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Home My WebLink About2005/2006 Comprehensive Annual Financial Report - CAFR - wit CITY OF HUNTINGTON BEACH INTER-DEPARTMENTAL COMMUNICATION FINANCE DEPARTMENT TO: Honorable Mayor and City Council, Penelope Culbreth Graft, DPA, City Administrator FROM: Dan T. Villella, CPA, Finance Director DATE: March 26, 2007 CC: Finance Board Members, Executive Team SUBJECT: COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR 2005/06 Attached is the City's Comprehensive Annual Financial Report (CAFR) for the year ending September 30, 2006. This report shows, in detail, the City's financial condition, and results of operations for all funds. The City received an unqualified (or clean) opinion on the financial statements, which is the highest opinion possible. We are also submitting the report to the Government Finance Officer's Association for a Certificate of Achievement for Excellence in Financial Reporting. We have received this award for twenty consecutive years and expect to receive it again this year. There will be a study session on May 7, 2007 on this report along with the mid- year budget review. Please call me if you have any questions. �-� ,,;•-, ,, ` ?�sue"` �A -•-_ `_ -e.._,_.� - 'ems,!-we•. `�'V�+M.. .. _ '�-�'�� '� -. '��Nw t_ -. a _ t o o 1 CITY OF HUNTINGTON BEACH , CALIFORNIA ltr COMPREHENSIVE ANNUAL 1 FINANCIAL REPORT For - Year Ended September 30, 2006 �N%� INGT0 Rk IVI- ®®CC o NT`( • A . . • • � Introductory Section 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 r TABLE OF CONTENTS INTRODUCTORY SECTION ' Table of Contents................................. ................ .... ......................... ........... ............................. .................. i-ii Letterof Transmittal ................................................................................................................................iii-vii CityOfficials............................................................................................................................................... vui OrganizationalChart.................................................................................................................................ix ' Certificate of Achievement in Excellence in Financial Reporting...................................................................x FINANCIAL SECTION 1 Independent Auditor's Report...................................................................................................................... 1-2 Management Discussion and Analysis........................................................................................................ 3-14 Basic Financial Statements: ' Government-wide Financial Statements: Statementof Net Assets .................................................................................................................... 15 Statement of Activities and Changes in Net Assets........................................................................... 16 ' Fund Financial Statements: Balance Sheet—Governmental Funds .............................................................................................. 17 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets........... 18 Statement of Revenues, Expenditures and Changes in Fund Balances—Governmental Funds ...... 19-20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities........................................................................21 Statement of Net Assets—Proprietary Funds....................................................................................22 ' Statement of Revenues, Expenses and Changes in Fund Net Assets— Proprietary Funds.............. 23 Statement of Cash Flows— Proprietary Funds...................................................................................24 Statement of Fiduciary Fund Net Assets............................................................................................ 25 Statement of Changes in Fiduciary Fund Net Assets—Trust Funds..................................................25 ' Notes to Financial Statements .............................................................................................................. 26-63 Required Supplemental Information: BudgetaryInformation........................................................................................................................ 64 ' Schedule of Revenues, Expenditures and Changes in Fund Balances—Budget And Actual —General Fund............ .. 65 Schedule of Revenues, Expenditures and Changes in Fund Balances—Budget AndActual —Grants Fund...............................................................................................................66 ' Schedule of Funding Progress (Normal and Supplemental Retirement Plans)..................................67 Supplementary Information: Combining and Individual Fund Statements and Schedules: Combining Balance Sheet— Nonmajor Governmental Funds............................................................69-72 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds......................................................................................................73-76 ' Schedule of Revenues, Expenditures, and Changes in Fund Balances— Budget and Actual — Non Major Governmental Funds....................................................................77-83 Schedule of Revenues, Expenditures and Changes in Fund Balances— Budget And Actual—Public Financing Authority......................................................................................... 84 Schedule of Revenues, Expenditures and Changes in Fund Balances— Budget And Actual— Redevelopment Agency.............................................................................................84 Combining Statement of Net Assets—Nonmajor Enterprise Funds................................................... 86 Combining Statement of Revenues, Expenses, and Changes in Net Assets— Nonmajor Enterprise Funds............................................................................................................ 87 Combining Statement of Cash Flows— Nonmajor Enterprise Funds................................................. 88 Combining Statement of Fiduciary Fund Net Assets..........................................................................90 ' Schedule of Changes in Fiduciary Assets and Liabilities...................................................................91-92 1 STATISTICAL SECTION NetAssets by Component........................................................................................................................... 94 , Change in Net Assets- Last Five Fiscal Years............................................................................................ 94-95 Fund Balances—Governmental Funds— Last Ten Fiscal Years ................................................................96 Changes in Fund Balances— Last Ten Fiscal Years................................................................................... 97-98 Assessed and Actual Valuation of All Taxable Property.............................................................................. 99 Property Tax Rates—All Direct and Overlapping Government...................................................................99 Property Tax Levies and Collections—Last Ten Fiscal Years .................................................................... 100 ' Ratios of Outstanding Debt by Type— Last Ten Fiscal Years..................................................................... 101 Top Ten Property Tax Payers—Last Two Fiscal Years............................................................................... 102 Legal Debt Margin—Last Ten Fiscal Years................................................................................................ 103 Principal and Private Employers—Current Year and Nine Years Ago........................................................ 103 Full-Time Budgeted City Employees by Program/Function......................................................................... 104 Operating Indicators by Function/Activity.................................................................................................... 105 Capital Assets Statistics by Function/Activity.............................................................................................. 105 , Statement of Direct and Overlapping Bonded Debt .................................................................................... 106 ii CITY OF HUNTINGTON BEACH March 1, 2007 To the Honorable Mayor and City Council City of Huntington Beach Huntington Beach, California The Charter of the City of Huntington Beach requires that the City's financial ' statements be audited each year by an independent accounting firm. This report fulfills that requirement for the fiscal year ending September 30, 2006. Management assumes full responsibility for the completeness and reliability of the information in this report, based upon a comprehensive framework of internal control established for this purpose. Because the cost of any control should not exceed the anticipated benefits, management's objective is to provide reasonable, but not absolute, assurance that the financial statements are free of any material misstatements. ' Caporicci and Larson, CPAs, a firm of licensed independent certified public accountants, has audited the City's financial statements for the year ending ' September 30, 2006. The auditors' report is located at the front of the financial statement. The City received an unqualified (clean) opinion. The goal of the audit is to provide reasonable assurance that the financial statements of the City of Huntington Beach are free of material misstatement. This independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management. The independent auditor concluded that there was a reasonable basis for rendering an unqualified opinion that the financial statements of the City of Huntington Beach for the fiscal year ending September 30, 2006 are presented fairly in accordance with generally accepted accounting principles. The opinion is presented as the first component of the financial section of this report. rThis audit was part of a broader, federally mandated "Single Audit" designed to meet the needs of federal granting agencies. The standards governing these ' engagements require the auditor to report not only on the fair presentation of the financial statements, but also on the City's internal controls and compliance with legal issues, especially concerning federal awards. These reports are available from the City's Finance Department. Management's Discussion and Analysis (MD & A) immediately follows the independent auditors' report and provides a narrative introduction, overview, and ' iii analysis of the financial statements. MD &A complement this letter and should be read in conjunction with it. , ABOUT THE CITY OF HUNTINGTON BEACH The City of Huntington Beach is located along the Southern California coast in Orange County, 35 miles south of Los Angeles and 90 miles north of San Diego. With a population of approximately 200,000 residents, it is known as Surf City due to its abundance of beaches; sunny,warm Mediterranean climate; and casual lifestyle. Huntington Beach covers 28 square miles of land, 26 square miles of water, and is the one of the 20 largest cities in California. With 8.5 miles of uninterrupted beach along the Pacific Ocean, the city also plays host to an annual visitor population of over 11 million people, especially during the summer, special events and weekends. Listed among the nation's safest cities for decades, Huntington Beach has often been ranked among the Top Ten Safest Cities by City Crime Rankings. ' Founded in the late 1880s, Huntington Beach was incorporated as a Charter City in 1909. Huntington Beach has a City Council/City Administrator form of government. ' The City Council has seven members, each of whom is elected to four-year terms. City Council Members are limited to two consecutive terms. There are three elected department heads, the City Attorney, City Clerk and City Treasurer. The position of Mayor is filled on a rotating basis. The City of Huntington Beach is a full service city. Its departments include the City , Administrator's Office, Building and Safety, City Attorney, City Clerk, City Treasurer, Community Services, Economic Development, Finance, Fire, Information Services, Library Services, Planning, Police, and Public Works. This report includes the financial activity of separate legal entities whose activities the City controls. These entities are: ' • Redevelopment Agency of the City of Huntington Beach • Huntington Beach Public Financing Authority ' • Various community facilities districts A component unit report (stand-alone report) is available for the Redevelopment Agency. The City operates on a fiscal year basis, beginning October 1st and ending September 30th. The budget is prepared under the supervision of the City Administrator and transmitted to the City Council for deliberation sixty days prior to the end of the fiscal year. The City Council adopts the annual budget by September , 30th of the prior fiscal year and may amend it or revise it at any time at a properly noticed meeting. Budgetary control is at the department level within each fund. A Department Head, with the Finance Director's approval, may transfer funds within like categories (salaries and benefits, operating, and capital expenditures) of the same department. iv ' LOCAL ECONOMY The City of Huntington Beach is one of the leading commercial and industrial centers in Southern California. The City works diligently to maintain its business ' friendly atmosphere, working closely with the Huntington Beach Chamber of Commerce and the Huntington Beach Conference and Visitors Bureau. The City seeks to attract new businesses and support existing business through retention and expansion efforts. Benefits from tourism and continued modest economic growth should allow for sustainable revenue growth for the City. As the third largest city in Orange County, more than 118,800 people are currently employed by over 12,800 businesses and governmental entities in the City. Huntington Beach residents represent nearly 8% of the entire Orange County working population. Huntington Beach businesses include aerospace and high technology; petroleum and petroleum support; manufacturing; computer hardware and software; financial and business services; automobile services; machine shop ' services, precision instruments, retailers and surf apparel, just to name a few. LONG-TERM FINANCIAL PLANNING ' In November 2004 California voters approved Proposition 1A, which will help stabilize the flow of revenues to municipalities and end future State raids on City finances. This will allow for better forecasting of City revenues and, along with modest economic growth, should allow for future sustainable revenue growth. The City has recently adopted a long-term strategic plan. MAJOR INITIATIVES Through its Strategic Plan, the Huntington Beach City Council seeks to assure a high quality of life endures and improves as the City ages. The Strategic Plan was first created in July 2001 as a way to help the City Council assess the effects of today's decisions on the City's future quality of life. As a blueprint for the City's future, the Strategic Plan defines the City Council's goals and objectives. The ' following are the City Council's strategic goals set forth in the City's development of the annual budget: • Public Safety - Maintain a healthy and safe community • Fiscal Integrity-Establish a sound financial foundation for the City's finances • Infrastructure and Transportation - Assure the long-term adequacy of the ' City's infrastructure, facilities, and transportation network. • Economic Development-Achieve development that maintains and improves the city's fiscal viability and reflects economic demands while maintaining ' and improving quality of life for current and future residents • Organizational Development and Technology - Maintain and continually improve organizational effectiveness. 1 • Community Livability and Sustainability—Build and maintain a sense of place and an exceptional quality of life within a sustainable urban environment. ' v • Enrichment, Communication and Involvement - Ensure that Huntington Beach's local government is open, accessible, responsive, nurturing, and ' respectful to all the citizens it serves. • Environment and Natural Resources - Enhance the community's environmental quality and its unique natural resources. , CASH MANAGEMENT POLICES AND PRACTICES The elected City Treasurer invests surplus cash in authorized investments allowed , by the government code and City policy. The City adopts an annual Investment Policy intended to provide guidelines for the prudent investment of the city's cash balances, and outlines the policies to assist in maximizing the efficiency of the city's cash management system while meeting the daily cash flow demands of the city. Both the Investment Advisory Board and the City Council approved the City's Investment Policy. The investment practices and policies of the City of Huntington Beach are based upon state law and prudent money management. The primary goals of these ' practices are: • To assure compliance with all Federal, State, and local laws governing the ' investment of public funds under the control of the City Treasurer. • To protect the principal moneys entrusted to the City Treasurer. • Achieve a reasonable rate of return within the parameters of prudent risk management while minimizing the potential for capital losses arising from market changes or issuer default. The City forecasts revenues and expenditures to meet current obligations and to earn a market rate of return on its investments. The City Treasurer earned a return of 3.91%for the year. The California Government Code requires the City Treasurer ' to prepare an annual statement of investment policy. The City Treasurer complied with this law. Note 2 to the Basic Financial Statements shows further information on the City's cash and investments. , PENSION AND OTHER POSTEMPLOYMENT BENEFITS The City of Huntington Beach is a member of the California Public Employees' Retirement System (CaIPERS) that provides benefits to all permanent employees. The City also maintains a retirement supplemental plan to employees hired before January 1, 1998. There are also certain post-retirement medical benefits available to retirees. This information is detailed in notes 5, 6, and 7 of the accompanying financial statements. Below is summary information: Percent Funded Unfunded Liability (in millions) , Retirement - Normal Plan 89% $64.1 Retirement - Supplemental 39% $26.2 ' Post-Employment Benefits 44% $ 6.2 vi The City has adopted actuarially sound funding plans to pay off the unfunded liabilities according to studies conducted by CalPERS and independent actuaries. The City will implement Government Accounting Standards Board Statement 45 (Other Post-Employment Benefits) for the fiscal year ending September 30, 2008. ' The City has made contributions to this plan since its inception in 1991, but GASB 45 will require that the City contribute additional amounts than have been contributed in past years. Options for this funding will be addressed during the next ' year. RISK MANAGEMENT The City is self-insured forworkers compensation and liability. These programs are recorded in the general fund. The City is a member of the Big Independent Cities Excess Insurance Pool (BICEP)to handle large claims. Further information on the City's risk management issues can be found in note 8 of the financial statements. AWARDS AND ACKNOWLEDGEMENTS The Governmental Finance Officers Association (GFOA) of the United States and Canada awarded the Certificate of Achievement for Excellence in Financial Reporting to the City for its Comprehensive Annual Financial Report ended ' September 30, 2005. This was the nineteenth consecutive year the City has received this prestigious award. To qualify for the Certificate of Achievement, the government entity must publish an easily readable and efficiently organized ' Comprehensive Annual Financial Report, the contents of which conform to program standards. Such report must satisfy both generally accepted accounting principles as well as all legal requirements. The Certificate of Achievement is valid for one year only. The City believes that this Comprehensive Annual Financial Report continues to conform to the Certificate of Achievement Program requirements and will be submitted to GFOA to determine its eligibility for another certificate. ' We wish to thank the City Council and the City Departments for responsibility conducting the fiscal affairs of the City of Huntington Beach. We would also like to thank Robert Sedlak, Valaya Chitchakkol, Dahle Bulosan, Josh Brooks, and Carrie Gonzales of the Finance Department who prepared this report. ' Dan T. Villella, CPA Finance Director ' vii City of Huntington Beach City Council 2005/2006 Gil Coe er Mayor � � Y Debbie Cook, Mayor Pro Tern , Keith Bohr, Councilmember Joe Carchio, Councilmember Cathy Green, Councilmember Jill Hardy, Councilmember Don Hansen, Councilmember Executive Team ' Penelope J. Culbreth-Graft, City Administrator t Paul Emery, Deputy City Administrator Robert Hall, Deputy City Administrator , Laurie E. Payne, Community Relations Officer Department Directors 1 Robert Beardsley, Public Works Ross D. Cranmer, Building & Safety ' Jim B. Engle, Community Services Joan L. Flynn, City Clerk Shari L. Freidenrich, City Treasurer Ron Hayden, Library Services Scott Hess, Planning Jack Marshall, Information Services t Jennifer M. McGrath, City Attorney Chief Duane S. Olson, Fire ' Stanley Smalewitz, Economic Development Chief Kenneth W. Small, Police Dan T. Villella, Finance ' viii CITY OF HUNTINGTON BEACH THE PEOPLE CITY CLERK CITY COUNCIL CITY CITY TREASURER ATTORNEY Mayor Admini Part Mayor Pro Tern itlrve Lltigatlon Public Su City Council Members Elections ; _�41 C lt�� Advisory Records � . - Managemant CITY ' ADMINISTRATOR FIRE Fire Unitorm Division Administration Fire Prevantlon Investigation Division Emergency Administrative Response Operations ' DEPUTY CITY DEPUTY CITY ADMINISTRATOR ADMINISTRATOR/ HR DIRECTOR BUILDING& ECONOMIC PLANNING PUBLIC " COMMUNITY ,FINA�ICE j INFpRMAT10N " LIBRARY SAFETY' = DEVELOPMENT WORKS SERVICES i SERVICES 1 SERVICES, Permit$ Accounting ' Plan Check Redevebpment Planning Engineering Beach Operations Systems Administration Services Services Cod rdo nt l Services $Housing� P9 bodrhood Utilities Marine Safety Research Communications BCaniIM�� ion Recreation, Mleratb Human& Central Services Operations Ad SNR ich�nical Cultural Services Transportation Concessions& Fiscal Services Development ix 1 Certificate of Achievement 1 for Excellence in Financial 1 Reporting Presented to City of Huntington Beach California For its Comprehensive Annual 1 Financial Report for the Fiscal Year Ended September 30,2005 A Certificate of Achievement for Excellence in Financial 1 Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports(CAFRs)achieve the highest standards in government accounting and financial reporting. 1 tli97F08WE, L d6�.'UBA Ton coanoaA,ax S^ President Executive Director , 1. X ._ V .� V � � � � � � � � � � � r � � r � � � � C&L Caporicci&Larson ' Certified Public Accountants INDEPENDENT AUDITORS'REPORT ' To the Honorable Mayor an 'y d Members of City Council of the.City of Huntington Beach Huntington Beach,California , We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund, and the aggregate remaining fund information of the City of Huntington Beach, California (City), as of and for the year ended September 30, 2006,which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these,financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States g Y acce p and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the ' audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the basic financial statements referred to above present fairly,in all material respects,the , respective financial position of the governmental activities,the business-type activities,each major fund, and the aggregate remaining fund information of the City as of September 30, 2006, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with generally accepted accounting principles in the United States. In accordance with Government Auditing Standards, we have also issued our report dated January 19, ' 2007 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws,regulations,contracts, and grants. That report is an integral ' part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. As described in Note 1 to the basic financial statements,the City adopted the Governmental Accounting Standards Board Statement No. 42,Accounting and Financial Reporting for Impairment of Capital Assets and Insurance Recoveries, No. 46, Net Assets Restricted by Enabling Legislation, and No. 47, Accounting for Termination Benefits. Toll Free Ph:(877)862-2200 Toll Free Fax:(866)436-0927 Oakland Orange County Sacramento San Diego 180 Grand Ave.,Suite 1365 9 Corporate Park,Suite 100 777 Campus Commons Rd.,Suite 200 4858 Mercury,Suite 106 Oakland,California 94612 Irvine,California 92606 Sacramento,California 95825 San Diego,California 92111 To the Honorable Mayor and Members of City Council of the City of Huntington Beach Huntington Beach,California The accompanying Required Supplement Information, such as Management's Discussion and �'Y g Analysis, budgetary comparison information and other information as listed in the table of contents are ' not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the Required Supplementary Information. However, we did not audit the information and express no opinion on the Required Supplementary Information. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying Supplementary Information is presented for purpose of additional analysis and is not a required part of the basic financial statements. The Supplementary Information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and,accordingly,we express no opinion on them. � 4;1-t, - ' Irvine,California January 19,2007 2 City of Huntington Beach Management's Discussion and Analysis t For the Year Ended September 30, 2006 As management of the City of Huntington Beach, we offer readers of the City's t financial statements this narrative overview and analysis of the financial activities of the City of Huntington Beach for the fiscal year ended September 30, 2006. , 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 iii-vii of this report. , Financial Highlights Below is a summary of the City's government-wide financial information (in thousands): Total Governmental and Business Activities Amount ercent September 30, September 30, Increase Increase 2006 2005 Decrease) (Decrease Assets $ 976,080 $ 936,629 $ 39,451 4.2% Liabilities 205,278 199,563 5,715 2.9% Total Net Assets 770,802 737,066 33,736 4.6% Unrestricted Net Assets 87,289 81,789 5,500 6.7% Long-Term Obligations 151,484 166,343 (14,859) -8.9% Program Revenues 108,620 139,638 (31,018) -22.2% Taxes 127,442 120,762 6,680 5.5% ' Other General Revenues 33,788 34,030 (242) -0.7% Expenses 244,244 216,876 27,368 12.6% • The total assets of the City of Huntington Beach exceeded its liabilities at the close of the most recent fiscal year by $770,802,000. Of this amount, ' $88,056,000 may be used to meet the City's ongoing obligations to citizens and creditors. Net assets increased $33,736,000 or 4.6%. This increase is due to in large part to investments in capitalized infrastructure. ' Unrestricted net assets increased by $6,267,000 or 7.7%. • Long-term liabilities decreased by ($14,859,000) or (8.9%). • Program revenues decreased by ($31,018,000) or (22.2%) which is a ' direct result of the City not receiving any developer contributions in the current fiscal year. Taxes increased $6,680,000 or 5.5%. Expenses increased $27,368,000 or 12.6% Overview of the Financial Statements This discussion and analysis serve as an introduction to the City of Huntington Beach basic financial statements. The City of Huntington Beach's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. ' This report also contains certain 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 financial condition and are prepared similarly to , those in the private sector. See Independent Auditor's Report and Notes to the Financial Statements ' 3 1 ' City of Huntington Beach Management's Discussion and Analysis For the Year Ended September 30, 2006 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, continued increases or decreases in net assets may indicate whether the City's financial condition is improving or deteriorating. The statement of activities presents information on how the City's net assets changed during the most recent fiscal year. These changes are reported on the accrual basis (when the economic event occurs), not when the cash is received ' or paid. The government-wide financial statements separate functions that are primarily ' supported by taxes and intergovernmental revenues (governmental activities) from functions that are supported by user fees (business activities). Governmental activities include public safety, public works, general government, and community-related activities. Business activities include the Water, Sewer, Refuse, Emerald Cove Housing, Emergency Fire Medical, Hazmat Service, and Ocean View Estates. The government-wide financial statements include the City and all of its component units that are legally separate but whose activities entirely support ' the City of Huntington Beach. These entities are, the Redevelopment Agency of the City of Huntington Beach, the Huntington Beach Public Financing Authority, and various assessment districts described in Note 1 to the financial statements. The government-wide financial statements can be found on pages 15-16 of this report. ' Fund Financial Statements The City separates financial activities into funds to maintain control over resources that have been legally separated. 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 the same functions reported in ' governmental activities in the government-wide financial statements. However, the focus in the governmental fund section of these financial statements is on near-term resource inflows and outflows available for spending, as well as 1 balances of resources available for spending at the end of the fiscal year. It is useful to compare information presented for the governmental funds to ' information presented for governmental activities in the government-wide financial statements. The reconciliation indicates to the reader the differences in financial reporting between the governmental activities section and the 1 governmental funds section. ' See Independent Auditor's Report and Notes to the Financial Statements 4 City of Huntington Beach Management's Discussion and Analysis t For the Year Ended September 30, 2006 The City maintains 20 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenue, expenditures, and changes in fund balances for the General Fund, Redevelopment Agency, Huntington Beach Public Financing Authority, and Grants, all of which are considered to be major funds. Data from the other 16 funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in a combining statement elsewhere in this report. , The City provides an annual appropriated budget for its governmental funds. Budgetary comparison schedules on pages 65-66 and 77-84 demonstrate , compliance. The basic governmental fund financial statements can be found on pages 17-20 of this report. Proprietary Funds Proprietary funds or enterprise funds are used to account for the same activities as the business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Water, Sewer, Refuse, Emerald ' Cove Housing, Emergency Fire Medical, Hazmat Service, and Ocean View Estates activities. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statement provides information for Water, Sewer Service, and Refuse Funds, which are , considered to be major funds of the City. The remaining proprietary funds noted above are combined into a single, aggregated presentation. The basic proprietary fund financial statements can be found on pages 22-24 of ' this report. Fiduciary Funds , Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government- , wide financial statement because the resources of those funds are not available to support the City of Huntington Beach's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 25 of this report. See Independent Auditor's Report and Notes to the Financial Statements ' 5 ' City of Huntington Beach Management's Discussion and Analysis For the Year Ended September 30, 2006 Notes to the financial statements The notes provide additional information that is essential to a full understanding 1 of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 26-63 of this report. Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's progress in funding its obligation to provide pension benefits to its employees and General Fund budget to actual comparisons. Required supplementary information can be found on pages 64-67 of this report. ' The combining statements referred to earlier in connection with non-major government funds is presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on page 69-76 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. Below is a summary schedule of the City's net assets at September 30, 2006 (in thousands): Amount ercen ' September 30, September 30, Increase Increase Governmental Activities 2006 1 2005 (Decrease) (Decrease) Current and Other Assets $ 164,117 $ 150,476 $ 13,641 9.1% Capital Assets 609,248 601,849 7,399 1.2% ' Total Assets 773,365 752,325 21,040 2.8% Current Liabilities 46,859 40,635 6,224 15.3% Long-Term Liabilities 151,484 152,340 (856) -0.6% Total Liabilities 198,343 192,975 5,368 2.8% Net Assets: ' Invested in Capital Assets,Net of Related Debt 472,372 479,897 (7,525) -1.6% Restricted 68,381 39,227 29,154 74.3% Unrestricted 34,269 40,226 (5,957) -14.8% Total Net Assets $ 575,022 $ 559,350 $ 15,672 2.8% Amount ercen September 30, September 30, Increase Increase Business Activities 2006 2005 (Decrease) (Decrease) Current and Other Assets $ 91,024 $ 82,124 $ 8,900 10.8% Capital Assets 111,691 102,180 9,511 9.3% Total Assets 202,715 184,304 18,411 10.0% Current Liabilities 6,067 5,802 265 4.6% Long-Term Obligations 868 786 82 10.4% Total Liabilities 6,935 6,588 347 5.3% Net Assets: Invested in Capital Assets,Net of Related Debt 111,651 102,068 9,583 9.4% ' Restricted 31,109 34,085 (2,976) -8.7% Unrestricted 53,020 41,563 11,457 27.6% Total Net Assets $ 195,780 $ 177,716 $ 18,064 10.2% See Independent Auditor's Report and Notes to the Financial Statements 6 City of Huntington Beach Management's Discussion and Analysis ' For the Year Ended September 30, 2006 The largest portion of the City's net assets reflects investment in capital assets ' (e.g., land, buildings, machinery, equipment, and infrastructure); less any related debt used to acquire those assets that is still outstanding. The City uses capital ' assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources, since capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City's net assets is subject to external (legally imposed or statutory) restrictions ($68,381,000 for governmental activities, and $31,109,000 for business activities). These amounts represent 11.9% and 15.9% of net assets for governmental activities and business activities respectively. The unrestricted assets ($35,036,000 for , governmental activities and $53,020,000 for business activities) represent 6.1% and 27.1% of net assets for governmental activities and business activities respectively. A condensed summary of governmental activities (in thousands) follows: Governmental Activities ' Amount Percent September 30, September 30, Increase Increase Revenues: 2006 2005 Decrease Decrease Program Revenues: Charges for Current Services $ 37,139 $ 28,808 $ 8,331 28.9% Operating Grants and Contributions 917 1,657 (740) -44.7% Capital Grants and Contributions 6,893 43,341 (36,448) -84.1% Total Program Revenues 44,949 73,806 (28,857) -39.1% General Revenues: Property Taxes 66,598 61,466 5,132 8.3% Sales Taxes 26,448 24,340 2,108 8.7% Utility Taxes 21,170 20,004 1,166 5.8% Other Taxes 13,226 14,952 (1,726) -11.5% Use of Money and Property 4,310 3,137 1,173 37.4% From Other Agencies 10,390 8,186 2,204 26.9% ' Participation Payments 6,221 12,697 (6,476) -51.0% Other 9,278 8,510 768 9.0% Total General Revenues 157,641 153,292 4,349 2.8% Total Revenues 202,590 227,098 (24,508) -10.8% Expenses: ' City Council 271 254 17 6.7% City Administrator 5,540 1,990 3,550 178.4% City Treasurer 1,479 1,568 (89) -5.7% City Attorney 2,317 2,852 (535) -18.8% City Clerk 756 685 71 10.4% Administrative Services - 5,554 (5,554) -100.0% Finance 3,306 2,501 805 32.2% Planning 2,813 2,559 254 9.9% Building 3,930 3,321 609 18.3% Fire 24,787 23,365 1,422 6.1% , Information Systems 7,361 6,806 555 8.2% Police 50,877 47,029 3,848 8.2% Economic Development 4,977 4,199 778 18.5% Community Services 15,777 13,693 2,084 15.2% Library Services 4,829 4,394 435 9.9% Public Works 49,654 33,018 16,636 50.4% Non-Departmental 11,263 12,024 (761) -6.3% Interest on Long-Term Debt 5,575 6,810 (1,235) -18.1% Total Expenses 195,512 172,622 22,890 13.3% Increase in Net Assets Before Transfers 7,078 54,476 ' Transfers 464 4,884 Net Assets-Beginning of Year As Restated 567,480 499,990 Net Assets-End of Year $ 575,022 $ 559,350 See Independent Auditor's Report and Notes to the Financial Statements ' 7 ' City of Huntington Beach Management's Discussion and Analysis ` For the Year Ended September 30, 2006 The cost of all governmental activities this year was $195,512,000. However, as shown in the Statement of Activities, the amount that the taxpayers ultimately ' financed for these activities was only $150.563,000, because costs of $37,139,000 were paid by those who directly benefited from the programs, or by other governments and organizations that subsidized certain programs with ' operating grants and contributions of $917,000, and capital grants and contributions of $6,893,000. Overall, the City's governmental program revenues were $44,949,000. The City paid for the remaining "public benefit" portion of governmental activities with $157,641,000 in taxes and general revenue (some of which could only be used for certain programs) and with other revenues, such as interest and general entitlements. Capital Grants and Contributions have decreased by $36,448,000 or 84.1%. This decrease is a result of the City receiving no contributions of infrastructure from developers in the current fiscal year. In the previous fiscal year the City received approximately $30,000,000 in infrastructure contributions from developers. Total resources available during the year to finance governmental operations ' were $770,802,000 consisting of net assets at October 1, 2005 of $567,480,000, program revenues of $44,949,000, general revenues of $157,641,000, and transfers of $464,000. Total expenses for governmental activities during the year were $195,512,000, thus, net assets were increased by $7,542,000, to $575,022,000. A condensed summary of business activities (in thousands) follows: Business Activities Amount Percent September 30, September 30, Increase Increase ' 2006 2005 jDe,rease Decrease Program Revenues: Charges for Current Services $ 56,525 $ 51,803 $ 4,722 9.1 Capital Grants and Contributions 7,146 14,029 (6,883) -49.1% Total Program Revenues 63,671 65,832 (2,161) -3.3% Use of Money and Property 3,589 1,500 2,089 139.3% Total Revenues 67,260 67,332 (72) -0.1% Expenses: Water Utility 28,117 22,349 5,768 25.8% ' Emerald Cove Housing 551 399 152 38.1% Emergency Fire Medical 5,637 5,497 140 2.5% Refuse Collection 10,289 9,826 463 4.7% Sewer Service 3,855 5,924 (2,069) -34.9% Hazmat Service 163 141 22 15.6% Ocean View Estates 120 118 2 1.7% Total Expenses 48,732 44,254 4,478 10.1% Increase in Net Assets Before Transfers 18,528 23,078 Transfers (464) (4,884) Net Assets-Beginning of Year 177,716 159,522 Net Assets-End of Year $ 195,780 $ 177,716 The City's net assets from business activities increased by $18,528,000 before transfers. The largest reasons for this increase was operating income of ' $7,793,000, capital contributions for the Water Master Plan of $7,146,000 and See Independent Auditor's Report and Notes to the Financial Statements 8 ffl Ink City of Huntington Beach qWManagement's Discussion and Analysis i For the Year Ended September 30, 2006 interest income of$3,589,000. , The cost of all Proprietary (Business Type) activities this year was $48,732,000. ' As shown in the Statement of Activities and Changes in Net Assets, the amount paid by users of the systems was $56,525,000, capital grants and contributions were $7,146,000, other revenue was $3,589,000, and transfers were $464,000. ' Beginning net assets were $177,716,000 and ending net assets were $195,780,000. Of the ending net asset amount, $111,651,000, or 57.0%, was invested in capital assets, $31,109,000 or 15.9% was restricted for expenditures for the Water Master Plan, and $53,020,000, or 27.1% was unrestricted. The City's programs for governmental activities include General Government, Fire, Police, Public Works, Redevelopment, Community Services and Library. Business type activities include the Water, Sewer, Refuse, FireMed, Hazmat Service, and Ocean View Estates. A listing of each program's revenues and expenses for the current year is presented below (in thousands): 2005-2006 2004-2005 ' Fun de y Funded y Taxes and Other Taxes and Less Program General Other General Governmental Activities: Expenses Revenues Revenues Revenues City Council $ 271 $ (90) $ 181 $ 254 City Administrator 5,540 (1,612) 3,928 1,990 City Treasurer 1,479 (1,332) 147 1,568 City Attorney 2,317 (43) 2,274 2,852 City Clerk 756 (95) 661 574 Administrative Services - - - 5,554 Finance 3,306 (325) 2,981 2,501 Planning 2,813 (825) 1,988 1,535 Building 3,930 (4,859) (929) (1,747) Fire 24,787 (1,199) 23,588 21,522 , Information Systems 7,361 (641) 6,720 6,806 Police 50,877 (5,487) 45,390 41,274 Economic Development 4,977 (877) 4,100 2,188 Community Services 15,777 (16,070) (293) (718) , Library Services 4,829 (1,009) 3,820 3,415 Public Works 49,654 (10,256) 39,398 (9,586) Non-Departmental 11,263 (229) 11,034 12,024 Interest on Long-Term Debt 5,575 - 5,575 6,810 , Total Govemmental Activities $ 195,512 $ (44,949) $ 150,563 $ 98,816 Business Activities Water Utility 28,117 (37,946) (9,829) (18,022) , Emerald Cove Housing 551 (960) (409) (467) Emergency Fire Medical 5,637 (6,145) (508) (228) Refuse Collection 10,289 (10,292) (3) (159) Sewer Service 3,855 (7,873) (4,018) (2,558) Hazmat Service 163 (182) (19) 31 , Ocean View Estates 120 (273) (153) (145) Total Business Activities $ 48,732 $ (63,671) $ (14,939) $ (21,548) See Independent Auditor's Report and Notes to the Financial Statements 9 1 City of Huntington Beach Management's Discussion and Analysis For the Year Ended September 30, 2006 ' Financial Analysis of the City's Major Governmental Funds Below is an analysis of the City's major governmental fund activities for the year (in thousands): GOVERNMENTALFUNDS Amount Percent September 30, September 30, Increase Increase 2006 2005 Decrease Decrease Total Fund Equity: ' General Fund $ 40,586 $ 38,286 $ 2,300 6.0% Redevelopment Agency 31,993 29,107 2,886 9.9% Public Financing Authority 7,120 7,158 (38) -0.5% Grants 7,062 4,283 2,779 64.9% Total Fund Equity $ 86,761 $ 78,834 $ 7,927 10.1% iUnreserved Fund Equity: General Fund $ 33,204 32,371 $ 833 2.6% Redevelopment Agency 24,455 12,176 12,279 100.8% ' Grants Fund - 3,668 (3,668) -100.0% Total Unreserved Fund Equity $ 57,659 $ 48,215 $ 9,444 19.6% ' The General fund balance increased by $2,300,000. Key factors in this growth were increased property tax revenue as a result of increases in the assessed value off real estate and increased sales tax revenue as a result of increasing economic activity. The Redevelopment Agency fund balance increased by $2,886,000 primarily due to increased property tax revenue as a result of increases in assessed real estate values. The Grants fund balance increased by $2,779,000 primarily due to transfers from other funds and increased grant activity. ' Financial Analysis of the City's Major Proprietary Funds Below is an analysis of the fund equity of the City's proprietary funds (in thousands): ' Enterprise Funds Amount Percent September 30, September 30, Increase Increase 2006 2005 Decrease (Decrease) Net Assets: Water Fund $ 140,613 $ 128,055 $ 12,558 9.8% Sewer Fund 40,205 35,648 4,557 12.8% Refuse Fund 164 18 146 811.1% Total Net Assets $ 180,982 $ 163,721 $ 17,261 10.5% Unrestricted Net Assets: Water Fund $ 33,105 $ 22,900 $ 10,205 44.6% Sewer Fund 12,366 12,285 81 0.7% Refuse Fund 164 18 146 811.1% Total Unrestricted Net Assets $ 45,635 $ 35,203 $ 10,432 29.6% See Independent Auditor's Report and Notes to the Financial Statements 10 City of Huntington Beach Management's Discussion and Analysis For the Year Ended September 30, 2006 The Water Fund net assets increased by $12,558,000 and unrestricted net ' assets increased by $10,205,000. Key factors in this growth were capital improvement fees of$7,146,000 and net operating income of$2,683,000. The Sewer Fund net assets increased by $4,557,000 and unrestricted net assets increased by $81,000. The key factor in this growth was net operating income of ' $4,018,000. Debt Administration ' Below is a schedule of the changes to the City's long-term debt (in thousands). Balance Balance September 30, Governmental Activities: October 1,2005 Additions I Retirements 1 2006 Certificates of Participation $ 15,525 $ $ (640) $ 14,885 Revenue Bonds 58,030 (2,910) 55,120 Tax Allocation Bonds 27,205 - (1,140) 26,065 , Judgement Obligation Bonds 12,245 - (720) 11,525 Special District Bonds - - - - Claims 14,545 2,383 (12,972) 3,956 Compensated Absences 9,045 2,858 (2,273) 9,630 Pension Obligation 7,640 752 (1,844) 6,548 Loans 17,749 15,579 (2,896) 30,432 Property Tax Claims - - - Leases Payable 3,461 614 (1,100) 2,975 Total Long-Term Obligations-Governmental Activities 165,445 22,186 (26,495) 161,136 Business Activities: Compensated Absences 786 82 - 868 Leases 112 - (72) 40 Business Activities 898 82 (72) 908 Total Long-Term Obligations $ 166,343 $ 22,268 $ (26,567) $ 162,044 Additional information on the City's long-term debt is shown in note 10 to the financial statements. The City of Huntington Beach is legally restricted to issuing general obligation bonds to 15% of its assessed valuation. Since the City has no general obligation bonds outstanding, the limit does not apply. This is shown on page 103 of the financial statements. The majority of the current year borrowing by the City involves amounts owed to developers as part of the redevelopment of Bella Terra. The City's total debt decreased ($4,299,000) or (2.6%) from its beginning amount primarily due to debt repayment. See Independent Auditor's Report and Notes to the Financial Statements ' 11 City of Huntington Beach Management's Discussion and Analysis For the Year Ended September 30, 2006 The City continues to maintain excellent credit ratings on all of its debt issues. The following are the latest ratings as determined by Moody's Investors Service and Standard and Poor's. Debt Instrument Moody's S &P 1998 Tax Allocation Refunding Bonds Aaa AAA 2000 Lease Revenue Bonds, Series A Aaa AAA 2001 Lease Revenue Bonds, Series A Aaa AAA 2001 Lease Revenue Bonds, Series B Aaa AAA 2002 Tax Allocation Refunding Bonds Aaa AAA 2004 Judgment Obligation Bonds Aa3 AA- 2002 Tax Allocation Refunding Bonds Aaa Not Available Capital Assets The capital assets of the City are those assets, which are used in the performance of the City's functions including infrastructure assets. The City has elected to use the "Basic Approach" as defined by GASB statement 34 for infrastructure reporting. The following infrastructure networks are recorded as capital assets in the government-wide financial statements: • Storm drain system including pump stations, drainage system and manholes. • Streets, (including land underneath streets) traffic signals, curbs, gutters, ' and sidewalks. Below is a schedule of the City's capital assets, net of accumulated depreciation (in thousands): Amount percent September 30, September 30, Increase Increase Governmental Activities: 2006 2005 Decrease Decrease Land $ 338,463 $ 334,636 $ 3,827 1.1% Buildings 108,507 99,580 8,927 9.0% Machinery and Equipment 19,945 18,445 1,500 8.1% ' Construction in Progress 2,448 - 2,448 N/A Joint Venture 1,284 1,321 (37) -2.8% Infrastructure 138,601 147,867 (9,266) -6.3% Total Governmental Activities 609,248 601,849 7,399 1.2% Business Activities: ' Land $ 7,840 $ 7,840 $ - 0.0% Buildings 38,210 39,412 (1,202) -3.0% Machinery and Equipment 5,515 6,188 (673) -10.9% Construction in Progress 4,143 - 4,143 N/A Infrastructure 55,983 48,740 7,243 14.9% Total Business Activities 111,691 102,180 9,511 9.3% Total Capital Assets $ 720,939 $ 704,029 $ 16,910 2.4% Capital assets from governmental activities increased $7,399,000 (1.2%) while capital assets from business activities increased $9,511,000 (9.3%). These increases were largely due to