of the City and management of the City and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Caporicci & Larson, CPAs Oakland, California F 11 s ic(,--L Caporicci & Larson. Certified Public Accountants Council Presented Kenneth H. 0 AIM, Voyffre 4141I,-FWW OMA ......... .... 11, WED 1 r. ❑ Professional Services started in 1959 ❑ Principals background With "Big Eight" CPA Firms for several years ❑ Professional Services emphasis: Governmental ❑ Cities ❑ Counties ❑ Transportation Agencies ❑ Special Districts (Water, Sanitation, Recreation and Parks, Colleges, etc.) 3 ❑ Professional Offices in California ■ Oakland Irvine ■ Sacramento ■ San Diego Professional Staff /, Partners im 42 ProfessionalStaff 6'Administrative UAJIL. . . .......... 11- I Eli 7 C�T:iiif6y Ii�f.'1 it�7�G�i:�iil Y Y 1 x: ❑ Obtain reasonable assurance that the financial statements are free of material misstatement ❑ Examine on a test basis, evidence supporting amounts and disclosures ❑ Assess accounting principles used, estimates made, and evaluate the overall financial statement presentation ❑ Review the City's internal control policies and procedures ❑ Express an opinion on the City's financial statements ❑ Communicate any significant audit findings to the City's Audit Committee and Council '3 (IN SUMMARY) o Assessed the City's Accounting Principles ❑ Reviewed, Tested and Evaluated the City's Internal Controls ❑ Validated the City's Significant Account Balances to Supporting Documents ❑ Obtained Information Directly from Attorneys., Banks, Fiscal Agents and Others ❑ Reviewed the basis of Management's Estimates 10 11111P. 1 IF111 It 0, ❑ Reviewed the City's Financial Statements for F T14451 MM_ - � r -i Performed Comparisons Specific Balances 11 Nw PEER REVIEW 12 mootuta Hai ON IN 13 14 ❑ Auditors' Report (our opinion) ❑ Basic Financial Statements: Management's Discussion and Analysis Government -Wide Financial Statements ❑ Statement of Net Assets ❑ Statement of Activities Fund Financial Statements Ea Notes to Basic Financial Statements ❑ Required Supplementary Information ❑ Supplementary Information 15 ❑ Unqualified Opinion Financial statements are fairly presented in all material respects Significant accounting policies have been consistently applied si Estimates are reasonable Disclosure are properly reflected in the financial statements 16 ❑ No disagreements with management • No material errors were found ❑ No material weaknesses in internal accounting i � '. . . e .;1 17 FINANCIAL 4" ti,,TATISTICS 18 Years a , a, , June 30, Expenses Indirect Cost Allocation Less Program Revenues Net Cost of Services for Governmental activities Tax Revenues Cost of Services to Tax Revenues Governmental Activities 2008 2007 $ 68,314,793 (1,848,050) (28,474,312) 37,992,431 53,059,464 72% $ 59,690,567 (2,913,500) (29,671,517) 27,105,550 44,839,450 60% 19 Year ended June 30, 11: Assets $ 8,162,700 Less Liabilities (4,547,854) Less Reserved Fund Balance (31773,191) Available Fund Balance $ (158,345) Annual Expenditures 48,434,913 Available Fund Balance to Annual Expenditures 0% 20 IMj VmuNIP City's ii Pension / 3=91 $ 5,321,234 21 ilia►6yC�7���1I_\►fy ❑ City's Annual Contribution Rate Zoos 200 Safety Miscellaneous 28.722% 11.752% 29.434% 11.489% 2006 34.910% 12.537% ❑ City's Funding Status (% of funded liability) Safety Miscellaneous 2007 80.600% 90.200% 2006 79.900% 89.100% 2005 79.400% 88.000% 22 o Subsequent Events — United States Financial Credit Crisis C&L Audit Deport ❑ Subsequent to the basic financial statements date of June 30, 2008 and the year then ended, the United States has entered into a Financial Credit Crisis. Although the United States Federal Government has tal-en actions which, at least in part, are intended to relieve and correct this Financial Credit Crisis, investments are subject to significant impairment and losses. To date, the City has not been informed and is not aware of any investment losses. Accordingly, such investment losses, if any, have not been reflected in the accompanying basic financial statements. 23 24 2008 Total Expenditures of Federal Awards $ 8,632,521 Major Programs: Community Development Block Grant $ 474,225 HOME Investment Partnership Program 3,958,000 DUI Enforcements & Awareness Program 137,026 S. McDowell Between Lakeville/E. Washington 1,307,095 Total Major Programs tested $ 5,876,346 Percentage of Total Federal Awards Expenditures 68.07% Audit Results: No findings or questioned costs were noted on the Major Programs except for the findings n in the Audit Findings Section. 25 26 SINGLE AUDIT EXPENDITURES o U.S. DEPARTMENT OF TRANSPORTATION m Federal Highway Assistance Program 27 TDA Compliance Fare Box Ratio Calculation Maintain a minimum of fare ratio of 10% The Fund's fare ratio of operating revenues to operating expenses for the years ended June 30, 2008 was 9. 1 ■ The City is not compliance with the provisions of the TDA. "I r 29 ❑ Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra -Entity Transfers of Assets and Future Revenues -IMPLEMENTED ❑ Statement No. 50, Pension Disclosures, an amendment of GASB Statements No. 25 and No. 27 -IMPLEMENTED 30 ❑ Statement No. 45, Accounting and Financial ,Reporting by Employes fog Postemployment Benefits Other Than Pensions ❑ GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations GASB Statement No. 52, Land and Other Real Estate Held as Investments by Endowments 31 ❑ GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets ❑ GASB Statement No. 53, Accounting and Financial Reporting fog Derivative Instruments 32 � 1 I ❑ GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions 33 Thank you for C&L Allowing to Provide Audit Services to the CI*ty Petaluma 34 EMIL Petaluma, California R eport to City Council and Management For the year ended June 30, 2008 Caporicci & Larson Cert yled Public Accountaws C&L Caporiccli & Iarson Certy ed Public Accountants April 9, 2009 To the Honorable Mayor and Members of the City Council of the City of Petaluma Petaluma, California In planning and performing our audit of the financial statements of the City of Petaluma, California (City) as of and for the year ended June 30, 2009, in accordance with generally accepted auditing standards in the United States, we considered the City s internal control over financial reporting (internal controls) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal controls. Accordingly, we do not express an opinion on the effectiveness of the City's internal controls. Our consideration of internal controls was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. However, as noted in the following pages, we identified certain deficiencies in internal control that we consider to be control deficiencies, significant deficiencies, and material weaknesses. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A signtficrnit deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Authority's ability to initiate, authorize, record, process, or report financial data -reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. A inaterial weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control. This communication presents control deficiencies that were identified during our 2008 audit and we consider these deficiencies to be significant deficiencies. This communication is intended solely for the information and use of City Council, management, and others within the City, and is not intended to be and should not be used by anyone other than these specified parties. Caporicci &Larson Oakland, California Toll Frec Ph: (877) 862.2200 Toll Frcc Fax: (866) 436-0927 0 Orange County 5acr a cnto San Diego IHO Grand -Ave, Sunt 1365 9 Corporate Park, Suite 100 777 Campus commons fid., Suite 200 9858 Mercury. Suite 106 pakland,eaarornia996n 4vine,C3llf0mi292G06 Sacramenta,CalifomI395825 San Diego, Califoraia92111 City of Petaluma Report to City Council and Management For the year ended June 30, 2005 Page SIGNIFICANT DEFICIENCIES 1. Single Audit Expenditures.......................................................................................................................1 2. Fare Box Ratio........................................................................................ City of Petaluma Report to City Council and Management For the year ended June 30, 2008 SINGLE AUDIT EXPENDITURES Findin In accordance with the Basic Guidelines section of OMB's, all Federal grants must be reported on the City's Single Audit Reports in the year the expenditures were incurred_ During our performance of the audit, we noted that the expenditures under the U.S. Department of Transportation, Federal Highway Assistance Program, CFDA Number 20.205, in the amount of 932,878 incurred in the fiscal year 2006-2007, were not reported on the Schedule of Federal Awards Expenditures for the year ended June 30, 2007. Recommendation We recommend that the City maintain sufficient control over all Federal awards to ensure the accuracy and completeness of the amounts reported on the Schedule of Expenditures of Federal Awards. Manazement Response The City will more closely monitor all dates of reimbursement claims and their corresponding federal expenditures for timeliness of reporting. Additional communication will be initiated with program staff if claims are not submitted for an extensive period of time. City of Petaluma Report to City Council and Management For the year ended June 30, 2008 EAR BOX RATIO Finding The TDA is defined in Chapter 4 of the California Public Utilities Code commencing with Section 99200. The Petaluma Transportation Enterprise Fund is subject to TDA provisions requiring the calculation of and adherence to fare and local support ratios for TDA transit funding. Accordingly, the City's Transportation Enterprise Fund must maintain a minimum fare ratio of 10%. The Fund's fare ratio of operating revenues to operating expenses for the years ended June 30, 2008 and 2007, indicate the City is not compliance with the provisions of the TDA for the year ended June 30, 2008, however was in compliance for the year ended June 30, 2007. Operating revenues_ Fare revenues Advertisement space revenues Total operating revenues Operating expenses Less: depreciation expense Applicable operating expenses Fare ratio Recommendation 2008 2007 $ 170,493 $ 151,266 31,309 '34,037 $ 201,602 $ 165,323 $ 2,505,153 $ 1,910,915 (291,721) (172,069) $ 2,213,432 $ 1,736,626 9.1% 10.7% It is recommended that the City review the transit operations and prepare a proposed plan in how they will meet the 10% fare box ratio requirements as required by the TDA provisions. Management Response The City's Transit staff will address the TDA 10% farebox ratio compliance requirement through expense reductions and may consider a fare increase. Already, the Transit staff is finding the current economic situation and the accompanying loss of both TDA and STA revenues requiring a reduction in the agency's service hours. Ideally this reduction should occur without a loss in ridership. The Transit staff is also considering a major route restructuring with shorter more frequent routes and timed transfers in addition to increases in the base fare (currently $1.00) to align with the $1.25 local fare charged by neighboring transit agencies. No changes to the frequent rider discounts will be proposed to encourage increased ridership. These plans are currently in the preliminary discussion stage: Any fare or service changes will require significant public outreach and approval by the City Council. Either the 25% percent fare increase or a reduction in costs of $200,000 (which is consistent with the expected revenue loses) will achieve the required 10% farebox ratio. ■ Petaluma, California Single Audit Reports For the year e�adec� June 30, 2008 C&L Caporicci & Larson Certified Public Accountants City of Petaluma Single Audit Reports For the year ended June 30, 2008 Table of Contents Pale Independent Auditors' Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Goverment Auditing Standards...............................................................................................................1 Independent Auditors' Report on Compliance with Requirements Applicable to each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133............................................................................................................. 3 Schedule of Expenditures of Federal Awards........................................................................................................ 5 Notes to Schedule of Expenditures of Federal Awards........................................................................................ 7 Schedule of Findings and Questioned Costs.......................................................................................................... 8 C&L Caporicci & Larson Certified Public Accountants REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITIl1fG STANDARDS To the Honorable Mayor and Members of City Council of the City of Petaluma Petaluma, California We have audited the basic financial statements of the City of Petaluma, California (City) as of and for the year ended June 30, 2008, and have issued out report thereon dated April 9, 2009. 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. Internal Control over -Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's basic internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiently is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. However, we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 'roll Free Ph: (877) 862-2200 Toll Free Fax: (866) 436-0927 - Oakland orange County Sacramento San Diego 180 Gmnd Avc., Sll1te 1365 9 Corporatc Park, Suitc 100 777 Campus Commons Rd., Suite 200 4858 Mercury, Suite 106 Oakland, California 94612 lrvinc,Callfornia 92606 Sacmmento,0difomia 95825 sun Diegn,Callfomia 92111 To the Honorable Mayor and Members of City Council of the City of Petaluma Petaluma, California Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The result of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and are reported in the Schedule of Findings and Questioned Costs as item 08-1. This report is intended solely for the information and use of management, the City Council, others within the entity, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. Oakland, California April 9, 2009 C&L Caporicci & Larson Certtged Public Accountants REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 To the Honorable Mayor and Members of City Council of the City of Petaluma Petaluma, California Compliance We have audited the compliance of the City of Petaluma, California (City) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A - I33 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2008. The City's major federal programs axe identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express and opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with generally accepted auditing standards in the United States; the standards applicable to financial audits contained in Government Audit Standards issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Govertullents, and Non -Profit Organizations. Those standards and DMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2008. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with OMB Circular A-133 and are reported in the accompanying Schedule of Findings and Questioned Costs as item 08-1. Internal Control over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs_ In planning and performing our audit, we considered the City's internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. Toll Free Ph: (877) 862.2200 Tou Fret Fax: (866) 436-0927 Oa}cland Orange County 6acr21nenta San Diego 180 Grand Ave., Suite 1365 9 Corporate Paris, Suite toe 777 Campus Commons Ad.,SWte 200 4858 Mercury, Sults 106 Oaklaad,cadifornia 94612 Irvine, California 92606 Sacramento,(--," rnia 95825 San Diego, California 92t 11 To the Honorable Mayor and Members of City Council of the City of Petaluma Page 2 A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A niaterial weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did identify one deficiency in internal control over compliance that we consider to be significant deficiency, as defined above. Schedule of Expenditures of Federal Awards We have audited the basic financial statements of the City as of and for the year ended June 30, 2008, and have issued our report thereon dated April 9, 2009. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by DMB Circular A-133 and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as whole. This report is intended solely for the information and use of management, the City Council, others within the entity, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. Oakland, California April 9, 2009 City of Petaluma Single Audit Reports Schedule of Expenditures of Federal Awards For the year ended June 30, 2008 See accompanying Notes to Schedule of Expenditures of Federal Awards. 5 Federal State Catalog Pass-through Program Grantor Agency and Grant Title Number Number Expenditures U.S. Department of Housing and Urban DeveIopment: Direct Prog=ns. -Commurdty Development Block Grant 14.218 8.06-MG050049 $ 297,726 - CommunityDevOopment Block Grant 14.218 W -MC 060Qf9 266,499 Subtotal 4742M Passed Thrmigh Slate of Uifonun Departrind of Housing -Home InveshmmtPartneislupProgram 14239 05-HOME,1663 3,958,000 Total U.S. Department of Housingand Urban Development 4,432225 U.S. Department of Justice: Direct Progrmrrs: Office of Community Oriented PolicingServices - Bullet Proof Vest Partnership (BVP) 16.607 2005BUBX 1,123 - Bullet Proof Vest Partnership (BVP) 16.607 2006BUBX 11816 - Bullet Proof Vest Partnership (BVP) 16.607 2007BUBX 3,883 Subtotal 6,822 Passed Thrmigh State of Califanua Office ofEnurgerinj Ser ims: - Domestic ViolenceSeaval Assault Unit (M5A) 16.588 LE06047631 39,102 -DorresticViolenceSexualAssault Unit (DVSA) 16.588 LE07047631 36,972 Subtotal 76,074 ToW U.S. Department of Justice 82,896 National Highway Traffic Safety Administration: Pass -Through State gF Califomia Offi m of Traffic 5rrfehf. - Collision Reduction Alcohol Suppression 211.600 AL0639 5,923 - DUI Enforcement & Awareness 20.600 AL0351 137,025 Subtotal 142,949 - Sobriety Checkpoint Program 20.601 SCO74902 25293 - Sobriety Checkpoint Program 20.601 SCO8313 7,692 Subtotal 32,985 - Seatbelt compliance Campaign 20.602 CT08313 5,216 Pass -Through State qf Uiforrz a Highnny Patrol: - Every 15 Minutes Program X3.602 7C051175-0 10,000 Total National Highway Traffic Safety Administration 191,150 Page subtotal of federal expenditures $ 4,6,271 See accompanying Notes to Schedule of Expenditures of Federal Awards. 5 City of Petaluma Single Audit Reports Schedule of Expenditures of Federal Awards, Continued For the year ended June 30, 2008 Grantor Agency and Grant Title Subtotal from previous page Federal Aviation Administration: Drect Progrmns: - AirportlT iprovemmt Program (-06 01186-17) - AirportImpravewmt Pmgram ('3-06-0186-18) Total Federal Aviation Administration US, Department of Transportation Pass-Tlmmcgh State ofGrlifornia Department q'Trmrsportatimr -S. iVkDowellbetimenLaloevMe/E Washington - "D" Street Bridge Between Weller &D St., 061 - Petaluma B1vdStreet Repairs -East Washington & 6th Pass 77vvu#i Alkim oli6m Trrrnsportatimr Onunssion: - Short Range Thdmit flan Total U.S. Departarent of Transportation U S. Environmental Protection Agency Direct Programs: - Brownfields Assessment - Brownfields Assessment Total US. Environmental Protection Agency U.S. Department of Homeland Security Pass-Tlmiji Stateof Cahfonria Offceof Enrrgeriny Senices: - Public Assistance - 2005 Winter storms - Public Assistance- 2006 Spring Storms Total US. DWartment of Homeland Security Total Expenditures of Federal Awards * Denotes major program a. $9M,878 of expenditure was ircurredinFYE 06/07. See accompanying Notes to Schedule of Expenditures of Federal Awards. 6 Federal State Catalog Pass-through Program Number Number Expenditures $ 4,706,271 20.106 DTFA08-95-00818 126,842 20.106 DTFAOS•95-C 30818 83,445 210,287 202E * Sff L-5022(039) 14(U.,.095 a 20.2CEi BHlS­5022(038) 121,951 20205 RPSI�5022(040) 437,455 20.205 SWL5022(041) 140,799 2,007,330 20.500 01-90-x901 45,000 2,052,330 68.818 BF -96914901-0 1354 68.818 BF -96954201-0 38,206 52,560 97.036 FEMA -1628 -DR -CA 1,277, 529 97.036 FEMA -1646 -DR -CA 333,544 1,611,073 $ 8,632,521 City of Petaluma Single Audit Reports Notes to Schedule of Expenditures of Federal Awards For the year ended June 30, 2008 1. REPORTING ENTITY The financial reporting entity consists of (a) the primary government, City of Petaluma, California (City), (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. 2. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS The accompanying Schedule of Expenditures of Federal Awards (Schedule) presents the activity of all Federal financial assistance programs of the City. Federal financial assistance received directly from Federal agencies as well as funds passed through the state are included in the Schedule. The Schedule was prepared from only the accounts of various grant programs and, therefore, does not present the financial position or results of operations of the City. 3. SUBRECIPIENTS Of the federal expenditures presented in the Schedule, the City provided federal awards to subredpients as follows: Program Title Community Development Bloc], Grant (CDBG) Community Resources for Independence Rebuilding Together Community of the Shelterless Petaluma Ecumenical Properties Petaluma People Services Center Total CDBG -Entitlement Grant See accompanying Notes to Schedule of Expenditures of Federal Awards. 7 Federal Amount CFDA Provided To Number Subrecipients 14.218 40,000 99,840 87,830 85,242 70,157 383,0&9 City of Petaluma Single Audit Reports Schedule of Findings and Questioned Costs For the year ended June 30, 2008 A. SUMMARY OF AUDIT RESULTS 1. The auditors' report expresses an unqualified opinion on the basic financial statements of the City of Petaluma, California (City). 2. No Significant deficiencies relating to the audit of the financial statements are reported in the basic financial statements. 3. No instances of noncompliance material to the basic financial statements of the City were disclosed during the audit. 4. Significant deficiencies relating to the audit of the major federal award programs are reported in the basic financial statements and are reported in Part C of this schedule below. 5. The auditors' report on compliance for the major federal award programs for the City expresses -an unqualified opinion. 6. Audit findings relative to the major federal award programs for the City is reported in Part C of this Schedule below. 7. The programs tested as major programs include: CFDA 0 Expenditures Major Program: Community Development block Grant 14.218 $ 474,225 Home investment Partnership Program 14,239 3,958,000 S. McDowell between Lakeville/E. Washington 20.205 1,307,095 DUI Enforcement & Awareness 20.600 137,026 Total Program Expenditures $ 5,876,346 Total Expenditures of Federal Awards $ 8,632,521 Percent of Total Federal Award Expenditures 68.07% S. The threshold for distinguishing Types A and B programs was $300,000. 9. The City was determined to be a low risk auditee. B. FINDINGS - FINANCIAL STATEMENTS AUDIT No financial statement finding; noted. 8 City of Petaluma Single Audit Reports Schedule of Findings and Questioned Costs, Continued For the year ended June 30, 2008 C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAM AUDIT Finding 08-1 U.S. Department of Transportation, Federal Highway Assistance (CFDA Number 20.205) - Under -reporting of Federal Expenditures. Criteria: In accordance with the Basic Guidelines section of OMB's, all Federal grants must be reported on the City's Single Audit Reports in the year the expenditures were incurred. Condition: During the performance of the audit, expenditures in the amount of $932,878 incurred in fiscal year 2006-2007, were not reported on the Schedule Expenditures of Federal Awards for the year. Cause: The project expenditures were incurred in the prior fiscal year, but the reimbursement was not claimed until current fiscal year. Due to the lack of sufficient communication between the City departments, the City's Accounting department was unaware of these grant related expenditures. As a result, the expenditures were not reported on the prior year's Schedule of Expenditures of Federal Awards. Questioned Costs: No questioned costs noted. Context and Effect: Being aware of all grants to be received by the City will ensure that the Schedule of Federal Awards is complete and accurate. Recommendation: We recommend that the City maintain sufficient control over all Federal awards to ensure the accuracy and completeness of the amounts reported on the Schedule of Expenditures of Federal Awards. Management Response: The City will more closely monitor all dates of reimbursement claims and their corresponding federal expenditures for timeliness of reporting. Additional communication will be initiated with program staff if claims are not submitted for an extensive period of time. City of Petaluma Single Audit Reports Schedule of Findings and Questioned Costs, Continued For the year ended rune 30, 2008 C. PRIOR YEAR FINDINGS AND QUESTIONED COSTS Finding 07-1 US Environmental Protection Agency (CFDA Number 66.458) - Under- reporting of Federal expenditures. Criteria: In accordance with the Basic Guidelines section of OMB's, all Federal grants must be reported on the City's Single Audit Report in the year the expenditure was incurred. Condition: During the performance of the audit, it was noted that expenditures in the amount of $15,324,793 incurred in fiscal years 2005-2006, were not reported on the Schedule of Federal Awards for those years. Cause: The City obtained a loan from the State Water Resources Control Board (Board). The City was unaware that the loan expenditures fell under Single Audit requirements, because this requirement was not made clear until the City received a letter in July 2007 that the loans were federally funded. As a result, the expenditure was not reported on the Schedule of Federal Awards. Questioned Costs: In fiscal year 2005-2006, the amount of the grant expenditures would have caused it to be a major program. The grant was tested in fiscal year 2006-2007. The tests of the grant did not reveal any questioned costs or non-compliance with the requirements of the grant. Context and Effect: Being aware of all grants to be received by the City will ensure that the Schedule of Federal Awards is complete and accurate. Recommendation: Although tliis finding may not have been avoided given the circumstances. We recommend that the City investigate all Federal and State funding to ensure compliance with Single Audit requirements. Management Response: In the instance reported with this finding on the 2007 Single Audit, the City had no way to know prior to issuance of 2006 Single Audit that some of the loan proceeds received during FY 06-07 were federal funds reimbursing FY 05-06 expenditures. Additionally the State confirmed that it failed to appropriately indicate on the October 2006 payment for FY 05-06 reimbursement, that the payment contained federal funds. Thus the lack of reporting in FY 05-06 Single Audit could not have been avoided. During FY 06-07 Single Audit work, the City obtained more information from the Board and clarified that the determination of whether federal funds will be used for a loan payments is not made until the payment is issued. Thus, the City cannot determine what future funding will be federal until the payment is actually received. Status: Not implemented. l0 *'Aty of Petaluma Petaluma, California Transportation Development Financial Statements and Independent Auditors' Reports .dor the year ended June 30, 2008 and 2007 CC -L Caporicci & Larson Certified PublicAccounlanis City of Petaluma Transportation Development Act Fund For the years ended June 30, 2008 and 2007 Table of Contents Page Independent Auditors' Report... .......................................................................................... .....1 Financial Statements: Capital Project Fund: BalanceSheet...............................................................................................................................................5 Statement of Revenues, Expenditures and Changes in Fund Balances..............................................b Transit Enterprise Fund: Statementsof Net Assets...........................................................................................................................9 Statements of Revenues, Expenses and Changes in Net Assets........................................................10 Statementsof Cash Flows........................................................................................................................11 Notes to the Financial Statements................................................................................................................13 Independent Auditors' Report on Compliance on Compliance on Internal Control Over Financial Reporting of the Transportation Funds Based on an Audit of the Transportation Funds' Financial Statements Performed In Accordance with Governinent Auditing Standards .............................................................................21 Schedule of Findings and Questioned Costs..................................................................................................23 C-1131 Caporicci & Larson Certified Publie.accounlants INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of City Council of the City of Petaluma Petaluma, California We have audited the accompanying financial statements of the Transportation Development Act Funds (TDA Funds), which included the Capital Projects Fund and the Transit Enterprise Funds, of the City of Petaluma, California (City), as of and for the years ended June 30, 2008 and 2007, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in Goveninfent Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the TDA Funds' 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 audits provide a reasonable basis for our opinion. As described in Note 2, the financial statements present only the TDA Funds and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2008 and 2007, and the changes in its financial position for the years then ended in conformity with generally accepted accounting principles in the Unites States. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the TDA Funds of the City as of June 30, 2008 and 2007, and the respective changes in financial position, and its cash flows, if applicable, for the years then ended in conformity with generally accepted accounting principles in the United States. In accordance with Govetlntlent Auditing Standards, we have also issued our report as of and for the year ended June 30, 2008, dated March 26, 2009, on our consideration of the City's internal control over financial reporting of the TDA Funds and on our tests of their compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report and considered in assessing the results of our audit. Oakland, California March 26, 2009 Toll Frei Ph -.(877) 862-2200 Oakland Orange County 180 Grandrlve-Suite 1365 9 Corporate Park, Suite 100 Oakland, Callfornia 94612 Irvine, California 92606 Toll Free Fax; (866) 436-0927 Sacramento San Diego 777 Campus Commons Rd, Suite app •1858 i1[ercury,Suitc lo( Sacramento, Califurnia 95825 San Diego, California 92111 This page intentionally left blank. CAPITAL PROJECTS FUND This page intentionally left blank City of Petaluma Transportation Development Act Capital Project Fund Balance Sheet June 30, 2008 and 2007 ASSETS Cash and Investinent Due from other governments Total assets LIABILITIES AND FUND BALANCE Liabilities: Accounts Payable Due to other City funds Total liabilities Fund Balances: Unreserved, reported in: Capital Traject Funds Total fund balances Total liabilities and fund balances See accompanying Notes to Financial Statements. 5 2008 2007 $ 70,375 $ 265,009 127,568 - $ 197,943 $ 265,009 $ 5,407 $ - 124,000 - 129,407 - 68,536 265,009 68,536 265,009 $ 197,943 $ 265,009 City of Petaluma Transportation Development Act Capital Project Fund Statements of Revenues, Expenditures and Changes in Fund Balances For the years ended June 30, 2008 and 2007 2008 2007 REVENUES: Intergovernmental: TDA Article 3 $ 127,568 $ 573,545 Investment earnings - 292 Total revenues 127,568 573,837 EXPENDITURES: Capital outlay 2,611,443 578,111 Total expenditures 2,611,443 578,111 REVENUES OVER (UNDER) EXPENDITURES (2,483,875) (4,566) OTHER FINANCING SOURCES (USES): Contribution from Transit Enterprise fund - 269,283 Capital contribution from the County of Sonoma 2,137,402 - Transfers in from the City of Petaluma 150,000 - Total other financing sources 2,287,402 269,575 Net change in fund balance (196,473) 265,009 FUND BALANCES: Beginning of year 265,009 - End of year $ 68,536 $ 265,009 See accompanying Notes to Financial Statements. 6 TRANSIT ENTERPRISE FUND This page irzteutionaliy left Ulartlu City of Petaluma Transportation Development Act Transit Enterprise Fund Statements of Net Assets June 30, 2008 and 2007 ASSETS Current assets: Cash and Investment Accounts receivable, net Intergovernmental receivable Inventories Prepaid and other assets Total current assets Capital Assets Nan -depreciable Depreciable, net Total capital assets Total assets LIABILITIES Current liabilities: Accounts payable and accrued liabilities Wages payable Total current Iiabilities Non-current liabilities: Compensated absences 'fatal non-current liabilities Total liabilities NET ASSETS Invested in capital assets Unrestricted Total net assets See accompanying Dotes to Financial Statements. 9 2008 2007 $ 70,685 $ 161,612 5,139 3,787 168,632 106,940 17,658 22,231 3,510 1,241 265,624 295,811 695,769 695,769 1,924,478 2,251,264 2,620,247 2,947,033 2,885,871 3,242,844 176,382 186,6 7/7 5,822 6,202 182,204 192,879 764 2,964 764 2,964 1.82,968 195,843 2,620,247 2,947,033 82,656 99,968 $ 2,702,903 $ 3,047,001 City of Petaluma Transportation Development Act Transit Enterprise Fund Statements of Revenues, Expenses and Changes in Net Assets For the years ended June 30, 2008 and 2007 See accompanying Notes to Financial Statements. 10 2008 2007 OPERATING REVENUES: Passenger fares $ 170,493 $ 151,286 Other operating revenues (ads/ leases) 31,309 34,037 Total operating revenues 201,802 185,323 OPERATING EXPENSES: Contract expenses 1,027,880 880,650 Non -contract expenses: Non -operator salary/benefits 187,474 104,42 Services 113,506 230,147 Materials & supplies 345,365 215,858 Lease 2,860 2,326 Insurance 52,678 43,883 Other G&A expense 483,669 261,540 Depreciation 291,721 172,089 Total operating expenses 2,505,153 1,910,915 Operating ineorne (loss) (2,303,351) (1,725,592) NONOPERATING REVENUES (EXPENSES): Other nonoperating revenues: Contributions to the Capital Projects Fund - (269,283) Transfers out to the City of Petaluma - (251,800) Intergovernmental 1,987,612 3,065,247 Settlement revenue - 73,871 Loss on disposal of capital assets (35,065) - Investment earnings 6,706 16,636 Interest expense - - Total operating nonoperating revenues (expenses): 1,959,253 2,634,671 Change in net assets (344,098) 909,079 NET ASSETS: Beginning of year 3,047,001 2,137,922 End of year $ 2,702,903 $ 3,047,001 See accompanying Notes to Financial Statements. 10 City of Petaluma Transportation Development Act Transit Enterprise Fund Statements of Cash Flows For the years ended June 30, 2008 and 2007 2008 2007 CASH FLOW FROM OPERATING ACTIVITIES Cash received from customers $ 200,450 $ 189,110 Cash payments to suppliers for goods and services (2,033,949) (1,665,3?2) Cash payments to employees for services (190,054) (135,901) Net cash provided (used) by operating activities (2,023,553) (1,612,113) CASH FLOW FROM NONCAPITAL FINANCING ACTIVITIES Settlement revenue - 73,871 Net cash provided (used) by capital and related financing activities - 73,871 CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTNITIES Intergovernmental capital receipts 1,925,920 3,034,827 Transfer in (out) - (251,800) Acquisition of capital assets, net - (1,159,104) Net cash provided (used) by capital and related financing activities 1,925,920 1,323,923 CASH FLOWS FROM INVESTING ACTIVITIES Interest received from investments 6,706 16,636 Net cash provided (used) by investing activities 6,706 16,636 Net increase (decrease) in cash and cash equivalents (90,927) (197,683) CASH AND CASH EQUIVALENTS Beginning of year 161,612 359,295 End of year $ 70,685 $ 161,612 RECONCILIATION OF OPERATING INCOME TO NET CAS14 PROVIDED BY OPERATING ACTIVITIES: Operating income (loss) $ (2,303,351) $ (1,725,592) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 291,721 172,089 Changes in: Accounts receivable (1,352) 3,787 Intergovernmental receivable Inventory 4,573 1,467 Prepaids and other assets (2,269) 8,839 Accounts payable and accrued liabilities (10,295) (41,224) Wages payable (380) 680 Compensated absences (2,200) (32,159) Total adjustments 279,798 113,479 Net cash provided (used) by operating activities $ (2,023,553) $ (1,612,113) See accompanying Notes to Financial Statements. 11 This page intentionally left blank, 11) City of Petaluma Transportation Development Act Funds Notes to the Financial Statements For the years ended June 30, 2008 and 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. The Reporting Eutitij The financial statements of the Transportation Development Act Funds (TDA Funds) are intended to present the financial positional and changes in financial position of only those transactions attributable to the TDA Funds administered and disbursed by the City of Petaluma, California (City). The accounting policies of the TDA Funds of the City are in conformity with generally accepted accounting principles in the United States applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing accounting principles. The following is a summary of the more significant accounting policies. B. Fluid AccountIiig The accounting activities of the City are organized on the basis of funds which are considered to be separate accounting entities. The operations of the TDA Funds are accounted for in separate sets of self - balancing accounts that comprise their assets, liabilities, fund balance or net assets, revenues, expenditures or expenses. Governmental resources are allocated to and for individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The TDA Funds are presented in the accompanying financial statements as follows: Governmental Fund Type Capital Proiects Fmid - Capital projects fund is used to account for the collection of resources and the related expenditures on acquisition and construction of TDA authorized capital improvements projects in the City Proprietary Fund Type Tiriiisit Entervi ise Fund - Enterprise fund is used to account for operations financed and operated similar to business activities such as services rendered to general public on a fee basis. C. Basis of Accoiuitiug aird Measitreiiieiit Focris Capital Projects Fmid The Capital Projects Fund's financial statements include a Balance Sheet and a Statement of Revenue, Expenditures and Changes in Fund Balances. The Capital Projects Fund is accounted for on a spending or "curreiit financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balances. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. 13 City of Petaluma Transportation Development Act Funds Notes to the Financial Statements, Continued For the years ended June 30, 2008 and 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. Basis of Accozzzltizzg mind Measzzl•ellrent Foczzs, Continued Capital Protects Fund, C0116117[ed Expenditures are recognized in the accounting period in wl-ich the fund liability is incurred, if measurable, except for unmatured interest on long-term liabilities, wluch is recognized when due. Additionally, consistent with the flow of "c1tr1•elzt fzizancial resources" measurement focus required for the governmental fund financial statements, unmatured long --term indebtedness would be reported as long- term liability of the City, not as a liability of the fund. Deferred revenues arise when potential revenues do not meet both the "measurable" and "available" criteria for recognition in the current period_ Deferred revenues also arise when the government receives resources before it has a legal claim to them, as when grant mordes are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the deferred revenue is removed from the balance sheet and revenue is recognized. Transit Enterprise Fund The Transit Enterprise Fund financial statements include a Statement of Net Assets, a Statement of Revenues, Expenses and Changes in Net Assets, and a Statement of Cash Flows. The Transit Enterprise Fund is accounted for using the "econo111ic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Assets. The Statement of Revenues, Expenses and Change in Fund Net Assets presents increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which liability is incurred. Operating revenues in the Transit Enterprise Fund are those revenues that are generated from the primary operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses. D. Caslz and Investments TDA Funds pools its cash resources with all funds in the City in order to facilitate the management of cash and achieve the goal of obtaining the highest yield with the greatest safety and Ieast risk. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms. 14 City of Petaluma Transportation Development Act Funds Notes to the Financial Statements, Continued For the years ended June 30, 2008 and 2007 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued D. Cash and Inveshuents, Continued In accordance with Governmental Accounting Standards Board Statement No. 31, Acco ntutg and Financial Reporting for Certairi Invesf?rrews and for External hivestinent Pools, highly liquid money market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. The City participates in an investment pool managed by the State of California titled Local Authority Investment Fund (LAIF) which has invested a portion of the pool funds in structured notes and asset- backed securities. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. LAIF's investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these investments are subject to market risk as to change in interest rates. Cash equivalents are considered amounts in demand deposits and short-term investments with a maturity date within three months of the date acquired by the Authority and are presented as "Cash and Investments" in the accompanying financial statements. In accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures (Amendment of GASB No. 3), certain disclosure requirements, if applicable for deposit and investment risk are specified for the following areas: Interest Rate Risk Credit Risk + Overall + Custodial Credit Risk + Concentration of Credit Risk y Foreign Currency Risk E. hiventories Inventories, consist primarily of supplies, meters, and vehicle parts held for further consumption, are valued at cost on a fust -in, first -out basis. Reported expenditures or expenses reflecting purchase of supplies have been restated to reflect the consumption method of recognizing inventory --related expenditures or expenses. F. Capital assets Capital assets are recorded at historical cost or estimated historical cost if actual cost is not available. Donated assets are valued at their estimated fair value on the date donated. The City's policy is to capitalize all vehicles, office equipment and items with an inherently lower value with a unit cost of $5,000 or more, and a useful life of one year or more. Land, easements, land improvements, buildings, building improvements and infrastructure with a cost exceeding $50,000, and a useful life exceeding one year are also capitalized. 15 City of Petaluma Transportation Development Act Funds Notes to the Financial Statements, Continued For the years ended June 30, 2008 and 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. Capital Assets Capital assets used in the Transit Enterprise fund are capitalized in the fund. