CITY OF ALHAMBRA CALIFORNIA

Transcription

1 CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2012

2 On the Cover: Howard Street Townhomes Residential affordable townhome project at 534 West Howard Street to accommodate six low-income and two moderate-income households. The townhomes will be sold through the City s first-time homebuyer program.

3 , CALIFORNIA Comprehensive Annual Financial Report Year ended June 30, 2012 (With Independent Auditors Report Thereon) Prepared by: Paul Espinoza, Director of Finance and Staff

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5 Comprehensive Annual Financial Report Table of Contents Page Introductory Section: Letter of Transmittal Officials of the City of Alhambra Organizational Chart GFOA Certificate of Achievement for Excellence in Financial Reporting iv ix x xi Financial Section: Independent Auditors Report 1 Management s Discussion and Analysis 3 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets 15 Statement of Activities 16 Fund Financial Statements: Balance Sheet Governmental Funds 17 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 19 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual: General Fund 21 Community Development Block Grant Special Revenue Fund 24 Home and Rental Rehabilitation Grant Special Revenue Fund 25 Statement of Net Assets Proprietary Funds 26 Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds 27 Statement of Cash Flows Proprietary Funds 28 Statement of Fiduciary Net Assets 30 Notes to the Basic Financial Statements 32 Required Supplementary Information (Unaudited): Schedule of Funding Progress of the City s Defined Benefit Pension Plan 82 Schedule of Funding Progress of the City s Health Subsidy Pension Plan 83 Schedule of Funding Progress of the City s Other Post-Employment Benefit Plans 83 i

6 Table of Contents, Continued Page Combining and Individual Fund Statements and Schedules: Other Governmental Funds: Combining Balance Sheet Other Governmental Funds 84 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Other Governmental Funds 85 Combining Balance Sheet Other Special Revenue Funds 86 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficits) Other Special Revenue Funds 88 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Other Special Revenue Funds: Law Enforcement Fund 90 TDA Bikeway Fund 91 State Gas Tax Fund 92 Proposition A Transportation Fund 93 Proposition C Transportation Fund 94 Measure R Fund 95 Air Quality Fund 96 Lighting and Landscape Maintenance Fund 97 Police Facility Assessment Fund 98 Asset Forfeiture Fund 99 Transportation Capital Improvements Fund 100 Alhambra Redevelopment Agency Low- and Moderate-Income Housing Fund 101 Combining Balance Sheet Other Debt Service Funds 102 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Other Debt Service Funds 103 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Other Debt Service Funds: Community Improvement Fund 104 Lighting and Sidewalk Construction Fund 105 Police Facility Fund 106 Alhambra Redevelopment Agency Tax Allocation Bond Fund 107 ii

7 Table of Contents, Continued Page Combining Balance Sheet Other Capital Projects Funds 108 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Other Capital Projects Funds 109 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Other Capital Projects Funds: Capital Outlay Fund 110 Alhambra Redevelopment Agency Central Projects Fund 111 Alhambra Redevelopment Agency Industrial Projects Fund 112 Internal Service Funds: Combining Statement of Net Assets (Deficits) Internal Service Funds 113 Combining Statement of Revenues, Expenses, and Changes in Net Assets (Deficits) Internal Service Funds 114 Combining Statement of Cash Flows Internal Service Funds 115 Statistical Section (Not Covered by Independent Auditors Report) Net Assets by Component - Last Nine Fiscal Years 117 Changes in Net Assets - Last Nine Fiscal Years 118 Fund Balances of Governmental Funds - Last Nine Fiscal Years 120 Changes in Fund Balances of Governmental Funds - Last Nine Fiscal Years 121 Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years 122 Direct and Overlapping Property Tax Rates - Current Year and Nine Years Ago 123 Principal Property Tax Payers - Current Year and Nine Years Ago 124 Property Tax Levies and Collections - Last Ten Fiscal Years 125 Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 126 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years 127 Direct and Overlapping Debt 128 Legal Debt Margin Information - Last Ten Fiscal Years 130 Pledged Revenue Coverage - Last Ten Fiscal Years 131 Demographic and Economic Statistics 132 Principal Employers - Current Year and Nine Years Ago 133 Full-time Equivalent City Government Employees by Function/Program - Last Ten Fiscal Years 134 Operating Indicators by Function - Last Ten Fiscal Years 135 Capital Asset Statistics by Function - Last Ten Fiscal Years 136 iii

