CITY OF MALIBU, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017

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2 , CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 Prepared by: City of Malibu Management and Administrative Services Department Lisa Soghor, Assistant City Manager

3 , CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2017 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal... i City Officials... iv Awards...v Organization Chart... vi FINANCIAL SECTION Independent Auditors Report...1 Management s Discussion and Analysis...4 Basic Financial Statements: Statement of Net Position...17 Statement of Activities...18 Balance Sheet Governmental Funds...19 Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds...20 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds...21 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities Governmental Funds...22 Statement of Net Position Proprietary Funds...23 Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds...24 Statement of Cash Flows Proprietary Funds...25 Statement of Fiduciary Net Position Fiduciary Funds...26 Statement of Changes in Fiduciary Net Position...27 Notes to the Financial Statements...28 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of the Net Pension Liability...59 Schedule of Contributions - Defined Benefit Pension Plan...60 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual & Next Year s Budget - General Fund...61 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Grants Special Revenue Fund...62 Note to Required Supplementary Information...63

4 , CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2017 TABLE OF CONTENTS SUPPLEMENTARY INFORMATION Individual Fund Financial Statements and Schedules: Governmental Funds: Combining Balance Sheet Non-major Governmental Funds...65 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds...68 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Individual Non-major Governmental Funds...71 Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Position - Budget Actual (Budgetary Basis) Commercial Real Estate Rental...85 Schedule of Revenues, Expenses and Changes in Fund Net Position - Budget Actual (Budgetary Basis) Wastewater Treatment...86 Fiduciary Funds: Combining Statement of Net Position Pension Trust Funds...87 Combining Statement of Changes in Net Position Pension Trust Funds...88 Combining Statement of Assets and Liabilities Agency Fund...89 Statement of Changes in Assets and Liabilities Agency Fund...90 STATISTICAL SECTION (UNAUDITED) Statistical Section Index Net Position by Component...94 Changes in Net Position...96 Fund Balances of Governmental Funds...98 Changes in Fund Balances of Governmental Funds Assessed Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections Ratio of Outstanding Debt by Type Direct and Overlapping Governmental Activity Debt Legal Debt Margin Information Demographic and Economic Statistics Full-Time Equivalent Government Employees by Function/Program Indicators of Demand or Level of Services Capital Asset Statistics by Function/Program...112

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6 City of Malibu Stuart Ranch Road, Malibu, California (310) fax (310) December 21, 2017 Honorable Mayor and City Council City of Malibu, California The Comprehensive Annual Financial Report (CAFR) of the City of Malibu for the fiscal year ending June 30, 2017 is hereby submitted. Responsibility for the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the information presented is accurate in all material aspects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City of Malibu. All disclosures necessary to enable the reader to gain an understanding of the City s financial activities have been included. The financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB). This report consists of management s representations concerning the finances of the City of Malibu, California. Consequently, management assumes 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 has established a comprehensive internal control framework that is designed both to protect the City s assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the City s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management we attest that, to the best of our knowledge and belief, this financial report is complete and reliable in all material aspects. The City s financial statements have been audited by Lance, Soll & Lunghard LLP, a public accounting firm fully licensed and qualified to perform audits of state and local governments within the State of California. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was reasonable basis for rendering an unmodified opinion that the City of Malibu, California s financial statements for the fiscal year ended June 30, 2017 are fairly presented in conformity with GAAP. GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Malibu s MD&A can be found immediately following the report of the independent auditors in the financial section of the CAFR. i

7 Profile of the City of Malibu The City of Malibu was incorporated as a general law city on March 28, 1991 and operates under the council/manager form of government. Located in northwest Los Angeles County, the City encompasses over 20 square miles along the Pacific Ocean. Malibu has a population of approximately 13,000 residents, but with its miles of public beaches, more than 15 million people visit the City each year. The City provides a full range of services, some of which are contracted through outside agencies and/or firms. These services include law enforcement, highways and roads, recreation areas, planning and zoning, building and environmental safety, emergency preparedness and general administrative services. The City of Malibu has a rich and diverse history. Originally settled by the Chumash Indians, they named the stretch of beach at the mouth of the Malibu Creek Humaliwo or the surf sounds loudly. In 1802, Jose Tapia established a ranch in the area. Passed on through generations, it was eventually sold in 1891 to Fredrick Rindge. Seeking an ideal country home for his family, the private domain was guarded fiercely. Rindge s widow, May, fought off an effort to route the Southern Pacific Railroad through Malibu by establishing her own private railroad. Later, the State of California succeeded in obtaining a right-of-way to build Pacific Coast Highway through the property. A final court battle in the late 1920s forced Rindge to begin leasing and then selling the property at the mouth of Malibu Creek. As most of the purchasers were movie stars, the area became known as the Malibu Movie Colony. Today, Malibu is a predominantly rural residential community that has become a haven for those seeking to escape the urban life of Los Angeles. Its small commercial sectors consist of many quaint shops and restaurants that welcome locals and visitors alike. Programs and exhibits offered by the Los Angeles County Public Library, Pepperdine University and the Wiesman Museum of Art provide culturally enriching experiences. Factors Affecting Financial Condition Malibu s local economy is unique in that it is significantly impacted by climate. In the warm weather months, millions come to Malibu to enjoy the beautiful beaches. During the winter months, rain and pounding surf can flood roads and create landslides, making travel through the City difficult. Since its incorporation in 1991, Malibu has been plagued with disasters, including floods, multiple fires and an earthquake, creating a significant drain on the City s finances. For this reason the City maintains a substantial reserve in its General Fund. Fortunately, Malibu has not experienced any significant disasters since While the State of California struggled with a significant budget deficit and many government agencies have been impacted by a slower economy in recent years, the City of Malibu s financial position remains steady. The largest revenue source is property tax, which continues to remain stable due to a strong residential real estate market and steady valuation. Sales tax is relatively unaffected by the economy, as the City has only small retail establishments. Malibu relies heavily on grant funding for many of the capital projects it undertakes and has been successful in securing millions of dollars over the years from various agencies. ii

8 Other Information Budgetary Controls. The City of Malibu maintains a budget control system to ensure compliance with the spending limits incorporated in the annual operating budget adopted by the City Council. Activities of the general fund and special revenue funds are included in the annual appropriated budget. Project-length financial plans are adopted for the capital project funds. Budgetary control is maintained at the fund level for administrative and operating expenditures and at the project level for capital improvements. Only the City Council has the authority to increase total appropriations within any fund, subject to the appropriations limitations established by State law. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Long Term Financial Planning. The City prepares and adopts its budget on an annual basis. Each budget, however, takes into account future years spending needs and revenue availability. Capital projects are budgeted using a multi-year planning approach and other major expenditures are evaluated and budgeted based on expectations of revenues and expenditures in future fiscal years. The City maintains a strong General Fund reserve. As of June 30, 2017, the City had approximately $35.7 million in total reserves, which allows for flexibility in budget projections, and also provides the City with funding in the event of an unexpected fiscal emergency in future years. Of this amount, the unassigned General Fund reserve is $28.9 million or 73% of General Fund expenditures and exceeds the City s goal of maintaining a minimum of 50% of the fund s operating expenses. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Malibu for its comprehensive annual financial report for the fiscal year ended June 30, In order to be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. The Certificate of Achievement from the GFOA is valid for a period of one year. City staff believes that this current comprehensive annual financial report continues to meet the Certificate of Achievement Program s requirements and will submit it to the GFOA to determine its eligibility for another certificate. The preparation of this report could not have been accomplished without the efficient and dedicated services of the Management and Administrative Services Department staff. Special acknowledgment is given to Julie Matsumoto, Ruth Piyaman, and the staff of Lance, Soll, & Lunghard LLP, the City s independent auditors. I would also like to thank the City Manager, Mayor and members of the City Council for their support in planning and conducting the operations of the City in a responsible and progressive manner. Respectfully submitted, Lisa Soghor Assistant City Manager iii

9 , CALIFORNIA LIST OF CITY OFFICIALS CITY COUNCIL MAYOR MAYOR PRO TEM COUNCIL MEMBER COUNCIL MEMBER COUNCIL MEMBER SKYLAR PEAK RICK MULLEN JEFFERSON WAGNER LOU LA MONTE LAURA ROSENTHAL DEPARTMENT OFFICIALS CITY MANAGER ASSISTANT CITY MANAGER CITY CLERK ENVIRONMENTAL SUSTAINABILITY DIRECTOR PLANNING DIRECTOR PARKS AND RECREATION DIRECTOR PUBLIC WORKS DIRECTOR CITY ATTORNEY REVA FELDMAN LISA SOGHOR HEATHER GLASER CRAIG GEORGE BONNIE BLUE JESSE BOBBETT BOB BRAGER CHRISTI HOGIN iv

10 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Malibu California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 Executive Director/CEO v

11 ORGANIZATIONAL CHART City Attorney City Treasurer CITY COUNCIL Assistant City Manager City Manager ADMINISTRATION PUBLIC SAFETY CITY CLERK PUBLIC WORKS COMMUNITY SERVICES Administration Human Resources Media Operations Finance/Accounting Information Systems Emergency Services LA County Fire Sheriff s Department City Clerk Passport Services Records Management Capital Projects Engineering Public Works Street Maintenance Water Treatment Facilities Community Support Cultural Arts Parks Management Recreation Senior Services City Commissions City Committees ENVIRONMENTAL SUSTAINABILITY Building Safety Water Quality Wastewater Management Environmental Services PLANNING Code Enforcement Current Planning Long Range Planning vi

12 INDEPENDENT AUDITORS REPORT To the Honorable Mayor and Members of the City Council City of Malibu, California Report on the Financial Statements 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 City of Malibu, California, (the City) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. An Association of Independent Accounting Firms 203 N. Brea Blvd., Suite 203 Brea, CA Phone:

13 To the Honorable Mayor and Members of the City Council City of Malibu, California Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Malibu, California, as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, the budgetary comparison schedules for the general fund and grants special revenue fund, the schedule of proportionate share of the net pension liability, and the schedule of contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

14 To the Honorable Mayor and Members of the City Council City of Malibu, California Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2017 on our consideration of the City s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control over financial reporting and compliance. Brea, California December 20, 2017

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16 Management s Discussion and Analysis June 30, 2017 As management of the City of Malibu, we offer readers of the City of Malibu s financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 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 in the introductory section of this report. Financial Highlights Assets and deferred outflows of resources exceed liabilities and deferred inflows of resources at the close of the fiscal year ended June 30, 2017 by $153,035,139 (net position). Of this amount, $36,658,091 (unrestricted net position) may be used to meet the government s ongoing obligations to citizens and creditors. The City s total net position increased by $33,928,308. As of June 30, 2017, the City s governmental funds reported a combined ending fund balance of $35,669,674, an increase of $4,103,774 over the prior year. Of this amount, $26,817,894 is available for spending at the government s discretion (unassigned fund balance). As of June 30, 2017, the General fund reported an ending fund balance of $34,398,201, an increase of $3,553,739 over the prior year. Of this amount, $28,852,046 is available for spending at the government s discretion (unassigned fund balance). Overview of the Financial Statements This discussion and analysis is required supplementary information and is intended to serve as an introduction to the City s basic financial statements, which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Other required supplementary information immediately follows the notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements and required supplementary information. Government-wide financial statements. The government-wide financial statements 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 position presents information on all of the City s assets and deferred outflows of resources as well as on liabilities and deferred inflows of resources. The amount by which assets and deferred outflows of resources exceed liabilities and deferred inflows of resources is reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Malibu is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event 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). 4

17 Management s Discussion and Analysis June 30, 2017 Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions 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 legislative and advisory, general government, public safety, community development, community services, and public works. Business-type activities are comprised of commercial real estate rental properties and wastewater services. The government-wide financial statements are in this report s financial section immediately following the Management s Discussion and Analysis (MD&A). 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 of Malibu, 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 funds, enterprise funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental 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. Fund balance is categorized into a hierarchy of five classifications: non-spendable, restricted, committed, assigned, and unassigned. These categories facilitate analysis and understanding of the City s commitment of financial resources. 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 with similar information presented for governmental activities in the governmentwide 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 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 City of Malibu maintains 17 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Grants Fund, and the Capital Improvements Fund, all of which are considered to be major funds. Data from the other 14 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided as supplementary information elsewhere in this report. The basic governmental fund financial statements can be found in the financial section of this report immediately following the government-wide financial statements. 5

18 Management s Discussion and Analysis June 30, 2017 The City of Malibu adopts an annual appropriated budget for each of its governmental funds, excluding Capital Projects Funds. A budgetary comparison schedule has been provided for each governmental fund which has an annual budget to demonstrate compliance with this budget. The budgetary comparison schedules for major funds are presented as required supplementary information and for nonmajor funds as supplementary information. Proprietary funds. Like the government-wide financial statements, the proprietary fund type provides both long-term and short-term financial information utilizing the economic resources measurement focus. The City of Malibu reports two proprietary funds; the City s commercial real estate rental and wastewater treatment enterprise funds are represented as business-type activities in the government-wide financial statements. Both of these enterprise funds are considered to be major funds, and information is presented separately in the proprietary fund statements. The fund statements provide detailed information about the net position, operating statements, and cash flows of each business-type activity. The City adopts an annual budget for these funds, and budgetary comparison schedules have been provided in the supplementary information section. Notes to the 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 financial statements can be found in the financial section of this report following the fund financial statements. Supplementary information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. Required supplementary information is found immediately following the notes to the financial statements. Optional supplementary information is presented as combining and individual statements for other funds. This optional supplementary information can be found immediately following the required supplementary information. Government-wide Financial Analysis City of Malibu Net Position Governmental Activities Business-type Activities Total 30-Jun Jun Jun Jun Jun Jun-17 Current and other assets $ 33,573,438 $ 40,296,533 $ 10,698,704 $ 13,164,186 $ 44,272,142 $ 53,460,719 Capital assets 72,223,765 82,423,141 48,937,450 77,160, ,161, ,583,699 Total assets 105,797, ,719,674 59,636,154 90,324, ,433, ,044,418 Deferred outflows from pension 542,502 1,966, ,502 1,966,547 Deferred charge on refunding 89,217 1,969, , , ,309 2,630,900 Total deferred outflows 631,719 3,935, , ,818 1,335,811 4,597,447 Long-term liabilities 27,260,180 40,078,845 14,964,184 14,365,515 42,224,364 54,444,360 Other liabilities 3,524,597 6,098,659 1,098,206 3,451,002 4,622,803 9,549,661 Total liabilities 30,784,777 46,177,504 16,062,390 17,816,517 46,847,167 63,994,021 Deferred inflows from pension 815, , , ,705 Total deferred inflows 815, , , ,705 Net investment in capital assets 47,850,477 48,132,050 34,152,337 62,921,246 82,002, ,053,296 Restricted 3,108,779 1,339,021 3,323,350 3,984,731 6,432,129 5,323,752 Unrestricted 23,869,719 30,394,023 6,802,169 6,264,068 30,671,888 36,658,091 Total net position $ 74,828,975 $ 79,865,094 $ 44,277,856 $ 73,170,045 $ 119,106,831 $ 153,035,139 As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the City of Malibu, net position was 6

19 Management s Discussion and Analysis June 30, 2017 $153,035,139 at June 30, The largest portion of the City s net position ($111,053,296 or 73%) reflects its investment in capital assets (e.g. land, infrastructure, buildings, and equipment). The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. An additional portion of the City s net position ($5,323,752 or 3%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($36,658,091 or 24%) may be used to meet the city s ongoing obligations to citizens and creditors. City of Malibu Changes in Net Position Governmental Activities Business-type Activities Total 30-Jun Jun Jun Jun Jun Jun-17 Program revenues: Charges for services $ 7,555,051 $ 7,335,053 $ 2,182,788 $ 2,055,485 $ 9,737,839 $ 9,390,538 Operating contributions and grants 1,120,225 1,270, ,120,225 1,270,237 Capital contributions and grants 55, ,860 9,309,028 30,693,993 9,364,182 31,066,853 General revenues: Property taxes 11,134,496 11,911, ,134,496 11,911,466 Other taxes 9,253,755 10,540, ,253,755 10,540,856 Other revenues 2,668,777 1,317,742 11, ,481 2,679,831 1,562,223 Total revenues 31,787,458 32,748,214 11,502,870 32,993,959 43,290,328 65,742,173 Expenses: Legislative and advisory 1,756,754 1,538, ,756,754 1,538,001 General government 5,394,805 5,505, ,394,805 5,505,847 Public safety 6,859,705 7,436, ,859,705 7,436,757 Community development 5,239,848 5,622, ,239,848 5,622,421 Community services 2,666,886 2,497, ,666,886 2,497,347 Public works 4,746,143 4,405, ,746,143 4,405,164 Interest on long-term debt 1,110,621 1,196, ,110,621 1,196,553 Commercial real estate rental - - 2,293,426 2,243,383 2,293,426 2,243,383 Wastewater treatment ,368, ,368,392 Total expenses 27,774,762 28,202,090 2,293,613 3,611,775 30,068,375 31,813,865 Excess/(deficiency) before transfers 4,012,696 4,546,124 9,209,257 29,382,184 13,221,953 33,928,308 Transfers (9,906,746) 489,995 9,906,746 (489,995) - - Increase/(decrease) in net position (5,894,050) 5,036,119 19,116,003 28,892,189 13,221,953 33,928,308 Net position - July 1 80,723,025 74,828,975 25,161,853 44,277, ,884, ,106,831 Net position - June 30 $ 74,828,975 $ 79,865,094 $ 44,277,856 $ 73,170,045 $ 119,106,831 $ 153,035,139 Governmental activities. Governmental activities increased the City s net position by $5.0 million during the fiscal year in contrast to a decrease of $5.9 million during the prior fiscal year. Key elements of this total $10.9 million change include: An increase of $777,000 in property taxes resulting from an increase in assessed value. A net increase of $1.3 million in other taxes, resulting from a $667,000 increase in transient occupancy tax revenue and a $666,000 increase in sales tax revenue. The transient occupancy tax increased mainly as a result of the City s tax collection of private rentals. Sales tax revenue increased as a result of a strong local economy during the fiscal year. A decrease of $1.3 million in other revenues, essentially due to a one-time prior year reimbursement from an assessment district of $1,260,000 for preliminary design and assessment district start-up costs. 7

