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CAFR FY 2003-04 CITY OF kAkolkk P\ANCHO PALOS VERDES C A L I F O R N I A COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCALYEAR ENDED JUNE30, 2004 r r N • CITY OF RANCHO PALOS VERDES, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2004 Prepared By: Finance Department Dennis McLean, Director of Finance & Information Technology Kathryn Downs, Accounting Manager Cover photo courtesy of Ms.Stephanie Brito,2004 Palos Verdes Peninsula Land Conservancy Photo Contest INTRODUCTORY SECTION CITY OF RANCHO PALOS VERDES COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2004 TABLE OF CONTENTS INTRODUCTORY SECTION: Table of Contents i-iii Letter of Transmittal iv-x Directory of City Officials A Organization Chart xii GFOA Certificate of Achievement for Excellence in Financial Reporting xiii CSMFO Certificate of Award for Outstanding Financial Reporting xiv FINANCIAL SECTION: Independent Auditor's Report 1 Management Discussion and Analysis 3 Government-Wide Financial Statements Statement of Net Assets 11 Statement of Activities 12 Fund Financial Statements Governmental Funds Balance Sheet 13 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 15 Statement of Revenues, Expenditures, and Changes in Fund Balances 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 18 General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 19 Street Maintenance Special Revenue Fund Statement of Revenues, Expenditures, and Change in Fund Balance - Budget and Actual 20 Proprietary Funds Statement of Net Assets 21 Statement of Revenues, Expenses, and Changes in Fund Net Assets 22 Statement of Cash Flows 23 Notes to the Financial Statements 24 i CITY OF RANCHO PALOS VERDES COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2004 TABLE OF CONTENTS Supplementary Information Major Fund Budgetary Comparison Schedules Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Capital Improvement Projects Capital Projects Fund 45 RDA Debt Service Fund 46 Non-Major Governmental Funds Combining Balance Sheet 50 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 56 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual — Special Revenue Funds Air Quality Management Fund 62 Community Development Block Grant Fund 63 EI Prado Fund 64 RDA Housing Set-Aside Fund 65 Proposition A Fund 66 Proposition C Fund 67 Recycling Fund 68 Solid Waste Fund 69 Public Safety Grants Fund 70 1972 Act Fund 71 1911 Act Fund 72 JPIA— Portuguese Bend Fund 73 Habitat Restoration Fund 74 Subregion One Maintenance Fund 75 Measure A Fund 76 Abalone Cove Sewer Assessment District 77 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual — Capital Projects Funds Bikeways Fund 78 RDA Abalone Cove Fund 79 Environmental Excise Tax Fund 80 Quimby Fund 81 Affordable Housing Fund 82 RDA Portuguese Bend Fund 83 Utility Undergrounding Fund 84 Roadway Beautification Fund 85 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual — Permanent Fund JPIA—Abalone Cove Fund 86 ii CITY OF RANCHO PALOS VERDES COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2004 TABLE OF CONTENTS Internal Service Funds Combining Statement of Net Assets 87 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets 88 Combining Statement of Cash Flows 89 STATISTICAL SECTION (Unaudited) General Governmental Expenditures by Function — Last Ten Fiscal Years 90 General Governmental Revenues by Source— Last Ten Fiscal Years 91 Property Tax Levies and Collections — Last Ten Fiscal Years 92 Assessed Value of Taxable Property— Last Ten Fiscal Years 93 Property Tax Rates —All Overlapping Governments — Last Ten Fiscal Years 94 Principal Property Taxpayers 95 Special Assessment Billings and Collections— Last Ten Fiscal Years 96 Computation of Legal Debt Margin 97 Statement of Direct and Overlapping Debt 98 Demographic Statistics — Last Ten Fiscal Years 99 Demographic Statistics —2000 Census Data 100 Building Permits and Property Value— Last Ten Fiscal Years 101 Miscellaneous Statistics 102 iii has a land area of 13.6 square miles and a population of 42,810. The City is primarily a"bedroom"community with relatively little commercial activity. The City has operated under the council-manager form of government since incorporation. Policy-making and legislative authority are vested in the governing council,which consists of five council members, including the mayor and mayor pro-tem. The governing council is responsible,among other things,for passing ordinances,adopting the budget, appointing committees and hiring the city manager and the city attorney. The city manager is responsible for carrying out the policies and ordinances of the governing council, for overseeing the day-to-day operations of the government, and for appointing the heads of the government's departments. The council is elected on a non- partisan, at-large basis. Council members are elected to four-year staggered terms with two or three council members elected every two years. The council designates the mayor and mayor pro-tem for a one-year term. Though the General fund reserves of the City increased during the fiscal year ended June 30,2004, it is important to continue to measure the City's financial strength over time, notjust on the basis of the most recent three or four years experience. The budget adopted by the City Council for the fiscal year ending June 30, 2005 presents the expectation of a decrease of General fund reserves. Potential economic downturn and the need to establish an infrastructure renewal and maintenance program will require continued conservative fiscal policies. MAJOR INITIATIVES The City's staff,following specific directives of the City Council and the City Manager, has been involved in a variety of projects throughout the year. These projects reflect the government's commitment to ensuring that its citizens are able to live and work in an enviable environment. Planning, Building, and Code Enforcement ➢ The City, in cooperation with the Palos Verdes Peninsula Land Conservancy, continued to oversee the implementation of the Forrestal Management Plan and the Forrestal Steering Committee. ➢ The City implemented the recently adopted Neighborhood Compatibility Requirements and distributed a Neighborhood Compatibility Handbook based on recommendations provided by the Neighborhood Compatibility Steering Committee. Additionally, the City Council formed the Residential Development Standards Committee to review the existing residential development standards and determine if any modifications are necessary. ➢ The Equestrian Committee and City Council reviewed and approved the continued operation of a Conditional Large Domestic Animal Permit to allow a non-profit organization to conduct equestrian activities in the Portuguese Bend Equestrian Overlay District. ➢ The City continued the process of updating the General Plan by holding monthly meetings of the General Plan Update Steering Committee. The Committee is charged with the task of reviewing and commenting on all of the existing goals and policies of the General Plan. ➢ The City continued to implement its State approved Housing Element and efforts to work with the Southern California Association of Governments in preparing the Regional Transportation Plan. ➢ The City continued work on Phase 11 of the Natural Communities Conservation Plan (NCCP)as part of its continuing effort to finalize the habitat preserve design. ➢ The City continued to provide review and inspection services for repair and rehabilitation of the Ocean Trails golf course damaged by a landslide in 1999. The City approved plans to improve the golf course and expand the existing Clubhouse. ➢ The City initiated the Environmental Impact Report(EIR)for the proposed Point View project, a proposed new residential tract partially located in the City's landslide moratorium area. ➢ The City continued to formally monitor development projects in surrounding jurisdictions (referred to as "border issues")to assess their potential impacts upon the City and its residents. V ➢ The City issued building permits for 19 additional homes within the Oceanfront Estates residential project located along Palos Verdes Drive West. ➢ The City continued to oversaw renovation of the Golden Cove Shopping Center. ➢ The City oversaw the development of 13 new residential lots on property located at 3200 Palos Verdes Drive West. ➢ The City continued to oversee and inspect construction of Belmont Village, a 122-unit assisted living facility on Crestridge Road. ➢ The City continued to approve the installation of various commercial antenna facilities for cellular telephones and personal communication systems on private property throughout the City. Public Works ➢ The City took steps to assess the condition of infrastructure by completing the Storm Drain Master Plan update and Sewer Master Plan. ➢ The annual sidewalk program and an update of the City's Pavement Management Program were successfully completed. ➢ The Point Vicente Interpretive Center(PVIC)construction site was rehabilitated and prepared for the expansion project approved on July 6, 2004. ➢ Two bus shelters were reconstructed and swing sets were added to Hesse Park. ➢ The City approved a new residential waste hauler, Universal Waste Systems, Inc. (UWS). UWS provides new services including green waste recycling. ➢ Recycling cans were purchased and installed in multi-family complex common areas. Recreation and Parks ➢ The City continued to offer the use of park facilities to the Peninsula Seniors,a local non-profit organization. ➢ Recreation and parks staff and the Los Serenos de Point Vicente docents hosted the annual Whale of a Day event on the Point Vicente Interpretive Center grounds. ➢ The Los Serenos de Pointe Vicente docents continued their successful docent-led hike programs at several sites throughout the City. ➢ Recreation and parks staff coordinated the City's annual July 4th Independence Day celebration. ➢ The City hosted the fourth annual Shakespeare By the Sea drama production at Upper Point Vicente Park. ➢ Recreation and parks staff continued to coordinate several annual community events including the Abalone Cove Beach Clean-Up Day and Breakfast with Santa. ➢ Once again,the City has qualified for the use of Community Development Block grant funds for the REACH program for the developmentally challenged. Administration ➢ The City celebrated its 30th Anniversary of incorporation with two special community events. A family-friendly Community Barbecue and Picnic was held in September 2003 at Upper Point Vicente Park and a formal dinner dance was hosted at the Los Verdes Country Club in November 2003. A thirteen-member resident volunteer committee assisted the City in planning both events. ➢ The City Council sponsored a Community Leaders' Breakfast meeting in March 2004 that featured a discussion of municipal finance problems and possible solutions. Representatives from City committees and VI commissions, adjoining cities and local districts, homeowners associations, community volunteer organizations and the local business community attended the Breakfast. ➢ The City continued to publish the widely read and much acclaimed quarterly City Newsletter. In FY 03-04, the newsletter featured articles on Marine training exercises at Long Point, the City's new Neighborhood Compatibility Ordinance, the Update of the City's General Plan, the City Council's Goal Setting Workshop and the acquisition of the Lower Point Vicente Park and the Point Vicente Fishing Access properties from Los Angeles County. ➢ The City Council continued to provide financial assistance to a variety of non-profit organizations that provide service to the community. ➢ The City completed a Girls' Softball Feasibility Study, which studied five park sites to determine where new softball fields could be located in the community. ➢ The City entered into an Agreement with Cox Communications to install a fiber optic cable connection from the City Studio to the Cox network to enable live and taped cable broadcasts directly from the City studio. ➢ The City continued to expand its presence on the local cable television network by moving production and editing of its monthly cable television show"RPV CityTalk" and other original programming to the Multi-Media Studio located at City Hall. ➢ The City changed medical insurance carriers, thereby cutting the City's cost for medical insurance premiums by 30%, while still providing City employees and their dependents with equivalent or better coverage levels. ➢ The City prepared a Joint Natural Hazards Mitigation Plan in cooperation with the City of Rolling Hills Estates. The two cities were the only ones in Los Angeles County to prepare a joint plan to comply with the federal Disaster Mitigation Act of 2000. ➢ The voters of the City approved the adoption of term limits for City Council members at the General Municipal Election held in November 2003. ➢ The Supreme Court agreed to hear the City's appeal involving an amateur radio operator who says the city of Rancho Palos Verdes unjustly denied him a permit to use a radio antenna for commercial purposes. At issue is whether the Federal Telecommunications Act of 1996 provides for money damages from city officials in cases of violations, or simply a court order requiring the city's compliance. ➢ The City Council adopted a Tactical Plan that included the following four goals: A Infrastructure Renewal and Maintenance: By July 1, 2005 formulate and present comprehensive plan to renew infrastructure. B Citywide Traffic and Parking: Formulate and Implement an action plan on/or before September 30, 2004. C Purchase the Portuguese Bend Open Space Properties: Continue to aggressively pursue Federal, State and local funds for the purchase of the Portuguese Bend Nature Preserve. D Complete the Open Space, Park and Recreation Master Plan: Publish Council adopted Open Space Parks & Recreation Master Plan including a Civic Center Plan. FINANCIAL INFORMATION The Finance department of the City is responsible for establishing and maintaining an appropriate internal control structure. The internal control system is designed to ensure that the assets of the City are protected from loss,theft, or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformitywith Generally Accepted Accounting Principles. The internal control structure is designed to provide reasonable,but not absolute,assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1)the cost of a control should not exceed the benefits likely to be derived; and(2)the valuation of costs and benefits requires estimates and judgements by management. Single Audit. As a recipient of federal,state, and county financial assistance,the City is responsible for ensuring that an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to those programs. This internal control structure is subject to periodic evaluation by management. In years when over $500,000 is expended on Federal financial assistance programs, the City is required to undergo an annual single VII audit in conformity with the provisions of the Single Audit Act of 1984 and U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. For the year ended June 30, 2004, less than$500,000 was expended on Federal financial assistance programs; and therefore,a single audit was not required. Budgeting Controls. The City of Rancho Palos Verdes maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions contained in the annual appropriated budgets approved by the City Council, Redevelopment Agency Board, and Improvement Authority Commission. Activities of the General fund,Special Revenue funds,Capital Projects funds,Debt Service fund and Permanent fund are included in the annual appropriated budgets of the government units. The level of budgetary control(that is,the level at which expenditures cannot legally exceed the appropriated amount) is established at the department/function level within each fund. Formal budgetary integration is employed as a management control device. The City also maintains an encumbrance accounting system as one method of maintaining budgetary control. Encumbrances lapse at year-end, and any unexpended balance is eligible to be carried over to the following year's budget appropriations with Council approval. General Government Functions. The following schedule presents a summary of all Governmental fund revenues for the fiscal year ended June 30, 2004 with the amount and percentage of increases or decreases in relation to prior year revenue: Increase/ Percent of (Decrease) Increase/ Amount from FY02-03 (Decrease) Taxes $ 12,081,242 $ 1,035,014 9.4% Licenses and permits 1,309,732 (153,403) -10.5% Fines and forfeitures 101,788 (13,660) -11.8% Use of money and property 732,971 (70,539) -8.8% Charges for services 378,995 174,197 85.1% Revenues from other agencies 3,453,070 (865,008) -20.0% Other revenues 2,363,433 1,809,398 326.6% TOTAL REVENUES $ 20,421,231 $ 1,915,999 10.4% With overall revenues increasing by over$1.9 million for the year,the City recognized large fluctuations in several of the different revenue categories. These increases and decreases are discussed below. Tax revenue increased by over$1 million when compared to FY02-03. The strength of local property values provided a property tax increase of more than $320,000. An increase in the occupancy rate within the City's commercial district contributed to a Sales ax increase of about$200,000. The City began collecting a storm water franchise tax from waste haulers in excess of$100,000. Cable franchise tax increased by about$70,000 due to increased cable rates and usage. Finally, golf tax revenue of about$130,000 was added to the Tax revenue category for FY03-04. Previously, it was reported in the Licenses and Permits revenue category. The increase in Charges for Services was attributable to the City collecting Quimby fees of more than$110,000 and Environmental Excise Tax of more than $60,000 from residential tract developments. The decrease of revenues from other agencies was primarily the result of the State's temporary increase of the Vehicle License Fee rate during Fall 2003. During the temporary increase, the State did not remit Vehicle License Fee backfill for three months. The City's loss of revenue is characterized by the State as a loan; however, Staff has conservatively elected not to record the revenue and a corresponding receivable from the State. Other revenues increased by more than$1.8 million due to the receipt of insurance proceeds for the emergency San Ramon drainage project completed in FY02-03. The following schedule presents a summary of all Governmental fund expenditures for the fiscal year ended June 30, 2004, and the amount and percentage of increases and decreases in relation to prior year amounts: VIII Increase/ Percent of (Decrease) Increase/ Amount from FY02-03 (Decrease) Administration $ 3,328,272 $ 235,673 7.6% Public safety 3,038,650 (55,355) -1.8% Public works 4,800,709 (490,941) -9.3% Parks and recreation 945,547 159,759 20.3% Planning,building and code enforcement 2,362,503 168,238 7.7% Pass through to other agencies 156,064 19,160 14.0% Capital outlay 368,018 (3,524,622) -90.5% Debt service 805,035 (31,200) -3.7% TOTAL EXPENDITURES $ 15,804,798 $ (3,519,288) -18.2% The overall $3.5 million decrease in expenditures is due to large fluctuations in several expenditure categories. These increases and decreases are discussed below. The Administration expenditures