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HomeMy WebLinkAbout; ; 2003-2004 CAFR; 2004-06-30OF CARLSE CALIFORNIA omprenensive Annual Financial Report ca/ Year Ended une 3O. 2OO4 COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2004 1635 Faraday Avenue, Carlsbad, CA 92008 Website: www.ci.carlsbad.ca.us Prepared by the Finance Department Photos on Cover: Background photo is of Stagecoach Park (photo taken by Tara Lee Torburn). Photo insets top to bottom: Girl on spring horse at Stagecoach Park, one of the two lions by artist Nikki de Saint Phalle at Poinsettia Park, the Caretaker's House at Leo Carrillo Ranch Historic Park. CITY OF CARLSBAD Comprehensive Annual Financial Report Year Ended June 30, 2004 TABLE OF CONTENTS Pae INTRODUCTORY SECTION: Table of Contents i City Council's Five-Year Vision Statements 1 Letter of Transmittal 3 Certificate of Achievement for Excellence in Financial Reporting, Government Finance Officers Association 11 Location Map 12 List of City Officials 13 Organization Chart 14 FINANCIAL SECTION: Independent Auditor's Report 15 Management's Discussion and Analysis 17 Basic Financial Statements Government-wide Financial Statements: Statement of Net Assets 30 Statement of Activities 32 Fund Financial Statements: Balance Sheet - Governmental Funds 34 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 36 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 38 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 40 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 42 Statement of Net Assets - Proprietary Funds 44 Statement of Revenues, Expenses and Changes in Net Assets - Proprietary Funds 48 Statement of Cash Flows - Proprietary Funds 50 Statement of Fiduciary Assets and Liabilities — Agency Funds 54 Notes to the Financial Statements 55 Supplementary Information Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds 80 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 84 Combining Schedule of Revenues and Expenditures - Budget and Actual (Budgetary Basis) - Special Revenue Funds 88 Combining Schedule of Revenue and Expenditures - Budget and Actual (Budgetary Basis) - Debt Service Funds 90 Combining Statement of Net Assets-Internal Service Funds 92 Combining Statement of Revenues, Expenses and Changes in Net Assets - Internal Service Funds 94 Combining Statement of Cash Flows - Internal Service Funds 96 Combining Statement of Changes in Assets and Liabilities - Agency Funds 100 Schedule of Annual Debt Service Requirements 102 CITY OF CARLSBAD Comprehensive Annual Financial Report Year Ended June 30, 2004 TABLE OF CONTENTS (CONTINUED) Page STATISTICAL SECTION: (Not covered by Independent Auditor's Report) Government-wide Information: Government-wide Expenses by Function 106 Government-wide Revenues 108 Fund Information: General Governmental Expenditures by Function - Last Ten Fiscal Years 110 General Governmental Revenues by Source - Last Ten Fiscal Years 112 Computation of Legal Debt Margin 114 Schedule of Direct and Overlapping Bonded Debt 115 Construction and Business Activity - Last Ten Fiscal Years 116 Water Enterprise - Revenue Bond Coverage - Last Ten Fiscal Years 117 Schedule of Assessed Valuation - Last Ten Fiscal Years 118 Demographic Statistics - Last Ten Fiscal Years 120 Property Tax Levies and Collections - Last Ten Fiscal Years 121 Principal Employers, 2003-04 122 Principal Taxpayers, 2003-04 123 Top 30 Sales Tax Generators, 2003-04 124 Miscellaneous Statistical Information, 2003-04 125 INTRODUCTORY SECTION Carlsbad City Council 2004 Five-Year Vision Statements _^r^LTlr1LS~\ri£^ City Council continues to clarify and pursue the vision of Carlsbad that reflects the pride and quality of life for all who live, ^ . work, and play here.Carlsbad... * Diverse and healthy economic base provides opportunities for employment to the residents of Carlsbad, economic vitality to the community, and the necessary revenues to support City services. * Policies and decisions implement the General Plan, enforce the Growth Management Plan, maintain the safety and security of its citizens, and are based on what is best for Carlsbad. * Leadership role in local and regional planning, (e.g., water, beach, circulation, and environmental issues) important to local governments actively involves addressing governmental issues at the local, state and national levels. * Open government provides for the betterment of the community and encourages in a non-partisan manner active citizen participation and involvement with the City Council and the City's Boards and Commissions. And Carlsbad Efficiently and Effectively... * Delivers top-quality public services. » Manages its environment proactively, including: • Open space . Wildlife habitats • Water quality/conservation • Beach erosion • Air quality • Resource conservation and waste reduction * Promotes a safe and efficient integrated transportation system. * Maintains citywide "small town" community spirit. * Provides a community where continuous and life-long learning is supported and encouraged for people of all ages. » Looks ahead and works to anticipate changes that are required now in order to make a better future for its citizens. City of Carlsbad Finance Department September 30, 2004 Honorable Mayor, City Council, and Citizens of the City of Carlsbad CITY OF CARLSBAD Carlsbad, California LETTER OF TRANSMITTAL 2003-04 COMPREHENSIVE ANNUAL FINANCIAL REPORT 1 am pleased to present the 2003-04 Comprehensive Annual Financial Report of the City of Carlsbad. The information found in this report is provided by management to the City Council and the public to assist those interested in understanding the fiscal condition of the City as of June 30, 2004. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. 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. State law and the City's Municipal Code require that an annual financial report is prepared. This report fulfills that obligation. It has been prepared in conformity with generally accepted accounting principles (GAAP) and with the financial reporting requirements prescribed by the Governmental Accounting Standards Board (GASB). The independent auditing firm of McGladrey & Pullen, LLP have issued an unqualified ("clean") opinion on the City of Carlsbad's financial statements for the year ended June 30, 2004. The independent auditor's report is located at the front of the financial section of this report. Management's discussion & analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview and analysis of the basic financial statements. MD&A complements this letter of transmirtal and should be read in conjunction with it Also, as a recipient of federal and state financial assistance, the City is required to have a "Single Audit" performed by our independent audit firm. The Single Audit was designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require that the independent auditor report not only on the fair presentation of the financial statement, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City's separately issued Single Audit Report. The results of the City's Single Audit for the fiscal year ended June 30, 2004 noted no material weaknesses in the framework of internal controls or significant violations of applicable laws and regulations. PROFILE OF THE CITY OF CARLSBAD Carlsbad incorporated in 1952 as a General Law city, although its "village" area dates back more than 100 years. It is located about 35 miles north of the city of San Diego on the southern California coast. The City is governed by a five-member City Council under the Council/Manager form of government. The City Council is elected at large on a staggered basis for a term of four years. The City Clerk and City Treasurer 3 1635 Faraday Avenue • Carlsbad, CA 92008-7314 • (76O) 6O2-2430 • FAX (76O) 6O2-8553 www.ci.carlsbad.ca.us • Business License (760) 602-2495 • Utility Billing (760) 602-242O • Purchasing (760) 6O2-2460 - FAX (760) 602-8556 - Bid Line (760) 602-2464 are also elected to four-year terms. The City Council appoints the City Manager and City Attorney. The City covers approximately 42 square miles and has a population of 92,995, with an expected build-out population of 120,000 residents. Industries in the City include 3 shopping centers; a regional mall, a specialty outlet center and a community center; a major family theme park; an auto mall; ovsr 30 hotels offering 3,500 rooms for tourist lodging; high- technology, multimedia, communication, and biomedical businesses; electronics, golf apparel, and equipment manufacturers; several business and light-industry parks; and numerous land developers.Carlsbad This report includes financial statements for the City, the Housing Authority of the City of Carlsbad, the Carlsbad Public Improvement Corporation, the Carlsbad Redevelopment Agency, and the Carlsbad Municipal Water District. Through these entities, Carlsbad provides a full range of services to its citizens and customers including: Police department Development services Fire and paramedic services Street construction and maintenance Water delivery system Library and arts programs Sewer system Recreation programming for all ages Solid waste services Park lands Housing programs School programs and facilities are provided by four different school districts located within the City boundaries. Although the City Council has no direct control over these school districts, the City Council recognizes the importance of quality school facilities and programs to Carlsbad's residents. The City Council has worked closely with the schools in the past to provide assistance. Budget Process The Carlsbad Municipal Code requires that the City Manager annually prepare a budget for the City Council with a message describing important features, and be responsible for the budget's administration after adoption. The budget process begins in January each year with a review and update of the City Council's five-year vision statements and strategic goals for the City. The goals outline the methods used to achieve the vision and call out areas upon which the City Council would like to place special emphasis during the year. Once these are developed, staff develops operational goals based on the City Council's direction. These operational goals are the basis for the development of the annual budget. City of Carlsbad 2003-04 Strategic Goals Top-Quality Services - Be a city that provides exceptional services on a daily basis. Transportation - Provide and support a safe and efficient transportation system that moves goods, services, and people through Carlsbad. Balanced Community Development - Be a city that connects community, place, and spirit through balanced and well-designed land uses. Parks/Open Space/Trails - Acquire, develop, and maintain a broad range of open space and recreational facilities that actively address citizen needs, that are fiscally responsible, and are consistent with the General Plan and Growth Management Standards. Water — Ensure, in the most cost-effective manner reliable, water reliability to the maximum extent practicable, to deliver high-quality potable and reclaimed water incorporating drought-resistant community principles. Environmental Management — Be an environmentally sensitive community by focusing on: clean storm water, sewage collection and treatment, solid waste, and cost-effective and efficient use of energy including alternative energy sources. Financial Health — Pursue and implement proactive strategies that provide and manage fiscal resources effectively. Communication — Ensure that community members, Council, and staff are well informed, leading to a more responsive government and a high level of citizen confidence in government. Learning — Promote and support continuous learning opportunities within the community and the City organization. Budgetary control for the City is maintained through its accounting systems. The City Council adopts the formal budget at the beginning of each year and may amend it throughout the year as necessary. Expenditures may not exceed budgeted figures at the fund level. Monthly reports summarizing the results of operations for the City's more significant funds are provided to the City Council. FACTORS AFFECTING FINANCIAL CONDITION Economic Profile Index of Leading Economic Indicators San Diego County 145 140 - 135 - 130 - 125 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Source: USD Center for Real Estate Diversification of San Diego County's employment base after the recession of the early 1990's has helped the region to weather the ups and downs of the business cycles without the dramatic declines seen in recent years in other parts of the State. The leading indicators for the San Diego region increased for the 13' consecutive month in July 2004 (the most recent data available). The indicators are published by the University of San Diego School of Business Administration and according to their report, "The outlook is for solid growth in the local economy at least through the first half of 2005. One topic that is on the minds of many San Diegans is the state of the local housing market. One concern is about whether we are in a housing price "bubble" after years of double-digit growth in prices. Some people worry about a repeat of the early 1990s, when housing prices dropped significantly after a large run up. The circumstances are much different today than they were back then. In the 1990s, we had just come through a period of huge residential construction, and the local economy was hit as the defense industry faced major cutbacks. Today, the supply of housing is much tighter after years of slow construction activity, and the local economy is experiencing solid job growth. Any weakness will likely be caused by a sharp increase in interest rates from the current low levels, which I don't see in the short term. The outlook for the local housing market is for a flattening of prices and more difficulty in selling, i.e., a longer time on the market, but no significant drop in prices." That is good news for Carlsbad as the strong demand for housing has continued to push housing prices up thereby increasing the assessed value base and property taxes. The median price for a single-family home in Carlsbad averaged $561,000 for calendar year 2003, a 17% increase from the previous year. Total assessed property value in the City stands at over $14 billion, double what it was just five years ago. Median SFD Home Prices in Carlsbad (in OOO's) 2003 In fiscal year 2004-05, the City expects to issue 1,198 residential permits, slightly higher than the 834 in fiscal year 2003-04. The impediment to higher development has been mainly due to the lack of supply rather than a lack of demand. Over the next five years, the City expects to add over 2,500 single-family homes and 1,000 multi-family units to the residential housing stock in Carlsbad. The completion of these master planned communities will signal the end to the large-scale residential developments in Carlsbad. As of 2004, the City's residential housing stock is about 85% built out, with approximately 6,800 housing units remaining to develop. Carlsbad, like the region, has benefited from diversification of its employment base and its sources of revenue. Although, commercial and industrial development has been sluggish recently, it is expected to pick up over the next five years to average over 1.1 million square feet per year. Some of the major businesses in the City include the Gemological Institute of America, ViaSat, Invitrogen, Callaway, Taylor Made, Upper Deck, and many others. Commercial development has brought much needed entertainment and shopping venues to citizens and visitors alike, as well as generating additional sales taxes to help pay for City services. Carlsbad is home to Car Country Carlsbad - an auto mall; the Carlsbad Company Stores - a specialty outlet center; Plaza Camino Real - a regional shopping mall; and the most recent addition, the Forum at Carlsbad - a community shopping center with retail shops, restaurants and other commercial sites. 100,000 -, 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 General Fund Revenues 94 95 96 97 98 99 00 01 02 03 04 D Property Tax D Vehicle Lie Fees D Sales Tax • Franchise Taxes ID Transient Occ Tax Q All Others Carlsbad's prime coastal location, its two premier resort hotels, Legoland - a family theme park, a regional airport, and its many businesses, make it a popular destination for both leisure and business travelers. The City has two luxury resorts available for its visitors: the Four Seasons Resort at Aviara and the La Costa Resort and Spa, as well as numerous other quality hotels and motels. There are over 3,500 hotel rooms available for visitors to choose from in Carlsbad. Tourism in Carlsbad, as in the rest of the state, declined significantly following the terrorist attacks of September 11, 2001. The industry has rebounded and Carlsbad's hotel tax revenue is expected to reach back to pre-9/11 levels this year. For fiscal year 2004-05, the City's revenue projections reflect increasing consumer confidence and the return of job growth. Increases are expected in most of the tax revenues with overall General fund revenues increasing by 5%. The most significant area of risk in the forecast for Carlsbad is in the impact of the State of California's budget deficit discussed below. State of California Budget The State of California has a significant budget deficit, which they have carried over from year to year by using various sources of one-time revenues - including that of local governments. The State's budget for fiscal year 2004 took approximately $1.5 million from the City's General fund with the promise to pay it back in the future. In addition, it authorized deficit reduction bonds, which are to be paid back through a series of revenue shifts known as the "Triple Flip". This essentially results in the temporary swap of a 25% of the cities' share of sales tax in return for property tax. It should have no effect on the amount of tax revenues the cities receive eventually, but it will result in the loss of some interest earnings due to the delay in the timing of the receipt of the taxes. The State's 2004-05 budget contains additional losses to city revenues. The budget calls for a "contribution" from cities, counties and special districts totaling $1.3 billion in both the '05 and '06 fiscal years. For the City of Carlsbad this means a loss of $1.8 million from the General fund and $220,000 from its Redevelopment Agency in each of the next two years. In exchange for this two year "contribution" to the State, the Governor has promised his support to pass a constitutional amendment that will provide cities protection from further raids on their revenues by the State. While it would be preferable for the State to balance its budget without impacting local government, if the State can limit the effects to those indicated in the proposed agreement and if the promised revenue protections are achieved, the impact on Carlsbad will be manageable. The danger is that these will not be enough and that further assaults on City revenue sources will occur. Long-Term Financial Planning It is the City Council's goal to ensure that the City remains in good financial health, and the City has taken a number of steps to attain that goal. One of these is the Growth Management Plan. This plan was adopted by the citizens to ensure that all necessary public facilities are either constructed along with development or that a financing plan is in place to pay for the facilities prior to the development of the property. Thus, the initial capital facilities needed to support the growing population are provided without financially impacting the City or its current residents. The City also prepares a 20+ year Capital Improvement Program. As part of the Capital Improvement Program, the amounts needed to pay for the various projects as well as the operating budget impacts are calculated. In this way, we can anticipate the effects of development from both a capital and an operating perspective. In order to assure that the City has the funds to replace these facilities as they age, an Infrastructure Replacement fund was created. With this fund, the City is setting aside money on an annual basis for major maintenance and replacement of its infrastructure. Much of the City's infrastructure is relatively new; therefore, the City has not felt the full impact of maintenance. By setting aside funds now, the citizens of Carlsbad can be assured that the proper maintenance and replacement, when needed, will be performed on streets, parks, and the many facilities for which the City is responsible. In addition to these steps, the City also prepares a long-term financial model for its operating needs. With a growing city such as Carlsbad, it is imperative that we plan for the impacts of serving new development and operating new public facilities, as well as planning for the capital needed to build them. Therefore, the City prepares a ten-year operating forecast for the General fund and its major enterprise funds. The City has experienced remarkable revenue growth over the past five to seven years due to the development of the majority of its commercial sites. The future will bring a few more commercial sites but at a much slower pace, while residential development will continue for a number of years. There are also a number of new facilities - mainly parks - planned for the future to serve the growing population. The new facilities will add operating costs to the City's General fund budget as they are completed and opened for use. These factors alone will cause the General fund costs to escalate at a higher rate than inflation. In addition, a number of other factors - mainly rising retirement and health care costs - will create upward pressure on expenditures, especially over the next five years. These factors have been incorporated into the General fund forecast, shown on the next page, and projected over the next ten years. While no forecast is ever totally accurate, it does represent a likely scenario given the assumptions on which it is built. The forecast reflects the following assumptions: • Revenue growth will pick up at a moderate pace in 2005 and continue into the future. • The changes included in the State's budget are implemented; thus, lowering property taxes in fiscal year '05 and '06 and then full revenue receipts after that time. • All known personnel costs are included, most of which have been negotiated with the employee groups. Increases are assumed in the City's contribution to its retirement plan. The City contributes to the California Public Employees' Retirement System (PERS), an agent multiple-employer public employee defined benefit pension plan, for all of its full-time employees. Each year, an actuary calculates the amount of the annual contribution that the City must make to the pension plan to ensure that the plan will be able to fully meet its obligations. Due to the sluggish economy, the stock market decline and benefit enhancements, the City's contribution rate is expected to continue to increase over the next several years. For more information on the pension plans, please read Note 16 of the notes to the financial statements. 