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2019-CAFRCOMPREHENSIVE ANNUAL FINANCIAL REPORT F I S C A L Y E A R E N D E D J U N E 3 0 , 2 0 1 9 City of Encinitas Encinitas, California Comprehensive Annual Financial Report and Independent Auditor’s Reports For the Year Ended June 30, 2019 Supported by the Finance Department Teresa S. McBroome Director of Finance/City Treasurer Tom Gallup Finance Manager - Budget Stella Huang Finance Manager - Reporting Marta Lundgren Finance Manager - Operating Tanya Allsup Finance Analyst Monica Attili Finance Analyst Glenna McShane Finance Analyst Alexis Angelini Accountant Katie Schroeder Accountant Cindy Dabney Finance Technician Alyce Gonzalez Finance Technician Annamae Lagdaan Finance Technician Julie Pickard Finance Technician Devon Seal Finance Technician INTRODUCTORY SECTION This page intentionally left blank. City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2019 Table of Contents Page INTRODUCTORY SECTION (Unaudited) Table of Contents Transmittal Letter .......................................................................................................................................... i List of City Officials ........................................................................................................................................xi Organization Chart .......................................................................................................................................xii Certificate of Achievement for Excellence in Financial Reporting – GFOA .................................................xiii FINANCIAL SECTION Independent Auditor’s Report on Financial Statements ......................................................................... 1 Management’s Discussion and Analysis (Required Supplementary Information – Unaudited) ........... 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position .............................................................................................................. 23 Statement of Activities and Changes in Net Position ...................................................................... 24 Fund Financial Statements: Governmental Fund Financial Statements: Balance Sheet ......................................................................................................................... 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: Statement of Net Position ........................................................................................................ 36 Statement of Revenues, Expenses, and Changes in Net Position ........................................... 38 Statement of Cash Flows ......................................................................................................... 40 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position ......................................................................................... 47 Notes to the Basic Financial Statements ......................................................................................... 51 City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2019 Table of Contents (Continued) Page FINANCIAL SECTION (Continued): Required Supplementary Information (Unaudited): Budgetary Information ........................................................................................................................ 113 Budgetary Comparison Schedule: General Fund ................................................................................................................................ 114 Infrastructure Improvements Special Revenue Fund .................................................................... 116 Schedule of Changes in the Net Pension Liability and Related Ratios ................................................ 117 Schedule of the City’s Proportionate Share of the Net Pension Liability .............................................. 118 Schedule of Contributions - Pension ................................................................................................... 120 Schedule of Changes in the Net OPEB Liability and Related Ratios ................................................... 123 Schedule of Contributions - OPEB ...................................................................................................... 125 Supplementary Information: Non-Major Governmental Funds: Combining Balance Sheet ............................................................................................................ 130 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...................... 132 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: Grants and Housing Special Revenue Fund ........................................................................... 134 Development Impact Special Revenue Fund .......................................................................... 135 Lighting and Landscaping Special Revenue Fund ................................................................... 136 Internal Service Funds: Combining Statement of Net Position ........................................................................................... 139 Combining Statement of Revenues, Expenses, and Changes in Net Position .............................. 140 Combining Statement of Cash Flows ............................................................................................ 141 Fiduciary Funds: Statement of Changes in Assets and Liabilities – Agency Funds. ................................................. 145 STATISTICAL SECTION (Unaudited) Index ........................................................................................................................................................ 149 Financial Trends: Net Position by Components – Last Ten Fiscal Years ........................................................................ 150 Changes in Net Position – Last Ten Fiscal Years ............................................................................... 152 Fund Balances of Governmental Funds – Last Ten Fiscal Years ........................................................ 156 Changes in Fund Balances of Governmental Fund – Last Ten Fiscal Years ....................................... 158 Revenue Capacity: Assessed Value of Taxable Property – Last Ten Fiscal Years ............................................................. 160 Principal Property Taxpayers – Current year and nine years ago......................................................... 161 Property Tax Levies and Collections – Last Ten Fiscal Years............................................................. 162 Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years ................................................. 164 City of Encinitas Comprehensive Annual Financial Report For the Year Ended June 30, 2019 Table of Contents (Continued) Page STATISTICAL SECTION (Continued): Debt Capacity: Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ............................................................. 168 Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years ................................................ 170 Schedule of Direct and Overlapping Bonded Debt .............................................................................. 171 Legal Debt Margin Information – Last Ten Fiscal Years ...................................................................... 172 Historical Debt Service Coverage – Last Ten Fiscal Years ................................................................. 174 Demographic and Economic Information: Demographic and Economic Statistics – Last Ten Fiscal Years .......................................................... 176 General Governmental Tax Revenue by Source................................................................................. 177 Taxable Sales by Business Type – Last Ten Fiscal Years .................................................................. 178 Principal Employers – Current Fiscal Year and Nine Years Ago ......................................................... 179 Operating Information: Full-Time and Part-Time Employees by Function – Last Ten Fiscal Years ......................................... 180 Operating Indicators by Function – Last Ten Fiscal Years .................................................................. 182 Capital Asset Statistics by Function – Last Ten Fiscal Years .............................................................. 184 Cardiff Sanitary Division: Rate Schedule for Annual Sewer Charges.......................................................................................... 188 Historical Service Charges Billed ........................................................................................................ 189 Ten Largest Customers ...................................................................................................................... 190 Historical Service Connections ........................................................................................................... 190 San Dieguito Water District: Schedule of Water Rates .................................................................................................................... 192 Bi-Monthly Meter Service Availability Charges .................................................................................... 192 Historic Potable Water System Revenues – Last Ten Fiscal Years .................................................... 193 Historic Recycled Water System Revenues – Last Ten Fiscal Years .................................................. 193 Summary of Water Production by Source – Last Ten Fiscal Years ..................................................... 194 Summary of Water Deliveries by Source – Last Ten Fiscal Years ...................................................... 194 Sales by Customer Class ................................................................................................................... 195 Total Service Connections by Category – Last Ten Fiscal Years ........................................................ 195 This page intentionally left blank. TRANSMITTALLETTER•INTRODUCTORYSECTIONHonorableMayor,CityCouncilandCitizensoftheCityofEncinitas,California:ItisapleasuretopresenttheFiscalYear2018-19ComprehensiveAnnttatfinancialReport(CAFR)fortheCityofEncinitasanditsrelatedentities.ThisreportwaspreparedtoassistthoseinterestedinunderstandingthefinancialconditionandresultsofCityoperationsforthefiscalyearendedJune30,2019andincludesfinancialinformationfortheCityofEncinitas,theSanDieguitoWaterDistrict,theEncinitasHousingAuthority,andtheEncinitasPublicFinancingAuthority.Thesefinancialstatementshavebeenpreparedinaccordancewithgenerallyacceptedaccountingprinciples(GAAP)andauditedinaccordancewithgenerallyacceptedauditingstandards.Responsibilityfortheaccuracyofthedata,thecompletenessandreliabilityofthepresentation,includingalldisclosures,restswithCitymanagement.ToprovideareasonablebasisformakingthepresentationsshowninthisreportandtocompilesufficientreliableinformationforthepreparationoftheCity’sfinancialstatements,themanagementoftheCityhasestablishedacomprehensiveinternalcontrolframeworkdesignedtoprotecttheCity’sassetsfromloss,theft,ormisuse.Becausethecostofinternalcontrolsshouldnotexceedtheirbenefits,theCity’sinternalcontrolshavebeendesignedtoprovidereasonableratherthanabsoluteassurancethatthefinancialstatementswillbefreefrommaterialmisstatements.TheCity’sfinancialstatementshavebeenauditedbyDavisFanLLP,certifiedpublicaccountants.Theindependentauditorconcludedbasedontheaudit,thattherewasreasonablebasisforrenderinganunmodifiedopinion(ora“cleanaudit”)ontheCity’sfinancialstatementsforthefiscalyearendedJune30,2019,whichmeansthatintheauditors’opinion,thefinancialstatementsaccuratelypresenttheCity’sfinancialposition.Management’sDiscussion&Analysis(MD&A)immediatelyfollowstheindependentauditor’sreportandprovidesanarrativeintroduction,overview,andanalysisofthebasicfinancialstatements.TheMD&Acomplementsthisletteroftransmittalandshouldbereadinconjunctionwithit.CITYPROFILEANDBACKGROUNDTheCityofEncinitaswasincorporatedinOctober1986asagenerallawcity,bringingtogetherthecommunitiesofNewandOldEncinitas,Cardiff-by-the-Sea,Leucadia,andOlivenhain.EncinitasislocatedinnorthernSanDiegoCountyapproximately25milesnorthofdowntownSanDiegoontheSouthernCaliforniacoast.TheCitywithanestimatedpopulationof63,000coversapproximately21squaremilesandispredominatelyresidentialwithtwomajorcommercialcorridors.December9,20191 TRANSMITTALLETTER•INTRODUCTORYSECTIONGOVERNANCETheCityisgovernedbyaCityCouncilconsistingofaMayorandfourCouncilmembersundertheCouncil-Managerformofgovernment.TheMayoriselectedat-largeforatwo-yeartermofoffice.TheCityofEncinitashastransitionedtoasystemwhereCityCouncilmembersareelectedbydistrictinsteadofserving“atlarge”withthesequenceofelectionsfordistrictelectionsinCouncilDistricts3and4in201$,anddistrictelectionsinCouncilDistricts1and2in2020.Thetransitiontodistrict-basedelectionswillbecompletein2020.InthegeneralmunicipalelectionheldonNovember6,2018,CouncilMemberswereelectedbydistrictforafullfour-yeartermofofficeinDistricts3and4.TheCityCouncilappointstheCityManagerandCityAttorney.AllotherstaffpositionsareappointedbytheCityManagerorherdesignee.TheCityCouncilactsastheBoardofDirectorsfortheSanDieguitoWaterDistrict,theEncinitasHousingAuthority,andtheEncinitasPublicFinancingAuthority.MUNICIPALSERVICESTheCityprovidesafullrangeofmunicipalservicessuchas:FireandparamedicservicesLawenforcement(contract)MarinesafetyParks,beachesandtrailsDevelopmentservicesRecreationservicesStreetmaintenanceandconstructionTrafficcontrolWastewaterservicesWaterservicesCITYFACILITIESCityHallislocatedonVulcanAvenuebetweenDandEStreets,adjacenttotheEncinitasTrainStationanddowntown.TheCitymaintainsanactiveCommunityandSeniorCenterlocatedatEncinitasBoulevardandBalourDrive,the44-acreEncinitasCommunityParklocatedat425SantaFeDrivealongwith20otherparksitesandMoonlightBeachlocatedat400BStreetwhichattractsanestimatedthreemillionvisitorsannually.Therearesixfirestationslocatedthroughoutthecity,afastresponsevehiclepilotprogramwithagoalofreducingfiredepartmentresponsetimesintheNorthLeucadia/SaxonyCanyonPeakarea,aswellasonesheriffsubstationwhichisownedandoperatedbytheCountyofSanDiego.ThecorporateyardforboththeCityofEncinitasandSanDieguitoWaterDistrictislocatednearEncinitasBoulevardandCalleMagdalena.TheWastewaterCollectionsdivisionislocatedattheSanElijoWaterReclamationFacilitylocatedinCardiff.BUDGETINGOVERVIEWTheCitydevelopsandadoptsbothanoperatingandacapitalbudgetonatwo-yearbudgetcycle.Amountsareappropriatedforthefirstyearonly,withtheamountsforthesecondyearsubjecttorevisionbeforeappropriation.AnychangestotheoperatingorcapitalbudgetsmustbeapprovedbytheCityCouncil.TheCityalsopublishesasix-yearcapitalimprovementprogramandfinancialplanwhichisupdatedaspartofthetwo-yearbudgetcycle.ThisdocumentprovidesmanagementandtheCityCouncilwithlong-termfinancialplanninginformationandtools.OnlineaccesstodetailedCityfinancialinformationisavailableontheCity’swebsite.Thisweb-basedtoolallowstheusertosortandfilterCityfinancialinformationtoobtainthespecificfinancialinformation11 TRANSMITTALLETTER•INTRODUCTORYSECTIONdesired.ThistoolmaybefoundontheCity’swebsiteathttps://encinitasca.opengov.com/transparency.FACTORSAFFECTINGFINANCIALCONDITIONOFTHECITYLocalEconomy—Encinitasenjoysastrongandwelldiversifiedtaxbase.Overtheyears,thepropertyvaluesandpersonalincomelevelswithintheCityhavegeneratedtaxrevenuessufficienttosupportthelevelofmunicipalservicesandfacilitiesforthecommunitytoenjoy.Thetaxbasehasperformedwellingoodeconomictimesandithasalsobeenabletoweatherthefinancialimpactsduringslowereconomictimes.ThenettaxableassessedvalueofpropertyintheCityhasgrown44.4percentsinceFiscalYear2008-09(tenyearsago).ThroughouttherecessiontheCitymaintainedslightincreaseseachyearinnettaxableassessedvalue.ForFiscalYears2017-18and2018-19taxablevaluesincreased6.2percentand6.5percent,respectively.AccordingtoinformationprovidedbytheCaliforniaEmploymentDevelopmentDepartment,employmentinEncinitasisstrongwiththeunemploymentratejust2.1percentasofOctober2019.TheunemploymentrateforallofSanDiegoCountywas2.8percentwhilestatewidetheratewas3.9percent.Encinitasalsohasover3,300businessesreportingretailsaleswithintheCity.Thetop100salestaxproducersincludeawidevarietyofbusinessessuchascardealers,homeimprovementstores,bigboxretail,gasstations,grocerystoresandrestaurants.Property,andSalesandUseTaxReventte-Propertytax,andsalesandusetaxrevenuerepresentapproximately77percentoftheCity’stotalGeneralFundrevenue.PropertytaxrevenueinFY2018-19totaled$47.4millionwhichwasanincreaseof$2.7million,or6.1percent,comparedtoFY2017-18.SalesandusetaxrevenueinFY2018-19was$13.7million,anincreaseof$0.4million,or3.3percenthighercomparedtoFY2017-18.Otherrevenuesourcesremainedrelativelystable,althoughrevenuesfromtheStateofCaliforniaarestillconsideredtobevulnerabletoStateactions.FinancialStrengthandSustainability-TheCityofEncinitasiswellpositionedtoweathereconomicfluctuationsandhasbeenevaluatedandratedbyinternationallyrecognizedthirdpartyreviewers.OnJanuary26,2017,Standard&Poor’sRatingServices(S&P)affirmedits‘AAA’issuercreditrating(ICR)fortheCityofEncinitas.TheCityhadapproximately$46.1millionofgeneralfundbondeddebtandcapitalleasesoutstandingatJune30,2019,withscheduledpaymentsofprincipalandinterestof$4.0millioninFY2018-19.ThisdebtserviceasapercentageoftheGeneralFundbudgetis5.8percent,whichiswellbelowtheCity’sdebtservicepolicywhichstatesthatdebtservicepaideachyearshallnotexceed15percentoftheGeneralFundbudget.DevelopmentandMaintenanceofFinancialReserves-TheCityhasanestablishedfinancialpolicyregardingmaintenanceofadequatefinancialreserves.TheCitysetsaside20percentofGeneralFundoperatingexpendituresforcontingencies(unanticipatedeventsthatcouldnegativelyimpacttheCity’sfinancialcondition).TheCityhasneverhadoccasiontodrawonthisreserve,sinceitsinceptionintheearly1990’s.TheCityalsomaintainsaGeneralFundbudgetstabilizationreserve,establishedin2007inanticipationoftheensuingrecession.Thisreserveisfundedataminimumoftwopercentofoperatingrevenues.TheCityhasnothadanyneedtodrawonthisreserve,despitethedeclineinoperatingrevenuesexperiencedduringtherecession.AnyamountsremainingafterthesetworeservesarefullyfundedareconsideredavaiLableforCityCouncildirecteduse,primarilyforfuturefundingofcapitalimprovements.GeneralFundreservesforcontingenciesandbudget111 TRANSMITTALLETTER•INTRODUCTORYSECTIONstabilizationtotal$15.5millionandfundingavailableforcapitalimprovementswas$24.4milLionasofJune30,2019.ACCOMPLISHMENTSBasedondirectionbytheCityCouncil,highlightedbelowaretheCity’saccomplishmentsthisfiscalyear.HousingElement—WithguidancefromtheHousingElementTaskForce,receivingpublicinputthroughover15publicmeetings,andcourtdirectedaction,theCityadoptedthe2019HousingElementinMarch2019.FollowingapprovalfromtheCaLiforniaCoastalCommissioninJuly2019,theStateHousingandCommunityDevelopmentcertifiedthedocumentinOctober2019.“One-Stop-Shop”PermitCenter-EffectiveJuly1,2019,CityHallopenedthenew“One-Stop-Shop”PermitCenter.ThePermitCentercentralizesallpermittingandpaymentneedsatonelocation.Customersseekingapermitwererequiredtogouptothreedifferentlocations.Nowallfunctions,includingregulatorypermits,planning,engineering,buildingandcashierarelocatedwithinthePermitCenter.OntheFridaywhentherestofCityHallisclosed,thePermitCenternowremainsopentooffercounterservice.CounterserviceallowscustomersaccesstoallfunctionswithinthePermitCenter,includingopportunitiestopaySanDieguitoWaterDistrictbills.CityHall’snewcustomerservicehoursareMondaythroughThursday7:30a.m.to5:30p.m.andeveryFridayfrom7:30a.m.to4:30p.m.CityHallwaspreviouslyclosedeveryotherFriday.EnerGov(EG)andCustomerSelfService(CSS)-EGisafullyintegratedenterprisesystemthatincorporatesprocessesanddatafromthevariouscitydepartments.Thistoolreducestheneedforredundantdataprocessingandprovidesstaffaccesstoinformationwithinasingleenvironment.CSSworkswithEGandisanoutwardfacingwebportal.CSSprovidesvariousservicestothepublic,suchastheabilitytosubmitpermitapplications,accessinformation,andpayinvoices.EGandCSSincorporateelectronicapplicationandplansubmittals,whichgreatlyreducepaperusage,theneedtoscandocuments,andcustomertripstoCityHall.ThesystemalsoroutesapplicationsandinformationelectronicallytoCityreviewers.TheCityhasover30,200contactswithinEG,sincetheCityimplementedthissysteminJune2015.Additionally,therearecurrentlyover4,600registeredCSSusersaccessingonlineservicessinceCSSwasrolledoutinJanuary201$.FirePreventionhasfullyimplementedEGandoffersallpermitsthroughtheCSSonlineapplicationprocess.AnotherFY2018-19accomplishmentconcernsPlanning-relatedpermits,whichnowaredoneentirelywithinEG.AnumberofBuildingandEngineeringpermitsarealsoconductedwithinthenewsystem,suchasHaulRoutePermits,HotWaterHeaterPermits,andMechanical/Electrical/PlumbingPermits.CyberSecurityUpdate—TheCityimplementedautomationtoenable24/7cyber-defense,improvingtheabilityforstafftosecuretheCity’sdataandbusinessprocessesfromapotentialbreach.Similarly,servers,workstations,andtheemailsystemwereupgradedinpreparationforMicrosoftproductretirementsplannedforJanuary2020.UnionNegotiations-TheMeyers-Milias-BrownAct(MMBA)governslabor-managementrelationshipswithinCalifornialocalgovernments.UnderMMBAthewages,hoursandotherconditionsofemploymentarecontainedinawrittenmemorandumofunderstanding.ItalsorequirestheCityanditsemployeeassociationstomeetandconferregardingthesewages,hoursandiv TRANSMITTALLETTER•INTRODUCTORYSECTIONotherconditionsofemployment.ThepreviousMemorandumofUnderstandingbetweentheCityofEncinitasandServiceEmployeesInternationalUnion(SITU)expiredonJune30,2019andrepresentativesfortheCityandSEWreachedagreementonanewfour-yearmemorandumofunderstanding.Thefour-yeartermisJuly1,2019toJune30,2023andincludedtwopercentbasepayincreasesforeachyear,anincreaseintheflexiblebenefitplan,notarycertificationpay,anincreaseinsafetyfootwear,achangetopaidfamilyillness,changingthecustomerservicehoursandopeningeveryFriday,addingaholidayclosure,andprovidingahalfdayofpaidleavetovoteorafulldayofpaidleavetovolunteerfortheCountyRegistrarofVotersforaGeneralElection.Additionally,therewereoperationalandadministrativechangesmadetocomplywithchangesinstateandfederallawsandregulations.CooperativeFireManagementServices-TheCityhasacooperativemanagementservicesagreementwiththeCitiesofDelMarandSolanaBeachsinceOctober2009,whichsharesfiredepartmentmanagementfunctions.Thecooperativeservicesagreementpromotescost-effectivenessandefficiencyacrosstheselocalgovernmentagencies.InJune2018,theCitiesapprovedthethirdamendmenttotheagreementaddinganadministrativefeetocapturecostsidentifiedthatwerenotpreviouslysharedandaddingafull-timeAdministrativeBattalionChiefpositionthatwouldbeinchargeoftrainingforallthreecities.ThenewadministrativefeereducedtheproportionalcosttotheCityofEncinitaswhilehavingafull-timeAdministrativeBattalionChiefdedicatedtoensuringthatallfirefighterswouldhavetrainingopportunities.InMay2019,theCitiesapprovedafourthamendmenttotheagreementwhichreclassifiedanEncinitasDeputyFireMarshaltoaSeniorFireMarshalandaddedthepositiontothecooperativemanagementservicesagreementtosharethepositionwiththethreeCities.HavingthissharedpositionreducedtheCityofEncinitas’costimpact.CommunityChoiceEnergy(CCE)-Since2016,theCityhasbeenactivelyinvestigatingthefeasibilityofcommencingCCEserviceforelectriccustomerswithintheCity,withtheobjectiveofallowingelectricitycustomersthechoiceofselectingagreaterpercentageofrenewableenergy,providinggreaterLocalinvolvementovertheprovisionofelectriccommodityservices,andpromotingcompetitivecommodityrates.TheCitycompletedaTechnicalFeasibilityStudywhichdeterminedthataCCEprogramcouldresultinlocalbenefitsincludingtheuseofrenewableenergy.OnSeptember18,2019CouncilofficiallyformedandjoinedanewCCEagency,theSanDiegoRegionalCommunityChoiceEnergyAuthority,alongwiththeCitiesofSanDiego,ChulaVista,ImperialBeachandLaMesa.ClimateActionPlan(CAP)Awards-InFiscalYear2018-19,theCity’sClimateActionPlanandassociatedimpLementationeffortsreceivedrecognitionfromlocalandstatewideorganizations.InOctober2018,theSanDiegoAssociationofEnvironmentalProfessionalsrecognizedEncinitas’2018ClimateActionPlan(CAP)withthedistinguishedawardof“OutstandingPlanningDocumentoftheYear”whichhonorsdocumentscreatedwithstrongpublicoutreachandaccessibilityeffortsthatareclearlyorganized,easytoread,thorough,andthatadvanceenvironmentaldesigninitiatives.InFebruary2019,theClimateActionCampaign,alocalnon-profitcLimateadvocacyorganization,recognizedtheCityofEncinitaswithatop-rankingscoreof“Silver”initspublishedregionalCAPReportCard.ThisrecognitionwasreceivedforthecompletionofarobustClimateActionPlan,early-stageimplementationeffortsandannualreporting.InMarch2019,theCaliforniaAssociationofEnvironmentalProfessionalsfurtherrecognizedtheCity’sCAPasthemost“OutstandingClimateChangeDocument,”statewide.SuccessfulSandReplenishmentProject-Inwinter/springof2019,theCityofEncinitasprocuredanddeposited40,000cubicyardsofcompatiblebeachsandonthenorthendoftheCityatBatiquitosBeach.Benefitstotheareawereimmediatelyrealized;depositedsandimprovedpublic-V TRANSMITTALLETTER•INTRODUCTORYSECTIONsafetyandrecreationwithincreasedbeachwidths,andenhancedwildlifehabitatforresidentandmigratingshorebirds.AmericanPublicWorksAssociation(APWA)Accreditation-TheDepartmentofPublicWorksreceivedafour-yearre-accreditationrecognizingthattheDepartmentoperatesinaccordancewithindustrystandardsestablishedbytheAmericanPublicWorksAssociation.TheEncinitasPublicWorksDepartmentisoneofonly19agenciesinCaliforniatoreceivesuchrecognition.HelenPutnamAwardforAccessoryDwellingUnits(ADU)s—OnOctober16,2019,theCityreceivedthe2019HelenPutnamAwardfromtheLeagueofCaliforniaCitiesforitsHousingforGenerationsprogram,underthe“HousingProgramsandInnovations”category.TheHousingforGenerationsprogramwasrecognizedforitsinnovative,multistepapproachtoencouragethepermittingan4constructionofAccessoryDwellingUnits(ADU).ThisprogramincludedtheadoptionoftwonewordinancesforADUandJuniorADUregulations,thesponsoringofstatelegislation(SB1226),andthecreationofthePRADUprogram,whichofferspropertyownersaselectionofpre-approvedADUbuildingplans,freeofcharge.TheCityhasalreadyexperiencedmorethanadoublingofADUapplicationsandpermitsineachofthelasttwoyears.In2019,asofNovember19,theDevelopmentServicesDepartmenthasprocessed201ADUapplications,with116ADUsreceivingbuildingpermits.Thedepartmenthasreceived27PermitReadyADUapplicationswhichmakeup19percentofthetotalsincetheplanswerereleasedinAprilofthisyear.Tenoftheseunitshavealreadyreceivedbuildingpermitsandareunderconstruction.CitywideCustomerServiceInitiative—TheHumanResourcesDepartmentthisyearlaunchedanewefforttoenhancecustomerservice.Multidepartmentalstaffteamsidentifiedexamplesofexemplarycustomerservicethroughover50staffinterviews,andmultipleteammeetings.TheresultswereusedtoimproveinternalCityoperations,andgiveunsurpassedcustomerservicetothecommunity,residents,businessesandvisitors.TransitiontoaZero/LowEmissionsVehicleFleet-ThePublicWorksDepartmentisprogressivelymovingtowardazero/lowemissionsmunicipalfleet.TheFleetDivisionreceivesregulardeliveryofrenewabledieselinsteadofconventionaldiesel.Renewabledieselisanon-petroleum-baseddieselthatworksinunmodifieddieselengines,andburns$0percentcleanerthanconventionaldieselfuel.AllthreeoftheCity’sfueltanks,whicharelocatedatthePublicWorksFacility,aswellasFireStations3and4,supplyrenewablediesel.Therenewabledieselisusedforalldiesel-fueledCityvehicles,includingPublicWorksheavydutytrucksandequipmentandallfireengines.PublicWorksfleetisalsosteadilytransitioningtoelectriclightdutyvehicLesincompliancewiththegoalsoftheCAP.TheCityownsthirty-three(33)heavy-andmedium-dutydieselvehiclesandfifty-six(56)lightdutyvehicles.Thisfleetincludestwenty-seven(27)vehiclescurrentlyfueledwithrenewablediesel,thirteen(13)hybridvehicles,one(1)plug-inhybridvehicle,andtwo(2)all-electricvehicles.WithapprovalfromCouncil,twomoreall-electricvehiclesareanticipatedtobepurchasedinearly2020.LeafBlowerOrdinance—Anordinanceregulatingtheuseofgas-poweredleafblowerswasadoptedbyCouncilonJuly10,2019.Theordinanceprohibitsgas-poweredleafblowersandallowstheuseofbatteryandelectricleafblowersasanalternative.TheordinancetakesfulleffectonJanuary20,2020.vi TRANSMITTALLETTER•INTRODUCTORYSECTIONThefollowingCWprojectswerecompletedduringFY2018-19:CardiffLivingShorelineProject—AwardwinningprojectcompletedinJune2019toconstructdunes,parking,andpedestrianaccessalongthebeach.CoastalRailTrail-TheCoastalRailTrail(CRT)isa44-milelongsystemofpedestrianandbicycletrailsgenerallyalongthecoastalrailcorridorbetweenthecitiesofOceansideandSanDiego.TheSanDiegoAssociationofGovernments(SANDAG),theagencyresponsibleforthedesignandconstructionoftheCRT,completedconstructionofthesegmentinCardiffinMay2019.ChesterfieldQuietZone-Thisprojectreducesnoiseimpactsfromtheexistingrailsystemandprovidesanincreasingbenefitintothefutureasrailtrafficincreases.QuietzoneconstructionfortheChesterfieldcrossingwascompletedinApril2019.TheCityalsocompletedtheQuietZonefeasibilityStudytoevaluateimplementationofextendingthe“quietzone”alongtheentirecorridor.LumberyardSidewalks—InSeptember2018,anextensionoftheDowntownStreetscapeprojectwascompletedonSouthCoastHighway101thatincludedupgradedsidewalks,pedestrianramps,drivewayreplacements,andlandscaping.MobilityImprovements—Generalmobilityimprovements,suchasbikelanebuffersandbollards,wereinstalledonLeucadiaBoulevard,QuailGardensDrive,SantaFeDrive,VulcanAvenue,andSanElijoAvenue.Pedestriancrossing,includingrapidflashingbeaconswereinstalledonQuailGardenDriveandMontgomeryAvenue,andWillowspringDriveTrafficCalming-SpeedcushionswereinstalledonNolbeyStreet,CornishDrive,AvenidaDeLasAdelsas,WindsorRoad,andatEncinitasCommunityParktocalmtraffic.Othertrafficcalmingmeasures,suchaslanenarrowingwereconstructedalongNeptuneAvenue,Requeza,andMacKinnonAvenue.SafeRoutestoSchool(SRTS)Implementations-ThisprogramimprovespedestrianandbikeaccessintheCity.ProjectsinFY2018-19focusedonimprovementsnearCapriElementarySchool,FloraVistaElementarySchool,AmargosaDrive,BonitaDrive,BalourDrive,andRequezaDrive.MAJORINITIATIVESANDPROJECTSTheCityCouncilhasfourStrategicPriorityFocusareaswhichare—1.AttainalegallycompliantHousingElement2.Betterincorporatetherailcorridorintoourneighborhoods3.Improveconnectivityandmobilityforallusers4.Promotegreeninitiativesandprotectnaturalresources.vii TRANSMITTALLETTER•INTRODUCTORYSECTIONHighlightedbelowaretheprojectsthattheCityisworkingonasitrelatestotheCityCouncil’sfocusareas:I.AttainalegallycompliantHousingElementHousingElement-DevelopmentoftheHousingElementUpdate2021-2029beganinMay2019withtheissuanceofaRequestforProposal(RFP)toobtainaqualifiedconsultanttohelppreparetheupdateandtheassociatedenvironmentalassessment,consistentwithcurrentStatehousinglaw.TheConsultantwillcompleteareviewofdemographics,populationandhousingtoreflectcurrentconditions,andcompleteanadequatesiteanalysisforthe2021-2019RegionalHousingNeedsAssessment(RHNA).TheCityandConsultantwillalsoholdcommunityworkshopsandpublicmeetingstoincreasecommunityinput.2.BetterincorporatetherailcorridorintoourneighborhoodsRailCorridorCross-ConnectImplementationPlan—BuildsontherecommendationspresentedintheRailCorridorVisionStudyandActiveTransportationPlan.-ApprovedbytheCityCouncilinFebruary2018,theRailCorridorVisionStudyisthecenterpieceoftheCoastalMobilityandLivabilityStudy(CMLS),abroadefforttoexaminemobilityissuesandopportunitiesintheEncinitascoastalrailcorridor.ElPortalPedestrianRailCrossing-Thisprojectisfullydesigned,andconstructionofagrade-separatedpedestrianandbicyclerailcrossingnearElPortalStreetinLeucadiaisplannedinJuly2020.TheCityretainedtheservicesoftheSanDiegoAssociationofGovernmentstomanageconstructionofthiscomplicatedproject.VerdiUndercrossing—ThisprojectconsistsofarailundercrossingatVerdiAvenueinCardiff—theprojectisindesignandgrantfundingisbeingsoughtforconstruction.3.ImproveconnectivityandmobilityforallusersLeucadia101Streetscape-ThisprojectprovidesstreetscapeimprovementsalongNorthCoastHighway101fromAStreettoLaCostaAvenue.Theprojectincludespedestrianandbicycleimprovements,roundabouts,roadlanenarrowingandtreeplantingsthroughouttheentirecorridor.TheCityCouncilapprovedtherequiredentitlementpermitsandcertifiedtheEnvironmentalImpactReportinMarch2018.TheCaliforniaCoastalCommissionapprovedtheprojectandcertifiedtheLocalCoastalPrograminOctober2018.BStreetSidewalkImprovements-Thisprojectconstructsnewsidewalk,pedestrianramps,curbsandguttersandlandscapingonthenorthsideofBStreetfromHighway101toMoonlightBeach.SantaFeDriveSouthSidewalkandSanDieguitoAcademyFrontageImprovements-Thisprojectinvolvesconstructionofcurb,gutter,andsidewalkonthesouthsideofSantaFeDrivefromGardenaRoadtoMackinnonAvenue.Inaddition,accessiblecurbrampswillbeprovidedonbothsidesoftheSantaFeDrive/MackinnonAvenueintersection,andlandscapingimprovementswillbeprovidedonthenorthsideofthestreet,frontingSanDieguitoAcademySchool.AmericanswithDisabilitiesAct(ADA)TransitionPlan-UnderTitleIIoftheADA,publicagenciesarerequiredtoconductaself-evaluationoftheirprogramsandservicesinordertoidentifyanyobstaclesorbarrierstoaccessibility.In2013,theCityandSanDieguitoWaterDistrictconductedaself-evaluationofitsprograms,services,administrativeemploymentpolicies,andfacilitiesonpublicpropertyanddevelopedaSelf-EvaluationandTransitionPlan.TheCity/Districtviii TRANSMITTALLETTER•INTRODUCTORYSECTIONrecognizesthatADAcomplianceisanongoingresponsibilityandhasupdatedtheSelf-EvaluationandTransitionPlans,GrievanceProcedures,PublicNoticeandAdministrativepoliciesP020,P021,P022,andP023whichwillbepresentedtoCityCouncilinDecember2019foradoption.RanchoSantaFe(Trail$2)andCaminoDelNorte(Trail95)DesignandConstruction-Designis95percentcomplete.ConstructionisexpectedtobegininSpring2020.AdamsRunTrailwillrequireenvironmentalreviewandpermitsfromFederalFishandWildliferegardinghabitatimpactstoCaliforniaGnatcatcher.4.Promotegreeninitiativesandprotectnaturalresources.ClimateActionPlan-TheupdatedClimateActionPlan(CAP)wasadoptedbyCouncilonJanuary17,2018.CitystaffcontinuestoimplementprOjects,programs,andinitiativesthatsupportthegoalsoftheCAPandreducegreenhousegas(GHG)emissions.SomeofthemajorCAPactionsthatwillbeadvancedinthecomingyearinclude:•LaunchaConmiunityChoiceEnergy(CCE)Program—ThenewCCEhascommencedstart-upactivitiesincludingdevelopingabusinessplan,hiringstaff,andacquiringthefinancingneededtopurchaseandserverenewableelectricitytothecommunity.•Developmentofbuildingordinancestorequireandencouragereductionoffossilfuelenergyuse—InNovember2019,Counciladoptedanordinancethatwillrequireadditionalelectricalimprovementsandelectricvehiclechargingstations(EVCS)tobeinstalledatapercentageofparkingspacesatcommercialandmultifamilyproperties,aswellasrequirenewsinglefamilyhomestocomeequippedwithelectricalinfrastructurenecessaryforthehometobe“EVCSready.”TheordinancewillgointoeffectonJanuary1,2020.State-requiredcosteffectivenessstudiesandproposedordinancesarecurrentlybeingdraftedtoaddresssolarphotovoltaicenergyproduction,energyefficientwaterheating,andotherefficiencymeasuresforcommercialandresidentialproperties.•Implementalocalshuttlesystem-StaffwillevaluateoptionstoenhancelocaltransitoptionsandbringtoCouncilforconsiderationaCity-supportedpublictransitoptionthatsupplementsexistingNCTDrailandbusprograms.