San Luis Obispo, California. Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014

Transcription

1 San Luis Obispo, California Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014

2 COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2014 JAN HOWELL MARX, MAYOR CARLYN CHRISTIANSON, VICE MAYOR JOHN ASHBAUGH, COUNCIL MEMBER DAN CARPENTER, COUNCIL MEMBER KATHY SMITH, COUNCIL MEMBER KATIE LICHTIG, CITY MANAGER Prepared by the Department of Finance & Information Technology City of San Luis Obispo, California

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4 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 Table of Contents Page Introductory Section Transmittal Memorandum Report Purpose and Organization Profile of the City of San Luis Obispo Factors Affecting Financial Condition Financial Condition Overview Relevant Financial Policies Major Initiatives Award for Excellence in Financial Reporting Acknowledgments Directory of Officials and Advisory Bodies City Council Advisory Bodies Appointed Officials and Department Heads Mission Statement Organizational Values Organization of the City of San Luis Obispo GFOA Certificate of Achievement for Excellence in Financial Reporting vii-xviii vii viii x xii xiv xvi xviii xviii xix xix xix xix xx xxi-xxii xxiii xxiv i

5 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 Table of Contents Page 2 Page Financial Section Independent Auditors Report 1-3 Management s Discussion and Analysis 4-15 Financial Highlights 4 Overview of the Financial Statements 4 Government-wide Overall Financial Analysis 6 Financial Analysis of the Governmental Funds 10 General Fund Budgetary Highlights 12 Capital Assets and Debt Administration 13 Economic Factors and Next Year s Budgets and Rates 15 Requests for Additional Information 15 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position 17 Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds 20 Reconciliation of the Balance Sheet of Governmental Funds to the Government-wide Statement of Net Position 21 Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Government-wide Statement of Activities 26 Statement of Fund Net Position Business-Type Activities Enterprise Funds Statement of Revenues, Expenses and Changes in Fund Net Position Business-Type Activities Enterprise Funds 29 ii

6 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 Table of Contents Page 3 Page Statement of Cash Flows Business-Type Activities Enterprise Funds Statement of Net Position - Fiduciary Funds - Agency Funds 32 Notes to the Basic Financial Statements Required Supplementary Information Section Budgetary Comparison Schedule General Fund Public Employees Retirement Systems Schedule of Funding Progress 84 Other Post Employment Benefits Plan Schedule of Funding Progress 85 Notes to Required Supplementary Information Other Supplementary Information and Combining and Individual Fund Statements and Schedules Measure Y Funding Schedule Major Governmental Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Debt Service Fund 94 Nonmajor Governmental Funds Combing Balance Sheet Nonmajor Governmental Funds Combining Statement of Revenues Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual: Downtown Business Improvement District Fund 105 Transportation Development Act (TDA) Fund 106 Tourism Business Improvement District Fund 107 Gas Tax Fund 108 Community Development Block Grant (CDBG) Fund 109 Law Enforcement Grants Fund 110 Public Art Contributions Fund 111 iii

7 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 Table of Contents Page 4 Agency Funds 112 Combining Statement of Changes in Assets and Liabilities Agency Funds Statistical Section Statistical Section Overview (Unaudited) 119 Financial Trends: Net Positions by Component Last Ten Fiscal Years 120 Changes in Net Position Last Ten Fiscal Years Governmental Activities Tax and Franchise Revenues by Source Last Ten Fiscal Years 124 Fund Balances of Governmental Funds Last Ten Fiscal Years 125 Revenues, Expenditures and Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years General Fund Operating Expenditure Trends by Type Last Ten Fiscal Years 128 Revenue Capacity: Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years 129 Property Tax Rates Last Ten Fiscal Years 130 Principal Property Taxpayers Current Year and Nine Years Ago 131 Secured Property Tax Roll Levies and Collections Last Ten Fiscal Years 132 Schedule of Taxable Sales and Permits by Category Last Ten Calendar Years 133 Historical Sales and Use Tax Rates 134 Schedule of Business Tax Certificates Issued - Fiscal years Ended June 30, 2014 and Page iv

8 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 Table of Contents Page 5 Page Debt Capacity: Per Capital Outstanding Debt by Type Last Ten Fiscal Years 136 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capital - Last Ten Fiscal Years 137 Direct and Overlapping Long-Term Debt Fiscal Year Ended June 30, Computation of Legal Debt Margins Last Ten Fiscal Years 139 Revenue Bond Coverage: Water Fund Last Ten Fiscal Years 140 Parking Fund Last Ten Fiscal Years 141 Demographic and Economic Information: Demographic and Economic Statistics Last Ten Fiscal Years 142 Principal Employers Current Year and Nine Years Ago 143 Regular Authorized Positions Last Ten Fiscal Years 144 Operating Information: Operating Indicators and Capital Asset Statistics by Function Last Ten Fiscal Years Water System Statistical Data 150 Water and Sewer Rates Last Ten Fiscal Years 151 Water System Ten Largest Users Fiscal Year Ended June 30, v

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10 INTRODUCTORY SECTION

11 MEORANDUM December 16, 2014 TO: FROM: SUBJECT: The Honorable Mayor and Members of the City Council and Citizens of the City of San Luis Obispo Katie Lichtig, City Manager Wayne Padilla, Director of Finance & I.T. Vilma Warner, Finance Operations Manager TRANSMITTAL MEMORANDUM FOR COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR REPORT PURPOSE AND ORGANIZATION We are pleased to submit the City of San Luis Obispo s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, Section 810 of the City s Charter requires that an independent certified public accountant conduct an annual audit at the end of each fiscal year and issue a financial report to the City Council. This CAFR is being issued in compliance with this requirement. The CAFR consists of management s representations concerning the finances of the City of San Luis Obispo (City). Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. We believe that the data presented in this report is accurate in all material respects and all statements and disclosures needed for the reader to obtain a thorough understanding of the City s financial activities have been included. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government s assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the City s financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the City s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. Audited Financial Statements. The City s financial statements have been audited by Glenn Burdette, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2014 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the overall accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified vii

12 TRANSMITTAL MEMORANDUM opinion that the City s financial statements for the fiscal year ended June 30, 2014 are fairly presented in conformity with GAAP. The independent auditors report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City s MD&A can be found immediately following the report of the independent auditors. Single Audit for Federal Grant Programs. 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. This separately prepared report is available from the Department of Finance & Information Technology upon request. Organization of Report This report is presented in three sections: introductory, financial and statistical. The Introductory section includes this transmittal memorandum and other information to familiarize the reader with the City, including a directory of officials and advisory bodies, the City's mission statement and organizational values, and the organization chart. The Financial section consists of five parts: the independent auditors report; Management s Discussion and Analysis; the basic financial statements including the Government-Wide Financial Statements, Fund Financial Statements, and Notes to the Financial Statements; Required Supplementary Information; and additional supplementary statements and schedules including the local half-percent sales tax (Measure Y), non-major governmental funds and agency funds. The Statistical section includes selected unaudited financial and demographic information generally presented on a multi-year basis. This information includes Financial Trends, Revenue Capacity, Debt Capacity, Demographics and Economic Information, and Operating Information. PROFILE OF THE CITY OF SAN LUIS OBISPO With a population of approximately 45,500, the City is located eight miles from the Pacific Ocean and is midway between San Francisco and Los Angeles at the junction of Highway 101 and scenic Highway 1. The City serves as the commercial, governmental, and cultural hub of California s Central Coast. San Luis Obispo is the County seat of San Luis Obispo County and a number of federal and State regional offices and facilities are located here, along with California Polytechnic State University and Cuesta College. One of California s oldest communities, the City began with the founding of Mission San Luis Obispo de Tolosa in 1772 by Father Junipero Serra as the fifth mission in the California chain of 21 missions. It was first incorporated in 1856 as a General Law City and became a Charter City in As a Charter City, San Luis Obispo has more local viii

13 TRANSMITTAL MEMORANDUM authority than cities that incorporate under the general laws of the State of California. The Charter is the City s governing document and any changes must be approved by the voters. The City s Charter has been amended several times since its adoption, most recently in August Form of Government As set forth in the City Charter, the City operates under the Council-Mayor-City Manager form of government. The Council has the authority to make and enforce all laws and regulations with respect to municipal affairs, subject only to the limitations of the City Charter and the State Constitution. There are four Council members, who are elected atlarge and serve overlapping, four-year terms. The Mayor is also elected at-large for a two-year term, and serves as an equal member of the Council. The Council appoints the City Manager and City Attorney. All other department heads are appointed by the City Manager. City Services The City provides a wide range of municipal services, including police and fire protection, water and sewer utilities, street maintenance, public transportation, parking, parks and recreation, planning, building and safety, and other general government services. Several municipal services are provided through other governmental agencies or private utility companies, including the following: Service Courts, Health and Social Services Elementary and Secondary Schools Community College Solid Waste Collection and Disposal Gas, Electric and Telephone Agency County of San Luis Obispo San Luis Coastal Unified School District San Luis Obispo County Community College District San Luis Garbage Company Private Utility Companies Financial data for all funds through which services are provided by the City have been included in this report. As required by GAAP, these financial statements present the City (the primary government) and its component units (entities for which the government is considered to be financially accountable). Blended component units (although legally separate entities) are in substance part of the government's operations, and so data from these units are combined with data of the primary government. The City has one component unit, the San Luis Obispo Capital Improvement Board, which provides financing for the construction and acquisition of City facilities. The Board is comprised solely of members of the City Council. Activities of the Board are accounted for in the applicable City governmental or enterprise funds. Budgetary Policy and Control Budgets are legally adopted annually by the Council by resolution, and are prepared for each fund in accordance with its basis of accounting. As provided under City Charter, the City Manager is responsible for preparing the budget and for its implementation after adoption. ix

14 TRANSMITTAL MEMORANDUM Since the City uses a two-year budget, operating appropriations not expended during the first year may be carried forward into the second year for specific purposes with the approval of the City Manager. (When applicable, these amounts are shown as assigned for subsequent year expenditures in the financial statements.) At the end of the final year of the two-year plan, operating appropriations lapse unless they are encumbered by contract or purchase order. Multi-year budgets are adopted for capital projects as necessary. The Council has the legal authority to amend the budget at any time during the fiscal year. The City Manager has the authority to make administrative adjustments to the budget as long as those changes will not have a significant policy impact nor affect budgeted year-end fund balances. The City's budgetary policies are more fully described in Note 1 of the financial statements. Expenditure and budgeting detail is maintained by the City for each fund and department by program area at the line item level. Budgetary control is exercised through an on-line computerized system, which interfaces with the City's general ledger. The system maintains an ongoing record of budget balances throughout the year based on actual expenditures and unfilled purchase orders. Open encumbrances at year-end are reported as assignments of fund balance. It is the City's policy to maintain an unassigned fund balance in the General Fund of at least 20% of operating expenditures. As noted above, this policy objective has been achieved for The City maintains a similar policy for working capital balances in the water, sewer and parking enterprise funds, and it has been met for these funds in as well. FACTORS AFFECTING FINANCIAL CONDITION The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economic Environment Historically the City has enjoyed a stable economy, largely insulated from economic downturns in other parts of the State or the nation due to major State and federal employers such as the California Polytechnic State University (Cal Poly), California Men s Colony, California Department of Transportation (Cal Trans) District 5 offices, Regional Water Control Board and Camp San Luis. However, these entities have also experienced budgetary pressures and reductions in the past few years that have affected the local economy. Employment. Employment in the San Luis Obispo County region has historically been stabilized by a large government presence and diversity. As noted above, the State has a major university, correctional facility and other regional offices located in the community. The County government and school districts are also major employers. Several of these entities have experienced job losses in the last few years due to reduction in State funding. Other major employers include a real estate investment firm, a regional bank, major hospital facilities, several software companies and Pacific Gas and Electric. x

15 TRANSMITTAL MEMORANDUM Unemployment rose sharply in the San Luis Obispo area in due to the severe economic downturn commonly referred to as the Great Recession. The unemployment rate has gradually declined as the economy has begun to recover and currently stands at 5.4% countywide which is consistent with Beacon Economics Central Coast Forecast. Key Revenue Sources. As the commercial, governmental, and cultural hub of San Luis Obispo County, the City is blessed with a diverse array of strong revenue sources. All of the City s top three revenue sources, Sales Tax, Property Tax, and Transient Occupancy Tax (TOT), substantially exceed the per capita average for the County. Long-Term Financial Planning. The City engages in a number of activities focused on long-term financial planning, including: Five Year Fiscal Forecast. Before the two-year budget process begins, the Council reviews a Five Year General Fund Fiscal Forecast to help set the stage for long-term decision making. The purpose of the forecast is to identify the General Fund s ability over the next five years on an order of magnitude basis to continue current services, maintain existing assets and fund new initiatives or acquire new capital assets. The forecast was first completed in early December 2012 and has been updated numerous times with the last occurring in June 2014 before the City Council considered the Supplemental Budget for adoption. It is available on the City s web site at An update to that forecast has been prepared which reflects the unaudited financial results which will be presented to the City Council on December 16, Further updates will be prepared and presented to the City Council in February and June Major City Goals. The City Council adopts Major City Goals as an integral part of the Financial Plan. These goals address the highest priority issues and community-wide concerns and needs. The Financial Plan is the City s main tool for programming implementation of these goals, plans and policies by allocating the resources necessary to do so. The following is a brief summary of the four major City goals adopted by the Council as part of the Financial Plan. Detailed work programs were prepared for each of these and their status is updated three times each year through presentation to the Council. These Council reports are available on the city s website. Implement Comprehensive Strategies to Address Homelessness. In partnership with other entities. Encourage existing, improved, and expanded services (including advocating to the County and other organizations for delivery of case management, drug, alcohol, and detoxification services, and mental health services), support the establishment of a new homeless services center, and pursue good-neighbor, safety, and quality of life programs (including restrooms), using technology as appropriate. Sustain essential services, infrastructure, and fiscal health. Preserve public health and safety and provide essential services in line with residents priorities and sustain the City s short and long term fiscal health by planning future revenues (including renewal of Measure Y or an alternative measure), while implementing contingency planning, efficiency measures, and cost containment strategies including implementation of the Compensation Philosophy and monitoring further pension and benefit issues. xi

16 TRANSMITTAL MEMORANDUM Expand bicycle and pedestrian paths. Improve connectivity and safety, including continued progress on Rail Road Bicycle and Pedestrian Safety Trail and Bob Jones Trail, and pursuit of other options contained in the Bicycle Transportation Plan. Continue and Enhance Neighborhood Wellness Initiatives. Continue to support proactive code enforcement, pursue a residential rental inspection program, improve street cleanliness, increase public safety enforcement, and support neighborhood led initiatives. Economic Development. Implement the adopted Economic Development Strategic Plan (EDSP) which includes an emphasis on head-of-household jobs, collaboration, and measureable outcomes. FINANCIAL CONDITION OVERVIEW Financial results for the year resulted in better than expected results when compared to the budget estimates in virtually all areas of the City s operations. For the General Fund, realized revenues were nearly $1.4 million or nearly 2.4% more than the budget estimate while expenditure and other uses were $4.3 million or almost 8% less than expected in the budget forecast. These results helped the General Fund end the year with an unassigned fund balance of $11.8 million of which $10.4 million represents the minimum required reserve under the City s budget policies. For the Future: Continue to Focus on Sustainability Through the adoption of the Financial Plan, the City continues to move along the path of financial sustainability by strategically expanding existing city programs, reinvesting in critical infrastructure and proposes a few staffing adjustments to address the most pressing community priorities. The Capital Improvement Plan includes new and significant investment and reinvestment in critical infrastructure. Revenue Base Growth. After experiencing the deepest recession since the Great Depression, the local economy is progressing and major revenues are continuing the growth that was first seen in Sales tax (including Measure Y), property tax and transient occupancy tax (TOT) account for 61% of all funding sources in the General Fund. All of these revenues are showing continuing growth over the past two years which is expected into the future. TOT revenues now exceed their pre-recession peak in Another revenue source that is seeing significant growth is development review fees. Fueled by strong private development occurring within the community, the fee levels are also approaching record levels in terms of amounts received and the level of annual growth. This growth trend is also expected to continue at varying levels over the next 5 years. It is important to note that Measure G was passed by voters in November 2014 which extends the local sales revenue stream for an additional 8 years. Containment of Operating Costs. Compared to the fiscal year, operating costs declined by $3.8 million. This is due in part to prior labor negotiations which lead to concessions by all employee groups resulting in ongoing savings in the General Fund. The City also implemented 2 nd and 3 rd Tier retirement benefit programs which now have a combined participation level of almost 20% of the current employees. These actions have been instrumental in helping the City contain its current costs and long-term liabilities related to retirement benefit programs. The City Council also approved two lump sum prepayments against the safety side fund retirement liability in order to begin making significant reductions in the amount owed. xii

17 TRANSMITTAL MEMORANDUM The first was paid in May 2014 in the amount of $935,000 and the second was approved as part of the budget in the amount of $300,000. Infrastructure and Facilities Maintenance. The estimated cost of adequately maintaining, repairing or replacing existing General Fund facilities, infrastructure and equipment exceeds $10 million annually. This excludes any enhancements or betterments. To place this in context, General Fund contributions to the Capital Improvement Program (CIP) for the 12 year period ending in averaged about $3.8 million annually. The budget for the General Fund s contributions to the CIP was reduced to $1.7 million for It then increased to $3.7 million the following year and in , the General Fund contributed nearly $3.5 million. In , that amount grows to nearly $6.5 million with the addition of $2.0 million from one-time monies taken from the General Fund reserve amount that exceeds the minimum 20% level. In , the General Fund contribution will be nearly $4.7 million with an additional $18.0 million coming from grant sources and $7.5 million will come from tax-exempt debt proceeds. These figures do not include the General Fund support of the Capital Improvement Program that occurs in the form of annual debt service payments that approximate $3.0 million per year. The City Council has indicated that funding an adequate CIP to maintain existing facilities will continue to be a priority. Ongoing Commitment to Measure Y Priorities The City remains committed to addressing the priorities identified by the community as established through the budget process, such as public safety, senior services, code enforcement, neighborhood street paving, open space preservation, traffic congestion relief and flood protection. During , nearly $12 million in Measure Y revenues were available for use, including unspent, assigned, and encumbered amounts from prior years. The following summarizes how Measure Y funds were used during As reflected below, total Measure Y expenditures were $5.3 million; another $1.7 million was placed into a contingency reserve in the event that Measure Y was not extended in November 2014; $4.3 million remains assigned or encumbered for on-going capital improvements and projects; and approximately $577,000 remains available for future expenditures. A more detailed schedule of Measure Y sources and uses is provided in the Financial Section of this report. xiii

18 TRANSMITTAL MEMORANDUM Operating Programs CIP Total Infrastructure Maintenance $ - $ 2,196,630 $ 2,196,630 Traffic Congestion Relief 92,520 80, ,510 Preservation of Essential Services Public Safety 1,248, ,716 1,487,721 Maintenance Services 751, ,754 1,087,094 Neighborhood Code Enforcement 301, ,830 Total Preservation of Essential Services 2,301, ,470 2,876,645 Open Space Preservation 50,967 8,247 59,214 Total $ 2,444,662 $ 2,861,337 $ 5,305,999 Measure Y Revenues & Uses Summary Revenues: Prior year revenue $ 36,238,100 Revenue for : 6,774,365 Total Revenues 43,012,465 Uses: Prior year uses (31,019,237) Current Year Uses (5,305,999) Total Uses (36,325,236) Measure Y funding available for future year expenditures 6,687,229 Assigned, encumbered or designated for carryover for future year expenditures (6,064,265) Net available for future year appropriations $ 622,964 RELEVANT FINANCIAL POLICIES The City of San Luis Obispo has adopted a comprehensive set of financial policies to provide guidance for all fiscal activities and resource allocation decisions. Although the policies cover virtually every aspect of financial management, several of these policies are particularly relevant to an understanding of the City s financial performance in Debt Administration Policies The City s Capital Financing and Debt Management policies contain general guidelines for refinancing of outstanding debt. These guidelines call for periodic review of all outstanding debt to determine refinancing opportunities, particularly to create economic benefit such as lower debt service payment or reduction of principal. Information on the City s outstanding debt issues and other long-term liabilities is provided in Note 7 in the notes to the financial statements. Recently, Standard & Poor s and Fitch credit rating services assigned an issuer credit rating of AA to the 2014 Lease Revenue Bonds issued by the City in October Prior to this, in May 2014 Fitch Ratings affirmed its implied general obligation bond rating of AA+ as well as the AA rating which had been assigned to the 2006, 2009 and 2012 lease revenue bonds. xiv

19 TRANSMITTAL MEMORANDUM Budgetary Policies The City of San Luis Obispo has a policy that requires the adoption of a balanced budget over the two-year period of the Financial Plan. This means that operating revenues must fully cover operating expenditures, including debt service. Additionally, ending fund balance (or working capital in the enterprise funds) must meet minimum policy levels. Under this policy it is allowable for total expenditures to exceed revenues in a given year but only when fund balance is used to pay for capital improvement plan projects or other one-time, nonrecurring expenditures. Fund Balance and Reserve Policies The City s policies recognize the importance of long-range planning in managing the City s fiscal affairs in order to provide for stable operations, promote more orderly spending patterns, and assure the City s long-term fiscal health. The reserves contained in the General Fund and Enterprise funds play a pivotal role in this strategy. The reserve policies call for a minimum fund balance of at least 20% of operating expenditures in the General Fund and a working capital level of 20% of operating expenses in the water, sewer, and parking enterprise funds. The policies also require the Fleet Management and Information Technology Replacement Funds to provide for the timely replacement of vehicles and related equipment. In the case of the Facility Maintenance Fund, adequate resources to pay for the costs of approved maintenance expenditures are required. Pension and Other Post Employment Benefits Pension Obligations. The City contributes to the California Public Employees Retirement System (CalPERS), an agent multiple-employer public employee defined benefit pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provision and all other requirements are established by State statute and City ordinance. The amount of the City s required annual contribution is determined actuarially and is reported to the City via the Annual Valuation Reports provided by CalPERS for each retirement plan. It is the policy of the City to fully fund the annual contribution to ensure that the plan will be able to fully meet its obligation to retired employees on a timely basis. As part of its cost reduction strategy, the City has implemented second tier and the state mandated third tier benefit programs for new hires. All employees pay at least the full amount of the member (employee) share of the annual retirement contribution. Members of the Police Officers Association contribute 3% of pay toward the cost of the City s share of the annual required contribution. These payments were agreed to as part of the last round of labor negotiations. Other Post Employment Benefits (OPEB). The City s primary OPEB cost obligation is for retiree health benefits under its election to participate in the CalPERS Health Benefit Program under the unequal contribution option. When the City joined the CalPERS health plan in 1993, it immediately experienced an increase in the plan choices available along with a significant reduction in rates. And due to CalPERS purchasing power, the City has continued to experience competitive health care rates since then. However, as a condition of joining the CalPERS health program, the City agreed to contribute the minimum amount required by law per month towards retiree health care coverage. xv

20 TRANSMITTAL MEMORANDUM Additionally, the City has established certain post-retirement health care benefits available to executive management employees appointed prior to August For the 6 former employees, one-half of the retiree health insurance premiums are paid by the City if they elect to remain members of the City's group health plan. This provision ceases upon the death of the retired employee or upon the retired employee reaching age 65. These OPEB benefits were financed on a pay-as-you-go basis in the past. As directed by Council in May 2008, the City began fully pre-funding the OPEB obligation via an irrevocable trust in Additional information on the City s retirement and post-employment benefits can be found in Note 6 in the notes to the financial statements. MAJOR INITIATIVES The City continued its efforts on a number of significant initiatives in which will have a beneficial effect on fiscal health and quality of life. Economic Development Strategic Plan. The City s 2012 Economic Development Strategic Plan (EDSP) provides a prioritized list of strategic actions aimed at overcoming barriers to job creation and nurturing the conditions, relationships, and resources that enable and encourage the private sector to create head of household jobs on a consistent basis - while continuing to support the broader economy of the City. To create and implement these efforts, the EDSP identified the City s fee program and its lack of infrastructure in key areas as barriers to overcome, and is in the process of implementing strategies to improve the economic environment for job creation in the City. The EDSP builds on the San Luis Obispo County Economic Strategy, which identified five industry clusters with the greatest potential to drive local and regional economic prosperity, and job creators. The EDSP focuses on partnerships and collaborative efforts with community partners including the Economic Vitality Corporation, the Chamber of Commerce, the Small Business Development Center, Cal Poly and Cuesta College. In , the City implemented an important component of the strategic plan by holding a series of study sessions with the City Council regarding alternatives available for financing new infrastructure projects in the City. The project resulted in several recommendations that will be implemented in coming years, and provided a primer to be used as a resource for decision makers when considering future decisions about infrastructure financing. There are two major projects on the horizon that will set the stage for important investments in City infrastructure in the future. These include the update to the City s impact fee programs following the adoption of the Land Use and Circulation Element update, and the second is the creation of a method to prioritize and enable City investment in infrastructure projects that have a public benefit but might not otherwise happen without City action. Chevron Development Agreement. The City adopted an update to the Airport Area Specific Plan and an Environmental Impact Report (EIR) for the Chevron project in September The approval of the EIR and specific plan update sets the stage for the Chevron remediation project to occur. The project is expected to move forward under County jurisdiction and take up to three years to complete. In the interim, the City is working with Chevron on the proposed subdivision design, infrastructure phasing, public facilities, and open space preservation components of the development project. This work includes planning for the expansion of Tank Farm Road to four lanes, including a major new intersection controlled by a round-a-bout at Tank Farm and Santa Fe, along with realignment of the Tank Farm and Santa Fe intersection. In total, Chevron would be responsible for the installation of more than 50% of the public facilities identified in the Airport Area Specific Plan over a 25-year period. The installation of infrastructure development phase of the project would be governed by a development agreement that would provide for the phasing xvi

21 TRANSMITTAL MEMORANDUM of infrastructure installation and potential reimbursement to Chevron for costs beyond their fair share from the Airport Area Specific Plan fee program (which consists of fees paid when other Airport Area properties are developed). Preservation of Essential Services and Fiscal Health One of the major goals of the City that continued into was to adopt a budget that sustains the City s short and long-term fiscal health, preserves public health and safety in line with residents priorities and includes cost reduction strategies. Key elements of this goal include: Plan future revenues including renewal of Measure Y or an alternative measure, as well as contingency planning Continuing emphasis on effectiveness and efficiency of the City organization Identify and address long-term liabilities that are important to the City s fiscal sustainability Continue to monitor personnel costs and develop strategies to effectively manage the cost Continuing to closely review and monitor the City s fiscal condition Two initiatives in this area are particularly worth noting: Monitoring of the City s Fiscal Condition. A presentation was made to the City Council in April 2014 that addressed the trend in pension costs and the issues that relate to prepaying portions of the retirement program s unfunded liabilities. In , the City made a prepayment against its unfunded retirement liabilities in the amount of $935,000. A second prepayment in the amount of $300,000 was made in July Beginning in , the City is self-assessing one percent of salaries to be used to reduce CalPERS obligation in the future. In preparation for the changes in pension reporting that are required by Governmental Accounting Standards Board Pronouncement #68, the City prepared a draft Changes in Net Position document for an interim period during in order to determine what effect this reporting change would have on the City s solvency level. While the impact was material, the City maintained a significant margin of solvency after the addition of the unfunded liability estimates were included in that report. Staff continues to monitor both the cost and liability trends that relate to the retirement program and will be reporting to the City Council with a policy to begin prepaying unfunded liabilities. The City also completed a benchmark analysis that provided comparisons between the City s performance in a number of key financial and outcome measures and those of other comparable cities. Measure Y. In 2006 voters approved Measure Y, the Essential Services Measure, adding a half-percent local sales tax which sunsets on March 31, 2015 unless reauthorized by the voters at a general election prior to that time. The added revenue from Measure Y supports major improvements in key areas identified by the community. In 2013 the City convened a citizen s committee that reviewed the City s stewardship of Measure Y and recommended to the City Council that a ballot measure should be drafted and placed before the voters at the November 2014 election to determine if Measure Y should be extended and remain as a general tax. As part of this Major City Goal, staff was directed to develop a budget contingency plan designed to facilitate budget reductions starting with the Financial Plan in the event that Measure Y was not extended. The Council took further action in to create a General Fund contingency reserve in the amount of $1.7 million to cover the revenues that would be lost in should Measure Y not be extended. (It is important to note that Measure G, which represented the extension of Measure xvii

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23 DIRECTORY OF OFFICIALS AND ADVISORY BODIES CITY COUNCIL* Jan Howell Marx Carlyn Christianson John Ashbaugh Dan Carpenter Kathy Smith Mayor Vice-Mayor Council Member Council Member Council Member *Reflects office holders as of the date of this report. ADVISORY BODIES Architectural Review Commission Bicycle Committee Board of Appeals Downtown Association Cultural Heritage Committee Housing Authority Human Relations Commission Jack House Advisory Committee Joint Recreational Use Committee Mass Transportation Committee Parks and Recreation Commission Personnel Board Planning Commission Coordinating Committee Tree Committee APPOINTED OFFICIALS AND DEPARTMENT HEADS Appointed Officials Katie Lichtig City Manager J. Christine Dietrick City Attorney Department Heads Wayne Padilla Michael Codron Garret Olson Monica Irons Derek Johnson Stephen Gesell Daryl Grigsby Carrie Mattingly Shelly Stanwyck Director of Finance & Information Tech. Assistant City Manager Fire Chief Director of Human Resources Director of Community Development Police Chief Director of Public Works Director of Utilities Director of Parks & Recreation xix

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25 MISSION STATEMENT SAN LUIS OBISPO STYLE Quality with Vision WHO ARE WE? People Serving People A team that puts high value on each citizen it serves. Providers of programs that meet basic service needs of each citizen. Enhancers of the quality of life for the community as a whole. WHAT DO WE STAND FOR? Quality in all Endeavors Pride in Results Service to the community the best at all times. Respect for each other and for those we serve. Value ensuring delivery of service with value for cost. Community involvement the opportunity to participate in attaining the goals of the City. WHERE ARE WE GOING? Into the Future with a Design Planning and managing for levels of service consistent with the needs of the citizens. Offering skills development and organizational direction for employees in order to improve the delivery of municipal services. Developing sources of funding and establishing a sound financial management program which will result in fiscal independence and flexibility in the delivery of City services. Providing the residents of the City with accurate and timely information on issues which affect them, and encouraging the full utilization of City services. Promoting the City as a regional trade, recreational and tourist center and improving the quality of life for residents and visitor. xx

26 ORGANIZATIONAL VALUES We, as an organization, embrace opportunities to improve our services and the quality and effectiveness of our relationships with the community and our teams. The following values guide and inspire our efforts. Shared Vision, Mission and Goals We have a sense of common purpose and direction pursued with passion and translated into concrete actions. Service We are dedicated to the best use of resources to fulfill identified community goals and needs. Leadership and Support We recognize that the ability to lead can be found at all levels and that to create an environment to succeed requires leading by example. Communication We foster open and clear discussion that encourages the willingness to speak up and to listen, within a framework of respect and understanding. Team Players We encourage effective working relationships within and between departments and the public to address issues and achieve valuable results. Honesty, Respect and Trust We honor commitments, acknowledge legitimate differences of opinion and accept decisions reached with integrity. Initiative and Accountability We take personal responsibility to do what needs to be done and report the results in a straightforward manner. Innovation and Flexibility We are open to change and willing to try new ways to fulfill the organization s vision, mission, and goals more effectively. xxi

27 Employee Development and Recognition We encourage and support each employee to improve relevant job skills and celebrate personal and team accomplishments. Stewardship and Ethics We promote public trust by using City resources wisely, and through consistent fulfillment of these values. xxii

28 ORGANIZATION OF THE CITY OF SAN LUIS OBISPO CITIZENS MAYOR AND CITY COUNCIL ADVISORY BODIES CITY ATTORNEY CITY MANAGER Police Fire Public Works Utilities Community Development Patrol Fire, Medical & Haz Mat Engineering Water Long Range Planning Traffic Safety Emergency Response Transportation Sewer Development Review Investigations Hazard Prevention Creek & Flood Protection Utilities Resource Building & Safety Neighborhood Services Fire Inspections Maintenance Services: Conservation CDBG Administration Animal Regulation Disaster Planning Streets, Parks, Bldgs Whale Rock Reservoir Housing Parks & Recreation Human Resources Finance & Information Tech Administration Recreation Programs Recruitment Budget Natural Resources Ranger Services Labor Relations Accounting & Revenue Economic Development Park Planning Fair Employment Information Technology Cultural Activities Golf Course Risk Management GIS Management City Clerk Services Public Art Human Relations Support Services General Administration Appointed by the City Council Dept Appointed by the City Manager xxiii

