2017-CAFR COMPREHENSIVE ANNUAL
FINANCIAL REPORT
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City of Encinitas
Encinitas, California
Comprehensive Annual Financial Report
and Independent Auditors' Reports
For the Year Ended June 30, 2017
Supported by the Finance Department
James R. Riley Interim Director of Finance
Tom Gallup Finance Manager - Budget
Stella Huang Finance Manager - Reporting
Marta Lundgren Finance Manager - Operating
Tanya Allsup Finance Analyst
Monica Attili Finance Analyst
Nancy Rau Finance Analyst
Kelly Sanderson Finance Analyst
Sandy Ekstrom Accountant
Cindy Dabney Finance Technician
Alyce Gonzalez Finance Technician
Joey Pennell Finance Technician
Katie Schroeder Finance Technician
City of Encinitas
Comprehensive Annual Financial Report
For the Year Ended June 30, 2017
Table of Contents
Page
INTRODUCTORY SECTION (Unaudited)
Table of Contents
TransmittalLetter ............................................................................................................................................ i
Listof City Officials.........................................................................................................................................vi
OrganizationChart........................................................................................................................................vii
Certificate of Achievement for Excellence in Financial Reporting — GFOA..................................................viii
FINANCIAL SECTION
Independent Auditors' Report on Financial Statements .......................................................................... 1
Management's Discussion and Analysis (Required Supplementary Information — Unaudited)........... 5
Basic Financial Statements:
Government-Wide Financial Statements:
Statementof Net Position.................................................................................................................23
Statement of Activities and Changes in Net Position .......................................................................24
Fund Financial Statements:
Governmental Fund Financial Statements:
BalanceSheet ............................................................................................................................31
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position................................................................32
Statement of Revenues, Expenditures, and Changes in Fund Balances...................................33
Reconciliation of the Governmental Statement of Revenues,
Expenditures, and Changes in Fund Balances to the Government-Wide
Statement of Activities and Changes in Net Position...............................................................34
Proprietary Fund Financial Statements:
Statementof Net Position...........................................................................................................36
Statement of Revenues, Expenses, and Changes in Net Position.............................................38
Statementof Cash Flows............................................................................................................40
Fiduciary Fund Financial Statements:
Statement of Fiduciary Net Position ...........................................................................................47
Notes to the Basic Financial Statements ...........................................................................................49
City of Encinitas
Comprehensive Annual Financial Report
For the Year Ended June 30, 2017
Table of Contents (Continued)
Page
FINANCIAL SECTION (Continued):
Required Supplementary Information (Unaudited):
BudgetaryInformation.......................................................................................................................... 121
Budgetary Comparison Schedule:
GeneralFund.................................................................................................................................. 122
Schedule of Changes in the Net Pension Liability and Related Ratios................................................ 124
Schedule of the City's Proportionate Share of the Net Pension Liability.............................................. 125
Scheduleof Contributions .................................................................................................................... 127
Schedules of Funding Progress —Other Post Employment Benefits ................................................... 130
Supplementary Information:
Non-Major Governmental Funds:
CombiningBalance Sheet.............................................................................................................. 134
Combining Statement of Revenues, Expenditures and Changes in Fund Balances...................... 136
Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual:
Infrastructure Improvements Special Revenue Fund ............................................................... 138
Grants and Housing Special Revenue Fund ............................................................................ 139
Development Impact Special Revenue Fund ........................................................................... 140
Lighting and Landscaping Special Revenue Fund ................................................................... 141
Internal Service Funds:
Combining Statement of Net Position............................................................................................. 145
Combining Statement of Revenues, Expenses, and Changes in Net Position............................... 146
Combining Statement of Cash Flows ............................................................................................. 147
Fiduciary Funds:
Statement of Changes in Assets and Liabilities—Agency Funds................................................... 151
STATISTICAL SECTION (Unaudited)
Index........................................................................................................................................................... 153
Financial Trends:
Net Position by Components — Last Ten Fiscal Years ......................................................................... 154
Changes in Net Position — Last Ten Fiscal Years................................................................................ 156
Fund Balances of Governmental Funds— Last Ten Fiscal Years........................................................ 160
Changes in Fund Balances of Governmental Fund — Last Ten Fiscal Years....................................... 162
Revenue Capacity:
Assessed Value and Estimated Actual Value of Taxable Property— Last Ten Fiscal Years ............... 164
Principal Property Taxpayers— Last Ten Fiscal Years......................................................................... 165
Property Tax Levies and Collections — Last Ten Fiscal Years............................................................. 167
Direct and Overlapping Property Tax Ratios— Last Ten Fiscal Years ................................................. 168
City of Encinitas
Comprehensive Annual Financial Report
For the Year Ended June 30, 2017
Table of Contents (Continued)
Page
STATISTICAL SECTION (Continued):
Debt Capacity:
Ratios of Outstanding Debt by Type — Last Ten Fiscal Years.............................................................. 172
Ratios of General Bonded Debt Outstanding — Last Ten Fiscal Years ................................................ 174
Schedule of Direct and Overlapping Bonded Debt............................................................................... 175
Legal Debt Margin Information — Last Ten Fiscal Years ...................................................................... 176
Historical Debt Service Coverage— Last Ten Fiscal Years.................................................................. 178
Demographic and Economic Information:
Demographic and Economic Statistics — Last Ten Fiscal Years .......................................................... 180
General Governmental Tax Revenue by Source.................................................................................. 181
Taxable Sales by Business Type— Last Ten Fiscal Years................................................................... 182
Operating Information:
Full-Time and Part-Time Employees by Function — Last Ten Fiscal Years.......................................... 183
Operating Indicators by Function — Last Ten Fiscal Years................................................................... 184
Capital Asset Statistics by Function — Last Ten Fiscal Years............................................................... 186
Cardiff Sanitary Division:
Rate Schedule for Annual Sewer Charges........................................................................................... 190
Historical Service Charges Billed ......................................................................................................... 191
TenLargest Customers........................................................................................................................ 192
Historical Service Connections............................................................................................................. 192
San Dieguito Water District:
Scheduleof Water Rates...................................................................................................................... 194
Bi-Monthly Meter Service Availability Charges..................................................................................... 194
Historic Potable Water System Revenues — Last Ten Fiscal Years..................................................... 195
Historic Recycled Water System Revenues — Last Ten Fiscal Years .................................................. 195
Summary of Water Production by Source— Last Ten Fiscal Years ..................................................... 196
Summary of Water Deliveries by Source— Last Ten Fiscal Years....................................................... 196
Salesby Customer Class..................................................................................................................... 197
Total Service Connections by Category— Last Ten Fiscal Years ........................................................ 197
Independent Auditors' 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.................................................................... 199
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TRANSMITTAL LETTER• INTRODUCTORY SECTION
December 13, 2017
Honorable Mayor, City Council and Citizens of the City of Encinitas,California,
We are pleased to present the fiscal year 2016-17 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, 2017 and includes financial
information for the City of Encinitas, the San Dieguito Water District, the Encinitas Housing
Authority, and the Encinitas Public Financing Authority. These financial statements have been
prepared in accordance with generally accepted accounting principles (GAAP) and audited in
accordance with generally accepted auditing standards. Responsibility for the accuracy of the
data,the completeness and reliability of the presentation, including all disclosures, rests with City
management.
To provide a reasonable basis for making the presentations shown in this report and to compile
sufficient reliable information for the preparation of the City's financial statements, the
management of the City has established a comprehensive internal control framework designed to
protect the City's assets from loss, theft, or misuse. Because the cost of internal controls should
not exceed their benefits, the City's internal controls have been designed to provide reasonable
rather than absolute assurance that the financial statements will be free from material
misstatements.
The City's financial statements have been audited by the Pun Group, certified public accountants.
The independent auditor concluded based on the audit, that there was reasonable basis for
rendering an unmodified opinion (or a "clean audit") on the City's financial statements for the
fiscal year ended June 30, 2017, which means in the auditors' opinion, the financial statements
accurately present the City's financial position.
Management's Discussion & Analysis (MD&A) immediately follows the independent auditors
report and provides a narrative introduction, overview, and analysis of the basic financial
statements. The 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
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TRANSMITTAL LETTER• INTRODUCTORY SECTION
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. In August 2017,
the Council adopted a resolution to evaluate moving toward to district elections.
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.
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 at 425
Santa Fe Drive along with 20 other park sites and Moonlight Beach located at 400 B Street which
attracts an estimated 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 program and
financial plan which is updated as part of the two-year budget cycle. 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 to obtain the specific
financial information desired. This tool may be found by selecting the "Open Finance" page on
the City's website https:Hencinitasca.opengov.com/transparency.
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TRANSMITTAL LETTER• INTRODUCTORY SECTION
FACTORS AFFECTING FINANCIAL CONDITION OF THE CITY
Local Economy — Encinitas enjoys a strong and well diversified tax base. Over the years, the
property values and personal income levels within the City have generated tax revenues sufficient
to support the level of municipal services and facilities for the community to enjoy. The tax base
has performed well in good economic times and it has also been able to weather the financial
impacts during slower economic times. The net taxable assessed value of property in the City has
grown 45% since Fiscal Year 2006-07 (ten years ago). Throughout the recession the City
maintained slight increases each year in net taxable assessed value. For Fiscal Years 2015-16 and
2016-17 taxable values increased 6.5%and 5.6%respectively.
According to information provided by the Bureau of Labor Statistics, employment in Encinitas is
strong with the unemployment rate just 3.0% as of April 2017. The unemployment rate for all of
San Diego County was 3.8% while statewide the rate was 4.8%. Encinitas also has over 3,300
businesses reporting retail sales within the City. The top 100 sales tax producers include a wide
variety of businesses such as car dealers, home improvement stores, big box retail, gas stations,
grocery stores and restaurants.
Property and Sales Tax Revenue - Property tax and sales tax revenue represent approximately
80% of the City's total General fund revenue. Property tax revenue in FY 2016-17 totaled $43.5
million which was an increase of$2.3 million or 6% over FY 2015-16. Sales tax revenue in FY
2016-17 was $12.5 million, a decrease of$1.7 million or 12.0% below FY 2015-16 revenue of
$14.2 million. The decrease in sales tax revenue was anticipated because FY 2015-16 sales tax
revenue included a one-time "true up" payment of $1.6 million which marked the end of the
property tax in lieu of sales tax program in California that was commonly known as the "Triple
Flip". 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. On January 26, 2017, Standard & Poor's Rating Services (S&P) affirmed its `AAA'
issuer credit rating(ICR)for the City of Encinitas.
The City had approximately $51.2 million of general fund bonded debt and capital leases
outstanding at June 30, 2017, with scheduled payments of principal and interest of$4.9 million in
FY 2016-17. This debt service as a percentage of general fund revenue is 7.0%, which is far
below the City's goal to maintain a debt service coverage 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
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TRANSMITTAL LETTER• INTRODUCTORY SECTION
directed use, primarily for future funding of capital improvements. General Fund reserves for
contingencies and budget stabilization total $13.9 million and funding available for capital
improvements was$18.4 million as of June 30,2017.
Major Initiatives and Projects—Pacific View-The City purchased the Pacific View Elementary
School site in December 2014. Proposals were solicited for an operating partner for use of the site
and the City Council selected the Encinitas Arts, Culture and Ecology Alliance in September
2015. The Alliance proposes to use the site for a self-sustaining non-profit arts, culture, and
ecology center utilizing the buildings and grounds, and incorporating the historic schoolhouse
into the broader site to increase its visibility and significance.
Coastal Rail Trail - The Coastal Rail Trail (CRT) is a 44-mile long system of pedestrian and
bicycle trails generally along the coastal rail corridor between the cities of Oceanside and San
Diego. For construction purposes, the CRT is broken into many segments along its length, four
of which are within the City of Encinitas. SANDAG is the agency responsible for the design and
construction of the Coastal Rail Trail.
Polystyrene Ban - On November 16, 2016, the City Council adopted Ordinance 2016-12, an
ordinance of the City of Encinitas, California, adding Encinitas Municipal Code chapter 11.27 -
Expanded Polystyrene Disposable Food Service Ware Prohibition Ordinance. Under the
ordinance, food providers are prohibited from providing prepared food in disposable food service
ware made of Expanded Polystyrene (EPS). All City facilities, City-managed concessions, City-
sponsored or co-sponsored events, City permitted events and all franchisees, contractors, and
vendors doing business with the City are prohibited from using disposable food service ware
made of EPS within the City.
Coastal Mobility and Livability Working Group - On May 18, 2016, the City Council
authorized the City Manager to refine the scope of work to achieve the project goals and provide
for coordinated public engagement between three mobility studies: the Rail Corridor Vision
Study, Active Transportation Plan and the Coastal Business Districts Parking Study. With
adoption of Resolution No. 2016-54 on July 13, 2016, the Council approved the formation of a
Coastal Mobility and Livability Work Group (CMLWG). The Working Group will support all
three mobility studies. The primary function of the group will be for members to help shape the
direction of a number of upcoming projects located in the rail corridor and build community
consensus for the final corridor vision; members of the Working Group will also be directly
responsible to inform their respective stakeholders, which would allow for consistent, regular
communication between all.interested parties.
Standard Pacific Park- In 2001 as part of the Maravu Development,the Standard Pacific parcel
was conveyed to the City for parkland mitigation. On October 26, 2016, the Parks, Beaches,
Trails and Open Space Master Plan was approved by City Council. The plan identified the
neighborhood around the Standard Pacific park site as an area that offered low service for
recreational opportunities. A park in this area would afford the residents more opportunity to
participate in park and recreation activities. On June 28, 2017 City Council awarded a contract to
design Standard Pacific Park. The scope of work in the contract includes development of
plans, specifications, permits, and environmental documentation for the Standard Pacific park
site. Construction on the park is expected to begin in the summer of 2018.
Leucadia 101 Streetscape — This project provides streetscape improvements along N. Coast
Highway 101 from A Street to La Costa Avenue. Phase I includes design of the entire Leucadia
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TRANSMITTAL LETTER• INTRODUCTORY SECTION
101 Streetscape project and construction of improvements from A Street to Basil Street and
extend other elements such as road diet and tree plantings throughout the entire corridor.
Moonlight Beach Marine Safety Center - Construction of the $3.7 million Moonlight Beach
Marine Safety Center began in October 2016 and is scheduled to be completed in November
2017. The new Moonlight Beach Marine Safety Center will replace the existing Lifeguard Tower
which has been deemed functionally obsolete.
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association(GFOA)awarded their Certificate of Achievement
for Excellence in Financial Reporting to the City of Encinitas for its Comprehensive Annual
Financial Report for the fiscal year ended June 30, 2016. The City feels the FY 2016-17
Comprehensive Annual Financial Report continues to meet the GFOA criteria for the award.
Lastly, we deeply appreciate the dedication and leadership of the Mayor and Council Members
who have consistently supported our goal of excellence in all aspects of financial management.
The completion of this report could not have been accomplished without the dedication and hard
work of the staff in the Finance Department. Special recognition goes to Finance Reporting team,
Stella Huang, Monica Attili and Sandy Ekstrom for their work with the auditors and the
coordination of the preparation of this report.
R pectfull s mitt
R, O-V
Karen P. Brust es R. Riley
City Manager Interim Director of Finance
v
LIST OF CITY OFFICIALS
As of June 30, 2017
CITY COUNCIL
Mayor Catherine S. Blakespear
Deputy Mayor Tony Kranz
Council Member Tasha Boerner Horvath
Council Member Joe Mosca
Council Member Mark Muir
EXECUTIVE TEAM MEMBERS
City Manager Karen P. Brust
Assistant City Manager Mark Delin
City Clerk/Legislative Services Director Kathy Hollywood
Public Works Director (Interim) Dennis Lamb
Finance Director (Interim) James R. Riley
Fire Chief Michael Stein
Human Resources Director Tom Bokosky
IT Manager Wendy Flynn
Development Services Director Brenda Wisneski
Risk Manager Jace Schwarm
Parks & Recreation Director Jennifer Campbell
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Encinitas
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2016
Executive Director/CEO
Viii
THE
PUN GROUP
ACCOUNTANTS&ADVISORS
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, 2017, and the related notes to the financial statements,
which collectively comprise the City's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not audit
the Investment in Joint Ventures of the R.E. Badger Joint Powers Authority, R.E. Badger Financing
Authority, and Encina Wastewater Authority, which collectively represent the following percentages of
assets, net position, and expenses of the following opinion units:
Opinion Unit Assets Net Position Expenses
Business-type Activities 10.20% 14.12% 3.65%
Each Major Enterprise Fund:
San Dieguito Water District 36.42% 49.30% 10.95%
Encinitas Sanitary Division 13.10% 13.28% 27.76%
Those statements were audited by other auditors whose reports have been furnished to us, and our
opinions, insofar as they relate to the amounts included for investment in joint ventures, are based solely on
the reports 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.
4365 Executive Drive, Suite 710,San Diego,California 92121
Tel:858-242-5100• Fax:858-242-5150
www.pungroup.com
To the Honorable Mayor and Members of the City Council
of the City of Encinitas
Encinitas, California
Page 2
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.
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, 2017, and the respective changes in financial position, and, where applicable, cash flows thereof
for the year then ended in accordance with accounting principles generally accepted in the United States of
America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's
Discussion and Analysis, Budgetary Comparison Schedules, 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 5 through 17 and 123 through 132 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 13, 2017, 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.
cG� '
San Diego, California
December 13, 2017
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City of Encinitas
law Management's Discussion and Analysis
For the Year Ended June 30, 2017
This discussion and analysis of the City of Encinitas' financial performance provides an
overview of the fiscal year ended June 30, 2017. 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.
FINANCIAL HIGHLIGHTS
• The City's total assets increased overall by $3.1 million. This is composed of a $1.0
million increase in Governmental activities and $2.1 million increase in Business-Type
activities.
• The City's total net position increased overall by $6.7 million. Total assets increased
$3.1 million; total liabilities increased $4.9 million, deferred outflows increased $7.1
million but deferred inflows decreased $1.4 million.
• The City's total revenues decreased $1.8 million from 2016.
• Governmental activities revenues decreased $2.2 million
• Business-type activities revenues increased $0.4 million
• The City's total expenses increased $3.3 million from 2016.
• Governmental activities expenses increased $3.6 million
• Business-type activities expenses decreased $0.3 million
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.
5
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
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 that 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 included in order to explain the differences created by the integrated
approach (please see pages 32 and 34).
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 Activities and 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. Revenues and expenses for the current
fiscal year are recorded, 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 provide 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 and a portion of the City's affordable housing program.
6
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
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 Funds account for all
governmentally funded capital improvements, as well as a number of work projects such as
long-term consultant studies. All of these expenses appear as capital outlay expenditures.
Capital spending totaled $12.2 million this fiscal year, an increase of approximately $1.4
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
• General Fund Governmental Activities
• Capital Improvements Capital Projects Funds Governmental Activities
• 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 by 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
detailed short-term view of 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 used 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.
7
City of Encinitas
. Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
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 of Encinitas' combined Net Position (i.e. inclusive of all City funds)
for the fiscal year ended June 30, 2017 is compared to results for 2016 in Table 1.
Table 1
Statement of Net Position
(in millions of dollars)
Governmental Business-type Total Primary
Activities Activities Government
2017 2018 2017 2018 2017 2016
Current assets $ 80.5 $ 74.8 $ 41.4 $ 42.7 $ 121.9 $ 117.5
Capital assets(net) 216.5 217.9 57.6 55.6 274.1 273.5
Other noncurrent assets 1.0 4.3 45.0 43.6 46.0 47.9
Total assets 298.0 297.0 144.0 141.9 442.0 438.9
Deferred outflows 11.3 4.9 1.5 0.8 12.8 5.7
Current liabilities 17.6 18.5 4.1 4.1 21.7 20.6
Long-term liabilities 92.5 86.7 16.8 18.8 109.3 105.5
Total Liabilities 110.1 103.2 20.9 22.9 131.0 126.1
Deferred inflows 4.1 5.4 0.3 0.4 4.4 5.8
Net Position:
Net investment in
capital assets 185.7 182.9 45.0 42.5 210.7 205.4
Restricted 19.9 31.0 - 1.4 19.9 32.4
Unrestricted 9.5 (0.6) 79.3 75 5 88.8 74.9
Total Net Position $ 195.1 $ 193.3 $ 124.3 S 119 4 S 319 4 $ 312.7
8
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
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 increased 2.1% from $312.7 million at June 30, 2016, to $319.4
million at June 30, 2017.
• The overall increase in total assets is $3.1 million. The Governmental activities total
assets increased $1.0 million with an increase in cash/investments but a decrease in
receivables and capital assets. The business-type activities total assets increased $2.1
million with increases in both investment in joint ventures and capital assets. In
summary, the governmental increase of $1.0 million plus the business-type increase of
$2.1 million results in an overall increase to the City's total assets of$3.1 million.
• The overall increase in total liabilities is $4.9 million. This is the net change attributable
to $5.3 million decrease in the long-term liabilities but $10.3 million increase in net
pension liability in the governmental and business activities. The $10.3 million of the
overall increase in net pension liabilities is from governmental activities total $ 9.0 million
and business-type activities total $1.3 million.
• The increase of total assets of $3.1 million along with an increase of total liabilities of
$4.9 million, a decrease in deferred inflows of $1.4 million and an increase in deferred
outflows of $7.1 million has increased the City's total net position by $6.7 million or
approximately 2.1% increase from 2016.
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9
City of Encinitas
C Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
Tasle 2
Statement of Activities and Changes in Net Position
fin millions of dollars)
Governmental Business-type Total Primary
Activities Activities Government
2017 2016 2017 2016 2017 2016
Program Revenues:
Charges for services $ 8.8 8.6 22.7 22.5 ► 31.5 $ 31.1
Operating grants 3.4 3.3 1.1 1.1 4.5 4.4
Capital grants 4.4 5.4 0.7 0.7 5.1 6.1
General Revenues:
Property taxes 43.5 41.2 1.0 0.9 44.5 42.1
Sales and use taxes 12.5 14.2 - - 12.5 14.2
Other taxes 4.7 4.8 - - 4.7 4.8
Intergovernmental - 0.4 - - - 0.4
Other general revenue - 1.6 0.2 0.1 0.2 1.7
Total Revenues 77.3 79.5 25.7 25.3 103.0 104.8
Program Expenses:
General government 11.7 11.7 - - 11.7 11.7
Public safety 29.5 27.3 - - 29.5 27.3
Public works 9.2 11.7 - - 9.2 11.7
Planning and building 6.9 7.3 - - 6.9 7.3
Engineering services 8.9 4.6 - - 8.9 4.6
Parks and recreation 7.1 6.8 - - 7.1 6.8
Interest on long-term debt 2.2 2.5 - - 2.2 2.5
Cardiff Sanitary Division - - 3.3 3.9 3.3 3.9
San Dieguito Water District - - 14.0 13.5 14.0 13.5
Encinitas Sanitary Division - - 2.0 2.3 2.0 2.3
Affordable Housing - - 1.5 1.4 1.5 1.4
Recreation - - - - - -
Total Expenses 75.5 71.9 20.8 21.1 96.3 93.0
Change in Net Position 1.8 7.6 4.9 4.2 6.7 11.8
Transfers in (out) 0.4 (0.4) - -
Increase in Net Position 1.8 8.0 4.9 3.8 6.7 11.8
Net Position - beginning * 193.3 185.3 119.4 115.6 312.7 300.9
Net Position - ending $ 195.1 S 193.3 124.3 $ 119.4 $ 319.4 $ 312.7
10
r
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
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 and Changes in
Net Position.
Char i
Expenses vs. Program Revenue
(Governmental Activities)
$35,000,000
$30,000,000
$25.000.000 —
$20,000,000
$15,000,000
$101 000,000
$5,000
General Pubic Safety Public Works Planning & Engineering Parks& interest on
Government Building Services Recreation long-term
De bt
■Program Revenue ■Expenses
Chart 2 shows that Property Tax, Sales Tax, Charges for Services, Capital Grants and
Contributions, and Other Taxes, which are the top five categories of revenue and comprise 94%
of funding for Governmental activities. The Other category includes Operating Grants and
Contributions, Use of Money and Property, and miscellaneous revenues.
Chart 2
Governmental Revenues
Use of Money& Other Chargesfor
;35
Intergovernmental Property ervices
0% 196 � 11%
Other Taxe Operating Grants&
Contributions
6 4%
Sales Taxes Capital Grants&
16% Contributions
6%
Properry'raxes
55%
11
r
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
Business-Type Activities for the City of Encinitas include water and wastewater operations
and a portion of the City's affordable housing program. These activities increased Net
Position by $4.9 million from the last fiscal year as noted in in Table 2. Overall revenues
increased $0.4 million while overall expenses decreased $0.3 million from 2016.
The Statement of Activities and Changes in Net Position for Business-type activities indicates
an increase of $0.2 million in program revenues and an increase of $0.2 million in general
revenues from the previous year. The primary reason for the increase in operating revenue in
2017 is attributable to water sales up 5.0%. The Cardiff Sanitary Division and Encinitas
Sanitary Division decreased $0.6 million in program expenses; on the other hand, the San
Dieguito Water District and Affordable Housing increased $0.6 million in program expenses.
Overall, program revenues and general revenues exceeded program expenses in 2017
resulting in a total net change of$0.7 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 and Changes in Net Position.
Chart 3
Expenses vs. Program Revenue
(Business-type Activities)
$18,0G0,000
$16,000,DOo
$14,ODD,OW
$12,00O,DD0
$1Q 000,000
Sa.DOO.000
$6,DDD,000
$4,000,000
S2,OOD,000
S-
Cardiff Sanitary Division San Dieguito water Encinitas Sanitary Division Affordable Housing
District
n Program Revenue ■EKpenses
12
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
General Fund
General Fund Budgetary Highlights
General Fund Revenues $0.9 million above projections
Property taxes made up 61% of the general fund revenue budget. The City of Encinitas receives
approximately 24 cents of each dollar of property tax revenue generated in the City. Current
secured property taxes, along with other property tax categories, exceeded projections by
$526,362, a 1.3% increase over 2016. The City experienced a next taxable value increase of
5.6% for the FY2016-17 tax roll, which was slightly more than countywide at 5.4%.
Documentary transfer tax exceeded projections by $9,777, which was related to the number of
homes sold. Sales tax is the City's second largest revenue source and actual revenue received
were under projections by $275,391, and 2.1% decrease over 2016. Sales in the fuel and
service station category fell 14% from the previous year due to lower than anticipated fuel prices
throughout the year, as well as a slight decline of 3% in the auto sales category, both of which
mirror county and countywide trends. The 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 exceeded projections by $164,515, an increase of 10.2%
from 2016. The City conducted an audit of rentals marketed through various marketplace and
hospitality service websites that resulted in additional units enrolled in the program and TOT
collections for these rentals. Overall, franchise taxes were under projections by $67,799, which
was a result of a reduction in taxes collected due to a declining number of cable television
subscribers. Licenses and permits were over projections by $1,749, which was similar to TOT
revenue increase. The City issued additional STVR permits for online rental services.
Intergovernmental revenue was over the projected by $60,212. Additional revenue was received
from agencies participating in the Carlsbad Watershed Water Quality Improvement Program
cost sharing agreement. Overall Charges for Services revenue exceeded projections by
$62,109, primarily from planning fees. Fines and Penalties, which include vehicle code and red
light violations, also exceeded projections by $60,850. Use of money and property which
include investment earnings exceeded projections by $340,904. Income from City property
rentals was 7.4% higher than projected due to a large number of facility rentals than anticipated
at the Community Center. Miscellaneous revenue was projected at $80,800; the City only
received $18,110. The short fall was the result of revenue from County Service Area (CSA) 17
benefit fees, which were recorded in CSA Fund but budgeted in the General Fund revenue
account. The revenue from cost recovery collections exceeded projects by $20,202. Overall, the
City's revenues exceeded projections by $0.9 million.
General Fund Expenditures $3.4 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$3.4 million. This
represents savings of approximately 6.0%. The saving was primarily from personnel costs
resulting from vacancies and reorganizations across City departments and savings in the
contract/services category. Departments also saved in materials and supplies expenses.
Overall, all departments were below budget between 1% to 24% saving, except non-
departmental. Actual general fund expenditures were $56.8 million compared to prior year
actual of$54.9 million.
13
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
Excess of Revenues over Expenditures $4.3 million above projections
Actual revenues over expenditures were approximately $12.6 million, compared to a budget of
$8.3 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) this fiscal year.
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. Transfers in for operating were lower than budgeted by
$133,758 primarily due to the Gasoline Taxes received were lower than budgeted.
Transfers-out to internal service funds includes the General Fund's contribution to the Self-
Insurance fund. The contribution was set and funded at approximately $900,000.
Appropriations for capital projects from the general fund totaled $15.2 million in 2017.
Transfers-out for debt service totaled $4.3 million, which was the same as the $4.3 million
budgeted
Analysis of Fund Balance and Changes in Fund Balance
Fund balance projected to be $21.1 million as of June 30, 2017, a scheduled decrease of about
$11.8 million. Actual fund balance was $25.7 million, or$4.6 million higher than projected.
There was an excess of revenues over expenditures of $12.6 million. Factoring in transfers for
debt service payments of $4.3 million, capital expenditures of $15.2 million and other transfer
activity of $0.3 million, the net result is a decrease in total fund balance of $7.2 million at year-
end.
CAPITAL ASSETS AND THE CAPITAL IMPROVEMENT PROGRAM
As of June 30, 2017, the City had approximately $319.2 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, $216.5 million is classified as capital assets under the category
of Governmental Activities, and $57.6 million is classified as capital assets of Business-Type
Activities. In addition, there are $45.0 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.
14
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
Governmental Activities $216.5 million
The City has three Capital Projects Improvement Funds for the 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 recorded as additions to the appropriate
capital asset category at year-end. .
The City spent approximately $12.2 million this fiscal year on capital improvement projects.
These capital expenditures consisted of a variety of different projects that were either in
development or construction phase. The primary emphasis this fiscal year were Moonlight
Beach Marine Safety Headquarters rebuild, Leo Mullen artificial turf, Leucadia Boulevard and El
Camino Real traffic signals upgrade, Paul Ecke-Central Elementary School improvements, the
North Coast Highway 101 Streetscape, and on-going pavement overlay project.
Business-Type Activities
Capital Assets: $57.6 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 $2.7 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: $45.0 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 then is 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.
15
City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
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. Therefore, these resources are not
available to SDWD for the funding of its operations.
Cardiff Sanitary Division (CSD) 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 (ESD) 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.
DEBT ISSUANCE AND ADMINISTRATION
The City has a total of$67.7 million of long-term debt for both Governmental and Business-type
activities as shown in Note 9 — Long-Term Obligations schedule on page 76 of this report. The
Governmental Activities debt totaling $55.2 million include $2.2 million in capital leases, $49.0
million in bonded debt and $4.0 million in claims payable and compensated absences. The
capital leases consist of the Civic Center Roof Replacement and fire apparatus vehicles. The
Business-type Activities debt totals $12.5 million and includes $12.3 million in bonded debt and
$0.2 million in compensated absences. $7.0 million of the total $67.7 million is due within one
year.
Governmental Activities $55.2 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, the Encinitas Community Park
and the Pacific View land acquisition. On September 23, 2015, the Encinitas Public Financing
Authority (on behalf of the City) refunded its 2006 Public Library bonds with the principal
balance of $16,975,000 with the 2015 Lease Revenue Refunding Bonds for $15,645,000. The
issuance of the new debt and refunding of the old debt resulted in an economic gain of
approximately $3.2 million and the final maturity is the same. Debt payments for all of these
bonds are due semi-annually at fixed amounts, and the debt matures at various times through
2036. Annual debt service averages approximately $1.1 million.
The City has a policy of utilizing lease/purchase financing for the acquisition of equipment
costing more than $100,000. The City is obligated under a lease/purchase agreement (a private
placement with a financial institution) for improvements made to City Hall in 2008. Annual
payments on that lease are $180,000. The City's total annual debt service of approximately
$4.9 million represents approximately 7.1% of annual general fund operating revenues. The
City currently leases four Fire Engines and the average annual leases are $422,965.