•Supportinitiativestodivertfoodwasteandrecyclingoutofthelandfill-SupportEDCO,theCity’sfranchisewastehauler,indevelopinganaerobicdigesterfacilityandcoordinatingcurbsidepickupofallorganicwaste,includingfoodwaste.Continuetofundandsupportcommunityeducationandoutreachprogramsthatencouragethediversionoffoodwastethroughcompostingandothermeansandencourageproperrecyclingandwastedisposal.•Plasticsinitiative-DeveloptheCityofEncinitasPlasticsInitiativedefiningmeasurestoregulatethesaleanddistributionofsingle-useplasticproductsinEncinitasincludingplasticstraws,plasticutensils,andplasticbeveragebottles.ThePlasticsInitiativeisamulti-phasedapproach,startinginDecember2019throughtheIntroductionofanOrdinancetorequirethedistributionofplasticstrawsuponrequestonly,includingtakeoutanddrive-thru,andaprohibitiononthedistributionofplasticstraws.Phase2willincludethedevelopmentofpolicytolimitthesaleordistributionofPlasticBeverageContainersatCityFacilitiesandEvents,andPhase3willbefocusedonthedevelopmentofpolicytocontroltheretailsaleofsingleuseplasticandexpandedpolystyreneproducts.ix TRANSTvUTTALLETTER•INTRODUCTORYSECTIONNetZeroMunicipalElectricity-Inthefallof201$,thePublicWorksDepartmentissuedaRequestforProposalstoengageanenergycompanytodevelopaplantobringtheCitytoanetzeroenergyfootprint.ThiswasinresponsetoamajorgoaloutlinedintheClimateActionPlan.Afterconductingprospectiveconsultantinterviews,Engiewasselectedtoevaluateallcityfacilities,proposeenergysavingsmeasures,andthendesignasolarsystemtooffsettheremainingdemand.Theevaluationofcityfacilitiesiscompleteandadraftproposaltofinanceandinstallenergyefficiencymeasuresandmultiplesolarphotovoltaicsystemshasbeenprepared.TheproposalwillgotoCityCouncilforconsiderationin2020.StandardPacificPark-In2001,aspartoftheMaravuDevelopment,theStandardPacificparcelwasconveyedtotheCityforparklandmitigation.OnOctober26,2016,theParks,Beaches,TrailsandOpenSpaceMasterPlanwasapprovedbyCityCouncil.TheplanidentifiedtheneighborhoodaroundtheStandardPacificparksiteasanareathatofferedlowserviceforrecreationalopportunities.Aparkinthisareawouldaffordtheresidentsmoreopportunitytoparticipateinparkandrecreationactivities.OnJune28,2017,CityCouncilawardedacontracttodesignStandardPacificPark.Thescopeofworkinthecontractincludesdevelopmentofplans,specifications,permits,andenvironmentaldocumentationfortheStandardPacificparksite.Thefinaldesigndocumentsarecompleteandarefullyentitledtobuildthepark.Constructionoftheparkisscheduledtobeginspring2020.EnerGov(EG)andCustomerSelfService(CSS)-theDevelopmentServicesDepartmentanticipatesconfiguringtheremainingBuildingandEngineeringpermitswithinEGandCSSduring2020,whichwillallowtheoldH.T.E.permittingsystemtobefinallyphasedout.Additionalimprovementsareplannedinthedigitalapplicationandsubmittalprocess.AWARDSANDACKNOWLEDGEMENTSTheGovernmentFinanceOfficersAssociation(GFOA)awardeditsCertificateofAchievementforExcellenceinFinancialReportingtotheCityofEncinitasforitsComprehensiveAnnualFinancialReportforthefiscalyearendedJune30,2018.TheCitybelievesthattheFY2018-19ComprehensiveAnnualFinancialReportcontinuestomeettheGFOAcriteriafortheaward.Lastly,wedeeplyappreciatethededicationandleadershipoftheMayorandCouncilMemberswhohaveconsistentlysupportedourgoalofexcellenceinallaspectsoffinancialmanagement.ThecompletionofthisreportcouldnothavebeenaccomplishedwithoutthededicationandhardworkoftheentirestaffintheFinanceDepartment.SpecialrecognitiongoestotheFinanceReportingteam,StellaHuang,MonicaAttili,AlexisAngelini,andKatieSchroederfortheirworkwiththeauditorsandthecoordinationofthepreparationofthisreport.TeresaS.McBroomeDirectorofFinance/CityTreasurerCityManagerx LIST OF CITY OFFICIALS As of June 30, 2019 CITY COUNCIL Mayor Catherine S. Blakespear Deputy Mayor Jody Hubbard (District 3) Council Member Kellie Hinze (District 2) Council Member Tony Kranz (District 1) Council Member Joe Mosca (District 4) EXECUTIVE TEAM MEMBERS City Manager Karen P. Brust Assistant City Manager Mark Delin City Clerk/Legislative Services Director Kathy Hollywood Public Works Director Carl Quiram Director of Finance/City Treasurer Teresa S. McBroome Fire Chief Michael Stein Human Resources Director Tom Bokosky IT Manager Wendy Flynn Development Services Director Brenda Wisneski Risk Manager Jace Schwarm Parks, Recreation & Cultural Arts Director Jennifer Campbell xi xii GovernmentFinanceOfficersAssociationCertificateofAchievementforExcellenceinFinancialReportingPresentedtoCityofEncinitasCaliforniaForitsComprehensiveAnnualFinancialReportfortheFiscalYearEndedJune30,2018ExecutiveDirector/CEOxiii This page intentionally left blank. FINANCIAL SECTION This page intentionally left blank. Independent Auditor’s Report City Council City of Encinitas Encinitas, California Report on the 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, as of and for the year ended June 30, 2019, and the related notes to the basic 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: Those statements were audited by other auditors whose reports have been furnished to us, and our opinions, 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 from material misstatement. As sets Net Position Expenses Business-type Activities 12.56% 17.71% 4.26% Each Major Enterprise Fund: Cardiff Sanitary District 51.79% 64.17% 43.49% San Dieguito Water District 31.37% 40.85% 14.70% Encinitas Sanitary Division 17.04% 17.37% 41.83% Opinion Unit 1 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 of Encinitas, California, as of June 30, 2019, 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 schedule for the General Fund and the Infrastructure Improvements Special Revenue Fund, Schedule of Changes in the Net Pension Liability and Related Ratios, Schedule of the City’s Proportionate Share of the Net Pension Liability, Schedules of Contributions – Pensions, Schedule of Changes in the Net OPEB Liability and Related Ratios, and the Schedule of Contributions – OPEB 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 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. 2 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Encinitas’ basic financial statements. The introductory section, supplementary information and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information is 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 supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and the statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2019 on our consideration of the City of Encinitas' 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 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 City of Encinitas’ internal control over financial reporting and compliance. Irvine, California December 9, 2019 3 This page intentionally left blank. 4 City of Encinitas Management’s Discussion and Analysis For the Year Ended June 30, 2019 The Management’s Discussion and Analysis (“MD&A”) provides an overview of the City of Encinitas’ (“City”) activities and financial performance for the fiscal year ended June 30, 2019. 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 the MD&A in conjunction with the transmittal letter, the basic financial statements and the accompanying notes to those financial statements. FINANCIAL HIGHLIGHTS The City’s total assets increased overall by $12.1 million. This is due to a $7.0 million increase in governmental activities and a $5.1 million increase in business-type activities. The City’s total net position increased overall by $15.8 million compared to the previous year. The governmental activities increased $9.6 million and business-type activities increased $6.2 million. Total assets increased $12.1 million, total liabilities decreased $7.2 million, deferred outflows decreased $4.6 million, and deferred inflows also decreased $1.1 million. The City’s total revenues increased $9.6 million from 2018. o Governmental activities revenues increased $7.8 million o Business-type activities revenues increased $1.8 million The City’s total expenses increased $6.6 million from 2018. o Governmental activities expenses increased $2.8 million o Business-type activities expenses increased $3.8 million The City’s total net pension liability decreased $2.5 million from 2018. o Governmental liability decreased $2.4 million o Business-type liability decreased $0.1 million The City’s total OPEB liability decreased $0.4 million from 2018. o Governmental liability decreased $0.4 million o Business-type liability slightly decreased and stayed the same at $0.3 million OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The basic financial statements are comprised of the government-wide financial statements, the fund financial statements, and the notes to the basic financial statements. The two sets of financial statements provide two different views of the City’s financial activities and positions. The financial statements presented herein include all the activities of the 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). 5 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 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. Reporting the City as a Whole The Statement of Net Position and the Statement of Activities The government-wide financial statements provide a long-term view of the City’s activities as a whole, and are composed of the statement of net position and the statement of activities and changes in net position. These statements are prepared on 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. 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 net position is one indicator of whether the financial condition of the City is improving or declining. The statement of activities and changes in net position 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. Examples include revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick 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 – Property, sales and use taxes, user fees, franchise fees, investment earnings, and state and federal grants revenues finance the governmental activities. Most of the City’s basic services are reported in this category, including: o General Government o Public Safety o Public Works o Planning o Engineering o Parks, Recreation and Cultural Arts In Fiscal Year 2018-19, the City reorganized some departments and functions. The Facilities Maintenance division and Stormwater Management division transferred to the Public Works Department. The Facilities Maintenance division previously was in the Park, Recreation and Cultural Arts Department and the Stormwater Management division was previously in the Development Services-Engineering Department. 6 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 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. Reporting the City’s Most Significant Funds 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. Fund Financial Statements – The City’s fund financial statements provide a greater level of detail regarding the City’s governmental activities and include the General Fund, Capital Improvements Capital Projects Fund, Infrastructure Improvements Special Revenue Fund and other non-major governmental funds. The City reports the General Fund, the Capital Improvements Capital Projects Fund, and the Infrastructure Improvements Special Revenues Fund as major funds, under the guidance provided by GASB No. 34. All other governmental funds are considered non-major funds, and are reported as one group. The General Fund is the largest and most discretionary source of funding for operations, debt service and capital improvements, via both direct expenditures and transfers to other City funds. The Capital Improvements Capital Projects Fund accounts for all governmental fund capital improvements, as well as work projects such as long-term consultant studies. The Infrastructure Improvements Special Revenue Fund accounts for financial resources from local, state and federal grants which are used primarily to fund capital improvements. All of these expenditures are categorized as capital outlay. The City’s Major Funds include: Type of Activity:  General Fund Governmental Activities  Capital Improvements Capital Projects Fund Governmental Activities  Infrastructure Improvements Special Revenue Fund Governmental Activities  City’s Water and Wastewater Enterprises Business-type Activities o San Dieguito Water District o Cardiff Sanitary Division o Encinitas Sanitary Division Governmental Funds – Most of the City’s basic services are reported in governmental funds. Unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City’s capacity to finance its programs in the near future. 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 funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balance present information separately for the General Fund, the Capital Improvements Capital Projects Fund, and the Infrastructure Improvements Special 7 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 Revenue Fund, which are all classified as major funds. These statements also report several individual governmental funds classified as non-major funds, such as Special Revenue and Debt Service Funds, which are combined into a single, aggregated presentation. Individual fund data for each of the non- major governmental funds is provided in the supplementary information section. 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, like government-wide financial statements, are presented on an accrual basis of accounting. There are two types of proprietary funds – enterprise funds and internal service funds. Enterprise funds are used to report activities for which external users are charged a fee for goods or services. Internal service funds are used to report activities that provide supplies and services to other City programs and activities. The internal service funds are reported with governmental activities in the government-wide financial statements. 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. The City’s fiduciary activities are reported in a separate statement of fiduciary net position. These activities are excluded 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. Financial Analysis of the City Overall Net Position – The City of Encinitas’ combined net position (i.e. inclusive of all City funds) for the fiscal year ended June 30, 2019 is compared to the results for 2018 in Table 1. 8 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 Net position represents the simplest test of financial health for the City, indicating the excess or deficit of assets, and deferred outflows of resources, over liabilities and deferred inflows of resources. Net position for the City as a whole increased 4.9 percent from $323.4 million at June 30, 2018, to $339.2 million at June 30, 2019.  The overall increase in total assets is $12.1 million when compared to the previous year. The governmental activities total assets increased $7.0 million compared to the previous year with an increase in cash and investments, receivable and noncurrent assets. The business-type activities total assets increased $5.1 million compared to the previous year with primary increases also in cash and investments. In addition, the investment in joint ventures increased slightly compared to the previous year. The only decrease was in capital assets due to a sale of SDWD property.  The overall decrease in total liabilities is $7.2 million when compared to the previous year. This is primarily attributable to a $3.7 million decrease in long-term liabilities and a $2.7 million decrease in net pension liabilities for governmental and business-type activities. Additionally, the liability in the other postemployment benefits (OPEB) also decreased $0.3 million.  The increase in total assets of $12.1 million, decrease in total liabilities of $7.2 million, deferred inflows of $1.1 million and deferred outflows of $4.6 million results in an increase in the City’s total net position by $15.8 million, or approximately 4.9 percent, compared to 2018. See Table 1. 9 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 10 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 Governmental Activities Chart 1 reflects 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, Development Services (Planning and Engineering) and Parks, Recreation and Cultural Arts. 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. Note: Program revenues only include charges for services, operating grants and contributions, capital grants and contributions and do not include general revenues. Chart 2 reflects that property taxes, sales and use taxes, charges for services, capital grants and contributions, and other taxes are the top five categories of total revenue and comprise 91 percent of funding for governmental activities. The remaining categories include operating grants and contributions, investment income and other. 11 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 Business-type Activities Business-type activities for the City of Encinitas include water and wastewater operations and the City’s affordable housing program. These activities increased net position by $6.2 million from the last fiscal year. The program revenues and general revenues totaled $29.9 million, exceeding total expenses of $23.7 million. Refer to Table 2, Statement of Activities and Changes in Net Position. The Statement of Activities and Changes in Net Position for business-type activities reflects a decrease of $0.9 million in program revenues and an increase of $2.6 million in general revenues from the previous year. The primary reason for the decrease in operating revenue during Fiscal Year 2018-19 was attributable to lower potable water and recycled water sales from the San Dieguito Water District (SDWD) by $1.2 million. The operating revenues in Cardiff Sanitary Division (CSD) increased slightly by one percent and the Encinitas Sanitary Division (ESD) didn’t change compared to the previous year. Due to a higher total portfolio amount and a slight increase in interest rates, investment income increased $1.8 million compared to the previous year. Supplies expense for SDWD increased $0.9 million and operations and maintenance expense increased by $0.1 million compared to the previous year. The sale of water decreased contributing to a $2.3 million decrease in net income for SDWD. The CSD and ESD operating income remained stable Overall, program revenues and general revenues exceeded program expenses during Fiscal Year 2018-19 resulting in a total net change of $6.2 million. Chart 3 below compares program revenue from business-type activities to program expenses. Water and wastewater operations operated at a surplus, as shown in the Statement of Activities and Changes in Net Position. Note: Program revenues only include charges for services, operating grants and contributions, capital grants and contributions; not include general revenues. 12 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 GENERAL FUND BUDGETARY HIGHLIGHTS General Fund Revenues $2.2 million above projections General Fund actual revenues of $79.2 million were $4.8 million, or 6.4 percent, higher than the original budget and $3.3 million, or 4.3 percent, higher than the final budget. Actual revenues were higher by $5.3 million, or 7.2 percent, when compared to FY 2017-18. Property taxes are the City’s largest revenue source and makeup 61 percent of the General Fund revenue budget. The City of Encinitas receives approximately 24 cents of each dollar of property taxes revenue generated in the City. Current secured property taxes, along with other property tax categories, exceeded projections by $0.7 million, or 1.5 percent, compared to the final budget. Total property tax revenue collected in FY2018-19 increased by $2.7 million or 6.1 percent more compared with the prior year. The continued growth in assessed values from transfers of ownership and the full two percent inflation adjustment applied under Proposition 13 contributed to the increase in property taxes revenue. The median sale price of a single-family home in Encinitas was $1,144,250 up from $932,500 compared with the same period January through July in FY 2017-18. The City experienced a net taxable value increase of 6.5 percent for the FY 2018-19 tax roll, which was slightly more than countywide at 6.0 percent. Documentary transfer tax exceeded projections by $222,706, which was related to the values of homes sold and the number of homes sold. The revenue from this category exceeded the budget due to higher than anticipated transfers of ownership occurring during the fourth quarter, which accounted for 50 percent of the actual amount received. Sales and use taxes is the City’s second largest revenue source, providing 18 percent of General Fund revenue. Actual revenue received was over projections by $225,450, which was a 1.7 percent increase compared to the final budget. The increase was from sales in the building and construction, fuel and services, restaurants and hotels. The total sales tax revenue received was $442,594 higher, an increase of 3.3 percent compared with the prior year. Transient occupancy tax (TOT) is apportioned 80 percent to the General Fund and 20 percent to the Coastal Zone Management Fund for sand replenishment and shore stabilization. TOT revenue exceeded projections by $357,957, an increase of 19.2 percent from the final budget. The TOT revenue increased by $184,426 and is an increase of 9.1 percent compared with prior year. Overall, franchise taxes were under projections by $101,081, which was a result of a reduction in taxes collected due to a declining number of paid services not meeting projections and a decrease in total electric consumption. The franchise fee revenue is generated from public utility sources, trash collection franchises, and telecommunication franchises conducting business within the city limits. The revenue collected from AT&T was $101,319 lower than anticipated and $14,070 below projection for collections from SDG&E. Licenses and permits were over projections by $19,024. This exceeded budget projection by 7.1 percent, mostly due to a one-time payment of $18,581 from Corridor Power Inc. for use of the City Hall lower parking lot for vehicle charging stations. Revenue collected in this category was $46,425 more than the previous fiscal year. 13 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 Intergovernmental revenue was higher than projected by $20,735. This was primarily due to revenue received from agencies participating in the Joint Technical Community Choice Aggregate (CCA) Feasibility Study cost sharing agreement. Overall charges for services revenue exceeded projections by $18,689, primarily from engineering fees, which were $261,739 higher than projected due to conservative budgeting. Revenues collected from inspection fees were also $163,922 higher than projected. However, building fees were $228,282 lower than projected due to a higher than anticipated number of Accessory Dwelling Unit (ADU) and energy efficiency permit fee waiver credits issued during the year, totaling $178,758. The revenue collected from recreation and art program fees and sponsorships was $163,208 lower than projected, which was due to fewer registrations than anticipated and postponement of the piano concert series and pottery classes. Fines, forfeitures and penalties, which include vehicle code and red-light violations, were over projections by $47,584. Use of money and property, which include investment earnings, exceeded projections by $1.7 million, due to a higher portfolio amount and a slight increase in interest rates. General Fund Expenditures $3.8 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 $3.8 million, or 5.5 percent compared to the final budget. The savings was primarily from personnel costs resulting from vacancies through the City departments, and savings in the contracts and services category. In FY 2018-19 the savings in major functions were from general government, public safety, engineering, and parks and recreation. Departments also saved in materials and supplies expenditures. Overall, all departments, except non-departmental, were 2.8 percent to 29.6 percent below budget. Actual General Fund expenditures were $65.2 million compared to prior year’s actual amount of $61.0 million. Excess of Revenues over Expenditures $7.1 million above projections Actual revenues over expenditures were approximately $14.0 million, compared to a budget of $6.9 million. This does not take into account other financing sources and uses which are 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 slightly over by $3,234. Transfers in for capital were over budget by $282,562. Transfers out of the General Fund category was $34,707 less than projected. The anticipated matching shares or subsidies from the General Fund for the Community Development Block Grant (CDBG) Fund, Section 8 Administration Fund and Pacific Pines Administration Fund were also lower than projected. Transfers out to internal service funds include the General Fund’s contribution to the Self-Insurance fund. The contribution was budgeted and funded at approximately $1.4 million. 14 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 Appropriations for capital projects from the General Fund totaled $11.0 million in 2019. Transfers out for debt service totaled $3.7 million which was under budget by $3,157. Analysis of Fund Balance and Changes in Fund Balance Fund balance was projected to be $17.0 million as of June 30, 2019, a scheduled decrease of about $10.3 million. Actual fund balance was $24.4 million, or $7.4 million higher than projected; as mentioned above, the revenues were $3.3 million above projected and the expenditures were $3.8 million under projected. The total other financing sources was also $0.3 million over projected. There was an excess of revenues over expenditures of $14.0 million. Factoring in transfers for debt service payments of $3.7 million, capital expenditures of $11.0 million and other transfer activity of $2.2 million, the net result is a decrease in total fund balance of $2.9 million at year end. Besides the General Fund, the Capital Improvements Capital Projects Fund and Infrastructure Improvements Special Revenue Fund are also major funds in the governmental funds. The City executes capital projects through the Capital Improvements Capital Projects Fund. When a project is designated and the budget is appropriated, the fund balance of the funding source will be transferred to the Capital Improvements Capital Projects Fund to complete the capital project. Because of the transfers, the Infrastructure Improvements Special Revenue Fund at June 30, 2019 had a deficit fund balance $14.3 million. The Capital Improvements Capital Projects Fund had a total $50.0 million in fund balances at the end of Fiscal Year 2018-19. CAPITAL ASSETS AND THE CAPITAL IMPROVEMENT PROGRAM As of June 30, 2019, the City had approximately $277.1 million invested in a broad range of capital assets including road and drainage systems, parks and beach facilities, public buildings, water and wastewater treatment facilities, collection and distribution systems, and affordable housing stock. Of that amount, $218.4 million is classified as capital assets under the category of governmental activities, and $58.7 million is classified as capital assets of business-type activities. For more detailed information on capital assets activity refers to Note 7. In addition, there are $60.0 million of assets under business-type activities classified as investments in joint ventures. These investments consist mainly of capital assets belonging to related governmental agencies where the City holds an equity interest in the joint venture. The assets are primarily water and wastewater treatment facilities. Governmental Activities Capital Assets: $218.4 million The City has three Capital Improvements Capital Projects Funds to monitor capital improvements projects for governmental activities. These projects include public facilities, acquisition of parkland and park improvements, infrastructure, and certain City “work projects” such as multi-year consultant studies that meet the criteria for inclusion as capital projects for budgeting purposes. The City uses a dollar threshold of $100,000 and a useful life of five years or more in its evaluation for capitalizing a capital expenditure. Eligible project costs are additions to construction in progress (CIP) at fiscal year- end. Costs for completed projects are recorded as additions to the appropriate capital asset category at year end. 15 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 The City spent approximately $11.9 million this fiscal year on capital improvement projects consisting of a variety of different projects that were either in development or under construction. The primary emphasis this fiscal year was the Cardiff Beach Living Shoreline Project also known as the Dune Restoration, the North Coast Highway 101 Streetscape, the South Coast Highway 101 Sidewalk Improvement, Montgomery Avenue At-Grade Pedestrian Rail Crossing, El Portal Pedestrian/Bike Underpass Project, Chesterfield Drive Quiet Zone Implementation, General Mobility Improvement, Technology Infrastructure Replacement, parkland and drainage improvements, and ongoing pavement overlay projects. Business-type Activities Capital Assets: $58.7 million The City accounts for the acquisition and construction of capital assets for its water and wastewater operations under its proprietary-type funds 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 capital assets. The criteria is the same as the City’s criteria ($100,000 threshold and a minimum five-year life). Eligible capital expenses are then capitalized to the construction-in-progress account, while non-eligible expenses are reclassified as operating expenses. Total amounts expensed on completed projects are then transferred to the appropriate capital asset class. Capital assets decreased slightly compared with prior year’s $59.1 million. During the year, SDWD sold their property at 2315 Cambridge Avenue for $650,000. The City’s Affordable Housing Fund carries an investment of about $2.5 million in affordable housing stock under the classification of utility, plant, vehicles and equipment. The City purchased 16 housing units in 2004. There has not been any capital spending activity in this fund since then. Investment in Joint Ventures: $60.0 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 proportional share of annual operating costs. SDWD also holds an equity interest in the R.E. Badger Water Facilities Financing Authority. The primary reason for this investment is to provide financing for the acquisition and construction of capital improvements related to the R.E. Badger Joint Facilities. SDWD has a proportional share of assets in the debt service reserve only. 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 (SEJPA) Joint Facilities. CSD makes capital contributions each year for the replacement and improvement of the SEJPA Joint Facilities, which is added to its investment account at the end of the fiscal year. CSD also makes quarterly payments to cover its proportional share of 16 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 annual operating costs. The treatment facilities, also serving other local agencies, bill quarterly for their proportional 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 (EWA) Joint Facilities. ESD makes capital contributions each year for the replacement and improvement of the EWA Joint Facilities. These capital contributions are additions to the investment account at the end of the fiscal year. ESD also makes quarterly payments to cover its proportional share of annual operating costs. The City’s joint ventures in the Cardiff Sanitary Division and Encinitas Sanitary Division increased $1.4 million, which was offset by a decrease of $1.2 million in the City’s joint venture in the San Dieguito Water District. DEBT ISSUANCE AND ADMINISTRATION The City has a total of $71.6 million of long-term obligation for both governmental and business-type activities as shown in Note 8 of the basic financial statements. The governmental activities debt totaling $46.1 million include $1.2 million in capital leases, and $44.9 million in bonded debt. Besides $46.1 million in debt, the long-term obligation in governmental activities also includes $4.8 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 long-term obligation totals $20.7 million and includes $20.5 million in bonded debt and $0.2 million in compensated absences. Of the $66.6 million total debt that is due, $3.7 million is due within one year. Governmental Activities $46.1 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. Debt payments for all of these bonds are due semi-annually at fixed amounts, and the debt matures at various times through 2045. The City’s total annual debt service of approximately $4.0 million represents approximately five percent of annual General Fund operating revenues. 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 for the repair of the roof. Annual payment on that lease is $183,556. Additionally, the City currently leases two fire engine vehicles with another one paid off in FY 2018-19. The annual lease payments in FY 2018-19 were $276,165. Business-type Activities $20.5 million SDWD and CSD carry long-term debt issued to construct capital improvements to both their distribution and collection systems and their Joint Facilities. On July 6, 2017, SEJPA on behalf of its members (the CSD division and the City of Solana Beach) issued 2017 Revenue Bonds for the purpose of funding facilities and improvements as part of SEJPA’s capital improvements. CSD’s share of the loan is $11,057,500. 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. 17 City of Encinitas Management’s Discussion and Analysis (Continued) For the Year Ended June 30, 2019 General Information on City Debt The City of Encinitas obtained and affirmed in 2017 an upgrade to its issuer credit rating to AAA by Standard & Poor’s (S&P). The City’s credit rating affirmed by S&P issued a credit rating of AA+ on the City’s 2017 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 over a two-year cycle, with legal appropriations set for the first year only. The operating and capital budgets for Fiscal Year 2019-20 were appropriated by the City Council in June 2019. The FY 2018-19 actual results, when compared to the adopted projections and appropriations, showed revenues above forecasts and expenditures significantly under budget. FY 2019-20 revenues are expected to increase slightly above FY 2018-19 actual levels. Expenditures are budged to increase modestly above FY 2018-19 levels. Next year’s budget includes a two percent adjustment to employee compensation, which is the largest portion of the General Fund budget. According to 2019 mid-year crime statistics published by the San Diego Association of Governments (SANDAG), the City of Encinitas had the lowest amount of crime among other cities in San Diego County. In October 2019, the City was certified compliant with state housing laws. Under the Housing Element, the City will address future housing needs. In addition, the City is eligible for more state grants for large infrastructure improvement and with state approval for adding housing at all income levels. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is intended to provide our residents, 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, California 92024, telephone (760) 633-2600, or visit our website at www.encinitasca.gov and review the Finance Department webpage. 18 BASIC FINANCIAL STATEMENTS 19 This page intentionally left blank. 20 GOVERNMENT-WIDE FINANCIAL STATEMENTS 21 This page intentionally left blank. 22 Governmental Business-Type Activities Activities Total ASSETS Current assets: Cash and investments (Note 3)83,292,641$ 46,530,397$ 129,823,038$ Restricted cash and investments with fiscal agent 1,540 20,907 22,447 Receivables (Note 4)7,872,549 2,352,489 10,225,038 Inventory and prepaid items 282,634 336,385 619,019 Total current assets 91,449,364 49,240,178 140,689,542 Noncurrent assets: Internal balances 69,415 (69,415) - Investments in joint ventures (Note 5)- 60,017,464 60,017,464 Long-term receivable (Note 6)458,186 - 458,186 Capital assets (Note 7): Non-depreciable 83,258,710 13,584,669 96,843,379 Depreciable, net 135,116,531 45,069,277 180,185,808 Total capital assets, net 218,375,241 58,653,946 277,029,187 Total noncurrent assets 218,902,842 118,601,995 337,504,837 Total assets 310,352,206 167,842,173 478,194,379 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on bond refunding 325,745 - 325,745 Pension related deferred outflows of resources (Note 13)12,142,818 1,453,178 13,595,996 OPEB related deferred outflows of resources (Note 14)1,269,129 66,983 1,336,112 Total deferred outflows of resources 13,737,692 1,520,161 15,257,853 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 7,477,119 1,731,178 9,208,297 Interest payable 440,593 228,665 669,258 Unearned revenue 1,096,969 - 1,096,969 Deposits and other liabilities 4,560,525 575,574 5,136,099 Long-term liabilities - due within one year (Note 8)5,233,041 1,580,548 6,813,589 Total current liabilities 18,808,247 4,115,965 22,924,212 Noncurrent liabilities: Long-term liabilities - due in more than one year (Note 8)45,725,662 19,099,796 64,825,458 Net pension liability (Note 13)46,511,899 7,073,051 53,584,950 Net OPEB liability (Note 14)8,748,893 287,106 9,035,999 Total noncurrent liabilities 100,986,454 26,459,953 127,446,407 Total liabilities 119,794,701 30,575,918 150,370,619 DEFERRED INFLOWS OF RESOURCES Deferred gain on refunding - 58,734 58,734 Pension related deferred inflows of resources (Note 13)3,158,826 423,157 3,581,983 OPEB related deferred inflows of resources (Note 14)201,027 9,295 210,322 Total deferred inflows of resources 3,359,853 491,186 3,851,039 NET POSITION Net investment in capital assets 172,580,765 38,074,788 210,655,553 Restricted: Community development 1,164,935 - 1,164,935 Debt service 1,540 198 1,738 Housing - 411,697 411,697 Capital projects 19,830,915 - 19,830,915 Unrestricted 7,357,189 99,808,547 107,165,736 Total net position 200,935,344$ 138,295,230$ 339,230,574$ Primary Government City of Encinitas Statement of Net Position June 30, 2019 Se e accompanying Notes to the Basic Financial Statements. 23 Operating Capital Total Charges for Grants and Grants and Program Functions/Programs Expenses Services Contributions Contributions Revenues Primary government: Governmental activities: General government 15,280,238$ 1,239,815$ 421,208$ -$ 1,661,023$ Public safety 33,160,544 2,075,725 148,752 - 2,224,477 Public works 9,166,709 57,786 3,378,969 5,762,983 9,199,738 Planning services 6,878,364 2,936,898 249,078 - 3,185,976 Engineering services 6,762,441 1,782,402 - - 1,782,402 Parks and recreation 9,809,964 1,310,426 223,581 863,300 2,397,307 Interest on long-term debt 1,655,750 - - - - Total governmental activities 82,714,010 9,403,052 4,421,588 6,626,283 20,450,923 Business-type activities: Cardiff Sanitary Division 3,548,203 4,937,942 - 73,874 5,011,816 San Dieguito Water District 16,615,687 15,727,590 - 294,259 16,021,849 Encinitas Sanitary Division 2,044,676 2,698,745 - 360,567 3,059,312 Affordable Housing 1,576,162 260,848 1,142,424 - 1,403,272 Total business-type activities 23,784,728 23,625,125 1,142,424 728,700 25,496,249 Total primary government 106,498,738$ 33,028,177$ 5,564,012$ 7,354,983$ 45,947,172$ Program Revenues City of Encinitas Statement of Activities and Changes in Net Position For the Year Ended June 30, 2019 See accompanying Notes to the Basic Financial Statements. 24 Governmental Business-type Functions/Programs Activities Activities Total Primary government: Governmental activities: General government (13,619,215)$ -$ (13,619,215)$ Public safety (30,936,067) - (30,936,067) Public works 33,029 - 33,029 Planning services (3,692,388) - (3,692,388) Engineering services (4,980,039) - (4,980,039) Parks and recreation (7,412,657) - (7,412,657) Interest on long-term debt (1,655,750) - (1,655,750) Total governmental activities (62,263,087) - (62,263,087) Business-type activities: Cardiff Sanitary Division - 1,463,613 1,463,613 San Dieguito Water District - (593,838) (593,838) Encinitas Sanitary Division - 1,014,636 1,014,636 Affordable Housing - (172,890) (172,890) Total business-type activities - 1,711,521 1,711,521 (62,263,087) 1,711,521 (60,551,566) General revenues: Taxes: Property taxes and documentary transfer taxes 49,237,265 1,110,248 50,347,513 Sales and use taxes 13,694,647 - 13,694,647 Transient occupancy taxes 2,775,771 - 2,775,771 Franchise taxes 2,571,367 - 2,571,367 Total taxes 68,279,050 1,110,248 69,389,298 Intergovernmental - unrestricted 185,380 - 185,380 Investment income 2,613,728 1,393,446 4,007,174 Rental income 636,999 231,600 868,599 Gain on disposal of capital assets 12,739 614,324 627,063 Other 190,491 1,074,947 1,265,438 Transfers (16,644) 16,644 - Total general revenues and transfers 71,901,743 4,441,209 76,342,952 Changes in net position 9,638,656 6,152,730 15,791,386 Net position: Beginning of year 191,296,688 132,142,500 323,439,188 End of year 200,935,344$ 138,295,230$ 339,230,574$ City of Encinitas Statement of Activities and Changes in Net Position (Continued) For the Year Ended June 30, 2019 Primary Government and Changes in Net Position Net (Expense) Revenue See accompanying Notes to the Basic Financial Statements. 25 This page intentionally left blank. 26 FUND FINANCIAL STATEMENTS 27 This page intentionally left blank. 28 GOVERNMENTAL FUND FINANCIAL STATEMENTS 29 This page intentionally left blank. 30 Capital Infrastructure Improvements Improvements Other Total General Capital Projects Special Revenue Governmental Governmental Fund Fund Fund Funds Funds ASSETS Cash and investments 27,280,962$ 37,644,922$ 1,108,455$ 10,083,409$ 76,117,748$ Receivables 4,737,316 - 2,870,855 264,025 7,872,196 Due from other funds (note 9)2,761,121 13,883,324 - - 16,644,445 Inventory and prepaid items 238,428 - - - 238,428 Long-term receivable 28,400 - - 429,786 458,186 Restricted cash and investments 383 - - 1,157 1,540 Total assets 35,046,610$ 51,528,246$ 3,979,310$ 10,778,377$ 101,332,543$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities 5,348,917$ 1,538,694$ 3,426$ 307,950$ 7,198,987$ Unearned revenue 736,064 - 360,905 - 1,096,969 Due to other funds (note 9)- - 16,309,027 266,003 16,575,030 Deposits and other liabilities 4,539,298 - - 21,227 4,560,525 Total liabilities 10,624,279 1,538,694 16,673,358 595,180 29,431,511 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - - 1,639,058 429,786 2,068,844 Total deferred inflows of resources - - 1,639,058 429,786 2,068,844 Fund Balances: Nonspendable 266,828 - - - 266,828 Restricted 383 25,576,702 1,105,029 9,753,411 36,435,525 Committed 15,545,889 24,412,850 - - 39,958,739 Unassigned 8,609,231 - (15,438,135) - (6,828,904) Total fund balances 24,422,331 49,989,552 (14,333,106) 9,753,411 69,832,188 Total liabilities, deferred inflows of resources, and fund balances 35,046,610$ 51,528,246$ 3,979,310$ 10,778,377$ 101,332,543$ City of Encinitas Balance Sheet Governmental Funds June 30, 2019 Major Funds See accompanying Notes to the Basic Financial Statements. 31 Total Fund Balances - Total Governmental Funds 69,832,188$ 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 $3,312,210 reported in internal service funds). Land 61,862,474 Land easements 2,381,057 Construction in progress 19,015,179 Public facilities 106,466,354 Vehicles, equipment and machinery 2,206,391 Infrastructure 117,435,353 Less: Accumulated depreciation (94,303,777) Total capital assets adjustment 215,063,031 Deferred loss on refunding in the governmental activities were not financial resources and, therefore, were not reported in governmental funds. 325,745 Interest payable on long-term debt did not require current financial resources.Therefore, interest payable was not reported as a liability in the Governmental Funds Balance Sheet.(440,593) 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 $544,033 reported in internal service funds): Amount reported in Government-wide Statement of Net Position: 2008 Civic Center roof replacement lease (676,834) 2013 Community Park Bonds, net of unamortized premium of $78,840 (5,988,840) 2014 Moonlight Beach Tower Series A Bonds, net of unamortized discount of $26,966 (2,803,034) 2014 Pacific View Series B Bonds, net of unamortized discount of $135,374 (9,419,626) 2015 Library Refunding Bonds, net of unamortized premium of $661,897 (14,791,897) 2017 Park Refunding Bonds, net of unamortized premium of $1,165,957 (11,895,957) Claims payable (2,652,742) Compensated absences (2,185,740) Total long-term liabilities (50,414,670) Net pension liability is not due and payable in the current period and, therefore, is not required to be reported in the governmental funds. (46,511,899) Actuarially determined pension deferred outflows of resources are reported in the government- wide statements but are not reported in the governmental funds. 12,142,818 Actuarially determined pension deferred inflows of resources are reported in the government- wide statements but are not reported in the governmental funds. (3,158,826) Net OPEB liability is not due and payable in the current period and,therefore,is not required to be reported in the governmental funds. (8,748,893) Actuarially determined OPEB deferred outflows of resources are reported in the government- wide statements but are not reported in the governmental funds. 1,269,129 Actuarially determined OPEB deferred inflows of resources are reported in the government- wide statements but are not reported in the governmental funds. (201,027) and, therefore, are deferred in the governmental funds or not recorded in the governmental funds. 2,068,844 Internal service funds were used by management to charge the costs of risk management, personnel support, fleet maintenance and vehicle replacement to individual funds. The assets and liabilities of the internal service funds were included in governmental activities in the Government-wide Statement of Net Position.9,709,497 Net position of governmental activities 200,935,344$ City of Encinitas Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position June 30, 2019 See accompanying Notes to the Basic Financial Statements. 32 Capital Infrastructure Improvements Improvements Other Total General Capital Projects Special Revenue Governmental Governmental Fund Fund Fund Funds Funds REVENUES: Taxes and assessments 66,263,561$ -$ 567,476$ 2,572,379$ 69,403,416$ Licenses and permits 286,224 - - - 286,224 Intergovernmental 663,028 - 5,599,024 899,754 7,161,806 Development impact fees - - - 1,485,129 1,485,129 Charges for services 7,383,043 - - - 7,383,043 Fines, forfeitures and penalties 794,237 - - - 794,237 Use of money and property 2,582,812 - 59,158 796,015 3,437,985 Other 1,214,504 - -103,696 1,318,200 Total revenues 79,187,409 - 6,225,658 5,856,973 91,270,040 EXPENDITURES: Current: General government 11,863,735 - 138,907 780,960 12,783,602 Public safety 31,279,823 - -214,582 31,494,405 Public works 5,338,578 - -536,565 5,875,143 Planning services 6,268,884 - -301,956 6,570,840 Engineering services 3,305,943 - -545,373 3,851,316 Parks and recreation 6,985,782 - -968,747 7,954,529 Capital outlay 133,137 11,717,500 - 75,000 11,925,637 Debt service: Principal - - - 1,949,298 1,949,298 Interest and fiscal charges - - - 1,774,333 1,774,333 Total expenditures 65,175,882 11,717,500 138,907 7,146,814 84,179,103 REVENUES OVER (UNDER) EXPENDITURES 14,011,527 (11,717,500) 6,086,751 (1,289,841) 7,090,937 OTHER FINANCING SOURCES (USES): Transfers in (note 9)1,587,071 18,940,165 148,313 4,574,238 25,249,787 Transfers out (note 9)(18,469,725) (328,155) (6,416,377) (2,127,403) (27,341,660) Total other financing sources (uses)(16,882,654) 18,612,010 (6,268,064) 2,446,835 (2,091,873) NET CHANGE IN FUND BALANCES (2,871,127) 6,894,510 (181,313) 1,156,994 4,999,064 FUND BALANCES: Beginning of year 27,293,458 43,095,042 (14,151,793) 8,596,417 64,833,124 End of year 24,422,331$ 49,989,552$ (14,333,106)$ 9,753,411$ 69,832,188$ City of Encinitas Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds For the Year Ended June 30, 2019 Major Funds See accompanying Notes to the Basic Financial Statements. 33 Net Change in Fund Balances - Total Governmental Funds 4,999,064$ 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. 7,044,841 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 $562,723 recorded in internal service funds). (5,996,487) Loss on the disposal of capital assets (29,999) 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. Principal payment of long-term debt 1,949,298 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 136,453 Deferred amounts on refunding (19,162) 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 (166,470) Changes in claims payable (139,261) Changes in the net pension liability 2,458,143 Changes in the net OPEB liability 396,238 The net effect of various miscellaneous transactions involving pension plans (i.e.deferred outflow/inflow amortization, contributions after the measurement date) increased Net Position. (3,070,638) The net effect of various miscellaneous transactions involving OPEB plans (i.e.deferred outflow/inflow amortization, contributions after the measurement date) increased Net Position. 264,763 Interest expense on long-term debt was reported in the Government-wide Statement of Activities and Changes in Net Position, but it did not require the use of current financial resources. This amount represented the change in accrued interest from prior year.19,062 A portion of deferred grant revenues are not available to pay for current period expenditures and, therefore, are not recognized in the funds.1,646,213 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. 146,598 Change in net position of governmental activities 9,638,656$ 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, 2019 See accompanying Notes to the Basic Financial Statements. 34 PROPRIETARY FUND FINANCIAL STATEMENTS 35 Cardiff San Dieguito Encinitas Sanitary Water Sanitary Division District Division ASSETS Current assets: Cash and investments 13,202,364$ 19,427,472$ 13,532,059$ Restricted cash and investments with fiscal agent - 198 - Accounts and taxes receivable 71,798 2,213,247 36,302 Inventory and prepaid items 3,625 236,956 3,081 Total current assets 13,277,787 21,877,873 13,571,442 Noncurrent assets: Investment in joint ventures 33,525,279 20,635,205 5,856,980 Capital assets: Land - 3,413,320 - Public works facility right-of-use - 3,378,700 - Construction in progress 3,571,843 184,302 3,036,504 Capacity rights, net - 171,829 - Utility, plant, vehicles, and equipment, net 14,360,049 16,116,650 11,915,682 Total capital assets, net 17,931,892 23,264,801 14,952,186 Total noncurrent assets 51,457,171 43,900,006 20,809,166 Total assets 64,734,958 65,777,879 34,380,608 DEFERRED OUTFLOWS OF RESOURCES Deferred pension related items - 1,453,178 - Deferred OPEB related items - 66,983 - Total deferred outflows of resources - 1,520,161 - LIABILITIES Current liabilities: Accounts payable and accrued liabilities 14,716 1,048,858 666,234 Due to other funds (note 9)- - - Accrued interest payable 151,540 77,125 - Deposits 37,382 519,981 - Compensated absences - due in one year - 81,046 - Current portion of long-term debt 275,000 1,135,000 - Total current liabilities 478,638 2,862,010 666,234 Noncurrent liabilities: Capital leases payable - - - Revenue bonds payable - due in more than one year - 3,211,858 - Notes and mortgages payable - due in more than one year 11,951,937 2,855,000 - Compensated absences - due in more than one year - 66,491 - Net pension liability - 7,073,051 - Net OPEB liability - 287,106 - Total noncurrent liabilities 11,951,937 13,493,506 - Total liabilities 12,430,575 16,355,516 666,234 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding 58,734 - - Deferred pension related items - 423,157 - Deferred OPEB related items - 9,295 - Total deferred inflows of resources 58,734 432,452 - NET POSITION Net investment in capital assets 5,646,221 16,062,943 14,952,186 Restricted: Debt service - 198 - Housing - -- Unrestricted 46,599,428 34,446,931 18,762,188 Total net position 52,245,649$ 50,510,072$ 33,714,374$ Major Enterprise Funds City of Encinitas Statement of Net Position Proprietary Funds June 30, 2019 See accompanying Notes to the Basic Financial Statements. 36 Non-major Governmental Enterprise Fund Activities Affordable Internal Housing Total Service Funds ASSETS Current assets: Cash and investments 368,502$ 46,530,397$ 7,174,893$ Restricted cash and investments with fiscal agent 20,709 20,907 - Accounts and taxes receivable 31,142 2,352,489 353 Inventory and prepaid items 92,723 336,385 44,206 Total current assets 513,076 49,240,178 7,219,452 Noncurrent assets: Investment in joint ventures - 60,017,464 - Capital assets: Land - 3,413,320 - Public works facility right-of-use - 3,378,700 - Construction in progress - 6,792,649 - Capacity rights, net - 171,829 - Utility, plant, vehicles, and equipment, net 2,505,067 44,897,448 3,312,210 Total capital assets, net 2,505,067 58,653,946 3,312,210 Total noncurrent assets 2,505,067 118,671,410 3,312,210 Total assets 3,018,143 167,911,588 10,531,662 DEFERRED OUTFLOWS OF RESOURCES Deferred pension related items - 1,453,178 - Deferred OPEB related items - 66,983 - Total deferred outflows - 1,520,161 - LIABILITIES Current liabilities: Accounts payable and accrued liabilities 1,370 1,731,178 278,132 Due to other funds (note 9)69,415 69,415 - Accrued interest payable - 228,665 - Deposits 18,211 575,574 - Compensated absences - due in one year 6,787 87,833 - Current portion of long-term debt 82,715 1,492,715 170,768 Total current liabilities 178,498 4,185,380 448,900 Noncurrent liabilities: Capital leases payable - - 373,265 Revenue bonds payable - due in more than one year - 3,211,858 - Notes and mortgages payable - due in more than one year 1,008,914 15,815,851 - Compensated absences - due in more than one year 5,596 72,087 - Net pension liability - 7,073,051 - Net OPEB liability - 287,106 - Total noncurrent liabilities 1,014,510 26,459,953 373,265 Total liabilities 1,193,008 30,645,333 822,165 DEFERRED INFLOWS OF RESOURCES Deferred amount on refunding - 58,734 - Deferred pension related items - 423,157 - Deferred OPEB related items - 9,295 - Total deferred inflows - 491,186 - NET POSITION Net investment in capital assets 1,413,438 38,074,788 2,768,177 Restricted: Debt service - 198 - Housing 411,697 411,697 - Unrestricted - 99,808,547 6,941,320 Total net position 1,825,135$ 138,295,230$ 9,709,497$ City of Encinitas Statement of Net Position (Continued) Proprietary Funds June 30, 2019 See accompanying Notes to the Basic Financial Statements. 37 Cardiff San Dieguito Encinitas Sanitary Water Sanitary Division District Division OPERATING REVENUES: Charges for services 4,937,942$ 15,662,658$ 2,698,745$ Rental income -112,108 - Interfund revenues -64,932 - Intergovernmental --- Other revenues 1,500 16,002 12,800 Total operating revenues 4,939,442 15,855,700 2,711,545 OPERATING EXPENSES: Housing assistance payments - - - Source of supply -5,900,120 - General operations and maintenance 927,194 5,322,770 592,799 Facility operations and maintenance 1,543,054 2,239,714 685,290 General and administrative 183,040 604,333 103,976 Depreciation 389,390 831,957 369,669 Insurance and claims 33,203 47,620 30,242 Total operating expenses 3,075,881 14,946,514 1,781,976 OPERATING INCOME (LOSS)1,863,561 909,186 929,569 NONOPERATING REVENUES (EXPENSES): Investment income 397,179 582,926 406,214 Property taxes -1,110,248 - Operating grants --- Net change from joint ventures 870,959 (1,376,819) (262,700) Gain on disposal of capital assets -614,324 - Amortization of bond premium 98,880 74,373 - Interest expense (472,322) (292,354)- Total nonoperating revenues (expenses)894,696 712,698 143,514 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 2,758,257 1,621,884 1,073,083 Capital contributions 73,874 294,259 360,567 Transfers in (note 9)- - - Transfers out (note 9)- - - Total capital contributions and transfers 73,874 294,259 360,567 CHANGES IN NET POSITION 2,832,131 1,916,143 1,433,650 NET POSITION: Beginning of year 49,413,518 48,593,929 32,280,724 End of year 52,245,649$ 50,510,072$ 33,714,374$ Major Enterprise Funds City of Encinitas Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2019 See accompanying Notes to the Basic Financial Statements. 38 Non-major Enterprise Fund Governmental Activities Affordable Internal Housing Total Service Funds OPERATING REVENUES: Charges for services -$ 23,299,345$ -$ Rental income 119,492 231,600 - Interfund revenues 97,632 162,564 2,528,167 Intergovernmental 163,216 163,216 - Other revenues 433 30,735 48,787 Total operating revenues 380,773 23,887,460 2,576,954 OPERATING EXPENSES: Housing assistance payments 1,184,973 1,184,973 - Source of supply - 5,900,120 - General operations and maintenance 105,284 6,948,047 1,019,517 Facility operations and maintenance - 4,468,058 - General and administrative 165,084 1,056,433 1,373,072 Depreciation 100,538 1,691,554 562,723 Insurance and claims 1,833 112,898 1,545,241 Total operating expenses 1,557,712 21,362,083 4,500,553 OPERATING INCOME (LOSS)(1,176,939) 2,525,377 (1,923,599) NONOPERATING REVENUES (EXPENSES): Investment income 7,127 1,393,446 - Property taxes - 1,110,248 - Operating grants 1,142,424 1,142,424 - Net change from joint ventures - (768,560) - Gain on disposal of capital assets - 614,324 12,739 Amortization of bond premium - 173,253 - Interest expense (18,450) (783,126) (17,771) Total nonoperating revenues (expenses)1,131,101 2,882,009 (5,032) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS (45,838) 5,407,386 (1,928,631) Capital contributions - 728,700 - Transfers in (note 9)43,538 43,538 2,207,229 Transfers out (note 9)(26,894) (26,894) (132,000) Total capital contributions and transfers 16,644 745,344 2,075,229 CHANGES IN NET POSITION (29,194) 6,152,730 146,598 NET POSITION: Beginning of year 1,854,329 132,142,500 9,562,899 End of year 1,825,135$ 138,295,230$ 9,709,497$ City of Encinitas Statement of Revenues, Expenses, and Changes in Net Position (Continued) Proprietary Funds For the Year Ended June 30, 2019 See accompanying Notes to the Basic Financial Statements.39 Cardiff San Dieguito Encinitas Sanitary Water Sanitary Division District Division CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users 4,932,617$ 15,870,117$ 2,688,914$ Cash received from other funds - 64,932 - Payments to employees (3,075) (1,983,301) - Payments to suppliers for goods and services (2,856,342) (11,233,551) (1,180,722) Other operating revenues 1,500 16,002 12,800 Net cash provided by (used in) operating activities 2,074,700 2,734,199 1,520,992 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (531,834) (220,145) (259,853) Capital contributions received - connection/capacity fees 73,874 105,600 360,567 Principal payments on long-term debt (663,846) (1,100,000) - Interest payments on long-term debt (481,174) (301,694) - Capital related payments to other agencies (76,595) (201,064) (704,171) Proceeds received from disposal of capital assets - 614,324 - Net cash (used in) capital and related financing activities (1,679,575) (1,102,979) (603,457) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating grants - - - Proceeds from property taxes - 1,110,248 - Cash received from other funds - - - Cash paid to other funds - - - Net cash provided by (used in) noncapital financing activities - 1,110,248 - CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 397,179 582,926 406,214 Net cash provided by investing activities 397,179 582,926 406,214 Net increase (decrease) in cash and cash equivalents 792,304 3,324,394 1,323,749 CASH AND CASH EQUIVALENTS: Beginning of year 12,410,060 16,103,276 12,208,310 End of year 13,202,364$ 19,427,670$ 13,532,059$ RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENT OF NET POSITION: Cash and investments 13,202,364$ 19,427,472$ 13,532,059$ Restricted cash and investments with fiscal agent - 198 - Total cash and cash equivalents 13,202,364$ 19,427,670$ 13,532,059$ Major Enterprise Funds Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2019 City of Encinitas See accompanying Notes to the Basic Financial Statements. 40 Non-major Enterprise Fund Governmental Activities Affordable Internal Housing Total Service Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users 300,907$ 23,792,555$ 2,591,031$ Cash received from other funds 97,632 162,564 - Payments to employees (155,879) (2,142,255) (1,372,992) Payments to suppliers for goods and services (1,302,553) (16,573,168) (2,430,999) Other operating revenues 433 30,735 - Net cash provided by (used in) operating activities (1,059,460) 5,270,431 (1,212,960) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets - (1,011,832) (246,315) Capital contributions received - connection/capacity fees - 540,041 - Principal payments on long-term debt (81,429) (1,845,275) (258,393) Interest payments on long-term debt (18,450) (801,318) (17,771) Capital related payments to other agencies - (981,830) - Proceeds received from disposal of capital assets - 614,324 12,739 Net cash (used in) capital and related financing activities (99,879) (3,485,890) (509,740) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Operating grants 1,142,424 1,142,424 - Proceeds from property taxes - 1,110,248 - Cash received from other funds 40,754 40,754 2,207,229 Cash paid to other funds (26,894) (26,894) (132,000) Net cash provided by (used in) noncapital financing activities 1,156,284 2,266,532 2,075,229 CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 7,127 1,393,446 - Net cash provided by investing activities 7,127 1,393,446 - Net increase (decrease) in cash and cash equivalents 4,072 5,444,519 352,529 CASH AND CASH EQUIVALENTS: Beginning of year 385,139 41,106,785 6,822,364 End of year 389,211$ 46,551,304$ 7,174,893$ RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENT OF NET POSITION: Cash and investments 368,502$ 46,530,397$ 7,174,893$ Restricted cash and investments with fiscal agent 20,709 20,907 - Total cash and cash equivalents 389,211$ 46,551,304$ 7,174,893$ City of Encinitas Statement of Cash Flows (Continued) Proprietary Funds For the Year Ended June 30, 2019 See accompanying Notes to the Basic Financial Statements. 41 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)1,863,561$ 909,186$ 929,569$ Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 389,390 831,957 369,669 Changes in operating assets, deferred outflows of resources, liabilities, and deferred inflows of resources: Accounts and taxes receivable (5,325) 95,351 (9,831) Inventory and prepaid items 156 835 162 OPEB-related deferred outflows - (13,692) - Pension-related deferred outflows - 694,928 - Accounts payable and accrued liabilities (209,214) 197,737 231,423 Deposits 36,132 117,681 - Compensated absences - 19,494 - Unearned revenue - -- Net OPEB liability - (28,559) - Net pension liability - (68,181) - OPEB-related deferred inflows - 2,221 - Pension-related deferred inflows - (24,759) - Total adjustments 211,139 1,825,013 591,423 Net cash provided by (used in) operating activities 2,074,700$ 2,734,199$ 1,520,992$ NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Amortization of original issue premium 98,880$ 74,373$ -$ Donation of capital assets - 188,659 - Total non-cash capital and related financing activities 98,880$ 263,032$ -$ Proprietary Funds For the Year Ended June 30, 2019 City of Encinitas Statement of Cash Flows (Continued) Major Enterprise Funds See accompanying Notes to the Basic Financial Statements. 42 Non-major Enterprise Fund Governmental Activities Affordable Internal Housing Total Service Funds RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Operating income (loss)(1,176,939)$ 2,525,377$ (1,923,599)$ Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 100,538 1,691,554 562,723 Changes in operating assets, deferred outflows of resources, liabilities, and deferred inflows of resources: Accounts and taxes receivable 18,593 98,788 14,077 Inventory and prepaid items (2,832) (1,679) (3,734) OPEB-related deferred outflows - (13,692) - Pension-related deferred outflows - 694,928 - Accounts payable and accrued liabilities (204) 219,742 137,573 Deposits 2,574 156,387 - Compensated absences (796) 18,698 - Unearned revenue (394) (394)- Net OPEB liability - (28,559) - Net pension liability - (68,181) - OPEB-related deferred inflows - 2,221 - Pension-related deferred inflows - (24,759) - Total adjustments 117,479 2,745,054 710,639 Net cash provided by (used in) operating activities (1,059,460)$ 5,270,431$ (1,212,960)$ NON-CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Amortization of original issue premium -$ 173,253$ -$ Donation of capital assets - 188,659 - -$ 361,912$ -$ City of Encinitas Statement of Cash Flows (Continued) Proprietary Funds For the Year Ended June 30, 2019 See accompanying Notes to the Basic Financial Statements. 43 This page intentionally left blank. 44 FIDUCIARY FUND FINANCIAL STATEMENTS Agency Fund –These funds are used to account for money and property held by the City as trustee or custodian.It is custodial in nature (assets equal liabilities).These funds include a Community Facilities (Mello- Roos) District. 45 This page intentionally left blank. 46 Agency Fund ASSETS Cash and investments (Note 3)2,333,543$ Restricted cash and investments with fiscal agent (Note 3)1,993,947 Current assessments receivable 18,889 Total assets 4,346,379$ LIABILITIES Due to bondholders 4,346,379$ Total liabilities 4,346,379$ City of Encinitas Statement of Fiduciary Net Position Fiduciary Funds June 30, 2019 See accompanying Notes to the Basic Financial Statements. 47 This page intentionally left blank. 48 NOTES TO THE BASIC FINANCIAL STATEMENTS 49 This page intentionally left blank. 50 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 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 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. 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 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. 51 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 1 – Reporting Entity (Continued) Blended Component Units (Continued) 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. The City reports deferred outflows related to pensions and Other Post- Employment Benefits (OPEB) in this category. Deferred Inflows of Resources represent inflows of resources (acquisition of net position) that apply to future periods and, therefore, are not recognized as revenue until that time. The City has two types of items that qualify for reporting in this category. The first item is deferred inflows related to pensions and OPEB. The second item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from grants. This amount is deferred and recognized as an inflow of resources in the period the amount becomes available. 52 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) B.Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) Government-wide Financial Statements The City’s Government-wide Financial Statements include a Statement of Net Position, and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. These financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Certain types of transactions are reported as program revenues for the City in three categories: Charges for services Operating grants and contributions Capital grants and contributions Certain eliminations have been made in regard 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. 53 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) B. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) Government Fund Financial Statements (Continued) Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recorded when received in cash, except for that revenues subject to accrual (generally 60 days after year end) are recognized when earned. 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. The Infrastructure Improvements Special Revenue Fund is used to account for financial resources from state and federal grants which are primarily to fund operations and capital improvements. 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. 54 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) B. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) Proprietary Fund Financial Statements (Continued) The Statement of Revenues, Expenses, and Changes in Net Position presents increases (revenues) and decreases (expenses) in total Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses. The City reports the following major proprietary funds: The Cardiff Sanitary Division (“CSD”) Enterprise Fund provides wastewater collection and treatment services to approximately 6,400 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 4,000 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 Community Facilities (Mello-Roos) District for which the City acts as an agent for debt service activities. 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. 55 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) C. Cash, Cash Equivalents, and Investments (Continued) 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 o Overall o Custodial credit risk o 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 Certain assets and liabilities are required to be reported at fair value. The fair value framework provides a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are described as follows: Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly and fair value is determined through the use of models or other valuation methodologies including:  Quoted prices for similar assets or liabilities in active markets;  Quoted prices for identical or similar assets or liabilities in markets that are inactive;  Inputs other than quoted prices that are observable for the asset or liability;  Inputs that are derived principally from or corroborated by observable market data by correlation or other means. 