20 Management s Discussion and Analysis June 30, 2017 Overall governmental expenses remained fairly steady and increased $427,000 to $28.2 million in the current fiscal year. The majority of this change is explained by offsetting changes in general government and public safety categories: o o A decrease of $220,000 in general government expenses. This decrease can be attributed to a one-time prior year payment of $125,000 to California Public Employees Retirement System (CalPERS) to reduce future employer contributions. An increase of $580,000 in public safety expenses due to higher contracted fees paid for County Sheriff services. In the prior year, the City s governmental activities transferred a net of $9.9 million to the City s business-type activities whereas the current year had a transfer of $490,000 from the City s business-type activities to governmental activities. The prior year s transfer from governmental activities was to move the construction in progress accumulated for the preliminary design of the wastewater treatment facility to the newly created Wastewater Treatment Enterprise Fund. The current year s transfer from business-type activities to governmental activities was to provide funding as budgeted for the enterprise funds share of costs incurred within governmental activities. Business-type activities. Business-type activities are financed primarily by fees charged to external parties for goods and services. The City reports two proprietary funds: the commercial real estate rental enterprise fund and the wastewater treatment enterprise fund. Business-type activities increased the City s net position by $28.9 million during the fiscal year in contrast to a prior year increase of $19.1 million. Key elements include: Capital contributions and grants increased by $21.4 million for reimbursement of the ongoing construction costs of the wastewater treatment facility. Current year expenses for operating the wastewater treatment facility increased from $200 to $1.4 million as a result of being in operation for the entire fiscal year rather than just a few days as in the prior year. In the prior year, a net transfer of $9.9 million was received from the City s governmental activities whereas the current year had a transfer of $490,000 from the City s business-type activities to governmental activities. The purposes of the transfers between the governmental and business-type activities are the same as previously explained in the governmental activities section. 8

21 Management s Discussion and Analysis June 30, 2017 Revenues by Source (Government-wide) Transient Occupancy Tax 5% Utility Users Tax 4% Property Taxes 18% Sales Tax 6% Other Taxes Other 2% 2% Charges for Services 14% Operating Contributions and Grants 2% Capital Contributions and Grants 47% Expenses and Program Revenues (Government-wide) 35,000,000 30,000,000 Expenses Program Revenues 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Legislative and Advisory General Government Public Safety Community Development Community Services Public Works Interest on long-term debt Commercial real estate rental Wastewater treatment The two charts above illustrate the City s overall expenses and revenues by source (including both governmental and business-type activities). General revenues such as property, utility users, and sales taxes are not shown by program, since they are used to support program activities citywide. In the current year, capital contributions and grants are the largest single source of funds for the City (47%), followed by taxes (35%) and charges for services (14%); the remaining sources of funds are from miscellaneous other revenues (2%) and operating contributions and grants (2%). As previously noted, the City s business-type activities received a large amount of capital funding in the current year for the construction of the wastewater treatment facility (a capital asset) in the wastewater treatment enterprise fund. 9

22 Management s Discussion and Analysis June 30, 2017 Public Safety is the largest expense function, accounting for 23% of the total. Community Development is second at 18%, with General Government at 17%, Public Works at 14%, Community Services at 8%, and Commercial Real Estate Rental at 7% of the total expenses. The remaining expense functions of Legislative and Advisory, Interest on Long-Term Debt, and Wastewater Treatment Facility, are each less than 5% of the total. Financial Analysis of the City s Funds At the end of the current fiscal year, the City s governmental funds reported combined ending fund balances of $35,669,674, a net increase of $4.1 million over the prior year s ending balance of $31,565,900. Fiscal year had a net increase to fund balance of $4.1 million, similar to the prior year s net increase of $3.8 million. While the current year s increase was $0.3 million higher than the prior year, there were several large changes within line items. Following are the key elements of the change in activity: Overall, revenues decreased by a net of $476,000 from the prior year: An increase of $1.6 million in taxes: property taxes increased by $777,000, transient occupancy tax increased by $667,000, and documentary transfer tax increased by $135,000. Other taxes had small changes for a combined increase of $485,000. A decrease of $294,000 in charges for services due to a decreased need for public works review fees, lower film permit revenues, and lower election fee charges. A decrease of $396,000 in intergovernmental revenues due to the completion of several capital projects in the prior year. A decrease of $1.4 million in miscellaneous revenues, mainly due to the prior year one-time reimbursement of $1.3 million received from Assessment District for design and start-up costs which were originally paid by the General Fund. Expenditures increased by $13.3 million due to the following reasons: Public safety costs increased by $580,000 due to higher contracted fees paid for County Sheriff services. Community development costs increased by $371,000 due to higher costs incurred for the wastewater management and clean water programs. Capital outlay increased by $10.6 million. In the current year, the City acquired the Trancas Field property for $11.4 million. This is offset by fewer capital project expenditures, as many general government capital projects were finished in the prior year. Principal and interest expense for debt service increased by $150,000 while other debt costs increased by $1.6 million due to the refunding of existing certificates of participation (COPs) in conjunction with the issuance of the Series 2016 Refunding COPs. In addition to refunding existing COPs, the 2016 Refunding COPs also included $11.3 million to acquire the Trancas Field property. Other Financing Sources and Uses increased by $14.1 million due to the following reasons: 10

23 Management s Discussion and Analysis June 30, 2017 Long-term financing for the issuance of the 2016 Refunding COPs resulted in proceeds of $30.9 million offset by $19.2 million in payment to the refunding escrow for the refunding of existing COPs. Net transfers with enterprise funds increased by $2.4 million due to transferring a net $1.9 million to enterprise funds in the prior year (for the City s assessments related to the wastewater treatment facility) while receiving $0.5 million from enterprise funds in the current year for the enterprise funds share of costs incurred within governmental activities. The governmental funds combined ending fund balance totals $35.7 million. Approximately 75% ($26.8 million) of this amount constitutes unassigned fund balance which is available for spending at the City s discretion. The remainder of the combined ending fund balances is nonspendable, restricted, committed or assigned to indicate that it is not available for new spending because it has already been designated as: 1) Nonspendable for prepaid items ($0.6 million), 2) Restricted for special revenue funds and debt service ($1.4 million), 3) Committed for capital improvement projects and city facilities ($4.6 million), 4) Assigned for vehicle and technology replacement and for working capital ($2.3 million). General Fund. The General Fund is the chief operating fund of the City of Malibu and comprises approximately 97% of the governmental expenditures of the City. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $28,852,046 while the total fund balance was $34,398,201. As a measure of the General Fund s liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. The General Fund s unassigned fund balance represents 73% of General Fund annual expenditures. The General Fund s fund balance increased in fiscal year by $3.6 million, which is higher than the prior year increase of $3.0 million. Because the General Fund comprises such a large part of the overall governmental expenditures of the City, many of the reasons for changes in the General Fund are similar to the reasons previously explained as changes in the overall governmental funds. Tax revenue increased over the prior year by $1.5 million, mainly due to increases in property, transient occupancy, and documentary transfer taxes. Intergovernmental revenues increased by $123,000 due to agreements for joint projects with other agencies. Charges for services decreased $288,000 due to a decreased need for public works review fees, lower film permit revenues, and lower election fee charges. Other revenue decreased by $1.4 million, mainly due to the prior year one-time reimbursement of $1.3 million received from Assessment District for design and start-up costs which were originally paid by the General Fund. Public safety costs increased by $564,000 due to higher contracted fees paid for County Sheriff services. Community development costs increased by $435,000 due to higher costs incurred for the wastewater management and clean water programs. Capital outlay increased by $11.3 million. In the current year, the City acquired the Trancas Field property for $11.4 million. This is offset by fewer capital project expenditures as many general government capital projects were finished in the prior year. 11

24 Management s Discussion and Analysis June 30, 2017 Principal and interest expense for debt service increased by $150,000 while other debt costs increased by $1.6 million due to the refunding of existing certificates of participation (COPs) in conjunction with the issuance of the Series 2016 Refunding COPs. In addition to refunding existing COPs, the 2016 Refunding COPs also included $11.3 million to acquire the Trancas Field property. Long-term financing for the issuance of the 2016 Refunding COPs resulted in proceeds of $30.9 million offset by $19.2 million in payment to the refunding escrow for the refunding of existing COPs. Net transfers from other funds increased by $3.0 mainly a result of transfers with enterprise funds increasing by $2.4 million due to transferring a net $1.9 million to enterprise funds in the prior year (for the City s assessments related to the wastewater treatment facility) while receiving $0.5 million from enterprise funds in the current year for the enterprise funds share of costs incurred within governmental activities. Grants Special Revenue Fund. This fund is used to account for grants received from other governmental agencies. The majority of funds received are transferred to the Capital Improvements Fund for capital project funding. Capital Improvements Capital Projects Fund. This fund is used to account for the acquisition, construction, and repair of major facilities and is fully funded by monies transferred from other funds. Commercial Real Estate Rental Enterprise Fund. This fund is used to account for the commercial real estate rental activity. All revenues and expenses are for the commercial real estate rental program. Activity does not vary much from year to year as the properties have long-term rental leases. Additional information on the rental leases can be found in the Operating Leases City as Lessor Note (Note 6) of the notes to the financial statements. Wastewater Treatment Enterprise Fund. This fund is used to account for the construction of a new wastewater treatment facility and the activities of the existing wastewater treatment facility. The existing facility will be removed upon completion of and connection of existing customers to the new facility. Budgetary Highlights In preparing its budgets, the City attempts to estimate its revenues using realistic, but conservative, methods so as to budget its expenditure appropriations and activities in a prudent manner. As a result, the City Council adopts budget adjustments during the course of the fiscal year to reflect both changed priorities and availability of additional revenues to allow for expansion of existing programs. During the course of the year, the City Council amended the originally adopted budget to reappropriate prior year approved projects and expenditures and to appropriate monies for the purchase of the Trancas Field real property. General Fund. The General Fund balance reflected a positive net budget variance for revenues and expenditures of $3.4 million when comparing actual amounts to the final budget for the current fiscal year. This amount reflects a positive variance of $2.7 million in revenues and a positive variance of $0.7 million in expenditures. The positive revenue 12

25 Management s Discussion and Analysis June 30, 2017 variance resulted from actual revenues exceeding the budget for all categories except intergovernmental revenues, with the majority of the variance ($2.3 million) attributed to tax revenues. The positive net expenditure variance resulted from the final budget exceeding actual expenditures for capital outlay and all current expenditure categories, offset by the unbudgeted debt service costs incurred for the refunding of COPs. The General Fund s revenue budget increased by $936,000 with $814,000 of the increase attributed to grants and other agency reimbursements which were approved after the budget was adopted. The remaining budgeted revenue increases were for higher revenues being anticipated for recreation fees, building-related fees, and miscellaneous reimbursements. The difference between the General Fund original expenditure budget and the final amended budget was an increase of $12.4 million and is attributed to: An increase of $695,000 in the Community Development budget for professional services in planning, wastewater management, and clean water programs. An increase of $112,000 in the Community Services budget for recreation programs. An increase of $107,000 in the Public Works budget for street maintenance and stormwater activities. An increase of $11.4 million in capital outlay for the acquisition of the Trancas Field property. Other small budget adjustments throughout the year. Capital Asset and Debt Administration Capital assets. The City s capital assets for governmental and business type activities as of June 30, 2017 total $159.6 million (net of accumulated depreciation), a net increase of $38.4 million. The capital assets include land, intangible assets, roadways, buildings, leasehold improvements, storm drains, vehicles, computer equipment, furniture, other equipment, and construction in progress. Capital asset additions totaled $42.6 million, net deletions were zero, and depreciation expense totaled $4.2 million. The major additions to capital assets included $11.4 million for the acquisition of real property and $30.6 million for construction of the enterprise fund s wastewater treatment facility. City of Malibu Capital Assets (net of depreciation) Governmental Activities Business-type Activities Total 30-Jun Jun Jun Jun Jun Jun-17 Land $ 9,669,669 $ 21,056,508 $ 17,325,848 $ 17,325,848 $ 26,995,517 $ 38,382,356 Right of Way 24,045,543 24,045, ,045,543 24,045,543 Construction in Progress 23, ,531 7,924,882 38,552,685 7,948,369 38,813,216 Buildings 19,530,883 18,745,454 23,289,804 20,896,880 42,820,687 39,642,334 Equipment and Furniture 843, , , ,911 Vehicles 116, , , ,016 Infrastructure 17,994,162 17,323, , ,145 18,391,078 17,708,323 Total $ 72,223,765 $ 82,423,141 $ 48,937,450 $ 77,160,558 $ 121,161,215 $ 159,583,699 Additional information on the City s capital assets can be found in the Capital Assets Note (Note 3) of the notes to the financial statements. 13

26 Management s Discussion and Analysis June 30, 2017 Long-term debt. At the end of the current fiscal year, the City of Malibu had total debt outstanding of $56.3 million. City of Malibu Outstanding Debt Governmental Activities Business-type Activities Total 30-Jun Jun Jun Jun Jun Jun-17 Employee compensated absences $ 534,620 $ 510,470 $ - $ - $ 534,620 $ 510,470 Capital leases 71,965 46, ,965 46,662 Notes payable ,117 48,506 57,117 48,506 Certificates of participation, net 24,390,540 36,213,511 15,489,205 14,901,130 39,879,745 51,114,641 Net pension liability 3,366,040 4,610, ,366,040 4,610,344 Total $ 28,363,165 $ 41,380,987 $ 15,546,322 $ 14,949,636 $ 43,909,487 $ 56,330,623 In conjunction with the Malibu Public Financing Corporation, in prior years the City issued certificates of participation (COP) for the Legacy Park acquisition and construction as well as for the acquisition and improvement of a civic center building. The debt service on the Legacy Park debt is expected to be funded within the enterprise fund through the collection of rent from commercial tenants; however if operating costs and debt service payments exceed the operating revenues, the City intends to budget within and transfer from the General Fund the amount needed to offset any shortfall in revenue. The debt service on the Civic Center debt will be budgeted for and paid from the General Fund. In the current year, the City issued refunding debt to refund the 2009 and 2010 COPs and to provide funding for the acquisition of the Trancas Field property. The amount of general obligation debt a governmental entity may issue is limited by state statutes to a maximum of 15% of the entity s total assessed valuation. The City of Malibu currently has no general obligation debt, and therefore, has no debt that is applicable to the limit. Additional information on the City s long-term debt can be found in the Long-Term Debt Note (Note 4) of the notes to the financial statements. Economic Factors and Next Year s Budget As in years past, the City developed its fiscal year budget conservatively with the continued approach of maintaining levels of service, reducing expenses where possible, and preserving a strong General Fund reserve. The fiscal year budget presents a prudent financial plan, with total budgeted revenues of $57.4 million and total budgeted appropriations of $59.6 million. This includes a balanced General Fund budget with $28.7 million of revenue and $28.3 million of expenditures. General Fund Revenues. The City s General Fund revenues for fiscal year are budgeted to remain strong. The major revenue source of property taxes continues to be steady and provides over 40% of the General Fund revenue. Certain other major tax revenue sources including sales tax and transient occupancy tax are budgeted to increase by a combined amount of $500,000 over the prior year. Overall General Fund revenues are projected to increase by $849,000 over the prior year. This growth in revenue is considered to be conservative yet realistic. General Fund Expenditures. The City s General Fund expenditures for fiscal year are budgeted to decrease by $8.9 million from fiscal year mainly due to the prior year s one-time property acquisition of $11.4 million. This is offset by increased 14

27 Management s Discussion and Analysis June 30, 2017 costs budgeted for public safety, insurance premiums, building and safety programs, and COP debt service. Capital Improvements. The City has adopted a multi-year capital improvement program with the next fiscal year s costs totaling $26.3 million. Major projects budgeted for fiscal year include: $21.4 million for Civic Center Wastewater Treatment Facility $1.5 million for City Hall Solar Power and Roof Projects $1.5 million for PCH Traffic Safety and Intersections Improvements $769,000 for Annual Street Maintenance and Civic Center Way Improvements $255,000 for Civic Center Storm Drain System Improvements $224,000 for Kanan Dume Road Widening The City Council is committed to maintaining a strong unassigned General Fund reserve to provide a buffer against unforeseen expenditures. Requests for Information This financial report is designed to provide a general overview of the financial position of the City of Malibu 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 Management and Administrative Services Department, Stuart Ranch Road, Malibu, California

28 16

29 STATEMENT OF NET POSITION JUNE 30, 2017 Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents $ 26,735,527 $ 8,369,279 $ 35,104,806 Accounts receivable 1,347,407 88,989 1,436,396 Interest receivable 82,830-82,830 Due from other governments 1,681,309-1,681,309 Prepaid expenses 591,204 1, ,305 Due from Assessment District 9,837, ,086 10,558,067 Restricted assets-cash and equivalents with fiscal agents 20,275 3,984,731 4,005,006 Capital assets, non-depreciable 45,362,582 55,878, ,241,115 Capital assets, net of accumulated depreciation 37,060,559 21,282,025 58,342,584 Total assets 122,719,674 90,324, ,044,418 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 1,969, ,818 2,630,900 Deferred amount from pension 1,966,547-1,966,547 Total deferred outflows of resources 3,935, ,818 4,597,447 LIABILITIES Accounts payable 4,015,492 7,533 4,023,025 Contractor and retention payable 1,910 2,354,114 2,356,024 Salaries and wages payable 139, ,683 Interest payable 216,931 86, ,552 Deposits - 418, ,613 Unearned revenue 422, ,501 Noncurrent liabilities due within one year 1,302, ,121 1,886,263 Noncurrent liabilities due in more than one year Compensated absences 10,470-10,470 Capital leases 9,520-9,520 Note payable - wastewater facility usage - 39,385 39,385 Certificates of participation, net 35,448,511 14,326,130 49,774,641 Net pension liability 4,610,344-4,610,344 Total liabilities 46,177,504 17,816,517 63,994,021 DEFERRED INFLOWS OF RESOURCES Deferred amount from pension 612, ,705 NET POSITION Net investment in capital assets 48,132,050 62,921, ,053,296 Restricted for: Debt service 20,275-20,275 Construction projects - 3,984,731 3,984,731 Public works 1,184,480-1,184,480 Environmental sustainability 60,055-60,055 Community services 74,211-74,211 Unrestricted 30,394,023 6,264,068 36,658,091 Total net position $ 79,865,094 $ 73,170,045 $ 153,035,139 The notes to the financial statements are an integral part of this statement. 17

