Loading...
HomeMy WebLinkAbout; ; 2004-2005 CAFR; 2005-06-30Comprehensive Annual Financial Report for the fiscal year ended June 30, 2005 COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2005 1635 Faraday Avenue, Carlsbad, CA 92008 Website: www.carlsbadca.gov Prepared by the Finance Department Cover design by: Nancy Lucore CITY OF CARLSBAD Comprehensive Annual Financial Report Year Ended June 30, 2005 TABLE OF CONTENTS Page 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 13 Location Map 14 List of City Officials 15 Organization Chart 1 6 FINANCIAL SECTION: Independent Auditor's Report 17 Management's Discussion and Analysis 19 Basic Financial Statements Government-wide Financial Statements: Statement of Net Assets 34 Statement of Activities 36 Fund Financial Statements: Balance Sheet - Governmental Funds 38 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 40 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 42 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 44 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 46 Statement of Net Assets - Proprietary Funds 48 Statement of Revenues, Expenses and Changes in Net Assets - Proprietary Funds 52 Statement of Cash Flows - Proprietary Funds 54 Statement of Fiduciary Assets and Liabilities - Agency Funds 58 Notes to the Financial Statements 59 Supplementary Information Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 90 Combining Schedule of Revenues and Expenditures - Budget and Actual (Budgetary Basis) - Special Revenue Funds 94 Combining Schedule of Revenue and Expenditures - Budget and Actual (Budgetary Basis) - Debt Service Funds 96 Combining Statement of Net Assets - Internal Service Funds 98 Combining Statement of Revenues, Expenses and Changes in Net Assets - Internal Service Funds 1 00 Combining Statement of Cash Flows - Internal Service Funds 102 Combining Statement of Changes in Assets and Liabilities - Agency Funds 106 Schedule of Annual Debt Service Requirements 108 CITY OF CARLSBAD Comprehensive Annual Financial Report Year Ended June 30, 2005 TABLE OF CONTENTS (CONTINUED) Page STATISTICAL SECTION: (Not covered by Independent Auditor's Report) Government-wide Information: Government-wide Expenses by Function 112 Government-wide Revenues 114 Fund Information: General Governmental Expenditures by Function - Last Ten Fiscal Years 116 General Governmental Revenues by Source - Last Ten Fiscal Years 118 Computation of Legal Debt Margin 120 Schedule of Direct and Overlapping Bonded Debt 121 Construction and Business Activity - Last Ten Fiscal Years 122 Water Enterprise - Revenue Bond Coverage - Last Ten Fiscal Years 123 Schedule of Assessed Valuation - Last Ten Fiscal Years 124 Demographic Statistics - Last Ten Fiscal Years 126 Property Tax Levies and Collections - Last Ten Fiscal Years 127 Principal Employers, 2004-05 128 Principal Taxpayers, 2004-05 129 Top 30 Sales Tax Generators, 2004-05 130 Miscellaneous Statistical Information, 2004-05 131 INTRODUCTORY SECTION Carlsbad City Council 2005 Five-Year Vision Statements 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... > Provides a diverse and healthy economic base that creates opportunities for employment to the residents of Carlsbad, economic vitality to the community, and the necessary revenues to support City services. > Provides programs, policies and decisions to 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. > Occupies a 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. > Provides an open government leading to 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: 0 Open space 0 Wildlife habitats 0 Water quality/conservation 0 Beach preservation 0 Air quality 0 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 October 7, 2005 Honorable Mayor, City Council, and Citizens of the City of Carlsbad CITY OF CARLSBAD Carlsbad, California LETTER OF TRANSMITTAL 2004-05 COMPREHENSIVE ANNUAL FINANCIAL REPORT I am pleased to present the 2004-05 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, 2005. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal controls 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 has issued an unqualified ("clean") opinion on the City of Carlsbad's financial statements for the year ended June 30, 2005. 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 statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City's separately issued Single Audit Report. The results of the City's Single Audit for the fiscal year ended June 30, 2005 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 1635 Faraday Avenue • Carlsbad, CA 92008-7314 • (760) 6O2-243O • FAX (760) 602-8553 www.ci.carlsbad.ca.us • Business License (760) 602-2495 • Utility Billing (760) 602-242O • Purchasing (760) 602-246O - 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 95,146, with an expected build-out population of 110,000 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; over 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 protection services 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, in part, 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 assume responsibility 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 City of Carlsbad 2004-05 Strategic Goals Top-Quality Services - Be a city that provides exceptional services on a daily basis. Transportation/Circulation - 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, which are fiscally responsible, and are consistent with the General Plan and Growth Management Standards. Water — Ensure, in the most cost-effective manner reliable, water quality and 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 support sustainable economic health and manage fiscal resources effectively. Communication — Ensure that community members, Council and staff are well informed, continuing to be a more responsive government and a high level of citizen confidence in government. Learning, Culture & Arts — Promote and support continuous learning, cultural opportunities and the arts within the community and the City organization. Citizen Connection — Be a city that embraces Community connectivity through the effective use of technological and interpersonal mediums. 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. Budgetary control for the City is maintained through its accounting systems. The City Council adopts the formal budget at the beginning of each fiscal 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 ISO 148 146 144 142 140 138 136 134 132 130 Index of Leading Economic Indicators San Diego County 2001-2005 '"'"• -., - • ;• ,."-„ •"* "-. .•' '" "-.' ...... - . T '' ....... 01 02 03 04 05 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 University of San Diego (USD) tracks the San Diego economy through its Index of Leading Economic Indicators. The USD index tracks six items to evaluate growth trends in the San Diego economy: unemployment filings, want ads, local stock prices, consumer confidence, building permits and the strength of the national economy. The index declined in April 2005 by .5%, which makes the fourth consecutive monthly decline in the index. It was led by a sharp drop in consumer confidence. Four of the other components—building permits, initial claims for unemployment insurance, local stock prices, and the outlook for the national economy—were down by small to moderate amounts. Only one component, help wanted advertising, was positive, but only by a small amount. USD has indicated, "the breadth of the decline continues to be broad. For the third straight month, five of the six components were negative. Although a downturn in the local economy is unlikely in 2005, the outlook is for a weakening to occur in the second half of the calendar year. Job growth will remain positive, but the local unemployment rate is likely to rise by the end of the year." Other factors contributing to the weakening outlook is the high price of gasoline and the uncertainties caused by the fiscal crisis in the City of San Diego. Carlsbad's economy is tied closely to that of the San Diego region, although development patterns may differ. Carlsbad experienced strong growth in the past year in revenues from property and sales taxes as well as Transient Occupancy Taxes (TOT). Property taxes are expected to grow by over 10% in fiscal year 2005-06, reflecting the continuing escalation in housing prices as well as new development. Sales taxes should add an additional $ 1 million for the upcoming fiscal year, due to good consumer demand and new sites in the City such as The Forum, a new retail center in southern Carlsbad. Transient Occupancy Taxes, the City's gauge of the tourism industry, ended the year showing a 14% gain with a large part of that coming from the reopening of one of Carlsbad's premiere resorts. With supply relatively low, housing prices have continued to escalate. The median price for single-family homes in Carlsbad was $725,000 for calendar year 2004, a 22% increase from the previous year. Total assessed values in the City stand at close to $ 16 billion; double what they were just five years ago. With the new developments Median SFD Home Prices within the City starting to sell this year, the City has projected it will add about 3,300 more residential units and an additional 4.5 million square feet of commercial/industrial development over the next five years. The City's residential housing stock is about 88% built out, with approximately 5,700 housing units remaining to develop. $800,000 -, Carlsbad's residential real estate market has continued strong throughout the year. The City expects to issue 1,350 residential permits this year, slightly higher than the 1,276 in the previous year. The impediment to higher development is mainly due to the lack of supply rather than a lack of demand. There are a number of new residential communities under construction or in the final phases of development that will add significantly to the residential housing stock in Carlsbad. Home sales are under way in the Calavera Hills project in northeast Carlsbad, with 331 single-family homes and 358 multi-family units planned. The Villages of La Costa projects known as the Oaks, the Greens and the Ridge are under construction and will add approximately 1,700 single-family and 550 multi-family units. The Bressi Ranch area is also under construction with 523 single-family and 100 multi-family units to be developed. And finally, the Robertson Ranch area, which is expected to contain over 1,000 residential units, is finishing up its master plan. The completion of these planned communities will signal an end to the large-scale residential developments in Carlsbad. Commercial and industrial development has been sluggish in the past few years, adding well under a million square feet per year. This is expected to pick up over the next five years to average 900,000 square feet per year. Some of the major businesses in town include the Gemological Institute of America, ViaSat, Invitrogen, Callaway, Taylor Made, Upper Deck, and many others. 2000 2001 2002 2003 2004 Commercial development has brought much needed entertainment and shopping venues to citizens and visitors alike, and has generated additional sales taxes to help pay for City services. Carlsbad is home to Car Country Carlsbad - an auto mall; the Carlsbad Premium Outlets - a specialty outlet center; Plaza Camino Real - a regional shopping mall; a Costco center; and the most recent addition; the Forum at Carlsbad - a commercial center with retail shops, restaurants and other commercial uses. General Fund Revenues 97 98 99 00 01 02 03 04 05e 06e H Property Tax | Sales Tax QTOT QVLF Q Franchise Fees (All Others Development has also enhanced Carlsbad's reputation as a destination resort for tourism. The City is host to a major family theme park: Legoland, and has two luxury resorts available for its visitors: the Four Seasons Resort at Aviara and the La Costa Resort & Spa. There are also a number of other quality hotels and motels in the City with the most recent addition being the Extended Stay America, which opened in fall 2002 bringing the total available hotel rooms in the City to about 3,500. For the future, there are several new tourist-serving projects in development. An 86-room hotel is under construction expecting to open in 2005-06. The La Costa Resort received approval to develop up to 197 commercial resort villas on their site. These are expected to be phased in over the next several years adding over $1.5 million in TOT when completed. In addition, a new project next to Legoland has been approved for 350 hotel rooms and 350 timeshare units. This project will also be phased in over time and is expected to generate an additional $2 million per year in TOT. For fiscal year 2005-06, the City's revenue projections reflect continued growth in sales taxes of about 5.5% plus additional amounts due to new retail sites opening in the next year. The growth in housing prices is expected to level out as interest rates rise with assessed values increasing 11.6% according to the County Assessor. New building permits are predicted to slow slightly as new housing developments come on line and absorption rates drag out. And finally, tourism is expected to continue strong, with TOT receipts surpassing 2001 's level by the end of 2005 and growing in the future with the addition of more available rooms. 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 In addition to the risk of a housing bubble burst or a slow down in the economy, the state of California's fiscal problems also cast a shadow on the City's economic future. The state of California has been in a severe fiscal crisis for a number of years. Through a variety of loans, one-time revenues, interfund borrowings and raids on city, county and special district funds, it has been able to manage its cash flows and stay solvent. However, more drastic measures will be needed for the State to finally get its budget in balance. According to the Legislative Analyst's Office (LAO), the State is facing significant deficits in future years despite the stronger revenues seen in the past few months. The LAO's report states that while the Governor's budget proposal for 2005-06 would balance the budget for the next two years, a $3 to 4 billion shortfall will still exist in future years. The ongoing budget shortfalls result from the high reliance in the near term on one-time savings and loans that will need to be repaid in the future. The State has balanced its budget by taking city money in the past, and the risk is that they may find a way to make it happen again. In fiscal year 2004, the State took approximately $1.5 million in Vehicle License Fees from the City's General fund with the promise to pay it back in the future. Then, in November 2003, a ballot measure was passed authorizing what is known as the "Triple Flip". This is a complicated method of securing payment for the Deficit Reduction Bonds, issued by the State to balance their budget. It is essentially a temporary swap of a % cent of the cities' sales tax in return for property tax. It should have no effect on the amount of tax revenues the cities receive but it will result in the loss of some interest earnings due to the delay in the timing of the receipt of the taxes. As a result of the continued attacks on cities revenues, a coalition of cities, counties and special districts got a measure placed on the November 2004 ballot to put some protections in place for local governments. The measure included the following provisions: • Permanently reduces the vehicle license fee (VLF) rate to its current .65% and provides property taxes to cities and counties to offset the loss on a dollar for dollar basis. • Guarantees repayment in fiscal year 2007 of the of VLF amounts taken by the State. • Guarantees that the "Triple Flip" will be reversed when the bonds are repaid. • Prevents the Legislature from reducing the combined property tax shares of cities, special districts, and the county, except to borrow the funds on a temporary basis to address a "severe state fiscal hardship". • Provides for mandate relief if the State does not pay the mandated costs. All of this in return for a contribution to the State totaling $1.3 billion in both the 2005 and 2006 fiscal years from cities, counties and special districts. The measure passed and as a result, the City of Carlsbad will give the State $1.8 million from the General fund and $220,000 from its Redevelopment Agency in fiscal years 2004-05 and 2005-06. However, in exchange for this two year "contribution" to the State, the cities have gained protection from further raids on their major tax revenues by the State. 