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HomeMy WebLinkAbout; ; 2005-2006 CAFR; 2006-06-30COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2006 1635 Faraday Avenue, Carlsbad, CA 92008 Website: www. carlsbadca. gov Prepared by the Finance Department INTRODUCTORY SECTION CITY OF CARLSBAD Comprehensive Annual Financial Report Year Ended June 30, 2006 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 16 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 90 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 94 Combining Schedule of Revenues and Expenditures - Budget and Actual (Budgetary Basis) - Special Revenue Funds 98 Combining Schedule of Revenue and Expenditures - Budget and Actual (Budgetary Basis) - Debt Service Funds 100 Combining Statement of Net Assets - Internal Service Funds 102 Combining Statement of Revenues, Expenses and Changes in Net Assets - Internal Service Funds 104 Combining Statement of Cash Flows - Internal Service Funds 106 Combining Statement of Changes in Assets and Liabilities - Agency Funds 110 Schedule of Annual Debt Service Requirements 112 STATISTICAL SECTION: CITY OF CARLSBAD Comprehensive Annual Financial Report Year Ended June 30, 2006 TABLE OF CONTENTS (CONTINUED) Page Financial Trends: Net Assets by Component - Last Five Fiscal Years 116 Changes in Net Assets - Last Five Fiscal Years 117 Fund Balances of Governmental Funds - Last Ten Fiscal Years 120 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 122 General Governmental Tax Revenues by Source - Last Ten Fiscal Years 124 Revenue Capacity: Water and Sewer Rates - Last Ten Fiscal Years 125 Assessed Value of Taxable Property 126 Principal Property Taxpayers 127 Property Tax Levies and Collections 128 Debt Capacity: Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 130 Schedule of Direct and Overlapping Bonded Debt - Current Fiscal Year 133 Direct and Overlapping Debt - Last Nine Fiscal Years 134 Legal Debt Margin Information - Last Ten Fiscal Years 136 Pledged-Re venue Coverage - Last Nine Fiscal Years 138 Demographic and Economic Information: Demographic and Economic Statistics 140 Principal Employers - Current Year and Nine Years Ago 142 Operating Information: Authorized Full and 3/4 Time City Government Employees by Major Service Area 144 Operating Indicators by Function/Program - Last Two Fiscal Years 146 Capital Asset Statistics - Last Two Fiscal Years 147 COUNCIL VISION STATEMENTS Carlsbad City Council 2006 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, provides opportunities for employment to the residents of Carlsbad, economic vitality to the community, and the necessary revenues to support City services. * Policies and decisions implement the General Plan, enforce the Growth Management Plan, maintain the safety and security of its citizens, and are based on what is best for Carlsbad. » Occupies a leadership role in local and regional planning, (e.g., water, beach, circulation, and environmental issues) important to local governments actively involved in addressing governmental issues at the local, state and national levels. * Provides an open government for the betterment of the community and encourages, in a non-partisan manner, active citizen participation and involvement with the City Council and the City's Boards and Commissions. And Carlsbad Efficiently and Effectively... * Delivers top-quality public services. * Manages its environment proactively, including: • Open space . Wildlife habitats • Water quality/conservation • Beach erosion • Air quality • Resource conservation and waste reduction * Promotes a safe and efficient integrated transportation system. * Maintains citywide "small town" community spirit. * Provides a community where continuous and life-long learning is supported and encouraged for people of all ages. « Looks ahead and works to anticipate changes that are required now in order to make a better future for its citizens. City of Carlsbad Finance Department October 5, 2006 Honorable Mayor, City Council, and Citizens of the City of Carlsbad CITY OF CARLSBAD Carlsbad, CA 92008 LETTER OF TRANSMIT!AL 2005-06 COMPREHENSIVE ANNUAL FINANCIAL REPORT Honorable Mayor, City Council, and Citizens: I am pleased to present the 2005-06 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, 2006. 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, 2006. 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 transmittal 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 Compliance Reports and Other Financial Information. The results of the City's Single Audit for the fiscal year ended June 30, 2006 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 lc'52 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 1635 Faraday Avenue • Carlsbad, CA 92008-7314 • (760) 6O2-2430 • FAX (760) 602-8553 www.ci.carlsbad.ca.us • Business License (76O) 602-2495 • Utility Billing (76O) 602-2420 • Purchasing (760) 602-2460 - FAX (760) 602-8556 - Bid Line (760) 602-2464 Council is elected at large on a staggered basis for a term of four years. The City Clerk and City Treasurer 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 98,607, 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 33 hotels offering over 3,400 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. 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, the Carlsbad Public Financing Authority, and the Carlsbad Municipal Water District. Through these entities, Carlsbad provides a full range of services to its citizens and customers including: Carlsbad 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 statements and strategic goals City of Carlsbad Strategic Goals Balanced Community Development - A city that connects community, place, and spirit through balanced and economically sustainable land uses. Citizen Connection — A city that embraces Community connectivity through the effective use of technological and interpersonal mediums. Communication — Ensure that community members, Council and staff are well informed, continuing to be a more responsive government while providing a high level of citizen confidence in its government. Environmental Management — An environmentally sensitive community by focusing on: conservation, 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. Learning, Culture & Arts — Promote and support continuous learning, cultural opportunities and the arts within the community and the City organization. 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. Top-Quality Services - 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. Water — Ensure, in the most cost-effective manner, water quality and reliability to the maximum extent practical, to deliver high-quality potable and reclaimed water incorporating drought-resistant community principles. for the City. The City Council also provides the City with its top 15 priority projects, which further defines the Council's vision. The goals and priority projects 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 Index of Leading Economic IndicatorsDiversification 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 September 2006 by 0.6%, which makes the sixth consecutive monthly decline in the index. The decline was primarily led by a decline in building permits, unemployment insurance and help wanted advertising. Local stock prices, consumer confidence, and the outlook for the national economy were slightly positive. USD has indicated, "Job growth is expected to cool considerably in the year ahead." In addition, according to Alan Gin, USD Economist, the housing market and retail sales are also expected to be slow, while consumer confidence and local stock prices are slightly positive for September 2006. In addition, Mr. Gin primarily attributed the consumer confidence increase to falling gas prices. Carlsbad's economy is tied closely to that of the San Diego region, although development patterns may differ. Carlsbad experienced strong growth in Fiscal Year (FY) 2005-06 in revenues from property and transient occupancy taxes (TOT). Property taxes grew by over 34% in FY 2005-06, reflecting the continuing escalation in housing prices as well as the State of California exchanging vehicle license fee and sales tax revenues for property tax revenue. TOT, 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 a major portion of one of Carlsbad's premiere resorts. Sales taxes added an additional $750,000 for FY 2005-06 due to good consumer demand after taking into consideration the closing of the Robinsons- May department store at Plaza Camino Real, as well as the State of California taking a portion of the City's sales tax in exchange for property tax revenue. With supply relatively low, housing prices have continued to escalate. The median price for single-family homes in Carlsbad was $748,000 for calendar year 2005, a 5.7% increase from the previous year. Total assessed values in the Median SFD Home Prices City for FY 2006-07 stand at over $20 billion; a 69% increase over what they were just five years ago. The City has projected it will add about 2,580 more residential units and an additional 4.1 million square feet of commercial/industrial development over the next five years. The City's residential housing stock is about 89% built out, with approximately 5,270 housing units remaining to develop. Carlsbad's residential real estate market has continued strong throughout FY 2005-06. The City expects to issue 1,000 residential permits this year, a decrease from the 1,663 issued in the previous year. The number of permits is expected to decline due to the nearing of build-out and a slowing economy. 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 well 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 970 single-family and 450 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. General Fund Revenues 100' 90 K 80 / / \ eo r 40 K 30 20 !•••Tiiimim 97 98 00 01 02 03 04 05 06e 07e • Sales tax • Property Tax D TOT D VLF • SDGE franchise B Other Franchise Commercial and industrial developments have been averaging 800,000 square feet per year. This is expected to remain about the same over the next five years to average 820,000 square feet per year, with the large industrial developments of the Forum, Carlsbad Raceway, and Oaks North. Some of the major companies in town include the Gemological Institute of America, ViaSat, Invitrogen, Callaway, TaylorMade, Upper Deck, and many others. 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. 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 West Inn, which opened in May 2006 bringing the total available hotel rooms in the City to about 3,400. For the future, there are several new tourist-serving projects in development. 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 $1.4 million in TOT when completed. Two hotels near the airport have been approved, which would add an additional 249 hotel rooms, bringing in an estimated $500,000 per year in TOT. 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 $ 1.4 to $1.7 million per year in TOT. The City's base sales taxes are projected to grow by 4.0%, while year-over-year sales tax growth is projected to grow by about 9.2% for FY 2006-07, due to one-time adjustments during FY 2005-06. While the growth in housing prices is expected to moderate as interest rates rise, there is a lag with the property tax revenue and therefore, according to the County Assessor, the City should expect assessed values to increase by over 15% in FY 2006-07. New building permits are predicted to slow slightly as new housing developments come on line and absorption rates of new homes slows. And finally, tourism is expected to continue to be strong, with TOT receipts projected to grow by 6% in the future, with the addition of more available rooms. For Fiscal Year 2006-07, the City's revenue projections reflect a slowing of the economy due to rising interest rates, an anticipated softening in the housing market, as well as higher oil and gas prices. Conservative increases are expected in most of the tax revenues with overall General Fund revenues increasing by 8.8%. 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 softening of the housing market 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, the State 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 indicates that the State's 2006-07 budget is using a significant portion of the fund balance to cover the State's current operating shortfall, and a $4.5 to $5 billion shortfall is expected to exist in Fiscal Years 2007-08 and 2008-09. The ongoing budget shortfalls result from expenditures growing faster than revenues. The State has balanced its budget by taking city money in the past, and there is a risk that they may continue this practice in the future. In Fiscal Year 2003-04, 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 !4 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 VLF amounts taken by the State. (The payment was repaid by the State during Fiscal Year 2006.) • 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 gave 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. During Fiscal Year 2007, the City Council approved allocating $7.2 million or 6.5% of the General Fund revenues to the Infrastructure Replacement Fund. During Fiscal Year 2006, $4.2 million or 4.0% of the General Fund revenues were allocated to the Infrastructure Replacement Fund. The increase in the allocation is due to the City's current financial strength as well as the desire to plan for the future to create and maintain a sustainable community. In addition to these steps, the City prepares a ten-year financial forecast 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 strong 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 is expected to slow over the next few 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, including 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 2007 and into the future. To project the expenditures, it includes all known personnel costs including any benefits negotiated with the employee groups. 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 General Fund I REVENUES TOTAL BUDGET remain essentially at current levels. It assumes that the contribution from the General Fund to the Infrastructure Replacement Fund is increased to 6.5% of General Fund revenues. This is an increase from last year's forecast assumption of 4% of the General Fund revenues. 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 as reflected in the Fiscal Year 2007 Adopted Budget will 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 few 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. One of the more significant revenue enhancements that occurred in 2004 was the passage of the reauthorization of Transnet revenues. Transnet is a 1A 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. Forecast Comparison '04 '06 '08 '10 '12 '14 '16 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 financial 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, 2006 was 2.022. The average return realized on the pooled investments rose from 3.55% in Fiscal Year 2004-05 to 3.98% for Fiscal Year 2005-06. 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. 4.00% I 3.00% 2.00% 1.00% 0.00% •1.00% •2.00% Jur Historical Unrealized Gains/Losses as Percent of Amortized Cost July 1996 -June 2006 A J\Jy\^ l-UnrealG/l.%1A / i/ y VMt V v\yv "X -01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 The graph at the right shows the amount of unrealized income (loss) reflected in the portfolio over the last few years. The total portfolio had an unrealized loss in Fiscal Year 2006. According to the City Treasurer, "This unrealized loss occurred as investments with high interest rates matured and were reinvested in lower market rates. It is likely that this trend will reverse in FY 2007 as investments with lower interest rates mature." This is discussed more thoroughly in the MD&A. 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 Public Safety personnel to maintain the current service levels in the community. In Fiscal Year 2006-07, the Police Department added five positions to serve the public and the Fire Department added seven positions. Six of the seven positions in the Fire Department were added to support a third ambulance. Several significant projects in design or under construction over the next few years. These include: • The Alga Norte Park and Aquatic Center consists of 30 acres in the Southeast Quadrant with planned amenities that include ball fields, soccer fields, picnic areas, tot lots, a skate park, a dog park, restrooms and parking facilities, and an aquatic center. Construction is scheduled to begin in Fiscal Year 2007-08. The park is expected to cost $15.9 million and the aquatic center is estimated at $23.3 million. Funding to come from impact fees and the General Fund. • The Carlsbad Municipal Golf Course is an 18-hole championship golf course on property located north of Palomar Airport Road along College Boulevard. The estimated costs for building and start up expenses are anticipated to be between $50 - $60 million. The project will include a 23,000 sq. ft. clubhouse and the total course length will be 6,850 yards. The project is to be funded with General Fund advances as well as tax exempt bonds. The 1st floor area of the existing Senior Center will be remodeled to include additional amenities for the senior community. These may include items such as an exercise room, art room, TV room, multi- purpose room, game room, health screening room and a computer room. The 2nd floor will be remodeled to house City offices. The estimated cost for the renovation is just under $1.6 million and will be funded from Redevelopment bonds and the General Fund. 10 • A 20,000 square foot community facility and gymnasium are planned for the Pine Park Community Center. The facility will include basketball, volleyball, gymnastics, multi-purpose rooms, meeting rooms, a teen center and office space. Design of this $9.0 million facility is expected to begin in the 2009-10 Fiscal Year. Funded by impact fees. • Phase II of the 42-acre Poinsettia Park Community Center includes amenities such as a community facility/gymnasium, enclosed soccer field, tot lot, picnic areas, tennis complex including a clubhouse and stadium court, and additional parking. The total cost is expected to be approximately $14.1 million. The construction of seven tennis courts are scheduled to begin in 2006-07 and the remainder of the project is expected to be completed in 2011-12. Funded by impact fees. In addition to the projects listed above, there are several significant civic projects being planned for the City of Carlsbad. These projects include: • The Public Works Center includes offices, shops, a yard, warehouse and parking to accommodate the Public Works Department. Initial estimates put the cost at approximately $26.4 million. • The Public Safety Training Facility project was authorized under Proposition C, which was approved in 2002. Preliminary design work is underway. The facility may include a fire training tower, residential training prop, outdoor seating pavilion, fire administration building with classroom and storage facilities, in addition to the shooting range. • The Library Learning Center will provide a permanent location for the Adult Learning and the Centra de Informacion programs. The existing building adjacent to Holiday Park will be remodeled and a second story, approximately 5,000 square feet, will be added for a total cost of $6.1 million. • Fire Station No. 3 is currently located at the corner of Chestnut and Catalina. As the City grows eastward, relocation of this station is needed to help ensure the five- minute response time. The new station is budgeted as a 6,200 square foot facility and the cost is projected at $6.6 million. 