CITY OF BELL GARDENS, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, Lance Soll & Lunghard, LLP

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1 , CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2011 Lance Soll & Lunghard, LLP 203 North Brea Blvd Suite 203 Brea, CA Golden Gate Circle Suite 103 Murrieta, CA 92562

2 , CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2011 PREPARED BY: FINANCE & ADMINISTRATIVE SERVICES DEPARTMENT

3 COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2011 INTRODUCTORY SECTION TABLE OF CONTENTS Page Number Letter of Transmittal... i City Officials... iv Organization Chart... v FINANCIAL SECTION Independent Auditor s Report... 1 Management s Discussion and Analysis... 3 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Budgetary Comparison Statement - General Fund Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to Financial Statements... 25

4 COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2011 TABLE OF CONTENTS Page Number COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Budgetary Comparison Schedules - Special Revenue Funds: Public Safety Augmentation COPS State (SLESF) State Gas Tax Asset Forfeiture Waste Management Community Development Block Grant Proposition A Proposition C Air Quality Improvement Recycling Grants Academic Pursuit Separated Employee Benefits Post Employment Benefits Measure R COPS 2010 Grants Anson Ford Park Budgetary Comparison Schedule Capital Projects Funds: Transportation Development Act Capital Improvement Projects Community Development Commission Budgetary Comparison Schedule Debt Service Funds: Community Development Commission... 90

5 COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2011 TABLE OF CONTENTS STATISTICAL SECTION Page Number Net Assets by Component Changes in Net Assets Program Revenues by Function/Program Fund Balances - Governmental Funds Changes in Fund Balances - Governmental Funds Tax Revenues by Source - Governmental Funds Assessed Value and Estimated Actual Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Tax Payers Property Tax Levies and Collections Taxable Sales by Category Direct and Overlapping Sales Tax Rates Principal Sales Tax Remitters Ratios of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Pledged Revenue Coverage Demographic and Economic Statistics Full-time-Equivalent City Government Employees by Function/Program Operating Indicators by Function/Program Capital Asset Statistics by Function/Program

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10 City of Bell Gardens City Officials Jennifer Rodriguez City Council Mayor Sergio Infanzon Mayor Pro Tem Pedro Aceituno Councilmember Daniel Crespo Councilmember Priscilla Flores Councilmember Administration and Department Heads G. Steve Simonian City Manager Philip Wagner Assistant City Manager Will Kaholokula Director of Finance & Administrative Services Robert Barnes Chief of Police Aldo Schindler Director of Community Development Pamela L. Wasserman Director of Recreation & Community Services John Oropeza Director of Public Works Rosalia A. Conde City Clerk Arnold M. Alvarez-Glasman City Attorney Sid Mousavi City Engineer iv

11 City of Bell Gardens Organization Chart Residents of Bell Gardens Mayor and City Council 5 Elected Officials 1 Secretary City Clerk 2 Full Time City Manager 4 Full Time City Attorney Police 77 Full Time Public Works 30 Full Time Finance & Adm. Services 8 Full Time Community Development 13 Full Time Recreation & Community Services 12 Full Time v

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13 Brandon W. Burrows, CPA David E. Hale, CPA, CFP A Professional Corporation Donald G. Slater, CPA Richard K. Kikuchi, CPA Susan F. Matz, CPA Shelly K. Jackley, CPA Bryan S. Gruber, CPA Deborah A. Harper, CPA INDEPENDENT AUDITOR S REPORT To The Honorable Mayor and Members of the City Council The City of Bell Gardens, California We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Bell Gardens, California, as of and for the year ended June 30, 2011, which collectively comprise the City s basic financial statements as listed in the accompanying table of contents. These financial statements are the responsibility of the City of Bell Gardens management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted by the United States of America and the standards applicable to financial audits contained in the Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Bell Gardens, California, as of June 30, 2011, and the respective changes in financial position and cash flows, where applicable, and the respective budgetary comparison for the General Fund thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. We would like to draw the reader s attention to Note 15 California Redevelopment Agency Dissolution. The note provides information on two bills passed, AB1X26 and AB1X27 which dissolve redevelopment agencies and provide an option to avoid dissolution by making certain defined payments. The Note also provides further information on the California Supreme Court ruling dated December 29, 2011 in regards to these two bills. In accordance with Government Auditing Standards, we have also issued our report dated January 24, 2012, on our consideration of the City of Bell Gardens internal control over financial reporting and our tests of its compliance with certain laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Lance, Soll & Lunghard, LLP 203 North Brea Boulevard Suite 203 Brea, CA TEL: Fax: Orange County Temecula Valley Silicon Valley

14 To The Honorable Mayor and Members of the City Council The City of Bell Gardens, California Accounting principles generally accepted in the United States of America require that the management's discussion and analysis as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s financial statements as a whole. The introductory section, combining and individual nonmajor fund financial statements and statistical section, are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the 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. Brea, California January 24,