30 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-type Expenses Services Contributions Contributions Activities Activities Total Governmental activities: Legislative and advisory $ 1,538,001 $ 1,303 $ - $ - $ (1,536,698) $ - $ (1,536,698) General government 5,505, ,914 6,979 66,190 (4,728,764) - (4,728,764) Public safety 7,436, , ,403 - (6,287,250) - (6,287,250) Community development 5,622,421 4,758, (863,477) - (863,477) Community services 2,497, ,902 7,708 - (1,923,737) - (1,923,737) Public works 4,405, , , ,670 (2,687,461) - (2,687,461) Interest on long-term debt 1,196, (1,196,553) - (1,196,553) Total governmental activities 28,202,090 7,335,053 1,270, ,860 (19,223,940) - (19,223,940) Business-type activities: Commercial real estate rental 2,243,383 1,786, (456,869) (456,869) Wastewater treatment 1,368, ,971-30,693,993-29,594,572 29,594,572 Total business-type activities 3,611,775 2,055,485-30,693,993-29,137,703 29,137,703 Total $ 31,813,865 $ 9,390,538 $ 1,270,237 $ 31,066,853 (19,223,940) 29,137,703 9,913,763 General revenues: Taxes: Property tax 11,911,466-11,911,466 Utility users tax 2,375,720-2,375,720 Transient occupancy tax 3,287,293-3,287,293 Franchise tax 708, ,302 Sales tax 3,736,746-3,736,746 Parking occupancy tax 427, ,103 Motor vehicle in lieu tax, intergovernmental, unrestricted 5,692-5,692 Unrestricted investment earnings 170,915 54, ,751 Other revenues 1,146, ,645 1,336,472 Transfers 489,995 (489,995) - Total general revenues and transfers 24,260,059 (245,514) 24,014,545 Change in net position 5,036,119 28,892,189 33,928,308 Net position - beginning of year 74,828,975 44,277, ,106,831 Net position - end of year $ 79,865,094 $ 73,170,045 $ 153,035,139 The notes to the financial statements are an integral part of this statement. 18

31 GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2017 Special Capital Revenue Projects Fund Other Fund Capital Governmental General Grants Improvements Funds Totals ASSETS Cash and investments $ 23,287,783 $ - $ 2,088,414 $ 1,359,330 $ 26,735,527 Accounts receivable 1,322, ,568 1,347,407 Interest receivable 82, ,830 Due from other governments 1,484, ,209-49,562 1,681,309 Prepaid items 591, ,204 Due from Assessment District 9,837, ,837,981 Due from other funds 167, ,540 Restricted assets - cash with fiscal agent 20, ,275 Total assets $ 36,794,990 $ 147,209 $ 2,088,414 $ 1,433,460 $ 40,464,073 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable $ 1,834,605 $ - $ 2,086,504 $ 94,383 $ 4,015,492 Retentions payable - - 1,910-1,910 Salaries and wages payable 139, ,683 Unearned revenue 422, ,501 Due to other funds - 147,209-20, ,540 Total liabilities 2,396, ,209 2,088, ,714 4,747,126 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - 47, ,273 FUND BALANCES Nonspendable Prepaid items 591, ,204 Restricted Public works activities ,088 70,088 Capital improvement projects , ,384 Community services activities , ,980 Environmental sustainability ,055 60,055 Special district projects , ,239 Debt service and debt service reserve 20, ,275 Committed Capital improvement projects 317,704-1,986,879-2,304,583 Landon Center 1,000, ,000,000 City facilities 1,056, ,056,016 Water quality settlement 250, ,000 Assigned Vehicle maintenance & replacement 29,341 29,341 Information technology replacement 37, ,995 Working capital 2,243, ,243,620 Unassigned 28,852,046 (47,273) (1,986,879) - 26,817,894 Total fund balances 34,398,201 (47,273) - 1,318,746 35,669,674 Total liabilities, deferred inflows of resources, and fund balances $ 36,794,990 $ 147,209 $ 2,088,414 $ 1,433,460 $ 40,464,073 The notes to the financial statements are an integral part of this statement. 19

32 GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2017 Fund Balances of Governmental Funds $ 35,669,674 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 82,423,141 47,273 Pension-related deferred outflows of resources, net of accumulated amortization, have not been reported in the governmental funds. 1,966,547 Pension-related deferred inflows of resources, net of accumulated amortization, have not been reported in the governmental funds. (612,705) Liabilities and deferred charges related to long-term debt are not due and payable in the current period and, therefore, are not reported in the funds, as follows: Deferred charge on refunding 1,969,082 Interest payable (216,931) Long-term liabilities (41,380,987) Net Position of Governmental Activities $ 79,865,094 The notes to the financial statements are an integral part of this statement. 20

33 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2017 Capital Special Projects Fund Other Revenue Fund Capital Governmental General Grants Improvements Funds Total REVENUES Taxes $ 23,288,059 $ - $ - $ 458,756 $ 23,746,815 Fines and forfeitures 577, , ,104 Intergovernmental 324, ,302-1,003,450 1,663,909 Use of money and property 160, , ,915 Charges for services 5,937, ,859 6,063,515 Other 305, ,398 Total revenues 30,593, ,302-1,782,082 32,711,656 EXPENDITURES Current: Legislative and advisory 1,535, ,535,435 General government 4,963, ,979 4,970,592 Public safety 7,290, ,324 7,419,922 Community development 5,533, ,532 5,610,033 Community services 2,199, ,032 2,380,503 Public works 2,837, ,812 3,225,476 Capital outlay 11,686, ,998-12,176,072 Debt service: Principal 606, ,770 Interest 1,257, ,257,754 Cost of issuance 228, ,065 Payment to refunding escrow 1,385, ,385,310 Total expenditures 39,524, , ,679 40,795,932 Revenues over (under) expenditures (8,930,983) 336,302 (489,998) 1,000,403 (8,084,276) OTHER FINANCING SOURCES (USES) Proceeds from long-term financing 30,860, ,860,651 Transfers in 958, ,998-1,448,082 Transfers out (171,418) (306,670) - (480,000) (958,088) Payment to refunding escrow (19,162,595) (19,162,595) Total other financing sources (uses) 12,484,722 (306,670) 489,998 (480,000) 12,188,050 Net change in fund balance 3,553,739 29, ,403 4,103,774 FUND BALANCE - BEGINNING 30,844,462 (76,905) - 798,343 31,565,900 FUND BALANCE - ENDING $ 34,398,201 $ (47,273) $ - $ 1,318,746 $ 35,669,674 The notes to the financial statements are an integral part of this statement. 21

34 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 Net Change in Fund Balances - Total Governmental Funds $ 4,103,774 Amounts reported for governmental activities in the Statement of Activities differ from the amounts reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. This activity is reconciled as follows: Cost of assets capitalized 11,884,619 Contributed capital assets 67,210 Depreciation expense (1,751,433) Governmental funds report as revenues those monies that become available in the current period but which were earned and reported as revenue in a prior period within the Statement of Activities. (76,905) Governmental funds exclude revenues for monies that are not available in the current year but which are earned and reported as revenue in the Statement of Activities. 47,273 The net expenses of other long-term debt (e.g., compensated absences) are reported in the statement of activities but do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 24,150 Governmental funds do not record interest expense until the payment is due. However, the statement of activities reports interest expense as the liability is incurred. The net change in interest payable is a reconciling item to the change in net position. 7,783 Governmental funds report the effect of premiums and discounts when debt is first issued and the loss on debt refunding when the refunding occurs. However, these amounts are deferred and amortized in the statement of activities. 53,418 Governmental funds report proceeds of debt as a financing source when debt is first issued. However, this type of transaction has no effect within the Statement of Activities. (30,860,651) Principal payment on long-term debt is reported as an expenditure in the governmental funds. However, this type of transaction has no effect within the Statement of Activities. 606,770 Payments to escrow for refunding of long-term debt is reported as an expenditure in the governmental funds. However, this type of transaction has no effect within the Statement of Activities. 20,547,905 Pension expense reported in the governmental funds includes the actual contributions made in the fiscal year. Pension expense reported in the Statement of Activities includes the changes in the net pension liability and pension-related deferred outflows/inflows. *Change in net pension liability (1,244,304) *Change in deferred outflows of resources related to pensions 1,424,045 *Changes in deferred inflows of resources related to pensions 202,465 Change in Net Position of Governmental Activities $ 5,036,119 The notes to the financial statements are an integral part of this statement. 22

35 PROPRIETARY FUNDS STATEMENT OF FUND NET POSITION JUNE 30, 2017 Business-Type Activities Enterprise Funds Commercial Real Wastewater Estate Rental Treatment Totals ASSETS Current assets: Cash and cash equivalents $ 860,668 $ 7,508,611 $ 8,369,279 Accounts receivable 88,989-88,989 Prepaid expenses 1,101-1,101 Due from Assessment District - 720, ,086 Total current assets 950,758 8,228,697 9,179,455 Noncurrent assets: Retricted: Cash and cash equivalents with fiscal agent 40 3,984,691 3,984,731 Capital assets, non-depreciable 15,404,922 40,473,611 55,878,533 Capital assets, net of accumulated depreciation 20,210,464 1,071,561 21,282,025 Total noncurrent assets 35,615,426 45,529,863 81,145,289 Total assets 36,566,184 53,758,560 90,324,744 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 661, ,818 LIABILITIES Current liabilities: Accounts payable 4,454 3,079 7,533 Contractor and retention payable - 2,354,114 2,354,114 Interest payable 86,621-86,621 Deposits 418, ,613 Noncurrent liabilities due within one year: Note payable - wastewater facility usage 9,121-9,121 Certificates of participation 575, ,000 Total current liabilities 1,093,809 2,357,193 3,451,002 Noncurrent liabilities: Noncurrent liabilities due in more than one year: Note payable - wastewater facility usage 39,385-39,385 Certificates of participation, net 14,326,130-14,326,130 Total noncurrent liabilities 14,365,515-14,365,515 Total liabilities 15,459,324 2,357,193 17,816,517 NET POSITION Net investment in capital assets 21,376,074 41,545,172 62,921,246 Restricted for construction project 40 3,984,691 3,984,731 Unrestricted 392,564 5,871,504 6,264,068 Total net position $ 21,768,678 $ 51,401,367 $ 73,170,045 The notes to the financial statements are an integral part of this statement. 23

36 PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 OPERATING REVENUES Charges for sales and services: Rental income 1,719,509 Business-Type Activities Enterprise Funds Commercial Real Wastewater Estate Rental Treatment Totals $ $ - $ 1,719,509 Sewer service fees - 268, ,971 Other 67,005-67,005 Total operating revenues 1,786, ,971 2,055,485 OPERATING EXPENSES Professional and contractual services 177,572 75, ,762 Personnel services 41,098-41,098 Repairs and maintenance 119,923 1, ,501 Utilities 19,604 27,619 47,223 Supplies ,503 Total operating expenses 358, , ,087 Operating income before depreciation 1,427, ,793 1,591,398 Depreciation expense 1,333,134 1,071,561 2,404,695 Operating income 94,471 (907,768) (813,297) NONOPERATING REVENUES (EXPENSES) Investment and interest income 6,474 48,361 54,835 Grant revenue 189, ,645 Interest expense (551,340) - (551,340) Other nonoperating expense - (191,653) (191,653) Total nonoperating revenues (expenses) (355,221) (143,292) (498,513) Income before transfers and capital contributions (260,750) (1,051,060) (1,311,810) Transfers to governmental funds (489,994) - (489,994) Capital contributions - 30,693,993 30,693,993 Change in net position (750,744) 29,642,933 28,892,189 NET POSITION, BEGINNING 22,519,422 21,758,434 44,277,856 NET POSITION, ENDING $ 21,768,678 $ 51,401,367 $ 73,170,045 The notes to the financial statements are an integral part of this statement. 24

37 PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 Business-Type Activities Enterprise Funds Commercial Real Wastewater CASH FLOWS FROM OPERATING ACTIVITIES Estate Rental Treatment Totals Receipts from customers $ 1,800,397 $ 268,971 $ 2,069,368 Payments to suppliers (364,269) (102,099) (466,368) Net cash provided by operating activities 1,436, ,872 1,603,000 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers to governmental funds (489,994) - (489,994) Noncapital grants 189, ,645 Net cash provided by noncapital financing activities (300,349) - (300,349) CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Interest paid (527,661) - (527,661) Principal payment (578,611) - (578,611) Payments made for capital assets acquired - (28,273,689) (28,273,689) Contributions from property owners, net - 33,769,457 33,769,457 Net cash used for capital financing activities (1,106,272) 5,495,768 4,389,496 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 6,474 48,361 54,835 Net increase in cash and cash equivalents 35,981 5,711,001 5,746,982 CASH AND CASH EQUIVALENTS, BEGINNING 824,727 5,782,301 6,607,028 CASH AND CASH EQUIVALENTS, ENDNG $ 860,708 $ 11,493,302 $ 12,354,010 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 94,471 $ (907,768) $ (813,297) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense 1,333,134 1,071,561 2,404,695 Decrease in accounts receivable 13,883-13,883 Decrease in prepaid expenses <Increase>/Decrease in accounts payable (5,860) 3,079 (2,781) Total adjustments 1,341,657 1,074,640 2,416,297 Net cash provided by operating activities $ 1,436,128 $ 166,872 $ 1,603,000 Noncash activities: Amortization of debt-related deferred items $ 24,199 $ - $ 24,199 Capital assets contributed to governmental funds $ - $ (66,190) $ (66,190) The notes to the financial statements are an integral part of this statement. 25

38 FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2017 Pension Agency Trust Funds Funds ASSETS Pooled cash and investments $ 2,741,322 $ - Cash and investments with fiscal agent 1,248,850 - Investments - mutual funds: Money market mutual funds - 138,648 U.S. stocks - 31,863 International/global stocks - 6,909 Specialty - 1,624 Due from other governments 9,855,669 - Notes receivable - capital facility 787,485 - Total assets $ 14,633, ,044 LIABILITIES Accounts payable $ 17,615 - Deposits 2,444,130 - Due to bondholders 1,549,203 - Due to City of Malibu 9,834,893 - Loan payable 787,485 - Total liabilities $ 14,633,326 - NET POSITION Restricted for pensions $ 179,044 The notes to the financial statements are an integral part of this statement. 26

39 FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 Pension Trust Funds ADDITIONS Contributions by employer $ 30,046 Investment earnings 23,761 Total additions 53,807 DEDUCTIONS Distributions 261,462 Change in net position (207,655) NET POSITION - BEGINNING 386,699 NET POSITION - ENDING $ 179,044 The notes to the financial statements are an integral part of this statement. 27

40 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Malibu (the City) conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the significant policies. A. REPORTING ENTITY The City of Malibu was incorporated in 1991 under the general laws of the State of California. The City has a council-manager form of government and is governed by an elected five-member council. The Mayor position is rotated among the five council members. As required by generally accepted accounting principles, the accompanying financial statements include the financial activity of the City and its blended component unit, the Malibu Public Financing Corporation. The Corporation is a legally separate entity although in substance it is considered to be part of the City s operations. The City is considered to be financially accountable for the Corporation which is governed by a board comprised entirely of the City s council members. There is no requirement for separate financial statements of the Corporation; consequently, separate financial statements for the Corporation are not prepared. The Corporation s financial activity during the fiscal year consisted of paying debt service on the outstanding certificates of participation and the defeasance of old debt with the issuance of the 2016 Refunding Certificates of Participation (see Note 4). B. MEASUREMENT FOCUS, BASIS OF PRESENTATION, AND FINANCIAL STATEMENT PRESENTATION The accounts of the City are organized and operated on the basis of funds, each of which is considered to be 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 or expenses. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained consistent with legal and managerial requirements. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Government-Wide Financial Statements The Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of non-fiduciary activities of the City. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. For the most part, the effect of interfund activity has been removed from these statements except for transactions between the City s governmental funds and the proprietary or fiduciary funds. Interfund services provided and used are not eliminated in the process of consolidation. These statements are presented on an economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the City s assets and liabilities, including capital assets, infrastructure, and long-term debt are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. 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. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. The types of transactions reported as program revenues for the City are classified in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Charges for services include revenues from customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function. Grants and contributions include revenues restricted to meeting the 28

41 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. 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 and aggregated non-major funds. An accompanying schedule is presented to reconcile and explain the difference in fund balance as presented in these statements to the net position as presented in the Government-Wide Financial Statements. 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 present 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. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual are recognized when due. The primary sources susceptible to accrual are property tax, sales tax, transient occupancy tax, franchise fees, investment income, and grant revenues. Generally, revenues are subject to accrual if anticipated to be received within 180 days after year-end. The exception to this general rule is that property taxes are subject to accrual if received within 60 days after year-end. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. An exception to this general rule is principal and interest on general long-term debt which is recognized when due. Proprietary Fund Financial Statements Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in Fund Net Position, and a Statement of Cash Flows. The City has two Proprietary Funds which are accounted for using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Fiduciary Fund Financial Statements Fiduciary Fund Financial Statements include a Statement of Net Position and a Statement of Changes in Fiduciary Net Position. The City s Fiduciary Funds consist of two Pension Trust Funds, which are accounted for using the accrual basis of accounting, and five Agency Funds. The Pension Trust Funds are used to account for activities of the City s defined contribution plans which are administered by the City. These defined contribution plans accumulate resources for pension benefit payments. The Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations; consequently, the Agency Funds are not included within the Statement of Changes in Fiduciary Net Position. The Agency Funds account for assets held for specific uses that are not part of the City s operating activities; specifically, monies held by the City as an agent for property owners with special assessments and for monies collected from individuals who have made special deposits with the City for property grading, special events, and donations. Fund Classifications The City reports the following major governmental funds: The General Fund is the City s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. 29

42 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 The Grants Special Revenue Fund is used to account for projects funded by various grants received from other government agencies. The majority of funds received are transferred to the Capital Improvement Capital Projects Fund to finance the related capital project expenditures. The amount of activity in this fund varies from year to year, and this fund is consistently reported as a major governmental fund. The Capital Improvements Capital Projects Fund is used to account for financial resources to be used for the acquisition, construction, or repair of major facilities. The amount of activity in this fund varies from year to year, and this fund is consistently reported as a major governmental fund. The City reports two proprietary funds, both of which are reported as major proprietary funds. The Commercial Real Estate Rental Fund accounts for the capital assets being leased to commercial customers (see Note 6). The lease revenue is used to pay the debt service requirements of the long-term liabilities of the fund (see Note 4). The Wastewater Treatment Fund accounts for the capital assets and the related activity for processing wastewater. This fund also accounts for the construction of a new civic center wastewater treatment facility. C. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY The legal level of budgetary control is at the fund level for governmental funds. For the year ended June 30, 2017, there were no major or nonmajor governmental funds with expenditures which exceeded appropriations. The Major Special Revenue Fund Grants has a deficit fund balance of $47,273 at June 30, This deficit is expected to be relieved by the receipt of grant monies. D. PROPERTY TAX REVENUES Property taxes are levied, based on the assessed values determined by the Los Angeles County Assessor (the County) as of March 1 st and become a lien on the real property at July 1 st. Secured taxes are due annually in two installments on November 1 st and February 1 st, and become delinquent on December 10 th and April 10 th, respectively. Unsecured taxes are due annually on July 1 st and become delinquent on August 31 st. The lien date for secured and unsecured property taxes is March 1 st of the preceding fiscal year. The total property tax levy is recognized as revenue to the extent that it results in current available resources. Current available resources are those property tax amounts received within 60 days past fiscal year end. California law limits ad valorem taxes on real property to 1% of value plus taxes necessary to pay indebtedness approved by the voters. Annual increases are limited to the cost of living, not to exceed 2% each year. Property may also be reassessed to full market value after a sale, transfer of ownership, or completion of new construction. The State is prohibited 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 electors voting in a general or special election. E. INVESTMENTS AND INTEREST INCOME ON INVESTMENTS Investments are reported at fair value, which represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Cash and investments of the City are managed on a pooled basis. Investment income from the pool is allocated to certain funds quarterly based on the average cash balances in relation to total cash balances. All investment income, including changes in the fair value of investments, is recognized as revenue in the operating statement. All pooled investments are controlled by an investment policy that is adopted by the City Council and further controlled by State legislation. F. CAPITAL ASSETS Capital assets, which include land, intangible assets, buildings, leasehold improvements, equipment and furniture, vehicles, and infrastructure, are reported in the applicable governmental or business-type activities columns of the Government-Wide Financial Statements. Non-infrastructure capital assets are defined by the City as individual assets with an initial, individual cost of more than $3,000 and an expected useful life of three years or more. 30