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, 2005. This was the eighth 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. 11 This report has been a joint effort by many people from many different areas of responsibility. It could not have been accomplished without their help and the dedicated efforts of all of the accounting staff, especially Kevin Branca, Assistant Finance Director. 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, —L- ~?C~ LISA IRVINE 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, 2005 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 SOLANA BEACH DEL MAR I 1-5 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 Harold "Mac" McSherry, City Treasurer ADMINISTRATION AND DEPARTMENT HEADS Raymond R. Patchett, City Manager Lisa Hildabrand, Assistant City Manager James F. Elliott, Administrative Services Director Glenn Pruim, Public Works Director Sandra Holder, Community Development Director Tom Zoll, Police Chief Kevin Crawford, Fire Chief Ron Ball, City Attorney Julie Clark, Human Resources Director Conrad "Skip" Hammann, City Engineer Debbie Fountain, Housing & Redevelopment Director Mark Stone, Deputy Public Works Director, Maintenance and Operations Lisa Irvine, Finance Director Vacant, Planning Director Pat Kelley, Principal Building Inspector Heather Pizzuto, Library Director Erin Letsch, Risk Manager Ken Price, Recreation Director Greg Clavier, Public Works Manager, General Services Aletha L. Rautenkranz, Information Systems Director CHAIRPERSONS, COMMISSIONS AND BOARDS Gary Hill Arts Commission Richard Erhardt Beach Preservation Committee April Shute Carlsbad Tourism Business Improvement District Board Bob Bender Community Television Foundation Courtney Heineman Design Review Board Sue Ladouceur Historic Preservation Commission Edward Scarpelli Housing Commission Claude A. Lewis Housing and Redevelopment Commission Rob Swette Library Board of Trustees Jim Craig Parks and Recreation Commission Donald Martin Personnel Board Marty Montgomery Planning Commission Mike O'Connell Senior Commission Vacant Serra Cooperative Library System Advisory Board Christine Petrou Sister City Committee Susan Gardner Traffic Safety Commission Vacant Underground Utility Advisory Committee 15 FINANCIAL SECTION McGladrey&Pulien 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 30,2006, 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 of Carlsbad'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 30,2006, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As described in Note 19 to the basic financial statements, the City retroactively applied the provisions of the Governmental Accounting Standards Board Statement No. 34 with respect to accounting and reporting for infrastructure capital assets. In accordance with Government Auditing Standards, we have also issued our report dated October 5,2006 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 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 the 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 nonmajor fund financial statements and other schedules, listed in the table of contents as supplementary information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. 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 them. Riverside, California October 5, 2006 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, 2006. Our intent is to assist the reader of these financial statements in better understanding the impact of financial decisions made by the City. This analysis will focus on the significant changes in an effort to explain the City's overall financial condition. We encourage readers to consider the information presented here in conjunction with the additional information furnished in our letter of transmittal. Overview of the Financial Statements Required Components of the City of Carlsbad's Annual Financial Report Management 's Discussion and Analysis \ 1 1 Basic Financial Statements Required Supplementary Information This section of the annual report consists of four parts - management's discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non- major governmental funds and internal service funds. The basic financial statements include two kinds of statements that present different views of the City. • The first two statements are Government-wide Financial Statements that provide both long-term and short- term information about the City's overall financial status. • The remaining statements are Fund Financial Statements that focus on individual parts of the City government, reporting the City's operations in more detail than the Government-wide Statements. > The Governmental Funds Statements detail how general government services such as public safety were financed in the short term as well as what remains for future spending. > Propriety Fund Statements offer short- and long-term financial information about the activities the City operates like businesses, such as the water and sewer services. > Fiduciary Fund Statements provide information about the financial relationships - such as contractor and miscellaneous deposits - in which the City acts solely as a trustee or agent for the benefit of others to whom the resources belong. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are accompanied by required supplementary information that further explains and supports the information in the financial statements. In addition to these required elements, we have included a section with combining statements that provide detail about our non-major governmental funds, internal service funds, and fiduciary funds, which are added together and presented in single columns in the basic financial statements. The remainder of this overview section of management's discussion and analysis explains the structure and contents of each of the statements. 1 1 Government- wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary 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, trash and golf 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 Just under 60% of the $197.7 million in unrestricted governmental activities net assets is attributable to the General Fund. Unrestricted net assets for the City's business-type activities decreased by $33.9 million during the 2005-06 Fiscal Year. This was the result of the construction of the City's municipal golf course, which at this point, is financed completely by an advance from the General Fund. Changes in Net Assets The condensed summary of activities, which follows, shows that net assets increased by $63.8 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, $14 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 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 - 103.9 855.9 $959.8 2006 $18.1 12.1 39.3 43.9 25.4 21.9 11.7 1.3 173.7 15.4 35.8 14.3 16.8 36.0 1.0 - - - 119.3 54.4 (0.3) 54.1 959.8 $1,013.9 Activities 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 2006 $28.2 0.7 11.2 2.3 - - 3.5 0.1 46.0 - - - - 24. 1 8.3 4.2 36.6 9.4 0.3 9.7 325.4 $335.1 Total 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 1,159.5 $1,285.2 2006 $46.3 12.8 50.5 46.2 25.4 21.9 15.2 1.4 219.7 15.4 35.8 14.3 16.8 36.0 1.0 24.1 8.3 4.2 155.9 63.8 - 63.8 1,285.2 $1,349.0 Total Percentage Change 2005-06 4.0% -3.8% -44.8% 6.2% 2.8% 7.4% 7.8% -53.3% -13.8% 36.3% 4.1% -0.7% 5.0% 62.9% 0.0% 12.6% 15.3% 180.0% 20.6% -49.2% -100.0% -49.2% 10.8% 5.0% 22 City of Carlsbad Sources of Revenue for Fiscal Year 2005-06 $219.7 Million Grants/ Contributions (23%) Income from Property and Investments (7%) Other Taxes (5%) TOT (5%) Other (1%) Just under 53% of the revenues of the City's governmental funds are generated through taxes collected (property, sales, transient occupancy tax, etc.), and just under 61% of the City's business-type revenue is generated through charges for services. The following chart graphically depicts the City's revenue sources. The large decrease in capital grants and contributions is the result of acquiring a portion of Poinsettia Lane and the other associated improvements last fiscal year. Interest earned by the General Fund on a $30.3 million advance from the City's General Fund to the Golf Course Fund contributed to the 7.8% increase in income from property and investments for the year. The total cost of all programs and services was just under $156 million in Fiscal Year 2005-06. The City's expenses cover a range of services: Property Taxes (21%) Charges for Services (21%) Sales Tax (11%)Federal Aid (4%) State Aid (2%) General Government (10%) 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. The Administrative Services group includes Finance, Human Resources, Information Technologies, Risk and Records Management. General Government 10% Public Safety 23% Public Safety (23%) 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 (9%) The mission of Community Development is helping people build a strong community by guiding and facilitating high quality projects, preserving the environment, providing for diverse housing and employment, and maintaining a strong 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. City of Carlsbad Functional Expenses for Fiscal Year 2005-06 $156 Million Public Works 23%Community Community Development Services 11% 9% 23 • Community Services (11%) 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 (23%) Public Works is responsible for building and maintaining all of the infrastructure assets of the City. This service area includes Engineering, Parks, Streets, Medians, Street Trees, the Buena Vista Channel, and Facilities Maintenance, Building Maintenance, Street Lighting and Traffic Sign and Signal Maintenance programs. • Water Operations (16%) The Carlsbad Municipal Water District, a subsidiary of the City of Carlsbad, provides potable water service to approximately 85% of the City (80,800 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 irrigation purposes. • Sewer Operations (5%) 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 (3%) 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 $54.1 million. This increase was generated by total revenues of governmental activities of $173.7 million ($69.5 million in program revenues and $104.2 million in general revenues) offset by $119.3 million in total costs of governmental activities and $315,000 in transfers out. 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 Governmental Activities Program Revenues and Expenses Fiscal Year 2005-06 (in millions) Q Program Revenues O Expenses General Public Safety Community Government Development Co mmunity Services Public Works 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 ($18.1 million), grants and contributions from other governments and organizations which subsidize certain programs ($51.4 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 $104.2 million. 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 Fiscal Year 2005-06 (in millions) Q Program Revenues E3 Expenses Water Sewer Solid Waste Program revenues for the City's business-type activities totaled $40.1 million for the year, while functional expenses equaled $36.6 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 graph above. The course is expected to open in July 2007. 25 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, one change was made in the reporting of special revenue funds. This change was to reclassify the Carlsbad Tourism Business Improvement District from a special revenue fund to an agency fund. Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Governmental Fund Balances (in millions) $384.4 Million Reserved for Other Purposes ($17.5 million) Reserved for Advances ^^^^^^^ "\ Undesignated (S108.3 million) to Other Funds (S47.9 million) Designated for Future Continuing Appropriations ($115 million) Designated for Approved Capital Projects ($77.9 million) Reserved to Liquidate Contracts and Purchase Orders ($17.8 million) As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $384.4 million, an increase of $10 million in comparison with the prior year. Approximately 28% of this amount ($108.3 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 - 20%, (2) to liquidate contracts and purchase orders of the prior period - 5%, (3) for future programs - 30%, (4) advances to other funds -12% or (5) for a variety of other restricted purposes - 5%. 26 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (in millions of dollars) Total Increase Percentage Total (Decrease) Revenues Taxes I ntergovemmenta 1 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 Total expenses Excess (deficiency) before transfers Transfers Increase (decrease) in fund balance Beginning fund balance Ending fund balance 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 82.9 20.9 (5.6) 15.3 84.1 $99.4 2006 $87.2 I.I 2.5 7.8 2.4 2.6 2.4 106.0 16.1 36.2 7.1 15.4 18.0 92.8 13.2 (6.0) 7.2 99.4 $106.6 2005-06 $12.2 (8.7) (0.9) (0.2) (0.6) 0.0 0.4 2.2 4.8 2.6 O.I 0.8 1.6 9.9 Change 16.3% -88.8% -26.5% -2.5% -20.0% 0.0% 20.0% 2.1% 42.5% 7.7% 1 .4% 5.5% 9.8% 11.9% 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 $106.6 million, an increase of $7.2 million. The unreserved fund balance portion of the General Fund was $61.5 million, of which $14 million was designated for future programs and service enhancements. The increase in revenues was primarily due to two factors: the effects of a strong housing market on property and transfer taxes and continued strength in the tourism industry (higher transient occupancy tax). The largest factor in the decrease of intergovernmental revenues can be attributed to the fact that the State has reallocated property taxes for Vehicle License Fees (VLF). Thus, instead of receiving $6.2 million in VLF, the City received additional property taxes in an equal amount. The increase in General Fund expenditures were driven by the following factors: • Normal salary and benefit increases. • PERS rates for the miscellaneous plan increased from 16.664% to 20.869%, and rates for the safety plan increased from 27.573% to 27.927% for a total impact of $2.8 million. • Significant costs to repair severe damage caused by the heavy rains from the 2005 winter storms. • The purchase of a fire ladder truck. • The purchase of a new radio frequency identification system in the City's libraries. One major governmental fund, the Redevelopment Debt Service Fund, had a negative fund balance of just under $12.6 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. Of the six remaining major governmental funds, three funds saw their fund balances decline during the fiscal year. The Assessment and Other Districts Funds purchased several large infrastructure assets including Poinsettia Lane, College Blvd. and Cannon Road. The Public Facilities Construction Fund financed several large projects including Aviara Community Park and Pine Avenue Park during Fiscal Year 2005-06. 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. Two of the five 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. 27 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. The Carlsbad Municipal Water District Funds had an operating loss of approximately $4.0 million for the year. Increased fixed and variable costs from Metropolitan Water District and County Water Authority (suppliers of the City's potable water), as well as increased depreciation expense due to newly constructed infrastructure assets, added to the operating loss for the year. In addition, the Carlsbad Water Recycling Facility became operational, resulting in increased operating costs of that facility. Non-operating revenues (primarily property tax and investment earnings) offset the majority of the operating loss, resulting in a net loss of approximately $350,000. The Sewer Funds had an annual operating loss of approximately $1.1 million for the fiscal year. Total revenues from operations increased 6% from the previous year; however, higher sewer plant operating costs led to an operating loss for the year. Staffing costs rose 13.4% due to normal salary increases and increases 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. Non-operating revenue (investment earnings) more than offset the operating loss, resulting in a slight gain of $41,000 for the year. Solid Waste operations and the Storm Water Protection Program are combined on the City's financial reports. Revenues decreased in the current year by approximately 19%. Non-jurisdictional fees paid by the City's solid waste franchisee for their impact on City streets, are now recorded in a capital project fund versus the Solid Waste Fund. Operating costs increased 15% due to inflationary increases, the expansion of the Storm Water Protection Program and enhanced Solid Waste and recycling efforts. Business-Type Activities Operating Revenues and Expenses Fiscal Year 2005-06 (in millions) 0 Operating Revenues 0 Operating Expenses Water Sewer Solid Waste The new municipal golf course is under construction and planned funding includes a combination of a loan from the General Fund and future bonds. The loan from the City and the proposed bond proceeds will be repaid through user fees and other revenues of the golf course. Unrestricted net assets for the Water, Sewer, and Solid Waste operations at the end of the year amounted to $9.5 million, or approximately 3% of the net assets of these proprietary funds. These assets will be used for future rate stabilization efforts as well as for any emergency situation. Approximately 32% of the net assets of all the proprietary funds are restricted for future capital construction of new and replacement water and sewer infrastructure assets. The Golf Course Fund has a negative unrestricted net asset balance of $31.8 million. This is the result of internal financing (General Fund advance) of the construction of the new municipal golf course. This advance will be repaid to the General Fund in the future. 28 General Fund Budgetary Highlights for Fiscal Year 2006 Management monitors revenues during the year and updates estimated revenue figures when new information is received by the City. Estimated revenues were decreased during this year by $1.7 million to reflect the net effect of the following changes: • The impacts on TOT from continued strength in the tourism industry. • A slow down in the sale of new automobiles, affecting the City's sales tax revenues. • Reimbursements received from FEMA and OES for assistance with the 2005 winter storm damage. • Additional miscellaneous revenues received due to energy rebates, police work at special events, and additional contributions from property owners for studies, projects and public improvements. The increase from the total original expenditure budget to the final budget amounted to $3 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. • Transfer of tree maintenance personnel from the Street Tree Special Revenue Fund to the Parks Department within the General Fund. • Interim tourism contracts prior to the formation of the Carlsbad Business Improvement District. The difference between the final budgeted expenditures and the actual expenditures for the year on a budgetary basis of $16.3 million can be generally summarized as follows: • $14 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. > Deferral of projects. *t» $ 14 million in "savings" are planned to be used for: => Additional technology and software upgrades at the City's libraries, and in Finance, Human Resources, Fire and Public Works Departments. => Upcoming "Futuring Conference." => Upcoming renovation costs resulting from the purchase of the former Carlsbad Unified School District building adjacent to the Senior Center. => Expected upgrade of the Senior Center. => Projected future park and public pool improvements. => Future Police communication improvements including the replacement of the 800 MHz system, new radios and a mobile command post. => Anticipated enhanced citywide street maintenance including additional concrete and asphalt repairs. => Anticipated costs associated with updating the City's General Plan and Local Coastal Program, and revising the associated Municipal Code. • $2.3 million in unspent major capital outlay appropriations was not carried forward, as well as any remaining balances from programs with a one-year life cycle. 