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9 Introductory Section

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12 The independent audit of the financial statements of the City was part of a broader, federally mandated Single Audit designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City s separately issued Single Audit Report. Management s discussion and analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complement this letter of transmittal and should be read in conjunction with it. Profile of the City of Alhambra The City of Alhambra was incorporated on July 11, 1903 and became the third city in the state to adopt by charter the Council-Manager form of government. Council members are nominated by district and elected at large for four-year terms at elections held in even numbered years. The City is located eight miles east of downtown Los Angeles and shares common boundaries with the cities of South Pasadena and San Marino to the north, San Gabriel to the east, Monterey Park to the south, and Los Angeles to the west. Alhambra occupies 7.69 square miles and generally has been fully developed since the 1960 s. Private development and higher densities have increased the population from 54,800 in 1960 to 89,501 in The City is diversified with single family and multiple family housing development, commercial development, and significant industrial development. The City provides a full range of municipal services. Services provided include police, fire, street maintenance and improvements, water and storm drains, recreation, library, public improvements, planning zoning, and general administrative and support services. Economic Condition and Outlook Local Economy. The City of Alhambra s economic base is a combination of commercial and light industrial business with over 8300 active businesses located in the City generating over $1 billion in taxable sales in Approximately 28% of that amount is from Auto Row which currently has 10 dealers and 13 different makes of automobiles. Other major businesses include Costco, Kohl s, Home Depot, Office Depot, Ross Dress For Less, Staples, Target, Smart and Final, and Toys R Us. The renaissance of downtown Alhambra includes the 14 screen Alhambra Renaissance Cineplex with adjacent parking structure. The Cineplex includes stadium seating, a 20,000 square foot public plaza, and 15,000 square feet of retail/restaurant space located at the northeast corner of Main Street and Garfield Avenue. Cineplex eating establishments include Applebee s Grill, Panda Express and Menchie s Frozen Yogurt, and Grill Em All, along with many other nearby restaurants. The Cineplex Parking Structure is a five-level 252,000 square foot structure with 811 parking spaces. Alhambra s economic condition generally reflects the overall economic condition of the Los Angeles County region. The recession which started in December 2007 has impacted General Fund revenues. In addition to the recession, in January 2011, the California Supreme Court upheld AB1X 26 calling for the dissolution of redevelopment agencies in the state. Pursuant to that ruling, the Alhambra Redevelopment Agency ceased to exist as of February 1, General Fund revenues collected and received for the fiscal year amounted to just above $54 million keeping in line with budget estimates, however, due to the dissolution of the Redevelopment Agency, the City was forced to remit a portion of its General Fund lease revenues ($1,044,732) to the Successor Agency (former Alhambra Redevelopment Agency). It is helpful to note that these lease revenues, lost due to AB1X 26, were not identified as funds to be used to offset regular general fund operating costs, but rather, were earmarked for expenses related to the operations of Freemont Plaza, Main Street and lease rental properties. In addition to these lease revenues, the general fund experienced a loss in Homeland Security Grant revenues in the amount of $363,377. Accordingly, these grant funds were earmarked for capital projects that were eliminated once it was determined that these revenues would not materialize. As a result of these two events, actual net General Fund revenues (adjusted for transfers and v