15 MANAGEMENT S DISCUSSION AND ANALYSIS As management of the City of Bell Gardens, we offer readers of the City s financial statements this narrative overview and analysis of the financial activities of the City of Bell Gardens for the fiscal year ended June 30, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal and the City s financial statements. FINANCIAL HIGHLIGHTS At June 30, 2011, the City s net assets (excess of assets over liabilities) were $101.1 million. Of this amount, $5.1 million is available to meet the City s ongoing operations. During the fiscal year ended June 30, 2011, the City s total net assets decreased by $4.6 million of which a majority is represented in the governmental activities. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City s basic financial statements, which are comprised of three components: 1) Government-Wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Basic Financial Statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The Government-Wide Financial Statements present the financial picture of the City and provide readers with a broad view of the City s finances. These statements present governmental activities and business type activities separately and include all assets of the City as well as all liabilities. The Statement of Net Assets and the Statement of Activities report information about the City as a whole and about its activities. These statements include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year s revenues and expenses are taken into account, regardless of when cash is received or paid. The Statement of Net Assets presents information on all of the City s assets and liabilities, with the difference between the two reported as net assets. Over time, increases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City s net assets changed during the year. All changes in net assets are reported as soon as the underlying event occurs, regardless of timing of related cash flows. In the Statement of Net Assets and the Statement of Activities, we separate the City activities as follows: Governmental Activities Most of the City s basic services are reported in this category, including general government, public safety, public works, community development, and recreation. Property, business, hotel and sales taxes, club card fees, interest income, and state and federal grants finance these activities. 3

16 Business-Type Activities The City charges a fee to customers to cover all or most of the costs of certain services it provides. The City s water utility and golf course operations are reported as business-type activities. The government-wide financial statements include not only the City itself (known as the primary government), but also two legally separate entities, the Bell Gardens Community Development Commission and the Bell Gardens Financing Authority. The City is financially accountable for these entities and financial information for these blended component units are reported within the financial information presented for the primary government itself. Fund Financial Statements The fund financial statements provide detailed information about the City s most significant funds not the City as a whole. Some funds are required to be established by State law and bond covenants. However, management establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other funding sources. The fund financial statements include statements for each of the three categories of activities governmental, proprietary and fiduciary. The governmental activities are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. The business-type activities are prepared using the economic resources measurement focus and the accrual basis of accounting. The fiduciary activities are agency funds, which only report assets and liabilities and do not have a measurement focus. Governmental Funds The 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 Funds Financial Statements focus on current financial resources, which emphasize near-term inflows and outflows of spendable resources as well as balances of spendable resources at the end of the fiscal year. This information is essential in evaluating the City s near-term financial requirements. To better understand the City s long-term and short-term requirements, it is useful to compare the City s Governmental Fund Statements with the governmental activities in the Government-Wide Financial Statements. A reconciliation of the statements is provided for both the governmental fund balance sheet and the statement of revenues, expenditures and changes in fund balances to facilitate this comparison. The City of Bell Gardens maintains 27 governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Community Development Commission Capital Projects Fund, and the Community Development Commission Debt Service Fund which are reported as major funds. Data from the other 24 governmental funds are combined into a single, aggregate presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements in the Supplementary Information section of this report. The City adopts an annual appropriated budget for its General fund. A budgetary comparison statement has been provided for the General fund to demonstrate its compliance with this budget. Proprietary Funds The City maintains only one type of proprietary fund, the enterprise fund for its water utility and golf course operations. Enterprise funds are used to report the same functions presented as business-type activities in government-wide financial statements. 4

17 Notes to the Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the Government-Wide and Fund Financial Statements. The combining statements referred to earlier in connection with the non-major governmental funds and enterprise funds are presented immediately following the required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Assets For the fiscal year ended June 30, 2011, net assets of the City were $101.1 million, which is a decrease of $4.6 million from the prior year. The following is the condensed Statement of Net Assets for the fiscal years ended June 30, 2011 and Net Assets As of June 30 Governmental Activities Business-type Activities Total Current and other assets $ 38,509,707 $ 35,914,168 $ 939,030 $ 806,334 $ 39,448,737 $ 36,720,502 Capital assets 109,692, ,372,619 7,486,262 7,337, ,179, ,710,318 Total Assets 148,202, ,286,787 8,425,292 8,144, ,627, ,430,820 Long-term liabilities outstanding 40,969,027 42,498,683 3,846,314 3,642,571 44,815,341 46,141,254 Other liabilities 5,787,508 5,807, , ,614 6,140,553 6,178,182 Total Liabilities 46,756,535 48,306,251 4,199,359 4,013,185 50,955,894 52,319,436 Net assets: Invested in Capital Assets Net of Related Debt 73,735,338 74,822,075 3,429,948 3,480,128 77,165,286 78,302,203 Restricted 17,088,677 17,354, , ,355 17,487,111 17,753,420 Unrestricted 10,622,027 4,804, , ,365 11,019,578 5,055,761 Total Net Assets $ 101,446,042 $ 96,980,536 $ 4,225,933 $ 4,130,848 $ 105,671,975 $ 101,111,384 Approximately $78 million (77%) of the City s net assets consist of the City s investment in capital assets such as land, buildings, machinery and equipment, less any related debt to acquire those assets that is still outstanding. These assets are used to provide services to the citizens of the City of Bell Gardens; therefore, they are not available for future spending. Although the City s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since capital assets themselves cannot be used to liquidate these liabilities. 5

