For The Fiscal Year Ended June 30, Prepared by the Office of the Auditor-Controller-Treasurer-Tax Collector

Transcription

1 COUNTY OF SONOMA STATE OF CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For The Fiscal Year Ended June 30, 2013 Prepared by the Office of the Auditor-Controller-Treasurer-Tax Collector David E. Sundstrom, CPA Auditor-Controller-Treasurer-Tax Collector

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3 TABLE OF CONTENTS TABLE OF CONTENTS Page(s) INTRODUCTORY SECTION: Letter to the Board of Supervisors and Citizens of the County...i-ix Directory of Appointive and Elected Officials... x-xi Chart of Administrative Reporting Relationships on Matters Under the Control of the Board of Supervisors... xii FINANCIAL SECTION: INDEPENDENT AUDITOR S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS (Required Supplementary Information) BASIC FINANCIAL STATEMENTS: Government-Wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Governmental Funds: Balance Sheet Reconciliation of the Balance Sheet to Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Human Services Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Health and Sanitation Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Mandated Revenues Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Open Space Special Tax Account Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Roads Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Mental Health Realignment Special Revenue Fund Proprietary Funds: Statement of Net Position Statement of Revenues, Expenses and Changes in Fund Net Position Statement of Cash Flows Fiduciary Funds: Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position... 51

4 TABLE OF CONTENTS (Continued) Page(s) Notes to the Basic Financial Statements: (1) Summary of Significant Accounting Policies (2) Stewardship, Compliance and Accountability (3) Cash and Investments (4) Receivables (5) Interfund Transactions (6) Capital Assets (7) Payables (8) Operating Leases (9) Long-Term Liabilities (10) Short-Term Obligations (11) Net Position/Fund Balances (12) Employees Retirement Plans (13) Other Postemployment Health Benefits (OPEB) (14) Risk Management (15) Landfill Closure and Postclosure Care Costs (16) Commitments and Contingencies (17) Pollution Remediation Obligations (18) Successor Agency Trust for Assets of Former County Redevelopment Agency (19) Restatement of Net Position (20) Extraordinary Item (21) Subsequent Events REQUIRED SUPPLEMENTARY INFORMATION: Schedule of Funding Progress County Defined Benefit Pension Plan Schedule of Funding Progress County Postemployment Healthcare Plan COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES: Nonmajor Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Special Revenue Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Schedules of Revenues, Expenditures and Changes in Fund Balance Budget and Actual: Advertising Special Revenue Fund Fire and Emergency Services Special Revenue Fund First 5 Sonoma County Commission Agricultural Preservation and Open Space District Special Revenue Fund Public Safety Realignment Special Revenue Fund Special Districts Special Revenue Fund Other Special Revenue Funds

5 TABLE OF CONTENTS TABLE OF CONTENTS (Continued) Page(s) Nonmajor Enterprise Funds: Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Fund Net Position Combining Statement of Cash Flows Internal Service Funds: Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Fund Net Position Combining Statement of Cash Flows Agency Fund: Statement of Changes in Fiduciary Assets and Liabilities Discretely Component Units: Combining Statement of Net Position Combining Statement of Activities STATISTICAL SECTION (Unaudited): Net Position by Category Expenses by Function Changes in Net Position Net Expenses by Function Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Assessed Value of Taxable Property Property Tax Rates Direct and Overlapping Governments Principal Revenue Taxpayers Property Tax Levies and Collections Ratios of Outstanding Debt Ratios of Net General Bonded Debt Outstanding Computation of Legal Debt Margin Schedule of Direct and Overlapping Debt Demographics and Economic Statistics Major Employers County Employees by Function Operating Indicators by Function/Program Capital Assets Statistics by Function GLOSSARY Glossary for the Comprehensive Annual Financial Report

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7 DAVID E. SUNDSTROM, CPA AUDITOR-CONTROLLER TREASURER -TAX COLLECTOR 585 FISCAL DRIVE, SUITE 100 SANTA ROSA, CA PHONE (707) FAX (707) DONNA DUNK, CPA ASSISTANT AUDITOR-CONTROLLER JONATHAN KADLEC ASSISTANT TREASURER-TAX COLLECTOR December 20, 2013 To the Board of Supervisors and Citizens of Sonoma County: The Comprehensive Annual Financial Report (CAFR) of the County of Sonoma (County) for the fiscal year ended June 30, 2013, is hereby submitted in compliance with Sections and of the Government Code of the State of California. Management assumes full responsibility for the completeness and reliability of the information contained in this report based upon a comprehensive internal control framework it established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. The independent auditor s report is located at the front of the financial section of this report. Vavrinek, Trine, Day & Co., LLP, a firm of licensed certified public accountants, has issued an unmodified ( clean ) opinion on the County s financial statements for the fiscal year ended June 30, The Management s Discussion and Analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview, and analysis of the financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. PROFILE OF THE GOVERNMENT Incorporated in 1850, the County of Sonoma is located in the northwestern part of the State of California, approximately 55 miles north of San Francisco. The County of Sonoma currently occupies over 1,768 square miles of land and water serving a population of 490,423. Open space and agricultural land account for a great majority of this acreage. Nine incorporated cities are within the County: Santa Rosa, Petaluma, Rohnert Park, Town of Windsor, Healdsburg, Sonoma, Cloverdale, Sebastopol, and Cotati. The largest employment categories include healthcare and social services, manufacturing, retail trade, accommodation and food services and public administration. The climate and diverse geographic regions, especially its world-renowned wine and scenic wineries, make the County a popular tourist and recreational area. The County government functions as a local government body to serve the needs of its residents. As geographical and political subdivisions of the state, counties serve a dual role; providing municipal services in the unincorporated areas and acting as administrative agents for state and federal government programs and services. As a general-law county, Sonoma County is bound by state law as to the number and duties of County elected officials. The County has five districts that are approximately equal in population with boundaries adjusted every ten years following the federal census. Policymaking and legislative authority are vested in the County Board of Supervisors (Board) that consists of an elected supervisor from each of the five districts. Supervisors are elected to four-year staggered terms in even-year elections. The County has four elected department heads: Auditor-Controller-Treasurer-Tax Collector, County Clerk-Recorder-Assessor, District Attorney, and Sheriff-Coroner. i

8 The County, with 3,928 full-time equivalent employees, provides a full range of services to its residents. Citizens residing in unincorporated areas of the County receive all municipal services from the County including law enforcement, fire protection, land use and zoning, building permits, local road building and maintenance, animal care and control, and public libraries. Every resident of the County, directly or indirectly, benefits from these services. In addition, most services performed by the County are provided for all residents, regardless of whether those residents live in cities or unincorporated areas. The County s principal functions include seven major areas: general government, public protection, public ways and facilities, health and sanitation, public assistance, education, and recreation and cultural services. The State and Federal governments mandate certain minimum levels of services in the public assistance and health areas. A major challenge to the County during fiscal year and future years is the maintenance of these services to the extent feasible within the County's financial resources. Included in operations are various component units, which provide specific services County-wide or to distinct geographic areas within the County. The governmental reporting entity consists of the County and its component units. Component units are legally separate organizations for which the Board is financially accountable, or other organizations whose nature and significant relationship with the County are such that exclusion would cause the County s financial statements to be misleading or incomplete. Financial accountability is defined as the appointment of a voting majority of the component unit s board, and either (i) the County s ability to impose its will on the organization or (ii) the potential for the organization to provide a financial benefit to or impose a financial burden on the County. During fiscal year the County implemented GASB Statement No. 61, The Financial Reporting Entity: Omnibus An amendment of GASB Statement No. 14 and No. 34, which modified certain requirements for inclusion of component units in the financial reporting entity. The following blended component units, although legally separate entities, are considered to be part of the primary government for financial reporting purposes: Sonoma County Fair and Exposition, Inc. (the Fair), Sonoma County Agricultural Preservation and Open Space District, the Community Hospital of Sonoma County (the Community Hospital), the Sonoma County Securitization Corporation, the Sonoma County Public Financing Authority, and the Successor Agency to the Sonoma County Community Redevelopment Agency. These component units are included in the County s reporting entity because of the significance of their financial or operational relationship and their mutual governing body in accordance with the new standard. As a result of the new standard the following component units will be presented discretely on the face of the financial statements, separate from the primary government: Sonoma County Community Development Commission (the Community Development Commission), Sonoma County Library (the Library), Sonoma County Water Agency (the Water Agency), Sonoma Valley County Sanitation District, Russian River County Sanitation District, South Park County Sanitation District, and Occidental County Sanitation District. The County is required by State law to adopt a final budget each year. This annual budget serves as the foundation for the County s financial planning and control. Budgets are adopted for most governmental and proprietary funds. The County maintains budgetary controls to assure compliance with legal provisions embodied in the annual appropriated budget approved by the Board. Activities of the general and special revenue funds are included in the annually appropriated budget. The government also maintains an encumbrance accounting system to assist departments in accomplishing budgetary control. Unencumbered annual appropriations lapse at year-end. The legal level of control for appropriations is exercised at the department level, within fund level. Appropriations beyond the level may only be adjusted during the year with approval of the Board. Management may make adjustments at their discretion below that level. Such adjustments by the Board and management are reflected in the revised budgetary data presented in the financial statements. ii

9 LETTER OF TRANSMITTAL FACTORS AFFECTING ECONOMIC CONDITION Economy During fiscal year (FY) Sonoma County continued to see positive trends, led by consumer spending, increased tourism and a decrease in unemployment rates. The median price of a home is at a three-year high, and home foreclosures have fallen to their lowest level in six years. Employment The County s unemployment rate decreased from 8.6% (2012 Annual) to 7.1% through June This is lower than the national unemployment rate of 7.7% and significantly lower than the California unemployment rate of 9.2%. percent Annual Unemployment Rate Income By August 2013, the national economy had seen nine quarters of positive Gross Domestic Product (GDP) growth. Sonoma County unemployment rates decreased to 6.9%. National unemployment rates decreased to 7.4% and California lagged behind with an unemployment rate of 8.8%. Per capita personal income increased from $43,977 in 2012 to $45,118 in 2013, an increase of 2.6%. thousands of dollars Annual Per Capita Income Retail Sales Retail sales County-wide increased 5.32% to $7.42 billion for the 2012 calendar year from $7.05 billion in 2011 and has increased 9.3% to $3.8 billion for the first two quarters of 2013 compared to $3.48 billion for the first two quarters of County unincorporated area local retail sales tax increased 3.39% to $13.62 million for the 2012 calendar year from $13.17 million in 2011 and has increased 17.6% to $7.31 million for the first two quarters of 2013 compared to $6.22 million for the first two quarters of billions of dollars Annual Retail Sales iii

10 FACTORS AFFECTING ECONOMIC CONDITION-CONTINUED Real Estate The County-wide median home price has decreased a significant 28.9% to $440,000 for August 2013 from its high of $619,000 in August of The year-over-year median home price increased from August 2012 to August 2013 by $54,500 or 14.1%. It is anticipated that the reduction in unsold existing homes will continue to lift housing prices, but permits for new residential construction have yet to increase. Certified valuation of secured and unsecured property, which includes residential and non-residential, decreased 0.27% to $64.6 billion for FY from $64.8 billion for FY Certified valuation of non-residential increased 0.70% to $19.4 billion for FY from $19.3 billion for FY Certified valuation of residential decreased 0.68% to $45.2 billion for FY from $45.5 billion for FY thousands of dollars Median Home Price Tourism The County s lodging occupancy rate continued to show positive trends in The 2012 annual average occupancy rate indicates that travelers are returning to Sonoma County. It remained at 64.0% in Countywide transient occupancy tax (TOT) increased 9.2% to $23.6 million in the 2012 calendar year when adjusted for inflation. TOT has increased 15.47% to $11.1 million for the first two quarters of 2013 as compared to $9.5 million for the first two quarters of TOT increased 12.1% to $25.1 million for FY12-13 from $22.4 million for FY millions of dollars Annual Transient Occupancy Tax ECONOMIC INDICATORS With signs of economic recovery after the recession, many of Sonoma County s core industry metrics remain strong and new strengths are coming to the fore. Retail sales county-wide increased by 5.32% in the current fiscal year, and the first two quarters of 2013 show continued positive growth when compared to the first two quarters of Despite the most recent fiscal forecasting depicting economic recovery, the County recognizes the level of recovery is materializing at a slow pace and continues its cautious approach and judicial use of limited one time resource. iv

11 LETTER OF TRANSMITTAL FINANCIAL INDICATORS From a countywide perspective all tax revenue types increased in FY 12-13, with a year-over-year increase in Prop. 172 public safety sales tax of 7.47%, realignment sales tax of 10.38%, transient occupancy tax of 10.85%, local sales tax to county-wide taxing jurisdictions increasing by 9.40%, and the County s largest revenue source, property taxes increased by 0.13%. Due to the continuing decline in short term interest yields on investments available to the County Treasury the interest earnings on funds, which comprise the Treasury Pool, decreased by 10.44%. The County s recommended budget for FY maintains core services, but it does not completely address countywide needs deferred because of lackluster resources and or/recent focus to first finance core county services. For FY 13-14, the anticipated secured property tax revenue is expected to increase by 3.6% based on increases in the Assessor s certified valuation from $62.2 billion in FY to $64.5 billion in FY Unsecured property tax revenue is expected to decrease slightly based on a 3.3% decline in assessed valuation. Other tax revenues are projected to remain flat or have minimal growth. The proposed California budget reflects significant improvements in the state s finances as a result of continued economic recovery and voter s approval of Proposition 30 and 39. For the past several years, the California budget has included significant reductions in funding for County programs and services. The proposed budget generally supports the same level of program funding and service levels as established in FY Although positive overall, some economic risks include federal fiscal challenges, rising health care costs, and the impact of court decisions, which could negatively impact the California proposed Budget. MAJOR INITIATIVES A major challenge to the County during FY and future years is the maintenance of services to the extent feasible within the County's financial resources. This section lists only a select number of the many major accomplishments, major programs (initiatives) implemented and challenges met by County and agency staff while maintaining essential services during FY This truncated list does not do justice to the many accomplishments of the Sonoma County organization. In FY 12-13: The County developed labor negotiations strategy to resolve the County s structural budget deficit by permanently reducing costs, particularly for pensions. Reached agreement with Service Employees International Union (SEIU), the County s largest employee organization, and also reduced compensation for the Board of Supervisors, Department Heads, and most management positions. These changes will save the County $19.7 million from March, 2013 through October, 2015, and save $115 million in pension costs through 2023, the first full ten years of implementation. Strengthened investments in local roads. In 2012, and for the first time in over a decade, the Board increased the amount of local dollars being spent to repair the County road network. The County created applications to support public safety including: a real-time tracking application for Emergency Operations Center (EOC) to improve response to incidents and disasters; a case management system for District Attorney Victim Services to enable better tracking and service to victims of violent crime; and, a data collection and reporting system in response to State realignment of supervised offender population. The County initiated Communication Tower improvements to support the Sheriff Office s critical First Responder communication network to improve public safety s communications abilities, directly impacting officer safety and emergency responders ability to operate more effectively and provide better services to the community. The County introduced content management system to improve online access to the County's services and information. Participating departments self-publish content to the official County web site, resulting in more timely updates and increased compliance with standards. v

12 Increased the efficiency of County tax collection and improved customer service by implementing an e- billing system for secured property tax bills and allowing taxpayers the option of over-the-counter credit card processing for property tax payments. The County successfully administered the Consolidated Presidential General election in November Voter registration reached an all-time high of 260,762 for Sonoma County. Voter participation topped 84% for this election with 218,820 ballots cast, 155,553 by absentee ballot and 63,267 ballots cast at precinct polling places. The Probation Department continued its central role in the County s response to Criminal Justice Realignment, including: chaired Community Corrections Partnership in crafting second year local plan; added five Probation Officers to respond to additional offenders and improved caseload ratio; fully embedded one full time mental health worker and substance abuse counselors into Adult Probation; provided rigorous training for all Realignment Probation Officers, commensurate with higher risk offender under county supervision; conducted multi-agency field operations throughout the year. The District Attorney identified, applied for, and was awarded a $300,000 grant from the Office of Traffic Safety for a new prosecution unit that specializes in Driving Under the Influence (DUI) cases. This new unit improves traffic safety, and deals with traffic safety problems and reduces the number of persons killed and injured in traffic collisions. The two prosecutors appointed to this unit will work with law enforcement agencies to provide better outreach and education to peace officers, prosecutors, and the public regarding the dangers of drinking and driving. The unit will also review all incoming reports alleging driving under the influence of alcohol, drugs, and their combination, as well as vehicular manslaughter and hit and run cases where drugs and/or alcohol are involved. Once filed, designated cases will be handled by the same unit and staff through disposition to ensure that a just outcome is reached. The County completed an extensive management review, which identify process and systems improvements. Including enhancements to the Integrated Justice System case management application to allow for new caseload data to be electronically recorded and modified. The County Launched Health Action s Cradle to Career initiative, an educational attainment initiative, providing the framework for the County s investment in Schools of Hope, Career Technical Education, and Scholarship Sonoma County. The County supported the Food System Alliance to successfully develop the Healthy and Sustainable Food Action Plan, which guides the investment and development of the Sonoma County food system to promote health, the environment, and social equity. The County engaged 165 local entities in the Upstream Investments policy, provided assistance to 85 organizations as they improve their services, and highlighted the work of 57 organizations on a local clearinghouse of best practices. The county obtained a $1 million grant from the state Strategic Growth Council which the Permit and Resources Management Department will use to prepare a Greenhouse Gas Reduction Implementation Plan in partnership with the Regional Climate Protection Authority and all nine cities. The County provided $1,073,177 in funding for 6 affordable housing developments providing 239 affordable housing units, 137 restricted for very-low income families, 98 for low-income families, and 4 for moderate income families. The County completed 23 housing rehabilitation projects, with a total value of $781,500, using a combination of federal Community Development Block Grant (CDBG), State of California CalHOME funds, or redevelopment funds. Elevated 14 flood-prone residential structures in the lower Russian River area using Federal Emergency Management Agency grant funding and owner matching funds in the amount of $2,178,000. vi

13 LETTER OF TRANSMITTAL The County s Fire & Emergency Services department improved public communications systems by upgrading the Operational Area Telephone Emergency Notification System. The North County Electric Vehicle Charging Infrastructure Project was recognized, as part of the Sonoma County Electric Trail, with a Governor s Environmental and Economic Leadership Award. The Sonoma County Water Agency achieved cost savings to match declining revenue and received an AA+ bond rating on its water revenue bonds from Standard and Poor s and received an AA- rating on the Sonoma Valley County Sanitation District Bonds. As a result of refinancing there were net present value savings of more than $3 million over the life of the bonds. The County s Economic Development department launched a Workplace Wellness program to promote the value of a healthy workforce. The program includes recognizing employers for implementing exceptional employee wellness programs. The County s Agricultural Commissioner launched online Certified Producer Certificate system, which allows produces who sell at certified farmers markets to enter their own production information for annual certificate renewals. Sonoma County Regional Library system implemented e-book service with a collection of over 2,000 items. LONG-TERM FINANCIAL PLANNING The FY Budget was prepared using a number of fairly conservative revenue assumptions including the General Fund s share of property tax revenues from the current year tax roll (current), which were projected to increase.7% to $141.3 million in FY By way of comparison, FY actual current property tax revenues decreased to $139.6 million. This decrease reflects minimal decreases in overall real estate values. Other property related revenue sources, like the Documentary Transfer Tax and the Supplemental Property Tax, track more closely to the current real estate activity and have dropped from highs of $7.7 million and $11.4 million in FY to a projected $3.2 million and $1.0 million for FY We believe these reductions in Documentary Transfer Tax and Supplemental Property Tax are markers for what the current property tax growth will look like beyond FY Fixed costs of doing business, primarily driven by retirement, are expected to continue to grow for the next 2-3 years before flattening as a result of pension reform. The budget does not include a cost of living adjustment for employees and reflects fixed County contributions for employee health insurance and a phased reduction for some of the retiree health plans. It is important to note that by reducing and fixing contributions for employee and retiree health insurance, the County has effectively capped the future liability for these costs. This provides the Board more direct control of these costs and the ability to weigh any future adjustments against other factors including the Board s public service priorities. vii

14 Balanced Budget RELEVANT FINANCIAL POLICIES The budget must balance expenditure appropriations with resources. The County must live within its own means and avoid disturbing other local jurisdictions revenue sources to resolve its deficiencies. Furthermore, any deviation from a balanced budget is not permitted by the California State Government Code, which states: In the recommended, adopted, and final budgets the funding sources shall equal the financing uses. (Government Code 29009). Multi-year Financial Forecasting Budget priorities are based on the County s Strategic Plan goal areas: Safe, Healthy & Caring Community; Economic & Environmental Stewardship; Invest in the Future; and Civic Services & Engagement. In addition, a 5- year fiscal projection anticipates and minimizes short-term fluctuations in revenues and known program expenditure changes. Expenditure Management & Control Federal and State program reductions will not be backfilled with County discretionary revenues except by Board of Supervisors direction. The Board typically does not backfill these programs due to their sheer size and magnitude on the county s financial position. Debt Management For over 10 years the County has had an established Debt Advisory Committee (DAC) to provide guidance and support related to all County debt issuance and management. The DAC provides the County Administrator and the Board of Supervisors a review process to ensure that all potential debt obligations are evaluated for cost effectiveness, optimal structure and the ability to maintain post issuance compliance requirements. This is in agreement with the debt management policy that was finalized in May of Fund Balance Reserve Sonoma County will create and maintain a prudent level of financial resources to protect against the need to reduce service levels or raise fees due to temporary revenue shortfalls or unpredicted one-time expenditures. Reserves will also be created and maintained to fund anticipated future one-time expenditure needs and to allow time for the County to respond to major actions of the State of California that materially affect the County s financial position. Consistent with best practice recommendations from the Government Finance Officers Association (GFOA), the County will strive to maintain total General Fund discretionary reserves equal to 5%-15% of annual General Fund operating revenues. This range will be further subdivided into traffic light increments where 5-10% represents the red light signaling that no further use of reserves will be made except in dire emergencies, or where almost immediate replenishment is assured. Further, priority will be given to increase reserve levels. The 10-15% increment of the range represents the yellow light signaling that caution will be exercised in the use of reserves and only for one-time costs. In addition, consideration should be given to increase reserve levels should resources become available. Above 15%, a green light is given and adequate reserve levels have been achieved. viii

15 LETTER OF TRANSMITTAL AWARDS AND ACKNOWLEDGMENTS Financial Reporting Certificate of Achievement: The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the County s CAFR for the fiscal year ended June 30, This was the twenty-first consecutive year that the County has achieved this prestigious award. In order to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized CAFR that satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to meet the Certificate of Achievement Program s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Budget Presentation Award: The County received the GFOA s Distinguished Budget Presentation Award for its annual budget document for the fiscal year beginning July 1, This was the eighteenth consecutive year that the County has achieved this prestigious award. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device. Popular Financial Reporting Award: The County received the GFOA s Award for Outstanding Achievement in Popular Annual Financial Reporting for its Popular Annual Financial Report for the fiscal year ended June 30, The County has achieved this prestigious award fifteen times. This award is a national award that recognizes conformance with the highest standards for preparation of state and local government popular reports. In order to receive this award, a government must publish a Popular Annual Financial Report, whose contents conform to program standards of creativity, presentation, understandability and reader appeal. Acknowledgments: The preparation of the Comprehensive Annual Financial Report was achieved through the combined efforts of numerous individuals. We are especially grateful to the Auditor-Controller-Treasurer-Tax Collector s Office staff for their special efforts, particularly Cheryl Enold and our auditors, Vavrinek, Trine, Day and Co., LLP, for their outstanding efforts and many hours, which helped us achieve our objectives of timely and accurate financial reporting. We would also like to thank all the County departments who participated in its preparation and the Board for its leadership, responsibility, and action that ensure the general fiscal health and integrity of the County. Respectfully Submitted, Veronica A. Ferguson County Administrator David Sundstrom, CPA Auditor-Controller-Treasurer-Tax Collector ix

16 DIRECTORY OF APPOINTIVE AND ELECTED OFFICIALS APPOINTIVE OFFICERS & DEPARTMENT HEADS Agricultural Commissioner... Toni Linegar Agricultural Preservation & Open Space District General Manager... Bill Keene Child Support Services Director... Julie Paik Community Development Commission Director... Kathleen Kane County Administrator... Veronica A. Ferguson County Counsel... Bruce Goldstein Economic Development Director... Ben Stone Fair Manager... Tawny Tesconi Fire & Emergency Services Director... Al Terrell General Services Director... José Obregón Health Services Director...Rita Scardaci Human Resources Director... Wendy Macy Human Services Director... Jerry Dunn Information Systems Director... John Hartwig Permit & Resource Management Director... Tennis Wick Probation Officer, Chief... Robert Ochs Public Defender... Kathleen Pozzi Regional Parks Director... Caryl Hart Sonoma County Library Director... Jaime Anderson & David Dodd (Interim Co-Directors) Court Executive Officer (Superior Court Of California)... Jose Guillen Transportation & Public Works Director... Susan Klassen U.C. Cooperative Extension Director... Stephanie Larson Water Agency Director... Grant Davis x

17 DIRECTORY OF APPOINTIVE AND ELECTED OFFICIALS DIRECTORY OF APPOINTIVE AND ELECTED OFFICIALS ELECTED OFFICIALS. Board of Supervisors: District One... Susan Gorin District Two... David Rabbitt District Three... Shirlee Zane District Four... Mike McGuire District Five... Efren Carrillo Auditor-Controller-Treasurer-Tax Collector... David Sundstrom County Clerk\Recorder\Assessor... William F. Rousseau District Attorney... Jill Ravitch Sheriff-Coroner... Steve Freitas xi

18 *Board of Supervisors sit as Board of Directors for the Water Agency, Ag Pres Open Space District, and IHSS Public Authority and also Commissioners of the Community Development Commission. GRAND JURY Board of Retirement ECONOMIC DEVELOPMENT DIRECTOR University of California COUNTY OF SONOMA CHART OF ADMINISTRATIVE REPORTING RELATIONSHIPS ON MATTERS UNDER THE CONTROL OF THE BOARD OF SUPERVISORS E L E C T O R A T E BOARD OF SUPERVISORS* (Five Supervisors) Local Agency Formation Commission STATE JUDICIAL COUNCIL COUNTY ADMINISTRATOR (CLERK OF THE BOARD) LAFCO Exec. Officer AUDITOR-CONTROLLER TREASURER-TAX COLLECTOR COUNTY CLERK- RECORDER-ASSESSOR DISTRICT ATTORNEY SHERIFF - CORONER SUPERIOR COURT JUDGES INFORMATION SYSTEMS DIRECTOR GENERAL SERVICES DIRECTOR DIRECTOR FIRE & EMERGENCY SERVICES PUBLIC DEFENDER CHIEF PROBATION OFFICER COURT EXECUTIVE OFFICER DIRECTOR HUMAN SERVICES DIRECTOR HEALTH SERVICES DIRECTOR CHILD SUPPORT SERVICES COMMUNITY DEVELOPMENT DIRECTOR* DIRECTOR OF TRANSPORTATION & PUBLIC WORKS GENERAL MGR. SONOMA COUNTY WATER AGENCY* DIR. OF PERMIT & RESOURCE MANAGEMENT IHSS PUBLIC AUTHORITY MANAGER* Legend Civil Service Commission HUMAN RESOURCES DIRECTOR COUNTY COUNSEL DIRECTOR REGIONAL PARKS GENERAL MGR. AGRICULTURE PRES. & OPEN SPACE* AGRICULTURAL COMMISSIONER- SEALER UC COOPERATIVE EXTENSION DIRECTOR ELECTED APPOINTED Commission or Board with Separate Appointing Authority Administrative Coordination Library Joint Powers Agency Commission LIBRARY DIRECTOR COUNTY FAIR MANAGER Fair Board RETIREMENT ADMINISTRATOR Administrative Reporting Relationships

19 FINANCIAL SECTION

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21 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants VALUE THE DIFFERENCE INDEPENDENT AUDITORS REPORT Board of Supervisors County of Sonoma, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Sonoma, California (County), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the County 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. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Sonoma County Agricultural Preservation and Open Space District (nonmajor governmental fund), Transit Fund (major enterprise fund), Sonoma County Fair and Exposition (nonmajor enterprise fund), Community Development Commission (discretely presented component unit), Sonoma County Library (discretely presented component unit), Sonoma County Water Agency (discretely presented component unit), Sonoma Valley County Sanitation District (discretely presented component unit), Russian River County Sanitation District (discretely presented component unit), South Park County Sanitation District (discretely presented component unit), and the Occidental County Sanitation District (discretely presented component unit), which represents the following percentages of assets, net position/fund balances and revenues of the opinion units listed below: Net Position/ Opinion Unit Assets Fund Balances Revenues Aggregate Discretely Presented Component Units 100% 100% 100% Governmental Activities Business-Type Activities 1% 18% 10% 49% 2% 32% Aggregate remaining fund information 1% 14% 0% Major Enterprise Fund Transit Fund 100% 100% 100% Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for those entities, is based solely on the report of the other auditors. 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. The financial statements of the Sonoma County Agricultural Preservation and Open Space District were not audited in accordance with Government Auditing Standards Aspen Street Rancho Cucamonga, CA Tel: Fax: FRESNO LAGUNA HILLS PALO ALTO PLEASANTON RANCHO CUCAMONGA riverside Sacramento

22 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 financial statement 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. Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison statements for the general fund and the major special revenue funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1 to the financial statements, the County adopted Governmental Accounting Standards Board (GASB) Statement No. 61 The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34, GASB Statement No. 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, and GASB Statement No. 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, effective July 1, Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 7 through 20 and the schedules of funding progress on page 111 and related notes, 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 and other auditors 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 County s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, budgetary comparison schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. 2

23 The combining and individual nonmajor fund financial statements and the budgetary comparison 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. Such 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 by us and other auditors. In our opinion, based on our audit, the procedures performed as described above, and the report of the other auditors, the combining and individual nonmajor fund financial statements and budgetary comparison 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2013, on our consideration of the County'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 to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and in considering the County s internal control over financial reporting and compliance. Rancho Cucamonga, California December 20,

24

25 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED)

26

27 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) As management of the County of Sonoma (County), we offer readers of the County s financial statements this narrative overview and analysis of the financial activities of the County 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 the County s financial statements, which immediately follow this section. All dollar amounts are expressed in thousands unless stated otherwise. Financial Highlights The assets of the County exceeded its liabilities at the close of the most recent fiscal year by $1,417,651 (net position). Of this amount, $41,761 in unrestricted net position is available to meet ongoing obligations to citizens and creditors. $235,434 in restricted net position must be used only for specific purposes and $1,140,456 is net investment in capital assets. As of June 30, 2013, the County s governmental funds reported combined fund balances of $375,298, an increase of $34,541 in comparison with the prior year. Amounts available for spending include restricted, committed, assigned and unassigned fund balances and total 97.9% of ending fund balance. Of this amount, $242,054 is restricted by law or externally imposed requirements, $3,457 is committed for specific purposes and $74,227 is assigned for specific purposes based on the intent of the Board of Supervisors. At the end of the current fiscal year, unassigned fund balance for the General Fund was $48,749 or 15.2% of total General Fund expenditures. The County s long-term liabilities decreased by $40,757 or 4.2% during the current fiscal year, primarily due to principal payments of $22,965 on pension obligation bonds, $8,770 on bonds payable, $6,019 on certificates of participation, and $3,565 on advances from other governments. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the County s basic financial statements. The County s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the County s finances, in a manner similar to a private-sector business. These statements provide both long-term and short-term information about the County s overall financial status. The Statement of Net Position presents information on all of the County s assets and liabilities, with the difference between the two 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 County is improving or deteriorating. The Statement of Activities presents information showing how the County s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the County 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 County include general government, public protection, public ways and facilities, health and sanitation, public assistance, education and recreation and cultural services. The business-type activities of the County include Refuse, the Charles M. Schultz Sonoma County Airport (Airport), the Energy Independence Program, the County of Sonoma Transportation Project (Transit), the Community Hospital of Sonoma County (Community Hospital), the Sonoma County Fair and Exposition, Inc. (Fair), Spud Point Marina, and other. During the fiscal year ended June 30, 2013, the County applied the criteria of Governmental Accounting Standards Board (GASB) Statement No. 61, Financial Reporting Entity: Omnibus, to determine which component units should be reported as blended or discretely presented component units. Due to this change in accounting standards, the June 30, 2012 reported net position has been restated and presented in the following schedules for comparability. In addition to the GASB 61 restatement, capital assets and related accumulated depreciation were also restated due to the identification that not all pre GASB 34 land was appropriately valued as well as the improper disposal of 7

28 buildings currently in service during a prior year. Please see Note 19 Restatement of Net Position for further information. The government-wide financial statements include the following blended component units: the Sonoma County Fair and Exposition, Inc., Sonoma County Agricultural Preservation and Open Space District, the Community Hospital of Sonoma County, the Sonoma County Securitization Corporation, and the Sonoma County Public Financing Authority. The Successor Agency to the Sonoma County Community Redevelopment Agency (Successor Agency) is reported as a private-purpose trust fund in the fiduciary fund financial statements. These component units are included in the County s reporting entity because of the significance of their financial or operational relationship, their mutual governing body and the financial benefit/burden on the County. The following component units are presented as discrete component units of the County: the Sonoma County Community Development Commission (Community Development Commission), the Sonoma County Water Agency, the Sonoma County Library (Library), the Sonoma Valley County Sanitation District, the Russian River County Sanitation District, the South Park County Sanitation District, the Occidental County Sanitation District. 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 County, 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 County can be divided into three categories: governmental funds, proprietary 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 (1) how cash and other financial assets can readily be converted to available resources and (2) the balances left at year-end that are available for spending. Such information may be useful in determining what financial resources are available in the near future to finance the County s programs. 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 government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The County maintains several individual governmental funds organized according to their type (special revenue, debt service and capital projects). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, Human Services Special Revenue Fund, Health and Sanitation Special Revenue Fund, Mandated Revenues Special Revenue Fund, Open Space Special Tax Account Special Revenue Fund, Roads Special Revenue Fund, and the Mental Health Realignment Special Revenue Fund, which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregate presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The County adopts an annual appropriated budget for its General Fund and Special Revenue funds. A budgetary comparison statement has been provided for these funds to demonstrate compliance with this budget. Proprietary Funds The County maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The County uses enterprise funds to account for Refuse, the Airport, the Energy Independence Program, Transit, the Community Hospital, the Fair, Spud Point Marina, and other districts. Internal service funds are an accounting device used to accumulate and allocate cost internally among the County s various functions. The County uses internal service funds to account for Insurance, Heavy Equipment Replacement, the Enterprise Resource Planning (ERP) System, and Employee Retirement. The Insurance, Heavy Equipment Replacement, ERP System, and Employee Retirement internal service funds predominantly benefit governmental rather than business-type functions, so they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for Refuse, the Airport, the Energy Independence Program, and Transit, all of which are considered to be major funds of the County. Conversely, all 8

29 MANAGEMENT S DISCUSSION AND ANALYSIS internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the non-major enterprise funds and internal service funds is provided in the form of combining statements elsewhere in this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. 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. Other information - In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the County s progress in funding its obligation to provide pension benefits and other postemployment benefits to its employees. The combining statements referred to earlier in connection with non-major governmental funds, non-major enterprise funds, and internal service funds are presented immediately following the required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, over time net position may serve as a useful indicator of a government s financial condition. In the case of the County, assets exceeded liabilities by $1,417,651 at the close of the fiscal year. Summary of Net Position For the Year Ended June 30, (in thousands) Total Governmental Activities Business-Type Activities Total Dollar Percent * * * Change Change Assets: Current and other assets $ 1,031,782 $ 1,145,145 $ 99,365 $ 98,606 $ 1,131,147 $ 1,243,751 $ (112,604) (9.1%) Capital assets 1,171,581 1,164, , ,397 1,287,964 1,280,638 7, % Total assets 2,203,363 2,309, , ,003 2,419,111 2,524,389 (105,278) (4.2%) Liabilities: Current and other liabilities 69, ,023 12,881 10,211 82, ,234 (134,684) (62.0%) Long-term liabilities 800, , , , , ,667 (40,757) (4.2%) Total liabilities 870,469 1,044, , ,891 1,001,460 1,176,901 (175,441) (14.9%) Net position: Net investment in capital assets 1,040,466 1,025,895 99,990 96,064 1,140,456 1,121,959 18, % Restricted 234, , , ,798 2, % Unrestricted 57,877 7,420 (16,116) (14,689) 41,761 (7,269) 49, % Total net position $ 1,332,894 $ 1,265,376 $ 84,757 $ 82,112 $ 1,417,651 $ 1,347,488 70, % * The 2012 balances have been restated. See Note 19 in the Notes to The Basic Financial Statements for further information. The current year decrease in total current and other liabilities is primarily due to the County not issuing a Tax Revenue Anticipation Note (TRAN) in FY as well as the repayment of the FY TRAN of $130,000 in the current year. 9

30 Analysis of Net Position The County s total net position increased by $70,163, or 5.2%, during the fiscal year. As described below, the County experienced increases in all three categories of net position. Net Investment in capital assets: The largest portion of the County s net position is net investment in capital assets (e.g. land, buildings, roads, bridges, machinery, equipment and intangible assets), less the outstanding debt used to acquire those assets. The County uses these capital assets to provide services to citizens; as such, these assets are not available for future spending. Although the County s investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The County s net investment in capital assets was $1,140,456 at fiscal year-end, and consisted of the following: investment in capital assets (net of accumulated depreciation) of $1,287,964, less related debt of $147,508. The $18,497 (1.6%) increase in net position from the net investment in capital assets represents capital acquisitions and deletions, less current year depreciation, and the addition and/or retirement of related long-term debt. Restricted net position: Restricted net position of $235,434 represents resources that are subject to external restrictions on their use, or by enabling legislation. Due to the unique nature of funding sources, the County has significantly more restricted net position dollars than unrestricted net position dollars. Restricted net position increased by $2,636, or 1.1%. Significant changes to restricted net position, by function, include: Health and Sanitation function increased by $4,578 due primarily to Mental Health Services Act Programs, Public Protection increased by $3,558 due primarily to department cost savings and vacant staff positions, Public Ways and Facilities decreased by $2,577 due primarily to increased project expenses in the current year, and General Government decreased by $2,006 due primarily to a reduction in unspent bond proceeds restricted for capital projects. The remainder of the change resulted from less significant fluctuations in the County s other functions. Unrestricted net position: Unrestricted net position in the amount of $41,761 is available to fund County programs to citizens and debt obligations to creditors. The majority of unrestricted net position resides in the County s General Fund. Unrestricted net position increased by $49,030 or 675%. Significant components of the increase include: an increase of $22,797 in assigned fund balance which is classified as unassigned net position as these funds are restricted by the County Board of Supervisors and not external restrictions or enabling legislation. 10

