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2014-CAFR ,r r tu t,a-� nf c ii,nfi,ii . �R kr ' it qC ■ ■ r a i..,or. n � a 1 r l 'e. 1 r Jy :1 . r, - -_-�:; r :,=rti . ate. •, v_�jdtG6dtlLGfS P�GrGtGiZ ;R ti it • 4. %oom rehensome AnnuM RnancW Report ' 201 RscW Year Faded Jane 30 City of Encinitas _ - California T Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 Issued by the Finance Department 505 South Vulcan Avenue . Encinitas, CA 92024 . 760-633-2600 • www.encinitasca.gov ABOUT THE CITY OF ENCINITAS The City of Encinitas was incorporated as a general law city in 1986, merging the existing communities of New and Old Encinitas, Cardiff-by-the-Sea, Leucadia, and Olivenhain. The City of Encinitas has a population of approximately 61,000 and is located along six miles of Pacific coastline in the northern half of San Diego County. Approximately 21 square miles in area, Encinitas is characterized by coastal beaches, cliffs, flat-topped coastal areas, steep mesa bluffs, and rolling hills. Encinitas is the center of a significant flower growing industry and is often referred to as the Flower Capital of the World. CITY COUNCIL KEY STRATEGIC PLAN DOCUMENT ELEMENTS: VISION STATEMENT "Encinitas is five unique communities thriving as ONE great city." MISSION STATEMENT "Preserve, protect and provide innovative services that enhance the quality of life for residents, visitors, businesses and our communities." ABOUT THE COVERS On the front cover is a collage representing public art located in Encinitas. On the back cover is a photo of the Self Realization Fellowship (SRF) Garden with a view of the Pacific Ocean. Photography: Front cover photography are courtesy of the following: San Diego Botanical Garden by Rachel Cobb and artwork by James Hubbell; photo of Magic Carpet Ride by Union Tribune's Crissy Pascual and artwork by Matthew Antichevich; photo of Encinitas Child by North County Times and artwork by Manuelita Brown; and photo of the Swami's Easter Island Head by city staff and artwork by Tim Richards. The back cover photography of the Self Realization Fellowship (SRF) Garden is courtesy of Jan Thompson. Copies of this report are available at the City of Encinitas, 505 South Vulcan Avenue, Encinitas, California 92024. City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2014 TABLE OF CONTENTS Page INTRODUCTORY SECTION Tableof Contents...........................................................................................................................................i TransmittalLetter ..........................................................................................................................................v Listof City Officials........................................................................................................................................x OrganizationChart.......................................................................................................................................xi Certificate of Achievement for Excellence in Financial Reporting - GFOA.................................................. xii FINANCIAL SECTION Independent Auditors' Report.................................................................................................................... 1 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ....................................................................... 5 Management's Discussion and Analysis (Required Supplementary Information - Unaudited)........... 7 Basic Financial Statements: Government-Wide Financial Statements: Statementof Net Position.................................................................................................................23 Statement of Activities and Changes in Net Position .......................................................................24 Fund Financial Statements: Governmental Fund Financial Statements: BalanceSheet ............................................................................................................................31 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position................................................................32 Statement of Revenues, Expenditures and Changes in Fund Balances....................................33 Reconciliation of the Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position...............................................................34 Proprietary Fund Financial Statements: Statementof Net Position ...........................................................................................................36 Statement of Revenues, Expenses and Changes in Net Position..............................................38 Statementof Cash Flows............................................................................................................40 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position ...........................................................................................47 Notes to Basic Financial Statements..................................................................................................49 City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2014 TABLE OF CONTENTS (Continued) Page FINANCIAL SECTION (Continued): Required Supplementary Information: BudgetaryInformation ............................................................................................................................. 97 Budgetary Comparison Schedule: GeneralFund..................................................................................................................................... 98 Schedules of Funding Progress: CalPERS ........................................................................................................................................... 99 Other Post Employment Benefits ................................................................................................... 100 Supplementary Information: Non-Major Governmental Funds: CombiningBalance Sheet.............................................................................................................. 104 Combining Statement of Revenues, Expenditures and Changes in Fund Balances...................... 106 Statement of Revenues, Expenditures and Changes in Fund Balances— Budget and Actual: Infrastructure Improvements Special Revenue Fund ............................................................... 108 Grants and Housing Special Revenue Fund ............................................................................ 109 Development Impact Special Revenue Fund ........................................................................... 110 Lighting and Landscaping Special Revenue Fund ................................................................... 111 Internal Service Funds: Combining Statement of Net Position............................................................................................. 114 Combining Statement of Activities and Changes in Net Position ................................................... 115 Combining Statement of Cash Flows ............................................................................................. 116 Fiduciary Funds: Combining Statement of Changes in Assets and Liabilities—Agency Funds ................................ 118 STATISTICAL SECTION Index........................................................................................................................................................... 119 Financial Trends: Net Position by Component— Last Ten Fiscal Years........................................................................... 120 Changes in Net Position — Last Ten Fiscal Years ................................................................................ 122 Fund Balances of Governmental Funds — Last Ten Fiscal Years ........................................................ 126 Changes in Fund Balance of Governmental Fund — Last Ten Fiscal Years......................................... 128 Revenue Capacity: Assessed Value and Estimated Actual Value of Taxable Property— Last Ten Fiscal Years ............... 130 Principal Secured Property Tax Payers— Last Ten Fiscal Years......................................................... 131 General Property Tax Levies and Collections— Last Ten Fiscal Years ............................................... 132 Direct and Overlapping Property Tax Ratios — Last Ten Fiscal Years ................................................. 134 ii City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2014 TABLE OF CONTENTS (Continued) Page STATISTICAL SECTION (Continued): Debt Capacity: Ratios of Outstanding Debt by Type — Last Ten Fiscal Years.............................................................. 138 Ratios of General Bonded Debt Outstanding — Last Ten Fiscal Years ................................................ 140 Schedule of Direct and Overlapping Bonded Debt............................................................................... 141 Property Tax Levies and Collections — Last Ten Fiscal Years ............................................................. 142 Historical Debt Service Coverage — Last Ten Fiscal Years.................................................................. 144 Demographic and Economic Information: Demographic and Economic Statistics — Last Ten Calendar Years..................................................... 145 Taxable Sales by Category— Last Ten Fiscal Years............................................................................ 146 Operating Information: Full-Time and Part-Time City Employees by Function — Last Six Fiscal Years.................................... 147 Operating Indicators by Function — Last Six Fiscal Years.................................................................... 148 Capital Assets Statistics by Function — Last Eight Fiscal Years........................................................... 149 Cardiff Sanitary Division: Rate Schedule for Annual Sewer Charges........................................................................................... 152 Historical Service Charges Billed ......................................................................................................... 153 TenLargest Customers........................................................................................................................ 154 Historical Service Connections............................................................................................................. 154 San Dieguito Water District: Scheduleof Water Rates...................................................................................................................... 156 Bi-Monthly Meter Service Availability Charges..................................................................................... 156 Historic Potable Water System Revenues - Last Ten Fiscal Years...................................................... 157 Historic Recycled Water System Revenues - Last Ten Fiscal Years................................................... 157 Summary of Water Production by Source - Last Ten Fiscal Years ...................................................... 158 Summary of Water Deliveries by Source - Last Ten Fiscal Years........................................................ 158 Ten Largest Water Customers ............................................................................................................. 159 Total Service Connections by Category - Last Ten Fiscal Years ......................................................... 159 iii TRANSNUTTAL LETTER ■INTRODUCTORY SECTION December 5,2014 Honorable Mayor,City Council and Citizens of the City of Encinitas,California, We are pleased to present the fiscal year 2013-14 Comprehensive Annual Financial Report (CAFR) for the City of Encinitas and its related entities. This report was prepared by the City's Finance Department to assist those interested in understanding the financial condition and results of the operations of the City for the fiscal year ended June 30, 2014 and includes financial information for the City of Encinitas, the San Dieguito Water District, the Encinitas Housing Authority, and the Encinitas Public Financing Authority. This CAFR fulfills a number of different reporting requirements, including Federal and State law and the covenants of many of the City's long-term debt issues. It has been prepared in conformance with generally accepted accounting principles for local governments, and is being submitted to the Government Finance Officers Association for consideration of an award for excellence in financial reporting. Management assumes full responsibility for the completeness and reliability of the information contained in this report. To the best of our knowledge, the data is accurate in all material respects and is reported in a manner designed to fairly present the financial position and results of the operations of the City,and that all relevant and material disclosures are included. Management's Discussion&Analysis (MD&A) provides a narrative introduction, overview, and analysis of the basic financial statements and can be found immediately following the independent auditor's report.MD&A complements this letter of transmittal and should be read in conjunction with it. CITY PROFILE AND BACKGROUND The City of Encinitas was incorporated in October 1986 as a general law city, bringing together the communities of New and OId Encinitas, Cardiff-by-the-Sea, Leucadia, and Olivenhain. Encinitas is located in northern San Diego County approximately 25 miles north of the City of San Diego on the Southern California coast. The City with an estimated population of.d 1,000 covers approximately 21 square miles and is predominately residential with two major commercial corridors. GOVERNANCE The City is governed by a five-member City Council under the Council-Manager form of government. The City Council is elected at large, on staggered four-year terms. The.Mayor is selected annually by a majority of the City Council. Beginning with the November 2414 election the Mayor will be elected at large every two years. The City Council appoints the City Manager and City Attorney. All other staff positions are appointed by the City Manager or his designee. The City Council acts as the Board of Directors for the San Dieguito Water District, the Encinitas Housing Authority,and the Encinitas Public Financing Authority. v TRANSMITTAL LETTER o INTRODUCTORY SECTION MUNICIPAL SERVICES The City provides a full range of municipal services such as: Law enforcement(San Diego County Sheriff) Fire and paramedic services Marine safety Planning and development services Water services Wastewater services Parks and trails Recreation services Street maintenance and construction Traffic control CITY FACILITIES City Hall is located on Vulcan Avenue between D and E Streets, adjacent to the Encinitas Train Station and downtown. The City maintains a full-service Public Library, which is located just above City Hall overlooking downtown Encinitas and the Pacific Ocean. The City also maintains an active Community and Senior Center located at Encinitas Boulevard and Balour Drive, the 44 acre_Encinitas Community Park located 425 Santa Fe Drive and Moonlight Beach located at 400 B Street which attracts about 3 million visitors annually. There are six fire stations located throughout the city, as well as one sheriff substation which is owned and operated by the County of San Diego. The corporate yard for both the City of Encinitas and San Dieguito Water District is located near Encinitas Boulevard and Calle Magdalena. BUDGETING OVERVIEW The City develops and adopts both an operating and a capital budget on a two-year budget cycle. Amounts are appropriated for the first year only, with the amounts for the second year subject to revision before appropriation. Any changes to the operating or capital budgets must be approved by the City Council. The City also publishes a six-year capital improvement/work project program and financial plan which is generally updated bi-annually. This document provides management and the City Council with long-term financial planning information and tools. New in FY 2013-14 online access to detailed City financial information was made available through the City's website. This web based tool allows the user to sort and filter City financial information in order to obtain the specific financial information desired. This tool may be found by selecting the "Open Finance" page on the City's website ht[ps://encihitasea.oLLengov.conVtransi2arenc FACTORS AFFECTING FINANCIAL CONDITION OF THE CITY Local Economy—The University of San Diego's Burnham Moores Center for Real Estate releases on a monthly basis it's analysis of leading economic indicators for San Diego County. The economic indicators used to calculate the index include residential building permits issued,initial claims for unemployment insurance, local stock prices, Iocal consumer confidence, online help wanted advertising and the national index of leading economic indicators. In the twelve months ended August 2014 the index has increased from 127.1 to 128.5 or 1.1%. Also the San Diego Regional Economic Development Council publishes an Economic Snapshot each quarter that analyzes key economic metrics. The July 2014 report analyzes data through April 2014. Highlights from this report include the San Diego County unemployment rate dropping 1.1% Vi TRANSMITTAL LETTER• INTRODUCTORY SECTION from 7.2% to 6.1% in the year ended city of Encinitas Sales Value History April 2014. In the same year Sari Diego si.OW,000 1•4W metropolitan area employment grew WmrQ00 1,N0 —Full 2.2% ranking 11`h of the 25 most g8A000 -- vame populous U.S. metro areas. Locally in nm,noo – 1.000 sales Encinitas as shown in the graph to the $600`000 S00 _'Median right, median and average home prices ss0o,m0 600 ?nre sioo.nao in Encinitas have bounced back to pre- � —Avp recession levels although sales volume is $200,00 PTire still below pre-recession levels, zlocy�oo - '°0 $0 Property and Scales Tax - Property tax and sales tax revenue represent approximately 80% of the City's total General fund revenue. Since fiscal year 2009110 property tax revenue has increased 10% and sales tax revenue has increased 29%. Other revenue sources have remained relatively stable, although revenues from the State of California are still considered to be vulnerable to State actions. S'O'W S35,000,10 Financial Strength and Sustcainability - The City of Encinitas is well positioned to weather economic fluctuations and has $2510001000 – been evaluated and rated by $2a,0w,mo – m internationally recognized third party ■saiu:�� reviewers. In 2413 Standard & Poor's $15,00W0,000– Rating Services (S&P) assigned its S140m,000 – `AAA' issuer credit rating (ICR) to the z,woxo City of Encinitas. According to S&P the `AAA' ICR reflects the City's: '.App O 2010 111 2011/12 2OLM3 223/14 Large and diverse tax base, which benefits from access to the broader San Diego County economy; • Very strong income levels; * Very strong financial performance and fund balance positions, strengthened by an official policy of maintaining a contingency reserve equal to 20% of expenditures; and • Low to moderate debt levels Under S&P's financial management assessment (FMA) methodology the City of Encinitas is considered "strong". An FMA of "strong" indicates that financial practices are strong, well imbedded,and likely sustainable. The City had approximately $47.5 million of general fund bonded debt and equipment leases outstanding at June 30, 2014,with scheduled payments of principal and interest of$4.6 million in FY2013114. This translates to a debt ratio of 7.8%, which is consistent with the City's goal to maintain a debt service ratio of less than 10%- Development and Maintenance of Financial Reserves – The City has an established financial policy regarding maintenance of adequate financial reserves. The City sets aside 20% of operating expenses for contingencies (unanticipated events that could negatively impact the City's financial condition.) The City has never had occasion to draw on this reserve, since its inception in the early 1990's. The City also maintains a budget stabilization reserve, which was established in 2007 in anticipation of the ensuing recession. This reserve is funded at a minimum of 2% of operating revenues. The city has not had any .need to draw on this reserve, despite the vii TRAW IITTAL LETTER ■INTRODUCTORY SECTION decline in operating revenues experienced during the recession. Any amounts remaining after these two reserves are fully funded are considered available for City Council directed use, primarily for future funding of capital improvements. Total General Fund reserves were $25.2 million as of June 30,2014. Major Initiatives and Projects — Strategic Plan —City Council has embarked on a strategic. planning effort for the City of Encinitas to better organize limited resources, to identify high priority projects and initiatives, and to continue the effective use of tax dollars. City Council is committed to providing great service to our citizens and taking care of the City's wonderful resources. The strategic plan contains eight focus areas, transportation, recreation, economic development, environment, arts &culture, public safety, community planning and organizational effectiveness & efficiency. Within each focus area are several goals or initiatives. These goals and initiatives will provide guidance for budget development over the next two years. More information about the strategic plan for the City of Encinitas can be found on our website www.encinitasca.gov. Pacific View Property Acquisition—The City has opened escrow to purchase approximately 2.8 acres and existing structures. The site is known as Pacific View Elementary School and is being sold by the Encinitas Union School District. The property is located on Third Street in Encinitas, between E Street and F Street and is just one block from the beach.Five school structures exist on the property, including an 1883 school building [currently in use by the Encinitas Historical Society]. The City Council is developing a community outreach process in order to create a vision for potential uses on the site. Encinitas Community Park--Construction on the 44 acre Encinitas Community Park continued throughout fiscal year 2013-14.The park when completed will include: • paved walking paths and bench areas located throughout the park; • five paved parking lots totaling 418 spaces distributed throughout the park to provide parking for every element; + two restroom buildings located in the northwestern and south-east areas of the park; ■ a skate park totaling 13,000 square feet located in the northern area of the park including a skate bowl as well an urban plaza area with specially designed planters,ramps and platform areas; ■ a dog park totaling over two acres located in the western area of the park including a large turf area,-dense perimeter landscaping,a show circle and an area for shy dogs and small dogs; ■ one soccer field and three multi-purpose fields that include two baseball fields and one softball field and open turf areas for unrestricted play. The park will be surrounded by a landscape buffer and includes a meandering dry creek with boulders,dense landscaping,decomposed granite pathway and al-caves with benches. Grand opening of the park is currently planned for early 2015. AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association(GFOA) awarded their Certificate of Achievement for Excellence in Financial Reporting to the City of Encinitas for its comprehensive annual financial report for the fiscal year ended rune 30, 2013. The City feels the FY 2013-14 comprehensive annual financial report continues to meet the GFOA criteria for the award. The completion of this report could not have been accomplished without the dedication and hard work of many of the City staff in the Finance Department. viii TRANSNUTTAL LETTER • INTRODUCTORY SECTION Lastly, we deeply appreciate the dedication and leadership of the Mayor and Council Members who have consistently supported our goal of excellence in all aspects of financial management. Respectfully submitted, �� Gus ina Tim Nash City Manager Finance Director ix LIST OF CITY OFFICIALS As of June 30, 2014 CITY COUNCIL: Mayor Kristin Gaspar Deputy Mayor Tony Kranz Councilmember Teresa Arballo Barth Councilmember Lisa Shaffer Councilmember Mark Muir CABINET TEAM MEMBERS: City Manager Gus Vina Communications Officer Marlena Medford City Clerk/Legislative Services Director Kathy Hollywood Engineering/Public Works Director Glenn Pruim Finance Director Tim Nash Fire Chief Michael Daigle Human Resources Department Manager Courtney Barnett IT/GIS Department Manager Lynne Tufts Law Enforcement Services Director Captain Theresa Adams-Hydar Parks & Recreation Department Director Lisa Rudloff Planning & Building Director Jeff Murphy Risk Management Department Manager Jace Schwarm x � 0 4� L- 0 Q k \ d k § [ 0 & 5, 2 / t / 2 / Ul © 5 / (R a) \ j 0 = 2 2 2 � ' N � N 4-3 � �_ E © / w Q Im .- � n _ _ n \ u 0 t \ � { 0 � 41 j »En 2 \ v 2 �_ :ƒ � / 0 E E 2 \ ' . 2 ® / � � E — \ o _ 2 E § 2 � \ � u � � 2 u5/ Q E m � � ■ = u � cg 0 E i � LU a / / 2 - 0 En \ \ U ro - 2 j O { E 8 Q § { z xi Government Finance Officers Association Certificate of e Achievement for Excellence in Financial Reporting Presented to City of Encinitas California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2413 Executive Director/CEO xii 6265 Greenwich Drive F iM Suite 220 San Diego, California 92122 PUN & McGEADY Phone: (858) 242-5100 Fax: (858) 242-5150 www.pm-llp.com INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council of the City of Encinitas Encinitas, California Report on Financial Statements 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 Encinitas, California (the "City"), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the Investment in Other Agencies which represent 10 percent, 12 percent and 4 percent of the assets, net position, and expenses, respectively, of the City. The financial statements of these agencies, as listed in Note 5 to the basic financial statements, were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Investments in Other Agencies, is based solely on the report of the other auditors. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. To the Honorable Mayor and Members of the City Council of the City of Encinitas Encinitas, California Page 2 Opinions In our opinion, based on our audit and the report of other auditors, 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, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Budgetary Comparison Schedules, and Schedules of Funding Progress on pages 7 through 18 and 97 through 100 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and other auditors have applied certain limited procedures to the Required Supplementary Information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The Introductory Section, Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules, and Statistical Section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. 2 To the Honorable Mayor and Members of the City Council of the City of Encinitas Encinitas, California Page 3 The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 5, 2014, on our consideration of the City's internal control over financial reporting and on 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 in considering the City's internal control over financial reporting and compliance. San Diego, California December 5, 2014 3 6265 Greenwich Drive Suite 220 FM San Diego, California 92122 JA PUN & McGFADY Phone: (858) 242-5100 Fax: (858) 242-5150 www.pm-llp.com REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Independent Auditors'Report To the Honorable Mayor and Members of the City Council of the City of Encinitas Encinitas, California We have audited, in accordance with the 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Encinitas, California (the "City"), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated December 5, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting ("internal control") to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. To the Honorable Mayor and Members of the City Council of the City of Encinitas Encinitas, California Page 2 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Diego, California December 5, 2014 6 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION USING THIS ANNUAL REPORT This section of the Comprehensive Annual Financial Report (CAFR) issued by the City of Encinitas (the "City") presents an overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2014. The City's financial statements include the accounts of the City, the Encinitas Public Financing Authority (EPFA), the Encinitas Housing Authority (EHA), and the San Dieguito Water District ("SDWD"). The City presents its financial statements under the reporting model required by the Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis — for State and Local Governments (GASB 34), which the City adopted in 2002. This annual report consists of a series of financial statements. The Government—Wide Financial Statements consist of the Statement of Net Position and the Statement of Activities and Changes in Net Position, which provide information about the government-wide activities of the City as a whole and present a longer-term view of the City's finances. Fund Financial Statements report the City's operations in more detail by providing information about the City's most significant funds, how services were financed in the short term, and what remains for future spending. The remaining statements provide financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside the government. Government—Wide Financial Statements Analysis of the City's financial position as a whole begins with the Statement of Net Position and the Statement of Activities and Changes in Net Position. One of the most important questions asked about the City's finances is: "Are the City's finances better or worse off as a result of this year's activities?" These statements can help to answer this question. The Statement of Net Position includes all of the assets, liabilities and deferred inflows of resources of the City using the accrual basis of accounting similar to most private-sector companies. The Statement of Activities and Changes in Net Position depicts all of the current year's revenues and expenses, also utilizing the accrual basis of accounting. These two statements report the City's net position, the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources, which is one way to measure the City's financial health. Over time, increases or decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. The reader will also need to consider other non-financial factors, such as changes in the City's property tax base and the condition of the City's roads, to assess the overall health of the City. In the Statement of Net Position and Statement of Activities and Changes in Net Position, two types of activities are depicted: • Governmental Activities - Most of the City's basic services are reported here, including law enforcement, fire suppression, public works, planning and building, engineering, parks and recreation departments, and general administration. Property and sales taxes, franchise fees, and state and federal grants finance most of these activities. • Business-Type Activities - The City charges a fee to customers to help cover all or most of the cost of certain services it provides. These activities include the water and wastewater operations, a portion of the City's affordable housing program, and certain fee-for-service recreation programs. MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION Fund Financial Statements The fund financial statements provide detailed information about the City's most significant funds, not the City as a whole. Some funds are required by State law and by bond covenants. The City Council has also established other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes and other monies. The City's two primary types of funds, governmental and proprietary, use different accounting methodologies: • Governmental Funds - Most of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps to determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. The relationship (or differences) between the governmental activities reported in the Statement of Net Position and the Statement of Activities and Changes in Net Position and the various governmental funds is included in the pages following the respective statements. • Proprietary Funds - When the City charges customers for the services it provides, whether to outside customers or to other units of the City, these services are generally reported in proprietary funds. Proprietary funds are reported in the same manner as the governmental activities are reported in Statement of Net Position and the Statement of Activities and Changes in Net Position. The City's enterprise funds (one component of the proprietary funds) are the same as the business-type activities reported in the government-wide financial statements, but provide more detail and additional information such as cash flows for proprietary funds. Internal service funds (the other component of the proprietary funds) report activities that provide supplies and services to other City's programs and activities. The City as Trustee - Reporting of the City's Agency Funds The City acts as an agent for the Community Facilities District No. 1 (the Encinitas Ranch Development), and the Requeza Street Assessment District No. 93-1. These activities are reported in the Statement of Fiduciary Assets and Liabilities—Agency Funds, and are not a part of the City's financial activities because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets in these funds are used for their intended purposes. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION REPORTING THE CITY AS A WHOLE Table 1 Summarized Statement of Net Position (Millions of Dollars) Governmental Business-type Total Primary Activities Activities Government 2014 2013 2014 2013 2014 2013 Current assets $ 60.7 $ 55.5 $ 43.1 $ 42.0 $ 103.8 $ 97.5 Capital assets (net) 209.4 196.5 54.6 51.7 264.0 248.2 Other non-current assets 4.9 13.1 42.7 41.9 47.6 55.0 Total Assets 275.0 265.1 140.4 135.6 415.4 400.7 Current liabilities 12.5 12.6 5.5 4.7 18.0 17.3 Long-term liabilities 44.8 47.5 16.8 18.6 61.6 66.1 Total Liabilities 57.3 60.1 22.3 23.3 79.6 83.4 Deferred inflows (outflows) - - 0.2 0.2 0.2 0.2 Net Position: Net investment in capital assets 162.0 157.4 54.4 38.4 216.4 195.8 Restricted 17.3 10.0 1.0 1.0 18.3 11.0 Unrestricted 38.4 37.6 62.4 72.7 100.8 110.3 Total Net Position $ 217.7 $ 205.0 $ 117.8 $ 112.1 $ 335.5 $ 317.1 Discussion and analysis of the City's Net Position and the changes in Net Position follow Table 2 on the next page. (Remainder of page left intentionally blank) 9 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION REPORTING THE CITY AS A WHOLE Table 2 Summarized Statement of Activities and Changes in Net Position (Millions of Dollars) Governmental Business-type Total Primary Activities Activities Government 2014 2013 2014 2013 2014 2013 Program Revenues: Charges for services $ 6.0 $ 4.8 $ 24.3 $ 22.6 $ 30.3 $ 27.4 Operating grants 4.3 3.8 1.0 1.1 5.3 4.9 Capital grants 8.8 6.5 1.0 1.0 9.8 7.5 General Revenues: Property taxes 36.4 35.0 0.8 0.8 37.2 35.8 Sales and use taxes 12.1 11.6 - - 12.1 11.6 Other taxes 4.2 3.8 - - 4.2 3.8 Intergovernmental 0.5 0.5 - - 0.5 0.5 Other general revenue 1.8 2.0 0.2 0.2 2.0 2.2 Total Revenues 74.1 68.0 27.3 25.7 101.4 93.7 Program Expenses: General government 9.5 10.6 - - 9.5 10.6 Public safety 25.1 24.6 - - 25.1 24.6 Public works 10.2 10.9 - - 10.2 10.9 Planning and building 5.9 4.4 - - 5.9 4.4 Engineering services 4.0 3.8 - - 4.0 3.8 Parks and recreation 4.7 5.5 - - 4.7 5.5 Interest on long-term debt 1.9 1.9 - - 1.9 1.9 Cardiff Sanitary Division - - 2.9 3.4 2.9 3.4 San Dieguito Water District - - 13.6 12.2 13.6 12.2 Encinitas Sanitary Division - - 2.4 2.0 2.4 2.0 Affordable Housing - - 1.4 1.5 1.4 1.5 Recreation - - 1.3 1.1 1.3 1.1 Total Expenses 61.3 61.7 21.6 20.2 82.9 81.9 Change in Net Position 12.7 6.3 5.7 5.5 18.4 11.8 Transfers in (out) - 1.8 - (1.8) - - Increase in Net Position 12.7 8.1 5.7 3.7 18.4 11.8 Net Position- beginning 205.0 196.9 112.1 108.4 317.1 305.3 Net Position -ending $ 217.7 $ 205.0 $ 117.8 $ 112.1 $ 335.5 $ 317.1 10 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION DISCUSSION AND ANALYSIS Table 1 and Table 2 The City's Total Net Position improved from $317.1 million to $335.5 million, an increase of $18.4 million. The overall increase breaks down to $12.7 million for Governmental Activities and $8.1 million for Business-Type Activities. Governmental Activities The City's Governmental Activities include General Fund functions such as public safety, public works and engineering, planning and building services and parks and recreation. The City accounts for other functions such as the collection and distribution of special taxes and assessments in its Special Revenue Funds category. Other functions include debt service and capital project accounting and monitoring. The City's unrestricted cash position improved by $5.2 million. This is primarily due to an excess of operating revenues over expenditures. Restricted cash declined during the year by about $8.0 million due to the capital transfers from the General Fund to the Capital Improvement Fund, related to the expenditure of bond proceeds on the Encinitas Community Park. Capital assets additions for the year totaled about $18.4 million, while capital assets, net of accumulated depreciation, increased $12.9 million. In addition, the General fund share of long- term debt principal payments during the year totaled $2.7 million. The combination of these factors resulted in the net increase of$12.7 million in Total Net Position. Business-Type Activities The City's Business-Type Activities include the operations of the San Dieguito Water District, the operations of the Cardiff and Encinitas Sanitary wastewater divisions, the activities of the Encinitas Housing Authority, and recreational activities that operate primarily on a fee-for- service basis. • San Dieguito Water District showed an increase in its cash position of $2.4 million. The District had positive cash flows from operations, after factoring in debt service payments of $1.6 million in fiscal year 2013-14. Average water rates were increased by 8.5%, effective September 1, 2013. That increase, combined with slightly higher sales volume, translated into an increase of 12% in operating revenues. The excess cash generated by operations is transferred to the capital project fund, which has the effect of increasing the District's capital reserve balance. The combination of these factors resulted in the net increase of $2.5 million in Total Net Position. • Cardiff Sanitary Division showed an increase in its cash position of $600,000. Operating revenues were slightly lower due to lower average water consumption by customers, which affects revenues that are calculated utilizing a flow-based model. The principal difference in the flow of resources year-over-year was significant capital spending in the prior year related to the rebuilding of the Olivenhain Pump Station. That project is now complete, and capital spending is expected to be significantly lower over the next couple of years. The combination of these factors resulted in the net increase of $2.8 million in Total Net Position. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION • Encinitas Sanitary Division showed a decrease in its cash position of$2.2 million. Operating revenues were slightly lower due to lower average water consumption by customers, which affects revenues that are calculated utilizing a flow-based model. The principal difference in the flow of resources year-over-year was significant capital spending in the current fiscal related to the Second Street underground improvements. That project is substantially complete, and capital spending is expected to be significantly lower over the next couple of years. The combination of these factors resulted in net increase of $450,000 in Total Net Position. • The Affordable Housing fund showed a small decrease in Net Position, primarily due to depreciation of existing housing stock. • Recreation Programs showed a small increase in Net Position, primarily due to rental income earned at the Community Center. DISCUSSION AND ANALYSIS The City's Fund Financial Statements The City's Fund Financial Statements provide a greater level of detail regarding the City's Governmental Activities, which include the General fund, Capital Improvements, and other Nonmajor Governmental funds. The City reports the General fund and the Capital Improvements fund as major funds, under the guidance provided by GASB 34. All other governmental funds are considered to be nonmajor, and are reported as one group. The General Fund is the largest and most discretionary source of funding for operations, debt service and capital improvements, via both direct expenditures and transfers to other City funds. The Capital Improvements Capital Projects Fund is utilized to account for all governmentally funded capital improvements, as well as a number of work projects such as long-term consultant studies. All of these expenses are classified as capital outlay expenditures. Capital spending totaled $14.6 million this fiscal year, a decrease of about $3.7 million compared to the prior year. Further discussion of the City's capital program is included in the section below entitled CAPITAL ASSETS AND CAPITAL IMPROVEMENT PROGRAM. The other Nonmajor Governmental Funds are primarily Special Revenue funds, where monies are collected and held, but are restricted to the specific purpose for which they are collected. The City's Debt Service funds are included in this group. Discussion of the City's debt service program is included in the section below entitled DEBT ISSUANCE AND ADMINISTRATION. The City's Major Funds include: Type of Activity (1) The General Fund Governmental Activities (2) The Capital Improvements Capital Projects Fund Governmental Activities (3) The City's Water and Wastewater Enterprises Business-Type Activities • San Dieguito Water District • Cardiff Sanitary Division • Encinitas Sanitary Division The focus of the discussion below will be on the General and Capital Improvement funds. Discussion of the position and results of the City's Water and Wastewater Enterprises is included above under Business-Type Activities. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION DISCUSSION AND ANALYSIS General Fund General Fund Budgetary Highlights General Fund Revenues $2.8 million above projections Property taxes made up 59% of the general fund revenue budget. Actual collections (including real property transfer fees) totaled $35.6 million, or 4% above projections. Property taxes had been forecast to be flat year-over-year, based on an assessed valuation increase of less than 1%. The actual increase year-over-year was 4%. This increase is based on a number of factors, including a lower delinquency rate on current year collections, an improved collection rate on delinquent taxes, and a modest amount of new development. Sales and use taxes made up 20% of the general fund revenue budget. Actual revenues totaled $12.1 million, or 3% above projections. Sales taxes had been forecast to increase about 1% year-over-year. The actual increase year-over-year was 4%. Improvements in the general economy and retail vacancy rates helped continue the trend of steady and relatively strong growth in this revenue category. Transient Occupancy (TOT) taxes were well above projections, and increased 5% year-over- year. This performance well exceeds the modest increases recorded in the past few years, and is evidence of the general improvement in tourism. The other revenue category showing strong growth was Charges for Services, which is primarily development processing fees and building services. Applications were up across the board, and total revenues increased to $5.5 million from $4.5 million in the prior year. There were no fee increases implemented during the fiscal year. The increase in building services revenue is mostly offset by increased payment to the City's building services contract provider. The City does collect a 31% overhead fee on all building applications. General Fund Expenditures $2.2 million under budget All general fund functional areas, including general government/administration, experienced savings in the current fiscal year, with total savings (budget vs. actual) of close to $1.8 million. This represents savings in the range of 3% to 4%. Actual general fund expenditures of $49.5 million compared to prior year actuals of $49.1 million. After adjusting for expenditures in Building Services (which are offset by service charges to applicants) general fund spending was essentially flat year-over-year. Another factor that affected year-over-year expenditure comparisons was a capital outlay expenditure of $559,653 in FY 2012-13 for the purchase of fire apparatus. There was also a one-time expenditure of bond issuance costs of $243,987 in the prior year. Taking all of those factors into account, discretionary spending actually declined about $900,000 year-over-year, or about 2%. Excess of Revenues over Expenditures $5.0 million above projections Actual revenues over expenditures were approximately $9.7 million, compared to a budget of $4.7 million. Note: this does not take into account: Other Financing Sources (Uses), which is discussed below. This result is a combination of revenues being above projections and expenditures being under budget, as discussed above. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION Other Financing Sources and Uses— General Fund Other financing Sources and Uses consisted of Transfers-in and Transfers-(out) this fiscal year. Scheduled transfers-in included: (a) monies for the Gasoline Taxes special revenue fund, which are utilized to fund a portion of the City's street maintenance program, and (b) monies for impact fees collected for community facilities and fire mitigation. The impact fees collected are meant to reimburse the General Fund for amounts expended in prior years for the Public Library and Fire Station Rehabilitation projects. The reason for the $250,000 difference between budgeted and actual transfers-in is that the transfers from the impact fee funds were not budgeted due to the initial low estimates of fee revenue. Transfers-out includes the General Fund's contribution to the self-insurance (risk management) fund, which is now accounted for as an internal service fund. That contribution was set and funded at approximately $800,000. Due to the method the City uses to account for the General Fund's contribution for capital projects, the scheduled and actual transfers typically do not align due to timing differences between when the City appropriates funds to a capital project and when those funds are actually expended. In this fiscal year, only $1.4 million was appropriated, but actual spending totaled $11.2 million. This total included $8.0 million of restricted bond funds dedicated to the Encinitas Community Park. Transfers-(out) for debt service totaled $4.6 million, which was very close to initial projections. Analysis of Fund Balance and Changes in Fund Balance Fund balance was projected to be $40.5 million as of June 30, 2014, a scheduled decrease of about $1.0 million. Actual fund balance was $35.9 million, or $4.6 million lower than projected. There was an excess of revenues over expenditures of $9.7 million. Factoring in transfers for debt service payments leaves a positive balance of$5.1 million. Capital transfers totaled $11.2 million. The net result is a decrease in total fund balance of$5.6 million. Because of the level of capital transfers during the year, committed fund balance shows a large decrease while unassigned fund balance actually shows an increase, to $25.2 million. (Remainder of page left intentionally blank) 14 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION CAPITAL ASSETS AND THE CAPITAL IMPROVEMENT PROGRAM As of June 30, 2014, the City had approximately $305 million invested in a broad range of capital assets including road and drainage systems, parks and beach facilities, public buildings, water and wastewater treatment facilities, collection and distribution systems and affordable housing stock. Of that amount, $209 million is classified as capital assets under the category of Governmental Activities, and $55 million is classified as capital assets of Business-Type Activities. In addition, there are $41 million of assets under Business-Type Activities which are classified as Investment in Joint Ventures. This investment consists mainly of capital assets belonging to related governmental agencies where the City holds an equity interest in the joint venture. The assets are principally water and wastewater treatment facilities. Governmental Activities $209 million The City utilizes its Capital Improvement Fund to account for all City capital improvements that are funded from Governmental Activities. These include public facilities, acquisition of parkland and park improvements, infrastructure, and certain City "work projects" such as multi-year consultant studies that meet the criteria for inclusion as capital projects for budgeting purposes. The City utilizes a dollar threshold of $100,000 and a useful life of five years or more in its evaluation of which capital expenditures should be capitalized and which should be expensed. Eligible project costs are added to construction in progress (CIP) at fiscal year-end. Costs for completed projects are then transferred to the appropriate capital asset category. The funding of capital expenditures is accomplished by transferring funds from various governmental funds to the capital fund each month, to cover spending as it occurs. The City spent approximately $14.5 million this fiscal year on capital improvement projects. The majority of that amount ($10.0 million) went towards the construction of park improvements for the Encinitas Community Park, a 44 acre park with both passive and active components. The Park had been in the planning stages for a number of years, and was substantially complete as of June 30, 2014. It is scheduled to open to the public in January of 2015. The remaining $4.5 million was expended on a variety of different projects that were either in development or construction phase. The primary emphasis this fiscal year was on streets and road projects, including the on-going pavement overlay project. The City signed a letter of intent in June 2014 to purchase a 3 acre piece of property from the Encinitas Union School District, known as the Pacific View Property. The site is considered a legacy property, and has been under continuous public ownership since the 1880's. The site was gifted to the School District, in order to build the original Encinitas Schoolhouse. The Schoolhouse remains on a small portion of the property, and is currently managed by the Encinitas Historical Society. The purchase price for the property is $10 million, which will be paid for out of the proceeds of the City's 2014 Lease Revenue bond issuance. The transaction is expected to close in November 2014. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION Business-Type Activities Capital Assets: $55 million The City accounts for the acquisition and construction of capital assets for its Water and Wastewater operations under its Proprietary-Type funds and as enterprise activities. Capital spending is recorded as expenses in the appropriate capital fund under each separate activity during the fiscal year. At the end of the fiscal year, the expenses are analyzed to determine if they meet the criteria to be capitalized as long-term fixed assets. The criteria are the same as the City criteria ($100,000 threshold and minimum five year life.) Eligible capital expenses are then capitalized to the construction-in-progress account(s), while non-eligible expenses are reclassified as operating expenses. Total amounts expended on completed projects are then transferred to the appropriate capital asset class. The City's affordable housing fund carries its investment of about $4 million in affordable housing stock under the classification of utility, plant, vehicles and equipment. There has not been any capital spending activity in this fund since its original purchase of the 16 housing units in 2004. Investment in Joint Ventures: $41 million The City's water and wastewater enterprises each hold equity interests in joint ventures with other local agencies. SDWD holds an equity interest, along with Santa Fe Irrigation District, in the R.E. Badger Joint Facilities. SDWD makes capital contributions each year for the replacement and improvement of the Joint Facilities, which gets added to the Investment account at the end of the fiscal year. SDWD also makes monthly payments to cover its ratable share of annual operating costs. SDWD also holds an equity interest in the R.E. Badger Water Facilities Financing Authority. The primary content of this investment consists of a ratable share of certain debt service reserve fund assets and capitalized financing costs. Thus, these resources are not available to SDWD for the funding of its operations. Cardiff Sanitary Division holds an equity interest, along with the City of Solana Beach, in the San Elijo Joint Powers Authority Joint Facilities. CSD makes capital contributions each year for the replacement and improvement of the Joint Facilities, which gets added to its Investment account at the end of the fiscal year. CSD also makes quarterly payments to cover its ratable share of annual operating costs. The treatment facilities also serve other local agencies, which are billed quarterly for their ratable share of operations costs and capital improvements. Encinitas Sanitary Division holds an equity interest, along with the five other local agencies, in the Encina Wastewater Authority Joint Facilities. ESD makes capital contributions each year for the replacement and improvement of the Joint Facilities, which gets added to its Investment account at the end of the fiscal year. The Division also makes quarterly payments to cover its ratable share of annual operating costs. There were no significant changes during the fiscal year in the net amounts invested in any of the Joint Ventures. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION DEBT ISSUANCE AND ADMINISTRATION The City has a total of$47.5 million of long-term debt and $2.7 million of other liabilities such as estimated claims and compensated absences, which are classified under Governmental Activities. Of that total, $2.7 million of long-term debt is due within one year, not including the other liabilities noted above. The City has a total of $18.5 million of long-term debt and $0.2 million of other liabilities such as compensated absences, which are classified under Business- Type Activities. Of that total, $1.7 million of long-term debt is due within one year, not including the other liabilities noted above. Governmental Activities $50.2 million The majority of the City's long-term debt is bonded debt, which was issued to acquire and/or construct public facilities including City Hall, the Public Library, and the Encinitas Community Park. Debt payments are due semi-annually at fixed amounts, and the debt matures at various times through 2037. Annual debt service averages approximately $3.9 million. The City has a policy of utilizing lease/purchase financing for the acquisition of equipment costing more than $100,000. The City currently leases three Fire Engines and one stormdrain cleaning machine. Total annual payments are about $400,000. In addition, the City is obligated under a lease/purchase agreement (a private placement with a financial institution) for improvements made to City Hall in 2008. Annual payments on that lease are $180,000. The City's annual debt service of approximately $4.5 million represents approximately 7.5% of annual general fund operating revenues. No new debt was issued during the fiscal year. The City is planning to issue Lease Revenue bonds in fiscal year 2014-15, to fund the acquisition of the Pacific View Property and to construct improvements to the Moonlight Beach Lifeguard Tower. Business-Type Activities $18.7 million SDWD and CSD carry long-term debt, which was issued to construct capital improvements to both their distribution and collection systems and their Joint Facilities. The Encinitas Housing Authority has a mortgage loan with a financial institution that partially funded the acquisition of the City's affordable housing units (Pacific Pines). The City is not obligated in any way for repayment of these debt issues There was no new debt issued this fiscal year. After the end of the fiscal year, the SDWD's 2004 Revenue Refunding Bonds was refinanced. The District realized a significant reduction in the amount of debt owed, and annual debt service for that issue was reduced by 25%. General Information on City debt The City of Encinitas obtained an upgrade to its issuer credit rating to AAA by Standard & Poor's (S & P) in 2012. The City's credit rating was recently affirmed by S & P, which issued a credit rating of AA+ on the City's 2014 Lease Revenue bonds. Ratings for lease revenue bond issues are typically one notch lower than the issuer rating, due to the structure of the bond issue. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS • FINANCIAL SECTION ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS The City's elected and appointed officials consider many economic factors when setting budgets, including national, state and local economic conditions, trends in residential housing, and the unique needs of the community. The Finance Department coordinates the development of the operating and capital budgets, which are presented by the City Manager to the City Council for consideration. The City adopts its operating budget in a two-year cycle, with appropriations set for the first year only. The operating and capital budgets for fiscal year 2014- 15, which is the "second year revise" were adopted by the City Council in May 2014. The fiscal year 2013-14 actual results, when compared to the adopted projections and appropriations, showed revenues well above forecasts and expenditures significantly under budget. Fiscal year 2014-15 revenues are expected to increase modestly above 2013-14 actual levels. Expenditures are also expected to rise modestly above 2013-14 levels. Next year's budget does not anticipate any adjustments to employee compensation, which is the largest portion of the general fund budget. Debt service costs will rise only modestly as well, since the 2014 Lease Revenue bond issue will only have a partial (interest only) payment in the first year. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to demonstrate the City's accountability for the monies it receives and manages. If you have questions about this report or need additional information, please contact the Finance Department of the City of Encinitas, 505 South Vulcan Ave, Encinitas, CA 92024, telephone (760) 633-2600, or visit our website at www.encinitasCA.gov and review the Finance Department webpage. 18 BASIC FINANCIAL STATEMENTS 19 GOVERNMENT-WIDE FINANCIAL STATEMENTS 21 City of Encinitas Statement of Net Position June 30, 2014 Primary Government Governmental Business-Type Activities Activities Total ASSETS Current assets: Cash and investments $ 56,582,631 $ 39,826,301 $ 96,408,932 Restricted cash and investments with fiscal agent - 14,251 14,251 Receivables 3,753,680 3,001,594 6,755,274 Inventory and prepaid items 406,259 226,725 632,984 Total current assets 60,742,570 43,068,871 103,811,441 Noncurrent assets: Restricted cash and investments with fiscal agent 3,100,395 1,039,739 4,140,134 Internal balances 70,475 (70,475) - Long-term receivable 650,000 - 650,000 Investment in joint ventures - 41,489,752 41,489,752 Other assets 997,556 294,459 1,292,015 Capital assets: Non-depreciable 83,636,359 19,946,012 103,582,371 Depreciable, net 125,777,880 34,632,417 160,410,297 Total capital assets, net 209,414,239 54,578,429 263,992,668 Total noncurrent assets 214,232,665 97,331,904 311,564,569 Total assets 274,975,235 140,400,775 415,376,010 LIABILITIES Current liabilities: Accounts payable and accrued liabiities 4,653,648 2,564,900 7,218,548 Interest payable 469,966 188,730 658,696 Unearned revenue 225,939 550,358 776,297 Deposits and other liabilities 1,713,780 373,209 2,086,989 Long-term liabilities-due within one year 5,417,765 1,853,265 7,271,030 Total current liabilities 12,481,098 5,530,462 18,011,560 Noncurrent liabilities: Long-term liabilities-due in more than one year 44,780,562 16,835,539 61,616,101 Total noncurrent liabilities 44,780,562 16,835,539 61,616,101 Total liabilities 57,261,660 22,366,001 79,627,661 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding - 205,570 205,570 NET POSITION Net investment in capital assets 161,902,991 54,362,661 216,265,652 Restricted: Community development 2,445,524 - 2,445,524 Debt service 3,075,628 1,039,739 4,115,367 Capital projects 11,842,552 - 11,842,552 Total restricted 17,363,704 1,039,739 18,403,443 Unrestricted 38,446,880 62,426,804 100,873,684 Total Net Position $ 217,713,575 $ 117,829,204 $ 335,542,779 See accompanying Notes to Basic Financial Statements. 23 City of Encinitas Statement of Activities and Changes in Net Position For the Year Ended June 30, 2014 Program Revenues Operating Capital Total Charges for Grants and Grants and Program Functions/Programs Expenses Services Contributions Contributions Revenues Primary government: Governmental activities: General government $ 9,549,338 $ 1,800,630 $ - $ - $ 1,800,630 Public safety 25,146,843 202,220 111,495 - 313,715 Public works 10,239,746 - 3,698,397 7,255,656 10,954,053 Planning and building 5,853,995 2,874,894 456,179 651,071 3,982,144 Engineering services 3,988,720 1,075,885 - - 1,075,885 Parks and recreation 4,735,864 35,791 79,860 849,554 965,205 Interest on long-term debt 1,913,349 - - - - Total governmental activities 61,427,855 5,989,420 4,345,931 8,756,281 19,091,632 Business-type activities: Cardiff Sanitary Division 2,922,446 4,605,867 - 548,701 5,154,568 San Dieguito Water District 13,552,862 15,297,718 - 471,802 15,769,520 Encinitas Sanitary Division 2,438,692 2,879,605 - 46,266 2,925,871 Affordable Housing 1,405,225 216,728 994,607 - 1,211,335 Recreation Programs 1,300,555 1,269,179 - - 1,269,179 Total business-type activities 21,619,780 24,269,097 994,607 1,066,769 26,330,473 Total primary government $ 83,047,635 $ 30,258,517 $ 5,340,538 $ 9,823,050 $ 45,422,105 See accompanying Notes to Basic Financial Statements. 24 City of Encinitas Statement of Activities and Changes in Net Position (Continued) For the Year Ended June 30, 2014 Net(Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Functions/Programs Activities Activities Total Primary government: Governmental activities: General government $ (7,748,708) $ - $ (7,748,708) Public safety (24,833,128) - (24,833,128) Public works 714,307 - 714,307 Planning and building (1,871,851) - (1,871,851) Engineering services (2,912,835) - (2,912,835) Parks and recreation (3,770,659) - (3,770,659) Interest on long-term debt (1,913,349) - (1,913,349) Total governmental activities (42,336,223) - (42,336,223) Business-type activities: Cardiff Sanitary Division - 2,232,122 2,232,122 San Dieguito Water District - 2,216,658 2,216,658 Encinitas Sanitary Division - 487,179 487,179 Affordable Housing - (193,890) (193,890) Recreation Programs - (31,376) (31,376) Total business-type activities - 4,710,693 4,710,693 Total primary government (42,336,223) 4,710,693 (37,625,530) General revenues: Taxes: Property taxes and transfer fees 36,414,507 787,242 37,201,749 Sales tax 12,067,360 - 12,067,360 Transient occupancy taxes 1,570,459 - 1,570,459 Franchise taxes 2,614,844 - 2,614,844 Total taxes 52,667,170 787,242 53,454,412 Intergovernmental-unrestricted 479,026 - 479,026 Use of money and property 705,849 357,357 1,063,206 Gain (loss)on disposal of capital assets (48,320) (187,942) (236,262) Other 1,257,002 63,768 1,320,770 Transfers (33,545) 33,545 - Total general revenues and transfers 55,027,182 1,053,970 56,081,152 Changes in net position 12,690,959 5,764,663 18,455,622 Net Position: Beginning of year 205,022,616 112,064,541 317,087,157 End of year $ 217,713,575 $ 117,829,204 $ 335,542,779 See accompanying Notes to Basic Financial Statements. 25 FUND FINANCIAL STATEMENTS 27 GOVERNMENTAL FUND FINANCIAL STATEMENTS 29 City of Encinitas Balance Sheet Governmental Funds June 30, 2014 Major Funds Capital Improvements Other Total General Capital Projects Governmental Governmental Fund Fund Funds Funds ASSETS Cash and investments $ 35,529,453 $ 609,552 $ 14,738,980 $ 50,877,985 Receivables 2,983,757 - 769,864 3,753,621 Due from other funds 801,707 - - 801,707 Inventory and prepaid items 404,694 - 1,565 406,259 Other assets 997,556 - - 997,556 Long-term receivable 650,000 - - 650,000 Restricted cash and investments 4,079 - 3,096,316 3,100,395 Total assets $ 41,371,246 $ 609,552 $ 18,606,725 $ 60,587,523 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 3,762,590 $ 609,552 $ 253,930 $ 4,626,072 Interest payable - - 24,767 24,767 Unearned revenue - - 225,939 225,939 Due to other funds - - 731,232 731,232 Deposits and other liabilities 1,702,548 - 11,232 1,713,780 Total liabilities 5,465,138 609,552 1,247,100 7,321,790 Fund Balances: Nonspendable 2,052,250 - 1,565 2,053,815 Restricted 4,079 - 17,358,060 17,362,139 Committed 8,136,886 - - 8,136,886 Assigned 561,762 - - 561,762 Unassigned 25,151,131 - - 25,151,131 Total fund balances 35,906,108 - 17,359,625 53,265,733 Total liabilities and fund balances $ 41,371,246 $ 609,552 $ 18,606,725 $ 60,587,523 See accompanying Notes to Basic Financial Statements. 31 City of Encinitas Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position June 30, 2014 Total Fund Balances-Total Governmental Funds $ 53,265,733 Amounts reported for governmental activities in the Statement of Net Position were different because: Capital assets used in governmental activities were not financial resources and therefore were not reported in governmental funds. Land 51,833,600 Land easements 2,104,542 Construction in progress 29,698,217 Public facilities 76,536,547 Vehicles, equipment and machinery 8,596,228 Infrastructure 109,979,254 Less:Accumulated depreciation (69,334,149) Total capital assets 209,414,239 Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liability in Governmental Funds Balance Sheet. (445,199) Long-term liabilities applicable to the City's governmental activities were not due and payable in the current period and therefore were not reported in the governmental funds. Amount reported in Government-Wide Statement of Net Position: 2008 Civic Center roof replacement (1,394,879) 2011 Fire apparatus lease (656,177) 2012 Fire apparatus lease (437,497) 2013 Fire apparatus lease (475,847) 1997 Civic Center COPS (1,680,000) 2002 ABAG financing (1,085,000) 2006 Public Library Lease Revenue Bonds, net of unamortized discount of$230,000 (17,225,000) 2010 Community Park Lease Revenue Bonds, net of unamortized premium of$174,208 (16,874,208) 2013 Community Park Bonds, net of unamortized premium of$122,640 (7,682,640) Claims payable (607,546) Compensated absences (2,079,533) Total long-term liabilities (50,198,327) Internal service funds were used by management to charge the costs of risk management, personnel support, fleet maintenance and vehicle replacement to individual funds. The assets and liabilities of the internal service funds were included in governmental activities in the Government-Wide Statement of Net Position. 5,677,129 Net Position of Governmental Activities $ 217,713,575 See accompanying Notes to Basic Financial Statements. 