16
_ City of Encinitas
Management's Discussion and Analysis (Continued)
For the Year Ended June 30, 2017
Business-Type Activities $12.5 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.
General Information on City debt
The City of Encinitas obtained and affirmed in 2015 an upgrade to its issuer credit rating to AAA by
Standard & Poor's (S & P). The City's credit rating affirmed recently by S & P issued a credit rating of AA+
on the City's 2015 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 legal appropriations set for the first year only. The operating and capital budgets for
Fiscal Year 2017-18 were appropriated by the City Council in June 2017.
Through the City Council's approval in March 2017, the engineering division and storm water functions will
be moved out of the City's Public Works Department and into the Planning & Building Department, which
will be renamed as Development Services Department for Fiscal Year 2017-18.
The fiscal year 2016-17 actual results, when compared to the adopted projections and appropriations,
showed revenues slightly above forecasts and expenditures significantly under budget. Fiscal year 2017-18
revenues expect to increase modestly above 2016-17 actual levels. Expenditures expect to decrease
greatly below 2016-17 levels. Next year's budget includes a 2% adjustment to employee compensation,
which is the largest portion of the general fund budget. Debt service costs will remain consistent with 2017-
18.
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.
17
FA
Ar
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18
BASIC FINANCIAL STATEMENTS
19
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20
GOVERNMENT-WIDE
FINANCIAL STATEMENTS
21
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22
City of Encinitas
Statement of Net Position
June 30, 2017
Primary Government
Governmental Business-Type
Activities Activities Total
ASSETS
Current assets:
Cash and investments(Note 3) $ 72,486,110 $ 38,718,713 $ 111,204,823
Restricted cash and investments with fiscal agent 2,266,016 20,237 2,286,253
Receivables (Note 4) 4,752,985 2,344,846 7,097,831
Inventory and prepaid items 1,047,191 307,949 1,355,140
Total current assets 80,552,302 41,391,745 121,944,047
Noncurrent assets:
Restricted cash and investments with fiscal agent - - -
Internal balances 71,443 (71,443) -
Long-term receivable (Note 6) 836,493 - 836,493
Investments in joint ventures (Note 5) - 45,099,620 45,099,620
Other assets(Note 7) - - -
Capital assets(Note 8):
Non-depreciable 79,859,572 14,374,609 94,234,181
Depreciable, net 136,695,056 43,140,741 179,835,797
Total capital assets, net 216,554,628 57,515,350 274,069,978
Total noncurrent assets 217,462,564 102,543,527 320,006,091
Total assets 298,014,866 143,935,272 441,950,138
DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on bond refunding 364,068 - 364,068
Pension related deferred outflows of resources(Note 14) 10,972,822 1,540,047 12,512,869
Total deferred outflows of resources 11,336,890 1,540,047 12,876,937
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 6,465,189 1,686,671 8,151,860
Interest payable 506,565 115,727 622,292
Unearned revenue 741,421 233 741,654
Deposits and other liabilities 3,263,843 316,515 3,580,358
Long-term liabilities-due within one year(Note 9) 5,050,915 1,954,418 7,005,333
Total current liabilities 16,027,933 4,073,564 20,101,497
Noncurrent liabilities:
Long-term liabilities-due in more than one year(Note 9) 50,158,464 10,542,608 60,701,072
Aggregate net pension liability(Note 14) 43,869,887 6,288,631 50,158,518
Total noncurrent liabilities 94,028,351 16,831,239 110,859,590
Total liabilities 110,056,284 20,904,803 130,961,087
DEFERRED INFLOWS OF RESOURCES
Deferred gain on refunding - 117,468 117,468
Pension related deferred inflows of resources(Note 14) 4,158,094 168,372 4,326,466
Total deferred inflows of resources 4,158,094 285,840 4,443,934
NET POSITION
Net investment in capital assets 165,759,601 44,977,544 210,737,145
Restricted:
Community development 1,329,540 - 1,329,540
Debt service 1,994,813 65 1,994,878
Housing - 20,172 20,172
Capital projects 16,543,189 - 16,543,189
Total restricted 19,867,542 20,237 19,887,779
Unrestricted (deficit) 9,510,235 79,286,895 88,797,130
Total Net Position $ 195,137,378 $ 124,284,676 $ 319,422,054
See accompanying Notes to the Basic Financial Statements.
23
City of Encinitas
Statement of Activities and Changes in Net Position
For the Year Ended June 30, 2017
Program Revenues
Operating Capital Total
Charges for Grants and Grants and Program
Functions/Programs Expenses Services Contributions Contributions Revenues
Primary government:
Governmental activities:
General government $ 11,737,634 $ 1,675,799 $ - $ - $ 1,675,799
Public safety 29,437,181 1,148,567 139,488 - 1,288,055
Public works 9,205,570 65,746 2,875,910 3,634,388 6,576,044
Planning and building 6,935,754 2,954,523 370,642 329,128 3,654,293
Engineering services 8,918,281 1,143,830 7,500 - 1,151,330
Parks and recreation 7,046,255 1,796,918 26,190 444,447 2,267,555
Interest on long-term debt 2,237,069 - - - -
Total governmental activities 75,517,744 8,785,383 3,419,730 4,407,963 16,613,076
Business-type activities:
Cardiff Sanitary Division 3,308,454 4,788,884 - 177,454 4,966,338
San Dieguito Water District 13,970,919 14,851,977 - 464,017 15,315,994
Encinitas Sanitary Division 2,037,116 2,819,006 - 94,899 2,913,905
Affordable Housing 1,449,917 213,124 1,099,366 - 1,312,490
Total business-type activities 20,766,406 22,672,991 1,099,366 736,370 24,508,727
Total primary government $ 96,284,150 $ 31,458,374 $ 4,519,096 $ 5,144,333 $ 41,121,803
See accompanying Notes to the Basic Financial Statements.
24
City of Encinitas
Statement of Activities and Changes in Net Position (Continued)
For the Year Ended June 30, 2017
Net(Expense) Revenue
and Changes in Net Position
Primary Government
Governmental Business-type
Functions/Programs Activities Activities Total
Primary government:
Governmental activities:
General government $ (10,061,835) $ - $ (10,061,835)
Public safety (28,149,126) - (28,149,126)
Public works (2,629,526) - (2,629,526)
Planning and building (3,281,461) - (3,281,461)
Engineering services (7,766,951) - (7,766,951)
Parks and recreation (4,778,700) - (4,778,700)
Interest on long-term debt (2,237,069) - (2,237,069)
Total governmental activities (58,904,668) - (58,904,668)
Business-type activities:
Cardiff Sanitary Division - 1,657,884 1,657,884
San Dieguito Water District - 1,345,075 1,345,075
Encinitas Sanitary Division - 876,789 876,789
Affordable Housing - (137,427) (137,427)
Total business-type activities - 3,742,321 3,742,321
(58,904,668) 3,742,321 (55,162,347)
General revenues:
Taxes:
Property taxes and documentary transfer taxes 43,494,220 959,873 44,454,093
Sales tax 12,549,609 - 12,549,609
Transient occupancy taxes 2,216,145 - 2,216,145
Franchise taxes 2,545,854 - 2,545,854
Total taxes 60,805,828 959,873 61,765,701
Intergovernmental-unrestricted 251,919 - 251,919
Use of money and property 770,634 (31,828) 738,806
Gain on disposal of capital assets 1,937 6,925 8,862
Impairment loss on capital assets(note 8) (2,088,668) - (2,088,668)
Other 961,475 216,146 1,177,621
Total general revenues and transfers 60,703,125 1,151,116 61,854,241
Changes in net position 1,798,457 4,893,437 6,691,894
Net Position:
Beginning of year 193,338,921 119,391,239 312,730,160
End of year $ 195,137,378 $ 124,284,676 $ 319,422,054
See accompanying Notes to the Basic Financial Statements.
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FUND FINANCIAL STATEMENTS
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GOVERNMENTAL FUND
FINANCIAL STATEMENTS
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30
City of Encinitas
Balance Sheet
Governmental Funds
June 30, 2017
Major Funds
Capital
Improvements Other Total
General Capital Projects Governmental Governmental
Fund Fund Funds Funds
ASSETS
Cash and investments $ 27,033,981 $ 28,450,188 $ 9,361,249 $ 64,845,418
Receivables 4,305,095 - 447,890 4,752,985
Due from other funds 223,443 13,260,720 - 13,484,163
Inventory and prepaid items 302,034 - 296,234 598,268
Other assets - - - -
Long-term receivable 425,060 - 411,433 836,493
Restricted cash and investments 1,472,372 - 793,644 2,266,016
Total assets $ 33,761,985 $ 41,710,908 $ 11,310,450 $ 86,783,343
LIABILITIES, DEFERRED INFLOWS
OF RESOURCES,AND
FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities $ 4,226,315 $ 723,908 $ 958,726 $ 5,908,949
Interest payable - - - -
Unearned revenue 636,577 - 104,844 741,421
Due to other funds - - 13,412,720 13,412,720
Deposits and other liabilities 3,247,501 - 16,342 3,263,843
Total liabilities 8,110,393 723,908 14,492,632 23,326,933
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - - 411,433 411,433
Total deferred inflows of resources - - 411,433 411,433
Fund Balances:
Nonspendable 727,094 - 296,234 1,023,328
Restricted 1,472,372 21,988,785 8,293,740 31,754,897
Committed 13,937,399 18,998,215 - 32,935,614
Unassigned 9,514,727 - (12,183,589) (2,668,862)
Total fund balances 25,651,592 40,987,000 (3,593,615) 63,044,977
Total liabilities,deferred inflows
of resources, and fund balances $ 33,761,985 $ 41,710,908 $ 11,310,450 $ 86,783,343
See accompanying Notes to the Basic Financial Statements.
31
City of Encinitas
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2017
Total Fund Balances -Total Governmental Funds $ 63,044,977
Amounts reported for governmental activities in the Statement of Net Position were different because:
Capital assets used in governmental activities were not financial resources and therefore were not reported in
governmental funds(net of$3,326,817 reported in internal service funds).
Land 61,862,474
Land easements 2,286,158
Construction in progress 15,710,940
Public facilities 102,560,379
Vehicles, equipment and machinery 1,996,509
Infrastructure 111,550,194
Less: Accumulated depreciation (82,738,843)
Total capital assets 213,227,811
Deferred loss on refunding in the governmental activities were not financial resources and therefore were not
reported in governmental funds. 364,068
Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was
not reported as a liability in Governmental Funds Balance Sheet. (506,565)
Long-term liabilities applicable to the City's governmental activities were not due and payable in the current
period and therefore were not reported in the governmental funds (net of$1,225,391 reported in internal service
funds):
Amount reported in Government-Wide Statement of Net Position:
2008 Civic Center roof replacement lease (979,891)
2002 ABAG financing (290,000)
2013 Community Park Bonds, net of unamortized premium of$96,360 (6,686,360)
2014 Moonlight Beach Tower Series A Bonds, net of unamortized discount of$27,438 (2,937,562)
2014 Pacific View Series B Bonds, net of unamortized discount of$140,834 (9,824,166)
2015 Library Refunding Bonds, net of unamortized premium of$735,441 (15,900,441)
2017 Park Refunding Bonds, net of unamortized premium of$1,360,284 (13,315,284)
Claims payable (2,113,535)
Compensated absences (1,936,749)
Total long-term liabilities (53,983,988)
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. (43,869,887)
Actuarially determined pension deferred outflows of resources are reported in the government-wide statements
but are not reported in the governmental funds. 10,972,822
Actuarially determined pension deferred inflows of resources are reported in the government-wide statements
but are not reported in the governmental funds. (4,158,094)
Unavailable revenue deferred inflows of resources are not available for the current period and, therefore, are
deferred in the governmental funds or not recorded in the governmental funds. 411,433
Internal service funds were used by management to charge the costs of risk management, personnel support,
fleet maintenance and vehicle replacement to individual funds. The assets and liabilities of the internal service
funds were included in governmental activities in the Government-Wide Statement of Net Position. 9,634,801
Net Position of Governmental Activities $ 195,137,378
See accompanying Notes to the Basic Financial Statements.
32
City of Encinitas
Statement of Revenues, Expenditures, and Changes in Fund Balance
Governmental Funds
For the Year Ended June 30, 2017
Major Funds
Capital
Improvements Other Total
General Capital Projects Governmental Governmental
Fund Fund Funds Funds
REVENUES:
Taxes and assessments $ 59,039,035 $ - $ 2,895,386 $ 61,934,421
Licenses and permits 250,749 - - 250,749
Intergovernmental 655,906 329,128 5,451,565 6,436,599
Development impact fees - - 800,370 800,370
Charges for services 6,688,958 - - 6,688,958
Fines, forfeitures and penalties 850,153 - - 850,153
Use of money and property 1,047,909 - 237,140 1,285,049
Other 889,150 34,089 241,094 1,164,333
Total revenues 69,421,860 363,217 9,625,555 79,410,632
EXPENDITURES:
Current:
General government 9,873,643 - 143,787 10,017,430
Public safety 27,499,669 - 225,290 27,724,959
Public works 4,256,600 - 2,094,937 6,351,537
Planning and building 4,662,871 - 447,427 5,110,298
Engineering services 4,147,138 - 221,463 4,368,601
Parks and recreation 6,375,653 - 234,655 6,610,308
Capital outlay - 12,230,552 - 12,230,552
Debt service:
Principal - - 2,853,417 2,853,417
Interest and fiscal charges - - 2,077,770 2,077,770
Total expenditures 56,815,574 12,230,552 8,298,746 77,344,872
REVENUES OVER
(UNDER) EXPENDITURES 12,606,286 (11,867,335) 1,326,809 2,065,760
OTHER FINANCING SOURCES (USES):
Issuance of debt - - 11,955,000 11,955,000
Premium on bond issuance - - 1,360,284 1,360,284
Deposit to escrow for bond refunding - - (14,725,914) (14,725,914)
Transfers in 2,317,535 28,072,797 4,769,507 35,159,839
Transfers out (22,156,773) (1,621,363) (12,872,709) (36,650,845)
Total other financing sources(uses) (19,839,238) 26,451,434 (9,513,832) (2,901,636)
NET CHANGE IN FUND BALANCES (7,232,952) 14,584,099 (8,187,023) (835,876)
FUND BALANCES:
Beginning of year 32,884,544 26,402,901 4,593,408 63,880,853
End of year $ 25,651,592 $ 40,987,000 $ (3,593,615) $ 63,044,977
See accompanying Notes to the Basic Financial Statements.
33
City of Encinitas
Reconciliation of the Governmental Statement of Revenues, Expenditures, and Changes in
Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position
For the Year Ended June 30, 2017
Net Change in Fund Balances-Total Governmental Funds $ (835,876)
Amounts reported for governmental activities in the Statement of Activities were different because:
Governmental funds reported capital outlay as expenditures. However, in the Government-Wide Statement of Activities
and Changes in Net Position, the cost of those assets was allocated over their estimated useful lives as depreciation
expense. This was the amount of capital assets recorded in the current period. 6,492,650
Contributions of capital assets were reported in the Government-Wide Statement of Activities and Changes in Net
Position, but they did not provide current financial resources. Therefore, contribution revenue was not reported as
revenue in the Governmental Funds. 9,500
Depreciation expense on capital assets was reported in the Government-Wide Statement of Activities and Changes in
Net Position, but it did not require the use of current financial resources. Therefore, depreciation expense was not
reported as expenditures in the Governmental Funds(net of$531,073 recorded in internal service funds). (5,898,726)
Impairment loss on disposal of capital assets is reported in the Statement of Activities but did not require the use of
current financial resources and,therefore,was not reported as an expenditure in the governmental funds. (2,088,668)
The issuance of long-term liabilities provided current financial resources to governmental funds, but issuing debt
increased long-term liabilities in the Government-Wide Statement of Net Position. Repayment of long-term liabilities was
an expenditure in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide
Statement of Net Position.
Issuance of long-term debt (11,955,000)
Premium on issuance of long-term debt (1,360,284)
Refunding of long-term debt 14,725,914
Principal payment of long-term debt 2,853,417
Interest payment on long-term debt (78,258)
Amortization expenses were reported in the Government-Wide Statement of Activities and Changes in Net Position, but
they did not require the use of current financial resources. Therefore, amortization expenses were not reported as
expenditures in the Governmental Funds.
Bond premium and discount (62,303)
Deferred amounts on refunding (19,161)
Certain long-term liabilities were reported in the Government-Wide Statement of Activities and Changes in Net Position,
but they did not require the use of current financial resources. Therefore, long-term liabilities were not reported as
expenditures in governmental funds. These amounts represented the changes in long-term liabilities from prior year.
Changes in compensated absences 170,940
Changes in claims payable (524,315)
Changes in the net pension liability reported in the Statement of Activities did not require the use of current financial
resources and,therefore,were not reported as an expenditure in the governmental funds. (8,993,255)
Changes in deferred outflows of resources in the Government-Wide Statement of Net Position but is reported as pension
expense in governmental funds. 6,435,792
Changes in deferred inflows of resources in the Government-Wide Statement of Net Position but is reported as pension
expense in governmental funds. 1,286,168
Interest expense on long-term debt was reported in the Government-Wide Statement of Activities and Changes in Net
Position, but it did not require the use of current financial resources. This amount represented the change in accrued
interest from prior year. 19,285
Issuances of loans receivable were recorded as expenditures in the governmental funds but not on the Government-
Wide Statement of Activities and Changes in Net Position. (17,200)
Internal service funds were used by management to charge the costs of certain activities to individual funds. The net
revenue of internal service funds was reported with governmental activities. 1,637,837
Change in Net Position of Governmental Activities $ 1,798,457
See accompanying Notes to the Basic Financial Statements.
34
PROPRIETARY FUND
FINANCIAL STATEMENTS
35
City of Encinitas
Statement of Net Position
Proprietary Funds
June 30, 2017
Major Enterprise Funds
Cardiff San Dieguito Encinitas
Sanitary Water Sanitary
Division District Division
ASSETS
Current assets:
Cash and investments $ 12,969,322 $ 13,671,646 $ 11,611,467
Restricted cash and investments with fiscal agent - 65 -
Accounts and taxes receivable 53,999 2,243,159 37,613
Inventory and prepaid items 2,219 221,388 1,742
Total current assets 13,025,540 16,136,258 11,650,822
Noncurrent assets:
Investment in joint ventures 18,530,234 22,547,246 4,022,140
Capital assets:
Land easements - 3,262,678 -
Public works facility right-of-use - 3,378,700 -
Construction in progress 3,452,586 1,914,409 2,366,236
Capacity rights, net - 184,757 -
Utility, plant, vehicles, and equipment, net 13,112,809 14,482,013 12,655,020
Total capital assets, net 16,565,395 23,222,557 15,021,256
Total noncurrent assets 35,095,629 45,769,803 19,043,396
Total assets 48,121,169 61,906,061 30,694,218
DEFERRED OUTFLOWS OF RESOURCES
Deferred pension related items - 1,540,047 -
Total deferred outflows of resources - 1,540,047 -
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 84,671 1,189,620 405,056
Due to other funds - - -
Accrued interest payable 18,468 97,259 -
Unearned revenue - - -
Deposits 1,250 298,195 -
Current portion of long-term debt 640,352 1,222,845 -
Total current liabilities 744,741 2,807,919 405,056
Noncurrent liabilities:
Capital leases payable - - -
Revenue bonds payable, due in more than one year - 4,630,602 -
Notes and mortgages payable, due in more than one year 918,948 3,820,000 -
Aggregate net pension liability(Note 14) - 6,288,631 -
Total noncurrent liabilities 918,948 14,739,233 -
Totalliabilities 1,663,689 17,547,152 405,056
DEFERRED INFLOWS OF RESOURCES
Deferred amount on refunding 117,468 - -
Deferred pension related items(Note 14) - 168,372 -
Total deferred inflows of resources 117,468 168,372 -
NET POSITION
Net investment in capital assets 14,888,627 13,614,696 15,021,256
Restricted:
Debt service - 65 -
Housing - - -
Unrestricted 31,451,385 32,115,823 15,267,906
Total net position $ 46,340,012 $ 45,730,584 $ 30,289,162
See accompanying Notes to the Basic Financial Statements.
36
City of Encinitas
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2017
Nonmajor
Enterprise Fund Governmental
Activities
Affordable Internal
Housing Total Service Funds
ASSETS
Current assets:
Cash and investments $ 466,278 $ 38,718,713 $ 7,640,692
Restricted cash and investments with fiscal agent 20,172 20,237 -
Accounts and taxes receivable 10,075 2,344,846 -
Inventory and prepaid items 82,600 307,949 448,923
Total current assets 579,125 41,391,745 8,089,615
Noncurrent assets:
Investment in joint ventures - 45,099,620 -
Capital assets:
Land easements - 3,262,678 -
Public works facility right-of-use - 3,378,700 -
Construction in progress - 7,733,231 -
Capacity rights, net - 184,757 -
Utility, plant, vehicles, and equipment, net 2,706,142 42,955,984 3,326,817
Total capital assets, net 2,706,142 57,515,350 3,326,817
Total noncurrent assets 2,706,142 102,614,970 3,326,817
Total assets 3,285,267 144,006,715 11,416,432
DEFERRED OUTFLOWS OF RESOURCES
Deferred pension related items - 1,540,047 -
Total deferred outflows - 1,540,047 -
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 7,324 1,686,671 556,240
Due to other funds 71,443 71,443 -
Accrued interest payable - 115,727 -
Unearned revenue 233 233 -
Deposits 17,070 316,515 -
Current portion of long-term debt 91,221 1,954,418 422,965
Total current liabilities 187,291 4,145,007 979,205
Noncurrent liabilities:
Capital leases payable - - 802,426
Revenue bonds payable, due in more than one year - 4,630,602 -
Notes and mortgages payable, due in more than one year 1,173,058 5,912,006 -
Aggregate net pension liability(Note 14) - 6,288,631 -
Total noncurrent liabilities 1,173,058 16,831,239 802,426
Total liabilities 1,360,349 20,976,246 1,781,631
DEFERRED INFLOWS OF RESOURCES
Deferred amount on refunding - 117,468 -
Deferred pension related items(Note 14) - 168,372 -
Total deferred inflows - 285,840 -
NET POSITION
Net investment in capital assets 1,452,965 44,977,544 2,101,426
Restricted:
Debt service - 65 -
Housing 20,172 20,172 -
Unrestricted 451,781 79,286,895 7,533,375
Total net position $ 1,924,918 $ 124,284,676 $ 9,634,801
See accompanying Notes to the Basic Financial Statements.
37
City of Encinitas
Statement of Revenues, Expenses, and Changes in Net Position
Proprietary Funds
For the Year Ended June 30, 2017
Major Enterprise Funds
Cardiff San Dieguito Encinitas
Sanitary Water Sanitary
Division District Division
OPERATING REVENUES:
Charges for services $ 4,788,884 $ 14,788,114 $ 2,819,006
Rental income - 91,247 -
Interfund revenues - 63,863 -
Intergovernmental - - -
Other revenues 40,237 37,620 -
Total operating revenues 4,829,121 14,980,844 2,819,006
OPERATING EXPENSES:
Housing assistance payments - - -
Source of supply - 5,888,028 -
General operations and maintenance 923,801 4,982,370 514,407
Facility operations and maintenance 1,381,047 1,570,463 565,412
General and administrative 227,958 551,431 110,966
Depreciation of capital assets 386,191 694,595 369,669
Amortization of investment in joint ventures 368,209 284,032 458,370
Administrative support - - -
Operational support services - - -
Insurance and claims 21,248 - 18,292
Total operating expenses 3,308,454 13,970,919 2,037,116
OPERATING INCOME(LOSS) 1,520,667 1,009,925 781,890
NONOPERATING REVENUES (EXPENSES):
Use of money and property 76,327 81,966 62,244
Property taxes - 959,873 -
Operating grants - - -
Gain on disposal of capital assets - 6,925 -
Accretion of bond premium 63,768 74,372 -
Interest expense (71,726) (366,740) -
Total nonoperating revenues(expenses) 68,369 756,396 62,244
INCOME (LOSS)BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS 1,589,036 1,766,321 844,134
Capital contributions 177,454 464,017 94,899
Transfers in - - -
Transfers out - - -
Total capital contributions and transfers 177,454 464,017 94,899
CHANGES IN NET POSITION 1,766,490 2,230,338 939,033
NET POSITION:
Beginning of year 44,573,522 43,500,246 29,350,129
End of year $ 46,340,012 $ 45,730,584 $ 30,289,162
See accompanying Notes to the Basic Financial Statements.
38
City of Encinitas
Statement of Revenues, Expenses, and Changes in Net Position (Continued)
Proprietary Funds
For the Year Ended June 30, 2017
Nonmajor
Enterprise Fund Governmental
Activities
Affordable Internal
Housing Total Service Funds
OPERATING REVENUES:
Charges for services $ - $ 22,396,004 $ -
Rental income 112,770 204,017 -
Interfund revenues 107,135 170,998 2,483,801
Intergovernmental 105,989 105,989 -
Other revenues 149 78,006 1,501,830
Total operating revenues 326,043 22,955,014 3,985,631
OPERATING EXPENSES:
Housing assistance payments 1,095,791 1,095,791 -
Source of supply - 5,888,028 -
General operations and maintenance 102,527 6,523,105 -
Facility operations and maintenance - 3,516,922 -
General and administrative 147,821 1,038,176 -
Depreciation of capital assets 100,538 1,550,993 531,073
Amortization of investment in joint ventures - 1,110,611 -
Administrative support - - 1,426,121
Operational support services - - 768,326
Insurance and claims 3,240 42,780 1,096,356
Total operating expenses 1,449,917 20,766,406 3,821,876
OPERATING INCOME(LOSS) (1,123,874) 2,188,608 163,755
NONOPERATING REVENUES (EXPENSES):
Use of money and property 3,730 224,267 -
Property taxes - 959,873 -
Operating grants 1,099,366 1,099,366 -
Gain (loss)on disposal of capital assets - 6,925 1,937
Accretion of bond premium - 138,140 -
Interest expense (21,646) (460,112) (18,861)
Total nonoperating revenues(expenses) 1,081,450 1,968,459 (16,924)
INCOME (LOSS)BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS (42,424) 4,157,067 146,831
Capital contributions - 736,370 -
Transfers in - - 1,604,006
Transfers out - - (113,000)
Total capital contributions and transfers - 736,370 1,491,006
CHANGES IN NET POSITION (42,424) 4,893,437 1,637,837
NET POSITION:
Beginning of year 1,967,342 119,391,239 7,996,964
End of year $ 1,924,918 $ 124,284,676 $ 9,634,801
See accompanying Notes to the Basic Financial Statements.
39
City of Encinitas
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2017
Major Enterprise Funds
Cardiff San Dieguito Encinitas
Sanitary Water Sanitary
Division District Division
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from users $ 4,823,129 $ 15,118,189 $ 2,824,836
Cash received from other funds - 63,863 -
Cash payments to suppliers and employees for goods and services (2,496,408) (12,765,157) (1,157,492)
Other operating revenues 40,237 37,620 -
Net cash provided by(used in)operating activities 2,366,958 2,454,515 1,667,344
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Acquisition of capital assets (1,956,962) (1,433,511) (105,013)
Capital contributions received-connection/capacity fees 177,454 464,017 94,899
Principal payments on long-term debt (612,192) (1,025,000) -
Proceeds from issuance of debt - - -
Interest payments on long-term debt (79,888) (276,628) -
Capital related payments to other agencies (451,816) (3,051,139) (543,080)
Proceeds received from disposal of capital assets - 6,925
Net cash (used in)capital and related financing activities (2,923,404) (5,315,336) (553,194)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Operating grants - - -
Proceeds from property taxes - 959,873 -
Transfers in - - -
Transfers(out) - -
Net cash provided by noncapital financing activities - 959,873 -
CASH FLOWS FROM INVESTING ACTIVITIES:
Interest income 76,327 81,966 62,244
Net cash provided by investing activities 76,327 81,966 62,244
Net increase(decrease)in cash and cash equivalents (480,119) (1,818,982) 1,176,394
CASH AND CASH EQUIVALENTS:
Beginning of year, as restated(Note 18) 13,449,441 15,490,693 10,435,073
End of year $ 12,969,322 $ 13,671,711 $ 11,611,467
RECONCILIATION OF CASH AND CASH EQUIVALENTS TO
STATEMENT OF NET POSITION:
Cash and investments $ 12,969,322 $ 13,671,646 $ 11,611,467
Restricted cash and investments with fiscal agent - 65 -
Total cash and cash equivalents $ 12,969,322 $ 13,671,711 $ 11,611,467
See accompanying Notes to the Basic Financial Statements.
40
City of Encinitas
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2017
Governmental
Nonmajor Activities
Affordable Internal
Housing Total Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from users $ 220,070 $ 22,986,224 $ 4,020,350
Cash received from(paid to)other funds 112,968 176,831 (629,851)
Cash payments to suppliers and employees for goods and services (1,344,918) (17,763,975) (2,729,838)
Other operating revenues 149 78,006 -
Net cash provided by(used in)operating activities (1,011,731) 5,477,086 660,661
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Acquisition of capital assets - (3,495,486) (662,875)
Capital contributions received-connection/capacity fees - 736,370 -
Principal payments on long-term debt (77,819) (1,715,011) (331,993)
Proceeds from issuance of debt - - 629,851
Interest payments on long-term debt (21,646) (378,162) (18,861)
Capital related payments to other agencies - (4,046,035) -
Proceeds received from disposal of capital assets - 6,925 1,937
Net cash (used in)capital and related financing activities (99,465) (8,891,399) (381,941)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Operating grants 1,099,366 1,099,366 -
Proceeds from property taxes - 959,873 -
Transfers in - - 1,604,006
Transfers(out) - - (113,000)
Net cash provided by noncapital financing activities 1,099,366 2,059,239 1,491,006
CASH FLOWS FROM INVESTING ACTIVITIES:
Interest income 3,730 224,267 -
Net cash provided by investing activities 3,730 224,267 -
Net increase(decrease)in cash and cash equivalents (8,100) (1,130,807) 1,769,726
CASH AND CASH EQUIVALENTS:
Beginning of year, as restated(Note 18) 494,550 39,869,757 5,870,966
End of year $ 486,450 $ 38,738,950 $ 7,640,692
RECONCILIATION OF CASH AND CASH EQUIVALENTS TO
STATEMENT OF NET POSITION:
Cash and investments $ 466,278 $ 38,718,713 $ 7,640,692
Restricted cash and investments with fiscal agent-current 20,172 20,237 -
Total cash and cash equivalents $ 486,450 $ 38,738,950 $ 7,640,692
See accompanying Notes to the Basic Financial Statements.
41
City of Encinitas
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2017
Major Enterprise Funds
Cardiff San Dieguito Encinitas
Sanitary Water Sanitary
Division District Division
RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH
PROVIDED BY(USED IN)OPERATING ACTIVITIES:
Operating income(loss) $ 1,520,667 $ 1,009,925 $ 781,890
Adjustments to reconcile operating income to net cash
provided(used)by operating activities:
Depreciation 386,191 694,595 369,669
Amortization of other assets - - -
Amortization of investment in joint ventures 368,209 284,032 458,370
Changes in operating assets, deferred outflows of resources,
liabilities, and deferred inflows of resources:
Accounts and taxes receivable 34,245 238,828 5,830
Inventory and prepaid items (2,219) (39,995) (1,742)
Pension-related deferred outflows - (699,416) -
Accounts payable and accrued liabilities 59,865 (127,094) 53,327
Due to other funds - - -
Unearned revenue - - -
Deposits - (56,433) -
Aggregate net pension liability - 1,269,138 -
Pension-related deferred inflows - (119,065) -
Total adjustments 846,291 1,444,590 885,454
Net cash provided by(used in)operating activities $ 2,366,958 $ 2,454,515 $ 1,667,344
NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Amortization of original issue premium $ 34,401 $ 74,371 $ -
Contributions of capital assets - 302,317 -
$ 34,401 $ 376,688 $ -
See accompanying Notes to the Basic Financial Statements.
