HomeMy WebLinkAbout; ; 1958-59 Report of Audit; 1959-10-01CITY OF CARLSBAD WATER DEPARTMENT
Carlsbad,
California
Report of Audit
July I. 1958 to June 30. 1959
« ,
EVERTS AND ESENOFF
CERTIFIED PUBLIC ACCOUNTANTS
San Diego, California
;, California El Cajon, California
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I,. M. EVEHTS, C. P. A, (1916-1946)
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CAHL M. E8ENOFF, C: . P. A,
ALBERT M, HUDSON, C. P. A.
J (»UN T . H W A N" , C . V. A .
HAMILTON MOODY, C. P. A.
CHARLES T. PORTEII, C. I'. A.
HERBERT I.. BECKETT. C. 1', A,
(HARLEM W. I, AM DEN', C. P. A,
HOY M . HERAMB, C. 1'. A.
CERTIFIED 1'1'BI.IC ACCOUNTANTS
TELEPHONEOCEANSIDE SA 2-
OTHEH OFFII:ES
MAX niEf.o, CALIFORNIA
EI. CAJON. CALIFORNIA
VISTA, C A1.1FO R NIA
I> . .MT CAHT11Y . C . P.
KF.SIUKNT MANAOEH
EVERTS AND ESENOFF
CKHTIFIKD Pirunc ACCOUNTANTS
7O3 THIRD STREET
OCKANSIDK. CALIFOHNIA
October I, 1959
The Honorable Mayor and
City CounciI
City of Carlsbad
Carlsbad, CalIfornia
Gent Iemen:
We have examined the financial records of the City of Carlsbad Water
Department, Carlsbad, California, for the period July I, 1958 to June 30,
1959, and have prepared the accompanying statement of financial position -
all funds, at June 30, 1959, and the related statements of revenues and ex-
penditures and unappropriated surplus for the year then ended. Our examina-
tion was made in accordance with generally accepted auditing standards and
accordingly included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.
HISTORY
The City of Carlsbad's entrance into the water business had its begin-
ning on December 17, 1957 when the voters approved the issuance of water
revenue bonds in the amount of $767,000.00. Under the propositions approved,
the City was granted the authority to purchase the assets of the Carlsbad
Mutual Water Company and to acquire such other additions and improvements deemed
necessary.
On February 18, 1958 the City signed an agreement for the purchase of assets
of the Terramar Water Company. The purchase price was $117,500.00, to be paid
from the proceeds of bonds when issued. The City commenced delivery of water to
residents of the Terramar area in March, 1958.
2
The Waterworks Revenue Bonds, 1958 were issued on August I, 1958. Simultane-
ously, the net assets of the Carlsbad Mutual Water Company were acquired for the
purchase price of $500,000.00. The employees of the Carlsbad Mutual Water Company
became City employees.
Resolution No. 397 of the City of Carlsbad, dated June II, 1958, outlines
the requirements for the operation of the Water Department for the protection of
the bond owners. The funds created under Section 13 of the Resolution No. 397 have
been properly established, and the requirements of Sections 14 through 18 have been
followed.
CO/VMENTS RESPECTING FINANCIAL POSITION
The statement of financial position - all funds is shown on exhibit A. Follow-
ing are comments regarding each fund.
CONSTRUCTION FUND;
The construction fund is not shown on exhibit A since all the funds have been
expended. The proceeds of the bonds were required to be placed in the following
funds:
Reserve Fund $ 45,000.00
Construction Fund 722,000.00
Total $767.000.00
The expenditures from the construction fund may be summarized as follows:
Payment to Car Isbad Mutual Water Company $500,000.00
Payments to Ecke and Cannon for purchase
of Terramar Water Company (includes interest
from April I, 1958) 119,066.63
Payment of IiabiIities of CarIsbad Mutual
Water Company 57,912.31
Expense of acquisition of water companies, in-
including attorney fees, financial services,
and bond issuance expense 18,348.18
City's shdre of South Carlsbad pipeline extension 4,741.68
Expenses in connection with San Luis Rey law suit:
Engineering $14,106.59
Legal 7,824.61 21,931.20
Total $722,000.00
WATER FUND;
The gross revenues of the enterprise are deposited in this fund. Each month
certain amounts are transferred from the water fund to the bond service fund,
the reserve fund, and the maintenance and operations fund. Actual cash transfers
were made to the following funds:
Operation and maintenance fund $171,899.91
Bond service fund 43,655.79
Reserve fund 1,080.00
Total $216.635.70
The accounts receivable - water accounts in the amount of $27,992.87 include
two accounts in dispute totaling $621.36.