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31 FINANCIAL SECTION

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33 The Honorable City Council of the City of City of San Luis Obispo, California Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of San Luis Obispo, California, as of June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended, in accordance with accounting principles generally accepted in the United States of America. Other Matters Requirement Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 4 through 15, and the budgetary comparison information, PERS schedule of funding progress, and OPEB schedule of funding progress on pages 79 through 87, 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 the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, Measure Y funding summary schedules on pages 89 through 91, combining and individual nonmajor fund financial statements and schedules on pages 95 through 111, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Measure Y funding summary schedule and combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Measure Y funding summary schedule and combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. 2

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35 Management s Discussion and Analysis The following provides a narrative overview and analysis of the financial activities of the City of San Luis Obispo (City) for the fiscal year ended June 30, It should be read in conjunction with the accompanying transmittal memorandum and the basic financial statements. Financial Highlights The following outlines financial highlights for the year: The assets and deferred outflows of resources of the City exceeded its liabilities at June 30, 2014 by $358 million (net assets). Of this amount, $87.2 million (unrestricted net assets) may be used to meet the government s ongoing obligations to citizens and creditors. Total unrestricted net assets are $15.6 million higher than last fiscal year, an increase of 22%. Total city-wide assets increased by approximately $21.6 million or 5.0%. In the governmental activities, accounts receivable from various sources increased by $340,000; cash and investment balances grew by $3.5 million or 12.8%; prepaid expenses increased by $1.1 million and Cash Held with Fiscal Agent increased by $2.4 million. In business-type activities, accounts receivable increased by $100,000 while cash and investment balances grew by $12.6 million or 23.7% and amounts due from other governments increased by $480,000. City-wide liabilities increased by approximately $5 million or 5.2%. Governmental activities experienced a reduction of $151,000 or 0.4% with most of that representing a decrease in long-term liabilities. Business-type activities saw an increase in long term liabilities $5.1 million or 8.5% while accounts payable decreased by $480,000 and unearned revenue increased by $740,000. The City s governmental funds altogether reported combined ending fund balances of $41.7 million. Approximately $26.3 million or 63% of this total amount is not available for new spending because it represents amounts that are: restricted for debt service, grant obligations, prepaid for insurance obligations, or is already committed to specific programs such as impact fee programs and general capital outlay. The amount of $3.5 million is assigned to meet expenditures in subsequent years in the form of purchase order encumbrances and unspent appropriations that have been rolled over into the fiscal year in accordance with the City s budget policies. The total General Fund balance increased by $1.4 million to $20.3 million. This reflects the steady increase in revenues over the prior year and greater than expected expenditure savings. After adjustments to reflect amounts committed to the Measure Y Contingency Reserve ($1.7 million); debt service reserve ($300,000); prepaid insurance costs ($3.2 million); purchase encumbrances and other future expenses ($3.2 million) and the amount required to be maintained to meet the 20% minimum reserve requirement ($10.4 million), $1.4 million remains as an unassigned amount. Overview of the Financial Statements The basic financial statements are comprised of three components: Government-wide Financial Statements; Fund Financial Statements; and Notes to the Financial Statements. 4

36 Management s Discussion and Analysis Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains sixteen individual governmental funds. Information is presented in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances. The General Fund, Capital Outlay Fund, Transportation Impact Fee Fund, and the Los Osos Valley Road (LOVR) Fund are considered to be major funds. Data from the major governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements in the supplementary information section in this report. Of the major funds, the City only adopts an annual appropriated budget for the General Fund. A budgetary comparison statement has been provided as required supplementary information to demonstrate compliance with the budget. Budgetary information for non-major governmental funds with annual budgets has been provided with the fund financial statements in the supplementary information section in this report. During the fiscal year ended June 30, 2014, the City implemented no new GASB statements. Proprietary Funds. The only type of proprietary fund the City maintains is enterprise funds. The Water, Sewer, Parking and Transit Funds are presented as business-type activities in the government-wide financial statements. Proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. The City considers all four of its enterprise funds to be major funds. The City closed its Golf Fund at the end of and merged the activity s assets into the General Fund. This accounts for the reduction in capital assets in business- type activities shown in the table below. Fiduciary Funds. Agency funds are the only type of fiduciary funds maintained by the City. These are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The Agency Funds are presented with the fund financial statements in the supplementary information section. Notes to the Financial Statements. The notes provide additional information that is essential to the reader for a full understanding of the data provided in the government-wide and fund financial statements. 5

37 Management s Discussion and Analysis Other Information. In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information, including budgetary comparison schedules and more detailed information regarding the progress of funding for retirement benefits and other postemployment benefits. Government wide Overall Financial Analysis Statement of Net Position. Net assets may serve over time as an indicator of a government s financial position. As noted earlier, for the City, assets exceeded liabilities by $358 million at June 30, 2014, which is a 4.8% increase from the prior fiscal year. The following is the condensed statement of net assets for the fiscal years ended June 30, 2014 and C O NDENS ED S TATEMENT O F NET PO S ITIO N FY & FY Governmental Activities Business-T ype Activities Total Current and other assets $ 47,571,292 $ 40,251,900 $ 61,379,987 $ 48,103,500 $ 108,951,279 $ 88,355,400 Capital assets 169,371, ,887, ,000, ,455, ,372, ,343,300 Total assets 216,942, ,139, ,380, ,559, ,323, ,698,700 Current liabilities 8,247,200 5,292,100 6,525,654 3,541,400 14,772,854 8,833,500 Noncurrent liabilities 26,079,726 29,185,800 53,954,762 51,826,800 80,034,488 81,012,600 Total liabilities 34,326,926 34,477,900 60,480,416 55,368,200 94,807,342 89,846,100 Net position: Net investment in capital assets 145,266, ,239, ,116, ,510, ,382, ,749,700 Restricted 4,825,662 2,374,800 2,248,979 2,254,200 7,074,641 4,629,000 Unrestricted 32,524,272 29,927,200 54,766,319 41,712,200 87,290,591 71,639,400 Total Net Position $ 182,615,977 $ 174,541,500 $ 176,131,601 $ 167,476,600 $ 358,747,578 $ 342,018,100 At the end of the fiscal year, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The largest portion of the City s net assets (74%) reflects its investment in capital assets, less any related debt used to acquire those assets that is 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. A small portion (2%) of the City s net assets represents resources that are subject to restrictions on how they may be used. The remaining balance of unrestricted net assets ($87.2 million) may be used to meet the government s ongoing obligations to citizens and creditors. 6

38 Management s Discussion and Analysis Information about changes in net assets for and is summarized below. Reasons for the changes are discussed in the following sections for governmental activities and business-type activities. SUMMARY OF CHANGES IN NET POSITION Governmental Activities Business-Type Activities Total Revenues: Program Revenues: Charges for services $ 10,940,086 $ 7,873,400 $ 41,594,436 $ 39,734,500 $ 52,534,522 $ 47,607,900 Operating grants and contributions 2,412,469 2,814,700 2,458,640 2,673,500 4,871,109 5,488,200 Capital grants and contributions 3,680,440 1,991,900 82, ,300 3,762,799 2,723,200 General Revenues: Sales taxes 22,180,173 20,736, ,180,173 20,736,000 Property taxes 8,960,010 9,176, ,960,010 9,176,600 Transient occupancy tax 6,063,232 5,572, ,063,232 5,572,400 Utility users tax 5,345,342 4,916, ,345,342 4,916,100 Property tax in lieu of VLF 3,645,692 3,533, ,645,692 3,533,200 Other taxes and fees 4,779,570 4,607, ,779,570 4,607,600 Investment earnings 566, , ,551 73, , ,600 Miscellaneous and other 679, , , ,900 Total revenues 69,253,071 61,797,900 44,499,986 43,212, ,753, ,010,700 Program expenses: Public safety 29,651,702 28,859,200 29,651,702 28,859,200 Public utilities 28,223,216 27,206,500 28,223,216 27,206,500 Transportation 8,975,047 8,551,500 7,695,745 7,582,500 16,670,792 16,134,000 Leisure, Cultural & Soc Serv 10,239,853 10,078,700 10,239,853 10,078,700 Community development 10,183,782 8,866,900 10,183,782 8,866,900 Interest on long-term debt 1,221,205 1,217,200 1,221,205 1,217,200 Total expenses 60,271,589 57,573,500 35,918,961 34,789,000 96,190,550 92,362,500 Increase (decrease) in net position before transfers 8,981,482 4,224,400 8,581,025 8,423,800 17,562,507 12,648,200 Transfers (73,771) 115,100 73,771 (115,100) - - Change in net position before transfers 8,907,711 4,339,500 8,654,796 8,308,700 17,562,507 12,648,200 Net position - beginning of year 174,541, ,890, ,476, ,010, ,018, ,901,000 Prior year restatement (833,234) 2,657, (833,234) 2,657,100 Cumulative effect from change in accounting principle - (345,400) - (842,600) - (1,188,000) Net position - end of year $ 182,615,977 $ 174,541,500 $ 176,131,601 $ 167,476,600 $ 358,747,578 $ 342,018,300 Governmental Activities. The City s net position in the Governmental activities increased $8.1 million, accounting for approximately 50% of the total increase in net assets. As noted previously, the City is continuing to see growth in its revenue base and realized savings in the General Fund above the level anticipated in the budget. As part of this growth trend, more private development is taking place which is generating significantly more revenues in the form of development-related impact and in-lieu fees which are held until needed for planned capital outlay. 7

39 Management s Discussion and Analysis Top Governmental Activity Revenue Sources. As shown in the shaded areas below, our top five tax revenues accounted for almost 70% of total revenues, with service charges accounting for another 16%. Generally, revenues for increased from those of the prior fiscal year. $2,245,238 Development Impact Fees $6,092,909 Grants Governmental Revenues $3,721,541 Other $22,180,173 Sales Tax $10,940,086 Services Charges $3,645,692 VLF Swap $5,345,342 Utility User Tax $6,063,232 Transit Occupancy Tax $8,960,010 Property Tax The following narrative addresses the significant variances in key revenues from the prior fiscal year: 1. Sales Tax. General sales tax receipts were $1.4 million or 8.2% higher than in This reflects continuing economic recovery in nearly every major business category. This is a somewhat greater increase than experienced statewide. Revenues from the local one-half percent sales tax (Measure Y) were $280,565 higher than the prior year, also a reflection of the current economic climate. 2. Property Tax. Property tax revenue increased by $407,000 or 4.6% after adjusting for the $620,000 refund of property tax fees that was received in Property taxes continue to grow at a steady pace. 3. Transient Occupancy Tax (TOT). These revenues increased by $490,800 or 8.8% over the prior year and continue to exceed their pre-recession peak. The increase in the local tourism industry has been impacted positively by the economic recovery and by the efforts of the Tourism Business Improvement District s efforts to market the area as a destination. 4. Charges for Services. These revenues increased by approximately $3.0 million over In the General Fund, charges for services increased significantly over the prior year due to the growth in private development application fees ($1.2 million) that is continuing to remain strong. Directly related to this is the receipt of nearly $1.9 million more in development-related capital fees over the prior year that were recognized in the development fee programs. 8

40 Management s Discussion and Analysis 5. Capital Grants and Contributions. These revenues increased by nearly $1.7 million as progress on City infrastructure projects resulted in an increased amount of grant reimbursements. 6. Program Expenses: Governmental Activities. Program expenses increased by approximately $2.7 million or 4.3% over the prior fiscal year. The most significant increase is in Community Development activity which reflects an increase in costs related to the growing demand for development review and inspection services in the General Fund and expenses from the CDBG program for project investments which totaled $855,000 in The following chart compares program revenues and expenses: Expenses and Program Revenues : Governmental Activities 30,000,000 20,000,000 10,000,000 0 Expenses Revenues Business-Type Activities. Business-type activities accounted for 50% of the total growth in net position. Revenue Sources: Business-Type Activities. Operating revenues for services reflect an increase of nearly $1.8 million or 4.5% over the prior fiscal year. This reflects growth in service charges in all of the enterprise funds. Significant variances are as follows: 1. Water revenues. Total operating revenues increased $1.6 million. Of this amount, revenues from the sale of water increased by $2.2 million or 13.9%. Warmer weather which increased consumption, coupled with the implementation of the new fixed charge for service and the implementation of a 7.5% rate increase that became effective on July 1, 2013 were responsible for the increase. General water impact fees were down compared to the prior year by $759,000. 9

41 Management s Discussion and Analysis 2. Sewer charges. The overall increase of nearly $1 million over the prior year is due to the implementation of a fixed charge for service and a 4% rate increase that became effective on July 1, Parking Fees. In the Parking Fund received $800,000 for in-lieu payments from developers. No such payments were received in , accounting for most of the year-to-year change in revenues. Program Expenses: Business Type Activities. The program expenses for the proprietary funds increased by $1.5 million or 4.5% over the prior fiscal year. The increase reflects the fact that each of the enterprise funds saw increases in their operating program costs. The Water and Sewer Funds each saw an increase in spending over the prior year of approximately $400,000 due to increases in the cost of supplies and maintenance. The Sewer Fund also saw an increase in its reimbursements to the General Fund for administrative overhead in the amount of $215,000. Expenses and Program Revenues: Business-Type Activities 20,000,000 15,000,000 10,000,000 Expenses Revenues 5,000,000 0 Water Sewer Parking Transit Revenues Expenses Financial Analysis of Governmental Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The following funds have been classified as either governmental or proprietary fund types. Governmental Funds. The focus of the City s governmental funds is on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unassigned fund balance serves as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of June 30, 2014, the City s governmental funds reported combined ending fund balances of $41.7 million, or an increase of $7.4 million compared to the prior fiscal year. Approximately 71% of this total amount ($

42 Management s Discussion and Analysis million) is not available for new spending because it is restricted for debt service, has already been committed to specific programs like impact fee programs or is assigned to meet expenditures in subsequent years. The remaining balance, $11.8 million (29%) is unassigned and available for spending in the future at the government s discretion. This includes approximately $577,000 in unspent and unassigned Measure Y funds. However, approximately $10.4 million of the General Fund s unassigned fund balance is needed to comply with the City s minimum fund balance policy for which is based on 20% of operating expenses. Major Governmental Funds. There are three major governmental funds: the General Fund, the Capital Outlay and Debt Service Fund. Changes in the General Fund are highlighted in the Financial Highlights section above. The following information highlights changes in the Capital Outlay and Debt Service Funds: Capital Outlay Fund. This fund was established to account for all of the City s capital facility and infrastructure improvement program projects and where the cost will be at least $25,000. Not counted in this fund are costs that are programmed into one or more of the following funds: Parkland Development, Transportation Impact Fees, Open Space Protection, Airport Area Impact Fees, Fleet Replacement, Affordable Housing, Los Osos Valley Road Sub-Area Fees, Information Technology Replacement and Enterprise Funds. The Capital Outlay fund relies primarily on resources provided by the General Fund and grants from the state and federal government. At June 30, 2014, the Capital Outlay Fund had a total fund balance of $6 million. The entire amount of the fund balance has been committed to capital projects or is assigned to liquidate contracts and purchase orders. The fund balance increased by $3.3 million over the prior fiscal year due to the fact that funding for projects received is spent incrementally as the projects proceed to completion and a number of projects were in progress at June 30, From year to year, spending activity in the Capital Outlay Fund may show significant fluctuations depending on the phase of completion of the various capital projects in progress. Significant variances from the prior year include: 1. Grant revenues were approximately $450,000 (41%) higher than the prior year. Grant revenues are received as reimbursements for costs incurred and reflect the level of activity in the grant-funded projects. 2. Capital expenditures of $5.3 million reflect a 36% increase from the prior year. This reflects progress made on capital projects during the year. 3. Transfers from the General Fund of approximately $6.5 million to support capital expenditures reflect an increase of $3.0 million compared to the prior year. Major projects undertaken during the year include street reconstruction ($1,050,000) and the LED streetlight conversion ($851,000), Santa Rosa Skate Park Construction ($1.2 million), bike trail improvements ($140,000) and park playground equipment replacement ($500,000). The Debt service fund was established to account for the activities related to the city s general long term liabilities. This is the first year this fund qualifies as a major fund as a result of transactions that relate to payment of insurance program liabilities. 11

43 Management s Discussion and Analysis Non-Major Governmental Funds. Non-major funds include the Transportation Impact Fee Fund, the Los Osos Valley Road Sub-Area Fee Fund, the Downtown Business Improvement District Fund, the Tourism Business Improvement Fund, the Gas Tax Fund, the Transportation Development Act Fund, the Community Development Block Grant Fund, the Law Enforcement Grants Fund and the Public Art Contributions Fund. These funds are presented in the basic financial statements in the aggregate. A significant number of these funds represent activity for capital projects. At June 30, 2014, these funds had an aggregate fund balance of $13.2 million. Of this total, 73% ($9.7 million) is restricted for payment of law enforcement grant programs and committed for specific future capital projects and other City programs. The remaining balance of $3.5 million is assigned to expenditures in subsequent years. More information about these aggregated non-major funds can be found in the combining and individual fund statements and schedules immediately following the required supplementary information. Proprietary Funds. The City s four enterprise funds provide the same type of information found in the governmentwide financial statements, but in more detail. Highlights of the annual activity for these funds have already been presented in the discussion of the business-type activities. General Fund Budgetary Highlights A detailed budgetary comparison schedule for the year ended June 30, 2014, is presented as required supplementary information following the notes to the financial statements. The final budget amounts include changes that were approved by the City Council at the February 2014 Mid-year Budget Update. The following summarizes the original budget compared with the final budget for Budgetary Highlights General Fund Original Budget Final Budget Variance Revenues $55,462,200 $59,524,946 $4,062,746 Expenditures 50,476,009 54,324,556 3,848,547 Other sources (uses) (7,115,000) (8,962,145) (1,847,145) Beginning fund balance 12,916,400 18,937,700 6,021,300 Ending fund balance $10,787,591 $15,175,945 $4,388,354 As discussed below, differences between the original budget and the final amended budget reflect the following key changes: Key revenue source estimates including sales tax, transient occupancy tax (TOT) and subventions and grants were updated at Mid-Year and with the Financial Plan Supplement, resulting in an increase in overall budgeted revenues of almost $3.6 million or 6% over the original budget estimate. The remaining increase to the originally budgeted revenues is the result of budget adjustments made subsequent to the Mid-Year budget update, before the end of the fiscal year. 12

44 Management s Discussion and Analysis The increase in the beginning fund balance results from the use of an estimate for the original budget and the use of the actual, audited amount for the final budget. Operating program increases resulted primarily from the carryover of unspent contractual obligations from the prior year, increases related to Mutual Aid program costs for the Fire Department and the changes related to the Community Development Department s use of excess revenues to fund development review costs to maintain timely responses per the government code.. The following table contains a comparison of actual results for revenues, expenditures, and fund balance with the final budget for the General Fund. As the table shows, revenues exceeded the final budget by nearly $1.4 million, while expenditures and other uses were below the final budget figure by nearly $4.3 million. The net amount of other sources was more than budgeted by $588,000. The net result of these differences lead to the ending fund balance increasing by more than $5.1 million over the amount anticipated in the budget. Budget-Actual Comparison General Fund Final Budget Actual Positive (Negative) Variance Revenues $59,524,946 $60,922,119 $1,397,173 Expenditures 54,324,556 49,992,402 (4,332,154) Other sources (uses) (8,962,145) (9,550,288) (588,143) Beginning fund balance 18,937,700 18,937, Ending fund balance $15,175,945 $20,317,179 $5,141,234 Ending fund balance Nonspendable 3,191,055 3,191,055 Restricted 312, ,037 Committed 4,973,497 4,973,497 Assigned - Unassigned 15,175,945 11,853,919 (2,317,326) Total ending fund balance 15,175,945 20,330,508 6,159,263 Capital Assets and Debt Administration Capital Assets. Capital assets, including infrastructure, are those assets that are used in the performance of the City s functions. As of June 30, 2014, the City s investment in capital assets for its governmental and business type activities amounts to $343.9 million (net of accumulated depreciation). The investment in capital assets includes land, park improvements, buildings and improvements, vehicles and equipment, streets, bikeways, water, wastewater and storm drain systems. 13

45 Management s Discussion and Analysis Capital Assets( Net of Depreciation) Governmental Business-Type Total Activities Activities Nondepreciable capital assets $ 44,891,130 $ 41,428,800 $ 17,261,492 $ 12,411,504 $ 62,152,622 $ 53,840,304 Depreciable capital assets (net of accumulated depreciation ) 124,480, ,625, ,739, ,044, ,219, ,669,937 Total Capital Assets $ 169,371,611 $ 168,054,566 $ 175,000,731 $ 174,455,675 $ 344,372,342 $ 342,510,241 Major capital asset expenditures during the fiscal year include the following: $1,050,000 for street reconstruction and resurfacing. $300,000 for Los Osos Valley Road/US 101 interchanges design work. $900,000 for Bob Jones Trail Connection-South Bridge project. $590,000 for Trench repairs a water line replacement projects. $2.8 million for WRF Energy Efficiency project $800,000 in sewer line improvements. $500,000 for the Santa Rosa sewer line replacement $217,000 for Jack House Remodel $422,000 for Fleet replacement. $644,000 for Parks improvements and equipment replacement. $490,000 for Streets signs and traffic signal upgrades. Additional information on the City s capital assets can be found in Note 5 to the basic financial statements. Long-Term Debt. At June 30, 2014, the City had $85.6 million in long-term debt outstanding as summarized below. This represents an increase of $4.5 million or 6% compared to the prior year. Long- Term Debt Governmental Business-Type Total Activities Activities Revenue bonds $ 22,543,171 $ 23,989,125 $ 27,689,883 $ 29,301,898 $ 50,233,054 $ 53,291,023 Lease-purchase financing 711, ,400 20,309, ,622 21,132,600 Claims & Liabilities 2,371,519 2,025,100 19,446,946-21,818,465 2,025,100 Installment sale agreement 8,979,000 1,620,000 8,979,000 1,620,000 Compensated absences 2,465,248 2,537, ,540 3,027,788 2,537,600 Conservation Loan 850, , , ,800 $ 28,942,335 $ 29,375,225 $ 56,678,369 $ 51,826,898 $ 85,620,704 $ 81,202,123 The California Government Code provides for a limit on debt secured by real property of 3.75% based on market value. The City s debt management policy, however, sets a lower debt limit of 2% of assessed valuation. At June 30, 2014, the City did not have any general obligation debt subject to the limit. Additional information about the City s long-term debt can be found in Note 7 to the basic financial statements. 14

46 Management s Discussion and Analysis Economic Factors and Next Year s Budgets and Rates On June 17, 2014, the City Council adopted the Financial Plan Supplement and approved Budget, with total appropriations of $134.2 million. Adequate resources are available to fund the proposed expenditures. For the General Fund, the budget reflects a margin of current revenues and other sources exceeding expenses and other uses by $655,000 or 1.2% of the General Fund operating budget. The City Council approved the use of reserves in excess of the 20% required minimum amount to pay for one-time expenses. These costs include $300,000 to make a prepayment against the safety side fund retirement liability owed to the California Public Employees Retirement System; $2.438 million to pay off the retrospective insurance charges owed to the California Joint Powers Insurance Authority; $196,000 to pay for one-time costs associated with a request for supplemental funding from the Community Development Department to fulfill its obligation to provide timely development inspection services. Consistent with the City s balanced budget policy the ending unassigned fund balance meets the City s policy minimum of 20% of operating expenditures. Measure Y. The passage of Measure Y in November 2006 increased the City sales tax rate by one half-percent effective April 1, In , the seventh full year of Measure Y revenues, the City received nearly $6.8 million from this source. Measure Y has continued to significantly improve the City s fiscal capacity to retain key services and maintain infrastructure by mitigating deeper program reductions than would otherwise be the case, as well as to consider new initiatives that are important to the community. Measure Y is scheduled to expire in March 2015 if not reauthorized by voters. It is important to note that while the budget s revenue forecast assumes that Measure Y will be extended when the community votes on the ballot measure at the November 2014 election, the City Council has designated $1.7 million as a contingency reserve in case Measure Y is not extended. Further, staff has presented the City Council with a conceptual contingency plan that will be put into place as part of the financial plan development process should Measure Y not be extended. (It is important to note that Measure G, which represented the extension of Measure Y on the November 2014 ballot, was approved by 70% of the voters.) Utility Rates. Effective July 1, 2014, water rates increased by 7.5% based on action previously adopted by Council during a public hearing held on June 10, Sewer rates were increased by 4% through the same Council action. Requests for Additional Information This financial report is designed to provide a general overview of the City s finances for all those with an interest in our finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Department of Finance & Information Technology, 990 Palm Street, San Luis Obispo, CA

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48 BASIC FINANCIAL STATEMENTS

49 Statement of Net Position June 30, 2014 Governmental Activities Business-Type Activities Total Assets Cash and cash equivalents $ 2,093,220 $ 2,172,408 $ 4,265,628 Investments 28,864,957 51,412,535 80,277,492 Taxes receivable 1,489,317 1,489,317 Accounts receivable 1,447,796 3,527,791 4,975,587 Accrued interest receivable 77, , ,025 Due from other governments 4,991,680 1,898,782 6,890,462 Prepaid expenses and other assets 3,808,272 3,808,272 Cash held by fiscal agent 4,798,517 2,248,979 7,047,496 Nondepreciable capital assets 44,891,130 17,261,492 62,152,622 Depreciable capital assets (net of accumulated depreciation) 124,480, ,739, ,219,720 Total assets 216,942, ,380, ,323,621 Deferred Outflows of Resources Deferred amounts from refunding of debt 231, ,299 Liabilities Accounts payable 2,564,813 2,119,539 4,684,352 Accrued salaries 1,799, ,957 2,023,301 Deposits payable 30,960 30,960 Unearned revenue 888,574 1,105,307 1,993,881 Interest payable 100, , ,211 Due to other funds - Other liabilities 30,933 30,933 Noncurrent liabilities: Due within one year 2,862,609 2,723,607 5,586,216 Due in more than one year 26,079,726 53,954,762 80,034,488 Total liabilities 34,326,926 60,480,416 94,807,342 Net Position Net investment in capital assets 145,266, ,116, ,382,346 Restricted for: Debt service 4,798,517 2,248,979 7,047,496 Grant program 27,145 27,145 Unrestricted 32,524,272 54,766,319 87,290,591 Total net position $ 182,615,977 $ 176,131,601 $ 358,747,578 The accompanying notes are an integral part of these financial statements. 17

50 Statement of Activities For the Fiscal Year Ended June 30, 2014 Program Revenues Functions/Programs Expenses Indirect Expense Allocation Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental activities: Public safety $ 25,642,077 $ 4,009,625 $ 1,589,278 $ 1,105,294 $ 176,980 Transportation 6,330,653 2,644,394 1,321,323 1,285,019 3,503,460 Culture and recreation 7,994,146 2,245,707 3,048,274 Community development 9,190, ,255 4,981,211 22,156 General government 10,701,534 (9,892,981) 734,599 73,954 Interest on long-term debt 1,221,205 Total governmental activities 61,080,142-11,674,685 2,486,423 3,680,440 Business-type activities: Water 17,575,961 19,755,909 Sewer 10,647,255 17,151,212 Parking 3,636,607 3,998,730 Transit 4,059, ,585 2,458,640 82,359 Total business-type activities 35,918,961 41,594,436 2,458,640 82,359 General revenues and transfers: General sales and use taxes Measure Y 1/2 cent sales and use tax Property taxes Transient occupancy tax (TOT) Utility users tax Property tax-in-lieu of vehicle license fees Franchise taxes Business tax Unrestricted investment earnings Other taxes Transfers Total general revenues and transfers Change in net position Net position, beginning of year Prior year restatement Net position, beginning of year restated Net position, end of year The accompanying notes are an integral part of these financial statements. 18

51 Net Revenues (Expenses) and Changes in Net Position Governmental Activities Business-type Activities Total $ (26,780,150) $ $ (26,780,150) (2,865,245) (2,865,245) (7,191,579) (7,191,579) (5,180,415) (5,180,415) - - (1,221,205) (1,221,205) (43,238,594) - (43,238,594) 2,179,948 2,179,948 6,503,957 6,503, , ,123 (829,554) (829,554) - 8,216,474 8,216,474 $ 15,405,808 $ $ 15,405,808 6,774,365 6,774,365 8,960,010 8,960,010 6,063,232 6,063,232 5,345,342 5,345,342 3,645,692 3,645,692 2,636,599 2,636,599 2,142,971 2,142, , , , , ,127 (73,771) 73,771-52,146, ,322 52,584,627 8,907,711 8,654,796 17,562, ,541, ,476, ,018,305 (833,234) (833,234) 173,708, ,476, ,185,071 $ 182,615,977 $ 176,131,601 $ 358,747,578 19

52 Balance Sheet Governmental Funds June 30, 2014 Other Governmental Funds Total Governmental Funds General Capital Outlay Debt Service Assets Cash and cash equivalents $ 708,485 $ 593,471 $ 39,403 $ 751,861 $ 2,093,220 Investments 11,723,302 4,668,685 12,472,970 28,864,957 Taxes receivable 1,489,317 1,489,317 Accounts receivable 218, , ,002 1,353,784 Other receivables 94,012 94,012 Due from other governments 3,953, , ,181 4,991,680 Due from other funds 2,595,035 2,595,035 Accrued interest receivable 39,668 9,652 28,213 77,533 Prepaid expense 3,191,055 3,191,055 Cash held by fiscal agent 312,037 4,486,480 4,798,517 Total assets $ 24,324,781 $ 6,568,219 $ 4,525,883 $ 14,130,227 $ 49,549,110 Liabilities, Deferred Inflows of Resources and Fund Balance Liabilities: Accounts payable $ 1,751,235 $ 151,245 $ 39,402 $ 622,931 $ 2,564,813 Accrued liabilities 1,708,743 90,601 1,799,344 Due to other funds 2,443, ,776 2,595,035 Unearned revenue 516, , ,574 Other liabilities 30,933 30,933 Total liabilities 4,007, ,128 2,482, ,308 7,878,699 Fund balance: Nonspendable 3,191,055 3,191,055 Restricted for: Debt service 312,037 2,043,222 2,355,259 Law enforcement grant programs 27,145 27,145 Committed to: Affordable housing programs 2,946,847 2,946,847 Capital outlay 6,045,091 6,045,091 General government programs 3,273,497 4,743,552 8,017,049 Impact fee programs 411, ,592 Open space programs 1,582,425 1,582,425 Contingency fund 12,158,000 12,158,000 Assigned to: Subsequent years expenditures 3,553,441 3,553,441 Unassigned 1,382,590 (83) 1,382,507 Total fund balance 20,317,179 6,045,091 2,043,222 13,264,919 41,670,411 Total liabilities and fund balance $ 24,324,781 $ 6,568,219 $ 4,525,883 $ 14,130,227 $ 49,549,110 The accompanying notes are an integral part of these financial statements. 20

53 Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position June 30, 2014 Total fund balance - governmental funds $ 41,670,411 Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Capital assets at estimated historical cost 245,484,522 Accumulated depreciation (76,112,911) Other long-term assets are not available to pay for current period expenditures and therefore are not reported in the funds. Long-term liabilities, including related interest payable, are not due and payable in the current period and therefore are not reported in the funds. Lease revenue bonds 22,152,010 Lease purchase financing 711,622 Compensated absences 2,465,248 Conservation loan 850,775 Bond premium 391,161 Other liabilities - estimated claims 2,371,519 Accrued interest payable 100, ,371, ,217 (29,043,262) Total net position - governmental activities $ 182,615,977 The accompanying notes are an integral part of these financial statements. 21

54 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2014 General Capital Outlay Debt Service Revenues: Sales and use tax - general $ 15,405,808 $ $ Sales and use tax - Measure Y 6,774,365 Sales tax - Prop ,567 Property tax 8,960,010 Transient occupancy tax 6,063,232 Utility users tax 5,345,342 Property tax in lieu of VLF 3,645,692 Franchise taxes 2,636,599 Business tax 2,142,971 Real property transfer tax 287,560 Fines, forfeitures and penalties 150,185 Use of money and property 372,655 37,748 Subventions and grants 1,238,410 1,539,622 Charges for services 7,364,616 Miscellaneous 143,107 1,500 Total revenues 60,922,119 1,578,870 - Expenditures: Current: General government 9,329,406 32,625 Public safety 23,863, ,000 Transportation 2,882,241 Leisure, cultural and social services 7,155,619 Community development 6,748,307 Debt service: Principal 1,534,668 Interest 1,048,671 Capital outlay: Public safety 97,667 Transportation 4,127,342 Leisure, cultural and social services 977,163 Community development 16,459 General government 13, ,870 Total expenditures 49,992,402 5,350,501 3,550,964 Excess (deficiency) of revenues over (under) expenditures 10,929,717 (3,771,631) (3,550,964) The accompanying notes are an integral part of these financial statements. 22