18 Statement of Activities The following is the condensed Statement of Activities and Changes in Net Assets for the fiscal years ended June 30, 2011 and City of Bell Gardens Changes in Net Assets Governmental Activities Business-type Activities Total Revenues: Program revenues: Charges for services $ 1,380,147 $ 1,651,510 $ 1,411,992 $ 1,401,856 $ 2,792,139 $ 3,053,366 Operating grants and contrib. 3,159,241 2,146, ,159,241 2,146,983 Capital grants and contrib. 3,791,143 1,839,711 10,000 3,801,143 1,839,711 General revenues: Sales taxes 2,030,961 2,321, Transient occupancy taxes 189, , Franchise taxes 2,572,707 2,568, Business license taxes 243, , Property taxes 4,886,712 4,696, ,886,712 4,696,696 Other taxes 1,104,418 1,182, Motor Vehicle in Lieu 3,866,793 3,905, Use of money and property 6,630,950 3,281,827 6,778 8,664 Club card taxes 10,684,933 9,695, ,684,933 9,695,632 Miscellaneous 303, , , ,606 Total Revenues 40,844,414 34,041,698 1,428,770 1,410,520 25,627,522 21,681,994 Expenses: General government 10,175,559 8,821, ,175,559 8,821,722 Public safety 12,965,767 12,393, ,965,767 12,393,794 Community development 1,220,075 2,241, ,220,075 2,241,756 Parks and recreation 2,485,134 2,838, ,485,134 2,838,313 Public works 9,941,721 10,146, ,941,721 10,146,753 Interest and fiscal charges 4,857,978 1,972, ,857,978 1,972,014 Water utility - 1,460,206 1,532,393 1,460,206 1,532,393 Golf course , , , ,584 Total Expenses 41,646,234 38,414,352 1,711,900 1,748,977 43,358,134 40,163,329 Increase (decrease) in net assets before transfers (801,820) (4,372,654) (283,130) (338,457) (17,730,612) (18,481,335) Transfers (1,466,556) (243,372) 1,466, , Changes in Net Assets (2,268,376) (4,616,026) 1,183,426 (95,085) (1,084,950) (4,711,111) Net assets - beginning of the year restated 103,714, ,596,562 3,042,507 4,225, ,756, ,822,495 Net assets - end of the year $ 101,446,042 $ 96,980,536 $ 4,225,933 $ 4,130,848 $ 105,671,975 $ 101,111,384 6

19 Governmental Activities The City s net assets from governmental activities totaled $96.9 million. The cost of all governmental activities this year was $38.4 million. Overall, the City s governmental program revenues were $5.6 million. The City paid for the remaining public benefit portion of governmental activities with $28.4 million in taxes (some of which could only be used for certain programs) and with other revenues, such as interest earnings and general entitlements. Revenue highlights: General Revenues decreased $6.8 million from the prior year mainly due to a decrease in operating and capital grants and the Card Club casino revenue. Card Club casino revenue decreased by $1.0 million from the prior year. Operating and Capital contributions and grants decreased $2.9 million. This decrease is principally related to the completion of street improvement projects that were funded by state and federal grants in the prior year. Expense highlights: Expenses decreased overall by $3.2 million. Decreases are a result of a decrease in interest and fiscal charges due to the refinancing in the City s loan to the RDA which deferred interest earned for the next 3 years. Business Type Activities The City s business-type activities decreased net assets by $0.1 million. Key elements of this decrease are as follows: Revenue Highlights: Total program revenue in the business-type activities decreased by about $18,000. Expense Highlights: Total expenses in the business-type activities increased $37,000. FUND FINANCIAL STATEMENT ANALYSIS The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City s governmental funds is to provide information on short-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City s financing requirements. As of the end of Fiscal Year , the City s governmental funds reported combined ending fund balance deficit of $1.5 million, a decrease of $1.0 million in comparison with the prior fiscal year. 7