13 sales of capital assets) amounted to $53,034,471 for fiscal year end June 30, During the year, the City addressed the anticipated reduction in revenues by having departments reduce spending. As a result of this, actual net General Fund expenditures (adjusted for transfers) for the fiscal year ended June 30, 2012 amounted to $53,546,712 and the final adopted General Fund budget amounted to $55,515,761 resulting in a budget savings of $1,969,049. Due to this decrease in General Fund spending, the year end fund balance is maintained at approximately the same level as the original budget. The City closely monitors current revenues and expenditures to determine if any long-term trends are developing which may require adjustment of anticipated revenues or expenses. Financial Information Long-term Financial Planning. The City has developed a Strategic Plan with established goals from which budgetary decisions are made. The Plan is periodically updated and the City is consistently working to achieve these goals. City goals for fiscal years are as follows: Enhance commercial development, housing and jobs creation Enhance the quality of our neighborhoods and community Improve financial stability Improve and enhance the City s infrastructure and facilities Enhance community awareness of the City s programs and services Substantial progress has been made towards the accomplishment of these goals. The City has also developed a Five-Year Capital Improvement Plan detailing specific capital projects planned for each City department. Each project is consistent with the overall goals and objectives of the City as outlined in the Strategic and General Plans. The current Five-Year Capital Improvement Plan proposed $16 million of capital projects which includes $3.6 million for major street projects, $4.6 million for water and sewer system improvements, and $4 million in public safety capital expenditures. Internal Controls. Management of the City is responsible for establishing and maintaining internal control designed to ensure that the assets of the government are protected from loss, theft, or misuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with U.S. generally accepted accounting principles. Internal control is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Management asserts that, to the best of their knowledge and belief, this financial report is complete and reliable in all material respects. Budgetary Control. The City of Alhambra adopts a comprehensive budget detailed by department prior to the start of the fiscal year on July 1. The budget is further broken down by character of expenditure, defined as personnel services, service and supplies, and capital outlay. The ledgers of the City and its component units are maintained by the line item detail or object of expenditure. However, all budgetary controls are exercised at the department and fund level. The City maintains budgetary controls to ensure compliance with legal provisions in the annual appropriated budget approved by the City. Revenues are estimated annually and measured against actual revenues earned. The City also maintains an encumbrance accounting system for budgetary control. Encumbrances generally are re-appropriated as part of the following year's budget. vi

14 Major Initiatives Establishment of the City s Economic Development Ordinance: On June 29, 2011, as part of adopting the State of California Fiscal Year (FY) budget, the Governor signed two trailer bills, AB1X 26 and AB1X 27 into law. The legislation was effective on June 29, AB1X 26 eliminates redevelopment agencies and AB1X 27 provides an opportunity for cities to opt-in and continue to have their redevelopment agencies operate and function. The California Supreme Court later upheld AB1X 26, while invalidating AB1X 27. Pursuant to that ruling, the Alhambra Redevelopment Agency ceased to exist as of February 1, For over forty years the Alhambra Redevelopment Agency has undertaken economic development activities that have enhanced the housing, jobs, shopping, dining and parking opportunities for its residents. The Agency has also constructed public improvements that have benefited the City and its residents. Additionally, the increased tax base created through the enhanced sales tax and property tax revenues resulting for all of the economic development activities of the Agency have enabled the City to maintain balanced budgets, while still funding critical public safety, infrastructure construction and maintenance, and recreational opportunities for the Alhambra residents. Because the legislature has elected to eliminate the only economic development engine of the state by eliminating redevelopment agencies, the Alhambra Redevelopment Agency will no longer be able to continue its vital and effective efforts to enhance the general welfare of the residents of Alhambra. Alhambra is a Charter law City. Pursuant to the Alhambra City Charter, the Alhambra City Council is authorized to legislate over any municipal affair to the full extent permitted by the California Constitution. Economic development within the City of Alhambra is a municipal affair, as demonstrated by the impacts of those efforts that directly benefit the general welfare of the citizens of Alhambra. Further, the decision to utilize City resources and funds to further those efforts within the City s boundaries is also a municipal affair, within the scope of the City Councils legislative authority. In February 2012, the Council adopted Ordinance O2M adding chapter 3.34 Economic Development in the Alhambra Municipal code and set forth the economic development powers and obligations of the City of Alhambra. The ordinance includes many of the powers of the former Alhambra Redevelopment agency utilized so successfully over the past forty plus years. The adoption of the ordinance will allow the City to continue to undertake those development assistance efforts that have resulted in so much benefit to the residents of the City. The ordinance will allow for the continued development of the infill affordable and transit oriented housing. Continued infill development of the major business and retail corridors, bringing housing, jobs, shopping and entertainment together to minimize the need for vehicle trips, while enhancing the City s vibrant downtown would facilitated by this ordinance. The City can also continue to work with developers to not only bring in enhanced shopping, dining and entertainment opportunities, but also create aesthetically pleasing development that brings new jobs to the City. Assistance can also be used not just to attract, but also to retain high paying jobs and industries within the City. Although the City will not receive tax increment for purposes of economic development as the Alhambra Redevelopment Agency did, other funds could be used by the City for those purposes (subject to City Council approval). Awards and Acknowledgements The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement in Excellence in Financial Reporting to the City of Alhambra for its Comprehensive Annual Financial Report for the year ended June 30, The Certificate of Achievement is a prestigious national award-recognizing conformance with the highest standards for preparation of state and local government financial reports. vii