infrastructure and building additions. Further ' See Independent Auditor's Report and Notes to the Financial Statements 12 City of Huntington Beach Management's Discussion and Analysis ' For the Year Ended September 30, 2006 information on the City's capital assets can be found in note 11 of the financial ' statements. General Fund Budgetary Highlights Comparing the fiscal year 2005/2006 original budget (or adopted) General Fund (expenditures and transfers) amount of $166,888,000 to the final budgeted amount of $169,126,000 shows a net increase of$2,238,000 (1.3)%. General Fund expenditures were $12,757,000 less than the final budget. The favorable budget variance is due to lower than expected insurance, capital outlay, operating, and personal services expenditures. Economic Factors And Next Year's Budgets And Rates The key assumptions in the General Fund revenue forecast for fiscal year 2006/2007 are: • Stabilization of local revenues due to recently passed statewide legislation and court decisions • Modest, consistent general economic growth with emphasis on improving the sales tax and transient occupancy tax base • Strong growth in property tax revenues • Establish and maintain proper cost allocations to enterprise funds • Maintain appropriate fee schedules for allowable cost recovery. Contacting the City's Financial Management ' This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report, separate reports of the City's component units or need any additional financial information, contact the Finance Department at 2000 Main ' Street, Huntington Beach, California, 92648-2702, phone (714) 536-5907 or e- mail rsedlak@surfcity-hb.org. i See Independent Auditor's Report and Notes to the Financial Statements 13 � Basic Financial Statements 1 1 i 1 1 i 1 1 1 i 1 1 1 1 1 CITY OF HUNTINGTON BEACH , STATEMENT OF NET ASSETS SEPTEMBER 30, 2006 (In Thousands) Governmental Business-Type ' ASSETS Activities Activities Total Cash and Investments $ 25,564 $ 50,077 $ 75,641 Receivables 24,274 7,654 31,928 Inventories - 1,148 1,148 Other Assets 12,467 - 12,467 Subtotal 62,305 58,879 121,184 Restricted Assets: Cash and Investments 62,668 32,145 94,813 Cash with Fiscal Agent 12,116 - 12,116 Receivables 24,346 24,346 Land Held for Resale 2,682 - 2,682 , Total Restricted Assets 101,812 32,145 133,957 Capital Assets: Non-Depreciable 342,195 11,983 354,178 Depreciable 267,053 99,708 366,761 Total Capital Assets 609,248 111,691 720,939 Total Assets 773,365 202,715 976,080 LIABILITIES Accounts Payable 3,644 4,448 8,092 Accrued Payroll 2,393 195 2,588 Deposits 1,591 388 1,979 Claims Payable 5,800 - 5,800 Current Liabilities 13,428 5,031 18,459 Current Liabilities Payable from Restricted Assets: Accounts Payable 1,280 - 1,280 Accrued Interest Payable 635 - 635 Unearned Revenue 18,790 - 18,790 Deposits 3,074 996 4,070 Long-Term Obligations Due Within One Year 9,652 40 9,692 Total Current Liabilities Payable from Restricted Assets 33,431 1,036 34,467 Long-Term Obligations: Long-Term Obligations Due in More than One Year 151,484 868 152,352 , Total Liabilities 198,343 6,935 205,278 NET ASSETS Investment in Capital Assets, Net of Related Debt 472,372 111,651 584,023 Restricted for: Debt Service 7,120 - 7,120 Capital Projects 26,021 31,109 57,130 Other Purposes 35,240 - 35,240 Total Restricted Net Assets 68,381 31,109 99,490 Unrestricted 34,269 53,020 87,289 Total Net Assets $ 575,022 $ 195,780 $ 770,802 , See Independent Auditors'Report and Notes to the Financial Statements 15 1 CITY OF HUNTINGTON BEACH STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS ' FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) Pro ram Revenues Net Expense Revenue and Changes in Charges for Operating Capital Grants Business- Current Grants and and Governmental Type Functions/Programs Expenses Services I Contributions Contributions Activities Activities Total ' Governmental Activities: City Council $ 271 $ 90 $ $ $ (181) $ - $ (181) City Administrator 5,540 1,612 (3,928) (3,928) City Treasurer 1,479 1,332 - (147) - (147) City Attorney 2,317 43 - (2,274) - (2,274) City Clerk 756 95 = _ (661) - (661) Finance 3,306 325 (2,981) (2,981) Planning 2,813 825 - - (1,988) - (1,988) Building 3,930 4,859 - 929 - 929 Fire 24,787 1,086 113 = (23,588) _ (23,588) Information Systems 7,361 641 (6,720) (6,720) Police 50,877 5,355 132 - (45,390) (45,390) Economic Development 4,977 505 372 - (4,100) (4,100) Community Services 15,777 14,644 5 1,421 293 0 293 Library Services 4,829 714 295 (3,820) (3,820) Public Works 49,654 4,784 - 5,472 (39,398) (39,398) Non-Departmental 11,263 229 - - (11,034) - (11,034) Interest on Long-Term Debt 5,575 - - (5,575) (5,575) Total Governmental Activities 195,512 37,139 917 6,893 (150,563) (150,563) Business-type Activities: Water Utility 28,117 30,800 - 7,146 - 9,829 9,829 1 Sewer Service 3,855 7,873 - _ - 4,018 4,018 Refuse Collection 10,289 10,292 3 3 Emerald Cove Housing 551 960 409 409 Emergency Fire Medical 5,637 6,145 - - - 508 508 Hazmat Service 163 182 - _ - 19 19 Ocean View Estates 120 273 153 153 Total Business Type Activities 48,732 56,525 7,146 14,939 14,939 Total Business and Government ' Type Activities $ 244,244 $ 93,664 $ 917 $ 14,039 (150,563) 14,939 (135,624) General Revenues: Taxes: Property Taxes 66,598 - 66,598 ' Sales Taxes 26,448 - 26,448 Utility Taxes 21,170 21,170 Other Taxes 13,226 - 13,226 Total Taxes 127,442 - 127,442 ' Other: Use of Money and Property 4,310 3,589 7,899 From Other Agencies 10,390 - 10,390 Participation Payments 6,221 6,221 Other 9,278 - 9,278 Total Other General Revenue 157,641 3,589 161,230 Transfers 464 (464) Total General Revenues and Transfers 158,105 3,125 161,230 ' Change in Net Assets 7,542 18,064 25,606 Net Assets-Beginning of Year as restated(see note 15) 567,480 177,716 745,196 Net Assets-End of Year $ 575,022 $ 195,780 $ 770,802 1 ' See Independent Auditors'Report and Notes to the Financial Statements 16 CITY OF HUNTINGTON BEACH BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30,2006 ' (In Thousands) Other Major Governmental Funds Public Total Major Non Major Redevelopment Financing Governmental Governmental ASSETS General Fund Agency Authority Grants Funds Funds Total Cash and Investments $ 25,564 $ 25,180 $ - $ 7,568 $ 58,312 $ 29,920 $ 88,232 Cash and Investments with Fiscal Agent 150 2,413 7,060 - 9,623 2,493 12,116 ' Taxes Receivable 21,281 2,687 - - 23,968 - 23,968 Other Receivables 2,993 11,719 61 8,545 23,318 1,334 24,652 Due from Other Funds - - - - - 771 771 Advances to Other Funds 1,836 - 1,836 - 1,836 Land Held for Resale - 2,682 2,682 - 2,682 Other Assets - - - 1,266 1,266 Prepaids 11,201 11,201 - 11,201 TOTAL ASSETS $ 63,025 $ 44,681 $ 7,121 $16,113 $ 130,940 $ 35,784 $166,724 LIABILITIES AND FUND BALANCE Liabilities: Accounts Payable $ 3,644 $ 65 $ 1 $ 434 $ 4,144 $ 780 $ 4,924 Accrued Payroll 2,326 7 - 23 2,356 37 2,393 Due to Other Funds - - - - 771 771 Advances from Other Funds - - - - 1,836 1,836 Deposits Payable 1,591 1,694 66 3,351 1,314 4,665 Deferred Revenue 9,078 10,922 8,528 28,528 - 28,528 Claims Payable 5,800 - 5,800 - 5,800 Total Liabilities 22,439 12,688 1 9,051 44,179 4,738 48,917 Fund Balances: ' Reserved for: Encumbrances 5,546 91 - 2,859 8,496 3,752 12,248 Special Revenue Funds - - - - - - Long-Term Receivables 1,836 4,765 - 6,601 6,601 Debt Service Funds - - 7,120 - 7,120 7,120 Capital Projects - - 4,203 4,203 4,203 Land Held for Resale - 2,682 - - 2,682 2,682 Total Reserved Fund Balance 7,382 7,538 7,120 7,062 29,102 3,752 32,854 Unreserved,Designated: Designated for Future Expenditure(Reported in): Special Revenue Funds - - - - - 16,705 16,705 Capital Projects Funds - 11,009 11,009 1,208 12,217 Other Designations: Equipment Replacement 6,000 - 6,000 - 6,000 Capital Projects 3,700 3,700 3,700 , Council Projects 840 840 840 Second Tier 5,090 5,090 5,090 Insurance 2,000 2,000 2,000 Economic Uncertainties 12,002 12,002 12,002 Unreserved,Undesignated(Reported in): General Fund 3,572 3,572 3,572 Special Revenue Funds - - - 3,926 3,926 Capital Projects Funds - 13,446 13,446 1,433 14,879 Total Unreserved 33,204 24,455 - 57,659 27,294 84,953 TOTAL FUND BALANCE 40,586 31,993 7,120 7,062 86,761 31,046 117,807 TOTAL LIABILITIES AND FUND BALANCE $ 63,025 $ 44,681 $ 7,121 $16,113 $ 130,940 $ 35,784 $166,724 See Independent Auditors'Report and Notes to the Financial Statements ' 17 CITY OF HUNTINGTON BEACH RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE 1 STATEMENT OF NET ASSETS SEPTEMBER 30, 2006 (In Thousands) Amounts reported for governmental activities in the statement of net assets are different because: Total Fund Balances Governmental Funds $ 117,807 Net capital assets used in governmental activities are not financial resources and,therefore, are not reported in the funds Capital Assets 617,677 Accumulated Depreciation (8,429) Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds Accrued Property Taxes Receivable not Recorded in Assets 9,738 1 Other long-term liabilities are not due in the current period and,therefore, are not recorded in the funds. 1 Accrued Interest Payable not Recorded in Liabilities (635) Long-term Liabilities, including bonds and certificates of participation payable are due and 1 payable and therefore are not reported in the funds. Long-Term Obligations Due in One Year (9,652) Long-Term Obligations Due in More than One Year (150,717) Net Assets of Governmental Activities $ 575,789 i 1 1 1 1 1 See Independent Auditors'Report and Notes to the Financial Statements 18 CITY OF HUNTINGTON BEACH ' STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE GOVERNMENTALFUNDS ' FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) Other Major Governmental Funds Redevelopment Public Financing REVENUES General Fund Agency Authority Grants Property Taxes $ 55,168 $ 13,897 $ $ Sales Taxes 24,003 - Utility Taxes 21,170 Other Taxes 13,226 Licenses and Permits 7,209 Fines and Forfeitures 4,288 - From Use of Money and Property 12,084 1,773 305 528 From Other Agencies 5,367 - - 3,348 Charges for Current Service 13,876 - - Other 3,224 6,262 Total Revenues 159,615 21,932 305 3,876 EXPENDITURES Current: City Council 271 - - - City Administrator 5,504 City Treasurer 1,446 - City Attorney 2,272 41 ' City Clerk 828 - Finance 3,310 - Planning 2,661 140 Building 3,576 152 Fire 23,918 468 Information Services 6,540 - Police 49,708 - 361 Economic Development 1,121 1,986 568 , Community Services 13,179 - 218 Library Services 3,129 108 Public Works 24,752 - 141 Non-Departmental 12,793 975 - CapitalOutlay - 15,804 - 2,353 Debt Service: Principal 1,216 3,825 3,550 95 ' Interest 145 2,376 3,361 206 Total Expenditures 156,369 25,007 6,911 4,810 Excess(Deficiency)Of Revenues Over (Under)Expenditures 3,246 (3,075) (6,606) (934) OTHER FINANCING SOURCES(USES) Transfers In 7,305 - 6,568 4,526 Issuance of Long-Term Debt - 15,579 - - ' Transfers Out (8,251) (9,618) - (813) Total Other Financing Sources(Uses) (946) 5,961 6,568 3,713 Net Change In Fund Balances 2,300 2,886 (38) 2,779 Fund Balance-Beginning Of Year 38,286 29,107 7,158 4,283 Fund Balance-End Of Year $ 40,586 $ 31,993 $ 7,120 $ 7,062 See Independent Auditors'Report and Notes to the Financial Statements 19 CITY OF HUNTINGTON BEACH STATEMENT OF REVENUES, EXPENDITURES,AND ' CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (in Thousands) Total Major Non Major Governmental Governmental ' Funds Funds Total $ 69,065 $ - $ 69,065 24,003 2,445 26,448 ' 21,170 - 21,170 13,226 13,226 7,209 223 7,432 4,288 - 4,288 14,690 1,771 16,461 8,715 7,896 16,611 13,876 2,956 16,832 9,486 919 10,405 185,728 16,210 201,938 ' 271 - 271 5,504 4 5,508 1,446 - 1,446 ' 2,313 2,313 828 828 3,310 3,310 2,801 2,801 3,728 3,728 24,386 24,386 6,540 - 6,540 ' 50,069 38 50,107 3,675 497 4,172 13,397 1,013 14,410 3,237 1,122 4,359 ' 24,893 3,555 28,448 13,768 13,768 18,157 12,017 30,174 8,686 720 9,406 6,088 424 6,512 193,097 19,390 212,487 (7,369) (3,180) (10,549) 18,399 2,140 20,539 ' 15,579 - 15,579 (18,682) (1,393) (20,075) 15,296 747 16,043 7,927 (2,433) 5,494 78,834 33,479 112,313 $ 86,761 $ 31,046 $ 117,807 ' See Independent Auditors'Report and Notes to the Financial Statements 20 CITY OF HUNTINGTON BEACH RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, , AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) Amounts reported for governmental activities in the Statement of ' Activities are different because: Net Changes in Fund Balances-Total Governmental funds $ 5,494 Capital Expenditures- Governmental funds report capital outlays as j expenditures. However, in the Statement of Activities, the cost of these assets is allocated over their estimated useful lives and reported as depreciation expense. Depreciable Assets Purchased 17,537 Non-Depreciable Assets Purchased 6,275 Captial Asset Dispositions (7,984) Captial Asset Depreciation (8,429) Accrual of Revenues- Certain revenues in the Statement of Activities do not ' meet the"availability"criteria for revenue recognition in the governmental funds and are not reported in the governmental funds as revenue. Current Year Property Tax Accrual 9,738 , Prior Year Property Tax Accrual (12,205) Liabilities not Liquidated with Current Resources- Some expenses reported in the statement of activities do not require the use of current financial resources and,therefore,are not reproted as expenditures in governmental funds. Current Year Interest Accrual (635) Prior Year Interest Accrual 1,572 Long-Term Debt Proceeds- Issuances and changes in long-term debt(bonds, ' leases, certificates of participation, compensated absences, etc) provide current financial resources to governmental funds, while repayments of this debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, etc. when debt is first issued. These amounts are deferred and amortized in the Statement of Activities. (21,419) Payments of Long-Term Debt - Principal payments on long-term debt are recorded an expenditure in the governmental funds and a reduction of liability in the govemment-wide statements. 26,495 , Change in Net Assets of Governmental Activities $ 16,439 See Independent Auditors'Report and Notes to the Financial Statements 21 ' CITY OF HUNTINGTON BEACH STATEMENT OF NET ASSETS PROPRIETARY FUNDS ' SEPTEMBER 30,2006 (In Thousands) ' Total Major Non-Major Sewer Service Enterprise Enterprise Water Fund Fund Refuse Fund Funds Funds Total ASSETS Current Assets: Cash and Investments $ 30,536 $ 12,892 $ v $ 43,428 $ 6,649 $ 50,077 Restricted Cash 32,145 32,145 32,145 Other Receivables 2,951 680 601 4,232 1,129 5,361 Inventories 1,148 - - 1,148 - 1,148 Unbilled Receivable 1,579 282 432 2,293 2,293 Due from Other Funds 36 36 36 Total Current Assets 68,395 13,854 1,033 83,282 7,778 91,060 Capital Assets: - Land 3,907 3,907 3,933 7,840 Buildings and Improvements 39,743 3,708 43,451 4,662 48,113 Machinery and Equipment 9,156 252 9,408 1,154 10,562 Infrastructure 69,379 39,504 v 108,883 - 108,883 Construction in Progress 4,143 4,143 4,143 Less Accumulated Depreciation (45,746) (19,768) (65,514) (2,336) (67.850) Total Capital Assets 76,439 27,839 104,278 7,413 111,691 Total Assets 144,834 41,693 1,033 187,560 15,191 202,751 LIABILITIES Current Liabilities: 1 Accounts Payable 2,214 1,228 826 4,268 180 4,448 Accrued Payroll 110 32 3 145 50 195 Due to Other Funds 36 36 36 Deposits Payable 1,329 2 1,331 53 1,384 Current Portion of Claims and Leases 40 - 40 - 40 Total Current Liabilities 3,693 1,260 867 5,820 283 6,103 Liabilities Payable from Restricted Assets Non-Current Liabilities: ' Compensated Absences 528 228 2 758 110 868 Capital Leases 40 40 40 Less Current Portion of Claims and Leases (40) - (40) (40) Total Non-Current Liabilities 528 228 2 758 110 868 Total Liabilities 4,221 1,488 869 6,578 393 6,971 NET ASSETS Invested in Capital Assets,Net of Related Debt 76,399 27,839 - 104,238 7,413 111,651 Restricted for: Capital Projects 31,109 31,109 31,109 Unrestricted 33,105 12,366 164 45,635 7,385 53,020 Total Net Assets $ 140,613 $ 40,205 $ 164 $ 180,982 $ 14,798 $ 195,780 1 See Independent Auditors'Report and Notes to the Financial Statements 22 CITY OF HUNTINGTON BEACH ' STATEMENT OF REVENUES, EXPENSES,AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 ' (In Thousands) Total Major Non-Major Sewer Service Enterprise Enterprise ' Water Fund Fund Refuse Fund Funds Funds Total OPERATING REVENUES Sales $ 29,211 $ $ $ 29,211 $ - $ 29,211 Rentals - - 1,233 1,233 Fees for Service - 6,732 10,247 16,979 6,327 23,306 Other 1,589 1,141 45 2,775 2,775 Total Operating Revenues 30,800 7,873 10,292 48,965 7,560 56,525 OPERATING EXPENSES Water Purchases 9,625 - - 9,625 - 9,625 Supplies and Operations 5,959 2,976 10,289 19,224 6,249 25,473 Engineering 1,886 - - 1,886 - 1,886 Production and Distribution 5,114 5,114 5,114 Maintenance 794 794 794 Water Meters 1,349 1,349 1,349 Water Quality 332 - 332 332 Depreciation 3,058 879 3,937 222 4,159 Total Operating Expenses 28,117 3,855 10,289 42,261 6,471 48,732 Operating Income 2,683 4,018 3 6,704 1,089 7,793 NON-OPERATING REVENUES(EXPENSES) Interest Income 2,761 564 - 3,325 264 3,589 Capital Improvement Fees 7,146 7,146 - 7,146 Total Non-Operating Revenues(Expenses) 9,907 564 10,471 264 10,735 Change In Net Assets Before Transfers and Capital Contributions 12,590 4,582 3 17,175 1,353 18,528 TRANSFERS AND CAPITAL CONTRIBUTIONS Transfers In - - 143 143 - 143 Transfers Out (32) (25) - (57) (550) (607) Total Transfers And Capital Contributions (32) (25) 143 86 (550) (464) Total Change In Net Assets 12,558 4,557 146 17,261 803 18,064 Net Assets-Beginning Of Year 128,055 35,648 18 163,721 13,995 177,716 Net Assets-End Of Year $ 140,613 $ 40,205 $ 164 $ 180,982 $ 14,798 $ 195,780 See Independent Auditors'Report and Notes to the Financial Statements 23 ' ' CITY OF HUNTINGTON BEACH STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) ' Total Major Non-Major Sewer Service Enterprise Enterprise Water Fund Fund Refuse Fund Funds Funds Total CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers and Users $ 30,295 $ 7,645 $ 10,286 $ 48,226 $ 7,644 $ 55,870 Cash Paid to Employees for Services (3,862) (1,059) (87) (5,008) (1,725) (6,733) Cash Paid to Suppliers of Goods and Services (21,458) (1,029) (10,342) (32,829) (4,608) (37,437) Net Cash Provided(Used)by Operating Items 4,975 5,557 (143) 10,389 1,311 11,700 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers In - - 143 143 - 143 Transfers Out (32) (25) (57) (550) (607) Net Cash Provided(Used)by Non Capital Financing Activities (32) (25) 143 86 (550) (464) ' CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of Plant,Property,and Equipment (8,316) (5,375) - (13,691) (13,691) Capital Surcharge 7,146 7,146 7,146 Net Cash Provided(Used)by Capital and Related Financing Activities 1,170 (5,375) (6,545) (6,545) 1 CASH FLOWS FROM INVESTING ACTIVITIES Cash Received from Investments 2,761 564 3,325 288 3,613 Net Increase in Cash and Cash Equivalents 6,534 721 7,255 1,049 8,304 Cash and Cash Equivalents- ' Beginning of Year 56,147 12,171 68,318 5,600 73,918 Cash and Cash Equivalents-End of Year $ 62,681 $ 12,892 $ - $ 75,573 $ 6,649 $ 82,222 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED (USED)BY OPERATING ACTIVITIES Operating Income(Loss) $ 2,683 $ 4,018 $ 3 $ 6,704 $ 1,089 $ 7,793 ' Adjustments to Reconcile Operating income to Net Cash Provided(Used) by Operating Activities Depreciation 3,058 879 - 3,937 222 4,159 Decrease(Increase)in Accounts Receivable (439) (206) 5 (640) 84 (556) Decrease(Increase)in Unbilled Receivables (66) (22) (11) (99) (99) Decrease(Increase)in Due from Other Funds 175 - - 175 175 Decrease(Increase)in Inventory 59 - - 59 - 59 ' Increase(Decrease)in Accounts Payable 324 842 30 1,196 (66) 1,130 Increase(Decrease)in Accrued Payroll (5) 2 3 (6) (6) Increase(Decrease)in Due to Other Funds - - (175) (175) - (175) Increase(Decrease)in Claims Payable (72) - (72) - (72) Increase(Decrease)in Deposits (762) - - (762) (16) (778) Increase(Decrease)in Compensated Absences 20 44 2 66 4 70 Net Cash Provided(Used)by Operating Activities $ 4,975 $ 5,557 $ (143) $ 10,389 $ 1,311 $ 11,700 ' See Independent Auditors'Report and Notes to the Financial Statements 24 CITY OF HUNTINGTON BEACH , STATEMENT OF FIDUCIARY FUND NET ASSETS FIDUCIARY FUNDS , SEPTEMBER 30, 2006 (In Thousands) Trust Fund- ' Retirement ASSETS Totai Agency Funds Supplemental Fund Cash and Investments-Local Agency Investment Fund $ 8,620 $ 16,687 Cash with Fiscal Agent 5,860 - Accounts Receivable, Net 432 134 Interest Receivable - - Total Assets $ 14,912 $ 16,821 LIABILITIES Accounts Payable $ 350 $ - Due to Bondholders 7,358 Held for Others 7,204 - Net Pension/Benefit Obligation - 6,548 Total Liabilities 14,912 6,548 ' NET ASSETS Held in Trust For Pension Benefits and Other Purposes $ - $ 10,273 CITY OF HUNTINGTON BEACH STATEMENT OF CHANGES IN FIDUCIARY FUND NET ASSETS TRUSTFUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 , (In Thousands) Trust Fund- Retirement ADDITIONS Supplemental Fund Employer Contributions $ 3,943 Other Income 1,093 Interest Income 644 Total Additions $ 5,680 DEDUCTIONS Benefits 1,844 Total Deductions 1,844 Change in Net Assets 3,836 ' Net Assets-Beginning of Year 6,437 Net Assets-End of Year $ 10,273 See Independent Auditors'Report and Notes to the Financial Statements ' 25 NOTES TO FINANCIAL STATEMENTS 1 Footnote Number Description Page 1. Summary of Significant Accounting Policies............................26-34 ' 2. Cash and Investments..................................................................35-36 3. Deferred Compensation ...............................................................36 4. Unearned Revenue.......................................................................37 ' 5. Retirement Plan — Normal............................................................37-39 6. Retirement Plan — Supplemental................................................39-41 7. Post-Employment Medical Insurance .......................................42 8. Risk Management................................................................42-43 9. Interfund Transactions.........................................................................44-45 10. Long-term Debt Obligations.........................................................45-58 11. Capital Assets.................................................................................58-60 12. Commitments and Contingencies ..............................................61-62 13. Other Information...........................................................................63 14. Subsequent Events.......................................................................63 City of Huntington Beach Notes to Financial Statements ' For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Reporting Entity The City of Huntington Beach is the primary government. It was incorporated in 1909, , is a charter, full-service city. The form of government is Council-Manager. Component units are legally separate organizations for which the City Council is financially accountable, or organizations that if excluded from the accompanying , financial statements, would make them misleading. The component units described below are blended (presented as if they are part of the primary government)with the primary government for financial reporting purposes because either the component , units have governing bodies identical to the City's (the City Council) or provide services exclusively to the City. Financial accountability means the appointment of a voting majority of the component unit's board and either the ability to impose will by the City or the possibility that the component unit will provide a financial benefit or impose a financial burden on the City. • Redevelopment Agency of the City of Huntington Beach (the Redevelopment ' Agency)—This entity was formed in 1967 to renovate older areas in the City. The City Council serves as its governing body and adopts its annual budget. The Redevelopment Agency is financially dependent on the City for all of its ' operations. Separately prepared financial statements are available for the Redevelopment Agency from the Finance Department. • Huntington Beach Public Financing Authority (Public Financing Authority) — This Corporation was formed in March 1988 to issue debt to finance public improvements and other capital purchases for the City and Redevelopment Agency. The Public Financing Authority's governing body is the City Council, which also adopts the annual budget. The Public Financing Authority is financially dependent on the City. There are no prepared financial statements available for t the Public Financing Authority. • The City of Huntington Beach Community Facilities Districts 1990-1,2000-1, 2002-1, and 2003-1 (Community Facilities Districts), were formed to construct public improvements within the City boundaries. The governing board of these districts is the City Council. The proceeds of debt issued and the expenditures for ' the public improvements are recorded in capital projects funds. The Community Facilities Districts' debt is not an obligation of the City. There are no separate financial statements prepared for these entities. b. Government-Wide Financial Statements ' The Government-Wide Financial Statements include a Statement of Net Assets, a Statement of Activities, and Changes in Net Assets. These statements present , 26 1 City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) summaries of Governmental and Business-Type Activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. These statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's ' assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net 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 with which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Indirect ' expenses are allocated to the various functions based on a proportionate use of services. The types of transactions reported as program revenues for the City are reported in three categories: 1) charges for current services, 2) operating grants and ' contributions, and 3) capital grants and contributions. Taxes and other items not properly included among program revenues are reported as general revenues. ' Government-wide financial statements do not provide information by fund or account group. They simply distinguish between governmental and business activities. The City's statement of net assets includes both current and non-current assets and ' liabilities. Financial Statement Classification ' In the Government-Wide financial statements net assets are classified in the following categories: Invested In Capital Assets, Net of Related Debt—This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation and the outstanding balances of debt that are attributable to the ' acquisition, construction or improvement of these assets reduce this category. Restricted Net Assets— This category presents restrictions imposed by creditors, ' grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. This category presents restrictions placed on the categories of Capital Projects, Debt ' Service, and Specific Projects and Programs as established by the City Council. Unrestricted Net Assets—represent the net assets of the City, not restricted for any ' project or other purpose. ' 27 City of Huntington Beach _ Notes to Financial Statements ' For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) c. Fund Financial Statements Separate fund financial statements are prepared for governmental funds, proprietary , funds, and fiduciary funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. The City applies all applicable Governmental Accounting Standards Board (GASB) ' pronouncements (including all National council on Governmental Accounting NCGA Statements and Interpretations currently in effect) as well as the following , pronouncements issued on or before November 30, 1989, to the business type activities, unless those pronouncements conflict with or contradict GASB pronouncements, Financial Accounting Standards Board (FASB) Statements and ' Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the committee on Accounting Procedure. The City applies all applicable FASB Statements and Interpretations issued after November ' 30, 1989, except those that conflict with or contradict GASB pronouncements. Measurement Focus, Basis of Accounting, and Financial Statement ' Presentation All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. 