20 Proprietary Funds The City s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Factors concerning these funds have already been addressed in the discussion of Government-wide Financial Analysis of business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS The original adopted General fund budget for this fiscal year was $23.61 million and the final amended budget was $23.77 million. Budget amendments totaled less than 1% of the original budget. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City of Bell Gardens has $116.7 million invested in the capital assets, as compared to $117.2 million in the prior year. Net decrease in the capital assets is approximately $0.5 million. Capital Assets at Year-End (Net of Depreciation) For the Year Ended June 30 Governmental Activities Business-Type Activities Totals Land $ 69,022,714 $ 69,022,714 $ 1,011,000 $ 1,011,000 $ 70,033,714 $ 70,033,714 Buildings 10,758,026 10,224,115-10,758,026 10,224,115 Equipment 1,753,295 1,213,899 4,549,926 4,384,837 6,303,221 5,598,736 Construction in Progress 960,509 2,665, , ,802 1,354,645 3,095,581 Infrastructure 27,198,326 26,246, ,198,326 26,246,112 Intangibles - - 1,531,200 1,512,060 1,531,200 1,512,060 Total $ 109,692,870 $ 109,372,619 $ 7,486,262 $ 7,337,699 $ 117,179,132 $ 116,710,318 The decrease was primarily due to the increase in Accumulated Depreciation of Fixed Assets for FY For more detailed information, see note 6 to the financial statements. 8

21 Long-term Debt At year-end, the City had $48.5 million in long-term debts including development fee related obligations, capital lease obligations, other post employment benefits obligation, certificates of participations and compensated absences, as compared to $47.6 million in prior year, a net increase of $0.9 million during the fiscal year. Please refer to Note 7 for further details on the City s long-term liabilities. Outstanding Long-Term Debt For Fiscal Year Ended June 30 Governmental Activities Business-Type Activities Totals Accrued Leave Payable $ 2,445,026 $ 2,582,495 $ - $ - $ 2,445,026 $ 2,582,495 Other post employment obligations 5,174,113 7,492, ,174,113 7,492, Tax Allocation Bonds Project Area 1 6,080,000 5,720, ,080,000 5,720, Tax Allocation Bond Central City Project 8,400,000 8,145, ,400,000 8,145, Revenue Bond Series A Project Area 1 1,535,000 1,465, ,535,000 1,465, Revenue Bond Series A Central City Project 2,895,000 2,830, ,895,000 2,830,000 Promissory Note- Bear Stearns 9,052,911 8,890, ,052,911 8,890,267 Promissory Note- County of LA 4,079,000 3,731, ,079,000 3,731, Certificates of Participation 3,590,000 3,510, ,590,000 3,510, Water Refunding Revenue Bonds - 4,220,000 4,010,000 4,220,000 4,010,000 Unamortized bond premium 437, ,022 5,637 5, , ,272 Unamortized bond discount (112,128) (104,745) (169,323) (157,679) (281,451) (262,424) Total $ 43,576,671 $ 44,625,290 $ 4,056,314 $ 3,857,571 $ 47,632,985 $ 48,482,861 ECONOMIC FACTORS AND NEXT YEAR S BUDGETS The City of Bell Gardens finances are dependent on the local, national and international economies. Even though over 40% of the City s revenues is received from one local source, the widespread effect of a negative downturn in the economies will have an effect on the City s finances. The fourth quarter forecast of 2011 completed by the UCLA Anderson School of Management, provided an outlook for the next five quarters that will provide a GDP growth rate for the nation that will be at a below trend rate. More specifically, the forecast presents a 2% growth rate over the next five quarters. The forecast for California is for the recent surge in employment to abate while slow growth persists on average through Although the outlook is not overwhelmingly positive, the outlook points out that recent economic data has improved taking the threat of a double-dip recession off the table. The Operating Budget for fiscal year reflects the City s commitment to foster steady, controlled growth and provide the highest level of service to the community within the City s financial constraint and is consistent with the City Council s goals and objectives. Questions or requests for information regarding the City of Bell Gardens budget should be sent to the Finance Department at the address below. CONTACTING THE CITY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City of Bell Gardens finances and to show the City s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City s Finance Department, at the City of Bell Gardens, 7100 Garfield Avenue, Bell Gardens, CA

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23 STATEMENT OF NET ASSETS JUNE 30, 2011 Primary Government Governmental Business-Type Activities Activities Total Assets: Cash and investments $ 16,177,665 $ 239,580 $ 16,417,245 Receivables: Accounts 813,018 13, ,537 Notes and loans 11,885,598-11,885,598 Accrued interest 14, ,462 Internal balances 10,604 (10,604) - Prepaid costs 1,225,560-1,225,560 Deposits 20,120-20,120 Due from other governments 2,078,815-2,078,815 Deferred charges 217, , ,583 Restricted assets: Cash with fiscal agent 3,471, ,355 3,870,582 Capital assets not being depreciated 71,688,493 1,440,802 73,129,295 Capital assets, net of depreciation 37,684,126 5,896,897 43,581,023 Total Assets 145,286,787 8,144, ,430,820 Liabilities: Accounts payable 2,731, ,349 2,837,796 Accrued liabilities 321,763 1, ,570 Accrued interest 463,835 47, ,293 Unearned revenue 25,598-25,598 Deposits payable 64,065-64,065 Due to other governments 74,253-74,253 Noncurrent liabilities: Due within one year 2,126, ,000 2,341,607 Due in more than one year 42,498,683 3,642,571 46,141,254 Total Liabilities 48,306,251 4,013,185 52,319,436 Net Assets: Invested in capital assets, net of related debt 74,822,075 3,480,128 78,302,203 Restricted for: Community development projects 553, ,252 Public safety 805, ,968 Public works 2,031,290-2,031,290 Debt service 13,963, ,355 14,362,910 Unrestricted 4,804, ,365 5,055,761 Total Net Assets $ 96,980,536 $ 4,130,848 $ 101,111,384 See Notes to Financial Statements 11