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows: Vehicles and equipment 3-15 years Building and improvements 10-50 years Infrastructure 20-50 years The Governmental Accounting Standards Board (GASB) issued Statement No. 34 which requires the inclusion of infrastructure capital assets in local governments' basic financial statements. In accordance with Statement No. 34, the City has included the value of all infrastructure in the current Basic Financial Statements. At June 30, 2008 the TDA fund had no infrastructure. H. Compensated Absences The City has compensated absences for regular vacation and sick leave which are accounted for in accordance with generally accepted accounting principles (GAAP). Employees may accumulate earned vacation time. Management employees are limited to the amount, which may be earned, in a three year period. All other employees are limited to the amount, which may be earned, in a two year period. A liability is calculated for all of the cost of compensated absences based on benefits earned by employees in the current period, for which there is a probability of payment at termination. The salary and related payroll costs are those in effect as of June, 30, 2008. For the Transit Enterprise fund, compensated absences are recorded as expenses. L NetAssets Net assets are classified in the following categories: Invested in Capital Assets, Net of Related Debt - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. Restricted Net Assets - This amount is restricted by external creditors, grantors, contributors, laws or regulations of other governments. The Transit Enterprise Fund has no restricted net assets at June 30, 2005. Unrestricted Net Assets - This amount is all net assets that do not meet the definition of "invested in capital assets, net of related debt" or "restricted net assets." J. Use of Estimates The preparation of financial statements in conforn-dty with generally accepted accounting principles requires management to male estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. I6 City of Petaluma Transportation Development Act Funds Notes to the Financial Statements, Continued For the years ended June 30, 2008 and 2007 2. CASH AND INVESTMENTS The City has pooled its cash and investments in order to achieve a higher facilitating management of cash. Cash in excess of current requirements is bearing accounts and other investments for varying terms. The balance of the 30, 2008 and 2007, respectively, was as follows: 2008 2007 Capital Projects Fund $ 70,375 $ 265,009 Transit Enterprise Fund 70,685 161,612 Total $ 141,060 $ 426,621 return on investments while invested in various interest - TDA Funds' cash, as of June The TDA Funds' cash is deposited in the City's internal investment pool, which is reported at fair value. Interest income is allocated based on average cash balances. Investment policies and associated risk factors applicable to the TDA Funds are those of the City and are included in the City's basic financial statements. The investments made by the City are limited to those allowable under State Statutes and may include the following types of investments: Certificates of Deposit Government Agency Securities Bankers Acceptances Treasury Bill and Notes Medium Term Notes Passbook Savings Accounts Repurchase Agreements State of California Local Agency Investment Fund (LAIF) The City's investments with LAIF at June 30, 2008 and 2007, included a small portion of the pooled funds invested in derivatives and similar transactions. These investments include the following: Structured Notes - Debt securities (other than Asset -Backed Securities) whose cash-flow characteristics (couponrate, redemption amount, or stated maturity) depend on one or more indices and/or that have imbedded forwards or options. Asset Bacicerl Securities - Generally, mortgage-backed securities which entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (for example, Collateralized Mortgage Obligations) or credit card receivables. As of June 30, 2008, the City had pooled cash and investments in LAIF, wldch had invested 14.72% of the pooled investment funds in derivatives and similar transactions. As of June 30, 2007, the City had pooled cash and investments in LAIF, which had invested 3.466% of the pooled investment funds in derivatives and similar transactions. See the City's basic financial statements for disclosures related to cash and investments including those disclosures relating to interest risk, credit rate risk, custodial credit risk, and concentration risk. 17 City of Petaluma Transportation Development Act Funds Notes to the Financial Statements, Continued For the years ended rune 30, 2008 and 2007 3. CAPITAL ASSETS The following is a summary of capital assets for the Transit Enterprise Fund: Capital assets, not being depreciated: Land Total capital assets, not being depreciated Capital assets, being depreciated: Buildings and improvements Vehicles and equipment Total capital assets, being depreciated Less accumulated depreciation for: Buildings and improvements Vehicles and equipment Total accumulated depreciation Total capital assets, being depreciated, net Total business -type activities 4. GRANT REVENUES Balance 2008 2007 Balance July 1, 2007 Additions Deletions June 30, 2008 $ 695,769 $ - $ $ 695,769 695,769 - - 693,769 669,048 - - 669,048 2,434,472 Federal Transporation Section 5307-SRTP (91,909) 2,342,563 3,103,520 - (91,909) 3,011,611 (16-2439) (32,017) - (194,456) (689,817) (259,704) 56,844 (892,6777) (852,256) (291,721) 56,844 (1,087,133) 2,251,264 (291,721) (35,065) 1,924,478 $ 2,947,033 $ (291,721) $ (35,065) $ 2,620,247 Metropolitan Transportation Comnussion grant revenues are recognized as earned, when the related costs have been incurred. Grant receipts collected in excess of reimbursable costs are accounted for as a liability, to be returned to the paying agency, County of Sonoma. The program incurred eligible costs and earned reimbursements under the following Transportation Development Act grants, State Transit Authority grant, Federal. Transportation grant, and Measure M: 18 2008 2007 TDA Article 8 Transit Operations $ 1,218,310 $ 1,213,608 TDA Article 4 Transit Operations 306,897 - TDA Article 3 Capital Petaluma Transit Mall - 1,376,457 TDA Article 3 Pedestrian and Bicycle Capital Projects 30,000 - STA Paratransit 163,353 198,335 Measure M 224,052 232,510 Federal Transporation Section 5307-SRTP 45,000 44,337 Total Intergovernmental Revenues 1,987,612 3,065,247 18 City of Petaluma Transportation Development Act Funds Notes to the Financial Statements, Continued For the years ended June 30, 2008 and 2007 5. TRANSPORTATION DEVELOPMENT ACT COMPLIANCE REQUIREMENTS The City received TDA funds under Article 8 (subsections 99400(c) for the year ended June 30, 2008. TDA funds received pursuant to Section 99400(c) of the Public Utilities Code may only be used for transportation services under contract with a service provider. According to the underlying TDA allocation instructions issued by the MTC, eligible costs must be incurred on or before rune 30 of the year for which funds were allocated. Unused portions revert back to the County's LTF. A summary of LTF allocations, corresponding expenditures and portion to be returned to the County's LTF follows: Transit Farebox Recovery Ratio The TDA is defined in Chapter 4 of the California Public Utilities Code commencing with Section 99200. The Petaluma Transportation Enterprise Fund is subject to TDA provisions requiring the calculation of and adherence to fare and local support ratios for TDA transit frunding. Accordingly, the City's Transportation Enterprise Fund must maintain a minimum fare ratio of 10%. The Fund's fare ratio of operating revenues to operating expenses for the years ended June 30, 2008 and 2007, indicate the City is not compliance with the provisions of the TDA for the year ended rune 30, 2008, however was in compliance for the year ended June 30, 2007. Operating revenues: Fare revenues Advertisement space revenues Total operating revenues Operating expenses Less: depreciation expense Applicable operating expenses Fare ratio 19 2008 Petaluma Petaluma $ 170,493 Transit Transit 31,309 2008 2007 LTF Allocations: $ 185,323 99400(c) $ 1,386,590 $ 1,355,229 Total LTF Allocations 1.,386,590 1,355,229 Less: applicable expenditures (1,218,310) (1,213,608) Amount to revert to the County's UFF $ 168,280 $ 141,621 Transit Farebox Recovery Ratio The TDA is defined in Chapter 4 of the California Public Utilities Code commencing with Section 99200. The Petaluma Transportation Enterprise Fund is subject to TDA provisions requiring the calculation of and adherence to fare and local support ratios for TDA transit frunding. Accordingly, the City's Transportation Enterprise Fund must maintain a minimum fare ratio of 10%. The Fund's fare ratio of operating revenues to operating expenses for the years ended June 30, 2008 and 2007, indicate the City is not compliance with the provisions of the TDA for the year ended rune 30, 2008, however was in compliance for the year ended June 30, 2007. Operating revenues: Fare revenues Advertisement space revenues Total operating revenues Operating expenses Less: depreciation expense Applicable operating expenses Fare ratio 19 2008 2007 $ 170,493 $ 151,286 31,309 34,037 $ 201,802 $ 185,323 $ 2,505,153 $ 1,910,915 (291,721) (172,089) $ 2,213,432 $ 1,738,826 9,1°v 10.7% This page is intentionally left Ulattic. 20 C-11111 Caporicci & Larson Cer•fzfietl Pu7�fic eYccarrutttrtts INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING OF THE TRANSPORTATION FUNDS BASED ON AN AUDIT OF THE TRANSPORTATION FUNDS' FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of City Council of the City of Petaluma Petaluma, California We have audited the accompanying financial statements of the Transportation Development Act Funds (TDA Fund), which included the Capital Projects Fund and the Transit Enterprise Fund, of the City of Petaluma, California (City), as of and for the year ended June 30, 2008, and have issued our reports thereon dated March 26, 2009. We conducted our audits in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. As part of the audit, we performed testing of the following program: Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA) In November 2006, California Voters passed a bond measure enacting the Highway Safety, Traffic reduction, Air Quality and Port Security Bond Act of 2006. Of the $19.925 billion of state general obligation bonds authorized, $4 billion was set aside by the State as instructed by the statue as the Public Transportation Modernization Improvement and Service Enhancement Account (PTMISEA). These funds are available to the California Department of Transportation for intercity rail projects and to transit operators in California for rehabilitation, safety or modernization improvements, capital service enhancements or expansions, new capital projects, bus rapid transit improvements or for rolling stock procurement, rehabilitation or replacement. During the fiscal year ended June 30, 2008, The City of Petaluma (City) applied for and received proceeds of $916,742 from the State's PTMISEA account for the purpose of Crinella Drive rehabilitation project_ As of June 30, 2008, PTMISEA funds received and expended were verified in the course of our audit as follows: Proceeds received: PTMISEA $ 916,742 Expenditures incurred: Crinella Drive Rehabilitation (1,734) Unexpended proceeds at June 30, 2008 $ 915,008 Toll Free Ph: (877) 862-2200 Toll Free Fay;: (866) i36-0927 Oakland Orange County Sacramento San Diego 1811 Grand Ave., Suite 3365 9 Corporate Pm*, Suite 100 777 Campus Commons Rd.,Suite 200 4858 Jiercury Suite 106 04 -land, California 93612 Irvine, CAifomia 92606 Sacramento, California 95825 San Diego, California 921 It To the Honorable Mayor and Members of the City Council of the City of Petaluma Petaluma, California Page Two Compliance As part of obtaining reasonable assurance about whether the TDA Funds' financial statements are free of material misstatement, we performed tests of their compliance with certain provisions of laws, regulations, contracts and grants, including the requirements governing the TDA Funds as described in §6666 and §6667 of Title 21, Division 3, Chapter 2, Article 5.5 of the California Code of Regulations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with these provisions was not an objective of our audits of the TDA Funds and, accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance that are required to be reported under Govenunerrt Auditing Standards and are disclosed as item 2008-01 in the Schedule of Findings and Questioned Costs, Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting of the TDA Funds as a basis for designing our audit procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting of the TDA Funds. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting of the TDA Funds. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant dleficimcy is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control. A material Weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control. Our consideration of internal control over financial reporting of the TDA Funds was for the limited purpose described in the first paragraph and would not necessarily identify all deficiencies in internal control that night be significant deficiencies or material weaknesses. This report is intended solely for the information and use of the City Council, audit committee, management, the Metropolitan Transportation Commission, and the California State Controller's Office and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. Cde-( � za-t"-� Oakland, California March 26, 2009 22 City of Petaluma Transportation Development Act Funds Schedule of Findings and Questioned Costs For the year ended June 30, 2008 A. CURRENT YEAR FINDINGS AND QUESTIONED COSTS 2008-01 Findings: The TDA is defiled in Chapter 4 of the California Public Utilities Code commencing with Section 99200. The Petaluma Transportation Enterprise Fund is subject to TDA provisions requiring the calculation of and adherence to fare and local support ratios for TDA transit funding. Accordingly, the City's Transportation Enterprise Fund must maintain a minimum fare ratio of 10%. The Fund's fare ratio of operating revenues to operating expenses for the years ended June 30, 2008 and 2007, indicate the City is not compliance with the provisions of the TDA for the year ended June 30, 2008, however was in compliance for the year ended June 30, 2007, Operating revenues: Fare revenues Advertisement space revenues Total operating revenues Operating expenses Less: depreciation expense Applicable operating expenses Fare ratio 2008 2007 $ 170,493 $ 151,286 31,309 34,037 $ 201,802 $ 185,323 $ 2,505,153 $ 1,910,915 (291,721) (172,089) S 2,213,432 $ 1,738,826 9.1 % 10,7-A) Recommendation: It is recommended that the City review the transit operations and prepare a proposed plan in how they will meet the 10% fare box ratio requirements as required by the TDA provisions. Management Response: The City's Transit staff will address the TDA 10% farebox ratio compliance requirement through expense reductions and may consider a fare increase. Already, the Transit staff is finding the current economic situation and the accompanying loss of both TDA and STA revenues requiring a reduction in the agency's service hours. Ideally this reduction should occur without a loss in ridership. The Transit staff is also considering a major route restructuring with shorter more frequent routes and timed transfers in addition to increases in the base fare (currently $1.00) to align with the $1.25 local fare charged by neighboring transit agencies. No changes to the frequent rider discounts will be proposed to encourage increased ridership. These plans are currently in the preliminary discussion stage: Any fare or service changes will require significant public outreach and approval by the City Council. Either the 25% percent fare increase or a reduction in costs of $200,000 (which is consistent with the expected revenue loses) will achieve the required 10% farebox ratio. B. PRIOR YEAR FINDINGS AND QUESTIONED COSTS No findings or questioned costs were noted for the year ended June 30, 2007. 23 BASIC FINANCIAL Independent Auditors' Reports FOR THE FISCAL YEAR ENDEDr 2001 PETALUMA Petaluma Community Development Commission Basic Financial Statements For the year ended rime 30, 2005 Table of Contents Page Financial Section IndependentAuditors' Report................................................................................................................................1 Basic Financial Statements: Government -Wide Financial Statements: Statement of Net Assets ................. .............. ............................6 Statement of Activities and Changes in Net Assets..................................................................................7 Fund Financial Statements: Governmental Funds: BalanceSheet..........................................................................................................................................12 Reconciliation of the Governmental Funds Balance Sheet to the Goven-Lnnent-Wide Statementof Net Assets....................................................................................................................13 Statement of Revenues, Expenditures and Changes in Fund BaIances.........................................15 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government -Wide Statement of Activities andChanges in Net Assets............................................................................................•.........•........16 Notes to Basic Financial Statements.................................................................................................................17 Required Supplementary Information: BudgetaryInformation................................................................................................................................36 Budgetary Comparison Schedule Redevelopment Special Revenue Fund..........................................................................................37 Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: RedevelopmentDebt Service Fund...........................................................................................................40 Redevelopment Capital Project Fund.......................................................................................................41 Compliance Section Report on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements Performed in Accordance with GovermnentAuditing Standards.................................................................................43 C-1-11 Caporicci & Larson Cei-tijied hiblic Accountants INDEPENDENT AUDITORS' REPORT To the Commissioners of the Petaluma Community Development Commission Petaluma, California We have audited the accompanying financial statements of the governmental activities and each major fund, of the Petaluma Community Development Commission (Commission), a component unit of the City of Petaluma, California (City), as of and for the year ended June 30, 2008, as listed in the table of contents. These financial statements are the responsibility of the Commission's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in Govemiizental Accounting Staiidards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic 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 provides a reasonable basis for our opinion. Subsequent to the basic financial statements date of June 30, 2008 and the year then ended, the United States has entered into a Financial Credit Crisis. Although the United States Federal Government has taken actions which, at least in part, are intended to relieve and correct this Financial Credit Crisis, investments are subject to significant impairment and losses- To date, the Commission has not been informed and is not aware of any investment losses. Accordingly, investment losses, if any, have not been reflected in the accompanying basic financial statements. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Commission as of June 30, 2008, and the respective changes in financial position, thereof for the year then ended in conformity with generally accepted accounting principles in the United States. In accordance with Govenniient Auditing Standards, we have also issued our report dated December 15, 2008 on our consideration of Commissions internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulation, contracts and grant. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Goverilillental Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Tell Free Pli: (877) 862-2200 Toll Free F;tx: (866) 436-0927 Oakland Orange County Sacramento San Diego 180 Grand Ave., Suite 1365 9 Corporate E arlt, Suite 106 777 Campos Commons Rd., Suite 200 4858 Mercury, Suite 106 Oakland, California 94612 Irvine, California 92606 Sacrtmcnto, California 95825 San Diegn, California 92111 To the Commissioners of the Petaluma Community Development Commission Petaluma, California As described in Note I to the Basic Financial Statements, the Commission implemented Governmental Accounting Standards Board Statement No. 48, Sales arxd Pledges of Receivables ayrd Futrcre Revenues and Intra-Elitihj Transfers of Assets wid Future Revemies. The accompanying Required Supplementary Information, such as Budgetary information, and Budgetary Comparison Schedule, is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the Required Supplementary Information. However, we did not audit the information and express no opinion on the Required Supplementary Information. The Commission has not presented the Management's Discussion and Analysis which the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Commissions basic financial statements. The accompanying Supplementary Information is presented for purpose of additional analysis and is not a required part of the basic financial statements. The Supplementary Information has been subjected to the auditing procedures applied in the audit of the basic financial statements and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Oakland, California December 15, 2008 2 BASIC FINANCIAL STATEMENTS This page infentionnlly left blank. GOVERNMENT -WIDE FINANCIAL STATEMENTS Petaluma Community Development Commission Statement of Net Assets June 30, 2008 ASSETS Current assets: Cash and investments Restricted cash and investments with fiscal agents Accounts receivable Intergovernmental receivables Total current assets Noncurrent assets: Noncurrent receivables Notes receivable Deferred charges, net Property held for resale Capital assets: Nondepreciable Capital assets, net Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Wages payable Interest payable Due to the City of Petaluma Refundable deposits Compensated absences - due within one year Long-term debt - due within one year Total current liabilities Noncurrent liabilities: Compensated absences - due in more than one year Long -tern debt - due in more than one year Total noncurrent liabilities Total liabilities Ii IMMIMIIIM" Invested in capital assets, net of related debt Restricted for: Debt service Capital projects Special projects Total restricted Unrestricted Total net assets See accompanying Notes to Basic Financial Statements. 6 Governmental Activities $ 5,510,984 26,425,261 6,688 878,195 32,821,078 2,078,171 15,397,678 1,433,237 402,053 38,980,952 38,980,952 58,392,091 91,213,169 218,557 46,612 565,727 1,927,000 147,423 35,595 1,250, 275 4,191,189 84,749 72,438,241 72,522,993 76,714,182 7,817,115 7,187 25,651,6&1 20,722,346 46,381,217 (39,699,345) $ 14,498,987 Petaluma Community Development Commission Statement of Activities and Changes in Net Assets For the year ended June 30, 2008 Functions/Programs Expenses Primary government: Governmental activities: Community development $ 10,274,277 5 Interest on long-term debt 3,567,427 Total governmental activities $ 13,841,704 $ Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions Total Net (Expense) Revenue and Changes in Not Assets Governmental Activities 31,666 $ 613,890 S 585,165 5 1,230,721 $ (9,043,556) - - - - (3,567,427) 31,666 $ 613,890 $ 585,165 $ 1,230,721 (12,610,983) General Revenues and Transfers: Tax increment Investment earnings Miscellaneous Transfers to the City of Petaluma Total general revenues and transfers Change in net assets Net assets - beginning of year Net assets - end of year See accompanying Notes to Basic Financial Statements. A 16,777,120 1,800,224 356 (6,552,673) 12,025,027 (585,956) 15,084,943 $ 14,498,987 This page intentionally left blank FUND FINANCIAL STATEMENTS Governmental Fund Financial Statements This page intentionally left blank- 10 lank 10 GOVERNMENTAL FUND FINANCIAL STATEMENTS 11 Petaluma Community Development Commission Balance Sheet Governmental Funds June 30, 2008 ASSETS Cash and investments Restricted cash and investments Receivables: Accounts receivable, net Intergovernmental receivables Notes receivable Noncurrent receivables Land held for resale Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Wages payable Deferred revenue Refundable deposits Due to City of Petaluma Total liabilities Fund Balances: Reserved: Encumbrances Notes receivable Land held for resale Debt service Unreserved, undesignated reported in-- Special n:Special revenue fund Capital projects fund Total fund balances Total liabilities and fund balances See accompanying Notes to Basic Financial Statements. Redevelopment Special Revenue $ 5,465,319 $ 6,500 565,911 15,26,102 2,078,171 S 2..3,342,003 $ Major Funds Redevelopment Debt Service Total Redevelopment Governmental Capital Project Funds 737 $ 44,928 S 5,510,984 51,450 26,373,811 26,425,261 - 188 6,688 - 312,234 878,145 - 271,576 15,497,678 - - 2,078,171 - 402,053 402,053 52,187 $ 27,404,790 5 50,798,980 $ 49,654 $ - $ 168,903 $ 218,557 9,832 - 36,780 46,612 2,078,17I - - 2,078,171 - - 147,42 147,423 482,000 45,000 1,400,000 1,927,000 2,619,657 45,000 1,753,106 4,417,763 175,000 - - 175,000 15,226,102 - 271,576 15,497,678 - - 402,053 402,053 - 7,187 - 7,187 5,321,244 - - 5,321,244 - - 24,978,055 24,978,055 20,722,346 7,187 25,651,684 46,381,217 $ 23,342,003 $ 52,187 $ 27,404,790 $ 50,798,980 12 Petaluma Community Development Commission Reconciliation of the Governmental Funds Balance Sheet to the Government -Wide Statement of Net Assets June 30, 2008 Total Fund Balances - Total Governmental Funds $ 46,381,217 Amounts reported for govemmental activities in the Statement of Net Assets were different because: Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. 38,980,952 Revenues which were deferred on the Governmental Funds Balance Sheet because they were not currently available were reported as revenue in the Statement of Activities and Changes in Net Assets and accordingly increase the net assets on the Government -Wide Statement of Net Assets. 2,078,171 Deferred charges, such as bond issuance costs, were an expenditure in the governmental funds but were capitalized and amortized over the life of the bonds in the Government -Wide Financial Statements- 1,433,237 Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a Iiability on the Governmental Funds Balance Sheet. (565,727) Long-term liabilities consisting of bonds and notes payable, were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet. Compensated absences - due within one year (35,595) Compensated absences - due in more than one year (84,749) Long-term debt - due within one year (1,250,275) Long-term debt - due in more than one year (72,438,244) Net Assets of Governmental Activities $ 14,498,987 See accompanying Nates to Basic Financial Statements. 13 This page intentionally left blank. 14 Petaluma Community Development Commission Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the year ended June 30, 2008 See accompanying Notes to Basic Financial Statements. 15 Major Funds Total Redevelopment Redevelopment Redevelopment Governmental Special Revenue Debi Services Capital Project Funds REVENUES: Taxes $ 3,277,878 $ - $ 13,499,242 5 16,777,120 Use of money and property 2.34,673 37,004 1,711,589 1,983,264 Intergovernmental 613,890 - 15,938 739,828 Charges for services 31,021 645 31,666 Other revenues 356 - - 356 Total revenues 4,157,816 37,004 15,337,114 19,532,234 EXPENDITURES: Current: Community development 787,682 26,308 10,815,815 11,629,805 Capital outlay - - 29,001 29,001 Debt service: Principal - 1,184,000 - I,184,000 Interest and fiscal charges - 3,484,023 - 3,494,05 Total expenditures 787,682 4,694,331 10,844,816 16,326,829 REVENUES OVER (UNDER) EXPENDITURES 3,370,134 (4,657,327) 4,492,598 3,205,405 OTHER FINANCING SOURCES (USES): Developer contribution 459,227 - 459,2227 Transfers in from the City of Petaluma - 81,000 81,000 Transfers out to the City of Petaluma - - (6,633,673) (6,633,673) Transfers in - 4,439,000 10,029,730 14,468,730 Transfers out (880,192) (455,750) (13,132,788) (14,468,730) Total other financing sources (uses) (420,965) 3,983,250 (9,655,731) (6,093,446) Net change in fund balances 2,949,169 (674,077) (5,163,133) (2,888,041) FUND BALANCES: Beginning of year 17,773,177 681,264 30,814,817 49,269,258 End of year $ 20,722,346 $ 7,187 $ 25,651,684 5 46,381,217 See accompanying Notes to Basic Financial Statements. 15 Petaluma Community Development Commission Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government -Wide Statement of Activities and Changes in Net Assets For the year ended June 30, 2008 Net Change in Fund Balances - Total Governmental Funds $ (218138,041) Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets were different because: Governmental funds reported capital outlay as expenditures. However, in the Government -Wide Statement of Activities and Changes in Net Assets, the cost of those assets was allocated over their estimated useful lives as depreciation expense. This was the amount of capital assets in the current period_ 4,146,880 The net effect of various miscellaneous transactions involving capital assets (Le., sales, trade-ins, and donations) is to decrease net assets. (2,731,265) Revenues which were deferred on the Governmental Funds Balance Sheet because they were not currently available in prior years were reported as revenue as they became available_ In the Statement of Activities and Changes in Net Assets these amounts had been recorded in prior years, as a result they were not subject to revenue recognition in the current year. (183,040) Compensated absences were reported in the Government -Wide Statement of Activities and Changes in Net Assets, but they did not require the use of current financial resources. Therefore, Compensated absences were not reported as expenditures in Governmental bunds. (31,086) Bond premium and discount were recognized as expenditures on the Governmental Funds Financial Statements. However, in the Government -Wide Statement of Activities and Changes in Net Assets, the bond premium and discount were capitalized and amortized over the life of the bonds_ This amount represents the current year amortization (61,725) Amortization expenses on bond issuance costs was reported in the Government -Wide Statement of Activities and Changes in Net Assets, but they did not require the use of current financial resources_ Therefore, amortization expenses on bond issuance cost was not reported as an expenditure in governmental funds. (56,991) Repayment of bond principal was an expenditure in Governmental Funds, but the repayment reduced long- term liabilities in the Government -Wide Statement of Net Assets. Long-term debt repayments 1,184,000 Interest expense on long-term debt was reported in the Government -Wide Statement of Activities and Changes in Net Assets, but they did not require the use of current financial resources. Therefore, interest expense was not reported as expenditures in Governmental Funds. The amount represents the change in accrued interest from prior year. 35,312 Change in Net Assets of Governmental Activities (585,956) See accompanying Notes to Basic Financial Statements. 16 Petaluma Community Development Commission Notes to Basic Financial Statements For the year ended June 30, 2008 Y. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the Petaluma Community Development Commission, of the City of Petaluma, California (Commission) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the Commission's accounting policies are described below_ A. Reporting Entity The Commission, a component unit of the City of Petaluma, California (City), is a community redevelopment agency formed in September 1976, pursuant to the provisions of Part 1 of Division 24 (commencing with Section 33000) of the California Health and Safety Code. Pursuant to this law, the Commission is vested with the responsibility of carrying out a duly adopted redevelopment plan. The Commission defined the Central Business District Project Area, encompassing approximately 225 acres, on September 27, 1976, amended in April 2001. The Petaluma Community Development Project Area was defined as encompassing approximately 2,740 acres on July 18, 1994 and 2001. The Commission's primary source of revenue, other than loans, advances from the City, and bond proceeds, is an allocation of a portion of current property taxes. Property taxes allocated to the Commission from other agencies are computed in the following manner: a. The assessed valuation of all property within the project area is determined on the date of adoption of the redevelopment plan, and identified as the base year valuation. b. Property taxes based on the incremental increase in assessed values above the base year valuation are allocated to the Commission. Property taxes based on the base year assessed valuation are allocated to the City, county and other districts. The Commission has no power to levy and collect taxes. B. Basis of Accounting and Measurement Focus The accounts of the Commission are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. 17 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Government - Wide Financial Statements The Commission's government -wide Financial statements include a Statement of Net Assets and a Statement of Activities and Changes in Net Assets. These statements present summaries of governmental activities for the Commission. These financial statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the Commission's assets and Iiabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Assets. The Statement of Activities and Changes in Net Assets are presented using the accrual basis of accounting, whereby revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The Commission's program revenues consisted of: Charges for services • Operating grants and contributions • Capital grants and contributions Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Assets have been eliminated. The following interfund activities have been eliminated: • Transfers in/out Governmental Fund Financial Statements Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental Funds. An accompanying schedule is presented to reconcile and explain the differences in net assets as presented in these statements to the net assets presented in the government -wide financial statements. The Commission has presented all funds as major funds. All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. 18 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued Revenues are recorded when received in cash, except for revenues subject to accrual (revenue received within 60 days following year-end) are recognized when due The primary revenue sources, which have been treated as susceptible to accrual by the Commission are property tax. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Deferred revenues arise when potential revenues do not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when the government receives resources before it has a legal claire to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met or when the government has a legal claim to the resources, the deferred revenue is removed and revenue is recognized. The Reconciliation of the Fund Financial Statements to the Government -Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34. C. Cash and Investments The Agency pools cash resources from all funds in order to facilitate the management of cash. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments with varying terms. Cash equivalents are considered amounts in demand deposits and short-term investments with a maturity date within three months of the date acquired by the Commission and are presented as "Cash and Investments" in the accompanying basic financial statements. In accordance with GASB Statement No. 40, Deposit and bivestment Disclosures (Amendment of GASB No. 3), certain disclosure requirements for Deposits and Investment Risks were made in the following areas: ° Interest Rate Risk Credit Risk ❑ Overall ❑ Custodial Credit Risk © Concentrations of Credit Risk In addition, other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end and other disclosures In accordance with GASB Statement No. 31, highly liquid money market investments with maturities of one year or less are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. Interest earned on investment is allocated to all funds on the basis of monthly cash and investment balances. 19 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. Cash and Investments, Continued The Commission participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF), which has invested a portion of the pool funds in Structured Notes and Asset- backed Securities. LAIF's investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-backed Securities are subject to market risk as to change in interest rates. D. Restricted Cash and Investments with Fiscal Agents Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt and for acquisition and construction of capital projects. E. Interfund Transactions Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans). Advances between funds, reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. F. Capital Assets The Commission transfers its capital assets to the City as projects are completed since the City is required to maintain all assets. The Commission retains its construction in process until the projects are completed. At that time, the assets will be contributed to the City. The PCDC cannot use tax increment for maintance, thus, the City is required to maintain all Agency assets. Consequently, all completed capital assets are recorded as City assets. G. Interest Payable In the government -wide financial statements, interest payable on long-term debt is recognized as the liability is incurred for governmental activities. However in the governmental funds financial statements, interest expenditures on long-term debt are recognized when payment is due. H Deferred Revenue In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the revenue recognition criteria based on the modified accrual basis of accounting. The Commission records deferred revenue for transactions for which funds are not available to meet current financial obligations. Typical transactions for which deferred revenue is recorded are interest on notes receivable and loans receivable financed with federal funds. 20 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L Compensated Absences The Commission has compensated absences of regular vacation and sick leave which are accounted for in accordance with generally accepted accounting principles (GAAP). Employees may accumulate earned vacation time. Management employees are limited to the amount, which may be earned, in a three year period. All other employees are limited to the amount, which may be earned, in a two year period. A liability is calculated for all of the cost of compensated absences based on benefits earned by employees in the current period, for which there is a probability of payment at termination. The salary and related payroll costs are those in effect as of June 30, 2008. Compensated absences are recorded as current and non- current liabilities only on the government -wide financial statements. J. Lon&Term Debt Government -Wide financial Statements Long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. Fund Financial Statements The governmental fund financial statements do not present long-term debt but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government -Wide Statement of Net Assets. Bond premiums and discounts, as well as issuance costs, are recognized during the current period. Bond proceeds are reported as other financing sources net of the applicable premium or discount. Issuance costs, whether or not withheld from the actual net proceeds received, are reported as debt service expenditures. K Net Assets and Fund EqWhj In the government -wide financial statements, net assets are classified in the following categories: Invested in Ca"vital Assets, net of Related Debt - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. Restricted - This amount is restricted by external creditors, grantors, contributors, Iaws or regulations of other governments. unrest icted - This amount is all net assets that do not meet the definition of "invested in capital assets, net of related debt" or "restricted net assets." 21 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued K Net Assets and Fund Equity, Continued When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the Commission's policy is to apply restricted net assets first. In the fund financial statements, governmental funds report reservations of fund balances for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. L. Use of Estimates The preparation of the basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses_ Actual results could differ from these estimates and assumptions. M. Property Tax Under California law, property taxes are assessed and collected by Sonoma County (County) up to 1% of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to cities based on complex formulas. The County assesses, bills, and collects property taxes as follows: Lien Date January 1 Levy Date July 1 Due Date Secured: November I and February 1 Unsecured: July 1 Collection Date Secured: December 10 and April 10 Unsecured: August 31 Property taxes levied are recorded as revenue when received, in the fiscal year of levy, under the Teeter Plan. The Teeter Plan authorizes the Auditor/ Controller of the County to allocate 100% of the secured property taxes billed, but not yet paid. N New Pronouncements In 2008, the City adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statement No. 48, Sales and Pledges of Receivables and Future Revenues and fntm- Entihj Transfers of Assets and Facture Revenues. This Statement establishes accounting and financial reporting standards for transactions in which a government receives, or is entitled to, resources in exchange for future cash flows generated by collecting specific receivables or specific future revenues. In addition, this Statement establishes accounting and financial reporting standards that apply to all 'ultra -entity transfers of assets and future revenues. 22 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 2. CASH AND INVESTMENTS Cash and investments at June 30, 200$ consisted of the following: Cash and investments pooled with the City $ 5,510,984 Restricted cash and investments 26,475,261 Total cash and investments $ 31,936,245 The Commission pools its cash and investments with the City in order to achieve a higher return on investment. Certain restricted funds, which are held and invested by independent outside custodians through contractual agreements, are not pooled. These restricted funds include cash with fiscal agents. The investments made by the Agency are limited to those allowable under State statutes and include the following types of investments: Local Agency Investment Fund (LAIF) California Assessment Management Program (CAMP) Certificates of deposits placed with commercial banks and/or savings and loans Negotiable Certificates of Deposits Bankers Acceptances Securities of the U.S. Government or its Agencies Repurchase Agreements Commercial Paper Money Market Mutual Funds Guaranteed Investment Contracts See the City's Comprehensive Annual Financial Report for disclosures related to cash and investments and the related interest rate risk, credit rate risk, custodial risk and concentration risk 23 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 3. NOTES RECEIVABLE At June 30, 2008, the Agency had the following loans receivable: Housing Loans Old Elm Partners Roundwalk Village Partners Boulevard (Buckelew) Project Downtown River Associate LP Edith Street Apartments, Inc. Lieb Senior Apartments Inc. Parklane Apartments Corp 575 Vallejo Street Association 579 Vallejo Street Association Casa Grande Wood Sorrel Petaluma Blvd Senior Apartments Logan Place Salishan Apartments Inc. Total Housing Loans Storefront Loan Program Total 1,305,961 933,400 480,200 3,662,836 889,964 810,241 167,314 851,184 990,000 1,656,655 657,967 1,432,000 1,000,000 388,380 15,226,102 271,576 $ 15,497,678 The Petaluma Community Development Commission entered into various loan agreements with not-for- profit agencies to finance the construction of low and moderate income housing. The terms range from 8 to 60 years, and the interest rates range from 0% to 6%. Payment is deferred until a variety of events occur, such as sale or transfer of property, failure to adhere to low and moderate income housing provisions of the promissory note, to the extent of residual receipts, or at the maturity date of the note. The Redevelopment Agency offers low interest loans to property owners with building Iocated in the Central Business District (Downtown) as an incentive to make improvements to the exterior storefronts. 4. DEFERRED REVENUE Deferred revenue in the Governmental Funds Financial Statements as of June 30, 2008 was reported as follows: Interest receivable on Notes Receivable $ 2,078,171 Total deferred revenue $ 2,078,171 These amounts are recognized as revenues in the Government -Wide Financial Statements. 24 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 5. INTERFUND ACTIVITIES A. Transfers ItVOut Transfers in/out for the year ended June 30, 2008 were as follows: Transfers between funds were to provide funding for capital projects, debt service, and general and specific operation expenditures. 6. PROPERTY HELD FOR RESALE Property held for resale is recorded in capital projects funds at the lower of cost or estimated net realizable value. The available fund balance is reserved in an amount equal to the carrying value of land and buildings held for resale because such assets are not available to finance the Commission's current operations. The amount recorded as assets held for resale and the corresponding fund balance reserved as of June 30, 2008, was $402,053. 7. CAPITAL ASSETS Changes in capital assets during the year ended June 30, 2008 were as follows: Balance Transfers In July 1, 2007 Adjustments Redevelopment Deletions Non -depreciable: Debt Service Capital Project 'Total En Redevelopment Special Revenue $ $ 880,192 S 880,192 Total non -depreciable Redevelopment Debt Service 455,750 455,750 H Redevelopment Capital Project 4,439,000 - 4,439,000 Total $ 4,439,000 $ 1,335,942 S 5,774,942 Transfers between funds were to provide funding for capital projects, debt service, and general and specific operation expenditures. 6. PROPERTY HELD FOR RESALE Property held for resale is recorded in capital projects funds at the lower of cost or estimated net realizable value. The available fund balance is reserved in an amount equal to the carrying value of land and buildings held for resale because such assets are not available to finance the Commission's current operations. The amount recorded as assets held for resale and the corresponding fund balance reserved as of June 30, 2008, was $402,053. 