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 net current assets. Under modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. , Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are ' property tax, sales tax, intergovernmental revenues and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred. In the Fund financial statements reserves and p designations segregate ortions of ' 9 fund balance that are either not available or have been earmarked for specific ' purposes. The various reserves and designations are established by actions of the City Council and Management and can be increased, reduced or eliminated by similar actions. ' The City reports the following major funds: 28 , City of Huntington Beach _ Notes to Financial Statements ,,. For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental Funds ' • General Fund - accounts for activity not required to be accounted for in another fund. • Redevelopment Agency - accounts for acquisition and construction of capital assets and the related debt service activity for certain projects in the City's Redevelopment project areas. • Public Financing Authority- accounts for the activity of the Huntington Beach ' Public Financing Authority. • Grant Fund - accounts for revenues and expenses of grant related activity. Proprietary Funds • Water Fund - used to account for water sales to customers • Sewer Service Fund - accounts for user fees charged to residents and ' businesses for sewer service. • Refuse Fund - used to account for the activities of the City's refuse program. ' Governmental Fund Financial Statements Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets as presented in these statements to the net assets presented in the Government-Wide Financial Statements. The City presents all major funds that met those qualifications. d. Fund Financial Statements Proprietary Fund Financial Statements Proprietary Fund Financial Statements include a Statement of Net Assets, a ' Statement of Revenues, Expenses and Changes in Fund Net Assets, and a Statement of Cash Flows for each major proprietary fund and non-major funds aggregated. Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities ' (whether current or non-current) are included on the Statement of Net Assets. The Statement of Revenues, Expenses and Changes in Fund Net Assets presents increases (revenues) and decreases (expenses) in total 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. ' Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non- , 29 City of Huntington Beach Notes to Financial Statements , For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses. ' Fiduciary Fund Financial Statements Fiduciary Fund Financial Statements include a Statement of Net Assets and a , Statement of Changes in Net Assets for Trust Funds. The City's Fiduciary funds represent Agency Funds, which are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The Agency funds are , accounted for on the accrual basis of accounting. Contributions made are funded by a percentage of payroll and are recognized when the payroll is incurred. Fiduciary funds are not presented in the government-wide financial statements because these funds do not represent net assets available to the City. Reconciliations of Financial Statements Reconciliation of the Fund financial statements to the Government-Wide financial statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34. , e. Cash and Investments The City records investments at fair value. The City pools cash resources of its various funds to facilitate cash management. Cash in excess of current requirements is invested and reported as investments. It is the City's intent to hold investments , until maturity. However, the City may, in response to market conditions, sell investments prior to maturity in order to improve the quality, liquidity or yield of the portfolio. Interest earnings are apportioned among funds based on ending accounting period cash and investment balances. The City's cash and cash equivalents are considered to be cash on hand, demand , deposits, and highly liquid investments with original maturities of three months or less at the time of acquisition. In accordance with GASB Statement No. 31,Accounting and Financial Reporting for , Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at ' amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. The City participates in the Local Agency Investment Fund (LAIF), an investment pool managed by the State of California. LAIF has invested a portion of the pool funds in Structured Notes and Asset-Backed Securities. LAIF's investments are subject to , credit risk with the full faith and credit of the State of California collateralizing these 30 City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ' investments. In addition, these Structured Notes and Asset-Backed Securities are subject to market risk as a result of changes in interest rates. The City early- implemented GASB Statement 40 (Deposit and Investment Risk Disclosures). The City's investment policy is further discussed in note 2 on page 36. f. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure, are ' reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets have an acquisition cost of $10,000 or greater($50,000 for infrastructure) and a useful life of two years or more. The City records all purchased capital assets at historical cost (where historical records are available) and at estimated historical cost where no historical records exist. Capital assets acquired from gifts or contributions are recorded at fair market ' value at the time received, or in the case of infrastructure assets, at City Council acceptance date. g. Capital Assets In the Government-Wide and proprietary fund financial statements, depreciation is ' recorded on the on the straight-line method over the estimated useful lives of the assets shown below and charged to the respective fund. No depreciation is recorded in the governmental funds of the fund financial statements. Production, pumping transmission and distribution plant 10 to 15 years General Plant 20 to 50 years Transportation Equipment 5 to 30 years Infrastructure 50 Years Interest is capitalized on proprietary fund assets acquired with tax-exempt debt. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of borrowing until completion of the project with interest earned 1 on the invested proceeds over the same period. h. Inventories Proprietary inventories are valued at weighted-average cost. There are no inventories in governmental funds. ' 31 City of Huntington Beach Notes to Financial Statements ' ys For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) i. Interfund Transactions As a general rule, interfund transactions have been eliminated from the government- ' wide financial statements. Exceptions to this rule are payments in-lieu or charges for current service between the City's enterprise activity and the City's General Fund. Elimination of these transactions would distort the direct costs and program revenues for the various functions. Certain eliminations have been made regarding interfund activities, payables and receivables. All internal balances in the Statement of Net Assets have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. Numerous transactions occur between funds of the City resulting in operating ' transfers, amounts due to or from other funds. Amounts due to or from are the current (due within one year) portion of moneys that are to be paid or to be received ' from other funds. j. Long-Term Obligations In the government-wide and proprietary fund financial statements, long-term obligations are recorded as liabilities in the applicable governmental activities, ' business type activities, or proprietary fund-type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the debt for all issues after October 1, 2001. Premiums and discounts for , debt issued before October 1, 2001 are not recorded or amortized. In the governmental fund financial statements, bond discounts and premiums are ' recognized as other financing source or use. Issuance costs are recorded a current year expenditure. k. Employee Compensated Absences ' The City records the cost of all accumulated and unused leave time (vacation, sick, ' comp) as a liability when earned in the government-wide financial statements. In the fund financial statements these amounts are recorded as expenditures in the years ' paid since it is the City's policy to pay these from future financial resources, rather than available, spendable resources. I. Property Tax Revenue , Property tax in California is levied according to Article 13-A of the California Constitution. The basic levy is a countywide-levy of one percent of total assessed 32 , City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) valuation and is allocated to count governments, school districts, cities and special Y9 districts. Additional levies require two-thirds approval by voters and are allocated directly to the specific government. In the government-wide financial statements, property tax is recorded when earned, regardless of when levied, due, or received. In the fund financial statements, property tax revenue is recognized in the fiscal year levied provided that revenue is ' collected in time to pay current year liabilities. Deferred property tax revenue represents property taxes related to the current fiscal year that are collected more than 60 days after the fiscal year end. Since the City's fiscal year differs from the County's property tax year, there is a difference between the property tax revenue recorded on the fund financial statements and the government-wide financial statements which is noted as a reconciling item in both the Reconciliation of the Statements of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities and the Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets. m. Property Tax Revenue ' The County acts as a collection agent for property tax for all of the local governmental units. Property taxes are normally collected twice per year. The property tax calendar is as follows. • Lien Date-January 1 - Prior Fiscal Year • Levy Date-July 1 - Prior Fiscal Year ' • Due Date, First Installment - November 10 • Due Date, Second Installment - February 10 • Delinquent Date, First Installment - December 10 ' • Delinquent Date, Second Installment - April 10 The taxes are paid to the local governments periodically during the year. Below are the dates of the payments from the County: • Payments of First Installment November to December • Balance of First Installment February 1 • Payments of Second Installment March to April • Balance of Second Installment July 26 n. Allocation of Interest Income Among Funds The City pools all non-restricted cash for investment purchases and allocates interest income based on month-end cash balances. Funds that have restricted cash record interest income in the respective fund. ' 33 City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) o. Cash Flow Statements For purposes of the Statement of Cash Flows,the Proprietary Fund types consider all cash and investments to be cash equivalents, as these funds participate in the citywide cash and investment pool. p. Estimates The accompanying financial statements require management to make estimates and assumptions that effect certain report amounts and disclosures. Actual results could , differ from those estimates. q. Implementation of New GASB Pronouncements ' The City adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements: ' GASB Statement No. 42 Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries establishes accounting and financial ' reporting standards for impairment of capital assets. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly. This Statement also clarifies and establishes accounting requirements for insurance recoveries. GASB Statement No. 46 Net Assets Restricted by Enabling Legislation addresses selected issues and amends GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. The Statement enhances the usefulness and comparability of net asset information and clarifies the meaning of legal enforceability. The Statement also specified accounting and financial reporting requirements for restricted net assets. GASB Statement No. 47 Accounting for Termination Benefits provides accounting , guidance for state and local governmental employers regarding benefits (such as early-retirement incentives and severance benefits) provided to employees that are terminated. The Statement requires recognition of the cost of involuntary termination benefits in the period in which a government becomes obligated to provide benefits to terminated employees. 34 City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 2. CASH AND INVESTMENTS Cash and investments were recorded in the government-wide statements as follows in 9 ( thousands): Investment Maturities(In Years) DEPOSITS: Fair Value Less than 1 1 to 3 3 to 5 more than 5 Total Demand Accounts $ 2 $ 2 $ 2 INVESTMENTS: ' US Treasuries 26,080 15,904 9,846 - 330 26,080 US Agencies 96,931 34,423 55,896 6,612 96,931 Guaranteed Investment Contracts 8,238 - - - 8,238 8,238 ' Commercial Paper 28,775 28,775 - 28,775 Money Market Funds 2,369 2,369 2,369 Local Agency Investment Fund 20,175 20,175 - - - 20,175 Subtotal of Investments 182,568 101,646 65,742 6,612 8,568 182,568 Total Deposits and Investments $ 182,570 $ 101,648 $ 65,742 $ 6,612 $ 8,568 $ 182,570 ' At Year end the City had the following investments and maturities (amounts in thousands): Statement of Net Assets: Cash and Investments $ 75,641 Restricted Assets(Cash and Cash Equivalents) 94.813 Cash with Fiscal Agent-Restricted 12.116 Total Per Statement of Net Assets 182,570 Fiduciary Funds: Cash and Investments 25,307 Cash with Fiscal Agent-Restricted 5.860 Total Fiduciary Funds 31,187 Total Cash and Investments $ 213,737 Interest Rate Risk-As a means of limiting exposure to fair value losses arising from interest rates, the City's investment policy limits investments over three years to be 30% or less. Credit Risk-State law limits investments in commercial paper and corporate bonds to have at least an "A" rating issued by a nationally recognized statistical rating organization. It is the City's policy to limit its investments in these investment types to the top two ratings issued by ' these rating organizations. As of Year end, Standard and Poor's rating of the City's investments in commercial paper was Al or better, and p-1 was the rating placed by Moody's Investor's Service. Standard and Poors rated the City's investments in medium- term bonds AAA or AA-, and a rating of Aaa or Aa3 was placed by Moody's. Concentration of Credit Risk- The City's investment policy limits investments in any one ' issuer, except for U.S. Treasury Securities and U.S. Government Agencies to no more than 35 City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 2. CASH AND INVESTMENTS (Continued) 10% of the investments. In addition, no more than 50% can be invested in a single security type or with single financial institution and every security type has a specific limit. Local Agency Investment Fund — The City holds investments with the Local Agency Investment Fund (LAIF), a State of California investment pool, which at Year end also included a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments included the following: Structured Notes are debt securities (other than asset-backed securities)whose cash , flow characteristics (coupon rate, redemption amount, or stated maturity)depend on one or more indices and/or that have embedded forwards or options. Asset-Backed Securities the bulk of which are mortgage-backed securities, entitle ' their purchasers to receive a share of the cash flow from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables. As of September 30, 2006, the City held $47,485,000 in callable securities,which amounted to approximately 24% of investments. The LAIF had invested 2.634% of the pooled investments funds in Structured Notes and Asset-Backed Securities. This external investment pool is not rated. 3. DEFERRED COMPENSATION Permanent Cityemployees ma defer a portion of their salary under tax deferred plans as Y p rY permitted under Internal Revenue Code. These plan permits employees to defer a portion of their salary until future years. The compensation is not available to the employees until termination, retirement, or unforeseen emergency. The City has established a trust for the assets of the plans held by third parties. All property i and rights purchased with these assets, as well as all income attributable to them are held in trust for the exclusive benefit of the participant and their beneficiary. The amounts are no longer the property of the City and are not subject to the claims of the City's general creditors. Amounts administered by outside organizations in a trustee capacity are no longer reported as assets of the City. The City does not have fiduciary responsibility for ' these assets. 36 City of Huntington Beach ' Notes to Financial Statements For the Year Ended September 30, 2006 4. UNEARNED REVENUE Certain revenues in governmental funds are deferred until received. The property tax amounts are recognized in the year as revenue in the government-wide financial statements, ' but are recorded as deferred revenue in the fund financial statements. The other amounts are unearned revenue in both the funds and government-wide financial statements. The amounts are as follows (in thousands): Other Property Deferred Taxes Revenue Total General Fund $ 8,987 $ 91 $ 9,078 Grant Fund - 8,528 8,528 ' Redevelopment Agency 751 10,171 10,922 Total $ 9,738 $ 18,790 $28,528 ' 5. RETIREMENT PLAN — NORMAL a. Plan Description The City contributes to the California Public Employees' Retirement System (CalPERS), an agent, which is a multiple-employer public employee defined benefit ' pension plan. CalPERS provides retirement and disability benefits, annual cost-of- living adjustments, and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities 1 within California. Benefit provisions and all other requirements are established by state statute and city ordinance. Copies of CalPERS annual financial report may be obtained from their executive office: 400 P Street, Sacramento, CA, 95814. ' b. Employer and Employee Contribution Obligations Y9 ' The City makes two types of contributions for covered employees. The first contribution represents the amount the City is required to make (the employer rate). The second represents an amount, which is made by the employee, but is reimbursed to the employee by the City(the member rate). The member rate is set by contract and normally remains unchanged. The employer rate is an actuarially established rate, is set by CalPERS, and changes from year to year. The employer rates for the fiscal year ending Year end are: ' October 1, 2005 to July 1, 2006 to June 30, 2006 Yearend Local Miscellaneous 7.182% 7.849% Local Safety 29.957% 28.556% ' 37 City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 5. RETIREMENT PLAN — NORMAL (Continued) c. Employer and Employee Contribution Obligations The member rates are as follows: , Rate Local Miscellaneous 7.000% Local Safety 9.000% d. Annual Pension Cost t The City's annual pension cost of$11,739,000 was equal to the City's required and actual contributions. The required contribution was determined as part of a June 30, 2005 actuarial valuation using the entry age normal actuarial cost method. CalPERS conducted an actuarial valuation using the entry-age actuarial cost method ' using a level percent of payroll to determine the City's net pension obligation as of June 30, 2005. Significant assumptions were: • Average amortization remaining period -18 Years as of the Valuation Date — closed end ' • Asset valuation method - 3 years smoothed market • Investment Rate of Return -7.75% • Projected salary increases - 3.25% to 14.45% (safety) and 3.75% to 14.2% (miscellaneous) depending on age, service, and type of employment • Inflation - 3.00% • Payroll growth -3.25% • Individual salary growth - A merit scale varying by duration of employment coupled with an assumed annual inflation component of 3.0% and an annual production growth of .25% ' Initial unfunded liabilities are amortized over a closed period that depends on the plan's date of entry into CaIPERS. Subsequent plan amendments are amortized as a ' level percent of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a rolling period, which results in an amortization of 10% of the unamortized gains and losses each year. If the plan's ' accrued liability exceeds the actuarial value of the assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30-year amortization period. ' 38 , City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 5. RETIREMENT PLAN — NORMAL (Continued) ' e. Trend Information ' Annual Percentage of Net Pension Fiscal Year Pension Cost APC Funded Obligation 9/30/2004 $8,123 100% $0 9/30/2005 $8,729 100% $0 9/30/2006 $11,739 100% $0 6. RETIREMENT PLAN — SUPPLEMENTAL ' a. Plan Description The City provides a supplemental retirement plan for all employees hired prior to ' December 27, 1997 (dates are different for various associations). It is a single- employer CaIPERS. It is a defined benefit plan and will pay the retiree an additional amount to his or her normal amount for life. The City's contracts with employee ' bargaining associations establish the plan. These associations must agree to any changes to the plan. The amount will cease upon the employee's death. The amount that is computed as a factor of an employee's normal retirement allowance is ' computed at retirement and remains constant for his or her life. Of the 1,036 active employees reported on the September 30, 2006 data, only 538 were eligible for plan benefits. No separately prepared financial statements are prepared forthis plan and ' it is not included in the financial report of any other pension plan. The assets used to pay these liabilities have not yet been set up in a legal trust. ' b. Employer Obligations and Funding Status and Progress The City annually transfers amounts from the various City funds to a pension trust ' fund. The City is required to contribute the actuarially determined rate of 3.68% of total payroll for all permanent employees. Administrative costs of this plan are financed through investment earnings. 