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16 Officials of the City of Alhambra Mayor Barbara A. Messina Second District City Council Members Luis Ayala Fifth District Gary S. Yamauchi Third District Steven T. Placido Fourth District Stephen K. Sham First District City Administration and Department Heads City Manager...Julio J. Fuentes City Attorney...Joseph Montes Director of Administrative Services... Tara Schultz Director of Public Works...Mary Chavez Director of Community Services... Cynthia Jarvis Director of Finance...Paul Espinoza Director of Development Services...Mary Swink Director of Library Services... Carmen Hernandez Police Chief... Mark Yokoyama Fire Chief...Bill Walker Assistant City Manager/Director of Personnel... Richard Bacio Director of Utilities...Mary Swink ix

17 ORGANIZATIONAL CHART PEOPLE OF ALHAMBRA City Council Stephen Sham First District Barbara Messina Second District Gary S. Yamauchi Third District Steven T. Placido Fourth District Luis Ayala Fifth District Civil Service Board of Appeals Parks & Recreation Commission Planning Commission HCDA Citizen s Advisory Committee Design & Review Board Board of Library Trustees Transportation Commission Arts & Cultural Events Committee City Manager City Attorney (Contract) Management Services Development Services Administrative Services Finance Fire Community Services Police Library Personnel Public Works Utilities x

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19 Financial Section

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21 INDEPENDENT AUDITORS REPORT The Honorable Mayor and Members of City Council City of Alhambra Alhambra, 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 Alhambra (City), as of and for the year ended June 30, 2012, which collectively comprise the City s basic financial statements as listed in the table of contents. The financial statements are the responsibility of the City of Alhambra s 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 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2012 and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the General Fund, Community Development Block Grant Special Revenue Fund, and Home and Rental Rehabilitation Grant Special Revenue Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note V.K to the financial statements, the Alhambra Redevelopment Agency, a blended component unit of the City, was dissolved effective February 1, 2012 as a result of legislation enacted by the State of California. In accordance with Government Auditing Standards, we have also issued our report dated January 23, 2013, on our consideration of the City s internal control over financial reporting and 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 should be considered in assessing the results of our audit Michelle Drive, Suite 300, Irvine, CA Tel: Fax: Offices located in Orange and San Diego Counties

22 The management s discussion and analysis and schedules of funding progress, listed in the table of contents as required supplementary information, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. This information is 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 management s discussion and analysis and the schedules of funding progress 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 the audit of the basic financial statements. We do not express an opinion or provide any assurance on the management s discussion and analysis and the schedules of funding progress 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 basic financial statements as a whole. The introductory section, supplementary information in the financial section and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information in the financial section is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information in the financial section is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section, and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion or provide any assurance on them. Irvine, California January 23,

23 Management s Discussion and Analysis June 30, 2012 This section of the City s Comprehensive Annual Financial Report provides a narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, We encourage readers to consider the information presented here in conjunction with additional information we have furnished in our letter of transmittal, which can be found beginning on page iv and the City s financial statements beginning on page 15. Financial Highlights The following are some key financial highlights for the fiscal year June 30, 2012: The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $202,934,046 (net assets), which was comprised of capital assets, net of related debt of $160,957,254, restricted for debt service of $1,821,727, restricted for projects and programs of $12,154,326, and unrestricted net assets of $28,000,739. The City s total net assets increased by $25,822,468 during the current fiscal year, comprised of an increase in governmental activities of $20,658,691, and an increase in business-type activities of $5,163,776. As of June 30, 2012, the City s governmental funds reported combined fund balances of $28,626,441, a decrease of $7,131,884 in comparison with the prior year. Of this amount, $8,171,614 or approximately 29% of total fund balances, are available for spending at the City s discretion (committed, assigned, and unassigned fund balance). At the end of the current fiscal year, committed, assigned, and unassigned fund balance for the General Fund was $9,074,904, or 18% of total general fund expenditures. However, the City has committed or assigned $8,700,231 for various projects and programs leaving $374,673 as unassigned. The Alhambra Redevelopment Agency revenues decreased $11,566,770 or 64% decrease from prior year, and expenditures decreased $10,608,345 or 81% decrease from prior year which resulted from the elimination of the Alhambra Redevelopment Agency on January 31, 2012 pursuant to AB1X26. Additional information can be found in notes to the basic financial statements on pages 72 through 79 of this report. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City s basic financial statements. The City s basic financial statements comprise of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to basic financial statements. This report also contains supplementary information in addition to the basic financial statements. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City s finances in a manner similar to a private-sector business. The statement of net assets presents information on all of the City s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. See accompanying independent auditors' report 3