7. CAPITAL ASSETS Changes in capital assets during the year ended June 30, 2008 were as follows: Wi Balance June 30, 2008 $ 38,943,910 38,943,910 $ 38,943,910 Balance July 1, 2007 Adjustments Additions Deletions Non -depreciable: Construction in progress $ 37,565,337 $ - $ 4,146,880 $ (2,768,307) Total non -depreciable 37,565,337 - 4,146,880 (2,768,307) Total $ 37,565,337 $ - $ 4,146,880 $ (2,768,307) Wi Balance June 30, 2008 $ 38,943,910 38,943,910 $ 38,943,910 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 8. LONG-TERM DEBT Changes in long-term debt for the year ended June 30, 2007 were as follows: 2000A Tux Allocation Bonds Classification Balance Amounts Balance Due in More July 1, 2007 Additions Deletions lune 30, 2008 2000A Tax Allocation Bonds $ 295,000 $ - 5 (145,000) $ 150,000 2001A Tax Allocation Bonds 2,410,000 - (305,000) 2,105,000 2003A Tax Allocation Bonds 23,200,000 (430,000) 2,770,000 Unamortized Discount 2003 A TAB (12,321) - 474 (11,847) 2005A Tax Allocation Bonds 18,165,000 - (105,000) 18,060,000 Deferred ami refunding 2005A TAB (1,148,546) 49,937 (1,098,609) Unamortized Premium 2005A TAB 150,616 - (6,478) 144,138 2007 Tax Allocatin Bonds 31,825,000 - (115,000) 31,710,000 Unamortized Premium 2007 TAB (5G3,955) - 17,792 (546,163) Auto Plaza DDA - AD 19 490,000 (84,000) 406,000 Total $ 74,810,794 $ - $ (1,122,275) $ 73,688,519 2000A Tux Allocation Bonds Classification Amounts Amounts Due Within Due in More One Year than One Year $ 150,000 $ - 315,000 1,790,000 445,000 2,325,000 (474) (11,373) 105,000 17,955,000 (49,937) (1,048,672) 6,478 137,660 205,000 31,505,000 (17,792) (528,371) 92,000 314,000 $ 1,250,275 $ 72,438,244 On June 15, 2000, the Petaluma Community Development Commission issued Tax Allocation Bonds, Series 2000A in the amount of $18,000,000. The proceeds of the bonds were to finance the flood control project, and to fund new and continuing improvement projects in the Petaluma Community Development Project Area. This debt was partially refunded with the 2005A TAB. The defeased amount currently outstanding and removed from the long-term liabilities was $16,700,000. The remaining balance at June 30, 2008, of $150,000, which is included in long-term liabilities, bears an interest rate of 5%. The Commission has pledged a portion of future property tax increment revenue to repay the 2000A Tax Allocation Bonds. Total principal and interest remaining on the bond is $157,500 payable through 2009. The annual debt service requirements for the 2000A Tax Allocation Bonds outstanding at June 30, 2008, was as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 150,000 $ 7,500 $ 157,500 Total $ 150,000 $ 7,500 $ 157,500 26 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 8. LONG-TERM DEBT, Continued 2001A Tax Allocation Bowls On June 4, 2001, the Commission issued Refunding Tax Allocation Bonds, Series 2001A in the amount of $4,025,000. The proceeds of the bonds were used to refund the 1992 Tax Allocation Bonds and to fund the development of the auto plaza located in the Petaluma Community Development Project Area. The Bonds mature annually each May 1 from 2002 to 2014, in amounts ranging from $250,000 to $390,000 and bear interest at rates ranging from 3.50% to 4.50%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or after May 1, 2010, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or by lot within any one maturity date, on any date on or after May 1, 2009, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from and secured by tax revenues. The outstanding balance of the bonds was $2,105,000 as of June 30, 2008, The Commission has pledged a portion of future property tax increment revenue to repay the 2001A Tax Allocation Bonds. Total principal and interest remaining on the bond is $2,434,935 payable through 2014. The annual debt service requirements for the 2001A Tax Allocation Bonds outstanding at June 30, 2008, was as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 315,000 $ 89,140 $ 404,140 2010 330,000 76,540 406,540 2011 340,000 63,340 403,340 2012 355,000 49,315 404,315 2013 375,000 34,050 409,050 2014 390,000 17,550 407,550 Total $ 2,105,000 $ 329,935 $ 2,434,935 2003A Tax Allocation Bonds On October 28, 2003, the Commission issued Tax Allocation Bonds, Series 2003A in the amount of $23,630,000. The proceeds of the bonds will be used to finance redevelopment projects within the Petaluma Community Development Project area. The Bonds mature annually each May 1 from 2007 to 2033, in amounts ranging from $430,000 to $8,215,000 and bear interest at rates ranging from 2.25% to 5.00%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or after May 1, 2014, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or by lot within any one maturity date, on any date on or after May 1, 2013, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from and secured by tax revenues. The outstanding balance of the bonds was $22,770,000 as of June 30, 2008. The Commission has pledged a portion of future property tax increment revenue to repay the 2003A Tax Allocation Bonds. Total principal and interest remaining on the bond is $41,572,169 payable through 2033. 27 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued Foz the year ended June 30, 2008 8. LONG-TERM DEBT, Continued 2003A Tax Allocation Bonds, Continued The annual debt service requirements outstanding at June 30, 2008 were as follows: For the Year Ending June 30, Principal interest Total 2009 $ 445,000 $ 1,052,655 $ 1,497,655 2010 460,000 I,040,418 1,500,418 2011 475,000 1,026,043 1,501,043 2012 49500 1,010,011 1,505,011 2013 505,000 992,686 1,497,686 2014-2018 2,700,000 4,662,320 7,362,320 2019-2023 3,310,000 4,035,458 7,345,458 2024-2028 4,180,000 3,177,577 7,357,577 2029-2033 10,200,000 1,805,001 12,005,001 Total $ 22,770,000 $ 18,802,169 $ 41,572,169 The bonds were issued at a discount of $14,217 which is being amortized over the 30 years life of the bonds resulting in an annual amortization of $474. 2005A Tax Allocation Bonds On September 21, 2005, the Commission issued Refunding Tax Allocation Bonds, Series 2005A Tax Allocation Bonds in the amount of $18,355,000. The proceeds of the bonds will be used to refund the 2000A Tax Allocation Bonds and finance the issuance of the 2005A Refunding Tax Allocation Bands. The Bonds mature annually each May 1 from 2006 to 2030, in amounts ranging from $90,000 to $1,420,000 and bear interest at rates ranging from 5.00% to 5.75%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or before May 1, 2016, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or in inverse order of maturity and by lot within any one maturity date, on any date on or after May 1, 2015, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from solely from secured tax revenues. The outstanding balance of the bonds was $18,060,000 as of June 30, 2008. The Commission has pledged a portion of future property tax increment revenue to repay the 2005A Tax Allocation Bonds. Total principal and interest remaining on the bond is $29,985,657 payable through 2030. 28 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 8. LONG-TERM DEBT, Continued 2005A Tax Allocation Bonds, Continued The annual debt service requirements outstanding at June 30, 2008 were as follows: For the Year Ending Jane 30, Principal Interest Total 2009 $ 105,000 $ 789,201 $ 894,201 2010 260,000 786,051 1,046,051 2011 270,000 778,251 1,048,251 2012 275,000 769,814 1,044,814 2013 285,000 760,739 1,045,739 2014-2018 3,475,000 3,541,513 7,016,513 2019-2023 4,740,000 2,711,453 7,451,453 2024-2028 5,880,000 1,579,135 7,459,135 2029-2030 2,770,000 209,500 2,979,500 Total $ 18,060,000 $ 11,925,657 $ 29,985,657 The bonds were issued at a premium of $161,953 which is being amortized over the 25 years life of the bonds resulting in an annual amortization of $6,478. In connection with the issuance of the bonds, the City recorded a deferral on refunding of debt which is reported as part of long-term debt. This deferral was in connection with interest payments made to the escrow agent for future payments of interest. The total amount deferred was $1,248,420 which will be amortized over the 25 years life of the bonds resulting in an annual amortization of $49,937. 2007 Tax Allocation Bonds On April 10, 2007, the Commission issued Subordinate Tax Allocation Bonds, Series 2007 in the amount of $31,825,000. The proceeds of the bonds will be used to refund the 2000B Tax Allocation Bonds and provide $30,000,000 in project funds. The Bonds mature annually each May 1 from 2008 to 2039, in amounts ranging from $115,000 to $4,355,000 and bear interest at rates ranging from 4.00% to 4.5%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or before May 1, 2016, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or in inverse order of maturity and by lot within any one maturity date, on any date on or after May 1, 2015, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable solely from secured tax revenues. The outstanding balance of the bonds was $31,710,000 as of June 30, 2008. The Commission has pledged a portion of future property tax increment revenue to repay the 2007 Tax Allocation Bonds. Total principal and interest remaining on the bond is $65,821,851 payable through 2039. 29 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 8. LONG-TERM DEBT, Continued 2007 Tax Allocation Bonds, Continued The annual debt service requirements outstanding at June 30, 2008 were as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 205,000 S 1,393,311 $ 1,598,3I1 2010 205,000 1,385,111 1,590,111 2011 220,000 1,376,911 1,596,911 2012 230,000 1,367,011 1,597,011 2013 240,000 1,357,812 1,597,812 2014-2018 1,330,000 6,638,460 7,968,460 2019-2023 1,610,000 6,250,440 7,860,440 2024-2028 1,950,000 5,988,966 7,938,966 2029-2033 2,235,000 5,534,468 7,769,468 2034-2038 19,130,000 3,623,384 22,753,384 2039 4,355,000 195,976 4,550,976 Total 5 31,710,000 S 35,111,851 $ 66,821,851 The bonds were issued at a discount of $568,396 which is being amortized over the 32 -year life of the bonds resulting in an annual amortization of $17,762. The deferred loss on refunding of $2,364 was immaterial, and thus not recorded. Auto Plaza DDA- AD 19 The Commission has an obligation under the Auto Center Disposition and Development Agreement, dated 1992 to refund 50% of assessments paid by property owners in relation to the Assessment District 19 Bonds. On February 3, 1992, the Assessment District 19 Bonds were issued in the amount of $1,080,000. The proceeds of the bonds were to finance public improvements at the Auto Plaza. The Bonds mature annually each September 2 from 1997 to 2010, in amounts ranging from $45,000 to $103,000 and bear interest at rates ranging from 5.60% to 7.75%. Interest is payable semiannually on March 2 and September 2. The bonds are payable from and secured by assessment paid by the property owners. The outstanding balance was $406,000 as of June 30, 2008. 30 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 8. LONG-TERM DEBT, Continued Auto Plaza DDA- AD 19, Continued The annual debt service requirements on these bonds outstanding at June 30, 2008, were as follows: For the Year Ending June 30, 2009 2010 2011 2012 Total Nan-AQencil Obliffation Debt Principal $ 92,000 $ 100,000 103,000 111,000 $ 406,000 5 Interest Total 27,782 $ 119,782 20,435 120,435 12,594 115,594 4,301 115,301 65,112 5 471,112 Oakmont project - the Redevelopment Agency issued $4,750,000 in Multifamily Housing Revenue Bonds, with a variable rate of interest, not to exceed 12%, with the variable rate to be determined by the marketing agent. The bonds will mature April 1, 2026. Current balance is $3,650,000. The proceeds from the bonds were used to make a loan to Oakmont Retirement Investors, LLC for the purpose of financing the acquisition and construction of a 76 -unit assisted living care/multi-family rental facility known as Oakmont at Petaluma. In August 1997, the Commission consented to a sale of the project from Oakmont Retirement Investors, LLC to Windchime of Walnut Creek Investors, LP, a California limited partnership. The bonds are special obligation of the Commission, payable solely from the rental revenue and other assets pledged or assigned to payment of the bonds by Windchime of Walnut Creek, LP. These bonds are not recorded as liabilities on the City's financial statements. On September 15, 2003, the Commission issued Multi -family Housing Revenue Bonds and Taxable Multi- family Housing Revenue Bonds in the amount of $6,197,000. Current balance is $5,985,000. The proceeds of the bonds will be used to finance the construction and equipping of an 81 unit, multifamily, rental housing development in the City of Petaluma, known as the "Downtown River Apartments". The bonds are special obligation of the Commission payable solely from the rental revenue and other assets pledged or assigned to payment of the bonds by the obligator. Non-Azenc» Defeased Debt In prior years, the Commission has defeased bond issues by creating separate, irrevocable trust funds. New debt was issued, and the proceeds were used to purchase US government securities, which were placed in the trust funds. The investments, and fixed earnings from the investments, are expected to be sufficient to fully service the defeased debt, until the debt is called or matures. For financial reporting purposes, the debt is considered defeased. Consequently, the trusts' assets and liabilities are not included in the Commission financial statements. At June 30, 2008, the amount of Redevelopment tax allocation defeased debt outstanding, but removed from the long-term liabilities, totaled $150,000. 31 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 9. COMPENSATED ABSENCES The Commission accrues a Iiability for the vested and unpaid compensated absences (accrued vacation, sick leave, compensatory time and administrative leave). The balance at June 30, 2008 was $120,344. Governmental activities $ Total $ Balance July 1, 2007 Additions 89,258 $ 313,919 $ 89,258 $ 313,919 $ 10. COMMITMENT .AND CONTINGENCIES A. Lawsuits Balance Deletions June 30, 2008 (282,833) $ 120,344 $ (282,833) $ 120,344 $ Due in Due in More One Year Than One Year 35,595 $ 84,749 35,595 $ 84,749 The Commission is presently involved in certain matters of litigation that have arisen in the normal course of conducting Commission business. Commission management believes, based upon consultation with the Commission Attorney, that these cases, in the aggregate, are not expected to result in a material adverse financial impact on the Commission. Additionally, Commission management believes that the Commissions insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize. B. Commitments The Commission's year-end commitments for professional services commitments were $379,271 as of June 30, 2008. In 1990, the Commission contributed to the North McDowell Boulevard Improvement project to finance roadway improvements; which was also funded by Assessment District 17. The Commission pays a right- of-way acquisition credit to the property owners who own residential property and also a credit to commercial property owners to maintain the low and moderate income housing use of the property. The credits totaled $52,920 for the fiscal year ended June 30, 2008. Pass-tluouvh Avivements The Petaluma Community Development Project Area is a party to pass-through agreements relating to property tax allocations with Sonoma County, Sonoma County Library, Cinnabar School District, Waugh School District, Petaluma City School District, Sonoma County Junior College District and Old Abode School District. The County and Library agreements allow the County to receive annual property tax revenue based upon increases in assessed valuation under state Iaw not to exceed 2% and the County and Library will each receive 96% of the property tax revenue that the agencies would have received based upon the fiscal year 1993-1994 assessed valuation. The School Districts have elected under Health and Safety Code Section 33676 to receive 100% of any taxes imposed by the District and the annual property tax revenue based on increases in assessed valuation allowed under state Iaw not to exceed 2%. 32 Petaluma Community Development Commission Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 10. COMMITMENT AND CONTINGENCIES, Continued B. Commitments, Continued During the fiscal year, the Petaluma Community Development Project Area received $4,775,485 in tax increment revenue, which was passed -through to the County, the Library and the School Districts mentioned above. This amount was recorded as both tax increment revenue and general government expenditure. The Central Business District Project Area was amended in 2001. The tax increment related to the increased project area is subject to a statutory pass-through amount of 25%. During the current fiscal year, the Central Business District Project Area received $264,658 in tax increment passed -through to various other local governmental agencies, with the highest pass-through amount going to Sonoma County, School Districts and the City of Petaluma. This amount was recorded as tax increment revenue and as a general government expenditure. 11. OTHER REQUIRED DISCLOSURES The unrestricted net asset (deficit) of $39,699,345 is expected as the Commission's investment in assets is primarily in City owned property, and other than property held for resale, it does not hold property in its own name. In fact, the Commission, under State Law, needs to show indebtedness in order to be eligible to receive tax increment. Future tax increment revenue will be used to pay the deficit. 12. REDEVELOPMENT ACTIVITIES On October 18, 2006 an ordinance approving and adopting an amendment to the redevelopment plan, fiscally merging the Central Business District Project Area with the Petaluma Community Development Project Area was approved by the City Council/PCDC Governing Board. The amendment provides for the fiscal merger of the project areas in order to pool tax increment revenue and establish a unified bonded indebtedness limit for the two project areas, while retaining the separate identity of each project area for other purposes. The amendment increases the outstanding bonded indebtedness limit to the sum of $250,000,000, but does not alter the limitation on the amount of tax increment revenue that may be allocated to PCDC over the life of the redevelopment plan. 33 This page intentionally left blank- 34 lank 34 REQUIRED SUPPLEMENTARY INFORMATION 35 Petaluma Community Development Commission Required Supplementary Information For the year ended June 30, 2008 1. BUDGETS AND BUDGETARY ACCOUNTING An annual budget is adopted by the Commissioners prior to the first day of the fiscal year. The budget process includes a detailed review of proposed budget by the Executive Director, and a final review by the Finance Director. The recommended budget is then transmitted to the Commissioners for their review before the required date of adoption. Once transmitted to the Commissioners, the proposed budget is made available for public inspection. A public hearing is held to give the public the opportunity to comment upon the proposed budget. Notice of such public hearing is given in a newspaper of general circulation. The adoption of the budget is accomplished by the approval of a Budget Resolution. The legal level of budgetary control is at the department level, Any budget modification, which would result in an appropriation increase, requires Commissioners' approval. The Finance Director and City Manager are jointly authorized to transfer appropriations within a departmental budget. Reported budget figures are as originally adopted or subsequently amended and include prior year encumbrances. Such budget amendments during the year, including those related to supplemental appropriations, did not cause these reported budget amounts to be significantly different than the originally adopted budget amounts. All appropriations which are not obligated, encumbered, or expended at the end of the fiscal year lapse and become a part of the unreserved fund balance which may be appropriated for the next fiscal year. An annual budget for the year ended June 30, 2008, was adopted and approved by the Commissioners for the special revenue, debt service and capital projects funds. These budgets are prepared on the modified accrual basis of accounting. The budgets of the capital projects funds are primarily Iong-term budgets, which emphasize major programs and capital outlay plans extending over a number of years. However the budget for the capital projects funds is approved by the Commissioners annually. Budget amounts are reported as originally adopted and as further amended by the Commissioners. 36 Petaluma Community Development Commission Required Supplementary Information, Continued For the year ended June 30, 2008 Bial getanj Comparism Schedide, Redevelopiiietit Special Revemie Frigid Fund balance, July 1 Resources (inflows): Taxes Use of money and property Intergovernmental Charges for current services Other Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: Community development Transfers to other funds Total charges to appropriations Fund balance at June 30, Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 17,773,I77 S 17,773,177 $ 17,773,177 $ - 2,800,000 2,800,000 3,277,878 477,878 44,000 44,000 234,671 190,671 630,000 630,000 613,890 (16,110) 13,500 13,500 31,021 17,521 - - 356 356 3,487,500 3,487,500 4,157,816 670,316 21,260,677 21,260,677 21,930,993 670,316 2,518,150 2,518,150 787,682 1,730,468 - 915,000 880,192 34,808 2,518,150 3,433,150 1,667,874 1,765,276 $ 18,742,527 $ 17,827,527 $ 20,263,119 $ 2,435,592 37 This page intentionally left blank 38 SUPPLEMENTARY INFORMATION 39 Petaluma Community Development Commission Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Redevelopment Debt Service Fund For the year ended June 30, 2008 Fund balance, July 1 Resources (inflows): Use of money and property Transfers frorn other funds Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: Community development Debt service: Principal Interest "Transfer to other funds Total charges to appropriations Fund balance at June 30, 40 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 681,264 $ 681,264 $ 681,264 $ - "1,000,000 1,000,000 37,004 (962,996) 3,973,000 3,973,000 4,439,000 466,000 4,973,000 4,973,000 4,476,004 (496,996) 5,654,264 5,654,264 5,I57,268 (496,996) 37,050 37,050 26,308 10,742 1,154,000 1,184,000 1,184,000 - 3,532,750 3,484,056 3,484,023 33 - - 455,750 (455,750) 4,723,800 4,705,106 5,150,081 (444,975) $ 930,464 $ 949,158 $ 7,187 $ (941,971) 40 Petaluma Community Development Commission Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Redevelopment Capital Project For the year ended June 30, 2008 41 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance, July 1 $ 30,814,8I7 $ 30,814,817 $ 30,814,817 $ Resources {inflows): Taxes 12,000,000 12,000,000 13,499,242 1,499,242 Use of money and property 16,000 16,000 1,711,589 1,695,589 Intergovernmental - - 15,938 125,938 Transfers from other funds 7,579,000 5,762,000 10,029,730 4,267,730 Transfers from the City of Petaluma - - 81,000 81,000 Total resources 19,595,000 17,778,000 25,447,499 7,669,499 Amount available for appropriation 50,409,817 48,592,817 56,262,316 7,669,499 Charges to appropriations (outflows): Departmental: Community development 7,799,700 14,560,700 10,815,815 3,744,885 Capital outlay 7,268,000 279,000 29,001 249,999 Transfers to other funds 17,372,000 15,435,000 13,132,788 2,302,212 Transfers to the City of Petaluma - - 6,633,673 (6,633,673) Total charges to appropriations 32,439,700 30,274,700 30,611,277 (336,577) Fund balance at June 30, $ 17,970,117 $ 18,318,117 $ 25,651,039 $ 7,332,922 41 This page intentionally left blank 42 G:L Caporicci & Larson Certified Public Accomitants REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Conuxussioners of the Petaluma Community Development Commission Petaluma, California We have audited the basic financial statements of the Petaluma Community Development Commission (Commission), a component unit of the City of Petaluma, California (City), as of and for the year ended June 30, 2008, and have issued our report thereon dated December 15, 2008. We conducted our audit in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in Governtttent Audit-ilig Strtttdards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting In planning and performing our audit, we considered the Commission's internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Commission's internal control over financial reporting. A cotztrol deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis - A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control. A ttlatei ird Weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses- We did not identify any deficiencies in internal over financial reporting control that we consider to be material wealmesses, as defined above. Toll Free Pll: (877) 862-2200 Toll Free Fax: (866) 436-0927 Oakland Orange County Sacramento San Diego ISO Grand Ave., Suite 1365 9 Corporate Park, Suite 100 777 Campus Commons Rd., Suite 200 4858 Mercury, Suite 106 Oakland, California 94612 Irvine, California 92606 Sacramento, California 95825 San Diego, California 92111 To the Commissioners of the Petaluma Community Development Commission Petaluma, California Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Commission's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Such provisions included those provisions of laws identified in the Guidelines for Compliance Audits of California Redevelopznezzt Agencies, issued by the State Controller and as interpreted in the Suggested Auditing Procedures for Acconzplislzizzg Compliance Audits of California Redeveloprzzent Agencies, issued by the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The result of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Govemiz zezzt Auditing Standards. This report is intended solely for the information and use of management, the Commission Board and the State Controller and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. 6�44W ' � Oakland, California December 15, 2008 INJ m m Ch w COVER COURTESY OF ScoTT HES, (WWW.SCOTTHESSPHOTO,COM) sh [MIM"I'llre, Comprehensive Annual Financial Report MHMIEV� The City of Petaluma Administrative Services Department Finance Division City of Petaluma Comprehensive Annual Financial Report For the year ended June 30, 2008 Table of Contents t4gwe 11011MV01 Letter of Transmittal .... ......... ........ ---- ... - ...... ........ ............. -- ........... GFOA Certificate of Achievement for Excellence in Financiat Reporting— ........ - ................ iii Organization Chart ....... ......... ............ ......... ......... iv, Principal Official-, of the Cih- of Petahinia, California .... -- ............ .... - ...... -----.—V FINANCIAL SEC'RON Independent Auditors' Report. ... ... -- ...... ... -- -----......................................................................... .... t Management's Discussion and Analvsis (Required Supplementary Information) ................................. 3 Basic Financial Statements: Governn-tent-Wicle Financial Statentents: Statement of Net Assets.,. ..... ........ -----.27 Statement of Activities an ChanrL—, in Net Assets ....... ........... . 5. . . , Fund Financial Statements: Govennywntal Ba la nce Sheet ......... Reconciliation of the Govcnini(Aital Funds Bah iice Sheet tothe Government -Wide Statement of Net \sNets ....... - ..........................................................--17 Staternent of Revenues, F,wendiwres and Changes ill 1"Und Balances .....................................38 Reconciliation of the. Governniental Funds Statement of Revenue"" El'xpendituresand Chanf_,,cs in Fund Balances, to the Government -Wide Statement of Activities and Changes in NetAssets ...... ........... .... 40 Pro7rwtar�j Fund Fbifoicial "iter ,,wioit� Statement of Net Assets ........ ......... ....... ............. .......... ....... . 42 Staternent of Revenuc-. F'x ileuses and Changes in 1,und Net Assets ..........................................I t staternent of Cash Flo%%s........... .. .... ...... ---- ... ......... 4 6 Fida"'hiry i and Financhil Statement of Fiduciary Net e\,, -sets ---- - ........ ............. ---------- DO Statement of Changes in 1,iduciary Net Assets. ...... ...... ...... ...... Notes to Basic Financial State(nents... City of Petaluma Comprehensive Annual Financial Report For the year ended June 30, 2008 FINANCIAL SECTION—Continued Required Supplementary Information: BudgetaryInformation.,.... .................. ..... --- --- ................... ------ ...................................................100 Budgetary Comparison Schedule - General Fund ............... .......... - ........ ........................................ 10-1 Budgetary Comparison Schedule - Home/Begin Special Revenue Fund............................................102 Budgetary Comparison Schedule - Redevelopment Special Revenue Fund .......................................103 Budgetary Comparison Schedule - Impact Fee Special Revenue Fund................................................104 Defined Benefit Pension Plan....... ---- ......................... .............. ......... .................. 105 Supplementary Information: -Kon-Major Governmental -Funds: CombiningBalance Sheet ...... ....... -- ....... -- ... ......... -- ...... --.- ----------- -----------_.-............................110 Combining Statement of Revenues, Expenditures and Changes in Fund Baldnces.....................112 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual City Capital Project Funds - Major Fund ...... --- ....... - ...... ...... ---- ......... .................. I 13 Redevelopment Capital Project Fund - Major Community Development Block Grant Special Revenue Fund ................................................117 Grants and Donations Special Revenue Fund . ... ......... . 118 GasTax Special Revenue Fu-nd .......... ... -- ....... ............... .................... ................... -119 Public Safety Special Revenue Fund..... ................ .............. -- ... ...... ................ 120 Landscape Assessment District Special Revenue Fund .............. ......... .... 121 StreetSpecial Revenue Fund . -- .......... ........... ................... ...................... ................................. 122 Transient Occupancy'rax Special Revenue Fund ........ ................. -.- ....... - --...........,........123 Prince Park Trust Special Revenue Fund ............................................ .......... ......... -- .............. .124 Redevelopment Debt Service Fund... ..................... ........... -..- .............. - ....... ....... -125 Wickersham Park Trust Permanent Fund...,-... - - .--- ........ ........ --- ................... ....... 126 Internal Service Funds - Combining Statement of Net Assets .............................. ........ ................................. - ................... 128 Combining Statement of Activities and Changes in Net Assets ......................................................130 CombiningStatement of Cash Flows... ... .......... ---- ........ ........ -- ....... ---- .... -132 � � City ���Petaluma — Comprehensive Annual Financial Report For the year ended June 30, 2008 FINANCIAL SEC1[ON~CuntmouJ Supplementary Information, Continued: Combining Balance Sheet ..... ...... _----------_----'_—........ -----...... ............ 3c) Combining Statement of ReVCvnWs, Expcndituresund Changes ioFundBa|aoces- Fidocbry FuuJs-yhsaloPorpmseI\ust--------------------'|317 Stabrnexnt/f[1hanuesinAssets and Liabilities -Agency 130 SlAT}SI'ICA{.SEC"~C)N(0oaudii�d) Net Assets bvCom pnum/L-----........ —.......... ...... ----....... —................ ...... ........ ........ ---14o Changes bsNet Assets —.......... ....... .--..—.—............ --^................ _^--....... ___ ................. J4i Fund Balances, Governmental Funds_ ................... '...... .--........ ........... -------............... .......... _ 143 Changes inFund RalaucosGo*en`mk'mtulI'unds.... --.----------_—....................... ...... '.... l44 Fax Revenues hv Suurce.(onerommni*| /-15 .Assessed Value and PsAomoted Ack/a|Value ofTaxable Pro Fert\,— 146 lsseaeed\aJucvd1axablcIromertv bvUse Code, C]ivr/idr.—.-.—.----_-----_------' 14; ASaessed Value *fTaxable Property 6k-UseCode, CiL,n/i1e 2DO6-U7'Land Use rt_ ... --...... --... >48 Direct and Ovunbypong Propertv Tax Rates —...... _....... _—_----....... —.-_--------....... 149 Principal |t-oom�lv(axPavers --- -------............. .—................... —...... .......... ---........ ............ --|5d PzmperiyTax(.rvesand Collections —.----_----.'—.---___---------------15i Ratios ofOutstanding Debt byType— .... _--'--_........ ._.---_----.............. —....... ---'152 Ratios ofGeneral Bonded Debt (}u(sbxnJ/ ....... ----.................. _---------....... ___ ....... —|68 Direct and OvodoppingGovernmental Activities D,bt—....... ...... -----................ _......... ........ lS4 Le�mlDebt ��argisln(urcua�am---..------------.—.—_--------------------155 Pledged -Revenue (\`wcnsgc... ____ ........ -------........ .------_--........ —.-----...... _---.156 Denicu-raohicanJ\cuo*micsi�t�hcp—_---------_------_---------------_—]�� I't-i i |Eooplo --- 58 Fu|I- bme-Eqni v a I u n L Ci t vGov crnmeo\I -om pi 01 UeS 6rFwmci ww/'{)ngra nn-- ...... ............... -----���� ()ucrxbngBokfi^atn*s bvFuncdvn. --------�*0 Capital Asset Stah,;hcybvfunction /!rwgraru—_----....... —..--...... .-------.........---.'\�| MEMEM 11-V 0 - /4 (-;I ty 0j ii English Street We are pleased to submit to you the Comprehensive Annual Financial Report (CAFR) of the City of Petaluma. This report is published in accordance with local ordinance and state law requirements that financial statements be presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby submit the CAFRof the City of Petaluma, California for the fiscal year ended June 30, 2008. For the fiscal year ended June 30, 2008, the City of Petaluma continues to comply with the ,pronouncements of the Governmental Accounting Standards Board (GASB), including GASB Statement No. 34. This is the sixth fiscal year the new reporting model has been presented, which provides financial report users a narrative introduction, overview, and nnalysis, in the form of Management's Discussion and Analysis (MD&A), which tccompanies the. Basic Financial Statements. The City of Petaluma's MD&A can be found �in the financial section, immediately following the reports of the independent auditors. This IVID&A consists of management's representations concerning the finances of the City of Petaluma. Consequently, management assurnes full responsibility for the completeness and reliability of all of the information presented in this report, To provide a reasonable basis for making these representations, management of the City of Petaluma has established a comprehensive internal control framework that is designed both to protect the government's assets from loss. theft, or misuse,, and to compile sufficient reliable information for the preparation of the City Of Petaluma's financial staternents, The City of Petaluma's financial statements have been audited by Caporicci & Larsen, Certified Public Accountants, a public accounting firm fully licensed and qualified to perform audits of the State and local governments within the State of California- The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Petaluma, for the fiscal year ended June 30, 2008, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial staternents; assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. The independent auditor concluded that there 1tvas a reasonable basis for rendering an unqjalftd opinion that the City of Petaluma's financial statements for the fiscal year ended June 30, 2008, are fairly presented in conformity with accounting principles generally accepted in the United States ot America. »....<,.e2 auditor's report is presented as the first component of the, financial section of this report. Acknowledgements. This report could not have been prepared without the effort of Kate Lloyd, Finance and Accounting Manager who spent untold hours preparing the financial statements, notes, statistical information and other details to comply with all hen requireinen»<ad pronouncernents. I would like to express my appreciation to all mernbers of the department that assisted and contributed to the preparation t»report, particularly the teani of Kate Lloyd and Cindy Juandy- I would also like to thank the Mayor and City Council for their confidence and support for maintaining the highest standards of prc�,essionallsrn in the managernent of the City of Petaluma's finances. Ta era Haas Interim Finance Director Certificate of Achievement for Excellence in Financial Prescritcd to California Fo- Its Counprclren.s'vc Annual W, I inancial Repon for the H -,cal Year Fndcd hrue 30, 2007 A Cerlifica I c of Achirwunient for Fx cc I I nce in Financia I Reporung is prl'slewcd �Iy I'lic- Govcnun.cat Finance Officet i Assucianon OR' the tfc ik-j Statc's smd ( 'aadc to whoq-- cornorcfm:silvt Fm. anal mports WAFP',.�) ac'i;cve the hi,hes' 0 standu6 m accounting, and Eni,,11611 -Cportmg M E.xecutive Dircutor M Lcc�lovw�: Lei I no NUA'Or-jAjllLQII - 9 0 �*Aujnl R:m- Fl 0 1 . hjA�ttomey G,,ty Coor-d- IF C;i-,y Ce ql City Mirage it tarncniae: Building t A i A "I -1 Loill`-Il A", I Ul 1: d Farkr�, G Admi i 14- 1iaI nat lor i CAL. r", As 1-4ciF,iro iv Marn-cleplerl pt I r,arl F t up Tra,61 c— :L Caporicci & Larson CeF•lified Public Accountants INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council of the City of Petaluma Petaluma, California We have audited the accompanying financial statements of the governmental activities, the business - type activities, each major fund, and the aggregate remaining fund information of the City of Petaluma, California (City), as of and for the year ended June 30, 2008, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States 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 perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting 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 provides a reasonable basis for our opinion. Subsequent to the basic financial statements dated of June 30, 2008 and the year then ended the United States has entered into a Financial Credit Crisis. Although the United States Federal Government has taken actions which, at least in part, are intended to relieve and correct this Financial Credit Crisis, investments are subjects to significant impairment and losses. To date, the City has not been informed and is not aware of any investment losses. Accordingly, such investment losses, if any, have not been reflected in the accompanying basic financial statements. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with generally accepted accounting principles in the United States. As described in Note 1 to the basic financial statements, the City adopted Statements of Governmental Accounting Standards Board No. 48, Sales and PIedges of Receivables aizd Future Revenntes and Inh-a- Entihj Transfers of Assets and Fittnre Revenues and No. 50, Pension Disclosures. Toll Free Ph: (877) 862-7200 Oakland Orange County 180 Grind Ave,, Suite 1365 9 Corporate 1 ark, Suite 100 Oakland, California 94612 Imine, Callfnrnia 92606 Tall Free Fmx: (866) 436-0927 Sacramento San Diego 777 Campus Communs Rd., Suite 200 4856 Nlereury; Suite 106 Sacramento, California 95825 San i iugo, Califontia 92111 To the Honorable Mayor and Members of the City Council of the City of Petaluma Petaluma, California Page 2 In accordance with Govermirent Auditing Standards, we have also issued our report dated April 9, 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 grants. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governirrental Artditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying Required Supplementary Information, such as Management's Discussion and Analysis, budgetary comparison information and other information as listed in the table of contents, is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the Required Supplementary Information. However, we did not audit the information and express no opinion on the Required Supplementary Information. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City's basic financial statements. The accompanying Supplementary Information is presented for purpose of additional analysis and is not a required part of the basic financial statements. The Supplementary Information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The Introductory Section has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we express no opinion on the Introductory Section. Oakland, California April 9, 2009 2 CITY OF PETALUMA MANAGEMENT'S DISCUSSI®N AND ANALYSIS As management of the City of Petaluma, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on page i -ii of this report. Financial Highlights Government Wide Financial Statements The assets of the City of Petaluma exceeded its liability at the close of the fiscal year by $317.0 million (Net Assets). Of this amount, $196.6 million was invested in capital assets, net of related debt. The balance was restricted for capital projects, $40.3 million, debt service, non -expendable trusts and special projects, $36.7 million, and unrestricted, $42.0 million. This included all City funds and Redevelopment Agency funds. The City's total net assets increased by $26.6 million, comprised of a $20.1 million, v increase in governmental net assets and $6.5 million increase in business -type activities net assets over prior year amounts. Fund Financial Statements At the close of the fiscal year, the City's governmental funds, including the General Fund, special revenue funds, debt service funds, capital projects funds, and redevelopment agency fiends, reported combined ending fund balances of $81.2 million, a decrease of $3.4 million from the prior year. The 2008 fund balance was comprised of $61.4 million reserved balances, and $0.7 million designated balances, producing an unreserved fund balance of $19.1 million. At the end of the fiscal year, the total General Fund fund balance was $3.6 million, approximately $5.3 million less than the prior year. Of this amount, $3.7 million was reserved with the undesignated/unreserved portion negatively impacted at $158,345. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction of the City ofPetaluma's Basic Financial Statements. The City of Petaluma's Basic Financial Statements are comprised of three components: 1) Government -Wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. This report also contains other supplementary information in addition to the Basic Financial Statements themselves. Government -Wide Financial Statements — The Government -Wide Financial Statements consist of a Statement of Net Assets and a Statement of Activities and Changes in Net Assets, which are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private -sector business. The Statement of Net Assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of changes in the City's financial position. �Ovei-view of the Financial Statements, continued The Statement of Activities and Changes in Net Assets presents the change in the government's net assets during the current fiscal year. All changes in net assets are reported when the underlying event, giving rise to the change, occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the Government -Wide Financial Statements distinguish the two functions of the City. The first is activities which are principally supported by taxes and intergovernmental revenues (governmental activities). The second is activities that are intended to recover all, or a significant portion, of their costs through user fees and charges (business -type activities). The governmental activities of the City include: general government, community development, police, fire, parks and recreation, and public works. The business - type activities of the City include: airport, ambulance, development services, marina, transit, waste water and water utilities. The Government -Wide Financial Statements include not only the City itself but also the Redevelopment Agency component unit. Financial information for this component unit is blended with the financial statements of the City, the primary government. The Redevelopment Agency, although legally separate, functions, for all practical purposes, as a department of the City, and therefore, has been included as an integral part of the primary government. The Government -Wide Financial Statements can be found on pages 27-29 of this report. Fund Financial Statements — A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into three categories: governmental fiends, proprietary Rinds, and fiduciary funds. Governmental Funds — Governmental funds account for basically the same functions as reported as government activities in the Government -Wide Financial Statements. However, unlike the Government - Wide Financial Statements, Governmental Fund Financial Statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the Government -Wide Financial Statements, it is useful to compare the information presented for governmental funds in the Governmental Fund Financial Statements with similar information presented for governmental activities in the Government -Wide Financial Statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Governmental Rinds information is presented in the Governmental Fund Financial Statements for the City's major funds: General Fund, HOME/Begin Special Revenue Fund, Redevelopment Agency Special Revenue Fund, Impact Fee Special Revenue Fund, City Capital Project Fund, Redevelopment Agency Capital Project Fund 4 (Overview of the Financial Statements, continued Data from the ten non -major governmental funds are combined into a single, aggregated presentation. Individual find data for each of the non -major governmental funds is provided in the form of combining statements elsewhere in this report. The basic Governmental Fund Financial Statements are on pages 33-40 of this report. Proprietary Funds — The City maintains two types of proprietary funds. Enterprise funds are used to report the functions presented as business -type activities in the Governmental -Wide Financial Statements. Enterprise funds account for airport, ambulance, development services, marina and transit operations, and waste water and water utilities. Internal service funds, the second type of proprietary fund, are used to account for the accumulation of resources, and the allocation of costs, which are required to provide internal services to various City departments and functions. Employee benefits, general services, information technology, risk management, vehicle/equipment replacement and worker's compensation comprise the City's internal service funds. Because these services predominantly benefit governmental, rather than business -type functions, all but the business activity portion of the vehicle/equipment replacement fund have been included within the governmental activities in the Government -Wide Financial Statements. The business activity portion of the vehicle/equipment replacement fund has been combined with the business type activities in the Government - Wide Financial Statements. The Proprietary Fund Financial Statements provide Rind information for the each enterprise fund separately. The internal service funds are combined into a single, aggregated presentation in the Proprietary Fund Financial Statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The Proprietary Fund Financial Statements are on pages 41-47 of this report. Notes to the Basic Financial Statements — The notes provide additional information that is essential to a full understanding of the data provided in the Government -Wide and Fund Financial Statements. The Notes to the Basic Financial Statements begin on page 53 through page 98 of this report. Other Information -- In addition to the Basic Financial Statements and accompanying notes, this report also presents certain required supplementary information. The first type of information presented is the budgetary information. The budgetary comparison statements have been provided for the governmental funds to demonstrate compliance with the legal provisions of the 2008 appropriation ordinance. The second type of information included relates to the City's progress in funding its obligation to provide pension benefits to its employees_ The Required Supplementary Information begins on page 99 of this report. �Government-Wide Financial Statement Analysis) Statement of Net Assets — As noted earlier, net assets are an indicator of a government's financial position. In the case of the City, net assets (the amount by which total assets exceeded total liabilities) equaled $317.1 million at the close of the fiscal year. The largest portion of the City's net assets (62%) reflect its investment in capital assets (e.g., infrastructure, land, buildings, machinery, 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, it should be noted that the resources needed to repay this debt must be provided from other sources i.e. future revenues, since the capital assets themselves cannot be used to liquidate these Iiabilities. An additional portion of the City's net assets (25%) represents resources that are subject to external restrictions. The remaining balance (13%), the unrestricted net assets, may be used to meet the government's ongoing obligations to citizens and creditors, subject to restrictions of various fimding sources, as applicable. As stated earlier, net assets increased by $26.6 million during the fiscal year. The general government capital assets increased $20.2 million, and the business activity capital assets increased $6.4 million (see disclosures for details). Net assets invested in capital assets, net of related debt decreased by $18.8 million; net assets restricted for capital projects increased by $34 million and unrestricted net assets increased by $11 million. Summary Statement of Net Assets Total Primary Government As of June 30, 2008 and 2007 (in thousands) Total Activities Total Activities Total Activities 2008 2007 Change Assets: Current and other assets $ 147,797 $ 135,349 $ 12,448 Capital Assets, net of depreciation 418.472 355,693 62.779 Total assets 566.269 491.042 75.227 Liabilities: Long-term liabilities 229,373 178,310 51,063 Other Liabilities 19.837 22.356 (2.519) Total liabilities 249.210 200.666 48.544 Net Assets: Invested in capital assets, net of related debt 196,650 215,525 (18,875) Restricted 78,413 44,399 34,014 Unrestricted 41.997 30.451 11.546 Total net assets $ 317 OFzQ $ 790.375 B_ 26 685 Government -Wide Financial Statement Analysis, continued) Governmental Activities — Governmental activities contributed $215.7 million to the City's net assets, an increase of $20.2 million over the prior year. Summary of Net Assets Governmental Activities As of June 30, 2008 and 2007 (in thousands) Governmental Governmental Governmental Activities Activities Activities 2008 2007 Change Assets: Current and other assets $ 119,080 $ 113,974 $ 5,106 Capital Assets, net of depreciation 186142 170.848 15.494 Total assets 305.422 284.822 20.600 Liabilities: Long-term liabilities 80,556 81,535 (979) Other Liabilities 9.163 7.768 1.395 Total liabilities 89.719 89,303 416 Net Assets: Invested in capital assets, net of related debt 113,973 128,149 (14,176) Restricted 77,069 43,108 33,961 Unrestricted 24.661 24,262 399 Total net assets _ 215.703 $ 195.519 $ 20_i84 Charges for services include: charges for administration, charges for community development planning, permits, inspection and other services, developer impact fees, specific police, fire and public works services for which a fee is charged, recreation charges and rents of park property, fines and penalties, various fees and license charges, parking permits, and sales. Operating and capital grants and contributions include amounts received from federal, state and county governments, as well as private grantors, developer and other donors. Franchise taxes include amounts collected from the providers of the City's cable, garbage and utilities services. Other taxes include transient occupancy tax, business license tax, and other miscellaneous taxes. 7 lGovemment-Wide Financial Statement Analysis, continued General government function includes legislative and administrative branches of the City: City Council, City Clerk, City Manager, City Attorney, Administrative Services Department, and Animal Services. Community development function provides for inspection, permit, code enforcement, as well as housing services. This year, a portion of this fund, the cost recovery section of building, development and planning services, continued as an enterprise fund, as it is required to charge fees to cover its costs of services. Parks and recreation includes operation of City parks, community centers, recreation classes and services, swimming pools, museum, and landscape assessment districts. Public works function covers costs for street maintenance, street lights, traffic signals, street signs, building and equipment maintenance, and the Turning Basin operation. Governmental Activities Changes: • General governmental indirect expense allocations are consistent with prior year; the additional increases in expenditures were seen in city manager and finance administrative divisions. • GeneraI governmental charges for service revenue decrease is attributed to decreased CIP activity for which overhead is charged and not eliminated . • Community development charges for service revenue decreased approximately $1.1 million primarily due to the slow -down in the housing market; the additional expenditure increases were seen in the planning services division. • Police fimction expenses increased due to increased staffing. Their revenues remain overall consistent with the prior year except for an increase Prop. 172 funding. • The Park and Recreation fi►nction's increase in operating grant is due to receipt of Prop 10, Prop 40 and State Parks grants, all used for non -capital park improvement expenses. • Public Works capital grants increase was developer contribution of infrastructure received by the City during 2008. Interest on long-term debt increased due to the acquisition of a capital lease for street equipment. • General property taxes and Redevelopment Agency tax increment both increased due to increasing property values in the community. • Property transfer tax and motor vehicle in -lieu tax are reported as Intergovernmental, unrestricted taxes in 2008, and are consistent with 2007, except for a decrease in transfer tax due to the slow- down in housing market sales. lGovernm ent- Wide Financial Statement Analysis, continued The charts that follow show the program revenues, general revenues, and expenses by function for all Governmental activities, including the Redevelopment Agency. Summary of Statement of Activities and Changes in Net Assets Governmental Activities For the Years Ended June 30, 2008 and 2007 (In thousands) 9 Governmental Governmental percentage Activities Activities Change 2008 2007 Revenues: Program Revenues Charges for service $ 7,924 $ 11,059 -28.3% Operating grants and contributions 9,278 7,103 30.6% Capital grants and contributions 11.272 11.509 -2.1% Total program revenue 28.474 29,671 -4.0% General Revenues: Taxes: Property Tax 7,392 7,136 3.6% Redevelopment Tax Increment 16,777 15,697 6.9% Sales Tax 11,650 11,460 1.7% Franchise Tax 2,549 2,608 -2.3% Intergovernmental/Unrestricted 12,356 5,594 120.9% Other Taxes 2.335 2.345 -0.4% Total Taxes 53,059 44,840 18.3% Unrestricted Investment Earnings 3,744 3,721 0.6% Miscellaneous Revenue 1,206 - 100.0% Total Revenue 86,483 78,232 10.5% Expenses: General government 4,194 987 324.9% Community development 18,168 13,396 35.6% Police 16,535 15,327 7.9% Fire 8,193 8,425 -2.8% Parks and recreation 6,154 5,388 14.2% Public works 9,725 10,841 -10.3% Interest on long-term debt 3.498 2.412 45.0% Total Expenses 66,467 56.776 17.1% Revenues Over (Under) Expenses 20,016 21,456 -6.7% Internal Capital Contributions - - Transfers 168 869 -80.7% Change in Net Assets 20,184 22,325 -9.6% Net assets -beginning of year 195,519 173.194 12.9% Net assets -end of year 215.703 $ 195„`Z9 10.3% 9 Government -Wide Financial Statement Analysis, continued) Business-Tvne Activities — Business -type activities net assets contributed $101.4 million to the City's net assets, an increase of $6.6 million over the prior year. All business -type activities are intended to be fully supported by the fees they charge (including subsidies received for operations, as is the case with the Transit operation). Their expenses include indirect costs and in -lieu fees of $1.8 million charged by the General Fund and the internal service finds for support and general City services. Summary of Statement of Net Assets Business -type Activities As of June 30, 2008 and 2007 (in thousands) Charges for services include: charges for waste water and water utilities , water and waste water connection fees, airport and marina charges for sales, airport and marina leases rents and transient parking, charges for ambulances services, charges for transit services charges for development services Operating grants and contributions, and capital grants and contributions include amounts received from federal, state and county governments. Business -type Activities Changes: • Airport received FAA funding for hangar capital project in both 2007 and 2008. • Development Services is a new business type activity for the City. It includes all cost recovery services for which fees charged are required to cover the cost of providing the building, development and planning services. • Transit received federal funding for the transit mall capital project in 2008 and less funding for operations than the prior year. • Waste water expense increase is attributable to the start-up of the Ellis Creek plant operations_ • Water expense decrease is primarily due to decreased CIP activity for which overhead is charged and not eliminated . 10 Business -type Business -type Business -type Activities Activities Activities 2008 2007 Chanqe Assets: Current and other assets $ 28,719 $ 21,375 $ 7,344 Capital Assets, net of depreciation 232.129 184.845 47.284 Total assets 260.848 206.220 54.628 Liabilities: Long-term liabilities 148,816 96,775 52,041 Other Liabilities 10.674 14.588 (3.914) Total liabilities 159.490 111.363 48.127 Net Assets: Invested in capital assets, net of related debt 82,677 87,376 (4,699) Restricted 1,344 1,291 53 Unrestricted 17.337 6.189 11.148 Total net assets $ __10 1-3-5-a $ R4,$66 $ 0 502 Charges for services include: charges for waste water and water utilities , water and waste water connection fees, airport and marina charges for sales, airport and marina leases rents and transient parking, charges for ambulances services, charges for transit services charges for development services Operating grants and contributions, and capital grants and contributions include amounts received from federal, state and county governments. Business -type Activities Changes: • Airport received FAA funding for hangar capital project in both 2007 and 2008. • Development Services is a new business type activity for the City. It includes all cost recovery services for which fees charged are required to cover the cost of providing the building, development and planning services. • Transit received federal funding for the transit mall capital project in 2008 and less funding for operations than the prior year. • Waste water expense increase is attributable to the start-up of the Ellis Creek plant operations_ • Water expense decrease is primarily due to decreased CIP activity for which overhead is charged and not eliminated . 10 Government -Wide Financial Statement Analysis, continued The charts that follow show the program revenues, general revenues, and expenses by function for all business-type activities: Summary of Statement of Activities and Changes in Net Assets Business -type Activities For the Years Ended June 30, 2008 and 2007 (In thousands) Business -type Business -type percentage Activities Activities Change 2008 2007 Revenues: Program Revenues Charges for service Operating grants and contributions Capital grants and contributions Total program revenue General Revenues: Miscellaneous revenue Unrestricted investment earnings Total Revenue Expenses: Business -type Activities Airport Ambulance Development Services Marina Transit Waste Water Water Utility Total Expenses Revenues Over(Under)Expenses Internal Capital Contributions Transfers Change in Net Assets Net assets -beginning of year Net assets -end of year $ 33,733 $ 31,517 7.0% - 2,963 -100.0% 2.706 2.559 0,0%a 36,439 37,039 -1.6% - 542 -100.0% 1.132 881 28.5% 37,571 38,462 -2.3% 1,586 1,437 10.4% 2,503 2,165 15.6% 1,349 1,286 4.9% 808 973 -17.0% 2,540 2,180 16.5% 11,545 10,169 13.5% 10.570 11.672 -9.4% 30.901 29.882 3.4% 6,670 8,580 -221.31% - - 0.0%6 (167) (869) -80.8% 6,503 7,711 -15.7% 94.856 87.145 8.8% _, 1413 94__$,-& 6.9% 11 Fund Financial Statements Analysis Governmental Maior Funds General Fund This fund provides for the basic services which are expected of a local government, including general government, police, fire, recreation, community development and public works. Support for these services is provided by charges for services, fees, taxes, intergovernmental revenues, donations and grants. HOME/Beizin Special Revenue Fund The federal HOME program was created in 1990 and has provided over $9.7 million to the City of Petaluma to fund affordable housing on a project -specific basis. The HOME program is administered through the California State Department of Housing and Community Development. Impact Fee Special Revenue Funds These funds are used to account for the impact fees, in the following categories, which are imposed on development in the City: • Community Facilities • Library Facility • Public Facilities • Fire Suppression • Storm Drainage • Housing in -Lieu • Commercial Linkage • Parkland Acquisition/Development • Aquatic Facility • Police Facility • Traffic Mitigation These fees are used for the specific purposes for which they are collected. The majority are used for capital improvement projects, which are required as a result of the impact of development on the City. City Capital Proiect Funds The City Capital Project Funds account for the capital improvement activities and projects {CIP} which are financed with governmental resources. They include: • General Government CIP • Community Development CIP • Police CIP • Fire CIP • Parks and Recreation CIP • Public Works CIP • FEMA CIP • TDA CIP 12 Fund Financial Statements Analysis, continued Redevelopment Special Revenue Funds and Redevelopment Capital Proiect Fund The City's Redevelopment Agency (RDA), Petaluma Community Development Commission (PCDC), was activated on December 1, 1975 and adopted the Redevelopment Plan for the Central Business District Project Area (CBD) on September 27, 1976. In 1988, the PCDC adopted the Petaluma Community Development Project Area (PCD). in adopting the redevelopment project areas, the PCDC exercises all redevelopment powers authorized under the constitution and the Health & Safety Code of the State of California. In October, 2007 the CBD and PCD project areas were fiscally merged. This enables the Agency to pool tax increment revenue and establishes a unified bonded indebtedness limit for the two project areas, while retaining the separate identity of each project area for other purposes. The seven members of the PCDC Board of Directors are the members of the Petaluma City Council. The City Manager acts as the Commission's Executive Director. This Redevelopment Agency includes three major funds: Redevelopment Special Revenue (Grants, Donations, Low and Moderate Income Housing), o Redevelopment Capital Projects. Revenues Classified by Source Governmental Funds Use of - money & property 4.2% Fines, forfeitures & penalties 1.1% 13 Licenses permits & fees 7.8% For the Years ending June 30, 2008 and 2007 (in millions of dollars) FY 2008 FY 2007 Increasel(Decrease) Revenue by Source Amount % of Total Amount % of Total Amount Percentage Taxes $ 41.28 51.0% $ 40.49 50.5% $ 0.79 2.0% Licenses, permits & fees 6.31 7.8% 3.80 4.7% 2.51 66.1% Fines, forfeitures & penalties 0.87 1.1% 0.76 0.9% 0.11 14.5% Use of money & property 3.39 4.2% 3.06 3.8% 0.33 10.8% Intergovernmental 14.61 18.00/a 11.78 14.7% 2.83 24.0% Charges for current services 5.70 7.0% 7.95 9.9% (2.25) -28.3% Other 8.84 10.9% 12.38 15.4% (3.54) -28.6% Totals $ 81 OQ 1QO 0% L EM 100.0% 5_ 0.78 IJQM Use of - money & property 4.2% Fines, forfeitures & penalties 1.1% 13 Licenses permits & fees 7.8% Fund Financial Statements Analysis, continued Expenditures Classified by Function Governmental Funds For the Years ending June 30, 2008 and 2007 (in millions of dollars) Expenditures By Function Governmental Funds General Debt Service ❑ebtService Government, Principal, Intere!A4.2% 6,0% 1.4% - Cap 1 tal .4% Capital Outlay, 23.1% Community levelopmen 19.8°% lice, 20.2% Public Works,-/ Parks & LFire, 9.8% 8.8% Recreation, 6.8°% 14 FY 2008 FY 2007 Increase/(Decrease) Expenditures by Function Amount % of Total Amount % of Total Amount Percentaqe Current: General Government $ 5.06 6.0% $ 4.63 5.6% $ 0.43 9.3% Community Development 16.59 19.8% 12.12 14.6% 4.47 36.9% Police 16.87 20.2% 15.49 18.7% 1.38 8.9% Fire 8.17 9.8% 7.97 9.6% 0.20 2.6% Parks & Recreation 5.65 6.8% 4.93 5.9% 0.72 14.6% Public Works 7.32 8.8% 9.02 10.9% (1.70) -18.8% Capital Outlay 19.32 23.1% 24.67 29.8% (5.35) -21.7% Debt Service: Principal 1.18 1.4% 1.14 1.4% 0.04 3.9% Interest 3.48 4,2% 2.09 2.5% 1.39 66.5% Cost of issuance 0.0% 0.84 1.0% (0.84) 0.0% Totals L--alm IMAM S EUM 7.OQ.01a $. ___ _4.7_4 0.M Expenditures By Function Governmental Funds General Debt Service ❑ebtService Government, Principal, Intere!A4.2% 6,0% 1.4% - Cap 1 tal .4% Capital Outlay, 23.1% Community levelopmen 19.8°% lice, 20.2% Public Works,-/ Parks & LFire, 9.8% 8.8% Recreation, 6.8°% 14 Fund Financial Statements Analysis, continued Proorietary Maior Funds Airport Fund This fund accounts for the daily operation and maintenance of the Petaluma Airport, including capital improvement projects. Ambulance Fund This fiend accounts for the activities related to providing ambulance services for the City. Development Services Fund This fund accounts for the cost recovery services offered by the City for building, development and planning. Marina Fund The Marina Fund accounts for the daily operation and maintenance of the Petaluma Marina, including capital improvement projects. Public Transportation Fund Transit services, which are provided by the City, are accounted for in this fund, including capital projects. Waste Water Utilitv Fund This fund is part of the Department of Water Resources and Conservation, which provides comprehensive and integrated management of Petaluma's water resources, including collection and treatment of waste water. Capital projects are included in this fiend. Water Utilitv Fund This fund is part of the Department of Water Resources and Conservation, which provides comprehensive and integrated management of Petaluma's water resources, including reliable delivery of high quality water. Capital projects are included in this fund. 15 Fund Financial Statements Analysis, continued Revenues Classified by Source Proprietary Funds For the Years en to Ju e 3p, 2 08 and 2007 (rn rt11 lois of dollarsq Interg mer 5.5 Connectior 4.4% Charge services 60.2% Revenue By Source - Proprietary Funds Investment Other revenue earningsand -0.10 _ 16 in apihdl Ch arg es fo r sales 25.6% FY 2008 FY 2007 Increase/(Decrease) Revenue by Source Amount % of Total Amount % of Total Amount Percentaqe Charges for sales $ 27.55 60.2% $ 11.15 24.5% $ 16.40 147.1% Charges for services 11.73 25.6% 25.35 55.7% (13.62) -53.7% Connection Fees 2.00 4.4% 1.65 3.6% 0.35 21.2% Intergovern. operatinglnon-operatinc 2.71 5.9% 4.31 9.5% (1.60) -37.1% Investment earnings and rent 1.85 4.0% 1.47 3.2% 0.38 25.9% Other revenue (0.06) -0.1% 1.34 2.9% (1,40) 0.0% Contribution to/from City/Capital 0.0% 0.21 0.5% (0.21) 0.0% Totals $ _ 45.7Q, 100.0°/Q45.48 100"0% ;$ p3.,A Interg mer 5.5 Connectior 4.4% Charge services 60.2% Revenue By Source - Proprietary Funds Investment Other revenue earningsand -0.10 _ 16 in apihdl Ch arg es fo r sales 25.6% �und Financial Statements Analysis, continued Expenditures Classified by Function - Proprietary Funds pep reci atior and amortization 19.3% Interest Claims, expense, a r,01. administrative, 0.31/. 17 Costof ervices, 54.0% Expenditures Classified by Function Proprietary Funds For the Years ending June 30, 2008 and 2007 (in millions of dollars) FY 200B FY 2007 Increasel(Decrease) Amount % of Total Amount % of Total Amount Percentaqe Cost of services $ 23.45 64.0% $ 22.44 61.9% $ 1.41 6.4% Claims 0.12 0.3% 1.B9 5.3% (1.77) -93.7% General and administrative 7.07 19.3% 6.96 19.6% 0.11 1.6% Depreciation and amortization 4.35 11.9% 4.05 11.4% 0.30 7.4% Interest expense 1.63 4.9% 0.66 1.9/0 0.97 147,0% Totals JO—A 35.60 Dom 2 _ jg 2 Expenditures Classified by Function - Proprietary Funds pep reci atior and amortization 19.3% Interest Claims, expense, a r,01. administrative, 0.31/. 17 Costof ervices, 54.0% Financial Analysis of the Governmental Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Governmental Funds — The focus of the City of Petaluma's Governmental Funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Petaluma Governmental Funds reported combined ending fund balances of $81.2 million, a decrease of $3.4 million from the prior year. Total reserves equal $61.4 million. Encumbrances are $0.3 million, capital projects are $26.4 million, notes receivable $22.3 million, long term advances and due from other funds $119 million, and miscellaneous $0.5 million. An additional $0.7 million is designated for special projects. This leaves an unreserved fund balance of $19.1 million. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unreserved fund balance of the General Fund was ($158,345) while total fiend balance was $3.6 million. As a measure of the General Fund's liquidity, it may be useful to compare both unreserved fund balance and total find balance to total fund expenditures. Unreserved fund balance represents a negative 0.3% of total General Fund expenditures, unreserved plus reserved for contingencies is a negative 0.3%, while total fund balance represents 7% of that same amount. The General Fund's fund balance decreased by $5.3 million during the current fiscal year. The Redevelopment Agency had a total fund balance of $46.3 million: • Special Revenue Funds $20.7 million • Capital Project Fund $25.6 million Reserves for notes receivables equal $15.4 million. An additional $26.3 million is reserved for capital projects, and $8.2 million is reserved for miscellaneous items, including debt service and inter -fund advances. The unreserved amount of $53 million is undesignated and reported in special revenue. The remaining negative $8.9 million is unreserved, undesignated and reported in capital projects. The negative fund balance is due to a reclassification to reserved fund balance of capital projects previously shown as unreserved in prior years. Overall, total RDA fund balance increased $4.0 million. The increase in special revenue funds totals $2.9 million, where tax increment revenue exceeded program expenses by that amount. Additionally the capital project fund's fund balance decreased by $5.2 million. Summary of Balance Sheet Governmental Funds As of June 34, 2068 and 2007 (in thousands) 18 Governmental Governmental Governmental Funds Funds Funds 2008 2607 Ghanne Assets: Total assets 110 pq g 101 139 ,"t, 12.573 Liabilities: Total liabilities 32,983 17,310 15,673 Fund Balance: Reserved 61,434 37,266 24,148 Unreserved, designated 678 1,22G (542) Unreserved, undesignated 19,170 45,876 (26,706) Total fund balance 81.282 84.382 (3.100) Total liabilities and fund balances X65 ,1$ int 80; 3 3257 18 Financial Analysis of the Proprietary Funds Proorietary Funds -- Enterprise Funds activity showed an increase in net assets for the Airport Fund of $554,197, a decrease of approximately $600,000 from the prior year. Ambulance fund's expenses were greater than the prior year by approximately $200,000; operating revenue was less than the prior year by approximate $100,000 resulting in a decrease to net assets of $300,000 from the prior year. Development Services had a negative change to net assets of $365,774, approximately $200,000 more than the prior year_ Marina Fund had a negative change in net assets of $559,264. Transit Fund received less TDA funds for both operating and capital this year, compared to prior year resulting in a negative change to net assets of $344,000. Waste Water Fund's revenue exceeded prior year by $1.8 million (due to increased rates) and expenses increased slightly, resulting in a total of $63 million added to net assets, compared to $5.6 from the prior year. Water Fund revenue activity was less than the prior year with an overall negative impact on net assets of $920,000. Internal Service Funds activity included more revenue and less expenses than in the prior year. The positive impact on net assets was $3.0 million compared to $1.9 million in the prior year with the greatest change attributable to Worker's Compensation Fund and Risk Management. Summary of Statement of Net Assets Proprietary Funds As of June 30, 2008 and 2007 (in thousands) Proprietary Funds Proprietary Funds 2008 2007 Assets: Current assets $ 42,421 $ 33,270 Non-current assets 237,973 189.822 Total assets ?fi0 394 223,0 ?4 Liabilities: Current liabilities Non-current liablities Total liabilities Net Assets: Invested in capital assets, net of related debt Restricted for debt service Unrestricted Total net assets 12,380 153.706 166.086 86,838 1,344 26,128 114. 10 5 16,716 101.679 118.395 90,584 Proprietary Funds Chanq 9,151 48,151 517.302 (4,336) 52.027 47.691 (3,746) 1,291 53 12,822 13,306 1 1. 9 General Fund Budgetary Highlights The General Fund total revenues were above the adopted budget estimates by $3.4 million, due to: unbudgeted developer contributions of $5.6 million. The General Fund expenditures were likewise over the budget by $5.6 million caused by the accounting for the developer contributions and resulting infrastructure expenditures at the end of the year. Note 12 contains detailed information on the amounts and the explanations for all governmental departments and funds which exceeded appropriation at the end of 2008. 19 Capital Asset and Debt Adtninistrationl Canital Assets - The City of Petaluma's investment in capital assets for its Governmental and Business -Type Activities as of June 30, 2008, equals $418.4 million (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, buildings and improvements, vehicles and equipment, and infrastructure. Detailed infor►nation about the City's capital assets is contained in Note 6. The total increase in the City's investment in capital assets, net of depreciation, for the current fiscal year was $62.8 million or a 18% increase (this represents an increase of 9% in Governmental Activities and a 26% increase for Business -type Activities). Capital asset balances as of June 30, 2007 and 2008 were: Capital Assets (net of depreciation, in millions) as of June 30, 2008 and 2007 Lona Term Debt At the end of the current fiscal year, the City had total long term debt of $223.6 million, of which $72.8 was bonded debt of the Redevelopment Agency (secured by future tax increment revenue), $20.6 million bonded debt of the enterprise funds ($6 million certificate of participation and $14.6 million secured by water and waste water revenue). Additionally the Waste Water Fund had $21.7 million in revolving lines of credit and $100 million in new State loan for the Ellis Creek Recycle Plant. Finally the Airport Fund and the Marina Fund also had State loans outstanding in the amounts of $1.6 million and $5.3 million, respectively. The Waste Water Fund's revolving lines of credit with BNP Paribas and Zion 1" National Bank, increased by $2.5 million this year. In 2005, the Waste Water Fund secured a State Water Resource Control Board loan in the amount of $126 million, $50 million of which was received during 2007 and $50 million received during the current year. The Public Works department entered into a capital lease for street paving equipment in the total amount of $270,393. The Moody's rating for the Redevelopment Agency is Aaa (A3 underlying). The Standard & Poor's rating is AAA (A- underlying). State statutes limit the amount of general obligation debt a governmental entity may issue up to 15% of its total assessed valuation. The current debt limitation for the City is $1.1 billion. At June 30, 2008, the City had no general obligation debt outstanding. Additional information on the City of Petaluma's long term debt can be found in Note 7 of this report. 20 Governmental Increase Business -type Increase Activities (Decrease) Activities (Decrease) 2008 2007 % Change 2008 2007 % Change Land $ 35.7 $ 35.6 0% $ 10.7 $ 10.7 0% Const in Proc 48.6 51.4 -6% 151.9 101.6 50% Bldg and Improv 10.8 11.3 -4% 14.6 15.1 -3% Vehicle and Equip 6.1 5.1 19% 4.1 4.3 -5% Infrastructure 85.2 67.4 26% 50.8 53.1 -4% Totals $.__$6_ Z $ 1711.a 9% 12 $184 8 26% Lona Term Debt At the end of the current fiscal year, the City had total long term debt of $223.6 million, of which $72.8 was bonded debt of the Redevelopment Agency (secured by future tax increment revenue), $20.6 million bonded debt of the enterprise funds ($6 million certificate of participation and $14.6 million secured by water and waste water revenue). Additionally the Waste Water Fund had $21.7 million in revolving lines of credit and $100 million in new State loan for the Ellis Creek Recycle Plant. Finally the Airport Fund and the Marina Fund also had State loans outstanding in the amounts of $1.6 million and $5.3 million, respectively. The Waste Water Fund's revolving lines of credit with BNP Paribas and Zion 1" National Bank, increased by $2.5 million this year. In 2005, the Waste Water Fund secured a State Water Resource Control Board loan in the amount of $126 million, $50 million of which was received during 2007 and $50 million received during the current year. The Public Works department entered into a capital lease for street paving equipment in the total amount of $270,393. The Moody's rating for the Redevelopment Agency is Aaa (A3 underlying). The Standard & Poor's rating is AAA (A- underlying). State statutes limit the amount of general obligation debt a governmental entity may issue up to 15% of its total assessed valuation. The current debt limitation for the City is $1.1 billion. At June 30, 2008, the City had no general obligation debt outstanding. Additional information on the City of Petaluma's long term debt can be found in Note 7 of this report. 20 Capital Asset and Debt Administration, continued Governmental Activities Long -Term Debt As of June 30, 2008 and 2007 (in millions) Business -Type Activities Long -Term Debt As of June 30, 2008 and 2007 (in millions) Balance Balance Increase June 30, 2008 June 30, 2007 (Decrease) 2000A Tax Allocation Bonds $ 150 $ 295 $ (145) 2000E Tax Allocation Bonds - - - 2001A Tax Allocation Bonds 2,105 2,410 (305) 2003A Tax Allocation Bonds 22,770 23,200 (430) 2003A TAB unamortized bond discount (12) (12) - 2005A Tax Allocation Bonds 18,060 18,165 (105) 2005A TAB unamortized bond premium 144 151 (7) 2005A TAB deferred amt on refunding (1,098) (1,148) 50 2007 Tax Allocation Bonds 31,710 31,825 (115) 2005A TAB unamortized bond discount (546) (564) 18 Auto Plaza DDA -AD 19 406 490 (84) Capital leases 461 - 461 Total $ 74,150 $ 74,812 $ (662) Business -Type Activities Long -Term Debt As of June 30, 2008 and 2007 (in millions) Total $ 149,452 $ 97,406 $ 52,046 21 Balance Balance Increase June 30, 2008 June 30, 2007 (Decrease) Airport loan -CA Dept Transportation $ 1,561 $ 1,698 $ (137) Airport 2003 Certificates of Participation 5,790 5,960 (170) 2003 COP unamortized bond premium 67 70 (3) 2000 Wastewater Revenue Bonds 6,325 6,700 (375) 2000 WW unamortized bond discount (53) (57) 4 WW- BNP Paribas line of credit 12,350 9,550 2,800 WW -Zion 1 st National Bank line of credit 9,376 9,662 (286) WW -CA SWRCB loan 100,000 50,000 50,000 2001 B Water Revenue Bonds 8,510 8,755 (245) 2001B Water unamortized bond discount (13) (14) 1 Marina loan -CA Dept of Boating & Waterways 5,271 5,082 189 Capital leases 268 - 268 Total $ 149,452 $ 97,406 $ 52,046 21 Economic Factors and Next Year's Budget The economy at both the national and State level is declining. We are also challenged by the rising retirement cost of the Public Employees Retirement System (PERS). The City has a diverse economic base that includes residential, retail, and commercial assets. While the property, sales and hotel tares have increased slightly, property transfer taxes decreased, mitigating the impact of the housing economic slowdown. We have adopted a balanced budget for FY 2008-09, taking all the known factors into account. IReguests for Information This financial report is designed to provide a general overview of the City of Petaluna's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, I 1 English Street, Petaluma, CA 94952. 72 BASIC FINANCIAL STATEMENTS 23 24 GOVERNMENT -WIDE FINANCIAL STATEMENTS 25 26 City of Petaluma Statement of Net Assets June 30, 2008 Primary Government Governmental Business -Type Activities Activities Total ASSETS Current assets: Cash and investments $ 46,33,566 $ 2'-)722,130 $ 69,045,696 Restricted cash and investments 27,246,931 1,344,216 28,591,147 Receivables: Accounts receivable, net 856,497 3,136,754 3,993,251 Intere5treceivable 432,466 - 432,466 Intergovernmental 4,589,503 257,033 4,846,536 Internal balances 1,22221,400 (1,271,400) - Intermal services balances (1,441,658) 1,441,658 - Inventories 29,691 339,697 359,388 Deposits and prepaid items 95,779 20,684 116,463 Total current assets 79,354,175 28,030,772 107,384,947 Noncurrent assets: Deposits receivable 1,074,694 24,630 1,099,334 Noncurrent interest receivable 4,240,478 - 4,240,478 Notes receivable 32,480,164 - 32,480,164 Land held For resale 40ZO53 - 402,053 Deferred charges 1,527,430 663,297 2,190,727 Capital assets: Non -depreciable 84,207,278 162,646,362 246,855,640 Depreciable, net 102,135,344 69,480,938 I71,616,282 Total capital assets 186,342,622 32,129,300 418,471,922 Total noncurrent assets 226,067,441 32,817,727 458,884,668 Total assets 305,421,616 260,847,999 566,269,615 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 5,43,470 4,614,131 10,037,901 Wages payable 1,287,350 203,906 1,491,256 Interest payable 576,622 3,325,680 3,902,303 Refundable deposits 30,339 1,180,370 1,210,709 Compensated absences - due within one year 483,210 77,078 560,288 Long-term debt - due within one year 1,362,360 1,272,334 2,634,694 Total current liabilities 9,163,351 10,673,799 19,837,150 Noncurrent liabilities: Noncurrent deposits - 54,343 54,343 Claims payable 4,638,138 - 4,638,138 Compensated absences - due in more than one year 3,129,542 581,737 3,711,279 Long-term debt - due in more than one year 72,787,669 148,179,783 2290,967,452 Total noncurrent liabilities 80,555,349 148,815,863 2299,371,212 Total liabilities 89,718,700 159,489,662 249,208,362 NET ASSETS Invested in capital assets, net of related debt 113,972,864 82,677,183 196,650,047 Restricted for: Special projects 36,707,513 - 36,707,513 Debt service 7,187 1,34=4,216 1,351,403 Capital projects 40,354,175 - 40,354,175 Total restricted 77,068,875 1,344,216 78,413,091 Unrestricted 34,661,177 17,336,938 41,998,115 Total net assets ti 215,'/0?,9I6 $ 101,3581337 $ 317,061,253 See accompanying Notes to Basic Financial Statements. 27 City of Petaluma Statement of Activities and Changes in Net Assets For the year ended June 30, 2008 See accompanying Notes to Basic Financial Statements. 28 Program Revenues Indirect Operating Capital Expense Charges for Grants and Grants and Functions/Programs Expenses Allocation Services Contributions Contributions Primary government: Governmental activities: General government $ 7,047,440 $ (2,653,850) $ 263,871 $ - $ - Community development 17,197,722 969,650 5,433,211 8,740,978 1,183,957 Police 16,535,445 - 708,384 480,656 - Fire 8,193,495 - - - - Parks and recreation 6,144,355 9,650 1,379,888 56,850 - Public works 9,698,443 26,500 138,806 - 10,087,812 Interest on long-term debt 3,497,893 - - - - Total governmental activities 68,31€,793 (1,848,050) 7,924,060 9,278,484 11,271,768 Business -type activities: Airport 1,522,129 61,950 1,653,143 - 318,793 Ambulance 3,373,599 139,500 1,855,217 - - Development Services 1,157,491 191,100 952,95 - - Marina 766,738 41,300 245,634 - - Transit 2,177,771 362,450 201,802 - 1,987,612 Waste water utility 10,996,313 548,650 16,910,890 - 399,248 Water utility 10,059,551 510,700 11,914,063 - - Total business -type activities 29,053,492 1,848,050 33,733,673 - 2,705,653 Total primary government $ 97,368,284 $ - 5 41,657,733 S 9,278,484 $ 13,977,421 General Revenues: Taxes: Property taxes Redevelopment tax increment Sales taxes Franchise tax Motor Vehicle in -lieu Intergovernmental, unrestricte:i Other taxes Total taxes Unrestricted investment earnings Miscellaneous revenue Transfers Total general revenues and transfers Change in net assets Net assets - beginning of year Net assets - end of year See accompanying Notes to Basic Financial Statements. 28 Net(Expense)Revenue and Changes in Net Assets Governmental Business -Type Total Activities Activities Total $ 263,871 5 (3,929,719) $ - S (3,929,719) 15,358,146 (2,809,2226) - (2,809,276) 1,188,940 (15,346,505) - (15,346,505) - (8,193,495) - (8,193,495) 1,436,738 (4,717,267) _ (4,717,267) 10,226,617 501,674 - 501,674 - (3,497,893) - (3,497,893) 28,474,313 (37,992,430) - (37,992,430) 1,971,936 - 385,357 385,357 1,855,217 - (647,882) (647,882) 952,925 - (395,666) (395,666) 245,63.4 - (562,304) (563,304) 2,189,414 - (350,807) (350,807) 17,310,138 - 5,765,275 5,765,275 11,914,063 - 1,3.43,811 1,343,811 36,439,326 - 5,537,784 5,537,784 S 64,913,638 (37,992,430) 5,537,784 (32,454,646) 7,392,338 - 7,393,338 16,777,120 - 16,777,120 11,649,973 11,649,972 2,549,185 - 2,549,185 4,244,088 - 4,244,088 8,111,724 _ 8,111,724 2,33,038 - 2,335,038 53,059,464 - 53,059,464 3,743,73 1,131,778 4,575,501 1,205,967 - 1,205,967 167,558 (167,558) - 58,176,712 964,2210 59,140,932 20,184,282 6,502,004 26,686,287 195,518,634 94,856,333 290,374,967 $ 215,702,916 $ 101,358,337 $ 317,061,253 29 30 FUND FINANCIAL STATEMENTS 31 32 Governmental Fund Financial Statements General Fund - The General Fund is used to account for resources traditionally associated with government, which are not required Iegally, or by sound financial management, to be accounted for in another fund. HOIVMF/Begin Special Revenue Fund - The Home/Begin Special Revenue Fund is used to account for federal grants received under the Housing and Community Development Act of 1974. The money is used for specific programs, which provide housing to people with low and moderate income. Redevelopment Special Revenue Fund - This fund accounts for the redevelopment agency's 20% set-aside, as required by Iaw, of tax increment for Low and Moderate Income Housing. The activity of this funds consists of supporting development of affordable housing in the community. Also included in this fund are redevelopment agency donations and grant revenues. Impact Fees Fund - This fund is used to account for fees received from local development projects, which are used for the construction of major public improvements, assistance to low income people in the community, acquisition, development, enhancement of neighborhood and community parks. Cihj Capital Project Fund - These funds account for the collection of resources and the related expenditure on acquisition and construction of major capital improvement projects in the City, other than those accounted for in proprietary funds. Redevelopment Capital Project Fund -This funds accounts for the administration, programs and capital projects undertaken in the Redevelopment Agency. 33 City of Petaluma Balance Sheet Governmental Funds June 30, 2008 Major Funds Impact General HOME/Begin Redevelopment Fees Fund Special Revenue Special Revenue Special Revenue ASSETS Cash and investments $ - $ 662,038 $ 5,465,319 $ 4,054,095 Restricted cash and investments 871,670 - - - Receivables: Accounts, net 595,986 - 6,386 - Interest 432,466 - - - Intergovernmental 2,612,500 - 565,911 2,091 Interfund receivable 3,519,400 - - 787,537 Inventories 19,030 - - - Deposits and prepaid items 87,386 - 114 - Noncurrent interest receivable 24,887 1,779,576 2,078,171 280,251 Deposit receivable - - - 270,640 Notes receivable 49,375 10,198,290 15,226,102 5,950,821 Land held for resale - - - - Total assets S 8,162,700 $ 1? 639,904 S 1.3,342,003 $ 11,345,435 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 2,242,428 $ 500,480 $ 49,654 $ 192,060 Wages payable 1,141,850 - 9,832 - Deferred revenue 399,373 11,977,866 2,078,171 380,251 Refundable deposits 11,666 - - - Interfund payable 752,537 - 482,000 82,000 Total liabilities 4,547,854 12,478,346 2,619,657 554,311 fund Balances: Reserved for: Encumbrances 98,000 - 175,000 - Notes receivable 49,375 - 15,226,102 5,950,821 Land held for resale - - - - Interfund receivable 3,519,400 - - 869,537 Inventories 19,030 - - - Deposits and prepaids 87,386 - 114 Capital Projects - - - - Debt service - - - - Total reserved 3,773,191 - 15,401,216 6,820,358 Unreserved, designated in: General fund - - - - Special revenue funds - 59,465 21,497 534,563 Capital project funds - - - - Unreserved, undesignated reported in: - General fund (158,345) - - - Special revenue funds - 1021093 5,299,633 3,436,203 Capital project funds - - - - Permanent funds - - - Total unreserved, undesignated (158,345) 103,093 5,299,633 3,436,203 Total fund balances 3,614,846 161,558 20,72,346 10,791,124 Total liabilities and fund balances $ 8,162,700 5 12,639,904 5 23,342,003 S 11,345,435 See Accompanying Notes to the Basic Financial Statements, 34 Major Funds 297,653 5 276,314 $ 5,087,349 11,593 Non -Major Total City Redevelopment Governmental Governmental Capital Project Capital Project Funds Funds S 16,187,832 $ 44,928 $ 5,377 248 S 31,79I,460 - 26,373,811 51,450 27,246,931 - - 193,400 795,772 - - - 432,466 127,568 312,234 969,199 4,589,503 - 7,600,000 - 11,906,937 - - - 19,030 1,444 188 - 89,132 - - 77,593 4,240,478 - - - 370,640 - 271,576 784,000 32,480,164 - 402,053 - 402,053 5 16,316,844 S 35,004,790 4 7,452,890 S 114,264,566 $ 1,528,760 5 297,653 5 276,314 $ 5,087,349 11,593 36,780 29,822) 1,229,877 - - 1,214,288 15,949,949 - 18,673 - 30,339 74,000 9,000,000 295,000 10,685,537 1,614,353 9,353,106 1,815,424 32,983,051 - - - 273,000 - 271,576 79-1,000 2_x,281,874 - 402,053 - 402,053 - 7,600,000 - 11,988,937 - - 19,030 - 188 - 87,688 - 26,373,811 - 26,373,811 - - 7,187 7,187 - 34,647,628 791,187 61,433,580 - - 9,858 625,383 52,134 - 52,134 - - (158,345) - - 4,814,023 13,651,952 14,650,357 (8,995,944) - 5,654,413 - - 22,39S 22,398 14,650,357 (8,995,944) 4,836,421 19,170,418 14,702,491 25,651,684 5,637,466 81,281,515 $ 16,316,844 $ 35,004,790 $ 7,452,890 $ 114,264,566 35 36 City of Petaluma Reconciliation of the Governmental Funds Balance Sheet to the Government -Wide Statement of Net Assets June 30, 2008 Total Fund Balances - Total Governmental Funds $ 81,281,515 Amounts reported for Govemmental Activities in the Statement of Net Assets were different because: Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. Except for the internal service funds reported below, the capital assets were adjusted as follows: Non -depreciable 84,207,278 Depreciable, net (Less $4,352,163 reported in the Internal Service Funds for governmental activities) 97,783,181 Total capital assets 181,990,459 Revenues which were deferred on the Governmental Funds Balance Sheet because they were not currently available were reported as revenue in the Statement of Activities and Changes in Net Assets and accordingly increased the net assets on the Statement of Net Assets. 15,949,949 Internal Service Funds were used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The assets and liabilities of the Internal Service Funds were included in governmental activities in the Govemment-Wide Statement of Net Assets. (Less $989,064 reported in the Equipment Replacement Fund which is entirely allocated to the business -type activities and 51,441,658 allocated to business -type activities from the remaining Internal Service Funds) 12,952,448 Deferred charges, such as bond issuance costs were expenditure in the governmental funds but were capitalized and amortized over the life of the bonds in the Government -Wide Financial Statements. 