43 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Infrastructure capital assets are defined by the City as long-lived capital assets with an initial cost of more than $50,000 that are stationary and can be preserved for at least 35 years (such as streets, storm drains, bridges, etc.). The City has capitalized all infrastructure assets, including those acquired prior to All purchased capital assets are valued at cost where historical cost records are available and at an estimated historical cost where no historical records exist. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are reported at acquisition value at the date of acquisition. Capital leases are capitalized in accordance with generally accepted accounting principles. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets and improvements are capitalized as construction in progress as projects are constructed. Using the convention of no depreciation expense in the year of acquisition, depreciation is recorded on a straightline basis over the useful life of the assets as follows: Buildings & Improvements Furniture, Machinery, & Office Equipment Vehicles Walkways and ramps Street network Storm drain network Bridges 5-45 years 3-15 years 5-10 years 45 years 35 years 60 years 65 years G. COMPENSATED ABSENCES PAYABLE Compensated absences include accrued vacation and sick leave that are available to employees in future years either in time off or in cash (upon leaving the employ of the City). The City accounts for compensated absences in accordance with GASB Code Section C60. A liability for compensated absences is reported in governmental funds only if the liability has matured, such as would occur as a result of employee resignations and retirements. The general fund has been used in prior years to liquidate the compensated absences liability; the City expects to continue using the general fund to liquidate the compensated absences liability. H. RESTRICTED ASSETS Certain assets are classified as restricted because their use is limited by applicable debt covenants. Specifically, the assets are restricted for principal and interest payments due on long-term debt, are maintained by a trustee as a reserve requirement for debt, or are restricted for payments on projects for which the debt was issued. Other assets may be classified as restricted when monies are held by a fiscal agent to pay contract retentions on certain projects. I. FLOW ASSUMPTIONS OF RESTRICTED AND UNRESTRICTED RESOURCES When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, then to use unrestricted resources as they are needed. See this note s sections (P) and (Q) for additional flow assumption information. J. PREPAID ITEMS The City uses the consumption method to account for prepaid items; payments to vendors which reflect costs applicable to future accounting periods are recorded as prepaid items in both the government-wide and fund financial statements. K. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES In addition to assets and liabilities, the Statement of Net Position and the Governmental Funds Balance Sheet will sometimes report separate sections for deferred outflows of resources and for deferred inflows of resources. The separate financial statement element of deferred outflows of resources represents a consumption of net position/fund balance that applies to a future period(s) which will not be recognized as an outflow of resources 31

44 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 (expense/expenditure) until that time. The City has items that qualify for reporting in this category: the deferred charge on refunding of long-term liabilities and components of the calculation for the net pension liability. The separate financial statement element of deferred inflows of resources represents an acquisition of net position/fund balance that applies to a future period(s) which will not be recognized as an inflow of resources (revenue) until that time. The City has items that qualify for reporting in this category: unavailable revenue and components of the calculation for the net pension liability. Unavailable revenue exists only under the modified accrual basis of accounting and, accordingly, is reported only in the governmental funds balance sheet. The governmental funds typically report unavailable revenues for grant receipts which have been earned but which are not received within the City s defined availability period; these amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. L. DEFERRED COMPENSATION PLANS The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. Pursuant to the IRC 457 subsection (g), all amounts of compensation deferred under the deferred compensation plan, all property, or rights are solely the property and rights of the employee and beneficiaries of the Plan. Deferred compensation funds are not subject to the claims of the City s general creditors; consequently, the assets and related liabilities of the plan are not included within the City s financial statements. M. CASH EQUIVALENTS Investments with original maturities of three months or less are considered to be cash equivalents. N. OPERATING AND NON-OPERATING REVENUES AND EXPENSES PROPRIETARY FUNDS Operating revenues and expenses result from activities related to renting commercial real estate to customers in the Legacy Park enterprise fund and from activities relating to the collection, treatment, and disposal of wastewater in the Wastewater Treatment enterprise fund. All revenues and expenses which do not relate to these activities and which are not capital in nature are reported as non-operating revenues and expenses. O. CONSTRUCTION COMMITMENTS The City has active construction projects as of June 30, At fiscal year-end, the City s commitments with contractors were as follows: Wastewater Treatment Enterprise Fund: Civic Center Wastewater Treatment Facility Design/Construction $ 17,656,451 Capital Improvements Capital Projects Fund: Civic Center Way Improvements 325,839 PCH Signal Synchronization 1,657,482 Small Projects 10,386 $ 19,650,158 P. FUND BALANCE In the fund financial statements, governmental fund balance is made up of the following categories: Nonspendable fund balance typically includes inventories, prepaid items, and other similar items that must be maintained intact pursuant to legal or contractual requirements. Restricted fund balance includes amounts that can be spent only for specific purposes imposed by creditors, grantors, contributors, or laws or regulations of other governments or through enabling legislation. 32

45 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Committed fund balance includes amounts that can be used only for the specific purposes determined by a resolution (formal action) of the City Council. The City Council has the authority to establish, modify, or rescind a fund balance commitment. Assigned fund balance is comprised of amounts designated by the City Council for specific purposes which do not meet the criteria to be classified as restricted or committed. In accordance with the City s fund balance policy, the City Council may assign a designee, the City Manager, to make assignments of fund balance. Unassigned fund balance is the residual classification that includes all spendable amounts not contained in other categories. The General Fund is the only fund that may report a positive unassigned fund balance. In all other governmental funds, when expenditures exceed the amounts available, it may be necessary to report a negative unassigned fund balance in that fund. In the governmental fund financial statements, when expenditures are incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) fund balances are available, the City s policy is to consider restricted fund balance to have been depleted before using any components of unrestricted fund balance. Further, when expenditures are incurred for purposes for which committed, assigned, or unassigned fund balances are available, the City s policy is to first deplete committed fund balance, then assigned fund balance, and finally unassigned fund balance. Q. NET POSITION In the government-wide and proprietary fund financial statements, net position is classified in the following categories: Net Investment in Capital Assets: This category represents all capital assets, unspent debt proceeds, and required reserves, less accumulated depreciation and the outstanding principal of capital-related debt. The City s capital assets do not represent a financial resource and, consequently, are not readily available for funding current obligations. Restricted Net Position: This category represents external restrictions imposed by creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Position: This category represents the net position that is not restricted for any purpose. In the government-wide statements and in the proprietary fund statements, when an expense is incurred for purposes for which both restricted and unrestricted resources are available, the City s policy is to consider restricted net position to have been depleted before applying unrestricted net position. R. NEW ACCOUNTING PRONOUNCEMENTS During the fiscal year ended June 30, 2017, the Governmental Accounting Standards Board (GASB) Statement No. 77, Tax Abatement Disclosures, was required to be implemented. The requirements of this statement did not impact the City. 33

46 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, CASH AND INVESTMENTS The City maintains a cash and investment pool, which is available for use by all funds. All funds participate in the pool except for the Pension Trust funds. Cash and investments consisted of the following at fiscal year-end: Amount Pooled Deposits & Investments: Demand Deposits $ 1,451,658 Investments 36,393,380 Pension Trust Investments 179,044 Cash and Investments with Fiscal Agents: Demand Deposits 659,541 Investments 4,594,315 Petty Cash 1,090 Total Cash and Investments $ 43,279,028 Cash and investments are reported in the basic financial statements as follows: Governmental Funds: Unrestricted $ 26,735,527 Restricted 20,275 Proprietary Funds: Unrestricted 8,369,279 Restricted 3,984,731 Fiduciary Funds: Pooled Cash and Investments 2,741,322 Cash and Investments with Fiscal Agents 1,248,850 Investments 179,044 Total Cash and Investments $ 43,279,028 At fiscal year end, the pooled demand deposit bank balance was $2,680,573. The amount shown for pooled demand deposits is the amount after outstanding checks are subtracted and deposits in transit are added. Interest income earned on pooled cash and investments is allocated quarterly to the various funds based on month-end cash balances. INVESTMENTS AUTHORIZED BY THE CALIFORNIA GOVERNMENT CODE & MALIBU S INVESTMENT POLICY The following table identifies the investment types that are authorized by the California Government Code and the City s investment policy. The table also identifies certain provisions of either the California Government Code or the City s investment policy (whichever is more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. A separate table addresses investments of debt proceeds that are held by fiscal agents. Those investments are governed by the provisions of the debt agreements rather than the general provisions of the California Government Code or the City s investment policy. Investments of the City s two defined contribution plans (see Note 7B) are not subject to following the City s investment policy and are instead governed by the trust agreement. At the end of the fiscal year, all of these monies are invested in various mutual funds. 34

47 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Authorized Maximum by Malibu's Maximum Investment Investment Type - Authorized by the Investment Maximum Percentage in a Single California Government Code Policy Maturity (1) of Portfolio (1) Issuer (1) Local Agency Bonds Yes 5 years None None U.S. Treasury Obligations Yes 5 years None None California State Treasury Obligations No 5 years None None U.S. Agency Securities Yes 5 years None None Banker's Acceptances Yes 180 days 20% (2) 10% (2) Commercial Paper Yes 270 days 15% (2) 5% (2) Negotiable Certificates of Deposit Yes 5 years 30% None Repurchase Agreements Yes 1 year None None Reverse Repurchase Agreements No 92 days 20% of base value None Corporate Medium-Term Notes No 5 years 30% None Mutual Funds No N/A 20% 10% Money Market Mutual Funds Yes N/A 20% None Mortgage Pass-Through Securities/CMO No 5 years 20% None County Investment Pools Yes N/A None None Local Agency Investment Fund (LAIF) Yes N/A None None Notes: (1) Restrictions are in accordance with the California Government Code unless indicated otherwise. (2) The restriction is in accordance with the City's Investment Policy which is more restrictive than the California Government Code. INVESTMENTS AUTHORIZED BY DEBT AGREEMENTS The investment of debt proceeds held by fiscal agents is governed by provisions of the debt agreements rather than the general provisions of the California Government Code or the City s investment policy. The following table identifies the investment types that are authorized for investments held by the City s fiscal agent. Unless indicated otherwise, the trust agreement does not specify a maximum maturity, a maximum percentage of the portfolio, nor a maximum investment in a single issuer. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. Certificates of 2016 AD 2008 CFD & 2010 AD Participation Limited 2012 CFD Limited Series 2009, 2010, Obligation Special Obligation Investment Type - Authorized by Trust Agreements 2015, & 2016 Bonds Tax Bonds Bonds Local Agency Bonds Allowed Note 4 Allowed Allowed U.S. Treasury Obligations Allowed Allowed Allowed Allowed California State Treasury Obligations Allowed Not Allowed Allowed Not Allowed U.S. Agency Securities Allowed Allowed Allowed Allowed Banker's Acceptances (Note 1) Allowed Note 4 Allowed Allowed Commercial Paper (Note 2) Allowed Allowed Allowed Allowed Repurchase Agreements Allowed Allowed Not Allowed Allowed Money Market Mutual Funds Allowed Allowed Allowed Allowed Local Agency Investment Fund (LAIF) Allowed Allowed Allowed Allowed Investment agreements Allowed Allowed Allowed Allowed Certificates of deposit (Note 3) Allowed Allowed Not Allowed Allowed County of Los Angeles Pooled Investment Fund Not Allowed Allowed Not Allowed Allowed Note 1: Maximum maturity allowed is 360 days. Note 2: Maximum maturity allowed is 270 days except the 2010 & 2016 AD Limited Obligation Bonds which is 180 days. Note 3: Maximum maturity allowed is 1 year. Note 4: Not specifically stated as being allowed, but investments allowed by the City's investment policy are allowed. This investment is allowed under the City's investment policy. 35

48 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 DISCLOSURES RELATING TO INTEREST RATE RISK Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer an investment has before maturity, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide cash flow and liquidity for operations. The City monitors the interest rate risk inherent in its investments, including those held by fiscal agents, by using specific identification of the investments. Following is a table of these investments as of fiscal year end. Fair Value Maturities City's Pooled Investments: Negotiable Certificates of Deposit Cit Bank $ 250,395 3/6/2018 Discover Bank 250,395 3/6/2018 American Express Cent Bank 250,395 3/7/2018 Bank of Baroda 251,697 11/13/2018 BMW Bank of North America 251,883 5/16/2019 Synchrony Bank 253,530 11/16/2020 Goldman Sachs Bank USA 253,603 11/18/2020 Comenity Bank 195,932 5/11/2021 State Bank of India 250,807 3/14/2022 Wells Fargo Money Market Mutual Fund 182,083 N/A Local Agency Investment Fund (LAIF) 34,002, day average Investments held by fiscal agents - US Bank: Money market mutual funds: First American Government Obligation Fund 4,378,697 N/A US Bank moneymarket 5 215,618 N/A Investments held in trust for defined contribution plan: Mutual Funds: Money market mutual funds 138,648 N/A U.S. stocks 31,863 N/A International/global stocks 6,909 N/A Specialty 1,624 N/A Total $ 41,166,739 INVESTMENTS WITH FAIR VALUES HIGHLY SENSITIVE TO INTEREST RATE FLUCTUATIONS As of fiscal year-end, the City had no investments whose fair values were highly sensitive to interest rate fluctuations. DISCLOSURES RELATING TO CREDIT RISK Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The minimum rating required by (where applicable) the California Government code, the City s investment policy, or debt agreements, and the actual rating as of year-end for each investment type are as follows: 36

49 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Minimum Fair Legal Investment Type Value Rating Not Rated City's Pooled Investments: Negotiable certificates of deposit $ 2,208,637 N/A $ 2,208,637 Money market mutual funds 182,083 N/A 182,083 Local Agency Investment Fund (LAIF) 34,002,660 N/A 34,002,660 Investments held by fiscal agents: Money market mutual funds 4,594,315 N/A 4,594,315 Investments held in pension trust: Mutual funds 179,044 N/A 179,044 $ 41,166,739 $ 41,166,739 CUSTODIAL CREDIT RISK Custodial credit risk for deposits is the risk that in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the City s investment policy contain legal requirements that limit the exposure to custodial credit risk for deposits as follows: a financial institution must secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. The City may waive the collateral requirements for deposits that are fully insured up to $250,000 by the FDIC. At fiscal year-end, the City s pooled bank balance of $2,680,573 was comprised of $250,000 insured and $2,430,573 that was collateralized in accordance with state law. Custodial credit risk for investments is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. At fiscal year-end, the City had negotiable certificates of deposit totaling $2,208,637 and investments in money market mutual funds totaling $182,083 which were held by the counterparty s trust department; investments held in trust for the defined contribution pension trust funds total $179,044 and all consist of various mutual funds. For investments held by fiscal agents as the bond trustee, the trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the City. At fiscal year-end, investments held by fiscal agents trust departments consisted of $4,594,315 in money market mutual funds. CONCENTRATION OF CREDIT RISK The City diversifies its investments by security type and institution. The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments guaranteed by the U.S. government, investments in mutual funds, and investments in external investment pools are excluded from the requirement to disclose all investments with more than a 5% concentration in a single security type or in a single financial institution. At fiscal year-end, the City s investment in negotiable certificates of deposit represented 6.1% of the City s pooled investments; the City had no investments in any one issuer that represented 5% or more of the City s pooled investments. 37

50 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 INVESTMENT IN STATE INVESTMENT POOL The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section under the oversight of the Treasurer of the State of California. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer s Office audits the fund annually. Included in LAIF s investment portfolio are mortgage-backed securities, other asset-backed securities, loans to certain state funds, securities with interest rates that vary according to changes in rates greater than a one-for-one basis, and structured notes. The fair value of the City s investment in this pool is reported in the accompanying financial statements at amounts based upon the City s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. FAIR VALUE MEASUREMENTS The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a description of the recurring valuation methods and assumptions used by the City to estimate the fair value of its investments. The methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. The use of different methodologies or assumptions could result in a different fair value measurement at the reporting date. When available in an active market, quoted prices are used to determine fair value; these investments are classified within Level 1 of the fair value hierarchy. When quoted prices in active markets are not available, fair values are based on evaluated prices received by the City s asset manager from a third party service provider; these investments are classified within Level 2 of the fair value hierarchy. When neither quoted prices in an active market nor other evaluated prices are available, unobservable inputs are used. Unobservable inputs are classified within Level 3 of the fair value hierarchy; they are developed based on the best information available in the circumstances and may include the City s own data. At June 30, 2017, the City s investments are categorized in the following input levels: Fair Value Investment Fair Value Level Input City's Pooled Investments: Negotiable certificates of deposit $ 2,208,637 Level 2 input Money market mutual funds 182,083 Level 1 input Local Agency Investment Fund (LAIF) 34,002,660 Level 2 input Investments held by fiscal agents: Money market mutual funds 4,594,315 Level 1 input Investments held in trust for defined contribution plan: Mutual funds 179,044 Level 1 input Total Investments $ 41,166,739 38