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 Fiscal Year 2006, the City had recorded an investment of just over $883 million in a broad range of capital assets, including park facilities, land, buildings, roads, bridges, drainage facilities, water and sewer lines, police and fire vehicles, and other maintenance equipment. This number includes infrastructure assets of the general government which were added per GASB 34 requirements. 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 2005 $124.2 69.2 17.6 21.9 402.3 72.2 - 707.4 (128.9) $578.5 2006 $128.6 69.5 28.3 23.0 409.7 101.4 - 760.5 (142.9) $617.6 Activities 2005 $8.7 16.2 5.6 1.5 159.7 40.3 40.3 272.3 (52.1) $220.2 2006 $8.7 16.9 5.6 1.5 169.6 76.9 42.8 322.0 (56.6) $265.4 Total 2005 $132.9 85.4 23.2 23.4 562.0 112.5 40.3 979.7 (181.0) $798.7 2006 $137.3 86.4 33.9 24.5 579.3 178.3 42.8 1,082.5 (199.5) $883.0 Total Percentage Change 2005-06 $4.4 1.0 10.7 1.1 17.3 65.8 2.5 102.8 (18.5) $84.3 Change 2005-06 3.3% 1.2% 46.1% 4.7% 3.1% 58.5% 6.2% 10.5% 10.2% 10.6% This year's major capital asset additions included: • Aviara Community Park • Recycled Water Flow Equalization Facility • Buena Vista Lift Station • Developer-dedicated streets, drainage facilities, traffic signals, water and sewer lines and streetlights • Construction of the municipal golf course • Construction of Pine Avenue Park • Development of the Coastal Rail Trail • Acquisition of the easterly extension of Poinsettia Lane, easterly extension of Cannon Road and the southerly extension of College Avenue • Continued development of Rancho Santa Fe Road • Installation of synthetic turf at Stagecoach Park In addition to carrying forward appropriations of $143.7 million for previously budgeted projects, the City's Fiscal Year 2006-07 capital budget appropriates an additional $48.8 million for capital projects. These additional appropriations are principally for construction of the golf course, park development, relocation of an existing fire station, expansion of the library learning center, the pavement management program, street projects, enhancing the sewer collection system, additional water lines, traffic signals, and miscellaneous civic projects, loans and 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. 30 Long-Term Debt At year-end, the City had $31.1 million in bonds, certificates of participation, loans and agreements, an increase of $7.9 million from last year, as shown in the table below. The increase in debt is attributable to additional loans made by the State Water Resources Control Board to the Carlsbad Municipal Water District for construction of the new recycled water facility. More detail about the City's long-term liabilities is presented in Note 8 to the financial statements. CITY OF CARLSBAD'S OUTSTANDING DEBT (in millions of dollars) Governmental Activities Bonds Certificates ot" participation Loans Installment purchase agreement Less: Deterred charges Total 2005 $12.5 2.7 - $15.2 2006 $12.1 2.1 - $14.2 Business-Type Activities 2005 $0.0 1.2 7.3 (0.5) $8.0 2006 $0.0 10.6 6.7 (0.4) $16.9 Total 2005 $12.5 2.7 1.2 7.3 (0.5) $23.2 2006 $12.1 2.1 10.6 6.7 (0.4) $31.1 Total Percentage Change 2005-06 -3.2% -22.2% 783.3% -8.2% -20.0% 34.1% Economic Factors and Next Year's Budgets and Rates for Fiscal Year 2007 • The State of California adopted its 2006-07 annual budget with the following provisions affecting the City: > The City will no longer be required to make a $1.8 million "contribution" to the State in the 2006-07 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 2006-07 Fiscal Year. > The "Triple Flip" swap 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. • Net assessed values in the City stand at almost $20.7 billion, almost double what they were just five years ago. • PERS rates for the miscellaneous plan have decreased for the 2006-07 Fiscal Year from 20.869% to 19.810%, and have decreased from 27.927% to 27.572% for the safety plan. The decrease in rates is a reflection of a recently implemented rate stabilization policy adopted by PERS to smooth future PERS rates. • Retail natural gas prices have stabilized during the past fiscal year, creating a minimal impact on the City's future franchise fee revenue. • The Consumer Price Index (CPI) for the western region of the United States for urban households increased by 3.1% during the twelve months ended November 30, 2005. • The total number of housing units in Carlsbad grew by 3.4% in Calendar Year 2005, impacting our budgeted expenditures for Fiscal Year 2006-07. • Median home prices in Carlsbad have increased by 5.7% in Calendar Year 2005 to $748,000. • The Federal Reserve has raised interest rates 17 times since June of 2004, impacting residential development within the City. All of these factors were considered when preparing the City of Carlsbad's General Fund budget for the 2006-07 Fiscal Year. Budgeted expenditures are expected to increase 9% to $106.4 million. The increase is mainly due to an increase in the number of positions and other personnel costs. Personnel costs make up approximately 65% of the General Fund budget so any changes in these costs can have a significant effect on the total budget. In addition, the annual transfer to the Infrastructure Replacement Fund is being increased by $2.7 million, to a total of $7.2 million. Adding to the adopted budget of $106.4 for the General Fund, just under $14 million in unspent 2005-06 budgeted expenditures will be carried over to the 2006-07 Fiscal Year, as well as $4.6 million in open encumbrances as of June 30, 2006. 31 As the City is approaching the build out of its remaining vacant land, the City is now ushering in a new era focusing on maintaining the City's infrastructure rather than building it. In an effort to address this issue, the City has developed an Infrastructure Replacement Fund (IFR). With this fund, the City sets aside money on an annual basis for major maintenance and replacement of its infrastructure. In the 2006-07 Operating Budget, the City has budgeted a $7.2 million transfer from the General Fund to the IFR, an increase of $2.7 million from the prior fiscal year, to meet our future needs. During the current fiscal year, the unreserved fund balance in the General Fund increased to $47.5 million due to the City of Carlsbad's fiscal discipline and a diverse economy. 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 2007. With the exception of the Public Facilities Construction Fund (PFF), there are sufficient revenues projected to build the projects listed in the 2006-07 Capital Improvement Program (CIP). A large increase in the cost of construction materials has occurred over the past three years, pushing up the cost of all of the City's projects. Although the City is considering various options to address the future funding of projects in the PFF, $12 million is forecasted to be loaned to the PFF from the General Capital Construction Fund in Fiscal Year 2006-07. This will allow projects to be constructed from this funding source while the City evaluates the future options for this fund. The City's business-type activities reflect the following: • Water rates will be increasing by 5.0% in Fiscal Year 2006-07. • Sewer rates will be increasing by 8.5% in Fiscal Year 2006-07. • No projected significant changes in other revenue sources. • The Recycled Water Operations Fund budget reflects a 39% increase, or $1,039,000, to fund costs associated with the new treatment plant: operations, depreciation expense, and debt service on a loan from the State. • Other changes in the Enterprise funds are the result of inflation, depreciation increases due to expanding infrastructure, and increased costs for maintenance and repair of the City's infrastructure. 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 Statement of Net Assets June 30, 2006 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 $ 372,576,531 5,936,014 480,706 202,595 709,340 215,441 332,760 13,112,974 659,500 - 38,118,520 128,582,931 69,476,635 28,273,684 23,073,418 409,728,105 101,370,353 - (142,877,215) 617,627,911 $ 1,049,972,292 Business-type Activities $ 130,016,590 : 27,486 4,082,681 - 1,440,376 552,090 - 437,510 953,706 21,300 (38,118,520) 8,663,600 16,941,971 5,556,571 1,475,229 169,637,849 76,912,553 42,809,292 (56,603,556) 265,393,509 $ 364,806,728 I Total $ 502,593,121 5,963,500 4,563,387 202,595 2,149,716 767,531 332,760 13,550,484 1,613,206 21,300 - 137,246,531 86,418,606 33,830,255 24,548,647 579,365,954 178,282,906 42,809,292 (199,480,771) 883,021,420 $ 1,414,779,020 The notes to the financial statements are an integral part of this statement. 34 CITY OF CARLSBAD Statement of Net Assets (Continued) June 30, 2006 LIABILITIES Accrued liabilities Accrued interest payable Due to other governments Estimated claims payable Deposits payable Current liabilities payable from restricted assets - accrued interest Deferred revenue Current portion of long-term debt Noncurrent liabilities: Due in more than one year, net of deferred charges and unamortized issuance costs of $437 ,443 Total liabilities Governmental Activities $ 12,467,878 252,127 4,198,701 4,127,834 199,890 - 666,431 1,090,703 13,080,000 36,083,564 Primary Government Business-type Activities $ 6,281,065 ! 182,918 4,915,825 - 534,055 143,992 800,674 993,382 15,891,555 29,743,466 Total 5 18,748,943 435,045 9,114,526 4,127,834 733,945 143,992 1,467,105 2,084,085 28,971,555 65,827,030 NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital assets Affordable, low and moderate income housing Habitat and agricultural mitigation management Other purposes Unrestricted Total net assets 604,116,708 172,473,473 27,453,435 7,041,515 5,131,421 197,672,176 $ 1,013,888,728 249,462,278 107,841,010 - - - (22,240,026) $ 335,063,262 853,578,986 280,314,483 27,453,435 7,041,515 5,131,421 175,432,150 $ 1,348,951,990 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, 2006 Functions/Programs Primary government: Governmental activities: General government Public safety Community development Community services Public works Interest and fiscal charges 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 $ 15,382,334 35,822,457 14,332,329 16,789,555 35,937,039 1,036,061 119,299,775 24,124,143 2,470,778 8,264,520 1,699,120 36,558,561 $ 155,858,336 Charges for Services $ 945,047 3,611,524 4,676,899 2,436,657 6,450,812 - 18,120,939 19,462,185 - 6,800,918 1,892,746 28,155,849 $ 46,276,788 Program Revenues Operating Grants and Contributions $ 1,113,994 285,408 7,674,290 825,731 2,216,485 - 12,115,908 688,961 - - 29,214 718,175 $ 12,834,083 Capital Grants and Contributions $ (1,111,525) 21,690 895,077 1,510,100 37,970,512 - 39,285,854 7,593,789 - 3,618,992 - 11,212,781 $ 50,498,635 General revenues: Property taxes Sales and use taxes Transient occupancy taxes Franchise taxes Business license taxes Real property transfer taxes Vehicle license fees Homeowners exemptions Income from property and investments Other general revenues Transfers Total general revenues and transfers Change in net assets Net assets at beginning of year (as restated) 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 $ (14,434,818) (31,903,835) (1,086,063) (12,017,067) 10,700,770 (1,036,061) (49,777,074) - - - (49,777,074) 43,936,095 25,429,074 11,512,552 5,429,311 3,039,678 1,905,842 587,179 371,640 11,681,912 278,824 (315,215) 103,856,892 54,079,818 959,808,910 Business-type Activities $ - - - - - - 3,620,792 (2,470,778) 2,155,390 222,840 3,528,244 3,528,244 2,257,124 - - - - - - - 3,538,004 56,223 315,215 6,166,566 9,694,810 325,368,452 Total $ (14,434,818) (31,903,835) (1,086,063) (12,017,067) 10,700,770 (1,036,061) (49,777,074) 3,620,792 (2,470,778) 2,155,390 222,840 3,528,244 (46,248,830) 46,193,219 25,429,074 11,512,552 5,429,311 3,039,678 1,905,842 587,179 371,640 15,219,916 335,047 - 110,023,458 63,774,628 1,285,177,362 $1,013,888,728 $335,063,262 $1,348,951,990 37 CITY OF CARLSBAD Balance Sheet Governmental Funds June 30, 2006 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 Redevelopment Assessment General Debt and Other Fund Service Funds Districts $ 64,420,482 $ 1,524,825 $ 26,436,794 5,763,301 135,490 61,073 1,471 36,270 403,211 _ 62,875 19,568 - - 124,417 - 52,981,823 Community Facilities District No. 1 $ 49,561,783 1 - - - - - - - - Total assets LIABILITIES AND FUND BALANCES 123,836,750 $ 1,661,786 $ 26,473,064 $ 49,561,784 Liabilities: Accrued liabilities Due to other funds Deposits payable Due to other governments Advances from other funds Deferred revenue Total liabilities Fund balances: Reserved Unreserved: Designated, reported in: General Fund Special Revenue Funds Debt Service Funds Capital Project Funds Undesignated, reported in: General Fund Special Revenue Funds Debt Service Funds Capital Project Funds Total fund balances Total liabilities and fund balances $ 4,342,870 $ 45,131,308 13,974,339 47,519,083 106,624,730 4,424 $20,243 71,618 2,284 - 12,795,248 17,212,020 2,680 14,232,552 - 14,235,232 - - - 4,424 20,243 7,936 99,796 26,460,704 49,441,745 (12,573,446) (12,573,446)26,468,640 49,541,541 $ 123,836,750 $ 1,661,786 $ 26,473,064 $ 49,561,784 The notes to the financial statements are an integral part of this statement. 38 General Public Rancho Santa Other Capital Facilities FeRoad Governmental Construction Construction Project Funds $ 50,920,111 $ 39,082,547 $ 16,801,496 $ 102,365,050 37,222 103,781 33,051 - - 42,023 136,933 123,468 646,465 . 332,760 659,500 12,988,557 2,850,021 - - 4,643,344 $ 53,803,183 $ 39,082,547 $ 16,938,429 $ 121,942,170 Total Governmental Funds $ 351,113,088 5,936,014 202,595 478,285 260,401 709,340 19,568 332,760 659,500 13,112,974 60,475,188 $ 433,299,713 $ 689,054 $ 698,747 $ 1,935,741 $ 1,082,205 260,401 57,472 - 70,800 4,193,737 8,124,116 135,060 142,699 - 76,714 824,114 898,918 6,129,478 9,614,236 5,816,469 926,220 2,252,258 28,897,315 5,576,058 41,358 16,507,666 37,257,409 8,556,693 35,078,750 . 24,448,169 851,104 30,654,934 - - 17,435,180 52,979,069 38,183,629 10,808,951 112,327,934 $ 53,803,183 $ 39,082,547 $ 16,938,429 $ 121,942,170 $ 8,773,284 260,401 199,890 4,198,701 22,356,668 13,149,721 48,938,665 83,131,302 13,974,339 5,576,058 41,358 173,302,967 47,519,083 24,448,169 (11,722,342) 48,090,114 384,361,048 $ 433,299,713 39 CITY OF CARLSBAD Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2006 Total fund balances - governmental funds. $ 384,361,048 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 611,697,993 Internal service funds 5,929,918 Total capital assets 617.627,911 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 20,221,476 Internal service fund net assets included as part of total capital assets (5,929,918) Internal service fund net assets less capital assets 14,291,558 Accrued interest is not due and payable in the current period and, therefore, is not reported in the funds. (252,127) Retentions payable are not due and payable in the current period and, therefore, are not reported in the funds. (452,249) 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. 12,567,568 A portion of the taxes receivable is not available to pay for current-period expenditures and, therefore, is deferred in the funds. (160,992) A portion of accounts receivables are not available to pay for current-period expenditures and, therefore, is deferred in the funds. 76,714 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 (14,170,703) Net assets of governmental activities. $1,013,888,728 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 30,2006 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 S 87,223,261 1,102,240 2,504,019 7,751,673 1,063,268 2,411,227 2,611,380 - - 1,280,462 105,947,530 16,051,181 36,201,909 7,049,027 15,406,372 18,046,546 - 6,663 460 92,762,158 13,185,372 76,666 (6,033,432) (5,956,766) 7,228,606 99,396,124 S 106,624,730 Redevelopment Debt Service Funds $ 2,384,571 - - - - 40,429 - - - - 2,425,000 18,503 - - - - - 395,000 1,485,357 1,898,860 526,140 - (1,000,000) (1,000,000) (473,860) (12,099,586) $ (12,573,446) Assessment and Other Districts $ - - - 1,085,231 - 10,014,741 - 39,857 11,139,829 - - - - 15,787,793 - - 15,787,793 (4,647,964) 3,861,887 (4J84.941) (323,054) (4,971,018) 31,439,658 $ 26,468,640 Community Facilities District No. 1 S 2,913,558 - - - - 1,068,745 - 612,847 - - 4,595,150 181,972 - - - 6,310 - 188,282 4,406,868 4,406,868 45,134,673 $ 49,541,541 The notes to the financial statements are an integral part of this statement. 42 General Public Capital Facilities Construction Construction $ - $ 493,774 - - - 1,392,876 1,277,146 - 5,900,483 - 212,939 312 2,099,589 7,177,941 - 2,684,734 7,653,585 _ - 2,684,734 7,653,585 (585,145) (475,644) 600,000 - 600,000 14,855 (475,644) 52,964,214 38,659,273 $52,979,069 $38,183,629 Rancho Santa Fe Road Project $ 1,124,810 - - 438,083 - 3,198,340 - 495,342 5,256,575 - - - - 7,944,216 7,944,216 (2,687,641) 136,933 - 136,933 (2,550,708) 13,359,659 $ 10,808,951 Other Governmental Funds $ 2,340,505 10,306,126 - 3,286,329 1 14,926 2,673,187 28,000 5,638,356 129,558 48,117 24,565,104 59,193 163,124 7,251,070 230,947 2,281,010 12,954,970 635,000 113,058 23,688,372 876,732 7,009,367 (1,115,127) 5,894,240 6,770,972 105,556,962 $112,327,934 Total Governmental Funds $ 94,861,895 13,026,950 2,504,019 11,038,002 1,178,194 10,386,924 2,639,380 25,364,767 129,558 2,077,029 163,206,718 16,310,849 36,365,033 14,300,097 15,637,319 20,327,556 47,031,608 1,036,663 1,598,875 152,608,000 10,598,718 11,684,853 (12,333,500) (648,647) 9,950,071 374,410,977 $ 384,361,048 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, 2006 Net change in fund balances - total governmental funds.$ 9,950,071 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 40,516,194 (13,476,971) Governmental funds do not reflect the donation of capital assets as revenues.11,696,347 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.