15% increases in health care costs in the near future, slowing to 5% in the future. Personnel growth (new positions) to remain rather flat at no more than 2% per year. Estimated operating costs for all capital projects in the timeframes shown in the CIP. General Fund 2006 2008 2010 2012 2014 Revenues - Projected Budget The results show that the General fund would operate at a surplus until 2008, at which time the forecast goes into a slight deficit and the deficit continues to grow to a maximum of 4% of the budget by 2014. The surpluses are caused by the surge in revenues that occurred over the past years. The City's costs are projected to continue to grow at a faster pace than revenues, so it will eventually lead into deficits. One of the more significant changes resulting in expenditure growth in the later years is the projected loss of Transnet revenues, which are used for street maintenance. Transnet is a Vi cent additional sales tax collected countywide and used to improve the transportation systems. The current authorization for the sales tax will end in 2008. SANDAG, the San Diego Association of Governments, is placing a measure on the November ballot to reauthorize the sales tax for another 40 years. If the measure passes, the deficits in the future years will be reduced. Of course, the City does not allow for deficit spending, so it will need to balance the budgets in the out years. This can be done by reducing costs, raising revenues, or slowing the addition of new facilities until the revenues have time to catch up. The General fund forecast is a tool available to the City for managing its fiscal resources effectively and monitoring the achievement of sustainable economic health for the City of Carlsbad. Cash Management The City Treasurer is charged with the design of an effective cash management and investment program consistent with legal requirements and the Carlsbad Investment Policy. The City annually adopts a comprehensive investment policy specifying, among other things, investment objectives and strategy, type, and term of investments, reporting requirements, and investment oversight. The City's investments generally include federal agencies, corporate notes, and investments in the State Treasurer's investment pool. The modified duration of the investments in the City's investment pool as of June 30, 2004 was 2.06. The average return realized on the pooled investments declined from 4.24% in fiscal year 2002-03 to 3.43% for fiscal year 2003-04. Historical Unrealized Gains/Losses as Percent of Amortized Cost Investment income shown in the financial statements includes changes in the fair value of investments as required under GAAP. Increases or declines in fair value during the current year, however, do not necessarily represent trends that will continue, nor is it always possible to realize such amounts. This is especially true as the City holds most of its investments to maturity rather than selling them at fair value. The graph at the right shows the amount of unrealized income reflected in the portfolio over the last few years. As of June 30, 2004, the market value is essentially equal to the amortized cost of the portfolio. Thus, the investment income for the 2003-04 fiscal year includes a significant reduction as a result in the decline in the market value of the portfolio. This is discussed more thoroughly in the MD&A. Major Initiatives 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 The Public Safety services are in the second year of implementing their Public Safety Technology Plan. The plan replaces the current computer-aided dispatch system and will allow for mobile computing, mapping and automatic vehicle location. Mobile computing will allow officers to receive calls on their in-car computer and perform other functions such as email and accessing regional databases while in the car. A computerized map will show the unit's current location and location of call. The Automatic Vehicle Location is the real-time tracking of police units with the closest unit to the call being dispatched. This $2.5 million project has been fully funded through grants and appropriations from the General fund. Construction of the Recycled Water Facility is complete, and the remaining pipelines for the project are under construction. When operational, the plant will be able to generate up to four million gallons of recycled water per day. It is expected to begin operating in 2005. The project will serve the industrial park area, and increase the City's water supply and reduce dependence on external suppliers. Funds for this project came from a combination of grants and loans from State and Federal agencies. The loans will be repaid from revenues generated by the plant. Several significant parks are in design and scheduled for construction over the next few years. These include: • Alga Norte Park and Aquatic Complex, scheduled to open in 2007. This 33-acre park site will include ball fields, picnic areas, tot lots, a skate park, a dog park, and an aquatic complex. Total cost estimated at over $25 million. Funded by impact fees and the General fund. • Hidden Canyon Park, opening in summer 2005. This 22-acre park will encompass mainly passive uses including trails, picnic areas and tot lots. Total cost of $ 1.8 million. Funded by impact fees. • Aviara Community Park, opening in summer 2005. Amenities will include a ball field, a synthetic turf soccer field, basketball courts, picnic areas and a tot lot. Total cost of $10.7 million. Funded by impact fees. • Pine Avenue Park, opening early in 2006. This park will include a multi-use field, basketball courts, picnic areas and tot lots, and an ornamental garden. Total cost of $6.2 million. Funded by impact fees. • Municipal Golf Course, expected opening in 2007. The City will begin the initial clearing and grubbing operation this fall in anticipation of constructing an 18-hole championship course. Total costs estimated at $30 million. Funding to come from a combination of General fund advances and tax exempt bonds. In addition to the numerous park projects, the City has embarked on an initiative with the ultimate goal of connecting community, place, and spirit. The initiative was kicked off with a conference held in March 2003, which brought together a wide range of community members as well as City staff, to a" begin a collective dialogue about the future. Over the past year, the process continued as twelve community focus groups were held throughout the City, attended by more than 400 citizens, to discuss the themes generated at the conference. All the information was "2 J.v distilled and presented in a Council workshop. At the workshop, Council developed their %^(tei|'V^ vision for the look and feel of the City's future civic centers and City government "'>>-, pta<* buildings. Based on the Council's direction, several initiatives have been launched. The Centre City Gateway project will develop a land use vision and strategy process for the coastal area near the center of the City. This may be the eventual site of a Civic Center Plaza. The conceptual planning is underway. In addition, the designs for a City/Safety Training facility and a Public Works center have been funded. These facilities are expected to be built in the next few years. Besides designing the hardscape for the City, there is also money in the 2004-05 budget to continue the work of community engagement - continuing the dialogue about what the citizens want and what they can do together to connect community, place and spirit in Carlsbad. AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Carlsbad for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2003. This was the sixth consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to GFOA to determine its eligibility for another certificate. This report has been a joint effort by many people from many different areas of responsibility. It could not have been accomplished without their help and the dedicated efforts of all of the accounting staff, especially Kevin Branca, Assistant Finance Director, and Helga Stover, Senior Accountant. I also appreciate the staff of McGladrey & Pullen, LLP for the professional way in which the audit of this financial report was conducted. It has been a pleasure to work with them throughout this period. Additionally, I would like to thank the City Council and the City's Leadership Team for their leadership and unfailing support in maintaining the highest standards of professionalism in the management of the City of Carlsbad's finances. Respectfully submitted, LISA HILDABRAND Finance Director 10 Certificate of Achievement for Excellence in Financial Reporting Presented to City of Carlsbad, California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2003 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. " President Executive Director 11 SOLANA BEACH DEL MAR I 1-5 12 CITY OF CARLSBAD ELECTED CITY OFFICIALS Claude A. "Bud" Lewis, Mayor Ramona Finnila, Mayor Pro Tern Ann J. Kulchin, Council Member Matt Hall, Council Member Mark Packard, Council Member Lorraine M. Wood, City Clerk James M. Stanton, City Treasurer ADMINISTRA TION AND DEPAR TMENT HEADS Raymond R. Patchett, City Manager Frank Mannen, Assistant City Manager James F. Elliott, Administrative Services Director Lloyd Hubbs, Public Works Director Sandra Holder, Community Development Director Tom Zoll, Police Chief Kevin Crawford, Fire Chief Ron Ball, City Attorney Julie Clark, Human Resources Director Douglas Duncanson, Deputy Public Works Director, General Services Debbie Fountain, Housing & Redevelopment Director Robert J. Greaney, Deputy Public Works Director, Maintenance and Operations Lisa Hildabrand, Finance Director Michael Holzmiller, Planning Director Pat Kelley, Principal Building Inspector Clifford Lange, Library Director Erin Letsch, Risk Manager Ken Price, Recreation Director Glenn Pruim, Deputy Public Works Director, Engineering Services Aletha L. Rautenkranz, Information Systems Director CHAIRPERSONS, COMMISSIONS AND BOARDS Gary Hill Arts Commission Norine Sigafoose Beach Preservation Committee Colleen Finnegan Community Television Foundation Sarah Marquez Design Review Board German Gutierrez Historic Preservation Commission Edward Scarpelli Housing Commission Claude A. Lewis Housing and Redevelopment Commission Rob Swette Library Board of Trustees Jim Comstock Parks and Recreation Commission Donald Martin Personnel Board Frank Whitton Planning Commission David Ricker Senior Commission VACANT Serra Cooperative Library System Advisory Board Leonard Martyns Sister City Committee Gorden Cress Traffic Safety Commission VACANT Underground Utility Advisory Committee 13 CITY OF CARLSBAD ORGANIZATION CHART 1Personnel i Board ' Beach i Preservation ] — Committee i ~ ~ ~lCommunity i Television 1 Foundation i 1 Traffic i Safety ] — Commission i Underground I Committee i Design Review Board Housing Commission Housing & Redevelopment Commission Planning Commission L 1 1 I1 1 1 'l L1 1 1 1 L1 I PUBLIC SAFETY ADMINISTRATIVE SERVICES FIRE POLICE KEY Elected Council Appointed ~-~i Staff Support Reporting Relationship Programs 0 am — CH FINANCE HUMAN RESOURCES INFORMATION TECHNOLOGY RISK MANAGEMENT RECORDS MANAGEMENT CMAYOR & COUNCIL >»CITY V TREASURER J ^~^~"—*^ CITY MANAGER CITY ATTORNEY PUBLIC WORKS ADMINISTRATION ENGINEERING SERVICES GENERAL SERVICES MAINTENANCE & OPERATIONS COMMUNITY} DEVELOPMENT COMMUNITY SERVICES BUILDING ECONOMIC DEVELOPMENT GEOGRAPHIC INFO SYSTEMS HOUSING AND REDEVELOPMENT PLANNING ARTS LIBRARY RECREATION SENIOR CENTER Arts Commission Sister City Committee Historic Preservation Commission Library Board of Trustees Serra Cooperative Library System Advisory Board Parks & Rec Commission Senior Commission FINANCIAL SECTION McGladrey&Pullen Certified Public Accountants Independent Auditor's Report The Honorable Mayor and Members of the City Council City of Carlsbad, California We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Carlsbad, California, (the City) as of and for the year ended June 30, 2004, which collectively comprise the City's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the General fund for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2004 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Management's Discussion and Analysis as listed in the table of contents is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual nonmajor fund financial statements and other schedules, listed in the table of contents as supplementary information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. McGladrey & Pullen, LIP is a member firm of RSM International, an affiliation of separate and independent legal entities. 15 The accompanying introductory and statistical sections, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. San Diego, California September 30, 2004 16 Management's Discussion and Analysis As management of the City of Carlsbad ("City"), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2004. Our intent is to assist the reader of these financial statements in better understanding the impact of financial decisions made by the City. This analysis will focus on the significant changes in an effort to explain the City's overall financial condition. We encourage readers to consider the information presented here in conjunction with the additional information furnished in our letter of transmittal. Overview of the Financial Statements Required Components of the City of Carlsbad's Annual Financial Report Management 's Discussion and Analysis \ 1 Basic Financial Statements Required Supplementary Information This section of the annual report consists of four parts - management's discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non- major governmental funds and internal service funds. The basic financial statements include two kinds of statements that present different views of the City. • The first two statements are Government-wide Financial Statements that provide both long-term and short- term information about the City's overall financial status. • The remaining statements are Fund Financial Statements that focus on individual parts of the City government, reporting the City's operations in more detail than the Government-wide Statements. — The Governmental Funds Statements detail how general government services such as public safety were financed in the short term as well as what remains for future spending. - Propriety Fund Statements offer short- and long-term financial information about the activities the City operates like businesses, such as the water and sewer services. - Fiduciary Fund Statements provide information about the financial relationships - such as contractor and miscellaneous deposits - in which the City acts solely as a trustee or agent for the benefit of others to whom the resources belong. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. In addition to these required elements, we have included a section with combining statements that provide detail about our non-major governmental funds, internal service funds, and fiduciary funds, which are added together and presented in single columns in the basic financial statements. The remainder of this overview section of management's discussion and analysis explains the structure and contents of each of the statements. 1 Government- wide Financial Statements I Fund Financial Statements Notes to the Financial Statements Summary Detail 17 Government-wide Financial Statements The Government-wide Financial Statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Assets includes all of the City's assets and liabilities. All of the current year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid. The two Government-wide Financial Statements report the City's net assets and how they have changed. Net assets • the difference between the City's assets and liabilities - are one way to measure the City's financial health, or position. Over time, increases or decreases in the City's net assets are an indicator of whether the City's financial health is improving or deteriorating, respectively. One needs to consider additional non-financial factors, such as changes in the City's property tax base and the condition of the City's infrastructure, to assess the overall health of the City. The Government-wide Financial Statements of the City are divided into two categories: • Governmental activities — Most of the City's basic services, such as police, fire, public works, community services, community development, and general administration, are included here. Taxes, revenues from other governments and agencies, income from property and investments, grants and contributions, and charges for services finance most of these activities. • Business-type activities - The City charges fees to customers to cover the costs of certain services it provides. The City's water, sewer, and trash services are the primary business-type activities. Fund Financial Statements The Fund Financial Statements provide more detailed information about the City's most significant funds - not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and bond covenants, while the City establishes other funds to control and manage money for particular purposes (such as the developer impact fee funds) or to show that it is properly using certain taxes and grants (such as the Section 8 Housing Assistance fund). The City has three kinds of funds: • Governmental funds - Most of the City's basic services are included in governmental funds. These funds are used to account for (1) cash and other financial assets that can readily be converted to cash flow in and out, and (2) balances left at year-end that are available for spending. Consequently, the Governmental Funds Statements provide a detailed short-term view that helps the reader determine the amount of financial resources that can be spent in the near future to finance the City's programs. A reconciliation between the long-term and short-term focus of the Government-wide Financial Statements is provided immediately following each statement. • Proprietary funds - Services for which the City charges customers a fee are generally reported in proprietary funds. Proprietary funds, like the Government-wide Financial Statements, provide both long- and short-term financial information. - There are two types of proprietary funds: enterprise funds and internal service funds. We use enterprise funds to report activities that provide business-type services, generally to external customers - such as water, sewer and trash services. In both the Government-wide Financial Statements and the Fund Financial Statements, these funds are shown under business-type activities. - We use internal service funds to report activities that provide services and supplies for the City's other programs and activities - such as fleet, self-insured benefits, and information technology. 18 • Fiduciary funds — These funds are used to account for situations where the City's role is purely custodial, such as the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. All of the City's fiduciary activities are reported in a separate Statement of Fiduciary Assets and Liabilities. We exclude these activities from the City's Government-wide Financial Statements because the City cannot use these assets to finance its operations. Financial Analysis of the City as a Whole Net Assets The City's combined net assets for the fiscal year ended June 30, 2004, as shown below, were $937.8 million. The capital asset figure for governmental activities does not include all of the City's infrastructure assets, since the City has not completed its inventory of infrastructure assets. Under GASB 34, the City has until fiscal year 2005-06 in which to complete a full accounting of its infrastructure. The City's net assets increased by $87.2 million during the current fiscal year. Approximately 32% of this increase represents the degree to which increases in operating revenues have exceeded increases in operating expenses. Approximately 68% represents one-time capital grants and contributions received by the City for the purchase and acquisition of infrastructure and other capital assets. CITY OF CARLSBAD'S NET ASSETS (in millions of dollars) Governmental Business-Type Activities Current and other assets Capital assets Total assets Long-term debt outstanding Other liabilities Total liabilities Net assets Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 2003 $330.9 265.0 595.9 17.5 12.9 30.4 248.2 200.3 117.0 $565.5 2004 $370.3 298.4 668.7 15.2 19.3 34.5 282.7 195.7 155.8 $634.2 Activities 2003 $128.0 175.1 303.1 10.8 7.1 17.9 163.2 96.7 25.2 $285.1 2004 $129.9 193.9 323.8 8.1 12.1 20.2 183.2 102.6 17.8 $303.6 Total 2003 $458.9 440.1 899.0 28.3 20.0 48.3 411.4 297.0 142.2 $850.6 2004 $500.2 492.3 992.5 23.3 31.4 54.7 465.9 298.3 173.6 $937.8 Total Percentage Change 2003-04 9.0% 1 1 .9% 10.4% -17.7% 57.0% 13.3% 13.2% 0.4% 22.1% 10.3% As noted earlier, net assets may serve over time as a useful indicator of the City's financial position. For the City of Carlsbad, assets currently exceed liabilities by $937.8 million at the close of the most recent fiscal year. A large portion of the City's net assets (50%) reflects its investment in capital assets (i.e., land, buildings, machinery, equipment, and infrastructure), 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 usually won't be used to liquidate these liabilities. An additional portion of the City's net assets (32%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($173.6 million) may be used to meet the government's ongoing obligations to citizens and creditors. Over 50% of the $155.8 million in unrestricted governmental activities net assets is attributable to the General fund. Although the unrestricted net assets of our business-type activities total $17.8 million, these resources cannot be 19 used to help fund governmental activities. The City can only use these net assets to finance the continuing operations of the City's enterprises: water, sewer, trash, and golf operations. Changes in Net Assets The condensed summary of activities, which follows, shows that net assets increased by $87.2 million during the year. This increase occurs when spending is less than the revenues received. This occurred in the current fiscal year for several reasons: an emphasis on efficiencies resulted in $4.2 million in savings; $13.1 million in "savings" in the General fund being carried forward into the new fiscal year by various major service areas within the City to enhance and provide for future services and programs; the build-up of cash reserves in the City's capital project funds for future capital project construction and acquisition; revenues received in the City's special revenue funds for future services and programs; and the donation of infrastructure assets from developers. CITY OF CARLSBAD'S CHANGES IN NET ASSETS (in millions of dollars) Governmental Business-type Activities Revenues Program revenues Charges for services Operating grants and contributions Capita] grants and contributions General revenues Property taxes Sales and use taxes Other taxes Income from property and investments Other Total revenues Expenses General government Public safety Community development Community services Public works Interest on long-term debt Carlsbad Municipal Water District Sewer Other business-type activities Total expenses Excess (deficiency) before transfers Transfers Increase (decrease) in net assets Beginning net assets Ending net assets 2003 $17.0 10.1 45.2 31.4 25.8 15.6 13.3 5.5 163.9 8.5 27.7 12.0 14.6 16.8 1.1 - - - 80.7 83.2 (0.6) 82.6 482.9 $565.5 2004 $15.1 14.6 42.2 33.9 24.6 18.3 3.1 4.8 156.6 8.6 30.9 13.8 15.1 19.5 1.0 - 88.9 67.7 1.0 68.7 565.5 $634.2 Activities 2003 $25.5 1.3 19.5 1.7 - - 5.8 0.2 54.0 - - - - - - 19.3 6.1 0.3 25.7 28.3 0.6 28.9 256.2 $285.1 2004 $26.7 1.5 17.4 1.9 - - 1.2 - 48.7 - - - - - 21.0 6.9 1.3 29.2 19.5 (1.0) 18.5 285.1 $303.6 Total 2003 $42.5 11.4 64.7 33.1 25.8 15.6 19.1 5.7 217.9 8.5 27.7 12.0 14.6 16.8 1.1 19.3 6.1 0.3 106.4 111.5 - 111.5 739.1 $850.6 2004 $41.8 16.1 59.6 35.8 24.6 18.3 4.3 4.8 205.3 8.6 30.9 13.8 15.1 19.5 1.0 21.0 6.9 1.3 118.1 87.2 - 87.2 850.6 $937.8 Total Percentage Change 2003-04 -1.6% 41.2% -7.9% 8.2% -4.7% 17.3% -77.5% -15.8% -5.8% 1 .2% 11.6% 15.0% 3.4% 16.1% -9.1% 8.8% 13.1% 333.3% 11.0% -21.8% 0.0% -21.8% 15.1% 10.3% 20 City of Carlsbad Sources of Revenue for Fiscal Year 2003-04 $205.3 Million Other (2%) Grants/ Contributions (32%) Income from Property and Investments (2%) Other Taxes (5%) TOT (4%) Property Taxes (17%) Charges for Services (20%) Federal Aid (4%) State Aid (2%) Sales Tax (12%) Just over 49% of the City's governmental funds revenue is generated through taxes collected (property, sales, transient occupancy tax, etc.), and almost 55% of the City's business-type revenue is generated through charges for services. The following chart graphically depicts the City's revenue sources. The large decrease in income from property and investments was primarily the result of a 19% drop in the average interest rate earned on the City's cash portfolio for the year, combined with an unrealized loss of $8.3 million from reflecting the value of the City's investments on a market value basis. This paper loss