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 15+ 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 prepares ten-year forecasts for the General fund each year in order to understand the effects of actions taken today on the City's future. The City has experienced remarkable revenue growth over the past ten years due to the development of the majority of its commercial sites. The future will bring a few more commercial sites but at a slower pace, while residential development will continue for a number of years. There are also quite a few City facilities - mainly parks and civic facilities - planned in 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 - have created upward pressure on expenditures, especially over the past several 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. This forecast assumes that revenue growth will continue at a moderate pace in 2006 and into the future. To project the expenditures, it includes all known personnel costs, most of which have been negotiated with the employee groups. The City has multi-year agreements with all the major employee groups so the effects can be projected fairly accurately for the next several years. Inrrillicns 200 180 160 140 120 100 80 60 General Find Revenues ewer Expencftues The forecast assumes 15% increases in health care costs in the near future, slowing to 5% in the future. It also assumes personnel growth (new positions) to remain rather flat at no more than 2% per year. Cost of living increases between 3 and 5% have been added to personnel costs. Pension plan costs are anticipated to remain essentially at current levels. And finally, it includes estimated operating costs for all capital projects in the timeframes shown in the Capital Improvement Program (CIP). One of the biggest assumptions in the forecast is that services remain the same. No new services have been anticipated although growth in current services to match the growing population has been incorporated. The results show that the General fund is balanced into the future with a slight surplus in each year of less than 5%. This achieves the goal set out by Council to maintain a balanced budget. The situation was different just a couple of years ago when the forecast projected that the City was headed for deficits unless corrective measures were taken. For the past two years, Council and staff have worked to bring the forecast back into balance. Through a combination of enhancing revenue sources and finding more efficient methods of providing services (and with the help of a strong local economy), the City was able to turn the forecast around from heading into deficits to a healthy balance. 40 BFBflvJUES HEXFBJDTRJRES 2005 2006 2007 2038 2009 2010 2011 2012 2013 2014 2015 2016 Millions $15 $10 Forecast Comparison One of the more significant revenue enhancements that occurred over the past year was the passage of the reauthorization of Transnet revenues. Transnet is a !/4 cent additional sales tax collected countywide and used to improve the transportation systems. The current authorization for the sales tax was to end in 2008. SANDAG, the San Diego Association of Governments, placed a measure on the November 2004 ballot to reauthorize the sales tax for another 40 years. The measure passed providing the City over $1.5 million in annual taxes to be spent on street repair, maintenance and construction, in addition to other potential project funds. The ability to understand the future impacts of both changes in revenue sources as well as program needs is crucial to ensure that the City has the funds available to make its future plans come true. The General fund -$io -$15 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Net Revenues over (under) Expenditures forecast is a tool available to the City to achieve the goal of 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, 2005 was 1.89. The average return realized on the pooled investments rose from 3.43% in fiscal year 2003-04 to 3.55% for fiscal year 2004- 05. 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 (loss) reflected in the portfolio over the last few years. As of June 30, 2005, the market value is essentially equal to the amortized cost of the portfolio. Thus, the investment income for the 2004-05 fiscal year includes a slight reduction as a result in the decline in the market value of the portfolio. This is discussed more thoroughly in the MD&A. Historical Unrealized Gains/Losses as Percent of Amortized Cost 4.00% T 3.00% 2.00% 1.00% 0.00% -1.00% J Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Major Initiatives Public safety has always been, and remains, a top Council priority. After reviewing the current staffing requirements and the population growth in the City, it was evident that there was a need to add new Police personnel to maintain the current service levels in the community. In 2005-06 additional staff will be hired to enhance the department's ability to provide community-oriented policing, to provide data and statistics allowing for increased efficiencies and smarter policing, and to provide school crossing guards that were previously provided through a contract with a temporary agency. In addition, the Fire Department will be purchasing and placing into service a new ladder truck in 2005-06. The new vehicle will provide better service coverage to the citizens of Carlsbad as the City continues towards buildout. Construction of the Recycled Water Facility and supporting infrastructure are near completion. This $45 million project included construction of a four-million-gallons-per-day treatment plant, distribution pipelines, a flow equalization storage facility, and pump stations. Although the construction of the treatment plant is complete, timing of the plant operations is dependent upon completion of Encina's Flow Equalization project. The facility 10 is being tested and should begin operations during fiscal year 2005-06. The pipelines will also be completed by that time, and the pump stations and Mahr Reservoir will become operational around July 2006. 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 $57 million. Funded by impact fees and the General fund. • Senior Center 1st floor remodeling to include additional amenities for the senior community. The 2nd floor will be remodeled to house City offices. The estimated cost for the renovation is just under $1 million. Funded by Redevelopment bonds and the General fund. • Pine Park Community Center design work is expected to begin in fiscal year 2008-09. This community facility and gymnasium will include basketball, volleyball, gymnastics, multi-purpose rooms, meeting rooms, a teen center and office space. Total cost of $7.6 million. Funded by impact fees. • Poinsettia Park Community Center is a 20,000 square foot community facility and gymnasium. Amenities include an enclosed soccer field, tot lot, picnic areas, tennis complex including a clubhouse and stadium court, and additional parking. Total cost of $11.6 million. The construction of seven tennis courts is scheduled to begin in 2005-06 and the remainder of the project will be completed in 2009-10. Funded by impact fees. • Lake Calavera Trails construction is scheduled to begin in the next year. The public, multi-use recreational trail system is planned on property located at Lake Calavera in the northeast quadrant of the City. The project expects to use volunteers to construct approximately 2.5 miles of the proposed 5 miles of trails. • Municipal Golf Course, expected opening in spring 2007. The City began the initial clearing and grubbing operation this fall in anticipation of constructing an 18-hole championship course. Total costs estimated at over $55 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 begin a collective dialogue about the future. Based on the community's input and Council's direction, there is a goal included in the 2005-06 Budget to begin the design of the hardscape (place) portion of the vision. The Centre City Gateway project will be developing a land use vision and strategy process for the coastal area near the center of the City. While the heart of the City may always be the Village area, the Gateway area is developing into the nerve center containing the commercial and industrial core of the City. The 2005-06 Operating Budget contains $100,000 to continue work on the land use planning while the Capital Improvement Program contains funding for the preliminary design of a City/Safety Training facility, a Public Works center and, ultimately, a Civic Center Plaza. 11 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, 2004. This was the seventh 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 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, KEVIN BRANCA Assistant Finance Director 12 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, 2004 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 13 ORANGE COUNTY SOLANA BEACH DEL MAR I "1-5 SAN DIEGO IMPERIAL BEACH TIJUANA 14 CITY OF CARLSBAD ELECTED CITY OFFICIALS Claude A. "Bud" Lewis, Mayor Matt Hall, Mayor Pro Tern Ann J. Kulchin, Council Member Mark Packard, Council Member Norine Sigafoose, Council Member Lorraine M. Wood, City Clerk James M. Stanton, City Treasurer ADMINISTRATION AND DEPARTMENT HEADS Raymond R. Patchett, City Manager Lisa Hildabrand, Assistant City Manager James F. Elliott, Administrative Services Director Lloyd Hubbs, Public Works Director Sandra Holder, Community Development Director Torn Zoll, Police Chief Kevin Crawford, Fire Chief Ron Ball, City Attorney Julie Clark, Human Resources Director Greg Clavier, Deputy Public Works Director, General Services ffm,: Debbie Fountain, Housing & Redevelopment Director Robert J. Greaney, Deputy Public Works Director, Maintenance and Operations - VACANT, Finance Director Marcella Escobar-Eck, Planning Director Pat Kelley, Principal Building Inspector Heather Pizzuto, 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 Richard Erhardt Beach Preservation Committee Bob Bender Community Television Foundation Courtney Heineman 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 Jeff Segall Planning Commission VACANT Senior Commission VACANT Serra Cooperative Library System Advisory Board Christine Petrou Sister City Committee Gorden Cress Traffic Safety Commission VACANT Underground Utility Advisory Committee 15 CITY OF CARLSBAD ORGANIZATION CHART Arts Commission Sister City Committee Historic Preservation CommissionELECTORATE Library Board of Trustees Serra Cooperative Library System Advisory Board Parks & Rec Commission Cl TY MANAGER Cl TY ATTORNEY Senior Commission PUBLIC SAFETY ADMINISTRA TIVE SERVICES PUBLIC WORKS COMMUNITY SERVICES ADMINISTRATION HUMAN RESOURCES ENGINEERING SERVICES ECONOMIC DEVELOPMENT INFORMATION TECHNOLOGY GENERAL SERVICES GEOGRAPHIC INFO SYSTEMS RECREATION RISK MANAGEMENT MAINTENANCE & OPERATIONS HOUSING AND REDEVELOPMENT SENIOR CENTER RECORDS MANAGEMENT Personnel Board Beach Preservation Committee Community Television Foundation Traffic Safety Commission Underground Committee I i- i 1t I 1 ^ 1 V 1 1 Elected Council Appointed TZ Staff Support Reporting Relationship Programs l~~l 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, 2005, 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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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, 2005, 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 October 7,2005 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. McGladrey & Pullen, LLP is a member firm of RSM International, an affiliation of separate and independent legal entities. 17 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 nonmajorfund 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. 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 October 7, 2005 18 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, 2005. 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 \ \ Basic Financial Statements 1 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. • ;-"--, ," "-"-"i?:- 1 1 Government- wide Financial Statements Fund Financial Statements :-- ::, :,.;-, ; ," - Notes to the Financial Statements Summary c>Detail 19 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 Rental 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. 20 • 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, 2005, as shown below, were $1.1 billion. 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 $125.7 million during the current fiscal year. Approximately 27% of this increase represents the degree to which increases in operating revenues have exceeded increases in operating expenses. Approximately 73% 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 2004 $370.3 298.4 668.7 15.2 19.3 34.5 282.7 195.7 155.8 $634.2 2005 $419.1 356.8 775.9 14.2 23.6 37.8 342.2 243.3 152.6 $738.1 Activities 2004 $129.9 193.9 323.8 8.1 12.1 20.2 183.2 102.6 17.8 $303.6 2005 $125.8 220.2 346.0 7.4 13.2 20.6 209.0 100.6 15.8 $325.4 Total 2004 $500.2 492.3 992.5 23.3 31.4 54.7 465.9 298.3 173.6 $937.8 2005 $544.9 577.0 1,121.9 21.6 36.8 58.4 551.2 343.9 168.4 $1,063.5 Total Percentage Change 2004-05 8.9% 17.2% 13.0% -7.3% 17.2% 6.8% 18.3% 15.3% -3.0% 13.4% 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 $1.1 billion at the close of the most recent fiscal year. A large portion of the City's net assets (52%) 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 ($168.4 million) may be used to meet the government's ongoing obligations to citizens and creditors. Just under 52% of the $152.6 million in unrestricted governmental activities net assets is attributable to the General fund. Although the unrestricted net assets of our business-type activities total $15.8 million, these resources cannot 21 be 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 $125.7 million during the year. This increase occurs when spending is less than the revenues received. There were several reasons for the increase in net assets: an emphasis on efficiencies resulting in a reduction in expenses/expenditures, $1.35 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 and enterprise 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 Capital 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 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 2005 $17.0 12.8 74.4 41.5 24.7 20.4 9.9 2.4 203.1 11.3 34.4 14.4 16.0 22.1 1.0 - - - 99.2 103.9 - 103.9 634.2 $738.1 Activities 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 2005 $27.5 0.5 17.1 2.0 - - 4.2 0.6 51.9 - - - - - - 21.4 7.2 1.5 30.1 21.8 - 21.8 303.6 $325.4 Total 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 2005 $44.5 13.3 91.5 43.5 24.7 20.4 14.1 3.0 255.0 11.3 34.4 14.4 16.0 22.1 1.0 21.4 7.2 1.5 129.3 125.7 - 125.7 937.8 $1,063.5 Total Percentage Change 2004-05 6.5% -17.4% 53.5% 21.5% 0.4% 11.5% 227.9% -37.5% 24.2% 31.4% 11.3% 4.3% 6.0% 13.3% 0.0% 1.9% 4.3% 15.4% 9.5% 44.2% -100.0% 44.2% 10.3% 13.4% 22 City of Carlsbad Sources of Revenue for Fiscal Year 2004-05 $255 Million Other (1%) Grants/ Contributions (32%) Income from Property and Investments (5%) Other Taxes (4%) TOT (4%) Property Taxes (17%) Charges for Services (18%) Federal Aid (7%) Just over 42% of the revenues of the City's governmental funds are generated through taxes collected (property, sales, transient occupancy tax, etc.), and almost 54% 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 increase in income from property and investments was primarily the result of a 4% rise in the average interest rate earned on the City's cash portfolio for the year and an average portfolio that was 10% higher during the fiscal year. In addition, the difference in the unrealized loss from last fiscal year to the current fiscal year was $10.1 million when reporting the value of the City's investments on a market value basis. This "paper loss", however, will never materialize, as the City holds its investments until maturity. The total cost of all programs and services was just over $129.3 million in fiscal year 2004-05. The City's expenses cover a range of services: • General Government (9%) 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 State Aid (2%) Sales Tax (10%) City of Carlsbad Functional Expenses for Fiscal Year 2004-05 $129.3 Million Sewer 6% General Government 9% 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 (11%) The mission of Community Development is to guide and facilitate the development of the City of Carlsbad. This is accomplished by ensuring 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. Public Safety 26% Public Works 17% Community Services 12% Community Development 11% 23 • Community Services (12%) Community Services consist of the Libraries, Cultural Arts, Recreation, Park Planning, and Senior Citizen programs. These programs are provided to a wide range of people and assist in their education and cultural development. • Public Works (17%) Public Works is responsible for building and maintaining all of the infrastructure assets of the City. This service area 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 (17%) The Carlsbad Municipal Water District, a subsidiary of the City of Carlsbad, provides potable water service to approximately 85% of the City (78,000 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 expense of the City's long-term debt that is associated with governmental activities. The following sections will provide information about the operations of the governmental and business-type activities separately. Governmental Activities The increase in net assets for governmental activities was $103.9 million. This increase was generated by total revenues of governmental activities of $203.1 million ($104.3 million in program revenues and $98.9 million in general revenues) offset by $99.2 million in total costs of governmental activities. The following table presents the total cost of each of the City's major programs, as well as each function's program revenue (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). 