55 Other Governmental Funds Total Governmental Funds $ $ 15,405,808 6,774, ,567 8,960,010 6,063,232 5,345,342 3,645,692 2,636,599 2,142, , , , ,930 3,211,849 5,989,881 3,802,417 11,167, , ,469 7,383,655 69,884,644 9,362,031 24,798,500 2,882,241 7,155,619 1,641,650 8,389,957 1,534,668 1,048, , , ,521 4,859, ,347 1,272, , , ,199 4,386,760 63,280,627 2,996,895 6,604,017 23

56 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds, continued For the Fiscal Year Ended June 30, 2014 Page 2 General Capital Outlay Debt Service Other Financing Sources (Uses): Proceeds from debt issuance $ $ $ 850,775 Transfers in 1,636,815 7,337,181 3,550,964 Transfers out (11,187,103) (211,306) (850,775) Total other financing sources (uses) (9,550,288) 7,125,875 3,550,964 Net change in fund balance 1,379,429 3,354,244 - Fund balance, beginning of year 18,937,750 2,690,847 2,043,222 Fund balance, end of year $ 20,317,179 $ 6,045,091 $ 2,043,222 The accompanying notes are an integral part of these financial statements. 24

57 Other Governmental Funds Total Governmental Funds $ $ 850,775 1,310,038 13,834,998 (1,659,585) (13,908,769) (349,547) 777,004 2,647,348 7,381,021 10,617,571 34,289,390 $ 13,264,919 $ 41,670,411 25

58 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities and Changes in Net Position For the Fiscal Year Ended June 30, 2014 Total net change in fund balance - governmental funds $ 7,381,021 Capital outlay net of depreciation expense and disposal Expenditures for capital outlay - governmental funds 6,797,679 Depreciation expense (5,421,786) 1,375,893 Loss on disposal of capital asset (58,848) Principal paid on long-term debt 1,534,668 Acquisition of new financing (1,197,194) Change in accrued interest on debt Change in unamortized discount/premium (netted with debt) Change in other long-term asset Change in compensated absences (195,598) 23,064 (27,647) 72,352 Total change in net position - governmental activities $ 8,907,711 The accompanying notes are an integral part of these financial statements. 26

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60 Statement of Fund Net Position Business-Type Activities Enterprise Funds June 30, 2014 Assets Current assets: Enterprise Funds Water Sewer Parking Transit Totals Cash and cash equivalents $ 621,194 $ 1,123,915 $ 396,537 $ 30,762 $ 2,172,408 Investments 17,266,322 26,250,956 7,198, ,682 51,412,535 Accounts receivable 1,903,979 1,544,467 16,563 4,657 3,469,666 Accrued interest receivable 39,048 61,193 17,503 1, ,492 Prepayments 58,125 58,125 Due from other governments 71,622 59,888 1,767,272 1,898,782 Total current assets 19,902,165 29,098,544 7,629,178 2,501,121 59,131,008 Noncurrent assets: Cash and investments held by fiscal agent 1,642,349 58, ,210 2,248,979 Capital assets: Land 915,926 2,176,114 5,515,137 8,607,177 Public art 74,100 74,100 Infrastructure 96,258,042 71,527,980 29,494, ,280,931 Buildings and improvements 19,134,912 5,024, ,033 5,016,142 30,052,496 Equipment 3,763,752 4,090, ,111 7,618,590 15,855,696 Construction in progress 991,395 6,976, ,617 39,038 8,580,215 Total capital assets 121,064,027 89,794,911 36,917,907 12,673, ,450,615 Less accumulated depreciation (42,837,003) (27,052,815) (10,605,237) (4,954,829) (85,449,884) Capital assets, net of accumulated depreciation 78,227,024 62,742,096 26,312,670 7,718, ,000,731 Total noncurrent assets 79,869,373 62,800,516 26,860,880 7,718, ,249,710 Total assets 99,771,538 91,899,060 34,490,058 10,220, ,380,718 Deferred Outflows of Resources Deferred amounts from refunding debt 231, ,299 The accompanying notes are an integral part of these financial statements. 27

61 Statement of Fund Net Position Business-Type Activities Enterprise Funds, continued June 30, 2014 Page 2 Enterprise Funds Water Sewer Parking Transit Totals Liabilities Current liabilities: Accounts payable $ 262,704 $ 1,345,817 $ 140,943 $ 370,075 $ 2,119,539 Accrued liabilities 88,127 98,663 31,184 5, ,957 Compensated absences 102, ,460 20,939 3, ,018 Deposits payable 30,960 30,960 Unearned revenue 1,105,307 1,105,307 Interest payable 172,942 49,879 99, ,284 Current portion of long-term debt 1,244, , ,962 2,484,589 Total current liabilities 1,902,169 2,397, ,491 1,485,248 6,525,654 Noncurrent liabilities: Compensated absences 147, ,393 13,387 2, ,624 Lease revenue bonds 18,172, ,960 7,240,800 25,983,255 Bond premium 603,643 3, ,837 Installment sale agreement 8,481,073 8,481,073 State loan/note payable 4,598,807 8,615,759 5,345,407 18,559,973 Total noncurrent liabilities 23,522,789 17,827,185 12,602,788 2,000 53,954,762 Total liabilities 25,424,958 20,224,931 13,343,279 1,487,248 60,480,416 Net Position Net investment in capital assets 53,838,678 44,283,377 13,275,307 7,718, ,116,303 Restricted - expendable for debt service 1,642,349 58, ,210 2,248,979 Unrestricted 19,096,852 27,332,332 7,323,262 1,013,873 54,766,319 Total net position $ 74,577,879 $ 71,674,129 $ 21,146,779 $ 8,732,814 $ 176,131,601 The accompanying notes are an integral part of these financial statements. 28

62 Statement of Revenues, Expenses and Changes in Fund Net Position Business-Type Activities Enterprise Funds For the Fiscal Year Ended June 30, 2014 Enterprise Funds Water Sewer Parking Transit Total Operating revenues: Charges for sales and service $ 18,645,973 $ 16,799,287 $ 3,409,516 $ 664,069 $ 39,518,845 Impact fees 819, ,132 1,087,609 Fines and forfeitures 585, ,783 Other revenues 210,749 46,371 10, ,584 Total operating revenues 19,676,199 17,113,790 4,005, ,069 41,459,821 Operating expenses: Salaries and benefits 2,926,028 3,241,016 1,055, ,353 7,412,941 Supplies and maintenance 1,506,090 2,200, , ,962 4,388,363 Contract services 8,295,509 1,288, ,828 2,173,245 12,388,877 General government 1,268,800 1,609, , ,400 3,808,120 Depreciation 2,716,681 2,037, , ,178 6,267,466 Total operating expenses 16,713,108 10,376,138 3,117,383 4,059,138 34,265,767 Operating income (loss) 2,963,091 6,737, ,380 (3,395,069) 7,194,054 Nonoperating revenues (expenses) Interest 136,205 98, ,130 6, ,551 Grants 2,458,640 2,458,640 Interest expense (862,853) (271,117) (519,224) (1,653,194) Miscellaneous nonoperating revenues (expenses) 79,710 37,422 (7,033) 24, ,615 Total nonoperating revenues (expenses) (646,938) (135,608) (402,127) 2,489,285 1,304,612 Income (loss) before transfers 2,316,153 6,602, ,253 (905,784) 8,498,666 and capital contributions Capital Contributions 82,359 82,359 Transfers 73,771 73,771 Total contributions and transfers - 73,771-82, ,130 Change in net position 2,316,153 6,675, ,253 (823,425) 8,654,796 Net position, beginning of year 72,261,726 64,998,314 20,660,526 9,556, ,476,805 Net position, end of year $ 74,577,879 $ 71,674,129 $ 21,146,779 $ 8,732,814 $ 176,131,601 The accompanying notes are an integral part of these financial statements. 29

63 Statement of Cash Flows Business-Type Activities Enterprise Funds For the Fiscal Year Ended June 30, 2014 Enterprise Funds Water Sewer Parking Transit Total Cash flows from operating activities: Cash received from customers $ 19,513,858 $ 17,205,935 $ 4,024,400 $ 926,147 $ 41,670,340 Cash payments to suppliers for goods and services (10,132,495) (2,764,409) (1,194,890) (3,221,432) (17,313,226) Cash payments to General Fund for interfund services (1,268,800) (1,609,600) (609,320) (320,400) (3,808,120) Cash payments to employees for services (2,930,621) (3,253,900) (1,075,434) (190,487) (7,450,442) Other operating cash receipts (payments) 79,710 37,422 (7,033) 24, ,615 Net cash provided by (used in) operating activities 5,261,652 9,615,448 1,137,723 (2,781,656) 13,233,167 Cash flows from noncapital financing activities: Operating grants received 2,458,640 2,458,640 Cash received for interfund services 73,771 82, ,130 Net cash provided by noncapital financing activities - 73,771-2,540,999 2,614,770 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (655,205) (5,705,717) (389,956) (61,719) (6,812,597) Principal paid on debt financing (1,198,898) (405,081) (920,531) (2,524,510) Interest paid on debt financing (911,267) (254,238) (502,167) (1,667,672) Proceeds from issuance of debt 7,479,000 7,479,000 Net cash provided by (used in) in capital and related financing activities (2,765,370) 1,113,964 (1,812,654) (61,719) (3,525,779) Cash flows from investing activities: Interest on investments 140,383 84, ,653 5, ,764 Net cash provided by investing activities 140,383 84, ,653 5, ,764 Net change in cash and cash equivalents 2,636,665 10,887,791 (544,278) (297,256) 12,682,922 Cash and cash equivalents, beginning of year 16,893,200 16,545,500 8,687,600 1,024,700 43,151,000 Cash and cash equivalents, end of year $ 19,529,865 $ 27,433,291 $ 8,143,322 $ 727,444 $ 55,833,922 The accompanying notes are an integral part of these financial statements. 30

64 Statement of Cash Flows Business-Type Activities Enterprise Funds, continued For the Fiscal Year Ended June 30, 2014 Page 2 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) 2,963,091 Enterprise Funds Water Sewer Parking Transit Total $ $ 6,737,652 $ 888,380 $ (3,395,069) $ 7,194,054 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 2,716,681 2,037, , ,178 6,267,466 Other revenues and expenses 79,710 37,422 (7,033) 24, ,615 Change in assets and liabilities: Accounts receivable (160,601) 92,145 18,637 (481,629) (531,448) Prepaid expense (58,125) (58,125) Accounts payable (330,896) 782,217 (370,957) (558,225) (477,861) Deposits payable (1,740) (1,740) Unearned revenue 743, ,707 Accrued salaries and compensated absences (4,593) (12,884) (19,890) (134) (37,501) Net cash provided by (used in) operating activities $ 5,261,652 $ 9,615,448 $ 1,137,723 $ (2,781,656) $ 13,233,167 Reconciliation of cash and investments to the balance sheet: Cash and cash equivalents $ 621,194 $ 1,123,915 $ 396,537 $ 30,762 $ 2,172,408 Investments 17,266,322 26,250,956 7,198, ,682 51,412,535 Cash and investments held by fiscal agent 1,642,349 58, ,210 2,248,979 Total cash and investments $ 19,529,865 $ 27,433,291 $ 8,143,322 $ 727,444 $ 55,833,922 Noncash investing, capital, and financing activities: None The accompanying notes are an integral part of these financial statements. 31

65 Statement of Net Position Fiduciary Funds Agency Funds June 30, 2014 Assets Current assets: Cash and cash equivalents $ 204,943 Investments 2,885,537 Accounts receivable 109,362 Accrued interest receivable 5,098 Due from other governments 40,084 Other assets 27,935 Total assets $ 3,272,959 Liabilities Current liabilities: Accounts payable $ 103,037 Accrued liabilities 22,638 Other liabilities 1,649,460 Due to agency participants 1,497,824 Total liabilities $ 3,272,959 The accompanying notes are an integral part of these financial statements. 32

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67 Notes to the Financial Statements June 30, 2014 Page Note 1: Summary of Significant Accounting Policies 35 Description of the Reporting Entity 35 Government-wide and Fund Financial Statements 35 Measurement Focus, Basis of Accounting and Basis of Presentation 36 Assets, Liabilities, and Net Position or Equity 38 Budgets and Budgetary Accounting 41 Note 2: Cash and Investments 43 Investments 43 Funds with Fiscal Agent 44 Note 3: Property Taxes 48 Note 4: Due from Other Governments 50 Note 5: Capital Assets 50 Note 6: Employee Retirement Benefits 52 California Public Employees Retirement System (CalPERS) 52 Other Post-Employment Benefits (OPEB) 56 Note 7: Long-Term Debt 58 Summary of Long-Term Debt 58 Governmental Activities Summary 59 Revenue Bonds 59 Lease-Purchase Financing 60 Conservation Loan 61 Business-Type Activities Summer 61 Revenue Bonds 61 Loans 63 Installment Sale Agreements 64 Note 8: Interfund Transactions 65 33

68 Notes to the Financial Statements Table of Contents June 30, 2014 Page 2 Page Note 9: Joint Ventures, Jointly Governed Organizations and Operating Agreements 66 Whale Rock Commission 66 San Luis Obispo Regional Transit Authority 67 San Luis Obispo Council of Governments 68 Nacimiento Water Supply Project 68 Note 10: Risk Management 69 California Joint Powers Insurance Authority 69 Self-Insurance Programs of the Authority 70 Purchased Insurance 71 Adequacy of Protection 72 Self Insurance 72 Note 11: Commitments and Contingencies 73 Litigation 73 Grant Awards 73 Note 12: Construction and Other Significant Commitments 74 Note 13: Fund Balance Deficiency 74 Note 14: Subsequent Events 74 Measure Y 74 Claims Liability 74 Lease Purchasing 74 Joint Powers Agreement 75 Lease Purchasing 75 Bonds 75 Note 15: New Accounting Standards 75 Accounting Standards Adopted 75 New Accounting Standards 76 Note 16: Prior Year Restatement 77 34

69 Notes to the Financial Statements June 30, 2014 Note 1: Summary of Significant Accounting Policies The basic financial statements of the City of San Luis Obispo (City) have been prepared in conformity with U.S. Generally Accepted Accounting Principles (GAAP), as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant policies: Description of the Reporting Entity The City is a California charter city. It was incorporated on February 19, 1856 and chartered on May 1, It is organized in accordance with the Council-Mayor-City Manager form of government. With a population of approximately 45,500, the City provides a broad range of municipal services, including police and fire protection, parks and recreation, water and sewer utilities, street maintenance, public transportation, parking, planning, building and safety, and other general government services. As required by GAAP, these financial statements present the City (the primary government) and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of the government's operations which creates the need to include their financial information with that of the primary government. The City has no component units that require discrete presentation in accordance with GASB standards. Blended Component Unit. The San Luis Obispo Capital Improvement Board provides financing for the construction and acquisition of City facilities. The Board consists of members of the City Council. Activities of the Board are accounted for in the applicable City governmental fund and consist of the issuance of debt secured by the lease of property. Separate financial statements are not prepared for the San Luis Obispo Capital Improvement Board. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component unit. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from businesstype activities, which rely to a significant extent on fees and charges for services. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The indirect expense allocation transfers general support services to operating programs based on the most current Cost Allocation Plan. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are 35

70 Notes to the Financial Statements June 30, 2014 Page 2 Note 1: Summary of Significant Accounting Policies (Continued) restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting and Basis of Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary funds. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government s enterprise funds and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government generally considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. An exception to this timeframe is made to allow for the recognition of the final property tax distributions received from the County, if necessary, as well as for sales tax revenues received in September. This later provision is made in order for the City s revenue stream to match that recognized by the State of California. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City reports the following major governmental funds: General Fund. This fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. 36

71 Notes to the Financial Statements June 30, 2014 Page 3 Note 1: Summary of Significant Accounting Policies (Continued) Capital Outlay Fund. This fund was established to account for all of the City's construction projects and capital purchases in excess of $25,000 with the exception of those funded through non-major capital project funds and Enterprise Funds. Financing is provided primarily through transfers in from the General Fund, and from State and Federal grants. Debt Service Fund. This fund was established to account for the payment and accumulation of resources related to governmental activities long-term debt principal and interest obligations. The only proprietary funds the City reports are the Enterprise Funds, all of which are major funds. Proprietary Funds are accounted for on the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Water Fund. This fund accounts for the provision of water services to the residents of the City as well as some customers in the County. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, capital improvements and debt service. Sewer Fund. This accounts for the provision of wastewater collection and treatment services to the residents of the City as well as some customers in the County. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, capital improvements and debt service. Parking Fund. This fund accounts for activities related to the implementation of the Access and Parking Management Plan, including the operation of municipal parking lots, parking structures, parking meters and residential parking districts. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, capital improvements and debt service. Transit Fund. This fund accounts for the operation and maintenance of the City's transit system. Although user fees are not the primary funding source for the operation of the system, the State of California and the Federal government, which provide the major funding sources for the system, require that local transit systems be accounted for on an enterprise fund basis. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 37

72 Notes to the Financial Statements June 30, 2014 Page 4 Note 1: Summary of Significant Accounting Policies (Continued) The City has established thirteen Agency Funds, which are used to account for funds held by the City as an agent for private individuals, organizations or other governmental agencies. Agency funds are accounted for using the accrual basis of accounting. Significant Agency Funds include Whale Rock Fund, Boysen Ranch Conservation Easement Fund, and the General Agency Fund. See page 113 for a complete list of Agency Funds. Assets, Liabilities, and Net Position or Equity Cash, Cash Equivalents and Investments. The City pools cash resources of its various funds to facilitate cash management. Cash in excess of current requirements is invested and reported as investments. It is the City s intent to hold investments until maturity. However, the City may, in response to market conditions, sell investments prior to maturity in order to improve the quality, liquidity or yield of the portfolio. The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Cash and investments held by fiscal agents are treated as cash equivalents for purposes of the statement of cash flows. Highly liquid investments with maturities of one year or less at time of purchase are stated at the amortized cost. All other investments are stated at fair value. Market value is used as fair value for those investments where market quotations are readily available. Receivables and Payables. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as due to/from other funds. All receivables are shown net of any allowance for uncollectible accounts if material. Charges for utility services rendered but unbilled as of June 30 are accrued and are recognized as revenues. Prepaids and Inventories. The City has no significant inventories. The cost of any inventoriable item has been recorded as an expenditure or expense at the time of purchase. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Restricted Assets. Certain proceeds of debt financings, as well as resources set aside for their repayment, are classified as restricted assets on the balance sheet because they are maintained in separate trust bank accounts and their use is limited by applicable debt covenants. Notes 2 and 7 have additional information on funds held by fiscal agents. 38

73 Notes to the Financial Statements June 30, 2014 Page 5 Note 1: Summary of Significant Accounting Policies (Continued) Capital Assets. Capital assets, which include property, plant, equipment and infrastructure assets (such as streets, sidewalks and bridges), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements, and in the proprietary funds statement of net position. Capital assets are defined by the City as assets with an initial, individual cost of more than $25,000. The City does not have any intangible assets. Detailed information on the City s capital assets can be found in Note 5. Property, plant and equipment of the City are depreciated using the straight line method over the following estimated useful lives: Assets Years Infrastructure Buildings and structures Improvements other than buildings Equipment 3-21 Compensated Absences. City employees are granted vacation and sick leave in varying amounts. In the event of termination, employees are reimbursed for the total value of their accumulated vacation days. Employees are reimbursed for 10% to 30% of the accumulated sick leave only upon retirement and only after at least 10 years of service. In selected cases, similar accumulated sick leave reimbursements may be available after 20 years of continuous employment. An employee's estate is reimbursed for 30% of the employee's accumulated sick leave in the event of death while in the City's employ. A liability for compensated absences is accrued in the government-wide and proprietary funds financial statements. Long-Term Obligations. In the government-wide financial statements, and proprietary funds in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary funds statement of net position. Bond premiums and discounts and deferred amounts on refunding are deferred and amortized over the life of the bonds. Deferred amounts on refunding are reported separately from assets and liabilities in the Statement of Net Position. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed as incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the period they originate. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 39

74 Notes to the Financial Statements June 30, 2014 Page 6 Note 1: Summary of Significant Accounting Policies (Continued) Fund Equity. In the fund financial statements, fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the City is bound to honor constraints on the specific purpose for which amounts in the funds can be spent. Fund balance is reported in five components in accordance with GASB Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions nonspendable, restricted, committed, assigned and unassigned. The City Council may take action via minute order to add, delete or amend a fund balance commitment that is not required as a condition of a bond covenant or other external, legal requirement. Nonspendable. This component includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted. This component consists of amounts that have constraints placed on them either externally by third-parties (creditors, grantors, contributors, or laws or regulations of other governments) or by law through constitutional provisions or enabling legislation. Enabling legislation authorizes the City to assess, levy, charge or otherwise mandate payment of resources (from external resource providers) and includes legally enforceable requirements (compelled by external parties) that those resources be used only for the specific purposes stipulated in the legislation. Committed. This component consists of amounts that can only be used for specific purposes pursuant to constraints imposed by minute order authorized by the City Council. Also included in this component are encumbrances which represent legal and binding obligations for the acquisition of future goods and services. Those committed amounts established by minute order cannot be used for any other purpose unless the City Council adopts a new minute order so directing. With respect to encumbered amounts, the City may take steps to cancel the order for goods or services and thereby terminate the obligation. Assigned. This component consists of amounts that are constrained by the City s intent to be used for specific purposes, but are neither restricted nor committed. The City Manager or Director of Finance are authorized to assign amounts to a specific purpose. Constraints imposed on the use of assigned amounts can be removed with no formal Council actions. Unassigned. This classification represents amounts that have not been restricted, committed or assigned to specific purposes. Fund Balance Spending Practice. The City follows a practice in which restricted, committed, assigned, and unassigned fund balances are spent when more than one amount is available for a specific purpose. When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, then unrestricted resources (committed, assigned and unassigned) as they are needed. When unrestricted resources (committed, assigned and unassigned) are available for use, it is the City s policy to use committed resources first, then assigned, and then unassigned as they are needed. 40

75 Notes to the Financial Statements June 30, 2014 Page 7 Note 1: Summary of Significant Accounting Policies (Continued) Budgets and Budgetary Accounting Overview. The City has received national recognition for its use of a two-year Financial Plan and budgetary process that emphasizes long-range planning and effective program management. Significant features of the City's two-year Financial Plan include the integration of Council goal-setting into the budgetary process and the extensive use of formal policies and measurable objectives. The Financial Plan includes operating budgets for two years and a capital improvement plan (CIP) covering five years. Under this multi-year approach, appropriations continue to be made annually; however, the Financial Plan is the foundation for preparing the budget for the second year. Additionally, unexpended operating appropriations from the first year may be carried over for specific purposes into the second year with the approval of the City Manager. Management Policies. The overall goal of the City's Financial Plan is to link what the City wants to accomplish over the next two years with the resources required to do so. Formal statements of budgetary policies and major objectives provide the foundation for achieving this goal. Key budget principles include: maintaining fund balances at levels which will protect the City from future uncertainties; estimating revenues at realistic levels; making current expenditures with current revenues; maintaining the City's traditional commitment to a strong General Fund; and complying with provisions of the State constitution, City charter, municipal code, and sound fiscal policy. Key revenue policies include: maintaining a diversified and stable revenue base; setting enterprise fund rates at levels that fully recover the total cost of providing services in the Water, Sewer and Parking Funds; and at policy levels for cost recovery in the Transit Fund; charging fees for General Fund programs in accordance with adopted user fee cost recovery goals; and ensuring that new development pays its fair share of the cost of constructing necessary community facilities. Budget Process. The City Manager is responsible for preparing the budget and submitting it to the Council for approval. Although specific steps will vary from year to year, the following is an overview of the general approach used under the City's two-year budgetary process: First Year. The Financial Plan process begins with City Council goal-setting to determine major objectives to be accomplished over the next two years. As part of this process, community groups, interested individuals, and Council advisory bodies present their recommendations to the Council. Goals approved by the City Council are incorporated into the budget instructions issued to the operating departments, who are responsible for submitting initial budget proposals. After these proposals are comprehensively reviewed and a detailed financial forecast is prepared, the City Manager issues the Preliminary Financial Plan for public comment. A series of study sessions and public hearings are then held leading to Council adoption of the Financial Plan and Budget prior to the start of the fiscal year. 41

76 Notes to the Financial Statements June 30, 2014 Page 8 Note 1: Summary of Significant Accounting Policies (Continued) Second Year. Before the beginning of the second year of the two-year cycle, the Council reviews the progress during the first year, makes adjustments as necessary and approves appropriations for the second fiscal year. Unspent operating appropriations from the first year may be carried over for specific purposes into the second year with the approval of the City Manager. Unspent and unencumbered operating appropriations lapse at the end of the second year. The fiscal year which ended June 30, 2014 was the first year of the two-year cycle. Mid-Year Reviews. The Council formally reviews the City's financial condition and amends appropriations, if necessary, each February. Status Reports. Financial reports are prepared monthly to monitor the City's fiscal condition; more formal reports are issued to the Council and Department Heads on a quarterly basis. Additionally, more focused reports are issued on key revenues, such as sales tax, transient occupancy tax and quarterly reports on investments. The status of major goals and program objectives, including CIP projects, are also formally reported to the Council on an ongoing basis. Accounting and Budget Administration. Budgets are prepared for each fund in accordance with its respective basis of accounting consistent with U.S. Generally Accepted Accounting Principles (GAAP). All governmental funds have legally adopted budgets annually. While budgets are prepared for the City's capital projects funds, the capital projects generally span more than one year and are effectively controlled at the project level; accordingly, budgetary comparisons are not presented in the accompanying other supplementary information following the basic financial statements. As provided under the City Charter, the Council may amend or supplement the budget at any time after its adoption by majority vote of the Council members. The legal level of budgetary control the level at which expenditures are not to exceed appropriations is the fund level. For management control purposes, the City Manager has the authority to make or approve administrative adjustments to the budget as long as those changes will not have a significant policy impact nor affect budgeted year-end fund balances. Department heads have the authority to transfer line-item budgets within the department within a fund. During fiscal year 2014 several supplemental budget appropriations were made to reflect the inclusion of costs related to prior year encumbered amounts as well as the rollover of unspent capital appropriations. Additional appropriations were added to fund a prepayment made to the retirement system as well as to provide additional resources for the Community Development Department to ensure that it maintained a development review process that complied with State law in light of the increased demand for services. These adjustments were material when compared to the original appropriations. Both the original and final amended budgets of the general fund are presented as required supplementary information following the notes to the financial statements. Budget information for non-major governmental funds with annual budgets is presented in other supplementary information following the notes to the financial statements. 42

77 Notes to the Financial Statements June 30, 2014 Page 9 Note 1: Summary of Significant Accounting Policies (Continued) Encumbrances. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the governmental funds. Encumbrances outstanding at the end of the year are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Amounts encumbered at year end are re-appropriated in the following year. Indirect Cost Reimbursement. All of the City's general government and engineering programs are accounted and budgeted for in the General Fund. However, some of these support service programs also benefit the City's enterprise and agency fund operations, and accordingly, transfers are made from these funds to reimburse the General Fund for these services. The transfers are based on a Central Service Cost Allocation Plan prepared for this purpose, which distributes these shared costs in a uniform, consistent manner in accordance with GAAP. Note 2: Cash and Investments The City follows the practice of pooling cash and investments for all funds under its direct daily control. Funds held by outside fiscal agents under provisions of bond indentures are maintained separately. Interest earned on pooled cash and investments is allocated quarterly to the various funds based on the respective fund's average quarterly cash balance. Interest earned from cash and investments with fiscal agents is credited directly to such funds. Investments The City is authorized by its investment policy, in accordance with Section of the California Government Code, to invest in the following instruments: Treasury bills and notes Government Sponsored Enterprises Commercial paper Repurchase agreements Bankers' acceptances Corporate medium-term notes Negotiable certificates of deposit Collateralized bank deposits Money market mutual funds State Local Agency Investment Fund (LAIF) 43

78 Notes to the Financial Statements June 30, 2014 Page 10 Note 2: Cash and Investments (Continued) Investments are stated at fair value, based on quoted market prices, except for discount notes which are stated at amortized cost which approximates fair value, in accordance with GASB standards. Investment income has been adjusted to reflect any unrealized gains and losses resulting from the fair value adjustment annually. While U.S. generally accepted accounting principles require recording any increases or decreases in the market value of the City s investments, it is the City s policy to make all investment decisions based on holding them through maturity, and therefore the City may not realize the gains or losses resulting from the fair value adjustment. As such, changes in market value generally do not affect the long-term results of the portfolio, but they can result in significant fluctuations from year-to-year. The fair value of the City s position in the State LAIF pool is the same as the value of the pool shares. The State LAIF pool credit quality is unrated. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer s Office audits the fund annually. Funds with Fiscal Agent The City has monies held by trustees or fiscal agents pledged to the payment or security of certain bonds. The California Government Code provides that these funds, in the absence of specific statutory provisions governing the issuance of bonds, may be invested in accordance with the ordinance, resolutions, or indentures specifying the types of investments its trustees or fiscal agents may make. These ordinances, resolutions, or indentures are generally more restrictive than the City's general investment policy. In no instance have additional types of investments been authorized which are not permitted by the City's investment policy. Cash and investments at June 30, 2014 consisted of the following: Cash and Investments: Fair Value Percent of Portfolio Cash and Cash Equivalents $ 3,782, % State Local Agency Investment Fund 35,184, % U.S. Treasury Securities 12,592, % U.S. Government-Sponsored Enterprise Agency Securities 29,481, % Guaranteed Investment Contracts 2,036, % U.S. Corporate Bonds 6,706, % Collateralized Certificates of Deposit 1,000, % Money Market Funds 806, % Total Cash and Investments $ 91,590, % 44

79 Notes to the Financial Statements June 30, 2014 Page 11 Note 2: Cash and Investments (Continued) Cash and investments are reflected in the financial statements as follows: Governmental Funds Enterprise Funds Total Cash and cash equivalents $ 2,093,220 $ 2,172,408 $ 4,265,628 Investments 28,864,957 51,412,535 80,277,492 Cash and investments held by fiscal agents 4,798,517 2,248,979 7,047,496 Total Cash and Investments $ 35,756,694 $ 55,833,922 $ 91,590,616 Cash and cash equivalents of $4,265,628 differ from that shown in the previous table ($3,782,085) due to the reclassification of the negative cash allocation in several funds (including CDBG Fund, Law Enforcement Grant Fund, and the General CIP Grant Fund) to accounts payable for financial statement purposes. The negative cash allocation is the result of timing differences between the receipt of revenue, the payment of expenses and the investment activity within the funds, but does not indicate any cash or investment accounts held are negative as of June 30, Custodial Credit Risk Deposits with Financial Institutions. The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover deposits. Deposits with financial institutions, including certificates of deposit, totaling $5,761,336 at June 30, 2014 were insured or collateralized with securities held by the pledging financial institution's trust department or agent in the City's name. The California Government Code requires California financial institutions to secure the City's deposits by pledging government securities as collateral. The market value of the pledged securities must equal 110% of the City's deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes equal to 150% of the City's deposits or letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105% in excess of the total amount of deposits. Custodial Credit Risk - Investments. This is the risk that in the event of the failure of a counterparty, the City will not be able to recover the value of its investments that are in the possession of an outside party. All of the City s investments in securities are insured or registered and held by a counterparty in the City s name in accordance with the City s policies. Interest Rate Risk. This is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. In accordance with its policies in the Investment Management Plan, the City mitigates interest rate risk by: Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market before maturity. Investing operating funds primarily in shorter-term securities. 45

80 Notes to the Financial Statements June 30, 2014 Page 12 Note 2: Cash and Investments (Continued) The City s investment policy also includes portfolio maturity targets. A minimum of 20% of the portfolio will be invested in securities maturing in one year or less. Up to 80% of the portfolio can be invested in securities with a maturity over one year, with no more than 10% of the portfolio invested in securities with a maturity over five years. Maturities using the segmented time distribution method for those investments requiring this disclosure are as follows: Fair Value Less Than One Month One Month to One Year One to Five Years Over Five Years U.S. Treasury Securities $ 12,592,945 $ $ 10,922,995 $ 1,144,730 $ 525,220 U.S. Government-Sponsored Enterprise Agency Securities 29,481,642 29,481,642 Certificates of Deposit 1,000,000 1,000,000 Guaranteed Investment Contract 2,036,161 2,036,161 U.S. Corporate Bonds 6,706,677 6,706,677 State LAIF 35,184,297 35,184,297 Money Market Funds 806, ,809 Total Maturities $ 87,808,531 $ 35,991,106 $ 11,922,995 $ 37,333,049 $ 2,561,381 Investments held by fiscal agents are structured with maturity dates that correspond to the payment of final debt service of the respective bond indenture. Credit Risk. This is the risk of loss due to the failure of the security issuer or backer. The City s policies to mitigate credit risk include: Limiting investments to the safest types of securities. As noted above, the California Government Code limits the investment vehicles available to local agencies. The credit risk of these securities is measured by the assignment of a rating by a nationally recognized statistical rating organization. The table below presents the rating for each investment type as provided by Standard & Poor s except as noted. Pre-qualifying the financial institutions, broker/dealers, intermediaries and advisors with which the City will do business. 46