(15,142) The repayment of the principal of long-term debt consumes the current financial resources of governmental funds but has no effect on net assets.1,036,663 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.18,556 Unpaid interest income on advances to other funds is not a current financial resource, and therefore is not recognized as revenue in the funds.3,001,359 A portion of sales and use taxes previously recoginized in the Statement of Activities, but had been deferred in the funds. The net revenue of activities of internal service funds is reported with governmental activities. Other Change in net assets of governmental activities. (974,360) 2,363,577 (36,476) $ 54,079,818 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, 2006 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 $ 85,961,000 1,647,000 2,750,000 7,091,000 926,000 2,960,000 2,700,000 750,000 104,785,000 19,776,477 38,918,970 9,122,761 20,434,491 22,368,295 6,663 460 110,628,117 (5,843,117) - (5,875,000) (5,875,000) (11,718,117) 99,396,124 $ 87,678,007 Amounts Final $ 83,649,000 2,031,000 2,750,000 7,114,000 926,000 2,960,000 2,700,000 984,000 103,114,000 21,703,254 38,922,233 10,071,706 20,493,265 22,442,827 6,663 460 113,640,408 (10,526,408) 101,444 (6,258,432) (6,156,988) (16,683,396) 99,396,124 $ 82,712,728 Actual Amounts (Budgetary Basis) $ 87,223,261 1,102,240 2,504,019 7,751,673 1,063,268 3,339,741 2,611,380 1,280,462 106,876,044 17,345,827 36,417,911 7,847,923 16,195,437 19,516,416 6,663 460 97,330,637 9,545,407 76,666 (6,258,432) (6,181,766) 3,363,641 99,396,124 $ 102,759,765 Variance With Final Budget - Over (Under) $ 3,574,261 (928,760) (245,981) 637,673 137,268 379,741 (88,620) 296,462 3,762,044 (4,357,427) (2,504,322) (2,223,783) (4,297,828) (2,926,411) - - (16,309,771) 20,071,815 (24,778) - (24,778) $ 20,047,037 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, 2006 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 31), 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. $ 106,876,044 (928,514) $ 105,947,530 $ 97,330,637 (4,568,479) $ 92,762,158 (6,181,766) 225,000 $ (5,956,766) The notes to the financial statements are an integral part of this statement. 47 CITY OF CARLSBAD Statement of Net Assets Proprietary Funds June 30,2006 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 Current restricted assets: Cash and investments Accrued interest Total current restricted assets Noncurrent 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 53,291,630 8,240,727 61,615,700 27,486 2,474,862 749,383 547,257 57,090,618 - - 1,583 911,793 690,993 4,833 8,242,310 63,223,319 953,706 21,300 975,006 437,510 1,909,565 16,941,971 2,185,604 950,900 108,384,891 33,766,924 - (28,127,860) 136,011,995 136,011,995 $ 193,102,613 : 5,075,228 - - - - 33,055,162 - 38,130,390 38,130,390 $ 46,372,700 1,678,807 - 3,370,967 524,329 61,252,958 10,090,467 42,809,292 (28,475,696) 91,251,124 91,688,634 $ 155,886,959 The notes to the financial statements are an integral part of this statement. 48 Enterprise Funds Solid Waste Totals Governmental Activities - Internal Service Funds $ 6,868,533 $ 130,016,590 $ 21,463,443 694,443 27,486 4,082,681 1,440,376 552,090 2,421 195,873 7,562,976 136,119,223 21,661,737 953,706 21,300 975,006 437,510 8,663,600 16,941,971 5,556,571 1,475,229 169,637,849 76,912,553 42,809,292 (56,603,556) 265,393,509 265,831,019 $ 7,562,976 $ 402,925,248 - 16,212,542 - - - (10,282,624) 5,929,918 5,929,918 $ 27,591,655 (Continued) 49 CITY OF CARLSBAD Statement of Net Assets Proprietary Funds (Continued) June 30,2006 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 $437,443 Total noncurrent liabilities Total liabilities NET ASSETS Business-type Activities - LIABILITIES Current liabilities: Accrued liabilities Accrued interest payable Due to other governments Estimated claims payable Current portion of long-term debt Deposits payable Total current liabilities Carlsbad Municipal Water District $ 2,416,587 182,918 3,534,203 388,382 156,379 6,678,469 Golf Course $ 3,131,106 : - - 4,749 3,135,855 Sewer $ 317,248 - 1,381,622 - 605,000 372,927 2,676,797 36,894,301 10,203,998 10,203,998 36,894,301 16,882,467 40,030,156 143,992 800,674 5,687,557 6,488,231 9,309,020 Invested in capital assets, net of related debt Restricted for: Capital assets Unrestricted Total net assets 125,419,615 50,725,006 75,525 $ 176,220,146 38,130,390 - (31,787,846) $ 6,342,544 85,912,273 57,116,004 3,549,662 $ 146,577,939 The notes to the financial statements are an integral part of this statement. 50 Enterprise Funds Solid Waste $ 416,124 416,124 Total Proprietary Funds $ 6,281,065 182,918 4,915,825 993,382 534,055 12,907,245 Governmental Activities - Internal Service Funds $ 3,242,345 4,127,834 7,370,179 143,992 1,224,219 1,224,219 1,640,343 38,118,520 800,674 10,203,998 5,687,557 54,810,749 67,861,986 - 7,370,179 5,922,633 $ 5,922,633 249,462,278 107,841,010 (22,240,026) $ 335,063,262 5,929,918 14,291,558 $ 20,221,476 51 CITY OF CARLSBAD Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds For the Year Ended June 30,2006 Business-type Activities - Operating revenues: Water sales Sewer service charges Other charges for services Contributions from other government agencies Miscellaneous Total operating revenues Operating expenses: Sewer plant operations Purchased water Depreciation Fuel and supplies Claims expense Small equipment purchases General and administrative Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Income from property and investments Interest expense and fees Intergovernmental Gain on sale of property Property taxes Total nonoperating revenues Income (loss) before transfers and capital contributions Transfers in Transfers out Capital contributions Change in net assets Total net assets at beginning of year Total net assets at end of year Carlsbad Municipal Water District $ 18,757,653 I 704,532 688,961 12,838 20,163,984 - 12,121,527 2,264,413 - - - 9,738,203 24,124,143 (3,960,159) 1,348,009 - - 4,450 2,257,124 3,609,583 (350,576) 55,687 - 7,593,789 7,298,900 168,921,246 $ 176,220,146 5 Golf Course Sewer 5 - $ 6,707,125 93,793 - 27,078 6,827,996 2,300,281 - 2,256,075 - - - 13,677 3,377,370 13,677 7,933,726 (13,677) (1,105,730) 551,149 1,478,787 (2,457,101) (330,794) - (837) - (1,905,952) 1,147,156 (1,919,629) 41,426 259,528 - 3,618,992 (1,919,629) 3,919,946 8,262,173 142,657,993 5 6,342,544 $ 146,577,939 The notes to the financial statements are an integral part of this statement. 52 Enterprise Funds Solid Waste $ 1,892,746 29,214 12,694 1,934,654 1,699,120 1,699,120 235,534 160,059 160,059 395,593 395,593 5,527,040 $ 5,922,633 Totals $ 18,757,653 6,707,125 2,691,071 718,175 52,610 28,926,634 2,300,281 12,121,527 4,520,488 14,828,370 33,770,666 (4,844,032) 3,538,004 (2,787,895) 3,613 2,257,124 3,010,846 (1,833,186) 315,215 11,212,781 9,694,810 325,368,452 $ 335,063,262 Governmental Activities - Internal Service Funds $ 11,897,287 395,225 12,292,512 1,438,534 928,615 1,951,182 22,317 6,601,857 10,942,505 1,350,007 379,655 27,878 41,516 449,049 1,799,056 633,432 (300,000) 231,089 2,363,577 17,857,899 $ 20,221,476 53 CITY OF CARLSBAD Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2006 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: Proceeds from capital debt 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 Golf Water District Course $ 19,366,409 $ (17,700,854) (13,677) (2,762,327) (2,214,513) - 701,799 (26,074) 8,367 (2,601,119) (39,751) 55,687 32,757,101 9,493,852 4,975,124 (15,295,143) (23,353,505) (124,071) (35,455) (2,457,101) 2,266,743 1,281,050 (25,810,606) 1,348,009 551,149 83,627 7,457,893 53,208,003 782,834 $ 53,291,630 $ 8,240,727 I Sewer $ 6,708,123 (3,664,755) (1,586,061) (967,976) - 8,275 - 497,606 259,528 - 1,605,479 (4,126,167) (575,000) (365,482) - (3,461,170) 1,478,787 (1,225,249) 62,855,074 5 61,629,825 The notes to the financial statements are an integral part of this statement. 54 Enterprise Funds Solid Waste $ 1,830,221 (775,705) (671,635) (332,112) - 75,267 - 126,036 - - - - 160,059 286,095 6,582,438 $ 6,868,533 Totals $ 27,904,753 (22,154,991) (5,020,023) (3,514,601) - 759,267 8,367 (2,017,228) 33,072,316 9,493,852 6,580,603 (42,774,815) (699,071) (2,858,038) 2,266,743 (27,990,726) 3,538,004 6,602,366 123,428,349 $ 130,030,715 Governmental Activities - Internal Service Funds $ 11,897,286 (4,223,761) (2,904,217) (878,380) (3,164,183) 224,083 - 950,828 333,432 782,747 (1,469,435) - - - (686,688) 379,655 977,227 20,486,216 $ 21,463,443 (Continued) 55 CITY OF CARLSBAD Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2006 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) increase in accrued liabilities (Decrease) increase in accrued interest payable 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: 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 $ (3,960,159) 2,264,413 (13,677) $ (1,105,730) 2,256,075 (95,777) (8,536) (84,782) 162,236 (886,881) 8,367 $ (2,601,119) $ (92,795) 2,670 (26,074) (543,810) - 29,677 (48,481) (39,751) $ 497,606 $ 6,919,001 $1,905,918 53,291,630 $ 8,240,727 $ 61,615,700 953,706 (939,581) 53,291,630 $ 8,240,727 $ 61,629,825 The notes to the financial statements are an integral part of this statement. 56 Enterprise Funds Governmental Solid Waste Totals $ 235,534 $ (4,844,032) 4,520,488 (29,167) (217,739) (5,866) (80,331) (734,997) 162,236 (857,204) - (40,114) $ 126,036 $ (2,017,228) $ - $ 8,824,919 Activities - Internal Service Funds $ 1,350,007 1,438,534 (1,170) (25,238) (319,034) - - (1,492,271) - $ 950,828 $ 231,089 $ 6,868,533 $ 130,016,590 $ 21,463,443 953,706 (939,581) $ 6,868,533 $ 130,030,715 $ 21,463,443 57 CITY OF CARLSBAD Statement of Fiduciary Assets and Liabilities Agency Funds June 30, 2006 ASSETS Current assets: Cash and investments $ 24,359,656 Other receivables 257,823 Total current assets 24,617,479 Restricted assets: Cash and investments 6,891,655 Total assets $ 31,509,134 LIABILITIES Accrued liabilities $ 197,587 Deposits held for others 31,311,547 Total liabilities $ 31,509.134 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, the Carlsbad Public Financing Authority 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 Activities) 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. 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 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 funds are 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 funds are used to account for the operation, maintenance, and capital facility financing of the City's sewer system. The Solid Waste enterprise funds are 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, risk management and workers' compensation services provided to other departments or agencies of the City. The Agency 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. Financial Accounting Standards Board (FASB) statements and interpretations issued prior to December 1, 1989, generally are followed in both the Government-wide and Proprietary Fund Financial Statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected to follow the standards set by the GASB as opposed to subsequently issued private-sector guidance. As a general rule, the effect of interfund activity has been eliminated from the Government-wide Financial Statements. An exception to this general rule are the 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. 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, 2006, 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 has capitalized all general infrastructure assets acquired or constructed in compliance with GASB 34 as of June 30, 2006. In addition the land upon which the streets and roads are constructed (right-of-way) has also been valued and capitalized as of June 30, 2006. 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. Interfund Transactions 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. Receivables and payables 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, 2006, the ambulance billing receivable allowance is equal to 40% of outstanding billings at June 30, 2006, 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. The only exception to these rules are receivables that were subsequently paid or were known to be collectible at year-end, were not reserved for at June 30, 2006. 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. 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. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. • GASB Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Infra-Equity Transfers of Assets and Future Revenues. Note 2. Budgetary Data The City follows these procedures in establishing its budgetary data: » During May or June, the City Manager submits to the City Council a proposed operating and capital budget for the fiscal year commencing the following July 1,. The budget includes estimated revenues and proposed expenditures on a departmental and/or project basis. » Public hearings are conducted at City Council meetings to obtain citizens' comments during June. • Prior to July 1, the budget is enacted legally through passage of an appropriation resolution. 64 CITY OF CARLSBAD Notes to the Financial Statements Note 2. Budgetary Data (Continued) The City Manager is authorized to make transfers of appropriated amounts from one department to another within a fund. The legal level of budgetary control is at the fund level. Revisions that alter the total appropriations of any fund must be approved by the City Council with the exception of budget adjustments that involve offsetting revenues and expenditures. The City Manager is authorized to increase or decrease an appropriation for a specific purpose where the appropriation is offset by unbudgeted revenue, which is designated for said specific purpose. Monthly reports are provided to the City Council during the year, and any changes to the adopted budget are approved by the City Council as necessary. During the year, several supplementary appropriations were necessary. Budgets for governmental type funds are adopted on the modified accrual basis except that encumbrances are treated as budgeted expenditures in the year purchases are committed. Expenditures may not exceed budgeted appropriations at the fund level. All appropriations lapse at fiscal year-end unless City Council takes action in the form of a resolution to continue the appropriation into the following fiscal year. For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses pursuant to GASB 31, actual expenditures have been adjusted to include encumbrances outstanding, and transfers out have been adjusted to reflect any transfer that was approved through the budget process as an expenditure but recorded as an advance in the financial statements. Annual budgets are adopted for the General 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 five types of risk: custodial (investments and cash deposits); concentration; default; event; and market or interest rate risk. The City of Carlsbad and its agencies invest funds in an external investment pool known as the Local Area Investment Fund (LAIF). Management and oversight are the responsibility of the California State Treasurer. As of June 30, 2006, the LAIF performance report shows a fair value factor of .998185821. The City of Carlsbad's position in the LAIF pool is calculated as a percentage of the fair value of the City's shares to the fair value of the pooled shares. 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, 2006 the City had the following investments in its portfolio: Fair Market Treasurer's Pool investments Value U.S. agencies: Federal Home Loan Mortgage Corporation $ 154,006,457 Federal Home Loan Bank 173,993,340 Federal National Mortgage Association 101,572,403 Federal Farm Credit Bank 5,873,731 Subtotal U.S. agencies 435,445,931 Corporate notes: Medium-term corporate notes 51,334,928 Commercial paper - Subtotal corporate notes 51,334,928 LAIF 16,736,038 Cash accounts 2,742,727 Total Treasurer's Pool 506,259,624 Investments held outside the Treasurer's Pool Debt Service funds/bond proceeds 28,657,669 Other deposits 534,030 Petty cash funds 6,315 Total cash and investments $ 535,457,638 Statement of Net Assets, Primary Government Cash and investments $ 502,593,121 Restricted cash and investments 1,613,206 Statement of Fiduciary Assets and Liabilities, Agency Funds Cash and investments 24,359,656 Restricted cash and investments 6,891,655 Total cash and investments $ 535,457,638 %of Total Modified Duration 30.4% 34.4% 20.1% 1.2% 86.1% 2.478 1.837 2.246 2.123 2.163 10.1% 0.0% 10.1% 3.3% 0.5% 100.0% 1.864 - 1.864 - - 2.022 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 pooled into funds collateralized with U.S. government securities (guaranteed) or U.S. agency securities (government sponsored). The California Code authorizes 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, 2006, approximately 10% 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, 2006, 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 principal when due. 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, 2006, approximately 2% 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 external 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, 2006, the average maturity of the LAIF investments was 142 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, 2006, the portfolio had a 1.9% 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 are equal to an amount that is not less than two-thirds of the current fiscal year's operating budget. The City met those requirements as follows: 1. As of June 30, 2006, the modified duration of the portfolio was 2.02. Modified duration is a prospective measure of the sensitivity of a fixed-income security's value to changes in market rates of interest. Modified duration identifies the potential gain/loss in value before it actually occurs. For example, 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 security's value will result. Investments with modified durations of one to three are considered to be relatively conservative. 2. As of June 30, 2006, maturities within one year exceeded the required minimum of $106,000,000 (two-thirds of current year operating budget for the City per the 2005-06 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, 2006: Due to Due from Other Funds Other Funds Capital Project Funds: Grants and Other Funds - IDA $ 136,933 $ Grants and Other Funds - Traffic Congestion 123,468 Rancho Santa Fe Road Project - 136,933 Sales Tax/TransNet - Local - 123,468 Totals $ 260,401 $ 260,401 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, 2006: Advances From Advances To Amount General Fund Redevelopment Debt Service Funds $ 14,232,552 General Fund Financing Districts Special Revenue Funds 630,751 GeneralFund Enterprise Funds: Golf Course 36,894,301 (I) Solid Waste 1,224,219 Special Revenue Funds: Capital Project Funds: Gas Tax Bridge and Thoroughfare Districts 3,643,344 Sales Tax/TransNet 1,000,000 Capital Projects Funds: Capital Project Funds: General Capital Construction Park Development 2,430,000 Planned Ixical Drainage Facilities 420,021 $ 60,475,188 Advances to and from other funds are primarily long term advances used to fund capital projects in advance of related revenues. (1) The advance between the General Fund and the Golf Course Fund is estimated to be repaid over a 35-40 year period through bond proceeds, possible disposition of golf course assets, and residual operating income from golf course operations. 