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2015-CAFR � CZNITA �� -. Mill AV y i '1 s Comprehensive Annual Financial Report ' Fiscal Year Ended June 30 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. Issued by the Finance Department 505 South Vulcan Avenue Encinitas, CA 92024 760-633-2600 www.encinitasca.gov City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2015 Table of Contents Page INTRODUCTORY SECTION Table of Contents ........................................................................................................................................... i Transmittal Letter .......................................................................................................................................... v List of City Officials ....................................................................................................................................... ix Organization Chart ........................................................................................................................................ x Certificate of Achievement for Excellence in Financial Reporting – GFOA .................................................. xi FINANCIAL SECTION Independent Auditors’ Report on Financial Statements ......................................................................... 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: Statement of Net Position ................................................................................................................. 25 Statement of Activities and Changes in Net Position ....................................................................... 26 Fund Financial Statements: Governmental Fund Financial Statements: Balance Sheet ............................................................................................................................ 33 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position ................................................................ 34 Statement of Revenues, Expenditures and Changes in Fund Balances .................................... 35 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 ............................................................... 36 Proprietary Fund Financial Statements: Statement of Net Position ........................................................................................................... 38 Statement of Revenues, Expenses and Changes in Net Position .............................................. 40 Statement of Cash Flows ............................................................................................................ 42 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position ........................................................................................... 49 Notes to the Basic Financial Statements ........................................................................................... 51 i City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2015 Table of Contents (Continued) Page FINANCIAL SECTION (Continued): Required Supplementary Information (Unaudited): Budgetary Information ....................................................................................................................... 123 Budgetary Comparison Schedule: General Fund ............................................................................................................................... 124 Schedule of Changes in the Net Pension Liability and Related Ratios ............................................. 126 Schedules of the City’s Proportionate Share of the Net Pension Liability ......................................... 127 Schedules of Contributions ................................................................................................................ 135 Schedule of Funding Progress – Other Post Employment Benefits .................................................. 144 Supplementary Information: Non-Major Governmental Funds: Combining Balance Sheet ........................................................................................................... 147 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................... 150 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: Infrastructure Improvements Special Revenue Fund ............................................................ 152 Grants and Housing Special Revenue Fund ......................................................................... 153 Development Impact Special Revenue Fund ........................................................................ 154 Lighting and Landscaping Special Revenue Fund ................................................................ 155 Internal Service Funds: Combining Statement of Net Position .......................................................................................... 158 Combining Statement of Activities and Changes in Net Position ................................................ 159 Combining Statement of Cash Flows .......................................................................................... 160 Fiduciary Funds: Combining Statement of Changes in Assets and Liabilities – Agency Funds ............................. 162 STATISTICAL SECTION Index........................................................................................................................................................ 163 Financial Trends: Net Position by Component – Last Ten Fiscal Years ........................................................................ 164 Changes in Net Position – Last Ten Fiscal Years ............................................................................. 166 Fund Balances of Governmental Funds – Last Ten Fiscal Years ..................................................... 170 Changes in Fund Balance of Governmental Fund – Last Ten Fiscal Years ...................................... 172 Revenue Capacity: Assessed Value and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ............ 174 Principal Secured Property Tax Payers – Last Ten Fiscal Years ...................................................... 175 General Property Tax Levies and Collections – Last Ten Fiscal Years ............................................ 176 Direct and Overlapping Property Tax Ratios – Last Ten Fiscal Years .............................................. 178 ii City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2015 Table of Contents (Continued) Page STATISTICAL SECTION (Continued): Debt Capacity: Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ........................................................... 182 Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years ............................................. 184 Schedule of Direct and Overlapping Bonded Debt ............................................................................ 185 Legal Debt Margin Information – Last Ten Fiscal Years ................................................................... 186 Historical Debt Service Coverage – Last Ten Fiscal Years ............................................................... 188 Demographic and Economic Information: Demographic and Economic Statistics – Last Ten Calendar Years .................................................. 189 Taxable Sales by Category – Last Ten Fiscal Years ......................................................................... 190 Operating Information: Full-Time and Part-Time City Employees by Function – Last Six Fiscal Years ................................. 191 Operating Indicators by Function – Last Six Fiscal Years ................................................................. 192 Capital Assets Statistics by Function – Last Eight Fiscal Years ........................................................ 193 Cardiff Sanitary Division: Rate Schedule for Annual Sewer Charges ........................................................................................ 196 Historical Service Charges Billed ...................................................................................................... 197 Ten Largest Customers ..................................................................................................................... 198 Historical Service Connections .......................................................................................................... 198 San Dieguito Water District: Schedule of Water Rates ................................................................................................................... 200 Bi-Monthly Meter Service Availability Charges .................................................................................. 200 Historic Potable Water System Revenues – Last Ten Fiscal Years .................................................. 201 Historic Recycled Water System Revenues – Last Ten Fiscal Years ............................................... 201 Summary of Water Production by Source – Last Ten Fiscal Years .................................................. 202 Summary of Water Deliveries by Source – Last Ten Fiscal Years .................................................... 202 Ten Largest Water Customers .......................................................................................................... 203 Total Service Connections by Category – Last Ten Fiscal Years ..................................................... 203 iii This page intentionally left blank. iv INTRODUCTORY SECTION City of Encinitas 505 South Vulcan Avenue Encinitas CA 92024 760-633-2600 www.encinitasca.gov TRANSMITTAL LETTER INTRODUCTORY SECTION December 9, 2015 Honorable Mayor, City Council and Citizens of the City of Encinitas, California, We are pleased to present the fiscal year 2014-15 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 operations of the City for the fiscal year ended June 30, 2015 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 legal reporting requirements, including Federal, State 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 Old Encinitas, Cardiff-by-the-Sea, Leucadia, and Olivenhain. Encinitas is located in northern San Diego County approximately 25 miles north of downtown San Diego on the Southern California coast. The City with an estimated population of 61,000 covers approximately 21 square miles and is predominately residential with two major commercial corridors. GOVERNANCE The City is governed by a City Council consisting of a Mayor and four Council members under the Council-Manager form of government. The Council members are elected at large, on staggered four-year terms while the Mayor is 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 her 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 INTRODUCTORY SECTION MUNICIPAL SERVICES The City provides a full range of municipal services such as: Fire and paramedic services Law enforcement (contract) Marine safety Parks and trails Planning and development services Recreation services Street maintenance and construction Traffic control Wastewater services Water services 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 an active Community and Senior Center located at Encinitas Boulevard and Balour Drive, the 44 acre Encinitas Community Park located 425 Santa Fe Drive along with 20 other park sites 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. Online access to detailed City financial information is available on 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 https://encinitasca.opengov.com/transparency. 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, its 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, local consumer confidence, online help wanted advertising and the national index of leading economic indicators. In the twelve months ended July 2015 the index has increased from 128.0 to 139.6 or 9.1%. The two indicators contributing the most to the overall increase in the index were both employment related. Initial claims for unemployment insurance dropped 16.9% while help wanted advertising increased 12.5%. Locally in Encinitas, according to the website www.trulia.com the median sales price for homes in Encinitas for July to October 2015 was $807,000. This represents an increase of 10.7% compared to the prior year. Property and Sales Tax - Property tax and sales tax revenue represent approximately 80% of the City’s total General fund revenue. Property tax revenue in FY 2014-15 totaled $37.1 million v TRANSMITTAL LETTER INTRODUCTORY SECTION which was an increase of $1.9 million or 5.5% over FY 2013-14. Sales tax revenue in FY 2014- 15 was $12.6 million, an increase of $.5 million or 4.2% over FY 2013-14 revenue. Other revenue sources remained relatively stable, although revenues from the State of California are still considered to be vulnerable to State actions. Financial Strength and Sustainability - The City of Encinitas is well positioned to weather economic fluctuations and has been evaluated and rated by internationally recognized third party reviewers. In 2014, Standard & Poor’s Rating Services (S&P) affirmed its ‘AAA’ issuer credit rating (ICR) for the City of Encinitas. According to S&P, the ‘AAA’ ICR reflects the City’s: 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 $57.9 million of general fund bonded debt and equipment leases outstanding at June 30, 2015, with scheduled payments of principal and interest of $4.7 million in FY 2014-15. This translates to a debt ratio of 7.6%, 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 General Fund 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 General Fund budget stabilization reserve, 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 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. General Fund reserves for contingencies and budget stabilization total $12.7 million and funding available for capital improvements was $18.4 million as of June 30, 2015. Pacific View Property Acquisition Major Initiatives and Projects – – In November 2014 the City closed on the purchase of approximately 2.8 acres and existing structures. The site is known as Pacific View Elementary School and was 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 considering a proposal for an operating partner to be responsible for the design, rehabilitation, scheduling, maintenance and management of the buildings and grounds of the Pacific View site. Encinitas Community Park – In January 2015, the Mayor and City Council hosted a grand opening celebration for the new Encinitas Community Park. The park was built on 44 acres of vi viii LIST OF CITY OFFICIALS As of June 30, 2015 CITY COUNCIL MayorKristin Gaspar Deputy MayorCatherine S. Blakespeare CouncilmemberTony Kranz CouncilmemberMark Muir CouncilmemberLisa Shaffer EXECUTIVE TEAM MEMBERS City ManagerKaren P. Brust City Clerk/Legislative Services DirectorKathy Hollywood Public Works DirectorGlenn Pruim Finance DirectorTim Nash Fire ChiefMichael Daigle Human Resources Department ManagerJodene Dunphy IT/GIS Department ManagerLynne Tufts Law Enforcement Services DirectorCaptain John Maryon Parks & Recreation Department DirectorLisa Rudloff Planning & Building Director (Interim)Manjeet Ranu Risk Management ManagerJace Schwarm ix City of Encinitas Organization Chart x xi This page intentionally left blank. xii FINANCIAL SECTION City of Encinitas 505 South Vulcan Avenue Encinitas CA 92024 760-633-2600 www.encinitasca.gov 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, 2015, 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 Investments in Joint Ventures which represent 9.4 percent, 13.5 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, 2015, 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. Emphasis of Matter Implementation of GASB Statements Nos. 68 and 71 As discussed in Note 14 to the basic financial statements, the City implemented Governmental Accounting Standards Board (“GASB”) Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27) and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. The adoption of these standards required retrospective application of previously reported net position and reclassification of certain accounts as of July 1, 2014 as described in Note 18 to the basic financial statements. In addition, the aggregate net pension liability is reported in the Statement of Net Position in the amount of $35,820,101 as of the measurement date. Net pension liability is calculated by actuaries using estimates and actuarial techniques from an actuarial valuation as of June 30, 2013 which was then rolled-forward by the actuaries to June 30, 2014, the measurement date for California Public Employee Retirement System (“CalPERS”). Our opinion is not modified with respect to this matter. 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, Schedules of Changes in Net Pension Liability and Related Ratios, Schedules of the Proportionate Share of the Net Pension Liability, Schedules of Contributions, and Schedules of Funding Progress on pages 7 through 19 and 125 through 146 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. 2 To the Honorable Mayor and Members of the City Council of the City of Encinitas Encinitas, California Page 3 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. 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 9, 2015, 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 9, 2015 3 This page intentionally left blank. 4 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, 2015, 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 9, 2015. 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. Adeficiencyin 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 9, 2015 6 City of Encinitas Management’s Discussion and Analysis For the Year Ended June 30, 2015 This discussion and analysis of the City of Encinitas’ financial performance provides an overview of the fiscal year ended June 30, 2015. 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). Please read it in conjunction with the accompanying transmittal letter, the basic financial statements and the accompanying notes to those financial statements. A glossary has been provided at the end of this analysis to assist the reader in understanding the terminology used within. FINANCIAL HIGHLIGHTS The City’s total assets increased by $15.9 million. This is composed of a $17.4 million increase in Governmental activities and $1.5 million decrease in Business-Type activities. The City’s total net position decreased overall by $34.9 million. Total assets increased $15.9 million and Total liabilities increased $44.6 million (due to increase in long-term debt as a result of a new bond issue and the recognition of aggregate net pension liabilities). The beginning Net Position was restated and decreased by $42.0 million due to net unfunded pension liability which is a new Governmental Accounting Standards Board (GASB) No. 68 accounting reporting requirement for year ended 6/30/15. Governmental activities Net Position was decreased $32.4 million o Business-type activities Net Position was decreased $2.2 million o The City’s total revenues decreased $1.9 million from 2014. Governmental activities revenues decreased $.7 million o Business-type activities revenues decreased 1.2 million o The City’s total expenses increased $9.2 million from 2014. Governmental activities expenses increased $7.1 million o Business-type activities expenses increased $2.1 million o THE FINANCIAL STATEMENTS The financial statements presented herein include all the activities of the City of Encinitas (City) and the component unit of San Dieguito Water District (SDWD) using the integrated approach as prescribed by GASB Statement No. 34. The City includes accounts for the Encinitas Public Financing Authority (EPFA) and the Encinitas Housing Authority (EHA). The Government-Wide Financial Statements present the financial picture of the City from the economic resources measurement focus using the accrual basis of accounting. They present Governmental activities and Business-type activities separately. These statements include all assets of the City (including infrastructure) as well as all liabilities (including long-term debt). Certain eliminations have occurred as prescribed by the statement in regards to interfund activity, payables and receivables. 7 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 The Fund Financial Statements include statements for each of the three categories of activities: - Governmental, Business-Type (proprietary) and Fiduciary. The Governmental activities (other than internal service activities) are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The Business-Type activities are prepared using the economic resources management focus and the accrual basis of accounting. The Fiduciary activities include agency funds which only report a balance sheet and do not have a measurement focus. Reconciliations of the Fund Financial Statements to the Government-Wide Financial Statements are provided to explain the differences created by the integrated approach. Reporting the City as a Whole The Statement of Net Position and the Statement of Activities The Government-Wide Financial Statements consist of two financial statements. The Statement of Net Position and the Statement of Activitiesand Changes in Net Position report information about the City as a whole and its activities. These statements include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. 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 answer this question and provides an analysis of the City’s financial position. The Statement of Net Position presents information on all of the City’s assets, deferred outflows-inflows and liabilities, with the difference between the four reported as Net Position, which is one way to measure the City’s financial health. Over time, increases or decreases in the City’s Net Position is one indicator of whether its financial health is improving or deteriorating. The Statement of Activities presents information showing how the City’s Net Position changed during the most recent fiscal year. All changes in Net Position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (i.e. uncollected taxes and earned but unused vacation leave). In both the Statement of Net Position and the Statement of Activities and Changes in Net Position the City activities are separated as follows: Governmental activities -Most of the City’s basic services are reported in this category, including General Government, Public Safety, Public Works, Building and Planning, Engineering Services, and Parks and Recreation. Property and sales taxes, user fees, franchise fees, investment earnings and state and federal grants finance these activities. Business-Type activities – The City charges a fee to customers to 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. 8 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 Reporting the City’s Most Significant Funds 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 No. 34. All other governmental funds are considered Nonmajor funds, 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 accounts for all governmentally funded capital improvements, as well as a number of work projects such as long-term consultant studies. All of these expenses appear as capital outlay expenditures. Capital spending totaled $18.4 million this fiscal year, an increase of about $3.9 million from 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 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 readily be converted to cash. The Governmental fund statements provide a detailedshort-termviewof the City’s general governmental operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. 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 Internal Service funds are reported with Governmental activities in the Government-Wide financial statements. 9 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 Fiduciary funds – The City is the trustee, or fiduciary, for certain funds held on behalf of the Community Facilities District No. 1 (the Encinitas Ranch Development) and Requeza Street Assessment District No. 93-1. The City’s fiduciary activities are reported in a separate Statement of Fiduciary Net Position and Liabilities. We exclude these activities from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. Net Position – The City’s combined Net Position (i.e. inclusive of all City funds) for the fiscal Table 1. year ended June 30, 2015 are compared to results for 2014 in 10 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 Net Position represents the most simple test of financial health for the City, indicating the excess (or deficit) of assets and deferred outflows of resources over liabilities. Net Position for the City as a whole decreased 10% from $335.5 million at June 30, 2014, to $300.9 million at June 30, 2015. The overall increase in Total Assets is $15.9 million. The Governmental activities total Assets increased $17.4 million with higher cash/investments and an increase in capital assets due to the land acquisition of Pacific View of $10 million. The Business-Type Total Assets activities decreased $1.5 million with a decrease in cash/investments offsetting increases to capital assets. In summary, the Governmental increase of $17.4 million plus the Business-Type decrease of $1.5 million results in an overall increase to the City’s Total Assets of $15.9 million. The overall increase in Total Liabilities is $44.6 million. This is the net change attributable to $39.7 million increase in the long-term liabilities and $4.9 million increase in other liabilities in the Governmental and Business activities (accounts payable, deposits, and unearned revenue). $35.8 million of the overall increase is the result of the implementation of GASB No. 68 accounting for net pension liabilities (governmental activities total $ 32 million and business-type activities total $3.8 million). Long-term obligations increased by $8.4 million resulting from a new bond issuance in governmental activities and a refunding bond issue in business-type activities. The increase of Total Assets of $15.9 million along with an increase of Total Liabilities of $44.6 million and increase in Deferred Inflows of $6.0 million has decreased the City’s Total Net Position by $34.6 million or approximately 10% decrease from 2014. (Remainder of page left intentionally blank) 11 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 12 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 Chart 1 shows the financial impact of the various City programs, or the extent to which these programs generate revenue from fees and grants. The City’s programs include General Government, Public Safety (Fire and Law Enforcement), Public Works, Planning and Building, Engineering Services, and Parks and Recreation. Each program’s net cost (total cost less revenues generated by the activities) is presented in the Statement of Activities. Chart1 ExpensesversusProgramRevenuesfor GovernmentalActivities $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $ GeneralPublicSafetyPublicWorksPlanning&EngineeringParks&Intereston GovernmentBuildingServicesRecreationLongTerm Debt ProgramRevenueExpenses Chart 2 shows that Property Tax, Sales Tax, Charges for Services, Capital Grants and Contributions, and Operating Grants and Contributions, which are the top five categories of revenue and comprise 90% of funding for Governmental activities. The Other category includes proceeds from the disposition of City real property, intergovernmental, cost recovery, and miscellaneous revenues. Chart2 GovernmentalRevenues OperatingGrants& UseofMoney& Other ChargesforServices Contributions Property 3% 9% 5% 1% OtherTaxes 6% CapitalGrants& Contributions 6% SalesTaxes 17% PropertyTaxes 53% 13 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 Business-Type Activities for the City of Encinitas include water and wastewater operations, a portion of the City’s affordable housing program, and certain fee-for-service recreation programs. These activities increased Net Position (including transfers) by $2.2 million from the last fiscal year as noted in in Table 2. Overall revenues decreased $1.1 million while overall expenses increased $2.1 million from 2014. Net transfers (an increase to Net Position) remained flat from the prior year. The Statement of Revenues, Expenses, and Changes in Net Position for proprietary funds indicate a decrease of $.5 million in operating revenues from the previous year. The Water operating revenue decreased $.5 million while Wastewater, Affordable Housing and Recreation Program revenues remained relatively flat. The 2015 decrease was mainly due to customer demand for potable water was 6% lower than 2014 due to mandatory water-use restrictions in response to the statewide drought situation. Nonoperating revenues decreased $0.6 million overall primarily due to a reduction of $0.4 million in state capital grants from 2014. Operating expenses increased $2.1 million due to an increase in the cost of purchased water, along with treatment costs, maintenance and operations costs. Overall, operating revenue exceeded operating expenses (before transfers) in 2015 resulting in a total net operating income of $0.4 million. Chart 3 below compares program revenue from Business-Type activities to program expenses. Water and wastewater operations operated at a surplus, as referenced in the Statement of Activities (with transfers-out for $20,000 appearing “below the line” of program expenses). Chart3 ExpensesversusProgramRevenuesfor BusinessTypeActivities $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ CardiffSanitarySanDieguitoWaterEncinitasSanitaryAffordableHousingRecreationPrograms DivisionDistrictDivision ProgramRevenueExpenses 14 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 General Fund General Fund Budgetary Highlights General Fund Revenues $3.1 million above projections Property taxes made up 60% of the general fund revenue budget. Current secured property taxes exceeded projections by $1,036,040, a 5.5% increase over 2014. Other property tax revenue came in at or above estimates for a total of $378,466. Documentary transfer tax exceeded projections by $172,372. Sales tax is the City’s second largest revenue source and actual revenue received exceeded projections by $381,467, a 4.1% increase over 2014. 