56 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) E.Fair Value Measurement (Continued) Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable inputs reflect the City’s own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk). These unobservable inputs are developed based on the best information available in the circumstances and may include the City’s own data. 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 Joint Ventures 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. Refer to 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 the first-in first-out basis. Prepaid items are payments made to vendors for services that will benefit periods beyond the fiscal year ended. The cost of inventory and prepaids are recorded as expenditures/expenses when consumed rather than purchased. I.Capital Assets Capital assets are valued at historical cost or estimated historical cost if the 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. 57 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) I. Capital Assets (Continued) Governmental fund capital assets include land, land easements, construction in progress, public facilities (buildings and building improvements), vehicles, equipment and machinery, and infrastructure assets (e.g., roads, streets and sidewalks, bridges, curbs and gutters, drainage systems, lighting systems and similar assets). Proprietary fund capital assets include, land easements, public works facility right of use, construction in progress, structures and improvements, collection and distribution systems, machinery and equipment, and capacity rights, which are stated at cost. Contributed assets, which are principally collection and distribution lines, are stated at cost or estimated acquisition value on the date of donation. J. Deposit Liabilities The City collects deposits from homeowners and commercial enterprises as surety for the payment of fees and other costs related to planning and engineering services provided by the City. The City collects two types of deposits: (1) Application Deposits and (2) Security Deposits. Application deposits are collected on certain projects for which a fee for services has not been established. As costs for these projects are incurred by the City, the applicant's deposit balance is adjusted and revenue (including applicable overhead charges) is recognized. Expenses incurred in excess of the deposit amounts are billed to the applicant. Any surplus at project completion is returned to the applicant. Security deposits are collected from the applicant to guarantee required performance. These may either be in cash or in the form of non-cash, such as performance bonds or letters of credit. The amount of cash deposits on hand as of June 30, 2019 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. K. Unearned Revenue Unearned revenue recorded in the government-wide statement of net position for governmental activities and the governmental fund financial statements consist of federal and state capital grants, representing voluntary non-exchange transactions, for which advance payments have been received from the provider for which eligibility requirements, other than timing requirements, have not been satisfied. Unearned revenue recorded in the government-wide statement of net position for business-type activities and the proprietary fund financial statements generally consist of program fees collected from customers prior to the statement of net position date for recreation programs that begin in the next fiscal year or donations for capital or work projects, for which the related expenses have not yet been incurred. L. Long-Term Debt For the government-wide financial statements and proprietary fund financial statements, long-term debt and other financial obligations are reported as liabilities, net of bond premiums or discounts. 58 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) L. Long-Term Debt (Continued) Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Issuance costs are reported as expense when incurred. Governmental fund financial statements do not present long-term debt but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position. M. Arbitrage Rebate Requirement The City is subject to the Internal Revenue Code (“IRC”) Section 148(f), related to its tax-exempt revenue bonds. The IRC requires that investment earnings on gross proceeds of any revenue bonds that are in excess of the amount prescribed be surrendered to the Internal Revenue Service. The City had no rebate liability for arbitrage as of June 30, 2019. N. Claims Liabilities The City accounts for material claims and judgments outstanding at year end. When it is probable that a claim liability has been incurred at year end, and the amount of the loss can be reasonably estimated, the City records the estimated loss. O. Compensated Absences The City’s policy permits its non-fire employees to accumulate not more than two times their current annual vacation allotment. Fire employees can accrue up to a maximum of 720 hours of vacation, depending on the 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 the 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. 59 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) P. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans (Note 13). 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: Valuation date June 30, 2017 Measurement Date June 30, 2018 Measurement Period July 1, 2017 to June 30, 2018 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. The obligations for net pension liability and OPEB are primarily liquidated from the General Fund. There is no fixed payment schedule for these liabilities Q. Other Post-Employment Benefits For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB 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). The following timeframes are used for OPEB reporting: Valuation date June 30, 2017 Measurement Date June 30, 2018 Measurement Period July 1, 2017 to June 30, 2018 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: 60 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) R. Net Position (Continued) 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. 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 Director of Finance to assign fund balance amounts in the annual financial statements. 61 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) S. Fund Balances (Continued) Unassigned – This amount is for any portion of the fund balances that do not fall into one of the above categories. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than the General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that particular fund. When expenditures are incurred for purposes where only unrestricted fund balances are available, the City uses the unrestricted resources in the following order: committed, assigned, and unassigned. 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 one percent of full market value (at time of purchase). The City receives a share of this basic tax levy. 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 on property taxes receivable was considered necessary. 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, 2019  GASB Statement No. 83 – “Certain Asset Retirement Obligations,” effective for financial statements starting with the fiscal year beginning after June 15, 2018. 62 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 2 – Summary of Significant Accounting Policies (Continued) V. Accounting Changes (Continued) New Governmental Accounting Standards Implemented for the Year Ended June 30, 2019 (Continued)  GASB Statement No. 88 – “Certain Disclosures Related to Debt, including Direct Borrowing and Direct Placements,” effective for reporting periods beginning after June 15, 2018. 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. 84 – “Fiduciary Activities,” effective for reporting periods beginning after December 15, 2018.  GASB Statement No. 85 – “Omnibus 2017,” effective for reporting periods beginning after December 15, 2018.  GASB Statement No. 86 – “Certain Debt Extinguishments,” effective for reporting periods beginning after December 15, 2018.  GASB Statement No. 87 – “Leases,” effective for reporting periods beginning after December 15, 2019.  GASB Statement No. 90 – “Majority Equity Interests-an amendment of GASB Statements No. 14 and No. 61,” effective for reporting periods beginning after December 15, 2018.  GASB Statement No. 91 – “Conduit Debt Obligations” effective for reporting periods beginning after December 15, 2020. Note 3 – Cash and Investments Cash and investments are classified in the accompanying financial statements as follows: Fiduciary Funds Governmental Business-type Statement of Activities Activities Net Position Total Current assets: Cash and investments 83,292,641$ 46,530,397$ 2,333,543$ 132,156,581$ Restricted cash and investments with fiscal agent 1,540 20,907 1,993,947 2,016,394 Total cash and investments 83,294,181$ 46,551,304$ 4,327,490$ 134,172,975$ Government-wide Statement of Position 63 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 3 – Cash and Investments (Continued) Cash and investments at June 30, 2019, consisted of the following: Cash on hand 3,655$ Deposits with financial institutions 353,796 Restricted cash 2,016,394 Investments 131,799,130 Total cash and investments 134,172,975$ At June 30, 2019, 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, 2019: Percentage Fair of Measurement Value Investments Input Investments: Local Agency Investment Fund (LAIF)19,529,853$ 14.82%Uncategorized California Asset Management Program 1,039,321 0.79%Uncategorized Money Market Mutual Funds 815,258 0.62%Uncategorized Negotiable Certificates of Deposit 9,288,859 7.05%Uncategorized U.S. Treasury Securities 48,334,265 36.67%Level 2 U.S. Government Sponsored Enterprise Securities 48,785,101 37.01%Level 2 San Diego County Investment Pool 4,006,473 3.04%Uncategorized Total Investments 131,799,130$ Investment Type The City’s level two investments are valued based on either quoted prices for identical securities in markets that are not active or quoted prices for similar securities in active markets. A. Demand Deposits The carrying amounts of the City’s demand deposits were $353,796 at June 30, 2019. Bank balances were $1,819,982 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. 64 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 3 – Cash and Investments (Continued) A. Demand Deposits (Continued) The market value of pledged securities must equal at least 110 percent 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 percent 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 has not waived the collateralization requirements. B. Investments Authorized by the California Government Code and the City’s Adopted Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s investment policy. Authorized Maximum Maximum Authorized by Investment Maximum Percentage of Investment in Investment Type Policy Maturity Portfolio One Issuer Repurchased Agreements-Overnight "Sweep"Yes 1 year 20%No Limit Local Agency Investment Fund (LAIF)Yes N/A 30%State Law Maximum Other Governmental Managed Investment Pools Yes N/A 30%10% per pool Money Market Mutual Funds Yes N/A 20%10% Certificates of Deposit Yes 1 year 10%5% Negotiable Certificates of Deposit Yes 5 years 10%5% Bankers' Acceptances Yes 180 days 10%5% U.S. Treasury Bills, Notes and Bonds Yes 5 years 50%No Limit U.S. Government Sponsored Enterprises Yes 5 years 60%25% Commercial Paper Yes 270 days 25%5% Commercial Medium-Term Notes Yes 5 years 15%5% 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 Government 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. 65 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 3 – Cash and Investments (Continued) D. Risk Disclosures Disclosures Related to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity, the greater the sensitivity its fair value is to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter-term and longer-term investments and by timing cash flows from 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: Less than 12 to 36 36-60 Total 12 Months Months Months Investments: Local Agency Investment Fund (LAIF)19,529,853$ 19,529,853$ -$ -$ California Asset Management Program 1,039,321 1,039,321 - - Money Market Mutual Funds 815,258 815,258 - - Negotiable Certificates of Deposit 9,288,859 1,216,380 1,448,590 6,623,889 U.S. Treasury Securities 48,334,265 11,852,839 23,640,769 12,840,657 U.S. Government Sponsored Enterprise Securities 48,785,101 9,881,086 19,899,977 19,004,038 San Diego County Investment Pool 4,006,473 4,006,473 - - Total Investments 131,799,130$ 48,341,210$ 44,989,336$ 38,468,584$ Investment Type Remaining Maturity (in Months) 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 $250,000 or less are fully insured by the Federal Deposit Insurance Corporation (FDIC), and therefore, do not seek a credit rating. Presented below is the minimum rating required by (where applicable) the Government Code, the Investment Policy, or the debt agreements, and the actual rating as of year-end for each investment type. 66 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 3 – Cash and Investments (Continued) Minimum Fair Legal AAA/ Value Rating AA+Not Rated Investments: Local Agency Investment Fund (LAIF)19,529,853$ N/A -$ 19,529,853$ California Asset Management Program 1,039,321 N/A 1,039,321 - Money Market Mutual Funds 815,258 AAA 815,258 - Negotiable Certificates of Deposit 9,288,859 N/A - 9,288,859 U.S. Treasury Securities*48,334,265 N/A - - U.S. Government Sponsored Enterprise Securities 48,785,101 N/A 48,785,101 - San Diego County Investment Pool 4,006,473 N/A 4,006,473 - T otal Investments 131,799,130$ 54,646,153$ 28,818,712$ *Exempt from rating disclosure Rating as of Year End Investment Type Disclosures Relating to Concentration of Credit Risk GASB Statement No. 40 requires disclosure by amount and issuer of investments in any one issuer that represent five percent or more of total investments. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represents five percent or more of the City's total investments are as follows: Issuer Investment Type Fair Value Federal Farm Credit Bank U.S Government Sponsored Enterprise Securities 18,136,777$ Federal Home Loan Bank U.S Government Sponsored Enterprise Securities 12,081,770 Federal Home Loan Mortgage U.S Government Sponsored Enterprise Securities 9,968,980 Federal National Mortgage Association U.S Government Sponsored Enterprise Securities 9,120,111 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. 67 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 3 – Cash and Investments (Continued) E. Investment in State Investment Pool – Local Agency Investment Fund The City is a participant in the Local Agency Investment Fund (LAIF) which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. 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 AAA by Standard & Poor's national rating agency. G. Investment in San Diego County Pooled Investment Fund The San Diego County Pooled Investment Fund (SDCPIF) is a pooled investment fund program governed by the County of San Diego Board of Supervisors and administered by the County of San Diego Treasurer and Tax Collector. Investments in SDCPIF are highly liquid as deposits and withdrawals can be made at any time without penalty. SDCPIF does not impose a maximum investment limit. The County of San Diego’s bank deposits are either Federally insured or collateralized in accordance with the California Government Code. Pool detail is included in the County of San Diego Comprehensive Annual Financial Report (CAFR). Copies of the CAFR may be obtained from the County of San Diego Auditor-Controller’s Office – 1600 Pacific Coast Highway – San Diego, CA 92101. Note 4 – Receivables At June 30, 2019, receivables consist of the following: Governmental Business-Type Activities Activities Total Accounts receivable 3,721,956$ 2,192,232$ 5,914,188$ Taxes and assessments receivable 505,778 135,220 640,998 Accrued revenues 2,919,636 25,037 2,944,673 Interest receivables 725,179 - 725,179 Total 7,872,549$ 2,352,489$ 10,225,038$ 68 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 SDWD Santa Fe Facilities 45%55%Filtration Plant 31%69%Filtered Water Reservoir 39%61%Joint Pipeline 42%58%San Dieguito Water Reservoir Note 5 – Investment in Joint Ventures Investment in joint ventures consists of the following as of June 30, 2019: Proprietary Fund Investment in Joint Ventures Cardiff Sanitary Division San Elijo Joint Facilities 33,525,279$ San Dieguito Water District R.E. Badger Joint Facilities 19,976,172 San Dieguito Water District R.E. Badger Financing Authority 659,033 20,635,205 Encinitas Sanitary Division Encina Joint Facilities 5,856,980 Total Investment in Joint Ventures 60,017,464$ A. Cardiff Sanitary Division Investment in San Elijo Joint Powers Authority (SEJPA) In 1964, Cardiff Sanitary Division (“CSD”) entered into an agreement with Solana Beach Sanitation District (“Solana Beach”) for the joint ownership, maintenance, operation, and use of a Wastewater Treatment Plant and Ocean Outfall (collectively, the "Joint Facilities"). In 1987, CSD and Solana Beach agreed to establish the San Elijo Joint Powers Authority (“SEJPA”), a separate legal entity whose function 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 Joint Facilities in exchange for a 50 percent interest in SEJPA. The Ocean Outfall is jointly owned by SEJPA (21 percent interest) and the City of Escondido (79 percent 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, 2019, CSD's share of those costs was $1,543,054, which is reported as a component of "facility operations and maintenance" in the accompanying financial statements. B. San Dieguito Water District Investment in R.E. Badger Filtration Plant and related Facilities (the "Joint Facilities") In 1967, SDWD entered into an agreement with Santa Fe Irrigation District (“Santa Fe”) for the joint ownership, maintenance, operation, and use of a water treatment plant and various facilities for the storage and delivery of potable water. During the ensuing years, the SDWD and Santa Fe have added various facilities and improvements, which are owned in different percentages depending on the type of facility and the agreements in place. The ownership percentages of these Joint Facilities are described below: 69 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 5 – Investment in Joint Ventures (Continued) B. San Dieguito Water District (Continued) Santa Fe is responsible for the operations and maintenance of the Joint Facilities as well as the related administration. The operations and maintenance costs are allocated monthly on the basis of the water used by each district, and administrative costs are allocated based on an agreed-upon cost allocation plan. For the year ended June 30, 2019, SDWD's share of those was $2,239,714, which is shown as "facility operations and maintenance" in the accompanying financial statements. Investment in R.E. Badger Water Facilities Financing Authority (the "Financing Authority") In 1999, SDWD and Santa Fe entered into a joint exercise of powers agreement and formed the Financing Authority to provide financing for the acquisition and construction of capital improvements related to the Joint Facilities. The Financing Authority subsequently issued revenue bonds for the purpose of funding those capital improvements. SDWD and Santa Fe are obligated under Installment Purchase Agreements to repay their proportionate shares of the long-term financing. The investment in the Financing Authority consists primarily of SDWD's share of the debt reserve funds held by a fiscal agent and unamortized bond discounts and issuance costs. C. Encinitas Sanitary Division Investment in Encina Water Pollution Control Facility (the "Joint Facilities") ESD is one of six member agencies with an ownership interest in the Joint Facilities. ESD owns approximately 2.7 percent of the Joint Facilities, after adjusting for the construction and upgrades to the Joint Facilities, referred to as "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, 2019, ESD's share of those costs was $685,290, which is shown as "facility operations and maintenance" in the accompanying financial statements. Note 6 – Long-Term Receivables Long-term receivables consist of loans to developers and loans to employees for the purchase of computer equipment, a program approved by the City Council to promote more efficient use of technology. At June 30, 2019, loans receivable consisted of the following: Iris Apartments 429,786$ Employee computer loans 28,400 Total 458,186$ 70 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 6 – Long-Term Receivables (Continued) 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 to the City bears simple interest at a rate of six percent 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 percent 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, 2019 was $429,786. Note 7 – Capital Assets A. Governmental Activities The summary of changes in governmental activities capital assets for the year ended June 30, 2019 is as follows: Balance Balance July 1, 2018 Additions Deletions Transfers June 30, 2019 Capital assets, not being depreciated: Land 61,862,474$ -$ -$ -$ 61,862,474$ Land easements 2,300,434 80,623 - - 2,381,057 Construction in progress 14,007,820 6,735,291 - (1,727,932) 19,015,179 Total capital assets, not being depreciated 78,170,728 6,815,914 - (1,727,932) 83,258,710 Capital assets, being depreciated: Public facilities 106,466,354 - - - 106,466,354 Vehicles, equipment and machinery 10,569,976 486,331 (207,705) 30,000 10,878,602 Infrastructure 115,707,421 - - 1,727,932 117,435,353 Total capital assets, being depreciated 232,743,751 486,331 (207,705) 1,757,932 234,780,309 Less accumulated depreciation Public facilities (35,315,341) (3,304,781) - - (38,620,122) Vehicles, equipment and machinery (6,469,461) (706,099) 166,615 (30,000) (7,038,945) Infrastructure (51,456,380) (2,548,331) - - (54,004,711) Total accumulated depreciation (93,241,182) (6,559,211) 166,615 (30,000) (99,663,778) Total capital assets being depreciated, net 139,502,569 (6,072,880) (41,090) 1,727,932 135,116,531 Governmental activities capital assets, net 217,673,297$ 743,034$ (41,090)$ -$ 218,375,241$ Depreciation expense was charged to the functions/programs of the governmental activities as follows: General government 1,223,028$ Public safety 515,742 Public works 2,763,089 Parks and recreation 1,494,629 Internal service funds 562,723 Total depreciation expense 6,559,211$ 71 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 7 – Capital Assets (Continued) B. Business-type Activities The summary of changes in business-type activities capital assets for the year ended June 30, 2019 is as follows: Balance Balance July 1, 2018 Additions Deletions Transfers June 30, 2019 Capital assets, not being depreciated: Land easements 3,300,931$ 112,389$ -$ -$ 3,413,320$ Public works facility right of use 3,378,700 - - - 3,378,700 Construction in progress 8,629,993 1,011,830 - (2,849,174) 6,792,649 Total capital assets, not being depreciated 15,309,624 1,124,219 - (2,849,174) 13,584,669 Capital assets, being depreciated: Structures and improvements 19,147,575 - - 2,022,647 21,170,222 Collection and distribution 63,727,816 76,272 - 681,220 64,485,308 Machinery and equipment 2,548,455 - - 145,307 2,693,762 Capacity rights 323,190 - - - 323,190 Total capital assets, being depreciated 85,747,036 76,272 - 2,849,174 88,672,482 Less accumulated depreciation Structures and improvements (6,240,735) (421,171) - - (6,661,906) Collection and distribution (33,632,037) (1,036,896) - - (34,668,933) Machinery and equipment (1,893,982) (227,023) - - (2,121,005) Capacity rights (144,897) (6,464) - - (151,361) Total accumulated depreciation (41,911,651) (1,691,554) - - (43,603,205) Total capital assets being depreciated, net 43,835,385 (1,615,282) - 2,849,174 45,069,277 Business-type activities capital assets, net 59,145,009$ (491,063)$ -$ -$ 58,653,946$ Depreciation expense was charged to the functions/programs of the business-type activities as follows: Cardiff Sanitary Division 389,390$ San Dieguito Water District 831,957 Encinitas Sanitary Division 369,669 Non-major Affordable Housing 100,538 Total 1,691,554$ 72 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations A summary of changes in long-term liabilities for the year ended June 30, 2019 is as follows: Balance Balance Due Within Due in More July 1, 2018 Additions Deletions June 30, 2019 One Year Than One Year Governmental Activities: Capital Leases: 2008 Civic Center Roof Replacement 831,133$ -$ (154,299)$ 676,834$ 160,045$ 516,789$ 2012 Fire Apparatus 91,335 - (91,335) - - - 2013 Fire Apparatus 164,653 - (81,547) 83,106 83,106 - 2017 Fire Apparatus 546,438 - (85,511) 460,927 87,663 373,264 Bonded Debt: 2013 Community Park Bonds 6,255,000 - (345,000) 5,910,000 350,000 5,560,000 add: original issue premium 87,600 - (8,760) 78,840 - 78,840 2014 Moonlight Beach Tower (Series A)2,900,000 - (70,000) 2,830,000 70,000 2,760,000 less: original issue discount (28,003) - 1,037 (26,966) - (26,966) 2014 Pacific View (Series B)9,760,000 - (205,000) 9,555,000 210,000 9,345,000 less: original issue discount (140,580) - 5,206 (135,374) - (135,374) 2015 Library Refunding Bonds 14,660,000 - (530,000) 14,130,000 555,000 13,575,000 add: original issue premium 698,669 - (36,772) 661,897 - 661,897 2017 Park Refunding Bonds 11,375,000 - (645,000) 10,730,000 680,000 10,050,000 add: original issue premium 1,263,121 - (97,164) 1,165,957 - 1,165,957 Claims payable 2,513,481 425,000 (285,739) 2,652,742 1,856,919 795,823 Compensated absences 2,019,270 1,934,103 (1,767,633) 2,185,740 1,180,308 1,005,432 Total governmental activities 52,997,117 2,359,103 (4,397,517) 50,958,703 5,233,041 45,725,662 Business-type Activities: 2011 CSD Note Payable to SEJPA 781,345 - (663,845) 117,500 57,500 60,000 add: original issue premium 103,202 - (34,400) 68,802 - 68,802 2017 CSD Note Payable to SEJPA 11,057,500 - - 11,057,500 217,500 10,840,000 add: original issue premium 1,018,248 - (35,112) 983,136 - 983,136 2007 SDWD Note Payable Badger 3,820,000 - (475,000) 3,345,000 490,000 2,855,000 2004 EHA Housing Note Payable 1,173,058 - (81,429) 1,091,629 82,715 1,008,914 2014 SDWD Water Revenue Bonds 4,110,000 - (625,000) 3,485,000 645,000 2,840,000 add: original issue premium 446,231 - (74,373) 371,858 - 371,858 Compensated absences (SDWD)128,043 142,133 (122,640) 147,536 81,046 66,490 Compensated absences (Affordable Housing)13,179 9,507 (10,303) 12,383 6,787 5,596 Total business-type activities 22,650,806 151,640 (2,122,102) 20,680,344 1,580,548 19,099,796 Total long-term obligations 75,647,923$ 2,510,743$ (6,519,619)$ 71,639,047$ 6,813,589$ 64,825,458$ 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 years, an interest rate of 3.69 percent, and semi-annual payments of $91,778. The project was completed during Fiscal Year 2008-09, and the final payment is due in Fiscal Year 2022-23. The total cost of the project was $3,543,258. 73 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) The annual debt service requirements for the lease outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 160,045$ 23,511$ 183,556$ 2021 166,004 17,552 183,556 2022 172,186 11,370 183,556 2023 178,599 4,957 183,556 Total 676,834$ 57,390$ 734,224$ 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 percent, and annual payments of $84,693. The lease is accounted for as a capital lease, as the City will be purchasing the unit at the maturity of the lease in Fiscal Year 2019-20. The annual debt service requirements for the lease outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 83,106$ 1,587$ 84,693$ Total 83,106$ 1,587$ 84,693$ 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 percent, and annual payments of $98,641. The lease is accounted for as a capital lease, as the City will be purchasing the unit at the maturity of the lease in Fiscal Year 2023-24. 74 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2017 Fire Apparatus Lease (Continued) The annual debt service requirements for the lease outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 87,663$ 10,978$ 98,641$ 2021 89,868 8,773 98,641 2022 92,129 6,512 98,641 2023 94,446 4,195 98,641 2024 96,821 1,819 98,640 Total 460,927$ 32,277$ 493,204$ 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$ (1,429,112)$ 2,114,146$ Fire apparatus and equipment 1,189,504 (355,649) 833,855 2013 Lease Revenue Refunding Bonds (Public Park Construction Project) On March 20, 2013, the Encinitas Public Financing Authority, a blended component unit of the City, 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 $510,000. Interest is due and payable semi-annually at rates ranging from 2.00 percent to 3.00 percent. The bonds were issued at a premium, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are payable from lease payments to be made by the City of Encinitas for the right to use certain real property and related improvements pursuant to a lease agreement dated March 1, 2013 between the City as lessee and the Authority as lessor. The bonds are secured by pledged revenue consisting of all lease revenue paid by the City of Encinitas in addition to any assets held in trust for the purpose of paying the lease payments. The Authority has a leasehold on the property until all the terms of the lease agreement are fulfilled. The refunding bonds are payable from any source of legally available funds of the City. The bonds are subject to federal arbitrage requirements. 75 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2013 Lease Revenue Refunding Bonds (Public Park Construction Project) (Continued) The annual debt service requirements for the 2013 Lease Revenue Refunding Bonds outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 350,000$ 164,806$ 514,806$ 2021 360,000 156,818 516,818 2022 365,000 148,206 513,206 2023 375,000 138,722 513,722 2024 390,000 127,950 517,950 2025-2029 2,120,000 455,250 2,575,250 2030-2034 1,950,000 119,250 2,069,250 Total 5,910,000$ 1,311,002$ 7,221,002$ The bonds maturing on or after October 1, 2023 are subject to optional redemption on any date on or after October 1, 2022, without a premium. 2014 Lease Revenue Bonds (Pacific View Property and Moonlight Beach Lifeguard Tower) On November 26, 2014, the Encinitas Public Financing Authority (on behalf of the City of Encinitas) issued its 2014 Lease Revenue Bonds, Series A tax-exempt (Moonlight Beach Lifeguard Tower) and Series B taxable (Pacific View Property) in the amounts of $3,095,000 and $10,365,000, respectively, to provide funds for the purpose of improving the Moonlight Beach Lifeguard Tower and financing the acquisition of a property known as the Pacific View Property. 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 $245,000. The term bonds mature through 2045 and are subject to mandatory sinking requirements. Interest is due and payable semi-annually at rates ranging from 2.00 percent to 3.50 percent. The bonds were issued at a discount, which is being amortized over the life of the bonds on a straight-line basis in the government-wide financial statements. The bonds are payable from lease payments to be made by the City of Encinitas for the right to use certain real property and related improvements pursuant to a lease agreement dated November 1, 2014 between the City as lessee and the Authority as lessor. The bonds are secured by pledged revenue consisting of all lease revenue paid by the City of Encinitas in addition to any assets held in trust for the purpose of paying the lease payments. The Authority has a leasehold on the property until all the terms of the lease agreement are fulfilled. The refunding bonds are payable from any source of legally available funds of the City. The bonds are subject to federal arbitrage requirements. 76 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2014 Lease Revenue Bonds (Pacific View Property and Moonlight Beach Lifeguard Tower) (Continued) The annual debt service requirements for the 2014 Lease Revenue Bonds, Series A Moonlight Beach Lifeguard Tower bonds outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 70,000$ 97,131$ 167,131$ 2021 70,000 95,381 165,381 2022 75,000 92,831 167,831 2023 75,000 89,831 164,831 2024 80,000 86,731 166,731 2025-2029 445,000 396,994 841,994 2030-2034 510,000 322,484 832,484 2035-2039 610,000 223,447 833,447 2040-2044 730,000 101,541 831,541 2045-2049 165,000 3,094 168,094 Total 2,830,000$ 1,509,465$ 4,339,465$ The annual debt service requirements for the 2014 Lease Revenue Bonds, Series B Pacific View Property bonds outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 210,000$ 432,033$ 642,033$ 2021 215,000 426,556 641,556 2022 225,000 420,225 645,225 2023 230,000 413,113 643,113 2024 240,000 405,475 645,475 2025-2029 1,335,000 1,881,838 3,216,838 2030-2034 1,655,000 1,559,694 3,214,694 2035-2039 2,105,000 1,108,150 3,213,150 2040-2044 2,710,000 509,500 3,219,500 2045-2049 630,000 15,750 645,750 Total 9,555,000$ 7,172,334$ 16,727,334$ 77 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 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 which were originally used to finance capital projects that included the construction of the Encinitas Library and the Encinitas Community Park, in addition to rehabilitating three fire stations and the public works facility. 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 percent to 5.0 percent. Annual debt service is approximately $1,065,000 through 2036. The bonds are subject to federal arbitrage requirements. The annual debt service requirements for the 2015 Library Refunding Bonds outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 555,000$ 504,706$ 1,059,706$ 2021 580,000 476,331 1,056,331 2022 610,000 446,581 1,056,581 2023 640,000 415,331 1,055,331 2024 675,000 382,456 1,057,456 2025-2029 3,745,000 1,506,256 5,251,256 2030-2034 4,355,000 886,919 5,241,919 2035-2039 2,970,000 161,578 3,131,578 Total 14,130,000$ 4,780,158$ 18,910,158$ 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 which were issued for the purpose of refinancing its 2001 Lease Revenue Bonds, Series A. The refunded 2001 Lease Revenue Bonds, Series A were used to finance the acquisition of real property (Hall Property) now known as the Encinitas Community Park. 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 percent to 5.0 percent. Annual debt service is approximately $1,140,000 through 2031. The bonds are subject to federal arbitrage requirements. 