increase was primarily due to an $84,000 increase in legal fees resulting from litigation, and a $125,000 increase in information technology expenditures resulting from several large projects, including the purchase of ortho-photographic maps for the City's Graphic Information System. The net decrease in Public works expenditures is almost entirely due to the continuance of FY03-04 street slurry seal projects to FY04-05. Parks and recreation expenditures increased due to consulting costs associated with activities of the Open Space, Planning and Park Recreation Task Force. Total capital outlay expenditures decreased by a net amount of more than $3.5 million. The City Council cut proposed capital outlay expenditures from the FY03-04 budget due to the State budget crisis. In addition, capital project budgets vary each year, due to the City's needs and funding availability. The annual residential overlay project was postponed to FY04-05 and there were no large storm drain construction projects. Budget to Actual Comparison. Once again,the City experienced a favorable budget variance in the General fund for the fiscal year ended June 30,2004. Actual General fund revenues were approximately$1,979,000 greater than the amount budgeted,while expenditures were approximately$755,000 less than the amount budgeted. The positive variance resulted from unexpected receipt of Vehicle License Fee revenue during the State budget crisis, the continued careful management of resources, and the continued strength of property values during FY03-04. Governmental Fund Balances. The combined fund balances of all Governmental Funds increased by approximately $4,616,000 from the prior year. The net increase is primarily attributable to reduced spending on infrastructure renewal and maintenance, as well as the receipt of insurance proceeds related to the emergency San Ramon drainage project completed in FY02-03. Debt Administration. At June 30, 2004, the City had no general obligation debt. The City's debt consists of one tax increment bond issued during FY97-98 and related deferred interest payable. The schedule for repayment of this bond is included in the notes to the financial statements. Cash Management. To obtain increased flexibility in cash management,the City employs a pooled cash system.The goals of the City's investment policy are safety,liquidity,and yield, in that order. Investments are currently maintained with the State Treasurer's Local Agency Investment Fund (LAIF); however, the City's investment policy permits investments legally allowable understate law. LAIF provides high safety and liquidity and is operated specifically for local governments. The City's invested balance with LAIF as of June 30,2004 was$33,314,937. The average return on invested funds was 1.535%. Earnings are allocated to the various funds based on average cash balances. Risk Management. The City of Rancho Palos Verdes is a member of the California Joint Powers Insurance Authority (CJPIA). With 106 members, it is the largest joint powers insurance authority in California. Through the CJPIA,the City is self-insured against liability and workers' compensation claims. As protection against catastrophic loss, members fund a pool to finance large settlements. During the fiscal year ended June 30, 2004, Rancho Palos Verdes continued its proactive liability risk management role through careful monitoring of losses, working closely with the CJPIA's third-party claims adjuster, and designing and implementing programs to minimize risks and reduce losses. In addition,the City Manager's staff analyzes workers compensation issues by monitoring work conditions, and organizing and implementing safety-training programs to reduce employee exposure to hazards. ix Fiduciary Operations. The City of Rancho Palos Verdes has a fiduciary fund that is used to account for assets(cash) held by the City in a trustee capacity or as an agent for other governmental units, private organizations or individuals. The trust and agency fund is restricted as to its use and is not available to fund the operating activities of the City and, as such, are offset by a liability equal to the carrying amount of the asset. OTHER INFORMATION Independent Audit. The City requires an annual audit by independent certified public accountants. The accounting firm of Vavrinek, Trine, Day&Company, LLP conducted this year's audit. The auditors' report on the government- wide financial statements and combining and individual fund statements and schedules is included in the financial section of this report. GFOA Certificate of Achievement Award. The Government Finance Officer's Association of the United States and Canada (GFOA) oversees a prestigious national award program to recognize conformance with the highest standards of report preparation. In order to be awarded a Certificate of Achievement,a government unit must publish an easily readable and efficiently organized CAFR. This report must satisfy both Generally Accepted Accounting Principles and applicable legal requirements. The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Rancho Palos Verdes for its CAFR for the fiscal year ended June 30, 2003. This was the eleventh consecutive year that the City of Rancho Palos Verdes has achieved this prestigious award. A copy of the GFOA Certificate of Achievement is included later in the introductory section of this year's CAFR. A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. CSMFO Certificate of Award for Outstanding Financial Reporting. The California Society of Municipal Finance Officers (CSMFO) awarded a Certificate of Award for Outstanding Financial Reporting to the City of Rancho Palos Verdes for its CAFR for the fiscal year ended June 30, 2003. A copy of this Certificate of Award has also been included later in the CAFR's introductory section. The certificate is issued in recognition of meeting professional standards and criteria in reporting which reflect a high level of quality in the annual financial statements. Acknowledgments. Completion of this report was the accomplishment by combined efforts of many individuals, especially Kathryn Downs,Accounting Manager, who prepared the report. I wish to acknowledge the assistance of our auditors, Vavrinek, Trine, Day& Company, LLP and the contributions of other Finance Department staff: Gary Gyves, Jane Lin, Teresa Takaoka, Gayle Vanoverbeck, Selena Wright, and Nancy Vitez. I would also like to recognize the City Council for their continued leadership directing the City to achieve a sound fiscal position over the last several years. We look forward to maintaining this success in the future under the leadership of the City Council and our City Manager, Les Evans. Respec . Ily submitted, A • 41.! Dennis McLean Director of Finance & Information Technology x 4 g g . , A; ....,:„. „... . . t ,„, gta . _. -- ---,. . i, . ... , ..2) ,' r, iii11111 ' 44.,.lipq I I ! 1 . •. s,' ' 14,. ..,,,,.....,:;., _I_ .... ..„,,i_ _, . :' __ i `, _ tLIIL1 III ,' I I al# 11 11.M L _. F Photo courtesy of Ed Shea CITY OF RANCHO PALOS VERDES DIRECTORY OF CITY OFFICIALS JUNE 30, 2004 CITY COUNCIL Peter Gardiner, Mayor Larry Clark, Mayor Pro-Tem Tom Long, Councilman Douglas Stern, Councilman Steve Wolowicz, Councilman ADMINISTRATION AND DEPARTMENT HEADS CityManager ........................................................................................................................................... Les Evans Assistant City Manager......................................................................................................................Carolynn Petru Director of Administrative Services/City Clerk...........................................................................................Jo Purcell Director of Finance& Information Technology.................................................................................. Dennis McLean Director of Planning, Building and Code Enforcement.............................................................................Joel Rojas Director of Public Works........................................................................................................................Dean Allison Director of Recreation and Parks ...................................................................................................... Ron Rosenfeld City Attorney................................................................................................................Richards, Watson &Gershon A CITY OF RANCHO PALOS VERDES ORGANIZATIONAL CHART CITIZENS OF RANCHO PALOS VERDES MAYOR AND CITY COUNCIL COMMISSIONS &COMMITTEES COMMISSIONS & COMMITTEES Planning Commission Open Space Planning Parks&Recreation Task Force Traffic Committee Emergency Preparedness Task Force Finance Advisory Committee View Restoration Mediators Equestrian Committee CITY MANAGER CITY ATTORNEY Administration/Budget Richards,Watson&Gershon Personnel/Community Outreach Risk Management CITY CLERK FINANCE & INFORMATION Records Management TECHNOLOGY Public Information Financial Reporting Elections Accounts Payable/Receivable Payroll Purchasing Information Technology RECREATION & PARKS Park Facilities PLANNING & BUILDING Point Vicente Interpretive Center Planning/Zoning Special Events Building&Safety/Geology REACH Program Code Enforcement View Restoration PUBLIC SAFETY PUBLIC WORKS L.A.County Sheriff Street Maintenance L.A.County Fire Refuse/City Engineering Animal Control Park/Building Maintenance Emergency Preparedness Capital Projects XII �� 111cafe of Achievement for Excellence in Financial Reporting Pres;ented to City of Rancho Palos Verdes, California For its Comprcbmsive Annual Financial Report for the�Fiscal Year Ended June 30, 2003 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association.of the United States,and.Canada to govemineW intuits and pubbe,employee retirement gysttnu who&a tomprehensive annual financial reports((.'.AFRs)achieve the highest s,tndards in overs rent accounting acrd financial reporting. 62 MOW. President &MA *I�Oe 444120AOt'o Ex:ecutivc Director xiii California Society of 34unicipai mance Officers Certificate of Award Outstanding Financial l Reporting 2002-2003 Presented to the City of Rancho Palos Verdes This certificate is Issued in recognition of to feting professional standards and criteria in reporting which reflect a high le -rel of quality in the annual financial statements and in the underlying accounting ,system from which the reports were prepared. Marsh 1, 2004 /46,_ Chair. Prnfct i nel & Technical Standards Camm1ttce Dedicated to Excellence in Municipal Financial Management FINANCIAL SECTION MANAGEMENT'S DISCUSSION & ANALYSIS CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 As management of the City of Rancho Palos Verdes, we offer readers of the City of Rancho Palos Verdes'financial statements this narrative overview and analysis of the financial activities of the City of Rancho Palos Verdes for the fiscal year ended June 30, 2004. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iv-x of this report. Financial Highlights ➢ The assets of the City of Rancho Palos Verdes exceed its liabilities, at the close of the fiscal year ended June 30, 2004, by$118,355,813 (net assets). Of this amount, $14,271,456(unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. ➢ The City's total net assets increased by$2,907,037. This increase is primarily attributable to the excess of General fund revenues over General fund expenditures. ➢ As of June 30, 2004, the City's governmental funds reported combined ending fund balances of$23,752,320, an increase of$4,616,433 in comparison with the prior year. The increase in combined ending fund balances is primarily attributable to reduced spending on infrastructure renewal and maintenance projects and receipt of insurance proceeds from the emergency San Ramon drainage project completed in FY02-03. Approximately$9,884,560 (unreserved fund balance) is available for spending at the government's discretion. The combined unreserved fund balance includes the RDA Debt Service negative fund balance of$12,070,150. ➢ As of June 30, 2004, unreserved fund balance for the General fund was $14,066,002 or 117%of total General fund expenditures and transfers out. ➢ The City's total debt increased by$3,120 (0.06%)during the current fiscal year. The total increase was entirely attributable to an increase in the accumulation of employee compensated absences. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements, which are comprised of three components: 1)government-wide financial statements; 2)fund financial statements; and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Rancho Palos Verdes is improving or deteriorating. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). 3 CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 Both the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities)from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, planning, building and safety, and recreation. The City does not have business-type activities. The government-wide financial statements include not only the City of Rancho Palos Verdes itself (known as the primary government), but also a legally separate Redevelopment Agency and a legally separate Improvement Authority for which the City of Rancho Palos Verdes is financially accountable. Financial information for these component units has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 11-12 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Rancho Palos Verdes, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Rancho Palos Verdes maintains 29 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General fund, the Street Maintenance fund, the Capital Improvements fund and the RDA Debt-Service fund, all of which are considered to be major funds. Data from the other 25 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non- major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Rancho Palos Verdes adopts an annual appropriated budget for each of its governmental funds. A budgetary comparison statement has been provided for each governmental fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 13-20 of this report. 4 CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 Proprietary funds. The City of Rancho Palos Verdes maintains one type of proprietary fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its fleet of vehicles, computer systems, furniture and equipment, employee benefits, and Civic Center building improvements. Because these services predominantly benefit the governmental function, they have been included within governmental activities in the government-wide financial statements. Proprietary fund financial statements provide the same type of information as the government- wide financial statements, only in more detail. All three internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 24-43 of this report. Other information. The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the notes to the financial statements. Combing and individual fund statements and schedules can be found on pages 50-89 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City of Rancho Palos Verdes, assets exceeded liabilities by $118,355,813 at June 30, 2004. By far the largest portion of the City's net assets (78 percent) reflects its investment in capital assets (e.g. land, infrastructure, buildings, equipment). The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. City of Rancho Palos Verdes Net Assets Governmental Governmental Activities Activities June 30, 2003 June 30, 2004 (As Restated) Current and other assets $ 37,360,800 $ 31,363,993 Capital assets 92,499,373 94,894,816 Total assets 129,860,173 126,258,809 Long-term liabilities outstanding 8,613,681 8,757,218 Other liabilities 2,890,679 2,052,815 Total liabilities 11,504,360 10,810,033 Invested in capital assets 92,499,373 94,894,816 Restricted 11,584,984 10,660,970 Unrestricted 14,271,456 9,892,990 Total net assets $ 118,355,813 $ 115,448,776 5 CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 An additional portion of the City's net assets ($11,584,984 or 10 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($14,271,456 or 12 percent) may be used to meet the government's ongoing obligations to citizens and creditors. Governmental activities. Governmental activities increased the City's net assets by $2,907,037, thereby accounting for 100 percent of the total growth in the net assets of the City. City of Rancho Palos Verdes Changes in Net Assets Governmental Governmental Activities Activities June 30, 2004 June 30, 2003 Program revenues: Charges for services $ 1,819,832 $ 1,783,853 Operating contributions and grants 2,836,293 2,970,984 Capital contributions and grants 36,878 130,988 General revenues: Property taxes 5,706,042 5,334,977 Other taxes 7,198,548 7,417,676 Other 2,810,966 887,160 Total revenues 20,408,559 18,525,638 Expenses: Administration 3,499,385 3,293,469 Public safety 3,024,081 3,094,005 Public works 7,461,918 7,954,034 Parks and recreation 947,485 809,454 Planning, building and code enforcement 2,295,903 2,170,348 Interest on long-term debt 272,750 272,750 Total expenses 17,501,522 17,594,060 Increase in net assets 2,907,037 931,578 Net assets - beginning of fiscal year (as restated) 115,448,776 114,517,198 Net assets -end of fiscal year (as restated) $ 118,355,813 1 $ 115,448,776 Key elements of this increase are as follows: General fund revenues exceed General fund expenses and net transfers by$4.2 million. The difference in the method of accounting for capital assets in the governmental funds versus the statement of activities accounts for a decrease in excess of$2.4 million in net assets. Governmental funds do not depreciate infrastructure assets. However, in the statement of activities, the cost of infrastructure assets is allocated over their estimated useful lives. 6 CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 ➢ The difference in the method of accounting for interest income in the governmental funds versus the Statement of Activities accounts for an increase in excess of approximately $532,000 in net assets. Unpaid accrued interest income is deferred in the governmental funds since it is not available. ➢ The Proposition C fund did not fund any major construction projects during FY03-04. The fund balance increased by$404,000 as it continued to accumulate transportation sales tax. ➢ The excess of Internal Service fund revenues over expenses of approximately$268,000. The net revenues and expenses of Internal Service funds are reported with governmental activities in the Statement of Activities. Revenues by Source—Governmental Activities charges for investment other services income 12% 9% operating contributions 2% and grants 14% other taxes 25% property taxes motor vehicle in lieu 28% tax 10% As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of$23,752,320, an increase of$4,616,433 in comparison with the prior year. Approximately 42 percent of the combined ending fund balances ($9,884,560)constitutes unreserved fund balance, which is available for spending at the City's discretion. The combined unreserved fund balance includes the RDA Debt Service negative fund balance of$12,070,150. The remainder of the combined ending fund balances is reserved to indicate that it is not available for new spending because it has already been committed 1)to liquidate contracts and purchase orders of the prior period ($4,262,400), 2)to reserve the principal balance of loans made to the City's Redevelopment Agency ($5,917,907), and 3)for a variety of other restricted purposes ($3,687,453). The General fund is the chief operating fund of the City of Rancho Palos Verdes. At the end of the current fiscal year, unreserved fund balance of the General fund was $14,066,002, while total fund balance reached $20,704,911. As a measure of the General fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures and transfers out. Unreserved fund balance represents 117 percent of total General fund expenditures, while total fund balance represents 172 percent of that same amount. 