80% of the City’s Transient Occupancy Tax (TOT) is deposited to the General Fund and 20% is deposited to the Coastal Zone Management Fund for sand replenishment. TOT revenue for hotels within the City exceeded projections by $79,055 while STVR revenue exceeded projections by $166,636, an increase of $16% from 2014. Overall, Franchise tax fees exceeded projections by $83,793. Licenses and permits exceeded projections by $31,674 mainly due to an increase in security alarm permits and short-term vacation permits. Intergovernmental revenue exceeded projections by $292,984, primarily due to state mandated reimbursements from 1996 through 2004 received from the State of California. Planning and building fees were lower than projections, while Engineering, Fire and Recreation fees exceeded projections so overall Charges for Services revenue exceeded projections by $66,700. Fines and Penalties, which include vehicle code and red light violations, exceeded projections by $60,329. For the first time in five years, investment earnings exceeded projections of $34,061 and income from City property rentals exceeded projections by $98,227, an increase of 38%. Other general fund revenues overall exceeded projections by $291,883, primarily due to an increase in cost recovery revenue received. General Fund Expenditures $2.7 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 over $2.4 million. This represents savings of approximately 4.5%. Actual general fund expenditures were $52.0 million compared to prior year actuals of $49.5 million. Excess of Revenues over Expenditures $5.6 million above projections Actual revenues over expenditures were approximately $10.4 million, compared to a budget of $4.8 million. NOTE: This does not take into account the Other Financing Sources (Uses) discussed below. This result is a combination of revenues being above projections and expenditures being under budget, as discussed above. Other Financing Sources and Uses – General Fund Other Financing Sources and Uses consisted of Transfers-in and Transfers-(out) as well as bond proceeds from the 2014 Lease Revenue Bonds this fiscal year. 15 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 Scheduled transfers-in included: (a) monies from the Gasoline Taxes special revenue fund, which 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 are transferred at year- end to reimburse the General Fund for amounts expended in prior years for the Public Library and Fire Station Rehabilitation projects. The reason for the $249,000 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 and excess portion of bond proceeds not budgeted. Transfers-out to internal service funds includes the General Fund’s contribution to the Self- Insurance fund. That contribution was set and funded at approximately $900,000. Due to the method the City uses to account for the General Fund’s contribution for capital projects, the 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 expended. Appropriations for capital projects totaled $15.7 million but actual expenditures totaled $13.6 million in 2015. Transfers-(out) for debt service totaled $4.7 million, which was lower than $5.2 million budgeted due to a lower payment of the Pacific View/MLB Tower financing in the first year resulting in a net savings of $436,241 and a savings of $25,000 in interest expense on the 1992 COPS bonds that will be paid next fiscal year. Analysis of Fund Balance and Changes in Fund Balance Fund balance projected to be $34.6 million as of June 30, 2015, a scheduled decrease of about $1.3 million. Actual fund balance was $41.4 million, or $6.8 million higher than projected. There was an excess of revenues over expenditures of $10.4 million. Factoring in transfers for debt service payments, the results are a positive balance of $5.7 million. Capital transfers totaled $13.6 million. The net result is an increase in total fund balance of $5.5 million. CAPITAL ASSETS AND THE CAPITAL IMPROVEMENT PROGRAM As of June 30, 2015, the City had approximately $315 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, $218.7 million classified as capital assets under the category of Governmental Activities, and $55.7 million classified as capital assets of Business-Type Activities. In addition, there are $40.6 million of assets under Business-Type Activities 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. 16 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 Governmental Activities $218.8 million The City has a Capital Projects Improvement Fund for all of its’ capital improvements for 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 uses a dollar threshold of $100,000 and a useful life of five years or more in its evaluation for capitalizing a capital expenditure. Eligible project costs are additions to construction in progress (CIP) at fiscal year-end. Costs for completed projects are additions to the appropriate capital asset category at year-end. There is a monthly transfer of funds from various governmental funds to the Capital Projects Improvement Fund to cover capital expenditures as they occur. The City spent approximately $13.6 million this fiscal year on capital improvement projects. The majority of that amount ($10.0 million) was for the acquisition of a 3-acre piece of property, known as the Pacific View Property, from the Encinitas Union School District. The bond proceeds of the City’s 2014 Lease Revenue bond issue in the current year funded the land acquisition. The remainder of $3.6 million 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. Business-Type Activities Capital Assets: $55.7 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 a 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 16 housing units in 2004. Investment in Joint Ventures: $40.6 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. 17 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 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 serving other local agencies, bill quarterly for their ratable share of operations costs and capital improvements. Encinitas Sanitary Division holds an equity interest, along with 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. These capital contributions are additions to the Investment account at the end of the fiscal year. The Division also makes quarterly payments to cover its ratable share of annual operating costs. Due to the implementation of GASB No. 68 accounting of net pension liabilities, CSD and SDWD recognized a decrease in their share of the joint venture investments due to the restatement of the district’s share in the Net Position of the joint venture investments. DEBT ISSUANCE AND ADMINISTRATION The City has a total of $57.9 million of long-term debt and $3.3 million of other liabilities such as estimated claims and compensated absences classified under Governmental Activities. Of that total, $3.1 million of long-term debt is due within one year, not including the other liabilities, noted above. The City has a total of $15.9 million of long-term debt and $0.2 million of other liabilities such as compensated absences classified under Business-Type Activities. Of that total, $1.6 million of long-term debt is due within one year, not including the other liabilities, noted above. Governmental Activities $57.9 million The majority of the City’s long-term debt is bonded debt issued in order to acquire and/or construct public facilities including City Hall, the Public Library, and the Encinitas Community Park. On November 26, 2014, the Encinitas Public Financing Authority (on behalf of the City) issued its 2014 Lease Revenue Bonds, Series A tax-exempt (Pacific View Property) and Series B taxable (Moonlight Beach Lifeguard Tower) in the amounts of $3,095,000 and $10,365,000, respectively. This bond issue was to provide funds for financing the acquisition of a property known as the Pacific View Property and for improving the Moonlight Beach Lifeguard Tower. Debt payments are due semi-annually at fixed amounts, and the debt matures at various times through 2045. Annual debt service averages approximately $4.2 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 storm-drain 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. 18 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2015 The City’s total annual debt service of approximately $4.7 million represents approximately 7.5% of annual general fund operating revenues. Business-Type Activities $15.9 million SDWD and CSD carry long-term debt 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. On September 18, 2014, SDWD issued $5,870,000 of Water Revenue Refunding Bonds, Series 2014. The Series 2014 bonds redeemed the outstanding 2004 Water Revenue Refunding Bonds remaining of $8,110,000. The 2014 refunding resulted in saving SDWD approximately $250,000 annually in debt service costs, due to lower market interest rates and the elimination of a reserve previously required on the 2004 bonds. 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 affirmed recently by S & P 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 issuers’ rating, due to the structure of the bond issue. 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 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 2015-16 were appropriated by the City Council in June 2015. The fiscal year 2014-15 actual results, when compared to the adopted projections and appropriations, showed revenues well above forecasts and expenditures significantly under budget. Fiscal year 2015-16 revenues expect to increase modestly above 2014-15 actual levels. Expenditures expect to rise modestly above 2015-16 levels. Next year’s budget does anticipate a 1% adjustment to employee compensation, which is the largest portion of the general fund budget. Debt service costs will remain consistent with 2014-15. CONTACTING THE CITY’S FINANCIAL MANAGEMENT The financial report’s intention is 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. 19 This page intentionally left blank. 20 BASIC FINANCIAL STATEMENTS SECTION City of Encinitas 505 South Vulcan Avenue Encinitas CA 92024 760-633-2600 www.encinitasca.gov GOVERNMENT-WIDE FINANCIAL STATEMENTS 23 This page intentionally left blank 24 City of Encinitas Statement of Net Position June 30, 2015 Primary Government GovernmentalBusiness-Type ctivitiesctivitiesTotal AA ASSETS Current assets: Cash and investments62,459,338 40,036,833 102,496,171 $$$ Restricted cash and investments with fiscal agent 23,368- 23,368 Receivables 2,235,9843,530,799 5,766,783 Inventory and prepaid items 229,847220,562 450,409 Total current assets 42,526,03266,210,699 108,736,731 Noncurrent assets: Restricted cash and investments with fiscal agent -6,110,098 6,110,098 Internal balances 64,194 -64,194 () Long-term receivable -650,000 650,000 Investments in joint ventures 40,602,600- 40,602,600 Other assets 196,307665,037 861,344 Capital assets: Non-depreciable 10,801,52573,926,960 84,728,485 Depreciable, net 44,900,122144,827,992 189,728,114 Total capital assets, net218,754,952 55,701,647 274,456,599 Total noncurrent assets 96,436,360226,244,281 322,680,641 Total assets 138,962,392292,454,980 431,417,372 DEFERRED OUTFLOWS OF RESOURCES Pension contributions made after measurement date 510,9573,069,314 3,580,271 Deferred positive change in pension plan proportion 126,588253,757 380,345 Total deferred outflows of resources 637,5453,323,071 3,960,616 LIABILITIES Current liabilities: ccounts payable and accrued liabiities A 1,738,3495,000,890 6,739,239 Interest payable 140,840596,514 737,354 Unearned revenue 515,415233,956 749,371 Deposits and other liabilities 333,6632,601,402 2,935,065 Long-term liabilities - due within one year 1,790,5796,403,090 8,193,669 Total current liabilities 4,518,84614,835,852 19,354,698 Noncurrent liabilities: Long-term liabilities - due in more than one year 14,262,27154,837,527 69,099,798 ggregate net pension liability (Note 14) A 3,779,28532,040,816 35,820,101 Total noncurrent liabilities 18,041,55686,878,343 104,919,899 Total liabilities 22,560,402101,714,195 124,274,597 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding 176,203- 176,203 Deferred negative change in pension plan proportion 5,5519,783 15,334 Deferred differences between projected and actual earnings on pension plan investments 1,270,0158,779,114 10,049,129 Total deferred inflows of resources 1,451,7698,788,897 10,240,666 NET POSITION Net investment in capital assets 39,806,764157,304,041 197,110,805 Restricted: Community development -2,449,636 2,449,636 Debt service -3,098,816 3,098,816 Capital projects -13,192,570 13,192,570 Total restricted -18,741,022 18,741,022 Unrestricted 75,781,0029,229,896 85,010,898 oaeoson TtlNtPiti$ 115,587,766185,274,959$ 300,862,725$ See accompanying Notes to the Basic Financial Statements. 25 City of Encinitas Statement of Activities and Changes in Net Position For the Year Ended June 30, 2015 Program Revenues OperatingCapitalTotal Charges for Grants andGrants andProgram Functions/Programs ExpensesServicesContributionsContributionsRevenues Primary government: Governmental activities: General government10,810,884$ 1,629,857$ -$ -$ 1,629,857$ Public safety25,762,703 160,178 111,913 - 272,091 Public works11,565,315 759,918 3,460,695 3,209,284 7,429,897 Planning and building6,550,992 2,737,225 227,374 - 2,964,599 Engineering services6,253,352 1,055,311 - - 1,055,311 Parks and recreation5,205,986 46,846 78,440 916,910 1,042,196 Interest on long-term debt2,311,944 - - - - Total governmental activities68,461,176 6,389,335 3,878,422 4,126,194 14,393,951 Business-type activities: Cardiff Sanitary Division4,262,565 4,528,511 - 86,849 4,615,360 San Dieguito Water District15,005,767 14,778,358 - 268,620 15,046,978 Encinitas Sanitary Division1,731,770 2,841,235 - 127,956 2,969,191 Affordable Housing1,408,226 230,486 1,061,698 - 1,292,184 Recreation Programs1,331,565 1,321,471 - - 1,321,471 Total business-type activities23,739,893 23,700,061 1,061,698 483,425 25,245,184 Total primary governmen t $ 30,089,39692,201,069$ 4,940,120$ 4,609,619$ 39,639,135$ See accompanying Notes to the Basic Financial Statements. 26 City of Encinitas Statement of Activities and Changes in Net Position (Continued) For the Year Ended June 30, 2015 Net (Expense) Revenue and Changes in Net Position Primary Government GovernmentalBusiness-type Functions/Programs ActivitiesActivitiesTotal Primary government: Governmental activities: General government(9,181,027)$ -$ (9,181,027)$ Public safety(25,490,612) - (25,490,612) Public works(4,135,418) - (4,135,418) Planning and building(3,586,393) - (3,586,393) Engineering services(5,198,041) - (5,198,041) Parks and recreation(4,163,790) - (4,163,790) Interest on long-term debt(2,311,944) - (2,311,944) Total governmental activities(54,067,225) - (54,067,225) Business-type activities: Cardiff Sanitary Division- 352,795 352,795 San Dieguito Water District- 41,211 41,211 Encinitas Sanitary Division- 1,237,421 1,237,421 Affordable Housing- (116,042) (116,042) Recreation Programs- (10,094) (10,094) Total business-type activities- 1,505,291 1,505,291 1,505,291(54,067,225) (52,561,934) General revenues: Taxes: Property taxes and transfer fees38,508,558 834,994 39,343,552 Sales tax12,569,119 - 12,569,119 Transient occupancy taxes1,828,116 - 1,828,116 Franchise taxes2,761,335 - 2,761,335 Total taxes55,667,128 834,994 56,502,122 Intergovernmental - unrestricted814,337 - 814,337 Use of money and property880,989 (60,169) 820,820 Gain on disposal of capital assets107,177 18,085 125,262 Other 88,1711,567,168 1,655,339 Transfers 36,068(36,068) - Total general revenues and transfers 917,14959,000,731 59,917,880 Changes in net position 2,422,4404,933,506 7,355,946 Net Position: Beginning of year, as restated (Note 18) 113,165,326180,341,453 293,506,779 End of yea r $ 115,587,766185,274,959$ 300,862,725$ See accompanying Notes to the Basic Financial Statements. 27 This page intentionally left blank 28 FUND FINANCIAL STATEMENTS 29 This page intentionally left blank 30 GOVERNMENTAL FUND FINANCIAL STATEMENTS 31 This page intentionally left blank 32 City of Encinitas Balance Sheet Governmental Funds June 30, 2015 Major Funds Capital ImprovementsOtherTotal GeneralCapital ProjectsGovernmentalGovernmental FundFundFundsFunds ASSETS Cash and investments40,016,477$ 564,567$ 15,942,871$ 56,523,915$ Receivables3,004,496 - 525,716 3,530,212 Due from other funds434,357 - - 434,357 Inventory and prepaid items220,562 - - 220,562 Other assets665,037 - - 665,037 Long-term receivable650,000 - - 650,000 Restricted cash and investments3,009,269 - 3,100,829 6,110,098 Total assets $ 564,56748,000,198$ 19,569,416$ 68,134,181$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities3,964,444$ 564,567$ 256,182$ 4,785,193$ Interest payable- - - - Unearned revenue45,210 - 188,746 233,956 Due to other funds- - 370,163 370,163 Deposits and other liabilities2,588,099 - 13,303 2,601,402 Total liabilities 564,5676,597,753 828,394 7,990,714 Fund Balances: Nonspendable1,535,599 - - 1,535,599 Restricted- - 18,741,022 18,741,022 Committed8,266,796 - - 8,266,796 Assigned561,762 - - 561,762 Unassigned31,038,288 - - 31,038,288 Total fund balances -41,402,445 18,741,022 60,143,467 Total liabilities and fund balances $ 564,56748,000,198$ 19,569,416$ 68,134,181$ See accompanying Notes to the Basic Financial Statements. 33 City of Encinitas Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position June 30, 2015 Total Fund Balances - Total Governmental Funds $ 60,143,467 Amounts reported for governmental activities in the Statement of Net Position were different because: Capitalassetsusedingovernmentalactivitieswerenotfinancialresourcesandthereforewerenotreportedin governmental funds (net of $3,505,511 in internal service funds). Land 61,862,474 Land easements 2,104,542 Construction in progress 9,959,944 Public facilities 100,192,351 Vehicles, equipment and machinery 1,806,094 Infrastructure 110,272,547 Less: Accumulated depreciation (70,948,511) Total capital assets 215,249,441 Interestpayableonlong-termdebtdidnotrequirecurrentfinancialresources.Therefore,interestpayablewas not reported as a liability in Governmental Funds Balance Sheet. (596,514) Long-termliabilitiesapplicabletotheCity'sgovernmentalactivitieswerenotdueandpayableinthecurrent period and therefore were not reported in the governmental funds. Amount reported in Government-Wide Statement of Net Position: 2008 Civic Center roof replacement (1,261,575) 2011 Fire apparatus lease (498,147) 2012 Fire apparatus lease (353,750) 2013 Fire apparatus lease (400,242) 1997 Civic Center COPs (1,150,000) 2002 ABAG financing (830,000) 2006 Public Library Lease Revenue Bonds, net of unamortized discount of $220,000(16,755,000) 2010 Community Park Lease Revenue Bonds, net of unamortized premium of $163,433(16,163,433) 2013 Community Park Bonds, net of unamortized premium of $113,880(7,358,880) 2014 Moonlight Beach Tower Series A Bonds, net of unamortized discount of $55,141(3,039,859) 2014 Pacific View Series B Bonds, net of unamortized discount of $230,486(10,134,514) Claims payable (1,193,289) Compensated absences (2,101,928) Total long-term liabilities (61,240,617) Aggregate net pension liability is not due and payable in the current period and therefore is not required to be reported in the governmental funds. (32,040,816) Pension contributions made during the year after the measurement date are reported as expenditures in governmental funds and as deferred outflow of resources in the government-wide financial statements. 3,069,314 Changes in proportion of cost-sharing pension plans are reported in the government-wide statements. Deferred positive change in pension plan proportion 253,757 Deferred negative change in pension plan proportion (9,783) Difference between projected and actual earnings on pension plan investments are reported in the government- wide statements. Projected earnings under actual earnings (8,779,114) Internalservicefundswereusedbymanagementtochargethecostsofriskmanagement,personnelsupport, fleetmaintenanceandvehiclereplacementtoindividualfunds.Theassetsandliabilitiesoftheinternalservice funds were included in governmental activities in the Government-Wide Statement of Net Position. 9,225,824 Net Position of Governmental Activities $185,274,959 See accompanying Notes to the Basic Financial Statements. 34 City of Encinitas Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds For the Year Ended June 30, 2015 Major Funds Capital ImprovementsOtherTotal GeneralCapital ProjectsGovernmentalGovernmental FundFundFundsFunds REVENUES: Taxes and assessments54,049,677$ -$ 2,775,951$ 56,825,628$ Licenses and permits251,730 - - 251,730 Intergovernmental814,337 - 6,208,148 7,022,485 Development impact fees- - 1,379,140 1,379,140 Charges for services5,315,721 - - 5,315,721 Fines, forfeitures and penalties802,936 - - 802,936 Use of money and property609,054 - 290,753 899,807 Other686,774 - 139,352 826,126 Total revenues -62,530,229 10,793,344 73,323,573 EXPENDITURES: Current: General government9,202,951 - 159,265 9,362,216 Public safety24,786,218 - 116,702 24,902,920 Public works4,034,654 - 2,647,770 6,682,424 Planning and building4,793,533 - 289,056 5,082,589 Engineering services4,162,630 - - 4,162,630 Parks and recreation4,954,898 - 136,326 5,091,224 Capital outlay - 18,440,036 - 18,440,036 Debt service: Principal- - 2,730,686 2,730,686 Interest and fiscal charges155,804 - 2,014,360 2,170,164 Total expenditures 18,440,03652,090,688 8,094,165 78,624,889 REVENUES OVER (UNDER) EXPENDITURES (18,440,036)10,439,541 2,699,179 (5,301,316) OTHER FINANCING SOURCES (USES): Proceeds from debt issuance13,174,373 - - 13,174,373 Transfers in1,295,358 18,440,036 4,778,899 24,514,293 Transfers out(19,412,935) - (6,096,681) (25,509,616) Total other financing sources (uses) 18,440,036(4,943,204) (1,317,782) 12,179,050 NET CHANGE IN FUND BALANCE S -5,496,337 1,381,397 6,877,734 FUND BALANCES: Beginning of year35,906,108 - 17,359,625 53,265,733 End of year41,402,445$ -$ 18,741,022$ 60,143,467$ See accompanying Notes to the Basic Financial Statements. 35 City of Encinitas Reconciliation of the Governmental Statement of Revenues, Expenditures, and Changes n Fund Balances to the Government-Wide Statement of Activities and Changes in Net Positio in For the Year Ended June 30, 2015 Net Change in Fund Balances - Total Governmental Funds $ 6,877,734 mounts reported for governmental activities in the Statement of Activities were different because: A Governmentalfundsreportedcapitaloutlayasexpenditures.However,intheGovernment-WideStatementof ActivitiesandChangesinNetPosition,thecostofthoseassetswasallocatedovertheirestimatedusefullives asdepreciationexpense.Thiswastheamountofcapitalassetsrecordedinthecurrentperiod(netof $1,038,887 added in internal service funds). 14,373,446 DepreciationexpenseoncapitalassetswasreportedintheGovernment-WideStatementofActivitiesand ChangesinNetPosition,butitdidnotrequiretheuseofcurrentfinancialresources.Therefore,depreciation expensewasnotreportedasexpendituresintheGovernmentalFunds(netof$487,057recordedininternal service funds). (5,584,563) Theissuanceoflong-termliabilitiesprovidedcurrentfinancialresourcestogovernmentalfunds,butissuingdebt increasedlong-termliabilitiesintheGovernment-WideStatementofNetPosition.Repaymentoflong-term liabilitieswasanexpendituresingovernmentalfunds,buttherepaymentreducedlong-termliabilitiesinthe Government-Wide Statement of Net Position. Issuance of long-term debt (13,174,373) Principal payment of long-term debt 2,730,686 AmortizationexpenseswerereportedintheGovernment-WideStatementofActivitiesandChangesinNet Position,buttheydidnotrequiretheuseofcurrentfinancialresources.Therefore,amortizationexpenseswere not reported as expenditures in the Governmental Funds. Bond premium and discount 9,535 Certainlong-termliabilitieswerereportedintheGovernment-WideStatementofActivitiesandChangesinNet Position,buttheydidnotrequiretheuseofcurrentfinancialresources.Therefore,long-termliabilitieswerenot reportedasexpendituresingovernmentalfunds.Theseamountsrepresentedthechangesinlong-term liabilities from prior year. Changes in compensated absences (22,395) Changes in claims payable (585,743) Changes in the net pension liability reported in the Statement of Activities did not require the use of current financial resources and, therefore, was not reported as an expenditure in the governmental funds. (3,203,834) Pension contribution made after the measurement date is reported as deferred outflow of resources in the Government-Wide Statement of Net Position but is reported as pension expense in governmental funds. 