24 $80 T $70 $60 $50 $40 - $30 $20 - $10 - Governmental Activities Program Revenues and Expenses Fiscal Year 2004-05 (in millions) " - -- -- ~iii (™*|| ~™« f™fji j^«~Ji F*** ^-""-M J fecrM P'"'" SsH 1 Q Program Revenues B 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 ($17 million), grants and contributions from other governments and organizations which subsidize certain programs ($87.3 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 $99.2 million. During the 2004-05 fiscal year, the City received additional affordable housing revenue from shared appreciation, when many of the participants in the various loan programs sold their homes for more than the original purchase price. This one-time community development revenue resulted in program revenues exceeding expenses for the fiscal year. In addition, development within the City grew at a fast pace during the year, pushing development revenues from charges for services up by over $1.3 million when compared to last fiscal year. Program revenues exceed expenses in Public Works. The majority of Public Works revenues are used to acquire and build capital assets (versus covering operating expenses) that have not yet been constructed. Capital assets are generally constructed or purchased once sufficient revenue has been accumulated to pay for the cost. The City is currently in a developing or growing stage, and master plans are continuing to be designed to construct these new facilities, roads, parks, and other City-owned infrastructure. Business-Type Activities Business-Type Activities Program Revenues and Expenses $25 1 $20 $15 $10 $5 $0 •=•••|~ SSX Fiscal Year 2004-05 (in millions) Water KBSjjB^H H^I-^F-TL. Sewer Solid Waste 0 Program Revenues ED Expenses 25 Program revenues for the City's business-type activities totaled $45.1 million for the year, while functional expenses equaled $30.1 million. The City golf course is currently under construction, so the program revenues and functional expenditures are still minimal, and therefore not shown on the previous page graph. The course is anticipated to be operational in fiscal year 2007. Program revenues are higher than program expenses primarily due to capital contributions in the form of capital connection fees, developer constructed assets donated to the City, and Federal and State capital construction grants earmarked to help fund the Recycled Water facilities. Capital construction expenses are spread over the life of an asset as annual depreciation charges (program expenses). 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. In the current CAFR, several changes were made in the reporting of special revenue funds, including: • Special Benefit Districts have been combined with the Business Improvement District in the Financing Districts column. • Habitat and Agricultural Management have been segregated from the Donations and Bequests column. • State and Federal Grants have been combined with Police Asset Forfeiture. 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 Reserved for Other Purposes (in mi»ions) ($33.8 million) $374.4 Million Designated for Future Continuing Reserved for Golf Course ($30.3 million) /'/••' "^^H^'-'• -^•""''. •'> ' v\ ^ Undesignated ($107.9 million) Designated for Future Continuing Appropriations ($90.4 million) Designated for Approved Capital Projects Reserved to Liquidate Contracts and ' ($81.6 million) Purchase Orders ($30.4 million) As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $374.4 million, an increase of $44.7 million in comparison with the prior year. Approximately 29% of this amount ($107.9 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 because it has already been committed (1) for future capital projects - 26 22%, (2) to liquidate contracts and purchase orders of the prior period - 8%, (3) for future programs - 24%, (4) the future construction of a municipal golf course - 8% or (5) for a variety of other restricted purposes - 9%. GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (in millions of dollars) Total Increase Percentage Total (Decrease) Revenues Taxes 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 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 2005 $75.0 9.8 3.4 8.0 3.0 2.6 2.0 103.8 11.3 33.6 7.0 14.6 16.4 0.0 82.9 20.9 (5.6) 15.3 84.1 $99.4 2004-05 $4.1 4.1 1.1 0.4 1.5 0.0 (0.4) 10.8^^^=^== 2.6 3.1 0.4 0.9 0.6 (0.1) 7.5 Change 5.8% 71.9% 47.8% 5.3% 100.0% 0.0% -16.7% 11.6% 29.9% 10.2% 6.1% 6.6% 3.8% -100.0% 9.9% 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 $99.4 million, an increase of $15.3 million. The unreserved fund balance portion of the General fund was $54.4 million, of which $15 million was designated for future programs and service enhancements. The increase in revenues was primarily due to four factors: the effects of a strong housing market on property and transfer taxes, a rebound in the tourism industry (higher transient occupancy tax), the repayment of the vehicle license fee backfill from fiscal year 2003-04 by the State of California, increased development-related revenue (building permits, planning fees and building fees), and the effects of higher interest rates and a larger average cash balance in the General fund (increased income from property and investments). 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 2.258% to 16.664%, and rates for the safety plan increased from 9.367% to 27.573% for a total impact of $4.3 million. • Significant costs to repair severe damage caused by the heavy rains from the 2005 winter storms. • The inclusion of the Records Management department within the General fund this year (last year it was classified as an internal service fund). One major governmental fund, the Redevelopment debt service fund, had a negative fund balance of just under $12.1 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. Five of the six remaining major governmental funds, which are all capital project funds, had increases in their fund balances during the year. These increases in fund balances are all designated for the construction or purchase of future capital assets. The Rancho Santa Fe Road Project fund had a decrease in fund balance due to the near completion of construction of this major arterial roadway in the City of Carlsbad. Proprietary Funds The purpose of the City's proprietary funds is to provide short and long-term financial information about the City's business-type activities. The analysis focuses on the determination of operating income, changes in net assets (cost recovery), financial position, and cash flows. 27 The Carlsbad Municipal Water District funds had an operating loss of approximately $2.1 million for the year. Heavy rains during the winter and spring led to a decrease in water sales revenue of 3% for the year. Increased Metropolitan Water District and County Water Authority fixed charges (suppliers of the City's potable water), as well as consulting expenses associated with a proposed new desalination plant, added to the operating loss for the year. On the other hand, non-operating revenues (primarily property tax and investment earnings) more than offset the operating loss, resulting in an overall gain of $1.5 million. The Sewer funds had an annual operating loss of approximately $341,000 for the fiscal year. Total revenues from charges for services increased 3% from the previous year; however, higher sewer plant operating costs led to an operating loss for the year. Staffing costs rose almost 8% due to normal salary increases and an increase in retirement and healthcare costs. In addition, there were higher outside services and maintenance expenditures related to the rehabilitation and repair of sewer lines and pump stations. As with the water funds, the non-operating revenue (investment earnings and a one-time gain on the sale of property) more than offset the operating loss, resulting in an overall gain of $1.7 million. Solid Waste operations and the Storm Water Protection Program are combined on the City's financial reports. Revenues increased in the current year by approximately 48% due to the fact that the storm water protection fee was collected for only a portion of the previous year (the fee went into effect in December 2003). $25- $20 $15- $10- $5- $0 Business-Type Activities Operating Revenues and Expenses Fiscal Year 2004-05 (in millions)*~- — ' _-— - -Tr*"""1? JiH Water [^"•"•"fiS rX*X"X'"^Si ^^^^"^^SLmmmmr^^p^^HL. 1 r*"Hl<<B_ Sewer Solid Waste C3 Operating Revenues S Operating Expenses The new municipal golf course will begin construction in fiscal year 2005-06, and will be funded with a combination of a loan from the General fund and bonds. The advance from the City and the bonds will be repaid through fees charged to the users of the golf course. Unrestricted net assets for the Water, Golf, Sewer, and Solid Waste operations at the end of the year amounted to $15.8 million, or approximately 5% 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 31% of the net assets are restricted for future capital construction of new and replacement water and sewer infrastructure assets. 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 $3.5 million to reflect the following changes: • The impacts on TOT from a rebound in the tourism industry. • Higher franchise taxes due in part to increased natural gas prices. • Studies paid for by developers. 28 • Higher rate of residential and commercial/industrial development than anticipated. • State and federal grants not originally budgeted. • Donations received by the City. • Additional State reimbursements for booking fees and mandated costs. The increase from the total original expenditure budget to the final budget amounted to S2.6 million, due predominantly to: • Local emergency repair work from winter storms. • Appropriating funds received from developers during the year for developer-funded studies. • Budgeted expenditures associated with new grant revenues. • Appropriating donations received. • Appropriating transfers from police grants for the City's purchase and installation of a new Computer Aided Dispatch (CAD) system. • Traffic signal battery backup system. The difference between the final budgeted expenditures and the actual expenditures for the year on a budgetary basis of $17.3 million, can be generally summarized as follows: • $15.3 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 delay in the purchase and installation of new library radio frequency identification system. > Anticipated purchase of a fire ladder truck in the upcoming fiscal year. > Projected costs in the next fiscal year for several key executive positions due to recent and anticipated retirements. > Upcoming renovation costs resulting from the purchase of the former Carlsbad Unified School District building adjacent to the Senior Center. > Expected expansion of the Senior Center. > Future purchases of replacement radios for the Police Department. > Funds accumulated for facility maintenance projects and traffic signal battery backup systems. > Anticipated costs associated with updating the City's General Plan and Local Coastal Program, and revising the associated Municipal Code. • $2 million in unspent major capital outlay appropriations was not carried forward and remaining balances from programs with a one-year life cycle, including: > A fire engine not purchased. > Unspent employee development and training funds. > Unspent administrative special project funds. > Unspent unfunded litigation funds. > Unspent miscellaneous professional service fees for building inspection services. > Unspent engineering plancheck funds. > Remaining council and non-departmental contingency funds. > Unspent budget for citywide goals. 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 remaining encumbrances, 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. 29 Capital Asset and Debt Administration Capital Assets At the end of 2005, the City had recorded an investment of just over $666.1 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 governmental infrastructure assets constructed prior to July 1, 2001, as the City has not completed its inventory of these assets. Under GASB 34, the City has until fiscal year 2005-06 to complete a full accounting of its infrastructure. New infrastructure purchased or constructed during the last four fiscal years in the City's governmental funds has been added to 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 2004 $55.1 66.9 10.9 21.2 112.9 61.8 - 328.8 (30.4) $298.4 2005 $57.1 69.2 17.6 21.9 155.8 72.2 - 393.8 (37.0) $356.8 Activities 2004 $8.7 2.2 5.6 1.6 138.3 48.4 37.7 242.5 (48.6) $193.9 2005 $8.7 16.2 5.6 1.5 159.7 40.3 40.3 272.3 (52.1) $220.2 Total 2004 $63.8 69.1 16.5 22.8 251.2 110.2 37.7 571.3 (79.0) $492.3 2005 $65.8 85.4 23.2 23.4 315.5 112.5 40.3 666.1 (89.1) $577.0 Total Percentage Change 2004-05 $2.0 16.3 6.7 0.6 64.3 2.3 2.6 94.8 (10.1) $84.7 Change 2004-05 3.1% 23.6% 40.6% 2.6% 25.6% 2.1% 6.9% 16.6% 12.8% 17.2% This year's major capital asset additions included: • The water recycling facility and the Vista-Carlsbad interceptor. • The second phase of Leo Carrillo Park and the Poinsettia Park synthetic turf soccer field. • Developer-dedicated streets, drainage facilities, water lines, sewer lines, streetlights, and drainage facilities at Calavera Hills and Rancho Carrillo. In addition to carrying forward appropriations of $139.4 million for previously budgeted projects, the City's fiscal year 2005-06 capital budget appropriates an additional $88.7 million for capital projects. These additional appropriations are principally for construction of the golf course, 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 and in the City's Capital Improvement Program document, which can be obtained from the Finance Department. Long-Term Debt At year-end, the City had $23.2 million in bonds, certificates of participation, loans, leases, and accrued assessments payable, a decrease of $2 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. 