81 Notes to the Financial Statements June 30, 2014 Page 13 Note 2: Cash and Investments (Continued) The following table identifies the Standard & Poor s credit quality ratings for those investments requiring this disclosure as of June 30, 2014: Fair Value AAA AA+ AA AA- Not Rated Investments: U.S. Treasury Securities $ 12,592,945 $ $ $ $ $ 12,592,945 U.S. Government-Sponsored Enterprise Agency Securities 29,481,642 29,481,642 Certificates of Deposit 1,000,000 1,000,000 Guaranteed Investment Contracts 2,036,161 2,036,161 U.S. Corporate Bonds 6,706,677 1,309,949 1,803,160 2,663, ,004 State LAIF 35,184,297 35,184,297 Money Market Funds 806, ,809 Total $ 87,808,531 $ 1,309,949 $ 31,284,802 $ 2,663,564 $ 930,004 $ 51,620,212 U.S. Treasury securities are exempt from credit rating disclosures. Concentration Credit Risk. The City s policies contained in the Investment Management Plan provide guidelines (by type of investment that limits either the dollar amount, the percent of the portfolio or the maturity term) for diversifying the investment portfolio so that potential losses on individual securities will be minimized. The City s Investment Management Plan outlines the following criteria related to portfolio diversification: No more than 5% of the City s portfolio (exclusive of government agency issues or LAIF) shall be placed with any financial institution. No more than 25% of the City s portfolio shall be invested in collateralized certificates of deposit issued by financial institutions. Certificates of deposit (negotiable and collateralized) placed by the City shall not constitute more than 15% of the total assets of the institution; and negotiable certificates of deposit will only be placed with institutions with total assets in excess of $200 million and that maintain a ratio of equity to total assets of at least 5%. 47

82 Notes to the Financial Statements June 30, 2014 Page 14 Note 2: Cash and Investments (Continued) Investments that exceed 5% of the portfolio by issuer are summarized below: Percent of Fair Value Portfolio Federal Home Loan Bank $ 6,559, % Federal National Mortgage Association 7,401, % Federal Home Loan Mortgage Corp 7,818, % Federal Farm Credit Bank 6,609, % These U.S. government-sponsored enterprise agency securities are not explicitly guaranteed by the U.S. government. Approximately 14% of the City s portfolio is comprised of U.S. Treasury securities, which are exempt from this disclosure. Foreign Currency Risk. The City does not hold any investment that is based foreign currency exchange rates. Note 3: Property Taxes Property taxes in the State of California (State) are administered for all local agencies at the county level, and consist of secured, unsecured and utility tax rolls. The following is a summary of major policies and practices relating to property taxes: Property Valuation. Valuations are established by the Assessor of the County of San Luis Obispo (County) for the secured and unsecured property tax rolls; the utility property tax roll is valued by the State Board of Equalization. Under the provisions of Article XIIIA of the State Constitution (Proposition 13 adopted by the voters on June 6, 1978), properties are assessed at 100% of full value. Proposition 13 also modified the value of taxable real property for fiscal 1979 by rolling back values to fiscal 1976 levels. From this base of assessment, subsequent annual increases in valuation are limited to a maximum of 2%. However, increases to full value are allowed for property improvements or upon change in ownership. Personal property is excluded from these limitations and is subject to annual reappraisal. Tax Levies. Under the provisions of Proposition 13, the County wide tax levy for general revenue purposes is limited to 1% of full market value, which results in a tax rate of $1.00 per $100 assessed valuation. Tax rates for voter approved indebtedness are excluded from this limitation. Tax Levy Dates. All lien dates attach annually on January 1 preceding the fiscal year for which the taxes are levied. The fiscal year begins July 1 and ends June 30 of the following year. Taxes are levied on both real and unsecured personal property as it exists at that time. The lien against real estate as well as the tax on personal property is not relieved by subsequent renewal or change in ownership. 48

83 Notes to the Financial Statements June 30, 2014 Page 15 Note 3: Property Taxes (Continued) Tax Collections. The County Treasurer/Tax Collector is responsible for all property tax collections. Taxes and assessments on the secured and utility rolls, which constitute a lien against the property, may be paid in two installments: the first installment is due on November 1 of the fiscal year and is delinquent if not paid by December 10; and the second installment is due on March 1 of the fiscal year and is delinquent if not paid by April 10. Unsecured personal property taxes do not constitute a lien against real property. However, if the taxes become delinquent the lien is attached against anything the individual owns, which could include real property. Payment must be made in one installment, which is delinquent if not paid by August 31 of the fiscal year. Significant penalties are imposed by the County for late payments. Teeter Plan. In the City elected to receive property tax revenue in accordance with the alternative method of distribution prescribed by Sections of the California Revenue and Taxation Code, which is commonly known as the Teeter Plan whereby the County remits 100% of taxes levied without regard to delinquencies. The County then pursues collection, retaining any delinquent taxes and related penalties and interest. Tax Levy Apportionments. Due to the nature of the County wide maximum levy, it is not possible to identify general purpose tax rates for specific entities. Under State legislation adopted subsequent to the passage of Proposition 13, apportionments to local agencies are made by the County Auditor Controller based primarily on two factors: the ratio that each agency represented of the total County wide levy for the three years prior to fiscal 1979; and subsequent adjustments to these apportionments and transfers to the Educational Revenue Augmentation Fund (ERAF) as determined by the State. City Property Tax Distribution Policy. Property taxes are recorded in the General Fund as general purpose revenue. Transfers are made from the General Fund as needed to support expenditures in the Capital Outlay, Open Space Protection, Fleet Replacement, Information Technology Replacement, Major Facility Replacement and Debt Service Funds. Property taxes receivable at June 30, 2014 have been accrued since they will be collected within 60 days subsequent to year-end. 49

84 Notes to the Financial Statements June 30, 2014 Page 16 Note 4: Due from Other Governments The following is a summary of amounts due to the City from other governmental agencies: County of San Luis Obispo State of California Other Agencies Total General Fund $ 377,954 $ 3,363,801 $ 211,643 $ 3,953,398 Capital Outlay Fund 355, , ,101 Other Governmental Funds 118, , ,181 Enterprise Funds Water Fund 71,622 71,622 Sewer Fund 59,888 59,888 Transit Fund 474,453 1,292,819 1,767,272 Total $ 970,607 $ 4,052,421 $ 1,867,434 $ 6,890,462 Note 5: Capital Assets GASB standards require that the City report in the government-wide statements the value of all capital assets net of accumulated depreciation, including infrastructure assets, in accordance with GAAP. Infrastructure assets are defined as long-lived capital assets that are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. The minimum requirement for compliance with GASB standards is to provide infrastructure valuations for all assets constructed, acquired, or placed into service on or after July 1, Relevant assets for the City were valued at one of two dates: 1) the original date of construction, if available, or 2) the incorporation date of the City. Each asset was reviewed to determine the adequacy of the data to value the asset prior to July 1, 1980 using historical cost or estimated historical cost. 50

85 Notes to the Financial Statements June 30, 2014 Page 17 Note 5: Capital Assets (Continued) Capital assets activity for the fiscal year ended June 30, 2014 was as follows: Governmental activities: Capital assets not being depreciated: Land 32,043,900 Balance Balance June 30, 2013 Increases Decreases June 30, 2014 $ $ - $ - $ 32,043,900 Construction in progress 8,738,300 4,560,655 (1,098,325) 12,200,630 Public art 646, ,600 Total capital assets not being depreciated 41,428,800 4,560,655 (1,098,325) 44,891,130 Capital assets being depreciated: Infrastructure 140,610,700 2,200, ,810,770 Accum. Depreciation (41,622,200) (3,228,003) (44,850,203) Buildings and improvements 35,140, ,024 35,357,824 Accum. Depreciation (15,126,300) (869,134) (15,995,434) Equipment 21,941, ,255 (435,074) 22,424,798 Accum. Depreciation (14,318,851) (1,324,649) 376,226 (15,267,274) Total capital assets being depreciated, net 126,625,766 (2,086,437) (58,848) 124,480,481 Governmental activities, capital assets, net 168,054,566 2,474,218 (1,157,173) 169,371,611 Business-type activities: Capital assets not being depreciated: Land 8,607,177 8,607,177 Construction in progress 3,730,227 5,379,967 (529,979) 8,580,215 Public art 74,100 74,100 Total capital assets not being depreciated 12,411,504 5,379,967 (529,979) 17,261,492 Capital assets being depreciated: Infrastructure 195,850,244 1,430, ,280,931 Accum. Depreciation (60,749,300) (4,506,191) (65,255,491) Buildings and improvements 30,052,496 30,052,496 Accum. Depreciation (10,461,900) (625,360) (11,087,260) Equipment 16,310, ,452 (1,037,928) 15,855,696 Accum. Depreciation (8,957,541) (1,135,915) 986,323 (9,107,133) Total capital assets being depreciated, net 162,044,171 (4,253,327) (51,605) 157,739,239 Business-type activities, capital assets, net 174,455,675 1,126,640 (581,584) 175,000,731 Total Government-wide $ 342,510,241 $ 3,600,858 $ (1,738,757) $ 344,372,342 51

86 Notes to the Financial Statements June 30, 2014 Page 18 Note 5: Capital Assets (Continued) Depreciation expense was charged to functions/programs as follows: Governmental activities: Public safety $ 758,441 Transportation 3,022,225 Leisure, cultural and social services 719,375 Community development 1,194 General government 920,551 Total depreciation - governmental activities 5,421,786 Business-type activities: Water 2,716,681 Sewer 2,037,021 Parking 628,586 Transit 885,178 Total depreciation - business-type activities 6,267,466 Total Government-wide $ 11,689,252 Note 6: Employee Retirement Benefits California Public Employees' Retirement System (CalPERS) Plan Description. The City contributes to the California Public Employees Retirement System (CalPERS), which provides agent multiple-employer public employee defined benefit pension plans and cost-sharing multiple employer defined benefit pension plans. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provision and all other requirements are established by State statute and City ordinance. Copies of CalPERS annual financial report may be obtained from their Executive Office, 400 P Street, Sacramento, CA The City maintains separate retirement benefit programs for safety employees (sworn police and firefighters) and miscellaneous employees (all other eligible employees). For both programs, benefits vest after five years of service. City employees who retire after vesting are entitled to an annual retirement benefit, payable for life, in an amount equal to a fixed percentage of their highest annual salary as determined by the benefit program they participate in. Effective July 1, 2007, the City s Safety Employee Plan (sworn police and fire employees) became a member of the CalPERS Safety 3% at 50 Risk Pool. CalPERS regulations require that public agency plans with less than 100 active members participate in a risk pool which meets the requirements for a cost-sharing multiple employer defined benefit pension plan. In the past, the City s Safety Employee Plan had more than 100 members and as such was a stand-alone plan. After joining a risk pool, a plan cannot at a future date request to leave the risk pool structure and become a standalone plan. Therefore, even if the City were to exceed 100 active members in the future, the Safety Employee Plan will 52

87 Notes to the Financial Statements June 30, 2014 Page 19 Note 6: Employee Retirement Benefits (Continued) remain in the risk pool. As a member of the risk pool, the City receives specific information on its plan, which is reflected in the tables that appear later in this footnote. Within each retirement program, there are three benefit tier programs described below: For employees who retire from the first tier benefit program, the service retirement benefit for public safety is capped at 90% of final compensation. There is no cap on retirement benefits for miscellaneous employees. The second tier benefit program provides a lower level of retirement benefits than the first tier benefit program. Employees hired after August 30, 2012 (sworn fire personnel) and after December 6, 2012 (miscellaneous and sworn police safety personnel) who meet eligibility requirements, are enrolled in the second tier benefit program. The third tier benefit program was implemented in January 2013 following the passage of AB 340 by the California Legislature. Employees hired after December 31, 2012 who were not previously enrolled in the CalPERS system elsewhere or who have had a break in service of at least 6 months are required to be enrolled in this retirement program which provides a benefit level that is lower than the first two tiers. Funding Policy. Unless otherwise noted, the following table information is presented for all of the retirement programs maintained by the City with CalPERS. Through December 2011, the City made the contributions required of City employees on their behalf and for their account (except for the Fire Battalion Chiefs and sworn Police Officers, who paid the 9% member contribution; non-sworn police members who paid the 8% member contribution). Beginning in January 2012, unrepresented management personnel began contributing the 8% or 9% full member contribution as appropriate. Subsequent negotiations with bargaining units resulted in agreements that resulted in the remaining employees paying the full member contributions. As of January 2014, members of the Police Officers Association are also paying 3% of the City s share of the annual required contribution. For the year ended June 30, 2014, the City s actuarially determined employer contribution rate was % of annual covered payroll for miscellaneous employees. This employer contribution rate represents a composite value provided by CalPERS for all three of the miscellaneous program s benefit programs. For the safety program s first tier benefits, the employer contribution rate was % The employer rates for the second tier safety benefit program were % (Fire) and % (Police). The contribution requirements of plan members and the City are established and may be amended by CalPERS. The following table provides the three year employer contribution rates when applicable, for the City s retirement programs, as taken from the applicable CalPERS Valuation Report. 53

88 Notes to the Financial Statements June 30, 2014 Page 20 Note 6: Employee Retirement Benefits (Continued) Retirement Program/Tier First Tier Second Tier Third Tier Fiscal Year Miscellaneous Safety Police Fire Police Fire 6/30/ % % n/a n/a n/a n/a 6/30/ % % % % n/a n/a 6/30/ % % % % % % Annual Pension Cost. For the year ended June 30, 2014, the City s annual required contributions for CalPERS was $4,528,325 for miscellaneous employees and $4,152,103 for all safety employees, which were equal to the City s annual expense and the ARC. The ARC was determined as part of the actuarial valuation dated June 30, 2011 using the entry age normal actuarial cost method. CalPERS indicates that the lag time in reporting is necessary due to the amount of time needed for them to extract and test the membership and financial data, and due to the need to provide public agencies with their employer contribution rates well in advance of the start of the fiscal year for budgeting purposes. The actuarial assumptions included: (a) 7.5% investment rate of return (net of administrative expenses); (b) projected salary increases that vary by duration of service ranging from 3.3% to 14.2% for both miscellaneous and safety members; and (c) an inflation factor of 2.75% compounded annually; and (d) 2.0% annual cost-of-living adjustments for miscellaneous and safety members. No other post-retirement assumptions are included. The actuarial values of the miscellaneous and safety plans assets were determined using a technique that smoothes the effect of short-term volatility in the market value of investments over a fifteen year period. The unfunded actuarial accrued liability (or surplus) is amortized as a level percentage of projected payrolls on a closed basis. As shown in the June 30, 2013 valuation report, the unfunded liability for both plans is comprised of several amounts or bases. For the Safety Plan these include the side fund and the plan s share of the pre-2013 pool unfunded liability. These amounts are amortized over 21 years and 22 years respectively. The unfunded liability of the Miscellaneous Plan is comprised of the liability related to benefits changes and changes in actuarial assumptions. These are amortized over 10 years and 16 years respectively. For both plans, the liability attributed to asset gains and losses is amortized over a 30 year period. These changes in the amortization methods and period are based on the April 17, 2013 action taken by the CalPERS Board of Administration. In addition, the CalPERS board approved changes in actuarial assumptions regarding retiree mortality which will have an effect on employer rates starting in The CalPERS board caused all public safety pools to merge into one pool while also changing the allocation of the pool s unfunded liability so that it will be based on each member agency s share of the total pool liability rather than the member s share of the total payroll of the pool. Finally, the board approved a change in funding the unfunded liability by creating a fixed charge that must be paid by the member agency to replace an amount that is determined by a charge against the member s payroll expense starting in

89 Notes to the Financial Statements June 30, 2014 Page 21 Note 6: Employee Retirement Benefits (Continued) The following table provides the amount of annual contributions made to each of the retirement plans for the three fiscal years ending on June 30, 2012, 2013, and Fiscal Year Annual Pension Cost (APC) % of APC Contributed Net Pension Obligation Safety Employee Plan (all employees): 6/30/2012 $ 4,226, % - 6/30/2013 4,609, % - 6/30/2014 4,152, % - Miscellaneous Employee Plan (all employees): 6/30/2012 $ 4,202, % - 6/30/2013 4,136, % - 6/30/2014 4,528, % - Funded Status and Funding Progress. The City has chosen to provide the following table which provides the funded status of the 3% at 50 Risk Pool based on the City s share of the Pool s unfunded liability and the miscellaneous retirement program as of June 30, 2013, the plan s most recent actuarial valuation date. The information shown below is based on the market value of assets as of June 30, First Tier Benefit Plans Only (amounts in thousands) 3% at 50 Safety Risk Pool Miscellaneous Employee Plan Actuarial accured liability (AAL) $ 154,746 $ 163,765 Market value of plan assets 100, ,989 Unfunded actuarial accrued liability (UAAL) 53,836 61,776 Funded ratio (actuarial value of plan assets/aal) 65.2% 62.3% Covered payroll (active Plan members) 9,981 18,676 UAAL as a percentage of covered payroll 539.4% 330.8% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and pension cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, included in required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 55

90 Notes to the Financial Statements June 30, 2014 Page 22 Note 6: Employee Retirement Benefits (Continued) Other Post-Employment Benefits (OPEB) The City s primary OPEB cost obligation is for retiree health benefits under the election to participate in the California Public Employees Retirement System (CalPERS) Health Benefit Program, an agent multiple-employer defined benefit OPEB plan, under the unequal contribution option. The City entered the CalPERS medical insurance program in 1993 under the Public Employees Medical and Hospital Care Act (PEMHCA). The required employer contribution was $ per month in Retirees pay the differential monthly amount of the premium, which varies depending on the health benefits they select. Additionally, the City has established certain post-retirement health care benefits available to executive management employees appointed prior to August For 6 former employees, the City contributes to the cost of the retiree health insurance premiums if they elect to remain members of the City's group health plan. This provision ceases upon the death of the employee or upon the retired employee reaching age 65. During the fiscal year ended June 30, 2009, the City entered into an agreement with California Employers Retiree Benefit Trust (CERBT) to pre-fund the City s OPEB liability. Funding Policy. The contribution requirements of the plan members and the City are established and may be amended by the City. The City prefunds the plan through CERBT by contributing at least 100% of the annual required contribution. The annual required contribution (ARC) is an amount actuarially determined in accordance with the parameters of GASB standards. The City s ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize the unfunded actuarial liability over a period of 30 years. The ARC for was $576,000. For fiscal year , the City contributed $576,000 to the Plan, which fully funded the ARC. The City paid $254,600 to the CalPERS Health Benefit Program and retirees during the year and $321,400 to the CERBT. CERBT is a tax-qualified irrevocable trust organized under Internal Revenue Code Section 115 and established to prefund retiree healthcare benefits. CERBT issues a publicly available financial report including GASB disclosure information in aggregate with other CERBT participating employers. That report may be obtained by contacting CalPERS, 400 P Street, Sacramento, CA Annual OPEB Cost and Net OPEB Obligation. For the fiscal year ended June 30, 2014, the City s annual OPEB cost (expense) of $576,000 was equal to the annual required contribution. 56

91 Notes to the Financial Statements June 30, 2014 Page 23 Note 6: Employee Retirement Benefits (Continued) The City s Annual OPEB Cost, the percentage of Annual OPEB Cost contributed to the Plan (as described in the funding policy above) and the Net OPEB Obligation for fiscal years and is as follows: Fiscal Year Ended Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 6/30/2014 $ 576, % - 6/30/ , % - 6/30/ , % - Funded Status and Funding Progress. The funded status of the plan as of June 30, 2013, the plan s most recent actuarial valuation date, was as follows: Actuarial accured liability (AAL) $ 6,954,000 Actuartial value of plan assets 2,527,000 Unfunded actuarial accrued liability (UAAL) 4,427,000 Funded ratio (actuarial value of plan assets/aal) 36.3% Covered payroll (active Plan members) 27,163,000 UAAL as a percentage of covered payroll 16.3% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress is presented as required supplementary information following the notes to the financial statements. The schedule presents multiyear trend information about whether the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits, and will include additional years in the future as information becomes available. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. 57

92 Notes to the Financial Statements June 30, 2014 Page 24 Note 6: Employee Retirement Benefits (Continued) In the June 30, 2013 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions included a 7.00% investment rate of return (net of administrative expenses), which is below the expected 7.61% longterm investment return on CERBT investments and a 3% inflation assumption. The projected health care cost trend rates range from 8-8.3% for 2015 down to 5% after The actuarial value of assets (AVA) at June 30, 2014 were projected to be less than market value (MVA) ($3,083,000 AVA vs. $3,351,000 MVA). The unfunded actuarial accrued liability (UAAL) is being amortized over 30 years based on a level percentage of payroll. The remaining amortization period at June 30, 2014 was 24 years. Note 7: Long-Term Debt Summary of Long-Term Debt The following is a summary of the City's long-term debt transactions for the year ended June 30, 2014: Balance Balance Due Within June 30, 2013 Additions Deductions June 30, 2014 One Year Governmental activities: Revenue bonds $ 23,574,900 $ $ (1,422,890) $ 22,152,010 $ 1,175,295 Unamortized bond premium 414,225 (23,064) 391,161 Lease-purchase financing 823,400 (111,778) 711, ,778 Claims and liabilities 2,025, ,419 2,371, ,500 Compensated absences 2,537,600 1,984,265 (2,056,617) 2,465,248 1,056,353 Conservation Loan - 850, ,775 84,683 Total long-term debt, governmental activities $ 29,375,225 $ 3,181,459 $ (3,614,349) $ 28,942,335 $ 2,862,609 Business-type activities: Revenue bonds $ 28,625,150 $ $ (1,542,110) $ 27,083,040 $ 1,099,705 Unamortized bond premium 676,748 (69,905) 606,843 Loans 20,309,200 (862,254) 19,446, ,933 Installment sale agreements 1,620,000 7,479,000 (120,000) 8,979, ,958 Compensated absences 595, ,341 (434,601) 562, ,011 Total long-term debt, business-type activities 51,826,898 7,880,341 (3,028,870) 56,678,369 2,723,607 Total Government-wide $ 81,202,123 $ 11,061,800 $ (6,643,219) $ 85,620,704 $ 5,586,216 Compensated absences in the governmental funds are generally liquidated by the General Fund on a pay as you go basis. Total interest incurred during the year ended June 30, 2014 was $3,313,399 of which $439,000 was capitalized into construction in progress. See Note 10 for detail of estimated claims and liabilities. 58

93 Notes to the Financial Statements June 30, 2014 Page 25 Note 7: Long-Term Debt (Continued) The San Luis Obispo Capital Improvement Board has entered into a number of lease agreements with the City of San Luis Obispo wherein the City is obligated to make all debt service payments. The transactions between the Board and the City have been eliminated from these financial statements. Governmental Activities Summary: Revenue Bonds 2005 Revenue Refunding Bonds. In 2005, the Board issued lease revenue refunding bonds in the amount of $6,550,000 to refinance the 1996 lease revenue bonds. The purpose of these bonds was to construct several high priority capital improvement projects, including the fire station headquarters, seismic safety and HVAC improvements to City Hall, Mission Plaza expansion, and various properties and street lighting system purchases. The bonds bear interest from 3.4% to 4.5%, and are due in annual installments on June 1 through June 1, 2026 that range from $195,000 to $565,000. At June 30, 2014, the principal amount outstanding on the bonds was $4,395,000. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30, Lease Revenue Bonds. In 2006, the Board issued lease revenue bonds in the amount of $16,160,000 to finance the costs of acquisition and construction of public parking facilities and for purposes of the City s administrative office. Of the original bond issuance, $7,433,600 was used for financing governmental activities related to this project and the remainder was used for business-type activities. The bonds bear interest from 4.00% to 4.70%, and are due in annual installments on June 1 through June 1, 2036 that range from $116,100 to $515,700. At June 30, 2014, the principal amount outstanding that pertains to governmental activities was $6,279,000 of the total $13,650,000 outstanding. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30, Lease Revenue Bonds. In 2009, the Board issued lease revenue bonds in the amount of $10,705,000 to finance the public safety communications and emergency operations center project. Of the original bond issuance, $9,067,135 was used for financing governmental activities related to this project and the remainder was used for business-type activities. The bonds bear interest from 3.0% to 5.75%, and are due in annual installments on June 1 through June 1, 2039 that range from $355,740 to $563,255. At June 30, 2014, the principal amount outstanding that pertains to governmental activities was $6,848,010 of the total $8,085,035 outstanding. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30,

94 Notes to the Financial Statements June 30, 2014 Page 26 Note 7: Long-Term Debt (Continued) 2012 Refunding Lease Revenue Bonds. In 2012, the Board issued refunding lease revenue bonds in the amount of $5,050,000 to refinance the outstanding 2001 lease revenue bonds, Series C. The purpose of these bonds is to purchase property and build athletic fields, purchase property for police station expansion, and purchase Downton Plan properties. The bonds bear interest from 2.0% to 4.0%, and are due in annual installments on December 1 through December 1, 2029 that range from $210,000 to $390,000. At June 30, 2014, the principal amount outstanding on the bonds was $4,630,000. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30, At June 30, 2014, the aggregate maturities of the aforementioned governmental activities revenue bonds were as follows: For the Year Ending June 30, Principal Interest Total 2015 $ 1,175,295 $ 980,556 $ 2,155, ,212, ,124 2,150, ,246, ,622 2,138, ,299, ,792 2,143, ,345, ,416 2,138, ,109,840 3,277,526 8,387, ,038,675 2,099,576 7,138, ,398,130 1,113,884 4,512, ,327, ,476 2,650,936 $ 22,152,010 $ 11,263,972 $ 33,415,982 Lease-Purchase Financing Fire Apparatus. In 2010 the Board obtained lease-purchase financing in the amount of $1,080,000 to purchase a fire truck. The gross amount of assets under this lease is $1,047,927 million with accumulated depreciation of $213,909 included in equipment at June 30, Amortization of the equipment is included in depreciation expense. The lease agreement bears an interest rate of 2.99% due in annual installments on February 1 through February 1, 2020 that range from $80,000 to $125,100. At June 30, 2014 the principal amount outstanding is $695,000. Police Vehicle. In 2012, the City obtained lease-purchase financing in the amount of $30,264 to purchase a police vehicle. The gross amount of assets under this lease is $30,264 with accumulated depreciation of $16,141 included in equipment at June 30, Amortization of the equipment is included in depreciation expense. The note bears an interest rate of 3.89% due in annual installments of $6,778 on October 1 with the remainder due at maturity on October 1, At June 30, 2014 the principal amount outstanding is $16,

95 Notes to the Financial Statements June 30, 2014 Page 27 Note 7: Long-Term Debt (Continued) At June 30, 2014, the aggregate maturities of the aforementioned governmental activities lease-purchase financing were as follows: For the Year Ending June 30, Principal Interest Total 2015 $ 116,778 $ 20,781 $ 137, ,778 17, , ,066 14, , ,000 10, , ,000 7, , ,000 3, ,738 $ 711,622 $ 74,304 $ 785, Energy Sources Conservation State Loan. In 2014, the City obtained a note in the amount of $850,775. The note bears an interest rate of 1% due in semi-annual installments on December 22 and June 22 through December 22, 2023 in the amount of $92,242. At June 30, 2014 the principal amount outstanding is $850,775. At June 30, 2014, the aggregate maturities of the aforementioned governmental activities conservation loan is as follows: For the Year Ending June 30, Principal Interest Total 2015 $ 84,683 $ 9,559 $ 94, ,778 7,465 94, ,667 6,575 94, ,546 5,696 94, ,434 4,809 94, ,667 10, ,090 $ 850,775 $ 44,527 $ 895,302 Business-Type Activities Summary: Revenue Bonds 2006 Lease Revenue Bonds. In 2006, the Board issued lease revenue bonds in the amount of $16,160,000 to finance the costs of acquisition and construction of public parking facilities and for purposes of the City s administrative office. Of the original bond issuance, $8,726,400 was used for financing business-type activities related to this project and the remainder was used for governmental activities. The bonds bear interest from 4.00% to 4.70%, and are due in annual installments on June 1 through June 1, 2036 that range from $116,100 to $515,700. At June 30, 2014, the principal amount 61

96 Notes to the Financial Statements June 30, 2014 Page 28 Note 7: Long-Term Debt (Continued) outstanding that pertains to business-type activities was $7,371,000 of the total $13,650,000 outstanding. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30, Lease Revenue Bonds. In 2009, the Board lease revenue bonds in the amount of $10,705,000 were issued to finance the public safety communications and emergency operations center project. Of the original bond issuance, $1,637,865 was used for financing business-type activities related to this project and the remainder was used for governmental activities. The bonds bear interest from 3.0% to 5.75%, and are due in annual installments on June 1 through June 1, 2039 that range from $64,260 to $58,905. At June 30, 2014, the principal amount outstanding that pertains to businesstype activities was $1,237,040 of the total $8,085,035 outstanding. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30, Water Revenue Refunding Bonds. In 2012, the City issued water revenue refunding bonds in the amount of $4,960,000 to refund the 2002 water revenue bonds, which were originally issued to fund water system improvements. The bonds bear interest from 2.0% to 4.0%, and are due in annual installments on June 1 through June 1, 2023 than range from $340,000 to $550,000. At June 30, 2014, the principal amount outstanding on the bonds was $4,240,000. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30, The City has pledged future water system revenues, net of specific operating expenses, to repay the bonds on parity with a pledge that services all parity obligations. The bonds are payable solely from water customer net revenues and any moneys in the bond service fund and the reserve fund. The principal and interest payments on the bonds required less than 11% of net revenues. For the year ended June 30, 2014, principal and interest paid and total customer net revenues were $564,800 and $5,076,210 respectively Water Revenue Bonds. In 2006, the City issued water revenue bonds in the amount of $16,905,000 to construct improvements to the water treatment plant. The bonds bear interest from 3.75% to 4.625%, and are due in annual installments on June 1 through June 1, 2036 that range from $235,000 to $985,000. At June 30, 2014, the principal amount outstanding on the bonds was $14,235,000. The bond indenture agreement specifies reserve requirements equal to the maximum debt service in any particular year to be held in the Trustee s reserve funds. The reserve requirement has been met for the year ended June 30, The City has pledged future water system revenues, net of specific operating expenses, to repay the bonds on parity with a pledge that services all parity obligations. The bonds are payable solely from water customer net revenues and any moneys in the bond service fund and the reserve fund. The principal and interest payments on the bonds required less than 20% of net revenues. For the year ended June 30, 2014, principal and interest paid and total customer net revenues were $1,034,548 and $5,076,210, respectively. 62

97 Notes to the Financial Statements June 30, 2014 Page 29 Note 7: Long-Term Debt (Continued) At June 30, 2014, the aggregate maturities of the business-type revenue bonds were as follows: For the Year Ending June 30, Principal Interest Total 2015 $ 1,099,705 $ 1,192,682 $ 2,292, ,142,800 1,148,916 2,291, ,188,960 1,103,204 2,292, ,235,885 1,055,366 2,291, ,289,745 1,003,912 2,293, ,250,170 4,212,514 10,462, ,181,335 2,993,800 8,175, ,491,870 1,696,176 8,188, ,202, ,793 3,456,363 $ 27,083,040 $ 14,660,363 $ 41,743,403 Loans 2004 State Water Control Board Loan. In 2004, the City obtained a note in the amount of $8,883,200 to go towards the water reuse project. The note bears an interest rate of 2.5% due in annual installments on August 31 through August 31, 2024 that range from $296,000 to $512,600. At June 30, 2014, the principal amount outstanding on the loan was $4,999, CIEDB State Loan. In 2001, the City obtained a note in the amount of $7,765,900 to go towards expanding the March Street parking structure. The note bears an interest rate of 3.37% due in semi-annual installments on February 1 and August 1 through August 31, 2031 that range from $169,000 to $396,000. At June 30, 2014, the principal amount outstanding on the loan was $5,582, Infrastructure and Economic Development Bank Loan Tank Farm Lift Station. In 2009, the City obtained a note in the amount of $10,000,000 to go towards the Tank Farm lift station and main sewer project. The note bears an interest rate of 3.25% due in annual installments on December 1 through December 1, 2039 that range from $212,600 to $520,744. At June 30, 2014, the principal amount outstanding on the loan was $8,865,421. The City has pledged future sewer system revenues, net of specific operating expenses, to repay the loan. The loan is payable solely from sewer customer net revenues. The principal and interest payments on the bonds required less than 5% of net revenues. For the year ended June 30, 2014, principal and interest paid and total customer net revenues were $422,197 and $8,275,831, respectively. 63