31 MANAGEMENT S DISCUSSION AND ANALYSIS Analysis of Primary Government The Primary Government (Governmental and Business-type activities) increased net position by $70,163, or 5.2%, to $1,417,651 for the year ended June 30, Changes in Net Position For the Fiscal Year Ended June 30, 2013 (in thousands) Total Governmental Activities Business-Type Activities Total Dollar Percent Change Change Revenues: Program revenues: Charges for services $ 111,112 $ 98,760 $ 56,889 $ 55,002 $ 168,001 $ 153,762 14, % Operating grants and contributions 406, ,426 10,584 12, , ,112 8, % Capital grants and contributions 11,116 4,617 2,340 7,332 13,456 11,949 1, % General revenues: Property taxes 183, , , ,431 11, % Documentary transfer taxes 4,301 3, ,301 3, % Transient occupancy taxes 9,705 8, ,705 8, % Grants and other governmental revenues not restricted to - - specific programs 34,360 33,028 34,360 33,028 1, % Unrestricted investment earnings 8,068 14, ,697 9,749 15,946 (6,197) (38.9%) Other 20,875 23, ,443 24,294 (2,851) (11.7%) Total operating revenues 789, ,423 72,062 77, , ,669 30, % Expenses: General government 85,310 73, ,310 73,075 12, % Public protection 241, , , ,093 13, % Public ways and facilities 33,573 32, ,573 32,421 1, % Health and sanitation 116, , , ,819 5, % Public assistance 186, , , ,641 13, % Education (262) (30.1%) Recreation and cultural services 12,465 12, ,465 12,560 (42) (0.3%) Interest on long-term debt 43,801 43, ,801 43, % Refuse ,803 33,169 32,803 33,169 (366) (1.1%) Airport - - 4,283 3,985 4,283 3, % Energy Independence Program - - 3,681 4,487 3,681 4,487 (806) (18.0%) Transit ,967 15,617 15,967 15, % Community Hospital (348) (64.4%) Fair ,743 10,901 10,743 10,901 (158) (1.4%) Spud Point Marina - - 2,284 2,482 2,284 2,482 (198) (8.0%) Other - - 1,693 1,229 1,693 1, % Total operating expenses 720, ,154 71,646 72, , ,564 45, % Excess before transfers and extraordinary items 68,404 76, ,836 68,820 81,105 (12,285) (15.1%) Transfers (886) 2, (2,338) Extraordinary item - 15,455 1,343-1,343 15,455 (14,112) (91.3%) Change in net position 67,518 94,062 2,645 2,498 70,163 96,560 (26,397) (27.3%) Net position at beginning of year, as restated 1,265,376 1,171,314 82,112 79,614 1,347,488 1,250,928 96, % Net position at end of year $ 1,332,894 $ 1,265,376 $ 84,757 $ 82,112 $ 1,417,651 $ 1,347,488 $ 70, % 11

32 Analysis of Governmental Activities Governmental activities increased the County s net position by $67,518 to $1,332,894 for the year ended June 30, 2013, accounting for 96.2% of the County s total increase in net position. Governmental activities operating revenues exceeded operating expenditures by $68,404. Transfers to business-type activities decreased net position by $886. Revenues: Total operating revenues for the County s Governmental Activities had an overall increase from the prior year of $35,695 or 4.7%, to $789,118. Revenues are divided into two categories: Program Revenues and General Revenues. Program Revenues: Program Revenues had an overall increase of $25,977, or 5.9%, to $528,380 from the prior year. As an arm of the state government, a significant portion of charges for services and operating grants and contributions are tied to mandated services such as public assistance, health and alcohol/drug/mental health services (ADMHS). Total program revenues represent 67% of the County s funding for governmental activities. Charges for services increased by $12,352, or 12.5%, to $111,112 due primarily to increased expenditures within the County s Retirement Internal Service Fund. Operating grants and contributions increased by $10,726, or 2.7%, to $406,152 due primarily to an increase in public safety realignment revenues. These revenues are driven by sales tax and vehicle license fee revenue, which increased in the current year. Capital grants and contributions increased by $6,499, or 141%, to $11,116 due primarily to donations of improvements totaling $2,651 to the roads fund, $1,500 of donated land as well as $4,000 of capital contributions to the Agricultural Preservation & Open Space District as well as various immaterial decreases. General Revenues: General Revenues had and an overall increase of $6,118, or 2.4%, to $260,738 from the prior year. These revenues included general taxes which provided the Board of Supervisors with the most discretionary spending ability. Property tax revenues increased by $11,998, or 7.0%, to $183,429 due primarily to assets from former RDA being distributed to affected taxing agencies. These distributions were from unencumbered Low-Mod Housing Funds (LMIHF) and other unencumbered assets that were returned to the Auditor-Controller- Treasurer-Tax Collector from the County s Redevelopment Agencies. Transient occupancy tax increased by $948, or 10.8%, to $9,705 due primarily to strong revenues as a result of the County s economic recovery. Grants and other governmental revenues not restricted for specific programs increased by $1,332, or 4.0%, to $34,360 due primarily to an increase in sales tax related revenues. Unrestricted investment earnings decreased by $6,181, or 43.4%, to $8,068 due primarily to due to low rates of return on Treasury investments available in the current market. Other general revenues decreased by $2,890, or 12.2%, to $20,875 due primarily to a $3,776 settlement related to damages from the Calpine fire received by Agricultural Preservation & Open Space District in prior fiscal year. 12

33 MANAGEMENT S DISCUSSION AND ANALYSIS Expenses: Total expenses for governmental activities increased $43,560, or 6.4%, to $720,714 from the prior year.. General government function expenses increased by $12,235, or 16.7%, to $85,310 due primarily to the settlement of $3,407 in Property Tax Administrative Fee to the City Trusts, $4,000 in contributions towards purchase of open space land and $914 increase in Advertising expenses. Public protection function expenses increased by $12,578, or 5.5%, to $241,671 due primarily to $8,767 increase in Public Safety Realignment programs based on increased funding from the State. Health and sanitation functionn expenses increased by $4,923, or 4.4%, to $116,742 due primarily to $5,098 increase in Mental Health Realignment Special Revenue Fund programs based on increased funding from the State. Public assistance function expenses increased by $12,906, or 7.4%, to $186,547 due primarily to $12,504 increase in Mental Health Realignment Special Revenue Fund programs based on increased funding from the State. Interest on long-term debt increased by $126, or 0.3%, to $43,801 primarily due to the recording of $3,407 settlement of the Property Tax Administration Fee Settlement which was offset by an overall decrease in long-term debt interest expense of $3, , , , , , , , ,000 75,000 50,000 25,000 0 Expenses and Program Revenues - Governmental Activities Revenues Expenses 13

34 Revenues by Source - Governmental Activities Unrestricted investment earnings 1.02% Other 4.42% Charges for services 14.08% Grants and other governmental revenue not restricted to specific programs 4.36% Property taxes 23.24% Operating grants and contributions 51.47% Capital grants and contributions 1.41% Analysis of Business-Type Activities Business-type activities net position increased by $2,645 to $84,757 for the year ended June 30, 2013, accounting for 3.8% % of the County s total increase in net position. Total revenues for the County s Business Business-Type Type Activities had an overall decrease from the prior year yea of $5,184 or 6.7%, to $72,062, though with reduced expenses the revenues were sufficient to cover the costs of operations. Expenses and Program Revenues - Business-Type Type Activities Revenues Expenses 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-14

35 MANAGEMENT S DISCUSSION AND ANALYSIS Revenues by Source - Business-Type Activities Unrestricted Investment Earnings 2.33% Capital Grants and Contributions 3.25% Other 0.79% Operating Grants and Contributions 14.69% Charges for Services 78.94% Financial Analysis of the Government's Funds As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related finance legal requirements. Governmental Funds The focus of the County's governmental funds is to provide information on near-term term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County's financing requirements. In particular, total fund balance less the nonspendable portion is a useful measu measure re of a government s resources available for spending at the end of the fiscal year. At June 30, 2013, the County's Governmental overnmental Funds reported combined fund balances of $375, ,298 an increase of $34,541 in comparison with the prior year. The components of fund balance are as follows, and with the exception of nonspendable fund balance, are available for appropriation at any time (for more information see Note 11 Fund Balance): Nonspendable fund balance, $$7,745, consists of amounts that are not spendable le in form or are legally or contractually required to be maintained intact and primarily consists of: Advances - $5,152 Prepaid items and deposits - $1,734 Inventories - $843 Receivables - $16 Restricted fund balance, $242, ,054, consists of amounts with constraints put on their use by externally imposed creditors, grantors, laws, regulations and enabling legislation and consists of amounts restricted to: 15

36 Agricultural Preservation and Open Space District related items - $82,446 Capital projects and equipment replacement - $55,445 Debt service - $12,652 First 5 Children and Families Commission - $27,439 Mental Health Services Act - $16,767 Lighting Districts - $6,715 Health and Welfare - $12,101 Public Protection - $13,261 Road Maintenance - $7,192 Other - $8,036 (includes fire and emergency services, air pollution control, and other programs) Committed fund balance, $3,457, consists of amounts that have been committed to specific purposes by the Board of Supervisors and consists of amounts committed to: Advertising activities - $3,217 Other programs - $240 Assigned fund balance, $74,172, represents amounts intended for use as determined by the Board of Supervisors and also represents the residual balance in governmental funds other than the General Fund. Assigned fund balance consists of amounts assigned to: Capital projects and equipment replacement - $15,941 Fiscal year budgetary deficit - $17,724 Road maintenance - $17,485 Tribal development impact mitigation - $4,387 Redevelopment agencies - $9,927 Other programs - $8,763 (includes general services, public protection and other programs) Unassigned fund balance, $47,870, represents the residual classification for the General Fund and negative unassigned fund balance of Human Services totaling $609 and Roads of $55. Approximately 97.9%, or $367,553, of the total fund balances is available to meet the County s current and future needs. With the approval of the Board of Supervisors, County management can earmark a portion of fund balance to a particular function, project or activity, and can also earmark it for purposes beyond the current year, within the constrains applied to the various categories of fund balance. With the exception of the nonspendable portion, fund balances are available for appropriation at any time. General Fund The General fund is the main operating fund of the County. The General Fund s total fund balance increased by 13.4%, or $11,796, to $99,641 at June 30, The nonspendable portion of fund balance was $5,179, and the spendable portion was $94,462, an increase of $10,068, or 11.9%, from the prior year spendable balance of $84,394. The increase in the spendable fund balance is mainly due to strategic cost saving measures implemented by the Board of Supervisors during the current year, including a soft hiring freeze, and County-wide efforts to reduce spending. As a measure of the General Fund s liquidity, it is useful to compare both total fund balance and spendable fund balance to total General Fund expenditures. Total fund balance equates to approximately 31.7% of total General Fund expenditures. Total spendable fund balance equates to 30.1% of total General Fund expenditures. Of the General Fund spendable fund balance, $240, or 0.2%, was committed, and $45,743, or 45.9%, was assigned. There was no restricted fund balance. General Fund unassigned fund balance at June 30, 2013, was $48,479, a decrease of $17 from the prior year balance of $48,496, due to current year activity. 16

37 MANAGEMENT S DISCUSSION AND ANALYSIS Other Governmental Funds As compared with the prior year, the total fund balances of the remaining governmental funds increased 9.0%, or $22,745, to $275,657 with the following significant changes: Mandated Revenues Special Revenue fund balance increased by $4,812, from $50,717 to $55,529. This increase is primarily due to $3,567 in reduced overall expenditures. The Open Space Special Tax Account Special Revenue fund balance increased by $8,367, from $60,976 to $69,343. This increase is primarily the result of Measure F tax revenues and reduced funding on acquisitions of parcels by the Agricultural Preservation and Open Space District Special Revenue Fund. The Roads Special Revenue fund balance increased by $8,732 from $34,456 to $43,188. This increase is primarily due to the Board of Supervisors awarding a one-time reserve of $8 million to fund projects to improve road conditions throughout the County. The fund balance for other major and nonmajor governmental funds as a whole increased by $834, from $106,763 to $107,597, primarily due to the strategic cost savings measures implemented by the Board of Supervisors discussed above. Proprietary Funds The County's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The net position of the enterprise funds increased by $2,645 in the current year to $84,757, primarily due to: Refuse net position increased by $3,030 from $573 to $3,603, primarily due to the re-opening of the landfill was able to increase the volume of garbage and increase charges for services revenue. Transit net position decreased by $1,342 from $30,649 to $29,307, primarily due to $3,078 decrease in capital grants and contribution revenues in fiscal year ended June 30, 2013 compared to fiscal year ended June 30, Other Districts net position increased by $957 from $50,890 to $51,847. This increase is primarily due to the Fair s extraordinary item of $1,343 related to the extinguishment of debt. The net position of the internal service funds increased by $9,441, or 17.3%, to $64,141, primarily due to: Enterprise Resource Planning (ERP) Systems Administration internal service fund net position decreased by $1,855 from $7,976 to $6,121 primarily due to $731 in additional expenses related to the over capitalization of capital assets in the prior year which were expensed in the current year. Employee Retirement internal service fund net position increased by $11,889 from $5,450 to $17,339 due to charges for services revenues being greater than the combination of the fund s operating and nonoperating expenses. Charges for services revenues are intentionally set higher than expenses in order for the fund to generate sufficient cash to make debt service payments on the pension obligation bonds. 17

38 General Fund Budgetary Highlights The County s final budget appropriations for expenditures for the General Fund differ from the original budget by $13,379, or 4.2%. The major changes in appropriations are as follows: Salaries and benefits increased $4,558 primarily due to the anticipation of filling vacant positions as well as changes to benefits costs due to multiple bargaining units in salary negotiations. Services and Supplies increased $9,587 primarily due to $2,882 in increases in anticipation of projects which were postponed until the next fiscal year, $2,268 in increases for the Probation department after a fully developed plan for the Community Corrections Partnership program (AB 109 and AB 118 funding) was created, $1,265 for multi-year Environmental Impact Report costs, $895 for increase in information system projects and additional expenses related to additional revenues for the Agricultural Commissioner, $838 for increases in Fire and Emergency Services performance grants, and $521 for new contracts with Veteran s Building service providers. Reimbursements increased by $7,059 primarily due to anticipated reimbursements related to increases in salaries and benefits expenditures. Revenues: General Fund actual revenues were $1,578 less than the final budget revenue estimates. The main reasons are as follows: Tax revenues out preformed revenue estimates by $2,059, or 1.0%, primarily due to $1,325 increase in documentary transfer tax due to increased home sales prices and $753 increase in sales and use taxes received. Licenses, permits, and franchise fees had a positive $2,690, or 22.2%, variance from revenue estimates due to an increase in building permit fees. Intergovernmental revenues were under budgeted estimates by $3,883, or 3.9%, due primarily to the County collecting less revenue than anticipated from a variety of federal and state reimbursement sources, which in most cases also had offsetting expenditure savings. Charges for services under preformed revenue estimates by $1,683 primarily due to $900 of estimated revenues related to staff reassignments for the ERP System not being charged Expenditures: General Fund expenditures variance between the final budget and actual expenditures resulted in $19,148 of unspent appropriations. Key variances are as follows: salary and benefit cost savings of approximately $7,477 resulting from unfilled positions and changes in current benefit costs across all functions, $13,707 resulting from unspent appropriations for services and supplies across all functions, and $1,702 resulting from capital assets budgeted, but not procured in this fiscal year. Capital Assets CAPITAL ASSETS AND DEBT ADMINISTRATION The County's capital assets for its governmental and business-type activities as of June 30, 2013, amounted to $1,287,964 Capital assets include land, intangible assets, buildings and improvements, machinery and equipment, park facilities, roads, highways, and bridges. The total net increase in the County's capital assets for the current fiscal year was $7,326, or less than 1 percent. Additional capital asset information, including depreciation and outstanding CIP as of June 30, 2013, can be found in Note 6 of the Notes to the Financial Statements. 18

39 MANAGEMENT S DISCUSSION AND ANALYSIS Major capital asset additions during the current fiscal year included the following: Capital Assets (net of depreciation) For the Year Ended June 30, (in thousands) Total Governmental Activities Business-Type Activities Total Dollar Percent * * * Change Change Total capital assets, not being depreciated Intangible assets $ 273,226 $ 247,120 $ 342 $ 371 $ 273,568 $ 247,491 $ 26, % Land 432, ,460 21,053 19, , ,314 17, % Work in progress 4,970 1, ,970 1,684 3, % Construction in progress (CIP) 44,665 65,722 13,170 11,371 57,835 77,093 (19,258) (25.0%) Total capital assets, not being depreciated 755, ,986 34,565 31, , ,582 27, % Total capital assets, net of accumulated depreciation Intangible assets 10,219 10,762 2,586 3,130 12,805 13,892 (1,087) (7.8%) Infrastructure 118, , , ,299 (42,392) (26.3%) Buildings and improvements 264, ,206 66,210 68, , ,854 21, % Land improvements % Machinery and equipment 22,000 20,988 13,022 13,023 35,022 34,011 1, % Total capital assets, net of accumulated depreciation 415, ,255 81,818 84, , ,056 (20,515) (4.0%) Total $ 1,171,581 $ 1,164,241 $ 116,383 $ 116,397 $ 1,287,964 $ 1,280,638 $ 7, % * The 2012 balances have been restated. See Note 19 in the Notes to The Basic Financial Statements for further information. The current year decrease of $42,392 in depreciable Infrastructure is primarily due to the County s identification of $38,900 of non-depreciable land related to infrastructure (roads and bridges) was misclassified as Infrastructure and was reclassified to non-depreciable land, $5,000 of new assets were placed into service from Construction In Progress and $8,500 of current year depreciation was recorded in the current year. The County both purchases and constructs capital assets throughout the year. When a capital project will be completed in a subsequent fiscal year, related expenditures are recorded as CIP. In the year of completion, a project s CIP is allocated to the appropriate capital asset classification(s). In the current fiscal year, CIP had a net decrease of $21,057 for governmental activities and an increase of $1,799 for business-type activities, as CIP expenditures of $26,872 were offset by project completions/disposals of $46,130. The County completed and capitalized projects costing approximately $43,497. Major projects completed include: $4,400 for the Public Protection Family justice Center $21,200 for General Government CMP Energy improvements, including the main fuel cell $2,600 for Probation Building at 370 Administration Drive $5,000 in Road and Bridge projects $2,700 in various Regional Park improvements $4,300 in Transit for structural improvement and equipment projects 19

40 During the year, the County capitalized $9,688 in equipment and buildings and improvements, and also recorded depreciation of $34,756 against its capital assets. Capital asset disposals for the fiscal year totaled $1,096, net of accumulated depreciation. Debt Administration At the end of the current fiscal year, the County had total long-term liabilities outstanding of $918,910. Long-Term Liabilities For the Year Ended June 30, (in thousands) Total Governmental Activities Business-Type Activities Total Dollar Percent * * * Change Change Pension obligation bonds $ 472,255 $ 495,220 $ - $ - $ 472,255 $ 495,220 $ (22,965) (4.6%) Bonds and bond - - premium payable 94,330 97,673 94,330 97,673 (3,343) (3.4%) Loans payable 75,856 77, ,856 77,356 (1,500) (1.9%) Net OPEB obligation 50,608 49, ,608 49,582 1, % Certificates of participation 32,471 36,990 3,200 4,700 35,671 41,690 (6,019) (14.4%) Self-Insurance 37,820 36, ,820 36,331 1, % Compensated absences 31,220 36, ,967 37,363 (5,396) (14.4%) Landfill closure and - - postclosure obligation 52,778 51,979 52,778 51, % Energy bonds payable ,648 46,614 47,648 46,614 1, % Advances from other - - governments 12,358 15,923 12,358 15,923 (3,565) (22.4%) Other long-term obligations 6,240 7,416 1,379 2,520 7,619 9,936 (2,317) (23.3%) Total $ 800,800 $ 836,987 $ 118,110 $ 122,680 $ 918,910 $ 959,667 $ (40,757) (4.2%) * The 2012 balances have been restated. See Note 19 in the Notes to The Basic Financial Statements for further information. During the fiscal year ended June 30, 2013, the County s long-term liabilities decreased by $40,757. This decrease is primarily due to principal payments of $22,965 for pension obligation bonds, $6,019 for certificates of participation, $5,625 for energy bonds payable, $3,343 for bonds and bond premium payable, $3,565 for advances from other governments, $3,111 for loans payable, which were partially offset by the issuance of $6,659 of Energy Bonds Payable, and $1,611 in loans payable related to the new Enterprise Financial System and PG&E lighting retrofit projects. Additional information on the County s long-term liabilities can be found in Note 9 to the basic financial statements. Standard & Poor s Ratings Services raised its rating on Sonoma County, Calif. s pension obligation bonds (POBs) one notch to AA from AA-, and the outlook is stable. ECONOMIC FACTORS AND NEXT YEAR S BUDGET Sonoma County s economy is seeing positive trends, led by consumer spending, increased tourism and decrease in unemployment rates. We are expecting an economic upturn to continue through the next fiscal year. A summary of current Sonoma County economic factors follows: The Sonoma County unemployment rate is currently at 7.1%, an improvement from the County s unemployment rate of 9.0% in

41 MANAGEMENT S DISCUSSION AND ANALYSIS Per capita income increased 2.6% when compared to the prior year. County-wide retail sales increased 7.32% when compared to the prior year. Real estate prices continued to rise during 2013, with the median home price increasing by $54,500, or 14.1%, from the prior year. However, since assessments are based on actual real estate prices and are calculated as of calendar year end, there is a lag in actual assessed values of residential and nonresidential property values resulting in a decrease of 1.0% when compared to the prior year. The County s tourism industry continues to show signs of improvement, with an increase in transient occupancy tax revenues of 9.2% compared to the prior year. The County s adopted budget for the next year reflects an expectation of a slight increase in property tax revenues, other tax revenues and intergovernmental revenues. The State of California adopted a budget on time, including a continuing source of funds from the Governor-sponsored Proposition 30 tax initiative. The improving condition of the State finances is helping the County s own effort to balance the local budget. In an effort to maintain a balanced budget, which is an adopted County policy, the board continues to take a cautious fiscal approach. The County will continue to focus on long term funding for the Road Fund infrastructure, pension cost reduction and keeping strong reserves. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the County's finances for all interested parties. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Sonoma County Auditor-Controller-Treasurer-Tax Collector, 585 Fiscal Drive, Suite 100, Santa Rosa, California

42

43 BASIC FINANCIAL STATEMENTS

44

45 Statement of Net Position June 30, 2013 (Dollars in Thousands) Primary Government Discrete Component Units Community Sonoma Non-Major Governmental Business-Type Development County Component Activities Activities Total Commission Water Agency Units ASSETS: Cash and investments $ 434,554 $ 37,917 $ 472,471 $ 6,728 $ 174,961 $ 30,878 Restricted cash and investments 12,888 7,204 20,092 2,697 5,826 11,609 Receivables, net 17,164 52,471 69,635 59,898 9,972 1,652 Inventories , Assets held for resale Internal balances 1,513 (1,513) Due from other governments 90,679 2,528 93,207 2,753-1,231 Advances to other governments ,056 Prepaid expenses and deposits 10, , Deferred charges 2, , Net pension asset 461, , Capital assets: - - Nondepreciable 755,858 34, ,423 5, ,945 18,122 Depreciable, net 415,723 81, ,541 4, ,094 99,455 Total assets 2,203, ,748 2,419,111 82, , ,458 LIABILITIES: Accounts payable and accrued liabilities 47,093 5,585 52, ,046 2,412 Due to other governments 4,204 2,364 6, Unearned revenue 12,369 4,049 16,418-5,524 - Interest payable 4, ,912-2, Deposits and other liabilities Pollution remediation ,298 Other liabilities 1,974-1, Long-term liabilities: - - Due within one year 36,266 5,565 41, ,369 2,074 Due in more than one year 764, , , ,045 39,247 Total liabilities 870, ,991 1,001,460 1, ,926 45,480 NET POSITION: Net investment in capital assets 1,040,466 99,990 1,140,456 9, ,805 82,727 Restricted: Capital projects 38, , Debt service 21, , Agricultural preservation and open spaces 75,090-75,090 First 5 Children and Families Commission 27,439-27, Mental health services act programs 16,767-16, Public protection 13, , Health and Welfare 12,101-12, APOSD IPA, Ops and Maintenance 7,356-7, Road maintenance 7,192-7, Lighting districts 6,715-6, Air pollution control 3, , Fire and emergency services 3,081-3, Other programs 1,710 1, Discrete Component Units 71, ,422 14,185 Total Restricted 234, ,434 71, ,422 14,185 Unrestricted 57,877 (16,116) 41,761-50,590 24,066 Total net position $ 1,332,894 $ 84,757 $ 1,417,651 $ 81,364 $ 375,817 $ 120,978 See accompanying notes to the basic financial statements. 25

46 Statement of Activities For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions FUNCTION/PROGRAM ACTIVITIES: Primary government: Governmental activities: General government $ 85,310 $ 53,062 $ 21,781 $ 6,031 Public protection 241,671 32,987 81, Public ways and facilities 33, ,648 2,651 Health and sanitation 116,742 8, ,597 - Public assistance 186,547 12, , Education Recreation and cultural services 12,465 4,011 2,374 1,783 Interest on long-term debt 43, Total governmental activities 720, , ,152 11,116 Business-type activities: Refuse 32,803 34, Airport 4,283 4, Energy Independence Program 3,681 2, Transit 15,967 2,193 10,522 1,733 Community Hospital Fair 10,743 9, Spud Point Marina 2,284 2, Other 1,693 1, Total business-type activities 71,646 56,889 10,584 2,340 Total primary government $ 792,360 $ 168,001 $ 416,736 $ 13,456 Component units: Community Development Commission $ 34,486 $ 1,104 $ 34,052 $ 3,467 Water Agency 64,337 45,611 4,449 2,163 Library 16, Sonoma Valley Sanitation District 13,213 13, ,885 Russian River Sanitation District 4,160 3,848-1,951 South Park Sanitation District 2,542 3, Occidential Sanitation District Total component units $ 135,748 $ 68,411 $ 39,172 $ 9,994 GENERAL REVENUES: Taxes: Property Documentary transfer Transient occupancy Grants and other governmental revenues not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Other EXTRAORDINARY ITEM TRANSFERS Total general revenues, extraordinary item and transfers Change in net position NET POSITION, BEGINNING OF YEAR, as restated NET POSITION, END OF YEAR See accompanying notes to the basic financial statements. 26

47 Net (Expense) Revenue and Changes in Net Position Primary Government Discrete Component Units Business- Community Sonoma Non-Major Governmental Type Development County Component Activities Activities Total Commission Water Agency Units FUNCTION/PROGRAM ACTIVITIES: Primary government: Governmental activities: $ (4,436) $ - $ (4,436) General government (126,493) - (126,493) Public protection (8,215) - (8,215) Public ways and facilities (2,090) - (2,090) Health and sanitation (2,456) - (2,456) Public assistance (546) - (546) Education (4,297) - (4,297) Recreation and cultural services (43,801) - (43,801) Interest on long-term debt (192,334) - (192,334) Total governmental activities Business-type activities: - 2,127 2,127 Refuse - (110) (110) Airport - (1,571) (1,571) Energy Independence Program - (1,519) (1,519) Transit Community Hospital - (798) (798) Fair - (43) (43) Spud Point Marina Other - (1,833) (1,833) Total business-type activities (192,334) (1,833) (194,167) Total primary government Component units: $ 4,137 $ - $ - Community Development Commission - (12,114) - Water Agency (14,972) Library 2,109 Sonoma Valley Sanitation District 1,639 Russian River Sanitation District 784 South Park Sanitation District 246 Occidential Sanitation District 4,137 (12,114) (10,194) Total component units GENERAL REVENUES: Taxes: 183, ,429-20,115 15,183 Property 4,301-4, Documentary transfer 9,705-9, Transient occupancy Grants and other governmental revenues 34,360-34, not restricted to specific programs 8,068 1,681 9, Unrestricted investment earnings Gain on sale of capital assets 20, , Other - 1,343 1, EXTRAORDINARY ITEM (886) TRANSFERS Total general revenues, extraordinary item 259,852 4, , ,013 15,711 and transfers 67,518 2,645 70,163 4,547 8,899 5,517 Change in net position 1,265,376 82,112 1,347,488 76, , ,461 NET POSITION, BEGINNING OF YEAR, as restated $ 1,332,894 $ 84,757 $ 1,417,651 $ 81,364 $ 375,817 $ 120,978 NET POSITION, END OF YEAR See accompanying notes to the basic financial statements. 27

48 Balance Sheet Governmental Funds June 30, 2013 (Dollars in Thousands) Human Health and Services Sanitation Special Special General Revenue Revenue ASSETS: Cash and investments $ 87,118 $ 454 $ 7,501 Cash and investments with trustee Receivables (net of allowance for doubtful accounts) Accounts 2, ,226 Loans Interest and other Due from other funds 31,271 6,158 1,109 Inventories Due from other governments 19,498 19,613 30,004 Advances to other funds 5, Prepaid items and deposits - 1, Total assets $ 146,034 $ 27,754 $ 40,016 LIABILITIES AND FUND BALANCES: Liabilities: Accounts payable and accrued salaries and benefits $ 33,197 $ 811 $ 5,062 Due to other funds - 20,497 10,033 Due to other governments 94-3,914 Deferred revenue 11,681 5,563 11,092 Deposits from others 1, Other liabilities Total liabilities 46,393 26,871 30,793 Fund balances: Nonspendable 5,179 1, Restricted - - 9,047 Committed Assigned 45, Unassigned 48,479 (609) - Total fund balances 99, ,223 Total liabilities and fund balances $ 146,034 $ 27,754 $ 40,016 See accompanying notes to the basic financial statements. 28

49 Mandated Open Space Mental Health Revenues Special Tax Account Roads Realignment Special Special Special Special Other Revenue Revenue Revenue Revenue Funds Total $ 55,967 $ 66,320 $ 47,028 $ 5,071 $ 74,917 $ 344, ,623 11, , , ,813 5, , ,537-3,792 6,529 8,642 89, , ,745 $ 57,627 $ 69,343 $ 51,493 $ 11,600 $ 98,617 $ 502,484 $ 218 $ - $ 2,218 $ - $ 2,280 $ 43, ,880 3,512 38, , ,814-3,003 37, , ,927 2,098-8,305 3,880 8, , ,745 55,501 69,343 25,100 7,720 75, , ,217 3, ,430-10,971 74, ,870 55,529 69,343 43,188 7,720 89, ,298 $ 57,627 $ 69,343 $ 51,493 $ 11,600 $ 98,617 $ 502,484 See accompanying notes to the basic financial statements. 29

50

51 Reconciliation of the Balance Sheet to Statement of Net Position Governmental Funds June 30, 2013 (Dollars in Thousands) Fund balances - total governmental funds $ 375,298 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 governmental funds. Governmental capital assets 1,734,088 Less: accumulated depreciation (574,762) Other long-term assets are not available to pay current period expenditures and, therefore, are deferred in the governmental funds. 25,212 Internal service funds are used by management to charge the costs of self insurance, equipment purchases and other activities to individual funds. The assets and liabilities of certain funds are included as governmental activities in the statement of net position. 64,141 Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental funds. Compensated absences (30,941) Certificates of participation (32,471) Bonds payable (90,700) Bond premium (3,630) Notes payable (1,925) Loans payable (74,582) Net OPEB obligation (50,608) Capital lease obligations (4,315) Accrued interest payable (1,911) (291,083) Net position of governmental activities $ 1,332,894 See accompanying notes to the basic financial statements. 31

52 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Human Health and Services Sanitation General Special Special Fund Revenue Revenue REVENUES: Taxes $ 200,537 $ - $ - Licenses, permits and franchise fees 14,803-4,056 Fines, forfeitures and penalties 20, Use of money and property 5,236 (24) (107) Intergovernmental 94,806 95,493 38,356 Charges for services 44,189 1,219 16,029 Other 5,958 3, Total revenues 385, ,636 59,266 EXPENDITURES: Current: General government 70, Public protection 210, Public ways and facilities Health and sanitation ,113 Public assistance ,962 - Education Recreation and cultural services 11, Capital outlay 8,870-1,677 Debt service: Principal 5, Interest and other 6, Total expenditures 314, ,962 65,790 Excess (deficiency) of revenues over (under) expenditures 71,868 (13,326) (6,524) Other financing sources (uses): Transfers in 4,122 14,620 7,495 Transfers out (64,610) (604) (230) Issuance of long-term debt Proceeds from sale of capital assets Total other financing sources (uses) (60,072) 14,016 7,265 NET CHANGE IN FUND BALANCES 11, Fund balances, beginning of year, as restated 87, ,482 FUND BALANCES, END OF YEAR $ 99,641 $ 883 $ 9,223 See accompanying notes to the basic financial statements. 32

53 Mandated Open Space Mental Health Revenues Special Tax Account Road Realignment Special Special Special Special Other Revenue Revenue Revenue Revenue Funds Total $ - $ 19,444 $ 117 $ - $ 11,822 $ 231,920 2, ,029 21,962 4, , ,276 19,403-22,268 66,617 64, ,810 7,053-1,803-4,287 74, ,072-7,845 20,422 33,903 19,940 25,808 66,732 90, , ,000-11,573 85,869 6, , , , ,991 6, ,271 9, ,133 11, ,537 28, , , ,044 13,909 32, ,488 12, ,611 17,838 25,403 4,000 33,832 82, , ,224 8,500 15,940 (8,024) (16,076) (17,634) 34, ,651 18,409 17,181 79,641 (3,851) (7,573) (895) - (2,780) (80,543) (3,688) (7,573) 16,756 18,409 14,704 (183) 4,812 8,367 8,732 2,333 (2,930) 34,541 50,717 60,976 34,456 5,387 92, ,757 $ 55,529 $ 69,343 $ 43,188 $ 7,720 $ 89,771 $ 375,298 See accompanying notes to the basic financial statements. 33

54

55 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities Governmental Funds For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Net change in fund balances - total governmental funds: $ 34,541 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay $ 32,643 Depreciation expense (25,394) 7,249 The statement of activities reports losses arising from the sale of capital assets as the difference between the proceeds from sale of capital assets and the book value of the sold capital assets, while the governmental funds report the proceeds from sale of capital assets. The difference is the book value of the sold capital assets. (5,574) Donations of capital assets increase net position in the statement of activities but do not appear in the governmental funds because they are not financial resources. 4,189 Transfer in of capital assets from business-type funds. 375 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds (deferred revenue). Revenue in the statement of activities is not limited by availability, so certain revenues have been reduced by the amounts that were unavailable at the beginning of the year and increased by the amounts that were unavailable at the end of the year. 836 Issuance of long-term debt provides current financial resources to governmental funds. Repayment of debt principal is an expenditure in the governmental funds. Neither has any effect on net position. Also, governmental funds report the effect of premiums when debt is issued, whereas these amounts are deferred and amortized in the statement of activities. Long-term debt issuance $ (594) Principal repayments 12,149 Amortization of bond premium ,753 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Change in accrued interest 256 Change in compensated absences 5,478 Change in OPEB (1,026) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net expense of certain internal service funds is reported with governmental activities. 9,441 Change in net position of governmental activities $ 67,518 See accompanying notes to the basic financial statements. 35

56 General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Taxes $ 196,210 $ 198,478 $ 200,537 $ 2,059 Licenses, permits, and franchise fees 12,019 12,113 14,803 2,690 Fines, forfeitures, and penalties 17,091 20,509 20,358 (151) Use of money and property 5,728 5,766 5,236 (530) Intergovernmental 87,533 98,689 94,806 (3,883) Charges for services 41,609 45,872 44,189 (1,683) Other 6,359 6,038 5,958 (80) Total revenues 366, , ,887 (1,578) EXPENDITURES: General government: Board of Supervisors 3,059 3,100 2, County Administrator 3,047 3,204 3, General Services 37,902 40,743 37,795 2,948 Assessor 9,796 10,160 9, Auditor-Controller-Treasurer-Tax Collector 15,948 15,917 15, County Counsel 7,117 7,481 7,476 5 Human Resources 5,940 6,144 5, Registrar of Voters 3,608 3,617 2, Information Systems 32,684 35,086 32,663 2,423 Employee Benefits 3,144 3,144 2, Other General Government 10,206 12,963 11,074 1,889 Appropriation for Contingencies 1,889 2, ,849 Total general government 134, , ,984 13,432 Public protection: District Attorney 19,894 20,280 19, Public Defender 9,439 9,425 9, Superior/Municipal Court 11,162 11,162 11, Grand Jury County Clerk Sheriff Division 75,900 77,174 75,956 1,218 Detention 52,751 54,393 54, Probation Department 23,601 26,313 23,764 2,549 Juvenile Halls 23,593 23,404 20,545 2,859 Emergency Services 1,765 3,154 2,132 1,022 Permit and Resource Management 17,537 18,677 15,414 3,263 Agricultural Commissioner 4,680 5,808 5, Total public protection 240, , ,910 12,530 See accompanying notes to the basic financial statements. 36

57 General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Continued) For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Budgeted Amounts Actual Amounts Original Final Public ways and facilities: Public Works Public assistance: Human Services Education: Agricultural Extension Recreation and cultural services: Regional Parks 14,889 15,547 14, Reimbursements (69,118) (76,178) (70,244) (5,934) Encumbrances (2,493) (2,368) (778) (1,590) Total expenditures 319, , ,019 19,148 Excess of revenues over expenditures 43,795 54,298 71,868 17,570 OTHER FINANCING SOURCES (USES): Transfers in 6,550 8,096 4,122 (3,974) Transfers out (74,961) (78,658) (64,610) 14,048 Proceeds from sale of capital asset (125) Total other financing sources (uses) (68,411) (70,562) (60,363) 9,949 NET CHANGE IN FUND BALANCE, BUDGETARY BASIS $ (24,616) $ (16,264) 11,505 $ 27,519 BUDGETARY BASIS ADJUSTMENTS: Issuance of long-term debt 291 NET CHANGE IN FUND BALANCE, GAAP BASIS $ 11,796 Variance with Final Budget Positive (Negative) See accompanying notes to the basic financial statements. 37

