HomeMy WebLinkAboutNotes to the Financial Statement - CAFR09CITY OF AZUSA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2009
I. SIGNIFICANT ACCOUNTING POLICIES
Note 1: Organization and Summary of Significant Accounting Policies
The financial statements of the City of Azusa, California (City) have been prepared in
conformity with Generally Accepted Accounting Principles (GAAP) as applied to government
units. The Governmental Accounting Standards Board (GASB) is the accepted
standard -setting body for establishing governmental accounting and financial reporting
principles. The significant accounting policies of the City of Azusa are described below:
a. Description of the Reporting Entity
The City of Azusa, the primary government, was incorporated on September 29, 1898,
under the general laws of the State of California. It is governed under a Council -Manager
form of government.
As required by accounting principles generally accepted in the United States of America,
these financial statements present the City and its component units, entities for which the
City is considered to be financially accountable. The City is considered to be financially
accountable for an organization if the City appoints a voting majority of that organization's
governing body and the City is able to impose its will on that organization or there is a
potential for that organization to provide specific financial benefits to or impose specific
financial burdens on the City. The City is also considered to be financially accountable if
that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set
rates or charges, or issued bonded debt without approval from the City). In certain cases,
other organizations are included as component units if the nature and significance of their
relationship with the City are such that their exclusion would cause the City's financial
statements to be misleading or incomplete.
All of the City's component units are considered to be blended component units. Blended
component units, although legally separate entities, are, in substance, part of the City's
operations and so data from these units are reported with the interfund data of the City.
The following organizations are considered to be component units of the City.
A description of these component units and the method of incorporating their financial
information in the accompanying basic financial statements are summarized as follows:
Redevelopment Agency of the City of Azusa
The Redevelopment Agency of the City of Azusa was established to upgrade
residential neighborhoods, improve the commercial environment, rehabilitate blighted
areas, generate added employment opportunities, and to strengthen the economic
base of the community. The governing board of the Agency is composed of the same
individuals that serve as council members for the City of Azusa. Upon completion,
separate financial statements of the Agency can be obtained at City Hall.
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City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
Azusa Public Financing Authority
The Azusa Public Financing Authority was established to provide financing to the City
of Azusa for specified projects. The governing board of the Authority is composed of
the same individuals that serve as council members for the City of Azusa. Upon
completion, separate financial statements of the Authority can be obtained at City
Hall.
Azusa Industrial Development Authority
The Azusa Industrial Development Authority was established to promote industrial
and commercial expansion and development within the City of Azusa. The governing
board of the Authority is composed of the same individuals that serve as council
members for the City of Azusa. Separate financial statements are not prepared for
the Authority because it has no activity to report.
b. Government -Wide and Fund Financial Statements
The government -wide financial statements (i.e., the statement of net assets and the
statement of activities) report information on all of the nonfiduciary activities of the
primary government and its component units. For the most part, the effect of interfund
activity has been removed from these statements. Governmental activities, which
normally are supported by taxes and intergovernmental revenues, are reported
separately from business -type activities, which rely to a significant extent on fees and
charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a
given function or segment is offset by program revenues. Direct expenses are those that
are clearly identifiable with a specific function or segment. Program revenues include:
1) charges to customers or applicants who purchase, use or directly benefit from goods,
services or privileges provided by a given function or segment, and 2) grants and
contributions that are restricted to meeting the operational or capital requirements of a
particular function or segment. Taxes and other items not properly included among
program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds, proprietary funds and
fiduciary funds, even though the latter are excluded from the government -wide financial
statements. Major individual governmental funds and major individual enterprise funds
are reported as separate columns in the fund financial statements.
c. Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government -wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund and
fiduciary fund financial statements, however agency funds have no measurement focus.
Revenues are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows. Property taxes are recognized as
revenues in the year for which they are levied. Grants and similar items are recognized
as revenue as soon as all eligibility requirements imposed by the provider have been
met.
Governmental fund financial statements are reported using the current financial
resources measurement focus and the modified accrual basis of accounting. Revenues
are recognized as soon as they are both measurable and available.
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City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
Revenues are considered to be available when they are collectible within the current
period or soon enough thereafter to pay liabilities of the current period. For this purpose,
the City considers revenues to be available if they are collected within 60 days of the end
of the current fiscal period, with the exception of gas tax, which is considered available if
collected within 120 days of year-end. Expenditures generally are recorded when a
liability is incurred, as under accrual accounting. However, debt service expenditures, as
well as expenditures related to compensated absences and claims and judgments, are
recorded only when payment is due.
Property taxes, franchise taxes, licenses and interest associated with the current fiscal
period are all considered to be susceptible to accrual and so have been recognized as
revenues of the current fiscal period. Only the portion of special assessments receivable
due within the current fiscal period is considered to be susceptible to accrual as revenue
of the current period. All other revenue items are considered to be measurable and
available only when cash is received by the government.
The City reports the following major governmental funds:
• The General Fund is the City's primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for
in another fund.
The Redevelopment Agency Capital Projects Fund account for the costs
associated with the implementation of separate redevelopment projects.
The Redevelopment Agency Debt Service Fund accounts for payments of
principal and interest on the long-term debt of the Azusa Redevelopment
Agency.
The City reports the following major proprietary funds:
The Water Fund accounts for the costs of labor and materials used in the
maintenance, construction, and consumption of water services within the City's
water service area.
The Light Fund accounts for the costs of labor and materials used in the
maintenance, construction and consumption of electric services throughout the
City.
Additionally, the City reports the following fund types:
• Special Revenue Funds account for revenues which are restricted for specific
purposes.
• Capital Projects Fund accounts for financial resources to be used for the
acquisition or construction of major capital improvement as outlined in the City's
Capital Improvement Program.
• Debt Service Funds account for the accumulation of resources and payment of
long-term debt.
• The Agency Fund is used to account for assets held by the City as trustee or
agent for individuals, private organizations and other governmental units.
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City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
The Internal Service Funds are used to finance and account for activities involved in
rendering services to departments within the City. Costs of materials and services used
are accumulated in these funds and charged to the user departments as such goods are
delivered or services rendered.
Private -sector standards of accounting and financial reporting issued prior to
December 1989, generally are followed in both the government -wide and proprietary fund
financial statements to the extent that those standards do not conflict with or contradict
guidance of the Governmental Accounting Standards Board. Governments also have the
option of following subsequent private -sector guidance for their business -type activities
and enterprise funds, subject to this same limitation. The government has elected not to
follow subsequent private -sector guidance.
As a general rule, the effect of interfund activity has been eliminated from the
government -wide financial statements. Exceptions to this general rule are charges
between the government's proprietary funds function and various other functions of the
government. Elimination of these charges would distort the direct costs and program
revenues reported for the various functions concerned.
Amounts reported as program revenues include: 1) charges to customers or applicants
for goods, services or privileges provided, 2) operating grants and contributions, and
3) capital grants and contributions, including special assessments. Internally dedicated
resources are reported as general revenues rather than as program revenues. Likewise,
general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items.
Operating revenues and expenses generally result from providing services and producing
and delivering goods in connection with a proprietary fund's principal ongoing operations.
The principal operating revenues of the Enterprise Funds are charges to customers for
sales and services. Operating expenses for Enterprise Funds include the cost of sales
and services, administrative expenses and depreciation on capital assets. All revenues
and expenses not meeting this definition are reported as nonoperating revenues and
expenses.
When both restricted and unrestricted resources are available for use, it is the City's
policy to use restricted resources first, then unrestricted resources as needed.
The City's fiduciary fund is an agency fund. Agency funds are custodial in nature, assets
equal liabilities. Agency funds are presented on the accrual basis of accounting.
d. Assets, Liabilities and Net Assets or Equity
Cash and Investments
The City's cash and cash equivalents are considered to be cash on hand, demand
deposits and short-term investments with original maturities of three months or less
from the date of acquisition. For financial statement presentation purposes, cash and
cash equivalents are shown as both restricted and unrestricted cash and investments
in the Proprietary Funds.
Investments for the City, as well as for its component units, are reported at fair value.
The City's policy is generally to hold investments until maturity or until market values
equal or exceed cost. The State Treasurer's Investment Pool operates in accordance
with appropriate state laws and regulations. The reported value of the pool is the
same as the fair value of the pool shares.
34
City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements
outstanding at the end of the fiscal year are referred to as either "due to/from other
funds" (i.e., the current portion of interfund loans) or "advances to/from other funds"
(i.e., the non -current portion of interfund loans). All other outstanding balances
between funds are reported as "due to/from other funds." Any residual balances
outstanding between the governmental activities and business -type activities are
reported in the government -wide financial statements as "internal balances."
Advances between funds, as reported in the fund financial statements, are offset by a
fund balance reserve account in applicable governmental funds to indicate that they
are not available for appropriation and are not expendable available financial
resources.
All trade and property tax receivables are shown net of an allowance for
uncollectibles.
Property tax revenue is recognized in the fiscal year for which the taxes have been
levied providing they become available. Available means then due, or past due and
receivable within the current period and collected within the current period or
expected to be collected soon enough thereafter (not to exceed 60 days) to be used
to pay liabilities of the current period. The County of Los Angeles collects property
taxes for the City. Tax liens attach annually as of 12:01 A.M. on the first day in
January preceding the fiscal year for which the taxes are levied. The tax levy covers
the fiscal period July 1 to June 30. All secured personal property taxes and one-half
of the taxes on real property are due November 1; the second installment is due
February 1. All taxes are delinquent, if unpaid, on December 10 and April 10,
respectively. Unsecured personal property taxes become due on the first of March
each year and are delinquent on August 31.
Functional Classifications
Expenditures of the Governmental Funds are classified by function. Functional
classifications are defined as follows:
• General Government includes legislative activities which have a primary
objective of providing legal and policy guidelines for the City. Also included in
this classification are those activities which provide management or support
services across more than one functional area, including Library Services.
• Public Safety includes those activities which involve the protection of people
and property.
• Community Development includes those activities which involve the
enhancing of the general quality of life.
• Parks and Recreation includes those activities which involve community park
maintenance and recreational activities within the community.
• Public Works includes those activities which involve the maintenance and
improvement of City streets and roads.
• Debt Service includes those activities that account for the payment of long-
term debt principal, interest and fiscal charges.
35
City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
Inventories, Prepaid Costs and Land Held for Resale
• All inventories are valued at cost using the first-in/first-out (FIFO) method.