32 City of Encinitas Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds For the Year Ended June 30, 2014 Major Funds Capital Improvements Other Total General Capital Projects Governmental Governmental Fund Fund Funds Funds REVENUES: Taxes and assessments $ 51,166,669 $ - $ 2,663,524 $ 53,830,193 Licenses and permits 289,116 - - 289,116 Intergovernmental 479,026 - 4,546,454 5,025,480 Development impact fees - - 2,628,484 2,628,484 Charges for services 5,479,847 - - 5,479,847 Fines, forfeitures and penalties 632,776 - - 632,776 Use of money and property 457,135 - 267,175 724,310 Other 713,818 - 23,203 737,021 Total revenues 59,218,387 - 10,128,840 69,347,227 EXPENDITURES: Current: General government 8,974,262 - 135,150 9,109,412 Public safety 24,047,241 - 117,738 24,164,979 Public works 3,705,397 - 2,576,403 6,281,800 Planning and building 4,294,095 - 422,220 4,716,315 Engineering services 3,949,352 - - 3,949,352 Parks and recreation 4,543,452 - 129,231 4,672,683 Capital outlay - 14,548,894 - 14,548,894 Debt service: Principal - - 2,661,976 2,661,976 Interest and fiscal charges - - 1,937,144 1,937,144 Total expenditures 49,513,799 14,548,894 7,979,862 72,042,555 REVENUES OVER (UNDER) EXPENDITURES 9,704,588 (14,548,894) 2,148,978 (2,695,328) OTHER FINANCING SOURCES(USES): Transfers in 1,295,818 14,548,894 4,726,254 20,570,966 Transfers out (16,641,076) - (4,687,692) (21,328,768) Total other financing sources(uses) (15,345,258) 14,548,894 38,562 (757,802) NET CHANGES IN FUND BALANCES (5,640,670) - 2,187,540 (3,453,130) FUND BALANCES: Beginning of year 41,546,778 - 15,172,085 56,718,863 End of year $ 35,906,108 $ - $ 17,359,625 $ 53,265,733 See accompanying Notes to Basic Financial Statements. 33 City of Encinitas Reconciliation of the Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position For the Year Ended June 30, 2014 Net Change in Fund Balances-Total Governmental Funds $ (3,453,130) Amounts reported for governmental activities in the Statement of Activities were different because: Governmental funds reported capital outlay as expenditures. However, in the Government-Wide Statement of Activities and Changes in Net Position, the cost of those assets was allocated over their estimated useful lives as depreciation expense. This was the amount of capital assets recorded in the current period. 13,608,989 Contributions of capital assets were reported in the Government-Wide Statement of Activities and Changes in Net Position, but they did not provide current financial resources. Therefore, contribution revenue was not reported as revenue in the Governmental Funds. 4,853,452 Depreciation expense on capital assets was reported in the Government-Wide Statement of Activities and Changes in Net Position, but they did not require the use of current financial resources. Therefore, depreciation expense was not reported as expenditures in the Governmental Funds. (5,486,895) The net effect of various miscellaneous transactions involving capital assets (i.e. sales, trade-ins, and donations)decreased Net Position. (86,746) The issuance of long-term liabilities provided current financial resources to governmental funds, but issuing debt increased long-term liabilities in the Government-Wide Statement of Net Position. Repayment of long-term liabilities was an expenditures in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Position. Principal payment of long-term debt 2,661,976 Amortization expenses were reported in the Government-Wide Statement of Activities and Changes in Net Position, but they did not require the use of current financial resources. Therefore, amortization expenses were not reported as expenditures in the Governmental Funds. Bond premium and discount 9,535 Certain long-term liabilities were reported in the Government-Wide Statement of Activities and Changes in Net Position, but they did not require the use of current financial resources. Therefore, long-term liabilities were not reported as expenditures in governmental funds. These amounts represented the changes in long-term liabilities from prior year. Changes in compensated absences (86,506) Changes in claims payable 440,763 Interest expense on long-term debt was reported in the Government-Wide Statement of Activities and Changes in Net Position, but it did not require the use of current financial resources. This amount represented the change in accrued interest from prior year. 14,260 Internal service funds were used by management to charge the costs of certain activities to individual funds. The net revenue of internal service funds was reported with governmental activities. 215,261 Change in Net Position of Governmental Activities $ 12,690,959 See accompanying Notes to Basic Financial Statements. 34 PROPRIETARY FUND FINANCIAL STATEMENTS 35 City of Encinitas Statement of Net Position Proprietary Funds June 30, 2014 Major Enterprise Funds Cardiff San Dieguito Encinitas Nonmajor Sanitary Water Sanitary Affordable Division District Division Housing ASSETS Current assets: Cash and investments $ 12,338,211 $ 17,152,589 $ 9,086,221 $ 394,841 Restricted cash and investments with fiscal agent - - - 14,251 Accounts and taxes receivable 106,651 2,790,244 75,903 2,694 Inventory and prepaid items - 143,164 - 80,694 Total current assets 12,444,862 20,085,997 9,162,124 492,480 Noncurrent assets: Restricted cash and investments with fiscal agent - 1,039,739 - - Prepaid pension asset, net - 294,459 - - Investment in joint ventures 19,687,756 18,321,553 3,480,443 - Capital assets: Land easements - 3,047,151 - - Public works facility right-of-use - 3,378,700 - - Construction in progress 7,279,754 776,498 5,463,909 - Capacity rights,net - 204,148 - - Utility,plant,vehicles,and equipment,net 7,450,801 14,540,163 9,429,549 3,007,756 Total capital assets,net 14,730,555 21,946,660 14,893,458 3,007,756 Total noncurrent assets 34,418,311 41,602,411 18,373,901 3,007,756 Total assets 46,863,173 61,688,408 27,536,025 3,500,236 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 13,740 2,309,554 190,118 1,945 Due to other funds - - - 70,475 Accrued interest payable 38,359 150,371 - - Unearned revenue - - - 2,276 Deposits 750 352,400 - 17,459 Current portion of long-term debt 579,366 1,210,665 - 63,234 Total current liabilities 632,215 4,022,990 190,118 155,389 Noncurrent liabilities: Revenue bonds payable,due in more than one year - 7,445,000 - - Notes and mortgages payable,due in more than one year 2,868,224 5,130,000 - 1,392,315 Total noncurrent liabilities 2,868,224 12,575,000 - 1,392,315 Total liabilities 3,500,439 16,597,990 190,118 1,547,704 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding 205,570 - - - Total deferred inflows 205,570 - - - NET POSITION Net investment in capital assets 11,282,965 26,623,213 14,893,458 1,563,025 Restricted - 1,039,739 - - Unrestricted 31,874,199 17,427,466 12,452,449 389,507 Total net position $ 43,157,164 $ 45,090,418 $ 27,345,907 $ 1,952,532 See accompanying Notes to Basic Financial Statements. 36 City of Encinitas Statement of Net Position Proprietary Funds (Continued) June 30, 2014 Governmental Nonmajor Activities Recreation Internal Fund Total Service Funds ASSETS Current assets: Cash and investments $ 854,439 $ 39,826,301 $ 5,704,646 Restricted cash and investments with fiscal agent - 14,251 - Accounts and taxes receivable 26,102 3,001,594 59 Inventory and prepaid items 2,867 226,725 - Total current assets 883,408 43,068,871 5,704,705 Noncurrent assets: Restricted cash and investments with fiscal agent - 1,039,739 - Prepaid pension asset, net - 294,459 - Investment in joint ventures - 41,489,752 - Capital assets: Land easements - 3,047,151 - Public works facility right-of-use - 3,378,700 - Construction in progress - 13,520,161 - Capacity rights,net - 204,148 - Utility,plant,vehicles,and equipment,net - 34,428,269 - Total capital assets,net - 54,578,429 - Total noncurrent assets - 97,402,379 - Total assets 883,408 140,471,250 5,704,705 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 49,543 2,564,900 27,576 Due to other funds - 70,475 - Accrued interest payable - 188,730 - Unearned revenue 548,082 550,358 - Deposits 2,600 373,209 - Current portion of long-term debt - 1,853,265 - Total current liabilities 600,225 5,600,937 27,576 Noncurrent liabilities: Revenue bonds payable,due in more than one year - 7,445,000 - Notes and mortgages payable,due in more than one year - 9,390,539 - Total noncurrent liabilities - 16,835,539 - Totalliabilities 600,225 22,436,476 27,576 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding - 205,570 Total deferred inflows - 205,570 - NET POSITION Net investment in capital assets - 54,362,661 - Restricted - 1,039,739 - Unrestricted 283,183 62,426,804 5,677,129 Total net position $ 283,183 $ 117,829,204 $ 5,677,129 See accompanying Notes to Basic Financial Statements. 37 City of Encinitas Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2014 Major Enterprise Funds Cardiff San Dieguito Encinitas Nonmajor Sanitary Water Sanitary Affordable Division District Division Housing OPERATING REVENUES: Charges for services $ 4,605,867 $ 15,166,038 $ 2,875,336 $ 100 Rental income - 90,497 - 95,728 Contribution from users - - - - Interfund revenues - 41,444 - 96,167 Intergovernmental - 73,767 - 117,405 Other revenues - 16,469 4,269 3,056 Total operating revenues 4,605,867 15,388,215 2,879,605 312,456 OPERATING EXPENSES: Housing assistance payments - - - 1,067,379 Source of supply - 6,403,037 - - General operations and maintenance 985,008 2,342,857 625,128 105,133 Facility operations and maintenance 1,395,857 1,489,420 556,364 - General and administrative 241,404 1,820,835 128,511 127,384 Program cost - - - - Depreciation of capital assets 200,459 622,435 288,124 100,538 Amortization of prepaid pension asset - 98,152 - - Amortization of investment in joint ventures - 770,219 744,192 - Administrative support - - - - Operational support services - - - - Other 99,718 5,907 96,373 4,791 Total operating expenses 2,922,446 13,552,862 2,438,692 1,405,225 OPERATING INCOME(LOSS) 1,683,421 1,835,353 440,913 (1,092,769) NONOPERATING REVENUES(EXPENSES): Use of money and property 757,211 32,789 21,538 890 Property taxes - 787,242 - - Operating grants - - - 994,607 Capital grants 395,962 - - - Gain (loss)on disposal of capital assets (140,485) 7,645 (55,102) - Accretion of bond premium 63,768 - - - Interest expense (126,337) (611,775) - (49,581) Total nonoperating revenues (expenses) 950,119 215,901 (33,564) 945,916 INCOME(LOSS) BEFORE CAPITAL 2,633,540 2,051,254 407,349 (146,853) CONTRIBUTIONS AND TRANSFERS Capital contributions 152,739 471,802 46,266 - Transfers in - - - 33,545 Total capital contributions and transfers 152,739 471,802 46,266 33,545 CHANGES IN NET POSITION 2,786,279 2,523,056 453,615 (113,308) NET POSITION: Beginning of year 40,370,885 42,567,362 26,892,292 2,065,840 End of year $ 43,157,164 $ 45,090,418 $ 27,345,907 $ 1,952,532 See accompanying Notes to Basic Financial Statements. 38 City of Encinitas Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds (Continued) For the Year Ended June 30, 2014 Governmental Nonmajor Activities Recreation Internal Fund Total Service Funds OPERATING REVENUES: Charges for services $ 1,230,032 $ 23,877,373 $ 986,049 Rental income 146,397 332,622 - Contribution from users 10,974 10,974 - Interfund revenues - 137,611 1,804,629 Intergovernmental - 191,172 - Other revenues 28,173 51,967 133,800 Total operating revenues 1,415,576 24,601,719 2,924,478 OPERATING EXPENSES: Housing assistance payments - 1,067,379 - Source of supply - 6,403,037 - General operations and maintenance - 4,058,126 - Facility operations and maintenance - 3,441,641 - General and administrative 149,373 2,467,507 - Program cost 1,151,182 1,151,182 - Depreciation of capital assets - 1,211,556 - Amortization of prepaid pension asset - 98,152 - Amortization of investment in joint ventures - 1,514,411 - Administrative support - - 1,338,795 Operational support services - - 804,338 Other - 206,789 1,328,767 Total operating expenses 1,300,555 21,619,780 3,471,900 OPERATING INCOME(LOSS) 115,021 2,981,939 (547,422) NONOPERATING REVENUES(EXPENSES): Use of money and property - 812,428 - Property taxes - 787,242 - Operating grants - 994,607 - Capital grants - 395,962 - Gain (loss)on disposal of capital assets - (187,942) 38,426 Accretion of bond premium - 63,768 - Interest expense - (787,693) - Total nonoperating revenues (expenses) - 2,078,372 38,426 INCOME(LOSS) BEFORE CAPITAL 115,021 5,060,311 (508,996) CONTRIBUTIONS AND TRANSFERS Capital contributions - 670,807 - Transfers in - 33,545 724,257 Total capital contributions and transfers - 704,352 724,257 CHANGES IN NET POSITION 115,021 5,764,663 215,261 NET POSITION: Beginning of year 168,162 112,064,541 5,461,868 End of year $ 283,183 $ 117,829,204 $ 5,677,129 See accompanying Notes to Basic Financial Statements. 39 City of Encinitas Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2014 Major Enterprise Funds Cardiff San Dieguito Encinitas Nonmajor Sanitary Water Sanitary Affordable Division District Division Housing CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users $ 4,638,237 $ 15,032,766 $ 2,863,554 $ 215,967 Cash received from (payments to)other funds - 41,444 - 148,735 Cash payments to suppliers and employees for goods and services (2,918,040) (10,894,634) (1,634,362) (1,303,246) Other operating revenues - 16,469 4,269 3,056 Net cash provided(used)by operating activities 1,720,197 4,196,045 1,233,461 (935,488) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital grants 395,962 - - Acquisition of capital assets (134,314) (834,187) (3,214,389) Capital contributions received-connection/capacity fees 152,739 327,360 46,266 Principal payments on bonds and notes payable (597,439) (1,038,554) - (52,081) Interest payments on bonds and notes payable (97,566) (622,073) (49,581) Capital related payments to other agencies (1,587,756) (497,359) (347,300) Proceeds received from disposal of capital assets 7,645 Net cash provided(used)by capital and related financing activities (1,868,374) (2,657,168) (3,515,423) (101,662) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating grants - 994,607 Proceeds from property taxes 787,242 - Transfers in - 33,545 Net cash provided(used)by noncapital financing activities - 787,242 - 1,028,152 CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 757,211 32,789 21,538 890 Net cash provided(used)by investing activities 757,211 32,789 21,538 890 Net increase(decrease)in cash and cash equivalents 609,034 2,358,908 (2,260,424) (8,108) CASH AND CASH EQUIVALENTS: Beginning of year 11,729,177 15,833,420 11,346,645 417,200 End of year $ 12,338,211 $ 18,192,328 $ 9,086,221 $ 409,092 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENT OF NET POSITION: Cash and investments $ 12,338,211 $ 17,152,589 $ 9,086,221 $ 394,841 Restricted cash and investments with fiscal agent-current - - - 14,251 Restricted cash and investments with fiscal agent-non-current - 1,039,739 - - Total cash and cash equivalents $ 12,338,211 $ 18,192,328 $ 9,086,221 $ 409,092 See accompanying Notes to Basic Financial Statements. 40 City of Encinitas Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2014 Governmental Nonmajor Activities Recreation Internal Fund Total Service Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users $ 1,377,618 $24,128,142 $ 2,926,488 Cash received from (payments to)other funds - 190,179 - Cash payments to suppliers and employees for goods and services (1,278,749) (18,029,031) (3,513,060) Other operating revenues 28,173 51,967 (1,369,927) Net cash provided(used)by operating activities 127,042 6,341,257 (586,572) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital grants - 395,962 Acquisition of capital assets (4,182,890) Capital contributions received-connection/capacity fees 526,365 Principal payments on bonds and notes payable (1,688,074) Interest payments on bonds and notes payable (769,220) Capital related payments to other agencies (2,432,415) - Proceeds received from disposal of capital assets 7,645 38,426 Net cash provided(used)by capital and related financing activities (8,142,627) 38,426 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating grants 994,607 - Proceeds from property taxes 787,242 - Transfers in 33,545 724,257 Net cash provided(used)by noncapital financing activities 1,815,394 724,257 CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 812,428 - Net cash provided(used)by investing activities 812,428 - Net increase(decrease)in cash and cash equivalents 127,042 826,452 176,111 CASH AND CASH EQUIVALENTS: Beginning of year 727,397 40,053,839 5,528,535 End of year $ 854,439 $ 40,880,291 $ 5,704,646 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENT OF NET POSITION: Cash and investments $ 854,439 $ 39,826,301 $ 5,704,646 Restricted cash and investments with fiscal agent-current - 14,251 - Restricted cash and investments with fiscal agent-non-current - 1,039,739 - Total cash and cash equivalents $ 854,439 $ 40,880,291 $ 5,704,646 See accompanying Notes to Basic Financial Statements. 41 City of Encinitas Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2014 Major Enterprise Funds Cardiff San Dieguito Encinitas Nonmajor Sanitary Water Sanitary Affordable Division District Division Housing RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES: Operating income(loss) $ 1,683,421 $ 1,835,353 $ 440,913 $ (1,092,769) Adjustments to reconcile operating income to net cash provided(used)by operating activities: Depreciation 200,459 622,435 288,124 100,538 Amortization of prepaid pension asset - 98,152 - - Amortization of investment in joint ventures - 770,219 744,192 - Changes in operating assets and liabilities: Accounts and taxes receivable 32,370 (297,536) (11,782) 2,734 Inventory and prepaid items - (587) 1,009 Accounts payable and accrued liabilities (196,053) 1,246,218 (227,986) (1,374) Due to other funds - 52,568 Unearned revenue 1,369 Deposits - (78,209) - 437 Total adjustments 36,776 2,360,692 792,548 157,281 Net cash provided(used)by operating activities $ 1,720,197 $ 4,196,045 $ 1,233,461 $ (935,488) NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Amortization of original issue premium $ 19,515 $ - $ - $ Contribution of capital assets - 144,442 Transfers out of capital assets to governmental activities - - $ 19,515 $ 144,442 $ $ See accompanying Notes to Basic Financial Statements. 42 City of Encinitas Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2014 Governmental Nonmajor Activities Recreation Internal Fund Total Service Funds RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES: Operating income(loss) $ 115,021 $ 2,981,939 $ (547,422) Adjustments to reconcile operating income to net cash provided(used)by operating activities: Depreciation - 1,211,556 Amortization of prepaid pension asset 98,152 Amortization of investment in joint ventures 1,514,411 - Changes in operating assets and liabilities: Accounts and taxes receivable (9,785) (283,999) 2,010 Inventory and prepaid items (2,867) (2,445) - Accounts payable and accrued liabilities (2,131) 818,674 (41,160) Due to other funds - 52,568 Unearned revenue 24,204 25,573 Deposits 2,600 (75,172) Total adjustments 12,021 3,359,318 (39,150) Net cash provided(used)by operating activities $ 127,042 $ 6,341,257 $ (586,572) NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Amortization of original issue premium $ - $ 19,515 $ Contribution of capital assets 144,442 Transfers out of capital assets to governmental activities - $ $ 163,957 $ See accompanying Notes to Basic Financial Statements. 43 FIDUCIARY FUND FINANCIAL STATEMENTS Agency Funds — These funds are used to account for money and property held by the City as trustee or custodian. They are custodial in nature (assets equal liabilities). These funds include one Assessment District and one Community Facilities (Mello-Roos) District. 45 City of Encinitas Statement of Fiduciary Net Position Fiduciary Funds June 30, 2014 Agency Funds ASSETS Cash and investments $ 2,245,874 Restricted cash and investments with fiscal agent 1,975,492 Special assessments receivable 31,325,000 Current assessments receivable 14,167 Total assets $ 35,560,533 LIABILITIES Due to bondholders 35,560,533 Total liabilities $ 35,560,533 See accompanying Notes to Basic Financial Statements. 47 City of Encinitas Notes to Basic Financial Statements For the Year Ended June 30, 2014 Note 1 — Reporting Entity The City of Encinitas (the "City") was incorporated on October 1, 1986, pursuant to an election approving the San Dieguito Reorganization Plan, which consisted primarily of the detachment of territory from the Cardiff area and the annexation of the same territory to the City of Solana Beach. The reporting entity of the City includes the accounts of the City, as the primary government, and the following blended component units: the Encinitas Housing Authority (the "EHA"), the Encinitas Public Financing Authority (the "EPFA"), and the San Dieguito Water District ("SDWD"). The EHA was formed on January 26, 1994, under the laws of the State of California to provide housing assistance to citizens of the City. The EPFA was formed on November 6, 1991, by the City and SDWD as a Joint Powers Authority under the laws of the State of California to purchase, finance, and lease certain real property to the members. The member agencies are the City and the SDWD. SDWD was formed in 1922 under the laws of the State of California to supply water services to the central western portion of San Diego County. Certain management, maintenance, and operating functions are the responsibility of the City, which bills periodically for these services. The criteria used in determining the scope of the reporting entity are based on the provisions of Governmental Accounting Standards Board (GASB) Statement No 14, The Financial Reporting Entity, as amended by GASB Statement No. 61, The Financial Reporting Entity- Omnibus—An Amendment of GASB Statements No. 14 and No. 34. The City is the primary governmental unit. Component units are financially accountable to the City. Financial accountability exists if the primary government appoints a voting majority of the entity's governing body and (1) it is able to impose its will on that organization or (2) there is potential for the organization to provide financial benefit, or impose financial burdens on the primary government. The component units have been accounted for as "blended" component units of the City. Despite being legally separate, these entities are so intertwined with the City that they are, in substance, part of the City's operations. Accordingly, the balances and transactions of these component units are reported within the funds of the City. SDWD is reported as an enterprise fund of the City. The following specific criteria were used in determining the status of these component units: • Members of the City Council also act as the governing body of the EHA, the EPFA, and SDWD. • The City, the EHA, the EPFA, and SDWD are financially interdependent. • The EHA, the EPFA, and SDWD are managed, at least in part, by employees of the City, who provide various support functions including financial reporting and investment decisions. Separate financial statements for SDWD are available at the City's administrative office. Separate financial statements are not required or prepared for the EHA and the EPFA. 49 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies A. Basis of Presentation Financial statement presentation follows the recommendations promulgated by the Governmental Accounting Standards Board ("GASB") commonly referred to as accounting principles generally accepted in the United States of America ("U.S. GAAP"). GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting standards. B. Measurement Focus, Basis of Accounting and Financial Statements Presentation The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self- balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained in accordance with legal and managerial requirements. In accordance with GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, the Statement of Net Position reports separate sections for Deferred Outflows of Resources, and Deferred Inflows of Resources, when applicable. Deferred Outflows of Resources represent outflows of resources (consumption of net position) that apply to future periods and that, therefore, will not be recognized as an expense until that time. Deferred Inflows of Resources represent inflows of resources (acquisition of net position) that apply to future periods and that, therefore, are not recognized as a revenue until that time. Government-Wide Financial Statements The City's Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. These financial statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Certain types of transactions are reported as program revenues for the City in three categories: v Charges for services v Operating grants and contributions Capital grants and contributions 50 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) B. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) Government-Wide Financial Statements (Continued) Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities and Changes in Net Position, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated: Due to/from other funds v Transfers in/out Government Fund Financial Statements Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in Net Position as presented in these statements to the Net Position presented in the Government-Wide Financial Statements. The City has presented all major funds that met the applicable criteria. All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balances. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recorded when received in cash, except for that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property taxes, transient occupancy taxes, franchise taxes, sales tax, licenses, intergovernmental revenues and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred. The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34. The City reports the following major Governmental Funds: The General Fund is used to account for resources which are not required to be accounted for in another fund. The fund includes the general activities of the City and other administrative functions. The Capital Improvements Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major property, equipment, or facilities which are generally financed by governmental funds. 51 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) B. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) Proprietary Fund Financial Statements Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows for each major Proprietary Fund. A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government-Wide Financial Statements. The City's internal service funds include four individual funds which provide services directly to other City funds. These areas of service include Risk Management, Wastewater Support, Vehicle Maintenance, and Vehicle Replacement. Proprietary funds are accounted for using the "economic resources"measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases (expenses) in total Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses. The City reports the following major proprietary funds: The Cardiff Sanitary Division ("CSD") Enterprise Fund provides wastewater collection and treatment services to approximately 6,000 customers in the southern portion of the City. The San Dieguito Water District ("SDWD") Enterprise Fund provides potable and reclaimed water services to approximately 11,000 customers in Encinitas. The Encinitas Sanitary Division ("ESD") Enterprise Fund provides wastewater collection and treatment services to approximately 5,000 customers in the northern portion of the City. Fiduciary Fund Financial Statements Fiduciary fund financial statements are accounted for according to the nature of the fund. The City has only Agency funds, which are purely custodial in nature (assets equal liabilities) and thus, do not involve the measurement of the results of operations. These funds are accounted for on the accrual basis of accounting. The Agency Fund is account for one Assessment District and one Community Facilities (Mello- Roos) District for which the City acts as an agent for debt service activities. 52 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) C. Cash, Cash Equivalents, and Investments The City pools its available cash for investment purposes. The City considers pooled cash and investment amounts, with original maturities of three months or less, to be cash equivalents. Highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. The statement of cash flows requires presentation of "cash and cash equivalents". For the purposes of the statement of cash flows, the City considers all proprietary fund pooled cash and investments as "cash and cash equivalents", as such funds are available to the various funds as needed. Certain disclosure requirements, if applicable, for Deposits and Investment Risks in the following areas: Interest Rate Risk v Credit Risk - Overall - Custodial Credit Risk - Concentration of Credit Risk v Foreign Currency Risk In addition, other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end and other disclosures. D. Restricted Cash and Investments with Fiscal Agents Cash and investments with fiscal agents are restricted due to limitations on their use by bond covenants. Fiscal agents acting on behalf of the City hold investment funds arising from the proceeds of long-term debt issuances. The funds may be used for specific capital outlays or for the payment of certain bonds, and have been invested only as permitted by specific State statutes or applicable City ordinance, resolution or bond indenture. E. Receivables Receivables include such items as taxes, intergovernmental revenues, charges for services, miscellaneous accounts receivable, and interest receivable. No allowance for doubtful accounts has been established, as the City believes all amounts are considered to be collectible in the normal course of business. F. Investment in Other Agencies The City's Cardiff Sanitary Division, San Dieguito Water District, and Encinitas Sanitary Division (the "City agencies") participate in joint ventures with other local agencies, generally to more efficiently provide water and wastewater treatment. Each entity has an ownership interest in the respective joint facilities, which are accounted for under the equity method of accounting. The City agencies pay for the fair share of operating costs, and make capital contributions for major maintenance and the upgrade or construction of facilities. The City agencies also record their share of the results of operations for these joint ventures. 53 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) G. Inventory and Prepaid Items Inventory applies only to SDWD and consists of water meters and other material used in the repair of capital facilities. Inventory is valued at average-cost using first-in first-out basis. Prepaid items are payments made to vendors for services that will benefit periods beyond the fiscal year ended, such as prepaid pension costs for the City and SDWD. H. Other Assets Other assets include prepaid pension costs for the City and SDWD. I. Capital Assets Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not available. Donated capital assets are valued at their estimated fair market value on the date donated. City policy has set the capitalization threshold for reporting capital assets at $5,000 for non- infrastructure assets and $100,000 for infrastructure assets. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows: Structures and improvements 20-45 years Equipment, machinery and vehicles 5-20 years Infrastructure 20-50 years Collection and distribution systems 50 years The City defines infrastructure as the basic physical assets that allow the City to function. Governmental fund capital assets include land, land easements, construction in progress, public facilities (buildings and building improvements), vehicles, equipment and machinery, and infrastructure assets (e.g., roads, streets and sidewalks, bridges, curbs and gutters, drainage systems, lighting systems and similar assets). Proprietary fund capital assets include, land easements, public works facility right of use, construction in progress, structures and improvements, collection and distribution systems, machinery and equipment, and capacity rights, which are stated at cost. Contributed assets, which are principally collection and distribution lines, are stated at cost or estimated fair value on the date of donation. J. Deposit Liabilities The City collects deposits from homeowners and commercial enterprises as surety for the payment of fees and other costs related to planning and engineering services provided by the City. The City collects two types of deposits: (1) Application Deposits and (2) Security Deposits. Application deposits are collected on certain projects for which a fee for services has not been established. As costs for these projects are incurred by the City, the applicant's deposit balance is adjusted and revenue (including applicable overhead charges) is recognized. Expenses incurred in excess of the deposit amounts are billed to the applicant. Any surplus at project completion is returned to the applicant. Security deposits are collected from the applicant to guarantee required performance. These may either be in cash or in the form of non-cash, such as performance bonds or letters of credit. The amount of cash deposits on hand as of June 30, 2014, is reported as a current liability in the Statement of Net Position and Balance Sheets. Noncash security deposits are not reported as liabilities, as the corresponding surety is not an asset of the City. 54 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) K. Deposit Liabilities The City collects deposits from homeowners and commercial enterprises as surety for the payment of fees and other costs related to planning and engineering services provided by the City. The City collects two types of deposits: (1) Application Deposits and (2) Security Deposits. Application deposits are collected on certain projects for which a fee for services has not been established. As costs for these projects are incurred by the City, the applicant's deposit balance is adjusted and revenue (including applicable overhead charges) is recognized. Expenses incurred in excess of the deposit amounts are billed to the applicant. Any surplus at project completion is returned to the applicant. Security deposits are collected from the applicant to guarantee required performance. These may either be in cash or in the form of non-cash, such as performance bonds or letters of credit. The amount of cash deposits on hand as of June 30, 2014, is reported as a current liability in the Statement of Net Position and Balance Sheets. Noncash security deposits are not reported as liabilities, as the corresponding surety is not an asset of the City. L. Unearned Revenue Unearned revenue recorded in the government-wide statement of net position for governmental activities and the governmental fund financial statements consist of federal and state capital grants, representing voluntary nonexchange transactions, for which advance payments have been received from the provider for which eligibility requirements, other than timing requirements, have not been satisfied. Unearned revenue recorded in the government-wide statement of net position for business-type activities and the proprietary fund financial statements generally consist of program fees collected from customers prior to the statement of net position date for recreation programs that begin in the next fiscal year or donations for capital or work projects, for which the related expenses have not yet been incurred. M. Long-Term Debt For the government-wide financial statements and proprietary fund financial statements, long-term debt and other financial obligations are reported as liabilities, net of bond premiums or discounts. Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Issuance costs are reported as expense when incurred. Governmental fund financial statements do not present long-term debt but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position. N. Arbitrage Rebate Requirement The City is subject to the Internal Revenue Code ("IRC") Section 148(f), related to its tax exempt revenue bonds. The IRC requires that investment earnings on gross proceeds of any revenue bonds that are in excess of the amount prescribed will be surrendered to the Internal Revenue Service. The City had no rebate liability for arbitrage as of June 30, 2014. 55 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) O. Claims Liabilities The City accounts for material claims and judgments outstanding at year-end. When it is probable that a claim liability has been incurred at year-end, and the amount of the loss can be reasonably estimated, the City records the estimated loss. P. Compensated Absences The City's policy permits its non-fire employees to accumulate not more than two times their current annual vacation allotment. Fire employees can accrue up to a maximum of 552 hours of vacation, depending on length of employment with the City. Non-fire employees are compensated five days of sick leave per year with no balances accruing upon separation of employment. Fire employees may accrue up to 240 hours of sick leave. The combined unused vacation and sick pay will be paid to the employee or his/her beneficiary upon leaving the City's employment. The amount due will be determined using salary/wage rate in effect at the time of separation. Government-Wide Financial Statements — For governmental and business-type activities, compensated absences are recorded as expenses and liabilities as incurred. Fund Financial Statements — In governmental funds, compensated absences are recorded as expenditures in the years paid, as it is the City's policy to liquidate any unpaid compensated absences at June 30 from future resources, rather than currently available financial resources. The General Fund is typically used to liquidate compensated absences. In proprietary funds, compensated absences are expensed to the various funds in the period they are earned, and such fund's share of the unpaid liability is recorded as a long-term liability of the fund. Q. Net Position For government-wide and proprietary fund financial statements, net position represents the difference between all other elements in the statement of net position and should be displayed in the following three components: Net Investment in Capital Assets — This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets. Restricted — This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Unrestricted — This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. When an expense is incurred for purposes for which both restricted and unrestricted Net Position are available, the City's policy is to apply restricted Net Position first. 56 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) R. Fund Balances In governmental fund financial statements, fund balances are categorized as follows: Non-spendable — Items that cannot be spent because they are not in spendable form, such as prepaid items and inventories, items that are legally or contractually required to be maintained intact, such as principal of an endowment or revolving loan funds. Restricted — Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt covenants, grantors, contributors, laws or regulations of other governments, as well as restrictions imposed by law through constitutional provisions or enabling legislation. Committed — Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making, normally the governing body, and that remain binding unless removed in the same manner. The City Council is considered the highest authority for the City. Assigned — Assigned fund balances encompass the portion of net fund resources reflecting the government's intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for that purpose. The City Council has authorized the Director of Finance for that purpose. Unassigned —This amount is for any portion of the fund balances that do not fall into one of the above categories. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than the General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that particular fund. When expenditures are incurred for purposes where only unrestricted fund balances are available, the City uses the unrestricted resources in the following order: committed, assigned, and unassigned. S. Property Taxes Property taxes are levied on July 1 and are payable in two installments: November 1 and February 1 of each year. Property taxes become delinquent on December 10 and April 10, for the first and second installments, respectively. The lien date is January 1. The County of San Diego, California (County) bills and collects property taxes and remits them to the City according to a payment schedule established by the County. The County is permitted by State law to levy taxes at 1% of full market value (at time of purchase) and can increase the property tax rate no more than 2% per year or the current CPI, whichever is less. The City receives a share of this basic tax levy proportionate to what it received during the years 1980-1981. 57 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 2 —Summary of Significant Accounting Policies (Continued) S. Property Taxes (Continued) Property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided the taxes are received within 60 days after the end of the fiscal year. Property taxes received after this date are not considered available as a resource that can be used to finance the current year operations of the City and, therefore, are not recorded as revenue until collected. No allowance for doubtful accounts was considered necessary. T. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. U. Accounting Changes GASB has issued Statement No. 66, Technical Corrections — 2012 — an amendment of GASB Statements No. 10 and No. 62. The requirements of this statement resolve conflicting accounting and financial reporting guidance that could diminish the consistency of financial reporting and thereby enhance the usefulness of the financial reports. This statement became effective for periods beginning after December 15, 2012 and did not have a significant impact on the City's financial statements for year ended June 30, 2014. GASB has issued Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. The requirements of this statement enhance comparability of financial statements among governments by requiring consistent reporting by those governments that extend nonexchange financial guarantees and by those governments that receive nonexchange financial guarantees. This statement also enhances the information disclosed about a government's obligations and risk exposure from extending nonexchange financial guarantees. This statement also augments the ability of financial statement users to assess the probability that governments will repay obligation holders by requiring disclosures about obligations that are issued with this type of financial guarantee. This statement became effective for period beginning after June 15, 2013 and did not have a significant impact on the City's financial statements for the year ended June 30, 2014. 58 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 3 —Cash and Investments Cash and investments are classified in the accompanying financial statements as follows: Government-Wide Statement of Position Fiduciary Funds Governmental Business-type Statement of Activities Activities Net Position Total Current assets: Cash and investments $ 56,582,631 $ 39,826,301 $ 2,245,874 $ 98,654,806 Restricted cash and investments with fiscal agent - 14,251 1,975,492 1,989,743 Noncurrent assets: Restricted cash and investments with fiscal agent 3,100,395 1,039,739 - 4,140,134 Total cash and investments $ 59,683,026 $ 40,880,291 $ 4,221,366 $ 104,784,683 Cash and investments at June 30, 2014, consisted of the following: Cash on hand $ 3,525 Deposits with financial institutions 6,805,093 Investments 97,976,065 Total cash and investments $ 104,784,683 A. Demand Deposits The carrying amounts of the City's demand deposits were $6,805,093 at June 30, 2014. Bank balances were $8,665,405 at that date, the total amount of which was collateralized or insured with securities held by the pledging financial institutions in the City's name as discussed below. The California Government Code requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City's deposits by pledging first trust deed mortgage notes having a value of 150% of the City's total cash deposits. The City may waive collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation ("FDIC"). The City, however, has not waived the collateral ization requirements. 59 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 3 —Cash and Investments (Continued) B. Investments Authorized by the California Government Code and the City's Adopted Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City's investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy. Authorized Maximum Maximum Authorized by Investment Maximum Percentage of Investment in Investment Type Policy Maturity Portfolio* One Issuer Repurchase Agreements-Overnight"Sweep" Yes 1 year No Limit No Limit Local Agency Investement Fund (LAIF)** Yes N/A No Limit No Limit Local Agency Bonds No 5 years N/A N/A Other Governmental Managed Investment Pools Yes N/A No Limit No Limit Money Market Mutual Funds Yes N/A 20% 10% Cretificates of Deposit Yes 5 years No Limit No Limit Negotiable Certificates of Deposit Yes 5 years 30% No Limit Banker's Acceptances Yes 180 days 40% 30% U.S. Treasury Bills, Notes and Bonds Yes 5 years No Limit No Limit U.S. Gov't Sponsored Enterprises Yes 5 years No Limit No Limit Commercial Paper Yes 270 days 25% 10% Commercial Medium-Term Notes Yes 5 years 30% No Limit * Excluding amounts held by bond trustee that are not subject to California Government Code restriction. ** Maximum is$50 million per account. C. Investments Authorized by Debt Agreements The investment of the proceeds from debt issuances, held by a third-party trustee, is governed by the provisions of the specific debt agreement rather than by the Gov't Code or the Investment Policy. The investment types that are authorized and currently utilized by the City are Guaranteed Investment Contracts and Money Market Mutual Funds. D. Risk Disclosures Disclosures Related to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity, the greater the sensitivity its fair value is to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter-term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. 60 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 3 —Cash and Investments (Continued) D. Risk Disclosures (Continued) Disclosures Related to Interest Rate Risk(Continued) Information about the sensitivity of the fair values of the City's investments to interest rate risk is provided in the table that shows the distribution by maturity is as follows: Remaining Maturity(in Months) Less than 12 to 60 Investment Type Total 12 Months Months Investments: Local Agency Investement Fund (LAIF) $ 15,032,653 $ 15,032,653 $ - California Asset Management Program 1,000,000 1,000,000 - Money Market Mutual Funds 2,111,179 2,111,179 - Certificates of Deposit 2,982,299 - 2,982,299 Corporate Medium Term Notes 1,007,170 - 1,007,170 US Treasury Securities 18,383,820 - 18,383,820 U.S. Government Sponsored Enterprise Securities 51,329,067 15,146,120 36,182,947 Total Investments 91,846,188 33,289,952 58,556,236 Investment with Fiscal Agents: Guaranteed Investment Contracts 619,500 - 619,500 Money Market Mutual Funds 5,510,377 5,510,377 - Total Investment with Fiscal Agents 6,129,877 5,510,377 619,500 Total $ 97,976,065 $ 38,800,329 $ 59,175,736 Disclosures Related to Credit Risk Credit risk is defined as the risk that an issuer of an investment will not fulfill its obligation to repay the holder at the maturity date. This is generally measured by the assignment of a rating by a nationally recognized statistical organization. However, some issuers do not seek a credit rating. For instance, the California Local Agency Investment Fund (LAIF) has not sought or received a credit rating. In these cases, the purchaser is solely responsible for performing their own due diligence before purchasing an investment or participating in an external investment pool. Certificates of deposit of$250,000 or less are fully insured by the Federal Deposit Insurance Corporation (FDIC), and therefore, do not seek a credit rating. 61 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 3 —Cash and Investments (Continued) D. Risk Disclosures (Continued) Disclosures Related to Credit Risk(Continued) Presented on the following is the minimum rating required by (where applicable) the Government Code, the Investment Policy, or the debt agreements, and the actual rating as of year-end for each investment type. Minimum Rating as of Year End Legal AAA/ Investment Type Total Rating AA+ Not Rated Investments: Local Agency Investement Fund (LAIF) $ 15,032,653 N/A $ - $ 15,032,653 California Asset Management Program 1,000,000 N/A 1,000,000 - Money Market Mutual Funds 2,111,179 AAA 2,111,179 - Certificates of Deposit 2,982,299 N/A - 2,982,299 Corporate Medium Term Notes 1,007,170 A 1,007,170 - US Treasury Securities 18,383,820 N/A 18,383,820 - U.S.Government Sponsored Enterprise Securities 51,329,067 N/A 51,329,067 - Total Investment 91,846,188 73,831,236 18,014,952 Investment with Fiscal Agents: Guaranteed Investment Contracts 619,500 N/A - 619,500 Money Market Mutual Funds 5,510,377 AAA 5,510,377 - Total Investment with Fiscal Agents 6,129,877 5,510,377 619,500 Total $ 97,976,065 $ 79,341,613 $ 18,634,452 Disclosures Relating to Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated in the Gov't Code. GASB Statement No. 40 requires disclosure by amount and issuer, of investments in any one issuer that represent 5% or more of total investments. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represents 5% or more of the City's total investments are as follows: Issuer Investment Type Fair Value Federal National Mortgage Association U.S. Government Sponsored $ 14,058,400 Enterprise Securities Federal Home Loan Mortgage Corporation U.S. Government Sponsored $ 15,172,900 Enterprise Securities Federal Home Loan Bank U.S. Government Sponsored $ 18,043,027 Enterprise Securities Local Agency Investment Fund (LAIF) California Pooled $ 15,032,653 Investment Fund The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. 62 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 3 —Cash and Investments (Continued) E. Investments in State Investment Pool — Local Agency Investment Fund The City's investments with Local Agency Investment Fund (LAIF) include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following: • Structured Notes - debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. • Asset-Backed Securities - the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as CMG's) or credit card receivables. LAIF is overseen by the Local Investment Advisory Board, which consists of five members, in accordance with State statute. The fair value of our position in the pool is the same as the value of the pool shares. As of June 30, 2014, the City had $15,032,653 invested in LAIF, which had invested 1.86% of the pool investment funds in Structured Notes and Asset-Backed Securities. F. Investment in California Asset Management Program (CAMP) The City is a voluntary participant in CAMP, a California Joint Powers Authority that falls under California Government Code Section 53601(p), which is directed by a Board of Trustees that is made up of experienced local government finance directors and treasurers. The CAMP pool is operated in a manner similar to registered money market funds which follow Rule 2a-7 of the Securities and Exchange Commission. The Pool is required to maintain an average maturity of less than 60 days, and is rated AAA by Standard & Poor's national rating agency. As of June 30, 2014, the City had $1,000,000 invested in CAMP. Note 4— Receivables At June 30, 2014, receivables consisted of the followings: Governmental Business-Type Activities Activities Total Accounts receivable $ 929,567 $ 2,779,853 $ 3,709,420 Taxes and assessments receivable 440,226 218,405 658,631 Accrued revenues 2,361,242 3,336 2,364,578 Loans receivable 22,645 - 22,645 Total $ 3,753,680 $ 3,001,594 $ 6,755,274 Loans receivable consist of loans to employees for the purchase of computer equipment, a program approved by the City Council to promote more efficient use of technology. 63 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 5 — Investment in Joint Ventures Investment in joint ventures is reported as other noncurrent assets in the Statement of Net Position, consists of the following as of June 30, 2014: Cardiff Sanitary Division San Elijo Joint Facilities $ 19,687,756 San Dieguito Water District R.E. Badger Joint Facilities 17,557,363 San Dieguito Water District R.E. Badger Financing Authority 764,190 18,321,553 Encinitas Sanitary Division Encina Joint Facilities 3,480,443 Total Investment in Joint Ventures $ 41,489,752 A. Cardiff Sanitary Division Investment in San Eliio Joint Powers Authority (SEJPA) In 1964, Cardiff Sanitary Division ("CSD") entered into an agreement with Solana Beach Sanitation District ("Solana Beach") for the joint ownership, maintenance, operation, and use of a Wastewater Treatment Plant and Ocean Outfall (collectively, the "Joint Facilities"). In 1987, CSD and Solana Beach agreed to establish the San Elijo Joint Powers Authority ("SEJPA"), a separate legal entity whose function it is to manage and operate the Joint Facilities and to determine the joint and separate obligations of the members concerning the transmission, treatment, disposal, and reclamation of wastewater within the respective service territories. On June 30, 1988, CSD and Solana Beach each transferred all of their assets related to the Facilities in exchange for a 50% interest in SEJPA. The Ocean Outfall is jointly owned by SEJPA (21% interest) and the City of Escondido (79% interest). SEJPA is responsible for the operations and maintenance of the Joint Facilities as well as the related administration. The operations and maintenance costs are allocated monthly and billed quarterly, based on the relative volume of flows after taking into account charges to other agencies that lease certain capacity rights and share in the costs of operations and maintenance. For the year ended June 30, 2014, CSD's share of those costs was $1,395,857, which is reported as a component of "facility operations and maintenance" in the accompanying financial statements. B. San Dieguito Water District Investment in R.E. Badger Filtration Plant and related Facilities (the "Joint Facilities") In 1967, SDWD entered into an agreement with Santa Fe Irrigation District ("Santa Fe") for the joint ownership, maintenance, operation, and use of a water treatment plant and various facilities for the storage and delivery of potable water. During the ensuing years, the SDWD and Santa Fe have added various facilities and improvements, which are owned in different percentages depending on the type of facility and the agreements in place. The ownership percentages of these Joint Facilities are described below: San Dieguito Water District Santa Fe Facilities 45% 55% Filtration Plant 31% 69% Filtered Water Reservoir 39% 61% Joint Pipeline 42% 58% San Dieguito Water Reservoir 64 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 5 — Investments in Other Agencies (Continued) B. San Dieguito Water District (Continued) Investment in R.E. Badger Filtration Plant and related Facilities (the" Joint Facilities") (Continued) Santa Fe is responsible for the operations and maintenance of the Joint Facilities as well as the related administration. The operations and maintenance costs are allocated monthly on the basis of the water used by each district, and administrative costs are allocated based on an agreed-upon cost allocation plan. For the year ended June 30, 2014, SDWD's share of those was $1,489,420, which is shown as "facility operations and maintenance" in the accompanying financial statements. Investment in R.E. Badger Water Facilities Financing Authority (the "Financing Authority") In 1999, SDWD and Santa Fe entered into a joint exercise of powers agreement and formed the Financing Authority to provide financing for the acquisition and construction of capital improvements related to the Joint Facilities. The Financing Authority subsequently issued revenue bonds for the purpose of funding those capital improvements. SDWD and Santa Fe are obligated under Installment Purchase Agreements to repay their proportionate shares of the long-term financing. The investment in the Financing Authority consists primarily of SDWD's share of the debt reserve funds held by a fiscal agent and unamortized bond discounts and issuance costs. C. Encinitas Sanitary Division Investment in Encina Water Pollution Control Facility (the "Joint Facilities") ESD is one of six member agencies with an ownership interest in the Joint Facilities. ESD owns approximately 2.7% of the Joint Facilities, after adjusting for the construction and upgrades to the Joint Facilities, referred to a "Phase V improvements." This ownership percentage affords ESD treatment capacity rights of approximately 2.0 million gallons/day, which is in excess of current needs and sufficient to meet all projected future needs. The Encina Wastewater Authority (Encina) is responsible for the operations and maintenance of the Joint Facilities, as well as the related administration. The operations, maintenance, and administrative costs are allocated monthly on the basis of the relative flows of each member agency. For the year ended June 30, 2014, ESD's share of those costs was $556,364, which is shown as "facility operations and maintenance" in the accompanying financial statements. Note 6 — Long-Term Receivable At June 30, 2014, the outstanding balance of the long-term receivable was $650,000. This receivable is one of the results of the Encinitas Ranch Development Agreement that was executed between the City and the developer of the Encinitas Ranch planned community in 1994. Part of that agreement allowed the developer to apply up to 50% of the sales tax proceeds generated by the Encinitas Ranch Town Center towards the payment of CFD assessments during its first five years of operation. The funds were applied to CFD payments pursuant to this loan agreement for approximately two years, and then discontinued. The original loan amount was about $1.3 million. The developer has been making interest and certain principal repayments, consistent with the contract terms, in the ensuing years. In 2011, the City Council approved an extension to the final maturity of the note by five years, to June 15, 2018. The balance at that time was approximately $650,000. Simple interest is payable annually, with principal payments commencing in June 2016 and continuing through until June 2018 when the remaining balance is due and payable. The note is secured by the developer's share of the future net revenues of the Encinitas Ranch Golf Course, which substantially exceed the face value of the note. 65 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 7 —Other Assets At June 30, 2014, the City has recorded other assets consisting of the following: Governmental Business-type Activities Activities Total Other Assets: Prepaid pension side funds $ 3,325,189 $ 981,523 $ 4,306,712 Less: accumulated amortization (2,327,633) (687,064) (3,014,697) Total other assets $ 997,556 $ 294,459 $ 1,292,015 These amounts represent the related unamortized prepayment of its pension side fund obligations in 2007. The City elected to amortize over a 10-year period. For the year ended June 30, 2014, the amortization expense was $332,519 for the governmental activities and $98,152 for the business-type activities. Note 8 —Capital Assets A. Governmental Activities Summary of changes in governmental activities capital assets for the year ended June 30, 2014 is as follows: Balance Transfers/ Balance July 1,2013 Additions Deletions Reclassification June 30,2014 Capital assets,not being depreciated: Land $ 51,833,600 $ - $ - $ - $ 51,833,600 Land easements 2,046,711 57,831 - - 2,104,542 Construction in progress 17,940,828 13,317,282 (86,746) (1,473,147) 29,698,217 Total capital assets,not being depreciated 71,821,139 13,375,113 (86,746) (1,473,147) 83,636,359 Capital assets,being depreciated: Public facilities 71,663,288 4,853,453 - 19,806 76,536,547 Vehicles,equipment and machinery 10,642,539 233,875 (2,312,077) 31,891 8,596,228 Infrastructure 108,525,913 - - 1,453,341 109,979,254 Total capital assets,being depreciated 190,831,740 5,087,328 (2,312,077) 1,505,038 195,112,029 Less accumulated depreciation Public facilities (20,488,112) (2,335,300) - - (22,823,412) Vehicles,equipment and machinery (7,152,933) (534,612) 2,312,077 (31,891) (5,407,359) Infrastructure (38,486,395) (2,616,983) - - (41,103,378) Total accumulated depreciation (66,127,440) (5,486,895) 2,312,077 (31,891) (69,334,149) Total capital assets being depreciated,net 124,704,300 (399,567) - 1,473,147 125,777,880 Governmental activities capital assets,net $ 196,525,439 $ 12,975,546 $ (86,746) $ - $ 209,414,239 66 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 8 —Capital Assets (Continued) A. Governmental Activities (Continued) Depreciation expense was charged to the functions/programs of the governmental activities as follows: General government $ 808,939 Public safety 653,088 Public works 2,953,320 Parks and recreation 1,071,548 Total depreciation expense $ 5,486,895 B. Business-type Activities Summary of changes in business-type activities capital assets for the year ended June 30, 2014 is as follows: Balance Transfers/ Balance July 1, 2013 Additions Deletions Reclassification June 30,2014 Capital assets, not being depreciated: Land easements $ 2,925,680 $ 121,471 $ - $ - $ 3,047,151 Public works facility right of use 3,378,700 - - - 3,378,700 Construction in progress 14,333,279 3,879,687 - (4,692,805) 13,520,161 Total capital assets, not being depreciated 20,637,659 4,001,158 - (4,692,805) 19,946,012 Capital assets,being depreciated: Structures and improvements 14,350,601 - (264,031) - 14,086,570 Collection and distribution 49,497,164 22,970 (167,617) 4,692,805 54,045,322 Machinery and equipment 2,333,285 303,202 (88,090) (31,891) 2,516,506 Capacity Rights 323,190 - - - 323,190 Total capital assets, being depreciated 66,504,240 326,172 (519,738) 4,660,914 70,971,588 Less accumulated depreciation Structures and improvements (4,430,652) (339,489) 119,827 - (4,650,314) Collection and distribution (28,566,553) (644,948) 116,237 - (29,095,264) Machinery and equipment (2,373,877) (220,655) 88,090 31,891 (2,474,551) Capacity rights (112,578) (6,464) - - (119,042) Total accumulated depreciation (35,483,660) (1,211,556) 324,154 31,891 (36,339,171) Total capital assets being depreciated,net 31,020,580 (885,384) (195,584) 4,692,805 34,632,417 Business-type activities capital assets, net $ 51,658,239 $ 3,115,774 $ (195,584) $ - $ 54,578,429 Depreciation expense was charged to the functions/programs of the business-type activities as follows: Cardiff Sanitary Division $ 200,459 San Dieguito Water District 622,435 Encinitas Sanitary Division 288,124 Non-major Affordable Housing 100,538 Total $ 1,211,556 67 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 - Long-Term Obligations A summary of changes in long-term liabilities for the year ended June 30, 2014 is as follows: Classification Balance Balance Due Within Due in More July 1,2013 Additions Deletion June 30,2014 One Year Than One Year Governmental Activities: Capital Leases: 2007 Storm Drain Equipment $ 37,789 $ - $ (37,789) $ - $ - $ - 2008 Civic Center Roof Replacement 1,523,397 - (128,518) 1,394,879 133,304 1,261,575 2011 Fire Apparatus 810,359 - (154,182) 656,177 158,030 498,147 2012 Fire Apparatus 519,447 - (81,950) 437,497 83,747 353,750 2013 Fire Apparatus 555,384 - (79,537) 475,847 75,605 400,242 Bonded Debt: 1997 Civic Center COP's 2,185,000 - (505,000) 1,680,000 530,000 1,150,000 2002 ABAG Financing 1,325,000 - (240,000) 1,085,000 255,000 830,000 2006 Public Library Bonds 17,920,000 - (465,000) 17,455,000 480,000 16,975,000 less: original issue discount (240,000) - 10,000 (230,000) - (230,000) 2010 Community Park Bonds 17,365,000 - (665,000) 16,700,000 700,000 16,000,000 add: original issue premium 184,983 - (10,775) 174,208 - 174,208 2013 Community Park Bonds 7,865,000 - (305,000) 7,560,000 315,000 7,245,000 add: original issue premium 131,400 - (8,760) 122,640 - 122,640 Subtotal of governmental capital leases and bonded debt 50,182,759 - (2,671,511) 47,511,248 2,730,686 44,780,562 Claims payable 1,048,309 419,372 (860,135) 607,546 607,546 - Compensated absences 1,993,027 1,429,931 (1,343,425) 2,079,533 2,079,533 - Total governmental activities 53,224,095 1,849,303 (4,875,071) 50,198,327 5,417,765 44,780,562 Business-type Activities: 2011 CSD Note Payable to SEJPA 3,769,821 - (563,036) 3,206,785 579,366 2,627,419 add:original issue premium 275,207 - (34,401) 240,806 - 240,806 2004 SDWD Water Revenue Bonds 8,750,000 - (640,000) 8,110,000 665,000 7,445,000 2007 SDWD Note Payable Badger 5,920,000 - (385,000) 5,535,000 405,000 5,130,000 2004 EHA Housing Note Payable 1,495,415 - (50,684) 1,444,731 52,417 1,392,314 Subtotal of business-type bonded debt 20,210,443 - (1,673,121) 18,537,322 1,701,783 16,835,539 Compensated absences(SDWD) 154,218 127,923 (141,476) 140,665 140,665 - Compensated absences(Affordable Housing) 12,215 10,817 (12,215) 10,817 10,817 - Total business-type activities 20,376,876 138,740 (1,826,812) 18,688,804 1,853,265 16,835,539 Total long-term obligations $73,600,971 $ 1,988,043 $(6,701,883) $68,887,131 $7,271,030 $61,616,101 68 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 - Long-Term Obligations (Continued) A. Governmental Activities 2007 Storm Drain Cleaning Equipment The City entered into a long-term lease arrangement in fiscal year 2006-07 to finance the purchase of a new 2007 Vac-Con combination sewer and storm drain cleaner for $231,358. The lease has a term of seven (7) years, an interest rate of 4.66%, and semi-annual payments of$19,557. At June 30, 2014, the outstanding balance of the capital lease has been paid in full. 2008 Civic Center Roof Replacement and Energy Optimization Project On February 27, 2008, the City entered into a long-term lease arrangement with a financial institution to finance $2,100,000 of the 2008 improvements to the Encinitas Civic Center. The lease has a term of fifteen (15) years, an interest rate of 3.69%, and semi-annual payments of $91,778. The project was completed during fiscal year 2008-2009, and the final payment is due in fiscal year 2023. The total cost of the project was $3,543,258. The annual debt service requirements for the lease outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 133,304 $ 50,253 $ 183,557 2016 138,268 45,288 183,556 2017 143,417 40,139 183,556 2018 148,758 34,798 183,556 2019 154,298 29,258 183,556 2020-2024 676,834 57,392 734,226 Total $ 1,394,879 $ 257,128 $ 1,652,007 2011 Fire Apparatus Lease The City entered into a long-term lease arrangement in fiscal year 2010-11 to finance the purchase of a 2011 Pierce Arrow XT Aerial Tiller Truck for $1,214,003. The lease has a term of seven years, an interest rate of 2.48%, and semi-annual payments of $86,665. The lease is accounted for as a capital lease, as the City will be purchasing the unit for$1.00 at the maturity of the lease in fiscal year 2018. The annual debt service requirements for the lease outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 158,030 $ 15,299 $ 173,329 2016 161,974 11,356 173,330 2017 166,015 7,314 173,329 2018 170,158 3,171 173,329 Total $ 656,177 $ 37,140 $ 693,317 69 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 - Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2012 Fire Apparatus Lease The City entered into a long-term lease arrangement in fiscal year 2011-12 to finance the purchase of a 2012 Pierce Arrow XT Pumper Truck for $603,397. The lease has a term of seven (7) years with an interest rate of 2.18% and semi-annual payments of $46,415. The lease is accounted for as a capital lease, as the City has the option to purchase the unit for $1 at the maturity of the lease term in fiscal year 2019. The annual debt service requirements for the lease outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 83,747 $ 9,083 $ 92,830 2016 85,582 7,248 92,830 2017 87,458 5,372 92,830 2018 89,375 3,455 92,830 2019 91,335 1,496 92,831 Total $ 437,497 $ 26,654 $ 464,151 2013 Fire Apparatus Lease The City entered into a long-term lease arrangement in fiscal year 2012-13 to finance the purchase of a 2012 Pierce Arrow XT Pumper Truck for $559,653. The lease has a term of seven years, an interest rate of 1.91%, and annual payments of $84,693. The lease is accounted for as a capital lease, as the City will be purchasing the unit for $1.00 at the maturity of the lease in fiscal year 2020. The annual debt service requirements for the lease outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 75,605 $ 9,089 $ 84,694 2016 77,049 7,645 84,694 2017 78,520 6,173 84,693 2018 80,020 4,673 84,693 2019 81,548 3,145 84,693 2020-2024 83,105 1,587 84,692 Total $ 475,847 $ 32,312 $ 508,159 Capital assets and