58 Human Services Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Use of money and property $ 25 $ 25 $ (24) $ (49) Intergovernmental 100, ,223 95,493 (7,730) Charges for services 1,087 1,087 1, Other revenue 4,478 4,481 3,948 (533) Total revenues 105, , ,636 (8,180) EXPENDITURES: Public assistance 173, , ,075 21,851 Reimbursements (48,257) (54,423) (46,113) (8,310) Total expenditures 125, , ,962 13,541 Deficiency of revenues under expenditures (19,252) (18,687) (13,326) 5,361 OTHER FINANCING SOURCES: Transfers in 19,252 19,252 14,620 (4,632) Transfers out - (604) (604) - Total other financing sources and uses 19,252 18,648 14,016 (4,632) NET CHANGE IN FUND BALANCE $ - $ (39) $ 690 $ 729 See accompanying notes to the basic financial statements. 38

59 Health and Sanitation Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Licenses, permits and franchise fees $ 3,977 $ 4,037 $ 4,056 $ 19 Fines, forfeitures and penalties Use of money and property (20) (20) (107) (87) Intergovernmental 50,814 54,163 38,356 (15,807) Charges for services 2,341 3,758 16,029 12,271 Other revenue 1,151 1, (523) Total revenues 58,354 63,348 59,266 (4,082) EXPENDITURES: Health and sanitation 150, , ,548 10,753 Reimbursements (78,930) (82,011) (81,742) (269) Encumbrances (17) (17) (16) (1) Total expenditures 71,077 76,273 65,790 10,483 Excess (deficiency) of revenues over (under) expenditures (12,723) (12,925) (6,524) 6,401 OTHER FINANCING SOURCES (USES): Transfers in 7,706 7,806 7,495 (311) Transfers out (230) (230) (230) - Total other financing sources (uses) 7,476 7,576 7,265 (311) NET CHANGE IN FUND BALANCE $ (5,247) $ (5,349) $ 741 $ 6,090 See accompanying notes to the basic financial statements. 39

60 Mandated Revenues Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Licenses, permits and franchise fees $ 1,954 $ 1,954 $ 2,073 $ 119 Fines, forfeitures and penalties 3,138 3,144 4,168 1,024 Use of money and property Intergovernmental 23,011 23,396 19,403 (3,993) Charges for services 5,464 5,549 7,053 1,504 Other revenue 959 1, (232) Total revenues 34,854 35,406 33,903 (1,503) EXPENDITURES: General government Public protection: Recorder 2,230 2,384 2, Superior Court District Attorney 1,707 1,822 1, Sheriff 2,229 2, ,369 Detention and Corrections 1,296 1, Emergency services 1,322 1,506 1, Other Public ways and facilities Health and sanitation 6,692 8,322 6,818 1,504 Public assistance Children's Services 14,589 14,579 11,607 2,972 Child Fund Reimbursements (104) (104) (97) (7) Encumbrances (154) (154) (481) 327 Total expenditures 31,812 33,472 25,403 8,069 Excess (deficiency) of revenues over (under) expenditures 3,042 1,934 8,500 6,566 OTHER FINANCING SOURCES (USES): Transfers in (23) Transfers out (16,164) (14,001) (3,851) 10,150 Total other financing sources (uses) (16,109) (13,815) (3,688) 10,127 NET CHANGE IN FUND BALANCE $ (13,067) $ (11,881) $ 4,812 $ 16,693 See accompanying notes to the basic financial statements. 40

61 Open Space Special Tax Account Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Taxes $ 16,128 $ 16,128 $ 19,444 $ 3,316 Use of money and property (3) Total revenues 16,627 16,627 19,940 3,313 EXPENDITURES: General government 23,133 22,929 4,000 18,929 Total expenditures 23,133 22,929 4,000 18,929 Deficiency of revenues under expenditures (6,506) (6,302) 15,940 22,242 OTHER FINANCING SOURCES (USES): Transfers out (8,000) (8,204) (7,573) 631 Total other financing sources (uses) (8,000) (8,204) (7,573) 631 NET CHANGE IN FUND BALANCE $ (14,506) $ (14,506) 8,367 $ 22,873 See accompanying notes to the basic financial statements. 41

62 Roads Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Taxes $ - $ - $ 117 $ 117 Licenses, permits and franchise fees Fines, forfeitures and penalties (17) Use of money and property Intergovernmental 37,714 37,714 22,268 (15,446) Charges for services 1,652 1,652 1, Other revenue 2,465 2,465 1,072 (1,393) Total revenues 42,188 42,188 25,808 (16,380) EXPENDITURES: Public ways and facilities 79,289 82,040 44,264 37,776 Reimbursements (11,084) (11,084) (10,403) (681) Encumbrances (29) (29) (29) - Total expenditures 68,176 70,927 33,832 37,095 Excess (deficiency) of revenues over (under) expenditures (25,988) (28,739) (8,024) 20,715 OTHER FINANCING SOURCES (USES): Transfers in 15,037 17,937 17,651 (286) Transfers out (347) (900) (895) 5 Total other financing sources (uses) 14,690 17,037 16,756 (281) NET CHANGE IN FUND BALANCE $ (11,298) $ (11,702) $ 8,732 $ 20,434 See accompanying notes to the basic financial statements. 42

63 Mental Health Realignment Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Use of money and property $ 73 $ 73 $ 115 $ 42 Intergovernmental 46,860 65,444 66,617 1,173 Total revenues 46,933 65,517 66,732 1,215 EXPENDITURES: Health and sanitation 34,493 42,353 41,271 1,082 Public assistance 30,169 41,537 41,537 - Total expenditures 64,662 83,890 82,808 1,082 Deficiency of revenues under expenditures (17,729) (18,373) (16,076) 2,297 OTHER FINANCING SOURCES: Transfers in 19,438 19,466 18,409 (1,057) Total other financing sources and uses 19,438 19,466 18,409 (1,057) NET CHANGE IN FUND BALANCE $ 1,709 $ 1,093 $ 2,333 $ 1,240 See accompanying notes to the basic financial statements. 43

64 Statement of Net Position Proprietary Funds June 30, 2013 (Dollars in Thousands) Business-type Activities-Enterprise Funds Energy Internal Independence Service Refuse Airport Program Transit Other Total Funds ASSETS: Current assets: Cash and investments $ 28,340 $ 579 $ 1,031 $ 3,185 $ 4,782 $ 37,917 $ 90,178 Restricted cash and investments , ,821 1,265 Receivables, net - Accounts 4, ,570 6,561 Contractual assessments Interest and other Inventories Due from other governments , ,528 1,064 Prepaid expenses and deposits ,046 Total current assets 33,010 1,365 5,262 6,336 5,492 51, ,114 Noncurrent assets: Restricted cash and investments , ,383 - Net pension asset ,167 Receivables - Contractual assessments , ,017 - Deferred charges ,194 Capital assets: Nondepreciable 5,288 22,592-4,776 1,909 34,565 2,653 Depreciable, net 23,481 16,996-22,599 18,742 81,818 9,602 Total noncurrent assets 28,784 40,021 46,017 30,321 20, , ,616 Total assets $ 61,794 $ 41,386 $ 51,279 $ 36,657 $ 26,145 $ 217,261 $ 583,730 See accompanying notes to the basic financial statements. 44

65 Statement of Net Position (Continued) Proprietary Funds June 30, 2013 (Dollars in Thousands) Business-type Activities-Enterprise Funds Energy Internal Independence Service Refuse Airport Program Transit Other Total Funds LIABILITIES: Current liabilities: Accounts payable $ 1,688 $ 445 $ 56 $ 2,488 $ 777 $ 5,454 $ 1,875 Due to other funds Due to other government ,164 1,200 2,364 - Interest payable ,118 Compensated absences Self-funded insurance ,857 Unearned revenue , ,049 - Advances from other governments ,049 - Landfill closure and postclosure costs Certificates of participation, net 1, ,565 - Bonds payable, net - - 1, ,632 13,090 Notes payable Capital leases Current liabilities payable from restricted assets: Other Total current liabilities 3,543 2,034 3,004 7,299 2,848 18,728 28,221 Noncurrent liabilities: Compensated absences Self-funded insurance ,963 Advances from other funds ,231 3,921 Other liabilities Advances from other governments - 5,860 1,000-4,449 11,309 - Landfill closure and postclosure costs 52, ,590 - Certificates of participation, net 1, ,535 - Notes payable ,021 Bonds payable, net , , ,165 Capital leases Total noncurrent liabilities 54,648 6,180 47, , , ,368 Total liabilities 58,191 8,214 50,795 7,350 7, , ,589 NET POSITION: Net investment in capital assets 25,338 32,099-27,375 15,178 99,990 12,256 Restricted for: Debt service ,201 Junior Livestock Auction Scholarships Capital projects Unrestricted (21,735) ,932 2,562 (16,116) 42,684 Total net position 3,603 33, ,307 18,191 84,757 64,141 Total liabilities and net position $ 61,794 $ 41,386 $ 51,279 $ 36,657 $ 26,145 $ 217,261 $ 583,730 See accompanying notes to the basic financial statements. 45

66

67 Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Business-type Activities-Enterprise Funds Energy Internal Independence Service Refuse Airport Program Transit Other Total Funds OPERATING REVENUES: Charges for services $ 31,147 $ 233 $ 125 $ 2,193 $ 2,762 $ 36,460 $ 132,197 Flat charges Rents and concessions 65 3, ,517 13,405 - Interest income - - 1, ,985 - Sales and miscellaneous 3, ,508 - Total operating revenues 34,930 4,056 2,110 2,193 13,600 56, ,197 OPERATING EXPENSES: Services and supplies 25,910 1, ,241 7,844 48,684 10,102 Salaries and employee benefits 4,209 1, ,348 12,255 57,722 Claims expenses ,029 Depreciation and amortization 2, ,963 1,404 7,756 2,280 Total operating expenses 32,583 4,218 1,460 15,838 14,596 68,695 97,133 Operating income (loss) 2,347 (162) 650 (13,645) (996) (11,806) 35,064 NONOPERATING REVENUES (EXPENSES): Investment income , , Interest expense (226) (65) (1,420) - (306) (2,017) (26,417) Intergovernmental , ,584 - Miscellaneous (801) (243) 351 Gain (Loss) on disposal of capital assets (129) - (123) 8 Total nonoperating revenues (expenses) (6) 349 (839) 10,570 (192) 9,882 (25,264) Income (loss) before contributions and transfers 2, (189) (3,075) (1,188) (1,924) 9,800 Capital contributions , ,340 - Transfers in , Transfers out (12) (5) - - (378) (395) (925) 3, (189) (1,342) (501) 1,302 9,441 Extraordinary item: Extinguishment of debt ,343 1,343 - Change in net position 3, (189) (1,342) 842 2,645 9,441 Net position (deficit), beginning of year , ,649 17,349 82,112 54,700 Net position, end of year $ 3,603 $ 33,172 $ 484 $ 29,307 $ 18,191 $ 84,757 $ 64,141 See accompanying notes to the basic financial statements. 47

68 Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Business-type Activities-Enterprise Funds Energy Internal Independence Service Refuse Airport Program Transit Other Total Funds Cash flows from operating activities: Received from customers $ 34,656 $ 4,120 $ 93 $ 2,030 $ 13,414 $ 54,313 $ - Received from interfund services provided ,248 Received from other sources Received from assessments - - 5, ,743 - Received for interest - - 1, ,985 - Payments for assessments - - (6,901) - - (6,901) - Payments to suppliers for goods and services (24,935) (1,753) (285) (12,373) (7,541) (46,887) (34,759) Payments to employees for services (4,304) (1,486) (627) (637) (6,399) (13,453) (26,602) Payments for interfund services used - - (522) - - (522) - Net cash provided by (used in) operating activities 5, (514) (10,980) (526) (5,722) 64,238 Cash flows from noncapital financing activities: Transfers in , Transfers out (12) (5) - - (1) (18) (925) Advances from other funds (2,870) Proceeds from bonds - - 6, ,659 - Principal paid on bonds - - (5,625) - - (5,625) (22,965) Interest paid - (1,426) - - (1,426) (26,523) Interest received - - 1, ,356 - Payments on advances from other governments - - (58) - - (58) - Receipts from other governments , ,721 - Receipts from due to other funds Miscellaneous noncapital financing sources (801) (293) 47 Net cash provided by (used in) noncapital financing activities , ,048 (52,670) Cash flows from capital and related financing activities: Proceeds from sale of capital assets Acquisition and construction of capital assets (701) (4,955) - (1,732) (843) (8,231) (2,739) Repayments of advances from other funds Interest received on advances to other funds ,921 Proceeds from notes payable ,320 Principal paid on notes payable - (810) - - (250) (1,060) (46) Principal paid on capital leases (65) (127) (192) (77) Principal paid on bonds and certificates (1,500) (1,500) - Proceeds from bonds payable refundings Proceeds from advances from other governments ,543 2,543 - Principal paid on advances from other governments - (460) - - (3,106) (3,566) - Capital contributions , ,340 - Interest paid (226) (67) - - (316) (609) (5) Net cash provided by (used in) capital and related financing activities (2,436) (5,492) - 11 (1,089) (9,006) 2,416 Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents 3,888 (3,940) (980) (359) 14,778 Cash and cash equivalents, beginning of year, as restated 24,454 5,384 4,259 5,526 5,857 45,480 76,665 Cash and cash equivalents, end of year $ 28,342 $ 1,444 $ 4,327 $ 6,131 $ 4,877 $ 45,121 $ 91,443 See accompanying notes to the basic financial statements. 48

69 Statement of Cash Flows (Continued) Proprietary Funds For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Business-type Activities-Enterprise Funds Energy Internal Independence Service Refuse Airport Program Transit Other Total Funds Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $ 2,347 $ (162) $ 650 $ (13,645) $ (996) $ (11,806) $ 35,064 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2, ,963 1,404 7,756 2,280 Miscellaneous (7) (7) 351 Changes in operating assets and liabilities: Decrease (increase) in: Accounts receivable (276) 25 - (163) - (414) (6,902) Loans receivable - - (987) - - (987) - Other receivable Inventories (47) (35) - Due from other governments (7) (7) - Prepaid expenses and deposits ,283 Net pension asset ,558 Increase (decrease) in: Accounts payable (145) (146) Unearned revenue 2 39 (32) - (182) (173) (47) Landfill closure and postclosure costs Self-funded insurance ,489 Long-term postemployment benefits (1,001) (1,001) - Compensated absences (95) (49) - (3) (50) (197) 279 Net cash provided by (used in) operating activities $ 5,417 $ 881 $ (514) $ (10,980) $ (526) $ (5,722) $ 64,238 Noncash investing, capital and financing activities: Acquisition of capital assets on account $ - $ 178 $ - $ - $ - $ 178 $ - Capitalized interest Contributed capital assets Loss on disposal of capital assets Capital contribution receivable Other/grant receivable - 1, ,691 - Accrual of pass-through grant expenses - 1, ,573 - Construction in progress reclassified to prepaid expense Book value of capital assets transferred in Reconciliation of cash and cash equivalents to the Statement of Net Position: Cash and investments $ 28,340 $ 579 $ 1,031 $ 3,185 $ 4,782 $ 37,917 $ 90,178 Restricted cash and investments, current , ,821 1,265 Restricted cash and investments, noncurrent , ,383 - Total cash and cash equivalents $ 28,342 $ 1,444 $ 4,327 $ 6,131 $ 4,877 $ 45,121 $ 91,443 See accompanying notes to the basic financial statements. 49

70 Statement of Fiduciary Net Position Fiduciary Funds June 30, 2013 (Dollars in Thousands) Other Postemployment Private Investment Benefits (OPEB) Purpose Trust Trust Trust Agency ASSETS: Cash and investments $ 807,651 $ - $ 12,169 $ 39,841 Restricted cash and investments: Restricted investments with trustee: Interest-bearing cash Mututal funds - 22,970 1,791 - Receivables: Taxes ,749 Notes, net Interest and other ,944 Due from other governments ,925 Assets held for sale Capital assets: Depreciable, net Total assets 807,651 23,694 15,190 $ 68,459 LIABILITIES: Interest payable $ - $ - $ 352 $ - Long-term debt: Due within one year Due in more than one year ,055 - Due to other agencies ,459 Total liabilities ,847 $ 68,459 NET POSITION: Net position held in trust for pool participants 807, Net position held in trust for OPEB - 23,694 - Net position held in trust for other purposes - - 1,343 Total net position $ 807,651 $ 23,694 $ 1,343 See accompanying notes to the basic financial statements. 50

71 Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Other Postemployment Private Investment Benefits (OPEB) Purpose Trust Trust Trust ADDITIONS: Contributions $ 3,220,443 $ 500 $ - Property taxes - - 1,810 Investment income 6,757 2, Total additions 3,227,200 3,194 1,968 DEDUCTIONS: Distributions 3,033, ,433 Services and salaries Interest expense Total deductions 3,033, ,290 Change in net position 193,413 3,103 (3,322) Net position held in trust, beginning of year 614,238 20,591 4,665 Net position held in trust, end of year $ 807,651 $ 23,694 $ 1,343 See accompanying notes to the basic financial statements. 51

72

73 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 (DOLLARS IN THOUSANDS) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the County of Sonoma (the County) conform to accounting principles generally accepted in the United States of America as applicable to governmental entities. The following is a summary of significant accounting policies: (a) Definition of Reporting Entity The County is a legal subdivision of the State of California and is charged with general governmental powers. The County's powers are exercised through a five member Board of Supervisors (the Board), which, as the governing body of the County, is responsible for the legislative and executive control of the County. The County provides certain services to its citizens, such as road construction and maintenance, law enforcement and criminal justice, regional parks, growth management, and health and social services. In addition, the County administers various special districts governed by the Board (the Special Districts) and provides services to other special districts governed by independent local boards. The Special Districts are located within the boundaries of the County and were established under various sections of the California Government Code. The County provides fiscal agent and accounting services to many of these districts. As required by generally accepted accounting principles (GAAP) in the United States of America, these financial statements present the County (the primary government) and its component units, entities for which the County is considered to be financially accountable. Blended component units, although legally separate entities are, in substance, part of the County s operations, and the Board is typically their governing body. Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the County. Management applied the criteria of Governmental Accounting Standards Board (GASB) Statement No. 61, Financial Reporting Entity: Omnibus, to determine whether the following component units should be reported as blended or discretely presented component units. Blended Component Units Sonoma County Fair and Exposition, Inc. (Fair) The governing body of the Fair is the County s governing body. The County owns the Fairgrounds property and has a contract with the Fairgrounds for operations and all debts and obligations of the Fair are County debts and obligations. The Fair s financial statements are presented as of December 31, 2012, which is the latest period audited. Sonoma County Securitization Corporation The Sonoma County Securitization Corporation (Corporation) is a California public benefit corporation created by the County Board of Supervisors in October Transactions related to the Corporation have been included in these financial statements as a blended component unit of the County, including a liability for Series 2005 Tobacco Settlement Asset-Backed Refunding Bonds (loan payable) in the amount of $74.2 million as of June 30, However, in the event of a decline in the tobacco settlement revenues that are used to repay the loan payable, including the default or bankruptcy of a participating cigarette manufacturer, resulting in a possible default on the loan payable, neither the California County Tobacco Securitization Agency, the County nor the Corporation have any liability to make up any such shortfall. This is reported within Mandated Special Revenue Funds. 53

74 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sonoma County Agricultural Preservation and Open Space District The governing body of the District is the County s governing body. Voters approved a ¼% County levied sales tax to fund District activities and the County issued bonds secured by the sales tax revenues. The District donates land to the County s Regional Parks and other entities for use by citizens. Sonoma County Public Financing Authority The governing body of the Authority is the County s governing body. The Authority was formed for the purpose of assisting in financing public improvements of the County and other local agencies. The County has operational responsibility for the Authority and manages it in the same manner as its own departments. The Authority is combined with Sonoma County Energy Independence Program (SCEIP) and reported as an enterprise fund. Discretely Presented Component Units Sonoma County Water Agency The governing body of the Agency is the County s governing body. The Agency is not managed the same as other County departments and their employees are not civil service employees. The Agency s activities include the transportation of water and generation of electrical power for services to eight prime contractors (the cities of Santa Rosa, Petaluma, Sonoma, Rohnert Park and Cotati, the Town of Windsor, and the Valley of the Moon and North Marin Water Districts) along with the engineering, administration, and operational services of four Sanitation Zones (Sea Ranch, Penngrove, Geyserville, and Airport-Larkfield-Wikiup). These activities are financed primarily from user fees. Sonoma County Community Development Commission (Community Development Commission) The governing body of the Commission is the County s governing body. The Commission is not managed the same as other County departments and their employees are not civil service employees. The Commission, which was established as a separate public and corporate entity pursuant to Section of the Health and Safety Code, which enables a community to have the option of operating and governing its housing authority and the Sonoma County Community Redevelopment Agency, until its dissolution on February 1, 2012, under a single governing board. On February 1, 2012, the County became the administrator for the Successor Agency for the Sonoma County Community Redevelopment Agency pursuant to the provisions of AB1x 26. The legislative body of a community may also delegate other powers regarding community development to the CDC. The Board of Supervisors has designated itself as the Board of Commissioners of the Community Development Commission, County Housing Authority and Redevelopment Agency through February 1, 2012 Sonoma Valley County Sanitation District - accounts for the activities of the Sonoma Valley County Sanitation District, which is responsible for operating and maintaining the local sanitation collection systems, pump stations and treatment plants. This Sonoma Valley County Sanitation District is managed by the Sonoma County Water Agency, which provides administrative, engineering, operational and maintenance services. The activities of the Sonoma Valley County Sanitation District are primarily financed through user fees. Russian River County Sanitation District - accounts for the activities of the Russian River County Sanitation District, which is responsible for operating and maintaining the local sanitation collection systems, pump stations and treatment plants. This Russian River County Sanitation District is managed by the Sonoma County Water Agency, which provides administrative, engineering, operational and maintenance services. The activities of the Russian River County Sanitation District are primarily financed through user fees. South Park County Sanitation District - accounts for the activities of the South Park County Sanitation District, which is responsible for operating and maintaining the local sanitation collection systems, pump stations and treatment plants. This South Park County Sanitation District is managed by the Sonoma County Water Agency, which provides administrative, engineering, operational and maintenance services. The activities of the South Park County Sanitation District are primarily financed through user fees. 54

75 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Occidental County Sanitation District - accounts for the activities of the Occidential County Sanitation District, which is responsible for operating and maintaining the local sanitation collection systems, pump stations and treatment plants. This Occidential County Sanitation District is managed by the Sonoma County Water Agency, which provides administrative, engineering, operational and maintenance services. The activities of the Occidential County Sanitation District are primarily financed through user fees. Sonoma County Library The governing body of the Library is the Library Joint Powers Authority (JPA) and is governed by a seven-member Library Commission, which includes five appointees of the Board of Supervisors and one each from the cities of Petaluma and Santa Rosa. This fund accounts for the operations of the Sonoma County Library (the Library), a joint powers agency established between the County and cities to provide library services on an equal basis throughout the County. There are currently ten regional libraries, two rural library stations, and the Santa Rosa Central Library. The Library Commission provides policy direction over the staffing, budget, operations and expansion of the Library system. The Board of Supervisors is responsible for adoption of the Library budget pursuant to the JPA agreement. Current programs are financed through property tax revenues, fees, fines and state and federal aid. Additional detailed financial information for each of the discretely presented component units can be obtained from the Auditor-Controller-Treasurer-Tax Collector s Office at 585 Fiscal Drive, Room 100, Santa Rosa, California, The Sonoma County Employees Retirement Association is excluded from the County s reporting entity as it is fiscally independent of the County and is governed by a separate Board of Directors and not by the Board of Supervisors. (b) Basis of Presentation Government - Wide Financial Statements The statement of net position and statement of activities display information about the primary government (the County) and its component units. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the County. 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 user fees and charges to external parties. The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the County and for each function of the County s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include 1) charges paid by the recipients of goods or services offered by the programs and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues. Fund Financial Statements The fund financial statements provide information about the County s funds, including fiduciary funds and blended component units. Separate statements for each fund category governmental, proprietary and fiduciary are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds. 55

76 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. Operating expenses for enterprise and internal service funds include services and supplies, salaries and employee benefits, self-insurance claims and depreciation on capital assets. All expenses not falling within these categories are reported as nonoperating expenses. The County reports the following major governmental funds: The General Fund is used to account for all revenues and expenditures necessary to carry out the basic governmental activities of the County that are not accounted for through other funds. Revenues are primarily derived from taxes; licenses, permits and franchises; fines, forfeitures and penalties; use of money and property; intergovernmental revenues; charges for services; and other revenues. Expenditures are primarily expended for functions of general government, public protection, public ways and facilities, public assistance, education, recreation and cultural services, capital outlay and debt service. The Human Services Special Revenue Fund accounts for proceeds restricted for the activities of the County s various state and federally funded public assistance programs. Revenues are primarily derived from intergovernmental revenues; charges for services; and other revenues. The Health and Sanitation Special Revenue Fund accounts for proceeds restricted for public health and mental health programs, which are primarily funded by state and federal agencies. Revenues are primarily derived from licenses, permits and franchises; fines, forfeitures and penalties; use of money and property; intergovernmental revenues; charges for services; and other revenues. The Mandated Revenues Special Revenue Fund accounts for state programs that are required to be accounted for in a separate fund. Revenues are primarily restricted and derived from licenses, permits and franchises; fines, forfeitures and penalties; use of money and property; intergovernmental revenues; charges for services; and other revenues. The Open Space Special Tax Account accounts for revenues received from County levied sales tax Measure F which funds are restricted to certain activities of the Sonoma County Agricultural Preservation and Open Space District. The Roads Special Revenue Fund accounts for proceeds restricted for the planning, design, construction, maintenance and administration of County roads. Road Fund is reimbursed by highway user tax (gas tax) distributions from the state, federal and state reimbursement for road-related construction and improvement projects, and by billing other County departments and non-county entities for time and materials spent on activities not related to roads. Revenues are primarily derived from taxes; licenses, permits and franchises; fines, forfeitures and penalties; use of money and property; intergovernmental revenues; charges for services; and other revenues. The Mental Health Realignment Special Revenue Fund accounts for proceeds restricted for the activities of the Health and Welfare Realignment Act of 1991, which provided the County s Health and Human Services Departments with state revenues from sales tax and vehicle license fees. From , these revenues were previously accounted for under the Trust and Agency Funds. The special revenue funds were established during , with Board approval, to more accurately reflect the fact that Realignment revenues, while restricted in use, are under the control and discretion of the Board of Supervisors. Revenues are primarily derived from use of money and property and intergovernmental revenues. 56

77 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The County reports the following major proprietary funds: The Refuse Enterprise Fund finances Sonoma County integrated waste management activities throughout the County and is administered as a division of the Sonoma County Department of Transportation and Public Works. Activities include management of one sanitary landfill and five transfer stations, regulation of two franchised commercial refuse haulers, and development, administration and implementation of the County Integrated Waste Management Plan. The Airport Enterprise Fund accounts for activities related to the operations of the Charles M. Schultz Sonoma County Airport (the Airport). Airport operations include commercial passenger services as well as air cargo, private and corporate flights, military, search and rescue, fire fighting, and law enforcement services. The Energy Independence Program Enterprise Fund accounts for activities related to the passage of California Assembly Bill 811 (AB 811) in July Activities include financing to commercial and residential property owners for energy and water efficiency improvements on existing buildings. The Transit Enterprise Fund accounts for activities related to the local and intercity fixed-route services and demand-responsive paratransit services throughout the County. Through cooperative agreements with each of the cities, the present transportation network consists of ten intercity, two express, and ten local bus routes. The County reports the following additional fund types: Internal Service Funds account for the financing of goods or services provided by one department or agency to other departments or agencies of the County or other governmental units on a cost reimbursement basis. Activities include the County s self-insurance programs and the heavy equipment financing of the County, the County s ERP System and the County s employee retirement program. The Investment Trust Fund accounts for the assets of legally separate entities, which invest in the County Treasurer s investment pool. These entities include school and community college districts, other special districts governed by local boards, regional boards and authorities and pass through funds for tax collections for cities. These funds represent the assets, primarily cash and investments, and the related liability of the County to disburse these monies on demand. The Other Postemployment Benefits Trust Fund account for assets held in trust by the Public Agency Retirement Services (PARS) for future postemployment healthcare plan benefits. The trust is used to accumulate resources to fund future benefits, however it does not represent the activity of the County s postemployment healthcare plan. The Successor Agency Private-Purpose Trust Fund was established by the County to report trust arrangements under which principal and income benefit other governments. This fund reports the assets, liabilities and activities of the Sonoma County Redevelopment Successor Agency. Agency Funds are custodial in nature and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. These funds account for assets held by the County in an agency capacity for individuals or other government units. The County reports on approximately 80 different agency funds. 57

78 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (c) Basis of Accounting The government-wide, proprietary funds and fiduciary trust funds financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the County gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an accrual basis, revenues from property taxes are recognized in the fiscal year for which the taxes are levied. Revenues from sales taxes are recognized when the underlying transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. Governmental funds financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Property taxes are accrued when their receipt occurs within sixty days of the end of the fiscal year. Sales and other taxes, interest, certain state and federal grants and charges for services are accrued when their receipt occurs within three hundred sixty five days of the end of the fiscal year so as to be both measurable and available. Licenses, permits, fines, forfeitures, and other revenues are recorded as revenues when received in cash because they are generally not measurable until actually received. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from the issuance of general long-term debt and capital leases are reported as other financing sources. Agency funds apply the accrual basis of accounting but do not have a measurement focus. (d) Non-Current Governmental Assets/Liabilities Non-current governmental assets and liabilities, such as capital assets and long-term liabilities, are reported in the governmental activities column in the government-wide statement of net position. (e) Cash and Cash Equivalents For purposes of the accompanying statement of cash flows, the enterprise and internal service funds consider all highly liquid investments with a maturity of three months or less when purchased, and their equity in the County Treasurer s investment pool, to be cash equivalents. (f) Investments Investments are stated at fair value in the statement of net position and balance sheet and the corresponding changes in the fair value of investments are recognized in the year in which the change occurred. The County follows the practice of pooling cash and investments of all funds with the County Treasurer except for restricted funds held by outside custodians or funds held by a trustee or funds in dedicated investments for the benefit of an individual pool participant. The fair value of investments is determined annually. Interest earned on pooled investments is allocated quarterly to the appropriate funds based on their respective average daily balance for that quarter. The value of participants pool shares is based on amortized cost, which is different than fair value. At the Board s direction, the investment income related to certain County funds is allocated to the General Fund. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, interest income has been recorded in the fund that earned the interest, and a transfer recorded to transfer an amount equal to the interest earnings to the General Fund. The County has not provided nor obtained any legally binding guarantees during the year ended June 30, 2013, to support the value of pool shares. 58

79 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (g) Restricted Cash and Investments Restricted assets in the governmental funds represent cash and investments that are restricted for debt service pursuant to various debt covenants. Restricted assets in the enterprise funds primarily represent cash and investments in the County Sanitation Districts and Water Agency that are restricted for debt service pursuant to various debt covenants and customer deposits. (h) Inventories Governmental funds value inventories at cost using primarily the average cost method. The cost is recorded as an expenditure at the time individual inventory items are consumed. Inventories reported in the governmental funds are equally offset by a nonspendable fund balance, which indicates that inventories do not represent expendable available financial resources. Inventories generally consist of printing services and garage supplies. Enterprise funds value inventories at cost using the first-in, first-out method. (i) Contractual Assessments Receivables Contractual assessments receivable are reported in the Energy Independence Program Enterprise fund and resulted from assessments levied against developed properties, with the consent of property owners, to finance projects to enhance the energy efficiency of real property as permitted by the Sonoma County Energy Independence Program (SCEIP). (j) Prepaid Expenses/Items and Deposits Payments made for services that will benefit periods beyond June 30, 2013, are recorded as prepaid expenses/items. In the fund financial statements, prepaid items and deposits are offset by a corresponding nonspendable portion of fund balance to indicate that they are not available for appropriation and are not expendable available financial resources. (k) Capital Assets Capital assets include land, land improvements, buildings and improvements, machinery and equipment, infrastructure (e.g. roads, bridges, sidewalks, and similar items), and intangible assets (e.g. land easements and computer software). Assets that are purchased or constructed are reported at historical cost or at estimated historical cost if actual historical cost is not available. Donated capital assets are valued at their estimated fair value on the date of donation. Normal maintenance and repairs are charged to operations when incurred. Betterments and major improvements that significantly increase values, change capacities or extend useful lives are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operations. Capital outlays are recorded as expenditures in the governmental funds and as additions to capital assets in the proprietary and fiduciary funds and the government-wide financial statements, in accordance with the County s capitalization policy. Interest is capitalized on construction in progress in the proprietary funds. Accordingly, interest capitalized is the total interest cost from the date of the borrowing net of any allowable interest carried on temporary investments of the proceeds of tax-exempt borrowings until the specified asset is ready for its intended use. Interest capitalized during the fiscal year ended June 30, 2013 totaled $843. Assets acquired under capital lease are amortized over the lesser of the useful life of the asset or the lease term. Capital assets used in operations are depreciated or amortized using the straight-line method over the estimated useful life in the government-wide statements, proprietary funds, and fiduciary trust funds statements. 59

80 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The capitalization thresholds and estimated useful lives for capital assets are as follows: Capitalization Threshold Estimated Useful Life Land $ - N/A Land improvements 25,000 5 to 50 years Buildings and improvements: Buildings 25, to 50 years Building improvements 25,000 5 to 50 years Machinery and equipment 5,000 5 years Infrastructure: Pavement 100, to 30 years Bridges 100, to 75 years All other 100, to 99 years Intangible assets: Computer software 100,000 7 years Temporary easements - Life of easement Permanent easements - N/A Construction in progress / work in progress Projects expected to exceed the N/A capitalization threshold for the applicable asset class (l) Long-term Obligations In the government-wide, proprietary funds, and fiduciary trust funds financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, proprietary fund type or fiduciary trust fund type statement of net position. In governmental fund types, bond and certificate of participation premiums, discounts and issuance costs are recognized in the period issued. In the government-wide statement of net position and statement of net position for proprietary fund types and fiduciary trust fund types, premiums, discounts, issuance costs and deferred amounts on refunding are deferred and amortized over the term of the issuance using the straight-line method, which approximates the effective interest method. (m) Net Position/Fund Balance The government-wide and proprietary fund financial statements utilize a net position presentation. Net position are categorized as net investment in capital assets (net of related debt), restricted and unrestricted. Net Investment in Capital Assets - This category groups all capital assets, including intangible assets and infrastructure, into one category of net position. Accumulated depreciation and amortization and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category. Restricted - This category presents 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 - This category represents net position of the County, not restricted for any project or other purpose. 60

81 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned or unassigned based primarily on the extent to which the County is bound to honor constraints on how specific amounts can be spent. Nonspendable Fund Balance Amounts that cannot be spent because they are either (a) not spendable in form or (b) legally or contractually required to be maintained intact. Restricted Fund Balance Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance Amounts that can only be used for specific purposes pursuant to constraints imposed by ordinance or resolution of the County s highest decision-making authority (the Board of Supervisors) and that remain binding unless removed by an equally binding action. Assigned Fund Balance Amounts that are neither restricted nor committed but are constrained by the County s intent to be used for specific purposes. The intent can be established by the County s highest level of decision-making authority (the Board of Supervisors) or by a body or an official designated for that purpose by the Board of Supervisors (County Administrator). This is also the classification for residual fund balance in all governmental funds other than the General Fund. Unassigned Fund Balance The residual classification for the County s General Fund that includes amounts not contained in the other classifications. In other funds the unassigned classification is used only if the expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes (i.e. negative fund balance). The Board of Supervisors establishes, modifies or rescinds fund balance commitments and assignments by passage of an ordinance or resolution, each resulting in equally binding constraints, and through adoption of the budget and subsequent budget amendments that occur throughout the year. When both restricted and unrestricted resources are available for use, it is the County s policy to use restricted resources first, followed by committed, assigned and unassigned resources as they are needed. (n) Property Tax Levy, Collection and Maximum Rates Property taxes, including tax rates, are regulated by the State and are administered locally by the County. The County is responsible for assessing, collecting and distributing property taxes in accordance with state law. Liens on real property are established January 1 for the ensuing fiscal year. The property tax is levied as of July 1 on all taxable property located in the County. Secured property taxes are due in two equal installments on November 1 and February 1 and are delinquent after December 10 and April 10, respectively. Unsecured property taxes are due in a single installment due July 31 and are delinquent after August 31. Unsecured property taxes added to the unsecured roll after July 31 are delinquent after the last day of the month succeeding the month of enrollment. Additionally, supplemental property taxes are levied on a pro rata basis when changes in assessed valuation occur due to sales transactions or the completion of construction. Since the passage of Article XIII of the California Constitution (commonly referred to as Proposition 13), beginning with fiscal year 1978/1979, general property taxes are based either on a flat one percent rate applied to the 1975/1976 full value of the property or on one percent of the sales price of the property on sales transactions and construction after the 1975/1976 valuation. Taxable values on properties (exclusive of increases related to sales and construction) can rise at a maximum of two percent per year. Net taxable valuation for the year ended June 30, 2013 was approximately $65.3 billion, which includes secured, unsecured, Home Owner Property Tax Relief, and unitary values. The tax rate was $1 per $100 of valuation ($0.35 for the County and Special Districts, $0.48 for schools, $0.09 for cities, and $0.08 for redevelopment activities within the County of Sonoma). On February 1, 2012, the State of California dissolved all redevelopment agencies (see note 18). Tax increment previously distributed to redevelopment agencies is administered in Redevelopment Property Tax Trust Funds (RPTTFs) as a result of the Dissolution Act. Residual dollars were reapportioned from 61