78 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) A. Governmental Activities (Continued) 2017 Park Refunding Bonds (Continued) The annual debt service requirements for the 2017 Park Refunding Bonds outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 680,000$ 461,750$ 1,141,750$ 2021 715,000 427,750 1,142,750 2022 750,000 392,000 1,142,000 2023 785,000 354,500 1,139,500 2024 825,000 315,250 1,140,250 2025-2029 4,785,000 923,800 5,708,800 2030-2034 2,190,000 99,000 2,289,000 Total 10,730,000$ 2,974,050$ 13,704,050$ 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 percent.) Annual debt service is approximately $690,000 through 2019, with smaller repayments due in 2020 and 2021. The average rate on the borrowing is approximately 2.0 percent. The bonds were issued at a premium, which is being amortized over the life of the bonds on a straight-line basis. The issue also resulted in deferred refunding costs, which are also being amortized over the life of the bonds on a straight-line basis. CSD has pledged its net revenues to pay for this outstanding obligation. Net revenues are defined as gross revenues less operations and maintenance costs, excluding depreciation, amortization and other non-cash type charges. CSD has covenanted to budget for net revenues each fiscal year of at least 110 percent of annual debt service. During the year ended June 30, 2019, principal and interest paid on the 2011 Note Payable was $693,634 and net revenue was $2,822,884, or 407 percent of annual debt service. Management of CSD believes it is in compliance with these covenants for Fiscal Year 2018-19. 79 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) B. Business-Type Activities 2011 CSD Note Payable to San Elijo Joint Powers Authority (SEJPA) (Continued) The annual debt service requirements for the 2011 CSD Note Payable to San Elijo Joint Powers Authority outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 57,500$ 3,234$ 60,734$ 2021 60,000 1,710 61,710 Total 117,500$ 4,944$ 122,444$ covenants for Fiscal Year 2018-19. percent of annual debt service. Management of CSD believes it is in compliance with these interest paid on the 2017 Note Payable was $451,388 and net revenue was $2,822,884, or 625 2017 Note Payable as of June 30, 2019 is $18,722,710. During the year ended June 30, 2019, least 1.3 times the annual debt service. Total principal and interest remaining to be paid on the shall produce gross revenues sufficient in each fiscal year to provide system revenues equal to at to collect its system revenues which after allowances for contingencies and error in the estimates, collection, treatment, reclamation, recycling, and disposal of wastewater. Encinitas has covenanted are defined as gross revenues less operations and maintenance costs that are related to the Encinitas has pledged its system revenues to pay for this outstanding obligation. System revenues issued at a premium, which is being amortized over the life of the bonds on a straight-line basis. through 2047. The average rate on the borrowing is approximately 2.5 percent. The bonds were approximately $451,000 through 2019 with larger repayments of approximately $670,000 from 2020 $11,057,500 of the total borrowing amount of $22,115,000 (50 percent). Annual debt service is Series 2017 Revenue Bonds. CSD is responsible for the repayment of the loan in the amount of 2017 as a successor to the CSD to assist in the financing of the CSD’s respective share of the unit, the CSD. The City of Encinitas entered into a Series 2017 Loan Agreement dated June 1, issuance. The 2017 revenue bonds are not the obligation of the City of Encinitas nor its component facilities and improvements as part of SEJPA’s capital improvement plan and certain costs of Solana Beach) issued 2017 Revenue Bonds (Clean Water Projects) for the purpose of funding On July 6, 2017 SEJPA, on behalf of its members (the Cardiff Sanitary Division and the City of 2017 CSD Note Payable to San Elijo Joint Powers Authority (SEJPA) 80 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2017 CSD Note Payable to San Elijo Joint Powers Authority (SEJPA) (Continued) The annual debt service requirements for the 2017 CSD Note Payable to SEJPA outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 217,500$ 451,388$ 668,888$ 2021 225,000 444,863 669,863 2022 230,000 438,113 668,113 2023 237,500 431,213 668,713 2024 245,000 424,088 669,088 2025-2029 1,407,500 1,937,563 3,345,063 2030-2034 1,785,000 1,556,563 3,341,563 2035-2039 2,210,000 1,134,219 3,344,219 2040-2044 2,645,000 696,900 3,341,900 2045-2049 1,855,000 150,300 2,005,300 Total 11,057,500$ 7,665,210$ 18,722,710$ 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 percent to 4.5 percent. Annual debt service is approximately $630,000 through 2028. The annual debt service requirements for the 2007 SDWD Note Payable to R.E. Badger Water Facilities Financing Authority outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 490,000$ 133,619$ 623,619$ 2021 525,000 111,465 636,465 2022 545,000 89,396 634,396 2023 570,000 66,043 636,043 2024 595,000 40,915 635,915 2025-2029 620,000 13,950 633,950 Total 3,345,000$ 455,388$ 3,800,388$ 81 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 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 percent to 4.0 percent. 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 $2,012,280 less than the old debt. The annual debt service requirements for the 2014 SDWD Water Refunding Bonds outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 645,000$ 126,500$ 771,500$ 2021 665,000 100,300 765,300 2022 695,000 73,100 768,100 2023 725,000 44,700 769,700 2024 755,000 15,100 770,100 Total 3,485,000$ 359,700$ 3,844,700$ 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, 2019, is $3,844,700. During the year ended June 30, 2019 principal and interest paid was $1,401,694 and net revenue was $4,228,613, or 302 percent of annual debt service. SDWD has covenanted to budget for net revenues each fiscal year of at least 115 percent of combined annual debt service. SDWD’s management believes it is in compliance with these covenants for Fiscal Year 2018-19. 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 are due and payable monthly. Annual principal installments range from $52,417 in 2014 to $98,938 in 2031. The note bears interest at 90 percent of the ten-year US Treasury note, adjustable every six years. The EHA is solely responsible for repayment of this note. 82 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 8 – Long-Term Obligations (Continued) B. Business-Type Activities (Continued) 2004 Encinitas Housing Authority (EHA) Note Payable (Continued) The annual debt service requirements for the 2004 Encinitas Housing Authority Note Payable outstanding at June 30, 2019 are as follows: Year Ending June 30 Principal Interest Total 2020 82,715$ 17,164$ 99,879$ 2021 84,115 15,764 99,879 2022 85,492 14,388 99,880 2023 86,891 12,989 99,880 2024 88,282 11,598 99,880 2025-2029 463,701 35,696 499,397 2030-2034 200,433 3,476 203,909 Total 1,091,629$ 111,075$ 1,202,704$ Note 9 – Interfund Receivables, Payable and Transfers A. Due To and From Other Funds Individual interfund receivables and payables at June 30, 2019 were as follows: Due from Due to Other Funds Other Funds Govermental Funds: General Fund 2,761,121$ -$ Capital Improvements Capital Projects Fund 13,883,324 - Infrastructure Improvements Special Revenue Fund 16,309,027 - 266,003 - 69,415 Total 16,644,445$ 16,644,445$ 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. Non-major Affordable Housing Enterprise Fund Enterprise Funds: Non-major Governmental Funds 83 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 9 – Interfund Receivables, Payable and Transfers (Continued) B. Transfers In and Out Transfers in and out between funds for the year ended June 30, 2019 were as follows: Transfers In Transfers Out General Fund Infrastructure Improvements 1,466,988$ General Fund Non-Major Governmental Funds 120,083 1,587,071 Infrastructure Improvements Capital Projects Fund 148,313 Capital Projects Fund Infrastructure Improvements 4,949,389 Capital Projects Fund Non-Major Governmental Funds 2,007,319 Capital Projects Fund Non-Major Proprietary Fund 26,894 Capital Projects Fund General Fund 11,956,563 18,940,165 Non-Major Governmental Funds General Fund 4,394,395 Non-Major Governmental Funds Capital Projects Fund 179,843 4,574,238 Internal Service Funds General Fund 2,075,229 Non-Major Proprietary Fund General Fund 43,538 Total 27,368,554$ Transfers into the General Fund consist of funds from the State Gasoline Tax, Development Impact Fees and a reimbursement from a Federal award. The City 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. The City's Development Impact Fee Funds transfer funds to the General Fund 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 General Fund was reimbursed by the Infrastructure Improvements Special Revenue Fund for an emergency repair that occurred in FY 2016-17 and awarded a Federal grant in FY 2018-19. Transfers into the Capital Improvements Capital Projects Fund represent funds from other governmental funds for capital expenditures. All capital projects are executed and expended through the Capital Improvements Capital Projects Fund. Transfers into the non-major governmental funds represent General Fund subsidies for the Senior Nutrition Program, the Community Development Block Grant (CDBG), the Section 8 Housing Program, the Home Program, and the Wiro Park Landscape and Lighting District. In 1998, the Council increased the Transient Occupancy Tax (TOT) from eight percent to ten percent. 84 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 9 – Interfund Receivables, Payable and Transfers (Continued) B. Transfers In and Out (Continued) The additional two percent of TOT revenue increase is transferred to the Coastal Zone Management fund for beach and sand replenishment and stabilization projects. The transfers in to the non-major 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. The transfers into the non-major governmental funds also include a transfer for future open space acquisition. Transfers into the Internal Service Funds represent the City’s annual contribution from the General Fund to the Self Insurance (Risk Management) Fund. The contribution is not mandated and is established by the City Council during the annual budget process. In addition, the General Fund also contributes toward vehicle replacement funds annually. 85 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 10 – Fund Balance and Net Position Classifications The City classifies fund balances, as shown on the Balance Sheet - Governmental Funds as of June 30, 2019 as follows: Capital Infrastructure Improvements Improvements Other General Capital Projects Special Revenue Governmental Fund Fund Fund Funds Totals Nonspendable: Inventory and prepaid items 238,428$ -$ -$ -$ 238,428$ Long-term receivable 28,400 - - - 28,400 Total nonspendable 266,828 - - - 266,828 Restricted: Capital projects - 25,576,702 - - 25,576,702 Street maintenance and improvements - - - 1,437,298 1,437,298 Cable Franchise PEG funds - - - 172,886 172,886 Environmental initiatives - - - 1,569,770 1,569,770 Affordable housing - - - 15,082 15,082 Donations - - - 124,939 124,939 Parkland and open space - - - 1,826,204 1,826,204 Traffic mitigation - - - 1,217,759 1,217,759 Flood control - - - 332,311 332,311 Lighting and landscaping assessments - - - 2,973,748 2,973,748 Law enforcement - - - 82,257 82,257 Sand management - - 1,105,029 - 1,105,029 Debt service 383 - - 1,157 1,540 Total restricted 383 25,576,702 1,105,029 9,753,411 36,435,525 Committed: Capital projects - 24,412,850 - - 24,412,850 Budget stabilization 1,545,909 - - - 1,545,909 Operating reserve 13,999,980 - - - 13,999,980 Total committed 15,545,889 24,412,850 - - 39,958,739 Unassigned 8,609,231 - (15,438,135) - (6,828,904) Total Fund Balances 24,422,331$ 49,989,552$ (14,333,106)$ 9,753,411$ 69,832,188$ Major Funds 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: 86 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 10 – Fund Balance and Net Position Classifications (Continued) Categorization of Reserves under Adopted City Policies (Continued) 1) Contingency Reserve – represents funds that are committed for use only in exceptional circumstances such as catastrophic events that could negatively impact the financial condition of the City. Funding represents 20 percent of the following year’s operating expenditures, and no drawdowns have ever been executed from 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, 2019 was $13,999,980. 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 two to five percent of the following 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 committed as of June 30, 2019 was $1,545,909. 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, 2019 was $8,609,231. Note 11 – 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 workers’ 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. 87 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 11 – Risk Management (Continued) The members do not hold any ownership stake in CSAC EIA and have no claims to revenue or assets upon withdrawal. 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 $50 million dollars. All members jointly share risk 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 workers’ compensation coverage between $5,000,000 and statutory limits is provided through contract reinsurance. City departments contribute premiums to the Self-Insurance Fund based on annual rates set for each work class. Changes in the balances of claims payable for liability and workers’ compensation during the past two years are as follows: Year Ended Year Ended June 30, 2019 June 30, 2018 Claims payable, beginning of year 2,513,481$ 2,113,535$ Estimated incurred claims, net 425,000 1,619,837 Claims payments or closures (285,739) (1,219,891) Claims payable, end of year 2,652,742$ 2,513,481$ A. 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 $91,408 for the year ended June 30, 2019. 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, 2019, 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, 2019 and did not pay any claims during the fiscal year. 88 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 12 – 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 CSAC EIA or LAWCX for self-insurance and insurance coverage (See Note 11). B. Grants Amounts received or owed 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. C. Construction Commitments As of June 30, 2019, the City had remaining contractual commitments totaling approximately $3.4 million for capital projects related to its governmental and business-type activities. The more significant capital commitments include approximately $2.0 million for street improvement projects, approximately $0.9 million for park improvements, and $0.2 million for CSD pump station upgrades. There were also commitments for drainage projects, emergency repairs, and pipeline rehabilitation- capacity improvement projects for approximately $0.3 million. Note 13 – California Public Employees’ Retirement System The information in the following table includes the aggregate total pension related items for the Miscellaneous and Safety plans of the City and the Miscellaneous plan of SDWD: Miscellaneous Safety SDWD Total Net Pension Liabilities 23,386,762$ 23,125,137$ 7,073,051$ 53,584,950$ Deferred Outflow of Resources 6,254,487 5,888,331 1,453,178 13,595,996 Deferred Inflow of Resources 1,690,500 1,468,326 423,157 3,581,983 Pension Expense 3,551,863 2,855,187 717,436 7,124,486 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 3. The Miscellaneous Plan of the San Dieguito Water District (SDWD Plan) 89 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) 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, 2017 Annual Actuarial Valuation Report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website under “Forms and Publications.” 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 Employees’ 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, California 95814. SDWD Plan 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 District participates with other public agencies that each have fewer than 100 active members and share the same benefit formula. The Plan is administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statutes within the Public Employee’s Retirement Law. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office – 400 P Street, Sacramento, California 95814. 90 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) Benefits Provided The City's Miscellaneous Plan is an agent multiple-employer plan that is part of the City’s portion of CalPERS. The Miscellaneous Plan provides employees hired before October 13, 2012 with a Tier 1 benefit equal to 2.7 percent 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 two percent at 60 years 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 two percent 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 three percent at 55 years of age, calculated based on the single highest year of qualifying compensation. Effective June 23, 2012, the City provides for modifications to the pension benefit formula for employees hired on or after the effective date (the "Tier 2 fire safety plan".) The three percent 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 percent 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 three percent 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. The SDWD Plan provides employees hired before October 13, 2012 with a Tier 1 benefit equal to 2.7 percent 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 two percent 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 percent 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. 91 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) Employees Covered by Benefit Terms As of the measurement date June 30, 2018, the following employees were covered by the benefit terms for the City’s plans: Miscellaneous Safety SDWD Active employees 150 64 22 Inactive employees or beneficiaries currently receiving benefits 146 76 32 Inactive employees entitled to, but not yet receiving benefits 158 54 8 Total 454 194 62 Contributions Miscellaneous Plan actuarial methods and assumptions adopted by the CalPERS Board of Administration. employer contribution rates are calculated and established annually by CalPERS, based on the percent for fire members and from 11.990 percent to 17.875 percent for lifeguard members. The The employer contribution rates for Fiscal Year 2017-18 ranged from 12.729 percent to 19.520 remaining amounts necessary to fund the benefits for its members (the “employer contributions”). salary (the “employee contribution”). The City is required to contribute the actuarially determined Active fire and lifeguard members are required to contribute 10.5 percent of their annual covered Safety Plan methods and assumptions as adopted by the CalPERS Board of Administration. contribution rates are calculated and established annually by CalPERS, based on the actuarial rate for Fiscal Year 2017-18 was 10.007 percent for miscellaneous members. The employer the benefits for its members (the "employer contributions"). The employer normal cost contribution The City is required to contribute the actuarially determined remaining amounts necessary to fund Employer Contributions requirements are established by State statute. and 6.25 percent of their annual covered salary, respectively. The employee contribution accounts. Members receiving the Tier 2 or Tier 3 benefits are required to contribute seven percent miscellaneous members contribute the full eight percent, which is credited to their individual covered salary (the "employee contribution"). Effective October 13, 2012, all City Tier 1 Active City Tier 1 miscellaneous members are required to contribute eight percent of their annual Employee Contributions 92 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) SDWD Plan Active members in the Tier 1 Plan are required to contribute eight percent of their annual covered salary (the "employee contribution"). Effective October 13, 2012, all Tier 1 members contribute the full eight percent, which is credited to their individual accounts. Members receiving the Tier 2 or Tier 3 benefits are required to contribute seven percent, and 6.25 percent 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 rates for the year ended June 30, 2018 for Tier 1, Tier 2, and PEPRA employees were 11.675 percent, 7.200 percent, and 6.533 percent, respectively. 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. Net Pension Liability Actuarial Methods and Assumptions Used to Determine Total Pension Liability (All Plans) For the measurement period ended June 30, 2018, the total pension liability was determined by rolling forward the June 30, 2017 total pension liability. The June 30, 2017 and June 30, 2018 total pension liabilities were based on the following actuarial methods and assumptions: Actuarial Methods and Assumptions Used to Determine Total Pension Liability Actuarial Cost Method No. 68 Actuarial Assumptions: Discount Rate 7.15% Inflation Salary Increases Mortality Rate Table Post Retirement Benefit Increase Entry Age Normal in accordance with the requirements of GASB 2.50% Varies by Entry Age and Service Derived using CalPERS' Membership Data for all funds Contract cost of living adjustment (COLA)up to 2.50%until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.50% thereafter. Discount Rate The long-term expected discount rate of 7.15 percent is applied to all plans in the Public Employees’ Retirement Fund (PERF). The cash flows used in the testing were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. The stress test results are presented in a detailed report titled “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB No. 68 section. 93 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) Discount Rate (Continued) The long-term expected rate of return on pension plan investments was determined using a building-block method in which 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, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first ten years) and the long-term (11+ 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 rounded 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 equal to the single equivalent rate calculated above and rounded down to the nearest quarter of one percent. The table below reflects the 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 expense. New Strategic Real Return Real Return Asset Class 1 Allocation 1 - 10 2 11 + 3 Global equity 50.0%4.80%5.98% Fixed income 28.0 1.00 2.62 Inflation assets -0.77 1.81 Private equity 8.0 6.30 7.23 Real assets 13.0 3.75 4.93 Liquidity 1.0 -(0.92) 2 An expected inflation of 2.00 percent was used for this period. 3 An expected inflation of 2.92 percent was used for this period. 1 In the CalPER's CAFR, fixed income is included in global debt securities; liquidity is included in short-term investments; inflation assets are included in both global equity securities and global debt securities. 94 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (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 Miscellaneous Plan: Total Pension Plan Fiduciary Net Net Pension Liability Position Liability/(Asset) (a)(b)(c) = (a) - (b) Balance at June 30, 2017 (Valuation Date)103,867,707$ 77,828,630$ 26,039,077$ Changes Recognized for the Measurement Period: Service Cost 2,258,659 - 2,258,659 Interest on the total pension liability 7,270,761 - 7,270,761 Changes of benefit terms - - - Difference between expected and actual experience (486,531) - (486,531) Changes of assumptions (739,046) - (739,046) Plan to plan resource movement - (196) 196 Contributions from the employer - 3,755,605 (3,755,605) Contributions from employees - 992,534 (992,534) Net investment income, net of administrative expense - 6,559,803 (6,559,803) Benefit payments, including refunds of employee contributions (4,164,974) (4,164,974) - Administrative expense - (121,278) 121,278 Other expense - (230,310) 230,310 Net Changes during July 1, 2017 to June 30, 2018 4,138,869$ 6,791,184$ (2,652,315)$ Balance at June 30, 2018 (Measurement Date)108,006,576$ 84,619,814$ 23,386,762$ Increase (Decrease) As of June 30, 2019, the City reported net pension liabilities for its proportionate shares of the net pension liability of the Safety Plan as follows: Plan Total Plan Plan Net Pension Fiduciary Pension Liability Net Position Liability/(Asset) Balance at June 30, 2017 (Valuation date)90,584,327$ 67,653,362$ 22,930,965$ Balance at June 30, 2018 (Measurement date)92,660,835 69,535,698 23,125,137 Net changes during 2017-2018 2,076,508$ 1,882,336$ 194,172$ 95 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) 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 Plan is measured as of June 30, 2018, 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, 2017 rolled forward to June 30, 2018 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 City’s proportionate share of the net pension liability for the Safety Plan as of measurement date June 30, 2018 was as follows: Safety Plan Proportionate share at June 30, 2017 0.38377% Proportionate share at June 30, 2018 0.39412% Change - Increase/(Decrease)0.01035% As of June 30, 2019, 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 June 30, 2017 23,132,699$ 15,991,467$ 7,141,232$ Balance at June 30, 2018 23,172,973 16,099,922 7,073,051 Net changes during 2017-2018 40,274$ 108,455$ (68,181)$ 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 Plan is measured as of June 30, 2018, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2017 rolled forward to June 30, 2018 using standard update procedures. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The City’s proportionate share of the net pension liability for the SDWD Plan as of June 30 was as follows: Proportionate share at June 30, 2017 0.18116% Proportionate share at June 30, 2018 0.18768% Change - Increase/(Decrease)0.00652% 96 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Miscellaneous Plan, Safety Plan, and SDWD Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.15 percent) or one percentage point higher (8.15 percent) than the current rate: Discount Rate - 1%Current Discount Discount Rate + 1% (6.15%)Rate (7.15%)(8.15%) City Miscellaneous 38,576,077$ 23,386,762$ 10,872,640$ City Safety 35,899,027 23,125,137 12,659,221 SDWD 10,207,687 7,073,051 4,485,461 84,682,791$ 53,584,950$ 28,017,322$ Plan's Net Pension Liability/(Asset) Pension Plan Fiduciary Net Position Detailed information about the Miscellaneous, Safety, and SDWD Plans’ fiduciary net position is available in a separately issued CalPERS financial report. Amortization of Deferred Outflows and Inflows of Resources Under GASB No. 68, 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: Net difference between projected and actual earnings on pension plan investments 5 years All other amounts Straight-line amortization over the expected average remaining service lifetime (EARSL) of all members that are provided with benefits (active, inactive and retired) as of the beginning of the measurement period. 97 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) Pension Expense and Deferred Outflows/Inflows of Resources Related to Pension For the year ended June 30, 2019, the City recognized pension expense of $3,551,863, $2,855,187, and $717,436 for the Miscellaneous, Safety and SDWD plans, respectively. At June 30, 2019, the City reported deferred outflows resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Deferred Deferred Outflows Inflows Outflows Inflows of Resources of Resources of Resources of Resources Contribution made after the measurement date 3,637,225$ -$ 2,457,135$ -$ Difference between expected and actual experience - (1,182,406) 494,996 - Difference between employer's contribution and proportionate share of contribution - - - (1,229,853) Changes of assumptions 2,497,798 (508,094) 1,962,853 - Net difference between projected and actual earning on pension plan investments 119,464 - 156,568 - Adjustments due to difference in proportions - - 816,779 (238,473) Total 6,254,487$ (1,690,500)$ 5,888,331$ (1,468,326)$ Miscellaneous Plan Safety Plan The $3,637,225 and $2,457,135 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Deferred Outflows/Deferred Outflows/ (Inflows) of (Inflows) of Resources Resources Measurement Period Miscellaneous Safety Ending June 30 Plan Plan 2019 1,686,148$ 1,641,454$ 2020 298,568 1,002,546 2021 (854,327) (520,954) 2022 (203,627) (160,176) 2023 - - Thereafter - - 926,762$ 1,962,870$ 98 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 13 – California Public Employees’ Retirement System (Continued) For the year ended June 30, 2019, the City recognized pension expense of $717,436 for the SDWD Plan. At June 30, 2019 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred outflows Deferred inflows of Resources of Resources Contribution made after the measurement date 585,749$ -$ Difference between expected and actual experience 179,031 - Changes of assumptions 608,728 - Net difference between projected and actual earnings on pension plan investments 34,967 - Difference between employer's actual contributions and proportionate share of contributions - (185,152) Adjustments due to difference in proportions 44,703 (238,005) Total 1,453,178$ (423,157)$ The $585,749 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Measurement Period Pension Ending June 30 Expense 2019 543,137$ 2020 258,339 2021 (293,584) 2022 (63,620) 2023 - Thereafter - 444,272$ Note 14 – 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, 2017 and was used to determine the June 30, 2018 measurement date amounts. 99 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) A. Summary The information in the following table includes the aggregate total OPEB related items for the City and SDWD: City SDWD Total Net OPEB Liabilities 8,748,893$ 287,106$ 9,035,999$ Deferred Outflow of Resources 1,269,129 66,983 1,336,112 Deferred Inflow of Resources 201,027 9,295 210,322 OPEB Expense 752,650 32,867 785,517 B. 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 defined benefit agent multiple-employer 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’s financial obligation is to provide the CalPERS minimum required employee contribution ($133 per month in 2018, $136 per month in 2019, and in future years, indexed to medical CPI increases) except for former Encinitas Fire Protection District employees hired on or before March 15, 1995 who receive full retiree health benefits for both the employee and their dependents. The City does not provide a retiree contribution for dental, vision, or life insurance benefits. The City's OPEB plan does not issue a separate stand-alone report. The City has elected to join the California Employers' Retiree Benefit Trust (the "Trust") in accordance with GASB Statement No. 75, which provides a means to fund the annual OPEB costs, referred to as the Actuarially Determined Contribution (ADC). The ADC includes the normal cost (current accrual for benefits being earned) plus an amortization of the unfunded accrued liability or net OPEB liability over 15 years on level-percentage of pay basis. The City’s funding policy is to pre-fund the ADC through the Trust. Eligibility Employees of the City are eligible for retiree health benefits if they retire from the City and commence pension benefits under PERS (typically on or after age 50 with at least five years of PERS eligible service). Membership in the plan consisted of the following at June 30, 2017, the date of the latest actuarial valuation: Active plan members 206 Inactive plan members or beneficiaries currently receiving benefits 88 Total 294 100 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) B. City of Encinitas Retiree Health Plan (Continued) Net OPEB Liability The City’s net OPEB liability was measured as of June 30, 2018. The total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2018. The net OPEB liability at June 30, 2019 was: Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability/(Asset) (a)(b)(c) = (a) - (b) Balance at June 30, 2017 12,639,192$ 3,494,061$ 9,145,131$ Changes Recognized for the Measurement Period: Service Cost 190,479 - 190,479 Interest on the total OPEB liability 867,343 - 867,343 Employer contributions - 1,102,937 (1,102,937) Net investment income - 358,109 (358,109) Benefit payments, including refunds of member contributions (878,114) (878,114) - Administrative expenses - (2,366) 2,366 Other expenses - (4,620) 4,620 Net Changes during July 1, 2017 to June 30, 2018 179,708$ 575,946$ (396,238)$ Balance at June 30, 2018 (Measurement Date)12,818,900$ 4,070,007$ 8,748,893$ Increase (Decrease) Actuarial Assumptions The net OPEB liability in the June 30, 2018 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Actuarial Cost Method Actuarial Assumptions: Discount Rate 7.00% Inflation 2.75% Wage Inflation 3% per annum, in aggregate Investment Rate of Return Mortality Rate 1 Pre-retirement Turnover 2 Healthcare Trend Rate Entry Age Normal 7.00%, assuming actuarially determined contributions funded into CERBT Investment Strategy 1. Derived using CalPERS' Membership Data for all funds Derived using CalPERS' Membership Data for all funds Based on recent premium experience assumng 1%-2% increase due to market trends then reduced to a rate reflecting medical price inflation. 101 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) B. City of Encinitas Retiree Health Plan (Continued) Actuarial Assumptions (Continued) 1 Pre-retirement mortality information was derived from data collected during 1997 to 2011 CalPERS Experience Study dated January 2014 and post-retirement mortality information was derived from the 2007-2011 CalPERS Experience Study. The Experience Study Reports may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications. 2 The pre-retirement turnover information was developed based on CalPERS' specific data. For more details, please refer to the 2007 to 2011 Experience Study Report. The Experience Study Reports may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications. The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial experience study for the period July 1, 2017 to June 30, 2018. Discount Rate The discount rate used to measure the net OPEB liability was seven percent. This discount rate assumes the City continues to fully fund for its retiree health benefits through the California Employers’ Retiree Benefit Trust (CERBT) under its investment allocation Strategy 1. The rate reflects the CERBT published median interest rate for Strategy 1 of 7.00 percent with an additional margin for adverse deviation. 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. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate 1-percentage-point lower (six percent) or 1-percentage-point higher (eight percent) than the current discount rate: Asset Class Target Allocation Long-term Expected Real Rate of Return* Global equity 57.00%5.50% Global fixed income 27.00%2.35% Inflation sensitive 5.00%1.50% Private equity 3.00%1.75% Real estate 8.00%3.65% *Long-term expected rate of return is 7.00 percent 102 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) B. City of Encinitas Retiree Health Plan (Continued) Sensitivity of the Net OPEB Liability to Changes in the Discount Rate (Continued) Discount Rate - 1%Current Discount Discount Rate + 1% (6.00%)Rate (7.00%)(8.00%) 10,230,391$ 8,748,893$ 7,515,208$ Plan's Net OPEB Liability/(Asset) Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using healthcare cost trend rates 1-percentage-point lower (5.0%HMO/5.5%PPO decreasing to 4.0%HMO/4.0%PPO) or 1-percentage-point higher (7.0%HMO/7.5%PPO decreasing to 6.0%HMO/6.0%PPO) than the current healthcare cost trend rates: (5.00% HMO/5.50%PPO (6.00% HMO/6.50%PPO (7.00% HMO/7.50%PPO decreasing to decreasing to decreasing to 4.00% HMO/4.00% PPO)5.00% HMO/5.00% PPO)6.00% HMO/6.00% PPO) 7,357,562$ 8,748,893$ 10,420,444$ Plan's Net OPEB Liability/(Asset) Contributions The City’s policy is to fund the ADC, which includes the normal cost (current accrual for benefits being earned) plus an amortization of the net (unfunded accrued) OPEB liability. OPEB Liabilities, OPEB Expense and Deferred Outflows/Inflows of Resources to OPEB For the year ended June 30, 2019, the City recognized OPEB expense of $752,650 for the City Plan. At June 30, 2019 the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred outflows Deferred inflows of Resources of Resources OPEB contribution made after the measurement period 1,269,129$ -$ Changes of assumptions - (201,027) 1,269,129$ (201,027)$ 103 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) B. City of Encinitas Retiree Health Plan (Continued) OPEB Liabilities, OPEB Expense and Deferred Outflows/Inflows of Resources to OPEB (Continued) The $1,269,129 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the fiscal year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows: Measurement Period OPEB Ending June 30 Expense 2019 (59,949)$ 2020 (59,949) 2021 (59,949) 2022 (21,180) 2023 - Thereafter - (201,027)$ C. 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 as of June 30, 2017 was used to determine the June 30, 2018 measurement date amounts. Plan Description SDWD provides postretirement health care benefits through the Public Employees Medical and Hospital Care Act (PEMHCA), which is a defined benefit agent multiple-employer 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. SDWD has elected to join the California Employers' Retiree Benefit Trust (the "Trust") in accordance with GASB Statement No. 75, which provides a means to fund the annual OPEB costs, referred to as the Actuarially Determined Contribution (ADC). The ADC includes the normal cost (current accrual for benefits being earned) plus an amortization of the unfunded accrued liability or net OPEB liability over 15 years on a level-percentage of pay basis. SDWD’s funding policy is to pre-fund the ADC through the trust. 104 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) C. San Dieguito Water District – Retiree Health Plan (Continued) Eligibility Employees of SDWD are eligible for retiree health benefits if they retire from SDWD and commence pension benefits under CalPERS (typically on or after age 50 with at least five years of CalPERS eligible service). Membership in the plan consisted of the following at June 30, 2017, the date of the latest actuarial valuation: Active plan members 22 Inactive plan members or beneficiaries currently receiving benefits 13 Total 35 Change in the Net OPEB Liability SDWD’s net OPEB liability was measured as of June 30, 2018. The total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2017. The net OPEB liability at June 30, 2019 was: Total OPEB Plan Fiduciary Net Net OPEB Liability Position Liability/(Asset) (a)(b)(c) = (a) - (b) Balance at June 30, 2018 493,240$ 177,575$ 315,665$ (Measurement Date: June 30, 2017) Changes Recognized for the Measurement Period: Service cost 14,241 - 14,241 Interest on the total OPEB liability 34,637 - 34,637 Changes of benefit terms - - - Difference between expected and actual experience - - - Changes of assumptions - - - Contributions from the employer - 59,205 (59,205) Contributions from employees - - - Net investment income, net of administrative expense - 18,590 (18,590) Benefit payments, including refunds of employee contributions (25,346) (25,346) - Administrative expense - (123) 123 Other expenses - (235) 235 Net Changes 23,532 52,091 (28,559) Balance at June 30, 2019 516,772$ 229,666$ 287,106$ (Measurement Date: June 30, 2018) Increase (Decrease) 105 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) C. San Dieguito Water District – Retiree Health Plan (Continued) Actuarial Assumptions The net OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Actuarial Cost Method Actuarial Assumptions: Discount Rate 7.00% Inflation 2.75% Wage Inflation 3% per annum, in aggregate Investment Rate of Return Mortality Rate 1 Pre-retirement Turnover 2 Healthcare Trend Rate Derived using CalPERS' Membership Data for all funds Entry Age Normal Derived using CalPERS' Membership Data for all funds 7.00%, assuming actuarially determined contributions funded into CERBT Investment Strategy 1. Based on recent premium experience assuming 1%-2% increase due to market trends then reduced to a rate reflecting medical price 1 Pre-retirement mortality information was derived from data collected during 1997 to 2011 CalPERS Experience Study dated January 2014 and post-retirement mortality information was derived from the 2007-2011 CalPERS Experience Study. The Experience Study Reports may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications. 2 The pre-retirement turnover information was developed based on CalPERS' specific data. For more details, please refer to the 2007 to 2011 Experience Study Report. The Experience Study Reports may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications. Discount Rate The discount rate used to measure the net OPEB liability was 7.00 percent. The projection of cash flows used to determine the discount rate assumed that District contributions will be made at rates equal to the actuarily determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. 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. 106 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) C. San Dieguito Water District – Retiree Health Plan (Continued) Discount Rate (Continued) Target Asset Class Allocation Real Return* Global equity 57.00%5.50% Global debt security 27.00%2.35% Inflation assets 5.00%1.50% Commodities 3.00%1.75% Real estate investment trusts 8.00%3.65% 100% * Long-term expected rate of return is 7.00 percent Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the net OPEB liability of SDWD, as well as what SDWD’s net OPEB liability would be if it were calculated using a discount rate 1-percentage point lower (6.00 percent) or 1- percentage point higher (8.00 percent) than the current discount rate: Discount Rate - 1%Current Discount Discount Rate + 1% (6.00%)Rate (7.00%)(8.00%) Net OPEB Liability 348,716$ 287,106$ 235,672$ Plan's Net OPEB Liability/(Asset) Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the net OPEB liability of SDWD, as well as what SDWD’s net OPEB liability would be if it were calculated using healthcare cost trend rates 1-percentage point lower (5.0%HMO/5.5%PPO decreasing to 4.0%HMO/4.0%PPO) or 1-percentage point higher (7.0%HMO/7.5%PPO decreasing to 6.0%HMO/6.0%PPO than the current healthcare cost trend rates: (5.00% HMO/5.50%PPO (6.00% HMO/6.50%PPO (7.00% HMO/7.50%PPO decreasing to decreasing to decreasing to 4.00% HMO/4.00% PPO)5.00% HMO/5.00% PPO)6.00% HMO/6.00% PPO) Net OPEB Liability 227,040$ 287,106$ 360,014$ Plan's Net OPEB Liability/(Asset) 107 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 14 – Other Postemployment Benefits (OPEB) (Continued) C. San Dieguito Water District – Retiree Health Plan (Continued) Contributions SDWD’s policy is to fund the ADC, which includes the normal cost (current accrual for benefits being earned) plus an amortization of the net (unfunded accrued) OPEB liability. OPEB Expense and Deferred Outflows/Inflows of Resources to OPEB For the year ended June 30, 2019, SDWD recognized OPEB expense of $32,867 for the SDWD Plan. At June 30, 2019, SDWD reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources OPEB contribution subsequent to the measurement date 66,983$ -$ Net difference between projected and actual earnings on OPEB plan investments - (9,295) 66,983$ (9,295)$ The $66,983 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the fiscal year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows: Measurement Period OPEB Ending June 30 Expense 2019 (2,766)$ 2020 (2,766) 2021 (2,764) 2022 (999) 2023 - Thereafter - (9,295)$ 108 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 15 – 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 16 – Special Assessment Debt City of Encinitas - Community Facilities District (CFD) #1: Encinitas Ranch Community During Fiscal Year 2012-13, the City, on behalf of the residents and businesses of the Community Facilities District (“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 six percent of the average annual debt service of the prior bonds. As of June 30, 2019, the outstanding balance on the 2012 Special Tax Refunding Bonds was $23,905,000. 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 this Assessment District, collecting the assessments and paying the CFD’s bills, as well as other administrative duties. The City has no duty or obligation to pay any liabilities or potential liabilities of the CFD. 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. 109 City of Encinitas Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2019 Note 17 – Other Required Disclosures Deficit Fund Balances/Net Position At June 30, 2019, the Infrastructure Improvements Special Revenue fund had a fund deficit of $14,333,106. The deficit is anticipated to be funded from future grants, other revenues, and operating or capital transfers. 110 REQUIRED SUPPLEMENTARY INFORMATION 111 This page intentionally left blank. 112 City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 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. Budgets for the General Fund 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. 113 City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 Note 2 – Budgetary Comparison Schedule General Fund Variance with Original Final Actual Final Budget REVENUES: Taxes: Property 46,061,136$ 46,711,136$ 47,406,620$ 695,484$ Real property transfer 519,777 519,777 742,483 222,706 Sales 13,469,197 13,469,197 13,694,647 225,450 Franchise 2,300,275 2,300,275 2,199,194 (101,081) Transient occupancy 1,862,660 1,862,660 2,220,617 357,957 Total taxes 64,213,045 64,863,045 66,263,561 1,400,516 Licenses and permits 267,200 267,200 286,224 19,024 Intergovernmental 616,547 642,293 663,028 20,735 Charges for services 7,189,819 7,364,354 7,383,043 18,689 Fines, forfeitures and penalties 746,653 746,653 794,237 47,584 Use of money and property 840,268 841,868 2,582,812 1,740,944 Other 532,560 1,164,530 1,214,504 49,974 Total revenues 74,406,092 75,889,943 79,187,409 3,297,466 EXPENDITURES: General government: City Council 477,401 477,401 426,133 51,268 City Attorney 406,500 416,500 416,493 7 City Manager 4,671,491 4,703,150 4,387,673 315,477 City Clerk 487,968 622,596 601,909 20,687 Finance 1,814,427 1,896,522 1,787,583 108,939 Non-departmental 4,124,069 4,624,069 4,243,944 380,125 Total general government 11,981,856 12,740,238 11,863,735 876,503 Public safety: Law enforcement 15,167,052 15,167,052 15,032,771 134,281 Fire and marine safety 15,870,293 17,014,563 16,247,052 767,511 Total public safety 31,037,345 32,181,615 31,279,823 901,792 Public works: Administration 310,054 421,616 410,620 10,996 Street maintenance 2,937,908 3,045,321 2,902,514 142,807 Facility maintenance 1,311,883 1,233,259 1,179,858 53,401 Stormwater 843,666 961,120 845,586 115,534 Total public works 5,403,511$ 5,661,316$ 5,338,578$ 322,738$ Budgeted Amounts 114 City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 Note 2 – Budgetary Comparison Schedule (Continued) General Fund (Continued) Variance with Original Final Actual Final Budget Development services - planning: Planning 3,192,317$ 3,297,747$ 3,117,376$ 180,371$ Code enforcement 2,584,330 2,574,630 2,412,974 161,656 Building services 754,944 754,944 738,534 16,410 Total development services - planning 6,531,591 6,627,321 6,268,884 358,437 Development services - engineering: City engineering 1,083,809 1,233,088 924,664 308,424 Traffic engineering 701,925 701,925 636,151 65,774 Stormwater 777,581 777,581 618,051 159,530 Coastal zone management 891,245 1,248,492 1,126,496 121,996 Street lighting 17,340 17,340 581 16,759 Total development services - engineering 3,471,900 3,978,426 3,305,943 672,483 Parks and recreation: Administration 1,122,510 1,122,510 1,106,884 15,626 Park services 2,378,273 2,378,273 2,188,486 189,787 Beach services 581,847 581,847 518,275 63,572 Recreational services 715,328 744,928 704,466 40,462 Community and senior center 2,729,955 2,778,825 2,467,671 311,154 Total parks and recreation 7,527,913 7,606,383 6,985,782 620,601 Capital outlay: Public safety 19,230 63,930 43,609 20,321 Public works 22,000 22,000 21,951 49 Parks and recreation 23,000 103,200 67,577 35,623 Total capital outlay 64,230 189,130 133,137 55,993 Total expenditures 66,018,346 68,984,429 65,175,882 3,808,547 EXCESS OF REVENUES OVER EXPENDITURES 8,387,746 6,905,514 14,011,527 7,106,013 OTHER FINANCING SOURCES (USES) Transfers in - operating 1,214,191 1,214,191 1,217,425 3,234 Transfers in - capital 8,000,000 87,084 369,646 282,562 Transfers out - operating (3,322,307) (3,322,307) (3,290,758) 31,549 Transfers out - capital (9,528,563) (10,956,563) (10,956,563) - Transfers out - debt service (3,725,561) (3,725,561) (3,722,404) 3,157 Transfers out - other - (500,000) (500,000) - Total other financing sources (uses)(7,362,240) (17,203,156) (16,882,654) 320,502 NET CHANGE IN FUND BALANCE 1,025,506$ (10,297,642)$ (2,871,127) 7,426,515$ Fund balance - beginning of year 27,293,458 Fund balance - end of year 24,422,331$ Budgeted Amounts 115 City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 Note 2 – Budgetary Comparison Schedule (Continued) Infrastructure Improvements Special Revenue Fund Original Final Actual Variance with Budget Budget Amounts Final Budget REVENUES: Taxes and assessments 465,756$ 465,756$ 567,476$ 101,720$ Intergovernmental 4,465,053 5,963,485 5,599,024 (364,461) Use of money and property - - 59,158 59,158 Total revenues 4,930,809 6,429,241 6,225,658 (203,583) EXPENDITURES: Current: General government 244,189 249,189 138,907 110,282 Total expenditures 244,189 249,189 138,907 110,282 REVENUES OVER (UNDER) EXPENDITURES 4,686,620 6,180,052 6,086,751 (93,301) OTHER FINANCING SOURCES (USES): Transfers in - 148,313 148,313 - Transfers out (4,946,086) (6,161,956) (6,416,377) (254,421) Total other financing sources (uses)(4,946,086) (6,013,643) (6,268,064) (254,421) NET CHANGE IN FUND BALANCE (259,466)$ 166,409$ (181,313) (347,722)$ Fund balance - beginning of year (14,151,793) Fund balance - end of year (14,333,106)$ 116 Meaurement period 2017-18 2016-17 2015-16 2014-15 2013-14 Service cost 2,258,659$ 2,427,983$ 2,192,399$ 2,261,277$ 2,448,194$ Interest on total pension liability 7,270,761 6,965,613 6,690,503 6,333,421 5,943,955 Differences between expected and actual experience (486,531) (1,781,097) (801,667) (126,649) - Changes in assumptions (739,046) 6,066,080 - (1,637,757) - Changes in benefit terms - - - -- Benefit payments, including refunds of employee contributions (4,164,974) (3,466,120) (3,178,023) (3,003,676) (2,990,732) Net change in total pension liability 4,138,869 10,212,459 4,903,212 3,826,616 5,401,417 Total pension liability - beginning 103,867,707 93,655,248 88,752,036 84,925,420 79,524,003 Total pension liability - ending (a)108,006,576$ 103,867,707$ 93,655,248$ 88,752,036$ 84,925,420$ Plan fiduciary net position Contributions - employer 3,755,605$ 2,944,153$ 2,927,539$ 2,077,263$ 2,278,140$ Contributions - employee 992,534 1,015,196 1,004,970 776,061 1,043,925 Investment income (net of administrative expenses)6,559,803 7,826,373 447,217 1,359,388 9,816,151 Benefit payments (4,164,974) (3,466,120) (3,178,023) (3,003,676) (2,990,732) Other (351,784) (102,777) (41,718) 49,406 - Net change in plan fiduciary net position 6,791,184 8,216,825 1,159,985 1,258,442 10,147,484 Plan fiduciary net position - beginning 77,828,630 69,611,805 68,451,820 67,193,378 57,045,894 Plan fiduciary net position - ending (b)84,619,814$ 77,828,630$ 69,611,805$ 68,451,820$ 67,193,378$ Net pension liability - ending (a)-(b)23,386,762$ 26,039,077$ 24,043,443$ 20,300,216$ 17,732,042$ Plan fiduciary net position as a percentage of the total pension liability 78.35% 74.93% 74.33% 77.13% 79.12% Covered payroll 13,562,192$ 13,167,177$ 12,783,667$ 12,951,932$ 13,022,309$ Net pension liability as a percentage of covered payroll 172.44% 197.76% 188.08% 156.74% 136.17% Notes to Schedule: Changes in Assumptions: *Fiscal Year 2014-15 was the first year of implementation; therefore, only five years of information are shown. Benefit changes The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 20, 2015 valuation date. In 2018, demographic assumptions and the inflation rate changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. In 2017, the accounting discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5 percent discount rate. Note 3 - Schedule of Changes in the Net Pension Liability and Related Ratios Last Ten Fiscal Years* City Miscellaneous Plan City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 117 Meaurement period 2017-18 2016-17 2015-16 2014-15 2013-14 Plan's proportion of the net pension liability 0.39412% 0.38377% 0.38281% 0.35376% 0.22994% Plan's proportionate share of the net pension liability 23,125,137$ 22,930,965$ 19,826,444$ 14,576,416$ 14,308,774$ Plan's covered payroll 6,197,680$ 6,017,165$ 5,841,908$ 5,671,755$ 5,115,288$ 373.13% 381.09% 339.38% 257.00% 279.73% Plan's fiduciary net position 69,535,698$ 67,653,362$ 63,591,785$ 65,540,377$ 62,697,310$ 75.04% 74.69% 76.23% 81.81% 81.42% Plan's proportionate share of aggregate employer contributions 2,203,690$ 1,108,343$ 1,609,491$ 1,250,672$ 1,775,034$ Notes to Schedule: *Fiscal Year 2014-15 was the first year of implementation; therefore, only five years of information are shown. Plan's proportionate share of the net pension liability as a percentage of covered payroll In 2018, demographic assumptions and the inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three year phase-in beginning with the June 20, 2016 actuarial valuation. Plan's fiduciary net position as a percentage of the total pension liability Changes in assumptions Benefit changes The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2017 valuation date. Last Ten Fiscal Years* Safety Plan Note 4 - Schedule of the City's Proportionate Share of the Net Pension Liability City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 118 Meaurement period 2017-18 2016-17 2015-16 2014-15 2013-14 Plan's proportion of the net pension liability 0.18768% 0.18116% 0.18103% 0.18296% 0.06074% Plan's proportionate share of the net pension liability 7,073,051$ 7,141,232$ 6,288,631$ 5,019,493$ 3,779,285$ Plan's covered payroll $1,918,865 $1,862,975 1,808,714$ 1,756,033$ 1,712,639$ 368.61% 383.32% 347.69% 285.84% 220.67% Plan's fiduciary net position 16,099,922$ 15,991,467$ 15,586,708$ 16,358,655$ 18,489,458$ 69.48% 69.13% 71.25% 76.52% 83.03% Plan's proportionate share of aggregate employer contributions 504,492$ 472,819$ 356,509$ 271,845$ 241,133$ Notes to Schedule: *Fiscal Year 2014-15 was the first year of implementation; therefore, only five years of information are shown. In 2018, demographic assumptions and the inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three year phase-in beginning with the June 20, 2016 actuarial valuation. Plan's proportionate share of the net pension liability as a percentage of covered payroll Plan's fiduciary net position as a percentage of the total pension liability Changes in assumptions Benefit changes The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2017 valuation date. Last Ten Fiscal Years* San Dieguito Water District Plan Note 4 - Schedule of the City's Proportionate Share of the Net Pension Liability City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 119 Fiscal Year 2018-19 2017-18 2016-17 2015-16 2014-15 Actuarially determined contribution 3,252,930$ 2,832,401$ 2,723,629$ 2,585,583$ 1,815,263$ Contributions in relation to the actuarially determined contributions 1 (3,637,225) (3,755,605) (2,944,153) (2,927,539) (2,077,263) Contribution deficiency (excess)(384,295)$ (923,204)$ (220,524)$ (341,956)$ (262,000)$ Covered payroll 13,653,405$ 13,562,192$ 13,167,177$ 12,783,667$ 12,951,932$ Contributions as a percentage of covered payroll 26.64% 27.69% 22.36% 22.90% 16.04% Notes to Schedule Fiscal Year: June 30, 2019 Valuation Date: June 30, 2016 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method/period Level percent of payroll Asset valuation method Market value Inflation Salary increases Varies by entry age and service Payroll growth Investment rate of return Retirement age 50 years (2% at 55 and 2% at 60), 52 years (2% at 62) Mortality CalPERS' membership data for all funds *Fiscal Year 2014-15 was the first year of implementation; therefore, only five years of information are shown. 2.75% 3.00% 7.375% Note 5 - Schedule of Contributions - Pension Last Ten Fiscal Years* City Miscellaneous Plan 1 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. City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 120 Fiscal Year 2018-19 2017-18 2016-17 2015-16 2014-15 Contractually determined contribution (actuarially determined)2,457,135$ 2,203,690$ 1,108,343$ 1,609,491$ 1,251,594$ Contributions in relation to the actuarially determined contributions (2,457,135) (2,203,690) (1,108,343) (1,609,491) (1,251,594) Contribution deficiency (excess)-$ -$ -$ -$ -$ Covered payroll 6,117,357$ 6,197,680$ 6,017,165$ 5,841,908$ 5,671,755$ Contributions as a percentage of covered payroll 40.17% 35.56% 18.42% 27.55% 22.07% Notes to Schedule Fiscal Year: June 30, 2019 Valuation Date: June 30, 2016 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method/period Level percent of payroll Asset valuation method Market Value Inflation 2.50% Projected salary increases 3.30% to 14.20% depending on age, service, and type of employment Payroll growth 3.00% Discount rate 7.375% Individual Salary Growth *Fiscal Year 2014-15 was the first year of implementation; therefore, only five years of information are shown. Required Supplementary Information Note 5 - Schedule of Contributions - Pension (Continued) A merit scale varying by duration of employment coupled with an assumed annual inflation growth of 2.75% and an annual production growth of 0.25% Last Ten Fiscal Years* Safety Plan City of Encinitas For the Year Ended June 30, 2019 121 Note 5 - Schedule of Contributions - Pension (Continued) Fiscal Year 2018-19 2017-18 2016-17 2015-16 2014-15 Contractually determined contribution (actuarially determined)585,749 504,492$ 472,819$ 356,509$ 271,845$ Contributions in relation to the actuarially determined contributions (585,749) (504,492) (472,819) (356,509) (271,845) Contribution deficiency (excess)-$ -$ -$ -$ -$ Covered payroll 1,887,782$ 1,918,865$ 1,862,975$ 1,808,714$ 1,756,033$ Contributions as a percentage of covered payroll 31.03% 26.29% 25.38% 19.71% 15.48% Notes to Schedule Fiscal Year: June 30, 2019 Valuation Date: June 30, 2016 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method/period Level percent of payroll Asset valuation method Market Inflation 2.50% Projected salary increases 3.30% to 14.20% depending on age, service, and type of employment Payroll growth 3.00% Discount rate Individual Salary Growth *Fiscal Year 2014-15 was the first year of implementation; therefore, only five years of information are shown. San Dieguito Water District Plan A merit scale varying by duration of employment coupled with an assumed annual inflation growth of 2.75% and an annual production growth of 0.25% 7.375% City of Encinitas Required Supplementary Information Last Ten Fiscal Years* For the Year Ended June 30, 2019 122 Measurement Period 2017-18 2016-17 Total OPEB liability Service cost 190,479$ 178,018$ Interest 867,343 856,058 Changes of benefit terms - - Differences between expected and actual experience - - Changes of assumptions - - Benefit payments, including refunds of member contributions (878,114) (892,532) Net change in total OPEB liability 179,708 141,544 Total OPEB liability - beginning 12,639,192 12,497,648 Total OPEB liability - ending (a)12,818,900$ 12,639,192$ OPEB fiduciary net position Contributions - employer 1,102,937$ 1,092,690$ Net investment income 358,109 403,267 Benefit payments, including refunds of member contributions (878,114) (892,532) Administrative expense (2,366) (2,046) Other expense (4,620) - Net change in plan fiduciary net position 575,946 601,379 Plan fiduciary net position - beginning 3,494,061 2,892,682 Plan fiduciary net position - ending (b)4,070,007 3,494,061 Plan net OPEB liability - ending (a) - (b)8,748,893$ 9,145,131$ Plan fiduciary net position as a percentage of the total OPEB liability 31.75% 27.64% Covered-employee payroll 21,767,304$ 17,816,557$ Plan net OPEB liability as a percentage of covered-employee payroll 40.19% 51.33% * Fiscal Year 2017-18 was the first year of implementation; therefore, only two years of information are shown. Note 6 - Schedule of Changes in Net OPEB Liability and Related Ratios Last Ten Fiscal Years* City Plan City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 123 Measurement Period 2017-18 2016-17 Total OPEB liability Service cost 14,241$ 13,309$ Interest 34,637 33,225 Benefit payments, including refunds of member contributions (25,346) (29,268) Net change in total OPEB liability 23,532 17,266 Total OPEB liability - beginning 493,240 475,974 Total OPEB liability - ending (a)516,772$ 493,240$ OPEB fiduciary net position Contributions - employer 59,205$ 63,332$ Net investment income 18,590 18,770 Benefit payments, including refunds of member contributions (25,346) (29,268) Administrative expense (358) (95) Net change in plan fiduciary net position 52,091 52,739 Plan fiduciary net position - beginning 177,575 124,836 Plan fiduciary net position - ending (b)229,666 177,575 Plan net OPEB liability - ending (a) - (b)287,106$ 315,665$ Plan fiduciary net position as a percentage of the total OPEB liability 44.44% 36.00% Covered-employee payroll 1,978,669$ 1,802,043$ Plan net OPEB liability as a percentage of covered-employee payroll 14.51% 17.52% * Fiscal Year 2017-18 was the first year of implementation; therefore, only two years of information are shown. Note 6 - Schedule of Changes in Net OPEB Liability and Related Ratios (Continued) Last Ten Fiscal Years* San Dieguito Water District Plan City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 124 Fiscal Year 2018-19 2017-18 Actuarialy determined contribution (ADC)958,415 930,499$ Contributions in relation to the ADC (1,269,129) (1,092,690) Contribution deficiency (excess)(310,714)$ (162,191)$ Covered employee payroll 22,403,865$ 21,767,304$ Contributions as a percentage of covered employee payroll 5.66% 5.02% Notes to Schedule Actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2019 were from the June 30, 2017 actuarial valuation. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method/period Level percentage of payroll over a closed rolling 15-year period Asset valuation method Market value Inflation 2.75% per annum Payroll growth 3% per annum, in aggregate Investment rate of return 7% per annum. Assumes investing in California Employers' Retirees Benefit Trust asset allocation Strategy 1. Retirement age According to the retirement rates under the most recent CalPERS pension plan experience study. Mortality Pre-retirement mortality probability based on 2014 CalPERS 1997-2011 Experience Study covering CalPERS participants. Post-retirement mortality probability based on CalPERS Experience Study 2007-2011 covering participants in CalPERS. * Fiscal Year 2017-18 was the first year of implementation; therefore, only two years of information are shown. City of Encinitas Required Supplementary Information Note 7 - Schedule of Contributions - OPEB Last Ten Fiscal Years* For the Year Ended June 30, 2019 City Plan 125 Fiscal Year 2018-19 2017-18 Actuarialy determined contribution (ADC)53,291$ 52,780$ Contributions in relation to the ADC (66,983) (63,332) Contribution deficiency (excess)(13,692)$ (10,552)$ Covered employee payroll 1,903,385$ 1,978,669$ Contributions as a percentage of covered employee payroll 3.52% 3.20% Notes to Schedule Actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2019 were from the June 30, 2017 actuarial valuation. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method/period Level percentage of payroll over a closed rolling 15-year period Asset valuation method Market value Inflation 2.75% per annum Payroll growth 3% per annum, in aggregate Investment rate of return 7% per annum. Assumes investing in California Employers' Retirees Benefit Trust asset allocation Strategy 1. Retirement age According to the retirement rates under the most recent CalPERS pension plan experience study. Mortality Pre-retirement mortality probability based on 2014 CalPERS 1997-2011 Experience Study covering CalPERS participants. Post-retirement mortality probability based on CalPERS Experience Study 2007-2011 covering participants in CalPERS. * Fiscal Year 2017-18 was the first year of implementation; therefore, only two years of information are shown. Last Ten Fiscal Years* Note 7 - Schedule of Contributions - OPEB (Continued) San Dieguito Water District Plan City of Encinitas Required Supplementary Information For the Year Ended June 30, 2019 126 SUPPLEMENTARY INFORMATION 127 This page intentionally left blank. 128 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS: 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 impact/mitigation fees that are collected in connection with land use and construction applications.These monies are utilized to fund specified City capital improvement projects. Lighting and Landscaping -This fund is used to account for special assessments and certain restricted property tax revenues collected from homeowners and businesses.These monies are utilized to fund specified operational and maintenance costs related to common area landscaping,street lighting and park maintenance. DEBT SERVICE FUNDS: City Debt Service -This fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditures for the payment of principal and interest on the 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 expenditures for the payment of principal and interest on the Encinitas Public Financing Authority long-term debt. 129 Grants and Development Lighting and Housing Impact Landscaping ASSETS Cash and investments 1,359,867$ 4,837,867$ 3,885,675$ Receivables 226,238 - 37,787 Long-term receivable 194,466 235,320 - Restricted cash and investments - - - Total assets 1,780,571$ 5,073,187$ 3,923,462$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable and accrued liabilities 155,167$ -$ 152,783$ Due to other funds 266,003 - - Deposits and other liabilities - 21,227 - Total liabilities 421,170 21,227 152,783 DEFERRED INFLOWS OF RESOURCES Unavailable revenue 194,466 235,320 - Total deferred inflows of resources 194,466 235,320 - Fund Balances Restricted 1,164,935 4,816,640 3,770,679 Total fund balances 1,164,935 4,816,640 3,770,679 Total liabilities, deferred inflows of resources and fund balances 1,780,571$ 5,073,187$ 3,923,462$ (Continued) Special Revenue City of Encinitas Combining Balance Sheet Non-Major Governmental Funds June 30, 2019 130 Total Encinitas Public Other City Financing Governmental Debt Service Authority Funds ASSETS Cash and investments -$ -$ 10,083,409$ Receivables -- 264,025 Long-term receivable -- 429,786 Restricted cash and investments -1,157 1,157 Total assets -$ 1,157$ 10,778,377$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable and accrued liabilities -$ -$ 307,950$ Due to other funds -- 266,003 Deposits and other liabilities -- 21,227 Total liabilities - - 595,180 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - - 429,786 Total deferred inflows of resources - - 429,786 Fund Balances Restricted -1,157 9,753,411 Total fund balances -1,157 9,753,411 Total liabilities, deferred inflows of resources and fund balances -$ 1,157$ 10,778,377$ (Concluded) City of Encinitas Combining Balance Sheet (Continued) Non-Major Governmental Funds June 30, 2019 Debt Service 131 Grants and Development Lighting and Housing Impact Landscaping REVENUES: Taxes and assessments 372,173$ -$ 2,200,206$ Intergovernmental 899,754 - - Development impact fees - 1,485,129 - Use of money and property 198,998 425,430 169,880 Other 96,658 - 7,038 Total revenues 1,567,583 1,910,559 2,377,124 EXPENDITURES: Current: General government 780,960 - - Public safety 214,582 - - Public works 603 - 535,962 Development services - planning 301,956 - - Development services - engineering - - 545,373 Parks and recreation 160,011 - 808,736 Capital outlay 75,000 - - Debt service: Principal - - - Interest and fiscal charges - - - Total expenditures 1,533,112 - 1,890,071 REVENUES OVER (UNDER) EXPENDITURES 34,471 1,910,559 487,053 OTHER FINANCING SOURCES (USES): Transfers in 157,991 539,567 154,276 Transfers out (336,828) (1,730,575) (60,000) Total other financing sources (uses)(178,837) (1,191,008) 94,276 NET CHANGE IN FUND BALANCES (144,366) 719,551 581,329 FUND BALANCES: Beginning of year 1,309,301 4,097,089 3,189,350 End of year 1,164,935$ 4,816,640$ 3,770,679$ (Continued) Special Revenue City of Encinitas Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds For the Year Ended June 30, 2019 132 Total Encinitas Public Other City Financing Governmental Debt Service Authority Funds REVENUES: Taxes and assessments -$ -$ 2,572,379$ Intergovernmental - - 899,754 Development impact fees - - 1,485,129 Use of money and property - 1,707 796,015 Other - -103,696 Total revenues - 1,707 5,856,973 EXPENDITURES: Current: General government - - 780,960 Public safety - - 214,582 Public works - - 536,565 Development services - planning - - 301,956 Development services - engineering - - 545,373 Parks and recreation - - 968,747 Capital outlay - - 75,000 Debt service: Principal 154,298 1,795,000 1,949,298 Interest and fiscal charges 29,347 1,744,986 1,774,333 Total expenditures 183,645 3,539,986 7,146,814 REVENUES OVER (UNDER) EXPENDITURES (183,645) (3,538,279) (1,289,841) OTHER FINANCING SOURCES (USES): Transfers in 183,645 3,538,759 4,574,238 Transfers out - - (2,127,403) Total other financing sources (uses)183,645 3,538,759 2,446,835 NET CHANGE IN FUND BALANCES - 480 1,156,994 FUND BALANCES: Beginning of year - 677 8,596,417 End of year -$ 1,157$ 9,753,411$ City of Encinitas Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Non-Major Governmental Funds For the Year Ended June 30, 2019 Debt Service 133 Final Actual Variance with Budget Amounts Final Budget REVENUES: Taxes and assessments 372,838$ 372,173$ (665)$ Intergovernmental 1,048,640 899,754 (148,886) Use of money and property 183,612 198,998 15,386 Other 96,613 96,658 45 Total revenues 1,701,703 1,567,583 (134,120) EXPENDITURES: Current: General government 862,357 780,960 81,397 Public safety 211,712 214,582 (2,870) Public works - 603 (603) Development services - planning 437,085 301,956 135,129 Parks and recreation 164,513 160,011 4,502 Capital Outlay 103,000 75,000 28,000 Total expenditures 1,778,667 1,533,112 245,555 REVENUES OVER (UNDER) EXPENDITURES (76,964) 34,471 111,435 OTHER FINANCING SOURCES (USES) Transfers in 156,720 157,991 1,271 Transfers out (336,828) (336,828) - Total other financing sources (uses)(180,108) (178,837) 1,271 NET CHANGE IN FUND BALANCE (257,072)$ (144,366) 112,706$ FUND BALANCE: Beginning of year 1,309,301 End of year 1,164,935$ City of Encinitas Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Grants and Housing Special Revenue Fund For the Year Ended June 30, 2019 134 Final Actual Variance with Budget Amounts Final Budget REVENUES: Development impact fees 1,098,668$ 1,485,129$ 386,461$ Use of money and property 34,034 425,430 391,396 Other - - - Total revenues 1,132,702 1,910,559 777,857 Expenditures: Current: General government - - - Total expenditures - - - REVENUES OVER (UNDER) EXPENDITURES 1,132,702 1,910,559 777,857 OTHER FINANCING SOURCES (USES) Transfers in 539,567 539,567 - Transfers out (1,699,200) (1,730,575) (31,375) Total other financing sources (uses)(1,159,633) (1,191,008) (31,375) NET CHANGE IN FUND BALANCE (26,931)$ 719,551 746,482$ FUND BALANCE: Beginning of year 4,097,089 End of year 4,816,640$ City of Encinitas Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Development Impact Special Revenue Fund For the Year Ended June 30, 2019 135 Final Actual Variance with Budget Amounts Final Budget REVENUES: Taxes and assessments 2,025,292$ 2,200,206$ 174,914$ Use of money and property 59,089 169,880 110,791 Other -7,038 7,038 Total revenues 2,084,381 2,377,124 292,743 EXPENDITURES: Current: Public works 632,900 535,962 96,938 Development services - engineering 671,662 545,373 126,289 Parks and recreation 946,931 808,736 138,195 Total expenditures 2,251,493 1,890,071 361,422 REVENUES OVER (UNDER) EXPENDITURES (167,112) 487,053 654,165 OTHER FINANCING SOURCES (USES) Transfers in 154,276 154,276 - Transfers out (60,000) (60,000) - Total other financing sources (uses)94,276 94,276 - NET CHANGE IN FUND BALANCE (72,836)$ 581,329 654,165$ FUND BALANCE: Beginning of year 3,189,350 End of year 3,770,679$ 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, 2019 136 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. 