98 Notes to the Financial Statements June 30, 2014 Page 30 Note 7: Long-Term Debt (Continued) At June 30, 2014, the aggregate maturities of the aforementioned business-type loans were as follows: For the Year Ending June 30, Principal Interest Total 2015 $ 886,933 $ 451,806 $ 1,338, , ,179 1,348, , ,057 1,358, , ,426 1,368, , ,268 1,379, ,409,102 1,654,347 7,063, ,050,280 1,136,190 5,186, ,304, ,921 3,860, ,986, ,551 2,118,390 $ 19,446,946 $ 5,575,745 $ 25,022,691 Installment Sale Agreements 2008 Suntrust Bond. In 2008, the Board entered into an installment sale contract financing $2,050,000 to finance the Tank Farm lift station. The terms state an interest rate of 4.2% due in annual installments through 2023 that range from $372,900 to $607,200. At June 30, 2014, the principal amount outstanding on the loan was $1,500,000. US Bank 2014 Wastewater Lease. In 2013, the Board entered into an installment sale contract financing $7,479,000 to finance the acquisition and installation of improvements to its water reclamation facility. The note bears an interest rate of % due in annual installments on June 1 and December 1 through December 1, 2028 that range from $372,900 to $607,200. At June 30, 2014, the principal amount outstanding on the loan was $7,479,000. At June 30, 2014, the aggregate maturities of the aforementioned business-type installment sale agreements were as follows: For the Year Ending June 30, Principal Interest Total 2015 $ 497,958 $ 271,859 $ 769, , , , , , , , , , , , , ,312, ,006 4,135, ,869, ,796 3,082,317 $ 8,979,000 $ 2,218,174 $ 11,197,174 There are a number of limitations and restrictions contained in the various bond indentures. City management believes that the City has complied with the indenture requirements. Security for revenue bonds is paid from receipts or net income and amounts in funds or accounts established under bond indentures. 64

99 Notes to the Financial Statements June 30, 2014 Page 31 Note 8: Interfund Transactions Interfund receivable and payable balances as of June 30, 2014 consist of the following: Interfund Receivables Interfund Payables General Fund $ 2,595,035 $ Debt Service Fund 2,443,259 Nonmajor Governmental Funds: TDA Bike Fund 12,292 Gas Tax Fund 139,484 Total $ 2,595,035 $ 2,595,035 Interfund receivables and payables include temporary negative cash balances that result from the timing of cash flows at year end and the time lag between the dates that transactions are recorded in the accounting system and payment between funds are made. Liquidation of interfund receivables and payables typically occurs in the first quarter of the subsequent fiscal year. Interfund balances between governmental funds are not included in the government-wide Statement of Net Position. Interfund transfers are used to move revenues from the fund with collection authorization to the debt service fund as debt service principal and interest payments become due or to move unrestricted revenues to finance various programs that the government must account for in other funds in accordance with budgetary authorizations. This may include amounts provided as matching funds for various grant programs. Transfers are also made from special revenue funds to reimburse expenditures made in the General Fund. 65

100 Notes to the Financial Statements June 30, 2014 Page 32 Note 8: Interfund Transactions (continued) Interfund transfers for the year ended June 30, 2014 consist of the following: Transfers In Transfers Out General Fund $ 1,636,815 $ 11,187,103 Capital Outlay 7,337, ,306 Debt Service Fund 3,550, ,775 Nonmajor Governmental Funds: Tourism Business Improvement District 24,356 Wastewater 73,770 Gas Tax Fund 1,460,290 TDA Fund 49,169 Community Development Block Grand Fund 52,493 IT Replacement Fund 565,500 Open Space Protection Fund 200,000 Public Art Fund 80,685 Fleet Replacement Fund 411,360 35,000 Affordable Housing 17,000 Enterprise Funds: Sewer Fund 73,771 Total $ 13,908,769 $ 13,908,769 Note 9: Joint Ventures, Jointly Governed Organizations and Operating Agreements The City participates in three multi-governmental organizations: the Whale Rock Commission, the San Luis Obispo Regional Transit Authority, and the San Luis Obispo Council of Governments. The City also has an operating agreement related to Nacimiento Water Supply Project. The following provides a general description of each of these agencies and operating agreements along with a summary of financial information and indebtedness: Whale Rock Commission General Description. The Whale Rock Commission (Commission) was established on December 12, 1960 to govern the operations of the Whale Rock Reservoir. The Commission is composed of six voting members and two non-voting members: three voting members are appointed by the City; one is appointed by California Polytechnic State University; one by California Men's Colony; and one by the Director of Finance, State of California. The two non-voting members are position appointments: the Director of Water Resources, State of California; and the Water Superintendent, City of San Luis Obispo. The Commission is authorized by their respective agencies to establish policies for the operation of the Reservoir, to contract for the sale of excess water, and to approve the annual budget. 66

101 Notes to the Financial Statements June 30, 2014 Page 33 Note 9: Joint Ventures, Jointly Governed Organizations and Operating Agreements (Continued) The City, in accordance with established policies of the Commission, operates and maintains the Reservoir; prepares and recommends the annual budget; and maintains the fiscal records and funds of the Commission. The Whale Rock Agency Fund is used to account for the Commission's ongoing operating activities. The Commission has no long term debt. Ownership in the Reservoir is as follows: 55.05%, City of San Luis Obispo; 33.71%, California Polytechnic State University; and 11.24%, California Men's Colony. The City's share of the Commission's expenses are recorded as expenses of the Water Fund. All receipts and disbursements of the Commission are included in an Agency Fund. Financial Information and Indebtedness. In 1959, the City issued general obligation bonds to secure a future water supply to City residents. Some of the proceeds from the bonds were used to participate with the State of California in the development of the Reservoir. Participation, which is in proportion to the original investment, includes continued operation and maintenance of the facilities. Such indebtedness was directly attributable to provision of water service, and as such, all related indebtedness was recorded in the City's Water Enterprise Fund. These bonds matured in August The City's original investment in the Reservoir project aggregates $3,900,000, and was amortized on a straight-line basis over thirty-five years. Separate financial statements are available from the Whale Rock Commission, 879 Morro Street, San Luis Obispo, CA The following segment financial information for the Whale Rock Commission is presented as of and for the year ended June 30, 2014: Joint Venture City Portion Total assets $ 1,261,232 $ 694,300 Total liabilities 87,225 48,000 Fund balance 1,348, ,300 Total revenues 985, ,800 Total expenditures 968, ,300 Excess of revenues over (under) expenditures $ 17,266 $ 9,500 San Luis Obispo Regional Transit Authority General Description. The City is a member of the San Luis Obispo Regional Transit Authority (Authority), which was established on February 27, 1990, to operate a joint public transportation system. The Authority is composed of the Cities of Arroyo Grande, Atascadero, Grover Beach, Morro Bay, Paso Robles, Pismo Beach, and San Luis Obispo, as well as the County of San Luis Obispo. The Authority is governed by a Board of Directors comprised of representatives of each of the seven cities, in addition to the five members of the Board of Supervisors. Each member of the Board has one vote. The Board has the authority to establish policies for the operation of the transit system and to adopt an annual budget. Each member makes an annual contribution to the agency for funding the adopted budget. 67

102 Notes to the Financial Statements June 30, 2014 Page 34 Note 9: Joint Ventures, Jointly Governed Organizations and Operating Agreements (Continued) Financial Information. The City allocates a portion of its Transportation Development Act funds directly to the Authority. During the City contributed approximately $676,192 of these funds to the Authority. The City's share of assets, liabilities, and fund equity has not been calculated by the Authority and therefore is not known to the City; however, based on the City's limited financial participation in the Authority, any such assets, liabilities, or equity are not believed to be significant to the basic financial statements taken as a whole. Separate financial statements are available from the Authority, 179 Cross Street, Suite A, San Luis Obispo, CA San Luis Obispo Council of Governments General Description. The San Luis Obispo Council of Governments (SLOCOG) was formed in 1968 through a joint powers agreement among the incorporated cities and the County of San Luis Obispo. It acts as the regional transportation planning agency for the county and is the metropolitan planning organization and the congestion management agency for the region. The governing board consists of twelve delegates, each with one vote that includes the five members of the County Board of Supervisors and one representative from each of the seven cities in the County. Financial Information. A portion of the City's Transportation Development Act funds are directly allocated to the SLOCOG. The City's share of assets, liabilities, and fund equity has not been calculated by SLOCOG and therefore is not known to the City; however, based on the City's limited financial participation in SLOCOG, any such assets, liabilities, or equity are not believed to be significant to the basic financial statements taken as a whole. Separate financial statements are available from SLOCOG, 1114 Marsh Street, San Luis Obispo, CA Nacimiento Water Supply Project General Description. In 2004, the Council adopted a resolution approving an agreement with the San Luis Obispo County Flood Control and Water Conservation District (District) for the design, construction and operations of the facilities required for the delivery of 3,380 acre-feet of water per year to the City of San Luis Obispo from the Nacimiento Water Supply Project (Project). The agreement includes conditions relative to the costs associated with the project and how these costs will be shared and paid by the participants in the project. Each project participant, including the City, has entered into an agreement in order to provide for the development, financing, construction, operation and maintenance of the Project. The agreement is a take-or-pay obligation: the City is obligated to pay amounts specified in the agreement whether or not water is delivered. The City is required to pay an amount equal to its share of various capital expenses relating to the funding of design costs, engineering, planning, environmental mitigation, equipping new facilities and/or construction efforts, accounting services, project administration and management, installation, grading, razing and building the Project. The City is also required to pay for its share of operating and maintenance costs. The City records these payments as operating expenses in its water enterprise fund. 68

103 Notes to the Financial Statements June 30, 2014 Page 35 Note 9: Joint Ventures, Jointly Governed Organizations and Operating Agreements (Continued) The City is required to make payments under its agreement solely from the revenues of its water system. The City agreed to establish, fix and collect rates and charges from the customers of the City s water enterprise fund at levels sufficient to produce revenues equal to: (1) the costs of operating and maintaining the City s water enterprise; plus (2) the contract payments, calculated in accordance with the delivery contract including the amounts allocated as the City s share of capital projects installment debt service; plus (3) the coverage factor for the amounts allocated as the City s share of capital projects installment debt service; and (4) under certain circumstances, that the City understands and agrees that the delivery contract may impose a surcharge following the occurrence of any payment default. Financial Information. In September 2007, the District sold water revenue bonds in the amount of $196 million for the construction of the Project. Based on the City s share of construction costs, debt service and operating and maintenance, the following summarizes the City s Project obligations for and five year projections. Nacimento Water Supply Obligations Actual $ 5,362,699 Projected: ,190, ,234, ,280, ,330, ,372,900 Separate financial statements are available from the San Luis Obispo County Flood Control and Water Conservation District, 1050 Monterey Street, San Luis Obispo, CA Note 10: Risk Management California Joint Powers Insurance Authority General Description The City is a member of the California Joint Powers Insurance Authority (Authority). The Authority is composed of 119 California public entities and is organized under a joint powers agreement pursuant to California Government Code 6500 et seq. The purpose of the Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group purchased insurance for property and other lines of coverage. The California JPIA began covering claims of its members in Each member government has an elected official as its representative on the Board of Directors. The Board operates through a nine-member Executive Committee. 69

104 Notes to the Financial Statements June 30, 2014 Page 36 Note 10: Risk Management (Continued) Each member pays an annual contribution to cover estimated losses for the coverage period. This initial funding is paid at the beginning of the coverage period. After the close of the coverage period, outstanding claims are valued. A retrospective deposit computation is then conducted annually thereafter until all claims incurred during the coverage period are closed on a pool-wide basis. This subsequent cost reallocation among members based on actual claim development can result in adjustments of either refunds or additional deposits required. The total funding requirement for self-insurance programs is estimated using actuarial models and prefunded through the annual contribution. Costs are allocated to individual agencies based on exposure (payroll) and experience (claims) relative to other members of the risk-sharing pool. Additional information regarding the cost allocation methodology is provided below. Self-Insurance Programs of the Authority Liability. In the liability program claims are pooled separately between police and non-police exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $30,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $30,000 to $750,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the second layer. (4) Incurred costs in excess of $750,000 up to the reinsurance attachment point of $5 million are distributed based on the outcome of cost allocation within the first and second loss layers. (5) Costs of covered claims from $5 million to $10 million are paid under a reinsurance contract subject to a $2.5 million annual aggregate deductible. The $2.5 million annual aggregate deductible is fully covered under a separate policy; as such no portion of it is retained by the Authority. Costs of covered claims from $10 million to $15 million are paid under two reinsurance contracts subject to a combined $3 million annual aggregate deductible. The $3.0 million annual aggregate deductible is fully retained by the Authority. (6) Costs of covered claims from $15 million to $20 million are paid under reinsurance agreements. (7) Costs of covered claims from $20 million to $50 million are paid under excess insurance policies. The overall coverage limit for each member including all layers of coverage is $50 million per occurrence. Costs of covered claims for subsidence losses are paid by reinsurance and excess insurance with a pooled sub-limit of $30 million per occurrence. This $30 million subsidence sub-limit is composed of (a) $5 million retained within the pool s SIR, (b) $15 million in reinsurance, subject to the same annual aggregate deductibles previously stated, and (c) $10 million in excess insurance. The excess insurance layer has a $10 million annual aggregate limit. Workers Compensation. In the workers compensation program claims are pooled separately between public safety (police and fire) and non-public safety exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to 70

105 Notes to the Financial Statements June 30, 2014 Page 37 Note 10: Risk Management (Continued) payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $50,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $50,000 to $100,000 for each occurrence and is evaluated as a percentage of the pool s total incurred costs within the second layer. (4) Incurred costs in excess of $100,000 up to the reinsurance attachment point of $2 million are distributed based on the outcome of cost allocation within the first and second loss layers. (5) Costs of covered claims from $2 million up to statutory limits are paid under a reinsurance policy. Protection is provided per statutory liability under California Workers Compensation Law. Employer s Liability losses are pooled among members to $2 million. Coverage from $2 million to $5 million is purchased as part of a reinsurance policy, and Employer s Liability losses from $5 million to $10 million are pooled among members. Purchased Insurance Pollution Legal Liability Insurance. The City of San Luis Obispo participates in the pollution legal liability insurance program (formerly called environmental insurance) which is available through the Authority. The policy covers sudden and gradual pollution of scheduled property, streets, and storm drains owned by the City of San Luis Obispo. Coverage is on a claims-made basis. There is a $50,000 deductible. The Authority has a limit of $50 million for the 3-year period from July 1, 2011 through July 1, Each member of the Authority has a $10 million sub-limit during the 3-year term of the policy. Property Insurance. The City of San Luis Obispo participates in the all-risk property protection program of the Authority. This insurance protection is underwritten by several insurance companies. City of San Luis Obispo property is currently insured according to a schedule of covered property submitted by the City of San Luis Obispo to the Authority. City of San Luis Obispo property currently has all-risk property insurance protection in the amount of $215,923,324. There is a $5,000 deductible per occurrence except for non-emergency vehicle insurance which has a $1,000 deductible. Premiums for the coverage are paid annually and are not subject to retrospective adjustments. Earthquake and Flood Insurance. The City of San Luis Obispo purchases earthquake and flood insurance on a portion of its property. The earthquake insurance is part of the property protection insurance program of the Authority. City of San Luis Obispo property currently has earthquake protection in the amount of $0. There is a deductible of 5% per unit of value with a minimum deductible of $100,000. Premiums for the coverage are paid annually and are not subject to retrospective adjustments. Crime Insurance. The City of San Luis Obispo purchases crime insurance coverage in the amount of $1,000,000 with a $2,500 deductible. The fidelity coverage is provided through the Authority. Premiums are paid annually and are not subject to retrospective adjustments. 71

106 Notes to the Financial Statements June 30, 2014 Page 38 Note 10: Risk Management (Continued) Special Event Tenant User Liability Insurance. The City of San Luis Obispo further protects against liability damages by requiring tenant users of certain property to purchase low-cost tenant user liability insurance for certain activities on agency property. The insurance premium is paid by the tenant user and is paid to the City of San Luis Obispo according to a schedule. The City of San Luis Obispo then pays for the insurance. The insurance is arranged by the Authority. Adequacy of Protection During the past three fiscal years, none of the above programs of protection experienced settlements or judgments that exceeded pooled or insured coverage. There were also no significant reductions in pooled or insured liability coverage from coverage in Claim Liability. During 2013, the Authority assessed a retrospective claims liability balance to pool members. The City s General Fund share of the liability was $2,025,193 at June 30, 2013 and was recorded as a governmental activity liability with a five year repayment requirement. During the year ended June 30, 2014, an additional retrospective liability of $346,419 was assessed with a total outstanding balance of $2,371,519 as of June 30, The five year repayment plan includes interest at 1.990%. Subsequent to June 30, 2014, the City repaid the full balance of this liability. Separate financial statements are available from the California Joint Powers Insurance Authority, 8081 Moody Street, La Palma, CA Self-Insurance The City retains the risk for workers compensation losses incurred prior to joining the California Joint Powers Insurance Authority. Several member agencies of the now dissolved Central Coast Cities Self-Insurance Fund continue to participate in a non-risk sharing arrangement for claims management and the purchase of excess insurance. The participating agencies share a set of common guidelines and annually set aside premiums to pay their individual losses within their self-insured retentions. Losses are debited and investment income is credited to specific member accounts. The City has not incurred any losses in excess of insurance coverage. Claims liabilities in the governmental funds are generally liquidated by the General Fund. The last actuarial study to determine the undiscounted outstanding claims liability was completed for the year ended June 30, The liability was estimated based on the actuarial study and considered claims asserted and paid, and the time limitations for filing claims. There are no estimates for claims incurred but not reported because the time limit for filing claims has elapsed. The estimated asset (liability) at June 30, 2014 is calculated as follows: 72

107 Notes to the Financial Statements June 30, 2014 Page 39 Note 10: Risk Management (Continued) Self-insurance activity as of and for the year ended June 30, 2014 is summarized is as follows: Interest earnings $ 4,297 Claims expense (126,507) Estimated liability for reported claims and settlement expenses (945,830) Assets on deposit 1,563,047 Estimated unpaid claims asset (liability) $ 617,217 Changes in the balances of claim liabilities during the past two fiscal years are as follows: Estimated unpaid claims asset (liability) June 30, 2012 $ 144,027 (Claim payments and related expenditures) reimbursement (117,376) Decrease in estimated claims liability June 30, ,900 Interest earnings 6,506 Estimated unpaid claims asset (liability) June 30, ,057 (Claim payments and related expenditures) reimbursement (126,507) Decrease in estimated claims liability June 30, ,370 Interest earnings 4,297 Estimated unpaid claims asset (liability) June 30, 2014 $ 617,217 Note 11: Commitments and Contingencies Litigation The City is presently involved in certain matters of litigation that have arisen in the normal course of conducting City business. City management believes, based upon consultation with the City Attorney, that these cases, in the aggregate, are adequately covered by insurance and not expected to result in a material adverse financial impact on the City. Grant Awards Under the terms of Federal and State grants, audits may be required and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to requests for reimbursement to the grantor agencies. City management believes disallowances, if any, will be immaterial. 73

108 Notes to the Financial Statements June 30, 2014 Page 40 Note 12: Construction and Other Significant Commitments Construction and other significant commitments as of June 30, 2014, including encumbrances outstanding at year-end, are as follows: General Fund $ 1,211,928 Special Revenue Funds 194,500 Capital Project Funds 4,507,749 Enterprise Funds: Water 437,615 Sewer 2,669,354 Parking 84,884 Transit 3,019 Total $ 9,109,049 Long term construction contracts are billed and paid on a percentage completion basis by construction phase. Note 13: Fund Balance Deficiency At June 30, 2014, the City had a negative fund balance in the Community Development Block Grant (CDBG) Fund of $83. Note 14: Subsequent Events Measure Y. In July 2014 the City Council approved a ballot measure that would seek voter approval for the extension of Measure Y for another 8 years. Measure Y is the existing one-half percent general sales tax. In November 2014 the ballot measure was approved by a margin of slightly more than 70%. An affirmative vote of only 50% + 1 was needed for the measure to pass. This means that the existing revenue stream created by Measure Y will continue uninterrupted and will remain available for any general purpose. Claims Liability. As mentioned in Note 10, the City has recognized claims liability amounts totaling $2,371,519 based on retrospective deposits that are required by the City s liability and workers compensation pool program. One portion of the total claim liability ($2,025,193) had been previously recognized with a 5 year repayment term however the City retired the full amount of the claims liability on July 1, Lease Purchasing. In September 2014, the City Council approved the use of a lease purchase line of credit in the amount of $1.5 million for the financing of various information technology equipment items. The City has financed $102,304 over a 5 year term at 1.7% for the acquisition of photocopiers for use throughout the City. Annual payments will be approximately $21,500. The City plans to finance an additional $688,500 over a 4 year term at 1.5% to acquire mobile computers for the police and fire departments upon their delivery. 74

109 Notes to the Financial Statements June 30, 2014 Page 41 Note 14: Subsequent Events (continued) This credit line can be accessed over a period of 2 years and any amounts financed during that time must be repaid in full within 6 years from the date of the initial lease. The City may finance equipment over 3, 4 and 5 year terms. Future rates will be set according to the Federal Reserve Board interest rate swap index that corresponds to the term of the proposed borrowing. The period of time during which the credit line can be accessed may be extended upon the City s request for an additional year. Joint Powers Agreement. In September 2014, the City of San Luis Obispo formed the City of San Luis Obispo Public Financing Authority under a joint powers agreement with the City of San Luis Obispo Parking Authority. The Financing Authority serves as third party to debt issuance transactions that involve the leasing of an asset which serves as the collateral for the debt. The Public Financing Authority will replace the Capital Improvement Board when the City considers issuing new debt transactions involving certain forms of a lease arrangement. The City Council serves as the governing body of the Public Financing Authority and the City Manager, City Clerk, City Attorney and City Finance Director serve as officers of the authority in order to carry out the functions that are related to each debt issuance. Lease Purchasing. In September 2014 the City took possession of a new fire truck that had been acquired under a lease purchase agreement with Oshkosh Capital that was approved by the City Council in November The total cost of the vehicle was $548,351 and the lease purchase agreement is based on a 5 year term with interest at 2.108%. Bonds. In October 2014 the City of San Luis Obispo Public Financing Authority issued $7.58 million par value tax exempt bonds via competitive sale. The proceeds will be used for the construction of the Los Osos Valley Road/Highway 101 overpass expansion project. The bonds mature in 30 years with interest set between 3-4% depending on the maturity date of the bond. The parking garage located at 842 Palm Street serves as the collateral for the underlying lease agreement. Note 15: New Accounting Standards Accounting Standards Adopted In March 2012, GASB issued Statement No. 65, Items Previously Reported as Assets and Liabilities, which establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The provisions of Statement No. 65 are effective for periods beginning after December 15, Early implementation of this Statement during the year ended June 30, 2013 resulted in the write-off of bond issuance costs and underwriter s discount that had previously been amortized over the life of the bonds. 75

110 Notes to the Financial Statements June 30, 2014 Page 42 Note 15: New Accounting Standards (continued) In March 2012, GASB issued Statement No. 66, Technical Corrections 2012 an amendment of GASB Statement No. 10 and No. 62. This statement improves accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance. The provisions of Statement No. 66 are effective for periods beginning after December 12, Implementation of this Statement did not have a significant impact on the financial statements of the City. In January 2013, GASB issued Statement No. 69, Government Combinations and Disposals of Government Operations. This Statement requires disclosures to be made about government combinations and disposals of government operations to enable financial statement users to evaluate the nature and financial effects of those transactions. The provisions of this Statement are effective for periods beginning after December 31, Management has not yet determined the impact of this Statement on its financial statements. In April 2012, GASB issued Statement No. 70, Accounting and Financial Reporting for Non-exchange Financial Guarantees. This Statement specifies the information required to be disclosed by governments that extend non-exchange financial guarantees. In addition, this Statement requires new information to be disclosed by governments that receive non-exchange financial guarantees. The provisions of Statement No. 70 are effective for periods beginning after June 15, Implementation of this Statement did not have a significant impact on the financial statements of the City. New Accounting Standards In June 2012, GASB issued Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25, which revises existing standards of financial reporting for most pension plans. The provisions of Statement No. 67 are effective for periods beginning after June 15, Since this pronouncement is only applicable to pension plans, it does not apply to the City. In June 2012, GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of Statement No. 27, which addresses accounting and financial reporting for pensions that are provided to the employees of state and local governmental employers. The provisions of Statement No. 68 are effective for fiscal years beginning after June 15, Management has not yet determined the impact of this Statement on its financial statements. In November 2013, GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. This Statement addresses an issue regarding application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or local government employer on non-employer contributing entity to a defined benefit pension plan after the measurement date of the government s beginning net pension liability. The provisions of Statement No. 71 are required to be applied simultaneously with the provisions of Statement No. 68, effective for fiscal years beginning after June 15, Management has not yet determined the impact of this Statement on its financial statements. 76

111 Notes to the Financial Statements June 30, 2014 Page 43 Note 16: Prior Year Restatement A prior year restatement was recorded to reflect equipment capital assets that had been disposed in prior years. The effect was to decrease capital assets and beginning net position of governmental activities by $833,234 as of June 30,

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114 Budgetary Comparison Schedule General Fund For the Fiscal Year Ended June 30, 2014 Revenues: Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Taxes and franchise fees: Sales and use tax - general $ 14,515,400 $ 15,394,694 $ 15,405,808 $ 11,114 Sales and use tax - Measure Y 1/2 percent add-on tax 6,600,000 6,674,000 6,774, ,365 Sales tax - Prop , , ,567 52,717 Property tax 8,740,700 8,761,050 8,960, ,960 Transient occupancy tax 5,749,400 5,990,329 6,063,232 72,903 Utility users tax 4,756,000 5,356,018 5,345,342 (10,676) Property tax in lieu of VLF 3,586,220 3,645,690 3,645,692 2 Franchise taxes 2,523,000 2,525,905 2,636, ,694 Business tax 2,116,200 2,116,625 2,142,971 26,346 Real property transfer tax 180, , ,560 87,560 Total taxes 49,051,520 51,003,161 51,653, ,985 Fines, forfeitures and penalties 167, , ,185 (5,815) Use of money and property 324, , , ,655 Subventions and grants: Homeowners' property tax relief 75,000 72,760 73,954 1,194 Other in-lieu 21,700 22,156 22,156 - Police training grant (POST) 50,000 40,000 36,787 (3,213) COPS grant AB , , ,000 - Mutual aid reimbursements 298, , ,344 State SB90 refunds 11,200 12, Transportation grants 85,000 85,000 37,007 (47,993) Other State and Federal grants 642, ,131 (142,677) Total subventions and grants 331,700 1,272,868 1,238,410 (34,458) 79

115 Budgetary Comparison Schedule General Fund, continued For the Fiscal Year Ended June 30, 2014 Page 2 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Charges for services: Public safety: Police $ 431,000 $ 418,317 $ 587,601 $ 169,284 Fire: Cal Poly fire services 265, , ,684 - Medical emergency recovery 168, , , Fire safety/hazardous materials permits 130,800 84, ,544 43,744 Multi-dwelling unit inspections 193, , , Other fire revenues 115, ,688 87,096 (37,592) Development review: Planning and zoning fees 423, ,316 1,023, ,668 Construction plan and check inspections 982,900 1,750,000 1,547,462 (202,538) Infrastructure plan check and inspections 427, , ,203 92,881 Fire plan check and inspections 155, , ,755 28,755 Encroachment permits 154, , ,346 13,346 Leisure, cultural and social services: Adult athletic fees 122, , ,158 1,758 Youth athletic fees 33,700 33,700 30,055 (3,645) Instruction fees 83,900 83,900 95,708 11,808 Special event fees 72,700 92, ,414 17,714 Rental and use fees 161, , ,711 54,687 Children services 511, , ,599 68,599 Teens & seniors ,304 5,804 Aquatics 241, , ,266 (46,875) Golf course 291, , ,743 45,043 General government: Other service charges 459, , ,431 61,304 Total charges for services 5,425,080 6,816,119 7,364, ,497 Other revenues: Insurance refunds 12,500 45,000 59,417 14,417 Sale of surplus property 6,024 6,024 Other 150,000 52,798 77,666 24,868 Total other revenues 162,500 97, ,107 45,309 Total Revenues 55,462,200 59,524,946 60,922,119 1,397,173 80

116 Budgetary Comparison Schedule General Fund, continued For the Fiscal Year Ended June 30, 2014 Page 3 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Expenditures: Public Safety: Police protection: Administration $ 1,459,700 $ 1,472,867 $ 1,358,810 $ 114,057 Investigations 2,346,900 2,348,981 2,408,762 (59,781) Neighborhood services 261, , ,690 38,987 Support services 2,347,800 2,352,561 2,231, ,008 Patrol services 7,580,987 7,604,972 7,221, ,751 Traffic safety 966,300 1,017, , ,041 Total police protection 14,962,987 15,058,553 14,215, ,063 Fire and environmental safety: Administration 793, , ,740 39,351 Emergency response 7,911,500 8,256,265 7,957, ,084 Hazard protection 622, , ,845 67,765 Training 155, , ,177 61,364 Technical services 24,800 27,569 30,600 (3,031) Disaster preparedness 9,700 20,734 22,467 (1,733) Total fire and environmental safety 9,516,900 10,110,810 9,648, ,800 Total public safety 24,479,887 25,169,363 23,863,500 1,305,863 Transportation: Transportation planning and engineering 502, , ,276 77,613 Street and sidewalk maintenance 1,319,500 1,330,171 1,189, ,118 Traffic signals and street lights 508, , , ,139 Creek and flood protection 779, , , ,587 Total transportation 3,110,722 3,405,698 2,882, ,457 81

117 Budgetary Comparison Schedule General Fund, continued For the Fiscal Year Ended June 30, 2014 Page 4 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Leisure, Cultural and Social Services: Recreation programs: Recreation administration $ 696,500 $ 732,059 $ 676,882 $ 55,177 Aquatics/Sinsheimer park facilities 321, , ,191 39,366 Children's services 879, , ,978 (3,887) Facilities 233, , ,165 29,054 Special events 259, , ,085 42,350 Recreational sports 314, , ,806 1,362 Golf course 554, , ,018 38,516 Ranger services 313, , ,109 40,319 Maintenance programs: Swim center maintenance 449, , , Parks and landscape maintenance 2,324,200 2,341,970 2,325,457 16,513 Tree maintenance 428, , ,189 1,358 Cultural and social service programs: Human relations 283, , ,836 15,264 Cultural activities 290, , , Total leisure, cultural and social services 7,348,100 7,431,456 7,155, ,837 Community Development: Planning: Commissions and communities 34,600 31,526 30,443 1,083 Community development administration 510, , ,580 40,145 Long-range planning 527,500 1,258,228 1,047, ,323 Development review 525, , ,689 44,086 Development services 870, , ,376 Natural resource protection 342, , ,600 21,115 Construction regulation: Building and safety 1,146,000 1,213,829 1,167,055 46,774 Engineering development review 450, , ,670 17,974 CIP project engineering 1,771,500 1,772,377 1,634, ,116 Economic health: Community promotion 386, , ,511 12,175 Economic development 234, , ,167 75,091 Total community development 5,929,000 7,984,565 6,748,307 1,236,258 82

118 Budgetary Comparison Schedule General Fund, continued For the Fiscal Year Ended June 30, 2014 Page 5 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) General Government: Legislation: Council $ 138,900 $ 138,651 $ 116,941 $ 21,710 General administration: City administration 741, , ,299 56,963 Public works administration 918, , ,263 50,449 Legal services: City attorney 548, , , ,710 City clerk services: Administration and records 373, , ,902 (14,315) Organization support services: Human resource administration 551, , ,928 33,753 Risk management 3,112,000 3,037,478 2,979,121 58,357 Finance and information technology administration 479, , , ,325 Revenue management 796, , , ,623 Accounting 621, , ,531 97,869 Network services 2,233,200 2,596,605 2,441, ,236 Geographic information services 436, , ,345 5,730 Support services 265, , ,483 70,364 Wellness program 16,800 16,800 14,831 1,969 Building and vehicle maintenance: Buildings 1,103,800 1,107,117 1,068,592 38,525 Vehicle and equipment maintenance 1,168,000 1,236,359 1,278,908 (42,549) Total general government before cost reimbursement 13,505,700 14,230,874 13,240, ,719 Cost reimbursement (Note 3 to RSI) (3,897,400) (3,897,400) (3,897,420) 20 Total general government 9,608,300 10,333,474 9,342, ,739 Total Expenditures 50,476,009 54,324,556 49,992,402 4,332,154 Excess of Revenues Over Expenditures 4,986,191 5,200,390 10,929,717 (2,934,981) Other Financing Sources (Uses) Expenditure savings 914, , ,700 Transfers in 1,446,300 1,457,300 1,636,815 (179,515) Transfers out (9,476,000) (11,334,145) (11,187,103) (147,042) Total other financing sources (uses) (7,115,000) (8,962,145) (9,550,288) 588,143 Net Change in Fund Balance (2,128,809) (3,761,755) 1,379,429 (2,346,838) Fund Balance, Beginning of the Year 12,916,400 18,937,700 18,937, Fund Balance, End of Year $ 10,787,591 $ 15,175,945 $ 20,317,179 $ (2,346,788) 83