Inventory costs are recorded as an expense when used.
• Certain payments to vendors reflect costs applicable to future accounting
periods and are recorded as prepaid items in both government -wide and fund
financial statements.
• Land purchased for resale is capitalized as inventory at acquisition costs or
net realizable value, if lower.
Restricted Assets
Certain proceeds of debt issues, as well as certain resources set aside for their
repayment, are classified as restricted assets on the balance sheet because their use
is limited by applicable bond covenants. In addition, funds have been restricted for
future capital improvements by City resolution.
Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets
(e.g., roads, bridges, sidewalks and similar items), are reported in the applicable
governmental or business -type activities columns in the government -wide financial
statements. Capital assets are defined by the City as assets with an initial, individual
cost of more than $5,000 (amount not rounded), and an estimated useful life in
excess of two years. Such assets are recorded at historical cost or estimated
historical cost if purchased or constructed. Donated capital assets are recorded at
estimated fair market value at the date of donation.
In accordance with GASB Statement No. 34, the City has reported general
infrastructure assets acquired in the current year and retroactively reported prior
year's acquisitions prior to fiscal years ended after June 30, 1980.
The costs of normal maintenance and repairs that do not add to the value of the
asset or materially extend assets lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are
constructed. Interest incurred during the construction phase of capital assets of
business -type activities is included as part of the capitalized value of the assets
constructed.
Property, plant and equipment of the primary government, as well as the component
units, are depreciated using the straight-line method over the following estimated
useful lives:
Assets Years
Land Improvements
20
Buildings and structure
30 - 50
Machinery and equipment
8 - 30
Automotive equipment
5 - 15
Infrastructure
30 - 65
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City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
Long -Term Obligations
In the government -wide financial statements, and proprietary fund types in the fund
financial statements, long-term debt and other long-term obligations are reported as
liabilities in the governmental activities, business -type activities or proprietary fund type
statement of net assets. Bond premiums and discounts, as well as issuance costs, are
deferred and amortized over the life of the bonds using the effective interest method.
Bonds payable are reported net of the applicable bond premium or discount. Bond
issuance costs are reported as deferred charges and amortized over the term of the
related debt.
In the fund financial statements, governmental fund types recognize bond premiums
and discounts, as well as bond issuance costs, during the current period. The face
amount of debt issued is reported as other financing sources. Premiums received on
debt issuances are reported as other financing sources while discounts on debt
issuances are reported as other financing uses. Issuance costs, whether or not
withheld from the actual debt proceeds received, are reported as debt service
expenditures.
Fund Equity
In the fund financial statements, governmental funds report reservations of fund
balance for amounts that are not available for appropriation or are legally restricted by
outside parties for use for a specific purpose. Designations of fund balance represent
tentative management plans that are subject to change.
e. Compensated Absences
In accordance with GASB Statement No. 16, a liability is recorded for unused vacation
and similar compensatory leave balances since the employees' entitlement to these
balances are attributable to services already rendered and it is probable that virtually all
of these balances will be liquidated by either paid time off or payments upon termination
or retirement. Under GASB Statement No. 16, a liability is recorded for unused sick leave
balances to the extent that it is probable that the unused balances will result in
termination payments. Generally, vacation, sick leave and compensatory absences vest
and are recorded as the obligation is incurred. If material, a proprietary fund liability is
accrued for all earned but unused leave benefits relating to the operations of the
proprietary funds. A current liability is accrued in the governmental funds for material
leave benefits due on demand to governmental fund employees that have terminated
prior to year-end. These non -current amounts will be recorded as fund expenditures in
the year in which they are paid or become due on demand to terminated employees.
f. Claims and Judgments
The City records a liability for litigation, judgments and claims when it is probable that an
asset has been impaired or a liability has been incurred prior to year-end and the
probable amount of loss (net of any insurance coverage) can be reasonably estimated.
Claims incurred but not reported are recorded as a liability when the liability has been
incurred or an asset has been impaired and the amounts can be reasonably determined.
This liability is recorded in the internal service fund that accounts for the City's
self-insurance activities.
37
City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
g. Cash Equivalents for Statement of Cash Flows
For purposes of the statement of cash flows, cash equivalents are defined as short-term,
highly liquid investments that are both readily convertible to known amounts of cash or so
near their maturity that they present insignificant risk of change in value because of
changes in interest rates. Investments purchased within three months of original maturity
are considered to be cash equivalents. Cash and cash equivalents in the accompanying
statements include the proprietary funds' share of the cash and investment pool of the
City of Azusa. Cash and cash equivalents for proprietary funds are reported in the
accompanying financial statements as:
Enterprise Internal Service
Cash and investments $ 35,556,627 $ 4,589,272
Cash with fiscal agent 11,788,331 -
Cash held for rate stabilization 9,316,625 -
Total $ 56,661,583 $ 4,589,272
h. Reconciliation of Government -Wide and Fund Financial Statements
Explanation of certain differences between the governmental fund balance sheet and the
government -wide statement of net assets:
The governmental fund balance sheet includes reconciliation between fund balance,
governmental funds and net assets of governmental activities as reported in the
government -wide statement of net assets. One element of that reconciliation explains
that "long-term debt and compensated absences have not been included in the
governmental fund activity." The detail of the ($76,223,540) long-term debt difference
is as follows:
Long-term debt:
Tax allocation bonds payable
$ (57,056,201)
Developer loans payable
(8,974,171)
Certification of participation
(3,695,000)
Taxable pension bonds
(7,215,000)
Deferred discount on bonds and COP
(to be amortized over life of debt)
716,832
Net adjustment to reduce fund balance of total
governmental funds to arrive at net assets of
governmental activities
$ (76,223,540)
Explanation of certain differences between the governmental fund statement of revenues,
expenditures and changes in fund balances and the government -wide statement of
activities:
The governmental fund statement of revenues, expenditures and changes in fund
balances includes reconciliation between net changes in fund balances of total
governmental funds and changes in net assets of governmental activities as reported
in the government -wide statement of activities.
38
City of Azusa
Notes to Financial Statements (Continued)
Note 1: Organization and Summary of Significant Accounting Policies (Continued)
One element of that reconciliation explains that "Governmental funds report capital
outlays as expenditures. However, in the statement of activities the cost of those
assets is allocated over their estimated useful lives and reported as depreciation
expense." The detail of this $1,001,459 difference is as follows:
Capital outlay
$ 3,036,893
Depreciation expense
(2,034,349)
Loss on disposal of asset
(1,085)
Net adjustment to increase net changes in fund
balances of total governmental funds to arrive at
changes in net assets of governmental activities
$ 1,001,459
Another element of that reconciliation states that "the issuance of long-term debt
(e.g., bonds, leases) provides current financial resources to governmental funds, while
the repayment of the principal of long-term debt consumes the current financial
resources of governmental funds." Neither transaction, however, has any effect on net
assets. Also, governmental funds report the effect of issuance costs, premiums,
discounts and similar items when debt is first issued, whereas these amounts are
deferred and amortized in the statement of activities. The detail of this ($24,293,022)
difference is as follows:
Debt issued or incurred
Tax allocation bonds
$ (18,295,000)
Taxable pension bonds
(7,215,000)
Developer loan
(369,924)
Bond premium/discount
323,410
Accreted interest
(79,503)
Principal repayments:
Tax allocation bonds
865,000
Certificate of participation
215,000
Notes payable
275,000
Bond discount
(12,005)
Net adjustment to decrease net changes in fund balance
of total governmental funds to arrive at changes in net
assets of governmental activities.
$ (24,293,022)
IL STEWARDSHIP
Note 2: Stewardship, Compliance and Accountability
a. Budgetary Data
The City adopts an annual budget prepared on the modified accrual basis of accounting
for the general, special revenue, debt service and capital projects funds and on the
accrual basis of accounting for the proprietary funds of the City. According to Section
3.04.040 of the Azusa Municipal Code, the City Council is required to adopt the annual
budget on or before the first Monday in July. The City is not legally required to report on
the budget approved. Where appropriations exceed actual expenditures, the excess
amounts lapse but can be re -appropriated in the subsequent year subject to City Council
approval.
39
City of Azusa
Notes to Financial Statements (Continued)
Note 2: Stewardship, Compliance and Accountability (Continued)
According to Section 2-450 of the Azusa Municipal Code, budget amendments increasing
the total budget of the City by $100,000 or more must be approved by City Council.
Spending control (legal level of control) is established by the amount of expenditures
budgeted at the department level. During the year, several supplementary appropriations
were necessary. Individual amendments were not material in relation to the original
appropriations.
The Highway 39 Fund did not adopt a budget therefore a budgetary comparison schedule
is not presented.
b. Expenditures Over Appropriations
Excess of expenditures over appropriations in individual funds are as follows:
Fund Expenditures Appropriations
Excess
General Fund:
Administration $ 524,340 $ 519,690 $
(4,650)
City Clerk 502,299 500,305
(1,994)
Admin Services / Business License 216,821 213,975
(2,846)
Parks Maintenance 1,495,787 1,483,817
(11,970)
Senior Programs 236,571 232,785
(3,786)
c. Deficit Fund Balance
The following funds had a deficit fund balance as of June 30, 2009:
Major Funds:
Governmental:
Debt Service Fund - Redevelopment Agency $ (22,651,251)
Nonmajor Funds:
Governmental:
Capital Projects (65,670)
Enterprise Funds Non Major:
Refuse Contract (98,043)
Internal Service Funds:
Self Insurance (307,998)
These deficits will be funded through future years' revenues and transfers.
III. DETAILED NOTES ON ALL FUNDS
Note 3: Cash and Investments
As of June 30, 2009, cash and investments were reported in the accompanying financial
statements as follows:
Governmental activities $ 38,570,757
Business -type activities 57,603,991
Fiduciary funds 1,478,374
Total Cash and Investments $ 97,653,122
40
City of Azusa
Notes to Financial Statements (Continued)
Note 3: Cash and Investments (Continued)
The City of Azusa maintains a cash and investment pool that is available for use for all funds.
Each fund type's position in the pool is reported on the combined balance sheet as cash and
investments. The City has adopted an investment policy, which authorizes it to invest in
various investments.
Deposits
At June 30, 2009, the carrying amount of the City's deposits was $3,411,079, and the
bank balance was $3,887,681. The $476,602 difference represents outstanding checks
and other reconciling items.