1,527,430 Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liability on the Governmental Funds Balance Sheet. (Less 510,895 reported in the Internal Service Funds for governmental activities) (565,727) Long-term liabilities were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet. Compensated absences - due in within one year (Less $20,175 reported in the Internal Service Funds for governmental activities) (463,035) Compensated absences - due in more than one year (Less $118,300 reported in the Internal Service Funds fur governmental activities) (3,011,242) Lang -terra liabilities - due within one year (Less $60,005 reported in the Internal Service Funds for goverrunental activities) (1,30) 355) Long-term liabilities - due in more than one year (Less $131,143 reported in the Internal Service Funds for governmental activities) (72,656,526) Total long-term liabilities (77,433,158) Net Assets of Governmental Activities 5 215,702,916 See accompanying Notes to Basic Financial Statements. 37 City of Petaluma Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the year ended June 30, 2008 REVENUES: 'faxes $ Licenses, permits and fees Fines, forfeitures and penalties Use of money and property Intergovernmental Charges for current services Other Total revenues EXPENDITURES: Current: General government Community development Police Fire Parks and recreation Public works Capital outlay Debt service: Principal Interest Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Proceeds from sale of asset Transfers in Transfers out Total other financing sources (uses) Net change in fund balances FUND BALANCES: Beginning of year End of year $ See Accompanying Notes to the Basic Financial Statements. Major Funds Impact General HOME/Begin Redevelopment Fees Fund Special Revenue Special Revenue Special Revenue 22,955,868 $ - $ 3,277,878 $ 1,784,715 - - 4,490,051 661,025 - - - 687,165 24,374 234,661) 390,344 4,949,185 3,457,520 613,890 5,301,614 - 31,021 - 5,846,205 - 459,583 42,185,777 3,481,794 4,617,032 4,680,395 5,058,079 - - 1,894,860 3,958,001 787,671 2,478,069 16,481,202 - - 5,773 8,134,710 - 6,823 5,051,947 - - 74,223 6,083,294 - - 79,541 5,730,621 - - - 48,434,913 3,958,001 787,671 2,613,879 (6,249,136) (476,207) 3,829,361 2,236,516 10,992 - - - 1,327,806 - - 201,398 (438,000) - (880,192) (3,354,905) 900,798 - (880,192) (3,153,507) (5,348,338) (476,207) 2,949,169 (916,991) 8,963,184 637,765 17,773,177 11,708,115 3,614,846 S 161,558 $ 20,722,346 S 10,791,124 3S Major Funds - 5,058,079 6,433,072 1,036,010 Non -Major Total City Redevelopment Governmental Governmental Capital Project Capital Project Funds Funds S - $ 13,499,242 $ 1,548,845 $ 41,281,833 - 645 36,358 6,311,769 1,184,000 - 207,584 868,609 69,362 1,711,590 277,316 3,394,711 1,044,310 125,938 4,419,952 14,610,795 - - 368,534 5,701,169 2,137,403 399,854 8,843,415 3,251,075 15,337,415 7,58,443 81,011,931 - - - 5,058,079 6,433,072 1,036,010 16,587,683 - - 379,710 16,866,135 - - 3,879 8,165,412 - - 521,787 5,647,957 - - 1,158,420 7,321,55 9,089,539 4,411,744 96,615 19,328,719 - - 11184,000 1,184,000 - 3,484,03 3,484,03 9,089,539 10,844,816 7,884,444 83,643,263 (5,838,464) 4,492,599 (636,001) (2,631,332) 10,992 12,300,549 10,110,729 5,506,718 29,447,200 (241,443) (19,766,461) (5,246,877) (29,927,878) L,059,106 (9,655,732) 259,841 (469,686) 6,220,642 (5,163,133) (366,160) (3,101,018) 8,481,849 30,814,817 6,003,626 84,382,533 5 14,702,491 5 25,651,684 $ 5,637,466 S 81,281,515 39 City of Petaluma Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government -Wide Statement of Activities and Changes in Net Assets For the year ended June 30, 2005 Net Change in Fund Balances - Total Governmental Funds S (3,101,018) Amounts reported for governmental activities in the Statement of Activities were different because: Governmental Funds reported capital outlay as expenditures. However, in the Government -Wide Statement of Activities and Changes in Net Assets, the cost of those assets was allocated over their estimated useful lives as depreciation expense. This was the amount of capital assets recorded in the current period. Capital assets additions (Less 51,596,650 reported in the Internal Service Funds for governmental activities) 19,15528 Net Assets, but they did not require the use of current financial resources. Therefore, depreciation expense was not reported as expenditures in Governmental Funds. (Less $700,032 reported in the Internal Service Funds for governmental activities) (4,373,024) Loss on the disposal of capital assets is reported in the Government -Wide Statement of Activities and Changes in Net Assets, but they do not require the use of current financial resources. therefore, it is not reported as revenues in Governmental Funds. Proceeds from sale of capital assets (10,992) Loss on disposal of capital assets (443,353) Revenue which were deferred on the Governmental Funds Balance Sheet because they were not currently available were reported as revenue in the Statement of Activities and Changes in Net Assets and accordingly increase the net assets on the Statement of Net Assets 4,753,306 Internal service funds are used by management to charge the costs of certain activities to individual funds. The net expense of certain activities of certain internal service funds is reported with governmental activities. (Less $(370,30) reported in the Equipment Replacement Fund which is entirely allocated to the business -type activities and $754,554 allocated to Business -type activities from the remaining Internal Service Funds) 3,112,218 Interest expense on long-term debt was reported in the Government -Wide Statement of Activities and Changes in Net Assets, but they did not require the use of current financial resources. Therefore, interest expense was not reported as expenditures in Governmental Funds. The amount represents the change in accrued interest from prior year. 35,312 Deferred charges, such as bonds issuance cost, were expenditures on the Governmental Funds Financial Statements. However, in the Government -Wide Statement of Activities and Changes in Net Assets, the bond issuance cost were capitalized and amortized over the life of the bonds. Current year amortization of bond issuance costs 37,202 Bond discount was recognized as expenditure on the Governmental Funds Financial Statements. However, in the Government -Wide Statement of Activities and Changes in Net Assets, the bond discount was capitalized and amortized over the life of the bonds. This amount represent the current year amortization. (61,693) Compensated Absences were reported on the Government -Wide Statement of Activities and Changes in Net Assets, but they did not require the use of current financial resources. Therefore, compensated absences were not reported as expenditures in the Governmental Funds. (102,207 Repayment of bond principal was an expenditure in Governmental Funds, but the repayment reduced lung -term liabilities in the Government -Wide Statement of Net Assets, Long-term debt repayments 1,184,000 Change in Net Assets of Governmental Activities S 20,184,282 See accompanying Notes to Basic Financial Statements. 40 Proprietary Fund Financial Statements Airport Fiuxd - This fund accounts for the daily operation and maintenance of the Petaluma Airport, including capital improvements. Ambulance Fund - The fund is used to account for the activities related to providing ambulance services to the citizens of the community. Development Services Fund - This fund accounts for cost recovery services, including building services, development services and planning services provided to developers, where fees charged are required to cover cost of providing services. Marina Fund - This fund accounts for the daily operation and maintenance of the Petaluma Marina, structural and equipment improvements, and planning and implementing promotional campaigns. Transit Fund - The fund is used to account for the operation of City's transit services. Waste Water Utilihj Fund - This fund is part of the Department of Water Resources and Conservation, which provides comprehensive and integrated management of Petaluma's water resources, including collection and treatment of wastewater. Water Utility Fund - T1 -ds fund is part of the Department of Water Resources and Conservation, which provides comprehensive and integrated management of Petaluma's water resources, including reliable delivery of high quality water. Intental Service Funds - These funds are used to account for goods and services provided by the internal service departments to other City departments, on a cost reimbursement basis. 41 City of Petaluma Statement of Net Assets Proprietary Funds June 30, 2008 Major Funds Some amounts reported for business -type activities in the statement of net assets are different because certain internal service fund assets and liabilities are included with business -type activities. Equipment replacement (SA) fund is completely allocated to the business -type activities. Net assets of business -type activities See Accompanying Notes the the Basic Financial Statements. 42 Development Airport Ambulance Services Marina Fund Fund Fund Fund ASSETS Current assets: Cash and investments $ 708 $ 838 $ 526,399 $ 400 Restricted cash and investment 537,955 - - - Receivables: Accounts receivable, net 58,249 331,615 - 18,070 Intergovernmental receivable 88,401 - - - Inventories 45,566 - - 3,913 Deposits and prepaids 9,372 - 561 197 Total current assets 740,251 332,453 526,960 22,580 Non-current assets: Deposits receivable 24,630 - - - Deferred charges, net 349,545 - - - Capital assets: Nondepreciable 12,153,277 - - - Depreciable 9,758,515 480,921 356,272 4,823,560 Less accumulated depreciation (7,998,211) (364,162) (76,344) (2,408,270) Total capital assets 13,913,581 116,759 279,928 2,415,290 Total non-current assets 14,287,756 116,759 279,928 2,415,290 Total assets 15,028,007 449,212 806,888 2,437,870 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 21,628 21,996 52,346 72,71.1 Wages payable 5,211 48,815 15,174 - Interest payable 123,727 - 13,991 177,849 Interfund payable 33,000 912,400 - 276,000 Refundable deposits 150,541 - 874,894 18,405 Compensated absences - due within one year 1,657 2,428 19,548 47 Long-term debt - due within one year 323,329 - 61,701 232,626 Total current liabilities 659,093 985,639 1,037,654 797,641 Non-current liabilities: Non-current deposits 24,630 - - - Advances from other funds - - - Claims payable - - - - Compensated absences - due in more than one year 1,791 153,744 123,189 - Long-term debt - due in more than one year 7,095,140 - 206,024 5,018,457 Total non-current liabilities 7,121,561 153,744 329,213 5,018,457 Total liabilities 7,780,654 1,139,383 1,366,867 5,816,096 NET ASSETS Invested in capital assets, net of related debt 6,495,112 116,759 12,203 (2,855,793) Restricted for debt service 537,955 - - - Unrestricted 214,286 (806,930) (572,182) (522,435) Total net assets S 7,247,353 $ (690.171) S (559,979) S (3.378,2228) Some amounts reported for business -type activities in the statement of net assets are different because certain internal service fund assets and liabilities are included with business -type activities. Equipment replacement (SA) fund is completely allocated to the business -type activities. Net assets of business -type activities See Accompanying Notes the the Basic Financial Statements. 42 43 Major Funds Governmental Activities Transit Waste Water Water Utility Internal Fund Utilitv Fund Fund Total Service Funds $ 70,685 `6 18,007,637 $ 4,010,602 $ 32 617,269 $ 14,636,967 - 79 806,182 1,3441,216 - 5,139 1,741,768 981,913 3,136,754 60,725 168,632 - - 257,033 - 17,658 - 262,560 329,697 10,661 3,510 1,750 5,294 20,684 6,647 265,624 19,751,234 6,066,551 27,705,653 14,715,000 - - - 34,630 804,054 - 135,190 178,562 663,297 - 695,769 147,630,2.42 2,169,074 163,648,363 - 3,011,609 60,579,165 56,560,252 135,570,294 7,601,570 (1,087,133) (28,152,377) (26,887,062) (66,973,559) (2,365,204) 2,620,245 180,057,030 31,842,264 231,245,097 5,236,366 2,620,245 180,192,370 32,020,826 31,933,024 6,040,420 2,885,869 199,943,454 38,087,377 259,638,677 30,755,420 165,809 3,073,513 1,206,425 4,614,431 336,121 5,253 58,830 70,623 203,906 57,473 - 3,942,967 67,146 3,325,680 10,895 - - - 1,31,400 - 10,573 - 125,957 1,180,370 - 569 25,310 37,519 77,078 20,175 - 385,552 249,126 1,272,334 60,005 182,204 6,486,172 1,746,796 11,895,199 48069 - 29,713 - 54,343 - - - - - 4,638,138 764 81,370 230,879 581,737 118,300 - 137,612,404 8,247,758 148,179,783 131,143 764 127,723,487 8,468,637 148,815,863 4,887,581 182,968 134,209,659 10,215,433 160,711,062 5,372,230 2,620,245 52,059,074 23,345,380 81,793,980 5,045,218 - 79 806,182 1,344,216 - 82,656 13,674,642 3,720,382 15,790,419 10,337,952 S 2,702,901 $ 65,733,795 $ 27,871,944 $ 98,927,615 $ 15,383170 1,441,658 989,0{x'4 $ 101358.337 43 City of Petaluma Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds For the year ended June 30, 2008 See Accompanying Notes the the Basic Financial Statements. 44 Major Funds Development Airport Ambulance Services Marina Fund Fund Hund Fund OPERATING REVENUES: Charges for sales $ 765,122 $ 70 $ - S 15,316 Charges for services 888,071 1,855,147 952,925 230,318 Connection fees - - - - Total operating revenues 1,653,143 1,855,217 952,925 245,634 OPERATING EXPENSES: Cost of services 1,056,969 1,896,048 973,114 359,679 Claims - - - - General and administrative 223,220 380,769 275,864 148,824 Depreciation and amortization 253,355 36,349 7€,387 117,052 Total operating expenses 1,533,544 2,313,166 1,323,365 625,555 Operating income (Ioss) 119,599 (457,949) (370,440) (379,921) NONOPERATING REVENUES (EXPENSES): Intergovernmental non-operating 318,793 - - - Investment earnings and rent 44,162 - 29,892 3,040 Interest expense (53,()35) (33,117) (25,2276) (182,383) Gain or (loss) on disposal of assets - 3,000 - - Total nonoperating revenues (expenses) 309,920 (30,117) 4,666 (179,343) Income (loss) before operating transfers 429,519 (488,066) (365,774) (559,264) TRANSFERS: Transfers in 124,678 - - - Transfers out - Total transfers 134,678 - - Change in net assets 554,197 (488,066) (365,774) (559,264) NET ASSETS. - Beginning of year 6,693,156 (202,105) (194,205) (2,818,964) End of year $ 7,247,353 $ (690,171) $ (559,979) $ (3,375,128) Some amounts reported for business -type activities in the statement of activities are different because the net revenue (expense) of certain internal service funds is reported with business -type activities. Equipment replacement (13A) fund is completely allocated to the business -type activities. Change in net assets of business -type activities See Accompanying Notes the the Basic Financial Statements. 44 754,554 (370,230) S 6,502,004 45 Major Funds Governmental Activities Transit Waste Water Water Utility Internal Fund Utility Fund Fund Total Service Funds $ - $ 15,532,642 $ 11,2271,388 $ 27,534,538 $ 16,358 201,802 9,007 69,665 4,206,885 7,525,634 - 1369,2.11 623,009 1,992,250 - 201,802 16,910,890 11,914,062 33,733,673 7,541,992 1,611,030 6,710,407 7,933,494 20,540,741 2,913,637 - - - - 118,653 609,529 2,416,212 1,779,134 5,833,552 1,240,523 284,596 1,396,355 1,270,925 3,433,019 912,620 3,505,155 10,522,974 10,983,553 29,807,312 5,185,433 (2,303,353) 6,387,916 930,509 3,926,361 2,356,559 1,987,612 399,248 - 2,705,653 - 6,707 824,464 213,419 1,121,684 778,328 - (1,249,415) (60,454) (1,603,630) (24,691) (35,066) - - (37,066) (44,654) 1,959,253 (25,703) 153,965 2,194,641 658,983 (344,100) 6,362 213 1,083,474 6,118,002 3,015,543 - - 124,678 648,236 - - (125,000) (125,000) (167,236) - - (125,000) (3222) 481,000 (344,100) 6,362,2I3 958,474 6,117,680 3,496,542 3,047,001 59,371,582 26,913,470 11,886,628 S 2,702,901 S 65,733,795 $ 37,871,944 $ 15,383,170 754,554 (370,230) S 6,502,004 45 City of Petaluma Combining Statement Of Cash FIows Proprietary Funds For the year ended June 30, 2008 CASH FLOWS FROM OPERATING ACTNITIES: Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees for services Claims paid Net cash provided (used) by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Due to other funds Advance from other funds Debt forgiveness Other revenues Transfers in Transfers out Net cash provided (used) by noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Intergovernmental cash receipts Acquisition of capital assets Proceeds from sale assets Proceeds of long term debt Payments of long term debt Interest paid Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Interest received from investments and rent Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of year End of year Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Changes in: Accounts receivable Inventories Deposits and prepaids Non-current assets Accounts payable and accrued liabilities Wage payable Refundable deposits Non-current deposits Accrued claims Accrued compensated absences Total adjustments Net cash provided (used) by operating activities NON CASH ACTIVITIES: Capital contribution to City See accompanying Notes to Basic Financial Statements. E0 Major Funds Development Airport Ambulance Services Marina Fund Fund Fund Fund $ 1,694,461 $ 1,876,810 $ 977,135 $ 242,545 (1,059,667) (1,886,878) (1,072101) (310,321) (70,271) (320,538) (183,248) (150,002) 414,523 (330,606) (278,214) (217,778) 33,000 361,000 219,000 124,678 - - 157,678 361,000 219,000 235,197 - - - (1,115,555) (3,196) (33:780 1 3,000 - - (277,569) - 267,725 188,728 (57,820) (33,117) (11,235) (193,261) (1,215,747) (33,313) (76,2931 (4,532) 44,162 29,892 3,040 44,162 - 29,892 3,040 (599,384) (2,919) (324,614) (270) 1,138,447 3,757 851,013 670 538,663 $ 838 $ 526,399 $ 400 5 119,399 S (457,949) $ (370,440) $ (379,911) 253,355 36,3.49 74,387 117,052 41,316 21,593 24,210 (3,089) (9,310) - - (2,309) (9,372) (561) 7,387 (7,021) - - - 3,818 9,170 (60,217) 57,372 1,893 14,836 11B (818) 12,166 - (38,209) 1,525 7,021 - (14,617) 1,056 45,393 92A98 (360} 29.4,92.4 127,343 92,2226 162,143 S 414,523 S (330,606) $ (278,214) S (217.7781 $ - $ - $ - $ Major Funds Governmental Activities Transit Waste Water Water Utility Internal Fund Utilitv Fund Fund Total Service Funds S 200,450 $ 16,358,095 S 11,829,833 $ 33,179,329 5 7,472,673 (1,619,021) (13,045,739) (7,601,538) (26,595,265) (2,768,966) (612,109) (2,408,716) (1,794,475) (5,689,359) (1200,769) - - (1,359,669) (2,030,680) 903,6-30 2,433,820 _ 894,705 2,143,219 - 613,000 - - - 124,678 648,236 - - (125,000) (12.5,000) _ (167,235) - (125,000) 612,678 481,000 1,925,920 399,248 2,560,365 - - (38,659,672) (520,838) (50,632,042) (1,770,506) 7,126 - I01126 (44,654) - 52,008,040 (218,066) 51,968,858 (56,652) - 733,747 (61,986) 386,328 (13,796) 1,933,046 4,491,363 (800,890) 4,393,635 (1,885,608) 6,797 824,464 213,419 1,121,684 7731,328 6,707 824,464 213,419 1,121,684 728,328 (90,927) 6,219,467 1,721,349 6,922702 1,466,939 I61,612 11,788,119 3,095,435 17,038,783 13,170,028 5 70,685 S 18.007.716 $ 4.816,784 S 21961,485 S 14,636,967 S (^_ 303,353) $ 6,387,916 $ 930,509 S 3,926,361 S 2,356,559 28-4,596 1,396,355 1,270,925 3,433,019 912,620 (1,352) (55€,.340) (84,229) (555,889) (59,253) 4,573 - 13,888 6,842) (293) (3,269) 2,661 (717) (3,871) (3,422) 1,000 - 4,0.31 (1,980) (57,745) (20,868) (6,337,8.33) 272,660 (6,075,908) 196,016 (949) 7,022 1,613 23,717 12,171 10,573 (150) 42,OB4 27,989 - - 1,545 - (6,051) - - - - (1,241,0I6) (1,631) 474 (16,954) 120,476 27,583 272,673 (5,484,276) 1,503,311 (3,031,656) (213,340) S (2.030,68(l} S 903,640 5 2.433,820 S 894,705 5 2.143,219 S - $ 47 48 Fiduciary Fund Financial Statements Private Purpose Trust Funds: These funds account for assets legally held in trust for specific purpose. Aaencv Funds: These funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. They are used to account for assets held in an agency capacity for others and therefore cannot be used to support the City's programs. 49 City of Petaluma Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2008 NET ASSETS Held in trust See Accompanying Nates to the Basic Financial Statements. 50 $ 182,356 Private Purpose Trusts Agency Funds Funds ASSET'S Cash and investments $ 182,356 $ 3,541,185 Intergovernmental receivable - 5,797 Total assets 182,356 $ 3,550,282 LIABILITIES Accrued liabilities - $ 3,550,282 Total liabilities - $ 3,550,282 NET ASSETS Held in trust See Accompanying Nates to the Basic Financial Statements. 50 $ 182,356 City of Petaluma Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the year ended June 30, 2008 See Accompanying Notes to the Basic Financial Statements. 51 Private - Purpose Trusts ADDITIONS: Investment income $ 8,408 Total additions 8,108 DEDUCTIONS: Program costs 1,950 Total deductions 1,950 CHANGES IN NET ASSETS 6,458 NET ASSETS: Beginning of year 175,898 End of year $ 182,356 See Accompanying Notes to the Basic Financial Statements. 51 52 City of Petaluma Notes to Basic Financial Statements For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Petaluma, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. A. Reporting Entitj The City was incorporated as a general law City by the state legislature on April 12, 1858. The City currently operates under a Council -Manager form of government established under a charter election in 1947. The City provides the following services as authorized by its charter: police and fire protection, ambulance service, transit service, parks and recreation, public works, community development, and general administrative services. In addition, the City owns and operates a water and waste water system, a municipal airport, and a marina. As required by generally accepted accounting principles in the United States, these basic financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and either the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City's financial statements to be misleading or incomplete. Component units for which the City is considered financially accountable are described below: Petaluma Communitv Development Commission The Petaluma Community Development Commission (PCDC) was established by the City Council under the State of California Health and Safety Code, Section 34100, et seq. on September 27, 1976, to perform redevelopment activities for the City. Although PCDC is a separate legal entity from the City, it is reported as if it were part of the primary government because the City Council is the governing board, and it is financially accountable to the City. Separate basic financial statements are issued by PCDC, to comply with the redevelopment agency guidelines as established by the State of California. A copy may be obtained upon request from the City of Petaluma. PCDC is comprised of two project areas, Central Business District (CBD) and Petaluma Community Development project area (PCD), which were fiscally merged during 2006/2007. City of Petaluma Public Financing Corporation The City of Petaluma Public Financing Corporation (PPFC) was established in November of 1990 and is a not-for-profit benefit corporation, created under the laws of the State of California. Although PPFC is a separate legal entity from the City, it is reported as if it were part of the primary goverrunent, because its sole purpose is to be a financing entity for the City. PPFC does not issue separate basic financial statements. 53 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued A. Reporting Entity, Continued Petaluma Public Financinz Authoritv The Petaluma Public Financing Authority (PPFA) was established in May, 1996 as a joint powers authority between the City and PCDC. Its purpose was to issue revenue bonds, which provided funds for a consolidated special assessment bond refunding. Although PPFA is a separate Iegal entity from the City, it is reported as if it were part of the primary government, because its sole purpose is to be a financing entity for the City. PPFA does not issue separate basic financial statements. Since the City Council serves as the governing board for these entities, they are considered blended component units. Blended component units, although legally separate entities, are in substance, part of the City's operations and so data from these units are reported with the interfund data of the primary government. B. Basis of Accoiiiitittg acrd Measuretlrent Focus The accounting policies of the City conform to generally accepted accounting principles in the United States for local governmental units. The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by Providing a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purpose which they are to be spent and means by which spending activities are controlled. Gouerinnent - Wide Financial Statenients The City's government -wide financial statements include a Statement of Net Assets and a Statement of Activities and Changes in Net Assets. These statements present summaries of governmental and business -type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. These government -wide financial statements are presented on an "econmdc resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Certain types of transactions are reported as program revenues for the City in three categories: Charges for services Operating grants and contributions Capital grants and contributions 54 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Goverrnnent -Wide Financial Statements, Corztbwed Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Assets have been eliminated except those representing balances between the governmental activities and the business - type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated, however, those transactions between governmental and business -type activities have not been eliminated. The following interfund activities have been eliminated: Interfund receivable and payable Transfers in and out The City applies all applicable GASB pronouncements (including all NCGA Statements and Interpretations currently in effect) as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the committee on Accounting Procedure. Governmental Fund Financial Statentents Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non -major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in fund balances as presented in these statements to the net assets presented in the government -wide financial statements. The City has presented all major funds that met those qualifications. All governmental funds are accounted for on a spending or "current financial resottrces" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balances. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are real and personal property tax, other local taxes, franchise fees, forfeitures and penalties, motor Iicense fees, rents and concessions, interest revenue, and state and federal grants and subventions. Expenditures are recorded in the accounting period in which the related fund liability is incurred. 55 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Acco7trttirtg cutd Measrtt•etrteitt Focus, Continued Governmental Fund Financial Statements, Continited Unearned revenues arise when potential revenues do not meet both the "measurable" and "available" criteria for recognition in the current period. Unearned revenues also arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the unearned revenue is removed from the balance sheet and revenue is recognized. Certain indirect costs are included as part of the program expenses reported for individual functions and activities. The Reconciliation of the Fund Financial Statements to the Government -Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34, The City determined the following funds to be major funds in fiscal year 2008: General Fund - The General Fund is use to account for resources traditionally associated with government, which are not required legally, or by sound financial management, to be accounted for in another fund. Home/Bevin Special Revemie Fttnd - The Home/Begin Special Revenue Fund is used to account for federal grants received under the Housing and Community Development Act of 1974. The money is used for specific programs, which provide housing to people with low and moderate income. Redevelopment Special Revemte Fnnd - This fund accounts for the redevelopment agency's 20% set- aside, as required by law, of tax increment for Low and Moderate Income Housing. The activity of this fund consists of supporting development of affordable housing in the community. Also included in this fund are redevelopment agency donations and grant revenues. Impact Fees Fund - This fund is used to account for fees received from local development projects, which are used for the construction of major public improvements, assistance to low income people in the community, acquisition, development, and enhancement of neighborhood and community parks. Cite Capital Project Fund - These funds account for the collection of resources and the related expenditure on acquisition and construction of major capital improvement projects in the City, other than those accounted for in proprietary funds. Redevelopment Cai7ital Proiect Fund -TI-Lis funds accounts for the administration, programs and capital projects undertaken in the Redevelopment Agency. 56 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis ofAccorrlrtitig acrd Measrrrerrrerrt Focus, Continued Pro nietatir Fund Financial Statements Proprietary fund financial statements include a Statement of Net Assets, a Statement of Revenues, Expenses and Changes in Net Assets, and a Statement of Cash Flows for all proprietary funds. Proprietary funds are accounted for using the "ecortotrtic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Assets. The Statement of Revenues, Expenses and Change in Fund Net Assets presents increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which liability is incurred. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses. The City determined all enterprise funds to be major funds in fiscal year 2008: Airvort Fluid - This fund accounts for the daily operation and maintenance of the Petaluma Airport, including capital improvements. Ambulance Fund - The fund is used to account for the activities related to providing ambulance services to the citizens of the community. Develoz7rttent Services Fund - This fund accounts for cost recovery services, including building services, development services and planning services provided to developers, where fees charged are required to cover cost of providing services. Marina Fund - This fund accounts for the daily operation and maintenance of the Petaluma Marina, structural and equipment improvements, and planning and implementing promotional campaigns. Transit Fund - The fund is used to account for the operation of City's transit services. Waste Water UtiIihl Fund - This fund is part of the Department of Water Resources and Conservation, which provides comprehensive and integrated management of PetaIuma's water resources, including collection and treatment of wastewater. Water Utility Frnid - This fund is part of the Department of Water Resources and Conservation, which provides comprehensive and integrated management of Petaluma's water resources, including reliable delivery of high quality water. 57 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accotiliting acid Measill'etiietit Foctts, Continued Propn&ietaril Fund Financial Statetntents, Continued Internal service fund balances and activities have been combined with governmental activities in the government -wide financial statements, and are comprised of the following funds: Etttt�lovee Benefits Fund - The fund accounts for City employees' dental, unemployment and vision benefits, and retiree benefits. General Services Fund - The fund accounts for purchasing, printing and mail services. Information Set -vices Fund - This fund accounts for the cost of purchasing, operating and maintaining the City's voice, data and computer systems. Risk Management Fund - The fund accounts for the accumulation of the resources and expenses related to the City's risk management activities and general insurance programs. Velticle/Eauivnient Replacetnent Fund - The fund accounts for the accumulation of resources, and related expenses incurred for the replacement of major equipment and vehicles in the City. The fund is divided into two sub -funds, one for equipment acquired for general government activities, and one for equipment acquired for business -type activities. Workers' Co ipensation Fund - The fund accounts for the accumulation of resources, and expenses related to funding workers' compensation benefits for City employees. Fiduciarif Fitted Financial Statetttents Fiduciary Fund Financial Statements include a Statement of Net Assets and a Statement of Changes in Fiduciary Net Assets. The City's fiduciary Funds represent Agency Funds and Private -Purpose Trust Funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds are accounted for using the accrual basis of accounting. The Private -Purpose Trust Funds are used to account for resources legally held in trust for special purposes. These funds are accounted for using the accrual basis of accounting. C. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration. Encumbrances outstanding at year-end are reported as reservations of fund balances and do not constitute GAAP basis expenditures or liabilities because the commitments will be honored during the subsequent year. The commitments will be re - appropriated and honored in the subsequent year. 58 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued D. Cash, Cash Equivalents, and Investments The City pools its available cash for investment purposes. The City considers pooled cash and highly liquid investments held with financial institutions, a fiscal agent, and in a pooled account with the State, to be cash equivalents. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain hlvestinents and for External Inveshuent Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. The City participates in an investment pool managed by the State of California titled Local Agency Inveshnent Fuad (LAIF) which has invested a portion of the pooled funds in structured notes and asset- backed securities. LAIF's investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset -Backed Securities are subject to market risk as to change in interest rates. In accordance with GASB Statement No. 40, Deposit and Inveshnent Risk Disclosures (an amendment of GASB Statenient No. 3), certain disclosure requirements, if applicable for deposit and investment risk are specified for the following areas: Interest Rate Risk s Credit Risk Overall ■ Custodial Credit Risk ■ Concentration of Credit Risk Foreign Currency Risk E. Inventories Inventories in General Fund, which consisted primarily of supplies and parts, are recorded at cost and inventories in Proprietary Funds, which consisted primarily supplies, meters, and vehicle parts held for future consumption, are record at the lower of cost or market on a first -in, first out basis. Reported expenditures/ expenses reflecting the purchase of supplies have been restated to reflect the consumption method of recognizing inventory -related expenditures/expenses. A reservation of fund balance has been reported in the governmental funds to show that inventories do not constitute "available spendable resources", even though they are a component of net current assets. F. Interfund Transactions Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds" (i.e., current portion of interfund loans)." Any residual balances outstanding between the governmental activities and business -type activities are reported in the governmental -wide financial statements as "internal balances." 59 City of Petaluma Notes to Basic Financial. Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. Land Held for Resale Land held for resale is carried at lower of cost or market, but not greater than the net realizable value. An amount equal to the carrying value of land is reserved in fund balance because such assets are not available to finance current operations. H. Capital Assets Capital assets, which include land, buildings, improvements, equipment and infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business - type activities in the Governmental -Wide Financial Statement. Capital assets are recorded at historical cost or estimated historical cost if actual cost is not available. Donated assets are valued at their estimated fair value on the date donated. The City's policy is to capitalize all vehicles, office equipment and items with an inherently lower value with a unit cost of `5,000 or more, and a useful life of one year or more. Land, easements, land improvements, buildings, building improvements and infrastructure with a cost exceeding $50,000 and a useful life exceeding one year are also capitalized. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows: Vehicles and equipment 3.15 years Building and improvements 10-50 years Infrastructure 20-50 years In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34 which requires the inclusion of infrastructure capital assets in local governments' basic financial statements. In accordance with GASB Statement No. 34, the City has included all infrastructures within the Basic Financial Statements. The City defines infrastructure as the basic physical assets that allow the City to function. The assets include: Sidewalks and bridges z Street system r Sewer system v Pipes The assets include streets, bridges, sidewalks, drainage systems, and lighting systems, etc. Each major infrastructure system can be divided into subsystems. For example the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, landscaping and land. These subsystems were not delineated in the basic financial statements. The appropriate operating department maintains information regarding the subsystems. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest on construction -related debt incurred during the period of construction for business -type and proprietary funds assets is capitalized as a cost of the constructed assets. 60 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued H. CapztalAssets, Continued Interest costs incurred on borrowed funds during the period of construction of capital assets for Enterprise Fund are capitalized, when material, as a component of the cost of acquiring such assets. Interest in the amount of $343,399 Airport Fund, and $2,064,812 Waste Water Fund was capitalized during the year ended June 30, 2008. For all infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure reporting. Estimated historical costs were developed in one of the following methods: 1) Use of historical records where available. 2) Standard unit costs appropriate for the construction/ acquisition date of asset. 3) Present replacement cost indexed by a reciprocal factor of the price increase from the construction/ acquisition date to the current date. The accumulated depreciation, defined as the total depreciation from the date of construction/acquisition to the current date, was computed on a straight Iine basis, using industry accepted life expectancies for each infrastructure subsystem. The book value was then computed by deducting the accumulated depreciation from the estimated historical cost. Cap_i_tal Assets Aottired Under Lease Purchase Co?zh°acts The long-term principal portion of debt on non-proprietary capital assets acquired through lease purchase contracts is accounted for in the government -wide financial statements as "capital Iease obligations". A capital asset is recorded at the net present value of total lease payments in the government -wide financial statements. I. Interest Payable In the Government -Wide Financial Statements, interest payable for long-term debt is recognized as the liability is incurred in the appropriate activity. In the Fund Financial Statements, propriety fund types recognize the interest payable when the liability is incurred. J. Deferred Revenue In the Government -Wide Financial Statements, deferred revenue is recognized for transactions for which revenue has not yet been earned. In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the revenue recognition criteria based on the modified accrual basis of accounting. The City records deferred revenue for transactions for which revenues have not been earned, or for which funds are not available to meet current financial obligations. Typical transactions for which deferred revenue is recorded are; interest earned but not received on notes receivable, intergovernmental revenue earned but not received within availability period, and revenue received, but not earned at year-end. 61 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued K. Compensated Absences The City has compensated absences of regular vacation and sick leave which are accounted for in accordance with generally accepted accounting principles (GAAP). Employees may accumulate earned vacation time. Management employees are limited to the amount, which may be earned, in a three year period. All other employees are limited to the amount, which may be earned, in a two year period. Employees may accumulate unused sick leave without limits. The unused sick leave vests after five years of service for firefighters, and after ten years of service for all other employees. Vested sick leave is payable upon death or retirement for all employees at 50% of the vested amount, up to a limit of 1,000 hours for fire battalion chiefs, 720 hours for firefighters, 600 hours for police mid -management employees, and 480 hours for all other employees. All employees may elect, in lieu of a cash payment, to have all vested sick leave applied to their years of service under the retirement plan. Public safety employees are also eligible for vested sick leave to be paid upon a disability retirement at 50% of the vested amount, up to a limit of 1,000 hours for firefighters, and 600 hours for all police officers. A liability is calculated for all of the cost of compensated absences based on benefits earned by employees in the current period, for which there is a probability of payment at termination. The salary and related payroll costs are those in effect as of June, 30, 2008. For governmental funds, compensated absences are recorded as current and non-current liabilities only on the government -wide financial statements. For proprietary funds, current and non-current liabilities for compensated absences are recorded as expenses in both the government -wide financial statement and the fund financial statements. L. Long -Terns Debt Government -Wide Financial Statements Long-term debt and other Iong-term obligations are reported as liabilities in the appropriate activities. Bond premiums and discounts and issuance costs are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of premium or discount. Issuance costs are reported as deferred charges. Fund Financial Statements Long-term debt is not reported in the Governmental Fund Financial Statements but is shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government -Wide Statement of the Net Assets. In the Fund Financial Statements, governmental funds recognized bond premiums and discounts and issuance costs during the current period. The current year amount of debt issued is reported as other financing sources. Premiums on debt issuance are reported as other financing sources while discounts on debt issuance are reported as other financing uses. All debt issuance costs are reported as debt service expenditure. 62 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued M. Net Assets and Fund Equihj Government -Wide Financial Statements Net assets are classified in the following categories: hivested in Capital Assets, Net of Related Debt - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt attributed to the acquisition, construction, or improvement of the assets. Restricted Net Assets - This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments. Unrestricted Net Assets - This amount is all net assets that do not meet the definition of "invested in capital assets, net of related debt" or "restricted net assets." Fund Financial Statements Reservations represent those portions of fund equity which are not appropriable for expenditure or which are legally segregated for specific future use. Designated fund balances represent tentative plans for future use of financial resources. Undesignated fund balance indicates that portion of the fund balance which is available for appropriation in future periods. N. Use of Restricted and Unrestricted Net Asset When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the City's policy is to apply restricted net assets first. O. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions. 63 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued P. Revenues Propertv Taxes Article XIII of the California Constitution (more commonly known as Proposition 13) limits ad valorem taxes on real property to one percent of value plus taxes necessary to pay indebtedness approved by voters prior to July 1, 1978. The Article also established the 1975/76 assessed valuation as the basis and limits annual increases to the cost of living, not to exceed two percent, for each year thereafter. Property may also be reassessed to full market value after a sale, transfer of ownership, or completion of new construction. The State is prolhibited under the Article from imposing new ad valorem, sales, or transactions taxes on real property. Local government may impose special taxes (except on real property) with the approval of two-thirds of the qualified voters. Property taxes attached as a lien on the property as of January 1. Secured property taxes are levied on July 1 and are due in two installments by December 10 and April 10. The County of Sonoma bills and collects property taxes on behalf of the City using an alternative method of distribution known as the "Teeter Plan." The State Revenue and Taxation Code allows counties to distribute secured real property and supplemental property taxes on an accrual basis resulting in full payment to the City each fiscal year. Any subsequent delinquent payments and related penalties and interest will revert to Sonoma County. The City reports property tax revenue net of collection fees. Sales Tax Revenue The City accrues the State's July, August and September's sales tax payments for the previous fiscal year. The July, August and September payment is comprised of the actual April, May and June receipts, respectively. The July and August payments are recognized as revenue. A portion of the September payment is accrued and recorded in deferred revenue since it is measurable, but not available. The City reports sales tax revenue net of collection fees. Program Revenue In general, program revenues are derived from the activities of a particular function. Program revenues include charges for services, permits and fees, and restricted operating and capital grants. Operating and Non -Operating Revenues of Proprietary Funds Operating revenues of proprietary funds result from providing goods and services. They also include all revenue not related to capital (and relating financing) non -capital financing, or investing activities. 