39 City of Huntington Beach Notes to Financial Statements , For the Year Ended September 30, 2006 6. RETIREMENT PLAN —SUPPLEMENTAL (Continued) c. Annual Pension Cost and Net Pension Obligation ' The City's annual pension cost and net pension obligation for this plan at June 30, ' 2006 were (in thousands): Annual required contribution $ 3,022 Interest on net pension obligation 420 Adjustment to annual required contribution (591) Annual pension cost 2,851 , Contributions made (3,943) Increase (decrease) in net pension obligation (1,092) Net Pension Obligation — Beginning of Year 7,640 Net Pension Obligation — End of Year $ 6,548 The annual required contribution was determined as part of an independent actuarial valuation using the Entry Age Normal Actuarial Cost Method which is a projected , benefit full-cost method which takes into account those benefits that are expected to be earned in the future as well as those already accrued. The actuarial assumptions used were: ' • Rate of return on present and future assets - 5.5% per annum • Projected salary increases for covered employees due to inflation - 3.0% per annum • Projected salary increases due to merit - 0% • Inflation rate - 3.0% • Post employment benefit increases - 0% • Amortization of unfunded liability-level percentage of pay ending in 2027 (closed) • Actuarial value of assets - market value ' d. Trend Information Below is the required three-year trend information (dollar amounts in thousands): , Annual Pension Percentage of Net Pension ' Fiscal Year Cost APC Funded Obligation 6/30/04 $3,073 98% $8,409 6/30/05 $2,900 127% $7,640 ' 6/30/06 $2,851 138% $6,548 Below is other required trend information (dollar amounts in thousands): ' 40 t ' City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 1 6. RETIREMENT PLAN — SUPPLEMENTAL (Continued) ' Fiscal Year Annual Percentage 9 Ending June Required of ARC ' 30 Contribution Contributed 2004 3,231 98% I 2005 3,074 120% 2006 3,022 130% ' e. Accounting for Plan Since the City is required to adopt GASB 25 for the supplemental pension plan, the difference between the ARC and the amount of pension cost funded for the years in which there was an actuarial study must be recorded as a liability in the government- wide financial statements. The amount of this liability is $6,548,000. Benefits are ' recognized when due and payable (see Note 10). 7. POST-EMPLOYMENT MEDICAL INSURANCE a. Plan Description ' The City agreed via contract with each employee association to provide post- employment medical insurance to retirees. The benefits are based on years of ' service and are available to all retirees who meet all three of the following criteria: • At the time of retirement the employee is employed by the City ' • At the time of retirement the employee has a minimum of ten years of service credit or is granted a service connected disability retirement • Following official separation from the City, CaIPERS grants a retirement allowance ' The 9 CitY's obligation to provide the benefits to a retiree ceases when either of the following occurs: • During any period the retiree is eligible to receive health insurance at the expense of another employer ' • The retiree becomes eligible to enroll automatically or voluntarily in Medicare If a retiree dies, the benefits that would be payable for his or her insurance are provided to the spouse or family for 18 months. Benefits for insurance premiums are payable based on the years of service credit for the retiree. The retiree may use the subsidy for any of the medical insurance plans that the City's active employees may ' enroll. ' 41 City of Huntington Beach Notes to Financial Statements ' For the Year Ended September 30, 2006 7. POST-EMPLOYMENT MEDICAL INSURANCE (Continued) The assets used to pay these liabilities have not yet been set up in a legal trust b. Accounting and Funding ' The Retiree Medical Insurance Fund is an agency fund. Other funds contribute on a periodic basis. Employees do not contribute. The actuarial assumptions for the plan are identical to the assumptions used for the Retirement Supplement Plan (see Note 6). Below are the required disclosures for this plan (in thousands): t Number of active participants 1 1,036 ' Employer's actuarially required contributions $740 Employer's actual contributions 1 $1,011 Below is a summary of the Unfunded Actuarial Accrued Liability for the plan (in ' thousands) Actuarial accrued liability $11,402 1 ' Net assets available for plan benefits $5,158 Unfunded Actuarial Accrued Liability $6,243 c. Accounting and Funding Under current generally accepted accounting principles, recording of unfunded ' liabilities on other post-employment benefits in the financial statements is not required. 8. RISK MANAGEMENT The City is exposed to various risks of losses related to torts; theft of, damage to and ' destruction of assets; errors and omissions; injuries to employees and natural disasters. The City records all of these claims as expenditures in the General Fund. The liability for ' these claims is recorded as part of long-term obligations in the Government-Wide financial statements. The City records the amount of claims payable at year-end that is due and payable at year-end in the fund financial statements. The full amount of claims is reported ' as a liability in the government-wide financial statements. Liabilities include amounts incurred, but not reported. Liability Claims ' Claims of up to$1,000,000 are paid from the General Fund. The City is also a participant in the Big Independent Cities Excess Pool Joint Powers Authority (BICEP), which shares payments for claims between $1,000,000 and $2,000,000. It also provides general liability 42 ' ' City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 8. RISK MANAGEMENT (Continued) insurance of$25,000,000 above the CitY's retention of$1,000,000. BICEP was created by a joint powers agreement between the City of Huntington Beach and four other local entities for the purpose of providing joint insurance coverage and related risk management services for member cities. BICEP allows member entities to finance claims payment pool for certain liability claims in excess of$1,000,000 million to a limit of$25,000,000. BICEP's governing ' board has one representative from each city (either a member of the City Council or designate). Current members must approve any changes to the board. Each participating City pays an insurance premium to BICEP that is used to fund the operating and debt ' service requirements. Workers' Compensation Claims ' Workers' compensation claims of up to $1,000,000 per claim are paid from the General Fund. The BICEP is a member of CSAC-Excess Insurance Authority for excess workers' compensation coverage. Payments for claims from $1,000,000 to $5,000,000 are shared. ' Payments for claims between $5,000,000 and $200,000,000 are paid by excess insurance coverage. ' All funds of the City participate in the program and make payments to these funds based on estimated cost information. ' Claims activity and liabilities relating to the current and prior year are (in thousands): Workers Liability Compensation Insurance Total Balance September 30,2004 $ 51909 $ 11,128 $ 17,037 ' Additions 1,874 5,062 6,936 Reductions (990) (2,494) (3,484) Net Increase(Decrease) 884 2,568 3,452 Balance September 30,2005 6,793 13,696 20,489 Additions 1,039 767 1,806 Reductions (1,098) (11,441) (12,539) ' Net Increase(Decrease) (59) (10,674) (10,733) Balance September 30,2006 $ 6,734 $ 3,022 $ 9,756 ' Below is a reconciliation of the above schedule of total claims payable to the financial statements(in thousands): Current Claims Payable-Reported on the Balance Sheet of Both the ' Government-Wide and Fund Statements $ 5,800 Claims Payable-Long-Term(Greater than One Year)-Reported in Government-Wide Statements,but not in Fund Statements 3,956 Total $ 9,756 ' 43 City of Huntington Beach _ Notes to Financial Statements ' For the Year Ended September 30, 2006 I 9. INTERFUND TRANSACTIONS a. Due To/From Other Funds ' The amounts at Year end were (in thousands): Due from Other Due to Other Funds Funds ' Governmental Funds Gas Tax $ 771 $ - Drainage - 771 Total Due to/from and Advances to/from ' Other Funds Governmental Funds $ 771 $ 771 Proprietary Funds Water 36 - ' Refuse - 36 Total all Funds $ 36 $ 36 These outstanding balances result mainly from short-term borrowings to cover ' payments for goods and services. b. Advances to/from Other Funds ' There is $1,836,000 advanced from the General Fund to the Park Acquisition and ' Development Fund (a non-major governmental fund) for closed school site purchases. The amount will be repaid in 2 years. c. Transfers In/Out , The amounts at Year end were (in thousands): ' Transfers Out on- afor ota ' General Redevelopment 74al vernment Governmental Transfers In Fund A enc Grants Funds Funds General Fund $ 22 $ 5,539 $ 364 $ 1,129 $ 7,054 Public Financing Authority 5,961 79 - 172 6,212 Grants 68 4,000 449 9 4,526 ' Non-Major Governmental Funds 2,057 - - 83 2,140 Total Governmental Funds 8,108 9,618 813 1,393 19,932 Refuse Fund 143 143 Total Transfers Out $ 8,251 $ 9,618 $ 813 $ 1,393 $ 20,075 Transfers Out Non-Major Total Enterprise Enterprise Tot��;] Transfers In Water Fund Sewer Fund Funds Funds General Fund $ 32 $ 25 $ 194 $ 251 $ 7,305 Public Financing Authority - - 356 356 6,568 ' Grants - - - - 4,526 Non-Major Governmental Funds - - - - 2,140 Total Governmental Funds 32 25 550 607 20,539 Refuse Fund 143 Total Transfers Out $ 32 $ 25 $ 550 $ 607 $ 20,682 ' 44 City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 9. INTERFUND TRANSACTIONS (Continued) ' These transfers are mainly used to: • Move revenues from a specific fund to the specific debt service fund as payments become due • Move monies to specific funds to finance programs that the City wishes to or is ' required to account for in other funds • Close out or open specific funds per City Council direction 10. LONG-TERM OBLIGATIONS Below is a schedule of changes in long-term governmental obligations for the year (in thousands): ' October 1, September 30, Accrued Principal Due Within Governmental Activities: Note 2005 Additions Retirements 2006 Interest One Year Judgment Obligation Bonds 10(a) $ 12,245 $ $ (720) $ 11,525 $ 68 $ 730 Public Financing Authority: 1997 Leasehold Revenue Bonds 10(b)(1) 4,330 (640) 3,690 58 665 2000 Certificates of Participation 10(b)(2) 15,525 (640) 14,885 48 670 2001-a Lease Revenue Bonds 10(b)(3) 29,030 (630) 28,400 83 650 2001-b Lease Revenue Bonds 10(b)(4) 24,670 = (1,640) 23,030 96 1,690 Total Public Financing Authority 73,555 (3,550) 70,005 285 3,675 Redevelopment Agency: 1999 Tax Allocation Refunding Bonds 10(c)(1) 8,505 (350) 8,155 63 365 2002 Tax Allocation Refunding Bonds 10(c)(2) 18,700 (790) 17,910 133 815 Mayer Disposition and Development Agreement 10(c)(3) 10,083 579 (2,465) 8,197 - _ Bella Terra Parking 10(c)(4) 15,000 15,000 Section 108 Loan/Bowen Court 10(c)(5) 7,550 - (315) 7,235 86 340 Total Redevelopment Agency 44,838 15,579 (3,920) 56,497 282 1,520 ' Other Long-Term Obligations: California Energy Commission 116 (116) Leases Payable 10(d)(1) 3,461 614 (1,100) 2,975 727 ' Compensated Absences 10(d)(2) 9,045 2,858 (2,273) 9,630 = 2,000 Net Pension Obligation 10(d)(3) 7,640 752 (1,844) 6,548 Claims Payable 10(d)(4) 14,545 2,383 (12,972) 3,956 1,000 Total Other Long-Term Obligations 34,807 6,607 (18,305) 23,109 3,727 ' Total Long-Term Obligations- Governmental Activities $ 165,445 $ 22,186 $ (26,495) $ 161,136 $ 635 $ 9,652 ' 45 City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) Below are reconciliations from amounts in the above table to amounts in the accompanying government-wide financial statements (in thousands): Issuance of Long-Term Debt in Governmental Fund Financial Statements $ 15,579 Increase in Leases Payable 614 Increase in Net Pension Obligation 752 , Increase in Compensated Absences 2,858 Increase in Claims Payable 1,616 Increases in Above Schedule $ 21,419 ' Principal Paid in Governmental Fund Financial Statements $ 9,406 Decrease in Compensated Absences 2,273 Decrease in Net Pension Obligation 1,844 Decrease in Claims Payable 12,972 Decreases in Above Schedule $ 26,495 ' a. Judgment Obligation Bonds Year of Issuance 2004 Type of Debt Judgment Obligation Bonds Original Principal Amount $12,500,000 Security Council Appropriations Interest Rates 2.00% to 4.20% Interest Payment Dates February 1st and August 1st Principal Payment Dates February 1st ' Purpose of Debt Pay claims on court judgment Debt service requirements to maturity are (in thousands): , Year Ending Principal Interest Total September 30 2007 730 405 1,135 2008 745 389 1,134 ' 2009 765 369 1,134 2010 785 346 1,131 2011 810 320 1,130 ' 2012-2016 4,520 1,115 5,635 2017-2019 1 3,170 1 201 1 3,371 Total $ 11,525 1 $ 3,145 1 $ 14,670 ' 46 ' r r City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 r 10. LONG-TERM OBLIGATIONS (Continued) rb. Public Financing Authority r (1) 1997 Public Financing Authority Revenue Bonds ' Year of Issuance 1997 Type of Debt Lease Revenue Bonds Original Principal Amount $8,070,000 r Security Lease Agreement with City for Central Library Interest Rates 5.00% to 5.50% r Interest Payment Dates June 15 and December 15 Principal Payment Dates December 15 Purpose of Debt Construct Pier Plaza and rPurchase 800 MHZ System Debt service requirements to maturity are (in thousands): rYear Ending Principal Interest Total September 30 2007 665 181 846 2008 80 163 243 2009 85 159 244 1 2010 90 154 244 2011 95 149 244.0 2012-2016 550 663 1,213 2017-2021 720 489 1,209 2022-2026 950 262 1,212 r 2027-2028 455 26 481 Total $ 3,690 $ 2,246 $ 5,936 r r r r r47 City of Huntington Beach _ Notes to Financial Statements ' For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) (2) 2000 Public Financing Authority Certificates of Participation Year of Issuance 2000 ' Type of Debt Certificates of Participation Original Princi al Amount $18,310,000 Security Lease with City ' Interest Rates 4.0% to 5.0% Interest Payment Dates September 1 S and March 1 s Principal Payment Dates September 1 S I Purpose of Debt Capital improvements and defeasance of Emerald Cove Certificates of Participation Debt service requirements to maturity are (in thousands): Year Ending ' Principal Interest Total September 30 2007 670 774 1,444 2008 700 744 1,444 2009 730 714 1,444 2010 760 680 1,440 2011 490 645 1,135 2012-2016 2,815 2,850 5,665 2017-2021 3,655 2,018 5,673 2022-2026 2,510 1,132 3,642 2027-2029 2,555 358 2,913 , Total $ 14,885 $ 9,915 $ 24,800 (3) 2001(a) Public Financing Authority Lease Revenue Bonds Year of Issuance 2001 Type of Debt Lease Revenue Bonds Original Principal Amount $31,360,000 Security Lease Agreement with City for Public Buildings Interest Rates 2.45% to 5.0% Interest Payment Dates March 1 s and September 1 s Principal Payment Dates September 1st Purpose of Debt Construct Sports Complex and South Beach Phase II Improvements ' 48 , ' City of Huntington Beach Notes to Financial Statements „W For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) ' Debt service requirements to maturity are in thousands): q Y ( ) Year Ending Principal Interest Total September 30 2007 650 1,334 1,984 2008 675 1,312 1,987 2009 700 1,288 1,988 ' 2010 725 1,262 1,987 2011 750 1,234 1,984 2012-2016 4,260 5,668 9,928 ' 2017-2021 5,315 4,610 9,925 2022-2026 6,735 3,192 9,927 2027-2031 8,590 1,330 9,920 Total $ 28,400 1 $ 21,230 1 $ 49,630 (4) 2001(b) Public Financing Authority Lease Revenue Bonds ' Year of Issuance 2001 Type of Debt Lease Revenue Bonds ' Original Principal Amount $31,095,000 Security Lease on Civic Center Buildings ' Interest Rates 4.0% to 5.0% Interest Payment Dates August 1, February 1 Principal Payment Dates August 1 Purpose of Debt Defease Civic Improvement Corporation Certificates ' Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total September 30 2007 1,690 925 2,615 2008 1,745 875 2,620 2009 1,800 818 2,618 2010 1,880 737 2,617 2011 1,955 662 2,617 ' 2012-2016 10,985 2,100 13,085 2017-2019 1 2,975 1 286 1 31261 Total $ 23,030 1 $ 6,403 1 $ 29.433 ' 49 City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) c. Redevelopment Agency ' (1) 1999 Redevelopment Agency Tax Allocation Refunding Bonds Year of Issuance 1999 Type of Debt Tax Allocation Refunding Bonds Original Principal Amount $10,835,000 Security Tax Increment Interest Rates 3.00% to 5.05% ' Interest Payment Dates February 1 S and August 1 S Principal Payment Dates August 1S Purpose of Debt Prepay Agency's 1992 Loans to Public Financing Authority Debt service requirements to maturity are (in thousands): , Year Ending Principal Interest Total September 30 ' 2007 365 380 745 2008 380 365 745 2009 390 350 740 , 2010 410 334 744 2011 430 317 747 2012-2016 2,460 1,278 3,738 , 2017-2021 2,530 645 3,175 2022-2024 1,190 117 1,307 ' Total $ 8,155 $ 3,786 $ 11,941 (2) 2002 Redevelopment Agency Tax Allocation Refunding Bonds , Year of Issuance 2002 Type of Debt Tax Allocation Refunding Bonds Original Principal Amount $20,900,000 Security Tax Increment Interest Rates 2.00% to 5.00% Interest Payment Dates February 1S and August 1S Principal Payment Dates August 1" Purpose of Debt Prepay Agency's 1992 Loans to ' Public Financing Authority and fully defease 1992 Public Financing Authority bonds 50 , City of Huntington Beach Notes to Financial Statements y For the Year Ended September 30, 2006 ' 10. LONG-TERM OBLIGATIONS (Continued) Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total September 30 2007 815 798 1,613 2008 845 772 1,617 2009 870 742 1,612 ' 2010 910 712 1,622 2011 945 677 1,622 2012-2016 5,410 2,776 8,186 2017-2021 5,540 1,410 6,950 2022-2024 2,575 253 2,828 Total $ 17,910 $ 8,140 $ 26,050 ' (3) Mayer Disposition and Development Agreement In fiscal year 1996-97, the Agency entered into a disposition and development agreement with Robert Mayer Corporation (Corporation) concerning additional development adjacent to the Waterfront Hotel. Under the agreement, the ' Corporation would advance payments for the project costs with the Agency reimbursing up to$16,750,000 of the costs. As of Year end, the Agency obligation under the agreement amounted to $8,197,000 Project-generated revenues as available will repay these amounts over the time needed to fully amortize the advance. (4) Bella Terra Parking Structure ' In fiscal year 2005-06, the agency entered into an owner participation agreement with Bella Terra Associates, LLC (formerly Huntington Center Associates, LLC). ' Under the agreement the Corporation would construct various public improvements, including a parking structure, which would then be deeded to the City. The Agency would reimburse $15,000,000 of the costs of the public ' improvements. Project-generated revenues as available will repay these amounts over the time needed to fully amortize the advance. 51 City of Huntington Beach Notes to Financial Statements . � For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) (5) Section 108 Loan Year of Issuance 2000 Type of Debt Loan from Federal Government Original Principal Amount $8,570,000 Security Loan Agreement with Federal Government Interest Rates 7.7% Interest Payment Dates February 1 S and August 1 S , Principal Payment Dates August 1 S Purpose of Debt 1 Capital Improvements Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total September 30 2007 340 518 858 2008 365 493 858 2009 390 467 857 2010 415 439 854 2011 445 408 853 2012-2016 3,185 1,487 4,672 2017-2019 1 2,0951 339 1 2,434 Total I $ 7,235 1 $ 4,151 1 $ 11,386 d. Other Long-Term Obligations (1) Leases Payable The City entered into capital leases for various items: Year of Insurance 2001 through 2006 Type of Debt —Capital Leases Original Principal Amount Various $10,000 to $1,800,000 Security Lease Agreement Interest Rates 4.2% to 6.9% Interest Payment Dates Monthly, Quarterly, Semi-Annuall ' Principal Payment Dates Monthly, Quarterly, Semi-Annuall Purpose of Debt —Equipment Financing i 52 ' City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 i 10. LONG-TERM OBLIGATIONS (Continued) Future minimum lease maturity a ments to thousands payments Y are (in ): Year Ending Principal Interest Total September 30 2007 $ 727 $ 126 $ 853 2008 582 95 677 2009 516 67 583 2010 300 47 347 2011 284 33 317 2012-2013 1 566 1 29 1 595 Total 1 $ 2,975 1 $ 397 1 $ 3,372 (2) Compensated Absences There is no repayment schedule to pay the compensated absences amount of $9,630,000 relating to governmental operations. The General Fund typically liquidates the vacation and sick leave liability. (3) Net Pension Obligation There is no fixed repayment schedule to fund the actuarial liability for the ' unfunded net pension obligation totaling $6,548,000 for the City's Retirement Supplement Plan described in Note 6. The amount will be funded through a contribution rate determined by an independent actuarial study. (4) Claims Payable There is no repayment schedule for the claims payable of$3,956,000 described in note 8. The City pays the claims upon final settlement. e. Long-Term Obligations— Business Activities Below is a schedule of the long-term obligations of business activities(in thousands): October 1, September Accrued Principal Due Within Long-Term Obligations-Business Activities: 2005 Additions Retirements 30,2006 Interest One Year Compensated Absences 10(e)(1) 786 $ 82 $ - $ 868 $ $ - Leases Payable 10(e)(2) 112 (72) 40 40 Total Long-Term Obligations- Business Activities $ 898 $ 82 $ (72) $ 908 $ $ 40 53 City of Huntington Beach is Notes to Financial Statements i For the Year Ended September 30, 2006 WE I 10. LONG-TERM OBLIGATIONS (Continued) 1) Compensated Absences There is no repayment schedule for the compensated absences amount of $868,000 relating to business activities. (2) Leases Payable The City entered into capital leases for various items: Year of Issuance 1993 through 2003 Type of Debt Capital Leases Original Principal Amount Various Security Lease Agreement Interest Rates 4.4% to 6.2% Interest Payment Dates Monthly, Quarterly, Semi-Annually Principal Payment Dates Monthly, Quarterly, Semi-Annually Purpose of Debt I Equipment Financing Future minimum lease payments to maturity are (in thousands): Year Ending Principal Interest Total September 30 2007 $ 40 1 $ 1 $ 41 , f. Long-Term Obligations for which City is not Liable in any Manner Obligations Not Recorded in Financial Statements: October 1, September Community Facilities Districts: 2005 Additions Retirements 30,2006 Community Facilities District No. 1990-1 Special Tax Refunding Bonds 10(f)(1) $ 1,830 $ - $ (85) $ 1,745 Community Facilities District 2000-1 Special Assessment Tax Bonds 10(f)(2) 15,500 (265) 15,235 Community Facilities District NO.2002-1 Special Assessment Tax Bonds 10(f)(3) 4,895 (10) 4,885 Community Facilities District NO.2003-1 Special Assessment Tax Bonds 10(f)(4) 25,000 (440) 24,560 Total Community Facilities Districts 47,225 - (800) 46,425 Without City Commitment Debt 10(f)(5) 25,500 - - 25,500 Total Obligations Not Recorded in ' Financial Statements $ 72,725 $ - $ (800) $ 71,925 54 ' City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 t 10. LONG-TERM OBLIGATIONS (Continued) ' (1)Community Facilities District 1990-1 2001 Special Tax Refunding Bonds ' Year of Issuance 2001 Type of Debt Community Facilities District Assessment Bonds ' Original Principal Amount $2,155,000 Security Special Tax