will never materialize, as the City hold's its investments until maturity. The total cost of all programs and services was just over $118 million in fiscal year 2003-04. The City's expenses cover a range of services: • General Government (7%) This segment of the City is divided into two major groups, the Policy and Leadership group and the Administrative Services group. The Policy and Leadership group encompasses all elected officials and the chief executive offices for the City • Public Safety (26%) Public Safety has always been a top City Council priority. The major service area includes the Police Department, whose goal is to provide quality service to the community to ensure the preservation of life and property and the maintenance of law and order. The Fire Department is also part of this major service area with a mission to enhance the quality of life by delivering exceptional services in safeguarding lives, property, and our environment. Community Development (12%) The mission of Community Development is to guide and facilitate the development of the City of Carlsbad. This is accomplished through the development of high-quality projects and public facilities, preservation of the local environment, diverse housing, employment and enrichment opportunities, and a strong and stable economic base. Community Development encompasses the Hiring Center, Geographic Information Systems (GIS), Economic Development, Community Promotion, Land Use Planning, Housing and Redevelopment, and Building Inspection. Community Services (13%) Community Services consist of the Library, Cultural Arts, Recreation, Park Planning, and Senior Citizen City of Carlsbad Functional Expenses for Fiscal Year 2003-04 $106.4 Million Public Safety 26% Community Development 12% 21 programs. These programs are provided to a wide range of people and assist in their education and cultural development. • Public Works (16%) Public Works is charged with building and caring for all of the assets of the City. It includes Engineering, Parks, Streets, Median, Street Tree, Buena Vista Channel, and Facilities Maintenance, Building Maintenance, Street Lighting, and Traffic Sign and Signal Maintenance programs. • Water Operations (18%) The Carlsbad Municipal Water District, a subsidiary of the City of Carlsbad, provides potable water service to approximately 85% of the City (66,300 customers). The District purchases 100% of its potable water as treated water from the Metropolitan Water District and the San Diego County Water Authority. The District also provides recycled water for irrigational purposes. • Sewer Operations (6%) The City of Carlsbad operates and maintains a sanitary sewer collection system, which covers approximately 65% of the geographic area of the City. Sewage is treated by the Encina Wastewater Treatment Plant, a facility jointly owned by the Cities of Carlsbad and Vista, the Leucadia County Water District, the Vallecitos Water District, the Buena Vista Sanitation District, and the Encinitas Sanitary District. • Other Expenses (2%) Other expenses include costs associated with the City's Solid Waste division, the City's Storm Water Protection Program, development of a municipal golf course, and interest on the City's long-term debt that is associated with governmental activities. The following sections will discuss the operations of governmental and business-type activities separately. Governmental Activities The increase in net assets for governmental activities was $68.7 million. This increase was generated by total revenues of governmental activities of $156.6 million ($71.9 million in program revenues and $84.7 million in general revenues) offset by $88.9 million in total costs of governmental activities plus $1 million in transfers into these activities from business-type activities. The following table presents the total cost of each of the City's major programs, as well as each function's program revenues (fees generated by the activities, contributions, and intergovernmental aid). The net cost (the difference between adjoining bars in the graph) shows the financial burden that was placed on the City's taxpayers by each of these functions (costs covered by general revenues). 22 Governmental Activities Program Revenues and Expenses Fiscal Year 2003-04 (in millions) E3 Program Revenues Q Expenses General Public Safety Community Community Public Works Government Development Services Revenues are generated through several sources to cover the cost of the City's programs. These revenues include fees and charges paid by those who directly benefit from the programs ($15.1 million), grants and contributions from other governments and organizations to subsidize certain programs ($56.8 million), and taxes and other revenues (such as income from property and investments and vehicle license fees) received by the City to pay for the "public benefit" portion, totaling $84.7 million. During the 2003-04 fiscal year, the City received additional affordable housing revenue as many of the participants in the various loan programs sold their homes, and the City shared in the appreciation of their homes values. This one-time occurrence pushed community development program revenues past expenses for the fiscal year. Program revenues exceed expenses in Public Works as a large majority of Public Works revenues are used to acquire and build capital assets (versus covering operating expenses). The City does not acquire or build a capital asset until the related revenues have been received. The City is currently in a developing or growing stage, and master plans are being designed to construct and develop these new facilities, roads, parks, etc. Business-Type Activities Program revenues for the City's business-type activities totaled $45.6 million for the year, while functional expenses equaled $29.2 million. Business-Type Activities Program Revenues and Expenses Fiscal Year 2003-04 (in millions) ED Program Revenues 0 Expenses Water Golf Course Sewer Solid Waste 23 As with the Public Works function in the governmental activities, program revenues are higher than program expenses. The City received contributions for current and future capital asset acquisitions and construction that will be reflected as depreciation expense (a program expense) over time. In addition, a small portion of the annual surplus is set aside for rate stabilization and unanticipated events. Financial Analysis of the City's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Governmental Fund Balances (in millions) Reserved for Other Purposes $329.7 Million ($31.1 million) Reserved for Golf Course ^ T*4ffijiBJ!| . >\ Undesignated ($115.5 million) ($15 million) Designated for Future Continuing Appropriations ($69.6 million) Designated for Approved Reserved to Liquidate Contracts and^^^ Capital Projects Purchase Orders ($62.3 million) ($36.2 million) As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $329.7 million, an increase of $32.5 million in comparison with the prior year. Approximately 35% of this amount ($115.5 million) constitutes undesignated fund balance, which is available for spending at the government's discretion based on the purpose for which it was received. The remainder of the fund balance is reserved or designated to indicate that it is not available for new spending because it has already been committed (1) for future capital projects - 19%, (2) to liquidate contracts and purchase orders of the prior period - 11%, (3) for future programs - 21%, (4) the future construction of a municipal golf course - 5% or (5) for a variety of other restricted purposes - 9%. 24 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (in millions of dollars) Total Increase Percentage Revenues 'faxes Intergovernmental Licenses and permits Charges for services Income from property and investments Interdepartmental charges Miscellaneous Total revenues Expenses General government Public safety Community development Community services Public works Principal and interest Total expenses Excess (deficiency) before transfers Transfers Increase (decrease) in fund balance Beginning fund balance Ending fund balance Total 2003 $66.1 6.6 2.0 7.7 4.3 2.7 1.5 90.9 8.1 26.5 6.0 12.9 14.9 0.7 69.1 21.8 (38.8) (17.0) 88.2 $71.2 2004 $70.9 5.7 2.3 7.6 1.5 2.6 2.4 93.0 8.7 30.5 6.6 13.7 15.8 0.1 75.4 17.6 (4.7) 12.9 71.2 $84.1 (Decrease) 2003-04 $4.8 (0.9) 0.3 (0.1) (2.8) (0.1) 0.9 2.1 0.6 4.0 0.6 0.8 0.9 (0.6) 6.3 Change 7.3% -13.6% 15.0% -1.3% -65.1%, -3.7% 60.0% 2.3% 7.4% 15.1% 10.0% 6.2% 6.0% -85.7% 9.1% The General fund is the main operating fund of the City, and at the end of the fiscal year had a total fund balance of $84.1 million, an increase of $12.9 million. The unreserved fund balance portion of the General fund was $56.1 million, of which $13.1 million was designated for future programs and service enhancements. The increase in revenues was primarily due to four factors: the continuation of a strong housing market on property and transfer taxes, higher natural gas prices (higher franchise fees), a 14% increase in the number of licensed businesses in the City (higher business license taxes) and a slight rebound in the tourism industry (higher transient occupancy taxes). On the other hand a 19% drop in the average interest rate earned on the City's cash portfolio for the year, combined with an unrealized loss of $1.3 million from reflecting the value of the City's investments on a market value basis, partially offset the increase in General fund revenues. This paper loss will never materialize, as the City hold's its investments until maturity. The increase in General fund expenditures were driven by the following factors: • Normal salary and benefit increases. • PERS rates for our miscellaneous plan increased from 0% to 2.258%, and rates for the safety plan increased from 3.504% to 9.367%. • First full year for a Communications department within General Government. • $2.1 million in additional workers' compensation costs. • Costs associated with the Police department's implementation of a new Computer Aided Dispatch system (CAD). • Additional Fire department costs associated with being a member of the North County Dispatch Joint Powers Authority (NCDJPA). • A 75% increase in expenditures related to developer-funded studies in the Planning area. • The opening of the Carrillo Ranch Park. • Operating costs associated with the former Farmers Insurance building. Of all the major governmental funds, the only one with a negative fund balance is the Redevelopment debt service fund. It reflects a negative fund balance of over $10.5 million. This deficit was created when the City's General fund loaned the agency money to cover debt service charges during the period soon after the agency's bonds were issued, but prior to the agency being able to support the debt service with property tax increment revenues alone. The agency has begun to repay the $13.1 million advance back to the City's General fund, as the tax increment collected within the redevelopment area grows. Two of the four remaining major governmental funds, which are all capital project funds, showed increases in their fund balances during the year. However, these increases in fund balances are all designated for the construction or purchase of future capital projects. The Bridge and Thoroughfare Districts funds reflect a reduction in fund balance due to the use of funds to construct Poinsettia Lane and Cannon Road (from El Camino Real to Faraday Avenue). 25 In addition, the General Capital Construction fund also shows a decrease in fund balance due to the construction of many small projects throughout the City. Proprietary Funds The focus of the City's proprietary funds is to provide information on short and long-term financial information about the activities of the City that act like businesses. These funds focus on the determination of operating income, changes in net assets (cost recovery), financial position, and cash flows. The Carlsbad Municipal Water District funds had an operating loss of approximately $575,000 for the year. Although water sales were up for the year by 3.3%, increased Metropolitan Water District and County Water Authority fixed charges, as well as consulting expenses associated with a proposed new desalination plant, more than offset the increase in revenues. Sewer funds had an annual operating loss of approximately $190,000 for the fiscal year. Total revenues only decreased from the previous year by 1%; a result of reduced water usage by the City's commercial and industrial customers. In addition, higher sewer plant operation expenses caused by increasing energy and chemical costs, a reallocation of personnel costs, and the rehabilitation and resizing of major sewer lines, contributed to the reduction in operating income for the year. Solid waste operations now include the Storm Water Protection Program, previously recorded as a special revenue fund. A solid waste fee increase went into effect in December 2003, to cover the majority of the costs of this program. Unrestricted net assets for the Water, Golf, Sewer, and Solid Waste operations at the end of the year amounted to $17.8 million, just under 6% of the net assets of all proprietary funds. These assets will be used for future rate stabilization efforts as well as for any emergency situation. Approximately 34% of the net assets are restricted for future capital construction, and reside in the Water and Sewer funds. General Fund Budgetary Highlights Management monitors revenues during the year and will update estimated revenue figures when new information is received by the City. Estimated revenues were increased during this year by $1.3 million to reflect the following changes: • Studies paid for by developers. • Results of sales and business license tax audits • State and federal grants not originally budgeted. • Donations received by the City. The increase from the total original budgeted expenditures to the final budget amounted to $3.6 million, due predominantly from: • Additional workers' compensation costs. • Appropriating funds received from developers during the year for developer-funded studies. • Costs associated with sales tax audits. • Budgeted expenditures associated with new grant revenues. • Appropriating donations received. • Appropriated transfers from police grants for the City's purchase and installation of a new Computer Aided Dispatch (CAD) system. The difference between the final budgeted expenditures and the actual expenditures for the year on a budgetary basis of $19.5 million can be generally summarized as follows: 26 $15.5 million in "savings" by the various major service areas within the City. Current year savings were generated from: Unfilled vacancies. Overall awareness of fiscal responsibility throughout the City. Planned reduction in scope of library software implementation. Delayed start up of the new CAD project. A timing delay in the street overlay program. Rescheduled implementation of new programs for Seniors, Carrillo Ranch and recreation special events. Deferral of the update of the Housing Element until fiscal year 2004-05. $2.2 million representing unspent City Council Contingency money that was budgeted for unanticipated emergencies or unforeseen program needs. $1.8 million in appropriations not carried forward for major capital outlay and programs with a one-year life cycle. Battery back up equipment for traffic signals not purchased. Unspent Carlsbad Convention and Visitors' Bureau funds. Unspent employee development and training funds. Unspent administrative special project funds. Reduced Communications expenses as the program was in the start up stage during the first part of the fiscal year. For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses pursuant to GASB 31, actual expenditures have been adjusted to include encumbrances outstanding, and transfers out have been adjusted to reflect any transfer that was approved through the budget process as an expenditure but recorded as an advance in the financial statements. Capital Asset and Debt Administration Capital Assets At the end of 2004, the City had recorded an investment of over $571 million in a broad range of capital assets, including park facilities, land, buildings, roads, bridges, water and sewer lines, police and fire vehicles, and other maintenance equipment. This number does not include infrastructure assets constructed prior to July 1, 2001, as the City has not completed its inventory of infrastructure assets. Under GASB 34, the City has until fiscal year 2005-06 in which to complete a full accounting of its infrastructure. New infrastructure purchased or constructed during the last two fiscal years in the City's governmental funds has been added into the total capital asset figures. CITY OF CARLSBAD'S CAPITAL ASSETS (in millions of dollars) Governmental Business-Type Activities Land Buildings and other structures Improvements other than buildings Machinery and equipment Infrastructure Construction in progress Sewage treatment facility Accumulated depreciation Total 2003 $54.3 66.7 10.4 21.5 57.4 80.2 - 290.5 (25.5) $265.0 2004 $55.1 66.9 10.9 21.2 112.9 61.8 - 328.8 (30.4) $298.4 Activities 2003 $8.7 2.2 5.5 1.6 128.6 37.8 35.9 220.3 (45.2) $175.1 2004 $8.7 2.2 5.6 1.6 138.3 48.4 37.7 242.5 (48.6) $193.9 Total 2003 $63.0 68.9 15.9 23.1 186.0 118.0 35.9 510.8 (70.7) $440.1 2004 $63.8 69.1 16.5 22.8 251.2 110.2 37.7 571.3 (79.0) $492.3 Change 2003-04 $0.8 0.2 0.6 (0.3) 65.2 (7.8) 1.8 60.5 (8.3) $52.2 Total Percentage Change 2003-04 1.3%, 0.3% 3.8% -1.3% 35.1% -6.6% 5.0% 1 1 .8% 1 1 .7% 11.9% This year's major capital asset additions included: • The construction of two major roads: Cannon Road from Interstate 5 to El Camino Real and Faraday Avenue, east of Cannon Road. • The widening of El Camino Real, Palomar Airport Road and Olivenhain Road. 27 • Developer-dedicated streets, drainage facilities, water lines, sewer lines, streetlights, and drainage facilities at Cobblestone Sea Village, the Terraces at Sunny Creek and Rancho Carrillo Villages. In addition to carrying forward appropriations of $106.2 million for previously budgeted projects, the City's fiscal year 2004-05 capital budget appropriates an additional $52.5 million for capital projects. These additional appropriations are principally for park development, a new fire station, the pavement management program, street projects, enhancing the sewer collection system, additional water lines, traffic signals, miscellaneous civic projects and loan repayments. These projects will be financed by development fees, infrastructure and replacement transfers from the General fund, special district fees and taxes, water and sewer replacement reserves, and other sources including grants and contributions from other agencies. More detailed information about the City's capital assets is presented in Note 6 to the financial statements as well as the City's Capital Improvement Program document available from the Finance Department. Long-Term Debt At year-end, the City had $25.2 million in bonds, certificates of deposit, loans, leases, and accrued assessments payable, a decrease of $3.1 million from last year, as shown in the table below. More detail about the City's long- term liabilities is presented in Note 8 to the financial statements. CITY OF CARLSBAD'S OUTSTANDING DEBT (in millions of dollars) Governmental Activities Bonds Certificates of participation Loans Obligations under capital leases Installment purchase agreement Accrued assessments Less: Deterred charges Total 2003 $13.2 3.9 0.2 0.2 - S17.5 2004 $12.8 3.4 0.1 - $16.3 Business-Type Activities 2003 $0.0 1.2 1.5 8.4 0.4 (0.7) $10.8 2004 $0.0 1.3 7.9 0.3 (0.6) $8.9 Total 2003 $13.2 5.1 1.7 0.2 8.4 0.4 (0.7) $28.3 2004 $12.8 3.4 1.3 0.1 7.9 0.3 (0.6) $25.2 Total Percentage Change 2003-04 -3.0% -33.3% -23.5% -50.0% -6.0% -25.0% -11.0% Economic Factors and Next Year's Budgets and Rates • The State of California adopted their 2004-05 annual budget with the following provisions affecting the City: > Vehicle License Fee revenue will be reduced by 67%, and offset by an increase in property taxes in the same amount. > The City will be required to make a $1.8 million "contribution" to the State in both this fiscal year and next fiscal year. r- The State is implementing a "Triple Flip" whereby the City's sales tax receipts will be reduced by one- quarter, and this reduction will be made up with property taxes equating to the same amount. > Both the VLF and "Triple Flip" swaps will have no effect on the ultimate amount of revenues the City receives, but it will result in a delay in the timing of the receipt of money by the City. • Total assessed values in the City stand at over $ 16 billion, almost double what they were just six years ago. • A new retail center in the southernmost part of the City opened in November 2003, positively impacting the City's sales tax revenues. • PERS rates for our miscellaneous plan have increased for the 2004-05 fiscal year from 2.258% to 6.938%, and have increased from 9.367% to 27.573% for our safety plan. • Retail natural gas prices have stabilized during the past two years, impacting our future franchise fee revenue. • The Consumer Price Index (CPI) for the western region of the United States for urban households increased by 1.5% during the twelve months ended November 30, 2003. • The total number of housing units in Carlsbad grew by 3.3% in calendar year 2003, impacting our budgeted expenditures for fiscal year 2004-05. • Median home prices have increased by 27% in calendar year 2004 through September 30, 2004. 28 All of these factors were considered in preparing the City of Carlsbad's General fund budget for the 2004-05 fiscal year. Budgeted expenditures are expected to increase 6.6% to $90.5 million. The increase is mainly due to the increase in personnel costs. Personnel costs make up approximately 65% of the General fund budget so any changes in these costs can have a significant effect on the total budget. In addition, just over $13.1 million in unspent 2003- 04 budgeted expenditures will be carried over to the 2004-05 fiscal year, as well as $3.2 million in open encumbrances as of June 30, 2004. During the current fiscal year, unreserved fund balance in the General fund decreased to $43 million. This decrease was the result of reserving $15 million for the upcoming construction of an 18-hole championship golf course. If the City's budget estimates are realized, the City's budgeted unreserved General fund is expected to increase modestly by the close of fiscal year 2005. The City's business-type activities reflect the following: • No anticipated rate structure changes during the next fiscal year. • No projected significant changes in other revenue sources. • Other changes in the Enterprise funds are the result of normal fluctuations in operations. Contacting the City's Financial Management This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to demonstrate the City's accountability for the money it receives. If you have any questions about this report or need additional information, contact the Finance Department, 1635 Faraday Avenue, Carlsbad, CA 92008, (760) 602-2430, or visit us online at www.ci.carlsbad.ca.us. 29 CITY OF CARLSBAD, CALIFORNIA Statement of Net Assets June 30, 2004 Primary Government ASSETS Cash and investments Receivables: Taxes Accounts, net Other Due from other governments Inventories Prepaid items Loans receivable Restricted assets: Cash and investments Accrued interest Internal balances Capital assets: Land Buildings and other structures Improvements other than buildings Machinery and equipment Infrastructure Construction in progress Sewage treatment facility Less accumulated depreciation Total capital assets Total assets Governmental Activities $ 343,933,119 7,165,289 266,845 314,012 3,110,778 117,735 408,838 10,188,243 659,500 15,580 4,097,419 55,152,578 66,853,662 10,873,878 21,209,462 112,905,006 61,768,235 - (30,416,447) 298,346,374 $ 668,623,732 Business-type Activities S 124,552,184 $ 68,803 3,430,721 - 4,386,095 578,721 - - 953,706 21,300 (4,097,419) 8,663,600 2,258,064 5,556,571 1,568,847 138,271,570 48,438,902 37,738,531 (48,582,225) 193,913,860 S 323,807,971 3 Total ; 468,485,303 7,234,092 3,697,566 314,012 7,496,873 696,456 408,838 10,188,243 1,613,206 36,880 - 63,816,178 69,111,726 16,430,449 22,778,309 251,176,576 110,207,137 37,738,531 (78,998,672) 492,260,234 ! 