51 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, CAPITAL ASSETS Changes in capital assets during the fiscal year ended June 30, 2017, were as follows: Balances Balances Governmental Activities July 1, 2016 Additions Deletions June 30, 2017 Cost: Nondepreciable capital assets: Land $ 9,669,669 $ 11,386,839 $ - $ 21,056,508 Right of way 24,045, ,045,543 Construction in progress 23, ,404 (142,360) 260,531 Total nondepreciable capital assets 33,738,699 11,766,243 (142,360) 45,362,582 Depreciable capital assets: Buildings and other improvements 23,828,640 48,023-23,876,663 Equipment and furniture 1,868, ,500 (9,029) 2,039,859 Vehicles 328,986 25, ,196 Infrastructure 35,216,730 73,193-35,289,923 Subtotal 61,242, ,926 (9,029) 61,560,641 Accumulated depreciation for: Buildings and other improvements (4,297,757) (833,452) - (5,131,209) Equipment and furniture (1,024,713) (134,264) 9,029 (1,149,948) Vehicles (212,640) (39,540) - (252,180) Infrastructure (17,222,568) (744,177) - (17,966,745) Subtotal (22,757,678) (1,751,433) 9,029 (24,500,082) Net depreciable assets 38,485,066 (1,424,507) - 37,060,559 Total net capital assets $ 72,223,765 $ 10,341,736 $ (142,360) $ 82,423,141 Business-type Activities Cost: Nondepreciable capital assets: Land $ 17,325,848 $ - $ - $ 17,325,848 Construction in progress 7,924,882 30,627,803-38,552,685 Total nondepreciable capital assets 25,250,730 30,627,803-55,878,533 Depreciable capital assets: Buildings and other improvements 31,756, ,756,803 Infrastructure 444, ,000 Subtotal 32,200, ,200,803 Accumulated depreciation for: Buildings and other improvements (8,466,999) (2,392,924) - (10,859,923) Infrastructure (47,084) (11,771) - (58,855) Subtotal (8,514,083) (2,404,695) - (10,918,778) Net depreciable assets 23,686,720 (2,404,695) - 21,282,025 Total net capital assets $ 48,937,450 $ 28,223,108 $ - $ 77,160,558 39

52 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 The City follows the convention of recording no depreciation expense in the year of acquisition and a full year s depreciation expense in the year of disposal. Depreciation expense was charged to programs of the City as follows: Governmental Activities: Legislative and advisory $ 2,566 General government 593,912 Public safety 13,314 Community development 12,388 Community services 297,876 Public works 831,377 Total depreciation expense $ 1,751,433 Business-type Activities: Commercial real estate rental 1,333,134 Wastewater treatment 1,071,561 Total depreciation expense $ 2,404, LONG-TERM DEBT The following is a summary of the changes in long-term debt for the fiscal year ended June 30, 2017: Governmental Activities: Unamortized Deferred Balance Balance Due Within (Discount)/ Long-Term Amount on July 1, 2016 Additions Deletions June 30, 2017 One Year Premium Amount Refunding Compensated absences $ 534,620 $ 495,181 $ (519,331) $ 510,470 $ (500,000) $ N/A $ 10,470 $ N/A Capital leases 71,965 11,467 (36,770) 46,662 (37,142) N/A 9,520 N/A Certificates of participation 2009 Series A 17,635,000 - (17,635,000) Series B 655,000 - (655,000) Series D 485,000 - (485,000) Refunding Series B 5,110,000 - (100,000) 5,010,000 (100,000) 464,422 5,374,422 (85,352) 2016 Refunding - 27,295,000-27,295,000 (665,000) 3,444,089 30,074,089 (1,883,730) Subtotal 24,491,585 27,801,648 (19,431,101) 32,862,132 (1,302,142) 3,908,511 35,468,501 (1,969,082) Net pension liability 3,366,040 1,759,086 (514,782) 4,610,344 N/A N/A 4,610,344 N/A Total $ 27,857,625 $ 29,560,734 $ (19,945,883) $ 37,472,476 $ (1,302,142) $ 3,908,511 $ 40,078,845 $ (1,969,082) Business-Type Activities: Note payable-facility usage $ 57,117 $ - $ (8,611) $ 48,506 $ (9,121) $ - $ 39,385 $ - Certificates of participation 2015 Refunding Series A 11,360,000 - (570,000) 10,790,000 (575,000) (92,997) 10,122,003 (564,675) 2015 Refunding Series B 3,665, ,665, ,127 4,204,127 (97,143) Total $ 15,082,117 $ - $ (578,611) $ 14,503,506 $ (584,121) $ 446,130 $ 14,365,515 $ (661,818) A. COMPENSATED ABSENCES (GOVERNMENTAL ACTIVITIES) The City s policies related to compensated absences are described in Note 1(G). B. CAPITAL LEASES (GOVERNMENTAL ACTIVITIES) The City has entered into lease agreements for copy machines. For accounting purposes, the lease agreements qualify as capital leases and, therefore, have been recorded at the present value of the future minimum lease payments as of the inception date. The interest rates on the capital leases are 1%. The assets acquired through capital leases are included in the Equipment and Furniture category of capital assets at a cost of $120,673 with accumulated depreciation of $36,062 as of June 30, The payments due on these leases are as follows: 40

53 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Year Ending June 30, Amount 2018 $ 37, ,520 Totals $ 46,662 C. CERTIFICATES OF PARTICIPATION 2009 Series A and B (Governmental Activities) The City issued $19,475,000 of certificates of participation in September 2009 at a premium of $31,507. The purpose of the certificates was to reimburse the City for the acquisition of a 35,000 square-foot building which has been converted into a city hall. During fiscal year , the certificates were refunded in the amount of $17,865,000 by a portion of the 2016 Series A Refunding Certificates of Participation. Money has been placed in an irrevocable trust, the certificates are considered to be defeased, and the liability for the certificates has been removed from the City s records. At June 30, 2017, $17,270,000 of the 2009 Series A certificates are outstanding and have a scheduled repayment on the call date of July 1, 2019, with no premium. At June 30, 2017, $595,000 of the 2009 Series B certificates are outstanding and are scheduled to be repaid through maturity on July 1, Series D (Governmental Activities) The City issued $565,000 of taxable certificates of participation in March 2010 with no discount or premium. The purpose of the certificates was to provide funds for renovating, equipping, and improving the building which has been converted into a city hall for the City. During fiscal year , the certificates were refunded in the amount of $440,000 by a portion of the 2016 Series A Refunding Certificates of Participation. Money has been placed in an irrevocable trust, the certificates are considered to be defeased, and the liability for the certificates has been removed from the City s records. At June 30, 2017, $440,000 of the 2010 Series D are outstanding and have a scheduled repayment on the call date of July 1, 2020 with no premium Refunding Series B (Governmental Activities and Business-Type Activities) In May 2015, the City issued $8,895,000 of tax-exempt refunding certificates of participation at a premium of $1,099,028. The purpose of the certificates was to refund the 2006B outstanding certificates of participation (businesstype activities used to finance a portion of the Legacy Park acquisition for the Commercial Real Estate Rental Enterprise Fund) in the amount of $4,130,000 and the 2010C outstanding certificates of participation (governmental activities used to finance a portion of the City Hall renovations) in the amount of $5,890,000. Both of the refunded series were paid in full by June 30, Each certificate of participation represents a direct and proportionate interest in the semi-annual interest payments and annual principal payments due on the certificates. Installment payments for the issues are payable from any source of lawfully available funds of the City. The interest rate on the certificates is fixed and ranges from 2.000% to 5.000%. Semi-annual interest payments are due on November 1 and May 1 beginning on November 1, Annual principal payments are due on November 1 in years 2015 through There is no required reserve. At June 30, 2017, the outstanding certificates total $5,010,000 for governmental activities and $3,665,000 for business-type activities. The refunding of the 2006B Series resulted in a difference between the reacquisition price of the 2006B Series and the net carrying amount of the applicable portion of the 2015B Series of $107,412. This difference is reported as a deferred loss on refunding which is reported in the basic financial statements as a deduction from long-term debt. It is being amortized on a straight-line method through July 1, At June 30, 2017, the unamortized amount of this deferred loss on refunding is $97,143. The refunding of the 2010C Series resulted in a difference between the reacquisition price of the 2010C Series and the net carrying amount of the applicable portion of the 2015B Series of $93,572. This difference is reported as a deferred loss on refunding which is reported in the basic financial statements as a deduction from long-term debt. It is being amortized on a straight-line method through July 1, At June 30, 2017, the unamortized amount of this deferred loss on refunding is $85,

54 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, Refunding Series A (Governmental Activities) In October 2016, the City issued $27,295,000 of tax-exempt refunding certificates of participation at a premium of $3,553,165. The purpose of the 2016 certificates was to refund the 2009 Series A, 2009 Series B, and 2010 Series D outstanding certificates of participation (governmental activities) in the amounts of $17,270,000, $595,000, and $440,000, respectively, and to acquire real property known as Trancas Field in the amount of $11,300,00. The purpose of the 2009 Series A and B and the 2010 Series D certificates was to acquire and renovate the building which is being used as the current city hall. The issuance results in savings of $4,135,461 and an economic gain (difference between the present value of the new and old debt service requirements) of $1,983,018. Each certificate of participation represents a direct and proportionate interest in the semi-annual interest payments and annual principal payments due on the certificates. Installment payments for the issues are payable from any source of lawfully available funds of the City. The interest rates on the certificates are fixed and range from 2.000% to 5.000%. Semi-annual interest payments are due on May 1 and November 1 beginning on May 1, Annual principal payments are due on November 1 in years 2017 through There is no required reserve. The refunding of the 2009 Series A resulted in a difference between the reacquisition price of the refunded certificates and the net carrying amount of the 2016 Series A certificates of $1,762,892. This difference is reported as a deferred loss on refunding which is reported in the basic financial statements as a decrease to long-term debt. It is being amortized using the straight-line method through July 1, At June 30, 2017, the unamortized amount of this deferred loss on refunding is $1,707,904. The refunding of the 2009 Series B resulted in a difference between the reacquisition price of the refunded certificates and the net carrying amount of the 2016 Series A certificates of $129,899. This difference is reported as a deferred loss on refunding which is reported in the basic financial statements as a decrease to long-term debt. It is being amortized using the straight-line method through July 1, At June 30, 2017, the unamortized amount of this deferred loss on refunding is $117,964. The refunding of the 2010 Series D resulted in a difference between the reacquisition price of the refunded certificates and the net carrying amount of the 2016 Series A certificates of $63,719. This difference is reported as a deferred loss on refunding which is reported in the basic financial statements as a decrease to long-term debt. It is being amortized using the straight-line method through July 1, At June 30, 2017, the unamortized amount of this deferred loss on refunding is $57, Series A (Business-Type Activities) The City issued $12,425,000 of taxable certificates of participation in March 2006 with no discount or premium. The purpose of the certificates was to finance a portion of the acquisition of Legacy Park and the related commercial lease properties. During fiscal year , the certificates were refunded in the amount of $10,795,000 by the 2015 Series A Refunding Certificates of Participation. Money has been placed in an irrevocable trust; the certificates are considered to be defeased, and the liability for the certificates has been removed from the City s records. The certificates were paid in full during fiscal year on the call date of July 1, Refunding Series A (Business-Type Activities) In May 2015, the City issued $11,940,000 of taxable refunding certificates of participation at a discount of $105,881. The purpose of the certificates was to refund the 2006A outstanding certificates of participation in the amount of $10,795,000; the 2006A certificates were issued to finance a portion of the acquisition of Legacy Park for the Commercial Real Estate Rental Enterprise Fund. Each certificate of participation represents a direct and proportionate interest in the semi-annual interest payments and annual principal payments due on the certificates. Installment payments for the issues are payable from any source of lawfully available funds of the City. The interest rate on the certificates is fixed and ranges from 0.55% to 4.00%. Semi-annual interest payments are due on November 1 and May 1 beginning on November 1, Annual principal payments are due on November 1 in years 2015 through There is no required reserve. At June 30, 2017, the certificates outstanding total $10,790,000. The refunding resulted in a difference between the reacquisition price of the 2006A Series and the net carrying amount of the 2015A Series of $644,222. This difference is reported as a deferred loss on refunding which is reported in the 42

55 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 basic financial statements as a deduction from long-term debt. It is being amortized on a straight-line method through July 1, At June 30, 2017, the unamortized amount of this deferred loss on refunding is $564,675. D. ANNUAL AMORTIZATION REQUIREMENTS CERTIFICATES OF PARTICIPATION The annual requirements to amortize the certificates of participation as of June 30, 2017, are as follows: Year Ending Governmental Activities Certificates of Participation June 30, Principal Interest Total 2018 $ 765,000 $ 1,300,050 $ 2,065, ,000 1,282,150 2,102, ,000 1,259,750 2,099, ,000 1,233,050 2,098, ,000 1,201,000 2,096, ,070,000 5,365,675 10,435, ,340,000 4,046,631 10,386, ,705,000 2,662,894 10,367, ,350,000 1,026,175 7,376, ,655, ,900 2,928,900 Totals $ 32,305,000 $ 19,651,275 $ 51,956,275 Year Ending Business-type Activities Certificates of Participation June 30, Principal Interest Total 2018 $ 575,000 $ 518,548 $ 1,093, , ,352 1,090, , ,328 1,089, , ,229 1,091, , ,246 1,091, ,360,000 2,061,108 5,421, ,955,000 1,396,894 5,351, ,170, ,850 4,664,850 Totals $ 14,455,000 $ 6,438,555 $ 20,893,555 E. NET PENSION LIABILITY The City s net pension liability is explained more thoroughly in Note 7. The City s proportionate share of the collective net pension liability was based on a projection of the City s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The net pension liability is recorded solely within Governmental Activities, and the liability is being liquidated by the General Fund. F. NOTE PAYABLE WASTEWATER FACILITY USAGE During fiscal year , the City s new Civic Center Wastewater Treatment Facility enterprise fund acquired land and an existing wastewater treatment facility. Some of the rental properties within the City s Legacy Park enterprise fund are connected to this wastewater treatment facility and are required to pay a monthly facility fee to the previous owner. The Legacy Park enterprise fund has a note payable in monthly installments of $1,011. The enterprise fund has a corresponding receivable due from the tenants who pay this fee in accordance with their lease agreements. The payments due on this note are as follows: 43

56 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, LIMITED OBLIGATION LIABILITIES Year Ending June 30, Amount 2018 $ 9, , , , ,658 Totals $ 48,506 Community Facilities District No (Carbon Beach) The Community Facilities District No of the City of Malibu (CFD) has issued special tax bonds pursuant to the Mello-Roos Community Facilities Act of 1982 to finance the undergrounding of utilities along Pacific Coast Highway at Carbon Beach. Although the City collects and disburses funds for the CFD, the City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds; therefore, the bonded indebtedness is not shown in the financial statements of the City. The construction is completed, and debt service payments are the only activity on the bonds. The bond s required reserve funds are recorded in the Carbon Beach CFD Agency Fund. The original CFD Bonds were issued for $4,365,000 and were refunded in July 2011; in fiscal year , the July 2011 refunding bonds were also refunded, and in February 2016, refunding bonds were issued for $3,520,000. The bonds outstanding at June 30, 2017 total $3,405,000. Assessment District No (Broad Beach) The City of Malibu Broad Beach Road Underground Utilities Assessment District (AD) has issued limited obligation improvement bonds pursuant to the Improvement Bond Act of 1915 to finance the undergrounding of utilities in a portion of Broad Beach Road. Although the City collects and disburses funds for the AD, the City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds; therefore, the bonded indebtedness is not shown in the financial statements of the City. The construction is completed, and debt service payments are the only activity on the bonds. The bond s required reserve funds are recorded in the Broad Beach AD Agency Fund. The AD Bonds were originally issued for $2,238,285; bonds outstanding at June 30, 2017 total $1,745,000. Community Facilities District No (Civic Center Wastewater Treatment Plant Design) The Community Facilities District No of the City of Malibu (CFD) has issued special tax bonds pursuant to the Mello-Roos Community Facilities Act of 1982 to finance the design of a wastewater treatment plant serving the City s civic center area. Although the City collects and disburses funds for the CFD, the City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds; therefore, the bonded indebtedness is not shown in the financial statements of the City. During fiscal year , the bonds were refunded with money held by the fiscal agent of the CFD bonds, with money from prepayments of Assessment District No , and with a portion of the Assessment District No State Revolving Fund loan proceeds. Assessment District No (Civic Center Wastewater Treatment Facility) A. Bonds: The Assessment District No of the City of Malibu (AD) has issued limited obligation improvement bonds pursuant to the Improvement Bond Act of 1915 to finance a portion of the costs to construct a wastewater treatment plant serving the City s civic center. Although the City collects and disburses funds for the AD, the City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds; therefore, the bonded indebtedness is not shown in the financial statements of the City. The City holds construction funds in the Wastewater Treatment enterprise fund, where the asset being constructed is recorded. The City holds required reserve and debt service funds on behalf of bondholders in the Civic Center 44

57 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Wastewater Treatment Facility AD Agency Fund. The AD bonds were issued for $6,295,000 in May 2016; bonds outstanding at June 30, 2017 total $6,295,000. B. Facility Upgrade Note: During fiscal year , the City s new Civic Center Wastewater Treatment Facility enterprise fund acquired land and an existing wastewater treatment facility. The Assessment District No has assumed a capital facility note payable to the previous owner. The customers who are connected to the existing wastewater treatment facility remit monthly payments in accordance with an existing payment plan which payments are then remitted to the holder of the note. The amount due on the note totals $787,485 at June 30, 2017 with the final payment due in fiscal year or upon connection to the new treatment facility, whichever occurs first. C. State Revolving Fund Loan 1%, Recycled Water & 1.7% Wastewater: The Assessment District No has obtained long-term financing through the State of California s Revolving Fund Loan program. The loan proceeds are being used to finance a portion of the costs to construct a wastewater treatment plant serving the City s civic center. Although the City collects and disburses funds for the AD, the City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the loans; therefore, the debt is not shown in the financial statements of the City. The loan amounts outstanding at June 30, 2017 total $13,696,390 (1% Recycled Water loan Program) and $12,835,275 (1.7% Wastewater Loan Program). 6. OPERATING LEASES CITY AS LESSOR The City s Commercial Real Estate Rental Enterprise Fund owns three commercial properties at the Legacy Park site; one of the properties is divided into two leasable spaces. As of June 30, 2017, the City has four non-cancelable tenant leases on the properties. Office/Retail Building: This property is comprised of two spaces available to be leased. The property is valued at $1,141,105 for the land and $2,924,082 for the building. Due to accumulated depreciation, the building has a net book value of $1,608,244 at June 30, ) A lease was signed on January 6, 2010 and amended on June 9, 2010 for 3,356 square feet of the total 4,501 square feet of this building. The lease was effective on January 6, 2010 for a ten-year period with an option to extend for one, ten-year period. For January 6, 2017 through January 5, 2018, the minimum monthly lease payment is $15,450. The monthly rent increases by 3% annually on January 6. There are no contingent rental payments on this lease. 2) A lease was signed on May 14, 2012 for 1,145 square feet of the total 4,501 square feet of this building. The lease was effective on January 14, 2013 for a ten-year period with an option to extend for one, ten-year period. The minimum monthly lease payment is $3,754 for January 14, 2017 through January 13, The monthly rate increases by 3% on January 14 of each year for the remainder of the lease term. There are no contingent rental payments on this lease. Animal Hospital: The City assumed the existing lease upon purchase of the Legacy park site in 2006; an extension to the lease was executed on April 10, 2013 which extends the lease through January 1, For January 2017 through December 2017, the minimum monthly lease payment is $22,976 with an annual rent reduction of $25,000 for the ten-year lease term. The monthly lease payment will increase by 2% on each January 1 during the remainder of the lease term. There are no contingent rental payments on this lease. This leased property is valued at $855,829 for the land and $2,303,900 for the building and its improvements. Due to accumulated depreciation, the building has a net book value of $1,615,982 as of June 30, Lumber Yard: The City executed a master lease agreement for the property in 2008 with the lease commencing on March 1, 2008 and continuing through March 1, 2046 with an option to extend to The minimum monthly lease payments from March 1, 2013 through March 1, 2018 are $80,937. The lease has a fixed amount increase on March 1, 2018 and every five years thereafter. Additionally, the City receives a percentage rental income based on a formula by which the City receives 30% of the tenant s income collected past $2.2 million annually. In fiscal year , the City received $273,290 of the 30% of the tenant s income. This leased property is valued at $3,138,040 for the land and $14,588,211 for the building. Due to accumulated depreciation, the building has a net book value of $8,752,926 as of June 30,