accumulated depreciation for assets held under capital leases are as follows: Accumulated Net Capital Cost Depreciation Assets Public facilities $ 3,543,258 $ (720,462) $ 2,822,796 Fire apparatus and equipment 2,377,053 (399,527) 1,977,526 Equipment and machinery 231,358 (231,358) - 70 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 — Long-Term Obligations (Continued) A. Governmental Activities (Continued) 1997 Refunding Certificates of Participation (COP's)-Series A (Encinitas Civic Center) In December 1991, the Encinitas Public Financing Authority (on behalf of the City of Encinitas) issued its 1991 Certificates of Participation-Series A totaling $7,635,000, to purchase the site and existing improvements for the Encinitas Civic Center. In December 1997, the EPFA issued the 1997 Refunding Certificates of Participation-Series A totaling $7,550,000, to refund all of the 1991 Certificates. The refunding qualified as an in-substance defeasance. Principal is due and payable annually in amounts ranging from $505,000 to $590,000. Interest is due and payable semi-annually with rates ranging from 3.70% to 5.05%. The final maturity of the issue is due and payable in fiscal year 2017. These certificates are subject to federal arbitrage requirements. The certificates are not subject to optional redemption prior to maturity. The annual debt service requirements for the 1997 Certificates of Participation outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 530,000 $ 70,750 $ 600,750 2016 560,000 43,500 603,500 2017 590,000 14,750 604,750 Total $ 1,680,000 $ 129,000 $ 1,809,000 2002 Association of Bay Area Governments (ABAG) Lease Revenue Bonds In July 2002, the City issued $6,590,000 of Lease Revenue Bonds, Series 2002-1 through ABAG, a California Joint Powers Authority. The proceeds were utilized to retire the 1992 Certificates of Participation-Series B (Encinitas Civic Center) and four existing debt obligations (including one of the Encinitas Sanitary Division) and to provide funding for improvements to the Civic Center and the SDWD Water Utility meter exchange and automation program. The Bonds mature annually in amounts ranging from $240,000 to $290,000. Interest is due and payable semiannually at rates ranging from 3.00% to 4.65%. The final maturity of the issue is due and payable in fiscal year 2018. The bonds are subject to federal arbitrage requirements. The Encinitas Sanitary Division and the San Dieguito Water District have repaid all of their obligations to the City under the agreement to advance funds. The remaining amounts payable are all attributable to the Civic Center funding. The annual debt service requirements for the 2002 ABAG Lease Revenue Bonds outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 255,000 $ 43,798 $ 298,798 2016 265,000 32,098 297,098 2017 275,000 19,810 294,810 2018 290,000 6,743 296,743 Total $ 1,085,000 $ 102,449 $ 1,187,449 71 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 — Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2002 Association of Bay Area Governments (ABAG) Lease Revenue Bonds (Continued) The bonds are subject to optional redemption beginning in 2013 at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed). Redemption Redemption Period Price June 1, 2013 through June 30, 2014 100.5% July 1, 2014 and thereafter 100% 2006 Lease Revenue Bonds (Public Library) On October 1, 2006 the Encinitas Public Financing Authority (on behalf of the City of Encinitas) issued its 2006 Lease Revenue Bonds - Series A (Library Construction Project) in the amount of $20,000,000 to provide funds for the construction of a new 26,000 square foot public library. The bonds consist of $10,405,000 of serial bonds and $9,595,000 in term bonds. The serial bonds mature through 2026 in annual installments ranging from $465,000 to $755,000. The term bonds mature through 2037 and are subject to mandatory sinking fund requirements. Annual principal installments range from $785,000 to $1,155,000. Interest is due and payable semi-annually at rates ranging from 3.6% to 4.4%. The bonds were issued at a discount, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are subject to federal arbitrage requirements. The annual debt service requirements for the 2006 Lease Revenue Bonds outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 480,000 $ 716,696 $ 1,196,696 2016 495,000 699,146 1,194,146 2017 515,000 680,966 1,195,966 2018 535,000 661,799 1,196,799 2019 555,000 641,634 1,196,634 2020-2024 3,105,000 2,862,065 5,967,065 2025-2029 3,780,000 2,157,341 5,937,341 2030-2034 4,670,000 1,253,508 5,923,508 2035-2037 3,320,000 222,031 3,542,031 Total $ 17,455,000 $ 9,895,186 $ 27,350,186 The bonds maturing on or after October 1, 2015 are subject to optional redemption beginning on or after October 1, 2014 at the following respective redemption prices: Redemption Redemption Period Price October 1, 2014 through September 30, 2015 102% October 1, 2015 through September 30, 2016 101% October 1, 2016 and thereafter 100% 72 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 — Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2010 Lease Revenue Refunding Bonds (Park Project) On September 1, 2010, the Encinitas Public Financing Authority (on behalf of the City of Encinitas) issued its 2010 Lease Revenue Refunding Bonds, Series A (Park Project) in the amount of$19,530,000 to provide funds for the refinancing of its 2001 Lease Revenue Bonds, Series A. The bonds consist of $15,675,000 of serial bonds and $3,855,000 of term bonds. The serial bonds mature from 2011 to 2028 in annual installments ranging from $625,000 to $1,175,000. The term bond matures on April 1, 2031 and is subject to mandatory sinking fund requirements. Interest is due and payable semi-annually at rates ranging from 2.00% to 4.85%. The bonds were issued at a premium, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are subject to federal arbitrage requirements. The bonds maturing on or after April 1, 2018 are subject to optional redemption on any date after April 1, 2017, without premium. The annual debt service requirements for the 2010 Lease Revenue Refunding Bonds outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 700,000 $ 711,831 $ 1,411,831 2016 735,000 676,831 1,411,831 2017 770,000 640,081 1,410,081 2018 810,000 601,581 1,411,581 2019 830,000 577,281 1,407,281 2020-2024 4,595,000 2,439,038 7,034,038 2025-2029 5,630,000 1,412,113 7,042,113 2030-2034 2,630,000 188,813 2,818,813 Total $ 16,700,000 $ 7,247,569 $ 23,947,569 2013 Lease Revenue Refunding Bonds (Public Park Construction Project) On March 20, 2013, the Encinitas Public Financing Authority (on behalf of the City of Encinitas) issued its 2013 Lease Revenue Bonds, Series A (Public Park Construction Project) in the amount of $7,865,000 to provide funds for the construction of capital improvements to the Encinitas Community Park. The bonds consist of $7,865,000 of serial bonds, which mature annually through 2033 in installments ranging from $305,000 to $510,000. Interest is due and payable semi-annually at rates ranging from 2.00% to 3.00%. The bonds were issued at a premium, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are subject to federal arbitrage requirements. 73 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 — Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2013 Lease Revenue Refunding Bonds (Public Park Construction Project) (Contiued) The annual debt service requirements for the 2013 Lease Revenue Refunding Bonds outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 315,000 $ 198,594 $ 513,594 2016 325,000 192,194 517,194 2017 330,000 185,644 515,644 2018 335,000 178,994 513,994 2019 345,000 172,194 517,194 2020-2024 1,840,000 736,502 2,576,502 2025-2029 2,120,000 455,250 2,575,250 2030-2034 1,950,000 119,250 2,069,250 Total $ 7,560,000 $ 2,238,622 $ 9,798,622 The bonds maturing on or after October 1, 2023 are subject to optional redemption on any date on or after October 1, 2022, without premium. B. Business-Type Activities 2011 CSD Note Payable to San Eliio Joint Powers Authority (SEJPA) On December 1, 2011, the SEJPA, on behalf of its members (the Cardiff Sanitary Division and the City of Solana Beach) refinanced all of its outstanding debt, including its 2003 refunding revenue bonds and a loan from the State of California. Information on the bond issuance itself is available through the SEJPA administrative offices. CSD is responsible, via a Third Amended and Restated Loan Agreement, for the repayment of $4,341,362 of the total borrowing amount of $9,235,000 (or approximately 47%.) Annual debt service is approximately $690,000 through fiscal year 2019, with smaller repayments due in 2020 and 2021. The average rate on the borrowing is approximately 2.0%. The bonds were issued at a premium, which is being amortized over the life of the bonds on a straight-line basis. The issue also resulted in deferred refunding costs, which are also being amortized over the life of the bonds on a straight-line basis. CSD has pledged its net revenues to pay for this outstanding obligation. Net revenues are defined as gross revenues less operations and maintenance costs, excluding depreciation, amortization and other non-cash type charges. CSD has covenanted to budget for net revenues each fiscal year of at least 110% of annual debt service. Total principal and interest remaining to be paid on the 2011 Note Payable as of June 30, 2014 is $3,589,579. During the year ended June 30, 2014, principal and interest paid on the 2011 Note Payable was $695,004 and net revenue was $3,253,560, or 467% of annual debt service. Management of CSD believes it is in compliance with these covenants for fiscal year 2013-2014. 74 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 - Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2011 CSD Note Payable to San Eliio Joint Powers Authority (SEJPA) (Continued) The annual debt service requirements for the 2011 CSD Note Payable to San Elijo Joint Powers Authority outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 579,366 $ 115,076 $ 694,442 2016 593,530 97,695 691,225 2017 612,192 79,889 692,081 2018 640,352 55,402 695,754 2019 663,846 29,788 693,634 2020-2024 117,499 4,944 122,443 Total $ 3,206,785 $ 382,794 $ 3,589,579 2004 SDWD Water Revenue Refunding Bonds On January 22, 2004, SDWD issued $13,845,000 of Water Revenue Refunding Bonds, Series 2004, to redeem all of the outstanding 1993 Water Revenue Refunding Bonds. The Bonds consist of $10,170,000 of serial bonds maturing from 2004 through 2019 in annual installments of $505,000 to $820,000 and one term bond of $3,675,000 maturing on October 1, 2023. The term bond is subject to sinking fund requirements, with annual principal installments ranging from $850,000 to $990,000. Interest is due and payable semi-annually at rates ranging from 2.5% to 5.0%. Annual debt service is approximately $1,020,000 through 2024. The bonds are subject to federal arbitrage requirements. The bonds maturing on or after October 1, 2015 are subject to optional redemption on any date after October 1, 2014, without premium. The 2004 Bonds were fully refunded subsequent to June 30, 2014 (See Note 18). The annual debt service requirements for the 2004 SDWD Water Revenue Refunding Bonds outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 665,000 $ 354,631 $ 1,019,631 2016 695,000 327,461 1,022,461 2017 720,000 299,131 1,019,131 2018 750,000 267,856 1,017,856 2019 785,000 234,791 1,019,791 2020-2024 4,495,000 580,300 5,075,300 Total $ 8,110,000 $ 2,064,170 $ 10,174,170 75 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 — Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2007 SDWD Note Payable to R.E. Badger Water Facilities Financing Authority (WFFA) On November 20, 2007, the WFFA, on behalf of its members (the Santa Fe Irrigation District and the San Dieguito Water District) issued $20,685,000 of 2007 Water Revenue Refunding Bonds while concurrently redeeming all of its outstanding 1999 Water Revenue Bonds. Information on the bond issuance itself is available through the WFFA administrative offices. SDWD is responsible, via an Amended and Restated Loan Agreement, for the repayment of $7,705,000 of the total borrowing. Principal is due and payable annually in amounts ranging from $335,000 to $620,000. Interest is due and payable semi-annually at rates ranging from 3.5% to 4.5%. Annual debt service is approximately $630,000 through fiscal year 2028. The annual debt service requirements for the 2007 SDWD Note Payable to R.E. Badger Water Facilities Financing Authority outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 405,000 $ 227,844 $ 632,844 2016 415,000 211,144 626,144 2017 440,000 191,244 631,244 2018 455,000 171,619 626,619 2019 475,000 152,919 627,919 2020-2024 2,725,000 441,438 3,166,438 2025-2029 620,000 13,950 633,950 Total $ 5,535,000 $ 1,410,158 $ 6,945,158 Pledged Revenues SDWD has pledged its net revenues to pay the debt service on these two obligations. Net revenues are defined as gross revenues less operations and maintenance costs, excluding depreciation, amortization and other non-cash type charges. Total principal and interest outstanding of the above mentioned debts as of June 30, 2014, is $17,119,328. During the year ended June 30, 2014 principal and interest paid was $1.647,075 and net revenue was $4,589,646, or 279% of annual debt service. SDWD has covenanted to budget for net revenues each fiscal year of at least 115% of combined annual debt service. SDWD's management believes it is in compliance with these covenants for fiscal year 2013- 2014. 2004 Encinitas Housing Authority (EHA) Note Payable In 2004, the EHA secured a note payable with a financial institution of $1,905,338 to partially fund the acquisition of 16 affordable housing units. The note is secured only by the rental income generated by the housing units. Principal and interest is due and payable monthly. Annual principal installments range from $50,684 in 2014 to $74,562 in 2034. The note bears interest at 90% of the ten-year US Treasury note, adjustable every six years. The EHA is solely responsible for repayment on this note. 76 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 9 — Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2004 Encinitas Housing Authority (EHA) Note Payable (Continued) The annual debt service requirements for the 2004 Encinitas Housing Authority Note Payable outstanding at June 30, 2014 are as follows: Year Ending June 30 Principal Interest Total 2015 $ 52,417 $ 47,848 $ 100,265 2016 54,083 46,182 100,265 2017 56,059 44,206 100,265 2018 57,976 42,289 100,265 2019 59,958 40,307 100,265 2020-2024 331,785 169,540 501,325 2025-2029 392,674 108,650 501,324 2030-2034 439,779 36,795 476,574 Total $ 1,444,731 $ 535,817 $ 1,980,548 Note 10— Interfund Receivables, Payable and Transfers A. Due To and From Other Funds Individual interfund receivables and payables at June 30, 2014, were as follows: Due from Due to Other Funds Other Funds Govermental Funds: General Fund $ 801,707 $ - NonmajorGovernmental Funds - 731,232 Non major Affordable Housing Enterprise Fund - 70,475 Total $ 801,707 $ 801,707 The amounts due to the General Fund are all short-term borrowings in anticipation of grant revenue not yet received or for debt service payments. 77 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 10— Interfund Receivables, Payable and Transfers (Continued) B. Transfers In and Out Transfers in and out between funds for the year ended June 30, 2014, were as follows: Transfers Out Nonmajor General Governmental Total Fund Funds All Funds Transfers In Major Governmental Funds: General Fund $ - $ 1,295,818 $ 1,295,818 Capital Improvement Capital Project Fund 14,548,894 - 14,548,894 Nonmajor Governmental Funds 2,092,182 2,634,072 4,726,254 Nonmajor Affordable Housing Enterprise Fund - 33,545 33,545 Internal Service Funds - 724,257 724,257 Total $ 16,641,076 $ 4,687,692 $ 21,328,768 Transfers In to the General Fund consist of reimbursements from two of the City's development impact fee funds for qualified costs incurred, or to be incurred in the future years, by the General Fund for the construction of public facilities. In addition, the City now accounts for all street maintenance expenditures in the Streets Division budget unit within the General Fund, and transfers all State Gasoline Tax operating revenues from the Infrastructure Improvements special revenue fund to the General Fund. Transfers in to the Capital Improvement Capital Projects Fund represent reimbursements from other governmental funds for capital expenditures incurred on their behalf. Reimbursements are transferred on a monthly basis, thus, the Capital Improvement fund maintains a zero fund balance. Transfers in to the Special Revenue funds represent the General Fund subsidy for the Senior Nutrition Program and the General Fund contribution to the Coastal Zone Management fund, which is included in the Grants and Housing special revenue fund. Transfers in to the debt service funds represent the amounts being transferred to the City's general debt service fund and the Encinitas Public Financing Authority debt service fund to pay for the City's various debt service obligations. Transfers in to the Internal Service Funds represent the City's annual contribution from the General Fund to the Risk Management fund. The contribution is not mandated and is established by the City Council during the annual budget process. 78 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 11 — Fund Balance and Net Position Classifications The City classifies fund balances, as shown on the Balance Sheet - Governmental Funds as of June 30, 2014 as follows: Major Funds Capital Improvements Other General Capital Projects Governmental Fund Fund Funds Totals Nonspendable: Inventory and prepaid items $ 404,694 $ - $ 1,565 $ 406,259 Other assets 997,556 - - 997,556 Long-term receivable 650,000 - - 650,000 Total nonspendable 2,052,250 - 1,565 2,053,815 Restricted: Infrastructure projects - - 1,601,467 1,601,467 Cable Franchise PEG funds - - 967,317 967,317 Environmental initiatives - - 1,212,557 1,212,557 Affordable housing - - 1,351,672 1,351,672 Donations - - 161,801 161,801 Parkland and open space - - 1,707,923 1,707,923 Traffic mitigation - - 3,997,171 3,997,171 Flood control - - 560,094 560,094 Lighting and landscaping assessments - - 2,726,509 2,726,509 Debt service - - 3,071,549 3,071,549 Other 4,079 - - 4,079 Total restricted 4,079 - 17,358,060 17,362,139 Committed: Capital projects 8,136,886 - - 8,136,886 Total committed 8,136,886 - - 8,136,886 Assigned: Capital projects 561,762 - - 561,762 Total assigned 561,762 - - 561,762 Unassigned 25,151,131 - - 25,151,131 Total Fund Balances $ 35,906,108 $ - $ 17,359,625 $ 53,265,733 79 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 11 — Fund Balance and Net Position Classifications (Continued) Categorization of Reserves under Adopted City Policies All unassigned amounts in the City's General Fund are considered reserves under internal City policies. The City maintains three separate and distinct reserves: 1) Contingency Reserve — represents funds that are set-aside for use only in exceptional circumstances such as catastrophic events that could negatively impact the financial condition of the City. Funding represents 20% of the next year's operating expenditures, and no drawdowns have ever been executed on this reserve. City Policy requires a 4/5 vote of the City Council to authorize draws on this reserve. The amount of the contingency reserve as of June 30, 2014 was $10,614,667. 2) Budget Stabilization Reserve — was established in 2007 to help mitigate potential fluctuations in operating revenues, or to fund unanticipated operating expenditures. Funding levels are mandated at 2% to 5% of the next year's budgeted operating revenues. Any changes to the level of funding for this reserve also require a 4/5 vote of the City Council. In practice, this reserve has been funded within the established range since 2007, and changes are made during the annual budget process. The amount of the budget stabilization reserve as of June 30, 2014 was $1,158,884. 3) General Undesignated Reserve - This reserve represents any remaining unassigned fund balance after funding levels have been established for (1) and (2) above. These funds may be allocated in any manner the City Council designates. The amount of the general undesignated reserve as of June 30, 2014 was $13,786,353. 80 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 12— Risk Management A. City of Encinitas - Risk Management and Insurance Programs The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City has a proactive in- house risk management program, which combines risk mitigation initiatives with a self-insurance program and excess coverage policies with outside providers. The City maintains a self-insurance fund to finance and account for its self-insured risks of loss. The Risk Management fund is accounted for as an Internal Service fund. It is supported by interfund charges for workers compensation coverage, unemployment insurance, and contributions from CSD, ESD and the City. The Risk Management fund strives to maintain an adequate net position, over time, to cover all known and reported claims, as well as an adequate reserve for incurred but not reported (IBNR) claims. The City is self-insured for liability claims and losses up to $500,000 per occurrence, and for worker's compensation claims and losses up to $350,000 per occurrence. The City is a member of the San Diego Pooled Insurance Program Authority (SANDPIPA) which covers any liability claims or losses above the $500,000 self-insured level. SANDPIPA is a separate legal entity formed by the participating municipalities to provide pooled excess liability insurance coverage to its members. The members do not hold any ownership stake in SANDPIPA and have no claims to revenue or assets upon withdrawal, at which time the purchase of tail coverage is required. SANDPIPA is governed by a Board of Directors, who determines policy and necessary funding levels, including retroactive adjustments for over-or under-funding, which is reflected as adjustments to current year premiums. The City is covered for losses between $125,000 and $2,500,000 by the SANDPIPA reserve pool. The members share the risk of claims in excess of reserves. For claims incurred after July 1, 1992, member expenses are included in the self-insurance reserve for purposes of calculating pooled coverage. Excess liability insurance coverage is provided for losses between $2,500,000 and $47,000,000 via excess insurers. The City is a member of the Local Agency Workers Compensation Excess (LAWCX), a California Joint Powers Insurance Authority. LAWCX provides coverage for claims between $500,000 and $2,500,000. Excess worker's compensation and commercial coverage between $2,500,000 and $45,000,000 is provided through contract reinsurance. City departments contribute premiums to the self-insurance fund based on annual rates set for each work class. 81 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 12— Risk Management (Continued) A. City of Encinitas - Risk Management and Insurance Programs (Continued) Changes in the balances of claims payable for liability and workers compensation during the past two years are as follows: Year Ended June 30, 2014 Claims Payable, beginning of year $ 1,048,309 Estimated Incurred Claims, net 419,372 Claims Payments (860,135) Claim Payable, end of year $ 607,546 The City and the General Contractor of the Encinitas Community Park received a Regional Water Quality Control Board (Regional Board) complaint and proposed fine of $430,851 on November 21, 2013. The City is in the process of entering settlement negotiations with the Regional Board for resolution and ultimately will be seeking recovery of a portion of the fine from the General Contractor. B. San Dieguito Water District (SDWD) - Risk Management and Insurance Programs Risk management programs and support for SDWD are provided by the City of Encinitas Risk Management Department, for which SDWD pays the City an annual fee (charge for those services.) SDWD is a member of the Association of California Water Agencies - Joint Powers Insurance Authority (JPIA), which provides coverage for general liability, property and casualty, and workers' compensation. Self-insured retention levels ranges from $10,000 to $25,000. As of June 30, 2014, in the opinion of the District's management and general counsel, there were no material claims which would require accrual in the accompanying financial statements. Management has determined, based on modest self- insurance retention levels and favorable claims experience, that no self-insurance liabilities were necessary. SDWD has no outstanding claims as of June 30, 2014, and did not pay any claims during the fiscal year. Note 13—Commitments and Contingencies A. Lawsuits Numerous claims and suits have been filed against the City in the normal course of conducting City business. Based upon information received from the City Attorney and the self-insurance administrator, the estimated liability under such claims would be adequately covered by the deposits paid to SANDPIPA or LAWCX for self-insurance and insurance coverage (See Note 12). B. Grants Amounts received or receivable from federal and state granting agencies are subject to audit and adjustment by grantor agencies. While no matters of noncompliance were disclosed by the audit of the financial statements or Single Audit of the Federal grant programs, grantor agencies may subject grant programs to additional compliance tests, which may result in disallowed costs. In the opinion of management, future disallowances of current or prior grant expenditures, if any, would not have a material adverse effect on the financial position of the City. 82 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 13—Commitments and Contingencies (Continued) C. Construction Commitments As of June 30, 2014, the City had remaining contractual commitments totaling nearly $2 million for capital projects related to its governmental and business-type activities. The more significant capital commitments include approximately $360,000 related to the North Coast Highway 101 Streetscape project and approximately $750,000 for the Olivenhain Trunk Sewer Design project. Note 14—California Public Employees' Retirement System A. City of Encinitas (not including the San Dieguito Water District) Plan Descriptions The City of Encinitas has entered into three separate defined benefit pension plans covering miscellaneous and safety employees with the California Public Employees' Retirement System (CaIPERS). CalPERS is an agent multiple-employer public employee defined benefit pension plan. The plans provide retirement and disability benefits, annual cost-of-living adjustments, and death benefits to Plan members and beneficiaries. The Plans are administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements is established by State statutes within the Public Employees' Retirement Law. The City selects optional benefit provisions from the benefit menu by contract and adopts those benefits through local ordinances. CalPERS provides a separate comprehensive annual financial report, which can be obtained from the CalPERS Executive Office, Lincoln Plaza North, 400 Q Street, Sacramento, CA 95811. The three City plans are as follows: 1. The Miscellaneous Plan of the City of Encinitas (Miscellaneous Plan) 2. The Safety Fire Department Plan of the City of Encinitas (Fire Plan) 3. The Safety Lifeguard Plan of the City of Encinitas (Lifeguard Plan) The City's Miscellaneous Plan is an agent multiple-employer Plan that is part of the Public Agency's portion of CalPERS. The Fire and Lifeguard Plans are cost-sharing multiple employer defined benefit plans in which the City participates with other public agencies that each have less than 100 active members and share the same benefit formula. The Miscellaneous Plan provides employees hired before October 13, 2012 with a Tier 1 benefit equal to 2.7% at 55 years of age, calculated based on the single highest year of qualifying compensation. As of October 13, 2012, the City Council imposed new terms and conditions on the miscellaneous employees which created a new benefit formula for employees hired after the effective date of the change (the "Tier 2 miscellaneous plan".) Employees hired under the Tier 2 miscellaneous plan receive a lower benefit formula, referred to as the 2% at 60 year of age formula. In addition, legislation enacted by the State of California applying to all local units of government, referred to as the Public Employees' Pension Reform Act (PEPRA) which became effective on January 1, 2013, created yet another benefit formula for new hires with no experience or prior service credit with CalPERS. In the case of the City, this will constitute a "Tier 3 miscellaneous plan" which provides a retirement benefit, referred to as the 2% at 62 years of age formula. The actual retirement benefit for Tier 2 and Tier 3 miscellaneous employees will be calculated using the average of the highest 36 consecutive months of qualifying compensation. 83 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 14—California Public Employees' Retirement System (Continued) A. City of Encinitas (not including the San Dieguito Water District) (Continued) The Fire Plan provides employees hired before June 23, 2012 with a Tier 1 benefit equal to 3.0% at 55 years of age, calculated based on the single highest year of qualifying compensation. Effective June 23, 2012, the Encinitas Firefighters Association executed a new four year Memorandum of Understanding (MOU) with the City that provides for modifications to the pension benefit formula for employees hired on or after the effective date (the "Tier 2 fire safety plan".) The 3.0% at 55 year of age formula is maintained, but the actual retirement benefit will be calculated using the average of the highest 36 consecutive months of qualifying compensation. In addition, the PEPRA legislation, created yet another benefit formula for new hires with no experience or prior service credit with CaIPERS. In the case of the City, this will constitute a "Tier 3 fire safety plan" which provides a retirement benefit, referred to as the 2.7% at 57 years of age formula. This plan also utilizes the mandated method of calculation based on the average of the highest 36 consecutive months of qualifying compensation. The Lifeguard Plan provides employees hired before October 13, 2012 with a Tier 1 benefit equal to 3.0% at 55 years of age, calculated based on the single highest year of qualifying compensation. The lifeguards have Tier II and Tier III plans which are identical to the Fire Plan described above. Funding Policy Employee Contributions Active Tier 1 miscellaneous members are required to contribute 8% of their annual covered salary (the "employee contribution"). Effective October 13, 2012, all Tier 1 miscellaneous members contribute the full 8%, which is credited to their individual accounts. Members receiving the Tier 2 or Tier 3 benefits are required to contribute 7% of their annual covered salary. Lifeguard members are now required to contribute the full 9% of their annual covered salary as their employee contribution. The funding of the employee contribution of 9% for fire safety members is in transition, based on the provisions of the June 23, 2012 MOU. In the first year, employees are required to contribute 3% towards the employee contribution, with the employer picking up the balance of 6%. After the third year, the employees will be required to contribute the full required 9%. The employee contribution requirements are established by State statute. Employer Contributions The City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members (the "employer contributions"). The employer contribution rates for fiscal year 2013-2014 range from approximately 18.85% for miscellaneous members to 23.34% for safety members. The employer contribution rates are calculated and established annually by CaIPERS, based on the actuarial methods and assumptions as adopted by the CaIPERS Board of Administration. Annual Pension Costs The annual pension cost (APC), which is equivalent to the actual annual required employer contributions made to CaIPERS, is based on the actuarially determined rates in effect for that fiscal year. These amounts do not include any payments made by the City on behalf of the employees for employee contributions. 84 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 14—California Public Employees' Retirement System (Continued) A. City of Encinitas (not including the San Dieguito Water District) (Continued) A summary of the annual pension costs and the percentage of the required APC contributed for the last three fiscal years is presented below: Miscellaneous Plan Fire Plan Lifeguard Plan Annual Percentage Annual Percentage Annual Percentage Pension of APC Pension of APC Pension of APC Fiscal Year Cost Contributed Cost Contributed Cost Contributed June 30, 2012 $ 2,525,786 100% $ 1,160,826 100% $ 85,924 100% June 30, 2013 2,247,251 100% 1,035,753 100% 81,503 100% June 30, 2014 2,246,342 100% 1,288,248 100% 82,599 100% Funded Status and Funding Progress The following table summarizes the City's Miscellaneous Plan's funding status for the most recent actuarial valuation (latest available data): Unfunded Actuarial Entry Age Unfunded Liability as Actuarial Actuarial Actuarial Actuarial Percentage of Valuation Assets Accrued Accrued Funded Covered Covered Date Value Liability Liability Ratio Payroll Payroll June 30, 2012 $ 55,775,486 $ 72,910,100 $ 17,134,614 76.5% $ 12,241,227 139.97% The actuarial assumptions in the June 30, 2011 actuarial valuation for the City's Miscellaneous Plan, which was used to determined the fiscal year 2013-2014 annual required contribution, included (1) 7.5% investment rate of return (net of administrative expenses), (b) projected salary increases that vary by duration of service ranging from 3.30% to 14.20%, and (c) a 3% growth in payroll. Both (a) and (b) included an inflation component of 2.75%. The actuarial assumptions in the June 30, 2012 actuarial valuation for the City's Miscellaneous Plan included (1) 7.50% investment rate of return (net of administrative expenses), (b) projected salary increases that vary by duration of service ranging from 3.30% to 14.20%, and (c) a 3% growth in payroll. Both (a) and (b) included an inflation component of 2.75%. The actuarial value of the Miscellaneous Plan assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a fifteen-year period (smoothed market value). CaIPERS' unfunded actuarial accrued liabilities (or excess assets) are being amortized as a level percentage of projected payroll on a closed basis, depending on the size of investment gains and/or losses. The Schedule of Funding Progress presented as Required Supplementary Information following the Notes to the Basic Financial Statements presents multi-year trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The actuarial assumptions utilized are as described above. The City's Fire Plan and Lifeguard Plan are part of a CalPERS Risk Pool for employers with less than 100 active plan members. As part of a cost sharing multiple-employer defined benefits plans, disclosure of the schedules of funding progress is not required. 