24 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2011 Program Revenues Operating Capital Charges for Contributions Contributions Expenses Services and Grants and Grants Functions/Programs Primary Government: Governmental Activities: General government $ 8,821,722 $ 134,597 $ 73,143 $ - Public safety 12,393, , ,650 - Community development 2,241,756-54,624 1,103,015 Parks and recreation 2,838, , Public works 10,146, ,628 1,265, ,696 Interest on long-term debt 1,972, Total Governmental Activities 38,414,352 1,651,510 2,146,983 1,839,711 Business-Type Activities: Water 1,532,393 1,249, Golf Course 216, , Total Business-Type Activities 1,748,977 1,401, Total Primary Government $ 40,163,329 $ 3,053,366 $ 2,146,983 $ 1,839,711 General Revenues: Taxes: Club card gross receipt tax Property taxes, levied for general purpose Transient occupancy taxes Sales taxes Franchise taxes Business licenses taxes Other taxes Motor vehicle in lieu - unrestricted Use of money and property Other Transfers Total General Revenues and Transfers Change in Net Assets Net Assets at Beginning of Year Restatement of Net Assets Net Assets at End of Year See Notes to Financial Statements 12

25 Net (Expenses) Revenues and Changes in Net Assets Primary Government Governmental Business-Type Activities Activities Total $ (8,613,982) $ - $ (8,613,982) (10,908,628) - (10,908,628) (1,084,117) - (1,084,117) (2,558,544) - (2,558,544) (7,638,863) - (7,638,863) (1,972,014) - (1,972,014) (32,776,148) - (32,776,148) - (283,106) (283,106) - (64,015) (64,015) - (347,121) (347,121) (32,776,148) (347,121) (33,123,269) 9,695,632-9,695,632 4,696,696-4,696, , ,374 2,321,800-2,321,800 2,568,428-2,568, , ,160 1,182,332-1,182,332 3,905,639-3,905,639 3,281,827 8,664 3,290, , ,606 (243,372) 243,372-28,160, ,036 28,412,158 (4,616,026) (95,085) (4,711,111) 101,446,042 4,225, ,671, , ,520 $ 96,980,536 $ 4,130,848 $ 101,111,384 See Notes to Financial Statements 13

26 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2011 Capital Projects Fund Debt Service Fund Community Community Development Development General Commission Commission Assets: Cash and investments $ 6,357,753 $ 4,803,955 $ - Receivables: Accounts 777, Notes and loans 280,855 9,176,547 - Accrued interest 13, Prepaid costs 1,160,034-65,526 Deposits - 20,120 - Due from other governments 867,696 39, ,533 Due from other funds 1,173,001 38,330 10,247,314 Advances to other funds 50,969, ,804 Restricted assets: Cash and investments with fiscal agents 1,520,350-1,950,877 Total Assets $ 63,120,337 $ 14,078,845 $ 13,229,054 Liabilities and Fund Balances: Liabilities: Accounts payable $ 778,937 $ 167,064 $ 179,695 Accrued liabilities 315,002 3,387 - Deferred revenues 21,944,336 6,176,547 - Unearned revenues Deposits payable 39,065 25,000 - Due to other governments Due to other funds - 9,010,240 1,275,404 Advances from other funds - 51,791,420 - Total Liabilities 23,077,340 67,173,658 1,455,099 Fund Balances: Nonspendable: Prepaid costs 1,160,034-65,526 Notes and loans 280,855 3,000,000 - Advances to other funds 29,660, ,804 Deposits - 20,120 - Restricted for: Community development projects Public safety Parks and recreation Public works Capital Projects Debt service 2,653,435-10,886,625 Committed to: Committed to contingencies 1,500, Post employment benefits Assigned to: Compensated absenses and post employment benefits 4,788, Unassigned - (56,114,933) - Total Fund Balances 40,042,997 (53,094,813) 11,773,955 Total Liabilities and Fund Balances $ 63,120,337 $ 14,078,845 $ 13,229,054 See Notes to Financial Statements 14