3,069,314 Interestexpenseonlong-termdebtwasreportedintheGovernment-WideStatementofActivitiesandChanges inNetPosition,butitdidnotrequiretheuseofcurrentfinancialresources.Thisamountrepresentedthe change in accrued interest from prior year. (151,315) Internalservicefundswereusedbymanagementtochargethecostsofcertainactivitiestoindividualfunds. Thenetrevenueofinternalservicefundswasreportedwithgovernmentalactivities(netof$2,953,681 contribution of capital assets from governmental activities). 595,014 Change in Net Position of Governmental Activities $4,933,506 See accompanying Notes to the Basic Financial Statements. 36 PROPRIETARY FUND FINANCIAL STATEMENTS 37 City of Encinitas Statement of Net Position Proprietary Funds June 30, 2015 Major Enterprise Funds Cardiff San DieguitoEncinitas Nonmajor SanitaryWater Sanitaryffordable A DivisionDistrictDivisionHousing ASSETS Current assets: Cash and investments12,597,018 16,451,873 9,532,617 444,069 $$$$ Restricted cash and investments with fiscal agent- - - 23,368 ccounts and taxes receivable84,922 2,041,686 59,047 275 A Inventory and prepaid items- 147,643 - 82,204 Total current assets12,681,940 18,641,202 9,591,664 549,916 Noncurrent assets: Restricted cash and investments with fiscal agent- - - - Other assets- 196,307 - - Investment in joint ventures18,857,817 17,652,230 4,092,553 - Capital assets: Land easements- 3,047,151 - - Public works facility right-of-use- 3,378,700 - - Construction in progress1,146,036 1,341,339 1,888,299 - Capacity rights, net- 197,685 - - Utility, plant, vehicles, and equipment, net13,886,32014,543,84813,365,0512,907,218 Total capital assets, net15,032,356 22,508,723 15,253,350 2,907,218 Total noncurrent assets33,890,173 40,357,260 19,345,903 2,907,218 Total assets 58,998,46246,572,113 28,937,567 3,457,134 DEFERRED OUTFLOWS OF RESOURCES Pension contributions after the measurement date- 510,957- - Deferred positive change in pension plan proportion- 126,588- - Total deferred outflows of resources 637,545- - - LIABILITIES Current liabilities: ccounts payable and accrued liabilities17,137 1,318,361 321,580 - A Due to other funds- - - 64,194 ccrued interest payable32,565 108,275 - - A Unearned revenue- - - 2,247 Deposits1,000 312,155 - 16,358 Current portion of long-term debt593,530 1,133,064 - 63,985 Total current liabilities644,232 2,871,855 321,580 146,784 Noncurrent liabilities: Revenue bonds payable, due in more than one year- - - - Notes and mortgages payable, due in more than one year2,240,293 10,684,345 - 1,337,633 ggregate net pension liabliity (Note 14)- 3,779,285- - A Total noncurrent liabilities2,240,293 14,463,630 - 1,337,633 Total liabilities 17,335,4852,884,525 321,580 1,484,417 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding176,203 - - - Deferred pension investment earnings- 1,270,015- - Deferred negative change in pension plan proportion- 5,551- - Total deferred inflows of resources 1,275,566176,203 - - NET POSITION Net investment in capital assets12,198,533 10,839,378 15,253,350 1,515,503 Unrestricted31,312,852 30,185,578 13,362,637 457,214 Total net position $ 41,024,95643,511,385$ 28,615,987$ 1,972,717$ See accompanying Notes to the Basic Financial Statements. 38 City of Encinitas Statement of Net Position Proprietary Funds (Continued) June 30, 2015 Governmental Nonmajorctivities A RecreationInternal FundTotalService Funds ASSETS Current assets: Cash and investments1,011,256 40,036,833 5,935,423 $$$ Restricted cash and investments with fiscal agent- 23,368 - ccounts and taxes receivable50,054 2,235,984 587 A Inventory and prepaid items- 229,847 - Total current assets1,061,310 42,526,032 5,936,010 Noncurrent assets: Restricted cash and investments with fiscal agent- - - Other assets 196,307- - Investment in joint ventures- 40,602,600 - Capital assets: Land easements 3,047,151- - Public works facility right-of-use- 3,378,700 - Construction in progress- 4,375,674 - Capacity rights, net- 197,685 - Utility, plant, vehicles, and equipment, net- 44,702,437 3,505,511 Total capital assets, net- 55,701,647 3,505,511 Total noncurrent assets- 96,500,554 3,505,511 Total assets 139,026,5861,061,310 9,441,521 DEFERRED OUTFLOWS OF RESOURCES Pension contributions after the measurement date- 510,957 - Deferred positive change in pension plan proportion- 126,588 - Total deferred outflows 637,545- - LIABILITIES Current liabilities: ccounts payable and accrued liabilities81,271 1,738,349 215,697 A Due to other funds 64,194- - ccrued interest payable- 140,840 - A Unearned revenue513,168 515,415 - Deposits 333,6634,150 - Current portion of long-term debt- 1,790,579 - Total current liabilities598,589 4,583,040 215,697 Noncurrent liabilities: Revenue bonds payable, due in more than one year- - - Notes and mortgages payable, due in more than one year- 14,262,271 - ggregate net pension liabliity (Note 14)- 3,779,285 - A Total noncurrent liabilities- 18,041,556 - Total liabilities 22,624,596598,589 215,697 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding- 176,203 - Deferred pension investment earnings- 1,270,015 - Deferred negative change in pension plan proportion- 5,551 - Total deferred inflows 1,451,769- - NET POSITION Net investment in capital assets- 39,806,764 - Unrestricted 75,781,002462,721 9,225,824 Total net position $ 115,587,766462,721$ 9,225,824$ See accompanying Notes to the Basic Financial Statements. 39 City of Encinitas Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2015 Major Enterprise Funds Cardiff San DieguitoEncinitas Nonmajor ffordable SanitaryWater Sanitary A DivisionDistrictDivisionHousing OPERATING REVENUES: Charges for services4,528,511$ 14,737,409$ 2,841,235$ -$ Rental income - 97,955 - 118,531 Contribution from users- - - - Interfund revenues- 40,949 - 97,822 Intergovernmental - - - 132,664 Other revenues40 7,500 - 16,863 Total operating revenues 14,883,8134,528,551 2,841,235 365,880 OPERATING EXPENSES: Housing assistance payments- - - 1,080,304 Source of supply- 6,772,402 - - General operations and maintenance974,187 4,361,762 615,163 98,844 Facility operations and maintenance1,384,221 1,728,398 581,604 - General and administrative246,450 (128,702) 128,585 123,807 Program cost- - - - Depreciation of capital assets274,114 663,043 291,596 100,538 mortization of other assets- 98,152 - - A mortization of investment in joint ventures1,281,841 1,510,712 16,705 - A dministrative support- - - - A Operational support services- - - - Other101,752 - 98,117 4,733 Total operating expenses 15,005,7674,262,565 1,731,770 1,408,226 OPERATING INCOME (LOSS) (121,954)265,986 1,109,465 (1,042,346) NONOPERATING REVENUES (EXPENSES): Use of money and property56,900 74,447 42,659 2,014 Property taxes- 834,994 - - Operating grants- - - 1,061,698 Capital grants- - - - Gain (loss) on disposal of capital assets- 18,085 - - ccretion of bond premium63,768 - - - A Interest expense(109,282) (475,776) - (47,249) Total nonoperating revenues (expenses) 451,75011,386 42,659 1,016,463 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 329,796277,372 1,152,124 (25,883) Capital contributions86,849 268,620 127,956 - Transfers in- - - 46,068 Transfers out(10,000) - (10,000) - Total capital contributions and transfers 268,62076,849 117,956 46,068 CHANGES IN NET POSITION 598,416354,221 1,270,080 20,185 NET POSITION: Beginning of year, as restated (Note 18)43,157,164 40,426,540 27,345,907 1,952,532 End of year43,511,385$ 41,024,956$ 28,615,987$ 1,972,717$ See accompanying Notes to the Basic Financial Statements. 40 City of Encinitas Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds (Continued) For the Year Ended June 30, 2015 Governmental Nonmajorctivities A RecreationInternal FundTotalService Funds OPERATING REVENUES: Charges for services1,321,471$ 23,428,626$ 1,069,930$ Rental income 179,632 396,118 - Contribution from users- - - Interfund revenues 138,771- 1,909,264 Intergovernmental 132,664- - Other revenues 24,403- 171,885 Total operating revenues 24,120,5821,501,103 3,151,079 OPERATING EXPENSES: Housing assistance payments- 1,080,304 - Source of supply 6,772,402- - General operations and maintenance- 6,049,956 - Facility operations and maintenance- 3,694,223 - General and administrative150,497 520,637 - Program cost1,181,068 1,181,068 - Depreciation of capital assets- 1,329,291 487,057 mortization of other assets- 98,152 - A mortization of investment in joint ventures- 2,809,258 - A dministrative support- - 1,404,106 A Operational support services 839,305- Other 204,602- 892,029 Total operating expenses 23,739,8931,331,565 3,622,497 OPERATING INCOME (LOSS) 380,689169,538 (471,418) NONOPERATING REVENUES (EXPENSES): Use of money and property- 176,020 - Property taxes 834,994- - Operating grants 1,061,698- - Capital grants -- - Gain (loss) on disposal of capital assets- 18,085 107,177 ccretion of bond premium- 63,768 - A Interest expense (632,307)- - Total nonoperating revenues (expenses) 1,522,258- 107,177 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 1,902,947169,538 (364,241) Capital contributions 483,425- 2,953,681 Transfers in 56,06810,000 959,255 Transfers out (20,000)- - Total capital contributions and transfers 519,49310,000 3,912,936 CHANGES IN NET POSITION 2,422,440179,538 3,548,695 NET POSITION: Beginning of year, as restated (Note 18)283,183 113,165,326 5,677,129 End of year$ 115,587,766462,721$ 9,225,824$ See accompanying Notes to the Basic Financial Statements. 41 City of Encinitas Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2015 Major Enterprise Funds Cardiff San DieguitoEncinitas Nonmajor SanitaryWater SanitaryAffordable DivisionDistrictDivisionHousing CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users4,550,240$ 15,583,922$ 2,858,091$ 253,614$ Cash received from other funds- 40,949 - 91,541 Cash payments to suppliers and employees for goods and services(2,702,963) (14,016,349) (1,292,007) (1,312,273) Other operating revenues40 7,500 - 16,863 Net cash provided by (used in) operating activities 1,616,0221,847,317 1,566,084 (950,255) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets(575,915) (1,225,106) (651,488) - Capital contributions received - connection/capacity fees86,849 268,620 127,956 - Principal payments on bonds and notes payable(613,767) (1,968,256) - (53,931) Interest payments on bonds and notes payable(80,675) (517,872) - (47,249) Capital related payments to other agencies(451,902) (841,389) (628,815) - Proceeds received from disposal of capital assets- 18,085 - - Net cash used in capital and related financing activities (4,265,918)(1,635,410) (1,152,347) (101,180) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating grants- - - 1,061,698 Proceeds from property taxes- 834,994 - - Transfers in -- - 46,068 Transfers (out)(10,000) - (10,000) - Net cash provided by (used in) noncapital financing activities 834,994(10,000) (10,000) 1,107,766 CASH FLOWS FROM INVESTING ACTIVITIES: Interest income56,900 74,447 42,659 2,014 Net cash provided by investing activities 74,44756,900 42,659 2,014 Net increase (decrease) in cash and cash equivalents (1,740,455)258,807 446,396 58,345 CASH AND CASH EQUIVALENTS: Beginning of year12,338,211 18,192,328 9,086,221 409,092 End of yea$ 16,451,8712,597,01$ 9,532,617$ 467,437$ r83 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENT OF NET POSITION: Cash and investments12,597,018$ 16,451,873$ 9,532,617$ 444,069$ Restricted cash and investments with fiscal agent - current- - - 23,368 Total cash and cash equivalents $ 16,451,8712,597,01$ 9,532,617$ 467,437$ 83 See accompanying Notes to the Basic Financial Statements. 42 City of Encinitas Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2015 Governmental NonmajorActivities RecreationInternal FundTotalService Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users1,477,151$ 24,723,018$ 3,150,551$ Cash received from other funds 132,490- - Cash payments to suppliers and employees for goods and services(1,330,334) (20,653,926) (2,947,319) Other operating revenues 24,403- - Net cash provided by (used in) operating activities 4,225,985146,817 203,232 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (2,452,509)- (1,038,887) Capital contributions received - connection/capacity fees- 483,425 - Principal payments on bonds and notes payable- (2,635,954) - Interest payments on bonds and notes payable- (645,796) - Capital related payments to other agencies- (1,922,106) - Proceeds received from disposal of capital assets- 18,085 107,177 Net cash used in capital and related financing activities (7,154,855)- (931,710) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating grants 1,061,698- - Proceeds from property taxes 834,994- - Transfers in 56,06810,000 959,255 Transfers (out) (20,000)- - Net cash provided by (used in) noncapital financing activities 1,932,76010,000 959,255 CASH FLOWS FROM INVESTING ACTIVITIES: Interest income -176,020 Net cash provided by investing activities 176,020- - Net increase (decrease) in cash and cash equivalents (820,090)156,817 230,777 CASH AND CASH EQUIVALENTS: Beginning of year 40,880,291854,439 5,704,646 End of yea$ 40,060,2011,011,256$ 5,935,423$ r RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENT OF NET POSITION: Cash and investments$ 40,036,8331,011,256$ 5,935,423$ Restricted cash and investments with fiscal agent - current- 23,368 - Total cash and cash equivalents $ 40,060,2011,011,256$ 5,935,423$ See accompanying Notes to the Basic Financial Statements. 43 City of Encinitas Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2015 Major Enterprise Funds Cardiff San DieguitoEncinitas Nonmajor SanitaryWater SanitaryAffordable DivisionDistrictDivisionHousing RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Operating income (loss)265,986$ (121,954)$ 1,109,465$ (1,042,346)$ Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation274,114 663,043 291,596 100,538 Amortization of other assets- 98,152 - - Amortization of investment in joint ventures1,281,841 1,510,712 16,705 - Changes in operating assets, deferred outflows of resources, liabilities, and deferred inflows of resources: Accounts and taxes receivable21,729 748,558 16,856 2,419 Inventory and prepaid items- (4,479) - (1,510) Pension contributions after the measurement date- (10,972) - - Deferred positive change in pension plan proportion- (126,588) - - Accounts payable and accrued liabilities3,397 (991,193) 131,462 (1,945) Due to other funds- - - (6,281) Unearned revenue- - - (29) Deposits250 (40,245) - (1,101) Aggregate net pension liability- (1,384,578) - - Deferred pension investment earnings- 1,270,015 - - Deferred negative change in plan proportion- 5,551 - - Total adjustments1,581,331 1,737,976 456,619 92,091 Net cash provided by (used in) operating activitie $ 1,616,0221,847,317$ 1,566,084$ (950,255)$ s NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Amortization of original issue premium19,515$ -$ -$ -$ Contributions of capital assets from governmental activities- - - - $ -19,515$ -$ -$ See accompanying Notes to the Basic Financial Statements. 44 City of Encinitas Statement of Cash Flows Proprietary Funds (Continued) For the Year Ended June 30, 2015 Governmental NonmajorActivities RecreationInternal FundTotalService Funds RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Operating income (loss)$ 380,689169,538$ (471,418)$ Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 1,329,291- 487,057 Amortization of other assets 98,152- - Amortization of investment in joint ventures- 2,809,258 - Changes in operating assets, deferred outflows of resources, liabilities, and deferred inflows of resources: Accounts and taxes receivable(23,952) 765,610 (528) Inventory and prepaid items2,867 (3,122) - Pension contributions after the measurement date- (10,972) - Deferred positive change in pension plan proportion- (126,588) - Accounts payable and accrued liabilities31,728 (826,551) 188,121 Due to other funds (6,281)- - Unearned revenue (34,943)(34,914) - Deposits (39,546)1,550 - Aggregate net pension liability- (1,384,578) - Deferred pension investment earnings- 1,270,015 - Deferred negative change in plan proportion- 5,551 - Total adjustments 3,845,296(22,721) 674,650 Net cash provided by (used in) operating activitie $ 4,225,98146,817$ 203,232$ s5 NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Amortization of original issue premium-$ 19,515$ -$ Contributions of capital assets from governmental activities- - 2,953,681 $ 19,515-$ 2,953,681$ See accompanying Notes to the Basic Financial Statements. 45 This page intentionally left blank 46 FIDUCIARY FUND FINANCIAL STATEMENTS AgencyFunds –ThesefundsareusedtoaccountformoneyandpropertyheldbytheCityastrusteeor custodian.Theyarecustodialinnature(assetsequalliabilities).ThesefundsincludeoneAssessmentDistrict and one Community Facilities (Mello-Roos) District. 47 This page intentionally left blank 48 City of Encinitas Statement of Fiduciary Net Position Fiduciary Funds June 30, 2015 Agency Funds ASSETS Cash and investments$ 2,275,857 Restricted cash and investments with fiscal agent 1,975,737 Special assessments receivable 29,920,000 Total assets $ 34,171,594 LIABILITIES Due to bondholders$ 34,171,594 Total liabilities $ 34,171,594 See accompanying Notes to the Basic Financial Statements. 49 This page intentionally left blank 50 NOTES TO THE FINANCIAL STATEMENTS City of Encinitas 505 South Vulcan Avenue Encinitas CA 92024 760-633-2600 www.encinitasca.gov City of Encinitas Notes to Basic Financial Statements For the Year Ended June 30, 2015 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. 51 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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: Charges for services Operating grants and contributions Capital grants and contributions 52 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 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: General Fund The 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. Capital Improvements Capital Projects Fund The 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. 53 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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: Cardiff Sanitary Division (“CSD”) Enterprise Fund The provides wastewater collection and treatment services to approximately 6,000 customers in the southern portion of the City. San Dieguito Water District (“SDWD”) Enterprise Fund The provides potable and reclaimed water services to approximately 11,000 customers in Encinitas. Encinitas Sanitary Division (“ESD”) Enterprise Fund The 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 statementsare 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. Agency Fund Theaccounts for one Assessment District and one Community Facilities (Mello-Roos) District for which the City acts as an agent for debt service activities. 54 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 Credit Risk Overall Custodial Credit Risk Concentration of Credit Risk 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, andinterest 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.Investments 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. 55 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 2 – Summary of Significant Accounting Policies (Continued) G. I nventory 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 improvements20 - 45 years Equipment, machinery and vehicles5 - 20 years Infrastructure20 - 50 years Collection and distribution systems50 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, 2015, 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. 56 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 2 – Summary of Significant Accounting Policies (Continued) K. 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. L. 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. M. 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, 2015. N. 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. 57 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 2 – Summary of Significant Accounting Policies (Continued) O. 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. P. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans (Note 14). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. The following timeframes are used for pension reporting: CalPERS Valuation dateJune 30, 2013 Measurement DateJune 30, 2014 Measurement PeriodJuly 1, 2013 to June 30, 2014 Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period. 58 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 2 – Summary of Significant Accounting Policies (Continued) 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. 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. Adoption of a resolution by the City Council is required to commit resources or rescind the commitment. 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 adopts a resolution contained within the annual budget that delegates the authority to the Finance Director to assign fund balance amounts in the annual financial statements. 59 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 2 – Summary of Significant Accounting Policies (Continued) R. Fund Balances (Continued) 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. 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. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27). This Statement establishes standards for measuring and recognizing liabilities, deferred outflow of resources, deferred inflows of resources, and expense/expenditures for 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. This statement became effective for periods beginning after June 15, 2014. See Note 18 for prior period adjustments as a result of implementation. 60 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 2 – Summary of Significant Accounting Policies (Continued) U. Accounting Changes (Continued) GASB has issued Statement No. 69, Government Combinations and Disposals of Government Operation. This Statement establishes accounting and financial reporting standards related to government combinations and disposals of government operations. As used in this Statement, the term government combinations includes a variety of transactions referred to as mergers, acquisitions, and transfers of operations This statement became effective for periods beginning after December 15, 2013 and did not have a significant impact on the City’s financial statements for year ended June 30, 2015. GASB has issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. This statement establishes standards relates to amounts associated with contributions, if any, made by a state or local government employer or non-employer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability. This statement became effective for periods beginning after June 15, 2014. See Note 18 for prior period adjustments as a result of implementation. Note 3 – Cash and Investments Cash and investments are classified in the accompanying financial statements as follows: Cash and investments at June 30, 2015, consisted of the following: Cash on hand3,500$ Deposits with financial institutions2,816,874 Investments110,060,857 Total cash and investments $112,881,231 A. Demand Deposits The carrying amounts of the City’s demand deposits were $2,816,874 at June 30, 2015. Bank balances were $3,571,788 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. 61 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 3 – Cash and Investments (Continued) A. Demand Deposits (Continued) 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 collateralization requirements. 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. AuthorizedMaximumMaximum Authorizedby InvestmentMaximumPercentage ofInvestment in Investment TypePolicyMaturityPortfolio*One Issuer Repurchase Agreements-Overnight "Sweep"Yes1 yearNo LimitNo Limit Local Agency Investement Fund (LAIF) **YesN/ANo LimitNo Limit Local Agency BondsNo5 yearsN/AN/A Other Governmental Managed Investment PoolsYesN/ANo LimitNo Limit Money Market Mutual FundsYesN/A20%10% Certificates of DepositYes5 yearsNo LimitNo Limit Negotiable Certificates of DepositYes5 years30%No Limit Banker's AcceptancesYes180 days40%30% U.S. Treasury Bills, Notes and BondsYes5 yearsNo LimitNo Limit U.S. Gov't Sponsored EnterprisesYes5 yearsNo LimitNo Limit Commercial PaperYes270 days25%10% Commercial Medium-Term NotesYes5 years30%No Limit * Excluding amounts held by bond trustee that are not subject to California Government Code restriction. ** Maximum is $50 million per account. C. Investments Authorized by Debt Agreements The investment of the proceeds from debt issuances, held by a third-party trustee, is governed by the provisions of the specific debt agreement rather than by the Gov't Code or the Investment Policy. The investment types that are authorized and currently utilized by the City are Guaranteed Investment Contractsand Money Market Mutual Funds. 62 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 3 – Cash and Investments (Continued) D. Risk Disclosures Disclosures Related to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity, the greater the sensitivity its fair value is to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter-term and longer-term investments and by timing cash flows from maturitiessothat a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City's investments to interest rate risk is provided in the table that shows the distribution by maturity is as follows: Remaining Maturity (in Months) Less than 12 to 60 Investment TypeTotal12 MonthsMonths Investments: Local Agency Investement Fund (LAIF)18,571,360$ 18,571,360$ -$ California Asset Management Program1,000,769 1,000,769 - Money Market Mutual Funds21,654 21,654 - Certificates of Deposit5,476,343 - 5,476,343 Corporate Medium Term Notes999,950 - 999,950 US Treasury Securities18,121,580 - 18,121,580 U.S. Government Sponsored Enterprise Securities60,249,650 15,146,120 45,103,530 Total Investments 34,739,903104,441,306 69,701,403 Investment with Fiscal Agents: Guaranteed Investment Contracts619,503 - 619,503 Money Market Mutual Funds5,000,048 5,000,048 - Total Investment with Fiscal Agents 5,000,0485,619,551 619,503 Total $ 39,739,951110,060,857$ 70,320,906$ 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 $250,000 or less are fully insured by the Federal Deposit Insurance Corporation (FDIC), and therefore, do not seek a credit rating. 63 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 3 – Cash and Investments (Continued) D. Risk Disclosures (Continued) Disclosures Related to Credit Risk (Continued) Presented on the following is the minimum rating required by (where applicable) the Government Code, the Investment Policy, or the debt agreements, and the actual rating as of year-end for each investment type. Disclosures Relating to Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated in the Gov't Code. GASB Statement No. 40 requires disclosure by amount and issuer, of investments in any one issuer that represent 5% or more of total investments. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represents 5% or more of the City's total investments are as follows: IssueInvestment TypeFair Value r Federal National Mortgage Association22,213,995U.S. Government Sponsored$ Enterprise Securities Federal Home Loan Mortgage Corporation15,090,952U.S. Government Sponsored$ Enterprise Securities Federal Home Loan BankU.S. Government Sponsored$ 16,938,502 Enterprise Securities Federal Farm CreditU.S. Government Sponsored$ 6,006,201 Enterprise Securities California Pooled Local Agency Investment Fund (LAIF)18,571,360$ Investment Fund 64 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 3 – Cash and Investments (Continued) D. Risk Disclosures (Continued) Disclosures Relating to Concentration of Credit Risk (Continued) 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. E. Investments in State Investment Pool – Local Agency Investment Fund The City’s investments with the 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 CMO’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, 2015, the City had $18,571,360 invested in LAIF, which had invested 2.08% 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, andis rated AAA by Standard & Poor's national rating agency. As of June 30, 2015, the City had $1,000,769 invested in CAMP. 65 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 4 – Receivables At June 30, 2015, receivables consisted of the following: Governmental Business-Type ActivitiesActivitiesTotal Accounts receivable834,250$ 2,058,764$ 2,893,014$ Taxes and assessments receivable242,011 176,745 418,756 Accrued revenues2,425,854 475 2,426,329 Loans receivable28,684 - 28,684 Total3,530,799$ 2,235,984$ 5,766,783$ 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. 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, 2015: Cardiff Sanitary DivisionSan Elijo Joint Facilities18,857,817$ San Dieguito Water DistrictR.E. Badger Joint Facilities16,888,038 San Dieguito Water DistrictR.E. Badger Financing Authority764,192 17,652,230 Encinitas Sanitary DivisionEncina Joint Facilities4,092,553 Total Investment in Joint Ventures $40,602,600 A. Cardiff Sanitary Division Investment in San Elijo 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, 2015, CSD's share of those costs was $1,384,221, which is reported as a component of "facility operations and maintenance" in the accompanying financial statements. 66 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 5 – Investments in Other Agencies (Continued) 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 DistrictSanta FeFacilities 45%55%Filtration Plant 31%69%Filtered Water Reservoir 39%61%Joint Pipeline 42%58%San Dieguito Water Reservoir 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, 2015, SDWD's share of those was $1,728,398, 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, 2015, ESD's share of those costs was $581,604, which is shown as "facility operations and maintenance" in the accompanying financial statements. 67 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 6 – Long-Term Receivable At June 30, 2015, 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 $650,000. Simple interest is payable annually, with principal payments commencing in June 2016 and continuing through until June 2018 when the remaining balance is due and payable. The note is secured by the developer’s share of the future net revenues of the Encinitas Ranch Golf Course, which substantially exceed the face value of the note. Note 7 – Other Assets At June 30, 2015, the City has recorded other assets consisting of the following: GovernmentalBusiness-type ctivitiesctivitiesTotal AA Other Assets: Prepaid pension side funds3,325,189$ 981,523$ 4,306,712$ Less: accumulated amortization(2,660,152) (785,216) (3,445,368) Total other assets $ 196,307665,037$ 861,344$ 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, 2015, the amortization expense was $332,519 for the governmental activities and $98,152 for the business-type activities. 68 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 8 – Capital Assets A. Governmental Activities The summary of changes in governmental activities capital assets for the year ended June 30, 2015 is as follows: Depreciation expense was charged to the functions/programs of the governmental activities as follows: General government1,234,469$ Public safety327,792 Public works2,892,057 Parks and recreation1,130,245 Internal service funds487,057 Total depreciation expense6,071,620$ 69 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 8 – Capital Assets (Continued) B. Business-type Activities The summary of changes in business-type activities capital assets for the year ended June 30, 2015 is as follows: Depreciation expense was charged to the functions/programs of the business-type activities as follows: Cardiff Sanitary Division274,114$ San Dieguito Water District663,043 Encinitas Sanitary Division291,596 Non-major Affordable Housing100,538 Total $ 1,329,291 70 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations A summary of changes in long-term liabilities for the year ended June 30, 2015 is as follows: 71 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) A. Governmental Activities 2008 Civic Center Roof Replacement andEnergy 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 $3,543,258. The annual debt service requirements for the lease outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016138,268$ 45,288$ 183,556$ 2017143,417 40,139 183,556 2018148,758 34,798 183,556 2019154,298 29,258 183,556 2020160,045 23,511 183,556 2021-2023516,789 33,879 550,668 Total1,261,575$ 206,873$ 1,468,448$ 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 $1.00 at the maturity of the lease in fiscal year 2018. The annual debt service requirements for the lease outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016161,974$ 11,356$ 173,330$ 2017166,015 7,314 173,329 2018170,158 3,171 173,329 Total498,147$ 21,841$ 519,988$ 72 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 $1 at the maturity of the lease term in fiscal year 2019. The annual debt service requirements for the lease outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 201685,582$ 7,248$ 92,830$ 201787,458 5,372 92,830 201889,375 3,455 92,830 201991,335 1,496 92,831 Total353,750$ 17,571$ 371,321$ 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 $1.00 at the maturity of the lease in fiscal year 2020. The annual debt service requirements for the lease outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 201677,049$ 7,645$ 84,694$ 201778,520 6,173 84,693 201880,020 4,673 84,693 201981,548 3,145 84,693 202083,105 83,105 Total400,242$ 21,636$ 421,878$ Capital assets and accumulated depreciation for assets held under capital leases are as follows: AccumulatedNet Capital CostDepreciationAssets Public facilities3,543,258$ (862,192)$ 2,681,066$ Fire apparatus and equipment2,377,053 (551,998) 1,825,055 73 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 1997 Refunding Certificates of Participation (COPs)-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 $590,000. Interest is due and payable semi-annually with rates ranging from 3.70% to 5.05%. The final maturity of the issue is due and payable in fiscal year 2017. These certificates are subject to federal arbitrage requirements. The certificates are not subject to optional redemption prior to maturity. The annual debt service requirements for the 1997 Certificates of Participation outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016560,000$ 43,500$ 603,500$ 2017590,000 14,750 604,750 Total1,150,000$ 58,250$ 1,208,250$ 2002Associationof 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 $290,000. Interest is due and payable semiannually at rates ranging from 3.00% to 4.65%. The final maturity of the issue is due and payable in fiscal year 2018. The bonds are subject to federal arbitrage requirements. The Encinitas Sanitary Division and the San Dieguito Water District have repaid all of their obligations to the City under the agreement to advance funds. The remaining amounts payable are all attributable to the Civic Center funding. The annual debt service requirements for the 2002 ABAG Lease Revenue Bonds outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016265,000$ 32,098$ 297,098$ 2017275,000 19,810 294,810 2018290,000 6,743 296,743 Total830,000$ 58,651$ 888,651$ 74 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2002Associationof 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 PeriodPrice July 1, 2014 and thereafter100% 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 $1,155,000. Interest is due and payable semi-annually at rates ranging from 3.6% to 4.4%. The bonds were issued at a discount, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are subject to federal arbitrage requirements. The annual debt service requirements for the 2006 Lease Revenue Bonds outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016495,000$ 699,146$ 1,194,146$ 2017515,000 680,966 1,195,966 2018535,000 661,799 1,196,799 2019555,000 641,634 1,196,634 2020575,000 620,585 1,195,585 2021-20253,225,000 2,735,079 5,960,079 2026-20303,940,000 1,944,038 5,884,038 2031-20354,875,000 1,045,274 5,920,274 2036-20372,260,000 99,969 2,359,969 Total16,975,000$ 9,128,490$ 26,103,490$ 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 PeriodPrice October 1, 2014 through September 30, 2015102% October 1, 2015 through September 30, 2016101% October 1, 2016 and thereafter100% 75 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 $1,175,000. The term bond matures on April 1, 2031 and is subject to mandatory sinking fund requirements. Interest is due and payable semi-annually at rates ranging from 2.00% to 4.85%. The bonds were issued at a premium, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are subject to federal arbitrage requirements. The bonds maturing on or after April 1, 2018 are subject to optional redemption on any date after April 1, 2017, without premium. The annual debt service requirements for the 2010 Lease Revenue Refunding Bonds outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016735,000$ 676,831$ 1,411,831$ 2017770,000 640,081 1,410,081 2018810,000 601,581 1,411,581 2019830,000 577,281 1,407,281 2020855,000 552,381 1,407,381 2021-20254,775,000 2,262,663 7,037,663 2026-20305,880,000 1,161,031 7,041,031 2031-20341,345,000 63,888 1,408,888 Total16,000,000$ 6,535,737$ 22,535,737$ 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 $510,000. Interest is due and payable semi-annually at rates ranging from 2.00% to 3.00%. The bonds were issued at a premium, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are subject to federal arbitrage requirements. 76 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2013 Lease Revenue Refunding Bonds (Public Park Construction Project) (Continued) The annual debt service requirements for the 2013 Lease Revenue Refunding Bonds outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016325,000$ 192,194$ 517,194$ 2017330,000 185,644 515,644 2018335,000 178,994 513,994 2019345,000 172,194 517,194 2020350,000 164,806 514,806 2021-20251,890,000 687,796 2,577,796 2026-20302,185,000 390,675 2,575,675 2031-20341,485,000 67,725 1,552,725 Total7,245,000$ 2,040,028$ 9,285,028$ 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. 2014 Lease Revenue Bonds (Pacific View Property and Moonlight Beach Lifeguard Tower) On November 26, 2014, the Encinitas Public Financing Authority (on behalf of the City of Encinitas) issued its 2014 Lease Revenue Bonds, Series A tax-exempt (Pacific View Property) and Series B taxable (Moonlight Beach Lifeguard Tower) in the amounts of $3,095,000 and $10,365,000, respectively, to provide funds for the purpose of financing the acquisition of a property known as the Pacific View Property and for improving the Moonlight Beach Lifeguard Tower. The bonds consist of $3,350,000 of serial bonds and $10,110,000 of term bonds. The serial bonds mature annually through 2030 in installments ranging from $65,000 to $245,000. The term bonds mature through 2045 and are subject to mandatory sinking requirements. Interest is due and payable semi-annually at rates ranging from 2.00% to 3.50%. The bonds were issued at a discount, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are subject to federal arbitrage requirements. The annual debt service requirements for the 2014 Lease Revenue Bonds, Series A Moonlight Beach Tower bonds outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 201665,000$ 102,481$ 167,481$ 201765,000 101,181 166,181 201865,000 99,881 164,881 201970,000 98,531 168,531 202070,000 97,131 167,131 2021-2025385,000 448,844 833,844 2026-2030455,000 384,297 839,297 2031-2035530,000 304,463 834,463 2036-2040630,000 201,044 831,044 2041-2045760,000 73,688 833,688 Total3,095,000$ 1,911,541$ 5,006,541$ 77 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2014 Lease Revenue Bonds (Pacific View Property and Moonlight Beach Lifeguard Tower) (Continued) The annual debt service requirements for the 2014 Lease Revenue Bonds, Series B Pacific View Property bonds outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016200,000$ 444,128$ 644,128$ 2017200,000 442,628 642,628 2018205,000 440,190 645,190 2019205,000 436,603 641,603 2020210,000 432,033 642,033 2021-20251,155,000 2,062,656 3,217,656 2026-20301,390,000 1,826,400 3,216,400 2031-20351,735,000 1,480,119 3,215,119 2036-20402,215,000 1,000,625 3,215,625 2041-20452,850,000 370,500 3,220,500 Total10,365,000$ 8,935,882$ 19,300,882$ B. Business-Type Activities 2011 CSD Note Payable to San Elijo 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 repaymentsdue 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 netrevenueseach 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, 2015 is $2,895,137. During the year ended June 30, 2015, principal and interest paid on the 2011 Note Payable was $694,442 and net revenue was $2,029,457, or 294% of annual debt service. Management of CSD believes it is in compliance with these covenants for fiscal year 2014-2015. 78 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2011 CSD Note Payable to San Elijo Joint Powers Authority (SEJPA) (Continued) The annual debt service requirements for the 2011 CSD Note Payable to San Elijo Joint Powers Authority outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016593,530$ 97,695$ 691,225$ 2017612,192 79,889 692,081 2018640,352 55,402 695,754 2019663,845 29,788 693,633 202057,500 3,234 60,734 2021-202460,000 1,710 61,710 Total2,627,419$ 267,718$ 2,895,137$ 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 2004 Bonds were fully refunded during the year via issuance of the SDWD Water Revenue Refunding Bonds, Series 2014. 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. 79 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2007 SDWD Note Payable to R.E. Badger Water Facilities Financing Authority (WFFA) (Continued) The annual debt service requirements for the 2007 SDWD Note Payable to R.E. Badger Water Facilities Financing Authority outstanding at June 30, 2015 are as follows: 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, 2015, is $13,352,350. During the year ended June 30, 2015 principal and interest paid was $1,652,475 and net revenue was $3,332,134, or 215% 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 2014- 2015. 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 $52,417 in 2014 to $74,562 in 2034. The note bears interest at 90% of the ten-year US Treasury note, adjustable every six years. The EHA is solely responsible for repayment on this note. 80 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 9 – Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2004 Encinitas Housing Authority (EHA) Note Payable (Continued) The annual debt service requirements for the 2004 Encinitas Housing Authority Note Payable outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 201654,083$ 46,182$ 100,265$ 201756,059 44,206 100,265 201857,976 42,289 100,265 201959,958 40,307 100,265 202061,904 38,361 100,265 2021-2025343,235 158,089 501,324 2026-2030406,102 95,223 501,325 2031-2034352,398 23,312 375,710 Total1,391,715$ 487,969$ 1,879,684$ 2014 SDWD Water Revenue Refunding Bonds On September 18, 2014, SDWD issued $5,870,000 of Water Revenue Refunding Bonds, Series 2014, to defease and refund on a current basis, all of the outstanding 2004 Water Revenue Refunding Bonds. The Bonds consist of serial bonds maturing from 2016 through 2024 in annual installments of $570,000 to $755,000. Interest is due and payable semi-annually at rates ranging from 3.0% to 4.0%. Annual debt service is approximately $780,000 through 2024. The bonds are subject to federal arbitrage requirements. The aggregate debt service payments of the new debt are $2,012,280 less than the old debt. The issuance of the new debt and refunding of the old debt resulted in an economic gain (the difference between the net present value of the old debt and new debt service payments) of approximately $780,873. The annual debt service requirements for the 2014 SDWD Water Refunding Bonds outstanding at June 30, 2015 are as follows: Year Ending June 30PrincipalInterestTotal 2016570,000$ 211,536$ 781,536$ 2017585,000 193,850 778,850 2018605,000 176,300 781,300 2019625,000 158,150 783,150 2020645,000 139,400 784,400 2021-20252,840,000 290,800 3,130,800 Total5,870,000$ 1,170,036$ 7,040,036$ 81 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 10 – Interfund Receivables, Payable and Transfers A.Due To and From Other Funds Individual interfund receivables and payables at June 30, 2015, were as follows: Due fromDue to Other FundsOther Funds Govermental Funds: General Fund$ - $434,357 Nonmajor Governmental Funds370,163 - Nonmajor Affordable Housing Enterprise Fund64,194 - Total434,357$ 434,357$ 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. B. Transfers In and Out Transfers in and out between funds for the year ended June 30, 2015, were as follows: Transfers in to the General Fund consist of funds 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 funds from other governmental funds for capital expenditures. Reimbursements are transferred on a monthly basis, thus, the Capital Improvement fund maintains a zero fund balance. 82 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 10 – Interfund Receivables, Payable and Transfers (Continued) B. Transfers In and Out (Continued) 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. 83 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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, 2015 as follows: Major Funds Capital ImprovementsOther GeneralCapital ProjectsGovernmental FundFundFundsTotals Nonspendable: Inventory and prepaid items220,562$ -$ -$ 220,562$ Other assets665,037 - - 665,037 Long-term receivable650,000 - - 650,000 Total nonspendable1,535,599 - - 1,535,599 Restricted: Capital projects- - 5,928,266 5,928,266 Street maintenance and improvements- - 1,304,246 1,304,246 Environmental initiatives- - 2,146,847 2,146,847 Affordable housing- - 1,297,999 1,297,999 Donations- - 120,068 120,068 Parkland and open space- - 1,347,033 1,347,033 Traffic mitigation- - 293,649 293,649 Flood control- - 341,798 341,798 Lighting and landscaping assessments- - 2,026,484 2,026,484 Law enforcement- - 835,816 835,816 Debt service- - 3,098,816 3,098,816 Total restricted- - 18,741,022 18,741,022 Committed: Capital projects8,266,796 - - 8,266,796 Total committed8,266,796 - - 8,266,796 Assigned: Capital projects 561,762 - - 561,762 Total assigned561,762 - - 561,762 Unassigned31,038,288 - - 31,038,288 Total Fund Balances41,402,445$ -$ 18,741,022$ 60,143,467$ 84 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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, 2015 was $11,323,163. 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, 2015 was $1,300,646. 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, 2015 was $18,984,746. 85 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 $500,000 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 $350,000 and $5,000,000. Excess worker's compensation coverage between $5,000,000 and statutory limits is provided through contract reinsurance. City departments contribute premiums to the self-insurance fund based on annual rates set for each work class. 86 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 12 – Risk Management (Continued) A.City of Encinitas - Risk Management and Insurance Programs (Continued) Changes in the balances of claims payable for liability and workers compensation during the past two years are as follows: Year EndedYear Ended June 30, 2015June 30, 2014 Claims payable, beginning of year607,546$ 1,048,309$ Estimated incurred claims, net972,064 419,372 Claims payments or closures(386,321) (860,135) Claim payable, end of year1,193,289$ 607,546$ 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. 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, 2015, 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. 87 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 13 – Commitments and Contingencies (Continued) C. Construction Commitments As of June 30, 2015, the City had remaining contractual commitments totaling nearly $1.8 million for capital projects related to its governmental and business-type activities. The more significant capital commitments include approximately $163,000 related to the North Coast Highway 101 Streetscape project and approximately $613,000 for the Olivenhain Trunk Sewer Design project. Note 14 – California Public Employees’ Retirement System A. Summary Net Pension Liability Net pension liability is reported in the accompanying Statement of Net Position as follows: GovernmentalBusiness-Type ActivitiesActivities CalPERS Miscellaneous Tier 1 Plan - 154317,732,042$ -$ CalPERS Fire Safety Tier 1 Plan - 464613,904,871 - CalPERS Fire Safety Tier 2 Plan - 230744,013 - CalPERS Fire Safety PEPRA Plan - 256771,981 - CalPERS Lifeguard Safety Tier 1 Plan - 4647397,006 - CalPERS Lifeguard Safety PEPRA Plan - 25678903 - CalPERS SDWD Tier 1 Plan - 686- 3,776,795 CalPERS SDWD Tier 2 Plan - 30022- 2,427 CalPERS SDWD PEPRA Plan - 21217- 63 Total32,040,816$ 3,779,285$ Deferred Outflows of Resources Deferred outflows of resources are reported in the accompanying Statement of Net Position as follows: Deferred Pension Contributions Made after the Measurement Date GovernmentalBusiness-Type ctivitiesActivities A CalPERS Miscellaneous Tier 1 Plan - 15431,609,246$ -$ CalPERS Miscellaneous Tier 2 Plan208,474 - CalPERS Fire Safety Tier 1 Plan - 4646942,133 - CalPERS Fire Safety Tier 2 Plan - 23074120,566 - CalPERS Fire Safety PEPRA Plan - 2567798,459 - CalPERS Lifeguard Safety Tier 1 Plan - 464787,184 - CalPERS Lifeguard Safety PEPRA Plan - 256783,252 - CalPERS SDWD Tier 1 Plan - 686- 491,190 CalPERS SDWD Tier 2 Plan - 30022- 14,342 CalPERS SDWD PEPRA Plan - 21217- 5,425 Total3,069,314$ 510,957$ 88 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) A. Summary (Continued) Deferred Outflows of Resources (Continued) Deferred Positive Change in Plan Proportion GovernmentalBusiness-Type ctivitiesActivities A CalPERS Fire Safety Tier 1 Plan - 4646242,070$ -$ CalPERS Fire Safety Tier 2 Plan - 230744,257 - CalPERS Fire Safety PEPRA Plan - 256777,430 - CalPERS SDWD Tier 1 Plan - 686- 126,588 Total253,757$ 126,588$ Deferred Inflows of Resources Deferred inflows of resources are reported in the accompanying Statement of Net Position as follows: Difference Between Projected and Actual Earnings on Pension Plan Investments GovernmentalBusiness-Type ActivitiesActivities CalPERS Miscellaneous Tier 1 Plan - 15434,458,821$ -$ CalPERS Fire Safety Tier 1 Plan - 46464,198,340 - CalPERS Fire Safety Tier 2 Plan - 230741,212 - CalPERS Fire Safety PEPRA Plan - 25677598 - CalPERS Lifeguard Safety Tier 1 Plan - 4647119,870 - CalPERS Lifeguard Safety PEPRA Plan - 25678273 - CalPERS SDWD Tier 1 Plan - 686- 1,269,178 CalPERS SDWD Tier 2 Plan - 30022- 816 CalPERS SDWD PEPRA Plan - 21217- 21 Total8,779,114$ 1,270,015$ Deferred Negative Change in Plan Proportion GovernmentalBusiness-Type ActivitiesActivities CalPERS SDWD Tier 2 Plan - 300224,249$ 4,113$ CalPERS SDWD PEPRA Plan - 212175,534 1,438 Total9,783$ 5,551$ 89 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) A. Summary (Continued) Pension Expense Pension expenses are included in the accompanying Statement of Revenues, Expenses, and Changes in Net Position as follows: GovernmentalBusiness-Type ctivitiesActivities A CalPERS Miscellaneous Tier 1 Plan - 15431,990,894$ -$ CalPERS Fire Safety Tier 1 Plan - 46461,173,719 - CalPERS Fire Safety Tier 2 Plan - 23074(3,849) - CalPERS Fire Safety PEPRA Plan - 25677(7,228) - CalPERS Lifeguard Safety Tier 1 Plan - 464744,672 - CalPERS Lifeguard Safety PEPRA Plan - 256785,626 - CalPERS SDWD Tier 1 Plan - 686- 258,581 CalPERS SDWD Tier 2 Plan - 30022- 4,360 CalPERS SDWD PEPRA Plan - 21217- 1,444 Total3,203,834$ 264,385$ B. City of Encinitas (not including the San Dieguito Water District) The City has the following California Public Employees’ Retirement Plans: 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) City Miscellaneous Plan Plan Description 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 (CalPERS). 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. A full description of the pension plans regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the June 30, 2013 Annual Actuarial Valuation Report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website under “Forms and Publications.” 90 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Benefits Provided The City's Miscellaneous Plan is an agent multiple-employer Plan that is part of the Public Agency's portion of CalPERS. 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. Employees Covered by Benefit Terms At June 30, 2015, the following employees were covered by the benefit terms for the Miscellaneous Plan: Miscellaneous Tier 1 Active employees159 Inactive employees or beneficiaries currently receiving benefits 113 Inactive employees entitled to, but not yet receiving benefits135 Total407 Contributions 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. 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 rate for fiscal year 2014-2015 was 20.67% for miscellaneous members. 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. 91 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Contributions (Continued) For the measurement year ended June 30, 2014, contributions were: Contributions - employees1,043,925$ Net Pension Liability Actuarial Methods and Assumptions Used to Determine Total Pension Liability For the measurement period ended June 30, 2014, the total pension liability was determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and June 30, 2014 total pension liabilities were based on the following actuarial methods and assumptions: Actuarial Cost Method EntryAgeNormalinaccordancewiththerequirementofGASB Statement No. 68 Actuarial Assumptions: Discount Rate7.50% Inflation2.75% Salary IncreasesVaries by Entry Age and Service Investment Rate of Return7.50%NetofPensionPlanInvestmentandAdministrative Expenses; includes inflation. Mortality Rate TableDerivedusingCalPERS’MembershipDataforallFunds.The mortalitytableusedwasdevelopedbasedonCalPERS’ specificdata.Thetableincludes20yearsofmortality improvements using Society of Actuaries Scale BB. Post Retirement Benefit Increase ContractCOLAupto2.75%untilPurchasingPowerProtection AllowanceFlooronPurchasingPowerapplies,2.75% thereafter. All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under “Forms and Publications.” Discount Rate The discount rate used to measure the total pension liability was 7.50 percent, which is net of administrative expenses. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.50 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section. 92 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Discount Rate (Continued) According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as we have changed our methodology. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, staff took into account both short-term and long- term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses. New Strategic Real Return Real Return Years 12 Allocation Asset Class Years 1 - 10 11 + Global equity47.00%5.25%5.71% Global fixed income 19.00%0.99%2.43% Inflation sensitive6.00%0.45%3.36% Private equity12.00%6.83%6.95% Real estate11.00%4.50%5.13% Infrastructure and forestland3.00%4.50%5.09% Liquidity2.00%-0.55%-1.05% 1 An expected inflation of 2.5% was used for this period. 93 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Miscellaneous Plan as of the measurement date, calculated using the discount rate of 7.50%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%) than the current rate: Changes in the Net Pension Liability The following tables show the changes in the net pension liability recognized over the measurement period for the Miscellaneous Plan: Miscellaneous Tier 1 Plan - 1543 Increase (Decrease) Total PensionPlan Fiduciary NetNet Pension LiabilityPositionLiability/(Asset) (a)(b)(c) = (a) - (b) Balance at June 30, 2013 (Valuation Date)79,524,003$ 57,045,894$ 22,478,109$ Changes Recognized for the Measurement Period: Service Cost2,448,194 2,448,194 Interest on the total pension liability5,943,955 5,943,955 Changes of benefit terms- - Difference between expected and actual experience- - Changes of assumptions- - Contributions from the employer2,278,140 (2,278,140) Contributions from employees1,043,925 (1,043,925) Net investment income, net of administrative expense9,816,151 (9,816,151) Benefit payments, including refunds of employee contributions(2,990,732) (2,990,732) - Net Changes during July 1, 2013 to June 30, 20145,401,417$ 10,147,484$ (4,746,067)$ Balance at June 30, 2014 (Measurement Date)84,925,420$ 67,193,378$ 17,732,042$ Pension Plan Fiduciary Net Position Detailed information about the plan’s fiduciary net position is available in the separately issued CalPERS financial report. 94 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Pension Expense and Deferred Outlows/Inflows of Resources to Pensions For the year ended June 30, 2015, the City recognized pension expense of $1,990,894 for the Miscellaneous Plan. At June 30, 2015, the City reported deferred outflows resources and deferred inflows of resources related to pensions from the following sources: Miscellaneous Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date1,609,246$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earning on pension plan investments- (4,458,821) Total1,609,246$ (4,458,821)$ The $1,609,246 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Deferred Outflows/ (Inflows) of Resources Miscellaneous Measurement Period Tier 1 Plan Ended June 30 2015494,540$ 2016(1,114,705) 2017(1,114,705) 2018(1,114,705) 2019- Thereafter- Fire Plan Plan Description TheFire Plan is a cost-sharing multiple employer defined benefit plan in which the City participates with other public agencies that each have fewer than 100 active members and share the same benefit formula. The Plan is administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statutes within the Public Employee’s Retirement Law. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office – 400 P Street, Sacramento, CA 95814. 95 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Benefits Provided TheFire 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 CalPERS. 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. Employees Covered by Benefit Terms At June 30, 2015, the following employees were covered by the benefit terms for each Fire Plan: Contributions Active fire members are required to contribute 9% of their annual covered salary (the “employee contribution”). 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 2014-2015 ranged from 23.065% to 23.948% for fire members. The employer contribution rates are calculated and established annually by CalPERS, based on the actuarial methods and assumptions adopted by the CalPERS Board of Administration. For the year ended June 30, 2014, the plan’s proportionate share of aggregate employer contributions made for each Fire Plan was as follows: 96 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions As of June 30, 2015, the City reported net pension liabilities for its proportionate shares of the net pension liability of each Fire Plan as follows: Safety FireSafety FireSafety Fire Tier 1Tier 2PEPRTotal A Proportionate share of net pension liability13,904,871$ 4,013$ 1,981$ 13,910,865$ The City’s net pension liability for each Fire Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plans is measured as of June 30, 2014, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool. (1) In determining a cost-sharing plan’s proportionate share, total amounts of liabilities and assets are first calculated for the risk pool as a whole on the valuation date (June 30, 2013). The risk pool’s fiduciary net position (“FNP”) subtracted from its total pension liability (“TPL”) determines the net pension liability (“NPL”) at the valuation date. (2) Using standard actuarial roll forward methods, the risk pool TPL is then computed at the measurement date (June 30, 2014). Risk pool FNP at the measurement date is then subtracted from this number to compute the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool’s FNP at the measurement date denotes the aggregate risk pool’s FNP at June 30, 2014 less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2013-14). (3) The individual plan’s TPL, FNP and NPL are also calculated at the valuation date. (4) Two ratios are created by dividing the plan’s individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool’s total TPL and FNP, respectively. (5) The plan’s TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan’s FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period. (6) The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5). 97 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions (Continued) The City’s proportionate share of the net pension liability for each Fire Plan as of June 30, 2014 was as follows: For the year ended June 30, 2015, the City recognized pension expense of $1,162,642. At June 30, 2015 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Safety Fire Tier 1 Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date942,133$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (4,198,340) Adjustments due to difference in proportions242,070 - Total1,184,203$ (4,198,340)$ Safety Fire Tier 2 Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date120,566$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (1,212) Adjustments due to difference in proportions4,257 - Total124,823$ (1,212)$ Safety Fire PEPRA Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date98,459$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (598) Adjustments due to difference in proportions7,430 - Total105,889$ (598)$ 98 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions (Continued) The $1,161,158 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Deferred Outflows/(Inflows) of Resources Fire Tier 1Fire Tier 1Fire PEPRATotal Measurement Period 2015(20,999)$ 121,784$ 100,963$ 201,748$ 2016(963,132) 1,218 2,504 (959,410) 2017(980,421) 912 1,972 (977,537) 2018(1,049,585) (303) (148) (1,050,036) 2019- - - - Thereafter- - - - Actuarial Methods and Assumptions Used to Determine Total Pension Liability For the measurement period ended June 30, 2014, the total pension liability was determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and June 30, 2014 total pension liabilities were based on the following actuarial methods and assumptions: Actuarial Cost MethodEntryAgeNormalinaccordancewiththerequirementofGASB Statement No. 68 Actuarial Assumptions: Discount Rate7.50% Inflation2.75% Salary IncreasesVaries by Entry Age and Service Investment Rate of Return7.50%NetofPensionPlanInvestmentandAdministrative Expenses; includes inflation. Mortality Rate TableDerivedusingCalPERS’MembershipDataforallFunds.The mortalitytableusedwasdevelopedbasedonCalPERS’ specificdata.Thetableincludes20yearsofmortality improvements using Society of Actuaries Scale BB. Post Retirement Benefit Increase ContractCOLAupto2.75%untilPurchasingPowerProtection AllowanceFlooronPurchasingPowerapplies,2.75% thereafter. All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under “Forms and Publications.” 99 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Discount Rate The discount rate used to measure the total pension liability was 7.50 percent, which is net of administrative expenses. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.50 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section. According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as we have changed our methodology. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, staff took into account both short-term and long- term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses. 100 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Discount Rate New Strategic Real Return Real Return Years 12 Allocation Asset Class Years 1 - 10 11 + Global equity47.00%5.25%5.71% Global fixed income 19.00%0.99%2.43% Inflation sensitive6.00%0.45%3.36% Private equity12.00%6.83%6.95% Real estate11.00%4.50%5.13% Infrastructure and forestland3.00%4.50%5.09% Liquidity2.00%-0.55%-1.05% 1 An expected inflation of 2.5% was used for this period. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability for each Fire Plan, calculated using the discount rate for each Fire Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.50%) or one percentage point higher (8.50%) than the current rate: Plan's Net Pension Liability/(Asset) Discount Rate - 1%Current DiscountDiscount Rate + 1% (6.50%)Rate (7.50%)(8.50%) Safety Fire Tier 1 23,928,483$ 13,904,871$ 5,645,848$ Safety Fire Tier 2 6,907 4,013 1,629 Safety Fire PEPRA3,410 1,981 805 Pension Plan Fiduciary Net Position Detailed information about the plan’s fiduciary net position is available in the separately issued CalPERS financial report. Lifeguard Plan Plan Description TheLifeguard Plan is a cost-sharing multiple employer defined benefit plan in which the City participates with other public agencies that each have fewer than 100 active members and share the same benefit formula. The Plan is administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statutes within the Public Employee’s Retirement Law. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office – 400 P Street, Sacramento, CA 95814. 101 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Benefits Provided TheLifeguard 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 2 and Tier 3 (PEPRA) plans which are identical to the Fire Plan described above. For the measurement period July1, 2013 through June 30, 2014, Tier 2 employees were grouped with Tier 1 employees because there was no separate Tier 2 actuarial study performed at the June 30, 2013 valuation date. Employees Covered by Benefit Terms At June 30, 2015, the following employees were covered by the benefit terms for the Lifeguard Plan: Safety LifeguardSafety Lifeguard Tier 1PEPR A Active employees6 1 Inactive employees or beneficiaries currently receiving benefits -1 Inactive employees entitled to, but not yet receiving benefits8 - Total15 1 Contributions Active lifeguard members are required to contribute 9% of their annual covered salary (the “employee contribution”). 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 2014-2015 were 22.25% for lifeguard members. The employer contribution rates are calculated and established annually by CalPERS, based on the actuarial methods and assumptions adopted by the CalPERS Board of Administration. For the year ended June 30, 2015, the plan’s proportionate share of aggregate employer contributions made for each Lifeguard Plan was as follows: Safety LifeguardSafety Lifeguard Tier 1PEPRTotal A Contributions - employer86,727$ 2,787$ 89,514$ 102 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions As of June 30, 2015, the City reported net pension liabilities for its proportionate shares of the net pension liability of each Lifeguard Plan as follows: Safety LifeguardSafety Lifeguard Tier 1PEPRTotal A Proportionate share of net pension liability397,006$ 903$ 397,909$ The City’s net pension liability for each Lifeguard Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plans is measured as of June 30, 2014, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool. (1) In determining a cost-sharing plan’s proportionate share, total amounts of liabilities and assets are first calculated for the risk pool as a whole on the valuation date (June 30, 2013). The risk pool’s fiduciary net position (“FNP”) subtracted from its total pension liability (“TPL”) determines the net pension liability (“NPL”) at the valuation date. (2) Using standard actuarial roll forward methods, the risk pool TPL is then computed at the measurement date (June 30, 2014). Risk pool FNP at the measurement date is then subtracted from this number to compute the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool’s FNP at the measurement date denotes the aggregate risk pool’s FNP at June 30, 2014 less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2013-14). (3) The individual plan’s TPL, FNP and NPL are also calculated at the valuation date. (4) Two ratios are created by dividing the plan’s individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool’s total TPL and FNP, respectively. (5) The plan’s TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan’s FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period. (6) The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5). 103 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) The City’s proportionate share of the net pension liability for each Lifeguard Plan as of June 30, 2014 was as follows: Safety LifeguardSafety Lifeguard Tier 1PEPR A Proportion June 30, 2014 0.00638%0.00001% For the year ended June 30, 2015, the City recognized pension expense of $50,298 for the Lifeguard Plan. At June 30, 2015 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Safety Lifeguard Tier 1 Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date87,184$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (119,870) Adjustments due to difference in proportions- (4,249) Total87,184$ (124,119)$ Safety Lifeguard PEPRA Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date3,252$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (273) Adjustments due to difference in proportions- (5,534) Total3,252$ (5,807)$ The $90,436 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Deferred Outflows/(Inflows) of Resources LifeguardLifeguard Total Tier 1PEPRA Measurement Period 201555,699$ 1,207$ 56,906$ 2016(31,485) (2,045) (33,530) 2017(31,180) (1,648) (32,828) 2018(29,969) (69) (30,038) 2019- - - Thereafter- - - 104 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Actuarial Methods and Assumptions Used to Determine Total Pension Liability For the measurement period ended June 30, 2014, the total pension liability was determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and June 30, 2014 total pension liabilities were based on the following actuarial methods and assumptions: Actuarial Cost MethodEntryAgeNormalinaccordancewiththerequirementofGASB Statement No. 68 Actuarial Assumptions: Discount Rate7.50% Inflation2.75% Salary IncreasesVaries by Entry Age and Service Investment Rate of Return7.50%NetofPensionPlanInvestmentandAdministrative Expenses; includes inflation. Mortality Rate TableDerivedusingCalPERS’MembershipDataforallFunds.The mortalitytableusedwasdevelopedbasedonCalPERS’ specificdata.Thetableincludes20yearsofmortality improvements using Society of Actuaries Scale BB. Post Retirement Benefit Increase ContractCOLAupto2.75%untilPurchasingPowerProtection AllowanceFlooronPurchasingPowerapplies,2.75% thereafter. All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under “Forms and Publications.” Discount Rate The discount rate used to measure the total pension liability was 7.50 percent, which is net of administrative expenses. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.50 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section. According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. 105 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Discount Rate (Continued) CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as we have changed our methodology. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, staff took into account both short-term and long- term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses. New Strategic Real Return Real Return Years 12 Allocation Asset Class Years 1 - 10 11 + Global equity47.00%5.25%5.71% Global fixed income 19.00%0.99%2.43% Inflation sensitive6.00%0.45%3.36% Private equity12.00%6.83%6.95% Real estate11.00%4.50%5.13% Infrastructure and forestland3.00%4.50%5.09% Liquidity2.00%-0.55%-1.05% 1 An expected inflation of 2.5% was used for this period. 106 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) B. City of Encinitas (not including the San Dieguito Water District) (Continued) Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability for each Lifeguard Plan, calculated using the discount rate for each Lifeguard Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.50%) or one percentage point higher (8.50%) than the current rate: Plan's Net Pension Liability/(Asset) Discount Rate - 1%Current DiscountDiscount Rate + 1% (6.50%)Rate (7.50%)(8.50%) Lifeguard Tier 1 683,196$ 397,006$ 161,198$ Lifeguard PEPRA1,554 903 366 Pension Plan Fiduciary Net Position Detailed information about the plan’s fiduciary net position is available in the separately issued CalPERS financial report. C. San Dieguito Water District Plan Description TheSDWD Plan is a cost-sharing multiple employer defined benefit plan that provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to members and beneficiaries, in which the City participates with other public agencies that each have fewer than 100 active members and share the same benefit formula. The Plan is administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statutes within the Public Employee’s Retirement Law. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office – 400 P Street, Sacramento, CA 95814. Benefits Provided TheSDWD Plan provides employees hired before October 13, 2012 with a Tier 1 benefit equal to 2.7% at 55years 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. 107 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) C. San Dieguito Water District (Continued) Employees Covered by Benefit Terms At June 30, 2015, the following employees were covered by the benefit terms for each SDWD plan: SDWDSDWDSDWD Tier 1Tier 2PEPR A Active employees20 3 1 Inactive employees or beneficiaries currently receiving benefits -33 - Inactive employees entitled to, but not yet receiving benefits4 - - Total57 3 1 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. SDWD 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 2014-2015 was 16.691%. 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. For the year ended June 30, 2015, the SDWD Plan’s proportionate share of aggregate employer contributions made for each plan was as follows: SDWDSDWDSDWD Tier 1Tier 2PEPRTotal A Contributions - employer321,411$ 13,496$ 5,821$ 340,728$ Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions As of June 30, 2015, the City reported net pension liabilities for its proportionate shares of the net pension liability of each SDWD Plan as follows: SDWDSDWDSDWD Tier 1Tier 2PEPRTotal A Proportionate share of net pension liability3,776,795$ 2,427$ 63$ 3,779,285$ The City’s net pension liability for each SDWD Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plans is measured as of June 30, 2014, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. 108 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) D. San Dieguito Water District (Continued) Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions (Continued) The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool. (1) In determining a cost-sharing plan’s proportionate share, total amounts of liabilities and assets are first calculated for the risk pool as a whole on the valuation date (June 30, 2013). The risk pool’s fiduciary net position (“FNP”) subtracted from its total pension liability (“TPL”) determines the net pension liability (“NPL”) at the valuation date. (2) Using standard actuarial roll forward methods, the risk pool TPL is then computed at the measurement date (June 30, 2014). Risk pool FNP at the measurement date is then subtracted from this number to compute the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool’s FNP at the measurement date denotes the aggregate risk pool’s FNP at June 30, 2014 less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2013-14). (3) The individual plan’s TPL, FNP and NPL are also calculated at the valuation date. (4) Two ratios are created by dividing the plan’s individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool’s total TPL and FNP, respectively. (5) The plan’s TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan’s FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period. (6) The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5). The City’s proportionate share of the net pension liability for each SDWD Plan as of June 30, 2014 was as follows: SDWDSDWDSDWD Tier 1Tier 2PEPR A Proportion June 30, 2014 0.06070%0.000040%0.000000% For the year ended June 30, 2015, the City recognized pension expense of $264,385 for the SDWD Plan. At June 30, 2015 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 109 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) E. San Dieguito Water District (Continued) Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions (Continued) SDWD Tier 1 Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date491,190$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (1,269,178) Adjustments due to difference in proportions126,588 - Total617,778$ (1,269,178)$ SDWD Tier 2 Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date14,342$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (816) Adjustments due to difference in proportions- (4,113) Total14,342$ (4,929)$ SDWD PEPRA Plan Deferred outflowsDeferred inflows of Resourcesof Resources Contribution made after the measurement date5,425$ -$ Difference between expected and actual experience- - Changes of assumptions- - Net difference between projected and actual earnings on pension plan investments- (21) Adjustments due to difference in proportions- (1,438) Total5,425$ (1,459)$ The $510,957 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: 110 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) F. San Dieguito Water District (Continued) Pension Liabilities, Pension Expenses and Deferred Outlows/Inflows of Resources to Pensions (Continued) Deferred Outflows/(Inflows) of Resources SDWDSDWDSDWD Measurement Period Tier 1 PlanTier 2 PlanPEPRA Plan Ended June 30 2015219,105$ 12,669$ 4,906$ 2016(272,085) (1,673) (519) 2017(281,127) (1,379) (415) 2018(317,293) (204) (6) 2019- - - Thereafter- - - Actuarial Methods and Assumptions Used to Determine Total Pension Liability For the measurement period ended June 30, 2014, the total pension liability was determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and June 30, 2014 total pension liabilities were based on the following actuarial methods and assumptions: Actuarial Cost MethodEntryAgeNormalinaccordancewiththerequirementofGASB Statement No. 68 Actuarial Assumptions: Discount Rate7.50% Inflation2.75% Salary IncreasesVaries by Entry Age and Service Investment Rate of Return7.50%NetofPensionPlanInvestmentandAdministrative Expenses; includes inflation. Mortality Rate TableDerivedusingCalPERS’MembershipDataforallFunds.The mortalitytableusedwasdevelopedbasedonCalPERS’ specificdata.Thetableincludes20yearsofmortality improvements using Society of Actuaries Scale BB. Post Retirement Benefit Increase ContractCOLAupto2.75%untilPurchasingPowerProtection AllowanceFlooronPurchasingPowerapplies,2.75% thereafter. All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under “Forms and Publications.” 111 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) G. San Dieguito Water District (Continued) Discount Rate The discount rate used to measure the total pension liability was 7.50 percent, which is net of administrative expenses. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.50 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section. According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as we have changed our methodology. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, staff took into account both short-term and long- term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses. 112 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 14 – California Public Employees’ Retirement System (Continued) H. San Dieguito Water District (Continued) Discount Rate (Continued) New Strategic Real Return Real Return Years Allocation 12 Asset Class Years 1 - 10 11 + Global equity47.00%5.25%5.71% Global fixed income 19.00%0.99%2.43% Inflation sensitive6.00%0.45%3.36% Private equity12.00%6.83%6.95% Real estate11.00%4.50%5.13% Infrastructure and forestland3.00%4.50%5.09% Liquidity2.00%-0.55%-1.05% 1 An expected inflation of 2.5% was used for this period. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability for each SDWD Plan, calculated using the discount rate for each SDWD Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.50%) or one percentage point higher (8.50%) than the current rate: Plan's Net Pension Liability/(Asset) Discount Rate - 1%Current DiscountDiscount Rate + 1% (6.50%)Rate (7.50%)(8.50%) SDWD Tier 1 6,729,081$ 3,779,795$ 1,326,678$ SDWD Tier 2 4,325 2,427 853 SDWD PEPRA112 63 22 Pension Plan Fiduciary Net Position Detailed information about the plan’s fiduciary net position is available in the separately issued CalPERS financial report. 113 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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. 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 theAnnual 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. 114 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 15 – Other Postemployment Benefits (OPEB) (Continued) A.City of Encinitas Retiree Health Plan (Continued) Annual Required Contribution (ARC) and OPEB costsummary The ARC for fiscal year 2014-15 of approximately $544,000 represents a level of funding that, if paid on anon-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 ofNet AnnualAnnual OPEBOPEB Fiscal YearOPEB CostCost ContributedObligation June 30, 2013 $ 100%-760,000$ June 30, 2014 100%-785,000 June 30, 2015 100%-544,000 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 AgeUnfundedLiability as ActuarialActuarialActuarialActuarialEstimatedPercentage of aluationAssetsAccruedccruedFundedCoveredCovered VA DateValueLiabilityLiabilityRatioPayrollPayroll June 30, 2013 $ 8,686,4822,178,800$ 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. 115 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 withGASB Statement No. 45, which provides a means to fund the annual OPEB costs, referred to as theAnnual 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 2014-15 of $29,000 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. 116 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 ofNet AnnualAnnual OPEBOPEB Fiscal Yea rOPEB CostCost ContributedObligation June 30, 2013 $ 100%-31,000$ June 30, 2014 100%-31,000 June 30, 2015 100%-29,000 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, 2015. 