58 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Future minimum lease payments are due to the City as follows: Year Ending June 30, Total ,507, ,520, ,431, ,340, ,365, ,097, ,640, ,922, ,218, ,772,416 Total $ 35,817, RETIREMENT BENEFITS A. DEFINED BENEFIT PLAN PLAN DESCRIPTION The City of Malibu s defined benefit pension plan is part of the Miscellaneous Risk Pool of the Public Agency portion of the California Public Employees Retirement System (CalPERS), a cost-sharing multiple-employer defined benefit plan, which acts as a common investment and administrative agent for participating public employers within the State of California. All qualified permanent and probationary employees are eligible to participate in one of the City s Plans. The City has a two-tiered plan depending on an employee s entry date into the plan. Tier A is for employees who enter the plan prior to January 1, 2013, and provides 2% of final average compensation per year of service at age 55. The final average compensation is based on the final twelve months of compensation. Tier B is for employees who enter the plan on or after January 1, 2013, and provides 2% of final average compensation per year of service at age 62. The final average compensation is based on the final three years of compensation. This plan is in accordance with the Public Employees Pension Reform Act (PEPRA). Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions, and membership information that can be found on the CalPERS website at BENEFITS PROVIDED CalPERS provides service retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age fifty with statutorily reduced benefits. All members are eligible for non-industrial disability benefits after five years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees Retirement Law. The Plans provisions and benefits in effect for the year ended June 30, 2017, are summarized as follows: 46

59 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Miscellaneous Risk Pool Tier I Tier II - PEPRA Prior to On or After Hire date January 1, 2013* January 1, 2013 Benefit formula 2% at 55 2% at 62 Benefit vesting schedule 5 years of service 5 years of service Benefit payments monthly for life monthly for life Retirement age Monthly benefits, as a % of eligible compensation 1.426% to 2.418% 1.0% to 2.5% Required employee contribution rates 7% 6.50% Required employer contribution rates: Normal cost rate 9.558% 6.93% Payment of unfunded liability $159,436 $26 * Closed to new entrants CONTRIBUTIONS Section 20814(c ) of the California Public Employees Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The City s contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contributions requirements are classified as plan member contributions. During the year, the employer contributions recognized as a reduction to the net pension liability totaled $514,781. PENSION LIABILITIES, PENSION EXPENSES, & DEFERRED OUTFLOWS/INFLOWS OF PENSION-RELATED RESOURCES As of June 30, 2017, the City reported net pension liabilities totaling $4,610,344. The City s net pension liability is measured as the proportionate share of the net pension liability. The net pension liability is measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2015, rolled forward to June 30, 2016 using standard update procedures. The City s proportionate share of the net pension liability was based on a projection of the City s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The City s proportionate share of the net pension liability as of June 30, 2015 and 2016 was as follows: Miscellaneous Risk Pool Proportion - June 30, % Proportion - June 30, % Change - Increase (Decrease) % For the year ended June 30, 2017, the City recognized pension expense of $274,147. At June 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 47

60 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 Deferred Deferred Outflows of Inflows of Resources Resources Pension contributions subsequent to measurement date $ 656,352 $ - Differences between actual and expected experience 21,670 (4,965) Change in assumptions - (205,017) Net differences between projected and actual earnings on plan investments 1,067,046 - Change in employer's proportion 159,136 (310,731) Differences between the employer's contributions and the employer's proportionate share of contributions 62,343 (91,992) Total $ 1,966,547 $ (612,705) The $656,352 deferred outflow of resources related to the contributions made subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, Other amounts reported as deferred inflows and outflows of resources related to pensions will be recognized as pension expense as follows: Fiscal Year Amount $ (84,288) , , ,377 Totals $ 697,490 ACTUARIAL ASSUMPTIONS The total pension liabilities in the June 30, 2015 actuarial valuations were determined using the following actuarial assumptions: Miscellaneous Risk Pool Valuation date June 30, 2015 Measurement date June 30, 2016 Actuarial cost method Entry-Age Normal Cost Method Actuarial assumptions: Discount rate 7.65% Inflation 2.75% Salary increases (1) Mortality rate table (2) Post retirement benefit increases (3) Notes (1) Varies by entry age and service (2) The mortality table used was developed based on CalPERS-specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the April 2014 experience study report (based on CalPERS demographic data from 1997 to 2011) available on the CalPERS website. (3) Contract COLA up to 2.75% until purchasing protection allowance floor on purchasing power applies, 2.75% thereafter. 48

61 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 All other actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality, and retirement rates. The Experience Study report can be obtained at the CalPERS website under Forms and Publications. CHANGE OF ASSUMPTIONS There were no changes of assumptions during the measurement period June 30, Deferred inflows of resources for changes of assumptions presented in the financial statements represent the unamortized portion of the changes of assumptions related to prior measurement periods. DISCOUNT RATE The discount rate used to measure the total pension liability was 7.65% for each plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate, CalPERS stress-tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, the tests revealed the assets would not run out. Therefore, the current 7.65% discount rate is appropriate, and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 7.65% is applied to all plans in the Public Employees Retirement Fund (PERF). The cash flows used in the testing were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. The stress test results are presented in a detailed report called, GASB Crossover Testing Report, that can be obtained from the CalPERS website under the GASB 68 section. The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund (PERF) cash flows. Taking into account historical returns of all the Public Employees Retirement Funds asset classes (which includes the agent plan and two cost-sharing plans or PERF A, B, and C funds), expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both shortterm and long-term, the present value of benefits was calculated for each PERF fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the CalPERS Board effective on July 1, New Real Return Real Return Stratetic Years Years Asset Class Allocation 1-10 (a) 11+ (b) Global equity 51.00% 5.25% 5.71% Global fixed income 20.00% 0.99% 2.43% Inflation sensitive 6.00% 0.45% 3.36% Private equity 10.00% 6.83% 6.95% Real estate 10.00% 4.50% 5.13% Infrastructure and forestland 2.00% 4.50% 5.09% Liquidity 1.00% -0.55% -1.05% Total % (a) An expected inflation of 2.5% used for this period (b) An expected inflation of 3.0% used for this period 49

62 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 SENSITIVITY OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TO CHANGES IN THE DISCOUNT RATE The following presents the City s proportionate share of the net pension liability, calculated using the current discount rate as well as what the City s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate: Miscellaneous Risk Pool 1% Decrease 6.65% Net Pension Liability $ 7,547,887 Current Discount Rate 7.65% Net Pension Liability $ 4,610,344 1% Increase 8.65% Net Pension Liability $ 2,182,611 PENSION PLAN FIDUCIARY NET POSITION Detailed information about each pension plan s fiduciary net position is available in the separately issued CalPERS financial reports. SUBSEQUENT EVENTS In December 2016, CalPERS Board of Directors voted to lower the discount rate used in its actuarial valuations from 7.5% to 7.0% over three fiscal years, beginning in fiscal year The change in the discount rate will affect the contribution rates for employers beginning in fiscal year 2019, and result in increases to employers normal costs and unfunded actuarial liabilities. For the GASB Statement 68 accounting valuations, the discount rate will move straight to 7% starting with the June 30, 2017 measurement date reports and will result in an increase to employer s total pension liabilities. PAYABLE TO THE PENSION PLAN At June 30, 2017, the City had no outstanding amount of contributions due to the pension plan required for the year ended June 30, 2017 for the CalPERS plans. B. DEFINED CONTRIBUTION PLANS CITY ADMINISTERED In March 2004, the City adopted a defined contribution pension plan with benefits at retirement for the City Manager and a separate, defined contribution pension plan with benefits at retirement for the City s department heads. The plans were established by City Resolution, may be amended by the City Council, and are administered by the City. In a defined contribution pension plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The plans are administered by the City and, as such, the financial statements of the plan are included as pension trust funds within the City s financial statements; no other reports are available for these plans. The plans financial statements are prepared using the accrual basis of accounting, and all contributions are recognized in the period that the contributions are due. Plan investments are reported at fair value (see Note 2). The City s contributions are funded by the General Fund. CITY MANAGER PLAN The plan requires the City to contribute six percent of the City Manager s salary; the City Manager is not allowed to make contributions. The contributions and any interest earned immediately vest in full. Terminated employees are not allowed to participate in the plan; all vested assets of terminated employees are removed and are under the control of the terminated employee. During fiscal year , the City contributed $13,431 on behalf of the City Manager, based on a salary of $223,850 for the covered period. There was one covered employee during the year. Assets of the plan totaled $15,540 at June 30,

63 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 DEPARTMENT HEAD PLAN The plan requires the City to contribute $3,000 annually (or a proportional amount based on the covered time period) on behalf of each member; members are not allowed to make contributions. The contributions and any interest earned immediately vest in full. Terminated employees are not allowed to participate in the plan; all vested assets of terminated employees are removed and are under the control of the terminated employee. During fiscal year , the City contributed a total of $16,615 on behalf of the covered employees. There were eight covered employees during the year. Assets of the plan totaled $163,504 at June 30, Summary financial statements for the two defined contribution plans follow: City of Malibu Combining Statement of Net Position - Pension Trust Funds June 30, 2017 Department City Total Head Manager Pension Trust Plan Plan Funds Assets: Cash and investments $ 163,504 $ 15,540 $ 179,044 Net Position: Held in trust for pension benefits $ 163,504 $ 15,540 $ 179,044 City of Malibu Combining Statement of Changes in Net Position - Pension Trust Funds For the Year Ended June 30, 2017 Department City Total Head Manager Pension Trust Plan Plan Funds Additions: Contributions by employer $ 16,615 $ 13,431 $ 30,046 Investment earnings 19,067 4,694 23,761 Total additions 35,682 18,125 53,807 Deductions: Distributions 108, , ,462 Change in net position (72,840) (134,815) (207,655) Net position - beginning of year 236, , ,699 Net position - end of year $ 163,504 $ 15,540 $ 179,044 C. DEFINED CONTRIBUTION PLAN ADMINISTERED BY PUBLIC AGENCY RETIREMENT SYSTEM In January 2007, the City entered into a defined contribution pension plan with Public Agency Retirement System (PARS) for all of its part-time employees. The plan was established by City Resolution and may be amended by the City Council. The plan is administered by PARS; no separate financial statements are available for this plan. Plan investments are reported at fair value and are based on quoted market prices. The City s contributions are funded by the General Fund. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All part-time employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan. Plan members are required to contribute 6.2% of their salaries, and the City is required to contribute 1.3% of the members salaries. The contributions and any interest earned immediately vest in full. 51

64 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 For the year ended June 30, 2017, the City s covered payroll was $304,180 for the 45 employees participating in the plan. The City made employer contributions of $3,954, and employees contributed $18,859. Assets of the plan totaled $107,866 at June 30, D. DEFINED CONTRIBUTION PLAN ADMINISTERED BY ICMA RETIREMENT CORPORATION In July 2006, the City entered into a defined contribution pension plan with ICMA Retirement Corporation (ICMA) for all of its full-time employees. The plan was established by City Resolution and may be amended by the City Council. The plan is administered by ICMA; no separate financial statements are available for this plan. Plan investments are reported at fair value and are based on quoted market prices. The City s contributions are funded by the General Fund. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All full-time employees are eligible to participate from the date of employment. In this defined contribution plan, the City is required to match an employee s contributions to a 457 Deferred Compensation account, up to $50 per pay period; while the City Manager and Department Heads may contribute to this plan, the City does not match their contributions. The contributions and any interest earned immediately vest in full. The amount contributed by the City immediately goes into an employee s individual account; consequently, the City does not have total plan assets to report. During the year ended June 30, 2017, there were 64 employees participating in the plan. The City made employer contributions of $69,800, and employees contributed $417, OTHER POST-EMPLOYMENT BENEFITS PLAN DESCRIPTION The City provides post-employment medical benefits to full-time employees who retire directly from the City under CalPERS (see Note 7A). Benefit provisions are established and may be amended by the City Council. The City participates in the California Employer s Retiree Benefit Trust Program (CERBT) Prefunding Plan. CERBT is administered by the CalPERS and is an agent multiple-employer plan. Copies of CalPERS annual financial report may be obtained from the CalPERS website at ELIGIBILITY All employees hired prior to December 1, 2005 who retire from the City can continue to participate in the City s medical plans and will eventually receive 100% employer contribution for health benefits. For fiscal year , the City was required to pay 67% to 100% of retirees health premiums; this percentage will increase by 5% each year until, ultimately, the City will pay 100% of the cost of health care for these retirees. All employees hired on or after December 1, 2005 who retire under CalPERS are eligible to participate in the City s medical plans and to receive 50% employer contribution for health benefits if they meet the following requirements: 1) have a minimum of ten years of state service credit, 2) have a minimum of five years of service performed with the City, and 3) retire from the City. Each additional service credit year after 10 years will increase the City s contribution by 5%, whereby at 20 years of service credit, retiring employees are eligible to receive 100% employer contribution for health benefits. Membership in the plan consisted of the following at June 30, 2017: FUNDING POLICY AND ANNUAL OPEB COST Retirees and survivors receiving benefits 18 Terminated plan members entitled to but not yet receiving benefits 1 Active plan members 76 Total 95 The obligation of the City to contribute to the plan is established and may be amended by the City Council. Employees are not required to contribute to the plan. The City s annual other post-employment benefit (OPEB) cost for the plan is calculated based on the annual required contribution of the employer (ARC). The City has established a policy of contributing 100% of the ARC of the employer. The ARC is an amount actuarially determined in accordance with the 52

65 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost (i.e., the value of employer-promised benefits that are excepted to be earned or allocated in a year) of each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The City s contributions are funded by the General Fund. Three-Year Trend Information Fiscal Year Ending 6/30/2017 6/30/2016 6/30/2015 Annual OPEB cost (AOC) $ 591,000 $ 504,000 $ 485,000 Actual employer contribution $ 591,000 $ 504,000 $ 485,000 Percentage of AOC contributed 100% 100% 100% Net OPEB obligation $ - $ - $ - ACTUARIAL METHODS AND ASSUMPTIONS Projections of benefits are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits in force at the valuation date and the pattern of sharing benefit costs between the City and the plan members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions were as follows: Actuarial cost method Entry age normal Amortization method Level percentage of payroll Remaining amortization period 21 years fixed (closed) Asset valuation method 5-year smoothing with 20% corridor Actuarial assumptions (each includes an inflation assumption of 3.0%): Investment rate of return 7.53% Projected salary increases 3.25% Healthcare inflation rate range from 5.0% to 7.2% Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plan and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The required schedule of funding progress which follows is presented as required supplementary information and provides multi-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The actuarial value of the plan assets is equal to the market value. Schedule of Funding Progress Actuarial valuation date 6/30/2015 6/30/2013 6/30/2011 Actuarial value of assets (AVA) $ 3,006,000 $ 1,736,000 $ 873,000 Actuarial accrued liability (AAL) $ 5,205,000 $ 3,740,000 $ 3,597,000 Unfunded actuarial accrued liability (UAAL) $ 2,199,000 $ 2,004,000 $ 2,724,000 Funded ratio (AVA/AAL) 58% 46% 24% Annual covered payroll $ 5,460,000 $ 5,327,000 $ 5,262,000 UAAL as a % of covered payroll 40% 38% 52% 53

66 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, PARKLAND DEVELOPMENT The City of Malibu charges Parkland Development fees when new residential units are constructed. In fiscal year , the fees were $3,865 for each detached single family dwelling; $3,298 for each unit of an attached multifamily dwelling with fewer than five units; $2,457 for each unit of an attached multi-family dwelling with five or more units; $3,063 for each unit of a duplex, triplex, or quadplex; and $2,222 for each mobile home space. The fees are deposited in the Parkland Development In-Lieu special revenue fund, and they are used to acquire and upgrade parks. The State of California requires fees to be spent within five years of collection. During the current fiscal year, the City collected Parkland Development fees of $40,729 and earned interest of $420; there were no expenditures in the current year. At June 30, 2017, the balance of fees on hand was $70, INTERFUND TRANSACTIONS During the normal course of operations, the City has numerous transactions between funds. Transactions that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as due from/due to other funds. These short-term loans are made from the General Fund to other funds in advance of receiving grant funds or other types of revenue. The composition of interfund balances at June 30, 2017 is as follows: Due from Due to Other Funds Other Funds Major Funds: General Fund $ 167,540 $ - Grants Special Revenue Fund - 147,209 Nonmajor Governmental Funds - 20,331 Total $ 167,540 $ 167,540 Other interfund transactions move resources from a fund receiving revenue to the fund through which the resources are expended. Such transactions are recorded as transfers. Transfers for the year ended June 30, 2017, are as follows: Transfers Out Proprietary Governmental Fund Type Fund Type Commercial Real Estate Grants Rental General Special Nonmajor Enterprise Fund Revenue Funds Fund Total Transfers In Major Funds: Governmental Fund Type: General Fund $ - $ - $ 480,000 $ 478,084 $ 958,084 Capital Improvements Capital Projects Fund 171, ,670-11, ,998 Total $ 171,418 $ 306,670 $ 480,000 $ 489,994 $ 1,448,082 The City uses the Capital Improvements Fund to account for all of its capital projects. The funding sources for those projects are reported as transfers from various funds to the Capital Improvements Fund. All other interfund transfers were to move resources from one fund to another fund in which the expenditures being funded were recorded. 11. LAND USE LEASE AGREEMENT On May 28, 2014, the City and Santa Monica Mountains Conservancy approved the terms of a 5-year land use agreement. The agreement will allow each agency to develop and process plans for potentially trading the City-owned 525 acres of Charmlee Wilderness Park for 83 State-owned acres of land adjacent to Bluffs Park. The land swap could 54