64 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Q. Implementation of New GASB Prottouncentents The City adopted a new accounting standard in order to conform to the following Governmental Accounting Standards Board (GASB) Statements: No. 48, Sales acid Pledges of Receivables and Fithire Revenues arui Inha-Entity Transfers of Assets and Future Revenues No. 50, Pension Disclosures Statement No. 48 improves financial reporting by establishing consistent measurement, recognition, and disclosure requirements that apply to both governmental and business -type activities. This Statement also improves the usefulness of financial reporting by requiring that specific relevant disclosures be made to inform financial statement users about the unavailability of future revenues that have been pledged or sold. Statement No. 50 is intended to improve the transparency and usefulness of financial reporting by pension plans and employers by amending GASB Statements No. 25 and No. 27 to conform to the applicable note disclosure and RSI modifications adopted in the GASB Statements No. 43 and 45. 2. CASH AND INVESTMENTS The City maintains a cash and investment pool, which includes cash balances and authorized investments for all funds. Tl-te following is a summary of cash and investments at June 30, 2008: Government -Wide Statement of Net Assets Business - Govemmentat Type Activities Activities Fiduciary Funds Total Cash and investments $ 46,33,566 $ 2) ZZ130 $ 3,726,811 $ 7Z772,537 Cash and investments with fiscal agents 27,246,931 1,344,216 - 28,591,147 Total $ 73,570,497 $ 21066,346 $ 3,726,841 $ 101,363,681 65 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 2. CASH AND INVESTMENTS, Continued Cash, cash equivalents, and investments consisted of the following at June 30, 2008: Cash and cash equivalents: Demand Depa sit $ (606,741) Total Cash and cash equivalents (606,741) Investments: Local Agency Investment Fund 22,994�148 California Assets Management Program 24,873,656 Money Market Fund 113,531 Investments in Assessment District Bond 821,675 U.S. Government Securities: FNMA 5,360,069 FFCB 1,017, 813 F14LB 1,794,9?2 FHLMC 3,961,377 Corporate Notes 6,825, 833 U.S. Treasury Notes 5,616,54 Investments with fiscal agents 28,591,147 Total Investments 101,970,425 Total Cash and Investments $ 101,363,684 A. Cash Deposits The carrying amount of the City's cash deposits were $(606,741) at June 30, 2008. Bank balances before reconciling items were $175,121. The total bank balance was collateralized or insured with securities held by the pledging financial institutions in the City's name as discussed below. The California Government Code requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150% of the City's total cash deposits. The City may waive collateral requirements for cash deposits, wNch are fully insured up to $100,000 by the Federal Deposit Insurance Corporation. The City, however, has not waived the collateralization requirements. The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures and asset seizure funds segregated in the police trust account. Interest income from cash and investments with fiscal agents is credited directly to the related fund. 66 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 2. CASH AND INVESTMENTS, Continued B. Investments Under the provisions of the City's investment policy, and in accordance with California Government Code, the City is authorized to invest or deposit in the following: Securities of the State or Local Agencies of the State Securities of the U.S. Treasury and other Federal Agencies Certificates of Deposit . Bankers' Acceptances Repurchase Agreements Commercial Paper Money Market Mutual Funds Guaranteed Investment Contracts California Assets Management Program (CAMP) State of California Local Agency Investment Fund (LAIF) In accordance with GASB Statement No, 31, Accounting and Financial Reporting far Certain Inveshments and for External Investment Pools, investments were stated at fair value using the aggregate method as follows. The total fair value adjustment resulted in a Ioss of $270,213. C. Investments in Local Agency Livestment Fund The City invests in the Local Agency Investment Fund (LAIF), a State of California investment pool. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. The City valued its investments in LAIF as of June 30, 2008, at fair value. The fair value is calculated by multiplying the account balance with LAIF times a fair value factor of 0.999950219 which is determined by LAIF. This fair value factor was determined by dividing total value by all LAIF participants' total cost. 67 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 2. CASH AND INVESTMENTS, Continued C. Ltvesbnents in Local Agency Investment Fund, Continued The City's investments with Local Agency Investment Funds (LAIF) at June 30, 2008, included a portion of the pooled funds invested in Structured Notes and Asset -Backed Securities. These investments included the following: Strttcfttred Notes are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset -Backed Securities the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables. As of June 30, 2008, the City had $22,994,148 invested in LAIF, which had invested 14.72% of the pooled investment funds in Structured Notes and Asset -Backed Securities. D. Investments in Assessment District Bond The City purchased an improvement bond for the Assessment District 2000-01 in September 2001. This bond was issued to finance a portion of the work of the Washington/ McDowell capital improvement project. The bond will be repaid by the property owners through September 2021. Interest is earned at a rate of 6% per annum. The assessment will be collected by the Sonoma County Assessor's Office. At June 30, 2008, the City had $821,675 invested in the bond. E. Iuvestments in California Asset Management Program CAMP is a separate public agency established under the provisions of the California Joint Exercise of Powers Act. This program provides California public agencies with investment management services, and accounting and arbitrage rebate calculation services of tax-exempt financings. At June 30, 2008, the City had $24,873,656 invested in CAMP. F. Cash and Investments with Fiscal Agents The Cash and Investments with Fiscal Agents in the amount of $28,591,147 include certain amounts which are held by fiscal agents to be used only for specific capital outlay, payments of certain long-term debt and maintaining required reserves. These funds have been invested only as permitted by specific State statutes governing their investment or applicable City ordinance, resolution, or bond indenture. 68 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 2. CASH AND INVESTMENTS, Continued G. .Risk Disclosures Interest Rate Risk Interest rate risk is the market value fluctuation due to overall changes in the interest rates. It is mitigated by limiting the average maturity of the City's portfolio not to exceed five years. As a means of maintaining liquidity and minimizing interest rate risk, the City's investment policy limits are as follows: Maturity "/o of Portfolio Up to one year 25°a (Minimum) one year to five years 759n (Maximum) Fair value of cash and investments held in the City Treasury grouped by maturity date at June 30, 2008, are shown below: Cash and Investment Type Cash deposits Securities of US. GoVernment Agencies FNA]A FFCB FELB FIILi11C Corporate Note US T[easury Notes Total Securities of US. Gov emment Agencies Local Agency lnvesments Funds Califomia Asset h1miagement Program Money Market Investments in Assessment Dist. Bond Cash and investments with Fiscal Agents Total 69 Investment Maturities (in years) Fair Value I year or less I -years 2-3 years 3-4 years 4-5 years Over 5 years $ (606,711) 5 (686,741) 5 - $ - $ - $ 5 5,368,069 2,016,553 1,795,703 1,547,813 1,017,813 - 1,017,813 - 1,794,922 1,016,563 770,359 3,961,377 - 2,2114,V60 1,677,317 6,875,833 995,588 3,548,3911 2,281,943 5,616,54 - 1301,9�� 4,314,332 24,576,368 4,028,616 10,726 547 9,821,485 22,994,148 22,994,148 24,873,656 24,873,656 113,531 113,531 - - 821,67-a 87,579 87,579 87,579 S7a79 87,579 383,780 28,591,147 28,591,147 - - - - - $ 101,353,684 .5 811,881,936 $ 191,813,826 5 9,988,984 S 87,579 5 87,579 5 383,780 69 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 Z CASH AND INVESTMENTS, Continued G. Risk Disclosures, Coutituied Credit Risk Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a real or perceived change in the ability of the issuer to repay its debt. According to the City's investment policy, no more than 5% of the total portfolio may be invested in securities of any single issuer, other than the US Government, its agencies and instrumentalities, and LAIR If a security is downgraded by either Moody's or S&P to a Ievel below the minimum quality required by the City, it shall be the City's policy to sell that security as soon as practicable. At June 30, 2008, the City had the following deposits and investments: Investments: Securities of U.S. Government Agencies: FNMA FFCB FHLB FHLMC Corporate Notes US Treasury Notes Local Agency Investment Funds California Asset Management Program Investments in Money Nlarkvt Accounts Investment in Authority Refunding Revenue Bond Investments in Assessment District Bond Custodial Credit Risk Credit Quality Ratings Moody's S&P Aaa Aaa Aaa Aaa Aaa, Aaa, Aa2, Aal Tsy AAA AAA AAA AAA AAA, AA, AA-, A+ Tsy Not Rated Not Rated Not Raked Not Rated Not Rated For an investment, custodial credit risk is the risk that, in the event of the 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 party. None of the City's investments were subject to custodial credit risk. 70 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 3. NOTES RECEIVABLE As of June 30, 2008, the City had the following notes receivables: Housing Loans to Nat -For -Profit agencies First -Time Home Buyers Loans Storefront Loan Program Total Balance Balance July 1, 2007 additions Deletions June 30, 2008 $ 21,737,862 $ 4,971,695 $ (100,169) $ 26,609,388 5,599,200 - - 5,599,200 284,744 - (13,168) 271,576 S 27,621,806 S 4,971,695 $ (113,337) $ 32,480,164 Housinz Loans to Nat -for -Profit -Agencies The City has provided various loans to not-for-profit agencies for the construction of units for Iow-income rental housing projects. The Ioans are funded using HOME funds, Community Development Block Grant funds, General fund, and Housing funds. The interest rates range from zero to 5.78%. Payment is deferred until a variety of events occur, such as: sale or transfer of property, failure to adhere to Iow and moderate housing provisions of the promissory note, to the extent of residual receipts, or at the maturity date of the note. The maturity dates range from 32-55 years. The City and the Petaluma Community Development Commission have Ioaned funds to not-for-profit agencies to finance construction of Iow and moderate income housing. The terms range from 13 to 60 years, and the interest rates range from zero to 6.56%. Payment is deferred until a variety of events occur, such as: sale or transfer of property, failure to adhere to low and moderate housing provisions of the promissory note, to the extent of residual receipts, or at the maturity date of the note. At June 30, 2008, the outstanding balance of the Housing Loans was $26,609,388. First -Time Home Buyers Loans The City offers qualified low and moderate income first time home buyers silent second mortgages on home purchases. Accrued interest and principal are due when the primary Ioan is refinanced or on sale of the property. The interest rate is the lower of the principal amount plus interest at a rate of 10% per annum, or 28.6% to 33% net of sales price. At June 30, 2008, the outstanding balance of the loans was $5,599,200. Storefront Loan Program The Redevelopment Agency offers low interest loans to property owners with building located in the Central Business District (Downtown) as an incentive to make improvements to the exterior storefronts. At June 30, 2008, the outstanding balance of the Ioans was $271,576. 71 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 4. DEFERRED REVENUE Fund Financial Statements At June 30, 2008, the following deferred revenues were recorded in the fund Financial Statements because the funds were not available to finance expenditures of the current period: Governmeittal Futtds: Interest receivable on related notes receivable $ 4,226,569 Housing loans 11,031,664 Intergovernmental revenues 558,028 Miscellaneous 13308 Total Governmental Funds $ 15,949,949 5. INTERFUND BALANCES AND TRANSACTIONS A. Interfmid Receivable and Payable Due to/from other funds for the year ended June 30, 2008 were as follows: Interfund Receivable �! yl ajar Funds General Impact Fees Redevelopment Fund Special Revenue Capital Project Governmental Funds: m Major funds: General Fund rMRedevelopment Special Revenue Fund Impact Fees Special Revenue Fund K City Capital Projects Fund Redevelopment Capital Projects Fund Non -Major Governmental Funds Proprietary Fund: Airport Enterprise Fund Ambulance Enterprise Fund Marina Enterprise Fund Total 5 - 5 752,537 5 5 752,537 482,000 - 482,000 82,000 82,000 74,000 7.1,000 1,100,000 - 7,600,000 9,000,000 260,000 35,000 - ?95,000 33,000 33,000 912,400 912,100 276,000 - - 276,000 S 3,519,400 S 767,537 6 7,600,000 S 11,906,937 72 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 5. INTERFUND BALANCES AND TRANSACTIONS, Continued B. Transfers IiVO tit Transfers in/out for the year ended June 30, 2008 were as follows: ITransfers In - - Governmental Funds Eulerprise Funds Non -Major Internal General Impart Fee City Redevelopment Govemmenlal Airport ,Service Fund Special Revenue Capital Project Capital Project Funds Fund Funds Total Governmental Funds !Major Funds: - General Fund $ - 5 - S 327 $ - 5 13,000 S 124,67$ 5 MUM S 438,000 RedEvelopmentSpecial Revenue - - - - 880,192 - - 880,192 Impact Fees Special Revenue - - 3,123,9[15 231,000 - - 3,35.1,905 _ C:ly Capital Project - 201,398 - - 40,045 - - 241,443 Redevelopment Capital Prvjerls 109,000 - 6,600,1100 918/V29 3,121,732 - 56,000 19,765,461 Non-NajorFunds 110,806 - "-,576,3-7 - 1,451,749 - 5,146,137 Enterprise Funds Water UtilHV - - - - - - 12500(1 1Z5,000 Internal Servia Funds - - - - - 167„7.36 167,236 Total 5 1,317,806 5 2171.398 S 12.300,549 $ 10,110,729 S 5,506,718 5 124,678 5 648,3336 5 30,71-0,114 Transfers between funds were to provide funding for capital projects, dent service, vehicle/ equipment replacements and general and specific operating expenses. 73 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 6. CAPITAL ASSETS A. Government -Wide Futancial Stateiiients The following is a summary of capital assets for governmental activities: Balance july1,2007 Additions Deletions Reclassification Governmental Activities: Capital assets, not being depreciated: Land $ 35,651,019 $ - $ Construction in process 51,381,596 12,964,009 Total capital assets, (15,676,135) 84,207,278 not being depreciated 87,032-615 12,964,009 Capital assets, being depreciated., - 10,9E5,967 Buildings and improvemeuts 19,357,518 - Vehicles and equipment 9,063,511 2,164,711 lnfrsstructure 111,961,2-31 51622,458 Total capital assets, - (4,9M,618) being depreciated 140,381,2=0 7,797,169 Accumulated deprodation: - (60,771,956) Buildings and improvements 15,676,136 (406,907) Vehicles and aluipment (3,971,493) (1,1011&x1) Infrastructure (41,491,169) (3,564,5.1) Total accumulated depreciation Cn6,565,414) (5,073,056) Total capital assets, being depreciated, not 83,815,836 2,714,113 Total governmental activities % 170,81$451 $ 15167811? S Balance june30,2008 - $ - $ 35,651,019 (113,210) (15,676,136) 48,556,239 (113,210) (15,676,135) 84,207,278 - - 19,357,5114 (241,255) - 10,9E5,967 (696,0011) 15,676,136 132,563,8T (937,20 15,676,136 162,907,300 - - (8,503,653) 170,514 - (4,9M,618) 696,000 (47,333,687) 866,514 - (60,771,956) (70,741) 15,676,136 102,135,344 (113,951) $ - $ 186,342,62 Depreciation expense was charged to various governmental functions as follows: General government S 928,877 Community development 739,065 Police 135,068 Fire 113,257 Parks and recreation 603,934 Public works 2,552,835 Total depreciation expense - governmental functions $ 5,073,056 74 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 5. CAPITAL ASSETS, Continued A. Government Wide Fiiiayicial Stateiiietzts, Colitilitied The following is a summary of capital assets for business -type activities: Balance July 1, 2007 Additions Deletions Business -Type Activities: Capital assets, not being depreciated: Land Construction in process Total capital mets, not being depreciated Capital assets, being depredated Buildings and improvements Vehicle; and equipment Infrastructure Total capital assets, being depreciated Less accumulated depreciation for. Buildings and improvements Vehicles and equipment Infrastructure Total accumulated depredation Total capital assets, being depreciated, net Total business;43Te activities $ 10,731,231 $ - $ 101,624,104 50,293,M7 112,355 335 50,293,GQ7 21-104689 - 8,006,857 614,292 106,357,707 64,85 136,467, 53 679,117 (6,970,479) (492,011) (3,703,564) (.,95,109) ("x3,3(13,591) (2,358,487) (63,977,634) (3,615,607) 72,489,619 ('—) %6,490) $ 184,844,954 $ 47,326,537 $ Balance Reclassification June 30, 2008 (1`130 13430 101,032 101,032 (42191) (42,191) $ Depreciation expense was charged to the business -type functions as follows: Airport 5 253,355 Ambulance 36,349 Development Services 74,387 Marina 117,052 Transit 281,596 Waste Water Utility 1,396,355 Water Utility 1,270,95 Vehicle Replacement 212,588 Total depreciation expense -business-type functions S 3,645,607 - $ 10,731,231 - 151,917,131 - 162 648,362 T' 102,689 8,477,9M 137,003,147 - (7,462,490) - (4,397,&f1) (67,577,209) 69,41.,9,938 $ 232129,300 B. Funds Financial Statements The governmental funds financial statements do not present general government capital assets but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government -Wide Statement of Net Assets. 75 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT A. Government -Wide Financial Statements The following is a summary of long-term debt for governmental activities: 2000A Tax Allocation Bonds Due Within Balance One Year Balance 150,000 July 1, 2007 Additions Deletions June 30, 2008 20WATax AOocationBonds $ 295,0110 - $ (145,000) $ 150,000 $ 2001A Tax Allocation Bonds 2 410,000 (305,(00) 2,105,000 2003ATax Allocation Bonds 23,200,000 - (430,000) 22,770,000 Unamortized Discount 2003 A TAB (12,321) - 474 (11,847) 2005ATaxAllocation Bonds 16,165,000 - (105,000) 18,t)60,nW Referred amt refunding 2005A TAB (1,148,546) - 49,937 (1,098,609) Unamortized Premium 2005A TAB 150,616 - (6,478) 144,138 2007 Tax Avocation Bonds 31,825,000 - (115,000) 31,710,000 i inamortized Discount 2007 TAB (563,955) - 17,762 (546,193) Information Services CapitalL.ease 247,801 - (56,60 191,147 Public Work Capital tease - 270,393 - 270,393 Auto Plaza DDA - AD 19 490,000 - (84,000) 406,000 Total $ 75,058,595 $ 270,393 S (1,178,959) $ 74,150,029 $ 2000A Tax Allocation Bonds Due Within Due in More One Year then One Year 150,000 $ 315,000 1,790,000 445,000 2Z325,000 (474) (11,373) 105,000 17,955,000 (49,937) (1,048,672) 6,478 137,660 205,000 31,505,000 (17,762) (528,431) 60, 004 131,143 5? 051 218,342 94100 314,000 1,362,360 $ 7_7787,669 On June 15, 2000, the Petaluma Community Development Commission issued Tax Allocation Bonds, Series 2000A in the amount of $18,000,000. The proceeds of the bonds were to finance the flood control project, and to fund new and continuing improvement projects in the Petaluma Community Development Project Area. This debt was partially refunded with the 2005A TAB. The defeased amount currently outstanding and removed from the long-term liabilities was $16,700,000. The remaining balance at June 30, 2008, of $150,000, which is included in long-term liabilities, bears an interest rate of 5%. The Commission has pledged a portion of future property tax increment revenue to repay the 2000A Tax Allocation Bonds. Total principal and interest remaining on the bond is $157,500 payable through 2009. The annual debt service requirements for the 2000A Tax Allocation Bonds outstanding at June 30, 2008, was as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 150,000 $ 7,500 $ 157,500 Total $ 150,000 $ 7,500 $ 157,500 76 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued A. Governmental Activities Long -Terra Delft, Continued 2001A Tax Allocation Botids On June 4, 2001, the Commission issued Refunding Tax Allocation Bonds, Series 2001A in the amount of $4,025,000. The proceeds of the bonds were used to refund the 1992 Tax Allocation Bonds and to fund the development of the auto plaza located in the Petaluma Community Development Project Area. The Bonds mature annually each May 1 from 2002 to 2014, in amounts ranging from $250,000 to $390,000 and bear interest at rates ranging from 3.50% to 4.50%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or after May 1, 2010, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or by lot within any one maturity date, on any date on or after May 1, 2009, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from and secured by tax revenues_ The outstanding balance of the bonds was $2,105,000 as of June 30, 2008. The Commission has pledged a portion of future property tax increment revenue to repay the 2001A Tax Allocation Bonds. Total principal and interest remaining on the bond is $2,434,935 payable through 2014. The annual debt service requirements for the 2001A Tax Allocation Bonds outstanding at June 30, 2008 was as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 315,000 5 89,140 $ 404,140 2010 330,000 76,540 406,540 2011 340,000 63,340 403,340 2012 355,000 49,315 404,315 2013 375,000 34,050 409,050 2014 390,000 17,550 407,550 Total $ 2,105,000 $ 329,935 $ 2,434,935 77 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued A. Governmental Activities Long -Terns Debt, Cotitinuerl 2003A Tax Allocation Banns On October 28, 2003, the Commission issued Tax Allocation Bonds, Series 2003A in the amount of $23,630,000. The proceeds of the bonds will be used to finance redevelopment projects within the Petaluma Community Development Project area. The Bonds mature annually each May 1 from 2007 to 2033, in amounts ranging from $430,000 to $8,215,000 and bear interest at rates ranging from 2.25% to 5.00%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or after May 1, 2014, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or by lot within any one maturity date, on any date on or after May 1, 2013, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from and secured by tax revenues. The outstanding balance of the bonds was $22,770,000 as of June 30, 2008. The Commission has pledged a portion of future property tax increment revenue to repay the 2003A Tax Allocation Bonds. Total principal and interest remaining on the bond is $41,572,169 payable through 2033. The annual debt service requirements outstanding at June 30, 2008 were as follows: For the Year Ending June 30, Principal interest Total 2009 $ 445,000 $ 1,052,655 $ 1,497,655 2010 460,000 1,040,418 1,500,418 2011 475,000 1,026,043 1,501,043 2012 495,000 1,010,011 1,505,011 2013 505,000 992,686 1,497,686 2014-2018 2,700,000 4,662,320 7,362,320 2019-2023 3,310,000 4,035,458 7,345,458 2024-2028 4,180,000 3,177,577 7,357,577 2029-2033 10,200,000 1,805,001 12,005,001 Total $ 22,770,000 $ 18,802,169 $ 41,572,169 The bonds were issued at a discount of $14,217 which is being amortized over the 30 years life of the bonds resulting in an annual amortization of $474. 78 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued A. Governmental Activities Long -Terve Debt, Continued 2005A TaxAlIocation Bonds On September 21, 2005, the Commission issued Refunding Tax Allocation Bonds, Series 2005A Tax Allocation Bonds in the amount of $18,355,000_ The proceeds of the bonds will be used to refund the 2000A Tax Allocation Bonds and finance the issuance of the 2005A Refunding Tax Allocation Bonds. The Bonds mature annually each May 1 from 2006 to 2030, in amounts ranging from $90,000 to $1,420,000 and bear interest at rates ranging from 5.00% to 5.75%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or before May 1, 2016, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or in inverse order of maturity and by lot within any one maturity date, on any date on or after May 1, 2015, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from solely from secured tax revenues. The outstanding balance of the bonds was $18,060,000 as of June 30, 2008. The Commission has pledged a portion of future property tax increment revenue to repay the 2005A Tax Allocation Bonds. Total principal and interest remaining on the bond is $29,985,657 payable through 2030. The annual debt service requirements outstanding at June 30, 2008 were as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 105,000 $ 789,201 $ 894,301 2010 260,000 786,051 1,046,051 2011 270,000 778,251 1,048,251 2012 275,000 769,814 1,044,814 2013 255,000 760,739 1,045,739 2014-2018 3,475,000 3,541,513 7,016,513 2019-2023 4,740,000 2,711,453 7,451,453 2024-2028 5,880,000 1,579,135 7,459,135 2029-2030 2,770,000 209,500 2,979,500 Total $ 18,060,000 5 11,925,657 $ 29,985,657 The bonds were issued at a premium of $161,953 which is being amortized over the 25 years life of the bonds resulting in an annual amortization of $6,478. In connection with the issuance of the bonds, the City recorded a deferral on refunding of debt which is reported as part of long-term debt. This deferral was in connection with interest payments made to the escrow agent for future payments of interest. The total amount deferred was $1,248,420 which will be - amortized over the 25 years life of the bonds resulting in an annual amortization of $49,937. 79 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued A. Governinental Activities Long Terin Debt, Coutinued 2007 Tat Allocation Bonds On April 10, 2007, the Commission issued Subordinate Tax Allocation Bonds, Series 2007 in the amount of $31,825,000. The proceeds of the bonds will be used to refund the 2000B Tax Allocation Bonds and provide $30,000,000 in project funds. The Bonds mature annually each May 1 from 2008 to 2039, in amounts ranging from $115,000 to $4,355,000 and bear interest at rates ranging from 4.00% to 4.5%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or before May 1, 2016, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or in inverse order of maturity and by lot within any one maturity date, on any date on or after May 1, 2015, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable solely from secured tax revenues. The outstanding balance of the bonds was $31,710,000 as of June 30, 2008. The Commission has pledged a portion of future property tax increment revenue to repay the 2007 Tax Allocation Bonds. Total principal and interest remaining on the bond is $66,821,851 payable through 2039. The annual debt service requirements outstanding at June 30, 2008 were as follows: For the Year Ending June 30, Principal interest Total 2009 S 205,000 $ 1,393,311 $ 1,598,311 2010 205,000 1,385,111 1,590,111 2011 220,000 1,376,911 1,596,911 2012 230,000 1,367,011 1,597,011 3013 240,000 1,357,812 1,597,812 2014-2018 1,330,000 6,638,460 7,968,460 2019-2023 1,610,000 6,250,440 7,860,440 2024-2028 1,950,000 5,988,966 7,938,966 2029-2033 2,235,000 5,534,468 7,769,468 2034-2038 19,130,000 3,623,384 22,753,384 2039 4,355,000 195,976 4,5550,976 Total $ 31,710,000 $ 35,111,851 $ 66,821,851 The bonds were issued at a discount of $568,396 which is being amortized over the 32 -year life of the bonds resulting in an annual amortization of $17,762. 80 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued A. GovernmentaI Activities Long -Terra Debi, Continued Cavital Lease On July 20, 2006 the City entered into a Master Tax -Exempt Lease/Purchase Agreement with Key Government Finance, Inc. for VOIP phone system. At the end of the 4 year lease period the City will own the equipment. The total principal amount was $343,455. The interest rate is 10.87.. The outstanding balance at June 30, 2008 was $191,147. Year Ending June 31, Principal Interest Total 2009 $ 60,004 $ 11,528 $ 71,532 2010 63,652 7,881 71,533 2011 67,491 4,042 71,533 Total $ 191,147 $ 23,451 $ 214,598 On March 28, 2008 the City entered into a Lease with Option to Purchase Agreement with First Municipal Leasing Corporation for Wirtgen E50DC Grinder. At the end of the 5 year lease period the City will have the option to purchase the equipment. The total principal amount was $270,393. The interest rate is 3.75%. The outstanding balance at June 30, 2008 was 270,393. Year Ending June 30, Principal Interest Total 2009 S 52051 $ 7,746 S 59,797 2010 51,609 8,188 59,797 2111 53,544 6,253 59,797 2012 55,552 4,245 59,797 2013 57,637 2,161 59,798 Total 5 270,393 $ 28,593 $ 298,986 81 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONGTERM DEBT, Continued A. Governmental Activities Long -Tenn Debt, Continued Auto Plaza DDA- AD 19 In 1992, the Commission has an obligation under the Auto Center Disposition and Development Agreement to refund 50% of assessments paid by property owners in relation to the Assessment District 19 Bonds. On February 3, 1992, the Assessment District 19 Bonds were issued in the amount of $1,080,000. The proceeds of the bonds were to finance public improvements at the Auto Plaza. The Bonds mature annually each September 2 from 1997 to 2010, in amounts ranging from $45,000 to $103,000 and bear interest at rates ranging from 5.60% to 7.75%. Interest is payable semiannually on March 2 and September 2. The bonds are payable from and secured by assessment paid by the property owners. The outstanding balance was $406,000 as of June 30, 2008. The annual debt service requirements on these bonds outstanding at June 30, 2008, were as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 92,000 $ 27,782 $ 119,782 2010 100,000 20,435 120,435 2011 103,000 12,594 115,594 2012 111,000 4,301 115,301 Total $ 406,000 $ 65,112 $ 471,112 Defeased Debt During fiscal year 2006-2007, the Commission issued Subordinate Tax Allocation Bonds Series 2007 in the amount of $31,825,000 and defeased the outstanding principal, in the amount of $480,000, of the 2000B Tax Allocation Refunding Bonds. The refundings were undertaken to reduce total debt service payments, consolidate issues following project area fiscal merger and to obtain an estimated net PV savings of $4,177. The balance of the defeased bonds outstanding as of June 30, 2008, was $370,000. In prior years, the City has defeased various bond issues by creating separate, irrevocable trust funds. New debt was issued, and the proceeds were used to purchase US government securities, which were placed in the trust funds. The investments, and fixed earnings from the investments, are expected to be sufficient to fully service the defeased debt, until the debt is called or matures. For financial reporting purposes, the debt is considered defeased. Consequently, the trusts' assets and liabilities are not included in the City's financial statements. 82 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued A. Goverlttnentnl Activities Long -Terni Debt, Continuer) At June 30, 2008, the amount of the Water revenue defeased debt outstanding, but removed from the long-term liabilities, totaled $2,650,000. At June 30, 2008, the amount of Redevelopment tax allocation defeased debt outstanding, but removed from the long-term liabilities, totaled $17,335,000. At June 30, 2008, the amount of 1993 Certificates of Participation defeased debt outstanding, but removed from the long-term liabilities, totaled $3,885,000. B. Business -Type Activities Long -Terra Debt The following is a summary of long-term debt for business -type activities: 2003 Certificate of Participation Unamortized Premium 2003 COP 2000 Waste Water Revenue Bonds Unamortized Discount 2000 Revenue bonds 2W1B Water Revenue Bonds Unamortized Discount 2001B Revenue Bonds BNP Paribas Line of Credit Zion 1_st National Bank Line of Credi t State Revolving Loan Fund ACCT -LA Capital lease CA DeptBoat/Waterways CA Dep t of Transportation Total Balance Amounts July 1, 2007 Additions $ 519601000 S - $ 20,412 175,000 6,700,000 - (57,074) - 8,7--35,000 - (13,991) - 9,550,000 4,450,000 9,661,800 1,425,5B2 50,000,000 50,000,000 9,3755,582 332,782 5,0V2,335 188,727 1,697,500 - $ 97,406,002 $ 56,397,091 $ 83 Balance Deletions June 30, 2008 (170,000) $ 5,790,000 5 (3,277) 67,135 (375,000) 6,325,000 4,448 (52,626) (245,000) 8,510000 874 (1-4116) (1,650,00() 12,350,000 0,711,800) 9,375,582 - 10+7,000,000 (65,057 267,725 - 5,271,083 (136,166) 1,561,334 (1,350,978) S 149,452117 $ Classification Amounts Amounts Due Within Due inMore One Year than One Year 175,000 $ 5,615,000 3,275 63,860 390,000 5,935,000 (4,448) (48,178) ?50,000 8,260,000 (B74) (12,242) - 17,350,000 - 9,3755,582 1{ID,000,000 61,701 206,1724 25,626 5,018,457 145,054 1,416,280 1,272,334 $ 146,179,783 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued B. Business -Type Activities Long -Terns Debt, Continuer) 2003 Certificate of Participation - On nal.Issue $6,295,000 On December 9, 2003, the City issued 2003 Certificate of Participation in the amount of $6,295,000. The proceeds of the certificates were used to refund the 1993 Certificates which were issued to finance portions of the Petaluma Municipal Airport. The certificates mature annually each August 1 from 2005 to 2028, in amounts ranging from $165,000 to $435,000 and bear interest at rates ranging from 2.500 % to 5.125%. Interest is payable semiannually on February 1 and August 1. The certificates maturing on or after August 1, 2014, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or in inverse order of maturity and by lot within any one maturity dates, on any elate on or after August 1, 2013, at a price equal to the principal amount, plus accrued interest on the redemption date. Principal and interest due with respect to the certificates will be made from the base rental payments payable by the City (the Airport Fund is the primary obhgator).The outstanding balance of the certificates was $5,790,000 as of June 30, 2008, The annual debt service requirements for 2003 Certificate of Participation outstanding at June 30, 2008, were as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 175,000 $ 260,273 S 435,273 2010 180,000 255,388 435,388 2011 185,000 219,819 434,819 2012 190,000 243,582 433,582 2013 200,000 236,504 436,504 2014-2018 1,135,000 1,050,063 2,185,063 2019-2023 1,435,000 761,337 2,196,337 2024-2028 1,855,000 358,501 2,213,501 2029 435,000 11,147 446,147 Total $ 5,790,000 S 3,426,614 $ 9,216,614 84 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued B. Business -Type Activities Lotzg--Terni Dent, Continued 2000 Waste Water Revenue Bonds - Original Issue $8,895,000 On May 1, 2000, the City issued Waterwater Revenue Bonds, Series 2000 in the amount of $8,895,000. The proceeds of the bonds were used to finance improvements to the Waste Water System. The Bonds mature annually each May 1 from 2001 to 2020, in amounts ranging from $280,000 to $690,000 and bear interest at rates ranging from 4.25% to 5.50%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or after May 1, 2010, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or in inverse order of maturity and by lot within any one maturity dates, on any date on or after May 1, 2009, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable solely from a pledge of and Iien upon the net revenues received by the City from the ownership and operation of its Waste Water Utility Fund. The outstanding balance of the bonds was $6,325,000 as of June 30, 2008. The annual debt service requirements for 2000 Waste Water Revenue Bonds outstanding at June 30, 2008, were as follows: For the Year Ending June 30, Principal Interest Total 2009 $ 390,000 $ 326,704 $ 716,704 2010 410,000 308,374 718,374 2011 435,000 288,694 723,694 2012 455,000 267,488 722,488 2013 480,000 2.14,736 724,736 2014-2018 2,815,000 827,652 3,642,652 2019-2020 1,340,000 111,000 1,451,000 Total 5 6,325,000 5 2,374,648 $ 8,699,648 83 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued B. Business -Type Activities Long -Term Debt, Continued 2001B Water Revenue Bon cls - OriginaI Issue $10,165,000 On August 1, 2001, the City issued Water Revenue Bonds, Series 2001 in the amount of $10,165,000. The proceeds of the bonds were used to refund the 1990 Certificates of Participation, and to finance improvements to the Water System. The Bonds mature annually each November 1 from 2001 to 2031, in amounts ranging from $210,000 to $2,445,000 and bear interest at rates ranging from 3.50% to 5.00%. Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or after November 1, 2012, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or in inverse order of maturity and by lot within any one maturity dates, on any date on or after November 1, 2011, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable solely from a pledge of and lien upon the net revenues received by the City from the ownership and operation of its Water Utility Fund. The outstanding balance of the bonds was $8,510,000 as of June 30, 2008. The annual debt service requirements for 2001 Water Revenue Bonds outstanding at June 30, 2008, were as follows: Year Ending June 30, Principal Interest Total 2009 $ 250,000 $ 398,190 $ 648,190 2010 260,000 388,562 648,562 2011 275,000 378,122 653,122 2012 285,000 366,923 651,923 2013 295,000 355,138 650,138 2014-2018 1,590,000 1,563,923 3,153,923 2019-2023 1,550,000 1,200,587 2,750,587 2024-2028 2,000,000 761,250 2,761,250 2029-2032 2,005,000 206,875 2,211,875 Total $ 8,510,000 5 5,619,570 $ 14,129,570 86 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued B. Bits iness- Type Activities Long-Terin Debt, Continued Revolving Credit Line On September 1, 2005, the City entered into a revolving credit agreement with two banking institutions. Zions First National Bank and BNP Paribas provided a revolving line of credit to the City in an amount up to $25,000,000 and $75,000,000, respectively. The BNP LOC bears interest with reference to the Base Rate (the greater of prime commercial rate, or the sum of rates quoted by two or more federal funds brokers, plus 1/2 1%.), or at the option of the City, with reference to an adjusted LIBOR (the LIBOR divided by the quantity of 100% Iess the reserve percentage rate). Interest on the outstanding balance is payable monthly. The LOC is secured by pledged revenues, and the General Fund of the City is not liable. The balance at June 30, 2008 was $12,350,000. y The Zion LOC fixed interest rate is 3,88%, and the variable interest rate is 91.03% of the oney ear Seattle Federal Home Loan Bank Rate. Interest is payable semiannually. The LOC is secured by pledged revenue, and the General Fund of the City is not liable. The outstanding balance at June 30, 2008 was $9,375,582. The LDCs are interim financing for the construction of the Ellis Creek sewer treatment plant. They will be in place until the City receives the State of California funding from the State Revolving Loan (SRL). State Revolvim, Loan Fund In October, 2005 the City was awarded $125,964,254 for the Ellis Creek Water Recycling Facility from the California Clean Water State Revolving Fund. The first draw was in September, 2006. Upon completion of the construction of the Ellis Creek Water Recycling Facility, the State Division of Financial Assistance of the State Water Resources Control Board will prepare an appropriate SRF installment sale agreement payment schedule. The City may without penalty prepay all or any portion of file outstanding principal amount of the obligation provided that the City also pays all accrued interest on the principal amount prepaid through the date of the prepayment. This obligation is secured by the net revenues of the Waste Water Enterprise Fund. The interest rate is 2.4%_ The outstanding balance at June 30, 2008 was $100,000,000. 87 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued B. Business -Type Activities Long-Terut Debt, Continued ACCELA Capital Lease On December 4, 2006 the City entered into a Municipal Lease -Purchase Agreement with Government Capital Corporation for ACCELA software. At the end of the 5 year lease period the City will have the option to purchase the software. The total principal amount was $332,782. The interest rate is 15.08°x. The outstanding balance at June 30, 2008 was $267,725. Year Ending June 30, Principal Interest Total 2009 $ 61,701 $ 14,591 $ 76,292 2010 65,064 11,228 76,292 2011 68,610 7,682 76,292 2012 72,350 3,943 76,293 Total $ 267,75 $ 37,444 $ 305,169 Notes Pailable On March 11, 1993, the California Department of Boating and Waterways note was issued in the amount of $3,960,000 to finance construction of die Petaluma Marina. The terms of the loan allow unpaid interest to be added to the outstanding principal. The loan balance was increased by unpaid interest and penalties for the years ended June 30, 1998, and 2000 through 2008, and the outstanding balance at June 30, 2008 was $5,271,082. The debt is the responsibility of the Marina Fund. The loan contract between the City and the California Department of Boating and Waterways states "the repayment of the loan is be made from the gross revenues originating from fees and rentals charged and received by the City for services, facilities and leaseholds provided or located within the project area. Such gross revenues shall constitute security for loan repayments. However, if such gross revenues should prove insufficient to repay the loan, then the City shall pay for the operations, maintenance and dredging costs occurring within the project area from revenue sources other than those generated within the project area, and all gross revenues shall be used to repay the loan." The City is out of compliance with this section of the loan agreement, as we are not making loan payments out of the gross revenue of the project area. Gross operating revenues usually do not cover the cost of operating expenses. Additionally, the cost of the required dredging of the Marina Fund was paid with contributions from other funds, not out of Marina Fund's gross revenue. In May, 2006, the City met with the Director of the California Department of Boating and Waterways in an attempt to have this loan forgiven. The State refused to forgive the debt, but agreed that the City could continue to operate the Marina, in a manner consistent with operations since inception. 88 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 7. LONG-TERM DEBT, Continued B. Busittess- Type Activities Long -Terns Debt, Continued Notes Pailable, Continued Year Ending June 30, 2009 2010 2011 2012 2013 2014-2018 2019 2000-08 Unpaid Prin+Int Total Principal Interest Total S 252,626 $ 168,27 S 420,853 263,995 157,349 421,344 275,874 145,980 421,854 288,289 134,101 422,390 301,262 121,686 42,948 1,72,280 401,760 2,124,040 392,310 52,202 444,512 1,774,447 545,085 2,319,532 $ 5,271,083 5 1,726,390 $ 6,997,473 On October 4, 1996, the California Department of Transportation issued three airport loans, in the amounts of $975,000, $50,000 and $40,000, which were used to finance construction of hangars, installation of an electronic payment fueling system, and upgrading the fueling system, respectively, at the Airport. In June, 2005 an additional $1,400,000 was loaned to finance the construction of additional hangars. At June 30, 2008 the outstanding balances of L-8 was $329,333, L-11 was $1,232,000. The annual debt service requirements at June 30, 2008, were as follows: Year Ending June 30, Principal Interest Total 2009 145,054 76,443 221,497 2010 154,231 68,921 223,152 2011 163,409 60,929 224,338 2012 137,920 52,470 190,390 2013 79,931 45,455 125,386 2014-2018 472,318 165,963 638,281 2019-2055 408,471 45,445 453,916 Total S 1,561,334 $ 515,626 $ 2,076,960 89 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 S. COMPENSATED ABSENCES The City records a liability to recognize the financial effect of unused vacation and other compensated leaves. The total of vacation and other compensated leaves is $4,271,567 as of June 30, 2009. The City typically uses the General Fund to liquidate compensated absences recorded in the governmental activities. For compensated absences recorded in the business -type activities, the program that has incurred the expense is used to liquidate the liability. Balance Balance Due in Due in More July 1, 2007 Additions Deletions June 30, 2008 One Year Than One Year Governmental activities $ 3,482,964 $ 4,900,831 $ (4,771,043) $ 3,612,752 $ 483,210 $ 3,129,542 Business -type activities 538,339 1,291,741 (1,171,265) 658,815 77,078 581,737 Total $ 4,021,303 $ 6,192,572 $ (5,942,308) $ 4,271,567 $ 560,288 $ 3,711,279 9. NON -CITY OBLIGATION The following bond issues are not reported in the City's financial statements, because they are special obligations payable solely from, and secured by, specific revenue sources described in the resolutions and official statements of the respective issues. Neither the faith and credit, nor the taxing power of the City, the County, the State of California, or any political subdivision thereof, is pledged for payment of these bonds. 