7 CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 During the current fiscal year, the fund balance of the City's General fund increased by $4,244,062. The key factor in this growth follows: Revenues exceeded expenditures by approximately$4.6 million; however, almost $370,000 was transferred to other funds primarily for capital projects. The debt service fund has a negative fund balance of$11,305,005. The Redevelopment Agency's debt to the City is recorded in the debt service fund; however, because there are currently no assets to extinguish that debt, the fund carries a negative fund balance. The net decrease in the debt service fund balance during the current year was $389,913, which represents accumulated interest on the advance from the City to the Redevelopment Agency. Proprietary funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets of the Internal Service funds at the end of the year amounted to $4,175,990. The total growth in net assets was $268,015. General Fund Budgetary Highlights The difference between the original budget and the final amended budget for expenditures was an increase of$958,474; and can be briefly summarized as follows: A decrease of$685,600 was attributable to appropriations continued to FY04-05. ➢ An increase of approximately $839,680 was attributable to appropriations continued from FY02-03. Additional funds of$344,007 for legal fees were required to support the Indian Ridge Crest Gardens lawsuit, proposed cable franchise modifications, and additional litigation services. ➢ Additional funds of$77,222 were approved for construction of the elevator at City Hall. ➢ Additional funds of$69,000 were required to purchase ortho-photographic maps. ➢ Additional funds of$64,000 were approved for a temporary full-time engineering position. Additional funds of$61,500 were required to support the CORE deputy program. ➢ Additional funds of$57,719 were required to support consulting services for the Building & Safety program. ➢ Other immaterial increases totaled approximately$130,946. Capital Asset and Debt Administration Capital assets. The City's investment in capital assets for its governmental activities as of June 30, 2004, amounts to $92,499,373 (net of accumulated depreciation). This investment in capital assets includes land, buildings, park improvements, roadways, sewer, storm drains, vehicles, computer equipment, furniture, other equipment, and construction in progress. During the current fiscal year, the City's investment in capital assets decreased by 2.5 percent. Major capital asset events during the current fiscal year included the following: ➢ Depreciation of$2.9 million was recorded for the City's capital assets. 8 CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 City of Rancho Palos Verdes Capital Assets (net of depreciation) Governmental Governmental Activities Activities June 30, 2004 June 30, 2003 Land $ 15,058,724 $ 15,058,724 Buildings 2,114,999 2,178,959 Park improvements 1,972,353 2,007,591 Roadways 49,201,523 51,268,840 Sewer system 11,635,062 12,165,526 Storm drain system 10,667,702 10,461,116 Vehicles 28,828 42,082 Computer equipment 136,964 96,320 Furniture and other equipment 218,056 184,317 Construction in Progress 1,465,162 1,431,341 Total $ 92,499,373 $ 94,894,816 Additional information on the City's capital assets can be found in note 4 on pages 34-35 of this report. Long-term debt. At the end of the current fiscal year, the City of Rancho Palos Verdes had total debt outstanding of$8,760,338. Of this amount, $8,566,400 is a liability of the Redevelopment Agency. City of Rancho Palos Verdes Outstanding Debt Governmental Governmental Activities Activities June 30, 2003 June 30, 2004 (As Restated) RDA Tax Increment Bond $ 5,455,000 $ 5,455,000 RDA Deferred Interest Payable 3,111,400 3,111,400 Employee compensated absences 193,938 190,818 Total $ 8,760,338 1 $ 8,757,218 The City's total debt increased by $3,120 (0.06 percent) during the current fiscal year, due to the accumulation of additional employee compensated absences. State statutes limit the amount of general obligation debt a governmental entity may issue to 15 percent of its total assessed valuation. The current debt limitation for the City of Rancho Palos Verdes is $962,539,428. Additional information on the City's long-term debt can be found in note 5 on pages 36-37 of this report. 9 CITY OF RANCHO PALOS VERDES Management's Discussion and Analysis June 30, 2004 Economic Factors and Next Year's Budgets and Rates ➢ Local property values remain strong; therefore, property tax revenue (approximately 28 percent of City-wide revenues) remains unaffected by the downturn in the economy. ➢ State shared revenues (i.e. Motor Vehicle In Lieu Tax) have substantially remained intact for FY03-04. These factors were considered in preparing the City's budget for FY04-05. Due to the continued uncertainty of the state budget, the FY04-05 city budget was conservatively prepared assuming that only one-third of the Motor Vehicle In Lieu Tax would be received. Requests for Information This financial report is designed to provide a general overview of the financial position of the City of Rancho Palos Verdes for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Department, 30940 Hawthorne Boulevard, Rancho Palos Verdes, CA 90275. 10 BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE STATEMENTS CITY OF RANCHO PALOS VERDES STATEMENT OF NET ASSETS JUNE 30, 2004 Governmental Activities ASSETS Cash and cash equivalents $ 33,747,422 Receivables: Taxes 519,824 Interest 116,476 Notes 604,982 Other 597,045 Prepaid costs 1,067,659 Deposits 5,000 Land held for development 702,392 Capital assets Non-depreciable: Land 15,058,724 Construction in progress 1,465,162 Depreciable, net of accumulated depreciation: Property and equipment 383,848 Buildings and improvements 2,114,999 Infrastructure 73,476,640 Total Assets 129,860,173 LIABILITIES Accounts payable and accrued liabilities 2,252,937 Interest payable 22,729 Deferred revenue 36,011 Deposits 432,345 Noncurrent liabilities: Due within one year 146,657 Due in more than one year 8,613,681 Total Liabilities 11,504,360 NET ASSETS Invested in capital assets 92,499,373 Restricted Community development Expendable 7,080,308 Non-expendable 1,000,000 Public safety 62,631 Public works 2,874,500 Recreation services 567,545 Unrestricted 14,271,456 Total Net Assets $ 118,355,813 See accompanying notes to financial statements. 11 CITY OF RANCHO PALOS VERDES STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2004 Program Revenues Operating Capital Net Charges for Contributions Contributions Governmental Expenses Services and Grants and Grants Activities Governmental Activities: Administration $ 3,499,385 $ 69,158 $ 96,484 $ (3,333,743) Public safety 3,024,081 164,558 113,794 (2,745,729) Public works 7,461,918 216,979 2,626,015 $ 36,878 (4,582,046) Parks and recreation 947,485 5,785 (941,700) Planning, building and code enforcement 2,295,903 1,363,352 (932,551) Interest on long-term debt 272,750 (272,750) Total Governmental Activities $ 17,501,522 $ 1,819,832 $2,836,293 $ 36,878 $ (12,808,519) General Revenues: Taxes: Property tax, levied for general purpose 5,706,042 Transient occupancy tax 31,286 Franchise tax 1,275,030 Sales tax 1,205,347 Motor vehicle in lieu tax 2,029,877 Utility user tax 1,850,877 Other taxes 806,131 Investment income 331,401 Loss on asset disposal (22,558) Other 2,502,123 Total General Revenues 15,715,556 Change in Net Assets 2,907,037 Net Assets at Beginning of Year(As Restated) 115,448,776 Net Assets at End of Year $ 118,355,813 See accompanying notes to financial statements. 12 FUND FINANCIAL STATEMENTS CITY OF RANCHO PALOS VERDES GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2004 Special Capital Revenue Projects Street Capital ASSETS General Maintenance Improvements Cash and cash equivalents $ 15,820,782 $ 1,130,789 $ 1,816,651 Receivable Taxes 498,848 Interest 53,927 3,527 6,389 Other 409,299 809 Due from other funds 46,027 37,444 Prepaid items 35,402 Advances to other funds 12,024,123 Deposits 5,000 Land held for development Total Assets $ 28,893,408 $ 1,135,125 $ 1,860,484 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable and accrued liabilities $ 1,613,926 $ 216,389 $ 191,614 Due to other funds Deferred revenue 6,142,226 Advances to Redevelopment Agency Deposits 432,345 Total Liabilities 8,188,497 216,389 191,614 FUND BALANCES Reserved for: Continuing appropriations 685,600 635,900 2,487,300 Reimbursement settlement agreement Prepaid costs 35,402 Advances to other funds 5,917,907 Land development Housing set-aside Unreserved, reported in: General fund 14,066,002 Special revenue funds 282,836 Capital projects funds (818,430) Permanent funds Debt service fund Total Fund Balances 20,704,911 918,736 1,668,870 Total Liabilities and Fund Balances $ 28,893,408 $ 1,135,125 $ 1,860,484 See accompanying notes to financial statements. 13 Debt Service Other Governmental RDA Funds Totals $ 10,729,536 $ 29,497,758 20,976 519,824 38,031 101,874 186,120 596,228 83,471 $ 765,145 240,677 1,041,224 12,024,123 5,000 702,392 702,392 $ 765,145 $ 11,917,732 $ 44,571,894 $ 115,480 $ 2,137,409 $ 46,027 37,444 83,471 6,142,226 12,024,123 12,024,123 432,345 12,070,150 152,924 20,819,574 453,600 4,262,400 1,000,000 1,000,000 765,145 240,677 1,041,224 5,917,907 702,392 702,392 943,837 943,837 14,066,002 4,757,721 5,040,557 3,248,310 2,429,880 418,271 418,271 (12,070,150) (12,070,150) (11,305,005) 11,764,808 23,752,320 $ 765,145 $ 11,917,732 $ 44,571,894 See accompanying notes to financial statements. 14 CITY OF RANCHO PALOS VERDES GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDIE TO THE STATEMENT OF NET ASSETS JUNE 30, 2004 Fund Balances of Governmental Funds $ 23,752,320 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets of governmental activities are not financial resources and, therefore, are not reported in the governmental funds. 92,115,525 Interest accrued on the advance receivable in the General Fund is not paid by the owing funds and, therefore, is recorded as deferred revenue and added to the balance of the advance. The statement of net assets reports on the full accrual basis and does not defer currently unavailable revenues. 6,106,215 Interest expenditures are recognized when due, and therefore, interest payable is not recorded in the governmental funds. (22,729) Long-term notes receivable are not current available resources and, therefore, are not reported in the governmental funds. 604,982 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds. (8,760,338) Internal service funds are used by management to charge the costs of certain activities, including equipment and building replacement and employee benefits, to individual funds. The assets and liabilities of the internal service funds are included in the statement of net assets. 4,559,838 Net Assets of Governmental Activities $ 118,355,813 See accompanying notes to financial statements. 15 CITY OF RANCHO PALOS VERDES GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES ANC CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2004 Special Capital Revenue Projects Street Capital General Maintenance Improvements REVENUES Taxes $ 9,543,495 Licenses and permits 1,309,732 Fines and forfeitures 101,788 Use of money and property 482,745 $ 15,398 $ 26,903 Charges for services 110,071 15,980 9,975 Revenue from other agencies 2,126,361 790,769 Other revenues 2,116,961 6,261 Total Revenues 15,791,153 828,408 36,878 EXPENDITURES Current: Administration 3,294,392 Public safety 3,032,887 Public works 1,542,627 1,292,355 325,908 Parks and recreation 945,547 Planning, building and code enforcement 2,362,503 Pass through to other agencies Capital outlay 363,564 Debt service: Principal and interest Total Expenditures 11,177,956 1,292,355 689,472 Excess (Deficiency)of Revenues Over Expenditures 4,613,197 (463,947) (652,594) OTHER FINANCING SOURCES (USES) Transfers in 463,583 504,320 689,472 Transfers out (832,718) Total Other Financing Sources (Uses) (369,135) 504,320 689,472 Net Change in Fund Balances 4,244,062 40,373 36,878 Fund Balances, Beginning of Year 16,460,849 878,363 1,631,992 Fund Balances, End of Year $ 20,704,911 $ 918,736 $ 1,668,870 See accompanying notes to financial statements. 16 Debt Service Other Governmental RDA Funds Totals $ 584,335 $ 1,953,412 $ 12,081,242 1,309,732 101,788 207,925 732,971 242,969 378,995 535,940 3,453,070 240,211 2,363,433 584,335 3,180,457 20,421,231 13,149 20,731 3,328,272 5,763 3,038,650 1,639,819 4,800,709 945,547 2,362,503 156,064 156,064 4,454 368,018 805,035 805,035 974,248 1,670,767 15,804,798 (389,913) 1,509,690 4,616,433 186,370 1,843,745 (1,011,027) (1,843,745) - (824,657) - (389,913) 685,033 4,616,433 (10,915,092) 11,079,775 19,135,887 $ (11,305,005) $ 11,764,808 $ 23,752,320 See accompanying notes to financial statements. 17 CITY OF RANCHO PALOS VERDES RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES ANC CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDIC TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2004 Net Change in Fund Balances-Total Governmental Funds $4,616,433 Amounts reported for governmental activities in the Statement of Activities differs from the amounts reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances because: 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 as depreciation expense, or are allocated to the appropriate functional expense when the cost is below the capitalization threshold. Gains and losses on asset disposals are also not recgonized in the governmental funds. This activity is reconciled as follows: Cost of assets capitalized 379,087 Depreciation expense (2,813,101) Loss on asset disposals (22,558) Unpaid accrued interest income is deferred in the governmental funds since it is not available. This income is accrued in the Statement of Activities. 532,285 Increases in long-term notes receivable use current financial resources and are included in the expenditures, of governmental funds. Repayments of long-term notes receivable provide current financial resources and are included in the revenues of governmental funds. These changes in notes receivable are not reflected in the revenues or expenses of the Statement of Activities. This amount represents the net change in the long-term notes receivable. (50,004) Compensated absences expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. (3,120) Internal service funds are used by management to charge the costs of certain activities, including equipment and building replacement and employee benefits, to individual funds. The net revenues/(expenses)of the internal service funds (excluding transfers and interest income)are reported with governmental activities. 268,015 Change in Net Assets of Governmental Activities $2,907,037 See accompanying notes to financial statements. 18 CITY OF RANCHO PALOS VERDES STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERALFUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 9,038,214 $ 9,038,214 $ 9,543,495 $ 505,281 Licenses and permits 1,146,039 1,146,039 1,309,732 163,693 Fines and forfeitures 78,500 78,500 101,788 23,288 Use of money and property 416,065 416,065 482,745 66,680 Charges for services 113,000 113,000 110,071 (2,929) Revenue from other agencies 837,638 906,638 2,126,361 1,219,723 Other revenues 89,950 2,113,700 2,116,961 3,261 Total Revenues 11,719,406 13,812,156 15,791,153 1,978,997 EXPENDITURES Current: Administration 3,183,703 3,585,156 3,294,392 290,764 Public safety 2,995,691 3,056,897 3,032,887 24,010 Public works 1,736,494 1,867,064 1,542,627 324,437 Parks and recreation 910,271 975,471 945,547 29,924 Planning, building and code enforcement 2,137,972 2,438,017 2,362,503 75,514 Capital outlay 10,000 10,000 10,000 Total Expenditures 10,974,131 11,932,605 11,177,956 754,649 Excess of Revenues Over Expenditures 745,275 1,879,551 4,613,197 2,733,646 OTHER FINANCING SOURCES(USES) Transfers in 470,810 470,810 463,583 (7,227) Transfers out (1,132,575) (1,209,797) (832,718) 377,079 Total Other Financing Sources(Uses) (661,765) (738,987) (369,135) 369,852 Net Change in Fund Balances 83,510 1,140,564 4,244,062 3,103,498 Fund Balance, Beginning of Year 16,460,849 16,460,849 16,460,849 Fund Balance, End of Year $16,544,359 $ 17,601,413 $ 20,704,911 $ 3,103,498 See accompanying notes to financial statements. 19 CITY OF RANCHO PALOS VERDES STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL STREET MAINTENANCE SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 5,900 $ 5,900 $ 15,398 $ 9,498 Charges for services 20,000 20,000 15,980 (4,020) Revenue from other agencies 799,000 799,000 790,769 (8,231) Other revenues 20,000 20,000 6,261 (13,739) Total Revenues 844,900 844,900 828,408 (16,492) EXPENDITURES Current: Public works 1,645,158 1,447,858 1,292,355 155,503 Excess (Deficiency) of Revenues Over Expenditures (800,258) (602,958) (463,947) 139,011 OTHER FINANCING SOURCES (USES) Transfers in 777,190 777,190 504,320 (272,870) Total Other Financing Sources (Uses) 777,190 777,190 504,320 (272,870) Net Change in Fund Balances (23,068) 174,232 40,373 (133,859) Fund Balance, Beginning of Year 878,363 878,363 878,363 Fund Balance, End of Year $ 855,295 $1,052,595 $ 918,736 $ (133,859) See accompanying notes to financial statements. 20 CITY OF RANCHO PALOS VERDES STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2004 Governmental Activities- Internal Service Funds ASSETS Current Assets Cash and cash equivalents $ 4,249,664 Receivables Interest 14,602 Other 817 Prepaid items 26,435 Total Current Assets 4,291,518 Noncurrent Assets Capital assets Property and equipment 857,622 Accumulated depreciation (473,774) Total Noncurrent Assets 383,848 Total Assets 4,675,366 LIABILITIES Current Liabilities Accounts payable and accrued liabilities 115,528 Total Liabilities 115,528 NET ASSETS Invested in capital assets 383,848 Unrestricted 4,175,990 Total Net Assets $ 4,559,838 See accompanying notes to financial statements. 21 CITY OF RANCHO PALOS VERDES STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Governmental Activities - Internal Service Funds OPERATING REVENUES Charges for services $ 1,223,506 Total Operating Revenues 1,223,506 OPERATING EXPENSES Personnel services 716,862 Material and supplies 121,631 Maintenance 49,484 Depreciation 127,404 Total Operating Expenses 1,015,381 Operating Income 208,125 NONOPERATING REVENUES Interest income 59,890 Change in Net Assets 268,015 Net Assets, Beginning of Year 4,291,823 Net Assets, End of Year $ 4,559,838 See accompanying notes to financial statements. 