42
City of Encinitas
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2017
Governmental
Nonmajor Activities
Affordable Internal
Housing Total Service Funds
RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH
PROVIDED BY(USED IN)OPERATING ACTIVITIES:
Operating income(loss) $ (1,123,874) $ 2,188,608 $ 163,755
Adjustments to reconcile operating income to net cash
provided(used)by operating activities:
Depreciation 100,538 1,550,993 531,073
Amortization of other assets - - -
Amortization of investment in joint ventures - 1,110,611 -
Changes in operating assets, deferred outflows of resources,
liabilities, and deferred inflows of resources:
Accounts and taxes receivable 1,311 280,214 34,719
Inventory and prepaid items (2,115) (46,071) 180,928
Pension-related deferred outflows - (699,416) -
Accounts payable and accrued liabilities 7,175 (6,727) 380,037
Due to other funds 5,833 5,833 (629,851)
Unearned revenue (659) (659) -
Deposits 60 (56,373) -
Aggregate net pension liability - 1,269,138 -
Pension-related deferred inflows - (119,065) -
Total adjustments 112,143 3,288,478 496,906
Net cash provided by(used in)operating activities $ (1,011,731) $ 5,477,086 $ 660,661
NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Amortization of original issue premium $ - $ 108,772 $ -
Contributions of capital assets - 302,317 -
$ - $ 411,089 $ -
See accompanying Notes to the Basic Financial Statements.
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FIDUCIARY FUND
FINANCIAL STATEMENTS
Agency Funds — These funds are used to account for money and property held by the City as trustee or
custodian. They are custodial in nature (assets equal liabilities). These funds include one Assessment District
and one Community Facilities (Mello-Roos) District.
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46
City of Encinitas
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2017
Agency
Funds
ASSETS
Cash and investments $ 2,139,194
Restricted cash and investments with fiscal agent 1,979,042
Special assessments receivable 26,925,000
Current assessments receivable 11,833
Total assets $ 31,055,069
LIABILITIES
Due to bondholders $ 31,055,069
Total liabilities $ 31,055,069
See accompanying Notes to the Basic Financial Statements.
47
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48
City of Encinitas
Notes to the Basic Financial Statements
For the Year Ended June 30, 2017
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 City is governed by a City Council consisting of a mayor and four council members under the Council-
Manager form of government.
In evaluating how to define the City for financial reporting purposes, management has considered all
potential component units. The primary criteria for including a potential component unit within the reporting
entity are the governing body's financial accountability and a financial benefit or burden relationship and
whether it is misleading to exclude. A primary government is financially accountable and shares a financial
benefit or burden relationship if it appoints a voting majority of an organization's governing body and it is
able to impose its will on the organization, or if there is a potential for the organization to provide specific
financial benefits to, or impose specific financial burdens on the primary government. A primary government
may also be financially accountable if an organization is fiscally dependent on the primary government
regardless of whether the organization has a separately elected governing board, a governing board
appointed by a higher level of government, or a jointly appointed board, and there is a potential for the
organization to provide specific financial benefits to, or impose specific financial burdens on the primary
government.
Blended Component Units
Although the following are legally separate from the City, they have been "blended" as though they are part
of the City because the component unit's governing body is substantially the same as the City's and there is
a financial benefit or burden relationship between the City and the component unit; management of the City
has operational responsibilities for the component units; and/or the component units provide services
entirely, or almost entirely, to the City or otherwise exclusively, or almost exclusively, benefits the City, even
though it does not provide services directly to it.
The Encinitas Housing Authority (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 Encinitas Public Financing Authority (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.
The San Dieguito Water District ("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.
49
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 1 — Reporting Entity (Continued)
Blended Component Units (Continued)
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.
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.
The Statement of Net Position/Balance Sheet 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, 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, 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.
50
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
B. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued)
Government-Wide Financial Statements (Continued)
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
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.
51
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
B. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued)
Government Fund Financial Statements (Continued)
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.
The City reports the following major Governmental Funds:
The General Fund is used to account for resources which are not required to be accounted for in
another fund. The fund includes the general activities of the City and other administrative functions.
The Capital Improvements Capital Projects Fund is used to account for financial resources to be
used for the acquisition or construction of major property, equipment, or facilities which are generally
financed by governmental funds.
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.
52
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
B. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued)
Proprietary Fund Financial Statements (Continued)
Operating revenues in the proprietary funds are those revenues that are generated from the primary
operations of the fund. All other revenues are reported as non-operating revenues. Operating
expenses are those expenses that are essential to the primary operations of the fund. All other
expenses are reported as non-operating expenses.
The City reports the following major proprietary funds:
The Cardiff Sanitary Division ("CSD") Enterprise Fund provides wastewater collection and
treatment services to approximately 6,000 customers in the southern portion of the City.
The San Dieguito Water District ("SDWD") Enterprise Fund provides potable and reclaimed
water services to approximately 11,000 customers in Encinitas.
The Encinitas Sanitary Division ("ESD") Enterprise Fund provides wastewater collection and
treatment services to approximately 5,000 customers in the northern portion of the City.
Fiduciary Fund Financial Statements
Fiduciary fund financial statements are accounted for according to the nature of the fund. The City has
only Agency funds, which are purely custodial in nature (assets equal liabilities) and thus, do not involve
the measurement of the results of operations. These funds are accounted for on the accrual basis of
accounting.
The Agency Fund accounts for one Assessment District and one Community Facilities (Mello-Roos)
District for which the City acts as an agent for debt service activities.
53
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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. Fair Value Measurement
U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes
disclosures about fair value measurement. Investments, unless otherwise specified, recorded at fair
value in the Statements of Net Position, are categorized based upon the level of judgment
associated with the inputs used to measure their fair value. Levels of inputs are as follows:
Level 1 — Inputs are unadjusted, quoted prices for identical assets and liabilities in active markets at the
measurement date.
Level 2 — Inputs, other than quoted prices included in Level 1, which are observable for the asset or
liability through corroboration with market data at the measurement date.
Level 3 — Unobservable inputs that reflect management's best estimate of what market participants
would use in pricing the asset or liability at the measurement date.
54
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
F. Receivables
Receivables include such items as taxes, intergovernmental revenues, charges for services,
miscellaneous accounts receivable, and interest receivable. No allowance for doubtful accounts has
been established, as the City believes all amounts are considered to be collectible in the normal course
of business.
G. 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. See Note 5, Investment in Joint Ventures.
H. Inventory and Prepaid Items
Inventory applies only to SDWD and consists of water meters and other material used in the repair of
capital facilities. Inventory is valued at average-cost using first-in first-out basis. Prepaid items are
payments made to vendors for services that will benefit periods beyond the fiscal year ended, such as
prepaid pension costs for the City and SDWD.
I. Other Assets
Other assets include prepaid pension costs for the City and SDWD.
J. 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 acquisition value on the date donated. City policy
has set the capitalization threshold for reporting capital assets at $5,000 for non-infrastructure assets
and $100,000 for infrastructure assets. Depreciation is recorded on a straight-line basis over estimated
useful lives of the assets as follows:
Structures and improvements 20-45 years
Equipment, machinery and vehicles 5-20 years
Infrastructure 20-50 years
Collection and distribution systems 50 years
The City defines infrastructure as the basic physical assets that allow the City to function.
Governmental fund capital assets include land, land easements, construction in progress, public
facilities (buildings and building improvements), vehicles, equipment and machinery, and infrastructure
assets (e.g., roads, streets and sidewalks, bridges, curbs and gutters, drainage systems, lighting
systems and similar assets).
55
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
J. Capital Assets (Continued)
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 acquisition value on the date of donation.
K. Deposit Liabilities
The City collects deposits from homeowners and commercial enterprises as surety for the payment of
fees and other costs related to planning and engineering services provided by the City. The City collects
two types of deposits: (1) Application Deposits and (2) Security Deposits. Application deposits are
collected on certain projects for which a fee for services has not been established. As costs for these
projects are incurred by the City, the applicant's deposit balance is adjusted and revenue (including
applicable overhead charges) is recognized. Expenses incurred in excess of the deposit amounts are
billed to the applicant. Any surplus at project completion is returned to the applicant. Security deposits
are collected from the applicant to guarantee required performance. These may either be in cash or in
the form of non-cash, such as performance bonds or letters of credit. The amount of cash deposits on
hand as of June 30, 2017 is reported as a current liability in the Statement of Net Position and Balance
Sheets. Noncash security deposits are not reported as liabilities, as the corresponding surety is not an
asset of the City.
L. Unearned Revenue
Unearned revenue recorded in the government-wide statement of net position for governmental
activities and the governmental fund financial statements consist of federal and state capital grants,
representing voluntary nonexchange transactions, for which advance payments have been received
from the provider for which eligibility requirements, other than timing requirements, have not been
satisfied.
Unearned revenue recorded in the government-wide statement of net position for business-type
activities and the proprietary fund financial statements generally consist of program fees collected from
customers prior to the statement of net position date for recreation programs that begin in the next fiscal
year or donations for capital or work projects, for which the related expenses have not yet been
incurred.
M. Long-Term Debt
For the government-wide financial statements and proprietary fund financial statements, long-term debt
and other financial obligations are reported as liabilities, net of bond premiums or discounts. Bond
premiums and discounts are amortized over the life of the bonds using the straight-line method.
Issuance costs are reported as expense when incurred.
Governmental fund financial statements do not present long-term debt but are shown in the
Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net
Position.
56
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
N. Arbitrage Rebate Requirement
The City is subject to the Internal Revenue Code ("IRC") Section 148(f), related to its tax exempt
revenue bonds. The IRC requires that investment earnings on gross proceeds of any revenue bonds
that are in excess of the amount prescribed be surrendered to the Internal Revenue Service. The City
had a rebate liability for arbitrage of$86,943 as of June 30, 2017.
O. Claims Liabilities
The City accounts for material claims and judgments outstanding at year-end. When it is probable that a
claim liability has been incurred at year-end, and the amount of the loss can be reasonably estimated,
the City records the estimated loss.
P. Compensated Absences
The City's policy permits its non-fire employees to accumulate not more than two times their current
annual vacation allotment. Fire employees can accrue up to a maximum of 720 hours of vacation,
depending on length of employment with the City. Non-fire employees are compensated five days of
sick leave per year with no balances accruing upon separation of employment. Fire employees may
accrue up to 240 hours of sick leave. The combined unused vacation and sick pay will be paid to the
employee or his/her beneficiary upon leaving the City's employment. The amount due will be determined
using salary/wage rate in effect at the time of separation.
Government-Wide Financial Statements — For governmental and business-type activities,
compensated absences are recorded as expenses and liabilities as incurred.
Fund Financial Statements — In governmental funds, compensated absences are recorded as
expenditures in the years paid, as it is the City's policy to liquidate any unpaid compensated
absences at June 30 from future resources, rather than currently available financial resources. The
General Fund is typically used to liquidate compensated absences. In proprietary funds,
compensated absences are expensed to the various funds in the period they are earned, and such
fund's share of the unpaid liability is recorded as a long-term liability of the fund.
Q. 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 date June 30, 2015
Measurement Date June 30, 2016
Measurement Period July 1, 2015 to June 30, 2016
57
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
Q. Pensions (Continued)
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.
R. 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, plus deferred outflows of resources attributed to their
acquisition, reduced by the outstanding balances of debt that are attributable to the acquisition,
construction, or improvement of those assets and deferred inflows of resources attributable to
their acquisition.
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.
S. 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, and 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.
58
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
S. Fund Balances (Continued)
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.
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.
T. 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.
59
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
U. 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.
V. Accounting Changes
New Governmental Accounting Standards Implemented for the Year Ended June 30, 2017
GASB Statement No. 73
In June 2015, GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and
Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain
Provisions of GASB Statements 67 and 68. This Statement establishes requirements for defined
benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial
Reporting for Pensions, as well as for the assets accumulated for purposes of providing those
pensions. In addition, it establishes requirements for defined contribution pensions that are not
within the scope of Statement 68. It also amends certain provisions of Statement No. 67, Financial
Reporting for Pension Plans, and Statement 68 for pension plans and pensions that are within their
respective scopes. This implementation did not have an effect on the City's financial statements.
GASB Statement No. 74
In June 2015, GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit
Plans Other Than Pension Plans, which addresses reporting by postemployment benefits other than
pensions (OPEB) plans that administer benefits on behalf of governments. This statement basically
parallels GASB Statement 67 and replaces GASB Statement 43. Application of this statement is
effective for the City's fiscal year ending June 30, 2017. This implementation did not have an effect
on the City's financial statements. This implementation did not have an effect on the City's financial
statements.
GASB Statement No. 77
In August 2015, the GASB issued Statement No. 77, Tax Abatement Disclosures. This statement
establishes financial reporting standards for tax abatement agreements entered into by state and
local governments. This implementation did not have an effect on the City's financial statements.
60
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
V. Accounting Changes (Continued)
New Governmental Accounting Standards Implemented for the Year Ended June 30, 2017
(Continued)
GASB Statement No. 78
In December 2015, GASB issued Statement No. 78, Pensions Provided Through Certain Multiple-
Employer Defined Benefit Pension Plans. This Statement amends the scope and applicability of
Statement 68 to exclude pensions provided to employees of state or local governmental employers
through a cost-sharing multiple-employer defined benefit pension plan that (1) is not a state or local
governmental pension plan, (2) is used to provide defined benefit pensions both to employees of
state or local governmental employers and to employees of employers that are not state or local
governmental employers, and (3) has no predominant state or local governmental employer (either
individually or collectively with other state or local governmental employers that provide pensions
through the pension plan). This Statement establishes requirements for recognition and
measurement of pension expense, expenditures, and liabilities; note disclosures; and required
supplementary information for pensions that have the characteristics described above. This
implementation did not have an effect on the City's financial statements.
GASB Statement No. 79
In December 2015, GASB issued Statement No. 79, Certain External Investment Pools and Pool
Participants. This Statement establishes additional note disclosure requirements for qualifying
external investment pools that measure all of their investments at amortized cost for financial
reporting purposes and for governments that participate in those pools. Those disclosures for both
the qualifying external investment pools and their participants include information about any
limitations or restrictions on participant withdrawals. This implementation did not have an effect on
the City's financial statements.
GASB Statement No. 80
In December 2015, GASB issued Statement No. 80, Blending Requirements for Certain Component
Units — An Amendment of GASB Statement No. 14. This Statement amends the blending
requirements for the financial statement presentation of component units of all state and local
governments. The additional criterion requires blending of a component unit incorporated as a not-
for-profit corporation in which the primary government is the sole corporate member. The additional
criterion does not apply to component units included in the financial reporting entity pursuant to the
provisions of Statement No. 39, Determining Whether Certain Organizations Are Component Units.
This implementation did not have an effect on the City's financial statements.
61
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
W. Accounting Changes (Continued)
New Governmental Accounting Standards Implemented for the Year Ended June 30, 2017
(Continued)
GASB Statement No. 82
In March 2016, GASB issued Statement No 82, Pension Issues — An Amendment of GASB
Statements No. 67, No. 68, and No. 73. This statement addresses certain issues that were raised
with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and
Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and
Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain
Provisions of GASB Statements 67 and 68. Specifically, this statement addresses issues regarding
(1) the presentation of payroll-related measures in required supplementary information, (2) the
selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard
of Practice for financial reporting purposes, and (3) the classification of payments made by
employers to satisfy employee (plan member) contribution requirements. This implementation did
not have an effect on the City's financial statements.
Upcoming Governmental Accounting Standards Implementation
The City is currently analyzing its accounting practices to determine the potential impact on the
financial statements for the following GASB statements:
GASB Statement No. 75
In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions. This statement applies to government employers
who provide OPEB to their employees and for governments that finance OPEB for employees of
other governments. This statement basically parallels GASB Statement 68 and replaces GASB
Statement 45. Application of this statement is effective for the City's fiscal year ending June 30,
2018.
GASB Statement No. 81
In December 2015, GASB issued Statement No. 81, Irrevocable Split-Interest Agreements. This
Statement requires that a government that receives resources pursuant to an irrevocable split-
interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of
the agreement. Furthermore, this Statement requires that a government recognize assets
representing its beneficial interests in irrevocable split-interest agreements that are administered by
a third party, if the government controls the present service capacity of the beneficial interests. This
Statement requires that a government recognize revenue when the resources become applicable to
the reporting period. Application of this statement is effective for the City's fiscal year ending June
30, 2018.
62
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2–Summary of Significant Accounting Policies (Continued)
V. Accounting Changes (Continued)
Upcoming Governmental Accounting Standards Implementation (Continued)
GASB Statement No. 83
In November 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. This
Statement establishes criteria for determining the timing and pattern of recognition of a liability and a
corresponding deferred outflow of resources for asset retirement obligations (ARO). This Statement
requires that recognition occur when the liability is both incurred and reasonably estimable. The
determination of when the liability is incurred should be based on the occurrence of external laws,
regulations, contracts, or court judgments, together with the occurrence of an internal event that
obligates a government to perform asset retirement activities. Laws and regulations may require
governments to take specific actions to retire certain tangible capital assets at the end of the useful
lives of those capital assets, such as decommissioning nuclear reactors and dismantling and
removing sewage treatment plants. Other obligations to retire tangible capital assets may arise from
contracts or court judgments. Internal obligating events include the occurrence of contamination,
placing into operation a tangible capital asset that is required to be retired, abandoning a tangible
capital asset before it is placed into operation, or acquiring a tangible capital asset that has an
existing ARO. Application of this statement is effective for the City's fiscal year ending June 30,
2019.
GASB Statement No. 84
In January 2017, GASB issued Statement No. 84, Fiduciary Activities. This Statement establishes
criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria
generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the
beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify
fiduciary component units and postemployment benefit arrangements that are fiduciary activities.
Application of this statement is effective for the City's fiscal year ending June 30, 2020.
GASB Statement No. 85
In March 2017, GASB issued Statement No. 85, Omnibus 2017. This Statement addresses practice
issues that have been identified during implementation and application of certain GASB Statements.
This Statement also addresses a variety of topics including issues related to blending component
units, goodwill, fair value measurement and application, and postemployment benefits (pensions and
other postemployment benefits [OPEB]). Application of this statement is effective for the City's fiscal
year ending June 30, 2018.
GASB Statement No. 86
In April 2017, GASB issued Statement No. 86, Certain Debt Extinguishment Issues. This Statement
improves consistency in accounting and financial reporting for in-substance defeasance of debt by
providing guidance for transactions in which cash and other monetary assets acquired with only
existing resources—resources other than the proceeds of refunding debt—are placed in an
irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves
accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to
financial statements for debt that is defeased in substance. Application of this statement is effective
for the City's fiscal year ending June 30, 2018.
63
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 2—Summary of Significant Accounting Policies (Continued)
V. Accounting Changes (Continued)
Upcoming Governmental Accounting Standards Implementation (Continued)
GASB Statement No. 87
In June 2017, GASB issued Statement No. 87, Leases. This Statement increases the usefulness of
governments' financial statements by requiring recognition of certain lease assets and liabilities for
leases that previously were classified as operating leases and recognized as inflows of resources or
outflows of resources based on the payment provisions of the contract. It establishes a single model
for lease accounting based on the foundational principle that leases are financings of the right to use
an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an
intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a
deferred inflow of resources, thereby enhancing the relevance and consistency of information about
governments' leasing activities. Application of this statement is effective for the City's fiscal year
ending June 30, 2020.
Note 3—Cash and Investments
Cash and investments are classified in the accompanying financial statements as follows:
Government-Wide Statement of Position Fiduciary Funds
Governmental Business-type Statement of
Activities Activities Net Position Total
Current assets:
Cash and investments $ 72,486,110 $ 38,718,713 $ 2,139,194 $ 113,344,017
Restricted cash and investments with fiscal agent 2,266,016 20,237 1,979,042 4,265,295
Total cash and investments $ 74,752,126 $ 38,738,950 $ 4,118,236 $ 117,609,312
Cash and investments at June 30, 2017, consisted of the following:
Fair
Value
Cash on hand $ 3,655
Deposits with financial institutions 386,635
Investments 117,218,957
Total cash and investments $ 117,609,247
64
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 3—Cash and Investments (Continued)
At June 30, 2017, cash and investments, excluding restricted cash and investments held by fiscal agent, are
reported at fair value based on quoted market prices. The following table represents the fair value
measurements of investments recognized in the accompanying Statement of Net Position measured at fair
value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements
fall at June 30, 2017:
Percentage
Fair of Measurement
Investment Type Value Investments Input
Investments:
LAIF $ 30,366,384 25.91% Uncategorized
California Asset Management Program 1,004,966 0.86% Uncategorized
Money Market Mutual Funds 4,327,401 3.69% Uncategorized
Certificates of Deposit 3,920,747 3.34% Uncategorized
Corporate Medium Term Notes 243,570 0.21% Level 2
US Treasury Securities 33,601,981 28.67% Level 2
U.S. Government Sponsored Enterprise Securities 43,753,908 37.33% Level 2
Total Investments $ 117,218,957
A. Demand Deposits
The carrying amounts of the City's demand deposits were $386,635 at June 30, 2017. Bank balances
were $2,615,796 at that date, the total amount of which was collateralized or insured with securities held
by the pledging financial institutions in the City's name as discussed below.
The California Government Code requires California banks and savings and loan associations to secure
the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in
this manner shall have the effect of perfecting a security interest in such collateral superior to those of a
general creditor. Thus, collateral for cash deposits is considered to be held in the City's name.
The market value of pledged securities must equal at least 110% of the City's cash deposits. California
law also allows institutions to secure City's deposits by pledging first trust deed mortgage notes having a
value of 150% of the City's total cash deposits. The City may waive collateral requirements for cash
deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation ("FDIC").
The City, however, has not waived the collateral ization requirements.
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.
65
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 3—Cash and Investments (Continued)
B. Investments Authorized by the California Government Code and the City's Adopted Investment
Policy (Continued)
Authorized Maximum Maximum
Authorized by Investment Maximum Percentage of Investment in
Investment Type Policy Maturity Portfolio" One Issuer
Repurchase Agreements-Overnight"Sweep" Yes 1 year 20% No Limit
Local Agency Investement Fund (LAIF) Yes N/A 30% No Limit
Local Agency Bonds No 5 years N/A N/A
Other Governmental Managed Investment Pools Yes N/A 30% 10%
Money Market Mutual Funds Yes N/A 20% 10%
Certificates of Deposit Yes 5 years 10% $1 M
Negotiable Certificates of Deposit Yes 5 years 10% $1 M
Banker's Acceptances Yes 180 days 10% $1 M
U.S. Treasury Bills, Notes and Bonds Yes 5 years 50% No Limit
U.S. Gov't Sponsored Enterprises Yes 5 years 60% 15%
Commercial Paper Yes 270 days 25% $5M
Commercial Medium-Term Notes Yes 5 years 15% $1 M
Excluding amounts held by bond trustee that are not subject to California Government Code restriction.
Maximum is$50 million per account.
C. Investments Authorized by Debt Agreements
The investment of the proceeds from debt issuances, held by a third-party trustee, is governed by the
provisions of the specific debt agreement rather than by the Gov't Code or the Investment Policy. The
investment types that are authorized and currently utilized by the City are Guaranteed Investment
Contracts and Money Market Mutual Funds.
D. Risk Disclosures
Disclosures Related to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally, the longer the maturity, the greater the sensitivity its fair value is to changes in
market interest rates. One of the ways that the City manages its exposure to interest rate risk is by
purchasing a combination of shorter-term and longer-term investments and by timing cash flows from
maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as
necessary to provide the cash flow and liquidity needed for operations.
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:
66
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 3—Cash and Investments (Continued)
D. Risk Disclosures (Continued)
Disclosures Related to Interest Rate Risk(Continued)
Remaining Maturity(in Months)
Less than 12 to 60
Investment Type Total 12 Months Months
Investments:
Local Agency Investement Fund(LAIF) $ 30,366,384 $ 30,366,384 $ -
California Asset Management Program 1,004,966 1,004,966 -
Money Market Mutual Funds 62,106 62,106 -
Certificates of Deposit 3,920,747 496,360 3,424,387
Negotiable Certificates of Deposit 243,570 - 243,570
US Treasury Securities 33,601,981 3,995,420 29,606,561
U.S. Government Sponsored Enterprise Securities 43,753,908 11,984,350 31,769,558
Total Investments 112,953,662 47,909,586 65,044,076
Investment with Fiscal Agents:
Money Market Mutual Funds 4,265,295 4,265,295 -
Total Investment with Fiscal Agents 4,265,295 4,265,295 -
Total $ 117,218,957 $ 52,174,881 $ 65,044,076
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.
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.
67
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 3—Cash and Investments (Continued)
D. Risk Disclosures (Continued)
Disclosures Related to Credit Risk(Continued)
Minimum Rating as of Year End
Fair Legal AAA/
Investment Type Value Rating AA+ Not Rated
Investments:
Local Agency Investment Fund(LAIF) $ 30,366,384 N/A $ - $ 30,366,384
California Asset Management Program 1,004,966 N/A 1,004,966 -
Money Market Mutual Funds 62,106 AAA 62,106 -
Certificates of Deposit 3,920,747 N/A - 3,920,747
Negotiable Certificates of Deposit 243,570 N/A - 243,570
US Treasury Securities 33,601,981 N/A 33,601,981 -
U.S. Government Sponsored Enterprise Securities 43,753,908 N/A 43,753,908 -
Total Investments 112,953,662 78,422,961 34,530,701
Investments with Fiscal Agents:
Money Market Mutual Funds 4,265,295 AAA - 4,265,295
Total Investments with Fiscal Agents 4,265,295 - 4,265,295
Total $ 117,218,957 $ 78,422,961 $ 38,795,996
Disclosures Relating to Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one
issuer beyond that stipulated in the Gov't Code. GASB Statement No. 40 requires disclosure by amount
and issuer, of investments in any one issuer that represent 5% or more of total investments.
Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external
investment pools) that represents 5% or more of the City's total investments are as follows:
Issuer Investment Type Fair Value
Federal National Mortgage Association U.S. Government Sponsored $ 16,949,584
Enterprise Securities
Federal Home Loan Mortgage Corporation U.S. Government Sponsored 5,967,690
Enterprise Securities
Federal Home Loan Bank U.S. Government Sponsored 13,869,040
Enterprise Securities
Federal Farm Credit U.S. Government Sponsored 6,966,798
Enterprise Securities
Local Agency Investment Fund(LAIF) California Pooled 30,366,384
Investment Fund
68
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 3—Cash and Investments (Continued)
D. Risk Disclosures (Continued)
Disclosures Relating to Custodial Credit Risk
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, 2017, the City had $30,366,383 invested in LAIF, which had invested 2.89% 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 Pool is required to maintain an
average maturity of less than 60 days, and is rated AAAm by Standard & Poor's national rating agency.
As of June 30, 2017, the City had $1,004,966 invested in CAMP.
69
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 4— Receivables
At June 30, 2017, receivables consisted of the following:
Governmental Business-Type
Activities Activities Total
Accounts receivable $ 1,243,694 $ 2,225,024 $ 3,468,718
Taxes and assessments receivable 424,589 119,822 544,411
Accrued revenues 3,084,702 - 3,084,702
Total $ 4,752,985 $ 2,344,846 $ 7,097,831
Note 5— Investment in Joint Ventures
Investment in joint ventures (See Note 2G) consists of the following as of June 30, 2017:
Cardiff Sanitary Division San Elijo Joint Facilities $ 18,530,234
San Dieguito Water District R.E. Badger Joint Facilities 21,786,539
San Dieguito Water District R.E. Badger Financing Authority 760,707
22,547,246
Encinitas Sanitary Division Encina Joint Facilities 4,022,140
Total Investment in Joint Ventures $ 45,099,620
A. Cardiff Sanitary Division
Investment in San Elijo Joint Powers Authority(CITY)
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,
2017, CSD's share of those costs was $1,381,047, which is reported as a component of "facility
operations and maintenance" in the accompanying financial statements.
70
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 5— Investment in Joint Ventures (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 District Santa Fe Facilities
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, 2017, SDWD's share of those was $1,570,463, 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.
71
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 5— Investments in Joint Ventures (Continued)
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, 2017, ESD's share of those costs was
$565,412, which is shown as "facility operations and maintenance" in the accompanying financial
statements.
Note 6— Long-Term Receivables
Long-term receivables consist of loans to developers and loans to employees for the purchase of computer
equipment, a program approved by the City Council to promote more efficient use of technology. At June
30, 2017, loans receivable consisted of the following:
Encinitas Ranch Town Center $ 390,000
Iris Apartments 411,433
Employee computer loans 35,060
Total $ 836,493
A. Encinitas Ranch Town Center
At June 30, 2017, the outstanding balance of the long-term receivable was $390,000. 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. The outstanding
principal at June 30, 2017 was $390,000.
72
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 6— Long-Term Receivables (Continued)
B. Iris Apartments
On April 20, 2012, the City entered into a promissory note agreement with Iris Apartments in the amount
of $350,000, secured by a Deed of Trust on the project. The outstanding principal balance due the City
bears simple interest at a rate of 6% per annum, commencing on the date of fund disbursement which
was May 2012. Under the terms of the agreement, Iris Apartments is obligated to make annual payments
of principal and interest in the amount equal to 50% of residual receipts, as defined in the promissory
note agreement. All principal and unpaid interest will be due and payable on April 20, 2067. The
outstanding principal and interest receivable at June 30, 2017 was $411,433.
Note 7—Other Assets
At June 30, 2017, the City has recorded other assets consisting of the following:
Governmental Business-type
Activities Activities Total
Other Assets:
Prepaid pension side funds $ 3,325,189 $ 981,523 $ 4,306,712
Less: accumulated amortization (3,325,189) (981,523) (4,306,712)
Total other assets $ - $ - $ -
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, 2017, the amortization
expense was $332,519 for the governmental activities and $98,155 for the business-type activities.
73
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 8—Capital Assets
A. Governmental Activities
During the year, the City evaluated its construction in progress projects and determined that $2,088,668
of expenditures on capital projects would not be capitalized as depreciable assets. An impairment loss
of$2,088,668 is reported on the Government-Wide Statement of Activities and Changes in Net Position.