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. Schedule of Funding Progress Thefor 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. 117 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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. Separateauditedfinancial 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, 2015, the outstanding balance on the 2012 Special Tax Refunding Bonds was $30,910,000. 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. 118 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 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 $165,000. 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. 119 City of Encinitas Notes to Basic Financial Statements (Continued) For the Year Ended June 30, 2015 Note 18 – Prior Period Adjustments The beginning net position at July 1, 2014 was restated as follows: Enterprise Funds GovernmentalBusiness-TypeSDWD ActivitiesActivitiesFund Net Position at July 1, 2014 $ 117,829,204217,713,575$ 45,090,418$ (1) CalPERS Miscellaneous Tier 1 Plan: Net Pension Liabilities (Note 14)(22,478,109) - - Deferred outflows of resources2,278,140 - - (2) CalPERS Fire Tier 1 Plan: Net Pension Liabilities (Note 14)(18,412,351) - - Deferred outflows of resources1,724,929 - - (3) CalPERS Fire Tier 2 Plan: Net Pension Liabilities (Note 14)(5,315) - - Deferred outflows of resources498 - - (4) CalPERS Fire PEPRA Plan: Net Pension Liabilities (Note 14)(2,623) - - Deferred outflows of resources246 - - (5) CalPERS Lifeguard Tier 1 Plan: Net Pension Liabilities (Note 14)(525,702) - - Deferred outflows of resources49,249 - - (6) CalPERS Lifeguard PEPRA Plan: Net Pension Liabilities (Note 14)(1,196) - - Deferred outflows of resources112 - - (7) CalPERS SDWD Tier 1 Plan: Net Pension Liabilities (Note 14)- (5,160,460) (5,160,460) Deferred outflows of resources- 499,656 499,656 (8) CalPERS SDWD Tier 2 Plan: Net Pension Liabilities (Note 14)- (3,317) (3,317) Deferred outflows of resources- 321 321 (9) CalPERS SDWD PEPRA Plan: Net Pension Liabilities (Note 14)- (86) (86) Deferred outflows of resources- 8 8 Subtotal (4,663,878)(37,372,122) (4,663,878) Net Position at July 1, 2014, as Restated $ 113,165,326180,341,453$ 40,426,540$ The City implemented GASB Statements No. 68 and No. 71 during the year ended June 30, 2015. The restatement to the beginning net position is to report the net pension liabilities for the City’s CalPERS plans in accordance with GASB Statements No. 68 and No. 71 based on the measurement date of June 20, 2014. 120 REQUIRED SUPPLEMENTARY SECTION ` City of Encinitas 505 South Vulcan Avenue Encinitas CA 92024 760-633-2600 www.encinitasca.gov City of Encinitas Required Supplementary Information For the Year Ended June 30, 2015 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. 123 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 2 – Budgetary Comparison Schedule General Fund Variance with Budgeted Amounts OriginalFinalActualFinal Budget REVENUES: Taxes: Property34,617,163$ 35,650,752$ 37,065,258$ 1,414,506$ Real property transfer408,000 458,000 630,381 172,381 Sales12,378,738 12,187,552 12,569,119 381,567 Transient occupancy1,097,656 1,217,656 1,463,347 245,691 Franchise2,237,779 2,237,779 2,321,572 83,793 Total taxes50,739,336 51,751,739 54,049,677 2,297,938 Licenses and permits195,057 220,057 251,730 31,673 Intergovernmental476,978 521,353 814,337 292,984 Charges for services5,006,577 5,249,022 5,315,721 66,699 Fines, forfeitures and penalties695,558 742,607 802,936 60,329 Use of money and property466,991 476,766 609,054 132,288 Other363,721 394,891 686,774 291,883 Total revenues 59,356,43557,944,218 62,530,229 3,173,794 EXPENDITURES: General government: City Council393,915 394,915 363,745 31,170 Community enhancement75,000 75,000 73,845 1,155 City Attorney308,500 308,500 308,343 157 City Manager4,260,305 4,558,654 4,005,803 552,851 City Clerk652,043 652,043 582,413 69,630 Finance1,743,001 1,743,001 1,587,004 155,997 Non-departmental 1,732,686 2,161,795 2,281,798 (120,003) Total general government9,165,450 9,893,908 9,202,951 690,957 Public safety: Law enforcement12,461,200 12,461,200 12,352,328 108,872 Fire and marine safety12,965,006 13,008,068 12,433,890 574,178 Total public safety25,426,206 25,469,268 24,786,218 683,050 Public works: Administration226,806 246,806 176,783 70,023 Environmental programs218,551 109,110 105,640 3,470 Street maintenance1,812,293 1,839,829 1,759,013 80,816 Facility maintenance1,099,454 1,250,754 1,242,380 8,374 Stormwater852,983 927,983 750,838 177,145 Total public works4,210,087$ 4,374,482$ 4,034,654$ 339,828$ 124 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 2 – Budgetary Comparison Schedule (Continued) General Fund (Continued) Budgeted AmountsVariance with OriginalFinalActualFinal Budget Planning and building: Planning2,689,972 2,695,520 2,467,082 228,438 Code enforcement646,358 682,163 545,719 136,444 Building services1,623,253 1,874,762 1,780,732 94,030 Total planning and building4,959,583 5,252,445 4,793,533 458,912 Engineering services: City engineering2,581,763 2,673,426 2,650,115 23,311 Traffic engineering730,771 730,771 690,858 39,913 Stormwater848,177 850,340 821,657 28,683 Total engineering services4,160,711 4,254,537 4,162,630 91,907 Parks and recreation: Administration933,509 971,846 985,610 (13,764) Park services1,705,960 1,691,289 1,586,996 104,293 Beach services515,621 575,092 481,248 93,844 Recreational trails126,915 126,915 117,030 9,885 Recreational services627,293 635,293 614,472 20,821 Community and senior center1,217,000 1,286,456 1,169,542 116,914 Total parks and recreation 5,126,298 5,286,891 4,954,898 331,993 Capital outlay- - - - Debt service: Interest and fiscal charges- - 155,804 (155,804) Total expenditures 54,531,53153,048,335 52,090,688 2,440,843 EXCESS OF REVENUES OVER EXPENDITURES 4,824,9044,895,883 10,439,541 5,614,637 OTHER FINANCING SOURCES (USES) Proceeds from bond issuance- - 13,174,373 (13,174,373) Transfers in - operating1,026,339 1,026,339 1,101,015 (74,676) Transfers in - capital- 20,000 20,000 - Transfers in - other- - 174,343 (174,343) Transfers out - operating(1,002,899) (1,068,064) (1,056,992) 11,072 Transfers out - capital(14,960,800) (15,675,917) (13,618,712) 2,057,205 Transfers out - debt service(5,289,723) (5,194,723) (4,737,231) 457,492 Total other financing sources (uses) (20,892,365)(20,227,083) (4,943,204) (10,897,623) NET CHANGE IN FUND BALANCE (16,067,461)(15,331,200) 5,496,337 (5,282,986) Fund balance - beginning of yea r 35,906,10835,906,108 35,906,108 - Fund balance - end of year $ 19,838,64720,574,908$ 41,402,445$ (5,282,986)$ 125 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 3 – Schedule of Changes in the Net Pension Liability and Related Ratios Last Ten Fiscal Years* City Miscellaneous Plan – 1543 Total Pension Liability2013-14 Service cost$2,448,194 Interest on total pension liability5,943,955 Differences between expected and actual experience- Changes in assumptions- Changes in benefit terms- Benefit payments, including refunds of employee contributions(2,990,732) Net change in total pension liability 5,401,417 Total pension liability - beginning 79,524,003 Total pension liability - ending (a) $84,925,420 Plan fiduciary net position Contributions - employer$2,278,140 Contributions - employee1,043,925 Investment income (net of administrative expenses)9,816,151 Benefit payments(2,990,732) Other- Net change in plan fiduciary net position 10,147,484 Plan fiduciary net position - beginning 57,045,894 Plan fiduciary net position - ending (b) $67,193,378 Net pension liability - ending (a)-(b) $17,732,042 Plan fiduciary net position as a percentage of the total pension liability79.12% Covered-employee payroll$13,022,309 Net pension liability as a percentage of covered- employee payroll136.17% Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 126 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability Last Ten Fiscal Years* Safety Fire Tier 1 Plan - 4646 1 6/30/2014 Plan's proportion of the net pension liabliity0.22346% Plan's proportionate share of the net pension liability13,904,871$ 2 Plan's covered-employee payroll $ 4,406,358 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll315.56% Plan's fiduciary net position$ 60,927,506 Plan's fiduciary net position as a percentage of the total pension liability81.42% 3, 4 Plan's proportionate share of aggregate employer contributions $ 1,724,929 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 127 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability (Continued) Last Ten Fiscal Years* Safety Fire Tier 2 Plan – 23074 1 6/30/2014 Plan's proportion of the net pension liabliity0.00006% Plan's proportionate share of the net pension liability4,013$ 2 Plan's covered-employee payroll $ 64,150 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll6.26% Plan's fiduciary net position$ 17,588 Plan's fiduciary net position as a percentage of the total pension liability81.42% 3, 4 Plan's proportionate share of aggregate employer contributions $ 498 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 128 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability (Continued) Last Ten Fiscal Years* PEPRA Safety Fire Plan – 25677 1 6/30/2014 Plan's proportion of the net pension liabliity0.00003% Plan's proportionate share of the net pension liability1,981$ 2 Plan's covered-employee payroll $ 207,261 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll0.96% Plan's fiduciary net position$ 8,681 Plan's fiduciary net position as a percentage of the total pension liability81.42% 3, 4 Plan's proportionate share of aggregate employer contributions $ 246 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 129 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability (Continued) Last Ten Fiscal Years* Safety Lifeguard Plan Tier 1 – 4647 1 6/30/2014 Plan's proportion of the net pension liabliity0.00638% Plan's proportionate share of the net pension liability397,006$ 2 Plan's covered-employee payroll $ 395,228 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll100.45% Plan's fiduciary net position$ 1,739,578 Plan's fiduciary net position as a percentage of the total pension liability81.42% 3, 4 Plan's proportionate share of aggregate employer contributions $ 49,249 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 130 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability (Continued) Last Ten Fiscal Years* PEPRA Safety Lifeguard Plan - 25678 1 6/30/2014 Plan's proportion of the net pension liabliity0.00001% Plan's proportionate share of the net pension liability903$ 2 Plan's covered-employee payroll $ 42,291 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll2.14% Plan's fiduciary net position$ 3,957 Plan's fiduciary net position as a percentage of the total pension liability81.42% 3, 4 Plan's proportionate share of aggregate employer contributions $ 112 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 131 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability (Continued) Last Ten Fiscal Years* San Dieguito Water District Tier 1 Plan - 686 1 6/30/2014 Plan's proportion of the net pension liabliity0.06070% Plan's proportionate share of the net pension liability3,776,795$ 2 Plan's covered-employee payroll $ 1,612,561 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll234.21% Plan's fiduciary net position$ 18,477,276 Plan's fiduciary net position as a percentage of the total pension liability83.03% 3, 4 Plan's proportionate share of aggregate employer contributions $ 499,656 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 132 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability (Continued) Last Ten Fiscal Years* San Dieguito Water District Tier 2 Plan - 30022 1 6/30/2014 Plan's proportion of the net pension liabliity0.00004% Plan's proportionate share of the net pension liability2,427$ 2 Plan's covered-employee payroll $ 123,658 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll1.96% Plan's fiduciary net position$ 11,875 Plan's fiduciary net position as a percentage of the total pension liability83.03% 3, 4 Plan's proportionate share of aggregate employer contributions $ 321 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 133 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 4 – Schedule of the City's Proportionate Share of the Net Pension Liability (Continued) Last Ten Fiscal Years* PEPRA San Dieguito Water District Plan - 27217 1 6/30/2014 Plan's proportion of the net pension liabliity0.00000% Plan's proportionate share of the net pension liability63$ 2 Plan's covered-employee payroll $ 58,551 Plan's proportionate share of the net pension liability as a percentage of covered-employee payroll0.11% Plan's fiduciary net position$ 307 Plan's fiduciary net position as a percentage of the total pension liability82.97% 3, 4 Plan's proportionate share of aggregate employer contributions $ 8 Notes to Schedule: Benefit changes . In 2015, benefit terms were modified to base miscellaneous employee pensions on a final three-year average salary instead of a final five-year average salary. Changes in assumptions . In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages of miscellaneous employees. * - Fiscal year 2015 was the first year of implementation, therefore only one year is shown. 1 Historical information is required only for measurement periods for which GASB 68 is applicable. 2 Covered-Employee Payroll represented above is based on pensionable earnings provided by the employer. However, GASB 68 defines covered-employee payroll as the total payroll of employees that are provided pensions through the pension plan. Accordingly, if pensionable earnings are different than total earnings for covered-employees, the employer should display in the disclosure footnotes the payroll based on total earnings for the covered group and recalculate the required payroll-related ratios. 3 The plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The plan’s proportionate share of aggregate contributions is based on the plan’s proportion of fiduciary net position shown on line 5 of the table above as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. 4 This data is not required to be displayed by GASB 68 for employers participating in cost-sharing plans, but it is being shown here because it is used in the calculation of the Plan’s pension expense. 134 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions Last Ten Fiscal Years* City Miscellaneous Plan - 1543 135 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* Safety Fire Tier 1 Plan - 4646 136 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* Safety Fire Tier 2 Plan – 23074 137 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* PEPRA Safety Fire Plan - 25677 138 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* Safety Lifeguard Tier 1 Plan - 4647 139 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* PEPRA Safety Lifeguard Plan - 25678 140 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* San Dieguito Water District Miscellaneous Tier 1 Plan - 686 141 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* San Dieguito Water District Miscellaneous Tier 2 Plan - 30022 142 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 5 – Schedule of Contributions (Continued) Last Ten Fiscal Years* PEPRA San Dieguito Water District Miscellaneous Plan - 27217 143 City of Encinitas Required Supplementary Information (Continued) For the Year Ended June 30, 2015 Note 6 – Schedules of Funding Progress – Other Postemployment Benefits A. Other Postemployment Benefits (OPEB) – City’s Plan Unfunded Actuarial Entry AgeUnfundedLiability as ActuarialActuarialActuarialActuarialPercentage of ValuationAssetsAccruedAccruedFundedCoveredCovered DateValueLiabilityLiabilityRatioPayrollPayroll June 30, 2009$9,523,00055.57% $ 9,990,000467,000$ 4.67%17,138,000$ June 30, 20111,960,000 10,506,000 8,546,000 46.82%18,252,000 18.66% June 30, 20132,178,800 8,686,482 6,507,682 35.88%18,135,000 25.08% B. Other Postemployment Benefits (OPEB) – San Dieguito Water District’s Plan Unfunded Actuarial Entry AgeUnfundedLiability as ActuarialActuarialActuarialActuarialPercentage of ValuationAssetsAccruedAccruedFundedCoveredCovered DateValueLiabilityLiabilityRatioPayrollPayroll June 30, 2009$289,00027.55% $ 302,00013,000$ 4.30%1,049,000$ June 30, 201165,000 343,000 278,000 22.60%1,230,000 18.95% June 30, 201368,176 322,326 254,150 13.48%1,886,000 21.15% 144 SUPPLEMENTARY INFORMATION SECTION ` City of Encinitas 505 South Vulcan Avenue Encinitas CA 92024 760-633-2600 www.encinitasca.gov NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS: InfrastructureImprovements-Thisfundisusedtoaccountforfinancialresourcesfromstateandfederal grants which are primarily to fund operations and capital improvements. GrantsandHousing-Thisfundisusedtoaccountforfinancialresourcesfromfederalgrantsthatare utilized to fund various City programs such as affordable housing and law enforcement. DevelopmentImpact-Thisfundisusedtoaccountfordevelopmentimpact/mitigationfeesthatare collectedinconnectionwithlanduseandconstructionapplications.Thesemoniesareutilizedtofund specified city capital improvement projects. LightingandLandscapinThifundiusetoaccounforspeciaassessmentsancertainrestricted g-ssdtld propertytaxrevenuescollectedfromhomeownersandbusinesses.Thesemoniesareutilizedtofund specifiedoperationalandmaintenancecostsrelatedtocommonarealandscaping,streetlighting,andpark maintenance. DEBT SERVICE FUNDS: CityDebtService-Thisfundisusedtoaccountforandreportfinancialresourcesthatarerestricted, committed, or assigned to expenditure for the payment of principal and interest on City long-term debt. EncinitasPublicFinancingAuthority-Thisfundisusedtoaccountforandreportfinancialresourcesthat arerestricted,committed,orassignedtoexpenditureforthepaymentofprincipalandinterestonEncinitas Public Financing Authority long-term debt. 146 City of Encinitas Combining Balance Sheet Non-Major Governmental Funds June 30, 2015 Special Revenue InfrastructureGrants and Development Lighting and ImprovementsHousingImpactLandscaping ASSETS Cash and investments1,471,087$ 2,400,343$ 9,121,955$ 2,949,486$ Receivables190,215 315,623 - 19,878 Restricted cash and investments- - - - Total assets $ 2,715,9661,661,302$ 9,121,955$ 2,969,364$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities3,319$ 122,941$ -$ 127,909$ Unearned revenue188,746 - - - Due to other funds226,774 143,389 - - Deposits and other liabilities- - 13,303 - Total liabilities 266,330418,839 13,303 127,909 Fund Balances: Restricted1,242,463 2,449,636 9,108,652 2,841,455 Total fund balances 2,449,6361,242,463 9,108,652 2,841,455 Total liabilities and fund balances $ 2,715,9661,661,302$ 9,121,955$ 2,969,364$ 147 City of Encinitas Combining Balance Sheet Non-Major Governmental Funds (Continued) June 30, 2015 Debt Service Total Encinitas Public Other CityFinancingGovernmental Debt ServiceAuthorityFunds ASSETS Cash and investments-$ -$ 15,942,871$ Receivables- - 525,716 Restricted cash and investments500,158 2,600,671 3,100,829 Total assets $ 2,600,671500,158$ 19,569,416$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities-$ 2,013$ 256,182$ Unearned revenue- - 188,746 Due to other funds- - 370,163 Deposits and other liabilities- - 13,303 Total liabilities 2,013- 828,394 Fund Balances: Restricted500,158 2,598,658 18,741,022 Total fund balances 2,598,658500,158 18,741,022 Total liabilities and fund balances $ 2,600,671500,158$ 19,569,416$ (Concluded) 148 This page intentionally left blank 149 City of Encinitas Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds For the Year Ended June 30, 2015 Special Revenue InfrastructureGrants and Development Lighting and ImprovementsHousingImpactLandscaping REVENUES: Taxes and assessments364,770$ 439,763$ -$ 1,971,418$ Intergovernmental4,638,189 810,041 759,918 - Development impact fees- - 1,379,140 - Use of money and property2,154 156,208 40,700 54,109 Other67,390 - - 71,962 Total revenues 1,406,0125,072,503 2,179,758 2,097,489 EXPENDITURES: Current: General government- 156,765 - - Public safety- 116,702 - - Public works229,530 448,663 - 1,969,577 Planning and building- 289,056 - - Parks and recreation- 136,018 - 308 Debt service: Principal- - - - Interest and fiscal charges- - - - Total expenditures 1,147,204229,530 - 1,969,885 REVENUES OVER (UNDER) EXPENDITURES 258,8084,842,973 2,179,758 127,604 OTHER FINANCING SOURCES (USES): Transfers in- 35,467 - 6,201 Transfers out(4,448,645) (290,163) (1,339,014) (18,859) Total other financing sources (uses) (254,696)(4,448,645) (1,339,014) (12,658) NET CHANGE IN FUND BALANCE S 4,112394,328 840,744 114,946 FUND BALANCES: Beginning of year848,135 2,445,524 8,267,908 2,726,509 End of year1,242,463$ 2,449,636$ 9,108,652$ 2,841,455$ 150 City of Encinitas Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds (Continued) For the Year Ended June 30, 2015 Debt Service Total Encinitas Public Other CityFinancingGovernmental Debt ServiceAuthorityFunds REVENUES: Taxes and assessments-$ -$ 2,775,951$ Intergovernmental- - 6,208,148 Development impact fees- - 1,379,140 Use of money and property185 37,397 290,753 Other -- 139,352 Total revenues 37,397185 10,793,344 EXPENDITURES: Current: General government- 2,500 159,265 Public safety- - 116,702 Public works- - 2,647,770 Planning and building- - 289,056 Parks and recreation 136,326- Debt service: Principal705,686 2,025,000 2,730,686 Interest and fiscal charges105,253 1,909,107 2,014,360 Total expenditures 3,936,607810,939 8,094,165 REVENUES OVER (UNDER) EXPENDITURES (3,899,210)(810,754) 2,699,179 OTHER FINANCING SOURCES (USES): Transfers in839,521 3,897,710 4,778,899 Transfers out- - (6,096,681) Total other financing sources (uses) 3,897,710839,521 (1,317,782) NET CHANGE IN FUND BALANCE S (1,500)28,767 1,381,397 FUND BALANCES: Beginning of year471,391 2,600,158 17,359,625 End of year500,158$ 2,598,658$ 18,741,022$ (Concluded) 151 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, 2015 FinalActualVariance with BudgetAmountsFinal Budget REVENUES: Taxes and assessments243,818$ 364,770$ 120,952$ Intergovernmental4,069,967 4,638,189 568,222 Use of money and property1,630 2,154 524 Other 67,390- 67,390 Total revenues 5,072,5034,315,415 757,088 EXPENDITURES: Current: Public works230,211 229,530 681 Total expenditures 229,530230,211 681 REVENUES OVER (UNDER) EXPENDITURES 4,842,9734,085,204 757,769 OTHER FINANCING SOURCES (USES): Transfers out(4,481,229) (4,448,645) 32,584 Total other financing sources (uses) (4,448,645)(4,481,229) 32,584 NET CHANGE IN FUND BALANCE $ 394,328(396,025) 790,353$ FUND BALANCE: Beginning of year 848,135 End of year$ 1,242,463 152 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, 2015 FinalActualVariance with BudgetAmountsFinal Budget REVENUES: Taxes and assessments425,895$ 439,763$ 13,868$ Intergovernmental1,211,890 810,041 (401,849) Use of money and property25,388 156,208 130,820 Total revenues 1,406,0121,663,173 (257,161) EXPENDITURES: Current: General government206,148 156,765 49,383 Public safety115,943 116,702 (759) Public works481,782 448,663 33,119 Planning and building713,985 289,056 424,929 Parks and recreation151,863 136,018 15,845 Total expenditures 1,147,2041,669,721 522,517 REVENUES OVER (UNDER) EXPENDITURES 258,808(6,548) 265,356 OTHER FINANCING SOURCES (USES) Transfers in46,539 35,467 11,072 Transfers (out)(577,720) (290,163) 287,557 Total other financing sources (uses) (254,696)(531,181) 298,629 NET CHANGE IN FUND BALANCE $ 4,112(537,729) 541,841$ FUND BALANCE: Beginning of year 2,445,524 End of year$ 2,449,636 153 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, 2015 FinalActualVariance with BudgetAmountsFinal Budget REVENUES: Intergovernmental1,340,000$ 759,918$ (580,082)$ Development impact fees958,851 1,379,140 420,289 Use of money and property24,397 40,700 16,303 Total revenues 2,179,7582,323,248 (143,490) REVENUES OVER (UNDER) EXPENDITURES 2,179,7582,323,248 (143,490) OTHER FINANCING SOURCES (USES) Transfers (out)(4,841,553) (1,339,014) 3,502,539 Total other financing sources (uses) (1,339,014)(4,841,553) 3,502,539 NET CHANGE IN FUND BALANCE $ 840,744(2,518,305) 3,359,049$ FUND BALANCE: Beginning of year 8,267,908 End of year$ 9,108,652 154 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, 2015 FinalActualVariance with BudgetAmountsFinal Budget REVENUES: Taxes and assessments1,883,788$ 1,971,418$ 87,630$ Use of money and property48,694 54,109 5,415 Other 71,9621,200 70,762 Total revenues 2,097,4891,933,682 163,807 EXPENDITURES: Current: Public works2,131,228 1,969,577 161,651 Parks and recreation400 308 92 Total expenditures 1,969,8852,131,628 161,743 REVENUES OVER (UNDER) EXPENDITURES 127,604(197,946) 325,550 OTHER FINANCING SOURCES (USES) Transfers in 6,2016,201 12,402 Transfers (out) (18,859)- (18,859) Total other financing sources (uses) (12,658)6,201 (6,457) NET CHANGE IN FUND BALANCE $ 114,946(191,745) 306,691$ FUND BALANCE: Beginning of year 2,726,509 End of year$ 2,841,455 155 This page intentionally left blank 156 Internal Service Funds InternalServiceFunds areusedtofinanceandaccountforspecialactivitiesandservicesperformedbya designated City department for other departments on a cost reimbursement basis. RiskManagement- Thisfundisusedtoaccountforthefinancingofgoodsorservicesprovidedbyone departmentoragencytootherdepartmentsoragenciesoftheCity,ortoothergovernments,onacost reimbursement basis for risk management expenditures. WastewaterSupport- Thisfundisusedtoaccountforthefinancingofgoodsorservicesprovidedby onedepartmentoragencytootherdepartmentsoragenciesoftheCity,ortoothergovernments,ona cost reimbursement basis for wastewater support expenditures. VehicleMaintenance- Thisfundisusedtoaccountforthefinancingofgoodsorservicesprovidedby onedepartmentoragencytootherdepartmentsoragenciesoftheCity,ortoothergovernments,ona cost reimbursement basis for vehicle maintenance expenditures. VehicleReplacement- Thisfundisusedtoaccountforthefinancingofgoodsorservicesprovidedby onedepartmentoragencytootherdepartmentsoragenciesoftheCity,ortoothergovernments,ona cost reimbursement basis for vehicle replacement expenditures. 