1915 Act Bonds The 1915 Act bonds have been issued to finance improvements in various special assessment districts in the City. The bonds are a liability of the property owners, and are secured by liens against the assessed properties. The City acts merely as the fiscal agent for the collection of the assessment to be used for the principal and interest payments from the property owners, disbursements of such monies to the bondholders, and if appropriate, beginning foreclosures. The principal amount of bonds outstanding at June 30, 2008, was $7,098,600. Multi -Family Housing Revenue Bonds Oakmont project -- the Redevelopment Agency issued $4,750,000 in Multifamily Housing Revenue Bonds, with a variable rate of interest, not to exceed 12%, with the variable rate to be determined by the marketing agent. The bonds will mature April 1, 2026. Current balance is $3,650,000. The proceeds from the bonds were used to make a loan to Oakmont Retirement investors, LLC for the purpose of financing the acquisition and construction of a 76 -unit assisted living care/multi-family rental facility known as Oakmont at Petaluma. In August 1997, the Commission consented to a sale of the project from Oakmont Retirement Investors, LLC to Windclume of Walnut Creek Investors, LP, a California limited partnership. The bonds are special obligation of the Commission, payable solely from the rental revenue and other assets pledged or assigned to payment of the bonds by Windchime of Walnut Creek, LP. These bonds are not recorded as liabilities on the City's financial statements. 90 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 9. NON -CITY OBLIGATION, Continued Multi -Family Housing Revenue Bonds, Continued On September 15, 2003, the Commission issued Multi -family Housing Revenue Bonds and Taxable Multi- family Housing Revenue Bonds in the amount of $6,197,000. Current balance is $5,985,000. The proceeds of the bonds will be used to finance the construction and equipping of an 81 unit, multifamily, rental housing development in the City of Petaluma, known as the "Downtown River Apartments". The bonds are special obligation of the Commission payable solely from the rental revenue and other assets pledged or assigned to payment of the bonds by the obligator. 10. RISK MANAGEMENT The City provides coverage up to a maximum of $500,000 for each general liability claim. The City is a member of a public entity risk pool, which provides liability coverage of up to $10,000,000 per occurrence, including the City's risk- limit. The actuarially determined liability at June 30, 2008 for general liability was $1,703,671, which includes an estimate for incurred, but not reported claims. The amounts of coverage for the risk retention, pool participation, purchased insurance and cost reimbursed benefits have not changed from the prior year. The amount of settled claims has not exceeded the maximum coverage in any of the past three years, under risk retention, pool participation, purchased insurance and cost reimbursed plans. The public entity risk pool (Pool), to which the City belongs, assesses each member an annual contribution to cover claims, operating costs and claim settlement expenses. The Pool has a multi-level risk sharing arrangement for its liability program. Members assume their own losses, up to their retention level. Losses in excess of the retention are paid out of a central pool maintained by the Pool for each of the four Ievels of coverage. This central pool is funded by all of the members participating in that program Iayer through contributions. Losses in excess of participation limits are the responsibility of the individual member from which the loss or claim originated. The City provides coverage up to a maximum of $750,000 for each workers' compensation claim and $1,000,000 from insurance per employee. The actuarially determined liability as of June 30, 2008 for workers' compensation was $2,934,165, which includes an estimate for incurred, but not reported claims. Most funds of the City participate in the retention program, and make payments to the Risk Management Fund and the Workers' Compensation Fund, based on budgetary estimates of the amounts needed to pay prior and current year claims, and to establish a reserve for catastrophic losses. The accrued claims liability of $1,638,139, reported in the risk funds as of June 30, 2008 is based upon the requirement of GASB Statement No.10. This statement requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the Ioss can be reasonably estimated. Liabilities for future claims and payments for workers' compensation were based on an actuarial study, which was completed for the year ended June 30, 2008. Liabilities for future claims and payments for general liability were determined by management, based on a review of actual active claims as of June 30, 2008. 91 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 10. RISK MANAGEMENT, Continued The following is a reconciliation of changes in the aggregate liabilities for claims for the years ended June 30, 2008, 2007, and 2006: Employee medical, disability and life insurance benefits are also purchased. The City self -insures for additional employee benefit insurance such as dental, vision and unemployment, on a cost reimbursement basis, up to defined annual maximums. No liability has been accrued for these claims, as they are deemed immaterial. 11. DEFICIT FUND BALANCES AND NET ASSETS A. Fund Financial Statements At June 30, 2008, the following funds had deficit fund balances or deficit net assets: Funds Deficit Ambulance Enterprise Fund $ (690,171) Development Services Enterprise Fund (559,979) Marina Enterprise Fund (3,378,228) The deficit in the Ambulance Fund will be continuously subsidized by the General Fund. However, it is anticipated that this fund will continue to accumulate a deficit of expenses over revenue due to the fact that external payers such as Medicare, pay less that the amount billed. The deficit in the Development Services Fund will be eliminated in fiscal year 2008-2009 by reducing operating expenses below revenue. In May of 2006, the City met with the Director of the California Department of Boating and Waterway in an attempt to have the $6,000,000 loan forgiven. Debt forgiveness would eliminate the negative fund balance. The State refused to forgive the debt, but agreed that the City could continue to operate the Marina in a manner consistent with operations since inception. 92 Claims Claims For the Years Payable Claims Claims Payable Ended June 30, July 1 Incurred Payments June 30 2006 $ 5,253,000 $ 1,726,307 $ (1,739,898) 5,239,409 2007 5,239,409 1,829,795 (1,190,050) 5,879,154 2008 5,879,154 (186,098) (1,054,918) 4,638,138 Employee medical, disability and life insurance benefits are also purchased. The City self -insures for additional employee benefit insurance such as dental, vision and unemployment, on a cost reimbursement basis, up to defined annual maximums. No liability has been accrued for these claims, as they are deemed immaterial. 11. DEFICIT FUND BALANCES AND NET ASSETS A. Fund Financial Statements At June 30, 2008, the following funds had deficit fund balances or deficit net assets: Funds Deficit Ambulance Enterprise Fund $ (690,171) Development Services Enterprise Fund (559,979) Marina Enterprise Fund (3,378,228) The deficit in the Ambulance Fund will be continuously subsidized by the General Fund. However, it is anticipated that this fund will continue to accumulate a deficit of expenses over revenue due to the fact that external payers such as Medicare, pay less that the amount billed. The deficit in the Development Services Fund will be eliminated in fiscal year 2008-2009 by reducing operating expenses below revenue. In May of 2006, the City met with the Director of the California Department of Boating and Waterway in an attempt to have the $6,000,000 loan forgiven. Debt forgiveness would eliminate the negative fund balance. The State refused to forgive the debt, but agreed that the City could continue to operate the Marina in a manner consistent with operations since inception. 92 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 12. EXCESS OF EXPENDITURES OVER APPROPRIATIONS Expenditures exceeded appropriations for the following funds: Fund Appropriatian Expenditure General Fund Departmental: City Manager Administrative Services Department Police Department Parks and recreation Public work Capital outlay Home/ Begin Fund Departmental: Community development Impact Fee Funds Departmental: Community development Police Department Fire Department Parks and recreation PCDC Capital Project Funds CDBG Fund Donation and Grant Funds LAD Funds PCDC Debt Service Funds $ 443,050 $ 460,559 S 2,600,000 2,661,225 16,369,450 16,481,202 4,848,500 5,051,947 5,893,500 6,083,294 377,500 5,730,821 3,950,700 1,652,750 1,900 3,200 55,500 24,512,700 357,400 283,-450 335,800 4,705,106 3,958,001 2,478,069 5,223 6,823 74,223 30,611,277 477,106 2,718,448 486,863 5,150,079 Variance (17,509) (61,225) (111,757) (203,447) (189,794) (5,353,321) (7,301) (825,319) (3,323) (3,623) (18,723) (6,098,577) (119,706) (2,134,998) (152,063) (-444,973) City Manager budget variance is due to an increase in payroll costs. > Administrative Services Department budget variance is due to the unbudgeted Sonoma County Collection Fee on property taxes. Police Department budget variance is due to $60,000 of unbudgeted capital outlay costs and $51,700 of overtime. > Parks and Recreation variance is due to $174,000 in unbudgeted payroll costs and $30,300 in recruitment fees. > PubIic Works variance is due to an increase in payroll costs. > Capital Outlay variance is due to the difference between the time the budget is determined and when the actual expenditures occur. > HOME/BEGIN program budget variance is due to the use of unspent grant funds from prior year. ➢ Community Development Impact Fee variance is due to Housing -in -lieu program costs utilizing unspent funds from prior years. > Police, Fire and Park and Recreation Impact Fee variance is due to administrative fees being higher than anticipated. 93 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 12. EXCESS OF EXPENDITURES OVER APPROPRIATIONS, Continued PCDC Capital Project Funds variance is due to the difference between the time the budget is determined and when the actual expenditures occur. CDBG Fund variance is due to the use of unspent grant funds from prior years. i Donation and Grant Funds variance is due to the difference between the time the budget is determined and when the actual expenditures occur. LAD Funds variance is due to $50,000 in unbudgeted administrative fees and $101,000 in increased landscaping services. i- PCDC Debt Service Funds variance is due to a correction between transfers in and transfers out. Revenue variance is under budget approximately the same amount. r� Due to unexpected personnel turnover during the fiscal year 2007-2008, the final administrative budget revision was not prepared. TI -ds left larger -than -usual budget to actual variances that would have normally been corrected with this adjustment. 13. CLASSIFICATION OF FUND BALANCES 94 Impact Non -Major General Home/13gg n Redevelopment Fees City Redevelopment Governmental Fund Special Revenue Special Revenue Special Revenue Capital Project Capital Project Funds Fund Fund Fund Fund Fund Fund Funds Total Fund Balances: Reserved $ 3,773,L9i 5 $ 15,401,216 $ 6,820,358 $ S 34,647,628 5 i91,187 5 61;133,580 Unreserved, designated For, Redwood Interchange - 526,545 - 525,545 Uorealired gain on investments 2,604 21;197 8,018 52,134 9,858 91,111 First Time homebuyer Program 56,861 - - - - 56,861 Total unreserved, designated - 59,465 21,497 534,563 51-134 9,858 677,517 Unreserved, undesignated (758,345] 202,1333 5,299,633 3,436,203 14,650,357 (8,995,944) 4,836,521 19,170,418 Total fund balances 5 3,614,846 5 161,5558 S 2o.712346 5 10,jq1,(24 5 14,702,49[ S 25.651,684 5 5,637,366 $ 81; 81.515 94 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 14. RETIREMENT PLANS A. Pension Plan Plait Description The City offers retirement benefits to all employees. There are two separate plans: - California Public Employees Retirement System, which is offered to employees who work in excess of 1,000 hours per year. - Public Agency Retirement System, which is offered to employees who work less than 1,000 hours per year. California Public Emplowees Retirement Silsteni The City contributes to the California Public Employees Retirement System (PERS), an agent multiple - employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost -of -living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. Copies of PERS' annual financial report may be obtained from their Executive Office located at 400 P Street, Sacramento, California 95814. Funding Policy Active plan members are required by State statute to contribute 7% for misceIIaneous and 9% for safety employees of their annual covered salary. The City employer makes the contributions required of City employees on their behalf and for their account, which amounted to $2,423,940 for the year ended June 30, 2008. The City employer was required to contribute for fiscal year 2007-2008 at an actuarially determined rate of 11.752% and 28.722% of annual covered payroll for miscellaneous and safety employees, respectively. Annual Pension Cost For 2007-2008, the City's annual pension cost of $5,321,234 for PERS was equal to the City's required and actual contributions. The required contribution was determined as part of the June 30, 2005 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.75% investment rate of return (net of administrative expenses), (b) projected annual salary increases ranging from 3.25% to 14.45% for miscellaneous employees and from 3.25% to 1315% for safety employees depending on age, service, and type of employment, and (c) 3.25% per year cost - of -living adjustments. Both (a) and (b) included an inflation component of 3.00%. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a three-year period. Initial unfunded liabilities are amortized over a closed period that depends on the plans date of entry into Ca1PERS. Subsequent plan amendments are amortized as a level amortized over a 30 year rolling period, which results in an amortization of about 6% of unamortized gains and Iosses each year. If the plan's accrued liability exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30 years for misceIIaneous employees and 30 years for safety employees. 95 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 14. RETIREMENT PLANS, Continued A. Pension PIait, Continued THREE-YEAR TREND INFORMATION FOR PERS Funded Status Actuarial Annual Percentage of Unfunded Pension Cost APC NetPension Fiscal Year (APC) Contributed Obligation 6/30/06 $ 4,974,106 100% $ - 6/30/07 4,636,270 100% - 6/30/08 5,321,234 100% - Funded Status Actuarial Entry Age Unfunded Valuation Actuarial Accrued Liabilities Date Assets Liability (UL) Funded Ratio Miscellaneous 6/30/07 $ 56,469,750 $ 62,630,507 $ 6,160,757 90?% Safety 6/30/07 83,733,721 103,858,166 20,124,945 80.6% Public Agencit Retirement Stistein Annual Covered UL As a'%o of Payroll Payroll $ 14,415,740 42 7 O 11,620,163 173.2% The City of Petaluma contributes to Public Agency Retirement System/ Alternative Retirement System (PARS), a public agency multiple -employer defined contribution pension trust PERS provides benefits at the time of retirement, total disability or death. PARS acts as a common investment and administrative agent for participating public agencies. Benefit provisions and all other requirements are established by federal statute and city resolutions. Copies of PARS' annual financial report may be obtained from their office: 3961 MacArthur Blvd., Suite 200, Newport Beach, CA 92660. Contributions Participants are required to contribute 7% of their annual salary. The City is required to contribute 0.5°0 of the annual salary of covered participants. The contribution requirements were established on the Adoption Agreement. For fiscal year ended June 30, 2008, the City contributed $3,052 and the covered employees contributed $42,722 the total of which met the requirements of the plan. 96 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 15. POST EMPLOYMENT BENEFITS The City provides eligible employees who retire with a monthly retiree allowance. The monthly benefit allowance varies by bargaining unit Iabor contract. The benefit allowances have been long-standing and previously ratified by Iabor and the City Council through the negotiation process. The dollar amount varies by bargaining unit and by years of service. The range of the benefit is $87 to $156.83 per month. Currently the City's minimum benefit allowance is $70 per month. That minimum allowance increases by $5 per year until it reaches $100 per month in 2014. For the fiscal year ended June 30, 2008, the total expenditure for all post employment benefits was $135,441. This consists of $70,366 in direct cash payments to individuals and $65,075 payment to the California Public Employees' Retirement System (CaIPERS) for the City's health premium contribution under the Public Employees' Medical and Hospital Care Act (PEMHCA). There are a total of 61 former employees, now retirees receiving a monthly allowance. In the 1990s, the City adopted various resolutions relating to a health benefit allowance for Council Members. There are 7 former Council Members receiving a benefit under the resolution ranging from $100 to $193 per month. In 1995, State law prohibited newly elected Council Members from receiving the benefit unless on a self -pay basis. The exception would be if a Council Member could retire into CalPERS and was covered under the PEMHCA. 16. DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan (Plan) created in accordance with California Government Code Section 53212 and Internal Revenue Code of 1986, 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 not available to employees until termination, retirement, death or an unforeseeable emergency. In March, 1997, the City amended the PIan's documents to comply with a new federal law. The Plan's assets have been placed into a trust for the exclusive benefit of the employees and their beneficiaries. The City is the administrator of the Plan but the assets are held by an independent investment manager and, therefore, are not recorded as assets of the City. Each employee directs the investment of the assets in his or her account. 97 City of Petaluma Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 17. COMMITMENTS AND CONTINGENCIES The City's governmental funds had year-end commitments at June 30, 2008 totaling $116,529, for construction related contracts awarded, but not completed and proprietary funds had year-end commitments of $9,718,925 for construction related contracts, awarded but not completed. The City's governmental funds had outstanding professional service contracts at year-end in the amount of $823,752, PCDC's in the amount of $379,021., and proprietary funds in the amount of $7,162,958. The City's governmental funds had outstanding purchase orders commitments at year-end of $86,271, PCDC's in the amount of $82,356, proprietary funds' in the amount of $100,729 and the internal service fund's commitments totaled $129,111. The City is directly and indirectly involved in various litigations, relating principally to claims arising from construction contracts, personal injury, property damage, alleged civil rights violations, and Iand use decisions. Liabilities other than from contracts and land use decisions will be covered or settled by the City's risk management program. Liabilities, which are excluded from the risk management program, will be covered from risk management reserves and/or the General Fund contingency reserve. The City participates in a number of federally assisted grant programs, including those from the US Department of Housing and Urban Development, US Department of Justice, National Highway Traffic Safety Administration, and the Federal Aviation Administration. Receipts from these grant programs are subject to audit to determine if the monies were expended in accordance with appropriate statues, grant terms and regulations. The City believes no significant liabilities will result. As of June 30, 2008, in the opinion of City Management, there were no additional outstanding matters that would have a significant effect on the financial position of the funds of the City. 98 REQUIRED SUPPLEMENTARY INFORMATION 99 City of Petaluma Required Supplementary Information For the year ended June 30, 2005 1. BUDGETARY INFORMATION BudketanI Policv and Control The City Council adopts an annual budget, submitted by the City Manager prior to the beginning of the new fiscal year. Public hearings are conducted prior to its adoption by the City Council. All appropriations which are not obligated, encumbered, or expended at the end of the fiscal year lapse and become a part of the unreserved fund balance which may be appropriated for the next fiscal year. The City Council has the legal authority to amend the budget at any time during the fiscal year. The City Manager has the authority to make adjustments to the operating budget within funds and between departments. Transfers of operating budgets from appropriated reserve accounts, use of unappropriated fund balances, cancellation of appropriation and all changes in capital improvement project budgets require the approval of the City Council. Supplemental appropriations during the fiscal year were not material. The annual budget is prepared on a basis consistent with generally accepted accounting principles. It is adopted for all governmental type funds. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated budget approved by the City Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) for the operating budget is within a department. Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded when issued in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary control in the governmental and proprietary fund types. Open encumbrances at year-end are recorded as reservations of fund balance since the commitments will be paid by subsequent years' budget appropriations. Encumbrances do not constitute expenditures or liabilities. 100 City of Petaluma Required Supplementary Information, Continued For the year ended June 30, 2008 1. BUDGETARY INFORMATION, Continued BiOvetai it Cwjipaiism Schedide - Geiieral Fund 101 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts {Negative) Fund balance July 1, $ 8,963,184 $ 8,963,184 $ 8,963,184 $ - Resources (inflows): Taxes 23,325,000 23,075,000 22,955,868 (119,132) Licenses, permits and fees 2,249,500 2,668,500 1,784,715 (883,785) Fines, forfeitures and penalties 604,000 335,000 661,025 326,025 Use of money and property 917,500 917,500 687,165 (230,335) Intergovernmental 5,2'-)9,000 5,22-2,000 4,949,185 (272,815) Charges for current services 6,698,450 6,407,450 5,301,614 (1,105,836) Other 195,500 177,200 5,846,205 5,669,005 Proceeds from sale of assets - 27,500 10,992 (16,508) Transfers from other funds 1,180,000 1,289,000 1,327,806 38,806 Total resources 40,391,950 40,119,150 43,524,575 3,405,425 Amount available for appropriation 49,355,134 -49,082,334 52,487,759 3,405,425 Charges to appropriations (outflows): Departmental: General government: City council 290,650 305,650 273,028 32,6222 City clerk 341,550 3.41,550 307,175 3.4,375 City attorney 416,800 593,800 448,675 145,125 City manager 387,050 443,050 460,559 (17,509) General plan - - - - Animal services 769,600 914,600 907,417 7,183 Administrative services 2,066,650 2,600,000 2,661,25 (61,25) Total General government 4,272,300 5,198,650 5,058,079 140,571 Community development 1,865,200 1,908,100 1,894,860 13,240 Police 15,513,450 16,369,450 16,481,202 (111,752) Fire 7,949,550 8,176,550 8,134,710 41,840 Parks and recreation 4,631,500 4,848,500 5,051,947 (203,447) Public works 5,592,600 5,893,500 6,083,29.4 (189,794) Capital outlay 223,000 377,500 5,730,821 (5,353,321) Debt Service: Principal - - - - hlterest - - - Transfers to other funds 313,000 438,000 438,000 - Total charges to appropriations 40,360,600 43,210,250 48,873,913 (5,662,663) Fund balance at June 30, $ 8,994,534 S 5,872,084 $ 3,614,846 $ (2,57,58) 101 City of Petaluma Required Supplementary Information, Continued For the year ended June 30, 2008 1. BUDGETARY INFORMATION, Continued Biid,geta?-v Coiaparism Sdcedide - Howe/Bezhi Svecir17 Reveiive Pwid Fund balance July 1, Resources (inflows): Use of money and property Intergovernmental Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: Community development Total charges to appropriations Fund balance at June 30, Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 637,765 $ 637,765 $ 637,765 $ 10,700 4,000,000 4,010,700 4,648,465 3,950,700 3,950,700 S 697,765 $ 102 10,700 24,274 13,574 4,000,000 3,457,520 (542,480) 4,01D,700 3,481,794 (528,906) 4,648,465 4,119,559 (528,906) 3,950,700 3,958,001 (7,301) 3,950,700 3,958,001 (7,301) 697,765 5 161,558 $ (536,207) City of Petaluma Required Supplementary Information, Continued For the year ended June 30, 2008 1. BUDGETARY INFORMATION, Continued Budgetaril Corttvarisoii Schedide - Redevelovtizeiit Special Reveizue Fuzzd 103 Variance Nvith Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance July 1, $ 17,773,177 $ 17,773,177 S 17,773,177 $ - Resources (inflows): Taxes 2,800,000 2,800,000 3,277,878 477,878 Use of money and property 44,000 44,000 234,660 190,660 Intergovernmental 630,000 630,000 613,890 (16,110) Charges for current services 13,500 13,500 31,021 17,521 Cather - - 459,583 459,583 Transfers from other funds - - - - Total resources 3,487,500 3,487,500 4,617,032 1,129,532 Amount available for appropriation 21,260,677 21,260,677 22,390,209 1,129,532 Charges to appropriations (outflows): Departmental: Community development 2,518,150 2,518,150 787,671 1,730,479 Capital outlay - - - - Transfers to other funds 630,000 915,000 880,192 34,808 Total charges to appropriations 3,148,150 3,433,150 1,667,863 1,765,287 Fund balance at June 30, $ 18,112,527 $ 17,827,527 5 20,722,346 $ 2,894,819 103 City of Petaluma Required Supplementary Information, Continued For the year ended June 30, 2008 1. BUDGETARY INFORMATION, Continued Bud,zetanl Coiniarism Scliedide - hw7act Fees Special Revaiiiie Fioid Fund balance July 1, Resources (inflows): Licenses, permits and fees Use of money and property Intergovernmental Transfers from other funds Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: General government Community development Police Fire Parks and recreation Public works Debt Service: Interest Transfers to other funds Total charges to appropriations Fund balance at June 30, Budgeted Amounts Original Final 5 11,708,115 $ 11,708,115 Variance with Final Budget Actual Positive Amounts (Negative) $ 11,708,115 $ - 4,091,000 4,091,000 4,490,051 399,051 1.44,100 144,100 390,344 246,244 - _ 201,398 201,398 4,235,100 4,235,100 5,081,793 846,693 15,943,215 15,943,215 16,789,908 846,693 5,300 5,300 - 5,300 1,653,750 1,652,750 7,478,069 (825,319) 1,900 1,900 5,223 (3,3?3) 3,200 3,200 6,823 (3,623) 55,500 55,500 74,223 (18,723) 93,600 93,600 79,541 1.4,059 2,267,000 3,298,000 3,354,905 (56,905) 4,079,250 5,110,250 5,998,784 (888,534) 5 11,863,965 $ 10,832,965 $ 10,791,124 $ 1,735,227 104 City of Petaluma Required Supplementary Information, Continued For the year ended June 30, 2008 2. DEFINED BENEFIT PENSION PLAN A schedule of funding progress for the year ended June 30, 2007, 2006, and 2005 of actuarial valuations are presented below. Underfunded (Overfunded) * Latest information available. 105 Underfunded Actuarial Entry Age (Overfunded) Liability as Actuarial Actual Actuarial Actuarial Percentage of Valuation Asset Accrued Accrued Funded Covered Covered Date* Value Liability Liability Ratio Payroll Payroll N iscellaneous 6/30/05 $ 46,674,278 $ 53,065,461 $ 6,391,183 88.0% $ 12,327,203 51.8% Employees Group 6/30/06 51,333,652 57,619,433 6,285,781 89.11/0 12,764,880 49.2% 6/30/07 56,469,750 62,630,507 6,160,757 90.2% 14,415,740 427% Safety 6/30/05 $ 69,712,120 $ 87,838,194 $ 18,126,074 79.40,0 $ 9,341,368 194.0% Employees Group 6/30/06 76,262,678 95,408,077 19,145,399 79.91/0 10,551,714 181.4% 6/30/07 83,733,721 103,858,166 20,124,445 80.6% 11,620,163 173.2% * Latest information available. 105 106 SUPPLEMENTARY INFORMATION 107 108 Non -Major Governmental Funds Special Revenue Funds: Community Development Block Grant Fuad - The fund accounts for federal grants received under the Housing and Community Development Act of 1971 from the US Department of Housing and Urban Development. Funds are used to develop a viable urban community, by providing adequate housing, a suitable living environment, and expanding economic opportunities, principally for persons with low and moderate income. Grants and Donations Fund - The fund accounts for various donations received by City departments, and related expenditures. Gas Tax Funic - The fund reports receipts and disbursements of funds under Streets and Highways Code Sections 2105, 2106, 2107 and 2107.5 of the State of California. Expenditures in this fund, for administrations, maintenance and construction, must be street related. Public Safehj Fund - The fund is used to account for asset seizure, supplemental law enforcement, service fund, abandoned vehicle abatement, fire hazmat, in law fees activates. Landscape Assessment Districts And - The fund details revenue and maintenance costs associated with forty-seven landscape assessment districts maintained by the City of Petaluma. These districts collect funds from the property owners, and use the funds to maintain common landscape areas within the boundaries of the district. Street Fund - The fund accounts for revenue received from the solid waste surcharge, imposed as part of the franchise fee on the waste hauler. This revenue, along with transfers from various other City funds, will be expended on street maintenance activities. Transient Occupancy Tax Fund - The fund reports the hotel and motel occupancy tax receipts, and the disbursements to local, not-for-profit groups, which sponsor community events, or promote tourism. Prince Park Fund - The fund details the activity of the ongoing maintenance of Prince Park. The activities included in this fund are receipts of investment earnings, and transfers out to the general fund to cover costs of the park's maintenance. Debt Service Funds: Redevelopment CBD/PCD Debt Service Fund - The fund accounts for the accumulation of resources, and the payment of principal and interest of the Redevelopment Agency's long-term debt. Permanent Funds: Wickersham Park Trust Permanent Fund - The fund accounts for resources that are held by the City, which are legally restricted to the extent that only earnings may be used maintenance improvements to Wickersham Park. 109 City of Petaluma Combining Balance Sheet Non -Major Governmental Funds June 30, 2008 110 Special Revenue Community Landscape Development Grants and Gas Public Assessment Blucl, Grant Donations Tax Safety Districts Street ASSETS Cash and investments S 33 $ 674,672 $ 568,157 $ 646,470 S 486,766 S 1,453,069 Restricted cash and investments - - - - - - Receivables: Accounts receivable - 20,920 - - - Intergovernmental receivable 170,031 432,762 344,400 8,296 13,710 - Misc other receivables 77,593 - - - - - Notes receivable 784,000 - - - - - Total assets $ 1,031,657 $ 1,128,354 $ 912,557 S 654,766 $ 500,476 $ 1,453,069 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 38,242 $ 29,803 $ - S 31,676 $ 77,317 $ 10,916 Wage payable 948 - - - - 28,874 Deferred revenue 861,592 - 344,400 8,296 - - Due to other funds 35,000 215,000 - - - - Total liabilities 935,782 244,803 344,400 39,972 77,317 39,790 Fund Balances: Reserved for: Encumbrances - - - - - Notes receivable 784,000 - - - - - Debt service - - - - Total reserved 784,000 - - - - - Unreserved, desibmated for: Special revenue funds - - 2,235 1,916 - 5,619 Unreserved, reported in: Special revenue funds (688,15) 883,551 565,922 612,878 423,159 1,407,660 Permanent funds - - - - - - Total unreserved (688,15) 883,551 568,157 614,794 423,159 1,413,279 Total fund balances 95,875 883,551 568,157 614,794 45,159 1,413,279 Total liabilities and fund balances $ 1,031,657 $ 1,128,354 S 912,557 $ 654,766 S 500,476 $ 1,453,069 110 $ 491,188 $ 1,033,670 $ 737 $ 22,486 $ 5,377,248 - - 51,450 - 51,450 172,480 - - - 193,400 - - - 969,199 - - - 77,593 784,000 $ 663,668 $ 1,033,670 5 52,187 $ 22,486 5 7,452,890 $ 88,360 $ - $ - $ 276,314 - - - - 29,82 - 1,214,288 45,000 - 295,000 88,360 - 45,000 - 1,815,424 784,000 7,187 - 7,187 7,187 791,187 88 9,856 575,308 Debt - - Special Revenue Service Permanent Total Transient 22,398 Nan -Major Occupancy Prince Wickersham Governmental Tax Park Redevelopment Park Trust Funds $ 491,188 $ 1,033,670 $ 737 $ 22,486 $ 5,377,248 - - 51,450 - 51,450 172,480 - - - 193,400 - - - 969,199 - - - 77,593 784,000 $ 663,668 $ 1,033,670 5 52,187 $ 22,486 5 7,452,890 $ 88,360 $ - $ - $ 276,314 - - - - 29,82 - 1,214,288 45,000 - 295,000 88,360 - 45,000 - 1,815,424 784,000 7,187 - 7,187 7,187 791,187 88 9,856 575,308 1,033,670 - - 4,814,023 - - - 22,398 22,398 575,308 1,033,670 - 222,486 4,846,279 575,308 1,033,670 7,187 22,486 5,637,466 $ 663,668 $ 1,033,670 $ 52,187 $ 2?,486 $ 7,452,890 (Concluded) 111 City Of Petaluma Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non -Major Governmental Funds For the year ended June 30, 2008 REVENUES: Taxes Licenses, permits and fees Fines, forfeitures and penalties Use of money and property Intergovernmental Charges for current services Other Total revenues EXPENDITURES: Current: Community development Police Fire Parks and recreation Public works Capital outlay Debt service: Principal Interest Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances FUND BALANCES: Beginning of year End of year Special Revenue Community Landscape Development Grants and Gas Public Assessment Block Grant Donations Tax Safety Districts Street $ - $ - $ - S - $ - $ 61,197 - - - 36,358 - - - - - 207,584 - - 100,170 (3,147) 39,833 25,023 20,822 12,699 334,106 2,878,933 689,375 147,566 - 369,972 - - - - 368,534 - - 399,679 - 175 - 434,276 3,255,465 729,208 416,706 389,356 413,868 429,226 156,570 - - - - - 34,267 - 5,443 - - - 21,489 - 2,390 - - - 34,924 - - 486,863 - - (150,500) 132,994 - - 1,175,926 - 36,451 - - - 60,164 429,226 453,201 132,994 27,833 186,863 1,36,090 5,050 2,802,264 596,214 388,873 (97,507) (792,2221) - 58,718 - - 13,000 996,000 (47,880) (2,265,247) (1,020,000) (1x0,000) - (318,000) (47,880) (2,206,529) (1,x20,000) (100,000) 13,aa0 678,000 (42,830) 595,735 (423,786) 288,873 (84,507) (114,1_22) 138,705 287,816 991,943 35,921 507,666 1,527,501 $ 95,875 S 883,551 $ 568,157 5 614,794 $ 423,159 $ 1,413,279 112 423,908 - 26,306 - 1,036,010 - - - - 379,710 - - - - 3,879 - - 531,787 - - 1,158,420 - - 96,615 - Debt 1,184,000 - Special Revenue Service Permanent Total Transient 3,484,023 43,908 Non -Major Occupancy Prince - Wickersham Governmental Tax Park Redevelopment Park Trust Funds $ 1,487,648 $ - $ - $ - $ 1,548,845 - - (1,000,000) - 36,358 - - - - 207,584 25,108 38,685 37,002 11121 277,316 - - - - 4,419,952 - - - 681,264 368,534 - - $ 575,308 $ - 399,854 1,512,756 38,685 37,002 11121 7,258,443 423,908 - 26,306 - 1,036,010 - - - - 379,710 - - - - 3,879 - - 531,787 - - 1,158,420 - - 96,615 - - 1,184,000 - 1,184,000 - 3,484,023 - 3,484,023 43,908 - 4,694,329 - 7,884,444 1,088,848 38,685 (4,657,327) 1,121 (626,001) - - 4,439,000 - 5,506,718 (1,000,000) (40,000) (455,750) - (5,246,877) (1,000,000) (40,000) 3,983,250 - 259,841 88,&48 (1,315) (674,077) 1,121 (366,160) 486,460 1,034,985 681,264 21,365 6,003,626 $ 575,308 $ 1,033,670 $ 7,187 $ 22,486 $ 5,637,466 (Concluded) 113 114 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual City Capital Project Funds - Major Fund For the year ended June 30, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance July 1, $ 8,481,849 $ 8,481,849 $ 8,481,849 $ - Resources (inflows): Use of money and property - - 69,362 69,362 Intergovernmental 562,000 562,000 1,044,310 4SZ310 Other 1,666,000 1,666,000 2,137,403 471,403 Transfers from other funds 11,454,000 12,572,000 12,300,549 (271,451) Total resources 13,682,000 14,800,000 15,551,624 751,624 Amount available for appropriation 22,163,849 23,281,849 24,033,473 751,624 Charges to appropriations (outflows): Current: Community Development - - - - Capital outlay 13,682,000 14,800,000 9,089,539 5,710,461 Transfers to other funds - - 241,443 (241,443) Total charges to appropriations 13,682,000 14,800,000 9,330,982 5,469,018 _ Fund balance at June 30, $ 8,481,849 $ 8,481,849 5 14,702,491 $ 6,220,642 115 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Redevelopment Capital Project Fund - Major Fund For the year ended June 30, 2008 Fund balance July 1, Resources (inflows): Taxes Licenses, permits and fees Use of money and property Intergovernmental Other Debt issuance Transfers from oklier funds Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: Community development Capital outlay Debt service: Interest Transfers to other funds Total charges to appropriations Fund balance at June 30, 116 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 30,814,817 $ 30,814,817 $ 30,814,817 S - 17,000,000 12,000,000 13,499,242 1,499,242 - - 645 645 16,000 16,000 1,711,590 1,695, 590 - - 125,938 125,938 - 230,000 10,110,729 9,880,729 12,016,000 12,246,000 25,448,144 13,202,14=1 42,830,817 43,060,817 56,262,961 13,202,144 7,488,700 8,250,700 6,433,072 1,817,628 7,579,000 6,589,000 4,411,744 2,177,56 9,793,000 9,673,000 19,766,461 (10,093,461) 24,860,700 24,512,700 30,611,277 (6,098,577) $ 17,970,117 S 18,548,117 $ 25,651,684 S 7,103,567 116 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Community Development Block Grant Special Revenue Fund For the year ended June 30, 2008 Fund balance July 1, Resources (inflows): Use of money and property Intergovernmental Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: Community development Capital outlay Transfers out Total charges to appropriations Fund balance at June 30, 357,400 357,400 429,2226 (71,826) - - 47,880 (47,880) 357,400 357,400 477,106 (119,706) $ 138,705 $ 138,705 $ 95,875 $ (42,830) 117 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 138,705 $ 138,705 $ 138,705 S - - - 100,170 100,170 357,400 357,400 334,106 (23,294) 357,400 357,400 434,276 76,876 496,105 496,105 572,981 76,876 357,400 357,400 429,2226 (71,826) - - 47,880 (47,880) 357,400 357,400 477,106 (119,706) $ 138,705 $ 138,705 $ 95,875 $ (42,830) 117 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Grants and Donations Special Revenue Fund For the year ended June 30, 2008 Fund balance July 1, Resources (inflows): Use of money and property Intergovernmental Other Transfer from other funds Total resources Amount available for appropriation Charges to appropriations (outflows): Departmen Lal: Community Development Police Fire Parks Public works Capital outlay Transfers to other funds Total charges to appropriations Fund balance at June 30, 128,000 129,000 156,570 Variance with 155,450 155,450 354,267 Final Budget Budgeted Amounts - Actual Positive Original Final Amounts (Negative) $ 287,816 $ 287,816 $ 287,816 $ - 20,000 20,000 (23,147) (43,1.47) 2,862,450 2,862,450 2,878,933 16,483 174,000 174,000 399,679 225,679 - - 58,718 58,718 3,056,450 3,056,450 3,314,183 257,733 3,344,266 3,344,266 3,601,999 257,733 128,000 129,000 156,570 (28,570) 155,450 155,450 354,267 (198,81.7) - - 21,489 (21,489) - - 34,924 (34,924) - - (150,500) 150,500 - - 36,451 (36,451) - - 2,265,247 (2,265,247) 283,450 283,450 2,718,448 (2414,998) $ 3,060,816 $ 3,060,816 $ 883,551 $ (2,177,265) 118 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Gas Tax Special Revenue Fund For the year ended June 30, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance July 1, $ 991,943 5 991,943 $ 991,943 $ - Resources (inflows): Use of money and property 10,000 10,000 39,833 29,833 Intergovernmental 1,020,000 1,020,000 689,375 (330,625) Total resources 1,030,000 1,030,000 729,208 (300,792) Amount available for appropriation 2,021,943 2,021,943 1,721,151 (300,792) Charges to appropriations (outflows): Departmental: Public works 103,000 134,000 132,994 1,006 Transfers to other funds 1,020,000 1,020,000 1,020,000 - Total charges to appropriations 1,13,000 1,154,000 1,152,994 1,006 Fund balance at June 30, $ 898,943 $ 867,943 $ 568,157 $ (299,786) 119 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Public Safety Special Revenue Fund For the year ended June 30, 2008 Fund balance July 1, Resources (inflows): Licenses, permits and fees Fines, forfeitures and penalties Use of money and property Intergovernmental Other Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: Police Fire Capital Outlay Transfers to other funds Total charges to appropriations Fund balance at June 30, 150,000 137,500 25,443 112,057 30,000 30,000 2,390 27,610 - 12,500 - 12,500 100,000 100,000 100,000 - 280,000 280,000 127,833 152,167 $ 248,121 $ 248,121 $ 614,794 $ 366,673 120 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 325,921 $ 325,921 $ 325,921 $ - 18,200 18,200 36,358 18,158 47,000 47,000 207,584 160,584 4,200 4,200 25,023 20,823 132,800 132,800 147,566 14,766 - - 175 175 202,200 202,200 416,706 214,506 528,121 528,121 742,627 214,506 150,000 137,500 25,443 112,057 30,000 30,000 2,390 27,610 - 12,500 - 12,500 100,000 100,000 100,000 - 280,000 280,000 127,833 152,167 $ 248,121 $ 248,121 $ 614,794 $ 366,673 120 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Landscape Assessment Districts Special Revenue Fund For the year ended June 30, 2008 121 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance July 1, $ 507,666 $ 507,666 $ 507,666 $ - Resources (inflows): Use of money and property 9,000 9,128 20,8222 11,694 Charges for current services 356,000 341,993 368,534 26,541 Other - 13,879 - (13,879) Transfers from other funds 13,000 13,000 13,000 - Total resources 378,000 378,000 402,356 24,356 Amount available for appropriation 885,666 885,666 910,022 24,356 Charges to appropriations (outflows): Departmental: Parks and recreation 295,950 335,80D 486,863 (151,063) Total charges to appropriations 295,950 335,800 486,863 (151,063) Fund balance at June 30, $ 589,716 $ 549,866 $ 423,159 $ (126,707) 121 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Street Special Revenue Fund For the year ended June 30, 2008 Fund balance July 1, Resources (inflows): Taxes Use of money and property Intergovernmental Transfers from other funds Total resources Amount available for appropriation Charges to appropriations (outflows): Departmental: Public works Capital Outlay Transfers to other funds Total charges to appropriations Fund balance at June 30, Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 1,527,501 $ 1,527,501 $ 1,527,501 $ - - - 61,197 61,197 10,500 10,500 12,699 2,199 376,000 376,000 369,972 (6,028) 996,000 996,000 996,000 - 1,382,500 1,382,500 1,439,868 57,368 2,910,001 2,910,001 2,967,369 57,368 2,280,450 2,280,450 1,175,926 1,104,524 - - 60,164 (60,164) - - 318,000 (318,000) 2,280,450 2,280,450 1,554,090 726,360 $ 629,551 $ 629,551 $ 1,413,279 $ 783,728 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Transient Occupancy Tax Special Revenue Fund For the year ended June 30, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance July 1, $ 486,460 $ 486,460 $ 486,460 $ - Resources (inflows): Taxes 1,400,000 1,400,000 1,487,648 87,648 Use of money and property 6,200 6,200 25,108 18,908 Total resources 1,406,200 1,406,200 1,512,756 106,556 Amount available for appropriation 1,892,660 1,892,660 1,999,216 106,556 Charges to appropriations (outflows): Departmental: Community development 426,000 426,000 423,908 2,092 Transfers to other funds 1,000,000 1,000,000 1,000,000 - Total charges to appropriations 1,426,000 1,436,000 1,423,908 2,092 Fund balance at June 30, $ 466,660 S 466,660 $ 575,308 $ 108,648 123 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Prince Park Special Revenue Fund For the year ended June 30, 2008 124 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance, July 1 $ 1,034,985 $ 1,034,985 S 1,034,985 $ - Resources (inflows): Use of money and property 40,000 40,000 38,685 (1,315) Total resources 40,000 40,000 38,685 (1,315) Amount available for appropriation 1,074,985 1,074,985 1,073,670 (1,315) Charges to appropriations (outflows): Transfers out 40,000 40,000 40,000 - Total charges to appropriations 40,000 40,000 40,000 - Fund balance at June 30, S 1,034,985 $ 1,034,985 $ 1,033,670 $ (1,315) 124 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Redevelopment Debt Service Fund .' For the year ended June 30, 2008 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance, July 1 $ 681,264 $ 681,264 $ 681,264 $ - Resources (inflows): Use of money and property 1,000,000 1,000,000 37,002 (962,998) Other - - - - Transfers from other funds 3,973,000 3,973,000 4,439,000 466,000 Total resources 4,973,000 4,973,000 4,476,002 (496,998) Amount available for appropriation 5,654,264 5,654,264 5,157,266 (496,998) Charges to appropriations (outflows): Departmental: Community development 37,050 37,050 26,306 10,744 Debt service: Principal 1,154,000 1,184,000 1,184,000 - Interest and fiscal charges 3,533,750 3,484,056 3,484,03 33 Transfers to other funds - - 455,750 (455,750) Total charges to appropriations 4,73,800 4,705,106 5,150,079 (444,973) Fund balance at June 30, $ 930,464 $ 949,158 $ 7,187 $ (941,971) 125 City of Petaluma Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Wickersham Park Trust Permanent Fund For the year ended June 30, 2008 126 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund balance, July 1 $ 21,365 $ 21,365 $ 21,365 $ - Resources (inflows): Use of money and property 500 500 1,121 621 Total resources 500 500 1,121 621 Fund balance at June 30, $ 21,865 $ 21,865 $ 22,486 $ 621 126 Internal Service Funds Employee Benefits Fund - The fund accounts for City employees' dental, unemployment and vision benefits, and retiree benefits. General Services Fund - The fund accounts for purchasing, printing and mail services. Infarination Services Fund - This fund accounts for the cost of purchasing, operating and maintaining the City's voice, data and computer systems. Risk Management Fund - The fund accounts for the accumulation of the resources and expenses related to the City's risk management activities and general insurance programs. VekiclelEgWpinent Replacement Ftcnd - The fund accounts for the accumulation of resources, and related expenses incurred for the replacement of major equipment and vehicles in the City. The fund is divided into two sub -funds, one for equipment acquired for general government activities, and one for equipment acquired for business -type activities. Workers' Compensation Fund - The fund accounts for the accumulation of resources, and expenses related to funding workers' compensation benefits for City employees. 