82 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) RPTTFs to affected taxing entities. Taxes are collected by the County and apportioned to each taxing agency in accordance with state law. In addition, there are additional taxes levied to provide for debt service on general obligations that were voter-approved. Delinquencies for the year amounted to approximately 2% of the current secured and unsecured property tax revenue assessed. In fiscal year , the County adopted the Alternate Method of Property Tax Allocation (commonly referred to as the Teeter Plan). Under the Teeter Plan, the County Auditor-Controller-Treasurer-Tax Collector, an elected official, is authorized to pay 100 percent of the property taxes billed (secured, supplemental, and debt service) to the taxing agencies within the County. The County recognizes property tax revenues in the period for which the taxes are levied. Previously, such taxes were allocated and paid as the taxes were collected. (o) Interfund Transactions Interfund transactions are reflected as loans, services provided, reimbursements or transfers. Loans are reported as receivables and payables as appropriate, are subject to elimination upon consolidation and are referred to as either due to/from other funds (i.e., the interfund loans, which are short-term in nature) or advances to/from other funds (i.e., interfund loans, which are long-term in nature). Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as internal balances. Advances between funds, as reported in the fund financial statements, are offset by a corresponding nonspendable portion of fund balance to indicate that they are not available for appropriation and are not expendable available financial resources. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide presentation. (p) Utility Connection Fees Sewer and water connection fees are recorded as revenues in the enterprise funds in accordance with GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. (q) Compensated Absences County employees are entitled to certain compensated absences based on their length of employment and position held. Vacation pay is subject to certain maximum accumulations and is payable upon termination. Sick leave may be accumulated without limitation. The monetary equivalent of 25 percent of all unused sick leave is included in the liability for compensated absences as unused sick leave is converted into service credits upon separation from the County. Because vacation, sick leave and other compensated absence balances do not require the use of current financial resources, no liability is recorded within the governmental funds. However, this liability is reflected in the government-wide statement of net position. In proprietary funds, the liability for compensated absences is recorded in the period that the benefits accrue to employees. In compliance with GASB Statement No. 16, Accounting for Compensated Absences, the amounts reported include estimated employer liability for taxes and workers compensation premiums. (r) Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. 62

83 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (s) Implementation of Governmental Accounting Standards Board (GASB) Statements The following GASB Statements have been implemented in the current financial statements: In November 2010, the GASB issued Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The objective of this statement is to improve financial reporting by addressing issues related to service concession arrangements (SCAs), which are a type of public-private or public-public partnership. The requirements of this statement are effective for the County s fiscal year ending June 30, In November 2010, the GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus An Amendment of GASB Statements No. 14 and No. 34. The objective of this statement is to improve financial reporting for a governmental financial reporting entity. This statement modifies certain requirements for inclusion of component units in the financial reporting entity. The requirements of this statement are effective for the County s fiscal year ending June 30, In December 2010, the GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The requirements of this statement are effective for the County s fiscal year ending June 30, In June 2011, the GASB issued Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB Statement No. 63 provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources, introduced and defined in GASB Concepts Statement No. 4. This statement amends the net position reporting requirements in Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net position. The requirements of this statement are effective for the County s fiscal year ending June 30, (t) Future Pronouncements The County is currently analyzing its accounting and financial reporting practices to determine the potential impact on the financial statements of the following GASB Statements: In March 2012, the GASB issued Statement No. 65, Items Previously Reported as Assets and Liabilities. The objective of this statement is to either (a) properly classify certain items that were previously reported as assets and liabilities as deferred outflows of resources or deferred inflows of resources or (b) recognize certain items that were previously reported as assets and liabilities as outflows of resources (expenses or expenditures) or inflows of resources (revenues). These determinations are based on the definitions of those elements in Concepts Statement No. 4, Elements of Financial Statement. The requirements of this statement are effective for the County s fiscal year ending June 30, Management has not determined the effect of this statement. In March 2012, the GASB issued Statement No. 66, Technical Corrections 2012 An Amendment of GASB Statements No. 10 and No. 62. The objective of this statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 54 and No. 62. The requirements of this statement are effective for the County s fiscal year ending June 30, Management has not determined the effect of this statement. In June 2012, the GASB issued Statement No. 67, Financial Reporting for Pension Plans An Amendment of GASB Statement No. 25. The objective of this statement is to improve financial reporting by state and local governmental pension plans. The requirements of this statement are effective for the County s fiscal year ending June 30, Management has not determined the effect of this statement. 63

84 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions An Amendment of GASB Statement No. 27. The objective of this statement is to improve accounting and financial reporting by state and local governmental pensions. The requirements of this statement are effective for the County s fiscal year ending June 30, Management has not determined the effect of this statement. In January 2013, the GASB issued Statement No. 69, Government Combinations and Disposals of Government Operations. The objective of this statement is to improve accounting and financial reporting related to government combinations and disposals of government operations. The requirements of this statement are effective for the County s fiscal year ending June 30, Management has not determined the effect of this statement. In April 2013, the GASB issued Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. The objective of this statement is to improve accounting and financial reporting by state and local governmental that extend and receive nonexchange financial guarantees. The requirements of this statement are effective for the County s fiscal year ending June 30, Management has not determined the effect of this statement. NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary Process The budget of the County is a detailed annual operating plan that identifies estimated costs (appropriations) and results in relation to estimated revenues. The budget includes (1) the programs, projects, services, and activities to be provided during the fiscal year, (2) the estimated revenue available to finance the operating plan, and (3) the estimated spending requirements of the operating plan. The budget represents a process through which policy decisions are made, implemented and controlled. State law prohibits expending governmental funds for which there is no legal appropriation except under court order, for an emergency as defined by statute, or as otherwise provided by law. Annual appropriations that have not been encumbered lapse at year-end. The following procedures establish the budgetary data reflected in the financial statements: Original Adopted Budget On or before June 10, all County officials must submit estimates of available financing and financing requirements for their respective divisions. On or before June 30, the County Administrator prepares and submits to the Board a recommended budget. On or before July 20, the Board formally approves the recommended budget. The Board conducts hearings to obtain public comment on the recommended annual budget. No later than October 2, the Board adopts the annual budget by resolution for the County and the Special Districts. Final Amended Budget The legal level of control for appropriations is exercised at the department within fund level. Appropriations at this level may only be adjusted during the year with the approval of the Board. Management may make adjustments at their discretion below that level. Such adjustments by the Board and management are reflected in the revised budgetary data presented in the financial statements. Budgetary data is presented in the accompanying fund financial statements for the General Fund and major Special Revenue Funds, since the operations of these funds are budgeted annually. Budgets for the General Fund, Human Services Special Revenue Fund, Health and Sanitation Special Revenue Fund, Mandates Revenues Special Revenue Fund, Open Space Special Tax Account Special Revenue Fund, Road Special Revenue Fund and Mental Health Realignment Special Revenue Fund are adopted on a non- GAAP basis. For the purposes of a budgetary presentation, actual GAAP expenditures have been adjusted to include reimbursements and current year encumbrances, other financing sources and offsetting expenditures related to capital lease additions. For GAAP purposes, reimbursements are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Reimbursements primarily consist of charges initially incurred by departments responsible for communications, vehicles, data processing, public safety realignment and are eventually applied to other funds. 64

85 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 3 CASH AND INVESTMENTS (a) Financial Statement Presentation Total cash and investments at June 30, 2013 were presented on the County s financial statements as follows: Investment Investments Held by Sonoma County Treasury Cash and Investments Held with Third Parties Petty Cash Total Cash and Investments Primary government $ 476,806 $ 15,707 $ 50 $ 492,563 Discrete component units 151,270 81, ,699 Investment trust fund 807, ,651 Other postemployment - benefits trust - 23,694 23,694 Private purpose trust fund 12,169 1,791-13,960 Agency funds 39, ,841 $ 1,487,737 $ 122,615 $ 56 $ 1,610,408 (b) Investment Guidelines Except for amounts held with trustees under bond indentures or other restrictive agreements, the County s cash and investments are invested by the County Treasurer. The Treasury Oversight Committee has oversight for all monies deposited into the Treasury Pool. Such amounts are invested in accordance with investment policy guidelines established by the County Treasurer and reviewed and approved by the Board of Supervisors. The objectives of the policy are, in order of priority, safety of capital, liquidity, and maximum rate of return. The policy addresses the soundness of financial institutions in which the County will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio that may be invested in certain instruments with longer terms to maturity. The table below identifies the investment types that are authorized by California Government Code Section This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the County, rather than the general provisions of the County s investment policy. 65 Maximum Percentage of Portfolio Maximum Investment in One Issuer Maximum Authorized Investment Type Maturity Local Agency Bonds 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Bankers Acceptance 180 days 40% 30% Commercial Paper 270 days 40% 10% A1/P1 Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% None Medium Term Notes (Corporate & Depository debt securities) 5 years 30% None A Mutual Funds (that invest in allowable securities) N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Collateralized Bank Deposits 5 years None None Mortgage Pass-through Securities 5 years 20% None AA Time Deposits 5 years None None County Pooled Investment N/A None None Joint Powers Authority Pool N/A 20% None Local Agency Investment Fund (LAIF) N/A None None Minimum Rating

86 NOTE 3 CASH AND INVESTMENTS (Continued) A copy of the County investment policy is available upon request from the Sonoma County Treasurer at 585 Fiscal Drive, Room 100, Santa Rosa, California, or can be found online at on the Auditor- Controller-Treasurer-Tax Collector s page. (c) Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. In a rising interest rate market, the fair value of investments could decline below original cost. Conversely, in a declining interest rate market, the fair value of investments will generally increase. The County manages its exposure to interest rate risk 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 evenly over time as necessary to provide the cash flow and liquidity needed for operations, which precludes the County from having to sell investments below original cost. Of the County s $1.610 billion portfolio, 30% of the investments have a maturity of one year or less. Of the remainder, only 4% have a maturity of more than 5 years. (d) 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 custodial credit risk for investments is the risk that, in the event of the failure of the counterparty 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 County s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits and securities lending transactions: The California Government Code requires that a financial institution 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. The market value of the pledged securities in the collateral pool must equal to at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the County s deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. The California Government Code limits the total of all securities lending transactions to 20% of the fair value of the investment portfolio. (e) Credit Risk 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. It is the County s policy to purchase investments meeting ratings requirements established by the California Government Code. (f) Concentration of Credit Risk The investment policy of the County contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer (other than U.S. Treasury securities, mutual funds or external investment pools) that represent 5% or more of total County pooled investments are as follows: 66

87 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 3 CASH AND INVESTMENTS (Continued) Issuer Investment Type Amount Percentage Holdings Federal National Mortgage Association Federal Agency Security $ 285, % Federal Farm Credit Banks Federal Agency Security 279, Federal Home Loan Bank Federal Agency Security 190, Federal Home Loan Mortgage Corp Federal Agency Security 149, California Asset Management Program Money Market Mutual Funds 130, Federated Mutual Fund Money Market Mutual Funds 125, (g) Treasury Pool The Treasury Pool includes amounts held for various school districts, whose participation in the Treasury Pool is mandated by State code. At June 30, 2013, involuntary participants of the County s investment pool totaled $896,179. Investments held in the Treasury Pool are summarized as follows: Investment Principal Fair Value Interest Rate Range Maturity Range U.S. Agency securities $ 904,930 $ 904, % 11/27/13-6/26/18 U.S. Treasury notes 60,000 60, /15/13-6/15/15 Corporate and medium term notes 162, , /1/13-12/20/17 Local agency bonds 42,006 42, /1/13-9/2/31 Money market mutual funds 144, , day Local Agency Investment Fund 48,834 48, day California Asset Management Program 130, , day Totals $ 1,492,842 $ 1,494,945 (h) Condensed Pool Statements The Treasury Pool includes investments with a fair value of $1,494,945 and deposits of $41,475. The following represents a condensed statement of net position and changes in net position for the Treasury Pool as of and for the fiscal year ended June 30, 2013: Statement of Net Position Cash and investments $ 1,538,230 Less: Investments held by fiscal agents (37,123) Net position held in trust for pool participants $ 1,501,107 Equity of internal participants $ 693,456 Equity of external pool participants 807,651 Net position held in trust for pool participants $ 1,501,107 Statement of Changes in Net Position Net position at July 1, ,358,242 Net change in pooled cash and investments 142,865 Net position held in trust for pool participants, June 30, 2013 $ 1,501,107 67

88 NOTE 3 CASH AND INVESTMENTS (Continued) As of June 30, 2013, the County s investments and credit ratings are as follows: Maturity Credit Rating (Moody s/ Under Over 5 Fair S & P) Days Days Days Years Years Value Non-pooled investments: Mutual funds Aaa/AAA $ 29,527 $ - $ - $ 135 $ - $ 29,662 Tax exempt municipal obligations Not rated/aaa Not rated/aa Commercial paper P-1/A-1+ 7, ,461 Total investments held by fiscal agents 36, ,123 Investments managed by County Treasurer: U. S. Agency Securities: Federal Farm Credit Banks Aaa/AA+ - 5,000 9, , ,792 Federal Home Loan Bank Aaa/AA+ - 9,998 10, , ,227 Federal Home Loan Mortgage Corp. Aaa/AA , ,640 Federal National Mortgage Association Aaa/AA , ,085 Subtotal U. S. Agency Securities - 14,998 19, , ,744 U.S. Treasury notes Aaa/AA+ 20,006 10,001-29,997-60,005 Medium-term notes Aa3-A1/ AA+ - A - 23,100 17, , ,552 Other government obligations Not rated 4, ,543 42,006 Money market mutual funds Aaa/AAA 144, ,217 LAIF Not Rated 48, ,834 Joint Powers Authority Pool: CAMP Not rated/aaa 130, ,587 Total investments managed by County Treasurer 348,429 48,699 37,707 1,023,566 36,543 1,494,945 Cash and deposits N/A 41,475 Less outstanding warrants N/A (35,313) Subtotal cash and investments $ 1,538,230 Discretely presented component units Maturity Cr edit M or e Rating 12 Months Than Fair (S & P) or Less Months Months 60 Months Value Sonoma Valley County Sanitation District Non-pooled investments: Money market mutual funds AAA $ 919 $ - $ - $ - $

89 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 3 CASH AND INVESTMENTS (Continued) Maturity Cr edit M or e Rating 12 Months Than Fair (S & P) or Less Months Months 60 Months Value Sonoma County Water Agency Non-pooled investments: Money market mutual funds AAA $ 2,718 $ - $ - $ - $ 2,718 SCEIP bonds N/A ,344 8,853 11,028 U.S. Treasury STRIPS N/A 6,105 6,090 29,771 15,547 57,513 Subtotal investments $ 9,232 $ 6,512 $ 31,115 $ 24,400 $ 71,259 Total cash and investments $ 1,610,408 (i) Investment in the Local Agency Investment Fund (LAIF) The County s total investment in the Local Agency Investment Fund (LAIF), managed by the Treasurer for the State of California, is $48,834 at June 30, The total amount invested by all public agencies in LAIF at June 30, 2013, was $21.2 billion. LAIF is part of the State of California Pooled Money Investment Account (PMIA), whose balance at June 30, 2013 was $61.15 billion. Of that amount, 98.04% is invested in non-derivative financial products, and 1.96% is invested in derivative financial products. PMIA is not SEC-registered, but is required to invest according to California State Code. The average maturity of PMIA investments was 278 days as of June 30, The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State Statute. The value of the pool shares in LAIF, which may be withdrawn, is determined on an amortized cost basis, which is different than the fair value of the pooled treasury's portion in the pool. Withdrawals from LAIF are done on a dollar to dollar basis. (j) California Asset Management Program (CAMP) The County is a voluntary participant in the California Asset Management Program (CAMP), a Joint Powers Authority that falls under California Government Code 53601(p), which is directed by a Board of Trustees that is made up of experienced local government finance directors and treasurers. As of June 30, 2013, CAMP had a balance of $2.16 billion with an average maturity of 37 days. The value of the pool shares in CAMP that may be withdrawn is determined on an amortized cost basis, which is the same as the fair value of the County s portion in the pool. As of June 30, 2013, the County s investment in CAMP was $130,587. (k) Tobacco Endowment In accordance with California Government Code Section 53601, any investment with a maturity in excess of five years requires the express authorization of the County s Board of Supervisors. In 2002, the County established the Sonoma County Tobacco Endowment Fund for the purpose of funding future capital improvements (The Endowment ). The Endowment was funded from a portion of the proceeds of the Series 2002B Tobacco Securitization Bonds. Pursuant to a resolution by the Board of Supervisors on October 24, 2000, the County Treasurer was authorized to purchase tax-exempt municipal obligations of any state or local government with a final maturity of no later than the final maturity of the Bonds. The scheduled final maturity of the Series B bonds is As of June 30, 2013, the County s investment in the Tobacco Endowment was $18,

90 NOTE 3 CASH AND INVESTMENTS (Continued) (l) Sonoma County Energy Independence Program (SCEIP) On March 24, 2009, the Board of Supervisors authorized the creation of the Sonoma County Energy Independence Program (SCEIP) in Sonoma County enabling Sonoma County property owners to finance energy conservation and generation improvements through voluntary contractual property assessments. State Assembly Bill 811 is the authorizing legislation for SCEIP and was signed into law the fall of To finance the program, on April 21, 2009, the Board of Supervisors authorized the Sonoma County Treasury Pooled Investment Fund to purchase SCEIP bonds issued by the Sonoma County Public Financing Authority with maturities of 5, 10 and 20 years. As of June 30, 2013, the County s investment in SCEIP bonds was $47,648. NOTE 4 RECEIVABLES Receivables for the fiscal year ended June 30, 2013, for the County s individual major funds, nonmajor and internal service funds in the aggregate are as follows: Accounts and other receivables - Governmental Activities: General Human Services Special Revenue Health and Sanitation Special Revenue Mandated Revenues Special Revenue Open Space Special Tax Account Special Revenue Roads Special Revenue Mental Health Realignment Special Revenue Other Governmental Funds Internal Service Funds Total Governmental Activities Accounts $ 2,945 $ 37 $ 1,226 $ 123 $ - $ 15 $ - $ 398 $ 6,561 $ 11,305 Loans Interest and other , ,813-5,844 Total $ 2,968 $ 37 $ 1,226 $ 123 $ 3,023 $ 15 $ - $ 3,211 $ 6,561 $ 17,164 Accounts and other receivables - Energy Other Total Business-type Independence Enterprise Business-type Activities Refuse Airport Program Transit Funds Activities Accounts $ 4,664 $ 222 $ - $ 219 $ 515 $ 5,620 Contractual assessments , ,882 Interest and other Less: Allowance (50) (50) Total $ 4,664 $ 222 $ 46,882 $ 219 $ 484 $ 52,471 Governmental funds report deferred revenues in connection with receivables for revenues not considered available to liquidate liabilities of the current period. Governmental and enterprise funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At June 30, 2013, the various components of deferred revenue and unearned revenue reported were as follows: 70

91 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 4 RECEIVABLES (Continued) Unearned Unavailable Total Governmental activities: General Fund $ 1,002 $ 10,679 $ 11,681 Human Services Special Revenue Fund 1,567 3,996 5,563 State Mandates and Tobacco Settlement Revenues Special Revenue Fund Health and Sanitation Special Revenue Fund 1,163 9,929 11,092 Roads 5, ,814 Nonmajor Funds 2, ,003 Total governmental activities $ 12,369 $ 25,212 $ 37,581 Business-type activities: Refuse $ 2 Airport 81 Energy Independence Program 334 Transit 3,595 Nonmajor Funds 37 Total business-type activities $ 4,049 NOTE 5 INTERFUND TRANSACTIONS (a) Interfund Receivables/Payables Interfund receivables and payables result from the time lag between the dates that 1) transactions are recorded in the accounting system or 2) payments between funds are made. The composition of interfund balances as of June 30, 2013 is as follows: Due to/from other funds: Receivable Fund Payable Fund Amount General Fund Human Services Special Revenue Fund $ 20,497 Health and Sanitation Special Revenue Fund 10,033 Energy Independence Program Enterprise Fund 276 Other governmental funds 459 Other enterprise funds 6 31,271 Human Services Special Revenue Fund Mental Health Realignment Special Revenue Fund 3,880 Other governmental funds 2,278 6,158 Health and Sanitation Special Revenue Fund Mandated Revenues Special Revenue Fund 334 Other governmental funds 775 1, $ 38,538

92 NOTE 5 INTERFUND TRANSACTIONS (Continued) Advances to/from other funds: Receivable Fund Payable Fund Amount Purpose General Fund Energy Independence Program Enterprise Fund $ 775 Operational funding Other enterprise funds 456 Capital funding Internal service funds 3,921 Capital funding $ 5,152 (b) Transfers Transfers are indicative of funding for capital projects, lease payments for debt service, subsidies of various County operations and re-allocations of special revenues. The following schedules summarize the County s transfer activity during the fiscal year ended June 30, 2013: (1) Between Governmental and Business-type Activities: Transfer from Transfer To Amount Purpose Governmental activities: Business-type activities General Fund Refuse Enterprise Fund $ 701 Funding for operations Airport Enterprise Fund 5 Other enterprise funds 489 Funding for operations 1,195 Mandated Revenues Special Revenue Fund Other enterprise funds 42 Funding for operations Other governmental funds Other enterprise funds 44 Funding for capital projects Business-type activities: Governmental activities Refuse Enterprise Fund General Fund (12) Funding for operations Airport Enterprise Fund General Fund (5) Funding operations Other enterprise funds General Fund (378) Funding for operations Net transfers between Governmental and Business-type activities $

93 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 5 INTERFUND TRANSACTIONS (Continued) (2) Between Funds within the Governmental Activities: Transfer From Transfer To Amount Purpose General Fund Human Services Special Revenue Fund $ 14,505 Funding for operations Health and Sanitation Special Revenue Fund 7,202 Funding for operations Mandated Revenues Special Revenue Fund 125 Funding for operations Roads Special Revenue Fund 17,651 Funding for road maintenance operations Mental Health Realignment Special Revenue Fund 18,409 Funding for realignment operations Other governmental funds 5,507 Funding for operations and capital outlay Internal service funds 16 Funding for operations and capital outlay 63,415 Mandated Revenues Special Revenue Fund General Fund 487 Funding for operations Human Services Special Revenue Fund 114 Funding for operations Health and Sanitation Special Revenue Fund 293 Funding for operations Other governmental funds 2,915 Funding for capital outlay and debt service Health and Sanitation Special Revenue Fund General Fund 230 Funding for operations 3,809 Human Services Special Revenue Fund Other governmental funds 604 Funding capital outlay Open Space Authority Special Revenue Fund Other governmental funds 7,573 Funding for operations Roads Special Revenue Fund Other governmental funds Internal service funds General Fund 42 Funding for operations Other governmental funds 303 Funding capital outlay Internal service funds 550 Funding for operations General Fund 2,421 Funding for operations Mandated Revenues Special Revenue Fund 38 Funding for operations Other governmental funds 278 Funding for operations 895 2,737 General Fund 925 Funding for operations $ 80,187 73

94 NOTE 6 CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2013 was as follows: Balance July 1, 2012, as restated Additions Retirements Transfers Balance June 30, 2013 Governmental activities: Total capital assets, not being depreciated Intangible assets $ 247,120 $ 5,573 $ (19) $ 20,552 $ 273,226 Land 416, (3,387) 19, ,997 Work in progress 1,684 5,915 (404) (2,225) 4,970 Construction in progress 65,722 20,598 (2,508) (39,147) 44,665 Total capital assets, not being depreciated 730,986 32,489 (6,318) (1,299) 755,858 Total capital assets, being depreciated Intangible assets 15,291 - (731) 2,177 16,737 Infrastructure 552, (33,935) 518,139 Buildings and improvements 349, , ,316 Land improvements Machinery and equipment 77,985 8,780 (6,035) (3,425) 77,305 Total capital assets, being depreciated 994,871 8,780 (6,766) 3,684 1,000,569 Less accumulated depreciation for: Intangible assets (4,529) (1,989) - - (6,518) Infrastructure (390,775) (8,457) - - (399,232) Buildings and improvements (109,315) (8,872) - (5,604) (123,791) Machinery and equipment (56,997) (7,680) 5,778 3,594 (55,305) Total accumulated depreciation (561,616) (26,998) 5,778 (2,010) (584,846) Total capital assets, being depreciated, net 433,255 (18,218) (988) 1, ,723 Governmental activities capital assets, net $ 1,164,241 $ 14,271 $ (7,306) $ 375 $ 1,171,581 Business-type activities: Total capital assets, not being depreciated Intangible assets $ 371 $ 3 $ (32) $ - $ 342 Land 19,854 1,224 (25) - 21,053 Construction in progress 11,371 6,274 (125) (4,350) 13,170 Total capital assets, not being depreciated 31,596 7,501 (182) (4,350) 34,565 Total capital assets, being depreciated Intangible assets 8, ,131 Buildings and improvements 181, (25) 181,833 Machinery and equipment 35, (1,024) 1,990 36,647 Total capital assets, being depreciated 224, (1,024) 1, ,611 Less accumulated depreciation for: Intangible assets (5,001) (544) - - (5,545) Buildings and improvements (112,669) (4,964) - 2,010 (115,623) Machinery and equipment (22,291) (2,250) (23,625) Total accumulated depreciation (139,961) (7,758) 916 2,010 (144,793) Total capital assets, being depreciated, net 84,801 (6,850) (108) 3,975 81,818 Business-type activities capital assets, net $ 116,397 $ 651 $ (290) $ (375) $ 116,383 74

95 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 6 CAPITAL ASSETS (Continued) Balance July 1, 2012 Additions Retirements Transfers Balance June 30, 2013 Sonoma County Community Development Commission Total capital assets, not being depreciated Land $ 5,687 $ - $ (237) $ - $ 5,450 Total capital assets, not being depreciated 5,687 - (237) - 5,450 Total capital assets, being depreciated Buildings and improvements 4, ,714 Machinery and equipment Total capital assets, being depreciated 4, ,832 Less accumulated depreciation for: Buildings and improvements (138) (137) - - (275) Machinery and equipment (66) (26) - - (92) Total accumulated depreciation (204) (163) - - (367) Total capital assets, being depreciated, net 4,628 (163) - - 4,465 Business-type activities capital assets, net $ 10,315 $ (163) $ (237) $ - $ 9,915 Sonoma County Library Total capital assets, not being depreciated Land $ 207 $ - $ - $ - $ 207 Total capital assets, not being depreciated Total capital assets, being depreciated Buildings and improvements 3, ,321 Machinery and equipment 4, (91) - 4,350 Total capital assets, being depreciated 7, (91) - 7,671 Less accumulated depreciation for: Buildings and improvements (561) (53) - - (614) Machinery and equipment (3,818) (187) 91 - (3,914) Total accumulated depreciation (4,379) (240) 91 - (4,528) Total capital assets, being depreciated, net 3,280 (137) - - 3,143 Governmental activities capital assets, net $ 3,487 $ (137) $ - $ - $ 3,350 75

96 NOTE 6 CAPITAL ASSETS (Continued) Balance July 1, 2012 Additions Retirements Transfers Balance June 30, 2013 Sonoma County Water Agency Governmental activities: Total capital assets, not being depreciated Intangible assets $ 102,372 $ 33 $ - $ - $ 102,405 Land 1, ,582 Construction in progress 1, (85) (198) 1,647 Total capital assets, not being depreciated 105, (85) (198) 105,634 Total capital assets, being depreciated Intangible assets Infrastructure 64, ,834 Buildings and improvements 3, ,427 Machinery and equipment (13) - 1,084 Total capital assets, being depreciated 70, (13) - 70,243 Less accumulated depreciation for: Intangible assets (38) (138) - - (176) Infrastructure (25,350) (1,562) - - (26,912) Buildings and improvements (1,728) (80) - - (1,808) Machinery and equipment (820) (51) 13 - (858) Total accumulated depreciation (27,936) (1,831) 13 - (29,754) Total capital assets, being depreciated, net 42,212 (1,723) ,489 Governmental activities capital assets, net $ 147,310 $ (904) $ (85) $ (198) $ 146,123 Business-type activities: Total capital assets, not being depreciated Intangible assets $ 5,011 $ 25 $ - $ 675 $ 5,711 Land 13,046 - (2,272) - 10,774 Intangible work in progress 1, (509) (1,068) 398 Construction in progress 21,305 11,675 (270) (1,282) 31,428 Total capital assets, not being depreciated 41,163 11,874 (3,051) (1,675) 48,311 Total capital assets, being depreciated Intangible assets ,068 1,383 Buildings and improvements 262, ,272 Machinery and equipment 9,112 1,488 (374) - 10,226 Total capital assets, being depreciated 272,092 1,488 (374) 1, ,881 Less accumulated depreciation for: Intangible assets (53) (53) - - (106) Buildings and improvements (97,389) (8,109) - - (105,498) Machinery and equipment (6,339) (671) (6,672) Total accumulated depreciation (103,781) (8,833) (112,276) Total capital assets, being depreciated, net 168,311 (7,345) (36) 1, ,605 Business-type activities capital assets, net $ 209,474 $ 4,529 $ (3,087) $ - $ 210,916 76

97 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 6 CAPITAL ASSETS (Continued) Balance July 1, 2012 Additions Retirements Transfers Balance June 30, 2013 Sonoma Valley County Sanitation District Total capital assets, not being depreciated Intangible assets $ 857 $ 293 $ - $ 1 $ 1,151 Land 4, ,507 Construction in progress 6,220 3,217 (20) (2,068) 7,349 Total capital assets, not being depreciated 11,584 3,510 (20) (2,067) 13,007 Total capital assets, being depreciated Intangible assets Buildings and improvements 101, , ,217 Machinery and equipment (5) Total capital assets, being depreciated 101, (5) 2, ,569 Less accumulated depreciation for: Intangible assets (4) (2) - - (6) Buildings and improvements (44,374) (3,301) - (70) (47,745) Machinery and equipment (194) (34) 5 70 (153) Total accumulated depreciation (44,572) (3,337) 5 - (47,904) Total capital assets, being depreciated, net 56,908 (3,310) - 2,067 55,665 Governmental activities capital assets, net $ 68,492 $ 200) $ (20) $ - $ 68,672 Russian River County Sanitation District Total capital assets, not being depreciated Intangible assets $ 5 $ - $ - $ - $ 5 Land Construction in progress 5, (4,477) 1,994 Total capital assets, not being depreciated 5, (4,477) 2,223 Total capital assets, being depreciated Buildings and improvements 44, ,477 49,172 Machinery and equipment Total capital assets, being depreciated 44, ,477 49,336 Less accumulated depreciation for: Buildings and improvements (22,478) (1,082) - - (23,560) Machinery and equipment (30) (23) - - (53) Total accumulated depreciation (22,508) (1,105) - - (23,613) Total capital assets, being depreciated, net 22,342 (1,096) - 4,477 25,723 Business-type activities capital assets, net $ 28,321 $ (375) $ - $ - $ 27,946 77

98 NOTE 6 CAPITAL ASSETS (Continued) Balance July 1, 2012 Additions Retirements Transfers Balance June 30, 2013 South Park County Sanitation District Total capital assets, not being depreciated Intangible assets $ 88 $ 32 $ - $ 4 $ 124 Construction in progress 1, ,353 Total capital assets, not being depreciated 1, ,477 Total capital assets, being depreciated Buildings and improvements 16, (4) 16,984 Total capital assets, being depreciated 16, (4) 16,984 Less accumulated depreciation for: Buildings and improvements (4,324) (342) - - (4,666) Total accumulated depreciation (4,324) (342) - - (4,666) Total capital assets, being depreciated, net 12,664 (342) - (4) (12,318 Governmental activities capital assets, net $ 13,972 $ (177) $ - $ - $ 13,795 Occidental County Sanitation District Total capital assets, not being depreciated Construction in progress $ 659 $ 549 $ - $ - $ 1,208 Total capital assets, not being depreciated ,208 Total capital assets, being depreciated Buildings and improvements 3, ,932 Machinery and equipment Total capital assets, being depreciated 3, ,973 Less accumulated depreciation for: Buildings and improvements (1,228) (133) - - (1,361) Machinery and equipment - (6) - - (6) Total accumulated depreciation (1,228) (139) - - (1,367) Total capital assets, being depreciated, net 2,745 (139) - - 2,606 Business-type activities capital assets, net $ 3,404 $ 410 $ - $ - $ 3,814 Depreciation Depreciation expense charged to governmental activities for the fiscal year ended June 30, 2013 was as follows: General government $ 3,709 Public protection 10,517 Public ways and facilities 8,874 Health and sanitation 678 Public assistance 566 Education 24 Recreation and cultural services 1,026 Depreciation on capital assets held by the Heavy Equipment Replacement and ERP internal services funds is charged to the various functions based on their usage of the assets 1,604 Total depreciation expense governmental activities $ 26,998 78

99 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 6 CAPITAL ASSETS (Continued) Depreciation expense charged to business-type activities for the fiscal year ended June 30, 2013 was as follows: Refuse $ 2,465 Airport 926 Transit 2,963 Community Hospital 126 Fair 908 Spud Point Marina 52 Other Districts 318 Total depreciation expense business-type activities $ 7,758 Depreciation expense charged to discrete component units for the fiscal year ended June 30, 2013 was as follows: Sonoma County Community Development Commission $ 163 Sonoma County Library 239 Sonoma County Water Agency 10,664 Sonoma Valley County Sanitation District 3,337 Russian River County Sanitation District 1,105 South Park County Sanitation District 342 Occidental County Sanitation District 139 Total depreciation expense discrete component units $ 15,750 79

100 NOTE 7 PAYABLES Accounts payable and accrued liabilities for the fiscal year ended June 30, 2013, for the County s individual major funds, nonmajor and internal service funds in the aggregate are as follows: Accounts payable and accrued liabilities - Governmental Activities: General Human Services Special Revenue Health and Sanitation Special Revenue Mandated Revenues Special Revenue Roads Special Revenue Other Governmental Funds Internal Service Funds Total Governmental Activities Accounts $ 6,223 $ 811 $ 5,062 $ 218 $ 2,218 $ 2,280 $ 1,875 $ 18,687 Accrued salaries and benefits 26, ,974 Deposits from others 1, ,432 Other accrued liabilties ,974 Total $ 34,618 $ 811 $ 5,754 $ 1,150 $ 2,491 $ 2,321 $ 1,922 $ 49,067 Accounts payable and accrued liabilities - Energy Other Total Business-type Independence Enterprise Business-type Activities Refuse Airport Program Transit Funds Activities Accounts $ 1,688 $ 445 $ 56 $ 2,488 $ 777 $ 5,454 Other accured liabilities Total $ 1,690 $ 479 $ 56 $ 2,488 $ 872 $ 5,585 NOTE 8 OPERATING LEASES The County has non-cancelable operating leases that are primarily for office space and equipment. Future minimum lease payments under these operating leases at June 30, 2013, are: Fiscal Year Ending Future Minimum June 30, Lease Payments , , , , ,234 Thereafter 12,477 Total $ 39,172 Total rental expense for operating leases for the fiscal year ended June 30, 2013 was $7,

101 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 9 LONG-TERM LIABILITIES The following is a summary of long-term liabilities activity for the fiscal year ended June 30, 2013: Balance Balance Due Within July 1, 2012 Additions Retirements June 30, 2013 One Year Governmental activities Compensated absences $ 36,419 $ 32,412 $ (37,611) $ 31,220 $ 3,123 Net OPEB obligation 49,582 1,026 50,608 - Certificates of participation 36,990 (4,519) 32,471 2,890 Bonds payable 93,845 - (3,145) 90,700 3,275 Notes payable 2,775 - (850) 1,925 1,925 Pension obligation bonds 495,220 - (22,965) 472,255 13,090 Loans payable 77,356 1,611 (3,111) 75, Self-insurance 36,331 25,000 (23,511) 37,820 10,857 Capital lease obligations 4, (628) 4, Subtotal, long-term obligations 833,159 60,351 (96,340) 797,170 36,068 Add deferred amounts: Issuance premiums 3,828 - (198) 3, Subtotal, deferred amounts 3,828 - (198) 3, Total governmental activities - long-term obligations $ 836,987 $ 60,351 $ (96,538) $ 800,800 $ 36,266 Balance Balance Due Within July 1, 2012 Additions Retirements June 30, 2013 One Year Business-type activities Compensated absences $ 944 $ 640 $ (837) $ 747 $ 123 Long-term postemployment benefits 1,000 - (1,000) - - Landfill closure and postclosure 51, (183) 52, Certificates of participation 4,700 - (1,500) 3,200 1,615 Advances from other governments 15,923 - (3,565) 12,358 1,049 Energy bonds payable 46,614 6,659 (5,625) 47,648 1,632 Note payable Capital lease obligations (191) Subtotal, long-term obligations 122,830 8,281 (12,901) 118,210 5,615 Add (less) deferred amounts: Loss on refunding (150) - 50 (100) (50) Subtotal, deferred amounts (150) - 50 (100) (50) Total business-type activities - long-term obligations $ 122,680 $ 8,281 $ (12,851) $ 118,110 $ 5,565 81

102 NOTE 9 LONG-TERM LIABILITIES (Continued) Balance Balance Due Within July 1, 2012 Additions Retirements June 30, 2013 One Year Discrete Component Units Community Development Commission Compensated Absences $ 303 $ - $ (67) 236 $ 35 Note Payable $ 750 $ - $ (750) - $ - Total Community Development Commission- long-term obligations $ 1,053 $ - $ (817) $ 236 $ 35 Sonoma County Library Compensated Absences $ 866 $ - $ (32) 834 $ - Long-term postemployment benefits $ 4,815 $ 820 $ - 5,635 $ - Capital Lease Obligations $ 18 $ - $ (17) 1 $ 1 Total Sonoma County Library - long-term obligations $ 5,699 $ 820 $ (49) $ 6,470 $ 1 Sonoma County Water Agency Long-term contract payable 100,982 - (3,029) 97,953 3,127 Compensated Absences $ 3,007 $ 2,097 $ (2,377) 2,727 $ 181 Pollution Remediation $ 230 $ - $ (3) 227 $ - Revenue and general obligation bonds $ 28,488 $ 12,265 $ (13,377) 27,376 $ 1,009 Advances from other governments 16, (1,112) 16,436 1,854 Capital lease obligations 12,952 - (1,146) 11,806 1,198 Subtotal, long-term obligations 162,502 15,067 (21,044) 156,525 7,369 Add deferred amounts: Issuance premiums (44) loss on refunding (405) (358) 64 (699) (44) Subtotal, deferred amounts (210) Total Sonoma County Water Agency - long-term obligations $ 162,292 $ 15,373 $ (21,024) $ 156,641 $ 7,369 Sonoma Valley County Sanitation District Revenue and general obligation bonds $ 12,587 $ 12,105 $ (7,249) 17,443 $ 965 Advances from other governments 6,015 2,320 (490) 7, Note Payable (186) Subtotal, long-term obligations 19,184 14,425 (7,925) 25,684 1,611 Add deferred amounts: Issuance discounts (105) - 74 (31) (5) Issuance premiums - 1,564 (63) 1, loss on refunding (363) (68) 58 (373) (58) Subtotal, deferred amounts (468) 1, ,097 - Total Sonoma Valley County Sanitation District - long-term obligations $ 18,716 $ 15,921 $ (7,856) $ 26,781 $ 1,611 82