27 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2011 Assets: Cash and investments Receivables: Accounts Notes and loans Accrued interest Prepaid costs Deposits Due from other governments Due from other funds Advances to other funds Restricted assets: Cash and investments with fiscal agents Total Assets Other Governmental Funds Total Governmental Funds $ 5,015,957 $ 16,177,665 35, ,018 2,428,196 11,885, ,387-1,225,560-20,120 1,027,693 2,078,815-11,458,645-51,791,420-3,471,227 $ 8,508,219 $ 98,936,455 Liabilities and Fund Balances: Liabilities: Accounts payable Accrued liabilities Deferred revenues Unearned revenues Deposits payable Due to other governments Due to other funds Advances from other funds Total Liabilities Fund Balances: Nonspendable: Prepaid costs Notes and loans Advances to other funds Deposits Restricted for: Community development projects Public safety Parks and recreation Public works Capital Projects Debt service Committed to: Committed to contingencies Post employment benefits Assigned to: Compensated absenses and post employment benefits Unassigned Total Fund Balances Total Liabilities and Fund Balances $ 1,605,751 $ 2,731,447 3, ,763 2,816,339 30,937,222 25,598 25,598-64,065 74,253 74,253 1,162,397 11,448,041-51,791,420 5,687,712 97,393,809-1,225,560-3,280,855-30,482,239-20, , , , , , ,854 2,030,498 2,030, ,540,060-1,500, , ,291-4,788,238 (1,348,294) (57,463,227) 2,820,507 1,542,646 $ 8,508,219 $ 98,936,455 See Notes to Financial Statements 15

28 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2011 Fund balances of governmental funds $ 1,542,646 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets net of depreciation have not been included as financial resources in governmental fund activity. 109,372,619 Bond issuance cost is an expenditure in the governmental funds, but it is a deferred charge in the statement of net assets. 217,174 Long-term debt and compensated absences have not been included in the governmental fund activity: Bonds and notes payable (34,550,544) Compensated absences (2,582,495) Governmental funds report all other post-employment benefits contributions as expenditures. However, in the statement Statement of Net Assets, any excess or deficit of contribution over the Annual Required Contribution (ARC) is reported as an assets or liabilities. (7,492,251) Accrued interest payable for the current portion of interest due on bonds has not been reported in the governmental funds. (463,835) Some of the City's revenue will be collected after year-end, but are not available soon enough to pay for the current year period expenditures and, therefore are reported as deferred revenue in the governmental funds. 30,937,222 Net assets of governmental activities $ 96,980,536 See Notes to Financial Statements 16

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30 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2011 Capital Projects Fund Debt Service Fund Community Community Development Development General Commission Commission Revenues: Taxes $ 4,179,691 $ 745,576 $ 2,982,303 Licenses and permits 425, Intergovernmental 4,268, Club card fees 9,695, Charges for services 288, Use of money and property 4,418, ,246 24,272 Fines and forfeitures 328, Contributions Miscellaneous 283,465 52,500 - Total Revenues 23,887,916 1,393,322 3,006,575 Expenditures: Current: General government 3,103,460 1,322, ,896 Public safety 11,463, Community development 787,788 1,046,097 - Parks and recreation 2,602, Public works 3,210, Capital outlay 86,675 30,407 - Debt service: Principal retirement 80, ,644 Interest and fiscal charges 163,998-1,678,513 Total Expenditures 21,497,729 2,398,673 3,225,053 Excess (Deficiency) of Revenues Over (Under) Expenditures 2,390,187 (1,005,351) (218,478) Other Financing Sources (Uses): Transfers in 244, Transfers out (738,448) - - Total Other Financing Sources (Uses) (494,448) - - Net Change in Fund Balances $ 1,895,739 $ (1,005,351) $ (218,478) Fund Balances: Beginning of year, as originally reported $ 36,077,440 $ (50,136,168) $ 12,167,080 Restatements 2,069,818 (1,953,294) (174,647) Beginning of year, as restated 38,147,258 (52,089,462) 11,992,433 Net Change in Fund Balances 1,895,739 (1,005,351) (218,478) End of Year $ 40,042,997 $ (53,094,813) $ 11,773,955 See Notes to Financial Statements 18

31 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2011 Revenues: Taxes Licenses and permits Intergovernmental Club card fees Charges for services Use of money and property Fines and forfeitures Contributions Miscellaneous Total Revenues Expenditures: Current: General government Public safety Community development Parks and recreation Public works Capital outlay Debt service: Principal retirement Interest and fiscal charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances: Beginning of year, as originally reported Restatements Beginning of year, as restated Net Change in Fund Balances End of Year Other Governmental Funds Total Governmental Funds $ 3,194,391 $ 11,101, ,579 3,867,091 8,135,923-9,695, , , ,693 5,208, , ,888 70,000 70,000 18, ,963 7,880,407 36,168, ,090 5,510, ,158 12,357, ,901 2,207, ,563 2,818,574 5,149,485 8,360,219 2,294,983 2,412, ,000 1,340, ,730 2,043,241 9,928,910 37,050,365 (2,048,503) (882,145) 1,004,721 1,248,721 (753,645) (1,492,093) 251,076 (243,372) $ (1,797,427) $ (1,125,517) $ 4,409,291 $ 2,517, , ,520 4,617,934 2,668,163 (1,797,427) (1,125,517) $ 2,820,507 $ 1,542,646 See Notes to Financial Statements 19