85 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 14—California Public Employees' Retirement System (Continued) B. San Dieguito Water District Plan Description The San Dieguito Water District has entered into a contract for a defined benefit pension plan for miscellaneous employees with CalPERS (the "SDWD Plan'). The SDWD Plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to members and beneficiaries and is administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements is established by State statutes within the Public Employees' Retirement Law. The District selects optional benefit provisions from the benefit menu by contract and adopts those benefits through local ordinances. CalPERS issues a separate comprehensive annual financial report, which can be obtained from the CalPERS Executive Office, Lincoln Plaza North - 400 Q Street - Sacramento, CA 95811. The SDWD Plan is a cost-sharing multiple employer defined benefit plan, in which the District participates with other public agencies that share the same benefit formula and have less than 100 active members. The SDWD Plan provides employees hired before October 13, 2012 with a Tier 1 benefit equal to 2.7% at 55 years of age, calculated based on the single highest year of qualifying compensation. As of October 13, 2012, the Board of Directors imposed new terms and conditions which created a new benefit formula for employees hired after the effective date of the change (the "Tier 2 Plan"). Employees hired under the Tier 2 Plan receive a lower benefit formula, referred to as the 2% at 60 years of age formula. In addition, PEPRA created yet another benefit formula for new hires with no experience or prior service credit with CalPERS. In the case of the District, this will constitute a "Tier 3 Plan" which provides a retirement benefit, referred to as the 2% at 62 years of age formula. The actual retirement benefit for Tier 2 and Tier 3 employees will be calculated using the average of the highest 36 consecutive months of qualifying compensation. Funding Policy Employee Contributions Active members in the Tier 1 Plan are required to contribute 8% of their annual covered salary (the "employee contribution"). Effective October 13, 2012, all Tier 1 members contribute the full 8%, which is credited to their individual accounts. Members receiving the Tier 2 or Tier 3 benefits are required to contribute 7% of their annual covered salary. The employee contribution requirements are established by State statute. Employer Contributions The District is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members (the "employer contributions"). The employer contribution rate for fiscal year 2013-2014 was approximately 15.69%. The employer contribution rates are calculated and established annually by CalPERS, based on the actuarial methods and assumptions as adopted by the CalPERS Board of Administration. 86 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 14—California Public Employees' Retirement System (Continued) B. San Dieguito Water District (Continued) Funding Policy (Continued) Annual Pension Costs The annual pension cost (APC), which is equivalent to the actual annual employer required contributions made to CalPERS, based on the actuarially determined rates in effect for that fiscal year. These amounts do not include any payments made by the District on behalf of the employees for employee contributions. A summary of the annual pension costs and the percentage of the required APC contributed for the last three fiscal years are presented below: Annual Percentage Net Pension of APC Pension Fiscal Year Cost Contributed Obligation June 30, 2012 $ 202,637 100% $ - June 30, 2013 252,408 100% - June 30, 2014 252,831 100% - Summary Description of CalPERS Actuarial Assumptions Some of the actuarial assumptions have changed effective with the latest actuarial valuation dated June 30, 2011. The primary assumptions and changes are briefly described below: 1. The price inflation factor was 2.75%. 2. The investment return assumption was 7.50%. 3. The overall payroll growth assumption was 3.00%. The actuarial value of the SDWD Plan assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a fifteen-year period (smoothed market value). CalPERS' unfunded actuarial accrued liabilities (or excess assets) are being amortized as a level percentage of projected payroll on a closed basis, depending on the size of investment gains and/or losses. Note 15—Other Postemployment Benefits (OPEB) The City of Encinitas and the San Dieguito Water District maintain separate plans to provide for post- retirement health care benefits. An actuarial report is prepared every two years to update plan information and assumptions (when required). The latest actuarial valuation was prepared for June 30, 2013, and applies to fiscal years 2013-14 and 2014-15. 87 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 15—Other Postemployment Benefits (OPEB) (Continued) A. City of Encinitas Retiree Health Plan Plan Description The City provides postretirement health care benefits through the Public Employees Medical and Hospital Care Act (PEMHCA), which is a health benefit plan administered by CalPERS, to eligible employees who retire directly from the City. The City pays the cost for lifetime retiree and dependent medical benefits (average premium for CalPERS health plans available in San Diego County) for fire department employees hired before March 16, 1995. Other City retirees receive the PEMHCA minimum benefit, as determined by CalPERS. The City does not provide a retiree contribution for dental, vision, or life insurance benefits. The City's OPEB plan does not issue a separate stand-alone report. The City has elected to join the California Employers' Retiree Benefit Trust (the "Trust") in accordance with GASB Statement No. 45, which provides a means to fund the annual OPEB costs, referred to as the Annual Required Contribution (ARC). The City makes an annual contribution to the Trust, pays benefits either directly to retirees or through PEMHCA during the year, and then seeks reimbursement for these "pay-as-you-go expenses" from the Trust. Funding Policy and Actuarial Methods and Assumptions It is the City's policy to fully fund the ARC each fiscal year. The actual contributions of the City to the Trust are established by action of the City Council. The contribution requirements were established via an actuarial valuation of the City's Retiree Healthcare Plan as of June 30, 2013, performed in conformity with the requirements of GASB Statement No. 45. The following key assumptions were utilized in developing the June 30, 2013 actuarial valuation: 1. The actuarial cost method used to determine the benefit obligations is the Entry Age Normal cost method. 2. The ARC is comprised of the present value of benefits in the current fiscal year (normal cost with interest) plus a 26-year amortization (on a level-percentage of basis) of the unfunded actuarial accrued liability. 3. The valuation reflects updated census and premium information, as well as changes to the demographic tables, reflecting the recent experience study published by CalPERS. 4. The investment rate of return assumption is 7.61%. 5. The expected future medical price inflation trend ranges from 5.0 to 7.5%. 6. Core inflation rate of 3.0%. 7. Payroll increases of 3.0% per annum, in aggregate. 8. Projected salary increases are based on merit increase data from the most recent CalPERS Pension Plan Study using the average pay increase based on the employee's date of hire. 9. Participation levels for safety personnel eligible for lifetime medical benefits is assumed to be 100%, while participation levels for miscellaneous employees who receive the CalPERS minimum required contribution is 50%, based on experience. 88 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 15—Other Postemployment Benefits (OPEB) (Continued) A. City of Encinitas Retiree Health Plan (Continued) Annual Required Contribution (ARC) and OPEB cost summary The ARC for fiscal year 2013-14 of approximately $785,000 represents a level of funding that, if paid on an on-going basis, is projected to cover normal costs each year and to amortize any unfunded actuarial liability over a maximum of 30 years. The City contributed the ARC to the Trust and received reimbursement for actual pay-as-you-expenses incurred during the year. The City's annual OPEB costs, the percentage of annual OPEB cost contributed, and the resulting net OPEB obligation for the preceding three years were as follows: Percentage of Net Annual Annual OPEEI OPEEI Fiscal Year OPEB Cost Cost Contributed Obligation June 30, 2012 $ 803,000 100% $ - June 30, 2013 760,000 100% - June 30, 2014 785,000 100% - Funded Status and Funding Progress The following table summarizes the funding status of the City's Retiree Health Plan from most recent actuarial valuations: Unfunded Actuarial Entry Age Unfunded Liability as Actuarial Actuarial Actuarial Actuarial Estimated Percentage of Valuation Assets Accrued Accrued Funded Covered Covered Date Value Liability Liability Ratio Payroll Payroll June 30, 2013 $ 2,178,800 $ 8,686,482 $ 6,507,682 25.08% $ 18,135,000 35.88% B. San Dieguito Water District— Retiree Health Plan The San Dieguito Water District maintains a separate plan to provide for post-retirement health care benefits. An actuarial report is prepared every two years to update plan information and assumptions (when required). The latest actuarial valuation was prepared for June 30, 2013, and applies to fiscal years 2013-14 and 2014-15. Plan Description SDWD provides postretirement health care benefits through the Public Employees Medical and Hospital Care Act (PEMHCA), which is a health benefit plan administered by CalPERS, to eligible employees who retire directly from SDWD. Retirees receive the PEMHCA minimum benefit, as determined by CalPERS. SDWD does not provide a retiree contribution for dental, vision, or life insurance benefits. SDWD's OPEB plan does not issue a separate stand-alone report. 89 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 15—Other Postemployment Benefits (OPEB) (Continued) B. San Dieguito Water District— Retiree Health Plan (Continued) Plan Description (Continued) SDWD has elected to join the California Employers' Retiree Benefit Trust (the "Trust") in accordance with GASB Statement No. 45, which provides a means to fund the annual OPEB costs, referred to as the Annual Required Contribution (ARC). SDWD makes its annual contribution to the Trust, pays benefits either directly to retirees or through PEMHCA during the year, and then seeks reimbursement for these "pay-as-you-go expenses" from the Trust. Funding Policy and Actuarial Methods and Assumption It is SDWD's policy to fully fund the ARC each fiscal year. The actual contributions of SDWD to the Trust are established by action of the Board of Directors. The contribution requirements were established via an actuarial valuation of the SDWD's Retiree Healthcare Plan as of June 30, 2013, performed in conformity with the requirements of GASB Statement No. 45. The following key assumptions were utilized in developing the June 30, 2013 actuarial valuation: 1. The actuarial cost method used to determine the benefit obligations is the Entry Age Normal cost method. 2. The ARC is comprised of the present value of benefits in the current fiscal year (normal cost with interest) plus a 26-year amortization (on a level-percentage of basis) of the unfunded actuarial accrued liability. 3. The valuation reflects updated census and premium information, as well as changes to the demographic tables, reflecting the recent experience study published by CalPERS. 4. The investment return assumption by the Trust is 7.61%. 5. The expected future medical price inflation trend ranges from 5.0 to 7.5%. 6. Core inflation rate of 3.0%. 7. Payroll increases of 3.0% per annum, in aggregate. 8. Projected salary increases are based on merit increase data from the most recent CalPERS Pension Plan Study using the average pay increase based on the employee's date of hire. 9. Participation levels for safety personnel eligible for lifetime medical benefits is assumed to be 100%, while participation levels for miscellaneous employees who receive the CalPERS minimum required contribution is 50%, based on experience. Annual Required Contribution (ARC) and OPEB cost summary The ARC for fiscal year 2013-14 of $31,000 represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and to amortize any unfunded actuarial liability over a maximum of 30 years. SDWD contributed the ARC to the Trust and received reimbursement for actual pay-as-you-expenses incurred during the year. 90 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 15—Other Postemployment Benefits (OPEB) (Continued) B. San Dieguito Water District— Retiree Health Plan (Continued) Annual Required Contribution (ARC) and OPEB cost summary (Continued) SDWD's annual OPEB costs, the percentage of annual OPEB cost contributed, and the resulting net OPEB obligation for the preceding three years were as follows: Percentage of Net Annual Annual OPEB OPEB Fiscal Year OPEB Cost Cost Contributed Obligation June 30, 2012 $ 25,000 100% $ - June 30, 2013 31,000 100% - June 30, 2014 31,000 100% - Funded Status and Funding Progress The following table summarizes the funding status of SDWD's Retiree Health Plan from most recent actuarial valuations. The latest information available on the funding status comes from the actuarial valuation dated June 30, 2013, projected to June 30, 2014. Unfunded Actuarial Entry Age Unfunded Liability as Actuarial Actuarial Actuarial Actuarial Estimated Percentage of Valuation Assets Accrued Accrued Funded Covered Covered Date Value Liability Liability Ratio Payroll Payroll June 30, 2013 $ 68,176 $ 332,472 $ 264,296 20.51% $ 1,886,000 14.01% General Information regarding Actuarial Valuations Methods and Assumptions Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood between the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and the plan members at that point. The actuarial methods and assumptions used include techniques designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of plan assets, consistent with the long-term perspective of the calculations. The Schedule of Funding Progress for the City and SDWD retiree health care plans are presented as Required Supplementary Information following the Notes to the Basic Financial Statements. These schedules show multi-year trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. 91 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 16— Encinitas Ranch Golf Authority The Encinitas Ranch Golf Authority (the "Golf Authority") is a joint powers authority, formed by the City and SDWD in 1995 to finance, own, and operate an 18-hole golf course (the "Golf Course") within the City. The Golf Course was constructed in connection with the development of the Encinitas Ranch master-planned community (the "Ranch"). The Ranch is a mixed-use community of residential, commercial and agricultural development within the City. As a condition to the development of the Ranch, the Carltas Company (the "Developer"), agreed to dedicate land for and construct the Golf Course improvements. The Golf Course opened to the public on March 1, 1998, and is managed and operated under a contract arrangement with a private company. The Golf Authority is governed by a five-member Board of Directors, the membership of which is specified in the 1994 Encinitas Ranch Development Agreement. It is a self-sustaining golf course operation and receives no financial support from the City or SDWD. In future years, depending on the net revenues from golf operations, the City may benefit financially from the operations. However, this is unlikely until at least 2030, when the Golf Course bonded debt is expected to be paid off. The debts and obligations of the Golf Authority are not the debts and obligations of the City or SDWD. Separate audited financial statements of the Golf Authority are available at City's administrative office. Note 17—Special Assessment Debt A. City of Encinitas - Community Facilities District (CFD) #1: Encinitas Ranch Community During fiscal year 2013-2014, the City, on behalf of the residents and businesses of the CFD #1, refunded all of the outstanding bonds of the 2004 Special Tax Bonds, Series A, via a current refunding transaction. The CFD #1 issued $32,265,000 par value of 2012 Special Tax Refunding Bonds (Encinitas Ranch Public Improvements), at lower interest rates, while maintaining the same general terms and conditions, including the final maturity date of September 1, 2030. The transaction will save the taxpayers an average of $170,000 in annual debt service, or about 6% of the average annual debt service of the prior bonds. As of June 30, 2014, the outstanding balance on the 2012 Special Tax Refunding Bonds was $32,265,000. The City acts solely as an agent for CFD #1. The City has no duty or obligation to pay any liabilities or potential liabilities of the district. Neither the full faith and credit, nor the taxing power of the City or any other City related agency, is pledged to the repayment of these 2012 Special Tax Refunding Bonds. Therefore, such bonds are not considered to be a liability of the City and are not included in the accompanying basic financial statements. B. City of Encinitas —Assessment District 93-1: Requeza Street/Bracero Road During fiscal year 1997-1998, the City, acting as the agent for the Requeza Assessment District ("District"), issued $1,356,400 of limited obligation bonds to finance and pay for infrastructure improvements to the District. The bonds were issued in two series. 92 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2014 Note 17—Special Assessment Debt (Continued) B. City of Encinitas —Assessment District 93-1: Requeza Street/Bracero Road (Continued) Series A: The Series A bonds were issued as tax-exempt obligations totaling $945,000 principal which were sold to the public. The bonds mature serially through 2017 and are being repaid by special assessments paid by the landowners. The remaining bonds have an average interest rate of 6.9%. At June 30, 2014, the outstanding balance was $215,000. Series B: The Series B bonds were issued as taxable obligations totaling $411,000 principal and were sold directly to the City of Encinitas. The Series B bonds have since been fully repaid. City of Encinitas—Duties and Responsibilities The City acts as the agent for both of these Assessment Districts, collecting the assessments and paying the Districts' bills, as well as other administrative duties. The City has no duty or obligation to pay any liabilities or potential liabilities of the these Districts. Neither the full faith and credit, nor the taxing power of the City or any other City related agency, is pledged in connection with these bond issues. Therefore, such bonds are not considered to be a liability of the City and are not included in the accompanying basic financial statements. Note 18—Subsequent Events A. GASB Statement No. 68, Accounting and Financial Reporting for Pension Plans In June 2012, GASB issued Statement No. 68, Accounting and Financial Reporting for Pension Plans (an amendment of GASB Statement No. 27). This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures of pension plans. This statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Management is evaluating the impact of the adoption of this standard on the financial statements and believes that its impact, when adopted, may be substantial to the City. GASB Statement No. 68 will be implemented effective with the fiscal year 2014-2015 financial statements. B. Issuance of Debt In September 2014, the San Dieguito Water District issued its Water Revenue Refunding Bonds, Series 2014 (the "2014 Bonds"). The 2014 Bonds were issued via a competitive process, and the proceeds were used to accomplish a full refunding of the District's 2004 Water Revenue Refunding Bonds. The purpose of the refunding was to obtain lower interest rates, and thus, save the District money on future interest costs. None of the terms or conditions of the original 2004 Bonds changed; all previous covenants are still in place, and the original final stated maturity of 2024 was not modified. The District retired $8,110,000 principal amount of bonds, and replaced them with $5,870,000 principal amount of the 2014 Bonds. The reason(s) for the reduction in principal amount are: (1) elimination of the previous debt service reserve fund, and (2) the opportunity to issue premium bonds. The District achieved net present value savings or 13.5% on the refunded bonds, which translates to annual debt service savings of approximately $250,000, and a new payment (principal and interest) of about $770,000 per year for the next ten years. The transaction was a pure current refunding, which did not raise any additional funds for the District's capital program. 93 REQUIRED SUPPLEMENTARY INFORMATION 95 City of Encinitas Required Supplementary Information For the Year Ended June 30, 2014 Note 1 — Budgetary Information Budget and Budgetary Accounting: The City follows these procedures in establishing the budgetary data reflected in the required supplementary information and other supplementary information budgetary comparison schedules: The City Council adopts a two year operating budget, with appropriations for the first year only. The annual budget provides for the general operations of the City. In includes all proposed expenditures and inter-fund transfers, and the means of financing them. The Council also approves any amendments to appropriations throughout the year, generally at the mid-year budget review in February. This "appropriated budget" covers substantially all City expenditures, with the exception of capital improvement projects, which expenditures constitute a legally authorized "non-appropriated budget." The legal level of budgetary control is the fund level. The budget figures used in the required supplementary information are both original and final budgeted amounts. The final budget amount includes any amendments adopted during the year. Formal budgetary integration is employed as a management control device. Commitments for materials and services, such as purchase orders and contracts, are recorded during the year as encumbrances to assist in controlling expenditures. Appropriations which are unencumbered lapse at year end. City Council approval is required to include any unencumbered appropriations at year end in the following fiscal year's budget as continuing appropriations. Budget for the General and special revenue funds are adopted on a basis substantially consistent with accounting principles generally accepted in the United States of America. Accordingly, actual revenue and expenditures can be compared with related budgeted amounts without any significant reconciling items. No budgetary comparisons are presented for the debt service, capital projects, or proprietary funds, as the City is not legally required to adopt an annual budget for those types of funds. Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), the City is restricted as to the amount of annual appropriations from the proceeds of taxes, and if proceeds of taxes exceed allowed appropriations, the excess must either be refunded to the State Controller, returned to the taxpayers through revised tax rates or revised fee schedules, or an excess in one year may be offset against a deficit in the following year. Further, Section 5 of Article XIIIB allows the City to designate a portion of fund balance for general contingencies to be used in future years without limitation. 97 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2014 Note 2 - Budgetary Comparison Schedule General Fund Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES: Taxes: Property $ 33,608,897 $ 33,679,087 $ 35,133,220 $ 1,454,133 Sales 11,789,274 11,720,889 12,067,360 346,471 Franchise 2,203,781 2,203,781 2,188,437 (15,344) Real property transfer 400,000 400,000 520,810 120,810 Transient occupancy 1,068,045 1,068,045 1,256,842 188,797 Total taxes 49,069,997 49,071,802 51,166,669 2,094,867 Licenses and permits 191,370 191,370 289,116 97,746 Intergovernmental 471,386 464,824 479,026 14,202 Charges for services 3,936,300 5,058,912 5,479,847 420,935 Fines, forfeitures and penalties 690,150 690,150 632,776 (57,374) Use of money and property 448,187 456,839 457,135 296 Other 357,359 464,859 713,818 248,959 Total revenues 55,164,749 56,398,756 59,218,387 2,819,631 EXPENDITURES: General government: City Council 386,530 386,560 353,472 33,088 Community enhancement 75,000 75,000 74,220 780 City Attorney 308,500 308,500 308,021 479 City Manager 4,317,513 4,279,435 3,863,602 415,833 City Clerk 545,167 545,167 498,889 46,278 Finance 1,708,576 1,708,576 1,655,714 52,862 Non-departmental 1,971,972 1,971,972 2,220,344 (248,372) Total general government 9,313,258 9,275,210 8,974,262 300,948 Public safety: Law enforcement 12,253,700 12,253,700 11,972,883 280,817 Fire and marine safety 12,873,713 12,680,350 12,074,358 605,992 Total public safety 25,127,413 24,934,050 24,047,241 886,809 Public works: Administration 163,908 163,908 142,859 21,049 Environmental programs 94,000 141,078 147,779 (6,701) Street maintenance 1,634,994 1,714,781 1,568,922 145,859 Facility maintenance 1,018,969 1,061,781 1,060,988 793 Stormwater 810,685 874,574 784,849 89,725 Total public works $ 3,722,556 $ 3,956,122 $ 3,705,397 $ 250,725 98 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2014 Note 2 - Budgetary Comparison Schedule (Continued) General Fund (Continued) Budgeted Amounts Variance with Original Final Actual Final Budget Planning and building: Planning $ 2,260,732 $ 2,303,884 $ 2,080,492 $ 223,392 Code enforcement 562,839 564,794 504,355 60,439 Building services 1,067,936 1,617,936 1,709,248 (91,312) Total planning and building 3,891,507 4,486,614 4,294,095 192,519 Engineering services: City engineering 2,489,005 2,573,005 2,515,606 57,399 Traffic engineering 721,269 721,269 662,997 58,272 Stormwater 801,871 801,871 770,749 31,122 Total engineering services 4,012,145 4,096,145 3,949,352 146,793 Parks and recreation: Administration 891,288 951,470 883,932 67,538 Park services 1,239,490 1,275,333 1,321,728 (46,395) Beach services 448,743 450,926 442,824 8,102 Recreational trails 119,533 119,533 107,596 11,937 Recreational services 618,968 608,968 615,141 (6,173) Community and senior center 1,183,108 1,183,608 1,172,231 11,377 Total parks and recreation 4,501,130 4,589,838 4,543,452 46,386 Capital outlay - - - - Total expenditures 50,568,009 51,337,979 49,513,799 1,824,180 EXCESS OF REVENUES OVER EXPENDITURES 4,596,740 5,060,777 9,704,588 995,451 OTHER FINANCING SOURCES (USES) Transfers in -operating 1,048,077 1,048,077 1,295,818 (247,741) Transfers out-operating (804,962) (814,962) (835,336) (20,374) Transfersout-capital (1,200,160) (1,398,000) (11,228,653) (9,830,653) Transfers out-debt service (4,595,015) (4,595,015) (4,577,087) 17,928 Total other financing sources(uses) (5,552,060) (5,759,900) (15,345,258) (10,080,840) NET CHANGE IN FUND BALANCE (955,320) (699,123) (5,640,670) (9,085,389) Fund balance-beginning of year 41,546,778 41,546,778 41,546,778 - Fund balance-end of year $ 40,591,458 $ 40,847,655 $ 35,906,108 $ (9,085,389) 99 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2014 Note 3 —Schedules of Funding Progress A. CalPERS—City's Miscellaneous Plan Unfunded Actuarial Entry Age Unfunded Liability as Actuarial Actuarial Actuarial Actuarial Percentage of Valuation Assets Accrued Accrued Funded Covered Covered Date Value Liability Liability Ratio Payroll Payroll June 30, 2010 $ 45,537,530 $ 61,709,285 $ 16,171,755 73.8% $ 13,394,687 120.73% June 30, 2011 50,482,359 67,942,601 17,460,242 74.3% 13,791,815 126.60% June 30, 2012 55,775,486 72,910,100 17,134,614 76.5% 12,241,227 139.97% B. Other Postemployment Benefits (OPEB) —City's Plan Unfunded Actuarial Entry Age Unfunded Liability as Actuarial Actuarial Actuarial Actuarial Percentage of Valuation Assets Accrued Accrued Funded Covered Covered Date Value Liability Liability Ratio Payroll Payroll June 30, 2009 $ 467,000 $ 9,990,000 $ 9,523,000 4.67% $ 17,138,000 55.57% June 30, 2011 1,960,000 10,506,000 8,546,000 18.66% 18,252,000 46.82% June 30, 2013 2,178,800 8,686,482 6,507,682 25.08% 18,135,000 35.88% C. Other Postemployment Benefits (OPEB) —San Dieguito Water District's Plan Unfunded Actuarial Entry Age Unfunded Liability as Actuarial Actuarial Actuarial Actuarial Percentage of Valuation Assets Accrued Accrued Funded Covered Covered Date Value Liability Liability Ratio Payroll Payroll June 30, 2009 $ 13,000 $ 302,000 $ 289,000 4.30% $ 1,049,000 27.55% June 30, 2011 65,000 343,000 278,000 18.95% 1,230,000 22.60% June 30, 2013 68,176 332,472 264,296 20.51% 1,886,000 14.01% 100 SUPPLEMENTARY INFORMATION 101 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS: Infrastructure Improvements - This fund is used to account for financial resources from state and federal grants which are primarily to fund operations and capital improvements. Grants and Housing - This fund is used to account for financial resources from federal grants that are utilized to fund various City programs such as affordable housing and law enforcement. Development Impact - This fund is used to account for development impact/mitigation fees that are collected in connection with land use and construction applications. These monies are utilized to fund specified city capital improvement projects. Lighting and Landscaping - This fund is used to account for special assessments and certain restricted property tax revenues collected from homeowners and businesses. These monies are utilized to fund specified operational and maintenance costs related to common area landscaping, street lighting, and park maintenance. DEBT SERVICE FUNDS: City Debt Service - This fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for the payment of principal and interest on City long-term debt. Encinitas Public Financing Authority- This fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for the payment of principal and interest on Encinitas Public Financing Authority long-term debt. 103 City of Encinitas Combining Balance Sheet Non-Major Governmental Funds June 30, 2014 Special Revenue Infrastructure Grants and Development Lighting and Improvements Housing Impact Landscaping ASSETS Cash and investments $ 1,322,584 $ 2,282,450 $ 8,279,140 $ 2,854,806 Receivables 224,794 527,321 - 17,749 Inventory and prepaids - 1,565 - - Restricted cash and investments - - - - Total assets $ 1,547,378 $ 2,811,336 $ 8,279,140 $ 2,872,555 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 11,676 $ 96,208 $ - $ 146,046 Interest payable - - - - Unearned revenue 225,939 - - - Due to other funds 461,628 269,604 - - Deposits and other liabilities - - 11,232 - Totalliabilities 699,243 365,812 11,232 146,046 Fund Balances: Nonspendable - 1,565 - - Restricted 848,135 2,443,959 8,267,908 2,726,509 Total fund balances 848,135 2,445,524 8,267,908 2,726,509 Total liabilities and fund balances $ 1,547,378 $ 2,811,336 $ 8,279,140 $ 2,872,555 104 City of Encinitas Combining Balance Sheet Non-Major Governmental Funds (Continued) June 30, 2014 Debt Service Total Encinitas Public Other City Financing Governmental Debt Service Authority Funds ASSETS Cash and investments $ - $ - $ 14,738,980 Receivables - - 769,864 Inventory and prepaids - - 1,565 Restricted cash and investments 496,158 2,600,158 3,096,316 Total assets $ 496,158 $ 2,600,158 $ 18,606,725 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ - $ - $ 253,930 Interest payable 24,767 - 24,767 Unearned revenue - - 225,939 Due to other funds - - 731,232 Deposits and other liabilities - - 11,232 Total liabilities 24,767 - 1,247,100 Fund Balances: Nonspendable - - 1,565 Restricted 471,391 2,600,158 17,358,060 Total fund balances 471,391 2,600,158 17,359,625 Total liabilities and fund balances $ 496,158 $ 2,600,158 $ 18,606,725 (Concluded) 105 City of Encinitas Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds For the Year Ended June 30, 2014 Special Revenue Infrastructure Grants and Development Lighting and Improvements Housing Impact Landscaping REVENUES: Taxes and assessments $ 313,616 $ 426,407 $ - $ 1,923,501 Licenses and permits - - - - Intergovernmental 3,421,961 1,124,493 - - Development impact fees - - 2,628,484 - Charges for services - - - - Fines, forfeitures and penalties - - - - Use of money and property 658 160,255 15,926 52,934 Other - - - 23,203 Total revenues 3,736,235 1,711,155 2,644,410 1,999,638 EXPENDITURES: Current: General government 32,746 102,404 - - Public safety - 117,738 - - Public works 276,160 400,143 - 1,900,100 Planning and building - 422,220 - - Engineering services - - - - Parks and recreation - 129,231 - - Capital outlay - - - - Debt service: Principal - - - - Interest and fiscal charges - - - - Total expenditures 308,906 1,171,736 - 1,900,100 REVENUES OVER (UNDER) EXPENDITURES 3,427,329 539,419 2,644,410 99,538 OTHER FINANCING SOURCES(USES): Issuance of debt - - - - Transfers in - 148,546 - 622 Transfers out (3,478,154) (481,482) (723,568) (4,488) Total other financing sources(uses) (3,478,154) (332,936) (723,568) (3,866) NET CHANGE IN FUND BALANCES (50,825) 206,483 1,920,842 95,672 FUND BALANCES: Beginning of year 898,960 2,239,041 6,347,066 2,630,837 End of year $ 848,135 $ 2,445,524 $ 8,267,908 $ 2,726,509 106 City of Encinitas Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds (Continued) For the Year Ended June 30, 2014 Debt Service Total Encinitas Public Other City Financing Governmental Debt Service Authority Funds REVENUES: Taxes and assessments $ - $ - $ 2,663,524 Licenses and permits - - - Intergovernmental - - 4,546,454 Development impact fees - - 2,628,484 Charges for services - - - Fines, forfeitures and penalties - - - Use of money and property 154 37,248 267,175 Other - - 23,203 Total revenues 154 37,248 10,128,840 EXPENDITURES: Current: General government - - 135,150 Public safety - - 117,738 Public works - - 2,576,403 Planning and building - - 422,220 Engineering services - - - Parks and recreation - - 129,231 Capital outlay - - - Debt service: Principal 721,976 1,940,000 2,661,976 Interest and fiscal charges 143,134 1,794,010 1,937,144 Total expenditures 865,110 3,734,010 7,979,862 REVENUES OVER (UNDER) EXPENDITURES (864,956) (3,696,762) 2,148,978 OTHER FINANCING SOURCES(USES): Issuance of debt - - - Transfers in 880,118 3,696,968 4,726,254 Transfers out - - (4,687,692) Total other financing sources(uses) 880,118 3,696,968 38,562 NET CHANGE IN FUND BALANCES 15,162 206 2,187,540 FUND BALANCES: Beginning of year 456,229 2,599,952 15,172,085 End of year $ 471,391 $ 2,600,158 $ 17,359,625 (Concluded) 107 City of Encinitas Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual Infrastructure Improvements Special Revenue Fund For the Year Ended June 30, 2014 Final Actual Variance with Budget Amounts Final Budget REVENUES: Taxes and assessments $ 243,818 $ 313,616 $ 69,798 Intergovernmental 4,543,345 3,421,961 (1,121,384) Use of money and property 1,752 658 (1,094) Total revenues 4,788,915 3,736,235 (1,052,680) EXPENDITURES: Current: General government - 32,746 (32,746) Public works 286,872 276,160 10,712 Total expenditures 286,872 308,906 (22,034) REVENUES OVER (UNDER) EXPENDITURES 4,502,043 3,427,329 (1,074,714) OTHER FINANCING SOURCES(USES): Transfers out (4,246,751) (3,478,154) 768,597 Total other financing sources(uses) (4,246,751) (3,478,154) 768,597 NET CHANGE IN FUND BALANCE $ 255,292 (50,825) $ (306,117) FUND BALANCE: Beginning of year 898,960 End of year $ 848,135 108 City of Encinitas Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual Grants and Housing Special Revenue Fund For the Year Ended June 30, 2014 Final Actual Variance with Budget Amounts Final Budget REVENUES: Taxes and assessments $ 425,895 $ 426,407 $ 512 Intergovernmental 1,478,938 1,124,493 (354,445) Use of money and property 173,945 160,255 (13,690) Total revenues 2,078,778 1,711,155 (367,623) EXPENDITURES: Current: General government 124,098 102,404 21,694 Public safety 126,150 117,738 8,412 Public works 491,147 400,143 91,004 Planning and building 889,438 422,220 467,218 Parks and recreation 137,553 129,231 8,322 Total expenditures 1,768,386 1,171,736 596,650 REVENUES OVER (UNDER) EXPENDITURES 310,392 539,419 229,027 OTHER FINANCING SOURCES(USES) Transfers in 46,539 148,546 (102,007) Transfers (out) (150,098) (481,482) (331,384) Total other financing sources(uses) (103,559) (332,936) (433,391) NET CHANGE IN FUND BALANCE $ 206,833 206,483 $ (350) FUND BALANCE: Beginning of year 2,239,041 End of year $ 2,445,524 109 City of Encinitas Schedule of Revenues, Expenditures and Change in Fund Balance - Budget and Actual Development Impact Special Revenue Fund For the Year Ended June 30, 2014 Final Actual Variance with Budget Amounts Final Budget REVENUES: Development impact fees $ 1,295,121 $ 2,628,484 $ 1,333,363 Use of money and property 24,395 15,926 (8,469) Total revenues 1,319,516 2,644,410 1,324,894 REVENUES OVER (UNDER) EXPENDITURES 1,319,516 2,644,410 1,324,894 OTHER FINANCING SOURCES(USES) Transfers (out) (762,197) (723,568) 38,629 Total other financing sources(uses) (762,197) (723,568) 38,629 NET CHANGE IN FUND BALANCE $ 557,319 1,920,842 $ 1,363,523 FUND BALANCE: Beginning of year 6,347,066 End of year $ 8,267,908 110 City of Encinitas Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Lighting and Landscaping Special Revenue Fund For the Year Ended June 30, 2014 Final Actual Variance with Budget Amounts Final Budget REVENUES: Taxes and assessments $ 1,864,359 $ 1,923,501 $ 59,142 Use of money and property 44,494 52,934 8,440 Other - 23,203 23,203 Total revenues 1,908,853 1,999,638 90,785 EXPENDITURES: Current: Public works 2,130,192 1,900,100 230,092 Total expenditures 2,130,192 1,900,100 230,092 REVENUES OVER (UNDER) EXPENDITURES (221,339) 99,538 320,877 OTHER FINANCING SOURCES(USES) Transfers in - 622 622 Transfers (out) - (4,488) (4,488) Total other financing sources(uses) - (3,866) (3,866) NET CHANGE IN FUND BALANCE $ (221,339) 95,672 $ 317,011 FUND BALANCE: Beginning of year 2,630,837 End of year $ 2,726,509 111 Internal Service Funds Internal Service Funds are used to finance and account for special activities and services performed by a designated City department for other departments on a cost reimbursement basis. Risk Management - This fund is used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, or to other governments, on a cost reimbursement basis for risk management expenditures. Wastewater Support - This fund is used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, or to other governments, on a cost reimbursement basis for wastewater support expenditures. Vehicle Maintenance - This fund is used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, or to other governments, on a cost reimbursement basis for vehicle maintenance expenditures. Vehicle Replacement - This fund is used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, or to other governments, on a cost reimbursement basis for vehicle replacement expenditures. 113 City of Encinitas Combining Statement of Net Position All Internal Service Funds June 30, 2014 Risk Wastewater Vehicle Vehicle Management Support Maintenance Replacement Total ASSETS Current assets: Cash and investments $ 3,863,516 $ 5,912 $ 8,333 $ 1,826,885 $ 5,704,646 Accounts receivable - - 59 - 59 Total current assets 3,863,516 5,912 8,392 1,826,885 5,704,705 Total assets 3,863,516 5,912 8,392 1,826,885 5,704,705 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 13,272 5,912 8,392 - 27,576 Total current liabilities 13,272 5,912 8,392 - 27,576 Total liabilities 13,272 5,912 8,392 - 27,576 NET POSITION Unrestricted 3,850,244 - - 1,826,885 5,677,129 Total net position $ 3,850,244 $ - $ - $ 1,826,885 $ 5,677,129 114 City of Encinitas Combining Statement of Revenues, Expenses, and Changes in Net Position All Internal Service Funds For the Year Ended June 30, 2014 Risk Wastewater Vehicle Vehicle Management Support Maintenance Replacement Total OPERATING REVENUES: Charges for services $ 986,049 $ - $ - $ - $ 986,049 Interfund revenues 150,000 829,111 520,677 304,841 1,804,629 Other revenues 131,004 2,796 - - 133,800 Total operating revenues 1,267,053 831,907 520,677 304,841 2,924,478 OPERATING EXPENSES: Operational support services 226,665 197,777 192,025 187,871 804,338 Administrative support 376,124 634,019 328,652 - 1,338,795 Insurance and claims 1,328,767 - - - 1,328,767 Total operating expenses 1,931,556 831,796 520,677 187,871 3,471,900 Operating income(loss) (664,503) 111 - 116,970 (547,422) NONOPERATING REVENUES: Gain (loss)on disposal of capital assets - - - 38,426 38,426 Total nonoperating revenues - - - 38,426 38,426 Income(loss) before transfers (664,503) 111 - 155,396 (508,996) TRANSFERS: Transfers in 724,257 - - - 724,257 Total transfers 724,257 - - - 724,257 Net increase(decrease) in net position 59,754 111 - 155,396 215,261 NET POSITION: Beginning of year 3,790,490 (111) - 1,671,489 5,461,868 End of year $ 3,850,244 $ - $ - $ 1,826,885 $ 5,677,129 115 City of Encinitas Combining Statement of Cash Flows All Internal Service Funds For the Year Ended June 30, 2014 Risk Wastewater Vehicle Vehicle Management Support Maintenance Replacement Total CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from users $ 1,269,122 $ 831,907 $ 520,618 $ 304,841 $2,926,488 Payments to employees (602,789) (831,796) (520,677) (187,871) (2,143,133) Payments to suppliers and vendors (1,343,309) (19,452) (7,166) - (1,369,927) Net cash provided(used)by operating activities (676,976) (19,341) (7,225) 116,970 (586,572) CASHFLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from sale of capital assets - - - 38,426 38,426 Net cash provided by capital and related financing activitie - - - 38,426 38,426 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in 724,257 - - - 724,257 Net cash provided by noncapital financing activities 724,257 - - - 724,257 Net increase(decrease)in cash and cash equivalents 47,281 (19,341) (7,225) 155,396 176,111 CASH AND CASH EQUIVALENT: Beginning of year 3,816,235 25,253 15,558 1,671,489 5,528,535 End of year $ 3,863,516 $ 5,912 $ 8,333 $ 1,826,885 $ 5,704,646 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED(USED) BY OPERATING ACTIVITIES: Operating income(loss) $ (664,503) $ 111 $ - $ 116,970 $ (547,422) Adjustments to reconcile operating income(loss)to net cash provided (used)by operating activities: Changes in operating assets and liabilities: Accounts receivable 2,069 - (59) - 2,010 Accounts payable and accrued liabilities (14,542) (19,452) (7,166) - (41,160) Total adjustments (12,473) (19,452) (7,225) - (39,150) Net cash provided(used)by operating activities $ (676,976) $ (19,341) $ (7,225) $ 116,970 $ (586,572) 116 FIDUCIARY FUNDS AGENCY FUND The Agency Funds are used to account for assets held by the City in a trustee capacity for individuals, private organizations, other governments, and/or other funds. Community Facilities District #1 - This fund accounts for all money collected to pay for debt service of the Community Facilities District #1 for which the City acts as paying agent but has no legal commitment or obligation. Requeza Street Assessment District #93-1 - This fund accounts for all money collected to pay for debt service of the Requeza Assessment District for which the City acts as paying agent but has no legal commitment or obligation. 117 City of Encinitas Statement of Changes in Assets and Liabilities Agency Funds For the Year Ended June 30, 2014 Balance Balance July 1, 2013 Additions Deletions June 30,2014 Community Facilities District#1 Assets: Cash and investments $ 1,920,236 $ 2,604,028 $ (2,448,411) $ 2,075,853 Restricted cash and investments: Held by fiscal agents 1,975,483 2,419,828 (2,419,819) 1,975,492 Interest receivable 14 - (14) - Special assessments receivable 32,265,000 - (1,155,000) 31,110,000 Current assessments receivable 12,424 14,167 (12,424) 14,167 Total assets $ 36,173,157 $ 5,038,023 $ (6,035,668) $ 35,175,512 Liabilities: Due to bondholders $ 36,173,157 $ 5,038,023 $ (6,035,668) $ 35,175,512 Total liabilities $ 36,173,157 $ 5,038,023 $ (6,035,668) $ 35,175,512 Requeza Street Assessment District No.93-1 Assets: Cash and investments $ 178,069 $ 77,403 $ (85,451) $ 170,021 Special assessments receivable 275,000 - (60,000) 215,000 Total assets $ 453,069 $ 77,403 $ (145,451) $ 385,021 Liabilities: Due to bondholders $ 453,069 $ 77,403 $ (145,451) $ 385,021 Total liabilities $ 453,069 $ 77,403 $ (145,451) $ 385,021 Total -All Agency Funds Assets: Cash and investments $ 2,098,305 $ 2,681,431 $ (2,533,862) $ 2,245,874 Restricted cash and investments: Held by fiscal agents 1,975,483 2,419,828 (2,419,819) 1,975,492 Interest receivable 14 - (14) - Special assessments receivable 32,540,000 - (1,215,000) 31,325,000 Current assessments receivable 12,424 14,167 (12,424) 14,167 Total assets $ 36,626,226 $ 5,115,426 $ (6,181,119) $ 35,560,533 Liabilities: Due to bondholders $ 36,626,226 $ 5,115,426 $ (6,181,119) $ 35,560,533 Total liabilities $ 36,626,226 $ 5,115,426 $ (6,181,119) $ 35,560,533 118 CITY OF ENCINITAS STATISTICAL INFORMATION This section of the City of Encinitas' Comprehensive Annual Financial Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, required supplementary and supplementary information says about the City's overall financial health. Contents Paqe Financial Trends -These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. 1 Net Position by Component 120-121 2 Changes in Net Position for Governmental Activities 122-125 3 Fund Balances, Governmental Funds 126-127 4 Changes in Fund Balances, Governmental Funds 128-129 Revenue Capacity-These schedules contain information to help the reader assess the City's most significant local revenue source which is property tax. 5 Assessed Value of Taxable Property, General Property Tax 130 6 Principal Secured Property Tax Payers, General Property Tax 131 7 General Property Tax Levies and Collections 132 8 Direct and Overlapping Property Tax Ratios, General Property Tax 134-137 Debt Capacity-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. 9 Ratios of Outstanding Debt by Type 138-139 10 Ratios of General Bonded Debt Outstanding 140 11 Schedule of Direct and Overlapping Debt 141 12 Legal Debt Margin Information 142-143 13 Historical Debt Service Coverage 144 Demographics and Economic Information -These schedules offer demographics and economic indicators to help the reader understand the environment within which the City's financial activities take place. 14 Demographic and Economic Statistics 145 15 Taxable Sales by Business Type 146 Operating Information -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. 16 Full-time and Part-Time City Employees by Function 147 17 Operating Indicators by Function 148 18 Capital Asset Statistics by Function 149 19 Cardiff Sanitary Division -Summary of Operational Data 151-154 20 San Dieguito Water District- Summary of Operational Data 155-159 Sources: Unless otherwise noted, the information in these schedules was derived from the comprehensive annual financial reports for the relevant year. 119 CITY OF ENCINITAS Net Position by Components Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year 2005 2006 2007 2008 2009 Government activities: Net investment in capital assets $ 99,822,192 $ 110,362,657 $ 120,651,504 $ 125,786,039 $ 131,703,037 Restricted 7,336,647 6,011,187 6,264,431 5,207,761 4,340,090 Unrestricted 52,506,975 51,645,424 52,721,705 56,901,871 53,452,967 Total Governmental activities net assets $ 159,665,814 $ 168,019,268 $ 179,637,640 $ 187,895,671 $ 189,496,094 Business-type activities: Restricted $ 8,170,042 $ 1,815,913 $ 18,865,708 $ 1,814,716 $ 1,048,426 Net investment in capital assets 32,464,901 26,265,471 1,806,768 19,204,679 19,422,684 Unrestricted 32,494,310 47,263,919 60,256,625 65,301,729 68,683,799 Total business-type activities net assets $ 73,129,253 $ 75,345,303 $ 80,929,101 $ 86,321,124 $ 89,154,909 Primary government: Net investment in capital assets $ 132,287,093 $ 136,628,128 $ 139,517,212 $ 144,990,718 $ 151,125,721 Restricted 15,506,689 7,827,100 8,071,199 7,022,477 5,388,516 Unrestricted 85,001,285 98,909,343 112,978,330 122,203,600 122,136,766 Total primary government net position $ 232,795,067 $ 243,364,571 $ 260,566,741 $ 274,216,795 $ 278,651,003 Source: City of Encinitas Finance Department 120 CITY OF ENCINITAS Net Position by Components Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 2010 2011 2012 2013 2014 Government activities: Net investment in capital assets $ 130,912,728 $ 139,575,875 $ 153,516,469 $ 157,395,370 $ 161,902,991 Restricted 4,219,623 - - 9,980,695 17,363,704 Unrestricted 54,755,944 56,799,902 43,857,634 37,646,551 38,446,880 Total Governmental activities net assets $ 189,888,295 $ 196,375,777 $ 197,374,103 $ 205,022,616 $ 217,713,575 Business-type activities: Restricted $ - $ - $ - $ - $ 1,039,739 Net investment in capital assets 25,014,811 30,076,172 25,155,766 32,247,941 54,362,661 Unrestricted 71,916,135 72,608,845 83,232,015 79,816,600 62,426,804 Total business-type activities net assets $ 96,930,946 $ 102,685,017 $ 108,387,781 $ 112,064,541 $ 117,829,204 Primary government: Net investment in capital assets $ 155,927,539 $ 169,652,047 $ 178,672,235 $ 189,643,311 $ 216,265,652 Restricted 4,219,623 - - 9,980,695 18,403,443 Unrestricted 126,672,079 129,408,747 127,089,649 117,463,151 100,873,684 Total primary government net position $ 286,819,241 $ 299,060,794 $ 305,761,884 $ 317,087,157 $ 335,542,779 Source: City of Encinitas Finance Department 121 CITY OF ENCINITAS Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year 2005 2006 2007 2008 2009 Expenses: Government activities: General government $ 11,371,884 $ 11,026,711 $ 11,858,189 $ 12,783,573 $ 14,249,545 Public safety 18,883,165 20,244,227 20,783,243 21,015,336 22,039,493 Public works 8,441,146 6,783,035 6,728,553 11,595,020 9,360,563 Planning and building 4,352,726 4,819,265 4,892,201 5,287,058 4,833,543 Engineering services 2,615,298 2,890,832 3,078,645 3,972,242 4,010,485 Parks and recreation 4,791,064 5,132,178 5,318,816 6,594,001 6,902,715 Interest and fiscal charges on long-term debt 1,563,771 1,511,337 1,978,163 2,261,104 2,266,817 Total governmental activities expenses 52,019,054 52,407,585 54,637,810 63,508,334 63,663,161 Business-type activities: Cardiff Sanitary Division 2,702,948 3,278,916 2,948,112 2,985,912 2,854,368 San Dieguito Water District 9,335,523 10,826,162 11,712,887 11,894,734 12,955,085 Encinitas Sanitary Division 1,227,303 1,332,980 1,357,343 1,823,088 1,805,624 Affordable Housing 1,594,702 3,028,297 1,405,094 242,553 260,130 Recreation Programs - - - - - Total business-type activities expenses 14,860,476 18,466,355 17,423,436 16,946,287 17,875,207 Total primary government expenses 66,879,530 70,873,940 72,061,246 80,454,621 81,538,368 Program revenues: Government activities: Charges for services: General government 448,271 1,701,854 2,248,666 2,895,795 1,608,273 Public safety 802,913 836,439 1,127,923 1,006,293 103,641 Public Works - - - - 19,276 Planning and building 1,563,196 1,896,751 2,341,988 2,284,066 1,539,851 Engineering services 731,638 839,176 1,430,282 1,655,539 759,885 Parks and recreation 965,685 907,974 928,810 1,224,923 810,667 Operating grants and contributions 5,279,931 5,299,476 5,086,623 5,736,957 4,838,455 Capital grants and contributions 5,458,200 5,638,059 4,372,149 2,699,027 3,613,636 Total governmental activities program revenues 15,249,834 17,119,729 17,536,441 17,502,600 13,293,684 Business-type activities: Charges for services: Cardiff Sanitary Division 4,154,963 4,939,158 4,826,970 4,926,104 5,009,340 San Dieguito Water District 8,059,594 9,515,054 10,961,760 11,283,219 11,379,337 Encinitas Sanitary Division 1,928,979 2,557,690 2,556,281 2,685,490 2,811,359 Affordable Housing 1,474,837 105,559 - - 222,507 Recreation Programs - - - - - Operating grants and contributions - - - - - Capital grants and contributions 534,135 380,593 277,210 746,586 299,326 Total business-type activities program revenues 16,152,508 17,498,054 18,622,221 19,641,399 19,721,869 Total primary government program revenues 31,402,342 34,617,783 36,158,662 37,143,999 33,015,553 Governmental activities (36,769,220) (35,287,856) (37,101,369) (46,005,734) (50,369,477) Business-type activities 1,292,032 (968,301) 1,198,785 2,695,112 1,846,662 Total net revenue (expense) $(35,477,188) $(36,256,157) $(35,902,584) $(43,310,622) $(48,522,815) Source: City of Encinitas Finance Department 122 CITY OF ENCINITAS Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 2010 2011 2012 2013 2014 Expenses: Government activities: General government $ 12,132,268 $ 10,912,556 $ 12,064,527 $ 10,616,440 $ 9,549,338 Public safety 22,269,616 22,324,624 23,062,746 24,629,613 25,146,843 Public works 9,520,416 10,981,355 8,560,330 10,851,147 10,239,746 Planning and building 5,599,614 5,539,148 5,008,179 4,353,831 5,853,995 Engineering services 3,873,432 3,646,306 5,817,932 3,813,678 3,988,720 Parks and recreation 6,518,623 6,243,769 5,578,716 5,542,550 4,735,864 Interest and fiscal charges on long-term debt 2,296,422 2,029,477 1,811,714 1,932,904 1,913,349 Total governmental activities expenses 62,210,391 61,677,235 61,904,144 61,740,163 61,427,855 Business-type activities: Cardiff Sanitary Division 3,569,880 3,715,529 3,385,439 3,373,704 2,922,446 San Dieguito Water District 11,633,694 11,622,126 12,448,911 12,200,431 13,552,862 Encinitas Sanitary Division 1,855,278 1,992,334 1,719,176 1,983,786 2,438,692 Affordable Housing 256,873 244,748 1,492,811 1,499,863 1,405,225 Recreation Programs - - 1,187,788 1,153,840 1,300,555 Total business-type activities expenses 17,315,725 17,574,737 20,234,125 20,211,624 21,619,780 Total primary government expenses 79,526,116 79,251,972 82,138,269 81,951,787 83,047,635 Program revenues: Government activities: Charges for services: General government 1,962,344 2,453,152 1,789,943 1,775,756 1,800,630 Public safety 105,799 98,202 99,047 91,495 202,220 Public Works 668 - - - - Planning and building 1,521,889 1,816,765 2,155,076 1,894,785 2,874,894 Engineering services 660,734 1,063,822 736,786 955,986 1,075,885 Parks and recreation 1,126,285 1,149,350 14,580 39,946 35,791 Operating grants and contributions 5,392,117 6,964,053 5,896,502 3,759,864 4,345,931 Capital grants and contributions 3,437,302 4,854,393 3,626,279 6,462,979 8,756,281 Total governmental activities program revenues 14,207,138 18,399,737 14,318,213 14,980,811 19,091,632 Business-type activities: Charges for services: Cardiff Sanitary Division 4,979,238 4,830,204 4,970,662 4,755,573 4,605,867 San Dieguito Water District 11,046,650 12,438,502 12,922,922 13,687,156 15,297,718 Encinitas Sanitary Division 2,816,963 2,895,879 2,897,592 2,933,319 2,879,605 Affordable Housing 202,499 216,723 214,503 214,115 216,728 Recreation Programs - - 1,273,007 1,059,009 1,269,179 Operating grants and contributions - - 1,105,851 1,103,639 994,607 Capital grants and contributions 231,362 712,827 460,688 1,003,057 1,066,769 Total business-type activities program revenues 19,276,712 21,094,135 23,845,225 24,755,868 26,330,473 Total primary government program revenues 33,483,850 39,493,872 38,163,438 39,736,679 45,422,105 Governmental activities (48,003,253) (43,277,498) (47,585,931) (46,759,352) (42,336,223) Business-type activities 1,960,987 3,519,398 3,611,100 4,544,244 4,710,693 Total net revenue (expense) $(46,042,266) $(39,758,100) $(43,974,831) $(42,215,108) $(37,625,530) Source: City of Encinitas Finance Department 123 CITY OF ENCINITAS Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 2005 2006 2007 2008 2009 General Revenues and Other Changes in Net Position: Governmental activities: Taxes Property taxes and transfer fees $ 26,417,943 $ 29,290,854 $ 32,593,979 $ 33,858,150 $ 35,064,401 Sales taxes 8,606,077 8,807,630 9,043,912 8,130,837 7,340,410 Transient occupancy taxes 790,943 1,094,994 1,089,065 1,182,816 1,099,817 Franchise taxes 1,837,213 1,951,637 2,011,947 2,212,915 2,162,729 Intergovernmental revenues 2,077,519 569,757 753,722 1,335,594 1,866,726 Use of money and property 3,506,285 2,670,990 3,957,869 3,842,268 2,884,233 Other general revenues 2,605,280 554,750 502,115 568,884 1,551,584 Gain/(Loss)on sale of assets - (32,510) (5,682) - - Transfers (1,456,893) (1,266,792) (1,227,186) - - Total governmental activities 44,384,367 43,641,310 48,719,741 51,131,464 51,969,900 Business-type activities: Property taxes 168,038 228,881 651,195 690,407 721,628 Intergovernmental-unrestricted - - 893,500 - - Use of money and property 1,304,963 1,550,626 1,374,862 1,756,153 974,702 Other general revenues 451,640 138,052 238,270 250,351 45,193 Gain/(Loss)on sale of assets - - - - - Transfers 1,456,893 1,266,792 1,227,186 - - Total business-type activities 3,381,534 3,184,351 4,385,013 2,696,911 1,741,523 Total primary government 47,765,901 46,825,661 53,104,754 53,828,375 53,711,423 Changes in Net Position Government activities 7,614,147 8,353,454 11,618,372 5,125,730 1,600,423 Business-type activities 4,673,566 2,216,050 5,583,798 5,392,023 3,588,185 Total primary government $ 12,287,713 $ 10,569,504 $ 17,202,170 $ 10,517,753 $ 5,188,608 The City reports Recreation Programs as a business-type activity starting in Fiscal Year 2012. Source: City of Encinitas Finance Department 124 CITY OF ENCINITAS Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 2010 2011 2012 2013 2014 General Revenues and Other Changes in Net Position: Governmental activities: Taxes Property taxes and transfer fees $ 32,285,155 $ 32,292,988 $ 32,788,129 $ 34,974,578 $ 36,414,507 Sales taxes 8,780,203 10,244,506 10,613,188 11,585,145 12,067,360 Transient occupancy taxes 1,179,789 1,276,980 1,413,926 1,491,998 1,570,459 Franchise taxes 2,031,924 2,108,420 2,144,162 2,323,616 2,614,844 Intergovernmental revenues 794,362 1,488,770 635,097 541,079 479,026 Use of money and property 1,085,981 657,796 387,066 552,512 705,849 Other general revenues 2,238,041 1,695,520 1,780,543 1,596,026 1,257,002 Gain/(Loss)on sale of assets - - - - (48,320) Transfers - - (668,877) 1,809,656 (33,545) Total governmental activities 48,395,455 49,764,980 49,093,234 54,874,610 55,027,182 Business-type activities: Property taxes 718,212 706,175 725,551 749,378 787,242 Intergovernmental-unrestricted - - - 189,676 - Use of money and property 392,152 508,089 188,259 3,118 357,357 Other general revenues 228,614 401,013 - - 63,768 Gain/(Loss)on sale of assets - - - - (187,942) Transfers - - 668,877 (1,809,656) 33,545 Total business-type activities 1,338,978 1,615,277 1,582,687 (867,484) 1,053,970 Total primary government 49,734,433 51,380,257 50,675,921 54,007,126 56,081,152 Changes in Net Position Government activities 392,202 6,487,482 1,507,303 8,115,258 12,690,959 Business-type activities 3,299,965 5,134,675 5,193,787 3,676,760 5,764,663 Total primary government $ 3,692,167 $ 11,622,157 $ 6,701,090 $ 11,792,018 $ 18,455,622 The City reports Recreation Programs as a business-type activity starting in Fiscal Year 2012. Source: City of Encinitas Finance Department 125 CITY OF ENCINITAS Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year 2005 2006 2007 2008 2009 General fund: Reserved $ 3,644,856 $ 4,092,489 $ 15,196,796 $ 6,210,167 $ 5,255,137 Unreserved, designated - - - 35,790,162 38,413,388 Unreserved, undesignated 36,390,504 36,866,828 36,488,893 9,126,804 3,866,759 Nonspendable - - - - - Restricted - - - - - Committed - - - - - Assigned - - - - - Unassigned - - - - - Total general fund $ 40,035,360 $ 40,959,317 $ 51,685,689 $ 51,127,133 $ 47,535,284 All other governmental funds: Reserved $ 3,691,791 $ 3,525,818 $ 4,176,025 $ 3,908,007 $ 3,771,850 Unreserved, designated 15,771,318 14,605,153 16,909,261 10,968,342 10,694,605 Unreserved, undesignated - - - - - Nonspendable - - - - - Restricted - - - - - Committed - - - - - Assigned - - - - - Unassigned - - - - - Total all other governmental funds $ 19,463,109 $ 18,130,971 $ 21,085,286 $ 14,876,349 $ 14,466,455 Total all governmental funds $ 59,498,469 $ 59,090,288 $ 72,770,975 $ 66,003,482 $ 62,001,739 (1) GASB 54, which requires changes in reporting categories for fund balances was implemented in Fiscal Year 2010-2011. Source: City of Encinitas Finance Department 126 CITY OF ENCINITAS Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) (Continued) Fiscal Year 2010 2011 2012 2013 2014 General fund: Reserved $ 4,286,026 $ - $ - $ - $ - Unreserved, designated 36,913,369 - - - - Unreserved, undesignated 5,789,899 - - - - Nonspendable - 2,648,338 2,868,533 1,980,075 2,052,250 Restricted - 633,245 - 7,996,400 4,079 Committed - 42,274,327 19,371,624 9,847,719 8,136,886 Assigned - - - 561,762 561,762 Unassigned - 1,850,582 17,964,935 21,160,822 25,151,131 Total general fund $ 46,989,294 $ 47,406,492 $ 40,205,092 $ 41,546,778 $ 35,906,108 All other governmental funds: Reserved $ 3,408,409 $ - $ - $ - $ - Unreserved, designated 10,430,543 - - - - Unreserved, undesignated - - - - - Nonspendable - 145,686 - - 1,565 Restricted - 8,290,163 13,471,421 13,036,985 17,358,060 Committed - 7,570,021 - - - Assigned - - 2,169,209 2,135,100 - Unassigned - - - - - Total all other governmental funds $ 13,838,952 $ 16,005,870 $ 15,640,630 $ 15,172,085 $ 17,359,625 Total all governmental funds $ 60,828,246 $ 63,412,362 $ 55,845,722 $ 56,718,863 $ 53,265,733 (1) GASB 54, which requires changes in reporting categories for fund balances was implemented in Fiscal Year 2010-2011. Source: City of Encinitas Finance Department 127 CITY OF ENCINITAS Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year 2005 2006 2007 2008 2009 Revenues: Taxes and assessments $ 39,383,642 $ 44,026,335 $ 46,922,540 $ 47,483,312 $ 47,800,573 Intergovernmental 9,301,017 6,464,129 5,596,224 5,999,680 5,950,205 Charges for services 5,582,317 6,642,855 8,022,053 9,293,303 6,621,931 Fines, forfeitures, and penalties 745,744 832,570 949,606 884,446 746,023 Use of money and property 3,506,285 2,586,286 3,943,512 3,851,877 2,008,557 Other 2,571,086 1,423,460 4,679,351 1,227,055 1,110,325 Total Revenues 61,090,091 61,975,635 70,113,286 68,739,673 64,237,614 Expenditures: Current: General government 10,129,726 9,378,799 9,601,089 11,903,557 13,036,815 Public safety 18,591,043 19,948,909 20,674,992 20,896,882 21,636,969 Public works 4,537,345 4,768,226 4,679,795 5,432,032 6,033,513 Planning and building 4,352,726 4,819,265 4,892,201 5,287,058 4,811,020 Engineering services 2,615,298 2,890,832 3,078,645 3,972,242 3,986,859 Parks and recreation 4,791,064 5,132,178 5,318,816 5,585,446 5,811,778 Capital outlay 5,440,192 11,215,699 23,383,302 20,704,628 8,473,396 Debt service: Principal 1,327,445 1,450,404 1,499,032 1,581,033 2,197,891 Interest and fiscal charges 1,553,393 1,512,712 1,780,651 2,244,288 2,251,116 Bond issuance costs - - - - - Total expenditures 53,338,232 61,117,024 74,908,523 77,607,166 68,239,357 Excess (deficiency)of revenues over(under)expenditures 7,751,859 858,611 (4,795,237) (8,867,493) (4,001,743) Other Financing Sources (Uses): Transfer in from CFD debt service - - - - - Operating transfers in 8,548,333 13,552,280 23,774,352 25,007,578 12,631,197 Operating transfers out (10,005,226) (14,819,072) (24,998,428) (25,007,578) (12,631,197) Proceeds from capital lease - - - - - Issuance of debt - - 20,000,000 2,100,000 - Premium on debt - - - - - Bond discounts - - (300,000) - - Total other financing sources (uses) (1,456,893) (1,266,792) 18,475,924 2,100,000 Net change in fund balances $ 6,294,966 $ (408,181) $ 13,680,687 $ (6,767,493) $ (4,001,743) Debt service as a percentage of noncapital expenditures 6.4% 6.3% 6.8% 7.2% 8.0% Source: City of Encinitas Finance Department 128 CITY OF ENCINITAS Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) (Continued) Fiscal Year 2010 2011 2012 2013 2014 Revenues: Taxes and assessments $ 46,805,219 $ 48,100,768 $ 49,089,142 $ 51,528,542 $ 53,830,193 Intergovernmental 6,917,521 8,369,571 6,537,855 8,520,220 5,025,480 Charges for services 5,164,315 6,376,261 4,406,737 4,450,756 5,479,847 Fines, forfeitures, and penalties 761,202 856,392 657,364 611,029 632,776 Use of money and property 1,085,981 657,798 639,676 572,481 724,310 Other 2,875,491 3,803,927 2,715,266 2,141,439 3,654,621 Total Revenues 63,609,729 68,164,717 64,046,040 67,824,467 69,347,227 Expenditures: Current: General government 11,859,415 10,155,732 9,277,443 9,430,487 9,109,412 Public safety 22,049,239 22,107,692 22,853,121 23,655,367 24,164,979 Public works 5,888,161 6,051,253 5,843,228 6,057,646 6,281,800 Planning and building 5,599,614 5,539,148 4,655,501 4,238,882 4,716,315 Engineering services 3,873,432 3,646,306 3,804,813 3,716,994 3,949,352 Parks and recreation 5,482,578 5,293,664 4,333,303 4,377,047 4,672,683 Capital outlay 5,606,327 8,559,193 12,803,379 18,836,006 14,548,894 Debt service: Principal 2,091,882 2,481,223 2,359,932 2,295,614 2,661,976 Interest and fiscal charges 2,332,574 2,056,501 1,872,773 2,050,068 1,937,144 Bond issuance costs - 395,404 - - - Total expenditures 64,783,222 66,286,116 67,803,493 74,658,111 72,042,555 Excess (deficiency)of revenues over(under)expenditures (1,173,493) 1,878,601 (3,757,453) (6,833,644) (2,695,328) Other Financing Sources (Uses): Transfer in from CFD debt service - - - - - Operating transfers in 11,066,120 13,133,224 17,661,946 23,363,240 20,570,966 Operating transfers out (11,066,120) (13,133,224) (18,354,656) (24,208,239) (21,328,768) Proceeds from capital lease - - 599,639 555,384 Issuance of debt - 19,530,000 - 7,865,000 Premium on debt - 215,515 - 131,400 Bond discounts - (19,040,000) - - Total other financing sources (uses) - 705,515 (93,071) 7,706,784 (757,802) Net change in fund balances $ (1,173,493) $ 2,584,116 $ (3,850,524) $ 873,140 $ (3,453,130) Debt service as a percentage of noncapital expenditures 8.1% 8.6% 8.3% 8.4% 8.7% Source: City of Encinitas Finance Department 129 CITY OF ENCINITAS Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (In thousands of dollars) Taxable Fiscal Year Residential Commercial Industrial All Other Assessed Total Direct Ended June 30 Property Property Property Property (1) Value (2) Tax Rate % 2005 $ 7,218,507 $ 748,540 $ 30,209 $ 457,085 $ 8,454,341 0.23720 2006 7,995,632 805,108 32,074 504,680 9,337,494 0.23747 2007 8,742,273 852,894 32,714 562,621 10,190,502 0.23789 2008 9,355,905 927,637 33,375 583,340 10,688,913 0.23837 2009 9,800,179 969,642 35,427 451,831 11,258,711 0.23278 2010 9,774,056 1,063,161 36,255 454,096 11,327,568 0.23338 2011 9,767,731 1,110,811 36,036 427,619 11,342,197 0.23375 2012 9,886,681 1,154,923 34,944 421,308 11,497,856 0.23492 2013 10,030,357 1,247,785 37,766 408,020 11,723,928 0.23977 2014 10,393,910 1,300,287 39,501 413,663 12,147,361 0.24002 In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only re-assessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above does not directly represent or correlate to actual market values of taxable property and is subject to the limitations described above. (1) Includes the following categories: dry farm, institutional, irrigated, recreation, vacant land, SBC nonunitary, possessory interest, unsecured, and unknown. (2)The "total net taxable assessed value" is net of tax-exempt property. In addition, homeowners exemptions are not included in the above totals. Source: San Diego County Assessor 2013/14 Combined Tax Rolls The Hdl Companies 130 CITY OF ENCINITAS Principal Property Taxpayers Current Fiscal Year and Nine Years Ago 2014 2005 Taxable % of Total Taxable % of Total Assessed City Assessed Assessed City Assessed Taxpayer Secured Value Rank Secure Value Secured Value Rank Secure Value TRC Encinitas Village $ 79,605,220 1 0.00655% Belmont Village Tenant LLC 69,272,280 2 0.00570% Collwood Pines Apartments LP 54,963,312 3 0.00452% Encinitas Town Center Associates LLC 35,679,927 4 0.00294% $ 35,253,932 1 0.00417% SSL Landlord LLC 34,704,622 5 0.00286% NCHC 3 LLC 33,914,047 6 