The California Government Code requires California banks and savings and loan
associations to secure a City's deposits by pledging government securities with a value of
110% of a City's deposits. California law also allows financial institutions to secure a
City's deposits by pledging first trust deed mortgage notes having a value of 150% of a
City's total deposits. The City Treasurer may waive the collateral requirement for
deposits that are fully insured up to $250,000 by the FDIC. The collateral for deposits in
federal and state chartered banks is held in safekeeping by an authorized Agent of
Depository recognized by the State of California Department of Banking. The collateral
for deposits with savings and loan associations is generally held in safekeeping by the
Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These
securities are physically held in an undivided pool for all California public agency
depositors. Under Government Code Section 53655, the placement of securities by a
bank or savings and loan association with an "Agent of Depository" has the effect of
perfecting the security interest in the name of the local governmental agency.
Accordingly, all collateral held by California Agents of Depository are considered to be
held for, and in the name of, the local governmental agency.
Investments
Under provision of the City's investment policy, and in accordance with the California
Government Code, the following investments are authorized:
• U.S. Treasury Obligations (bills, notes and bonds)
• U.S. Government Agency Securities and Instrumentalities of Government
Sponsored Corporations
• Mutual Funds
• Commercial Paper
• Repurchase Agreements
• Certificates of Deposit
• Negotiable Certificates of Deposit
• Passbook Savings Accounts
• Medium Term Corporate Notes
• Bank Money Market Accounts
• Local Agency Investment Fund (State Pool)
Investments Authorized by Debt Agreements
The above investments do not address investment of debt proceeds held by a bond
trustee. Investments of debt proceeds held by a bond trustee are governed by provisions
of the debt agreements rather than the general provisions of the California Government
Code or the City's investment policy.
41
City of Azusa
Notes to Financial Statements (Continued)
Note 3: Cash and Investments (Continued)
Investments in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is
regulated by California Government Code Section 16429 under the oversight of the
Treasurer of the State of California. LAW is overseen by the Local Agency Investment
Advisory Board, which consists of five members, in accordance with State statute. The
State Treasurer's Office audits the fund annually. The fair value of the position in the
investment pool is the same as the value of the pool shares.
GASB Statement No. 31
The City adopted GASB Statement No. 31, Accounting and Financial Reporting for
certain investments and for External Investment Pools, as of July 1, 1997. GASB
Statement No. 31 establishes fair value standards for investments in participating interest
earning investment contracts, external investment pools, equity securities, option
contracts, stock warrants and stock rights that have readily determinable fair values.
Accordingly, the City reports its investments at fair value in the balance sheet. All
investment income, including changes in the fair value of investments, is recognized as
revenue in the operating statement.
Credit Risk
The City's investment policy limits investments in medium term notes (MTNs) to those
rated A or higher by Standard and Poor's (S&P) or by Moody's. At June 30, 2009, the
City's investments in Federal Agency securities consisted of investments with Federal
Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association, and Federal Farm Credit Bank. At June 30, 2009, all Federal Agency
Securities were rated AAA by Standard & Poor's. All securities were investment grade
and were legal under State and City law. As of June 30, 2009, the City's investments in
external investment pools and money market mutual funds are unrated.
Custodial Credit Risk
The custodial credit risk for deposits is the risk that, in the event of the failure of a
depository financial institution, a government will not be able to recover deposits or will
not be able to recover collateral securities that are in the possession of an outside party.
The custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty to a transaction, a government will not be able to recover the value of
investment or collateral securities that are in the possession of an outside party.
As of June 30, 2009, none of the City's deposits or investments were exposed to
custodial credit risk.
Concentration of Credit Risk
The City's investment policy imposes restriction on the percentage that the City can invest
in certain type of investments. In addition, GASB 40 requires a separate disclosure if any
single issuer comprises more than 5% of the total investment value.
As of June 30, 2009, the City has investments of $15,114,390 (16%) with Federal Farm
Credit Bank and $24,493,712 (26%) with Federal Home Loan Bank. Investments
guaranteed by the U.S. government, investments in mutual funds and external investment
pools are excluded from this requirement.
42
City of Azusa
Notes to Financial Statements (Continued)
Note 3: Cash and Investments (Continued)
Interest Rate Risk
The City's investment policy limits investment maturities as a means of managing its
exposure to fair value losses arising from increasing interest rates. The City's investment
policy states that no investment may have a maturity of more than five years without
receiving prior City Council approval. The only exception to these maturity limits shall be
the investment of the gross proceeds of tax-exempt bonds. Reserve funds associated
with bond issues may have a maturity of more than five years. The City has elected to
use the segmented time distribution method of disclosure for its interest rate risk. As of
June 30, 2009, the City had the following investments and original maturities:
Remaining Investment Maturities
6 months 6 months
1 to 3
3 to 5
More than
Fair
or less to 1 year
years
years
5 years
Value
Federal agency securities $ 4,038,740 $ -
$ 24,486,542
$ 17,084,440
$ -
$ 45,609,722
Money market mutual funds 1,617,755 -
-
-
-
1,617,765
Local Agency Investment Fund 21,808,902 -
-
-
-
21,808,902
Cash with Fiscal Agents:
Money market mutual funds 17,756,497 -
-
-
-
17,756,497
Federal agency securities - 1,023,380
1,600,880
-
2,624,260
Guaranteed Investment Contracts - -
-
1,778,723
284,527
2,063,250
Repurchase Agreements -
-
2,761,657
2,761,657
$ 45,221,894 $ 1,023,380
$ 26,087,422
$ 18,863,163
$ 3,046,184
$ 94,242,043
Note 4: Capital Assets
Capital asset activity for the year ended
June 30, 2009,
was as follows:
Beginning
Ending
Balance
Increases Decreases
Balance
Governmental Activities:
Capital Assets, Not Being Depreciated:
Land $
1,729,956 $
- $
$
1,729.956
Construction4n-progress
2,237,360
508,578
2,272,435
473,503
Total Capital Assets
Not Being Depreciated
3,967,316
508,578
2.272,435
2,203,459
Capital Assets, Being Depreciated:
Land improvements
5,374,464
459,361
-
5,833,825
Buildings and structures
10,096,231
1,008,171
-
11,104,402
Machinery and equipment
6,357,217
373,627
-
6,730,844
Automotive equipment
3,293,526
413,766
50,325
3,656,967
Infrastructure
39,664,038
2,853,700
42,517,738
Total Capital Assets
Being Depreciated
64,785,476
5,108,625
50,325
69,843,776
Less Accumulated Depreciation:
Land improvements
2,570,578
203,764
-
2,774,342
Buildings and structures
3,908,372
262,857
-
4,171,229
Machinery and equipment
5,078,334
280,562
-
5,358,896
Automotive equipment
2,130,854
249,879
30,898
2,349,835
Infrastructure
25,168,424•
1,177,543
26,345,967
Total Accumulated Depreciation
38,856,562
2,174,605
30,898
41,000,269
Total Capital Assets
Being Depreciated, Net
25,928,914
2.934,020
19,427
28,843.507
Governmental Activities
Capital Assets, Net $
29,896,230 $
3,442,598 $
2,291,862 $
31.046,966
43
City of Azusa
Notes to Financial Statements (Continued)
Note 4: Capital Assets (Continued)
Adjusted
Beginning
Beginning
Ending
Balance
Adjustments
Balance Increases Decreases
Balance
Business -Type Activities:
Capital Assets, Not Being Depreciated:
Land $
2,988,973
$ -
$ 2,988,973 $ - $
$ 2,988,973
Construction -In -Progress
42,142,664
(109,214)
42,033,450 11,476,105 2,220,881
51.288,674
Total Capital Assets
Not Being Depreciated 45,131,637 (109,214) 45,022,423 11,476,105 2,220,881 54,277,647
Capital Assets, Being Depreciated:
Land improvements
1,152,774
- 1,152,774
22,995
- 1,175,769
Building and structures
21,687,569
- 21,687,569
925,183
- 22,612,752
Machinery and equipment
11,618,720
- 11,618,720
259,957
- 11,878,677
Automotive equipment
3,395,316
- 3,395,316
141,626
23,325 3,513,517
Infrastructure
80,994,022
29,543 81,023,565
8,631,556
89,655,121
Total Capital Assets
Being Depreciated
118,848,401
29,543 118,877,944
9,981,317
23,325 128,835,936
Less Accumulated Depreciation
Land improvements:
512,980
- 512,980
43,023
- 556,003
Building and structures:
6,061,018
- 6,061,018
554,512
- 6,615,530
Machinery and equipment:
7,082,430
- 7,082,430
581,801
- 7,664,231
Automotive equipment:
2,697,149
- 2,697,149
207,835
23,325 2,881,659
Infrastructure:
25,776.179
985 25,777,164
2,104,207
27,881,371
Total Accumulated Depreciation 42.129,756 985 42,130,741 3,491,378 23,325 45,598,794
Total Capital Assets
Being Depreciated, Net 76,718,645 28,558 76,747,203 6,489,939 - 83,237,142
Business -Type Activities
Capital Assets, Net $ 121,850.282 $ (80,656) $ 121,769,626 $ 17.966,044 $ 2,220,881 $ 137,514,789
' Adjustments were to correct prior period capital assets
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental Activities
General government
$ 881,346
Public safety
136,859
Community development
13,846
Parks and recreation
390,691
Public works
611,607
Internal service funds
140,256
Total
$ 2,174,605
Business -Type Activities
Water
$ 1,761,398
Light
1,228,752
Sewer/Wastewater
325,309
Internal service funds
175,919
Total
$ 3,491,378
44
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt
a. Long -Term Debt— Governmental Activities
The following is a summary of changes in long-term debt of the City for the year ended
June 30, 2009:
Balances at
Balances at
Due Within
July 1, 2008
Additions
Deletions
June 30, 2009
One Year
City:
Compensated absences
$ 2,790,214
$ 1,557,003
$ 1,164,216
$ 3,183,001
$ 1,327,896
Net OPEB liability
-
2,696,000
352,395
2,343,605
350,000
Section 108 notes payable
275,000
-
275,000
2008 Taxable pension funding bonds
-
7,215,000
-
7,215,000
480,000
Total City
3,065,214
11,468,003
1,791,611
12,741,606
2,157,896
Public Financing Authority
2003 Certificates of participation 3,910,000 215,000 3,695,000
215,000
Redevelopment Agency:
Tax allocation bonds, 2003 Series A 9,710,000 - 445,000 9,265,000
450,000
Tax allocation bonds, 2005 Series A 9,266,698 79,503 - 9,346,201
-
Tax allocation bonds, 2007 Series A 15,780,000 - 340,000 15,440,000
365,000
Tax allocation bonds, 2007 Series B 4,790,000 - 80,000 4,710,000
85,000
Tax allocation bonds, 2008 Series A - 6,715,000 - 6,715,000
70,000
Tax allocation bonds, 2008 Series B - 11,580,000 - 11,580,000
355,000
Obligalion under developer
agreements 8,604,247 369,924 - 8,974,171
-
Total Redevelopment Agency 48,150,945 18,744,427 865,000 66,030,372
1,325,000
Internal Service Funds:
Compensated absences 197,009 99,255 84,047 212,217
85,721
Claims and judgments payable 2,600,445 1,419,363 951,639 3,068,169
1,122,804
Total Internal Service 2,797,454 1,518,618 1,035,686 3,280,386
1,208,525
Total Governmental
Long-term Debt $ 57,923,613 $ 31,731,048 $ 3,907,297 85,747,364 $
4,906,421
Less unamortized original issue discount (716,832)
$ 85,030,532
* Addition of $79,503 related to accreted interest for the fiscal year.