119 Public Employees Retirement System Schedule of Funding Progress For the Fiscal Year Ended June 30, 2014 (Amounts in Thousands) Safety Employee Plan 3% at 50 Safety Risk Pool* Unfunded Actuarial Actuarial Actuarial Entry Age Unfunded Liability as a Valuation Value Actuarial Actuarial Accrued Funded Covered Percentage of Date of Assets Accrued Liability Liability Ratio Payroll Covered Payroll 6/30/2010 $ 8,470,235 $ 10,165,475 $ 1,695, % $ 955, % 6/30/2011 $ 9,135,654 $ 10,951,745 $ 1,816, % $ 949, % 6/30/2012 $ 9,854,788 $ 11,724,021 $ 1,869, % $ 947, % *Information for the period ending June 30, 2012 is the latest available from CalPERS. Amounts represent the entire pool and are not limited to the City's share of the pool. Miscellaneous Employee Plan Unfunded Actuarial Actuarial Actuarial* Entry Age Unfunded Liability as a Valuation Value Actuarial Actuarial Accrued Funded Covered Percentage of Date of Assets Accrued Liability Liability Ratio Payroll Covered Payroll 6/30/2011 $ 103,392 $ 150,651 $ 47, % $ 19, % 6/30/2012 $ 108,926 $ 157,223 $ 24, % $ 19, % 6/30/2013 $ 101,989 $ 163,765 $ 61, % $ 18, % *Beginning with the June 20, 2013 valuation report, the Actuarial Value of Assets equals the Market Value of Assets per the CalPERS Direct Rate Smoothing Policy. 84

120 Other Post-Employment Benefits Plan Schedule For the Fiscal Year Ended June 30, 2014 The table below shows an analysis of the actuarial value of assets as a percentage of the actuarial accrued liability and the unfunded actuarial accrued liability (UAAL) as a percentage of the annual covered payroll as of the most recent actuarial report for the period ending June 30, Actuarial Actuarial Entry Age Unfunded UAAL as a Valuation Value Actuarial Actuarial Accrued Funded Covered Percentage of Date of Assets Accrued Liability Liability Ratio Payroll Covered Payroll 6/30/2013 $ 2,527,000 $ 6,954,000 $ 4,427, % $ 27,163, % 6/30/2011 $ 1,611,000 $ 6,063,000 $ 4,452, % $ 26,960, % 6/30/2009 $ 540,000 $ 4,748,000 $ 4,208, % $ 30,006, % 85

121 Notes to Required Supplementary Information June 30, 2014 Budgetary Comparison Schedule 1. The budget is prepared using the modified accrual basis of accounting consistent with U.S. generally accepted accounting principles. 2. Outstanding encumbrances from the prior fiscal year are not reflected in the original budget column but are included in the final budget amounts. 3. All the City s general government and engineering programs are initially accounted and budgeted for in the General Fund. However, certain of these support service programs also benefit the City s enterprise and agency fund operations, and accordingly, transfers are made from these funds to reimburse the General Fund for these services. The transfers are based on a Cost Allocation Plan prepared for this purpose which distributes the shared costs in a uniform, consistent manner in accordance with U.S. generally accepted accounting principles. Excess of Expenditures Over Appropriations 1. At June 30, 2014 expenditures exceeded appropriations in the General Fund as noted below. This does not represent a violation of City budget policies because no department s total expenditures exceeded their total appropriations within the General Fund. Department/Division Budget Variance Police: Investigations $ 59,781 Fire: Technical services 3,031 Disaster preparedness 1,733 Recreation: Children's services 3,887 City Clerk: Administration and records 14,315 Public Works Vehicle and equipment maintenance 42,549 Public Employees Retirement System Schedule of Funding Progress 1. The City participates in the CalPERS 3% at 50 Safety Risk Pool. Information shown in the preceding table is for the entire pool and is not specific to the City. For non-safety members, the City participates in the miscellaneous plan. 2. The schedules show an analysis of the actuarial value of assets as a percentage of the actuarial accrued liability and the unfunded actuarial accrued liability (UAAL) as a percentage of the annual covered payroll as of the three most recent actuarial reports. 86

122 Notes to Required Supplementary Information June 30, 2014 Page 2 3. This schedule of funding progress presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial liabilities for benefits. Other Post-Employment Benefits Plan Schedule of Funding Progress 1. The schedule shows an analysis of actuarial value of assets as a percentage of the actuarial accrued liability and the unfunded actuarial accrued liability (UAAL) as a percentage of the annual covered payroll as of the most recent actuarial report for the period ending June 30, The actuarial report for the period ending June 30, 2011 was used to determine the ARC. 2. This schedule of funding progress presents multiyear trend information about whether the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Additional years will be presented in the future as the information becomes available. The City prospectively implemented GASB Statement No. 45 for the fiscal year ending June 30,

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124 OTHER SUPPLEMENTARY INFORMATION AND COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

125 Measure Y Funding Schedule For the Fiscal Year Ended June 30, 2014 The following summarizes revenues and expenditures for the current year in responding to Measure Y priorities. Preservation of Essential Services Operating Programs Capital Improvement Plan Actual Actual Encumbered/ Assigned Public Safety Police Services $ 850,029 $ $ Police Vehicles 31, ,379 Public Safety Mobile Data Computers 184,500 Fire Prevention & Training 397,976 Extrication Equipment 60,115 Fire Engine/Truck Replacement: Debt Service 128,920 Fire Station #2 Remodel 630 2,070 Quickest Route Software 18,630 1,970 Maintenance Services Streets, Sidewalks and Traffic Signal Operations 163,488 Creek & Flood Protection 412, ,379 31,021 Parks 73,102 50, ,625 Project Management & Inspection 102,617 Neighborhood Wellness Enhanced Building & Zoning Code Enforcement 110,846 "SNAP" Enhancement 53,079 Neighborhood Code Enforcement Specialists 137,905 Traffic Congestion Relief Traffic Safety Report Implementation 25,000 Traffic Operations Report Implementation 30,000 Traffic Engineer 92,520 Bicycle Facility Improvements 18,936 81,064 Neighborhood Traffic Improvements 4,846 15,154 Open Space Preservation Open Space Acquisition 200,000 Ranger Services Staffing 47,534 Open Space Wildfire Reduction 3,433 89

126 Measure Y Funding Schedule, continued For the Fiscal Year Ended June 30, 2014 Page 2 Operating Programs Capital Improvement Plan Actual Actual Encumbered/ Assigned Infrastructure Maintenance & Improvements Santa Rosa Skatepark $ 16,313 $ 1,209,987 Street Reconstruction & Resurfacing 939, ,128 Central Irrigation Controller Replacement 163,323 Facility Maintenance 26,029 27,971 Jack House Exterior Painting 25,000 Johnson Avenue Underpass Pump 190,000 Library Restroom Remodel 39,000 Marsh Street Bridge Replacement 19,300 Mission Plaza Railing Upgrade 30,000 Olympic Pool Replastering 5,525 19,475 Pedestrian and Bicycle Pathway Maintenance 60,000 Sidewalk Repairs 25,000 Tree Maintenance Equipment 100,400 Sinsheimer Parking Lot Paving ,834 Mission Plaza Master Plan 100,000 I.T. Replacement Fund 116, ,934 Facility Maintenance Reserve 293, ,521 Total Current Projects $ 2,444,662 $ 2,303,025 $ 4,116,033 Prior Year Encumbered/Assigned Amounts Transportation (Mobility and Safety) Traffic Safety Report Implementation 12,608 Traffic Sign Maintenance 44,600 Open Space Preservation Froom Ranch Improvement 8,247 2,687 Infrastructure Maintenance and Improvements Street Reconstruction & Resurfacing 114,516 Broad Street Creek Bank Reinforcement 2,689 15,629 Olympic Pool Heater Replacement 166,345 Playground Equipment Replacement 169, ,141 Maintenance Services Streets, Sidewalks and Traffic Signal Repairs 31,584 Creek & Flood Protection Sinsheimer Stadium Bldg. Assessment 7,780 26,776 Sub-Total Prior Year Amounts 558, ,233 Totals $ 2,444,662 $ 2,861,336 $ 4,364,266 90

127 Measure Y Funding Schedule For the Fiscal Year Ended June 30, 2014 The following summarizes revenues and expenditures for all years in responding to Measure Y priorities. Measure Y Revenues & Uses Summary Revenues: Carryover from $ 1,000,000 Revenues for ,996,595 Revenues for ,641,393 Revenues for ,252,509 Revenues for ,616,332 Revenues for ,237,468 Revenues for ,493,836 Revenues for ,774,365 Total Revenues 43,012,498 Uses: Operating programs (1,463,693) Capital improvement plan (2,434,107) Operating programs (2,418,295) Capital improvement plan (3,684,405) Operating programs (2,267,103) Capital improvement plan (2,161,197) Operating programs (2,430,185) Capital improvement plan (3,443,015) Operating programs (2,203,890) Capital improvement plan (3,967,510) Operating programs (2,225,125) Capital improvement plan (2,320,712) Operating programs (2,444,662) Capital improvement plan (2,861,336) Total Uses (36,325,235) Contingency Reserve 2014 (1,700,000) Encumbered or assigned for carryover for future year expenditures (4,364,266) Net available for future year appropriations $ 622,997 91

128 Major Governmental Funds For the Fiscal Year Ended June 30, 2014 The City maintains the following major governmental fund: Debt Service Fund The City has established one debt service fund to account for the payment and accumulation of resources related to governmental activities long-term debt principal and interest for the following debt issues. Budgets are prepared using the modified accrual basis of accounting consistent with U.S. generally accepted accounting principles. The following governmental activity debt issuances are serviced by this fund Energy Conservation Lease-Purchase Financing. Lease financing was obtained in order to construct energy conservation improvements at various City locations. Debt service obligations are recorded in the Debt Service Fund for the General Government share of the projects. In addition, the Water and Sewer Funds record debt service for their share of the projects. Capital Improvement Board 2004 Lease Revenue Refunding Bonds. These bonds were issued to refinance the 1994 Lease Revenue Refunding Bonds. The 1994 bonds were issued to refinance the 1986 Lease Revenue Bonds, which were issued to finance parking structures and various road improvement and property acquisition projects. The Board has entered into a lease agreement with the City under which the City is responsible for making lease payments to fund the annual debt service requirements. Debt service related to parking structures is recorded directly in the Parking Fund while debt service related to the road improvement and property acquisition projects is recorded in the Debt Service Fund. Capital Improvement Board 2005 Refunding Revenue Bonds. These bonds were issued to refinance the 1996 Lease Revenue Bonds. The original 1996 bonds were issued to accomplish several high priority capital improvement projects including the headquarters fire station, seismic safety and HVAC improvements to City Hall, Mission Plaza expansion, and various properties and street lighting system purchases. The Board has entered into a lease agreement with the City under which the City is responsible for making lease payments to fund the annual debt service requirements. Capital Improvement Board 2006 Lease Revenue Bonds. The bonds were issued to finance the purchase of a parking structure and office building at 919 Palm Street. Debt service related to the parking structure is recorded directly in the Parking Fund while debt service related to the City office building is recorded in the Debt Service Fund. The Board has entered into a lease agreement with the City under which the City is responsible for making lease payments to fund the annual debt service requirements. Capital Improvement Board 2009 Lease Revenue Bonds. The bonds were issued to finance the construction of the Public Safety Communications and Emergency Operations Center project. Debt service obligations on the bonds are recorded in the Water, Sewer and Parking and Debt Service Funds based on a proportionate share of the project benefits 92

129 Major Governmental Funds For the Fiscal Year Ended June 30, 2014 Page 2 The Board has entered into a lease agreement with the City under which the City is responsible for making lease payments to fund the annual debt service requirements Fire Engine/Truck Lease-Purchase Financing. Lease-purchase financing was obtained in order to purchase a fire apparatus with 100-foot ladder. Debt service obligations are recorded in the Debt Service Fund. Capital Improvement Board 2012 Refunding Lease Revenue Bonds. On May 24, 2012 the Board issued $5,050,000 of 2012 Lease Revenue Refunding Bonds. These bonds were issued to refinance the outstanding 2001 Lease Revenue Bonds, Series C, which will be redeemed on December 1, The 2001 bonds were used to purchase property and build athletic fields; purchase property for police station expansion; purchase Downtown Plan properties. The Board has entered into a lease agreement with the City under which the City is responsible for making lease payments to fund the annual debt service requirements. Capital Outlay Fund This fund was established to account for all of the City s construction projects and capital purchases in excess of $25,000 with the exception of those funded through non-major capital project funds and Enterprise Funds. Financing is provided primarily through transfers from the General Fund, and from State and Federal grants. While budgets are prepared for the City s capital outlay fund, the capital projects generally span more than one year and are effectively controlled at the project level; accordingly, budgetary comparisons are not presented. 93

130 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Debt Service Fund For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Expenditures General government $ $ $ 32,625 $ 32,625 Public safety 935, ,000 - Principal 1,664,800 1,664,800 1,534,668 (130,132) Interest 1,095,400 1,095,400 1,048,671 (46,729) Total Expenditures 2,760,200 3,695,200 3,550,964 (144,236) Other Financing Sources: Proceeds from debt issuance 850, ,775 Transfers in 2,760,200 3,695,200 3,550,964 (144,236) Transfers out (850,775) (850,775) Total Other Financing Sources 2,760,200 3,695,200 3,550,964 (144,236) Net Change in Fund Balance Fund Balance, Beginning of Year 2,285,700 2,176,100 2,043,222 (132,900) Fund Balance, End of Year $ 2,285,700 $ 2,176,100 $ 2,043,222 $ (132,900) 94

131 Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2014 The City maintains the following nonmajor governmental funds: Special Revenue Funds The City has established the following seven special revenue funds in order to account for the proceeds from revenue sources that are restricted or committed to expenditures for specified purposes. Budgets are prepared using the modified accrual basis of accounting consistent with U.S. generally accepted accounting principles. Downtown Business Improvement District (BID) Fund. This fund has been established to account for the receipt of a surcharge derived from a supplemental assessment upon businesses within the Downtown Business Improvement District s boundaries. Pursuant to the provisions of the Municipal Code, this surcharge is equal to $ per year. Expenditures from the fund are limited to four basic purposes: decorating public places within the downtown; promoting public events in the downtown core; promoting trade activities; and improving parking in the downtown core. Transportation Development Act (TDA) Fund. The State of California has designated 1/4% of the sales tax levied statewide for local transportation purposes. Funding for this program was provided during the 1971 legislative session with the enactment of the Transportation Development Act, which extended the State sales tax to include purchases of gasoline. Revenues allocated to the City of San Luis Obispo under this program are divided into two categories: Article 3 funds, which are restricted for the improvement and maintenance of street systems including pedestrian and bicycle facilities; and Article 4 funds, which are restricted for public transit systems and are recorded directly in the Transit Fund. Under the City's Financial Plan policies, all TDA Article 3 revenues are allocated for alternative transportation purposes. The purpose of this fund is to account for these revenues. Tourism Business Improvement District (BID) Fund. This fund has been established to account for the receipt of a surcharge derived from assessments upon the lodging establishments within the City. The surcharge is equal to 2% of gross room rents. Expenditures from the fund are limited to the marketing and promotion of tourism. Gas Tax Fund. Portions of the tax rate per gallon levied by the State of California on all gasoline purchases are allocated to cities throughout the State on a population basis. These funds are restricted for expenditures by the State of California for street-related purposes only. Under the City's Financial Plan policies, all gas tax revenues are transferred to the General Fund for street maintenance purposes. Community Development Block Grant (CDBG) Fund. This fund has been established to account for federal funds received by the City specifically to benefit low and moderate income persons, aid in the elimination of blight, and meet other community development needs as allowed by block grant regulations. Law Enforcement Grants Fund. This fund has been established to account for public safety grant funds. Public Arts Contribution Fund. Public contributions to the public art program are accounted for in this fund along with the expenditures for public art projects funded by this revenue source 95

132 Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2014 Page 2 Capital Projects Funds The following nine capital project funds are used by the City to account for the financial resources used in the construction or acquisition of major capital facilities or equipment (with the exception of those financed primarily through proprietary funds). The City also has two other capital projects funds that are considered major governmental funds. Budgets are prepared using the modified accrual basis of accounting consistent with U.S. generally accepted accounting principles on a multi-year project basis. Accordingly, budgetary comparisons for the capital projects funds are not presented in the accompanying other supplementary information. Parkland Development Fund. This fund was established to account for construction projects related to park acquisition and development that will be financed primarily with park in-lieu fees. Transportation Impact Fee Fund. This fund was established to account for construction projects that will be financed primarily with transportation impact fees. Open Space Protection Fund. This fund was established to account for projects funded as part of the City s open space protection program to enhance open space and agricultural conservation on lands within and surrounding the City, improve passive recreational and nature study opportunities, and restore and enhance wildlife habitat. Projects in this fund will be financed with General Fund contributions, outside contributions, and State and Federal grants. Airport Area Impact Fee Fund. This fund was established to account for interim annexation fees collected for the specific plan and related infrastructure master plans for annexing the airport area to the City. Los Osos Valley Road (LOVR) Sub-Area Fee Fund. This fund was established to account for sub-area impact fees collected from development activity in the Los Osos Valley Road sub-area boundary. Waste Water Impact Fee Fund. This fund was established to account for the collection of development impact fees collected from the Tank Farm Road, Irish Hills, and Silver City sub-areas. Fleet Replacement Fund. This fund was established to account for the financing and replacement of vehicles for all General Fund programs of the City. Financing is primarily provided through operating transfers from the General Fund as well as from interest earnings and sales of surplus property. Information Technology Replacement Fund. This fund was established in FY to account for the financing and replacement of information technology for all General Fund programs of the City. Financing is primarily provided through operating transfers from the General Fund as well as from interest earnings. Affordable Housing Program. This fund accumulates revenues from inclusionary housing fees for capital projects related to affordable housing programs and projects. 96

133 Combining Balance Sheet Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2014 Downtown BID Special Revenue Funds Transportation Development Act (TDA) Tourism BID Gas Tax Assets Cash and cash equivalents $ 3,983 $ $ 9,530 $ Investments 158,936 Accounts receivable ,490 Due from other governments 12, ,484 Accrued interest receivable 291 Total assets $ 4,133 $ 12,292 $ 314,247 $ 139,484 Liabilities and Fund Balances Liabilities: Accounts payable $ 3,011 $ $ 63,430 $ Accrued liabilities 2,415 Due to other funds 12, ,484 Total liabilities 3,011 12,292 65, ,484 Fund balance: Restricted for: Law enforcement grant programs Committed to: Affordable housing programs Impact fee programs Open space programs Parkland development programs Assigned to: Subsequent years expenditures 1, ,402 Unassigned Total fund balance 1, ,402 - Total liabilities and fund balance $ 4,133 $ 12,292 $ 314,247 $ 139,484 97

134 Community Development Block Grant (CDBG) Special Revenue Funds Law Enforcement Grants Public Art Contributions $ $ $ 23, ,640 52, , $ 118,200 $ 52,463 $ 416,103 $ 114,534 $ 25,318 $ 3, ,283 25,318-27, ,103 (83) (83) 27, ,103 $ 118,200 $ 52,463 $ 416,103 98

135 Combining Balance Sheet Nonmajor Governmental Funds, continued For the Fiscal Year Ended June 30, 2014 Page 2 Capital Projects Funds Assets Cash and cash equivalents Investments Accounts receivable Due from other governments Accrued interest receivable Total assets Liabilities and Fund Balances Liabilities: Accounts payable Accrued liabilities Due to other funds Total liabilities Parkland Development Transportation Impact Fee Open Space Protection $ 74,175 $ 188,664 $ 21,100 1,237,077 3,146, , ,000 50,205 2,880 7, $ 1,314,132 $ 3,701,186 $ 423,981 $ 147,810 $ 56,045 $ 12,389 3, ,810 59,485 12,389 Fund balance: Restricted for: Law enforcement grant programs Committed to: Affordable housing programs Impact fee programs Open space programs Parkland development programs Assigned to: Subsequent years expenditures Unassigned 1,166,322 3,641, ,592 Total fund balance Total liabilities and fund balance 1,166,322 3,641, ,592 $ 1,314,132 $ 3,701,186 $ 423,981 99

136 Capital Projects Funds Airport Area Impact Fee LOVR Sub- Area Fee Waste Water Impact Fee Fleet Replacement Info Tech Replacement Affordable Housing $ 54,445 $ 18,352 $ $ 153,307 $ 38,475 $ 166, , ,064 2,556, ,673 2,774,308 2, ,868 1,293 6,192 $ 964,600 $ 325,116 $ - $ 2,716,002 $ 681,441 $ 2,946,847 $ 7,959 $ 179,906 $ $ 12,371 $ 158 $ 80,997 7, ,906-93, , ,210 2,946,847 2,622, , , ,210-2,622, ,283 2,946,847 $ 964,600 $ 325,116 $ - $ 2,716,002 $ 681,441 $ 2,946,

137 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2014 Downtown BID Special Revenue Funds Transportation Development Act (TDA) Tourism BID Gas Tax Revenues: Use of money and property $ $ $ 9,040 $ Subventions and grants 49,169 1,460,290 Charges for services 218,267 1,217,781 Other revenues 150 Total revenues 218,417 49,169 1,226,821 1,460,290 Expenditures: Current: Community development 218,417 1,175,402 Capital: Public safety Transportation Leisure, cultural and social services Community development Total expenditures 218,417-1,175,402 - Excess (deficiency) of revenues over (under) expenditures - 49,169 51,419 1,460,290 Other financing sources (uses): Transfers in Transfers out (49,169) (24,356) (1,460,290) Total other financing sources (uses) - (49,169) (24,356) (1,460,290) Net change in fund balance ,063 - Fund balance, beginning of year 1, ,339 - Fund balance, end of year $ 1,122 $ - $ 248,402 $ - 101

138 Community Development Block Grant (CDBG) Special Revenue Funds Law Enforcement Grants Public Art Contributions Parkland Development Capital Projects Funds Transportation Impact Fee Open Space Protection $ 351 $ 2,167 $ 3,148 $ 9,500 $ 28,352 $ 4,560 1,012, , ,208 50,205 2,616 97,535 1,002,592 20,980 18, ,940 1,032, , , ,035 1,313,152 75, , , , , , ,106 58,452 1,081, , , , ,600 58,452 (49,762) 4,421 (12,139) (66,085) 603,552 17,293 52,493 80, ,000 52,493-80, ,000 2,731 4,421 68,546 (66,085) 603, ,293 (2,814) 22, ,557 1,232,407 3,038, ,299 $ (83) $ 27,145 $ 416,103 $ 1,166,322 $ 3,641,701 $ 411,

139 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds, continued For the Fiscal Year Ended June 30, 2014 Page 2 Capital Projects Funds Revenues: Use of money and property Subventions and grants Charges for services Other revenues Total revenues Expenditures: Current: Community development Capital: Public safety Transportation Leisure, cultural and social services Community development 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 balance Fund balance, beginning of year Fund balance, end of year Airport Area Impact Fee LOVR Sub- Area Fee Waste Water Impact $ 6,676 $ 8,939 $ ,011 3,097 73, ,687 12,036 73,770 9,845 13,076 9,845 13, ,842 (1,040) 73,770 (73,770) - - (73,770) 251,842 (1,040) - 704, ,250 - $ 956,641 $ 145,210 $ - 103

140 Capital Projects Funds Fleet Replacement Info Tech Replacement Affordable Housing Total Nonmajor Governmental Funds $ 19,074 $ 4,252 $ 59,724 $ 156, ,955 3,211, ,512 3,802,417 59,123 27,947 (249) 212,862 78,197 32,199 1,071,942 7,383,655 1,641, , , , , ,347 30, , , ,066 30,000 4,386,760 (343,910) (83,867) 1,041,942 2,996, , ,500 1,310,038 (35,000) (17,000) (1,659,585) 376, ,500 (17,000) (349,547) 32, ,633 1,024,942 2,647,348 2,590, ,650 1,921,905 10,617,571 $ 2,622,634 $ 681,283 $ 2,946,847 $ 13,264,

141 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Downtown Business Improvement District Fund For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Revenues Charges for services Assessments $ 205,000 $ 205,000 $ 218,267 $ 13,267 Other revenues Total Revenues 205, , ,417 13,417 Expenditures Current Community development 205, , ,417 13,417 Total Expenditures 205, , ,417 13,417 Excess of Revenues Over Expenditures Net Change in Fund Balance Fund Balance, Beginning of Year 102, ,165 1, ,035 Fund Balance, End of Year $ 102,000 $ 135,165 $ 1,122 $ 128,

142 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Transportation Development Act (TDA) For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Revenues Subventions and grants $ 49,100 $ 49,100 $ 49,169 $ 69 Total Revenues 49,100 49,100 49, Excess of Revenues Over Expenditures 49,100 49,100 49, Other Financing Uses: Operating transfers out (49,100) (49,100) (49,169) (69) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year $ - $ - $ - $ - 106

143 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Tourism Business Improvement District Fund For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Revenues Use of money and property $ 1,500 $ 1,500 $ 9,040 $ 7,540 Charges for services Assessments 1,149,900 1,198,000 1,217,781 19,781 Total Revenues 1,151,400 1,199,500 1,226,821 27,321 Expenditures Current Community development 1,128,400 1,250,604 1,175,402 (75,202) Total Expenditures 1,128,400 1,250,604 1,175,402 (75,202) Excess of Revenues Over (Under) Expenditures 23,000 (51,104) 51, ,523 Other Financing Uses: Operating transfers out (23,000) (23,000) (24,356) (1,356) Net Change in Fund Balance - (74,104) 27, ,167 Fund Balance, Beginning of Year 102, , , ,035 Fund Balance, End of Year $ 102,000 $ 61,061 $ 248,402 $ 229,

144 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Gas Tax Fund For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Revenues Subventions and grants $ 1,357,200 $ 1,282,200 $ 1,460,290 $ 178,090 Total Revenues 1,357,200 1,282,200 1,460, ,090 Excess of Revenues Over Expenditures 1,357,200 1,282,200 1,460, ,090 Other Financing Uses: Operating transfers out (1,357,200) (1,282,200) (1,460,290) (178,090) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year $ - $ - $ - $ - 108

145 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Community Development Block Grant (CDBG) Fund For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Revenues Subventions and grants $ 512,805 $ 1,251,041 $ 1,012,873 $ (238,168) Other revenues 19,302 19,302 Total Revenues 512,805 1,251,041 1,032,175 (218,866) Expenditures Current Community development 472, , ,831 (11,489) Capital Projects 105,000 1,062, ,106 (228,170) Total Expenditures 577,600 1,321,596 1,081,937 (239,659) Excess of Revenues Over (Under) Expenditures (64,795) (70,555) (49,762) 20,793 Other Financing Uses: Operating transfers in 71,000 73,200 52,493 (20,707) Net Change in Fund Balance 6,205 2,645 2, Fund Balance, Beginning of Year 266, ,500 (2,814) 576,000 Fund Balance, End of Year $ 272,305 $ 576,145 $ (83) $ 576,

146 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Law Enforcement Grants Fund For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Revenues Use of money and property $ 100 $ 100 $ 2,167 $ 2,067 Subventions and grants 325, , ,149 (69,241) Other revenues 2,000 2,000 2, Total Revenues 327, , ,932 (66,558) Expenditures Capital Projects 121, , ,511 (71,879) Total Expenditures 121, , ,511 (71,879) Excess of Revenues Over (Under) Expenditures 205,604 (900) 4,421 5,321 Net Change in Fund Balance 205,604 (900) 4,421 5,321 Fund Balance, Beginning of Year 21,400 21,600 22,724 1,400 Fund Balance, End of Year $ 227,004 $ 20,700 $ 27,145 $ 6,

147 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Public Art Contributions Fund For the Fiscal Year Ended June 30, 2014 Variance with Final Budget Budget Positive Original Final Actual (Negative) Revenues Use of money and property $ 2,100 $ 2,100 $ 3,148 $ 1,048 Other revenues 2, , ,940 6,417 Total Revenues 4, , ,088 7,465 Expenditures Capital Projects 504, ,227 (382,702) Total Expenditures - 504, ,227 (382,702) Excess of Revenues Over (Under) Expenditures 4,100 (402,306) (12,139) 390,167 Other Financing Uses: Operating transfers in - 806,855 80,685 (726,170) Net Change in Fund Balance 4, ,549 68,546 (336,003) Fund Balance, Beginning of Year 166, , ,557 7,000 Fund Balance, End of Year $ 170,400 $ 778,349 $ 416,103 $ (329,003) 111

148 Agency Funds For the Fiscal Year Ended June 30, 2014 The City of San Luis Obispo has established the following agency funds, which are used to account for funds held by the City as an agent for private donations and programs operated jointly with other local agencies: Whale Rock Fund. This fund was established to account for the financial activities of the Whale Rock Commission, a joint venture providing water service to the City, the California Polytechnic State University, and the California Men's Colony. Jack House Fund. This fund was established to account for the financial activities of the Jack House Committee, which includes the rehabilitation and use of a use of the historic Jack House property. Joint Recreational Use Fund. This fund was established to account for the financial activities of the committee on Joint Recreational Use, which includes the development and use of recreational facilities built on school district property. Mayor s Youth Task Force Fund. This fund was established to account for the financial activities of this community task force. Narcotics Task Force Fund. This fund was established to account for the financial activities of the County task force. Bomb Task Force Fund. This fund was established to account for the financial activities of the County task force. Hazardous Materials Task Force Fund. This fund was established to account for the financial activities of the County task force. General Agency Fund. This fund was established to account for a broad category of funds, including donations, provided to the City to be utilized for specific purposes. Duvall Fund. This fund was established to account for a bequest by Mary Jane Duvall to assist in civic and beautification projects in the Mission Plaza area and extensions. Boysen Ranch Conservation Easement Fund. This fund was established to account for contributions toward obtaining a conservation easement on the Boysen Ranch property. Cable Television Public, Educational and Government Funds for the City of San Luis Obispo, San Luis Coastal Unified School District (SLCUSD) and San Luis Obispo County Public Access, Inc. Public Access Television (PAT). These funds account for collections by Charter Communications from its customers for PEG access equipment and facilities. The City of San Luis Obispo, SLCUSD and PAT annually receive equal shares of collections, restricted for approved uses as stipulated in the cable franchise agreement. 112

149 Combining Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2014 Whale Rock Fund Assets Cash and cash equivalents 137,800 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 $ $ 1,071,016 $ 1,140,684 $ 68,132 Investments 1,162,800 19,340 1,143,460 Accounts receivable 9,647 9,647 Accrued interest receivable 4,000 2,800 3,962 2,838 Prepaid expense 24,600 10,571 38,100 (2,929) Due from other governments 38,100 26,584 24,600 40,084 Total Assets $ 1,367,300 $ 1,120,618 $ 1,226,686 $ 1,261,232 Liabilities Accounts payable $ 99,100 $ 540,952 $ 606,726 $ 33,326 Accrued salaries 71,000 47,158 95,520 22,638 Other liabilities 30, ,262 Due to agency participants 1,166,400 1,168,033 1,160,427 1,174,006 Total Liabilities $ 1,367,300 $ 1,756,605 $ 1,862,673 $ 1,261,232 Jack House Fund Assets Cash and cash equivalents 2,000 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 $ $ 11,058 2,408 $ 10,650 Investments 8,500 8,500 - Accounts receivable Accrued interest receivable Total Assets $ 10,500 $ 11,134 $ 10,908 $ 10,726 Liabilities Accounts payable Other liabilities 10, ,670 Total Liabilities $ 10,500 $ 226 $ - $ 10,726 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Joint Recreational Use Fund Assets Investments $ 200 $ 15 $ 215 Total Assets Liabilities Other liabilities Total Liabilities $ 200 $ 15 $ - $

150 Combining Statement of Changes in Assets and Liabilities Agency Funds, continued For the Fiscal Year Ended June 30, 2014 Page 2 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Mayor's Youth Task Force Fund Assets Cash and cash equivalents $ 100 $ 100 $ - Investments 2, ,247 Total Assets 2, ,247 Liabilities Other liabilities 2, ,247 Total Liabilities $ 2,200 $ 47 - $ 2,247 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 CDBG Loan Program Fund Assets Cash and cash equivalents $ 3,900 $ 3,900 $ - Investments 35,300 35,300 - Total Assets $ 39,200 $ - $ 39,200 $ - Liabilities Due to agency participants 39,200 39,200 - Total Liabilities $ 39,200 $ - $ 39,200 $ - Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Narcotics Task Force Fund Assets Cash and cash equivalents $ 7,900 $ 215,788 $ 187,338 $ 36,350 Investments 69,900 69,900 - Accrued interest receivable Total Assets $ 78,100 $ 215,879 $ 257,538 $ 36,441 Liabilities Accounts payable , ,953 1,282 Due to agency participants 78, , ,746 35,159 Total Liabilities $ 78,100 $ 391,040 $ 432,699 $ 36,