32 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2011 Net change in fund balances - total governmental funds $ (1,125,517) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. (320,251) The issuance of long-term debt provides financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Repayment of long-term debt principal 1,406,988 Debt issuance costs are expenditures in governmental funds, but these costs are capitalized on the statement of net assets. (14,752) Accrued interest for long-term liabilities. This is the net change in accrued interest for the current period. 19,635 Compensated absences 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. (137,469) Other post-retirement benefit obligation 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. (2,318,138) Revenues reported as deferred revenue in the governmental funds and recognized in the Statement of Activities. These are included in the intergovernmental revenues in the governmental fund activity. (2,126,522) Change in net assets of governmental activities $ (4,616,026) See Notes to Financial Statements 20

33 BUDGETARY COMPARISON STATEMENT GENERAL FUND YEAR ENDED JUNE 30, 2011 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1, as restated $ 38,147,258 $ 38,147,258 $ 38,147,258 $ - Resources (Inflows): Taxes 3,894,162 3,894,162 4,179, ,529 Licenses and permits 277, , , ,899 Intergovernmental 4,023,734 4,023,734 4,268, ,098 Club card fees 10,644,350 10,644,350 9,695,632 (948,718) Charges for services 305, , ,118 (17,422) Use of money and property 3,346,164 3,346,164 4,418,033 1,071,869 Fines and forfeitures 397, , ,566 (69,108) Miscellaneous 59,500 59, , ,965 Transfers in 894, , ,000 (650,000) Amounts Available for Appropriations 61,990,062 61,990,062 62,279, ,112 Charges to Appropriations (Outflow): General government 3,875,017 3,875,017 3,103, ,557 Public safety 12,093,219 12,093,219 11,463, ,156 Community development 831, , ,788 79,219 Parks and recreation 2,766,266 2,766,266 2,602, ,255 Public works 3,206,701 3,206,701 3,210,734 (4,033) Capital outlay 86, ,150 86,675 26,475 Debt service: Principal retirement 80,000 80,000 80,000 - Interest and fiscal charges 163, , ,998 - Transfers out 509, , ,448 (131,948) Total Charges to Appropriations 23,612,587 23,771,858 22,236,177 1,535,681 Budgetary Fund Balance, June 30 $ 38,377,475 $ 38,218,204 $ 40,042,997 $ 1,824,793 See Notes to Financial Statements 21

34 STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2011 Assets: Current: Business-Type Activities - Enterprise Funds Nonmajor Enterprise Funds Water Golf Course Total Cash and investments $ 239,580 $ - $ 239,580 Receivables: Accounts 13,519-13,519 Accrued interest Restricted: Cash with fiscal agent 399, ,355 Total Current Assets 652, ,529 Noncurrent: Unamortized debt issuance costs 164, ,409 Capital assets - net of accumulated depreciation 7,334,902 2,797 7,337,699 Total Noncurrent Assets 7,499,311 2,797 7,502,108 Total Assets $ 8,151,840 $ 2,797 $ 8,154,637 Liabilities and Net Assets: Liabilities: Current: Accounts payable $ 102,711 $ 3,638 $ 106,349 Accrued liabilities 751 1,056 1,807 Accrued interest 47,458-47,458 Due to other funds - 10,604 10,604 Bonds, notes, and capital leases 215, ,000 Total Current Liabilities 365,920 15, ,218 Noncurrent: Bonds, notes, and capital leases 3,642,571-3,642,571 Total Noncurrent Liabilities 3,642,571-3,642,571 Total Liabilities 4,008,491 15,298 4,023,789 Net Assets: Invested in capital assets, net of related debt 3,477,331 2,797 3,480,128 Restricted for debt service 399, ,355 Unrestricted 266,663 (15,298) 251,365 Total Net Assets 4,143,349 (12,501) 4,130,848 Total Liabilities and Net Assets $ 8,151,840 $ 2,797 $ 8,154,637 See Notes to Financial Statements 22