68 CITY OF CARLSBAD Notes to the Financial Statements Note 6. Capital Assets Capital asset activity was as follows for the year ended June 30, 2006: 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 Governmental activities capital assets, net Balance at Balance at July 1,2005 Increases Decreases June 30,2006 $ 124,136,131 $ 4,446,800 $ - $ 128,582,931 72,209,568 46,938,677 (17,777,892) 101,370,353 196,345,699 69,203,460 17,629,241 21,890,701 402,314,322 51,385,477 273,175 10,962,982 2,515,666 7,486,577 (17,777,892) (318,539) (1,332,949) (72,794) 229,953,284 69,476,635 28,273,684 23,073,418 409,728,105 511,037,724 21,238,400 (1,724,282) 530,551,842 (14,314,396) (3,264,087) (13,268,461) (98,047,170) (128,894,114) 382,143,610 (1,427,900) (737,053) (2,056,057) (10,694,496) (14,915,506) 6,322,894 72,999 786,612 72,794 932,405 (791,877) (15,742,296) (3,928,141) (14,537,906) (108,668,872) (142,877,215) 387,674,627 $ 578,489,309 $ 57,708,371 $ (18,569,769) $ 617,627,911 69 CITY OF CARLSBAD Notes to the Financial Statements Note 6. Capital Assets (Continued) 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 Balance at July 1,2005 $ 8,663,600 40,328,185 48,991,785 16,208,704 5,556,571 1,535,443 159,709,825 40,318,093 223,328,636 Increases $ - : 42,098,354 42,098,354 740,028 - 81,267 9,928,024 2,491,199 13,240,518 Balance at Decreases June 30, 2006 $ - $ 8,663,600 (5,513,986) 76,912,553 (5,513,986) 85,576,153 (6,761) 16,941,971 5,556,571 (141,481) 1,475,229 169,637,849 42,809,292 (148,242) 236,420,912 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 capita] assets, net (886,708) (2,136,973) (1,260,623) (36,497,731) (11,360,409) (52,142,444) 171,186,192 (340,196) (148,770) (64,018) (3,167,209) (800,295) (4,520,488) 8,720,030 (1,226,904) (2,285,743) 59,376 (1,265,265) (39,664,940) (12,160,704) 59,376 (56,603,556) (88,866) 179,817,356 $ 220,177,977 $ 50,818,384 $ (5,602,852) $ 265,393,509 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 $ 538,458 Community development 202,621 Public safety 454,287 Community services 1,440,344 Public works 10,841,262 Capital assets held by the internal service funds (charged to various functions based on their usage of the assets) 1,438,534 Total depreciation expense - governmental activities $ 14,915,506 Business-type activities: Sewer $ 2,256,075 Water 2,264,413 Total depreciation expense - business-type activities $ 4,520,488 71 CITY OF CARLSBAD Notes to the Financial Statements Note 7.Accrued Liabilities Accrued liabilities were as follows at June 30, 2006: Governmental activities: General Fund Assessment and Other Districts Community Facilities District No. 1 General Capital Construction Public Facilities Construction Rancho Santa Fe Road Project Other Governmental Funds Subtotals * Internal Service Funds * Retentions Payable Vendors and Miscellaneous $ 1,615,001 4,424 20,243 689,054 698,747 1,935,741 1,016,194 5,979,404 225,315 452,249 Salaries and IFD Refuse Benefits Payable Disposal $2,646,123 $ 81,746 $ - . - _ . 66,011 2,712,134 81,746 3,017,030 _ Total $ 4,342,870 4,424 20,243 689,054 698,747 1,935,741 1,082,205 8,773,284 3,242,345 452,249 Total governmental activities Business-type activities: Enterprise funds: Carlsbad Municipal Water District Golf Course Sewer Solid Waste $ 6,656,968 $5,729,164 $ 81,746 $$ 12,467,878 $ 1,966,289 3,131,106 242,452 100,838 $ 450,298 $ - 74,796 44,814 $ - $ 2,416,587 3,131,106 317,248 270,472 416,124 Total business-type activities $ 5,440,685 $ 569,908 $$ 270,472 $ 6,281,065 * Internal service funds and retentions payable 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, 2006: Governmental activities: Bonds Certificates of participation Obligations under capital leases Total governmental activities Business-type activities: Installment purchase agreement Loan payable Less deferred charges Total business type activities Entity-wide total Principal Balance at June 30, 2005 Additions $ 12,460,000 $ 2,740,000 7,366 15,207,366 7,305,000 1,222,599 9,493,852 8,527,599 9,493,852 (497,365) 8,030,234 9,493,852 $23,237,600 $9,493,852 Reductions $ 395,000 635,000 6,663 1,036,663 575,000 124,071 699,071 (59,922) 639,149 $1,675,812 Principal Balance at June 30, 2006 $ 12,065,000 2,105,000 703 14,170,703 6,730,000 10,592,380 17,322,380 (437,443) 16,884,937 $31,055,640 Due Within One Year $ 420,000 670,000 703 1,090,703 605,000 388,382 993,382 (60,494) 932,888 $2,023,591 73 CITY OF CARLSBAD Notes to the Financial Statements Note 8. Long-term Debt (Continued) Long-term debt at June 30, 2006 is comprised of the following issues: Governmental long-term debt Balance at June 30, 2006 1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds, principal due in amounts ranging from $420,000 to $1,000,000 on September 1 of each year through 2023. 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. Payable from redevelopment property tax increment revenues. 1997 Hosp Grove Refunding Certificates of Participation, principal due in amounts ranging from $670,000 to $735,000 on August 1 of each year through 2008, interest payable on August 1 and February 1 at rates varying from 4.50% to 4.70% per annum. Payable from the General Fund, with a required reserve amount of $659,500. The City has entered into one office equipment lease-purchase agreement. As of June 30, 2006, the City has purchased copier equipment totaling $5,926. The lease term is for 60 months, with an interest rate of 16.82%. This lease expires in November 2006. Payable from General Fund revenues. Sub-total governmental long-term debt Less current portion Total long-term portion of governmental debt $ 12,065,000 2,105,000 703 14,170,703 1,090,703 $ 13,080,000 74 CITY OF CARLSBAD Notes to the Financial Statements Note 8. Long-term Debt (Continued) Business-type long-term debt Balance at June 30, 2006 1997 Encina Financing Joint Powers Authority (EFJPA) Installment Purchase Agreement, principal due in varying amounts ranging from $605,000 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 $937,169. Payable from sewer user fees.6,730,000 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. Payable from recycled water user fees. 2005 Carlsbad Municipal Water District loan agreement with the State Water Resources Control Board. Principal is due in varying amounts ranging from $260,712 to $627,584 on June 1 of each year through 2025, interest payable on June 1 of each year at 2.50% per annum. Payable from recycled water user fees. 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 1,098,528 9,493,852 17,322,380 437,443 993,382 15,891,555 The aggregate maturities of long-term debt are as follows: Governmental Activities Business-type Activities Year ended June 30: 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2025 Principal 1,090,703 1,140,000 1,200,000 490,000 515,000 3,005,000 3,880,000 2,850,000 $ 14,170,703 : Interest 706,090 652,310 595,182 552,840 526,459 2,186,569 1,286,898 231,875 $ 6,738,223 Principal 993,382 1,183,817 1,232,937 1,277,427 1,327,294 6,180,075 2,707,469 2,419,979 $ 17,322,380 : Interest 743,363 554,490 507,031 458,380 406,925 1,201,798 508,899 153,117 $ 4,534,003 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. 75 CITY OF CARLSBAD Notes to the Financial Statements Note 9. Rate Covenants (Continued) The 2005 Carlsbad Municipal Water District loan agreement with the State Water Resources Control Board requires that the District set its charges for services and rates for fees each year at rates sufficient to produce net revenues (after paying the operating and maintenance expenses of the District, excluding depreciation) of at least 1.0 times debt service for that year. Note 10. Debt without Government Commitment Special assessment bonds As of June 30, 2006, the City has six series of Assessment District Bonds outstanding in the amount of $73,621,457. 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. Community Facilities District No. 3 As of June 30, 2006, the City has Community Facilities District No. 3 (CFD #3) Bonds outstanding in the amount of $11,490,000. These bonds were issued under the provisions of the Mello-Roos Community Facilities Act of 1982 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 CFD #3 Agency fund. 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, 2006 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. 76 77 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, 2006: Governmental Funds Fund Balances Redevelopment Assessment Community Debt Service and Other Facilities General Funds Districts District No. 1 Reserved for: Loans receivable Inventory Prepaid items Debt service Advances to other other funds* Flower fields preservation Library endowment Low and moderate income housing Encumbrances Totals Unreserved: Designated for approved capital projects Designated for continuing appropriations Totals Undesignated Total fund balances 124,417 19,568 40,414,255 4,573,068 45,131,308 13,974,339 13,974,339 7,936 7,936 1,320,833 25,139,871 47,519,083 (12,573,446) 99,796 99,796 44,897,160 4,544,585 26,460,704 49,441,745 $106,624,730 $(12,573,446) $26,468,640 $49,541,541 * Only reflects that portion of fund balance invested in interfund advances (the General Fund amount is net of $12,567,568 in deferred revenue for measurable but unavailable interest earned on such advances). 78 CITY OF CARLSBAD Notes to the Financial Statements Note 11. Fund Balances (Continued) Governmental Funds General Capital Construction $ 2,850,021 2,966,448 5,816,469 Public Rancho Santa Other Facilities Fe Road Governmental Construction Project Funds $ $ $ 12,988,557 332,760 659,500 4,643,344 935,000 251,000 2,142,000 926,220 2,252,258 6,945,154 926,220 2,252,258 28,897,315 Total $ 13,112,974 19,568 332,760 659,500 47,907,620 935,000 251,000 2,142,000 17,770,880 83,131,302 7,379,062 3,866,109 20,422,496 77,885,660 16,507,666 16,507,666 30,654,934 29,878,347 37,257,409 _ 4,690,584 8,556,693 _ 20,273,670 40,696,166 42,734,453 115,009,062 192,894,722 108,335,024 $52,979,069 $38,183,629 $10,808,951 $112,327,934 $384,361,048 79 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 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, 2006: Deficit Balance Debt Service Funds: Redevelopment Areas $ (12,573,446) Internal Service Funds: Risk Management (52,394) SO CITY OF CARLSBAD Notes to the Financial Statements Note 13.Interfund Transfers Interfund transfers for the year ended June 30, 2006, consisted of the following: Fund Transfers In From Other Funds Transfers Out To Other Funds Major Funds: General Redevelopment Debt Service Funds Capital Project Funds: Assessment and Other Districts General Capital Construction Rancho Santa Fe Road Project Nonmajor Governmental Funds Enterprise Funds, Carlsbad Municipal Water District Enterprise Funds, Sewer Internal Service Funds Totals 76,666 $6,033,432 1,000,000 3,861,887 600,000 136,933 7,009,367 55,687 259,528 633,432 $ 12,633,500 4,184,941 - - 1,115,127 - - 300,000 $ 12,633,500 Transfers are used to (1) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, (2) move the remaining fund balances of closed funds to the General Fund, (3) move revenues and expenditures to the appropriate funds, and (4) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Note 14. Risk Management The City is exposed to various risks of loss related to its operations, including losses associated with errors and omissions and injuries to employees and members of the public. The City uses a Risk Management Self-Insurance Fund, a Self Insured Benefits Fund and a Workers' Compensation Fund (all internal service funds) to account for and finance its uninsured risks of loss. All funds of the City make payments based on estimates of the amounts needed to pay prior and current year claims and to establish a reserve for catastrophe losses. Since July 1, 1999, the City has been a member of the California Municipal Excess Liability Program, a group purchase program for general liability coverage. Under this program, the pool provides coverage up to a maximum of $10,000,000 per occurrence with a self-insured retention provided by the City in the amount of $500,000. At June 30, 2006, the unencumbered fund equity for the Risk Management Self-Insurance fund was approximately ($52,000) due to the large increase in estimated claims payable reserves in Fiscal Year 2004-05. Although there is currently insufficient cash in the fund to pay all existing and anticipated expenditures at June 30, 2006, additional cash will be available in the fund to cover these claims through the rates being charged during the 2006-07 Fiscal Year. The existing deficit will also be addressed through the rates set in the 2006-07 annual budget. 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 of the City's financial statements. However, should the other party prevail, the City will be financially obligated. It is not possible at this time to determine the ultimate amount, if any, that the City may be obligated for. Dental insurance coverage for City employees is administered by CoreSource. Under the City's agreement with CoreSource, CoreSource will pay dental claims for each covered member, up to a maximum of $1,500 per calendar year. 81 CITY OF CARLSBAD Notes to the Financial Statements Note 14. Risk Management (Continued) 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, 2006, the unencumbered fund equity for the Workers' Compensation Self-Insurance fund was approximately $1,212,000. The estimated claims payable reported at June 30, 2006 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 2005 and 2006 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: 2004-2005 2005-2006 77,863 78,486 403,965 396,579 (403,342) (397,199) 78,486 77,866 Risk Management fund: 2004-2005 2005-2006 620,678 1,927,843 1,537,137 (551,681) (229,972) (624,142) 1,927,843 752,020 Workers' Compensation fund: 2004-2005 2005-2006 2,908,890 3,613,777 1,838,796 934,484 (1,133,909) (1,250,313) 3,613,777 3,297,948 Note 15. Joint Ventures Encina Water Pollution Control Facilities The Encina Water Pollution Control Facilities (the Facilities) are sewer facilities 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 facilities. It is responsible for the management, maintenance and operations of the joint system. Ownership interests in the facilities are determined by joint agreement at the time the assets are acquired. As of June 30, 2006, the Cities and Districts have the following approximate ownership interest: City of Carlsbad City of Vista Leucadia Wastewater District Vallecitos Water District Buena Sanitation District City of Encinitas 25% 22% 20% 20% 8% 5% EWA's financial statements for the fiscal year ended June 30, 2005 (the latest available) incorporated the provisions of GASB 34 and reflect the following: Total assets Total liabilities Net assets 66,487,445 3,649,739 $ 62,837,706 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' 82 CITY OF CARLSBAD Notes to the Financial Statements Note 15. Joint Ventures (Continued) 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 income for the EWA totaled $12,088 in Fiscal Year 2005. The financial statements of the EWA can be obtained at 6200 Avenida Encinas, Carlsbad, California 92011 or at www.encinajpa.com. 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, 2006: Agreement Member Balance City of Carlsbad $ 6,730,000 Leucadia Wastewater District 4,590,000 $ 11,320,000 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 capital asset of the Sewer Enterprise Fund. Note 16. Retirement Plan Plan description The City of Carlsbad contributes to the California Public Employees' Retirement System (PERS), an agent multiple- employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of- living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions, and all other requirements, are established by state statutes and city ordinances. Copies of PERS' annual financial report may be obtained from their executive office: Lincoln Plaza, 400 P Street, Sacramento, California 95814. Funding policy Participants are required to contribute 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 employees. The City is required to contribute at an actuarially determined rate. For the year ended June 30, 2006, the employer contribution rate for the City of Carlsbad (as a percentage of covered payroll) was 27.927% for safety employees 83 CITY OF CARLSBAD Notes to the Financial Statements Note 16. Retirement Plan (Continued) and 20.869% for miscellaneous employees. The contribution requirements of plan members and the City are established by PERS. In October 2006, the City was notified by PERS that the employer contribution rate for the City of Carlsbad (as a percentage of payroll) will be 28.462% for safety employees and 20.478% for miscellaneous employees for the fiscal year ended June 30, 2008. Annual pension cost For Fiscal Year 2005-06, the City's annual pension cost (employer contribution) of $4,152,149 for safety and $5,667,848 for miscellaneous to PERS was equal to the City's required and actual contributions. For Fiscal Year 2005-06, the member contributions paid by the City and its employees were $1,377,883 for safety and $2,254,137 for miscellaneous. The required contribution was determined as part of the June 30, 2003, 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 actuarial 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 6/30/04 6/30/05 6/30/06 1,704,651 3,917,550 4,152,149 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 6/30/04 6/30/05 6/30/06 579,190 3,112,596 5,667,848 100% 100% 100% 84 CITY OF CARLSBAD Notes to the Financial Statements Note 16. Retirement Plan (Continued) Required supplementary information Funded status of plan (safety) Valuation Date 6/30/03 6/30/04 6/30/05 Entry Age Normal Accrued Liability $ 99,827,853 $ 110,306,847 $ 123,237,518 Actuarial Value of Assets $ 85,963,105 $ 92,529,369 $ 102,021,173 Unfunded Liability/ (Excess Assets) $ 13,864,748 $ 17,777,478 $ 21,216,345 Funded Status 86.1% 83.9% 82.8% Annual Covered Payroll $ 12,709,908 $ 13,382,181 $ 14,305,227 UAAL Asa% of Payroll 109.1% 132.8% 148.3% Funded status of plan (miscellaneous) Valuation Date Entry Age Normal Accrued Liability Actuarial Value of Assets Unfunded Liability/ (Excess Assets) Funded Status Annual Covered Payroll UAAL As a% of Payroll 6/30/03 $ 121,455,280 $ 98,339,566 $ 23,115,714 81.0% $ 25,059,422 92.2% 6/30/04 $ 132,074,893 $ 105,423,856 $ 26,651,037 79.8% $ 26,476,671 100.7% 6/30/05 $ 149,626,877 $ 117,576,007 $ 32,050,870 78.6% $ 26,688,294 120.1% Note 17.Postretirement Healthcare The majority of City of Carlsbad employees are under the City of Carlsbad defined contribution plan. The Carlsbad Municipal Water District has a defined benefit plan. Carlsbad Municipal Water District The first plan is for active and retired employees that were employed with the Carlsbad Municipal Water District (CMWD) at the time the District was acquired by the City. Per Resolution 614, all former employees of CMWD (including dependents) are eligible for postretirement health care benefits if they voluntarily retire after the age of 50, with no less than five years of service and whose age, combined with years of service, equals 70 or more. There are approximately eleven active and thirteen retired plan members as of June 30, 2006. 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. This plan is administered by the Association of California Water Agencies (ACWA). Expenditures were approximately $103,000 for post-retirement health care costs during Fiscal Year 2005-06. Based on an actuarial valuation performed as of June 30, 2006, the District's liability for the current and past service costs of these benefits is approximately $2,821,000. City of Carlsbad City of Carlsbad retirees are eligible for a postretirement healthcare subsidy. This plan is administered by the Public Employees Retirement System (PERS). There are approximately 630 active and 93 retired plan members as of June 30, 2006. Surviving spouses of eligible retirees are eligible for the City subsidy. Surviving spouses/domestic partners of deceased active members are eligible for the City subsidy only if the employee had attained age 50 with five years of service. 