The summary of changes in governmental activities capital assets for the year ended June 30, 2017 is
as follows:
Balance Impairment Transfers/ Balance
July 1,2016 Loss Additions Deletions Reclassification June 30,2017
Capital assets,not being depreciated:
Land $ 61,862,474 $ $ - $ $ $ 61,862,474
Land easements 2,114,042 172,116 2,286,158
Construction in progress 14,236,480 (2,088,668) 6,259,212 (2,696,084) 15,710,940
Total capital assets,not being depreciated 78,212,996 (2,088,668) 6,431,328 (2,696,084) 79,859,572
Capital assets,being depreciated:
Public facilities 100,389,962 - 2,170,417 102,560,379
Vehicles,equipment and machinery 9,279,951 733,695 (34,873) 19,299 9,998,072
Infrastructure 111,024,528 - 525,666 111,550,194
Total capital assets,being depreciated 220,694,441 733,695 (34,873) 2,715,382 224,108,645
Less accumulated depreciation
Public facilities (28,925,213) (3,220,978) - 16,580 (32,129,611)
Vehicles,equipment and machinery (5,678,912) (661,704) 34,873 (35,878) (6,341,621)
Infrastructure (46,395,240) (2,547,117) - - (48,942,357)
Total accumulated depreciation (80,999,365) (6,429,799) 34,873 (19,298) (87,413,589)
Total capital assets being depreciated,net 139,695,076 (5,696,104) - 2,696,084 136,695,056
Governmental activities capital assets,net $ 217,908,072 $ (2,088,668) $ 735,224 $ - $ - $ 216,554,628
Depreciation expense was charged to the functions/programs of the governmental activities as follows:
General government $ 1,220,793
Public safety 369,945
Public works 2,769,664
Parks and recreation 1,538,324
Internal service funds 531,073
Total depreciation expense $ 6,429,799
74
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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, 2017 is
as follows:
Balance Transfers/ Balance
July 1,2016 Additions Deletions Reclassification June 30,2017
Capital assets,not being depreciated:
Land easements $ 3,219,301 $ 43,377 $ $ $ 3,262,678
Public works facility right of use 3,378,700 - 3,378,700
Construction in progress 4,694,596 3,118,824 (80,189) 7,733,231
Total capital assets,not being depreciated 11,292,597 3,162,201 (80,189) 14,374,609
Capital assets, being depreciated:
Structures and improvements 19,147,575 - - 19,147,575
Collection and distribution 61,325,186 258,940 80,189 61,664,315
Machinery and equipment 2,428,212 74,345 (98,737) (19,299) 2,384,521
Capacity Rights 323,190 - - 323,190
Total capital assets, being depreciated 83,224,163 333,285 (98,737) 60,890 83,519,601
Less accumulated depreciation
Structures and improvements (5,404,962) (417,973) - (5,822,935)
Collection and distribution (31,712,172) (953,792) - - (32,665,964)
Machinery and equipment (1,696,800) (172,764) 98,737 19,299 (1,751,528)
Capacity rights (131,969) (6,464) - - (138,433)
Total accumulated depreciation (38,945,903) (1,550,993) 98,737 19,299 (40,378,860)
Total capital assets being depreciated,net 44,278,260 (1,217,708) - 80,189 43,140,741
Business-type activities capital assets,net $ 55,570,857 $ 1,944,493 $ $ - $ 57,515,350
Depreciation expense was charged to the functions/programs of the business-type activities as follows:
Cardiff Sanitary Division $ 386,191
San Dieguito Water District 694,595
Encinitas Sanitary Division 369,669
Non-major Affordable Housing 100,538
Total $ 1,550,993
75
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9- Long-Term Obligations
A summary of changes in long-term liabilities for the year ended June 30, 2017 is as follows:
Classification
Balance Balance Due Within Due in More
July 1,2016 Additions Deletion June 30,2017 One Year Than One Year
Governmental Activities:
Capital Leases:
2008 Civic Center Roof Replacement $ 1,123,307 $ $ (143,416) $ 979,891 $ 148,758 $ 831,133
2011 Fire Apparatus 336,172 (166,015) 170,157 170,157 -
2012 Fire Apparatus 268,168 (87,458) 180,710 89,375 91,335
2013 Fire Apparatus 323,193 (78,520) 244,673 80,020 164,653
2017 Fire Apparatus - 629,851 629,851 83,413 546,438
Bonded Debt:
1997 Civic Center COPS 590,000 - (590,000) - - -
2002 ABAG Financing 565,000 (275,000) 290,000 290,000
2010 Community Park Bonds 15,265,000 (15,265,000) - -
add:original issue premium 152,656 (152,656) - - -
2013 Community Park Bonds 6,920,000 (330,000) 6,590,000 335,000 6,255,000
add:original issue premium 105,120 (8,760) 96,360 - 96,360
2014 Moonlight Beach Tower(Series A) 3,030,000 (65,000) 2,965,000 65,000 2,900,000
less:original issue discount (53,303) 25,865 (27,438) - (27,438)
2014 Pacific View(Series B) 10,165,000 (200,000) 9,965,000 205,000 9,760,000
less:original issue discount (222,803) 81,969 (140,834) - (140,834)
2015 Library Refunding Bonds 15,645,000 (480,000) 15,165,000 505,000 14,660,000
add:original issue premium 772,212 - (36,771) 735,441 - 735,441
2017 Park Refunding Bonds - 11,955,000 11,955,000 580,000 11,375,000
add:original issue premium - 1,360,284 1,360,284 - 1,360,284
Subtotal of governmental
capital leases and bonded debt 54,984,722 13,945,135 (17,770,762) 51,159,095 2,551,723 48,607,372
Claims payable 1,589,220 1,131,053 (606,738) 2,113,535 562,443 1,551,092
Compensated absences 2,107,689 1,708,191 (1,879,131) 1,936,749 1,936,749 -
Total governmental activities 58,681,631 16,784,379 (20,256,631) 55,209,379 5,050,915 50,158,464
Business-type Activities:
2011 CSD Note Payable to SEJPA 2,033,889 - (612,192) 1,421,697 640,352 781,345
add:original issue premium 172,004 (34,401) 137,603 - 137,603
2007 SDWD Note Payable Badger 4,715,000 (440,000) 4,275,000 455,000 3,820,000
2004 EHA Housing Note Payable 1,331,409 (78,232) 1,253,177 80,119 1,173,058
2014 SDWD Water Revenue Bonds 5,300,000 (585,000) 4,715,000 605,000 4,110,000
add:original issue premium 594,973 (74,371) 520,602 - 520,602
Subtotal of business-type
bonded debt 14,147,275 - (1,824,196) 12,323,079 1,780,471 10,542,608
Compensated absences(SDWD) 161,310 131,111 (129,576) 162,845 162,845 -
Compensated absences(Affordable
Housing) 10,688 9,240 (8,826) 11,102 11,102 -
Total business-type activities 14,319,273 140,351 (1,962,598) 12,497,026 1,954,418 10,542,608
Total long-term obligations $ 73,000,904 $ 16,924,730 $ (22,219,229) $ 67,706,405 $ 7,005,333 $ 60,701,072
76
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9— Long-Term Obligations (Continued)
A. Governmental Activities
2008 Civic Center Roof Replacement and Energy Optimization Project
On February 27, 2008, the City entered into a long-term lease arrangement with a financial institution to
finance $2,100,000 of the 2008 improvements to the Encinitas Civic Center. The lease has a term of
fifteen (15) years, an interest rate of 3.69%, and semi-annual payments of $91,778. The project was
completed during fiscal year 2008-2009, and the final payment is due in fiscal year 2023. The total cost
of the project was $3,543,258.
The annual debt service requirements for the lease outstanding at June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 148,758 $ 34,798 $ 183,556
2019 154,298 29,258 183,556
2020 160,045 23,511 183,556
2021 166,005 17,552 183,557
2022 172,186 11,370 183,556
2023 178,599 4,957 183,556
Total $ 979,891 $ 121,446 $ 1,101,337
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 $1,124,003. 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, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 170,157 $ 3,171 $ 173,328
Total $ 170,157 $ 3,171 $ 173,328
77
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 89,375 $ 3,455 $ 92,830
2019 91,335 1,495 92,830
Total $ 180,710 $ 4,950 $ 185,660
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, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 80,020 $ 4,673 $ 84,693
2019 81,548 3,145 84,693
2020 83,105 1,587 84,692
Total $ 244,673 $ 9,405 $ 254,078
78
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9— Long-Term Obligations (Continued)
A. Governmental Activities (Continued)
2017 Fire Apparatus Lease
The City entered into a long-term lease arrangement in fiscal year 2016-17 to finance the purchase of a
2017 Pierce Arrow XT Pumper Truck for $629,851. The lease has a term of seven years, an interest
rate of 2.50%, and annual payments of $98,641. 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 2024.
The annual debt service requirements for the lease outstanding at June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 83,413 $ 15,228 $ 98,641
2019 85,511 13,130 98,641
2020 87,663 10,978 98,641
2021 89,868 8,773 98,641
2022 92,129 6,512 98,641
2023-2024 191,267 6,015 197,282
Total $ 629,851 $ 60,636 $ 690,487
Capital assets and accumulated depreciation for assets held under capital leases are as follows:
Accumulated Net Capital
Cost Depreciation Assets
Public facilities $ 3,543,258 $ (1,145,652) $ 2,397,606
Fire apparatus and equipment 2,916,904 (867,435) 2,049,469
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 bonds were paid in full as of June 30, 2017.
79
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9— Long-Term Obligations (Continued)
A. Governmental Activities (Continued)
2002 Association of Bay Area Governments (ABAG) Lease Revenue Bonds
In July 2002, the City issued $6,590,000 of Lease Revenue Bonds, Series 2002-1 through ABAG, a
California Joint Powers Authority. The proceeds were utilized to retire the 1992 Certificates of
Participation-Series B (Encinitas Civic Center) and four existing debt obligations (including one of the
Encinitas Sanitary Division) and to provide funding for improvements to the Civic Center and the SDWD
Water Utility meter exchange and automation program. The Bonds mature annually in amounts ranging
from $240,000 to $290,000. Interest is due and payable semiannually at rates ranging from 3.00% to
4.65%. The final maturity of the issue is due and payable in fiscal year 2018. The bonds are subject to
federal arbitrage requirements.
The Encinitas Sanitary Division and the San Dieguito Water District have repaid all of their obligations to
the City under the agreement to advance funds. The remaining amounts payable are all attributable to
the Civic Center funding.
The annual debt service requirements for the 2002 ABAG Lease Revenue Bonds outstanding at
June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 290,000 $ 6,743 $ 296,743
Total $ 290,000 $ 6,743 $ 296,743
The bonds are subject to optional redemption beginning in 2013 at the following respective redemption
prices (expressed as percentages of the principal amount of the Bonds to be redeemed).
Redemption
Redemption Period Price
July 1, 2014 and thereafter 100%
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 2010 Lease Revenue Refunding Bonds (Park Project) were refunded in fiscal year 2017 via the
issuance of the 2017 Park Refunding Bonds. The outstanding balance at June 30, 2017 is $0.
80
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9— Long-Term Obligations (Continued)
A. Governmental Activities (Continued)
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.
The annual debt service requirements for the 2013 Lease Revenue Refunding Bonds outstanding at
June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 335,000 $ 178,994 $ 513,994
2019 345,000 172,194 517,194
2020 350,000 164,806 514,806
2021 360,000 156,818 516,818
2022 365,000 148,206 513,206
2023-2027 2,000,000 578,147 2,578,147
2028-2032 2,325,000 255,375 2,580,375
2033-2034 510,000 7,650 517,650
Total $ 6,590,000 $ 1,662,190 $ 8,252,190
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.
81
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9- Long-Term Obligations (Continued)
A. Governmental Activities (Continued)
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 Pacific View
Property bonds outstanding at June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 65,000 $ 99,881 $ 164,881
2019 70,000 98,531 168,531
2020 70,000 97,131 167,131
2021 70,000 95,381 165,381
2022 75,000 92,831 167,831
2023-2027 415,000 422,219 837,219
2028-2032 480,000 355,484 835,484
2033-2037 570,000 265,663 835,663
2038-2042 675,000 153,475 828,475
2043-2045 475,000 27,281 502,281
Total $ 2,965,000 $ 1,707,877 $ 4,672,877
82
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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 Moonlight Beach
Lifeguard Tower bonds outstanding at June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 205,000 $ 440,190 $ 645,190
2019 205,000 436,603 641,603
2020 210,000 432,033 642,033
2021 215,000 426,556 641,556
2022 225,000 420,225 645,225
2023-2027 1,235,000 1,980,631 3,215,631
2028-2032 1,515,000 1,702,688 3,217,688
2033-2037 1,910,000 1,305,075 3,215,075
2038-2042 2,450,000 767,500 3,217,500
2043-2045 1,795,000 137,625 1,932,625
Total $ 9,965,000 $ 8,049,126 $ 18,014,126
2015 Library Refunding Bonds
On September 1, 2015, the Encinitas Public Financing Authority issued $15,645,000 of 2015 Lease
Revenue Refunding Bonds to defease and refund on a current basis, all of the outstanding 2006 Library
Bonds. The Bonds consist of serial bonds maturing from 2016 through 2036 in annual installments of
$480,000 to $1,025,000. Interest is due and payable semi-annually at rates ranging from 2.5% to 5.0%.
Annual debt service is approximately $1,065,000 through 2036. The bonds are subject to federal
arbitrage requirements. The aggregate debt service payments of the new debt are $3,252,589 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 $1,547,162.
The annual debt service requirements for the 2015 Library Refunding Bonds outstanding at June 30,
2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 505,000 $ 557,706 $ 1,062,706
2019 530,000 531,831 1,061,831
2020 555,000 504,706 1,059,706
2021 580,000 476,331 1,056,331
2022 610,000 446,581 1,056,581
2023-2027 3,495,000 1,771,356 5,266,356
2028-2032 4,095,000 1,147,691 5,242,691
2033-2037 4,795,000 433,494 5,228,494
Total $ 15,165,000 $ 5,869,696 $ 21,034,696
83
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9— Long-Term Obligations (Continued)
A. Governmental Activities (Continued)
2017 Park Refunding Bonds
On February 7, 2017, the Encinitas Public Financing Authority issued $11,955,000 of 2017 Lease
Revenue Refunding Bonds to defease and refund on a current basis, all of the outstanding 2010 Park
Bonds. The Bonds consist of serial bonds maturing from 2018 through 2031 in annual installments of
$580,000 to $1,110,000 and term bonds maturing April 1, 2030 in the amount of $2,125,000. Interest is
due and payable semi-annually at rates ranging from 3.0% to 5.0%. Annual debt service is
approximately $1,140,000 through 2031. The bonds are subject to federal arbitrage requirements. The
aggregate debt service payments of the new debt are $3,725,644 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 $1,691,810.
The annual debt service requirements for the 2017 Park Refunding Bonds outstanding at June 30, 2017
are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 580,000 $ 565,131 $ 1,145,131
2019 645,000 494,000 1,139,000
2020 680,000 461,750 1,141,750
2021 715,000 427,750 1,142,750
2022 750,000 392,000 1,142,000
2023-2027 4,345,000 1,359,250 5,704,250
2028-2031 4,240,000 333,300 4,573,300
Total $ 11,955,000 $ 4,033,181 $ 15,988,181
B. Business-Type Activities
2011 CSD Note Payable to San Elijo Joint Powers Authority(SEJPA)
On December 1, 2011, the City, on behalf of its members (the Cardiff Sanitary Division and the City of
Solana Beach) refinanced all of its outstanding debt, including its 2003 refunding revenue bonds and a
loan from the State of California. Information on the bond issuance itself is available through the SEJPA
administrative offices. CSD is responsible, via a Third Amended and Restated Loan Agreement, for the
repayment of $4,341,362 of the total borrowing amount of $9,235,000 (or approximately 47%.) Annual
debt service is approximately $690,000 through fiscal year 2019, with smaller repayments due in 2020
and 2021. The average rate on the borrowing is approximately 2.0%. The bonds were issued at a
premium, which is being amortized over the life of the bonds on a straight-line basis. The issue also
resulted in deferred refunding costs, which are also being amortized over the life of the bonds on a
straight-line basis.
84
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9— Long-Term Obligations (Continued)
B. Business-Type Activities (Continued)
2011 CSD Note Payable to San Elijo Joint Powers Authority(SEJPA) (Continued)
CSD has pledged its net revenues to pay for this outstanding obligation. Net revenues are defined as
gross revenues less operations and maintenance costs, excluding depreciation, amortization and other
non-cash type charges. CSD has covenanted to budget for net revenues each fiscal year of at least
110% of annual debt service. Total principal and interest remaining to be paid on the 2011 Note Payable
as of June 30, 2017 is $1,511,831. During the year ended June 30, 2016, principal and interest paid on
the 2011 Note Payable was $692,081 and net revenue was $2,592,616, or 374% of annual debt service.
Management of CSD believes it is in compliance with these covenants for fiscal year 2017.
The annual debt service requirements for the 2011 CSD Note Payable to San Elijo Joint Powers
Authority outstanding at June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 640,352 $ 55,402 $ 695,754
2019 663,845 29,788 693,633
2020 57,500 3,234 60,734
2021 60,000 1,710 61,710
Total $ 1,421,697 $ 90,134 $ 1,511,831
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.
85
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 455,000 $ 171,619 $ 626,619
2019 475,000 152,919 627,919
2020 490,000 133,619 623,619
2021 525,000 111,465 636,465
2022 545,000 89,396 634,396
2023-2025 1,785,000 120,908 1,905,908
Total $ 4,275,000 $ 779,926 $ 5,054,926
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, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 605,000 $ 167,225 $ 772,225
2019 625,000 148,775 773,775
2020 645,000 126,500 771,500
2021 665,000 100,300 765,300
2022 695,000 73,100 768,100
2023-2025 1,480,000 59,800 1,539,800
Total $ 4,715,000 $ 675,700 $ 5,390,700
86
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 9— Long-Term Obligations (Continued)
B. Business-Type Activities (Continued)
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 debt
as of June 30, 2017, is $10,445,626. During the year ended June 30, 2017 principal and interest paid
was $1,401,319 and net revenue was $3,273,387, or 234% 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 2017.
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 $98,938 in 2031. 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.
The annual debt service requirements for the 2004 Encinitas Housing Authority Note Payable
outstanding at June 30, 2017 are as follows:
Year Ending
June 30 Principal Interest Total
2018 $ 80,119 $ 19,760 $ 99,879
2019 81,429 18,450 99,879
2020 82,715 17,164 99,879
2021 84,115 15,764 99,879
2022 85,492 14,388 99,880
2023-2027 448,874 50,523 499,397
2028-2032 390,433 13,235 403,668
Total $ 1,253,177 $ 149,284 $ 1,402,461
87
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 10— Interfund Receivables, Payable and Transfers
A. Due To and From Other Funds
Individual interfund receivables and payables at June 30, 2017, were as follows:
Due from Due to
Other Funds Other Funds
Govermental Funds:
General Fund $ 223,443 $ -
Capital Improvements Capital Projects Fund 13,260,720 -
Nonmajor Governmental Funds - 13,412,720
Internal Service Funds - -
Enterprise Funds:
Nonmajor Affordable Housing Enterprise Fund - 71,443
Total $ 13,484,163 $ 13,484,163
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.
The amounts due to the Capital Improvements Capital Projects fund represent grant revenues due from
other funds for capital projects.
B. Transfers In and Out
Transfers in and out between funds for the year ended June 30, 2017, were as follows:
Transfers Out
Capital Nonmajor
General Improvement Governmental Internal Total
Fund Capital Projects Funds Service Funds All Funds
Transfers In
Major Governmental Funds:
General Fund $ - $ 1,621,363 $ 583,172 $ 113,000 $ 2,317,535
Capital Improvement Capital Project Fund 22,156,773 - 5,916,024 - 28,072,797
Nonmajor Governmental Funds - 4,769,507 4,769,507
Internal Service Funds - 1,604,006 1,604,006
Total $ 22,156,773 $ 1,621,363 $ 12,872,709 $ 113,000 $ 36,763,845
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.
88
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 10— InterFund Receivables, Payable and Transfers (Continued)
B. Transfers In and Out (Continued)
Transfers in to the Capital Improvement Capital Projects Fund represent funds from other governmental
funds for capital expenditures.
Transfers in to the Nonmajor Governmental funds represent General Fund subsidies for the Senior
Nutrition Program, the Community Development Block Grant (CDBG), Home Program entitlement, the
Mizel Donation General Fund match, and the taro Park M.I.D. In 1998, the Council increased the
transient occupancy tax from eight percent to ten percent. The additional two percent increase is
transferred to the Coastal Zone Management fund for beach and sand replenishment and stabilization
projects. The transfers in to the Nonmajor Governmental funds also include transfers to the City's 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 Self Insurance Fund (Risk Management) Fund. The contribution is not mandated and is
established by the City Council during the annual budget process.
89
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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, 2017 as follows:
Major Funds
Capital
Improvements Other
General Capital Projects Governmental
Fund Fund Funds Totals
Nonspendable:
Inventory and prepaid items $ 302,034 $ - $ 296,234 $ 598,268
Long-term receivable 425,060 - - 425,060
Total nonspendable 727,094 - 296,234 1,023,328
Restricted:
Capital projects 1,469,071 21,988,785 - 23,457,856
Street maintenance and improvements - - 791,458 791,458
Cable Franchise PEG funds - - 101,181 101,181
Environmental initiatives - - 1,289,631 1,289,631
Affordable housing - - 1,148,097 1,148,097
Parkland and open space - - 709,883 709,883
Traffic mitigation - - 1,270,907 1,270,907
Flood control - - 88,084 88,084
Lighting and landscaping
assessments - - 2,181,437 2,181,437
Law enforcement - - 124,209 124,209
Debt service 3,301 - 226,208 229,509
Other - - 362,645 362,645
Total restricted 1,472,372 21,988,785 8,293,740 31,754,897
Committed:
Capital projects - 18,998,215 - 18,998,215
Budget stabilization 1,417,046 - - 1,417,046
Operating reserve 12,520,353 - - 12,520,353
Total committed 13,937,399 18,998,215 - 32,935,614
Unassigned 9,514,727 - (12,183,589) (2,668,862)
Total Fund Balances $ 25,651,592 $ 40,987,000 $ (3,593,615) $ 63,044,977
90
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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, 2017 was
$12,520,353.
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, 2017 was $1,417,046.
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, 2017 was $9,514,727.
91
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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 $250,000 per occurrence, and for worker's
compensation claims and losses up to $350,000 per occurrence.
The City is a member of the California State Association of Counties, Excess Insurance Authority
(CSAC, EIA), a joint risk sharing pool which covers liability claims or losses above the City's $250,000
self-insured level. CSAC, EIA is a separate legal entity formed by the participating municipalities and
counties to provide pooled excess liability insurance coverage to its members. The members do not hold
any ownership stake in CSAC, EIA and have no claims to revenue or assets upon withdrawal, at which
time the purchase of tail coverage is required. CSAC, EIA 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
above $250,000 with excess coverage through CSAC, EIA and excess carriers up to $60 million dollars.
All members joint risk share liability exposures in excess of each member's self-insured retention.
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.
92
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 12— Risk Management (Continued)
A. City of Encinitas - Risk Management and Insurance Programs (Continued)
Changes in the balances of claims payable for liability and workers compensation during the past two
years are as follows:
Year Ended Year Ended
June 30, 2017 June 30, 2016
Claims payable, beginning of year $ 1,589,220 $ 1,193,289
Estimated incurred claims, net 1,131,053 1,430,314
Claims payments or closures (606,738) (1,034,383)
Claim payable, end of year $ 2,113,535 $ 1,589,220
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 paid the City $108,232 for the year ended June 30, 2017.
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, 2017, 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, 2017, 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.
93
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 13— Commitments and Contingencies (Continued)
C. Construction Commitments
As of June 30, 2017, the City had remaining contractual commitments totaling approximately $3.9
million for capital projects related to its governmental and business-type activities. The more significant
capital commitments include approximately $1.4 million for street and pedestrian projects, approximately
$1.1 million related to the Moonlight Beach Tower rebuild, and approximately $560,000 for storm water
capture and reuse studies, amongst other projects.
Note 14— California Public Employees' Retirement System
A. Summary
Aggregate Net Pension Liability
Aggregate net pension liability is reported in the accompanying Statement of Net Position as follows:
Governmental Business-Type
Activities Activities
CalPERS Miscellaneous Plan-City $ 24,043,443 $ -
CalPERS Miscellaneous Plan-SDWD - 6,288,631
CalPERS Safety Plan 19,826,444 -
Total $ 43,869,887 $ 6,288,631
94
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
A. Summary (Continued)
Deferred Outflows of Resources
Deferred outflows of resources are reported in the accompanying Statement of Net Position as follows:
Governmental Business-Type
Activities Activities Total
Deferred outflows of resources:
Pension contribution made after measurement date:
CalPERS Miscellaneous Plan -City $ 2,723,629 $ - $ 2,723,629
CalPERS Miscellaneous Plan -SDWD - 472,819 472,819
CalPERS Safety Plan 1,108,343 - 1,108,343
Difference between expected and actual experience:
CalPERS Miscellaneous Plan -City - - -
CalPERS Miscellaneous Plan -SDWD - 11,600 11,600
CalPERS Safety Plan - - -
Difference between projected and actual earnings on
pension plan investments:
CalPERS Miscellaneous Plan -City 3,829,079 - 3,829,079
CalPERS Miscellaneous Plan -SDWD - 740,965 740,965
CalPERS Safety Plan 2,715,426 - 2,715,426
Difference between employer contribution and
proportionate share of contributions
CalPERS Miscellaneous Plan -City - - -
CalPERS Miscellaneous Plan -SDWD - 13,320 13,320
CalPERS Safety Plan - - -
Adjustments due to differences in proportions:
CalPERS Miscellaneous Plan -City - - -
CalPERS Miscellaneous Plan -SDWD - 301,343 301,343
CalPERS Safety Plan 596,345 - 596,345
Total deferred outflows of resources $ 10,972,822 $ 1,540,047 $ 12,512,869
95
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
A. Summary (Continued)
Deferred Inflows of Resources
Deferred inflows of resources are reported in the accompanying Statement of Net Position as follows:
Governmental Business-Type
Activities Activities Total
Deferred inflows of resources:
Difference between projected and actual earnings on
pension plan investments:
CalPERS Miscellaneous Plan -City $ - $ - $ -
CalPERS Miscellaneous Plan -SDWD - - -
CalPERS Safety Plan - - -
Difference between projected and actual experience
CalPERS Miscellaneous Plan-City 626,898 - 626,898
CalPERS Miscellaneous Plan -SDWD - - -
CalPERS Safety Plan 126,766 - 126,766
Change in plan proportion
CalPERS Miscellaneous Plan -City - - -
CalPERS Miscellaneous Plan -SDWD - - -
CalPERS Safety Plan 1,257,541 - 1,257,541
Difference between employer contribution and
proportionate share of contributions
CalPERS Miscellaneous Plan -City - - -
CalPERS Miscellaneous Plan -SDWD - 26,007 26,007
CalPERS Safety Plan 892,287 - 892,287
Change in assumptions
CalPERS Miscellaneous Plan-City 701,895 - 701,895
CalPERS Miscellaneous Plan -SDWD - 142,365 142,365
CalPERS Safety Plan 552,707 - 552,707
Total deferred inflows of resources $ 4,158,094 $ 168,372 $ 4,326,466
96
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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:
Governmental Business-Type
Activities Activities
CalPERS Miscellaneous Plan-City $ 2,549,792 $ -
CalPERS Miscellaneous Plan-SDWD - 923,486
CalPERS Safety Plan 2,553,477 -
Total $ 5,103,269 $ 923,486
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 Plan of the City of Encinitas (Safety Plan)
a. Fire Plan of the City of Encinitas
b. Lifeguard Plan of the City of Encinitas
Plan Descriptions
Miscellaneous Plan
The City of Encinitas has entered into 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, 2015 Annual Actuarial Valuation Report. This report
and CalPERS' audited financial statements are publicly available reports that can be obtained at
CaIPERS' website under"Forms and Publications."
Safety Plan
The Safety 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 and includes both fire and lifeguard employees and retirees. The Safety 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 Safety
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.
97
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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.
The City's Safety Plan provides Fire Department 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.
The City's Safety Plan also provides lifeguard 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.
98
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
B. City of Encinitas (not including the San Dieguito Water District) (Continued)
Employees Covered by Benefit Terms
At June 30, 2017, the following employees were covered by the benefit terms for the City's plans:
City city
Miscellaneous Safety
Active employees 159 58
Inactive employees or beneficiaries currently
receiving benefits 128 42
Inactive employees entitled to, but not yet receiving
benefits 137 85
Total 424 185
Contributions
City Miscellaneous Plan
Employee Contributions
Active City Tier 1 miscellaneous members are required to contribute 8% of their annual covered salary
(the "employee contribution"). Effective October 13, 2012, all City 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
2016-2017 was 21.231% 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.
For the measurement year ended June 30, 2016, contributions were:
Contributions- employees $ 1,004,970
Contributions- employer 2,927,539
City Safety Plan
Active fire and 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 2016-2017 ranged from 12.821% to 19.334% for fire members and from
12.082% to 17.689% 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.
99
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
B. City of Encinitas (not including the San Dieguito Water District) (Continued)
Contributions (Continued)
City Safety Plan (Continued)
For the year ended June 30, 2016, the plan's proportionate share of aggregate employer contributions
made for the Safety Plan was as follows:
Safety
Plan
Contributions-employer $ 1,609,491
Net Pension Liability
Actuarial Methods and Assumptions Used to Determine Total Pension Liability
For the measurement period ended June 30, 2016, the total pension liability was determined by rolling
forward the June 30, 2015 total pension liability. The June 30, 2015 and June 30, 2016 total pension
liabilities were based on the following actuarial methods and assumptions:
Actuarial Cost Method Entry Age Normal
Actuarial Assumptions:
Discount Rate 7.65%
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Investment Rate of Return 7.65% Net of Pension Plan Investment and Administrative
Expenses; includes inflation.
Mortality Rate Table Derived using CaIPERS' Membership Data for all Funds. The
mortality table used was developed based on CalPERS'specific
data. The table includes 20 years of mortality improvements
using Society of Actuaries Scale BB.
Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing Power Protection
Allowance Floor on Purchasing Power applies, 2.75%
thereafter.
All other actuarial assumptions used in the June 30, 2015 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."
Change of Assumption
In accordance with GASB 68, the long-term expected rate of return should be determined net of pension
plan investment expense but without reduction for pension plan administrative expense. The discount
rate was changed from 7.5% (net of administrative expense in 2014) to 7.65% as of the June 30, 2015
measurement date to correct the adjustment which previously reduced the discount rate for
administrative expenses.
100
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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 7.65 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 7.65 percent discount rate is adequate
and the use of the municipal bond rate calculation is not necessary. The long term expected discount
rate of 7.65 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 CaIPERS' 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 7.65 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 7.50
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.
101
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
B. City of Encinitas (not including the San Dieguito Water District) (Continued)
Discount Rate (Continued)
New Strategic Real Return Real Return Years
Asset Class Allocation Years 1 -10 11 + 2
Global equity 47.00% 5.25% 5.71%
Global fixed income 19.00% 0.99% 2.43%
Inflation sensitive 6.00% 0.45% 3.36%
Private equity 12.00% 6.83% 6.95%
Real estate 11.00% 4.50% 5.13%
Infrastructure and forestland 3.00% 4.50% 5.09%
Liquidity 2.00% -0.55% -1.05%
1 An expected inflation of 2.5%was used for this period.
2 An expected inflation of 3.0%was used for this period.
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 7.65%, as well as what the net pension liability would be if it were
calculated using a discount rate that is 1 percentage point lower (6.65%) or 1 percentage point higher
(8.65%) than the current rate:
Plan's Net Pension Liability/(Asset)
Discount Rate-1% Current Discount Discount Rate+ 1%
(6.65%) Rate(7.65%) (8.65%)
City Miscellaneous $ 37,212,670 $ 24,043,443 $ 13,189,715
City Safety 31,149,939 19,826,444 10,531,016
102
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
B. City of Encinitas (not including the San Dieguito Water District) (Continued)
Changes in the Net Pension Liability
The following tables show the changes in the net pension liability recognized over the measurement
period for the City Miscellaneous Plan:
Miscellaneous Plan
Increase(Decrease)
Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability/(Asset)
(a) (b) (c)_ (a) -(b)
Balance at June 30, 2015(Valuation Date) $ 88,752,036 768,451,820 $ 20,300,216
Changes Recognized for the Measurement Period:
Service Cost 2,192,399 - 2,192,399
Interest on the total pension liability 6,690,503 - 6,690,503
Changes of benefit terms - - -
Difference between expected and actual experience (801,667) - (801,667)
Changes of assumptions - - -
Plan to plan resource movement - - -
Contributions from the employer - 2,927,539 (2,927,539)
Contributions from employees - 1,004,970 (1,004,970)
Net investment income, net of administrative expense - 447,217 (447,217)
Benefit payments, including refunds of employee
contributions (3,178,023) (3,178,023) -
Administrative expense - (41,718) 41,718
Net Changes during July 1, 2015 to June 30, 2016 $ 4,903,212 $ 1,159,985 $ 3,743,227
Balance at June 30, 2016(Measurement Date) $ 93,655,248 $ 69,611,805 $ 24,043,443
As of June 30, 2017, the City reported net pension liabilities for its proportionate shares of the net
pension liability of the Safety Plan is as follows:
Plan Total Plan Plan Net
Pension Fiduciary Pension
Liability Net Position Liability/(Asset)
Balance at: 6/30/15 (Valuation date) $ 80,116,793 $ 65,540,377 $ 14,576,416
Balance at: 6/30/16(Measurement date) 83,418,229 63,591,785 19,826,444
Net changes during 2015-2016 $ 3,301,436 $ (1,948,592) $ 5,250,028
The City's net pension liability for the Safety 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, 2016, 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, 2015 rolled forward to June 30, 2016 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.