151 Combining Statement of Changes in Assets and Liabilities Agency Funds, continued For the Fiscal Year Ended June 30, 2014 Page 3 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Bomb Task Force Fund Assets Cash and cash equivalents $ 14,700 $ 43,467 $ 58,167 - Investments 134,800 78, ,188 Accrued interest receivable Total Assets $ 149,800 $ 122,318 $ 58,467 $ 213,651 Liabilities Accounts payable 300 5,040 5, Due to agency participants 149, , , ,389 Total Liabilities $ 149,800 $ 230,803 $ 166,952 $ 213,651 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Hazardous Materials Task Force Fund Assets Cash and cash equivalents $ 7,200 $ 27 $ 7,227 $ - Investments 62,900 12,430 75,330 Total Assets 70,100 12,457 7,227 75,330 Liabilities Accounts payable Due to agency participants 70,100 49,240 44,070 75,270 Total Liabilities $ 70,100 $ 49,300 $ 44,070 $ 75,330 General Agency Fund Assets Cash and cash equivalents 98,300 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 $ $ 1,314,245 $ 1,377,209 $ 35,336 Investments 901, , ,323 Accounts receivable ,369 31,314 79,155 Other assets 30, ,864 Total Assets 1,030,500 1,424,614 1,720, ,678 Liabilities Accounts payable 61, , ,067 41,929 Other liabilities 969, , , ,749 Total Liabilities $ 1,030,500 $ 830,692 $ 1,126,514 $ 734,

152 Combining Statement of Changes in Assets and Liabilities Agency Funds, continued For the Fiscal Year Ended June 30, 2014 Page 4 Duvall Fund Assets Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Cash and cash equivalents $ 15,400 $ $ 3,928 $ 11,472 Investments 139,400 5, ,592 Accrued interest receivable Total Assets $ 155,500 $ 5,192 $ 4,284 $ 156,408 Liabilities Other liabilities 155, ,408 Total Liabilities $ 155,500 $ $ 156,408 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Boysen Ranch Conservation Easement Assets Cash and cash equivalents $ 38,300 $ 10,448 $ 26,661 $ 22,087 Investments 348,900 19, ,356 Accrued interest receivable 1, , Total Assets $ 389,000 $ 30,766 $ 28,461 $ 391,305 Liabilities Accounts payable 24, ,567 Other liabilities 364,400 2, ,738 Total Liabilities $ 389,000 $ 2,338 $ ,305 Peg - City of San Luis Obispo Assets Cash and cash equivalents 14,400 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 $ $ 104,648 $ 109,915 $ 9,133 Investments 130,300 22, ,317 Accounts receivable 10, ,255 Accrued interest receivable Total Assets $ 145,300 $ 137,544 $ 110,665 $ 172,179 Liabilities Accounts payable 14,000 70,311 82,756 1,555 Other liabilities 131,300 48,196 8, ,624 Total Liabilities $ 145,300 $ 118,507 $ 91,628 $ 172,

153 Combining Statement of Changes in Assets and Liabilities Agency Funds, continued For the Fiscal Year Ended June 30, 2014 Page 5 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Peg - SLCUSD Assets Cash and cash equivalents $ 300 $ 11,483 $ - $ 11,783 Investments 2, , ,509 Accounts receivable 10,255 10,255 Total Assets $ 2,800 $ 215,747 $ - $ 218,547 Liabilities Other liabilities 2, , ,547 Total Liabilities $ 2,800 $ 215,747 $ - $ 218,547 Peg - PAT Assets Balance Balance June 30, 2013 Additions Deductions June 30, 2014 Cash and cash equivalents $ 27,000 $ - $ 27,000 $ - Investments 244, ,300 - Accrued interest receivable 1,100 1,100 - Total Assets $ 272,400 $ - $ 272,400 $ - Liabilities Due to agency participants 272, ,400 - Total Liabilities $ 272,400 $ - $ 272,400 $ - Totals - All Agency Funds Assets Cash and cash equivalents 367,300 Balance Balance June 30, 2013 Additions Deductions June 30, 2014 $ $ 2,782,180 $ 2,944,537 $ 204,943 Investments 3,243, , ,217 2,885,537 Accounts receivable ,726 31, ,362 Accrued interest receivable 8,800 4,716 8,418 5,098 Other assets 55,500 10,571 38,136 27,935 Due from other governments 38,100 26, ,600 40,084 Total Assets $ 3,712,900 $ 3,296,431 $ 3,736,372 $ 3,272,959 Liabilities Accounts payable $ 199,600 $ 1,137,050 $ 1,233,613 $ 103,037 Accrued salaries 71,000 47, ,520 22,638 Other liabilities 1,666, , ,319 1,649,460 Due to agency participants 1,775,600 1,638,941 1,916,717 1,497,824 Total Liabilities $ 3,712,900 $ 3,596,228 $ 4,036,169 $ 3,272,

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155 STATISTICAL SECTION (UNAUDITED)

156 Statistical Section Overview June 30, 2014 This part of the City of San Luis Obispo s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government s overall financial health. Contents Financial Trends Schedules 1-6. These schedules contain trend information to help the reader understand how the City s financial performance and well-being have changed over time. Revenue Capacity Schedules These schedules contain information to help the reader assess the government s most significant local revenue sources, sales and property taxes. Debt Capacity Schedules These schedules present information to help the reader assess the affordability of the City s current levels of outstanding debt and the City s ability to issue additional debt in the future. Demographic and Economic Information Schedules These schedules offer demographic and economic indicators to help the reader understand the environment within which the government s financial activities take place. Operating Information Schedules These schedules contain service and infrastructure data to help the reader understand how the information in the City s financial report relates to the services the government provides and the activities it performs. 119

157 Schedule 1 City of San Luis Obispo, California Net Positions by Component Last Ten Fiscal Years (Accrual Basis of Accounting) For the Fiscal Year Ended June Governmental activities: Net investment in capital assets $ 107,663,800 $ 113,263,400 $ 115,149,100 $ 121,247,100 $ 119,425,100 $ 129,416,800 $ 133,145,800 $ 141,686,600 $ 142,239,500 $ 145,266,043 Restricted 1,185,000 4,512,200 3,452,100 1,822,300 2,510,500 2,569,800 2,543,800 2,620,700 2,374,800 4,825,662 Unrestricted 19,446,800 20,321,700 28,786,300 30,935,700 38,928,500 26,204,500 26,401,500 23,583,000 29,927,200 32,524,272 Total governmental activities net position $ 128,295,600 $ 138,097,300 $ 147,387,500 $ 154,005,100 $ 160,864,100 $ 158,191,100 $ 162,091,100 $ 167,890,300 $ 174,541,500 $ 182,615,977 Business-type activities: Net investment in capital assets $ 91,869,500 $ 96,024,900 $ 95,526,800 $ 102,540,500 $ 109,675,900 $ 112,395,800 $ 117,314,700 $ 119,957,600 $ 123,510,200 $ 119,116,303 Restricted 1,568,700 4,401,900 8,009,800 2,506,200 3,918,600 2,763,700 2,777,100 2,293,900 2,254,200 2,248,979 Unrestricted 24,742,600 24,327,400 27,327,200 31,873,200 31,329,500 38,245,900 36,493,600 37,759,000 41,712,200 54,766,319 Total business-type activities net position $ 118,180,800 $ 124,754,200 $ 130,863,800 $ 136,919,900 $ 144,924,000 $ 153,405,400 $ 156,585,400 $ 160,010,500 $ 167,476,600 $ 176,131,601 Primary government (City wide totals): Net investment in capital assets $ 199,533,300 $ 209,288,300 $ 210,675,900 $ 223,787,600 $ 229,101,000 $ 241,812,600 $ 250,460,500 $ 261,644,200 $ 265,749,700 $ 264,382,346 Restricted 2,753,700 8,914,100 11,461,900 4,328,500 6,429,100 5,333,500 5,320,900 4,914,600 4,629,000 7,074,641 Unrestricted 44,189,400 44,649,100 56,113,500 62,808,900 70,258,000 64,450,400 62,895,100 61,342,000 71,639,400 87,290,591 Total primary government net position $ 246,476,400 $ 262,851,500 $ 278,251,300 $ 290,925,000 $ 305,788,100 $ 311,596,500 $ 318,676,500 $ 327,900,800 $ 342,018,100 $ 358,747,578 Note: The City implemented GASB Statement No. 34 in the fiscal year. The information in this schedule is therefore set forth prospectively from the year of implementation. 120

158 Schedule 2 City of San Luis Obispo, California Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) For The Fiscal Year Ended June Expenses: Governmental activities: Public safety $ 20,901,500 $ 22,018,800 $ 23,083,200 $ 28,189,900 $ 29,330,300 $ 27,687,200 $ 26,774,800 $ 27,993,900 $ 28,859,200 $ 29,651,702 Transportation 4,548,400 5,142,200 6,276,600 6,463,200 6,619,300 7,116,400 8,809,400 7,778,000 8,551,500 8,975,047 Leisure, cultural and social services 7,662,700 7,973,800 7,688,000 9,518,400 9,778,900 9,445,600 9,299,200 9,500,300 10,078,700 10,239,853 Community development 5,739,700 5,503,700 6,953,500 7,822,300 8,233,600 11,020,400 8,166,300 8,782,200 8,866,900 10,183,782 Interest on long-term debt 1,365, ,200 1,021, , ,500 1,348,100 1,248,400 1,198,000 1,217,200 1,221,205 Total governmental activities expenses 40,218,000 41,368,700 45,022,400 52,944,400 54,913,600 56,617,700 54,298,100 55,252,400 57,573,500 60,271,589 Business-type activities: Water 7,942,000 8,338,000 11,208,800 10,656,200 11,532,900 11,323,200 16,106,300 17,455,200 17,019,000 17,575,961 Sewer 7,451,700 7,403,700 7,885,100 8,511,300 9,250,200 9,153,200 9,633,900 9,530,400 10,189,400 10,647,255 Parking 2,491,900 2,741,800 3,444,000 3,416,400 3,704,700 3,494,300 3,501,500 3,598,000 3,678,600 3,636,607 Transit 2,384,500 2,556,000 2,894,700 3,060,100 3,199,200 3,295,500 3,409,700 3,778,900 3,903,900 4,059,138 Golf 504, , , , , , ,100 Total business-type activities expenses 20,774,700 21,578,800 26,041,800 26,277,600 28,409,100 27,974,600 33,375,500 34,362,500 34,790,900 35,918,961 Total primary government expenses $ 60,992,700 $ 62,947,500 $ 71,064,200 $ 79,222,000 $ 83,322,700 $ 84,592,300 $ 87,673,600 $ 89,614,900 $ 92,364,400 $ 96,190,550 Program Revenues: Governmental activities: Charges for services: Public safety $ 626,100 $ 1,371,900 $ 1,515,100 $ 1,441,200 $ 1,508,600 $ 1,501,500 $ 1,745,200 $ 1,750,700 $ 1,599,000 $ 1,589,278 Transportation 636,700 1,781, ,700 1,150,000 1,492, ,700 2,690, , ,200 1,321,323 Leisure, cultural and social services 1,331,500 1,562,100 1,257,600 2,190,500 1,470,000 1,304,700 1,421,600 1,834,200 1,926,800 3,048,274 Community development 3,267,200 5,268,800 5,067,400 3,981,400 3,107,400 2,917,700 3,166,200 4,563,200 4,126,400 4,981,211 Operating grants and contributions 1,234,700 2,071,500 3,083,100 2,835,700 3,671,200 2,052,000 1,885,100 2,152,700 2,814,700 2,412,469 Capital grants and contributions 4,826,100 2,907,200 1,657,200 1,985,500 5,320,500 2,946,800 3,066,300 2,021,800 1,991,900 3,680,440 Total governmental activities program revenues 11,922,300 14,962,700 13,278,100 13,584,300 16,570,500 10,964,400 13,974,600 12,740,600 12,680,000 17,032,

159 Schedule 2 City of San Luis Obispo, California Changes in Net Position, continued Last Ten Fiscal Years (Accrual Basis of Accounting) For The Fiscal Year Ended June Business-type activities: Charges for services: Water $ 9,214,800 $ 10,512,500 $ 11,603,100 $ 12,691,900 $ 13,836,000 $ 13,812,100 $ 14,298,100 $ 16,753,100 $ 18,148,200 $ 19,755,909 Sewer 8,872,400 10,236,000 10,868,800 10,205,500 11,785,200 13,225,100 13,320,400 14,789,700 16,212,000 17,151,212 Parking 3,719,500 3,668,200 3,740,600 3,508,100 3,496,100 3,564,700 3,533,300 4,693,400 3,998,730 Transit 435, , , , , , , , , ,585 Golf 314, , , , , , ,000 Operating grants and contributions 1,737,900 1,685,500 1,879,100 1,841,500 2,192,200 2,350,200 2,220,700 2,502,500 2,673,500 2,458,640 Capital grants and contributions 2,034, , ,800 1,960,900 1,627, ,300 1,242, , ,300 82,359 Total business-type activities programs revenues 26,328,400 27,229,500 29,695,400 27,569,300 33,938,000 34,782,000 35,603,000 38,882,400 43,141,100 44,135,435 Total primary government program revenues $ 38,250,700 $ 42,192,200 $ 42,973,500 $ 41,153,600 $ 50,508,500 $ 45,746,400 $ 49,577,600 $ 51,623,000 $ 55,821,100 $ 61,168,430 Net Revenues (Expenses): Governmental activities $ (28,295,700) $ (26,406,000) $ (31,744,300) $ (39,360,100) $ (38,343,100) $ (45,653,300) $ (40,323,500) $ (42,511,800) $ (44,893,500) $ (43,238,594) Business-type activities 5,553,700 5,650,700 3,653,600 1,291,700 5,528,900 6,807,400 2,227,500 4,519,900 8,350,200 8,216,474 Total primary government $ (22,742,000) $ (20,755,300) $ (28,090,700) $ (38,068,400) $ (32,814,200) $ (38,845,900) $ (38,096,000) $ (37,991,900) $ (36,543,300) $ (35,022,120) General Revenues and Other Changes in Net Position: Governmental activities: Sales and use taxes $ 11,745,400 $ 12,675,900 $ 14,993,800 $ 19,578,300 $ 17,712,100 $ 15,976,400 $ 17,714,900 $ 19,527,500 $ 20,736,000 $ 22,180,173 Property taxes 6,709,400 7,596,700 8,255,000 8,374,200 8,788,400 8,579,300 8,441,100 8,367,000 9,176,600 8,960,010 Transient occupancy tax 4,079,800 4,539,200 4,786,000 5,054,700 4,679,500 4,496,100 4,844,200 5,222,000 5,572,400 6,063,232 Utility users tax 3,670,200 3,947,300 4,096,100 4,177,700 4,358,500 4,862,400 4,592,300 4,584,100 4,916,100 5,345,342 Property tax in-lieu of vehicle license fees 2,187,000 2,486,400 3,358,200 3,280,100 3,504,700 3,565,100 3,551,100 3,492,400 3,533,200 3,645,692 Other taxes and fees 3,838,800 4,069,900 3,860,400 4,228,100 4,317,900 4,226,800 4,149,900 4,299,800 4,607,600 4,779,570 Investment earnings 632, ,200 1,675,400 1,605,300 1,775,300 1,239, , , , ,931 Miscellaneous and other 63, , , , , , , , , ,127 Gain (loss) on disposal of capital assets (337,100) (3,400) (11,000) Prior period adjustment 2,657,100 (833,234) Cumulative change in accounting principle (GASB 65) (345,400) Transfers (176,900) (255,300) (350,900) (462,000) (335,000) (301,500) (227,200) 1,820, ,100 (73,771) Total governmental activities 32,749,800 36,268,100 41,034,500 45,977,700 45,202,200 42,980,300 44,223,500 48,311,000 51,544,700 51,313,

160 Schedule 2 City of San Luis Obispo, California Changes in Net Position, continued Last Ten Fiscal Years (Accrual Basis of Accounting) For The Fiscal Year Ended June Business-type activities Investment earnings 658, ,400 2,105,100 1,413,400 1,699,600 1,372, , ,100 73, ,551 Cumulative change in accounting principle (842,600) Transfers 176, , , , , , ,200 (1,820,900) (115,100) 73,771 Total business-type activities 835, ,700 2,456,000 1,875,400 2,034,600 1,674, ,500 (1,094,800) (884,200) 438,322 Total primary government $ 33,584,900 $ 37,190,800 $ 43,490,500 $ 47,853,100 $ 47,236,800 $ 44,654,300 $ 45,176,000 $ 47,216,200 $ 50,660,500 $ 51,751,394 Change in net position: Governmental activities $ 4,454,100 $ 9,862,100 $ 9,290,200 $ 6,617,600 $ 6,859,100 $ (2,673,000) $ 3,900,000 $ 5,799,200 $ 6,651,200 $ 8,074,478 Business-type activities 6,388,800 6,573,400 6,109,600 3,167,100 7,563,500 8,481,400 3,180,000 3,425,100 7,466,000 8,654,796 Total primary government $ 10,842,900 $ 16,435,500 $ 15,399,800 $ 9,784,700 $ 14,422,600 $ 5,808,400 $ 7,080,000 $ 9,224,300 $ 14,117,200 $ 16,729,274 Note: The City implemented GASB Statement No. 34 in the 2003 fiscal year. The information in this schedule is therefore set forth prospectively from the year of implementation. 123

161 Schedule 3 City of San Luis Obispo, California Governmental Activities Tax and Franchise Revenues by Source Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Sales Measure Y Property Transient Utility Property Franchise Business Other Year and Use 1/2 cent (Note 1) Occupancy Users in-lieu of VLF Fees Tax Taxes Total ,745,400 6,630,600 4,079,800 3,670,200 2,005,600 1,518, ,400 29,964, (Note 2) 12,675,900 7,519,600 4,539,200 3,947,300 1,530,800 2,101,300 1,578, ,600 34,282, (Note 3) 13,993,800 1,000,000 8,255,000 4,786,000 4,096,100 3,061,500 2,153,700 1,706, ,500 39,413, ,581,700 5,996,600 8,374,200 5,054,700 4,177,700 3,280,100 2,361,700 1,866, ,100 44,981, ,070,700 5,641,400 8,788,400 4,679,500 4,358,500 3,504,700 2,439,400 1,878, ,300 43,595, ,723,900 5,252,500 8,579,300 4,496,100 4,862,400 3,565,100 2,396,700 1,830, ,600 41,910, ,098,600 5,616,300 8,441,100 4,844,200 4,592,300 3,551,100 2,352,100 1,797, ,100 43,502, ,290,000 6,237,500 8,367,000 5,222,000 4,584,100 3,492,400 2,462,300 1,837, ,200 45,720, ,242,200 6,493,800 9,176,600 5,572,400 4,916,100 3,533,200 2,552,300 2,055, ,900 48,891, ,405,808 6,774,365 8,960,010 6,063,232 5,345,692 3,645,692 2,636,599 2,142, ,127 51,653,496 Notes: 1. Property tax revenues are presented net of SB2557 County administrative fees (approximately 3% of total property tax revenues). The City has elected to receive its property tax revenues based on the Teeter Plan method of collection whereby the County remits 100% of taxes levied, pursues collection and retains any delinquent taxes and related penalties and interest. 2. GASB 34 was implemented in and prior information is not available. 3. Beginning in , the State implemented a "VLF Swap," under which an equal amount of Vehicle License Fees was "swapped" for an equal amount of revenues to be collected with the property tax roll. 4. In November 2006, voters in San Luis Obispo approved a local sales and use tax measure (Measure Y) increasing the City rate by 1/2%, which became effective April 1, The sales tax measure has a sunset provision of 8 years. 124

162 Schedule 4 City of San Luis Obispo, California Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) For the Fiscal Year Ended June General fund: Reserved $ 345,000 $ 311,500 $ 437,800 $ 808,100 $ 291,500 $ 201,800 Unreserved: Designated 1,623, ,500 1,093, , ,500 Undesignated 9,398,100 11,625,100 17,648,700 12,927,100 13,575,400 9,988,800 Nonspendable: Prepaid items 2,777,000 3,191,055 Restricted for: (Note 1) Debt service 258, , , ,037 Committed to: (Note 1) General government programs 317,500 1,288,200 1,768,200 4,973,497 Contingency fund Assigned to: 10,458,000 Subsequent years expenditures 8,200 11,900 Unassigned 12,324,100 11,781,500 14,060,900 1,382,590 Total general fund 9,743,100 13,559,900 18,830,000 14,829,100 13,991,900 11,114,100 12,907,900 13,684,400 18,937,700 20,317,179 All other governmental funds: Reserved 3,618,200 3,001,100 3,412,200 8,557,100 10,038,200 6,932,600 Unreserved reported in: Capital projects funds 7,003,500 11,936,700 11,441,300 10,962,000 19,748,900 1,245,000 Special revenue funds 267, , , , , ,300 Restricted for: (Note 1) Debt service 2,285,700 2,017,900 2,043,200 2,043,222 Law enforcement grant programs 42,000 20,500 22,900 27,145 Committed to: Affordable housing programs 294,000 1,052,000 1,254,900 2,946,847 Assessment district programs 170, ,000 Capital outlay 1,172,800 1,227,700 1,326,000 6,045,091 General government programs 4,743,552 Impact Fees Programs 4,350,000 4,069,800 3,542, ,592 Open space programs 183, ,300 1,582,425 Parkland development programs 998,900 1,057,100 1,209,600 Public art programs 293, , ,400 Assigned to: Subsequent years expenditures 8,997,800 4,359,300 5,413,900 3,552,319 Unassigned (2,500) 1,039 Total all other governmental funds 10,888,700 15,553,700 15,312,200 20,104,600 9,097,900 18,605,600 14,544,400 15,352,400 21,353,232 Total all governmental funds $ 20,631,800 $ 29,113,600 $ 34,142,200 $ 34,933,700 $ 13,991,900 $ 20,212,000 $ 31,513,500 $ 28,228,800 $ 34,290,100 $ 41,670,411 Note: The City implemented GASB Statement No. 54 in the fiscal year which requires the City to use new designations of ending fund balances. 125

163 Schedule 5 City of San Luis Obispo, California Revenues, Expenditures and Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) For The Fiscal Year Ended June Revenues: Taxes Sales and Use - general $ 11,745,400 $ 12,675,900 $ 13,993,800 $ 13,581,700 $ 12,070,700 $ 10,723,900 $ 12,098,600 $ 13,290,000 $ 14,242,200 $ 15,405,808 Sales and Use - Measure Y 1,000,000 5,996,600 5,641,400 5,252,500 5,616,300 6,237,500 6,493,800 6,774,365 Prop. 172 Public Safety 276, , , , , , , , , ,567 Property 6,630,600 7,519,600 8,255,000 8,374,200 8,788,400 8,579,300 8,441,100 8,367,000 9,176,600 8,960,010 Transient Occupancy 4,079,800 4,539,200 4,786,000 5,054,700 4,679,500 4,496,100 4,844,200 5,222,000 5,572,400 6,063,232 Utility Users 3,670,200 3,947,300 4,096,100 4,177,700 4,358,500 4,862,400 4,592,300 4,584,100 4,916,100 5,345,342 Property tax in-lieu of VLF (Note 1) 1,530,800 3,061,500 3,280,100 3,504,700 3,565,100 3,551,100 3,492,400 3,533,200 3,645,692 Franchise Fees 2,005,600 2,101,300 2,153,700 2,361,700 2,439,400 2,396,700 2,352,100 2,462,300 2,552,300 2,636,599 Business Tax 1,518,800 1,578,000 1,706,700 1,866,400 1,878,500 1,830,100 1,797,800 1,837,500 2,055,300 2,142,971 Real Property Transfer 314, , , , , , , , , ,560 Fines, forfeitures and penalties 243, , , , , , , , , ,185 Use of money and property 600, ,900 1,751,400 1,605,300 1,775,300 1,239, , , , ,931 Subventions and grants Vehicle License Fees 9Note 1) 2,187, , , , , , ,600 45,600 19,300 Other subventions and grants 5,863,400 4,872,500 4,686,800 4,679,000 8,774,200 4,837,000 4,776,500 3,932,100 4,603,140 4,450,259 Charges for services 5,959,400 9,460,000 8,448,700 8,409,500 6,677,700 5,865,700 9,209,300 8,954,500 8,106,600 12,706,655 Other revenues 222,800 1,500, , ,800 1,810, , ,500 36, , ,469 Total revenues 45,317,100 52,188,600 55,316,300 60,940,600 63,293,600 54,769,900 59,074,300 59,857,300 62,778,240 69,884,645 Expenditures: Current: General Government 4,887,000 4,988,200 6,093,700 6,333,900 6,793,100 7,253,500 6,828,700 8,175,200 8,723,300 9,362,031 Public safety 17,824,200 19,247,000 20,659,600 25,055,900 26,002,400 24,203,800 23,506,100 23,953,200 23,973,400 24,798,500 Transportation 2,020,300 1,967,800 2,173,500 2,539,800 3,224,200 3,019,700 2,901,900 2,865,100 2,798,200 2,882,241 Leisure, cultural and social services 5,376,000 5,541,900 5,705,000 6,398,600 6,598,900 6,279,900 6,268,700 6,704,200 6,790,300 7,155,619 Community development 4,815,400 4,799,500 5,620,100 6,341,600 6,280,800 6,690,200 7,053,500 6,986,300 7,777,400 8,389,957 Debt service: Principal 1,011, ,100 1,062,400 1,124,300 1,159,900 1,550,200 1,774,000 1,493,200 1,543,000 1,534,668 Interest 989, ,200 1,021, , ,900 1,358,500 1,249,200 1,211,800 1,192,700 1,048,671 Debt issuance costs 261, ,100 36,

164 Schedule 5 City of San Luis Obispo, California Revenues, Expenditures and Changes in Fund Balances of Governmental Funds, continued Last Ten Fiscal Years (Modified Accrual Basis of Accounting) For The Fiscal Year Ended June Capital: Public safety 249, ,000 1,384,500 1,541,500 1,652,700 4,704, , , , ,351 Transportation 4,367,400 2,762,200 6,404,200 6,177,600 4,237,200 6,913,200 9,121,000 5,228,300 4,859,863 Leisure, cultural and social services 1,241, ,800 1,253, ,200 1,213,900 1,188, , , ,500 1,272,510 Community development (Note 2) 162, ,700 1,288,600 1,270,000 1,382,500 3,893, , ,300 70, ,017 General government 519,100 6,624, ,500 1,053, ,700 3,076,800 1,731, , , ,199 Total expenditures 39,359,400 50,885,100 49,403,400 59,687,100 62,271,600 67,456,400 60,225,400 62,800,100 59,380,400 63,280,627 Excess of revenues over(under) expenditures 5,957,700 1,303,500 5,912,900 1,253,500 1,022,000 (12,686,500) (1,151,100) (2,942,800) 3,397,840 6,604,018 Other Financing Sources(Uses): Sale of surplus property 393,900 30,200 Issuance of debt/refunding debt 6,558,800 7,433,600 9,067,000 1,080,000 5,050, ,775 Cost of debt issuance (11,500) Payment to refunded bond escrow agent (6,298,000) (281,800) (5,442,200) Transfers in 4,892,700 5,798,200 7,215,700 15,350,100 8,655,400 8,081,900 6,464,100 8,121,200 8,407,600 13,834,998 Transfers out (5,069,600) (6,053,500) (7,566,600) (15,812,100) (8,990,400) (8,383,400) (6,691,300) (8,101,100) (8,292,500) (13,908,769) Total other financing sources(uses) 83,900 7,178,300 (350,900) (462,000) 8,450,200 (301,500) 1,246,700 (341,900) 103, ,004 Net change in fund balance $ 6,041,600 $ 8,481,800 $ 5,562,000 $ 791,500 $ 9,472,200 $ (12,988,000) $ 95,600 $ (3,284,700) $ 3,501,440 $ 7,381,022 Debt service as a percentage of noncapital expenditures 6.66% 5.13% 6.10% 5.15% 4.93% 7.24% 7.61% 6.68% 6.62% 5.98% Notes: 1. Beginning in the State implemented a "VLF swap," under which an equal amount of Vehicle License Fees was "swapped" for an equal amount of revenues to be collected on the property tax roll. 2. Community Development Block Grant (CDBG) expenditures are included in the Community Development total for purposes of this schedule. 127

165 Schedule 6 City of San Luis Obispo, California General Fund Operating Expenditure Trends by Type Last Ten Fiscal Years (Modified Accrual Basis of Accounting For The Fiscal Year Ended June Staffing: Salaries and wages: Regular salaries $ 17,457,000 $ 17,388,200 $ 18,491,700 $ 22,745,800 $ 24,310,100 $ 24,180,400 $ 23,848,400 $ 23,432,400 $ 23,214,900 $ 23,242,170 Temporary salaries 1,654,100 1,956,900 2,108,000 2,026,800 1,851,700 1,592,700 1,507,300 1,626,900 1,812,700 2,191,214 Overtime 1,657,700 2,184,000 2,484,600 2,876,000 3,009,200 2,397,500 2,162,500 2,763,100 3,309,000 3,018,181 Benefits: Retirement 4,936,400 5,686,000 6,278,300 7,485,200 8,006,100 7,915,900 7,899,200 8,444,000 7,661,900 7,637,931 Group health/disability ins (Note 1) 2,140,800 2,114,400 2,399,900 2,710,000 3,579,400 3,744,200 3,407,500 3,441,700 3,463,500 3,387,101 Medicare 231, , , , , , , , , ,913 Unemployment Reimbursements 16,100 14,800 19,600 42,900 24,100 87,600 35,500 26,200 28,800 31,634 Total staffing 28,093,700 29,591,000 32,053,800 38,226,300 41,144,300 40,288,600 39,227,500 40,105,500 39,875,200 39,902,144 Contract services 4,796,600 3,764,900 4,300,300 4,546,400 4,228,700 3,812,400 3,728,100 4,306,000 5,208,900 5,725,290 Other operating expenditures Communications & utilities 1,334,500 1,221,400 1,489,900 1,539,700 1,662,000 1,538,000 1,629,500 1,658,000 1,842,300 2,034,997 Rents & leases 192, , , , , , , , , ,104 Insurance: General liability & property 785, , ,300 1,054,900 1,051,500 1,447,300 1,434,600 1,475,600 1,320,700 1,425,450 Workers compensation 1,599,300 1,441,200 1,423,600 1,514,400 1,017, , , , ,000 1,405,916 Other operating expenditures 709,500 2,229,600 2,874,900 2,699,900 3,061,900 2,399,300 2,544,400 2,696,500 2,910,900 2,991,619 Total operating expenditures 4,620,300 5,927,400 6,752,100 6,951,000 6,940,100 6,275,600 6,197,400 6,561,300 7,131,500 8,055,086 Minor capital 102,600 77, , ,500 90,600 38,300 10,800 14,200 99, ,473 Total program expenditures 37,613,200 39,361,100 43,302,000 49,886,200 52,403,700 50,414,900 49,163,800 50,987,000 52,315,000 53,877,993 Reimbursed expenditures (3,430,400) (3,590,000) (3,786,700) (4,075,300) (4,210,800) (4,264,000) (4,449,900) (3,774,900) (3,732,100) (3,897,420) Total general fund operating expenditures $ 34,182,800 $ 35,771,100 $ 39,515,300 $ 45,810,900 $ 48,192,900 $ 46,150,900 $ 44,713,900 $ 47,212,100 $ 48,582,900 $ 49,980,573 Note: 1. Beginning in , the City began to fund retiree health costs on a full accrual basis. The added cost compared with the prior "pay-as-you-go" approach in is $364,800. While this change in accounting increases costs initially, in the not-so-distant future (about 12 years), it becomes a much less expensive option than continuing "pay-as-you-go" cash funding. 128

166 Schedule 7 City of San Luis Obispo, California Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Gross Assessed Valuation (Notes 1 and 2) Fiscal Year Homeowners Secured Roll Unitary Unsecured Total Direct Market Value Percentage of Market Exemptions Gross Value Roll TOTAL Tax Rate (Note 1) Value ,170,300 4,189,832,800 4,245, ,487,300 4,413,565, % 4,413,565, % ,891,200 4,538,762,000 4,018, ,164,900 4,780,945, % 4,780,945, % ,698,000 5,085,935,700 6,905, ,871,700 5,333,713, % 5,333,713, % (Note 3) 42,600,200 5,456,264,900 5,678, ,783,200 5,716,726, % 5,716,726, % ,384,800 5,828,492,800 5,582, ,186,700 6,108,262, % 6,108,262, % ,222,400 6,008,936,600 4,904, ,718,500 6,291,559, % 6,291,559, % ,929,800 5,985,294,700 5,505, ,434,500 6,270,234, % 6,270,234, % ,988,100 5,894,189,700 6,842, ,800,100 6,176,832, % 6,176,832, % ,572,300 5,963,182,500 19,545, ,203,900 6,261,931, % 6,261,931, % ,327,300 6,152,693,400 19,280, ,626,200 6,467,600, % 6,467,600, % Notes: 1. Valuations are established by the County Assessor of the County of San Luis Obispo, except for property owned by private utility companies, which is valued by the State of California. The City assumes that Market Values are equal to total Assessed Valuation. 2. For comparison purposes, gross assessed valuations include homeowners' exemptions. Although these exemptions reduce property tax collections, the revenue loss is reimbursed by the State of California. As such, gross assessed valuation is the revenue base used in establishing property tax-related revenues. 3. The decrease in value of utility taxable property in is due to a federally mandated decrease in the assessment ratio on railroad property. Source: 129