103 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 9 LONG-TERM LIABILITIES (Continued) Balance Balance Due Within July 1, 2012 Additions Retirements June 30, 2013 One Year Discrete Component Units Russian River County Sanitation District Revenue and general obligation bonds $ 1,650 $ - $ (210) 1,440 $ 85 Advances from other governments 2,679 3,885 (2,219) 4, Total Russina River County Sanitation District - long-term obligations $ 4,329 $ 3,885 $ (2,429) $ 5,785 $ 343 South Park County Sanitation District Pollution Remediation $ 1,298 $ - $ - 1,298 $ - Revenue and general obligation bonds $ 2,565 $ - $ (125) 2,440 $ 130 Subtotal, long-term obligations 3,863 - (125) 3, Add deferred amounts: Issuance premiums 49 - (3) 46 3 loss on refunding (215) - 14 (201) (14) Subtotal, deferred amounts (166) - 11 (155) (11) Total South Park County Sanitaion District - long-term obligations $ 3,697 $ - $ (114) $ 3,583 $ 119 The Insurance and Heavy Equipment Replacement internal service funds predominantly serve the governmental funds. Accordingly, long-term obligations for them are included as part of the above totals for governmental activities. At year-end, $37,820 of internal service funds self-insurance liability is included in the above amounts. In governmental activities, the liabilities for compensated absences as well as the unfunded OPEB obligation are primarily liquidated by the General Fund. Refer to Note 16 for information regarding the long-term postemployment benefits obligation for the Community Hospital. 83

104 NOTE 9 LONG-TERM LIABILITIES (Continued) Individual issues of bonds, notes and certificates of participation outstanding at June 30, 2013 are as follows: Interest Annual Original Outstanding Rates / Principal Issue Balance Type of indebtedness (purpose) Maturity Ranges Installments Amount June 30, 2013 Governmental activities Certificates of Participation (2): 2003 Series (A) Detention Facility Refinance % 1,435-1,800 19,295 8, Series (B) Juvenile Justice Center % ,960 2, ACTTC Remodel (12) % ,776 1, General Services Energy (14) % 415-2,217 18,900 19, Administration Building COP % ,475 1,245 32,471 Bonds payable (3): 2007 Series A Agricultural Preservation And Open Space (Measure F) % 0-7,340 93,845 90,700 Notes payable (2): Human resources management system % 1,925 1,925 1,925 Pension obligation bonds (4): 2003 Series A % 7,685-25, , , Series B % 0-21,000 21,000 21, % 0-38, , , ,255 Loans payable Sonoma County Tobacco Securitization Corporation (5) % 755-4,200 83,060 74,220 Pacific Gas & Electric Loans % Enterprise Financial System Loans (17) % ,321 1,274 75,856 Capital lease obligations (6) % ,429 4,315 Total governmental activities $ 677,522 84

105 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 9 LONG-TERM LIABILITIES (Continued) Interest Annual Original Outstanding Rates / Principal Issue Balance Type of indebtedness (purpose) Maturity Ranges Installments Amount June 30, 2013 Business-type activities Certificates of Participation: 2007 Refuse Refunding 2000 COPS (13) %-4.90% ` $1,220-1,635 $ 11,315 $ 3,200 Advances from other governments (8): California Department of Boating and Waterways to Spud Point Marina % ,000 2,947 Various state and local agencies for the County's other enterprise funds % ,172 1,737 California Department of Transportation to the Airport Enterprise Fund % ,987 6,343 California Energy Commission to Energy Independence Program ,000 2,000 1,000 California Construction Authority to the Fair Enterprise Fund , ,358 Energy Bonds Payable (15): Energy Independence Program % 1,713-4,599 62,187 47,648 Capital Lease Obligations (6): Refuse % Airport security system % Notes Payable: Airport % Total business-type activities $ 64,685 85

106 NOTE 9 LONG-TERM LIABILITIES (Continued) Interest Annual Original Outstanding Rates / Principal Issue Balance Type of indebtedness (purpose) Maturity Ranges Installments Amount June 30, 2013 Discrete component units Sonoma County Library Capital Lease Obligations (6): % Total Sonoma County Library 1 Sonoma County Water Agency Long-term contract payable (1) % $2,934-6,286 $ 114,764 $ 97,953 Revenue and General Obligation Bonds (7): Water Agency General Obligation Bonds % Water and Wastewater Revenue Bonds, Series C % ,220 4, Water Revenue Bonds, Series A % ,500 10, A Water Revenue Refunding Bonds % ,265 12,265 27,376 Advances from other governments (8): California Department of Water Resources to Water Agency (9) % 653-1,019 15,856 12,676 Sonoma Valley County Sanitation District % ,443 3,056 North Marin Water District 2014 n/a Solano County 2014 n/a Sonoma Valley County Sanitation District 2014 n/a ,436 Capital Lease Obligations (6): Water Agency % 260-4,340 19,385 11,806 Total Sonoma County Water Agency 153,571 Sonoma Valley County Sanitation District Revenue and General Obligation Bonds (7): Sonoma Valley General Obligation Bonds % Sonoma Valley Revenue Bonds Series C % ,240 5, Sonoma Valley Revenue Bonds % 0-1,410 12,105 12,105 17,443 Advances from other governments (8): U.S. Department of Agriculture and the State Water Resources Control Board to Sonoma Valley County Sanitation District (11) % ,089 7,845 Notes Payable: Sonoma Valley CSD (16) % Total Sonoma Valley Sanitation District $ 25,684 86

107 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 9 LONG-TERM LIABILITIES (Continued) Interest Annual Original Outstanding Rates / Principal Issue Balance Type of indebtedness (purpose) Maturity Ranges Installments Amount June 30, 2013 Discrete component units Russian River County Sanitation District Revenue and General Obligation Bonds (7): Russian River General Obligation Bonds % , Russina River Revenue Bonds % , ,440 Advances from other governments (8): U.S. Department of Agriculture and the State Water Resources Control Board to Russian River County Sanitation District (10) % 138-2,042 7,685 4,345 Total Russina River Sanitation District 5,785 South Park County Sanitation District Revenue and General Obligation Bonds (7): 2005 South Park Revenue Bonds Series C % ,565 2,440 Total South Park Sanitation District $ 2,440 NOTES: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) The long-term contract payable represents the Water Agency s proportionate share of a federal government dam project. Debt service payments are funded by property tax revenues of the Water Agency. Debt service payments are funded by legally available resources of the County and are fully collateralized by the facilities financed with the proceeds of the certificates of participation, bonds and notes. Debt service payments are funded by legally available resources of the Open Space Special Tax Account (OSSTA) and are fully collateralized by the Measure F quarter cent sales tax revenue and assets financed with the proceeds. Pension obligation bonds were issued in 2003 and 2010 to fund the County s unfunded pension liability. Debt service payments are funded by charges to County departments based on their proportionate share of salaries and benefit expenses. The Sonoma County Securitization Corporation (Corporation) borrowed from the California County Tobacco Securitization Agency the proceeds of the Series 2005 Tobacco Settlement Asset-Backed Refunding Bonds to provide additional resources and to refund the Series 2002 A and B Tobacco Settlement Asset-Backed Bonds issued by the Agency. Loan repayments will be funded by future tobacco settlement revenues. The County has entered into capital leases to acquire various machinery and equipment. Debt service payments are funded by legally available resources. Debt service payments are funded by operating revenues. The advances from other governments represent: (a) loans from the California Department of Boating and Waterways and the California Coastal Conservancy and (b) loans from various state and local agencies for which debt service payments are funded by the operations of the related fund or activity. The Water Agency has constructed a collector well located adjacent to the Russian River at Wohler Road. The Russian River Sanitation District received a loan from the State Water Resources Control Board (SWRCB) to help fund the third unit processes project and the disinfection upgrade project. Debt service payments are funded by operating revenues. The Sonoma Valley County Sanitation District received revolving fund loans from the SWRCB to help fund an outfall rehabilitation project, the Tertiary Treatment Plant upgrade project, and the Watmaugh main sewer trunk replacement project. Debt service payments are funded by operating revenues. The County issued Certificates of Participation in November 2007 to help fund the remodel of the Auditor Controller s Office. Debt service payments are funded by operating revenues. In December 2007, Refuse refunded the outstanding Certificates of Participation. 87

108 NOTE 9 LONG-TERM LIABILITIES (Continued) (14) (15) (16) (17) The County issued Certificates of Participation in April 2009 for a comprehensive energy project for improvements at the Central Mechanical Plant, reduce energy and water consumption, and install a 1.4 megawatt fuel cell to generate electricity and heat. The Sonoma County Public Financing Authority sold increments of special Contractual Assessment Revenue Bonds to the County s Treasury. The proceeds of the bonds were lent to the Energy Independence Program major enterprise fund to fund the County s Energy Independence program. The note was issued to acquire a parcel of land during The County entered into an agreement with Oracle Credit Corporation to have the option of drawing on a line of credit in order to provide payment as invoices become due for the new financial system being acquired. The applicable interest rate is calculated each time the line of credit is accessed. There are a number of limitations and restrictions contained in the various bond indentures. County management believes that the County is in compliance with all significant limitations and restrictions. The Sonoma County Securitization Corporation has pledged all revenues to be received from the tobacco master settlement agreement with four US tobacco manufacturers to repay the outstanding amount of $74,220 in tobacco securitization bonds issued in October The bonds were issued to finance the acquisition of the County Tobacco Assets from the County of Sonoma. Total principal and interest remaining on the bonds is $169,517 payable through The tobacco revenue is determined by applying a rate to the number of cigarettes sold; hence, the amount to be received over the term of the bonds is not estimable. During the fiscal year ended June 30, 2013, principal and interest payments were $6,937 while tobacco settlement revenue was $6,481. Following is a schedule of debt payment requirements of governmental activities to maturity for long-term obligations, excluding compensated absences, pollution remediation and self-insurance liabilities that have indefinite maturities, outstanding at June 30, 2013: Certificates of Participation Bonds Payable Pension Obligation Bonds Year ending June 30: Principal Interest Principal Interest Principal Interest $ 2,890 $ 1,427 $ 3,275 $ 4,233 $ 13,090 $ 23,042 3,096 1,305 3,405 4,100 15,600 24,595 3,318 1,172 3,565 3,942 18,315 23,910 3,552 1,026 3,745 3,760 21,065 23,081 3, ,940 3,568 24,260 22,093 8,638 2,949 22,840 14, ,980 87,047 7, ,875 8, ,540 42, ,055 1,467 68,405 3, Subtotals 32,470 9,370 90,700 44, , ,596 Plus: Issuance premiums - - 3, Total $ 32,470 $ 9,370 $ 94,330 $ 44,421 $ 472,255 $ 250,596 88

109 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 9 LONG-TERM LIABILITIES (Continued) Loans Payable (1) Capital Lease Obligations Notes Payable Year ending June 30: Principal Interest Principal Interest Principal Interest , $ 1,925 $ , , , , ,014 18,819 1, ,920 16,599 1, , ,045 15, , ,260 2, Total $ 75,856 $ 95,384 $ 4,315 $ 1,365 $ 1,925 $ 35 (1) Debt service requirements relating to the Sonoma County Securitization Corporation loan payable are based on various assumptions, including the timing of tobacco settlement revenues. The loan is subject to mandatory redemption prior to the stated maturity dates based on amounts available in the Turbo Redemption Account on June 1 and December 1. As of June 30, 2013, annual debt service requirements of business-type activities to maturity are as follows: Note Payable Certificates of Participation Year ending June 30: Principal Interest Principal Interest , , Subtotals 810-3, Less: Deferred loss on refunding - - (100) - Total $ 810 $ - $ 3,100 $ 201 Advances From Other Capital Lease Obligations Governments Energy Bonds Payable Year ending June 30: Principal Interest Principal Interest Principal Interest 2014 $ 198 $ 19 $ 1,049 $ 484 $ 1,632 $ 1, , ,820 1, , ,932 1, , ,053 1, ,199 1, , ,939 4, , ,360 3, , Total $ 669 $ 45 $ 12,358 $ 3,294 $ 47,648 $ 15,089 89

110 NOTE 9 LONG-TERM LIABILITIES (Continued) As of June 30, 2013, annual debt service requirements of the component unit Sonoma County Library to maturity are as follows: Capital Lease Oblications Year ending June 30: Principal Interest Total $ 1 $ - As of June 30, 2013, annual debt service requirements of the component unit Sonoma County Water Agency to maturity are as follows: Revenue and General Obligation Long-term Contract Bonds Payable Year ending June 30: Principal Interest Principal Interest ,127 3,159 1,009 1, ,227 3,058 1,025 1, ,332 2,954 1,058 1, ,439 2,847 1, ,550 2,736 1, ,542 11,885 6,113 4, ,904 8,524 6,975 2, ,843 4,585 6,420 1, , , Subtotals 97,953 40,331 27,376 13,143 Plus: Issuance premiums Less: Deferrred loss on refunding - - (699) - Total $ 97,953 $ 40,331 $ 27,492 $ 13,143 Advances From Other Capital Lease Obligations Governments Year ending June 30: Principal Interest Principal Interest 2014 $ 1,198 $ 510 $ 1,854 $ , , , , , , , ,761 1, , Total $ 11,806 $ 2,148 $ 16,436 $ 3,392 90

111 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 9 LONG-TERM LIABILITIES (Continued) As of June 30, 2013, annual debt service requirements of the component unit Sonoma Valley Sanitation District to maturity are as follows: Revenue and General Obligation Advances From Other Bonds Payable Governments Note Payable Year ending June 30: Principal Interest Principal Interest Principal Interest $ 452 $ 187 $ 194 $ , , , , ,265 1,816 2, , , , , Subtotals 17,443 5,716 $ 7,845 $ 1,693 $ 396 $ 20 Less: Issuance discounts (31) Plus: Issuance premiums 1, Less: Deferred loss on refunding (373) Total $ 18,540 $ 5,716 $ 7,845 $ 1,693 $ 396 $ 20 As of June 30, 2013, annual debt service requirements of the component unit Russian River Sanitation District to maturity are as follows: Revenue and General Obligation Advances From Other Bonds Payable Governments Year ending June 30: Principal Interest Principal Interest 2014 $ 85 $ 75 $ 258 $ , Total $ 1,440 $ 282 $ 4,345 $

112 NOTE 9 LONG-TERM LIABILITIES (Continued) As of June 30, 2013, annual debt service requirements of the component unit South Park Sanitation District to maturity are as follows: Revenue and General Obligation Bonds Payable Year ending June 30: Principal Interest Subtotals 2, Plus: Issuance premiums 46 - Less: Deferred loss on refunding (201) - Total $ 2,285 $ 891 Arbitrage The Tax Reform Act of 1986 instituted certain arbitrage restrictions with respect to the issuance of tax-exempt bonds after August 31, Arbitrage regulations deal with the investment of all tax-exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service (IRS) at least every five years. During the current year, the County performed calculations of excess investment earnings on various bonds and financings, and at June 30, 2013 does not expect to incur a liability. Capital Leases The carrying amount of assets acquired under capital leases totaled $16,807 at June 30, NOTE 10 SHORT-TERM OBLIGATIONS Governmental Activities Summary of the governmental activities short-term debt for the year ended June 30, 2013 is as follows: Balance Balance Governmental activities July 1, 2012 Additions Reductions June 30, 2013 Tax and Revenue Anticipation Note $ 130,000 $ - $ (130,000) $ - 92

113

114 NOTE 11 NET POSITION/FUND BALANCES Fund balances at June 30, 2013 are as follows: General Nonspendable: Not in spendable form: Inventories 27 Human Services Special Revenue Health and Sanitation Special Revenue Mandated Revenues Special Revenue $ $ - $ 176 $ - Receivables Prepaid items and deposits - 1, Advances 5, Total nonspendable fund balance 5,179 1, Restricted: Agricultural Preservation and Open Space District Capital projects and equipment replacement ,813 First 5 Children and Families Commission Debt service APOSD IPA, operations and maintenance Mental Health Service Act programs - - 9,047 - Fire and emergency services Lighting districts Road maintenance Public protection ,126 Air pollution control Health and welfare programs ,101 Other programs Total restricted fund balances - - 9,047 55,501 Committed: Advertising activities Other programs Total committed fund balances Assigned: Capital projects and equipment replacement 4, Tribal development impact mitigation 4, Eliminate projected budgetary deficit 17, Redevelopment Agencies 9, General services 3, Public protection 2, Road maintenance Other programs 2, Total assigned fund balances 45, Unassigned 48,479 (609) - - Total fund balances $ 99,641 $ 883 $ 9,223 $ 55,529 94

115 NOTES TO THE BASIC FINANCIAL STATEMENTS Open Space Special Tax Account Special Revenue Mental Health Realignment Special Revenue Other Funds Total Roads Nonspendable: Not in spendable form: $ - $ 640 $ - $ - $ 832 Inventories Receivables ,734 Prepaid items and deposits ,152 Advances ,745 Total nonspendable fund balance Restricted 61, ,103 75,090 Agricultural Preservation and Open Space District - 18, ,445 Capital projects and equipment replacement ,439 27,439 First 5 Children and Families Commission ,652 12,652 Debt service 7, ,356 APOSD IPA, operations and maintenance - - 7,720-16,767 Mental Health Services Act programs ,081 3,081 Fire and emergency services ,715 6,715 Lighting districts - 6, ,192 Road maintenance ,135 13,261 Public protection ,245 3,245 Air pollution control ,101 Health and welfare programs ,249 1,710 Other programs 69,343 25,100 7,720 75, ,054 Total restricted fund balances Committed: ,217 3,217 Advertising activities Other programs ,217 3,457 Total committed fund balances Assigned: ,971 15,941 Capital projects and equipment replacement ,387 Tribal development impact mitigation ,724 Eliminate projected budgetary deficit ,927 Redevelopment Agencies ,044 General services ,984 Public protection - 17, ,430 Road maintenance ,735 Other programs - 17,430-10,971 74,172 Total assigned fund balances ,870 Unassigned $ 69,343 $ 43,188 $ 7,720 $ 89,771 $ 375,298 Total fund balances 95

116 NOTE 12 EMPLOYEES RETIREMENT PLANS (a) Plan Description The Sonoma County Employees Retirement Association (SCERA) was organized on January 1, 1946, under the provisions of the 1937 County Employees Retirement Act. SCERA a cost-sharing, multiple-employer Defined Benefit Pension Plan (Plan), serves as a distribution agent for County Postemployment Healthcare Plan (PH Plan), and is legally separate of the County. For purposes of accounting and financial reporting, the Plan is treated as a single employer plan as the majority of the participants are employees of the County. The California Public Employees Pension Reform Act of 2013 (PEPRA) was signed into law by Governor Jerry Brown in early September with an effective date of January 1, The new law is complex and broad-reaching. SCERA worked throughout the fall to analyze and make important policy decisions and implemented the legislation on January 1, All employees hired after January 1, 2013, with the exception of employees who are eligible for reciprocity with another qualified California retirement system, are part of Plan B which complies with the laws established by PEPRA. The details of the Board s policy decisions have been documented and posted to the SCERA website. Plan members include all permanent employees appointed to a permanent position of at least half time in the County of Sonoma, Sonoma County Water Agency, Valley of the Moon Fire District (District), Sonoma County Transportation Authority, Superior Courts of California and Community Development Commission. Plan members are classified as either General or Safety (e.g., eligible Sheriff, Fire, and Probation Department employees). Membership becomes effective on the first day of service. The Plan provides benefits as defined by the law upon retirement, death, or disability of members and may be amended by the Board of Supervisors and then shall be implemented by the Board of Retirement. At December 31, 2012, the date of the most recent actuarial valuation, Plan membership consisted of the following: Retirees and beneficiaries currently receiving benefits 4,258 Current active members 3,620 Terminated vested members 503 Total 8,381 SCERA issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. That report can be obtained from the SCERA Association located at: 433 Aviation Boulevard, Santa Rosa, California or can be found online at (b) Funding Policy The contribution requirements of Plan members and the County are determined by an independent actuary, approved by the SCERA Board of Retirement, and adopted by the Board of Supervisors. The contribution rates for the fiscal year ended June 30, 2013 were based on the Plan s valuation dated December 31, The contribution rates determined in each actuarial valuation take effect at the beginning of the fiscal year starting at least twelve months after the beginning of the valuation year, except when significant benefit or actuarial assumption changes occur. Plan A members are required to contribute 7% -14% of their annual covered salary based upon the member s age at the date of entry into the system and Plan B members are required to contribute 10.28% for General Plan B Employees and 14.75% for Safety Plan B Employees of their annual covered salary. The County is required to contribute the remaining amounts necessary to finance the coverage of their employees through periodic contributions at actuarially determined rates. Employer and member contributions are funded and recognized through the County and District payroll systems via employer benefit payments and employee deductions. For the fiscal year ended June 30, 2013, the County contributed $42,997 or approximately 15.54% of covered payroll. 96

117 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 12 EMPLOYEES RETIREMENT PLANS (Continued) (c) Annual Pension Cost and Net Pension Asset The County s annual pension cost (APC) and net pension asset as of and for the fiscal year ended June 30, 2013, were as follows: Annual required contribution (ARC) $ 42,997 Interest on beginning net pension asset (36,336) Adjustment to the ARC 47,895 Annual pension cost 54,556 Contributions made 42,997 Decrease in net pension asset (11,559) Net pension asset, beginning of year 472,726 Net pension asset, end of year $ 461,167 Fiscal Year Ended June 30, Annual Pension Cost (APC) Contribution Percent of APC Contributed Net Pension Asset 2013 $ 54,556 $ 42,997 79% $ 461, ,136 36,450 81% 472, , , % 481,411 (d) Funded Status and Funding Progress As of December 31, 2012, the most recent actuarial valuation date, the Plan was 77.9% funded. The actuarial accrued liability (AAL) for benefits was $2,383,700, and the actuarial value of assets was $1,856,847, resulting in an unfunded actuarial accrued liability (UAAL) of $526,853. The covered payroll (annual payroll of active employees covered by the Plan) was $302,764, and the ratio of the UAAL to the covered payroll was 174.0%. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. (e) Actuarial Methods and Assumptions In the December 31, 2012 and 2010 actuarial valuations, Plan A used the entry age normal cost method. Under the entry age normal cost method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated on a level basis over the working lifetime of the individual. Plan B uses a single rate methodology, regardless of entry age, where members pay 50% of the normal cost. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a 5-year period. The funding policy adopted by the Board of Retirement is to amortize the UAAL at December 31, 2008 as well as any new UAAL established on each subsequent actuarial valuation after the December 31, 2008 valuation over separate 20-year declining periods. As a result, a pensionable salary cash allowance of $3.45 per hour for General-County and Safety-County members is amortized over a 20-year declining period, with 16 years remaining as of December 31,

118 NOTE 12 EMPLOYEES RETIREMENT PLANS (Continued) The table below summarizes the actuarial methods and assumptions of Plan A for the actuarial valuations for the years ended December 31, 2012 and December 31, 2010: December 31, 2012 December 31, 2010 Actuarial cost method Entry Age Normal Entry Age Normal Amortization method Level percent, open Level percent, open Amortization period 20 years, layers 20 years, layers Asset valuation method 5-year smoothed market value 5-year smoothed market value Actuarial assumptions: Investment rate of return 7.50% 7.75% Projected annual salary increases - General 4.50% to 10.00% 4.75% to 10.25% Projected annual salary increases - Safety 4.50% to 12.50% 5.00% to 12.25% Inflation 3.25% 3.50% Across-the-board salary increases 0.75% 0.75% Cost-of-living adjustments None None NOTE 13 OTHER POSTEMPLOYMENT HEALTH BENEFITS (OPEB) (a) Plan Description The County is the plan sponsor of a postemployment healthcare plan (PH Plan). In accordance with County Salary Resolution No , the County offers either a cost-sharing defined benefit or a defined contribution plan depending on an employee s date of hire. The County entered into another postemployment health benefit (OPEB) trust with the Public Agency Retirement Services (PARS) to accumulate resources to fund future benefit payments of the cost-sharing defined benefit plan. In addition, the County entered into a Memorandum of Understanding with the Sonoma County Retirement Association to perform retiree health benefit administrative services. Retiree healthcare eligibility itself, however, is determined by the County's Human Resources-Risk Management Division. Authority to establish and amend benefit provisions of the PH Plan resides with the County Board of Supervisors. The PH Plan is treated as a single-employer plan for purposes of accounting and financial reporting, since the majority of the participants are employees of the County. Eligibility for participation in each plan is based upon date of hire. Employees hired prior to January 1, 2009 are eligible to participate in the cost-sharing defined benefit PH Plan and employees hired on or after January 1, 2009, are eligible to participate in a defined contribution Plan. Benefit levels and eligibility requirements for each plan are as follows: Cost-sharing Defined Benefit Plan: To be eligible for the cost-sharing defined benefit PH Plan, participants must have been continuously employed by the County prior to retirement, retire directly from County service, be enrolled in a County sponsored medical plan (or have waived enrollment) at the time of retirement, and receive a monthly pension from the Sonoma County Employees Retirement Association. Benefit levels and eligibility for employees hired prior to January 1, 2009 are as follows: Employees hired prior to January 1, 1990 receive retiree plus family coverage without any service requirements. 98

119 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 13 OTHER POSTEMPLOYMENT HEALTH BENEFITS (OPEB) (Continued) Employees hired on or after January 1, 1990 but before January 1, 2009 (a) with ten years of County service are eligible to receive County-subsidized retiree only medical coverage or (b) with twenty years of County service are eligible to receive County-subsidized retiree and one dependent medical coverage, with the retiree bearing the full cost of premiums for covering additional dependents. Retirees and the County share in the cost of monthly premium for medical coverage. Effective June 1, 2009, the County began to phase in a contribution maximum toward the cost of the plan over a five-year period. During this period the County contribution is reduced each year until June 1, 2013, when it reaches a $500 per month maximum contribution, an amount which is equal to the County's contribution toward the cost of active, unrepresented Administrative Management employees' medical plans. Retirees may enroll eligible dependents in the County offered medical plan elected by the retiree, but the retiree is responsible for all premium costs in excess of the County s contribution. In the case of a Safety employee's line-of-duty death, dependents of the deceased employee are eligible to receive County-subsidized medical coverage. Defined Contribution Plan: For employees hired on or after January 1, 2009, the County provides a defined contribution in the form of a deposit into a Health Reimbursement Arrangement (HRA) account. Upon an employee s completion of two full years of consecutive County regular service in pay status the County provides (a) an initial contribution of $2,400 to an HRA account established in the employees name, this initial contribution of $2,400 is based on full-time status and is prorated based on their allocated position, and (b) thereafter contributes $.58 per pay status hour, not including overtime, into the HRA account for each eligible employee. Once an employee has worked the two full years of service and the initial contribution into their HRA account is made, there are no further service requirements. Participants may access their HRA account at age 50 or upon retirement from the County, whichever is earlier, and may defer this date. There is no requirement to be covered under a County-sponsored medical plan in retirement to receive this benefit. Retirees and dependents that elect coverage under a County-sponsored plan are responsible for all costs. (b) Funding Policy The cost-sharing defined benefit PH Plan funding policy provides for periodic contributions by the County. The contribution rate is determined by an independent actuary and authorized annually by the County Board of Supervisors. The contribution rate is based on the annual required contribution (ARC), an amount that is actuarially determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) of the cost-sharing defined benefit PH Plan over a period not to exceed thirty years. The ARC for the fiscal year ended June 30, 2013 was actuarially determined to be 7.5% of annual covered payroll and was based on the June 30, 2011 actuarial valuation. 99

120 NOTE 13 OTHER POSTEMPLOYMENT HEALTH BENEFITS (OPEB) (Continued) (c) Annual OPEB Cost and Net OPEB Obligation For the fiscal year ended June 30, 2013, the County s actuary determined an annual OPEB cost (expense) of $27,692. The County s annual OPEB cost and the net OPEB obligation as of and for the fiscal year ended June 30, 2013 were as follows: Annual required contribution $ 26,715 Interest on net OPEB obligation 3,469 Adjustment to annual required contribution (2,492) Annual OPEB cost (expense) 27,692 Contributions made (21,851) Increase in net OPEB obligation 5,841 Net OPEB obligation - beginning of year 44,767 Net OPEB obligation - end of year $ 50,608 The County s annual OPEB cost, the percentage of annual OPEB cost contributed to the cost-sharing defined benefit PH plan and the net OPEB obligation for 2013, 2012, and 2011 are as follows: Fiscal Percentage of Year Ended Annual Annual OPEB Cost Net OPEB June 30, OPEB Cost Contribution Contributed Obligation 2013 $ 27,692 $ 21,851 79% $ 50, ,313 21,814 83% 44, ,465 23,042 94% 40,268 (d) Funded Status and Funding Progress As of June 30, 2013, the most recent actuarial valuation date, the cost-sharing defined benefit PH Plan was 7.0% funded. The actuarial accrued liability for benefits was $335,364, and the actuarial value of assets was $23,694, resulting in an unfunded actuarial accrued liability (UAAL) of $311,670. The covered payroll (annual payroll of active employees covered by the plan) was $327,651, and the ratio of the UAAL to the covered payroll was 95.1%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, which is presented as required supplementary information following the notes to the financial statements, presents 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. (e) Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the County and PH Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the County and PH plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. 100

121 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 13 OTHER POSTEMPLOYMENT HEALTH BENEFITS (OPEB) (Continued) In the June 30, 2013 actuarial valuation, the projected unit credit method was used. The actuarial assumptions included a 7.5% investment rate of return (net of administrative expenses), which is based upon the expected rate of return on the SCERA investment pool; a County Health Plan Medical cost trend rate of 8.5% initially, graded down by decrements to an ultimate rate of 5.0% over 7 years; a County Health Plan Drug cost trend rate of 8.5% initially, graded down by decrements to an ultimate rate of 5.0% over 7 years; a Kaiser Medical/Drug cost trend rate of 8.5% initially, graded down by decrements to an ultimate rate of 5.0% over 7 years; and an AARP Medicare Supplement trend rate of 8.5% initially, graded down by decrements to an ultimate rate of 5.0% over 7 years. These rates include an inflation assumption of 3.25% and projected payroll increases of 4.0%. The UAAL is being amortized as a level percentage of payroll on an open basis. The remaining amortization period at June 30, 2013 was 30 years. NOTE 14 RISK MANAGEMENT Numerous claims and lawsuits are pending or threatened against the County related to the governmental and proprietary fund types. The County's self-insurance coverage is as follows: $300 per occurrence for workers' compensation claims, $1,000 per occurrence for automobile and general liability claims, $500 per occurrence and any amount in excess of $10,000 per occurrence for hospital medical malpractice claims occurring prior to March 26, 1996, and $275 per occurrence for health insurance claims with unlimited stop-loss coverage/no lifetime maximum per individual. The County is entirely self-insured for unemployment claims and for long-term disability claims occurring prior to August 1, The County has established a separate internal service fund to account for the eventual settlement of these lawsuits and claims. The governmental and certain proprietary fund types contribute amounts to the internal service fund based on actuarially determined estimates of the ultimate settlements. Such estimates are generally based upon a 70% confidence level. Contributions for the fiscal year ended June 30, 2013, totaled $34,458, which is recorded in the internal service fund as operating revenue. As of June 30, 2013, the estimated liability in the internal service fund totaled $37,820 of which $10,857 is estimated to be payable in the ensuing year. The remaining $26,963 is classified as long-term, self-funded insurance payable in the internal service fund. Effective August 1, 1987, the County became a participant in the CSAC Excess Insurance Authority excess liability insurance program. The County is covered under this program for $1,000 to $25,000 per occurrence for liability claims. Amounts in excess of $300 per occurrence for workers compensation claims with statutory limits are maintained through participation in the CSAC Excess Insurance Authority, Excess Worker s Compensation Program. The County maintains All Risk coverage for physical loss and damage including flood and earthquake coverage (for certain structures) through participation in the CSAC Excess Insurance Authority with the following limits and deductibles: $600,000 limit (shared) per occurrence and $50 deductible for All-Risk and flood, earthquake limits of $307,000 with a deductible of 5% of the building value. Boiler and machinery coverage is included in the All- Risk coverage. The County pays an annual basic premium for excess coverage and is assessed an annual risk premium based on an actuarial review that estimates the ultimate liability of each program participant. Settled claims have not exceeded the commercial coverage in any of the past three fiscal years. A summary of activity of the claims liability is as follows: Fiscal Year Ended Fiscal Year Ended June 30, 2013 June 30, 2012 Unpaid claims liability at beginning of year $ 36,331 $ 38,117 Incurred claims 25,000 25,964 Claim payments (23,511) (27,750) Unpaid claims liability at end of year $ 37,820 $ 36,

122 NOTE 15 LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS The Refuse Enterprise Fund (REF) follows the provisions of GASB Statement No. 18, Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care Costs. Under Statement No. 18, the Refuse Enterprise Fund calculated the total estimated current cost of closure and postclosure care for its landfill accepting solid waste (Central) and those no longer accepting solid waste (Healdsburg and Annapolis). Federal and state laws require landfill operators to place a cover on their landfills when closed and to perform certain maintenance and monitoring functions for up to 30 years after closure. The estimated cost of closure and postclosure care are subject to change due to variables such as inflation, changes in the cost of materials, revisions of Federal and state laws, changes in technology and other variables. As of June 30, 2013, the estimated closure and postclosure liability was $52,778. This liability represents the cumulative amount reported to that date based on the use of 74% of the estimated capacity of the operating landfill and approximately $5,652 for postclosure care of landfills already closed. The REF will recognize the remaining estimated costs of closure and postclosure care of approximately $7,321 for the operating landfill as the remaining estimated capacity is filled. The estimated percentages of permitted landfill capacity used are as follows: Capacity Used Closure Date Central 74% 2035* Annapolis 100% 1995 Healdsburg 100% 1989 *Landfill operations at the Central Disposal Site resumed on September 7, 2010 under a new agreement with Keller Canyon Landfill, Inc. that provides all of the equipment and staff necessary to bury up to 150,000 tons per year of solid waste. The new agreement with Keller Canyon Landfill also provided for them to prepare a comprehensive permit application to permit full build-out and resumption of long-term waste disposal at the Central Landfill. As of June 30, 2013, the Central Landfill has fully permitted capacity to operate without outhaul for 22+ years. The County anticipates that additional liner will be constructed in the summer of 2014, and that the landfill will be in full operation by October The REF is required by state laws and regulations to make annual contributions to an account to finance all closure costs and one year of postclosure care for its landfill site closed after The REF is in compliance with these requirements, and at June 30, 2013, assets of $10,321 were held for these purposes. The REF expects that any future inflation costs will be paid from earnings on these investments and future contributions. However, if investment earnings are inadequate or additional closure or postclosure care requirements are determined (due to changes in technology or applicable laws or regulations), these costs may need to be covered by charges to future users of the solid waste system or from future non-ad valorem assessments. Although the REF is not legally required by state or federal laws to provide funding for its landfill site closed prior to 1991, the REF has accepted final responsibility for this site. NOTE 16 COMMITMENTS AND CONTINGENCIES (a) Medical Malpractice Claims The County of Sonoma participates in a medical malpractice program through the CSAC Excess Insurance Authority. Coverage includes exposures within the Health Services Department, including the Behavioral Health Division. Limits of coverage are $21,500 for each event with a $5 deductible. The County has participated in this program since July 1, Funding for this program is actuarially determined and contributions are determined by claims experience and exposures (number of patient visits). Previously, the County was self-insured for medical malpractice, and upon leasing the Community Hospital in March 1996, the County discontinued the self-insurance program, although the Insurance internal service fund is maintained to pay outstanding claims and claims which 102

123 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 16 COMMITMENTS AND CONTINGENCIES (Continued) occurred during the operation of the hospital but have not been reported. At June 30, 2013, the estimated claims liability for this program totaled $570 and is included in the County s self-funded insurance liability. No additional contributions have been made to the internal service fund during the fiscal year ended June 30, As the funding requirements decrease, the estimated claims liability will be reduced and eventually eliminated. (b) Grants and Subventions Receipts from federal, state and local sources are subject to audit by representatives of those agencies to determine if the monies were expended in accordance with appropriate statutes, grant terms, and regulations. Such audits could lead to a request for reimbursement to the grantor agencies. The County believes that no significant liabilities will be incurred as a result of these audits. (c) Lease of Community Hospital On March 25, 1996, the County transferred operational control of the Community Hospital to an independent third party. The transfer included a 20-year lease of the facility, for which the County received a discounted prepayment of the entire amount of $1,925. The Community Hospital has recorded this prepayment as deferred revenue that is being amortized over the life of the lease, which ends in In connection with the lease agreement, the Community Hospital also reduced the carrying value of its operating property, plant, and equipment to the value of the lease prepayment plus its cost basis in the land. The new carrying value, net of the cost of the land, will be amortized over the life of the lease. In addition to the lease of the facility, the Community Hospital transferred all working capital assets and liabilities to the hospital operator in exchange for a payment of $12,588. The working capital transfer included all liabilities associated with providing services under third-party payer arrangements such as the Medicare and Medi-Cal programs in periods prior to the transfer. Net cash received in excess of recorded working capital amounts at the date of the transfer was $3,487. The proceeds from this working capital transfer have been set aside in the Community Hospital fund to help fund certain retirement benefits (primarily pension and medical benefits) of the Community Hospital employees terminated by the County as a result of the transfer of operational control. A related liability estimated at approximately $10,700 was recorded by the Community Hospital prior to the transfer. This amount is reduced as severance/liability payments are made to hospital employees. This liability has been exhausted and all additional actual costs will be paid by the County through an adjustment of future benefit rates. (d) Encumbrances The County governmental funds had the following open encumbrances at June 30, 2013: General Fund $ 2,812 Human Services Special Revenue Fund 145 Health and Sanitation Special Revenue Fund 11 Mandated Revenue Special Revenue Fund 469 Roads Special Revenue Fund 912 Other governmental funds 8,383 Total encumbrances for governmental funds $ 12,732 (e) Other The County from time to time is a party to various claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of the County's administration, except for the matters previously discussed, the various claims, legal actions, and complaints would have no material effect on the financial position of the County. 103