103
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
B. City of Encinitas (not including the San Dieguito Water District) (Continued)
Changes in the Net Pension Liability(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, 2015). 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, 2016). 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, 2016 less the sum of all additional side fund (or unfunded
liability) contributions made by all employers during the measurement period (2015-16).
(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 the Safety Plan as of June 30, 2016 was as
follows:
Safety
Plan
Proportion June 30, 2015 0.35376%
Proportion June 30, 2016 0.38281%
Change- Increase/(Decrease) -0.02905%
Pension Plan Fiduciary Net Position
Detailed information about the Miscellaneous and Safety Plans' fiduciary net position is available in the
separately issued CalPERS financial report.
104
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
B. City of Encinitas (not including the San Dieguito Water District) (Continued)
Pension Expense and Deferred Outflows/Inflows of Resources Related to Pension
For the year ended June 30, 2017, the City recognized pension expense of $2,549,792 for the
Miscellaneous Plan and $2,553,477 for the Safety Plan.
At June 30, 2017, the City reported deferred outflows resources and deferred inflows of resources
related to pensions from the following sources:
Miscellaneous Plan Safety Plan Total
Deferred outflows Deferred inflows Deferred outflows Deferred inflows Deferred outflows Deferred inflows
of Resources of Resources of Resources of Resources of Resources of Resources
Difference between expected and actual experience $ $ (626,898) $ $ (126,766) $ $ (753,664)
Changes of assumptions (701,895) (552,707) (1,254,602)
Net difference between projected and actual earning on
pension plan investments 3,829,079 2,715,426 6,544,505
Difference between employer's actual contributions
and proportionate share of contributions - - (892,287) - (892,287)
Adjustments due to difference in proportions - 596,345 (1,257,541) 596,345 (1,257,541)
Total $ 3,829,079 $ (1,328,793) $ 3,311,771 $ (2,829,301) $ 7,140,850 $ (4,158,094)
The $3,831,972 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, 2017. 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/ Deferred Outflows/
(Inflows)of (Inflows)of Deferred Outflows/
Resources Resources (Inflows)of
Measurement Period Miscellaneous Safety Resources
Ended June 30 Plan Plan Total
2017 $ (146,765) $ (843,062) $ (989,827)
2018 105,292 (646,794) (541,502)
2019 1,586,583 1,265,420 2,852,003
2020 955,176 706,906 1,662,082
2021 - - -
Thereafter - - -
$ 2,500,286 $ 482,470 $ 2,982,756
105
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
C. San Dieguito Water District Miscellaneous Plan (SDWD Plan)
Plan Description
The SDWD 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 (CaIPERS), 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
The SDWD Plan provides employees hired before October 13, 2012 with a Tier 1 benefit equal to 2.7%
at 55 years of age, calculated based on the single highest year of qualifying compensation. As of
October 13, 2012, the Board of Directors imposed new terms and conditions which created a new
benefit formula for employees hired after the effective date of the change (the "Tier 2 Plan"). Employees
hired under the Tier 2 Plan receive a lower benefit formula, referred to as the 2% at 60 years of age
formula. In addition, PEPRA created yet another benefit formula for new hires with no experience or
prior service credit with CalPERS. In the case of the District, this will constitute a "Tier 3 Plan" which
provides a retirement benefit, referred to as the 2% at 62 years of age formula. The actual retirement
benefit for Tier 2 and Tier 3 employees will be calculated using the average of the highest 36
consecutive months of qualifying compensation.
Employees Covered by Benefit Terms
At June 30, 2017, the following employees were covered by the benefit terms for the SDWD plan:
SDWD
Plan
Active employees 25
Inactive employees or beneficiaries currently
receiving benefits 32
Inactive employees entitled to, but not yet receiving
benefits 7
Total 64
106
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
C. San Dieguito Water District Miscellaneous Plan (SDWD Plan) (Continued)
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% and 6.25% of their annual covered salary, respectively. 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
2016-2017 ranged from 6.555% to 11.634%. 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, 2016, the SDWD Plan's proportionate share of aggregate employer
contributions made for each plan was as follows:
SDWD
Plan
Contributions-employer $ 356,509
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions
As of June 30, 2017, the City reported net pension liabilities for its proportionate shares of the net
pension liability of the SDWD Plan as follows:
Plan Total Plan Plan Net
Pension Fiduciary Pension
Liability Net Position Liability/(Asset)
Balance at: 6/30/15 (valuation date) $ 21,378,148 $ 16,358,655 $ 5,019,493
Balance at: 6/30/16 (measurement date) 21,875,339 15,586,708 6,288,631
Net changes during 2015-2016 $ 497,191 $ (771,947) $ 1,269,138
107
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
C. San Dieguito Water District Miscellaneous Plan (SDWD Plan) (Continued)
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions (Continued)
The City's net pension liability for the 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, 2016, 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, 2015 rolled forward to June 30, 2016 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, 2015). 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, 2016). 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, 2015 less the sum of all additional side fund (or unfunded
liability) contributions made by all employers during the measurement period (2015-16).
(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).
108
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
C. San Dieguito Water District Miscellaneous Plan (SDWD Plan) (Continued)
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources to Pensions
(Continued)
The City's proportionate share of the net pension liability for the SDWD Plan as of June 30, 2016 was as
follows:
SDWD
Plan
Proportion June 30, 2015 0.0018296%
Proportion June 30, 2016 0.0018103%
Change-Increase/(Decrease) 0.0000193%
For the year ended June 30, 2017, the City recognized pension expense of $923,486 for the SDWD
Plan. At June 30, 2017 the City reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following sources:
Deferred outflows Deferred inflows
of Resources of Resources
Difference between expected and actual experience $ 11,600 $ -
Changes of assumptions - (142,365)
Net difference between projected and actual earnings on
pension plan investments 740,965 -
Difference between employer's actual contributions
and proportionate share of contributions 13,320 (26,007)
Adjustments due to difference in proportions 301,343 -
Total $ 1,067,228 $ (168,372)
The $472,819 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, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources
related to pensions will be recognized as pension expense as follows:
Measurement Period
Ended June 30
2018 $ 176,947
2019 148,909
2020 381,091
2021 191,909
2022 -
Thereafter -
$ 898,856
109
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
C. San Dieguito Water District Miscellaneous Plan (SDWD Plan) (Continued)
Actuarial Methods and Assumptions Used to Determine Total Pension Liability
For the measurement period ended June 30, 2016, the total pension liability was determined by rolling
forward the June 30, 2015 total pension liability. The June 30, 2015 and June 30, 2016 total pension
liabilities were based on the following actuarial methods and assumptions:
Actuarial Assumptions:
Discount Rate 7.65%
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Investment Rate of Return 7.65% Net of Pension Plan Investment and Administrative
Expenses; includes inflation
Mortality Rate Table Derived using CaIPERS' Membership Data for all Funds. The
mortality table used was developed based on CaIPERS' specific
data. The table includes 20 years of mortality improvements
using Society of Actuaries Scale BB.
Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing Power Protection
Allowance Floor on Purchasing Power applies, 2.75%thereafter.
All other actuarial assumptions used in the June 30, 2015 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."
Change of Assumption
In accordance with GASB 68, the long-term expected rate of return should be determined net of pension
plan investment expense but without reduction for pension plan administrative expense. The discount
rate was changed from 7.5% (net of administrative expense in 2014) to 7.65% as of the June 30, 2015
measurement date to correct the adjustment which previously reduced the discount rate for
administrative expenses.
110
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
C. San Dieguito Water District Miscellaneous Plan (SDWD Plan) (Continued)
Discount Rate
The discount rate used to measure the total pension liability was 7.65 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 7.65 percent discount rate is adequate
and the use of the municipal bond rate calculation is not necessary. The long term expected discount
rate of 7.65 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 CaIPERS' 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 7.65 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.
111
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 14— California Public Employees' Retirement System (Continued)
C. San Dieguito Water District Miscellaneous Plan (SDWD Plan) (Continued)
Discount Rate (Continued)
New Strategic Real Return Real Return Years
Asset Class Allocation Years 1 -10 11 + 2
Global equity 47.00% 5.25% 5.71%
Global fixed income 19.00% 0.99% 2.43%
Inflation sensitive 6.00% 0.45% 3.36%
Private equity 12.00% 6.83% 6.95%
Real estate 11.00% 4.50% 5.13%
Infrastructure and forestland 3.00% 4.50% 5.09%
Liquidity 2.00% -0.55% -1.05%
An expected inflation of 2.5%was used for this period.
2 An expected inflation of 3.0%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 (6.65%) or one percentage point higher (8.65%) than the current rate:
Plan's Net Pension Liability/(Asset)
Discount Rate-1% Current Discount Discount Rate+ 1%
(6.65%) Rate(7.65%) (8.65%)
SDWD Plan $ 9,233,733 $ 6,288,631 $ 3,854,650
Pension Plan Fiduciary Net Position
Detailed information about the plan's fiduciary net position is available in the separately issued CalPERS
financial report.
112
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
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, 2015, and
applies to fiscal years 2015-16 and 2016-17.
A. City of Encinitas Retiree Health Plan
Plan Description
The City provides postretirement health care benefits through the Public Employees Medical and
Hospital Care Act (PEMHCA), which is a health benefit plan administered by CalPERS, to eligible
employees who retire directly from the City. The City pays the cost for lifetime retiree and dependent
medical benefits (average premium for CalPERS health plans available in San Diego County) for fire
department employees hired before March 16, 1995. Other City retirees receive the PEMHCA minimum
benefit, as determined by CalPERS. The City does not provide a retiree contribution for dental, vision, or
life insurance benefits. The City's OPEB plan does not issue a separate stand-alone report.
The City has elected to join the California Employers' Retiree Benefit Trust (the "Trust") in accordance
with GASB Statement No. 45, which provides a means to fund the annual OPEB costs, referred to as
the Annual Required Contribution (ARC). The City makes an annual contribution to the Trust, pays
benefits either directly to retirees or through PEMHCA during the year, and then seeks reimbursement
for these "pay-as-you-go expenses" from the Trust.
Funding Policy and Actuarial Methods and Assumptions
It is the City's policy to fully fund the ARC each fiscal year. The actual contributions of the City to the
Trust are established by action of the City Council. The contribution requirements were established via
an actuarial valuation of the City's Retiree Healthcare Plan as of June 30, 2015, performed in conformity
with the requirements of GASB Statement No. 45.
The following key assumptions were utilized in developing the June 30, 2015 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 7.28%.
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.
113
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 15— Other Postemployment Benefits (OPEB) (Continued)
A. City of Encinitas Retiree Health Plan (Continued)
Annual Required Contribution (ARC) and OPEB Cost Summary
The ARC for fiscal year 2017 of approximately $930,499 represents a level of funding that, if paid on an
on-going basis, is projected to cover normal costs each year and to amortize any unfunded actuarial
liability over a maximum of 30 years. The City contributed the ARC to the Trust and received
reimbursement for actual pay-as-you-expenses incurred during the year.
The City's annual OPEB costs, the percentage of annual OPEB cost contributed, and the resulting net
OPEB obligation for the preceding three years were as follows:
Percentage of Net
Annual Annual OPEB OPEB
Fiscal Year OPEB Cost Cost Contributed Obligation
June 30, 2015 $ 544,000 100% $ -
June 30, 2016 560,000 100% -
June 30, 2017 930,499 100% -
Funded Status and Funding Progress
The following table summarizes the funding status of the City's Retiree Health Plan from most recent
actuarial valuations:
Unfunded
Actuarial
Entry Age Unfunded Liability as
Actuarial Actuarial Actuarial Actuarial Estimated Percentage of
Valuation Assets Accrued Accrued Funded Covered Covered
Date Value Liability Liability Ratio Payroll Payroll
June 30, 2015 $ 2,915,458 $ 12,060,155 $ 9,144,697 24.17% $ 18,533,738 49.34%
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, 2015, and applies to fiscal
years 2015-16 and 2016-17.
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.
114
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 15— Other Postemployment Benefits (OPEB) (Continued)
B. San Dieguito Water District— Retiree Health Plan (Continued)
Plan Description (Continued)
SDWD has elected to join the California Employers' Retiree Benefit Trust (the "Trust") in accordance
with GASB Statement No. 45, which provides a means to fund the annual OPEB costs, referred to as
the Annual Required Contribution (ARC). SDWD makes its annual contribution to the Trust, pays
benefits either directly to retirees or through PEMHCA during the year, and then seeks reimbursement
for these "pay-as-you-go expenses" from the Trust.
Funding Policy and Actuarial Methods and Assumption
It is SDWD's policy to fully fund the ARC each fiscal year. The actual contributions of SDWD to the Trust
are established by action of the Board of Directors. The contribution requirements were established via
an actuarial valuation of the SDWD's Retiree Healthcare Plan as of June 30, 2015, 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 7.28%.
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 2017 of $52,780 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.
115
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 15— Other Postemployment Benefits (OPEB) (Continued)
B. San Dieguito Water District— Retiree Health Plan (Continued)
Annual Required Contribution (ARC) and OPEB Cost Summary(Continued)
SDWD's annual OPEB costs, the percentage of annual OPEB cost contributed, and the resulting net
OPEB obligation for the preceding three years were as follows:
Percentage of Net
Annual Annual OPEB OPEB
Fiscal Year OPEB Cost Cost Contributed Obligation
June 30, 2015 $ 29,000 100% $ -
June 30, 2016 28,794 100% -
June 30, 2017 52,780 100% -
Funded Status and Funding Progress
The following table summarizes the funding status of SDWD's Retiree Health Plan from most recent
actuarial valuations. The latest information available on the funding status comes from the actuarial
valuation dated June 30, 2015, projected to June 30, 2017.
Unfunded
Actuarial
Entry Age Unfunded Liability as
Actuarial Actuarial Actuarial Actuarial Estimated Percentage of
Valuation Assets Accrued Accrued Funded Covered Covered
Date Value Liability Liability Ratio Payroll Payroll
June 30, 2015 $ 111,363 $ 484,247 $ 372,884 23.00% $ 1,767,898 21.09%
General Information regarding Actuarial Valuations Methods and Assumptions
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined
regarding the funded status of the plan and the annual required contributions of the employer are
subject to continual revision as actual results are compared with past expectations and new estimates
are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as
understood between the employer and the plan members) and include the types of benefits provided at
the time of each valuation and the historical pattern of sharing benefit costs between the employer and
the plan members at that point. The actuarial methods and assumptions used include techniques
designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial
value of plan assets, consistent with the long-term perspective of the calculations.
The Schedule of Funding Progress for the City and SDWD retiree health care plans are presented as
Required Supplementary Information following the Notes to the Basic Financial Statements. These
schedules show multi-year trend information about whether the actuarial value of the plan assets is
increasing or decreasing over time relative to the actuarial accrued liability for benefits.
116
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 16— Encinitas Ranch Golf Authority
The Encinitas Ranch Golf Authority (the "Golf Authority") is a joint powers authority, formed by the City and
SDWD in 1995 to finance, own, and operate an 18-hole golf course (the "Golf Course") within the City. The
Golf Course was constructed in connection with the development of the Encinitas Ranch master-planned
community (the "Ranch"). The Ranch is a mixed-use community of residential, commercial and agricultural
development within the City. As a condition to the development of the Ranch, the Carltas Company (the
"Developer'), agreed to dedicate land for and construct the Golf Course improvements. The Golf Course
opened to the public on March 1, 1998, and is managed and operated under a contract arrangement with a
private company.
The Golf Authority is governed by a five-member Board of Directors, the membership of which is specified
in the 1994 Encinitas Ranch Development Agreement. It is a self-sustaining golf course operation and
receives no financial support from the City or SDWD. In future years, depending on the net revenues from
golf operations, the City may benefit financially from the operations.
However, this is unlikely until at least 2030, when the Golf Course bonded debt is expected to be paid off.
The debts and obligations of the Golf Authority are not the debts and obligations of the City or SDWD.
Separate audited financial statements of the Golf Authority are available at the City's administrative office.
Note 17—Special Assessment Debt
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, 2017, the outstanding balance on the 2012 Special Tax Refunding Bonds was $26,925,000.
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.
City of Encinitas—Duties and Responsibilities
The City acts as the agent for both of this Assessment District, collecting the assessments and paying the
District's bills, as well as other administrative duties. 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 in connection with this bond issue. Therefore, such bonds are not
considered to be a liability of the City and are not included in the accompanying basic financial statements.
117
City of Encinitas
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2017
Note 18— Prior Period Adjustment
The City recorded the following prior period adjustment to the beginning net position of the Business-
Type Activities and the San Dieguito Water District ("SDWD") major enterprise fund in order to remove
restricted cash and investments with fiscal agents and the Due to R.E. Badger liability in the same
amount. Cash in the amount of $1,377,006 was originally thought to be held by the City, but in actuality
was held by R.E. Badger Financing Authority. The amount previously reported is a reserve account for
Santa Fe Irrigation District and is not associated with SDWD's portion of the reserve. SDWD's portion of
the reserve is included and reported in Investment in Joint Ventures.
San Dieguito
Water District
Business-Type Major Enterprise
Activities Fund
Net position at July 1, 2016, as previously reported $ 119,391,239 $ 43,500,246
To adjust restricted cash (1,377,006) (1,377,006)
to adjust amount due to R.E. Badger 1,377,006 1,377,006
Net position at July 1, 2016, as restated $ 119,391,239 $ 43,500,246
118
REQUIRED SUPPLEMENTARY
INFORMATION (UNAUDITED)
119
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120
City of Encinitas
Required Supplementary Information (Unaudited)
For the Year Ended June 30, 2017
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. It 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.
121
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 2- Budgetary Comparison Schedule
General Fund
Budgeted Amounts Variance with
Original Final Actual Final Budget
REVENUES:
Taxes:
Property $ 41,517,561 $ 41,517,561 $ 42,043,923 $ 526,362
Real property transfer 510,000 510,000 519,777 9,777
Sales 13,190,000 12,825,000 12,549,609 (275,391)
Franchise 2,218,970 2,218,970 2,151,171 (67,799)
Transient occupancy 1,610,040 1,610,040 1,774,555 164,515
Total taxes 59,046,571 58,681,571 59,039,035 357,464
Licenses and permits 249,000 249,000 250,749 1,749
Intergovernmental 510,693 595,694 655,906 60,212
Charges for services 6,138,225 6,626,849 6,688,958 62,109
Fines, forfeitures and penalties 679,303 789,303 850,153 60,850
Use of money and property 667,005 707,005 1,047,909 340,904
Other 602,835 916,190 889,150 (27,040)
Total revenues 67,893,632 68,565,612 69,421,860 856,248
EXPENDITURES:
General government:
City Council 462,021 462,021 397,342 64,679
City Attorney 375,500 375,500 375,435 65
City Manager 4,634,450 4,468,250 4,098,908 369,342
City Clerk 685,914 824,795 740,927 83,868
Finance 1,877,388 1,877,388 1,787,102 90,286
Non-departmental 2,351,809 2,472,243 2,473,929 (1,686)
Total general government 10,387,082 10,480,197 9,873,643 606,554
Public safety:
Law enforcement 13,685,300 13,626,325 13,448,657 177,668
Fire and marine safety 14,431,586 14,627,906 14,051,012 576,894
Total public safety 28,116,886 28,254,231 27,499,669 754,562
Public works:
Administration 219,707 219,707 162,597 57,110
Environmental programs 110,242 135,242 122,735 12,507
Street maintenance 1,944,777 2,053,777 1,977,975 75,802
Facility maintenance 1,251,681 1,270,159 1,253,330 16,829
Stormwater 858,592 858,592 739,963 118,629
Total public works $ 4,384,999 $ 4,537,477 $ 4,256,600 $ 280,877
122
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 2- Budgetary Comparison Schedule (Continued)
General Fund (Continued)
Budgeted Amounts Variance with
Original Final Actual Final Budget
Planning and building:
Planning $ 1,619,250 $ 1,655,200 $ 1,538,234 $ 116,966
Code enforcement 705,188 666,225 479,463 186,762
Building services 3,090,291 3,186,929 2,645,174 541,755
Total planning and building 5,414,729 5,508,354 4,662,871 845,483
Engineering services:
City engineering 2,815,042 3,063,739 2,839,568 224,171
Traffic engineering 713,085 708,085 666,300 41,785
Stormwater 760,101 710,154 641,270 68,884
Total engineering services 4,288,228 4,481,978 4,147,138 334,840
Parks and recreation:
Administration 1,016,874 1,028,124 988,263 39,861
Park services 1,901,028 1,901,028 1,805,480 95,548
Beach services 540,078 591,053 464,395 126,658
Recreational trails 131,875 131,875 115,439 16,436
Recreational services 658,456 650,606 546,440 104,166
Community and senior center 2,272,211 2,678,678 2,455,636 223,042
Total parks and recreation 6,520,522 6,981,364 6,375,653 605,711
Total expenditures 59,112,446 60,243,601 56,815,574 3,428,027
EXCESS OF REVENUES OVER
EXPENDITURES 8,781,186 8,322,011 12,606,286 4,284,275
OTHER FINANCING SOURCES (USES)
Proceeds from sale of property - - - -
Transfers in-operating 1,174,360 1,174,360 1,040,602 (133,758)
Transfers in -capital - 913,715 1,276,933 363,218
Transfers out-operating (2,728,739) (2,736,589) (2,659,952) 76,637
Transfers out-capital (12,762,997) (15,235,405) (15,235,405) -
Transfers out-debt service (4,250,552) (4,250,552) (4,261,416) (10,864)
Total other financing sources(uses) (18,567,928) (20,134,471) (19,839,238) 295,233
NET CHANGE IN FUND BALANCE (9,786,742) (11,812,460) (7,232,952) 4,579,508
Fund balance-beginning of year 32,884,544 32,884,544 32,884,544 -
Fund balance-end of year $ 23,097,802 $ 21,072,084 $ 25,651,592 $ 4,579,508
123
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 3—Schedule of Changes in the Net Pension Liability and Related Ratios
Last Ten Fiscal Years*
City Miscellaneous Plan
Total Pension Liability 2015-16 2014-15 2013-14
Service cost $ 2,192,399 $ 2,261,277 $ 2,448,194
Interest on total pension liability 6,690,503 6,333,421 5,943,955
Differences between expected and actual experience (801,667) (126,649) -
Changes in assumptions - (1,637,757) -
Changes in benefit terms - - -
Benefit payments, including refunds of employee contributions (3,178,023) (3,003,676) (2,990,732)
Net change in total pension liability 4,903,212 3,826,616 5,401,417
Total pension liability-beginning 88,752,036 84,925,420 79,524,003
Total pension liability-ending (a) $ 93,655,248 $ 88,752,036 $ 84,925,420
Plan fiduciary net position
Contributions-employer $ 2,927,539 $ 2,077,263 $ 2,278,140
Contributions-employee 1,004,970 776,061 1,043,925
Investment income(net of administrative expenses) 447,217 1,359,388 9,816,151
Benefit payments (3,178,023) (3,003,676) (2,990,732)
Other (41,718) 49,406 -
Net change in plan fiduciary net position 1,159,985 1,258,442 10,147,484
Plan fiduciary net position -beginning 68,451,820 67,193,378 57,045,894
Plan fiduciary net position -ending (b) $ 69,611,805 $ 68,451,820 $ 67,193,378
Net pension liability-ending (a)-(b) $ 24,043,443 $ 20,300,216 $ 17,732,042
Plan fiduciary net position as a percentage of the
total pension liability 74.33% 77.13% 79.12%
Covered-employee payroll $ 12,783,667 $ 12,951,932 $ 13,022,309
Net pension liability as a percentage of covered-
employee payroll 188.08% 156.74% 136.17%
Notes to Schedule:
Changes in assumptions. The discount rate was changed from 7.5% (net of administrative expenses)to 7.65%in 2015.
Fiscal year 2015 was the first year of implementation, therefore only three years are shown.
124
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 4—Schedules of the City's Proportionate Share of the Net Pension Liability
Last Ten Fiscal Years*
Safety Plan
2015-2016 2014-2015 2013-2014
Plan's proportion of the net pension liabliity 0.38281% 0.35376% 0.22994%
Plan's proportionate share of the net pension liability $ 19,826,444 $ 14,576,416 $ 14,308,774
Plan's covered-employee payroll 2 $ 5,841,908 $ 5,671,755 $ 5,115,288
Plan's proportionate share of the net pension liability as a
percentage of covered-employee payroll 339.38% 257.00% 279.73%
Plan's fiduciary net position $ 63,591,785 $ 65,540,377 $ 62,697,310
Plan's fiduciary net position as a percentage of the total
pension liability 76.23% 81.81% 78.26%
Plan's proportionate share of aggregate employer contributions 3'4 $ 1,609,491 $ 1,250,672 $ 1,775,034
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 three years are shown.
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.
125
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 4—Schedules of the City's Proportionate Share of the Net Pension Liability (Continued)
Last Ten Fiscal Years*
San Dieguito Water District Plan
2015-20161 2014-20151 2013-20141
Plan's proportion of the net pension liabliity 0.18103% 0.18296% 0.06074%
Plan's proportionate share of the net pension liability $ 6,288,631 $ 5,019,493 $ 3,779,285
Plan's covered-employee payroll 2 $ 1,808,714 $ 1,756,033 $ 1,712,639
Plan's proportionate share of the net pension liability as a
percentage of covered-employee payroll 347.69% 285.84% 220.67%
Plan's fiduciary net position $ 15,586,708 $ 16,358,655 $ 18,489,458
Plan's fiduciary net position as a percentage of the total
pension liability 71.25% 76.52% 83.03%
Plan's proportionate share of aggregate employer contributions 3'4 $ 356,509 $ 565,860 $ 499,985
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 three years are shown.
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.
126
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 5—Schedules of Contributions
Last Ten Fiscal Years*
City Miscellaneous Plan
2016-17' 2015-16 2014-15' 2013-14'
Actuarially determined contribution $ 2,723,629 $ 2,585,583 $ 1,815,263 $ 2,278,140
Contributions in relation to the actuarially determined contributions 2 (2,723,629) (2,927,539) (2,077,263) (2,278,140)
Contribution deficiency(excess) $ - $ (341,956) $ (262,000) $
Covered-employee payroll 3,4 $ 13,167,177 $ 12,783,667 $ 12,951,932 $ 13,022,309
Contributions as a percentage of covered-
employee payroll 3 20.68% 22.90% 16.04% 17.49%
Historical information is required only for measurement periods for which GASB 68 is applicable.
2 Employers are assumed to make contributions equal to the actuarially determined contributions. However,some employers may choose to make
additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined contributions.
3 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.
4 Payroll from prior year($12,783,667)was assumed to increase by the 3.00%payroll growth assumption.
Notes to Schedule
Valuation date: 6/30/2015 6/30/2014 6/30/2013
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2013-14 were from the June 30,2011
public agency valuations.
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Normal
Amortization method/period
For details,see June 30,2012 Funding Valuation Report
Asset valuation method Actuarial Value of Assets. For details, see June 30,
2012 Funding Valuation Report.
Inflation 2.75%
Salary increases Varies by entry age and service
Payroll growth 3.00%
Investment rate of return 7.50%, net of pension plan investment and
administrative expenses,including inflation
Retirement age The probabilities of retirement are based on the 2010
Ca1PERS Experience study for the period from 1997 to
2007.
Mortality
The probabilities of mortality are based on the 2010
Ca1PERS Experience Study for the period from 1997 to
2007. Pre-retirement and Post-retirement mortality rates
include 5 years of projected mortality improvement using
Scale AA published by the Society of Actuaries.
Fiscal year 2015 was the first year of implementation,therefore only four years are shown.
127
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 5—Schedules of Contributions (Continued)
Last Ten Fiscal Years*
Safety Plan
2016-17 2015-16' 2014-15' 2013-14'
Contractually determined contribution(actuarially determined) $ 1,108,343 $ 1,609,491 $ 1,251,594 $ 1,209,864
Contributions in relation to the actuarially determined contributions 2 (1,108,343) (1,609,491) (1,251,594) (1,209,864)
Contribution deficiency(excess) $ - $ - $ - $ -
Covered-employee payroll 3,4 $ 6,017,165 $ 5,841,908 $ 5,671,755 $ 5,154,534
Contributions as a percentage of covered-
employee payroll 3 18.42% 27.55% 22.07% 23.47%
Historical information is available only for measurement periods for which GASB 68 is applicable.
2 Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to
make additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined
contributions.
3 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.
4 Payroll from prior year($5,671,755)was assumed to increase by the 3.00%payroll growth assumption.
Notes to Schedule
Valuation date: 6/30/2015 6/30/2014 6/30/2013
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2016-17 were from the June 30,
2014 public agency valuations.
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Normal
Amortization method/period For details,see June 30,2011 Funding Valuation Report
Asset valuation method Actuarial Value of Assets. For details,see June 30,2011
Funding Valuation Report.
Inflation 2.75%
Salary increases Varies by entry age and service
Payroll growth 3.00%
Investment rate of return 7.50%, net of pension plan investment and
administrative expenses,including inflation
Retirement age The probabilities of retirement are based on the 2010
Ca1PERS Experience study for the period from 1997 to
2007.
Mortality
The probabilities of mortality are based on the 2010
Ca1PERS Experience Study for the period from 1997 to
2007. Pre-retirement and Post-retirement mortality rates
include 5 years of projected mortality improvement using
Scale AA published by the Society of Actuaries.
Fiscal year 2015 was the first year of implementation,therefore only four years are shown.
128
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 5—Schedules of Contributions (Continued)
Last Ten Fiscal Years*
San Dieguito Water District Plan
2016-17' 2015-16 2014-15' 2013-14'
Contractually determined contribution(actuarially determined) $ 493,586 $ 356,509 $ 271,845 $ 241,133
Contributions in relation to the actuarially determined contributions 2 (493,586) (356,509) (271,845) (241,133)
Contribution deficiency(excess) $ - $ - $ - $ -
Covered-employee payroll 3,4 $ 1,862,975 $ 1,808,714 $ 1,756,033 $ 1,712,639
Contributions as a percentage of covered-
employee payroll 3 26.49% 19.71% 15.48% 14.08%
Historical information is available only for measurement periods for which GASB 68 is applicable.
2 Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to
make additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined
contributions.
3 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.
4 Payroll from prior year($1,808,714)was assumed to increase by the 3.00%payroll growth assumption.
Notes to Schedule
Valuation date: 6/30/2015 6/30/2014 6/30/2013
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2016-17 were from the June 30,
2014 public agency valuations.
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Normal
Amortization method/period For details,see June 30,2011 Funding Valuation Report
Asset valuation method Actuarial Value of Assets. For details, see June 30,
2011 Funding Valuation Report.
Inflation 2.75%
Salary increases Varies by entry age and service
Payroll growth 3.00%
Investment rate of return 7.50%, net of pension plan investment and
administrative expenses,including inflation
Retirement age The probabilities of retirement are based on the 2010
Ca1PERS Experience study for the period from 1997 to
2007.
Mortality
The probabilities of mortality are based on the 2010
Ca1PERS Experience Study for the period from 1997 to
2007. Pre-retirement and Post-retirement mortality rates
include 5 years of projected mortality improvement using
Scale AA published by the Society of Actuaries.
Fiscal year 2015 was the first year of implementation,therefore only four years are shown.