BOND SERVICE FUND:
The activity in the bond service fund may be shown as follows:
Transfers from water fund $43,655.79
Accrued interest received upon
issuance of bonds 2,609.97
Area inclusion fees 416.07
Total receipts 46,681.83
Less: Paid to agent for payment
of matured bond coupons 31,319.50
Cash with Treasurer, June 30, 1959 $15.362.33
The Waterworks Revenue Bonds, 1958 are dated July I, 1958 and are due as
follows:
Years Due Each Year Total
1964-69 $20,000.00 $120,000.00
1970-74 25,000.00 125,000.00
1975-78 30,000.00 120,000.00
1979-81 35,000.00 105,000.00
1982-85 40,000.00 160,000.00
1986-87 45,000.00 90,000.00
1988 47,000.00 47,000.00
Total $767,000.00
Future revenue required to retire these bonds and to pay the interest
thereon is as follows:
Principal $ 767,000.00
Interest 633.455.00-
Total $1.400.455.00
4
The bonds are a 30 year issue and an average of $46,681.83 each year is re-
quired for the payment of the principal and interest. As indicated above, suf-
ficient funds were transferred from the water fund so that $46,681.83 was available
in the bond service fund at June 30, 1959.
The interest coupons are payable annual Iy the first years on July I, 1959
and semi-annual Iy thereafter on January I and July I. At June 30, 1959, $31,319.50
had been transferred to the fiscal agent for payment of the coupons due on July I,
1959.
RESERVE FUND;
In accordance with the bond resolution, $45,000.00 was placed in this fund
from the bond proceeds, and on April 30, 1959, this amount was invested in U. S.
Treasury notes. The cash of $1,080.00 with the Treasurer, as shown on exhibit A,
represents nine transfers of $120.00 each from the water fund, as required by
Resolution #397.
MAINTENANCE AND OPERATION FUND:
Monthly sums sufficient for the necessary and reasonable maintenance and
operation costs of the enterprise have been transferred to this fund from the
water fund. As shown on exhibit B, the amount necessary for current expenses
during the year was $167,456.50.
The fixed assets acquired from the Carlsbad Mutual Water Company were re-
corded on the City's records at the net book value as shown on the books of the
Carlsbad Mutual Water Company. The fixed assets acquired from the Terramar Water
Company were recorded on the City's records from figures obtained from the
Browning report issued in 1956. This report was an appraisal of the two water
companies to help guide the City in purchasing these companies. The fixed
assets as shown on exhibit A are composed of the following:
Land, water rights, and rights of way $ 113,973.68
Wells, reservoirs, and dams 220,167.75
Purification system 27,686.73
Booster pumps and stations
Transmission and distribution lines
Bu iId!ngs
Autos and trucks
Equipment
Office fixtures and equipment
Terramar fixed assets - (unclassified)
Meters and services
Total—per exhibit A
$ 78,224.99
831,423.64
16,038.15
20,359.33
11,575.83
14,256.30
163,566.00
308,988.90
$1,806.261.30
The fixed assets were acquired as follows:
Transferred from Carlsbad Mutual Water Company
Transferred from Ierramar Water Company
Purchased from water revenues—-exhibit C
Meters and services contributed by consumers (net)
Pipelines installed by contractors
Booster station installed by contractor
Expense of San Luis Rey suit for protection
of water rights:
Paid by Construction Fund
Paid by Water Fund
Totdl
Less: addressograph traded
Total—June 30, 1959
$21,931.20
25,252.06
$1,522,832.03
163,566.00
15,682.62
26,024.00
27,80U.25
3,606.04
47,183.26
l,80o,702.20
440.90
$1.806.261.30
COMMENTS RESPECTING OPERATIONS
The statement of revenues and expenditures is shown on exhibit B. Follow-
ing is a computation of the requirements of the gross revenues of the enter-
prise, in accordance wnh Covenant #9, Seciion 21, of Resolution #397:
Gross revenues of enterprise—exhibit B
Add: Proceeds from sale of land
Total
Deduct: Current expenses for necessary
and reasonable maintenance and operations
costs
Net revenues
Net revenues required:
Interest and principal
requ i rements
Reserve fund
Total
Multiplication factor (per
resolut ion)
$28,709.53
I,080.00
29,789.53
1.35
40,215.87
15,682.62Capital outlay
Expenses of San Luis Rey suit paid
from water revenues 25,252.06
Total net revenues
requ ired
Excess of net revenues over requirements
$258,927.25
1,005.00
259,932.25
167,456.50
92,475.75
81.150.55
OPINION
In our opinion the accompanying statement of financial position - all funds,
and the related statements of revenues and expenditures and unappropriated sur-
plus, present fairly the financial position of each fund of the City of Carlsbad
Water Department at June 30, 1959, and the results of its operations for the year
then ended, in conformity with generally accepted accounting principals of fund
accounting.