167 Schedule 8 City of San Luis Obispo, California Property Tax Rates Last Ten Fiscal Years For The Fiscal Year Ended June Proposition 13 maximum tax rate (Note 2) Voter approved indebtedness: State water project Elementary and high school Bond and lease agreements Total (Notes 1 and 3) Notes: 1. Property tax rates are levied per $100 of assessed valuation. The tax rate information provided is for Tax Rate Area , which is the largest tax rate area in the City. 2. The passage of Proposition 13 on June 6, 1978 established a maximum County-wide levy for general revenue purposes of 1% of market value. Voter-approved tax rates for the retirement of long-term liabilities were excluded from this limit. 3. It is not possible to identify tax rates for individual agencies however, the following is a summary of derived property tax allocations within Tax Rate Area for Fiscal Year : Base ERAF Net Rate Allocation Apportionment San Luis Coastal Unified School District San Luis Obispo County - General Fund 30.3 (8.2) 22.1 City of San Luis Obispo 18.4 * (3.5) 14.9 San Luis Obispo Community College District County School Services City/County Library 2.00 (0.3) 1.7 Port San Luis Harbor 1.6 (0.4) 1.2 Other Agencies 1.4 (0.1) 1.3 Education Revenue Augmentation Fund (ERAF) Total 100% 0% 100% *The County further adjusts the 18.4% base rate for revenue shifts to school districts as directed by the State as part of their cuts to local agencies, resulting in an effective rate for the City of approximately 14.9%. Source: Prepared by HdL, Coren & Cone Data source: San Luis Obispo County Assessor 2013/14 Annual Tax Increment Tables 130

168 Schedule 9 City of San Luis Obispo, California Principal Property Taxpayers Current Year and Nine Years Ago Number of Secured Percent of Total Number of Secured Percent of Total Owner Parcels Assessed Value Rank City Assessed Value Parcels Assessed Value Rank City Assessed Value Mustang-Ucal LLC 4 $ 78,483, % 4 Sierra Vista Hospital Inc. 7 73,465, % 7 $ 46,630, % Charles Pasquini Jr Trust 9 59,599, % 9 Jamestown Premir SLO Court Etal 9 49,128, % 9 Irish Hills Plaza West II LLC 3 35,458, % 3 Costco Wholesale Corporation 1 33,192, % 1 SLO Promenade Limited Partnership 9 31,785, % 9 29,485, % Marigold Center LLC 9 26,160, % 9 22,658, % Target Corporation 1 24,749, % 1 Stephen N. Dorsi Trust 9 23,296, % 9 Cal Poly 1 - University Housing 41,886, % UHS-Corona Inc. LP Etal 33,736, % John E. & Carole D. King 26,946, % MRP Institutional Associates, Et.Al. 19,385, % Charter Communications Properties 11,176, % Wallance Business Formas Inc. 16,559, % San Luis Obispo Downtown Centre LLC. 16,502, % Total $ 435,320, % $ 264,966, % Source: Cal Muni 131

169 Schedule 10 City of San Luis Obispo, California Secured Property Tax Roll Levies and Collections Last Ten Fiscal Years Total Secured Current Year Percent Fiscal Tax Levy Current Year Percent Delinquencies Delinquent Year (Notes 1 and 2) Collections Collected (Note 3) (Note 3) ,145,900 6,145, % ,639,000 6,639, % ,354,900 7,354, % ,868,700 7,868, % ,335,400 8,335, % ,456,800 8,456, % ,405,600 8,405, % ,269,300 8,269, % ,151,000 8,151, % ,601,630 8,601, % 0 0 Notes: 1. The secured property tax roll is composed of ad valorem taxes as well as special assessments, and is calculated by the San Luis Obispo County Auditor-Controller. The San Luis Obispo County Tax Collector is responsible for all property tax roll collections within the City of San Luis Obispo. The amount reported is before the SB2557 County administrative fees of approximately 3% of total property tax revenues. 2. The secured levy does not include supplemental assessments, unsecured tax revenues, or prior year adjustments, which can be significant. For example, in revenue to the City from supplemental assessments was $99,500 and $215,100 from unsecured. A one-time refund was received from the County Auditor-Controller, refunding $632,800 representing prior overcharges for the SB2557 fee. Property tax revenues totaled $8,740, The City has elected the Teeter Plan method of property tax collection, whereby the County remits 100% of taxes levied and pursues collection and retains any delinquent taxes and related penalties and interest. Source: San Luis Obispo County Auditor-Controller 132

170 Schedule 11 City of San Luis Obispo, California Schedule of Taxable Sales and Permits by Category Last Ten Calendar Years Sales In Thousands of Dollars * Apparel stores $ 33,265 $ 42,488 $ 49,051 $ 54,345 $ 59,309 $ 77,252 $ 80,562 $ 76,229 $ 73,441 $ 75,136 General merchandise stores 89, , , , , , , , , ,094 Food and drug stores 43,218 46,575 44,768 45,703 48,084 55,870 54,729 58,556 45,284 46,725 Eating & drinking places 105, , , , , , , , , ,602 Home furnishings & appliances 44,366 49,195 52,454 54,932 63,568 69,187 67,337 65,903 69,138 65,835 Building materials & farm tools 109, , , ,793 82,154 73,812 74,342 83, , ,035 Auto dealers & supplies 263, , , , , , , , , ,692 Service stations 60,508 76,331 83,495 81,030 82,142 71,512 85, , , ,420 Other retail stores 171, , , , , , , , , ,955 Total retail stores 921,518 1,003,490 1,080,365 1,062, , , , ,623 1,211,758 1,269,494 All other outlets 129, , , , , , , , , ,961 Total 1,050,959 1,140,163 1,228,079 1,226,170 1,163,793 1,032,296 1,080,238 1,188,454 1,479,319 1,565,455 Permits Apparel stores General merchandise stores Food and drug stores Eating & drinking places Home furnishings & appliances Building materials & farm tools Auto dealers & supplies Service stations Other retail stores Total retail stores ,177 1,176 1,147 1,201 1,272 All other outlets 1,161 1,106 1,075 1,074 1, Total 2,008 1,964 1,939 1,954 1,914 1,849 1,864 1,803 1,867 1,936 * Source: State Board of Equalization, State of California Taxable Sales in California, and The HDL Companies Information is thru June. 133

171 Schedule 12 City of San Luis Obispo, California Historical Sales and Use Tax Rates Effective End State Local City Combined Date Date Jurisdiction Transportation Fund Rate Rate 8/1/1933 6/30/1935 (Note 2) 2.50% 2.50% 7/1/1935 6/30/ % 3.00% 7/1/1943 6/30/ % 2.50% 7/1/ /31/ % 3.00% 1/1/1962 7/31/ % 1.00% 4.00% 8/1/1967 6/30/ % 1.00% 5.00% 7/1/1972 6/30/ % 0.25% 1.00% 5.00% 7/1/1973 9/30/ % 0.25% 1.00% 6.00% 10/1/1973 3/31/ % 0.25% 1.00% 5.00% 4/1/ /30/ % 0.25% 1.00% 6.00% 12/1/ /31/ % 0.25% 1.00% 6.25% 1/1/1991 7/14/ % 0.25% 1.00% 6.00% 7/15/ /31/ % 0.25% 1.00% 7.25% 1/1/ /31/ % 0.25% 1.00% 7.00% 1/1/2002 6/30/ % 0.25% 1.00% 7.25% 7/1/2004 3/31/2007 (Note 3) 6.25% 0.25% 0.75% (Note 3) 7.25% 4/1/2007 3/31/ % 0.25% 1.25% (Note 4) 7.75% 4/1/ % 0.25% 1.25% 8.75% 7/1/ % 0.25% 1.25% 7.75% 1/1/ % 0.25% 0.50% 8.00% 1/1/ % 0.25% 0.50% 8.00% Notes: 1. The Bradley-Burns Uniform Local Sales and Use Tax Law was enacted in The law authorizes cities and counties to impose a sales and use tax. Effective January 1, 1962, all cities and counties have adopted ordinances for the State Board of Equalization to collect the local tax. 2. Sales tax only. The use tax was enacted effective July 1, In March 2004, a State ballot measure was passed issuing deficit reduction bonds for State purposes. Funding was provided effective July 1, 2004 by repealing 25% of the local 1% sales tax and then adopting a new 1/4-cent sales tax dedicated to repayment of the deficit reduction bonds. Cities and counties would then be "made whole" by the State from increased property tax allocations via reduced contributions to ERAF. This "triple flip" is theoretically revenue-neutral, and as such, the effective rate for revenue purposes remains at 1%. 4. In November 2006, voters in San Luis Obispo approved a local sales tax measure increasing the City rate by 1/2%, which became effective April 1, The sales tax measure has a sunset provision of 8 years. The local Sales Tax was extended as Measure G in the November 2014 election for 8 years. Source: State Board of Equalization, State of California 134

172 Schedule 13 City of San Luis Obispo, California Schedule of Business Tax Certificates Issued Fiscal Years Ended June 30, 2014 and No. of No. of Certificates Percent Certificates Percent Construction % % Manufacturing % % Transportation/Utilities % % Wholesale % % Retail % % Professional % % Residential Rental 2, % 2, % Commercial Rental % % Services 1, % 1, % Total business certificates issued 7, % 7, % Home occupations % % Located outside City limits 1, % 1, % Located in Downtown Business Improvement District % % Source: City of San Luis Obispo Finance & Information Technology Department 135

173 Schedule 14 City of San Luis Obispo, California Per Capita Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Business-Type Activities Lease Lease Installment Total Percentage of Fiscal Purchase Purchase Sales Primary Per Gross Assessed Year Bonds Financing Loans Bonds Financing Agreement Loans Government Capita Value ,533, ,300 13,846,900 2,117,900 29,109,700 62,998,900 1, % ,091, ,900 21,499,000 1,888,300 27,259,200 75,086,400 1, % ,072, ,800 36,947,300 1,649,400 25,922,200 87,896,400 1, % ,994, ,900 35,345,600 1,400,400 2,050,000 23,600,700 84,650,000 1, % ,949, ,200 35,330,700 1,142,100 2,050,000 31,219,700 99,903,000 2, % ,448, ,400 33,946, ,900 1,950,000 28,554,000 93,933,300 2, % ,806,500 1,109,800 32,503, ,500 1,845,000 25,807,000 88,665,300 1, % ,962, ,900 30,082, ,300 1,735,000 22,976,300 81,014,500 1, % ,574, ,400 2,025,100 28,625,150 1,620,000 20,309,200 76,977,750 1, % ,152, , ,775 27,083,025 8,979,000 19,446,784 79,223,216 1, % Notes: 1. See Schedule of Demographic and Economic Statistics for population data. 2. Total personal income statistics not available. Source: City of San Luis Obispo Finance & Information Technology Department 136

174 Schedule 15 City of San Luis Obispo, California Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capital Last Ten Fiscal Years Service Ratio of Net Net Taxable General Payable from Net Bonded Debt Net Bonded Assessed Bonded Enterprise Bonded to Assessed Debt per Fiscal Year Population Value Debt Revenues Debt Value Capita ,519 4,413,565, % ,439 4,780,945, % ,239 5,333,713, % ,697 5,716,726, % ,750 6,108,262, % ,948 6,291,559, % ,418 6,270,234, % ,308 6,176,832, % ,541 6,261,931, % ,473 6,454,835, % - Notes: 1. Valuations are established by the County Assessor of the County of San Luis Obispo, except for property owned by private utility companies, which is valued by the State of California. 2. See Schedule of Demographic and Economic Statistics for population data. 3. Personal income information is not available. Net Bonded Debt is expressed as a ratio to Assessed Value. Sources: California Department of Finance. San Luis Obispo County Assessor Combined Tax Rolls. 137

175 Schedule 16 City of San Luis Obispo, California District and Overlapping Long-Term Debt Fiscal Year Ended June 30, 2014 Amount Applicable Percent Applicable to the City of to the City of San Luis Obispo San Luis Obispo as of June 30, 2014 Direct long-term debt: City of San Luis Obispo 2001 Refunding Lease Revenue Bonds (1999) % $ City of San Luis Obispo 2002 Water Revenue Refunding Bonds (1993) % City of San Luis Obispo 2004 Refunding Lease Revenue Bonds (1994) % City of San Luis Obispo 2005 Refunding Revenue Bonds (1996) % 4,395,000 City of San Luis Obispo 2006 Lease Revenue Bonds % 13,650,000 City of San Luis Obispo 2006 Water Revenue Bonds % 14,235,000 City of San Luis Obispo 2009 Lease Revenue Bonds % 8,085,035 City of San Luis Obispo 2012 Refunding Revenue Bonds (2001) % 4,630,000 City of San Luis Obispo 2012 Water Revenue Refunding Bonds (2002) % 4,240,000 49,235,035 Overlapping long-term debt (percentage of overlapping agency's assessed valuation located within boundaries of the City): San Luis Obispo County Certificates of Participation % 4,722,587 San Luis Obispo County Pension Obligations % 17,696,280 San Luis Community College District Certificates of Participation % 3,116,110 25,534,977 Total gross direct and overlapping long-term debt 74,770,012 Less self-supporting issues: City of San Luis Obispo 2001 Refunding Lease Revenue Bonds (1999) - Water Fund supported portion City of San Luis Obispo 2002 Water Revenue Refunding Bonds (1993) City of San Luis Obispo 2004 Refunding Lease Revenue Bonds (1994) - Parking Fund supported portion City of San Luis Obispo 2006 Lease Revenue Bonds - Parking Fund supported portion 7,371,000 City of San Luis Obispo 2006 Water Revenue Bonds 14,235,000 City of San Luis Obispo 2009 Lease Revenue Bonds - Parking/Sewer/Water Funds supported portion 1,237,025 City of San Luis Obispo 2012 Water Revenue Refunding Bonds (2002) 4,240,000 Total self-supporting issues 27,083,025 $ 47,686,987 Ratio of long-term debt to assessed valuation and population Gross Assessed Valuation $ 6,448,319,651 Population 45,473 Percent of Gross Per Capita Amount Assessed Valuation Long-Term Debt Direct and Overlapping Debt: Gross $74,770, % $1, Net 47,686, % 1,049 Direct Debt: Gross $49,235, % $1, Net 22,152, % 487 SOURCE: California Municipal Statistics, Inc. 138

176 Schedule 17 City of San Luis Obispo, California Computation of Legal Debt Margins Last Ten Fiscal Years (amounts expressed in thousands) Legal debt limit 165, , , , , , , , ,822 $241,812 Total debt applicable to limit Legal debt margin 165, , , , , , , , , ,812 Total debt applicable to the limit as a percentage of debt limit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Legal Debt Margin Calculation for Fiscal Year Gross Assessed Valuation $ 6,448,319,651 Legal Debt Limit % of Gross Assessed Valuation $ 241,811,987 Long-term Debt: Revenue Bonds Secured by Capital Leases $30,760 Water Revenue Bonds 18,475 49,235 Less deductions allowed by law: Revenue Bonds Secured by Capital Leases 30,760 Water Revenue Bonds 18,475 49,235 Total debt applicable to computed limit $0 Legal debt margin $ 241,811,987 Note: The California Government Code provides for a legal debt limit of 15% of gross assessed valuation based on 25% of market value, or a legal debt limit of 3.75%. The City's debt management policy, however, sets a more restrictive debt limit of 2% of assessed valuation. 139

177 Schedule 18 City of San Luis Obispo, California Revenue Bond Coverage Water Fund Last Ten Fiscal Years Less Operating & Net Revenue Fiscal Operating Development Other Maintenance Available for Bonded Debt Service Requirements Year Revenues Impact Fees Revenues Expenses Bond Debt Service Principal Interest Total Coverage ,197,100 (820,200) 378,900 (5,788,600) 2,967, , ,900 1,076, % ,495,900 (1,822,200) 255,000 (6,175,000) 2,753, , ,900 1,127, % ,565,200 (1,479,900) 1,669,400 (7,999,700) 3,755, , ,200 1,891, % ,668,800 (1,386,300) 759,100 (7,111,600) 4,930,000 1,045,000 1,064,600 2,109, % ,447,400 (663,000) 1,339,700 (7,877,500) 6,246,600 1,075,000 1,023,600 2,098, % ,755,800 (448,200) 719,800 (7,603,500) 6,423, ,100 1,038,500 1,791, % ,256,100 (639,600) 384,500 (12,389,200) 1,611, ,500 1,006,300 1,786,800 90% ,266,300 (643,200) 825,400 (13,666,100) 2,782, , ,300 1,100, % ,250,700 (1,578,100) 97,500 (13,353,300) 3,416, , ,400 1,632, % ,676,199 (819,477) 215,915 (13,996,427) 5,076, , ,514 1,665, % Notes: 1. Debt service requirements include 2012 Refunding Revenue Bonds, 2006 Refunding Revenue Bonds, and the 2009 Lease Revenue Bonds. 2. Principal and interest amounts do not include loans, lease purchase financing or other forms of long-term debt. 3. Net revenues available for debt service exclude development impact fees. 4. Operating expenses exclude depreciation and amortization. Source: City of San Luis Obispo Finance & Information Technology Department 140

178 Schedule 19 City of San Luis Obispo, California Revenue Bond Coverage Parking Fund Last Ten Fiscal Years Net Revenue Fiscal Gross Operating Available for Bonded Debt Service Requirements Year Revenues Expenses Bond Debt Service Principal Interest Total Coverage ,896,700 (1,661,100) 2,235, , , , % ,921,800 (1,871,700) 2,050, , , , % ,265,500 (2,021,000) 2,244, , , , % ,027,500 (2,032,500) 1,995, , , , % ,007,900 (2,344,300) 1,663, , , , % ,788,300 (2,142,400) 1,645, , ,200 1,048, % ,730,100 (2,190,200) 1,539, , ,700 1,050, % ,688,200 (2,351,400) 1,336, , ,100 1,050, % ,726,000 (2,440,600) 2,285, , ,000 1,049, % ,122,860 (2,488,797) 1,634, , ,822 1,052, % Notes: 1. In 1994 the Capital Improvement Lease Revenue Bonds were refinanced resulting in new debt of $11,780,000, of which $7,421,400 is designated for the Parking Fund. In 2004 the 1994 bonds were refinanced with a maturity date of In 2006 Lease Revenue Bonds were issued resulting in new debt of $16,160,000, of which $8,726,400 is allocated to the Parking Fund. 2. Operating expenses exclude depreciation. Source: City of San Luis Obispo Finance & Information Technology Department. 141

179 Schedule 20 City of San Luis Obispo, California Demographic and Economic Statistics Last Ten Fiscal Years Median Public Elementary and Cuesta Community Fiscal Household Median Secondary School College Unemployment Year Population (1) Income (2) Age (1) Enrollment (4) Enrollment (3) Rate (1) ,519 33, ,324 8, % ,439 46, ,098 8, % ,239 38, ,989 8, % ,697 49, ,982 8, % ,750 42, ,123 9, % ,948 40, ,112 8, % ,418 53, ,226 7, % ,308 57, ,402 7, % ,541 58, ,368 7, % ,473 59, ,366 7, % Sources: CAFR Statistical Reports by the HdL Companies. 2. U.S. Census Bureau. Information is based on all of San Luis Obispo County. 3. Cuesta Community College Admissions Office. Note: Enrolled students (head count) San Luis Obispo campus only. 4. San Luis Coastal Unified School District ADA Annual Report. Note: The boundaries of SLCUSD are significantly larger than the City. The above school enrollment also includes these outlaying areas, most notably Los Osos, Morro Bay, and Avila Beach. 142

180 Schedule 21 City of San Luis Obispo, California Principal Employers Current Year and Nine Years Ago Percentage Percentage Number of Total City Number of Total City Employer Employees Rank Employment Employees Rank Employment Cal Poly State University 3, % % County of San Luis Obispo 2, % % P.G. & E (Diablo Canyon) 1, % % California Men's Colony 1, % % Cal Poly Foundation (Corporation) 1, % % San Luis Coastal Unified School District % % Mindbody % California Department of Transportation % Cuesta Community College % % Community Action Partnership % City of San Luis Obispo % Sierra Vista Regional Medical Center % French Hospital % Total 13, % 13, % Note: Source for the employers information is the August 15-21, 2014 Pacific Coast Business Times (The List ). This information represents employers in San Luis Obispo County. 143

181 Schedule 22 City of San Luis Obispo, California Regular Authorized Positions Last Ten Fiscal Years Function Public Safety Police Sworn Non-sworn Fire Sworn Non-sworn Public Utilities Transportation Leisure, Cultural and Social Services Community Development General Government Total Ratio of Sworn Police Personnel per 1,000 Population:* Ratio of Sworn Fire Personnel per 1,000 Population:* *Does not include the Cal Poly student and faculty population served. Note: See Schedule of Demographic and Economic Statistics for population data. Source: City of San Luis Obispo Finance & Information Technology Department 144

182 Schedule 23 City of San Luis Obispo, California Operating Indicators and Capital Asset Statistics by Function Last Ten Fiscal Years Function/Program: For The Fiscal Year Ended June Police: Calls for police/fire service 33,563 35,018 33,832 33,580 33,211 32,057 32,074 34,751 36,236 34,659 Incident numbers issued 29,464 30,984 29,652 29,275 28,855 27,555 27,595 29,991 31,156 29,277 Police reports written 7,958 8,255 7,705 8,053 7,839 7,454 7,661 8,322 9,192 8,665 Traffic citations issued 4,113 3,713 7,635 6,389 7,099 * Other citations issued ,315 * Violations cited 4,808 4,373 5,264 6,389 8,410 8,471 5,939 8,119 7,213 5,793 Citations issued 4,262 3,935 4,774 5,811 7,737 7,398 5,380 7,718 6,665 5,275 Collision reports 1,207 1, Violent crimes:** Willful homicide** Forcible rape** Robbery** Aggravated assault** Property crimes:** Burglary** Motor vehicle theft** Larceny-theft:** 1,442 1,335 1,273 1,450 1,328 1,240 1,260 1,345 1,476 1,384 Over $400** $400 and under** 1,212 1,084 1,001 1,144 1,068 1,012 1,046 1,068 1,167 1,062 Fire: Medical responses***(note 4) 2,742 2,727 2,564 2,788 2,613 3,325 2,799 2,856 2,985 3,232 Fire suppression responses***(note 4) Hazardous materials responses***(note 4) Other responses***(note 4) 1,308 1,214 1,504 1,302 1,897 1,224 1,528 1,552 1,812 1,840 Total service responses*** 4,263 4,158 4,204 4,440 4,646 4,718 4,451 4,527 4,913 5,192 Fire and life-safety inspections*** 1,750 2,010 2,063 1,684 1,977 1,110 2,489 2,431 2, Arson investigations*** Education activities (# of people)*** 8,000 15,900 17,200 18,000 15,000 14,000 20,106 23,120 23,377 23,

183 Schedule 23 City of San Luis Obispo, California Operating Indicators and Capital Asset Statistics by Function, continued Last Ten Fiscal Years Function/Program: For The Fiscal Year Ended June Public Utilities: Water/Sewer customer accounts 14,270 14,425 14,260 14,380 14,682 14,875 14,734 14,695 14,742 14,899 Miles of sewerline Miles of waterline Water service line repairs and renewals***** Sewer main stoppages Acre feet of water delivered - Nacimento 981 2, ,506 Acre feet of water delivered - Salinas 1,000 1,652 1,818 1,944 2,473 2,736 2,640 2,149 2,378 1,444 Acre feet of water delivered - Whale Rock 5,700 4,688 5,003 4,855 4,280 3,402 1,277 2,875 3,212 Transportation: Signals and lights: Intersections with traffic signals Traffic signal service requests Streetlights operated & maintained 220 2,230 2,300 Streetlight service requests Parking spaces: Estimated miles of paved streets Pavement condition index Number of street lights 2,238 2,258 2,260 2,300 2,300 2,179 2,270 2,270 2,270 2,300 Traffic collisions 1,206 1, Parking spaces provided (lot, garage & street) 2,819 2,869 3,065 3,059 3,060 3,059 3,067 3,065 3,071 3,119 Parking citations written 38,800 46,068 43,080 39,234 40,062 30,087 30,278 26,515 28,690 23,957 Total transit passengers 875, , ,534 1,003,805 1,032,232 1,019,852 1,045,299 1,118,519 1,109,600 1,122,

184 Schedule 23 City of San Luis Obispo, California Operating Indicators and Capital Asset Statistics by Function, continued Last Ten Fiscal Years Function/Program: For The Fiscal Year Ended June Leisure, Cultural and Social Services: Open space acres maintained 2,498 2,689 3,015 3,015 3,015 3,420 3,420 3,510 3,510 3,510 Open space easement acres 2,018 2,089 2,479 2,482 3,139 3, ,200 3,200 3,200 Trail mileage Total golf rounds played 42,000 42,603 45,635 40,216 42,438 34,376 32,228 34,699 33,067 34,766 Acres of park landscape maintained Trees in City jurisdiction 23,800 18,600 18,600 18,600 18,600 17,779 18,700 18,700 18,700 18,700 Children's services enrollment totals ,664 1,755 1,605 2,338 Triathlon: participants, spectators and volunteers 4,800 4,800 4,800 6,470 6,600 6,700 5,400 6,000 6,525 6,000 Annual senior attendance (total) 14,800 14,825 14,900 13,915 14,576 14,250 14,500 14,000 14,200 * Facility permits processed 1,807 2,009 2,020 1,645 1,273 1,971 1,806 1,803 1,269 1,416 Annual aquatics attendance (total) 46,069 46,521 49,174 55,691 61,264 60,052 56,676 56,042 67,000 73,903 Adult athletic teams registered Youth athletic participants registered ,065 1,500 1,625 1,650 1,320 1,400 1,300 1,200 Special event applications processed Banner permits processed Instructional class enrollments 1,422 1,369 1,539 1,905 2,017 1,837 1,628 1,400 1,308 1,

185 Schedule 23 City of San Luis Obispo, California Operating Indicators and Capital Asset Statistics by Function, continued Last Ten Fiscal Years Function/Program: For The Fiscal Year Ended June Community Development: Housing characteristics: Single family units 10,627 10,670 10,691 10,729 10,793 10,808 10,951 10,969 10, units 2,225 2,242 2,253 2,337 2,337 2,350 2,634 2,650 2,656 5 or more unit structures 5,608 5,648 5,656 5,654 5,654 5,702 5,596 5,596 5,647 Mobile homes 1,502 1,502 1,502 1,502 1,534 1,534 1,482 1,482 1,482 Total 19,962 20,062 20,102 20,222 20,318 20,394-20,663 20,697 20,779 Housing units (replaces above categories) 20,578 Households (replaces above categories) 1,361 Building permits issued (Note 1): Residential: Single family residential (Note 2) Multi-family residential Non-residential Other permits: Additions, alterations, demolitions (Note 3) Other improvements Total Approximate value of building permits (in thousands) Residential: Single family residential $ 9,354 $ 5,631 $ 6,521 $ 6,172 $ 6,800 $ 4,424 $ 6,085 $ 3,278 $ 15,698 $ 15,412 Multi-family residential 3,143 8,640 9,592 11,843 4,286 2, ,847 1,560 6,744 Non-residential 15,736 31,274 15,209 20,340 10, ,608 5,142 1,935 15,310 Other permits: Additions, alterations, demolitions (Note 3) 20,548 22,652 17,689 21,741 21,080 26,464 15,948 16,589 20,761 19,139 Other improvements Total $ 48,781 $ 68,197 $ 49,011 $ 60,096 $ 42,648 $ 33,941 $ 39,567 $ 28,856 $ 39,954 56,605 Building inspections conducted 10,327 6,950 8,888 8,477 10,371 8,359 10,210 13,685 10,543 8,996 Home occupation permits processed Development permit applications received

186 Schedule 23 City of San Luis Obispo, California Operating Indicators and Capital Asset Statistics by Function, continued Last Ten Fiscal Years Function/Program: For The Fiscal Year Ended June General Government: Business tax certificates issued: Located outside city limits 1,044 1,618 1,555 1,452 1,487 1,548 1,569 1,670 1,670 1,472 Total certificates issued 6,590 7,072 7,190 7,297 7,458 7,090 6,873 7,086 7,086 7,578 Human resources recruitments (total) Fleet vehicles maintained City-wide fleet & equipment assets Replaces prior category Telephone lines managed ,003 1,003 1, Cell phones supported**** IT users supported * Data Not Available ** Data from California Department of Justice based on calendar year *** Data is based on calendar year **** Includes cellular modems (70) (90 for 11-12) ***** The amount now includes recycled waterline. Notes: Some workload indicators are projections. 1. Excludes special permits such as plumbing, mechanical, electrical, signs, and grading as well as plan check permits. 2. Condominiums are included with single family residential. 3. Swimming pools are included with additions, alterations and demolitions. 4. In Fiscal year , numbers reported used observed code from Spillman rather than condition code. Source: City of San Luis Obispo 149

187 Schedule 24 City of San Luis Obispo, California Water System Statistical Data Fiscal Historic Increase/ Sales Increase/ Deliveries Increase/ Year Connections (Decrease) Revenues (Decrease) In Acre Feet (Decrease) ,074 $43, % 42,074 $43, , % 7,873, % 6, % , % 8,139, % 6, % , % 8,442, % 6, % , % 9,850, % 6, % , % 11,030, % 6, % , % 12,513, % 6, % , % 13,025, % 5, % , % 13,302, % 5, % , % 15,385, % 5, % , % 16,347, % 5, % , % 16,950, % 5, % Source: City of San Luis Obispo Finance & Information Technology Department. 150

188 Schedule 25 City of San Luis Obispo, California Water and Sewer Rates Last Ten Fiscal Years Water Rates (Note 1) Sewer Rates (Monthly) As of Monthly Single family Multi-family dwelling June 30 of Each Year Consumption Price per hcf* dwelling hcf $2.71 $28.36 $ hcf $ hcf $2.93 $32.33 $ hcf $ hcf $3.28 $35.56 $ hcf $ hcf (note 2) $ hcf $3.71 $5.00 min. charge per $5.00 min. charge per 6-25 hcf $4.64 dwelling unit account 26 + hcf (note 2) $5.81 $5.05/unit volume charge** $5.05/unit volume charge** hcf $4.19 $5.50 min. charge per $5.50 min. charge per 6-25 hcf $5.24 dwelling unit account 26 + hcf (note 2) $6.57 $5.56/unit volume charge** $5.56/unit volume charge** hcf $4.69 $6.00 min. charge per $6.00 min. charge per 6-25 hcf $5.87 dwelling unit account 26 + hcf (note 2) $7.36 $6.63/unit volume charge ** $6.63/unit volume charge** hcf $5.21 $6.55 min. charge per $6.55 min. charge per 6-25 hcf $6.52 dwelling unit account 26 + hcf (note 2) $8.17 $7.22/unit volume charge ** $7.22/unit volume charge ** hcf $5.73 $7.01 min. charge per $7.01 min. charge per 6-25 hcf $7.17 dwelling unit account 26 + hcf (note 2) $8.99 $7.73/unit volume charge ** 2013 Base Fee $5.00 $7.73 min. charge per $7.73 min. charge per 0-8 hcf $6.56 dwelling unit account 8 + hcf $8.20 $8.52/unit volume charge ** $8.52/unit volume charge ** 2014 Base Fee $5.28 $7.96 min. charge per $7.96 min. charge per 1-8 hcf 6.92 dwelling unit dwelling unit 8 + hcf 8.65 $8.77/unit volume charge** $8.77/unit volume charge** *hcf = 100 cubic feet ** Total monthly volume charge capped based on average winter water consumption. Notes: 1. Rates are for services inside the City, outside the City rates are double. 2. Third tier applies only to single-family residential customers. Source: City of San Luis Obispo Utilities Department 151

189 Schedule 26 City of San Luis Obispo, California Water System Ten Largest Water Users Fiscal Year Ended June 30, 2014 Service Water Use Percent of Name Type (acre-feet) Total Silver City Mobile Home Park Mobile Homes % Mustang Village Apartments % Sierra Vista Hospital Care Facilities % Laguna Lake Mobile Homes Mobile Homes % City of San Luis Obispo Parks Landscape % Creekside Mobile Homes Mobile Homes % Irish Hills Hamlet Apartments % Embassy Suites Hotel % San Luis Coastal Unified School Landscape % Chumash Village Mobile Homes % Total % Source: City of San Luis Obispo 152

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