157 City of Encinitas Combining Statement of Net Position All Internal Service Funds June 30, 2015 RiskWastewaterVehicleVehicle ManagementSupportMaintenanceReplacementTotal ASSETS Current assets: Cash and investments4,494,928$ 7,153$ 16,870$ 1,416,472$ 5,935,423$ Accounts receivable- - 587 - 587 Total current assets 7,1534,494,928 17,457 1,416,472 5,936,010 Noncurrent assets: Capital assets: Utility, plant, vehicles, and equipment, net- - - 3,505,511 3,505,511 Total noncurrent assets -- - 3,505,511 3,505,511 Total assets 7,1534,494,928 17,457 4,921,983 9,441,521 LIABILITIES Current liabilities: Accounts payable and accrued liabilities54,4617,15317,457136,626 215,697 Total current liabilities 7,15354,461 17,457 136,626 215,697 Total liabilities 7,15354,461 17,457 136,626 215,697 NET POSITION Unrestricted4,440,467 - - 4,785,357 9,225,824 Total net position $ -4,440,467$ -$ 4,785,357$ 9,225,824$ 158 City of Encinitas Combining Statement of Revenues, Expenses, and Changes in Net Position All Internal Service Funds For the Year Ended June 30, 2015 RiskWastewaterVehicleVehicle ManagementSupportMaintenanceReplacementTotal OPERATING REVENUES: Charges for services1,069,930$ -$ -$ -$ 1,069,930$ Contribution from users- - - - - Interfund revenues150,000 919,154 529,966 310,144 1,909,264 Other revenues160,942 262 1,152 9,529 171,885 Total operating revenues 919,4161,380,872 531,118 319,673 3,151,079 OPERATING EXPENSES: Operational support services419,665 235,169 184,471 - 839,305 Administrative support373,212 684,247 346,647 - 1,404,106 Insurance and claims892,029 - - - 892,029 Depreciation of capital assets- - - 487,057 487,057 Total operating expenses 919,4161,684,906 531,118 487,057 3,622,497 Operating income (loss) -(304,034) - (167,384) (471,418) NONOPERATING REVENUES: Gain (loss) on disposal of capital assets- - - 107,177 107,177 Total nonoperating revenues -- - 107,177 107,177 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS -(304,034) - (60,207) (364,241) Capital contributions- - - 2,953,681 2,953,681 Transfers in894,257 - - 64,998 959,255 Transfers out- - - - - Total capital contributions and transfers -894,257 - 3,018,679 3,912,936 Net increase (decrease) in net position -590,223 - 2,958,472 3,548,695 NET POSITION: Beginning of year3,850,244 - - 1,826,885 5,677,129 End of yea$ -4,440,467$ -$ 4,785,357$ 9,225,824$ r 159 City of Encinitas Combining Statement of Cash Flows All Internal Service Funds For the Year Ended June 30, 2015 RiskWastewaterVehicleVehicle ManagementSupportMaintenanceReplacementTotal CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from users1,380,872$ 919,416$ 530,590$ 319,673$ 3,150,551$ Payments to employees(792,877) (919,416) (531,118) - (2,243,411) Payments to suppliers and vendors(850,840) 1,241 9,065 136,626 (703,908) Net cash provided by (used in) operating activities 1,241(262,845) 8,537 456,299 203,232 CASHFLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets- - - (1,038,887) (1,038,887) Proceeds from sale of capital assets- - - 107,177 107,177 Net cash used in capital and related financing activities -- - (931,710) (931,710) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in894,257 - - 64,998 959,255 Net cash provided by noncapital financing activities -894,257 - 64,998 959,255 Net increase (decrease) in cash and cash equivalents 1,241631,412 8,537 (410,413) 230,777 CASH AND CASH EQUIVALENT: Beginning of year3,863,516 5,912 8,333 1,826,885 5,704,646 End of yea$ 7,1534,494,928$ 16,870$ 1,416,472$ 5,935,423$ r RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Operating (loss)(304,034)$ -$ -$ (167,384)$ (471,418)$ Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation- - - 487,057 487,057 Changes in operating assets and liabilities: Accounts receivable- - (528) - (528) Accounts payable and accrued liabilities41,189 1,241 9,065 136,626 188,121 Total adjustments41,189 1,241 8,537 136,626 187,593 Net cash provided by (used in) operating activitie$ 1,241(262,845)$ 8,537$ 456,299$ 203,232$ s NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Contribution of capital assets from governmental activities-$ -$ -$ 2,953,681$ 2,953,681$ 160 FIDUCIARY FUNDS AGENCY FUND TheAgencyFundsareusedtoaccountforassetsheldbytheCityinatrusteecapacityforindividuals,private organizations, other governments, and/or other funds. CommunityFacilitiesDistrict#1 -Thisfundaccountsforallmoneycollectedtopayfordebtserviceof theCommunityFacilitiesDistrict#1forwhichtheCityactsaspayingagentbuthasnolegalcommitment or obligation. RequezaStreetAssessmentDistrict#93-1 -Thisfundaccountsforallmoneycollectedtopayfordebt serviceoftheRequezaAssessmentDistrictforwhichtheCityactsaspayingagentbuthasnolegal commitment or obligation. 161 City of Encinitas Statement of Changes in Assets and Liabilities gency Fund As For the Year Ended June 30, 2015 BalanceBalance July 1, 2014AdditionsDeletionsJune 30, 2015 Community Facilities District #1 Assets: Cash and investments2,075,853$ 2,670,261$ (2,645,437)$ 2,100,677$ Restricted cash and investments: Held by fiscal agents1,975,492 2,596,942 (2,596,697) 1,975,737 Interest receivable- - - - Special assessments receivable31,110,000 - (1,355,000) 29,755,000 Current assessments receivable14,167 - (14,167) - Total assets $ 5,267,20335,175,512$ (6,611,301)$ 33,831,414$ Liabilities: Due to bondholders35,175,512$ 5,267,203$ (6,611,301)$ 33,831,414$ Total liabilities $ 5,267,20335,175,512$ (6,611,301)$ 33,831,414$ Requeza Street Assessment District No. 93-1 Assets: Cash and investments170,021$ 77,601$ (72,442)$ 175,180$ Special assessments receivable215,000 - (50,000) 165,000 Total assets $ 77,601385,021$ (122,442)$ 340,180$ Liabilities: Due to bondholders385,021$ 77,601$ (122,442)$ 340,180$ Total liabilities $ 77,601385,021$ (122,442)$ 340,180$ Total - All Agency Funds Assets: Cash and investments2,245,874$ 2,747,862$ (2,717,879)$ 2,275,857$ Restricted cash and investments: Held by fiscal agents1,975,492 2,596,942 (2,596,697) 1,975,737 Interest receivable- - - - Special assessments receivable31,325,000 - (1,405,000) 29,920,000 Current assessments receivable14,167 - (14,167) - Total assets $ 5,344,80435,560,533$ (6,733,743)$ 34,171,594$ Liabilities: Due to bondholders35,560,533$ 5,344,804$ (6,733,743)$ 34,171,594$ Total liabilities $ 5,344,80435,560,533$ (6,733,743)$ 34,171,594$ 162 STATISTICAL SECTION City of Encinitas 505 South Vulcan Avenue Encinitas CA 92024 760-633-2600 www.encinitasca.gov 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. ContentsPage 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. 1Net Position by Component164 2Changes in Net Position for Governmental Activities166 3Fund Balances, Governmental Funds170 4Changes in Fund Balances, Governmental Funds172 Revenue Capacity - These schedules contain information to help the reader assess the City's most significant local revenue source which is property tax. 5Assessed Value of Taxable Property, General Property Tax174 6Principal Secured Property Tax Payers, General Property Tax175 7General Property Tax Levies and Collections176 8Direct and Overlapping Property Tax Ratios, General Property Tax178 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. 9Ratios of Outstanding Debt by Type182 10Ratios of General Bonded Debt Outstanding184 11Schedule of Direct and Overlapping Debt185 12Legal Debt Margin Information186 13Historical Debt Service Coverage188 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. 14Demographic and Economic Statistics189 15Taxable Sales by Business Type190 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. 16Full-time and Part-Time City Employees by Function191 17Operating Indicators by Function192 18Capital Asset Statistics by Function193 19Cardiff Sanitary Division - Summary of Operational Data195 20San Dieguito Water District - Summary of Operational Data199 Sources: Unless otherwise noted, the information in these schedules was derived from the comprehensive annual financial reports for the relevant year. 163 City of Encinitas Net Position by Components Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year 20062007200820092010 Government activities: Net investment in capital assets110,362,657$ 120,651,504$ 125,786,039$ 131,703,037$ 130,912,728$ Restricted6,011,1876,264,4315,207,7614,340,0904,219,623 Unrestricted51,646,42452,721,70556,901,87153,452,96754,755,944 Total Governmental activities net assets168,020,268$ 179,637,640$ 187,895,671$ 189,496,094$ 189,888,295$ Business-type activities: Net investment in capital assets26,265,471 1,806,768 19,204,679 19,422,684 25,014,811 Restricted1,815,913$ 18,865,708$ 1,814,716$ 1,048,426$ -$ Unrestricted47,263,91960,256,62565,301,72968,683,79971,916,135 Total business-type activities net assets75,345,303$ 80,929,101$ 86,321,124$ 89,154,909$ 96,930,946$ Primary government: Net investment in capital assets136,628,128$ 122,458,272$ 144,990,718$ 151,125,721$ 155,927,539$ Restricted7,827,10025,130,1397,022,4775,388,5164,219,623 Unrestricted98,910,343112,978,330122,203,600122,136,766126,672,079 Total primary government net position243,365,571$ 260,566,741$ 274,216,795$ 278,651,003$ 286,819,241$ 164 Source: City of Encinitas Finance Department City of Encinitas Net Position by Components Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 20112012201320142015 Government activities: Net investment in capital assets139,575,875$ 153,516,469$ 157,395,370$ 161,902,991$ 157,304,041$ Restricted- - 9,980,695 17,363,70421,750,291 Unrestricted56,799,90243,857,63437,646,55138,446,8806,220,629 Total Governmental activities net assets196,375,777$ 197,374,103$ 205,022,616$ 217,713,575$ 185,274,961$ Business-type activities: Net investment in capital assets30,076,172 25,155,766 32,247,941 54,362,661 63,998,339 Restricted-$ -$ -$ 1,039,739$ -$ Unrestricted72,608,845 83,232,015 79,816,600 62,426,804 51,589,427 Total business-type activities net assets102,685,017$ 108,387,781$ 112,064,541$ 117,829,204$ 115,587,766$ Primary government: Net investment in capital assets169,652,047$ 178,672,235$ 189,643,311$ 216,265,652$ 221,302,380$ Restricted- - 9,980,695 18,403,44321,750,291 Unrestricted129,408,747127,089,649117,463,151100,873,68457,810,056 Total primary government net position299,060,794$ 305,761,884$ 317,087,157$ 335,542,779$ 300,862,727$ 165 Source: City of Encinitas Finance Department City of Encinitas Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year 20062007200820092010 Expenses: Government activities: General government11,026,711$ 11,858,189$ 12,783,573$ 14,249,545$ 12,132,268$ Public safety20,244,227 20,783,243 21,015,336 22,039,493 22,269,616 Public works6,783,035 6,728,553 11,595,020 9,360,563 9,520,416 Planning and building4,819,265 4,892,201 5,287,058 4,833,543 5,599,614 Engineering services2,890,832 3,078,645 3,972,242 4,010,485 3,873,432 Parks and recreation5,132,178 5,318,816 6,594,001 6,902,715 6,518,623 Interest and fiscal charges on long-term debt1,511,337 1,978,163 2,261,104 2,266,817 2,296,422 Total governmental activities expenses52,407,585 54,637,810 63,508,334 63,663,161 62,210,391 Business-type activities: Cardiff Sanitary Division3,278,916 2,948,112 2,985,912 2,854,368 3,569,880 San Dieguito Water District10,826,162 11,712,887 11,894,734 12,955,085 11,633,694 Encinitas Sanitary Division1,332,980 1,357,343 1,823,088 1,805,624 1,855,278 Affordable Housing3,028,297 1,405,094 242,553 260,130 256,873 Recreation Programs- - - - - Total business-type activities expenses18,466,355 17,423,436 16,946,287 17,875,207 17,315,725 Total primary government expenses70,873,940 72,061,246 80,454,621 81,538,368 79,526,116 Program revenues: Government activities: Charges for services: General government1,701,854 2,248,666 2,895,795 1,608,273 1,962,344 1,127,923 1,006,293 103,641 105,799 Public safety836,439 Public Works- - - 19,276 668 Planning and building1,896,751 2,341,988 2,284,066 1,539,851 1,521,889 Engineering services839,176 1,430,282 1,655,539 759,885 660,734 Parks and recreation907,974 928,810 1,224,923 810,667 1,126,285 Operating grants and contributions5,299,476 5,086,623 5,736,957 4,838,455 5,392,117 Capital grants and contributions5,638,059 4,372,149 2,699,027 3,613,636 3,437,302 Total governmental activities program revenues17,119,729 17,536,441 17,502,600 13,293,684 14,207,138 Business-type activities: Charges for services: Cardiff Sanitary Division4,939,158 4,826,970 4,926,104 5,009,340 4,979,238 San Dieguito Water District9,515,054 10,961,760 11,283,219 11,379,337 11,046,650 Encinitas Sanitary Division2,557,690 2,556,281 2,685,490 2,811,359 2,816,963 Affordable Housing105,559 - - 222,507 202,499 Recreation Programs- - - - - Operating grants and contributions- - - - - Capital grants and contributions380,593 277,210 746,586 299,326 231,362 Total business-type activities program revenues17,498,054 18,622,221 19,641,399 19,721,869 19,276,712 33,483,850 Total primary government program revenues34,617,783 36,158,662 37,143,999 33,015,553 Governmental activities(35,287,856) (37,101,369) (46,005,734) (50,369,477) (48,003,253) Business-type activities(968,301) 1,198,785 2,695,112 1,846,662 1,960,987 Total net revenue (expense)(36,256,157)$ (35,902,584)$ (43,310,622)$ (48,522,815)$ (46,042,266)$ 166 Source: City of Encinitas Finance Department City of Encinitas Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 20112012201320142015 Expenses: Government activities: General government10,912,556$ 12,064,527$ 10,616,440$ 9,549,338$ 10,810,882$ Public safety22,324,624 23,062,746 24,629,613 25,146,843 25,762,703 Public works10,981,355 8,560,330 10,851,147 10,239,746 11,565,315 Planning and building5,539,148 5,008,179 4,353,831 5,853,995 6,550,992 Engineering services3,646,306 5,817,932 3,813,678 3,988,720 6,253,352 Parks and recreation6,243,769 5,578,716 5,542,550 4,735,864 5,205,986 Interest and fiscal charges on long-term debt2,029,477 1,811,714 1,932,904 1,913,349 2,311,944 Total governmental activities expenses61,677,235 61,904,144 61,740,163 61,427,855 68,461,174 Business-type activities: Cardiff Sanitary Division3,715,529 3,385,439 3,373,704 2,922,446 4,262,565 San Dieguito Water District11,622,126 12,448,911 12,200,431 13,552,862 15,005,767 Encinitas Sanitary Division1,992,334 1,719,176 1,983,786 2,438,692 1,731,770 Affordable Housing244,748 1,492,811 1,499,863 1,405,225 1,408,226 Recreation Programs- 1,187,788 1,153,840 1,300,555 1,331,565 Total business-type activities expenses17,574,737 20,234,125 20,211,624 21,619,780 23,739,893 Total primary government expenses79,251,972 82,138,269 81,951,787 83,047,635 92,201,067 Program revenues: Government activities: Charges for services: General government2,453,152 1,789,943 1,775,756 1,800,630 1,629,857 99,047 91,495 202,220 160,178 Public safety98,202 Public Works- - - - 759,918 Planning and building1,816,765 2,155,076 1,894,785 2,874,894 2,737,225 Engineering services1,063,822 736,786 955,986 1,075,885 1,055,311 Parks and recreation1,149,350 14,580 39,946 35,791 46,846 Operating grants and contributions6,964,053 5,896,502 3,759,864 4,345,931 3,878,422 Capital grants and contributions4,854,393 3,626,279 6,462,979 8,756,281 4,126,194 Total governmental activities program revenues18,399,737 14,318,213 14,980,811 19,091,632 14,393,951 Business-type activities: Charges for services: Cardiff Sanitary Division4,830,204 4,970,662 4,755,573 4,605,867 4,528,551 San Dieguito Water District12,438,502 12,922,922 13,687,156 15,297,718 14,785,858 Encinitas Sanitary Division2,895,879 2,897,592 2,933,319 2,879,605 2,841,235 Affordable Housing216,723 214,503 214,115 216,728 247,349 Recreation Programs- 1,273,007 1,059,009 1,269,179 1,321,471 Operating grants and contributions- 1,105,851 1,103,639 994,607 1,061,698 Capital grants and contributions712,827 460,688 1,003,057 1,066,769 483,425 Total business-type activities program revenues21,094,135 23,845,225 24,755,868 26,330,473 25,269,587 39,663,538 Total primary government program revenues39,493,872 38,163,438 39,736,679 45,422,105 Governmental activities(43,277,498) (47,585,931) (46,759,352) (42,336,223) (54,067,223) Business-type activities3,519,398 3,611,100 4,544,244 4,710,693 1,529,694 Total net revenue (expense)(39,758,100)$ (43,974,831)$ (42,215,108)$ (37,625,530)$ (52,537,529)$ 167 Source: City of Encinitas Finance Department City of Encinitas Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 20062007200820092010 General Revenues and Other Changes in Net Position: Governmental activities: Taxes Property taxes and transfer fees29,290,854$ 32,593,979$ 33,858,150$ 35,064,401$ 32,285,155$ Sales taxes8,807,630 9,043,912 8,130,837 7,340,410 8,780,203 Transient occupancy taxes1,094,994 1,089,065 1,182,816 1,099,817 1,179,789 Franchise taxes1,951,637 2,011,947 2,212,915 2,162,729 2,031,924 Intergovernmental revenues569,757 753,722 1,335,594 1,866,726 794,362 Use of money and property2,670,990 3,957,869 3,842,268 2,884,233 1,085,981 Other general revenues554,750 502,115 568,884 1,551,584 2,238,041 Gain/(Loss) on sale of assets(32,510) (5,682) - - - Transfers(1,266,792) (1,227,186) - - - Total governmental activities43,641,310 48,719,741 51,131,464 51,969,900 48,395,455 Business-type activities: Property taxes228,881 651,195 690,407 721,628 718,212 Intergovernmental-unrestricted- 893,500 - - - Use of money and property1,550,626 1,374,862 1,756,153 974,702 395,152 Other general revenues138,052 238,270 250,351 45,193 228,614 Gain/(Loss) on sale of assets- - - - - Transfers1,266,792 1,227,186 - - - Total business-type activities3,184,351 4,385,013 2,696,911 1,741,523 1,341,978 Total primary government46,825,661 53,104,754 53,828,375 53,711,423 49,737,433 Changes in Net Position Government activities8,353,454 11,618,372 5,125,730 1,600,423 392,202 Business-type activities2,216,050 5,583,798 5,392,023 3,588,185 3,302,965 Total primary government10,569,504$ 17,202,170$ 10,517,753$ 5,188,608$ 3,695,167$ The City reports Recreation Programs as a business-type activity starting in Fiscal Year 2012. 168 Source: City of Encinitas Finance Department City of Encinitas Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) (Continued) Fiscal Year 20112012201320142015 General Revenues and Other Changes in Net Position: Governmental activities: Taxes Property taxes and transfer fees32,292,988$ 32,788,129$ 34,974,578$ 36,414,507$ 38,508,558$ Sales taxes10,244,506 10,613,188 11,585,145 12,067,360 12,569,119 Transient occupancy taxes1,276,980 1,413,926 1,491,998 1,570,459 1,828,116 Franchise taxes2,108,420 2,144,162 2,323,616 2,614,844 2,761,335 Intergovernmental revenues1,488,770 635,097 541,079 479,026 814,337 Use of money and property657,796 387,066 552,512 705,849 880,989 Other general revenues1,695,520 1,780,543 1,596,026 1,257,002 1,567,168 Gain/(Loss) on sale of assets- - - (48,320) 107,177 Transfers- (668,877) 1,809,656 (33,545) (36,068) Total governmental activities49,764,980 49,093,234 54,874,610 55,027,182 59,000,731 Business-type activities: Property taxes706,175 725,551 749,378 787,242 834,994 Intergovernmental-unrestricted- - 189,676 -- Use of money and property508,089 188,259 3,118 357,357 (60,169) Other general revenues401,013 - - 63,768 63,768 Gain/(Loss) on sale of assets- - - (187,942) 18,085 Transfers- 668,877 (1,809,656) 33,545 36,068 Total business-type activities1,615,277 1,582,687 (867,484) 1,053,970 892,746 Total primary government51,380,257 50,675,921 54,007,126 56,081,152 59,893,477 Changes in Net Position Government activities6,487,482 1,507,303 8,115,258 12,690,959 4,933,508 Business-type activities5,134,675 5,193,787 3,676,760 5,764,663 2,422,440 Total primary government11,622,157$ 6,701,090$ 11,792,018$ 18,455,622$ 7,355,948$ The City reports Recreation Programs as a business-type activity starting in Fiscal Year 2012. 169 Source: City of Encinitas Finance Department City of Encinitas Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year 20062007200820092010 General fund: Reserved4,092,489$ 15,196,796$ 6,210,167$ 5,255,137$ 4,286,026$ Unreserved, designated- - 35,790,162 38,413,388 36,913,369 Unreserved, undesignated36,866,82836,488,8939,126,8043,866,7595,789,899 Nonspendable- - - - - Restricted- - - - - Committed- - - - - Assigned- - - - - Unassigned- - - - - Total general fund40,959,317$ 51,685,689$ 51,127,133$ 47,535,284$ 46,989,294$ ll other governmental funds: A Reserved3,525,818$ 4,176,025$ 3,908,007$ 3,771,850$ 3,408,409$ Unreserved, designated14,605,15316,909,26110,968,34210,694,60510,430,543 Unreserved, undesignated- - - - - Nonspendable- - - - - Restricted- - - - - Committed- - - - - Assigned- - - - - Unassigned- - - - - Total all other governmental funds18,130,971$ 21,085,286$ 14,876,349$ 14,466,455$ 13,838,952$ Total all governmental funds59,090,288$ 72,770,975$ 66,003,482$ 62,001,739$ 60,828,246$ (1) GASB 54, which requires changes in reporting categories for fund balances was implemented in Fiscal Year 2010-2011. 170 Source: City of Encinitas Finance Department City of Encinitas Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) (Continued) Fiscal Year 20112012201320142015 General fund: Reserved--$ -$ -$ -$ Unreserved, designated-- - - - Unreserved, undesignated-- - - - Nonspendable2,648,338 2,868,533 1,980,075 2,052,250 1,535,601 Restricted633,245 - 7,996,400 4,079 3,009,269 Committed42,274,327 19,371,624 9,847,719 8,136,886 8,266,796 Assigned- - 561,762 561,762 561,762 Unassigned1,850,582 17,964,935 21,160,822 25,151,131 28,029,019 Total general fund47,406,492$ 40,205,092$ 41,546,778$ 35,906,108$ 41,402,447$ ll other governmental funds: A Reserved-$ -$ -$ -$ -$ Unreserved, designated- - - - - Unreserved, undesignated- - - - - Nonspendable145,686 - - 1,565 - Restricted8,290,163 13,471,421 13,036,985 17,358,060 18,741,022 Committed7,570,021 - - - - Assigned- 2,169,209 2,135,100 - - Unassigned- - - - - Total all other governmental funds16,005,870$ 15,640,630$ 15,172,085$ 17,359,625$ 18,741,022$ Total all governmental funds63,412,362$ 55,845,722$ 56,718,863$ 53,265,733$ 60,143,469$ (1) (1) GASB 54, which requires changes in reporting categories for fund balances was implemented in Fiscal Year 2010-2011. 171 Source: City of Encinitas Finance Department City of Encinitas Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year 20062007200820092010 Revenues: Taxes and assessments44,026,335$ 46,922,540$ 47,483,312$ 47,800,573$ 46,805,219$ Intergovernmental6,464,1295,596,2245,999,6805,950,2056,917,521 Charges for services6,642,8558,022,0539,293,3036,621,9315,164,315 Fines, forfeitures, and penalties832,570949,606884,446746,023761,202 Use of money and property2,586,2863,943,5123,851,8772,008,5571,085,981 Other1,423,4604,679,3511,227,0551,110,3252,875,491 Total Revenues61,975,63570,113,28668,739,67364,237,61463,609,729 Expenditures: Current: General government9,378,7999,601,08911,903,55713,036,81511,859,415 Public safety19,948,90920,674,99220,896,88221,636,96922,049,239 Public works4,768,2264,679,7955,432,0326,033,5135,888,161 Planning and building4,819,2654,892,2015,287,0584,811,0205,599,614 Engineering services2,890,8323,078,6453,972,2423,986,8593,873,432 Parks and recreation5,132,1785,318,8165,585,4465,811,7785,482,578 Capital outlay11,215,69923,383,30220,704,6288,473,3965,606,327 Debt service: Principal1,450,4041,499,0321,581,0332,197,8912,091,882 Interest and fiscal charges1,512,7121,780,6512,244,2882,251,1162,332,574 Bond issuance costs- - - - - Total expenditures61,117,02474,908,52377,607,16668,239,35764,783,222 Excess (deficiency) of revenues over (under) expenditures858,611(4,795,237)(8,867,493)(4,001,743)(1,173,493) Other Financing Sources (Uses): Transfer in from CFD debt service- - - - - Operating transfers in13,552,28023,774,35225,007,57812,631,19711,066,120 Operating transfers out(14,819,072)(24,998,428)(25,007,578)(12,631,197)(11,066,120) Proceeds from capital lease- - - - - Issuance of debt- 20,000,000 2,100,000 0- Premium on debt- - - - - Bond discounts- (300,000) 0- - Total other financing sources (uses)(1,266,792)18,475,9242,100,0000- Net change in fund balances(408,181)$ 13,680,687$ (6,767,493)$ (4,001,743)$ (1,173,493)$ Debt service as a percentage of noncapital expenditures6.3%6.8%7.2%8.0%8.1% 172 Source: City of Encinitas Finance Department City of Encinitas Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) (Continued) Fiscal Year 20112012201320142015 Revenues: Taxes and assessments48,100,768$ 49,089,142$ 51,528,542$ 53,830,193$ 56,825,628$ Intergovernmental8,369,5716,537,8558,520,2205,025,4807,022,485 Charges for services6,376,2614,406,7374,450,7565,479,8475,315,721 Fines, forfeitures, and penalties856,392657,364611,029632,776802,936 Use of money and property657,798639,676572,481724,310899,807 Other3,803,9272,715,2662,141,4393,654,6212,456,996 Total Revenues68,164,71764,046,04067,824,46769,347,22773,323,573 Expenditures: Current: General government10,155,7329,277,4439,430,4879,109,4129,362,214 Public safety22,107,69222,853,12123,655,36724,164,97924,902,920 Public works6,051,2535,843,2286,057,6466,281,8006,682,424 Planning and building5,539,1484,655,5014,238,8824,716,3155,082,589 Engineering services3,646,3063,804,8133,716,9943,949,3524,162,630 Parks and recreation5,293,6644,333,3034,377,0474,672,6835,091,224 Capital outlay8,559,19312,803,37918,836,00614,548,89418,440,036 Debt service: Principal2,481,2232,359,9322,295,6142,661,9762,730,686 Interest and fiscal charges2,056,5011,872,7732,050,0681,937,1442,170,164 Bond issuance costs395,404 0- - - Total expenditures66,286,11667,803,49374,658,11172,042,55578,624,887 Excess (deficiency) of revenues over (under) expenditures1,878,601(3,757,453)(6,833,644)(2,695,328)(5,301,314) Other Financing Sources (Uses): Transfer in from CFD debt service- - - - - Operating transfers in13,133,22417,661,94623,363,24020,570,96624,514,293 Operating transfers out(13,133,224)(18,354,656)(24,208,239)(21,328,768)(25,509,616) Proceeds from capital lease- 599,639 555,384 -- Issuance of debt19,530,000 - 7,865,000 -13,174,373 Premium on debt215,515 - 131,400 -- Bond discounts(19,040,000) - - - - Total other financing sources (uses)705,515 (93,071)7,706,784(757,802)12,179,050 Net change in fund balances2,584,116$ (3,850,524)$ 873,140$ (3,453,130)$ 6,877,736$ Debt service as a percentage of noncapital expenditures8.6%8.3%8.4%8.7%8.9% 173 Source: City of Encinitas Finance Department City of Encinitas Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (In thousands of dollars) Total Net Taxable Fiscal YearResidentialCommercialIndustrialll OtherAssessedTotal Direct A Ended June 30PropertyPropertyPropertyProperty (1)Value (2)Tax Rate % (3) 20067,981,763 759,967 32,074 377,592 9,151,396 0.23140% 20078,729,334 831,148 32,714 425,261 10,018,457 0.23182% 20089,342,260 875,958 33,263 435,672 10,687,153 0.23229% 20099,800,179 969,642 35,427 451,831 11,257,079 0.23278% 20109,774,056 1,063,161 36,255 464,096 11,337,568 0.23338% 20119,767,731 1,110,811 36,036 427,619 11,342,197 0.23472% 20129,886,681 1,154,923 34,944 421,308 11,497,856 0.23866% 201310,030,357 1,247,785 37,766 408,020 11,723,928 0.23974% 201410,393,910 1,300,287 39,501 413,663 12,147,361 0.24570% 201511,073,358 1,323,412 39,665 433,569 12,870,004 0.24534% TaxableAssessedValue $12,000,000 $10,000,000 $8,000,000 Residential $6,000,000 Commercial $4,000,000 Industrial $2,000,000 $0 2006200720082009201020112012201320142015 FiscalYear (1) All Other Property includes the following categories: dry farm, institutional, irrigated, recreational, vacant land , SBC nonunitary, possessory interest, unsecured, and unknown. (2) The "total net taxable assessed value" is net of tax-exempt property. Homeowners exemptions are not included in the totals shown.. (3) The total direct tax rate is the city's proportionate share of Proposition 13 property taxes collected within the tax area . Source: San Diego County Assessor 2014/15 Combined Tax Rolls The Hdl Companies 174 City of Encinitas Principal Property Taxpayers Current Fiscal Year and Nine Years Ago 20152006 Taxable% of Total Taxable% of Total AssessedCity AssessedAssessedCity Assessed Secured ValueRankSecure ValueSecured ValueRankSecure Value Taxpayer TRC Encinitas Village94,751,723$ 10.75% Collwood Pines Apartments LP65,993,312 20.52% Belmont Village Tenant LLC 55,191,737 30.43% Encinitas Town Center Associates LLC 35,858,895 40.28%38,321,264$ 10.43% SSL Landlord LLC34,862,180 50.27% NCHC 3 LLC34,068,015 60.27%19,384,563 90.22% Weingarten Nostat Inc33,420,431 70.26% PK III Encinitas Marketplace LP 31,560,000 80.25% Scripps Health 30,864,771 90.24% ASN Encinitas LLC27,665,031 100.22% Home Depot USA Inc.26,079,103 20.29% Vons Companies Inc.19,624,684 70.22% Urschel Holdings LP20,638,511 80.23% Quail Pointe Apartments LP 17,165,075 100.19% Enrique Apartment Company 26,307,560 30.29% WRI El Camino LP 40.28%25,058,340 North Coast Business Park 23,661,924 50.26% Encinitas Plaza LLC23,489,223 60.26% $ 3.49%239,730,247444,236,095$ 2.66% 175 Source: HdL Coren Cone City of Encinitas