129
City of Encinitas
Required Supplementary Information (Unaudited) (Continued)
For the Year Ended June 30, 2017
Note 6—Schedules of Funding Progress —Other Postemployment Benefits
A. Other Postemployment Benefits (OPEB) — City's Plan
Unfunded
Actuarial
Entry Age Unfunded Liability as
Actuarial Actuarial Actuarial Actuarial Percentage of
Valuation Assets Accrued Accrued Funded Covered Covered
Date Value Liability Liability Ratio Payroll Payroll
June 30, 2011 $ 1,960,000 $ 10,506,000 $ 8,546,000 18.66% $ 18,252,000 46.82%
June 30, 2013 2,178,800 8,686,482 6,507,682 25.08% 18,135,000 35.88%
June 30, 2015 2,915,458 12,060,155 9,144,697 24.17% 18,533,738 49.34%
B. Other Postemployment Benefits (OPEB) — San Dieguito Water District's Plan
Unfunded
Actuarial
Entry Age Unfunded Liability as
Actuarial Actuarial Actuarial Actuarial Percentage of
Valuation Assets Accrued Accrued Funded Covered Covered
Date Value Liability Liability Ratio Payroll Payroll
June 30, 2011 $ 65,000 $ 343,000 $ 278,000 18.95% $ 1,230,000 22.60%
June 30, 2013 68,176 484,247 416,071 14.08% 1,886,000 22.06%
June 30, 2015 111,363 484,247 372,884 23.00% 1,767,898 21.09%
130
SUPPLEMENTARY INFORMATION
131
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132
NON-MAJOR
GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS:
Infrastructure Improvements - This fund is used to account for financial resources from state and federal
grants which are primarily to fund operations and capital improvements.
Grants and Housing- This fund is used to account for financial resources from state and federal grants that
are utilized to fund various City programs such as affordable housing and law enforcement.
Development Impact - This fund is used to account for development impacUmitigation fees that are
collected in connection with land use and construction applications. These monies are utilized to fund
specified city capital improvement projects.
Lighting and Landscaping - This fund is used to account for special assessments and certain restricted
property tax revenues collected from homeowners and businesses. These monies are utilized to fund
specified operational and maintenance costs related to common area landscaping, street lighting, and park
maintenance.
DEBT SERVICE FUNDS:
City Debt Service - This fund is used to account for and report financial resources that are restricted,
committed, or assigned to expenditure for the payment of principal and interest on City long-term debt.
Encinitas Public Financing Authority- This fund is used to account for and report financial resources that
are restricted, committed, or assigned to expenditure for the payment of principal and interest on Encinitas
Public Financing Authority long-term debt.
133
City of Encinitas
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2017
Special Revenue
Infrastructure Grants and Development Lighting and
Improvements Housing Impact Landscaping
ASSETS
Cash and investments $ 952,921 $ 1,484,631 $ 3,806,259 $ 3,117,438
Receivables 141,766 231,734 - 74,390
Inventory and prepaids - - - -
Long-term receivable - 194,466 216,967 -
Restricted cash and investments - - - -
Total assets $ 1,094,687 $ 1,910,831 $ 4,023,226 $ 3,191,828
LIABILITIES, DEFERRED INFLOWS
OF RESOURCES,AND FUND BALANCES
LIABILITIES
Accounts payable and accrued liabilities $ 3,837 $ 143,700 $ - $ 243,752
Unearned revenue 104,844 - - -
Due to other funds 13,169,595 243,125 - -
Deposits and other liabilities - - 16,342 -
Totalliabilities 13,278,276 386,825 16,342 243,752
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - 194,466 216,967 -
Total deferred inflows of resources - 194,466 216,967 -
Fund Balances:
Nonspendable - - - -
Restricted - 1,329,540 3,789,917 2,948,076
Unassigned (deficit) (12,183,589) - - -
Total fund balances (12,183,589) 1,329,540 3,789,917 2,948,076
Total liabilities,deferred inflows of
resources and fund balances $ 1,094,687 $ 1,910,831 $ 4,023,226 $ 3,191,828
(Continued)
134
City of Encinitas
Combining Balance Sheet (Continued)
Non-Major Governmental Funds
June 30, 2017
Debt Service
Total
Encinitas Public Other
City Financing Governmental
Debt Service Authority Funds
ASSETS
Cash and investments $ - $ - $ 9,361,249
Receivables - - 447,890
Inventory and prepaids 296,234 - 296,234
Long-term receivable - - 411,433
Restricted cash and investments 784,068 9,576 793,644
Total assets $ 1,080,302 $ 9,576 $ 11,310,450
LIABILITIES, DEFERRED INFLOWS
OF RESOURCES,AND FUND BALANCES
LIABILITIES
Accounts payable and accrued liabilities $ 567,437 $ - $ 958,726
Unearned revenue - - 104,844
Due to other funds - - 13,412,720
Deposits and other liabilities - - 16,342
Total liabilities 567,437 - 14,492,632
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - - 411,433
Total deferred inflows of resources - - 411,433
Fund Balances:
Nonspendable 296,234 - 296,234
Restricted 216,631 9,576 8,293,740
Unassigned (deficit) - - (12,183,589)
Total fund balances 512,865 9,576 (3,593,615)
Total liabilities,deferred inflows of
resources and fund balances $ 1,080,302 $ 9,576 $ 11,310,450
(Concluded)
135
City of Encinitas
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
Non-Major Governmental Funds
For the Year Ended June 30, 2017
Special Revenue
Infrastructure Grants and Development Lighting and
Improvements Housing Impact Landscaping
REVENUES:
Taxes and assessments $ 447,107 $ 394,684 $ - $ 2,053,595
Intergovernmental 4,434,934 1,016,631 - -
Development impact fees - - 800,370 -
Use of money and property 21,189 12,959 99,347 74,995
Other - 201,625 - 39,469
Total revenues 4,903,230 1,625,899 899,717 2,168,059
EXPENDITURES:
Current:
General government - 143,787 - -
Public safety - 225,290 - -
Public works - 445,991 - 1,648,946
Planning and building - 447,427 - -
Engineering services 221,463 - - -
Parks and recreation - 127,379 - 107,276
Debt service:
Principal - - - -
Interest and fiscal charges - - - -
Total expenditures 221,463 1,389,874 - 1,756,222
REVENUES OVER
(UNDER) EXPENDITURES 4,681,767 236,025 899,717 411,837
OTHER FINANCING SOURCES (USES):
Issuance of debt - - - -
Premium on bond issuance - - - -
Deposit to escrow for bond refunding - - - -
Transfers in 154,775 253,920 72,052 27,344
Transfers out (8,804,396) (532,570) (3,323,243) (212,500)
Total other financing sources(uses) (8,649,621) (278,650) (3,251,191) (185,156)
NET CHANGE IN FUND BALANCES (3,967,854) (42,625) (2,351,474) 226,681
FUND BALANCES:
Beginning of year (8,215,735) 1,372,165 6,141,391 2,721,395
End of year $(12,183,589) $ 1,329,540 $ 3,789,917 $ 2,948,076
(Continued)
136
City of Encinitas
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued)
Non-Major Governmental Funds
For the Year Ended June 30, 2017
Debt Service
Total
Encinitas Public Other
City Financing Governmental
Debt Service Authority Funds
REVENUES:
Taxes and assessments $ - $ - $ 2,895,386
Intergovernmental - - 5,451,565
Development impact fees - - 800,370
Use of money and property 1,035 27,615 237,140
Other - - 241,094
Total revenues 1,035 27,615 9,625,555
EXPENDITURES:
Current:
General government - - 143,787
Public safety - - 225,290
Public works - - 2,094,937
Planning and building - - 447,427
Engineering services - - 221,463
Parks and recreation - - 234,655
Debt service:
Principal 418,417 2,435,000 2,853,417
Interest and fiscal charges 62,061 2,015,709 2,077,770
Total expenditures 480,478 4,450,709 8,298,746
REVENUES OVER
(UNDER) EXPENDITURES (479,443) (4,423,094) 1,326,809
OTHER FINANCING SOURCES (USES):
Issuance of debt - 11,955,000 11,955,000
Premium on bond issuance - 1,360,284 1,360,284
Deposit to escrow for bond refunding - (14,725,914) (14,725,914)
Transfers in 488,109 3,773,307 4,769,507
Transfers out - - (12,872,709)
Total other financing sources(uses) 488,109 2,362,677 (9,513,832)
NET CHANGE IN FUND BALANCES 8,666 (2,060,417) (8,187,023)
FUND BALANCES:
Beginning of year 504,199 2,069,993 4,593,408
End of year $ 512,865 $ 9,576 $ (3,593,615)
(Concluded)
137
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, 2017
Final Actual Variance with
Budget Amounts Final Budget
REVENUES:
Taxes and assessments $ 401,550 $ 447,107 $ 45,557
Intergovernmental 8,819,510 4,434,934 (4,384,576)
Use of money and property - 21,189 21,189
Total revenues 9,221,060 4,903,230 (4,317,830)
EXPENDITURES:
Current:
Engineering services 226,547 221,463 5,084
Total expenditures 226,547 221,463 5,084
REVENUES OVER
(UNDER) EXPENDITURES 8,994,513 4,681,767 (4,312,746)
OTHER FINANCING SOURCES (USES):
Transfers in 154,775 154,775 -
Transfers out (8,924,510) (8,804,396) 120,114
Total other financing sources(uses) (8,769,735) (8,649,621) 120,114
NET CHANGE IN FUND BALANCE $ 224,778 (3,967,854) $ (4,192,632)
FUND BALANCE:
Beginning of year (8,215,735)
End of year $ (12,183,589)
138
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, 2017
Final Actual Variance with
Budget Amounts Final Budget
REVENUES:
Taxes and assessments $ 404,601 $ 394,684 $ (9,917)
Intergovernmental 1,084,758 1,016,631 (68,127)
Use of money and property 538 12,959 12,421
Other 215,000 201,625 (13,375)
Total revenues 1,704,897 1,625,899 (78,998)
EXPENDITURES:
Current:
General government 191,609 143,787 47,822
Public safety 239,360 225,290 14,070
Public works 508,904 445,991 62,913
Planning and building 503,038 447,427 55,611
Parks and recreation 225,883 127,379 98,504
Total expenditures 1,668,794 1,389,874 278,920
REVENUES OVER
(UNDER) EXPENDITURES 36,103 236,025 199,922
OTHER FINANCING SOURCES (USES)
Transfers in 279,480 253,920 (25,560)
Transfers(out) (532,570) (532,570) -
Total other financing sources(uses) (253,090) (278,650) (25,560)
NET CHANGE IN FUND BALANCE $ (216,987) (42,625) $ 174,362
FUND BALANCE:
Beginning of year 1,372,165
End of year $ 1,329,540
139
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, 2017
Final Actual Variance with
Budget Amounts Final Budget
REVENUES:
Development impact fees $ 820,976 $ 800,370 $ (20,606)
Use of money and property 34,734 99,347 64,613
Total revenues 855,710 899,717 44,007
REVENUES OVER
(UNDER) EXPENDITURES 855,710 899,717 44,007
OTHER FINANCING SOURCES (USES)
Transfers in 72,052 72,052 -
Transfers(out) (3,336,887) (3,323,243) 13,644
Total other financing sources(uses) (3,264,835) (3,251,191) 13,644
NET CHANGE IN FUND BALANCE $ (2,409,125) (2,351,474) $ 57,651
FUND BALANCE:
Beginning of year 6,141,391
End of year $ 3,789,917
140
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, 2017
Final Actual Variance with
Budget Amounts Final Budget
REVENUES:
Taxes and assessments $ 1,900,050 $ 2,053,595 $ 153,545
Use of money and property 50,600 74,995 24,395
Other - 39,469 39,469
Total revenues 1,950,650 2,168,059 217,409
EXPENDITURES:
Current:
Public works 1,970,469 1,648,946 321,523
Parks and recreation 125,522 107,276 18,246
Total expenditures 2,095,991 1,756,222 339,769
REVENUES OVER
(UNDER) EXPENDITURES (145,341) 411,837 557,178
OTHER FINANCING SOURCES (USES)
Transfers in 8,400 27,344 18,944
Transfers(out) (212,500) (212,500) -
Total other financing sources(uses) (204,100) (185,156) 18,944
NET CHANGE IN FUND BALANCE $ (349,441) 226,681 $ 576,122
FUND BALANCE:
Beginning of year 2,721,395
End of year $ 2,948,076
141
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142
Internal Service Funds
Internal Service Funds are used to finance and account for special activities and services performed by a
designated City department for other departments on a cost reimbursement basis.
Risk Management - This fund is used to account for the financing of goods or services provided by one
department or agency to other departments or agencies of the City, or to other governments, on a cost
reimbursement basis for risk management expenditures.
Wastewater Support - This fund is used to account for the financing of goods or services provided by
one department or agency to other departments or agencies of the City, or to other governments, on a
cost reimbursement basis for wastewater support expenditures.
Vehicle Maintenance - This fund is used to account for the financing of goods or services provided by
one department or agency to other departments or agencies of the City, or to other governments, on a
cost reimbursement basis for vehicle maintenance expenditures.
Vehicle Replacement - This fund is used to account for the financing of goods or services provided by
one department or agency to other departments or agencies of the City, or to other governments, on a
cost reimbursement basis for vehicle replacement expenditures.
143
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144
City of Encinitas
Combining Statement of Net Position
All Internal Service Funds
June 30, 2017
Risk Wastewater Vehicle Vehicle
Management Support Maintenance Replacement Total
ASSETS
Current assets:
Cash and investments $ 6,016,281 $ 5,226 $ 6,328 $ 1,612,857 $ 7,640,692
Inventory and prepaid items 47,762 - - 401,161 448,923
Total current assets 6,064,043 5,226 6,328 2,014,018 8,089,615
Noncurrent assets:
Capital assets:
Utility, plant, vehicles, and equipment, net - - - 3,326,817 3,326,817
Total noncurrent assets - - - 3,326,817 3,326,817
Total assets 6,064,043 5,226 6,328 5,340,835 11,416,432
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 109,099 5,226 6,328 435,587 556,240
Current portion of capital leases payable - - - 422,965 422,965
Total current liabilities 109,099 5,226 6,328 858,552 979,205
Noncurrent liabilities:
Capital lease payable - - - 802,426 802,426
Total noncurrent liabilities - - - 802,426 802,426
Total liabilities 109,099 5,226 6,328 1,660,978 1,781,631
NET POSITION
Net investment in capital assets - - - 2,101,426 2,101,426
Unrestricted 5,954,944 - - 1,578,431 7,533,375
Total net position $ 5,954,944 $ - $ - $ 3,679,857 $ 9,634,801
145
City of Encinitas
Combining Statement of Revenues, Expenses, and Changes in Net Position
All Internal Service Funds
For the Year Ended June 30, 2017
Risk Wastewater Vehicle Vehicle
Management Support Maintenance Replacement Total
OPERATING REVENUES:
Interfund revenues $ 1,035,314 $ 854,074 $ 594,413 $ - $ 2,483,801
Other revenues 1,500,784 - 1,046 - 1,501,830
Total operating revenues 2,536,098 854,074 595,459 - 3,985,631
OPERATING EXPENSES:
Operational support services 449,894 75,412 232,893 10,127 768,326
Administrative support 397,893 665,662 362,566 - 1,426,121
Insurance and claims 1,096,356 - - - 1,096,356
Depreciation of capital assets - - - 531,073 531,073
Total operating expenses 1,944,143 741,074 595,459 541,200 3,821,876
Operating income(loss) 591,955 113,000 - (541,200) 163,755
NONOPERATING REVENUES:
Gain (loss)on disposal of capital assets - - - 1,937 1,937
Interest expense - - - (18,861) (18,861)
Total nonoperating revenues - - - (16,924) (16,924)
INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS 591,955 113,000 - (558,124) 146,831
Transfers in 988,006 - - 616,000 1,604,006
Transfers out - (113,000) - - (113,000)
Total capital contributions and transfers 988,006 (113,000) - 616,000 1,491,006
Net change in net position 1,579,961 - - 57,876 1,637,837
NET POSITION:
Beginning of year 4,374,983 - - 3,621,981 7,996,964
End of year $ 5,954,944 $ - $ - $ 3,679,857 $ 9,634,801
146
City of Encinitas
Combining Statement of Cash Flows
All Internal Service Funds
For the Year Ended June 30, 2017
Risk Wastewater Vehicle Vehicle
Management Support Maintenance Replacement Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from users $2,567,357 $ 854,074 $ 598,919 $ - $4,020,350
Cash received from(paid to)other funds - - - (629,851) (629,851)
Payments to employees (847,787) (741,074) (595,459) (10,127) (2,194,447)
Payments to suppliers and vendors (1,154,027) (5,871) (6,118) 630,625 (535,391)
Net cash provided by(used in)operating activities 565,543 107,129 (2,658) (9,353) 660,661
CASHFLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES:
Acquisition of capital assets - - - (662,875) (662,875)
Principal payment on long-term debt - - - (331,993) (331,993)
Proceeds from issuance of debt - - - 629,851 629,851
Interest payments on capital leases - - - (18,861) (18,861)
Proceeds from sale of capital assets - - - 1,937 1,937
Net cash(used in)capital and related financing activities - - - (381,941) (381,941)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in 988,006 - - 616,000 1,604,006
Transfers(out) - (113,000) - - (113,000)
Net cash provided by(used in)noncapital financing activities 988,006 (113,000) - 616,000 1,491,006
Net increase(decrease)in cash and cash equivalents 1,553,549 (5,871) (2,658) 224,706 1,769,726
CASH AND CASH EQUIVALENTS:
Beginning of year 4,462,732 11,097 8,986 1,388,151 5,870,966
End of year $6,016,281 $ 5,226 $ 6,328 $1,612,857 $ 7,640,692
RECONCILIATION OF OPERATING INCOME(LOSS)TO
NET CASH PROVIDED BY(USED IN)OPERATING ACTIVITIES:
Operating income(loss) $ 591,955 $ 113,000 $ - $ (541,200) $ 163,755
Adjustments to reconcile operating income(loss)to
net cash provided by(used in)operating activities:
Depreciation - - - 531,073 531,073
Changes in operating assets and liabilities:
Accounts receivable 31,259 - 3,460 - 34,719
Inventory and prepaid items (47,762) - - 228,690 180,928
Accounts payable and accrued liabilities (9,909) (5,871) (6,118) 401,935 380,037
Due to other funds - - - (629,851) (629,851)
Total adjustments (26,412) (5,871) (2,658) 531,847 496,906
Net cash provided by(used in)operating activities $ 565,543 $ 107,129 $ (2,658) $ (9,353) $ 660,661
147
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148
FIDUCIARY FUNDS
AGENCYFUND
The Agency Funds are used to account for assets held by the City in a trustee capacity for individuals, private
organizations, other governments, and/or other funds.
Community Facilities District #1 - This fund accounts for all money collected to pay for debt service of
the Community Facilities District#1 for which the City acts as paying agent but has no legal commitment
or obligation.
Requeza Street Assessment District #93-1 - This fund accounts for all money collected to pay for debt
service of the Requeza Assessment District for which the City acts as paying agent but has no legal
commitment or obligation.
149
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150
City of Encinitas
Statement of Changes in Assets and Liabilities
Agency Funds
For the Year Ended June 30, 2017
Balance Balance
July 1, 2016 Additions Deletions June 30, 2017
Community Facilities District#1
Assets:
Cash and investments $ 2,089,264 $ 2,683,416 $ (2,637,001) $ 2,135,679
Restricted cash and investments:
Held by fiscal agents 1,976,121 2,588,981 (2,586,060) 1,979,042
Special assessments receivable 28,350,000 - (1,425,000) 26,925,000
Current assessments receivable 18,531 11,833 (18,531) 11,833
Total assets $ 32,433,916 $ 5,284,230 $ (6,666,592) $ 31,051,554
Liabilities:
Due to bondholders $ 32,433,916 $ 44,222 $ (1,426,584) $ 31,051,554
Total liabilities $ 32,433,916 $ 44,222 $ (1,426,584) $ 31,051,554
Requeza Street Assessment District No.93-1
Assets:
Cash and investments $ 3,494 $ 1,305 $ (1,284) $ 3,515
Special assessments receivable - - - -
Total assets $ 3,494 $ 1,305 $ (1,284) $ 3,515
Liabilities:
Due to bondholders $ 3,494 $ 1,305 $ (1,284) $ 3,515
Total liabilities $ 3,494 $ 1,305 $ (1,284) $ 3,515
Total -All Agency Funds
Assets:
Cash and investments $ 2,092,758 $ 2,684,721 $ (2,638,285) $ 2,139,194
Restricted cash and investments:
Held by fiscal agents 1,976,121 2,588,981 (2,586,060) 1,979,042
Interest receivable - - - -
Special assessments receivable 28,350,000 - (1,425,000) 26,925,000
Current assessments receivable 18,531 11,833 (18,531) 11,833
Total assets $ 32,437,410 $ 5,285,535 $ (6,667,876) $ 31,055,069
Liabilities:
Due to bondholders $ 32,437,410 $ 45,527 $ (1,427,868) $ 31,055,069
Total liabilities $ 32,437,410 $ 45,527 $ (1,427,868) $ 31,055,069
151
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152
City of Encinitas Statistical Section
This section of the City of Encinitas' Comprehensive Annual Financial Report presents detailed information as a contex
for understanding what the information in the financial statements, note disclosures, required supplementary and
supplementary information says about the City's overall financial health.
Contents Page
Financial Trends -These schedules contain trend information to help the reader understand how the
City's financial performance and well-being have changed overtime.
1 Net Position by Components 154
2 Changes in Net Position 156
3 Fund Balances of Governmental Funds 160
4 Changes in Fund Balances of Governmental Funds 162
Revenue Capacity-These schedules contain information to help the reader assess the City's most
significant local revenue source which is property tax.
5 Assessed Value of Taxable Property, General Property Tax 164
6 Principal Property Taxpayers, General Property Tax 165
7 Property Tax Levies and Collections 167
8 Direct and Overlapping Property Tax Rates, General Property Tax 168
Debt Capacity-These schedules present information to help the reader assess the affordability of the
City's current levels of outstanding debt and the City's ability to issue additional debt in the future.
9 Ratios of Outstanding Debt by Type 172
10 Ratios of General Bonded Debt Outstanding 174
11 Schedule of Direct and Overlapping Bonded Debt 175
12 Legal Debt Margin Information 176
13 Historical Debt Service Coverage 178
Demographics and Economic Information -These schedules offer demographics and economic indicators
to help the reader understand the environment within which the City's financial activities take place.
14 Demographic and Economic Statistics 180
15 General Governmental Tax Revenue by Source 181
16 Taxable Sales by Business Type 182
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.
17 Full-time and Part-Time Employees by Function 183
18 Operating Indicators by Function 184
19 Capital Asset Statistics by Function 186
20 Cardiff Sanitary Division - Summary of Operational Data 189
21 San Dieguito Water District- Summary of Operational Data 193
Sources: Unless otherwise noted, the information in these schedules was derived from the Comprehensive
Annual Financial Reports for the relevant year.
153
City of Encinitas
Net Position by Components
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Fiscal Year
2008 2009 2010 2011 2012
Government activities:
Net investment in capital assets $ 125,786,039 $ 131,703,037 $ 130,912,728 $ 139,575,875 $ 153,516,469
Restricted 5,207,761 4,340,090 4,219,623 - -
Unrestricted 56,901,871 53,452,967 54,755,944 56,799,902 43,857,634
Total governmental activities net position $ 187,895,671 $ 189,496,094 $ 189,888,295 $ 196,375,777 $ 197,374,103
Business-type activities:
Net investment in capital assets $ 19,204,679 $ 19,422,684 $ 25,014,811 $ 30,076,172 $ 25,155,766
Restricted 1,814,716 1,048,426 - - -
Unrestricted 65,301,729 68,683,799 71,916,135 72,608,845 83,232,015
Total business-type activities net position $ 86,321,124 $ 89,154,909 $ 96,930,946 $ 102,685,185 $ 108,387,781
Primary government:
Net investment in capital assets $ 144,990,718 $ 151,125,721 $ 155,927,539 $ 169,652,047 $ 178,672,235
Restricted 7,022,477 5,388,516 4,219,623 - -
Unrestricted 122,203,600 122,136,766 126,672,079 129,408,747 127,089,649
Total primary government net position $ 274,216,795 $ 278,651,003 $ 286,819,241 $ 299,060,970 $ 305,761,884
154
City of Encinitas
Net Position by Components
Last Ten Fiscal Years
(Accrual Basis of Accounting)
(Continued)
Fiscal Year
2013 2014 2015 2016 2017
Government activities:
Net investment in capital assets $ 157,395,370 $ 161,902,991 $ 157,304,041 $ 162,923,350 $ 165,759,601
Restricted 9,980,695 17,363,704 18,741,022 30,996,309 19,867,542
Unrestricted 37,646,551 38,446,880 9,229,896 (580,736) 9,510,235
Total governmental activities net position $ 205,022,616 $ 217,713,575 $ 185,274,959 $ 193,338,923 $ 195,137,378
Business-type activities:
Net investment in capital assets $ 32,247,941 $ 54,362,661 $ 39,806,764 $ 42,501,264 $ 44,977,544
Restricted - 1,039,739 - 1,377,006 20,237
Unrestricted 79,816,600 62,426,804 75,781,002 75,512,969 79,286,895
Total business-type activities net position $ 112,064,541 $ 117,829,204 $ 115,587,766 $ 119,391,239 $ 124,284,676
Primary government:
Net investment in capital assets $ 189,643,311 $ 216,265,652 $ 197,110,805 $ 205,424,614 $ 210,737,145
Restricted 9,980,695 18,403,443 18,741,022 32,373,315 19,887,779
Unrestricted 117,463,151 100,873,684 85,010,898 74,932,233 88,797,130
Total primary government net position $ 317,087,157 $ 335,542,779 $ 300,862,725 $ 312,730,162 $ 319,422,054
155
City of Encinitas
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Fiscal Year
2008 2009 2010 2011 2012
Expenses:
Government activities:
General government $ 12,783,573 $ 14,249,545 $ 12,132,268 $ 10,912,556 $ 12,064,527
Public safety 21,015,336 22,039,493 22,269,616 22,324,624 23,062,746
Public works 11,595,020 9,360,563 9,520,416 10,981,355 8,560,330
Planning and building 5,287,058 4,833,543 5,599,614 5,539,148 5,008,179
Engineering services 3,972,242 4,010,485 3,873,432 3,646,306 5,817,932
Parks and recreation 6,594,001 6,902,715 6,518,623 6,243,769 5,578,716
Interest and fiscal charges on long-term debt 2,261,104 2,266,817 2,296,422 2,029,477 1,811,714
Total governmental activities expenses 63,508,334 63,663,161 62,210,391 61,677,235 61,904,144
Business-type activities:
Cardiff Sanitary Division 2,985,912 2,854,368 3,569,880 3,715,529 3,385,439
San Dieguito Water District 11,894,734 12,955,085 11,633,694 11,622,126 12,448,911
Encinitas Sanitary Division 1,823,088 1,805,624 1,855,278 1,992,334 1,719,176
Affordable Housing 242,553 260,130 256,873 244,748 1,492,811
Recreation Programs - - - - 1,187,788
Total business-type activities expenses 16,946,287 17,875,207 17,315,725 17,574,737 20,234,125
Total primary government expenses 80,454,621 81,538,368 79,526,116 79,251,972 82,138,269
Program revenues:
Government activities:
Charges for services:
General government 2,895,795 1,608,273 1,962,344 2,453,152 1,789,943
Public safety 1,006,293 103,641 105,799 98,202 99,047
Public works - 19,276 668 - -
Planning and building 2,284,066 1,539,851 1,521,889 1,816,765 2,155,076
Engineering services 1,655,539 759,885 660,734 1,063,822 736,786
Parks and recreation 1,224,923 810,667 1,126,285 1,149,350 14,580
Operating grants and contributions 5,736,957 4,838,455 5,392,117 6,964,053 5,896,502
Capital grants and contributions 2,699,027 3,613,636 3,437,302 4,854,393 3,626,279
Total governmental activities program revenues 17,502,600 13,293,684 14,207,138 18,399,737 14,318,213
Business-type activities:
Charges for services:
Cardiff Sanitary Division 4,926,104 5,009,340 4,979,238 4,830,204 4,970,662
San Dieguito Water District 11,283,219 11,379,337 11,046,650 12,438,502 12,922,922
Encinitas Sanitary Division 2,685,490 2,811,359 2,816,963 2,895,879 2,897,592
Affordable Housing - 222,507 202,499 216,723 214,503
Recreation Programs - - - - 1,273,007
Operating grants and contributions - - - - 1,105,851
Capital grants and contributions 746,586 299,326 231,362 712,827 460,688
Total business-type activities program revenues 19,641,399 19,721,869 19,276,712 21,094,135 23,845,225
Total primary government program revenues 37,143,999 33,015,553 33,483,850 39,493,872 38,163,438
Governmental activities (46,005,734) (50,369,477) (48,003,253) (43,277,498) (47,585,931)
Business-type activities 2,695,112 1,846,662 1,960,987 3,519,398 3,611,100
Total net revenue (expense) $(43,310,622) $ (48,522,815) $(46,042,266) $(39,758,100) $(43,974,831)
156
City of Encinitas
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
(Continued)
Fiscal Year
2013 2014 2015 2016 2017
Expenses:
Government activities:
General government $ 10,616,440 $ 9,549,338 $ 10,810,882 $ 11,750,737 $ 11,737,634
Public safety 24,629,613 25,146,843 25,762,703 27,255,755 29,437,181
Public works 10,851,147 10,239,746 11,565,315 11,743,123 9,205,570
Planning and building 4,353,831 5,853,995 6,550,992 7,255,460 6,935,754
Engineering services 3,813,678 3,988,720 6,253,352 4,591,315 8,918,281
Parks and recreation 5,542,550 4,735,864 5,205,986 6,778,769 7,046,255
Interest and fiscal charges on long-term debt 1,932,904 1,913,349 2,311,944 2,494,815 2,237,069
Total governmental activities expenses 61,740,163 61,427,855 68,461,174 71,869,974 75,517,744
Business-type activities:
Cardiff Sanitary Division 3,373,704 2,922,446 4,262,565 3,857,531 3,308,454
San Dieguito Water District 12,200,431 13,552,862 15,005,767 13,462,935 13,970,919
Encinitas Sanitary Division 1,983,786 2,438,692 1,731,770 2,306,540 2,037,116
Affordable Housing 1,499,863 1,405,225 1,408,226 1,440,124 1,449,917
Recreation Programs 1,153,840 1,300,555 1,331,565 - -
Total business-type activities expenses 20,211,624 21,619,780 23,739,893 21,067,130 20,766,406
Total primary government expenses 81,951,787 83,047,635 92,201,067 92,937,104 96,284,150
Program revenues:
Government activities:
Charges for services:
General government 1,775,756 1,800,630 1,629,857 1,594,277 1,675,799
Public safety 91,495 202,220 160,178 1,009,713 1,148,567
Public works - - 759,918 107,279 65,746
Planning and building 1,894,785 2,874,894 2,737,225 2,800,413 2,954,523
Engineering services 955,986 1,075,885 1,055,311 1,367,902 1,143,830
Parks and recreation 39,946 35,791 46,846 1,741,619 1,796,918
Operating grants and contributions 3,759,864 4,345,931 3,878,422 3,349,186 3,419,730
Capital grants and contributions 6,462,979 8,756,281 4,126,194 5,409,098 4,407,963
Total governmental activities program revenues 14,980,811 19,091,632 14,393,951 17,379,487 16,613,076
Business-type activities:
Charges for services:
Cardiff Sanitary Division 4,755,573 4,605,867 4,528,551 4,761,486 4,788,884
San Dieguito Water District 13,687,156 15,297,718 14,785,858 14,684,387 14,851,977
Encinitas Sanitary Division 2,933,319 2,879,605 2,841,235 2,855,690 2,819,006
Affordable Housing 214,115 216,728 247,349 218,148 213,124
Recreation Programs 1,059,009 1,269,179 1,321,471 - -
Operating grants and contributions 1,103,639 994,607 1,061,698 1,068,549 1,099,366
Capital grants and contributions 1,003,057 1,066,769 483,425 681,412 736,370
Total business-type activities program revenues 24,755,868 26,330,473 25,269,587 24,269,672 24,508,727
Total primary government program revenues 39,736,679 45,422,105 39,663,538 41,649,159 41,121,803
Governmental activities (46,759,352) (42,336,223) (54,067,223) (54,490,487) (58,904,668)
Business-type activities 4,544,244 4,710,693 1,529,694 3,202,542 3,742,321
Total net revenue(expense) $(42,215,108) $(37,625,530) $(52,537,529) $(51,287,945) $(55,162,347)
157
City of Encinitas
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
(Continued)
Fiscal Year
2008 2009 2010 2011 2012
General Revenues and Other Changes in Net Position:
Governmental activities:
Taxes
Property and documentary transfer taxes $ 33,858,150 $ 35,064,401 $ 32,285,155 $ 32,292,988 $ 32,788,129
Sales taxes 8,130,837 7,340,410 8,780,203 10,244,506 10,613,188
Transient occupancy taxes 1,182,816 1,099,817 1,179,789 1,276,980 1,413,926
Franchise taxes 2,212,915 2,162,729 2,031,924 2,108,420 2,144,162
Intergovernmental revenues 1,335,594 1,866,726 794,362 1,488,770 635,097
Use of money and property 3,842,268 2,884,233 1,085,981 657,796 387,066
Other general revenues 568,884 1,551,584 2,238,041 1,695,520 1,780,543
Gain/(Loss)on sale of assets - - - - -
Impairment loss on capital assets - - - - -
Transfers - - - - (668,877)
Total governmental activities 51,131,464 51,969,900 48,395,455 49,764,980 49,093,234
Business-type activities:
Property taxes 690,407 721,628 718,212 706,175 725,551
Intergovernmental-unrestricted - - - - -
Use of money and property 1,756,153 974,702 395,152 508,089 188,259
Other general revenues 250,351 45,193 228,614 401,013 -
Gain/(Loss)on sale of assets - - - - -
Transfers - - - - 668,877
Total business-type activities 2,696,911 1,741,523 1,341,978 1,615,277 1,582,687
Total primary government 53,828,375 53,711,423 49,737,433 51,380,257 50,675,921
Changes in Net Position
Government activities 5,125,730 1,600,423 392,202 6,487,482 1,507,303
Business-type activities 5,392,023 3,588,185 3,302,965 5,134,675 5,193,787
Total primary government $ 10,517,753 $ 5,188,608 $ 3,695,167 $ 11,622,157 $ 6,701,090
The City reports Recreation Programs as a business-type activity starting in Fiscal Year 2012.