Compensated Absences
The City's policies relating to compensated absences are described in Note 1
of the
notes to financial statements. For the governmental activities, the liability will be
paid in
future years by the General Fund.
Net OPEB Liability
The City's policies relating to OPEB are described in Note 9 of the notes to financial
statements. For governmental activities, the liability will be paid in future years
by the
General Fund.
45
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
Notes Payable
On April 30, 1999, the City received a Section 108 loan in the amount of $2,435,000. This
money was advanced to the City for the Downtown Azusa Revitalization Program. The
loan matures from 1999 to 2008 and bears varying interest rates. There was no
remaining outstanding principal balance at June 30, 2009.
2008 Taxable Pension Funding Bonds
In December 2008, the City issued $7,215,000 pension funding bonds to fund the City's
actuarial accrued liability with respect to its public safety plan. The bonds bear interest at
6.50% and the principal matures in amounts ranging from $480,000 to $1,175,000 on
January 1 each year from 2010 through 2018. The annual principal requirements to
amortize the 2008 Pension Funding Bonds outstanding as of June 30, 2008, are as
follows:
Taxable Pension Funding Bonds
Series
2008
Principal
Interest
2009-2010
$ 480,000
$ 479,397
2010-2011
555,000
437,775
2011-2012
625,000
401,700
2012-2013
700,000
361,075
2013 - 2014
780,000
315,575
2014-2019
4,075,000
695,175
Total
$ 7,215,000
$ 2,690,697
2003 Certificates of Participation
On August 7, 2003, the Azusa Public Financing Authority issued the 2003 Lease
Revenue Refunding Certificates of Participation in the amount of $4,825,000 to refund
the outstanding balance of the 1994 Certificates of Participation. The bonds are subject
to optional and mandatory redemption prior to maturity and are payable from certain
revenue consisting of certain base rental payments with respect to the lease agreement
between the City and the Authority.
Debt covenants require that the Authority maintain a reserve account equal to the
maximum annual debt service on all outstanding certificates. At June 30, 2009, the
reserve requirement of $452,500 was fully funded.
The certificates maturing from 2004 to 2020 are serial certificates payable in annual
installments ranging from $200,000 to $845,000. Interest is payable semi-annually on
each August 1 and February 1, commencing August 1, 2004, at rates ranging from 2.00%
to 4.40% per annum. The outstanding principal balance at June 30, 2009, was
$3,695,000.
46
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
The annual requirements to repay the outstanding indebtedness at June 30, including
interest, are shown in the schedule below:
2003 Certificates of
Participation
Principal
Interest
2009-2010
$ 215,000
$ 140,589
2010 - 2011
225,000
134,560
2011 - 2012
230,000
127,588
2012-2013
240,000
119,650
2013-2014
245,000
111,940
2014-2019
1,380,000
401,512
2019-2024
1,160,000
62,661
Total
$ 3,695,000
$ 1,097,600
Tax Allocation Bonds Payable
Tax Allocation Bonds
2003 Tax Allocation Refunding Bonds, Series A
The Azusa Redevelopment Agency issued $11,580,000 Merged Project Area Tax
Allocation Refunding Bonds, 2003 Series A, dated December 1, 2003 to refund the
1994 Series A Merged Project Area Tax Allocation Bonds. Principal payments
ranging from $425,000 to $1,235,000 are due annually on August 1 beginning in the
year 2004 through the year 2023, interest rates ranging from 3.00% to 4.60% per
annum are due and payable on February 1 and August 1 and are secured by tax
increment revenues. Debt service payments on the bonds are payable from pledged
tax increment revenues. The outstanding principal balance at June 30, 2009, was
$9,265,000.
The annual requirements to amortize the outstanding bond indebtedness as of
June 30, 2009, including interest, are as follows:
2003 Tax Allocation Refunding
Bonds, Series A
Principal
Interest
2009 - 2010
$ 450,000
$ 367,085
2010 - 2011
460,000
354,279
2011 - 2012
475,000
339,779
2012 - 2013
495,000
323,516
2013-2014
515,000
305,519
2014 -2019
2,870,000
1,206,794
2019 - 2024
4,000,000
510,276
Totals
$ 9,265,000
$ 3,407,248
47
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
2005 Tax Allocation Bonds, Series A
The Azusa Redevelopment Agency issued $9,022,800 Merged Project Area Tax
Allocation Bonds, 2005 Series A, dated February 17, 2005, to finance redevelopment
projects. The issue consists of $7,765,000 Current Interest Bonds which are subject
to annual sinking fund installment payments ranging from $715,000 to $1,170,000
beginning August 1, 2027 through August 1, 2034, bearing interest at 4.50% per
annum: and Capital Appreciation Bonds of $1,257,800 due beginning August 1, 2024
through August 1, 2027, bearing interests rates ranging from 5.16% to 5.33% per
annum. Debt service payments on the bonds are secured by tax increment revenues.
Debt service payments on the bonds are payable from pledged tax increment
revenues. The outstanding principal balance at June 30, 2009, was $9,346,201.
The annual requirements to amortize the outstanding bond indebtedness as of
June 30, 2009, including interest are as follows:
2005 Tax Allocation
Refunding
Bonds
Principal
Interest
2009 - 2010
$
$ 349,425
2010 - 2011
349,425
2011 - 2012
349,425
2012 - 2013
-
349,425
2013 - 2014
-
349,425
2014-2019
-
1,747,125
2019-2024
-
1,747,125
2024 - 2029
3,416,201
1,775,920
2029-2034
4,960,000
2,931,427
2034 - 2039
970,000
237,620
Totals $ 9,346,201 $ 10,186,342
2007 Tax Allocation Bonds, Series A
The Azusa Redevelopment Agency issued $15,780,000 Series A Merged Project
Area Tax Allocation Bonds, dated July 31, 2007 to finance redevelopment projects.
Current Interest Bonds are subject to annual sinking fund installment payments
ranging from $340,000 to $365,000 beginning August 1, 2008 through
August 1, 2009, bearing interest rates ranging from 5.27% to 5.30% per annum.
Term Bonds are due beginning August 1, 2010 through August 1, 2035, with
installment payments ranging from $385,000 to $1,625,000, bearing interest rates
ranging from 5.77% to 6.15% per annum. Debt service payments on the bonds are
payable from pledged tax increment revenues. The outstanding principal balance at
June 30, 2009, was $15,440,000.
48
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
The annual requirements to amortize the outstanding bond indebtedness as of
June 30, 2009, including interest are as follows:
2007 Tax Allocation
Bonds, Series A
Principal
Interest
2009 - 2010
$ 365,000
$ 915,545
2010-2011
385,000
894,779
2011-2012
410,000
871,863
2012-2013
430,000
847,650
2013 - 2014
450,000
822,284
2014-2019
2,690,000
3,676,179
2019-2024
3,240,000
2,767,988
2024-2029
1,905,000
2,018,891
2029 - 2034
3,250,000
1,218,008
2034-2039
2,315,000
171,124
Totals $15,440,000 $ 14,204,311
2007 Tax Allocation Refunding Bonds, Series B
The Azusa Redevelopment Agency issued $4,790,000 Series A Merged Project Area
Tax Allocation Bonds, dated July 31, 2007 to refund the 1997 tax allocation bonds.
Current Interest Bonds are subject to annual sinking fund installment payments
ranging from $80,000 to $140,000 due beginning August 1, 2008 through
August 1, 2021, bearing interest rates ranging from 4.00% to 5.00% per annum.
Term Bonds are due beginning August 1, 2022 through August 1, 2036, with
installment payments ranging from $150,000 to $305,000, bearing interest rates
ranging from 5.25% to 5.30% per annum. Debt service payments on the bonds are
payable from pledged tax increment revenues. The outstanding principal balance at
June 30, 2009, was $4,710,000.
The annual requirements to amortize the outstanding bond indebtedness as of
June 30, 2009, including interest are as follows:
2007 Tax Allocation
Bonds,
Series B
Principal
Interest
2009 - 2010
$ 85,000
$ 237,811
2010-2011
85,000
234,230
2011 -2012
90,000
230,423
2012-2013
95,000
226,305
2013-2014
100,000
221,968
2014-2019
570,000
1,035,718
2019-2024
710,000
881,501
2024-2029
920,000
670,500
2029-2034
1,185,000
393,658
2034-2039
870,000
70,755
Totals $ 4,710,000 $ 4,202,869
49
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
2008 Tax Allocation Bonds, Series A
The Azusa Redevelopment Agency issued $6,715,000 Series A Merged Project
Area Tax Allocation Bonds, dated December 18, 2008 to finance redevelopment
projects, satisfy reserve requirements, and pay costs incurred with the bond
issuance. The bonds consist of serial bonds due in annual installments ranging
from $70,000 to $140,000 maturing on August 1, 2009 through August 1, 2018,
and term bonds of $1,850,000 due August 1, 2023 and $1,815,000 due
August 1, 2028 and $2,045,000 due August 1, 2034. Serial bonds have interest
rates ranging from 4.5% through 6.75%. The term bonds carry interest rates of
7.5% and 8.2%. Debt service payments on the bonds are payable from pledged
tax increment revenues. The outstanding principal balance at June 30, 2009, was
$6,715,000.