992,431,703 The notes to the financial statements are an'integral part of this statement. 30 CITY OF CARLSBAD, CALIFORNIA Statement of Net Assets (Continued) June 30, 2004 Primary Government LIABILITIES Accrued liabilities Accrued interest payable Due to other governments Estimated claims payable Current portion of long-term debt Deposits payable Current liabilities payable from restricted assets - accrued interest Deferred revenue Noncurrent liabilities: Due in more than one year, net of deferred charges and unamortized issuance costs of $559,305 Total liabilities Governmental Activities S 13,194,045 288,699 388,119 3,607,432 1,069,907 144,749 - 551,099 15,208,600 34,452,650 Business-type Activities S 6,816,084 3 - 3,100,083 - 805,560 466,073 167,483 734,372 8,090,361 20,180,016 Total 5 20,010,129 288,699 3,488,202 3,607,432 1,875,467 610,822 167,483 1,285,471 23,298,961 54,632,666 NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital assets Other purposes Unrestricted Total net assets 282,727,367 140,837,356 54,800,201 155,806,158 S 634,171,082 183,234,445 102,585,081 - 17,808,429 $ 303,627,955 465,961,812 243,422,437 54,800,201 173,614,587 S 937,799,037 The notes to the financial statements are an integral part of this statement. 31 CITY OF CARLSBAD Statement of Activities For the Year Ended June 30, 2004 Program Revenues Functi on s/Programs Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Primary government: Governmental activities: General government Public safety Community development Community services Public works Interest on long-term debt Total governmental activities Business-type activities: Carlsbad Municipal Water District Golf course Sewer Solid waste Total business-type activities Total primary government $ 8,604,212 30,894,018 13,814,331 15,034,661 19,533,596 995,895 88,876,713 20,950,012 53,916 6,890,389 1,300,281 29,194,598 S 118,071,311 $ 570,967 3,698,789 4,203,091 2,102,473 4,532,815 - 15,108,135 18,862,404 - 6,202,700 1,672,526 26,737,630 $ 41,845,765 $ 750,583 247,767 11,079,755 734,499 1,757,012 - 14,569,616 1,391,285 - 60,735 51,923 1,503,943 $ 16,073,559 S 68,497 - 415,217 733,261 40,997,913 - 42,214,888 13,186,002 - 4,190,758 - 17,376,760 S 59,591,648 General revenues: Property taxes Sales and use taxes Transient occupancy taxes Franchise taxes Business license taxes Real property transfer taxes Vehicle license fees Homeowners exemptions Income from property and investments Other general revenues Transfers Total general revenues and transfers Change in net assets Net assets at beginning of year Net assets at end of year The notes to the financial statements are an integral part of this statement. 32 Net Revenue (Expense) and Changes in Net Assets Primary Government Governmental Activities $ (7,214,165) (26,947,462) 1,883,732 (11,464,428) 27,754,144 (995,895) (16,984,074) - - - - (16,984,074) 33,948,761 24,578,301 8,813,426 5,027,425 2,871,715 1,587,201 4,124,672 353,511 3,123,638 283,287 962,741 85,674,678 68,690,604 565,480,478 $634,171,082 Business-type Activities $ - - - - - - 12,489,679 (53,916) 3,563,804 424,168 16,423,735 16,423,735 1,841,928 - - - - - - - 1,192,792 13,926 (962,741) 2,085,905 18,509,640 285,118,315 $ 303,627,955 Total $ (7,214,165) (26,947,462) 1,883,732 (11,464,428) 27,754,144 (995,895) (16,984,074) 12,489,679 (53,916) 3,563,804 424,168 16,423,735 (560,339) 35,790,689 24,578,301 8,813,426 5,027,425 2,871,715 1,587,201 4,124,672 353,511 4,316,430 297,213 - 87,760,583 87,200,244 850,598,793 $ 937,799,037 33 CITY OF CARLSBAD Balance Sheet Governmental Funds June 30, 2004 ASSETS Cash and investments Receivables: Taxes Other Accounts, net Due from other funds Due from other governments Inventories Prepaid items Restricted cash and investments Loans receivable Deposits Advances to other funds Total assets LIABILITIES AND FUND BALANCES Liabilities: Accrued liabilities Due to other funds Deposits payable Due to other governments Advances from other funds Deferred revenue Total liabilities General Fund $ 71,632,522 7,116,026 300,476 95,130 339,296 65,040 15,165 6,600 - 158,844 - 17,896,310 $ 97,625,409 S 3,477,383 - 56,558 2,027 - 10,031,893 13,567,861 Redevelopment Debt Service Funds $ 2,958,826 27,185 397 - - - - - - - - - S 2,986,408 $ - - 237,424 13,218,891 - 13,456,315 Bridge and Thoroughfare Districts $ 7,008,960 - - - - - - - - - - - $ 7,008,960 $ 7,984 - - - 4,483,344 - 4,491,328 Fund balances: Reserved Unreserved: Designated, reported in: General Fund Special Revenue Funds Debt Service Funds Capital Project Funds Undesignated, reported in: General Fund Special Revenue Funds Debt Service Funds Capital Project Funds Total fund balances Total liabilities and fund balances 27,916,775 13,124,942 43,015,831 (10,469,907) 84,057,548 (10,469,907) 115,492 2,402,140 2,517,632 $ 97,625,409 S 2,986,408 $ 7,008,960 The notes to the financial statements are an integral part of this statement. 34 Community General Public Other Facilities Capital Facilities Governmental District No. 1 Construction Construction Funds $ 38,215,658 $ 48,402,891 $ 37,202,142 $119,138,842 2,287 - - 19,791 12,184 171,715 - 3,045,738 - 402,238 675,080 10,029,399 4,060,854 - 3,643,344 $ 38,217,945 $ 52,463,745 $ 37,202,142 $137,138,331 Total Governmental Funds $ 324,559,841 7,165,289 313,057 266,845 339,296 3,110,778 15,165 408,838 675,080 10,188,243 25,600,508 $ 372,642,940 $ 75,442 $ 251,879 $ 539,729 $ 5,878,817 339,296 88,191 148,668 3,800,854 137,957 - 148,185 75,442 389,836 539,729 10,404,011 70,170 5,780,140 9,494,089 38,954,422 4,738,227 21,260 38,072,333 3,303,970 27,168,324 43,077,373 _ 25,102,548 660,060 42,989,799 - 14,180,430 38,142,503 52,073,909 36,662,413 126,734,320 $ 38,217,945 S 52,463,745 S 37,202,142 $137,138,331 $ 10,231,234 339,296 144,749 388,119 21,503,089 10,318,035 42,924,522 82,331,088 13,124,942 4,738,227 21,260 114,024,140 43,015,831 25,102,548 (9,809,847) 57,170,229 329,718,418 $ 372,642,940 35 CITY OF CARLSBAD Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2004 Total fund balances - governmental funds. S 329,718,418 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental funds 292,711,353 Internal service funds 5,635,021 Total capital assets 298,346,374 Internal service funds are used by management to charge the costs of fleet management, self insured benefits, information technologies, records management, risk management and workers' compensation to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. Total internal service fund net assets 18,538,269 Internal service fund net assets included as part of total capital assets (5,635,021) Internal service fund net assets included as part of long-term liabilities 3,312 Internal service fund net assets less capital assets 12,906,560 Accrued interest is not due and payable in the current period and, therefore, is not reported in the funds. (288,699) Interest receivable on advances to other funds is not a current financial resource and, therefore, is not recognized as revenue in the funds until received. 9,096,806 A portion of the taxes receivable are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 670,130 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. Governmental funds (16,275,195) Internal service funds (3,312) Total long-term liabilities (16,278,507) Net assets of governmental activities. $ 634,171,082 The notes to the financial statements are an integral part of this statement. 36 37 CITY OF CARLSBAD Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2004 Redevelopment Bridge and Revenues: Taxes Intergovernmental Licenses and permits Charges for services Fines and forfeitures Income from property and investments Interdepartmental charges Contributions from property owners Donations Miscellaneous Total revenues Expenditures: Current: General government Public safety Community development Community services Public works Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits) at beginning of year Fund balances (deficits) at end of year General Fund $ 70,831,211 5,717,861 2,328,524 7,583,932 936,406 1,476,749 2,604,355 - - 1,479,370 92,958,408 8,718,703 30,478,373 6,564,344 13,705,769 15,821,803 - 85,136 9,881 75,384,009 17,574,399 314,266 (4,968,000) (4,653,734) 12,920,665 71,136,883 $ 84,057,548 Debt Service Funds S 2,446,830 - - - - 30,597 - - - - 2,477,427 27,421 - - - - - 360,000 1,280,059 1,667,480 809,947 - (240,000) (240,000) 569,947 (11,039,854) S (10,469,907) Thoroughfare Districts S - - - - 107,266 - 1,722,370 - 6,107 1,835,743 - - - - - 2,568,645 - - 2,568,645 (732,902) 215,280 (1,863) 213,417 (519,485) 3,037,117 S 2,517,632 The notes to the financial statements are an integral part of this statement. 38 Community Facilities District No. 1 $ 3,870,611 344,717 506,953 4,722,281 81,742 88,938 170,680 4,551,601 1,863 (215,280) (213,417) 4,338,184 33,804,319 $ 38,142,503 General Capital Construction $ 430,928 92,000 522,928 1,132,345 1,132,345 (609,417) 36,000 (827,554) (791,554) (1,400,971) 53,474,880 $ 52,073,909 Public Facilities Construction $ 311,237 4,879,103 2,002 5,192,342 2,885,404 2,885,404 2,306,938 32,000 32,000 2,338,938 34,323,475 $ 36,662,413 Other Governmental Funds $ 2,384,389 16,788,108 2,315,251 155,974 1,199,921 130,130 16,481,922 141,399 55,876 39,652,970 917,153 320,413 7,079,957 209,228 2,222,981 19,730,282 768,842 176,627 31,425,483 8,227,487 8,129,950 (2,076,921) 6,053,029 14,280,516 112,453,804 $ 126,734,320 Total Governmental Funds S 79,533,041 22,505,969 2,328,524 9,899,183 1,092,380 3,901,415 2,734,485 23,682,348 141,399 1,543,355 147,362,099 9,745,019 30,798,786 13,644,301 13,914,997 18,044,784 26,405,614 1,213,978 1,466,567 115,234,046 32,128,053 8,729,359 (8,329,618) 399,741 32,527,794 297,190,624 S 329,718,418 39 CITY OF CARLSBAD Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2004 Net change in fund balances - total governmental funds. $ 32,527,794 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Purchase of capital assets 26,094,574 Depreciation expense (4,364,946) Governmental funds do not reflect the donation of capital assets as revenues. 12,478,499 Governmental funds report the entire proceeds from the sale of capital assets as revenue. However, in the statement of activities, the net gain or loss from the sale of capital assets is reported. (1,822) The repayment of the principal of long-term debt consumes the current financial resources of governmental funds but has no effect on net assets. 1,213,927 Some expenses reported in the statement of activities do not require the use of current financial resources, and therefore are not reported as expenditures in governmental funds. 22,730 Unpaid interest income on advances to other funds is not a current financial resource, and therefore is not recognized as revenue in the funds. 190,535 A portion of sales and use taxes is not available to pay for current-period expenditures and, therefore, is deferred in the funds. (242,308) The net revenue of certain activities of internal service funds is reported with governmental activities. 771,621 The notes to the financial statements are an integral part of this statement. 40 Change in net assets of governmental activities. $ 68,690,604 41 CITY OF CARLSBAD Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund For the Year Ended June 30, 2004 Revenues: Taxes Intergovernmental Licenses and permits Charges for services Fines and forfeitures Income from property and investments Interdepartmental charges Miscellaneous Total revenues Expenditures: Current: General government Public safety Community development Community services Public works Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balance at beginning of year Fund balance at end of year Budgeted Original $ 68,460,000 6,480,000 1,430,000 6,240,000 930,000 3,950,000 2,700,000 700,000 90,890,000 15,550,503 32,354,345 9,542,008 17,903,239 19,008,413 85,136 9,881 94,453,525 (3,563,525) - (6,231,800) (6,231,800) (9,795,325) 71,136,883 $ 61,341,558 Amounts Final $ 68,706,400 6,786,618 1,430,000 6,245,200 930,000 3,950,000 2,700,000 1,441,598 92,189,816 15,626,213 34,202,812 10,390,262 18,215,074 19,566,572 85,136 9,881 98,095,950 (5,906,134) 314,266 (6,231,800) (5,917,534) (11,823,668) 71,136,883 $ 59,313,215 Actual Amounts (Budgetary Basis) $ 70,831,211 5,717,861 2,328,524 7,583,932 936,406 2,816,383 2,604,355 1,479,370 94,298,042 9,348,423 30,867,419 7,439,940 13,965,927 16,878,522 85,136 9,881 78,595,248 15,702,794 314,266 (4,968,000) (4,653,734) 11,049,060 71,136,883 $ 82,185,943 Variance With Final Budget - Over (Under) $ 2,124,811 (1,068,757) 898,524 1,338,732 6,406 (1,133,617) (95,645) 37,772 2,108,226 (6,277,790) (3,335,393) (2,950,322) (4,249,147) (2,688,050) - - (19,500,702) 21,608,928 - 1,263,800 1,263,800 22,872,728 - $ 22,872,728 The notes to the financial statements are an integral part of this statement. 42 CITY OF CARLSBAD Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund (Continued) For the Year Ended June 30, 2004 BUDGET-TO-GAAP RECONCILIATION Actual Amounts (Budgetary Basis) Revenues Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison schedule (previous page). $ 94,298,042 The recording of unrealized gains and losses on the City's investments are shown for financial reporting purposes (pursuant to GASB 31), but are not shown for budgetary purposes. (1,339,634) $ 92,958,408 Expenditures Actual amounts (budgetary basis) "total charges to appropriations" from the budgetary comparison schedule (previous page). $ 78,595,248 Differences - budget to GAAP: Encumbrances are shown in the year encumbered for budgetary purposes, but in the year paid for financial reporting purposes. (3,211,239) $ 75,384,009 The notes to the financial statements are an integral part of this statement. 43 CITY OF CARLSBAD Statement of Net Assets Proprietary Funds June 30, 2004 Business-type Activities - ASSETS Carlsbad Municipal Water District Golf Course Sewer Current assets: Cash and investments Receivables: Taxes Accounts, net Due from other governments Inventories Total current assets Noncurrent assets: Restricted assets: Cash and investments Accrued interest Total restricted assets Capital assets: Land Buildings and other structures Improvements other than buildings Machinery and equipment Infrastructure Construction in progress Sewage treatment facility Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrent assets Total assets $ 50,849,981 $ 2,095,546 $ 66,079,465 35,443 2,169,501 4,386,095 571,317 58,012,337 2,095,546 678,761 7,404 66,765,630 - - 953,706 21,300 975,006 1,909,565 2,258,064 2,185,604 994,958 95,577,434 26,277,920 - (24,030,740) 105,172,805 105,172,805 $ 163,185,142 $ 5,075,228 1,678,807 - 3,370,967 573,889 42,694,136 4,057,062 18,103,920 37,738,531 (24,551,485) 9,132,290 79,608,765 9,132,290 80,583,771 1 11,227,836 $ 147,349,401 The notes to the financial statements are an integral part of this statement. 44 Enterprise Funds Solid Waste Totals Governmental Activities - Internal Service Funds 5,527,192 $ 124,552,184 $ 19,373,278 33,360 582,459 68,803 3,430,721 4,386,095 578,721 955 102,570 6,143,01:133,016,524 19,476,803 953,706 21,300 - - 975,006 8,663,600 2,258,064 5,556,571 1,568,847 138,271,570 48,438,902 37,738,531 (48,582,225) 193,913,860 194,888,866 S 6,143,011 $ 327,905,390 : - - 14,502,256 - - - (8,867,235) 5,635,021 5,635,021 $ 25,111,824 (Continued) 45 CITY OF CARLSBAD Statement of Net Assets Proprietary Funds (Continued) June 30, 2004 Current liabilities payable from restricted assets: Accrued interest Noncurrent liabilities: Advance from other funds Deferred revenue Loan payable Installment purchase agreement, net of deferred charges of $559,305 Accrued assessments Total noncurrent liabilities Total liabilities NET ASSETS 1,222,598 1,222,598 8,626,317 Business-type Activities - LIABILITIES Current liabilities: Accrued liabilities Due to other governments Estimated claims payable Current portion of long-term debt Deposits payable Total current liabilities Carlsbad Municipal Water District $ 4,031,571 3,100,083 - 120,575 151,490 7,403,719 Golf Course $ 300,659 ! - - 196,925 - 497,584 Sewer $ 2,169,026 - - 488,060 314,583 2,971,669 2,737,200 60,128 2,797,328 3,294,912 167,483 734,372 6,807,635 7,542,007 10,681,159 Invested in capital assets, net of related debt Restricted for: Capital assets Unrestricted Total net assets 103,829,632 44,051,275 6,677,918 $ 154,558,825 ! 6,138,037 - 1,794,887 5 7,932,924 73,266,776 58,533,806 4,867,660 $ 136,668,242 The notes to the financial statements are an integral part of this statement. 46 Enterprise Funds Solid Waste $ 314,828 - - - - 314,828 Total Proprietary Funds S 6,816,084 3,100,083 - 805,560 466,073 11,187,800 Governmental Activities - Internal Service Funds $ 2,962,811 - 3,607,432 3,312 - 6,573,555 167,483 1,360,219 - - _ - 1,360,219 1 ,675,047 4,097,419 734,372 1,222,598 6,807,635 60,128 12,922,152 24,277,435 - - _ - - 6,573,555 - _ 4,467,964 S 4,467,964 183,234,445 102,585,081 17,808,429 $ 303,627,955 5,631,709 _ 12,906,560 S 18,538,269 47 CITY OF CARLSBAD Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds For the Year Ended June 30, 2004 Business-type Activities - Operating revenues: Water sales Sewer service charges Other charges for services Contributions from other government agencies Miscellaneous Total operating revenues Operating expenses: Sewer plant operations Purchased water Depreciation Fuel and supplies Claims expense General and administrative Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Income from property and investments Interest expense and fees Gain on sale of property Property taxes Amortization of issuance costs Total nonoperating revenues Income (loss) before transfers and capital contributions Transfers in Transfers out Capital contributions Change in net assets Total net assets at beginning of year Total net assets at end of year Carlsbad Municipal Water District $ 18,219,940 ! - 642,464 1,391,285 2,643 20,256,332 - 10,918,694 1,742,820 - - 8,170,267 20,831,781 (575,449) 533,453 (115,520) 8,317 1,841,928 (2,711) 2,265,467 1,690,018 - (1,698,512) 13,186,002 13,177,508 141,381,317 $ 154,558,825 ! Golf Course Sewer 5 - $ 6,119,301 83,399 60,735 2,654 6,266,089 2,376,801 - 1,606,032 - - 53,916 2,473,286 53,916 6,456,119 (53,916) (190,030) 16,326 587,912 (434,270) - - - 16,326 153,642 (37,590) (36,388) 1,698,512 - 4,190,758 (37,590) 5,852,882 7,970,514 130,815,360 5 7,932,924 $ 136,668,242 The notes to the financial statements are an integral part of this statement. 48 Enterprise Funds Solid Waste $ 1,672,526 51,923 312 1,724,761 1,300,281 1,300,281 424,480 55,101 55,101 479,581 (962,741) (483,160) 4,951,124 $ 4,467,964 Totals $ 18,219,940 6,119,301 2,398,389 1,503,943 5,609 28,247,182 2,376,801 10,918,694 3,348,852 11,997,750 28,642,097 (394,915) 1,192,792 (549,790) 8,317 1,841,928 (2,711) 2,490,536 2,095,621 1,698,512 (2,661,253) 17,376,760 18,509,640 285,118,315 $ 303,627,955 Governmental Activities - Internal Service Funds S 14,671,295 162,507 14,833,802 1,684,148 533,304 3,832,488 8,871,427 14,921,367 (87,565) 122,112 61,623 183,735 96,170 620,769 (57,769) 112,451 771,621 17,766,648 $ 18,538,269 49 CITY OF CARLSBAD Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2004 Business-type Activities - Cash flows from operating activities: Receipts from customers and users Payments to suppliers Payments to employees Internal activity - payments to other funds Claims paid Other receipts Increase in deposits payable Net cash provided by operating activities Cash flows from noncapital financing activities: Operating subsidies and transfers to other funds Cash flows from capital and related financing activities: Capital contributions Purchases of capital assets Principal paid on capital debt Interest and other fees paid Property taxes received Net cash (used in) capital and related financing activities Cash flows from investing activities: Interest on investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Carlsbad Municipal Water District $ 18,650,399 $ (14,452,894) (2,419,023) (2,088,052) - 1,393,928 22,631 1,106,989 (1,698,512) 6,189,880 (9,400,090) (545,345) (107,569) 1,831,821 (2,031,303) 533,453 (2,089,373) 52,939,354 $ 50,849,981 S Golf Course Sewer $ 6,266,845 (31,180) (2,089,033) (844,985) (960,775) - 270,647 122,141 - 239,467 2,494,193 1,698,512 1,624,293 (394,043) (3,511,760) (186,060) (520,000) (370,754) - (580,103) (2,778,221) 16,326 587,912 (324,310) 2,002,396 2,419,856 64,090,769 1 2,095,546 $ 66,093,165 The notes to the financial statements are an integral part of this statement. 50 Enterprise Funds Solid Waste $ 1,371,995 (522,833) (634,821) (190,309) 51,923 75,955 283,800 - 55,101 414,856 5,112,336 $ 5,527,192 Totals $ 26,289,239 (17,095,940) (3,898,829) (3,239,136) 1,838,639 22,631 3,916,604 283,800 7,814,173 (13,305,893) (1,251,405) (478,323) 1,831,821 (5,389,627) 1,192,792 3,569 124,562,315 $ 124,565,884 Governmental Activities - Internal Service Funds $ 15,078,701 (3,464,816) (2,931,813) (1,097,757) (3,222,619) 194,663 4,556,359 547,482 (587,138) (6,217) (593,355) 122,112 4,632,598 14,740,680 $ 19,373,278 (Continued) 51 CITY OF CARLSBAD Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2004 Business-type Activities - Carlsbad Municipal Water District Golf Course Sewer Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization Change in assets and liabilities: (Increase) decrease in receivables (Increase) in inventories Decrease in prepaid items (Decrease) increase in accrued liabilities Increase in due to other governments Increase in estimated claims payable Increase in deposits payable Net cash provided by operating activities Noncash capital financing activities: Capital assets contributed by other sources Reconciliation of cash and cash equivalents to amounts reported on the balance sheet: Reported on the balance sheet: Cash and investments Restricted assets: Cash and investments Less investments not meeting the definition of cash equivalents: Investment contracts Cash and cash equivalents at end of year $ (575,449) 1,742,819 3,733,367 (53,916) $(190,030) 1,606,032 (212,005) (53,299) 7,212 (624,958) 800,038 22,631 $ 1,106,989 $ 64,145 (118) - 293,383 955,412 - 58,752 239,467 S 2,494,193 $ 2,074,502 $ 50,849,981 $ 2,095,546 $ 66,079,465 953,706 (940,006) S 50,849,981 $ 2,095,546 $ 66,093,165 The notes to the financial statements are an integral part of this statement. 52 Enterprise Funds Solid Waste Governmental Activities - Internal Totals Service Funds 424,480 (394,915) $(87,565) 3,348,851 1,684,146 (300,843) - - (47,682) - - - $ 75,955 S $ - S (448,703) (53,417) 7,212 576,155 800,038 - 81,383 ; 3,916,604 S ! 5,807,869 5 31,403 (6,015) 132,280 2,210,521 - 591,589 - ) 4,556,359 ; 112,451 5,527,192 $124,552,184 953,706 $ 19,373,278 (940,006) $ 5,527,192 $ 124,565,884 S 19,373,278 53 CITY OF CARLSBAD Statement of Fiduciary Assets and Liabilities Agency Funds June 30, 2004 ASSETS Current assets: Cash and investments $ 17,495,367 Other receivables 40,135 Total current assets 17,535,502 Restricted assets: Cash and investments 4,760,326 Accrued interest 79,916 Total restricted assets 4,840,242 Total assets S 22,375,744 LIABILITIES Accrued liabilities $ 396,737 Deposits held for others 21,979,007 Total liabilities S 22,375,744 The notes to the financial statements are an integral part of this statement. 