24 Management s Discussion and Analysis June 30, 2012 The statement of activities presents information showing how the City s net assets changed during the most recent fiscal year. All changes in net assets 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 only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the City include general government, public safety, public works, housing, health and community development, culture and recreation, and interest on long-term debt. The business-type activities of the City include its water, sewer and storm drain, sanitation, and golf course/clubhouse operations. The government-wide financial statements include not only the City itself (known as the primary government), but also five legally separate entities, the Alhambra Capital Improvements Corporation, Alhambra Golfcourse/Clubhouse Corporation, Alhambra Public Financing Authority, and the Alhambra Parking Authority. The City is financially accountable for these entities and financial information for these blended component units is reported within the financial information presented for the primary government itself. Financial information for another blended component unit, the Alhambra Redevelopment Agency, is also included with the activities of the primary government. The government-wide financial statements can be found on page 15 and page 16 of this report. Fund Financial Statements. A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary 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 governmental-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of this fiscal year. Such information may be useful in evaluating the City s near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds 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 City s near-term financial decision. Both the governmental fund balance sheet and the governmental fund statement of revenue, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 23 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, Community Development Block Grant Fund, Home Rental and Rehabilitation Fund, and the Housing Asset Fund, each of which is considered to be major funds. Data from the other 19 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these other governmental funds is provided in the form of combining statements in the other governmental funds section of this report. See accompanying independent auditors' report 4

25 Management s Discussion and Analysis June 30, 2012 The City adopts an annual appropriated budget for all of its funds. A budgetary comparison statement is provided for all funds with an annually adopted budget. The budgetary comparison statement for the General Fund, Community Development Block Grant Fund, Home Rental and Rehabilitation Fund, and the Housing Asset Fund are located in the basic financial statements. The basic governmental fund financial statements can be found on page 17 and page 19 of this report. Proprietary Funds. The City 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 City uses enterprise funds to account for its water, sewer and storm drain, sanitation, and golf course/clubhouse operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City s various functions. The City uses internal service funds to account for self-insurance activities, including: general claims liability, workers compensation insurance, vehicle operation and maintenance, and compensated absences. Because these services benefit both governmental and business-type functions, the services have been allocated to governmental and business type 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 the water, sewer and storm drain, sanitation, and golfcourse/clubhouse operations, all of which are considered major funds of the City. Conversely, the internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements in the Supplementary Information section of this report. The basic proprietary fund financial statements can be found on page 26 through page 29 of this report. Fiduciary Funds. The City maintains one fiduciary fund, a Private Purpose Trust for the Alhambra Revelopment Agency Successor Agency. Fiduciary Funds are used to account for financial resources held for the benefit of parties outside the City government. Fiduciary Funds are not reflected in the government-wide statements because the resources are not available to support governmental activities of the City. The basic fiduciary fund financial statements can be found on page 30 through page 31 of this report. Notes to the Basic Financial Statements. The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found on pages 32 through 81 of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City s progress in funding its obligation to provide pension benefits and other post-employment benefits to its employees. Required supplementary information can be found on pages 82 through 83 of this report. The combining statements referred to earlier in connection with other governmental funds and internal service funds, together with information on capital assets used in the operation of governmental funds (those not included in internal service funds), are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 84 through 116 of this report. See accompanying independent auditors' report 5