The annual requirements to amortize the outstanding bond indebtedness as of
June 30, 2009, including interest are as follows:
2008 Tax
Allocation
Bonds,
Series A
Principal
Interest
2009 - 2010
$ 70,000
$ 502,963
2010-2011
80,000
499,388
2011-2012
80,000
495,188
2012-2013
85,000
490,544
2013-2014
95,000
485,250
2014-2019
595,000
2,321,219
2019-2024
1,850,000
2,021,938
2024 - 2029
1,815,000
1,205,306
2029-2034
1,095,000
503,400
2034-2039
950,000
38,000
Totals $ 6,715,000 $ 8,563,196
2008 Housing Tax Allocation Bonds, Series B
The Azusa Redevelopment Agency issued $11,580,000 of Housing Tax
Allocation Bonds, Series B, dated November 25, 2008. Proceeds of the bonds
were to provide funds to finance low and moderate income housing within or of
benefit to the project area, satisfy the reserve requirement for the bonds, and pay
costs incurred in connection with the issuance. The bonds consist of serial
bonds due in annual installments ranging from $125,000 to $355,000 maturing
on August 1, 2009 through August 1, 2020; and term bonds of $1,075,000 due
August 1, 2024 and'$8,42O,O0O due August 1, 2038. Serial bonds have interest
rates ranging from 3.5% through 6.6%. The term bonds carry interest rates of
6.75% and 7.0%. Debt service payments on the bonds are payable from
pledged tax increment revenues. The outstanding principal balance at
June 30, 2009, was $11,580,000.
50
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
The annual requirements to amortize the outstanding bond indebtedness as of
June 30, 2009, including interest are as follows:
Housing Tax Allocation Bond
2008 Series B
Principal
Interest
2009-2010
$ 355,000
$ 708,583
2010-2011
125,000
697,626
2011 - 2012
125,000
691,533
2012-2013
130,000
685,158
2013 - 2014
135,000
678,364
2014-2019
815,000
3,261,161
2019-2024
985,000
2,958,964
2024-2029
2,805,000
2,341,763
2029-2034
3,650,000
1,193,500
2034-2039
2,455,000
108,325
Totals $11,58D,000 $ 13,324,977
The Azusa Redevelopment Agency has pledged through a portion of the tax
increment revenue that it receives as security for bonds. The Agency has
committed to appropriate each year, from these resources, amounts sufficient to
cover the principal and interest requirements on the debt. The remaining principal
and interest on such debt is reflected in bond issues described above and
amounted to $110,945,144. For the current year, the total tax increment revenue
recognized net of pass -through payments by the Agency was $5,206,551 and
debt service on bond outstanding was $2,970,048.
Obligation Under Developer Agreements
On October 4, 1988, the Redevelopment Agency of the City of Azusa, a component unit
of the City of Azusa, entered into a sales tax allocation note with the Price Company. In
fiscal year 1988-1989, the Price Company advanced to the Agency $4,558,300 for the
purpose of redeveloping the Price Company site located in the West End Project Area.
Interest on the advance accrues at a rate of 9.5% per annum. Sales tax revenues
received from the site have been pledged as security for the repayment of principal and
interest. Annual repayments to Price Company are due on the last business day of
December, March, June and September beginning December 31, 1989, based upon the
following allocation of sales tax revenues:
First, $493,000 to Agency
Next, $490,000 to Price Company
Next, $178,000 to Agency
Next, $178,000 to Price Company
Then, balance divided 50% to Agency and 50% to Price Company
Payments will continue for a period of 25 years through October 31, 2015, or until all
accrued interest and principal are paid in full, whichever occurs first. In the event that the
entire interest and principal has not been repaid as of October 31, 2015, the unpaid
balance will be forgiven. The outstanding principal balance at June 30, 2009, was
$8,974,171.
On May 15, 1989, the Agency entered into an agreement with the City of Azusa to
transfer all sales tax revenues received by the Agency under the Price Company
developer agreement to the City, except that required for repayment of the note or other
required purposes.
51
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
b. Long -Term Debt- Business -Type Activities
The following
is a summary
of changes
in long-term
debt for the year
ended
June 30, 2009:
Balances at
Balances at
Due Within
July 1, 2008
Additions
Deletions
June 30, 2009
One Year
Water Fund:
Compensated absences
$ 338,303
$ 224,751
$ 184,499
$ 378,555
$ 206,451
Certificates of participation,
2003 Series A
17,280,000
-
790,000
16,490,000
815,000
2006 Water Revenue Bonds
54,850,000
-
-
54,850,000
280,000
Total Water Fund
72,468,303
224,751
974,499
71,718,555
1,301,451
Light Fund
Compensated absences
503,728
209,485
187,845
525,368
195,915
Certificates of participation,
2003 Series B and C
10,415,000
-
435,000
9,980,000
455,000
Total Light Fund
10,918,728
209,485
622,845
10,505,368
650,915
Sewer/Wastewater Fund:
Compensated absences
77,617
59,820
46,596
90,841
54,535
Certificates of participation, 1994
2,130,000
-
100,000
2,030,000
105,000
Total Sewer/WastewaterFund
2,207,617
59,820
146,596
2,120,841
159,535
Internal Service Funds:
Compensated absences
272,538
168,632
148,641
292,529
159,544
Total Internal Service
272,538
168,632
148,641
292,529
159,544
Total Business -Type
Funds $ 85,867,186 $ 662,688 $ 1,892,581 84,637,293 $ 2,271,445
Unamortized bond premiums 3,423,640
Unamortized bond discounts (98,710)
$ 87,962,223
Compensated Absences
The City's policies relating to compensated absences are described in Note 1 of the
notes to financial statements. For the business -type activities, the liability will be paid in
future years by the proprietary funds and the Consumer Services internal service funds.
Water Certificates of Participation, 2003 Series A
On December 18, 2003, the Financing Authority for Resource Efficiency of California
(FARECal) issued $20,370,000 of Certificates of Participation, 2003 Series A, with an
average interest rate of 3.91 % to current refund $20,130,000 of outstanding Azusa Public
Financing Authority Revenue Bonds, 1993 Series A, and to pay costs associated with the
execution and delivery of Series A Water Certificates.
Debt covenants require that the City maintain a reserve account equal to the maximum
annual debt service on all outstanding certificates. At June 30, 2009, the reserve
requirement of $1,953,000 was fully funded.
52
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
The Series A Water Certificates maturing 2004 to 2023, are serial certificates payable in
annual installments of $735,000 to $1,480,000. Interest is payable semi-annually on each
July 1 and January 1 of each year, commencing January 1, 2004, at rates ranging from
2.0% to 5.0% per annum. The outstanding principal balance at June 30, 2009, was
$16,940,000.
The annual requirements to amortize the outstanding certificates of participation as of
June 30, 2009, including interest are as follows:
Water - Certificates of
Participation, 2003 Series A
Principal
Interest
2009-2010
$ 815,000
$ 725,845
2010-2011
840,000
695,833
2011 -2012
870,000
662,683
2012 - 2013
910,000
627,083
2013 - 2014
945,000
589,510
2014-2019
5,370,000
2,279,014
2019 - 2024
6,740,000
858,508
Totals
$ 16,490,OD0
$ 6,438,476
2006 Water Revenue Bonds
On December 13, 2006, the Azusa Public Financing Authority, a component unit of the
City of Azusa, issued $54,850,000 of 2006 Water Revenue Bonds. The proceeds were
primarily used to finance certain improvements to the municipal water system of the City
of Azusa. The bonds are payable from pledged revenues comprising primarily of
installment payments received by the Authority from the City. Serial bonds mature in
annual installments beginning on July 1, 2009 through July 1, 2017, in amounts ranging
from $200,000 to $1,200,000. Interest ranges from 4.000% to 5.000% and is payable
semi-annually on July 1 and January 1. Term bonds mature in various years ranging
from July 1, 2019 through July 1, 2039, with amounts ranging from $2,595,000 to
$13,230,000 and interest ranges from 3.920% to 4.380%.
The annual requirements to amortize the outstanding bonds as of June 30, 2009,
including interest are as follows:
2006
Water Revenue Bonds
Principal
Interest
2009-2010
$ 280,000 $
2,686,588
2010 - 2011
295,000
2,675,088
2011 -2012
310,000
2,662,988
2012-2013
320,000
2,650,388
2013 - 2014
330,000
2,637,388
2014 - 2019
5,745,000
12,494,463
2019-2024
7,365,000
10,878,563
2024 - 2029
9,335,000
8,902,281
2029-2034
11,955,000
6,282,375
2034-2039
15,355,000
2,886,125
2039-2044
3,560,000
89,000
Totals $ 54,850,000 $ 54,845,247
53
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
Electric Certificates of Participation, 2003 Series B
On December 18, 2003, the Financing Authority for Resource Efficiency of California
(FARECaI) issued $5,470,000 of Certificates of Participation, 2003 Series B, with an
average interest rate of 3.91 % to finance the acquisition, construction and installation of a
new substation (the Kirkwall Substation), including associated equipment and facilities
and certain upgrades to the distribution lines and equipment of the City of Azusa's
Electric System that are adjacent to the Kirkwall substation. The certificates were also
issued to fund a reserve account for the Series B Electric Certificates and to pay costs
associated with the execution and delivery of the Series B Electric Certificates. There are
no Series A Electric Certificates.
Debt covenants require that the City maintain a reserve account equal to the maximum
annual debt service on all outstanding certificates. At June 30, 2009, the reserve
requirement of $547,000 was fully funded.
The Series B Electric Certificates maturing 2004 to 2023 are serial certificates payable in
annual installments of $565,000 to $915,000. Interest is payable semi-annually on each
July 1 and January 1 of each year, commencing January 1, 2004, at rates ranging from
2.0% to 5.0% per annum. The outstanding principal balance at June 30, 2009, was
$5,470,000.
The annual requirements to amortize the outstanding certificates of participation as of
June 30, 2009, including interest are as follows:
Electric- Certificates of
Participation, 2003 Series B
Principal Interest
2009 - 2010
$ - $ 263,438
2010 - 2011
- 263,438
2011 - 2012
- 263,438
2012 - 2013
- 263,438
2013 - 2014
- 263,438
2014 -2019
1,290,000 1,261,165
2019-2024
4,180,000 532,228
Totals $ 5,470,000 $ 3,110,583
Electric Certificates of Participation, 2003 Series C
On December 18, 2003, the Financing Authority for Resource Efficiency of California
(FARECaI) issued $6,525,000 of Certificates of Participation, 2003 Series C to finance
the acquisition, construction, and installation of certain facilities to interconnect the
electric system of Southern California Edison Company to the Kirkwall Substation, and
together with the Series B Electric Project, to fund a reserve account for the Series C
Electric Certificates and to pay costs associated with the execution and delivery of the
Series C Electric Certificates. There are no Series A Electric Certificates.