124 NOTE 17 POLLUTION REMEDIATION OBLIGATIONS Sonoma County Agricultural Preservation and Open Space District The Sonoma County Agricultural Preservation and Open Space District has two properties where pollution remediation is needed. The Poff Ranch property, a conservation easement acquired during fiscal year 2008, is undergoing pollution remediation due to the property being utilized for sheep grazing including a sheep-dip area for a number of years. An analysis of the soil in the sheep dip area was performed and pesticide contamination was found. The District has contracted with independent contractors for the removal and disposal of the contaminated soil and has recorded a liability of $32. Also, the District has performed an analysis of the buildings on the McCullough Ranch property and a conservation easement acquired in fiscal year 2009 and found asbestos and lead and a small amount of oil contaminated soil. The District has estimated cost of $30 for the asbestos, lead and soil clean-up and has recorded a liability. The District has included a total of $62 in estimated polluted remediation costs as part of its accounts payable balance at June 30, The District has taken it upon itself to perform the clean-up as there is no regulatory body involved. NOTE 18 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER COUNTY REDEVELOPMENT AGENCY On December 29, 2011, the California Supreme Court upheld Assembly Bill XI 26 ( the Bill ) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the County that previously had reported a redevelopment agency within the reporting entity of the County as a blended component unit. The Bill provides that upon dissolution of a redevelopment agency, either the county or another unit of local government will agree to serve as the successor agency to hold the assets until they are distributed to other units of state or local government. On January 10, 2012, the County Board of Supervisors elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of County resolution number On June 27, 2012, Assembly Bill 1484 (AB 1484) was signed by the Governor into law effective immediately. AB 1484 amended provisions contained in the Bill, one of which clarified that the Successor Agency was a legal separate entity. After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated. The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill. In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1,

125 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 18 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER COUNTY REDEVELOPMENT AGENCY (Continued) Prior to that date, the final seven months of the activity of the redevelopment agency continued to be reported in the governmental funds of the County (Community Development Commission Special Revenue Fund). After the date of dissolution, the assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund (Successor Agency Private-Purpose Trust Fund) in the financial statements of the County. Long-term Liabilities Balance Balance Due Within July 1, 2012 Additions Retirements June 30, 2013 One Year Redevelopment Successor Agency Tax allocation bonds payable $ 13,915 $ - $ (420) $ 13,495 $ 440 Total $ 13,915 $ - $ (420) $ 13,495 $ 440 Tax Allocation Bonds payable acquired from the former Sonoma County Community Redevelopment Agency on February 1, 2012 were comprised of two tax allocation bond issuances. The bonds were issued to fund redevelopment projects in three separate redevelopment areas within the County. Principal and interest payments are payable solely from and secured by a pledge of property tax increment revenue. The Agency has pledged future tax increment revenues, less amounts required to be set aside pursuant to ABX1 26 and AB1484 for enforceable obligations for the repayment of the 1986 Series A and Springs Tax Allocation Bonds of 2008 bonds. The Roseland, 1986 Series A Bond has a maturity date of August 1, 2014, carries an interest rate of 7.9% per annum with $240 outstanding at June 30, The Commission issued the Springs Redevelopment Tax Allocation Bonds of 2008 on December 2, 2008 and the amount outstanding at June 30, 2013 was $13,255. The Springs Bonds are payable on a predetermined schedule. The first bonds being repaid on August 1, 2009 and the final scheduled for payment on August 1, The interest rates vary from 4.0% being paid on the early maturities to 6.5% being paid on the bonds that mature on August 1, Bond principal in the amount of $13,495 was outstanding as of the fiscal year-end. Interest is payable on both the Roseland 1986 bonds and The Springs 2008 bonds each August 1st and February 1st. The original amounts of the Roseland 1986 bonds at issuance were $1,330 and they are callable at the Successor Agency s discretion. The Springs 2008 bonds were issued in the amount of $14,345. The Successor Agency can only call the Springs bonds earlier than stated on the bond repayment schedule where bonds mature after July 31, Prior to the dissolution of the former redevelopment agency, the County had pledged future tax increment revenue to repay the 2008 Springs Redevelopment Tax Allocation Bonds. The bonds were issued to fund redevelopment projects of the County. The bonds are payable solely from future tax increment revenue through Total principal and interest remaining on the bonds is $25,973 payable through For the five months ended June 30, 2013, interest paid was $

126 NOTE 18 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER COUNTY REDEVELOPMENT AGENCY (Continued) The annual principal and interest requirements on the long-term bonds outstanding at June 30, 2013, are as follows: Year ending June 30: Principal Interest Total 2014 $ 440 $ 813 $ 1, , , , , ,260 3,325 5, ,025 2,528 5, ,140 1,375 5, , ,191 Total $ 13,495 $ 11,224 $ 24,719 Capital Assets Capital asset activity for the fiscal year ended June 30, 2013 was as follows: Balance July 1, 2012 Additions Retirements Transfers Balance June 30, 2013 Total capital assets, being depreciated Buildings and improvements $ 67 $ - $ - $ - $ 67 Total capital assets, being depreciated Less accumulated depreciation for: Buildings and improvements - (1) - - (1) Total accumulated depreciation - (1) - - (1) Successor Agency capital assets, net $ 67 $ (1) $ - $ - $ 66 NOTE 19 RESTATEMENT OF NET POSITION Effective July 1, 2012, the County has restated the nondepreciable and depreciable capital assets on the Statement of Net Position as well as restated Net Position to properly account for financial statement disclosure changes related to GASB 61. Footnote 6 Capital Assets, reflects the change to beginning capital assets costs for land, buildings and improvements, as well as accumulated depreciation for buildings and improvements. The restatement is the result of identification that not all pre GASB 34 land was appropriately valued as well as the improper disposal of buildings currently in service during a prior year. The restatements of net position are summarized as follows: 106

127 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE 19 RESTATEMENT OF NET POSITION (Continued) Governmental Activities June 30, 2012 Previously Presented Restatement June 30, 2012 Restated Cash $ 675,573 $ (148,749) $ 526,824 Receivables, net 71,707 (57,447) 14,260 Assets held for sale 420 (420) - Internal balances 2,512 (1,593) 919 Due from other governments 86,631 (3,052) 83,579 Prepaid expenses and deposits 30,195 (10) 30,185 Net capital assets 1,033, ,804 1,164,240 Accounts payable and accrued liabilities 43,941 3,346 40,595 Due to other governments 6, ,248 Unearned revenue 14,371 (6,769) 21,140 Interest payable 8,761 2,171 6,590 Long-term liabilities 946, , ,005 Net position, invested in capital assets, net of related debt 789, ,897 1,025,895 Net position, restricted 376,933 (144,872) 232,061 Net position, unrestricted 69,850 (62,430) 7,420 Net position, beginning of year $ 1,236,781 $ (28,595) $ 1,265,376 Business-Type Activities June 30, 2012 Previously Presented Restatement June 30, 2012 Restated Cash $ 94,919 $ (56,184) $ 38,735 Restricted cash and investments 17,329 (10,584) 6,745 Receivables, net 59,363 (8,298) 51,065 Internal balances (2,512) 1,593 (919) Due from other governments 2,573 (465) 2,108 Prepaid expenses and deposits 1,291 (1,125) 166 Deferred charges 503 (484) 19 Net capital assets 440,060 (323,664) 116,396 Accounts payable and accrued liabilities 9,252 3,835 5,417 Due to other governments 1,870 1, Unearned revenue 9,258 5,661 3,597 Interest payable 1, Long-term liabilities 204,000 81, ,680 Net position, invested in capital assets, net of related debt 336,310 (240,246) 96,064 Net position, restricted 13,019 (12,282) 737 Net position, unrestricted 38,734 (53,423) (14,689) Net position, beginning of year $ 388,063 $ (305,951) $ 82,

128 NOTE 20 EXTRAORDINARY ITEM In June 2012, the Fair entered into a settlement agreement and mutual release with PNC related to the lawsuit against the Fair and the California Fairs Financing Authority (CFFA) alleging that in May 2011, PNC notified the Fair that the CFFA had defaulted under the master financing lease. Under the terms of the settlement agreement, the Fair agreed to remit a settlement payment in the amount of $1,400 to PNC in satisfaction of the outstanding note, release of PNC s security interest in the photovoltaic equipment and dismissal of the action brought against the Fair. In June 2012, the Fair remitted the $1,400 settlement payment in September 2012, and the agreement was deemed fully executed. Debt forgiveness income associated with the settlement in the amount of $1,343 has been recognized for the year ended December 31, 2012 as an extraordinary item in connection with the settlement. NOTE 21 SUBSEQUENT EVENTS On August 1, 2013, the County issued the 2003 Series A Certificates of Participation Refinancing (2013A) to refund $8,335 of outstanding principal and $120 of accrued interest of the 2003 Series A 1993 COPs Refinancing, and issued the 2003 Series B Certificates of Participation Refinancing (2013B) to refund $2,155 of outstanding principal and $30 of accrued interest of the 2003 Series B Juvenile Justice Center Project. The 2003 Series A & B bonds were redeemed on August 28, The 2013A bonds have a total par amount of $8,455 and the 2013B bonds have a total par amount of $2,185. The bonds reach final maturity on November 17, Principal will be payable on November 15th of each year. Interest will be payable on November 15 and May 15 of each year. The interest rates range from 0.08% to 1.55%. On September 10, 2013, the Airport Enterprise fund entered into a Grant Anticipation Note (GAN) with the Sonoma County Treasurer with borrowings not to exceed $10,000. The principal will be payable on September 10, The interest will be payable June 30 th of each year. The interest rate will be the rate earned by funds invested by the Sonoma County Treasurer in the most recent calendar quarter, plus 0.75 basis points, initially set upon the period ending June 30, The interest rate shall adjust on July 1 st of 2014, 2015 and 2016, using the aforementioned interest rate calculation. 108

129 REQUIRED SUPPLEMENTARY INFORMATION

130

131 Required Supplementary Information County Defined Benefit Pension Plan (Dollars expressed in thousands) Actuarial Accrued Percentage Actuarial Actuarial Value Liability (AAL) Unfunded Funded Covered Of Covered Valuation of Assets Entry Age AAL (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 12/31/2010 1,890,874 2,139, , % 323, % 12/31/2011 1,867,117 2,220, , % 308, % 12/31/2012 1,856,847 2,383, , % 302, % Schedule of Funding Progress - County Postemployment Healthcare Plan (Dollars expressed in thousands) Actuarial Accrued Percentage Actuarial Actuarial Value Liability (AAL) Unfunded Funded Covered Of Covered Valuation of Assets Projected Unit Credit AAL (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 6/30/2009 9, , , % 308, % 6/30/ , , , % 314, % 6/30/ , , , % 327, % 111

132

133 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special revenue funds are established to finance particular governmental activities and are financed by specific taxes or other revenues. Such funds are authorized by statutory provisions to pay for certain activities of a continuing nature. Included in the Special Revenue classification are the following funds: ADVERTISING This fund was established to account for revenues generated by the county Transient Occupancy Tax. The fund finances both the Economic Development Department and the Advertising Program pursuant to Government Code Section Tax revenues are derived from a nine percent tax on the rental revenue of hotel, motel, bed and breakfast, and inn beds and on campgrounds in unincorporated areas of the County. FIRE AND EMERGENCY SERVICES This fund was established to finance fire service activity in the unincorporated areas of Sonoma County. The Fire and Emergency Services Fund receives property tax revenue. FIIRST 5 COMMISSION This fund is used to account for the operations of the Sonoma County First 5 Children and Families Commission (the Commission). The Commission was established by the Sonoma County Board of Supervisors through adoption of Ordinance No on December 15, 1998 pursuant to Proposition 10, the California Children and Families First Act of The purpose of the Commission is to promote, support, and improve the early development of children from the prenatal stage through five years of age. The Commission is funded by a tax of fifty cents per pack of cigarettes and by a similar tax on other tobacco products. The Department of Health Services acts as administrative agent to the Commission. ARICULTURAL PRESERVATION AND OPEN SPACE DISTRICT This fund is used to account for the operations of the Sonoma County Agricultural Preservation and Open Space District (Open Space District), which is a separate legal entity governed by its Board of Directors, which is the County Board of Supervisors, ex officio (California Public Resources Code (b)). The Open Space District was formed in 1990 for the purpose of preserving agricultural land and open space in Sonoma County. The Open Space District is financed primarily through a quarter-cent sales tax, which is administered by the Sonoma County Auditor-Controller-Treasurer-Tax Collector. PUBLIC SAFETY REALIGNMENT This fund was established to account for the requirements of Assembly Bill 109 and associated legislation that transferred responsibility from the State to the County for the supervision, custody and programming needs of certain realigned offenders. The State realigned certain revenues from sales tax and vehicle license fees to fund the program. SPECIAL DISTRICTS Special Districts are independent units of local government organized to perform a single government function or a restricted number of related functions. This fund, which is governed by the Board of Supervisors, is used to account for the activities of Special Districts operating within the unincorporated area of the county.

134 OTHER SPECIAL REVENUE The Other Special Revenue statements include the Fish and Wildlife Special Revenue Fund and the Tobacco Tax Special Revenue Fund. The Sonoma County Fish and Wildlife Commission was established as the Sonoma County Fish and Wildlife Advisory Board in The Sonoma County Fish and Wildlife Commission is responsible for assisting the Sonoma County Board of Supervisors in the proper and orderly propagation and conservation of fish and game. The Fish and Wildlife Special Revenue Fund is financed primarily by the County s portion of fines and forfeitures imposed or collected as a result of environmental enforcement actions prosecuted by the District Attorney for violations of the California Statement Fish and Game Code in Sonoma County. The Tobacco Tax Fund was established to finance the delivery of indigent health care prevention and education services. This fund is responsible for a portion of the physician services, which includes educational and preventative programs to deter smoking. Indigent health care is administered by the State while educational and preventative services are provided by the County. Programs are financed through a portion of the state tobacco tax revenue. CAPITAL PROJECTS FUND The Capital Projects Fund accounts for financial resources used for the acquisition or construction of major capital facilities (other than those financed in the proprietary fund types). DEBT SERVICE FUND The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, long-term debt.

135

136 Nonmajor Governmental Funds Combining Balance Sheet June 30, 2013 (Dollars in Thousands) Special Capital Debt Revenue Projects Service Funds Fund Fund Total ASSETS: Cash and investments $ 63,153 $ 10,735 $ 1,029 $ 74,917 Cash and investments with trustee ,623 11,623 Receivables (net of allowance for doubtful accounts) Accounts Loans Special assessments Interest and other 2-2,811 2,813 Due from other funds Inventories Due from other governments 8, ,642 Advances to other funds Advances to other governments Prepaid items and deposits Total assets $ 71,651 $ 11,503 $ 15,463 $ 98,617 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 1,748 $ 532 $ - $ 2,280 Due to other funds 3, ,512 Due to other governments Deferred revenue 192-2,811 3,003 Deposits from others Other liabilities Total liabilities 5, ,811 8,846 Fund balances: Nonspendable Restricted 62,691-12,652 75,343 Committed 3, ,217 Assigned - 10,971-10,971 Unassigned Total fund balances 66,148 10,971 12,652 89,771 Total liabilities and fund balances $ 71,651 $ 11,503 $ 15,463 $ 98,

137 Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Special Capital Debt Revenue Projects Service Funds Fund Fund Total REVENUES: Taxes $ 11,822 $ - $ - $ 11,822 Licenses, permits and franchise fees 1, ,029 Fines, forfeitures and penalties Use of money and property Intergovernmental 59,823 1,783 3,261 64,867 Charges for services 4, ,287 Other revenue ,482 7,845 Total revenues 78,538 2,229 10,009 90,776 EXPENDITURES: Current: General government 9,980 1, ,573 Public protection 26, ,496 Public ways and facilities Health and sanitation 9, ,945 Public assistance 28, ,208 Recreation and cultural services Capital outlay 6,091 7,818-13,909 Debt service: Principal 36-6,452 6,488 Interest and other 11-11,600 11,611 Total expenditures 80,947 9,361 18, ,410 Deficiency of revenues under expenditures (2,409) (7,132) (8,093) (17,634) Other financing sources (uses): Transfers in 484 8,845 7,852 17,181 Transfers out (2,657) (123) - (2,780) Issuance of long-term debt Total other financing sources (uses) (1,870) 8,722 7,852 14,704 NET CHANGE IN FUND BALANCES (4,279) 1,590 (241) (2,930) Fund balances, beginning of year, as restated 70,427 9,381 12,893 92,701 FUND BALANCES, END OF YEAR $ 66,148 $ 10,971 $ 12,652 $ 89,

138 Nonmajor Special Revenue Funds Combining Balance Sheet June 30, 2013 (Dollars in Thousands) Agricultural Fire and First 5 Preservation and Emergency Sonoma County Open Space Advertising Services Commission District ASSETS Cash and investments $ 3,403 $ 3,264 $ 27,094 $ 13,308 Receivables (net of allowance for doubtful accounts) Accounts Loans Interest and other Inventories Due from other funds Due from other governments , Advances to other funds Prepaid items and deposits Total assets $ 3,419 $ 3,360 $ 28,360 $ 13,731 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 186 $ 112 $ 681 $ 578 Due to other funds Due to other governments Deferred revenue Interest payable Advances from other funds Deposits from others Other liabilities Total liabilities ` Fund balances: Nonspendable Restricted - 3,081 27,439 13,103 Committed 3, Assigned Unassigned Total fund balances 3,233 3,081 27,613 13,153 Total liabilities and fund balances $ 3,419 $ 3,360 $ 28,360 $ 13,

139 Other Public Safety Special Special Realignment Districts Revenue Total ASSETS $ 4,070 $ 11,887 $ 127 $ 63,153 Cash and investments Receivables (net of allowance for doubtful accounts) Accounts Loans Interest and other Inventories Due from other funds 6, ,214 Due from other governments Advances to other funds Prepaid items and deposits $ 10,766 $ 11,888 $ 127 $ 71,651 Total assets LIABILITIES AND FUND BALANCES Liabilities: $ 119 $ 72 $ - $ 1,748 Accounts payable 3, ,512 Due to other funds Due to other governments Deferred revenue Interest payable Advances from other funds Deposits from others Other liabilities 3, ,503 Total liabilities Fund balances: Nonspendable 7,135 11, ,691 Restricted ,217 Committed Assigned Unassigned 7,135 11, ,148 Total fund balances $ 10,766 $ 11,888 $ 127 $ 71,651 Total liabilities and fund balances 119

140 Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Agricultural Fire and First 5 Preservation and Emergency Sonoma County Open Space Advertising Services Commission District REVENUES: Taxes $ 7,279 $ 2,922 $ - $ - Licenses, permits and franchise fees Fines, forfeitures and penalties Use of money and property Intergovernmental ,058 4,531 Charges for services Other revenue Total revenues 7,446 4,506 4,449 5,080 EXPENDITURES: Current: General government 4, ,248 Public protection - 4, Public ways and facilities Health and sanitation Public assistance - - 6,168 - Recreation and cultural services Capital outlay ,628 Debt service: Principal Interest Total expenditures 4,732 5,126 6,168 10,876 Excess (deficiency) of revenues over (under) expenditures 2,714 (620) (1,719) (5,796) Other financing sources (uses): Transfers in Transfers out (2,389) (32) - (11) Issuance of long-term debt Total other financing sources (uses) (2,379) NET CHANGE IN FUND BALANCES (1,719) (5,791) Fund balances, beginning of year 2,898 3,078 29,332 18,944 FUND BALANCES, END OF YEAR $ 3,233 $ 3,081 $ 27,613 $ 13,

141 Other Public Safety Special Special Realignment Districts Revenue Total REVENUES: $ - $ 1,621 $ - $ 11,822 Taxes - 1,029-1,029 Licenses, permits and franchise fees Fines, forfeitures and penalties Use of money and property 49,470 1, ,823 Intergovernmental 3, ,287 Charges for services Other revenue 52,545 4, ,538 Total revenues EXPENDITURES: Current: ,980 General government 21, ,496 Public protection Public ways and facilities 8,189 1, ,945 Health and sanitation 21, ,208 Public assistance Recreation and cultural services ,091 Capital outlay Debt service: Principal Interest 50,586 3, ,947 Total expenditures Excess (deficiency) of revenues 1,959 1,058 (5) (2,409) over (under) expenditures Other financing sources (uses): Transfers in - (225) - (2,657) Transfers out Issuance of long-term debt - (119) - (1,870) Total other financing sources (uses) 1, (5) (4,279) NET CHANGE IN FUND BALANCES 5,176 10, ,427 Fund balances, beginning of year $ 7,135 $ 11,816 $ 117 $ 66,148 FUND BALANCES, END OF YEAR 121

142

143 Advertising Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Taxes $ 6,578 $ 6,578 $ 7,279 $ 701 Use of money and property Intergovernmental (67) Charges for services Other revenue (148) Total revenues 6,900 6,950 7, EXPENDITURES: General government 6,409 6,683 5,265 1,418 Reimbursements (210) (210) (119) (91) Encumbrances (639) (639) (414) (225) Total expenditures 5,560 5,834 4,732 1,102 Excess of revenues over expenditures 1,340 1,116 2,714 1,598 OTHER FINANCING SOURCES (USES): Transfers in (100) Transfers out (2,269) (2,489) (2,389) 100 Total other financing sources (uses) (2,260) (2,379) (2,379) - NET CHANGE IN FUND BALANCE $ (920) $ (1,263) $ 335 $ 1,

144 Fire and Emergency Services Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Taxes $ 2,864 $ 2,864 $ 2,922 $ 58 Use of money and property (5) Intergovernmental (36) Charges for services 1,041 1, (78) Other revenue (15) Total revenues 4,335 4,582 4,506 (76) EXPENDITURES: Public protection 4,973 5,346 5, Encumbrances (13) (13) (12) (1) Total expenditures 4,960 5,333 5, Excess (deficiency) of revenues over (under) expenditures (625) (751) (620) 131 OTHER FINANCING SOURCES (USES): Transfers in (3) Transfers out (32) (32) (32) - Total other financing sources (uses) NET CHANGE IN FUND BALANCE $ (390) $ (428) $ 3 $

145 First 5 Sonoma County Commission Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Use of money and property $ 236 $ 236 $ 297 $ 61 Intergovernmental 3,869 3,973 4, Charges for services Other revenue (21) Total revenues 4,136 4,284 4, EXPENDITURES: Health and sanitation 15,489 15,808 7,634 8,174 Encumbrances (632) (632) (1,466) 834 Total expenditures 14,857 15,176 6,168 9,008 Excess (deficiency) of revenues over (under) expenditures (10,721) (10,892) (1,719) 9,173 NET CHANGE IN FUND BALANCE $ (10,721) $ (10,892) $ (1,719) $ 9,

146 Agricultural Preservation and Open Space District Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Use of money and property $ 143 $ 143 $ 128 $ (15) Intergovernmental 23,133 23,966 4,531 (19,435) Other revenue Total revenues 23,442 24,275 5,080 (19,195) EXPENDITURES: General government 25,326 29,187 14,741 14,446 Reimbursements - (206) - (206) Encumbrances (2,349) (2,349) (3,865) 1,516 Total expenditures 22,977 26,632 10,876 15,756 Deficiency of revenues under expenditures 465 (2,357) (5,796) (3,439) OTHER FINANCING SOURCES (USES): Transfers in (1) Transfers out (11) (11) (11) - Total other financing sources (uses) (1) NET CHANGE IN FUND BALANCE $ 471 $ (2,351) $ (5,791) $ (3,440) 126

147 Public Safety Realignment Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Use of money and property $ - $ 1 $ 49 $ 48 Intergovernmental 38,350 53,049 49,470 (3,579) Charges for services - 5 3,026 3,021 Other revenue (172) Total revenues 38,350 53,227 52,545 (682) EXPENDITURES: Public Protection 19,499 24,524 21,157 3,367 Health and Sanitation 1,670 9,239 8,189 1,050 Public assistance 18,163 21,240 21,240 - Total expenditures 39,332 55,003 50,586 4,417 Excess of revenues over expenditures (982) (1,776) 1,959 3,735 NET CHANGE IN FUND BALANCE $ (982) $ (1,776) $ 1,959 $ 3,

148 Special Districts Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Taxes 1,232 1,232 1, Licenses, permits and franchise fees 1,020 1,020 1,029 9 Fines, forfeitures and penalties Use of money and property Intergovernmental 1,504 1,504 1,358 (146) Charges for services (38) Other revenue Total revenues 4,071 4,071 4, EXPENDITURES: Current: Public protection: County Services Area # 41: Roseland Meadowlark Airport Business Center Airport-Larkfield-Wikiup Countywide Lighting Belmont Terrace Lighting Carmet Lighting Cinnabar Lighting Countryside Manor Lighting Forestville Lighting Geyserville Lighting Graton Lighting Guerneville Lighting Jenner Lighting Madrone Acres Lighting Monte Rio Lighting Penngrove Lighting Rio Nido Lighting South Park Lighting Summer Home Park Lighting Valley of the Moon Lighting West Side Lighting CFD #7 Mayacamas Rio Nido GHAD

149 Special Districts Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (Continued) For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Expenditures (continued): Public ways and facilities: Bittner Lane Permanent Road Mill Creek Lane Permanent Road Mirabel Heights Permanent Road Monte Rosa Permanent Road Peaks Pike Permanent Road Cannon Manor Maintenance and Operations Health and sanitation: North Air Pollution Control District 2,246 2,588 1, Public assistance: IHSS Public Authority 1,045 1, Recreation and cultural services: County Services Area # Encumbrances (3) (3) (3) 0 Total expenditures 4,992 5,584 3,276 2,308 Excess (deficiency) of revenues over (under) expenditures (921) (1,513) 1,058 2,571 OTHER FINANCING SOURCES (USES): Transfers in 211 1, (1,239) Transfers out (424) (7,440) (225) 7,215 Total other financing sources (uses) (213) (6,095) (119) 5,976 NET CHANGE IN FUND BALANCE $ (1,134) $ (7,608) $ 939 $ 8,

150

151 Other Special Revenue Funds Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Fines, forfeitures and penalties $ 43 $ 43 $ 25 $ (18) Use of money and property (3) Intergovernmental (38) Total revenues (59) EXPENDITURES: Public protection: Fish and Game Tobacco tax program Total expenditures NET CHANGE IN FUND BALANCE $ (18) $ (60) $ (5) $

152

153 NONMAJOR ENTERPRISE FUNDS COMMUNITY HOSPITAL This fund was established to account for the operations of the Community Hospital, which is located in Santa Rosa. On March 25, 1996, the County transferred operational control to an independent third party. FAIR This fund was established to account for the activities of the Sonoma County Fair and Exposition, Inc. (the Fair), which operates through an agreement with the County to act as its agent with regard to the operation of the Sonoma County Fairgrounds. The operating results of the Fair are accounted for on a calendar-year basis. SPUD POINT MARINA The Spud Point Marina Enterprise Fund accounts for the operations of Spud Point Marina, a 244-berth marina located in Bodega Bay. OTHER DISTRICTS This fund was established to account for the activities of various small enterprise funds. The eight components of this fund are four small water systems within the County Service Area (CSA), Sea Ranch Zone #2, Porto Bodega, Mason s Marina, and South Santa Rosa Avenue Lighting and Landscaping District. Fitch Mountain, Salmon Creek, Freestone, and Jenner are the small water systems within the CSA. The CSA zones provide water services and are under the control of the Board of Supervisors. These CSA zones provide for the operation, maintenance, and improvement of small water systems. Sea Ranch Zone #2 was formed in 1986 to provide for an on-site waste disposal operation for the Sea Ranch subdivision. The sportfishing center at Porto Bodega currently has five permanent berths in addition to the transient dock. Porto Bodega is operated and maintained by the regional parks department for party boat use. Mason s Marina is a 130-berth marina which includes a leased fish buying pier, small mini-mart and gas station. The South Santa Rosa Avenue Lighting and Landscaping District provides street lighting services. This fund is financed through user charges.

154 Nonmajor Enterprise Funds Combining Statement of Net Position June 30, 2013 (Dollars in Thousands) Community Spud Point Other Hospital Fair Marina Districts Total ASSETS: Current assets: Cash and investments $ - $ 2,851 $ 221 $ 1,710 $ 4,782 Restricted cash and investments Receivables, net Accounts Interest and other Inventories Due from other governments Total current assets - 3, ,852 5,492 Noncurrent assets: Restricted cash and investments Receivables, net Other assets Capital assets: Nondepreciable ,909 Depreciable, net - 10,435 3,257 5,050 18,742 Total noncurrent assets - 10,984 3,774 5,895 20,653 Total assets $ - $ 14,163 $ 4,235 $ 7,747 $ 26,

155 Nonmajor Enterprise Funds Combining Statement of Net Position (Continued) June 30, 2013 (Dollars in Thousands) Community Spud Point Other Hospital Fair Marina Districts Total LIABILITIES: Current liabilities: Accounts payable $ - $ 581 $ 120 $ 76 $ 777 Due to other funds Due to other governments - 1, ,200 Interest payable Compensated absences Unearned revenue Advances from other governments Current liabilities payable from restricted assets: Bonds payable Other Total current liabilities - 1, ,848 Noncurrent liabilities: Compensated absences Advances from other funds Advances from other governments ,707 1,574 4,449 Total noncurrent liabilities ,720 2,030 5,106 Total liabilities - 2,322 3,334 2,298 7,954 NET POSITION: Net investment in capital assets - 10, ,699 15,178 Restricted for: Debt service Scholarships Junior Livestock Auction Unrestricted ,750 2,562 Total net position - 11, ,449 18,191 Total liabilities and net position $ - $ 14,163 $ 4,235 $ 7,747 $ 26,

156

157 Nonmajor Enterprise Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Community Spud Point Other Hospital Fair Marina Districts Total OPERATING REVENUES: Charges for services $ 2 $ - $ 2,241 $ 519 $ 2,762 Flat charges Rents and concessions 50 9, ,517 Sales and miscellaneous Total operating revenues 244 9,455 2,241 1,660 13,600 OPERATING EXPENSES: Services and supplies - 5,147 1,509 1,188 7,844 Salaries and employee benefits - 4, ,348 Depreciation and amortization ,404 Total operating expenses ,691 2,151 1,628 14,596 Operating income (loss) 118 (1,236) (996) NONOPERATING REVENUES (EXPENSES): Taxes Investment income Interest expense (66) (42) (133) (65) (306) Intergovernmental Miscellaneous - (10) Total nonoperating revenues (expenses) (59) (40) (106) 13 (192) Income (loss) before capital contributions and transfers 59 (1,276) (16) 45 (1,188) Capital contributions Transfers in Transfers out (377) - (1) - (378) (201) (786) (501) EXTRAORDINARY ITEM: Extinguishment of debt - 1, ,343 Change in net position (201) Net position, beginning of year , ,384 17,349 Net position, end of year $ - $ 11,841 $ 901 $ 5,449 $ 16,

158 Nonmajor Enterprise Funds Combining Statement of Cash Flows For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Community Spud Point Other Hospital Fair Marina Districts Total Cash flows from operating activities: Received from customers $ 78 $ 9,516 $ 2,153 $ 1,667 $ 13,414 Received from other sources Payments to suppliers for goods and services - (4,886) (1,429) (1,226) (7,541) Payments to employees for services (1,001) (4,681) (595) (122) (6,399) Payments for interfund services used Net cash provided by (used in) operating activities (923) (51) (526) Cash flows from noncapital financing activities: Transfers in Transfers out - - (1) - (1) Taxes received Receipts from other governments Net cash provided by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from sale of capital assets Acquisition and construction of capital assets - (477) - (366) (843) Repayments of advances from other funds Principal paid on notes payable (250) (250) Proceeds from notes payable Principal paid on capital leases Principal paid on bonds and certificates Proceeds of advances from other governments - 2, ,543 Principal paid on advances from other governments - (2,717) (231) (158) (3,106) Capital contributions Interest paid (66) (42) (143) (65) (316) Net cash provided by (used in) capital and related financing activities (66) (203) (374) (446) (1,089) Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents (865) (242) 193 (66) (980) Cash and cash equivalents, beginning of year 865 3, ,782 5,857 Cash and cash equivalents, end of year $ - $ 2,851 $ 310 $ 1,716 $ 4,

159 Nonmajor Enterprise Funds Combining Statement of Cash Flows For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Community Spud Point Other Hospital Fair Marina Districts Total Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $ 118 $ (1,236) $ 90 $ 32 $ (996) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization ,404 Miscellaneous - (10) - 3 (7) Changes in operating assets and liabilities: Decrease (increase) in: Accounts receivable - 61 (65) 4 - Inventories - - (11) (36) (47) Due from other governments - - (7) - (7) Prepaid expenses and deposits Increase (decrease) in: Accounts payable (6) 189 Compensated absences - (45) (5) - (50) Unearned revenue (166) - (16) - (182) Long-term postemployment benefits (1,001) (1,001) Net cash provided by (used in) operating activities $ (923) $ (51) $ 129 $ 319 $ (526) Reconciliation of cash and cash equivalents to the Statement of Net Position: Cash and investments $ - $ 2,851 $ 221 $ 1,710 $ 4,782 Restricted cash and investments, current Restricted cash and investments, noncurrent Total cash and cash equivalents $ - $ 2,851 $ 310 $ 1,716 $ 4,

160

161 INTERNAL SERVICE FUNDS These funds account for the financing of goods or services provided by one department or agency to other departments or agencies within the County and to various other governmental agencies. They are exempt from legal compliance for budgetary control and follow commercial accounting principles for a determination of operating, rather than budgetary, results. Their major source of revenue consists of charges to user departments for services rendered. These charges are based upon standard rates calculated on an estimated cost recovery basis. A more detailed description of the funds established and used by the County follows: INSURANCE This fund was established to account for the operations of the County's self-insurance programs, which cover general liability, medical malpractice, workers' compensation, health, long-term disability and unemployment insurance. HEAVY EQUIPMENT REPLACEMENT This fund was established for the dual purposes of (1) paying General Services Fleet Operations for the cost of heavy equipment maintenance and operations based on usage, and (2) accumulating funds for the future replacement of heavy equipment. Revenue is primarily derived from equipment rental charges to the Road Department, which utilizes the heavy equipment. ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM This fund was established to provide funding for the administration of the Kronos Timekeeping System and the Human Resources Management System. Costs associated with the administration of these global systems are allocated to departments that utilize the systems based on full time equivalent employees. EMPLOYEE RETIREMENT This fund was established to account for our pension related activities. This fund is used to make the annual required contribution (ARC), which is comprised of a portion of the unfunded actuarial accrued liability (UAAL) and the normal cost. This fund is also used to make the debt service payments for the pension obligation bonds. Charges are collected from departments through bi-weekly payroll.

162 Internal Service Funds Combining Statement of Net Position June 30, 2013 (Dollars in Thousands) Heavy Equipment Employee Insurance Replacement ERP System Retirement Total ASSETS: Current assets: Cash and investments $ 74,052 $ 706 $ 2,633 $ 12,787 $ 90,178 Restricted cash and investments 1, ,265 Accounts receivable ,503 6,561 Due from other governments 1, ,064 Prepaid expenses ,046 9,046 Total current assets 76, ,633 28, ,114 Noncurrent assets: Net pension asset , ,167 Deferred charges ,194 2,194 Capital assets: Nondepreciable - - 2,653-2,653 Depreciable, net - 3,492 6,110-9,602 Total noncurrent assets - 3,492 8, , ,616 Total assets $ 76,422 $ 4,200 $ 11,396 $ 491,712 $ 583,730 LIABILITIES: Current liabilities: Accounts payable $ 1,842 $ - $ 33 $ - $ 1,875 Compensated absences Self-funded insurance 10, ,857 Notes payable, current portion Interest payable ,118 2,118 Bond payable, current portion ,090 13,090 Total current liabilities 12, ,208 28,221 Noncurrent portion of long-term liabilities: Compensated absences Other liabilities Notes payable, non-current portion - - 1,021-1,021 Self-funded insurance 26, ,963 Bond payable, non-current portion , ,165 Advances from other funds - - 3,921-3,921 Total noncurrent liabilities 27,214-4, , ,368 Total liabilities 39,941-5, , ,589 NET POSITION: Net investment in capital assets - 3,493 8,763-12,256 Restricted for debt service ,201 9,201 Unrestricted (deficit) 36, (2,642) 8,138 42,684 Total net position 36,481 4,200 6,121 17,339 64,141 Total liabilities and net position $ 76,422 $ 4,200 $ 11,396 $ 491,712 $ 583,

163 Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Heavy Equipment Employee Insurance Replacement ERP System Retirement Total Operating revenues: Charges for services $ 34,458 $ 2,237 $ 2,161 $ 93,341 $ 132,197 Operating expenses: Services and supplies 5,979 2,135 1, ,102 Salaries and employee benefits 3, ,556 57,722 Claims expenses 27, ,029 Depreciation and amortization , ,280 Total operating expenses 36,174 2,603 3,122 55,234 97,133 Operating income (loss) (1,716) (366) (961) 38,107 35,064 Nonoperating revenues (expenses): Investment income Interest expense - (2) - (26,415) (26,417) Miscellaneous Loss on sale of capital assets Total nonoperating revenues (expenses) (26,218) (25,264) Income (loss) before capital contributions and transfers (809) (343) (937) 11,889 9,800 Transfers in Transfers out (7) - (918) - (925) Change in net position (800) 207 (1,855) 11,889 9,441 Net position, beginning of year, as restated 37,281 3,993 7,976 5,450 54,700 Net position, end of year $ 36,481 $ 4,200 $ 6,121 $ 17,339 $ 64,

164 Internal Service Funds Combining Statement of Cash Flows For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Heavy Equipment Employee Insurance Replacement ERP System Retirement Total Cash flows from operating activities: Received from interfund services provided $ 34,014 $ 2,235 $ 2,161 $ 86,838 $ 125,248 Received from other sources Payments to suppliers for goods and services (30,666) (2,138) (1,953) (2) (34,759) Payments to employees for services (2,887) - - (23,715) (26,602) Net cash provided by (used in) operating activities ,121 64,238 Cash flows from noncapital financing activities: Transfers in Transfers out (7) - (918) - (925) Advances from other funds (2,870) (2,870) Principal paid on bonds (22,965) (22,965) Interest paid (26,523) (26,523) Miscellaneous noncapital financing sources Net cash used in noncapital financing activities (871) (52,358) (52,670) Cash flows from capital and related financing activities: Proceeds from sale of capital assets Acquisition and construction of capital assets - (817) (1,922) - (2,739) Proceeds from interfund borrowings - - 3,921 3,921 Proceeds from notes payable 1,320 1,320 Principal paid on notes payable (46) (46) Principal paid on capital leases - (77) - - (77) Interest paid - (5) - - (5) Net cash used in capital and related financing activities - (857) 3,273-2,416 Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents 1,377 (193) 2,633 10,961 14,778 Cash and cash equivalents, beginning of year, as restated 73, ,841 76,665 Cash and cash equivalents, end of year $ 75,302 $ 706 $ 2,633 $ 12,802 $ 91,443 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $ (1,716) $ (366) $ (961) $ 38,107 $ 35,064 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization , ,280 Miscellaneous nonoperating revenues Changes in operating assets and liabilities: Decrease (increase) in: Accounts receivable (397) (2) - (6,503) (6,902) Prepaid expenses ,283 19,283 Net pension asset ,558 11,558 Increase (decrease) in: Accounts payable 853 (3) Compensated absences Unearned revenue (47) (47) Self-funded insurance 1, ,489 Net cash provided by (used in) operating activities $ 801 $ 108 $ 208 $ 63,121 $ 64,238 Reconciliation of cash and cash equivalents to the Statement of Net Position: Cash and investments $ 74,052 $ 706 $ 2,633 $ 12,787 $ 90,178 Restricted cash and investments, current 1, ,265 Restricted cash and investments, noncurrent Total cash and cash equivalents $ 75,302 $ 706 $ 2,633 $ 12,802 $ 91,

165 AGENCY FUND This fund accounts for assets held by the County in an agency capacity for individuals or other government units. The Agency Fund is custodial in nature and does not involve the measurement of results of operations. This fund has no equity account since all assets are due to individuals or entities at some future time.