137 This page intentionally left blank. 138 Risk Wastewater Vehicle Vehicle Management Support Maintenance Replacement Total ASSETS Current assets: Cash and investments 5,786,650$ 17,403$ 9,878$ 1,360,962$ 7,174,893$ Accounts receivable 353 - - - 353 Inventory and prepaid items 44,206 - - - 44,206 Total current assets 5,831,209 17,403 9,878 1,360,962 7,219,452 Noncurrent assets: Capital assets: Utility, plant, vehicles, and equipment, net - - - 3,312,210 3,312,210 Total noncurrent assets - - - 3,312,210 3,312,210 Total assets 5,831,209 17,403 9,878 4,673,172 10,531,662 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 199,644 17,403 9,878 51,207 278,132 Current portion of capital leases payable - - - 170,768 170,768 Total current liabilities 199,644 17,403 9,878 221,975 448,900 Noncurrent liabilities: Capital lease payable - - - 373,265 373,265 Total noncurrent liabilities - - - 373,265 373,265 Total liabilities 199,644 17,403 9,878 595,240 822,165 NET POSITION Net investment in capital assets - - - 2,768,177 2,768,177 Unrestricted 5,631,565 - - 1,309,755 6,941,320 Total net position 5,631,565$ -$ -$ 4,077,932$ 9,709,497$ June 30, 2019 All Internal Service Funds Combining Statement of Net Position City of Encinitas 139 Risk Wastewater Vehicle Vehicle Management Support Maintenance Replacement Total OPERATING REVENUES: Interfund revenues 1,135,749$ 903,414$ 489,004$ -$ 2,528,167$ Other revenues 48,559 228 - - 48,787 Total operating revenues 1,184,308 903,642 489,004 -2,576,954 OPERATING EXPENSES: Operational support services 735,215 106,362 177,940 - 1,019,517 Administrative support 396,786 665,222 311,064 - 1,373,072 Insurance and claims 1,545,241 - - - 1,545,241 Depreciation of capital assets - - - 562,723 562,723 Total operating expenses 2,677,242 771,584 489,004 562,723 4,500,553 Operating income (loss)(1,492,934) 132,058 -(562,723)(1,923,599) NONOPERATING REVENUES: Gain (loss) on disposal of capital assets - - - 12,739 12,739 Interest expense - - - (17,771) (17,771) Total nonoperating revenues - - - (5,032) (5,032) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS (1,492,934) 132,058 -(567,755)(1,928,631) Transfers in 1,392,229 - - 815,000 2,207,229 Transfers out -(132,000)- - (132,000) Total capital contributions and transfers 1,392,229 (132,000)-815,000 2,075,229 Net change in net position (100,705) 58 - 247,245 146,598 NET POSITION: Beginning of year 5,732,270 (58)-3,830,687 9,562,899 End of year 5,631,565$ -$ -$4,077,932$ 9,709,497$ City of Encinitas Combining Statement of Revenues, Expenses, and Changes in Net Position All Internal Service Funds For the Year Ended June 30, 2019 140 Risk W astewater Vehicle Vehicle Management Support Maintenance Replacement Total CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from users 1,190,289$ 903,642$ 489,100$ 8,000$ 2,591,031$ Payments to employees (396,786) (665,142) (311,064) - (1,372,992) Payments to suppliers and vendors (2,187,734) (99,672) (194,453) 50,860 (2,430,999) Net cash provided by (used in) operating activities (1,394,231) 138,828 (16,417) 58,860 (1,212,960) CASHFLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets - - - (246,315) (246,315) Principal payment on long-term debt - - - (258,393) (258,393) Interest payments on capital leases - - - (17,771) (17,771) Proceeds from sale of capital assets - - - 12,739 12,739 Net cash (used in) capital and related financing activities - - - (509,740) (509,740) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in 1,392,229 - - 815,000 2,207,229 Transfers (out)- (132,000) - - (132,000) Net cash provided by (used in) noncapital financing activities 1,392,229 (132,000) - 815,000 2,075,229 Net increase (decrease) in cash and cash equivalents (2,002) 6,828 (16,417) 364,120 352,529 CASH AND CASH EQUIVALENTS: Beginning of year 5,788,652 10,575 26,295 996,842 6,822,364 End of year 5,786,650$ 17,403$ 9,878$ 1,360,962$ 7,174,893$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Operating income (loss)(1,492,934)$ 132,058$ -$ (562,723)$ (1,923,599)$ Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation - - - 562,723 562,723 Changes in operating assets and liabilities: Accounts receivable 5,981 - 96 8,000 14,077 Inventory and prepaid items (3,734) - -- (3,734) Accounts payable and accrued liabilities 96,456 6,770 (16,513) 50,860 137,573 Total adjustments 98,703 6,770 (16,417) 621,583 710,639 Net cash provided by (used in) operating activities (1,394,231)$ 138,828$ (16,417)$ 58,860$ (1,212,960)$ There were no non-cash capital and related financing activitites. City of Encinitas Combining Statement of Cash Flows All Internal Service Funds For the Year Ended June 30, 2019 141 This page intentionally left blank. 142 AGENCY FUND FIDUCIARY FUNDS The Agency Fund is 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 the debt service of the Community Facilities District #1 for which the City acts as paying agent but has no legal commitment or obligation. 143 This page intentionally left blank. 144 Balance Balance July 1, 2018 Additions Deletions June 30, 2019 Community Facilities District #1 Assets: Cash and investments 2,207,163$ 2,730,634$ (2,604,254)$ 2,333,543$ Restricted cash and investments: Held by fiscal agents 1,984,266 2,618,276 (2,608,595) 1,993,947 Current assessments receivable 9,554 18,889 (9,554) 18,889 Total assets 4,200,983$ 5,367,799$ (5,222,403)$ 4,346,379$ Liabilities: Due to bondholders 4,200,983$ 1,685,396$ (1,540,000)$ 4,346,379$ Total liabilities 4,200,983$ 1,685,396$ (1,540,000)$ 4,346,379$ For the Year Ended June 30, 2019 Agency Funds Statement of Changes in Assets and Liabilities City of Encinitas 145 This page intentionally left blank. 146 STATISTICAL SECTION (UNAUDITED) 147 This page intentionally left blank. 148 City of Encinitas Statistical Section This section of the City of Encinitas' Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, required supplementary and supplementary information says about the City's overall financial health. Contents Page Financial Trends - These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. 1 Net Position by Components 150 2 Changes in Net Position 152 3 Fund Balances of Governmental Funds 156 4 Changes in Fund Balances of Governmental Funds 158 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 160 6 Principal Property Taxpayers 161 7 Property Tax Levies and Collections 162 8 Direct and Overlapping Property Tax Rates 164 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 168 10 Ratios of General Bonded Debt Outstanding 170 11 Schedule of Direct and Overlapping Bonded Debt 171 12 Legal Debt Margin Information 172 13 Historical Debt Service Coverage 174 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 176 15 General Governmental Tax Revenue by Source 177 16 Taxable Sales by Business Type 178 17 Principal Employers 179 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. 18 Full-time and Part-Time Employees by Function 180 19 Operating Indicators by Function 182 20 Capital Asset Statistics by Function 184 21 Cardiff Sanitary Division - Summary of Operational Data 188 22 San Dieguito Water District - Summary of Operational Data 192 Sources: Unless otherwise noted, the information in these schedules was derived from the Comprehensive Annual Financial Reports for the relevant year. (Unaudited) 149 2010 2011 2012 2013 2014 Government activities: Net investment in capital assets 130,912,728$ 139,575,875$ 153,516,469$ 157,395,370$ 161,902,991$ Restricted 4,219,623 - - 9,980,695 17,363,704 Unrestricted 54,755,944 56,799,902 43,857,634 37,646,551 38,446,880160 Total governmental activities net position 189,888,295$ 196,375,777$ 197,374,103$ 205,022,616$ 217,713,575$ Business-type activities: Net investment in capital assets 25,014,811$ 30,076,172$ 25,155,766$ 32,247,941$ 54,362,661$ Restricted - - - - 1,039,739 Unrestricted 71,916,135 72,608,845 83,232,015 79,816,600 62,426,804 168 Total business-type activities net position 96,930,946$ 102,685,017$ 108,387,781$ 112,064,541$ 117,829,204$ Primary government: Net investment in capital assets 155,927,539$ 169,652,047$ 178,672,235$ 189,643,311$ 216,265,652$ Restricted 4,219,623 - - 9,980,695 18,403,443 Unrestricted 126,672,079 129,408,747 127,089,649 117,463,151 100,873,684176 Total primary government net position 286,819,241$ 299,060,794$ 305,761,884$ 317,087,157$ 335,542,779$ Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 (Accrual Basis of Accounting) Fiscal Years City of Encinitas Net Position by Components Last Ten Fiscal Years 150 2015 2016 2017 2018 2019 Government activities: Net investment in capital assets 157,304,041$ 162,923,350$ 165,759,601$ 169,553,838$ 172,580,765 Restricted 18,741,022 30,996,309 19,867,542 19,779,315 20,997,390 Unrestricted 9,229,896 (580,736)9,510,235 1,963,535 7,357,189 Total governmental activities net position 185,274,959$ 193,338,923$ 195,137,378$ 191,296,688$ 200,935,344 Business-type activities: Net investment in capital assets 39,806,764$ 42,501,264$ 44,977,544$ 36,547,324$ 38,074,788 Restricted - 1,377,006 20,237 421,938 411,895 Unrestricted 75,781,002 75,512,969 79,286,895 95,173,238 99,808,547 Total business-type activities net position 115,587,766$ 119,391,239$ 124,284,676$ 132,142,500$ 138,295,230 Primary government: Net investment in capital assets 197,110,805$ 205,424,614$ 210,737,145$ 206,101,162$ 210,655,553 Restricted 18,741,022 32,373,315 19,887,779 20,201,253 21,409,285 Unrestricted 85,010,898 74,932,233 88,797,130 97,136,773 107,165,736 Total primary government net position 300,862,725$ 312,730,162$ 319,422,054$ 323,439,188$ 339,230,574 Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 Net Position by Components (Continued) (Accrual Basis of Accounting) Last Ten Fiscal Years City of Encinitas Fiscal Years 151 2010 2011 2012 2013 2014 Expenses: Government activities: General government 12,132,268$ 10,912,556$ 12,064,527$ 10,616,440$ 9,549,338$ Public safety 22,269,616 22,324,624 23,062,746 24,629,613 25,146,843 Public works 9,520,416 10,981,355 8,560,330 10,851,147 10,239,746 Planning 5,599,614 5,539,148 5,008,179 4,353,831 5,853,995 Engineering services 3,873,432 3,646,306 5,817,932 3,813,678 3,988,720 Parks and recreation 6,518,623 6,243,769 5,578,716 5,542,550 4,735,864 Interest and fiscal charges on long-term debt 2,296,422 2,029,477 1,811,714 1,932,904 1,913,349 Total governmental activities expenses 62,210,391 61,677,235 61,904,144 61,740,163 61,427,855 Business-type activities: Cardiff Sanitary Division 3,569,880 3,715,529 3,385,439 3,373,704 2,922,446 San Dieguito Water District 11,633,694 11,622,126 12,448,911 12,200,431 13,552,862 Encinitas Sanitary Division 1,855,278 1,992,334 1,719,176 1,983,786 2,438,692 Affordable Housing 256,873 244,748 1,492,811 1,499,863 1,405,225 Recreation Programs - - 1,187,788 1,153,840 1,300,555 Total business-type activities expenses 17,315,725 17,574,737 20,234,125 20,211,624 21,619,780 Total primary government expenses 79,526,116 79,251,972 82,138,269 81,951,787 83,047,635 Program revenues: Government activities: Charges for services: General government 1,962,344 2,453,152 1,789,943 1,775,756 1,800,630 Public safety 105,799 98,202 99,047 91,495 202,220 Public works 668 - - - - Planning and building 1,521,889 1,816,765 2,155,076 1,894,785 2,874,894 Engineering services 660,734 1,063,822 736,786 955,986 1,075,885 Parks and recreation 1,126,285 1,149,350 14,580 39,946 35,791 Operating grants and contributions 5,392,117 6,964,053 5,896,502 3,759,864 4,345,931 Capital grants and contributions 3,437,302 4,854,393 3,626,279 6,462,979 8,756,281 Total governmental activities program revenues 14,207,138 18,399,737 14,318,213 14,980,811 19,091,632 Business-type activities: Charges for services: Cardiff Sanitary Division 4,979,238 4,830,204 4,970,662 4,755,573 4,605,867 San Dieguito Water District 11,046,650 12,438,502 12,922,922 13,687,156 15,297,718 Encinitas Sanitary Division 2,816,963 2,895,879 2,897,592 2,933,319 2,879,605 Affordable Housing 202,499 216,723 214,503 214,115 216,728 Recreation Programs - - 1,273,007 1,059,009 1,269,179 Operating grants and contributions - - 1,105,851 1,103,639 994,607 Capital grants and contributions 231,362 712,827 460,688 1,003,057 1,066,769 Total business-type activities program revenues 19,276,712 21,094,135 23,845,225 24,755,868 26,330,473 Total primary government program revenues 33,483,850 39,493,872 38,163,438 39,736,679 45,422,105 Governmental activities (48,003,253) (43,277,498) (47,585,931) (46,759,352) (42,336,223) Business-type activities 1,960,987 3,519,398 3,611,100 4,544,244 4,710,693 Total net revenue (expense)(46,042,266)$ (39,758,100)$ (43,974,831)$ (42,215,108)$ (37,625,530)$ City of Encinitas (Accrual Basis of Accounting) Changes in Net Position Last Ten Fiscal Years Fiscal Years 152 Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) 2015 2016 2017 2018 2019 Expenses: Government activities: General government 10,810,882$ 11,750,737$ 11,737,634$ 14,403,144$ 15,280,238$ Public safety 25,762,703 27,255,755 29,437,181 30,762,894 33,160,544 Public works 11,565,315 11,743,123 9,205,570 8,325,467 9,166,709 Planning 6,550,992 7,255,460 6,935,754 8,741,589 6,878,364 Engineering services 6,253,352 4,591,315 8,918,281 7,492,540 6,762,441 Parks and recreation 5,205,986 6,778,769 7,046,255 8,429,448 9,809,964 Interest and fiscal charges on long-term debt 2,311,944 2,494,815 2,237,069 1,755,100 1,655,750 Total governmental activities expenses 68,461,174 71,869,974 75,517,744 79,910,182 82,714,010 Business-type activities: Cardiff Sanitary Division 4,262,565 3,857,531 3,308,454 3,086,434 3,548,203 San Dieguito Water District 15,005,767 13,462,935 13,970,919 13,800,288 16,615,687 Encinitas Sanitary Division 1,731,770 2,306,540 2,037,116 1,652,061 2,044,676 Affordable Housing 1,408,226 1,440,124 1,449,917 1,464,181 1,576,162 Recreation Programs 1,331,565 - - - - Total business-type activities expenses 23,739,893 21,067,130 20,766,406 20,002,964 23,784,728 Total primary government expenses 92,201,067 92,937,104 96,284,150 99,913,146 106,498,738 Program revenues: Government activities: Charges for services: General government 1,629,857 1,594,277 1,675,799 1,815,086 1,239,815 Public safety 160,178 1,009,713 1,148,567 1,421,393 2,075,725 Public works 759,918 107,279 65,746 394,647 57,786 Planning and building 2,737,225 2,800,413 2,954,523 3,262,604 2,936,898 Engineering services 1,055,311 1,367,902 1,143,830 1,874,562 1,782,402 Parks and recreation 46,846 1,741,619 1,796,918 1,405,704 1,310,426 Operating grants and contributions 3,878,422 3,349,186 3,419,730 3,253,127 4,421,588 Capital grants and contributions 4,126,194 5,409,098 4,407,963 4,851,823 6,626,283 Total governmental activities program revenues 14,393,951 17,379,487 16,613,076 18,278,946 20,450,923 Business-type activities: Charges for services: Cardiff Sanitary Division 4,528,551 4,761,486 4,788,884 4,885,227 4,937,942 San Dieguito Water District 14,785,858 14,684,387 14,851,977 16,852,732 15,727,590 Encinitas Sanitary Division 2,841,235 2,855,690 2,819,006 2,711,075 2,698,745 Affordable Housing 247,349 218,148 213,124 225,468 260,848 Recreation Programs 1,321,471 - - - - Operating grants and contributions 1,061,698 1,068,549 1,099,366 1,093,800 1,142,424 Capital grants and contributions 483,425 681,412 736,370 560,651 728,700 Total business-type activities program revenues 25,269,587 24,269,672 24,508,727 26,328,953 25,496,249 Total primary government program revenues 39,663,538 41,649,159 41,121,803 44,607,899 45,947,172 Governmental activities (54,067,223) (54,490,487) (58,904,668) (61,631,236) (62,263,087) Business-type activities 1,529,694 3,202,542 3,742,321 6,325,989 1,711,521 Total net revenue (expense)(52,537,529)$ (51,287,945)$ (55,162,347)$ (55,305,247)$ (60,551,566)$ City of Encinitas (Continued) Fiscal Years 153 2010 2011 2012 2013 2014 General Revenues and Other Changes in Net Position: Governmental activities: Taxes Property and documentary transfer taxes 32,285,155$ 32,292,988$ 32,788,129$ 34,974,578$ 36,414,507$ Sales taxes 8,780,203 10,244,506 10,613,188 11,585,145 12,067,360 Transient occupancy taxes 1,179,789 1,276,980 1,413,926 1,491,998 1,570,459 Franchise taxes 2,031,924 2,108,420 2,144,162 2,323,616 2,614,844 Intergovernmental revenues 794,362 1,488,770 635,097 541,079 479,026 Investment income 1,085,981 657,796 387,066 552,512 705,849 Other general revenues 2,238,041 1,695,520 1,780,543 1,596,026 1,257,002 Gain/(Loss) on sale of assets - - - - (48,320) Impairment loss on capital assets - - - - - Transfers - - (668,877) 1,809,656 (33,545) Total governmental activities 48,395,455 49,764,980 49,093,234 54,874,610 55,027,182 Business-type activities: Property taxes 718,212 706,175 725,551 749,378 787,242 Intergovernmental-unrestricted - - - 189,676 - Investment income 395,152 508,089 188,259 3,118 357,357 Other general revenues 228,614 401,013 - - 63,768 Gain/(Loss) on sale of assets - - - - (187,942) Transfers - - 668,877 (1,809,656) 33,545 Total business-type activities 1,341,978 1,615,277 1,582,687 (867,484) 1,053,970 Total primary government 49,737,433 51,380,257 50,675,921 54,007,126 56,081,152 Changes in Net Position Government activities 392,202 6,487,482 1,507,303 8,115,258 12,690,959 Business-type activities 3,302,965 5,134,675 5,193,787 3,676,760 5,764,663 Total primary government 3,695,167$ 11,622,157$ 6,701,090$ 11,792,018$ 18,455,622$ The City reports recreation programs as a business-type activity beginning in Fiscal Year 2011-12. Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 Fiscal Years Changes in Net Position Last Ten Fiscal Years City of Encinitas (Accrual Basis of Accounting) (Continued) 154 2015 2016 2017 2018 2019 General Revenues and Other Changes in Net Position: Governmental activities: Taxes Property and documentary transfer taxes 38,508,558$ 41,210,485$ 43,494,220 46,311,814 49,237,265 Sales taxes 12,569,119 14,166,771 12,549,609 13,252,053 13,694,647 Transient occupancy taxes 1,828,116 2,018,024 2,216,145 2,562,484 2,775,771 Franchise taxes 2,761,335 2,794,144 2,545,854 2,587,443 2,571,367 Intergovernmental revenues 814,337 388,876 251,919 97,163 185,380 Investment income 880,989 611,350 770,634 958,172 2,613,728 Other general revenues 1,567,168 956,824 961,475 452,275 827,490 Gain/(Loss) on sale of assets 107,177 8,865 1,937 61,400 12,739 Impairment loss on capital assets - - (2,088,668) - - Transfers (36,068) 399,112 - 20,018 (16,644) Total governmental activities 59,000,731 62,554,451 60,703,125 66,302,822 71,901,743 Business-type activities: Property taxes 834,994 906,106 959,873 1,030,168 1,110,248 Intergovernmental-unrestricted - - (31,828) - - Investment income (60,169) (63,690) 6,925 (446,745) 1,393,446 Other general revenues 63,768 153,667 - 1,247,955 1,306,547 Gain/(Loss) on sale of assets 18,085 4,010 216,146 8,285 614,324 Transfers 36,068 (399,112) - (20,018) 16,644 Total business-type activities 892,746 600,981 1,151,116 1,819,645 4,441,209 Total primary government 59,893,477 63,155,432 61,854,241 68,122,467 76,342,952 Changes in Net Position Government activities 4,933,508 8,063,964 1,798,457 4,671,586 9,638,656 Business-type activities 2,422,440 3,803,523 4,893,437 8,145,634 6,152,730 Total primary government 7,355,948$ 11,867,487$ 6,691,894$ 12,817,220$ 15,791,386$ The City reports recreation programs as a business-type activity beginning in Fiscal Year 2011-12. Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 Fiscal Years (Accrual Basis of Accounting) (Continued) City of Encinitas Last Ten Fiscal Years Changes in Net Position 155 2010 2011(1)2012 2013 2014 General fund: Reserved 4,286,026$ -$ -$ -$ -$ Unreserved, designated 36,913,369 - - - - Unreserved, undesignated 5,789,899 - - - - Nonspendable - 2,648,338 2,868,533 1,980,075 2,052,250 Restricted - 633,245 - 7,996,400 4,079 Committed - 42,274,327 19,371,624 9,847,719 8,136,886 Assigned - - - 561,762 561,762 Unassigned - 1,850,582 17,964,935 21,160,822 25,151,131 Total general fund 46,989,294$ 47,406,492$ 40,205,092$ 41,546,778$ 35,906,108$ All other governmental funds: Reserved 3,408,409$ -$ -$ -$ -$ Unreserved, designated 10,430,543 - - - - Nonspendable - 145,686 - - 1,565 Restricted - 8,290,163 13,471,421 13,036,985 17,358,060 Committed - 7,570,021 - - - Assigned - - 2,169,209 2,135,100 - Unassigned - - - - - Total all other governmental funds 13,838,952$ 16,005,870$ 15,640,630$ 15,172,085$ 17,359,625$ Total all governmental funds 60,828,246$ 63,412,362$ 55,845,722$ 56,718,863$ 53,265,733$ (1) GASB No.54, which requires changes in reporting categories for fund balances was implemented in Fiscal Year 2010-11. Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 Fiscal Years City of Encinitas Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 156 2015 2016 2017 2018 2019 General fund: Reserved -$ -$ -$ -$ -$ Unreserved, designated - - - - - Unreserved, undesignated - - - - - Nonspendable 1,535,601 1,109,424 727,094 267,203 266,828 Restricted 3,009,269 - 1,472,372 251 383 Committed 8,266,796 - 13,937,399 14,691,792 15,545,889 Assigned 561,762 - -- - Unassigned 28,029,019 31,775,120 9,514,727 12,334,212 8,609,231 Total general fund 41,402,447$ 32,884,544$ 25,651,592$ 27,293,458$ 24,422,331$ All other governmental funds: Reserved -$ -$ -$ -$ -$ Unreserved, designated - - - - - Nonspendable - 287,756 296,234 - - Restricted 18,741,022 4,305,652 30,282,525 34,724,312 36,435,142 Committed - 1,626,219 18,998,215 17,760,602 24,412,850 Assigned - 24,776,682 - - - Unassigned - -(12,183,589) (14,945,248) (15,438,135) Total all other governmental funds 18,741,022$ 30,996,309$ 37,393,385$ 37,539,666$ 45,409,857$ Total all governmental funds 60,143,469$ 63,880,853$ 63,044,977$ 64,833,124$ 69,832,188$ (1) GASB No.54, which requires changes in reporting categories for fund balances was implemented in Fiscal Year 2010-11. Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 City of Encinitas Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) (Continued) Fiscal Years 157 2010 2011 2012 2013 2014 Revenues: Taxes and assessments 46,805,219$ 48,100,768$ 49,089,142$ 51,528,542$ 53,830,193$ Intergovernmental 6,917,521 8,369,571 6,537,855 8,520,220 5,025,480 Charges for services 5,164,315 6,376,261 4,406,737 4,450,756 5,479,847 Fines, forfeitures, and penalties 761,202 856,392 657,364 611,029 632,776 Use of money and property 1,085,981 657,798 639,676 572,481 724,310 Other 2,875,491 3,803,927 2,715,266 2,141,439 3,654,621 Total Revenues 63,609,729 68,164,717 64,046,040 67,824,467 69,347,227 Expenditures: Current: General government 11,859,415 10,155,732 9,277,443 9,430,487 9,109,412 Public safety 22,049,239 22,107,692 22,853,121 23,655,367 24,164,979 Public works 5,888,161 6,051,253 5,843,228 6,057,646 6,281,800 Planning and building 5,599,614 5,539,148 4,655,501 4,238,882 4,716,315 Engineering services 3,873,432 3,646,306 3,804,813 3,716,994 3,949,352 Parks and recreation 5,482,578 5,293,664 4,333,303 4,377,047 4,672,683 Capital outlay 5,606,327 8,559,193 12,803,379 18,836,006 14,548,894 Debt service: Principal 2,091,882 2,481,223 2,359,932 2,295,614 2,661,976 Interest and fiscal charges 2,332,574 2,056,501 1,872,773 2,050,068 1,937,144 Bond issuance costs - 395,404 - - - Total expenditures 64,783,222 66,286,116 67,803,493 74,658,111 72,042,555 Excess (deficiency) of revenues over (under) expenditures (1,173,493)1,878,601 (3,757,453)(6,833,644)(2,695,328) Other Financing Sources (Uses): Operating transfers in 11,066,120 13,133,224 17,661,946 23,363,240 20,570,966 Operating transfers out (11,066,120)(13,133,224)(18,354,656)(24,208,239)(21,328,768) Proceeds from capital lease - - 599,639 555,384 - Proceeds from sale of property - 19,530,000 - 7,865,000 - Issuance of debt - - - - - Premium on debt - 215,515 - 131,400 - Deposit to escrow for bond refunding - - - - - Bond discounts - (19,040,000) - - - Total other financing sources (uses)- 705,515 (93,071)7,706,784 (757,802) Net change in fund balances (1,173,493)$ 2,584,116$ (3,850,524)$ 873,140$ (3,453,130)$ Debt service as a percentage of noncapital expenditures 7.4%7.6%7.2%7.3%7.8% Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 Fiscal Years City of Encinitas Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 158 2015 2016 2017 2018 2019 Revenues: Taxes and assessments 56,825,628$ 61,325,308$ 61,934,421$ 65,845,166$ 69,403,416$ Intergovernmental 7,022,485 6,689,475 6,436,599 6,966,193 7,161,806 Charges for services 5,315,721 6,585,518 6,688,958 7,280,374 7,383,043 Fines, forfeitures, and penalties 802,936 889,388 850,153 704,216 794,237 Use of money and property 899,807 1,222,730 1,285,049 1,126,652 3,437,985 Other 2,456,996 2,804,043 2,215,452 2,566,551 3,089,553 Total Revenues 73,323,573 79,516,462 79,410,632 84,489,152 91,270,040 Expenditures: Current: General government 9,362,214 9,288,227 10,017,430 12,213,808 12,783,602 Public safety 24,902,920 26,976,136 27,724,959 29,478,104 31,494,405 Public works 6,682,424 6,305,340 6,351,537 5,033,316 5,875,143 Planning and building 5,082,589 5,159,777 5,110,298 6,017,914 6,570,840 Engineering services 4,162,630 4,298,563 4,368,601 3,504,336 3,851,316 Parks and recreation 5,091,224 6,366,337 6,610,308 7,879,881 7,954,529 Capital outlay 18,440,036 10,799,083 12,230,552 12,933,995 11,925,637 Debt service: Principal 2,730,686 2,783,268 2,853,417 2,128,758 1,949,298 Interest and fiscal charges 2,170,164 2,372,231 2,077,770 1,899,328 1,774,333 Bond issuance costs - - - - - Total expenditures 78,624,887 74,348,962 77,344,872 81,089,440 84,179,103 Excess (deficiency) of revenues over (under) expenditures (5,301,314)5,167,500 2,065,760 3,399,712 7,090,937 Other Financing Sources (Uses): Operating transfers in 24,514,293 44,550,246 35,159,839 30,412,724 25,249,787 Operating transfers out (25,509,616)(45,577,444)(36,650,845)(32,024,289)(27,341,660) Proceeds from capital lease - - - - - Proceeds from sale of property 13,174,373 15,645,000 - - - Issuance of debt - 115 11,955,000 - - Premium on debt - 772,212 1,360,284 - - Deposit to escrow for bond refunding - (16,820,243) (14,725,914) - - Bond discounts - - - - - Total other financing sources (uses)12,179,050 (1,430,114)(2,901,636)(1,611,565)(2,091,873) Net change in fund balances 6,877,736$ 3,737,386$ (835,876)$ 1,788,147$ 4,999,064$ Debt service as a percentage of noncapital expenditures 7.6%7.5%6.9%5.4%4.8% Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 City of Encinitas Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years Fiscal Years (Modified Accrual Basis of Accounting) (Continued) 159 (In thousands of dollars) Fiscal Year Ended June 30 Residential Property Commercial Property Industrial Property All Other Property (1) Total Net Taxable Assessed Value (2) Total Direct Tax Rate % (3) 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% 2018 13,453,667 1,436,502 42,618 433,992 15,366,779 0.23749% 2019 14,191,006 1,546,386 44,994 590,531 16,372,917 0.23769% (1) All Other Property includes the following categories: dry farm, institutional, irrigated, recreational, vacant land, exempt and unsecured properties. (2) The "total net taxable assessed value" is net of tax-exempt property. Homeowners' exemptions are not included in the totals shown. (3) The total direct tax rate is the City's proportionate share of Proposition 13 property taxes collected within the tax area. Source: HdL Companies City of Encinitas Assessed Value of Taxable Property Last Ten Fiscal Years $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Taxable Assessed Value (In thousands) Residential Commercial Industrial Fiscal Years 160 Taxable % of Total Taxable % of Total Assessed City Assessed Assessed City Assessed Secured Value Rank Secure Value Secured Value Rank Secure Value Scripps Health $166,475,379 1 1.03%16,515,834$ 20 1.46% TRC Encinitas Village LLC 86,242,451 2 0.53%- - - Collwood Pines Apartments 80,206,891 3 0.49%70,979,046 1 6.27% Belmont Village 59,461,933 4 0.37%33,546,200 3 2.96% Pacifico Encinitas Apartment 52,880,000 5 0.33%- - - Encinitas Town Center Association 38,870,426 6 0.24%32,123,522 4 2.84% Encinitas MarketPlace LLC 38,000,000 7 0.23%- - - NCHC3 LLC 36,703,861 8 0.23%- - - Weingarten Nostat Inc 36,006,174 9 0.22%- - - Home Depot USA Inc.31,226,189 10 0.19%28,228,851 8 2.49% SS L Landlord LLC 25,897,648 11 0.16%- - - Mission Ridge LLC 25,270,729 12 0.16%- - - Vons Companies Inc.24,531,128 13 0.15%21,392,678 14 1.89% Paul H Meardon Trust 24,293,023 14 0.15%- - - Keith B. and Sara S. Harrison 22,298,230 15 0.14%16,126,379 22 1.42% Paul Vincent Bernard Hyde 21,638,939 16 0.13%- - - Quail Pointe Apartment Homes LP 21,000,293 17 0.13%18,566,995 15 1.64% Sterling Family Trust 19,464,355 18 0.12%17,102,759 18 1.51% Plenc El Camino LLC 19,182,068 19 0.12%16,802,557 19 1.48% Los Angeles Fitness Int'l LLC 19,172,328 20 0.12%- - - Shea Homes LP 16,077,460 21 0.10%- - - Camino Village LLC 16,005,086 22 0.10%- - - Essex Heights LLC 15,971,708 23 0.10%- - - Target Corporation 15,638,930 24 0.10%- - - Golden Eagle Annuity Invest LP 15,587,522 25 0.10%- - - PK III Encinitas Marketplace LP - - - 39,717,270 2 3.51% North Coast Health Center LLC - - - 32,011,781 5 2.83% WRI El Camino LP - - - 31,813,910 6 2.81% Lofts at Moonlight Beach LLC - - - 31,155,758 7 2.75% North Coast Business Park - - - 23,628,937 9 2.09% Urschel Laboratories Inc.- - - 22,402,164 10 1.98% ASN Encinitas LLC - - - 22,347,830 11 1.97% SDCC Properties - - - 21,848,400 12 1.93% KSL Encinitas Resort Corporation - - - 21,536,280 13 1.90% Pacific Station Property LLC - - - 18,117,684 16 1.60% Encinitas Plaza LLC - - - 17,278,863 17 1.53% Hughes Encinitas Limited - - - 16,348,444 21 1.44% ARV Assisted Living Inc.- - - 14,565,600 23 1.29% Encinitas Terraces LLC - - - 14,056,502 24 1.24% Bellflower Capital LP - - - 13,438,253 25 1.19% $928,102,751 5.74%611,652,497$ 54.02% Source: HdL Companies City of Encinitas Taxpayer Principal Property Taxpayers Current Fiscal Year and Nine Years Ago 2019 2010 161 Fiscal Taxes Levied Collections Year Ended for the Percent in Subsequent Percentage of June 30 Fiscal Year Amount of Levy Years Amount Levy 2010 27,421,386 26,490,783 96.61%548,636 27,039,420 98.61% 2011 27,541,487 26,888,921 97.63%238,418 27,127,339 98.50% 2012 28,100,611 27,540,858 98.01%238,418 27,779,276 98.86% 2013 29,207,237 28,712,036 98.30%157,287 28,869,323 98.84% 2014 30,550,301 30,009,574 98.23%133,208 30,142,782 98.67% 2015 32,251,814 31,755,994 98.46%168,077 31,924,071 98.98% 2016 34,443,972 33,961,174 98.60%235,730 34,196,904 99.28% 2017 48,540,436 47,871,961 98.62%330,704 48,202,665 99.30% 2018 50,804,445 50,172,791 98.76%171,827 50,344,617 99.09% 2019 53,427,075 52,652,248 98.55% N/A 52,652,248 98.55% Source: County of San Diego Auditor and Controller: Property Tax Apportionment City of Encinitas Total Collections to Date Collected within the Fiscal Year of Levy Property Tax Levies and Collections Last Ten Fiscal Years 162 This page intentionally left blank. 163 2010 2011 2012 2013 2014 %%%%% City of Encinitas Basic Rate 0.23338 0.23472 0.23866 0.23974 0.24002 City of Encinitas Total Direct Rate (1)0.23338 0.23472 0.23866 0.23974 0.24002 Overlapping Rates: (2) City of Encinitas 0.26648 0.26648 0.24020 0.24020 0.24020 Encinitas Landscape & Lighting District 0.01596 0.01596 0.02100 0.02100 0.02100 Autistic Pupils Minors Elementary 0.00009 0.00009 0.00000 0.00000 0.00000 Autistic Pupils Minors High 0.00009 0.00009 0.00000 0.00000 0.00000 Cardiff, Encinitas Elementary 0.26240 0.26240 0.24870 0.24870 0.24870 Children's Institutions Tuition 0.00146 0.00146 0.00107 0.00107 0.00107 County General 0.07570 0.07570 0.08020 0.08020 0.08020 County Library 0.01995 0.01995 0.01969 0.01969 0.01969 County School Service 0.00687 0.00687 0.00643 0.00643 0.00643 County School Service-Capital Outlay 0.00173 0.00173 0.00161 0.00161 0.00161 County Service Area No. 17 0.00291 0.00291 0.00251 0.00251 0.00251 CWA San Dieguito Water District, OMWD 0.00344 0.00344 0.02510 0.02510 0.02510 Development Centers for Handicapped Elementary 0.00043 0.00043 0.00000 0.00000 0.00000 Development Centers for Handicapped High 0.00044 0.00044 0.00000 0.00000 0.00000 Educable Mentally Retarded Minors 0.00196 0.00196 0.00161 0.00161 0.00161 Educational Revenue Augmentation Fund 0.08570 0.08570 0.08620 0.08620 0.08620 Mira Costa Community College 0.08590 0.08590 0.08150 0.08150 0.08150 Physically Handicapped Minors Elementary 0.00303 0.00303 0.00268 0.00268 0.00268 Physically Handicapped Minors High 0.00304 0.00304 0.00268 0.00268 0.00268 Regional Occupational Centers 0.00438 0.00438 0.00375 0.00375 0.00375 San Dieguito Union High 0.14400 0.14400 0.13610 0.13610 0.13610 San Dieguito Water District 0.00992 0.00992 0.03590 0.03590 0.03590 Trainable Mentally Retarded Minors Elementary 0.00197 0.00197 0.00161 0.00161 0.00161 Trainable Mentally Retarded Minors High 0.00198 0.00198 0.00161 0.00161 0.00161 Oceanside (19/85001),Vista (19/85701) Projects 0.00017 0.00017 0.00000 0.00000 0.00000 Total Prop 13 Rate (3)1.00000 1.00000 1.00000 1.00000 1.00000 (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. Fiscal Years (3) In 1978, the voters of the State of California passed Proposition 13, which limited property taxes to a total maximum rate of one percent 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 two percent). 