Debt covenants require that the City maintain a reserve account equal to the maximum
annual debt service on all outstanding certificates. At June 30, 2009, the reserve
requirement of $618,000 was fully funded.
54
City of Azusa
Notes to Financial Statements (Continued)
Note 5: Long -Term Debt (Continued)
The Series C Electric Certificates maturing 2004 to 2023 are serial certificates payable in
annual installments of $565,000 to $915,000. Interest is payable semi-annually on each
July 1 and January 1 of each year, commencing January 1, 2004, at rates ranging from
1.46% to 5.57% per annum. The outstanding principal balance at June 30, 2009, was
$4,510,000.
The annual requirements to amortize the outstanding certificates of participation as of
June 30, 2009, including interest, are as follows:
Electric - Certificates of
_ Participation, Series C
Principal
Interest
2009 - 2010
$ 455,000
$ 229,345
2010 - 2011
480,000
205,176
2011-2012
505,000
179,713
2012-2013
530,000
152,959
2013-2014
555,000
124,911
2014-2019
1,985,000
183,949
Totals $ 4,510,000 $ 1,076,053
1994 Sewer System Certificates of Participation
On March 1, 1994, the Azusa Public Financing Authority, a component unit of the City of
Azusa, issued $3,100,000 of 1994 Sewer System Certificates of Participation. The
proceeds were used to refinance a portion of the 1990 Local Agency Revenue Bonds.
The Certificates of Participation are payable from pledged revenues derived from the
Sewer Enterprise of the City of Azusa sufficient to equal 125% of the maximum annual
debt service of the bonds related to this enterprise. Principal on the Certificates is due in
annual payments beginning on August 1, 1994 through August 1, 2020, in amounts
ranging from $40,000 to $485,000. Interest ranges from 3.500% to 5.625% and is
payable semi-annually on August 1 and February 1.
Debt covenants require that the City maintain a reserve account equal to the maximum
annual debt service on all outstanding certificates. At June 30, 2009, the reserve
requirement of $239,000 was fully funded. The outstanding principal balance at
June 30, 2009, was $2,030,000.
The annual requirements to amortize the outstanding certificates of participation as of
June 30, 2009, including interest, are as follows:
Sewer- 1994 Certificates of
Participation
Principal Interest
2009 - 2010 $
105,000 $
112,363
2010 - 2011
115,000
106,313
2011 -2012
115,000
99,988
2012-2013
125,000
93,388
2013 - 2014
130,000
86,375
2014 - 2019
770,000
308,777
2019 - 2024
670,000
47,151
Totals $ 2,030,000 $ 854,355
55
City of Azusa
Notes to Financial Statements (Continued)
Note 6:
Mortgage Revenue Bonds
The City of Azusa and the Azusa Redevelopment Agency have issued various residential
mortgage revenue bonds. The proceeds of these bonds were invested in mortgage loans that
were made to homeowners for the purpose of financing residential property. These bonds are
secured by first trust deeds on those loans and private mortgage insurance. Although the City
and the Redevelopment Agency have arranged this financing program, these bonds are not
payable from any revenues or assets of the City or the Redevelopment Agency. Generally,
the bondholders may look only to the mortgage loans and other assets held by trustees for
security on the indebtedness. Accordingly, since these bonds do not constitute an obligation
of the City or the Redevelopment Agency, they are not reflected in long-term debt.
Year Original Balance at
Issued Amount Issued June 30, 2009 Due Date
Taxable Collateralized
Refunding Bonds -
Series 1992 (Agency) 1992
Single Family Mortgage
Revenue Refunding Bonds
(Agency) 1992
Note 7: Defined Benefit Pension Plan
Plan Description
$ 9,903,000 $ 303,000 December 1, 2012
10,000,000 $ 6,670,000 October 1, 2012
The City of Azusa contributes to the California Public Employees Retirement System
(PERS), an agent multiple -employer public employee defined benefit pension plan. PERS
provides retirement and disability benefits, annual cost -of -living adjustments and death
benefits to plan members and beneficiaries. PERS acts as a common investment and
administrative agent for participating public entities within the State of California. Benefit
provisions and all other requirements are established by State statute and City ordinance.
Copies of PERS' annual financial report may be obtained from their executive office: 400
P Street, Sacramento, CA 95514.
Funding Policy
Participants are required to contribute 7% (9% for safety employees) of their annual
covered salary. The City makes the contributions required of City employees on their
behalf and for their account. The City is required to contribute at an actuarially
determined rate; the current rate is 12.021% for non -safety employees and 40.744% for
safety employees, of annual covered payroll. The contribution requirements of plan
members and the City are established and may be amended by PERS.
Annual Pension Cost and Net Pension Obligation (Asset)
The City's annual pension cost and change in net pension obligation (asset) for the fiscal
year ending June 30, 2009, were as follows:
56
City of Azusa
Notes to Financial Statements (Continued)
Note 7: Defined Benefit Pension Plan (Continued)
Annual required contribution
Interest on net pension obligation
Adjustment to annual required contribution
Annual pension cost
Contribution made
Increase (decrease) in net pension obligation
Net pension obligation (asset) beginning of year
Net pension obligation (asset) end of year
$ 5,915,919
5,915,919
13,015,089
(7,099,170)
$ (7,099,170)
The required contribution was determined as part of the June 30, 2008, actuarial
valuation, using the entry age normal actuarial cost method.
A summary of principal assumptions and methods used to determine the annual required
contribution is shown below.
Valuation Date
Actuarial Cost Method
Amortization Method
Average Remaining Period
Asset Valuation Method
Actuarial Assumptions:
Investment Rate of Return
Projected Salary Increases
Inflation
Payroll Growth
Individual Salary Growth
June 30, 2007
Entry Age Actuarial Cost Method
Level Percent of Payroll
21 Years as of the Valuation Date for Miscellaneous
Employee and 16 Years as of the Valuation Date for
Safety Employees
15 Year Smoothed Market
7.75% (net of administrative expenses)
3.25% to 14.45% depending age, service and type of
employment
3.00%
3.25%
A merit scale varying by duration of employment
coupled with an assumed annual inflation growth of
3.00% and an annual production growth of 0.25%.
Initial plan unfunded liabilities are amortized over a closed period equal to the average
amortization period at the plan's date of entry into the CalPERS Risk Pool. Subsequent
plan amendments are amortized as a level percentage of pay over a closed 20-year
period. Gains and losses that occur in the operation of the risk pool are amortized over a
rolling 30-year period. If the plan's accrued liability exceeds the actuarial value of plan
assets, then the amortization payment on the total unfunded liability may not be lower
than the payment calculated over a 30-year amortization period.
Three -Year Trend Information for PERS
(Amounts in Thousands)
Fiscal Year
Annual Pension
Cost (APC)
6/30/2007
$ 5,010
6/30/2008
5,475
6/30/2009
5,916
57
Percentage of Net Pension
APC Contributed Obligation
100% $
100%
100%
City of Azusa
Notes to Financial Statements (Continued)
Note 7: Defined Benefit Pension Plan (Continued)
PERS Miscellaneous Plan
(Amounts in Thousands)
Actuarial
Accrued
UAAL as
Actuarial
Actuarial
Liability
Unfunded
a%of
Valuation
Value of
(AAL) Entry
AAL
Funded
Covered
Covered
Date
Assets
Age
(UAAL)
Ratio
Payroll
Payroll
6/30/2005
$ 58,432
$ 65,094
6,662
89.8%
$ 11,793
56.49%
6/30/2006
63,329
69,289
5,960
91.4%
12,295
48.47%
6/30/2007
68,944
75,027
6,083
91.9%
1,374
442.72%
For fiscal year 2008-2009, the City of Azusa participated in risk pooling for its safety
employees. Risk pooling consists of combining assets and liabilities across employers to
produce large groups where the impact of a catastrophic demographic event is shared
among all employers of the same risk pool. Participation in risk pools is mandatory for all
plans with less than 100 active members. Mandated participation in risk pools was
initially based on the active membership of each rate plan as of June 30, 2003. The
implementation of risk pools was done in a way that minimizes the impact on employer
contribution rates. The first year in risk pools, the employer contributions are almost
identical to what the rates would have been outside the pools. Future rates will be based
on the experience of each pool. Pooling will reduce the volatility of future employer rates.
Mandated participation will occur on an annual basis. If on any valuation date, starting
with the June 30, 2003, valuation, a rate plan has less than 100 active members, it will be
mandated in one of the risk pools effective on that valuation date.
Note 8: Public Agency Retirement System (PARS)
Defined Contribution Pension Plan
The City of Azusa contributes to the Public Agency Retirement System (PARS), a defined
contribution pension plan provided and administered by the Public Agency Retirement
System Alternate Retirement System Plan. Employees of the City not otherwise eligible
to participate in PERS or eligible to opt not to participate in PERS, are eligible for
participation in this plan. In a defined contribution plan, benefits depend solely on
amounts contributed to the plan plus investment earnings. Federal legislation requires
contribution of at least 7.5% to a retirement plan. The plan is established by City
ordinance. For the year ended June 30, 2009, the covered payroll for employees in the
plan was $600,803. Total payroll for the City was $28,312,830. Under an adoption
agreement dated January 1, 1992, both the employer and the employee are required to
contribute 3.75% of each participant's compensation. For the year ended June 30, 2009,
the employer and the employees each contributed an amount equal to $22,530. Under
this plan, normal retirement age is 60 years of age. Plan assets are primarily invested in
money market funds.
Retirement Enhancement Plan
The City of Azusa also contributes to the PARS Retirement Enhancement Plan. The plan
provides pension benefits to 116 eligible covered positions in International Brotherhood of
Electrical Workers (IBEW), Service Employees International Union Local 721 (SEIU),
Azusa Middle Management Association (AMMA), and Executive Management. The plan
is administered by Phase II Systems, PARS Trust Administration. Under adopted
agreements approved in July and August 2007, both the employer and the employee are
required to contribute the following contributions for each participant's compensation:
58
City of Azusa
Notes to Financial Statements (Continued)
Note 8: Public Agency Retirement System (PARS) (Continued)
Covered
Positions
IBEW
SEIU
AMMA
Executive Management
Note 9: Post -Employment Benefits
Plan Description
Employer
Employee
Contribution
Contribution
2.26%
2.00%
0.07%
4.00%
6.41%
2.50%
4.00%
7.00%
The City provides other postemployment benefits (OPEB) through a single -employer
defined benefit healthcare plan by contributing approximately one-half of all premiums
charged under the health benefit plan for all eligible employees and qualified family
members. These benefits are provided per contract between the City and the employee
associations. A separate financial report is not available for the plan.