26 Management s Discussion and Analysis June 30, 2012 Government-wide Financial Analysis Summary of Net Assets June 30, 2012 and 2011 Governmental Business-type activities activities Total Assets: Current and other assets $ 53,312,499 69,053,669 32,088,720 27,184,081 85,401,219 96,237,750 Capital assets 144,859, ,060,966 45,972,777 46,435, ,832, ,496,458 Total assets 198,172, ,114,635 78,061,497 73,619, ,233, ,734,208 Liabilities: Current and other liabilities 5,738,972 7,581,222 3,072,061 3,242,912 8,811,033 10,824,134 Long-term liabilities 50,066,054 93,824,776 14,422,718 14,973,720 64,488, ,798,496 Total liabilities 55,805, ,405,998 17,494,779 18,216,632 73,299, ,622,630 Net assets (deficit): Invested in capital assets, net of related debt 125,254, ,571,980 35,702,569 35,565, ,957, ,137,372 Restricted 12,815,183 29,145,405 1,160,870 1,160,870 13,976,053 30,306,275 Unrestricted (deficit) 4,297,460 (25,008,748) 23,703,279 18,676,679 28,000,739 (6,332,069) Total net assets $ 142,367, ,708,637 60,566,718 55,402, ,934, ,111,578 As noted earlier, net assets may serve over time as a useful indicator of the City s financial position. In the case of the City, assets exceeded liabilities by $202,934,046 at June 30, The largest portion of the City s net assets of $160,957,254 reflects its investment in capital assets (e.g., land, buildings, infrastructure, machinery and equipment, etc.), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The second largest portion of the City s net assets of $13,976,053 represent resources that are subject to external restrictions on how they may be used. The remaining portion of the City s net assets is unrestricted and may be used to meet the City s ongoing obligations to citizens and creditors. At June 30, 2012, unrestricted net assets were $28,000,739. See accompanying independent auditors' report 6

27 Management s Discussion and Analysis June 30, 2012 Summary of Activities Year ended June 30, 2012 and 2011 Governmental Business-type activities activities Total Revenues: Program revenues: Charges for services $ 10,800,440 16,426,649 35,047,417 31,721,769 45,847,857 48,148,418 Operating grants and contributions 11,362,119 7,811,223 45, ,018 11,407,943 8,287,241 Capital grants and contributions 1,724,680 6,302,102 1,724,680 6,302,102 General revenues 52,194,557 58,322, , ,188 52,549,675 58,549,033 Total revenues 76,081,796 88,862,819 35,448,359 32,423, ,530, ,286,794 Expenses: General government 1,441,044 2,493,419 1,441,044 2,493,419 Public safety 43,467,450 42,807,574 43,467,450 42,807,574 Public works 8,106,881 8,445,460 8,106,881 8,445,460 Housing, health, and community development 8,161,367 12,464,262 8,161,367 12,464,262 Culture and recreation 9,482,993 9,541,415 9,482,993 9,541,415 Interest on long-term debt 2,427,493 3,447,568 2,427,493 3,447,568 Water 17,571,245 16,841,738 17,571,245 16,841,738 Sewer and storm drain 2,053,522 1,665,141 2,053,522 1,665,141 Sanitation 8,581,865 8,640,626 8,581,865 8,640,626 Golf course/clubhouse 1,541,488 1,622,215 1,541,488 1,622,215 Total expenses 73,087,228 79,199,698 29,748,120 28,769, ,835, ,969,418 Increase (decrease) in net assets before other gains and transfe 2,994,568 9,663,121 5,700,239 3,654,255 8,694,807 13,317,376 Extraordinary gain 17,127,661 17,127,661 Transfers in (out) 536,462 1,123,716 (536,462) (1,123,716) Increase (decrease) in net assets 20,658,691 10,786,837 5,163,777 2,530,539 25,822,468 13,317,376 Net assets, July 1, as restated 121,708, ,921,800 55,402,941 52,872, ,111, ,794,202 Net assets, June 30 $ 142,367, ,708,637 60,566,718 55,402, ,934, ,111,578 Governmental Activities. Governmental activities increased the City s net assets by $20,658,691 primarily due to the elimination of the Alhambra Redevelopment Agency which resulted in an extraordinary gain of $17,127,661. Governmental Revenues. Governmental revenues decreased by $12,781,023 or 14.4%. There are several reasons which account for this decrease, however the main factors are a decrease in general revenues of $6,128,288 due to decrease in property tax increment of $5,485,692 from the elimination of the Alhambra Redevelopment Agency and a decrease in charges for services of $5,626,209 due to a one-time property sale of $4.5 million that occurred in the fiscal year Governmental Expenses. Governmental expenses decreased by $6,112,470 or 7.7%. There are several reasons which account for this decrease, however main factors are a decrease in housing, health, and community development expenses of $4,302,895 and a decrease in interest on long-term debt of $1,020,075 primarily due to the elimination of the Alhambra Redevelopment Agency. See accompanying independent auditors' report 7