166 Agency Fund Statement of Changes in Fiduciary Assets and Liabilities For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Balance, Balance, June 30, 2012 Additions Deletions June 30, 2013 ASSETS: Cash and investments $ 17,770 $ 2,072,526 $(2,050,455) $ 39,841 Receivables: Taxes 29,202 17,607 (24,060) 22,749 Interest and other 3,647 12,496 (13,199) 2,944 Due from other agencies 9,914 2,925 (9,914) 2,925 Total assets $ 60,533 $ 2,105,554 $ (2,097,628) $ 68,459 LIABILITIES: Accounts payable $ 9,914 $ - $ (9,914) $ - Due to other agencies 50,619 2,038,192 (2,020,352) 68,459 Total liabilities $ 60,533 $ 2,038,192 $ (2,030,266) $ 68,

167 NON-MAJOR DISCRETELY PRESENTED COMPONENT UNITS These non-major discretely presented component units account for the goods and services provided by these component units. A more detailed description of the discretely presented component units can be found in Note 1 of the Notes to The Basic Financial Statements: SONOMA COUNTY LIBRARY SONOMA VALLEY COUNTY SANITATION DISTRICT RUSSIAN RIVER COUNTY SANITATION DISTRICT SOUTH PARK COUNTY SANITATION DISTRICT OCCIDENTAL COUNTY SANITATION DISTRICT

168

169 Discretely Presented Component Units Combining Statement of Net Position June 30, 2013 (Dollars in Thousands) Sonoma Valley Russian River South Park Occidental Sonoma County County County County County Sanitation Sanitation Sanitation Sanitation Library District District District District Total ASSETS: Cash and investments $ 9,979 $ 8,020 $ 4,236 $ 8,013 $ 630 $ 30,878 Restricted cash and investments - 10,140 1, ,609 Receivables, net ,652 Due from other governments - 1, ,231 Advances to other governments - 3, ,056 Prepaid expenses and deposits Deferred charges Capital assets: Nondepreciable ,007 2,223 1,477 1,208 18,122 Depreciable, net 3,143 55,665 25,723 12,318 2,606 99,455 Total assets 13,428 92,199 33,895 22,279 4, ,458 LIABILITIES: Accounts payable and accrued liabilities 628 1, ,412 Interest payable Pollution remediation - 1,298 1,298 Long-term liabilities: Due within one year 1 1, ,074 Due in more than one year 6,469 25,170 5,442 2,166-39,247 Total liabilities 7,098 28,796 5,874 3, ,480 NET POSITION: Net investment in capital assets 3,349 41,892 22,161 11,511 3,814 82,727 Restricted: Sonoma County Library 2, ,981 Sonoma Valley County Sanitation District - 9, ,772 Russian River County Sanitation District - - 1, ,129 South Park County Sanitation District Occidential County Sanitation District Total Restricted 2,981 9,772 1, ,185 Unrestricted - 11,739 4,731 6, ,066 Total net position $ 6,330 $ 63,403 $ 28,021 $ 18,669 $ 4,555 $ 120,978 See accompanying notes to the basic financial statements. 149

170 Discretely Presented Component Units Combining Statement of Activities For the Fiscal Year Ended June 30, 2013 (Dollars in Thousands) Program Revenues FUNCTION/PROGRAM ACTIVITIES: Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Component units: Library 16, Sonoma Valley Sanitation District 13,213 13, ,885 Russian River Sanitation District 4,160 3,848-1,951 South Park Sanitation District 2,542 3, Occidential Sanitation District Total component units $ 36,925 $ 21,696 $ 671 $ 4,364 GENERAL REVENUES: Taxes: Property Unrestricted investment earnings Gain on sale of capital assets Other Total general revenues Change in net position NET POSITION, BEGINNING OF YEAR, as restated NET POSITION, END OF YEAR See accompanying notes to the basic financial statements. 150

171 Net (Expense) Revenue and Changes in Net Position Discrete Component Units Sonoma Valley Russian River South Park Occidential Sonoma County County County County County Sanitation Sanitation Sanitation Sanitation Library District District District District Total FUNCTION/PROGRAM ACTIVITIES: Component units: (14,972) (14,972) Library 2,109 2,109 Sonoma Valley Sanitation District 1,639 1,639 Russian River Sanitation District South Park Sanitation District Occidential Sanitation District (14,972) 2,109 1, (10,194) Total component units GENERAL REVENUES: Taxes: 14, ,183 Property Unrestricted investment earnings - Gain on sale of capital assets Other 14, ,711 Total general revenues 3 2,413 1, ,517 Change in net position 6,327 60,990 26,036 17,804 4, ,461 NET POSITION, BEGINNING OF YEAR, as restated $ 6,330 $ 63,403 $ 28,021 $ 18,669 $ 4,555 $ 120,978 NET POSITION, END OF YEAR See accompanying notes to the basic financial statements. 151

172

173 STATISTICAL SECTION (UNAUDITED)

174

175 STATISTICAL SECTION This part of the County s Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the County s overall financial health. CONTENTS Financial Trends Pages This segment contains trend information to help the reader understand how the County s financial performance and well-being have changed over time Revenue Capacity This segment contains information to help the reader assess the County s most significant local revenue source, the property tax Debt Capacity This segment contains information to help the reader assess the affordability of the County s current levels of outstanding debt and the County s ability to issue additional debt in the future Economic and Demographic Information This segment contains demographic and economic indicators to help the reader understand the environment within which the County s financial activities take place Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the County s financial report relates to the services the County provides and the activities it performs Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year.

176 Net Position By Category (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) (Accrual Basis of Accounting) Governmental activities Net investment in capital assets $ 499,356 $ 564,178 $ 602,520 $ 649,596 $ 638,123 Restricted 164, , , , ,285 Unrestricted 122,587 30,488 21,361 4,950 47,391 Total governmental activities net position $ 785,946 $ 839,454 $ 884,316 $ 919,339 $ 924,799 Business-type activities Net investment in capital assets $ 295,706 $ 304,577 $ 321,115 $ 320,253 $ 310,006 Restricted 23,413 21,060 20,257 14,244 16,585 Unrestricted 70,672 63,779 (19,328) (19,681) (10,229) Total business-type activities net position $ 389,791 $ 389,416 $ 322,044 $ 314,816 $ 316,362 Total government Net investment in capital assets $ 795,062 $ 868,755 $ 923,635 $ 969,849 $ 948,129 Restricted 187, , , , ,870 Unrestricted 193,259 94,267 2,033 (14,731) 37,162 Total government net position $ 1,175,737 $ 1,228,870 $ 1,206,360 $ 1,234,155 $ 1,241,161 Notes: FY net position was restated from $1,624,844 to $1,347,488 for the implementation of GASB 61 and restatement of (1) capital assets. Accounting standards require that net position be reported in three components in the financial statements: net investment in capital assets; restricted; and unrestricted. Net position are considered restricted when 1) externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments or 2) imposed by law through constitutional provisions or enabling legislation. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 156

177 STATISTICAL SECTION as restated Governmental activities $ 639,694 $ 679,921 $ 759,723 $ 1,025,895 $ 1,040,466 Net investment in capital assets 266, , , , ,551 Restricted 116,262 85,857 57,518 7,420 57,877 Unrestricted $ 1,022,414 $ 1,015,042 $ 1,137,065 $ 1,265,376 $ 1,332,894 Total governmental activities net position Business-type activities $ 316,361 $ 326,402 $ 329,814 $ 96,064 $ 99,990 Net investment in capital assets 15,053 13,199 13, Restricted (21,646) 29,617 31,018 (14,689) (16,116) Unrestricted $ 309,768 $ 369,218 $ 374,091 $ 82,112 $ 84,757 Total business-type activities net position Total government $ 956,055 $ 1,006,323 $ 1,089,537 $ 1,121,959 $ 1,140,456 Net investment in capital assets 281, , , , ,434 Restricted 94, ,474 88,536 (7,269) 41,761 Unrestricted $ 1,332,182 $ 1,384,260 $ 1,511,156 $ 1,347,488 $ 1,417,651 Total government net position 157

178 Expenses By Function (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) (Accrual Basis of Accounting) Expenses Governmental activities General government $ 79,812 $ 79,721 $ 83,541 $ 94,498 $ 99,168 Public protection 217, , , , ,154 Public ways and facilities 29,751 31,825 32,698 48,129 50,542 Health and sanitation 105, , , , ,519 Public assistance 168, , , , ,274 Education 12,879 13,819 14,847 15,681 19,148 Recreation and cultural services 10,998 11,161 12,529 14,096 15,944 Interest on long-term debt 26,977 28,600 38,772 31,912 31,016 Total governmental activities expenses $ 651,686 $ 673,704 $ 715,581 $ 766,845 $ 820,765 Business-type activities Refuse $ 31,248 $ 33,630 $ 114,814 $ 43,712 $ 40,407 Airport Energy Independence Program Transit Spud Point Marina 1,881 1,976 2,460 1,957 2,115 Fair Water Agency 35,964 34,263 31,491 40,616 52,086 Sonoma Valley County Sanitation District 12,963 12,769 7,688 9,055 10,027 Other business-type activities 27,631 25,746 32,192 34,947 37,948 Total business-type activities expenses $ 109,687 $ 108,384 $ 188,645 $ 130,287 $ 142,583 Total primary government $ 761,373 $ 782,088 $ 904,226 $ 897,132 $ 963,348 Notes: (1) FY net position was restated from $1,624,844 to $1,347,488 for the implementation of GASB 61 and restatement of capital assets. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 158

179 STATISTICAL SECTION as restated Expenses Governmental activities $ 98,084 $ 102,272 $ 98,919 $ 73,075 $ 85,310 General government 260, , , , ,671 Public protection 35,382 32,958 37,790 32,421 33,573 Public ways and facilities 137, , , , ,742 Health and sanitation 220, , , , ,547 Public assistance 18,933 18,409 16, Education 15,475 15,290 13,191 12,560 12,465 Recreation and cultural services 31,962 35,320 47,045 43,675 43,801 Interest on long-term debt $ 816,935 $ 839,288 $ 800,272 $ 677,154 $ 720,714 Total governmental activities expenses Business-type activities $ 36,398 $ (24,419) $ 32,712 $ 33,169 $ 32,803 Refuse ,985 4,283 Airport ,487 3,681 Energy Independence Program ,617 15,967 Transit 1,995 1,638 1,933 2,482 2,284 Spud Point Marina ,901 10,743 Fair 53,009 53,651 50, Water Agency 11,798 13,242 12, Sonoma Valley County Sanitation District 38,952 39,758 41,754 1,769 1,885 Other business-type activities $ 142,152 $ 83,870 $ 139,182 72,410 71,646 Total business-type activities expenses $ 959,087 $ 923,158 $ 939,454 $ 749,564 $ 792,360 Total primary government 159

180 Changes in Net Position (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) (Accrual Basis of Accounting) Program Revenue Governmental Activities Charges for services General government $ 38,198 $ 45,465 $ 40,571 $ 59,522 $ 52,920 Public protection 38,653 43,433 41,868 53,054 53,080 Public ways and facilities 7,665 8,639 11,407 8,503 5,404 Health and sanitation 16,678 18,592 19,374 16,749 11,937 Public assistance 7,285 3,847 2,299 8,078 2,176 Education ,056 Recreation and cultural services 5,388 5,534 5,985 4,387 3,573 Total charges for services 114, , , , ,146 Operating grants and contributions 305, , , , ,581 Capital grants and contributions 22,753 40,175 46,087 27,821 18,063 Total governmental activities program revenues 443, , , , ,790 Business - type activities Charges for services Refuse 33,504 33,645 32,226 35,252 34,234 Airport Energy Independence Program Transit Spud Point Marina 1,382 1,514 1,538 1,729 1,928 Fair Water Agency 31,380 29,637 32,254 40,414 45,742 Sonoma Valley County Sanitation District 14,115 12,769 8,997 9,223 9,570 Other business-type activities 13,542 25,746 20,263 20,387 22,933 Total charges for services 93, ,311 95, , ,407 Operating grants and contributions 9,588 12,179 12,092 19,398 16,263 Capital grants and contributions 5,898 5,322 3,022 7,215 5,683 Total business - type activities program revenues 109, , , , ,353 Total primary government Total program revenues $ 552,791 $ 610,883 $ 621,014 $ 630,721 $ 642,143 Net (Expense) Revenue Governmental activities $ (208,304) $ (186,082) $ (204,959) $ (269,742) $ (314,975) Business - type activities (278) 1,861 (76,435) 3,331 (6,230) Total primary government net expenses $ (208,582) $ (184,221) $ (281,394) $ (266,411) $ (321,205) Notes: (1) FY net position was restated from $1,624,844 to $1,347,488 for the implementation of GASB 61 and Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 160

181 STATISTICAL SECTION as restated Program Revenue Governmental Activities Charges for services $ 65,296 $ 66,710 $ 43,331 $ 34,924 $ 53,062 General government 45,817 30,940 31,505 27,092 32,987 Public protection 3,044 2,365 1,883 7, Public ways and facilities 12,568 11,285 23,004 24,611 8,055 Health and sanitation 3,705 1,859 1,377 1,256 12,938 Public assistance Education 4,976 2,824 3,337 3,555 4,011 Recreation and cultural services 136, , ,993 98, ,112 Total charges for services 363, , , , ,152 Operating grants and contributions 16,864 31,048 15,293 4,617 11,116 Capital grants and contributions Total governmental activities 516, , , , ,380 program revenues Business - type activities Charges for services 31,877 33,860 32,640 34,234 34,930 Refuse ,650 4,056 Airport ,892 2,110 Energy Independence Program ,157 2,193 Transit 1,279 1,154 1,747 2,172 2,241 Spud Point Marina ,671 9,455 Fair 44,447 42,528 49, Water Agency 10,199 10,773 11, Sonoma Valley County Sanitation District 22,807 24,092 25,698 1,226 1,904 Other business-type activities 110, , ,910 55,002 56,889 Total charges for services 14,175 12,594 12,611 12,686 10,584 Operating grants and contributions 4,214 9,888 4,771 7,332 2,340 Capital grants and contributions Total business - type activities 128, , ,292 75,020 69,813 program revenues Total primary government $ 645,872 $ 685,842 $ 676,348 $ 573,823 $ 598,193 Total program revenues Net (Expense) Revenue $ (300,061) $ (288,335) $ (262,216) $ (178,351) $ (192,334) Governmental activities (13,154) 51,019 (890) 2,610 (1,833) Business - type activities $ (313,215) $ (237,316) $ (263,106) $ (175,741) $ (194,167) Total primary government net expenses 161

182 Net Expense By Function (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) (Accrual Basis of Accounting) Net (expense) revenue Governmental activities $ (208,304) $ (183,633) $ (204,959) $ (269,742) $ (314,975) Business-type activities (278) 2,019 (76,435) 3,331 (6,230) Total primary government net expense (208,582) (181,614) (281,394) (266,411) (321,205) General Revenues and Other Changes in Net Position: Governmental activities: Taxes: Property 177, , , , ,770 Documentary transfer 6,313 7,312 7,765 10,844 3,867 Transient occupancy 5,268 5,551 6,206 1,791 1,997 Sales tax in-lieu - 2, Grants and other governmental revenues not restricted to specific programs 24,432 24,569 14,258 37,034 19,209 Unrestricted investment earnings 3,830 15,317 9,515 25,523 37,044 Gain on sale of capital assets Other 5, ,127 17,870 Special/Extraordinary items Transfers (3,453) (1,151) (3,507) (5,055) (2,343) Total governmental activities 218, , , , ,459 Business-type activities: Taxes: Property Unrestricted investment earnings 2,112 2,835 4,550 5,864 5,057 Gain on sale of capital assets , Other Special items: Dissolution of Graton Sanitation Zone - (2,820) Dissolution of Forestville Sanitation District - (3,862) Forgiveness of debt ,753 - Landfill liability remeasurement Transfers 3,453 1,151 3,507 5,055 2,343 Total business-type activities 5,834 (2,396) 9,187 20,145 7,776 Total primary government $ 224,808 $ 234,800 $ 258,884 $ 327,431 $ 336,235 Changes in net position: Governmental activities 10,670 53,563 44,738 37,544 13,484 Business-type activities 5,556 (377) (67,248) 23,476 1,546 Total primary government $ 16,226 $ 53,186 $ (22,510) $ 61,020 $ 15,030 Notes: (1) FY net position was restated from $1,624,844 to $1,347,488 for the implementation of GASB 61 and restatement of capital assets. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 162

183 STATISTICAL SECTION as restated Net (expense) revenue $ (300,061) $ (288,335) $ (262,216) $ (178,351) $ (192,334) Governmental activities (13,154) 51,019 (890) 2,610 (1,833) Business-type activities (313,215) (237,316) (263,106) (175,741) (194,167) Total primary government net expense General Revenues and Other Changes in Net Assets: Governmental activities: Taxes: 232, , , , ,429 Property 3,117 3,114 2,960 3,390 4,301 Documentary transfer 7,457 7,139 7,929 8,757 9,705 Transient occupancy Sales tax in-lieu Grants and other governmental revenues 16,337 12,208 15,928 33,028 34,360 not restricted to specific programs 25,117 17,979 13,883 14,249 8,068 Unrestricted investment earnings 42 2, Gain on sale of capital assets 21,669 19,472 25,850 23,765 20,875 Other ,033 15,455 - Special/Extraordinary items (3,987) (5,315) (3,998) 2,338 (886) Transfers 302, , , , ,852 Total governmental activities Business-type activities: Taxes: Property 2,927 1, ,697 1,681 Unrestricted investment earnings Gain on sale of capital assets 572 1, Other Special items: Dissolution of Graton Sanitation Zone Dissolution of Forestville Sanitation District ,343 Forgiveness of debt Landfill liability remeasurement 3,987 5,315 3,998 (2,338) 886 Transfers 7,858 7,934 5,763 (112) 4,478 Total business-type activities $ 310,607 $ 281,548 $ 334,065 $ 272,301 $ 264,330 Total primary government Changes in net position: 2,688 (14,721) 66,086 94,062 67,518 Governmental activities (5,296) 58,953 4,873 2,498 2,645 Business-type activities $ (2,608) $ 44,232 $ 70,959 $ 96,560 $ 70,163 Total primary government 163

184 General Fund Reserved for: Encumbrances $ 4,826 $ 5,140 $ 5,284 Other Purposes 34,633 38,398 34,803 Unreserved: Designated 7,050 22,728 - Undesignated 55,040 49,634 69,740 Total General Fund 101, , ,827 All Other Governmental Funds: Reserved for: Encumbrances 45,421 16,560 23,512 Inventories Long-term advances 1, Prepaid items and deposits Debt service 91,123 93,189 89,270 Library programs Unreserved, Reported in: Special Revenue Funds: Designated Undesignated 160, , ,176 Capital Projects Funds 12,288 23,610 31,097 Total Other Governmental Funds 312, , ,438 $ 413,888 $ 419,230 $ 431, as restated General Fund (1) Nonspendable $ 30,642 $ 3,451 $ 5,179 Restricted Committed Assigned 35,980 35,655 45,743 Unassigned 41,710 48,496 48,479 Subtotal general fund 109,176 87,845 99,641 All Other Governmental Funds Nonspendable 11,962 2,280 2,566 Restricted 338, , ,054 Committed 9,330 2,868 3,217 Assigned 24,894 15,775 28,429 Unassigned (1,271) (1,329) (609) Subtotal all other governmental funds 383, , ,657 Total governmental fund balance $ 492,389 $ 342,486 $ 375,298 Notes: (1) During the fiscal year ended June 30, 2011, the County implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, under which governmental fund balances are reported as nonspendable, restricted, committed, assigned and unassigned. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector Fund Balances of Governmental Funds (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) (Modified Accrual Basis of Accounting) 164

185 STATISTICAL SECTION General Fund Reserved for: $ 4,393 $ 3,146 $ 6,466 $ 3,092 Encumbrances 33,658 28,865 38,144 28,331 Other Purposes Unreserved: - 35,289 48,277 36,390 Designated 75,215 54,565 28,430 37,107 Undesignated 113, , , ,920 Total General Fund All Other Governmental Funds: Reserved for: 23,814 19,740 30,242 21,383 Encumbrances ,062 Inventories - 1,042 1,062 1,072 Long-term advances 539 1,949 2,147 2,197 Prepaid items and deposits 90, , , ,636 Debt service Library programs Unreserved, Reported in: Special Revenue Funds: - - 4,504 4,513 Designated 190, , , ,472 Undesignated 16,749 15,846 16,726 4,261 Capital Projects Funds 322, , , ,596 Total Other Governmental Funds $ 435,809 $ 502,753 $ 512,267 $ 454,

186 Changes in Fund Balances of Governmental Funds (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) (Modified Accrual Basis of Accounting) Revenues (by source): Taxes $ 160,088 $ 198,566 $ 227,021 $ 249,548 $ 260,652 Licenses, permits and franchise fees 15,172 16,945 17,302 18,243 18,463 Fines, forfeitures and penalties 10,848 11,526 11,147 11,922 11,674 Use of money and property 11,001 23,737 19,272 30,102 35,013 Intergovernmental 340, , , , ,417 Charges for services 78,526 85,326 83,187 86,122 83,100 Other 17,822 19,998 22,886 21,529 23,006 Total revenues 634, , , , ,325 Expenditures (by function): Current: General government 76,274 68,592 75,294 80,883 86,741 Public protection 187, , , , ,146 Public ways and facilities 20,050 20,751 25,604 27,942 25,054 Health and sanitation 100, , , , ,099 Public assistance 162, , , , ,745 Education 12,697 13,639 14,813 15,651 16,752 Recreation and cultural services 10,069 10,266 11,630 13,016 14,270 Capital outlay 50,373 59,813 98,770 65,132 50,179 Debt service: Principal 11,822 14,458 19,170 23,253 57,948 Bond issuance cost 116-1,529 3,308 - Refunded bond escrow - - 6, Interest 29,054 31,232 28,886 28,779 34,801 Total expenditures 661, , , , ,735 Excess (deficiency) of revenues over (under) expenditures (27,252) (587) (45,133) 3,313 (35,410) Other financing sources (uses): Transfers in 53,337 54,021 77,265 58, ,115 Transfers out (56,825) (54,660) (81,257) (63,268) (215,470) Proceeds of refunding certificates of participation 19, Long-term debt issuance 28,372 6, ,575 6,213 99,957 Payment to refunded bond escrow agent (16,862) - (61,849) - - Discount on long term debt issuance - - (2,576) Premium on long term debt issuance ,752 Proceeds from sale of capital assets Capital lease financing Total other financing sources and uses 27,388 6,005 57,158 1, ,354 Extraordinary item - Open Space Authority Dissolution Extraordinary item - State takeaway (AB99) NET CHANGE IN FUND BALANCES 136 5,418 12,025 4,544 66,944 Fund balances, beginning of year, as restated 413, , , , ,809 FUND BALANCES, END OF YEAR $ 413,888 $ 419,250 $ 431,265 $ 435,809 $ 502,753 Debt service as a percentage of noncapital expenditures 6.69% 7.07% 6.89% 7.03% 11.54% Notes: By State Controller function. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 166

187 STATISTICAL SECTION as restated Revenues (by source): $ 259,512 $ 239,365 $ 238,234 $ 216,720 $ 231,920 Taxes 16,508 15,966 17,245 22,053 21,962 Licenses, permits and franchise fees 11,906 18,388 21,872 16,110 24,978 Fines, forfeitures and penalties 24,248 17,752 13,706 13,940 7,276 Use of money and property 410, , , , ,810 Intergovernmental 76,588 77,765 65,293 61,135 74,580 Charges for services 20,629 20,400 28,285 24,122 20,422 Other 820, , , , ,948 Total revenues Expenditures (by function): Current: 86,953 76, ,407 72,306 85,869 General government 243, , , , ,245 Public protection 24,839 23,123 30,048 27,922 25,991 Public ways and facilities 129, , , , ,133 Health and sanitation 210, , , , ,708 Public assistance 17,932 17,313 16, Education 14,061 13,919 12,078 12,284 12,037 Recreation and cultural services 56,743 83,254 41,569 37,105 32,643 Capital outlay Debt service: 24,513 24,956 30,771 10,683 12,149 Principal Bond issuance cost Refunded bond escrow 31,533 33,255 45,749 16,714 17,838 Interest 840, ,926 1,108, , ,224 Total expenditures Excess (deficiency) of revenues (19,797) (59,494) (303,672) 33,484 34,724 over (under) expenditures Other financing sources (uses): 96,981 94, ,232 98,435 79,641 Transfers in (101,147) (99,923) (120,483) (95,189) (80,543) Transfers out Proceeds of refunding certificates of participation 33,472 5, , Long-term debt issuance Payment to refunded bond escrow agent Discount on long term debt issuance Premium on long term debt issuance 5 1,923-5, Proceeds from sale of capital assets Capital lease financing 29,311 1, ,159 8,477 (183) Total other financing sources and uses , Extraordinary item - Open Space Authority Dissolution - - (15,455) 15,455 - Extraordinary item - State takeaway (AB99) 9,514 (57,751) 41,520 57,416 34,541 NET CHANGE IN FUND BALANCES 502, , , , ,757 Fund balances, beginning of year, as restated $ 512,267 $ 454,516 $ 492,389 $ 342,486 $ 375,298 FUND BALANCES, END OF YEAR 7.16% 7.36% 7.17% 4.60% 4.19% Debt service as a percentage of noncapital expenditures 167

188 Assessed Value of Taxable Property (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) Fiscal Year (1) Secured (2) Unsecured (3) Exempt (4) Total Taxable Assessed Value (4) Total Direct Tax Rate ,083,624 2,213,111 (1,577,877) 47,718, % ,543,743 2,243,581 (1,688,458) 52,098, % ,940,931 2,293,079 (1,746,079) 56,487, % ,859,643 2,445,351 (1,881,427) 62,423, % ,050,722 2,351,474 (2,012,498) 67,389, % ,603,799 2,465,232 (2,194,033) 68,874, % ,795,681 2,554,701 (2,313,446) 68,036, % ,227,140 2,515,625 (2,382,686) 66,360, % ,715,029 2,550,892 (2,437,205) 65,828, % ,424,659 2,394,378 (2,514,061) 65,304, % Notes: (1) Secured property is generally real property, defined as land, mines, minerals, timber, and improvements such as buildings, structures, crops, trees, and vines. (2) (3) (4) Unsecured property is generally personal property including machinery, equipment, office tools, and supplies. Exempt properties include numerous full and partial exclusions/ exemptions provided by the State Constitution and the legislature that relieve certain taxpayers from the burden of paying property taxes. Due to the 1978 passage of the property tax initiative Proposition 13 (Prop 13) the County does not track the estimated actual value of all County properties. Under Prop 13 property is assessed at the 1978 market value with an annual increase limited to the lesser of 2% or the CPI on properties not involved in a change of ownership or properties that did not undergo new construction. Newly acquired property is assessed at its new market value (usually the purchase price) and the value of any new construction is added to the existing base value of a parcel. As a result, similar properties can have substantially different assessed values based on the date of purchase. Additionally, Prop 13 limits the property tax rate to 1% of assessed value plus the rate necessary to fund local voter-approved bonds and special assessments. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 168

189 STATISTICAL SECTION Property Tax Rates - Direct and Overlapping Governments (Unaudited) Last Ten Fiscal Years Fiscal Year (1) County Direct Rates (1) Overlapping Rates Sonoma County (3) General (2) Cities Schools Total Notes: (1) County Direct Rates are ad valorem taxes levied by the County and authorized by Article 13A of the Constitution of the State of California. Overlapping rates are taxes levied to service voter-approved debt of overlapping jurisdictions such as a school district or local city. (2) Rates shown represent a weighted average of the nine incorporated cities within the County of Sonoma. (3) Rates shown represent a weighted average of the various school district tax rate areas within the County of Sonoma. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 169

190 Principal Revenue Taxpayers (Unaudited) June 30, 2013 and June 30, 2004 (Dollar Amounts in Thousands) June 30, 2013: Taxpayer Type of Business (1) Total Taxes Percentage of Total County Taxes Geysers Power Co LLC Utility $ 11, % Pacific Gas and Electric Company Utility 8, % Pacific Bell Utility 1, % Agilent Technologies Technology 1, % Ferrari-Carano Vineyards and Winery Winery % EMI Santa Rosa LTD Commercial Real Estate % Constellation Wines US Inc Winery % Varenna at Fountaingrove LLC Senior Living % Silverado Sonoma Vineyards Winery % CPN Wild Horse GeoThermal LLC Utility % Total $ 28, % Total taxes of all Taxpayers $ 772,787 June 30, 2004: Taxpayer Type of Business (1) Total Taxes Percentage of Total County Taxes Geysers Power Utility $ 7, % Pacific Gas and Electric Co. Utility 4, % Agilent Technologies Technology 3, % Pacific Bell Utility 1, % Jackson Family Estates Winery 1, % Codding Enterprises Commercial Real Estate 1, % Optical Coating Technology 1, % Crescent Real Estate Fund VIII LP Commercial Real Estate % Redwood Business Park Commercial Real Estate % EMI Santa Rosa LTD Partnership Commercial Real Estate % Total $ 22, % Total taxes of all taxpayers $ 594,117 Notes: (1) Taxable Assessed Secured amounts. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector Comprehensive Annual Financial Report, Fiscal Year ended June 30,

191 STATISTICAL SECTION Property Tax Levies and Collections (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) Fiscal Year (2) Collections within the fiscal year of the Levy (1) Taxes Levied Amount % of Levy Total Collections to Date Collections in Subsequent Years Amount % of Levy , ,554 98% 7, , % , ,132 98% 8, , % , ,322 98% 13, , % , ,133 97% 17, , % , ,267 96% 26, , % , ,445 96% 27, , % , ,556 97% 20, , % , ,684 97% 14, ,760 99% , ,641 98% 10, ,542 99% , ,750 98% - 641,750 98% Notes: (1) Secured and unsecured tax levy for the County itself, school districts, cities and special districts under the supervision of their own governing boards. (2) Included are amounts collected by the County on behalf of itself, school districts, cities, and special districts under the supervision of their own governing boards. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 171

192 Ratios of Outstanding Debt (Unaudited) Last Ten Fiscal Years (Dollars Amounts in Thousands) Governmental Activities Fiscal Year Certificates of Participation Long-Term Contract Payable Pension Obligation Bonds Loans Payable Notes Payable Bonds Payable Special Assessment Bonds $ 43,420 $ 116,264 $ 311,020 $ 63,965 $ 1,032 $ 2,335 $ 5, , , ,525 62,205 5,915 2,200 4, , , ,535 83,060 1,000 2,050 8, , , ,925 82, ,890 8, , , ,540 80, ,600 6, , , ,225 79, ,840 5, , , ,795 78, ,575 5, , , ,455 77,860 4, ,195 4, , , ,220 77,356 3,525 93,845 4, , ,255 75,856 1,925 90,700 - Business-Type Activities Fiscal Year Certificates of Participation Sewer Bonds Water Bonds Capital Leases Notes Payable Energy Independence Bonds Compensated Absences $ 14,470 $ 25,250 $ 22,347 $ 10,406 $ - $ - $ ,427 24,419 21,687 10, ,315 21,716 21,569 12, ,170 20,773 32,245 12, ,095 20,944 31,779 11, ,830 25,923 25,030 16, ,515 24,663 24,470 15,098-29, ,135 23,349 23,895 15,125 1,441 44,295 1, ,700 21,995 23,295 13,812 1,392 46, , , Ratios based on Total Primary Debt Fiscal Year (1) Percentage of Assessed Value Percentage of Personal Income (2) Population (3) Per Capita % 2.86% 469,500 $ 1, % 3.84% 472,700 1, % 3.59% 478,400 1, % 3.90% 479,900 1, % 3.65% 481,765 1, % 3.87% 484,470 1, % 4.09% 486,630 1, % 4.24% 493,285 1, % 5.64% 487,125 2, % 5.37% 487,011 2, % 4.15% 490,423 1,874 Notes: (1) See the "Assessed Value of Taxable Property and Actual Value of Property" table for total taxable assessed value. Assessed value does not include tax exempt property. (2) Population Estimate as of January 1. (3) See the "Demographic and Economic Statistics" table for population figures. Note that this ratio is calculated using population for the latest calendar year for each corresponding fiscal year. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 172

193 STATISTICAL SECTION Governmental Activities Capital Leases Compensated Absences Pollution Remediation Unfunded OPEB Obligation Other Government Obligation Self-Insurance Deferred Amounts Subtotal Fiscal Year $ 4,656 $ 29,354 $ - $ - $ - $ 49,694 $ - $ 627, ,695 29, ,865 49, , ,960 34, ,616 44, , ,449 36, ,818 43, , ,058 35, ,146 4, , ,761 36, ,757 4, , ,388 39, ,150-43,174 4, , ,493 37, ,273-38,117 4, , ,641 39, ,582-36,331 3, , ,315 31,220-50,608-37,820 3, , Business-Type Activities Long-Term Postemployment Benefits Landfill Closure and Postclosure Pollution Remediation $ 7,052 $ 21,920 - Advances From Other Governments Deferred Amounts Subtotal Total Primary Government Fiscal Year $ $ (537) $ 131,839 $ 759, $ 30,931 6,394 22,507-30,940 (490) 129, , ,669 99,033-30,290 (1,618) 201, , , ,353-28,118 (1,260) 214, , , ,987-37,669 (1,556) 223, , , ,000 1,298 38,405 (1,416) 226, , ,681 50,225 1,298 36,186 (1,276) 191, , ,891 51,237 1,298 34,124 (1,135) 202,757 1,192, ,000 51,979 1,298 37,966 (995) 204,000 1,150, ,778-12,358 (100) 118, ,

194 Ratios of Net General Bonded Debt Outstanding (Unaudited) Last Ten Fiscal Years (In thousands, except Population and Per Capita) Fiscal Year Total Gross General Obligation Bonds (1) Amounts Restricted for Principal Payments Total Net General Obligation Bonds Actual Taxable Value of Property Percentage of Actual Taxable Value of Property Population Net Bonded Debt Per Capita $ 311,020 $ - $ 311,020 $ 44,318, % 469,501 $ , ,535 56,487, % 479, , ,925 62,423, % 481, , ,540 67,389, % 484, , ,225 68,874, % 486, , ,795 68,036, % 493, , ,455 66,360, % 487,125 1, , ,220 65,828, % 490,423 1, , ,255 65,304, % 490, (1) Includes Pension Obligation Bonds Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 174

195 STATISTICAL SECTION Computation of Legal Debt Margin (Unaudited) Last Ten Fiscal Years (Dollar Amounts in Thousands) (1) Assessed Value (2) Legal Debt Limit (3) Debt Applicable to Limit Legal Debt Margin/Debt Limit (4) Legal Fiscal Year Debt Margin ,718, , , ,357 67% ,098,866 1,041, , ,452 71% ,487,931 1,129, , ,224 74% ,423,567 1,248, , ,546 77% ,389,698 1,347, ,540 1,072,254 80% ,874,998 1,377, ,225 1,115,275 81% ,036,936 1,360, ,795 1,113,944 82% ,360,079 1,327, , ,747 61% ,828,716 1,316, , ,354 62% ,304,976 1,306, , ,845 64% Notes: (1) Assessed Value does not include tax exempt property. Property value data can be found in the "Assessed Value of Taxable Property and Actual Value of Property" schedule. (2) (3) The legal debt limit is 2.00% of assessed value. Debt applicable to the limit only includes general obligation bonds. (4) The legal debt margin is the County's available borrowing authority under state finance statutes and is calculated by subtracting the debt applicable to the legal debt limit from the legal debt limit. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 175

196 Schedule of Direct And Overlapping Debt (Unaudited) June 30, 2013 (Dollar Amounts in Thousands) Assessed Valuation: $ 65,304,976 Overlapping General Fund Obligation Debt and Tax Assessment Debt (1) Debt Outstanding Percentage High School Districts $ 153, % Unified School Districts 225, % Elementary Districts 183, % Santa Rosa Junior College 180, % Total Overlapping General Fund Obligation Debt and Tax Assessment Debt $ 742,788 Direct General Fund Obligation Debt (1) Debt Outstanding Sonoma County Compensated Absences $ 31, % Sonoma County Unfunded OPEB obligation 49, % Sonoma County Pension Obligation Bonds 472, % Sonoma County Certificates of Participation 32, % Sonoma County Loans Payable 75,856 Sonoma County Notes Payable 1,925 Sonoma County Bonds Payable 90,700 Sonoma County Capital Leases 4,315 Sonoma CountySelf- Insurance 37,820 Sonoma County Deferred amounts 3, % $ 799,770 Total Direct Debt $ 799,770 Total Combined Overlapping and Direct Debt $ 1,542,558 Ratio of Assessed Valuation Total Overlapping Tax and Assessment Debt 1.14% Total Direct Debt 1.22% Total Combined Overlapping and Direct Debt 2.36% Notes: (1) Direct debt is an obligation of the County whereas overlapping debt is an obligation of other governments within the geographic boundary of the County. Excludes tax and revenue anticipation notes. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector 176