22 CITY OF RANCHO PALOS VERDES STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Governmental Activities- Internal Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 1,222,689 Payments to suppliers (734,763) NET CASH PROVIDED BY OPERATING ACTIVITIES 487,926 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (188,533) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 61,670 NET INCREASE IN CASH AND CASH EQUIVALENTS 361,063 CASH AND CASH EQUIVALENTS, Beginning of Year 3,888,601 CASH AND CASH EQUIVALENTS, End of Year $ 4,249,664 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income $ 208,125 Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 127,404 Decrease in other receivables (817) Decrease in prepaid items 55,767 Decrease in accrued liabilities 97,447 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 487,926 See accompanying notes to financial statements. 23 NOTES TO FINANCIAL STATEMENTS CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Rancho Palos Verdes conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the significant policies. A. Reporting Entity: The reporting entity "City of Rancho Palos Verdes" includes the accounts of the City, the Rancho Palos Verdes Redevelopment Agency (the RDA) and the Joint Powers Improvement Authority (the Authority). The City was incorporated on September 7, 1973 as a general law city and operates under a Council/Manager form of government. The RDA was formed in 1984 pursuant to the State of California Health and Safety Code, Section 33000 entitled "Community Redevelopment Law". Its purpose is to finance long-term capital improvements designed to eliminate physical and economic blight in a project area through stabilization of hazardous landslides. The Authority was formed on September 4, 1990 in accordance with the provisions of the Reimbursement and Settlement Agreement, dated October 27, 1987, entered into by the City, the RDA and the County of Los Angeles (the County) in connection with the Horan lawsuit. The Agreement requires funds to be set aside and expended by the Authority to maintain landslide abatement improvements installed and constructed by the RDA. The criteria used in determining the scope of the reporting entity are based on the provisions of GASB Statement 14. The City of Rancho Palos Verdes is the primary government unit. Component units are those entities which are financially accountable to the primary government, either because the City appoints a voting majority of the component unit's Board, or because the component unit will provide a financial benefit or impose a financial burden on the City. The City has accounted for both the RDA and the Authority as "blended" component units. Despite being legally separate, the RDA and the Authority are so intertwined with the City, it is in substance, part of the City's operations. Accordingly, the balances and transactions of the RDA are reported as separate funds in the Special Revenue, Debt Service, and Capital Projects Funds. The balances and transactions of the Authority are reported as separate funds in a Permanent Fund and a Special Revenue Fund. The following specific criteria were used in determining that the RDA and the Authority are "blended" component units: 1) The members of the City Council also act as the governing body of both the RDA and the Authority. 2) The City, the RDA and the Authority are financially interdependent. The City makes loans to the RDA for use on redevelopment projects. Available property tax revenues of the RDA will be used to repay the loans from the City. It is not anticipated that tax increment revenues will be available to repay the loans any time in the immediate future. 3) Employees of the City manage both the RDA and the Authority. 24 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued The financial statements for both the RDA and the Authority may be obtained at the City's administrative offices. Participation In Public Entity Joint Powers Authority: The City is a member of the Palos Verdes Peninsula Transit Joint Powers Authority. The Transit Authority is comprised of four member cities and is organized under a Joint Powers Agreement pursuant to the California Government Code. The purpose of the Authority is to study, implement, and provide a public transit system within and around the Palos Verdes Peninsula. These transit services include Palos Verdes Transit, Dial-A-Ride, and a fixed route shuttle service. Periodic deposits are paid by member cities and are adjusted retrospectively to cover costs. Costs are prorated among all participating cities based on population. The City does not have an equity interest in the Transit Authority; therefore, no amount has been reported in the Statement of Net Assets. However, the City does have an ongoing financial interest because the City is able to influence the operations of the Authority so that the Authority uses its resources on behalf of the City. Also, an ongoing financial responsibility exists because the Authority is dependent on continued funding from the City. The condensed financial information of the Authority has not been reproduced in this report, but is available from the Authority. B. Accounting and Reporting Policies: The City has conformed to the pronouncements of the GASB, which are the primary authoritative statements of accounting principles generally accepted in the United States of America applicable to state and local governments. In accordance with GASB Statement No. 20, the City applies all applicable Financial Accounting Standards Board (FASB) pronouncements, as well as those of its predecessors, issued on or before November 30, 1989, unless any such pronouncements contradict GASB pronouncements. The City also applies all FASB Statements and Interpretations issued after November 30, 1989, except those that conflict with or contradict GASB pronouncements. C. Description of Funds: The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. The following are types of funds used: Governmental Fund Types: • General Fund— Used to account for all financial resources except those that are required to be accounted for in another fund. • Special Revenue Funds— Used to account for the proceeds of specific revenue sources that are restricted by law or administrative action for specified purposes. • Debt Service Fund — The debt service fund of the RDA is used to account for property tax increment revenue and related interest income. Disbursements from this fund consist mainly of principal and interest on RDA indebtedness. 25 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued • Capital Projects Funds — Used to account for financial resources used for the construction of specific capital projects. • Permanent Fund — Used to account for resources legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs. Proprietary Fund Type: • Internal Service Funds— Used to account for the financing of goods or services provided by one department of the City to other departments on a cost-reimbursement basis. D. Basis of Accounting/Measurement Focus Government—Wide Financial Statements The City's Government-Wide Financial Statements include a Statement of Net Assets and a Statement of Activities and Changes in Net Assets. These statements present summaries of Governmental Activities for the City. These statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets and liabilities, including capital assets and infrastructure as well as long-term debt, are included in the accompanying Statement of Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. The types of transactions reported as program revenues for the City are reported in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Charges for services include revenues from customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function. Operating grants and contributions include revenues restricted to meeting the requirements of a particular operating function and may include state shared revenues and grants. Capital grants and contributions include revenues restricted to meeting the requirements of a particular capital function and may include grants and developer fees. Taxes and other items not properly included among program revenues are reported instead as general revenues. Internal balances in the Governmental-wide statements have been eliminated as prescribed by GASB Statement No. 34. Governmental Fund Financial Statements Governmental fund financial statements include a Balance Sheet and Statement of Revenue, Expenditures, and Changes in Fund Balances for all major governmental funds and aggregated non- major funds. An accompanying schedule is presented to reconcile and explain the differences in fund balances as presented in these statements to the net assets presented in the Government-Wide Financial Statements. The City has presented all major funds that met qualifications of GASB Statement No. 34. In addition, the City has presented the Street Maintenance Special Revenue Fund and the Capital Improvements Capital Projects Fund, as major funds because the City believes the financial position and activities of these funds are significant to the City as a whole. 26 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balances. Revenues are recognized in the accounting period in which they become susceptible to accrual, that is, when they become both measurable and available to finance expenditures of the current period. "Measurable" means that the amount of the transaction can be determined, and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Accrued revenues include property taxes received within 60 days after year-end (see Note #11), taxpayer-assessed taxes such as sales taxes, and earnings on investments. Grant funds earned but not received are recorded as a receivable, and grant funds received before the revenue recognition criteria have been met are reported as deferred revenues. Expenditures are recorded when the fund liability is incurred, if measurable, except for immature interest on general long-term debt, which is recognized when due. The City reports the following major governmental funds: The General Fund is the government's primary operating fund. It accounts for all financial resources of the City, except those that are required to be accounted for in another fund. The Street Maintenance Special Revenue Fund is used to account for State highway users tax used for street maintenance, right-of-way acquisition and street construction. The Capital Improvement Capital Projects Fund is used to account for the funds used for the City's capital improvement projects. The RDA Debt Service Fund is used to account for the accumulation of resources for, and the payment of principal and interest on the RDA's debt and other long-term obligations. Proprietary Fund Financial Statements Proprietary fund types are accounted for using the "economic resources" measurement focus and accrual basis of accounting. This means that all assets and liabilities (whether current or non-current) associated with the activity are included on the balance sheet. Their reported fund equity presents total net assets. The operating statement of the proprietary funds present increases (revenues) and decreases (expenses) in total net assets. Revenues are recognized when they are earned and expenses are recognized when the liability is incurred. Proprietary funds distinguish operating revenues and expenses from non-operating 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 City's internal service funds are charges to other funds for services. Operating expenses for the internal service funds include the costs of employee benefits, maintenance of capital assets, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The City's internal service funds are presented in the proprietary funds financial statements. Because the principal users of the internal services are the City's governmental activities, the financial statements of the internal service funds are consolidated into the governmental column when presented in the government-wide financial statements. To the extent possible, the cost of these services is reported in the appropriate functional activity (administration, public safety, public works, etc.). 27 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued The City uses the internal service funds to finance and account for goods and services provided by one City department to other City department including the purchase and maintenance of equipment, replacement of buildings and employee benefits. E. Budgetary Accounting: Annual budgets are adopted on a basis consistent with GAAP for all governmental funds. All annual appropriations lapse at fiscal year-end. Throughout the year, the City Council made several supplementing budgetary adjustments to the General fund, Special Revenue funds, Capital Projects funds, Proprietary funds and the Permanent fund. These adjustments resulted in a net appropriation increase in the amount of $4,161,937. This increase resulted primarily from amounts carried over from FY02-03 as continuing appropriations. Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), the City is restricted as to the amount of annual appropriations from the proceeds of taxes, and if proceeds of taxes exceed allowed appropriations, the excess must either be refunded to the State Controller, returned to the taxpayers through revised tax rates or revised fee schedules, or an excess in one year may be offset against a deficit in the following year. For the fiscal year ended June 30, 2004, based on calculations by City Management, proceeds of taxes did not exceed related appropriations. F. Advances to Other Funds Long-term inter-fund advances are recorded as a receivable in the advancing governmental fund and as a liability in the fund receiving the advance. Accrued unpaid interest is deferred in the advancing governmental fund and the principal portion of the advance is reported as a reservation of fund balance. G. Capital Assets Capital assets, which include land, machinery and equipment (vehicles, computers, etc.), buildings and improvements, and infrastructure assets (street systems, storm drains, sewer systems, etc.), are reported in Governmental Activities column of the Government-Wide Financial Statements. Capital assets are defined by the City as all land and buildings, vehicles, computers and equipment with an initial individual cost of more than $5,000; and improvements and infrastructure assets with costs of more than $100,000. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated or annexed capital assets are recorded at estimated market value at the date of donation or annexation. 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. Depreciation is recorded in the Government-Wide Financial Statements on a straight-line basis over the useful life of the assets as follows: Buildings and improvements 25 to 50 years Vehicles, computers, and equipment 3 to 10 years Infrastructure Assets Roadway Network 10 to 100 years Sewer Network 25 to 50 years Storm Drain Network 30 to 100 years Parks and Recreation Network 25 years 28 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued H. Employee Compensated Absences: City employees may receive from 10 to 20 days vacation time each year, depending upon length of service. An employee may accumulate earned vacation time up to a maximum of two years' worth of accrued vacation leave. Upon termination, employees are paid the full value of their unused vacation time at their existing salary. There is no fixed payment schedule for employee compensated absences. At June 30, 2004, vested accrued vacation and compensatory time amounted to $193,938. I. Investments: The City has adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No 31, "Accounting and Financial Reporting for Certain Investments and External Pools", which require governmental entities to report certain investments at fair value in the balance sheet and recognize the corresponding change in the fair value of investments in the year in which the change occurred. In accordance with GASB Statement No. 31, the City has adjusted certain investments to fair value (when material). Investments are included within the Financial Statement classifications of "Cash and Cash Equivalents" and are stated at fair value, (see Note#2). J. Cash and Cash Equivalents: For purposes of the statement of cash flows of the proprietary funds, all cash and investments with an original maturity of 90 days or less are considered to be cash and cash equivalents. As explained in Note #2, the City pools investment funds for maximum return. A substantial portion of these investments is held in the State Treasurer's Local Agency Investment Pool, which is highly liquid. The City has no non-cash investing, capital, or financing activities to be reported on the statement of cash flows. K. Claims and Judaments: When it is probable that a claim liability has been incurred, and the amount of the loss can be reasonably estimated, the City records the estimated loss, net of any insurance coverage under its self-insurance program. At June 30, 2004, in the opinion of the City Attorney, the City had no material claims, which require loss provisions in the financial statements. Small claims and judgments are recorded as expenditures when paid. The City's self-insurance program is administered through the California Joint Powers Authority (the CJPIA), which is described at Note#8. The CJPIA is a public entity risk pool, which is accounted for under the provisions of GASB Statement 10. Claim losses recorded in the CJPIA include both current claims and Incurred But Not Reported claims (IBNR). The City records amounts deposited with CJPIA as insurance expenditures in the General Fund when paid. These deposits are subject to retrospective adjustment. Favorable claims experience result in a refund of deposits from the CJPIA and such refunds, if any, are recorded as a reduction of insurance expenditures in the year received. Adverse claims experience result in the payment of additional deposits and such deposits, if any, are recorded as insurance expenditures when paid. 29 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. M. Use of Restricted Resources: When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, and then unrestricted resources as they are needed. N. New Pronouncements GASB Statement No. 39 - In May 2002, the GASB issued Statement No. 39, Determining Whether Certain Organizations Are Component Units. This statement provides additional guidance to determine whether certain organizations should be reported as component units based on the nature and the significance of the relationship with the primary government. This statement does not have a significant impact on the financial statements of the City. GASB Statement No. 40 - In March 2003, the GASB issued Statement No. 40, Deposit and Investment Risk Disclosures, an amendment of GASB No. 3. This statement modifies the Deposit and Investment Risk Categorization Disclosures and requires additional information on an entity's portfolio. This statement is not effective until June 30, 2005. The City has not determined its effect on the financial statements. GASB Statement No. 41 - In May 2003, the GASB issued Statement No. 41, Budgetary Comparison Schedules - Perspective Differences, an amendment of GASB 34. This statement establishes guidance for governments with significant budgetary perspective differences to report budgetary comparison schedules within the GASB 34 reporting model. This statement does not have a significant impact on the financial statements of the City. GASB Statement