Yours very truly,
For Everts and Esenoff
Certified Public Accountants
CPW/ewt
Exhibit B
CITY OF CARLSBAD WATER DEPARTMENT
Statement of Revenues and Expenditures
July I. 1958 to June 30, 1959
REVENUES - PLEDGED TO REQUIREMENTS OF RESOLUTION *397;
Water sales $252,929.27
Rents received 2,348.00
Interest earned on investments 300.00
Pipeline inclusion fees 638.78
Charges for turning on water 265.00
Penalties for late payment of water accounts 2,117.13
Loan meter fees 290.00
Miscellaneous 39.07
Total revenues 258,927.25
EXPENSES;
Maintenance and operations expense—schedule B-l:
Water production and purification $99,854.66
Water transmission and distribution 43,535.77
General and administrative 24,066.07
Total expenses except interest and
depreciation deducted below 167,456.50
Net revenues before interest and depreciation 91,470.75
DEDUCT;
Interest on bonds 28,709.53
Provision for depreciation 40,306.08
Total 69,015.61
Net revenues after deducting current expenses,
interest, and depreciation 22,455.14
ADD;
Provision for depreciation, an expense which did not
require a current cash outlay 40,306.08
Net revenue available for retirement of bonds,
capital outlay, and other Water Department
purposes—to exhibit C $ 62,761.22
Statement of Financial Position -All Funds
At June 30, 1959
ASSETS
CURRENT ASSETS;
Cash with Treasurer, City of Carlsbad
Cash in Security-First National Bank - Trust #C-6574
Accounts receivable - water accounts
Accounts receivable - other
Warehouse stock (net of reserve for losses)
Prepaid expenses
Total current assets
INVESTMENTS:
U. S. Treasury Notes, 4%, due February 15, 1962
FIXED ASSETS
LESS ALLOWANCE FOR DEPRECIATION
Net fixed assets
FUTURE BOND REQUIRE/UENTS
LIABILITIES, RESERVES, AND SURPLUS
CURRENT LIABILITIES;
Accounts payable
Matured bond interest coupons
Advance rentals
Meter and service deposits
Total current liabilities
WATERWORKS REVENUE BONDS - 1958
RESERVES AND SURPLUS:
Reserve for capital invested in fixed assets
Reserve for bond principal and Interest
Unappropriated surplus—exhibit C
Total
Al I
Funds
44,797.20
31,319.50
2.1,992.87
3,239.22
31,093.89
866.85
139,309.53
45,000.00
I,284,U76.67
767,OOP.UP
$2,235.386.20
22,888.29
31,319.50
800.50
135.00
55,193.29
767,000.00
1,284,076.67
61,442.33
67,673.91
$2.235.386.20
Water
Fund
$28,354.87
27,992.til
667.96
57,UI5.70
$57.015.70
800.50
800.50
56,215.20
$57.015.70
Bond
Service
Fund
15,362.33
31,319.50
46,681.83
767,uOO.OO
$813,681.83
31,319.50
31,319.50
767,000.00
15,362.33
$813,681.83
Reserve
Fund
$ 1,080.00
I,U80.00
45,OOO.uO
$46,080.00
46,080.00
$46.080.00
Maintenance
and Operat ion
Fund
2,571.26
31,093.89
866.85
34,532.00
1,806,261.30
522,1 84.b3
I,284,076.o7
$1,318.608.67
$ 22,888.29
185.00
23,073.29
1,284,076.67
I 1,458.71
$1,318.608.67
Exhibit C
CITY OF CARLSBAD WATER DEPARTMENT '
Analysis of Unappropriated Surplus
July I, 1958 to June 30, 1959
UNAPPROPRIATED SURPLUS, JULY I, 1958 $ 3,013.43
ADDITIONS;
Net current assets acquired from the Carlsbad
Mutual Water Company, August I, 1958 $57,855.20
Net revenue for yeai—-exhibit B 62,761.22
Proceeds from sale of land 1,005.00
Total additions 121.621.42
Total available 124,634.85
DEDUCTIONS;
Transferred to Bond Service Fund:
Total transferred $43,655.79
Less deducted as interest expense
on exhibit B 28,709.53 14,946.26
Transferred to Reserve Fund 1,080.00
Capital outlay:
Well clocks 50.00
Improvements to Elm Street property
under lease to J. R. Keenan 1,675.50
Pipelines installed at Department
expense 10,695.95
Water Department's share of building
cost to June 30, 1959 2,713.92
New addressograph ' 547.25 15,682.62
Expenses on San Luis Rey law suit
paid from Water Fund 25,252.06
Total deductions 56,960.94
UNAPPROPRIATED SURPLUS, JUNE 50, 1959—to exhibit A $ 67.673.91
CITY OF CARLSBAD WATER DEPaRTMENT
Schedule of Maintenance and Operations Expenses
July I, 1958 to June 30, 1959
Schedule B-l
Water production and purification:
Salaries and wages
Power
Supplies and expense
Maintenance - water production facilities
Purchased water
Total
Water transmission and distribution:
Salaries and wages
Power
Maintenance:
Pumping stations and reservoirs
Transmission and distribution lines
Meters and services, including cost
of replacements
Mi see I Ianeous
Total
General and administrative:
Salaries and wages
Operation and maintenance of mobile equipment
Professional services
Office supplies and expense
Small tools and shop supplies
Maintenance and supplies - buildings
Insurance and taxes
Contributions to retirement and group insurance
Other general and administrative expense
Total
Less portion applied to construction work
Net
I 4,718.44
3,308.45
1,601.91
579.52
89,646.34
20,805.59
8,701.39
2,065.14
920.91
10,924.36
I Id.38
16,938.29
2,258.13
877.50
3,132.37
888.33
390.54
8,902.86
2,056.42
2B3.58
35,728.02
I 1,661.95
$ 99,854.66
43,535.77
24,066.07
Total—to exhibit B $167,456.50