Property Tax Levies and Collections Last Ten Fiscal Years (1)Collected within the FiscalTaxes LeviedFiscal Year of Lev y Year Endedfor thePercent June 30Fiscal YeaAmountof Levy r 200624,285,772 23,360,483 96.19% 200725,857,065 24,741,077 95.68% 200826,950,803 25,584,630 94.93% 200927,441,558 26,326,996 95.94% 201027,421,386 26,490,783 96.61% 201127,541,487 26,888,921 97.63% 201228,100,611 27,540,858 98.01% 201329,207,237 28,712,036 98.30% 201430,550,301 30,009,574 98.23% 201532,251,814 31,755,994 98.46% (1) City of Encinitas General Fund 176 Source: San Diego County Assessor Combined Tax Rolls This page intentionally left blank 177 City of Encinitas Direct and Overlapping Property Tax Rates Last Ten Fiscal Years Fiscal Year 20062007200820092010 %%%%% City of Encinitas Basic Rate 0.231400.231820.232290.232780.23338 City of Encinitas Direct Rate (1)0.231400.231820.232290.232780.23338 Overlapping Rates: (2) City of Encinitas0.266410.266410.266410.266480.26648 Encinitas Landscape & Lighting District0.015960.015960.015960.015960.01596 Autistic Pupils Monors Elem0.000090.000090.000090.000090.00009 Autistic Pupils Monors High0.000090.000090.000090.000090.00009 Cardiff Elementary0.262380.262370.262370.262400.26240 Children's Institutions Tuition0.001460.001460.001460.001460.00146 County General0.082640.082640.082640.075700.07570 County Library0.012980.012980.012980.019950.01995 County School Service0.006870.006870.006870.006870.00687 County School Service-Capital Outlay0.001730.001730.001730.001730.00173 County Service Area No. 170.002910.002910.002910.002910.00291 CWA San Dieguito Water District0.003440.003440.003440.003440.00344 Development Centers for Handicapped Elem0.000430.000430.000430.000430.00043 Development Centers for Handicapped High0.000440.000440.000440.000440.00044 Educable Mentally retarded Minors0.001960.001960.001960.001960.00196 Educational Revenue Augmentation Fund0.085740.085740.085740.085700.08570 Mira Costa community College0.085940.085940.085940.085900.08590 Physically Handicapped Minors Elem0.003030.003030.003030.003030.00303 Physically Handicapped Minors High0.003040.003040.003040.003040.00304 Regional Occupational Centers0.004380.004380.004380.004380.00438 San Dieguito Union High0.144040.144050.144050.144000.14400 San Dieguito Water District0.009920.009920.009920.009920.00992 Trainable Mentally Retarded Minors Elem0.001970.001970.001970.001970.00197 Trainable Mentally Retarded Minors High0.001980.001980.001980.001980.00198 Vista Project (19/85701)0.000170.000170.000170.000170.00017 Total Prop 13 Rate (3)1.000001.000001.000001.000001.00000 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 2005/2006 through 2014/2015 Tax Increment Table 178 The Hdl Companies City of Encinitas Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (Continued) Fiscal Year 20112012201320142015 %%%%% City of Encinitas Basic Rate 0.234720.238660.239740.240020.24534 City of Encinitas Direct Rate (1)0.234720.238660.239740.240020.24534 Overlapping Rates: (2) City of Encinitas0.266480.240200.240200.240200.24020 Encinitas Landscape & Lighting District0.015960.021000.021000.021000.02100 Autistic Pupils Monors Elem0.000090.000000.000000.000000.00000 Autistic Pupils Monors High0.000090.000000.000000.000000.00000 Cardiff Elementary0.262400.248700.248700.248700.24870 Children's Institutions Tuition0.001460.001070.001070.001070.00107 County General0.075700.080200.080200.080200.08020 County Library0.019950.019690.019690.019690.01969 County School Service0.006870.006430.006430.006430.00643 County School Service-Capital Outlay0.001730.001610.001610.001610.00161 County Service Area No. 170.002910.002510.002510.002510.00251 CWA San Dieguito Water District0.003440.025100.025100.025100.02510 Development Centers for Handicapped Elem0.000430.000000.000000.000000.00000 Development Centers for Handicapped High0.000440.000000.000000.000000.00000 Educable Mentally retarded Minors0.001960.001610.001610.001610.00161 Educational Revenue Augmentation Fund0.085700.086200.086200.086200.08620 Mira Costa Community College0.085900.081500.081500.081500.08150 Physically Handicapped Minors Elem0.003030.002680.002680.002680.00268 Physically Handicapped Minors High0.003040.002680.002680.002680.00268 Regional Occupational Centers0.004380.003750.003750.003750.00375 San Dieguito Union High0.144000.136100.136100.136100.13610 San Dieguito Water District0.009920.035900.035900.035900.03590 Trainable Mentally Retarded Minors Elem0.001970.001610.001610.001610.00161 Trainable Mentally Retarded Minors High0.001980.001610.001610.001610.00161 Vista Project (19/85701)0.000170.000000.000000.000000.00000 Total Prop 13 Rate (3)1.000001.000001.000001.000001.00000 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 2005/2006 through 2014/2015 Tax Increment Table 179 The Hdl Companies City of Encinitas Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (Continued) Fiscal Year 20062007200820092010 %%%%% Gen Bond Cardiff 2000A0.03409 0.03508 0.03306 0.03212 0.03518 d -- - - - Gen Bond Cardiff 2000 Election, 2010 Ref. Bon MWD D/S Remainder of SDCWA 15019990.00520 0.00470 0.00450 0.00430 0.00430 Total Voter Approved Rate0.03929 0.03978 0.03756 0.03642 0.03948 Total Tax Rate1.03929 1.03978 1.03756 1.03642 1.03948 Source: San Diego County Assessor 2005/2006 through 2014/2015 Tax Increment Table 180 The Hdl Companies City of Encinitas Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (Continued) 20112012201320142015 %%%%% Gen Bond Cardiff 2000A-- - - - d 0.034890.03715 0.03458 0.03386 - Gen Bond Cardiff 2000 Election, 2010 Ref. Bon MWD D/S Remainder of SDCWA 15019990.00370 0.00370 0.00350 0.00350 0.00350 Total Voter Approved Rate0.04085 0.03859 0.03808 0.03736 0.00350 Total Tax Rate1.04085 1.03859 1.03808 1.03736 1.00350 Source: San Diego County Assessor 2005/2006 through 2014/2015 Tax Increment Table 181 The Hdl Companies City of Encinitas Ratios of Outstanding Debt by Typ e Last Ten Fiscal Years Governmental Activities Fiscal Year EndedTotal Governmental June 30Bonded DebtCapital LeasesActivities 200631,105,000 559,048 31,664,048 200749,410,000 696,373 50,106,373 200847,960,000 2,670,340 (3)50,630,340 200946,005,000 2,432,449 48,437,449 201044,165,000 2,185,567 46,350,567 201142,705,000 3,036,900 45,741,900 201240,700,000 3,281,606 43,981,606 201346,660,000 3,446,376 50,106,376 201444,480,000 2,964,400 47,444,400 201555,660,000 2,513,713 58,173,713 (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 Cit y population shown on the Demographic and Economic statistics page. (3) During 2008, the City borrowed $2.1 million to partially fund major improvements to th e Encinitas Civic Center under a capital lease arrangement with a financial institution. 182 Source: City of Encinitas Finance Department City of Encinitas Ratios of Outstanding Debt by Typ e Last Ten Fiscal Years (Continued) Business-type Activities Fiscal Year EndedWater Bonds CSD Note EHA Note Total Business-Total Primary Debt Per June 30and NotesPayablePayabletype ActivitiesGovernmentCapita (2) 200620,815,000 7,500,000 1,825,255 30,140,255 61,804,303 984 200720,030,000 7,085,000 1,786,769 28,901,769 79,298,142 1254 200819,340,000 6,660,000 1,723,832 27,723,832 78,354,172 1227 200918,440,000 6,220,000 1,681,534 26,341,534 74,778,983 1258 201017,545,000 5,770,000 1,638,817 24,953,817 71,304,384 1190 201116,620,000 5,300,000 1,591,681 23,511,681 69,253,581 1148 201215,660,000 4,316,361 1,544,434 21,520,795 65,502,401 1085 201314,670,000 3,769,821 1,495,415 19,935,236 70,041,612 1156 201413,645,000 3,206,785 1,444,731 18,296,516 65,740,916 1074 201511,000,000 2,627,418 1,391,715 15,019,133 73,192,846 1196 (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 Cit y population shown on the Demographic and Economic statistics page. (3) During 2008, the City borrowed $2.1 million to partially fund major improvements to th e Encinitas Civic Center under a capital lease arrangement with a financial institution. 183 Source: City of Encinitas Finance Department City of Encinitas Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Outstanding General Bonded Debt FiscalCertificates of ParticipationPercentage ssessedof AssessedPe Year EndedandAr June 30Lease Revenue BondsValuation (1)ValueCapita 200631,105,000$ 9,151,396,000$ 0.34%495 200749,410,000$ 10,018,457,000$ 0.49%781 200847,960,000$ 10,687,153,000$ 0.45%751 200946,005,000$ 11,257,079,000$ 0.41%774 201044,165,000$ 11,337,568,000$ 0.39%741 201142,705,000$ 11,342,197,000$ 0.38%713 201240,700,000$ 11,497,857,000$ 0.35%674 201346,660,000$ 11,725,285,000$ 0.40%770 201444,480,000$ 12,147,361,000$ 0.37%727 201555,660,000$ 12,870,003,660$ 0.43%905 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 184 San Diego County Assessor Combined Tax Rolls City of Encinitas Schedule of Direct and Overlapping Bonded Debt June 30, 2015 2014-15 Assessed Valuation:$12,871,872,103City's Share of Total DebtApplicableOverlapping Debt 6/30/15 % (1)6/30/15 OVERLAPPING TAX AND ASSESSMENT DEBT: Metropolitan Water District110,420,000$ 0.556%613,935$ Cardiff School District5,235,198 100%5,235,198 Encinitas Union School District31,328,506 67.213%21,056,829 San Dieguito Union High School266,795,000 24.425%65,164,679 San Dieguito Union High School District Community Facilities Districts35,347,002 1.840-100.00%11,157,242 City of Encinitas Community Facilities District No. 129,755,000 100%29,755,000 City of Encinitas 1915 Act Bonds165,000 100%165,000 Olivenhain Municipal Water District, Assessment District No. 96-113,270,000 29.886%3,965,872 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT137,113,755$ DIRECT AND OVERLAPPING GENERAL FUND DEBT San Diego County General Fund Obligations351,670,000$ 3.071%10,799,786$ San Diego County Pension Obligations682,615,180 3.071%20,963,112 San Diego County Superintendent of Schools Obligations14,732,500 3.071%452,435 Mira Costa Community College District Certificates of Participation1,705,000 15.070%256,944 San Dieguito Union High School District General Fund Obligations13,015,000 24.425%3,178,914 City of Encinitas Governmental Bonded Debt55,660,000 100%55,660,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT91,311,191$ TOTAL DIRECT DEBT$ 55,660,000 TOTAL OVERLAPPING DEBT172,764,946 COMBINED TOTAL DEBT$ (2)228,424,946 (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 2014-15 Assessed Valuation: Total Overlapping Tax and Assessment Debt..………………………….….1.07% Total Direct Debt ($55,660,000).……...……..………………………….…..0.43% Combined Total Debt…...…….………….….….…….………....…………..…1.77% 185 Source: California Municipal Statistics City of Encinitas Legal Debt Margin Information Last Ten Fiscal Years (in thousands) Fiscal Years 20062007200820092010 Assessed valuation9,151,396$ 10,018,457$ 10,687,153$ 11,257,079$ 11,337,568$ Conversion percentage equal25%25%25%25%25% to 25% of Assessed valuation Adjusted assessed valuation2,287,8492,504,6142,671,7882,814,2702,834,392 Debt limit percentage15%15%15%15%15% Debt limit343,177375,692400,768422,141425,159 Total net debt applicable to limit:31,10549,41047,96046,00544,165 Legal debt margin312,072$ 326,282$ 352,808$ 376,136$ 380,994$ Total debt applicable to the limit as a percentage of debt limit9.06%13.15%11.97%10.90%10.39% 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 186 San Diego County Assessor Combined Tax Rolls City of Encinitas Legal Debt Margin Information Last Ten Fiscal Years (in thousands) (Continued) Fiscal Years 20112012201320142015 Assessed valuation11,342,197$ 11,497,857$ 11,723,929$ 12,147,361$ 12,870,004$ Conversion percentage equal25%25%25%25%25% to 25% of Assessed valuation Adjusted assessed valuation2,835,5492,874,4642,930,9823,036,8403,217,501 Debt limit percentage15%15%15%15%15% Debt limit425,332431,170439,647455,526482,625 Total net debt applicable to limit:42,70540,70046,66044,48055,660 Legal debt margin382,627$ 390,470$ 392,987$ 411,046$ 426,965$ Total debt applicable to the limit as a percentage of debt limit10.04%9.44%10.61%9.76%11.53% 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 187 San Diego County Assessor Combined Tax Rolls City of Encinitas Historical Debt Service Coverag e Last Five Fiscal Year s SAN DIEGUITO WATER DISTRICT 20112012201320142015 Revenues: Operating revenues - including connection fees12,574,450$ 13,170,422$ 13,789,636$ 15,715,575$ 15,841,022$ Non-operating revenues817,872 813,610 869,568 827,676 238,936 Gross Revenues13,392,322 13,984,032 14,659,204 16,543,251 16,079,958 Total Operating & Non-Operating Expenses11,614,631 12,448,911 12,198,228 14,066,485 14,512,293 Net Income1,777,691 1,535,121 2,460,976 2,476,766 1,567,665 Add back…….. Interest expense 725,936 698,908 657,963 622,075 475,775 Depreciation and amortization expense1,196,007 1,294,904 1,476,044 1,490,806 1,288,694 Net Revenues Available for Debt Service3,699,634 3,528,933 4,594,983 4,589,647 3,332,134 Less: Debt Service Paid 2004 Water Revenue Refunding Bonds - Interest Charges452,244 433,950 408,906 380,731 144,720 2004 Water Revenue Refunding Bonds - Principal Payments575,000 595,000 615,000 640,000 665,000 2007 Note Payble to Financing Authority - Interest Charges281,494 270,352 256,744 241,344 224,994 2007 Note Payble to Financing Authority - Principal Payments350,000 365,000 375,000 385,000 405,000 2014 Water Revenue Refunding Bonds - Interest Charges- - - - 106,061 Total Debt Service1,658,738$ 1,664,302$ 1,655,650$ 1,647,075$ 1,545,775$ Coverage by Net Revenues Available for Debt Service223%212%278%279%215% Debt service coverage requirement is minimum 115% incl connection fees. The above schedules include connection fees in operating revenues. CARDIFF SANITARY DIVISION 20112012201320142015 Revenues: Operating revenues - including connection fees5,337,717$ 5,039,818$ 4,755,573$ 4,758,606$ 4,615,399$ Non-operating revenues355,974 126,914 39,015 1,216,941 120,668 Gross Revenues5,693,691 5,166,732 4,794,588 5,975,547 4,736,067 Total Operating & Non-Operating Expenses3,715,529 3,310,986 3,310,986 3,189,268 4,371,847 Net Income1,978,162 1,855,746 1,206,029 2,786,279 364,220 Add back…….. Interest expense267,533 248,400 142,898 266,822 109,282 Depreciation and amortization expense932,273 404,641 800,000 200,459 1,555,955 Net Revenues Available for Debt Service3,177,968 2,508,787 2,148,927 3,253,560 2,029,457 Less: Debt Service 2003 Note Payable to SEJPA - Interest Charges273,800 255,000 -- - 2003 Note Payable to SEJPA - Principal Payments470,000 490,000 -- - 2011 Note Payable to SEJPA - Interest Charges- 29,946 142,898 131,967 109,282 2011 Note Payable to SEJPA - Principal Payments- 25,000 546,540 563,037 579,366 Total Debt Service743,800$ 799,946$ 689,438$ 695,004$ 688,648$ Coverage by Net Revenues Available for Debt Service427%314%312%467%294% Debt service coverage requirement is minimum 110% incl connection fees. The above schedules include connection fees in operating revenues 188 Source: City of Encinitas Finance Department City of Encinitas Demographic and Economic Statistics Last Ten Fiscal Years % Change % of San fromAvg. CityDiego County PreviousMedianHouseholdUnemployment YearPopulationPopulationYearAgeSizeRate 200662,8262.1%0.35%40.52.642.8% 200763,2592.0%0.68%41.02.653.2% 200863,8642.0%0.95%41.52.654.2% 200959,4532.0%-7.42%41.72.696.9% 201059,6282.0%0.29%41.62.45NA 201159,9102.0%0.47%42.02.507.3% 201260,3462.0%0.72%42.22.459.2% 201360,5682.0%0.37%41.52.505.5% 201461,2042.1%1.04%41.52.495.2% 201561,5182.0%0.51%41.52.504.2% 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. Sources: California State Department of Finance, California Employment Dev. Department, city data.com Source: California State Department of Finance Unemployment rate estimates are from California Employment 189 Development. City of Encinitas Taxable Sales by Business Typ e Last Seven Fiscal Years 2009201020112012201320142015 Autos and Transportation1,138,428$ 1,189,413$ 1,330,270$ 1,427,132$ 1,446,737$ 1,519,006$ 1,638,839$ Building and Construction1,057,851818,484774,109868,790820,467887,182944,334 Business and Industry520,656461,247537,840518,699560,723573,032556,835 Food and Drugs979,585931,937945,542995,5111,003,4911,001,9421,028,085 Fuel and Service Stations1,085,7581,146,3721,351,2881,569,2651,577,7831,559,3421,500,416 General Consumer Goods2,949,6252,836,9892,818,8093,117,5473,165,7463,355,5403,476,481 Restaurants and Hotels1,448,8671,388,5701,442,9761,624,0071,699,7051,825,9711,978,072 Total9,180,770$ 8,773,012$ 9,200,834$ 10,120,951$ 10,274,652$ 10,722,015$ 11,123,062$ 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 190 HdL Companies City of Encinitas Full-Time and Part-Time Employees by Function Last Five Fiscal Years Fiscal Years Function20112012201320142015 General government44.2544.5544.7544.7546.75 Fire department63.0063.0063.0066.0066.00 Public works28.8528.8529.2529.5528.55 Engineering services27.4727.4226.4227.1727.17 Parks and recreation21.1821.1821.1821.1820.18 Planning and building26.7526.7526.7527.2527.25 Subtotal211.50211.75211.35215.90215.90 San Dieguito Water District25.4025.4025.0023.0024.00 191 City of Encinitas Operating Indicators by Function Last Five Fiscal Years Fiscal Years 20112012201320142015 San Diego County Sheriffs Dept Criminal arrests1,0471,2311,5481,5951,743 Traffic arrests535485383331551 Traffic accidents472441372323297 Traffic citations12,02411,34911,38110,35713,650 Calls for service20,60220,15020,55919,39421,335 Deputy initiated action29,22429,86231,28129,84927,339 Fire: Number of emergency fire calls96124102383300 Number of EMS/rescue3,4983,4953,6973,8063,844 Other1,5201,7371,9321,4581,265 Inspections2,2632,2522,1632,1432,072 Engineering: Number of permits issued397392269351383 Parks and recreation: Number of recreation class registrations10,69711,11911,17516,23616,289 Number of facility rentals377749421578557 Planning and building: Number of planning permits issued177202207298335 Number of New Dwelling Units Issued5112163161135 Environmental review476910 Appeals33576 Plan checks8829489901,3911,737 Code enforcement complaints1,6451,2701,1991,1531,063 Water: New connections9796413169 Average daily consumption (millions of gallons)5.215.325.615.715.49 Sewer: New connections1444502253 Average daily sewage treatment (millions of gallons)2.432.382.402.362.22 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. 192 Source: City of Encinitas City of Encinitas Capital Asset Statistics by Functio n Last Five Fiscal Years Fiscal Years 20112012201320142015 Law enforcement: * Number of sub-Stations11111 Fire department: Fire stations55666 Public works: Streets (miles)201201201201201 Engineering: Signalized intersections6363636363 Parks and recreation: Community and senior center11111 Developed parks1818181818 Undeveloped parks44444 Parkland acres 382382382382382 Habitat/open space acreage8787878787 Marine life refuge11111 Trails/streetscapes (miles)41/1041/1041/1041/1041/10 Lifeguard towers77777 Water: Water mains (miles)168168168168168 Maximum daily capacity (millions of gallons)1515151515 * 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. 193 Source: City of Encinitas This page intentionally left blank 194 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. 195 TABLE1 CARDIFF SANITARY DIVISIO N Rate Schedule for Annual Sewer Charges s of June 30, 2015 A CategoryChargeHCF RateHCFMedian Charge Users/Class New Connections (no prior water consumption Group I Residential history) Single FamilySF$41.084.80$ 106.08550.26$ Multi FamilyMFSee belo $359.70/unit4.80 w Trailer ParkTPSee below $359.70/unit4.80 New Connections (no prior water consumption Non-Residentialhistory) Commercial Group IISee beloSee belo$ See belo5.04See belo wwww Commercial Group IIISee belowSee below See belo6.57wSee below Commercial Group IVSee beloSee belo See belo9.86See belo wwww Multi Family* and Non-Residential Fixed Meter Charge Meter Sizennual ChargeMeter Sizennual Charge AA 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 = 2 Lowest Periods of Water Consumption For Meter Readings Occurring Between Dec.-May (most recent available 5-year period) Residential = Water Consumption For Meter Readings Occurring Between July-June of Preceding Year Non-Residential (Commercial) Annual HCF Median Usage SubUnit Cost (NewCharge (New Category(perHCF)Connections)Connections) Users/Class Group II Commercial Softwater ServiceSW5.04$ ------- Car WashCW5.04 1,520$7,660.80 Office BuildingOF5.04 2001,008.00 Fire StationFS5.04 110554.40 Professional Building (Doctor)PB5.04 160806.40 Veterinary ClinicVC5.04 ------- thletic GymnasiumG5.04 1,3406,753.60 A LaundromatL5.04 9904,989.60 Department and Retail StoreDRS5.04 120604.80 WarehouseW5.04 1,0505,292.00 Hospital, Convalescent HomeHCH5.04 3,24016,329.60 ParksPB5.04 5102,570.40 Church-Membership OrganizationC 5.04 4402,217.60 Membership Organization (Non-Church)MO5.04 2401,209.60 Social ServicesSS5.04 160806.40 Group III Commercial Hotels-Motels (without restaurant)HM6.57$ 890$5,847.30 Repair and Service StationRSS6.57 70459.90 Shopping CenterSC6.57 1,0306,767.10 KennelK6.57 9005,913.00 Coffee ShopCS6.57 ------- Amusement ParkAP6.57 ------- Nightclub/BarNC6.57 3202,102.40 Commercial LaundryCL6.57 ------- ManufacturingM6.57 1801,182.60 Lumber YardLY6.57 ------- Group IV Commercial Hotels-Motel (with restaurant)HM9.86$ 3,130$30,861.80 Bakery (wholesale)/Food ProcessorBW9.86 ------- SupermarketSM9.86 1,03010,155.80 MortuaryMT9.86 3002,958.00 RestaurantR9.86 6005,916.00 (1) Sewer rates are based on water consumption (fixed charge based on meter size and consumption component). The consumption is based on HCF (hundred cubic feet - 748 gallons). 196 TABLE 2 CARDIFF SANITARY DIVISIO N Historical Service Charges Billed Last Five Years Fiscal Residential Commercial Commercial Single Family Year(Tax Roll) (Tax Roll) (Manual) Total Billed Average 20113,984,339 628,165 127,210 4,739,715 664 20124,058,990 645,560 123,822 4,828,372 676 ,5,44 , 4,7,77,5 2013393166609912662819062 4 5,, ,4 4,544,,57 201381233899321391062622 54, , , 4,75,57, 20103339362303213892012610 Cardiff Sanitary Division bills most customers through the San Diego County property tax billing service. Delinquincy rates have been between 1.8%-3.0% during the period presented. Delinquencies do not apply to direct billings. 197 TABLE 3 CARDIFF SANITARY DIVISIO N Ten Largest Customers Fiscal Year 2014-2015 ParcelSewer Service Percentage o f Property OwneCountChargesSewer Charges r SCRIPPS HEALTH192,518$ 2.06% COLLWOOD PINES APARTMENTS L P370,154 1.56% STATE OF CALIFORNIA PARKS & REC257,855 1.29% SAN DIEGUITO UNION HIGH SCHOOL DISTRICT243,886 0.98% NEWPORT TAFT INC128,578 0.64% CARDIFF TOWN CENTER L L C126,709 0.60% 944 REGAL ROAD L L C123,522 0.52% DELUCA TRUST122,179 0.49% WEST VILLAGE INC121,883 0.49% VOLENCIA INVESTMENT GROUP LLC121,517 0.48% A 14408,801$ 9.11% Total Billed4,485,301$ Source: Cardiff Sanitary Division TABLE 4 CARDIFF SANITARY DIVISIO N Historical Service Connections Fiscal Year 2014-2015 Commercial Total ConnectionsResidentialIndustrialTotal Yea(Billed Parcels)EDU'sEDU'sEDU's r 20096,312 6,990 1,124 8,114 20106,317 7,011 1,124 8,136 20116,329 7,033 1,124 8,187 20126,334 7,067 1,154 8,221 20136,365 7,083 1,174 8,257 20146,375 7,126 1,176 8,302 201 7,1326,394 1,187 8,319 5 Source: Cardiff Sanitary Division 198 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. 199 TABLE 1 SAN DIEGUITO WATER DISTRIC T Schedule of Water Rates s of June 30, 2015 A Rate (footnote 1) Customer Class Residential Rate TiePotableRecycled r Single-family residential 0-12 units$2.63 13-20 units$3.93 21-40 units$4.64 41+ units$5.87 0-8 units$2.63 Multi-family residential (per dwelling ) 9-12 units$3.93 13-16 units$4.64 17+ units$5.87 Agriculture $3.27$2.78 Commercial $3.69$3.14 Government / Public$3.69$3.14 Landscaping $4.64$3.94 Construction $4.64$3.94 Source: San Dieguito Water District (1) Per Unit (one hundred cubic feet or 748 gallons) TABLE 2 SAN DIEGUITO WATER DISTRIC T Bi-Monthly Meter Service Availability Charge s s of June 30, 2015 A Water Meter ServiceInfrastructureFire Meter Service AccessAvailabilit Availabilit yy Meter SizeChargeChargeCharge 5/8" & 3/4"35.05$ 5.52$ N/A 1"55.73 8.83 7.37$ 1-1/2"107.45 16.56 13.74 2"169.50 28.70 24.72 3"314.30 52.99 64.17 4"521.14 90.52 132.20 6"1,038.27 165.60 376.37 8"1,658.82 287.04 797.51 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. 200 TABLE 3 SAN DIEGUITO WATER DISTRIC T Historic Potable Water System Revenues Last Ten Fiscal Years Mete r FiscalPotablePercentageAvailabilitPercent y YeaWater SalesChange (2)ChargeChange (2) r 20066,465,975 23.1%2,061,454 #REF! 20077,579,205 17.2%2,251,011 9.2% 20087,717,818 1.8%2,404,547 6.8% 20097,525,927 -2.5%2,453,075 2.0% 20107,146,854 -5.0%2,501,264 2.0% 20118,205,876 14.8%3,007,127 20.2% 20128,528,418 3.9%3,196,605 6.3% 20139,236,462 8.3%3,087,794 -3.4% 201410,649,157 15.3%3,227,823 4.5% 20159,728,434 -8.6%3,415,227 5.8% Source: San Dieguito Water District (3) Due to the varying number of billing cycles in a fiscal year, changes year-over-year may ot be exactly comparable. TABLE 4 SAN DIEGUITO WATER DISTRIC T Historic Potable Water System Revenues Last Ten Fiscal Years Mete r FiscalRecyclePercentAvailabilitPercent y YeaWater SalesChangeCharges (4)Change r 2006454,145 17.2%- N/ A 2007596,299 31.3%- N/ A 2008600,401 0.7%- N/ A 2009663,036 10.4%- N/ A 2010537,654 -18.9%- N/ A 2011523,397 -2.7%- N/ A 2012422,925 -19.2%- N/ A 2013400,244 -5.4%- N/ A 2014460,383 15.0%60,048 N/ A 2015648,398 40.8%80,585 N/ A Source: San Dieguito Water District (4) The District first implemented a meter availability charge for recycled customers on September 1, 2013. 201 TABLE 5 SAN DIEGUITO WATER DISTRICT Summary of Water Production by Source Last Ten Fiscal Years Potable Production (5) Fiscal LocalImportedTotalRecycled Total YeaWaterWaterPotableWaterProduction r 20062,765 5,093 7,858 600 8,458 20072,706 5,692 8,398 708 9,106 20083,539 3,753 7,292 676 7,968 20093,869 3,369 7,237 694 7,931 20104,399 2,156 6,555 498 7,053 20114,434 1,901 6,335 511 6,846 20123,719 2,663 6,382 5786,960 (6) 20134,200 2,395 6,595 6787,273 (6) 20141,136 5,593 6,729 692 7,421 2015603 5,726 6,329 736 7,065 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 DISTRIC T Summary of Water Deliveries by Source Last Ten Fiscal Years FiscalPercent Percent YeaPotableIncreaseRecycledIncrease r 20067,2818.4%6000.8% 20077,5924.3%70818.0% 20086,753-11.1%676-4.5% 20096,463-4.3%6942.7% 20105,649-12.6%498-28.2% 20115,425-4.0%5112.6% 20125,9579.8%57813.1% (6) 20136,2845.5%67817.3% (6) 20146,4492.6%6922.1% 20156,134-4.9%7366.4% Source: San Dieguito Water District (6) 2012 and 2013 Recycled Water Production and Delivery figures revised to now include wate r 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 Distric t 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. 202 TABLE 7 SAN DIEGUITO WATER DISTRIC T Sales by Customer Class As of June 30, 2015 Acre-FeetPercent of Customer DescriptionSoldWater Sold Agriculture981.6% Commercial5158.4% Construction320.5% Government310.5% Landscaping3756.1% Multi-Family Residential1,15718.9% Pooled4186.8% Publi971.6% c Single-Family Residential3,41155.6% Subtotal - Top 10 Customers6,134100.0% Source: San Dieguito Water District TABLE 8 SAN DIEGUITO WATER DISTRIC T Total Service Connections by Categor y Last Ten Fiscal Years FiscalPercent Percent YearPotableIncreaseRecycledIncrease 200611,2750.1%55#REF! 200711,3380.6%561.8% 200811,3640.2%595.4% 200911,3700.1%6815.3% 201011,3880.2%737.4% 201111,3970.1%72-1.4% 201211,4760.7%742.8% 201311,5020.2%774.1% 201411,6100.9%770.0% 201511,6440.3%815.2% 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. 203