197 STATISTICAL SECTION Demographics and Economic Statistics (Unaudited) Last Ten Fiscal Years (1) Year (2) Population (3) Personal Income Per Capita Personal Income School Enrollment (4) Unemployment Rate ,700 19,784,555 28,633 72, % ,400 20,981,396 41,298 72, % ,900 22,178,237 45,264 71, % ,765 23,642,001 49,152 71, % ,470 23,663,256 48,891 70, % ,630 22,787,716 46,792 71, % ,285 21,701,296 44,019 71, % ,125 21,142,471 43,403 70, % ,011 21,417,425 43,977 70, % ,423 22,126,957 45,118 70, % (2) Incorporated Cities Population Cloverdale 8,669 Cotati 7,310 Healdsburg 11,509 Petaluma 58,804 Rohnert Park 41,034 Santa Rosa 170,093 Sebastopol 7,445 Sonoma 10,731 Town of Windsor 27,132 Total Incorporated 342,727 Total Unincorporated Areas 147,696 Total Population 490,423 Notes: (1) Calendar year. (2) Population Estimate as of January 1, 2013 (3) Personal Income is estimate in thousands. (4) Average Unemployment Rate Through June Sources: State of California, Department of Finance, E-1 Population Estimates for Cities, Counties and the State, 2012 and 2013 US Department of Commerce, Bureau of Economic Analysis - Regional Date of GDP and Personal Income. Estimates based on 2011 data California Department of Education; Data Enrollment by Grand report for State of California Employment Development Department: Labor Force Statistics 177

198

199 STATISTICAL SECTION Major Employers (Unaudited) June 30, 2013 and June 30, 2004 Employer June 30, 2013 June 30, 2004 Percent of Number of Employees Total County Employment Employer (2) Number of Employees Percent of Total County Employment County of Sonoma 3, % County of Sonoma 4, % Kaiser Permanente 2, % Santa Rosa Junior College (1) 3, % Santa Rosa Junior College (1) 2, % State of California 2, % Graton Resort and Casino 2, % Kaiser Permanente 2, % Sutter Medical Center 1, % St. Joseph's Health System 2, % St. Joseph's Health System 1, % Agilent Technologies 2, % Santa Rosa School District 1, % JDS Uniphase 1, % City of Santa Rosa 1, % United States Government 1, % Agilent Technologies 1, % Sonoma State University 1, % Sonoma State University % Santa Rosa School District 1, % Ten Largest Employers 18, % Ten Largest Employers 25, % All other employers 215, % All other employers 217, % Total Employers 234, % Total Employers 242, % Notes: (1) Data available as of 2012 (2) As of June Source: Sonoma County CAFR 2004 North Bay Business Journal List - Private Sector Empoyers Sonoma County October 2013 State of California Employment Development Department: Labor Force Statistics Total Employment 179

200 County Employees By Function (Unaudited) Last Ten Fiscal Years FTE'S: General Government County Administrator Board of Supervisors / County Administrator General Services Treasurer-Tax Collector County Clerk-Assessor-Recorder-PA Auditor-Controller Auditor-Controller / Treasurer-Tax Collector County Counsel Human Resources Information Systems Public Protection District Attorney Public Defender Sheriff Probation Permit and Resource Management Emergency Services Public Assistance Human Services Office of Commission In-Home Supportive Services (IHSS) Child Support Services Agricultural Commissioner Community Development Commission Economic Development Health Services H.S.-Administration Prevention & Planning Environmental Health Public Health Mental Health Alcohol, Drug & Tobacco Special Revenue Funds County Medical Services Program Public Ways & Facilities Roads Integrated Waste Enterprise Fund Airport Enterprise Fund Northern Sonoma County Air Pollution Control Sonoma County Water Agency Transit Cultural & Recreational Regional Parks Agricultural Preservation and Open Space District Fairgrounds Education U.C. Cooperative Extension Library ,345 4,348 4,342 4,392 4,478 Notes: Number includes full-time, part-time and extra-help positions budgeted in each fiscal year based on 2088 hours per position. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector: Adopted Budget for FY

201 STATISTICAL SECTION FTE'S: General Government County Administrator Board of Supervisors / County Administrator General Services Treasurer-Tax Collector County Clerk-Assessor-Recorder-PA Auditor-Controller Auditor-Controller / Treasurer-Tax Collector County Counsel Human Resources Information Systems Public Protection District Attorney Public Defender Sheriff Probation Permit and Resource Management Emergency Services Public Assistance Human Services Office of Commission In-Home Supportive Services (IHSS) Child Support Services Agricultural Commissioner Community Development Commission Economic Development Health Services H.S.-Administration Prevention & Planning Environmental Health Public Health Mental Health Alcohol, Drug & Tobacco Special Revenue Funds County Medical Services Program Public Ways & Facilities Roads Integrated Waste Enterprise Fund Airport Enterprise Fund Northern Sonoma County Air Pollution Control Sonoma County Water Agency Transit Cultural & Recreational Regional Parks Agricultural Preservation and Open Space District Fairgrounds Education U.C. Cooperative Extension Library 4,439 4,211 3,975 3,841 3,

202 Operating Indicators by Function/Program (Unaudited) Last Ten Fiscal Years Function/Program Law & Justice Filed Felonies - District Attorney 2,502 2,799 2,879 2,656 2,589 Court Appearances - District Attorney 127, , , , ,492 New Cases Opened (Felony) - Public Defender 3,768 4,211 3,982 2,489 2,368 Public Safety Fire Investigations (Hours) - Emergency Services Dispatch Calls - Sheriff 111, , , , ,311 Adult Detention Facility Bookings - Sheriff 15,977 16,715 17,575 19,805 20,641 Juvenile Hall Average Daily Population Probation Investigations 7,413 11,461 10,342 11,365 9,138 Health & Public Assistance Birth Certificates Registered - Health Services 6,553 5,950 6,010 6,100 5,904 Emergency Medical Responses (3 County) - Health Services 59,545 69,399 66,000 53,365 53,365 Caregivers Trained - In Home Support Services (IHSS) Total Collections - Child Support Enforcement $ 31,259,600 $ 31,549,146 $ 31,008,350 $ 30,754,336 $ 32,023,284 Community Resources & Public Facilities Code Enforcement Cases-Permit & Resource Management 1,769 1,305 1,735 1,426 1,369 Customers Served (Public Counter) - Permit & Resource Management 27,982 42,642 40,603 36,244 33,727 Building Permits Issued - Permit & Resource Management 22,556 31,854 32,735 31,588 31,617 County Maintained Miles - Transportation and Public Works 1,388 1,387 1,387 1,384 1,384 Integrated Waste Tonnage - Transportation & Public Works 493, , , , ,000 Diverted Tonnage - Transportation & Public Works 90,103 94, , , ,000 Regional Parks Park Visitors 3,314,311 4,105,716 4,320,407 4,925,117 4,653,942 Veterans/Community Center: Events 1,964 6,137 4,788 4,788 4,507 Attendance 422, , , , ,013 Notes: (1) Indicators revised to reflect actuals for FY (2) Indicators reflect estimated for F (3) Regional Parks took over the management and operation of Annadel State Park from the state in Fiscal Year Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector- Adopted Budget Book 182

203 STATISTICAL SECTION (1) (2) Function/Program Law & Justice 2,550 2,533 2,196 2,066 2,321 Filed Felonies - District Attorney Court Appearances - 145, , , , ,008 District Attorney New Cases Opened (Felony) - 2,283 2,378 1,671 1,554 1,746 Public Defender Public Safety Fire Investigations (Hours) Emergency Services 140, , , , ,959 Dispatch Calls - Sheriff 19,661 20,890 17,903 18,000 17,773 Adult Detention Facility Bookings - Sheriff Juvenile Hall Average Daily Population 8,904 7,922 6,401 5,501 4,278 Probation Investigations Health & Public Assistance 5,704 5,880 5,532 5,188 5,058 Birth Certificates Registered - Health Services Emergency Medical Responses (3 County) - 55,364 54,000 53,417 43,278 45,980 Health Services Caregivers Trained In Home Support Services (IHSS) Total Collections - $ 30,338,278 $ 29,743,712 $ 30,363,022 $ 28,574,419 $ 28,371,969 Child Support Enforcement Community Resources & Public Facilities Code Enforcement Cases-Permit 1,453 1, & Resource Management Customers Served (Public Counter) - 29,552 35,060 33,988 30,389 n/a Permit & Resource Management Building Permits Issued - 25,011 15,914 16,340 16,690 n/a Permit & Resource Management County Maintained Miles - 1,384 1,383 1,382 1,382 1,382 Transportation and Public Works Integrated Waste Tonnage - 263, , , , ,837 Transportation & Public Works Diverted Tonnage - 108, , , , ,000 Transportation & Public Works Regional Parks 4,766,850 4,605,999 4,064,068 5,383,600 5,843,143 (3) Park Visitors Veterans/Community Center: 4,095 4,145 4,397 3,655 4,788 Events 360, , , , ,570 Attendance 183

204 Capital Assets Statistics By Function (Unaudited) Last Ten Fiscal Years Function Sheriff: Stations Sub-Stations Patrol Units Helicopter Marine Craft Streets And Highways: Streets (miles) 1,387 1,387 1,387 1,384 1,384 Bridges (longer then 20 feet) Traffic Lights - County Only Traffic Lights - Shared With Cities Traffic Lights - Shared With State Total Traffic Lights Parks And Recreation: Acreage: Developed Undeveloped 5,057 6,843 6,828 6,824 6,824 Total Acreage 5,502 7,299 7,296 7,299 7,299 Water Agency: Water Mains (miles) Fire Hydrants Storage Capacity (thousands of gallons) 128, , , , ,800 Sanitation: Sanitary Sewers (miles) Treatment Capacity (thousands of gallons) 13,291 13,291 13,291 13,439 13,439 Transit: Fleet (including buses and vans) Notes: (1) Regional Parks took over the management and operation of Annadel State Park from the state in Fiscal Year (2) In FY12-13 Sonoma County Open Space District transferred Taylor Mountain Open Space to Regional Parks. Source: Sonoma County Auditor-Controller-Treasurer-Tax Collector - Adopted Budget Book 184

205 STATISTICAL SECTION Function Sheriff: Stations Sub-Stations Patrol Units Helicopter Marine Craft Streets And Highways: 1,381 1,382 1,382 1,382 1,382 Streets (miles) Bridges (longer then 20 feet) Traffic Lights - County Only Traffic Lights - Shared With Cities Traffic Lights - Shared With State Total Traffic Lights Parks And Recreation: Acreage: Developed 7,283 8,336 8,336 49,112 (1) 57,203 ( Undeveloped 7,776 8,855 8,855 49,882 57,980 Total Acreage Water Agency: Water Mains (miles) Fire Hydrants Storage Capacity 128, , , , ,800 (thousands of gallons) Sanitation: Sanitary Sewers (miles) Treatment Capacity 13,439 13,439 13,439 13,439 13,439 (thousands of gallons) Transit: Fleet (including buses and vans) 185

206

207 GLOSSARY

208

209 GLOSSARY ACCOUNTS PAYABLE. A short-term liability account reflecting amounts owed to private persons or organizations for goods and services received by a government. ACCOUNTS RECEIVABLE. An asset account reflecting amounts due from private persons or organizations for goods and services furnished by a government (but not including amounts due from other funds or other governments). ACCRUAL BASIS. The recording of the financial effects of a government of transactions and other events and circumstances that have cash consequences for the government during the periods in which those transactions, events, and circumstances occur, rather than only in the periods in which cash is received or paid by the government. ACCUMULATED DEPRECIATION. A contra-asset account used to report the accumulation of periodic credits in order to reflect the expiration of the estimated service life of capital assets. ACTUARIAL ACCRUED LIABILITY. The present value of projected future benefits earned by employees to date. ADVANCE FROM OTHER FUNDS. A liability account used to record noncurrent portions of a long-term loan from one fund to another fund within the same reporting entity. See DUE TO OTHER FUNDS and INTERFUND RECEIVABLE/ PAYABLE. ADVANCE TO OTHER FUNDS. An asset account used to record noncurrent portions of a long-term loan from one fund to another fund within the same reporting entity. See DUE FROM OTHER FUNDS and INTERFUND RECEIVABLE/ PAYABLE. AGENCY FUND. A fund normally used to account for assets held by a government as an agent for individuals, private organizations or other governments, and/or other funds. AMORTIZATION. (1) The portion of the cost of a limited-life or intangible asset charged as an expense during a particular period. (2) The reduction of debt by regular payments of principal and interest sufficient to retire the debt by maturity. ANNUAL OPEB COST. An accrual-basis measure of the periodic cost of an employer s participation in a defined benefit OPEB plan. ANNUAL REQUIRED CONTRIBUTIONS (ARC). Term used in connection with defined benefit pension and other postemployment benefit plans to describe the amount an employer must contribute in a given year. APPROPRIATION. A legal authorization granted by a legislative body to make expenditures and to incur obligations for specific purposes. An appropriation usually is limited in amount and the time it may be expended. ASSESSED VALUATION. A valuation set upon real estate or other property by a government as a basis for levying taxes. ASSIGNED FUND BALANCE. Amounts that are constrained by the County s intent to be used for specific purposes. The intent can be established at either the highest level of decision making, or by a body or an official designated for that purpose. This is also the classification for residual funds in the County s special revenue funds. AUDITORS REPORT. In the context of a financial audit, a statement by the auditor describing the scope of the audit and the auditing standards applied in the examination, and setting forth the auditor s opinion on the fairness of presentation of the financial information in conformity with GAAP or some other comprehensive basis of accounting. BALANCE SHEET. The financial statement disclosing the assets, liabilities, and equity of an entity at a specified date in conformity with GAAP. BASIC FINANCIAL STATEMENTS (BFS). The minimum combination of financial statements and note disclosures required for fair presentation in conformity with GAAP. Basic financial statements have three components: government-wide financial statements, fund financial statements and notes to the financial statements. BASIS OF ACCOUNTING. A term used to refer to when revenues, expenditures, expenses, and transfers, and the related assets and liabilities, are recognized in the accounts and reported in the financial statements. Specifically, it relates to the timing of the measurements made, regardless of the nature of the measurement, on either the cash or the accrual method. BOOK VALUE. Value as shown by the books of account. In the case of assets subject to the reduction by valuation allowances, book value refers to cost or stated value less the appropriate allowance. Sometimes a distinction is made between gross book value and net book value, the former designating value before deduction of related allowances and the latter the value after their deduction. BUDGET. A plan of financial operation embodying an estimate of proposed expenditures for a given period and the proposed means of financing them. Used without any modifier, the term usually indicates a financial plan for a single fiscal year. The term budget is used in two senses in practice. Sometimes it designates the financial plan presented to the appropriating governing body for adoption, and sometimes, the plan finally approved by that body. BUDGETARY CONTROL. The control or management of a government or enterprise in accordance with an approved budget to keep expenditures within the limitations of available appropriations and available revenues. BUSINESS-TYPE ACTIVITIES. One of two classes of activities reported in the government-wide financial statements. Business-type activities are financed in whole or in part by fees 189

210 charged to external parties for goods and services. These activities are usually reported in enterprise funds. CAPITAL ASSETS. Land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period. CAPITAL OUTLAY. Expenditures resulting in the acquisition of or addition to the government s capital assets. CAPITALIZATION POLICY. The criteria used by a government to determine which outlays should be reported as capital assets. CAPITAL LEASE. An agreement that conveys the right to use property, plant, or equipment, usually for a stated period of time. See LEASE-PURCHASE AGREEMENT. CAPITAL PROJECTS FUND. A fund created to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). CASH BASIS. A basis of accounting under which transactions are recognized only when cash is received or disbursed. CASH EQUIVALENT. Short-term, highly liquid investments that are both (1) readily convertible to known amounts of cash and (2) so near their maturity that they present insignificant risk of changes in value due to changes in interest rates. CASH WITH FISCAL AGENT. An asset account reflecting deposits with fiscal agents, such as commercial banks, for the payment of bond principal and interest. CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING PROGRAM. A voluntary program administered by the GFOA to encourage governments to publish efficiently organized and easily readable CAFRs/CUFRs and to provide technical assistance and peer recognition to the finance officers preparing them. CHANGE IN THE FAIR VALUE OF INVESTMENTS. The difference between the fair value of investments at the beginning of the year and at the end of the year, taking into consideration investment purchases, sales, and redemptions. CLOSED AMORTIZATION PERIOD. Term used in connection with the unfunded actuarial accrued liability associated with defined benefit pension and other postemployment benefit plans. A specific number of years that is counted from one date and, therefore, declines to zero with the passage of time. For example, if the amortization period is initially 30 years on a closed basis, 29 years remain after the first year, 28 years after the second year, and so forth. COMMITTED FUND BALANCE. Amounts that can only be used for specific purposes determined by formal action of the County s highest level of decision-making authority (the Board of Supervisors) and that remain binding unless removed in the same manner. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period. COMPENSATED ABSENCES. Absences, such as vacation, illness, and holidays, for which it is expected employees will be paid. The term does not encompass severance or termination pay, postretirement benefits, deferred compensation, or other long-term fringe benefits, such as group insurance and long-term disability pay. COMPONENT UNITS. Legally separate organizations for which the elected officials of the primary government are financially accountable. In addition, a component unit can be another organization for which the nature and significance of its relationship with a primary government is such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. COMPONENT UNIT FINANCIAL REPORT (CUFR). A report covering all funds and account groups of a component unit including introductory section; appropriate combined, combining, and individual fund statements; notes to the financial statements; required supplementary information; schedules; narrative explanations; and statistical tables. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR). A CAFR is a financial report that encompasses all funds and component units of the government. It contains (a) the basic financial statements and required supplementary information, (b) combining statements to support columns in the basic financial statements that aggregate information from more than one fund or component unit, and (c) individual fund statements as needed. It is the governmental unit s official annual report and it also contains introductory information, schedules necessary to demonstrate compliance with financerelated legal and contractual provisions, and statistical data. CONTINGENT LIABILITY. Items that may become liabilities as a result of conditions undetermined at a given date, such as guarantees, pending lawsuits, judgments under appeal, unsettled disputed claims, unfilled purchase orders, and uncompleted contracts. Contingent liabilities should be disclosed within the financial statements (including the notes) when there is a reasonable possibility that a loss may have been incurred. Guarantees, however, should be disclosed even though the possibility of loss may be remote. CONTRIBUTION DEFICIENCIES. The difference between the annual required contributions of the employer(s) (ARC) and the employer s actual contributions in relation to the ARC. COST SHARING MULTIPLE-EMPLOYER PLAN. A single plan with pooling (cost-sharing) arrangements for the participating employers. All risks, rewards, and costs, including benefit costs, are shared and are not attributed individually to the employers. A single actuarial valuation covers all plan 190

211 GLOSSARY members and the same contribution rate(s) applies for each employer. COVERED PAYROLL. Term used in connection with defined benefit pension and other postemployment benefit plans to describe all elements of annual compensation paid to active employees on which contributions to a plan are based. CURRENT FINANCIAL RESOURCES MEASUREMENT FOCUS. Measurement focus according to which the aim of a set of financial statements is to report the near-term (current) inflows, outflows, and balances of expendable (spendable) financial resources. The current financial resources measurement focus is unique to accounting and financial reporting for state and local governments and is used solely for reporting the financial position and results of operations of governmental funds. DEBT. An obligation resulting from the borrowing of money or from the purchase of goods and services. Debts of governments include bonds, time warrants, and notes. DEBT SERVICE FUND. A fund established to account for the accumulation of resources for, and the payment of, general longterm debt principal and interest. DEFERRED INFLOWS OF RESOURCES. An acquisition of net assets that is applicable to a future reporting period. DEFERRED OUTFLOWS OF RESOURCES. A consumption of net assets that is applicable to a future reporting period. DEFICIT. (1) The excess of the liabilities of a fund over its assets. (2) The excess of expenditures over revenues during an accounting period or, in the case of proprietary funds, the excess of expenses over revenues during an accounting period. DEFINED BENEFIT OPEB PLAN. Plan having terms that specify the amount of benefits to be provided at or after separation from employment. The benefits may be specified in dollars (for example, a flat dollar payment or an amount based on one or more factors such as age, years of service, and compensation), or as a type or level of coverage (for example, prescription drugs or a percentage of healthcare insurance premiums). DEFINED BENEFIT PENSION PLAN. A pension plan having terms that specify the amount of pension benefits to be provided at a future date or after a certain period of time; the amount specified usually is a function of one or more factors such as age, years of service, and compensation. DEPRECIATION. (1) Expiration in the service life of capital assets, other than wasting assets, attributable to wear and tear, deterioration, action of the physical elements, inadequacy, and obsolescence. (2) The portion of the cost of a capital asset, other than a wasting asset, charged as an expense during a particular period. In accounting for depreciation, the cost of a capital asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period is charged with a portion of such cost. Through this process, the entire cost of the asset is ultimately charged off as an expense. DUE FROM OTHER FUNDS. An asset account reflecting amounts owed to a particular fund by another fund for goods sold or services rendered. This account includes only short-term obligations on open account, not interfund loans. DUE TO OTHER FUNDS. A liability account reflecting amounts owed by a particular fund to another fund for goods sold or services rendered. This account include only short-term obligations on open account, not interfund loans. ECONOMIC RESOURCES MEASUREMENT FOCUS. Measurement focus under which the aim of a set of financial statements is to report all inflows, outflows, and balances affecting or reflecting an entity s net position. The economic resources measurement focus is used for proprietary and fiduciary funds, as well as for government-wide financial reporting. It is also used by business enterprises in the private sector. EMPLOYER S CONTRIBUTIONS. Term used in the context of pension and other postemployment benefits to describe contributions actually made by the employer in relation to the annual required contribution (ARC) of the employer. (Only amounts paid to trustees and outside parties qualify.) ENCUMBRANCES. Commitments related to unperformed (executory) contracts for goods or services. Used in budgeting, encumbrances are not GAAP expenditures or liabilities, but represent the estimated amount of expenditures which will ultimately to result if unperformed contracts in process are completed. ENTERPRISE FUND. Proprietary fund type used to report an activity for which a fee is charged to external users for goods and services. EXCHANGE-LIKE TRANSACTIONS. Transaction in which there is an identifiable exchange between the reporting government and another party, but the values exchanged may not be quite equal or the direct benefits of the exchange may not be exclusively for the parties to the exchange. EXPENDITURES. Decreases in net financial resources. Expenditures include current operating expenses requiring the present or future use of net current position, debt service and capital outlays, intergovernmental grants, entitlement, and shared revenues. EXPENDITURE-DRIVEN GRANTS. Government-mandated or voluntary non-exchange transaction in which expenditure is the prime factor for determining eligibility. Also referred to as reimbursement grants. EXPENSES. Outflows or other using up of assets or incurrence of liabilities (or a combination of both) from delivering or producing goods, rendering services or carrying out other 191

212 activities that constitute the entity s ongoing major or central operations. EXTERNAL AUDITORS. Independent auditors typically engaged to conduct an audit of a government s financial statements. EXTERNAL INVESTMENT POOL. An arrangement that commingles (pools) the moneys of more than one legally separate entity and invests, on the participants behalf, in an investment portfolio; one or more of the participants is not part of the sponsors reporting entity. An external investment pool can be sponsored by an individual government, jointly by more than one government, or by a nongovernmental entity. An investment pool that is sponsored by an individual state or local government is an external investment pool if it includes participation by a legally separate entity that is not part of the same reporting entity as the sponsoring government. If a government-sponsored pool includes only the primary government and its component units, it is an internal investment pool and not an external investment pool. FAIR VALUE. The amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. FIDUCIARY FUND TYPE. The trust and agency funds used to account for assets held by a government unit in a trustee capacity or as an agent for individuals, private organizations, other government units, and/or other funds. FINANCIAL RESOURCES. Resources that are or will become available for spending. Financial resources include cash and resources ordinarily expected to be converted to cash (e.g. receivables, investments). Financial resources may also include inventories and prepaids (because they obviate the need to expend current available resources). FISCAL AGENT. A fiduciary agent, usually a bank or county treasurer, who performs the function of paying debt principal and interest when due. FUND. A fiscal and accounting entity with a self-balancing set of accounts in which cash and other financial resources, all related liabilities and residual equities, or balances, and changes therein, are recorded and segregated to carry on specific activities or attain certain objectives in accordance with special regulations, restrictions, or limitations. FUND BALANCE. The difference between fund assets and fund liabilities of governmental and similar trust funds. FUND FINANCIAL STATEMENTS. Basic financial statements presented on the basis of funds. Term used in contrast with government-wide financial statements. FUND TYPE. Any one of seven categories into which all funds are classified in governmental accounting. The seven fund types are: general, special revenue, debt service, capital projects, enterprise, internal service, and trust and agency. GENERAL FUND. The general fund is one of five governmental fund types and typically serves as the chief operating fund of the government. The general fund is used to account for all financial resources except those required to be accounted for in another fund. GENERAL REVENUES. All revenues that are not required to be reported as program revenues. All taxes, even those that are levied for a specific purpose, are general revenues and should be reported by type of tax (e.g. property tax, sales tax, and transient occupancy tax). All other nontax revenues (including interest, grants and contributions) that do not meet the criteria to be reported as program revenues should also be reported as general revenues. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The conventions, rules, and procedures that serve as the norm for the fair presentation of financial statements. The various sources of GAAP for state and local governments are set forth by SAS No. 69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor s Report. GOVERNMENT FINANCE OFFICERS ASSOCIATION (GFOA). An association of public finance professionals founded in 1906 as the Municipal Finance Officers Association. The GFOA has played a major role in the development and promotion of GAAP for state and local governments since its inception and has sponsored the Certificate of Achievement for Excellence in Financial Reporting Program since GOVERNMENTAL ACCOUNTING. The composite activity of analyzing, recording, summarizing, reporting, and interpreting the financial transactions of governments. GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB). The ultimate authoritative accounting and financial reporting standard setting body for state and local governments. The GASB was established in June 1984 to replace the National Council on Governmental Accounting (NCGA). GOVERNMENTAL ACTIVITIES. Activities generally financed through taxes, intergovernmental revenues, and other non-exchange revenues. These activities are usually reported in governmental funds and internal service funds. GOVERNMENTAL FUNDS. Funds generally used to account for tax-supported activities. The five different types of government funds are as follows: the general fund, special revenue fund, debt service funds, capital projects funds, and permanent funds. GOVERNMENT-WIDE FINANCIAL STATEMENTS. Financial statements that incorporate all of a government's governmental and business-type activities, as well as its nonfiduciary component units. There are two basic governmentwide financial statements: the statement of net position and the statement of activities. Both basic governmental financial 192

213 GLOSSARY statements are presented using the economic resources measurement focus and the accrual basis of accounting. IMPROVEMENT. An addition made to, or change made in a capital asset, other than maintenance, to prolong its life or to increase its efficiency or capacity. The cost of the addition or change is added to the book value of the asset. INDIRECT EXPENSES. Expenses that cannot be specifically associated with a given service, program, or department and thus, cannot be clearly associated with a particular functional category. INFRASTRUCTURE. Long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams and lighting systems. INVESTMENT IN CAPITAL ASSETS, NET OF RELATED DEBT. One of three components of net assets that must be reported in both government-wide and proprietary fund financial statements. Related debt, for this purpose, includes the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of capital assets of the government. INTERFUND RECEIVABLE/PAYABLE. Short-term loans made by one fund to another, or the current portion of an advance to or from another fund. INTERFUND TRANSFERS. Flow of assets (such as cash or goods) between funds and blended component units of the primary government without equivalent flows of assets in return and without a requirement for payment. INTERNAL SERVICE FUND. A fund used to account for the financing of goods or services provided by one department or agency to other departments or agencies of a government, or to other governments, on a cost-reimbursement basis. JOINT VENTURE. A legal entity or other contractual arrangement in which a government participates as a separate and specific activity for the benefit of the public or service recipients and in which the government retains an ongoing financial interest. LAPSE. As applied to appropriations, the automatic termination of an appropriation. Except for indeterminate appropriations and continuing appropriations, an appropriation is made for a certain period of time. At the end of this period, any unexpended or unencumbered balance thereof lapses, unless otherwise provided by law. LEASE-PURCHASE AGREEMENT. Contractual agreements that are termed leases, but that in substance are purchase contracts. LEGAL LEVEL OF BUDGETARY CONTROL. The level at which spending in excess of budgeted amounts would be a violation of law. LEVEL OF BUDGETARY CONTROL. One of the three possible levels of budgetary control and authority to which organizations, programs, activities, and functions may be subject. These levels of budgetary control are (1) appropriated budget, (2) legally authorized non-appropriated budget review and approval process, which is outside the appropriated budget process, or (3) non-budgeted financial activities, which are not subject to the appropriated budget and the appropriation process, or to any legally authorized non-appropriated budget review and approval process, but are still relevant for sound financial management and oversight. LEVEL PERCENTAGE OF PROJECTED PAYROLL AMORTIZATION METHOD. Amortization payments are calculated so that they are a constant percentage of the projected payroll of active plan members over a given number of years. The dollar amount of the payments generally will increase over time as payroll increases due to inflation; in dollars adjusted for inflation, the payments can be expected to remain level. LIABILITIES. Probable future sacrifices of economic benefits, arising from present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. LOANS RECEIVABLE. An asset account reflecting amounts loaned to individuals or organizations external to a government, including notes taken as security for such loans. Loans to other funds and governments should be recorded and reported separately. MAJOR FUND. A governmental fund or enterprise fund reported as a separate column in the basic fund financial statements. The general fund is always a major fund. Otherwise, major funds are funds whose revenues/expenditures, assets or liabilities are at least 10 percent of corresponding totals for all government or enterprise funds and at least 5 percent of the aggregate amount for all governmental and enterprise funds for the same item. Any other governmental or enterprise fund may be reported as a major fund if the government's officials believe that fund is particularly important to financial statement users. MANAGEMENT'S DISCUSSION AND ANALYSIS. A component of required supplementary information used to introduce the basic financial statements and to provide an analytical overview of the government's financial activities. MEASUREMENT FOCUS. A way of presenting an entity s financial performance and position by considering which resources are measured (financial or economic) and when the effects of transactions or events involving those resources are recognized (the basis of accounting). The measurement focus of government-wide financial statements, proprietary fund financial statements and fiduciary fund financial statements is economic resources. The measurement focus of governmental fund financial statements is current financial resources. 193

214 MODIFIED ACCRUAL BASIS. The accrual basis of accounting adapted to the governmental fund-type measurement focus. Under it, revenues and other financial resource increments (e.g., bond issue proceeds) are recognized when they become susceptible to accrual, that is, when they become both measurable and available to finance expenditures of the current period. Available means collectible in the current period or soon enough thereafter to be used to pay liabilities of the current period. Generally, expenditures are recognized when the fund liability is incurred. All governmental funds, expendable trust funds, and agency funds are accounted for using the modified accrual basis of accounting. NET OPEB OBIGATION. In the context of defined benefit pension and other postemployment benefit plans, the cumulative difference between the annual pension cost and employer s contributions to the plan, including the pension/opeb liability (asset) at transition, if any and excluding (a) short-term differences and (b) unpaid contributions that have been converted to pension related /OPEB-related debt. NET POSITION. The residual of all other elements presented in a statement of financial position. NONSPENDABLE FUND BALANCE. Amounts that cannot be spent because they are either (a) not spendable in form or (b) legally contractually required to be maintained intact. OPEN AMORTIZATION PERIOD. In the context of defined benefit pension and other postemployment benefit plans, an open amortization period (open basis) is one that begins again or is recalculated at each actuarial valuation date. Within a maximum number of years specified by law or policy (for example, 30 years), the period may increase, decrease, or remain stable. OPERATING TRANSFERS. All interfund transfers other than residual equity transfers (e.g., legally authorized transfers from a fund receiving revenue to the fund through which the resources are to be expended). OTHER FINANCING SOURCES. An increase in current financial resources that is reported separately from revenue to avoid distorting revenue trends. The use of the other financing sources category is limited to items so classified by GAAP. Such as long-term debt proceeds, amounts equal to the present value of minimum lease payments arising from capital leases, proceeds from the sale of general fixed assets, and operating transfers in. OTHER FINANCING USES. A decrease in current financial resources that is reported separately from expenditures to avoid distorting expenditure trends. The use of other financing uses category is limited to items so classified by GAAP. Such as operating transfers out, and the amount of refunding bond proceeds deposited with the escrow agent. OTHER POSTEMPLOYMENT BENEFITS (OPEB). Medical, dental, vision, and other health-related benefits provided to terminated employees, retired employees, dependents, and beneficiaries. OVERLAPPING DEBT. The proportionate share that property within a government must bear of the debts of all local governments located wholly or in part within the geographic boundaries of the reporting government. Except for special assessment debt, the amount of debt of each unit applicable to the reporting unit is arrived at by (1) determining what percentage of the total assessed value of the overlapping jurisdiction lies within the limits of the reporting unit, and (2) applying this percentage to the total debt of the overlapping jurisdiction. Special assessment debt is allocated on the basis of the ratio of assessment receivable in each jurisdiction, which will be used wholly or in part to pay off the debt, to total assessments receivable, which will be used wholly or in part for this purpose. PAY-AS-YOU-GO. A method of financing a pension plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due. PENSION BENEFITS. Retirement income and all other benefits, including disability benefits, death benefits, life insurance, and other ancillary benefits, except healthcare benefits, that are provided through a defined benefit pension plan to plan members and beneficiaries after termination of employment or after retirement. Postemployment healthcare benefits are considered other postemployment benefits, whether they are provided through a defined benefit pension plan or another type of plan. PENSION TRUST FUND. A trust fund used to account for a Public Employee Retirement System (PERS). Pension trust funds, like nonexpendable trust funds, use the accrual basis of accounting and have a capital maintenance focus. POSTEMPLOYMENT. Period following termination of employment, including the time between termination and retirement postemployment healthcare benefits. PROGRAM REVENUES. Term used in connection with the government-wide statement of activities. Revenues that derive directly from the program itself or from parties outside the reporting government's taxpayers or citizenry, as a whole; they reduce the net cost of the function to be financed from the government's general revenues. PROPRIETARY FUND TYPES. Funds that focus on the determination of operating income, changes in net position (or cost recovery), financial position, and cash flows. There are two different types of proprietary funds: enterprise funds and internal service funds. REBATABLE ARBITRAGE. A term used in connection with the reinvestment of the proceeds of tax-exempt debt. A requirement to remit the federal government interest revenue in excess of interest costs when the proceeds from the sale of taxexempt securities are reinvested in a taxable money market instrument with a materially higher yield. 194

215 GLOSSARY REPORTING ENTITY. The oversight unit and all of its component units, if any, that are combined in the CAFR and/or GPFS. REQUIRED SUPPLEMENTARY INFORMATION. Consists of statements, schedules, statistical data or other information which, according to the GASB, is necessary to supplement, although not required to be a part of, the general purpose financial statements. RESTRICTED ASSETS. Assets whose use is subject to constraints that are either (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. RESTRICTED FUND BALANCE. Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. RESTRICTED NET POSITION. A component of net position whose use is subject to constraints that are either (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. RETAINED EARNINGS. An equity account reflecting the accumulated earning of an enterprise or internal service fund. REVENUE BONDS. Bonds whose principal and interest are payable exclusively from earnings of an enterprise fund. In addition to a pledge of revenues, such bonds sometimes contain a mortgage on the enterprise fund s property. REVENUES. (1) Increases in the net current assets of a governmental fund type from other than expenditure refunds and residual equity transfers. Also, general long-term debt proceeds and operating transfers in are classified as other financing sources, rather than as revenues. (2) Increases in the net total assets of a proprietary fund type from other than expense refunds, capital contributions, and residual equity transfers. Also, operating transfers in are classified separately from revenues. RISK MANAGEMENT. All the ways and means used to avoid accidental loss or to reduce its consequences if it does occur. SELF-INSURANCE. A term often used to describe the retention by an entity of a risk of loss arising out of the ownership of property or from some other cause, instead of transferring that risk to an independent third party through the purchase of an insurance policy. It is sometimes accompanied by the setting aside of assets to fund any related losses. Because no insurance is involved, the term self-insurance is a misnomer. Management and Budget (OMB) Circular A-133, Audits of State and Local Governments. The Single Audit Act allows or requires governments (depending on the amount of federal assistance received) to have one audit performed to meet the needs of all federal grantor agencies. SPECIAL DISTRICT. An independent unit of local government organized to perform a single government function or a restricted number of related functions. Special districts usually have the power to incur debt and levy taxes; however, certain types of special districts are entirely dependent upon enterprise earnings and cannot impose taxes. Examples of special districts are water districts, drainage districts, flood control districts, hospital districts, fire protection districts, transit authorities, port authorities, and electric power authorities. SPECIAL REVENUE FUND. A fund used to account for the proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to expenditure for specified purposes. GAAP only require the use of special revenue funds when legally mandated. TAX AND REVENUE ANTICIPATION NOTES (TRANs). Notes (or warrants) issued in anticipation of the collection of taxes, usually retirable only from tax collections, and frequently only from the proceeds of the tax levy whose collection they anticipate. TRUST FUNDS. Funds used to account for assets held by a government in a trustee capacity for individuals, private organizations, other governments, and/or other funds. UNFUNDED ACTUARIAL ACCRUED LIABILITY. The difference between the actuarial accrued liability and the actuarial value of assets accumulated to finance that obligation. UNASSIGNED FUND BALANCE. The residual classification for the County s General Fund that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. UNMODIFIED OPINION. An auditor s opinion stating that the financial statements present fairly the financial position, results of operations, and (when applicable) changes in financial position in conformity with GAAP (which include adequate disclosure). This conclusion may be expressed only when the auditor has formed such an opinion on the basis of an examination made in accordance with Generally Accepted Auditing Standards (GAAS) or Generally Accepted Governmental Auditing Standards (GAGAS). UNRESTRICTED NET POSITION. That portion of net position that is neither restricted nor invested in capital assets (net of related debt). SINGLE AUDIT. An audit performed in accordance with the Single Audit Act Amendments of 1997 and Office of 195

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