85 CITY OF CARLSBAD Notes to the Financial Statements Note 17. Postretirement Healthcare (Continued) The City pays a monthly subsidy per eligible employee/retiree regardless of coverage elected: Calendar year 2006 $64.60 Calendar year 2007 $80.80 Calendar year 2008 $97.90 Thereafter, the subsidy is adjusted annually to reflect changes in the medical component of the Consumer Price Index. Expenditures for postretirement health care benefits are funded on a pay-as-you-go basis. Expenditures were approximately $63,000 for City subsidy payments during Fiscal Year 2005-06. Based on an actuarial valuation performed as of June 30, 2006, the City's liability for the current and past service costs of these benefits is approximately $7,771,000. The GASB recently issued Statement No. 45 to address the accounting and disclosure treatment for this type of plan. Effective with the fiscal year ending June 30, 2008, the City will be required to recognize postretirement health care costs on an accrual basis over a period approximating the employees' years of service, and to provide information about actuarial liabilities associated with these benefits, and whether and to what extent progress is being made in funding the plan. 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. Current fiscal year lease payments totaled $88,720. Minimum future rental payments under the operating lease as of June 30, 2006 are: 2007 94,044 2008 15,674 Total minimum future rental payments $ 109,718 Water purchase agreements On March 25, 1991, the Carlsbad Municipal Water District (CMWD) entered into a twenty year agreement with the Leucadia County Water District, to purchase recycled water to be used primarily for irrigation at the La Costa Resort & Spa golf course, and for other appropriate uses within the CMWD's boundaries. CMWD agreed to purchase of minimum of 394 acre feet of recycled water per fiscal year, at a basic price of retail potable water charged to residential users within the CMWD boundary. The current cost is $688.25 per acre foot or a minimum of $271,170.50 per fiscal year, regardless of the actual amount used. On August 5, 2003, CMWD entered into a twenty-two year agreement with the Vallecitos Water District, to purchase three million gallons per day (3,360 acre feet) of recycled water for uses throughout CMWD's boundaries. The agreement stipulates that CMWD pay for the actual operating costs of the Mahr Reservoir, which produces the water, since CMWD is the only customer of the water produced. The estimated operating costs for the period ended June 30, 2006 is $640,000. 86 CITY OF CARLSBAD Notes to the Financial Statements Note 19. Change in Accounting Principle Effective July 1, 2005, the City capitalized all general infrastructure assets acquired prior to July 1, 2001 in the Statement of Net Assets, in accordance with GASB 34. The cumulative effect of this change in accounting principle upon the beginning net assets balance of governmental activities is as follows: Governmental Activities Net assets at July 1, 2005 $ 738,099,131 Capitalization of all general infrastructure assets acquired prior to July 1, 2001 221,709.779 Net assets at July 1, 2005, as restated $ 959.808.910 87 88 SUPPLEMENTARY INFORMATION 89 CITY OF CARLSBAD Combining Balance Sheet Nonmajor Governmental Funds June 30, 2006 Special Revenue Funds ASSETS Cash and investments Receivables: Taxes Other Accounts, net Affordable Housing $ 11,209,014 Community Development Block Grant $ 18,542 Donations and Endowments $ 1,734,312 10,175 Financing Districts $ 2,697,640 11,015 9,494 Gas Tax $ 5,711,247 Due from other funds Due from other governments Prepaid items Restricted assets, cash and investments Loan receivables Advances to other funds Total assets LIABILITIES AND FUND BALANCES 295,407 10,001,933 16,252 224,404 4,643,344 21,506,354 $ 259,198 $ 1,744,487 $2,718,149 $10,354,591 Liabilities: Accrued liabilities Due to other funds Deposits payable Advances from other funds Deferred revenue Total liabilities Fund balances: Reserved for: Loans receivable Prepaid items Debt service Advances to other funds Flower fields preservation Library endowment Low and moderate income housing Encumbrances Unreserved: Designated for approved capital projects Designated for continuing appropriations Undesignated Total fund balances Total liabilities and fund balances 12,677 $ 34,794 $ 21,753 $ 92,068 $ 6,934 630,751 12,677 10,001,933 34,794 21,753 722,819 224,404 6,934 4,643,344 1,932,000 25,810 9,533,934 21,493,677 $ 21,506,354 108,956 (108,956) 224,404 $ 259,198 935,000 251,000 21,431 172,401 342,902 1,722,734 $ 1,744,487 131,506 1,863,824 1,995,330 $2,718,149 364,450 1,269,574 4,070,289 10,347,657 $ 10,354,591 90 Special Revenue Funds Low and Other Habitat and Moderate Special Agricultural Income Revenue Management Housing Funds $ 7,041,515 $ 3,163,802 $1,210,814 37,222 368 - 2,762,220 $ 7,041,515 $ 5,963,612 $1,210,814 Police Grants and Section 8 Tyler Asset Rental Court Forfeiture Assistance Apartments $ 715,830 $ 92,767 $1,016,066 12,703 332,760 - $ 715,830 $ 438,230 $ 1,016,066 Totals $ 34,611,549 37,222 11,383 32,372 311,659 332,760 12,988,557 4,643,344 $ 52,968,846 $ - $ 3,854 $ 7,488 - 3,854 7,488 2,762,220 210,000 4,669 5,739 4,762 12,684 - 209 7,024,162 2,981,799 1,198,355 7,041,515 5,959,758 1,203,326 $ 7,041,515 $ 5,963,612 $1,210,814 $ 27,831 $ 26,233 $ 42,800 21,724 27,831 69,033 21,724 332,760 53,553 2,175 50,901 583,545 34,262 994,342 687,999 369,197 994,342 $ 715,830 $ 438,230 $ 1,016,066 $ 233,632 64,524 630,751 928,907 12,988,557 332,760 4,643,344 935,000 251,000 2,142,000 723,051 1,269,574 4,306,484 24,448,169 52,039,939 $ 52,968,846 (Continued) 91 CITY OF CARLSBAD Combining Balance Sheet Nonmajor Governmental Funds (Continued) June 30,2006 ASSETS Cash and investments Debt Service Fund Hosp Grove COPs $ 876,778 Capital Project Funds Bridge and Thoroughfare Districts $ 9,373,847 Grants and Other Funds $ 188,859 Infrastructure Replacement $ 21,744,498 Park Development $ 6,004,845 Receivables: Taxes Other Accounts, net Due from other funds Due from other governments Prepaid items Restricted assets, cash and investments Loan receivables Advances to other funds 15,684 659,500 266,281 Total assets LIABILITIES AND FUND BALANCES Liabilities: Accrued liabilities Due to other funds Deposits payable Advances from other funds Deferred revenue Total liabilities $ 1,551,962 $ 9,373,847 : S - $ 798 : 3,643,344 3,644,142 S 455,140 $ 177,579 260,401 437,980 $21,744,498 $6,004,845 $ 18,330 $ 1,047 2,430,000 18,330 2,431,047 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 659,500 21,490 464,867 1,441,725 974,443 41,358 851,104 1,551,962 $ 1,551,962 4,901,391 806,824 5,729,705 $ 9,373,847 (447,707) 17,160 $ 455,140 2,401,556 17,882,887 21,726,168 $ 21,744,498 2,344,866 254,489 3,573,798 $ 6,004,845 92 Capital Project Funds Planned Local Drainage Facilities $ 9,680,624 _ 76,714 - - - - - - - $ 9,757,338 Traffic Redevelopment Sales Tax/ Impact Agency TransNet Projects $ 930,122 $ 8,148,844 $ 10,805,084 _ . 9,651 123,468 68,525 _ , . . $ 939,773 $ 8,340,837 $ 10,805,084 Totals $ 66,876,723 _ 76,714 9,651 123,468 334,806 - - - - $ 67,421,362 Total Other Governmental Funds $ 102,365,050 37,222 103,781 42,023 123,468 646,465 332,760 659,500 12,988,557 4,643,344 $ 121,942,170 $ 111,627 - - 420,021 76,714 608,362 - - - - - - 434,021 5,297,131 3,417,824 - 9,148,976 $ 9,757,338 $ 33,410 $ 383,254 $ 122,528 _ 6,276 1,000,000 . 39,686 1,383,254 122,528 _ _ . _ , - 233,203 1,062,799 1,589,555 282,432 6,327,102 666,884 5,612,352 2,765,899 . 900,087 6,957,583 10,682,556 $ 939,773 $ 8,340,837 $ 10,805,084 $ 848,573 260,401 6,276 7,493,365 76,714 8,685,329 - - - - 6,222,103 19,152,922 15,925,828 17,435,180 58,736,033 $ 67,421,362 $ 1,082,205 260,401 70,800 8,124,116 76,714 9,614,236 12,988,557 332,760 659,500 4,643,344 935,000 251,000 2,142,000 6,945,154 '20,422,496 20,273,670 42,734,453 112,327,934 $ 121,942,170 93 CITY OF CARLSBAD Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2006 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 $ 295,407 57,102 240,700 847,500 1,440,709 252,157 252,157 1,188,552 472,573 472,573 1,661,125 19,832,552 $21,493,677 Community Development Block Grant $ 1,046,363 143,195 1,189,558 249,045 243,536 492,581 696,977 (472,573) (472,573) 224,404 $ 224,404 Donations and Endowments $ 54,850 39,787 129,558 224,195 67,870 181,964 249,834 (25,639) . (25,639) 1,748,373 $ 1,722,734 Financing Districts $ 1,989,367 62,664 28,000 6,000 2,086,031 2,281,010 144,423 2,425,433 (339,402) - (339,402) 2,334,732 $1,995,330 Gas Tax $ 1,743,693 169,708 3,735 1,917,136 2,820,665 2,820,665 (903,529) 57,839 (7,500) 50,339 (853,190) 11,200,847 $ 10,347,657 94 Special Revenue Funds Low and Habitat and Moderate Agricultural Income Management Housing $ - $ 596,812 158,796 148,791 82,888 241,684 745,603 2,316 97,339 2,316 97,339 239,368 648,264 Other Police Special Grants and Section 8 Tyler Revenue Asset Rental Court Funds Forfeiture Assistance Apartments $<t c; <r-p - 3> 4> 32,462 158,974 6,013,874 431,118 114,926 28,610 12,624 1,577 17,788 13,257 61,072 286,524 6,028,708 448,906 28,058 163,124 5,732,312 280,377 48,983 51,124 77,041 214,248 5,732,312 280,377 (15,969) 72,276 296,396 168,529 Totals $ 2,340,505 7,547,080 2,532,437 114,926 1,024,240 28,000 940,123 129,558 13,257 14,670,126 28,058 163,124 6,681,416 230,947 2,281,010 3,259,748 12,644,303 2,025,823 530,412 (480,073) 50,339 239,368 648,264 6,802,147 5,311,494 $7,041^515 $5,959,758 (15,969) 72,276 296,396 168,529 1,219,295 615,723 72,801 825,813 $ 1,203,326 $ 687,999 $ 369,197 $ 994,342 2,076,162 49,963,777 $ 52,039^939 (Continued) 95 CITY OF CARLSBAD Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds (Continued) For the Year Ended June 30, 2006 Debt Service Fund Capital Project Funds Bridge and Grants Hosp Grove Thoroughfare and Other Infrastructure Park COPs Districts Funds Replacement Development 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 at beginning of year Fund balances at end of year 1,699,046 58,197 - _ 58,197 197,491 1,273,232 540 1,471,263 9,407 - _ 1,708,453 512,908 - 24,862 537,770 109,261 1,510,100 _ 1,619,361 20,312 116 1,549,158 1,457,728 216,470 635,000 .... 113,058 - ... 748,058 20,428 (689,861) 1,450,835 800,000 800,000 110,139 1,450,835 1,441,823 4,278,870 $1,551,962 $ 5,729,705 1,549,158 159,295 (565,888) (565,888) (406,593) 423,753 $ 17,160 1,457,728 (919,958) 4,250,000 4,250,000 3,330,042 18,396,126 $21,726,168 216,470 1,402,891 - 1,402,891 2,170,907 $ 3,573,798 96 Capital Project Funds Planned Local Drainage Redevelopment Facilities Agency $ - $ - 21,675 - 233,658 90,993 - 740,738 20,000 - - 974,396 132,668 - 569,654 - - 1,263,885 232,199 _ - 1,263,885 801,853 (289,489) (669,185) 1,000,000 (69,166) 930,834 (289,489) 261,649 9,438,465 638,438 $9,148,976 $ 900,087 Sales Tax/ TransNet $ 1,060,000 732,217 - 201,165 - - - - 1,993,382 7,418 - - - - 4,469,661 _ - 4,477,079 (2,483,697) 428,955 - 428,955 (2,054,742) 9,012,325 $ 6,957,583 Traffic Impact Projects $ - - 235,867 - 1,154,163 - 9,458 1,399,488 3,405 - - - - 506,005 - 509,410 890,078 - 890,078 9,792,478 $ 10,682,556 Totals $ 2,759,046 753,892 - 1,590,750 - 4,698,233 - 34,860 9,836,781 31,135 - 569,654 - - 9,695,222 _ - 10,296,011 (459,230) 5,678,955 (635,054) 5,043,901 4,584,671 54,151,362 $ 58,736,033 Total Other Governmental Funds $ 2,340,505 10,306,126 3,286,329 114,926 2,673,187 28,000 5,638,356 129,558 48,117 24,565,104 59,193 163,124 7,251,070 230,947 2,281,010 12,954,970 635,000 113,058 23,688,372 876,732 7,009,367 (1,115,127) 5,894,240 6,770,972 105,556,962 $ 112,327,934 97 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds Year Ended June 30, 2006 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 $ 1,570,000 438,599 1,131,401 1,080,000 1,092,916 (12,916) 202,000 585,975 (383,975) 2,111,000 3,195,031 (1,084,031) 2,069,211 7,130,358 (5,061,147) 9,669 (9,669) 698,000 134,793 563,207 Actual Amounts (Budgetary Basis) $ 1,604,481 277,967 1,326,514 1,189,558 601,537 588,021 249,340 271,265 (21,925) 2,120,569 2,556,939 (436,370) 1,995,664 3,185,115 (1,189,451) 344,308 6,985 337,323 791,418 103,078 688,340 Variance Over (Under) $ 34,481 (160,632) 195,113 109,558 (491,379) 600,937 47,340 (314,710) 362,050 9,569 (638,092) 647,661 (73,547) (3,945,243) 3,871,696 344,308 (2,684) 346,992 93,418 (31,715) 125,133 (Continued) 98 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds (Continued) Year Ended June 30,2006 Budget Actual Amounts (Budgetary Basis) Variance Over (Under) 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 43,000 98,712 (55,712) 269,000 318,704 (49,704) 6,008,000 5,981,340 26,660 14,050,211 18,986,097 78,631 81,803 (3,172) 297,005 267,801 29,204 6,028,708 5,734,487 294,221 14,699,682 13,086,977 35,631 (16,909) 52,540 28,005 (50,903) 78,908 20,708 (246,853) 267,561 649,471 (5,899,120) $ (4,935,886) $ 1,612,705 $ 6,548,591 99 CITY OF CARLSBAD Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Debt Service Funds Year Fnded June 30, 2006 Budget Actual Amounts (Budgetary Basis) Variance Over (Under) Redevelopment Areas Total revenues Total expenditures Net change in fund balance 2,265,000 1,914,976 2,461,851 1,898,860 196,851 (16,116) 350,024 562,991 $212,967 100 101 CITY OF CARLSBAD Combining Statement of Net Assets Internal Service Funds June 30,2006 ASSETS Current assets: Cash and investments Receivables: Accounts, net Inventory Total current assets Noncurrent assets: Capital assets: Machinery and equipment Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrent assets Total assets LIABILITIES Current liabilities: Accrued liabilities Estimated claims payable Total current liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted Total net assets Reet Self Insured Management Benefits $ 8,487,389 $ 3,468,849 1,449 972 195,873 8,684,711 3,469,821 13,071,542 (7,536,772) 5,534,770 5,534,770 $ 14,219,481 $ 3,469,821 $ 161,864 $ 2,754,463 77,866 161,864 2,832,329 161,864 2,832,329 5,534,770 8,522,847 637,492 $ 14,057,617 $ 637,492 Information Technology $ 4,217,553 4,217,553 3,141,000 (2,745,852) 395,148 395,148 $ 4,612,701 $ 246,316 246,316 246,316 395,148 3,971,237 $ 4,366,385 102 Risk Workers' Management Compensation Total 772,698 $ 4,516,954 $ 21,463,443 2,421 195,873 772,698 4,516,954 21,661,737 16,212,542 (10,282,624) 5,929,918 5,929,918 772,698 $ 4,516,954 $ 27,591,655 73,072 752,020 6,630 3,297,948 3,242,345 4,127,834 825,092 3,304,578 7,370,179 825,092 3,304,578 7,370,179 (52,394) 1,212,376 $ (52,394) $ 1,212,376 5,929,918 14,291,558 $ 20,221,476 103 CITY OF CARLSBAD Combining Statement of Revenues, Expenses and Changes in Net Assets Internal Service Funds For the Year Ended June 30,2006 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 I ntergo vernmental Gain (loss) on sale of property Total nonoperating revenues (expenses) Fleet Self Insured Management Benefits $ 3,437,292 $ 848,481 15,016 3,452,308 848,481 1,276,098 928,615 735,589 - 1,443,359 3,648,072 735,589 (195,764) 112,892 188,111 - 39,516 227,627 Information Technology $ 4,126,816 - 4,126,816 162,436 - - 22,317 3,936,688 4,121,441 5,375 86,996 27,878 2,000 116,874 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 31,863 333,432 231,089 596,384 13,461,233 112,892 (300,000) (187,108) 824,600 122,249 122,249 4,244,136 $ 14,057,617 $ 637,492 $ 4,366,385 104 Risk Management $ 1,284,459 309,763 1,594,222 1,104,140 1,104,140 490,082 21,391 21,391 511,473 511,473 (563,867) $ (52,394) Workers' Compensation $ 2,200,239 S 70,446 2,270,685 1,215,593 117,670 1,333,263 937,422 83,157 83,157 1,020,579 300,000 1,320,579 (108,203) $ 1,212,376 $ Totals ; 11,897,287 395,225 12,292,512 1,438,534 928,615 1,951,182 22,317 6,601,857 10,942,505 1,350,007 379,655 27,878 41,516 449,049 1,799,056 633,432 (300,000) 231,089 2,363,577 17,857,899 ; 20,221,476 105 CITY OF CARLSBAD Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2006 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: Capital contributions Purchases of capital assets Net cash provided by (used in) capital and related financing activities Cash flows from investing activities: Interest on investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Fleet Self Insured Management Benefits $ 3,437,291 $ 848,481 (1,576,313) (719,564) (276,913) (735,588) 15,016 107,507 879,517 220,400 333,432 (300,000) (1,426,969) (1,426,969) 188,111 (25,909) (79,600) 8,513,298 3,548,449 $ 8,487,389 $ 3,468,849 Information Technology $ 4,126,816 (1,858,956) (1,886,097) (433,030) (51,267) 782,747 (42,466) 740,281 86,996 776,010 3,441,543 $ 4,217,553 106 Risk Management $ 1,284,459 (788,492) (211,564) (137,947) (897,174) 31,114 (719,604) - Workers' Compensation $ 2,200,239 - (86,992) (30,490) (1,531,421) 70,446 621,782 300,000 - Total $11,897,286 (4,223,761) (2,904,217) (878,380) (3,164,183) 224,083 950,828 333,432 782,747 (1,469,435) (686,688) 21,391 (698,213) 1,470,911 $ 772,698 83,157 1,004,939 3,512,015 $ 4,516,954 379,655 977,227 20,486,216 $21,463,443 (Continued) 107 CITY OF CARLSBAD Combining Statement of Cash Flows Internal Service Funds (Continued) For the Year Ended June 30, 2006 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 (195,764) $ 112,892 $ 5,375 1,276,098 (367) (25,238) (175,212) 162,436 (803) 108,931 (620) (219,078) $ 879,517 $ 220,400 $(51,267) $ 231,089 $ 108 Risk Workers' Management Compensation Total 490,082 $ 937,422 $ 1,350,007 1,438,534 (1,170) (25,238) (33,863) 188 (319,034) (1,175,823) (315,828) (1,492,271) (719,604) $ 621,782 $ 950,828 231,089 109 CITY OF CARLSBAD Combining Statement of Changes in Assets and Liabilities Agency Funds For the Year Ended June 30, 2006 Contractors' and Miscellaneous Deposits ASSETS Balance July 1,2005 Additions Deductions Balance June 30, 2006 Current assets: Cash and investments Accrued interest Total current assets LIABILITIES Accrued liabilities Deposits held for others Total liabilities 17,540,809 35,619 3,017,775 14,558,653 36,307,836 26,255 35,192,574 51,632 23,124,226 39,318,731 26,057,822 35,295,250 18,656,071 10,242 $ 17,576,428 $ 36,334,091 $ 35,244,206 $ 18,666,313 84,179 18,582,134 $ 17,576,428 $ 62,442,957 $ 61,353,072 $ 18.666.313 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 1,2005 $ 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 Additions $ 19,112,012 334,861 19,446,873 958,101 - 958,101 $ 20,404,974 $ 178,951 8,097,422 $ 8,276,373 Deductions $ 18,482,355 194,133 18,676,488 1,266,780 88,335 1,355,115 $ 20,031,603 $ 153,243 7,749,759 $ 7,903,002 Balance June 30, 2006 $ 5,703,585 247,581 5,951,166 6,891,655 - 6,891,655 $ 12,842,821 $ 113,408 12,729,413 $ 12,842,821 (Continued) 110 CITY OF CARLSBAD Combining Statement of Changes in Assets and Liabilities Agency Funds (Continued) For the Year Ended June 30, 2006 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 1,2005 $ 22,614,737 142,472 22,757,209 7,200,334 88,335 7,288,669 $ 30,045,878 $ 3,105,475 26,940,403 $ 30,045,878 Additions $ 55,419,848 361,116 55,780,964 958,101 - 958,101 $ 56,739,065 $ 23,303,177 47,416,153 $ 70,719,330 Deductions $ 53,674,929 245,765 53,920,694 1,266,780 88,335 1,355,115 $ 55,275,809 $ 26,211,065 43,045,009 $ 69,256,074 Balance June 30, 2006 $ 24,359,656 257,823 24,617,479 6,891,655 - 6,891,655 $ 31,509,134 $ 197,587 31,311,547 $ 31,509,134 111 CITY OF CARLSBAD Schedule of Annual Debt Service Requirements $15,495,000 -1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds Fiscal Year 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 $ 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 $ 3,453,044 Interest Due March 1 $ 306,607 295 282 269 ,058 ,851 ,989 256,470 242,295 227,332 211 195 177 ,583 ,045 ,589 159,213 139,920 119 98 75 51 ,576 ,183 ,525 ,675 26,500 $ 3,135 - ,411 Total Interest $ 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 $ 6,588,455 Principal Due Total Annual September 1 Debt Service $ 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 ,044,240 ,041,665 ,042,909 ,042,840 ,041,459 ,038,765 ,039,627 ,038,915 ,036,628 ,037,634 ,036,802 ,034,134 ,034,496 ,032,759 ,028,707 ,027,200 ,028,175 ,026,500 $ 12,065,000 $ 18,653,455 $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 2006-07 2007-08 2008-09 Totals 48,448 33,373 17,273 33,372 17,272 81,820 50,645 17,273 670,000 700,000 735,000 99,094 $50,644 $ 751,820 750,645 752,273 149,738 $ 2,105,000 $ 2,254,738 112 CITY OF CARLSBAD Schedule of Annual Debt Service Requirements (Continued) $11,080,000 - Encina Financing Joint Powers Authority Installment Purchase Agreement Fiscal Year 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Totals Interest Due August 1 $ 172,791 156,153 139,353 122,816 105,191 86,228 66,241 45,228 23,190 $ 917,191 Interest Due February 1 $ 156,153 139,353 122,816 105,191 86,228 66,241 45,228 23,191 - $ 744.401 — : Total Interest $ 328,944 295,506 262,169 228,007 191,419 152,469 111,469 68,419 23,190 $ 1,661,592 Principal Due August 1 $ 605,000 640,000 675,000 705,000 740,000 780,000 820,000 860,000 905,000 $ 6,730,000 Total Annual Debt Service $ 933,944 935,506 937,169 933,007 931,419 932,469 931,469 928,419 928,190 $ 8,391,592 $2,331,489 - Carlsbad Municipal Water District State Loan for Reclaimed Water Projects Fiscal Year 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Interest Due November 30 $ 31,857 28,155 24,345 20,425 16,391 12,240 7,969 2,682 Principal Due November 30 $ 127,670 131,372 135,181 139,102 143,136 147,287 151,558 123,222 Total Annual Debt Service $ 159,527 159,527 159,526 159,527 159,527 159,527 159,527 125,904 Totals $ 144.064 S 1.098.528 $ 1.242.592 113 CITY OF CARLSBAD Schedule of Annual Debt Service Requirements (Continued) $9,493,852 - Carlsbad Municipal Water District State Water Resources Control Board Loan Fiscal Year 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 2024-25 Interest Due June 1 $ 382,562 230,829 220,517 209,948 199,115 188,011 176,630 164,964 153,006 140,749 128,186 115,309 102,110 88,581 74,713 60,500 45,930 30,997 15,690 Principal Due June 1 $ 260,712 412,445 422,756 433,325 444,158 455,262 466,644 478,310 490,268 502,524 515,087 527,965 541,164 554,693 568,560 582,774 597,344 612,277 627,584 Total Annual Debt Service $ 643,274 643,274 643,273 643,273 643,273 643,273 643,274 643,274 643,274 643,273 643,273 643,274 643,274 643,274 643,273 643,274 643,274 643,274 643,274 Totals 9.493.852 $12,222.199 114 STATISTICAL SECTION CITY OF CARLSBAD Statistical Section This section of the City of Carlsbad's Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Contents Page Financial Trends 116 These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity 125 These schedules contain information to help the reader assess the City's most significant local revenue source, property taxes. Debt Capacity 130 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt, and the City's ability to issue additional debt in the future. Demographic and Economic Information 140 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 144 These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. The City implemented GASB Statement 34 in Fiscal Year 2001-02; schedules presenting government-wide information include information beginning in that year. 115 CITY OF CARLSBAD Net Assets by Component Last Five Fiscal Years (dollars in thousands) 2002(1)2003 2004 2005 Source: City of Carlsbad Comprehensive Annual Financial Reports. (1) The City first began calculating net asset balances in Fiscal Year 2001 -02. (2) The large increase in 2005-06 reflects the addition of infrastructure assets as per OASB34 requirements. (3) Net Assets Restricted for Other Purposes increased significantly in Fiscal Years 2003-04 and 2004-05 to set aside funds for future golf course construction ($15 million in 2003-04 and an additional $15.3 million in 2004-05). (4) The large decrease in 2005-06 reflects an additional $30.3 million advance received from the General Fund. 2006 Governmental activities Invested in capital assets, net of related debt $ 198,808 $ 248,219 $ Restricted for: Capital assets 130,545 139,760 Affordable, low and moderate income housing 16,652 18,625 Habitat and agricultural mitigation management 5,980 6,840 Other purposes (3) Unrestricted 4,260 6,019 126,632 146,018 Total governmental activities net assets $ 482,877 $ 565,481 $ 282,728 $ 342,232 $ 151,395 175,663 23,042 25,144 6,893 7,528 20,451 35,173 149,662 152,352 634,171 $ 738,092 $ 604,117 (2) 172,474 27,453 7,042 5,131 197,672 1,013,889 Business-type activities Invested in capital assets, net of related debt $ 143,175 $ 165,943 $ Restricted for: Capital assets Unrestricted 96,807 96,666 16,261 22,509 Total business-type activities net assets $ 256,243 $ 285,118 $ Total government Invested in capital assets, net of related debt $ 341,983 $ 414,162 $ Restricted for: Capital assets 227,352 236,426 Affordable, low and moderate income housing 16,652 18,625 Habitat and agricultural mitigation management 5,980 6,840 Other purposes Unrestricted Total net assets $1,500 $1,000 $500 $0 4,260 6,019 142,893 168,527 $ 739,120 $ 850,599 $ Total Governmental Net Assets (in millions) , - _ ,,, , ji "fl — fl — 1 — B~~r 2002 2003 2004 2005 2006 Fiscal Year 185,971 $ 213,101 $ 102,585 100,597 15,072 11,670 303,628 $ 325,368 $ 468,699 $ 555,333 $ 253,980 276,260 23,042 25,144 6,893 7,528 20,451 35,173 164,734 164,022 937,799 $ 1,063,460 $ D Total Unrestricted • Total Restricted D Invested in Capital Assets 249,462 107,841 (22,240) (4) 335,063 853,579 280,315 27,453 7,042 5,131 175,432 1,348,952 116 CITY OF CARLSBAD Changes in Net Assets Last Five Fiscal Years (dollars in thousands) Expenses Governmental activities General government Public safety Community development Community services Public works Interest and fiscal charges on long-term debt Total governmental activities Business-type activities Carlsbad Municipal Water District Golf course Sewer Solid waste Total business-type activities Total government Program Revenues Governmental activities Charges for services: General government Public safety Community development Community services Public works Operating grants and contributions Capital grants and contributions Total governmental activities Business-type activities Charges for services: Carlsbad Municipal Water District Sewer Solid waste Operating grants and contributions Capital grants and contributions Total business-type activities Total government Net (Expense)/Revenue: Governmental activities Business-type activities Total government net expense 2002 2003 2004 2005 2006 $ 7,600 3 25,660 10,539 13,270 15,015 1,673 73,757 19,311 98 6,169 213 25,791 $ 99,548 $ $ 582 $ 2,957 3,810 1,828 5,440 7,985 26,852 49,454 19,102 5,919 505 577 16,155 42,258 3 91,712 3 3 (24,303) 3 16,467 3 (7,836) $ 8,518 $ 27,748 12,004 14,538 16,826 1,048 80,682 19,261 93 6,104 218 25,676 106,358 3 750 $ 3,269 4,261 2,086 6,668 10,139 45,180 72,353 18,276 6,286 868 1,267 19,539 46,236 118,589 3 (8,329) 3 20,560 12,231 3 8,604 $ 30,894 13,814 15,035 19,534 996 88,877 20,950 54 6,891 1,300 29,195 118,072 3 571 $ 3,699 4,203 2,102 4,533 14,570 42,215 71,893 18,862 6,203 1,673 1,504 17,377 45,619 117,512 3 (16,984) 5 16,424 (560) $ 11,353 34,366 14,363 16,033 22,064 1,014 99,193 21,422 25 7,235 1,488 30,170 129,363 926 3,232 5,934 2,292 4,633 12,817 74,414 104,248 18,788 6,378 2,348 508 17,122 45,144 149,392 5,055 14,974 20,029 $ 15,382 35,822 14,332 16,790 35,937 1,036 119,299 24,124 2,471 8,265 1,699 36,559 3 155,858 3 945 3,611 4,677 2,437 6,451 12,116 39,286 69,523 19,462 6,801 1,893 718 11,213 40,087 $ 109,610 3 (49,776) 3,528 3 (46,248) 117 CITY OF CARLSBAD Changes in Net Assets Last Five Fiscal Years (dollars in thousands) General Revenues and Other Changes in Net Assets Governmental activities Taxes: Property taxes Sales and use taxes Transient occupancy taxes Franchise taxes Business license taxes Real property transfer taxes Vehicle license fees Income from property and investments Other general revenues Transfers Total governmental activities Business type activities Property taxes Income from property and investments Other general revenues Transfers Total business-type activities Total government Change in Net Assets Governmental activities Business-type activities Total government 2002 2003 2004 2005 2006 $ 28,495 $ 21,004 8,533 7,495 2,440 1,193 4,675 18,095 762 17 92,709 1,516 7,010 804 (17) 9,313 $ 102,022 $ $ 68,406 5 25,780 $ 94,186 S : 31,411 $ 25,767 8,387 3,730 2,305 1,127 5,067 13,347 390 (600) 90,931 1,672 5,836 208 600 8,316 ; 99,247 $ ; 82,602 $ 28,876 ; 111,478 $ 33,949 $ 24,578 8,813 5,027 2,872 1,587 4,125 3,124 637 963 85,675 1,842 1,193 14 (963) 2,086 87,761 $ 68,691 $ 18,510 87,201 $ : 41,479 $ 24,759 10,072 5,683 2,890 1,646 2,136 9,910 441 (150) 98,866 2,025 4,162 579 - 6,766 105,632 $ 103,921 $ 21,740 125,661 $ 43,936 25,429 11,513 5,429 3,040 1,906 587 11,682 650 (315) 103,857 2,257 3,538 56 315 6,166 110,023 54,081 9,694 63,775 Source: City of Carlsbad Comprehensive Annual Financial Report. Note: Data in this table is available from the date the City implemented GASB 34 (Fiscal Year 2001-02). 118 119 CITY OF CARLSBAD Fund Balances of Governmental Funds Last Ten Fiscal Years (dollars in thousands) General Fund Reserved Unreserved Total General Fund All Other Governmental Funds Reserved Unreserved, reported in: Special revenue funds Capital project funds Debt service funds (1) Total all other governmental funds 1997 9,825 21,171 30,996 12,107 11,517 72,097 2,498 98,219 1998 10,346 31,498 41,844 27,255 15,016 87,336 433 $ 130,040 1999 2000 12,893 39,221 52,114 30,938 18,639 102,038 291 $ 151,906 14,324 42,179 56,503 27,658 20,458 108,866 (11,092) 145,890 2001 11,746 58,857 70,603 36,030 19,709 131,382 (11,586) 175,535 $80,000 $60,000 $40,000 $20,000 $0 General Fund Balance (in thousands) E3 Reserved H Unreserved 1-997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Fiscal Year Source: City of Carlsbad Comprehensive Annual Financial Report. (1) Effective July 1, 1999, the City changed the manner in which it accounted for advances from the City to the Redevelopment Agency, and began recording such advances as a liability on the balance sheet of the funds obligated for the repayment. (2) A $35 million transfer was made from the General Fund to the General Capital Construction Fund to assist in the construction of four large projects. 120 2002 2003 (2) 2004 2005 2006 12,006 $ 12,794 $ 27,917 $ 44,996 $ 45,131 76,149 58,343 56,141 54,400 61,494 8,155 $ 71,137 $ 84,058 $ 99.396 $ 106,625 $ 37,776 $ 44,265 $ 54,414 $ 49,583 $ 38,000 20,542 21,011 29,841 30,031 30,024 128,869 171,227 171,194 206,711 221,393 (10,371) (10,449) (9,789) (11,317) (11,681) $ 176,816 $ 226,054 $ 245,660 $ 275,008 $ 277,736 121 CITY OF CARLSBAD Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (dollars in thousands) 1997(1)1998 1999 2000 2001 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 Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Proceeds of advances Proceeds of debt Total other financing sources (uses) Net change in fund balances Debt service as percentage of noncapital expenditures (2,3) $ 41,512 $ 14,650 4,235 10,708 318 6,075 2,042 15,451 220 3,434 98,645 49,010 - - - - 13,556 992 2,385 65,943 32,702 3,530 (3,525) 539 - 544 $ 33,246 $ 51,381 $ 20,296 4,883 7,615 331 8,632 1,919 16,610 220 1,514 113,401 6,748 18,631 7,895 6,673 11,437 23,854 1,663 3,144 80,045 33,356 2,069 (2,097) 579 9,252 9,803 43,159 $ 57,508 $ 17,802 3,827 6,805 936 8,925 1,934 45,763 350 1,544 145,394 6,784 21,928 8,636 7,541 12,690 52,107 825 1,645 112,156 33,238 2,603 (2,603) 589 589 33,827 $ 62,268 $ 14,094 3,321 5,749 840 10,496 2,007 14,733 561 1,183 115,252 7,383 21,799 11,538 9,088 13,823 39,543 821 1,660 105,655 9,597 15,533 (15,533) - 332 332 9,929 $ 70,147 14,286 3,409 6,427 889 20,385 2,148 15,982 312 2,260 136,245 9,022 23,627 9,352 11,571 14,402 22,067 1,029 1,814 92,884 43,361 9,544 (9,651) - 91 (16) 43,345 Source: City of Carlsbad Comprehensive Annual Financial Report. (1) In Fiscal Year 1997-98, the City went through a major reorganization. At this time, five major service areas were created, as reflected in Fiscal Year 1997-98 and thereafter. (2) Noncapital expenditures are total expenditures less capital outlay (to the extent capitalized for the Government-wide Statement of Net Assets) and expenditures for capitalized assets included within the functional expenditure categories. (3) Information not available for years prior to GASB 34 implementation. 122 2002 2003 2004 2005 2006 $ 71,528 $ 14,267 1,998 7,751 947 18,700 2,284 11,251 210 2,386 131,322 8,415 25,598 10,316 12,449 15,404 37,503 1,133 1,694 112,512 18,810 11,833 (11,816) 6 23 $ 18,833 $ 74,156 $ 19,775 2,043 10,059 923 14,802 2,815 14,547 149 2,349 141,618 8,805 26,798 11,799 13,374 18,177 26,410 1,672 1,628 108,663 32,955 47,846 (48,581) _ (735) 32,220 $ 79,533 $ 22,506 2,329 9,899 1,092 3,902 2,735 23,682 141 1,543 147,362 9,745 30,799 13,644 13,915 18,045 26,406 1,214 1,466 115,234 32,128 8,729 (8,329) _ 400 32,528 $ 84,065 5 24,245 3,393 10,433 1,084 10,741 2,700 49,446 164 1,107 187,378 12,113 33,819 14,319 14,744 18,737 46,420 1,040 1,501 142,693 44,685 10,228 (10,228) _ - 44,685 $ ; 94,862 13,027 2,504 11,038 1,178 10,387 2,639 25,365 130 2,077 163,207 16,311 36,365 14,300 15,637 20,327 47,032 1,037 1,599 152,608 10,599 11,685 (12,334) _ (649) 9,950 3.74%4.01%3.01%2.65%2.48% 123 CITY OF CARLSBAD General Governmental Tax Revenues by Source Last Ten Fiscal Years (in thousands) Property Fiscal Year Tax * 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 $ 22,126 26,249 26,688 27,335 30,656 28,512 31,412 33,949 35,650 43,936 Sales and Use Taxes $ 12,495 14,817 17,129 19,493 21,197 21,661 25,543 25,571 (1) 26,331 27,294 Transient Occupancy Taxes $ 3,675 6,046 7,010 8,333 9,269 8,533 (3) 8,387 8,814 10,072 11,513 Real Business Property Franchise Taxes $ 1,513 (6) 1,714 1,954 2,592 3,916 (4) 7,495 (5) 3,730 5,027 5,683 5,429 License Transfer Taxes $ 1,510 $ 1,604 1,738 1,864 2,300 2,440 2,305 2,872 (2) 2,890 3,040 Total Tax Taxes Misc. Taxes Revenue 466 $ 1 836 1 1,081 1 993 1 1,095 1 1,193 1 1,127 1 1,587 1 1,646 1 1,906 1 ,237 $ 43,022 ,719 52,985 ,908 57,508 ,658 62,268 ,714 70,147 ,694 71,528 ,652 74,156 ,713 79,533 ,793 84,065 ,744 94,862 Change 1997-2006 99%118%213%259% Total General Governmental Tax 101%. Revenues 309% 41%. 120%. (in thousands) 50,000 - 40,000 - 30,000 - 20 000 - 10,000 - _^-*— t*^ JHw-"** »-— *^ • , ^,-i^^BBW^ -- l^^m 1997 1998 — • *^ — •— ^*^ — — =•=* 1999 2000 ^<*£^1 2001 2002 Fiscal Year ^*-~-^~~~~*^ ^m •— *^»*es£Z"— 2003 2004 . . — IT - — B -* 1 — - — — 1ji, 2005 2006 + Property Tax —•—Sales and Taxes — — Transient Use Occupancy Taxes Other Source: City of Carlsbad. * Includes Vehicle License Fees (VLF) in lieu, property tax increment, low/moderate housing, set aside taxes and CFD#1 special taxes. (1) Vehicle License Fee revenue began decreasing in 2004-05 because the City began receiving property taxes in lieu of a portion of the VLF. (2) This reflects the results from hiring a company to assist in the identification of unlicensed businesses, and the recovery of non-reported and under-reported business license taxes. (3) The City modified the methodology used in accruing sales tax revenue for the year, in accordance with Generally Accepted Accounting Principles (GAAP). (4) The drop in transient occupancy tax was the result of the impacts from September 11, 2001 on tourism. (5) This was the result of higher natural gas prices paid by consumers in calendar year 2000. (6) Reflects the opening of the Four Seasons Resort at Aviara. 124 CITY OF CARLSBAD Water and Sewer Rates Last Ten Fiscal Years Water Sewer Monthly Base Fiscal Year Charge Unit (1) Rate 1997 $9.25 $1.70 $15.00 1998 9.25 1.70 15.00 1999 9.25 1.70 15.00 2000 9.25 1.60 15.00 2001 9.25 1.60 13.00 2002 9.25 1.60 13.00 2003 9.25 1.60 13.00 2004 9.25 1.60 13.00 2005 9.25 1.60 13.00 2006 9.25 1.60 13.50 Source: City of Carlsbad. Note: Rates shown are for on 5/8" meter, which is the standard household meter size. (1) One unit of water equals 748 gallons. 125 CITY OF CARLSBAD Assessed Value of Taxable Property (dollars in millions) Fiscal Year 1997 3 1998 1999 2000 2001 2002 2003 2004 2005 2006 15,000 n 10,000 5,000 Residential Commercial Industrial Property Property Property 4,458 $ 688 $ 552 4,723 766 631 5,315 954 713 6,418 1,036 854 7,367 1,192 1,282 8,543 1,310 1,341 9,612 1,413 1,469 10,700 1,516 1,231 11,984 1,749 1,266 13,619 1,962 1,398 Taxable (in [LFL.FLlLlt/1 Exemptions and Other Net Assessed Total Property Total Direct Taxable Valuation Tax Revenue Tax Rate (2) Property (1) $ 307 $ 6,005 $ 11.238 0.187% 304 6,424 12.410 0.193% 410 7,392 14.196 0.192% 583 8,891 16.762 0.189% 649 10,490 19.658 0.187% 657 11,851 22.286 0.188% 516 13,010 24.974 0.192% 856 14,303 26.960 0.188%) 742 15,741 30.220 0.192% 729 17,708 33.751 0.191% Assessed Value millions) n 1 •-i •: n Un -m-i 1997 1998 1999 2000 2001 2002 2003 2004 2005 —i Q Residential Property • Commercial Property H— 1 D Industrial Property 2006 Fiscal Year Source: County of San Diego, California Auditor and Controller. Notes: Information about estimated actual value of property is not available; the assessed value is based on the most recent sales value and includes secured property only. (1) Other property includes farm, rural, institutional, recreational, state secured property, unsecured property, personal property and fixtures, and fixtures. (2) The total direct tax rate was calculated by dividing the total property tax revenue by the total taxable value. (3) In Fiscal Year 2003-04, there was an increase in the assessed valuation of the power plant subsequent to its purchase by Cabrillo Power. 126 CITY OF CARLSBAD Principal Property Taxpayers Current Year and Nine Years Ago 2006 1997 Taxpayer Greystone Homes Inc Aviara Resort Associates KSL La Costa Resort Cpg Carlsbad Holdings LLC Continuing Life Prentiss Properties Borders, Inc. Legoland California, Inc. H.G. Fenton Company Pulte Home Corp Callaway Golf Company San Diego Gas & Electric Upper Deck Company Real Estate Collateral Mgmt. Co. Puritan-Bennett Corporation Plaza Camino Real Shopping Ctr. Aviara Land Associates LTD Hughes Aircraft Company Vons Companies, Inc. Total Net assessed valuation Taxable Assessed Value $ 144,779,270 125,256,000 124,657,356 105,346,743 93,828,207 76,456,459 75,213,933 71,000,000 68,998,021 68,322,346 - - - - - - - - - $ 953,858,335 $ 17,707,928,440 Rank 1 2 3 4 5 6 7 8 9 10 Percentage of Total City Taxable Assessed Value (1) 0.82% 0.71% 0.70% 0.59% 0.53% 0.43% 0.42% 0.40% 0.39% 0.39% - - - - - - - - - 5.39% Taxable Assessed Value 0 0 109,176,067 0 - - - - - - 63,171,578 298,803,993 59,670,485 48,680,000 33,023,600 31,405,087 26,022,165 23,412,450 23,090,328 $ 716,455,753 $ 6,005,069,504 Rank 2 3 1 4 5 6 7 8 9 10 Percentage of Total City Taxable Assessed Value (1) 0 0 1.82% 0 - - - - - - 1.05% 4.98% 0.99% 0.81% 0.55% 0.52% 0.43% 0.39% 0.38% 11.5% Source: County of San Diego Office of the Auditor and Controller. 