30 CITY OF CARLSBAD'S OUTSTANDING DEBT (in millions of dollars) Governmental Business-Type Activities Bonds Certificates of participation Loans Obligations under capital leases Installment purchase agreement Accrued assessments Less: Deferred charges Total 2004 $12.8 3.4 - 0.1 - - - $16.3 2005 $12.5 2.7 - - - - - $15.2 Activities 2004 $0.0 - 1.3 - 7.9 0.3 (0.6) $8.9 2005 $0.0 - 1.2 - 7.3 - (0.5) $8.0 Total 2004 $12.8 3.4 1.3 0.1 7.9 0.3 (0.6) $25.2 2005 $12.5 2.7 1.2 - 7.3 - (0.5) $23.2 Total Percentage Change 2004-05 -2.3% -20.6% -7.7% -100.0% -7.6% -100.0% -16.7% ($0.1) Economic Factors and Next Year's Budgets and Rates • The State of California adopted its 2005-06 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 the fiscal year. > The State implemented the "Triple Flip" in fiscal year 2004-05, whereby the City's sales tax receipts were reduced by one-quarter, and this reduction was made up with property taxes equating to the same amount. This will continue in the 2005-06 fiscal year. > Both the VLF and "Triple Flip" swaps will have no effect on the ultimate amount of revenue 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 almost $ 16 billion, almost double what they were just five years ago. • PERS rates for our miscellaneous plan have increased for the 2005-06 fiscal year from 16.664% to 20.869%, and have increased from 27.573% to 27.927% for our safety plan. • Retail natural gas prices have increased recently due to the hurricanes that recently hit the Gulf Coast, impacting our future franchise fee revenue. • The Consumer Price Index (CPI) for the western region of the United States for urban households increased by 3.5% during the twelve months ended November 30, 2005. • The total number of housing units in Carlsbad grew by 3.7% in calendar year 2004, impacting our budgeted expenditures for fiscal year 2005-06. • Median home prices increased by 22% in calendar year 2004. All of these factors were considered when preparing the City of Carlsbad's General fund budget for the 2005-06 fiscal year. Budgeted expenditures are expected to increase 6.7% to $97.2 million. The increase is mainly due to the increase in personnel costs. Personnel costs make up approximately 66% of the General fund budget so any changes in these costs can have a significant effect on the total budget. In addition, just over $15.3 million in unspent 2004-05 budgeted expenditures will be carried over to the 2005-06 fiscal year, as well as $3.8 million in open encumbrances as of June 30, 2005. During the current fiscal year, the unreserved fund balance in the General fund decreased to $39 million. This decrease was the result of reserving an additional $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 balance is expected to increase modestly by the close of fiscal year 2006. The City's business-type activities reflect the following: • No anticipated rate structure changes during the next fiscal year for water operations. • Sewer rates will be increasing by 4% in fiscal year 2005-06. • No projected significant changes in other revenue sources. 31 • Additional water personnel will be hired to operate and maintain the expanded recycled water distribution system. • The Solid Waste Management fund budget reflects a 20% increase, or $320,000, to fund costs associated with negotiating a new solid waste contract, a loan repayment and street sweeping costs, which were previously, funded elsewhere. • 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, 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.carlsbadca.gov. 32 33 CITY OF CARLSBAD, CALIFORNIA Statement of Net Assets June 30, 2005 Primary Government ASSETS Cash and investments Receivables: Taxes Accounts, net Other Due from other governments Inventories Prepaid items Loan and reimbursement receivables 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 $ 387,803,652 7,637,383 453,066 223,851 4,757,145 185,368 428,046 11,433,317 659,708 15,580 5,497,419 57,086,762 69,203,460 17,629,241 21,890,701 155,795,788 72,209,568 - (37,035,990) 356,779,530 $ 775,874,065 Business-type Activities $ 123,414,224 1 37,105 3,864,943 - 2,051,677 546,224 - 437,510 953,706 21,300 (5,497,419) 8,663,600 16,208,704 5,556,571 1,535,443 159,709,825 40,328,185 40,318,093 (52,142,444) 220,177,977 $ 346,007,247 Total $ 511,217,876 7,674,488 4,318,009 223,851 6,808,822 731,592 428,046 11,870,827 1,613,414 36,880 - 65,750,362 85,412,164 23,185,812 23,426,144 315,505,613 112,537,753 40,318,093 (89,178,434) 576,957,507 $ 1,121,881,312 The notes to the financial statements are an integral part of this statement. 34 CITY OF CARLSBAD, CALIFORNIA Statement of Net Assets (Continued) June 30,2005 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 Unearned revenue Noncurrent liabilities: Due in more than one year, net of deferred charges and unamortized issuance costs of $497,365 Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital assets Other purposes Unrestricted Total net assets Governmental Activities $ 12,022,225 270,683 3,084,898 5,620,106 1,036,662 577,334 - 999,612 14,170,704 37,782,224 342,231,872 164,334,833 78,913,066 152,612,070 $ 738,091,841 Business-type Activities $ 6,595,730 - 4,421,084 - 639,079 574,168 157,169 860,410 7,391,155 20,638,795 208,964,249 100,597,456 - 15,806,747 $ 325,368,452 Total $ 18,617,955 270,683 7,505,982 5,620,106 1,675,741 1,151,502 157,169 1,860,022 21,561,859 58,421,019 551,196,121 264,932,289 78,913,066 168,418,817 $ 1,063,460,293 The notes to the financial statements are an integral part of this statement. 35 CITY OF CARLSBAD Statement of Activities For the Year Ended June 30, 2005 Functions/Programs 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 Expenses $ 11,352,893 34,366,093 14,362,610 16,033,363 22,064,209 1,013,773 99,192,941 21,422,207 25,344 7,234,986 1,488,109 30,170,646 $ 129,363,587 Charges for Services S 925,689 3,232,000 5,934,071 2,292,308 4,632,751 - 17,016,819 18,787,973 - 6,378,446 2,348,266 27,514,685 S 44,531,504 Program Revenues Operating Grants and Contributions $ 843,776 280,908 9,083,968 817,995 1,790,638 - 12,817,285 489,722 - - 18,504 508,226 $ 13,325,511 Capital Grants and Contributions $ 1,464,716 - 1,016,867 1,695,188 70,237,178 - 74,413,949 12,816,187 - 4,306,090 - 17,122,277 S 91,536,226 General revenues: Property taxes Sales and use taxes Transient occupancy taxes Franchise taxes Business license taxes Real property transfer taxes Intergovernmental, unrestricted Homeowners exemptions Income from property and investments Gain (loss) on sale of capital assets 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. 36 Net Revenue (Expense) and Changes in Net Assets Primary Government Governmental Activities $ (8,118,712) (30,853,185) 1,672,296 (11,227,872) 54,596,358 (1,013,773) 5,055,112 - - - - 5,055,112 41,478,809 24,758,792 10,072,278 5,682,953 2,889,989 1,646,331 2,136,364 357,240 9,910,572 (149,678) 81,997 98,865,647 103,920,759 634,171,082 _$ 738,091, 841 Business-type Activities $ - - - - - - 10,671,675 (25,344) 3,449,550 878,661 14,974,542 14,974,542 2,025,306 - - - - - - - 4,162,386 229,400 348,863 6,765,955 21,740,497 303,627,955 $ 325,368,452 Total $ (8,118,712) (30,853,185) 1,672,296 (11,227,872) 54,596,358 (1,013,773) 5,055,112 10,671,675 (25,344) 3,449,550 878,661 14,974,542 20,029,654 43,504,115 24,758,792 10,072,278 5,682,953 2,889,989 1,646,331 2,136,364 357,240 14,072,958 79,722 430,860 105,631,602 125,661,256 937,799,037 $1,063,460,293 37 CITY OF CARLSBAD Balance Sheet Governmental Funds June 30, 2005 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 Redevelopment General Debt Fund Service Funds S 85,055,541 $ 1,554,057 7,512,236 88,427 157,209 285,731 720,942 1,324,553 14,733 15,813 - 144,138 - 19,564,964 $114,795,860 $ 1,642,484 $ 4,175,784 $ - 455,350 5,585 53,776 13,688,294 10,763,017 15,399,736 13,742,070 Assessment Bridge and and Other Thoroughfare Districts Districts $ 32,169,653 $ 7,922,706 - 66,642 - - - - - - - - - $ 32,236,295 $ 7,922,706 $ 5,783 $ 492 - - - 790,854 3,643,344 - 796,637 3,643,836 Fund balances: Reserved Unreserved: Designated, reported in: Genera] 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 44,996,160 15,042,975 40,679 26,207 31,398,979 4,252,663 39,356,989 (12,099,586) 99,396,124 (12,099,586)31,439,658 4,278,870 S 114,795,860 $ 1,642,484 S 32,236,295 $ 7,922,706 The notes to the financial statements are an integral part of this statement. 38 Community General Public Facilities Capital Facilities District No. 1 Construction Construction $ 45,136,300 $ 49,953,725 $ 40,096,627 3,489 . . - . . . . - 3,220,854 $ 45,139,789 $ 53,174,579 $ 40,096,627 Rancho Santa Other Fe Road Governmental Project Funds $ 16,401,484 $ 89,027,343 33,231 - 166,085 - 1,939,441 738,283 - 412,233 675,288 11,289,179 3,643,344 $ 18,340,925 $ 105,984,986 Total Governmental Funds $367,317,436 7,637,383 223,851 451,816 720,942 4,002,277 14,733 428,046 675,288 11,433,317 26,429,162 $419,334,251 $ 5,116 $ 75,305 $ 898,770 - 57,472 - - 135,060 481,112 5,116 210,365 1,437,354 110,992 4,876,997 7,694,786 . . 45,023,681 10,417,756 30,964,487 _ . - 37,669,461 45,134,673 52,964,214 38,659,273 $ 45,139,789 $ 53,174,579 $ 40,096,627 $ 1,955,729 $ 1,006,289 720,942 64,512 3,025,537 2,809,251 113,190 4,981,266 4,714,184 10,837,169 25,996,244 4,676,767 31,304 2,522,490 27,634,680 - 25,354,399 751,019 16,826,389 13,359,659 101,270,802 $ 18,340,925 $ 105,984,986 $ 8,123,268 720,942 577,334 3,084,898 20,931,743 11,492,379 44,930,564 94,579,234 15,042,975 4,676,767 31,304 152,214,736 39,356,989 25,354,399 (11,348,567) 54,495,850 374,403,687 $419,334,251 39 CITY OF CARLSBAD Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30,2005 Total fund balances - governmental funds. 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 Internal service funds Total capital assets 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 Internal service fund net assets included as part of total capital assets Internal service fund net assets less capital assets Accrued interest is not due and payable in the current period and, therefore, is not reported in the funds. Retentions payable are not due and payable in the current period and, therefore, are not reported in the funds. 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. A portion of the taxes receivable is not available to pay for current-period expenditures and, therefore, is deferred in the funds. A portion of accounts receivables are not available to pay for current-period expenditures and, therefore, is deferred in the funds. 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 Net assets of governmental activities. S 374,403,687 351,153,119 5,626,411 356,779,530 17,857,899 (5,626,411) 12,231,488 (270,683) (337,582) 9,566,209 813,368 113,190 (15,207,366) $ 738,091,841 The notes to the financial statements are an integral part of this statement. 40 41 CITY OF CARLSBAD Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2005 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 $ 75,003,646 9,815,218 3,392,682 8,023,260 950,813 2,956,876 2,565,543 - - 1,066,032 103,774,070 11,341,515 33,544,123 6,999,415 14,561,441 16,397,864 - 32,577 2,894 82,879,829 20,894,241 139,765 (5,695,430) (5,555,665) 15,338,576 84,057,548 $ 99,396,124 Redevelopment Debt Service Funds $ 2,001,511 - - - - 67,468 - - - - 2,068,979 19,854 - - - - - 380,000 1,356,804 1,756,658 312,321 - (1,942,000) (1,942,000) (1,629,679) (10,469,907) $ (12,099,586) Assessment and Other Districts $ - - - - 627,137 - 28,860,361 - - 29,487,498 81,003 - - - - 12,550,955 - - 12,631,958 16,855,540 2,365,679 (18,288) 2,347,391 19,202,931 12,236,727 $ 31,439,658 The notes to the financial statements are an integral part of this statement. 42 Bridge and Thoroughfare Districts $ 187,407 1,737,242 12,241 1,936,890 282,015 282,015 1,654,875 106,363 106,363 1,761,238 2,517,632 $ 4,278,870 Community General Public Rancho Santa Facilities District Capital Facilities Fe Road No. 1 Construction Construction Project $ 4,752,799 $ - $ $ 3,964,980 1,173,525 1,417,863 1,254,156 448,343 1,174,399 3,919 8,769,052 765,572 738 12,447 7,100,723 1,421,782 10,023,946 5,191,342 60,643 - 39,699 47,910 1,569,012 7,987,387 9,432,679 108,553 1,569,012 8,027,086 9,432,679 6,992,170 (147,230) 1,996,860 (4,241,337) 1,037,535 (2,365,679) 1,037,535 - (2,365,679) 6,992,170 890,305 1,996,860 (6,607,016) 38,142,503 52,073,909 36,662,413 19,966,675 $ 45,134,673 $52,964,214 $38,659,273 $13,359,659 Other Governmental Funds $ 2,307,151 10,465,043 2,410,032 132,885 2,609,063 134,000 8,135,280 164,264 14,981 26,372,699 570,689 275,041 7,319,551 182,094 2,338,781 14,549,661 627,559 141,494 26,004,870 367,829 6,578,995 (206,940) 6,372,055 6,739,884 94,530,918 $101,270,802 Total Governmental Funds $ 84,065,107 24,245,241 3,392,682 10,433,292 1,083,698 10,741,838 2,699,543 49,445,825 164,264 1,106,439 187,377,929 12,113,403 33,819,164 14,318,966 14,743,535 18,736,645 46,419,619 1,040,136 1,501,192 142,692,660 44,685,269 10,228,337 (10,228,337) . 44,685,269 329,718,418 $ 374,403,687 43 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, 2005 Net change in fund balances - total governmental funds.44,685,269 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 Depreciation expense 46,079,631 (6,126,640) Governmental funds do not reflect the donation of capital assets as revenues.18,328,564 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.(149,678) The repayment of the principal of long-term debt consumes the current financial resources of governmental funds but has no effect on net assets.1,040,136 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.18,016 Unpaid interest income on advances to other funds is not a current financial resource, and therefore is not recognized as revenue in the funds.469,403 A portion of sales and use taxes is not available to pay for current-period expenditures and, therefore, is deferred in the funds. A portion of accounts receivables is not available to pay for current-period expenditures and, therefore, is deferred in the funds. The net revenue of activities of internal service funds is reported with governmental activities. Change in net assets of governmental activities. 143,238 113,190 (680,370) $ 103,920,759 The notes to the financial statements are an integral part of this statement. 44 45 CITY OF CARLSBAD Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund For the Year Ended June 30, 2005 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 $ 72,586,000 6,220,000 2,880,000 7,080,000 950,000 2,910,000 2,700,000 750,000 96,076,000 15,885,678 36,782,752 9,795,205 19,371,980 19,587,791 32,577 2,894 101,458,877 (5,382,877) - (5,765,751) (5,765,751) (11,148,628) 84,057,548 $ 72,908,920 Amounts Final $ 74,487,000 6,767,000 3,000,000 7,778,000 900,000 3,010,000 2,600,000 1,000,000 99,542,000 17,158,714 37,125,031 9,970,360 19,730,580 20,001,480 32,577 2,894 104,021,636 (4,479,636) 139,765 (6,031,181) (5,891,416) (10,371,052) 84,057,548 $ 73,686,496 Actual Amounts (Budgetary Basis) $ 75,003,646 9,815,218 3,392,682 8,023,260 950,813 3,279,619 2,565,543 1,066,032 104,096,813 12,596,632 33,886,092 7,519,772 15,002,701 17,636,459 32,577 2,894 86,677,127 17,419,686 139,765 (6,031,181) (5,891,416) 11,528,270 84,057,548 S 95,585,818 Variance With Final Budget - Over (Under) $ 516,646 3,048,218 392,682 245,260 50,813 269,619 (34,457) 66,032 4,554,813 (4,562,082) (3,238,939) (2,450,588) (4,727,879) (2,365,021) - - (17,344,509) 21,899,322 - - . $ 21,899,322 The notes to the financial statements are an integral part of this statement. 46 CITY OF CARLSBAD Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund (Continued) For the Year Ended June 30, 2005 BUDGET-TO-GAAP RECONCILIATION Actual Amounts (Budgetary Basis) Revenues Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison schedule (previous page). The recording of unrealized gains and losses on the City's investments are shown for financial reporting purposes (pursuant to GASB 3 1 ), but are not shown for budgetary purposes. Expenditures Actual amounts (budgetary basis) "total charges to appropriations" from the budgetary comparison schedule (previous page). Differences - budget to GAAP: Encumbrances are shown in the year encumbered for budgetary purposes, but in the year paid for financial reporting purposes. Other financing sources (uses) Actual amounts (budgetary basis) "total other financing sources (uses)" from the budgetary comparison schedule (previous page). Differences - budget to GAAP: Some advances are budgeted for as transfers out for budgetary purposes, but reflected as advances for financial reporting purpes. $ 104,096,813 (322,743) S 103,774,070 $ 86,677, 1 27 (3,797,298) S 82,879,829 S (5,891,416) 335,75 1 S (5,555,665) The notes to the financial statements are an integral part of this statement. 