No. 42 - In November 2003, the GASB issued Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries. This statement requires governments to measure, recognize, and disclose the effects of capital asset impairments in their financial statements when it occurs. This statement also clarifies and establishes accounting requirements for insurance recoveries, including those associated with capital asset impairment. This statement is not effective until June 30, 2006. The City has not determined its effect on the financial statements. GASB Statement No. 43 - In April 2004, the GASB issued Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This statement establishes accounting and financial reporting standards for plans that provide postemployment benefits other than pension benefits (known as other postemployment benefits or OPEB). This statement is not effective until June 30, 2007. This statement does is not expected to have a significant impact on the financial statements of the City. 30 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued GASB Statement No. 44 - In May 2004, the GASB issued Statement No. 44, Economic Condition Reporting: The Statistical Section-an amendment of NCGA Statement No. 1. This Statement amends the portions of NCGA Statement 1, Governmental Accounting and Financial Reporting Principles, that guide the preparation of the statistical section. The statistical section presents detailed information, typically in ten-year trends, that assists users in utilizing the basic financial statements, notes to basic financial statements, and required supplementary information to assess the economic condition of a government. This statement is not effective until June 30, 2006. The City has not determined its effect on the financial statements. GASB Statement No. 45 - In June 2004, the GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. This Statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. This statement is not effective until June 30, 2008. The City has not determined its effect on the financial statements. NOTE#2— CASH AND INVESTMENTS The City maintains a cash and investments pool, which is available for use by all funds. Each fund's portion of the pool is displayed on the Financial Statements as "Cash and Cash Equivalents". Interest income earned on pooled cash and investments is allocated quarterly to the funds based on average monthly cash and investment balances. Interest income from restricted cash is allocated directly to the fund earning the income. Authorized Investments: Under provisions of the City's Investment Policy, and in accordance with Section 53601 of the California Government Code, the City may invest in the following types of instruments, subject to certain restrictions as to maturity and percentage of portfolio: Demand Deposits and Money Market Accounts Insured Certificates of Deposit Repurchase Agreements Obligations of the U.S. Treasury and U.S. Agencies Assessment Bonds of the City of Rancho Palos Verdes California Local Agency Investment Fund (LAIF) Shares of"Money Market Funds" Throughout the year ended June 30, 2004, the City did not utilize overnight Repurchase Agreements. Classification of Deposits and Investments by Credit Risk Statement No. 3 of the Governmental Accounting Standards Board requires that deposits and investments be classified into three categories of credit risk. These categories are as follows: 31 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#2— CASH AND INVESTMENTS, Continued Deposits: Category 1: Insured or collateralized with securities held by the City or by its agent in the City's name. Category 2: Collateralized with securities held by the pledging financial institution's trust department or agent in the City's name. Category 3: Uncollateralized. This includes any bank balance that is collateralized with securities held by the pledging financial institution or by its trust department or agent, but not in the City's name. Investments: Category 1: Insured or registered, or securities held by the City or its agent in the City's name. Category 2: Uninsured and unregistered, with securities held by the pledging financial institutions or counterparty's trust department or agent in the City's name. Category 3: Uninsured and unregistered, with securities held by the counterparty or by its trust department or agent, but not in the City's name. Deposits and investments were categorized as follows at June 30,2004: BANK BALANCE- CATEGORY BANK CARRYING FAIR Categorized: 1 2 3 BALANCES AMOUNTS VALUE Demand Deposits $ 100,000 $ 337,922 $ 437,922 $ 431,485 Investments at June 30, 2004, by risk category are as follows: CATEGORY 1 2 3 Investments: Local Agency Investment Fund(1) $ - $ - $ - 33,314,937 $ 33,261,106 (2) Petty cash on hand at June 30, 2004 1,000 Total Cash and Investments $ 33,747,422 Cash and investments are reported in the accompanying financial statements as follows: Governmental Funds $29,497,758 Proprietary Funds 4,249,664 $ 33,747,422 Not subject to categorization. (2) The management of the State of California Pooled Money Investment Account (generally referred to as LAIF) has indicated to the City that as of June 30, 2004, the carrying amount of the pool was $57,600,699,158 and the estimated market value of the pool (including accrued interest) was $57,637,500,817. The City's proportionate share of the carrying amount is $33,314,937. Certain asset-backed securities are included in the LAIF investment portfolio, totaling $923,460,000. The LAIF (and the City's)exposure to risk(credit, market, or legal) is not currently available. 32 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#2— CASH AND INVESTMENTS, Continued Fair Value of Investments GASB Statement No. 31 generally applies to investments in external investment pools (State of California LAIF), investments purchased with maturities greater than one year, mutual funds, and certain investment pools agreements. Generally, governmental entities need to report the "fair value" changes for these investments at year-end and record these gains or losses on their income statement. The City holds an investment in LAIF that is subject to being adjusted to "fair value". The City is required to disclose its methods and assumptions used to estimate the fair value of its holdings in LAIF. The City relied upon information provided by the State Treasurer when estimating the City's fair value position of investments held in LAIF. The City had a contractual withdrawal value of $33,314,937 whose pro-rata share of fair value was estimated by the state Treasurer to be $33,261,106. The fair value change in this investment for the year came to an amount that was not material for presentation in the financial statements. LAIF is a governmental investment pool managed and directed by the California State Treasurer and is not registered with the Securities and Exchange Commission. An oversight committee, comprised of California State officials and various participants, provide the management of the fund. The daily operations and responsibilities of LAIF fall under the auspices of the State Treasurer's office. The City is a voluntary participant in the investment pool. NOTE#3—INTERFUND TRANSACTIONS Inter-fund Balances Inter-fund balances consisted of the following at June 30, 2004: Due to the General fund from: RDA Debt Service $46,027 General fund monies were used to cover an RDA Debt Service fund negative cash balance for the ERAF shift and property tax administrative fee. Due to the Capital Improvement Projects fund from: CDBG $37,444 The CIP fund covered a CDBG fund negative cash balance for grants and interest receivable. Inter-fund Advances The General Fund has advanced the RDA Debt Service Fund amounts as described below: Balance Balance July 1, 2003 Additions Deletions June 30, 2004 Advances to the Redevelopment Agency $ 11,451,482 $572,641 $ 12,024,123 33 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#3—INTERFUND TRANSACTIONS, Continued The City has entered into an agreement to provide the RDA operating funds and staff assistance, supplies, technical and other services and facilities of the City as the RDA requires in carrying out its function under the community redevelopment law. The RDA will repay the resulting indebtedness, plus interest, from incremental property tax revenues arising from the project area, as such revenue becomes available. As of June 30, 2004, no revenue was available to the RDA to repay the advances due to the City, nor are sufficient revenues expected to be available to repay advances in the immediate future. Variable interest was accrued at a rate of 5.18 percent and 4.54 percent respectively during the fiscal years ended June 30, 2003 and 2004. Of the $12,024,123 remaining indebtedness, $9,527,888 relates to the Portuguese Bend portion of the RDA, while $2,496,235 relates to the Abalone Cove portion. During the year ended June 30, 2004, accrued interest of $422,393 was added to the balance of the advance to the Portuguese Bend Fund, while principal of$40,355 and accrued interest of$109,893 was advanced to the Abalone Cove Fund. No interest has ever been paid by the RDA on these advances; therefore, the interest component of the advance has been recorded as deferred revenue in the General Fund of the City. Inter-fund Transfers Inter-fund transfers for the year ended June 30, 2004 consisted of the following: Transfer From General Other Fund Governmental Total General Fund $ 463,583 $ 463,583 0 Street Maintenance $ 20,911 483,409 504,320 U) Capital Improvement Project 628,555 60,917 689,472 c� Other Governmental 183,252 3,118 186,370 Total $ 832,718 $ 1,011,027 $ 1,843,745 Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations or grant matching requirements. NOTE#4— CAPITAL ASSETS AND DEPRECIATION In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the Government-Wide Statement of Net Assets. The City elected to use the basic reporting approach as defined by GASB Statement No. 34 for all infrastructure, whereby depreciation expense and accumulated depreciation has been recorded. The following table presents the capital assets activity for the year ended June 30, 2004. 34 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#4— CAPITAL ASSETS AND DEPRECIATION, Continued Depreciation expense was charged to functions/programs of the primary government as follows: Beginning Ending Governmental Activities Balance Increases Decreases Balance Capital assets not being depreciated: Land $ 15,058,724 $ 15,058,724 Construction in progress 1,431,340 $ 379,087 $ (345,265) 1,465,162 Total capital assets not being depreciated 16,490,064 379,087 (345,265) 16,523,886 Capital assets being depreciated: Buildings and improvements 3,197,989 3,197,989 Vehicles 177,069 177,069 Computer equipment 196,417 101,905 (14,945) 283,377 Furniture, fixtures and equipment 440,582 86,628 (130,034) 397,176 Infrastructure Roadway system 77,261,598 (659,089) 76,602,509 Sewer system 25,755,463 25,755,463 Storm drain system 11,487,179 333,693 11,820,872 Parks system 5,575,075 5,575,075 Total capital assets being depreciated 124,091,372 522,226 (804,068) 123,809,530 Less accumulated depreciation for: Buildings and improvements (1,019,030) (63,960) (1,082,990) Vehicles (134,987) (13,254) (148,241) Computer equipment (100,097) (61,261) 14,945 (146,413) Furniture, fixtures and equipment (256,265) (52,889) 130,034 (179,120) Infrastructure Roadway system (25,992,758) (2,056,331) 648,103 (27,400,986) Sewer system (13,589,937) (530,464) (14,120,401) Storm drain system (1,026,062) (127,108) (1,153,170) Parks system (3,567,484) (35,238) (3,602,722) Total accumulated depreciation (45,686,620) (2,940,505) 793,082 (47,834,043) Total capital assets being depreciated, net 78,404,752 (2,418,279) (10,986) 75,975,487 Governmental activities capital assets, net $94,894,816 $(2,039,192) $ (356,251) $92,499,373 Depreciation expense was charged to functions/programs of the primary government as follows: Administration $ 63,960 Public works, including depreciation of general infrastructure assets 2,713,903 Recreation services 35,238 Capital assets held by the City's internal service funds are charged to the various functions based on their usage of the assets 127,404 Total Depreciation Expense-Governmental Activities $2,940,505 35 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#5—LONG-TERM DEBT Balance July 1, 2003 Balance Amount Due As Restated Additions Deletions June 30, 2004 in 2005 RDA Tax Increment Bond $ 5,455,000 $ 5,455,000 $ 5,000 RDA Deferred Interest Payable 3,111,400 3,111,400 Employee compensated absences 190,818 $ 142,498 $ (139,378) 193,938 141,657 Totals $ 8,757,218 $ 142,498 $ (139,378) $ 8,760,338 $ 146,657 A. RDA Tax Increment Bond and Deferred interest Payable In July 1991, the RDA received $10,000,000 in loan proceeds (the Loan) from the County of Los Angeles (the County) upon the County's issue of Abalone Cove Improvement Bonds 2651-M pursuant to a Reimbursement and Settlement Agreement (the Agreement), dated October 27, 1987 in connection with the Horan Lawsuit. The Loan was made for the purpose of abating the Abalone Cove landslide. The settlement Loan was secured by property assessment liens in the Abalone Cove project area. As stipulated by the parties to the Agreement, a portion of the Loan proceeds was used to repay a tax allocation and revenue anticipation promissory note issued to the County in the principal amount of $1,450,000, plus accrued interest equal to $179,244. A second portion of the proceeds was used to repay expenses advanced by the County in the amount of $135,614. A third portion was used to repay certain loans from the City to the RDA in the amount of$787,340. Per the terms of the Agreement, $1,000,000 of the proceeds was deposited in the Abalone Cove Maintenance Nonexpendable Trust Fund of the Joint Powers Improvement Authority. The remainder of the proceeds was accounted for in the RDA's Abalone Cove Fund. Concurrent with the execution of the Agreement, the County deeded its title in the Abalone Cove Beach Park to the RDA. As part of the Agreement, the RDA is required to transfer 17 percent of tax increment revenue to the Consolidated Fire Protection District of the County and 50.9 percent of tax increment revenue for debt repayment to the County. In accordance with the Agreement, the RDA was to pay the Loan principal plus interest at 7.7654 percent over a 30-year period that began in 1992. However, these debt payments were to be deferred 10 years until the fiscal year ended June 30, 2002. As part of the deferral arrangement, the accrued interest from the inception of the Loan through June 30, 2002, in the amount of $7,314,944, was scheduled for payment over a 20-year period beginning in the fiscal year ending June 30, 2002, with no additional interest. The remaining balance of $10,274,119 was scheduled for payment to the County over a 20-year period beginning in the fiscal year ending June 30, 2002, with interest at 7.7654 percent. On November 1, 1997, the City, RDA and County of Los Angeles entered into a Memorandum of Understanding (MOU) agreeing to restructure the repayment schedule of the debt owed the County by the RDA. In accordance with the terms of the MOU, the $10,000,000 loan principal owed the County was cancelled. As consideration for the loan cancellation, the RDA made a lump sum payment to the County in the amount of $4,545,000 and issued a $5,455,000 tax increment bond to the County (the RDA bond). Of the $4,545,000 lump sum payment, $2,000,000 was paid from tax increment revenue and interest earnings accumulated in the Debt Service Fund. The remaining $2,545,000 was funded by a combination of a loan from the General Fund of the City to the Agency for$1,545,000 and a net operating transfer from the Agency's Abalone Cove Capital Projects Fund to the Debt Service Fund of $1,000,000. The private property liens resulting from the formation of the bond assessment district in connection with the Reimbursement and Settlement Agreement in 1987 were discharged in accordance with the terms of the MOU. 36 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#5—LONG-TERM DEBT, Continued The RDA bond was issued as a conduit through the Improvement Authority to the County. No issuance costs were incurred. One hundred percent of net future tax increment revenue will fund the payment of the RDA bond debt and the deferred interest from the original Loan until paid in full. In December 1997, the County began withholding payment of the Agency's net tax increment revenue (net of the 17 percent payment to the County Fire Protection District and the 20 percent housing set- aside amount) to offset the annual principal and interest charges. The principal of the RDA bond will mature in installments each December 2nd, commencing December 2, 2004. Interest accrues at a rate of 5 percent per annum and is payable in arrears each June 2nd and December 2nd. Additionally, both the accrued interest and deferred interest on the $10,000,000 Loan previously owed the County was retroactively recalculated from the Loan origination date at a rate of approximately 5 percent compared to 7.7654 percent per the original Agreement. The recalculated deferred interest is $3,111,400. In accordance with the MOU, the recalculated deferred interest does not accrue additional interest. The accumulated amount of tax increment withheld over the scheduled principal and interest payment made during the life of the RDA bond is recorded in the Debt Service Fund as a prepaid item at June 30, 2004. After payment of the deferred interest, the RDA may elect to further defer payment to the County of the 50.9 percent of tax increment revenue in order to extinguish any other indebtedness of the RDA. This deferral would allow the tax increment to be available for the repayment of loans made to the RDA by the City (Note#3). In the event the deferral is elected, the debt owed the City is fully extinguished and no other RDA indebtedness exists, the RDA will transfer all subsequent tax increment revenue to the County to fund prior deferrals of, and current payments of, the 50.9 percent of tax increment revenue required to be paid per the Settlement Agreement. The debt service schedule below summarizes all fixed principal and interest payments for the term of the RDA bond. Because the payback period for the deferred interest amount will fluctuate depending on the availability of excess tax increment revenues, no amounts have been included in the following schedule for repayment of the deferred interest. Year Ended Tax Allocation Bond June 30 Principal Interest Total 2005 $ 5,000 272,625 277,625 2006 15,000 272,125 287,125 2007 25,000 271,125 296,125 2008 40,000 269,500 309,500 2009 55,000 268,125 323,125 2010-2014 505,000 1,275,375 1,780,375 2015-2019 1,020,000 1,087,500 2,107,500 2020-2024 1,730,000 748,250 2,478,250 2025-2028 2,060,000 216,750 2,276,750 $ 5,455,000 $ 4,681,375 $ 10,136,375 B. Employee Compensated Absences There is no fixed payment schedule for employee compensated absences. Based on historical trends, $141,657 is estimated to be the amount that will be used and/or paid out during FY04-05. 