Levies Interest Rates 4.00% to 5.40% ' Interest Payment Dates Aril 1st and October 1st Principal Payment Dates October 1 S Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total September 30 - - - 2007 2008 90 88 178 ' 2009 95 84 179 2010 95 80 175 2011 100 75 175 2012-2016 595 291 886 2017-2021 1 770 1 109 1 879 Total 1 $ 1,745 1 $ 727 1 $ 2.472 (2) Community Facilities District 2000-1 2001 Special Tax Bonds Year of Issuance 2001 Type of Debt Community Facilities District ' Assessment Bonds Original Principal Amount $16,000,000 Security Special Tax Levies 1 Interest Rates 3.80% to 6.40% Interest Payment Dates September 1 St and March 1 S Principal Payment Dates September 1st Purpose of Debt Public Improvements for Grand Coast Resort t 55 City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) Debt service requirements to maturity are (in thousands): Year Ending September 30 Principal Interest Total 2007 280 956 1,236 2008 295 943 1,238 2009 305 928 1,233 2010 325 912 1,237 2011 340 895 1,235 ' 2012-2016 2,030 4,150 6,180 2017-2021 2,755 3,426 6,181 2022-2026 3,765 2,416 6,181 2027-2031 5,140 1,036 6,176 Total $ 15,235 $ 15,662 $ 30,897 (3) Community Facilities District 2002-1 Special Tax Bonds Year of Issuance 2002 Type of Debt Community Facilities District Assessment Bonds Original Principal Amount $4,900,000 Security Special Tax Levies Interest Rates 3.80% to 6.20% Interest Payment Dates March 15 and September 1S Principal Payment Dates September 1 S Debt service requirements to maturity are (in thousands): Year Ending principal Interest Total ' September 30 2007 15 298 313 2008 25 298 323 2009 30 296 326 2010 40 295 335 2011 50 293 343 2012-2016 390 1,417 1,807 2017-2021 730 1,271 2,001 2022-2026 1,215 994 2,209 2027-2031 1,905 532 2,437 2032 485 30 515 Total I $ 4,885 1 $ 5,724 $ 10,609 ' 56 i City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) ' (4) CommunityFacilities District 2003-1 Special Tax Bonds P 1 Year of Issuance 2003 Type of Debt Community Facilities District Assessment Bonds Original Principal Amount $25,000,000 Security Special Tax Levies Interest Rates 2.65% to 5.85% Interest Payment Dates March 1S and September 1S Principal Payment Dates September 1 s 1 Debt service requirements to maturity are (in thousands): 1 Year Ending Principal Interest Total September 30 2007 450 1,354 1,804 2008 465 1,340 1,805 2009 485 1,323 1,808 2010 500 1,305 1,805 2011 520 1,284 1,804 2012-2016 2,995 6,036 9,031 2017-2021 3,875 5,158 9,033 ' 2022-2026 5,130 3,897 9,027 2027-2031 6,825 2,212 9,037 2032-2033 3,315 294 3,609 Total $ 24,560 $ 24,203 $ 48,763 (5) Residential Development Bonds The Cityis involved in various bond issues where the City or Redevelopment Y p Agency issued bonds to assist in the financing of residential developments. A trustee holds all funds and payment cannot be made from any other source than the mortgages received. i 1 1 57 City of Huntington Beach _ Notes to Financial Statements ' For the Year Ended September 30, 2006 10. LONG-TERM OBLIGATIONS (Continued) These bond issues are (in thousands): ' Outstanding Original Issue 1 Bond Issue Yearend Amount Five Points Senior Project Multi-Family Housing $9,500 $9,500 Revenue Bonds - Series A- 1991 Huntington Breakers Mortgage Revenue Bonds $16,000 $16,000 Refunding Issue - 1996 Series A Total $25,500 $25,500 11. CAPITAL ASSETS a. Changes in Capital Assets , Capital asset activity for the year was (in thousands): October 1, September 30, Governmental Activitites 2005 Additions Dispositions 2006 Capital Assets, Not Depreciated: Land $ 334,636 3,827 - $ 338,463 Construction in Progress - 2,448 - 2,448 Joint Ventures 1,321 - (37) 1,284 Total Capital Assets-Not Depreciated 335,957 6,275 (37) 342,195 Capital Assets Being Depreciated Buildings 127,238 11,527 - 138,765 Machinery and Equipment 54,276 6,010 (2,446) 57,840 Infrastructure 300,456 - (7,917) 292,539 Total Capital Assets Being Depeciated 481,970 17,537 (10,363) 489,144 Less Accumulated Depreciation: Buildings (27,658) (2,600) (30,258) Machinery and Equipment (35,831) (4,480) 2,416 (37,895) Infrastructure (152,589) (1,349) - (153,938) Total Accumulated Depreciation (216,078) (8,429) 2,416 (222,091) Total Depreciated-Net 265,892 9,108 (7,947) 267,053 Total Capital Assets 817,927 23,812 (10,400) 831,339 Total Accumulated Depreciation (216,078) (8,429) 2,416 (222,091) Capital Assets of Governmental Activitites-Net $ 601,849 $ 15,383 $ (7,984) $ 609,248 t 58 City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 11. CAPITAL ASSETS (Continued) October 1, September 30, Business Activities: 2005 Additions Dispositions 2006 ' Capital Assets, Not Depreciated: Land $ 7,840 - $ 7,840 Construction in Progress 1,189 4,143 (1,189) 4,143 Total Capital Assets-Not Depreciated 9,029 4,143 (1,189) 11,983 Capital Assets Being Depreciated Buildings 46,924 1,189 48,113 Machinery and Equipment 10,235 422 (75) 10,582 Infrastructure 100,242 9,126 (485) 108,883 Total Capital Assets Being Depeciated 157,401 10,737 (560) 167,578 Less Accumulated Depreciation: Buildings (8,702) (1,201) - (9,903) Machinery and Equipment (4,047) (1,095) 75 (5,067) Infrastructure (51,502) (1,863) 465 (52,900) Total Accumulated Depreciation (64,251) (4,159) 540 (67,870) Total Depreciated-Net 93,150 6,578 (20) 99,708 Total Capital Assets 166,430 14,880 (1,749) 179,561 Total Accumulated Depreciation (64,251) (4,159) 540 (67,870) Capital Assets of Governmental Activitites-Net $ 102,179 $ 10,721 $ (1,209) $ 111,691 b. Depreciation Expense Depreciation in governmental activities was charged to the following functions/programs in the Statement of Activities (in thousands) Department: 1 City Council $ - City Administrator 32 City Treasurer 33 City Attorney 4 City Clerk 3 Finance 60 Planning 13 Building and Safety 229 Fire 554 Information Services 988 Police 774 Economic Development 1 Community Services 1,056 Library Services 402 Public Works 2,903 Non-Departmental 1,377 Total $ 8,429 59 City of Huntington Beach _ Notes to Financial Statements , For the Year Ended September 30, 2006 11. CAPITAL ASSETS (Continued) Depreciation in business activities was charged to the following functions/programs in , the Statement of Activities (in thousands): Fund: , Water $ 3,058 Sewer Service 879 Emerald Cove 82 Fire Medical Program 129 Ocean View Estates 11 Total $ 4,159 c. Capital Assets Acquired via Capital Leases At year-end the City's assets acquired through outstanding capital leases (see note 10) were (in thousands): Governmental Business-Type Activities Activities Machinery and Equipment $ 6,162 $ 824 Less: Accumulated Depreciation (2,797) (340) Total $ 3,365 $ 484 i 1 i 60 , 1 City of Huntington Beach Notes to Financial Statements For the Year Ended September 30, 2006 12. COMMITMENTS AND CONTINGENCIES 1 a. Legal Actions g ' There are legal actions pending against the City resulting from normal operations. In the opinion of management and the City Attorney, the financial resolution of these actions should not have a significant impact on these financial statements. b. Huntington Beach Union High School District (HBUHSD) Sharing Agreement In 1997 the City Council agreed to pay the HBUHSD certain increased sales tax revenues relating to the development of a new commercial site by Home Depot. The City will retain the first $50,000 of annual increased sales tax revenues and will pay HBUHSD a portion of the amount over $50,000 until the year 2015/2016. c. Disposition and Development and Owner Participation Agreements In June 1999, the Redevelopment Agency entered into a disposition and ' development agreement with the CIM Group, LLC to allow development of a hotel, retail and restaurant improvements and a public parking facility. The project costs are to be paid initially by the developer with the Agency reimbursing the developer a 1 maximum of$7.9 million pursuant to a Third Implementation Agreement approved on October 21, 2002. The Fourth Implementation Agreement provided a maximum Agency cost for additional parking spaces $1,500,000. The Fifth Implementation Agreement, dated July 19, 2004, clarified certain provisions in the DDA relating to the Agency Participation Payment, Acquisition costs and indemnification obligations. On September 2, 2003 the Redevelopment Agency Approved a Cooperation Agreement Regarding Capital Improvements in the Southeast Coastal Redevelopment Project with the City. This agreement commits the Redevelopment ' Agency to reimburse the City for a number of capital improvement projects to be undertaken as part of the Five Year Capital Improvement Program in the Southeast Redevelopment project area starting in FY 2003/04 as they are undertaken. 61 t City of Huntington Beach Notes to Financial Statements MA 0I-- For the Year Ended September 30, 2006 12. COMMITMENTS AND CONTINGENCIES (Continued) d. Redevelopment Agency Debt to City ' The City has advanced money to the Redevelopment Agency for capital improvements and operations. There is no fixed repayment schedule for these advances and the Council/Agency has no requirement for the timing of any repayment. Accordingly, the City has not recorded the advances in the accompanying financial statements. These advances have been made since 1984 and include direct advances of cash, overhead charges, deferred development fees, deferred land sales, and interest. Below is a schedule of the activity for the year(in ' thousands): Amount @ Amount @ 10/1/05 Reductions Additions 9/30/06 General Fund Direct Advances $ 3,766 $ 3,766 Overhead Charges 6,567 6,567 Land Sales 32,833 32,833 Interest 34,368 (5,553) 2,940 31,755 Total General Fund 77,534 (5,553) 2,940 74,921 Sewer Fund Direct Advances 131 - 131 Deferred Development Fees 38 - 38 Interest 189 13 202 Total Sewer Fund 358 - 13 371 Drainage Fund Direct Advances 250 - 250 Deferred Development Fees 54 54 Interest 374 26 400 Total Drainage Fund 678 - 26 704 Park Acquisition and Development Fund Direct Advances 1,741 - - 1,741 Deferred Development Fees 247 247 Interest 2,717 177 2,894 Total Park Acquisition and Development Fund 4,705 - 177 4,882 Capital Improvement Fund Direct Advances 470 470 Interest 315 19 334 Total Capital Improvement Fund 785 - 19 804 Water Fund Direct Advances 1,138 1,138 Interest 2,157 124 2,281 Total Water Fund 3,295 - 124 3,419 Total All Funds $ 87,355 $ (5,553) $ 3,299 $ 85,101 The cash a re ments are recorded as transfers from the Redevelopment Agency to ' repayments p 9 Y the fund receiving the repayment. 62 , City of Huntington Beach _ Notes to Financial Statements For the Year Ended September 30, 2006 13. OTHER INFORMATION a. Expenditures Exceeding Appropriations Expenditures exceeded appropriations at the departmental level in the funds shown (in thousands): Major Funds Nondepartmental $ 449 Redevelopment Agency- Economic Development 254 Grants- Public Works 133 Other Non-Major Funds Transportation Public Works 14 Sewer Development- Public Works 2 ' b. Fund and Accumulated Deficits The Drainage Fund had a total fund deficit of$777,000 at year end. The deficit will Ibe eliminated through monitoring of expenditures. c. Participation Payments The revenue from participation payments are received in-lieu of having to pay certain fees or for acquiring land. 14. SUBSEQUENT EVENTS 1 On October 16, 2006 the Redevelopment Agency approved an Owner Participation Agreement with Makallon Atlanta Huntington Beach, LLC (also know as Makar) to develop a 31-acre site in the Main-Pier sub-area of the Huntington Beach ' Redevelopment Project (Pacific City). Makar will advance $5,500,000 to the Redevelopment Agency to fund the Agency's obligation for the Regional Urban Runoff Treatment System and the Pacific View Drive Extension. The advance will be repaid over 20 years from tax increment generated from the site. 15. PRIOR PERIOD ADJUSTMENT The City determined that the claims payable balance was overstated by $8,130,000 as of September 30, 2006. Government-Wide Financial Statements Beginning Net Assets-Governmental Activities $ 559,350 Prior Period Adjustment 8,130 Beginning Net Assets-Governmental Activities(Restated) $ 567,480 ' 63 THIS PAGE INTENTIONALLY LEFT BLANK i 1 1 i 1 1 1 1 1 1 i r � Required Supplementary Information 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 City of Huntington Beach Required Supplementary Information Yearend Budgetary Information The City Council must annually adopt a budget by September 30 of the prior fiscal year. The budgeted expenditures become the appropriations to the various departments. The budget includes estimates for revenue that, along with the appropriations, compute the budgetary fund balance. The appropriated budget covers substantially all governmental fund expenditures with the exception of capital improvement projects (capital projects funds) carried forward from prior years, which constitute a legally authorized non-appropriated budget. The City Council may amend the budget at any time. The City Administrator may transfer funds from between object purposes (personal services, operating expenditures or capital outlay expenditures)within the same department without changing the total departmental budget. Department heads may transfer funds from like object categories of the same department. The City Council must approve any changes to departmental budgets. Expenditures may not exceed appropriations at the departmental level. All unused appropriations lapse at year-end. During the year the City Council made several supplemental appropriations with included carryovers of prior year encumbrances all of which were within available fund balance and estimated revenue amounts. The City Council adopts governmental fund budgets consistent with generally accepted principles as legally required. There are no significant non-budgeted financial activities. Revenues for special revenue funds are budgeted by entitlements, grants and estimates of future development and economic growth. Expenditures and transfers are budgeted based upon available financial resources. On or before May 31 of each year, each department submits data to the City Administrator for budget , preparation. Staff prepares the budget by fund, function and activity. The budget includes information on past years, current year estimates and requested appropriations for the next fiscal year. Before August 1, the City Council receives the proposed budget. The City Council holds public hearings and may amend the budget by a majority vote. Changes to the budget must be within the available revenues and reserves. These financial statements show budgetary data for the General, Special Revenue, Capital Projects and Debt Service Funds. The original budget, revised budget, actual expenditures, and variance , amounts are shown. The City uses an encumbrance system as an aid in controlling expenditures.When the City issues a purchase order for goods or services, it records an encumbrance until the vendor delivers the goods or performs the service. At year-end, the City reports all outstanding encumbrances as reservations of fund balance in governmental fund types. The City reappropriates these encumbrances into the ' new fiscal year. Below is a schedule of a budget to actual comparison of the General and Grant Fund's Revenues, and Expenditures (in thousands): 64 , CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2006 (In Thousands) General Fund REVENUES Original Budget Final Budget Actual Variance Property Taxes $53,700 $53,700 $55,168 $ 1,468 Sales Taxes 22,538 22,538 24,003 1,465 Utility Taxes 20,867 20,867 21,170 303 Other Taxes 12,641 12,641 13,226 585 Licenses and Permits 6,614 6,884 7,209 325 Fines,Forfeitures and Penalties 4,829 4,829 4,288 (541) From Use of Money and Property 9,414 9,414 12,084 2,670 ' From Other Agencies 9,534 9,272 5,367 (3,905) Charges for Current Service 13,320 13,320 13,876 556 Other 1,171 2,171 3,224 1,053 Total Revenues 154,628 155,636 159,615 3,979 EXPENDITURES Current: City Council 300 300 271 29 City Administrator 8,841 9,042 5,504 3,538 City Treasurer 1,970 1,630 1,446 184 ' City Attorney 3,210 2,701 2,272 429 City Clerk 913 940 828 112 Finance 3,134 3,555 3,283 272 Planning 3,133 4,016 2,660 1,356 Building 3,856 3,949 3,577 372 Fire 24,008 23,993 23,866 127 Information Services 7,667 7,730 6,540 1,190 Police 49,431 50,038 49,752 286 Economic Development 1,252 1,325 1,121 204 Community Services 12,869 13,211 13,151 60 Library Services 3,659 3,651 3,129 522 Public Works 28,223 29,279 24,752 4,527 Non-Departmental 12,624 12,016 12,465 (449) ' Debt Service: Principal 1,653 1,605 1,607 (2) Interest 145 145 145 Total Expenditures 166,888 169,126 156,369 12,757 Excess(Deficiency)Of Revenues Over(Under)Expenditures (12,260) (13,490) 3,246 (8,778) ' OTHER FINANCING SOURCES(USES) Transfers In 6,954 7,276 7,305 29 Transfers Out (8,020) (9,102) (8,251) 851 ' Total Other Financing Sources(Uses) (1,066) (1,826) (946) 880 Excess Of Revenues And Other Souces Over(Under)Expenditures And Other Uses (13,326) (15,316) 2,300 (7,898) ' Fund Balance-Beginning Of Year 38,286 38,286 38,286 Fund Balance-End Of Year $ 24,960 $ 22,970 $ 40,586 $ (7,898 65 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2006 (In Thousands) Grants , REVENUES Original Budget Final Budget Actual Variance From Use of Money and Property $ 218 $ 258 $ 528 $ 270 From Other Agencies 4,358 9,970 3,348 (6,622) Other 17 17 - (17) Total Revenues 4,593 10,245 3,876 (6,369) EXPENDITURES Current: Planning 174 174 140 34 ' Building 1,019 152 867 Fire 562 1,009 468 541 Police 300 560 361 199 EconomicDevelopment 2,100 2,100 568 1,532 CommunityServices 199 339 218 121 LibraryServices 74 159 108 51 PublicWorks 55 8 141 (133) CapitalOutlay 10,451 18,260 2,353 15,907 DebtService: Principal 95 95 95 - Interest 183 206 206 - Total Expenditures 14,193 23,929 4,810 19,119 Excess Of Revenues Over(Under) ' Expenditures (9,600) (13,684) (934) (25,488) OTHER FINANCING SOURCES(USES) Transfers In 4,517 4,526 9 Transfers Out (650) (813) (163) Total Other Financing Sources(Uses) 3,867 3,713 (154) Excess Of Revenues And Other Sources Over(Under)Expenditures And Other Uses (9,600) (9,817) 2,779 (25,642) Fund Balance-Beginning of Year - 4,283 4,283 , Fund Balance-End Of Year $ (9,600) $ (9,817) $ 7,062 $ (25,642) 66 , CITY OF HUNTINGTON BEACH REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED SEPTEMBER 30,2005 SCHEDULE OF FUNDING PROGRESS RETIREMENT PLAN-NORMAL (In Thousands) Entry Age Normal Excess Assets Excess Assets as a Actuarial Actuarial Accrued Actuarial Value of (Unfunded Percentage of Valuation Date Liability(AAL) Assets Liability) Funded Ratio Covered Payroll Covered Payroll 2001 1 Safety 211,411 $ 211,211 $ 11,842 104.2% 1 21,111 42.7% Non Safety 177,467 237,108 59,641 133.6% 35,985 165.7% Total $ 460,905 $ 532,388 $ 71,483 115.5% $ 63,702 112.2% 2002 Safety $ 299,052 $ 272,367 $ (26,685) 91.1% $ 23,270 -114.7% Non Safety 191,997 223,364 31,367 116.3% 37,811 83.0% Total $ 491,049 $ 495,731 $ 4,682 101.0% $ 61,081 7.7% 2003 Safety $ 320,670 $ 270,538 $ (50,132) 84.4% $ 28,919 -173.4% Non Safety 222,221 225,689 3,468 101.6% 36,918 9.4% Total $ 5422891 $ 496,227 $ (46,664) 91.4% $ 65,837 -70.9% 2004 Safety $ 339,301 $ 280,745 $ (58,556) 82.7% $ 27,412 -213.6% Non Safety 234,602 236,189 1,587 100.7% 36,143 4.4% Total $ 573,903 $ 516,934 $ (56,969) 115.5% $ 63,555 -89.6% ' 2005 Safety $ 356,782 $ 296,477 $ (60,305) 83.1% $ 29,081 -207.4% Non Safety 253,268 249,443 (3,825) 98.5% 37,343 -10.2% ' Total $ 610,050 $ 545,920 $ (64,130) 115.5% $ 66,424 -96.5% CITY OF HUNTINGTON BEACH REQUIRED SUPPLEMENTARY INFORMATION ' FOR THE YEAR ENDED SEPTEMBER 30, 2005 SCHEDULE OF FUNDING PROGRESS RETIREMENT PLAN-SUPPLEMENTAL ' (In Thousands) Actuarial Entry Age Normal Actuarial Value of Unfunded AAL UAAL as a%of 1 Valuation Date Accrued Liability Assets (UAAL) Funded Ratio Covered Payroll Covered Payroll 6/30/95 Update 15 776 290 (16,066) -1.8% 51,779 -31.0% 6/30/96 Actual 16,071 120 16 191 -0.7% 54,368 -29.8% 6/30/1997 Actual 25 342 2,334 (23,008) 9.2% 49,881 -46.1% ' 6/30/98 Update 26,493 3,251 (23,242) 12.3% 48,585 -47.8% 6/30/99 Actual 28,601 4,162 (24,439) 14.6% 50,723 -48.2% 6/30/2000 Update 28 844 5,077 (23,767) 17.6% 57,674 -41.2% 6/30/2001 Actual 36 453 6,678 (29,775) 18.3% 63,345 -47.0% ' 6/30/2002 Update 35,524 8,775, (26,749) 24.7% 65,137 -41.1% 6/30/2003 Actual 40,436, 10,474, 29 962 25.9% 65,227 -45.9% 6/30/2004 Update 40,978 11,936 29,042 29.1% 63,538 -45.7% 6/30/2005 Acutal 40,8731 14,227 26,646 34.8% 1 65,843 1 -40.5% 9/30/2006Update 43,0661 16,821 26,245 39.1% 1 72,186 1 -36.4% i67 THIS PAGE INTENTIONALLY LEFT BLANK ' � Supplementary Information 1 1 1 t 1 1 1 1 1 1 1 1 1 1 1 i THIS PAGE INTENTIONALLY LEFT BLANK , i 1 1 1 1 1 i 1 Other Governmental Funds ISpecial Revenue Funds account for revenues and e I p expenditures legally restricted to a specific purpose. • The Gas Tax Fund accounts for moneys allocated underthe Streets and Highways Code of California.Expenditures may be made for any street-related purpose allowed under the code. • The Drainage Fund accounts for fees received from developers to construct and maintain the City's drainage system. ' • The Narcotics Forfeiture Fund accounts for moneys received from the State of California for special law enforcement expenditures. • The Transportation Fund accounts for moneys received from the countywide%cent sales tax and other specific sources to be spent on transportation-related expenditures. • The Air Quality Fund accounts for revenues from the local agencies used to improve local air quality. • The Traffic Impact Fee Fund accounts for moneys received from the traffic impact fee levied on new developments in the City. ' The Fourth of July Parade Fund accounts for the activities of the City's annual parade. • The Special Library Fund accounts for revenues and expenditures related to the expanded Central Library including some construction. ' The Cultural Affairs Fund accounts revenues and expenditures associated with the City's Art Center. • The Park Acquisition and Development Fund accounts for fees received from developers to develop and maintain the City's park system. Debt Service Funds account for the receipts for and payment of general long-term debt. • The Property Tax Refund Fund records the payment of claims for repayment of the Judgment Obligation Bonds. Capital Projects Funds account for the acquisition and construction of capital assets other than those financed by proprietary fund types. • The Holly Seacliff Fund accounts for capital improvements made to the Holly Seacliff area. • The Parking in-lieu Fund records construction activity from developers who pay fees in-lieu of directly providing parking facilities to the City. • The Sewer Development Fund accounts for fees received from developers to construct and maintain sewer facilities. • The Bella Terra Parking Structure Fund accounts for the fees paid by the developer for expenses related to the Bella Terra Parking Structure. ' 68 r CITY OF HUNTINGTON BEACH ' BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30,2006 (In Thousands) i SPECIAL REVENUE FUNDS Narcotics ASSETS Gas Tax Drainage Forfeiture Transportation Cash and Investments $ 8,382 $ - $ 566 $ 2,966 Cash and Investments with Fiscal Agent - - - Other Receivables 707 4 427 Due from Other Funds 771 - - - Other Assets - - - , Total Assets $ 9,860 $ - $ 570 $ 3,393 LIABILITIES , Accounts Payable $ 606 $ 6 $ - $ - Accrued Payroll 8 - - 9 Due to Other Funds - 771 - - Advances from Other Funds - - - Deposits Payable - - - - Total Liabilities $ 614 $ 777 $ - $ 9 FUND BALANCES Reserved for: Encumbrances 1,881 - 90 815 Total Reserved Fund Balances 1,881 - 90 815 ' Unreserved Fund Balances Unreserved, Designated for Future Expenditures 7,365 - 254 251 Undesignated - (777) 226 2,318 Total Unreserved Fund Balance 7,365 (777) 480 2,569 Total Fund Balances 9,246 (777) 570 3,384 Total Liabilites and Fund Balances $ 9,860 $ - $ 570 $ 3,393 r r r r r 69 ' ' CITY OF HUNTINGTON BEACH BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2006 (In Thousands) SPECIAL REVENUE FUNDS ' Park Acquisition and Total Special Air Quality Traffic Impact Fourth of July Special Library Cultural Affairs Development Revenue Funds $ 899 $ 7,543 $ 105 $ 703 $ 185 $ 4,249 $ 25,598 7 61 1 5 1 57 1,270 - - - - - 771 1,266 1,266 $ 906 $ 7,604 $ 106 $ 708 $ 186 $ 5,572 $ 28,905 ' $ - $ 122 $ 3 $ 18 $ 15 $ 8 $ 778 2 - 11 4 2 36 - - _ - 771 1,836 1,836 1,266 1,266 $ $ 124 $ 3 $ 29 $ 19 $ 3,112 $ 4,687 ' 40 450 7 16 - 288 3,587 40 450 7 16 288 3,587 262 6,760 96 354 - 1,363 16,705 604 270 - 309 167 809 3,926 866 7,030 96 663 167 2,172 20,631 906 7,480 103 679 167 2,460 24,218 $ 906 $ 7,604 $ 106 $ 708 $ 186 $ 5,572 $ 28,905 1 70 CITY OF HUNTINGTON BEACH BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS ! SEPTEMBER 30, 2006 (In Thousands) (continued) Debt Service ! Fund Ca ital Projects Funds Property Tax Sewer ASSETS Refund Holly Seacliff Parking in-lieu Development Cash and Investments $ 1,539 $ 188 $ 888 $ 639 Cash and Investments with Fiscal Agent 2,493 - Other Receivables 40 2 8 5 Due from Other Funds - Other Assets - - - Total Assets $ 4,072 $ 190 $ 896 $ 644 LIABILITIES , Accounts Payable $ 2 $ - $ - $ - Accrued Payroll - 1 Due to Other Funds - - - Advances from Other Funds - - - ! Deposits Payable 48 - Total Liabilities $ 50 $ - $ - $ 1 FUND BALANCES ! Reserved for: Encumbrances - 165 - Total Reserved Fund Balances - 165 - ! Unreserved Fund Balances Unreserved, Designated for Future Expenditures - 14 - 138 Undesignated 4,022 11 896 505 Total Unreserved Fund Balance 4,022 25 896 643 Total Fund Balances 4,022 190 896 643 Total Liabilites and Fund Balances $ 4,072 $ 190 $ 896 $ 644 ' ! ! ! 