Funding Policy
The contribution requirements of plan members and the City are established and may be
amended by the City, City Council, and/or employee associations. Currently, contributions
are not required from plan members. A contribution of $352,395 was made during the
2008-2009 fiscal year and was not included in the July 1, 2006, actuarial study. The
purpose of the contribution was to pay current year premiums for retirees.
As a result, the City calculated and recorded a Net OPEB Liability, representing the
difference between the Annual Required Contribution (ARC) and actual contributions, as
presented below:
Annual required contribution (ARC)
$ 2,696,000
Adjustment to ARC
-
Annual OPEB Cost
2,696,000
Contributions made
(352,395)
(Decrease) increase in Net OPEB obligation
2,343,605
Net OPEB obligation (asset) June 30, 2008
-
Net OPEB obligation (asset) June 30, 2009
$ 2,343,605
The contribution rate of 17.7% is based on the ARC of $2,696,000, an amount actuarially
determined in accordance with the parameters of GASB Statement No. 45. The ARC
represents a level of funding that, if paid on an ongoing basis is projected to cover the
annual normal cost and the amortization of unfunded actuarial liabilities (or funding
excess) over a thirty year period.
59
City of Azusa
Notes to Financial Statements (Continued)
Note 9: Post -Employment Benefits (Continued)
Annual OPEB Costs and Net OPEB Obligation (Asset)
For the fiscal year 2008-2009, the City's annual OPEB cost (expense) of $2,696,000 was
equal to the ARC. Since this fiscal year is the transition year, information on the annual
OPEB cost, percentage of Annual OPEB cost contributed, and Net OPEB Obligation is
only available for the current fiscal year, as presented below:
Annual
Actual
Percentage of
Net OPEB
Fiscal Year OPEB
Contribution (Net
Annual OPEB Cost
Obligation
End Cost
of Adjustments)
Contributed
(Asset)
6/3012009 $ 2,696,000
$ 352,395
13%
$ 2,343,605
Funded Status and Funding Progress
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts
and assumptions about the probability of occurrence of events far into the future.
Examples include assumptions about future employment, mortality, and the healthcare
cost trend. Amounts determined regarding the funded status of the plan and the annual
required contributions of the City are subject to continual revision as actual results are
compared with past expectations and new estimates are made about the future. The
schedule of funding progress below presents multiyear trend information about whether
the actuarial value of plan assets is increasing or decreasing over time relative to the
actuarial accrued liabilities for benefits. Only one year is presented as this is the first year
of the plan.
UAAL as
Actuarial
Actuarial Unfunded
percent of
Type of Valuation
Value of Actuarial
Funded Covered Interest
Valuation Date
Assets Accrued Liability
Ratio Covered Payroll Payroll Rate
Actual 7/1/2006
$ - $ 24,432,000
0.0% $ 15,202,000 161% 3.50°/n
Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan
(the plan as understood by the employer and the plan members) and include the types of
benefits provided at the time of each valuation and the historical pattern of sharing of
benefit costs between the employer and plan members to that point. The actuarial
methods and assumptions used include techniques that are designed to reduce the effects
of short-term volatility in the actuarial accrued liabilities and the actuarial value of assets,
consistent with the long-term perspective of the calculations.
In the July 1, 2006, actuarial valuation, the projected unit credit method was used. The
actuarial assumptions include a 3.50% investment rate of return, which is a blended rate
of the expected long-term investment return on plan assets and on the employer's own
investments calculated based on the funded level of the plan at the valuation date, and
annual healthcare cost trend rate of 11% beginning July 1, 2006, and reduced by
decrements to an ultimate rate of 5% after six years. The actuarial value of assets is set
equal to the reported market value of assets. The UAAL is being amortized as a level
percentage of payroll on an open basis. The remaining amortization period at
June 30, 2009, was twenty-nine years. The number of active participants is 280.
A
City of Azusa
Notes to Financial Statements (Continued)
Note 10: Insurance
The City is self -insured for workers' compensation and general liability claims arising in the
ordinary course of City operations. The City is a member of the Independent Cities Risk
Management Authority (ICRMA) for general liability insurance coverage in excess of
$500,000 up to a maximum of $2,000,000 per claim and for coverage of workers'
compensation claims in excess of $350,000 up to a maximum of $5,000,000 per claim. In
addition the City also purchased excess liability insurance of $18,000,000 in excess of the
$2,000,000 and excess worker's compensation insurance of $95,000,000 in excess of
$5,000,000.
For the past three years, no settlements or claims payments have exceeded the amount of
the applicable insurance coverage. For the past two fiscal years, the changes in the City's
liability for claims payable are summarized as follows:
Claims Incurred
Beginning and Changes Less Claim Ending
Balance in Estimates Payments Balance
2007-2008 $ 2,556,210 $ 1,275,135 $ (1,230,900) $ 2,600,445
2008-2009 2,600,445 1,419,363 (951,639) 3,068,169
Additional losses may result from matters pending before the City. In the opinion of legal
counsel and management, the resolution of these matters is not expected to have a material
adverse effect on the financial condition of the City.
Note 11: Interfund Receivables, Payables and Transfers
The composition of interfund balances as of June 30, 2009, was as follows:
Due To/From Other Funds
Funds
Due to Other Funds:
General
Capital Project -
Redevelopment Agency
Debt Service -
Redevelopment Agency
Nonmajor Governmental Funds
Light
Internal service funds
Total
Due From other Funds
Debt Service Nonmajor
General Redevelopment Governmental
Fund Agency Funds Light Total
- $ 640,971 $ - $ - $ 640,971
10,654,001 - 3,187,348 5,520,915 19,362,264
614,950 - 90,345 - 705,295
192,418 46 - - 192,464
42,537 - - - 42,537
$ 11,503,906 $ 641.017 $ 3,277,693 $ 5,520,915 $ 20,943,531
The due from other funds amount in the General Fund consisted of a variety of items.
Amounts with internal service funds and various non -major funds was a result of
temporary deficit cash balances in those funds at year-end. Amounts with the
Redevelopment Agency — Debt Service fund related to routine inter -fund transactions not
cleared prior to year end and amounts with Redevelopment Agency — Capital Projects
Fund consisted of a short-term loan to purchase new property.
The due from other funds amount in the Redevelopment Agency —Capital Projects Fund
with the General Fund consisted of a short-term loan.
61
City of Azusa
Notes to Financial Statements (Continued)
Note 11: Interfund Receivables, Payables and Transfers (Continued)
The due from other funds amount in the Redevelopment Agency — Debt Service Fund
with the General Fund relates to amounts the City owes the RDA for sales tax triple flip.
The due from other funds in the non -major funds with the Redevelopment Agency —
Capital Projects Fund of $3,187,348 consisted of a short -tern loan to fund capital
projects to be repaid with the 2007 Tax Allocation Bonds. The other amount with the
Redevelopment Agency — Debt Service Fund related to routine inter -fund transactions
not cleared prior to year-end.
The due from other funds in the Light Fund consisted of a short-term loan to fund capital
projects to be repaid with the 2007 Tax Allocation Bonds.
Advances To/From Other Funds
Advances To Other Funds:
Water Light Internal
Funds Fund Fund Service Funds Total
Advances From Other Funds:
General $ - $ 331,000 $ - $ 331,000
Debt Service - Redevelopment
Agency 180,429 10,197,560 16,846,937 27,224,926
Nonmajor Funds 1,586,200 - 1,586,200
Total $ 180,429 $ 12,114,760 $ 16,846,937 $ 29,142,126
The Light Fund advanced $331,000 to the General Fund and $750,000 to the Capital
Projects Fund and $836,280 to Low and Moderate Income Housing Fund for various
project expenditures. The Light Fund also advanced $10,197,560 to the Redevelopment
Agency Debt Service Fund to fund multiple development projects, such as Krems Loan,
Auto Dealer Loan, Ranch Center Loan and Pic N Sav Loan.
The Water Fund advanced $180,429 to the Redevelopment Agency to fund various
project expenditures.
The Intra-governmental Loan Fund advanced $16,846,937 to the Redevelopment Agency
Debt Service Fund for multiple development projects, such as Price Club, Ranch Center
Loan and the Ranch Center Sales Tax Loan.
City of Azusa
Notes to Financial Statements (Continued)
Note 11: Interfund Receivables, Payables and Transfers (Continued)
Interfund Transfers
Transfer In
Capital Projects
Debt Service
Nonmajor
Nonmajor
General
Redevelopment
Redevelopment
Governmental
Enterprise
Funds
Fund
Agency
Agency
Funds
Funds
Total
Transfer Out:
General
$ -
$ -
$ -
$ 4,155,196
$ -
$ 4,155,196
Capital Projects -
Redevelopment Agency
105,720
-
473,858
-
-
579,578
Debt Service -
Redevelopment Agency
-
6,699,556
-
11,346,870
-
18,046,426
Nonmajor Governmental
Funds
-
251,226
473,494
19,760
150,000
894,480
Water Fund
-
-
835,976
-
835,976
Light Fund
245,691
-
-
396,110
-
641,801
Nonmajor Proprietary
Funds
725,800
-
-
-
-
725,800
Internal Service Funds
188,257
-
-
7,553
195,810
Total
$ 1,265,468
$ 6,950,782
$ 947,352
$ 16,761,465
$ 150,000
$ 26,075,067
The total transfer of $4,155,196 from the General Fund to various nonmajor funds was for
various operating, capital, and debt service transactions made throughout the year.
Transfers to the Redevelopment Agency — Capital Projects fund were to fund capital
projects and to cover administrative costs incurred by other RDA funds.
Transfers to the Redevelopment Agency — Debt Service Fund were to cover various
expenditures within the Redevelopment Agency, such as, debt service payments, pay
City advances and project area deficits.
Transfers from Redevelopment Agency — Debt Service Fund of $1,586,870 to non -major
funds related to 20% set -aside to low and moderate income housing fund.