67 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 lead to additional playing fields and trails that would be adjacent to Bluffs Park. In fiscal year the City began developing the conceptual plan for these improvements and is still in the planning stage at June 30, The City pays $1 rent to the Conservancy on July 1 st of each year of the lease. The lease will terminate five years from July 1, 2014 or upon the transfer of fee titles of the respective properties, whichever is earlier. Final transfer of land is dependent upon approval of each agency. 12. LIABILITY, WORKERS COMPENSATION, AND PURCHASED INSURANCE DESCRIPTION OF SELF-INSURANCE POOL PURSUANT TO JOINT POWERS AGREEMENT The City is a member of the California Joint Powers Insurance Agency (Authority). The Authority is comprised of 117 California public entities and is organized under a joint powers agreement pursuant to California Government Code Section 6500 et seq. The purpose of the Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group-purchased insurance for property and other lines of coverage. The Authority began covering claims of its members in Each member government has an elected official as its representative on the Board of Directors. The Board operates through a nine-member Executive Committee. SELF INSURANCE PROGRAMS OF THE AUTHORITY Each member pays an annual contribution at the beginning of the coverage period. A retrospective adjustment is then conducted annually thereafter, for coverage years and prior. Coverage years and forward are not subject to routine annual retrospective adjustment. The total funding requirement for self-insurance programs is based on an actuarial analysis. Costs are allocated to individual agencies based on payroll and claims history, relative to other members of the risk-sharing pool. Primary Liability Program. Claims are pooled separately between police and general government exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $30,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $30,000 to $750,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the second layer. (4) Incurred costs from $750,000 to $50 million are distributed based on the outcome of cost allocation within the first and second loss layers. For fiscal year the Authority s pooled retention is $2 million per occurrence, with reinsurance to $20 million, and excess insurance to $50 million. The Authority s reinsurance contracts are subject to the following additional pooled retentions: (a) $2.5 million annual aggregate deductible in the $3 million in excess of $2 million layer and (b) $3 million annual aggregate deductible in the $5 million in excess of $10 million layer. There is a third annual aggregate deductible in the amount of $2.5 million in the $5 million in excess of $5 million layer; however, it is fully covered under a separate policy and, therefore, not retained by the Authority. The overall coverage limit for each member, including all layers of coverage is $50 million per occurrence. Costs of covered claims for subsidence losses have a sub-limit of $30 million per occurrence. Workers Compensation Program. Claims are pooled separately between public safety (police and fire) and general government exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $50,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $50,000 to $100,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the second layer. (4) Incurred costs from $100,000 to statutory limits are distributed based on the outcome of cost allocation within the first and second loss layers. For fiscal year the Authority s pooled retention is $2 million per occurrence, with reinsurance to statutory limits under California Workers Compensation Law. Employer s liability losses are pooled among members to $2 55

68 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 million. Coverage from $2 million to $5 million is purchased as part of a reinsurance policy, and employer s liability losses from $5 million to $10 million are pooled among members. Pollution Legal Liability Insurance. The City of Malibu participates in the pollution legal liability insurance program which is available through the Authority. The policy covers sudden and gradual pollution of scheduled property, streets, and storm drains owned by the City of Malibu. Coverage is on a claims-made basis. There is a $50,000 deductible. The Authority has a limit of $50 million for the 3-year period from July 1, 2014 through July 1, Each member of the Authority has a $10 million sub-limit during the 3-year policy term. Property Insurance. The City of Malibu participates in the all-risk property protection program of the Authority. This insurance protection is underwritten by several insurance companies. The City s property is currently insured according to a schedule of covered property submitted by the City to the Authority. The City s property currently has all-risk property insurance protection in the amount of $98,108,000. There is a $5,000 deductible per occurrence except for non-emergency vehicle insurance which has a $2,500 deductible. Earthquake and Flood Insurance. The City purchases earthquake and flood insurance on a portion of its property. The earthquake insurance is part of the property protection insurance program of the Authority. The City s property currently has earthquake protection in the amount of $58,550,000. There is a deductible of 5% per unit of value with a minimum deductible of $100,000. Crime Insurance. The City purchases crime insurance coverage in the amount of $1 million with a $2,500 deductible. The fidelity coverage is provided through the Authority. Special Event Tenant User Liability Insurance. The City further protects against liability damages by requiring tenant users of certain property to purchase low-cost tenant user liability insurance for certain activities on City property. The insurance premium is paid by the tenant user and is paid to the City according to a schedule. The City then pays for the insurance. The insurance is facilitated by the Authority. ADEQUACY OF PROTECTION During the past three fiscal years, none of the above programs of protection experienced settlements or judgments that exceeded pooled or insured coverage. There were no significant reductions in pooled or insured liability coverage in fiscal year COMMITMENTS AND CONTINGENCIES The City is involved in various legal proceedings. At this time, the City is unable to determine the effect that these cases may have on the financial condition of the City. The City has received State and Federal funds for specific purposes that are subject to review by the grantor agencies. Although such audits could generate expenditure disallowances under the terms of the grants, the City is unable to determine the effect this may have on the financial condition of the City at this time. The City is prone to natural disasters. The City is aware of the potential for disaster and attempts to maintain an adequate fund balance in the General Fund to cover the cost of these disasters. Based on the history, there remains a potential for a call on future revenues and existing fund balances. 14. CAPITAL PROJECTS IN PROGRESS CIVIC CENTER WASTEWATER TREATMENT FACILITY PHASE I The Civic Center Wastewater Treatment Facility Phase I consists of constructing a new wastewater and recycled water treatment facility. The new wastewater treatment and recycled water facility is currently being constructed to treat up to 190,000 gallons of wastewater per day but also to have flexibility to expand the treatment capacity for Phase II and III. The recycled water system is being constructed to supply recycled water to customers within the Civic Center area. 56

69 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 PACIFIC COAST HIGHWAY (PCH) REGIONAL TRAFFIC MESSAGING SYSTEMS PROJECT This project will improve communication, operations, and traffic flow along PCH and throughout the region. The project consists of installing changeable message signs at strategic locations along the highway to alert travelers of critical traffic information. The project is funded by Los Angeles County Metropolitan Transportation Authority Measure R. As of June 30, 2017, the project was in the preliminary design phase. The City anticipates hiring a consultant to perform design and permitting work in fiscal year PACIFIC COAST HIGHWAY (PCH) INTERSECTION PROJECT This project includes traffic safety and operations improvements at two key locations along PCH: 1) the intersection of Big Rock Drive and PCH and 2) the existing crosswalk between Rambla Vista East and Rambla Vista West in the vicinity of La Costa. The project is funded by Los Angeles County Metropolitan Transportation Authority Measure R. The project at Big Rock Drive and PCH was the installation of a left turn signal. This work was completed in fiscal year , and the project was accepted by the City Council on January 26, The second project is at the existing crosswalk in the vicinity of PCH and La Costa. This project includes the installation of a pedestrian-activated traffic signal. During fiscal year , the City completed the project design. The City anticipates permitting, conducting public bidding, and starting construction on the project in fiscal year PACIFIC COAST HIGHWAY (PCH) MEDIAN IMPROVEMENT PROJECT This project will promote traffic safety and operations along PCH by channelizing the highway, regulating turn movements, and improving traffic operations. The project includes the rehabilitation of the existing medians and installation of new raised medians along PCH from the intersection of Webb Way to the intersection of Puerco Canyon Road. The PCH Median Improvement Project is funded by Los Angeles County Metropolitan Transportation Authority Measure R. As of June 30, 2017, the project is in the preliminary design phase. The City anticipates completing design and permitting work in fiscal year CIVIC CENTER WAY ROADWAY IMPROVEMENTS PROJECT This project will improve safety and operations along Civic Center Way from the intersection of Webb Way to the intersection of Malibu Canyon Road. The project includes widening the roadway, improving vertical and horizontal sight distances, and installing sidewalks. The Civic Center Way Roadway Improvements Project is funded by Los Angeles County Metropolitan Transportation Authority Measure R. During fiscal year , the City completed the project design. The City anticipates permitting, conducting public bidding, and starting construction on the project in fiscal year MALIBU COMMUNITY LABOR EXCHANGE TRAILER REPLACEMENT PROJECT This project will remove and replace the existing office trailer used by the Malibu Community Labor Exchange (MCLE). The MCLE s existing trailer was put into service in 2000 and is in poor condition. The purchase and installation of a new trailer will enable the MCLE to continue serving low and moderate income individuals. During fiscal year , the City worked with Los Angeles County Community Development Block Grant staff to allocate funding for the project. The City also worked on the design, permitting, and placement of the trailer. As of June 30, 2017, the City is still trying to work out an agreement with Los Angeles County for the placement of the trailer on Los Angeles County property. The City anticipates that an agreement will be reached regarding the placement of the trailer in fiscal year Once the agreement is finalized, the City will move forward with the purchase and installation of the new trailer. PACIFIC COAST HIGHWAY (PCH) SIGNAL SYNCHRONIZATION SYSTEM This project was identified by the PCH Safety Study to improve safety along the Malibu highway corridor. The project will enable communication between the existing traffic signals on PCH from Topanga Canyon Road to John Tyler Drive and connect the signals back to Caltrans Traffic Management Center. The project will interconnect the signals and allow Caltrans to control and operate the signals remotely. The City awarded a contract for design in fiscal year The City anticipates completing the design and permitting processes in fiscal year

70 , CALIFORNIA NOTES TO THE FINANCIAL STATEMENTS (Continued) June 30, 2017 CIVIC CENTER STORMDRAIN SYSTEM IMPROVEMENTS This project consists of stormdrain improvements in the Civic Center area. The improvements will promote the flow and circulation of stormwater into Legacy Park. This project is currently in design. The City anticipates that a contract will be awarded and construction on the project will begin in fiscal year PACIFIC COAST HIGHWAY (PCH) SHOULDER ENHANCEMENTS This project was identified by the PCH Parking Study to improve safety for motorists, pedestrians, and cyclists along the highway. This project will implement recommendations from the final study. Some of the identified improvements were paving, grading, installation of small retaining curbs, striping, signage, and other treatments to improve safety, parking, and circulation. MARIE CANYON GREEN STREETS This project includes the installation of biofilters and other devices to capture and treat stormwater and comply with the City s Municipal Separate Storm Sewer System Discharge Permit with the Regional Water Quality Control Board. As of June 30, 2017, the project is in the preliminary design phase. The City anticipates completing design and permitting work in fiscal year STORMDRAIN TRASH SCREENS This project includes the installation of trash screens at the City s stormdrain inlets to prevent debris from entering the stormdrain system and to comply with the City s Trash Total Maximum Daily Loads (TMDLs) requirements. As of June 30, 2017, preliminary design has been completed. The City anticipates final design, permitting, public bidding, and construction to be completed in fiscal year PROJECTS COMPLETED IN FISCAL YEAR The City has several multi-year projects which were completed during fiscal year : Annual Street Overlay, Speed Advisory Signs, Bus Stop Shelters, and Paradise Cove Media Filters Projects. 15. SUBSEQUENT EVENTS In July 2016, construction began on the Civic Center Wastewater Treatment Facility (CCWTF), wastewater collection system, recycled water distribution system, and the groundwater injection wells. Construction has proceeded on schedule and is anticipated to be completed in early January Between January 2018 and July 2018, the properties within the Civic Center area will be connecting their private wastewater lines to the City s new wastewater collection system, and the City will need to start collecting wastewater and recycled water service fees. Property owners will be charged at a rate that provides sufficient revenue to offset the associated operation, maintenance, and management costs. On September 11, 2017, the City Council conducted a public hearing and adopted Resolution No establishing the wastewater and recycled water service charges for fiscal years , , and

71 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY AS OF THE FISCAL YEAR ENDING JUNE 30, LAST TEN FISCAL YEARS** Measurement date 6/30/2016 6/30/2015 6/30/2014 Plan's proportion of the collective net pension liability % % % Plan's proportionate share of the net pension liability $ 4,610,344 $ 3,366,039 $ 3,241,379 Covered employee payroll $ 5,624,392 $ 5,398,632 $ 5,398,632 Plan's proportionate share of the net pension liability as a percentage of covered employee payroll 81.97% 62.35% 60.04% Plan's fiduciary net position as a percentage of the total pension liability 74.06% 78.40% 83.03% Plan's proportionate share of aggregate employer contributions $ 640,844 $ 428,499 $ 628,322 Notes to Schedule: Benefit Changes: There were no changes in benefits. Changes in Assumptions: There were no changes in assumptions except for the following: From fiscal year 6/30/15 to 6/30/16: GASB 69 paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan administative expense. ** Fiscal year was the first year of implementation, therefore, only three years are shown. 59

72 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS-DEFINED BENEFIT PENSION PLAN AS OF THE FISCAL YEAR ENDING JUNE 30, LAST TEN FISCAL YEARS** Valuation Date 6/30/2014 6/30/2013 6/30/2012 Contractually required contribution (actuarially determined) $ 656,352 $ 514,781 $ 626,811 Contributions in relation to the actuarially determined contributions (656,352) (514,781) (626,811) Contribution deficiency (excess) $ - $ - $ - Covered - employee payroll $ 5,593,683 $ 5,624,392 $ 5,398,632 Contributions as a percentage of covered - employee payroll 11.73% 9.15% 11.61% Notes to Schedule: Methods and Assumptions Used to Determine Contribution Rates (applies to all years unless indicated otherwise): Cost-sharing employers Entry age normal cost method Amortization method Level percentage of payroll, closed Asset valuation method June 30, 2012 valuation: 15-year smoothed market June 30, 2013 and 2014 valuations: Market Value Inflation 2.75% Salary increases 3.30% to 14.20% depending on age, service, and type of employment; including inflation Investment rate of return 7.50%, net of pension plan investment expense, including inflation Retirement age 50 years (2%@55); 52 years (2%@62) Mortality Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-going mortality improvement using Scale AA published by the Society of Actuaries until June 30, There is no margin for future mortality improvement beyond the valuation date. ** Fiscal year was the first year of implementation, therefore, only three years are shown. 60

73 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL AND NEXT YEAR'S BUDGET FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget FY Budgeted Amounts Positive/ Original Original Final Actual (Negative) Budget REVENUES Taxes $ 21,015,000 $ 21,015,000 $ 23,288,059 $ 2,273,059 $ 21,830,000 Fines and forfeitures 475, , , , ,000 Intergovernmental 125, , ,157 (614,678) 521,678 Use of money and property 80,000 80, ,576 80, ,000 Charges for services 5,200,750 5,263,000 5,937, ,656 5,673,700 Other 23,000 83, , ,398 43,000 Total revenues 26,918,750 27,854,835 30,593,272 2,738,437 28,703,378 EXPENDITURES Current: Legislative and advisory 1,781,914 1,808,914 1,535, ,479 1,721,043 General government 5,163,673 5,168,473 4,963, ,860 5,648,742 Public safety 7,365,956 7,387,956 7,290,598 97,358 7,690,864 Community development 5,676,378 6,371,114 5,533, ,613 6,317,097 Community services 2,680,276 2,791,776 2,199, ,305 2,934,313 Public works 3,008,971 3,115,471 2,837, ,807 1,966,956 Capital outlay 495,200 11,916,975 11,686, ,901 - Debt service: Principal 606, , , ,000 Interest 1,037,520 1,037,520 1,257,754 (220,234) 1,300,050 Cost of issuance ,065 (228,065) - Payment to refunding escrow - - 1,385,310 (1,385,310) - Total expenditures 27,816,658 40,204,969 39,524, ,714 28,344,065 Revenues over (under) expenditures $ (897,908) $ (12,350,134) (8,930,983) $ 3,419,151 $ 359,313 OTHER FINANCING SOURCES (USES) Proceeds from long-term financing 30,860,651 Transfers in 958,084 Transfers out (171,418) Payment to refunding escrow (19,162,595) Total other financing sources (uses) 12,484,722 Net change in fund balance 3,553,739 FUND BALANCE - BEGINNING 30,844,462 FUND BALANCE - ENDING $ 34,398,201 61

74 GRANTS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Intergovernmental $ 2,048,185 $ 2,048,185 $ 336,302 $ (1,711,883) OTHER FINANCING USES Transfers out (306,670) Net change in fund balance 29,632 FUND BALANCE - BEGINNING (76,905) FUND BALANCE - ENDING $ (47,273) 62

75 , CALIFORNIA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION 1. BUDGETS AND BUDGETARY PRINCIPLES General Budget Policies JUNE 30, 2017 The City Manager submits a proposed budget to the City Council by May 15 th of each year. The City Council holds public hearings, modifies the City Manager s recommendations, and adopts a final budget by resolution prior to June 30 th of each year. The City Manager is authorized to transfer budgeted amounts between line items within a fund. Any revisions or transfers that alter the total appropriations of any fund must be approved by the City Council. Supplemental appropriations may be adopted by the City Council during the year. Budgets are adopted on a basis consistent with generally accepted accounting principles and are used as a management control device. Annual appropriated budgets are adopted for the General Fund and all Special Revenue funds. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated budget approved by the City Council. The annual budget indicates appropriations by fund, and the legal level of budgetary control (the level at which expenditures cannot legally exceed the appropriated amount) for the operating budget is within a fund. Continuing Appropriations Unexpended annual appropriations lapse at the end of the fiscal year; encumbered appropriations are re-budgeted in the next fiscal year. Unexpended capital improvement appropriations are carried forward until the improvements or programs are complete. Budgetary Basis of Accounting Budgets are adopted on a basis consistent with generally accepted accounting principles. Budgeted amounts presented are as originally adopted and as further amended by the City Council. Supplemental appropriations were required and approved by the City Council for the General Fund which increased the originally adopted budget of $27,816,658 to $40,204,96. The majority of the budget amendments was a $11.4 million adjustment to purchase the Trancas Field property. 63

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77 NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2017 Special Revenue Funds ASSETS State Traffic Proposition Proposition Measure Gas Tax Safety A C R Cash and investments $ 5,997 $ - $ 363,926 $ 230,445 $ 184,728 Accounts receivable Due from other governments - 22, Total assets $ 5,997 $ 22,165 $ 363,926 $ 230,445 $ 184,728 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ - $ - $ 15,946 $ - $ - Due to other funds - 19, Total liabilities - 19,169 15, FUND BALANCES Restricted Public works activities 5,997 2, Capital improvement projects , ,728 Community services activities , Environmental sustainability Special district projects Total fund balances 5,997 2, , , ,728 Total liabilities and fund balances $ 5,997 $ 22,165 $ 363,926 $ 230,445 $ 184,728 (Continued) 65