28 Management s Discussion and Analysis June 30, 2012 Expenses and Program Revenues Governmental Activities For the year ending June 30, 2012 $50,000,000 $45,000,000 $40,000,000 $35,000,000 Expenses Program revenues $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 General government Public safety Public works Housing, health, and community development Culture and recreation Interest on longterm debt Revenues by Source Governmental Activities Other 22% Charges for services 12% Investment earnings 1% Other taxes 8% Operating grants and contributions 12% Capital grants and contributions 2% Motor vehicle in lieu 8% Sales taxes 14% Property taxes 22% See accompanying independent auditors' report 8

29 Management s Discussion and Analysis June 30, 2012 Business-type Activities. Business-type activities increased the City s net assets by $5,163,777 indicating that business-type activities had revenues sufficient to cover operations. A key element of this increase is as follows: Water Fund net assets increased $2,831,100 due to revenues exceeding expenses providing for the accumulation of resources for future capital projects and expenses. Sewer and Storm Drain Fund net assets increased $2,758,188 due to revenues exceeding expenses providing for the accumulation of resources for future capital projects and expenses. Exp enses and P rog ram R evenues B usiness-type Activities for the year ended June 30, 2012 $25,000,000 $20,000,000 $15,000,000 Expenses Program revenues $10,000,000 $5,000,000 $0 W ater Sew er and storm drain S an itation G olf course/clubhouse Revenues by Source Business-type Activities $40,000,000 $35,000,000 35,047,417 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Charges for services 45, , ,178 Operating grants and contributions Capital grants and contributions Investment earnings Other See accompanying independent auditors' report 9

30 Management s Discussion and Analysis June 30, 2012 Financial Analysis of the City s Major Funds Governmental Funds. The focus of the City s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information may be useful in assessing the City s financing requirements. Below is an analysis of the City s major governmental funds for the year ended June 30, Amount Percentage June 30, June 30, Increase Increase , as restated (Decrease) (Decrease) Total Fund Balance: Fund: General Fund $ 9,245,955 9,758,196 (512,241) -5% Community Development Block Grant 1,065,458 1,003,391 62,067 6% Home and Rental Rehabilitation Grants 1,176,509 1,453,952 (277,443) -19% Housing Asset Fund 5,019,279 5,019,279 - Total Fund Balance $ 16,507,201 12,215,539 4,291,662-18% The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the fund balance was $9,245,955 which decreased by $512,241 during the current fiscal year. There are multiple reasons for the decrease, however a significant reason is a loss of over $1 million in lease revenues from properties transferred back to the Redevelopment Agency. This loss in revenues was partially offset by property maintenance costs for the associated properties resulting in a net loss of lease revenues of $766,550. The Community Development Block Grant Fund is utilizes federal grant monies received from the U.S. Department of Housing and Urban Development along with miscellaneous program income to develop certain project areas in accordance with HUD regulations. At the end of the current fiscal year, the fund balance was $1,065,458 which increased by $62,067 during the current fiscal year. The net increase in fund balance is due to timing differences in the recording of grant revenues and expenditures. The Home and Rental Rehabilitation Grant (HOME) Fund utilizes federal grant monies received from the U.S. Department of Housing and Urban Development along with miscellaneous program income to fund affordable housing projects. At the end of the current fiscal year, the fund balance was $1,176,509 which decreased by $277,443 during the current fiscal year. The net decrease in fund balance is primarily due to timing differences in the recording of grant revenues and expenditures. The Housing Asset Fund is used to account for funds used for low and moderate income housing activities in accordance with applicable housing-related regulations. At the end of the current fiscal year, the fund balance was $5,019,279. This is a new fund for the current fiscal year created as a result of the dissolution of the Alhambra Redevelopment Agency. Certain assets of the former Low and Moderate Income Housing Fund were transferred to the Housing Asset Fund. See accompanying independent auditors' report 10