47 CITY OF CARLSBAD Statement of Net Assets Proprietary Funds June 30, 2005 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 Loans and reimbursement receivables 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 $ 53,208,003 $782,834 $ 62,840,949 37,105 2,379,085 1,331,007 538,721 57,493,921 - 1,583 - - 784,417 - 818,998 720,670 7,503 64,388,120 - - 953,706 21,300 975,006 - 1,909,565 16,208,704 2,185,604 963,255 101,057,201 24,899,289 - (25,875,801) 121,347,817 121,347,817 $ 178,841,738 : 437,510 5,075,228 1,678,807 - 3,370,967 572,188 58,652,624 6,628,570 8,800,326 40,318,093 (26,266,643) 11,703,798 87,126,362 11,703,798 88,538,878 S 12,488,215 $ 152,926,998 The notes to the financial statements are an integral part of this statement. 48 Enterprise Funds Solid Waste Totals Governmental Activities - Internal Service Funds $ 6,582,438 $ 123,414,224 20,486,216 665,277 37,105 3,864,943 2,051,677 546,224 1,250 754,868 170,635 7,247,715 129,914,173 21,412,969 953,706 21,300 - - 975,006 437,510 8,663,600 16,208,704 5,556,571 1,535,443 159,709,825 40,328,185 40,318,093 (52,142,444) 220,177,977 221,590,493 $ 7,247,715 $ 351,504,666 - _ - - 15,175,787 - - - (9,549,376) 5,626,41 1 5,626,41 1 S 27,039,380 (Continued) 49 CITY OF CARLSBAD Statement of Net Assets Proprietary Funds (Continued) June 30, 2005 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 $ 4,128,797 4,421,084 - 124,072 148,012 8,821,965 Golf Course $ 84,093 ! - - - 4,749 88,842 Sewer S 2,022,384 - - 515,007 421,407 2,958,798 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 3497,365 Total noncurrent liabilities Total liabilities 1,098,527 4,137,200 157,169 860,410 6,292,628 1,098,527 9,920,492 4,137,200 4,226,042 7,153,038 10,269,005 NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital assets Unrestricted Total net assets 120,125,218 45,691,348 3,104,680 $ 168,921,246 < 7,566,598 - 695,575 5 8,262,173 81,272,433 54,906,108 6,479,452 S 142,657,993 The notes to the financial statements are an integral part of this statement. 50 Enterprise Funds Solid Waste $ 360,456 360,456 Total Proprietary Funds $ 6,595,730 4,421,084 639,079 574,168 12,230,061 Governmental Activities - Internal Service Funds $ 3,561,375 5,620,106 9,181,481 157,169 1,360,219 1,360,219 1,720,675 5,497,419 860,410 1,098,527 6,292,628 13,748,984 26,136,214 - - 9,181,481 5,527,040 $ 5,527,040 208,964,249 100,597,456 15,806,747 $ 325,368,452 5,626,411 12,231,488 $ 17,857,899 51 CITY OF CARLSBAD Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds For the Year Ended June 30, 2005 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: Scwcr plant operations Purchased water Depreciation Fuel and supplies Claims expense Small equipment purchases 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 Other financing sources Total nonoperating revenues Carlsbad Municipal Golf Water District Course $ 18,018,649 S - $ - 769,324 489,722 25,580 19,303,275 - 10,945,363 1,874,504 - - - 8,565,428 25,344 21,385,295 25,344 (2,082,020) (25,344) 1,638,447 130,735 (36,912) 1,413 2,025,306 223,858 3,628,254 354,593 Sewer > 6,296,639 81,807 - 99,425 6,477,871 2,416,863 - 1,716,859 - - - 2,685,149 6,818,871 (341,000) 1,851,325 (54,651) 227,987 - - 2,024,661 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 1,546,234 12,816,187 14,362,421 154,558,825 329,249 329,249 7,932,924 1,683,661 4,306,090 5,989,751 136,668,242 168,921,246 $ 8,262,173 S 142,657,993 The notes to the financial statements are an integral part of this statement. 52 Enterprise Funds Solid Waste $ - 2,348,266 18,504 - 2,366,770 - - - - - 1,488,109 1,488,109 878,661 180,415 - - - - 180,415 Totals $ 18,018,649 6,296,639 3,199,397 508,226 125,005 28,147,916 2,416,863 10,945,363 3,591,363 - - - 12,764,030 29,717,619 (1,569,703) 3,800,922 (91,563) 229,400 2,025,306 223,858 6,187,923 Governmental Activities - Internal Service Funds S - 11,430,764 - 70,158 11,500,922 - 1,565,152 753,122 4,767,377 99,309 6,571,258 13,756,218 (2,255,296) 454,685 - 58,218 - - 512,903 1,059,076 4,618,220 (1,742,393) 17,122,277 1,062,023 1,059,076 4,467,964 21,740,497 303,627,955 (680,370) 18,538,269 S 5,527,040 S 325,368,452 S 17,857,899 53 CITY OF CARLSBAD Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2005 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 (payments) Increase (decrease) 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 $ 18,578,390 ! (13,601,798) (2,565,594) (2,199,506) - 515,302 (3,478) 723,316 - 12,132,093 (13,999,950) (120,575) (38,953) 2,023,644 (3,741) 1,638,447 2,358,022 50,849,981 $ 53,208,003 : Golf Course 5 - : (25,344) - - - 20,212 - (5,132) 1,400,000 - (2,805,120) (33,195) - - (2,838,315) 130,735 (1,312,712) 2,095,546 5 782,834 1 Sewer 5 6,238,209 (3,162,449) (1,070,642) (1,020,795) - 206,249 - 1,190,572 - 2,237,672 (7,573,916) (550,000) (394,169) - (6,280,413) 1,851,750 (3,238,091) 66,093,165 $ 62,855,074 The notes to the financial statements are an integral part of this statement. 54 Enterprise Funds Solid Waste S 2,265,749 (643,288) (619,752) (179,441) - 51,563 - 874,831 Totals $ 27,082,348 (17,432,879) (4,255,988) (3,399,742) - 793,326 (3,478) 2,783,587 Governmental Activities - Internal Service Funds $ 11,430,638 (3,580,900) (2,623,977) (845,747) (2,754,701) 225,842 - 1,851,155 1,400,000 - - - - 180,415 1,055,246 5,527,192 $ 6,582,438 14,369,765 (24,378,986) (703,770) (433,122) 2,023,644 (9,122,469) 3,801,347 (1,137,535) 124,565,884 S 123,428,349 (1,193,452) (1,732) - - (1,195,184) 456,967 1,112,938 19,373,278 S 20,486,216 (Continued) 55 CITY OF CARLSBAD Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2005 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 $ (2,082,020) $ 1,874,504 S 3,707,480 (25,344) S (341,000) 1,716,859 (209,584) 32,596 (209,703) 1,321,001 (3,478) $ 723,316 $ (1,583) 21,795 _ (5,132) $ (140,237) (99) (151,775) 106,824 1,190,572 S 1,700,072 $ 53,208,003 $782,834 $ 62,840,949 953,706 (939,581) S 53,208,003 $782,834 S 62,855,074 The notes to the financial statements are an integral part of this statement. 56 Enterprise Funds Solid Waste Totals Governmental Activities - Internal Service Funds 878,661 $ (1,569,703) $ (2,255,296) 3,591,363 1,565,152 (49,458) - - 45,628 - - - (400,862) 32,497 - (294,055) 1,321,001 - 103,346 (783) (68,065) 2,679 594,792 - 2,012,676 - S 874,831 2,783,587 S 1,851,155 S 5,407,552 307,155 $ 6,582,438 123,414,224 $ 20,486,216 953,706 (939,581) S 6,582,438 S 123,428,349 $ 20,486,216 57 CITY OF CARLSBAD Statement of Fiduciary Assets and Liabilities Agency Funds June 30, 2005 ASSETS Current assets: Cash and investments $ 22,614,737 Other receivables 142,472 Total current assets 22,757,209 Restricted assets: Cash and investments 7,200,334 Accrued interest 88,335 Total restricted assets 7,288,669 Total assets S 30,045,878 LIABILITIES Accrued liabilities $ 3,105,475 Deposits held for others 26,940,403 Total liabilities S 30,045,878 The notes to the financial statements are an integral part of this statement. 58 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. 59 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, as long as the expenditure reflects a near-term cash outflow. 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 1 and February 1, 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. Homewoner exemption revenues reflect the property taxes associated with the $7,000 assessed value credit given to owner-occupied residences by the State of California, which are reimbursed to the City by the State. 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 Assessment and Other Districts capital project funds are used to account for capital projects financed by the issuance of assessment and community facility district bonds. 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. The Rancho Santa Fe Road Project capital project fund is used to account for the amounts paid by developers and costs for the construction and improvements related to Rancho Santa Fe Road . 60 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 new 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 with the enterprise funds within the 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. 61 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, 2005, 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. 62 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 four years ended June 30, 2005. 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, 2005, the ambulance billing receivable allowance is equal to 40% of outstanding billings at June 30, 2005, and the trade and false alarm receivable allowance is equal to the total of all outstanding receivables that are over 90 days past due plus 30% of all remaining balances. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the governmental funds. Unexpended and unencumbered 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. 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. 63 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. » GASB Statement No. 46, Net Assets Restricted for Enabling Legislation (An Amendment of GASB Statement No. 34). « GASB Statement No. 47, Accounting for Termination Benefits. 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. 64 CITY OF CARLSBAD Notes to the Financial Statements Note 2. Budgetary Data (Continued) « Prior to July 1, the budget is enacted legally through passage of an appropriation resolution. 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 fund, 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. 65 CITY OF CARLSBAD Notes to the Financial Statements Note 3. Deposit and Investment Risk (Continued) As of June 30, 2005 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 Federal National Mortgage Association Notes Subtotal U.S. agencies Corporate notes: Medium-term corporate notes Commercial paper Subtotal 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 Fiduciary Assets and Liabilities, Agency Funds Cash and investments Restricted cash and investments Total cash and investments Fair Market Value 131,246,267 124,826,229 95,608,062 5,990,847 3,384,675 361,056,080 68,406,662 9,941,000 78,347,662 64,208,499 5,218,106 508,830,347 33,498,536 311,415 6,063 S 542,646,36T $ 511,217,876 1,613,414 22,614,737 7,200,334 $ 542,646,361 % of Total Modified Duration 25.8% 24.5% 18.8% 1.2% 0.7% 71.0% 2.733 2.176 2.659 1.940 0.144 2.483 13.4% 2.0% 15.4% 12.6% 1.0% 100.0% 1.097 0.171 0.978 - - 1.89 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 pooled investments, which are in either pooled U.S. government securities (guaranteed) or in pooled 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 Federal Deposit Insurance Corporation (FDIC) insured. 66 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, 2005, approximately 13% 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, 2005, 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, 2005, approximately 46% 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, 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, 2005, the average maturity of the LAIF investments was 151 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, 2005, 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, 2005, the modified duration of the portfolio was 1.89. 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, 2005, maturities within one year exceeded the required minimum of $148,000,000 (total operating budget for the City per the 2004-05 Operating Budget adopted by the City Council). 67 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, 2005: Due to Due from Other Funds Other Funds General $ - $ 720,942 Special Revenue Funds: Community Development Block Grant 49,000 Section 8 Rental Assistance 288,000 Capital Project Funds: Grants and Other Funds - Intermodal Surface Transportation Efficiency Act 200,865 Grants and Other Funds - Air Pollution Control District 169,906 Grants and Other Funds - City of Encinitas 13,171 Totals $ 720,942 $ 720,942 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, 2005: Advances From Advances To Amount General Fund Redevelopment Debt Service Funds $ 13,688,294 General Fund Financing Districts Special Revenue Fund 379,251 General Fund Enterprise Funds Golf Course 4,137,200 Solid Waste 1,360,219 Special Revenue Funds: Gas Tax Bridge and Thoroughfare Districts Capital Project Funds 3,643,344 Capital Projects Funds: Capital Projects Funds: General Capital Construction Assessment and Other Districts 790,854 Park Development 2,430,000 $ 26,429,162 Advances to and from other funds are primarily long term advances used to fund capital projects in advance of related revenues. 68 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, 2005: Balance at July 1 , 2004 $ 55,152,578 5 61,768,235 116,920,813 66,853,662 10,873,878 21,209,462 112,905,006 211,842,008 (12,938,049) (2,833,303) (12,154,961) (2,490,134) (30,416,447) 181,425,561 Increases 5 1,934,184 44,616,786 46,550,970 2,349,798 6,755,363 2,262,599 42,890,782 54,258,542 (1,376,347) (430,784) (2,185,749) (3,698,912) (7,691,792) 46,566,750 Balance at Decreases June 30, 2005 $ - S 57,086,762 (34,175,453) 72,209,568 (34,175,453) 129,296,330 69,203,460 17,629,241 (1,581,360) 21,890,701 155,795,788 (1,581,360) 264,519,190 (14,314,396) (3,264,087) 1,072,249 (13,268,461) (6,189,046) 1,072,249 (37,035,990) (509,111) 227,483,200 Governmental activities capital assets, net $298,346,374 $93,117,720 $(34,684,564) $356,779,530 69 CITY OF CARLSBAD Notes to the Financial Statements Note 6. Capital Assets (Continued) Balance at July 1,2004 Increases Decreases Balance at June 30, 2005 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 48,438,902 21,344,539 (29,455,256) 40,328,185 57,102,502 2,258,064 5,556,571 1,568,847 138,271,570 37,738,531 185,393,583 (831,263) (1,988,203) (1,224,502) (33,916,698) (10,621,559) (48,582,225) 136,811,358 21,344,539 13,950,640 - - 21,438,255 3,072,245 38,461,140 (55,445) (148,770) (67,265) (2,581,033) (738,850) (3,591,363) 34,869,777 (29,455,256) 48,991,785 16,208,704 5,556,571 (33,404) 1,535,443 159,709,825 (492,683) 40,318,093 (526,087) 223,328,636 (886,708) (2,136,973) 31,144 (1,260,623) (36,497,731) (11,360,409) 31,144 (52,142,444) (494,943) 171,186,192 $193,913,860 $56,214,316 $(29,950,199) $220,177,977 70 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 $ 532,957 Community development 174,714 Public safety 451,503 Community services 1,121,431 Public works 3,846,035 Capital assets held by the internal service funds (charged to various functions based on their usage of the assets) 1,565,152 Total depreciation expense - governmental activities $ 7,691,792 Business-type activities: Sewer $ 1,716,859 Water 1,874,504 Total depreciation expense - business-type activities $ 3,591,363 71 CITY OF CARLSBAD Notes to the Financial Statements Note 7. Accrued Liabilities Accrued liabilities were as follows at June 30, 2005: Governmental activities: General Fund Assessment and Other Districts Bridge and Thoroughfare Districts Community Facilities District No. 1 General Capital Construction Public Facilities Construction Rancho Santa Fe Road Project 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 Salaries and IFD Refuse Vendors Benefits Payable Disposal $1,768,680 $2,325,358 $ 81,746 $ 5,783 492 - 5,116 75,305 898,770 1,955,729 936,822 69,467 $5,646,697 $2,394,825 $ 81,746 $ Total $ 4,175,784 5,783 492 5,116 75,305 898,770 1,955,729 1,006,289 $ 8,123,268 $3,694,431 84,093 1,954,367 81,827 678,517 $6,493,235 $ 434,366 $ - 68,017 39,331 2,882,858 $3,424,572 $ $ - $ 4,128,797 84,093 2,022,384 239,298 360,456 3,561,375 $ 239,298 $10,157,105 ""Internal service funds have been included with governmental activities on the Government-wide Statement of Net Assets. 