78 NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2017 (Continued) ASSETS Special Revenue Funds Air Solid Waste Parkland Quimby Act Brulte Community Quality Management Development Parkland Bill Development Management Surcharge In-Lieu Dedication Grant Block Grant Cash and investments $ 56,971 $ 47,873 $ 70,666 $ 3,545 $ - $ - Accounts receivable - 24, Due from other governments 4, ,743 Total assets $ 61,095 $ 73,136 $ 70,666 $ 3,545 $ - $ 1,743 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ - $ 13,081 $ - $ - $ - $ 581 Due to other funds ,162 Total liabilities - 13, ,743 FUND BALANCES Restricted Public works activities 61, Capital improvement projects ,666 3, Community services activities Environmental sustainability - 60, Special district projects Total fund balances 61,095 60,055 70,666 3, Total liabilities and fund balances $ 61,095 $ 73,136 $ 70,666 $ 3,545 $ - $ 1,743 66

79 Special Revenue Funds Total Big Rock Malibu Calle Non-major Mesa Road del Barco Governmental LMD LMD LMD Funds $ 255,949 $ 50,524 $ 88,706 $ 1,359, ,568 12,242 5,291 3,302 49,562 $ 268,191 $ 55,815 $ 92,008 $ 1,433,460 $ 53,169 $ 6,515 $ 5,091 $ 94, ,331 53,169 6,515 5, , , , , , ,022 49,300 86, , ,022 49,300 86,917 1,318,746 $ 268,191 $ 55,815 $ 92,008 $ 1,433,460 67

80 NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2017 Special Revenue Funds State Gas Traffic Proposition Proposition Measure Tax Safety A C R REVENUES Taxes $ - $ - $ - $ - $ - Fines and forfeitures - 183, Intergovernmental 245, , , ,870 Use of money and property 1, ,412 1, Charges for services Total revenues 246, , , , ,799 EXPENDITURES Current: General government Public safety Community development Community services , Public works Total expenditures , Revenues over (under) expenditures 246, ,541 78, , ,799 OTHER FINANCING USES Transfers out (250,000) (200,000) Net change in fund balance (3,595) (15,459) 78, , ,799 FUND BALANCE - BEGINNING 9,592 18, ,155 32,979 36,929 FUND BALANCE - ENDING $ 5,997 $ 2,996 $ 347,980 $ 230,445 $ 184,728 68

81 Special Revenue Funds Air Solid Waste Parkland Quimby Act Brulte Community Quality Management Development Parkland Bill Development Management Surcharge In-Lieu Dedication Grant Block Grant $ - $ - $ 40,729 $ - $ - $ ,225 5, ,324 6, , , ,242 41, ,324 6, , , , , ,324 6,979 16,590 54,710 41, (30,000) ,590 24,710 41, ,505 35,345 29,517 3, $ 61,095 $ 60,055 $ 70,666 $ 3,545 $ - $ - (Continued) 69

82 NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2017 (Continued) Special Revenue Funds Total Big Rock Malibu Calle Non-major Mesa Road del Barco Governmental LMD LMD LMD Funds REVENUES Taxes $ 291,978 $ 83,246 $ 42,803 $ 458,756 Fines and forfeitures ,678 Intergovernmental ,003,450 Use of money and property 1, ,339 Charges for services ,859 Total revenues 293,705 83,530 43,469 1,782,082 EXPENDITURES Current: General government ,979 Public safety ,324 Community development ,532 Community services ,032 Public works 290,036 47,559 50, ,812 Total expenditures 290,036 47,559 50, ,679 Revenues over (under) expenditures 3,669 35,971 (6,748) 1,000,403 OTHER FINANCING USES Transfers out (480,000) Net change in fund balance 3,669 35,971 (6,748) 520,403 FUND BALANCE - BEGINNING 211,353 13,329 93, ,343 FUND BALANCE - ENDING $ 215,022 $ 49,300 $ 86,917 $ 1,318,746 70

83 STATE GAS TAX SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Intergovernmental $ 275,217 $ 275,217 $ 245,261 $ (29,956) Use of money and property , Total revenues $ 275,717 $ 275, ,405 $ (29,312) OTHER FINANCING USES Transfers out (250,000) Net change in fund balance (3,595) FUND BALANCE - BEGINNING 9,592 FUND BALANCE - ENDING $ 5,997 71

84 TRAFFIC SAFETY SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Fines and forfeitures $ 300,000 $ 300,000 $ 183,678 $ (116,322) Use of money and property Total revenues $ 300,500 $ 300, ,541 $ (115,959) OTHER FINANCING USES Transfers out (200,000) Net change in fund balance (15,459) FUND BALANCE - BEGINNING 18,455 FUND BALANCE - ENDING $ 2,996 72

85 PROPOSITION A SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Intergovernmental $ 220,000 $ 220,000 $ 257,445 $ 37,445 Use of money and property ,412 2,012 Total revenues 220, , ,857 39,457 EXPENDITURES Current: Community services 209, , ,032 27,968 Revenues over (under) expenditures $ 11,400 $ 11,400 78,825 $ 67,425 FUND BALANCE - BEGINNING 269,155 FUND BALANCE - ENDING $ 347,980 73

86 PROPOSITION C SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Intergovernmental $ 175,000 $ 175,000 $ 196,346 $ 21,346 Use of money and property , Total revenues $ 175,400 $ 175, ,466 $ 22,066 FUND BALANCE - BEGINNING 32,979 FUND BALANCE - ENDING $ 230,445 74

87 MEASURE R SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Intergovernmental $ 130,000 $ 130,000 $ 146,870 $ 16,870 Use of money and property Total revenues $ 130,300 $ 130, ,799 $ 17,499 FUND BALANCE - BEGINNING 36,929 FUND BALANCE - ENDING $ 184,728 75

88 AIR QUALITY MANAGEMENT SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Intergovernmental $ 15,000 $ 15,000 $ 16,225 $ 1,225 Use of money and property Total revenues $ 15,050 $ 15,050 16,590 $ 1,540 FUND BALANCE - BEGINNING 44,505 FUND BALANCE - ENDING $ 61,095 76

89 SOLID WASTE MANAGEMENT SURCHARGE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Budgeted Amounts Original Final Actual REVENUES Intergovernmental $ 5,000 $ 5,000 $ 5,000 $ - Use of money and property Charges for services 135, , ,859 (9,141) Total revenues 140, , ,242 (8,858) EXPENDITURES Current: Community development 133, ,190 76,532 56,658 Revenues over (under) expenditures $ 6,910 $ 6,910 54,710 $ 47,800 OTHER FINANCING USES Transfers out (30,000) Net change in fund balance 24,710 FUND BALANCE - BEGINNING 35,345 FUND BALANCE - ENDING $ 60,055 Variance with Final Budget Positive/ (Negative) 77

90 PARKLAND DEVELOPMENT IN-LIEU SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Taxes $ 15,000 $ 15,000 $ 40,729 $ 25,729 Use of money and property (80) Total revenues $ 15,500 $ 15,500 41,149 $ 25,649 FUND BALANCE - BEGINNING 29,517 FUND BALANCE - ENDING $ 70,666 78

91 QUIMBY ACT PARKLAND DEDICATION SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Budgeted Amounts Original Final Actual REVENUES Use of money and property $ 100 $ 100 $ 26 $ (74) FUND BALANCE - BEGINNING 3,519 FUND BALANCE - ENDING $ 3,545 Variance with Final Budget Positive/ (Negative) 79

92 BRULTE BILL GRANT SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Budgeted Amounts Original Final Actual REVENUES Intergovernmental $ 100,000 $ 129,324 $ 129,324 $ - EXPENDITURES Current: Public safety 100, , ,324 - Revenues over (under) expenditures $ - $ - - $ - FUND BALANCE - BEGINNING - FUND BALANCE - ENDING $ - Variance with Final Budget Positive/ (Negative) 80

93 COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Budgeted Amounts Original Final Actual REVENUES Intergovernmental $ 106,979 $ 106,979 $ 6,979 $ (100,000) EXPENDITURES Current: General government 6,979 6,979 6,979 - Revenues over (under) expenditures $ 100,000 $ 100,000 - $ (100,000) FUND BALANCE - BEGINNING - FUND BALANCE - ENDING $ - Variance with Final Budget Positive/ (Negative) 81

94 BIG ROCK MESA LMD SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Taxes $ 284,311 $ 284,311 $ 291,978 $ 7,667 Use of money and property ,727 1,427 Total revenues 284, , ,705 9,094 EXPENDITURES Current: Public works 304, , ,036 14,325 Revenues over (under) expenditures $ (19,750) $ (19,750) 3,669 $ 23,419 FUND BALANCE - BEGINNING 211,353 FUND BALANCE - ENDING $ 215,022 82

95 MALIBU ROAD LMD SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Taxes $ 51,549 $ 51,549 $ 83,246 $ 31,697 Use of money and property Total revenues 51,599 51,599 83,530 31,931 EXPENDITURES Current: Public works 60,123 60,123 47,559 12,564 Revenues over (under) expenditures $ (8,524) $ (8,524) 35,971 $ 44,495 FUND BALANCE - BEGINNING 13,329 FUND BALANCE - ENDING $ 49,300 83

96 CALLE DEL BARCO LMD SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Positive/ Original Final Actual (Negative) REVENUES Taxes $ 41,961 $ 41,961 $ 42,803 $ 842 Use of money and property Total revenues 42,161 42,161 43,469 1,308 EXPENDITURES Current: Public works 59,639 59,639 50,217 9,422 Revenues over (under) expenditures $ (17,478) $ (17,478) (6,748) $ 10,730 FUND BALANCE - BEGINNING 93,665 FUND BALANCE - ENDING $ 86,917 84

97 COMMERCIAL REAL ESTATE RENTAL ENTERPRISE FUND SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION BUDGET AND ACTUAL (BUDGETARY BASIS) FOR THE YEAR ENDED JUNE 30, 2017 Variance with Actual Final Budget Budgeted Amounts Budgetary (Budgetary Positive/ Original Final Actual Adjustments Basis) (Negative) OPERATING REVENUES Charges for sales and services: Rental income $ 2,096,219 $ 2,096,219 $ 1,719,509 $ - $ 1,719,509 $ (376,710) Other 50,000 50,000 67,005-67,005 17,005 Total operating revenues 2,146,219 2,146,219 1,786,514-1,786,514 (359,705) OPERATING EXPENSES Professional and contractual services 182, , , ,572 5,178 Personnel services ,098-41,098 (41,098) Repairs and maintenance 155, , , ,923 44,377 Utilities 45,000 45,000 19,604-19,604 25,396 Supplies 2,000 2, ,288 Total operating expenses 384, , , ,909 35,141 Operating income before depreciation 1,761,469 1,752,169 1,427,605-1,427,605 (324,564) Depreciation expense - - 1,333,134 (1,333,134) - - Operating income 1,761,469 1,752,169 94,471 1,333,134 1,427,605 (324,564) NONOPERATING REVENUES (EXPENSES) Investment and interest income 5,000 5,000 6,474-6,474 1,474 Grant revenue , , ,645 Interest expense (524,135) (524,135) (551,340) - (551,340) (27,205) Principal payments on debt (570,000) (570,000) - (570,000) (570,000) - Total nonoperating revenues (expenses) (1,089,135) (1,089,135) (355,221) (570,000) (925,221) 163,914 Income before transfers $ 672,334 $ 663,034 (260,750) $ 763,134 $ 502,384 $ (160,650) Transfers to governmental funds (489,994) Change in net position (750,744) NET POSITION - BEGINNING 22,519,422 NET POSITION - ENDING $ 21,768,678 85

98 WASTEWATER TREATMENT ENTERPRISE FUND SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION BUDGET AND ACTUAL (BUDGETARY BASIS) FOR THE YEAR ENDED JUNE 30, 2017 Variance with Actual Final Budget Budgeted Amounts Budgetary (Budgetary Positive/ Original Final Actual Adjustments Basis) (Negative) OPERATING REVENUES Charges for sales and services: Sewer service fees $ - $ 78,079 $ 268,971 $ - $ 268,971 $ 190,892 OPERATING EXPENSES Professional and contractual services ,190-75,190 (75,190) Repairs and maintenance - - 1,578-1,578 (1,578) Utilities ,619-27,619 (27,619) Supplies (791) Total operating expenses , ,178 (105,178) Operating income before depreciation - 78, , ,793 85,714 Depreciation expense - - 1,071,561 (1,071,561) - - Operating income - 78,079 (907,768) 1,071, ,793 85,714 NONOPERATING REVENUES (EXPENSES) Investment and interest income ,361-48,361 48,361 Other nonoperating expense - - (191,653) - (191,653) (191,653) Total nonoperating revenues (expenses) - - (143,292) - (143,292) (143,292) Income before transfers and capital activities - 78,079 (1,051,060) 1,071,561 20,501 (57,578) Capital outlay (47,372,466) (47,372,466) - (30,693,993) (30,693,993) (16,678,473) Capital contributions 47,372,466 47,372,466 30,693,993-30,693,993 16,678,473 Change in net position $ - $ 78,079 29,642,933 $ (29,622,432) $ 20,501 $ (57,578) NET POSITION - BEGINNING 21,758,434 NET POSITION - ENDING $ 51,401,367 86

99 COMBINING STATEMENT OF NET POSITION PENSION TRUST FUNDS JUNE 30, 2017 ASSETS Cash and investments: Mutual funds: Department City Head Manager Defined Defined Total Contribution Contribution Pension Pension Pension Trust Trust Fund Trust Fund Funds Money market mutual funds $ 123,108 $ 15,540 $ 138,648 U.S. stocks 31,863-31,863 International/global stocks 6,909-6,909 Specialty 1,624-1,624 Total cash and invesments $ 163,504 $ 15,540 $ 179,044 NET POSITION Restricted for pensions $ 163,504 $ 15,540 $ 179,044 87

100 COMBINING STATEMENT OF CHANGES IN NET POSITION PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Department City Head Manager Defined Defined Total Contribution Contribution Pension Pension Pension Trust Trust Fund Trust Fund Funds ADDITIONS Contributions by employer $ 16,615 $ 13,431 $ 30,046 Investment earnings 19,067 4,694 23,761 Total additions 35,682 18,125 53,807 DEDUCTIONS Distributions 108, , ,462 Change in net position (72,840) (134,815) (207,655) Net position - beginning of year 236, , ,699 Net position - end of year $ 163,504 $ 15,540 $ 179,044 88

101 COMBINING STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS JUNE 30, 2017 Civic Center Civic Center Carbon Wastewater Wastewater Total Special Beach Broad Treatment Treatment Agency Deposits CFD Beach AD Plant CFD Facility AD Funds ASSETS Cash and investments $ 2,448,870 $ 206,753 $ 85,699 $ - $ - $ 2,741,322 Cash and investments with fiscal agent - 215, , ,434 1,248,850 Due from other governments 12,875 2,714 5,187-9,834,893 9,855,669 Notes receivable-capital facility , ,485 Total assets $ 2,461,745 $ 425,085 $ 231,684 $ - $ 11,514,812 $ 14,633,326 LIABILITIES Accounts payable $ 17,615 $ - $ - $ - $ - $ 17,615 Deposits 2,444, ,444,130 Due to bondholders - 425, , ,434 1,549,203 Due to City of Malibu ,834,893 9,834,893 Loan payable , ,485 Total liabilities $ 2,461,745 $ 425,085 $ 231,684 $ - $ 11,514,812 $ 14,633,326 89

102 STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Balances Balances July 1, 2016 Additions Deletions June 30, 2017 Special Deposits ASSETS Cash and investments $ 1,890,964 $ 1,269,236 $ 711,330 $ 2,448,870 Accounts receivable 14,083-14,083 - Due from other governments 15,549 12,875 15,549 12,875 Total assets $ 1,920,596 $ 1,282,111 $ 740,962 $ 2,461,745 LIABILITIES Accounts payable $ 96,106 $ 458,204 $ 536,695 $ 17,615 Deposits 1,824, , ,267 2,444,130 Total liabilities $ 1,920,596 $ 1,282,111 $ 740,962 $ 2,461,745 Carbon Beach CFD ASSETS Cash and investments $ 185,038 $ 236,684 $ 214,969 $ 206,753 Cash and investments with fiscal agent 238, , , ,618 Due from other governments 3,277 2,714 3,277 2,714 Total assets $ 427,310 $ 442,445 $ 444,670 $ 425,085 LIABILITIES Due to bondholders $ 427,310 $ 442,445 $ 444,670 $ 425,085 Broad Beach AD ASSETS Cash and investments $ 66,183 $ 146,023 $ 126,507 $ 85,699 Cash and investments with fiscal agent 181, , , ,798 Due from other governments 6,717 5,187 6,717 5,187 Total assets $ 254,772 $ 270,568 $ 293,656 $ 231,684 LIABILITIES Accounts payable $ 466 $ 125,499 $ 125,965 $ - Due to bondholders 254, , , ,684 Total liabilities $ 254,772 $ 270,568 $ 293,656 $ 231,684 Civic Center Wastewater Plant ASSETS Cash and investments with fiscal agent $ 1,569,543 $ 5,192,472 $ 6,762,015 $ - LIABILITIES Due to bondholders $ 1,569,543 $ 5,192,472 $ 6,762,015 $ - 90

103 Civic Center Wastewater Facility ASSETS Cash and investments - Balances Balances July 1, 2016 Additions Deletions June 30, 2017 $ $ 30,361,594 $ 30,361,594 $ - Cash and investments with fiscal agent 1,121, , ,434 Due from other governments 5,247,320 9,834,893 5,247,320 9,834,893 Notes receivable - capital facility 925,956 52, , ,485 Total assets $ 7,294,743 $ 40,249,601 $ 36,029,532 $ 11,514,812 LIABILITIES Due to bondholders $ 1,121,467 $ 497 $ 229,530 $ 892,434 Due to City of Malibu 5,247,320 40,196,487 35,608,914 9,834,893 Loan payable 925,956 52, , ,485 Total liabilities $ 7,294,743 $ 40,249,601 $ 36,029,532 $ 11,514,812 Totals - All Agency Funds ASSETS Cash and investments $ 2,142,185 $ 32,013,537 $ 31,414,400 $ 2,741,322 Cash and investments with fiscal agent 3,111,877 5,515,374 7,378,401 1,248,850 Accounts receivable 14,083-14,083 - Due from other governments 5,272,863 9,855,669 5,272,863 9,855,669 Notes receivable - capital facility 925,956 52, , ,485 Total assets $ 11,466,964 $ 47,437,197 $ 44,270,835 $ 14,633,326 LIABILITIES Accounts payable $ 96,572 $ 583,703 $ 662,660 $ 17,615 Deposits 1,824, , ,267 2,444,130 Due to bondholders 3,372,626 5,780,483 7,603,906 1,549,203 Due to City of Malibu 5,247,320 40,196,487 35,608,914 9,834,893 Loan payable 925,956 52, , ,485 Total liabilities $ 11,466,964 $ 47,437,197 $ 44,270,835 $ 14,633,326 91

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