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. City of Encinitas Direct and Overlapping Property Tax Rates Last Ten Fiscal Years Notes; 164 2015 2016 2017 2018 2019 %%%%% City of Encinitas Basic Rate 0.24534 0.23978 0.23644 0.23695 0.23769 City of Encinitas Total Direct Rate (1)0.24534 0.23978 0.23644 0.23695 0.23769 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 Minors Elementary 0.00000 0.00000 0.00000 0.00000 0.00000 Autistic Pupils Minors 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 Elementary 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 Elementary 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 Elementary 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 (3) In 1978, the voters of the State of California passed Proposition 13, which limited property taxes to a total maximum rate of one percent 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 two percent). 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. (1) Total Direct Rate is the weighted average of all individual direct rates applied by the government preparing the statistical section information. Notes: (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. City of Encinitas Direct and Overlapping Property Tax Rates (Continued) Fiscal Years Last Ten Fiscal Years 165 2010 2011 2012 2013 2014 %%%%% Gen Bond Cardiff 2000A 0.03518 - - - - Gen Bond Cardiff 2000 Election,2010 Ref. Bonds - 0.03715 0.03489 0.03458 0.03386 MWD D/S Remainder of SDCWA 1501999 0.00430 0.00370 0.00370 0.00350 0.00350 Total Voter Approved Rate 0.03948 0.04085 0.03859 0.03808 0.03736 Total Tax Rate 1.03948 1.04085 1.03859 1.03808 1.03736 Source: HdL Companies; County of San Diego Office of Property Tax Services Fiscal Years Last Ten Fiscal Years Direct and Overlapping Property Tax Rates City of Encinitas (Continued) 166 2015 2016 2017 2018 2019 %%%%% Gen Bond Cardiff 2000A - - - 0.03028 0.03737 Gen Bond Cardiff 2000 Election,2010 Ref. Bonds 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 0.03904 0.03674 0.03542 0.03378 0.04087 Total Tax Rate 1.03904 1.03674 1.03542 1.03378 1.04087 Source: HdL Companies; County of San Diego Office of Property Tax Services Fiscal Years Last Ten Fiscal Years City of Encinitas Direct and Overlapping Property Tax Rates (Continued) 167 Fiscal Year Ended June 30 Bonded Debt Capital Leases Total Governmental Activities 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 54,984,722 2017 48,953,813 2,205,282 51,159,095 2018 46,830,807 1,633,559 48,464,366 2019 44,899,354 1,220,867 46,120,221 Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 (1) Debt per Capita is calculated by dividing the total primary government amount by the City population shown on the Demographic and Economic statistical page. Governmental Activities City of Encinitas Ratios of Outstanding Debt by Type Last Ten Fiscal Years 168 Fiscal Year Ended June 30 Water Bonds and Notes CSD Note Payable EHA Note Payable Total Business- type Activities Total Primary Government Debt Per Capita (1) 2010 17,545,000$ 5,770,000$ 1,638,817$ 24,953,817$ 71,304,384$ 1,190$ 2011 16,620,000 5,300,000 1,591,681 23,511,681 69,190,115 1,147 2012 15,660,000 4,625,969 1,544,434 21,830,403 65,757,768 1,090 2013 14,670,000 4,045,028 1,495,415 20,210,443 70,393,202 1,162 2014 13,645,000 3,447,591 1,444,731 18,537,322 66,048,570 1,079 2015 11,669,345 2,833,824 1,391,715 15,894,884 73,840,284 1,200 2016 10,609,973 2,205,893 1,331,410 14,147,276 69,131,998 1,117 2017 9,510,602 1,559,300 1,253,177 12,323,079 63,482,174 1,019 2018 8,376,231 12,960,295 1,173,058 22,509,584 70,973,950 1,124 2019 7,201,858 12,226,938 1,091,629 20,520,425 66,640,646 1,051 Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 (Continued) population shown on the Demographic and Economic statistical page. (1) Debt per Capita is calculated by dividing the total primary government amount by the City Business-type Activities City of Encinitas Ratios of Outstanding Debt by Type Last Ten Fiscal Years 169 Fiscal Certificates of Participation Percentage Year Ended and Assessed of Assessed Per June 30 Lease Revenue Bonds Valuation (1)Value Capita 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 11,723,928,000 0.40%772 2014 44,546,848 11,497,856,000 0.39%728 2015 55,431,687 12,870,004,000 0.43%901 2016 52,933,882 13,702,972,000 0.39%855 2017 48,953,813 12,870,004,000 0.38%786 2018 46,830,807 15,366,779,000 0.30%741 2019 49,737,836 16,372,917,000 0.30%785 Source: Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 (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 of the Statistical Section. Ratios of General Bonded Debt Outstanding City of Encinitas Last Ten Fiscal Years Notes: Details regarding the City's outstanding debt can be found in the Notes to the Basic 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. Outstanding General Bonded Debt 170 FY 2018-19 Assessed Valuation:$16,374,697,624 City's Share of Total Debt Applicable Overlapping Debt June 30, 2019 % (1)June 30, 2019 OVERLAPPING TAX AND ASSESSMENT DEBT: Metropolitan Water District 48,050,000$ 56.100%269,561$ Mira Costa Community College District 85,850,000 15.141%12,998,549 Cardiff School District 24,425,198 100.000%24,425,198 Encinitas Union School District 47,547,433 67.956%32,311,334 San Dieguito Union High School 333,920,000 24.795%82,795,464 San Dieguito Union High School District Community Facilities Districts 37,985,000 31.405%11,929,114 City of Encinitas Community Facilities District No. 1 23,905,000 100.000%23,905,000 Olivenhain Municipal Water District, Assessment District No. 96-1 9,765,000 25.924%2,531,479 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 191,165,699$ DIRECT AND OVERLAPPING GENERAL FUND DEBT San Diego County General Fund Obligations 255,365,000$ 3.113%7,949,512$ San Diego County Pension Obligations 508,765,000 3.113%15,837,854 San Diego County Superintendent of Schools Obligations 10,085,000 3.113%313,946 Mira Costa Community College District Certificates of Participation 150,000 15.141%22,712 San Dieguito Union High School District General Fund Obligations 12,730,000 24.795%3,156,404 City of Encinitas Bonded Debt 43,155,000 100.000%43,155,000 City of Encinitas Bond Premiums and Discounts 1,744,354 100.000%1,744,354 City of Encinitas Capital Leases 1,220,867 100.000%1,220,867 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT 73,400,649$ TOTAL DIRECT DEBT 46,120,221$ TOTAL OVERLAPPING DEBT 218,446,127$ COMBINED TOTAL DEBT 264,566,348$ (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 districts' assessed value that is within the City divided by the districts' total taxable assessed value. (2)Excludes tax and revenue anticipation notes, enterprise revenue and mortgage revenue. Ratios to FY 2018-19 Assessed Valuation: Total Overlapping Tax and Assessment Debt..…………………………….1.17% Total Direct Debt ($ 46,120,221).……...……..….……………………….…0.28% Combined Total Debt…...…….………….….….…….………....…………….1.62% Source: County of San Diego Assessor City of Encinitas Schedule of Direct and Overlapping Bonded Debt June 30, 2019 171 City of Encinitas Legal Debt Margin Information Last Ten Fiscal Years (in thousands) 2010 2011 2012 2013 2014 Assessed valuation 11,337,568$ 11,342,197$ 11,497,856$ 11,723,928$ 12,147,361$ Conversion percentage equal 25%25%25%25%25% to 25% of assessed valuation Adjusted assessed valuation 2,834,392 2,835,549 2,874,464 2,930,982 3,036,840 Debt limit percentage 15%15%15%15%15% Debt limit 425,159 425,332 431,170 439,647 455,526 Total net debt applicable to limit:44,165 42,641 40,646 46,736 44,547 Legal debt margin 380,994$ 382,691$ 390,524$ 392,911$ 410,979$ Total debt applicable to the limit as a percentage of debt limit 10.39%10.03%9.43%10.63%9.78% Notes: Details regarding the City's outstanding debt can be found in the Notes to the Financial Statements section. Source: HdL Companies Fiscal Years The Government Code of the State of California provides for a legal debt limit of 15 percent of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25 percent of market value. Effective with Fiscal Year 1981-82, each parcel is now assessed at 100 percent 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 percent level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the state. 172 City of Encinitas Legal Debt Margin Information Last Ten Fiscal Years (in thousands) 2015 2016 2017 2018 2019 Assessed valuation 12,870,004$ 13,702,972$ 14,472,213$ 15,366,779$ 16,374,698$ Conversion percentage equal 25%25%25%25%25% to 25% of assessed valuation Adjusted assessed valuation 3,217,501 3,425,743 3,618,053 3,841,695 4,093,675 Debt limit percentage 15%15%15%15%15% Debt limit 482,625 513,861 542,708 576,254 614,051 Total net debt applicable to limit:55,432 52,934 48,954 46,831 49,738 Legal debt margin 427,193$ 460,927$ 493,754$ 529,423$ 564,313$ Total debt applicable to the limit as a percentage of debt limit 11.49%10.30%9.02%8.13%8.10% Notes: Details regarding the City's outstanding debt can be found in the Notes to the Financial Statements section. Source: HdL Companies Fiscal Years (Continued) The Government Code of the State of California provides for a legal debt limit of 15 percent of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25 percent of market value. Effective with Fiscal Year 1981-82, each parcel is now assessed at 100 percent 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 percent level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the state. 173 2010 2011 2012 2013 2014 Revenues: Operating revenues - including connection fees 11,267,684$ 12,574,450$ 13,170,422$ 13,789,636$ 15,715,575$ Non-operating revenues 879,477 817,872 813,610 869,568 827,676 Gross Revenues 12,147,161 13,392,322 13,984,032 14,659,204 16,543,251 Total Operating & Non-Operating Expenses 11,634,347 11,614,631 12,448,911 12,198,228 14,066,485 Net Income 512,814 1,777,691 1,535,121 2,460,976 2,476,766 Add: Interest expense 749,704 725,936 698,908 657,963 622,075 Depreciation and amortization expense 1,213,640 1,196,007 1,294,904 1,476,044 1,490,806 Net Revenues Available for Debt Service 2,476,158 3,699,634 3,528,933 4,594,983 4,589,647 Less: Debt Service Paid 2004 Water Revenue Refunding Bonds - Interest Charges 469,269 452,244 433,950 408,906 380,731 2004 Water Revenue Refunding Bonds - Principal Payments 560,000 575,000 595,000 615,000 640,000 2007 Note Payable to Financing Authority - Interest Charges 265,157 281,494 270,352 256,744 241,344 2007 Note Payable to Financing Authority - Principal Payments 335,000 350,000 365,000 375,000 385,000 2014 Water Revenue Refunding Bonds - Interest Charges - - - - - 2014 Water Revenue Refunding Bonds - Principal Payments - - - - - Total Debt Service 1,629,426$ 1,658,738$ 1,664,302$ 1,655,650$ 1,647,075$ Coverage by Net Revenues Available for Debt Service 152%223%212%278%279% 2010 2011 2012 2013 2014 Revenues: Operating revenues - including connection fees (1)5,049,039$ 5,337,717$ 5,087,182$ 4,755,573$ 4,758,606$ Non-operating revenues 162,601 355,974 79,347 39,015 1,216,941 Gross Revenues 5,211,640 5,693,691 5,166,529 4,794,588 5,975,547 Total Operating & Non-Operating Expenses 3,569,880 3,746,748 3,385,439 3,310,986 3,189,268 Net Income 1,641,760 1,946,943 1,781,090 1,483,602 2,786,279 Add: Interest expense 285,800 267,533 248,400 142,898 266,822 Depreciation and amortization expense 912,026 932,273 404,640 800,000 200,459 Net Revenues Available for Debt Service 2,839,586 3,146,749 2,434,130 2,426,500 3,253,560 Less: Debt Service 2003 Note Payable to SEJPA - Interest Charges 291,800 273,800 255,000 - - 2003 Note Payable to SEJPA - Principal Payments 450,000 470,000 490,000 - - 2011 Note Payable to SEJPA - Interest Charges - - 28,945 142,898 131,967 2011 Note Payable to SEJPA - Principal Payments - - 25,000 546,540 563,037 2017 Note Payable to SEJPA-Interest Charges - - - - - 2017 Note Payable to SEJPA-Principal Payments - - - - - Total Debt Service 741,800$ 743,800$ 798,945$ 689,438$ 695,004$ Coverage by Net Revenues Available for Debt Service 383%423%305%352%468% Source: City of Encinitas Finance Department City of Encinitas Historical Debt Service Coverage Last Ten Fiscal Years Debt service coverage requirement is a minimum 110 percent of net revenue including connection fees. The above schedules include connection fees in operating revenues. San Dieguito Water District Cardiff Sanitary Division Debt service coverage requirement is a minimum 115 percent of net revenue including connection fees. The above schedules include connection fees in operating revenues. 174 2015 2016 2017 2018 2019 Revenues: Operating revenues - including connection fees 15,152,433$ 14,852,061$ 15,142,544$ 17,219,494$ 15,961,300$ Non-operating revenues 927,526 1,013,297 1,048,764 1,092,337 2,307,498 Gross Revenues 16,079,959 15,865,358 16,191,308 18,311,831 18,268,798 Total Operating & Non-Operating Expenses 15,481,543 13,800,671 14,263,288 15,198,929 16,541,314 Net Income 598,416 2,064,687 1,928,020 3,112,902 1,727,484 Add: Interest expense 475,775 412,108 366,740 328,050 292,354 Depreciation and amortization expense 2,271,907 1,514,716 978,627 1,848,913 2,208,775 Net Revenues Available for Debt Service 3,346,098 3,991,511 3,273,387 5,289,865 4,228,613 Less: Debt Service Paid 2004 Water Revenue Refunding Bonds - Interest Charges 144,720 - - - - 2004 Water Revenue Refunding Bonds - Principal Payments 665,000 - - - - 2007 Note Payable to Financing Authority - Interest Charges 224,994 211,144 191,244 171,619 152,919 2007 Note Payable to Financing Authority - Principal Payments 405,000 415,000 440,000 455,000 475,000 2014 Water Revenue Refunding Bonds - Interest Charges 106,061 202,400 185,075 167,225 148,775 2014 Water Revenue Refunding Bonds - Principal Payments - 570,000 585,000 605,000 625,000 Total Debt Service 1,545,775$ 1,398,544$ 1,401,319$ 1,398,844$ 1,401,694$ Coverage by Net Revenues Available for Debt Service 216%285%234%378%302% 2015 2016 2017 2018 2019 Revenues: Operating revenues - including connection fees (1)4,615,399$ 4,862,274$ 5,006,574$ 5,081,021$ 5,013,316$ Non-operating revenues 120,668 149,151 140,095 162,951 496,059 Gross Revenues 4,736,067 5,011,425 5,146,669 5,243,972 5,509,375 Total Operating & Non-Operating Expenses 4,371,847 3,949,288 3,380,180 3,578,417 3,548,203 Net Income 364,220 1,062,137 1,766,489 1,665,555 1,961,172 Add: Interest expense 109,282 91,757 71,727 491,983 472,324 Depreciation and amortization expense 1,555,955 1,303,272 754,400 386,019 389,390 Net Revenues Available for Debt Service 2,029,457 2,457,166 2,592,616 2,543,557 2,822,886 Less: Debt Service 2003 Note Payable to SEJPA - Interest Charges - - - - - 2003 Note Payable to SEJPA - Principal Payments - - - - - 2011 Note Payable to SEJPA - Interest Charges 109,282 91,757 79,889 55,402 29,788 2011 Note Payable to SEJPA - Principal Payments 579,366 593,530 612,192 640,352 663,846 2017 Note Payable to SEJPA-Interest Charges - - - 294,656 451,388 2017 Note Payable to SEJPA-Principal Payments - - - - - Total Debt Service 688,648$ 685,287$ 692,081$ 990,410$ 1,145,021$ Coverage by Net Revenues Available for Debt Service 295%359%375%257%247% Source: City of Encinitas Finance Department (Continued) San Dieguito Water District Cardiff Sanitary Division City of Encinitas Historical Debt Service Coverage Last Ten Fiscal Years Debt service coverage requirement is a minimum 110 percent of net revenue including connection fees. The above schedules include connection fees in operating revenues. Debt service coverage requirement is a minimum 115 percent of net revenue including connection fees. The above schedules include connection fees in operating revenues. 175 Fiscal Year Ended June 30 City Population % of San Diego County Population % Change from Previous Year Median Age Average Household Size Unemployment Rate 2010 59,628 2.0%0.29%41.6 2.45 8.8% 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% 2018 63,158 1.9%1.38%41.5 2.45 2.8% 2019 63,390 1.9%0.37%42.9 2.56 2.6% NOTE: City population figures have been revised to match updated population from the California State Department of Finance as of January 1, 2019. Sources: California Department of Finance; US Census Bureau QuickFacts; Employment Development Department City of Encinitas Demographic and Economic Statistics Last Ten Fiscal Years 176 Fiscal Year Ended June 30 Property and Documentary Transfer Tax Sales and Use Tax Transient Occupancy Tax Franchise Tax Total Tax Revenue 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 2018 46,311,814 13,252,053 2,562,484 2,587,443 64,713,794 2019 50,330,691 13,701,719 2,775,771 2,199,194 69,007,375 Property Tax Levies and Collections Source: City of Encinitas Finance Department City of Encinitas General Governmental Tax Revenue by Source Last Ten Fiscal Years $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total General Governmental Tax Revenues Property Tax Sales Tax Transient Occupancy Tax Franchise Tax Fiscal Years 177 2010 2011 2012 2013 2014 Autos and Transportation 1,189,413$ 1,330,270$ 1,427,132$ 1,446,737$ 1,519,006$ Building and Construction 818,484 774,109 868,790 820,467 887,182 Business and Industry 461,247 537,840 518,699 560,723 573,032 Food and Drugs 931,937 945,542 995,511 1,003,491 1,001,942 Fuel and Service Stations 1,146,372 1,351,288 1,569,265 1,577,783 1,559,342 General Consumer Goods 2,836,989 2,818,809 3,117,547 3,165,746 3,355,540 Restaurants and Hotels 1,388,570 1,442,976 1,624,007 1,699,705 1,825,971 Total 8,773,012$ 9,200,834$ 10,120,951$ 10,274,652$ 10,722,015$ 2015 2016 2017 2018 2019 Autos and Transportation 1,638,839$ 1,684,618$ 1,627,531$ 1,744,199$ 1,806,753$ Building and Construction 944,334 980,140 1,021,600 924,933 1,133,022 Business and Industry 556,835 738,490 623,641 567,665 629,112 Food and Drugs 1,028,085 1,005,870 931,650 1,010,551 1,110,862 Fuel and Service Stations 1,500,416 1,382,946 1,191,164 1,025,386 1,630,124 General Consumer Goods 3,476,481 3,535,734 3,492,330 3,400,696 3,812,472 Restaurants and Hotels 1,978,072 2,113,116 2,264,487 2,274,664 2,560,108 Total 11,123,062$ 11,440,914$ 11,152,403$ 10,948,094$ 12,682,453$ Source: HdL Companies 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. City of Encinitas Taxable Sales by Business Type Last Ten Fiscal Years 178 % of Total City % of Total City Employer Industry Employees Rank Employment Employees Rank Employment Scripps Memorial Hospital Health Care & Social Assistance 1,017 1 2.93%650 1 1.69% Walmart Supercenter Retail 335 2 0.96%- - - YMCA Recreation Facilities 300 3 0.86%300 2 0.78% Target Retail 250 4 0.72%250 4 0.65% San Diego Hebrew Homes Health Care & Social Assistance 220 5 0.63%220 7 0.57% Paul Ecke Ranch Agriculture 201 6 0.58%250 5 0.65% Encinitas City Hall Government Office 200 7 0.58%- - - Magdalena Ecke Family YMCA Recreation Facilities 200 8 0.58%- - - Marriott International Inc Hotels & Motels 200 9 0.58%- - - Seacrest Village Retire Community Health Care & Social Assistance 200 10 0.58%- - - Hom e Depot Retail - - - 250 3 0.65% Scripps Rehabilitation Services Health Care & Social Assistance - - - 250 6 0.65% Quality Children's Services Child Care Services - - - 205 8 0.53% California Bank & Trust Financial Services - - - 200 10 0.52% Subtotal Employees 3,123 9.00%2,575 6.69% Total Employees 34,745 38,493 Sources: InfoUSA 2019 2010 City of Encinitas Principal Employers Current Fiscal Year and Nine Years Ago 179 Function 2010 2011 2012 2013 2014 General government 43.00 44.25 44.55 44.75 44.75 Public safety 68.00 63.00 63.00 63.00 66.00 Public works 29.55 28.85 28.85 29.25 29.55 Engineering services 27.47 27.47 27.42 26.42 27.17 Parks and recreation 21.18 21.18 21.18 21.18 21.18 Planning and building 26.75 26.75 26.75 26.75 27.25 Subtotal 215.95 211.50 211.75 211.35 215.90 San Dieguito Water District 25.70 25.40 25.40 25.00 23.00 Function 2015 2016 2017 2018 2019 General government 46.75 46.75 46.75 44.60 44.60 Public safety 66.00 69.00 69.00 69.00 69.00 Public works 28.55 28.55 28.55 27.55 27.55 Engineering services*27.17 27.17 27.17 - - Parks and recreation 20.18 20.18 20.18 22.25 22.25 Planning and building*27.25 27.25 27.25 - - Development services*- - - 53.00 52.25 Subtotal 215.90 218.90 218.90 216.40 215.65 San Dieguito Water District 24.00 24.00 24.00 24.00 24.00 *Engineering and Planning/Building merged into Development Services during FY 2017-18. Fiscal Years Fiscal Years City of Encinitas Full-Time and Part-Time Employees by Function Last Ten Fiscal Years Source: City of Encinitas Finance Department 180 This page intentionally left blank. 181 2010 2011 2012 2013 2014 San Diego County Sheriff's Department Criminal arrests 1,803 1,047 1,231 1,548 1,595 Traffic arrests 482 535 485 383 331 Traffic accidents 385 472 441 372 323 Traffic citations 11,714 12,024 11,349 11,381 10,357 Calls for service 21,216 20,602 20,150 20,559 19,394 Deputy initiated action 25,401 29,224 29,862 31,281 29,849 Fire: Number of emergency fire calls 106 96 124 102 383 Number of EMS/rescue 3,291 3,498 3,495 3,697 3,806 Other 1,475 1,520 1,737 1,932 1,458 Inspections 2,055 2,263 2,252 2,163 2,143 Engineering: Number of permits issued 301 397 392 269 351 Parks and recreation: Number of recreation class registrations 11,435 10,697 11,119 11,175 16,236 Number of facility rentals 459 377 749 421 578 Planning and building: Number of planning permits issued 181 177 202 207 298 Number of new dwelling units issued 39 51 121 63 161 Environmental review 11 4 7 6 9 Appeals 1 3 3 5 7 Plan checks 805 882 948 990 1,391 Code enforcement complaints 1,667 1,645 1,270 1,199 1,153 Water: New connections 18 9 79 64 131 Average daily consumption (millions of gallons)5.42 5.21 5.32 5.61 5.71 Sewer: New connections 26 14 44 50 22 Average daily sewage treatment (millions of gallons)2.46 2.43 2.38 2.40 2.36 The City of Encinitas contracts with the County of San Diego Sheriff's Department to provide law enforcement services. Source: City of Encinitas Fire, Parks, Recreation and Cultural Arts, Development Services, and San Dieguito Water District City of Encinitas Operating Indicators by Function Last Ten Fiscal Years 182 2015 2016 2017 2018 2019 San Diego County Sheriff's Department Criminal arrests 1,743 1,997 1,612 1,130 1,161 Traffic arrests 551 263 201 213 355 Traffic accidents 297 274 289 307 281 Traffic citations 13,650 14,873 4,891 5,501 9,635 Calls for service 21,335 22,518 19,372 20,019 19,190 Deputy initiated action 27,339 27,481 24,625 22,612 25,725 Fire: Number of emergency fire calls 300 328 283 532 934 Number of EMS/rescue 3,844 4,098 4,717 4,775 6,270 Other 1,265 1,517 1,035 2,382 1,711 Inspections 2,072 2,133 2,122 3,145 2,198 Engineering: Number of permits issued 383 436 440 424 399 Parks and recreation: Number of recreation class registrations 16,289 15,500 16,338 15,444 17,812 Number of facility rentals 557 538 492 537 550 Planning and building: Number of planning permits issued 335 263 276 222 194 Number of new dwelling units issued 135 117 94 160 71 Environmental review 10 4 7 3 6 Appeals 6 11 6 6 5 Plan checks 1,737 2,339 1,807 2,147 2,409 Code enforcement complaints 1,063 1,199 1,282 878 1,090 Water: New connections 69 77 39 50 114 Average daily consumption (millions of gallons)5.49 4.56 4.85 5.21 4.82 Sewer: New connections 53 33 65 62 14 Average daily sewage treatment (millions of gallons)2.22 2.20 2.27 2.20 1.21 The City of Encinitas contracts with the County of San Diego Sheriff's Department to provide law enforcement services. Source: City of Encinitas Fire, Parks, Recreation and Cultural Arts, Development Services, and San Dieguito Water District Last Ten Fiscal Years (Continued) City of Encinitas Operating Indicators by Function 183 2010 2011 2012 2013 2014 Law enforcement: * Number of sub-stations 1 1 1 1 1 Fire department: Fire stations 5 5 5 6 6 Public works: Streets (miles) **201 201 201 201 201 Engineering: Signalized intersections 63 63 63 63 63 Parks and recreation: Community and senior center 1 1 1 1 1 Developed parks 18 18 18 18 18 Undeveloped parks 4 4 4 4 4 Parkland acres 382 382 382 382 382 Habitat/open space acreage 87 87 87 87 87 Marine life refuge 1 1 1 1 1 Trails/streetscapes (miles)41/10 41/10 41/10 41/10 41/10 Lifeguard towers 7 7 7 7 7 Water: Water mains (miles)166 168 168 168 168 Maximum daily capacity (millions of gallons)15 15 15 15 15 Source: City of Encinitas Fire, Parks, Recreation and Cultural Arts, Development Services, and San Dieguito Water District ** Prior to FY 2017-18 data included both City and privately maintained streets. In FY 2017-18, data includes only City maintained streets. * The City of Encinitas contracts with the County of San Diego Sheriff's Department to provide law enforcement services. City of Encinitas Capital Asset Statistics by Function Last Ten Fiscal Years 184 2015 2016 2017 2018 2019 Law enforcement: * Number of sub-stations 1 1 1 1 1 Fire department: Fire stations 6 6 6 6 7 Public works: Streets (miles) **201 201 201 168 168 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 382 382 382 382 325 Habitat/open space acreage 87 87 87 87 90 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 9 9 Water: Water mains (miles)168 168 170 175 174 Maximum daily capacity (millions of gallons)15 15 15 15 15 Source: City of Encinitas Fire, Parks, Recreation and Cultural Arts, Development Services, and San Dieguito Water District ** Prior to FY 2017-18 data included both City and privately maintained streets. In FY 2017-18, data includes only City maintained streets. * The City of Encinitas contracts with the County of San Diego Sheriff's Department to provide law enforcement services. City of Encinitas Capital Asset Statistics by Function Last Ten Fiscal Years (Continued) 185 This page intentionally left blank. 186 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. 187 Users/Class Sub Category Fixed Meter Charge HCF Rate Median Annual HCF Median Charge Group I Residential Single Family SF $45.76 5.35$ 93.30 544.92$ Multi Family MF See below 5.35 $373.12/unit Trailer Park TP See below 5.35 $373.12/unit Non-Residential Commercial Group II See below See below 5.62$ See below See below Commercial Group III See below See below 7.31 See below See below Commercial Group IV See below See below 10.98 See below See below Meter Size Annual Charge Meter Size Annual Charge 5/8"45.76$ 1-1/2"228.80$ 3/4"68.64$ 2"366.08$ 1"114.40$ 3"686.40$ *Multi Family/Trailer Park = Fixed Meter Charge x 2 Users/Class Sub Category Unit Cost (perHCF) Median Annual HCF (New Connections) Median Usage Charge (New Connections) Group II Commercial Softwater Service SW 5.62$ -- Car W ash CW 5.62 1,520 $8,542.40 Office Building OF 5.62 200 1,124.00 Fire Station FS 5.62 110 618.20 Professional Building (Doctor)PB 5.62 160 899.20 Veterinary Clinic VC 5.62 -- Athletic Gymnasium G 5.62 1,340 7,530.80 Laundromat L 5.62 990 5,563.80 Department and Retail Store DRS 5.62 120 674.40 Warehouse W 5.62 1,050 5,901.00 Hospital, Convalescent Home HCH 5.62 3,240 18,208.80 Parks PB 5.62 510 2,866.20 Church-Membership Organization C 5.62 440 2,472.80 Membership Organization (Non-Church)MO 5.62 240 1,348.80 Social Services SS 5.62 160 899.20 Group III Commercial Hotels-Motels (without restaurant)HM 7.31$ 890 $6,505.90 Repair and Service Station RSS 7.31 70 511.70 Shopping Center SC 7.31 1,030 7,529.30 Kennel K 7.31 900 6,579.00 Coffee Shop CS 7.31 -- Amusement Park AP 7.31 -- Nightclub/Bar NC 7.31 320 2,339.20 Commercial Laundry CL 7.31 -- Manufacturing M 7.31 180 1,315.80 Lumber Yard LY 7.31 -- Group IV Commercial Hotels-Motel (with restaurant)HM 10.98$ 3,130 $34,367.40 Bakery (wholesale)/Food Processor BW 10.98 -- Supermarket SM 10.98 1,030 11,309.40 Mortuary MT 10.98 300 3,294.00 Restaurant R 10.98 600 6,588.00 (1)Sewer rates are based on water consumption (fixed charge based on meter size and consumption component). The consumption is based on HCF (hundred cubic feet - 748 gallons). Non-Residential (Commercial) = Water Consumption For Meter Readings Occurring Between July-June of Preceding Year Cardiff Sanitary Division Rate Schedule for Annual Sewer Charges As of June 30, 2019 Table 1 Residential = 2 Lowest Periods of Water Consumption For Meter Readings Occurring Between Dec.-May (most recent available 5-year period) New Connections (no prior water consumption history) New Connections (no prior water consumption history) Multi Family/Trailer Park* and Non-Residential Fixed Meter Charge Water Consumption Periods To Be Used 188 Table 2 Fiscal Year Residential (Tax Roll) Commercial (Tax Roll) Commercial (Manual) Total Billed Single Family Average 2010 4,034,670$ 703,126$ 128,223$ 4,866,019$ 674$ 2011 3,984,339 628,165 127,210 4,739,715 664 2012 4,058,990 645,560 123,822 4,828,372 676 2013 3,935,414 666,099 126,677 4,728,190 652 2014 3,812,338 599,324 134,910 4,546,572 622 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 2018 4,065,382 595,450 118,660 4,779,492 665 2019 4,048,063 633,674 126,925 4,808,662 662 Cardiff Sanitary Division bills most customers through the San Diego County property tax billing service. Delinquency rates have been between 1.8 -3.0 percent during the period presented. Delinquencies do not apply to direct billings. Cardiff Sanitary Division Historical Service Charges Billed Last Ten Fiscal Years 189 Parcel Sewer Service Percentage of Property Owner Count Charges Sewer Charges Scripps Health 1 89,980.74$ 1.87% Collwood Pines Apartments LP 3 77,294.52 1.61% San Dieguito Union High School District 2 54,160.83 1.13% State of California Parks & Rec.2 42,964.96 0.89% Cardiff Town Center LLC 1 33,510.00 0.70% Georges Restaurant Inc.1 32,147.18 0.67% Newport Taft, Inc.1 29,627.72 0.62% 944 Regal Road LLC 1 28,858.64 0.60% Belmont Village LLC 1 25,732.60 0.54% West Village, Inc.1 23,765.70 0.49% Subtotal 14 438,042.89$ 9.11% Total Billed 4,779,492$ Source: Cardiff Sanitary Division Commercial Total Connections Residential Industrial Total Year (Billed Parcels)EDU's EDU's EDU's 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 2018 6,442 7,223 1,202 8,425 2019 6,456 7,247 1,205 8,452 Source: Cardiff Sanitary Division Table 3 Cardiff Sanitary Division Ten Largest Customers Fiscal Year 2018-19 Historical Service Connections Last Ten Fiscal Years Table 4 Cardiff Sanitary Division 190 Net Position by Components 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. 191 Customer Class Residential Rate Tier Potable Recycled Single-family residential 0-12 units 2.99$ -$ 13-20 units 4.75 - 21-40 units 5.87 - 41+ units 6.69 - Multi-family residential (per dwelling) 0-8 units 2.99 - 9-12 units 4.75 - 13-16 units 5.87 - 17+ units 6.69 - Agriculture Uniform 5.09 4.07 Commercial Uniform 5.09 4.07 Government Uniform 5.57 4.46 Public Uniform 5.57 4.46 Landscaping Uniform 5.87 4.70 Construction Uniform 5.97 4.78 (1) Per Unit (one hundred cubic feet or 748 gallons) Source: San Dieguito Water District Bi-Monthly Meter Service Availability Charges (2) As of June 30, 2019 Water Meter Service Infrastructure Fire Meter Service Availability Access Availability Meter Size Charge Charge Charge 5/8" & 3/4"42.41$ 6.02$ 9.02$ 1"62.44 9.63 9.02 1-1/2"112.08 18.06 10.17 2"171.89 31.90 17.73 3"311.53 57.79 44.66 4"511.00 98.73 91.63 6"1,009.18 180.60 259.53 8"1,607.26 313.04 549.12 Source: San Dieguito Water District As of June 30, 2019 Rate (1) Table 2 San Dieguito Water District (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 Infrastructure Access Charge is levied by the San Diego County Water Authority and is collected from the customer by the District. Table 1 San Dieguito Water District Schedule of Water Rates 192 Meter Fiscal Potable Percentage Availability Percent Year Water Sales Change (3)Charge Change (3) 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% 2018 11,222,736 18.5%3,772,759 6.4% 2019 10,203,984 (9.1%)3,839,847 1.8% (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 Meter Fiscal Recycled Percent Availability Percent Year Water Sales Change Charges (4)Change 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%) 2018 853,052 19.0%86,098 9.4% 2019 587,272 (31.2%)86,801 0.8% (4) The District first implemented a meter availability charge for recycled customers on September 1, 2013. Source: San Dieguito Water District Historic Recycled Water System Revenues Last Ten Fiscal Years Table 3 San Dieguito Water District Historic Potable Water System Revenues Last Ten Fiscal Years Table 4 San Dieguito Water District 193 Fiscal Local Imported Total Recycled Total Year Water Water Potable Water Production 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 2018 3,450 2,660 6,110 714 6,824 2019 2,173 3,407 5,580 550 6,130 (5) Potable water production is defined as water either produced locally or purchased from imported sources. Fiscal Percent Percent Year Potable Change Recycled Change 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% 2018 5,838 10.4%714 9.2% 2019 5,397 (7.6%)550 (23.0%) distribution system and/or water pumped or used through the fire distribution system. Source: San Dieguito Water District San Dieguito Water District Table 5 Summary of Water Deliveries by Source Last Ten Fiscal Years (6)Since FY 2011-12,Recycled Water Production and Delivery figures are revised to include water provided to the Encinitas Ranch Golf Authority (ERGA).Beginning in FY 2011-12,the San Elijo Joint Powers Authority (SEJPA)began directly providing recycled water to ERGA.The recycled water provided to ERGA credits towards the District's production and delivery water to ERGA and the District ceased selling recycled water as ERGA falls within the District's sphere of influence. Note: The differences between potable water production and deliveries represents water loss in the San Dieguito Water District Summary of Water Production by Source Last Ten Fiscal Years Potable Production (in acre-feet)(5) Table 6 194 Acre-Feet Percent of Customer Description Sold Water Sold Agriculture 184 3.4% Commercial 532 9.9% Construction 31 0.6% Government 22 0.4% Landscaping 385 7.1% Multi-Family Residential 1,122 20.8% Public 124 2.3% Single-Family Residential 2,997 55.5% Total Sales 5,397 100.0% Source: San Dieguito Water District Fiscal Percent Percent Years Potable Increase Recycled Increase 2010 11,388 0.1%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% 2018 11,790 0.4%85 (2.3%) 2019 11,861 0.6%93 9.4% Source: San Dieguito Water District Total Service Connections by Category Last Ten Fiscal Years Table 7 San Dieguito Water District Sales by Customer Class As of June 30, 2019 Table 8 San Dieguito Water District 195 CITY OF ENCINITAS 5 0 5 S . V u l c a n A v e n u e E n c i n i t a s , C A 9 2 0 2 4 P h o n e : ( 7 6 0 ) 6 3 3 - 2 6 0 0 F A X : ( 7 6 0 ) 6 3 3 - 2 8 7 9 W W W . E N C I N I T A S . G O V