127 CITY OF CARLSBAD Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Total Current Levy(l) 12,010,693 13,601,772 15,717,747 18,306,661 21,551,102 24,108,706 26,709,097 29,382,034 39,785,892 (3) 44,915,159 Property T Last Total Current "/ Collections (2) ( 11,265,012 12,916,890 14,995,541 17,472,632 20,662,671 23,237,535 25,674,795 28,154,961 38,162,630 43,053,536 ax Levies & Collections Ten Fiscal Years it of Levy Collected 93.8% 95.0% 95.4% 95.4%- 95.9% 96.4% 96.1% 95.8% 95.9% 95.9% 50 40 H I 30 - § 20- 10 0 D Total Current Levy (1) 11 Total Current Source: County of San Diego Office of the Auditor and Controller. (1) Includes real property transfer taxes, homeowner exemptions and Proposition 172 public safety sales taxes. (2) Total Current Collections includes prior year delinquencies and adjustments; delinquency collections by year are not available. (3) In Fiscal Year 2004-05, the City received $4.9 million in property tax payments in lieu of vehicle license fees. 128 129 CITY OF CARLSBAD Ratios of Outstanding Debt by Type Last Ten Fiscal Years (dollars in thousands except per capita) Governmental Activities Fiscal Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Bonds / Special Debt $ 21,185 14,740 14,460 14,170 13,865 13,540 13,200 12,840 12,460 12,065 Certificates of Participation $ 6,615 6,595 6,075 5,570 5,055 4,515 3,950 3,360 2,740 2,105 Capital Leases $ 2,512 2,399 633 904 888 791 179 79 7 1 Loans Payable $ 990 875 750 620 480 330 170 - - - Outstanding Debt per Capita 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) In Fiscal Year 2005-06, the State Water Resources Control Board issued a low interest loan for the Carlsbad Water Recycling Facility for $9.5 million. (2) Percentage of personal income is calculated using personal income for the prior year. Source: County of San Diego, California Auditor and Controller. Information about estimated actual value of property is not presently available and therefore not presented on these statements. 130 Business-Type Activities Accrued Assessments $ 2,375 1,985 1,252 951 789 621 443 257 - - Certificates of Participation $ 8,160 6,360 5,405 4,410 3,370 2,295 1,175 - - - Installment Purchase Agreements $ 11,080 10,675 10,250 9,810 9,350 8,870 8,375 7,855 7,305 6,730 Loan Payable (1) $ 2,097 1,999 1,897 1,792 1,705 1,574 1,460 1,343 1,223 10,592 Total $ 55,014 45,628 40,722 38,227 35,502 32,536 28,952 25,734 23,735 31,493 Percentage of Personal Income (2) - - - - 0.69% 0.60% 0.53% 0.47% 0.42% 0.53% Per Capita $ 819.88 655.57 558.60 488.54 426.49 369.22 319.41 277.62 249.46 319.38 131 132 CITY OF CARLSBAD Schedule of Direct and Overlapping Bonded Debt Current Fiscal Year 2005-06 Assessed Valuation: Redevelopment Incremental Valuation: Adjusted Assessed Valuation: OVERLAPPING TAX AND ASSESSMENT DEBT: Metropolitan Water District Carlsbad Unified School District Carlsbad Unified School District CFD No. 1 Oceanside Unified School District Vista Unified School District Encinitas Union School District San Marcos Unified School District School Facility Improvement District San Marcos Unified School District CFD No. 4 San Marcos Unified School District CFD No. 5 San Dieguito Union HS District CFD No. 94-1 San Dieguito Union HS District CFD No. 94-2 San Dieguito Union HS District CFD No. 95-2 San Dieguito Union High School District combined CFD Palomar Pomerado Hospital District Olivenhain Municipal Water District, Assess. Dist. No. 96-1 City of Carlsbad CFD No. 3, LA. No. 1 City of Carlsbad 1915 Act Bonds TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Diego County General Fund Obligations San Diego County Pension Obligations San Diego City Superintendent of Schools General Fund Obligations Mira Costa Community College Dist Certificates of Participation Palomar Community College District General Fund Obligations Carlsbad Unified School District General Fund Obligations San Marcos Unified School District General Fund Obligations Encinitas Union School District Certificates of Participation Other School District Certificates of Participation City of Carlsbad General Fund Obligations TOTAL DIRECT AND OVERLAPPING GEN FUND DEBT COMBINED TOTAL DEBT (1) Percentage of overlapping agency's assessed valuation located within boundaries of the city, obligations. Ratios to 2005-06 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.12% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($2,105,000) 0.01% Combined Total Debt 2.06% Source: California Municipal Statistics, Inc. $ 17,965,430,228 257,501,788 $ 17,707,928,440 Total Debt 6/30/2006 $ 389,565,000 19,985,811 8,445,000 96,920,000 108,749,882 22,506,805 18,328,019 14,115,000 25,795,000 278,485 20,366,850 839,613 48,440,000 80,000,000 19,335,000 11,490,000 73,370,000 $ 958,530,465 $ 389,852,147 1,231,282,916 12,495,000 4,760,000 8,425,000 56,330,000 5,910,000 1,410,000 10,140,000 2,105,000 $ 1,722,710,063 $ 2,681,240,528 Percent Applicable (1) 1.223% 97.627% 100.000% 0.006% 0.115% 30.607% 37.048% 23.403% 100.000% 100.000% 98.080% 12.035% 30.399% 2.204% 22.168% 100.000% 100.000% 6.293% 6.293% 6.293% 26.708% 2.816% 97.627% 31.771% 30.607% Various 100.000% City's Share of Debt 6/30/06 $ 4,764,380 19,511,548 8,445,000 5,815 125,062 6,888,658 6,790,164 3,303,333 25,795,000 278,485 19,975,806 101,047 14,725,276 1,763,200 4,286,183 11,490,000 73,370,000 $ 201,618,957 $ 24,533,396 77,484,634 786,310 1,271,301 237,248 54,993,289 1,877,666 431,559 9,802 2,105,000 $ 163,730,205 $ 365,349,162 133 CITY OF CARLSBAD Direct and Overlapping Debt Last Nine Fiscal Years (rate per $1,000 of assessed value) OVERLAPPING TAX AND ASSESSMENT DEBT: San Diego County Water Authority Metropolitan Water District Carlsbad Unified School District Carlsbad Unified School District Lease Tax Obligations Carlsbad Unified School District CFD No. 1 Oceanside Unified School District Vista Unified School District Encinitas Union School District Encinitas Union School District Lease Tax Obligations San Marcos Unified School District School Fac. Improv. Dist. Tri-City Hospital District Palomar Pomerado Hospital District Leucadia County Water District and I.D. No. 1 Vallecitos Water District and I.D. No. 6 San Marcos Unified School District CFD No. 4 San Marcos Unified School District CFD No. 5 San Dieguito Union HS District CFD No. 1 San Dieguito Union HS District CFD No. 94-1 San Dieguito Union HS District CFD No. 94-2 San Dieguito Union HS District CFD No. 95-2 San Dieguito Union HS District combined CFD Olivenhain Municipal Water District, I.D. No. 1 Olivenhain Municipal Water District, Assess. Dist. No. 96-1 City of Carlsbad CFD No. 3,1.A. No. 1 City of Carlsbad 1915 Act Bonds 1998 0.068 0.696 4.009 1.076 1.778 1.032 0.226 1.023 0.012 0.004 0.017 0.683 4.702 1999 0.054 0.691 3.502 0.729 1.638 0.941 0.174 0.785 1.752 2.581 0.011 0.611 6.467 2000 0.040 0.611 2.909 0.186 1.315 0.874 0.131 0.682 1.457 1.319 0.005 0.553 4.908 2001 0.028 0.545 2.472 0.187 1.073 0.756 0.138 0.615 1.216 0.029 2.051 0.032 0.465 3.959 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: San Diego County General Fund Obligations San Diego County Pension Obligations San Diego City Superintendent of Schools General Fund Obligations Mira Costa Community College District Certificates of Participation Palomar Community College District General Fund Obligations Carlsbad Unified School District General Fund Obligations San Marcos Unified School District General Fund Obligations San Marcos Unified School District Certificates of Participation Encinitas Union School District Certificates of Participation Other School District Certificates of Participation City of Carlsbad General Fund Obligations 3.958 J 2.935 0.017 0.061 5 3.584 3 2.569 0.016 0.246 5 3.524 ! 2.149 0.014 0.207 S 3.016 1.801 0.012 0.176 1.733 1.514 1.460 5.493 0.103 0.268 0.026 1.027 0.075 0.212 0.028 0.822 0.050 0.166 0.021 0.626 0.031 0.063 0.018 0.482 Note: Data is unavailable for 1997. Source: California Municipal Statistics, Inc. 134 2002 2003 2004 2005 2006 $ o.oiv ; 0.481 2.099 0.122 0.909 0.005 0.678 0.050 0.629 - - 1.059 0.025 1.816 0.028 - 0.400 - 3.287 $ 2.701 3 1.470 0.011 0.145 - 4.843 - 0.015 0.078 0.022 0.381 S 0.008 : 0.398 1.832 0.070 0.789 0.004 0.621 0.020 0.544 - - 1.909 0.023 1.628 0.025 - 0.357 - 2.809 > 2.281 3 3.951 0.010 0.121 - 4.392 - - 0.045 0.021 0.304 S 0.368 1.594 0.033 0.678 0.005 0.530 - 0.524 - - 1.886 0.020 1.456 0.023 0.973 0.314 - 3.145 i 1.881 3 5.528 0.009 0.098 - 3.961 0.143 - 0.037 0.018 0.235 $ 0.319 1.342 - 0.578 0.005 0.471 - 0.448 - - 1.677 0.018 1.298 0.020 0.884 0.279 - 4.848 > 1.855 5.008 0.051 0.085 - 3.557 0.122 - 0.032 0.015 0.174 $ 0.269 1.102 - 0.477 0.007 0.389 - 0.383 0.100 0.187 1.457 0.016 1.128 0.006 0.832 0.242 0.649 4.143 $ 1.385 4.376 0.044 0.072 0.013 3.106 0.106 - 0.024 0.001 0.119 135 CITY OF CARLSBAD Legal Debt Margin Information Last Ten Fiscal Years (dollars in thousands) 1997 1998 1999 2000 2001 Net assessed valuation Debt limit (25% x 15%) Amount of debt applicable to limit: Bonded debt Certificates of participation Obligations under capital leases Total net debt applicable to limit Legal debt margin Total net debt applicable to the limit as a percentage of debt limit $ 6,005,070 225,190 21,185 6,615 113 27,913 $ 197,277 $ 6,424,231 240,909 14,740 6,595 2,399 23,734 $ 217,175 $ 7,391,939 277,198 14,460 6,075 633 21,168 $ 256,030 $ 8,890,683 333,401 14,170 5,570 904 20,644 $ 312,757 $ 10,490,116 393,380 13,865 5,055 888 19,808 $ 373,572 12.4%9.9 7.6%6.2%)5.0% 12.0% - 0 f\C/fl _ A ftCTL „ v <lfc 1997 ' v >• > ' ^, -," - <'• '*' ^ ''i 1998 1999 .>: 2000 Fisca -, • " 2001 lYeai '• • : 2002 -&"• *• "V.-- \ 2003 2004 :-,, 2005 "?••; 2006 Note: Under state finance law, the City's outstanding general obligation debt should not exceed 15 percent (as adjusted) of total assessed property value. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general obligation bonds. 136 2002 11,850,679 444,400 2003 13,009,712 487,864 2004 14,303,050 536,364 2005 15,741,122 590,292 2006 17,707,928 664,047 13,540 4,515 791 18,846 $ 425.554 13,200 3,950 179 17,329 $ 470,535 12,840 3,360 79 16,279 $ 520,085 12,460 2,740 7 15,207 $ 575,085 12,065 2,105 1 14,171 $ 649,876 4.2%3.6%3.0%2.6%2.1% 137 CITY OF CARLSBAD Pledged-Revenue Coverage Last Nine Fiscal Years Sewer Revenue Bonds Debt Service Fiscal Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 Gross Revenues (1) (3) $ 7,531,548 7,897,329 8,421,638 11,089,995 9,438,807 9,342,266 6,854,001 8,557,183 8,306,783 Less: Expenses (2) $ 3,037,634 3,762,721 3,792,799 4,352,912 4,707,348 4,584,265 5,284,357 5,156,663 6,009,282 Net Available Revenue $ 4,493,914 4,134,608 4,628,839 6,737,083 4,731,459 4,758,001 1,569,644 3,400,520 2,297,501 Principal $ 405,000 425,000 440,000 460,000 480,000 495,000 520,000 550,000 575,000 Interest $ 513,179 517,672 500,371 482,027 462,162 441,199 416,256 387,581 361,394 Coverage 4.89 4.39 4.92 7.15 5.02 5.08 1.68 3.63 2.45 Source: City of Carlsbad (1) Include operating and non-operating revenues. (2) Include operating and non-operating expenses, excluding depreciation. (3) Fiscal Year 1997-98 is the first year debt service payments were made. (4) Include recycled water operating and non-operating revenues and fees. (5) Include recycled water operating and non-operating expenses, excluding depreciation. (6) No debt service payments will be made on the outstanding loan until Fiscal Year 2006-07. 138 Recycled Water Loan Debt Service Gross Revenues (4) n/a n/a n/a n/a n/a n/a n/a n/a 2,404,369 Less: Expenses (5) n/a n/a n/a n/a n/a n/a n/a n/a 2,347,032 Net Available Revenue n/a n/a n/a n/a n/a n/a n/a n/a 57,337 Principal (6) n/a n/a n/a n/a n/a n/a n/a n/a - Interest (6) n/a n/a n/a n/a n/a n/a n/a n/a - Coverage n/a n/a n/a n/a n/a n/a n/a n/a - 139 CITY OF CARLSBAD Demographic and Economic Statistics Last Ten Fiscal Years % of S.D. Total County % Change from Avg. Household Year Population Population Previous Year Median Age Size 1996 65,500 2% 1.6% n/a n/a 1997 67,100 3% 2.4% n/a n/a 1998 69,600 3% 3.7% n/a n/a 1999 72,900 3% 4.7% n/a n/a 2000 78,247 3% 7.3% 38.9 2.46 2001 83,242 3% 6.4% 38.9 2.46 2002 88,120 3% 5.9% 39.4 2.48 2003 90,643 3% 2.9% 39.7 2.48 2004 92,695 3% 2.3% 40.0 2.50 2005 95,146 3% 2.2% 40.4 2.47 2006 98,607 3% 4.0% 40.7 2.52 Sources: Population data is from the California Department of Finance and SANDAG. Household and demographic characteristics estimates are from SANDAG Current Estimates, the U.S. Census Bureau Census 2000 and American Community Survey. Income estimates are derived from data from the Bureau of Economic Analysis, U.S. Census Bureau Census 2000. Current population estimates are from SANDAG. Unemployment rate estimates are from the California Employment Development Department. (1) Values in inflation-adjusted 2005 dollars. (2) Per Capita Personal Income and Unemployment Rate are calculated on a calendar year basis, and therefore not yet available for 2006. (3) Personal Income is the total aggregate income that correlates to the total population. 140 Educational Attainment ; High School Graduate n/a n/a n/a n/a 93% n/a n/a n/a n/a 95% n/a % Bachelor's Degree or Higher n/a n/a n/a n/a 46% n/a n/a n/a n/a 47% n/a Personal Income (1,3) (millions) n/a n/a n/a n/a $4,863 $5,087 $5,292 $5,331 $5,552 $5,708 n/a Per Capita Personal Income n/a n/a n/a n/a $62,100 $61,100 $60,100 $58,800 $59,900 $60,200 n/a Unemployment Rate (2) n/a n/a n/a n/a 2.5% 2.7% 3.4% 3.4% 3.1% 2.8% n/a 141 CITY OF CARLSBAD Principal Employers Current Year and Nine Years Ago Manufacturing 2006 Employees Rank % of Total City Employment 1997 Employees Rank Callaway Golf Invitrogen ViaSat Taylor Made Golf - Adidas Golf Company Acushnet Golf The Upper Deck Zimmer Dental Asymtek Dot Hill Systems Beckman Coulter Cobra Golf Inc. II Nellcor Puritan Bennett Corp. Smith & Nephew DonJoy, Inc. Ashworth, Inc. Republic Tool & Mfg. Company Palomar Products 1,637 982 726 650 530 333 321 278 275 263 2 3 4 5 6 7 8 9 10 2.9% 1.8% 1.3% 1.2% 1.0% 0.6% 0.6% 0.5% 0.5% 0.5% 2,250 275 400 700 1,000 1,000 602 400 400 300 10 Non-Manufacturing La Costa Resort & Spa Carlsbad Unified School District LEGOLAND, California Four Seasons Resort - Aviara City of Carlsbad Grand Pacific Resorts Gemological Institute of America Prescription Solutions Eastridge Costco ISIS Pharmaceuticals Plaza Camino Real Car Country Carlsbad Farmers Insurance San Diego Gas & Electric Software of the Month Club Subtotal Employees Total Employees 1,068 950 801 781 660 465 421 420 415 379 12,355 1 2 3 4 5 6 7 8 9 10 1.9% 1.7% 1.4% 1.4% 1.2% 0.8% 0.8% 0.8% 0.7% 0.7% 22.2% 1,050 610 526 450 300 3,000 500 400 300 245 14,708 2 3 4 6 8 1 5 7 9 10 (2) (2) 55,538 Source: Carlsbad Business License Data (2006) and Carlsbad Chamber of Commerce (1997). (1) Total Employee count is not available for 1997. (2) These employers are now tracked by individual store versus combined by mall name. 142 143 CITY OF CARLSBAD Authorized Full and 3/4 Time City Government Employees by Major Service Area Last Nine Fiscal Years 1997 1998 1999 Major Service Area General Government City Council City Manager Communications City Treasurer City Attorney Administration Records Management Information Technology Finance Risk Management Human Resources and Worker's Comp Public Safety Police Fire Community Development Community Development Administration Building Inspection Economic Development Geographic Information Planning Housing and Redevelopment Community Services Library Cultural Arts Recreation & Senior Programs Public Works Administration & Environmental Programs Engineering Services General Services Maintenance & Operations Full and 3/4 Time Authorized Employees Increase/(decrease) over prior year Source: City of Carlsbad Operating Budget Notes: A full-time employee is scheduled to work 2,080 hours per year (including vacation and sick-leave). A 3/4 time employee is scheduled to work 1,560 hours per year (including vacation and sick-leave). In 1997 the City went though a reorganization and Major Service Areas (MSAs) were created. 2000 2001 1.00 8.00 - 0.75 5.00 - 3.60 5.40 19.00 1.00 8.00 115.00 79.00 4.00 11.00 1.00 1.00 24.00 10.00 31.50 3.00 20.00 6.75 38.00 52.75 76.75 525.50 - 1.00 8.00 - 0.75 5.00 - 3.60 6.40 19.00 1.00 8.00 122.00 79.00 4.75 13.00 1.00 1.00 24.00 10.00 32.50 3.00 21.50 7.00 34.00 50.75 76.75 533.00 7.50 1.00 9.00 - 0.75 5.00 - 4.00 13.00 19.00 2.00 8.00 128.00 79.00 4.75 13.00 1.00 2.00 24.00 10.00 32.25 3.00 21.50 7.25 37.00 47.25 81.25 553.00 20.00 1.00 6.75 - 0.75 6.00 2.00 8.00 14.00 26.00 2.00 9.00 134.00 79.75 4.75 13.00 1.00 2.00 24.00 10.00 40.75 4.00 22.00 3.00 49.00 51.75 70.00 584.50 31.50 1.00 6.00 1.00 0.75 6.00 2.00 8.00 15.00 27.00 2.00 9.00 138.00 79.75 3.75 13.00 1.00 2.00 24.00 10.00 41.75 4.00 27.00 3.00 48.70 55.75 70.30 599.75 15.25 144 2002 2003 2004 2005 2006 1.00 6.00 1.00 0.75 7.00 2.00 8.00 15.00 27.00 2.00 10.00 143.00 79.75 3.00 13.00 1.00 2.00 25.00 10.00 46.25 4.75 30.00 3.50 58.70 57.25 70.30 627.25 27.50 1.00 6.00 2.75 0.75 7.00 2.00 8.00 16.00 28.00 2.00 10.00 150.00 79.75 3.00 13.00 1.00 2.00 25.00 10.00 48.00 4.75 33.00 6.00 57.00 57.75 73.00 646.75 19.50 1.00 6.00 2.75 0.75 7.00 2.00 8.00 16.00 28.00 2.00 10.00 148.00 79.75 3.00 13.00 1.00 2.00 25.00 10.00 48.00 5.00 33.00 6.00 57.00 58.75 73.00 646.00 (0.75) 1.00 6.00 2.75 0.75 7.00 2.00 8.00 16.00 28.00 2.00 10.00 148.00 79.75 3.00 13.00 1.00 2.00 25.00 10.00 48.00 5.00 32.50 14.20 51.10 82.85 47.10 646.00 - 1.00 6.00 2.75 0.75 7.00 2.00 8.00 16.00 27.00 2.00 10.00 151.00 79.75 4.00 13.00 1.00 2.00 24.00 10.00 48.00 5.00 32.50 14.20 51.60 91.95 49.50 660.00 14.00 145 CITY OF CARLSBAD Operating Indicators by Function/Program Last Two Fiscal Years 2005 2006 General Government Number of recruitments processed Number of new hires and promotions Business licenses processed Public Safety Police Calls for service Average priority one response (minutes) Cases 67 50 8,507 74,546 6.8 10,059 83 135 8,955 79,855 6.3 10,605 Fire Inspections - new construction Emergency responses Fires extinguished Community Development Affordable housing units completed Financial assistance to affordable housing projects Residential building permits issued Code enforcement inspections Building inspections conducted Final inspections (dwelling units) Planning applications considered Community Services Library - total material circulation Library - patron visits Arts - number of events Arts - attendance of events Recreation - youth sports participants Recreation - adult sports participants Recreation - enrichment classes held Recreation - enrichment class enrollees Recreation - special events participants Public Works Streets Road miles - overlay or slurry seal Trees trimmed Carlsbad Municipal Water District Potable water deliveries - acre feet Average daily consumption (gal/single family) Water customers 6,705 220 439 $1,600,000 1,745 5,600 53,267 1,702 197 1,282,974 731,326 65 50,000 1,100 5,100 1,650 16,700 2,000 28.20 1,767 19,172 363 83,400 7,245 218 110 $1,440,000 948 5,600 51,000 1,440 162 1,237,311 898,511 62 65,000 1,150 5,150 1,650 16,700 3,500 32.30 1,800 19,885 398 83,800 Sewer Sewage pumped (mgd) Annual flow (mgd) Sewer customers 7.36 2,688 62,570 6.62 2.416 64,095 Source: City of Carlsbad 146 CITY OF CARLSBAD Capital Asset Statistics Last Two Fiscal Years 2005 2006 Community Services Number of parks Acres of parks Acres of open opace Miles of trails Number of pools Number of community centers Number of libraries Number of materials in library collections 39 295 625 13 1 2 2 373,998 39 295 625 27 1 2 2 380,000 Public Safety Fire Protection Number of stations Number of fire trucks Number of ambulances Number of other fire vehicles 6 11 4 11 6 11 4 11 Police Protection Number of patrol and other vehicles Number of motorcycles 85 13 82 13 Public Works Carlsbad Municipal Water District Number of water connections Miles of lines and mains 25,900 434 27,000 488 Sewer Number of sewer connections Miles of sewers 20,500 254 21,839 282 Streets Miles of streets Number of street lights Number of traffic signals 295 6,445 138 338 6,786 152 Source: City of Carlsbad 147 148