35 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2011 Business-Type Activities - Enterprise Funds Nonmajor Enterprise Funds Water Golf Course Total Operating Revenues: Sales and service charges $ 1,139,956 $ 148,441 $ 1,288,397 Miscellaneous 109,331 4, ,459 Total Operating Revenues 1,249, ,569 1,401,856 Operating Expenses: Cost of sales and services 987, ,032 1,102,558 Personnel services 160,621 94, ,100 Depreciation expense 177,156 7, ,229 Total Operating Expenses 1,325, ,584 1,541,887 Operating Income (Loss) (76,016) (64,015) (140,031) Nonoperating Revenues (Expenses): Interest revenue 2,164 6,500 8,664 Interest expense (207,090) - (207,090) Total Nonoperating Revenues (Expenses) (204,926) 6,500 (198,426) Income (Loss) Before Transfers (280,942) (57,515) (338,457) Transfers in - 487, ,372 Transfers out (244,000) - (244,000) Changes in Net Assets (524,942) 429,857 (95,085) Net Assets: Beginning of Year 4,668,291 (442,358) 4,225,933 End of Fiscal Year $ 4,143,349 $ (12,501) $ 4,130,848 See Notes to Financial Statements 23

36 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2011 Business-Type Activities - Enterprise Funds Water Other Enterprise Funds Golf Course Total Cash Flows from Operating Activities: Cash received from customers and users $ 1,249,287 $ 152,569 $ 1,401,856 Cash paid to suppliers for goods and services (972,614) (117,374) (1,089,988) Cash paid to employees for services (160,621) (94,480) (255,101) Net Cash Provided (Used) by Operating Activities 116,052 (59,285) 56,767 Cash Flows from Non-Capital Financing Activities: Cash transfers out (244,000) - (244,000) Cash transfers in - 487, ,372 Repayment made to other funds - (434,587) (434,587) Net Cash Provided (Used) by Non-Capital Financing Activities (244,000) 52,785 (191,215) Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets (35,666) - (35,666) Principal paid on capital debt (210,000) - (210,000) Interest paid on capital debt (183,692) - (183,692) Net Cash Provided (Used) by Capital and Related Financing Activities (429,358) - (429,358) Cash Flows from Investing Activities: Interest received 2,164 6,500 8,664 Net Cash Provided (Used) by Investing Activities 2,164 6,500 8,664 Net Increase (Decrease) in Cash and Cash Equivalents (555,142) - (555,142) Cash and Cash Equivalents at Beginning of Year 1,194,077-1,194,077 Cash and Cash Equivalents at End of Year $ 638,935 $ - $ 638,935 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ (76,016) $ (64,015) $ (140,031) Adjustments to reconcile operating income (loss) net cash provided (used) by operating activities: Depreciation 177,156 7, ,229 Increase (decrease) in accounts payable 14,912 (2,342) 12,570 Increase (decrease) in accrued liabilities - (1) (1) Total Adjustments 192,068 4, ,798 Net Cash Provided (Used) by Operating Activities $ 116,052 $ (59,285) $ 56,767 Non-Cash Investing, Capital, and Financing Activities: Amortization of cost of issuance, bond premium and loss on defeasance. $ 23,398 $ - $ 23,398 See Notes to Financial Statements 24

37 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 I. SIGNIFICANT ACCOUNTING POLICIES Note 1: Organization and Summary of Significant Accounting Policies a. Description of the Reporting Entity This report includes all fund types of the City of Bell Gardens (the "primary government"), as well as the Bell Gardens Community Development Commission (the Commission) and the Bell Gardens Financing Authority (the Authority). These latter two entities meet the definition of a "component unit", and are presented on a "blended" basis, as if they were part of the primary government. Although the Commission and the Authority are legally separate entities, the governing boards of these entities are comprised of the same membership as the City Council. The City may impose its will on these component units, including the ability to appoint, hire, reassign or dismiss management. There is also a financial benefit/burden relationship between the City and these entities. The City of Bell Gardens, California (City) was incorporated on August 1, The City operates under a Council-Manager form of government and provides the following services: general government, public safety, public works, recreation and community development. The Bell Gardens Redevelopment Agency (Agency) was established on July 10, 1972, pursuant to the State of California Health and Safety Code Section 33000, entitled "Community Redevelopment Law". On May 27, 1997, the City expanded the Agency to a Community Development Commission (Commission) pursuant to the State of California Health and Safety Code, Section 34100, to include housing activities. The primary purpose of the Commission is to eliminate blighted areas by encouraging development of residential, commercial, industrial, recreational and public facilities and to provide safe and sanitary dwelling accommodations in the City, available to persons of low income. The Bell Gardens Financing Authority (Authority) was created on November 28, 1988, under a Joint Exercise of Powers Agreement by and between the City of Bell Gardens and the Bell Gardens Community Development Commission. The Authority was established pursuant to the laws of the State of California with authority to acquire the Commission's bonds as provided in Section 6588 of the Government Code of the State of California. The Commission has determined that "significant public benefits" will be derived by the Commission in undertaking the issuance of the bonds and their sale to the Authority and resale to the underwriter, in furtherance of the corporate purposes of the Commission. Separate financial statements of the Commission are available at City Hall, 7100 Garfield Avenue, Bell Gardens, California Separate financial statements are not prepared for the Authority. 25