158
City of Encinitas
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
(Continued)
Fiscal Year
2013 2014 2015 2016 2017
General Revenues and Other Changes in Net Position:
Governmental activities:
Taxes
Property and documentary transfer taxes $ 34,974,578 $ 36,414,507 $ 38,508,558 $ 41,210,485 43,494,220
Sales taxes 11,585,145 12,067,360 12,569,119 14,166,771 12,549,609
Transient occupancy taxes 1,491,998 1,570,459 1,828,116 2,018,024 2,216,145
Franchise taxes 2,323,616 2,614,844 2,761,335 2,794,144 2,545,854
Intergovernmental revenues 541,079 479,026 814,337 388,876 251,919
Use of money and property 552,512 705,849 880,989 611,350 770,634
Other general revenues 1,596,026 1,257,002 1,567,168 956,824 961,475
Gain/(Loss)on sale of assets - (48,320) 107,177 8,865 1,937
Impairment loss on capital assets - - - - (2,088,668)
Transfers 1,809,656 (33,545) (36,068) 399,112 -
Total governmental activities 54,874,610 55,027,182 59,000,731 62,554,451 60,703,125
Business-type activities:
Property taxes 749,378 787,242 834,994 906,106 959,873
Intergovernmental-unrestricted 189,676 - - - (31,828)
Use of money and property 3,118 357,357 (60,169) (63,690) 6,925
Other general revenues - 63,768 63,768 153,667 -
Gain/(Loss)on sale of assets - (187,942) 18,085 4,010 216,146
Transfers (1,809,656) 33,545 36,068 (399,112) -
Total business-type activities (867,484) 1,053,970 892,746 600,981 1,151,116
Total primary government 54,007,126 56,081,152 59,893,477 63,155,432 61,854,241
Changes in Net Position
Government activities 8,115,258 12,690,959 4,933,508 8,063,964 1,798,457
Business-type activities 3,676,760 5,764,663 2,422,440 3,803,523 4,893,437
Total primary government $ 11,792,018 $ 18,455,622 $ 7,355,948 $ 11,867,487 $ 6,691,894
The City reports Recreation Programs as a business-type activity starting in Fiscal Year 2012.
159
City of Encinitas
Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
Fiscal Year
2008 2009 2010 2011 2012
General fund:
Reserved $ 6,210,167 $ 5,255,137 $ 4,286,026 $ - $ -
Unreserved, designated 35,790,162 38,413,388 36,913,369 - -
Unreserved, undesignated 9,126,804 3,866,759 5,789,899 - -
Nonspendable - - - 2,648,338 2,868,533
Restricted - - - 633,245 -
Committed - - - 42,274,327 19,371,624
Assigned - - - - -
Unassigned - - - 1,850,582 17,964,935
Total general fund $ 51,127,133 $ 47,535,284 $ 46,989,294 $ 47,406,492 $ 40,205,092
All other governmental funds:
Reserved $ 3,908,007 $ 3,771,850 $ 3,408,409 $ - $ -
Unreserved, designated 10,968,342 10,694,605 10,430,543 - -
Unreserved, undesignated - - - - -
Nonspendable - - - 145,686 -
Restricted - - - 8,290,163 13,471,421
Committed - - - 7,570,021 -
Assigned - - - - 2,169,209
Unassigned - - - - -
Total all other governmental funds $ 14,876,349 $ 14,466,455 $ 13,838,952 $ 16,005,870 $ 15,640,630
Total all governmental funds $ 66,003,482 $ 62,001,739 $ 60,828,246 $ 63,412,362 $ 55,845,722
(1) GASB 54, which requires changes in reporting categories for fund balances was implemented
in Fiscal Year 2010-2011.
160
City of Encinitas
Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
(Continued)
Fiscal Year
2013 2014 2015 2016 2017
General fund:
Reserved $ - $ - $ - $ - $ -
Unreserved, designated - - - - -
Unreserved, undesignated - - - - -
Nonspendable 1,980,075 2,052,250 1,535,601 1,109,424 727,094
Restricted 7,996,400 4,079 3,009,269 - 1,472,372
Committed 9,847,719 8,136,886 8,266,796 - 13,937,399
Assigned 561,762 561,762 561,762 - -
Unassigned 21,160,822 25,151,131 28,029,019 31,775,120 9,514,727
Total general fund $ 41,546,778 $ 35,906,108 $ 41,402,447 $ 32,884,544 $ 25,651,592
All other governmental funds:
Reserved $ - $ - $ - $ - $ -
Unreserved, designated - - - - -
Unreserved, undesignated - - - - -
Nonspendable - 1,565 - 287,756 296,234
Restricted 13,036,985 17,358,060 18,741,022 4,305,652 30,282,525
Committed - - - 1,626,219 18,998,215
Assigned 2,135,100 - - 24,776,682 -
Unassigned - - - - (12,183,589)
Total all other governmental funds $ 15,172,085 $ 17,359,625 $ 18,741,022 $ 30,996,309 $ 37,393,385
Total all governmental funds $ 56,718,863 $ 53,265,733 $ 60,143,469 $ 63,880,853 $ 63,044,977
(1) GASB 54, which requires changes in reporting categories for fund balances was implemented
in Fiscal Year 2010-2011.
161
City of Encinitas
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
Fiscal Year
2008 2009 2010 2011 2012
Revenues:
Taxes and assessments $ 47,483,312 $ 47,800,573 $ 46,805,219 $ 48,100,768 $ 49,089,142
Intergovernmental 5,999,680 5,950,205 6,917,521 8,369,571 6,537,855
Charges for services 9,293,303 6,621,931 5,164,315 6,376,261 4,406,737
Fines, forfeitures, and penalties 884,446 746,023 761,202 856,392 657,364
Use of money and property 3,851,877 2,008,557 1,085,981 657,798 639,676
Other 1,227,055 1,110,325 2,875,491 3,803,927 2,715,266
Total Revenues 68,739,673 64,237,614 63,609,729 68,164,717 64,046,040
Expenditures:
C u rre nt:
General government 11,903,557 13,036,815 11,859,415 10,155,732 9,277,443
Public safety 20,896,882 21,636,969 22,049,239 22,107,692 22,853,121
Public works 5,432,032 6,033,513 5,888,161 6,051,253 5,843,228
Planning and building 5,287,058 4,811,020 5,599,614 5,539,148 4,655,501
Engineering services 3,972,242 3,986,859 3,873,432 3,646,306 3,804,813
Parks and recreation 5,585,446 5,811,778 5,482,578 5,293,664 4,333,303
Capital outlay 20,704,628 8,473,396 5,606,327 8,559,193 12,803,379
Debt service:
Principal 1,581,033 2,197,891 2,091,882 2,481,223 2,359,932
Interest and fiscal charges 2,244,288 2,251,116 2,332,574 2,056,501 1,872,773
Bond issuance costs - - - 395,404 -
Total expenditures 77,607,166 68,239,357 64,783,222 66,286,116 67,803,493
Excess(deficiency)of revenues
over(under)expenditures (8,867,493) (4,001,743) (1,173,493) 1,878,601 (3,757,453)
Other Financing Sources(Uses):
Transfer in from CFD debt service - - - - -
Operating transfers in 25,007,578 12,631,197 11,066,120 13,133,224 17,661,946
Operating transfers out (25,007,578) (12,631,197) (11,066,120) (13,133,224) (18,354,656)
Proceeds from capital lease - - - - 599,639
Proceeds from sale of property - - - 19,530,000 -
Issuance of debt 2,100,000 - - - -
Premium on debt - - - 215,515 -
Deposit to escrow for bond refunding - - - - -
Bond discounts - - - (19,040,000) -
Total other financing sources(uses) 2,100,000 - - 705,515 (93,071)
Net change in fund balances $ (6,767,493) $ (4,001,743) $ (1,173,493) $ 2,584,116 $ (3,850,524)
Debt service as a percentage of
noncapital expenditures 6.7% 7.4% 7.5% 7.9% 7.7%
162
City of Encinitas
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
(Continued)
Fiscal Year
2013 2014 2015 2016 2017
Revenues:
Taxes and assessments $ 51,528,542 $ 53,830,193 $ 56,825,628 $ 61,325,308 $ 61,934,421
Intergovernmental 8,520,220 5,025,480 7,022,485 6,689,475 6,436,599
Charges for services 4,450,756 5,479,847 5,315,721 6,585,518 6,688,958
Fines, forfeitures, and penalties 611,029 632,776 802,936 889,388 850,153
Use of money and property 572,481 724,310 899,807 1,222,730 1,285,049
Other 2,141,439 3,654,621 2,456,996 2,804,043 2,215,452
Total Revenues 67,824,467 69,347,227 73,323,573 79,516,462 79,410,632
Expenditures:
Current:
General government 9,430,487 9,109,412 9,362,214 9,288,227 10,017,430
Public safety 23,655,367 24,164,979 24,902,920 26,976,136 27,724,959
Public works 6,057,646 6,281,800 6,682,424 6,305,340 6,351,537
Planning and building 4,238,882 4,716,315 5,082,589 5,159,777 5,110,298
Engineering services 3,716,994 3,949,352 4,162,630 4,298,563 4,368,601
Parks and recreation 4,377,047 4,672,683 5,091,224 6,366,337 6,610,308
Capital outlay 18,836,006 14,548,894 18,440,036 10,799,083 12,230,552
Debt service:
Principal 2,295,614 2,661,976 2,730,686 2,783,268 2,853,417
Interest and fiscal charges 2,050,068 1,937,144 2,170,164 2,372,231 2,077,770
Bond issuance costs - - - - -
Total expenditures 74,658,111 72,042,555 78,624,887 74,348,962 77,344,872
Excess(deficiency)of revenues
over(under)expenditures (6,833,644) (2,695,328) (5,301,314) 5,167,500 2,065,760
Other Financing Sources (Uses):
Transfer in from CFD debt service - - - - -
Operating transfers in 23,363,240 20,570,966 24,514,293 44,550,246 35,159,839
Operating transfers out (24,208,239) (21,328,768) (25,509,616) (45,577,444) (36,650,845)
Proceeds from capital lease 555,384 - - - -
Proceeds from sale of property 7,865,000 - 13,174,373 15,645,000 -
Issuance of debt - - - 115 11,955,000
Premium on debt 131,400 - - 772,212 1,360,284
Deposit to escrow for bond refunding - - - (16,820,243) (14,725,914)
Bond discounts - - - - -
Total other financing sources(uses) 7,706,784 (757,802) 12,179,050 (1,430,114) (2,901,636)
Net change in fund balances $ 873,140 $ (3,453,130) $ 6,877,736 $ 3,737,386 $ (835,876)
Debt service as a percentage of
noncapital expenditures 7.8% 8.0% 8.1% 8.1% 7.6%
163
City of Encinitas
Assessed Value and Estimated
Actual Value of Taxable Property
Last Ten Fiscal Years
(In thousands of dollars)
Total Net
Taxable
Fiscal Year Residential Commercial Industrial All Other Assessed Total Direct
Ended June 30 Property Property Property Property(1) Value (2) Tax Rate % (3)
2008 $ 9,342,260 $ 875,958 $ 33,263 $ 435,672 $ 10,687,153 0.23229%
2009 9,800,179 969,642 35,427 451,831 11,257,079 0.23278%
2010 9,774,056 1,063,161 36,255 464,096 11,337,568 0.23338%
2011 9,767,731 1,110,811 36,036 427,619 11,342,197 0.23472%
2012 9,886,681 1,154,923 34,944 421,308 11,497,856 0.23866%
2013 10,030,357 1,247,785 37,766 408,020 11,723,928 0.23974%
2014 10,393,910 1,300,287 39,501 413,663 12,147,361 0.24570%
2015 11,073,358 1,323,412 39,665 433,569 12,870,004 0.24534%
2016 11,864,809 1,359,004 41,187 437,972 13,702,972 0.23978%
2017 12,622,536 1,390,398 41,805 417,474 14,472,213 0.24019%
FTaxable Assessed Value
$14,000,000 (In thousands)
$12,000,000 — —
$10,000,000
$8,000,000
Residential
$6,000,000 Commercial
■Industrial
$4,000,000
$2,000,000 — —
$0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Fiscal Year
(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.
164
City of Encinitas
Principal Property Taxpayers
Current Fiscal Year and Nine Years Ago
2017 2008
Taxable % of Total Taxable % of Total
Assessed City Assessed Assessed City Assessed
Taxpayer Secured Value Rank Secure Value Secured Value Rank Secure Value
TRC Encinitas Village $ 82,893,554 1 0.58%
Collwood Pines Apartments LP 77,155,677 2 0.54%
Belmont Village Tenant LLC 57,152,956 3 0.40%
Encinitas Town Center Associates LLC 37,265,074 4 0.26% $ 32,518,472 3 0.31%
NCHC 3 LLC 35,278,609 5 0.25% 25,487,698 7 0.24%
PK III Encinitas Marketplace LP 35,100,000 6 0.24% 38,175,000 2 0.36%
Weingarten Nostat Inc 34,608,013 7 0.24%
Home Depot USA Inc. 30,013,643 8 0.21% 27,332,975 5 0.26%
ASN Encinitas LLC 28,648,098 9 0.20%
SSL Landlord LLC 24,892,013 10 0.17%
Mission Ridge 24,289,441 11 0.17%
Keith B. and Sara S. Harrison 23,947,260 12 0.17% 19,091,138 10 0.18%
Vons Companies Inc. 23,578,557 13 0.16% 20,542,368 9 0.19%
Shea Homes LP 22,552,043 14 0.16%
Loja Pacific Station LLC 20,798,678 15 0.15%
Quail Pointe Apartments LP 20,210,329 16 0.14% 17,851,085 11 0.17%
UCSD Garden View LLC 19,098,730 17 0.13%
Sterling Family Trust 18,649,210 18 0.13% 16,408,871 13 0.16%
LA Fitness International LLC 18,427,845 19 0.13%
Plenc El Camino LLC 18,339,169 20 0.13% 16,150,099 14 0.15%
Scripps Health 86,837,209 1 0.82%
Essex Cardiff Apartments 31,048,341 4 0.29%
WRI El Camino LP 26,070,696 6 0.25%
Urschel Laboratories Inc. 21,488,604 8 0.20%
Encinitas Plaza LLC 16,607,905 12 0.16%
NCBP Development Inc. 15,856,500 15 0.15%
Hughes Encinitas Limited 15,713,615 16 0.15%
Security Title Insurance Co. 13,520,105 17 0.13%
G M S Realty LLC 13,420,914 18 0.13%
Bellflower Capital 12,916,443 19 0.12%
North Coast Business Park 12,875,299 20 0.12%
$ 652,898,899 4.56% $ 479,913,337 4.55%
165
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166
City of Encinitas
Property Tax Levies and Collections
Last Ten Fiscal Years
(1) Collected within the
Fiscal Taxes Levied Fiscal Year of Levy
Year Ended for the Percent
June 30 Fiscal Year Amount of Levy
2008 $ 26,950,803 $ 25,584,630 94.93%
2009 27,441,558 26,326,996 95.94%
2010 27,421,386 26,490,783 96.61%
2011 27,541,487 26,888,921 97.63%
2012 28,100,611 27,540,858 98.01%
2013 29,207,237 28,712,036 98.30%
2014 30,550,301 30,009,574 98.23%
2015 32,251,814 31,755,994 98.46%
2016 34,443,972 33,961,174 98.60%
2017 48,540,436 47,871,961 98.62%
(1) City of Encinitas General Fund
167
City of Encinitas
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
Fiscal Year
2008 2009 2010 2011 2012
% % % % %
City of Encinitas Basic Rate 0.23229 0.23278 0.23338 0.23472 0.23866
City of Encinitas Direct Rate (1) 0.23229 0.23278 0.23338 0.23472 0.23866
Overlapping Rates: (2)
City of Encinitas 0.26641 0.26648 0.26648 0.26648 0.24020
Encinitas Landscape & Lighting District 0.01596 0.01596 0.01596 0.01596 0.02100
Autistic Pupils Monors Elem 0.00009 0.00009 0.00009 0.00009 0.00000
Autistic Pupils Monors High 0.00009 0.00009 0.00009 0.00009 0.00000
Cardiff, Encinitas Elementary 0.26237 0.26240 0.26240 0.26240 0.24870
Children's Institutions Tuition 0.00146 0.00146 0.00146 0.00146 0.00107
County General 0.08264 0.07570 0.07570 0.07570 0.08020
County Library 0.01298 0.01995 0.01995 0.01995 0.01969
County School Service 0.00687 0.00687 0.00687 0.00687 0.00643
County School Service-Capital Outlay 0.00173 0.00173 0.00173 0.00173 0.00161
County Service Area No. 17 0.00291 0.00291 0.00291 0.00291 0.00251
CWA San Dieguito Water District, OMWD 0.00344 0.00344 0.00344 0.00344 0.02510
Development Centers for Handicapped Elem 0.00043 0.00043 0.00043 0.00043 0.00000
Development Centers for Handicapped High 0.00044 0.00044 0.00044 0.00044 0.00000
Educable Mentally Retarded Minors 0.00196 0.00196 0.00196 0.00196 0.00161
Educational Revenue Augmentation Fund 0.08574 0.08570 0.08570 0.08570 0.08620
Mira Costa Community College 0.08594 0.08590 0.08590 0.08590 0.08150
Physically Handicapped Minors Elem 0.00303 0.00303 0.00303 0.00303 0.00268
Physically Handicapped Minors High 0.00304 0.00304 0.00304 0.00304 0.00268
Regional Occupational Centers 0.00438 0.00438 0.00438 0.00438 0.00375
San Dieguito Union High 0.14405 0.14400 0.14400 0.14400 0.13610
San Dieguito Water District 0.00992 0.00992 0.00992 0.00992 0.03590
Trainable Mentally Retarded Minors Elem 0.00197 0.00197 0.00197 0.00197 0.00161
Trainable Mentally Retarded Minors High 0.00198 0.00198 0.00198 0.00198 0.00161
Oceanside (19/85001),Vista (19/85701) Projects 0.00017 0.00017 0.00017 0.00017 0.00000
Total Prop 13 Rate (3) 1.00000 1.00000 1.00000 1.00000 1.00000
Notes:
(1) Total Direct Rate is the weighted average of all individual direct rates applied by the government preparing the
statistical section information.
(2) General fund tax rates are representative and based upon the direct and overlapping rates for the largest
General Fund tax rate area (TRA) by net taxable value.
(3) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total
maximum rate of 1%based upon the assessed value of the property being taxed. Each year the assessed value of
property may be increased by an "inflation factor"(limited to a maximum increase of 2%). With few exceptions,
property is only reassessed at the time that it was sold to a new owner. At that point,the new assessed value is
reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the
only data currently available with respect to the actual market value.
168
City of Encinitas
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
(Continued)
Fiscal Year
2013 2014 2015 2016 2017
City of Encinitas Basic Rate 0.23974 0.24002 0.24534 0.23978 0.23644
City of Encinitas Direct Rate (1) 0.23974 0.24002 0.24534 0.23978 0.23644
Overlapping Rates: (2)
City of Encinitas 0.24020 0.24020 0.24020 0.24020 0.24020
Encinitas Landscape & Lighting District 0.02100 0.02100 0.02100 0.02100 0.02100
Autistic Pupils Monors Elem 0.00000 0.00000 0.00000 0.00000 0.00000
Autistic Pupils Monors High 0.00000 0.00000 0.00000 0.00000 0.00000
Cardiff, Encinitas Elementary 0.24870 0.24870 0.24870 0.24870 0.24870
Children's Institutions Tuition 0.00107 0.00107 0.00107 0.00107 0.00107
County General 0.08020 0.08020 0.08020 0.08020 0.08020
County Library 0.01969 0.01969 0.01969 0.01969 0.01969
County School Service 0.00643 0.00643 0.00643 0.00643 0.00643
County School Service-Capital Outlay 0.00161 0.00161 0.00161 0.00161 0.00161
County Service Area No. 17 0.00251 0.00251 0.00251 0.00251 0.00251
CWA San Dieguito Water District, OMWD 0.02510 0.02510 0.02510 0.02510 0.02510
Development Centers for Handicapped Elem 0.00000 0.00000 0.00000 0.00000 0.00000
Development Centers for Handicapped High 0.00000 0.00000 0.00000 0.00000 0.00000
Educable Mentally Retarded Minors 0.00161 0.00161 0.00161 0.00161 0.00161
Educational Revenue Augmentation Fund 0.08620 0.08620 0.08620 0.08620 0.08620
Mira Costa Community College 0.08150 0.08150 0.08150 0.08150 0.08150
Physically Handicapped Minors Elem 0.00268 0.00268 0.00268 0.00268 0.00268
Physically Handicapped Minors High 0.00268 0.00268 0.00268 0.00268 0.00268
Regional Occupational Centers 0.00375 0.00375 0.00375 0.00375 0.00375
San Dieguito Union High 0.13610 0.13610 0.13610 0.13610 0.13610
San Dieguito Water District 0.03590 0.03590 0.03590 0.03590 0.03590
Trainable Mentally Retarded Minors Elem 0.00161 0.00161 0.00161 0.00161 0.00161
Trainable Mentally Retarded Minors High 0.00161 0.00161 0.00161 0.00161 0.00161
Oceanside (19/85001),Vista (19/85701) Projects 0.00000 0.00000 0.00000 0.00000 0.00000
Total Prop 13 Rate (3) 1.00000 1.00000 1.00000 1.00000 1.00000
Notes:
(1) Total Direct Rate is the weighted average of all individual direct rates applied by the government preparing the
statistical section information.
(2) General fund tax rates are representative and based upon the direct and overlapping rates for the largest
General Fund tax rate area (TRA) by net taxable value.
(3) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total
maximum rate of 1%based upon the assessed value of the property being taxed. Each year the assessed value of
property may be increased by an "inflation factor"(limited to a maximum increase of 2%). With few exceptions,
property is only reassessed at the time that it was sold to a new owner. At that point,the new assessed value is
reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the
only data currently available with respect to the actual market value.
169
City of Encinitas
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
(Continued)
Fiscal Year
2008 2009 2010 2011 2012
Gen Bond Cardiff 2000A 0.03306 0.03212 0.03518 - -
Gen Bond Cardiff 2000 Election,2010 Ref.Bonds - - - 0.03715 0.03489
MWD D/S Remainder of SDCWA 1501999 0.00450 0.00430 0.00430 0.00370 0.00370
Total Voter Approved Rate 0.03756 0.03642 0.03948 0.04085 0.03859
Total Tax Rate 1.03756 1.03642 1.03948 1.04085 1.03859
170
City of Encinitas
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
(Continued)
Fiscal Year
2013 2014 2015 2016 2017
Gen Bond Cardiff 2000A - - - - -
Gen Bond Cardiff 2000 Election,2010 Ref.Bonds 0.03458 0.03386 0.03554 0.03324 0.03192
MWD D/S Remainder of SDCWA 1501999 0.00350 0.00350 0.00350 0.00350 0.00350
Total Voter Approved Rate 0.03808 0.03736 0.03904 0.03674 0.03542
Total Tax Rate 1.03808 1.03736 1.03904 1.03674 1.03542
171
City of Encinitas
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
Governmental Activities
Fiscal Year
Ended Total Governmental
June 30 Bonded Debt Capital Leases Activities
2008 47,960,000 2,670,340 (3) 50,630,340
2009 46,005,000 2,432,449 48,437,449
2010 44,165,000 2,185,567 46,350,567
2011 42,641,535 3,036,899 45,678,434
2012 40,645,759 3,281,606 43,927,365
2013 46,736,383 3,446,376 50,182,759
2014 44,546,848 2,964,400 47,511,248
2015 55,431,687 2,513,713 57,945,400
2016 52,933,882 2,050,840 (4) 54,984,722
2017 48,953,813 2,205,282 51,159,095
(1) Percentage of Personal Income ratios are calculated using personal income and population
for the prior calendar year.
(2) Debt per Capita is calculated by dividing the total primary government amount by City
population shown on the Demographic and Economic statistics page.
(3) During 2008, the City borrowed $2.1 million to partially fund major improvements to the
Encinitas Civic Center under a capital lease arrangement with a financial institution.
172
City of Encinitas
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
(Continued)
Business-type Activities
Fiscal Year Debt Per
Ended Water Bonds CSD Note EHA Note Total Business- Total Primary Capita
June 30 and Notes Payable Payable type Activities Government (2)
2008 19,340,000 6,660,000 1,723,832 27,723,832 78,354,172 1318
2009 18,440,000 6,220,000 1,681,534 26,341,534 74,778,983 1254
2010 17,545,000 5,770,000 1,638,817 24,953,817 71,304,384 1190
2011 16,620,000 5,300,000 1,591,681 23,511,681 69,190,115 1147
2012 15,660,000 4,625,969 1,544,434 21,830,403 65,757,768 1090
2013 14,670,000 4,045,028 1,495,415 20,210,443 70,393,202 1162
2014 13,645,000 3,447,591 1,444,731 18,537,322 66,048,570 1079
2015 11,669,345 2,833,824 1,391,715 15,894,884 73,840,284 1200
2016 10,609,973 2,205,893 1,331,410 14,147,276 69,131,998 1117
2017 9,510,602 1,559,300 1,253,177 12,323,079 63,482,174 1019
(1) Percentage of Personal Income ratios are calculated using personal income and population
for the prior calendar year.
(2) Debt per Capita is calculated by dividing the total primary government amount by City
population shown on the Demographic and Economic statistics page.
(3) During 2008, the City borrowed $2.1 million to partially fund major improvements to the
Encinitas Civic Center under a capital lease arrangement with a financial institution.
173
City of Encinitas
Ratios of General Bonded Debt Outstanding
Last Ten Fiscal Years
Outstanding General Bonded Debt
Fiscal Certificates of Participation Percentage
Year Ended and Assessed of Assessed Per
June 30 Lease Revenue Bonds Valuation (1) Value Capita
2008 10,687,153,000 0.00% 751
2009 46,005,000 11,257,079,000 0.41% 774
2010 44,165,000 11,337,568,000 0.39% 741
2011 42,641,535 11,342,197,000 0.38% 712
2012 40,645,759 11,497,857,000 0.35% 674
2013 46,736,383 11,725,285,000 0.40% 772
2014 44,546,848 12,147,361,000 0.37% 728
2015 55,431,687 12,870,003,660 0.43% 901
2016 52,933,882 13,702,972,188 0.39% 855
2017 $ 48,953,813 $ 14,472,213,000 0.34% 786
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.
174
City of Encinitas
Schedule of Direct and Overlapping Bonded Debt
June 30, 2017
$14,473,964,302 City's Share of
Total Debt Applicable Overlapping Debt
6/30/17 %(1) 6/30/17
OVERLAPPING TAX AND ASSESSMENT DEBT:
Metropolitan Water District $ 74,905,000 0.560% $ 419,468
Cardiff School District 17,889,035 100% 17,889,035
Encinitas Union School District 49,961,066 67.287% 33,617,302
San Dieguito Union High School 316,250,000 24.617% 77,851,263
San Dieguito Union High School District Community Facilities Districts 38,916,731 1.840-100.00% 10,491,612
City of Encinitas Community Facilities District No. 1 26,925,000 100% 26,925,000
Olivenhain Municipal Water District, Assessment District No. 96-1 11,670,000 25.975% 3,031,283
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $ 170,224,962
DIRECT AND OVERLAPPING GENERAL FUND DEBT
San Diego County General Fund Obligations $291,180,000 3.098% $ 9,020,756
San Diego County Pension Obligations 605,520,000 3.098% 18,759,010
San Diego County Superintendent of Schools Obligations 11,460,000 3.098% 355,031
Mira Costa Community College District Certificates of Participation 12,265,000 15.106% 1,852,751
San Dieguito Union High School District General Fund Obligations 12,730,000 24.617% 3,133,744
City of Encinitas Governmental Bonded Debt 46,930,000 100% 46,930,000
City of Encinitas Governmental Capital Leases 2,205,282 100% 2,205,282
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $ 82,256,573
TOTAL DIRECT DEBT $ 49,135,282
TOTAL OVERLAPPING DEBT 203,346,254
COMBINED TOTAL DEBT $252,481,535 (2)
(1) The percentage of overlapping applicable to the city is estimated using taxable assessed property value. Applicable
percentages were estimated by determining the portion of the overlapping district's assessed value that is within the
city divided by the district's total taxable assessed value.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, and mortgage revenue.
Ratios to 2016-17 Assessed Valuation:
Total Overlapping Tax and Assessment Debt.................................... 1.18%
Total Direct Debt ($49,135,282)..................................................... 0.34%
Combined Total Debt...................................................................... 1.74%
175
City of Encinitas
Legal Debt Margin Information
Last Ten Fiscal Years
(in thousands)
Fiscal Years
2008 2009 2010 2011 2012
Assessed valuation $ 10,687,153 $ 11,257,079 $ 11,337,568 $ 11,342,197 $ 11,497,857
Conversion percentage equal 25% 25% 25% 25% 25%
to 25% of Assessed valuation
Adjusted assessed valuation 2,671,788 2,814,270 2,834,392 2,835,549 2,874,464
Debt limit percentage 15% 15% 15% 15% 15%
Debt limit 400,768 422,141 425,159 425,332 431,170
Total net debt applicable to limit: 47,960 46,005 44,165 42,641 40,646
Legal debt margin $ 352,808 $ 376,136 $ 380,994 $ 382,691 $ 390,524
Total debt applicable to the limit
as a percentage of debt limit 11.97% 10.90% 10.39% 10.03% 9.43%
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.