127 City of Petaluma Combining Statement of Net Assets All Internal Service Funds June 30, 2008 ASSETS Current assets: Cash and investments Account receivable Inventories Due from other Funds Deposits and prepaids Total current assets Non-current assets: Deposits receivable Capital assets: Depreciable Less accumulated depreciation Total capital assets Total non-current assets Total assets: LIABILITIES Current liabilities: Accounts payable Wages payable Accrued interest payable Compensated absences Capital lease - due within one year Total current liabilities Non-current liabilities: Accrued clairns Compensated absences Capital lease -due in more than one year Total Non-current liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted Total net assets Risk Employee General Information Management Benefits Fund Services Fund Services Fund Fund $ 398,4222 $ 761,132 191,695 $ 6,081,258 - 10,661 - - 1,255 4,433 959 398,42 773,048 196,128 6,082,217 30,895 - - 773,159 - 27,144 1,386,836 - - (13,669) (105,101) - - 13,475 981,735 - 30,895 13,475 981,735 773,159 429,317 786,523 1,177,863 6,855,376 82,741 3,325 112,374 89,529 1,653 9,607 31,484 11,607 - - 10,895 - 114 3,395 13,676 2,737 - - 60,005 - 84,508 16,327 228,434 103,873 - - - 1,703,673 1,731 42,705 37,664 31,041 - - 131,143 - 1,731 42,705 168,807 1,734,714 86,239 59,032 397,241 1,838,587 343,078 $ 343,078 S 129 13,475 981,735 - 714,016 (201,113) 5,016,789 727,491 $ 780,62-7 $ 5,016,789 $ Equipment Replacement (GG) Fund 298,450 $ 298,450 4,754,735 (1,397,782) 3,356,953 3,356,9.53 3,655,403 Equipment Workers' Replacement Compensation (BA) Fund Fund Total 104,861 $ 6,801,149 $ 14,636,967 - 60,725 60,725 - - 10,661 6,647 104,861 6,861,874 14,715,000 - - 804,054 1,42,S55 - 7,601,570 (548,652) - (2,365,204) 884,203 - 5,36,366 884,203 - 6,040,420 989,064 6,861,874 20,755,420 - - 48,152 336,121 - - 3,12 57,473 - - 10,895 - - 253 20,175 - - - 60,005 - - 51,527 484,669 - - 2,934,465 4,638,138 - - 5,159 118,300 - - - 131,143 - - 2,939,624 4,887,581 - - 2,991,151 5,372,250 3,356,953 884,303 - 5,36,366 298,450 104,861 3,870,723 10,146, 804 $ 3,655,403 S 989,06=1 $ 3,870,723 $ 15,383,170 129 City of Petaluma Combining Statement of Activities and Changes in Net Assets All Internal Service Funds For the year ended June 30, 2008 OPERATING REVENUES: Charges for sales Charges for current services Total operating revenues OPERATING EXPENSES: Cost of services Claims General and administrative Depreciation Total operating expenses Operating income (loss) NONOPERATING REVENUES (EXPENSES): Investmen t earnings and rent Interest expense Gain or (loss) on disposal of assets Total nonoperating revenues (expenses) INCOME (LOSS) BEFORE TRANSFERS Transfers in Transfers (out) Total transfers Change in net assets NET ASSETS: Beginning of year End of year Employee General Information Benefits Fund Services Fund Services Fund $ - $ 16,358 $ - 816,153 772,900 1,926,421 816,153 789,258 1,926,421 Risk Management Fund 1,994,523 1,994,523 539,232 310,4'x' 1,252,582 585,911 450,103 - - (848,617) 69,096 40,794 348,665 443,235 - 'x,714 172,990 - 1,058,431 353,930 1,774,237 180,529 (242,278) 435,328 152,184 1,813,994 26,200 26,264 15,837 285,551 - - (24,691) - 26,200 26,264 (8,854) 285,551 (216,078) 461,592 143,330 2,099,545 100,000 - 181,000 - 100,000 - 181,000 - (116,078) 461,592 324,330 2,099,545 459,156 265,899 456,292 2,917,244 $ 343,078 $ 727,491 $ 780,622 $ 5,016,789 130 Equipment Equipment Workers' Replacement Replacement Compensation (GG) Fund (BA) Fund Fund Total $ - $ - $ - $ 16,358 - - x,015,637 7,525,634 - - 2,015,637 7,541,992 - - 225,490 2,913,637 - - 517,167 118,653 36,975 500 302,008 1,240,523 „ .. 524,328 212,588 - 91Z620 560,553 33,088 1,044,665 5,185,433 (560,553) (213,088) 970,972 2,356,559 28,730 10,094 335,652 728,328 - - (24,691) (44,654) - - (44,654) (15,924) 10,094 335,652 658,983 (576,477) (202,994) 1,306,624 3,015,542 367,236 - 648,236 - (167,36) - (167,236) 367,236 (167,36) - 481,000 (209,241) (370,30) 1,306,624 3,496,542 3,864,644 1,359,294 2,564,099 11,886,628 $ 3,655,403 $ 989,064 $ 3,870,723 $ 15,383,170 131 City of Petaluma Combining Statement of Cash Flows All Internal Service Funds For the year ended June 30, 2008 CASH FLOWS FROM OPERATING AC71VITIES: Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees for services Claims paid Net cash provided (used) by operating activities CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES: Due to/from other funds Transfers in Transfers (out) Net cash provided (used) by non -capital financing activities CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES: Acquisition of capital assets Proceeds from sale assets Payments of long term debt Interest paid Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Interest received Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of year End of year RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense Changes in assets and liabilities: Account receivable Inventories Deposits and prepaids Non-current assets Accounts payable Wages payable Accrued claims Compensated absences Total adjustments Net cash provided (used) by operating activities 132 Risk Employee General Information Management Benefits Fund Services Fund Services Fund Fund $ 806,038 $ 789,258 $ 1,926,421 S 1,994,523 (489,035) (306,735) (1,185,968) (5€5,177) (69,172) (35,703) (328,193) (429,035) (450,103) - - (250,262) (202,272) 446,820 412,260 770,049 100,000 - 181,000 - 100,000 - 181,000 - - - (794,289) - - - (56,652) - - - (13,796) - - - (864,737) - 26,200 26,264 15,837 285,551 26,200 26,26=1 15,837 285,551 (76,072) 473,084 (255,640) 1,055,600 474,494 288,048 447,335 5,025,658 S 398,4229 S 761,132 $ 191,695 `n 6,081,258 $ (242,278) $ 435,328 $ 152,184 $ 1,813,994 - 2,714 172,990 - - (293) - - - 1,970 (4,433) (959) (10,115) - - (47,630) 50,197 2,010 71,047 89,323 438 528 8,698 3,340 - - - (1,098,879) (514) 4,563 11,774 10,860 40,006 11,492 260,076 (1,043,945) $ (202,272) S 446,820 S 412,260 S 770,049 Equipment Equipment Workers' 738,328 Replacement Replacement Compensation 738,328 (GG) Fund _(BA) Fund Fund Total 786,213 $ - $ - $ 1,956,383 $ 7,472,623 (489) - (241,562) (2,768,966) (36,125) (500) (301,941) (1,200,769) _ - (659,304) (1,359,669) (36,714) (500) 753,576 2,143,219 367,236 - - 648,336 - (167,236) - (167,116) 367,236 (1676) - 481,000 (802,361) (173,856) - (1,770,506) (44,654) - - (44,654) - - (56,652) - (13,796) (847,015) (173,856) - (1,885,608) 28,730 10,094 335,652 738,328 38,730 10,094 335,652 738,328 (487,763) (331,498) 1,089,E 1,466,939 786,213 436,359 5,711,921 13,170,028 S 298,450 S 1US61 S 6,801,1.19 S 14,636,967 $ (560,553) $ (313,088) $ 970,972 $ 2,356,559 524,338 212,588 - 912,630 - - (59,254) (59,254) (293) _ - (3,422) - - - (57,745) (489) - (16,072) 196,016 - - (833) 12,171 - - (147,137) (1,241,016) - - 900 27,583 523,839 212,588 (217,396) (213,340) S (36,714) S (500) S 753,576 S 2,143,219 133 134 Fiduciary Fund Financial Statements Private Purpose Trust Funds: Thomas Lee Charihj Trust Fund - This fund is a private purpose trust fund in which trust earnings are available for one-time aid to Petaluma citizens in need. Child Care Trust Fund - This is a private purpose trust fund in which the fund's earnings are available for childcare vouchers for eligible Petaluma working families with childcare costs. Agency Funds: General Agency Funds - The fund is account for resources received from, held for, and due to, non - related parties. Public Conn entity Access Fund - The fund is used to account for funds received from the local television cable company, and used by the not-for-profit organization, which provides public television to City residents. Assessment Districts Funds - This fund accounts for funds held by the City, collected from parcel assessments, and used to pay special assessment debt, pursuant to the provisions of the Improvements Bonds Act of 1915. 135 City of Petaluma Combining Balance Sheet Fiduciary Funds - Private Purpose Trust Funds June 30, 2008 136 Thomas Lee Child Care Charity Fund Fund Total ASSETS Cash and investments $ 77,812 5 159,514 5 182,356 Total assets 229,812 159,514 182,356 NET ASSETS Held in test 5 2,812 $ 159,54=1 $ 182,356 136 City of Petaluma Combining Statement of Changes in Fiduciary Net Assets Fiduciary Funds - Private Purpose Trust Funds For the year ended June 30, 2008 137 Thomas Lee Child Care Charity Fund Fund Total ADDITIONS: Investment income $ 996 $ 7,412 $ 8,408 Total revenues 996 7,412 8,408 DEDUCTIONS: Program costs - 1,950 1,950 Total expenditures - 1,950 1,950 Change in net assets 996 5,462 6,458 NET ASSETS: Beginning of year 21,816 154,082 175,898 End of year $ 2.2,812 $ 159,544 $ 182,356 137 City of Petaluma Statement of Changes in Assets and Liabilities Agency Funds For the year ended June 30, 2008 General Azencv Funds Assets: Cash and investments Total assets Liabilities: Accrued liabilities Total liabilities Public Community Access Fund Assets: Cash and investments Total assets Liabilities: Accrued liabilities Total Iiabilities Assessment District Funds Assets: Cash and investments Intergovernmental receivable Total assets Liabilities: Accrued liabilities Total liabilities Total Aeencv Funds Assets: Cash and investments Intergovernmental receivable Total assets Liabilities: Accrued liabilities Total liabilities Balance Balance July 1, 2007 Additions Deletions June 30, 2008 $ 1,594,188 5 1,632,174 $ (2,051,949) $ 1,174,413 $ 1,594,188 $ 1,632,174 $ (2,051,949) 5 1,174,413 $ 1,594,188 $ 2,438,359 5 (2,858,134) $ 1,174,413 $ 1,594,188 $ 2,438,359 $ (2,858,134) $ 1,174,413 $ 148,101 $ 881,815 $ (933,653) $ $ 148,101 S 881,815 $ (933,653) S S 148,101 $ 250,620 $ (302,458) $ S 148,101 $ 250,620 $ (302,458) $ 96,263 96,263 96,263 96,263 $ 2,152,740 $ 4,354,773 $ (4,233,704) $ 2,273,809 42,043 5,796 (42,042) 5,797 $ 2,194,783 $ 4,360,569 $ (4,275,746) $ 2,279,606 $ 2,194,783 $ 1,538,743 S (1,453,920) $ 2,279,606 $ 3,194,783 $ 1,538,743 $ (1,453,920) $ 2,279,606 $ 3,895,029 $ 6,868,762 $ (7,219,306) $ 3,544,485 42,043 5,796 (47,042) 5,797 $ 3,937,072 $ 6,874,558 $ (7,261,348) $ 3,550,252 $ 3,937,072 $ 4,2227,722 $ (4,614,512) $ 3,550,282 $ 3,937,072 $ 4,2227,722 $ (4,614,512) S 3,550,282 138 City of Petaluma, CA Statistical Section This part of the City of Petahoara's Couaprehensive Amaral Financial Report presents detailed infortuat'on as a contest for zuzderstazzding what the inforarzatim in the financial statements, zaote disclosures, and required supplezrrentany inforwation says abort the City's overall financial health. Contents Schedule Financial Trends 1, 2, 3, 4, 5 These schedules contain trend information to help the reader zorderstarrd hoar the Cihj's financial per forrnance and well-being have changed over time. Revenue Capacity 6, 7, 8, 9,10, 11 These schedules contain trend information to help the reader assess the factors affecting the City's ability to generate its property tares. Debt Capacity 12,13,14,15,16 These schedules present information to help the reader assess the affordabilihj of the City's current levels of outstanding debt arid the City's abilihj to issue additional debt in the fittue. Demographic and Economic Information 17,18 These schedules offer demographic and economic indicators to lrelp the reader understand the envirowamt Within which the City's firxancial activities take place and to help make comparisons over thae and With othergovernments. Operating Information 19, 20, 21 These schedules contain inforrrzation about the City's operations and resources to help the reader anderstmzd horn the City's financial infornratiorr relates to the services the Cihj provides arrd the activities it performs. Sources: Unless otherwise noted, the fuforumtiorz in these sclredrrles is derived from the coarrprehensive aznwal financial reports for the relevant year. 77ze City izrrplemeazted GASB Statement No. 34 hi 2004, schedules presenting govern went -wide information include iufonaation beginning in that year. 139 Schedule 1 City of Petaluma, CA Net Assets by Component Last Four Fiscal Years (accrual basis of accouutiug) Fiscal Year 2005 2006 2007 2008 Governmental Activities Invested in capital assets, net of related debt $ 89,920,349 $ 103,563,697 $ 128,149,019 $ 113,972,864 Restricted: Special projects 16,289,349 33,162,999 34,938,959 36,707,513 Debt service - 686,807 681,264 7,187 Permanent fund: non -expendable trust - 16,000 16,000 - Capital projects 40,933,275 12,635,285 7,471,666 40,35.4,175 Unrestricted 11,873,653 23,129,499 24,261,726 24,661,177 Total governmental activities net assets 159,016,626 173,194,287 195,518,634 215,702,916 Business -type activities Invested in capital assets, net of related debt 69,768,989 82,862,307 87,376,102 82,677,183 Restricted: Special projects - - - - Debt service 5,126,132 1,225,327 1,290,671 I,344,216 Permanent fund: non -expendable trust - - - - Capital projects - - - - Unrestricted 10,713,062 3,057,840 6,189,560 17,336,938 Total business -type activities net assets 85,608,183 87,143,474 94,856,333 101,358,337 Primary government Invested in capital assets, net of related debt 159,689,338 186,436,00-4 215,525,121 196,650,047 Restricted: Special projects 16,289,349 33,162,999 34,938,959 36,707,513 Debt service 5,126,132 1,912,134 1,971,935 1,351,403 Permanent fund: non -expendable trust - 16,000 16,000 - Capital projects 40,933,275 12,635,285 7,471,666 40,354,175 Unrestricted 22,586,715 26,187,339 30,451,286 41,998,115 Total primary government activities net assets $ 24-1,62409 $ 260,339,761 $ 290,374,967 $ 317,061,253 Notes: Tile City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. 140 Schedule 2 City of Petaluma, CA Changes in Net Assets, Last Four Fiscal Years (accmal basis of accowiting) Expenses: Governmental activities: General government Community development Police Fire Parks and recreation Public works Debt service Total governmental activities net assets Business -type activities Airport Ambulance Development Services Marina Public Transportation Wastewater Water Utility Total business -type activities net assets Total primary goverrunent activities net assets Program Revenues: Governmental activities: Charges for services: General government Community development Police Fire Parks and recreation Public works Operating grants and contributions Capital grants and contributions Total government activities program revenues Business -type activities Charges for services: Airport Ambulance Development Services Marina Public Transportation Wastewaier Utility Water Utilih' Operating grants and contributions Capital grants and contributions Total business -type activities program revenues Total primary government program revenues Fiscal Year 2005 3006 2007 3008 $ (116,666) $ 767,089 $ 987,353 $ 4,193,590 I5,463,212 14,526,449 13 395,617 18,167,372 12,731,433 14,701,135 15,327,707 16,428,111 7,086,322 7,596,507 8,425,482 8,193,495 4,541,987 1,970,013 5,388,317 6,122,230 6,284,072 7,424,386 10,840,989 (6) 9,696,513 1,156,896 1,9553,163 2,111,702 3,497,895 47,147,56 51,938,712 56,777,067 66,399,509 1,150,586 L258,864 1,437,123 1,586,579 2,17a 271 2,511,75 2,165,665 2,628,526 - - 1,285,879 (5) 1,35,365 636,&13 941,162 973,383 807,938 1,431,130 1,637,727 2,180,198 Z540,22-31 8,593,484 1D,674,274 10,168,807 11,586,67-2) 9,539,452 10,048,200 11,672,040 10,570,251 23,526,766 27,071,958 29,883,395 31,043,552 $ 70,674,022 5 79,010,692 $ 86,660,462 $ 97,343,061 5 1,046,469 5 2,009,426 $ 4,375,803 $ 263,871 3,662,041 3,547,011 2,716,984 5,433,211 1,201,915 823,226 804,138 708,2&1 583,811 518,681 539,327 - 1,431,244 1;181,006 1,623,461 1,379,888 1,545,972 259,982 999,774 138,886 2,414,691 (1) 3,392,838 7,103,20B (7) 9,278,181 11244,101 (1) 3,816,602 11,508,82-7 (8) 11,271,768 23,133,244 15,878,772 29,671,517 28,473,312 1,031,176 1,3 ?,124 1, '5,886 1,653,143 1,799,204 1,982,093 1,959,471 1,855,217 - - 1,056,394 (5) 952,925 235,068 205,910 225,298 245,631 186,207 170,296 185,323 201,802 13,289,537 13,621, 443 15, 088,411 16,910, 890 9,691,568 10,421, 392 11, 276,420 11,914, 062 3,137,622 (1) 1,183,859 2,963,475 - - (1) 990,059 2,559 227 2,386,860 28,770,382 29,850,176 37,039,905 36,120,533 $ 51,903,626 5 45,=728,948 $ 66,711,422) 5 64,594,845 141 Schedule 2 City of Petaluma, CA Changes in Net Assets, Last Four Fiscal Years (accrtial basis of accoutithiV) Fiscal Year 2005 2006 2007 2008 Net revenues (expenses): Governmental activities $ (24,014,012) $ (36,059,970) $ (37,105,550) Business -type activities 5,243,616 2,778,226 7,156,510 Total net revenues (expenses) $ (18,77D,396) $ (33,281,74-4) $ (19,949,040) General revenues and other changes in net assets: Governmental activities: Taxes: Property taxes $ 5,202,054 5 6,030,437 $ 7,135,526 Redevelopment tax increment 13,358,873 14,180,658 15,697,091 Sales taxes 14,313,999 1D,726,182 11,460,165 Franchise tax 1,840,1B7 3,418,833 3,607,627 Property transfer tax 1,756,647 - (4) - Motor Vehicle in4ieu - - - Intergovernmental, unrestricted 4,271,413 (2) 5,999,946 (4) 5,593,600 Other taxes 3,160,981 5,962,328 3,345,441 Unrestricted investment earnings 1,816,739 2,555,420 3,721,310 Miscellaneous revenue 1,060,745 683,389 - Internal capital contributions (1,556,046) - - Transfers 2,267,332 1,680,549 869,137 Total governmental activities 43,792,930 50,237,631 49,429,897 Business -type activities: Taxes: Unrestricted investment earnings $ .430,542 $ 439,614 S 881,406 Miscellaneous revenue $ - $ - $ 542,080 Internal capital contributions 1,556,D46 (3) - Transfers (2,267,332) (1,680,549) (869,137) Total business-typeactivities (380,744) (1,240,935) 554,349 Total primary government 5 43,512,176 $ 48,996,696 5 19,984,316 Changes in net assets: Governmental activities 5 19,778,908 5 1.4,177,661 $ 2-1,324,347 Business -type activities 4,962,872 1,537,291 7,710,859 To tat primary government $ 24,741,780 5 15,714,952 $ 30,035,206 Notes: i7ie City implemented GA513 Statement 34 in 20D4; schedules presenting government -wide information begin in that year. (1) Operating brrants and contributions decreased, and capital grants and contributions increased in 2005 due to a change in classification between Operating and capital. Additionally, capital contributions increased $3.8 million over 2004 from developer contributions. (2) Motor vehicle -in -lieu tax increased in 2005 due to increased state funding. (3) Internal capital contributions were recorded for the first time in 2005. 'Mis represents the transfers Of capital assets from governmental activities to hnsiness-type activities. (4) The category' of intergoverramental, unrestricted taxes was created in 2006 to include the motor vehicle -in -lieu tax and the property transfer tax previously recorded separately. (5) Development Services (BA fund) began operations in 2006-07 (6) Public works expenditures increased from street maintenance, engineering activity and non -capital FEMA disaster grants (}7 Operating grant revenues increased 53.7 million Over 21106 from non -capital FEMA disaster grants (8) Capital contributions increased $7.6 million over 3006 from developer contributions 142 $ (37,625,197) 5,076,981 $ (32,748,216) $ 7,392,338 16,x,120 11,619,972 2,519,185 4,,244,088 8,111,724 335,038 3,743,723 1,205,971 32' 58,009,481 $ 1,131,778 5 99,362 (32-1) 1,330,818 $ 59,240,299 $ 30,18.1,296 6,307,799 $ 26,492,086 Schedule 3 City of Petaluma, CA Fund Balances, Governmental Funds Last Four Fiscal Years Onodified accrual basis of accounting) General Fund: Reserved Unreserved, designated unreserved Total general fund All Other Governmental Funds Reserved Unreserved, designated for: Special revenue funds Capital project funds Unreserved, reported in: Special revenue funds Debt service funds Capital project funds Permanent funds Total all other governmental funds Total governmental fund balances Fiscal Year 2005 2006 2007 2008 $ 6,510,392 S 8,146,807 $ 8,538,875 $ 2,849,553 184,392 202,665 294,705 761,418 11966,866 21-0,848 129,604 3,875 8,663,650 8,570,320 8,963,184 3,614,846 55,261,046 60,954,996 28,746,906 (1) 40,732,331 3,862,927 4,510,513 926,105 625,383 - - - 82,077 11,340,241 2,495,448 7,129,104 4,206,199 (3227,393) - - (20,149,590) (21,133,551) 38,595,869 (2) 31,998,281 25,450 25,595 21,365 2,398 50,017,681 46,853,001 75,419,349 77,666,669 $ 58,681,331 $ 55,423,321 $ 84,382,533 $ 81,281,515 Notes: The City implemented GAS13 Statement 34 in 2004, schedules presenting government -wide information begin in that year. (1) Reserved fund balance decreased $322 million due to the removal of the intergovernmental receivable from the fiscal merger of the two redevelopment project areas. (2) Unreserved capital project fund balances increased $59.7 million due to the fiscal merger of the hvo redevelopment project areas and the receipt of $30 million in debt proceeds 143 Schedule 4 City of Petaluma, CA Changes in Fund Balances, Governmental Funds Last Four Fiscal Years (modified accrual basis of accoiaitittg) Notes: The City implemented GA513 Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) GASB -544 paragraph 12b requires that the interest and principal components of debt service expenditures be presented separately and that total debt service be shown as a percentage of total noncapital expenditures, Noncapital expenditures are total expenditures less capital outlay (to the extent capitalized for the government -wide statement of net assets) and expenditures for capitalized assets included within the functional expenditure categories. 144 Fiscal Year 2005 2006 2007 2008 Revenues Taxes (see schedule 5) $ 34,115,853 $ 37,373,918 S 40,489,024 26,718,643 Licenses, permits and fees 4,702,4277 7,004,651 3,802,778 6,311,769 lines, forfeitures and penalties 461,484 640,529 757,904 868,609 Use of money and property 2,410,608 2,709,507 3,061,200 3,394,711 Intergovernmental 8,667,B88 8,437,421 11,776,669 14,610,795 Charges for current services 7,002,640 7,261,639 7,947,098 5,701,169 Other 12,466,301 3,549,793 12,386,785 8,843,045 Total revenues 69,827,201 66,977,457 80,221,458 66,448,741 Expenditures Current: General government 3,874,863 4,534,477 4,635,200 5,058,079 Community development 13,553,608 13,254,401 12,118,473 16,587,683 Police 12,709,603 15,148,920 15,488,637 16,866,135 Fire 7,116,641 7,825,626 7,972,434 8,165,412 Parks and recreation 4,263,778 4,809,275 4,95,759 5,647,957 Public worts 4,985,813 6,207,52 9,016,455 7,321,255 Capital outlay 41,93,353 17,280,890 24,671,199 19,328,719 Debt service Principal 563,000 672,000 1,140,000 1,184,000 Interest 2,687,678 1,870,837 2,088,863 3,484,03 Cost of issuance - 559,891 844,300 - Total expenditures 91,677,337 72,163,839 82,901,320 83,643,263 Excess of revenues over (under) expenditures (21,850,136) (5,186,382) (2,679,862) (17,194,52) Other Financing Sources (Uses): Debt issuance - 568,533 31,85,000 - Premium paid - - (568,396) - Payment to escrow agent - - (483,364) - Proceeds from the sale of assets 8,756 60,908 56,414 10,992 Contributions from enterprise funds - - 269,283 - Transfers in 71,642,416 19,431,281 46,357,315 39,447,2170 Transfers out (70,150,553) (18,133,350) (45,818,178) (39,927,878) Total other financing sources (uses) 1,500,619 1,938,372 31,639,074 (469,686) Net change in fund balances $ (20,349,517) $ (3,258,010) $ 28,959,212 $ (17,664,308) Debt service as a percentage of noncapital expenditures (1) 421°b 8.07% 4.8596 7.26,6 Notes: The City implemented GA513 Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) GASB -544 paragraph 12b requires that the interest and principal components of debt service expenditures be presented separately and that total debt service be shown as a percentage of total noncapital expenditures, Noncapital expenditures are total expenditures less capital outlay (to the extent capitalized for the government -wide statement of net assets) and expenditures for capitalized assets included within the functional expenditure categories. 144 Schedule 5 City of Petaluma, CA Tax Revenues by Source, Governmental Funds Last Four Fiscal Years Notes: The City implemented GASB Statement 34 in 2004; schedules presenting govemment-wide information begin in that year. 145 Fiscal Year % Change Tax type 2005 206 2007 2008 2005-2008 Property '18,570,923 $ 20,211,085 $ Z-2832,617 24,169,158 30.15% Sales and Use 10,313,999 10,726,182 11,483,300 - -100.00°5 Occupancy 1,182,897 1,395,574 1,446,005 - -100.00;'5 Franchise 1,840,187 2,418,831 2,607,627 2,519,185 38.5396 Property Transfer 1,756,647 1,936,582 1,20,039 - -100.0096 Other 451,200 685,664 899,436 - -100.0096 Total taxes $ 34,115,853 $ 37,373,918 $ 40,489,024 $ 26,718,643 Notes: The City implemented GASB Statement 34 in 2004; schedules presenting govemment-wide information begin in that year. 145 Schedule 6 City of Petaluma, CA Assessed Value and Estimated Actual Value of Taxable Property Last Four Fiscal Years city Redevelopment Agency Total Less: Total Taxable Estimated Direct Fiscal Secured Unsecured Tax -Exempt Assessed Actual Tax Year Property Property Property Value Value (2) Rate (1) 2005 1,123,050,779 494438,143 (6,432,958) 1,611,055,964 n/a 1.14 2MM6 1,194,266,828 492,122,499 (6,330,688) 1,680,058,639 n/a 1.12 2007 1,423,411,000 458,036,000 (7,917,500) 1,802,272,000 25,016,000 1.10 2008 1,627,639,769 411,773,777 (8,398,000) 1,955,130,038 23,786,900 1.21 Total Assessed Value for City of Petaluma Unsecured Assessed Value for City Secured Assessed Value for City of of Petaluma Petaluma em0006 a666tlQ a6Q6o6o N fi00006 G fA 400tl0Q- - ,'F`� � �,. GDOODO 1 2607-04 2004-05 2000 � 0 Otlnsecured 4 2GD4-M 20o5 -0B 2DOGR7 -06 7000.07 0 ■SeOured FI♦o1Y"' -6 Fiscal Year 2003-04 26 F1idwSY 0000-06 2006-07 Source: Sonoma County Auditor -Controller; Sonoma County Assessor; MuniServices, LLC Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of the property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold, 'The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations above. (2) As of 2007-08, secured and unsecured values are gross taxable values. Exemptions include all types of exempt properties. Previous years reported homeowners` exemptions only. (3) As of 2007-08, Estimated Actual Value is derived from a series of calculations comparing median assessed values from 1940 to current median sales prices_ Based on these calculations, a multiplier value was extrapolated and applied to current assessed values. 146 Less: Total Taxable Estimated Ratio of Total Fiscal Secured Unsecured Tax -Exempt Assessed Actual Assessed to Total Year Property Property Property Value Value (2) Estimated Actual 2005 5,722,477,031 615,814,178 (83,986,218) 6,254,304,991 n/a n/a 2006 6,225,079,545 608,213,942 (83,074,728) 6,750,218,759 n/a n/a 2007 6,954,365,000 617,496,000 (242,659,000) 7,329,201,000 101,729,000 1.388 2008 7,596,193,405 557,237,333 (248,192,761) 7,905,237,977 9,616,326,737 1.216 Redevelopment Agency Total Less: Total Taxable Estimated Direct Fiscal Secured Unsecured Tax -Exempt Assessed Actual Tax Year Property Property Property Value Value (2) Rate (1) 2005 1,123,050,779 494438,143 (6,432,958) 1,611,055,964 n/a 1.14 2MM6 1,194,266,828 492,122,499 (6,330,688) 1,680,058,639 n/a 1.12 2007 1,423,411,000 458,036,000 (7,917,500) 1,802,272,000 25,016,000 1.10 2008 1,627,639,769 411,773,777 (8,398,000) 1,955,130,038 23,786,900 1.21 Total Assessed Value for City of Petaluma Unsecured Assessed Value for City Secured Assessed Value for City of of Petaluma Petaluma em0006 a666tlQ a6Q6o6o N fi00006 G fA 400tl0Q- - ,'F`� � �,. GDOODO 1 2607-04 2004-05 2000 � 0 Otlnsecured 4 2GD4-M 20o5 -0B 2DOGR7 -06 7000.07 0 ■SeOured FI♦o1Y"' -6 Fiscal Year 2003-04 26 F1idwSY 0000-06 2006-07 Source: Sonoma County Auditor -Controller; Sonoma County Assessor; MuniServices, LLC Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of the property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold, 'The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations above. (2) As of 2007-08, secured and unsecured values are gross taxable values. Exemptions include all types of exempt properties. Previous years reported homeowners` exemptions only. (3) As of 2007-08, Estimated Actual Value is derived from a series of calculations comparing median assessed values from 1940 to current median sales prices_ Based on these calculations, a multiplier value was extrapolated and applied to current assessed values. 146 Schedule7 City of Petaluma, CA Assessed Value of Taxable Property by Use Code, Citywide Last Four Fiscal Years (in thousands) Category 2008 Residential -Single Residential -Multi Commercial 737,020 Manufacturing 494,966 Vacant 276,480 Rural 56,741 Professional 67,838 Recreation 32,333 Unknown 27,686 Institution 40,580 Agriculture 22,344 Industrial 72,889 Transportation 9,495 Miscellaneous 1,178 TOTAL $ 1,779,550 Sources: 2006-07 Use code categories provided by Sonoma County Assessor data, MuniServices, LLC Prior years' data is unavailable. Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. 147 Schedule 8 City of Petaluma, CA Assessed Value of Taxable Property by Use Code, Citywide 2006-07 Land Use Chart Manufacturing, 602629 Commercial, 1013303 Assessed Value by Land Use Code ([n Thousands) Institutional, 22575 Recreational, 34075 Rural, 36064 Professional, 41606 Unknown, 68689 Vacant, 231487 - �0 DResidenlial ©Commercial ORccreational Dlnstitutional Source: MuniServices, LLC ElManufacturiug OVacant DAgricultuns Dlndustrial 148 _Agriculture, 21232 Industrial, 15979 Parking; Lot/11 d, 6997 Public Camps, 1577 Miscellaneous, 1112 Residential, 5231876 A1lnknown OPmfcssionai DI'arkingLot/Read NPublic Camps ORural NMlsceltaneous Schedule 9 City of Petaluma, CA Direct and Overlapping Property Tax Rates (rate per $100 of assessed value) Last Four Fiscal Years 2005 2006 2007 2008 Basic City and County Levy (1): City Direct Rate 0.1600 0.1600 0.1600 0.1643 County of Sonoma 0.6400 0.8400 0.84011 0.8357 Total Basic City and County Levy: 1.0000 1.0000 1.0000 1.0000 Override Assessments: WS Dam -Russian River Project 0.0070 0.0070 0.0070 0.0070 Petaluma High school bonds 0.0480 0.0480 0.0480 0.0200 Sonoma County Junior College bonds 0.0300 0.0200 0.0200 0.0250 Petaluma Elementary school bonds 0.0250 0.0250 0.0750 0.0480 Old Adobe Elementary school bands 0.0256 0.0?"0 - - Total Override Assessments: 0.1356 0.1220 0.1000 0.1000 Total Direct and Overlapping Rates: 1.1356 1.1220 1.1000 1.1000 Source: Sonoma County Auditor -Controller Office; 2007-08 County Auditor data, Muniservices LLC Rates are not adjusted for ERAF Nates: The City implemented CASE Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1.00`;6 fixed amount. This 1 m is shared by all taxing agencies within which jurisdiction's) the subject property resides. In addition to the 1.0046 fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of the School District bonds. 149 Schedule 10 City of Petaluma, CA Principal Property Tax Payers Current Year and Nine Years Ago Source: 2006-07 Sonoma County Assessor, MuniServices, LLC 150 2008 1999 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Cerent Corp $ 69,763,450 1 1.41% S - 0.00% RNM Lakeville LP 62,259,852 2 1.ao , - 0.0090 l:ibex Systems Inc. 55,119,280 3 0.8390 - 0.0050 Sequoia Equities Cypress Point 50,777,370 4 0,68% - O.aO°o Quarry Heights Llc 38,085,000 5 0.51% - 0.00°0 CRP Holdings A-1 LLC 32,895,000 6 0.449. - 0.00% EQR Lakeville Resort General PTP 32,334,436 7 0.439. - 0,00% Telltabs Petaluma Inc 32,224,750 8 0.41% - 0.0010 Redwood Gateway LIc & Gateway 29,103,507 9 0.35% - 0.009. Cisco Systems Inc. 28,002150 10 0.38% - 0.009. $ 430,564,795 6.449u S - 0.0090 All Other Taxpayers 7,474,673,182 93.561,.' - 0.00°. Total Taxable Assessed Value $ 7,905,237,977 100.00% $ - 100.001/. Source: 2006-07 Sonoma County Assessor, MuniServices, LLC 150 Schedule 11 City of Petaluma, CA Property Tax Levies and Collections Last Four Fiscal Years Fiscal Collected within the Fiscal Year of the Year Taxes Levied Levy (1) Collections Total Collections to Date Ended for the Percentage in Subsequent Percentage June 30, Fiscal Year Amount of Levy Years Amount (1) of Levy 2005 $ 5,601,266 S 5,593,021 99.85% $ - $ 5,593,031 99,859 2006 $ 6,078,868 $ 6,072,830 99.90% S - $ 6,073,830 99.90% 2007 $ 6,617,725 $ 6,617,75 100.00% S - $ 6,617,725 100.00% 2008 $ - $ - 0.00%, S - $ - 0.00% Source: Sonoma County Auditor -Controller Office, Property "fax Division Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) The County of Sonoma bills and collects property taxes on behalf of the City using an alternative method of distribution known as the "Teeter Plan". The State Revenue and Taxation Code allows counties to distribute secured real property and supplemental property taxes on an accrual basis resulting in full payment to the City each fiscal year. Any subsequent delinquent payments and related penalties and interest will revert to Sonoma County. 151 Schedule 12 City of Petaluma, CA Ratios of Outstanding Debt by Type Last Four Fiscal Years Notes: The City implemented GASB Statement 34 in 2004, schedules presenting government -vide information begin in that year. 152 Governmental Activities General Redevelopment Total Fiscal Obligation Tax Allocation Redevelopment Governmental Year Bonds Bonds Other Activities 2005 44,555,000 642,000 45,197,000 2006 - 45,610,000 570,000 46,180,000 20D7 - 75,895,000 490,000 76,385,000 2008 - 74,795,000 406,000 75,201,000 Business -type Activities Certificates Revolving Total Revenue Term of Credit Business -Type Year Bonds Loans Participation Lines Activities 2005 16,615,000 6,651,649 6,295,000 - 29,561,649 2006 16,045,000 6,718,771 6,130,000 20,497,041 49,390,812 2007 15,455,000 6,779,855 5,960,000 69,211,800 97,406,655 2008 14,835,000 - 5,790,000 121,725,582 142,350,582 Total Percentage Fiscal Primary of Personal Per Year Government Income Capita 2005 74,758,6.49 7"G S1,320 3006 95,570,812 9% $1,685 3007 173,791,655 91". 53,049 2008 217,551,582 11,11 53,789 Notes: The City implemented GASB Statement 34 in 2004, schedules presenting government -vide information begin in that year. 152 Schedule 13 City of Petaluma, CA Ratios of General Bonded Debt Outstanding Last Four Fiscal Years Percentage of General Bonded Debt Outstanding Actual "Taxable General Redevelopment Fiscal Obligation Tax Allocation Per Year Bonds Bands Total 2004 $ - $ 45,050,000 S 45,050,000 2005 - 41,555,000 41,555,000 2006 - 45,610,000 45,610,000 2007 - 74,795,000 74,795,000 Percentage of Actual "Taxable Value of Per Property Capita 0.72% S 806 0.66 o $ 787 0.62% $ 804 0,951". $ 1,312 Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. 153 Schedule 14 City of Petaluma, CA Direct and Overlapping Governmental Activities Debt As of June 30, 2008 2007-08 Assessed Valuation: S 7,876,544,447 (includes aircraft valuations) Redevelopment Incremental Valuation: (1,469,790,94-4) Adjusted Assessed Valuation: $ 6,406,753,503 City's Share Total Debt 96 Applicable (1) of Debt 6/30/2008 Debt6/30/2008 6/30/2008 OVERLAPPING TAX AND ASSESSMENT DEBT: Sononra County Joint Community College S 215,568,364 10.5939. S 2-7,835,157 Petaluma joint Union High School District 32,999,713 74.8259. 24,692,035 Old Adobe Union School District 8,916,289 88960910 5,263,131 Petaluma City School District 22 505,000 8{7.0719. 18,019,979 Waugh School District Community Facilities District K 9,945,000 100.000% 9,945,000 City of Petaluma 1915 Act Bonds 7,098,600 100.000 % 7,098,600 Sonoma County Sunnyslope Assessment District 160,000 100.0001. 160,000 Total Overlapping Tax and Assessment Debt $ 88,013,902 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Sonoma County General Fund Obligations S 30,575,000 10.694% $ 3,269,691 Sonoma County Pension Obligations 275,540,000 10.69496 29,466,248 Sonoma County Office of Education COP 3,185,000 10.694% 340,604 Sonoma County joint Community College GF Obligation 2,245,000 10.593`0) 256,880 Petaluma joint Union High School District COP 8,035,000 75.580% 6,072,853 City of Petaluma General Fund Obligations 5,790,000 100.000% 5,790,000 Total Direct and Overlapping General Fund Debt: $ 45,196,276 Combined Total Debt Source: MuniServices, LLC S 133,210,178 (2) No tes: (1) Percentage of overlapping agency's assessed valuation located tvitltin boundaries of the City. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. Ratios to 2007-08 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.12% Rations to Adjusted Assessed Valuation" Combined Direct Debt ($5,790,000) 0.0996 Combined Total Debt 20896 State School Building Aid Repayment as of 6/30/2008: $0 154 Schedule 75 City of Petaluma, CA Legal Debt Margin Information Last Four Fiscal Years Fiscal Year 2004 $ 2005 2006 2007 *grass tax increment ** all bonded debt Tax Increment Revenue" 9,637,694 $ 10,761,694 11,439,527 16,777,120 Annual Debt Service" 2,189,165 S 2,711,593 3,250,890 4,549,617 Required Coverage (175%) 2,736,456 $ 3,389,€91 4,063,613 5,687,021 Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -~vide information begin in that year. 155 Legal Debt Margin 6,595,938 7,372,203 7,375,915 11,090,099 Debt as Percentage of Legal Debt Margin 32,6 37,6 44 °a 41% Schedule 16 City of Petaluma, CA Pledged -Revenue Coverage Last Four Fiscal Years 156 Coverage* 2.93 215 2.63 ?01 Coverage`* Coverage* 10.47 9.14 5.91 10.77 Coverage** 8.49 8.10 3.93 9.46 20018 Water Revenue Bonds Net Fiscal Operating Operating Available Debt Service Year Revenue Expenses Revenue Principal Interest 2004 $ 10,459,233 $ 8,532,241 $ 1,936,992 $ 215,000 $ 441,784 2005 10,078,729 8,673,483 1,405,346 ?' 0,000 433,627 2006 10,576,626 8,853,724 1,722,902 330,000 425,190 2007 11,410,484 10,056,453 1,354,031 235,000 416,471 2001B Water Revenue Bonds Operating Rev Net Fiscal less Operating Available Debt Service Year Connect Fees Expenses Revenue Principal Interest 2004 $ 9,682,718 $ 8,532,241 $ 1,150,477 $ 215,000 $ 441,784 2005 9,61.1,126 8,673,483 937,643 2201000 433,627 3006 9,513,307 8,853,734 659,583 230,000 425,190 2007 10,705,186 10,056,453 648,733 235,000 416,471 2000 Waste Water Revenue Bonds Net Fiscal Operating Operating Available DebtSer:ice Year Revenue Expenses Revenue Principal Interest 200.4 S 13,444,505 5 5,986,656 ,$ 7,457,849 $ 3,100,000 S 402,608 2005 13,289,537 6,759,849 6,529,688 325,000 389,278 2006 13,621,441 9,395,294 4.226,147 340,000 375,058 2007 16,419,779 8,717,162 7,702,617 355,000 359,938 2000 Waste Water Revenue Bands Operating Rev Net Fiscal less Operating Available Debt Service Year Connect Fees Expenses Revenue Principal Interest 2004 $ 13,037,906 $ 5,986,656 S 6,051,250 $ 3,100,000 $ 402,608 2005 12,542,228 6,759,849 5,782,379 325,000 389,278 2006 12,208,399 9,395,294 2,813,105 340,000 375,058 2007 15,477,387 8,717,162 6,760,125 355,000 359,928 * 1259'. required ** 100% required Nates: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. 156 Coverage* 2.93 215 2.63 ?01 Coverage`* Coverage* 10.47 9.14 5.91 10.77 Coverage** 8.49 8.10 3.93 9.46 Statement 17 City of Petaluma, CA Demographic and Economic Statistics Last Four Calendar Years Sources: Sonoma County Economic Development Board (Economic and Demographic Profile Series) Petaluma Area Chamber of Commerce Sonoma County Office of Education MuniServices, LLC Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) Population projections are provided by the Califomia Department of Finance Projections (2) As of 2007-08, Personal Income is total citywide income for all residents as recommended by GASB -S44-. Tlie previous years' values were an average household income per resident. (3) As of 2007-08, Personal Income per Capita is provided by American Community Survey Data adjusted for inflation. (4) Unemployment data is provided by EDD, Labor Market Information Division 157 Personal Per Household Capita Estimated Calendar Income (2) Personal Median School Unemployment Year population (1) (in thousands of dollars) Income (3) Age Enrollment Rate % (4) 2005 56,632 S 61,679 $ 18,650 37.1 16,597 4.90% 2006 56,727 $ 63,726 S 18,775 37.1 16,845 3.80°i, 2007 56,996 $ 1,868,215 $ 32,778 n/a 12,290 3.60aQ 2008 57,€18 $ 1,935,618 $ 33,711 37.1 8,00=1 4.00% Sources: Sonoma County Economic Development Board (Economic and Demographic Profile Series) Petaluma Area Chamber of Commerce Sonoma County Office of Education MuniServices, LLC Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) Population projections are provided by the Califomia Department of Finance Projections (2) As of 2007-08, Personal Income is total citywide income for all residents as recommended by GASB -S44-. Tlie previous years' values were an average household income per resident. (3) As of 2007-08, Personal Income per Capita is provided by American Community Survey Data adjusted for inflation. (4) Unemployment data is provided by EDD, Labor Market Information Division 157 Schedule 18 City of Petaluma, CA Principal Employers Current Year and Nine Years Ago Sources: 3007-08: Muni5ervices, LLC Notes: (1) Total city employment provided by EDD Labor Force Data (2) N/ X unable to obtain the top ten employers for 1999 158 1999 (2) Percentage of Total City Rank Employment 2008 Percentage of Total City Employer Employees Rank Employment Employees Petaluma School District 11000 1 3.2796 n/a United States Postal Service 607 2 1.99% n/a Petaluma Valley Hospital 600 3 2.96% n/a Petaluma Poultry Processors 400 4 1.31;6 n/a Santa Rosa Junior College 350 5 1.1416 n/a City of Petaluma 336 6 1.10% n/a Hansel Honda 300 7 0.98;6 n/a North Bay Construction 250 8 0.82% n/a Old Adobe Union School District 225 9 0.74,6 n/a Calix Networks Inc. 225 10 0.7496 n/a Total Principal Employers 4,293 14.03,6 n/a Total City Employment (1) 32,300 n/a Sources: 3007-08: Muni5ervices, LLC Notes: (1) Total city employment provided by EDD Labor Force Data (2) N/ X unable to obtain the top ten employers for 1999 158 1999 (2) Percentage of Total City Rank Employment Schedule 19 City of Petaluma, CA Full -time -Equivalent City Government Employees by FunctiorVProgram Last Four Fiscal Years Source: City budget, finance department Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. 159 Full-time and Part-time Equivalent as of lune 30, 2005 2006 2007 2008 Function/ Program Governmental General government 60 62 49 0 Community development 37 31 28 0 Fire 48 48 48 0 Police 99 103 105 0 Parts and recreation 44 47 48 0 Public worts 28 35 40 0 Business Activities Airport 2 2 3 0 Ambulance 10 10 11 0 Development Services 0 0 3 0 Transit 1 1 1 0 Water 23 24 24 0 Waste water 16 18 19 0 Total 368 381 379 0 Source: City budget, finance department Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. 159 Schedule 20 City of Petaluma, CA Operating Indicators by Function/Program Last Four Fiscal Years Sources: Various city department reports, annual budget narrative Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) N/ A - Statistical information unavailable from the city department (2) As of 3006-07, airport movements are restricted to take -offs only. Prior years' data included take -offs and landings. 160 2008 Q Q 0 0 0 a 0 0 0 Q Q 0 0 (2) 0 0 0 0 0 0 Q 0 Fiscal Year 2005 2006 2007 Function/Program Community development Commercial building permits issued 325 333 334 Residential building permits issued 879 948 833 Inspections performed N/A (1) 8,307 6,740 Polio' Number of police calls 55,545 58,748 68,748 Parking violations 6,127 7,000 7,834 "Traffic violations 5,845 7,670 9,079 Fire Ambulance runs 3,323 3,484 3,73 Fire calls 1,430 1,401 1,445 Inspections 1,899 2,043 1,974 Public works Street resurfacing miles 16.82 2.94 250 Potholes repaired 3.40 3.40 3.23 Parks and recreation Historical library & museum visitors 7,053 8,340 7,890 Recreation class attendance 41,298 40,737 34,639 Special event attendance 22,636 25,636 24,716 Airport Airport movements 56,000 56,Oo0 26,000 Annual fuel consumption (gallons) 155,618 163,866 188,000 Water New connections 86 145 174 Water main breaks 25 23 15 Annual water purchased in billion of gallons 3 3 3 Utility accounts 19,265 18,955 19,549 Wastewater Average dry weather flows of sewage 5.1 mgd 4.4 mgd 4.6mgd Transit Number of bus routes 3 3 3 Annual ridership 159,690 163,775 189,500 Sources: Various city department reports, annual budget narrative Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year. (1) N/ A - Statistical information unavailable from the city department (2) As of 3006-07, airport movements are restricted to take -offs only. Prior years' data included take -offs and landings. 160 2008 Q Q 0 0 0 a 0 0 0 Q Q 0 0 (2) 0 0 0 0 0 0 Q 0 Schedule 21 City of Petaluma, CA Capital Asset Statistics by Function/Program Last Four Fiscal Years Function/Prceram Police Stations Lone offices Patrol units Fire Fire stations Ambulances Public works Streets (miles) Highways (miles) Streetlights Traffic Signals Park and recreation Acreage Parks Community centers Recreation facilities Ball/soccer fields Tennis court Turning basin public dock footage Community swimming pools Library Water Water mains (miles) Fire hydrants Aqueduct stations Wells Valves Reservoirs, finished water (total capacity -13.1 mg) Wastewater Booster stations (24 pumps) Sanitary sewers (miles) Storm sewers (miles) Treatment capacity (thousands of gallons) Transit - buses Airport Runway length City hangars Fiscal Year 2004 2005 2006 2007 1 1 1 1 1 1 I I 40 40 59 53 3 3 3 3 3 3 4 4 170 170 170 185 0.80 0.80 0.80 0.80 5,043 5,043 4,740 4,600 45 47 48 48 180 187 196 265 43 43 43 44 2 2 2 2 3 3 3 4 40 40 43 48 7 7 7 9 995 995 995 995 2 2 2 2 1 1 1 1 245 245 250 273 2,312 2,658 2,405 2,474 8 8 8 8 20 18 18 18 6,864 6,799 6,965 7,118 10 10 11 11 11 11 11 11 N/A N/A 192 195 N/A N/A 142 144 1,898 1,898 1,898 1,898 8 8 9 10 3,600 3,600 31600 3,600 127 127 182 181 Sources: Various city department reports, annual budget narrative Notes: The City implemented GASB Statement 34 in 2004; schedules presenting government -wide information begin in that year, (1) N/A - Statistical information unavailable from the city department 161