72 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, 2005: Governmental activities: Bonds Certificates of participation Obligations under capital leases Total governmental activities Business-type activities: Installment purchase agreement Loan payable Accrued assessments Less deferred charges Total business type activities Entity-wide total Principal Balance at June 30, 2004 Additions $ 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 Reductions $ 380,000 620,000 71,141 1,071,141 550,000 120,574 257,053 927,627 (61,940) 865,687 Principal Balance at June 30, 2005 $12,460,000 2,740,000 7,366 15,207,366 7,305,000 1,222,599 - 8,527,599 (497,365) 8,030,234 Due Within One Year $ 395,000 635,000 6,662 1,036,662 575,000 124,072 - 699,072 (59,993) 639,079 $25,174,428 S SI,936,828 $23,237,600 $1,675,741 73 CITY OF CARLSBAD Notes to the Financial Statements Note 8. Long-term Debt (Continued) Long-term debt at June 30, 2005 is comprised of the following issues: Governmental long-term debt Balance at Jure 30, 2005 1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds, principal due in amounts ranging from $395,000 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 $635,000 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 two office equipment lease-purchase agreements. As of June 30, 2004, the City has purchased copier equipment totaling $50,500. All lease terms are for 60 months, with interest rates ranging from 15.5% to 16.8%. Sub-total governmental long-term debt Less current portion Total long-term portion of governmental debt Business-type long-term debt $ 12,460,000 2,740,000 7,366 15,207,366 1,036,662 $ 14,170,704 Balance at June 30, 2005 1997 Encina Financing Joint Powers Authority (EFJPA) Installment Purchase Agreement, principal due in varying amounts ranging from $575,000 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 4.90% to 5.50% per annum. The required reserve amount is $939,581. 1993 Carlsbad Municipal Water District loan agreement with the State Water Resources Control Board. Principal is due in varying amounts ranging from $123,222 to $151,558 on November 30 of each year through 2013, interest payable on November 30 of each year at 2.90% per annum. Subtotal business-type long-term debt Less unamortized discounts, issuance costs and deferred charges Less current portion Total long-term portion of business-type debt 7,305,000 1,222,599 8,527,599 497,365 639,079 $ 7,391,155 74 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: 2006 2007 2008 2009 2010 2011-2015 2016-2020 2021-2024 Principal 1,036,662 1,090,704 1,140,000 1,200,000 490,000 2,855,000 3,690,000 3,705,000 $ 15,207,366 3 Interest 756,499 706,060 652,310 595,182 552,840 2,340,394 1,485,825 405,582 i 7,494,692 Principal 699,072 732,670 771,372 810,182 844,102 4,670,201 - - $ 8,527,599 S Interest 396,849 360,801 323,661 286,514 248,432 586,246 - - i 2,202,503 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, 2005, the City has six series of Assessment District Bonds outstanding in the amount of $76,626,843. 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 Districts 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, 2005 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. 75 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, 2005: Governmental Funds Fund Balances Reserved for: Loans receivable Inventory Prepaid items General $ 144,138 14,733 15,813 Redevelopment Debt Service Funds $ - - Assessment and Other Districts S - - Bridge and Thoroughfare Districts $ - - 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 9,998,755 725,423 30,300,000 3,797,298 44,996,160 - - 40,679 40,679 - - 26,207 26,207 15,042,975 4,540,311 26,858,668 15,042,975 39,356,989 (12,099,586) 3,469,400 783,263 31,398,979 4,252,663 S 99,396,124 $ (12,099,586) S 31,439,658 S 4,278,870 * Only reflects that portion of fund balance invested in interfund advances (the General fund amount is net of $9,566,209 in deferred revenue for measurable but unavailable interest earned on such advances). 76 CITY OF CARLSBAD Notes to the Financial Statements Note 11. Fund Balances (Continued) 44,945,652 Governmental Funds Community General Public Rancho Santa Other Facilities Capital Facilities Fe Road Governmental District No. 1 Construction Construction Project Funds $ - $ - $ - $ - $ 11,289,179 - 412,233 659,500 3,220,854 - - 3,643,344 935,000 251,000 2,571,516 . . 110,992 1,656,143 7,694,786 10,837,169 6,234,472 110,992 4,876,997 7,694,786 10,837,169 25,996,244 Total $ 11,433,317 14,733 428,046 659,500 16,862,953 935,000 251,000 2,571,516 725,423 30,300,000 30,397,746 94,579,234 9,241,621 19,374,687 81,571,671 78,029 45,023,681 _ 10,417,756 10,417,756 37,669,461 21,722,866 30,964,487 . 2,522,490 2,522,490 . 12,968,064 32,342,751 42,931,807 90,394,111 171,965,782 107,858,671 $ 45,134,673 $ 52,964,214 $ 38,659,273 $ 13,359,659 $ 101,270,802 S 374,403,687 77 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 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, 2005: Deficit Balance Debt Service Funds: Redevelopment Areas $ (12,099,586) Internal Service Funds: Risk Management (563,867) Workers' Compensation (108,203) 78 CITY OF CARLSBAD Notes to the Financial Statements Note 13. Interfund Transfers Interfund transfers for the year ended June 30, 2005, consisted of the following: Fund Transfers Transfers In From Out To Other Funds Other Funds Major Funds: General Redevelopment, Debt Service Funds Capital Project Funds: Assessment and Other Districts Bridge and Thoroughfare Districts General Capital Construction Rancho Santa Fe Road Project Nonmajor Governmental Funds 139,765 S 5,695,430 1,942,000 2,365,679 18,288 106,363 1,037,535 2,365,679 6,578.995 206,940 Totals 10,228,337 10,228,337 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. 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 I, 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 510,000,000 per occurrence with a self-insured retention provided by the City in the amount of S500.000. At June 30, 2005, the unencumbered fund equity for the Risk Management Self-Insurance fund was approximately (5564,000) due to the large increase in estimated claims payable reserves. Although there is currently insufficient cash in the fund to pay all existing and anticipated expenditures at June 30, 2005, additional cash will be available in the fund to cover these claims through the rates being charged during the 2005-06 fiscal year. The existing deficit will also be addressed through the rates set in the 2005-06 annual budget, as well as future budgets. The City is a defendant in a substantial property damage claim resulting from the heavy rains that occurred in fiscal year 2005. In the opinion of the City's legal counsel, this claim is without substantial merit and should not result in a judgement which would have a material adverse effect on the City's financial statements. However, should the adverse parties prevail, the City will be financially obligated. It is not possible at this time to determine the ultimate amount, if any, for which the City may be obligated. Dental insurance coverage for City employees is administered by CoreSourcc. Under the City's agreement with CoreSource, CoreSource will pay dental claims for each covered member, up to a maximum of S1,500 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. At June 30, 2005, the unencumbered fund equity for the Workers' Compensation Self-Insurance fund was approximately ($108,000) due to the large increase in estimated claims payable reserves. Although there is currently insufficient cash in the fund to pay all existing and 79 CITY OF CARLSBAD Notes to the Financial Statements Note 14. Risk Management (Continued) anticipated expenditures at June 30, 2005, additional cash will be available in the fund to cover these claims through the rates being charged during the 2005-06 fiscal year. The existing deficit will also be addressed through the rates set in the 2005-06 annual budget. The estimated claims payable reported at June 30, 2005 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. Settled claims have not exceeded insurance coverage in any of the past three fiscal years. Changes in the estimated claims payable amounts in fiscal years 2004 and 2005 for the three internal service funds are as follows: Claims Beginning Balance Expense and Changes in Estimates Claim Payments Ending Balance Self-Insured Benefits fund: 2003-2004 $ 300,949 $ 379,151 $ (602,237) $ 77,863 2004-2005 S 77,863 $ 403,965 S (403,342) S 78,486 Risk Management fund: 2003-2004 $ 704,403 $ 211,010 $ (294,735) $ 620,678 2004-2005 $ 620,678 $ 1,537,137 $ (229,972) $ 1,927,843 Workers' Compensation fund: 2003-2004 $ 2,010,491 $ 2,094,932 $ (1,196,533) S 2,908,890 2004-2005 $ 2,908,890 $ 1,838,796 $ (1,133,909) $ 3,613,777 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, 2005, 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, 2004 (the latest available) incorporated the provisions of GASB 34 and reflect the following: Total assets $ 55,482,902 Total liabilities 3,417,513 Net assets $ 52,065,389 80 CITY OF CARLSBAD Notes to the Financial Statements Note 15. Joint Ventures (Continued) The EWA does 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 expense for the EWA totaled $22,511 in fiscal year 2004. The financial statements of the EWA can be obtained at 6200 Avenida Encinas, Carlsbad, California 92011. 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, 2005: Agreement Member Balance City of Carlsbad $ 7,305,000 Leucadia County Water District 4,980,000 $ 12,285,000 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 Q Street, Sacramento, California 95814. Funding policy Participants are required to contribute 8% (9% for safety employees) of their annual covered salary. The City makes 7% of the required 8% contributions for non-safety employess, and 8% of the required 9% contributions for the City's safety 81 CITY OF CARLSBAD Notes to the Financial Statements Note 16. Retirement Plan (Continued) employees. The City is required to contribute at an actuarially determined rate. For the year ended June 30, 2005, the employer contribution rate for the City of Carlsbad (as a percentage of covered payroll) was 27.573% for safety employees and 6.938% for miscellaneous employees for the first half of the fiscal year, and 16.664% for the second half of the fiscal year. The contribution requirements of plan members and the City are established by PERS. In October 2004, the City was notified by PERS that the employer contribution rate for the City of Carlsbad (as a percentage of payroll) will be 27.927% for safety employees and 20.869% for miscellaneous employees for the fiscal year ended June 30, 2006. Annual pension cost For 2005, the City's annual pension cost (employer contribution) of $3,917,550 for safety and $3,112,596 for miscellaneous to PERS was equal to the City's required and actual contributions. For 2005, the member contributions paid by the City and its employees were $1,307,527 for safety and $2,018,559 for miscellaneous. The required contribution was determined as part of the June 30, 2002, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.75% investment rate of return (net of administrative expenses), (b) projected annual salary increases of 3.25% to 14.45% depending on age, service and type of employment, (c) 3.0% inflation factor, (d) payroll growth of 3.25%, and (e) individual salary growth that utilizes a merit scale varying by duration of employment coupled with an assumed annual inflation growth of 3.0% and an annual production growth of 0.25%. Initial unfunded liabilities are amortized over a closed period that depends on the plan's date of entry into CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a rolling period, which results in an amortization of about 6% of unamortized gains and losses each year. If the plan's accrued liability exceeds the acturial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30 year amortization period. Three-year trend information for PERS (safety) Fiscal Year Ending Annual Pension Cost (Employer Contribution) Percentage of APC Contributed Net Pension Obligation 6/30/03 6/30/04 6/30/05 441,058 1,704,651 3,917,550 Three-year trend information for PERS (miscellaneous) 100% 100% 100% Fiscal Year Ending Annual Pension Cost (Employer Contribution) Percentage of APC Contributed Net Pension Obligation 6/30/03 6/30/04 6/30/05 579,190 3,112,596 100% 100% 100% 82 CITY OF CARLSBAD Notes to the Financial Statements Note 16. Retirement Plan (Continued) Required supplementary information Funded status of plan (safety) Valuation Date 6/30/02 6/30/03 6/30/04 Entry Age Normal Accrued Liability $ 92,896,916 $ 99,827,853 $ 110,306,847 Actuarial Value of Assets $ 83,572,239 $ 85,963,105 $ 92,529,369 Unfunded Liability/ (Excess Assets) $ 9,324,677 $ 13,864,748 $ 17,777,478 Funded Status 90.0% 86.1% 83.9% Annual Covered Payroll $ 12,110,117 $ 12,709,908 $ 13,382,181 UAAL Asa% of Payroll 77.0% 109.1% 132.8% Funded status of plan (miscellaneous) Valuation Date 6/30/02 6/30/03 6/30/04 Entry Age Normal Accrued Liability $ 88,036,696 $ 121,455,280 $ 132,074,893 Actuarial Value of Assets $ 95,730,136 $ 98,339,566 $ 105,423,856 Unfunded Liability/ (Excess Assets) $ (7,693,440) $ 23,115,714 $ 26,651,037 Funded Status 108.7% 81.0% 79.8% Annual Covered Payroll $ 23,279,207 $ 25,059,422 $ 26,476,671 UAAL Asa% of Pay roll (33.0%) 92.2% 100.7% 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 $109,308 for post-retirement health care costs during fiscal year 2004-05. 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. 83 CITY OF CARLSBAD Notes to the Financial Statements 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, 2005 are: 2006 S 83,700 2007 83,700 2008 7,000 Total minimum future rental payments $ 174,400 84 SUPPLEMENTARY INFORMATION 85 CITY OF CARLSBAD Combining Balance Sheet Nonmajor Governmental Funds June 30, 2005 Special Revenue Funds ASSETS Cash and investments Receivables: Taxes 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 Liabilities: Accrued liabilities Due to other funds Deposits payable Advances from other funds Deferred revenue Total liabilities Community Affordable Development Housing Block Grant $ 10,650,367 $ 902 - - 67,847 - - 9,197,895 - $ 19,848,262 $ 68,749 $ 15,710 $ 19,749 49,000 - - - 15,710 68,749 Donations and Endowments $ 1,736,650 - 31,085 - - - - - $ 1,767,735 $ 19,362 - - - - 19,362 Financing Districts $2,834,880 11,125 1,007 - - - - - $2,847,012 $ 140,319 - - 379,251 - 519,570 Gas Tax $ 7,608,842 - - - - - - 3,643,344 $ 11,252,186 $ 51,339 - - - - 51,339 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 9,197,895 3,643,344 - 1,420,000 22,116 _ - 9,192,541 19,832,552 $ 19,848,262 - - 190,664 _ - (190,664) . $ 68,749 935,000 251,000 - 9,075 _ 166,787 386,511 1,748,373 $ 1,767,735 - - 198,033 _ 447,855 1,681,554 2,327,442 $2,847,012 - - 389,535 3,709,159 277,698 3,181,111 11,200,847 $ 11,252,186 86 Special Revenue Funds Low and Other Habitat and Moderate Special Agricultural Income Revenue Management Housing Funds $ 6,802,147 $ 3,203,720 $1,226,228 22,106 2,091,284 $ 6,802,147 $ 5,317,110 $1,226,228 Police Grants and Section 8 Tyler Asset Rental Court Forfeiture Assistance Apartments $ 618,866 $ 2,050 $ 847,260 1,595 437 412,233 $ 618,866 $ 415,878 $ 847,697 Totals $ 35,531,912 33,231 34,124 67,847 412,233 11,289,179 3,643,344 $ 51,011,870 $ - $ 5,616 $ 6,933 5,616 6,933 2,091,284 1,151,516 4,668 4,479 3,654 4,595 6,797,479 2,064,215 1,211,046 6,802,147 5,311,494 1,219,295 $ 6,802,147 $ 5,317,110 $1,226,228 $ 3,143 $ 18,090 $ 635 288,000 36,987 21,249 3,143 343,077 21,884 412,233 825 70,673 545,050 (340,257) 825,813 615,723 72,801 825,813 $ 618,866 $ 415,878 $ 847,697 $ 280,896 337,000 58,236 379,251 1,055,383 11,289,179 412,233 3,643,344 935,000 251,000 2,571,516 823,049 3,709,159 967,608 25,354,399 49,956,487 $ 51,011,870 (Continued) 87 CITY OF CARLSBAD Combining Balance Sheet Nonmajor Governmental Funds (Continued) June 30, 2005 ASSETS Cash and investments Debt Service Fund Hosp Grove COPs $ 766,535 Capital Project Funds Grants and Other Funds $ 388,519 Infrastructure Replacement $ 18,433,808 Park Development $4,708,916 Planned Local Drainage Facilities $ 9,445,998 Receivables: Taxes Accounts, net Due from other governments Prepaid items Restricted assets, cash and investments Loan receivables Advances to other funds 670,436 675,288 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 659,500 31,304 751,019 1,258,083 (834,330) 299,597 658,334 17,438,195 568,856 1,301,506 300,545 113,190 Total assets LIABILITIES AND FUND BALANCES Liabilities: Accrued liabilities Due to other funds Deposits payable Advances from other funds Deferred revenue Total liabilities $ 1,441,823 $ 1,058,955 $ - $ 251,260 383,942 635,202 $ 18,433,808 $4,708,916 $ 37,682 $ 108,009 2,430,000 37,682 2,538,009 $ 9,559,188 $ 7,533 113,190 120,723 109,793 5,257,941 4,070,731 1,441,823 423,753 18,396,126 2,170,907 9,438,465 Total liabilities and fund balances 1,441,823 $ 1,058,955 $ 18,433,808 $4,708,916 $ 9,559,188 Capital Project Funds Redevelopment Agency $ 640,021 _ 18,771 - - - - - $ 658,792 Traffic Sales Tax/ Impact TransNet Projects Totals $ 9,300,627 S 9,811,007 $ 52,728,896 _ 131,961 670,436 . . . . $ 9,300,627 