31 Management s Discussion and Analysis June 30, 2012 Proprietary Funds. The City s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Amount Percentage June 30, June 30, Increase Increase (Decrease) (Decrease) Net Assets: Water Fund $ 40,794,874 37,963,774 2,831, % Sewer Fund 16,860,335 14,102,147 2,758, % Sanitation Fund (50,242) 159,179 (209,421) % Golf course/clubhouse Fund 4,733,635 4,543, , % Total Net Assets $ 62,338,602 56,769,044 5,569, % Unrestricted Net Assets: Water Fund $ 16,639,719 13,719,148 2,920, % Sewer Fund 10,796,040 8,432,072 2,363, % Sanitation Fund (229,522) (60,446) (169,076) 279.7% Golf course/clubhouse Fund (1,731,074) (2,047,992) 316, % Total Unrestricted Net Assets $ 25,475,163 20,042,782 5,432, % Enterprise Funds. Unrestricted net assets of the enterprise funds totaled $25,454,615 and total growth in net assets for these funds was $5,569,558. Other factors concerning the finances of these funds have already been addressed in the discussion of the City s business-type activities. The Water Fund s unrestricted net assets were $16,639,719, while total net assets were $40,794,874 at the end of the current year. The net assets of the Water Fund increased by $2,831,100 during the current fiscal year attributable primarily due to water rate increases to accumulate funds for future capital projects. The Sewer and Storm Drain Fund s unrestricted net assets were $10,796,040, while total net assets were $16,860,335 at the end of the fiscal year. The net assets of the Sewer and Storm Drain Fund increased by $2,758,188 during the current fiscal year primarily due to sewer rate increases to accumulate funds for future capital projects. The Sanitation Fund s unrestricted net deficit was $229,522 at the end of the current fiscal year, while total net deficit was $50,242. The net assets of the Sanitation Fund decreased by $209,421 during the current fiscal year. This decrease was due to the planned use of available net assets during the current fiscal year. The Golf course/clubhouse fund s unrestricted net deficit was $1,731,074, while total net assets were $4,733,635 at the end of the current fiscal year. The net assets of the Golf course/clubhouse fund increased $189,691 during the current fiscal year. This increase is a significant improvement from prior years primarily attributed to decreased golf course operating costs. See accompanying independent auditors' report 11

32 Management s Discussion and Analysis June 30, 2012 General Fund Budgetary Highlights In the General Fund, differences between the original budget and the final amended budget resulted in a net increase in appropriation of $804,892 (net of prior year carryover of available and encumbered balances) and can be briefly summarized as follows: $85,000 in increases allocated to various general government departments $17,664 in increases allocated to the library department $80,200 in increases allocated to the community services department $622,029 in increases allocated to public safety The increase in various general government departments included $95,000 for a rose parade float budgeted from available committed fund balance and a decrease of $10,000 for a transfer to community services department for capital improvements. The increase in library department of $17,664 was funded from donations made to the library. The increase in community services included $45,000 for additional staffing required at pool facility funded by additional user fees, $10,000 transfer from general government departments, and $25,000 in grant funded facility repairs. The increase of $622,029 in public safety included $610,062 for training and equipment funded from homeland security and urban area grants made available to the fire department and $12,700 for training center maintenance funded by additional user fees. Also in the General Fund, differences between the final amended budget and the actual amounts for revenues and expenditures resulted in a net positive variance of $282,828. General fund revenues accounted for a negative variance of $1,418,427 resulting primarily from lease revenues from properties transferred back to the Redevelopment Agency which accounted for the negative variance of over $1 million in investment income. Other negative variances were from many sources including homeland security grants of $363,377 and sales taxes of $282,524 which were also offset by other positive variances from budget to actual comparisons. The General Fund expenditures were under budget by $1,701,255 primarily due to expenditures for non-capital public safety under budget by $399,323 due to savings resulting from unfilled positions offset partially by overtime costs, community services departments under budget by $450,576, public safety capital expenditures under budget by $580,572 from unexpended grant revenues, and many other departmental expenditures under budget due to cost savings. Capital Asset and Debt Administration Capital Assets. The City s investment in capital assets for its governmental and business-type activities amounts to $190,832,632 (net of accumulated depreciation of $92,552,360) as of June 30, This investment in capital assets includes land, buildings, improvements other than building, infrastructure (roads, sidewalks, land held under easement, streetlights, etc.), and machinery and equipment. See accompanying independent auditors' report 12