54 CITY OF CARLSBAD Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies The City of Carlsbad, California, (City) was incorporated on July 16, 1952. The City operates under a Council-Manager form of government and provides the following services: general government, public safety, community development, community services and public works. The accounting policies of the City and its component units conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The following is a summary of the more significant policies: Description and scope of the reporting entity As required by accounting principles generally accepted in the United States of America, these financial statements present the financial position of the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent upon the City (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City's financial statements to be misleading or incomplete. Based upon the above criteria, the component units of the City are the Housing Authority of the City of Carlsbad, the City of Carlsbad Public Improvement Corporation, the Carlsbad Redevelopment Agency and the Carlsbad Municipal Water District (District). Since the City Council serves as the governing board for these component units, all of the City's component units are considered to be blended component units. Blended component units, although legally separate entities, are in substance part of the City's operations, and so data from these units is reported with the interfund data of the primary government. Only the City of Carlsbad Public Improvement Corporation and the Carlsbad Redevelopment Agency issue separate component unit financial statements. Upon their completion, the financial statements of these component units can be obtained from the Finance department. Government-wide and Fund Financial Statements The Government-wide Financial Statements (i.e., the Statement of Net Assets and the Statement of Changes in Net Assets) report information on all of the nonfiduciary activities of the City and its blended component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on user fees and charges for support. 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 to a specific function or segment. 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 restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly classified as program revenues are reported 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 in separate columns in the Fund Financial Statements. 55 CITY OF CARLSBAD Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) Measurement focus, basis of accounting, and financial statement presentation The Government-wide Financial Statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund and Fiduciary Fund Financial Statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the individual programs are used as guidance. Property taxes are recognized as revenues in the year for which they are levied. 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 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 considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. Principal and interest on long-term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Revenues that are accrued generally include real property taxes, sales tax, transient occupancy taxes, franchise taxes, vehicle license fees, highway users tax, interest, and some state and federal grants. Real property taxes are levied on October 15 against property owners of record on January 1 of that year. The taxes are due in two installments, on November! and February], and become delinquent after December 10 and April 10, respectively. Tax liens attach annually as of 12:01 a.m. on the first day of January in the fiscal year for which the taxes are levied. Under the provisions of NCGA Interpretation 3, property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided it is collected within 60 days of the end of the fiscal year. Fiduciary fund types are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Fiduciary fund assets and liabilities are accounted for on the accrual basis of accounting. The City reports the following major governmental funds: The General fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Redevelopment Debt Service Funds are used to account for the accumulation of resources for, and payment of, principal and interest on the Carlsbad Redevelopment Agency's bonds and other debt, used to finance improvements for the redevelopment areas of the City. The Bridge and Thoroughfare Districts capital project funds are used to account for the receipt of fees charged to developers and expenditures for streets within designated district boundaries. The Community Facilities District No. 1 capital project fund is used to account for civic facilities, freeway interchanges, and road segments financed by Community Facilities District No. 1 "special tax revenues" (Mello Roos). The General Capital Construction capital project fund is used to account for transfers from the General fund and expenditures for various capital projects not financed through another capital project fund. The Public Facilities Construction capital project fund is used to account for the receipt of fees charged to developers, and expenditures for specific public facilities such as libraries and fire stations necessitated by growth. 56 CITY OF CARLSBAD Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) Measurement focus, basis of accounting, and financial statement presentation (continued) The City reports the following major enterprise funds: The Carlsbad Municipal Water District enterprise fund is used to account for the operation, maintenance, and capital facility financing of the City's water system. The Golf Course enterprise fund is used to account for revenues and expenses for the construction activities of the City's proposed municipal golf course. The Sewer enterprise fund is used to account for the operation, maintenance, and capital facility financing of the City's sewer system. The Solid Waste enterprise fund is used to account for the revenues and expenses of the City's solid waste source- reduction, recycling and storm water programs. Additionally, the City reports the following fund types: Internal Service funds account for fleet management, self insured benefits, information technology, records management, risk management and workers' compensation services provided to other departments or agencies of the City. The Fiduciary funds account for assets held by the City for other funds, governments or individuals. These funds include contractors' deposits for future development, miscellaneous deposits, as well as debt service transactions on assessment district bonds for which the City is not obligated. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the Government-wide and Proprietary Fund Financial Statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected to follow the standards set by the GASB as opposed to subsequently issued private-sector guidance. As a general rule, the effect of interfund activity has been eliminated from the Government-wide Financial Statements. Exceptions to this general rule are payments of special taxes (CFD #1) by the golf course and charges between the Carlsbad Municipal Water District and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources, such as taxes, are reported as general revenues rather than as program revenues. Proprietary funds distinguish operating revenues and expenses from nonoperating 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 City's proprietary funds are charges to customers for sales and services. The City also recognizes new account charges, late fees and contributions from other agencies as operating revenues. Operating expenses for enterprise and internal service funds include the cost of sales and services, general and administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. 57 CITY OF CARLSBAD Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) Cash and investments Cash includes amounts in demand and time deposits. Investments are reported in the accompanying balance sheet at fair value, except for certain certificates of deposit and investment contracts that are reported at cost because they are not transferable and they have terms that are not affected by changes in market interest rates. Changes in fair value that occur during a fiscal year are recognized as income from property and investments reported for that fiscal year. Income from property and investments includes interest earnings; changes in fair value; any gains or losses realized upon the liquidation, maturity, or sale of investments; property rentals and the sale of City owned property. The City pools cash and investments of all funds, except for assets held by fiscal agents. Each fund's share in this pool is displayed in the accompanying financial statements as cash and investments. Investment income earned by the pooled investments is allocated to the various funds on a monthly basis, based on each fund's average cash and investments balance. Restricted cash and investments represent amounts that are restricted under the terms of debt agreements. Inventories Inventories consist of materials and supplies that are valued at cost and are recorded as expenses or expenditures on a first- in, first-out basis when consumed. Compensated absences Compensated absences are comprised of vacation payable for all City employees and vested sick benefits for certain former District employees. Vacation pay is payable to employees at the time used or upon termination of employment. For governmental funds, the cost of accumulated vacation expected to be paid in the next 12 months is recorded as a liability in the Self Insured Benefits Special Revenue fund. For compensated absences recorded at June 30, 2004, all balances are expected to be paid within the following 12 months. For proprietary funds, the cost of vacation is recorded as a liability when earned. Risk management The City accounts for its general liability, a portion of its health insurance, and workers' compensation activities in internal service funds. The funds are responsible for collecting premiums from other City funds and departments and paying claims settlements and insurance premiums. Interfund premiums are based on the insured fund's claims experience. Incurred but not reported claims are accrued at year-end, if material. Unbilled services Unbilled water revenue of the enterprise funds is recognized as earned when the water is consumed. Capital assets Capital assets, which include land, buildings, equipment and infrastructure assets (e.g., roads, bridges, traffic signals, water and sewer systems, and similar items), are reported in the applicable governmental or business-type activities columns in the Government-wide Financial Statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of an asset or materially extend an asset's useful life are not capitalized. Construction in progress costs are transferred to their respective fixed asset category upon completion. 58 CITY OF CARLSBAD Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) Depreciation is charged to operations using the straight-line method based on the estimated useful life of an asset. The estimated useful lives of depreciable assets are as follows: Years Buildings and other structures 10-50 Improvements other than buildings 20 - 50 Machinery and equipment 3-20 Infrastructure 10 - 100 Sewage treatment facility 50 The City capitalized all general infrastructure assets acquired during the three years ended June 30, 2004. No infrastructure assets acquired prior to that time have been capitalized. In addition the land upon which the streets and roads are constructed (right-of-way) has not been valued and capitalized. It will be addressed when the remaining infrastructure assets are capitalized and placed on the City's books. According to GASB 34, the City has until June 30, 2006 to record its general infrastructure assets. Deferred revenue The deferred revenue reported in the City's financial statements represents money received during the current or previous fiscal years that has not been earned by, or is not available to, the City as of the end of the fiscal year. These monies will be recognized as revenues in subsequent fiscal years, once the revenue has been earned or becomes 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 either "due to/from other funds" (short-term interfund loans) or "advances to/from other funds" (long- term interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the Government-wide Financial Statements as "internal balances." Advances between funds, as reported in the Fund Financial Statements, are offset by a fund balance reserve account in the applicable governmental fund to indicate that they are not available for appropriation and are not expendable available financial resources. All trade, service and tax receivables are shown net of an allowance for uncollectibles. The utility billing receivable allowance is equal to 1% of outstanding billings at June 30, 2004, the ambulance billing receivable allowance is equal to 40% of outstanding billings at June 30, 2004, and the trade receivable allowance is equal to the total of all outstanding receivables that are over 90 days past due. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve thar portion of the appicable appropriation, is employed as an extension of formal budgetary integration in the governmental funds. Unexpended and unencumbered appropriations of the governmental funds automatically lapse at the end of the fiscal year. Encumbrances at year end are a portion of the reserved fund balance and are reappropriated the following year. Net Assets Net assets represent the differences between assets and liabilities. Net assets invested in capital assets, net of related debt, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings, used for the acquisition, construction or improvement of those assets. Net assets invested in capital assets, net of related debt, excludes unspent debt proceeds. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Restricted resources are used first to fund appropriations. The City first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. 59 CITY OF CARLSBAD Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) Cash flows Statements of cash flows are presented for proprietary fund types. Cash and cash equivalents include all unrestricted and restricted highly liquid investments with original purchase maturities of three months or less. Pooled cash and investments in the City's Treasury represent monies in a cash management pool and such accounts are similar in nature to demand deposits. Long-term obligations In the Government-wide Financial Statements, and proprietary fund types 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 fund type Statement of Net Assets. Bond premiums, discounts, and issuance costs are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the Fund Financial Statements, governmental fund types recognize bond premiums, discounts, and issuance costs during the current period. 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. Fund equity In the Fund Financial Statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans, and are subject to change. Pronouncements issued, not yet effective The GASB has issued several pronouncements that have effective dates that may impact future financial presentations. Management has not currently determined what, if any, impact implementation of the following statements may have on the financial statements of the City. • GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and Insurance Recoveries. » GASB Statement No. 44, Economic Condition Reporting: The Statistical Section. • GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. Note 2. Budgetary Data The City follows these procedures in establishing its budgetary data: * During May or June, the City Manager submits to the City Council a proposed operating and capital budget for the fiscal year commencing the following July 1. The budget includes estimated revenues and proposed expenditures on a departmental and/or project basis. * Public hearings are conducted at City Council meetings to obtain citizens' comments during June. » Prior to July 1, the budget is enacted legally through passage of an appropriation resolution. 60 CITY OF CARLSBAD Notes to the Financial Statements Note 2. Budgetary Data (Continued) The City Manager is authorized to make transfers of appropriated amounts from one department to another within a fund. The legal level of budgetary control is at the fund level. Revisions that alter the total appropriations of any fund must be approved by the City Council with the exception of budget adjustments that involve offsetting revenues and expenditures. The City Manager is authorized to increase or decrease an appropriation for a specific purpose where the appropriation is offset by unbudgeted revenue, which is designated for said specific purpose. Monthly reports are provided to the City Council during the year, and any changes to the adopted budget are approved by the City Council as necessary. During the year, several supplementary appropriations were necessary. Budgets for governmental type funds are adopted on the modified accrual basis except that encumbrances are treated as budgeted expenditures in the year purchases are committed. Expenditures may not exceed budgeted appropriations at the fund level. All appropriations lapse at fiscal year-end unless City Council takes action in the form of a resolution to continue the appropriation into the following fiscal year. For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses pursuant to GASB 31, actual expenditures have been adjusted to include encumbrances outstanding, and transfers out have been adjusted to reflect any transfer that was approved through the budget process as an expenditure but recorded as an advance in the financial statements. Annual budgets are adopted for the General, special revenue funds except for the Tyler Court Apartments fund, and debt service funds except for the Hosp Grove COPs. Accordingly, the revenues and expenditures for these two funds have been excluded from the budget basis financial statements. Annual operating budgets are not adopted for the capital projects funds; therefore, budget basis financial statements have not been prepared because a comparison of such budgetary amounts to annual revenues and expenditures is not meaningful. Note 3. Deposit and Investment Risk Cash resources of the individual funds are combined to form a pool of cash and investments. The City maintains a formal investment policy, which is reviewed by the Investment Committee and adopted annually by the City Council. All investments held in the Treasurer's Pool are consistent with the City's investment policy objectives of safety of principal, adequacy of liquidity, and achievement of an average market rate of return. The risk disclosures below apply to the City's internal investment pool. Portfolio investments are exposed to four types of risk: custodial (investments and cash deposits); default; concentration; and market or interest rate risk. Investments held outside the Treasurer's Pool consist mainly of required reserve funds for various bond issues. They are held by trustees, and are not available for the City's general expenditures. 61 CITY OF CARLSBAD Notes to the Financial Statements Note 3. Deposit and Investment Risk (Continued) As of June 30, 2004 the City had the following investments in its portfolio: Treasurer's Pool investments U.S. agencies: Federal Home Loan Mortgage Corporation Federal Home Loan Bank Federal National Mortgage Association Federal Farm Credit Bank Subtotal U.S. agencies Medium-term corporate notes LAIF Cash accounts Total Treasurer's Pool Investments held outside the Treasurer's Pool Debt Service Funds/bond proceeds Other deposits Petty cash funds Total cash and investments Statement of Net Assets, Primary Government Cash and investments Restricted cash and investments Statement of Net Assets, Fiduciary Funds Cash and investments Restricted cash and investments Total cash and investments Fair Market Value 147,341,598 78,755,837 35,099,925 3,007,083 264,204,443 97,989,309 109,885,607 2,622,282 474,701,641 17,318,615 327,883 6,063 492,354,202 $ 468,485,303 1,613,206 17,495,367 4,760,326 S 492,354,202 %of Total Modified Duration 31.0% 16.6% 7.4% 0.6% 55.7% 20.6% 23.1% 0.6% 100.0% 3.383 2.998 2.591 1.645 3.144 1.501 2.055 Custodial credit risk (investments) The City uses Union Bank of California (UBC) as a third-party custody and safekeeping service for its investment securities. Custodial credit risk is the risk that the City will not be able to recover the value of its investments in the event of a UBC failure. All City investments held in custody and safekeeping by UBC are held in the name of the City and are segregated from securities owned by the bank. This is the lowest level of custodial credit risk exposure. Custodial credit risk (deposits) The City maintains cash accounts at Wells Fargo Bank (WFB) and UBC. At the conclusion of each business day, balances in these accounts are "swept" into overnight investments, which are in either U.S. government securities (guaranteed) or in U.S. agency securities (government sponsored). The California Code and the City's Investment Policy authorize both of these types of investments. A small amount of cash is not swept from the WFB checking accounts to cover checks that may be presented for payment. Amounts up to $100,000 are FDIC insured. 62 CITY OF CARLSBAD Notes to the Financial Statements Note 3. Deposit and Investment Risk (Continued) Concentration credit risk Concentration credit risk is the heightened risk of potential loss when investments are concentrated in one issuer. The California state code requires that total investments in medium-term corporate notes of all issuers not exceed 30% of the portfolio. As of June 30, 2004, approximately 25% of the City's total portfolio investments, based on cost, were in medium-term corporate notes. For concentration of investments in any one issuer, the City's Investment Policy requires that no more than 5% of investments in corporate notes be in any one issuer. There is no similar requirement in either the state code or the City's Investment Policy for U.S. agencies. As of June 30, 2004, the portfolio was in compliance with this requirement. Default credit risk Default credit risk is the risk that the issuer of the security does not pay either the interest or the principal when due. The debts of most U.S. agencies are not backed by the full faith and credit of the federal government; however, because the agencies are U.S. Government-sponsored, they carry AAA credit ratings. The default credit risk of these investments is minimal. California state code limits investments in medium-term corporate notes to the top three credit ratings (AAA, AA, and A). It is the City's policy, however, to limit investments to the top two credit ratings (AAA and AA). As of June 30, 2004, approximately 49% of the investments in medium-term corporate notes did not have one of these two credit ratings, however, these investments had credit ratings of at least an A rating. All of these investments were made when the credit ratings were either AAA or AA. California state code and the City's Investment Policy allow the City Treasurer to determine the course of action to correct exceptions to the Policy. It is the intent of the City Treasurer to hold these investments in the portfolio until maturity unless events indicate they should be sold. The default credit risk for corporate notes with a credit rating of single A is lower than U.S. federal agencies or LAIF, but is considered by the City Treasurer to be within acceptable limits for purposes of holding to maturity. A credit rating of single A is within State code requirements. The Local Agency Investment Fund (LAIF) is an investment pool managed by the California State Treasurer. Its investments are short-term and follow the investment requirements of the State. As of June 30, 2004, the average maturity of the LAIF investments was 196 days. LAIF is not rated; however, the City Treasurer considers the default credit risk of LAIF to be minimal. Interest rate risk Interest rate risk is the risk that investments will lose market value because of increases in market interest rates. A rise in market interest rates will cause the market value of investments made earlier at lower interest rates to lose value. The reverse will cause a gain in market value. As of June 30, 2004, the portfolio had a 0.2% loss in market value. The City's investment policy has adopted two means of limiting its exposure to market value losses caused by rising market interest rates: (1) limiting total portfolio investments to a maximum modified duration of 2.2, and (2) requiring maturing investments within one year be equal to an amount that is not less than the current fiscal year's operating budget. The City met those requirements as follows: 1. As of June 30, 2004, the modified duration of the portfolio was 2.055. Modified duration is a measure of the sensitivity that the value of a fixed-income security has to changes in market rates of interest. Modified duration identifies the potential gain/loss in value before the gain/loss actually occurs. It is a prospective measurement, e.g., a modified duration of 1.5 indicates that when and if a 1% change in market interest rates occurs, a 1.5% change in the value of a security will result. Investments with modified durations of one to three are considered to be relatively conservative. 