37 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#6— CLASSIFICATIONS OF NET ASSETS AND FUND BALANCE In the Government-Wide financial statements net assets are classified in the following categories: Invested in Capital Assets This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation on these assets reduces this category. Restricted Net Assets This category presents external restrictions imposed by creditors, grantors, contributions or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Assets This category represents the net assets of the City that are not externally restricted for any project or other purpose. In the Fund Financial Statements the City has established "reserves" to segregate portions of fund balance which are not appropriable for expenditure in future periods, or which are legally set aside for a specific future use. In addition, fund balance may be designated to indicate tentative plans for financial resource utilization of unreserved fund balance in a future period. The City's governmental funds reserves and designations at June 30, 2004 are presented below, followed by explanations of the nature and purpose of each reserve and designation. Steet Capital RDA Debt Other General Maintenance Improvement Service Governmental Fund Fund Fund Fund Funds Reserved: Continuing appropriations $ 685,600 $ 635,900 $ 2,487,300 $ 453,600 Reimbursement settlement agreement 1,000,000 Advances to other funds 5,917,907 Prepaid costs 35,402 $765,145 240,677 Land held for development 702,392 Housing set-aside 943,837 Total Reserved $ 6,638,909 $ 635,900 $ 2,487,300 $765,145 $ 3,340,506 A. Reserves for Encumbrances and Continuing Appropriations These reserves are maintained for purchase orders and other commitments outstanding at year-end. B. Reserved for Reimbursement Settlement Agreement This reserve has been established under the legal requirements of the Reimbursement Settlement Agreement(see Note#5). 38 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#6— CLASSIFICATIONS OF NET ASSETS AND FUND BALANCE, Continued C. Reserved for Advances to Other Funds This reserve represents the long-term portion of loans from the City's General Fund to the RDA less $6,106,216 recorded as deferred revenue(see Note#12). D. Reserved for Prepaid Items This reserve is provided to indicate that the asset carrying value is not available to spend to meet expenditures of the current year. E. Reserved for Land Held for Development These funds are reserved for land purchased by the City to be sold or otherwise used for the development of low and moderate-income housing. F. Reserved for Housing Set-Aside These funds are reserved for low and moderate-income housing as restricted by law or administrative action. NOTE#7—PENSION PLAN Plan Description The City's defined benefit pension plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public Employees Retirement System (CalPERS), an agent multiple- employer plan administrated by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. State statutes, within the Public Employees' Retirement Law, establish benefit provisions and other requirements. The City selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance. The CalPERS issues a separate comprehensive annual financial report. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office — 400 P Street, Sacramento, California, 95814. Funding Policy A contribution of 7 percent of annual covered salary is required for each active plan member. For local miscellaneous members, the City pays the full 7 percent contribution for all the full-time positions, while part-time employees must contribute the 7 percent from earnings. Additionally, the City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for FY03-04 was 2.455 percent for local miscellaneous members. The contribution requirements of the plan members are established by State statute and the employer contribution rate is established and may be amended by CalPERS. 39 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#7—PENSION PLAN, Continued Annual Pension Cost For FY03-04, the City's actual and contributed pension cost was $267,684. The required contribution for FY03-04 was determined as part of the June 30, 2001 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 8.25 percent investment rate of return (net of administrative expenses); (b) projected salary increases that vary by duration of service ranging from 3.75 percent to 14.20 percent; and (c) payroll growth of 3.75 percent. Both (a) and (b) include an inflation component of 3.5 percent. The actuarial value of the Plan's assets was determined using a technique that smoothes the effect of short-term volatility in the market value of investments over a two to five year period depending on the size of investment gains and/or losses. The Plan's un-funded actuarial accrued liability (or excess assets) is being amortized as a level percentage of projected payroll expenditures on a closed basis. The remaining amortization period at June 30, 2004, was one year. Three-Year Trend Information for Plan: Annual Percentage Fiscal Year Pension Cost of APC Net Pension Ending (APC) Contributed Obligation 6/30/2002 144,783 100% $ 0 6/30/2003 167,423 100% $ 0 6/30/2004 267,684 100% $ 0 Schedule of Funding Status of Plan: Actuarial Entry Age Unfunded Annual Valuation Value of Normal Accrued (Overfunded) Funded Covered UAAL as a Date Assets Liability Liability Ratio Payroll % of Payroll 6/30/2000 $7,227,658 $ 5,690,826 $(1,536,832) 127.0% $2,102,848 -73.1% 6/30/2001 7,445,220 6,515,182 (930,038) 114.3% 2,086,935 -44.6% 6/30/2002 7,178,677 7,477,012 298,335 96.0% 2,455,956 12.1% NOTE#8—INSURANCE Description of Self-Insurance Pool Pursuant to Joint Powers Agreement The City is a member of the California Joint Powers Insurance Authority (CJPIA). The CJPIA is comprised of 106 California public entities and is organized under a joint powers agreement pursuant to California Government Code section 6500 et seq. The purpose of the CJPIA is to arrange and administer programs for the pooling of self-insured losses and to purchase excess insurance or reinsurance, and to arrange for group-purchased insurance for property and other coverage. The CJPIA pool began covering claims of its members in 1978. Each member government has an elected official as its representative on the Board of Directors. The Board operates through a 9-member Executive Committee. The accounting methods used by the CJPIA are more fully described at Note#1-K. 40 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#8—INSURANCE, Continued Self-Insurance Programs of the CJPIA • General Liability Each member government pays a primary deposit to cover estimated losses for a fiscal year (claims year). Six months after the close of a fiscal year, outstanding claims are valued. A retrospective deposit computation is then made for each open claims year. Costs are spread to members as follows: the first $30,000 of each occurrence is charged directly to the member; costs from $30,001 to $750,000 are pooled based on a member's share of costs under $30,000; costs from $750,001 to $15,000,000 are pooled based on payroll. Costs of covered claims above $15,000,000 are currently paid by reinsurance. The protection for each member is $50,000,000 per occurrence and $50,000,000 annual aggregate. • Workers' Compensation The City also participates in the workers compensation pool administered by the Authority. Pool deposits an retrospective adjustments are valued in a manner similar to the General Liability pool. The City is charged for the first $25,000 of each claim. Costs are pooled above that level to $50,000. Costs from $50,001 to $100,000 per claim are pooled based on the member's losses under its retention level. Costs between $100,001 and $2,000,000 per claim are pooled based on payroll. Costs between $2,000,000 and $50,000,000 are paid by excess insurance purchased by CJPIA. Costs in excess of$50,000,000 are pooled based on payroll. Purchased Insurance • Environmental Insurance The City participates in the pollution legal liability and remediation legal liability insurance, which is available through the CJPIA. The policy covers sudden and gradual pollution of scheduled property, streets, and storm drains owned by the City. Coverage is on a claims-made basis. There is a $50,000 deductible. The CJPIA has a limit of$120,000,000 for the 3-year period from July 1, 2002 through June 30, 2005. Each member of the CJPIA has a $10,000,000 limit during the 3-year term of the policy. • Property Insurance The City participates in the all-risk property protection program of the CJPIA. Several insurance companies underwrite this insurance protection. The City's property is currently insured according to a schedule of covered property submitted by the City to the CJPIA. Total all-risk property insurance coverage is $9,408,365. There is a $5,000 per loss deductible. Premiums for the coverage are paid annually and are not subject to retroactive adjustments. • Earthquake and Flood Insurance The City purchases earthquake and flood insurance on a portion of its property. The earthquake insurance is part of the property protection insurance program of the CJPIA. The City's property currently has earthquake protection in the amount of$8,763,365. There is a deductible of 5% of value with a minimum deductible of$100,000. Premiums for the coverage are paid annually and are not subject to retroactive adjustments. 41 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#8—INSURANCE, Continued Adequacy of Protection During the past three fiscal (claims) years none of the above programs of protection have had settlements or judgments that exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage in the year ended June 30, 2004. As previously described in Note #1-K, the City has no material claims, which would require loss provisions in the financial statements. NOTE#9—ASSESSMENT DISTRICTS BOND ISSUES Assessment District No. 9 issued special assessment bonds for the purpose of public improvements under the Municipal Improvement acts of 1911 and 1913. Neither the faith, credit, not taxing power of the City is pledged to the repayment of the bonds. The City is only acting as an agent for the property owners and bondholders in collecting and forwarding the special assessment. Accordingly, the un-retired principal at June 30, 2004 of$1,247 has not been recorded as a long-term liability in the Statement of Net Assets. NOTE#10— CONTINGENCIES AND COMMITMENTS In the normal course of operations, the City has been named as a defendant in various claims and legal actions. In the opinion of management and legal counsel, the ultimate liability for these legal actions and claims will not have a material adverse effect on the City's general-purpose financial statements. NOTE#11—PROPERTY TAXES Under California law, property taxes are assessed and collected by the counties up to 1 percent of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the cities based on complex formulas. Accordingly, the City accrues only those taxes, which are received from the county within sixty days after year-end. Lien date March 1 Levy date June 30 Due date November 1 and February 1 Collection dates December 10 and April 10 NOTE#12—DEFERRED REVENUES The deferred revenues in the fund financial statements of the City of Rancho Palos Verdes as of June 30, 2003 consisted of the following: Source General Fund Accrued Interest from Long-Term Advances to the Redevelopment Agency $ 6,106,215 Advance on Federal Grant 36,011 Total Deferred Revenues $ 6,142,226 42 CITY OF RANCHO PALOS VERDES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 NOTE#13—LAND HELD FOR DEVELOPMENT On March 21, 2000, the City purchased approximately 20 acres of land to be used for an affordable housing project. The total cost of the land was $702,392. The City has recorded the cost of the land as an asset in the special revenue fund that purchased the property(Housing Set-Aside fund). The City expects one or more developers to file an application for a multiple unit housing project, with an affordable housing element, during the fiscal year ending June 30, 2005. If approved, the City anticipates transferring the land to a developer for construction of the housing project. The City will recognize a gain or loss on the disposal of the land at the time a disposition and development agreement is finalized. The fund balance in the Housing Set-Aside fund has been reserved for an amount equal to the purchase price of the land. In the event the Crestridge property is not used for low or moderate income housing, or in the event the property is used for a purpose that may not be charged against the Housing Set-Aside fund in the full amount of $702,392, then all, or a portion of the $702,392 purchase price must be reimbursed to the Housing Set-Aside fund. Following such reimbursement, the fund balance will likely exceed $1 million. The amount exceeding $1 million is defined as "excess surplus." In the event of the occurrence of excess surplus, the RDA may be required to either transfer the excess surplus to the County Housing Authority within one year, or spend such excess within an additional two years after such occurrence. The Community Redevelopment Law sets forth substantial penalties if the RDA fails to properly dispose of excess surplus funds. NOTE#14— OTHER REQUIRED FUND DISCLOSURES The following fund had a deficit fund balance as of June 30, 2004: RDA Debt Service Fund $ 11,305,005 The City plans to finance this deficit through future revenues to the fund. The expenditures of the Capital Improvements Capital Projects Fund exceeded the budget by$28,652. NOTE#15—RESTATEMENT OF NET ASSETS During the 2003-04 fiscal year the City reevaluated the accounting treatment of the deferred interest payable in connection with the City's Memorandum of Understanding (MOU) with the County of Los Angeles (see Note 5A). As a result, the City restated beginning net assets to recognize the deferred interest as a long-term liability. The following is a summary of the effect of the restatement: Net Assets at June 30, 2003, as previously reported $ 118,560,176 Recognition of deferred interest payable (3,111,400) Net Assts at June 30, 2003, as restated $ 115,448,776 43 SUPPLEMENTARY INFORMATION CITY OF RANCHO PALOS VERDES JUNE 30, 2004 MAJOR FUND BUDGETARY COMPARISON SCHEDULES Budgetary comparison statements are presented as part of the basic financial statements for the General fund and the major Special Revenue fund as provided for by GASB Statement No. 34. The budgetary comparison schedules for the remaining major funds are presented to aid in additional analysis and are not a required part of the basic financial statements. 44 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI CAPITAL IMPROVEMENTS CAPITAL PROJECTS FUNC FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 5,700 $ 5,700 $ 26,903 $ 21,203 Charges for services 9,975 9,975 Revenue from other agencies 1,525,747 1,525,747 (1,525,747) Total Revenues 1,531,447 1,531,447 36,878 (1,494,569) EXPENDITURES Current: Public works 330,723 334,123 325,908 8,215 Capital outlay 1,203,843 326,697 363,564 (36,867) Total Expenditures 1,534,566 660,820 689,472 (28,652) Excess (Deficiency)of Revenues Over Expenditures (3,119) 870,627 (652,594) (1,523,221) OTHER FINANCING SOURCES (USES) Operating transfer in 1,096,319 4,869,673 689,472 (4,180,201) Net Change in Fund Balances 1,093,200 5,740,300 36,878 (5,703,422) Fund Balance, Beginning of Year 1,631,992 1,631,992 1,631,992 Fund Balance, End of Year $ 2,725,192 $ 7,372,292 $1,668,870 $ (5,703,422) 45 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI RDA DEBT SERVICE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 469,200 $ 469,200 $ 584,335 $ 115,135 EXPENDITURES Current: Administration 12,900 12,900 13,149 (249) Pass through to other agencies 98,740 128,100 156,064 (27,964) Debt Service-interest 845,947 845,947 805,035 40,912 Total Expenditures 957,587 986,947 974,248 12,699 Excess (Deficiency)of Revenues Over Expenditures (488,387) (517,747) (389,913) 127,834 OTHER FINANCING SOURCES (USES) Advances to Redevelopment Agency 573,197 573,197 (573,197) Total Other Financing Sources (Uses) 573,197 573,197 (573,197) Net Change in Fund Balances 84,810 55,450 (389,913) (445,363) Fund Balance, Beginning of Year (10,915,092) (10,915,092) (10,915,092) Fund Balance, End of Year $(10,830,282) $(10,859,642) $(11,305,005) $ (445,363) 46 CITY OF RANCHO PALOS VERDES JUNE 30, 2004 NONMAJOR GOVERNMENTAL FUNDS Special Revenues Fund Descriptions Special Revenue Funds are used to account for taxes and other revenues set aside in accordance with law or administrative regulation for a specific purpose. Air Quality Management—to account for AB2766 fees received to fund programs to reduce air pollution from motor vehicles. Community Development Block Grant (CDBG) — to account for Federal Grants received from the Department of Housing and Urban Development (HUD). EI Prado —to account for taxes collected to maintain and service existing and proposed improvements. Redevelopment Agency (RDA) — Housing Set-Aside — to account for the portion of Redevelopment tax increment monies which is a requirement under California Redevelopment Law, Section 33334, to be set-aside for the development of low and moderate income housing. Proposition A—to account for the City's share of an additional one-half percent sales tax designated to fund certain public transportation orientated projects. Proposition C — to account for sales taxes received from the County and used to support public transit and related services. Recycling — to account for monies received for the City's recycling program used for community improvement, grants and promotion of recycling. Solid Waste — to account for AB939 fees received for state mandated waste reduction and recycling plans and programs. Public Safety Grants — to account for federal grant funds for local law enforcement supplemental services, AB3229 funds used for additional law enforcement services and public safety technology equipment. 1972 Act Landscaping and Lighting District — to account for revenues and costs associated with the City's landscaping and lighting district. 1911 Act Lighting District — to account for revenue and costs associated with a lighting district transferred to the "city-wide" landscape and lighting district from the County in 1995. Joint Powers Improvement Authority OPIA) — Portuguese Bend — to account for maintenance and repairs of landslide abatement improvements in the Portuguese Bend Project area. Habitat Restoration — to account for fees paid by developers for conservation easements to be used exclusively for future habitat restoration efforts on City owned property. 