0.00279% 19,004,474 7 0.00225% Weingarten Nostat Inc 33,269,389 7 0.00274% PK III Encinitas Marketplace LP 31,500,000 8 0.00259% Home Depot USA Inc. 30,701,514 9 0.00253% 29,337,064 2 0.00347% ASN Encinitas LLC 27,610,055 10 0.00227% Vons Companies Inc. 26,527,614 11 0.00218% 19,141,848 6 0.00226% Urschel Holdings LP 23,442,461 12 0.00193% 20,272,567 5 0.00240% Keith and Sara Harrison 22,919,272 13 0.00189% 10,697,421 21 0.00127% Loja Pacific Station LLC 19,951,200 14 0.00164% LA Fitness International LLC 18,701,886 15 0.00154% UCSD Garden View LLC 18,360,000 16 0.00151% Sterling Family Trust 17,921,209 17 0.00148% Plenc El Camino LLC 17,571,263 18 0.00145% 14,928,606 12 0.00177% Target Corporation 17,344,915 19 0.00143% Scripps Health 17,070,232 20 0.00141% 10,721,683 20 0.00127% Quail Pointe Apartments LP 15,025,500 21 0.00124% 16,806,017 9 0.00199% Encinitas Terraces LLC 14,699,582 22 0.00121% Terramar Retail Centers LLC 14,675,276 23 0.00121% LF Encinitas Properties LLC 14,500,000 24 0.00119% Golden Eagle Annuity Investment LP 14,402,736 25 0.00119% Enrique Apartment Company 25,675,508 3 0.00304% North Coast Business Park 23,197,970 4 0.00274% ACF El Camino 02 LLC 17,179,589 8 0.00203% Encinitas Ranch Apartments LLC 15,838,052 10 0.00187% Encinitas Plaza LLC 15,650,000 11 0.00185% Hughes Encinitas Limited 14,807,293 13 0.00175% Security Title Insurance Company Trust 13,902,153 14 0.00164% Pan Pacific Retial Properties Inc. 13,121,916 15 0.00155% Dayton Hudson Corporation/Target 12,640,244 17 0.00150% GMS Realty LLC 12,646,830 16 0.00150% LVM California Corporation 10,270,037 22 0.00121% Brogan and Jones Living Trust 9,725,701 23 0.00115% Zittle Family Trust 9,218,963 24 0.00109% KSL Encinitas Resort Corporation 9,141,712 25 0.00108% $ 704,333,512 0.05798% $ 379,179,580 0.04485% Source: HdL Coren Cone 131 CITY OF ENCINITAS Property Tax Levies and Collections Last Ten Fiscal Years (1) Collected within the Fiscal Taxes Levied Fiscal Year of Levy Year Ended for the Percent June 30 Fiscal Year Amount of Levy 2005 $ 22,082,262 $ 21,269,966 96.32% 2006 24,285,772 23,360,483 96.19% 2007 25,857,065 24,741,077 95.68% 2008 26,950,803 25,584,630 94.93% 2009 27,441,558 26,326,996 95.94% 2010 27,421,386 26,490,783 96.61% 2011 27,541,487 26,888,921 97.63% 2012 28,100,611 27,540,858 98.01% 2013 29,207,237 28,712,036 98.30% 2014 30,550,301 30,009,574 98.23% (1) City of Encinitas General Fund Source: San Diego County Assessor Combined Tax Rolls 132 CITY OF ENCINITAS Direct and Overlapping Property Tax Rates Last Ten Fiscal Years Fiscal Year 2005 2006 2007 2008 2009 City of Encinitas Basic Rate 0.23720 0.23747 0.23789 0.23837 0.23278 City of Encinitas Direct Rate (1) 0.23720 0.23747 0.23789 0.23837 0.23278 Overlapping Rates: (2) City of Encinitas 0.26641 0.26641 0.26641 0.26641 0.26648 Encinitas Landscape & Lighting District 0.01596 0.01596 0.01596 0.01596 0.01596 Autistic Pupils Monors Elem 0.00009 0.00009 0.00009 0.00009 0.00009 Autistic Pupils Monors High 0.00009 0.00009 0.00009 0.00009 0.00009 Cardiff Elementary 0.26238 0.26238 0.26237 0.26237 0.26240 Children's Institutions Tuition 0.00146 0.00146 0.00146 0.00146 0.00146 County General 0.08264 0.08264 0.08264 0.08264 0.07570 County Library 0.01298 0.01298 0.01298 0.01298 0.01995 County School Service 0.00687 0.00687 0.00687 0.00687 0.00687 County School Service-Capital Outlay 0.00173 0.00173 0.00173 0.00173 0.00173 County Service Area No. 17 0.00291 0.00291 0.00291 0.00291 0.00291 CWA San Dieguito Water District 0.00344 0.00344 0.00344 0.00344 0.00344 Development Centers for Handicapped Elem 0.00043 0.00043 0.00043 0.00043 0.00043 Development Centers for Handicapped High 0.00044 0.00044 0.00044 0.00044 0.00044 Educable Mentally retarded Minors 0.00196 0.00196 0.00196 0.00196 0.00196 Educational Revenue Augmentation Fund 0.08574 0.08574 0.08574 0.08574 0.08570 Mira Costa community College 0.08594 0.08594 0.08594 0.08594 0.08590 Physically Handicapped Minors Elem 0.00303 0.00303 0.00303 0.00303 0.00303 Physically Handicapped Minors High 0.00304 0.00304 0.00304 0.00304 0.00304 Regional Occupational Centers 0.00438 0.00438 0.00438 0.00438 0.00438 San Dieguito Union High 0.14404 0.14404 0.14405 0.14405 0.14400 San Dieguito Water District 0.00992 0.00992 0.00992 0.00992 0.00992 Trainable Mentally Retarded Minors Elem 0.00197 0.00197 0.00197 0.00197 0.00197 Trainable Mentally Retarded Minors High 0.00198 0.00198 0.00198 0.00198 0.00198 Vista Project(19/85701) 0.00017 0.00017 0.00017 0.00017 0.00017 Total Prop 13 Rate (3) 1.00000 1.00000 1.00000 1.00000 1.00000 Notes: (1) Total Direct Rate is the weighted average of all individual direct rates applied by the government preparing the statistical section information. (2) General fund tax rates are representative and based upon the direct and overlapping rates for the largest General Fund tax rate area (TRA) by net taxable value. (3) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it was sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value. Source: San Diego County Assessor 2004/2005 through 2013/2014 Tax Increment Table The Hdl Companies 134 CITY OF ENCINITAS Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (Continued) Fiscal Year 2010 2011 2012 2013 2014 City of Encinitas Basic Rate 0.23338 0.23375 0.23492 0.23977 0.24002 City of Encinitas Direct Rate (1) 0.23338 0.23375 0.23492 0.23977 0.24002 Overlapping Rates: (2) City of Encinitas 0.26648 0.26648 0.24020 0.24020 0.24020 Encinitas Landscape & Lighting District 0.01596 0.01596 0.02100 0.02100 0.02100 Autistic Pupils Monors Elem 0.00009 0.00009 0.00000 0.00000 0.00000 Autistic Pupils Monors High 0.00009 0.00009 0.00000 0.00000 0.00000 Cardiff Elementary 0.26240 0.26240 0.24870 0.24870 0.24870 Children's Institutions Tuition 0.00146 0.00146 0.00107 0.00107 0.00107 County General 0.07570 0.07570 0.08020 0.08020 0.08020 County Library 0.01995 0.01995 0.01969 0.01969 0.01969 County School Service 0.00687 0.00687 0.00643 0.00643 0.00643 County School Service-Capital Outlay 0.00173 0.00173 0.00161 0.00161 0.00161 County Service Area No. 17 0.00291 0.00291 0.00251 0.00251 0.00251 CWA San Dieguito Water District 0.00344 0.00344 0.02510 0.02510 0.02510 Development Centers for Handicapped Elem 0.00043 0.00043 0.00000 0.00000 0.00000 Development Centers for Handicapped High 0.00044 0.00044 0.00000 0.00000 0.00000 Educable Mentally retarded Minors 0.00196 0.00196 0.00161 0.00161 0.00161 Educational Revenue Augmentation Fund 0.08570 0.08570 0.08620 0.08620 0.08620 Mira Costa community College 0.08590 0.08590 0.08150 0.08150 0.08150 Physically Handicapped Minors Elem 0.00303 0.00303 0.00268 0.00268 0.00268 Physically Handicapped Minors High 0.00304 0.00304 0.00268 0.00268 0.00268 Regional Occupational Centers 0.00438 0.00438 0.00375 0.00375 0.00375 San Dieguito Union High 0.14400 0.14400 0.13610 0.13610 0.13610 San Dieguito Water District 0.00992 0.00992 0.03590 0.03590 0.03590 Trainable Mentally Retarded Minors Elem 0.00197 0.00197 0.00161 0.00161 0.00161 Trainable Mentally Retarded Minors High 0.00198 0.00198 0.00161 0.00161 0.00161 Vista Project(19/85701) 0.00017 0.00017 0.00000 0.00000 0.00000 Total Prop 13 Rate (3) 1.00000 1.00000 1.00000 1.00000 1.00000 Notes: (1) Total Direct Rate is the weighted average of all individual direct rates applied by the government preparing the statistical section information. (2) General fund tax rates are representative and based upon the direct and overlapping rates for the largest General Fund tax rate area (TRA) by net taxable value. (3) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it was sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value. Source: San Diego County Assessor 2004/2005 through 2013/2014 Tax Increment Table The Hdl Companies 135 CITY OF ENCINITAS Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (Continued) Fiscal Year 2005 2006 2007 2008 2009 Gen Bond Cardiff 2000A 0.03913 0.03409 0.03508 0.03306 0.03212 Gen Bond Cardiff 2000 Election, 2010 Ref. Bonc - - - - - MWD D/S Remainder of SDCWA 1501999 0.00580 0.00520 0.00470 0.00450 0.00430 Total Voter Approved Rate 0.04493 0.03929 0.03978 0.03756 0.03642 Total Tax Rate 1.04493 1.03929 1.03978 1.03756 1.03642 Source: San Diego County Assessor 2004/2005 through 2013/2014 Tax Increment Table The Hdl Companies 136 CITY OF ENCINITAS Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (Continued) 2010 2011 2012 2013 2014 Gen Bond Cardiff 2000A 0.03518 - - - - Gen Bond Cardiff 2000 Election, 2010 Ref. Bonc - 0.03715 0.03489 0.03458 0.03386 MWD D/S Remainder of SDCWA 1501999 0.00430 0.00370 0.00370 0.00350 0.00350 Total Voter Approved Rate 0.03948 0.04085 0.03859 0.03808 0.03736 Total Tax Rate 1.03948 1.04085 1.03859 1.03808 1.03736 Source: San Diego County Assessor 2004/2005 through 2013/2014 Tax Increment Table The Hdl Companies 137 CITY OF ENCINITAS Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Fiscal Year Ended Total Governmental June 30 Bonded Debt Capital Leases Activities 2005 $ 32,450,000 $ 314,452 $ 32,764,452 2006 31,105,000 559,048 31,664,048 2007 49,410,000 696,373 50,106,373 2008 47,960,000 2,670,340 (3) 50,630,340 2009 46,005,000 2,432,449 48,437,449 2010 44,165,000 2,185,567 46,350,567 2011 42,705,000 3,036,900 45,741,900 2012 40,700,000 3,281,606 43,981,606 2013 46,660,000 3,446,376 50,106,376 2014 44,480,000 2,964,400 47,444,400 (1) Percentage of Personal Income ratios are calculated using personal income and population for the prior calendar year. (2) Debt per Capita is calculated by dividing the total primary government amount by City population shown on the Demographic and Economic statistics page. (3) During 2008, the City borrowed $2.1 million to partially fund major improvements to the Encinitas Civic Center under a capital lease arrangement with a financial institution. Source: City of Encinitas Finance Department 138 CITY OF ENCINITAS Ratios of Outstanding Debt by Type Last Ten Fiscal Years (Continued) Business-type Activities Fiscal Year Ended Water Bonds CSD Note EHA Note Total Business- Total Primary Debt Per June 30 and Notes Payable Payable type Activities Government Capita (2) 2005 $ 21,575,000 $ 7,900,000 $ 1,862,347 $ 31,337,347 $ 64,101,799 1,024 2006 20,815,000 7,500,000 1,825,255 30,140,255 61,804,303 984 2007 20,030,000 7,085,000 1,786,769 28,901,769 79,298,142 1254 2008 19,340,000 6,660,000 1,723,832 27,723,832 78,354,172 1227 2009 18,440,000 6,220,000 1,681,534 26,341,534 74,778,983 1258 2010 17,545,000 5,770,000 1,638,817 24,953,817 71,304,384 1190 2011 16,620,000 5,300,000 1,591,681 23,511,681 69,253,581 1148 2012 15,660,000 4,316,361 1,544,434 21,520,795 65,502,401 1085 2013 14,670,000 3,769,821 1,495,415 19,935,236 70,041,612 1156 2014 13,645,000 3,206,785 1,444,731 18,296,516 65,740,916 1074 (1) Percentage of Personal Income ratios are calculated using personal income and population for the prior calendar year. (2) Debt per Capita is calculated by dividing the total primary government amount by City population shown on the Demographic and Economic statistics page. (3) During 2008, the City borrowed $2.1 million to partially fund major improvements to the Encinitas Civic Center under a capital lease arrangement with a financial institution. Source: City of Encinitas Finance Department 139 CITY OF ENCINITAS Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Outstanding General Bonded Debt Fiscal Certificates of Participation Percentage Year Ended and Assessed of Assessed Per June 30 Lease Revenue Bonds Valuation (1) Value Capita 2005 $ 32,450,000 $ 8,454,341,000 0.38% 518 2006 $ 31,105,000 $ 9,337,494,000 0.33% 495 2007 $ 49,410,000 $ 10,190,502,000 0.48% 781 2008 $ 47,960,000 $ 10,688,913,000 0.45% 751 2009 $ 46,005,000 $ 11,258,711,000 0.41% 774 2010 $ 44,165,000 $ 11,327,568,000 0.39% 741 2011 $ 42,705,000 $ 11,342,197,000 0.38% 713 2012 $ 40,700,000 $ 11,497,857,000 0.35% 674 2013 $ 46,660,000 $ 11,725,285,000 0.40% 770 2014 $ 44,480,000 $ 12,147,361,000 0.37% 727 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds of which, the City has none. (1) Assessed valuation has been used because the actual market value of taxable property is not readily available in the State of California. The assessed valuation information can be found in the Assessed Value and Estimated Actual Value of Taxable Property schedule in the Statistical Section. Source: City of Encinitas Finance Department San Diego County Assessor Combined Tax Rolls 140 CITY OF ENCINITAS Schedule of Direct and Overlapping Bonded Debt June 30, 2014 2013-14 Assessed Valuation: $12,149,166,465 City's Share of Total Debt Applicable Overlapping Debt 6/30/14 %(1) 6/30/2014 OVERLAPPING TAX AND ASSESSMENT DEBT: Metropolitan Water District $ 132,275,000 0.556% $ 735,449 Cardiff School District 5,985,198 100% 5,985,198 Encinitas Union School District 32,683,636 67.819% 22,165,715 San Dieguito Union High School 160,000,000 24.375% 39,000,000 San Dieguito Union High School District Community Facilities Districts 36,261,602 1.840-100.00% 11,445,934 City of Encinitas Community Facilities District No. 1 31,110,000 100% 31,110,000 City of Encinitas 1915 Act Bonds 215,000 100% 215,000 Olivenhain Municipal Water District,Assessment District No. 96-1 14,040,000 26.363% 3,701,365 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $ 114,358,661 DIRECT AND OVERLAPPING GENERAL FUND DEBT San Diego County General Fund Obligations $ 379,835,000 3.075% $ 11,679,926 San Diego County Pension Obligations 720,855,256 3.075% 22,166,299 San Diego County Superintendent of Schools Obligations 16,125,000 3.075% 495,844 Mira Costa Community College District Certificates of Participation 2,060,000 15.089% 310,833 San Dieguito Union High School District General Fund Obligations 13,015,000 24.375% 3,172,406 City of Encinitas Governmental Bonded Debt 44,480,000 100% 44,480,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $ 82,305,308 TOTAL DIRECT DEBT $ 44,480,000 TOTAL OVERLAPPING DEBT 152,183,969 COMBINED TOTAL DEBT $ 196,663,969 (2) (1) The percentage of overlapping applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Ratios to 2013-14 Assessed Valuation: Total Overlapping Tax and Assessment Debt................................ ....0.94% Total Direct Debt ($44,480,000)......................................................0.37% Combined Total Debt.......................................................................1.62% Source: California Municipal Statistics 141 CITY OF ENCINITAS Legal Debt Margin Information Last Ten Fiscal Years (in thousands) Fiscal Years 2005 2006 2007 2008 2009 Assessed valuation $ 8,454,341 $ 9,337,494 $ 10,190,502 $ 10,688,913 $ 11,258,711 Conversion percentage equal 25% 25% 25% 25% 25% to 25% of Assessed valuation Adjusted assessed valuation 2,113,585 2,334,374 2,547,626 2,672,228 2,814,678 Debt limit percentage 15% 15% 15% 15% 15% Debt limit 317,038 350,156 382,144 400,834 422,202 Total net debt applicable to limit: 32,450 31,105 49,410 47,960 46,005 Legal debt margin $ 284,588 $ 319,051 $ 332,734 $ 352,874 $ 376,197 Total debt applicable to the limit as a percentage of debt limit 10.24% 8.88% 12.93% 11.97% 10.90% The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time the that the legal debt margin was enacted by the State of California for local governments located within the state. Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Source: City of Encinitas Finance Department San Diego County Assessor Combined Tax Rolls 142 CITY OF ENCINITAS Legal Debt Margin Information Last Ten Fiscal Years (in thousands) (Continued) Fiscal Years 2010 2011 2012 2013 2014 Assessed valuation $ 11,327,568 $ 11,342,197 $ 11,497,857 $ 11,725,285 $ 12,147,361 Conversion percentage equal 25% 25% 25% 25% 25% to 25% of Assessed valuation Adjusted assessed valuation 2,831,892 2,835,549 2,874,464 2,931,321 3,036,840 Debt limit percentage 15% 15% 15% 15% 15% Debt limit 424,784 425,332 431,170 439,698 455,526 Total net debt applicable to limit: 44,165 42,705 40,700 46,660 44,480 Legal debt margin $ 380,619 $ 382,627 $ 390,470 $ 393,038 $ 411,046 Total debt applicable to the limit as a percentage of debt limit 10.40% 10.04% 9.44% 10.61% 9.76% The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time the that the legal debt margin was enacted by the State of California for local governments located within the state. Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Source: City of Encinitas Finance Department San Diego County Assessor Combined Tax Rolls 143 CITY OF ENCINITAS Historical Debt Service Coverage Last Five Fiscal Years SAN DIEGUITO WATER DISTRICT 2010 2011 2012 2013 2014 Revenues: Operating revenues-including connection fees $11,267,684 $12,574,450 $13,170,422 $13,789,636 $15,715,575 Non-operating revenues 879,477 817,872 813,610 869,568 827,676 Gross Revenues 12,147,161 13,392,322 13,984,032 14,659,204 16,543,251 Total Operating&Non-Operating Expenses 11,634,347 11,614,631 12,448,911 12,198,228 14,066,485 Net Income 512,814 1,777,691 1,535,121 2,460,976 2,476,766 Add back........ Interest expense 749,704 725,936 698,908 657,963 622,075 Depreciation and amortization expense 1,213,640 1,196,007 1,294,904 1,476,044 1,490,806 Net Revenues Available for Debt Service 2,476,158 3,699,634 3,528,932 4,594,983 4,589,647 Less: Debt Service Paid 2004 Water Revenue Refunding Bonds-Interest Charges 469,269 452,244 433,950 408,906 380,731 2004 Water Revenue Refunding Bonds-Principal Payments 560,000 575,000 595,000 615,000 640,000 2007 Note Payble to Financing Authority-Interest Charges 265,157 281,494 270,352 256,744 241,344 2007 Note Payble to Financing Authority-Principal Payments 335,000 350,000 365,000 375,000 385,000 Total Debt Service $ 1,629,426 $ 1,658,738 $ 1,664,302 $ 1,655,650 $ 1,647,075 Coverage by Net Revenues Available for Debt Service 152% 223% 212% 278% 279% Debt service coverage requirement is minimum 115%incl connection fees. The above schedules include connection fees in operating revenues. CARDIFF SANITARY DIVISION 2010 2011 2012 2013 2014 Revenues: Operating revenues-including connection fees $ 5,049,039 $ 5,337,717 $ 5,039,818 $ 4,755,573 $ 4,758,606 Non-operating revenues 162,601 355,974 126,914 39,015 1,216,941 Gross Revenues 5,211,640 5,693,691 5,166,733 4,794,588 5,975,547 Total Operating&Non-Operating Expenses 3,569,880 3,715,529 3,310,986 3,588,560 3,189,268 Net Income 1,641,760 1,978,162 1,855,747 1,206,029 2,786,279 Add back........ Interest expense 285,800 267,533 248,400 142,898 266,822 Depreciation and amortization expense 912,026 932,273 404,641 800,000 200,459 Net Revenues Available for Debt Service 2,839,586 3,177,968 2,508,788 2,148,927 3,253,560 Less: Debt Service 2003 Note Payable to SEJPA-Interest Charges 291,800 273,800 255,000 - - 2003 Note Payable to SEJPA-Principal Payments 450,000 470,000 490,000 - - 2011 Note Payable to SEJPA-Interest Charges - - 28,946 142,898 131,967 2011 Note Payable to SEJPA-Principal Payments - - 25,000 546,540 563,037 Total Debt Service $ 741,800 $ 743,800 $ 798,946 $ 689,438 $ 695,004 Coverage by Net Revenues Available for Debt Service 383% 427% 314% 312% 467% Debt service coverage requirement is minimum 110%incl connection fees. The above schedules include connection fees in operating revenues Source: City of Encinitas Finance Department 144 CITY OF ENCINITAS Demographic and Economic Statistics Last Ten Fiscal Years % Change % of San from Avg. City Diego County Previous Median Household Unemployment Year Population Population Year Age Size Rate 2005 62,605 2.1% 0.23% 40.2 2.64 3.0% 2006 62,826 2.1% 0.35% 40.5 2.64 2.8% 2007 63,259 2.0% 0.68% 41.0 2.65 3.2% 2008 63,864 2.0% 0.95% 41.5 2.65 4.2% 2009 59,453 2.0% -7.42% 41.7 2.69 6.9% 2010 59,628 2.0% 0.29% 41.6 2.45 NA 2011 59,910 2.0% 0.47% 42.0 2.50 7.3% 2012 60,346 2.0% 0.72% 42.2 2.45 9.2% 2013 60,568 2.0% 0.37% 41.5 2.50 5.5% 2014 61,204 2.1% 1.04% 41.5 2.49 5.2% NOTE: City population figures have been revised to match updated population from the California State Department of Finance starting in 2009 from 2010 census data available. Source: California State Department of Finance Unemployment rate estimates are from California Employment Development. 145 CITY OF ENCINITAS Taxable Sales by Business Type Last Seven Fiscal Years 2008 2009 2010 2011 2012 2013 2014 Autos and Transportation $ 1,304,574 $1,138,428 $1,189,413 $1,330,270 $ 1,427,132 $ 1,446,737 $ 1,519,006 Building and Construction 1,334,408 1,057,851 818,484 774,109 868,790 820,467 887,182 Business and Industry 580,488 520,656 461,247 537,840 518,699 560,723 573,032 Food and Drugs 1,039,216 979,585 931,937 945,542 995,511 1,003,491 1,001,942 Fuel and Service Stations 1,182,908 1,085,758 1,146,372 1,351,288 1,569,265 1,577,783 1,559,342 General Consumer Goods 3,042,340 2,949,625 2,836,989 2,818,809 3,117,547 3,165,746 3,355,540 Restaurants and Hotels 1,425,305 1,448,867 1,388,570 1,442,976 1,624,007 1,699,705 1,825,971 Total $ 9,909,239 $9,180,770 $8,773,012 $9,200,834 $10,120,951 $10,274,652 $10,722,015 Note: Due to confidentiality issues,the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the City's revenue. Source: State of California Board of Equalization and the HdL Companies 146 CITY OF ENCINITAS Full-Time and Part-Time Employees by Function Last Five Fiscal Years Fiscal Years Function 2010 2011 2012 2013 2014 General government 43.00 44.25 44.55 44.75 44.75 Fire department 68.00 63.00 63.00 63.00 66.00 Public works 29.55 28.85 28.85 29.25 29.55 Engineering services 27.47 27.47 27.42 26.42 27.17 Parks and recreation 21.18 21.18 21.18 21.18 21.18 Planning and building 26.75 26.75 26.75 26.75 27.25 Subtotal 215.95 211.50 211.75 211.35 215.90 San Dieguito Water District 25.70 25.40 25.40 25.00 23.00 147 CITY OF ENCINITAS Operating Indicators by Function Last Five Fiscal Years Fiscal Years 2010 2011 2012 2013 2014 San Diego County Sheriffs Dept Criminal arrests 1,803 1,047 1,231 1,548 1,595 Traffic arrests 482 535 485 383 331 Traffic accidents 385 472 441 372 323 Traffic citations 11,714 12,024 11,349 11,381 10,357 Calls for service 21,216 20,602 20,150 20,559 19,394 Deputy initiated action 25,401 29,224 29,862 31,281 29,849 Fire: Number of emergency fire calls 106 96 124 102 383 Number of EMS/rescue 3,291 3,498 3,495 3,697 3,806 Other 1,475 1,520 1,737 1,932 1,458 Inspections 2,055 2,263 2,252 2,163 2,143 Engineering: Number of permits issued 301 397 392 269 351 Parks and recreation: Number of recreation class registrations 11,435 10,697 11,119 11,175 16,236 Number of facility rentals 459 377 749 421 578 Planning and building: Number of planning permits issued 181 177 202 207 298 Number of New Dwelling Units Issued 39 51 121 63 161 Environmental review 11 4 7 6 9 Appeals 1 3 3 5 7 Plan checks 805 882 948 990 1,391 Code enforcement complaints 1,667 1,645 1,270 1,199 1,153 Water: New connections 18 9 79 64 131 Average daily consumption (millions of gallons) 5.42 5.21 5.32 5.61 5.71 Sewer: New connections 26 14 44 50 22 Average daily sewage treatment (millions of gallons) 2.46 2.43 2.38 2.40 2.36 The City of Encinitas contracts with the County of San Diego Sheriff's Department to provide law enforcement services. The City of Encinitas has elected to show only five years of data for this schedule. Source: City of Encinitas 148 CITY OF ENCINITAS Capital Asset Statistics by Function Last Five Fiscal Years Fiscal Years 2010 2011 2012 2013 2014 Law enforcement: Number of sub-Stations 1 1 1 1 1 Fire department: Fire stations 5 5 5 6 6 Public works: Streets (miles) 201 201 201 201 201 Engineering: Signalized intersections 63 63 63 63 63 Parks and recreation: Community and senior center 1 1 1 1 1 Developed parks 18 18 18 18 18 Undeveloped parks 4 4 4 4 4 Parkland acres 382 382 382 382 382 Habitat/open space acreage 87 87 87 87 87 Marine life refuge 1 1 1 1 1 Trails/streetscapes (miles) 41/10 41/10 41/10 41/10 41/10 Lifeguard towers 7 7 7 7 7 Water: Water mains (miles) 166 168 168 168 168 Maximum daily capacity (millions of gallons) 15 15 15 15 15 *The City of Encinitas contracts with the County of San Diego Sheriffs department to provide law enforcement services. The City of Encinitas has elected to show only five years of data for this schedule. Source: City of Encinitas 149 Cardiff Sanitary Division Summary of Operational Data The following tables are being presented as supplementary information based on requirements for bonds issued to CSD for continuing bond disclosure certificate. 151 TABLE 1 CARDIFF SANITARY DIVISION Rate Schedule for Annual Sewer Charges As of June 30,2014 Users/Class Category Charge HCF Rate HCF Median Charge New Connections(no prior water consumption Group I Residential history) Single Family SF $41.08 $ 4.80 103.02 $ 535.58 Multi Family MF See below 4.80 $397.50/unit Trailer Park TP See below 4.80 $397.50/unit New Connections(no prior water consumption Non-Residential history) Commercial Group 11 See below See below $ 5.04 See below See below Commercial Group III See below See below 6.57 See below See below Commercial Group IV See below See below 9.86 See below See below Multi Family"and Non-Residential Fixed Meter Charge Meter Size Annual Charge Meter Size Annual Charge 5/8" $ 41.08 1-1/2" $ 205.38 3/4" 61.61 2" 328.60 1" 102.69 3" 616.13 "Multi Family=Fixed Meter Charge x 2 Water Consumption Periods To Be Used Residential=2 Lowest Periods of Water Consumption For Meter Readings Occurring Between Dec.-May(most recent available 5-year period) Non-Residential(Commercial)=Water Consumption For Meter Readings Occurring Between July-June of Preceding Year Annual HCF Median Usage Sub Unit Cost (New Charge(New Users/Class Category (perHCF) Connections) Connections) Group 11 Commercial Softwater Service SW $ 5.04 ------- Car Wash CW 5.04 1,520 $7,660.80 Office Building OF 5.04 200 1,008.00 Fire Station FS 5.04 110 554.40 Professional Building(Doctor) PB 5.04 160 806.40 Veterinary Clinic VC 5.04 ------- Athletic Gymnasium G 5.04 1,340 6,753.60 Laundromat L 5.04 990 4,989.60 Department and Retail Store DRS 5.04 120 604.80 Warehouse W 5.04 1,050 5,292.00 Hospital,Convalescent Home HCH 5.04 3,240 16,329.60 Parks PB 5.04 510 2,570.40 Church-Membership Organization C 5.04 440 2,217.60 Membership Organization(Non-Church) MO 5.04 240 1,209.60 Social Services SS 5.04 160 806.40 Group 111 Commercial Hotels-Motels(without restaurant) HM $ 6.57 890 $5,847.30 Repair and Service Station RSS 6.57 70 459.90 Shopping Center SC 6.57 1,030 6,767.10 Kennel K 6.57 900 5,913.00 Coffee Shop CS 6.57 ------- Amusement Park AP 6.57 ------- Nightclub/Bar NC 6.57 320 2,102.40 Commercial Laundry CL 6.57 ------- Manufacturing M 6.57 180 1,182.60 Lumber Yard LY 6.57 ------- Group IV Commercial Hotels-Motel(with restaurant) HM $ 9.86 3,130 $30,861.80 Bakery(wholesale)/Food Processor BW 9.86 ------- Supermarket SM 9.86 1,030 10,155.80 Mortuary MT 9.86 300 2,958.00 Restaurant R 9.86 600 5,916.00 (1) Sewer rates are based on water consumption(fixed charge based on meter size and consumption component). The consumption is based on HCF(hundred cubic feet-748 gallons). 152 TABLE 2 CARDIFF SANITARY DIVISION Historical Service Charges Billed Last Five Years Fiscal Residential Commercial Commercial Single Family Year (Tax Roll) (Tax Roll) (Manual) Total Billed Average 2010 $ 4,034,670 $ 703,126 $ 128,223 $ 4,866,019 $ 674 2011 3,984,339 628,165 127,210 4,739,715 664 2012 4,058,990 645,560 123,822 4,828,372 676 2013 3,935,414 666,099 126,677 4,728,190 652 2014 3,812,338 599,324 134,910 4,546,572 622 Cardiff Sanitary Division bills most customers through the San Diego County property tax billing service. Delinquincy rates have been between 1.8%-3.0% during the period presented. Delinquencies do not apply to direct billings. 153 TABLE 3 CARDIFF SANITARY DIVISION Ten Largest Customers Fiscal Year 2013-2014 Parcel Sewer Service Percentage of Property Owner Count Charges Sewer Charges SCRIPPS HEALTH 1 $ 103,708 2.28% COLLWOOD PINES APARTMENTS L P 3 68,801 1.51% STATE OF CALIFORNIA PARKS & REC 2 56,471 1.24% SAN DIEGUITO UNION HIGH SCHOOL DISTRICT 2 45,051 0.99% AVOLENCIA INVESTMENT GROUP LLC 1 44,812 0.99% 944 REGAL ROAD L L C 1 36,732 0.81% CARDIFF TOWN CENTER L L C 1 28,288 0.62% WEST VILLAGE INC 1 27,139 0.60% NEWPORT TAFT INC 1 24,633 0.54% DELUCA TRUST 1 21,480 0.47% 14 $ 457,114 10.05% Total Billed $ 4,546,572 Source: Cardiff Sanitary Division TABLE 4 CARDIFF SANITARY DIVISION Historical Service Connections Fiscal Year 2013-2014 Commercial Total Connections Residential Industrial Total Year (Billed Parcels) EDU's EDU's EDU's 2009 6,312 6,990 1,124 8,114 2010 6,317 7,011 1,124 8,136 2011 6,329 7,033 1,124 8,187 2012 6,334 7,067 1,154 8,221 2013 6,365 7,083 1,174 8,257 2014 6,375 7,126 1,176 8,302 Source: Cardiff Sanitary Division 154 A- $a bieguito Water District Summary of Operational Data The following tables are being presented as supplementary information based on requirements for bonds issued by SDWD for continuing bond disclosure certificate. 155 TABLE 1 SAN DIEGUITO WATER DISTRICT Schedule of Water Rates As of June 30, 2014 Rate (footnote 1) Customer Class Residential Rate Tier Potable Recycled Single-family residential 0-12 units $2.52 13-20 units $3.76 21-40 units $4.44 41+ units $5.62 Multi-family residential (per dwelling) 0-8 units $2.52 9-12 units $3.76 13-16 units $4.44 17+ units $5.62 Agriculture $3.13 $2.66 Commercial $3.53 $3.00 Government/ Public $3.53 $3.00 Landscaping $4.44 $3.77 Construction $4.44 $3.77 Source: San Dieguito Water District (1) Per Unit (one hundred cubic feet or 748 gallons) TABLE 2 SAN DIEGUITO WATER DISTRICT Bi-Monthly Meter Service Availability Charges As of June 30, 2014 Water Meter Service Infrastructure Fire Meter Service Availability Access Availability Meter Size Charge Charge Charge 5/8" & 3/4" $ 33.54 $ 5.30 N/A 1" 53.33 8.48 $ 7.05 1-1/2" 102.82 15.90 13.15 2" 162.20 27.56 23.66 3" 300.77 50.08 61.41 4" 498.70 86.92 126.51 6" 993.56 159.00 360.16 8" 1,587.39 275.60 763.17 Source: San Dieguito Water District (2) San Dieguito charges a bi-monthly service availability charge, which covers the costs for the maintenance of meters, water lines, and storage facilities, to ensure that water is available upon demand. This charge also covers customer service costs for meter reading and billing. The infrastructure access charge is levied by the San Diego County Water Authority, and is collected from the customer by the District. 156 TABLE 3 SAN DIEGUITO WATER DISTRICT Historic Potable Water System Revenues Last Ten Fiscal Years Meter Fiscal Potable Percentage Availability Percent Year Water Sales Change (2) Charge Change (2) 2005 $ 5,252,235 8.0% $ 1,877,863 10.5% 2006 6,465,975 23.1% 2,061,454 9.8% 2007 7,579,205 17.2% 2,251,011 9.2% 2008 7,717,818 1.8% 2,404,547 6.8% 2009 7,525,927 -2.5% 2,453,075 2.0% 2010 7,146,854 -5.0% 2,501,264 2.0% 2011 8,205,876 14.8% 3,007,127 20.2% 2012 8,528,418 3.9% 3,196,605 6.3% 2013 9,236,462 8.3% 3,087,794 -3.4% 2014 10,649,157 15.3% 3,227,823 4.5% Source: San Dieguito Water District (3) Due to the varying number of billing cycles in a fiscal year, changes year-over-year may of be exactly comparable. TABLE 4 SAN DIEGUITO WATER DISTRICT Historic Potable Water System Revenues Last Ten Fiscal Years Meter Fiscal Recycle Percent Availability Percent Year Water Sales Change Charges (4) Change 2005 $387,607 -8.0% $ - N/A 2006 454,145 17.2% - N/A 2007 596,299 31.3% - N/A 2008 600,401 0.7% - N/A 2009 663,036 10.4% - N/A 2010 537,654 -18.9% - N/A 2011 523,397 -2.7% - N/A 2012 422,925 -19.2% - N/A 2013 400,244 -5.4% - N/A 2014 460,383 15.0% 60,048 N/A Source: San Dieguito Water District (4) The District first implemented a meter availability charge for recycled customers on September 1, 2013. 157 TABLE 5 SAN DIEGUITO WATER DISTRICT Summary of Water Production by Source Last Ten Fiscal Years Potable Production (5) Fiscal Local Imported Total Recycled Total Year Water Water Potable Water Production 2005 1,705 5,602 7,307 595 7,902 2006 2,765 5,093 7,858 600 8,458 2007 2,706 5,692 8,398 708 9,106 2008 3,539 3,753 7,292 676 7,968 2009 3,869 3,369 7,237 694 7,931 2010 4,399 2,156 6,555 498 7,053 2011 4,434 1,901 6,335 511 6,846 2012 3,719 2,663 6,382 578 (6) 6,960 2013 4,200 2,395 6,595 678 (6) 7,273 2014 1,136 5,593 6,729 692 7,421 Source: San Dieguito Water District (5) Water Production is defined as water either produced locally or purchased expressed in acre-feet). TABLE 6 SAN DIEGUITO WATER DISTRICT Summary of Water Deliveries by Source Last Ten Fiscal Years Fiscal Percent Percent Year Potable I ncrease Recycled I ncrease 2005 6,719 -6.8% 595 -16.3% 2006 7,281 8.4% 600 0.8% 2007 7,592 4.3% 708 18.0% 2008 6,753 -11.1% 676 -4.5% 2009 6,463 -4.3% 694 2.7% 2010 5,649 -12.6% 498 -28.2% 2011 5,425 -4.0% 511 2.6% 2012 5,957 9.8% 578 (6) 13.1% 2013 6,284 5.5% 678 (6) 17.3% 2014 6,449 2.6% 692 2.1% Source: San Dieguito Water District (6) 2012 and 2013 Recycled Water Production and Delivery figures revised to now include water provided to the Encinitas Ranch Golf Authority (ERGA). Beginning in 2012, the San Elijo Joint Powers Authority (SEJPA) began directly providing recycled water to ERGA and the District ceased selling recycled water to ERGA. The recycled water provided to ERGA credits towards the Districts production and delivery figures as ERGA falls within the District's sphere of influence. The differences between potable water production and deliveries represents water loss in the distribution system and/or water pumped or used through the fire distribution system. 158 TABLE 7 SAN DIEGUITO WATER DISTRICT Ten Largest Customers As of June 30, 2014 Acre-Feet Percent of Customer Description Sold Water Sold City of Encinitas 124 1.9% Park Place Bluffs 80 1.2% Cardiff by the Sea Apartments 62 1.0% Scripps Memorial Hospital 56 0.9% Leucadia Seabluff Village 48 0.7% Encinitas Ranch Community Association 47 0.7% Skyloft Homeowners 45 0.7% LF Encinitas Properties, LLC 44 0.7% Seacrest Village 43 0.7% Cal West Enterprises 38 0.6% Subtotal - Top 10 Customers 587 9.1 Total Sold 6,449 Source: San Dieguito Water District TABLE 8 SAN DIEGUITO WATER DISTRICT Total Service Connections by Category Last Ten Fiscal Years Fiscal Percent Percent Year Potable I ncrease Recycled I ncrease 2005 11,268 0.9% 49 11.4% 2006 11,275 0.1% 55 12.2% 2007 11,338 0.6% 56 1.8% 2008 11,364 0.2% 59 5.4% 2009 11,370 0.1% 68 15.3% 2010 11,388 0.2% 73 7.4% 2011 11,397 0.1% 72 -1.4% 2012 11,476 0.7% 74 2.8% 2013 11,502 0.2% 77 4.1% 2014 11,610 0.9% 77 0.0% Source: San Dieguito Water District (8) The decline of one connection in 2011 reflects the change in the contract arrangement with the Encinitas Ranch Golf Course. 159