S 9,811,007 $ 53,531,293 Total Other Governmental Funds $ 89,027,343 33,231 166,085 738,283 412,233 675,288 11,289,179 3,643,344 $ 105,984,986 $ 14,078 - 6,276 - - 20,354 - - - - - - 158,546 , 257,368 222,524 638,438 $ 658,792 $ 288,302 $ 18,529 $ 725,393 383,942 6,276 2,430,000 113,190 288,302 18,529 3,658,801 - . . . - _ 2,912,987 103,561 5,411,423 2,455,548 6,650,533 15,665,528 3,643,790 3,038,384 11,969,152 16,826,389 9,012,325 9,792,478 49,872,492 S 9,300,627 S 9,811,007 S 53,531,293 $ 1,006,289 720,942 64,512 2,809,251 113,190 4,714,184 11,289,179 412,233 659,500 3,643,344 935,000 251,000 2,571,516 6,234,472 19,374,687 12,968,064 42,931,807 101,270,802 S 105,984,986 89 CITY OF CARLSBAD Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2005 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 $ 7,464 46,750 - 320,651 - 2,775,508 - - 3,150,373 - - 214,322 - - 1,321,529 1,398 166 1,537,415 1,612,958 - - 1,612,958 18,219,594 $19,832,552 Community Development Donations and Block Grant Endowments $ - $ 663,706 - - 52,315 - - 163,570 465 663,706 216,350 - - 198,186 67,100 136,778 - 510,677 - - 708,863 203,878 (45,157) 12,472 - (113,978) (113,978) (45,157) (101,506) 45,157 1,849,879 $ - $ 1,748,373 Financing Districts $ - 1,922,038 - 77,060 134,000 15,000 - - 2,148,098 - - 7,408 - 2,338,781 - - - 2,346,189 (198,091) - - (198,091) 2,525,533 $2,327,442 Gas Tax $ 1,748,474 - - - 204,667 - 2,550 - - 1,955,691 - - - - - 1,305,419 - - 1,305,419 650,272 . (7,500) (7,500) 642,772 10,558,075 $11,200,847 90 Special Revenue Funds Low and Habitat and Moderate Agricultural Income Management Housing S - S 513,822 - - - 185,562 83,222 - 449,322 . - 634,884 597,044 - 107,022 - - - 524 62 107,608 634,884 489,436 - Other Special Revenue Funds $ 27,934 - - 35,273 - - 694 4,000 67,901 49,605 - - 45,316 - - _ - 94,921 (27,020) - Police Grants and Asset Forfeiture $ 214,006 - 132,885 19,700 - - - - 366,591 275,041 - - - 55,808 _ - 330,849 35,742 1,670 (1,670) Section 8 Rental Assistance $ 6,050,735 - - 2,271 - - - 8,840 6,061,846 - 6,425,930 - - - 3,805 451 6,430,186 (368,340) - Tyler Court Apartments Totals $ - $ 2,262,296 6,963,845 422,166 2,390,954 132,885 19,511 1,000,232 134,000 3,242,380 164,264 13,305 441,677 16,304,161 49,605 275,041 299,583 7,319,551 182,094 2,338,781 3,193,433 5,727 679 299,583 13,364,911 142,094 2,939,250 1,670 (123,148) (121,478) 634,884 489,436 6,167,263 4,822,058 $6a802J47 $5,311,494 (27,020) 1,246,315 $ 1,219,295 35,742 579,981 S 615,723 (368,340) 441,141 S 72,801 142,094 2,817,772 683,719 47,138,715 $ 825,813 S 49,956,487 (Continued) 91 CITY OF CARLSBAD Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds (Continued) For the Year Ended June 30, 2005 Revenues: Taxes Intergovernmental Charges for services Fines and forfeitures Income from property and investments Interdepartmental charges Contributions from property owners Donations Miscellaneous Total revenues Debt Service Fund Grants Hosp Grove and Other COPs Funds $ - $ 842,768 - - 61,601 10,389 - 44,960 - - 61,601 898,117 Capital Project Funds Infrastructure Park Replacement $ 44,855 - - - 530,575 - - - - 575,430 Development $ - - - 150,284 - 1,695,188 - 1,676 1,847,148 Planned Local Drainage Facilities $ - - - 262,145 - 1,449,296 - - 1,711,441 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 800,000 800,000 842,124 749,281 1,758,218 3,830,000 (83,792) (83,792) 3,830,000 708,771 620,000 - ... 140,598 .... 760,598 842,124 (698,997) 55,993 749,281 1,758,218 708,771 (173,851) 88,930 1,002,670 101,003 (27,799) 3,656,149 88,930 1,002,670 1,340,820 451,552 14,739,977 2,081,977 8,435,795 $1,441,823 $ 423,753 818,396,126 $ 2,170,907 S 9,438,465 92 Capital Project Funds Redevelopment Sales Tax/ Agency TransNet $ - $ - 2,658,430 19,078 - 68,204 273.647 - - - - 87,282 2,932,077 485,359 - - - - 2,248,011 4,409,466 1,832 217 2,735,419 4,409,466 (2,648,137) (1,477,389) 1,942,000 - 1,942,000 (706,137) (1,477,389) 1,344,575 10,489,714 S 638,438 $ 9,012,325 Traffic Impact Projects $ - - - 251,986 - 1,703,456 - - 1,955,442 35,725 - - - - 640,357 _ - 676,082 1,279,360 5,325 - 5,325 1,284,685 8,507,793 $9,792,478 Totals $ 44,855 3,501,198 19,078 - 1,547,230 - 4,892,900 - 1,676 10,006,937 521,084 - - - - 11,356,228 1,832 217 11,879,361 (1,872,424) 5,777,325 (83,792) 5,693,533 3,821,109 46,051,383 $ 49,872,492 Total Other Governmental Funds $ 2,307,151 10,465,043 2,410,032 132,885 2,609,063 134,000 8,135,280 164,264 14,981 26,372,699 570,689 275,041 7,319,551 182,094 2,338,781 14,549,661 627,559 141,494 26,004,870 367,829 6,578,995 (206,940) 6,372,055 6,739,884 94,530,918 S 101,270,802 93 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds Year Ended June 30, 2005 Affordable Housing Total revenues Total expenditures Net change in fund balance Community Development Block Grant Total revenues Total expenditures Net change in fund balance Donations and Endowments Total revenues Total expenditures Net change in fund balance Financing Districts Total revenues Total expenditures Net change in fund balance Gas Tax Total revenues Total expenditures Net change in fund balance Habitat and Agricultural Management Total revenues Total expenditures Net change in fund balance Low and Moderate Income Housing Total revenues Total expenditures Net change in fund balance Budget $ 3,376,597 1,619,799 1,756,798 626,247 1,385,335 (759,088) 175,000 436,311 (261,311) 2,161,538 2,992,079 (830,541) 1,849,277 5,681,811 (3,832,534) 4,668 (4,668) 559,875 171,972 387,903 Actual Amounts (Budgetary Basis) $ 3,191,511 1,559,531 1,631,980 663,706 899,527 (235,821) 223,583 212,953 10,630 2,158,894 2,544,222 (385,328) 1,984,377 1,694,954 289,423 660,479 4,668 655,811 608,817 112,087 496,730 Variance Over (Under) $ (185,086) (60,268) (124,818) 37,459 (485,808) 523,267 48,583 (223,358) 271,941 (2,644) (447,857) 445,213 135,100 (3,986,857) 4,121,957 660,479 660,479 48,942 (59,885) 108,827 94 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds (Continued) Year Ended June 30, 2005 Other Special Revenue Funds Total revenues Total expenditures Net change in fund balance Police Grants and Asset Forfeiture Total revenues Total expenditures Net change in fund balance Section 8 Rental Assistance Total revenues Total expenditures Net change in fund balance Totals Total revenues Total expenditures Net change in fund balance Budget $ 70,634 105,986 (35,352) 214,300 483,260 (268,960) 6,252,735 6,482,198 (229,463) 15,286,203 19,363,419 $ (4,077,216) Actual Amounts (Budgetary Basis) $ 72,758 98,575 (25,817) 368,770 330,849 37,921 6,061,846 6,431,011 (369,165) 15,994,741 13,888,377 $ 2,106,364 Variance Over (Under) $ 2,124 (7,411) 9,535 1 54,470 (152,411) 306,881 (190,889) (51,187) (139,702) 708,538 (5,475,042) $ 6,183,580 95 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Debt Service Funds Year Ended June 30, 2005 Budget Actual Amounts (Budgetary Basis) Variance Over (Under) Redevelopment Areas Total revenues Total expenditures Net change in fund balance 1,948,622 1,785,735 2,079,649 1,756,658 131,027 (29,077) 162,887 $322,991 $160,104 96 97 CITY OF CARLSBAD Combining Statement of Net Assets Internal Service Funds June 30, 2005 ASSETS Current assets: Cash and investments Receivables: Accounts, net Due from other governments Inventory Total current assets Noncurrent assets: Capital assets: Machinery and equipment Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrcnt assets Total assets LIABILITIES Current liabilities: Accrued liabilities Estimated claims payable Total current liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted Fleet Self Insured Management Benefits $ 8,513,298 $ 3,548,449 1,081 169 - 170,635 8,685,014 3,548,618 1 1 ,904,762 (6,791,469) 5,113,293 5,113,293 S 13,798,307 S 3,548,618 $ 337,074 S 2,645,532 78,486 337,074 2,724,018 337,074 2,724,018 5,113,293 8,347,940 824,600 Information Technology $ 3,441,543 - 754,868 - 4,196,411 3,271,025 (2,757,907) 513,118 513,118 $ 4,709,529 S 465,393 - 465,393 465,393 513,118 3,731,018 Total net assets $ 13,461,233 $824,600 $ 4,244,136 98 Risk Management Workers' Compensation Total 1,470,911 3,512,015 S 20,486,216 1,250 754,868 170,635 1,470,911 3,512,015 21,412,969 15,175,787 (9,549,376) 5,626,411 5,626,41 1 1,470,911 S 3,512,015 S 27,039,380 S 106,935 $ 1,927,843 2,034,778 2,034,778 6,441 ! 3,613,777 3,620,218 3,620,218 E 3,561,375 5,620,106 9,181,481 9,181,481 (563,867) $ (563,867) $ (108,203) : (108,203) ! 5,626,411 12,231,488 5 17,857,899 99 CITY OF CARLSBAD Combining Statement of Revenues, Expenses and Changes in Net Assets Internal Service Funds For the Year Ended June 30, 2005 Operating revenues: Other charges for services Miscellaneous Total operating revenues Operating expenses: Depreciation Fuel and supplies Claims expense Small equipment purchases 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 Self Insured Management Benefits $ 3,263,168 $ 813,022 21,959 3,285,127 813,022 1,163,992 753,122 737,059 36,537 1,222,192 1,949 3,175,843 739,008 109,284 74,014 225,595 2,960 64,990 290,585 2,960 399,869 76,974 _ - 307,155 707,024 76,974 12,754,209 747,626 $ 13,461,233 $ 824,600 Information Technology $ 4,154,145 - 4,154,145 401,160 - - 62,772 4,404,744 4,868,676 (714,531) 95,746 (6,772) 88,974 (625,557) _ - 754,868 129,311 4,114,825 $ 4,244,136 100 Risk Workers' Management Compensation Totals $ 1,200,800 $ 16,093 1,216,893 - 1,898,854 - 821,999 2,720,853 (1,503,960) 40,091 - 40,091 (1,463,869) - (1,463,869) 900,002 $ (563,867) J 1,999,629 5 32,106 2,031,735 - 2,131,464 - 120,374 2,251,838 (220,103) 90,293 - 90,293 (129,810) - (129,810) 21,607 J (108,203) ! 5 11,430,764 70,158 11,500,922 1,565,152 753,122 4,767,377 99,309 6,571,258 13,756,218 (2,255,296) 454,685 58,218 512,903 (1,742,393) 1,062,023 (680,370) 18,538,269 J 17,857,899 101 CITY OF CARLSBAD Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2005 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 S 3,263,042 $ 813,022 (955,040) (621,891) (272,171) (736,436) 21,959 155,684 1,435,899 232,270 (797,278) (797,278) 227,877 2,960 866,498 235,230 7,646,800 3,313,219 $ 8,513,298 $ 3,548,449 Information Technology $ 4,154,145 (2,192,947) (1,722,030) (412,833) (173,665) (396,174) (U32) (397,906) 95,746 (475,825) 3,917,368 $ 3,441,543 102 Risk Workers' Management Compensation Total $ 1,200,800 $ 1,999,629 ! (432,913) (188,592) (91,464) (131,780) (28,963) (591,688) (1,426,577) 16,093 32,106 (128,080) 484,731 5 11,430,638 (3,580,900) (2,623,977) (845,747) (2,754,701) 225,842 1,851,155 - (1,193,452) (1,732) (1,195,184) 40,091 90,293 (87,989) 575,024 1,558,900 2,936,991 $ 1,470,911 $ 3,512,015 ! 456,967 1,112,938 19,373,278 £ 20,486,216 103 CITY OF CARLSBAD Combining Statement of Cash Flows Internal Service Funds (Continued) For the Year Ended June 30, 2005 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 109,284 $ 74,014 $ (714,531) ,163,992 401,160 (126) (68,065) 2,679 228,135 - (657) - - 158,290 623 - - - 139,706 - 1,435,899 S 232,270 S (173,665) 307,155 $S 754,868 104 Risk Workers' Management Compensation Total $ (1,503,960) $ (220,103) $ (2,255,296) 1,565,152 - - - 68,714 1,307,166 S (128,080) $ - - - (53) 704,887 i 484,731 $ (783) (68,065) 2,679 594,792 2,012,676 1,851,155 1,062,023 105 CITY OF CARLSBAD Combining Statement of Changes in Assets and Liabilities Agency Funds June 30, 2005 Contractors' and Miscellaneous Deposits ASSETS Current assets: Cash and investments Accrued interest Total current assets LIABILITIES Accrued liabilities Deposits held for others Total liabilities Balance July 1,2004 $ 13,675,836 11,730 $ 13,687,566 $ 314,791 13,372,775 S 13,687,566 Additions $ 32,926,650 37,645 $ 32,964,295 $ 20,634,181 32,346,114 S 52,980,295 Deductions S 29,061,677 13,756 S 29,075,433 $ 17,931,197 31,160,236 $ 49,091,433 Balance June 30, 2005 S 17,540,809 35,619 S 17,576,428 $ 3,017,775 14,558,653 $ 17,576,428 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 Accrued liabilities Deposits held for others Total liabilities Balance July 1 , 2004 $ 3,819,531 28,405 3,847,936 4,760,326 79,916 4,840,242 S 8,688,178 S 81,946 8,606,232 $ 8,688,178 Additions S 5,927,946 106,852 6,034,798 2,472,364 97,634 2,569,998 $ 8,604,796 $ 251,221 8,119,152 $ 8,370,373 Deductions $ 4,673,549 28,404 4,701,953 32,356 89,215 121,571 $ 4,823,524 S 245,467 4,343,634 $ 4,589,101 Balance June 30, 2005 $ 5,073,928 106,853 5,180,781 7,200,334 88,335 7,288,669 $ 12,469,450 $ 87,700 12,381,750 $ 12,469,450 106 CITY OF CARLSBAD Combining Statement of Changes in Assets and Liabilities Agency Funds (Continued) June 30, 2005 Total Agency Funds ASSETS Current assets: Cash and investments Accrued interest Total current assets Restricted assets: Cash and investments Accrued interest Total current assets Total assets LIABILITIES Accrued liabilities Deposits held for others Total liabilities Balance July 1,2004 $ 17,495,367 40,135 17,535,502 4,760,326 79,916 4,840,242 $ 22,375,744 S 396,737 21,979,007 S 22,375,744 Additions $ 38,854,596 144,497 38,999,093 2,472,364 97,634 2,569,998 S 41,569,091 $ 20,885,402 40,465,266 S 61,350,668 Deductions $ 33,735,226 42,160 33,777,386 32,356 89,215 121,571 S 33,898,957 $ 18,176,664 35,503,870 $ 53,680,534 Balance June 30, 2005 $ 22,614,737 142,472 22,757,209 7,200,334 88,335 7,288,669 S 30,045,878 $ 3,105,475 26,940,403 $ 30,045,878 107 CITY OF CARLSBAD Schedule of Annual Debt Service Requirements $15,495,000 - 1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds Fiscal Year 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 S 328,001 $ 317,633 306,607 295,058 282,851 269,989 256,470 242,295 227,332 211,583 195,045 177,589 159,214 139,920 119,576 98,182 75,525 51,675 26,500 S 3,781,045 $ Interest Due March 1 317,633 306,607 295,058 282,851 269,989 256,470 242,295 227,332 211,583 195,045 177,589 159,213 139,920 119,576 98,183 75,525 51,675 26,500 - 3,453,044 Total Interest $ 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 $ 7,234,089 Principal Due September 1 $ 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 $ 12,460,000 Total Annual Debt Service S 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 $ 19,694,089 $6,595,000 -1997 Hosp Grove Certificates of Participation (1988 Refunding) Fiscal Year Interest Due August 1 Interest Due February 1 Total Interest Principal Due August 1 Total Annual Debt Service 2005-06 2006-07 2007-08 2008-09 Totals 62,418 48,448 33,373 17,273 161,512 48,447 33,372 17,272 110,865 81,820 50,645 17,273 99,091 $ 635,000 670,000 700,000 735,000 745,865 751,820 750,645 752,273 260,603 $ 2,740,000 $ 3,000,603 108 CITY OF CARLSBAD Schedule of Annual Debt Service Requirements (Continued) $11,080,000 - Encina Financing Joint Powers Authority Installment Purchase Agreement Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Totals Interest Due August 1 188,603 172,791 156,153 139,353 122,816 105,191 86,228 66,241 45,228 23,190 $ 1,105,794 Interest Due February 1 172,791 156,153 139,353 122,816 105,191 86,228 66,241 45,228 23,191 - $ 917,192 Total Interest 361,394 328,944 295,506 262,169 228,007 191,419 1 52,469 111,469 68,419 23,190 S 2,022,986 Principal Due August 1 575,000 605,000 640,000 675,000 705,000 740,000 780,000 820,000 860,000 905,000 S 7,305,000 Total Annual Debt Service 936,394 933,944 935,506 937,169 933,007 931,419 932,469 931,469 928,419 928,190 S 9,327,986 $2,331,489 - Carlsbad Municipal Water District State Loan for Reclaimed Water Projects Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Interest Due November 30 35,455 31,857 28,155 24,345 20,425 16,391 12,240 7,969 2,680 Principal Due November 30 124,072 127,670 131,372 135,182 139,102 143,136 147,287 151,558 123,219 Total Annual Debt Service 159,527 159,527 159,527 159,527 159,527 159,527 159,527 159,527 125,899 Totals 179.517 ,222,598 S 1,402,115 109 110 STATISTICAL SECTION 111 CITY OF CARLSBAD Government-wide Expenses by Function Fiscal Year 2001-02(1) 2002-03 2003-04 2004-05 General Government $7,599,821 8,517,581 8,604,212 11,352,893 Public Safety $25,659,586 27,747,646 30,894,018 34,366,093 Community Development $10,539,139 12,351,779 13,814,331 14,362,610 Community Services $13,269,566 14,190,510 15,034,661 16,033,363 Public Works $15,015,344 16,825,872 19,533,596 22,064,209 Interest on Long-Term Debt $1,673,516 1,048,264 995,895 1,013,773 (1) The City first began issuing Government-wide statements in fiscal year 2001-02. GOVERNMENT-WIDE EXPENSES BY FUNCTION 2004-05 Carlsbad Municipal Water District 