71 ' CITY OF HUNTINGTON BEACH BALANCE SHEET ' NON-MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2006 (In Thousands) (continued) Ca ital Projects Funds Bella Terra Total Non-Major Parking Total Capital Governmental Structure Infrastructure Projects Funds Funds $ 7 $ 1,061 $ 2,783 $ 29,920 2,493 9 24 1,334 - - - 771 1,266 $ 7 $ 1,070 $ 2,807 $ 35,784 ' $ - $ - $ - $ 780 1 37 ' - - - 771 1,836 1,314 $ $ - $ 1 $ 4,738 - = 165 3,752 165 3,752 1,056 1,208 17,913 7 14 1,433 9,381 7 1,070 2,641 27,294 7 1,070 2,806 31,046 $ 7 $ 1,070 $ 2,807 $ 35,784 72 CITY OF HUNTINGTON BEACH ' COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS ' FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) Special Revenue Funds Narcotics REVENUES Gas Tax Drainage Forfeiture Transportation Sales Taxes $ $ $ - $ 2,445 Licenses and Permits - - From Use of Money and Property 252 23 164 From Other Agencies 5,713 - 16 - Charges for Current Service - 93 - - Other 3 - - 70 Total Revenues 5,968 93 39 2,679 EXPENDITURES Current: City Administrator - - - - Police - 38 Economic Development - - ' Community Services - Library Services - - - Public Works 2,168 - - 913 Capital Outlay 1,727 - 46 3,622 ' Debt Service: Principal - - - - Interest - - - - Total Expenditures 3,895 - 84 4,535 Excess Of Revenues Over (Under)Expenditures 2,073 93 (45) (1,856) Other Financing Sources(Uses): Transfers In - - Transfers Out (937) - Total Other Financing Sources Sources(Uses) (937) - - Net Change in Fund Balances 1,136 93 (45) (1,856) Fund Balance-Beginning Of Year 8,110 (870) 615 5,240 Fund Balance-End Of Year $ 9,246 $ (777) $ 570 $ 3,384 73 iCITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES, EXPENDITURES ' AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (In Thousands) (continued) Debt Service Sp ecial Revenue Funds Fund Park Acquisiton Total Special Special Cultural and Revenue Property Tax Air Quality Traffic Impact Fourth of July Library Affairs Development Funds Refund $ $ - $ - $ - $ - $ - $ 2,445 $ 6 3 9 33 341 37 473 10 159 1,492 183 239 540 55 - - 817 7,380 428 123 661 167 1,197 2,669 - - 104 11 80 402 670 - 272 1,315 319 1,148 257 2,575 14,665 183 4 - - 38 - 336 - 297 380 1,013 - - - 1,122 - - 1,122 45 429 - - 3,555 25 2,391 4,163 11,974 - - - - - 720 - - - - - 424 70 2,820 336 1,122 297 4,543 17,702 1,148 ' 202 (1,505) (17) 26 (40) (1,968) (3,037) (965) 83 83 1,065 (456) - (1,393) - - - - (456) 83 - (1,310) 1,065 202 (1,505) (17) (430) 43 (1,968) (4,347) 100 704 8,985 120 1,109 124 4,428 28,565 3,922 $ 906 $ 7,480 $ 103 $ 679 $ 167 $ 2,460 $ 24,218 $ 4,022 74 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) (continued) Capital Projects Funds Bella Terra ' Sewer Parking REVENUES Holly Seacliff Parking In-Lieu Development Structure Sales Taxes $ - $ - $ - $ Licenses and Permits - 212 2 From Use of Money and Property 9 54 20 From Other Agencies - - 12 504 Charges for Current Service - 287 - Other - 249 Total Revenues 9 515 321 504 EXPENDITURES Current: City Administrator - Police - - - Economic Development - - 497 ' Community Services - - - - Library Services - - - Public Works - - - Capital Outlay - - 43 Debt Service: Principal - - - Interest - - - - Total Expenditures - - 43 497 Excess Of Revenues Over (Under)Expenditures 9 515 278 7 Other Financing Sources(Uses): ' Transfers In - - - - Transfers Out - Total Other Financing Sources Sources(Uses) - - - - Net Change in Fund Balances 9 515 278 7 Fund Balance-Beginning Of Year 181 381 365 - Fund Balance-End Of Year $ 190 $ 896 $ 643 $ 7 ' 75 t CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES, EXPENDITURES ' AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 ' (In Thousands) (continued) ' Capital Projects Total Non-Major Total Capital Governmental Infrastructure Projects Funds Funds ' $ - $ - $ 2,445 214 223 13 96 1,771 ' - 516 7,896 287 2,956 - 249 919 13 1,362 16,210 4 ' - 38 497 497 1,013 1,122 ' = 3,555 43 12,017017 - 720 _ - 424 540 19,390 13 822 (3,180) 992 992 2,140 - (1,393) ' 992 992 747 1,005 1,814 (2,433) 65 992 33,479 ' $ 1,070 $ 2,806 $ 31,046 1 ' 76 CITY OF HUNTINGTON BEACH ' SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) ' Gas Tax ' REVENUES: Original Budget Final Budget Actual Variance From Use of Money and Property $ 119 $ 119 $ 252 $ 133 From Other Agencies 7,100 7,100 5,713 (1,387) ' Other - - 3 3 TOTAL REVENUES 7,219 7,219 5,968 (1,251) EXPENDITURES: ' Current: Public Works 2,897 2,897 2,168 729 Capital Outlay 9,552 9,552 1,727 7,825 TOTAL EXPENDITURES 12,449 12,449 3,895 8,554 ' EXCESS OF REVENUES OVER (UNDER)EXPENDITURES (5,230) (5,230) 2,073 (9,805) OTHER FINANCING SOURCES(USES): Transfers Out (1,194) (1,222) (937) 285 ' NET CHANGE IN FUND BALANCE (6,424) (6,452) 1,136 (9,520) FUND BALANCE-BEGINNING OF YEAR 8,110 8,110 8,110 - FUND BALANCE-END OF YEAR $ 1,686 $ 1,658 $ 9,246 $ (9,520) Drainage REVENUES: Original Budget Final Budget Actual Variance , Charges for Current Service $ 50 $ 50 $ 93 $ 43 FUND BALANCE-BEGINNING OF YEAR (748) (748) (870) (122) FUND BALANCE-END OF YEAR $ (698} $ (698) $ (777) $ (79) Narcotics Forfeiture REVENUES: Original Budget Final Budget Actual Variance , From Use of Money and Property $ 14 $ 14 $ 23 $ 10 From Other Agencies 163 163 16 (147) TOTAL REVENUES 177 177 39 (138) , EXPENDITURES: Current: Police 95 205 38 167 Capital Outlay 101 358 46 312 , TOTAL EXPENDITURES 196 563 84 479 NET CHANGE IN FUND BALANCE (19) (386) (45) (617) FUND BALANCE-BEGINNING OF YEAR 570 570 615 45 FUND BALANCE-END OF YEAR $ 551 $ 184 $ 570 $ (572) ' 77 ' CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND ' CHANGES IN FUND BALANCES-BUDGET AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 ' (In Thousands) (continued) ' Transportation REVENUES: Original Budget Final Budget Actual Variance Property Taxes Sales Taxes $ 2,200 $ 2,200 $ 2,445 $ 245 From Use of Money and Property 95 95 164 69 TOTAL REVENUES 2,295 2,295 2,679 384 EXPENDITURES: Current: Public Works 899 899 913 (14) Capital Outlay 5,096 5,096 3,622 1,474 TOTAL EXPENDITURES 5,995 5,995 4,535 1,460 EXCESS OF REVENUES OVER (UNDER)EXPENDITURES (3,700) (3,700) (1,856) 1,844 OTHER FINANCING SOURCES(USES): ' Transfers Out (150) (150) (150) NET CHANGE IN FUND BALANCE (3,850) (3,850) (1,856) 1,694 FUND BALANCE-BEGINNING OF YEAR 184 1,081 5,240 4,159 FUND BALANCE-END OF YEAR $ (3,666) $ (2,769) $ 3,384 $ 5,853 ' Air Quality ' REVENUES: Original Budget Final Budget Actual Variance From Use of Money and Property $ 10 $ 10 $ 33 $ 23 From Other Agencies 220 220 239 19 TOTAL REVENUES 230 230 272 42 EXPENDITURES: Current: Public Works 38 49 45 4 Capital Outlay 50 75 25 50 TOTAL EXPENDITURES 88 124 70 54 EXCESS OF REVENUES OVER ' (UNDER)EXPENDITURES 142 106 202 96 OTHER FINANCING SOURCES(USES): Transfers Out (150) (115) 115 NET CHANGE IN FUND BALANCE (8) (9) 202 211 ' FUND BALANCE-BEGINNING OF YEAR 351 351 704 353 FUND BALANCE-END OF YEAR $ 343 $ 342 $ 906 $ 5" ' 78 CITY OF HUNTINGTON BEACH ' SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL ' NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) , (continued) Traffic Impact ' REVENUES: Original Budget Final Budget Actual Variance ' Licenses and Permits $ - $ - $ 6 $ 6 From Use of Money and Property 153 153 341 188 From Other Agencies - - 540 540 Charges for Current Service 900 900 428 (472) ' TOTAL REVENUES 1,053 1,053 1,315 263 EXPENDITURES: Current: Public Works 989 989 429 560 ' Capital Outlay 5,222 5,222 2,391 2,831 TOTAL EXPENDITURES 6,211 6,211 2,820 3,391 NET CHANGE IN FUND BALANCE (5,158) (5,158) (1,505) 3,653 , FUND BALANCE-BEGINNING OF YEAR 3,201 3,034 8,985 5,951 FUND BALANCE-END OF YEAR $ (1,957) $ (2,124) $ 7,480 $ 9,604 Fourth of July , REVENUES: Original Budget Final Budget Actual Variance From Use of Money and Property $ 3 $ 3 $ 37 $ 34 ' From Other Agencies - - 55 55 Charges for Current Service - - 123 123 Other 400 400 104 (296) TOTAL REVENUES 403 403 319 (84) EXPENDITURES: Current: Community Services 407 407 336 71 NET CHANGE IN FUND BALANCE (4) (4) (17) (13) ' FUND BALANCE-BEGINNING OF YEAR 213 (10) 120 130 FUND BALANCE-END OF YEAR $ 209 $ 103 $ 117 79 ' CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND ' CHANGES IN FUND BALANCES-BUDGET AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) (continued) Library 1 REVENUES: Original Budget Final Budget Actual Variance Licenses and Permits $ - $ - $ 3 $ 3 From Use of Money and Property 428 428 473 45 Charges for Current Service 864 864 661 (203) Other 160 160 11 (149) TOTAL REVENUES 1,452 1,452 1,148 (304) EXPENDITURES: Current: ' Library Services 1,297 1,297 1,122 175 Capital Outlay 200 200 200 TOTAL EXPENDITURES 1,497 1,497 1,122 375 EXCESS OF REVENUES OVER ' (UNDER)EXPENDITURES (45) (45) 26 71 OTHER FINANCING SOURCES(USES): Transfers Out (473) (473) (456) 17 NET CHANGE IN FUND BALANCE (518) (518) (430) 88 FUND BALANCE-BEGINNING OF YEAR 1,265 1,306 1,109 (197) FUND BALANCE-END OF YEAR $ 747 $ 788 $ 679 $ (109 Cultural Affairs REVENUES: Original Budget Final Budget Actual Variance ' From Use of Money and Property $ 9 $ 9 $ 10 $ 1 Charges for Current Service 162 162 167 5 Other 88 88 80 (8) TOTAL REVENUES 259 259 257 (2) EXPENDITURES: Current: Community Services 334 333 297 36 ' EXCESS OF REVENUES OVER (UNDER)EXPENDITURES (75) (74) (40) 34 OTHER FINANCING SOURCES(USES): Transfers In 85 85 83 (2) ' NET CHANGE IN FUND BALANCE 10 11 43 32 FUND BALANCE-BEGINNING OF YEAR 124 124 124 FUND BALANCE-END OF YEAR $ 134 $ 135 $ 167 $ 32 80 CITY OF HUNTINGTON BEACH ' SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL , NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) ' (continued) Park Acquisition and Development REVENUES: Original Budget Final Budget Actual Variance From Use of Money and Property $ 57 $ 57 $ 159 $ 102 From Other Agencies - - 817 817 Charges for Current Service 926 926 1,196 270 Other - 403 403 TOTAL REVENUES 983 983 2,575 1,592 ' EXPENDITURES: Current: Community Services 952 969 380 589 ' Capital Outlay 4,631 4,614 4,163 451 TOTAL EXPENDITURES 5,583 5,583 4,543 1,040 NET CHANGE IN FUND BALANCE (4,600) (4,600) (1,968) 2,632 FUND BALANCE-BEGINNING OF YEAR 4,428 4,428 4,428 FUND BALANCE-END OF YEAR $ (172) $ (172) $ 2,460 $ 2,632 Property Tax Refund r REVENUES: Original Budget Final Budget Actual Variance From Use of Money and Property $ 23 $ 23 $ 183 $ 160 EXPENDITURES: Current: City Administrator 56 59 4 55 Debt Service: ' Principal 720 720 720 - Interest 539 539 424 115 TOTAL EXPENDITURES 1,315 1,318 1,148 170 EXCESS OF REVENUES OVER ' (UNDER)EXPENDITURES (1,292) (1,295) (965) 330 OTHER FINANCING SOURCES(USES): Transfers In 1,146 1,146 1,065 (81) NET CHANGE IN FUND BALANCE (146) (149) 100 249 ' FUND BALANCE-BEGINNING OF YEAR 3,922 3,922 3,922 - FUND BALANCE-END OF YEAR $ 3,776 $ 3,773 $ 4,022 $ 249 Holly Seacliff ' REVENUES: Original Budget Final Budget Actual Variance ' From Use of Money and Property $ 12 $ 12 $ 9 $ (3) EXPENDITURES: Current: ' Capital Outlay 165 165 - 165 NET CHANGE IN FUND BALANCE (153) (153) 9 162 FUND BALANCE-BEGINNING OF YEAR 181 181 181 - FUND BALANCE-END OF YEAR $ 28 $ 28 $ 190 $ 162 ' 81 ' CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) (continued) ' Parking in-Lieu REVENUES: Original Budget Final Budget Actual Variance ' Licenses and Permits $ - $ 171 $ 212 $ 41 From Use of Money and Property 6 6 54 48 Other - - 249 249 ' TOTAL REVENUES 6 177 515 338 FUND BALANCE-BEGINNING OF YEAR 94 94 381 287 FUND BALANCE-END OF YEAR $ 100 $ 271 $ 896 $ 624 ' Sewer Development REVENUES: Original Budget Budget Actual Variance Licenses and Permits $ $ - $ 2 $ 2 From Use of Money and Property 20 20 From Other Agencies - 12 12 ' Charges for Current Service 100 100 287 187 TOTAL REVENUES 100 100 321 221 EXPENDITURES: Current: ' Capital Outlay 16 41 43 (2) NET CHANGE IN FUND BALANCE 84 59 278 219 FUND BALANCE-BEGINNING OF YEAR 365 365 365 - FUND BALANCE-END OF YEAR $ 449 $ 424 $ 643 $ 219 Bella Terra Parking Structure ' REVENUES: Original Budget Final Budget Actual Variance From Other Agencies 504 504 $ - EXPENDITURES: Current: Economic Development 504 497 7 ' TOTAL EXPENDITURES - EXCESS OF REVENUES OVER 504 497 (7) NET CHANGE IN FUND BALANCE - - 7 7 ' FUND BALANCE-BEGINNING OF YEAR - - FUND BALANCE-END OF YEAR $ - $ - $ 7 $ 7 ' 82 CITY OF HUNTINGTON BEACH ' SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL ' NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) (continued) Infrastructure ' REVENUES: Original Budget Budget Actual Variance From Use of Money and Property $ $ - $ 13 $ 13 ' OTHER FINANCING SOURCES(USES): Transfers In 992 992 - NET CHANGE IN FUND BALANCE - 992 1,005 13 FUND BALANCE-BEGINNING OF YEAR 65 65 65 FUND BALANCE-END OF YEAR $ 65 $ 1,057 $ 1,070 $ 13 83 ' ' CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND ' CHANGES IN FUND BALANCES-BUDGET AND ACTUAL MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 ' (In Thousands) Public Financing Authority ' REVENUES Original Budget Final Budget Actual Variance From Use of Money and Property $ 330 $ 330 $ 305 (25) EXPENDITURES Debt Service: Principal 3,550 3,550 3,550 - Interest 3,394 3,394 3,361 33 Total Expenditures 6,944 6,944 6,911 33 Excess Of Revenues Over(Under)Expenditures (6,614) (6,614) (6,606) 8 OTHER FINANCING SOURCES(USES) ' Transfers In 6,589 6,589 6,568 (21) Net Changes in Fund Balance (25) (25) (38) (13) Fund Balance-Beginning Of Year 7,516 7,516 7,158 (358) Fund Balance-End Of Year $ 7,491 $ 7,491 $ 7,120 $ (371) Redevelopment Agency REVENUES Original Budget Final Budget Actual Variance Property Taxes $ 12,346 $ 12,346 $ 13,897 $ 1,551 From Use of Money and Property 1,009 1,009 1,773 764 Other 170 170 6,262 6,092 Total Revenues 13,525 13,525 21,932 8,407 EXPENDITURES Current: ' City Attorney 268 268 41 227 Economic Development 1,563 1,732 1,986 (254) Non-Departmental 1,446 1,446 975 471 Capital Outlay 4,650 19,864 15,804 4,060 Debt Service: Principal 3,825 3,825 3,825 Interest 4,500 4,500 2,376 2,124 Total Expenditures 16,252 31,635 25,007 6,628 Excess Of Revenues Over(Under)Expenditures (2,727) (18,110) (3,075) 1,779 OTHER FINANCING SOURCES(USES): Proceeds of Long-Term Debt 15,579 15,579 - Transfers Out (5,141) (9,890) (9,618) 272 ' Total Other Financing Sources(Uses) (5,141) 5,689 5,961 272 Excess Of Revenues And Other Sources Over Net Change in Fund Balance (7,868) (12,421) 2,886 2,051 Fund Balance-Beginning Of Year 29,107 29,107 29,107 - ' Fund Balance-End Of Year $ 21,239 $ 16,686 $ 319993 $ 2,051 t ' 84 THIS PAGE INTENTIONALLY LEFT BLANK ' ' Non-Major Enterprise Funds Enterprise Funds account for operations similar to private businesses. The City's intent is to recover the costs to the general public through user charges or where the City wished to periodically determine net income. • The Emerald Cove Housing Fund accounts for the operations of a senior-citizens apartment complex. • The_Emergency Fire Medical Fund accounts for the user-fee portion of the City's paramedic service. • The Hazmat Service Fund accounts for user fees charged for City's hazardous material program. • The Ocean View Estates Fund accounts for the operation of the Ocean View Estates Mobile Home Park owned by the City ' 85 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS SEPTEMBER 30,2006 , (In Thousands) Emerald Cove Emergency Fire Ocean View ASSETS Housing Medical Hazmat Service Estates Total ' CURRENT ASSETS: Cash and Investments $ 2,833 $ 2,005 $ 260 $ 1,551 $ 6,649 Other Receivables 23 1,079 14 13 1,129 TOTAL CURRENT ASSETS 2,856 3,084 274 1,564 7,778 , CAPITAL ASSETS: Land 1,289 - - 2,644 3,933 Buildings 4,102 - 560 4,662 Machinery and Equipment - 1,154 - 1,154 Less Accumulated Depreciation (1,723) (535) (78) (2,336) TOTAL CAPITAL ASSETS 3,668 619 3,126 7,413 TOTAL ASSETS 6,524 3,703 274 4,690 15,191 LIABILITIES AND NET ASSETS ' CURRENT LIABILITIES: Accounts Payable 50 126 - 4 180 Accrued Payroll - 46 3 1 50 Deposits Payable 43 - - 10 53 TOTAL CURRENT LIABILITIES 93 172 3 15 283 NON-CURRENT LIABILITIES: Compensated Absences 84 14 12 110 TOTAL LIABILITIES 93 256 17 27 393 NET ASSETS: Invested in Capital Assets,Net of Related Debt 3,668 619 - 3,126 7,413 Unrestricted 2,763 2,828 257 1,537 7,385 TOTAL NET ASSETS $ 6,431 $ 3,447 $ 257 $ 4,663 $ 14,798 86 ' 1 1 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES, EXPENSES 1 AND CHANGES IN NET ASSETS NON-MAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2006 (In Thousands) Emerald Cove I Emergency Fire Ocean View Housing Medical Hazmat Service Estates Total OPERATING REVENUES: Rentals $ 960 $ - $ - $ 273 $ 1,233 Fees for Service - 6,145 182 6,327 TOTAL OPERATING REVENUES 960 6,145 182 273 7,560 OPERATING EXPENSES: Supplies and Operations 469 5,508 163 109 6,249 Depreciation 82 129 11 222 TOTAL OPERATING EXPENSES 551 5,637 163 120 6,471 1 OPERATING INCOME(LOSS) 409 508 19 153 1,089 NON-OPERATING REVENUES(EXPENSES): Interest Income 120 68 15 61 264 CHANGE IN NET ASSETS BEFORE OPERATING TRANSFERS AND CAPITAL CONTRIBUTIONS 529 576 34 214 1,353 TRANSFERS AND CAPITAL CONTRIBUTIONS: Transfers Out (356) (181) (13) - (550) TOTAL CHANGE IN NET ASSETS 173 395 21 214 803 NET ASSETS-BEGINNING OF YEAR 6,258 3,052 236 4,449 13,995 NET ASSETS-END OF YEAR $ 6,431 $ 3,447 $ 257 $ 4,663 $ 14,798 i i 1 1 1 1 1 i 1 i87 CITY OF HUNTINGTON BEACH ' STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2006 ' (In Thousands) Emerald Cove Emergency Fire Ocean View Housing Medical Hazmat Service Estates Total ' CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Customers and Users $ 958 $ 6,230 $ 186 $ 270 $ 7,644 Cash Paid to Employees for Services - (1,580) (108) (37) (1,725) Cash Paid to Suppliers of Goods and Services (484) (4,001) (51) (72) (4,608) NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES 474 649 27 161 1,311 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers Out (356) (181) (13) - (550) CASH FLOWS FROM INVESTING ACTIVITIES Cash Received from Investments 128 68 15 77 288 NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS 246 536 29 238 1,049 CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR 2,687 1,469 231 1.313 5,600 CASH AND CASH EQUIVALENTS-END OF YEAR $ 2,833 $ 2,005 $ 260 $ 1,551 $ 6,649 RECONCILIATION OF OPERATING INCOME NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES Operating Income $ 409 $ 508 $ 19 $ 153 $ 1,089 ADJUSTMENTS TO RECONCILE OPERATING ' INCOME TO NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES Depreciation 82 129 - 11 222 Decrease(Increase)in Accounts Receivable (2) 85 4 (3) 84 Increase(Decrease)in Accounts Payable - (66) - - (66) Increase(Decrease)in Accrued Payroll - (6) (6) Increase(Decrease)in Deposits (15) (1) - (16) Increase(Decrease)in Compensated Absences - 4 4 NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES $ 474 $ 649 $ 27 $ 161 $ 1,311 i' 88 Fiduciary Funds ' FiduciaryFunds account for assets held b the City as an agent for other organizations or individuals. Y Y 9 9 • The General Deposit Fund accounts for the deposit of general monies held by the City for private individuals and businesses. ' The Community Facilities Districts Funds accounts for the debt service activity of the City's community facilities district. • The Huntington Beach Auto Business Improvement District Fund accounts forthe activities of the City's business improvement district. • The Central Net Fund accounts for the activity of the Central Net Operations Authority. • The Retiree Medical Insurance Fund accounts for the City's medical retirement program. 1 89 CITY OF HUNTINGTON BEACH STATEMENT OF FIDUCIARY FUND NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30,2006 , Agency Funds Community Business Central Net Facilities Improvement Operations Retiree Medical Total Agency Assets: General Deposit Districts Districts Authority Insurance Funds Cash and Investments- Local Agency Investment Fund $ 739 $ 1,126 $ 191 $ 1,446 $ 5,118 $ 8,620 Cash with Fiscal Agent - 5,860 - - - 5,860 ' Accounts Receivable,Net - 372 19 - 41 432 Total Assets $ 739 $ 7,358 $ 210 $ 1,446 $ 5,159 $ 14,912 Liabilities: Accounts Payable $ - $ - $ 152 $ 197 $ 1 $ 350 Due to Bondholders - 7,358 - - 7,358 Held for others 739 58 1,249 5,158 7,204 Total Liabilities $ 739 $ 7,368 $ 210 $ 1,446 $ 5,159 $ 14,912 1 90 CITY OF HUNTINGTON BEACH SCHEDULE OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES ALL AGENCY FUNDS SEPTEMBER 30, 2006 Balance Balance October 1,2005 Additions Deletions September 30,2006 General Deposit Assets: Cash and Investments $ 2,010 $ - $ (1,271) $ 739 Liabilities: Held for others $ 2,010 $ - $ (1,271) $ 739 Community Facilities Districts Assets: Cash and Investments $ 950 $ 176 $ $ 1,126 Cash with Fiscal Agent 8,318 (2,458) 5,860 Accounts Receivable, Net 402 - (30) 372 Total Assets $ 9,670 $ 176 $ (2,488) $ 7,358 Liabilities: Due to Bondholders $ 9,670 $ - $ (2,312) $ 7,358 i Business Improvement Districts Assets: Cash and Investments $ 103 $ 88 $ - $ 191 Accounts Receivable, Net 17 2 - 19 ' Total Assets $ 120 $ 90 $ - $ 210 Liabilities: Accounts Payable $ - $ 152 $ - $ 152 Held for others 120 (62) 58 Total Liabilities $ 120 $ 152 $ (62) $ 210 Central Net Operations Authority Assets: Cash and Investments $ 1,674 $ $ (228) $ 1,446 Accounts Receivable, Net 12 - (12) - Total Assets $ 1,686 $ - $ (240) $ 1,446 Liabilities: Accounts Payable $ - $ 197 $ - $ 197 Held for others 1,686 - (437) 1,249 ' Total Liabilities $ 1,686 $ 197 $ (437) $ 1,446 Retiree Medical Insurance Assets: 1 Cash and Investments $ 4,796 $ 322 $ _ $ 5,118 Accounts Receivable, Net 38 3 41 Total Assets $ 4,834 $ 325 $ - $ 5,159 Liabilities: Accounts Payable $ 6 $ $ (5) $ 1 Held for others 4,828 330 - 5,158 Total Liabilities $ 4,834 $ 330 $ (5) $ 5,159 ' 91 CITY OF HUNTINGTON BEACH SCHEDULE OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES ALL AGENCY FUNDS SEPTEMBER 30, 2006 (CONTINUED) Balance Balance October 1,2005 Additions Deletions September 30,2006 Total-All Agency Funds Assets: Cash and Investments $ 9,533 $ 586 $ (1,499) $ 8,620 Cash with Fiscal Agent 8,318 - (2,458) 5,860 Accounts Receivable,Net 469 5 (42) 432 Total Assets $ 18,320 $ 591 $ (3,999) $ 14,912 Liabilities: Accounts Payable $ 6 $ 349 $ (5) $ 350 ' Due to Bondholders 9,670 - (2,312) 7,358 Held for others 8,644 330 (1,770) 7,204 Total Liabilities $ 18,320 $ 679 $ (4,087) $ 14,912 i I 1 1 1 1 1 1 92 , ! Statistical Section This part of the City of Huntington Beach's Comprehensive Annual Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the City's overall financial health. Financial Trends- contain trend information to aid the reader understand how the City's financial performance has changed over time. Revenue Capacity- contain information to help the reader assess the City's most significant local revenue source, the property tax. ! Debt Capacity - present information to assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information-offers information to help the reader understand the environment within which the City's financial activities take place. Operating Information-contains service and infrastructure data to help the reader understand how the City's financial report relates to the services the City provides and the activities it performs. i Unless otherwise noted, the information in these schedules is derived from the comprehensive ' annual financial reports for the relevant year. The City implemented GASB 34 in the 2002 fiscal year; schedules presenting government-wide information include information beginning in that year. 1 ' 93 City of Huntington Beach Net Assets by Component-Last Five Fiscal Years (In Thousands) Fiscal Year Ending September 30, Governmental Activities 2006 2005 2004 2003 2002 Investment in Capital Assets,Net of Related Debt $ 472,372 $ 479,897 $ 448,217 $ 446,061 $ 425,967 Restricted 68,381 39,227 61,051 51,261 42,417 Unrestricted 34,269 40,226 (9,278) (12,924) (10,745) Total Governmental Activities Net Assets $ 575,022 $ 559,350 $ 499,990 $ 484,398 $ 457,639 Business-Type Activities Investment in Capital Assets,Net of Related Debt $ 111,651 $ 102,068 $ 92,890 $ 88,884 $ 79,781 Restricted 31,109 34,085 32,968 30,946 31,043 Unrestricted 53,020 41,563 33,664 25,671 23,236 Total Business-Type Activities Net Assets $ 195,780 $ 177,716 $ 159,522 $ 145,501 $ 134,060 Primary Government Investment in Capital Assets,Net of Related Debt $ 584,023 $ 581,965 $ 541,107 $ 534,945 $ 505,748 Restricted 99,490 73,312 94,019 82,207 73,460 Unrestricted 87,289 81,789 24,386 12,747 12,491 Total Primary Government Net Assets $ 770,802 $ 337,066 $ 659,512 $ 629,899 $ 591,699 City of Huntington Beach Changes in Net Assets-Last Five Fiscal Years (In Thousands) Expenses; Fiscal Year Ending September 30, Governmental Activities: 2006 2005 2004 2003 2002 City Council $ 271 $ 254 $ 280 $ 267 $ 262 City Administrator 5,540 1,990 1,188 1,587 2,214 City Treasurer 1,479 1,568 1,541 1,341 1,160 City Attorney 2,317 2,852 2,775 2,899 3,634 City Clerk 756 685 717 559 698 Administrative Services - 5,554 6,348 8,357 7,230 Finance 3,306 2,501 na na na Planning 2,813 2,559 2,396 3,633 2,658 Building 3,930 3,321 2,858 3,045 3,101 Fire 24,787 23,365 20,000 19,490 19,361 Information Systems 7,361 6,806 6,423 4,401 4,464 Police 50,877 47,029 40,686 41,104 42,187 Economic Development 4,977 4,199 19,372 3,830 3,080 Community Services 15,777 13,693 15,735 9,989 12,440 Library Services 4,829 4,394 4,138 6,721 4,801 ' Public Works 49,654 33,018 30,277 25,386 28,237 Non-Departmental 11,263 12,024 4,054 25,604 19,725 Interest on Long-Term Debi 5,575 6,810 6,001 6,199 9,438 Total Governmental Activities 195,512 172,622 164,789 164,412 164,690 Business-type Activities: Water Utility 28,117 22,349 24,643 24,943 27,250 Sewer Service 3,855 5,924 4,042 3,775 2,419 Refuse Collection 10,289 9,826 9,806 9,681 9,178 Emerald Cove Housing 551 399 409 401 405 Emergency Fire Medical 5,637 5,497 5,605 3,765 3,172 ' Cultural Affairs - - - - 317 Hazmat Service 163 141 204 150 143 Ocean View Estates 120 118 62 58 11 Total Business Type Activities 48,732 44,254 44,771 42,773 42,895 Total Business and Government Type Activities $ 244,244 $ 216,876 $ 209,560 $ 207,185 $ 207,585 94 ' iCity of Huntington Beach Changes in Net Assets-Last Five Fiscal Years (In Thousands) (continued) Revenues: Fiscal Year Ending September 30, Governmental Activities: 2006 2005 2004 2003 2002 Charges for Services $ 37,139 $ 28,808 $ 30,419 $ 22,958 $ 23,556 Operating Grants 917 1,657 6,343 1,736 5,063 Capital Grants 6,893 43,341 7,384 6,955 13,039 Transfers 464 4,884 Total Governmental Activities Program Revenue 45,413 78,690 44,146 31,649 41,658 ' Business-Type Activities Program Revenue Water Utility 37,946 40,371 40,172 37,943 59,104 Sewer Service 7,873 8,512 6,373 5,876 4,540 Refuse Collection 10,292 9,985 10,412 9,123 9,182 Emerald Cove Housing 960 866 781 746 707 Emergency Fire Medical 6,145 5,725 5,650 4,103 4,103 Cultural Affairs 189 Hazmat Service 182 110 187 233 145 Ocean View Estates 273 263 258 245 192 Total Business Type Activities 63,671 65,832 63,833 58,269 78,162 Total Primary Government Program Revenue 109,084 144,522 107,979 89,918 119,820 Net(Expense)Revenue: Governmental Activities: (150,099) (93,932) (120,643) (132,763) (123.032) Business-Type Activities 14,939 21,578 19,062 15,496 35,267 Total Net(Expense)Revenue (135,160) (72,354) (101,581) (117,267) (87,765) 1 General Revenue and Other Changes in Net Assets Governmental Activities: Property Taxes 66,598 61,466 47,405 40,633 38,106 Sales Taxes 26,448 24,340 28,273 28,011 23,449 UtilltyTaxes 21,170 20,004 19,424 18,310 18,114 Other Taxes 13,226 14,952 11,365 13,337 13,521 Use of Money and Property 4,310 3,137 3,528 9,923 13,895 From Other Agencies 10,390 8,186 14,406 16,414 20,359 Participation Payments 6,221 12,697 na na na ' Other 9,278 8,510 7,328 5,491 2,603 Total Governmental General Revenue 157,"1 153,292 131,729 132,119 130,047 Business-Type Activities: Transfers (464) (4,884) - - - Use of Money and Property 3,589 1,500 1,085 1,482 2,240 Total Business-Type Activities General Revenue 3,125 (3,384) 1,085 1,482 2,240 Total General Revenue and Transfers 160,766 149,908 132,814 133,601 132,287 Changes in Net Assets-Governmental Activities 7,542 59,360 11,086 (644) 7,015 Changes in Net Assets-Business Activities 18,064 18,194 20,147 16,978 37,507 Net Assets-Beginning of Year(restated) 745,196 659,512 628,279 613,565 563,111 Net Assets-End of Year $ 770,802 $ 737,066 $ 659,512 $ 629,899 $ 607,633 Source:Comprehensive Annual Financial Reports. The City implemented the new reporting model in fiscal year 2001-2002. Until 10 years of data are available,only the available years will be presented. 95 t CITY OF HUNTINGTON BEACH FUND BALANCES -GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS (In Thousands) (Modified Accrual Basis of Accounting) Fiscal Year Ending September 30, 2006 2005 2004 2003 2002 General Fund: Reserved $ 7,382 $ 5,915 $ 2,113 $ 2,757 $ 25,773 Unreserved 33,204 32,371 24,219 12,217 15,972 Total General Fund $ 40,586 $ 38,286 $ 26,332 $ 14,974 $ 41,745 Other Governmental Funds: Reserved $ 25,472 $ 35,458 $ 30,143 $ 35,470 $ 45,259 Unreserved, Reported in: Special Revenue Funds 20,631 17,833 11,810 10,399 7,967 Debt Service Funds 4,022 3,916 4,434 10,992 (33,364) Capital Projects Funds 27,096 16,820 10,242 8,553 8,637 , Total Other Governmental Funds $ 77,221 $ 74,027 $ 56,629 $ 65,414 $ 28,499 Fiscal Year Ending September 30, 2001 2000 1999 1998 1997 General Fund: Reserved $ 23,677 $ 26,115 $ 23,628 $ 23,807 $ 23,358 , Unreserved 11,741 17,618 19,291 8,998 11,142 Total General Fund $ 35,418 $ 43,733 $ 42,919 $ 32,805 $ 34,500 Other Governmental Funds: , Reserved $ 81,465 $ 72,056 $ 61,401 $ 58,634 $ 54,676 Unreserved, Reported in: Special Revenue Funds 21,698 19,073 12,748 8,845 8,004 ' Debt Service Funds 12,969 - - 9,567 9,442 Capital Projects Funds 7,898 11,793 4,968 9,933 10,465 Total Other Governmental Funds $ 124,030 $ 102,922 $ 79,117 $ 86,979 $ 82,587 Notes: (a)Beginning with fiscal year 2001/2002,the City implemented the new reporting model which changed the way in which interfund , advances were reported and resulted in a larger negative fund balance in the Redevelopment Agency Debt Service fund (b) In fiscal year 2002-2003 the City changed accounting for interfund advances and eliminated the advances to/from in each fund. This results in a smaller reserved fund balance in the General Fund and eliminates the deficit in the Redevelopment Agency Debt Service Fund ' 96 , ' THIS PAGE INTENTIONALLY LEFT BLANK t CITY OF HUNTINGTON BEACH CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS-LAST TEN FISCAL YEARS (In Thousands) (Modified Accrual Basis of Accounting) Fiscal Year Ending September 30, 2006 2005(d) 2004 2003 2002 REVENUES: Property Taxes $ 69,065 $ 59,716 $ 43,501 $ 38,983 $ 33,204 Sales Taxes 26,448 24,340 28,273 28,011 23,449 Utility Taxes 21,170 20,004 19,424 18,310 18,014 Other Taxes 13,226 13,068 11,365 13,337 13,621 Licenses and Permits 7,432 7,457 7,736 8,045 7,162 Fines and Forfeitures 4,288 4,365 4,342 3,815 3,797 From Use of Money and Property 16,461 12,733 11,856 9,923 13,895 From Other Agencies 16,611 20,179 26,321 25,103 28,426 Charges for Current Service/Other Revenue 27,237 33,950 17,553 14,140 15,201 TOTAL REVENUES 201,938 195,812 170,371 159,667 156,769 EXPENDITURES Current: City Council 271 254 280 269 237 City Administrator 5,508 1,917 1,165 1,559 2,109 , City Treasurer 1,446 1,547 1,519 1,377 1,108 City Attorney 2,313 2,848 2,771 2,836 3,570 City Clerk 828 679 712 555 676 Administrative Services - 5,731 6,295 8,323 7,095 Finance 3,283 2,501 - - - Community Development - - - - - Planning 2,800 2,548 2,382 2,544 2,585 Building 3,729 3,291 2,938 3,043 2,991 Fire 24,334 22,365 19,018 19,021 18,024 ' Information Systems 6,540 5,726 5,315 3,619 3,500 Police 50,151 45,778 39,414 41,184 37,990 Economic Development 4,172 2,866 5,132 3,616 3,073 Community Services 14,382 12,321 11,718 10,182 11,065 , Library Services 4,359 3,969 3,745 4,215 4,350 Public Works 28,448 21,535 16,756 19,832 21,565 Non-Departmental 13,831 13,039 23,809 31,236 13,407 Capital Outlay 30,174 9,065 29,484 24,217 54,356 ' Debt Service: Principal 9,406 8,474 8,718 7,427 5,541 Interest 6,512 5,999 5,987 6,273 7,152 TOTAL EXPENDITURES 212,487 172,453 187,158 191,328 200,394 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER) EXPENDITURES (10,549) 23,359 (16,787) (31,661) (43,625) OTHER FINANCING SOURCES(USES): , Transfers In 20,539 20,890 30,274 54,463 58,948 Proceeds of Bankruptcy Settlements - - - - - Reclassification of Interfund Advances - 16,018 - Capital Assets Reclassication for Changes in Fi - - - (1,743) - Payments to Escrow - - - - (52,673) , Proceeds of Long-Term Debt 15,579 1,102 13,236 24,582 61,514 Transfers Out (20,075) (16,006) (24,148) (57,096) (59,818) TOTAL OTHER FINANCING SOURCES(USES) 16,043 5,986 19,362 36,224 7,971 INCREASE(DECREASE)IN FUND BALANCES $ 5,494 $ 29,345 $ 2,575 $ 4,563 $ (35,654) , DEBT SERVICE AS A PERCENTAGE OF NON-CAPITAL EXPENDITURES 9.6% 9.7% 10.3% 8.9% 9.5% (c)Community Development was reorganized into two separate departments(Planning and Building). Information Systems was , recorded originally in the Non-departmental area and transferred to a new department. (d)Finance was originally included with Administrative Services , 97 t t t tFiscal Year Ending September 30, 2001 2000 1999(c) 1998 1997 $ 36,860 $ 37,645 $ 34,345 $ 32,477 $ 29,341 28,082 26,268 22,699 21,156 19,512 17,045 15,058 14,936 13,888 14,059 15,096 10,868 11,122 9,851 8,632 6,902 8,538 10,527 8,848 8,121 4,092 4,018 2,744 2,649 2,707 15,812 14,603 10,913 12,614 12,971 31,634 32,021 24,753 21,539 19,810 t 12,150 15,847 14,071 13,945 11,191 167,673 164,866 146,110 136,967 126,344 t 231 277 275 207 233 1,776 1,799 1,569 1,092 1,856 916 884 820 805 781 2,943 2,227 1,969 2,340 1,738 559 451 474 434 470 3,874 3,559 2,876 3,056 4,028 - - 4,067 3,919 3,694 2,329 2,180 - - - 2, 2, - - 18,142 142 17,471 471 15,639 16,368 15,806 2,814 39,081 36,140 34,343 34,127 33,413 2,816 6,749 3,598 3,452 2,142 11,395 9,815 8,439 7,723 7,301 4,265 3,984 3,510 3,212 3,034 24,870 25,263 18,287 18,686 17,159 15,298 18,572 12,929 14,919 9,867 33,687 18,740 20,739 15,894 13,833 11,884 6,333 12,111 2,313 2,340 16,204 14,965 16,654 9,648 10,189 t195,673 171,793 158,299 138,195 127,884 (28,000) (6,927) (12,189) (1,228) (1,540) t21,267 30,529 7,794 12,494 14,820 - 3,833 - - - - - (10,001) - - 37,947 30,110 25,684 1,179 9,977 (21,908) (32,958) (9,053) (12,852) (20,924) ' 37,306 31,514 14,424 821 3,873 $ 9,306 $ 24,587 $ 2,235 $ (407) $ 2,333 21.0% 16.2% 26.40/6 10.8% 12.3% t t98 CITY OF HUNTINGTON BEACH ASSESSED AND ACTUAL VALUATION OF ALL TAXABLE PROPERTY(EXCLUDING REDEVELOPMENT AGENCY) LAST TEN FISCAL YEARS ' (In Thousands) Common Total ssesse TotalDirect Tax] Fiscal Year Property Public Utilities Total Secured Unsecured Valuation Rate 1996-1997 $ 11,707,410 $ 1,899 $ 11,709,309 $ 600,667 $ 12,309,976 $ 1.05832 1997-1998 12,311,145 1,800 12,312,945 546,050 12,858,995 1.05830 1998-1999 13,376,116 2,705 13,378,821 598,733 13,977,554 1.05840 1999-2000 13,386,740 1,670 13,388,410 581,160 13,969,570 1.05810 2000-2001 15,796,157 2,745 15,798,902 674,719 16,473,621 1.05810 2001-2002 16,081,760 2,449 16,084,209 699,307 16,783,516 1.00770 2002-2003 17,949,445 2,428 17,951,873 820,219 18,772,092 1.01902 2003-2004 17,987,861 2,876 17,990,737 911,027 18,901,764 1.02571 2004-2005 19,532,238 3,524 19,535,762 877,078 20,412,840 1.06575 2005-2006 20,925,190 1,522 20,926,712 790,513 21,717,225 1.06575 Source:County of Orange Auditor Controller PROPERTY TAX RATES , ALL DIRECT AND OVERLAPPING GOVERNMENTS TAX RATE 04-001 , LARGEST AREA IN CITY Metro Water Fiscal Year Basic Levy City Orange County School Districts District Others Total 1996-1997 $ 1.00000 $ 0.04930 $ 0.00012 $ $ 0.00890 $ $ 1.05832 1997-1998 1.00000 0.04930 0,00010 0.00890 1.05830 1998-1999 1.00000 0.04930 0.00020 0.00890 1.05840 1999-2000 1,00000 0.04930 - 0,00880 1.05810 2000-2001 1.00000 0.04930 0.00880 1.05810 2001-2002 1.00000 - 0.00770 1.00770 2002-2003 1.00000 - 0.01232 0.00670 1.01902 2003-2004 1.00000 0.00696 0,01214 0.00610 0.00051 1.02571 ' 2004-2005 1.00000 0.00696 0.02850 0.00520 0,02509 1.06575 2005-2006 1.00000 0.00696 0.03814 0,00520 0.01545 1.06575 Note: Rates are per$100 of assessed valuation Source:County of Orange Auditor Controller 99 ' CITY OF HUNTINGTON BEACH PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (In Thousands) 1 Secured Taxes Unsecured Taxes Total Delinquency Delinquency Total Delinquency Delinquency Fiscal Year Total Levy Collections Amount Percent Total Levy Collections Amount Percent 1996-1997 $ 16,722 $ 16,401 $ 320 1.91% $ 1,102 $ 1,085 $ 17 1.60% 1997-1998 17,630 17,176 272 1.54% 1,247 1,077 40 3.21% 1998-1999 18,341 17,868 262 1.47% 1,243 1,146 35 3.05% 1999-2000 21,001 20,676 284 1.35% 1,321 1,231 29 2.20% 2000-2001 22,724 22,035 629 2.77% 1,348 1,267 33 2.45% 2001-2002 24,581 24,238 343 1.40% 1,419 1,366 53 3.74% 2002-2003 26,376 25,937 362 1.37% 1,467 1,343 82 5.59% 2003-2004 29,423 28,669 293 1.00% 1,507 1,382 35 2.32% 2004-2005 31,855 31,373 411 1.29% 1,606 1,473 42 2.62% I2005-2006 34,094 33,396 191 0.56% 1,523 1,370 40 2.63% Reservoir Hill Community Facilities Districts ' Total Delinquency Delinquency Total Delinquency Delinquency Fiscal Year Total Levy Collections Amount Percent Total Levy Collections Amount Percent 1996-1997 $ 182 $ 179 $ 3 1.68% $ 264 $ 251 $ 13 5.18% 1997-1998 173 184 9 4.89% 264 255 9 3.53% 1998-1999 194 184 9 4.89% 264 255 8 3.14% 1999-2000 184 181 3 1.63% 264 259 5 1.89% 2000-2001 184 180 4 2.17% 264 258 5 1.89% 2001-2002 188 184 4 2.13% 264 258 6 2.27% 2002-2003 191 188 3 1.57% 538 538 1 0.19% 2003-2004 191 192 0.00% 1,796 1,789 2 0.11% 2004-2005 238 234 7 2.94% 1,731 1,722 5 0.29% 2005-2006 - - - 0.00% 4,084 4,080 1 0.02% Source:County of Orange Auditor Controller's Office collections amount since there are always amounts collected from prior years ' 100 CITY OF HUNTINGTON BEACH RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (In Thousands) , Fiscal Year EndingSeptember 30 Fiscal Year EndingSeptember 30 Long-Term Indebtedness 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 Governmental Activities: Judgement Obligation Bonds $ 11.525 $ 12,500 $ 12,500 , Public Financing Authority: - - 20,460 20,885 21,275 30,860 31,360 Revenue and Lease Revenue Bonds 55,120 58,030 60,840 63,535 66,125 37,940 7,020 7,440 7,840 8,070 Certificates of Participation 14,885 15,525 16,140 16,730 17,295 17,840 18,310 Civic Improvement Corporation: - - - Refunding Certificates of Participation 0 0 29,750 30,880 31,955 32,980 33,960 Assessment Bonds - - - 360 415 605 815 1,030 1,090 1,145 Redevelopment Agency: Tax Allocation Bonds 26,065 27,205 28,305 29,375 30,370 9,770 10,060 10,340 - DispositionandDevelopmentAgreement 8,197 10,083 10,730 10,549 11,280 4,756 9,770 10,142 Notes Payable - 116 337 545 1,035 1,272 1,566 759 810 862 Section 108 Loan 7,235 7,235 7,850 7,630 7,890 8,130 8,355 - Capital Leases Payable 2,975 3,461 4,885 6,420 4,107 2,007 155 - Claims Payable 3,956 14,545 11,937 37,191 12,612 10,177 9,743 9,982 11,774 11,761 Compensated Absences Payable 9,630 9,046 8,037 8,223 8,950 8,075 6,135 5,463 5,323 4,977 Pension Benefit Obligation 6,548 7,640 8,409 8,342 8,593 8,337 8,150 7,255 6,271 5,592 Business Activities: Emerald Cove Certificates of Participation - - - - - - 5,105 5,205 5,300 Capital Leases 40 112 183 250 595 432 1,550 1,633 2,215 993 Compensated Absences 868 786 710 623 491 472 457 383 375 333 $ 147,044 $ 166,284 $ 170,863 $ 189,773 $169,758 $160,023 $133,851 $112,762 $104,743 $104,353 2006 2005 2004 2003 2002 2001 2000 1999(c.) 1998 1997 , Population 201,000 200,763 199,025 196,954 194,600 191,500 199,327 196,660 192,430 188,518 Debt Per-Capita $ 732 $ 828 $ 859 $ 964 $ 872 $ 836 $ 672 $ 573 $ 544 $ 554 Total Personal Income(in Thousands) $7,436,799 $7,311,186 $7,247,893 $7,444,861 Per-Capita Personal Income 36,999 36,417 $ 36,417 $ 37,800 Unemployment Rate 2.40% 2.80% 2.80% 3.10% 3.60% 3.80% 0.032 3.60% Total Employment 118,800 118,700 116,200 113,600 111,800 111,200 119,400 NOTE: Information on personal income is not readily available for year 2002 and earlier. Until Data is readily available,only the available years will be presented. 101 ' CITY OF HUNTINGTON BEACH TOP TEN PROPERTY TAXPAYERS FOR FISCAL YEAR 2005-2006 2005-2006 Revenue Percent In Thousands of Total Mayer Financial Limited Partnership $ 1,803 4.21% Bella Terra Associates LLC 575 1.07% ' Mullrock 1 Beach Pointe LLC 500 1.04% Waterfront Construction 1 379 0.88% William Lyon Homes 303 0.69% Essex Huntington Breakers 295 0.56% Pierside Pavillion LLC 270 0.51% First Huntington Capital 269 0.77% Atlanta Huntington Beach LLC 240 0.63% ' Mc Donnel Douglas Corp/Boeing Corp 234 1.90% Total Top Ten 4,868 12.26% All Other Properties 40,845 87.74% City Total $ 45,713 100.00% 2004-2005 Revenue Percent In Thousands of Total Mayer Financial Limited Partnership $ 1,765 4.21% Mc Donnel Douglas Corp/Boeing Corp 798 1.90% PLC Waterfront LLC 450 1.07% Huntington Center Associates 437 1.04% Waterfront Construction 1 369 0.88% Mullrock 1 Beach Pointe LLC 324 0.77% Essex Huntington Breakers 288 0.69% Pierside Pavillion LLC 264 0.63% Atlanta Huntington Beach LLC 234 0.56% First Huntington Center 215 0.51% 5,144 12.27% 36,786 87.73% $ 41,930 100.00% ' Source: HdL Coren&Cone Note: Information on the top ten property taxpayers is not readily available for fiscal year ' ending September 2004 and earlier. Until data is readily available,only the available years will be presented. ' 102 CITY OF HUNTINGTON BEACH , LEGAL DEBT MARGIN LAST TEN FISCAL YEARS ' (In Thousands) Debt Limit-12% Assessed of Assessed Debt Applicable Legal Debt , Valuation Valuation to Limit Margin 1996-97 $ 12,309,976 $ 1,477,197 $ - $ 1,477,197 1997-98 12,858,995 1,543,079 - 1,543,079 ' 1998-99 13,977,554 1,677,306 - 1,677,306 1999-2000 13,969,570 1,676,348 - 1,676,348 2000-2001 16,473,621 1,976,835 - 1,976,835 2001-2002 16,783,516 2,014,022 - 2,014,022 2002-2003 18,772,092 2,252,651 - 2,252,651 2003-2004 18,901,764 2,268,212 - 2,268,212 2004-2005 20,412,840 2,449,541 - 2,449,541 2005-2006 21,717,225 2,606,067 - 2,606,067 , PRINCIPAL PRIVATE EMPLOYERS ' CURRENT YEAR AND ONE YEAR AGO (a) 2006 %of total Boeing 8,498 7.15% ' Quiksilver 1,327 1.12% Cambo Manufacturing 886 0.75% Verizon 764 0.64% C&D Aerospace 600 0.51% ' Huntington Beach Hospital 527 0.44% Rainbow Disposal 408 0.34% Home Depot(inlcuding Expo) 383 0.32% Huntington Valley Healthcare 381 0.32% ' Triad Financial 353 0.30% Total of top 10 14,127 11.89% all others 104,673 88.11% Total employment(public and private) 118,800 100.00% ' 2005(b) %of total Boeing 4,282 3.59% ' Quiksilver 1,550 1.30% Cambo Manufacturing 886 0.74% Dynamic Cooking Systems 706 0.59% Triad Financial 637 0.53% ' E-Trade Mortgage 554 0.46% C&D Aerospace 554 0.46% Huntington Beach Hospital 513 0.43% Rainbow Disposal 408 0.34% Verizon 556 0.47% Total of top 10 10,646 8.92% all others 108,654 91.08% , Total employment(public and private) 119,300 100.00% Source-Economic Development Department,City of Huntington Beach , (a)The information for 1996 is not readily available. Until data is readily available,only the available years will be presented. (b) Total employment number for 2005 is not readily available, as a result,2004 total was used. 103 ' CITY OF HUNTINGTON BEACH FULL-TIME BUDGETED CITY EMPLOYEES BY FUNCTION/PROGRAM ' General Government: 2006 2005 2004 2003 2002 2001 City Council 1.00 1.00 1.00 1.00 1.00 1.00 City Administrator 29.00 29.00 7.00 13.00 17.00 17.00 City Treasurer 10.00 16.00 16.00 16.00 16.00 16.00 City Attorney 18.00 17.00 15.00 14.00 16.00 16.00 City Clerk 8.00 7.50 7.50 8.00 8.00 8.00 Finance 31.00 23.00 - - - - Administrative Services 47.00 49.00 53.50 50.50 Planning 28.00 27.50 25.00 26.00 28.00 28.00 Building 31.50 30.50 27.50 27.50 27.50 25.50 Information Systems 38.00 36.00 37.00 18.50 18.25 15.25 Economic Development 13.00 14.00 11.00 12.00 15.00 15.00 Library Services 37.25 37.25 38.25 40.25 45.75 45.75 ' Fire 160.00 157.00 156.50 162.00 166.00 165.00 Police 374.00 371.50 366.00 379.00 388.00 388.00 Community Services 69.75 64.50 62.25 67.50 71.50 71.50 Public Works 255.30 240.00 231.00 264.00 270.00 263.00 ' 1,103.80 1,071.75 1,048.00 1,097.75 1,141.50 1,125.50 Source: Finance Department, City of Huntington Beach r r i ' 104 r CITY OF HUNTINGTON BEACH , OPERATING INDICATORS BY FUNCTION/ACTIVITY Function/Program 2006 2005 2004 ' Finance: Water Bills Processed 626,903 586,000 632,868 Business Licenses Issued 19,746 20,184 19,515 Accounts Receivable Billings Processed 22,453 22,768 27,044 City Clerk: Passports Issued 3,069 3,676 3,795 Planning: Entitlements Processed 566 523 572 Plan Reviews 2,105 2,296 1,414 Field Inspection Complaints 5,926 5,550 3,857 Code Violation Cases 3,580 3,906 2,018 Building: #of Permits Issued 11,210 12,082 11,840 #of Inspections Completed 43,905 49,737 45,629 ' Value of Construction Permits(Thousands of Dollars) 196,453 169,570 212,711 Processed#of Certificate of Occupancies 307 683 647 Automated Information Requests 77,006 78,868 81,141 Fire: , Inspections 4,300 4,100 4,000 Responses 12,100 12,100 12,800 Police: Physical Arrests 6,368 5,282 5,942 ' Parking Violations 68,712 112,698 79,235 Traffic Violations 22,755 25,902 24,467 Community Services: Acreage of Parks 999 998 Estimated Beach Visitors 10,085,358 8,727,369 7,958,466 Enrollment in Recreation Classes 25,447 22,346 22,670 Public Works: ' Water Sold(Acre Feet) 29,246 29,730 32,147 Gallons of Sewage Pumped Per Day 23 million 23 million 23 million Library: Volumes in Collection 437,472 441,523 439,789 Volumes Borrowed 823,116 931,347 1,200,000 Source:Various departments of the City of Huntington Beach CAPITAL ASSET STATISTICS BY FUNCTION/ACTIVITY Library Services One Main Library and Four Branches Fire: Fire Stations 8 Police: , Stations One Main Station and Two Substations Community Services: Acreage of Parks 955 Community Centers 4 Miles of Beach Maintained 3.5 Public Works: Centerline Square Miles of Streets Maintained 463 Miles of Storm Drains Maintained 127 Miles of Sewer Maintained 355 Source:Various departments of the City of Huntington Beach 105 , i CITY OF HUNTINGTON BEACH STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT SEPTEMBER 30, 2006 2005-06 Assessed Valuation$21,985,619,802(after deducting$1,171,434,547)of incremental redevelopment valuation) Debt Repaid with Property Taxes(Tax and Assessment Debt): Percent Debt Applicable Tax Debt: Applicable to City Orange County Teeter Plan Obligations 7.1370% $ 8,830,253 Metropolitan Water District 1.5010% 5,847,371 Coast Community College District 30.7070% 108,458,311 Huntington Beach Union High School District 76.7870% 156,675,269 Huntington Beach City School District 97.5950% 29,326,284 Los Alamitos Unified School District Comm Facilities Dist. 1990-1 1.2780% 143,775 City of Huntington Beach Community Facilities Districts 100.0000% 46,510,000 Tax and Assessment Debt 346,961,010 1 Other Debt Other Entities: Orange County General Fund Obligations 41,644,181 ' Orange County Pension Obligations 6,415,669 Orange County Board of Education Certifictes of Participation 1,414,553 Orange County Transit Authority 88,142 MWDOC Facilities Corporation 1,763,840 ' Orange County Sanitation District Certificates of Participation 11,717,533 Coast Community College District Certificates of Participation 2,055,834 Huntington Beach Union High School District Certificates of Participation 13,053,790 Los Alamitos Unified School District Certificates of Participation 212,087 Fountain Valley School Districts Certificates of Participation 4,286,134 Huntington Beach City School District Certificates of Participation 10,276,754 Ocean View School District Certificates of Participation 8,587,779 Westminster School District Certificates of Participation 6,299,439 City of Huntington Judgement Obligation Bonds 70,797,910 City of Huntington Reporting Entity Beach General Fund Obligations: 11,525,000 Total Gross and Overlapping Bonded Debt Not Repaid by Property Taxes 190,138,645 Less Self Supporting Debt of MWDOC and OCTA (1,834,354) Total Net Direct and Overlapping General Fund Obligation Debi 188,304,291 Gross Combined Total Debt $ 535,265,301 Ratios to 2005-2006 Assessed Valuation Total Overlapping Debt and Assessment Debt 1.43% Ratios to Adjusted Assessed Valuations Combined Direct Debt($82,322,910) 0.37% Gross Combined Total Debt 2.37% Net Combined Total Debt 2.36% State School Building Aide Repayable $ 276,895 Source:California Municipal Statistics and City of Huntington Beach Finance Department 106 THIS PAGE INTENTIONALLY LEFT BLANK '