176
City of Encinitas
Legal Debt Margin Information
Last Ten Fiscal Years
(in thousands)
(Continued)
Fiscal Years
2013 2014 2015 2016 2017
Assessed valuation $ 11,723,929 $ 12,147,361 $ 12,870,004 $ 13,702,972 $ 14,472,213
Conversion percentage equal 25% 25% 25% 25% 25%
to 25% of Assessed valuation
Adjusted assessed valuation 2,930,982 3,036,840 3,217,501 3,425,743 3,618,053
Debt limit percentage 15% 15% 15% 15% 15%
Debt limit 439,647 455,526 482,625 513,861 542,708
Total net debt applicable to limit: 46,736 44,547 55,432 52,934 48,954
Legal debt margin $ 392,911 $ 410,979 $ 427,193 $ 460,927 $ 493,754
Total debt applicable to the limit
as a percentage of debt limit 10.63% 9.78% 11.49% 10.30% 9.02%
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.
177
City of Encinitas
Historical Debt Service Coverage
Last Ten Fiscal Years
San Dieguito Water District
2008 2009 2010 2011 2012
Revenues:
Operating revenues-including connection fees $ 11,468,569 $ 11,521,897 $ 11,267,684 $ 12,574,450 $ 13,170,422
Non-operating revenues 1,464,949 1,129,594 879,477 817,872 813,610
Gross Revenues 12,933,518 12,651,491 12,147,161 13,392,322 13,984,032
Total Operating&Non-Operating Expenses 12,366,526 12,955,085 11,634,347 11,614,631 12,448,911
Net Income 566,992 (303,594) 512,814 1,777,691 1,535,121
Add back........
Interest expense 830,953 803,748 749,704 725,936 698,908
Depreciation and amortization expense 2,250,919 2,217,274 1,213,640 1,196,007 1,294,904
Net Revenues Available for Debt Service 3,648,864 2,717,428 2,476,158 3,699,634 3,528,933
Less:Debt Service Paid
1999 Badger Bonds-Interest Charges 148,992 - - -
1999 Badger Bonds-Principal Payments 280,000 - - - -
2004 Water Revenue Refunding Bonds-Interest Charges 497,181 485,769 469,269 452,244 433,950
2004 Water Revenue Refunding Bonds-Principal Payments 530,000 540,000 560,000 575,000 595,000
2007 Note Payble to Financing Authority-Interest Charges 167,780 290,748 265,157 281,494 270,352
2007 Note Payble to Financing Authority-Principal Payments - 360,000 335,000 350,000 365,000
2014 Water Revenue Refunding Bonds-Interest Charges - - - -
2014 Water Revenue Refunding Bonds-Principal Payments - - - - -
Total Debt Service $ 1,623,953 $ 1,676,517 $ 1,629,426 $ 1,658,738 $ 1,664,302
Coverage by Net Revenues Available for Debt Service 225% 162% 152% 223% 212%
Debt service coverage requirement is minimum 115%including connection fees. The above schedules include connection fees in operating revenues.
■
Cardiff Sanitary Division
2008 2009 2010 2011 2012
Revenues:
Operating revenues-including connection fees(1) $ 5,422,603 $ 5,062,773 $ 5,049,039 $ 5,337,717 $ 5,087,182
Non-operating revenues 688,423 392,505 162,601 355,974 79,347
Gross Revenues 6,111,026 5,455,278 5,211,640 5,693,691 5,166,529
Total Operating&Non-Operating Expenses 2,985,912 2,854,368 3,569,880 3,746,748 3,385,439
Net Income 3,125,114 2,600,910 1,641,760 1,946,943 1,781,090
Add back........
Interest expense 315,700 302,067 285,800 267,533 248,400
Depreciation and amortization expense 460,083 303,930 912,026 932,273 404,640
Net Revenues Available for Debt Service 3,900,897 3,206,907 2,839,586 3,146,749 2,434,130
Less:Debt Service
2003 Note Payable to SEJPA-Interest Charges 319,950 307,200 291,800 273,800 255,000
2003 Note Payable to SEJPA-Principal Payments 425,000 440,000 450,000 470,000 490,000
2011 Note Payable to SEJPA-Interest Charges - - - - 28,945
2011 Note Payable to SEJPA-Principal Payments - - - - 25,000
Total Debt Service $ 744,950 $ 747,200 $ 741,800 $ 743,800 $ 798,945
Coverage by Net Revenues Available for Debt Service 524% 429% 383% 423% 305%
Debt service coverage requirement is minimum 110%including connection fees. The above schedules include connection fees in operating revenues.
178
City of Encinitas
Historical Debt Service Coverage
Last Ten Fiscal Years
(Continued)
San Dieguito Water District
2013 2014 2015 2016 2017
Revenues:
Operating revenues-including connection fees $ 13,789,636 $ 15,715,575 $ 15,152,433 $ 14,852,061 $ 15,142,544
Non-operating revenues 869,568 827,676 927,526 1,013,297 1,048,764
Gross Revenues 14,659,204 16,543,251 16,079,959 15,865,358 16,191,308
Total Operating&Non-Operating Expenses 12,198,228 14,066,485 15,481,543 13,800,671 14,263,288
Net Income 2,460,976 2,476,766 598,416 2,064,687 1,928,020
Add back........
Interest expense 657,963 622,075 475,775 412,108 366,740
Depreciation and amortization expense 1,476,044 1,490,806 2,271,907 1,514,716 978,627
Net Revenues Available for Debt Service 4,594,983 4,589,647 3,346,098 3,991,511 3,273,387
Less:Debt Service Paid
1999 Badger Bonds-Interest Charges - - - - -
1999 Badger Bonds-Principal Payments - - -
2004 Water Revenue Refunding Bonds-Interest Charges 408,906 380,731 144,720
2004 Water Revenue Refunding Bonds-Principal Payments 615,000 640,000 665,000 - -
2007 Note Payble to Financing Authority-Interest Charges 256,744 241,344 224,994 211,144 191,244
2007 Note Payble to Financing Authority-Principal Payments 375,000 385,000 405,000 415,000 440,000
2014 Water Revenue Refunding Bonds-Interest Charges - - 106,061 202,400 185,075
2014 Water Revenue Refunding Bonds-Principal Payments - - - 570,000 585,000
Total Debt Service $ 1,655,650 $ 1,647,075 $ 1,545,775 $ 1,398,544 $ 1,401,319
Coverage by Net Revenues Available for Debt Service 278% 279% 216% 285% 234%
Debt service coverage requirement is minimum 115%including connection fees. The above schedules include connection fees in operating revenues.
Cardiff Sanitary Division
2013 2014 2015 2016 2017
Revenues:
Operating revenues-including connection fees(1) $ 4,755,573 $ 4,758,606 $ 4,615,399 $ 4,768,651 $ 4,829,120
Non-operating revenues 39,015 1,216,941 120,668 149,151 140,095
Gross Revenues 4,794,588 5,975,547 4,736,067 4,917,802 4,969,215
Total Operating&Non-Operating Expenses 3,310,986 3,189,268 4,371,847 3,949,288 3,380,180
Net Income 1,483,602 2,786,279 364,220 968,514 1,589,035
Add back........
Interest expense 142,898 266,822 109,282 91,757 71,727
Depreciation and amortization expense 800,000 200,459 1,555,955 1,303,272 754,400
Net Revenues Available for Debt Service 2,426,500 3,253,560 2,029,457 2,363,543 2,415,162
Less:Debt Service
2003 Note Payable to SEJPA-Interest Charges - - - - -
2003 Note Payable to SEJPA-Principal Payments - - - - -
2011 Note Payable to SEJPA-Interest Charges 142,898 131,967 109,282 91,757 79,889
2011 Note Payable to SEJPA-Principal Payments 546,540 563,037 579,366 593,530 612,192
Total Debt Service $ 689,438 $ 695,004 $ 688,648 $ 685,287 $ 692,081
Coverage by Net Revenues Available for Debt Service 352% 467% 294% 345% 349%
Debt service coverage requirement is minimum 110%including connection fees. The above schedules include connection fees in operating revenues.
179
City of Encinitas
Demographic and Economic Statistics
Last Ten Fiscal Years
% Change
% of San from Avg.
Fiscal Year City Diego County Previous Median Household Unemployment
Ended June 30 Population Population Year Age Size Rate
2008 63,864 2.0% 2.47% 41.5 2.65 4.2%
2009 59,453 2.0% -7.42% 41.7 2.69 6.9%
2010 59,628 2.0% 0.29% 41.6 2.45 NA
2011 59,910 2.0% 0.47% 42.0 2.50 7.3%
2012 60,346 2.0% 0.72% 42.2 2.45 9.2%
2013 60,568 2.0% 0.37% 41.5 2.50 5.5%
2014 61,204 2.1% 1.04% 41.5 2.49 5.2%
2015 61,518 2.0% 0.51% 41.5 2.50 4.2%
2016 61,893 1.9% 0.67% 41.5 2.50 4.5%
2017 62,288 1.9% 0.63% 41.5 2.50 3.8%
NOTE: City population figures have been revised to match updated population from the California State
Departi Property Tax Levies and Collections
180
City of Encinitas
General Governmental Tax Revenue by Source
Last Ten Fiscal Years
Fiscal Year Property and
Ended June Documentary Transient
30 Transfer Tax Sales Tax Occupancy Tax Franchise Tax Total Tax Revenue
2008 $ 33,858,150 $ 8,130,837 $ 1,182,816 $ 2,212,915 45,384,718
2009 35,064,401 7,340,410 1,099,817 2,162,729 45,667,357
2010 32,285,155 8,780,202 1,179,789 2,031,924 44,277,070
2011 32,292,988 10,244,506 1,276,980 2,108,420 45,922,894
2012 32,788,129 10,613,188 1,413,926 2,144,162 46,959,405
2013 34,974,578 11,585,145 1,491,998 2,323,616 50,375,337
2014 36,414,507 12,067,360 1,570,459 2,614,844 52,667,170
2015 38,508,558 12,569,119 1,828,116 2,761,335 55,667,128
2016 41,210,486 14,166,771 1,616,171 2,358,567 59,351,995
2017 43,494,220 12,549,609 2,216,145 2,545,854 60,805,828
Total General Governmental Tax Revenues
$50,000,000
$45,000,000
$40,000,000
$35,000,000
■Pro perty Tax
$30,000,000
$25,000,000 Sales Tax
$20,000,000
■Transient
$15,000,000 Occupancy Tax
$10,000,000 ■Franchise Tax
$5,000,000
$0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Fiscal Year
181
City of Encinitas
Taxable Sales by Business Type
Last Ten Fiscal Years
2008 2009 2010 2011 2012
Autos and Transportation $ 1,304,574 $ 1,138,428 $ 1,189,413 $ 1,330,270 $ 1,427,132
Building and Construction 1,334,408 1,057,851 818,484 774,109 868,790
Business and Industry 580,488 520,656 461,247 537,840 518,699
Food and Drugs 1,039,216 979,585 931,937 945,542 995,511
Fuel and Service Stations 1,182,908 1,085,758 1,146,372 1,351,288 1,569,265
General Consumer Goods 3,042,340 2,949,625 2,836,989 2,818,809 3,117,547
Restaurants and Hotels 1,425,305 1,448,867 1,388,570 1,442,976 1,624,007
Total $ 9,909,239 $ 9,180,770 $ 8,773,012 $ 9,200,834 $ 10,120,951
2013 2014 2015 2016 2017
Autos and Transportation $ 1,446,737 $ 1,519,006 $ 1,638,839 $ 1,684,618 $ 1,627,531
Building and Construction 820,467 887,182 944,334 980,140 1,021,600
Business and Industry 560,723 573,032 556,835 738,490 623,641
Food and Drugs 1,003,491 1,001,942 1,028,085 1,005,870 931,650
Fuel and Service Stations 1,577,783 1,559,342 1,500,416 1,382,946 1,191,164
General Consumer Goods 3,165,746 3,355,540 3,476,481 3,535,734 3,492,330
Restaurants and Hotels 1,699,705 1,825,971 1,978,072 2,113,116 2,264,487
Total $ 10,274,652 $ 10,722,015 $ 11,123,062 $ 11,440,914 $ 11,152,403
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.
182
City of Encinitas
Full-Time and Part-Time Employees by Function
Last Ten Fiscal Years
Function Fiscal Years
2008 2009 2010 2011 2012
General government
Fire department 45.45 45.45 43 44.25 44.55
Public works 67 67 68 63 63.00
Engineering services 30.4 30.4 29.55 28.85 28.85
Parks and recreation 27.12 27.12 27.47 27.47 27.42
Planning and building 21.38 21.18 21.18 21.18 21.18
Subtotal 26.75 26.75 26.75 26.75 26.75
218.1 217.9 215.95 211.5 211.75
San Dieguito Water District
22.7 22.7 25.7 25.4 25.40
Property Tax Levies and Collections
Function 2013 2014 2015 2016 2017
General government 44.75 44.75 46.75 46.75 46.75
Fire department 63.00 66.00 66.00 69.00 69.00
Public works 29.25 29.55 28.55 28.55 28.55
Engineering services 26.42 27.17 27.17 27.17 27.17
Parks and recreation 21.18 21.18 20.18 20.18 20.18
Planning and building 26.75 27.25 27.25 27.25 27.25
Subtotal 211.35 215.90 215.90 218.90 218.90
San Dieguito Water District 25.00 23.00 24.00 24.00 24.00
183
City of Encinitas
Operating Indicators by Function
Last Ten Fiscal Years
2008 2009 2010 2011 2012
San Diego County Sheriff's Dept
Criminal arrests 1,560 1,715 1,803 1,047 1,231
Traffic arrests 371 424 482 535 485
Traffic accidents 522 438 385 472 441
Traffic citations 11,690 11,974 11,714 12,024 11,349
Calls for service 20,460 19,764 21,216 20,602 20,150
Deputy initiated action 26,971 29,098 25,401 29,224 29,862
Fire:
Number of emergency fire calls 134 113 106 96 124
Number of EMS/rescue 3,290 3,179 3,291 3,498 3,495
Other 1,498 1,645 1,475 1,520 1,737
Inspections N/A 4,099 2,055 2,263 2,252
Engineering:
Number of permits issued 405 325 301 397 392
Parks and recreation:
Number of recreation class registrations 10,927 11,368 11,435 10,697 11,119
Number of facility rentals 524 491 459 377 749
Planning and building:
Number of planning permits issued 110 97 181 177 202
Number of new dwelling units issued 98 86 39 51 121
Environmental review 11 8 11 4 7
Appeals 11 12 1 3 3
Plan checks 825 906 805 882 948
Code enforcement complaints 1,881 1,973 1,667 1,645 1,270
Water:
New connections 26 6 18 9 79
Average daily consumption (millions of gallons) 6.52 6.24 5.42 5.21 5.32
Sewer:
New connections 39 14 26 14 44
Average daily sewage treatment(millions of gallons) 2.55 2.55 2.46 2.43 2.38
The City of Encinitas contracts with the County of San Diego Sheriff's Department to provide
law enforcement services.
184
City of Encinitas
Operating Indicators by Function
Last Ten Fiscal Years
(Continued)
2013 2014 2015 2016 2017
San Diego County Sheriff's Dept
Criminal arrests 1,548 1,595 1,743 1,997 1,612
Traffic arrests 383 331 551 263 201
Traffic accidents 372 323 297 274 289
Traffic citations 11,381 10,357 13,650 14,873 4,891
Calls for service 20,559 19,394 21,335 22,518 19,372
Deputy initiated action 31,281 29,849 27,339 27,481 24,625
Fire:
Number of emergency fire calls 102 383 300 328 283
Number of EMS/rescue 3,697 3,806 3,844 4,098 4,717
Other 1,932 1,458 1,265 1,517 1,035
Inspections 2,163 2,143 2,072 2,133 2,122
Engineering:
Number of permits issued 269 351 383 436 440
Parks and recreation:
Number of recreation class registrations 11,175 16,236 16,289 15,500 16,338
Number of facility rentals 421 578 557 538 492
Planning and building:
Number of planning permits issued 207 298 335 263 276
Number of new dwelling units issued 63 161 135 117 94
Environmental review 6 9 10 4 7
Appeals 5 7 6 11 6
Plan checks 990 1,391 1,737 2,339 1,807
Code enforcement complaints 1,199 1,153 1,063 1,199 1,282
Water:
New connections 64 131 69 77 39
Average daily consumption (millions of gallons) 5.61 5.71 5.49 4.56 4.85
Sewer:
New connections 50 22 53 33 65
Average daily sewage treatment(millions of gallons) 2.40 2.36 2.22 2.20 2.27
The City of Encinitas contracts with the County of San Diego Sheriff's Department to provide
law enforcement services.
185
City of Encinitas
Capital Asset Statistics by Function
Last Ten Fiscal Years
2008 2009 2010 2011 2012
Law enforcement:
Number of sub-stations 1 1 1 1 1
Fire department:
Fire stations 5 5 5 5 5
Public works:
Streets (miles) 198 201 201 201 201
Engineering:
Signalized intersections 63 63 63 63 63
Parks and recreation:
Community and senior center 1 1 1 1 1
Developed parks 18 18 18 18 18
Undeveloped parks 4 4 4 4 4
Parkland acres 382 382 382 382 382
Habitat/open space acreage 87 87 87 87 87
Marine life refuge 1 1 1 1 1
Trails/streetscapes (miles) 35 35 41 41/10 41/10
Lifeguard towers 7 7 7 7 7
Water:
Water mains (miles) 140 166 166 168 168
Maximum daily capacity (millions of gallons) 15 15 15 15 15
* The City of Encinitas contracts with the County of San Diego Sheriff's department to provide
law enforcement services.
186
City of Encinitas
Capital Asset Statistics by Function
Last Ten Fiscal Years
(Continued)
2013 2014 2015 2016 2017
Law enforcement:
Number of sub-stations 1 1 1 1 1
Fire department:
Fire stations 6 6 6 6 6
Public works:
Streets (miles) 201 201 201 201 201
Engineering:
Signalized intersections 63 63 63 63 63
Parks and recreation:
Community and senior center 1 1 1 1 1
Developed parks 18 18 18 18 18
Undeveloped parks 4 4 4 4 4
Parkland acres 382 382 382 382 382
Habitat/open space acreage 87 87 87 87 87
Marine life refuge 1 1 1 1 1
Trails/streetscapes (miles) 41/10 41/10 41/10 41/10 41/10
Lifeguard towers 7 7 7 7 7
Water:
Water mains (miles) 168 168 168 168 170
Maximum daily capacity (millions of gallons) 15 15 15 15 15
187
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188
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.
189
Table 1
Cardiff Sanitary Division
Rate Schedule for Annual Sewer Charges
As of June 30,2017
Sub Fixed Meter Median Annual
Users/Class Category Charge HCF Rate HCF Median Charge
New Connections(no prior water consumption
Group I Residential history)
Single Family SF $44.00 $ 5.14 94.90 $ 532.00
Multi Family MF See below 5.14 $355.73/unit
Trailer Park TP See below 5.14 $355.73/unit
New Connections(no prior water consumption
Non-Residential history)
Commercial Group 11 See below See below $ 5.40 See below See below
Commercial Group III See below See below 7.03 See below See below
Commercial Group IV See below See below 10.56 See below See below
Multi Family'and Non-Residential Fixed Meter Charge
Meter Size Annual Charge Meter Size Annual Charge
5/8" $ 44.00 1-1/2" $ 220.00
3/4" $ 66.00 2" $ 352.00
V $ 110.00 3" $ 660.00
Multi Family=Fixed Meter Charge x 2
Water Consumption Periods To Be Used
Residential=2 Lowest Periods of Water Consumption For Meter Readings Occurring Between Dec.-May(most recent available 5-year period)
Non-Residential(Commercial)=Water Consumption For Meter Readings Occurring Between July-June of Preceding Year
Median Annual
Sub Unit Cost HCF(New Median Usage Charge
Users/Class Category (perHCF) Connections) (New Connections)
Group 11 Commercial
Softwater Service SW $ 5.40 -------
Car Wash CW 5.40 1,520 $8,208.00
Office Building OF 5.40 200 1,080.00
Fire Station FS 5.40 110 594.00
Professional Building(Doctor) PB 5.40 160 864.00
Veterinary Clinic VC 5.40 -------
Athletic Gymnasium G 5.40 1,340 7,236.00
Laundromat L 5.40 990 5,346.00
Department and Retail Store DRS 5.40 120 648.00
Warehouse W 5.40 1,050 5,670.00
Hospital,Convalescent Home HCH 5.40 3,240 17,496.00
Parks PB 5.40 510 2,754.00
Church-Membership Organization C 5.40 440 2,376.00
Membership Organization(Non-Church) MO 5.40 240 1,296.00
Social Services SS 5.40 160 864.00
Group III Commercial
Hotels-Motels(without restaurant) HM $ 7.03 890 $6,256.70
Repair and Service Station RSS 7.03 70 492.10
Shopping Center SC 7.03 1,030 7,240.90
Kennel K 7.03 900 6,327.00
Coffee Shop CS 7.03 -------
Amusement Park AP 7.03 -------
Nightclub/Bar NC 7.03 320 2,249.60
Commercial Laundry CL 7.03 -------
Manufacturing M 7.03 180 1,265.40
Lumber Yard LY 7.03 -------
Group IV Commercial
Hotels-Motel(with restaurant) HM $ 10.56 3,130 $33,052.80
Bakery(wholesale)/Food Processor BW 10.56 -------
Supermarket S M 10.56 1,030 10,876.80
Mortuary MT 10.56 300 3,168.00
Restaurant R 10.56 600 6,336.00
(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).
190
Table 2
Cardiff Sanitary Division
Historical Service Charges Billed
Last Ten Fiscal Years
Fiscal Residential Commercial Commercial Single Family
Year (Tax Roll) (Tax Roll) (Manual) Total Billed Average
2008 $ 3,983,597 $ 739,676 $ 130,386 $ 4,853,659 $ 668
2009 4,092,138 753,503 127,030 4,972,671 682
2010 4,034,670 703,126 128,223 4,866,019 674
2011 3,984,339 628,165 127,210 4,739,715 664
2012 4,058,990 645,560 123,822 4,828,372 676
2013 3,935,414 666,099 126,677 4,728,190 652
2014 3,812,338 599,324 134,910 4,546,572 622
2015 4,033,393 623,032 135,587 4,792,012 610
2016 3,873,157 610,169 135,107 4,618,432 634
2017 3,958,853 597,392 135,581 4,691,826 648
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.
191
Table 3
Cardiff Sanitary Division
Ten Largest Customers
FY 2016-2017
Parcel Sewer Service Percentage of
Property Owner Count Charges Sewer Charges
Scripps Health 1 $ 83,752 1.79%
Collwood Pines Apartments LP 4 76,313 1.63%
State of California Parks & Recreation 2 54,974 1.17%
San Deiguito Union High School District 2 47,967 1.02%
Newport Taft Inc 1 29,003 0.62%
944 Regal Road LLC 1 28,988 0.62%
Cardiff Town Center LLC 1 27,699 0.59%
Deluca Trust 1 27,319 0.58%
K&K Lumber Co 2 25,932 0.55%
George's Restaurant Inc 1 22,582 0.48%
Subtotal 16 $ 424,529 9.05%
Total Billed $ 4,691,826
Source: Cardiff Sanitary Division
Table 4
Cardiff Sanitary Division
Historical Service Connections
Last Ten Fiscal Years
Commercial
Total Connections Residential Industrial Total
Year (Billed Parcels) EDU's EDU's EDU's
2008 6,283 6,976 1,122 8,097
2009 6,312 6,990 1,124 8,114
2010 6,317 7,011 1,124 8,136
2011 6,329 7,033 1,124 8,187
2012 6,334 7,067 1,154 8,221
2013 6,365 7,083 1,174 8,257
2014 6,375 7,126 1,176 8,302
2015 6,394 7,132 1,187 8,319
2016 6,416 7,157 1,187 8,344
2017 6,435 7,186 1,187 8,373
Source: Cardiff Sanitary Division
192
San Dieguito Water District
Summary of Operational Data
The following tables are being presented as supplementary information based on
requirements for bonds issued by SDWD for continuing bond disclosure certificate.
193
Table 1
San Dieguito Water District
Schedule of Water Rates
As of June 30, 2017
Rate (1)
Customer Class Residential Rate Tier Potable Recycled
Single-family residential 0-12 units $ 2.81
13-20 units 4.46
21-40 units 5.51
41+ units 6.28
Multi-family residential (per dwelling) 0-8 units 2.81
9-12 units 4.46
13-16 units 5.51
17+ units 6.28
Agriculture Uniform 4.78 $ 4.06
Commercial Uniform 4.78 4.06
Government Uniform 5.23 4.44
Public Uniform 5.23 4.44
Landscaping Uniform 5.51 4.68
Construction Uniform 5.61 4.76
(1) Per Unit (one hundred cubic feet or 748 gallons)
Source: San Dieguito Water District
Table 2
San Dieguito Water District
Bi-Monthly Meter Service Availability Charges(2)
As of June 30, 2017
Water Meter Service Infrastructure Fire Meter Service
Availability Access Availability
Meter Size Charge Charge Charge
5/8" & 3/4" $ 39.82 $ 5.74 $ 8.47
1" 58.63 9.18 8.47
1-1/2" 105.24 17.22 9.55
2" 161.40 29.84 16.65
3" 292.52 55.10 42.12
4" 479.81 94.13 86.04
6" 947.59 172.20 243.69
8" 1,509.16 298.48 515.61
(2) San Dieguito Water District 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 Intrastructure Access
Charge is levied by the San Diego County Water Authority and is collected from the customer by the District.
Source: San Dieguito Water District
194
Table 3
San Dieguito Water District
Historic Potable Water System Revenues
Last Ten Fiscal Years
Meter
Fiscal Potable Percentage Availability Percent
Year Water Sales Change (3) Charge Change (3)
2008 $ 7,717,818 1.8% $ 2,404,547 6.8%
2009 7,525,927 -2.5% 2,453,075 2.0%
2010 7,146,854 -5.0% 2,501,264 2.0%
2011 8,205,876 14.8% 3,007,127 20.2%
2012 8,528,418 3.9% 3,196,605 6.3%
2013 9,236,462 8.3% 3,087,794 -3.4%
2014 10,649,157 15.3% 3,227,823 4.5%
2015 9,728,434 -8.6% 3,415,227 5.8%
2016 9,503,108 -2.3% 3,503,933 2.6%
2017 9,467,085 -0.4% 3,544,758 1.2%
(3) Due to the varying number of billing cycles in a fiscal year, changes year-over-year may not be exactly
comparable.
Source: San Dieguito Water District
Table 4
San Dieguito Water District
Historic Recycled Water System Revenues
Last Ten Fiscal Years
Meter
Fiscal Recycle Percent Availability Percent
Year Water Sales Change Charges (4) Change
2008 $ 600,401 0.7% $ - N/A
2009 663,036 10.4% - N/A
2010 537,654 -18.9% - N/A
2011 523,397 -2.7% - N/A
2012 422,925 -19.2% - N/A
2013 400,244 -5.4% - N/A
2014 460,383 15.0% 60,048 N/A
2015 648,398 40.8% 80,585 34.2%
2016 702,301 8.3% 85,149 5.7%
2017 716,826 2.1% 78,732 -7.5%
(4) The District first implemented a meter availability charge for recycled customers on September 1, 2013.
Source: San Dieguito Water District
195
Table 5
San Dieguito Water District
Summary of Water Production by Source
Last Ten Fiscal Years
Potable Production (6)
Fiscal Local Imported Total Recycled Total
Year Water Water Potable Water Production
2008 3,539 3,753 7,292 676 7,968
2009 3,869 3,369 7,237 694 7,931
2010 4,399 2,156 6,555 498 7,053
2011 4,434 1,901 6,335 511 6,846
2012 3,719 2,663 6,382 578 (6) 6,960
2013 4,200 2,395 6,595 678 (6) 7,273
2014 1,136 5,598 6,734 692 7,426
2015 603 5,726 6,329 736 7,065
2016 1,400 3,839 5,239 628 5,867
2017 1,446 3,984 5,430 654 6,084
(5) Potable water production is defined as water either produced locally or purchsed from imported
sources (expressed in acre-feet).
Table 6
San Dieguito Water District
Summary of Water Deliveries by Source
Last Ten Fiscal Years
Fiscal Percent Percent
Year Potable Change Recycled Change
2008 6,753 -11.1% 676 -4.5%
2009 6,463 -4.3% 694 2.7%
2010 5,649 -12.6% 498 -28.2%
2011 5,425 -4.0% 511 2.6%
2012 5,957 9.8% 578 (6) 13.1%
2013 6,284 5.5% 678 (6) 17.3%
2014 6,449 2.6% 692 2.1%
2015 6,134 -4.9% 736 6.4%
2016 5,112 -16.7% 628 -14.7%
2017 5,287 3.4% 654 4.1%
(6) Since 2012 Recycled Water Production and Delivery figures are revised to include water provided
to the Encinitas Ranch Golf Authority (ERGA). Beginning in 2012, the San Elijo Joint Powers Authority
(SEJPA) began directly providing recycled water to ERGA and the District ceased selling recycled water
to ERGA. The recycled water provided to ERGA credits towards the Districts production and delivery
figures as ERGA falls within the District's sphere of influence.
Note: 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.
Source: San Dieguito Water District
196
Table 7
San Dieguito Water District
Sales by Customer Class
As of June 30, 2017
Acre-Feet Percent of
Customer Description Sold Water Sold
Agriculture 175 3.3%
Commercial 509 9.6%
Construction 15 0.3%
Government 22 0.4%
Landscaping 378 7.1%
Multi-Family Residential 1127 21.3%
Public 122 2.3%
Single-Family Residential 2939 55.6%
Total Sales o
Source: San Dieguito Water District
Table 8
San Dieguito Water District
Total Service Connections by Category
Last Ten Fiscal Years
Fiscal Percent Percent
Year Potable Increase Recycled Increase
2008 11,364 0.2% 59 5.4%
2009 11,370 0.1% 68 15.3%
2010 11,388 0.2% 73 7.4%
2011 11,397 0.1% 72 -1.4%
2012 11,476 0.7% 74 2.8%
2013 11,502 0.2% 77 4.1%
2014 11,610 0.9% 77 0.0%
2015 11,644 0.3% 81 5.2%
2016 11,721 0.7% 82 1.2%
2017 11,740 0.2% 87 6.1%
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.
197
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198
THE
PUN GROUP
ACCOUNTANTS&ADVISORS
INDEPENDENT AUDITORS' 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
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, 2017, 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 13, 2017.
Our report includes a reference to other auditors who audited the financial statements of the following: R.E.
Badger Joint Powers Authority, R.E. Badger Financing Authority, and the Encina Wastewater Authority,
which are reported as Investment in Other Agencies in the business-type activities, the San Dieguito Water
District major enterprise fund, and the Encinitas Sanitary Division, as described in our report on the City's
financial statements. This report does not include the results of the other auditors' testing of internal control
over financial reporting or compliance and other matters that are reported on separately by those auditors.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal control
over financial reporting ("internal control") to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not
express an opinion on the effectiveness of the City's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the City's financial
statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness,
yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
4365 Executive Drive, Suite 710,San Diego,California 92121
Tel:858-242-5100• Fax:858-242-5150
www.pungroup.com
To the Honorable Mayor and Members of the City Council
of the City of Encinitas
Encinitas, California
Page 2
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.
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.
cG� '
San Diego, California
December 13, 2017
200
the city of
E N C I N I T A
CITY OF ENCINITAS
505 S . Vulcan Avenue
Encinitas , CA 92024
Phone : 760 . 63 3 . 2600
FAX : 760 . 633 . 2879
www . EncinitasCA . gov