2. As of June 30, 2004, maturities within one year exceeded the required minimum of $143,000,000 (total operating budget for the City per the 2003-04 Operating Budget adopted by the City Council). 63 CITY OF CARLSBAD Notes to the Financial Statements Note 4. Due to and from Other Funds The following table shows amounts due from funds within the City to other funds within the City at June 30, 2004: Due to Due from Other Funds Other Funds General $ - $ 339,296 Special Revenue Funds: Section 8 Housing Authority 153,000 Capital Project Funds: Federal Grants - Intermodal Surface Transportation Efficiency Act 174,742 Other Capital Project Funds 11,554 - Totals $ 339,296 S 339,296 These balances resulted from expenditures being incurred prior to receipt of the related revenue source. Note 5. Advances to and from Other Funds The following table shows amounts advanced from governmental funds within the City to other funds within the City at June 30, 2004: Advances From General Fund General Fund General Fund General Fund Special Revenue Funds: Gas Tax Capital Projects Funds: General Capital Construction Advances To Redevelopment Debt Service Funds Park Development Capital Projects Fund Special Benefit Districts Special Revenue Fund Enterprise Funds Golf Course Solid Waste Bridge and Thoroughfare Districts Capital Project Fund Capital Projects Funds: Park Development Bridge and Thoroughfare Districts Assessment and Other Districts Amount $ 13,218,891 550,000 30,000 2,737,200 1,360,219 3,643,344 2,430,000 840,000 790,854 $ 25,600,508 Advances to and from other funds are primarily long term advances used to fund capital projects in advance of related revenues. 64 CITY OF CARLSBAD Notes to the Financial Statements Note 6. Capital Assets Capital asset activity was as follows for the Governmental activities: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings Improvements Machinery and equipment Infrastructure Total capital assets, being depreciated Less accumulated depreciation for: Buildings Improvements Machinery and equipment Infrastructure Total accumulated depreciation Total capital assets being depreciated, net year ended June 30, 2004: Balance at July 1,2003 $ 54,385,184 $ 80,252,719 134,637,903 66,638,374 10,384,245 21,463,208 57,431,872 155,917,699 (11,566,008) (2,427,016) (10,984,968) (530,126) (25,508,118) 130,409,581 Increases 767,394 24,616,316 25,383,710 215,288 489,633 1,076,645 55,473,134 57,254,700 (1,372,041) (406,287) (2,310,756) (1,960,008) (6,049,092) 51,205,608 Balance at Decreases June 30, 2004 $ - $ 55,152,578 (43,100,800) 61,768,235 (43,100,800) 116,920,813 66,853,662 10,873,878 (1,330,391) 21,209,462 112,905,006 (1,330,391) 211,842,008 (12,938,049) (2,833,303) 1,140,763 (12,154,961) (2,490,134) 1,140,763 (30,416,447) (189,628) 181,425,561 Governmental activities capital assets, net $265,047,484 $76,589,318 $(43,290,428) $298,346,374 65 CITY OF CARLSBAD Notes to the Financial Statements Note 6. Capital Assets (Continued) Balance at July 1,2003 Increases Balance at Decreases __ June 30, 2004 Business-type activities: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings Improvements, other than buildings Machinery and equipment Infrastructure Sewage treatment facility Total capital assets, being depreciated Less accumulated depreciation for: Buildings Improvements Machinery and equipment Infrastructure Sewage treatment facility Total accumulated depreciation Total capital assets being depreciated, net Business-type activities capital assets, net 8,663,600 $ $ - $ 8,663,600 37,792,947 14,463,112 (3,817,157) 48,438,902 46,456,547 2,258,064 5,556,571 1,565,983 128,559,111 35,903,734 173,843,463 (775,818) (1,839,433) (1,160,211) (31,528,001) (9,938,362) (45,241,825) 128,601,638 14,463,112 - 30,232 9,712,459 1,913,783 11,656,474 (55,445) (148,770) (72,741) (2,388,697) (683,197) (3,348,850) 8,307,624 (3,817,157) 57,102,502 2,258,064 5,556,571 (27,368) 1,568,847 138,271,570 (78,986) 37,738,531 (106,354) 185,393,583 (831,263) (1,988,203) 8,450 (1,224,502) (33,916,698) (10,621,559) 8,450 (48,582,225) (97,904) 136,811,358 175,058,185 $22,770,736 (3,915,061) $193,913,860 66 CITY OF CARLSBAD Notes to the Financial Statements Note 6. Capital Assets (Continued) Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $ 533,123 Community development 165,844 Public safety 445,964 Community services 1,111,747 Public works 2,108,266 Capital assets held by the internal service funds (charged to various functions based on their usage of the assets) 1,684,148 Total depreciation expense - governmental activities $ 6,049,092 Business-type activities: Sewer $ 1,606,031 Water 1,742,819 Total depreciation expense - business-type activities $ 3,348,850 67 CITY OF CARLSBAD Notes to the Financial Statements Note 7. Accrued Liabilities Accrued liabilities were as follows Governmental activities: General Fund Bridge and Thoroughfare Districts Community Facilities District No. 1 General Capital Construction Public Facilities Construction Other Governmental Funds Total governmental activities Business-type activities: Enterprise funds: Carlsbad Municipal Water District Golf Course Sewer Solid Waste * Internal Service Funds Total business-type activities at June 30, 2004: Salaries and Vendors Benefits $1,370,293 $2,028,084 7,984 75,442 251,879 539,729 5,797,065 81,752 $8,042,392 $2,109,836 $3,620,262 $ 411,309 300,659 2,097,713 71,313 46,751 35,736 280,909 2,681,902 $6,346,294 $3,200,260 IFD Refuse Payable Disposal Total $ 79,006 $ - $ 3,477,383 7,984 75,442 251,879 539,729 5,878,817 $ 79,006 $ - $10,231,234 $ - $ - $ 4,031,571 300,659 2,169,026 232,341 314,828 2,962,811 $ - $ 232,341 $ 9,778,895 "Internal service funds have been included with governmental activities on the Government-wide Statement of Net Assets. 68 CITY OF CARLSBAD Notes to the Financial Statements Note 8. Long-term Debt The folowing is a summary of changes in the principal balance of long-term debt for the year ended June 30, 2004: Principal Principal Balance at Balance at Due Within June 30,2003 Additions Reductions June 30,2004 One Year Governmental activities: Bonds Certificates of participation HUD Section 108 loan Obligations under capital leases Total governmental activities Business-type activities: Certificates of participation Installment purchase agreement Loan payable Accrued assessments Less deferred charges Total business type activities Entity-wide total $13,200,000 $ 3,950,000 169,950 178,701 17,498,651 1,175,000 8,375,000 1,460,350 443,113 11,453,463 (644,083) 10,809,380 $28,308,031 $ $ 360,000 590,000 169,950 100,194 1,220,144 1,175,000 520,000 117,177 186,060 1,998,237 (84,778) 1,913,459 $3,133,603 $12,840,000 3,360,000 - 78,507 16,278,507 7,855,000 1,343,173 257,053 9,455,226 (559,305) 8,895,921 $25,174,428 $ 380,000 620,000 - 69,907 1 ,069,907 550,000 120,575 196,925 867,500 (61,940) 805,560 $1,875,467 69 CITY OF CARLSBAD Notes to the Financial Statements Note 8. Long-term Debt (Continued) Long-term debt at June 30, 2004 is comprised of the following issues: Governmental long-term debt Balance at June 30, 2004 1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds, principal due in amounts ranging from $380,000 to $1,000,000 on September 1 of each year through 2024. Interest payable on March 1 and September 1 at rates varying from 5.25% to 5.30% per annum. The City posted a surety bond in lieu of cash reserve in the amount of $1,055,953. 1997 Hosp Grove Refunding Certificates of Participation, principal due in amounts ranging from $620,000 to $735,000 on August 1 of each year through 2009, interest payable on August 1 and February 1 at rates varying from 4.40% to 4.70% per annum. Payable from the General Fund, with a required reserve amount of $659,500. The City has entered into several office equipment lease-purchase agreements. As of June 30, 2004, the City has purchased copier equipment totaling $456,783. All lease terms are for 60 months, with interest rates ranging from 5.56% to 16.82%. Sub-total governmental long-term debt Less current portion Total long-term portion of governmental debt Business-type long-term debt 12,840,000 3,360,000 78,507 16,278,507 1,069,907 $ 15,208,600 Balance at June 30, 2004 1997 Encina Financing Joint Powers Authority (EFJPA) Installment Purchase Agreement, principal due in varying amounts ranging from $550,000 to $905,000 on August 1 of each year through 2015, interest payable on February 1 and August 1 each year at rates varying from 4.50% to 5.50% per annum. The required reserve amount is $939,581. 7,855,000 1993 Carlsbad Municipal Water District loan agreement with the State Water Resources Control Board. Principal is due in varying amounts ranging from $ 120,575 to $ 151,558 on November 30 of each year through 2013, interest payable on November 30 of each year at 2.90% per annum. 1,343,173 In December 1994, the Golf Course Enterprise Fund purchased land with accrued assessments. Principal is due in the amount of $196,925 in 2004-05. The 2005-06 principal amount of $206,432 will be reduced by a reserve fund credit of $ 146,304 which is already reflected on the City's books. 257,053 Subtotal business-type long-term debt 9,455,226 Less unamortized discounts, issuance costs and deferred charges 559,305 Less current portion 805,560 Total long-term portion of business-type debt $ 8,090,361 70 CITY OF CARLSBAD Notes to the Financial Statements Note 8. Long-term Debt (Continued) The aggregate maturities of long-term debt are as follows: Governmental Activities Business-type Activities Year ended June 30: 2005 2006 2007 2008 2009 2010-2014 2015-2019 2020-2024 Principal $ 1,069,907 3 1,037,896 1 ,090,704 1,140,000 1,200,000 2,715,000 3,505,000 4,520,000 $ 16,278,507 3 Interest i 808,825 756,975 706,090 652,310 595,182 2,486,606 1 ,674,694 623,341 i 8,304,023 Principal $ 867,500 3 759,200 732,670 771,372 810,182 4,609,302 905,000 - $ 9,455,226 3 Interest ! 448,706 407,274 360,801 323,661 286,514 811,488 23,190 - ! 2,661,634 Note 9. Rate Covenants The 1997 Encina Financing Joint Powers Authority Installment Purchase Agreement (Wastewater Revenue Bonds) require that the District set its charges for services each year at rates sufficient to produce net revenues (after paying the operating and maintenance expenses of the District, excluding depreciation) of at least 1.25 times debt service for that year. Note 10. Debt without Government Commitment Special assessment bonds As of June 30, 2004, the City has five series of Assessment District Bonds outstanding in the amount of $45,352,913. These bonds were issued under the provisions of the Improvement Bond Acts of 1911 and 1915 and were used to finance public infrastructure improvement projects. The City collects assessments to pay the bond debt. These monies are accounted for in the Assessment District Agency Funds. Mortgage revenue bonds Multi-Family Housing Revenue Bonds are issued to provide construction and permanent financing to developers of multi- family residential rental projects located in the City which will be partially occupied by persons of low or moderate income. The total amount of mortgage revenue bonds outstanding as of June 30, 2004 is $48,477,000. The bonds, together with interest thereon, are limited obligations of the City payable solely from bond proceeds, revenues and other amounts derived solely from home mortgage and developer loans secured by first deeds of trust, irrevocable letters of credit, and irrevocable surety bonds. Industrial development bonds The Industrial Development Authority (Authority) of the City has issued $3,172,500 in Industrial Development Revenue Bonds. Any costs relating to the issuance of the Bonds, as well as the principal and interest payments, are to be paid by the private party benefiting from the bond issue. In the opinion of City officials, the above bonds are not payable from any revenues or assets of the City, and neither the full faith and credit nor the taxing power of the City of Carlsbad, the State of California, nor any political subdivision thereof, is obligated to the payment of the principal or interest on the bonds. Accordingly, no liability has been recorded in the accompanying financial statements. 71 CITY OF CARLSBAD Notes to the Financial Statements Note 11. Fund Balances The following is a summary of reserved and unreserved but designated fund balances as of June 30, 2004: Fund Balances Reserved for: Loans receivable Inventory Prepaid items Debt service Advances to other other funds* Flower fields preservation Library endowment Low and moderate income housing Habitat mitigation Golf course Encumbrances Totals Unreserved: Designated for approved capital projects Designated for continuing appropriations Totals Undesignated Total fund balances Governmental Funds Redevelopment Bridge and Community General Debt Service Thoroughfare Facilities Capital General Funds Districts District No. 1 Construction $ 158,844 $ - $ - $ - $ 15,165 .... 6,600 ... - _ 8,799,504 - - - 4,060,854 . . 725,423 - 15,000,000 - 3,211,239 - 115,492 70,170 1,719,286 27,916,775 - 115,492 70,170 5,780,140 1,090,423 37,990,275 13,124,942 - 1,311,717 82,058 3,303,970 13,124,942 - 2,402,140 38,072,333 3,303,970 43,015,831 (10,469,907) - - 42,989,799 $ 84,057,548 $ (10,469,907) $ 2,517,632 $ 38,142,503 $ 52,073,909 Public Other Facilities Governmental Construction Funds $ - $ 10,029,399 - 402,238 659,500 3,643,344 935,000 251,000 1,399,650 - - 9,494,089 21,634,291 9,494,089 38,954,422 4,446,884 18,746,916 22,721,440 29,089,944 27,168,324 47,836,860 39,943,038 $ 36,662,413 $ 126,734,320 Total $ 10,188,243 15,165 408,838 659,500 16,503,702 935,000 251,000 1,399,650 725,423 1 5,000,000 36,244,567 82,331,088 62,274,498 69,634,071 131,908,569 115,478,761 $ 329,718,418 * Only reflects that portion of fund balance invested in interfund advances (the General fund amount is net of $9,096,806 in deferred revenue for measurable but unavailable interest earned on such advances). 72 CITY OF CARLSBAD Notes to the Financial Statements Note 11. Fund Balances (Continued) Reserves for loan receivables, inventory, prepaid items and advances to other funds, net of accrued interest recorded as deferred revenue, are established to show that certain assets are already committed to other purposes and are not available for discretionary expenditures. Reserves for debt service represent resources legally restricted to the payment of long-term debt principal and interest maturing in future years. Reserves for flower-fields preservation represent resources set aside to support floriculture research for the preservation of the "Flower Fields" located in Carlsbad. Reserves for library endowment represent resources set aside to support programs in the Dove Library auditorium. Reserves for low and moderate income housing are for future Council approved loans to developers. Reserves for habitat mitigation represent resources set aside as security for the construction of wetland habitat to ensure the mitigation of certain species required as part of the Cannon Road West project. Reserves for the golf course represent resources set aside for a future loan to the Golf Course Enterprise fund for the construction of a municipal golf course. Reserves for encumbrances represent commitments related to unperformed contracts for services and undelivered goods. Unreserved-undesignated and unrestricted represents the fund balance or net assets remaining after reduction for reserved and designated fund balances or net assets. Note 12. Accumulated Fund Deficits/Negative Net Assets The following funds reported deficits in fund balances or net assets as of June 30, 2004: Deficit Balance Debt Service Funds: Redevelopment Areas $ (10,469,907) 73 CITY OF CARLSBAD Notes to the Financial Statements Note 13. Interfund Transfers Interfund transfers for the year ended June 30, 2004, consisted of the following: Fund Major Funds: General Redevelopment, Debt Service Funds Capital Project Funds: Bridge and Thoroughfare Districts Community Facilities District No. 1 General Capital Construction Public Facilities Construction Nonmajor Governmental Funds Enterprise Fund, Carlsbad Municipal Water District Enterprise Fund, Sewer Enterprise Fund, Solid Waste Internal Service Funds Totals Transfers In From Other Funds $ 314,266 - 215,280 1,863 36,000 32,000 8,129,950 - 1,698,512 - 620,769 $ 11,048,640 Transfers Out To Other Funds $ 4,968,000 240,000 1,863 215,280 827,554 - 2,076,921 1,698,512 - 962,741 57,769 $ 11,048,640 Transfers are used to (1) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, (2) move the remaining fund balances of closed funds to the General fund, (3) move revenues and expenditures to the appropriate funds, and (4) use unrestricted revenues collected in the General fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Note 14. Risk Management The City is exposed to various risks of loss related to its operations, including losses associated with errors and omissions and injuries to employees and members of the public. The City uses a Risk Management Self-Insurance fund, a Self Insured Benefits fund and a Workers' Compensation fund (all internal service funds) to account for and finance its uninsured risks of loss. All funds of the City make payments based on estimates of the amounts needed to pay prior and current year claims and to establish a reserve for catastrophe losses. Since July 1, 1999, the City has been a member of the California Municipal Excess Liability Program, a group purchase program for general liability coverage. Under this program, the pool provides coverage up to a maximum of $10,000,000 per occurrence with a self-insured retention provided by the City in the amount of $500,000. At June 30, 2004, the unencumbered fund equity for the Risk Management Self-Insurance fund was approximately $900,000. Dental insurance coverage for City employees is administered by CoreSource. Under the City's agreement with CoreSource, CoreSource will pay dental claims for each covered member, up to a maximum of $1,500 per calendar year. The City is insured for workers' compensation claims by Continental Casualty. Continental Casualty provides coverage for losses which exceed the City's self-insured retention of $1,000,000 per claim. 74 CITY OF CARLSBAD Notes to the Financial Statements Note 14. Risk Management (Continued) The estimated claims payable reported at June 30, 2004 is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the estimated claims payable amounts in fiscal years 2003 and 2004 for the three internal service funds are as follows: Claims Health Insurance fund: 2002-2003 2003-2004 Beginning Balance $ 324,340 $ 300,949 Expense and Changes in Estimates $ 1,223,712 $ 379,151 Claim Payments S (1,247,103) $ (602,237) Ending Balance $ 300,949 $ 77,863 Risk Management fund: 2002-2003 S 1,001,635 $ 123,794 $ (421,026) S 704,403 2003-2004 $ 704,403 S 211,010 $ (294,735) $ 620,678 Workers' Compensation fund: 2002-2003 $ 1,159,351 S 1,807,792 S (956,652) $ 2,010,491 2003-2004 $ 2,010,491 $ 2,094,932 S (1,196,533) $ 2,908,890 Note 15. Joint Ventures Encina Water Pollution Control Facility The Encina Water Pollution Control Facility (the Facility) is a sewer facility owned jointly by the Cities of Carlsbad, Vista and Encinitas and the Leucadia County Water District, the Buena Vista Sanitation District and the Vallecitos Water District. The Encina Wastewater Authority (EWA) is a joint powers authority established to operate and administer the facility. It is responsible for the management, maintenance and operations of the joint system. Ownership interests in the facility are determined by joint agreement at the time the assets are acquired. As of June 30, 2004, the Cities and Districts have the following approximate ownership interest: City of Carlsbad 24% City of Vista 25% Leucadia County Water District 17% Vallecitos Water District 23% Buena Vista Sanitation District 7% City of Encinitas 4% EWA's financial statements for the fiscal year ended June 30, 2003 (the latest available) incorporated the provisions of GASB 34 and reflect the following: Total assets $ 47,194,922 Total liabilities 1,424,280 Net assets S 45,770,642 The EWA docs not recognize net income or loss. Net operating expenditures in excess of users' assessments are treated as accounts receivable on EWA's books and charged to users' accounts in the following year. Conversely, users' assessments in excess of net operating expenditures are treated as a liability and credited against users' accounts, also in the following year. Under this basis, net operating revenue for the EWA totaled $5,822 in fiscal year 2003. The financial statements of the EWA can be obtained at 6200 Avenida Encinas, Carlsbad, California 92009. 75 CITY OF CARLSBAD Notes to the Financial Statements Note 15. Joint Ventures (Continued) Encina Financing Joint Powers Authority The Encina Financing Joint Powers Authority (the Authority) was created on February 1, 1989 between the City of Carlsbad (Carlsbad), the City of Vista (Vista), the Buena Vista Sanitation District (Buena) and the Leucadia County Water District (Leucadia). The primary purpose of the Authority is to issue revenue bonds in order to finance the expansion of the Facility. The Authority is governed by a Board of Directors, which consists of one director appointed by each member. The financial statements of the Authority can be obtained at the City of Carlsbad's Finance department. In August 1989, the Authority issued $33,500,000 of revenue bonds and executed installment purchase agreements for approximately the same amount. In February 1997, bonds were issued by the Authority to refinance and defease the outstanding bonds. Two of the members (Buena and Vista) defeased their 1989 obligations through available funds; while Carlsbad and Leucadia refinanced their obligations. Repayment of the bonds will be accomplished through payments made by Carlsbad and Leucadia pursuant to the new installment purchase agreements. The individual agreements set forth the purchase price and specify the debt service requirements for each member. The following is a table of the outstanding balance owed as of June 30, 2004: Member City of Carlsbad Leucadia County Water District Agreement Balance $ 7,855,000 5,355,000 $ 13,210,000 The installment balances are secured by a pledge of the revenues from each member's wastewater system, net of a deduction for maintenance and operating costs. Significant covenants within the agreements require the members to maintain insurance on the facility, and establish wastewater rates which are sufficient to pay the operating costs and debt service on the bonds and which will result in net revenues equal to at least 1.25 times the annual installment payments due. The City's share in the accounts of the Authority is recorded in the Sewer Enterprise Fund. The expansion of the Facility is shown as a fixed asset of the Sewer Enterprise Fund. Note 16. Retirement Plan Plan description The City of Carlsbad contributes to the California Public Employees' Retirement System (PERS), an agent multiple- employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of- living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions, and all other requirements, are established by state statutes and city ordinances. Copies of PERS' annual financial report may be obtained from their executive office: Lincoln Plaza, 400 P Street, Sacramento, California 95814. Funding policy Participants are required to contribute 7% (9% for safety employees) of their annual covered salary. The City makes the contributions required of the City's miscellaneous and fire employees on their behalf and for their account. The City makes 8% of the required 9% contributions for the City's safety employees. The amount paid by the City on behalf of employees for the year ended June 30, 2004 was $3,922,495. The City is required to contribute at an actuarially determined rate. For the year ended June 30, 2004, the employer contribution rate for the City of Carlsbad (as a percentage of covered payroll) was 15.951% for safety employees and 2.258% for miscellaneous employees. The contribution requirements of plan members and the City are established by PERS. 76 CITY OF CARLSBAD Notes to the Financial Statements Note 16. Retirement Plan (Continued) In October 2003, the City was notified by PERS that the employer contribution rate for the City of Carlsbad (as a percentage of payroll) will be 27.573% for safety employees and 6.938% for miscellaneous employees for the fiscal year ended June 30, 2005. At January 1, 2005, the miscellaneous employees plan rates will increase to 16.664% due to the contract agreement to increase the retirement formula to 3% at 60 years of age. Annual pension cost For 2004, the City's annual pension cost (employer contribution) of $1,704,651 for safety and $579,190 for miscellaneous to PERS was equal to the City's required and actual contributions. For 2004, the member contributions paid by the City were $1,124.752 for safety and $1,797,744 for miscellaneous. The required contribution was determined as part of the June 30, 2001, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 8.25% investment rate of return (net of administrative expenses), (b) projected annual salary increases of 3.75%, and (c) 2.0% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.5%. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four-year period (smoothed market value). PERS unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period for miscellaneous employees at June 30, 2004 is through June 30, 2022; for safety employees at June 30, 2004, it is through June 30, 2009. Three-year trend information for PERS (safety) Fiscal Year Ending Annual Pension Cost (Employer Contribution) Percentage of APC Contributed Net Pension Obligation 6/30/02 6/30/03 6/30/04 473,370 441,058 1,704,651 Three-year trend information for PERS (miscellaneous) Fiscal Year Ending Annual Pension Cost (Employer Contribution) 100% 100% 100% Percentage of APC Contributed Net Pension Obligation 6/30/02 ! 6/30/03 ! 6/30/04 ! Required supplementary information Funded status of plan (safety) 579,190 100% 100% 100% Valuation Date 6/30/01 6/30/02 6/30/03 Entry Age Normal Accrued Liability $ 77,957,502 $ 92,896,916 $ 99,827,853 Actuarial Value of Assets $ 87,913,468 $ 83,572,239 $ 85,963,105 Unfunded Liability/ (Excess Assets) $ (9,955,966) $ 9,324,677 $ 13,864,748 Funded Status 112.8% 90.0% 86.1% Annual Covered Payroll $ 11,581,444 $ 12,110,117 $ 12,709,908 UAAL As a % of Payroll (85.965%) 76.999% 109.086% 77 CITY OF CARLSBAD Notes to the Financial Statements Note 16. Retirement Plan (Continued) Funded status of plan (miscellaneous) Valuation Date 6/30/01 6/30/02 6/30/03 Entry Age Normal Accrued Liability $ 79,229,253 $ 88,036,696 $ 121,455,280 Actuarial Value of Assets $ 99,603,848 $ 95,730,136 $ 98,339,566 Unfunded Liability/ (Excess Assets) $(20,374,595) $ (7,693,440) $ 23,115,714 Funded Status 125.7% 108.7% 81.0% Annual Covered Payroll $ 21,056,410 $ 23,279,207 $ 25,059,422 UAAL As a % of Payroll (96.762%) (33.049%) 92.244% Note 17. Postretirement Health Care In addition to the pension benefits described herein, per Resolution 614, all former employees of the Carlsbad Municipal Water District (including dependents) are eligible for postretirement health care benefits if they voluntarily retire after the age of 50 with no less than 5 years of service and whose age, combined with years of service, equals 70 or more. Currently, fourteen retirees meet these eligibility requirements and are receiving benefits. The City pays for 100% of the premiums for health insurance which is coordinated with Medicare and other benefits provided by federal and state law, when available, to the extent it reduces the cost of insurance premiums. Expenditures for postretirement health care benefits are funded on a pay-as-you-go basis. Expenditures were approximately $97,150 for post-retirement health care costs during 2003-04. Based on an actuarial valuation performed as of November 1991, the District's liability for the current and past service costs of these benefits is approximately $1,600,000. Note 18. Commitments and Contingencies Operating lease In June 1988, the Carlsbad Redevelopment Agency entered into an agreement to lease a parking lot on State Street from a private party. The lease requires monthly rental payments, adjusted annually based upon an increase in the consumer price index, not to exceed 6% of the previous year's rents, and re-adjusted in years 10 and 15 based upon market rental values, through August 2007. Minimum future rental payments under the operating lease as of June 30, 2004 are: 2005 2006 2007 2008 83,700 83,700 83,700 7,000 Total minimum future rental payments $ 258,100 78 SUPPLEMENTARY INFORMATION 79 CITY OF CARLSBAD Combining Balance Sheet Nonmajor Governmental Funds June 30, 2004 Accounts, net Due from other governments Prepaid items Restricted assets, cash and investments Loan receivables Advances to other funds Total assets LIABILITIES AND FUND BALANCES Special Revenue Funds ASSETS Cash and investments Receivables: Taxes Other Affordable Housing $ 10,291,376 Community Development Block Grant $ 62,892 Donations and Bequests $ 9,013,427 Federal Grants $ 58,772 Gas Tax $ 6,920,907 Low and Moderate Income Housing $ 2,727,912 6,796 99 510 20,000 7,938,115 3,643,344 $ 18.229,491 $62,892 $ 9,033,937 58,772 $10,564,251 2,091,284 4,826,091 Liabilities: Accrued liabilities Due to other funds Deposits payable Due to to other governments Advances from other funds Deferred revenue Total liabilities Fund balances: Reserved for: Loans receivable Prepaid items Debt service Advances to other funds Flower fields preservation Library endowment Low and moderate income housing Encumbrances Unreserved: Designated for approved capital projects Designated for continuing appropriations Undesignated Total fund balances Total liabilities and fund balances 9,897 $ 9,897 7,938,115 17,735 26,682 6,193 6,176 17,735 26,682 6,193 6,176 20,000 3,643,344 4,033 4,033 2,091,284 1,189,650 7,816 9,084,013 18,219,594 $ 18,229,491 209,729 (164,572) 45,157 $ 62,892 935,000 251,000 8,515 200,953 7,591,787 9,007,255 $ 9,033,937 32,038 20,396 145 52,579 $ 58,772 217,278 4,198,166 2,499,287 10,558,075 $ 10,564,251 210,000 674 2,520,100 4,822,058 $ 4,826,091 80 Special Revenue Funds Other Special Police Section 8 Revenue Asset Housing Funds Forfeiture Authority $ 241,509 $ 418,754 $ 240 2,615 326,425 382,238 - $ 241,509 $ 418,754 $ 711,518 Special Storm Tyler Benefit State Water Court Districts Grants Program Apartments $ 2,668,504 $ 5,010 $ - $ 704,360 12,995 2,047 134,514 - $ 2,683,546 $ 139,524 $ - $ 704,360 Totals $ 33,113,663 19,791 99 5,172 460,939 402,238 10,029,399 3,643,344 $ 47,674,645 $ 192 $ 23 $ 49,827 153,000 67,550 - 192 23 270,377 382,238 7,010 13,761 4,567 50,100 234,307 354,870 54,336 241,317 418,731 441,141 $ 241,509 $ 418,754 $ 711,518 $ 128,013 $ 15,968 $ - $ - 20,641 30,000 158,013 15,968 - 20,641 - 103,374 32,547 255,649 12,963 2,166,510 78,046 - 683,719 2,525,533 123,556 - 683,719 $ 2,683,546 $ 139,524 $ - $ 704,360 $ 264,739 153,000 88,191 30,000 535,930 10,029,399 402,238 3,643,344 935,000 251,000 1,399,650 637,309 4,198,166 540,061 25,102,548 47,138,715 $ 47,674,645 (Continued) 81 CITY OF CARLSBAD Combining Balance Sheet Nonmajor Governmental Funds (Continued) June 30, 2004 ASSETS Cash and investments Debt Service Fund Hosp Grove COPs $ 665,740 Capital Project Funds Assessment and Other Districts $ 13,613,542 Federal Infrastructure Grants Replacement $ - $14,751,254 Other Capital Project Funds $ 299,923 Park Development $ 5,062,761 Receivables: Taxes Other Accounts, net Due from other governments Prepaid items Restricted assets, cash and investments Loan receivables Advances to other funds Total assets LIABILITIES AND FUND BALANCES 12,085 231,501 675,080 1,340,820 $13,625,627 $ 231,501 $14,751,254 $ 299,923 $ 5,062,761 Liabilities: Accrued liabilities Due to other funds Deposits payable Due to to other governments Advances from other funds Deferred revenue Total liabilities Fund balances: Reserved for: Loans receivable Prepaid items Debt service Advances to other funds Flower fields preservation Library endowment Low and moderate income housing Hncumbrances Unreserved: Designated for approved capital projects Designated for continuing appropriations Undesignated Total fund balances Total liabilities and fund balances 598,046 $ 56,759 $ 11,277 $ - $ 784 174,742 - 11,554 790,854 - - - 2,980,000 1,388,900 231,501 1.277 11,554 2,980,784 659,500 21,260 660,060 141,166 1,620,207 10,475,354 77,206 (77,206) 418,694 341,145 13,980,138 1,528 9,343 277,498 5,000 195,779 1,881,198 1,340,820 12,236,727 14,739,977 288,369 2,081,977 $ 1,340,820 13,625,627 231,501 $ 14,751,254 299,923 $ 5,062,761 82 Capital Project Funds Planned Rancho Local Santa Fe Traffic Drainage Road Redevelopment Sales Tax/ State Impact Facilities Project Agency TransNet Grants Projects $9,303,917 $ 21,569,778 $ 1,361,163 $10,586,621 $ 257,384 $ 8,553,096 . . 148,185 - 18,358 1,405,153 - 869,678 78,467 _ _ _ _ $9,452,102 $ 22,974,931 $ 1,379,521 $11,456,299 $ 335,851 $ 8,553,096 Totals $ 85,359,439 _ 12,085 166,543 2,584,799 - - $ 88,122,866 Total Other Governmental Funds $ 119,138,842 19,791 12,184 171,715 3,045,738 402,238 675,080 10,029,399 3,643,344 $ 137,138,331 $ 868,122 $ 3,008,256 $ 34,946 $ 966,585 $ 24,000 $ 45,303 . _ 148,668 . 148,185 - .... 1,016,307 3,008,256 34,946 966,585 172,668 45,303 _ _ _ . _ . 25,315 18,261,049 80,207 1,519,219 52,750 414,848 4,430,872 - - 1,528,484 106,803 6,666,605 3,979,608 1,705,626 1,264,368 7,442,011 3,630 1,426,340 _ 8,435,795 19,966,675 1,344,575 10,489,714 163,183 8,507,793 $9,452,102 $ 22,974,931 $ 1,379,521 $11,456,299 $ 335,851 $ 8,553,096 $ 5,614,078 186,296 - 148,668 3,770,854 148,185 9,868,081 - - - - - 20,996,982 14,548,750 28,528,623 14,180,430 78,254,785 $ 88,122,866 $ 5,878,817 339,296 88,191 148,668 3,800,854 148,185 10,404,011 10,029,399 402,238 659,500 3,643,344 935,000 251,000 1,399,650 21,634,291 18,746,916 29,089,944 39,943,038 126,734,320 $ 137,138,331 83 CITY OF CARLSBAD Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2004 Special Revenue Funds Revenues: Taxes Intergovernmental Charges for services Fines and forfeitures Income from property and investments Interdepartmental charges Contributions from property owners Donations Miscellaneous Total revenues Expenditures: Current: General government Public safety Community development Community services Public works Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits) at beginning of year Fund balances at end of year Affordable Housing $ 544,503 99,322 - 75,996 - 3,763,048 - - 4,482,869 - - 771,921 - - - 1,592 442 773,955 3,708,914 5,496 - 5,496 3,714,410 14,505,184 $ 18,219,594 Community Development Block Grant $ 615,638 - - 117,702 - - - 25,496 758,836 - - 222,286 - - 314,436 170,000 7,029 713,751 45,085 - (5,496) (5,496) 39,589 5,568 $ 45,157 Donations and Bequests $ - - - 72,895 - 181,327 141,399 1,473 397,094 52,745 - 57,200 158,767 - - - - 268,712 128,382 9,443 - 9,443 137,825 8,869,430 $ 9,007,255 Federal Grants $ 34,408 - - - - - - - 34,408 - 37,912 - - - - - - 37,912 (3,504) 3,823 (15,000) (11,177) (14,681) 67,260 $ 52,579 Low and Moderate Gas Income Tax Housing $ 1,702,712 $ 671,063 - - - 83,073 105,314 - - - - 1,785,785 776,377 - - 73,194 - - 502,378 619 172 502,378 73,985 1,283,407 702,392 - (7,500) (7,500) 1,275,907 702,392 9,282,168 4,119,666 $10,558,075 $4,822,058 84 Special Revenue Funds Other Special Revenue Funds $ - - - 1,921 - - - - 1,921 - - 14,480 - - _ - 14,480 (12,559) - . (12,559) 253,876 $ 241,317 Police Asset Forfeiture $ - - 155,974 951 - - - - 156,925 36,190 - - - 29,407 _ - 65,597 91,328 (267,236) (267,236) (175,908) 594,639 S 418,731 Section 8 Housing Authority S 5,749,564 - - 1,943 - - - - 5,751,507 - 5,719,216 - - - 4,421 1,230 5,724,867 26,640 - 26,640 414,501 $ 441,141 Special Benefit Districts $ - 1,808,521 - 21,612 130,130 - - - 1,960,263 - - - 2,222,981 16,150 _ - 2,239,131 (278,868) - . (278,868) 2,804,401 $2,525,533 Storm Tyler State Water Court Grants Program Apartments $ - $ - $ - 163,365 394,492 _ 7 - 6,669 . _ . 28,907 192,279 - 401,161 246,311 236,140 35,981 . - _ . 282,292 - 236,140 (90,013) - 165,021 962,741 (73,796) (73,796) 962,741 (163,809) 962,741 165,021 287,365 (962,741) 518,698 $ 123,556 $ - $ 683,719 Totals $ 2,373,775 7,107,478 2,302,335 155,974 488,083 130,130 3,944,375 141,399 55,876 16,699,425 52,745 320,413 7,079,957 209,228 2,222,981 862,371 176,632 8,873 10,933,200 5,766,225 981,503 (369,028) 612,475 6,378,700 40,760,015 $ 47,138,715 (Continued) 85 CITY OF CARLSBAD Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds (Continued) For the Year Ended June 30, 2004 Revenues: Taxes Intergovernmental Charges for services Fines and forfeitures Income from property and investments Interdepartmental charges Contributions from property owners Donations Miscellaneous Debt Service Fund Assessment Hosp Grove and Other COPs Districts $ - $ - - - 47,335 19,518 - 10,261,224 - - Capital Project Funds Federal Infrastructure Grants Replacement $ - $ 10,614 361,047 - - 203,936 - - - - Other Capital Project Park Funds Development $ - $ - - - 1,890 19,872 - 733,261 - - Total revenues Expenditures: Current: General government Public safety Community development Community services Public works Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (Uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year Fund balances at end of year 47,335 10,280,742 361,047 214,550 1,890 753,133 800,000 800,000 72,743 520,525 361,452 336,294 37,559 9,621 634,321 3,731,560 634,321 3,731,560 719,982 590,000 - - ... 167,140 - - ... 757,140 (709,805) 593,268 9,687,474 361,452 (405) 336,294 (121,744) 47,180 (45,290) 719,982 33,151 90,195 10,321,795 (405) 3,609,816 (45,290) 33,151 1,250,625 1,914,932 405 11,130,161 333,659 2,048,826 : 1,340,820 $12,236,727 14,739,977 $288,369 $2,081,977 86 Capital Project Funds Planned Rancho Local Santa Fe Drainage Road Facilities Project $ - $ 514,214 4,533,346 - - 81,857 155,884 - 645,363 - - 1,241,434 4,689,230 - - - - 957,271 11,198,208 _ - 957,271 11,198,208 284,163 (6,508,978) 2,220 (634,321) (632,101) 284,163 (7,141,079) 8,151,632 27,107,754 $8,435,795 $19,966,675 Redevelopment Sales Tax/ Agency TransNet $ - $ 4,193,556 12,916 - 50,756 53,659 - - - - 63,672 4,247,215 605,438 - - - - 15,441 4,360,271 2,210 614 623,703 4,360,271 (560,031) (113,056) 1,929,752 (862,198) 1,067,554 507,523 (113,056) 837,052 10,602,770 $ 1,344,575 $ 10,489,714 Traffic State Impact Grants Projects $ - $ - 78,467 - - 1,538 75,593 - 897,699 - - 80,005 973,292 148,668 - - - - 240,860 147,986 _ - 389,528 147,986 (309,523) 825,306 50,594 (211,374) (160,780) (470,303) 825,306 633,486 7,682,487 $ 163,183 $8,507,793 Totals $ 10,614 9,680,630 12,916 - 664,503 - 12,537,547 - - 22,906,210 864,408 - - - - 18,867,911 2,210 614 19,735,143 3,171,067 6,348,447 (1,707,893) 4,640,554 7,811,621 70,443,164 $ 78,254,785 Total Other Governmental Funds $ 2,384,389 16,788,108 2,315,251 155,974 1,199,921 130,130 16,481,922 141,399 55,876 39,652,970 917,153 320,413 7,079,957 209,228 2,222,981 19,730,282 768,842 176,627 31,425,483 8,227,487 8,129,950 (2,076,921) 6,053,029 14,280,516 112,453,804 $ 126,734,320 87 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds Year Ended June 30, 2004 Affordable Housing Total revenues Total expenditures Net change in fund balance Community Dev Block Grant Total revenues Total expenditures Net change in fund balance Donations and Bequests Total revenues Total expenditures Net change in fund balance Federal Grants Total revenues Total expenditures Net change in fund balance Gas Tax Total revenues Total expenditures Net change in fund balance Low & Moderate Income Housing Total revenues Total expenditures Net change in fund balance Other Special Revenue Funds Total revenues Total expenditures Net change in fund balance Budget $ 1,347,000 824,196 522,804 1,451,700 1 ,446,627 5,073 234,440 506,918 (272,478) 35,908 90,275 (54,367) 4,917,823 (4,917,823) 528,400 255,951 272,449 10,000 47,994 (37,994) Actual Amounts (Budgetary Basis) $ 4,654,498 781,771 3,872,727 758,836 923,480 (164,644) 601,918 277,227 324,691 36,032 69,879 (33,847) 1,891,704 719,656 1,172,048 816,842 74,659 742,183 7,792 21,490 (13,698) Variance Over (Under) $ 3,307,498 (42,425) 3,349,923 (692,864) (523,147) (169,717) 367,478 (229,691) 597,169 124 (20,396) 20,520 1,891,704 (4,198,167) 6,089,871 288,442 (181,292) 469,734 (2,208) (26,504) 24,296 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds (Continued) Year Ended June 30, 2004 Actual Amounts (Budgetary Budget Basis) Police Asset Forfeiture Total revenues Total expenditures Net change in fund balance Section 8 Housing Authority Total revenues Total expenditures Net change in fund balance Special Benefit Districts Total revenues Total expenditures Net change in fund balance State Grants Total revenues Total expenditures Net change in fund balance $ 55,000 3 256,694 (201,694) 5,697,929 5,729,525 (31,596) 1,966,880 3,627,782 (1,660,902) 195,851 459,034 (263,183) 5 169,215 77,692 91,523 5,751,507 5,729,434 22,073 2,028,506 2,342,505 (313,999) 197,606 316,545 (118,939) Variance Over (Under) $ 114,215 (179,002) 293,217 53,578 (91) 53,669 61,626 (1,285,277) 1,346,903 1,755 (142,489) 144,244 Storm Water Program Total revenues Total expenditures Net change in fund balance Totals Total revenues Total expenditures Net change in fund balance 11,523,108 18,162,819 16,914,456 11,334,338 5,391,348 (6,828,481) 5,580,118 S 12,219,829 89 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Debt Service Funds Year Ended June 30, 2004 Budget Actual Amounts (Budgetary Basis) Variance Over (Under) Redevelopment Areas Total revenues Total expenditures Net change in fund balance 2,066,200 1,686,718 2,527,580 1,667,480 461,380 (19,238) 379,482 $860,100 $480,618 90 91 CITY OF CARLSBAD Combining Statement of Net Assets Internal Service Funds June 30, 2004 ASSETS Current assets: Cash and investments Receivables: Accounts, net Inventory Total current assets Noncurrent assets: Capital assets: Machinery and equipment Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrent assets Total assets LIABILITIES Current liabilities: Accrued liabilities Estimated claims payable Current portion of long-term debt Total current liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted Total net assets Fleet Self Insured Management Benefits $ 7,646,800 $ 3,313,219 955 102,570 7,750,325 3,313,219 11,495,425 (6,385,281) 5,110,144 5,110,144 $ 12,860,469 S 3,313,219 S 104,680 $ 2,487,730 77,863 1,580 106,260 2,565,593 106,260 2,565,593 5,108,564 7,645,645 747,626 $ 12,754,209 $ 747,626 Information Technology $ 3,917,368 - - 3,917,368 3,006,831 (2,481,954) 524,877 524,877 $ 4,442,245 $ 325,688 - 1,732 327,420 327,420 523,145 3,591,680 S 4,114,825 92 Records Risk Workers' Management Management Compensation Total $ 1,558,900 $ 2,936,991 $ 19,373,278 955 - - - 102,570 1,558,900 2,936,991 19,476,803 14,502,256 - - (8,867,235) - - 5,635,021 ~ ~5,635,0~ $ 1,558,900 $ 2,936,991 S 25,111,824 38,220 $ 6,493 $ 2,962,811 620,678 2,908,891 3,607,432 3,312 658,898 2,915,384 6,573,555 658,898 2,915,384 6,573,555 5,631,709 900,002 21,607 12,906,560 900,002 $ 21,607 $ 18,538,269 93 CITY OF CARLSBAD Combining Statement of Revenues, Expenses and Changes in Net Assets Internal Service Funds For the Year Ended June 30, 2004 Operating revenues: Other charges for services Miscellaneous Total operating revenues Operating expenses: Depreciation Fuel and supplies Claims expense General and administrative Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Income from property and investments Gain (loss) on sale of property Total nonoperating revenues (expenses) Income (loss) before transfers and capital contributions Transfers in Transfers out Capital contributions Change in net assets Total net assets at beginning of year Total net assets at end of year Fleet Management $ 3,053,379 87,523 3,140,902 1,168,826 533,304 - 1,348,897 3,051,027 89,875 60,550 74,240 134,790 224,665 _ - 112,451 337,116 12,417,093 $ 12,754,209 Self Insured Benefits $ 2,904,615 1,517 2,906,132 - - 891,433 2,054,188 2,945,621 (39,489) 3,287 - 3,287 (36,202) _ - - (36,202) 783,828 S 747,626 Information Technology $ 3,888,912 - 3,888,912 504,324 - - 3,769,002 4,273,326 (384,414) 38,911 (12,617) 26,294 (358,120) 620,769 - - 262,649 3,852,176 $ 4,114,825 94 Records Management $ 923,105 - 923,105 10,998 - - 972,012 983,010 (59,905) (34) - (34) (59,939) _ (57,769) - (117,708) 117,708 $ Risk Management $ 651,068 20,099 671,167 - 603,627 568,035 1,171,662 (500,495) 5,673 - 5,673 (494,822) _ - - (494,822) 1,394,824 $ 900,002 Workers' Compensation $ 3,250,216 < 53,368 3,303,584 - 2,337,428 159,293 2,496,721 806,863 13,725 - 13,725 820,588 _ - - 820,588 (798,981) $ 21,607 1 Totals 5 14,671,295 162,507 14,833,802 1,684,148 533,304 3,832,488 8,871,427 14,921,367 (87,565) 122,112 61,623 183,735 96,170 620,769 (57,769) 112,451 771,621 17,766,648 $ 18,538,269 95 CITY OF CARLSBAD Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2004 Cash flows from operating activities: Receipts from customers and users Payments to suppliers Payments to employees Internal activity - payments to other funds Claims paid Other receipts Net cash provided by (used in) operating activities Cash flows from noncapital financing activities: Operating subsidies and transfers to other funds Cash flows from capital and related financing activities: (Purchases) sales of capital assets Principal paid on capital debt Net cash provided by (used in) capital and related financing activities Cash flows from investing activities: Interest on investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Fleet Self Insured Management Benefits $ 3,053,379 S 3,312,021 (1,354,172) (596,887) (248,805) (1,095,412) 118,957 2,238 972,472 2,218,847 (413,508) (2,981) (416,489) 60,550 3,287 616,533 2,222,134 7,030,267 1,091,085 S 7,646,800 $ 3,313,219 Information Technology $ 3,888,912 (1,720,036) (1,495,251) (384,851) 288,774 605,251 (189,148) (3,236) (192,384) 38,911 740,552 3,176,816 $ 3,917,368 96 Records Management $ 923,105 (188,262) (580,106) (253,333) (98,596) (57,769) 15,518 15,518 (34) (140,881) 140,881 $ Risk Workers' Management Compensation S 651,068 $ 3,250,216 5 (202,346) (172,075) (87,494) (140,049) (70,719) (687,352) (1,439,855) 20,100 53,368 (530,654) 1,705,516 - 5,673 13,725 (524,981) 1,719,241 2,083,881 1,217,750 $ 1,558,900 $ 2,936,991 ! Total 5 15,078,701 (3,464,816) (2,931,813) (1,097,757) (3,222,619) 194,663 4,556,359 547,482 (587,138) (6,217) (593,355) 122,112 4,632,598 14,740,680 B 19,373,278 (Continued) 97 CITY OF CARLSBAD Combining Statement of Cash Flows Internal Service Funds (Continued) For the Year Ended June 30, 2004 Fleet Self Insured Information Management Benefits Technology Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided by operting activities: Depreciation and amortization Change in assets and liabilities: (Increase) decrease in receivables (Increase) in inventory Decrease in prepaid items Increase (decrease) in accrued liabilities Increase (decrease) in estimated claims payable Net cash provided by (used in) operating activities Noncash capital financing activities: Capital assets contributed by other funds 89,875 $ (39,489) $ (384,414) 1,168,825 31,434 (6,015) (31) $ 972,472 $ 2,218,847 504,324 (311,647) 752 2,480,700 (223,085) 54,800 114,064 288,774 112,451 S 98 Records Risk Workers' Management Management Compensation Total $ (59,905) $ (500,495) $ 806,863 $ (87,565) 10,997 - - 1,684,146 31,403 (6,015) 76,728 - 132,280 (49,688) (23,162) 254 2,210,521 (83,725) 898,399 591,589 S (98,596) S (530,654) $ 1,705,516 $ 4,556,359 112,451 99 CITY OF CARLSBAD Combining Statement of Changes in Assets and Liabilities Agency Funds June 30, 2004 Contractors' and Miscellaneous Deposits ASSETS Current assets: Cash and investments Accrued interest Total current assets LIABILITIES Accounts payable Deposits held for others Total liabilities Balance July 1,2003 $ 12,088,228 - $ 12,088,228 $ 22,051 12,066,177 S 12,088,228 Additions $ 28,452,778 27,683 $ 28,480,461 $ 13,671,638 29,039,614 $ 42,711,252 Deductions $ 26,865,170 15,953 $ 26,881,123 $ 13,378,898 27,733,016 S 41,111,914 Balance June 30, 2004 $ 13,675,836 11,730 $ 13,687,566 $ 314,791 13,372,775 $ 13,687,566 Assessment Districts ASSETS Current assets: Cash and investments Accrued interest Total current assets Restricted assets: Cash and investments Accrued interest Total restricted assets Total assets LIABILITIES Accounts payable Deposits held for others Total liabilities Balance July 1 , 2003 $ 3,179,074 29,766 3,208,840 4,017,696 83,592 4,101,288 $ 7,310,128 $ 2,811 7,307,317 $ 7,310,128 Additions S 5,689,356 77,238 5,766,594 894,630 79,916 974,546 $ 6,741,140 S 185,026 6,074,498 $ 6,259,524 Deductions $ 5,048,899 78,599 5,127,498 152,000 83,592 235,592 $ 5,363,090 S 105,891 4,775,583 $ 4,881,474 Balance June 30, 2004 $ 3,819,531 28,405 3,847,936 4,760,326 79,916 4,840,242 $ 8,688,178 S 81,946 8,606,232 S 8,688,178 100 CITY OF CARLSBAD Combining Statement of Changes in Assets and Liabilities Agency Funds (Continued) June 30, 2004 Total Agency Funds ASSETS Current assets: Cash and investments Accrued interest Total current assets Restricted assets: Cash and investments Accrued interest Total restricted assets Total assets LIABILITIES Accounts payable Deposits held for others Total liabilities Balance July 1,2003 $ 15,267,302 29,766 15,297,068 4,017,696 83,592 4,101,288 $ 19,398,356 S 24,862 19,373,494 $ 19,398,356 Additions $ 34,142,134 104,921 34,247,055 894,630 79,916 974,546 $ 35,221,601 $ 13,856,664 35,114,112 $ 48,970,776 Deductions $ 31,914,069 94,552 32,008,621 152,000 83,592 235,592 $ 32,244,213 S 13,484,789 32,508,599 S 45,993,388 Balance June 30, 2004 $ 17,495,367 40,135 17,535,502 4,760,326 79,916 4,840,242 S 22,375,744 $ 396,737 21,979,007 S 22,375,744 101 CITY OF CARLSBAD Schedule of Annual Debt Service Requirements $15,495,000 - 1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Totals Interest Due September 1 $ 337,976 328,001 317,633 306,607 295,058 282,851 269,989 256,470 242,295 227,332 211,583 195,045 177,589 159,214 139,920 119,576 98,182 75,525 51,675 26,500 S 4,119,021 Interest Due March 1 S 328,001 317,633 306,607 295,058 282,851 269,989 256,470 242,295 227,332 211,583 195,045 177,589 159,213 139,920 119,576 98,183 75,525 51,675 26,500 - $ 3,781,045 Total Interest $ 665,977 645,634 624,240 601,665 577,909 552,840 526,459 498,765 469,627 438,915 406,628 372,634 336,802 299,134 259,496 217,759 173,707 127,200 78,175 26,500 $ 7,900,066 Principal Due September 1 $ 380,000 395,000 420,000 440,000 465,000 490,000 515,000 540,000 570,000 600,000 630,000 665,000 700,000 735,000 775,000 815,000 855,000 900,000 950,000 1,000,000 S 12,840,000 Total Annual Debt Service S 1,045,977 1,040,634 1,044,240 1,041,665 1 ,042,909 1,042,840 1,041,459 1,038,765 1,039,627 1,038,915 1,036,628 1,037,634 1,036,802 1,034,134 1,034,496 1,032,759 1,028,707 1,027,200 1,028,175 1,026,500 $ 20,740,066 $6,595,000 - 1997 Hosp Grove Certificates of Participation (1988 Refunding) Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 Interest Due August 1 S 76,058 $ 62,418 48,448 33,373 17,273 Interest Due February 1 62,417 S 48,447 33,372 17,272 - Total Principal Due Total Annual Interest August 1 Debt Service 138,475 S 110,865 81,820 50,645 17,273 620,000 S 635,000 670,000 700,000 735,000 758,475 745,865 751,820 750,645 752,273 Totals 237,570 $161,508 S 399,078 $ 3,360,000 S 3,759,078 102 CITY OF CARLSBAD Schedule of Annual Debt Service Requirements (Continued) $11,080,000 - Encina Financing Joint Powers Authority Installment Purchase Agreement Fiscal Year 2004-05 ' 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Totals Interest Due August 1 $ 200,978 188,603 172,791 156,153 139,353 122,816 105,191 86,228 66,241 45,228 23,190 $ 1,306,772 Interest Due February 1 $ 188,603 172,791 156,153 139,353 122,816 105,191 86,228 66,241 45,228 23,191 - $ 1,105,795 Total Interest $ 389,581 361,394 328,944 295,506 262,169 228,007 191,419 152,469 111,469 68,419 23,190 S 2,412,567 Principal Due August 1 $ 550,000 575,000 605,000 640,000 675,000 705,000 740,000 780,000 820,000 860,000 905,000 S 7,855,000 Total Annual Debt Service $ 939,581 936,394 933,944 935,506 937,169 933,007 931,419 932,469 931,469 928,419 928,190 $ 10,267,567 $2,331,489 - Carlsbad Municipal Water District State Loan for Reclaimed Water Projects Interest Due Fiscal Year November 30 2004-05 $ 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Totals S $2,618,908 - Golf Course Accrued Fiscal Year 2004-05 $ 2005-06 38,952 3 35,455 31,857 28,155 24,345 20,425 16,391 12,240 7,969 2,680 218,469 3 Assessment Interest 20,173 3 10,425 Principal Due November 30 ! 120,575 124,072 127,670 131,372 135,182 139,102 143,136 147,287 151,558 123,219 > 1,343,173 Principal > 196,925 60,128 Total Annual Debt Service $ 159,527 159,527 159,527 159,527 159,527 159,527 159,527 159,527 159,527 125,899 . _$ 1.561,642 Total Annual Debt Service $ 217,098 70,553 Totals S 30,598 S 257.053 287,651 103 104 STATISTICAL SECTION 105 CITY OF CARLSBAD Government-wide Expenses by Function Fiscal Year 2001-02(1) 2002-03 2003-04 General Government $7,599,821 8,517,581 8,604,212 Public Safety $25,659,586 27,747,646 30,894,018 Community Development $10,539,139 12,351,779 13,814,331 Community Services $13,269,566 14,190,510 15,034,661 Public Works $15,015,344 16,825,872 19,533,596 Interest on Long-Term Debt $1,673,516 1,048,264 995,895 (1)The City first began issuing Government-wide statements in fiscal year 2001-02. GOVERNMENT-WIDE EXPENSES BY FUNCTION 2003-04 Sewer ^ u Generalbewer other „ Carlsbad Municipal Water District 18% Interest on Long- Term Debt 1% Public Works 16% Government Community Services 13% Public Safety 26% Community Development 12% Source: City of Carlsbad Comprehensive Annual Financial Reports 106 Carlsbad Municipal Water Golf Solid District Course Sewer Waste Total $19,310,792 $98,565 $6,168,690 $212,605 $99,547,624 19,261,199 93,341 6,103,668 218,014 106,357,874 20,950,012 53,916 6,890,389 1,300,281 118,071,311 107 CITY OF CARLSBAD Government-wide Revenues PROGRAM REVENUES Fiscal Year 2001-02(1) 2002-03 2003-04 Charges for Services $40,142,313 42,464,001 41,845,765 Operating Grants and Contributions $8,562,412 11,406,166 16,073,559 Capital Grants and Contributions $43,007,215 64,719,339 59,591,648 (1*The City first began issuing Government-wide statements in fiscal year 2001-02. GOVERNMENT-WIDE REVENUES BY FUNCTION 2003-04 Income from Vehicle License Property and Fees Investments Charges for 2% 2% Services 21% Operating Grants and Contributions 8% Capital Grants and Contributions 29% Source: City of Carlsbad Comprehensive Annual Financial Reports 108 GENERAL REVENUES Taxes $70,676,423 74,398,635 78,668,757 Vehicle License Fees $4,675,269 5,066,902 4,124,672 Income from Property and Investments $25,105,269 19,182,978 4,316,430 Miscellaneous $1,564,886 598,688 650,724 Total $193,733,797 217,836,709 205,271,555 109 CITY OF CARLSBAD General Governmental Expenditures by Function*l) Last Ten Fiscal Years Fiscal Year(2> 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Total $ 60,280,103 59,802,924 65,943,032 80,045,280 112,156,205 105,655,384 92,884,485 112,513,403 108,662,936 115,234,046 General Government $ 5,871,248 5,850,829 6,961,469 6,909,151 6,784,525 7,382,909 9,022,218 8,414,743 8,805,313 9,745,019 Public Safety $ 15,915,678 16,850,087 17,410,033 18,631,042 21,927,751 21,799,386 23,627,184 25,598,466 26,797,864 30,798,786 Community Development $ 6,465,977 7,363,194 7,431,539 7,894,536 8,636,634 11,538,444 9,351,917 10,315,783 12,146,247 13,644,301 (1)Includes General, Special Revenue, Debt Service, and Capital Projects Funds. (2) Beginning in fiscal year 1997-98, Park Maintenance expenditures are included in Public Works instead of Community Services. GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION 2003-04 Capital Projects 23% Public Works 16% Debt Service 2% Community Services 12% General Government 8% Public Safety 27% Community Development 12% Source: City of Carlsbad Comprehensive Annual Financial Reports 110 Community Services $ 7,459,685 7,590,363 8,390,009 6,672,810 7,541,378 9,088,264 11,571,249 12,448,725 13,026,341 13,914,997 Public Works $8,111,572 8,956,757 8,816,767 11,437,101 12,689,683 13,822,429 14,402,096 15,404,566 18,176,697 18,044,784 Capital Outlay $12,159,653 9,654,082 13,556,164 23,693,412 52,106,587 39,543,074 22,066,731 37,503,175 26,410,483 26,405,614 Debt Service $ 4,296,290 3,537,612 3,377,051 4,807,228 2,469,647 2,480,878 2,843,090 2,827,945 3,299,991 2,680,545 SPENDING ON CAPITAL PROJECTS LAST TEN YEARS TOTAL EXPENDITURES LAST TEN YEARS $o $0 Fiscal Year Fiscal Year 111 CITY OF CARLSBAD General Governmental Revenues by Source*'* Last Ten Fiscal Years Fiscal Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Total(2) $69,768,517 74,611,395 98,645,130 122,653,159 145,393,991 115,252,270 136,244,948 131,323,111 141,617,437 147,362,099 Property Taxes $13,537,893 13,576,407 14,516,474 15,226,827 17,121,586 19,916,613 23,143,014 28,495,155 31,410,575 33,948,756 Sales Taxes $11,399,568 11,542,970 12,495,143 14,817,057 17,129,474 19,493,247 21,196,726 21,660,902 25,542,844 25,571,192 Transient Occupancy Taxes $3,252,270 3,406,917 3,675,472 6,046,092 7,010,249 8,333,196 9,269,484 8,533,329 8,387,388 8,813,426 Business Licenses $1,245,830 1,491,159 1,510,462 1,603,744 1,737,850 1,863,514 2,300,367 2,440,387 2,305,178 2,871,715 Other Taxes $8,434,825 8,621,717 10,824,890 15,290,601 14,508,643 12,661,882 14,237,832 10,398,486 6,510,259 8,327,952 (1) (2) Includes General, Special Revenue, Debt Service, and Capital Projects Funds. Includes interdepartmental services, donations, and miscellaneous revenues. GENERAL GOVERNMENTAL REVENUE LAST TEN YEARS PROPERTY TAX AND SALES TAX REVENUE LAST TEN YEARS vi NO r- oo ONON ON ON ON ONON ON ON ON ON O —e oo -ts M »s fs Fiscal Year Source: City of Carlsbad Comprehensive Annual Financial Reports Fiscal Year D Property Tax • Sales Tax 112 Licenses Inter- and Charges for Governmental Permits Services $7,590,323 $3,766,340 $9,819,230 6,426,262 4,178,844 6,805,386 11,764,760 5,609,730 10,707,653 17,091,140 6,484,025 7,614,902 17,801,614 3,826,686 6,805,147 14,094,118 3,320,851 5,749,416 14,285,677 3,409,156 6,427,307 14,266,527 1,998,210 7,751,065 19,775,324 2,042,529 10,058,671 22,505,969 2,328,524 9,899,183 TRANSIENT OCCUPANCY TAX LAST TEN YEARS 10 -f <tm f^HLffULc o •0 ~| 1 "" 1i '-l-lTi f\ m 4 EiJii": Bira BJpg ^jHfej mm ^ _ 1 _ i « 1 « C-sCSOVOVONOOOO Income from Fines and Property and Forfeitures Investments $263,411 $4,415 335,395 4,862 317,892 6,075 331,318 8,632 935,955 8,925 839,831 10,495 888,608 20,384 947,183 18,700 923,068 14,801 1,092,380 3,901 975 050 188 ,261 ,565 ,817 ,618 ,470 ,549 ,415 Contributions from Property Owners $2,148,548 $ 9,359,802 15,450,861 25,861,948 45,763,304 14,733,063 15,982,528 11,250,770 14,546,966 23,682,348 Other(2) 3,894,304 4,004,486 5,696,605 3,653,244 3,827,918 3,750,722 4,719,631 4,880,627 5,313,086 4,419,239 CHARGES FOR SERVICES LAST TEN YEARS 12 - r*H- <» 10 •eo 3 8 - § c 6 • tt1. J5 4 • O « 2- J|J 0 • o >4 ^ a OSOS ~fl~ - ||-ujyj OS OSOS OS ^^m i& iMl OS OS O O OOS OS O 0 0 \ - . • "P ^ f) ^o o0 O Fiscal Year Fiscal Year 113 CITY OF CARLSBAD Computation of Legal Debt Margin June 30, 2004 Net assessed valuation $ 14.303.050.347 Debt limit (15% of 25% of net assessed valuation as adjusted) 536.364,388 Amount of debt applicable to debt limit: Bonded debt 12,840,000 Certificates of participation 3,360,000 Obligations under capital leases 78.507 Total amount of debt applicable to debt limit 16.278.507 Legal debt margin $ 520,085,881 Percent of debt limit 3,0% Source: County of San Diego Office of the Auditor and Controller 114 CITY OF CARLSBAD Schedule of Direct and Overlapping Bonded Debt June 30, 2004 2003-04 Assessed Valuation: $14,654,767,555 Redevelopment Incremental Valuation: 351,717,208 Adjusted Assessed Valuation: $14,303,050,347 OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/30/04 Metropolitan Water District 1.175 $ 5,257,831 Carlsbad Unified School District 98.066 22,799,138 Carlsbad Unified School District Lease Tax Obligations 98.066 465,814 Carlsbad Unified School District Community Facilities District No. 1 100.000 9,700,000 Oceanside Unified School District 0.008 5,900 Vista Unified School District 0.069 66,488 Encinitas Union School District 28.808 7,587,030 San Marcos Unified School District School Facilities Improvement District 36.912 7,494,250 San Marcos Unified School District Community Facilities District No. 5 100.000 26,975,000 San Dieguito Union High School District Community Facilities District No. 94-1 100.000 289,506 San Dieguito Union High School District Community Facilities District No. 94-2 98.327 20,818,677 San Dieguito Union High School District Community Facilities District No. 95-2 36.882 321,922 San Dieguito Union High School District combined Community Facilities District 28.740 13,921,656 Olivenhain Municipal Water District, Assessment District No. 96-1 22.168 4,490,128 City of Carlsbad 1915 Act Bonds 100.000 44,985,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $165,178,340 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: San Diego County General Fund Obligations 6.231% $ 26,900,161 San Diego County Pension Obligations 6.231 79,063,783 San Diego County Superintendent of Schools General Fund Obligations 6.231 129,449 Mira Costa Community College District Certificates of Participation 26.874 1,408,198 Carlsbad Unified School District General Fund Obligations 98.066 56,657,631 San Marcos Unified School District General Fund Obligations 31.739 2,051,926 Encinitas Union School District Certificates of Participation 28.808 534,388 Other School District Certificates of Participation Various 261,324 City of Carlsbad General Fund Obligations 100.000 3,360,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $ 170,366,860 COMBINED TOTAL DEBT $335,545,200'" '''Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 2003-04 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.15% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($3,360,000) 0.02% Combined Total Debt 2.35% SHARE OF AUTHORIZED AND UNSOLD GENERAL OBLIGATION BONDS: Oceanside Unified School District $4,040 Vista Unified School District $19,072 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/04: $0 Source: California Municipal Statistics, Inc. 115 Fiscal Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 CITY OF CARLSBAD Construction and Business Activity Last Ten Fiscal Years Building Permit Revenue 644,131 917,788 1,262, 2,094, 177 523 2,524,063 2,156, 2,102, 1,085, 986, 1,282, $600 -| $500 • $400 • $300 - $200 - $100 • $0 - 584 074 819 890 126 E S Percent Chan 76 42 37 65 20 ge 2 4 6 9 5 (14.6) (2 5) (48.3) (9 29 1) 9 Estimated Valuation $145,344,099 162, 305, 479, 588, 468, 513, 272, 265, 323, STIMATED VALUATION 116,427 247,426 909,805 527,417 596,775 763,904 671,912 175,025 157,350 Business License Revenue $1 1 1 1 1 1 2 245,830 491,159 510,462 603,744 737,850 863,514 300,367 2,440,387 2,305,178 2 OF BUILDING PERMITS ISSUED - LAST TEN YEARS / s X "1-f xi manA o\ t 1 > r~ x - iL 90 O-OS ^ ^m - mT"1 — •;ooo oors 871,715 jg&g^gL OO ] b Oo oM M 1 Fiscal Year Percent Change 13.9 19.7 1.3 6.2 8.4 7.2 23.4 6.1 (5.5) 24.6 Source: City of Carlsbad Comprehensive Annual Financial Reports 116 CITY OF CARLSBAD Water Enterprise Revenue Bond Coverage Last Ten Fiscal Years Fiscal Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Gross Revenue0' $ 15,912,020 17,147,790 18,911,511 18,356,555 19,942,226 22,178,880 23,187,752 24,925,994 23,791,166 22,640,030 Total Expenses'2' $ 12,690,114 13,998,346 14,692,531 14,583,879 16,732,975 18,609,221 18,027,298 19,310,792 19,261,199 20,950,012 Net Revenue Available for Debt Service $ 3,221,906 3,149,444 4,218,980 3,772,672 3,209,251 3,569,659 5,160,454 5,615,202 4,529,967 1,690,018 Principal $ 825,000 880,000 1,040,000 955,000 995,000 1,040,000 1,075,000 1,120,000 1,175,000 0 Debt Service Interest $ 700,098 644,822 494,954 264,695 227,450 187,650 145,010 99,860 51,700 0 Requirements Total $ 1,525,098 1,524,822 1,534,954 1,219,695 1,222,450 1,227,650 1,220,010 1,219,860 1,226,700 0 Coverage 2.11 2.07 2.75 3.09 2.63 2.91 4.23 4.60 3.69 N/A oQ (1) (2) Includes operating and non-operating revenues. Includes operating and non-operating expenses. WATER ENTERPRISE GROSS REVENUE VS. TOTAL EXPENSES LAST TEN YEARS $25 i Fiscal Year D GROSS REVENUE • TOTAL EXPENSES WATER ENTERPRISE REVENUE AVAILABLE FOR DEBT SERVICE LAST TEN YEARS $6 -i Fiscal Year Source: City of Carlsbad Comprehensive Annual Financial Reports 117 CITY OF CARLSBAD Schedule of Assessed Valuation Last Ten Fiscal Years Less Property Fiscal Year Secured Property Unsecured Property Exemptions 1994-95 $ 5,673,354,814 $ 288,206,831 $ 40,417,338 1995-96 5,676,061,219 310,402,764 46,279,594 1996-97 5,811,751,594 348,706,124 55,138,448 1997-98 6,232,883,670 352,854,173 57,681,797 1998-99 7,154,426,710 424,962,226 78,827,023 1999-00 8,675,347,964 419,824,253 85,462,447 2000-01 10,289,895,123 422,862,440 95,111,634 2001-02 11,586,003,633 519,294,090 115,461,551 2002-03 12,801,430,765 487,682,538 131,448,341 2003-04 14,054,283,700 559,694,669 153,968,422 Does not include redevelopment incremental valuation or State-assessed unitary values. Source: County of San Diego Office of the Auditor and Controller 118 Total Assessed Valuation"' $ 5,921,144,307 5,940,184,389 6,105,319,270 6,528,056,046 7,500,561,913 9,009,709,770 10,617,645,929 11,989,836,172 13,157,664,962 14,460,009,947 Homeowner's Exemptions $ 96,173,142 98,488,810 100,249,766 103,825,400 108,623,200 119,026,600 127,530,200 139,157,200 147,953,400 156,595,600 Net Assessed Valuation $ 5,824,971,165 5,841,695,579 6,005,069,504 6,424,230,646 7,391,938,713 8,890,683,170 10,490,115,729 11,850,678,972 13,009,711,562 14,303,050,347 Percentage Change (2.9) 0.3 2.8 7.0 15.1 20.3 18.0 13.0 9.8 9.9 NET TAXABLE VALUE LAST TEN YEARS 03 Q $16 - $14 - Fiscal Year 119 Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2010 (Estimate) 2020 (Estimate) Square Miles 42.2 42.2 42.2 42.2 42.2 42.2 42.2 42.2 42.2 42.2 42.2 42.2 Population* ° 66,479 68,010 70,532 73,688 77,550 82,030 83,469 88,013 90,271 92,995 103,121(2) 108,5 14<2) CITY OF CARLSBAD Demographic Statistics Last Ten Fiscal Years Population Percent Change (0.2) 2.3 3.7 4.5 5.2 5.8 1.8 5.4 2.6 3.0 10.9 5.2 County Population0' 2,658,584 2,682,093 2,724,437 2,794,785 2,853,258 2,911,468 2,883,595 2,918,300 2,961,579 3,017,204 3,388,400(3) 3,863,500<3) City Population Percent of County 2.5 2.5 2.6 2.6 2.7 2.8 2.9 3.0 3.0 3.1 3.0 2.8 (1) Source: State Department of Finance. (2) Source: Based on City of Carlsbad projected residential construction estimates in 2004-05 Capital Improvement Program. (3) Source: State Department of Finance Population Projections (May 2003). POPULATION LAST TEN YEARS 100,000 -' 90,000 - ' 80,000 - ' 70,000 - ' 60,000 - ' 50,000 - ' 40,000 - ' 30,000 - ' 20,000 • 10,000 • ' £o\ E^SJ /MB §ON E^a im. r- ON ON apa fsm 00&>a^ f=i -"-: 8ON E^a s. ,£ io cp /•I =~ oo Ejsa m ,- <s § ^H ism ~ " IT %, fnoo *¥• ffsm P ^r§ °r Fiscal Year 120 CITY OF CARLSBAD Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 $35 Y $30 •' .1 $25 - ' § $20 - ' a v $15-' -2 fl•3 $10-'Q $5 -' $0 -I«LJir9a Total Total Current Current Levy Collections $11,977,833 $10,843,322 11,891,199 11,164,134 12,227,583 11,551,981 13,277,486 12,636,654 15,115,611 14,421,616 17,923,250 17,110,252 20,959,581 20,085,365 23,554,392 22,705,762 26,220,028 25,200,220 32,215,674 30,859,058 PROPERTY TAX LEVIES & COLLECTIONS LAST TEN FISCAL YEARS r~m •r*ILy^/fcfitaTB [ [LI 1 1 il 1[[[[[[[^^fe§ BBBPjjii! ^^^^Ks IBKis BHUr? BBH^^ IBBBiij?i — ^^^ | -P.^ | ,,. | _^^^j , «^_p_ o r* oo ON o -HON ON ON ON o oON ON ON ON O O Fiscal Year a LEVIES B COLLECTIONS 1Itft 0 0O 0 % of Levy Collected 90.5 93.9 94.5 95.2 95.4 95.5 95.8 96.4 96.1 95.8 I t 11 HI Source: County of San Diego Office of the Auditor and Controller 121 CITY OF CARLSBAD Principal Employers 2003-04 FIRM Manufacturing Callaway Golf Invitrogen Taylor Made Golf- Adidas Golf Company Acushnet Golf Tyco-Healthcare Seasilver USA ViaSat Ashworth PRODUCT/SERVICE Golf Equipment Research Supplies Golf Equipment Golf Equipment Respiratory Products Nutritional Supplements Data Communications Golf Apparel EMPLOYEES 1,785 900 645 535 500 500 450 400 Non-Manufacturing Carlsbad Unified School District Four Seasons Resort - Aviara City of Carlsbad La Costa Resort & Spa Gemological Institute of America ISIS Pharmaceuticals 24-Hour Fitness SOMC Group, Inc. LEGOLAND, California San Diego Gas & Electric Hoehn Motors Upper Deck Education Resort Municipal Government Hotel/Health Spa Gemological School Research and Development Health Club Headquarters Software Distributor Family Theme Park Utilities Car Dealership Trading Cards 950 900 646 604 600 506 450 410 372 325 300 300 Source: City of Carlsbad, Chamber of Commerce 122 Taxpayer CITY OF CARLSBAD Principal Taxpayers 2003-04 Callaway Golf Company Aviara Resort Associates La Costa Hotel & Spa Corporation Continuing Life Legoland California, Inc. Bressi Gardenlane LLC Prentiss Properties Borders, Inc. H. G. Fenton Company Real Estate Collateral Mgmt. Co. Gemological Institute Universe Institutional Percentage of Net Assessed Type of Business Manufacturer Resort & Golf Course Hotel & Health Spa Senior Retirement Community Family Theme Park Real Estate Real Estate Retail Sales Distribution Warehouse Real Estate Gemological School Residential Apartment Rentals Valuation $159,353,837 138,722,821 132,292,486 125,451,962 105,000,000 76,495,927 71,845,631 68,001,543 63,028,919 62,465,278 55,520,616 52,549,615 $1,110,728,635 Valuation* ' 1.1% 1.0% 0.9% 0.9% 0.7% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 7.8% (i)Net assessed valuation for 2003/04:$14,303,050,347 Source: County of San Diego Office of the Auditor and Controller 123 CITY OF CARLSBAD Top 30 Sales Tax Generators 2003-04 Firm Product/Service Aviara Resort Associates Bob Baker Jeep Bob Baker Volkswagen Carlsbad Toyota Carlsbad Volvo Costco Wholesale Dixon Ford Hoehn Acura Hoehn Honda Invitrogen Corporation J C Penney Company La Costa Resort & Spa Legoland Lexus Carlsbad Macy's Department Store North County CMC North County Hyundai Pacific Sales Kitchen & Bath Polo Ralph Lauren Outlet Reliable Wholesale Lumber Robinsons-May Department Store Rorick Buick/Cadillac Sears Roebuck & Company The Gap Townsend Lincoln/Mercury Toyota Motor Credit Verizon Wireless Vons Grocery Company Weseloh Chevrolet Worthington Dodge * Companies are listed in alphabetical order. Hotel/Food Sales Car Dealership Car Dealership Car Dealership Car Dealership General Stores Car Dealership Car Dealership Car Dealership Manufacturer of Research Supplies Department Store Hotel/Food Sales/Spa Family Theme Park Car Dealership Department Store Car Dealership Car Dealership Furniture/Appliance Clothing Store Building Materials Department Store Car Dealership Department Store Clothing Store Car Dealership Automobile Lessor Wireless Telecommunication Grocery/Food Markets Car Dealership Car Dealership Source: MBIA MuniServices Company 124 CITY OF CARLSBAD Miscellaneous Statistical Information 2003-04 Date of Incorporation July 16, 1952 Type of City General Law Form of Government Council/Manager Area 42.19 sq. miles Population (CA Dept. of Finance Report 01 /04/04) 92,995 Net Assessed Valuation $14,303,050,347 Streets: Number of Street Lights 6,432 Miles of Streets 293 Fire Protection: Number of Stations 6 Number of Firefighters & Officers 73 Police Protection: Number of Stations 1 Number of Sworn Police Officers 107 Municipal Water District: Number of Customers 79,050 Number of Water Connections 24,560 Average Daily Consumption (in Millions of Gallons) 18.4 Miles of Lines and Mains 431 Miles of Sewers 232 Recreation and Culture: Number of Parks 39 Acres of Parks (Improved Community & Special Use Areas) 295 Acres of Open Space (Special Resource Areas & General City-Owned Open Space) 490 Number of Pools 1 Number of Libraries 2 Number of Materials in Circulation 353,339 Total Number of Authorized Full-Time City Employees 646 Source: City of Carlsbad, Finance Department 125 126