47 CITY OF RANCHO PALOS VERDES JUNE 30, 2004 NONMAJOR GOVERNMENTAL FUNDS Special Revenues Fund Descriptions, Continued Subregion One Maintenance —to account for monies used to maintain public improvements and habitat areas dedicated to the City upon completion of the Subregion One residential development project. Measure A — to account for the voter approved 1992 and 1996 Measure A funds and other state and county grants used for the acquisition of open space and park improvements. Abalone Cove Sewer Assessment District—to account for property assessments used to partially pay for operation and maintenance of the Abalone Cove sewer system. Capital Projects Funds Descriptions Capital Projects Funds are used to account for financial resources used for the acquisition or construction of major capital facilities. Bikeways —to account for State funds used for the construction of bikeways and/or pedestrian facilities. Redevelopment Agency (RDA) — Abalone Cove — to account for landslide abatement in the Abalone Cove Project Area. Environmental Excise Tax — to account for taxes received in connection with new construction within the City. Quimby — to account for funds from the payment of fees or the dedication of land for park and recreation purposes. Affordable Housing — to account for in-lieu fees by developers for the City to construct low and moderate income housing. Redevelopment Agency (RDA) — Portuguese Bend — to account for monies used for landslide abatement in the Portuguese Bend Project Area. Utility Undergrounding — to account for the accumulation of monies transferred from the General fund, to be used for relocating utility poles and lines on arterial roadways underground, and provide residents assistance with utility undergrounding in residential areas of the City. Roadway Beautification — to account for the accumulation of monies transferred from the General and Recycling funds to be used for landscape improvements along the City's roadways. 48 CITY OF RANCHO PALOS VERDES JUNE 30, 2004 NONMAJOR GOVERNMENTAL FUNDS Permanent Fund Description Permanent Funds are used to account for resources legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the City's programs. Joint Powers Improvement Authority (JPIA) —Abalone Cove —to account for monies received as part of a July 1991 Reimbursement and Settlement Agreement with the County of Los Angeles. As a part of this agreement the Authority received a $1,000,000 deposit of nonexpendable principal. The interest earnings are used to pay for maintenance and repair of Abalone Cove landslide abatement improvements. 49 CITY OF RANCHO PALOS VERDES NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2004 Special Revenue Funds Air Quality ASSETS Management CDBG EI Prado Cash and cash equivalents $ 11,170 $ 12,156 Receivable Taxes 46 Interest 37 41 Other 13,483 $ 64,379 Prepaid items 21,000 16,094 Land held for development Total Assets $ 45,690 $ 80,473 $ 12,243 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable and accrued liabilities $ 42,492 $ 12 Due to other funds 37,444 Total Liabilities 79,936 12 FUND BALANCES Reserved for: Continuing appropriations Reimbursement settlement agreement Prepaid items $ 21,000 16,094 Land development Housing set-aside Unreserved, reported in: Special revenue funds 24,690 (15,557) 12,231 Capital projects funds Permanent funds Total Fund Balances 45,690 537 12,231 Total Liabilities and Fund Balances $ 45,690 $ 80,473 $ 12,243 50 CONTINUED ON NEXT PAGE Special Revenue Funds Redevelopment Agency- Housing Proposition Proposition Solid Set-Aside A C Recycling Waste $ 938,538 $ 358,335 $ 744,816 $ 697,087 $ 553,180 1,897 3,402 1,438 2,664 2,324 1,911 61,077 7,545 188,086 702,392 $ 1,646,229 $ 547,859 $ 747,480 $ 760,488 $ 562,636 $ 577 $ 5,414 $ 14,662 577 5,414 14,662 215,900 188,086 $ 702,392 943,837 359,196 $ 747,480 539,174 547,974 1,646,229 547,282 747,480 755,074 547,974 $ 1,646,229 $ 547,859 $ 747,480 $ 760,488 $ 562,636 51 CITY OF RANCHO PALOS VERDES NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET (CONTINUED) JUNE 30, 2004 Special Revenue Funds Public Safety ASSETS Grants 1972 Act 1911 Act Cash and cash equivalents $ 45,814 $ 144,579 $ 1,156,344 Receivable Taxes 6,758 12,275 Interest 201 581 3,981 Other 16,616 Prepaid items Land held for development Total Assets $ 62,631 $ 151,918 $ 1,172,600 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable and accrued liabilities $ 1,008 $ 19,488 Due to other funds Total Liabilities 1,008 19,488 FUND BALANCES Reserved for: Continuing appropriations $ 48,700 Reimbursement settlement agreement Prepaid items Land development Housing set-aside Unreserved, reported in: Special revenue funds 13,931 150,910 1,153,112 Capital projects funds Permanent funds Total Fund Balances 62,631 150,910 1,153,112 Total Liabilities and Fund Balances $ 62,631 $ 151,918 $ 1,172,600 52 CONTINUED ON NEXT PAGE Special Revenue Funds Joint Powers Improvement Abalone Cove Authority- Sewer Portuguese Habitat Subregion One Assessment Bend Restoration Maintenance Measure A District $ 242,234 $ 272,254 $ 814,518 $ 45,167 $ 41,548 858 942 2,823 168 141 22,116 904 $ 243,092 $ 273,196 $ 817,341 $ 67,451 $ 42,593 $ 10,751 $ 4,537 $ 2,323 $ 12,482 10,751 4,537 2,323 12,482 171,000 18,000 232,341 97,659 815,018 $ 67,451 12,111 232,341 268,659 815,018 67,451 30,111 $ 243,092 $ 273,196 $ 817,341 $ 67,451 $ 42,593 53 CITY OF RANCHO PALOS VERDES NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET (CONTINUED) JUNE 30, 2004 Capital Projects Funds Redevelopment Agency- Abalone Environmental ASSETS Bikeways Cove Excise Tax Quimby Cash and cash equivalents $ 53,816 $ 724,708 $ 498,375 Receivable Taxes Interest 199 2,490 1,719 Other Prepaid items Land held for development Total Assets $ - $ 54,015 $ 727,198 $ 500,094 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable and accrued liabilities Due to other funds Total Liabilities - FUND BALANCES Reserved for: Continuing appropriations Reimbursement settlement agreement Prepaid items Land development Housing set-aside Unreserved, reported in: Special revenue funds Capital projects funds $ 54,015 $ 727,198 $ 500,094 Permanent funds Total Fund Balances 54,015 727,198 500,094 Total Liabilities and Fund Balances $ - $ 54,015 $ 727,198 $ 500,094 54 Permanent Capital Projects Funds Fund Joint Powers Redevelopment Improvement Total Agency- Authority- Non-major Affordable Portuguese Utility Roadway Abalone Governmental Housing Bend Undergrounding Beautification Cove Funds $ 1,012,883 $ 300,728 $ 235,820 $ 410,718 $ 1,414,748 $ 10,729,536 20,976 3,499 1,122 815 1,418 5,257 38,031 186,120 15,497 240,677 702,392 $ 1,016,382 $ 317,347 $ 236,635 $ 412,136 $ 1,420,005 $ 11,917,732 $ 1,734 $ 115,480 37,444 1,734 152,924 453,600 1,000,000 1,000,000 $ 15,497 240,677 702,392 943,837 4,757,721 $ 1,016,382 301,850 $ 236,635 $ 412,136 3,248,310 418,271 418,271 1,016,382 317,347 236,635 412,136 1,418,271 11,764,808 $ 1,016,382 $ 317,347 $ 236,635 $ 412,136 $ 1,420,005 $ 11,917,732 55 CITY OF RANCHO PALOS VERDES NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2004 Special Revenue Funds Air Quality Management CDBG EI Prado REVENUES Taxes $ 1,396 Use of money and property $ 209 166 Charges for services Revenue from other agencies 50,125 $ 273,203 Other revenues Total Revenues 50,334 273,203 1,562 EXPENDITURES Current: Administration Public safety Public works 42,000 243,836 169 Capital outlay Total Expenditures 42,000 243,836 169 Excess (Deficiency)of Revenues Over Over Expenditures 8,334 29,367 1,393 Other Financing Sources (Uses): Transfers in Transfers out (34,410) Total Other Financing Sources (Uses) (34,410) Net Change in Fund Balances 8,334 (5,043) 1,393 FUND BALANCES, Beginning of Year 37,356 5,580 10,838 FUND BALANCES, End of Year $ 45,690 $ 537 $ 12,231 56 CONTINUED ON NEXT PAGE Special Revenue Funds Redevelopment Agency- Housing Proposition Proposition Solid Set-Aside A C Recycling Waste $ 143,979 $ 586,738 $ 488,511 13,658 5,790 8,693 $ 9,693 $ 8,906 24,909 11,931 3,140 240,211 157,637 592,528 497,204 261,835 36,955 440,928 139,405 92,321 440,928 139,405 92,321 157,637 151,600 497,204 122,430 (55,366) (20,563) (93,659) (52,118) (20,563) (93,659) (52,118) 157,637 131,037 403,545 122,430 (107,484) 1,488,592 416,245 343,935 632,644 655,458 $ 1,646,229 $ 547,282 $ 747,480 $ 755,074 $ 547,974 57 CITY OF RANCHO PALOS VERDES NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (CONTINUED; YEAR ENDED JUNE 30, 2004 Special Revenue Funds Public Safety Grants 1972 Act 1911 Act REVENUES Taxes $ 326,105 $ 372,695 Use of money and property $ 1,021 2,404 15,739 Charges for services Revenue from other agencies 112,773 Other revenues Total Revenues 113,794 328,509 388,434 EXPENDITURES Current: Administration Public safety 5,763 Public works 55,264 261,976 Capital outlay Total Expenditures 5,763 55,264 261,976 Excess (Deficiency)of Revenues Over Over Expenditures 108,031 273,245 126,458 Other Financing Sources (Uses): Transfers in Transfers out (112,773) (371,190) Total Other Financing Sources (Uses) (112,773) (371,190) Net Change in Fund Balances (4,742) (97,945) 126,458 FUND BALANCES, Beginning of Year 67,373 248,855 1,026,654 FUND BALANCES, End of Year $ 62,631 $ 150,910 $ 1,153,112 58 CONTINUED ON NEXT PAGE Special Revenue Funds Joint Powers Improvement Abalone Cove Authority- Sewer Portuguese Habitat Subregion One Parks/ Assessment Bend Restoration Maintenance Measure A District $ 33,988 $ 3,398 $ 3,955 $ 12,116 $ 673 545 56,382 3,398 3,955 12,116 57,055 34,533 32,229 56,190 26,958 53,214 32,229 56,190 26,958 53,214 (28,831) (52,235) (14,842) 57,055 (18,681) 91,500 76,752 15,000 (75,000) (47,914) 16,500 76,752 (47,914) 15,000 (12,331) 24,517 (14,842) 9,141 (3,681) 244,672 244,142 829,860 58,310 33,792 $ 232,341 $ 268,659 $ 815,018 $ 67,451 $ 30,111 59 CITY OF RANCHO PALOS VERDES NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (CONTINUED; YEAR ENDED JUNE 30, 2004 Capital Projects Redevelopment Agency- Abalone Environmental Bikeways Cove Excise Tax Quimby REVENUES Taxes Use of money and property $ 14 $ 870 $ 11,125 $ 6,129 Charges for services 60,120 157,940 Revenue from other agencies 28,386 Other revenues Total Revenues 28,400 870 71,245 164,069 EXPENDITURES Current: Administration Public safety Public works 129,854 Capital outlay 4,454 Total Expenditures 129,854 4,454 Excess (Deficiency)of Revenues Over Over Expenditures 28,400 870 (58,609) 159,615 Other Financing Sources (Uses): Transfers in 3,118 Transfers out (28,400) Total Other Financing Sources (Uses) (28,400) 3,118 Net Change in Fund Balances 870 (58,609) 162,733 FUND BALANCES, Beginning of Year 53,145 785,807 337,361 FUND BALANCES, End of Year $ - $ 54,015 $ 727,198 $ 500,094 60 Permanent Capital Projects Fund Joint Powers Redevelopment Improvement Total Agency- Authority- Non-major Affordable Portuguese Utility Roadway Abalone Governmental Housing Bend Undergrounding Beautification Cove Funds $ 1,953,412 $ 14,813 $ 54,862 $ 3,449 $ 6,005 $ 23,692 207,925 242,969 535,940 240,211 14,813 54,862 3,449 6,005 23,692 3,180,457 20,731 20,731 5,763 65,475 1,639,819 4,454 20,731 65,475 1,670,767 14,813 34,131 3,449 6,005 (41,783) 1,509,690 186,370 (175,000) (1,011,027) (175,000) (824,657) 14,813 (140,869) 3,449 6,005 (41,783) 685,033 1,001,569 458,216 233,186 406,131 1,460,054 11,079,775 $ 1,016,382 $ 317,347 $ 236,635 $ 412,136 $ 1,418,271 $ 11,764,808 61 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI AIR QUALITY MANAGEMENT SPECIAL REVENUE FUNC FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 800 $ 800 $ 209 $ (591) Charges for services 48,000 48,000 50,125 2,125 Total Revenues 48,800 48,800 50,334 1,534 EXPENDITURES Current: Public works 42,000 42,000 42,000 Net Change in Fund Balance 6,800 6,800 8,334 1,534 Fund Balance, Beginning of Year 37,356 37,356 37,356 Fund Balance, End of Year $ 44,156 $ 44,156 $ 45,690 $ 1,534 62 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUNS FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Revenue from other agencies $ 1,207,863 $ 1,378,863 $ 273,203 $ (1,105,660) EXPENDITURES Current: Public works 293,840 964,640 243,836 720,804 Capital outlay 879,613 1,187,335 1,187,335 Total Expenditures 1,173,453 2,151,975 243,836 1,908,139 Excess (Deficiency) of Revenues Over Expenditures 34,410 (773,112) 29,367 802,479 OTHER FINANCING SOURCES (USES) Transfers in 77,222 (77,222) Transfers out (34,410) (34,410) (34,410) Total Other Financing Sources (Uses) (34,410) 42,812 (34,410) (77,222) Net Change in Fund Balance (730,300) (5,043) 725,257 Fund Balance, Beginning of Year 5,580 5,580 5,580 Fund Balance, End of Year $ 5,580 $ (724,720) $ 537 $ 725,257 63 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI EL PRADO SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 1,200 $ 1,200 $ 1,396 $ 196 Use of money and property 200 200 166 (34) Total Revenues 1,400 1,400 1,562 162 EXPENDITURES Current: Public works 900 900 169 731 Net Change in Fund Balance 500 500 1,393 893 Fund Balance, Beginning of Year 10,838 10,838 10,838 Fund Balance, End of Year $ 11,338 $11,338 $ 12,231 $ 893 64 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI RDA HOUSING SET-ASIDE SPECIAL REVENUE FUNS FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 119,600 $ 119,600 $ 143,979 $ 24,379 Use of money and property 15,500 15,500 13,658 (1,842) Total Revenues 135,100 135,100 157,637 22,537 Net Change in Fund Balance 135,100 135,100 157,637 22,537 Fund Balance, Beginning of Year 1,488,592 1,488,592 1,488,592 Fund Balance, End of Year $ 1,623,692 $ 1,623,692 $ 1,646,229 $ 22,537 65 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL PROPOSITION A SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 584,723 $ 584,723 $ 586,738 $ 2,015 Use of money and property 9,400 9,400 5,790 (3,610) Total Revenues 594,123 594,123 592,528 (1,595) EXPENDITURES Current: Public works 441,295 441,295 440,928 367 Excess of Revenues Over Expenditures 140,828 152,828 151,600 (1,228) OTHER FINANCING SOURCES (USES) Transfers out (15,000) (27,000) (20,563) 6,437 Net Change in Fund Balance 125,828 125,828 131,037 5,209 Fund Balance, Beginning of Year 416,245 416,245 416,245 Fund Balance, End of Year $ 542,073 $542,073 $ 547,282 $ 5,209 66 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI PROPOSITION C SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 479,798 $ 479,798 $488,511 $ 8,713 Use of money and property 7,000 7,000 8,693 1,693 Revenue from other agencies 45,500 45,500 (45,500) Total Revenues 532,298 532,298 497,204 (35,094) OTHER FINANCING USES Transfers out (337,583) (598,937) (93,659) 505,278 Net Change in Fund Balance 194,715 (66,639) 403,545 470,184 Fund Balance, Beginning of Year 343,935 343,935 343,935 Fund Balance, End of Year $ 538,650 $ 277,296 $747,480 $ 470,184 67 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI RECYCLING SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 9,400 $ 9,400 $ 9,693 $ 293 Revenue from other agencies 11,931 11,931 Other revenues 204,000 204,000 240,211 36,211 Total Revenues 213,400 213,400 261,835 48,435 EXPENDITURES Current: Public works 233,996 139,996 139,405 591 Net Change in Fund Balance (20,596) 73,404 122,430 49,026 Fund Balance, Beginning of Year 632,644 632,644 632,644 Fund Balance, End of Year $ 612,048 $ 706,048 $ 755,074 $ 49,026 68 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI SOLID WASTE SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 13,100 $ 13,100 $ 8,906 $ (4,194) Charges for services 75,600 75,600 24,909 (50,691) Revenue from other agencies 55,039 55,039 3,140 (51,899) Total Revenues 143,739 143,739 36,955 (106,784) EXPENDITURES Current: Public works 133,663 133,663 92,321 41,342 Excess (Deficiency)of Revenues Over Expenditures 10,076 10,076 (55,366) (65,442) OTHER FINANCING USES Transfers out (74,000) (74,000) (52,118) 21,882 Net Change in Fund Balance (63,924) (63,924) (107,484) (43,560) Fund Balance, Beginning of Year 655,458 655,458 655,458 Fund Balance, End of Year $ 591,534 $ 591,534 $ 547,974 $ (43,560) 69 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI PUBLIC SAFETY GRANTS SPECIAL REVENUE FUNC FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 480 $ 480 $ 1,021 $ 541 Revenue from other agencies 115,000 115,000 112,773 (2,227) Total Revenues 115,480 115,480 113,794 (1,686) EXPENDITURES Current: Public safety 43,479 5,779 5,763 16 Excess (Deficiency) of Revenues Over Expenditures 72,001 109,701 108,031 (1,670) OTHER FINANCING USES Transfers out (115,000) (115,000) (112,773) 2,227 Net Change in Fund Balance (42,999) (5,299) (4,742) 557 Fund Balance, Beginning of Year 67,373 67,373 67,373 Fund Balance, End of Year $ 24,374 $ 62,074 $ 62,631 $ 557 70 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI 1972 ACT SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 327,860 $ 327,860 $ 326,105 $ (1,755) Use of money and property 1,350 1,350 2,404 1,054 Total Revenues 329,210 329,210 328,509 (701) EXPENDITURES Current: Public works 55,678 55,678 55,264 414 Excess of Revenues Over Expenditures 273,532 273,532 273,245 (287) OTHER FINANCING USES Transfers out (371,190) (371,190) (371,190) Net Change in Fund Balance (97,658) (97,658) (97,945) (287) Fund Balance, Beginning of Year 248,855 248,855 248,855 Fund Balance, End of Year $ 151,197 $ 151,197 $ 150,910 $ (287) 71 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI 1911 ACT SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 312,000 $ 312,000 $ 372,695 $ 60,695 Use of money and property 18,800 18,800 15,739 (3,061) Total Revenues 330,800 330,800 388,434 57,634 EXPENDITURES Current: Public works 361,800 361,800 261,976 99,824 Net Change in Fund Balance (31,000) (31,000) 126,458 157,458 Fund Balance, Beginning of Year 1,026,654 1,026,654 1,026,654 Fund Balance, End of Year $ 995,654 $ 995,654 $ 1,153,112 $ 157,458 72 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI JPIA - PORTUGUESE BEND SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 2,800 $ 2,800 $ 3,398 $ 598 EXPENDITURES Current: Public works 91,500 91,500 32,229 59,271 Deficiency of Revenues Over Expenditures (88,700) (88,700) (28,831) 59,869 OTHER FINANCING SOURCES (USES) Transfers in 91,500 91,500 91,500 Transfers out (75,000) (75,000) (75,000) Total Other Financing Sources 16,500 16,500 16,500 Net Change in Fund Balance (72,200) (72,200) (12,331) 59,869 Fund Balance, Beginning of Year 244,672 244,672 244,672 Fund Balance, End of Year $ 172,472 $ 172,472 $ 232,341 $ 59,869 73 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI HABITAT RESTORATION SPECIAL REVENUE FUNC FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 2,100 $ 2,100 $ 3,955 $ 1,855 EXPENDITURES Capital outlay 100,000 56,500 56,190 310 Deficiency of Revenues Over Expenditures (97,900) (54,400) (52,235) 2,165 OTHER FINANCING SOURCES Transfers in 76,752 76,752 76,752 Net Change in Fund Balance (21,148) 22,352 24,517 2,165 Fund Balance, Beginning of Year 244,142 244,142 244,142 Fund Balance, End of Year $ 222,994 $ 266,494 $ 268,659 $ 2,165 74 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI SUBREGION ONE MAINTENANCE SPECIAL REVENUE FUNS FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 16,100 $ 16,100 $ 12,116 $ (3,984) EXPENDITURES Current: Public works 24,000 26,958 26,958 Net Change in Fund Balance (7,900) (10,858) (14,842) (3,984) Fund Balance, Beginning of Year 829,860 829,860 829,860 Fund Balance, End of Year $ 821,960 $ 819,002 $ 815,018 $ (3,984) 75 CITY OF RANCHO PALOS VERDES STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI MEASURE A SPECIAL REVENUE FUNS FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 673 $ 673 Revenue from other agencies $ 197,813 $ 3,022,598 56,382 (2,966,216) Total Revenues 197,813 3,022,598 57,055 (2,965,543) OTHER FINANCING USES Transfers out (197,813) (3,022,598) (47,914) 2,974,684 Net Change in Fund Balance 9,141 9,141 Fund Balance, Beginning of Year 58,310 58,310 58,310 Fund Balance, End of Year $ 58,310 $ 58,310 $ 67,451 $ 9,141 76 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI ABALONE COVE SEWER ASSESSMENT DISTRICT SPECIAL REVENUE FUN[ FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 35,000 $ 35,000 $ 33,988 $ (1,012) Use of money and property 545 545 Total Revenues 35,000 35,000 34,533 (467) EXPENDITURES Current: Public works 45,000 45,000 53,214 (8,214) Capital outlay 5,000 8,300 8,300 Total Expenditures 50,000 53,300 53,214 86 Deficiency of