Transfers to General Fund from the Light fund, non -major proprietary funds, and internal
service funds were related to interest income, franchise fees and operating transactions.
Transfers of $1,232,086 from the Light and Water Fund were for the Utility Mitigation
Fund.
63
City of Azusa
Notes to Financial Statements (Continued)
Note 12: Fund Equity and Net Assets Restatements
Beginning fund equity and net assets have been restated as follows:
Major govemmental funds:
General Fund
To record various prior period account corrections
To record prior years budgeted transfers not recorded
Total General Fund
Non -major governmental funds:
State Gasoline Tax Fund
To record prior years budgeted transfers not recorded
Grants and Seizure Fund
To record various prior period account corrections
Utility Mitigation Fund
To record prior years budgeted transfers not recorded
Total Governmental Funds
Proprietary Funds:
Enterprise Funds:
Water Fund
To correct prior period capital asset balances
To correct prior period amounts in unearned revenue
Total Water Fund
Light Fund
To correct prior period capital asset balances
To correct prior period inventory balances
Total Light Fund
Internal Service Funds:
Equipment Replacement Fund
To record prior years budgeted transfers not recorded
Total Proprietary Funds
Beginning net assets has been restated as follows:
Governmental Activities:
Governmental fund restatements detailed above
Internal Service fund restatements detailed above
Total Governmental Activities
Business -Type Activities:
Enterprise funds restatements detailed above
Total Net Asset Restatements
64
$ 124,234
(400,000)
(275,766)
889,078
(1,929)
(889,078)
$ (277,695)
$ (77,236)
101,866
24,630
(3,420)
(9,434)
12,854
400,000
$ 411,776
$ (277,695)
400,000
122,305
11,776
$ 134,081
City of Azusa
Notes to Financial Statements (Continued)
Note 13: Grant and Seizure Fund
The Grant and Seizure special revenue fund include the following items in its fund balance:
Assets Seizure Federal - Department of Justice $ 198,599
Asset Seizure County 20,613
Asset Seizure Drug and Gang 6,918
Office of Traffic Safety 2,763
Asset Seizure Federal - Department of Treasury
81
Inmate Welfare Fund
11,736
JAG Grant 07-08
(1,796)
OTS - DUI/DL Checkpoint
257
Senior Restricted Donations
98
Public Library Fund
284,573
Library Restricted Donations
62,358
Gates Foundation
557
Book Clubs
2,489
Summer Reading
3,260
Special Programs
451
California Literacy Grant
26,912
General Plan Surcharge
201,458
Caltrans Goldmine
(39,897)
SBSX California Energy Commission
(60,060)
AB29X Meters
86,607
Oil Block Grant
(1,644)
Beverage Container Recycling
44,146
AB939 Fee
299,642
Technology Grant
143,058
Rehabilitation of Zacatecas
516
Grants and Seizures
(8,941)
Jack Williams Memorial
600
Police - grants and seizure
16
Total $ 1,285,370
65
City of Azusa
Notes to Financial Statements (Continued)
Note 14: Segments of Enterprise Activities
The City issued Sewer System Certificates of Participation to refinance a portion of the 1990
Local Agency Revenue Bonds. The sewer department is accounted for in the Other
Enterprise Funds as the Sewer/Wastewater Fund. Summary information for the
Sewer/Wastewater Fund for the year ended June 30, 2009, is as follows:
Condensed Statement of Net Assets
Assets:
Current assets
$ 3,672,022
Restricted assets
293,120
Capital assets
8,945,011
Noncurrent assets
95,731
Total assets
13,005,884
Liabilities:
Current liabilities
269,945
Noncurrent liabilities
1,899,031
Total liabilities
2,168,976
Net assets:
Invested in capital assets, net of related debt
6,977,286
Restricted
293,120
Unrestricted
3,566,502
Total net assets
$ 10,836,908
Condensed Statement of Revenues, Expenses
and Changes in Net Assets
Sewer charges
$ 1,511,120
Depreciation expense
(325,309)
Other operating expenses
(1,518,931)
Operating income
(333,120)
Nonoperating revenues (expenses):
Investment earnings
156,150
Interest expense
(120,611)
Special franchise fees
(30,934)
Transfers out
(140,000)
Change in net assets
(468,515)
Beginning net assets
11,305,423
Ending net assets
$ 10,836,908
Condensed Statement of Cash Flows
Net cash provided (used) by
Operating activities
$ (1,277)
Noncapital financing activities
(140,000)
Capital and related financing activities
(462,322)
Investing activities
164,304
Net increase (decrease)
(439,295)
Beginning cash and cash equivalents
4,215,413
Ending cash and cash equivalents
$ 3,776,118
[Yd
City of Azusa
Notes to Financial Statements (Continued)
Note 15: Proposition 218
Proposition 218, which was approved by the voters in November 1996, regulates the City's
ability to impose, increase and extend taxes, assessments and fees. Any new, increased, or
extended taxes, assessments, and fees that are determined to be subject to the provisions of
Proposition 218 require voter approval before they can be implemented. Additionally,
Proposition 218 provides that these taxes, assessments, and fees are subject to the voter
initiative process and may be rescinded in the future by the voters. Therefore, the City's
ability to finance the services for which the taxes, assessments, and fees were imposed may
be significantly impaired. At this time, it is uncertain how Proposition 218 will affect the City's
ability to maintain or increase the revenue it receives from taxes, assessments and fees.
Note 16: Summary Financial Data for Joint Ventures
Southern California Public Power Authority
The City of Azusa is a member of the Southern California Public Power Authority
(SCPPA), a public entity organized under the laws of the State of California. The SCPPA
was formed by a Joint Powers Agreement dated as of November 1, 1980, pursuant to
the Joint Exercise of Powers Act of the State of California. The SCPPA's participant
membership consists of ten Southern California cities and one public district of the State
of California. The SCPPA was formed for the purpose of planning, financing, developing,
acquiring, constructing, operating and maintaining projects for the generation and
transmission of electric energy for sale to its participants. The Joint Powers Agreement
has a term of 50 years. Complete financial statements may be obtained from 200 S. Los
Robles Avenue, Suite 155, Pasadena, California 91101-9738.
As of June 30, 2009, the City's ownership of significant projects of SCPPA includes the
following: 1 % of SCPPA's $684,208,000 investment (at cost) in the Palo Verde Nuclear
Generating Station (with related SCPPA indebtedness of $82,426,000) 4.2% of SCPPA's
$21,000,000 investment (at cost) in the Hoover Uprating Project (with related SCPPA
indebtedness of $13,850,000), 1% of SCPPA's $53,611,000 investment (at cost) in the
Mead — Phoenix Project (with related SCPPA indebtedness of $55,660,000), 2.2% of
SCPPA's $173,271,000 investment (at cost) in the Mead - Adelanto Project (with related
SCPPA indebtedness of $175,837,000) and 14.7% of SCPPA's $26,745,000 investment
(at cost) in the San Juan Generating Station (with related indebtedness of
$139,830,000).
Power Agency of California
The City of Azusa is a member of the Power Agency of California (the Agency), a public
entity organized under the laws of the State of California. The Agency was formed by a
Joint Powers Agreement dated as of July 1, 1990, pursuant to the Joint Exercise of
Powers Act of the State of California. The Agency's membership consists of four
Southern California cities. The Agency was formed in order to take advantage of
synergies and economies of scale as a result of the four cities acting in concert. The
Agency has the ability to plan, finance, develop, acquire, construct, operate and maintain
projects for the generation and transmission of electric energy for sale to its participants.
The term of the Joint Powers Agreement is 50 years. Each participant advances funds to
the Agency to provide operating capital for the Agency. The advances are used by the
Agency to pay for costs incurred in the purchase of power, coordination services and
administrative expenses. Each participant has entered into an Integrated Operations
Agreement with Southern California Edison Company (Edison) which provides, among
other things, for the participants to integrate their resources with Edison and for Edison
to provide scheduling and/or dispatching services. The cost of performing these services
is allocated proportionately among the participants. Complete financial statements may
be obtained from the City of Riverside Power Resources, 3601 University Avenue,
2"' Floor, Riverside, California 92501.
67
City of Azusa
Notes to Financial Statements (Continued)
Note 17: Rate Stabilization Fund
The City of Azusa has provided for a rate stabilization fund in the amount of $9,316,625
(presented in the accompanying balance sheet as cash held for rate stabilization) to cover
the difference between the City's cost to provide electricity to its customers (including power
charges for power purchased from other utilities in which the City has a joint venture interest)
and the local market price for electricity as established by a regional power pool approved by
the Federal Energy Regulatory Commission.
Note 18: Commitments and Contingencies
The City of Azusa has been named as a defendant in numerous lawsuits and claims arising
in the course of operations. In the aggregate, these claims seek monetary damages in
significant amounts. To the extent the outcome of such litigation has been determined to
result in probable financial loss to the City, such loss has been accrued in the accompanying
combined financial statements.
Note 19: Subsequent Events
SERAF Tax Increment Revenue Shift for fiscal year 2009-2010 and 2010-2011
On July 23, 2009, the California Legislature passed SIB 26, requiring a shift in tax increment
revenues during fiscal years 2009-2010 and 2010-2011 to be deposited into the county
"Supplemental" Educational Revenue Augmentation Fund (SERAF) and which is to be
distributed to meet the State's Prop 98 obligations to schools. It is estimated that the
Agency's share of the SERAF shift for fiscal year 2009-2010 and 2010-2011, will amount to
approximately $2,489,504 and $512,545, respectively. In October 2009, the California
Redevelopment Association and its member agencies filed a legal action in an attempt to
stop these amounts from having to be paid. As of the date of this report, no legal
determination has been made by the courts on that action.
Should these amounts be required to be paid, looking at current resources, it is uncertain as
to whether the Agency will have sufficient resources to accomplish those payment(s). If the
Agency is unable to make the payment(s) it would be subject to the provisions of the law
which substantially restrict its operational ability.
Local Government Revenues Withheld by the State of California
On July 24, 2009, the legislature approved the "borrowing" of up to 8 percent of the local
property tax under Proposition 1A (2004). For the City of Azusa, this is estimated to be
$727,997. The State of California is required to repay this obligation by June 30, 2013.
Property acquisitions and disposals
Subsequent to the end of the year the agency purchased approximately $4 million dollars in
properties used for capital projects. The agency also sold properties to Target for
approximately $7 million dollars for capital project developments.
M