17% Interest on Long- Term Debt 1% Public Works 17% Sewer 6% General Government 9% Public Safety 26% Community Services 12% Community Development 11% Source: City of Carlsbad Comprehensive Annual Financial Reports 112 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 21,422,207 25,344 7,234,986 1,488,109 129,363,587 113 CITY OF CARLSBAD Government-wide Revenues PROGRAM REVENUES Fiscal Year 2001-02(l) 2002-03 2003-04 2004-05 Charges for Services $40,142,313 42,464,001 41,845,765 44,531,504 Operating Grants and Contributions $8,562,412 11,406,166 16,073,559 13,325,511 Capital Grants and Contributions $43,007,215 64,719,339 59,591,648 91,536,226 (1*The City first began issuing Government-wide statements in fiscal year 2001-02. GOVERNMENT-WIDE REVENUES BY FUNCTION 2004-05 Taxes 35% Income from Property and Investments 5% Intergov. (Unrestricted) 1% Charges for Services 17% Operating Grants and Contributions 5% Other 1% Capital Grants and Contributions 36% Source: City of Carlsbad Comprehensive Annual Financial Reports 114 GENERAL REVENUES Income from Intergovernmental Property and Taxes (Unrestricted) Investments Miscellaneous Total $70,676,433 $4,675,269 $25,105,269 $1,564,886 $193,733,797 74,398,635 5,066,902 19,182,978 598,688 217,836,709 78,668,757 4,124,672 4,316,430 650,724 205,271,555 88,554,458 2,136,364 14,072,958 867,822 255,024,843 115 CITY OF CARLSBAD General Governmental Expenditures by Function'1' Last Ten Fiscal Years Fiscal Year(2) 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Total $ 59,802,924 65,943,032 80,045,280 112,156,205 105,655,384 92,884,485 112,513,403 108,662,936 115,234,046 142,692,660 General Government $ 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 12,113,403 Public Safety $ 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 33,819,164 Community Development $ 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 14,318,966 (1)Includes General, Special Revenue, Debt Service, and Capital Projects Funds. Beginning in fiscal year 1997-98, Park Maintenance expenditures are included in Public Works instead of Community Services. GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION 2004-05 Capital Projects 33% Public Works 13% Debt Service 2%General Government 8% Community Services 10% Source: City of Carlsbad Comprehensive Annual Financial Reports Public Safety 24% Community Development 10% 116 Community Services $ 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 14,743,535 Public Works $ 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 18,736,645 Capital Outlay $ 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 46,419,619 Debt Service $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 2,541,328 SPENDING ON CAPITAL PROJECTS LAST TEN YEARS TOTAL EXPENDITURES LAST TEN YEARS Fiscal Year 117 CITY OF CARLSBAD General Governmental Revenues by Source0' Last Ten Fiscal Years Fiscal Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Total(2) $74,611,395 98,645,130 122,653,159 145,393,991 115,252,270 136,244,948 131,323,111 141,617,437 147,362,099 187,377,929 Property Taxes $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 35,649,689 Sales Taxes $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 26,330,537 Transient Occupancy Taxes $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 10,072,278 Business Licenses $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 2,889,989 Other Taxes $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 9,122,614 (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 200 i Fiscal Year Source: City of Carlsbad Comprehensive Annual Financial Reports Fiscal Year D Property Tax • Sales Tax 118 Licenses Inter- Governmental $ 6,426,262 11,764,760 17,091,140 17,801,614 14,094,118 14,285,677 14,266,527 19,775,324 22,505,969 24,245,241 and Charges for Permits Services $4,178 5,609 6,484 3,826 3,320 3,409 1,998 2,042 844 $ 6,805,386 730 10,707,653 025 7,614,902 686 6,805,147 851 5,749,416 156 6,427,307 210 7,751,065 ,529 10,058,671 2,328,524 9,899,183 3,392 682 10,433,292 TRANSIENT OCCUPANCY TAX LAST TEN YEARS 10 -f c 1 4"l=3Q 2-' 0 -W- VO £ ^lH^^r^i 1 111 1 ^aa^M^pa— msfta<- ao 0\ Ov . . . . . i i n i i _Kl|lln Hrylrll «t f t 5 0 0 O O 0O\ O 0 O O 0 Income from Fines and Property and Forfeitures Investments $ 335,395 $ 4,862,050 317,892 6,075,188 331,318 8,632,261 935,955 8,925,565 839,831 10,495,817 888,608 20,384,618 947,183 18,700,470 923,068 14,801,549 1,092,380 3,901,415 1,083,698 10,741,838 Contributions from Property Owners $ 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 49,445,825 Other(2> 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 3,970,246 CHARGES FOR SERVICES LAST TEN YEARS 12 - ' n 10-'B0 3 8 •' "5 I D ! -I i z ,e - L [- 0 y\ c fj*. r^B litf jj U U U U 1 ) 9\ O ^^ fS f)IN ON O O O Or\ ff\ O O O O - . . jjy_ j Tt IT)0 0O O Fiscal Year Fiscal Year 119 CITY OF CARLSBAD Computation of Legal Debt Margin June 30, 2005 Net assessed valuation $ 15.741.121.590 Debt limit (15% of 25% of net assessed valuation as adjusted) 590,292.060 Amount of debt applicable to debt limit: Bonded debt 12,460,000 Certificates of participation 2,740,000 Obligations under capital leases 7.366 Total amount of debt applicable to debt limit 15.207.366 Legal debt margin $ 575.084.694 Percent of debt limit 2.6% Source: County of San Diego Office of the Auditor and Controller 120 CITY OF CARLSBAD Schedule of Direct and Overlapping Bonded Debt June 30, 2005 2004-05 Assessed Valuation: $16,13 8,026,027 Redevelopment Incremental Valuation: 240,373,237 Adjusted Assessed Valuation: $15,897,652,790 OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/30/05 Metropolitan Water District 1.198 $ 5,024,292 Carlsbad Unified School District 97.811 21,118,431 Carlsbad Unified School District Community Facilities District No. 1 100.000 9,095,000 Oceanside Unified School District 0.007 5,107 Vista Unified School District 0.064 72,397 Encinitas Union School District 30.374 7,408,740 San Marcos Unified School District School Facilities Improvement District 36.564 7,050,643 San Marcos Unified School District Community Facilities District No. 5 100.000 26,395,000 San Dieguito Union High School District Community Facilities District No. 94-1 100.000 284,113 San Dieguito Union High School District Community Facilities District No. 94-2 98.327 20,430,827 San Dieguito Union High School District Community Facilities District No. 95-2 36.882 315,924 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 4,390,372 City of Carlsbad 1915 Act Bonds 100.000 76.315.000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $191,827,502 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: San Diego County General Fund Obligations 6.295% $ 29,201,033 San Diego County Pension Obligations 6.295 78,828,692 San Diego County Superintendent of Schools General Fund Obligations 6.295 807,176 Mira Costa Community College District Certificates of Participation 26.851 1,343,893 Carlsbad Unified School District General Fund Obligations 97.811 55,991,907 San Marcos Unified School District General Fund Obligations 31.320 1,923,048 Encinitas Union School District Certificates of Participation 30.374 498,134 Other School District Certificates of Participation Various 242,377 City of Carlsbad General Fund Obligations 100.000 2,740.000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $ 171,576,260 COMBINED TOTAL DEBT $363,403,762(l) '''Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 2004-05 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.19% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($2,740,000) 0.02% Combined Total Debt 2.29% SHARE OF AUTHORIZED AND UNSOLD GENERAL OBLIGATION BONDS: Oceanside Unified School District $3,535 Vista Unified School District $17,690 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/3Q/05: $0 Source: California Municipal Statistics, Inc. 121 Fiscal Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 CITY OF CARLSBAD Construction and Business Activity Last Ten Fiscal Years Building Permit Revenue £ 917,788 1,262,177 2,094,523 2,524,063 2,156,584 2,102,074 1,085,819 986,890 1,282,126 2,031,708 Percent Change 42.4 37.6 65.9 20.5 (14.6) (2.5) (48.3) (9.1) 29.9 58.5 Estimated Valuation $162,116,427 305,247,426 479,909,805 588,527,417 468,596,775 513,763,904 272,671,912 265,175,025 323,157,350 530,149,898 Business License Revenue $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 2,889,989 ESTIMATED VALUATION OF BUILDING PERMITS ISSUED - LAST TEN YEARS Fiscal Year Percent Change 19.7 1.3 6.2 8.4 7.2 23.4 6.1 (5.5) 24.6 0.1 Source: City of Carlsbad Comprehensive Annual Financial Reports 122 CITY OF CARLSBAD Water Enterprise Revenue Bond Coverage Last Ten Fiscal Years Fiscal Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Gross Revenue(l) $ 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 22,968,441 Total Expenses'2' $ 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 21,422,207 Net Revenue Available for Debt Service $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 1,546,234 Principal $ 880,000 1,040,000 955,000 995,000 1,040,000 1,075,000 1,120,000 1,175,000 0 0 Debt Service Interest $ 644,822 494,954 264,695 227,450 187,650 145,010 99,860 51,700 0 0 Requirements Total $ 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 0 Coverage 2.07 2.75 3.09 2.63 2.91 4.23 4.60 3.69 N/A N/A (1) (2) Includes operating and non-operating revenues. Includes operating and non-operating expenses. WATER ENTERPRISE GROSS REVENUE VS. TOTAL EXPENSES LAST TEN YEARS Fiscal Year D GROSS REVENUE • TOTAL EXPENSES WATER ENTERPRISE REVENUE AVAILABLE FOR DEBT SERVICE LAST TEN YEARS Fiscal Year Source: City of Carlsbad Comprehensive Annual Financial Reports 123 CITY OF CARLSBAD Schedule of Assessed Valuation Last Ten Fiscal Years Fiscal Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Secured Property $ 5,676,061,219 5,811,751,594 6,232,883,670 7,154,426,710 8,675,347,964 10,289,895,123 11,586,003,633 12,801,430,765 14,054,283,700 15,473,484,241 Unsecured Property $ 310,402,764 348,706,124 352,854,173 424,962,226 419,824,253 422,862,440 519,294,090 487,682,538 559,694,669 600,161,425 Less Property Exemptions $ 46,279,594 55,138,448 57,681,797 78,827,023 85,462,447 95,111,634 115,461,551 131,448,341 153,968,422 175,992,876 (i)Does not include redevelopment incremental valuation or State-assessed unitary values. Source: County of San Diego Office of the Auditor and Controller 124 Total Assessed Valuation*1' $ 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 15,897,652,790 $16 -ix $14 -' ti $12 -x o 3 $10 -x PS .S $8 - x J3 $6-' "o .Q $4 -x $2 •'"' Homeowner's Exemptions $ 98,488,810 100,249,766 103,825,400 108,623,200 119,026,600 127,530,200 139,157,200 147,953,400 156,595,600 156,531,200 Net Assessed Percentage Valuation Change $ 5,841,695,579 0.3 6,005,069,504 2.8 6,424,230,646 7.0 7,391,938,713 15.1 8,890,683,170 20.3 10,490,115,729 18.0 11,850,678,972 13.0 13,009,711,562 9.8 14,303,050,347 9.9 15,741,121,590 NET TAXABLE VALUE LAST TEN YEARS BlUVO l~ 00 ON OON ON ON ON oON ON ON ON o ._. i- ipl J e o0 O - m j$^ \\f _W . V ^t^t •& mO O 0O O 0 10.1 ^ Fiscal Year 125 Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 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(1) 68,010 70,532 73,688 77,550 82,030 83,469 88,013 90,271 92,995 95,146 104,070<2) 109,185(2) CITY OF CARLSBAD Demographic Statistics Last Ten Fiscal Years Population Percent Change 2.3 3.7 4.5 5.2 5.8 1.8 5.4 2.6 3.0 2.3 9.4 4.9 County Population*l) 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 3,051,280 3,258,951(3) 3,633,572(3) City Population Percent of County 2.5 2.6 2.6 2.7 2.8 2.9 3.0 3.0 3.1 3.1 3.2 3.0 (1) Source: State Department of Finance. (2) Source: Based on City of Carlsbad projected residential construction estimates in 2005-06 Capital Improvement Program. (3) Source: State Department of Finance Population Projections (May 2004). POPULATION LAST TEN YEARS 100,000 -| 90,000 80,000 70,000 - 60,000 - 50,000 - 40,000 - 30,000 20,000 • 10,000 • Fiscal Year 126 CITY OF CARLSBAD Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Total Current Levy $11,891,199 12,227,583 13,277,486 15,115,611 17,923,250 20,959,581 23,554,392 26,220,028 32,215,674 43,164,454 Total Current Collections $11,164,134 11,551,981 12,636,654 14,421,616 17,110,252 20,085,365 22,705,762 25,200,220 30,859,058 41,246,613 % of Levy Collected 93.9 94.5 95.2 95.4 95.5 95.8 96.4 96.1 95.8 95.6 PROPERTY TAX LEVIES & COLLECTIONS LAST TEN FISCAL YEARS $45 -f ao oO Fiscal Year DLEVIES • COLLECTIONS Source: County of San Diego Office of the Auditor and Controller 127 CITY OF CARLSBAD Principal Employers 2004-05 FIRM Manufacturing. Callaway Golf Invitrogen Taylor Made Golf- Adidas Golf Company ViaSat Acushnet Golf Zimmer Dental Beckman Coulter Melles Griot Schumacher Respironics, Inc Non-Manufacturing Four Seasons Resort - Aviara Carlsbad Unified School District La Costa Resort & Spa Gemological Institute of America City of Carlsbad ISIS Pharmaceuticals LEGOLAND, California 24-Hour Fitness Modern Postcard/The Iris Group Inc. Grand Pacific Resorts PRODUCT/SERVICE Golf Equipment Research Supplies Golf Equipment Data Communications Golf Equipment Dental Implants Medical Supplies Semiconductors Chemicals for Semiconductors Medical/Orthopedic Devices Resort Education Hotel/Health Spa Gemological School Municipal Government Research and Development Family Theme Park Health Club Headquarters Software Distributor Hotel/Resort EMPLOYEES 2,000 1,000 645 624 535 391 260 256 250 200 1,030 950 720 660 635 510 490 450 270 200 Source: City of Carlsbad, Chamber of Commerce 128 Taxpayer Callaway Golf Company 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 CITY OF CARLSBAD Principal Taxpayers 2004-05 Type of Business (i)Net assessed valuation for 2004-05: Manufacturer Hotel & Health Spa Senior Retirement Community Family Theme Park Real Estate Real Estate Retail Sales Distribution Warehouse Real Estate Gemological School Residential Apartment Rentals $15,741,121,590 Valuation $159,353,837 132,292,486 125,451,962 105,000,000 76,495,927 71,845,631 68,001,543 63,028,919 62,493,519 55,520,616 52,549,615 $972,034,055 Percentage of Net Assessed Valuation0} 1.0% 0.8% 0.8% 0.7% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.3% 62% Source: County of San Diego Office of the Auditor and Controller 129 CITY OF CARLSBAD Top 30 Sales Tax Generators 2004-05 Firm Product/Service Banana Republic Bob Baker Chrysler Jeep Bob Baker Volkswagen Carlsbad Fuels Service Station Carlsbad Volvo Costco Wholesale Four Seasons Resort Aviara Hoehn Acura Hoehn Honda Invitrogen Corporation J C Penney Company Ken Grody Ford Ken Grody GMC Pontiac La Costa Resort & Spa Legoland Lexus Carlsbad Macy's Department Store North County Hyundai Pacific Sales Kitchen & Bath Reliable Wholesale Lumber Robinsons-May Department Store Rorick Buick/Cadillac Sears Roebuck & Company Townsend Lincoln/Mercury Toyota Carlsbad Toyota Motor Credit Vons Grocery Company Weseloh Chevrolet Worthington Dodge * Companies are listed in alphabetical order. Clothing Store Car Dealership Car Dealership Fuel Service Station Car Dealership General Stores Hotel/Food Sales/Spa Car Dealership Car Dealership Manufacturer of Research Supplies Department Store Car Dealership Car Dealership Hotel/Food Sales/Spa Family Theme Park Car Dealership Department Store Car Dealership Furniture/Appliance Building Materials Department Store Car Dealership Department Store Car Dealership Car Dealership Automobile Lessor Grocery/Food Markets Car Dealership Car Dealership Source: MBIA MuniServices Company 130 CITY OF CARLSBAD Miscellaneous Statistical Information 2004-05 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 1/1/05) 95,146 Net Assessed Valuation $ 15,741,121,590 Streets: Number of Street Lights 6,445 Miles of Streets 295 Fire Protection: Number of Stations 6 Number of Firefighters & Officers 73 Police Protection: Number of Stations 1 Number of Sworn Police Officers 109 Municipal Water District: Number of Customers 83,400 Number of Water Connections 25,900 Average Daily Consumption (in Millions of Gallons) 19.1 Miles of Lines and Mains 434 Miles of Sewers 254 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) 625 Number of Pools 1 Number of Libraries 2 Number of Materials in Circulation 373,998 Total Number of Authorized Full-Time City Employees 635 Source: City of Carlsbad, Finance Department 131 132