Revenues Over Expenditures (15,000) (18,300) (18,681) (381) OTHER FINANCING SOURCES Transfers in 15,000 15,000 15,000 Net Change in Fund Balance (3,300) (3,681) (381) Fund Balance, Beginning of Year 33,792 33,792 33,792 Fund Balance, End of Year $ 33,792 $ 30,492 $ 30,111 $ (381) 77 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL BIKEWAYS CAPITAL PROJECTS FUNS FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 14 $ 14 Revenue from other agencies 28,386 28,386 Total Revenues 28,400 28,400 OTHER FINANCING USES Transfers out (28,400) (28,400) Net Change in Fund Balance - - - - Fund Balance, Beginning of Year Fund Balance, End of Year $ - $ - $ - $ - 78 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL RDA ABALONE COVE CAPITAL PROJECTS FUNC FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 870 $ 870 Fund Balance, Beginning of Year $ 53,145 $ 53,145 53,145 Fund Balance, End of Year $ 53,145 $ 53,145 $ 54,015 $ 870 79 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI ENVIRONMENTAL EXCISE TAX CAPITAL PROJECTS FUN[ FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 3,800 $ 3,800 $ 11,125 $ 7,325 Charges for services 60,120 60,120 Other revenues 221,720 221,720 (221,720) Total Revenues 225,520 225,520 71,245 (154,275) EXPENDITURES Current: Public works 129,854 129,854 Excess (Deficiency) of Revenues Over Expenditures 225,520 95,666 (58,609) (154,275) OTHER FINANCING USES Transfers out (310,024) 310,024 Net Change in Fund Balance 225,520 (214,358) (58,609) 155,749 Fund Balance, Beginning of Year 785,807 785,807 785,807 Fund Balance, End of Year $ 1,011,327 $ 571,449 $ 727,198 $ 155,749 80 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAI QUIMBY CAPITAL PROJECTS FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 630 $ 630 $ 6,129 $ 5,499 Charges for services 157,940 157,940 Revenue from other agencies 24,000 24,000 (24,000) Total Revenues 24,630 24,630 164,069 139,439 EXPENDITURES Current: Public works 7,500 7,500 7,500 Capital outlay 30,000 30,000 4,454 25,546 Total Expenditures 37,500 37,500 4,454 33,046 Excess (Deficiency) of Revenues Over Expenditures (12,870) (12,870) 159,615 172,485 OTHER FINANCING SOURCES (USES) Transfers in 3,118 3,118 Transfers out (337,900) 337,900 Total Other Financing Sources (Uses) (337,900) 3,118 341,018 Net Change in Fund Balance (12,870) (350,770) 162,733 513,503 Fund Balance, Beginning of Year 337,361 337,361 337,361 Fund Balance, End of Year $ 324,491 $ (13,409) $ 500,094 $ 513,503 81 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL AFFORDABLE HOUSING CAPITAL PROJECTS FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 20,100 $ 20,100 $ 14,813 $ (5,287) Fund Balance, Beginning of Year 1,001,569 1,001,569 1,001,569 Fund Balance, End of Year $ 1,021,669 $ 1,021,669 $ 1,016,382 $ (5,287) 82 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL RDA PORTUGUESE BEND CAPITAL PROJECTS FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 3,700 $ 3,700 $ 54,862 $ 51,162 EXPENDITURES Current: Administration 23,810 32,125 20,731 11,394 Capital outlay 20,000 20,000 Total Expenditures 23,810 52,125 20,731 31,394 Excess (Deficiency)of Revenues Over Expenditures (20,110) (48,425) 34,131 82,556 OTHER FINANCING USES Transfers out (175,000) (175,000) (175,000) Net Change in Fund Balance (195,110) (223,425) (140,869) 82,556 Fund Balance, Beginning of Year 458,216 458,216 458,216 Fund Balance, End of Year $ 263,106 $ 234,791 $ 317,347 $ 82,556 83 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL UTILITY UNDERGROUNDING CAPITAL PROJECTS FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 4,300 $ 4,300 $ 3,449 $ (851) Fund Balance, Beginning of Year 233,186 233,186 233,186 Fund Balance, End of Year $ 237,486 $ 237,486 $ 236,635 $ (851) 84 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ROADWAY BEAUTIFICATION CAPITAL PROJECTS FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget- Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 8,100 $ 8,100 $ 6,005 $ (2,095) Fund Balance, Beginning of Year 406,131 406,131 406,131 Fund Balance, End of Year $ 414,231 $ 414,231 $ 412,136 $ (2,095) 85 CITY OF RANCHO PALOS VERDES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL JPIA -ABALONE COVE PERMANENT FUND FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $ 26,400 $ 26,400 $ 23,692 $ (2,708) EXPENDITURES Current: Public works 107,700 107,700 65,475 42,225 Net Change in Fund Balance (81,300) (81,300) (41,783) 39,517 Fund Balance, Beginning of Year 1,460,054 1,460,054 1,460,054 Fund Balance, End of Year $ 1,378,754 $ 1,378,754 $ 1,418,271 $ 39,517 86 CITY OF RANCHO PALOS VERDES INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET ASSETS JUNE 30, 2004 Equipment Building Employee Replacement Replacement Benefits Totals ASSETS Current Assets Cash and cash equivalents $ 2,476,557 $ 1,547,210 $ 225,897 $ 4,249,664 Receivables Interest 8,523 5,351 728 14,602 Other 817 817 Prepaid items 26,435 26,435 Total Current Assets 2,485,080 1,552,561 253,877 4,291,518 Noncurrent Assets Capital assets Property and equipment 857,622 857,622 Accumulated depreciation (473,774) (473,774) Total Noncurrent Assets 383,848 383,848 Total Assets 2,868,928 1,552,561 253,877 4,675,366 LIABILITIES Current Liabilities Accounts payable and accrued liabilities 42,936 7,250 65,342 115,528 NET ASSETS Invested in capital assets 383,848 383,848 Unrestricted 2,442,144 1,545,311 188,535 4,175,990 Total Net Assets $ 2,825,992 $ 1,545,311 $ 188,535 $ 4,559,838 87 CITY OF RANCHO PALOS VERDES INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2004 Equipment Building Employee Replacement Replacement Benefits Totals OPERATING REVENUES Charges for services $ 446,617 $ 776,889 $ 1,223,506 Total Operating Revenues 446,617 776,889 1,223,506 OPERATING EXPENSES Personnel services 716,862 716,862 Material and supplies 98,455 $ 23,176 121,631 Maintenance 44,369 5,115 49,484 Depreciation 127,404 127,404 Total Operating Expenses 270,228 28,291 716,862 1,015,381 Operating Income (Loss) 176,389 (28,291) 60,027 208,125 NONOPERATING REVENUES Interest income 35,269 22,693 1,928 59,890 Change in Net Assets 211,658 (5,598) 61,955 268,015 Net Assets, Beginning of Year 2,614,334 1,550,909 126,580 4,291,823 Net Assets, Ending of Year $ 2,825,992 $ 1,545,311 $ 188,535 $ 4,559,838 88 CITY OF RANCHO PALOS VERDES INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2004 Equipment Building Employee Replacement Replacement Benefits Totals CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 446,617 $776,072 $ 1,222,689 Payments to suppliers (116,776) $ (21,896) (596,091) (734,763) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 329,841 (21,896) 179,981 487,926 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (188,533) (188,533) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 36,380 23,528 1,762 61,670 NET INCREASE IN CASH AND CASH EQUIVALENTS 177,688 1,632 181,743 361,063 CASH AND CASH EQUIVALENTS, Beginning of Year 2,298,869 1,545,578 44,154 3,888,601 CASH AND CASH EQUIVALENTS, End of Year $ 2,476,557 $ 1,547,210 $ 225,897 $4,249,664 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ 176,389 $ (28,291) $ 60,027 $ 208,125 Adjustments to reconcile operating income (loss)to net cash provided (used) by operating activities: Depreciation 127,404 127,404 Decrease in other receivables (817) (817) Decrease in prepaid items 55,767 55,767 Decrease in accrued liabilities 26,048 6,395 65,004 97,447 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 329,841 $ (21,896) $ 179,981 $ 487,926 89 STATISTICAL SECTION CITY OF RANCHO PALOS VERDES Table 1 GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION' LAST TEN FISCAL YEARS Planning, Code Fiscal Public Public Parks and Enforcement Capital Debt Year Administration Safety Works Recreation &Building Outlay Service Totals 1995 $ 1,497,317 $ 2,539,329 $ 3,166,876 $ 489,834 $ 1,031,028 $ 1,623,833 --- $ 10,348,217 1996 1,545,955 2,609,804 3,638,583 543,602 1,148,340 1,129,275 --- 10,615,559 1997 1,588,565 2,637,280 3,856,324 550,722 1,360,468 8,885,989 --- 18,879,348 1998 1,659,753 2,533,309 4,079,842 710,477 1,558,511 3,974,928 --- 14,516,820 1999 1,679,549 2,658,145 3,942,290 633,292 1,882,051 3,116,632 --- 13,911,959 2000 1,836,468 2,662,096 5,864,072 597,045 1,646,824 2,110,309 --- 14,716,814 2001 2,388,727 2,732,579 3,616,253 596,185 1,778,319 4,227,852 --- 15,339,915 2002 2,939,097 2,898,265 3,855,747 668,938 1,950,504 9,441,273 --- 21,753,825 2003 3,084,614 3,094,005 4,306,768 785,786 2,194,265 4,767,678 --- 18,233,116 2004 3,294,392 3,038,650 4,703,005 945,547 2,362,503 368,018 --- 14,712,115 Includes all governmental fund types,excluding activity of the Redevelopment Agency and Improvement Authority. Source: City Finance Department 90 CITY OF RANCHO PALOS VERDES Table 2 GENERAL GOVERNMENTAL REVENUES BY SOURCE LAST TEN FISCAL YEARS Licenses Use of Charges Revenues Fiscal and Fines and Money and for From Other Other Year Taxes Permits Forfeitures Property Services Agencies Revenues Totals 1995 $ 7,310,905 $ 825,680 $ 89,494 $ 819,185 $ 285,235 $ 2,754,149 $ 326,863 $ 12,411,511 1996 8,321,970 689,077 85,790 960,071 297,124 2,558,842 359,737 13,272,611 1997 8,432,900 798,168 93,076 1,145,664 336,634 10,673,669 513,625 21,993,736 1998 8,449,951 890,269 114,409 1,239,537 175,418 4,899,646 640,609 16,409,839 1999 8,539,047 1,292,498 140,089 1,177,539 217,699 4,340,676 518,009 16,225,557 2000 9,022,637 1,089,720 156,730 1,314,901 203,691 3,654,695 1,875,671 17,318,045 2001 9,391,699 1,530,425 139,694 1,602,638 196,730 4,816,266 866,621 18,544,073 2002 9,723,259 1,589,701 116,598 987,793 217,387 8,170,513 513,512 21,318,763 2003 10,002,224 1,855,746 115,448 735,526 204,798 4,223,490 554,035 17,691,267 2004 11,352,928 1,309,732 101,788 636,491 378,995 3,453,070 2,363,433 19,596,437 Includes all governmental fund types,excluding activity of the Redevelopment Agency and Improvement Authority. Source: City Finance Department 91 CITY OF RANCHO PALOS VERDES Table 3 PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Fiscal Current Current Percent Year Levy Collection Collected 1994-1995 $ 2,218,369 $ 2,147,249 96.79% 1995-1996 2,700,133 2,571,526 95.24% 1996-1997 2,708,114 2,651,513 97.91% 1997-1998 2,731,834 2,664,833 97.55% 1998-1999 2,877,987 2,770,246 96.26% 1999-2000 3,123,218 3,048,626 97.61% 2000-2001 3,352,310 3,233,833 96.47% 2001-2002 3,567,276 3,451,599 96.76% 2002-2003 3,768,471 3,688,465 97.88% 2003-2004 4,021,832 3,901,862 97.02% Source: City Public Works and Finance Departments 92 CITY OF RANCHO PALOS VERDES Table 4 ASSESSED VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Net Fiscal Secured Public Unsecured Homeowners Assessed Percent Year Value Utility Value Subtotal Exemption Value Increase 1995 $ 4,277,717,064 $ 210,000 $ 12,448,590 $ 4,290,375,654 $ 79,193,508 $ 4,211,182,146 3.26% 1996 4,316,092,536 210,000 15,334,559 4,331,637,095 79,614,908 4,252,022,187 0.97% 1997 4,354,282,854 210,000 14,956,195 4,369,449,049 79,417,508 4,290,031,541 0.89% 1998 4,414,137,301 975,785 14,526,105 4,429,639,191 79,074,508 4,350,564,683 1.41% 1999 4,666,924,997 975,785 22,058,574 4,689,959,356 78,654,508 4,611,304,848 5.99% 2000 5,121,424,832 975,785 16,961,594 5,139,362,211 78,055,228 5,061,306,983 9.76% 2001 5,420,734,560 1,023,567 18,422,700 5,440,180,827 77,799,028 5,362,381,799 5.95% 2002 5,758,506,586 947,258 19,641,491 5,779,095,335 77,157,828 5,701,937,507 6.33% 2003 6,069,010,412 449,498 21,740,910 6,091,200,820 76,980,028 6,014,220,792 5.48% 2004 6,469,818,726 495,782 22,889,439 6,493,203,947 76,274,428 6,416,929,519 6.70% Source: HdL Companies 93 CITY OF RANCHO PALOS VERDES Table 5 PROPERTY TAX RATES-ALL OVERLAPPING GOVERNMENTS (PER$100 OF ASSESSED VALUATION) LAST TEN FISCAL YEARS Basic PVP School Metropolitan Fiscal County &LA Community Flood Water Library Year Levy College Districts Control District District County Totals 1995 1.0000% --- 0.0060% 0.0089% 0.0042% 0.0020% 1.0211% 1996 1.0000% --- 0.0010% 0.0089% 0.0150% 0.0018% 1.0267% 1997 1.0000% --- 0.0020% 0.0089% 0.0150% 0.0016% 1.0275% 1998 1.0000% --- 0.0022% 0.0089% 0.0148% 0.0016% 1.0275% 1999 1.0000% --- 0.0020% 0.0089% 0.0114% 0.0015% 1.0237% 2000 1.0000% --- 0.0018% 0.0089% 0.0113% 0.0014% 1.0234% 2001 1.0000% --- 0.0016% 0.0088% 0.0114% 0.0013% 1.0230% 2002 1.0000% --- 0.0005% 0.0077% 0.0096% 0.0011% 1.0189% 2003 1.0000% 0.0294% 0.0009% 0.0067% 0.0097% 0.0010% 1.0477% 2004 1.0000% 0.0346% 0.0005% 0.0061% 0.0090% 0.0010% 1.0511% Note: The state constitutional amendment Proposition 13 provided that the tax rate be limited to 1%of assessed value,levied only by the County and shared with all other jurisdictions. All other jurisdictions and the County can levy a tax rate for voter approved debt. Source: HdL Companies 94 CITY OF RANCHO PALOS VERDES Table 6 PRINCIPAL PROPERTY TAXPAYERS JUNE 30,2004 2003 Percentage of Type of Assessed Total Assessed Taxpayer Business Valuation Valuation Ocean Trails Limited Partnership Golf Course/Residential $ 63,807,638 1.06% VRPV LLC Apartments 50,189,800 0.83% P.V.Victoria Apartments Apartments 41,629,842 0.69% Riviera Investors Western Apartments 25,348,216 0.42% York Long Point Associates Commercial/Residential 22,450,709 0.37% Top Terraces Inc. Commercial/Retail 12,692,880 0.21% Palos Verdes Land Holdings Company Inc. Open Space 3,512,581 0.06% Eric C.Johnson Family Trust Residential 2,304,633 0.04% Charles E.Jr.&Sandra J.Parks Residential/Vacant 1,385,737 0.02% John D.&Michelle Parks Residential 1,282,187 0.02% TOTAL TOP TEN $ 224,604,223 3.72% Source: HdL Companies 95 CITY OF RANCHO PALOS VERDES Table 7 SPECIAL ASSESSMENT BILLINGS AND COLLECTIONS LAST TEN FISCAL YEARS Special Special Percent of Fiscal Assessment Assessments Levy Year Billings Collected Collected 1995 $ 811,651 $ 796,924 98.2% 1996 809,208 788,919 97.5% 1997 756,438 741,261 98.0% 1998 374,483 368,652 98.4% 1999 325,130 333,455 102.6% 2000 326,425 327,423 100.3% 2001 326,396 325,337 99.7% 2002 327,460 324,016 98.9% 2003 327,384 332,806 101.7% 2004 327,737 326,106 99.5% Source: City Public Works and Finance Departments 96 CITY OF RANCHO PALOS VERDES Table 8 COMPUTATION OF LEGAL DEBT MARGIN AS OF JUNE 30, 2004 Net Assessed Value $ 6,416,929,519 Debt limit- 15%of assessed value $ 962,539,428 Amount of debt applicable to debt limit --- Legal debt margin $ 962,539,428 Note: Section 43605 of the Government Code of the State of California limits the amount of indebtedness for public improvements to 15%of the assessed valuation of all real personal property in the City. The City of Rancho Palos Verdes has no general bonded indebtedness. Source: City Finance Department 97 CITY OF RANCHO PALOS VERDES Table 9 STATEMENT OF DIRECT AND OVERLAPPING DEBT AS OF JUNE 30, 2004 Percent Bonded Debt Applicable June 30,2004 DIRECT AND OVERLAPPING BONDED DEBT: Los Angeles County Detention Facilities 1987 1.015% $ 238,276 Los Angeles County Flood Control Storm Drain Bonds No.4 1.030% 57,670 Los Angeles County Flood Control Refunding Bonds 1993 1.030% 5,716 Palos Verdes Library District Refunding Bonds 1998 49.295% 5,885,834 West Basin Metropolitan Water District * 0.979% 4,380,721 Los Angeles City Community College 2003 Series A 1.808% 1,770,975 Los Angeles City Community College 2003 Series B&C 1.788% 1,640,276 Los Angeles City Community College 2001 Series A 1.808% 8,748,307 Los Angeles Unified School District 2002 Refunding Bonds 0.220% 558,720 Los Angeles Unified School District 2002 Series A 0.220% 1,115,626 Los Angeles Unified School District 1997 Series A 0.220% 675,451 Los Angeles Unified School District 1997 Series B 0.220% 475,149 Los Angeles Unified School District 1997 Series C 0.220% 440,461 Los Angeles Unified School District 1997 Series D 0.220% 566,032 Los Angeles Unified School District 1997 Series E 0.220% 1,068,283 Los Angeles Unified School District 1997 Series F 0.220% 4,617,794 Palos Verdes Peninsula USD Series 2000 A 46.700% 9,052,767 Palos Verdes Peninsula USD Series 2000 B 46.700% 6,991,014 Palos Verdes Peninsula USD Series 2000 C 46.700% 4,869,563 TOTAL DIRECT AND OVERLAPPING BONDED DEBT $ 53,158,635 (1) (1) Excludes revenue,mortgage revenue,tax allocation bonds, interim financing obligations, non-bonded capital lease obligations,and certificates of participation. Debt to Assessed Valuation Ratios: Direct Debt 0.00% Overlapping Debt 0.92% Total Debt 0.92% * This debt is a portion of a larger agency,which is responsible for debt in areas outside the City. Source: HdL Companies 98 CITY OF RANCHO PALOS VERDES Table 10 DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS Fiscal Housing Year Population Units 1995 42,089 15,588 1996 42,670 15,610 1997 43,155 15,623 1998 43,657 15,652 1999 44,345 15,683 2000 44,933 15,706 2001 41,145 15,753 2002 42,002 15,762 2003 42,322 15,772 2004 42,810 15,781 Source: CA Department of Finance and the City Planning, Building and Code Enforcement Department 99 CITY OF RANCHO PALOS VERDES Table 11 DEMOGRAPHIC STATISTICS 2000 CENSUS DATA Population distribution by ethnic group: Individuals Percent White 27,660 67.23% Asian 10,676 25.95% Black or African American 815 1.98% American Indian/Alaska Native 62 0.15% Other 1,932 4.70% Total 41,145 100.00% Population distribution by age: Individuals Percent 0-9 years 4,732 11.50% 10-19 years 5,436 13.21% 20-34 years 4,067 9.88% 35-44 years 6,584 16.00% 45-54 years 6,789 16.50% 55-64 years 5,837 14.19% 65-74 years 4,574 11.12% 75+years 3,126 7.60% Total 41,145 100.00% Household by type: Household Number of type: households Percent Family-Married Couple 6,423 42.10% Family-Married Couple with children under 18 4,375 28.68% Family-Single Parent 830 5.44% Family-Single Parent with children under 18 595 3.90% Non Family 464 3.04% Householder living alone 2,569 16.84% Total 15,256 100.00% Housing Tenure: Units Percent Owner-occupied 12,456 81.65% Renter-occupied 2,800 18.35% Total 15,256 100.00% Source: U.S.Bureau of the Census 100 CITY OF RANCHO PALOS VERDES Table 12 BUILDING PERMITS AND PROPERTY VALUE LAST TEN FISCAL YEARS Total Construction New Residential Construction Fiscal Number of Property Number of Property Bank Year Permits Value Units Value Deposits 1995 1,269 $ 24,004,600 25 $ 10,805,000 $ 113,023,000 1996 1,356 19,993,784 19 8,572,000 193,339,000 1997 1,389 20,897,000 23 9,766,000 139,282,000 1998 2,373 25,799,345 31 11,948,000 170,584,000 1999 3,129 65,373,000 96 43,200,000 198,802,000 2000 2,544 41,403,218 39 24,949,630 202,839,000 2001 2,468 22,685,411 9 4,677,000 207,807,000 2002 1,319 20,363,386 10 4,387,828 208,627,000 2003 1,405 37,526,472 16 9,931,300 111,787,000 2004 1,492 35,955,300 34 17,682,700 — Data regarding bank deposits within the City of Rancho Palos Verdes for the fiscal year ended June 30,2004 is not currently available. Source: City Planning,Building and Code Enforcement Department and State Banking Department 101 CITY OF RANCHO PALOS VERDES Table 13 MISCELLANEOUS STATISTICS AS OF JUNE 30, 2004 Date of Incorporation September 7, 1973 Form of Government Council/Manager Area 13.6 square miles Coastline 7.5 miles Contract Services: Police Protection Los Angeles County Sheriff Fire Protection Los Angeles County Fire Protection District Sewers Los Angeles County Sanitation District#5 Utilities: Water California Water Service Company Gas Southern California Gas Company Electricity Southern California Edison Telephone Verizon, Pacific Bell City Facilities: Streets 143 miles Parks 14 with 514 acres Employees(Full-Time) 45 Source: City Finance Department 102